Mon | Sep 23, 2019

Cement case affirms CCJ importance to Caricom

Published:Wednesday | September 11, 2019 | 12:22 AMDr Jan Yves Remy and Alicia Nicholls/Guest Columnists

This year, the Caribbean Court of Justice, CCJ, delivered two substantive rulings in a dispute aptly dubbed by the media as the ‘cement saga’, a reference to a long-running spat involving regional competitors in the cement business: Rock Hard Distribution Limited and its subsidiary Rock Hard Cement Limited, on the one hand; and Trinidad Cement Limited, TCL, and its subsidiary Arawak Cement Company Limited on the other.

The dispute would result in five CCJ rulings and several orders.

In its first substantive ruling, issued in April, the court decided on the applicable rate of duty to be paid on Rock Hard cement imported from outside the region into Barbados.

The second ruling concerned the correctness of the cement classification decision made by the Council for Trade and Economic Development, or COTED the Caricom Ministerial Council charged with administering the Common External Tariff, or CET.

Cement occupies a special place in the CCJ jurisprudence. It was the subject matter of the first case brought to the CCJ in its original jurisdiction in 2008, and has featured in many subsequent cases litigated throughout the court’s near 15-year history.

The cement business is one of the few truly regional ones, characterised by cross-border ownership and operations – Rock Hard Distribution Limited, for instance, was incorporated in St Lucia but also operates out of Barbados; and TCL, a Trinidad company, has subsidiaries in Jamaica, Guyana and Barbados.

The genesis of the ‘cement saga’ dates back to the 11th Meeting of COTED in 2001 when Barbados requested, and was granted, a derogation to apply a tariff rate on imported cement that differed from the CET rate of zero to five per cent.

The CET, which member states must “establish and maintain” in accordance with plans and schedules set out by COTED, provides the rates to be charged on goods imported from third states, that is, from outside of the Community. The purpose of the CET, which is a defining feature of the Caricom Single Market and Economy, or CSME, is to inter alia provide uniformity in the rates for goods imported, and allow a margin of protection for community manufacturers from foreign imports. Any derogation or “suspension” from the CET, upward or downward, must be approved by COTED.

Barbados had requested COTED’s approval to increase its rate up to the maximum rate allowed under the World Trade Organization – the “bound rate” – and apply a 60 per cent rate of duty on certain categories of cement, including those which fall under the category ‘other hydraulic cement’. Barbados amended its Customs Tariff legislation to give effect to the 60 per cent rate of duty. Barbados’ reasoning for the derogation was to give a greater margin of protection to the local cement manufacturing sector from more competitive extra-regional cement imports. In 2009, Barbados finally gave legislative effect to this decision via its Customs Tariff (Amendment) Order 2009.

However, in 2015, Barbados decided to no longer apply the 60 per cent tariff on cement and reimposed the CET-consistent rate of duty of 5 per cent. It did not, however, request COTED’s approval to reimpose the CET nor did it reflect this policy reversal legislatively.

As such, regional cement manufacturers, TCL and ACCL, which had benefited from the higher tariff rate, sought and were granted special leave from the CCJ to bring an action against Barbados.

To be clear, the CCJ has exclusive jurisdiction in the resolution of disputes arising out of the Revised Treaty of Chaguaramas.

TCL and its subsidiary argued that Barbados had required COTED’s permission to reimpose the CET rate, and that cement imported by RHCL was not ‘other hydraulic cement’ but ‘building cement (grey)’, which attracted a higher tariff. In July 2018 the CCJ gave an interim order requiring Barbados to reimpose the 60 per cent tariff.

Brewing as well in the background of the Barbados case was a decision by COTED to classify Rock Hard cement imported from Turkey and Portugal as ‘other hydraulic cement’ for purposes of the CET. COTED made that determination, in accordance with advice it sought and received from the World Customs Organization (WCO), the body that administers the classification system – the Harmonized System – on which the CET is based. At issue in that dispute, brought by Trinidad & Tobago, was whether the decision by COTED was proper.

In February 2019, the CCJ ordered the consolidation of the four disputes related to the classification of Rock Hard cement.

In its April ruling, the CCJ held that the derogation Barbados received from the CET included ‘other hydraulic cement’ and that Barbados did not require COTED approval to re-implement the CET. The court stated, as a matter of public policy, that a member state should give reasonable notice of its intention of re-imposing the CET, but found that in this case Barbados had given enough notice to the regional cement manufacturers of its intention to revert to the CET.

Additionally, the court ruled that there is also an implied obligation on member States to give COTED reasonable notice of their intention to revert to the CET. This, according to the court, would ensure COTED’s records are up to date and enable it to discharge its functions as the regional supervisor of external tariffs.

The court also emphasised the importance of certainty in the application by member states of ‘extraordinary rates’ to engender private sector confidence and because changes to the applicable duty directly affect “the integration of national markets into a community market area”.

In August, the CCJ upheld the COTED’s classification decision of Rock Hard cement as ‘other hydraulic cement’ and held that it was binding on all member states. The court found that COTED was entitled to rely on the advice received by the WCO because of that organisation’s pivotal role in the administration of the Harmonised Code.

However, as a matter of public policy, the CCJ made several recommendations following the legal decision. First, it recommended that COTED conduct a study to assess whether the CET for imported ‘other hydraulic cement’ be increased to provide additional protection to regional cement manufacturers in keeping with the obligation placed on COTED by the Revised Treaty to keep the CET under review.

Second, it suggested that member states consider more robust participation in WCO and similar bodies, and collaborate more when undertaking international trade commitments. Third, the CCJ suggested the implementation of a project to harmonise the classification of goods based on WCO standards which would help to increase Caricom trade.

This is the first of a two-part article.

Dr Jan Yves Remy is the deputy director and Alicia Nicholls is a trade researcher with the Shridath Ramphal Centre for International Trade Law, Policy & Services.janyves.remy@cavehill.uwi.edualicia.nicholls@cavehill.uwi.edu