. /.  WORLD TRADE  
ORGANIZATION   
WT/DS423/4 
7 June 2011 
 
 (11-2788) 
 Original:   English 
  
 
UKRAINE – TAXES ON DISTILLED SPIRITS  
 
Request for the Establishment of a Panel by Moldova 
 
 
 The following communication, dated 1 June 2011, from the delegation of Moldova to the 
Chairperson of the Dispute Settlement Body, is ci rculated pursuant to Article 6.2 of the DSU. 
 
_______________ 
 
 
The Permanent Mission of the Republic of Moldova  to the UN Office in Geneva presents its 
compliments to the Dispute Settlement Body of the World Trade Organization (WTO) and has the honour to communicate the following.  
On 2 March 2011, the Republic of Moldova re quested consultations with Ukraine under 
Article XXII of the General Agreement on Tariffs  and Trade 1994 ("GATT 1994") and Article 4 of 
the Understanding on Rules and Procedures Governing the Settlement of Disputes ("DSU") with 
respect to discriminatory taxation applied on imported alcoholic beverages by the Ukraine 
(WT/DS423/1). 
 
The Republic of Moldova and Ukraine held cons ultations in Kiev on 13 April 2011 with a 
view to reach a mutually satisfactory solution. Un fortunately, the consultati ons failed to settle the 
dispute.  
The Republic of Moldova hereby request that a pa nel be established at the next meeting of the 
Dispute Settlement Body ("DSB") pursuant to Ar ticle XXIII:2 of GATT 1994 and Article 6 of the 
DSU.  
The Republic of Moldova claims that: 
 
- Ukraine had acted inconsistently with Artic le III:2, first sentence, of the GATT 1994 by 
applying a lower tax rate on the domestic dis tilled spirits, namely ”Cognac”, than on certain 
other imported like distilled spirits , thereby nullifying or impairin g the benefits accrued to the 
Republic of Moldova under the GATT 1994; 
  
In the event that the beverages falling within th e category of "spirits" were found by the Panel 
not to be "like products" to domestic "Cognac" within the meaning of the first sentence of Article III:2, the Republic of Moldova further claims that:  
- Ukraine has acted inconsistently with Artic le III:2, second sentence, of the GATT 1994 by 
applying a lower tax rate on domestic distille d  spirits, namely "Cognac", than on certain 
other imported directly competitive or substitutabl e distilled spirits, so as to afford protection 
to the domestic production, thereby nullifying or impairing the benefits accrued to the 
Republic of Moldova under the GATT 1994. WT/DS423/4 
Page 2 
 
 
  The above claims are set out in detail in the following paragraphs. 
 
The Republic of Moldova requests that the pane l be established with the standard terms of 
reference as set out in Article 7 of the DSU. 
 (1) Article III:2, first sentence 
 
Under, the amendments made to the Law No. 178 from 07.05.1996 "On rates of excise duty 
on ethyl alcohol and alcoholic beverages" in 2008, (provisions further included in the new Ukrainian 
Tax Code nr. 2755 from 02.12.2010), different excise  tax rates are applied to "spirits" falling under 
HS 2208 20 12 00 and HS 2208 20 62 00, namely "Cognac" , and to the rest of the alcoholic beverages 
falling under HS 2208.   
This difference in tax burden is made even more  dramatic by a systemic postponement of the 
term of equalization of the mentioned rates. Thus , the tax burden on some Moldavian distilled spirits 
reached a value almost four times greater than th e tax burden on Ukrainian "like products", named 
"Cognac".    
The Republic of Moldova considers that the "C ognac" and all alcoholic beverages falling with 
the category of "spirits" are "like products" within th e meaning of the first sentence of Article III:2 of 
the GATT 1994.  
Therefore, the Republic of Moldova claims that  by levying a tax on the alcoholic beverages 
falling within the category of "spirits" which is in excess of the tax applied to domestic "Cognac", 
Ukraine violates Article III:2, first sentence, of the GATT 1994. 
 
(2) Article III:2, second sentence 
 
In case that any of the beverages falling within  the category of "spirits" will be found by the 
Panel not to be a "like product" to domestic "Cogn ac", the Republic of Moldova claims that, at the 
very least, they would still be "directly competitiv e or substitutable" produc ts. Moreover, the Republic 
of Moldova believes that the above-mentioned tax di fferentials between the "Cognac" and the rest of 
the alcoholic beverages falling under HS 220 8 cannot be regarded as "de minimis".   
 
Nevertheless, the Republic of Moldova notes th at most of the alcoholic beverages falling 
within the category of "spirits”, which is exported in substantial quantities to Ukraine, is classified 
under different from "Cognac" tariff position.  In  contrast, so called "Cognac" is primarily 
manufactured in Ukraine and almost all of the consumed "Cognac" in Ukraine is domestically 
produced.  
For the above reasons, the Republic of Moldova  claims that, by applying a higher tax on 
distilled spirits (to the extent that they are not "like products" to "Cognac", but still "directly 
competitive or substitutable" products) than on the "Cognac", Ukraine affords protection to its 
domestic production of so called "C ognac", thereby violating Article III:2, second sentence, of the 
GATT 1994. 
 
 
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