WORLD TRADE  
ORGANIZATION  WT/DS411/2/Rev.1 
8 October 2010 
 (10-5155) 
 Original:   English 
  
 
ARMENIA – MEASURES AFFECTING THE IMPORTATION AND 
INTERNAL SALE OF CIGARETTES AND ALCOHOLIC BEVERAGES 
 
Request for the Establishment of a Panel by Ukraine
 
 
Revision  
   The following communication, dated 6 October 2010, from the delegation of Ukraine to the Chairman of the Dispute Settlement Body, is circulated pursuant to Article 6.2 of the DSU. 
 
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  On 20 July 2010, Ukraine requested consulta tions with the Government of the Republic of 
Armenia ("Armenia") pursuant to Article 4 of the Understanding on Rules and Procedures Governing 
the Settlement of Disputes  ("DSU") and Article XXII of the General Agreement on Tariffs and Trade 
1994  ("GATT") with respect to: 
 
– The imposition of higher tax rates on importe d cigarettes than on like domestic products, 
pursuant to Armenia's "Law on Fixed Charg es on Tobacco Products" of 31 March 2000 
("Tobacco Charges Law");  
– The collection of customs duties on imported cigarettes pursuant to the Tobacco Charges Law 
in excess of those set forth in Armenia's Schedule of Concessions;  and 
– The imposition of higher excise tax rates on imported alcoholic beverages than on like 
domestic products, pursuant to the Law "On Exci se Tax" of 7 July 2000 ("Excise Tax Law"). 
 Armenia failed to reply to Ukraine's request  for consultations, such that no consultations 
could be held.  Thus, it was impossible to resolve the dispute through consultations.  
 
I. THE PRESUMPTIVE TAX ON CIGARETTES   
 For a small number of products, including cigarettes, Armenia imposes a single, fixed charge 
(the "presumptive tax") which includes both inte rnal taxes such as VAT and excise tax and the 
applicable customs duty. Armenia applies this so -called "presumptive tax" at the fixed rates of 
AMD6,500 per 1,000 imported cigarettes and AM D4,750 per 1,000 like domestic cigarettes 
(HS 2402 20) pursuant to Article 3 of the Tobacco Charges Law.    This presumptive tax on cigarettes at the above fixed rates for imported and domestic 
cigarettes is in violation of Arme nia's obligations of providing nati onal treatment to imported products 
and leads to the imposition of customs duties in excess of Armenia's tariff binding of 15 per cent 
ad valorem for cigarettes as set forth in Armenia's Schedule of Concessions.  WT/DS411/2/Rev.1 
Page 2  
 
  A. T
HE PRESUMPTIVE TAX VIOLATES GATT  ARTICLE III – NATIONAL TREATMENT  
 Pursuant to the Tobacco Charges Law, Armenia is subjecting imported cigarettes to VAT and 
excise taxes at rates that exceed rates for domestic  cigarettes.  The VAT for imported cigarettes is 
15 per cent of the total fixed charge, while 76.5 per cent of the fixed charge represents the excise tax that is due on imported cigarettes.  This is so becau se the fixed charge covers VAT, excise tax and the 
customs duty for imported cigarettes.  The proporti on of Customs Duty of the fixed charge is 
8.5 per cent, which implies that 76.5 per cent of the fi xed charge represents the excise tax.  It is clear 
that the VAT of 15 per cent of a fixed charge for imported cigarettes of 6,500 AMD (i.e. 975 AMD) is 
higher than the VAT of 20 per cent of the fixe d charge for domestic cigarettes of 4750 AMD 
(i.e. 950 AMD).  Similarly, the excise tax of 76.5 pe r cent of the fixed charge for imported cigarettes 
of 6,500 AMD (i.e. 4,972.50 AMD) is higher than the ex cise tax of 80 per cent of the fixed charge for 
domestic cigarettes of 4750 AMD (i.e. 3800 AMD).  In  sum, the different taxable base used for the 
determination of the VAT and the excise taxes l eads to the imposition of internal taxes on imported 
cigarettes that are in excess of those imposed on domestic cigarettes.   
 Thus, Armenia imposes internal taxes on imported cigarettes in excess of those imposed on 
like domestic cigarettes.  In addition, Armenia is not similarly taxing imported cigarettes and 
domestic directly competitive or substitutable produc ts, and this so as to afford protection to the 
domestic production of cigarettes.    Ukraine therefore considers that Armeni a's Tobacco Charges Law and any relevant 
amendments, replacements, and related or subs equent measures implementing such law, are 
inconsistent with Armenia's oblig ations under Articles III:1, III:2, first and second sentence, and III:4 
of the GATT 1994 and paragraph 1.2 of the Pr otocol of Accession of Armenia to the WTO 
(WT/L/506, 17 December 2002), that incorporates by reference the commitments set out in 
paragraph 72 of the Report of the Working Party on the Accession of the Repub lic of Armenia to the 
World Trade Organization (WT/ACC/ARM/23, 26  November 2002), which provides as follows: 
 
"From the date of accession, Armenia w ould apply its domestic taxes, including 
value-added and excise taxes, in a non- discriminatory manner consistent with 
Articles I and III of the GATT 1994 … . The Working Party took note of these commitments."   
B. T
HE PRESUMPTIVE TAX LEADS TO THE COLLECTION OF CUSTOMS DUTIES ON IMPORTED 
CIGARETTES IN EXCESS OF ARMENIA 'S BOUND TARIFF RATES  
 Armenia bound its tariffs for cigarettes (HS 2402 20) at 15 per cent pursuant to its Schedule 
of Concessions.  Nevertheless, under the Tobacco Ch arges Law, Article 3, Armenia collects customs 
duties of 8.5 per cent of the fixed charge of 6500 AMD (i.e. 552.50 AMD) which equals the 
imposition of a customs duty on imported cigarettes of up to 24 per cent.  
  By imposing customs duties in excess of t hose provided in its Schedule of Concessions 
reproduced in the Annex to the Protocol of Acces sion of Armenia to the WTO, Armenia's Tobacco 
Charges Law and any relevant amendments, repl acements and related or subsequent measures 
implementing such law are inconsistent with Ar menia's obligations under Article II:1  of the 
GATT 1994.      
  In addition, Armenia's imposition of specifi c duties on cigarettes under the Tobacco Charges 
Law is inconsistent with paragraph 1.2 of the Pr otocol of Accession of Ar menia to the WTO which 
incorporates by reference the commitments set out in  paragraph 53 of the Report of the Working Party 
on the Accession of the Republic of Armenia to th e World Trade Organization, which provides that:  WT/DS411/2/Rev.1 
 Page 3 
 
 
  "The representative of Armenia stated that the rates of customs duty would not be 
applied in excess of the levels bound in Armenia's WTO Schedule of Concessions on 
Goods, which is annexed to the Protocol of  Accession of Armenia.  In addition, upon 
request, Armenia would consult with WTO Me mbers to address any concerns related 
to the application of specific duties to imports where Armenia had adopted bound 
ad valorem tariff rates.  The Working Pa rty took note of this commitment."  
 The imposition of this presumptive tax on imported cigarettes constitutes a specific duty 
which exceeds the bound ad valorem rate.  Furthermor e, Armenia has refused to consult with Ukraine 
in order to address the concerns of Ukraine relate d to the application of specific duties to imports 
where Armenia had adopted bound ad valorem tariff rates.  Both constitute  clear breaches of 
Armenia's accession commitments set forth above.   
 
II. THE EXCISE TAX ON ALCOHOLIC BEVERAGES 
 Pursuant to its Excise Tax Law, Armenia applies an excise tax on alcoholic beverages 
(HS 2203, 2204, 2205, 2206, 2207, and 2208) at rates th at are substantially higher than those applied 
on domestic like products or directly  competitive or substitutable products.   
  Armenia imposes a lower excise tax on domestic products than on products imported from Ukraine so as to afford protection to domestic  production and to accord imported products treatment 
less favourable than that accorded to like products or directly competitive or substitutable products of 
national origin.  Ukraine considers that Armenia' s Excise Tax Law, any amendments, replacements, 
and any related or subsequent measures implementi ng such law are inconsistent with Articles III:1, 
III:2, and III:4 of the GATT as well as with the pa ragraph 1.2 of the Prot ocol of Accession of 
Armenia to the WTO that  incorporates the comm itments set out in paragraphs 70 and 72 of the 
Report of the Working Party on the Accession of the Republic of Armenia to the World Trade 
Organization which provides that:  
 
"In response, the representative of Armenia st ated that legislation had been enacted 
by Armenia's Parliament in Law No. HO-415-N on 21 October 2002 and would be 
implemented before the date of accession to equalise the level of excise duties applied to all distilled beverages, vodka, cognac, li quor, etc. (HS 2208) and to equalise the 
level of excise duties applied to champagne, sparkling wines, wines, etc. (HS 2204).  
The Working Party took note  of these commitments."  
 Accordingly, Ukraine respectfully requests, pursu ant to Article 6 of the DSU, that the Dispute 
Settlement Body establish a panel to examine these ma tters, with the standard terms of reference set 
out in Article 7.1 of the DSU.  Ukraine asks that this request be placed on the agenda of the next 
meeting of the WTO Dispute Settlement Body that will take place on 25 October 2010. 
 
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