TWN Info Service on WTO and Trade Issues (Apr10/07)
24 April 2010
Third World Network

Panel set over Philippine taxes on distilled spirits
Published in SUNS #6908 dated 21 April 2010 

Geneva, 20 Apr (Kanaga Raja) -- The WTO Dispute Settlement Body (DSB) on Tuesday agreed to establish a panel, at the request of the United States, to rule on the taxation of distilled spirits by the Philippines.

This is a second-time request and panel establishment was automatic.

At the DSB meeting, the United States, the European Union and the Philippines agreed that a panel that was established on 19 January 2010 to examine an European Union complaint against the Philippines on this same issue will also examine the US complaint.

Trade officials said that a single panel will thus be examining the two complaints on this issue.

Australia, China, Mexico, Thailand, Chinese Taipei, the United States, the EU (both as third parties in each other's dispute) and India reserved their third party rights in the dispute.

In a communication to the DSB, the US complained that the Philippines taxes distilled spirits at rates that differ depending on the product from which the spirit is distilled.

Distilled spirits produced from certain materials that are typically produced in the Philippines are taxed at a low rate.

Other distilled spirits are taxed at significantly higher rates (for example, at a rate that is approximately 10 to 40 times higher than the rate for the domestic product).

According to the US communication, the Philippine taxes on distilled spirits do not appear to tax imported distilled spirits and directly competitive or substitutable domestic distilled spirits similarly.

The taxes appear to be applied in a way that affords protection to domestic production. In addition, the taxes appear to subject imported distilled spirits to internal taxes in excess of those applied to like domestic products, said the US.

The US communication lists a range of instruments reflecting the Philippine measures.

The US argued that the Philippine measures appear to be inconsistent with the first and second sentences of Article III: 2 of the GATT 1994.

[Article III: 2 states: The products of the territory of any [Member] imported into the territory of any other [Member] 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. Moreover, no [Member] shall otherwise apply internal taxes or other internal charges to imported or domestic products in a manner contrary to the principles set forth in paragraph 1.

[The preceding Article III: 1 states: The [Members] recognize that internal taxes and other internal charges, and laws, regulations and requirements affecting the internal sale, offering for sale, purchase, transportation, distribution or use of products, and internal quantitative regulations requiring the mixture, processing or use of products in specified amounts or proportions, should not be applied to imported or domestic products so as to afford protection to domestic production.]

In a statement at the DSB, the US said that the Philippines taxes distilled spirits at different rates depending on the product from which the spirit is distilled. Spirits distilled from products typically produced in the Philippines are taxed at a low rate, while other distilled spirits are taxed at rates from approximately 10 to 40 times higher.

The US urged the Philippines to address the concerns that have been raised, and hoped that the Philippines takes action soon to level the playing field for imported and domestic spirits in the Philippine market.

The Philippines reiterated its firm commitment to a rules-based multilateral trading system, and that it was its fundamental policy to be fully consistent with its international obligations, including those undertaken under the World Trade Organization.

It said that it was in this spirit that it consulted with the US last February, with the participation of the EU, and it clarified the non-discriminatory and impartial nature of its excise tax regime on distilled spirits.

The Philippines further said that it posed no objection to the request that a single panel be established to examine the complaints in this dispute and in the EU dispute (DS396).

In other actions, three separate first-time panel requests were blocked at the DSB. Panels will be established automatically when these three requests come up again before the DSB.

The three panel requests are on the use by the US of the "zeroing" methodology in anti-dumping measures involving products from Korea; US anti-dumping measures on certain shrimp from Vietnam; and European Union anti-dumping measures on certain footwear from China.

Meanwhile, under the agenda item of "other business", both China and the US made statements concerning a dispute on Chinese measures affecting the protection and enforcement of intellectual property rights.

In its statement, China recalled that at the last meeting of the DSB, it had introduced the progress of China's implementation and had stated that China had completed all necessary domestic legislative procedures in implementing the recommendations and rulings of the DSB in the dispute.

China said that it wishes to provide today further information related to these domestic legislative procedures.

It said that on 26 February 2010, the thirteenth session of the Standing Committee of the 11th National People's Congress (NPC) of China approved the Decision of the Standing Committee of the NPC on the Amendments of Copyright Law of the People's Republic of China.

This Decision revised Article 4, among others, of the Copyright Law. This Decision was published on 26 February 2010 and came into force on 1 April 2010, said China.

On 17 March 2010, the State Council approved the Decision of the State Council on the Amendments of Regulations on Customs Protection of Intellectual Property Rights of the People's Republic of China.

This Decision revised Article 27, among others, of the Regulations on Customs Protection of Intellectual Property Rights of the People's Republic of China. This Decision was published on 24 March 2010 and came into force on 1 April 2010.

China said that with the coming-into-force of these two Decisions, it has brought its measures under this dispute into conformity with the DSB's recommendations and rulings.

The US said that while China has today stated that it has implemented the recommendations and rulings of the DSB with respect to its customs regime, "we are not in a position to share China's assessment at this time."

The US added that it has begun working with China bilaterally on addressing certain questions that it has, and looked forward to further discussions with China on this issue.

(The next issue of SUNS will carry further details of the three panel requests that were blocked at the DSB.) +