Europe Pressures U.S. to Drop Trump-Era Tariffs

The European Union has ini­ti­ated a com­pli­ance pro­ceed­ing at the World Trade Organization to pres­sure the United States to drop its tar­iffs on some Spanish table olive imports.

The deci­sion comes eigh­teen months after the WTO ruled that the U.S. tar­iffs vio­lated inter­na­tional rules and four months after U.S. action intended to com­ply with the rul­ing.

“The United States has failed to com­ply with the rec­om­men­da­tions and rul­ings,” João Aguiar Machado, the E.U.’s per­ma­nent rep­re­sen­ta­tive at the WTO, wrote in a let­ter to the orga­ni­za­tion that announced the ini­ti­a­tion of the pro­ceed­ing.

The European Commission has also pub­licly ques­tioned the ​“lack of changes to the U.S. domes­tic leg­is­la­tion despite it hav­ing been judged incon­sis­tent with WTO rules.”

“As a result, duties are kept in place, mak­ing it more and more dif­fi­cult for Spanish olive grow­ers and proces­sors to remain in the U.S. mar­ket,” the com­mis­sion added.

While Brussels said attempts to set­tle the mat­ter had failed so far, a spokesper­son for the com­mis­sion told Law360 that ​“the E.U. hopes for con­struc­tive con­sul­ta­tions and remains open to find­ing a nego­ti­ated solu­tion to ensure full imple­men­ta­tion of the WTO rul­ing and removal of the duties.”

However, the fate of the E.U.’s case at the WTO may hinge on the result of a sep­a­rate case that stemmed from the orig­i­nal dis­pute. Aceitunas Guadalquivir v. United States, Coalition for Fair Trade in Ripe Olives, is being lit­i­gated in the U.S. Court of Appeals for the Federal Circuit.

The dis­pute began with a legal action taken by the Coalition for Fair Trade in Ripe Olives in 2017.

The coali­tion of California olive grow­ers and table olive pro­duc­ers, spear­headed by Musco Family Olive Co and Bell-Carter Foods, filed a peti­tion with the U.S. Commerce Department alleg­ing sub­si­dies pro­vided to olive grow­ers by the Spanish gov­ern­ment and the E.U. Common Agricultural Policy (CAP) unfairly ben­e­fited olive pack­ers and exporters who, as a result of the sub­si­dies, could sell their pack­aged table olives in the U.S. at below-mar­ket prices.

The Commerce Department selected Aceitunas Guadalquivir, Angel Camacho Alimentacion and Agro Sevilla Aceitunas S.COOP Andalusia, the three largest ripe table olive pack­ers and exporters to the U.S., as its sam­ple to deter­mine whether Spanish ripe table olive exports to the U.S. were being sub­si­dized.

In July 2018, Commerce Department deter­mined that Spanish ripe table olives were being sub­si­dized. They passed this find­ing on to the U.S. International Trade Commission (ITC), which deter­mined that the sub­si­dized ripe table olive imports mate­ri­ally injured the domes­tic indus­try.

Based on the ITC’s find­ing, the Commerce Department autho­rized anti-dump­ing and coun­ter­vail­ing duties (CVD) rang­ing from 7.52 per­cent to 27.02 per­cent.

The effects of the tar­iffs were imme­di­ate and dev­as­tat­ing for Spanish table olive pro­duc­ers, with exports to the United States falling by 60 per­cent and cost­ing pro­duc­ers hun­dreds of mil­lions of Euros in short order.

In response, the table olive pro­duc­ers and the Spanish Association of Table Olive Exporters and Producers (Asemesa) sued the Commerce Department.

After unsuc­cess­fully defend­ing its posi­tion at the U.S. Court of International Trade twice, the Commerce Department defended its posi­tion on the sub­si­dies in a third court sub­mis­sion. It was imme­di­ately appealed and will be heard in a U.S. Court of Appeals.

The Court of Appeals’ deci­sion will likely be final as any appeal to the U.S. Supreme Court is unlikely to be heard.

Meanwhile, protests in Sevilla and out­cries from Madrid spurred the E.U. to sue the U.S. at the WTO in January 2019. In its com­plaint, the E.U. argued that the U.S. tar­iffs vio­lated inter­na­tional trade rules because the CAP does not pro­vide spe­cial ben­e­fits to table olive pro­duc­ers.

Adding to the pres­sure on Brussels, E.U. offi­cials pub­licly expressed con­cern that the tar­iffs set a dan­ger­ous prece­dent and might encour­age addi­tional lit­i­ga­tion against the CAP.

In November 2021, the WTO ruled in favor of the E.U. and found that anti-dump­ing and coun­ter­vail­ing duties imposed in 2018 by the U.S. on imports of ripe table olives from Spain were ille­gal under inter­na­tional rules.

The WTO ulti­mately agreed with the E.U. that the sec­tion of the U.S. Tariff Act of 1930, cited in the Commerce Department’s deci­sion to impose the tar­iffs, was incon­sis­tent with inter­na­tional trade law.

In its rul­ing, the WTO told the U.S. to ​“bring its mea­sures into con­for­mity” with its General Agreement on Tariffs and Trade and other free-trade rules.

The U.S. declined to appeal the WTO rul­ing and agreed to revise the tar­iffs. However, the Commerce Department kept most of the tar­iffs in place.

The depart­ment also has not pub­licly com­mented on the E.U.’s deci­sion to start a com­pli­ance pro­ceed­ing and did not respond to Olive Oil Times’ request for com­ment.

At the start of the year, California table olive pro­duc­ers re-asserted their sup­port for the tar­iffs, which they claim cre­ate a level play­ing field for national table olive pro­duc­ers.

In January, the Olive Growers Council of California applauded the deci­sion to make only minor tar­iff adjust­ments. It argued that the move ​“fully addresses and resolves all WTO con­cerns.”

The council’s chief exec­u­tive Todd Sanders said he ​“strongly sup­ports” the deci­sion to keep the tar­iffs in place. He did not respond to Olive Oil Times’ request for com­ment.

However, if the WTO decides in the E.U.’s favor before the U.S. Court of Appeals rules on its case and the Commerce Department con­tin­ues inac­tion, the E.U. may apply retal­ia­tory tar­iffs against U.S. imports.

“The issues before the WTO and the U.S. Court are dif­fer­ent,” Matthew McCullough, a part­ner at Curtis, Mallet-Prevost, Colt & Mosle LLP, which has rep­re­sented Spanish table olive pro­duc­ers from the onset, told Olive Oil Times.

“The WTO has said the law itself is incon­sis­tent and, there­fore, any appli­ca­tion of it ren­ders a mea­sure that is incon­sis­tent,” he added. ​“The only way you fix that and fix the mea­sure is to change the law and then recon­sider the mea­sure.”

“The appeal that’s before the U.S. court isn’t about whether the law is ille­gal because it’s U.S. law, and the courts inter­pret U.S. law,” McCullough con­tin­ued. ​“The argu­ment before the court is that the Commerce Department inter­preted the statute incor­rectly and applied a stan­dard in reach­ing an affir­ma­tive find­ing that was incon­sis­tent with the mean­ing of the statute.”

The case hinges on the appli­ca­tion of the stan­dard for ​“sub­stan­tially depen­dent” estab­lished for cer­tain agri­cul­tural prod­ucts by the U.S. Congress in 19 U.S.C. §1677 – 2(1):

In a brief filed with the court, McCullough argued the Commerce Department mis­ap­plied the stan­dard because it ​“relied on post-cod­i­fi­ca­tion admin­is­tra­tive deci­sions to apply a lower stan­dard” instead of fol­low­ing ​“the stan­dard laid out in the unam­bigu­ous statute and not against its own later deci­sions,” which he con­tends would have been legally cor­rect.

McCullough and his team added that the Commerce Department ​“failed to sup­port its deter­mi­na­tion with sub­stan­tial evi­dence and engaged in arbi­trary deci­sion-mak­ing.”

As a result, they argue that the Commerce Department mis­ap­plied the stan­dard, which resulted in the imple­men­ta­tion of tar­iffs.

“The pro­vi­sion of U.S. law that per­mit­ted the Commerce Department to find that sub­si­dies received by olive grow­ers ben­e­fited the proces­sors of those olives, the ripe olive pro­duc­ers them­selves, was incon­sis­tent as such with the SCM [Subsidies and Countervailing Measures] agree­ment,” McCullough said.

“When you have an ​‘as such’ find­ing about a statute, it means that the statute has to be changed,” he added. ​“I think that is one of the key con­tro­ver­sies now and will be the sub­ject of that [WTO] com­pli­ance pro­ceed­ing.”

As a result of what McCullough believes is the Commerce Department’s mis­in­ter­pre­ta­tion of the stan­dard and mis­ap­pli­ca­tion of the statu­tory pro­vi­sion, there would be no sub­sidy mar­gin.

“In other words, the level of sub­si­diza­tion would’ve been de min­imis, which is the equiv­a­lent of zero, and if that had been the result, then the case would’ve been ter­mi­nated,” he said.

The ter­mi­na­tion of the case would remove the Commerce Department’s legal basis for its coun­ter­vail­ing duties because, ​“in terms of injury, the imports issue would’ve been found not sub­si­dized,” McCullough said.

If McCullough and the Spanish table olive pro­duc­ers win their appeal, the CVD tar­iffs could be voided. This may resolve the spe­cific mea­sure at issue in the E.U.’s com­pli­ance com­plaint (the duties on ripe olives) but would not resolve the ​‘as such’ find­ing, which would require the U.S. Congress to change the law to become con­sis­tent with the SCM agree­ment.

Arguments in Washington, D.C., are set to begin later this year.

• Law360