WASHINGTON, DC – The United States today requested the World Trade Organization (WTO) to establish a dispute settlement panel regarding customs duties that India imposes on alcoholic beverages and other imports from the United States.

“India is an important export market for U.S. products and the United States and India have successfully worked on a number of important trade issues. However, we believe the layers of customs duties India applies to U.S. products, in particular to wine and distilled spirits, are not in line with its WTO commitments,” said U.S. Trade Representative Susan C. Schwab. “We are disappointed that WTO consultations failed to resolve our concern with the duties and that we must resort to a WTO panel.  The United States will continue to work toward a resolution of this issue with India but we must ensure a level playing field for U.S. products around the world.”

On top of its basic customs duties, India imposes an “additional duty” of 20 to 75 percent ad valorem on imports of beer and wine and from 25 to 150 percent ad valorem on imports of distilled spirits.  In addition, India applies an “extra additional duty” of four percent, resulting in aggregated duties on these imports that range from approximately 150 to 550 percent.  In the WTO, India committed that its tariffs on beer, wine and spirits would not exceed 150 percent. The additional duty and extra additional duty also apply to other imports from the United States such as dairy products and, in some cases, also result in customs duties that exceed India’s WTO bound rates.

In cases where wine and distilled spirits may enter India under special duty-free rules, such as for airport duty-free and use at luxury hotels, U.S. exports of these products to India have grown by 350 percent and 200 percent, respectively, between 2000 and 2005.  However, because of the high duties imposed on the vast majority of American wines and spirits, total exports to India remain low.   

Between 2000 and 2005, U.S. exports of wine and spirits world-wide averaged approximately $630 million and $633 million, respectively, making the United States the world’s sixth largest exporter of wine and third largest exporter of spirits.

Background:

Under WTO rules, parties that do not resolve an issue through consultations may refer the matter to a WTO dispute settlement panel.  The United States and India held WTO consultations on the duties on April 13, 2007, which the European Communities (EC) also joined.  These consultations unfortunately failed to resolve the dispute.

The specific WTO obligations concerned are Articles II and III of the General Agreement on Tariffs and Trade 1994 (GATT 1994).  Article II prohibits WTO Members from applying ordinary customs duties or other duties or charges in excess of those specified in their WTO tariff schedules; whereas Article III prohibits WTO Members from affording less favorable treatment to imports than to like domestic products in terms of internal taxes or other measures affecting imports’ internal sale.

The EC has also requested a WTO dispute settlement panel on India’s duties on wine and distilled spirits, which the WTO established on April 24, 2007.  The United States, Chile, Australia and Japan will participate in that dispute as third parties.