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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> Text of the Dispute Settlement Understanding
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See also: One-page summary of key findings of this dispute
Consultations
Complaints by the European Communities.
On 4 June 1997 and 15 December 1997, the EC requested
consultations with Chile in respect of Chile’s Special Sales Tax on
spirits, which allegedly imposes a higher tax on imported spirits than on Pisco,
a locally brewed spirit. The EC’s second request (WT/DS110), takes issue
with the modification to the law on taxation on alcoholic beverages passed
by Chile to address the concerns of the EC in WT/DS87. The EC contended
that this differential treatment of imported spirits violates Article
III:2 of GATT 1994.
On 3 October 1997, the EC requested the establishment
of a panel in respect of the complaint WT/DS87. At its meeting on 16
October 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, the DSB established a panel
at its meeting on 18 November 1997. Canada, Mexico, Peru and the US
reserved their third-party rights.
Further to the EC’s complaint with respect to WT/DS110,
the DSB established a panel at its meeting on 25 March 1998. The DSB also
agreed that a single panel be established to examine the two complaints.
Peru, Canada and the US reserved their third-party rights. On 10 and 11
June 1998, the EC and Chile, respectively, requested the Director-General
to determine the composition of the Panel. On 1 July 1998, the Panel was
composed. The report of the panel was circulated to Members on 15 June
1999. The panel found that Chile’s Transitional System and its New System
for taxation of distilled alcoholic beverages was inconsistent with
Article III:2 of GATT 1994.
On 13 September 1999, Chile 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 13
December 1999. The Appellate Body upheld the panel’s interpretation and
application of Article III:2 of GATT 1994, subject to exclusion of certain
considerations relied upon by the panel.
The DSB adopted the Appellate Body Report and the Panel Report, as
modified by the Appellate Body Report, on 12 January 2000.
Implementation of adopted reports
On 11 February 2000, Chile informed the DSB that it was
studying ways in which to implement the recommendations of the DSB, noting
that any changes to its tax laws required the approval of the National
Congress and that it would therefore require a reasonable period of time
to implement the recommendations of the DSB. On 15 March 2000, Chile
requested, pursuant to Article 21.3(c) of the DSU, that the reasonable
period of time be determined by arbitration.
The report of the arbitrator was circulated to Members
on 23 May 2000. The arbitrator determined, pursuant to Article 21.3 of the
DSU, that the reasonable period of time for Chile to implement the
recommendations and rulings of the DSB is not more than 14 months and 9
days from 12 January 2000, i.e. Chile had until 21 March 2001 to enact and
put into effect a law appropriately amending the relevant tax legislation.
At the DSB meeting of 1 February 2001, Chile announced
that implementing legislation was adopted by a clear majority in both the
Chamber of Deputies and the Senate, and that its full entry into force
awaits only its promulgation by the President of the Republic and its
publication in the Official Journal. Under this legislative reform, the
existing rate of 27 per cent would be maintained for Pisco, while that
same rate would be applied to other alcoholic beverages as from 21 March
2003. In the meantime, the tax applied to those spirits will be
progressively reduced to 27 per cent.
At the DSB meeting of 12 March 2001, Chile said that, as indicated at the 1 February 2001 DSB meeting, Chile's Congress had adopted amendments to the law on taxes on alcoholic beverage. This law had now been published and was fully in force. Thus, Chile had fully complied with the DSB's recommendations. |
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