WTO Appellate Body Upholds Adverse Panel Finding on Clove Cigarettes Ban
The World Trade Organization Appellate Body upheld the panel’s finding that a U.S. ban on the sale and production of clove cigarettes is inconsistent with U.S. WTO obligations. The provision at issue, Section 907(a)(1)(A) to the Food, Drug & Cosmetic Act, which prohibits the production or sale in the U.S. of cigarettes containing certain additives including clove, was challenged at the WTO by Indonesia and eight third parties1 in United States -- Measures Affecting the Production and Sale of Clove Cigarettes (DS406).
(On September 2, 2011, the Dispute Settlement Body (DSB) panel circulated its findings that the ban is inconsistent with the national treatment obligation in Article 2.1 of the Technical Barriers to Trade Agreement (TBT) because it accords clove cigarettes less-favorable treatment than that for domestic menthol-flavored cigarettes. The panel also said the U.S. acted inconsistently with Article 2.9.2 (obligation to notify WTO Members of technical regulations) and Article 2.12 (obligation to allow reasonable interval between publication and entry into force of technical regulations). On January 5, 2012, the United States notified the DSB of its decision to appeal.)
AB Finds Less Favorable Treatment Given to Imported Cloves than Domestic Menthols
In its report, the Appellate Body upholds, albeit for different reasons, the Panel's finding that Section 907(a)(1)(A) of the FD&C Act is inconsistent with Article 2.1 of the TBT Agreement because it accords to imported clove cigarettes less favorable treatment than that accorded to similar menthol cigarettes of national origin.
U.S. Did Not Provide Enough Time Between Publication and Entry Into Force of Law
The Appellate Body also upheld, albeit for different reasons, the Panel's finding that by failing to allow an interval of not less than six months between the publication and the entry into force of Section 907(a)(1)(A) of the FD&C Act, the U.S. acted inconsistently with Article 2.12 of the TBT Agreement.
1Third parties to the case include: Brazil; Colombia; Dominican Republic; European Union; Guatemala; Mexico; Norway; and Turkey.
(See ITT's Online Archives 11090709 for summary of DSB panel report in this case. See also ITT's Online Archives 09092210 for summary of CBP announcement of September 22, 2009 effective date for ban on imports of all flavored cigarettes except menthols.)
WTO summary of dispute available here.
Findings and conclusions of Appellate Body available here.
Full Appellate Body report available here.