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Briefing Case Wto/Ds8

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1. Issues in the Panel proceeding 3
2. Issues in the Appellate proceeding 3

Anh/chị hãy đọc vụ Japan Alcoholic Beverages, WTO, Japan Alcoholic Beverages Panel Report, WT/DS8/R [1996] và trả lời câu hỏi: - Anh/chị có đồng ý với lập luận của các bên và phán quyết của DSB không? Tại sao? - Anh/chị hãy chỉ ra vấn đề pháp lý, vấn đề này đã được giải quyết như thế nào? - Anh/chị hãy đưa ra một số lập luận và lời tuyên án khác.
On 21 June 1995, the European Communities (“EC”) filed a request for consultations with Japan. The dispute related to the internal taxes levied by Japan on certain alcoholic beverages. Pursuant to Japanese Liquor Tax Law, spirits exported to Japan were discriminated against as a substantially lower tax was levied on “shochu” than on whisky, cognac and white spirits. For example, the tax rates per litre of pure alcohol levied on "shochu A" and shochu B" are lower than the corresponding rates on "whisky/brandy" and "liqueurs" described in the table below:[1]
| |Current Tax Rate per Litre of Pure Alcohol |Tax Discrimination Index |
|Shochu otsu (B) (20%) |Y 346.00 |100 |
|Shochu koh (A) (20%) |Y 540.00 |165 |
|Liqueurs (40%) |Y 821.75 |238 |
|Whisky/Brandy (40%) | Y 2455.75 |710 |

The EC claimed that by applying different taxes on "directly competitive or substitutable" products, Japan has afforded protection to its domestic production of shochu, thereby violating Article III:2, second sentence, of the GATT. After unsuccessful consultations, a Panel was established on 27 September 1995. On August 1996 Japan filed an appeal. The Appellate Report was adopted on 1 November 1996.
I agree with the arguments of the complainants and the Judgement of DSB for the following reasons: - Article III:2 GATT: “2. The products of the territory of any contracting party imported into the territory of any other contracting party shall not be subject, directly or indirectly, to internal taxes or other internal charges of any kind in excess of those applied, directly or indirectly, to like domestic products. […]” Pursuant to the first sentence, Japan, by applying a higher tax rate on imported spirits, did violate its obligation. - Japan’s action not to tax similarly imported and “directly competitive or substitutable” domestic products afforded protection to domestic production was in violation of Article III:1 and III:2 the second sentence. - As a contracting party of GATT, Japan has to follow the provisions of GATT. The act of levying a lower tax on domestic products (shochu) violated its obligations that it promised to fulfill once joining the Agreement and was in disregard of the contractual rights of other contracting parties of GATT. Therefore, it is appropriate of the DSB to request Japan to bring its Liquor Tax Law into conformity with its obligations under Article III of GATT.
1. Issues in the Panel proceeding
1.1 Issues - Did Japan violate its obligations under General Agreement on Tariffs and Trade 1994 (GATT)? - In particular, did Japan violate its obligations under Article III:1, III:2 of GATT?
2. Issues resolutions
The Panel found that Japanese tax system, particularly liquor tax system was inconsistent with Article III:2 of GATT as Japan applied diferrent tax on imported and domestic products. Those products were proved by the Panel to be “like products” and “directly competitive and substitutable products” based on their similar properties, end–uses, consumers’ viewpoint,…[2]. The Panel also claimed that Japan achieved domestic products protection through this action.
2. Issues in the Appellate proceeding
2.1 Issues - Did the Panel err in interpreting Article III:2 by virtually ignoring Article III:1? - Did the Panel err in interpreting legal terminology relating to the matter such as: “like products”, “in excess of”, “directly competitive and substitutable products”, “so as to afford protection to domestic protection”? - Would the Panel’s conclusions be upheld by the Appellate Body (“AB”)?
2.2 Issues resolutions - The connection of Aritcle III:1 and III:2: The purpose of Article III:1 is to establish a general principle that internal measures should not be applied so as to afford protection to domestic production as a guide to understanding and interpreting the specific obligations contained in Article III:2.[3] Therefore, in interpreting and applying Article III:2, Article III:1 must also be taken into account. - The AB agreed with the legal reasoning of the Panel in interpreting “like products” and “in excess of” in the first sentence of Article III:2. However, the Panel erred in law in limiting its conclusions in paragraph 7.1(ii) on "directly competitive or substitutable products" to "shochu, whisky, brandy, rum, gin, genever, and liqueurs", which is not consistent with the Panel's Terms of Reference. Moreover, it erred in law in failing to examine "so as to afford protection" in Article III:1 as a separate inquiry from "not similarly taxed" in the Ad Article to Article III:2, second sentence.[4] - In para 1(a), part H, the AB noted that the determination of whether vodka is a "like product" or a "directly competitive or substitutable product" to shochu, did not materially affect the outcome of this case. In fact, the AB affirmed the Panel’s legal findings and conclusions that Japan violated Article III:2 of GATT and continued to recommend the DSB to request Japan to amend its liquor tax law to be consistent with its obligations under GATT.
Although consideration one product to be “like product” or “directly competitive and substitutable product” to another or not must be made case – by – case, the DSB should make a clear list of criterion for the parties in the dispute to base on. In both the Panel’s report and the AB’s report, the criterion were not paricularly applied to the products related in the issue. Another thing is about Japan’s afford protection to domestic production. It must be examined to see whether Japan achieved the protection or not, especially the benefit from the action. Furthermore, there may be no or little competition between shochu and other alcoholic beverages in Japan and shochu is even produced outside Japan, so it is evidence – lack to claim that imported liquors are “directly competitive and substitutable product” so as not to tax them differently. In conclusion, the DSB should request Japan to lower the tax rates levying on certain imported alcoholic beverages to ease the dissatisfaction of the other contracting parties of GATT, not to amend the whole liquor tax system as it takes a lot of time and money.


- Japan – Taxes on Alcoholic Beverages, Report of the Panel, 11 July 1996. - Japan – Taxes on Alcoholic Beverages, Report of the Appellate Body, 4 October 1996. - Japan – Taxes on Alcoholic Beverages, Request for Consultations by the European Community, 29 June 1995. - Japan – Taxes on Alcoholic Beverages, One – page case summary. - Document sources:

[1] Japan – Taxes on Alcoholic Beverages: ./01MNOP[\]wñæÛÓ¶£•‰•o£_Q?Q#j?hÕ@)hÕ@)U[pic]mHnHu[pic]?hÕ@)hÕ@)mHnHu[pic]hÕ@)hÕ@)0JmHnHsH u[pic]2[2]?j[pic]hÕ@)hÌZ>*[pic]B*[3]U[pic]mHnHphÿu[pic]hÕ@)hÕ@)mHnHu[pic]hÕ@)hÕ@)0JmHnHu[pic]$jhÕ@)hÕ@)0JU[pic]mHnHu[pic]hÕ@)hÕ@)>*[pic]mH sH jhÕ@)hÕ@)>*[pic]U[pic]mH sH hÕ@)mH sH hÕ@)Request for Consultations by the European Community, 29 June 1995.
[4] Japan – Taxes on Alcoholic Beverages, Report of the Panel, 11 July 1996.
[5]Japan – Taxes on Alcoholic Beverages, Report of the AB , 4 October 1996.
[6] Japan – Taxes on Alcoholic Beverages, Report of the Appellate Body , 4 October 1996.…...

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