TEQUILA TAXES CASE
White & Cage LLP GDL
Foreign trade practice
• The exports of Tequila to China have been
stopped due to new restrictive internal
taxes and charges to the imported liquor.
• Chinese national drink Maotai has been
excused of the charges.
• Drinks like GIN, VODKA, WHISKEY are recently
being imported without any internal taxation, and
they go through the custom inspection in delays
of time inferiors.
Main GATT Principles
• Degree to which trade policies and practices, and the
process by which they are established, are open and
predictable. (Art. II Schedules of Concessions)
• MFN Most-favoured-nation treatment (GATT Article I,
GATS Article II and TRIPS Article 4), the principle of not
discriminating between one’s trading partners.
• National treatment The principle of giving others the
same treatment as one’s own nationals.
• National Treatment.
• Most Favoured Nation
Treatment. Art. I
• (1) Internal taxes and other charges…,
should not be applied to imported products
so as to afford protection to domestic
• (2) [Foreign products] imported in the
territory of a contracting party shall not be
subject… to internal taxes… in any kind of
excess of those applied… “to like
• (1)With respect of duties and charges…in
connection to exportation or importation…and in
respect with all matters referred to in paragraph
2 and 4 in article III, any advantage, favour,
privilege or immunity granted by any contracting
party to any product originating in or destined for
any other country shall be accorded,
immediately and unconditionally to the “like
product” originating or destined for the
territories of all other contracting parties.
To apply non-discrimination principle under
Art. I & III, we have to establish LIKENESS
MAOTAI, GIN, VODKA, WHISKEY
• The first criterion of likeness: more two
products have the same physical
characteristics, the more “like” they can be
said to be. The greater the physical
identity of two products the more likely it is
that they are interchangeable. Physical
characteristics is so often the first criterion
that legal decisions look to.
1970 report of a Working Party on
Product is “similar”: the product’s end-uses in a
given market; consumers’ tastes and habits,
which change from country to country; the
product’s properties, nature and quality.
• Australian Subsidy on Ammonium Sulphate,
Germany -- Treatment of Imports of Sardines,
EC Measures on Animal FeedProteins, Spain --
Tariff Treatment of Unroasted Coffee.
• Alcoholic beverages are
drinks containing ethanol.
Ethanol, also known as ethyl
alcohol or grain alcohol, is a
chemical compound, one of
the alcohols that is most
often found in alcoholic
beverages. Most distilled
liquors are 40% alcohol by
• The concentration of alcohol in an
alcoholic beverage may be specified in
percent alcohol by volume (ABV), in
percentage by weight (sometimes
abbreviated w/w for weight for weight), or
in proof. (e.g. 80 proof = 40% ABV).
• Gin is a spirit, or strong
alcoholic beverage. It is
made from the distillation of
white grain spirit and juniper
berries, which provide its
distinctive flavour. Plymouth
Gin is 41.2% alcohol by
volume. There is also a
'navy strength' variety
available which is 57% abv.
• Vodka is a typically
usually distilled from
fermented grain. The
vodka is 40 percent
(80 degrees proof).
• Malt whisky consists of
whisky made from 100
percent malted barley;
malt whisky from one
distillery is called single
malt to distinguish it from
blended varieties. Crown
Royal is a blended
Canadian whisky, 40%
alcohol (ethanol) by
volume, 80 proof.
• Tequila is a strong
from the agave
plant. Tequlia has
an average of
40% alcohol by
• Maotai is a famous
Maotai has an alcohol
content of 65% by
volume but recently
ranging down from
35% to 47%.
Denomination of Origin
• Alcoholic Beverage
commonly have an
• The obvious reason for preventing
differences in treatment is to prevent
distortions in competition between
otherwise competitive goods.
DRINKS MARKET IN CHINA
• FISH WINE
• The alcoholic drinks market in China has been
fuelled by a buoyant economy in 2004, with total
value and volume sales reaching about RMB385
billion and 33 billion litres, up by 7% in current
value and 6% in volume terms from 2003.
• First criteria -- the extent to which consumers
perceive two products as functionally equivalent,
measured by the consumer’s willingness to
substitute one for the other, a willingness which
in turn is usually measured by the extent to
which relatively small changes in price affect
consumer preferences for one or the other.
MENUES AT BARS
MENUES AT DISCOTECS
• Second criteria, the extent to which the
two products do in fact perform the same
LIFE STILE IS CHANGING
Japan Alcoholic Beverages cases
• Shochu and vodka are like products and Japan,
by taxing the latter in excess of the former, is in
violation of its obligation under Article III:2, first
sentence, of the General Agreement on Tariffs
and Trade 1994.
• Shochu, whisky, brandy, rum, gin, genever, and
liqueurs are "directly competitive or substitutable
products" and Japan, by not taxing them
similarly, is in violation of its obligation under