2006/790/EC: Commission Decision of 7 November 2006 concerning initiation of dispute settlement proceedings against India under the Understanding on Rules and Procedures Governing the Settlement of Disputes and other relevant WTO provisions as regards an obstacle to trade constituted by an Additional Duty on imported wines and spirits and an Extra Additional Duty on imported spirits maintained by India, and a ban on sale of imported wines and spirits maintained by the Indian State of Tamil Nadu
Date: 2006-11-07
Institutions: European Commission
Subjects: GATT, India, World Trade Organisation, alcoholic beverage, import, tariff barrier, trade dispute, trade restriction, wine

L 319/46

EN

Official Journal of the European Union

18.11.2006

COMMISSION

COMMISSION DECISION

of 7 November 2006

concerning initiation of dispute settlement proceedings against India under the Understanding on
Rules and Procedures Governing the Settlement of Disputes and other relevant WTO provisions as
regards an obstacle to trade constituted by an Additional Duty on imported wines and spirits and
an Extra Additional Duty on imported spirits maintained by India, and a ban on sale of imported
wines and spirits maintained by the Indian State of Tamil Nadu

(2006/790/EC)

THE COMMISSION OF THE EUROPEAN COMMUNITIES,

Having regard to the Treaty
Community,

establishing the European

Having regard to Council Regulation (EC) No 3286/94 of 22
December 1994,
laying down Community procedures in the
field of the common commercial policy in order to ensure
the Community’s rights under international
the exercise of
trade rules,
in particular those established under the auspices
of the World Trade Organisation (1), and in particular Articles
12(1) and 13(2) thereof,

Whereas:

(1)

(2)

On 20 July 2005, the Commission received a complaint
pursuant to Article 4 of Regulation (EC) No 3286/94
(the ‘Trade Barriers Regulation’). The complaint was
lodged jointly by the Comité européen des entreprises
vins (‘CEEV’) and The European Spirits Organisation
(‘CEPS’).

The complaint concerned certain alleged Indian trade
practices that adversely affected the importation and
sale of wines and spirits in India (2). These practices
included an Additional Duty applied upon importation

(3)

(4)

(5)

(1) OJ L 349, 31.12.1994, p. 71. Regulation as amended by Regulation

(6)

(EC) No 356/95 (OJ L 41, 23.2.1995, p. 3).

(2) The proceeding concerns wines, vermouths, aromatised wines and
spirits classified under HS headings 2204, 2205, 2206 and 2208.
They include still and sparkling wines, vermouths and other fortified
wines such as port and sherry, and spirit drinks distilled from raw
materials of agricultural origin such as brandies and wine spirits,
whiskies, gin, vodka, rum and liqueurs.

by India to wines and spirits, indirect taxes applied by
certain Indian States to imported wines and spirits and
restrictions on the sale of imported wines and spirits
applied by certain Indian States.

The complainants alleged that these practices were incon-
the General
sistent with Articles
Agreement on Tariffs and Trade 1994 (‘GATT 1994’).
On that basis, the complainants asked the Commission
to take the necessary action.

III and XI of

II,

a Community

The complaint contained sufficient evidence to justify the
initiation of
examination procedure
pursuant to Article 8(1) of the Trade Barriers Regulation.
Consequently, the Commission initiated that procedure
in the
after
framework
on
the
17 September 2005 (3).

consulting with the Member States

Committee,

Advisory

of

During the examination procedure,
the complainants
withdrew the claims made in relation to indirect taxes
applied by certain Indian States to imported wines and
spirits, and India introduced a new Additional Duty
(‘Extra Additional Duty’) which is applied upon impor-
In the framework of that
tation to wines and spirits.
procedure,
the Commission therefore carried out an
investigation of the Additional Duty, the Extra Additional
Duty and the alleged restrictions on the sale of imported
wines and spirits applied by certain Indian States.

The investigation considered the relevant Indian legis-
lation and took into account the views expressed by
the various Indian Government Ministries, as well as
Community and Indian enterprises and Trade Asso-
ciations.

(3) OJ C 228, 17.9.2005.

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Official Journal of the European Union

L 319/47

(7)

(8)

(9)

(10)

(11)

The investigation concluded that the Additional Duty is
inconsistent with Article II:1 of GATT 1994, and not
justified under Article II:2(a) of GATT 1994,
to the
extent that it applies to wines and spirits, and that the
Extra Additional Duty is inconsistent with Article II:1 of
GATT 1994, and not justified under Article II:2(a) of
GATT 1994,
it applies to spirits.
Since the WTO Agreement prohibits these practices,
there is evidence of an obstacle to trade in the sense of
Article 2(1) of the Trade Barriers Regulation.

to the extent

that

expected growth of the Indian market for wines and
spirits.

(12)

This evidence clearly shows that the Community industry
has suffered and continues to suffer adverse effects within
the meaning of Article 2(4) of the Trade Barriers Regu-
lation.

(13)

The investigation also concluded that further analysis of
the alleged restrictions on the sale of imported wines and
spirits in certain Indian States was required. An analysis
conducted after
the investigation
the completion of
showed that the legislation of the Indian State of Tamil
Nadu contains a ban on sale of imported wines and
spirits, which is inconsistent with Article III:4 of GATT
1994. Since the WTO Agreement prohibits this practice,
there is evidence of an obstacle to trade in the sense of
Article 2(1) of the Trade Barriers Regulation.

sector of

represent a major

The complainants
the
economy of the Community, consisting of producers of
wines and spirits in respectively 11 and 21 EC Member
States. Those producers
exported in 2005 goods
amounting to EUR 10,45 billion to some 150 third
country markets and employed over 600 000 people
directly. The investigation showed that the Additional
Duty and the Extra Additional Duty has prevented
producers within this sector from gaining access to the
potentially large Indian market

and

spirits

dispute

The investigation showed that despite the elimination, in
2001, of quantitative restrictions on the importation of
wines
settlement
following
proceedings against India under the Understanding on
Rules and Procedures Governing the Settlement of
Disputes,
imports of wines and spirits from the EC
decreased in 2002 and have since 2003 increased only
in line with the overall growth in consumption in India
of wines and spirits. The effects that reasonably could be
expected to flow from the elimination of the quantitative
restrictions have therefore not occurred, due to the appli-
cation of the measures under investigation.

The investigation showed furthermore that Indian total
consumption of wines and spirits amounted in 2004 to
respectively 0,67 and 87,1 million nine-litre cases, with
an expected growth of between 5 % and 10 % per year
over the next decade, and that less than 0,5 % per cent of
spirits and less than 9 % of wines consumed in India are
imported products, which are subject to the Additional
Duty and the Extra Additional Duty.

The investigation confirmed that there is a large potential
market in India for imported wines and spirits, and that
elimination of the Additional Duty for wines and spirits
and of the Extra Additional Duty for spirits would entail
a reduction in retail prices of imported wines and spirits
of respectively 22 % to 35 % and 23 % to 48 % in
different Indian States. A reduction of that magnitude
would significantly increase demand for imported wines
and spirits given Indian consumer preferences and the

(14) On the basis of the above, it can be concluded that it is
in the Community’s interest in the sense of Article 12(1)
of the Trade Barriers Regulation to take action, within
the WTO framework, to seek a rapid removal of the
Indian Additional Duty on imported wines and spirits,
the Indian Extra Additional Duty on imported spirits and
the ban on sale of imported wines and spirits in the
Indian State of Tamil Nadu, which represent a breach
of fundamental WTO rules and an obstacle to trade in
the sense of Article 2(1) of the Trade Barriers Regulation.

(15)

It is also of utmost importance for the Community to
ensure that WTO partners fully comply with their obli-
just as the Community is required to do. It is
gations,
therefore fundamental for the good functioning of the
multilateral
incompatibility
with WTO rules should be addressed in that forum.

trading system that

this

(16) Attempts

the Additional Duty,

to resolve this dispute through numerous
meetings with the Indian authorities since the intro-
the Extra Additional
duction of
Duty and the ban on sale in the Indian State of Tamil
Nadu, and throughout the course of this investigation,
have failed to identify a willingness on the part of the
Indian authorities to reach a mutually agreed solution. In
the absence of any likelihood that the Indian position
will change,
the initiation of a procedure within the
framework of the WTO Understanding on Rules and
Procedures Governing the Settlement of Disputes
is
therefore deemed necessary.

(17)

The measures provided for
accordance with the opinion of the TBR Committee,

in this Decision are in

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HAS DECIDED AS FOLLOWS:

Article 2

Article 1

The maintenance and application of an Additional Duty on
imported wines and spirits and of an Extra Additional Duty
on imported spirits by India, and the maintenance and appli-
cation of a ban on sale of imported wines and spirits by the
Indian State of Tamil Nadu appear to be inconsistent with
India's obligations under the Marrakech Agreement Establishing
the World Trade Organisation and,
in particular, under the
provisions of
the General Agreement on Tariffs and Trade
1994, and constitute an obstacle to trade within the meaning
of Article 2(1) of Regulation (EC) No 3286/94.

India pursuant

initiate dispute settlement proceedings
The Community will
against
to the Understanding on Rules and
Procedures Governing the Settlement of Disputes and the
relevant WTO provisions with a view to securing
other
removal of the obstacle to trade referred to in Article 1.

Done at Brussels, 7 November 2006.

For the Commission

Peter MANDELSON
Member of the Commission