WORLD TRADE WT/DS8/19
WT/DS10/19
ORGANIZATION WT/DS11/17
12January 1998
(98-0138)
Original: English
JAPAN -TAXES ONALCOHOLIC BEVERAGES
Mutually Acceptable Solution onModalities forImplementation
Thefollowing communication, dated 9January 1998, from thePermanent Mission ofJapan
andthePermanent Mission oftheUnited States, together withenclosures, iscirculated toMembers
attherequest ofbothdelegations.
_______________
TheGovernmentsoftheUnitedStatesofAmericaandJapanwishtonotifytheDisputeSettlement
Body ("DSB") thattheyhavereached amutually satisfactory solution regarding theimplementation
byJapan oftheconclusions andrecommendations adopted bytheDSBinthedispute "Japan -Taxes
onAlcoholic Beverages" (WT/DS11/8). Accordingly, theUnited States andJapan consider that
Article 21.6oftheUnderstanding onRules andProcedures Governing theSettlement ofDisputes no
longer requires thatthisitemremain ontheagenda oftheDSB.
Please findattached thetextoftheexchange ofletters of15December 1997 onthissubject.
_______________
Enclosure 1:Letter fromAmbassador Kunihiko SaitoofJapan toAmbassador Charlene Barshefsky
oftheUnited States
Irefertotheconsultations between theofficials ofourtwogovernments ontheliquor taxissue,
themost recent sessions ofwhich were held inVancouver inNovember, inGeneva andin
Washington, D.C. inDecember 1997. Iampleased toconfirm, onbehalf oftheGovernment ofJapan
(GOJ), thattheGOJhasdecided totakethefollowing measures, whose adoption willbeinaccordance
withthenecessary domestic legislative procedures, toimplement therecommendations andrulings
oftheWTO Dispute Settlement Body pursuant tothepanel andtheAppellate Body reports on"Japan -
Taxes onAlcoholic Beverages".
Based ontheoutcome oftheconsultations referred toabove, andhaving carefully considered
theWTO arbitration award issued on14February 1997, theGOJwillrevise thecurrent liquor tax
scheme asdescribed indetail inAnnex Atothisletter, andwillcarry outtariff eliminations and
reductions ontheapplied ratebasis asdescribed indetail inAnnex Btothisletter.
Ascompensation forthelonger implementation period intheamended Liquor TaxLawfor
thenewtaxation scheme, from 1April 1998 onward, theGOJwillapply reduced tariff ratesandin
some cases zerotariffs ontheitems inAnnex Btothisletter asspecified therein. Forthispurpose
theGOJwillsubmit adraftlawamending theCustoms Tariff LawandtheTemporary Tariff MeasuresWT/DS8/19
WT/DS10/19
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Page2
Lawtothenextordinary session oftheDiettobeconvened inJanuary 1998, andwilldoitsutmost
toobtain Dietapproval ofsuchanamendment. TheGOJwillnotraisetariffratesabove those specified
inAnnex B.Furthermore, theGOJwillapply therateslisted inAnnex Binfullrecognition thatJapan's
WTO bound ratesarehigher andintends tobindthesetariffreductions intheWTO atthenextpossible
opportunity tomodify theSchedule ofJapan following amultilateral, multisectoral negotiation. In
addition, theUnited States willreceive atleastcomparable tariffeliminations/reductions tothose which
Japan maygrant totheEC,Canada oranyother WTO Members (ifany)asaresult ofnegotiations
oncompensation regarding theliquor taxissue.
Anymeasures, including subsidies, tobetaken fordomestic producers ofdistilled spirits in
relation tothesettlement oftheliquor taxissuewillbefullyconsistent withtheGOJ'sobligations under
theWTO Agreement, andwillinnowaynullify orimpair thebenefits provided bytheGOJtothe
United States asaresult ofthismutually satisfactory solution totheliquor taxissue.
Withregard tosubsidies, taxmeasures orother measures ofJapan thatmayaltertheconditions
ofcompetition between imported anddomestic distilled spirits, theGOJconfirms thatitcannot be
anticipated thattheUnited States Government (USG) isaware ofexisting measures other thanthose
listed inAnnex C.
Inaddition, theGOJconfirms thatitwillneither grant normaintain subsidies orspecial tax
measures orother measures benefiting domestic producers ofdistilled spirits which would haveeffect
ofdisplacing orimpeding theexport toJapan ofdistilled spirits from theUnited States andother
countries.
TheGOJwillprovidetheUSG,uponrequest,relevantinformationonsuchmeasuresfordomestic
producers ofdistilled spirits unless suchinformation isofaconfidential nature anditsprovision would
impede enforcement ofdomestic lawsandregulations orwould prejudice thelegitimate commercial
interests ofparticular enterprises.
Iconfirm thatattherequest ofeither party, consultations ontheimplementation oreffects
ofanyaspect ofthismutually satisfactory solution totheliquor taxissue willbeheldexpeditiously
withaviewtoreaching asatisfactory solution.
Iwould appreciate yourconfirmation thatimplementation ofthemeasures setoutinthisletter,
together withtheamendments totheLiquor TaxLawpromulgated inMarch 1997, willbeamutually
satisfactorysolutiontothedisputebetweentheUnitedStatesandJapanconcerningthetaxationofdistilled
spirits.WT/DS8/19
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Page3ANNEX A
TheLiquor TaxRates
(perkilolitre)
Categories Degree ofAlcohol
Content30Sep.1997 1Oct.1997
30Apr.19981May1998
30Sep19981Oct1998
30Sep.20001Oct.2000
Shochu A 25degrees(¥6,228)
¥155,700(¥8,076)
¥201,900(¥9,924)
¥248,100(¥9,924)
¥248,100(¥9,924)
¥248,100
Shochu B 25degrees(¥4,084)
¥102,100(¥6,028)
¥150,700(¥6,028)
¥150,700(7,976)
¥199,400(¥9,924)
¥248,100
Whiskies 40degrees(¥24,558)
¥982,300(¥13,775)
¥551,000(¥10, 225)
¥409,000(¥10,225)
¥409,000(¥10,225)
¥409,000
Spirits 37degrees(¥9,927)
¥367,300(¥9,924)
¥367,188(¥9,924)
¥367,188(¥9,924)
¥367,188(¥9,924)
¥367,188
Liqueurs 12degrees (¥8,217)
¥98,600(¥9,924)
¥119,088(¥9,924)
¥119,088(9,924)
¥119,088(¥9,924)
¥119,088
(Note) Theratesinbrackets aretaxratesperkilolitre perdegree ofalcohol.WT/DS8/19
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Page4ANNEX B
TheTariff Rates
Categories 1April 1998 1April 1999 1April 2000 1April 2001 1April 2002 1April 2003 1April 2004
HS2208.30-011
HS2208.30-019
Bourbon whisky10.3% 7.9% 5.4% 3.0% 0%
HS2208.40-000
Rum andtafia18.0% 13.5% 9.0% 4.5% 0%
HS2208.50-000
GinandGeneva
(Seenote)77.00 yen/litre
17.5%57.75 yen/litre
13.1%38.50 yen/litre
8.8%19.25 yen/litre
4.4%0
0%
HS2208.60-020
Vodka16.0% 12.0% 8.0% 4.0% 0%
HS2208.70-000
Liqueurs and
cordialsyen/litre
126.00yen/litre
94.50yen/litre
63.00yen/litre
31.50 0
(Note) Advalorem dutyorspecific duty, whichever lower, isapplied forGinandGenevaWT/DS8/19
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Page5
Annex C
WORLD TRADE G/SCM/N/25/JPN
17November 1997
ORGANIZATION(97-5026)
Original: English Committee onSubsidies
andCountervailing Measures
SUBSIDIES
Updating Notifications Pursuant toArticle XVI.1 oftheGATT 1994 andArticle 25
oftheAgreement onSubsidies andCountervailing Measures
JAPAN
Thefollowingcommunication,dated7October1997,hasbeenreceivedfromthePermanentMission
oftheJapan.
_________________
Japan submits thisnotification inaccordance withitsobligations under Article XVI.1 ofthe
GATT 1994andArticle 25oftheAgreement onSubsidies andCountervailing Measures. Thisnotification
doesnotprejudge thelegalstatus, effects ornature ofthenotified programmes ormeasures under GATT
1994 andtheAgreement onSubsidies andCountervailing Measures.WT/DS8/19
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Page6
FINANCIAL MEASURES FOR SHOCHU BMANUFACTURERS
1. Titleofthesubsidy programme
Financial Measures forShochu BManufacturers
2. Period covered bythenotification
-
3. Policy objective and/or purpose ofthesubsidy
Toreform thestructure ofShochu Bindustry andtohelpthemodernization ofitsenvironment
protection facilities.
4. Background andauthority forthesubsidy
TheMinistry ofFinance.
5. Legislation under which itisgranted
Special Measures Lawconcerning thestability oftheSakeBrewing andRelated Manufacture.
6. Form ofthesubsidy (i.e.grant, loan, taxconcession, etc.)
Interest-free loanto"theShochu BManufactures Industry Funds" andGrants
7. Towhom andhowthesubsidy isprovided
Japan Brewers Association.
8. Subsidy perunit,orincases where thisisnotpossible, thetotalamount ortheannual amount
budgeted forthatsubsidy
- TheFunds 'running profit: ¥1.06 billion
- Grants from theState budget: ¥0.33 billion
9. Duration ofasubsidy and/or anyother timelimits attached toit
Duration oftheinterest-free loanislimited totenyears.WT/DS8/19
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Page7
10. Statistical datapermitting anassessment ofthetrade effects ofasubsidy1
Quantity ofShipment ofShochu B
(kl)
Year 1994 1995 1996
Domestic 287,211 296,621 318,076
Import 43 42 537
Total 287,254 296,663 318,613
Enclosure 2:LetterfromAmbassadorCharleneBarshefskyoftheUnitedStatestoAmbassadorKunihiko
Saito ofJapan.
Iampleased toreceive yourletter oftoday'sdateconcerning theliquor taxissue.
Iconfirm onbehalf oftheUnited States Government, thathisexchange ofletters, together with
theamendments totheLiquor TaxLawpromulgated inMarch 1997, resolves thedispute onliquor taxes
between theUnited States andJapan.
Iwelcome thecommitments made byyourGovernment withregard tosubsidies andothermeasures
inrelation tothesettlement oftheliquor taxissue. Ialsowelcome theGOJ'scommitment expressed
inyourletter toprovide relevant information onmeasures fordomestic producers ofdistilled spirits.
Inotethatitisjointly understood thatacceptance bytheUnited States ofJapan'sproposals to
settle thisdispute cannot beinterpreted asinanywayprejudging theposition oftheUnited States inthe
WTO withregard tothedefinition ofdeminimis differentials orthe"reasonable period oftime" for
implementation. Inparticular, thisarrangement iswithout prejudice tothequestion ofwhether the
differential intaxratesbetween brown andwhite spirits thatwillremain asof1October 2000 isade
minimis differential orwould constitute ademinimis differential inanyother market orunder anyother
factual circumstances.
Thisexchange ofletters iswithout prejudice totherights andobligations oftheUnited States
under theWTO Agreement. Ifthismutually satisfactory solution totheliquor taxissueisnotimplemented
fully, theUnited States reserves itsrights toresort todispute settlement under theWTO Agreement.
__________
1Statistics ofproduction, consumption, imports andexports:
(i) forthethree most recent years forwhich statistics areavailable;
(ii) foraprevious representative year, which, where possible andmeaningful, should bethelatest period preceding
theintroduction ofthesubsidy orpreceding thelastmajor change inthesubsidy.