DS: Japan — 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

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Complaints by the European Communities, Canada and the United States.

The EC requested consultations on 21 June 1995, and Canada and the US on 7 July 1995. 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 and white spirits.


Panel and Appellate Body proceedings

A joint panel was established at the DSB meeting on 27 September 1995. On 30 October 1995, the Panel was composed. The report of the panel, which found the Japanese tax system to be inconsistent with GATT Article III:2, was circulated to Members on 11 July 1996.

On 8 August 1996 Japan filed an appeal. The report of the Appellate Body was circulated to Members on 4 October 1996. The Appellate Body’s Report affirmed the Panel’s conclusion that the Japanese Liquor Tax Law is inconsistent with GATT Article III:2, but pointed out several areas where the Panel had erred in its legal reasoning. The Appellate Report, together with the panel report as modified by the Appellate Report, was adopted on 1 November 1996.


Implementation of adopted reports

On 24 December 1996, the US, pursuant to Article 21(3)(c) of the DSU applied for binding arbitration to determine the reasonable period of time for implementation by Japan of the recommendations of the Appellate Body.

The Arbitrator’s report was circulated to members on 14 February 1997. The Arbitrator found the reasonable period for implementation of the recommendations to be 15 months from the date of adoption of the reports i.e. it expired on 1 February 1998. Japan presented modalities for implementation which were accepted by the complainants.


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