COLOMBIA – MEASURES CONCERNING IMPORTED SPIRITS REQUEST FOR CONSULTATIONS BY THE EUROPEAN UNION
Document: REQUEST FOR CONSULTATIONS BY
Date: 18 January 2016
Document codes: WT/DS502/1; G/L/1142
Complainant: EU
Respondent: Colombia
Third parties: Brazil, Canada, Chile, China, Ecuador, El Salvador, Guatemala, India, Kazakhstan, South Korea, Mexico, Panama, Russia, Taiwan, U.S.
Dispute stage: Panel
Agreements cited: Art. III:2, III:1, III, XXIV:12, III:4, X:3(a)  GATT 1994

COLOMBIA – MEASURES CONCERNING IMPORTED SPIRITS
REQUEST FOR CONSULTATIONS BY THE EUROPEAN UNION
The following communication, dated 13 January 2016, from the delegation of the European Union
to the delegation of the Republic of Colombia and to the Chairperson of the Dispute Settlement
Body, is circulated in accordance with Article 4.4 of the DSU.

My authorities have instructed me to request consultations with the Government of the Republic of
Colombia ("Colombia"), pursuant to Articles 1 and 4 of the Understanding on Rules and Procedures
Governing the Settlement of Disputes (the DSU) and Article XXII of the General Agreement on
Tariffs and Trade, 1994 (the GATT 1994), with respect to the discriminatory and other WTO-
inconsistent treatment that Colombia accords, without justification, to imported alcoholic
beverages at national and departmental level. Th ese measures adversely affect exports of spirits
classified under HS 22.08 ("spirits") from the European Union to Colombia.
1 DISCRIMINATORY TAXATION OF IMPORTED SPIRITS
Under the Colombian fiscal regime, all spirits appear to be subject to national excise tax on
consumption, except in departments or local subdi visions exercising the so-called fiscal monopoly
over spirits. These local departments levy instead a charge connected to the fiscal monopoly
(participación). Both the tax and the charge are levied per degree of alcohol.
1 The amounts of the
tax and of the charge increase above a point set at 35% ABV (alcohol by volume).
The products that are taxed or charged at the higher rates are spirits, including whiskey, gin,
vodka, aniseed vodka, liqueur and rum, whether im ported or domestic, with an ABV of more than
35%. The products that are taxed or charged at the lower rates are spirits, including aguardiente
and rum, whether imported or domestic, with an ABV equal to or less than 35%. Even if the
Colombian fiscal regime on spirits is on its face origin neutral, it results in the unjustified
imposition of a higher fiscal burden on like or directly competitive and substitutable imported
spirits than the one applied on domestically produced spirits, mostly rums and aguardientes. It
appears that all or most of the products that the European Union imports or aims to import into
Colombia are subject to the higher rate of the tax or charge, whilst all or most of the products that
are produced and sold in Colombia are subject to the lower rate.
In addition, it appears that, in certain departments, domestically produced spirits destined for
promotion are unjustifiably exempt from the paym ent of the charge, whilst no such exemption is
available for imported spirits.
For these reasons, the European Union is concerned that Colombia's fiscal regime for spirits, as
described above and as provided in or evidenced by, inter alia , the provisions of the legal
instruments identified in this consultations request (including its Annex), as well as any
amendments, supplements, extensions, replacement measures, renewal measures, related and
implementing measures, is inconsistent with the obligation or each of the obligations (and any
combination thereof) contained in the following provisions (including the Ad note or Ad notes
related to each provision):

1 The current tax rate is set out in Law no 1393 of 12 July 2010, last adjusted by Certificación no 3 of
21 December 2015. The rate of the participación shall be in no case lower than the rate of the tax.
WT/DS502/1 • G/L/1142

‐ Article III:1 of the GATT 1994;
‐ Article III:2 of the GATT 1994, first sentence;
‐ Article III:2 of the GATT 1994, second sentence.
2 OTHER WTO INCONSISTENT MEASURES APPLIED ON IMPORTED SPIRITS
In addition to fiscal measures, Colombia subjects imported spirits to a number of unjustified
marketing restrictions connected to the administration and implementation of the fiscal monopolies
over the introduction and sale of spirits in the departments.
2.1. Introduction contracts
Once a department establishes a monopoly over introduction or sales of spirits in the territory of
its jurisdiction, the introduction of imported spirits in that department is made subject to an
authorization or license. This is in turn subject to the conclusion of a contract of introduction
(convenio de introducción ) with the department in the majority of cases. Once introduced into a
department, imported spirits cannot circulate freely between the departments.
Prior to granting the introduction contract, Colombian authorities carry out a study on its economic
and fiscal suitability. Introduction contracts are concluded with the departments for a period of
several months to a number of years. The contracts for the introduction of imported spirits vary
per department and appear to include, inter alia, the following typical clauses: authorization to
introduce spirits in the department; list of products (name, alcohol by volume, SKU or space-
keeping unit); duration of the contract; amount of the local charge ( participación); obligation to
contract an insurance policy ( póliza de seguro ) to guarantee, inter alia, the payment of the local
charge for the duration of the contract; other liabilities; and sanctions and/or fines for lack of
compliance with the terms of the introduction contracts.
In certain cases, the contracts for the introduction of imported spirits in the departments include
also the following requirements: (i) minimum introduction quotas, i.e. the obligation to sell a pre-
established volume or value of imported spirits, (ii) minimum prices, i.e. the obligation to sell
imported spirits at prices no lower than the minimum sale prices fixed by the Colombian
authorities and which would, in some or most cases, be benchmarked on a competing
departmental distillery's prices, (iii) additional char ges, and (iv) obligations to provide confidential
information.
Furthermore, Colombian authorities impose a number of other administrative requirements that
apply solely to imported spirits, such as a) the obligation to affix strip stamps which is not imposed
on like or directly competitive or substitutable domestic spirits, b) the requirement to advance the
payment of the amount of the national excise tax at the time of importation to the Fund-Account
for Taxes on Consumptions of Foreign Products ( Fondo-Cuenta de Impuestos al Consumo de
Productos Extranjeros), even though the taxable event is not yet triggered and even though the
product will have to be declared again in the department of destination, where the difference
between the national excise tax and the participat ion will be levied before the product can enter
the market in the department, and c) the ne cessary completion of additional legal or
administrative procedures to permit the introduction of such spirits (legalization of the tornaguía,
storage requirements ( bodegas de rentas ), etc.). These aspects of the administration and
implementation of the fiscal monopoly over the introduction and commercialization of spirits result
in higher transaction costs and - in particular with regard to the Fondo-Cuenta - a higher fiscal
burden for imported spirits, placing them at a disadvantage in the Colombian market.
For these reasons, the European Union is concerned that each of the Colombian measures, as
described above and as provided in or evidenced by, inter alia , the provisions of the legal
instruments identified in this consultations request (including its Annex), as well as any
amendments, supplements, extensions, replacement measures, renewal measures, related and
implementing measures, is inconsistent with the obligation or each of the obligations (and any
combination thereof) contained in the following provisions (including the Ad note or Ad notes
related to each provision):
‐ Article III:1 of the GATT 1994;
‐ Article III:4 of the GATT 1994;
WT/DS502/1 • G/L/1142

And to the extent that they concern fiscal measures:
‐ Article III:1 of the GATT 1994;
‐ Article III:2 of the GATT 1994, first sentence;
‐ Article III:2 of the GATT 1994, second sentence.
2.2. Other trade restrictive measures
In addition, Colombian departments have and appear to exercise the authority to ban the entry of
spirits into their jurisdiction by, inter alia, (i) declining the grant of the contract of introduction or
the relevant authorization or license to a certain operator introducing spirits, (ii) delaying the grant
of the contract or relevant authorization or license to a certain operator introducing spirits
(renewals are non-automatic and entail a lengthy process, during which period the introduction
and marketing of imported spirits in the department is prohibited), and/or (iii) by refusing to
extend the contract or the authorization or license to additional brands of spirits.
It further appears that certain departments steer imports towards the higher bracket of taxation
by arbitrarily refusing access to their markets for imported spirits at or under 35% ABV, or
otherwise use contracts of introduction to control the entry of spirits into their territory, distorting
the conditions of competition in the market to the detriment of imported spirits.
For these reasons, the European Union is concerned that each of these Colombian measures, as
provided in or evidenced by, inter alia, the provisions of the legal instruments identified in this
consultations request (including its Annex), as we ll as any amendments, supplements, extensions,
replacement measures, renewal measures, related an d implementing measures, as well as all of
those measures considered together, are, by according a less favourable treatment to imported
spirits than the treatment granted to domestic spirits and by otherwise restricting imports of spirits
into the departments in Colombia, inconsistent with the obligation or each of the obligations (and
any combination thereof) contained in the following provisions (including the Ad note or Ad notes
related to each provision):
‐ Article III:1 of the GATT 1994;
‐ Article III:4 of the GATT 1994;
And to the extent that they concern fiscal measures:
‐ Article III:1 of the GATT 1994;
‐ Article III:2 of the GATT 1994, first sentence;
‐ Article III:2 of the GATT 1994, second sentence.
In addition, or in the alternative, it appears that these measures entail prohibitions or restrictions,
instituted or maintained by Colombia on the importation of spirits of the European Union,
inconsistently with the obligation or each of the obligations (and any combination thereof)
contained in Article XI:1 of the GATT 1994.
2.3. Lack of uniform, impartial and reasonable administration
In addition, it appears that Colombia, including through its departmental governments and
authorities, implements and administers its system of fiscal monopolies over the introduction and
sale of spirits in a way that is not uniform, impartial and reasonable, in particular by failing to treat
imported products in a transparent and predictable way. The European Union is concerned that
this is inconsistent with the obligation or each of the obligations (and any combination thereof)
contained in Article X:3(a) of the GATT 1994.
3. OBLIGATIONS OF COLOMBIA UNDER ARTICLE XXIV: 12 OF THE GATT 1994
Finally, in connection to the measures at issue described above, and for the reasons already set
out above, Colombia is obliged to take such reasonable measures as may be available to it to
ensure observance of the cited provisions of the GATT 1994 by the regional and local governments
WT/DS502/1 • G/L/1142

and authorities within its territories, and by failing to do so, Colombia is acting in a manner that is
inconsistent with the provisions of Article XXIV:12 of the GATT 1994.
4. CONCLUDING OBSERVATIONS
The measures described above appear to nullify or impair the benefits accruing to the European
Union directly or indirectly under the covered agreements.
2
This consultation request relates to the measures at issue and to any additional measures that
prolong, replace, amend, implement, extend or apply the measures at issue, as well as other
related measures adopted by Colombia at national, regional, local or departmental level.
The European Union reserves the right to address additional issues under the provisions of the
covered agreements regarding the above matters during the course of the consultations.
The European Union looks forward to receiving Colombia's reply to this request and expresses its
readiness to consider a mutually convenient date and place for the consultations.