CCJ upholds Caricom CET safeguard in sugar case

A ruling by the Caribbean Court of Justice, CCJ, in an almost two-year-old case, has restated the importance of the 40 per cent common external tariff, CET, to trade within the 15-nation Caricom trading bloc.

The February 1 judgment is being hailed by regional sugar producers, represented by the umbrella Sugar Association of the Caribbean, as a successful outcome, despite the substantive claim by Caricom member, Belize, being dismissed by the court that adjudicates trade disputes stemming from the Revised Treaty of Chaguaramas, RTC, which is the community’s foundation document.

“This court has had reason to affirm, repeatedly, the importance of the obligation on member states to impose and maintain the CET on the importation of extra-regional goods. The court considers it necessary to repeat these injunctions,” the CCJ seven-member panel said in its 49-page decision on the case brought by Belize in September 2020.

The CCJ drew on its previous declarations about the CET, noting its decision in the previous trade disputes, in which it described the CET as “a fundamental pillar” of the Caricom Single Market and Economy, CSME. It noted that CSME is a customs union and a regional trade agreement area covered and protected by Article XXIV of General Agreement on Tariffs and Trade, or GATT, requiring the establishment of a CET.

“This court re-emphasises the importance of maintaining the CET especially in respect of a product such as brown sugar, which is of demonstrable importance to member states such as Belize which manufactures that product. The CET does not guarantee producers of sugar in Belize an assured market, but those producers are entitled to the protection of the market that the tariff is intended to provide. The court also urges the community to superintend the conclusion of the monitoring mechanism for sugar as quickly as possible to ensure that the benefits intended to ensure to the regional sugar producers are not frustrated and impaired,” the CCJ said in its adjudication of the sugar trade impasse.

Belize had taken Caricom trading partner Trinidad & Tobago to court alleging that the twin-island state allowed several shipments of brown sugar from non-member countries Guatemala and Honduras, both located in Central America, to enter the country without the 40 per cent CET tax that is heavily relied on by sugar producers in Belize to safeguard its access to Caricom markets.

CET CREATING ADVANTAGE

The CET serves to increase the price of extra-regional products thereby creating a advantage, for items produced within the CSME, in which most Caricom members participate.

The September 2020 application by Belize on behalf of Belize Sugar Industries Limited, BSI, alleged that between November 2018 and June 2020, brown sugar from Guatemala and Honduras entered the Trinidad market without payment of the applicable CET, resulting in reduced prices and sales of BSI-produced brown sugar. It was Belize’s contention that in allowing this importation, Trinidad breached its obligation under article 82 of the RTC.

Belize sought orders against Trinidad declaring its failure to apply the CET on the sugar import, and that approximately 3,000 metric tons of the commodity from the named countries had been imported in violation of the RTC and the Revised Procedures for the Suspension of the CET. Belize also asked that it be awarded damages to be paid by Trinidad and that its lawsuit costs also be paid.

Belize had initially named the Georgetown, Guyana-based Caricom Secretariat as a respondent in the suit, alleging that the entity failed in its duty to prevent the alleged breach of the trade treaty and had not put in place mechanisms to ensure the protection of the interests of member states through adequate monitoring of the implementation of the CET regime. It charged that Caricom had failed to review the CET, had not assessed the impact of the CET on production and trade within the CSME and had not ensured the uniform implementation of the tariff on imported brown sugar. It sought court orders making these declarations in keeping with its allegations.

Belize also wanted the CCJ to compel the Caricom secretary general to urgently complete a planned mechanism for sugar designed to monitor the requests for imports of sugar into the CSME, place those requests before Caricom’s Council for Trade and Economic Development, COTED, for its consideration and approval; and to report on the adoption of mechanism to the court within three months.

However, the action against the regional body was discontinued in October 2021 after, jointly with Caricom, Belize provided the court with documentation showing that steps had been taken by the organisation to implement the monitoring mechanism.

Caricom was said to have considered the matter raised by Belize, established the Monitoring Mechanism for Sugar, mandated its members to comply with their existing obligations by applying the CET to all brown sugar entering the CSME, conducted consultations on the establishment of a web-service for the monitoring mechanism, and placed the terms of reference for the system for consideration and adoption before the COTED meeting held in November 2020. It said that member states required more time to consult on the TOR and that the COTED agreed to hold a special meeting in February 2021 to consider the TOR’s adoption.

A March 2021 meeting at the COTED was said to have established a ministerial subcommittee aimed at completing consideration and adoption of the terms of reference for the monitoring mechanism. Following two meetings of the subcommittee in July 2021, the terms were said to have been approved at a COTED meeting in October 2021.

Caricom’s lawyers had argued that the case against the institution was premature and unfounded. It was Caricom’s assertion that only member countries have the responsibility to ensure the imposition of the CET and that any failure of states to ensure the imposition of the tariff was not a reasonable ground for bringing a claim against the community. Caricom said its responsibility was to make every effort to urge member states to impose the CET on importation of extra-regional products, and that it had done so.

The community’s lawyers argued, too, that it was Belize’s right and responsibility to request a special meeting of the COTED to deal with the issue of alleged non-imposition of the CET on extra-regional brown sugar but the member country had not done so between May and November 2019.

Trinidad filed its defence in February 2021 denying that it had permitted the importation of extra-regional brown sugar without imposing the 40 per cent CET in breach of its obligations under the RTC. Its denial was accompanied by customs documents which it provided the court but refused to share in full with Belize. Trinidad insisted that its customs law forbade the disclosure to Belize of documents and informatWion relating to specific importers. Instead, it provided Belize with summaries of information generated by searches of its customs database. Belize’s challenge of the withholding of the information was not upheld by the court.

The Caricom member conceded that extra-regional brown sugar was imported into the country between November 2018 and June 2020 but said the 40 per cent CET was applied to those imports. Any falloff in BSI’s sugar sales to Trinidad, it asserted, did not mean that the CET was not applied to imports of extra-regional sugar, but rather, to Trinidadian importers possibly having sourced their supplies more cheaply than they would have from Belize.

Trinidad also challenged Belize’s right to present a claim on behalf of BSI, as it contended that although the company was incorporated in the Caricom member country, it is not a state entity and its owners resided in the United States. As such, its lawyers argued, the twin-island republic had no case to answer.

This point was dismissed by the CCJ, which ruled that in its power to determine disputes concerning the interpretation and application of the RTC, the court had the competence to determine its jurisdiction, and further, was empowered by the treaty to grant special leave to private entities or persons of any contracting party to the RTC, to be allowed to appear as parties in proceedings before the court.

The CCJ ruled in favour of Trinidad and dismissed Belize’s original case on the grounds that the circumstantial evidence produced by the Central American-located Caricom country was unauthored, and as such, its allegations against Trinidad were not proved. It concluded that the documents relied on by Belize did not indicate that the CET was not imposed as there are no references to pricing.

Each party was ordered to bear their own costs.

huntley.medley@gleanerjm.com