Law - Case Unit 6 [PDF]

Zitiervorschau

CASE-SOLVING: UNIT 6 NATIONAL TREATMENT Issue 1: Newland applied to the following excise tax rates currently: N$5 ppl on wine, N$15 ppl on ordinary beer and N$6 ppl on specialty beers (ordinary beer and specialty beer are imported from Richland). Does it violate the obligation provided for in Article III:2, first sentence of the GATT 1994? To solve this issue, it is necessary to answer the following questions: *For wine and ordinary beer: - Is Newland's excise tax internal taxes or other internal charges?  In Article III:2, first sentence of GATT 1994: “The products of the territory of any contracting party imported into the territory of any other contracting party shall not be subject, directly or indirectly, to internal taxes or other internal charges of any kind in excess of those applied, directly or indirectly, to like domestic products.”  The excise tax which Newland imposed on wine and ordinary beers is the internal tax provided for in Article III:2, first sentence of GATT 1994 and applied directly by Newland to the two products. So, this act of excise tax imposed by Newland is subject to the provisions of Article III:2, first sentence of GATT 1994.  Newland applies the excise tax of 5 N $ for wine and 15 N $ for ordinary beer imported from Richland under the scope Article III:2, first sentence of GATT 1994. - Are ordinary beers from Richland and domestic wines considered to be “like products”?  In the case of Japan – Alcoholic Beverages (1999), two "like products" do not mean identical. The analogy of the product is likened to the acordion, pulling in or out depending on the different circumstances when the various rules in the WTO agreements apply.  In the cases of EC - Asbestos (2001) and Philippine - Distilled Spirits (2012), the judicial authorities identified the factors that need to be considered to conclude that the two suspects are "like products": (i) physical characteristic; (ii) the product’s end-uses; (iii) consumers’ tastes and habits; (iv) tariff classification

 Physical characteristic: wine and beer are usually alcoholic products but the alcohol content of them varies greatly (the average alcohol content of beer is 4.5 5%, while the alcohol content of wine is 12-14%)  The product’s end-uses: is for drink  Consumers’ tastes and habits: because the concentration of stimulants in the two products is so large => difference in consumption behavior.  Tariff classification: both products are not in the same category of tariff classification  From the above analysis, we can conclude that wines produced in Newland and ordinary beers imported from Richland are not two ‘like products’. - Are ordinary beers from Richland subject to tax levies exceeding domestic wines?  Any tax identified as "excess" also violates Article III: first sentence of GATT 1994. "Excess" is the expression of any difference between the taxation between the two products. This means that there is a larger taxpayer than the other party, which is considered excessive, even the smallest amount of ‘excess’ is too much. Specifically, in this situation, Newland levied a tax of 15 N $ for imported ordinary beer, while for domestic wines it was only $ 5 N, there was a clear difference in the tax rate that the two products must bear.  imported products have been taxed in excess of domestic products * For wine and special beer: - Is Newland's excise tax internal taxes or other internal charges?  Basing on Article III:2, first sentence of GATT 1994 and as discussed in the case of wine and ordinary beer, we can conclude that Newland applies the excise tax of 5 N $ for wine and 6 N $ for specialty beer imported from Richland under the scope Article III:2, first sentence of GATT 1994. - Are special beers from Richland and domestic wines considered to be “like products”?  As discussed in the case of wine and ordinary beer, we base on the following factors to conclude that the two suspects are "like products":  Physical characteristic: wine and beer are usually alcoholic products and fruit flavors, the alcohol content of them is not differ much (the average alcohol content of specialty beer is 8 - 9%, while the alcohol content of wine is 12-14%)  The product’s end-uses: is for drink  Consumers’ tastes and habits: because the content of alcohol in the two products does not have much difference => relatively similar in consumption behavior.

 Tariff classification: both products are in the same tariff classification. - Are ordinary beers from Richland subject to tax levies exceeding domestic wines?  As discussed in the case of wine and ordinary beer, Newland levied a tax of 6 N $ for imported specialty beer, while for domestic wines it was only $ 5 N, there was a clear difference in the tax rate that the two products must bear => imported products have been taxed in excess of domestic products Conclusion 1: Newland applied to the following excise tax rates currently: N$5 ppl on wine, N$15 ppl on ordinary beer and N$6 ppl on specialty beers (ordinary beer and specialty beer are imported from Richland):  It did not violate the obligations set out in Article III:2, first sentences of GATT 1994  It violated the obligations set out in Article III:2, first sentences of GATT 1994 Issue 2: Newland applied to the following excise tax rates currently: N$5 ppl on wine, N$15 ppl on ordinary beer. Does it violate the obligation provided for in Article III:2, second sentence of the GATT 1994? To solve this issue, it is necessary to answer the following questions: - Newland's excise tax internal taxes or other internal charges?  Article III:2, second sentence: “Moreover, no contracting party shall otherwise apply… contrary to the principles set forth in paragraph 1*”  The excise tax levied on the alcohol content of each liter of alcohol that Newland applies to the two products is that wine and beer are internal taxes. Consequently, Newland's application of this excise tax on ordinary wines and beers falls within the scope of Article III:2, second sentence of GATT 1994  Newland applied excise tax on wines and imported ordinary beers from Richland falls within the scope of Article III:2, second sentence of GATT 1994 - Are ordinary beer and wine products two directly competitive or substitutable products?  In the case of Korea - Alcoholic Beverages (1999), the product "directly competitive or substitutable" is understood in a broader sense than the "like product" defined in Article III:2, first sentence of GATT 1994. As discussed in Issue 1, ordinary beer and wine are not two "like products". Domestic wines and ordinary beer imported from Richland are not a perfect substitute for one another. However, depending on the nature of the two products can still be interchangeable although not giving the consumer a degree of absolute utility but still acceptable => these two products are considered two "substitutable" products.

 In addition, recent Newland market research shows that the demand for beer in Newland is growing rapidly and tends to grow in the near future. At that time, Richland wanted to increase its exports of beers including ordinary beer, specialty beers and non-alcoholic beers to Newland. On the other hand, Newland set quotas on imported beer at 50,000 hectoliters per year (prior to WTO accession) and Newland's beer boycott movements or Newland’s National Federation of Restaurateurs, prescribed for 10,000 of its members not to serve beer with traditional Newland dishes to protect domestic wine. Newland has these policies to protect domestic wines from imported beers => regular imported beer and domestic wines are "directly competitive ".  Ordinary beer imported from Richland and Newland's wine are the products “directly competitive or substitutable” -Is ordinary beer dissimilarly taxed to wine?  In the case of Japan - Alcoholic Beverages (1996), the dissimilarly tax must be determined depending on the difference between the two rates applied to the domestic product and the imported product. This difference in margins only needs to go through a de minimis level, which is considered "dissimilarly". Here, Newland applies the excise tax on wine is $ 5N while the ordinary beer imported is $ 15 and also be measured by alcohol. It can be seen that this is not a "very small" but rather large difference.  Generally imported beer is subject to a dissimilarly taxed to that of domestic wines. - Is the dissimilar taxation aim at protecting the domestic production?  When entry into the WTO, Newland was obliged to break down the quota requirement in order to limit the import of beer to protect the winegrowers in its country from the competition of imported beer. The country has imposed a significantly higher excise tax on ordinary beer than wine, limiting the consumption of ordinary beer imported in the domestic market, facilitating the development of the traditional wine industry.  the dissimilar taxation is applied so as to afford protection to domestic production Conclusion 2: From the above analysis, it can be concluded that Newland applied to the following excise tax rates currently: N$5 ppl on wine, N$15 ppl on ordinary beer, it violated the obligation provided for in Article III:2, second sentence of the GATT 1994 Issue 3: Newland's 21% VAT applies to non-alcoholic beer - the main import product from Richland, while only 15% VAT on Newland’s canned grape-juice. Does it violate the obligations under the scope Article III:2, second sentence of GATT 1994?

To solve this issue, it is necessary to answer the following questions: -Does the Newland measure apply as a internal tax or other internal charges?  Article III:2, second sentence of GATT 1994: "Moreover, no contracting party shall otherwise apply internal taxes or other internal charges to imported or domestic products in a manner contrary to the principles set forth in paragraph 1*."  The VAT applied by Newland on non-alcoholic beverages and canned fruit juice is the internal tax provided for in Article III:2 second sentence, so the VAT action taken by Newland on two products above falls within the scope of Article III:2, second sentence of GATT 1994.  21% VAT on non-alcoholic beer and 15% VAT on Newland's canned fruit juice is internal tax. - Are the non alcoholic beer and canned grape-juice two “directly competitive or substitutable products”?  Basing on the case of Korea – Alcoholic Beverages (1999): “directly competitive or substitutable products” in Article III:2 second sentence have a broader meaning than ‘like products’ in Article III:2, first sentence  It can be seen that non-alcoholic beer and canned grape-juice are not similar products under Article III:2, first sentence. Although these two products are physically identical, there is no alcohol content and the purpose is to make beverages, however, in terms of their chemical characteristics, materials and processing of these two products are different. In addition, for consumers' tastes and habits, beer (although not alcoholic) and grape-juice are the default that are completely different drink and depending on the age they will choose to use the product. Consequently, despite the similarities, non-alcoholic beer and canned grape-juice are not a perfect substitute for each other but only can substitutes.  Recent market research shows that the demand for beer in Newland is growing fast and tends to grow in the near future. Although the tastes for both nonalcoholic beer and canned grape-juice of the customers are different, they can still choose them for easy substitute use (because beer does not contain alcohol). So in this case, the two products have potential competition in the market  The non-alcoholic beer and canned grape-juice are two “directly competitive or substitutable products” - Does a non-alcoholic beer subject to dissimilar tax to Newland's canned grape-juice?  Basing on the case of Japan – Alcoholic Beverages II (1996): when the difference between the two taxes exceeds the de minimis level and the difference is large enough to make an impact, the change in market competition for the two products

will be called a "dissimilar taxation". In the case of Newland, the imposition of a 21% VAT on non-alcoholic beer and a 15% VAT on canned grape-juice has been found to be inequitable (21% and 15%). There are certain differences in competition between the two products in the market (the price of non-alcohol beer is higher due to higher VAT). From the difference in tariffs, canned grape-juice is more competitive in price than non-alcoholic beer.  Non-alcoholic beer is subject to a dissimilarly taxed to that of canned grape-juice. - Is the dissimilar taxation aim at protecting the domestic production?  After the accession to the WTO, Newland abolished quotas on imported beers, but at the same time adjusted internal taxes, which imposed a 21% VAT on all alcoholic beverages (including non-alcoholic beer) and canned grape-juice is only subject to 15% VAT. The application of this measure shows that Newland has created a price advantage for domestic products (canned grape-juice) and reduces the competitiveness of non-alcoholic beers in the market.  the dissimilar taxation is applied so as to afford protection to domestic production Conclusion 3: From the above analysis, it can be concluded that Newland's 21% VAT applies to non-alcoholic beer - the main import product from Richland, while only 15% VAT on Newland’s canned grape-juice, it violated the obligation provided for in Article III:2, second sentence of the GATT 1994 Issue 4: In support of the national wine industry, Newland’s National Federation of Restaurateurs, a government-sponsored organization, has instructed its 10,000 members not to serve beer with traditional Newland dishes. Does it violate the obligation provided for in Article III:4 of the GATT 1994?  Article III:4 of the GATT 1994: “The products of the territory of any contracting party imported into the territory of any other contracting party shall be accorded treatment no less favourable than that accorded to like products of national origin in respect of all laws, regulations and requirements affecting their internal sale, offering for sale, purchase, transportation, distribution or use.”  Subject to the above measures is the Newland’s National Federation of Restaurateurs, a private entity, which is not governed by Article III: 4. Private investigator measures fall within the scope of Article III: 4 if and only if the conduct of the private subject arises because of an impact from the Government of a Member State. Relate to this incident, it can be seen that the a governmentsponsored organization due to the significant impact of the boycott beer promotion and encourage domestic wine. This movement may have been partly influenced by the government, but it was not directly attributable to the government-sponsored organization's decision to impose the measure, nor was there any indication that

the a government-sponsored organization orders directly from the government to enact those measures. Conclusion 4: From the above analysis, it can be concluded this measure did not violate the obligation provided for in Article III:4 of the GATT 1994 CONCLUSION: - Most of these measures violate the national treatment principle of WTO. Therefore, the dispute settlement may require Newland to change the measure in accordance with the provisions of GATT 1994 and this decision can bring the market to fair competition. - For the legal protection of the winemaking industry, The National Association of Wineries (NAW) can mobilize local wineries to carry out campaigns calling on consumers to use local wines, to implement measures to stimulate demand for wine products, enterprises to improve the quality of products.