India's Taxes on Alcohol Are Legal, WTO Judges Rule

The U.S. failed to prove that Indian duties on alcohol imports discriminate against products such as Brown-Forman Corp.'s Jack Daniels whiskey, World Trade Organization judges said, after changes to Indian import rules. ``The U.S. has failed to establish that the additional duty on alcoholic liquor is inconsistent'' with Indian commitments at the WTO, judges said in a 182-page report issued today from Geneva. In response to a complaint by the European Union, India trimmed the levies to 150 percent last year. The U.S. lodged its complaint with the Geneva-based arbiter in March 2007, saying India imposes ``excessive'' tariffs on imported wine, beer and distilled spirits. India protects its domestic makers of rum, whiskey, wine and vodka with duties of as much as 550 percent. Under its WTO pledges, India can impose tariffs no higher than 150 percent, the U.S. said when filing the case. U.S. makers of spirits estimate the Indian market is worth more than $14 billion a year and say it's protected by tariffs high enough to keep out almost all American-made products. U.S. spirits exports to India were valued at $540,000 in 2006, according to the Washington-based Distilled Spirits Council. ``The United States finds the panel's report `Deeply Flawed' and very troubling both in terms of the specifics of this dispute and because it could have broad, negative effects on members' tariff commitments if the panel's approach were ultimately adopted by the WTO,'' said Gretchen Hamel, a spokeswoman for the U.S. trade office in Washington. The U.S. hasn't decided whether to appeal the ruling, she said. The U.S. case matched one filed by the EU against India in November 2006 complaining of the same additional duties on imported spirits. The EU dropped its complaint last July after the Indian government changed the laws. At the time, the EU said its litigation would remain on hold for a year and that it would ``continue to monitor the situation on the ground, to make sure that no new discriminations appear.'' Exported spirits from the U.S. climbed an estimated 21 percent to $901 million last year, led by demand for bourbon and whiskey in fast-growing markets such as China and Russia, the Distilled Spirits Council of the United States said on Jan. 22. The U.S. case also targeted duties on certain agricultural and industrial products. India argued that the extra levies on alcohol and the tariffs on additional goods are ``equivalent to internal taxes'' and, after the panel of judges was established, provided a refund mechanism when imported products are sold domestically. By Ms.Bobby Aanand, Metropolitan Jury.

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