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Ds8 Japan Taxes

This document summarizes a WTO dispute settlement case from 1996 regarding Japan's taxes on alcoholic beverages. The panel found that Japan's tax rates on imported vodka were higher than similar domestic shochu drinks, violating Article III:2. The panel did not consider whether the higher taxes resulted in disadvantages for imported products or compare taxes between all domestic and imported substitutable goods. On appeal, the US argued the panel's finding created a dilemma, but pushed for an "aims and effects" approach rather than promoting an asymmetric impact test. The Appellate Body also did not significantly rely on the asymmetric tax treatment of overall imports and domestic goods.

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Vishwesh Singh
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128 views2 pages

Ds8 Japan Taxes

This document summarizes a WTO dispute settlement case from 1996 regarding Japan's taxes on alcoholic beverages. The panel found that Japan's tax rates on imported vodka were higher than similar domestic shochu drinks, violating Article III:2. The panel did not consider whether the higher taxes resulted in disadvantages for imported products or compare taxes between all domestic and imported substitutable goods. On appeal, the US argued the panel's finding created a dilemma, but pushed for an "aims and effects" approach rather than promoting an asymmetric impact test. The Appellate Body also did not significantly rely on the asymmetric tax treatment of overall imports and domestic goods.

Uploaded by

Vishwesh Singh
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as DOCX, PDF, TXT or read online on Scribd
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Name:Vishwesh Singh

Ba llb 8
En.no. 03719103819

INTERNATIONAL TRADE LAW ASSIGNMENT

Dispute settlement at WTO


Japan — Taxes on Alcoholic Beverages Case 1996
Japan replaced the GATT incompatible regime with a new tax system,
but again designed it with different beverage categories in such a
manner that imported drinks were predominantly subject to higher
specific tax rates than like domestic products. Whether these higher
specific rates truly resulted in a disadvantage in competitive
opportunities expressed in the price ratio of the different drinks,
remained somewhat doubtful. This is, however, immaterial for the
purpose of exploring in what manner the sub-categories were
compared in the Article III:2 assessment.

In the new dispute, the panel confined itself to establishing that vodka
was obviously taxed in excess of shochu, without even adding the
attributes imported/domestic. In respect of Article III:2, second
sentence, the panel similarly established that the tax rates applicable
to the different directly substitutable drinks at issue were dissimilar by
more than de minimis. Hence, Japan afforded protection to shochu in
contradiction to the GATT. Again, the panel did not add the attributes
of origin contained in GATT Article III:2 and, more importantly, the
comparison did not take place between the entire groups of domestic
and imported substitutable goods. Only after making these findings
did the panel refer to the fact that the favored “shochu is essentially a
Japanese product.”
The reasoning, therefore, does not reflect the asymmetric impact
approach, although the facts certainly allowed it and the European
Communities had expressly relied on it and accordingly furnished
market share numbers. Interestingly, the U.S.A. who won at the panel
stage appealed and referred precisely to the dilemma of the diagonal
test, that tax distinctions among like products automatically result in a
violation of Article III:2, first sentence. Rather than promoting an
asymmetric impact test, the appeal in vain pushed for the adoption of
the “aims and effects” approach to remedy the dilemma.

The Appellate Body also did not significantly rely on the factual
asymmetry in the tax treatment of imports and domestic goods as a
whole. The report neither provides support for the diagonal test,
except for the fact that the Appellate Body upheld the panel’s
reasoning, which however should not be overestimated given the facts
of the case.

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