DISPUTE SETTLEMENT: DISPUTE DS75

Korea — Taxes on Alcoholic Beverages


This summary has been prepared by the Secretariat under its own responsibility. The summary is for general information only and is not intended to affect the rights and obligations of Members.

  

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Current status  back to top

 

Key facts  back to top

Short title:

Complainant:

Respondent:

Third Parties:

Agreements cited:
(as cited in request for consultations)
Request for Consultations received:

Panel Report circulated: 17 September 1998
Appellate Body Report circulated: 18 January 1999
Article 21.3(c) Arbitration Report circulated: 4 June 1999

  

Summary of the dispute to date  back to top

The summary below was up-to-date at
See also: One-page summary of key findings of this dispute

Consultations

Complaints by the European Communities and the United States.

On 4 April 1997, the EC requested consultations with Korea in respect of internal taxes imposed by Korea on certain alcoholic beverages pursuant to its Liquor Tax Law and Education Tax Law. The EC contended that the Korean Liquor Tax Law and Education Tax Law appear to be inconsistent with Korea’s obligations under Article III:2 of GATT 1994. On 23 May 1997, the US requested consultations with Korea in respect of the same measures complained of by the EC. The US also alleged violations of Article III:2.

On 10 September 1997, the EC and the US requested the establishment of a panel. At its meeting on 25 September 1997, the DSB deferred the establishment of a panel.

 

Panel and Appellate Body proceedings

Further to a second request to establish a panel by the EC and the US, the DSB established a panel at its meeting on 16 October 1997. Canada and Mexico reserved their third-party rights. On 26 November 1997, the EC and the US requested the Director-General to determine the composition of the Panel. On 5 December 1997, the Panel was composed. The report of the Panel was circulated to Members on 17 September 1998. The Panel found that:

  • soju (both diluted and distilled), is directly competitive and substitutable with the imported distilled alcoholic beverages that were in issue, namely, whisky, brandy, rum, gin, vodka, tequila, liqueurs and ad-mixtures.
     
  • Korea has taxed the imported products in a dissimilar manner and that the tax differential was more than de minimis, and is applied so as to afford protection to domestic production.
     
  • The Panel therefore concluded that Korea had violated Article III:2 of GATT 1994.

On 20 October 1998, Korea notified its intention to appeal certain issues of law and legal interpretations developed by the Panel. The report of the Appellate Body was circulated to Members on 18 January 1999. The Appellate Body upheld the panel’s findings on all points.

The DSB adopted the Panel and Appellate Body Reports on 17 February 1999.

 

Implementation of adopted reports

At the DSB meeting on 19 March 1999, Korea informed the DSB that it was considering options for implementation of the DSB’s recommendations. On 9 April 1999, the two complainants separately requested, pursuant to Article 21.3(c) of the DSU, that the reasonable period of time for Korea to implement the recommendations of the DSB be determined by arbitration. On 23 April 1999, the three parties to the dispute jointly informed the DSB that they had agreed on the appointment of an arbitrator for the determination of the reasonable period of time for implementation, and also that they had agreed that the arbitrator issue his arbitration award no later than 7 June 1999. On 4 June 1999, the arbitrator determined the reasonable period of time to be 11 months and two weeks. i.e. until 31 January 2000.

At the DSB meeting on 27 January 2000, Korea stated that it considered to have fully implemented the DSB’s rulings and recommendations by amending its Liquor Tax Law and the Education Tax Law to impose flat rates of 72% liquor tax and 30% education tax on all distilled alcoholic beverages on a non-discriminatory basis.

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