CCJ rules for dramatic cut to duty on imported cement product
The Caribbean Court of Justice, CCJ, on Wednesday ruled that the regional tax payable on ‘other hydraulic cement’ – a product used to stop water and leaks in concrete and masonry structures – should be set at five per cent.
The ruling endorses a rate that is a fraction of the 60 per cent tariff that Barbados-based Rock Hard Cement had once paid on the imports from Portugal and Turkey, dealt a blow to regional cement producer Trinidad Cement Limited and its Barbados subsidiary Aarawak Cement.
The case was heard in the CCJ’s original jurisdiction, where the court interprets the Revised Treaty of Chaguaramas.
In 2001, Caricom’s Council for Trade and Economic Development, COTED, granted Barbados an exemption of the regional Common External Tariff, CET, of zero-five per cent so that the state could apply taxes of 60 per cent to categories of cement described as ‘other hydraulic cement’.
The regional tariff is intended to offer goods produced and distributed in the region an advantage over imports. In 2015, Barbados decided to return to the CET and apply a five per cent tax on the ‘other hydraulic cement’ imported by Rock Hard Cement Limited.
In its ruling, the CCJ decided that where COTED allowed a member state to charge taxes higher than the regional tariff on the importation of goods from outside the region there was no need for the state to obtain approval from the council to revert to the CET.
However, the court ruled that in such circumstances, the member state should give reasonable notice of its intention of returning to the regional tariff, saying it would ensure that regional businesses enjoy transparency, certainty and predictability of tax structures.
According to a statement from the court after the case was decided, it would be “reflective of good administrative practices, preserved the sovereign autonomy of the member state and ultimately enhanced the overall functioning of the CSME (Caribbean Single Market and Economy).”
The court also found that the regional manufacturers of cement – Trinidad Cement and Arawak Cement – which had brought the action against Barbados, had notice for several years of the country’s intention to revert to the regional tariff and therefore could not succeed in their action.
Rock Hard Cement, as intervener in the case, had applied to discharge interim measures ordered by the court in a ruling on July 17, 2018, directing the state of Barbados to restore and enforce the 60 per cent rate which COTED approved in 2001 on ‘other hydraulic cement’ imported from outside the Caricom bloc.
The claimants, Trinidad Cement and Arawak Cement brought an application against Barbados claiming a declaration that the country contravened the Revised Treaty of Chaguaramas by unilaterally reducing and/or altering the CET on ‘other hydraulic cement’ from the rate approved by COTED from 60 per cent downward to five per cent.
They also claimed that Barbados misclassified extra-regional cement imported by Rock Hard as ‘other hydraulic cement.’
Trinidad Cement and Arawak Cement obtained a court order for interim measures in reaction to Rock Hard’s importation of cement from Turkey into Barbados. It was on the basis that the COTED approved tariff on other hydraulic cement was 60 per cent that the court made the order for interim measures against Barbados.
According to a judgment delivered last year, Trinidad Cement and Arawak Cement’s underlying claim was that Barbados was obliged to levy a tariff of 60 per cent.
COTED, the organ of the Caribbean Community created by the Revised Treaty of Chaguaramas that sets the CET on goods originating outside the community, had set a tariff of 15 per cent on building or grey cement and zero to five per cent on other hydraulic cement.
The claimants’ case was that in 2001, at the request of Barbados, COTED increased the tariff which Barbados may levy on cement to 60 per cent.
In a judgment delivered last year before the resolution of the substantive dispute, the court noted that in an affidavit in support of the application for the discharge of the interim measures, Mark Maloney, executive chairman of Rock Hard, said those measures spelled disaster for the company and its ancillary businesses.
He said Rock Hard is part of a group of companies operating in Barbados which utilises the bulk of the cement imported into that country for carrying on construction and manufacturing of precast concrete for all types of structures, such as housing solutions, commercial buildings, hotels, condominiums, and roofing titles for the local export market.
According to the court document, Maloney said that Rock Hard was established on the basis of a five per cent rate of duty, and its business model and prices were derived on that basis.
He also said the company was unable to sustain imports at a rate of 60 per cent and if the order continues, then Rock Hard and its related companies will have to consider ceasing business, which would result in losses such as job cuts.