Indonesia - launches formal dispute with WTO over U.S, ban on clove cigarettes..

April 13, 2010 - Indonesia is launching a formal dispute at the World Trade Organization (WTO) against the United States over a U.S. ban on clove-flavored cigarettes, an official at Indonesia's WTO mission said on Monday, April 12th.

Back on June 19, 2009 we reported that Indonesia, the largest maker of clove cigarettes, may complain to the WTO about U.S. legislation that gives regulators expanded powers to regulate tobacco products, including possible bans on flavors such as clove but NOT menthol..

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

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

Kretek cigarettes account for the bulk of tobacco consumption in Indonesia, the world's fifth biggest tobacco market, although unflavored or "white" sticks are gaining in popularity.

Indonesian exports of cigarettes and cigars totaled $357.8 million in 2008, the last year for which data is available.

Only relatively small numbers of kretek cigarettes are exported, and anecdotally they are coveted by young people in the United States 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 white stick sales.

Last June, 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 Hanjaya Mandala Sampoerna in 2005. Other Indonesian manufacturers include Gudang Garam and unlisted conglomerate Djarum

Reference: Indonesia takes U.S. to WTO over clove cigarette ban, Jonathan Lynn GENEVA (Editing by Michael Roddy and Peter Cooney), 4/12/2010.

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