INDIA – ADDITIONAL AND EXTRA-ADDITIONAL DUTIES ON IMPORTS FROM THE UNITED STATES
Document: Report of the Appellate Body
Date: 30 October 2008
Document codes: WT/DS360/AB/R
Complainant: U.S.
Respondent: India
Third parties: Australia, Chile, EU, Japan, Vietnam
Dispute stage: Appellate Body
Agreements cited: Art. II:1, III:2, III:4  GATT 1994

INDIA – ADDITIONAL AND EXTRA-ADDITIONAL DUTIES
ON IMPORTS FROM THE UNITED STATES

AB-2008-7

Report of the Appellate Body

APPELLATE BODY

United States, Appellant/Appellee
India, Appellant/Appellee

Australia, Third Participant
Chile, Third Participant
European Communities, Third Participant
Japan, Third Participant
Viet Nam, Third Participant
 AB-2008-7

 Present:

 Hillman, Presiding Member
 Sacerdoti, Member
 Zhang, Member

I. Introduction
1. The United States and India each appeals certain issues of law and legal interpretations
developed in the Panel Report, India – Additional and Extra-Addi tional Duties on Imports from the
United States (the "Panel Report").
1 The Panel was established to consider a complaint by the United
States concerning two specific duties—the "Additional Duty" 2 and the "Extra-Additional Duty" 3—
imposed by India at the border on imports of certain products entering its customs territory.4
2. The United States challenged the Additional Duty as imposed by India on imports of
alcoholic liquor for human consumption (beer, wine , and distilled spirits, collectively "alcoholic

1, 9 June 2008.
2In our discussion, we use the term "Additional Duty" to describe the customs duties imposed by India
on imports of alcoholic beverages pursuant to authority under Section 3(1) of India's Customs Tariff Act
of 1975 (Exhibits US-3A and IND-2A submitted by the United States and India, respectively, to the Panel).
Further details regarding the Additional Duty may be found in Panel Report, paras. 7.10-7.16.
3In our discussion, we use the term "Extra-Additional Duty" to describe the customs duties imposed by
India on imports of alcoholic beverages pursuant to authority under Section 3(5) of India's Customs Tariff Act.
We note that the Panel and India refer to this measur e as "SUAD", an abbreviation based on the phrase "such
additional duty" found in Section 3(5) of India's Cust oms Tariff Act. Further details regarding the Extra-
Additional Duty may be found in Panel Report, paras. 7.17-7.24.
4Panel Report, para. 7.2. India applies these duties in addition to the basic customs duties it imposes
pursuant to authority under Section 12 of India's Customs Act of 1962 (Exhibits US-2 and IND-1 submitted by
the United States and India, respectivel y, to the Panel). In our discussion, we use the term "Basic Customs
Duty" to refer to the latter duties imposed under Section 12. Further details regarding India's Basic Customs
Duty may be found in Panel Report, paras. 2.2, 7.2, and 7.6-7.9.

beverages").
5 The United States also challenged the Ex tra-Additional Duty imposed by India on
imports of alcoholic beverages and other products, including agri cultural products (such as milk,
raisins, and orange juice) and industrial products falling mainly under chapters 84, 85, and 90 of the
Harmonized Commodity Description and Coding System (the "Harmonized System"). 6 The factual
aspects of the challenged measures are set out in greater detail in the Panel Report 7 and in Section V
of this Report.
3. Before the Panel, the United States claimed that the Additional Duty and the Extra-Additional
Duty are inconsistent with India's obligati ons under Articles II:1(a) and II:1(b) of the General
Agreement on Tariffs and Trade 1994 (the "GATT 1994") because the Additional Duty and the Extra-
Additional Duty subject imports to ordinary cust oms duties ("OCDs") or other duties or charges
("ODCs") in excess of those specified in India's Schedule of Concessions.8
4. In response, India contested the characteriz ation of the Additional Duty and the Extra-
Additional Duty as an OCD or an ODC within the meaning of Article II:1(b), arguing instead that the
Additional Duty and the Extra-Additional Duty are charges equivalent to internal taxes imposed
consistently with Article III:2 of the GATT 1994 in respect of like domestic products and, as such, fall
within the scope of Article II:2(a). 9 India further claimed that the Additional Duty is levied in lieu of
state excise duties imposed in respect of like alc oholic beverages produced or manufactured in the
state imposing the duty, while the Extra-Additional Duty is imposed to coun terbalance sales taxes,
value-added tax ("VAT") and other local taxes and charges.10
5. The Panel defined the issue presented in this case as whether the residual category of charges
imposed on the importation of a product—ODC s under Article II:1(b), second sentence—should

5Panel Report, para. 7.11. The rates of Additional Duty on alcoholic beverages are specified in India's
Customs Notification 32/2003 of 1 March 2003. (Exhibits US-6 and IND-5 submitted by the United States and
India, respectively, to the Panel) See also Panel Report, paras. 2.1 and 7.15. On 3 July 2007, India issued
Customs Notification 82/2007 (Exhibit IND-6 submitted by India to the Panel). Through this notification, India
exempted from the Additional Duty all goods listed in Customs Notification 32/2003. (Panel Report, para. 7.16)
The Panel found that its terms of reference did not exte nd to Customs Notification 82/2007 and, consequently,
declined to rule on the Additional Duty on alcoholic liquor as modified by that notification. (Panel Report,
paras. 7.71 and 7.72)
6Panel Report, para. 7.19. The Extra-Additional Duty is imposed by India at a rate of four per cent
ad valorem pursuant to Customs Notification 19/2006 of 1 March 2006. (Exhibits US-7 and IND-7 submitted by
the United States and India, respectively, to the Panel) See also Panel Report, para. 2.1. On 14 September
2007, India issued Customs Notification 102/2007, that exempted, subject to certain conditions, certain products
from the Extra-Additional Duty when imported into Indi a for subsequent sale. (Panel Report, para. 7.24) The
Panel found that its terms of reference did not extend to Customs Notification 102/2007 and, consequently,
declined to rule on the Extra-Additional Duty as modified by that notification. (Panel Report, paras. 7.99 and
7.100)
7Panel Report, paras. 7.2-7.24.
8Ibid., para. 7.5.
9Ibid., paras. 7.30 and 7.150.
10Ibid., para. 7.30.

comprise any and all duties and charges other than OCDs, or only a subset of all such duties and
charges.11 The Panel considered that OCDs discrimin ate against imports because they inherently
disadvantage imports of the subject products vis-à- vis domestic products, and that there is a "readily
apparent rationale" of anti-circumvention for subj ecting ODCs that are of the same kind as OCDs to
the disciplines of Article II:1(b). 12 The Panel then determined that duties and charges identified in
Article II:2 differ from OCDs because they "do not i nherently discriminate ag ainst, or disadvantage,
imports".13 As a result, the Panel concluded that "A rticle II:2 does not set out exceptions to the
positive obligations contained in Article II:1(b)", and that, accordingly, the "sub-paragraphs of
Article II:2 do not provide affirmative defences to a claim of violation of Article II:1(b)".14
6. The Panel recalled that the United States define d OCDs as applying to goods as a matter of
course on their importation, and which typically take the form of ad valorem duties, specific duties, or
a combination thereof. 15 The Panel considered, however, that the elements of this definition would
also apply to ODCs under Article II:1(b) and a "c harge equivalent to an internal tax" under
Article II:2(a), and that the definition offered by the United States "is not sufficient, by itself" to
establish that the relevant charge falls within Article II:1(b), as opposed to Article II:2(a).16 The Panel
found, therefore, that the United States must also show that a charge "inherently discriminates against,
or disadvantages, imports".17 Noting that the United States had not done so, the Panel was of the view
that the United States could only establish that a charge is in the nature of an OCD or ODC if it could
also demonstrate that the charge "falls outside the scope of Article II:2(a)". 18 The Panel thus found
that, "in the circumstances of the present case, it is incumbent upon the United States to make a prima
facie case that the measures at issue fall outside the scope of Article II:2(a)".19
7. The Panel read Article II:2(a) as comprising two elements, namely, "equivalence" and
"consistency with Article III:2". The Panel considered that "equivalent" could not mean "having the
same effect" or "equal in amount", because this woul d fail to give separate meaning to the concepts of
"equivalence" and "consistency with Article III:2".20 Instead, the Panel found that "equivalent" means
"having the same function" or "corresponding". Th e Panel also determined that a rate differential

11Panel Report, para. 7.127
12Ibid., para. 7.131.
13Ibid., para. 7.137.
14Ibid., para. 7.148 and footnote 193 thereto.
15Ibid., para. 7.151.
16Ibid., para. 7.156.
17Ibid., para. 7.156.
18Ibid., para. 7.159.
19Ibid., para. 7.160.
20In paragraph 7.179 of the Panel Report, the Panel listed several definitions of the term "equivalent"
taken from the Shorter Oxford English Dictionary , 5th edn, W.R. Trumble, A. Stevenson (eds) (Oxford
University Press, 2002), Vol. 1, p. 851.

between a border charge and an internal tax is pe rmissible under Article II:2(a) and that this "is
consistent with the distinction drawn in Article II:2(a) between the concepts of 'equivalence' and
'consistency with Article III:2'".
21
8. The Panel considered that a border charge e quivalent to an internal tax, but imposed
inconsistently with Article III:2, would "fall out side the scope of application of Article II:1". 22
Accordingly, the Panel determined that "equivale nce is both a necessary and a sufficient condition
whereas consistency of the internal tax with the provisions of Article III:2 is not a necessary
condition".23 The Panel further considered that the pur pose of the reference to Article III:2 in
Article II:2(a) is "to acknowledge , and call attention to, the exis tence of relevant requirements
stipulated elsewhere in the GATT 1994". 24 The Panel explained that a finding of equivalence would
not lead it to conduct an inquiry under Article II:2(a) with respect to "consistency with Article III:2".
Rather, the Panel noted that, if the complaining part y sought to have a panel review an internal tax
and an equivalent border charge in the light of th e requirements of Article III:2, it was "open to the
complaining party to include in its panel request an independent claim of violation of Article III:2".25
9. Based on its review of the evidence and argumen ts before it, the Panel concluded that the
United States had failed to establish that the Additio nal Duty and the Extra-Additional Duty were in
the nature of OCDs or ODCs. 26 As a result, the Panel found that the United States had failed to
establish that the Additional Duty and the Extra-Add itional Duty are inconsistent with Articles II:1(a)
and II:1(b) of the GATT 1994. 27 In the light of these conclusions, the Panel made no
recommendations under Article 19.1 of the Understanding on Rules and Procedures Governing the
Settlement of Disputes (the "DSU"). However, recalling that India had issued new customs
notifications making certain changes to the Ad ditional Duty and the Extra-Additional Duty
"to address concerns raised by [India's] trading partners" 28, the Panel found it "appropriate" to note
that its disposition of the United States' claims did not "necessarily imply that it would be consistent
with India's WTO obligations for India to withdr aw the relevant new customs notifications or
otherwise re-establish the status quo ante, i.e., the situation as it existe d on the date of establishment
of the Panel."29 The Panel further explained that it did not "wish to suggest that the entry into force of

21Panel Report, para. 7.193.
22Ibid., para. 7.209.
23Ibid., para. 7.210.
24Ibid., para. 7.211.
25Ibid., para. 7.215.
26Ibid., paras. 7.298 and 7.393.
27Ibid., para. 8.1(a) and (b).
28Ibid., para. 8.2 (quoting India's statement at the second Panel meeting, para. 9.1).
29Ibid., para. 8.2.

the new customs notifications necessarily implies that the [Additional Duty] on alcoholic liquor, to the
extent it still exists, and the [Extra-Additional Duty] are WTO-consistent."30
10. On 1 August 2008, the United States notified the Dispute Settlement Body (the "DSB") of its
intention to appeal certain issues of law covered in the Panel Report and certain legal interpretations
developed by the Panel, pursuant to Articles 16.4 and 17 of the DSU, and filed a Notice of Appeal 31
pursuant to Rule 20 of the Working Procedures for Appellate Review (the "Working Procedures").32
On 8 August 2008, the United States filed an appellant's submission. 33 On 13 August 2008, India
notified the DSB of its intention to appeal certain issues of law covered in the Panel Report and
certain legal interpretations developed by the Panel, pursuant to Articles 16.4 and 17 of the DSU, and
filed a Notice of Other Appeal 34 pursuant to Rule 23(1) and (2) of the Working Procedures . On
18 August 2008, India filed an other appellant's submission. 35 On 26 August 2008, India and the
United States each filed an appellee's submission. 36 On the same day, Australia, the European
Communities and Japan each filed a third participant's submission 37, and Chile and Viet Nam each
notified its intention to appear at the oral hearing as a third participant.38
11. By letter dated 20 August 2008, the United Stat es requested authorization from the Appellate
Body Division hearing the appeal to correct certain "clerical errors" in its appellant's submission,
pursuant to Rule 18(5) of the Working Procedures . On 22 August 2008, the Division invited all
participants and third participants to comment on th e United States' request. None of the participants
or third participants objected to the United States' request. On 27 August 2008, the Division
authorized the United States to correct the "clerical errors" in its appellant's submission.
12. The oral hearing in this appeal was held on 4 September 2008. The participants and third
participants presented oral arguments and respond ed to questions posed by the Members of the
Division hearing the appeal.

30Panel Report, para. 8.2.
31WT/DS360/8 (attached as Annex I to this Report).
32WT/AB/WP/5, 4 January 2005.
33Pursuant to Rule 21 of the Working Procedures.
34WT/DS360/9 (attached as Annex II to this Report).
35Pursuant to Rule 23(3) of the Working Procedures.
36Pursuant to Rules 22 and 23(4) of the Working Procedures.
37Pursuant to Rule 24(1) of the Working Procedures.
38Pursuant to Rule 24(2) of the Working Procedures.

II. Arguments of the Participants and the Third Participants
A. Claims of Error by the United States – Appellant
1. Interpretation and Application of Ar ticles II:1(b) and II:2(a) of the
GATT 1994
13. The United States claims that the Panel erre d in its interpretation and application of
Articles II:1(b) and II:2(a) of the GATT 1994, and re quests the Appellate Body to reverse the Panel's
finding that the United States has failed to establish that the Additional Duty and the Extra-Additional
Duty are inconsistent with Articles II:1(a) and II:1(b).
(a) Inherent Discrimination
14. The United States argues that the Panel erred in finding that Article II:1(b) applies only to
duties or charges that "inherently discriminate agains t imports", and in doing so failed to give proper
meaning to the terms "all", "other", and "of any kind" in the second sentence of Article II:1(b). The
United States submits that, "[b]ecause the first senten ce of Article II:1(b) refers to 'ordinary customs
duties,' the words 'all other' in the second senten ce indicates that it concerns a residual category of
duties, encompassing 'all' duties or charges 'of an y kind' other than 'ordinary customs duties'". 39 The
United States adds that a duty or charge imposed on or in connection with importation is either an
OCD under the first sentence of Article II:1(b), or an ODC under the second sentence of Article
II:1(b), but that "[t]here is no third category".
40
15. The United States also argues that there is no textual basis in Article II:1(b) to conclude, as
the Panel did, that the scope of that provision is limited to duties or charges that "inherently
discriminate against imports". In the United States' view, the Panel's finding "reads words, and in turn
a limitation, into the text of Article II:1(b) that is not there, contrary to the relevant rule of treaty
interpretation".41 Even if an ordinary customs duty "were defined in relation to whether it 'inherently
discriminates against imports'", the United States c onsiders that the phrase "all other duties or charges
of any kind" in the second sentence of Article II:1(b) would cover "even those duties or charges that

40Ibid.
41Ibid., para. 17 (referring to the Vienna Convention on the Law of Treaties done at Vienna, 23 May
1969, 1155 UNTS 331; 8 International Legal Materials 679).

do not 'inherently discriminate against imports'". 42 As a result, the United States rejects the Panel's
conclusion that OCDs, and ODCs, are charges "of th e same kind", and believes that the text of the
second sentence of Article II:1(b) in fact "indicates precisely the opposite".43
16. The United States also challenges other aspects of the Panel's reasoning. The United States
submits that customary rules of treaty interpretati on do not allow a panel to apply a "readily apparent
rationale" (that is, the aim of Members to avoid circumvention of negotiated tariff concessions) in
place of a provision's terms as a basis for concluding that all duties and charges subject to
Article II:1(b) must "inherently discriminate against imports". Rather, the United States insists, the
first sentence of Article II:1(b) does not indicate a rationale for prohibiting OCDs in excess of bound
rates and may, in any event, reflect other purposes fo r imposing tariffs, such as the raising of revenue,
or apply in cases where there is no domestic produc tion to protect. In addition, the United States
takes issue with the Panel's interpretation that Article II:1(b) charges must be inherently
discriminatory because it suggests that a Member is free to impose duties or charges that exceed
bound rates so long as they are not "inherently di scriminatory". The United States also faults the
Panel for creating "considerable uncertainty as to wh at must be established to prove that a duty or
charge breaches Article II:1(b)".
44 The United States finally notes that the Panel cited no prior WTO
panel or Appellate Body rulings in support of its interpretation.
17. The United States further argues that the Pane l erred in finding that duties and charges
described in Article II:2 fall outside the scope of Article II:1(b). Recalling its view that Article II:1(b)
comprises OCDs and a "residual category of all other duties or charges of any kind", the United States
argues that the duties or charges referred to in Article II:2 thus fall within the scope of
Article II:1(b).45 The United States also maintains that th e relationship between the two provisions
demonstrates that Article II:2 is an exception to Ar ticle II:1(b). As the United States explains, "while
Article II:1(b) prohibits all duties or charges of any kind imposed on or in connection with
importation, Article II:2 provides that certain duties shall nonetheless be permitted." 46 The United
States thus considers that "Article II:1(b) establis hes a rule, and Article II:2 establishes an exception

42United States' appellant's submissi on, para. 18. The United States also characterizes as "misplaced"
the Panel's reliance on the canon of construction ejusdem generis in support of its interpretation. (Ibid. (referring
to Panel Report, para. 7.141)) Black's Law Dictionary defines ejusdem generis as follows: Latin term
meaning "of the same kind" is a canon of construction that when a general word or phrase follows a list of
specific persons or things, the general word or phrase will be interpreted to include only persons or things of the
same type as those listed. (Black's Law Dictionary, 7th edn, B.A. Garner (ed.) (West Group, 1999), p. 535)
44Ibid., para. 23.
45Ibid., para. 27. (original emphasis)
46Ibid., para. 28.

to that rule", and that this relationship is importa nt because "as an exception, Article II:2 is not itself a
limitation on the scope of Article II:1(b)."
47
18. The United States refers to the decisions of two pre-WTO panels ( US – Customs User Fee
and EEC – Minimum Import Prices ) concerning the relationship between Articles II:1(b) and II:2(c),
and asserts that both panels "considered Article II:1( b) to cover all duties and charges imposed on or
in connection with importation but that some of th ese duties or charges may be imposed in excess of
bound rates because Article II:2 so permits". 48 The United States also argues that the relationship
between Articles II:1(b) and II:2 is "analogous" to th e relationship between other provisions that have
been addressed by the Appellate Body in US – FSC (Article 3.1(a) and the fifth sentence of
footnote 59 of the Agreement on Subsidies and Countervailing Measures (the "SCM Agreement")) and
in EC – Tariff Preferences (Article I:1 of the GATT 1994 and the "Enabling Clause"49).50
19. Additionally, the United States criticizes the Panel for operating under the assumption that, if
Article II:1(b) were understood to include the dut ies and charges under Article II:2, this would
prohibit a Member from imposing such duties or charges unless they were scheduled. This, the
United States argues, reflects the Panel's "funda mental misconception of the relationship between
Article II:1(b) and Article II:2" 51, and "risks rendering Article II:2 redundant". 52 The United States
submits that none of the authorities relied upon by the Panel support the Panel's position that
Article II:2 duties and charges fall outside the scope of Article II:1(b). The United States believes
that, contrary to the Panel's finding, the language in a 1955 Working Party report on tariffs 53 in fact
supports the United States' view that the scope of Article II:1(b), second sentence, is all-inclusive.
Although the United States acknowledges that the passage relied on by the Panel states that
Article II:2 charges "do not fall under" Article II:1( b), the United States considers that the Working
Party's statement "could equally mean that the 'special charges' do not fall under paragraph 1
[of Article II] because contracting parties are not prohibited from imposing them despite the fact that
such charges are not set out in their respective Schedules".54
20. The United States also argues that the Panel's findi ng that Article II:2 charges fall outside the
scope of Article II:1(b) is not supported by the statement in a 1980 GATT Council Decision on the

48Ibid., para. 29.
49GATT 1979 Decision on Differential and More Favourable Treatment, Reciprocity, and Fuller
Participation of Developing Countries, L/4903, 28 November 1979, BISD 26S/203 (the "Enabling Clause").
50United States' appellant's submission, paras. 30 and 31.
51Ibid., para. 32.
52Ibid., para. 33.
53Review Working Party II Report, Schedules and Customs Administration , GATT document L/329,
adopted 26 February 1955, BISD 3S/205, para. 7.

Introduction of a Loose-Leaf System for the Schedules of Tariff Concessions 55 that "such 'other duties
or charges' concern neither charges equivalent to internal taxes, nor anti-dumping or countervailing
duties, nor fees or other charges commensura te with the cost of services rendered". 56 In the United
States' view, the reference to "such" other duties or charges was limited to those duties or charges that
were imposed by legislation of the importing Me mber on the date of the Agreement, and should
therefore be scheduled. Accordingly, the United St ates argues, "it would be inaccurate to read the
cited paragraph of the Council Decision as the Pa nel does as pronouncing that the duties or charges
described in paragraph (a) through (c) of GATT Article II:2 are not 'other duties or charges'".57
21. Finally, the United States rejects the Panel's re liance on the statement by the Appellate Body
in Chile – Price Band System that Article II:2 covers measures that "do not qualify as either 'ordinary
customs duties' or 'other duties or charges'". 58 The United States maintains that this statement was
"made only in passing", was not relevant to the Appe llate Body's inquiry into the meaning of OCD,
and was not made "in connection with an exam ination of either Article II:1(b) or II:2". 59 As such, the
United States concludes, it "cannot reasonably be read as an Appellate Body interpretation of either
provision".60
(b) Prima Facie Case
22. The United States claims that the Panel erred in requiring the United States to establish a
prima facie case by demonstrating that the Additional Du ty and Extra-Additional Duty "inherently
discriminate against imports", including by demons trating that the duties fall outside the scope of
Article II:2. Recalling its arguments regarding th e proper interpretation of the second sentence of
Article II:1(b), the United States submits that there is no basis in the text for requiring the United
States to demonstrate that either duty "inherently discriminates against imports" or falls outside the
scope of Article II:2. The United States maintain s that prior WTO panel and Appellate Body reports
that address Article II:1(b) do not support the Pa nel's finding. The United States notes that, in
Argentina – Textiles and Apparel, for instance, the Appellate Body found that the United States had
established a prima facie case of inconsistency with Article II:1(b) notwithstanding the fact that
neither party had raised Article II:2 or discuss ed whether the measure at issue inherently
discriminated against imports. The United States also notes that, in US – Certain EC Products , the

55GATT Council Decision, Introduction of a Loose-Leaf System for the Schedules of Tariff
Concessions, GATT document C/107/Rev.1, adopted 26 March 1980, BISD 27S/22, para. 9.
57Ibid.
59Ibid.
60Ibid.

panel did not require the European Communities, as the complainant, to establish as part of its prima
facie case that the measure of the United States was outside the scope of Article II:2(c).
23. The United States remarks that the Panel's findi ng would seem to require that a complaining
party bringing an Article II:1(b) claim would have to prove that the challenged duty or charge falls
outside the scope of all of the subparagraphs of Article II:2, "regardless of whether the responding
party even raises Article II:2".
61 Moreover, the United States submits that, under the Panel's logic, the
complaining party would also have to establish that the measure is not some other duty or charge that
does not "inherently discriminate against imports". The United States contends that "[t]here is no
basis for the Panel's unprecedented approach".62
24. The United States claims that the Panel erred in not requiring India to support its assertion
that the Additional Duty and Extra-Additional Duty are justified under Article II:2(a). As the United
States submits, even though the complaining party would bear the burden of demonstrating that a
measure, which the responding party asserts is covere d by Article II:2(a), falls outside the scope of
Article II:2(a), this "does not relieve the respondi ng party of its burden of substantiating its own
assertions that the exception set out in Article II:2 applies". 63 In this respect, the United States
considers that "although Article II:2 is an exception that may be invoked in defense of a measure that
would otherwise be inconsistent w ith Article II, it is not an affirm ative defense in the sense that the
responding party bears the ultimate burden of proof". 64 Instead, the United States contends, once the
responding party asserts and supports a defence under Article II:2, "the ultimate burden would rest
with the complaining party to rebut and ultimately disprove that evidence and argument".65
(c) Equivalence
25. The United States claims that the Panel erred in its interpretation of the term "equivalent" in
Article II:2(a). Specifically, the United States argues that the Panel erred in finding that a charge
equivalent to an internal tax is one that "serve s the same function (in the sense of purpose)" as an
internal tax, regardless of whether the charge "is e quivalent in amount, effect or function (in the sense
of operation)".
66 The United States challenges the Panel's fi nding in two respects. First, the United
States considers that the Panel "incorrectly fo cuse[d] on a single attribute" in determining
equivalence, ignoring that the term "equivalent" also means "corresponding or virtually identical in

62Ibid.
63Ibid., para. 78.
64Ibid., para. 80.
65Ibid.
66Ibid. (referring to Panel Report, paras. 7.185-7.189).

effect, amount and function". 67 The United States submits that an interpretative approach that arrives
at a meaning permissive of more than one attribut e is supported by the Appellate Body's treatment of
the word "like" in its comparison of imported and domestic products in EC – Asbestos . The United
States observes that, in that case, the Appellate Bo dy noted that the term "like" does not prejudge
what attributes or criteria should be compared in evaluating whether two products are "like", and
faulted the panel for focusing on a single criterion. The United States acknowledges that evaluating
whether two products are "like" is "somewhat diffe rent" than examining whether two products are
"equivalent", but nonetheless contends that it is useful to "tak[e] into account various attributes or
criteria and supporting evidence that may indicate the relatedness of two things".68
26. Secondly, the United States claims that th e Panel's focus on "function (in the sense of
purpose)" as the meaning of "equivalent" is incorr ect. As the United States submits, "whether a
charge is equivalent to an internal tax must be based on an examination of the structure, design and
application of the two measures (with the relevant attributes for comparison in that examination being
amount, effect and function)". 69 Otherwise, the United States continues, a Member would be free to
impose duties or charges on importation in excess of those set forth in its Schedule based solely on the
reason or purpose it had for imposing them, or becau se of its characterization of such changes under
domestic law. The United States asserts that past panel and Appellate Body reports rejected
arguments "that the purpose or characterization of a measure under domestic law is determinative",
and focused instead on "an examination of the structure, design and effect of the measure".70
27. The United States also rejects the Panel's relian ce on the "perfume example" cited by the
Legal Drafting Committee to explain the mean ing of "equivalent" in Article II:2(a). 71 According to
the United States, the Panel appears to have c oncluded that the Legal Drafting Committee believed
that the function or purpose of the charge and th e internal tax was the same. The United States,
however, submits that the statement does not speak to function or purpose and, moreover, that such a
reading would ignore other aspects of the meaning of "equivalent". The United States posits an

68Ibid., para. 66.
69Ibid., para. 69.
70Ibid., para. 69 (referring to GATT Panel Report, EEC – Parts and Components , paras. 5.6-5.7;
Appellate Body Report, Chile – Price Band System (Article 21.5 – Argentina) , paras. 149, 162, and 189;
Appellate Body Report, Chile – Price Band System , paras. 226, 227 , 239, and 252; Appellate Body Report,
Japan – Alcoholic Beverages II , pp. 29-31, DSR 1996:I, 97, at 119-123; and Appellate Body Report, Chile –
Alcoholic Beverages, para. 61).
71Ibid., para. 71 (quoting the explanation given by the Chairman of the Legal Drafting Committee at the
second session of the Preparatory Committee held in Geneva on 23 September 1947: "if a [charge] is imposed
on perfume because it contains alcohol, the [charge] to be imposed must take into consideration the value of the
alcohol and not the value of the perfume, that is to say, the value of the content and not the value of the whole."
(Twenty-sixth Meeting of the Tariff Agreement Committee, United Nations Document E/PC/T/TAC/PV/26,
p. 21)

example wherein the border charge could be substa ntially greater than the amount of the internal
charge and still satisfy the Panel's definition of "equivalent".
28. In addition, the United States argues that the Panel was wrong to dismiss certain definitions it
considered in relation to the meaning of "equivale nt"—in particular, the definitions of "having the
same effect", "equal in amount", "that is virtually th e same thing", and "virtua lly identical especially
in effect or function".
72 As the United States submits, the Panel appears to have reasoned that if it is
was obliged to consider whether a charge is equivale nt to an internal tax on the basis of effect or
amount, the only attributes of the charge that could be considered is its effect or amount. For the
United States, however, "there is no basis for limiting the inquiry as to whether a charge is 'equivalent'
to an internal tax to a single attribute".73
29. The United States notes that the Panel's rejection of these definitions was premised on the
view that, if they were to be accepted, this woul d fail to give separate meaning to the concepts of
"equivalence" and "consistency with Article III:2". The United States explains that, whether a border
charge is equal in amount to an internal tax does not "prejudge" that tax's consistency with
Article III:2. The United States explains that, "while a charge may be 'equivalent' to an internal tax
without being exactly or precisely equal in amount to the internal tax, the same is not true for a tax
imposed consistently with Article III:2 in resp ect of a like domestic product, since Article III:2
prohibits any amount of taxation of imports in excess of like domestic products."74
(d) Consistency with Article III:2 of the GATT 1994
30. The United States claims that the Panel erred in "read[ing] out the requirement under
Article II:2(a) that, for a charge to fall within its scope, the internal tax to which the border charge is
equivalent must be imposed c onsistently with Article III:2". 75 According to the United States, the
Panel "essentially [found] that a charge e quivalent to an internal tax imposed inconsistently with
Article III:2 would fall within the scope of Article II:2(a)". 76 The United States submits that it is
difficult to reconcile the Panel's view that Article II:2 charges do not inherently discriminate against
imports when charges imposed inconsistently with Article III:2 would necessarily afford less
favourable treatment and thereby discriminate agains t imports. The United States rejects the Panel's
finding that the concept of "consistency with Article III:2" in Article II:2(a) is a "cross-reference or

72See Panel Report, footnote 226 to para. 7.179 (referring to Shorter Oxford English Dictionary ,
5th edn, W.R. Trumble, A. Stevenson (eds.) (Oxford University Press, 2002), Vol. 1, p. 851)
74Ibid. (original emphasis)
75Ibid., para. 43.

'reminder' that a border charge equivalent to an internal tax is subject to Article III:2"77 because, as the
United States insists, the border ch arges at issue are not subject to Article III:2. The United States
adds that this would also render the Panel's interp retation inconsistent with the object and purpose of
the GATT 1994, because Members would be free under Article II to impose border charges that are
functionally equivalent to internal taxes in excess of those taxes, and in excess of tariff bindings.
31. The United States also claims that the Panel im properly found that a border charge that is
"equivalent" to an internal tax is subject to Article III:2. For the United States, the Panel's findings
are inconsistent with the text of Article III:2 b ecause "while Article II concerns duties and charges
imposed on or in connection with importation, Artic le III:2 concerns taxes and other charges imposed
internally".
78 Moreover, the United States contends that this dispute does not implicate the Ad Note to
Article III, because that provision applies only to a situ ation where there is "an internal measure [that]
applies to both the imported and the like domestic product" 79, and thus, despite that charge being
collected or enforced at the time of importation, it remains an internal measure. By contrast, the
United States posits, this case involves a border measu re that is not the sa me as the measure that
applies to products within India's customs terr itory. The United States submits that, although the
Panel appears to have acknowledged that the Ad Note to Article III is not applicable to this case, it
"nevertheless conclude[d] that a border charge equiva lent to an internal tax is subject to Article
III:2".80 In the view of the United States, the reference to consistency with Article III:2 in the text of
Article II:2(a) indicates that "for a measure to be permitted under Article II:2(a) it must not only be a
charge equivalent to an internal tax but the intern al tax to which the charge is equivalent must be
imposed consistently with Article III:2". 81 The United States observes th at India does not assert that
the customs duties at issue were inte rnal taxes, or that the claims of inconsistency should be analyzed
under Article III:2.
32. In addition, the United States claims that the Pa nel erred in determining that it is incumbent
upon the complaining party to bring an indepe ndent claim under Article III:2. Because "border
charges—whether equivalent to an internal tax or otherwise—are not subject to Article III:2", the
United States submits, "it would not be possible for a complaining party to pursue a border charge
under an independent Article III:2 claim". 82 Moreover, the United States considers that the Panel's
reasoning, if coupled with its finding that a complaining party must demonstrate that the measure falls
outside the scope of Article II:2 in order to prove a violation of Article II:1(b), would seem to require

77United States' appellant's submission, para. 46 (referring to Panel Report, paras. 7.211-7.213).
78Ibid., para. 51.
79Ibid., para. 53.
81Ibid., para. 55.
82Ibid., para. 58.

not only an independent claim under Article III:2, but also independent claims under Article VI and,
potentially, Article VIII in order to disprove the a pplication of Article II:2(b) and (c). The United
States asserts that the Panel's finding and its implications are "unprecedented".
83
(e) Article 11 of the DSU
33. The United States argues that the Panel, in its assessment of the United States' claims under
Articles II:1(a) and II:1(b) of the GATT 1994, fail ed to carry out an objective assessment of the
matter before it, as required under Article 11 of the DSU. The United States ta kes issue with several
aspects of the Panel's analysis.
34. First, the United States contends that the Panel failed to require India to identify the state-
level excise duties to which the Additional Duty on alcoholic beverages is a llegedly equivalent. The
Panel also did not require India to support its assertions that such excise duties exist, that each of the
28 Indian states and 7 union territories impose them, or that they operate such that the Additional
Duty offsets or counterbalances them. 84 Instead, the Panel assumed that such duties exist and then
required the United States to establish that the Additional Duty is not equivalent to them. 85 I n s o
doing, the Panel placed "an impossible burden" on th e United States to guess which state-level excise
duties India contends the Additional Duty on alcoholic beverages offsets or counterbalances, and then
to prove that such duties do not exist or do not op erate such that the Additional Duty offsets or
counterbalances them.86 The United States points out, in this re gard, that denominations of state taxes
may vary and that there is no official definition of what constitutes an excise duty. The United States
adds that it had requested India to identify the excise duties that the Add itional Duty on alcoholic
beverages allegedly offsets on a number of occasi ons—including during consul tations—but that India
failed, on each occasion, to identify the relevant excise duties or provide information substantiating its
contentions as to their existence or operation. More over, the United States submits that the Panel also
asked India for this information but that India failed to respond.87
35. With respect to the Extra-Additional Duty, the United States similarly argues that India had
failed to identify or submit any of the state-level sal es taxes on alcoholic beverages or any of the local
taxes or charges to which it contends the Extra-Add itional Duty is equivalent. Nonetheless, the Panel
assumed that such sales taxes or charges exist and then "placed an impossible burden" on the United
States to guess the state-level sales taxes and local taxes and charges India contends that the Extra-

84Ibid., para. 86.
85Ibid. (referring to Panel Report, paras. 7.271, 7.272, and 7.291).
86Ibid.

Additional Duty offsets or counterbalances, and then to prove that such taxes or charges do not exist
or do not operate such that the Extra-Additional Duty offsets or counterbalances them.88
36. With respect to the Panel's analysis of the A dditional Duty, the United States submits that the
Panel erred by drawing inferences that are not supported by the evidence on record about the
existence and operation of Indian state-level excise taxes. According to the United States, the Panel
found that the evidence before it supported four "inferences": (i) that state-level excise duties on
domestic alcoholic beverages exist 89; (ii) that each of the Indian states impose them 90; (iii) that the
Additional Duty on imports of alcoholic beverages ma y only be levied if an excise duty is levied on
like domestic products91; and (iv) that none of the Indian states impose excise duties or other internal
charges on imported alcoholic beverages. 92 The United States emphasizes that the Panel failed to
discharge its duties under Article 11 of the DSU beca use it relied on these inferences as a basis for its
finding that the evidence before it "supported or w as not inconsistent" with India's assertion that the
Additional Duty is "equivalent" to state-level excise duties. 93 The United States further argues that
the mere fact that the Indian states are author ized to impose excise duties on the manufacture or
production of domestic alcoholic beverages does not indicate that those states exercised such authority
and that each imposed excise duties on domestic alcoholic beverages.94
37. In addition, the United States argues that the Panel erred in its analysis of the Extra-
Additional Duty by disregarding the fact that the st ate-level VAT, Central Sa les Tax, and other local
taxes and charges already apply to imported products.95 According to the United States, because these
taxes or charges already apply to imported products, it is incorrect to suggest, as the Panel did, that the
Extra-Additional Duty offsets or counterbalances them . In addition, the United States contends that
the Panel erred in finding that the evidence before it supported three "inferences": (i) that state-level
sales taxes on alcoholic beverages and other local taxes or charges exist; (ii) that the Indian states
impose them; and (iii) that the Extra-Additional Duty may only be levied on an imported product if
relevant internal taxes are levied on a like domestic product. In the United States' view, in drawing
and relying on these inferences, the Panel acted inc onsistently with its duties under Article 11 of the
DSU.96

89Ibid., para. 92 (referring to Panel Report, paras. 7.271, 7.272, and 7.291).
90Ibid. (referring to Panel Report, paras. 7.271, 7.272, and 7.291).
91Ibid. (referring to Panel Report, paras. 7.247 and 7.281).
92Ibid. (referring to Panel Report, paras. 7.287, 7.288, and 7.292).
93Ibid.
94Ibid., para. 93.
95Ibid., para. 101 (referring to Panel Report, paras. 7.366 and 7.367).
96Ibid., paras. 104 and 105.

(f) Conclusion
38. In the light of these arguments, the United St ates requests the Appellate Body to reverse the
Panel's findings that the United States failed to establish that the Additional Duty and the Extra-
Additional Duty are inconsistent with Articles II:1(a) and II:1(b) of the GATT 1994.
2. Scope of the United States' Challenge to the Additional Duty and the Extra-
Additional Duty
39. The United States argues that the Panel erre d in finding that the United States is not
challenging, as such, Section 12 of India's Custom s Act and Section 3(1) of India's Customs Tariff
Act with respect to the Additional Duty on alcoholic beverages, and is not challenging Section 12 of
the Customs Act and Section 3(5) of the Customs Tariff Act with respect to the Extra-Additional
Duty. In addition, the United States asserts that th e Panel erred in finding that the United States'
challenge to the Additional Duty is "limited" to the Additional Duty as imposed through Customs
Notification 32/2003, and that its challenge to the Extra-Additional Duty is "limited" to the Extra-
Additional Duty as imposed through Customs Notification 19/2006.97
3. Conformity of the Additional Duty and the Extra-Additional Duty with
Articles II:1(a) and II:1(b) of the GATT 1994
40. Should the Appellate Body reverse the Pa nel's interpretation and findings under
Articles II:1(a) and II:1(b) of the GATT 1994, th e United States requests the Appellate Body to
complete the analysis and, applying the correct interpretation of those provisions, find that the
Additional Duty on alcoholic beverages and the Ex tra-Additional Duty are each inconsistent with
Articles II:1(a) and II:1(b). 98 The United States also requests the A ppellate Body to find that neither
the Additional Duty nor the Extra-Additional Duty is justified under Article II:2(a).
(a) Articles II:1(a) and II:1(b) of the GATT 1994
41. The United States maintains that the Additional Duty on alcoholic beverages and the Extra-
Additional Duty are inconsistent with Articles II:1(a) and II:1(b) of the GATT 1994 because they
result in OCDs or ODCs that exceed the duties or charges set forth in India's Schedule of Tariff
Concessions. In support of its position, the United States refers to evidence and arguments that it
presented to the Panel.

98Ibid., para. 124.

42. First, the United States submits that the A dditional Duty and the Extra-Additional Duty are
OCDs within the meaning of Article II:1(b) because they apply: (i) at the time of importation; (ii) as
a matter of course on importation (that is, not on a case-by-case basis); (iii) exclusively to imports
(that is, not to domestic products); and (iv) in the form of an ad valorem or specific duty, depending
on the value of the import. 99 Moreover, the Additional Duty and the Extra-Additional Duty are
considered under India's laws as "duties of customs" , and are collected and administered by India's
customs authorities pursuant to the provisions of India's Customs Act.
43. Secondly, the United States argues, as it did before the Panel, that the Additional Duty and the
Extra-Additional Duty, applied in conjunction with the Basic Cust oms Duty, each results in the
imposition of duties on subject products "in excess of" those set forth in India's Schedule. 100 With
respect to the Additional Duty, the United States explains that Secti on 3(1) of the Customs Tariff Act
requires the imposition of the Additional Duty on imports, and Customs Notification 32/2003 set outs
the rates of Additional Duty on imports of alcoholic beverages. 101 In addition, Section 3(2) of the
Customs Tariff Act requires that the Additional Duty be calculated based on the value of the import
inclusive of the Basic Customs Duty owed. 102 As a result, the Additional Duty required under those
measures results in OCDs that exceed the rates bound in India's Schedule. In support of its
contention, the United States points to evidence that it presented to the Panel demonstrating that, with
respect to beer and wine, "all but the lowest rate " of Additional Duty results in OCDs that exceed
India's bound rate and that, with respect to distilled sp irits, the Additional Duty "at all rates" results in
OCDs that exceed India's WTO bound rates.103
44. The United States adds that, before the Panel, India did not contest the fact that the Additional
Duty, applied in conjunction with the Basic Cust oms Duty, results in duties on beer, wine, and
distilled spirits that exceed 150 per cent. Instead , India only contested the characterization of the
Additional Duty as an OCD or ODC within the mean ing of Article II:1(b). According to the United
States, the Appellate Body therefore has before it un contested facts sufficient to complete the Panel's
analysis and to find that the Additional Duty, as imposed pursuant to Section 3(1) of the Customs
Tariff Act and Customs Notification 32/2003, is, as such , inconsistent with Article II:1(b) as an OCD
in excess of those duties specified in India's Schedule.104

100Ibid., para. 134.
101Ibid., para. 136 (referring to United States' first written submission to the Panel, paras. 18-19, 22-23,
and 50; and Exhibits US-3A and US-6 submitted by the United States to the Panel).
102Ibid. (referring to United States' first written submissi on to the Panel, paras. 19 and 50; and Exhibit
US-3A submitted by the United States to the Panel).
103Ibid., para. 137.
104Ibid., para. 138.

45. The United States similarly explains that Secti on 3(5) of the Customs Tariff Act provides for
the imposition of the Extra-Additional Duty exclusiv ely on imports; Section 3(6) requires that the
Extra-Additional Duty be calculated on the value of the import inclusive of the Basic Customs Duty
and Additional Duty owed; and Customs Notifica tion 19/2006 stipulates that the Extra-Additional
Duty be levied on imports at four percent ad valorem . In addition, the United States refers to
evidence that it presented to the Panel demonstrating that the Extra-Additional Duty, when imposed in
conjunction with India's Basic Customs Duty, results in OCDs on imports in excess of India's WTO-
bound rates for any product for which the rate of Basic Customs Duty "is at or very near India's
WTO-bound rate".
105
46. The United States further observes before the Panel that India did not contest the fact that the
Extra-Additional Duty applied in conjunction with the Basic Customs Duty results in duties on
imports from the United States in excess of those set forth in India's Schedule. Instead, India only
contested the characterization of the Extra-Additional Duty as an OCD or ODC within the meaning of
Article II:1(b). Therefore, according to the Un ited States, the Appellate Body has before it
uncontested facts sufficient to complete the Panel's analysis and find that the Extra-Additional Duty,
as imposed pursuant to Section 3(5) of the Custom s Tariff Act and Customs Notification 19/2006, is,
as such, inconsistent with Article II:1(b) as an OC D in excess of those duties specified in India's
Schedule.106
47. The United States adds that, in any event, if the Additional Duty and the Extra-Additional
Duty are found not to constitute OCDs, they are duties imposed on importation of a product and must
therefore necessarily constitute ODCs. The United St ates contends also that resolving whether the
Additional Duty and the Extra-Additional Duty constitute OCDs or ODCs is unnecessary, because,
either way, they fall within the scope of Article II:1(b) and would result in the imposition of duties in
excess of those set out in India's Schedule. 107 On this basis, the United States requests the Appellate
Body to find that the Additional Duty and th e Extra-Additional Duty are inconsistent with
Articles II:1(a) and II:1(b) of the GATT 1994.108
(b) Article II:2(a) of the GATT 1994
48. The United States requests the Appellate Body to find that neither the Additional Duty nor the
Extra-Additional Duty is justifie d under Article II:2(a). The United States argues that, for a measure

105United States' appellant's submission, footnote 231 to para. 146. The United States notes in this
regard that Exhibits US-1A and US-1B submitted by the United States to the Panel contains examples of
products for which this would be the case.
106Ibid., para. 156.
107Ibid., paras. 132, 144, and 150.
108Ibid., paras. 139, 140, 157 and 158.

to fall within the scope of Article II:2(a), the measure must be (i) a charge equivalent to an internal
tax, and (ii) imposed consistently with Article III:2 in respect of like domestic products.
49. As regards the Additional Duty, the United Stat es argues that the evidence before the Panel
indicates that the Additional Duty is an OCD within the meaning of Article II:1(b) and, therefore, not
a charge "equivalent" to an internal tax within the meaning of Article II:2(a). Furthermore, the United
States observes that the structure and level of st ate-level excise duties vary from state to state. 109
Therefore, the United States contends that, "even if the [Additional Duty] were virtually identical in
structure or amount to the state-level excise duty in one Indian state, it would not be so in relation to
another Indian state."
110
50. Regarding consistency with Article III:2, the United States refers to India's recognition that it
arrived at the rates of Additional Duty through "a process of averaging" and that it is therefore
possible that in some instances that the Additional Duty may subject imports to charges in excess of
those on like domestic products. The United States furt her points out that the Panel made a finding to
this effect.111 According to the United States, if India aver aged the rates of excise duties levied in the
various states and the rates of Additional Duty refl ect the average rate of t hose excise duties, this
"necessarily means" that the Additional Duty ex ceeds the excise duties imposed on like domestic
products in some Indian states.112
51. In addition, the United States notes that, in instances where the like domestic product is
subject to various tax rates, Section 3(1) of the Customs Tariff Act provides that imports shall be
liable to an Additional Duty that is equal to the hi ghest rate of excise duty imposed. Because the rate
of excise duty on like domestic alcoholic beverages varies from state to state, and the Additional Duty
must be equal to the highest rate of excise duty imposed by any of the Indian states, Section 3(1)
subjects imports of alcoholic beverages to rates of Additional Duty that exceed the rate of excise
duties on like domestic alcoholic beverages in at l east some Indian states. From this, the United
States concludes that the Additional Duty is not imposed consistently with Article III:2.
 113
52. As regards the Extra-Additional Duty, the United States recalls India's acknowledgement
before the Panel that "the overa ll burden of taxation on imported products as a result of the [Extra-
Additional Duty] may be marginally 'in excess of' the tax on like domestic products." 114 The United
States further recalls that India does not dispute th at the state-level VATs and the Central Sales Tax

109United States' appellant's submission, para. 165 (referring to Panel Report, paras. 7.271 and 7.272).
110Ibid.
111Ibid., para. 164 (referring to Panel Report, paras. 7.269 and 7.274).
112Ibid.
113Ibid., para. 166.
114Ibid., para. 172 (referring to India's first written submission to the Panel, footnote 51 to para. 85).

apply to imported products sold within India and th at the Extra-Additional Duty is not eligible as a
credit against the state-level VATs or Central Sales Tax owed on that sale.
115 The United States
concludes from this that "imported products are s ubject to the [Extra-Additional Duty] as well as the
state-level VATs and [Central Sales Tax] with no offsetting credit against either for the [Extra-
Additional Duty] paid." 116 In the United States' view, th is indicates that imported products are
subject to charges in excess of t hose on like domestic products and th at the Extra-Additional Duty is
not imposed consistently with Article III:2.
53. The United States further argues that the Extra- Additional Duty is not "equivalent" to state-
level VATs and the Central Sales Tax, "w hether in amount, effect or function". 117 The United States
notes that, while, according to India, the state-leve l VATs are set generally at four different rates
depending on the product subject to the VAT, the Extra- Additional Duty "is set at a single rate of four
percent for all products".118
54. In addition, the United States argues that, while the state-level VATs may consist of four
rates, there is no requirement that the individual states apply the same rate to the same domestic
products. Thus, the United States maintains that "one state may apply a VAT of four or 12.5 percent
on a particular product, whereas another st ate may apply no VAT on that same product." 119 T h e
United States points out in this regard that a "W hite Paper on State-Level Value Added Tax by the
Empowered Committee of Indian State Finance Ministers" explains that an individual state may
exempt up to ten commodities of its choosing from the VAT, and that certain goods will be "outside"
the VAT system, including liquor.
120 By contrast, the Extra-A dditional Duty does not prescribe
different rates for different products and does no t subject imported produc ts to different rates
depending on the Indian state into which the product is imported.
55. Moreover, the United States argues that "the st ate level VATs operate by crediting against the
VAT owed on a product's transfer, the VAT pa id on the product's previous transfers."121 By contrast,
there was, at the time of establishment of the Pa nel, no mechanism for crediting against the Extra-
Additional Duty owed on a product, taxes or charges pa id on the product's previous transfers. Nor,

115United States' appellant's submission para. 172 (referring to Panel Report, paras. 7.366 and 7.367).
116Ibid.
117Ibid., para. 176.
118Ibid., para. 177.
119Ibid., para. 178.
120Ibid.
121Ibid., para. 179.

according to the United States, w as there a mechanism for crediting the Extra-Additional Duty paid
on a product against the VAT owed on the product's subsequent transfers in India.122
56. Regarding the Central Sales Tax, the United Stat es considers that it is not "equivalent" to the
Extra-Additional Duty for similar reasons. The United States contends that, like the VAT, the Central
Sales Tax is imposed at various rates and may vary from state to state and from product to product.
Moreover, depending on the recipient, the Central Sal es Tax may be set at a flat 3 per cent rate (if the
recipient is a registered dealer) or may be set at a rate corresponding to one of the four VAT rates
applicable to that product in the state in which it origin ated (if the recipient is not a registered dealer).
By contrast, the Extra-Additional Duty is set at "a flat four percent and does not vary from product to
product or based on the recipient or the state into which the product is imported." 123 The United
States further submits that, with respect to both the VAT and the Central Sales Tax, the amount of
Extra-Additional Duty owed on imports as compared to the amount of VAT or Central Sales Tax
owed on like domestic products is not "equivalent", since it does not correspond, and is not "virtually
identical to", the VAT or Central Sales Tax, respectively, on like domestic products. For example, the
United States argues that, with respect to some pr oducts, the rate of state-level VATs and the Central
Sales Tax is 12.5 per cent, whereas the Extra-Additional Duty is four per cent.124
(c) Article III:2 of the GATT 1994
57. The United States concludes by reiterating its position that the Additional Duty and the Extra-
Additional Duty "are border charges and thus subject to Article II, not Article III". 125 However,
should the Appellate Body find either the Additional Duty or the Extra-Additional Duty to constitute
an internal tax or otherwise be subject to Article III, the United States requests the Appellate Body to
"complete the analysis" by finding that the Additional Duty and the Extra-Additional Duty are
inconsistent with Article III:2. The United States s ubmits that the legal analysis can be completed on
the basis of undisputed facts on the record and the Panel's findings of fact.126
(d) Conclusion
58. For all these reasons, the United States requests the Appellate Body to find that the Additional
Duty and the Extra-Additional Duty are inconsiste nt with Articles II:1(a) and II:1(b), and are not
justified under Article II:2(a) of the GATT 1994.

123Ibid., para. 180.
124Ibid., para. 181.
125Ibid., para. 184.
126Ibid. At the oral hearing, the United States cl arified that it was not requesting a finding under
Article III:2 independent of its claim under Articles II:1(a) and II:1(b).

B. Arguments of India – Appellee
1. Interpretation and Application of Artic les II:1(b) and II:2(a) of the GATT
1994
59. India claims that the Panel was correct in its interpretation and application of Articles II:1(b)
and II:2(a) of the GATT 1994, and requests the Appe llate Body to uphold the Panel's finding that the
United States has failed to establish that the A dditional Duty and the Extra-Additional Duty are
inconsistent with India's obligations under Articles II:1(a) and II:1(b).
(a) Inherent Discrimination
60. India supports the reasoning of the Panel that Article II:1(b) duties and charges "inherently
discriminate against imports", and that Article II:2(a) charges do not. India submits that the Panel
"paid close attention to the plain language of Ar ticle II:1(b)"—including the terms "all" and "of any
kind" in the second sentence of Article II:1(b)—but "given that both OCDs and ODCs are charges
referred to in the same sub-section of Article II:1( b), the Panel chose to utilize the principle of
ejusdem generis to read the two types of charges in the context of each other". 127 Although it
recognizes that "the plain language of Article II:1" does not use the words "inherent" or
"discriminate", India refers to the statement of the 1980 GATT Council Decision on Introduction of a
Loose-Leaf System for the Schedules of Tariff Concessions , quoted by the Panel, that "'other duties or
charges' are in principle only tho se that discriminate against imports".
128 India maintains that "the
framers of the GATT had themselves acknowledged that the OCDs and ODCs referred to in Article
II:1(b) were to apply only to imports and were to that extent discriminatory charges". 129 Accordingly,
India does not consider that the Panel read into Artic le II:1(b) a requirement that is not there, as the
United States contends.
61. India rejects the reliance by the United States on the word "other" in Article II.1(b), second
sentence, to suggest that ODCs would include even those duties that do not inherently discriminate
against imports. In India's view, the United Stat es fails to recognize that the Panel "acknowledge[d]
that OCDs and ODCs are different types of charges, but views them together in the context of their
character and ultimate effect".
130 Critical to the Panel's consideration of the issue, India submits, is
that OCDs and ODCs, "although different, are applied only on imports and not domestic like

127India's appellee's submission, para. 13. See also supra, footnote 42.
128Ibid. (quoting GATT Council Decision, Introduction of a Loose-Leaf System for the Schedules of
Tariff Concessions, GATT document C/107/Rev.1, adopted 26 March 1980, BISD 27S/22, para. 9).
129Ibid., para. 14.
130Ibid., para. 15.

products".131 India thus maintains that "ODCs as well as OCDs are inherently discriminatory charges
that are applied on imports alone and are conseque ntly subjected to a binding which helps preserve
the value of tariff concessions". 132 India also defends the Panel's re ference to inherent discrimination
as a "readily apparent rationale" in Article II:1(b) , arguing that it "flows directly from the language
and intention of the provisions of GATT Article II:1(b)".133
62. In response to the United States' argument th at WTO Members may have reasons apart from
discrimination for imposing tariffs, India observes th at the "discrimination inherent in an OCD or
ODC is the effect of the imposition of a tariff, and not necessarily the purpose behind it".134 As India
maintains, although protecting domestic productio n may not always be the primary purpose for
imposing customs duties, "the effect of such duti es irrespective of their purpose, continues to be
essentially discriminatory".135
63. India further supports the Panel's finding that charges under Article II:1(b), but not under
Article II:2(a), "inherently discriminate", and reject s the argument of the United States that such a
finding would lead to absurd results since charg es that discriminate, but do not inherently do so,
would go undisciplined. India argues that use of the word "inherent" does not "take away from the
fundamental character of the charge, i.e. it is applied exclusively on imports ", and that the United
States "fails to appreciate that all border charges th at apply exclusively to imports will necessarily be
intrinsically discriminatory".136 India also disagrees with the United States' contention that the Panel's
ruling provided no clear guidance on how a compla ining party could establish that a charge is
"inherently discriminatory", arguing that the Pane l offered extensive guidance on the analysis a
complaining party must undertake.137
64. India submits that Article II:2 charges do not represent an exception to Article II:1. India
cites the fact that charges falling under Article II: 2 are not scheduled by Members as OCDs or ODCs.
India also notes that the Panel concluded that ch arges under Article II:2 "did not in themselves
discriminate between imported and domestic produ cts because they are each subjected to the tests
prescribed in GATT Articles III:2, VI & VIII:1(a)". 138 India points out that the language of the
chapeau of Article II:2 ("Nothing in this Article sh all prevent..."), does not necessarily indicate a rule-
exception relationship between Article II:1(b) and Artic le II:2. India argues that the United States

132Ibid.
133Ibid., para. 16.
134Ibid., para. 17. (original emphasis)
135Ibid.
136Ibid., para. 18. (original emphasis)
137Ibid., para. 20.
138Ibid., para. 23.

"chose to ignore" the statemen t by the Appellate Body in Chile – Price Band System that Article II:2
"sets out examples of measures that do not qualify as e ither 'ordinary customs duties' or 'other duties
or charges'"
139, and submits that this statement represent s "the most comprehensive and unambiguous
characterization of the difference between Article II:1(b) charges and Article II:2 charges". 140 India
considers significant the Appellate Body's statement in Chile – Price Band System , which, India
contends, "unequivocally categorized the relationshi p between Article II:2 and Article II:1(b) charges
as being independent of each other".141
65. India further supports the Panel's "elaborate analysis devoted to finding whether and why
there was a 'readily apparent rationale' for bindi ng OCDs and ODCs, but no corresponding rationale
for subjecting Article II:2 char ges to a similar discipline".142 India agrees with the Panel's reliance on
various authorities for its distinction between the charges subject to Article II:1(b) and those subject to
Article II:2. India argues that the 1955 Working Party report on tariffs 143 cannot be read in the
manner sought by the United States, and that the Repor t "clearly indicated, as the Panel reflects, that
Article II:2 charges were special and were d esigned for a specific purpose and consequently do not
fall under paragraph 1 [of Article II]." 144 India also maintains that the language in the 1980 GATT
Council Decision on Introduction of a Loose-Leaf System for the Schedules of Tariff Concessions 145
"can only be read to mean th at Article II:1 charges are not related to charges" under Article II:2, and
that this "reinforces India's contention and the Panel' s finding that Articles II:1(b) and II:2 deal with
distinct types of charges".146
66. In addition, India argues that none of the pre- WTO panel reports cited by the United States
"support the proposition that the United States now contends ... that Article II:2(a) is in the nature of
an exception to Article II:1(b)". 147 India observes that US – Customs User Fee does not support the
position of the United States because the GATT panel did not "engage in an analysis of whether
Article II:2(c) is in the nature of a positiv e rule which establishes obligations itself". 148 Similarly,
India maintains that the GATT panel in EEC – Minimum Import Prices had rejected the argument that
Article II:1(b) covers all duties or charges, and instead "viewed Article II:2(c) as constituting a

139India's appellee's submission, paras. 24 and 25 (quoting Appellate Body Report, Chile – Price Band
System, para. 276).
140Ibid., para. 25.
141Ibid., para. 30(iii).
142Ibid., para. 28.
143Review Working Party II Report, Schedules and Customs Administration , GATT document L/329,
adopted 26 February 1955, BISD 3S/205.
144India's appellee's submission, para. 30(i).
145GATT Council Decision, Introduction of a Loose-Leaf System for the Schedules of Tariff
Concessions, GATT document C/107/Rev.1, adopted 26 March 1980, BISD 27S/22, para. 9.
146India's appellee's submission, para. 30(ii).
148Ibid., para. 34(ii).

separate category of border charges". 149 India argues that the reliance by the United States on the
decision of the Appellate Body in US – FSC is inapposite because the relationship between the
provisions analyzed in that case (Article 3.1(a) and the fifth sentence of footnote 59 of the SCM
Agreement) is "fundamentally different" from the relations hip between Article II:1(b) and Article II:2
of the GATT 1994.150 Finally, India considers that th e decision of the Appellate Body in EC – Tariff
Preferences reflects a "fact-specific, special approach" not relevant to the facts of this case and,
moreover, that the Appellate Body in that case placed some burden on the complaining party "of
raising the 'Enabling Clause' in making a claim of inconsistency under GATT Article I:1".151
(b) Prima Facie Case
67. India supports the Panel's finding that it was incumbent on the United States as the
complaining party to "raise a presumption" that India's duties do not qualify as non-discriminatory
charges under Article II:2.
152 India argues that there is no support for the United States' contention
that, as a consequence of Article II:2 representing an exception to Article II:1(b), India as the party
invoking such an exception bears the burden of establishing a prima facie case that its Additional
Duty and Extra-Additional Duty are consistent with Article II:2(a). In India's view, the Panel clarified
that "[i]n the circumstances of this case , where the United States ... had failed to demonstrate that
India's duties were inherently discriminatory, it would be incumbent upon it as the complaining party
to make a prima facie case that the measures at issue fall outside of Article II:2(a)". 153 India asserts
that the Panel also clarified that the requirement of making a prima facie case that a challenged
measure falls outside Article II:2(a) "extends only to an analysis of whether the charge in question is
'equivalent' and does not require the complaining pa rty to show that such a charge is imposed
consistently with Article III:2".154
68. India submits that the Panel seems to have adequately defined the contours of what is required
of a complaining party, in general and with specific reference to the facts of this case, in order to show
that the charges fall outside the scope of Article II :2. In addition, India considers that the United
States' assertion that the Panel would require a complaining party in all cases involving an
Article II:1(b) challenge to establish that a duty or charge is outside the scope of each of the sub-

149India's appellee's submission, para. 38(i).
150Ibid., para. 38(ii).
151Ibid., para. 38(iii).
152Ibid., para. 38.
154Ibid., para. 41(ii). India also views the Panel as havi ng clarified that to establish that a charge falls
outside of Article II:2(b), "it would be adequate for a complaining party to show that such a charge is not an
anti-dumping or countervailing duty and does not require the complaining party to establish that such charges
are imposed consistently with Article VI". (Ibid.)

clauses of Article II:2 "is entirely unsupporte d by the Panel's reasoning or its language".
155 Finally,
India agrees with the Panel's characterization that ch arges that are outside the scope of Article II:2 are
charges within the scope of Article II:1(b) and that, since Article II:2(a) is not an exception to Article
II:1(b), the burden of making a prima facie case "squarely falls" upon the United States as
complainant.156
69. India further submits that the United States "appears to have taken contradictory positions" on
whether Article II:2 represents "an exception that is an affirmative defence to Article II:1". 157 India
notes that, although the United States responde d to a question from the Panel that
Article II:2 was not an exception that is an af firmative defence, the United States now argues on
appeal that Article II:2(a) is an exception, but no t an affirmative defence. India states that this
position "appears to suggest a somewhat different burden of proof requirement that is 'similar' to an
affirmative defence, but unlike an affirmative defence did not requir e the responding party to bear the
burden of proof". 158 Because the United States "has taken a diametrically opposite stand in seeking
appellate review on this issue", India states that the Appellate Body may "accordingly disregard" the
United States' contention that Article II:2(a) is an exception to Article II:1(b)".159
(c) Equivalence
70. India rejects the United States' argument that the Panel focused on a single attribute of the
word "equivalent", and argues that the Panel "i n fact examined all attributes of the word". 160
Moreover, India also considers erroneous and misl eading the assertion that equivalence relates to
effect, amount, and function. India contends that the dictionary meaning suggests that "equivalent"
could refer to one of the three attributes, but not all three taken together.
71. India agrees with the Panel's rejection of the de finitions of "equivalent" offered by the United
States—"having the same effect", "equal in amount", "virtually the same thing", "virtually identical
especially in effect or function"—on the grounds that attributing such meanings to the word
"equivalent" would fail to give separate meaning to the concept of "consistency with Article III:2".

156Ibid., para. 44.
157Ibid., para. 32.
158Ibid., para. 34.
159Ibid., para. 35.
160Ibid., para. 62 (referring to Panel Report, paras. 7.179-7.187).

72. India explains that the Panel considered th e phrase "consistently with the provisions of
paragraph 2 of Article III" particularly relevant in interpreting the meaning of "equivalent". In India's
view, the test under Article III:2 requires "an ass essment of the economic impact of taxes and
consequently requires an examination of the ne t tax burdens on imported vis-à-vis domestic like
products".161 India maintains that, by construing the term "equivalent" as meaning "having the same
effect" or "equal in amount", the United States failed to distinguish the meaning of "equivalent" under
Article II:2(a) from the test of "consistency w ith Article III:2" under the same provision.
Accordingly, in India's view, the interpretation of the United States "renders the cross-reference
contained in Article II:2(a) to the consistency with the provisions of Article III:2 redundant and is also
contrary to the concept of effective treaty interpretation". 162 India also believes that the Appellate
Body's findings in EC – Asbestos, do not "suggest that panels are precluded from basing their decision
on a single attribute as long as they have based such a decision on a consideration of all possible
attributes of an item". 163 In this case, India asserts that the Pa nel's interpretation was correct because
it considered the relevance of all possible interpretati ons of the term "equivalent". India remarks that
the Panel "looked at the applicability and relevance of each of these factors and provided adequate
reasons for dismissing them".164
73. India rejects the argument of the United States that the Panel's focus on the "purpose or reason
that a Member may have for imposing the charge " would permit Members to impose duties in excess
of those set out in their Schedules. 165 Instead, the rationale of the Pa nel was that border charges that
are equivalent to internal taxes, but in excess of t hose taxes, will be disciplin ed by a separate analysis
under Article III:2. As India maintains, "[a]n i ndependent examination und er Article III:2 would
ensure that the net tax burden on imported and domestic like products are the same". 166 India
concludes that the analysis of the United States is "based on an incomplete and incorrect reading of
the Panel's findings and should therefore be disregarded".167

161India's appellee's submission, para. 63 (referring to Panel Report, Argentina – Hides and Leather ,
para. 11.243).
162Ibid.
163Ibid., para. 65.
164Ibid., para. 73.
165Ibid., para. 69.
166Ibid., para. 70.
167Ibid.

(d) Consistency with Article III:2 of the GATT 1994
74. India disagrees with the United States that the Panel did not require an examination of
consistency with Article III:2 in order to establish a claim under Article II:2(a). For India, the United
States' claims that the Panel's interpretation is not co nsistent with the text of Article II:2(a) and reads
out the requirement of consistency with Article III:2 "are based on an erroneous reading of the Panel's
findings."
168
75. India considers that the United States "has not been able to sufficiently appreciate the two-
step analysis conducted by the Panel". 169 The Panel first looked into whether the border charge fits
within the scope of non-discriminatory Article II:2 charge using the concept of equivalence. The
Panel then examined whether the ch arge satisfied the requirements of Article II:2(a)—that is, whether
"it is 'equivalent' to an internal charge, and the in ternal charge is imposed consistently with GATT
Article III:2, using the 'concept of consistency'". 170 In India's view, the Panel's ruling does not imply,
as the United States suggests, "that a border charge whic h is equivalent to an internal tax but which in
turn is not imposed consistently with Article III: 2 would be compatible with the requirements of
Article II:2(a)". 171 Rather, India continues, even if a border charge is determined to be within the
scope of Article II:2(a), "the internal charge in question will be subjected to a further Article III:2
scrutiny".172
76. India believes the Panel suggested that the ultim ate analysis of whether an internal tax is
imposed consistently with Article III:2 will involve a comparison of the net tax burden on imported
products vis-à-vis domestic like products. Because th e Panel found in this case that the border charge
is equivalent to an internal tax, the Panel also suggested that the border ch arge "will effectively be
caught by the provisions of Article III:2". 173 India emphasizes that if the "watertight demarcation
between border charges and internal taxes" advan ced by the United States were adopted, this would
not allow the "net tax burden" on imported and domestic like products to be addressed.174
77. India disagrees with the United States that the Panel required the complaining party to make
an independent claim of violation of Article III:2 in order to challenge a border charge that is found to
be equivalent to an internal tax. In India's vi ew, the United States' misinterpretation of the Panel's
finding "flows from its failure to distinguish the 'scope' and 'consistency' requirements from each

169Ibid., para. 48 (referring to Panel Report, paras. 7.204 and 7.205).
170Ibid. (referring to Panel Report, paras. 7.204 and 7.205).
171Ibid., para. 50.
172Ibid.
173Ibid., para. 53 (referring to Panel Report, paras. 7.196 and 7.206).
174Ibid., para. 55.

other".175 India acknowledges the Panel's finding that a border charge need not be consistent with
Article III:2 for it to fall within the scope of Article II:2(a). However, according to India, the Panel's
ruling requires that for a border charge to be impos ed consistently with Article II:2(a), it must meet
two requirements: the border charge must be equivalent to an internal tax; and the internal tax must
be imposed consistently with Article III:2. Thus , India submits, "for the complaining party to
establish that the border charge is equivalent to an internal charge, but inconsistent with Article III:2,
it must make an independent claim."176
78. India also takes issue with the United States ' argument that, where the complaining party
alleges a violation of Article II:1(b), it must al so make an independent claim under Article VI.
Instead, India argues, the Panel's finding implies that a complaining party must establish that a
challenged measure "is non-discriminatory" by demons trating "in the case of Article II:2(a) that it is
(functionally) equivalent to an internal charge, an d in the case of Article II:2(b), that it is an
antidumping or countervailing duty".
177 India considers that "[a]n independent claim under Article III
and VI in every Article II:1(b) challenge does not appear to be the Panel's suggestion".178
(e) Article 11 of the DSU
79. India requests the Appellate Body to reject the United States' claim that the Panel acted
inconsistently with its obligati ons under Article 11 of the DSU. Referring to the Appellate Body
Report in EC – Hormones , India argues that a panel acts inconsistently with its obligations under
Article 11 only when it deliberately or wilfully dist orts or disregards evidence before it. According to
India, the United States has failed to demonstrate that the Panel in this case acted in such a manner.
80. India emphasizes that the burden of establishing a prima facie case under Article II:2(a)
rested on the United States as the complaining part y, and that it was not incumbent on India, as the
responding party, to identify any excise duties or local taxes as would coun terbalance the Additional
Duty and the Extra-Additional Duty. Rather, it was for the United States to point out the charges that
it perceived as being not equivalent to relevant internal taxes so as to sustain its claim under
Articles II:1(a) and II:1(b).
81. India further claims that it did not fail to iden tify the relevant internal taxes to which the
Additional Duty and the Extra-Additional Duty are equivalent. Rather, India submits that it explained
in detail to the Panel the mechanism, structure, d esign, and effect of both Additional Duty and Extra-

176Ibid.
177Ibid., para. 59.
178Ibid.

Additional Duty. In addition, it provided detaile d information of various legal provisions of the
Customs Act and Customs Tariff Ac t and relevant Articles in the Constitution of India, which
constitute and establish the system of indirect taxation in India. According to India, this information,
together with the Panel's finding th at "equivalent" under Article II:2 (a) refers to "function", enabled
the Panel to conclude that the Additional Duty w as "equivalent" to state excise duties and that the
Extra-Additional Duty was "equivalent" to state-le vel VAT, sales taxes, and other local taxes and
charges.
82. India submits that the Panel examined all the evidence and "accorded suitable weight to those
pieces of evidence upon which it believed that a de termination of equivalence would depend".
179 In
particular, the Panel considered evidence indicating the possibility of a rate differential between the
Extra-Additional Duty and the intern al sales taxes. However, India contends that after weighing the
evidence the Panel chose to place greater emphasi s on the functional equivalence of the Extra-
Additional Duty and the state sales taxes. 180 India argues, in this rega rd, that the relative weight
accorded by the Panel to particular evidence on the record cannot form the basis of a challenge under
Article 11 of the DSU.181
83. India further submits that it was incumben t upon the United States to adduce evidence to
substantiate its contention that India's state-level VAT, sales taxes and other local taxes and charges
are not "equivalent" to the Extra-Additional Duty. 182 In the absence of such evidence the Panel was
"perfectly justified" in relying on available evid ence and in concluding that the Extra-Additional Duty
and India's state-level VAT and Central Sal es Tax performed the same function and were
consequently "equivalent".183 Consequently, in India's view, the United States' claim under Article 11
of the DSU should be rejected.
(f) Conclusion
84. For these reasons, India requests the Appellate Body to uphold the Panel's finding that the
United States has failed to establish that the A dditional Duty and the Extra-Additional Duty are
inconsistent with Articles II:1(a) and II:1(b) of the GATT 1994.

180Ibid.
181Ibid.
182Ibid., para. 103.
183Ibid.

2. Scope of the United States' Challenge to the Additional Duty and the Extra-
Additional Duty
85. India argues that the Panel was correct in concluding that the United States was not
challenging the provisions of the Customs Act an d the Customs Tariff Act and that, instead, the
United States' claims were limited to the relevant customs notifications that imposed the Additional
Duty on alcoholic beverages and the Extra-Additiona l Duty on a broader rang e of products. India
argues that the Panel's finding in this regard was due to the failure of the United States to distinguish
between the relevant statutory provisions and the customs notifications imposing the Additional Duty
and the Extra-Additional Duty and its failure to draw a distinction between the mandatory and
discretionary nature of the statutory provisions and the customs notifications. In any event, even if
the scope of the United States' challenge had been broader, India reiterates that the Customs Act and
the Customs Tariff Act do not mandate a WTO-inconsiste nt action. India, therefore, requests that the
Appellate Body reject the United States' challenge of the Panel's finding that the United States was not
challenging the provisions of the Customs Act an d the Customs Tariff Act with respect to the
Additional Duty and the Extra-Additional Duty.
3. Conformity of the Additional Duty and the Extra-Additional Duty with
Articles II:1(a) and II:1(b) of the GATT 1994
(a) Articles II:1(a) and II:1(b) of the GATT 1994
86. India emphasizes, first, that the Additional Duty is neither an OCD nor an ODC within the
meaning of Article II:1(b). Instead, it is a char ge imposed at the time of importation of alcoholic
liquor in lieu of state level excise duties, and is t hus a charge "equivalent" to internal taxes permitted
under Article II:2(a). 184 India explains that "the structure, effect and design of the [Additional Duty]
is solely to offset the excise duties payable by Indian manufacturers of the like domestic product." 185
Similarly, India submits that the Extra-Additiona l Duty is imposed on products at the time of
importation in lieu of state-level VAT, sales taxes, and other local taxes and charges.
87. Based on its view that the United States has failed to establish that the Additional Duty and
the Extra-Additional Duty fall within the scope of Article II:1(b), India requests the Appellate Body to
reject the United States' claim that those measures are inconsistent with Articles II:1(a) and II:1(b).

184India's appellee's submission , para. 116 (referring to India's first written submission to the Panel,
para. 42).
185Ibid.

(b) Article II:2(a) of the GATT 1994
88. India further argues that the United States has "misunderstood" the relationship between
Articles II:1(b) and II:2(a), and ther efore erroneously claims that I ndia has the burden to prove that
the Additional Duty is "equivalen t" to state-level excise duties.
186 India asserts that, although it was
not required to do so, it nonetheless produced sufficient evidence explaining to the Panel the structure,
design and effect of the Additional Duty in order to enable the Panel to come to a conclusion that the
Additional Duty is "equivalent" to state-level ex cise duties. India further argues that it provided
sufficient evidence to establish the equivalence of th e Extra-Additional Duty with relevant internal
taxes, including by identifying relevant provisions of the Customs Act and the Customs Tariff Act.
According to India, the Panel, based on this evidence and Customs Notification 19/2006, rightly
found that the Extra-Additional Duty was equivalent to state-level VAT, sales tax, and other taxes and
charges.
89. India notes that, on appeal, the United States makes reference to India's "admission" that the
rates of the Additional Duty "are arrived at throu gh a process of averaging" the rates of state-level
excise duties, "which in turn indicates that in some instances the [Additional Duty] may subject
imports to charges in excess of those on like domestic products." 187 According to India, this "process
of averaging" is not indicative of whether the Add itional Duty is equivalent to state-level excise
duties, because the Additional Duty serves the same "function" as the state-level excise duties. 188
Moreover, India contends that the United States, by relying on India's assertion that different rates of
excise duty may exist in Indian states, has "implici tly acknowledged" that Indian states do in fact
impose such excise duties.189
90. For these reasons, India requests the Appellate Body to reject the United States' claim that the
Additional Duty and the Extra-Additional Duty are not justified under Article II:2(a) of the
GATT 1994.
(c) Article III:2 of the GATT 1994
91. India submits that the Appellate Body "need not" complete the analysis if it finds the
Additional Duty or the Extra-Additional Duty to constitu te internal taxes or otherwise to be subject to
Article III:2 of the GATT 1994.190

188Ibid.
189Ibid.
190Ibid., para. 134.

92. According to India, the United States appears to contend that, while conducting its analysis
under Article II:2(a), the Panel failed to examine the consistency of the Additional Duty and the
Extra-Additional Duty with Article III:2, and that th e Appellate Body should ex amine this issue if it
finds that those measures are otherwise subject to Ar ticle III. In this regard, India submits that the
Panel was not required to examine the consistency of the Additional Duty and Extra-Additional Duty
with Article III:2 in order to dispose of the Unite d States' claims under Articles II:1(a) and II:1(b).
Nor, according to India, would there appear to be a "need" for the Appellate Body to complete the
analysis because the Panel did not "fail to address" the United States' claim, which was made under
Article II and not under Article III:2. 191 India further argues that there are no facts on the record,
much less uncontested ones, given that the United States did not produce any evidence in support of
its claim.
192
93. India submits that the United States requests, in the alternative, that the Appellate Body
examine the consistency of the Additional Duty and the Extra-Additional Duty under Article III:2 if it
concludes that these measures are "internal taxes". 193 India emphasizes that the Panel's analysis in the
present case was focused on whether the Additional Du ty and the Extra-Additional Duty fall within
the scope of Article II:1(b). In particular, th e Panel was called upon to examine whether those
measures constitute border charges th at are "equivalent" to internal taxes under Article II:2(a). India
underscores, however, that at no point was the Pa nel called upon, either by the United States or by
India, to characterize the Additional Duty and the Extra-Additional Duty as "internal taxes" within the
meaning of Article III:2.194
94. India further argues that a claim that the A dditional Duty and Extra-Additional Duty are
internal taxes under Article III:2 cannot be said to be "closely related" to a claim of inconsistency with
Article II:1(b), nor is there a "logical continuum" between the two. 195 In addition, India alleges that
the United States presented no arguments or eviden ce to support its allegation that the Additional
Duty and Extra-Additional Duty ar e inconsistent with Article III:2 196 and that the United States is
precluded from raising what is essentially a new claim before the Appellate Body. 197 Accordingly,
India submits that the Appellate Body should reject the United States' request to make a finding under
Article III:2 of the GATT 1994.

192Ibid.
193Ibid., para. 133.
194Ibid., para. 141.
195Ibid., para. 142.
196Ibid., para. 143 (referring to Panel Report, paras. 7.403 and 7.415).
197Ibid., para. 144.

C. Claims of Error by India – Other Appellant
95. India claims that the Panel committed legal error by making certain "concluding remarks" at
the end of its Report. India points out that Articles 19.1 and 19.2 of the DSU authorize a panel to
make recommendations and suggestio ns regarding implementation "only when" a measure has been
found to be inconsistent with provisions of a covered agreement.
198 India observes that this was not
the case in the underlying dispute. On this basis, India takes issue with the Panel's remarks, which it
says "appear to be in the nature of policy suggestions to the Government of India". 199 India
emphasizes in this regard that it is "well within its rights under the covered ag reements ... to continue
to impose duties on imports, where such duties have not been found to be inco nsistent with its WTO
obligations."200 Viewed in this light, the Panel's "concl uding remarks" could, therefore, "add to or
diminish such rights and obligations and consequently contravene the provisions of Article 19.2 of the
DSU".201 India submits, moreover, that the Panel's "c oncluding remarks" would not qualify as "such
other findings" as will assist the DSB in making re commendations or rulings within the meaning of
Article 11 of the DSU.
96. For these reasons, India requests the Appellate Body to find that the Panel erred in offering
"concluding remarks" contrary to the provisions of Articles 3.2, 11, and 19 of the DSU. Accordingly,
India requests that the Appellate Body "modify pa ragraph 8.2 of the Panel Report and remove the
Panel's concluding remarks commencing from the second sentence of paragraph 8.2 until the end of
that paragraph".202
D. Arguments of the United States – Appellee
97. The United States submits the Panel's "concluding remarks"—contained in the final paragraph
of the Panel Report—are simply clarifications of th e Panel's conclusions and are not in the nature of
suggestions within the meaning of Article 19.1 of the DSU. According to the United States, the
Panel's remarks do not add to or diminish India's obligations under the covered agreements and are,
therefore, not inconsistent with Article 3.2 or Article 19.2 of the DSU. The United States submits that
nothing in the DSU prohibits a panel from offering such remarks. For the United States, this is true,
regardless of whether a panel finds or does not fi nd the measure at issue to be WTO-inconsistent. 203

198India's other appellant's submission, para. 14.
200Ibid., para. 22.
201Ibid., para. 22.
202Ibid., para. 30.
203Ibid., para. 5.

In addition, the United States submits that, "it is difficult to see how, in being clear about its findings
and conclusions, the Panel is acting in a manner contrary to Article 11" of the DSU.204
98. Accordingly, the United States requests the Appella te Body to dismiss India's claim that the
Panel's concluding remarks are inconsistent with Articles 3, 11, and 19 of the DSU and to reject
India's request to remove the Panel's concludi ng remarks commencing with the second sentence of
paragraph 8.2 until the end of that paragraph.
E. Arguments of the Third Participants
1. Australia
99. Australia submits that the Panel should not ha ve relied on the 1980 GATT Council Decision
on the Introduction of a Loose-Leaf System for the Schedules of Tariff Concessions205 as establishing a
"strict test" between OCDs and ODCs being discr iminatory and charges falling under Article II:2
being non-discriminatory.206 Australia adds that such a test is not required by the ordinary meaning of
the text in context and adds an unnecessary layer of legal complexity to the analysis. According to
Australia, while the GATT panel in US – Customs User Fee referred to the 1980 GATT Council
Decision, that panel also observed that Article II: 2(c) charges disadvantage imports. Australia argues
that the fact that Article II:2 charges may be "generally non-discriminatory ... should not be
extrapolated into an absolute rule". 207 Australia notes that the Panel's test may make it "impossible"
for a complaining party to establish that a charge is inherently discriminatory, and that the
complaining party may therefore be unable to satisfy the burden of proof. 208 Australia maintains that
the better approach to examining whether a char ge falls under Article II:1(b) is the "broader
framework" suggested by the Appellate Body in Chile – Price Band System , which includes an
examination "of the charge's overall design, application and structure".209
100. Australia contends that the Panel erred in failing to characterize Article II:2 as an exception or
defence to Article II:1(b). Australia notes that la nguage in the chapeau of Article II:2 ("Nothing in
this Article shall prevent ...") is similar language to Articles XX, XXI, and XXIV:5, which have been
found to be affirmative defences. Australia considers that the GATT panel in US – Customs User Fee
allocated to the responding party the burden of prov ing consistency with Article II:2(c). Australia

205GATT Council Decision, Introduction of a Loose-Leaf System for the Schedules of Tariff
Concessions, GATT document C/107/Rev.1, adopted 26 March 1980, BISD 27S/22, para. 9.
206Australia's third participant's submission, para. 4.
207Ibid., para. 6.
208Ibid., para. 7.
209Ibid., para. 8.

submits that the Panel "was incorrect in attempti ng to distinguish" the GATT panel's reasoning in that
case, and that such reasoning applies equally to the other subparagraphs of Article II:2, which share
the same chapeau.
210 Australia objects to placing on the complaining party the burden of disproving
consistency with Article II:2 because of its potential to lead to difficulties in the resolution of future
disputes and to inequitable outcomes.
101. Australia supports the Panel's finding regarding the meaning of "equivalent" in Article II:2(a).
The meaning arrived at by the United States is incorrect, Australia submits, because it is "not
supported by the ordinary meaning of the words in the first sentence of Article II:2(a) in their
context".
211 Australia also contends that, as a practical matte r, the United States' test is too strict as it
is "unlikely that all such 'equivalent' taxes charge d at the border would be found to be 'structured',
'applied' or 'designed' in the same way as a more complex domestic tax."212
102. Australia agrees with the Panel's finding that Article II:2 "sets up a two part test" requiring
that a border tax has to be both "equivalent" to an internal tax on like products, and "imposed
consistently with the provisions of Article III:2". 213 Australia disagrees with the United States'
characterization of Article III:2 as confined only to in ternal taxes and charges. In Australia's view,
such an approach "would appear to read down" the meaning of the Ad Note to Article III which
subjects internal taxes and charges to the disciplines of Article III even if levied at the "time or point
of importation" on imported goods. 214 Similarly, such an approach disregards the language of
Article II:2(a), which directly links charges "imposed at the time of importation" to the provisions of
Article III:2.215 If, as India concedes, application of the Additional Duty and Extra-Additional Duty
results in some imported products incurring char ges "in excess of" those imposed on like domestic
products, in Australia's view, those charges would be inconsistent with Article III:2 and could not
therefore satisfy the test set out in Article II:2(a) . Australia submits that Articles II, III, and the
Ad Note to Article III "describe a system of oblig ations and affirmative defences, and provide a
framework for regulating the range of charges th at may be imposed on imports as compensation for
the treatment of like domestic products". 216 Australia considers that these provisions "cannot be read
in isolation as the United States' approach would appear to require".217

210Australia's third participant's submission, para. 13.
211Ibid., para. 17a.
212Ibid., para. 17b.
213Ibid., para. 19.
214Ibid., para. 21.
215Ibid.
216Ibid., para. 23.
217Ibid.

2. Chile
103. Pursuant to Rule 24(2) of the Working Procedures , Chile chose not to submit a third
participant's submission but notified its intention to a ppear at the oral hearing. At the oral hearing,
Chile indicated that it had a systemic interest in so me of the issues raised in this appeal, including the
relationship between Articles II:1(b) and II:2(a) of the GATT 1994.
3. European Communities
104. The European Communities cautions against an "overly formalistic basis" for distinguishing
between charges that apply to imported prod ucts under Articles II and III of the GATT 1994 and
"against widely differing legal consequences depending on which set of provisions are applied". 218
The European Communities adds that "if various measures of similar effect are inconsistent with
GATT 1994, then that may be the important finding to reach with relative clarity and simplicity,
without getting excessively lost in the detail of preci sely which of two or more (perhaps overlapping)
provisions has been breached."219
105. The European Communities disagrees with th e Panel's finding that only measures that
"inherently discriminate" against imports fall within the scope of Article II:1(b). The European
Communities wonders whether the distinction betw een rule and exception, on the one hand, and
mutually delimiting provisions, on the other hand, ma y be "excessively rigid, or possibly circular". 220
The European Communities suggests that one alterna tive would be "to read the relevant provisions
constantly together, and to apply some robust common sense when it comes to burden of proof". 221
Referring to the example of an anti-dumping duty th at allegedly violates Article VI, the European
Communities notes that, while a complaining Member may have the burden of proving inconsistency,
the defending Member has some responsibility to refer to the measure and the record of administrative
proceedings, and the investigating authority must, with respect to the measure itself, substantiate its
findings and resort to facts available only under specific procedural constraints. In the light of these
observations, the European Communities submits that, if a defending Member asserts that its measure
is "equivalent" to an internal tax, that Member should be in a position to substantiate its assertion. "At
the very least", the European Co mmunities adds, "one may reasonably be open to the proposition that
once the complaining Member has done what it r easonably can to fairly raise the question of
equivalence, the burden shifts to the defending Member."222

218European Communities' third participant's submission, para. 7.
219Ibid.
220Ibid., para. 9.
221Ibid.
222Ibid., para. 10.

106. The European Communities disagre es with the Panel's finding that the term "equivalent" in
Article II:2(a) means "having the same function" or "corresponding". Instead, the European
Communities believes that it means that the amount imposed with respect to an imported product
must be the same as the amount imposed with respect to a domestic like product and that "this must
be so with respect to each import (or sale)".
223 Moreover, the European Communities submits, the
Panel's interpretation appears premised on the noti on that it would otherwise deprive Article III:2 of
the GATT 1994 of meaning, which erroneously fails to take into account the possibility that Articles
II and III may to some extent overlap.
107. The European Communities disagrees with India' s claim that the Panel committed legal error
by offering "concluding remarks" at the end of its Report. According to the European Communities,
the Panel simply noted that, since the establishment of the Panel, India adopted or modified certain
measures. The European Communities also notes that the Panel Report does not necessarily mean
that the new measures are WTO-consistent, or that the withdrawal of such measures would be WTO-
consistent. The European Communities does not c onsider these remarks to be recommendations or
suggestions within the meaning of Article 19 of the DSU. Nor does the European Communities
consider the Panel's remarks to add to or diminish the rights or obligations of the parties, or to be
inconsistent with Article 11 of the DSU. Rather , the European Communities considers them to be
"obiter dicta of no legal effect, and thus not susceptible to appeal."
224
4. Japan
108. Japan submits that Article II:2 sets forth exceptions to the prohibition contained in Article II:1
of the GATT 1994. Japan considers that the prohi bition of Article II:1(b) is "key to the GATT
system" and "is broadly phrased", underlining "the importance of effective tariff commitments in the
GATT system".225 Japan maintains, however, that "certain duties or charges were taken out of this
broad prohibition, and these were listed in Article II:2". 226 Japan refers to the chapeau of Article II:2
("Nothing in this Article shall prevent ...") in su pport of its characterization of Article II:2 as an
exception. Japan also rejects the Pa nel's view that this language merely confirms or clarifies what is
set out elsewhere in the Agreement. As Japan argu es, the final clause in Article II:2(a) (that is, "in
respect of an article from which the imported product has been manufactured or produced in whole or
in part) is not covered by the Ad Note to Article III, and thus could not have been a confirmation or

223European Communities' third participant's submission, para. 11.
224Ibid., para. 12.
225Japan's third participant's submission, para. 11.
226Ibid., para. 12.

clarification that these charges fall outside the prohibition of Article II:1(b). As Japan submits,
"[w]ithout the express provision of Article II:2(a), these charges would be covered by the prohibition
of Article II:1(b)."227
109. Observing that under WTO jurisprudence the pa rty invoking an exception carries the initial
burden of showing that its reliance thereon is justified, Japan states that this would require India as the
defending Member invoking the exception contained in Article II:2(a) to demonstrate the fulfilment of
all its elements. Japan considers, however, that su ch an approach raises an important concern, "as it
would, arguably, reverse the burden of proof" in demonstrating conformity with Article III:2. 228
Japan maintains that it would be reasonable and c onsistent with WTO and GATT precedents for India
to bear the burden of demonstrating that its measure is covered by Article II:2(a). After India has met
its burden of showing that Article II:2(a) applies by demonstrating that the charge is "equivalent" to
an internal tax, according to Japan, it would be for the United States to assume the burden of
demonstrating inconsistency of the measure with Article II:2(a). Japan adds that this interpretation
would ensure that independent meaning be given to t hose elements of Article II:2(a) that are not part
of the requirements of Article III:2. 229 Moreover, Japan considers it "contrary to common sense" that
in response to India's mere assertion that Article II:2(a) applies, the United States would have to
demonstrate that such internal taxes "never exist[ ed]", because "it is difficult if not impossible to
prove a negative". 230 Finally, Japan argues that the Panel's allocation of the burden of proof would
frustrate "fair, prompt and effective" dispute resolution, because the United States as complainant
could not be expected to be familiar with a system for internal taxation that does not apply to its
imported products.231
110. Japan submits that the interpretation advan ced by the United States—that India must
substantiate its assertions that the measures fall within the scope of Article II:2(a)—might also avoid a
reversal of the burden of proof under Article III:2. Japan maintains, however, that such an approach
would still impose on the complaining party "the ul timate burden of proving the lack of 'equivalence'
with internal taxes", as well as "the burden of pr oving the inconsistency w ith Article III:2 of those
internal taxes in respect of an article from which the imported product has been manufactured or
produced in whole or in part". 232 Japan believes that the allocation of burden of proof in a case
involving an Article II:2 defence should not result in a situation where the complaining Member
"bears at least part of a prima facie burden" with respect to elements specific to a provision that

227Japan's third participant's submission, para. 14.
228Ibid., para. 19.
229Ibid., para. 21.
230Ibid., para. 23.
231Ibid., para. 24.
232Ibid., para. 28.

functions as an exception.
233 Japan considers the interpretation advanced by the United States as
"more balanced and proper" than the one developed by the Panel, pursuant to which the complaining
party would carry the full burden of proof.234
5. Viet Nam
111. Pursuant to Rule 24(2) of the Working Procedures , Viet Nam chose not to submit a third
participant's submission, but notified its intention to appear at the oral hearing. In its statement at the
oral hearing, Viet Nam addressed the relationship between Articles II:1(b), II:2(a), and III:2 of the
GATT 1994, and the meaning of the word "equivalent" in Article II:2(a).
112. With respect to the relationship between Artic les II:1(b), II:2(a), and III:2 of the GATT 1994,
Viet Nam agrees with the Panel that OCDs or ODCs as defined under Article II:1(b) are to be
distinguished from charges imposed under Article II:2(a ). In particular, Viet Nam considers that the
Panel correctly determined that Article II:1(b) a pplies only to duties and charges that "inherently
discriminate" against imports, and that Article II:2 do es not constitute an exception to Article II:1(b).
Viet Nam also supports the Panel's interpretation of the word "equivalent" in Article II:2(a).
Viet Nam considers that the Panel properly examin ed all meanings of the word "equivalent" and
rightly concluded that the term must be interp reted in its context, which includes the phrase
"consistently with the provisions of Article III:2". Viet Nam adds that, to be imposed consistently
with Article II:2(a), a border charge must satisfy tw o requirements: (i) it must be "equivalent" to an
internal tax; and (ii) the internal tax must be imposed consistently with Article III:2.
III. Issues Raised in This Appeal
113. The following issues are raised in this appeal:
(a) whether the Panel erred in limiting its findings to the Additional Duty as imposed
through Customs Notification 32/2003 a nd the Extra-Additional Duty as imposed
through Customs Notification 19/2006;

233Japan's third participant's submission, para. 27.
234Ibid., para. 29.

(b) whether the Panel erred in its interpretati on of Articles II:1(b) and II:2(a) of the
GATT 1994, in particular, in finding that:
(i) Article II:1(b) covers only duties or charges that "inherently discriminate
against imports", while Article II:2 covers only charges that do not
"inherently discriminate against imports";
(ii) the term "equivalent" in Article II:2(a) relates to the "function" of a border
charge and an internal tax, and does not relate to "effect" or "amount"; and
(iii) in order to satisfy the conditions of Article II:2(a), it is not necessary to
determine whether a charge equivalent to an internal tax is "imposed
consistently with the provisions of paragraph 2 of Article III";
(c) whether the Panel erred in finding that, in the circumstances of the present case, the
United States was required to show that the Additional Duty and the Extra-Additional
Duty are not justified under Article II:2(a);
(d) whether the Panel failed to make an objec tive assessment of the matter before it, as
required by Article 11 of the DSU;
(e) whether the Additional Duty and the Extra- Additional Duty are inconsistent with
Articles II:1(a) and II:1(b) of the GATT 1994; and, finally,
(f) whether the Panel acted contrary to Articles 3.2, 11, and 19 of the DSU by offering
"concluding remarks" relating to certain s ubsequent customs notifications issued by
India, and, if so, whether the Appellate Body should declare these remarks to be of no
legal effect.
IV. Introduction
114. These proceedings concern two types of duties imposed by India on imports of certain
products entering its customs territory.
235 In particular, the United States challenges: (i) the
"Additional Duty" 236 imposed by India at the border on imports of alcoholic liquor for human
consumption (beer, wine, and distilled spirits, collectiv ely "alcoholic beverages"); and (ii) the "Extra-

235Panel Report, para. 7.2.
236In our discussion, we use the term "Additional Duty" to describe the customs duties imposed by
India on imports of alcoholic beverages pursuant to authority under Section 3(1) of India's Customs Tariff Act,
1975 (Exhibits US-3A and IND-2A submitted by the United States and India, respectively, to the Panel).

Additional Duty"
237 imposed by India at the border on imports of a wider range of products, including
certain agricultural and industrial pro ducts, as well as alcoholic beverages. 238 India collects these
duties in addition to its basic customs duty imposed under Section 12 of India's Customs Act of 1962
(the "Basic Customs Duty"). 239 According to India, the Additional Duty and the Extra-Additional
Duty are taken to counter-balance various internal taxes or charges.240
115. Before the Panel, the United States claimed that the Additional Duty, when imposed in
conjunction with the Basic Customs Duty, is inconsistent with India's obligations under
Articles II:1(a) and II:1(b) of the GATT 1994 because it results in the imposition of ordinary customs
duties ("OCDs") or other duties or charges ("ODCs") that exceed the bound rates set out in India's
Schedule of Concessions. The United States brought a similar claim against the Extra-Additional
Duty. In response, India argued that the measur es challenged by the United States are charges on the
importation of products that are e quivalent to internal taxes impo sed in respect of like domestic
products. As such, India argued that they are subject to Article II:2(a) and do not fall within the scope
of Article II:1(b).241
116. The Panel concluded that the United States ha d not established that the Additional Duty on
alcoholic beverages and the Extra-Additional Duty ar e OCDs, or alternatively, ODCs, and that they
do not fall within the scope of Article II:2(a). As a result, the Panel found that the United States had
failed to establish that the Additional Duty and th e Extra-Additional Duty are inconsistent with
Articles II:1(a) and II:1(b).242 The United States challenges these findings on appeal.
117. Before examining the issues raised by the par ticipants on appeal, we consider it useful to
provide a brief description of India's Basic Cu stoms Duty, the Additional Duty and the Extra-
Additional Duty, as well as the legal framework in which they operate.

237In our discussion, we use the term "Extra-Additio nal Duty" to describe the customs duties imposed
by India on imports of alcoholic beverages pursuant to authority under Section 3(5) of India's Customs Tariff
Act. We note that the Panel and India referred to this measure as "SUAD", an abbreviation based on the phrase
"such additional duty" found in Section 3(5) of India's Customs Tariff Act.
238Panel Report, paras. 7.11 and 7.19.
239See ibid., paras. 2.2, 7.2 and 7.6-7.9.
240Ibid., para. 2.3.
241Ibid., para. 7.150.
242Ibid., para. 8.1(a) and (b).

V. The Measures at Issue
118. Several types of duties imposed by India's Central Government on imported products, are
relevant to this dispute. These include the Basi c Customs Duty, the Additional Duty, and the Extra-
Additional Duty.243
119. As regards the United States' challenge to the Additional Duty, Part 1 of India's Schedule of
Concessions specifies India's tariff binding at 150 per cent for beer, wine, and distilled spirits. 244 As
regards the products subject to the Extra-Additi onal Duty, India's tariff bindings range from 25 per
cent to 100 per cent for a range of agricu ltural products under the Harmonized Commodity
Description and Coding System (the "Harmonized System") chapters 02, 04, 07, 08, 09, 11, 15, and
20; and from 0 per cent to 5 per cent in the case of certain industrial products falling mainly under
Harmonized System chapters 84, 85, and 90.245
120. India indicated to the Panel that there ar e no recorded ODCs within the meaning of
Article II:1(b) of the GATT 1994 in India's Schedule of Concessions that are applicable to any of the
products subject to the measures at issue in these proceedings.246
A. The Basic Customs Duty
121. The authority to levy the Basic Customs Duty is provided in Section 12 of India's Customs
Act of 1962 (the "Customs Act"). 247 Regarding the rates at which the Basic Customs Duty is to be
levied, Section 2 of India's Customs Tariff Act of 1975 (the "Customs Tariff Act") provides that "[t]he
rates at which duties of customs shall be levied under the Customs Act, 1962, are specified in the First
and Second Schedules".248

243Panel Report, para. 7.3.
244Ibid., footnote 115 to para. 7.8.
245Ibid., para. 7.19; Exhibits US-1A and US-1B submitte d by the United States to the Panel. See also
para. 135 of this Report.
246Ibid., para. 7.4 (referring to India's response to Question 10 posed by the Panel at the first Panel
meeting).
247Section 12 of India's Customs Act, 1962 (Act 52 of 1962) (Exhibits US-2 and IND-1
submitted by the United States and India, respectively, to the Panel) is reproduced in paragraph 7.6 of
the Panel Report and provides, in relevant part:
Dutiable Goods. (1) Except as otherwise provided in this Act, or any other
law for the time being in force, duties of customs shall be levied at such
rates as may be specified under [the Customs Tariff Act, 1975 (51 of 1975)],
or any other law for the time being in force, on goods imported into, or
exported from India.
248India's Customs Tariff Act, 1975 (Act 51 of 1975) (Exhibits US-3A and IND-2A submitted by the
United States and India, respectively, to the Panel).

122. The First Schedule to the Customs Tariff Act specifies "standard rates" of duty for all imports.
India has, however, partially exempted imports of certain goods from these "standard rates" through
customs notifications.
249 For instance, India has partially exempted certain alcoholic beverages from
the standard duty rates through its Customs Notificat ions 11/2005 and 20/1997, issued on the basis of
Section 25 of the Customs Act. 250 As a result, at the date of esta blishment of the Panel, the applied
rate of Basic Customs Duty for imports of distilled spirits was 150 per cent ad valorem , and the
applied rate of Basic Customs Duty for imports of beer and wine was 100 per cent ad valorem.251 On
3 July 2007, after the date the Panel was establis hed, India increased the applied rate of Basic
Customs Duty for imports of wine to 150 per cent ad valorem through Customs
Notification 81/2007.252
B. The Additional Duty
123. The Additional Duty is provided for in Section 3(1) of the Customs Tariff Act.253 The opening
paragraph in Section 3(1) sets out that "any article" that is imported into India "shall ... be liable" to a
duty, in addition to the Basic Customs Duty, that is "equal to the excise duty for the time being

249Panel Report, para. 7.8.
250Section 25 of the Customs Act states as follows:
Power to grant exemption from duty. (1) If the Central Government is
satisfied that it is necessary in the public interest so to do, it may, by
notification in the Official Gazette, exempt generally either absolutely or
subject to such conditions (to be fulfilled before or after clearance) as may
be specified in the notification goods of any specified description from the
whole or any part of duty of customs leviable thereon.
251Panel Report, para. 7.8.
252Ibid.
253Section 3(1) of the Customs Tariff Act is reproduced in paragraph 7.10 of the Panel Report and
provides, in relevant part:
Any article which is imported into India shall, in addition, be liable to a duty
(hereafter in this section referred to as the additional duty) equal to the excise
duty for the time being leviable on a like article if produced or manufactured in
India and if such excise duty on a like article is leviable at any percentage of its
value, the additional duty to which the imported article shall be so liable shall be
calculated at that percentage of the value of the imported article:
Provided that in case of any alcoholic liquor for human consumption imported
into India, the Central Government may, by notification in the Official Gazette,
specify the rate of additional duty having regard to the excise duty for the time
being leviable on a like alcoholic liquor produced or manufactured in different
States or, if a like alcoholic liquor is no t produced or manufactured in any State,
then, having regard to the excise duty which would be leviable for the time being
in different States on the class or description of alcoholic liquor to which such
imported alcoholic liquor belongs.
Explanation.— In this sub-section, the expression "the excise duty for the time
being leviable on a like article if produced or manufactured in India" means the
excise duty for the time being in force which would be leviable on a like article
if produced or manufactured in India or, if a like article is not so produced or
manufactured, which would be leviable on the class or description of articles to
which the imported article belongs, and wher e such duty is leviable at different
rates, the highest duty.

leviable on a like article if produced or manufactured in India." It further indicates that, where an
excise duty is assessed as a percentage of the value of an article produced or manufactured in India,
the Additional Duty applicable to the corresponding imported article "shall be calculated at that
percentage of the value of the imported article".
124. Entry 51 of List II of the Constitution of India empowers individual states, rather than the
Central Government, to impose "duties of excise" on alcoholic beverages manufactured or produced
in the relevant state. 254 In addition, the same entry of the Constitution empowers states to impose
"countervailing duties" on alcoholic beverages manufactured or produced elsewhere in India.255
125. Section 3(1) of the Customs Tariff Act includes a proviso governing the imposition of the
Additional Duty on alcoholic beverages. Whereas the opening paragraph of Section 3(1) stipulates
that for products other than alcoholic beverages th e Additional Duty shall be "equal" to the excise
duty, the proviso stipulates that the Central Government "may" specify the rate of Additional Duty
applicable to imports of alcoholic beverages "having regard" to excise duties leviable on like alcoholic
beverages produced or manufactured in different Indian states.256
126. Section 3(1) of the Customs Tariff Act also clar ifies that the reference to "excise duty" in
Section 3(1) is the excise duty for the time being "in force" which would be leviable on a like article if
produced or manufactured in India and, where such dut y is leviable at different rates, the "highest
duty".
127. Section 3(2) of the Customs Tariff Act requires, inter alia , that the Basic Customs Duty
leviable under Section 12 of the Customs Act is to be included in the calculation of the amount of
Additional Duty payable under Section 3(1) of the Customs Tariff Act. 257 Section 3(7) of the
Customs Tariff Act stipulates further that the duties imposed under Section 3 shall be in addition to
any other duty imposed under the Customs Tariff Act or any other law. 258 Section 3(8) of the

254See Panel Report, paras. 7.271 and 7.284 (referrin g to Entry 51 of List II of the Constitution of
India).
255Ibid., 7.284. The relevant entry is silent on the issue of the powers of states in respect of excise
duties or countervailing duties on imported alcoholic liquor.
256See ibid., paras. 7.11 and 7.280.
257Ibid., para. 7.12.
258Ibid., para. 7.13.

Customs Tariff Act explains the relationship betwee n the Additional Duty and the provisions of the
Customs Act.
259
128. Customs Notification 32/2003 of 1 March 2003 sp ecifies the rates of Additional Duty for
alcoholic beverages that were applicable on the date of establishment of the Panel. 260 These rates
were specified by the Central Government "[i]n ex ercise of the powers conferred by the proviso to
sub-section (1) of Section 3 of the Customs Tariff Act".261

259Section 3(8) of the Customs Tariff Act is reproduced in paragraph 7.14 of the Panel Report and
provides, in relevant part:
The provisions of the Customs Act, 1962 and the rules and regulations made
thereunder, including those relating to drawbacks, refunds and exemption
from duties shall, so far as may be, apply to the duty chargeable under this
section as they apply in relation to the duties leviable under that Act.
260Customs Notification 32/2003 creates different price bands and different rates of Additional Duty
corresponding to these bands. These rates are reproduced in paragraph 7.15 of the Panel Report. The details are
provided in the table below:
 Heading Description of goods Rate of additional duty
BEERS AND
WINES
2203,
2204,
2205, or
2206
All goods put up in bottles or cans or any
other packing, for ultimate sale in retail
and having a CIF price, -
(a) not exceeding USD 25 per case;

(b) exceeding USD 25 but not exceeding
USD 40 per case;

(c) exceeding USD 40 per case

75% ad valorem

50% ad valorem or USD 37 per case,
whichever is higher

20% ad valorem or USD 40 per case,
whichever is higher

DISTILLED
SPIRITS
2208 All goods put up in bottles or cans or any
other packing, for ultimate sale in retail
and having a CIF price, -

(a) not exceeding USD 10 per case;

(b) exceeding USD 10 but not exceeding
USD 20 per case;

(c) exceeding USD 20 but not exceeding
USD 40 per case;

(d)exceeding USD 40 per case

150% ad valorem

100% ad valorem or USD 40 per
case, whichever is higher

50% ad valorem or USD 53.2 per
case, whichever is higher

25% ad valorem or USD 53.2 per
case, whichever is higher

261Panel Report, para. 7.266. In response to a question posed by the Panel, India stated that the rates of
Additional Duty specified in Customs Notification 32/2003 are the result of "a process of averaging, whereby
the Central Government tried to ensure that to the extent possible, the rate was a reasonable representation of the
net fiscal burden imposed on like domestic products on ac count of the excise duty pa yable on alcoholic liquor."
(Panel Report, para. 7.269 (referring to India's response to Question 28 posed by the Panel in the first Panel
meeting)). India further explained that, "[w]hile it is possible that in some States and in some price bands, the
[Additional Duty] imposed [through CN 32/2003] on imported products may be marginally in 'excess of' the
excise duty imposed on like domestic products in that State, it is equally likely that the [Additional Duty] is less
than the State excise duty in some other States". ( Ibid. (referring to India's response to Question 8(c) posed by
the Panel at the first Panel meeting))

129. As noted earlier 262, the United States in this case chal lenges the Additional Duty only with
respect to alcoholic beverages.263
130. On 3 July 2007, after the date the Panel was established, India issued Customs
Notification 82/2007.264 Through this notification, India exempted from the Additional Duty all
products listed in Customs Notification 32/2003. Th e Panel found that its terms of reference did not
extend to Customs Notification 82/2007 and, consequently, declined to rule on the Additional Duty on
alcoholic beverages as modified by Customs Notification 82/2007. 265 Neither party appeals this
finding by the Panel.
C. The Extra-Additional Duty
131. The Extra-Additional Duty is provided for in Section 3(5) of the Customs Tariff Act. 266
Section 3(5) provides that the Central Governme nt may levy "on any imported article ... such
additional duty as would counter-balance the sales tax, value added tax, local tax or any other charges
for the time being leviable on a like article on its sale, purchase or transportation in India". Customs
Notification 19/2006 of 1 March 2006 prescribes the Extra-Additional Duty "having regard to the
sales tax, value added tax, local tax and other ta xes or charges leviable on sale or purchase or
transportation of like goods in India". Specifically, India maintains that the Extra-Additional Duty is
intended to counter-balance three categories of internal taxes: (i) state value-added taxes ("VAT") or

263Panel Report, para. 7.11 (referring to United States' first written submission to the Panel, para. 52;
and United States' oral statement at the first Panel meeting, para. 12).
264Exhibit IND-6 submitted by India to the Panel.
265Panel Report, paras. 7.71 and 7.72.
266Section 3(5) of the Customs Tariff Act is reproduced in paragraph 7.17 of the Panel Report and
provides, in relevant part:
If the Central Government is satisfied that it is necessary in the public
interest to levy on any imported article [whether on such article duty is
leviable under subsection (1) or, as th e case may be, sub-section (3) or not]
such additional duty as would counte r-balance the sales tax, value added
tax, local tax or any other charges for the time being leviable on a like
article on its sale, purchase or transpor tation in India, it may, by notification
in the Official Gazette, direct that such imported article shall, in addition, be
liable to an additional duty at a rate not exceeding four per cent. of the value
of the imported article as specified in that notification.
Explanation.—In this sub-section, the expression "sales tax, value added
tax, local tax or any other charges for the time being leviable on a like
article on its sale, purchase or transportation in India" means the sales tax,
value added tax, local tax or other charges for the time being in force, which
would be leviable on a like article if so ld, purchased or transported in India
or, if a like article is not so sold, purchased or transported, which would be
leviable on the class or description of articles to which the imported article
belongs, and where such taxes, or, as the case may be, such charges are
leviable at different rates, the highest such tax or, as the case may be, such
charge.

sales taxes, (ii) the Central Sales Tax, and (iii) othe r local taxes and charges im posed by state or local
governments.
267
132. State sales taxes are imposed on products outside the state VAT system, including on
alcoholic liquor, tobacco products , and certain petroleum products. 268 Indian states are prohibited by
Article 286(1) of the Indian Constitution from im posing taxes in respect of the importation of
products into India's customs territory, and in respect of inter-state sales transactions. 269 Subsequent
domestic sales of imported products , however, may be subject to state taxes. For inter-state
transactions, the Central Sales Tax applies and, although prescribed by a law of the Central
Government, it is assessed and collected by the Indi an state where the good being sold originates. 270
Examples of "other local taxes and charges" incl ude Mandi taxes, market committee fees, turnover
taxes, and transport fees.271
133. According to Section 3(5), the Central Government may specify, through notification in the
Official Gazette, the Extra-Additional Duty "at a rate not exceeding four per cent" of the value of the
imported products. Customs Notification 19/20 06 of 1 March 2006 specifies that the Extra-
Additional Duty shall be applied at the rate of four percent ad valorem .272 Customs Notification
19/2006 also provides that the Extra-Additional Du ty applies to all imported products "specified
under the Chapter, heading, sub-heading or tariff ite m of the First Schedule to the [Customs Tariff
Act]". Customs Notification 20/2006 exempts certain goods from some or all of the Extra-Additional
Duty.273
134. Section 3(6) of the Customs Tariff Act requires, inter alia , that the Basic Customs Duty
leviable under Section 12 of the Customs Act and the Additional Duty are to be included in the
calculation of the amount of Extra-Additional Duty owed under Section 3(5) of the Customs Tariff
Act.274
135. The United States' claims regarding the Extra- Additional Duty concern a broader range of
products than those in the Unite d States' claims against the A dditional Duty, which concern only
alcoholic beverages. Although the Extra-Additiona l Duty applies to all products, the United States

267Panel Report, para. 7.356.
268Ibid., para. 7.352.
269Ibid., para. 7.379.
270Ibid., para. 7.352.
271Ibid., para. 7.365.
272Exhibits US-7 and IND-7 submitted by the United States and India, respectively, to the Panel.
273Panel Report, para. 7.362. Other than "goods of local importance"—which India acknowledges are
exempt from state VAT but for which there is no exemption of the Extra-Additional Duty—goods that are nil-
rated are exempt from the Extra-Additional Duty, and goods subject to a one per cent state VAT are subject to a
corresponding rate of Extra-Additional Duty.
274Ibid., para. 7.20.

provided an illustrative list of products to which the application of the Extra-Additional Duty
allegedly resulted in violation of India's bound rates. 275 The examples identified by the United States
included a range of agricultural products under Harm onized System chapters 02, 04, 07, 08, 09, 11,
15, and 20 (such as certain animal and dairy products, raisins and dried prunes, and orange juice), and
certain industrial products falling ma inly under Harmonized System chapters 84, 85, and 90 (such as
calculating and data processing machines, electrical devices and resistors, printed circuits and
semiconductor devices, and instrume nts and apparatus for measuring, and for physical or chemical
analysis).276
136. On 14 September 2007, after the date the Pa nel was established, India issued Customs
Notification 102/2007, which, under certain condition s, exempted the products falling within the First
Schedule of the Customs Tariff Act from the Extr a-Additional Duty when imported into India for
subsequent sale.277 The Panel noted that, pursuant to the no tification, the importer would be required
to pay the Extra-Additional Duty on the product's im portation, but may subsequently file a claim for
refund of the Extra-Additional Duty already paid on the imported product. 278 As it did in the case of
the Additional Duty, the Panel found that its te rms of reference did not extend to Customs
Notification 102/2007 and, consequently, declined to rule on the Extra-Additional Duty as modified
by that notification.279 Neither party has appealed this finding by the Panel.
137. We begin our consideration of the claims rais ed on appeal by examining the United States'
claim regarding the scope of its challenge to the Additional Duty and the Extra-Additional Duty.
VI. Scope of the United States' Challenge to the Additional Duty and the Extra-Additional
Duty
138. The United States argues that the Panel erred in finding that the United States did not
challenge, as such, Section 12 of the Customs Act and Section 3(1) of the Customs Tariff Act with
respect to the Additional Duty on alcoholic be verages, and that it did not challenge, as such,
Section 12 of the Customs Act and Section 3(5) of the Customs Tariff Act with respect to the Extra-
Additional Duty.
280 In addition, the United States asserts that the Panel erred in finding that the
United States' challenge to the Additional Duty was "limited" to the Additional Duty as imposed

275Panel Report, para. 7.19; Exhibits US-1A and US-1B submitted by the United States to the Panel.
276Ibid.
277Ibid., para. 7.24.
278Ibid.
279Ibid., paras. 7.99 and 7.100.

through Customs Notification 32/2003, and that its challenge to the Extra-Additional Duty was
"limited" to the Extra-Additional Duty as imposed through Customs Notification 19/2006.
281
139. In response, India argues that the Panel was co rrect in concluding that the United States did
not challenge the aforementioned provisions of the Customs Act and the Customs Tariff Act,
respectively, and that, instead, the United States' claims are limited to the relevant customs
notifications that imposed the Additional Duty and the Extra-Additional Duty. India argues that the
Panel's finding in this regard resulted from the failu re of the United States to distinguish between the
relevant statutory provisions and the customs no tifications imposing the Additional Duty and the
Extra-Additional Duty, and its failure to draw a di stinction between the mandatory and discretionary
nature of the statutory provisions and the customs notifications. In any event, India argues that the
provisions of the Customs Act and the Customs Tariff Act merely confer upon the Central
Government the discretion to impose the Additiona l Duty and the Extra-Additional Duty, and do not
prescribe the rates at which they may be charged.282
140. We begin our evaluation of this aspect of the United States' appeal by examining the Panel's
terms of reference, which define the scope of the dispute.283
141. Document WT/DS360/5, referred to in the Panel' s terms of reference, is the request by the
United States for the establishment of a panel. That request mentions the relevant Indian measures as
including the Customs Act, Section 3 of the Customs Tariff Act, Customs Notification 32/2003 and
Customs Notification 19/2006.
284 Therefore, the United States' panel request includes Section 12 of
the Customs Act and Sections 3(1) and 3(5) of the Customs Tariff Act in the scope of the dispute.
142. In its first written submission to the Panel, th e United States argued that the Additional Duty
and the Extra-Additional Duty are inconsistent with Articles II:1(a) and II:1(b) and that India imposes
these duties, inter alia, through Section 12 of the Customs Act, Section 3 of the Customs Tariff Act,
Customs Notification 32/2003, and Customs Notification 19/2006. 285 In addition, the United States'
response to a question posed by the Panel reveals that the United States is challenging the Additional
Duty and the Extra-Additional Duty "comprising" Section 12 of the Customs Act, Section 3 of the
Customs Tariff Act, Customs Notification 32/2003, and Customs Notification 19/2006.286

283See Appellate Body Report, US – Carbon Steel, para. 126.
284WT/DS360/5, pp. 1-2.
285See United States' first written submission to the Panel, para. 2.
286See United States' response to Question 16 posed by the Panel at the first Panel meeting.

143. As we understand it, the United States contends that the Panel erred to the extent it limited the
scope of its challenge to the customs notifications that imposed the Additional Duty and the Extra-
Additional Duty. 287 In support of its contention, the United States refers to paragraph 7.106 of the
Panel Report:
The United States has described the [Additional Duty] on alcoholic
liquor as comprising a number of provisions of Indian law, including
Section 3(1) of the Customs Tariff Act and CN 32/2003. Likewise, it
has described the [Extra-Additional Duty] as comprising a number of
provisions of Indian law, including Section 3(5) of the Customs
Tariff Act and CN 19/2006. The various provisions identified by the
United States are the provisions which it considers to be the
provisions through which the [Add itional Duty] on alcoholic liquor
and the [Extra-Additional Duty] are levied. We understand that the
United States has identified these provi sions in an effort to identify
the specific measures at issue, which are the [Additional Duty] on
alcoholic liquor and the [Extra-Additional Duty]. The United States
has never said that it is challenging Section 3(1) or Section 3(5) of
the Customs Tariff Act separatel y from the [Additional Duty] on
alcoholic liquor and the [Extra-Additional Duty], as actually imposed
through specific customs notifications, nor has it requested the Panel
to find that Section 3(1) and Section 3(5) are, as such, inconsistent
with Article II:1. It is clear to us, therefore, that this case involves no
challenge to Indian statutory prov isions as such. In our view, the
United States is challenging the [Additional Duty] on alcoholic
liquor, as imposed through CN 32/ 2003, and the [Extra-Additional
Duty], as imposed through CN 19/2006.
288 (footnotes omitted)
144. We do not read this paragraph cited by the Un ited States as containing a finding by the Panel
that the United States was not challenging Section 12 of the Customs Act and Section 3(1) of the
Customs Tariff Act with respect to the Additiona l Duty on alcoholic beverages, and that it was not
challenging Section 12 of the Customs Act and Section 3(5) of the Customs Tariff Act with respect to
the Extra-Additional Duty. 289 Rather, we understand the Panel si mply to have concluded that the
United States was not challenging Sections 3(1) and 3(5) of the Customs Tariff Act and Section 12 of
the Customs Act in isolation from the Additional Duty on alcoholic beverages and the Extra-
Additional Duty. In fact, the United States confirms , in its appellant's submission, that it is not
bringing separate challenges to these provisions.290 We note, moreover, that, in the passage to which
the United States refers, the Panel observed that th e United States described the Additional Duty and
the Extra-Additional Duty as comprising a number of provisions of Indian law, "including"
Sections 3(1) and 3(5) of the Customs Tariff Act, and that the United States considered the Additional

287United States' response to questioning at the oral hearing.
288Panel Report, para. 7.106.
290Ibid., para. 120.

Duty and the Extra-Additional Duty to be levied through these provisions.
291 Furthermore, in its
analysis of the function of the measures at issue, the Panel carefully examined the statutory basis of
Customs Notifications 32/2003 and 19/2006 —including Sections 3(1) and 3(5) of the Customs Tariff
Act and Section 12 of the Customs Act—and did not lim it its review to the notifications themselves.
145. For these reasons, we do not agree with the Unite d States to the extent it suggests that the
Panel improperly limited the scope of its challenge to the customs notifications that imposed the
Additional Duty and the Extra-Additional Duty. Inst ead, as we see it, the Panel's findings relate, on
the one hand, to the Additional Duty as imposed thr ough Section 12 of the Customs Act, Section 3(1)
of the Customs Tariff Act, and Customs Notificat ion 32/2003, and, on the other hand, the Extra-
Additional Duty as imposed through Section 12 of the Customs Act, Section 3(5) of the Customs
Tariff Act, and Customs Notification 19/2006.
VII. Article II:1(b) and Article II:2(a) of the GATT 1994
146. The United States claims that the Additional Duty and the Extra-Additional Duty are each
inconsistent with Articles II:1( a) and II:1(b) of the GATT 1994.
292 The Panel considered that the
United States' claims under Article II:1(a) were consequential to its claims under Article II:1(b), and
turned first to interpret Article II:1(b), whereby it also interpreted Article II:2(a). 293 We follow the
order of the Panel's analysis.
147. The United States claims that the Panel erred in finding that Article II:1(b) covers only duties
and charges that "inherently discriminate against imports", and that the Panel also erred in finding that
Article II:2 covers only non-discriminatory charges.294 The United States also contends that the Panel
incorrectly defined the term "equiva lent" in Article II:2(a), and, in so doing, disregarded the "effect"
and "amount" of the charge. 295 In addition, the United States submits that the Panel read out of
Article II:2(a) the requirement of "consistency w ith Article III:2", and incorrectly concluded that a
charge "equivalent" to an internal tax can be ch allenged only pursuant to an independent claim under
Article III:2.296 Finally, the United States contends th at the Panel erred in finding that the prima facie
case of the United States required a showing th at the challenged measures do not fall under

291Panel Report, para. 7.106.
292Ibid., para. 7.111.
293Ibid., para. 7.400. The Panel also refers to the Appellate Body Report in Argentina – Textiles and
Apparel, where the Appellate Body conducted its analysis first of Article II:1(b), first sentence, because that
provision was "more specific and german e to the case at hand" than Article II:1(a). (Panel Report, para. 7.111
(quoting Appellate Body Report in Argentina – Textiles and Apparel, para. 45))
294See United States' appellant's submission, paras. 13-38.
295See ibid., paras. 63-74.
296See ibid., paras. 43-62.

Article II:2(a), in this case, by demonstrating that they do not "inherently discriminate against
imports".297
148. India supports the reasoning of the Panel that duties or charges falling under Article II:1(b)
"inherently discriminate against imports", and that charges falling under Article II:2(a) do not. 298
India likewise believes that the Panel correctly defined the meaning of "equivalent", and that the Panel
did not, as the United States contends, read out of Ar ticle II:2(a) the requirement of "consistency with
Article III:2", or require consideration of th at requirement outside of an analysis under
Article II:2(a).299 Finally, India disagrees that the Panel's articulation of the United States' prima facie
burden was in error.300
A. Interpretation of Article II:1(b) and Article II:2(a)
149. We begin our analysis by examining Articles II:1(b) and II:2(a) of the GATT 1994.
Article II:1(b) provides as follows:
The products described in Part I of the Schedule relating to any
Member, which are the products of territories of other Members,
shall, on their importation into the territory to which the Schedule
relates, and subject to the terms, conditions or qualifications set forth
in that Schedule, be exempt from ordinary customs duties in excess
of those set forth and provided therein. Such products shall also be
exempt from all other duties or charges of any kind imposed on or in
connection with the importation in excess of those imposed on the
date of this Agreement or those directly and mandatorily required to
be imposed thereafter by legislation in force in the importing territory
on that date.
150. The first sentence of Article II:1(b) provides th at products described in a Member's Schedule
of Concessions shall be exempt from "ordinary cust oms duties" that are "in excess of" those duties set
out in the Schedule. Thus, the principal obligation in the first sentence of Article II:1(b) requires a
Member to refrain from imposing OCDs on imported products in excess of those provided for in that
Member's Schedule.
301
151. The second sentence of Article II:1(b) stipulates fu rther that such imported products shall be
exempt from "all other duties or charges of any kind" that are imposed "on or in connection with"
importation, to the extent that such duties or ch arges exceed amounts imposed on the date of entry
into force of the GATT 1994 (or which are directly and mandatorily required to be imposed by

297See United States' appellant's submission, paras. 39-42 and 75-81.
298India's appellee's submission, paras. 10-14, 22-23 and 37.
299Ibid., paras. 49-50, 58 and 62.
300Ibid., para. 44.
301Appellate Body Report, Argentina – Textiles and Apparel, para. 46.

legislation in force on that date), as recorded and bound in the Schedules of Concessions annexed to
the GATT 1994.
302 As the Panel acknowledged, the duti es and charges covered by the second
sentence of Article II:1(b) are "defined in re lation to" duties covered by the first sentence of
Article II:1(b), such that ODCs encompass only duties and charges that are not OCDs.303
152. Article II:2 of the GATT 1994 provides as follows:
Nothing in this Article shall prevent any Member from imposing at
any time on the importation of any product:
(a) a charge equivalent to an internal tax imposed
consistently with the provisions of paragraph 2 of Article III in
respect of the like domestic product or in respect of an article
from which the imported product has been manufactured or
produced in whole or in part;
(b) any anti-dumping or countervailing duty applied
consistently with the provisions of Article VI;
(c) fees or other charges commensurate with the cost of
services rendered.
153. The chapeau to Article II:2 thus makes reference to "this Article", that is, Article II in its
entirety. Article II:1(b) clarifies that the tariff bi nding in the relevant column of a Member's Schedule
of Concessions provides an upper limit on the amo unt of OCDs and ODCs that may be imposed.
Article II:2, in turn, clarifies that nothing in Ar ticle II, including Article II:1(b), shall prevent a
Member from imposing on the importation of a product: (i) a charge equivalent to an internal tax
imposed consistently with Article III:2 in respect of a like domestic product; (ii) an anti-dumping or
countervailing duty applied c onsistently with Article VI; or (iii) fees or other charges commensurate
with the cost of services rendered. The chapeau of Article II:2, therefore, connects Articles II:1(b)
and II:2(a) and indicates that the two provisions ar e inter-related. Article II:2(a), subject to the
conditions stated therein, exempts a charge from th e coverage of Article II:1(b). The participants
agree that, if a charge satisfies the conditions of Ar ticle II:2(a), it would not result in a violation of

302See Understanding on the Interpretation of Article II:1(b) of the General Agreement on Tariffs and
Trade 1994.
303Panel Report, para. 7.125.

Article II:1(b). 304 Thus, we consider that, in the context of this case involving the application of
duties that are claimed to correlate to certain internal taxes, Article II:1(b) and Article II:2(a) are
closely related and must be interpreted together.
154. We turn now to consider the Panel's interpreta tion of Articles II:1(b) and II:2(a) and review
the participants' arguments on appeal.
1. Scope of Article II:1(b)
155. The United States argues that there is no textual basis in Article II:1(b) to conclude, as the
Panel did, that the scope of that provision is limit ed to duties or charges that "inherently discriminate
against imports".305 India, however, supports the reasoning of the Panel. 306 We note, at the outset,
that the Panel's interpretative analysis was guided by what it characterized as the "issue presented in
this case": that is, whether the residual cate gory of ODCs reflected in the second sentence of
Article II:1(b) includes, as argued by the United States, "any and all charges imposed on the
importation of a product" other than OCDs, or whether it was, as India argued, li mited to "a subset of
all such duties and charges".307
156. The Panel acknowledged that the phrase "'other duties and charges of any kind' could
conceivably support the interpretation argued for by the United States" 308, but considered that
customary rules of treaty interpretation require that th e terms of the treaty also be read in their context
and in the light of the treaty's object and purpose. As "immediate context", the Panel noted a
"parallelism" between the two sentences of Article II:1(b) and concluded that this parallelism
"strongly suggests that ... the charges intended to be covered by the two provisions are charges of the
same kind". 309 In addition, the Panel reasoned that OC Ds "inherently discriminate against, or
disadvantage, imports", and that there is a "r eadily apparent rationale"—that is, avoiding the
circumvention of tariff concessions—for subjecting ODCs that are "of the same kind" as OCDs to the

304The United States' and India's responses to questioning at the oral hearing. The Panel and the
participants also agree that the Additional Duty and th e Extra-Additional Duty are border charges subject to the
terms of Article II, and that they are not disciplined by the provisions of Article III as "internal taxes". The
Ad Note to Article III provides that "any internal tax or other internal charge" that applies to both domestic and
imported products, but which is "collected or enforced" in respect of the imported product "at the time or point
of importation", is "nevertheless to be regarded" as subject to the provisions of Article III. Whether a measure is
a "charge" to which Article II:2(a) applies, or an "internal tax or other internal charge" referred to in the Ad Note
to Article III, has to be decided in the light of the ch aracteristics of the measure and the circumstances of the
case.
306India's appellee's submission, paras. 13 and 14.
307Panel Report, para. 7.127.
308Ibid., para. 7.128.
309Ibid.

same disciplines.
310 Finally, the Panel considered that th e charges referred to in Article II:2 differ
from OCDs and ODCs because they do not "inherently discriminate against, or disadvantage,
imports", and inferred from this that charges falling under Article II:2 are therefore outside the scope
of Article II:1(b).
157. We do not agree with the Panel that Article II:1(b) "strongly suggests" that OCDs and ODCs
are "of the same kind". 311 As the Panel itself observed, the two sets of charges are described and
disciplined in separate sentences of Article II:1(b), a nd may, by their terms, not pertain to the same
event of importation.312 While both sentences of Article II:1(b) relate to duties or charges applied "on
the importation" of certain products, the second se ntence of Article II:1(b) also uniquely covers
charges imposed "in connection with the importati on" of such products. Moreover, the second
sentence of Article II:1(b) refers to duties or ch arges "of any kind", which suggests that, while in
some instances ODCs may be of a similar kind to OCDs, in other instances they may be of a different
kind. Accordingly, we do not find the language of Artic le II:1(b) read in its context to be conclusive
as to whether OCDs and ODCs are necessarily of a similar or dissimilar kind.
158. We also disagree with the Panel that duties and charges within the meaning of Article II:1(b)
must always be considered to "inherently discrim inate against imports". We do not see a textual or
other basis for the Panel's conclusi on that "inherent discrimination" is a relevant or necessary feature
of charges covered by Article II:1(b). Article II:1( b) does not set out a specific rationale for imposing
duties or charges, and there exist rationales other than "inherent discrimination" for applying such
duties or charges. The Panel observed that OCDs "a re typically applied so as to afford protection to
domestic production" and concluded from this th at OCDs are inherent ly discriminatory. 313 T h i s
rationale, however, would not seem to apply in situ ations where there is no domestic production (or
even expectations of future domestic production) to protect. OCDs may be applied for a variety of
reasons unrelated to domestic production, including , as the United States observes, the raising of
revenue. India argues that the United States fails to appreciate that the Panel's standard of inherent
discrimination relates to the effect, not the purpose, of a duty. 314 Even if this were so, we do not
consider that the language and context of Article II: 1(b) provide a basis for concluding that all duties
and charges falling under Article II:1(b) are inherently discriminatory. Moreover, as the United States
contends, the language of the second sen tence of Article II:1(b) could be read to suggest that, even if
OCDs inherently discriminate against imports, ODCs cover all duties or charges of any kind imposed

310Panel Report, para. 7.131.
311See ibid., para. 7.128.
312See ibid., paras. 7.125 and 7.126.
313Ibid., para. 7.129.

on or in connection with importation other than OCDs, including those duties or charges that do not
inherently discriminate against imports.
159. We also have concerns with the Panel's characterization of duties or charges under
Article II:1(b) as "inherently discriminatory", insofar as this may suggest that the mere application of
a tariff by a Member on imports of another Member is somehow unfair or prejudicial. Such a
connotation would, in our view, be at odds with negotiations by Members of tariff concessions that
allow for the imposition of duties up to a bound level.
315 Tariffs are legitimate instruments to
accomplish certain trade policy or other objectives such as to generate fiscal revenue. Indeed, under
the GATT 1994, they are the preferred trade policy instrument, whereas quantitative restrictions are in
principle prohibited. 316 Irrespective of the underlying objec tive, tariffs are permissible under
Article II:1(b) so long as they do not exceed a Member's bound rates.
160. Moreover, we disagree with the Panel that Ar ticles II:2(b) and II:2(c) provide contextual
support for the proposition that duties and charge s falling under Article II:2 do not "inherently
discriminate against imports". The Panel may have re ferred to Articles II:2(b) and II:2(c) in order to
suggest that charges falling under Article II:2(a) are not "inherently discriminatory" because they are
functionally equivalent to certain internal taxes. However, for anti-dumping and countervailing duties
under Article II:2(b), there is nominally no domestic charge that would serve as the counterpart to
which such duties would correspond. Likewise, charges under Article II:2(c) are, as the Panel admits,
imposed exclusively on imports 317, and also do not have an obvious domestic counterpart. Thus, we
do not find contextual support in Articles II:2(b) and II:2(c) for considering Article II:2 duties and
charges as universally non-discriminatory in respect of imports.

315As recited in the preamble to the GATT 1994, Memb ers sought through the Agreement to enter into
"reciprocal and mutually advantageous arrangements directed to the substantial reduction of tariffs and other
barriers to trade".
316We note in this regard that the panel in Turkey – Textiles stated:
A basic principle of the GATT system is that tariffs are the preferred and
acceptable form of protection. Tariffs, to be reduced through reciprocal
concessions, ought to be applied in a non-discriminatory manner
independent of the origin of the goods (the "most-favoured-nation" (MFN)
clause). Article I, which requires MFN treatment, and Article II, which
specifies that tariffs must not exceed bound rates, constitute Part I of GATT.
Part II contains other related obligations, inter alia to ensure that Members
do not evade the obligations of Part I. Two fundamental obligations
contained in Part II are the national treatment clause and the prohibition
against quantitative restrictions. The prohibition against quantitative
restrictions is a reflection that ta riffs are GATT's border protection "of
choice". (Panel Report, Turkey – Textiles, para. 9.63).
317Panel Report, para. 7.136.

161. In support of its interpretation of Article II:1( b), the Panel referred to a 1980 proposal of the
Director-General, adopted by the GATT Council, regarding the introduction of a loose-leaf system for
the Schedules of Concessions. That document contains the following statement:
I wish to point out in this connexion that such "other duties or
charges" are in principle only tho se that discriminate against imports.
As can be seen from Article II:2 of the General Agreement, such
"other duties or charges" concern neither charges equivalent to
internal taxes, nor anti-dumping or countervailing duties, nor fees or
other charges commensurate with the cost of services rendered.
318
162. This was a statement made by the Director-Gener al in proposing a loose-leaf system through
which schedules of tariff concessions among GATT Memb ers were to be consolidated, published and
updated. We find that this statement is of limite d relevance to an interpre tation of the relationship
between Articles II:1(b) and II:2(a) and, in any even t, it does not provide a basis for the Panel to have
introduced into those provisions an implicit concept of inherent discrimination.
163. The Panel's reliance on the 1955 Working Party re port on tariffs is also misplaced. The
Working Party considered whether to amend subparagraphs (b) and (c) of paragraph 1 of Article II to
address the possibility that these provisions do not apply to charges on transfers, and noted without
elaboration that Article II:2, "which sets out th e special charges which do not fall under paragraph 1
[of Article II], does not refer to charges on transfers". 319 It does not appear from this statement that
the relationship between Articles II:1(b) and II:2 wa s central to the issue addressed by the Working
Party. Nor did the Appellate Body suggest in Chile – Price Band System that Article II:1(b) applies
only to duties and charges that "inherently discr iminate against imports", while Article II:2 does
not.320 We therefore do not find that these statements pr ovide a sufficient basis for the Panel to devise
a reading of Articles II:1(b) and II:2(a) based on wh ether a duty or charge "inherently discriminates
against imports", nor do we believe that they are incompatible with the interpretation we reach above.
164. For these reasons, we find that the Panel erred in its interpretation of Article II:1(b) as
covering only duties or charges that "inherently discriminate against imports", and of Article II:2(a) as
covering only charges that do not "inherently discriminate against imports".

318Panel Report, para. 7.144. (quoting GATT Council Decision, Introduction of a Loose-Leaf System
for the Schedules of Tariff Concessions , GATT document C/107/Rev.1, adopted 26 March 1980, BISD 27S/22,
para. 9)
319Ibid., para. 7.143. (quoting Review Working Party II Report, Schedules and Customs Administration,
GATT document L/329, adopted 26 February 1955, BISD 3S/205, para. 7)
320Ibid., para. 7.146. In Chile – Price Band System, the Appellate Body stated that Article II:2 sets out
charges that "do not qualify" as OCDs or ODCs, but did so in the context of its consideration of the meaning of
the term "ordinary customs duty" in Article 4.2 of the Agreement on Agriculture. (Appellate Body Report, Chile
– Price Band System , para. 276) As we have noted, and all participants to this proceeding agree, charges that
are justified under Article II:2(a) are not in breach of Article II:1(b).

2. Article II:2(a)
165. We now turn to consider the Panel's interpreta tion of Article II:2(a) of the GATT 1994. The
United States claims that the Panel erred in both its interpretation of the term "equivalent" and its
interpretation of the phrase "consistently with the pr ovisions of paragraph 2 of Article III". We first
examine the Panel's consideration of the term "e quivalent". Article II:2 of the GATT 1994 reads in
relevant part:
Nothing in this Article shall prev ent any Member from imposing at
any time on the importation of any product:
(a) a charge equivalent to an internal tax imposed
consistently with the provisions of paragraph 2 of Article III in
respect of the like domestic product or in respect of an article
from which the imported product has been manufactured or
produced in whole or in part.
166. Article III:2 of the GATT 1994, referred to in Article II:2(a), reads in relevant part:
The products of the territory of any Member imported into the
territory of any other Member shall not be subject, directly or
indirectly, to internal taxes or other internal charges of any kind in
excess of those applied, directly or indirectly, to like domestic
products.
167. The Panel considered several dictionary definitions of the term "equivalent"
321 and concluded
that whether a border charge and internal tax are "equivalent" is determined by whether they "have the
same function".322 The United States argues that the Panel erred by "incorrectly focus[ing] on a single
attribute to determine whether the charge and the internal tax are 'equivalent'". 323 We agree that all
relevant attributes or definitions need to be considered in ascribi ng to a treaty's terms the ordinary
meaning given to those terms in their context and in the light of the treaty's object and purpose. 324
However, we note that the Panel considered various definitions in interpreting the meaning of the
term "equivalent" in Article II:2(a) , and we do not find the fact that the Panel settled on one attribute
of that term to be in error per se.

321The Panel identified the following dictionary definitions of the term "equivalent": "equal in power,
rank, authority, or excellence"; "equal in value, signific ance, or meaning"; "that is virtually the same thing;
having the same effect"; "having the same relevant position or function; corresponding". (Panel Report,
para. 7.179, quoting the Shorter Oxford English Dictionary, 5th edn, W.R. Trumble, A. Stevenson (eds) (Oxford
University Press, 2002), Vol. 1, p. 851)
322Panel Report, para. 7.189.
324We are mindful here of prior statements of the Appellate Body that dictionary definitions are a useful
starting point for discerning the ordinary meaning of a tr eaty term, but that they are not necessarily dispositive.
A treaty term cannot be interpreted in isolation from the context in which it appears and in the light of the
treaty's object and purpose. (Appellate Body Report, EC – Chicken Cuts , para. 175; Appellate Body Report,

168. The United States argues that the Panel interpreted "equivalent" to mean "function" only in
the sense of "purpose" or "reason for existing", and disregarded the United States' characterization of
"function" as meaning "how the charge a nd the internal tax operate or apply".
325 The Panel
considered that a determination of "equivalen ce" seeks to establish whether separate charges on
imported and domestic products "when viewed together, can be considered to form a distinct whole
within the relevant Member's customs duty and tax system" 326, such that "the relevant function
fulfilled both by the internal tax on the domestic product and the border charge is to impose a charge
on a particular product qua product".327 On this basis, we do not cons ider that the Panel conveyed an
understanding of the word "function" as being excl usively limited to the "purpose" or "reason for
existing" of a charge, or as referring only to a Member's aims or intentions associated with the levying
of the charge. Rather, the Panel suggested that it would examine whether the border charge and the
internal tax in question serve a relative or comp arable function or role in imposing a financial
assessment on a particular product by virtue of the nature of that product, not because that product
happens to be either imported or manufactured domestically.328
169. The United States further alleges that the Pa nel's construction of the term "equivalent"
dismisses the definitions of "having the same effect" and "equal in amount".329 India contends that the
Panel "in fact looked at the applicability and releva nce of each of these factors and provided adequate
reasons for dismissing them". 330 The Panel reasoned that to adopt the definitions "having the same
effect" and "equal in amount" would "fail to give se parate meaning to the concepts of 'equivalence'
and 'consistency with Article III:2'" in Article II:2(a). 331 If it were to adopt these meanings, the Panel
explained, "it would be difficult to see any differe nce between the two concepts", which would run
counter to the Panel's view that "equivalence" a nd "consistency with Article III:2" are separate and
distinct elements of Article II:2(a). 332 As a result, the Panel concluded that a border charge and an

325United States' appellant's submission, footnote 87 to para. 67.
326Panel Report, para. 7.189.
327Ibid., para. 7.190. "Qua" is defined as "in so far as" or "in the capacity of". ( Shorter Oxford English
Dictionary, 5th edn, W.R. Trumble, A. Stevenson (eds) (Oxford University Press, 2002), Vol. 2, p. 2422)
328We note, in this regard, that the Panel refers to both the "design or purpose" of the Additional Duty
and the Extra-Additional Duty (Panel Report, paras. 7.277 and 7.372) and the "legal framework" of such duties
(Ibid., paras. 7.290 and 7.379).
329United States' appellant's submission, para. 72. The United States also alleges that the Panel
dismissed the definitions of "virtually the same thing" and "virtually identical especially in effect or function".
The first was part of one of the definitions the Panel originally cited: "[t]hat is virtually the same thing; having
the same effect". (Panel Report, para. 7.179) The Panel then referred to this earlier definition simply as "having
the same effect" (Ibid., para. 7.182), but did not give a reason for doing so. The Panel also did not explain why
it dismissed the second definition—"virtually identical especially in effect or function". Nonetheless, we do not
consider that these definitions impart significance to the term "equivalent" that is different from what we discuss
below.
331Panel Report, para. 7.185. When referring to "c onsistency with Article III:2", the Panel was making
reference to the phrase "imposed consistently with the provisions of paragraph 2 of Article III" in Article II:2(a).
332Ibid.

internal tax could be "equivalent" even if there were a "tax burden differential to the detriment of
imported products".333
170. In our view, these two concepts—"equivalence" and "consistency with Article III:2"—cannot
be interpreted in isolation from each other; they impart meaning to each other and need to be
interpreted harmoniously. By contrast, the Panel's interpretation was predicated on its understanding
that, because the term "equivalent" refers to the border charge, and the phrase "imposed consistently
with the provisions of paragraph 2 of Article III" re fers to the internal tax, Article II:2(a) draws a
distinction between the two concepts. We are not persuaded that the phrase "imposed consistently
with the provisions of paragraph 2 of Article III" relates exclusively to the words "internal tax".
Determining whether a charge is imposed consis tently with Article III:2 necessarily involves a
comparison of a border charge with an internal tax in order to determine whether one is "in excess of"
the other. Yet, the Panel's statement that the "term 'imposed' in Article II:2(a) relates to the internal
tax and not the border charge" leaves nothing with which the internal tax can be compared.334
171. Moreover, we disagree with the Panel's conclusi on that the term "equivalent" does not require
any quantitative comparison of the charge and internal tax. This would mean that a border charge that
is significantly greater in amount than an inte rnal tax could still be deemed "equivalent" under
Article II:2(a), provided that the two were functiona lly equivalent. We find that such a result would
be incompatible with a proper interpretation of Article II:2(a).
172. To give meaning and effect to the phrase "i mposed consistently with the provisions of
paragraph 2 of Article III", we consider it necessa ry, in the light of the structure and context of
Article II:2, to read this phrase in a manner that imparts meaning to the assessment of whether the
charge and internal tax are "equivalent". We di sagree with the Panel that understanding the term
"equivalent" as requiring a quantitative comparis on would make redundant the reference to
consistency with Article III:2. Indeed, as we see it, the reference in Article II:2(a) to consistency with
Article III:2 suggests that the concept of equivalen ce includes elements of "effect" and "amount" that
necessarily imply a quantitative comparison.
173. In support of its view, the Panel referred to the explanation of the Chairman of the Legal
Drafting Committee during the second session of the Preparatory Committee in 1947 concerning the
meaning of the term "equivalent" in Article II:2(a):
[T]he word "equivalent" here means that if a [charge] is imposed on
an article because a [charge] is impos ed on part of the content of this

333Panel Report, para. 7.187.
334Ibid., para. 7.171.

article, then the [charge] should only be imposed regarding the
particular content of this article. For example, if a [charge] is
imposed on perfume because it contains alcohol, the [charge] to be
imposed must take into consideration the value of the alcohol and not
the value of the perfume; that is to say, the value of the content and
not the value of the whole.
335
174. The Panel considered the Legal Drafting Committ ee's statement in the context of the Panel's
interpretation of the term "equiva lent", but did not attribute any significance to the reference to
"value". Contrary to what the Panel suggested, we believe that the statement of the Legal Drafting
Committee supports the understanding of the term "equivalent" as incorpora ting consideration of
"value". We also note, in this respect, that th e Panel referred in its interpretative analysis to a
definition of "equivalent" as meaning "equal in value". 336 The Panel, however, dismissed this
definition since "charges are not normally considered to have a value" and th e reference to "value"
was referring to "an exchange situation" not relevant to Article II:2(a).337 We do not see on what basis
the Panel could have excluded the relevance of "value" for purposes of interpreting the meaning of the
term "equivalent" in Article II:2(a).
175. We thus consider that the term "equivalent" calls for a comparative assessment that is both
qualitative and quantitative in nature . Such an assessment is not lim ited to the relative function of a
charge and an internal tax, but must also include quantitative considerations relating to their effect and
amount. For the foregoing reasons, we find that the Panel erred in attributing an overly narrow
meaning to the term "equivalent".
176. The second element of the Panel's interpretative analysis concerned the phrase "imposed
consistently with the provisions of para graph 2 of Article III" in Article II:2(a). 338 Article III:2
requires that imported products shall not be subject "t o internal taxes or other internal charges of any
kind in excess of those applied, directly or i ndirectly, to like domestic products." The Panel
considered that a border charge that is equivalent to an internal tax, but imposed inconsistently with
Article III:2, would nonetheless be justified under Article II:2(a), and that the element of "consistency
with Article III:2" is therefore "not a necessary condition" for the application of Article II:2(a). 339 In
the Panel's view, the reference to Article III:2 in Article II:2(a) was intended "to acknowledge, and
call attention to, the existence of relevant re quirements stipulated elsewhere in the GATT 1994". 340

335Panel Report, para. 7.187 (referring to the Twenty Sixth Meeting of the Tariff Agreement
Committee, held in Geneva on 23 September 1947, United Nations document E/PC/T/TAC/PV/26, p. 21).
336Ibid., para. 7.179.
337Ibid., para. 7.181.
338As we noted supra, at footnote 331, the Panel also referred to this phrase in its report as "consistency
with Article III:2".
339Panel Report, paras. 7.209 and 7.210.
340Ibid., paras. 7.211.

According to the Panel, "if the complaining party wishes a panel to examine the internal tax and an
equivalent border charge in the light of the require ments of Article III:2, it is open to the complaining
party to include in its panel request an independent claim of violation of Article III:2".341
177. The United States contends that the Panel e rred in "read[ing] out the requirement under
Article II:2(a) that, for a charge to fall within its scope, the internal tax to which the border charge is
equivalent must be imposed c onsistently with Article III:2". 342 The United States argues that the
Panel's interpretation renders inutile the reference to Article III:2 in Article II:2(a), contrary to the
customary rules of treaty interpretation. Although the Panel referred to this phrase, as the United
States puts it, as a "cross-reference or 'reminder' that a border charge equivalent to an internal tax is
subject to Article III:2", the United States submits th at this finding is also in error because "border
charges—whether equivalent to an internal tax or otherwise—are not subject to Article III:2". 343
Relying on the distinction between a "charge" in Artic le II:2(a) and an "internal tax" in Article III:2,
the United States posits that, "while Article II concerns duties and charges imposed on or in
connection with importation, Article III:2 concer ns taxes and other charges imposed internally". 344
Finally, the United States argues that the Panel erred in concluding that, in order to demonstrate that a
charge equivalent to an internal tax is "imposed consistently with Article III:2", the United States was
required to bring an independent claim under Article III:2.345
178. India does not believe that the Panel's interpre tation implies, as the United States suggests,
"that a border charge which is equivalent to an internal tax but which in turn is not imposed
consistently with Article III:2 would be compa tible with the requirements of Article II:2(a)". 346 In
India's view, the United States' misinterpretation of the Panel's finding "flows from its failure to
distinguish the 'scope' and 'consiste ncy' requirements from each other". 347 As India understands the
Panel's reasoning, even if a charge is determined to be within the scope of Article II:2(a) because it is
"equivalent" in function to an inte rnal tax, consistency with Article III:2 is still required in order to
meet the requirements of Article II:2(a).
179. We note, however, the Panel's statement th at "for the purposes of an inquiry under
Article II:2(a) ... consistency of the internal tax w ith the provisions of Article III:2 is not a necessary
condition".348 The Panel added that "the reference in Artic le II:2(a) to 'consistency with Article III:2'

341Panel Report, para. 7.215.
343Ibid., para. 46.
344Ibid., para. 51.
345Ibid., paras. 57 and 58.
347Ibid., para. 58.
348Panel Report, para. 7.210.

is not intended to stipulate an additional requirement to be met for a border charge to fall outside the
scope of Article II:1."
349 Given these unequivocal statements, we do not consider that the Panel
preserved a role for evaluating "consistency with Article III:2" in the context of Article II:2(a).
180. We consider that Article II:2(a) should not be interpreted in a manner that reads out the
significance, for purposes of an Article II:2(a) inquiry, of the element of "consistency with
Article III:2" or, at most, ascribes to it the purpose of "acknowledg[ing], and call[ing] attention to, the
existence of relevant requirements stipulated elsewhere in the GATT 1994."
350 Rather, as we have
indicated, we believe that the requirement of "consis tency with Article III:2" must be read together
with, and imparts meaning to, the requirement that a charge and internal tax be "equivalent". We
recall that Article II:2(a) refers to "a charge equivalent to an internal tax imposed consistently with the
provisions of paragraph 2 of Article III in respect of the like domestic product". We also recall that
the first sentence of Article III:2 prohibits the im position on imported products of "internal taxes or
other internal charges of any kind in excess of those applied, directly or indirectly, to like domestic
products". We therefore consider that whether a charge is imposed "in excess of" a corresponding
internal tax is an integral part of the analysis in determining whether the charge is justified under
Article II:2(a).351 Contrary to what the Panel suggests, a co mplaining party is not required to file an
independent claim of violation of Article III:2 if it wishes to challenge the consistency of a border
charge with Article III:2.
181. We thus find that the element "imposed consis tently with the provisions of paragraph 2 of
Article III" forms an integral part of the assessment under Article II:2(a) of whether a charge and an
internal tax are "equivalent". Accordingly, we be lieve the Panel erred in its interpretation that the
element of "consistency with Article III:2" is not a necessary condition in the application of
Article II:2(a).
B. Conclusion
182. In sum, we find that the Panel erred in its interpretations of Article II:1(b) and Article II:2(a).
In particular, the Panel erred in concluding that Article II:1(b) covers only duties or charges that
"inherently discriminate against imports", and that Article II:2(a) covers only charges that do not
"inherently discriminate against imports". The Panel also incorrectly interpreted the term
"equivalent" in Article II:2(a) as requiring only a qu alitative comparison of the relative function of a
charge and internal tax, and thereby incorrectly excluded quantitative considerations relating to their
effect and amount. Moreover, the Panel erred in find ing that "consistency with Article III:2" is not a

349Panel Report, para. 7.215.
350Ibid., para. 7.211.
351See Appellate Body Report, Japan – Alcoholic Beverages II, pp. 18-19, DSR 1996:I, 97, at 115.

necessary condition in the application of Article II: 2(a). Having based its analysis on an erroneous
interpretation of Articles II:1(b) and II:2(a), the Pane l, in our view, could not have arrived at a proper
conclusion regarding whether the Additional Duty and Extra-Additional Duty are consistent with
these provisions. For these reasons, we reverse the Panel's findings in paragraphs 7.299, 7.394, 7.401,
and 8.1 of the Panel Report, that the United States failed to establish that the Additional Duty and the
Extra-Additional Duty are inconsistent with Ar ticles II:1(a) and II:1(b) of the GATT 1994. We
examine the conformity of the Additional Duty and the Extra-Additional Duty with India's obligations
under Article II:1(b) of the GATT 1994 in Section X of this Report.
VIII. Burden of Proof
183. The United States claims that the Panel erred in finding that, in the circumstances of this case,
it was "incumbent upon the United States to make a prima facie case that the measures at issue fall
outside the scope of Article II:2(a)." 352 According to the United States, "although Article II:2 is an
exception that may be invoked in defence of a meas ure that would otherwise be inconsistent with
Article II, it is not an affirmative defence in th e sense that the responding party bears the ultimate
burden of proof." 353 Rather, if a responding party asserts that the measure does not breach
Article II:1(b) because it is a measure described in Article II:2 and "substantiates that assertion, then
the complaining party would bear the burden of proving the measure falls outside the scope of
Article II:2 and, therefore, cannot be justified by way of Article II:2." 354 The United States
emphasizes, however, that the fact that the complain ing party would bear the burden of proof in this
case does not relieve the responding party of its burden of substantiating its own assertions.
According to the United States, "[t] his is consistent with the respons ibility that either party has to
support the facts and arguments it puts forward."355
184. India criticizes the United States' contention that Article II:2(a) represents an exception but
not an affirmative defence 356; asserts that there is no suppor t for the United States' contentions 357;
and supports the reasoning of the Panel by noting th at it "adequately defined the contours of what is
required of a complaining party" to establish a prima facie case.358 India argues that the Panel "was
correct in ruling that the burden of proof must be squarely borne by the United States to make out a

352Panel Report, para. 7.160.
354Ibid., para. 78.
355Ibid., para. 80.
357Ibid., para. 35.
358Ibid., para. 42.

prima facie case" that the Additional Duty and Extra-Additional Duty violate Article II:1(b) and are
not charges falling within the scope of Article II:2(a).
359
185. In examining the United States' claims con cerning the elements required to establish a prima
facie showing in this case, we first recall certain f eatures of the Appellate Body's approach to the
burden of proof in WTO dispute settlement proceedings. Although the DSU contains no express rules
with respect to allocation of the burden of proof in dispute settlement, the Appellate Body has
recognized that generally accepted legal principles provide "that the burden of proof rests upon the
party, whether complaining or de fending, who asserts the affirmative of a particular claim or
defence".360 Where the complaining party has met the burden of making its prima facie case, it is then
for the responding party to rebut that showing.361
186. With respect to legal argumentation and the pr oduction of evidence, the Appellate Body has
explained that "[t]he party asserting that another part y's municipal law, as such, is inconsistent with
relevant treaty obligations bears the burden of in troducing evidence as to the scope and meaning of
such law to substantiate that assertion." 362 The nature and scope of arguments and evidence required
to establish a prima facie case "will necessarily vary from measure to measure, provision to provision,
and case to case".363
187. Importantly, the Appellate Body has also rec ognized that the principle that a complainant
must establish a prima facie case of inconsistency does not r esolve the question of who bears the
burden of proving each specific fact alleged in a dispute. In Japan – Apples , the Appellate Body
pointed out that "[i]t is important to distinguish, on the one hand, the principle that the complainant
must establish a prima facie case of inconsistency with a provi sion of a covered agreement from, on
the other hand, the principle that the party that asserts a fact is responsible for providing proof
thereof."364 The Appellate Body went on to find that, although the complainant must establish the
 prima facie case in support of its complaint, the respondent bears the burden of proving the facts that
it asserts in its defence.
188. We recall that, in the context of this dispute, the United States in the first instance sought to
establish that the Additional Duty and Extra-Additiona l Duty are inconsistent with Article II:1(b) as

360Appellate Body Report, US – Wool Shirts and Blouses, p. 14, DSR 1997:1, 323, at 335.
361See Appellate Body Report, US – Wool Shirts and Blouses, p. 14, DSR 1997:1, 323, at 335.
362Appellate Body Report, US – Carbon Steel , para. 157 (referring to Appellate Body Report, US –
Wool Shirts and Blouses, p. 14, DSR 1997:1, 323, at 335).
363Appellate Body Report, Chile – Price Band System (Article 21.5 – Argentina), para. 134 (referring to
Appellate Body Report, US – Wool Shirts and Blouses, p. 14, DSR 1997:1, 323, at 335).
364Appellate Body Report, Japan – Apples, para. 157 (referring to Appellate Body Report, US – Wool
Shirts and Blouses, p.14, DSR 1997:1, 323 at 335; Appellate Body Report, EC – Hormones, para. 98).

either OCDs or ODCs in excess of those set out in India's Schedule of Concessions. The United
States made no reference to Article II:2 in its firs t written submission to the Panel, nor, it contends,
did it need to do so. Rather, the United States consid ers that all it was required to show in order to
establish a prima facie case of violation of Article II:1(b) was that the Additional Duty and Extra-
Additional Duty are duties or charges falling within Article II:1(b), and that they are in excess of
India's bound rates. 365 In the United States' view, it was up to India to show that the charges fall
within the scope of Article II:2 as part of its refutation of the United States' prima facie case.
189. In considering the responsibilities of the parties with respect to the burden of proof, we recall
the Appellate Body's observation in prio r reports that the requirements of a prima facie case in the
context of a particular dispute will be judged case by case, provision by provision, and measure by
measure.366
190. Not every challenge under Article II:1(b) w ill require a showing with respect to
Article II:2(a). In the circumstances of this dispute, however, where the potential for application of
Article II:2(a) is clear from the face of the challenged measures
367, and in the light of our conclusions
above concerning the need to read Articles II:1( b) and II:2(a) together as closely inter-related
provisions, we consider that, in order to establish a prima facie case of a violation of Article II:1(b),
the United States was also required to present argum ents and evidence that the Additional Duty and
the Extra-Additional Duty are not justified under Article II:2(a).
191. We note that, in any event, India responded in its first written submission to the Panel that the
Additional Duty and Extra-Additional Duty are not in violation of Article II:1(b) because they are
charges justified under Article II:2(a). Conseque ntly, India was required to adduce arguments and
evidence in support of that assertion. Once the responding party seeks to rebut arguments and evidence
offered by the complaining party, the complaining party, depending on the na ture and content of the
rebuttal submission, may need to present additional arguments and evidence in order to prevail on its
claim. In this case, following India's rebuttal submission, the United States presented further

366Supra, footnote 363.
367We note that Section 3(1) of the Customs Tariff Act provides the authority for the imposition of the
Additional Duty "having regard to the excise duty for the time being leviable on a like alcoholic liquor produced
or manufactured in different States", and that Section 3(5) of the Customs Tariff Act provides the authority for
the imposition of the Extra-Additional Duty "as would counter-balance the sales tax, value added tax, local tax
or any other charges for the time being leviable on a like article on its sale, purchase or transportation in India."
We further note that Customs Notifications 32/2003 and 19/2006, which set out the rates of the Additional Duty
and the Extra-Additional Duty, respectively, each indicate that the rates ther ein are specified "having regard to"
the corresponding internal taxation measures that are described in the same manner as they are set out,
respectively, in Sections 3(1) and 3(5) of the Customs Tariff Act.

argumentation concerning the issue of whether th e Additional Duty and Extra-Additional Duty are
justified under Article II:2(a). At that point, it was for the Panel to decide the issues before it based on
the arguments and evidence of the parties. We note, in this respect, the statement of the United States
that, once a responding party asserts and supports a de fence under Article II:2(a), "the ultimate burden
would rest with the complaining party to rebut and ultimately disprove that evidence and argument."
368
192. The United States contends that, if the Panel's prima facie standard were accepted,
complaining parties alleging a violation of Article II:1(b) would have to prove, first, that the
challenged duty or charge falls outside the scope of each of the subparagra phs of Article II:2 (even
when the relevance of Article II: 2 is not evident), and, secondly, that the measure is not some other
type of duty or charge not covered by Article II:2. 369 We do not consider that a complaining party
alleging a violation of Article II:1(b) must also di sprove in all cases that the challenged charge is
justified under Article II:2, much less some other hyp othetical category of charges. We do consider,
however, that if, due to the characteristics of the measures at issue or the arguments presented by the
responding party, there is a reasonable basis to unde rstand that the challenged measure may not result
in a violation of Article II:1(b) because it satisfies the requirements of Article II:2(a), then the
complaining party bears some burden in establishing that the conditions of Article II:2(a) are not met.
193. We do not find unduly burdensome the complaining party's responsibility to establish a prima
facie showing by adducing evidence and arguments also with respect to Article II:2(a). Consistent
with what we have said above, the showing required by the complaining party that the conditions for
the application of Article II:2(a) are not met will to some extent vary, depending upon the particular
substance of the challenged measure and the extent to which a relationship between the border charge
and the corresponding internal taxes is identifiable. In the circumstances of this case, both parties had
a responsibility, in our view, to adduce relevant ev idence at their disposal, both with respect to
Article II:1(b) and Article II:2(a). Failure of a party to prove the facts it asserts leaves that party at
risk of losing the case.
194. We further note, in this regard, that the DSU calls on parties to cooperate with panels in
dispute settlement proceedings. 370 In the particular circumstances of this case, where the challenged

369Ibid., para. 42.
370Article 13.1 of the DSU provides: "A Member should respond promptly and fully to any request by
a panel for such information as the panel considers necessary and appropriate." The Appellate Body has
recognized the authority of panels to draw inferences fr om the facts before it, including refusal by a party to
provide information requested by a panel. (Appellate Body Report, Canada – Aircraft , para. 203) The
Appellate Body has also said that, where a party refuses to provide information requested by a panel pursuant to
Article 13.1 of the DSU, "that refusal will be one of the relevant facts of record, and indeed an important fact, to
be taken into account in determining the appropriate inference to be drawn". (Appellate Body Report, US –
Wheat Gluten, para. 174)

measures refer to certain internal taxes but do not sp ecifically indicate how the border charges and the
corresponding internal taxes are equivalent, it was particularly important that both parties respond
fully and promptly to requests from the Panel c oncerning its enquiry as to whether or not the
Additional Duty and Extra-Additional Duty are justified under Article II:2(a).
195. We recall our finding that the United States was re quired, in the circumstances of this case, to
present arguments and evidence that the Additiona l Duty and the Extra-Additional Duty are not
justified under Article II:2(a). We also recall our finding that India, in asserting that the Additional
Duty and the Extra-Additional Duty are justif ied under Article II:2(a), was required to adduce
arguments and evidence in support of that assertion. In the light of these findings, we conclude that
the Panel did not err in considering that, in th e circumstances of this case, the United States was
required to show that the Additional Duty and th e Extra-Additional Duty are not justified under
Article II:2(a). In any event, because the Pane l relied on an interpretation of Articles II:1(b)
and II:2(a) that was in error, the Panel could no t have properly reached a conclusion on whether the
United States had satisfied its burden of proof in this case.
IX. Article 11 of the DSU
196. The United States also argues th at the Panel, in examining the United States' claims under
Articles II:1(a) and II:1(b) of the GATT 1994, failed to carry out an objective assessment of the
matter before it, as required under Article 11 of the DSU. The United States ta kes issue with several
aspects of the Panel's analysis.
197. The United States contends that the Panel failed to require that India identify the state-level
excise duties to which the Additional Duty on alcoho lic beverages is allegedl y equivalent. Instead,
according to the United States, the Panel "assumed" that such duties exist, and then required the
United States to establish that the Additional Duty is not equivalent to them. 371 In so doing, the Panel
"placed an impossible burden" on the United States to guess which state-level excise duties that
India's Additional Duty purports to offset or counter balance, and then to prove that such duties do not
exist or do not operate such that the Add itional Duty offsets or counterbalances them. 372 The United
States adds that it had requested India to identify the excise duties that the Additional Duty allegedly
offsets. Moreover, the United States submits that th e Panel also asked India for this information, but,
again, India failed to respond.373

371United States' appellant's submission, para. 86 (referring to Panel Report, paras. 7.271, 7.272,
and 7.291).
372Ibid.

198. With respect to the Extra-Additional Duty, the United States similarly argues that India failed
to identify or submit information on the state-level sa les taxes or any of the local taxes or charges to
which it contends the Extra-Additional Duty is eq uivalent. Nonetheless, according to the United
States, the Panel assumed that such sales taxes or charges exist, and then "placed an impossible
burden" on the United States to guess the state-le vel sales taxes and local taxes and charges that
India's Extra-Additional Duty purportedly offsets or counterbalances, and then to prove that such
taxes or charges do not exist or do not operate su ch that the Extra-Additional Duty offsets or
counterbalances them.
374
199. The United States further contends that the Panel erred in its analysis of the Extra-Additional
Duty by disregarding the fact that the state-level VATs, Central Sales Tax, and other local taxes and
charges already apply to imported products. 375 According to the United St ates, because these taxes or
charges are applied to imported products, it is inco rrect to suggest, as the Panel did, that the Extra-
Additional Duty offsets or counterbalances them.
200. India requests the Appellate Body to reject the United States' claim that the Panel failed to
comply with its obligations under Article 11. Refe rring to the ruling of the Appellate Body in EC –
Hormones, India argues that a panel acts inconsistently with its obligations u nder Article 11 of the
DSU only when it deliberately or wilfully di storts or disregards evidence before it. 376 According to
India, the United States has failed to demonstrate that the Panel in this case acted in such a manner.
India further emphasizes that, as the responding party, it was not required to identify any excise duties
or local taxes that would counterbalance the Add itional Duty and the Extra-Additional Duty. India
alleges that, in any event, it su bmitted sufficient information for the Panel to conclude that the
Additional Duty was "equivalent" to state ex cise duties and the Extra-Additional Duty was
"equivalent" to state-level VATs, sales taxes, and othe r local taxes and charges. Finally, India argues
that "the relative weight accorde d by the Panel to particular evid ence on record cannot form the basis
of a challenge under Article 11 of the DSU."377
201. We are mindful of the scope of appellate review with respect to legal and factual issues.378 To
the extent that the United States' arguments con cern the Panel's weighing and appreciation of the
evidence before it, we note that the Appellate Body has stated on several occasions that panels enjoy a
certain margin of discretion in assessing the credibility and weight to be ascribed to a given piece of

375Ibid., para. 101 (referring to Panel Report, paras. 7.366 and 7.367).
377Ibid., para. 101.
378Pursuant to Article 17.6 of the DSU, appeals are "limited to issues of law covered in the panel report
and legal interpretations developed by the panel".

evidence.379 At the same time, the Appellate Body has underscored that Article 11 of the DSU
requires panels "to take account of the evidence put before them and forbids them to wilfully
disregard or distort such evidence."380
202. We have already found that the Panel erred in its interpretation of Articles II:1(b) and II:2(a)
of the GATT 1994. As a result, we have reversed the Panel's finding that the United States failed to
establish that the Additional Duty and the Extra-Add itional Duty are inconsistent with Articles II:1(a)
and II:1(b) of the GATT 1994. Under these circumstances, we decline to make an additional finding
on the United States' claim under Article 11 of the DSU.
X. Conformity of the Additional Duty and the Extra-Additional Duty under Articles II:1(a)
and II:1(b) of the GATT 1994
203. Having reversed the Panel's findings under Artic les II:1(a) and II:1(b) of the GATT 1994, we
turn to consider the United States ' request that we complete the analysis and rule on whether the
Additional Duty on alcoholic beverages and the Ex tra-Additional Duty are inconsistent with these
provisions.381
204. In previous disputes, the Appellate Body has held that it can complete the analysis only if the
factual findings by the panel and the undisputed fact s in the panel record provide a sufficient basis for
the Appellate Body to do so .
382 Where this has not been the case, the Appellate Body has declined to
complete the analysis.
383 Moreover, as Article 17.6 of the DSU limits appeals to "issues of law
covered in the panel report and lega l interpretations developed by th e panel", the Appellate Body has
also declined to complete the legal analysis in circumstances where doing so would involve
addressing claims "which the panel had not examined at all". 384 In addition, the Appellate Body has
indicated that it may complete the analysis only if the provision that a panel has not examined is

379See Appellate Body Report, EC – Hormones, para. 132; and Appellate Body Report, EC – Sardines,
para. 299.
380Appellate Body Report, US – Carbon Steel , para. 142. See also Appellate Body Report, EC –
Hormones, para. 133.
382See Appellate Body Report, EC – Hormones , paras. 222 ff; Appellate Body Report, EC – Poultry,
paras. 156 ff; Appellate Body Report, Australia – Salmon , paras. 117 ff and 193 ff; Appellate Body Report,
US – Shrimp, paras. 123 ff; Appellate Body Report, Japan – Agricultural Products II , paras. 112 ff; Appellate
Body Report, EC – Asbestos, paras. 133 ff .
383See Appellate Body Report, Australia – Salmon , paras. 209 ff, 241 ff and 255; Appellate Body
Report, Korea – Dairy , paras. 91 ff and 102 ff; Appellate Body Report, Canada – Autos , paras. 133 ff
and 144 ff; Appellate Body Report, Korea – Various Measures on Beef , paras. 128 ff; Appellate Body Report,
EC – Asbestos , paras. 78 ff; Appellate Body Report, Canada – Dairy (Article 21.5 New Zealand and US) ,
paras. 98 ff.
384Appellate Body Report, EC – Asbestos , paras. 79 and 82 (cited in Appellate Body Report, US –
Section 211 Appropriations Act, para. 343). See also Appellate Body Report, EC – Poultry, para. 107.

"closely related" to a provision that the panel has examined, and that the two are "part of a logical
continuum".
385
205. Before we begin our analysis, we recall that ne ither party argues that the Additional Duty and
the Extra-Additional Duty constitute "internal taxe s" within the meaning of Article III:2 of the
GATT 1994.386 We further recall the Panel's observati on—in relation to whether the relevant
imported and domestic products are considered "like" for purposes of Article II:2(a)—that the parties
had "been arguing or assuming that this is the case."387 Moreover, we note that India has not contested
the United States' assertion that the Additional Duty and the Extra-Additional Duty, when applied in
conjunction with the Basic Customs Duty, may subj ect certain imports to an aggregate amount of
duties that is in excess of the rates specified in India's Schedule of Concessions. Instead, India argues
that the Additional Duty and the Extra-Additional Duty are charges equivalent to internal taxes
imposed consistently with Article III:2 and, consequently, are jus tified under Article II:2(a) of the
GATT 1994. Specifically, India argues that the Additional Duty on alcoholic beverages is
"equivalent" to state-level excise duties on alcoholi c liquor. India further asserts that the Extra-
Additional Duty is "equivalent" to three categories of in ternal taxes: (i) state VAT or sales taxes, (ii)
the Central Sales Tax, and (iii) other local taxes and charges imposed by state or local governments.388
206. The task before us in this appeal is, theref ore, to examine the relationship (i) between the
Additional Duty on alcoholic beverages and stat e-level excise duties on alcoholic liquor, and
(ii) between the Extra-Additional Duty and state sales taxes, value-added taxes, and other local taxes
or charges in the light of our interpretation of Ar ticle II:2(a). We begin by considering the Panel's
findings regarding the Additional Duty and the Extr a-Additional Duty imposed by India at the border
on imports of certain products entering its customs territory.

385See Appellate body Report, Canada – Periodicals, p. 24, DSR 1997:I, 449, at 469. This issue does
not arise in the present proceedings given that the United States does not request a separate finding under
Article II:2 of the GATT 1994. (United States' response to questioning at the oral hearing)
386India's and the United States' responses to questioning at the oral hearing.
387This may be due to the fact that Sections 3(1) and 3(5) of India's Customs Tariff Act provide that the
Additional Duty and the Extra-Additional Duty are levied on imported products where "like" domestic products
are subject to excise taxes, sales taxes, value-added taxe s, local taxes, or any other charges. (See Panel Report,
para. 7.264 and 7.350 (referring to United States' second written submission to the Panel, para. 30 and India's
first written submission to the Panel, para. 84)) See al so Panel Report, para. 7.350. The parties confirmed in
response to questioning at the oral hearing that they were not contesting that the relevant imported and domestic
products were "like" for purposes of Article II:2(a).
388See Panel Report, para. 7.356.

A. The Additional Duty and the Extra-Additional Duty
207. The Panel found that Section 3(1) of the Customs Tariff Act 389 provides for the Additional
Duty; Section 3(2) of the Customs Tariff Act requires, inter alia, that the Basic Customs Duty is to be
included in the calculation of the amount of Additional Duty due under Section 3(1) 390; Section 3(7)
of the Customs Tariff Act provides that the duty im posed under Section 3 shall be in addition to any
other duty imposed under the Customs Tariff Act or any other law 391; and Customs
Notification 32/2003 creates different price ba nds and different rates of Additional Duty
corresponding to these bands. 392 Turning to the Extra-Additional Duty, the Panel found that
Section 3(5) of the Customs Tariff Act provides for the imposition of that duty on imports 393;
Section 3(6) of the Customs Tariff Act requires th at the Extra-Additional Duty be calculated on the
value of the import inclusive of the Basic Customs Duty and Additional Duty owed 394; and Customs
Notification 19/2006 stipulates that the Extra-Additiona l Duty be levied on imports at a rate of four
percent ad valorem.395 The Panel also mentioned that India "confirmed, and accepts, that [Customs
Notification] 32/2003, through which the [Additi onal Duty] on alcoholic liquor was imposed, and
[Customs Notification] 19/2006, through which th e [Extra-Additional Duty] was imposed, have the
force of law and, in that sense, are mandatory." 396 Moreover, the Panel found that the Additional
Duty on alcoholic beverages and the Extra-Additiona l Duty apply to goods that are imported into
India; neither applies to domestic goods; they are assessed at the time and point of importation by
India's Customs authorities; and they are both payable by the importers of the subject goods or their
agents.
397
B. Domestic Counterparts to the Additional Duty and the Extra-Additional Duty
1. State-Level Excise Duties on Alcoholic Beverages
208. The internal taxes that India asserts are "equi valent" to the Additional Duty are state-level
excise duties on alcoholic beverages. Under Indi a's Constitution, such excise duties on alcoholic
beverages are established and collected by the indi vidual states, not the Central Government, and the

389Panel Report, para. 7.10.
390Ibid., para. 7.12.
391Ibid., para. 7.13.
392Ibid., para. 7.15.
 393Ibid., para. 7.17.
 394Ibid., para. 7.20.
395Ibid., para. 7.19.
396Ibid., para. 7.108 (referring to India's first written submission to the Panel, para. 32).
 397Ibid., paras. 7.246 and 7.335. Further details regarding the Additional Duty and the Extra-Additional
Duty are provided in paragraphs 123-130 and 131-136, respectively, of this Report.

different Indian states are permitted to levy such excise duties at varying rates.
398 Individual states are
empowered to levy excise duties on alcoholic liquor "manufactured or produced" in the relevant
state.399 In addition, states are empowered to im pose "countervailing duties" on alcoholic liquor
manufactured or produced elsewhere in India.400
209. Regarding the rates of Additional Duty specifi ed in Customs Notification 32/2003, we note
that Section 3(1) of the Customs Tariff Act includes a proviso governing the imposition of the
Additional Duty on imports of alcoholic beverages. Whereas the opening para graph of Section 3(1)
stipulates that, for products other than alcoholic be verages the Additional Duty "shall" be "equal" to
the excise duty, the proviso stipulates that the Central Government "may" specify the rate of
Additional Duty applicable to imports of alcoholic beverages "having regard" to excise duties leviable
on like alcoholic products manufactured or produced in different Indian states.401
210. Concerning the proviso's phrase "having regard to ", India explained to the Panel that this
phrase "addresses the specific situation of alcoholic liquor where different States levy varying rates of
excise duty and the Central Government is [therefore ] unable to fix a single rate of [Additional Duty]
which is 'equal to the excise duty'". 402 India further stated that th e proviso "requires the Central
Government to consider the varying rates of Stat e excise duties pertaining to alcoholic liquor before
fixing the rate of [Additional Duty], but does not make it mandatory to adopt any one single rate—this
continues to be left to the discretion of the Central Government".
403 Finally, India observed that the
proviso "does not require a correlation between the methodology for the calculation of the [Additional
Duty] and the respective State excise duties" due to "the inherent difficulties in using the same
methodology when different States have different rates of excise duties for alcoholic liquor".404
211. As we have explained above, we disagree w ith the Panel's conclusion that the term
"equivalent" in Article II:2(a) does not require any quantitative comparison of the relevant border
charge with the corresponding internal tax. We fu rther recall our conclusion that, to give meaning
and effect to the phrase "imposed consistently with the provisions of paragraph 2 of Article III", it is
necessary to read that phrase in a manner that im parts meaning to the assessment of whether the
charge and internal tax are "equivalent". We also st ated that the issue of whether a charge is imposed

 398India noted that each of its 28 st ate governments and 7 union territori es are empowered to levy their
own excise duties. (Panel Report, para. 7.237)
399Panel Report, para. 7.271 (referring to Entry 51 of List II of the Constitution of India).
400Ibid., para. 7.284.
401See ibid., paras. 7.11 and 7.280.
402Ibid., para. 7.268 (referring to India's response to Question 27(d) posed by the Panel at the first Panel
meeting).
403Ibid. (referring to India's response to Question 27(d) posed by the Panel at the first Panel meeting).
404Ibid.

"in excess of" a corresponding internal tax is an integr al part of the analysis in determining whether a
charge is justified under Article II:2(a). Based on its erroneous interpretati on of Article II:2(a), the
Panel did not consider relevant for its analysis th e extent to which the Additional Duty and the Extra-
Additional Duty are "in excess of" the corresponding in ternal taxes. Applying, instead, the correct
interpretation of Article II:2(a), we consider th e Panel's findings indicating a difference in amount
between the Additional Duty imposed on imported alc oholic beverages and state-level excise taxes on
like domestic alcohol to be both relevant and criti cal to a consideration of whether the Additional
Duty and Extra-Additional Duty are charges justified under Article II:2(a).405
212. We note, however, that there was no specific information before the Panel regarding the
"excise duties actually levied by different States on alcoholic liquor." 406 Nor was there evidence
before the Panel regarding the form and structure of the rates of such duties. 407 Moreover, the Panel
said that there was no evidence in th e record to demonstrate that, on the date of establishment of the
Panel, there were Indian states permitting the sale of alcoholic beverages that did not levy an excise
duty on alcoholic beverages subject to the Additi onal Duty; and that there was no evidence in the
record to demonstrate that excise duties were, in fact, imposed in the Indian states on imported
alcoholic beverages.408
213. Despite the failure of both the United States a nd India to provide specific information about
the excise duties, the Panel took note of India's e xplanations regarding the relationship between the
rate of the Additional Duty as established by the Central Government and the rates of excise duties
assessed by the states. 409 In particular, the Panel noted India's statement that the rates of Additional
Duty specified in Customs Notification 32/2003 are the result of a "process of averaging, whereby the
Central Government tried to ensure that to the extent possible, the rate was a reasonable
representation of the net fiscal burden imposed on like domestic products on account of the excise

405In WTO jurisprudence under Article III, offsetting less favourable treatment of some imported
products with more favourable treatment of other imported products has been rejected. See, for example, GATT
Panel Report, US – Section 337 Tariff Act, paras. 5.13 and 5.14.
406Panel Report, para. 7.271.
407See ibid., para. 7.273.
408Ibid., para. 7.294.
409Despite being asked by the Panel for the details of these varying state rates and the averaging process
used to establish the Additional Duty, India declined to provide such information The Panel considered this to
be "regrettable" and explained that it had "put the question to India in an effort at obtaining more background
information that could have helped" it in its internal deliberations (Panel Report, footnote 310 to para. 7.271).
We agree with the Panel given that a critical issue be fore the Panel was whether India's Additional Duty was
equivalent to excise duties with variable rates across the many Indian states. As such, these various rates and
the methodology by which the Central Government averaged them in order to establish the corresponding
Additional Duty rate were particularly important pieces of evidence at India's disposal that should have been
provided to the Panel.

duty payable on alcoholic liquor".
410 The Panel also noted India's statement that "[w]hile it is possible
that in some States and in some price bands, the [Additional Duty] imposed [through Customs
Notification 32/2003] on imported products may be marginally in 'excess of' the excise duty imposed
on like domestic products in that State, it is equally likely that the [Additional Duty] is less than the
State excise duty in some other States". 411 For the Panel, this "could have meant that the rate of
[Additional Duty] for alcoholic liquor exceeded the rate of excise duty applicable to like domestic
alcoholic liquor in some States and in some price bands." 412 The Panel added, however, that India had
not provided "further particulars" regarding the averaging process or the fiscal burden imposed in
different states on low and high-priced alcoholic liquor.413
214. In light of the above, and in view of our interpre tation of Article II:2(a), we consider that the
Additional Duty would not be justified under Article II:2(a) of the GATT 1994 insofar as it results in
the imposition of charges on imports of alcoholic be verages in excess of the excise duties applied on
like domestic products. Consequen tly, this would render the Additi onal Duty inconsistent with
Article II:1(b) to the extent that it results in th e imposition of duties on alcoholic beverages in excess
of those set forth in India's Schedule of Concessions.
2. The Sales Tax, Value-Added Tax, Local Tax, or Other Charges
215. We recall that the Extra-Additional Duty is provided for in Section 3(5) of the Customs Tariff
Act.414 It provides, in relevant part, that the Centra l Government may levy "on any imported article ...
such additional duty as would counter-balance the sale s tax, value added tax, local tax or any other
charges for the time being leviable on a like article on its sale, purchase or transportation in India".
216. State sales taxes are imposed on products outside the state VAT system, including on
alcoholic liquor, tobacco products , and certain petroleum products. 415 Indian states are prohibited by
Article 286(1) of the Indian Constitution from imposing taxes in respect of the importation of
products into India's customs territory, and in respect of inter-state transactions.
416 Subsequent

410Panel Report, para. 7.269 (referring to India's response to Question 28 posed by the Panel in the First
Meeting Panel).
411Ibid., and footnote 308, referring to India's response to Question 8(c) posed by the Panel in the First
Meeting. The Panel further noted that "the quoted statement seems consistent with India's argument that in
cases where the rates of excise duty in each State vary, the Central Govern ment need not specify the rate of
[Additional Duty] at the highest excise duty rate."
412Panel Report, para. 7.274.
413Ibid., footnotes 306 and 307 to para. 7.269.
414See supra, footnote 266.
415Panel Report, para. 7.352.
416Ibid., para. 7.379.

domestic sales of imported products, however, may be subject to state taxes. 417 For inter-state
transactions, the Central Sales Tax applies and, although prescribed by a law of the Central
Government, it is assessed and collected by the Indi an state where the good being sold originates. 418
Examples of "other local taxes and charges" incl ude Mandi taxes, market committee fees, turnover
taxes, and transport fees.419
217. The Panel found that there was "no evidence" in th e record to demonstrate that, on the date of
establishment of the Panel, there were states that did not levy internal taxes or charges referred to in
Customs Notification 19/2006 on products subject to the Extra-Additional Duty; and that there was
"no evidence" in the record to de monstrate that relevant internal taxes or charges were, in fact,
imposed on products subject to the Extra-Additional Duty in the course of their import into India's
customs territory.420
218. However, the Panel found that imported produc ts that are assessed and charged the Extra-
Additional Duty and which are subsequently re-sol d or used in the manufacture of another product,
are subject to state VAT, state sales tax, Central Sales Tax, and/or "other local taxes or charges" in the
same way as like domestic products. 421 The Panel further noted that, at the time of the establishment
of the Panel, "no refund" of the Extra-Additiona l Duty "in respect of the import transaction was
available against the State VAT, or the [Central Sal es Tax], payable in respect of a domestic re-sale
transaction"422, and that the Extra-Additional Duty was not "creditable against the State VAT, or the
[Central Sales Tax], payable in respect of a domestic re-sale transaction." 423 Thus, to the extent that
imported products are being assessed the Extra-Add itional Duty as well as the state VAT and sales
taxes and other local taxes without receiving a cr edit for the Extra-Additional Duty, such imports
would be subject to duties "in excess" of the internal taxes on like domestic products.

417See Panel Report, para. 7.366 (referring to India's first written submission to the Panel, para. 71;
India's second written submission to the Panel, para. 2.5; and India's response to Questions 48(e) and 48(f)
posed by the Panel at the second Panel meeting).
418Ibid., para. 7.352.
419Ibid., para. 7.365.
420Ibid., para. 7.389.
421Ibid., para. 7.366.
422Ibid., para. 7.367. The Panel further explained that, in the course of the Panel proceedings, "India
issued [Customs Notification] 102/2007 which provides, subject to certain conditions being satisfied, for the
possibility of obtaining a refund from the [Extra-Additiona l Duty] paid in case of a subsequent domestic re-sale
transaction subject to state VAT." (Ibid., footnote 426 to para. 7.367)
423Ibid. (referring to India's response to Question 51 (a) posed by the Panel at the second Panel
meeting). India further pointed out to the Panel that a credit of the Extra-Additional Duty paid is available when
imported raw materials are used for further manufacturing finished products and the finished products are sold.
That credit can be used against th e central excise duty (CENVAT) payable on the finished manufactured
product.

219. As far as imported products are concerned, Sec tion 3(5) of the Customs Tariff Act provides
that the Central Government may specify through notification in the Official Gazette the imposition of
the Extra-Additional Duty "at a rate not exceeding four per cent". Customs Notification 19/2006 of
1 March 2006 imposes the Extra-Additional Duty at this maximum rate of four percent ad valorem.
424
As far as domestic products are c oncerned, the Panel noted that the states adopted VAT statutes that
largely provide for four applicable ad valorem rates of VAT: (i) nil for exempt goods, which include
(a) certain natural and unprocessed goods as well as (b ) "goods of local importance"; (ii) a special
rate of 1 per cent for gold, bullion, jewellery, etc.; ( iii) a basic rate of 4 per cent for basic necessities;
and (iv) a basic rate of 12.5 per cent for all other goods.425 India explained to the Panel that the rate of
four per cent of the Extra-Additional Duty has been "calibrated" to ensure equivalence between the
Extra-Additional Duty and the various state VAT and sales taxes, Central Sales Tax, and other local
taxes or charges.426 India further explained to the Panel that other local taxes or charges increase the
tax burden borne by products subject to state VAT or Central Sales Tax, and "effectively raise" the
cumulative rate resulting from the imposition of internal taxes to one that is higher than the basic four
per cent rate of Extra-Additional Duty. 427 The Panel further noted India's explanation that, where a
product is subject to a state VAT rate of nil (or 1 pe r cent) and, in addition, to other local taxes and
charges that are not creditable against state VAT, the Extra-Additional Duty would "be applied at a
rate of nil (or 1 per cent), and not at a rate of 4 per cent". 428
220. Based on its analysis of the arguments and evidence before it, the Panel found that:
... it is clear from the information we have and the explanations India
has provided that there could conceivably be circumstances where
the [Extra-Additional Duty] is levied at a rate that is higher than the
rate resulting from imposition of th e relevant internal taxes on like
domestic goods, or results in a hi gher tax burden being imposed on
products being imported. Such ci rcumstances might , for example,
arise where an equivalent domestic transaction: (i) involves a "good
of local importance" for which a particular State has set a rate of
State VAT of nil, (ii) involves an inter-State sale to a registered
dealer ... with the consequence th at, in certain circumstances,
products being imported are treated less favourably than like
domestic products.
429 (footnotes omitted)

424Exhibits US-7 and IND-7 submitted by the United States and India, respectively, to the Panel. See
also Panel Report, paras. 2.1 and 7.359.
425Panel Report, para. 7.360.
426Ibid., para. 7.359.
427Ibid., para. 7.365.
428Ibid., para. 7.365.
429Ibid., para. 7.369.

221. In light of the above, and in view of our interpretation of Article II:2(a) 430, we consider that
the Extra-Additional Duty would not be justified under Article II:2(a) of the GATT 1994 insofar as it
results in the imposition of charges on imports in ex cess of the sales taxes, value-added taxes, and
other local taxes and charges that India alleges are equivalent to the Extra-Additional Duty.
Consequently, this would render the Extra-Additional Duty inconsistent with Article II:1(b) to the
extent that it results in the imposition of duties in excess of those set forth in India's Schedule of
Concessions.
XI. India's Other Appeal
222. We turn now to India's other appeal relating to certain concluding remarks offered by the
Panel.
223. Having found that the United States has failed to establish that the Additional Duty on
alcoholic beverages and the Extra-Additional Duty are inconsistent with India's obligations under
Articles II:1(a) and II:1 (b) of the GATT 1994, the Panel made "no recommendations under
Article 19.1 of the DSU."431 However, the Panel added:
[w]e find it appropriate, in the partic ular circumstances of this case,
to offer some concluding remarks. To recall, after the establishment
of this Panel, India issued new customs notifications making certain
changes to the [Additional Duty] on alcoholic liquor and the [Extra-
Additional Duty], "to address concerns raised by [India's] trading
partners". It is therefore appr opriate to note that the Panel's
disposition of the [United States] cl aims under Article II:1(a) and (b)
does not necessarily imply that it would be consistent with India's
WTO obligations for India to withdraw the relevant new customs
notifications or otherwise re-establish the status quo ante , i.e., the
situation as it existed on the date of establishment of the Panel. By
the same token, in making this point, we do not wish to suggest that
the entry into force of the ne w customs notifications necessarily
implies that the [Additional Duty] on alcoholic liquor, to the extent it
still exists, and the [Extra-Additional Duty] are WTO-consistent.
432
(footnotes omitted)
224. On appeal, India claims that the Panel comm itted legal error by offering these "concluding
remarks". In support of its contention, India point s to Articles 19.1 and 19.2 of the DSU and asserts
that those provisions authorize a panel to ma ke recommendations and suggestions regarding
implementation "only when" a measure has been found to be inconsistent with the provisions of a
covered agreement.433 India recalls that, in this case, the Panel did not find the Additional Duty and

430See paragraph 211 of this Report.
431Panel Report, para. 8.2.
432Ibid.
433India's other appellant's submission, para. 14.

the Extra-Additional Duty to be inconsistent w ith India's WTO obligations, and suggests that the
Panel's remarks "appear to be in the nature of policy suggestions to the Government of India."
434
India asserts that it is "well within its rights under the covered agreements ... to continue to impose
duties on imports, where such duties have not b een found to be incons istent with its WTO
obligations."435 Viewed in this light, the Panel's "concl uding remarks" could, therefore, "add to or
diminish such rights and obligations and consequently contravene the provisions of Article 19.2 of the
DSU."436 In addition, India argues that the Panel's "c oncluding remarks" would not qualify as "such
other findings" as will assist the DSB in making re commendations or rulings within the meaning of
Article 11 of the DSU. Based on these arguments, Indi a requests the Appellate Bo dy to find that the
Panel erred in offering "concluding remarks" contrary to the provisions of Articles 3.2, 11, and 19 of
the DSU. Accordingly, India requests that the Ap pellate Body "modify paragraph 8.2 of the Panel
Report and remove the Panel's concluding remarks commencing from the second sentence of
paragraph 8.2 until the end of that paragraph."437
225. The United States argues that th e Appellate Body should reject India's request. The United
States submits that the Panel's "concluding remarks" are simply clarifications of the Panel's
conclusions and are not in the nature of suggestions within the meaning of Article 19.1 of the DSU.
Therefore, they do not add to or diminish India' s obligations under the covered agreements and are,
thus, not inconsistent with Article 3.2 or 19.2 of the DSU. 438 The United States adds that nothing in
Article 19 or elsewhere in the DSU prohibits a pa nel from offering such remarks. For the United
States, "[t]his is true, regardless of whether a panel finds or does not find the measure at issue WTO-
inconsistent."439 In addition, the United States submits that "it is difficult to see how, in being clear
about its findings and conclusions, the Panel is acting in a manner contrary to Article 11 [of the
DSU]."440
226. In its third participant's submission, the European Communities disagrees with India's
contention that the Panel committed legal error by offering "concluding remarks" at the end of its
Report. The European Communities does not consid er these remarks to be recommendations or
suggestions within the meaning of Article 19 of the DSU. Nor does the European Communities
consider the Panel's remarks to add to or diminish the rights or obligations of the parties, or to be

434India's other appellant's submission, para. 21. (referring to Panel Report, para. 8.2)
435Ibid., para. 22.
436Ibid.
437Ibid., para. 30.
438Ibid., para. 6.
439Ibid., para. 5.
440Ibid., para. 7.

inconsistent with Article 11 of the DSU. Rather , the European Communities considers them to be
"obiter dicta of no legal effect, and thus not susceptible to appeal."441
227. We begin our analysis of this issue by examining the text of Article 19.1 of the DSU:
Where a panel or the Appellate Body concludes that a measure is
inconsistent with a covered agre ement, it shall recommend that the
Member concerned bring the measure into conformity with that
agreement. In addition to its recommendations, the panel or
Appellate Body may suggest ways in which the Member concerned
could implement the recommendations.
228. Article 19.2 of the DSU further states that, "in their findings and recommendations, the panel
and Appellate Body cannot add to or diminish th e rights and obligations provided in the covered
agreements."
229. We do not agree with India's argument that the Panel's "concluding remarks" amount to a
legal finding or a recommendation within the meani ng of the first sentence of Article 19.1, or a
suggestion regarding implementation within the meani ng of the second sentence of Article 19.1 of the
DSU. Rather, the Panel did not find a breach of Articles II:1(a) and II:1(b), and made it clear that it
was making "no recommendation under Article 19.1 of the DSU."
442 As there was nothing to
implement, it is difficult to see why the Panel would have made a "suggestion" on implementation. In
addition, the Panel recalled its finding that the cu stoms notifications to which it referred in its
"concluding remarks" were outside its terms of refe rence, and that it, therefore, "did not assess their
impact upon the WTO-consistency of the [Additiona l Duty] on alcoholic liquor and the [Extra-
Additional Duty]."443
230. The Panel's "concluding remarks" do no t amount to findings, conclusions, or
recommendations regarding the WTO-conformity of th e new customs notifications issued by India.
Instead, they are simply explanations of the Pa nel's conclusions, which ar e permissible, but not
findings in and of themselves. We find that the Panel did not act contrary to Articles 3.2, 11, and 19
of the DSU in providing "concluding remarks" in paragraph 8.2 of the Panel Report.

441European Communities' third participant's submission, para. 12.
442Panel Report, para. 8.2.
443Ibid., footnote 482 to para. 8.2

XII. Findings and Conclusions
231. For the reasons set out in this Report, the Appellate Body:
(a) rejects
 the United States' claim that the Panel limited the scope of the United States'
challenge to the Additional Duty as imposed only through Customs
Notification 32/2003, and the Extra-Additional Duty as imposed only through
Customs Notification 19/2006;
(b) as regards the Panel's findings with respect to the interpretation of Articles II:1(b)
and II:2(a):
(i) finds
 that the Panel erred in its interpre tation that Article II:1(b) covers only
duties or charges that "inherently discriminate against imports";
(ii) finds that the Panel erred in interp reting the term "equivalent" in
Article II:2(a) as requiring only a qu alitative comparison of the relative
function of a charge and internal tax, thereby incorrectly excluding
quantitative considerations relating to their effect and amount;
(iii) finds that the Panel erred in finding that "consistency with Article III:2" is not
a necessary condition in the application of Article II:2(a); and, consequently
(iv) reverses the Panel's findings, in paragraphs 7.299, 7.394, 7.401, and 8.1 of
the Panel Report, that the United States failed to establish that the Additional
Duty and the Extra-Additional Duty are inconsistent with Articles II:1(a) and
II:1(b) of the GATT 1994;
(c) finds
, in the circumstances of this case, that the United States was required to present
arguments and evidence that the Additional Duty and the Extra-Additional Duty are
not justified under Article II:2(a), and that India, in asserting that those duties are
justified, was required to adduce arguments and evidence in support of its assertion;
(d) declines
 to make an additional finding on the United States' claim under Article 11 of
the DSU;
(e) considers that the Additional Duty would not be justified under Article II:2(a) of the
GATT 1994 insofar as it results in the imposition of charges on imports of alcoholic
beverages in excess of the excise duti es applied on like domestic products; and,
consequently, that this would render th e Additional Duty inconsistent with

Article II:1(b) to the extent that it results in the imposition of duties in excess of those
set forth in India's Schedule of Concessions;
(f) considers that the Extra-Additional Duty would not be justified unde r Article II:2(a)
of the GATT 1994 insofar as it results in the imposition of charges on imports in
excess of the sales taxes, value-added taxes, and other local taxes or charges that
India alleges are equivalent to the Extra-Additional Duty; and, consequently, that this
would render the Extra-Additional Duty inconsis tent with Article II:1(b) to the extent
that it results in the imposition of duties in excess of those set forth in India's
Schedule of Concessions; and
(g) finds
 that the Panel did not act contrary to Articles 3.2, 11, and 19 of the DSU in
providing "concluding remarks" in paragraph 8.2 of the Panel Report.
232. Having reversed the Panel's findings in paragraph 8.1 of the Pane l Report, and in view of its
findings and conclusions above, th e Appellate Body makes no recommendation, in this case, to the
Dispute Settlement Body pursuant to Article 19.1 of the DSU.

Signed in the original in Geneva this 10th day of October 2008 by:

Jennifer Hillman
Presiding Member

 _________________________ _________________________
 Giorgio Sacerdoti Yuejiao Zhang
 Member Member

ANNEX I

5 August 2008
 (08-3697)
 Original: English

Notification of an Appeal by the United States

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 1 August 20 08, from the Delegation of the United States, is
being circulated to Members.

Pursuant to Article 16 of the Understanding on Rules and Procedures Governing the
Settlement of Disputes (“DSU”) and Rule 20 of the Working Procedures for Appellate Review, the
United States hereby notifies its decision to appeal to the Appellate Body certain issues of law
covered in the report of the panel in India – Additional and Extra-A dditional Duties on Imports from
the United States (WT/DS360/R) (“Panel Report”) and certain legal interpretations developed by the
panel in this dispute.
1. The United States seeks review by the Appellate Body of the panel's legal conclusions that the
United States failed to establish that:
(a) India's additional customs duty (AD) on imports of alcoholic beverages from the
United States is inconsistent with Article II:1(b) of the General Agreement on Tariffs
and Trade 1994 (GATT 1994);
1

(b) the AD imposed on imports of alcoholic beverages from the United States is
inconsistent with Article II:1(a) of the GATT 1994;2

(c) India's extra-additional customs duty (EAD) 3 on imports from the United States,
including alcoholic beverages, is inconsistent with Article II:1(b) of the GATT 1994;4

(d) the EAD imposed on imports from the Unite d States, including alcoholic beverages,
is inconsistent with Article II:1(a) of the GATT 1994;
5 and

1See, e.g., Panel Report, paras. 7.297-7.299.
3The panel refers to this measure as the “SUAD.” See, e.g., Panel Report, para. 7.18.
4See, e.g., Panel Report, paras. 7.392-7.394.

(e) the AD on alcoholic beverages and the EAD fall outside the scope of Article II:2(a)
of the GATT 1994.6

 These findings are in error and are based inter alia on erroneous findings on issues of law and
related legal interpretations as described below and the panel's failure to undertake an objective
assessment described in paragraph 3.

2. The errors in the panel report include:
(a) the erroneous interpretation and applicati on of Articles II:1(b), II:2, and III:2 of the
GATT 1994;
7 and the following erroneous findings on issues of law and related legal
interpretations:

(b) Article II:1(b) applies only to duties or charges that "inherently discriminate against
imports";8

(c) the duties and charges described in Article II:2 fall outside the scope of
Article II:1(b);9

(d) establishing a prima facie case that the AD and the EAD fall within the scope of
Article II:1(b) requires the United States to demonstrate that the measure "inherently
discriminates against imports," including by demonstrating that the measures fall
outside the scope of Article II:2;10

(e) a charge equivalent to an internal tax fall s within the scope of Article II:2(a) regardless
of whether the internal tax to which it is equivalent is imposed consistently with
Article III:2 of the GATT 1994;11

(f) a border charge equivalent to an in ternal tax is subject to Article III:2;12

(g) establishing that a duty or charge falls outside the scope of Article II:2(a) requires the
complaining party to raise and establish an "independent" claim under Article III:2;
13

(h) "equivalent" in Article II:2(a) means having or serving the same function (in the
sense of purpose or objective) and does not relate to the amount, effect or function (in
the sense of operation) of the charge;
14 and

(i) a responding party is not required to support its assertions that a measure falls within
the scope of Article II:2(a).15

6See, e.g., Panel Report, paras. 7.260-7.295, 7.346-7.390.
7See, e.g., Panel Report, paras. 7.125-7.172, 7.179-7.215, 7.240-7.299, 7.331-7.394.
8See, e.g., Panel Report, paras. 7.141, 7.156; see also, e.g., 7.128-7.164.
9See, e.g., Panel Report, paras. 7.133-7.141, 7.156-7.160.
10See, e.g., Panel Report, paras. 7.156-7.164, 7.258-7.261, 7.297-7.299, 7.392-7.394.
11See, e.g., Panel Report, paras. 7.199-7.215.
12See, e.g., Panel Report, paras. 7.196, 7.206-7.215.
14See, e.g., Panel Report, paras. 7.179-7.198, 7.273-7.274, 7.369.
15See, e.g., Panel Report, paras. 7.159-7.164, 7.293-7.297, 7.388-7.390.

3. The United States requests the Appellate Body to find that the panel failed to make "an
objective assessment of the matter before it, including an objective assessment of the facts of the case
and the applicability of and conformity with the re levant covered agreements " as required by Article
11 of the DSU with respect to India's assertion that the AD on alcoholic beverages and the EAD
constitute "charges equivalent to an internal tax impo sed consistently with [Article III:2] in respect of
the like domestic product" and fall within the scope of Article II:2(a) of the GATT 1994. The panel
failed to undertake an objective assessment, for example, by:
(a) not requiring India to support its assertions (in particular that the AD on alcoholic
beverages and the EAD are "equivalent" to internal taxes on like domestic products),
including by finding that India was not required to specify the particular internal taxes
to which it asserted the AD and the EAD are e quivalent or to substantiate that the
Indian states imposed such taxes;
16

(b) making inferences that are not supported by evidence before the panel about the
existence and operation of Indian state-level excise taxes and the AD on alcoholic
beverages, for example by inferring, based on the AD being collected at the time the
panel was established and on general references to st ate-level excise taxes under
provisions of Indian law, that state-level excise taxes exist and that the AD is
"equivalent" to them,
17 and relying on evidence pertaining to the AD on products
other than alcoholic beverages to make findings about the AD on alcoholic beverages
that are not supported by evidence before the panel;18

(c) making inferences that are not supported by evidence before the panel about the
existence and operation of Indian state-le vel value-added taxes (VATs), sales taxes
and other local taxes and the EAD, for example by inferring, based on the EAD being
collected at the time the panel was estab lished and on general references to state-
level VATs, sales taxes and other local taxes under provisions of Indian law, that
such taxes exist and that the EAD is "equivalent" to them,
19 and relying on evidence
pertaining to the AD to make findings about the EAD that are not supported by
evidence before the panel;
20 and

(d) disregarding evidence before the panel that Indian state-level VATs, the Central Sales
Tax, and other local taxes apply to imported products.21

4. The United States seeks review by the Appellate Body of the panel's legal conclusion that the
United States is not challenging Section 12 of the Customs Act and Section 3(1) of the Customs Tariff
Act with respect to the AD on alcoholic beverages and its related finding that the United States is only
challenging the AD as specified in Customs Notification (CN) 32/2003.
5. The United States seeks review by the Appellate Body of the panel’s legal conclusion that the
United States is not challenging Section 12 of the Customs Act and Section 3(5) of the Customs Tariff
Act with respect to the EAD and its related finding that the United States is only challenging the EAD
as specified in Customs Notification (CN) 19/2006.

16See, e.g., Panel Report, paras. 7.160-7.164, 7.270.
17See, e.g., Panel Report, paras. 7.247, 7.262-7.295.
18See, e.g., Panel Report, paras. 7.247- 7.248, 7.263, 7.279-7.281.
19See, e.g., Panel Report, paras. 7.336, 7.346-7.394.

6. In light of the errors in the panel's lega l findings, related lega l interpretations, and
conclusions, as well as its failure to make an objective assessment of the matters elaborated above, the
United States requests that the Appellate Body re verse the panel and find that the AD on alcoholic
beverages and the EAD are each in consistent with Article II:1(a) and (b) and are not justified under
Article II:2(a).

ANNEX II

15 August 2008
 (08-3870)
 Original: English

Notification of an Other Appeal by India
under Article 16.4 and Article 17 of the Understanding on Rules
and Procedures Governing the Settlement of Disputes (DSU),
and under Rule 23(1) of the Working Procedures for Appellate Review

 The following notification, dated 13 August 2008, from the Delegation of India, is being
circulated to Members.

Imports from the United States, WT/DS360/R ("Panel Report") and legal interpretations developed by
the Panel in this dispute.
2. India seeks review by the Appellate Body of the issues of law and legal interpretations
developed by the Panel in its Report. In India’s view, the Panel has erred in its Report by erroneously
interpreting the provisions of Article 19 of the DSU Rules and has in its "Conclusions and
Recommendations", made certain "concluding remarks"
1 which India submits are without basis and
result in an ambiguous and unpredictable interpretation of India’s WTO rights and obligations.
3. As a consequence of the errors in the issues of law covered in the Pa nel Report and the legal
interpretations developed therein, the Panel has er red in interpreting and a pplying the following legal
provisions of the covered agreements:
(i) Article 19.1 and 19.2 read with Article 3.2 of the DSU Rules, which authorize the Panel to
make recommendations or suggestions pertaining to implementation only if a measure has
been found inconsistent with the provisions of a covered agreement, provided that such
suggestions or "concluding remarks" do not add to or diminish the rights and obligations
contained in the covered agreements.

(ii) Article 11 of the DSU that inter alia authorizes the Panel to make "such other findings"
provided that such findings or "concluding remarks" assist the DSB in making its
recommendations.
4. The relevant paragraph of the Panel Report in which the Panel has erred in addressing the
issues of law and/or the legal interpretations is pa ragraph 8.2 of the Panel Report pertaining to the
misinterpretation of Article 19 of the DSU.
5. In light of the errors in the issues of la w covered in the Panel Report and the legal
interpretations developed therein, India request s that the Appellate Body rectify the Panel’s
"concluding remarks" and hold that such remarks are inconsistent with Article 19 of the DSU.