Saturday, July 3, 2010

U.S Kretek Cigarette Ban

On September 2009, the United States of America issued the Family Smoking Prevention and Tobacco Control Act that prohibits the sales of all kinds of flavored cigarettes including Indonesia's Kretek cigarettes in the U.S, except menthol cigarettes.

Indonesia thought that this law violated regulations of theWorld Trade Organization (WTO), because it excemps menthol cigarettes which is actually flavored cigarettes like Kretek. Therefore Indonesia has brought this matter to WTO's dispute settlement body.

Please find some details below that I have quoted from an article in Kompas.

I hope that the WTO would make a fair decision on this matter.

Indonesia Urged US to Scrap Its "Kretek" Cigarette Ban
Jumat, 2 Juli 2010 | 10:08 WIB
AP/Steve Helber.
In this photo made May 18, 2009, flavored cigarettes are on display at a tobacco store in Richmond, Va. Kretek International Inc. , the nations top distributor of clove cigarettes, is offering fans a new way to get their fix after the spice-flavored cigarettes are banned later this year cigars. 
JAKARTA, - Indonesia has urged the United States to lift its ban on aromatic cigarette imports that would cause Jakarta to cut its ’kretek’ (clove-flavored) cigarette exports to that country and reduce its foreign exchange earning.

"Indonesia’s foreign exchange income from kretek cigarette exports is expected to drop significantly this year due to the imposition of the ban," Frans Rupang, director for prosecution and prevention of the Directorate General of Customs, said.
The United States has imposed the ban since September 2009 based on its law that prohibits the entry into the country of aromatic tobacco, yet both nations are still negotiating the matter. According to US Ambassador to Indonesia Cameron R Hume, Indonesia and the US are still negotiating the US ban on Indonesia’s kretek cigarette exports to the United States.

Speaking on the sidelines of the US Independence Day anniversary which falls on July 4, in Surabaya, East Java, on Thursday evening, Cameron R Hume said that Indonesia was of the view that the ban violated the World Trade Organization (WTO)’s regulations. Therefore, the United States and Indonesia were discussing the matter but the envoy said he could predict what would come out of the negotiation process.

"Let’s wait," he said.

However, if the United States remains to impose the ban, Indonesia’s cigarette exports and income from this sector would decline significantly. Frans Rupang said that in 2009 cigarette exports contributed 6.451 million dollars to the state.  Indonesia’s kretek cigarette exports to the United States in 2008 totaled 298.932 million pieces worth US$6.662 million and in 2009 they stood at 267.308 million pieces worth US$6.451 million.

Since the imposition of the ban,  there was practically no Indonesia’s kretek exports to the United States this year.  Rupang said that the contribution to the state of the country’s kretek cigarette exports to the United States was the biggest one compared to that exported to other countries. Therefore, the ban reduced Indonesia’s income from kretek exports significantly, he said.

According to the Ministry of Trade, exports of various kinds of cigarettes to the US in 2007 reached US$11,165,432 and dropped to US$9,703,991 in 2008 and US$8,338,419 in 2009.  The realization of exports of the product from January to March 2010 reached US$2,531,317 higher than in the same period last year that was recorded at US$2,531,989.

During the period however no exports of cigarette tobacco that include clove cigarettes were done. This happened following the implementation of the Family Smoking Prevention and Tobacco Control Act as of September 2009. The law prohibits sale of all kinds of flavored cigarettes including clove cigarettes in the US except menthol cigarettes.

The Indonesian government has asked the WTO to solve its dispute over the ban of its kretek exports to the United States. Washington has banned the commodity’s imports based on its health law which also prohibited the importation of other aromatic cigarettes in an effort to prevent youths from being addicted.
Indonesia has previously taken the ban to Dispute Settlement Body of the WTO with regard to the imposition of the Family Smoking Prevention and Tobacco Control Act of 2009. The Indonesian government considers the law running against the WTO regulation because it exempts menthol cigarettes while menthol and clove cigarettes are like products according to Article 2.1 of the Agreement on Technical Barriers to Trade or TBT Agreement.

Around 99 percent of clove cigarettes sold in the US are imported from Indonesia while all menthol cigarettes are produced in the US and because of that, according to the Indonesian government, the US implicitly bans imports of clove cigarettes.

The government considers the ban discriminative. As a member of the WTO,  the US must have carried out its international obligation as mentioned in the TBT Agreement and the General Agreement on Tariff and Trade or GATT of 1994.

The director general of international trade cooperation of the ministry of trade, Gusmardi Bustami, said the move to take the matter to the WTO dispute settlement body was the last resort. He said the government has already expressed its opposition to the regulation while it was still being discussed at the US Congress.
Indonesia, he said, has also conveyed its complaint in various bilateral forums at senior official and ministerial levels for more than four years but it had come to no avail.
"This is about principles. There has been discrimination," Gusmardi said.
In the DSB WTO meeting on June 22, 2010 in Geneva, the Indonesian delegation conveyed reasons and legal basis for the need to form a panel to deal with the problem.

He said Indonesia had asked the panel to investigate the violation by the US against Article III of the GATT of 1994 and the use of Article XX of GATT 1994 without providing scientific evidence and meeting the provisions in a number of articles in the TBT and Sanitary and Phythosanitary Act (SPS).

In the meeting the US delegation expressed disappointment over the Indonesian move.  The US has asked Indonesia to reconsider its request for the establishment of a panel to investigate the case.
Gusmardi said the rejection by the US was common, had often happened in a DSB meeting because the US as a disputed party has a right to block the move on the first occasion in line with the WTO’s provision on Dispute Settlement Understanding.


colson said...

I'm sorry for the Americans who would have to miss the sweet fragrance of kretek cigarettes.

Well, seriously: th US is the main advocate of free trade. So it is a little odd to prohibit import of cigarettes (to exempt flavoured cigarettes, with a counter exception for menthol, seems to be odd, if not weird). So fair would mean: allow the import.

On the other hand any reasonable measure which discourages and limits ( or rolls back) individuals to start or continue a habit of smoking, is a blessing to people. So a caps on the import and sale might help.

By the way: what is your own definition of a 'fair decision in this case?

umihoney said...

It does seems unfair. But I am for reduction of cigarette sales anywhere regardless of whether they are flavoured or not. Somehow if we are serious in this issue an alternative to tobacco industry must be found.

Meutia Halida Khairani said...

it seems odd put an exception only to menthol cigarettes..
but honestly, i dont even care about the cigarettes company because i hate smoke. hahaha

TUKANG CoLoNG said...

ada Djarum versi Amerika ya?

H. Nizam said...

The U.S has been discriminative in adopting the law by exempting the menthol cigarettes which is actually a flavored cigarette, thus similar to kretek. This is unfair for Indonesia and violates WTO rules.
So my idea of WTO 'fair decision' would be one that ask the US to accept Kretek.

Individually, I share your opinion that any attempt to reduce smoking would be okay. But the case here is about discriminatory treatment something that the US has always say unfair.

I understand you, because I also don't smoke. But this is about unfair treatment in international trade.

Saya tahu tentang adanya kretek dengan merek tertentu yang dibuat di AS. Tapi masalahnya hukum tsb melarang rokok yang punya rasa kecuali menthol.

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H. Nizam said...

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Thank you for following my blog on Google Friend Connect. I will link your blog as per request and show on my blog list.

Ron Abagnale said...

Interesting article. Hope you can have more of these.

H. Nizam said...

Ron Abagnale,
Thank you for the kind words.

Link Tea said...

I'm coming bos to read your post.. n it's good article

Saung Link said...

wow... down again the value of Indonesian exsport

CherylT said...

Smoking is so harmful, not just to the person who smokes but also the people who live around them. If the tobacco lobby in the U.S. wasn't so powerful, cigarettes would have been outright banned years ago with no exceptions. Not trying to discriminate against your country, but I hope the U.S. continues the ban and bans even more tobacco imports for health reasons.

H. Nizam said...

Thank you for your kind comment, I can understand your reason because
I also don't smoke.
My post talked about international policy for fair treatment in trade that has been signed by the U.S and Indonesia.

H. Nizam said...

Thank you very much for your visit and comment.

Yes it will surely effect our foreign trade

Rob Baiton said...

I am a non-smoker.

I would have no qualms if tobacco was outlawed across the globe.

I appreciate that your post is focused on fairness and the just application of the prevailing laws and regulations as they relate to fair trade.

I also appreciate that the ban will in fact have serious and significant consequences in the small villages in Indonesia that provide significant numbers of employees to factories dedicated to the export of kretek cigarettes. Most of who will go from steady employment to unemployment overnight.

Perhaps a follow-up post can focus on how the government might seek to absorb these newly unemployed people back into the workforce?

e-liquid said...

I admit I'm not a smoker but charging tax on e-cigarette consumers is not a fair deal.