U.S Kretek Ban

Last September, the United States Food and Drugs Administration banned Cigarettes with Clover, Fruit or Confectionery flavors, saying that they were particularly attractive to children.

As a consequence, the Kretek Cigarette i.e. Clover flavored Cigarettes that dominates the market in Indonesia can no longer be exported to the United States.

According to The Jakarta Globe, based on World Trade Organization rules, Indonesia and the U.S has 60 days to settle their differences, otherwise Indonesia can request the organization to help settle this matter. And right now the Indonesian government is preparing to take this step.

April 13, 2010

Jonathan Lynn

Indonesia Takes US Kretek Ban to World Trade Body

Geneva. Indonesia is launching a formal dispute at the World Trade Organization against the United States over its ban on clove-flavored kretek cigarettes, an official at Indonesia’s WTO mission said on Monday.

Like many trade disputes, this one involves health standards and whether they are being abused for protectionist purposes. It centers on the kretek clove and tobacco blends that dominate the market in Indonesia but are little smoked abroad.

The US Food and Drug Administration banned cigarettes with fruit, confectionery or clove flavors last September, arguing they were particularly attractive to children. But the US ban does not include menthol-flavored cigarettes widely produced in the US and smoked by about 19 million Americans. Indonesia argues this discriminates against foreign producers of flavored tobacco to help US manufacturers.

“They have to prove menthol doesn’t have a bad impact,” the official said.

US tobacco companies told the FDA on March 31 that adding menthol did not make cigarettes more harmful or addictive.

Under WTO rules, the two countries now have 60 days to resolve their differences, or Indonesia can ask the WTO to create a panel of experts to rule on the issue.

The case is only the fifth brought by Indonesia, the world’s 21st biggest exporter, at the WTO.

Indonesia is the world’s fifth-biggest tobacco market, and kretek cigarettes still account for most of the market. Exports of cigarettes and cigars totaled $358 million in 2008, the last year for which data is available. Only a relatively small number of kretek cigarettes is exported, and they are coveted by some young people in the US who see them as an alternative to more conventional brands.

Foreign tobacco producers, keen to gain a bigger share of expanding markets for cigarettes in emerging economies, have been buying up Indonesian manufacturers to acquire kretek brands and expertise and build on the potential for sales.

In June last year the world’s No. 2 cigarette maker, British American Tobacco, bought an 85 percent stake in Indonesia’s fourth-largest cigarette maker by volume, PT Bentoel Internasional Investama.

Philip Morris International acquired the majority of PT Hanjaya Mandala Sampoerna in 2005. Other Indonesian manufacturers include PT Gudang Garam and unlisted conglomerate Djarum.

Supervising the consultations with Indonesia will be one of the first tasks of the new US ambassador to the WTO, Michael Punke, whose Senate confirmation was held up for six months by a Republican senator from the tobacco-growing state of Kentucky.