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A provision in the Family Smoking Prevention and Tobacco Control Act (Public Law 111-31) that the U.S. Congress enacted in 2009 prohibits the production, importation, or sale in the United States of cigarettes containing clove or certain other additives. Indonesia has challenged this law and requested consultations with the United States (the first step in the dispute-settlement process of the World Trade Organization).
Public Law 111-31 adds a new chapter to the Federal Food, Drug, and Cosmetic Act (21 U.S.C. 301 et seq.). That chapter brings tobacco and tobacco products within the regulatory authority of the Food and Drug Administration. The bill had wide support in Congress, being approved by the House of Representatives by a vote of 298-112 on April 2, 2009, and in the Senate by 79-17 on June 11, 2009. President Obama signed the bill into law on June 22, 2009, and the ban on flavored cigarettes came into effect three months later.
In addition to regulating tobacco, the bill imposed an outright ban on certain types of flavored tobacco. One of the provisions of the new chapter (section 907) reads in relevant part as follows:
a cigarette or any of its component parts (including the tobacco, filter, or paper) shall not contain, as a constituent (including a smoke constituent) or additive, an artificial or natural flavor (other than tobacco or menthol) or an herb or spice, including strawberry, grape, orange, clove, cinnamon, pineapple, vanilla, coconut, licorice, cocoa, chocolate, cherry, or coffee, that is a characterizing flavor of the tobacco product or tobacco smoke.
That ban on clove cigarettes and other flavored cigarettes applies both to domestic and imported goods. The ban specifically does not cover menthol, however, a point that is critical to the claim that this is a discriminatory measure. While there is no production of clove cigarettes in the United States, and this product is consumed only in a small niche of the market (primarily young persons), menthol cigarettes are both widely consumed and produced by U.S. firms. An Indonesian trade official was quoted in an account by Reuters as saying that the United States must 'prove that menthol doesn't have a bad impact' in order to win the case.
Apart from minor amounts imported from Canada, India, and Nicaragua, virtually all U.S. imports of clove cigarettes came from Indonesia. Imports of this product (HTS item 2402.20.1000) totaled $15.6 million in 2008, then dropped to $8.8 million in 2009 (all of which took place before October) and zero in the first three months of 2010.
Indonesia has raised numerous questions regarding the WTO-legality of the ban. In its request for consultations with the United States, Indonesia alleged that this law is inconsistent with three articles of GATT 1994: III:4 (national treatment), XX (general exceptions), and XXIII:1(a) (nullification or impairment). Indonesia further argues that the ban violates articles 2 and 12 of the Technical Barriers to Trade Agreement, and articles 2, 3, 5, and 7 of the Sanitary and Phytosanitary Measures Agreement.
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