Jack Daniel’s: Tough tariffs

Mumbai, June 9: Jack Daniel’s and Californian wines will continue to face a basic import duty of 150 per cent and additional levies that could go as high as 550 per cent.

The World Trade Organisation (WTO) today ruled in favour of India in its year-long slugfest with the US over its tiered duty structure on imports of distilled spirits and wines.

The US failed to prove that India’s duties on alcohol imports — which consist of a basic customs duty of 150 per cent topped by an additional duty that ranges from 40 per cent to 75 per cent and capped by an optional levy — discriminated against products like Jack Daniel’s whiskey.

The US maintained that India had committed to the WTO that it would cap its duty at 150 per cent on liquor but the additional discretionary levies meant that India was way above that level.

The nub of the argument was over the nomenclature of the duties: the US said it was an additional customs duty and, therefore, violated the commitments that India had made to the trade body.

India, on the other hand, argued that the two additional duties were levied to “offset different kinds of internal taxes” and were not customs levies at all.

The Indian argument rested on some adroit legal casuistry: it said the basic customs duty was levied under the Indian Customs Act, 1962, while the additional duty was charged under the Customs Tariff Act, 1975.

The government argued that the additional duties “counter-balance internal taxes” such as sales tax, value added tax and other local taxes that are imposed on products in India.

“The US has failed to establish that the additional duty on alcoholic liquor is inconsistent” with Indian commitments at the WTO, the judges said in a 182-page report.

In response to a complaint filed by the European Union, India had trimmed the levies to 150 per cent last year.

The US had lodged its complaint with the Geneva-based arbiter in March 2007, saying India imposed “excessive” tariffs on imported wine and distilled spirits.

The US case was similar to the one filed by the EU in November 2006. The EU dropped its complaint last July after the Indian government changed the duties.

At the time, the EU had said its litigation would remain on hold for a year and that it would continue to monitor the situation to see that no new discriminations arose.