India - Additional And Extra-Additional Duties On Imports From The United States (AB-2008-7 / WT/DS360)

Oral Statement by Australia

4 September 2008, Geneva

Presiding Member, Members of the Division:

1. Thank you for the opportunity to present Australia’s further views in this appeal. The appeal raises important questions about the characterisation of ‘ordinary customs duties’ and ‘other duties or charges’ in GATT Article II:1(b), and the relationship between GATT Articles II:1(b), II:2(a) and III:2.

2. At the outset, we note that the Panel found that the United States failed to establish that India’s ‘Additional Duty’ (AD) and ‘Such Additional Duty’ (SUAD) charges were inconsistent with Article II:1 of GATT 1994. In so doing, Australia submits that the Panel made a number of significant errors. One such error is the Panel’s characterisation of ‘ordinary customs duties’ and ‘other duties and charges’ as being only those charges which inherently discriminate against imports. As Australia states in its written submission, this characterisation is not found in the ordinary meaning of the language of Article II:1 in its context, nor is it supported by previous jurisprudence or a practical examination of the possible consequences of such an interpretation.

3. In its analysis the Panel should have looked at a charge’s overall design, application and structure in determining whether it was an ordinary customs duty or other duties or charges for the purposes of Article II:1(b), an approach that was suggested by the Appellate Body in the Chile – Price Band cases.[1]

4. The Panel’s second error, which is central to this dispute, concerns the allocation of the burden of proof. Australia submits the Panel erred in finding that Article II:2 is not an exception or ‘affirmative defence’ to the other provisions of Article II. Australia argues that Article II:2 establishes a series of exceptions or ‘affirmative defences’ to the general principle set out in Article II:1. Thus, the burden of proof should fall on the party that seeks to rely on those exceptions or defences. In our view, the Panel incorrectly allocated the burden of proof under Article II:2 to the complaining party, therefore requiring it to demonstrate that a measure inconsistent with Article II:1 is not also consistent with Article II:2.

5. Like Japan, Australia is of the view that to impose on the complaining party the burden of proving a negative is at odds with the principle of ‘fair, prompt and effective resolution of disputes’.[2] Further, it is not logical that a complaining party should be made to disprove a range of negatives which may or may not provide the justification for the responding party imposing border charges in excess of those bound in a tariff schedule.

6. Moving on to the specific requirements of Article II:2(a), Australia submits that this Article establishes a two part test. To be consistent with Article II:2(a), a charge must be both ‘equivalent’ to an internal tax and imposed consistently with the provisions of Article III:2. Neither part of the test is severable or able to be read to the exclusion of the other part.

7. Australia does not support either the United States’ or the European Communities’ interpretation of ‘equivalent’ for the purposes of Article II:2(a).[3] Whilst Australia agrees that there is an unseverable relationship between Articles II and III, this does not mean that ‘equivalent’ has the same meaning as ‘imposed consistently with the provisions of paragraph 2 of Article III’. If followed, both approaches would have the affect of rendering meaningless the term ‘equivalent’ and could lead to legitimate charges on imports levied consistently with Article III:2 being held to be WTO-inconsistent[4]. Australia also submits that there is no inherent conflict in requiring a party seeking to rely on the Article II:2(a) defence to establish consistency with Article III:2 as part of that defence and requiring a party alleging a separate breach of Article III:2 to establish the elements of that breach.

8. The meaning of ‘equivalent’, as the Panel rightly points out,[5] should be interpreted as requiring an investigation as to whether the purpose or function of the border charge is directly related to an internal tax on a like domestic product.

9. If the United States were found to have made a prima facie case that India’s charges violated Article II:1, then the Panel should have required India to adduce sufficient evidence to support its assertion, or defence, that its charges did in fact satisfy the Article II:2(a) requirements. Proving this assertion should have also included a thorough investigation of compliance with the provisions of Article III:2 by the Panel.

10. Australia notes the argument raised by the United States[6], that many of the internal taxes and charges that India claims are adjusted for at the border are also levied domestically on sales of United States wine as value-added or consumption taxes. This practice, if sufficiently demonstrated by the evidence on the record, would clearly be taxing imports twice and thus in breach of Article III:2 and hence Article II:2(a).

11. Furthermore, India’s Customs Tariff Act directs AD and SUAD be calculated at the highest (excise) rate in certain circumstances[7]. This could result in charges in excess of the internal taxes and charges levied on like domestic products, at least in some parts of the territory of India. This should have been explored further by the Panel in any determination of consistency with Articles II:2(a) and III:2.

12. In its investigation of Article III:2 consistency as part of its consideration of Article II:2(a), the Panel further erred in not drawing the appropriate inferences from India’s refusal to answer questions relating to its taxation system.[8] Australia considers that answering such questions should have formed a significant part of India’s justification for its measures under Article II:2(a).

13. Australia also notes that the United States has requested in the alternative that, should the Appellate Body find that the Indian charges are internal taxes or otherwise subject to Article III, then it complete the analysis under Article III:2.[9] Australia sees no basis for this claim given the Panel’s findings based on the United States evidence.[10]

14. Finally, Australia does not agree with India that the Panel’s concluding remarks were in breach of Article 3, 11 and 19 of the Dispute Settlement Understanding (DSU). As noted by the European Communities,[11] the Panel’s remarks did not constitute an examination or comment on the consistency of India’s charges if amended and do not impose any obligation or burden on India in contravention of Article 19 of the DSU.

Thank you again for the opportunity to address you here today.


[1] See Chile – Price Band System, Report of the Appellate Body, WT/DS207/AB/R, paragraphs 264-288; and Chile – Price Band System 21.5, paragraphs 149; 164-172; 190-226. See also the Third Participant’s Submission of Australia, paragraph 7.

[2] Third Participant Submission of Japan, paragraph 24.

[3] Third Participant Submission of the European Communities, paragraph 11 and Appellant Submission of the United States, paragraph 69.

[4] Third Participant’s Submission of Australia, paragraph 17.

[5] Panel Report, paragraphs 7.186 and 7.187.

[6] Appellant Submission of the United States, paragraphs 101-102.

[7] First Written Submission by India (Panel Stage), paragraph 14 and 20.

[8] Panel Report, paragraph 7.271 (and see footnotes 310 and 313).

[9] Appellant Submission of the United States, paragraph 184.

[10] Panel Report, paragraph 7.407.

[11] Third Participant Submission of the European Communities, paragraph 12

Back to Disputes Main Page