Question

Case Study 2

Customs Changes, Tariff Reduction Among Measures Responding to COVID-19

Monday, March 30, 2020

Sandler, Travis & Rosenberg Trade Report

Countries around the world are taking a variety of measures to ensure adequate access to and supplies of medical goods to deal with the COVID-19 pandemic. A recent Congressional Research Service report examines some of these actions, including the following.

Imposing Export Restrictions. The European Union has introduced measures that prohibit the export of personal protective equipment (e.g., masks, protective glasses, and garments) without prior regulatory approval. India has restricted exports of 26 pharmaceutical components as well as medicines and vitamins made from them. Dozens of other countries have also imposed export restrictions to address potential supply shortages. The U.S. has generally not supported such measures, but it is unclear whether they are inconsistent with World Trade Organization rules or may qualify for one of the available exceptions regarding critical shortages of essential products, protection of human life, or national security.

Reducing Tariffs. The U.S. has removed some of its Section 301 tariffs on medical goods from China, but the Trump administration has come under pressure to remove or suspend others as well. The report points out that Congress could potentially do this itself since it has the constitutional authority to “lay and collect duties.” Another option would be for the administration to permit duty-free imports of food, clothing, and medical, surgical, and other supplies for use in emergency relief work under Section 318 of the Tariff Act of 1930.

Revising Import Procedures. Most countries regulate imports of medical goods for public health and safety reasons, but some have taken steps to streamline their customs procedures to address issues that could delay access to medical goods. For example, China created a “green lane” system that prioritizes the inspection and review of imported medical goods. Similarly, the EU recently introduced guidelines instructing its member states to create “green lanes” for freight transport to ensure access to essential products such as medicines and medical equipment.

The U.S. has not yet publicly proposed amending its customs or other regulatory procedures in response to the COVID-19 pandemic. However, U.S. Customs and Border Protection may be able to create a “green lane” system using its congressional authorization to develop and implement screening and targeting capabilities, including prioritizing of passengers and cargo. The report notes that creating such a system may require CBP to complete a rulemaking process, which could take time, but that Congress could consider using its constitutional authority to regulate foreign commerce to more quickly implement new customs prioritization procedures.

Prioritizing Domestic Production. Many countries import more health-related products than they export. As an alternative to reliance on cross-border supply chains, the U.S. and some of its trading partners have sought to prioritize domestic production of necessary goods, either by requiring manufacturers to complete orders of medical goods before orders of non-medical goods or by imposing increased production requirements on these manufacturers. Such measures may be permitted under WTO rules provided (a) they are not unlawful subsidies (e.g., those that harm the industries of other WTO members) under the WTO Agreement on Subsidies and Countervailing Measures or (b) if they are potentially WTO-inconsistent, they fall within an exception.

Questions:

1.   What do your understand of the term ‘green lane’ as mentioned in the paragraph? What will happen if the ‘green lane’ system is not being applied in this time of COVID-19 pandemic? Explain.

2.   In this case, why do you think most countries in the world are introducing custom changes and tariff reduction? Have these changes in trade policies helped the countries’ economy or created even bigger barriers for trade. Discuss.

Answer 1

Green Lanes are basically a set of measures adopted by a country to improve its trade flow with other countries. Under this system specific steps are taken to ensure trade takes place more efficiently and at a faster pace. These steps could be to give special treatments to goods from certain countries or certain industies at custom clearances, prioritise their inspection and review. All the steps taken are done to ensure the movement of goods is expedious.  

Although many countries have adopted this system, US still has not adopted it as yet but is under the process as stated in the article.

The Green Lane system plays an essential role in the recent times of COVID 19 as it will ensure faster and safer supply of medical goods and other essential goods. With industry already at a shortage due to lower production level, these steps can be crucial for a country's survival. Example : Especially incase of importing certain medicines which may help in the treatment of COVID 19.

If this system is not adopted, it may create burden on the local industry to produce more which might not be feasible, this in turn would increase the cost of products available due to higher demand. But the maximum impact would be in the medical and helathcare sector. In an extreme situation it might end up being an expensive life threatening decision to withhold.