The European Union has imposed adjusted counter-balancing measures in response to the continuation of payments by the US government to US companies under the terms of the Byrd Amendment, which has been ruled by the WTO as incompatible with WTO rules.

The annual adjustment is required by the WTO, because the duties are tied to the annual disbursement by the US government. Since the amount paid to US companies from duties collected on EC products has increased in 2005, the level of retaliation will also increase. From today, May 1,2006, measures will be set at $36.91 million, an increase on the $27.81 million applied in 2005.

8 new products will consequently be added to the list of products subject to the 15% additional import duty. These products are different type of blankets, paper products, photocopying apparatus and drills. These products are taken from an agreed list.

While the Byrd Amendment issue has been a long-running irritant in the US- EU trade relationship, it is important to note that the huge bulk of EU-US trade is trouble-free. The EU has always worked hard to ensure that the Byrd issue does not unnecessarily affect the highly successful wider EU-US trading relationship.

The repeal of the Byrd Amendment contains a transition clause that allows the US government to continue paying anti-dumping and countervailing duties collected on imports made before 1 October 2007 to US companies.

In the US, such duties are often collected several years after the import took place. This means, in turn, that the Byrd Amendment will remain in operation for a number of years even after October 2007, even if it has technically been repealed.

Following a complaint by the EU and ten other WTO members, payments made under the Byrd Amendment have been ruled by the WTO to be injurious to non-US companies. While they continue, the EU and other co-complainants have strong grounds to continue to take counter-balancing measures.

As long as distributions continue, the United States will not be in compliance with WTO rules. Because our counterbalancing measures are tied directly and exclusively to the Byrd payments they will cease immediately the payments cease.

This is not just a question of principle. The US administration has estimated that it will distribute more than two billion US dollars in payments in the next two years.

Since May 1, 2005, an additional import duty of 15% has been applied on paper products, textiles, machinery and sweet-corn originating in the United States (selected from the list notified to the WTO in November 2004).

The WTO award determined that the level of retaliation we may apply is 72% of the amount disbursed to US companies from duties collected on EC products in the most recent distribution. We consequently have a WTO obligation to adjust annually our retaliatory measures, whose level will mirror the fluctuations of the disbursements under the Byrd Amendment. Council Regulation (EC) No 673/2005 which imposed retaliation in the first place on 1 May 2005 delegated competence to the Commission to implement this obligation of annual adjustment.

On February 8, 2006, the United States enacted the Deficit Reduction Act of 2005, which among other provisions, repeal the Byrd Amendment but allows for a transition period of two years or more.

The repeal will not affect distribution of the anti-dumping and countervailing duties collected on imports made before October 1, 2007. Under US practice, collection of duties does not take place at the time of imports since the duty rate may be revised every year and the revised rate is applied retrospectively to the imports of the previous year. It is only after completion of this so-called administrative review that collection will take place. Collection may also be suspended as a result of on-going litigation. Anti-dumping and countervailing duties are therefore usually collected several years after the import, which means, in turn, that distribution under the Byrd Amendment may continue for several years after October 1,2007