WASHINGTON DC – The United States today requested World Trade Organization (WTO) dispute settlement consultations with India over customs duties India imposes on imports of wine and distilled spirits.

On top of its basic customs duties, India imposes an “additional duty” and an “extra additional duty” on imports of wine and distilled spirits, resulting in aggregated duties on these imports that range from approximately 150 to 550 percent.  In the WTO, India committed that its tariffs on wine and spirits would not exceed 150 percent.

“With its fast-growing middle class, India could be an important export market for American wines and distilled sprits if not for these layers of duties,” said U.S. Trade Representative Susan C. Schwab.  “We have raised this issue with the Government of India on several occasions over a number of years.  We hope the matter can be successfully resolved in WTO consultations.”

In cases where wine and distilled spirits may enter India under special duty-free rules, such as for airport duty-free and use at luxury hotels, U.S. exports of these products to India have grown by 350 percent and 200 percent, respectively, between 2000 and 2005.  However, because of the high duties imposed on the vast majority of American wines and spirits, total exports to India remain low.    

Between 2000 and 2005, U.S. exports of wine and spirits worldwide averaged approximately $630 million and $633 million, respectively, making the United States the world’s sixth largest exporter of wine and third largest exporter of spirits.

Consultations are the first step in a WTO dispute.  Under WTO rules, parties that do not resolve an issue through consultations may refer the matter to a WTO dispute settlement panel. 

The European Communities (EC) has also requested WTO dispute settlement consultations on India’s duties on wine and distilled spirits.  The United States requested to join these consultations, but India denied the U.S. request.  WTO rules specifically provide that a Member, whose request to join consultations as a third party is denied, may request consultations in its own right.

Background

India applies an additional duty that ranges from 20 to 75 percent ad valorem on wine and from 25 to 150 percent ad valorem on distilled spirits.  For some import values, the additional duty applies as a specific duty, resulting in ad valorem duties exceeding even these ranges.  The extra additional duty is four percent ad valorem.  The additional duty is calculated in addition to, and after applying, India’s basic customs duties.  The extra additional duty is calculated in addition to, and after applying, India’s basic customs duties as well as the additional duty.

The additional duty and extra additional duty appear to subject imports of wine and distilled spirits to duties in excess of India’s WTO tariff commitments or, alternatively, appear to subject imported wine and distilled spirits to internal taxes in excess of those applied to domestic products.  In either case, the duties appear to breach India’s WTO obligations.  The specific WTO obligations concerned are Articles II and III of the General Agreement on Tariffs and Trade 1994 (GATT 1994). 

The United States has raised its concerns regarding these duties with India several times and over a number of years, including through senior U.S. officials. 

On November 20, 2006, the EC requested WTO consultations over the duties.  The United States and Australia requested to join these consultations, but India denied both requests and, as a consequence, neither the United States nor Australia were able to participate.  Europe and the United States are the world’s top exporters of distilled spirits; whereas Europe, Australia, Chile and the United States comprise the world’s top exporters of wine.