EU Challenges Colombia at WTO Over Import Measures for Spirits

21 January 2016

The EU filed a WTO challenge last week against Colombia, citing tax and regulatory measures that it claims adversely affect imported spirits, such as whiskies, liqueurs, and cordials.

According to the consultations request (DS502), spirits sold in Colombia are subject to either a national excise tax on consumption or a local charge derived from the “fiscal monopoly over spirits.” The tax and the charge are both determined based on a beverage’s degree of alcohol – with any beverage with more than 35 percent alcohol per volume prompting an increase in the tax or charge.

Colombia primarily produces spirits such as rum and aguardiente, which have 35 percent or less alcohol per volume, while the EU alcoholic beverage exports to Colombia are made up primarily of whiskies, liqueurs, and cordials, which all tend to fall above this alcohol threshold.

Brussels therefore argues in its consultations request that the fiscal regime, while “on its face origin neutral,” actually leads to an “unjustified imposition of a higher fiscal burden on like or directly competitive and substitutable imported spirits than the one applied on domestically produced spirits such as rums and aguardientes.”

The European Union claims that as a result of such policies, Colombia is in violation of certain provisions of the General Agreement on Tariffs and Trade’s (GATT) article relating to national treatment on internal taxation and regulation.

Another issue raised by the 28-nation bloc in its complaint is the use of several alleged “marketing restrictions connected to the administration and implementation of the fiscal monopolies over the introduction and sale of spirits in the departments,” which it claims run contrary to certain GATT provisions. Departments, in Colombia, refers to the 32 different regional areas that the country’s territory is divided into.

“The EU’s concerns about discrimination in the Colombian market are longstanding,” said a press release from the European Commission, adding that the measures at issue lead to increased “cost of doing business” in the Latin American country.

Furthermore, the EU noted, Colombia had committed to “ending the discrimination” under the bilateral free trade agreement between the two sides by 1 August 2015. The EU has a trade deal with both Colombia and Peru that has been provisionally applied since August and March 2013, respectively. Ecuador completed talks to join the trade pact the following year, though the internal procedures for applying the agreement have not yet been completed. (See Bridges Weekly, 24 July 2014)

According to EU figures, the bloc’s exports of spirits to Colombia were worth €43 million in 2014, making up over three-quarters of the South American country’s total spirits imports.

Colombia’s consumption of spirits, however, is mainly of rums and aguardientes, which the EU says made up 83 percent of domestic consumption in 2013.

The EU press release also suggested that some other trading partners – such as Mexico, Costa Rica, and the US – are also affected by the Colombian measures cited in the consultations request, though those countries have not yet filed their own disputes on the subject.

“These measures raise the cost of doing business in Colombia and place EU spirits at a competitive disadvantage on the Colombian market,” the press release said.

Under WTO rules, the two sides must hold consultations for a minimum of 60 days in an effort to reach a mutually agreed solution. Otherwise, the EU will have the right to ask that a WTO dispute panel be established to hear the case.

ICTSD reporting.

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