PERU - TAXES ON CIGARETTES
Document: Request for the Establishment of a Panel by Chile
Date: 4 May 2001
Document codes: WT/DS227/2
Complainant: Chile
Respondent: Peru
Dispute stage: Panel
Agreements cited: Art. III:2  GATT 1994

PERU - TAXES ON CIGARETTES
Request for the Establishment of a Panel by Chile
The following communication, dated 3 May 2001, from the Permanent Mission of Chile to
the Chairman of the Dispute Settlement Body, is circulated pursuant to Article 6.2 of the DSU.
I am writing to request the establishment of a panel against the Republic of Peru, in
accordance with Articles 4 and 6 of the Understanding on Rules and Procedures Governing the
Settlement of Disputes (DSU), concerning the differential taxation of cigarettes under Supreme
Decree No. 158-99-EF.
On 1 March 2001, Chile requested consultations with Peru with a view to reaching a mutually
satisfactory solution to this matter. That request was circulated in document The
consultations, which were held in Lima, Peru, on 20 April 2001, enabled the parties to gain a better
understanding of each other's positions, but unfortunately did not give rise to a mutually satisfactory
solution.
Chile's claims are based on the discriminatory treatment established for the taxation of
cigarettes under the Supreme Decree in question. Supreme Decree No. 158-99-EF of
25 September 1999 modified certain taxes and fixed amounts in the General Sales Tax and Selective
Consumption Tax Law, including the taxes applicable to cigarettes. The new tax system for cigarettes
provided in Article 2 of Supreme Decree No. 158-99-EF establishes a different specific tax for each of
three categories of cigarettes, with rates ranging from S/0.025 to S/0.100 per unit. The difference in
the amount of the tax is based on the number of countries in which the different commercial brands of
cigarettes are marketed. Premium cigarettes made of bright tobacco are brands marketed
internationally in more than three markets, and are subject to the highest tax rate. Standard cigarettes
made of bright tobacco are the bright tobacco cigarettes not included in the previous category, in other
words, brands marketed in not more than three markets. These are subject to a tax rate of S/0.050 per
cigarette. Lastly, cigarettes made of dark tobacco are subject to the lowest tax rate.
Chile has argued and continues to maintain that this criterion constitutes discrimination
against imported cigarettes, for example from Chile, which are subject to a higher tax because they
are marketed in more than three markets. This st ate of affairs causes injury to Chilean exporters of
cigarettes to Peru.
Chile considers that this differential tax treatment of cigarettes constitutes an infringement of
the provisions of the General Agreement on Tariffs and Trade 1994, in particular, but not exclusively,
Article III.2 including the interpretative note thereto in Annex I of the General Agreement.

Accordingly, the Republic of Chile requests the establishment of a panel with the standard
terms of reference set out in Article 7 of the DSU. To that end, I should be grateful if this request
could be included in the agenda for the next meeting of the Dispute Settlement Body.