RESTRICTED  WORLD TRADE  
ORGANIZATION  WT/DSB/M/161 
28 January 2004 
 (04-0307) 
Dispute Settlement Body 
19 December 2003  
 
 
 
MINUTES OF MEETING 
 
Held in the Centre William Rappard  
on 19 December 2003  
 
Chairman:  Mr. Shotaro Oshima (Japan) 
 
 
1. Dominican Republic – Measures affecting the importation and internal sale of cigarettes 
(a) Request for the establishment of a panel by Honduras (WT/DS302/5) 
1. The Chairman  drew attention to the communicati on from Honduras contained in document 
WT/DS302/5. 
2. The representative of Honduras  said that, in spite of numerous efforts to reach a mutually 
acceptable solution, his country had no alternative but  to request the DSB to establish a panel in order 
to assert its rights with regard to the importation and internal sale of cigarettes of Honduran origin in 
the Dominican Republic. As stated in its pane l request, circulated in document WT/DS302/5, 
Honduras considered that the measures at issue in this dispute were clearly inconsistent with a number 
of basic provisions of the GATT 1994 and had upset th e balance of rights and obligations between the 
Dominican Republic and various WTO Members, Honduras in particular.  Without wishing to repeat what had already been stated in detail in its request for the establishment of a panel, Honduras 
stressed that the measures taken by the Dominican Republic had clearly resulted in the nullification or 
impairment of benefits for imports of cigarettes of Honduran origin.  In the view of Honduras, these 
measures:  (i) discriminated against like domes tic and imported cigarettes through the Selective 
Consumption Tax, in vi olation of Article III:2 and III:4 as well as Article X:3(a) of the GATT;  
(ii) failed to provide governments and traders with transparency and predictability regarding 
commercial tax requirements affecting the marketab ility sale of cigarettes in the Dominican Republic, 
in violation of Article X:1 of the GATT;  (iii)  discriminated against like domestic and imported 
cigarettes as regards the stamp requirement only in  the territory of the Dominican Republic, in 
violation of Article III:4 of the GATT;  (iv) by re quiring the posting of bonds for the importation of 
cigarettes, imposed access barriers to the Dominican ma rket, in violation of Article II:1(a) and (b) and 
Article XI:1 of the GATT, or alternatively, discrim inated against imported cigarettes, in violation of 
Article III:2 and III:4 of the GATT;  and (v) impo sed duties or charges different from ordinary 
customs duties that did not comply with the require ments of Article II:1(a) and (b) of the GATT, and 
in one case, a charge that was inconsistent with Article XV:4 of the GATT.  These measures distorted 
the conditions of competition for cigarettes of Hondur an origin in the Dominican Republic and altered 
his country's competitive advantages in the area of ci garette production and exports.  In view of the 
above considerations, Honduras hoped that the DSB w ould agree to its request for the establishment 
of a panel to examine this matter, with standard te rms of reference as set forth in Article 7.1 of the 
DSU.  WT/DSB/M/161 
Page 2  
 
 3. The representative of the Dominican Republic
 said that her Government regretted the 
decision of Honduras to request the establishment of a panel to examine the matter referred to in its 
request.  The Dominican Republic considered that  the complaint of Honduras was without foundation 
in fact or law.  In particular, the Dominican Re public wished to repeat what it had stated in the 
consultations with Honduras held on 4 November 2003, namely, that the measures at issue in the 
complaint of Honduras were consistent with the provisions and principles of the GATT.  Honduras 
had offered nothing but general asser tions suggesting the contrary.  The way in which the Dominican 
Republic determined the value of imported ciga rettes for the purpose of applying the Selective 
Consumption Tax did not give rise to any di scrimination between imported cigarettes and 
domestically produced cigarettes.  The Dominican Republic  did not afford any protection, in fact or in 
law, to domestically produced cigarettes.  Nor di d it grant less favourable treatment to cigarettes 
imported from Honduras or any other WTO Member.  It was, therefore, incorr ect to assert that the 
provisions of the Tax Code of the Dominican Repub lic, of Decree 79-03 and of General Rule 02-96, 
violated the most-favoured-nation obligation set forth in Article III:2 and III:4 of the GATT.  Honduras had offered nothing, but general assertions to prove the contrary.  The Dominican Republic 
applied its laws, regulations, judicial decisi ons and administrative provisions concerning the 
determination of the value of imported cigare ttes for the purposes of applying the Selective 
Consumption Tax in a uniform, impartial and reasonable manner.  There were no grounds for 
asserting that the Dominican Republic violated its obligations under Article X:3 of the GATT.  Contrary to what Honduras claimed, the stamp requirements in the Dominican Republic did not 
establish less favourable conditions of competition fo r imported cigarettes.  All cigarette packages, 
whatever their origin or place of production, had to comply with the stamp requirement.  This 
requirement was also applied by other WTO Member s.  Consequently, the statement by Honduras to 
the effect that Decree 79-03 and Laws 858, 190 an d 368 with reference to the stamp requirement 
violated Article III:4 of the GATT was incorrect.  The Dominican Republic, exercising its sovereign right to ensure compliance with fiscal obligations, re quired that a bond be posted to cover fiscal risk.  
The bond was required of both the importer and the domestic producer.  It was an internal measure 
which did not give rise to any discrimination between  the importer and the domestic producer.  In this 
respect, it was no different from similar measures applied by other WTO Members seeking to ensure compliance with the fiscal obligations of tax payers .  The bond requirement did not violate Article III, 
let alone Articles II and XI of the GATT. 
4. The 2 per cent transitional surcharge and the fo reign exchange fee of 22 October 2003 were 
consistent with the Dominican Republic's Schedule of Concessions and with Article II of the GATT.  
The characterization by Honduras of the foreign exch ange fee was incorrect.  This measure was not 
inconsistent with Article XV of the GATT – it was an appropriate response to  the country's current 
macro-economic situation and w as consistent with the requirements and guidelines of the 
International Monetary Fund.  Finally, aside from her Government's serious objection to such 
characterization of her country's legislation and practices in respect of the importation and sale of 
cigarettes, the Dominican Republic considered th at the request of Honduras failed to meet the 
requirements of Article 6.2 of the DSU.  Honduras fa iled to identify properly the specific measures at 
issue, with the result that it did not present the problem clearly.  This created, for Honduras, a 
situation of defencelessness.  Her country urge d Honduras to identify clearly each of the specific 
measures which it considered to be in violation of the GATT provi sions.  If Honduras did not make its 
request more specific in this or another DSB meeti ng, her delegation would reserve the right to raise 
this matter in the corresponding panel proceedings so that the panel could rule on this matter 
accordingly.  For these and other reasons, the Do minican Republic could not accept the request by 
Honduras and, therefore, opposed the establishm ent of a panel at the present meeting. 
5. The representative of Honduras
 said that, with respect to the procedures, his delegation had 
noted the statement made by the Dominican Repub lic.  His country disagreed with the Dominican 
Republic's interpretation of the request by Honduras fo r the establishment of a panel.  It considered 
that the request presented the problem sufficiently cl early, in accordance with Article 6.2 of the DSU,  WT/DSB/M/161 
 Page 3 
 
 
 and hence it would enable the panel to carry out its functions in a satisfactory manner.  His delegation 
had also taken note of what had been stated by the Dominican Republic with regard to the substance.  
In his country's view, the violation by the Dominican Republic of a number of basic provisions of the WTO Agreement, and in particular the GATT, was evident.  Thus, Honduras disagreed with the views 
expressed by the Dominican Republic.  It considered that, in any case, the establishment of the panel 
would help to clarify these controversial issues, and it would ultimately be up to the panel to rule on 
the claims of both parties. 
6. The DSB took note
 of the statements and agreed  to revert to this matter. 
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