Bridges Weekly Trade News Digest • Volume 12 • Number 37 • 6th November 2008
WTO Rules on India-US Liquor Dispute
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The WTO’s Appellate Body issued a mixed ruling on 30 October that concluded that a WTO dispute panel had erred in rejecting a US complaint against Indian alcohol duties. However, the judgement did not call on New Delhi to withdraw the measures.
Both India and the US had appealed the June 2008 ruling that largely favoured India. In that judgement, a WTO panel rejected Washington’s claim that New Delhi was illegally imposing extra duties (’additional’ duties and ‘extra additional’ duties) - in addition to basic customs duties - on imported US alcoholic products such as beer, spirits and wine, resulting in combined tariffs of up to 550 percent.
New Delhi had argued that the tariffs were allowed because they simply offset certain internal taxes, such as local or value-added taxes.
But the Appellate Body reversed the panel’s decision (WTO/DS360/AB/R) that any import tariff offsetting an internal tax need only “serve the same function” as the internal tax but not necessarily be the equivalent amount of the internal tax. The ruling also found that the extra duties are inconsistent with India’s WTO tariff concessions. Under WTO rules, India can charge a maximum 150 percent duty on the alcoholic imports.
“The Appellate Body reversed a deeply flawed panel report and reaffirmed a fundamental WTO rule that Members cannot impose duties on imports that exceed their tariff commitments,” US Trade Representative, Susan Schwab, said in a statement welcoming the ruling.
“This is an important decision for all WTO members, particularly at a time when they are negotiating tariff commitments,” she said.
While the report faulted India for failing to justify the import tariffs, it also said that the US had “failed to establish that the additional duty and the extra-additional duty are inconsistent with India’s WTO obligations.”
But in the end the ruling has proved largely symbolic. The Appellate Body did not recommend any changes to India’s import rules, as India has already lifted most of the ‘additional’ duties and modified the ‘extra-additional’ charge to provide a refund mechanism, eliminating discrimination against US imports.
In this sense, Indian officials have claimed that they were also victors in the dispute, as the WTO did not find any inconsistencies with India’s current duties, reported the Economic Times.
However, a lack of forthcoming information from India prevented the Appellate Body from determining whether the country’s tariffs in fact exceeded the amount charged on domestic products, the ruling said.
The US, which is the world’s third-largest exporter of spirits and sixth-largest exporter of wine, filed the complaint against India in May 2007.
The EU recently restarted a separate WTO complaint against India over the same issue and, like the US, argued that the tariffs prevent their products from breaking into the Indian market. India’s 1.1 billion population represents an alcohol market with huge potential, as it currently registers few imports.
ICTSD reporting; “WTO appeals body issues mixed ruling on US, India spirits spat,” AGENCE FRANCE PRESSE, 31 October 2008; “WTO supports US objection to India’s wine duties,” BUSINESS STANDARD, 31 October 2008; “U.S. wins WTO appeal in India wine, spirits case,” REUTERS, 31 October; “WTO ruling on wine duty is a damp squib,” THE ECONOMIC TIMES, 1 November 2008; “WTO issues ruling in US-India wine dispute,” THE ASSOCIATED PRESS, 1 November 2008; “WTO rules against India on wine duties: US,” THE ECONOMIC TIMES, 2 November 2008.
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