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Japan – Alcoholic Beverages (1996)

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Hai Ha Do

on 16 May 2014

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Transcript of Japan – Alcoholic Beverages (1996)

Is Japan treating “like” imported products differently from domestic products, that is, is Japan violating the principle of national treatment?

Article III* National Treatment on Internal Taxation and Regulation
Art. 3 (2) GATT addresses two situations:
1. WTO’s website – Dispute settlement, DS8, 10, 11
http://www.wto.org/english/tratop_e/dispu_e/dispu_status_e.htm Accessed on 14 & 15 May, 2014
2. Europa Press release IP/97/84 on February 1997. “EU and Japan agree outcome on liquor tax Dispute” - europa.eu/rapid/press-release_IP-97-84_en.pdf
3. Japan – Taxes on Alcoholic Beverages – Report of the Panel http://www.mofa.go.jp/policy/economy/wto/cases/WTDS8R.pdf
Interpretation of Art. III
1. Art. 3 (2) sent. 1 GATT – any
discrimination of like products a
violation of the GATT (even if it
does not have a protectionist
effect) – judgement of the
“likeness” to be based on the
following criteria:
Characteristics, quality and nature of the product
Possible use
Consumer behaviour/preferences
Tariff classification
2. Art. 3 (2) sent. 2 in conjunction
with Art. 3 (1) GATT – to be judged
upon the following criteria whereas
unequal treatment/dis-crimination
is not per se unlawful
directly competitive/directly substitutable products and
taxed/charged differently and
results in protectionist effect

Sentence 1
The contracting parties 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.*

Sentence 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. Moreover, no contracting party 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.*
May 2014
International Business Law Assignment
Group H: Do Hai Ha - Quach Viet Nga - Phan T. Thu Hoai - Do Minh Ngoc
Japanese Liquor Tax Law
European Communities (DS8), Canada (DS10), United States (DS11)


The complainants claimed that spirits exported to Japan were discriminated against under the Japanese liquor tax system which, in their view, levies a substantially lower tax on “shochu” than on whisky, cognac, white spirits and other liqueurs.

The complainants argued that this tax violated Article III, GATT 1994 (application of an internal tax to favour domestic products)
The Liquor Tax Law classifies the various types of alcoholic beverages into ten categories and additional sub-categories i.e. sake, sake compound, shochu (group A, group B), mirin, beer, wine (wine, sweet wine), whisky/brandy, spirits, liqueurs, miscellaneous (various sub-categories).

Different tax rates are applied to each of the above-mentioned categories or subcategories. Within each category or subcategory, the rate increases with the alcohol content, although not proportionately
Japan – Alcoholic Beverages (1996)
Panel Report – Findings
Final conclusion by Appellate Body
(July 11, 1996)
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