WORLD TRADE  
ORGANIZATION   
WT/DS396/7 
WT/DS403/7 
27 September 2011 
 
 (11-4674) 
 Original:   English 
   
PHILIPPINES – TAXES ON DISTILLED SPIRITS 
 
Notification of an Appeal by the Philippines 
under Article 16.4 and Article 17 of the Understanding on Rules 
and Procedures Governing the Settlement of Disputes (DSU), 
and under Rule 20(1) of the Working Procedures for Appellate Review  
 
  The following notification, dated 23 Septembe r 2011, from the Delegation of the Republic of 
the Philippines, is being circulated to Members.  
_______________ 
 
 1. Pursuant to Articles 16.4 and 17 of the Understanding on Rules and Procedures Governing 
the Settlement of Disputes ("DSU") and Rule 20 of the Working Procedures for Appellate Review 
(WT/AB/WP/6, 16 August 2010), the Republic of the Philippines ("the Philippines") hereby notifies 
the Dispute Settlement Body ("DSB") of its deci sion to appeal certain issues of law and legal 
interpretations in Philippines – Taxes on  Distilled Spirits  (WT/DS396, WT/DS403) ("Panel Report").  
As set out in this notice of appeal, and pursuant to Article 17.13 of the DSU, the Philippines requests that the Appellate Body reverse or modify various legal findings and conclusions of the Panel, that 
result from the errors identified below. 
2. Pursuant to Rule 20(2)(d)(iii) of the Working Procedures for Appellate Review , this notice of 
appeal includes an indicative list of the paragraphs  of the Panel Report containing the alleged errors, 
without prejudice to the Philippines' ability to refe r to other paragraphs of  the Panel Report in the 
context of its appeal. 
I. APPEAL OF THE PANEL'S FINDINGS OF A VIOLATION OF ARTICLE III:2, 
FIRST SENTENCE OF THE GATT 1994 
3. The Panel erred in its interpretation and a pplication of the term "like products" under 
Article III:2, first sentence of the GATT 1994 and failed to apply the appropriate standard when 
assessing the products' physical characteristics, cons umer tastes and habits, and the products' tariff 
classifications. 
4. The Panel's errors of law and legal application include: 
(a) The Panel failed to apply the correct standard when examining the physical 
characteristics of the products in question, and the manner in which they compete in 
the Philippine market. 
 
(b) The Panel failed to apply the correct st andard when assessing consumers' tastes and 
habits in the Philippine market. 
 WT/DS396/7 
WT/DS403/7 Page 2 
 
 
  (c) The Panel failed to apply the appropriate standard when examining whether the tariff 
classification of non-sugar-based spirits and sugar-based spirits indicated "likeness." 
 5. As a result of these errors, the Philippines request s that the Appellate Body reverse the Panel's 
findings in paragraphs 7.39, 7.40, 7.42, 7.43, 7.45, 7.46, 7.47, 7.59, 7.60, 7.62, 7.63, 7.71, 7.74, 7.76, 
7.77, 7.80, 7.82, 7.83, 7.85, 7.90, 8.2 (with respect to the claims of the European Union) and 8.2(a) (with respect to the claims of the United States) of the Panel Report. 
II. APPEAL OF THE PANEL'S FINDINGS OF A VIOLATION OF ARTICLE III:2, 
SECOND SENTENCE OF THE GATT 1994 
6. The Panel erred in its interpretation and app lication of the term "directly competitive or 
substitutable" within the meaning of Article III: 2, second sentence of the GATT 1994, as well as the 
term "so as to afford protection".  The Panel conse quently also failed to a pply the correct standard 
when assessing competition in the Philippine market. 
7. The Panel's errors of law and legal application include: 
(a) The Panel failed to properly interpret and apply the term "directly" when it found that 
competition existed in the market due to the possibility that some consumer could 
purchase non-sugar-based spirits on "special occasions." 
 
(b) The Panel failed to apply the correct sta ndard when it found that it was sufficient for 
a certain market segment to have  access to both types of products. 
 
(c) The Panel failed to apply the correct  standard when it found that potential 
competition existed in the Philippine market. 
 
(d) The Panel misinterpreted the applicati on of the term "directly competitive or 
substitutable" by finding that some degr ee of substitutability in a non-representative 
sample of the market in question was sufficient to show direct competition. 
 
(e) The Panel erred in its interpretation of th e treaty term "so as to afford protection to 
domestic production", and misapplied this provision in the instant case.  
 
8. As a result of these errors, the Philippines request s that the Appellate Body reverse the Panel's 
findings in paragraphs 7.118, 7.119, 7.120, 7.121, 7. 137, 7.138, 7.187, 7.188, and 8.2(b) (with respect 
to the claims of the United States) of the Panel Report. 
III. APPEAL OF THE PANEL'S FAILURE TO MAKE AN OBJECTIVE ASSESSMENT 
OF THE MATTER AS REQUIRED BY ARTICLE 11 OF THE DSU 
9. The Panel acted inconsistently with Article 11 of the DSU by failing to conduct an objective 
assessment of the matter when examining the eviden ce relating to physical characteristics of the 
products at issue, their tariff classification, the r esult of the econometric study and the Euromonitor 
International study and the segmentation of the market. 
10. The Panel's errors of law and lega l application under Article 11 include: 
(a) The Panel erroneously substituted its own j udgment for that of the experts in relation 
to the organoleptic properties of th e products and the congener results. 
  WT/DS396/7 
 WT/DS403/7 
 Page 3 
 
 
  (b) The Panel erred when it found that the evidence on tariff classification was 
inconclusive. 
 
(c) The Panel misinterpreted the results of  the econometric study and the Euromonitor 
International survey, and substituted its ow n judgment for that of the experts in 
violation of Article 11. 
 
(d) The Panel erred when it found that the Ph ilippine market is not segmented and that 
"many consumers may be able to purchase high-priced spirits" on "special 
occasions". 
 
(e) The Panel erred when it concluded that th ere is evidence that the products are capable 
of being directly competitive or substitutable in the near future. 
 
11. As a result of these errors, the Philippines request s that the Appellate Body reverse the Panel's 
findings in paragraphs 7.39, 7.40, 7.42, 7.43, 7.45, 7.46, 7.56, 7.57, 7.59, 7.60, 7.62, 7.76, 7.77, 7.80, 
7.82, 7.90, 7.113, 7.119, 7.121, 7.127, 7.137, 7.138, 7.188, 8.2 (with respect to the claims of the European Union) and 8.2(a) and (b) (with respect to the claims of the United States) of the Panel 
Report. 
__________