Case against Lankan tyre exports dismissed by US courts

Sri Lanka has achieved another legal victory in the case of countervailing duties imposed by the United States (US) against off-the-road (OTR) tires from Sri Lanka, after the US Department of Commerce (USDoC) decided to withdraw an appeal against the decision of the US Court of International Trade, which in 2018 ruled against the US’ decision to impose countervailing duties on tire imports from Sri Lanka.

The decision to withdraw followed the submission of extensive evidence and documentation by the Sri Lankan government, and the United States Court of Appeals for the Federal Circuit, which was to hear the appeal, has now officially dismissed the case.  

As a result, the decision issued by the Court of International Trade requiring the USDoC to rescind the countervailing duty order stands and the US government’s appeal is dismissed with prejudice.

It must be noted that this particular case sets an important precedent not only for any future case against Sri Lanka, but also on agricultural subsidies provided by all countries going forward.

“This can be considered a significant victory for the entire Sri Lanka’s rubber products industry. I must congratulate our Department of Commerce and Attorney General’s Department for battling this successfully, and also the affected company for its strength and export competitiveness,” Development Strategies and International Trade Minister Malik Samarawickrama said.

Based on a countervailing duty petition filed by US industry at the USDoC and US International Trade Commission (USITC) alleging that producers of OTR tires in Sri Lanka benefit from subsidies provided by the government and the subsidized imports cause injury to the domestic rubber industry of the United States, the USDoC initiated a subsidies and countervailing duty (CVD) investigation aiming at imposition of countervailing duty on imports of OTR tires from Sri Lanka to the US.

The investigation was based on alleged twenty subsidy programmes by the Sri Lankan government.

However, the detailed counter submissions made by the Department of Commerce and the Attorney General’s Department of Sri Lanka, resulted to limit the number of programmes subject to this investigation to three.

After the investigation in 2017, the USDoC t imposed a countervailing duty of 2.18 percent on OTR tire imports from Sri Lanka, claiming unfair financial support to it and the wider rubber industry in the country.

Despite substantial submissions made by the Department of Commerce of Sri Lanka, in collaboration with the Attorney General’s Department and the affected exporter in Sri Lanka, rebutting the claims of the US industry, the US held that subsides under three government programmes, namely ‘Exemptions on fiscal levies on capital and intermediate goods’, ‘Tax concessions for exporters of non-traditional products’ and “Guaranteed price scheme for rubber given to rubber smallholders,” were causing injury to the domestic industry and imposed duties accordingly.

Thereafter, the Department of Commerce of Sri Lanka, with the assistance of other line agencies and the local company, took necessary measures to challenge the decision by the USDoC at the US Court of International Trade.

As a result of effective interventions in the appeal procedures by the Sri Lankan government, the US Court of International Trade ruled that the 0.95 percent countervailing duty attributed to the guaranteed price scheme be removed.

With this removal, the overall countervailing duty rate on import of OTR tyres from Sri Lanka to the US imposed by the USDOC fell below the minimum threshold of 2 percent to impose countervailing duty on developing countries as specified in the WTO Agreements.

Therefore, the imposition of 2.18 percent countervailing duty on export of OTR tyres from Sri Lanka to the USA was to be terminated.  It was this decision the US DoC sought to appeal, and has now withdrawn.