At the World Trade Organisation’s (WTO) Committee on Balance-of-Payments (BoP) Restrictions meeting on May 5, its members discussed the US’s new notification regarding the imposition of import surcharges to address the country’s serious BoP deficits.

The US’s surcharges took effect on February 24 and expire on July 24 unless extended by an Act of Congress.

WTO members welcomed the transparency of the US and its readiness to engage in consultations in line with WTO rules. The US indicated that it is ready to enter into consultations with the committee. It also requested that consultations take place next month, as provided for under WTO rules.

At the same time, members raised concerns about the necessity of the measures and their impact on global trade. They noted the International Monetary Fund’s (IMF’s) role in these matters and expressed their readiness to participate in consultations with the US. Under WTO rules, such consultations should take place within four months of the measures’ adoption, which is why the US requested them next month.

As a reminder, the WTO BoP provisions, primarily found in the General Agreement on Tariffs and Trade 1994 (GATT 1994) Articles XII and XVIII:B and the General Agreement on Trade in Services (GATS), allow WTO members to apply temporary import restrictions to safeguard their external financial position and reserves.

However, these measures must be transparent, temporary and preferably price based, with regular consultations held with the Committee on BoP. The purpose is to enable countries facing serious BoP difficulties or a threat thereof to restrict the quantity or value of imports to protect their monetary reserves.

The BoP provisions confirm that restrictions should be temporary and, where possible, price based (such as surcharges) rather than quantitative restrictions (such as quotas). In its consultations, the Committee on BoP reviews these measures, with the IMF invited to participate.

On February 20, US President Donald Trump imposed a 10% ad valorem import surcharge on all goods from all trading partners, subject to certain product exceptions, pursuant to Section 122 of the Trade Act, 1974, citing fundamental international payment problems. The US notified this BoP measure to the WTO on March 20. The import surcharge applies in excess of the bound duty rates agreed to by the US in its WTO schedule of concessions on goods.

The product coverage of the import surcharge applies to all imported goods from all trading partners, subject to certain product exceptions which are based on the fact that the US economy might require it or the fact that the surcharge would be unnecessary or ineffective in carrying out the purposes of the Trade Act, 1974, or goods that are already subject to other import restrictions imposed by the US on goods in transit.

The product exceptions are: certain critical minerals; metals used in currency and bullion; energy and energy products; natural resources and fertilisers that cannot be grown, mined, or otherwise produced in the US or grown, mined or otherwise produced in sufficient quantities to meet domestic demand; certain agricultural products, including beef, tomatoes and oranges; pharmaceuticals and pharmaceutical ingredients; certain electronics; passenger vehicles, certain light trucks, certain medium- and heavy-duty vehicles, buses, and certain parts of passenger vehicles, light trucks, heavy-duty vehicles and buses; certain aerospace products; information materials, donations and accompanied baggage; all articles and parts of articles currently or that later become subject to measures imposed pursuant to Section 232 of the Trade Expansion Act, 1962 (as amended from 1862); articles that are entered free of customs duty as a good of Canada or Mexico, as related to the agreement between the US, United Mexican States and Canada (the North American Free Trade Agreement); textile and apparel products that are entered free of duty as a good of El Salvador, Guatemala, Honduras, Costa Rica, the Dominican Republic, or Nicaragua under the Dominican Republic-Central America Free Trade Agreement; and certain goods in transit loaded onto vessels and entered for consumption before specific dates.

While the WTO is in consultation, the import surcharge will automatically terminate 150 days after its imposition, on July 24, unless the US extends this period through an Act of Congress.