Text: U.S. Wins WTO Ruling on India Challenge to Textile Rules

(Panel upholds U.S. rules of origin, USTR says) (890)



A World Trade Organization (WTO) dispute-settlement panel has rejected
India's challenge to U.S. rules on determining country of origin for
textiles, the Office of the U.S. Trade Representative (USTR) says.


In a June 20 press release, USTR said India has a right to appeal the
panel ruling, which rejected each of India's arguments.


"Detailed U.S. rules of origin for textiles help make sure that
everyone plays by the rules," U.S. Trade Representative Robert
Zoellick said, "and we are very pleased that the panel rejected
India's complaints."


India had argued that the U.S. rules improperly differentiate between
textiles and other products. It had also argued that the rules were
used to protect the U.S. industry from competition, were administered
in a discriminatory way and distorted trade.


The United States uses the rules of origin to administer its textile
and apparel quotas, which all expire at the end of 2004 under WTO
agreement.


The rules could still be used after 2004, however, to enforce tariff
preferences under free trade agreements or to administer any temporary
tariffs or quotas imposed to protect U.S. industry from a surge of
imports, according to U.S. trade officials who briefed reporters in a
teleconference.


One official said the panel decision was significant both because the
United States won a textile case at the WTO for the first time -- it
lost three previous cases -- and because a panel ruled for the first
time on the rules of origin agreement.


The 1996 U.S. rules assign country of origin for most textiles, such
as cotton sheets, to the country where the fabric is woven, not where
it is further processed or finished. A 2000 amendment to the rules,
passed by Congress to settle a dispute with the European Union (EU),
assigned country of origin for finely finished silk goods to the
country where dyeing and finishing is performed.


According to the trade official, India argued that the 2000 amendment
should apply to cotton sheets from India as well, but the WTO panel
rejected that argument.


"We argued that nothing in the agreement on rules of origin requires
the same rules for fine silk and cotton sheets," he said. The panel
concluded that settlement reached with the EU was not discriminatory
because it applied to all WTO members, he said.


Following is the text of the press release:



(begin text)



OFFICE OF THE UNITED STATES TRADE REPRESENTATIVE

Executive Office of the President

Washington, D.C.

20508

June 20, 2003



United States Wins Textile Case Against India in WTO



WASHINGTON -- U.S. Trade Representative Robert B. Zoellick announced
today that a World Trade Organization (WTO) panel has upheld U.S. laws
on determining the country of origin of textile and apparel products
in a dispute brought by India challenging these rules. Rules of origin
are used to determine the country of origin of imported goods. The
panel concluded that the U.S. laws are consistent with U.S. WTO
obligations, rejecting all of India's challenges.


"This is an important victory for American trade laws and American
textile trade. Detailed U.S. rules of origin for textiles help make
sure that everyone plays by the rules, and we are very pleased that
the panel rejected India's complaints," said Zoellick. "Today's report
reaffirms that U.S. rules are consistent with our WTO commitments, and
it shows that countries do have flexibility under the WTO to develop
accurate rules of origin. The Administration is fully committed to
enforcing fair, predictable rules that ensure fair trade."


The panel findings are significant because they uphold rules of origin
that ensure that textile and apparel products imported into the United
States accurately reflect their country of origin, and not where minor
finishing operations take place.


The WTO panel rejected each of India's arguments. Specifically, the
panel:


-- rejected India's argument that the U.S. rules of origin improperly
differentiate between textile and apparel products and other
industrial products;


-- rejected India's argument that the U.S. rules were adopted to
protect the U.S. textile industry from competition;


-- rejected India's argument that the U.S. rules of origin distort,
disrupt and restrict international trade; and,


-- rejected India's argument that the U.S. rules are administered in a
discriminatory manner.


Instead, the panel agreed with the United States that the rules of
origin are entirely consistent with U.S. obligations under the WTO
Agreement on Rules of Origin.


Background



Section 334 of the Uruguay Round Agreements Act of 1996, the so-called
"Breaux-Cardin rules," established statutory rules of origin
applicable to textile and apparel products based on standards set out
in the law. Section 405 of the Trade and Development Act of 2002
amended Section 334 by providing further rules of origin for specific
products. On January 11, 2002, India requested WTO dispute settlement
consultations with the United States regarding Section 334 and Section
405. Consultations were unsuccessful, and a panel was established on
June 24, 2002.


India alleged that Sections 334 and 405 were inconsistent with various
provisions of the WTO Agreement on Rules of Origin. In today's report,
the panel rejected all of these claims.


India will have an opportunity to appeal today's report.



(end text)



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Department of State. Web site: http://usinfo.state.gov)