Case: Japan -Taxes on Alcoholic Beverages Case.

Case: Japan - Taxes on Alcoholic Beverages case.

Facts: Japan implemented a higher tax on imported vodka from US, Canada, and the European Union. Japanese manufactured shochu (alcoholic beverage) was often charge at a lower tax rate which was thought to be unfair to other countries importing their goods to Japan. This action was viewed as a violation of GATT Article III, paragraph 2, which states "imported products should be taxed at the same rate as similar domestic products ("WTO | WTO analytical index: Guide to WTO Law and Practice - General Agreement on Trade in Services", 2014). Japan and the United States wanted to utilize the aim-and-effect test in order to determine if the products are similar. Japan believes shochu is not a similar product to vodka and that the tax rate does not violate Article III.

Procedure: World Trade Organization (WTO), Dispute Settlement Panel

Issue:

1. Can the aim-and-effect test be practical to this circumstance?

2. Is vodka and shochu a similar product?

3. Will a neutral tax and price ratio meet the requirements of Article III?

Holding:

1. NO

2. YES

3. NO

Reasoning: Article III requirement for WTO members require them to have the same taxes on imported products as they do with similar domestic products. According to Article III of the General Agreement on Tariffs and Trade (GATT), states "taxes