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Complaint by Honduras.
On 8 October 2003, Honduras requested
consultations with the Dominican Republic concerning certain measures
affecting the importation and internal sale of cigarettes. This request
is a new and expanded version of a complaint filed by Honduras on 28
August 2003 (WT/DS300/1).
According to Honduras, the Dominican Republic:
- applies special rules, procedures and
administrative practices to determine the value of imported cigarettes
for the purpose of applying the Selective Consumption Tax (inter alia,
in certain instances, considers the value of imported cigarettes to be
equal to the value of the “nearest similar” product in the
domestic market), and fails to establish and apply transparent and
generally applicable criteria for determining the value of imported
cigarettes (inter alia, fails to establish and apply such
criteria for the identification of the “nearest similar”
- does not publish the surveys conducted by the
Central Bank that are to be used to determine the value of cigarettes
for the purpose of applying the Selective Consumption Tax;
- accords conditions of competition to imported
cigarettes that are less favourable than those accorded to domestic
cigarettes by requiring that stamps be affixed to cigarettes packages in
the territory of the Dominican Republic;
- entails costs and administrative burdens
hindering the importation of cigarettes by requiring importers of
cigarettes to post a bond;
- levies a transitional surcharge for economic
stabilization of 2% of the CIF value of the imported goods;
- levies a foreign exchange fee of 4.75% of the
value of the imported merchandise.
Honduras considers that these Dominican
Republic’s measures are inconsistent with Articles II:1(b), III:2,
III:4, X:1, X:3(a), XI:1, and XV:4 of GATT 1994.
On 23 October 2003, Guatemala and Nicaragua
requested to join the consultations. On 28 October 2003, the Dominican
Republic accepted both requests.
On 8 December 2003, Honduras requested the
establishment of a panel. At its meeting on 19 December 2003, the DSB
deferred the establishment of a panel.
Panel and Appellate Body proceedings
Further to a second request to
establish a panel by Honduras, the DSB established a panel at its
meeting on 9 January 2004. China, Chile, the European Communities and
the United States reserved their third-party rights. On 19 January 2004,
Guatemala, Nicaragua and El Salvador reserved their third-party rights.
On 17 February 2004, the Panel was composed.
On 23 August 2004, the Chairman of the Panel informed the DSB that the
Panel expected to complete its work by October 2004.
On 26 November 2004, the Panel report was
circulated to Members. The Panel found that:
- The transitional
surcharge and the foreign exchange fee imposed by the Dominican Republic
are inconsistent with Article II:1(b) of GATT 1994. The foreign exchange
fee is not justified under Article XV:9(a) of GATT 1994;
- The stamp requirement imposed on cigarettes by the Dominican
Republic is inconsistent with Article III:4 of GATT 1994;
- Honduras did not demonstrate that the bond requirement imposed on
cigarette importers by the Dominican Republic violates either Article
X:1 or Article III:4 of GATT 1994; and
- Before the legislation was amended in January 2004, the Dominican
Republic imposed its Selective Consumption Tax on imported cigarettes
in a manner inconsistent with Articles III:2 and X of GATT 1994.
The Panel then recommended that the Dominican
Republic bring its measures (namely, the foreign exchange fee, the
transitional surcharge and the stamp requirement) into conformity with
its WTO obligations.
On 24 January 2005, the Dominican Republic
notified its intention to appeal certain issues of law and legal
interpretations developed by the Panel. On 7 February 2005, Honduras
notified its intention to appeal certain issues of law and legal
interpretations developed by the Panel.
On 22 March 2005, the Chairman of the
Appellate Body informed the DSB that the Appellate Body would not be
able to circulate its Report within the 60-day period due to the time
required for completion and translation of the Report, and that it
estimated it would be circulated to WTO Members no later than 25 April
On 25 April 2005, the report of the Appellate Body was circulated to Members. The Appellate Body upheld three findings but reversed four of the Panel’s legal findings. The Appellate Body found:
- The stamp requirement imposed on cigarettes by the Dominican Republic is not justified under the exception of Article XX(d) of the GATT 1994;
- The bond requirement imposed on cigarette importers by the Dominican Republic violates Article III:4 of GATT 1994.
At its meeting on 19 May 2005, the DSB adopted the Appellate Body Report and the Panel Report, as modified by the Appellate Body Report.
Implementation of adopted reports
At the DSB meeting on 13 June 2005, the Dominican Republic announced its intention to implement the recommendations and rulings of the DSB, and indicated that it would need a reasonable period of time to implement the recommendations and rulings of the DSB. Both parties failed to agree on a reasonable time of period for implementation in accordance with Article 21.3(b) of the DSU. On 12 July 2005, Honduras requested that the reasonable period of time be determined through binding arbitration pursuant to Article 21.3(c) of the DSU. On 21 July 2005, both parties jointly requested M. John Lockhart to act as arbitrator pursuant to Article 21.3(c) of the DSU, and on 22 July 2005 Mr Lockhart accepted the appointment to serve as arbitrator. On 29 July 2005, the parties requested that the arbitration proceedings be suspended so as to allow the parties to further explore the possibility of reaching an agreement on a reasonable period of time for implementation. On 4 August 2005, the Arbitrator agreed to treat the matter as suspended until further notice. On 16 August 2005, the parties jointly informed the Arbitrator that they had mutually agreed that the Dominican Republic shall bring the measure at issue into conformity within 24 months from 19 May 2005. On 29 August 2005, the Arbitrator’s Report was circulated to the Members.
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