DS: Chile — 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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Summary of the dispute to date

The summary below was up-to-date at


Complaints by the European Communities.

On 4 June 1997 and 15 December 1997, the EC requested consultations with Chile in respect of Chileís Special Sales Tax on spirits, which allegedly imposes a higher tax on imported spirits than on Pisco, a locally brewed spirit. The ECís 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 ECís 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 Chileís 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 panelís 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.


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