FAS Says UK Still in EU for Dairy License Purposes; Warns Retaliatory Airbus Tariffs Won't Affect Licenses

Cheese importers should still apply for 2020 licenses for importing cheese from the United Kingdom as if the U.K. is still part of the European Union despite the country’s preparations for Brexit, Foreign Agricultural Service officials said, according to a Cheese Importers Association of America update. The U.K. is still considered part of the EU for tariff schedule purposes, and the Office of the U.S. Trade Representative would need to issue regulations for the U.K. to receive separate treatment under the tariff system, FAS officials told CIAA. That process could take several years to complete, though it would be quicker if the U.S. signs a free trade agreement with the U.K, the officials said.

If a deal is signed, that FTA would determine what, if any, tariff-rate quotas are allocated to the U.K., FAS officials said. The CIAA said it urged FAS to set a new TRQ for the U.K., rather than splitting out a portion of the existing EU TRQ. “Under that approach, importers would continue to have maximum flexibility in the use of their licenses, while not losing access to UK product,” the CIAA said.

Any retaliatory tariffs imposed on the EU as a result of the World Trade Organization’s ruling against its Airbus subsidies would not affect how FAS administers dairy licenses for EU products, FAS told the CIAA at the same meeting. FAS would not view such tariffs as “force majeure” that would relieve importers from fulfilling their license obligations, and “as such would not use that provision to waive any quota allocation and licensing requirements if the tariffs are imposed on European cheeses,” FAS said. While USTR is still considering the retaliatory tariffs, “cheese importers should prepare to be impacted as dairy has been the previous target of trade actions between the U.S. and the EU,” FAS said.

Under cheese import license regulations, importers that fail to enter at least 85 percent of the amount permitted under their licenses are ineligible for licenses for the same country and article for the next quota year. Importers may surrender portions of their licenses if they are at risk of failing to meet that threshold. FAS encouraged further discussions with the CIAA if tariffs are imposed on EU cheese “to discuss possible areas of relief that are within FAS’s discretion (e.g. reopen the application period to make quota adjustments, suspend the application of Section 6.25(b), etc.),” the CIAA said.

The CIAA continues to urge FAS to eliminate Section 6.25(b) entirely, it said in the update. That regulation, currently suspended until 2023, mandates that importers that surrender more than 50 percent of their licenses in three out of five years will have their license amounts reduced to the average annual quantity entered during those five quota years. FAS said CIAA should anticipate a rulemaking to begin “not later than spring 2020” on the subject. “CIAA pressed its view that the multiple suspensions of 6.25(b) demonstrate that there is no discernible practical value to the rule and that it should be eliminated, rather than reissued with another suspension,” the trade group said.