WTO nipped India on wine duties, claims US

Washington, October 31:

The US says the World Trade Organization (WTO) Appellate Body has ruled in its favour in its challenge against India’s additional and extra-additional duties on wine, spirits and other agricultural and manufactured products.

The Appellate Body reversed a panel’s finding that any import charge offsetting an internal tax need only “serve the same function” as internal tax and need not be equivalent in amount to that internal tax, US Trade Representative (USTR) Susan C Schwab announced yesterday.

India imposed extra duties on US imports in addition to and on top of its basic customs duty, resulting in combined duties of 550 per cent on imports of alcoholic beverages. India argued the duties were permitted because they simply offset certain internal taxes (such as value-added taxes).

In reversing the panel, the Appellate Body agreed with the US that any import charges aimed at offsetting internal taxes cannot result in a higher amount being charged to imports than to like domestic products.

“This is an important decision for all WTO members, particularly at a time when they are negotiating tariff commitments,” Schwab said. “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.”

In response to US concerns, during the dispute settlement proceedings, India announced it was withdrawing the additional duty on alcoholic beverages and modifying the extra-additional duty to provide a refund mechanism. This, it represented to the panel eliminated any discrimination against US imports.

But the US continues to have concerns about whether these measures have eliminated India’s abusive use of additional tariffs, particularly given India’s refusal to produce information to support its claims that the duties merely offset internal state-level taxes, Schwab’s office stated. “We continue to closely monitor the effect of both actions,” it added.

The Appellate Body considered that the additional duty on imports of alcoholic beverages and the extra-additional duty on imports of alcoholic beverages and other products would not be justified, USTR said.

This was so as offsetting excise duties and other internal taxes on like domestic products insofar as the duties result in charges on imports that exceed those on like domestic products. Consequently, this would render both the additional duty and extra-additional duty inconsistent with India’s tariff commitments.

The Panel’s interpretation would have opened a Pandora’s box by inviting widespread imposition of “additional” tariffs in violation of WTO commitments, USTR said adding that the Appellate Body’s report provides clear guidance that should help ensure that India does not impose either the additional duty or extra-additional duty to discriminate against US imports.