Bangkok Mango Problem

The Government of the Kingdom of Thailand, a WTO member, and the Mango Growers of Thailand (MGT), a trade association, are your clients. MGT and the Government of Thailand are upset at the United States laws and regulations which they claim to be discriminatory to them and their product. They would like to bring an action at the WTO. The facts presented to you are as follows.

Mango is imported into the United States from a couple of Caribbean countries and Mexico. It is also produced internally in the United States. Thai or Bangkok mango however is different from any of the mangos produced in either the Caribbean, US or Mexico. It looks and tastes different. Bangkok mangos are more delicate, have softer skin, are juicer, and have a different texture. On the other hand, Thai mangos do not last as long as other types of mangos once they are picked and packed in crates and get bruised easily during transportation and handling.

Your clients believe that if the Bangkok mangos were allowed to enter into the US market they would be quickly take over the mango market because if a consumer has the choice between mangos from Thailand or from Mexico and California they would choose Thai mangos because of its taste and texture. That is why, they argue, the US government has been protective of the domestic mango producers.
Specifically, the Thai government and MGT are objecting to the following practices by the US government which effect the sale, distribution, and importation of Thai mangos into the United States :

(a) Tariff change. Prior to 1996 United States had applied a 20% ad valorem tariff rate on all fresh mangos, a rate which had been had been since 1963 bound under GATT 1947. In 1996, the United States adopted a tariff/quota scheme and in effect withdrew the 20% ad valorem tariff rate and replaced it with a complex tax system: First, it replaced a single tariff rate with a two step tariff/quota system. Under the new system the second rate, Tariff Rate B, was applicable to over-the quota imports. Tariff B schedule was a much higher tariff rate and was designed to be trade prohibitive and prevent over-quota shipments. Under the 1996 law, a single quota was established for all mangos irrespective of source, type or biological genrea. Once the quota of imports had been met for all mangos all subsequent imports of mango were charged at the higher Tariff B rate.

The 1996 law provided the following new rates which are still in effect:

(1) Tariff A schedule which had two specific rates for mangos based on biological genrea or species of mangos:
A. Specific rate 1 at 9.9%;
B. Specific rate 2 at 18.5%.
All Thai mangos fall under Tariff A rate 2 at 18.5% based on their biological genrea or species. Small portion of mangos imported from the Caribbean also fall under rate 2.

(2) Tariff B schedule (45%). [Applicable to over the quota imports of any kind of mango, irrespective of biological genrea or species.]

(3) In addition to the change in tariff rate, importers felt that the changing of valuation method from ad valorem to specific increased tariff liability and made that liability harder to predict.
[NB: Your independent research shows that just last month (August 2006), after the U.S. had withdrawn its bound 20% ad valorem tax rate on mangos for some time, US did notify the WTO about its intention to renegotiate the tariff binding on mangos as permitted under GATT.]

(b) US customs import licensing regulation 1289 which provided that all mangoes imported into the United States must have import licenses and must go through the licensing procedure each time an importer wants to import mangos into the United States. The usual import licensing procedure can take up to two weeks and has two rounds of applications as well as licensing fees which add to the cost of the imported mangos.

However, US regulations provide certain exemptions to the traditional and mandatory import licensing requirements:

(1) hurricane licenses were issued within 1-2 days for those countries that import mango into the United States and have either just suffered from a hurricane or are likely to suffer from hurricane, i.e., have hurricane season. In recent years, hurricane licenses have been issued as a matter of course to any imports from the Caribbean. Assume Thailand will never be able to take advantage of this exception because it does not have a hurricane season as it is defined under the U.S. law.

(2) Mexican imports were exempt from all licensing requirements under NAFTA.

(3) Licensing fees are waived both in case of Mexico and when hurricane licenses are issued.

(c) US Food and Drug Administration regulations require that all crates of mangos from Thailand be individually checked and quarantined to make certain they are not infested by the Durian Beetle. This examination can take two weeks or perhaps longer and given the delicate and perishable nature of the Thai mangos it has become in itself a "de facto" ban on imports of mango from Thailand. These regulations were formulated 10 years ago when Durian Beatles were found in a region of Thailand that produced mangos. However, no cases of Durian Beatle infestation has been detected for almost a decade and mangos are constantly monitored in Thailand by the Royal Thai Department of Health for the recurrence of the Durian Beatle infestation.

Furthermore, all Thai mangos that are exported to European union are treated with Pesticide K which is proven to be 100% effective against the Durian Beatle as well as many other forms of infestation.

Thai officials have tried to negotiate with the US government to change its regulations since 1995, but have enjoyed no success. They suspect that the mango lobbying groups both domestically (Florida and California growers) and other foreign importers of mango to the US market are too powerful and will not purposefully allow any change in the law even though they are aware that the Durian Beatle has been eradicated from Thailand.

(d) Environmental, health and safety legislation: In April 1, 2005, the US passed an environmental legislation prohibiting the use of Pesticide K in the United States. It also prohibited the import of any product, treated with any amount of Pesticide K. Although Pesticide K is not harmful to humans, US scientists have determined it to be fatal to some endangered species of plants and generally harmful to the ecosystem. The Thai Government questions this data and continues to use Pesticide K quite freely as do almost all other countries of the world on selected fruits and vegetables.

Recently, legislation has been introduced in the US Congress that would permit a certain small amount of Pesticide K to be used by domestic fruit and vegetable growers. This legislation has not been enacted but rumors are that it probably will be passed.

Look at this problem particularly from the perspective of GATT/WTO MFN, Non-Discrimination and Tariff-Binding provisions. Analyze separately each of the different US governmental measures identified and the legal basis in GATT/WTO for objecting to them as we go through our initial review of basic GATT/WTO pillars. Please identify as many provisions of the WTO/GATT system that you think would be useful to your client's case. Identify the weaknesses and strengths of each argument.

Remember: The Trade Minister and the MGT representatives know nothing about the WTO or the dispute settlement process. They are very upset however that after many years of talking with the US government they have not been able to reach a solution that would open up the US market to mangos from Thailand which are universally recognized as being the best mangos in the world.  What is the issue in trade law terms?