I.

THAT THE FEE ON SALE IMPOSED BY KONAHA IS VIOLATION OF ITS OBLIGATION UNDER
ARTICLE III: 2
It is humbly submitted before this Hon’ble Dispute Settlement Body that the usage-fee of 2%
(ad-valorem) collected on sale of every EVDs is inconsistent with Konaha’s obligation under
Article III:2. The said measure charges imported product i.e. EVDs adversely than “Like”
domestic product i.e. cigarettes. Thus, the said measure violates obligation set under first
sentence of article III:2 [A]. Further, it is submitted that the said measure treats EVPs which is
directly competitive and substitute product of cigarette with extra charges on consumption. This
affects competiveness condition between the two products and therefore, violates principal given
under second sentence of article III: 2[B].

[A] Usage charge violates Konaha obligation under first sentence.

Any measure adopted by GATT member nations which makes imported product subject to
different tax or charge than ‘like’ domestic product is violation of first sentence of article III:2 1.
Further, it is immaterial to examine whether law is for protection of domestic market or not 2
[A.1]. EVDs are ‘like’ cigarettes for purpose of the said provision [A.2]. And has been charged
differently [A.3] and therefore, kanoha has violated its obligation given under first sentence of
Article III:2.

[A.1] It is immaterial to examine protectionist nature of law

It is submitted before this Hon’ble Dispute Settlement Body that for determining violation of
obligation set under first sentence of Article: III intention is immaterial 3. It was held in the case
of EEC - Measures on Animal Feed Proteins, that sentence one of the article III:2 do not make
any direct reference to Para 1 of the same article. The said provision only asks to examine
whether ‘like’ products has been charged differently or not. This implies that for the said

1
“United States - Taxes on Petroleum and Certain Imported Substances”, adopted 17 June 1987, BISD 34S/136,
158, para. 5.1.9.
2
“Japan - Customs Duties, Taxes and Labelling Practices on Imported Wines and
Alcoholic Beverages”, L/6216, adopted on 10 November 1987, 34S/83, 122-123, para. 5.11.
3
“EEC - Measures on Animal Feed Proteins” L/4599, adopted 14 March 1978, 25S/49, 64-65, paras. 4.6-4.8.
provision it is immaterial to protectionist nature of domestic law4. Thus, whatever may be the
effect or intention behind charging EVPs with 2% consumption charge, is immaterial for
determining konahas responsibility under First sentence of Article III:2.

[A.2] EVDs and Cigarettes are like products for the purpose of the said provision
Likeliness of two products needs to be determined on case to case basis 5. It is possible that two
products may have different raw material or different compositions but are like products for
purpose of Article III:26. To determine likeliness of product emphasis should be given on usage
of two products. As per test decided in Border Tax Agreement 7, End use of products and
consumer behavior are important factors which need to be considered for determine similarity
between the products.

[A.2.1] EVDs and Cigarettes serve same end use.

It was held in the case of Thailand – Cigarettes (Philippines) 8, that even if chemical compositions
of two products are different, if they can fulfill same and similar functions than they are ‘like’
products. The end uses of consuming cigarettes are9 (i) to satisfy an addiction to nicotine and, (ii)
creating a pleasurable experience associated with the taste of the cigarette and the aroma of the
smoke. In the factsheet it is given that EVPs can be used to inhale nicotine 10. It comes in
different flavors and research has shown that it is used by consumers addicted to cigarettes to
fulfill their demand11. Since both EVPs and cigarettes can be used to fulfill demand of nicotine
consumption of consumers they are like product for article III.

[A.2.2] Consumers Taste and Habits:

4
Supra note 2.
5
Japan – Alcoholic Beverages, Supra Note 2.
6
Philippines – Distilled Spirit, Panel Report, Philippines – Distilled Spirits, paras. 7.34-7.37.
7
the Working Party on Border Tax Adjustments, BISD 18S/97, para.
18.
8
Thailand – Cigarettes (Philippines), Panel Report, Thailand - Cigarettes (Philippines), paras. 7.425-7.451., United
States – Measures Affecting the Production and Sale of Clove Cigarettes (US–Clove Cigarettes), WT/DS406/AB/R,
adopted 24 April 2012.
9
Id.
10
Supra note 7.
11
Marina Foltea And Anna Markitanov, The “Likeness” of E-Vapour Products and Cigarettes in the World Trade
Organization, European Journal of Risk Regulation, 8 (2017), pp. 342–36.
Two products are like if consumer shares same opinion regarding taste and habits of the two
products12. It is not necessary that all consumers in a market consider similar opinion for two
goods13. Even if a particular segment of consumer consider that their taste and habit can be
satisfied is sufficient for this taste. In given case EVPs are fastly growing popular and most of its
consumers are habitual cigarettes consumers14. Research conducted by WHO has shown that
EVPs can be used as an alternative for cigarette consumption 15. Further, on world level there is
only 1% of EVPs user who has never smoked cigarettes 16. EVPs have potential to replace 15% of
cigarette market in the world by 2025 17. This shows that consumer have same taste and habit
regarding two products.

[A.3] EVDs were charged differently than Cigarettes

Article III:2 of GATT prohibits both direct as well indirect application of adverse taxes and
charges on imported products. The measure applied by the government of Konhha per se does
not distinguish between imported and domestic products 18. However, it is important to note that
Konaha does not have any technology or industry to manufacture EVDs 19. Further, 90% of
Konaha’s EVDs are imported from Sharinga 20. Thus, 2% Ad Valorem tax which is not been
applied on like domestic products i.e. cigarettes violates Konaha obligation under the said
provision.

[B] Measure adopted violates Konaha obligation under second sentence.

Unlike first sentence, second sentence of Article III: 2 makes direct reference to Paragraph 1 of
the said article21. It was held in the case of United States - Measures Affecting Alcoholic and
Malt Beverage22, that this reference serves an important purpose. By refereeing to paragraph 1

12
United States – Measures Affecting the Production and Sale of Clove Cigarettes (US–Clove Cigarettes),
WT/DS406/AB/R, adopted 24 April 2012.
13
Id.
14
Fact Sheet Para No.2
15
WHO, Framework Convention on Tobacco Control, Report on Electronic Nicotine Delivery Systems,
FCTC/COP/ 6/10 dated 21 July 2014, <http://apps.who.int/gb/fctc/PDF/cop6/FCTC_COP6_10-en.pdf> 7 (accessed
31 March 2017).
16
Id.
17
Fact Sheet Para No.7
18
Fact Sheet Guidelines.
19
Fact Sheet Para No.8
20
Fact Sheet Para No.8
21
United States - Measures Affecting Alcoholic and Malt Beverage, DS23/R, adopted 19 June 1992, 39S/206, 270,
para. 5.2.
22
Id
second sentence enlarges its scope from ‘like products’ to ‘protection of competition in
market’.23 It is submitted that the said measure violates obligation under second sentence of
Article: III: 2 as EVPs and Cigarettes are substitute and complimentary goods [B.1] and the
measurer adopted has protective in nature [B.2].

[B.1] EVPs and Cigarettes are substitute and complimentary goods

While first sentence deals only with like goods, second sentence of article III: 2 deals with
directly competitive or substitutable product. The preparatory committee of GATT has said that
even Apple and Oranges can be considered as a directly compatible or substitutable product for
the purpose of this provision24. Two products are said directly compatible or substitutable when
there exists commercial interchangeability or alternate uses between the two25.

[B.1.1] EVPs and Cigarettes have alternative usage.

As submitted above that both EVPs and cigarettes serve common end usage. Youth largely uses
EVPs as a substitute or as an interchange able product for cigarettes 26. Addicted smokers who
wish to reduce nicotine consumption use EVPs for this purpose 27. Further, certain studies in other
developed countries like New Zeland has suggested that there exists positive Cross Price
Elasticity of Demand (CPED) between EVPs and cigarettes 28. Positive CPED shows that
products have alternate usage.

[B.1.2] EVPs can substitute cigarettes in near future

It was decided in the case of US-Clove Case, that substitutable products also includes those
products which can replace an existing product in a given market in near future. It is given in the
fact sheet that EVPs have potential to replace 15% of cigarettes consumption in developed
markets in near future29. Since, konaha is a developed country and popularity of EVP is
increasing in Konaha it is submitted that EVPs and cigarettes are substitutable products.

23
Id
24
the Geneva session of the Preparatory Committee, EPCT/A/PV/9, p. 7.
25
United States – Transitional Safeguard Measures on Combed Cotton Yarn from Pakistan, WT/DS/192/AB/R,
adopted on 8 October 2001, (US–Cotton Yarn) para. 96.
26
Fact Sheet guidelines
27
Fact Sheet Para No.7
28
See, the FCTC Report prepared for the COP 7 meeting, Doc FCTC/COP/7/11 August 2016.
29
US–Clove Cigarettes, Supra note 12. ppellate Body Report, Korea – Taxes on Alcoholic Beverages,
WT/DS75/AB/R, WT/DS84/AB/R (Feb. 17, 1999)
 [B.2] the measure adopted has protective in nature
In the given case the measure adopted by the government of Konaha are protective in nature as it
unduly affects ‘fair competition’ between EVDs and cigarettes. The marker share of cigarettes is
more than that of EVPs30.Then also government has imposed 2% use charge only upon
consumption of EVPs. Application of such measures on EVPs which are new product and not
upon traditional cigarettes will affect compatibility in the markets.

[B.2.1] Tax charged upon EVDs shows measure is protectionist.

The second sentence of article III:2 makes reference to principle laid down under Paragraph 1 of
the same article. The principle prohibits taxation protecting domestic goods from competing with
imported goods31. It was decided in the case of Japan-Alcoholic Beverages 32that to determine
whether a tax has protective nature or not should be based tax charged and not on basis of reason
cited by the other party33. Therefore, it is submitted that the health reasons cited by the
government of the Konaha are immaterial for considering weather tax affect competition in
market or not.

The effect of a tax measure on sales and consumption of products depend on multiple factors 34.
In the given case as the two products are ‘like in nature’ and there are hardly any EVPs
consumers who does not use cigarettes 35. This 2% increase will affect compatibility of EVPs
with cigarettes many folds. Further, EVPs are generally expensive than cigarettes and are new
products as compared to traditional cigarettes.36This shows that even 2% increase in cost price of
product would be sufficient to give protective effect prohibited by Article III:2.

30
Fact Sheet Para No.8
31
“United States - Taxes on Petroleum and Certain Imported Substances”, adopted 17 June 1987, BISD 34S/136,
158, para. 5.1.9.
32
Japan-Alcoholic Beverages, Supra note 2.
33
Id
34
Gregory Mankew, Principle of Economics, (6th Ed., Cengage).
35
Fact Sheet Para No.7
36
Fact Sheet Para No.4
 II. THAT THE HEIGHT RESTRICTION IMPOSED BY KONAHA IS IN VIOLATION OF ITS
OBLIGATION UNDER ARTICLE III: 4

It is submitted before this Hon’ble Dispute Settlement Body that the measure of compulsorily
placing all EVDs 5 ft above the ground level violates Konaha obligation under Article III: 4 of
GATT. The French text of the provision says that “ne seront pas soumis à un traitement moins
favorable.37” This means that once custom is cleared there should not be any discrimination on
imported product as against like domestic product. In the present case Konaha has breached its
obligation under Article III: 4 as EVDs and Cigarette are like products [A] and there is De Jure
discrimination based on place of origin against EVDs [B]. Assuming but not accepting that there
is no De Jure discrimination, still there is De Facto discrimination against EVDs [C] as it is
being treated less favorably in Konaha.

[A] EVDs and Cigarette are like products

The scope of the term ‘like product’ as used in the Article III: 4 of GATT is wider than the scope
of the same term as used in first sentence of Article III: 2 38 . Article III: 4 deals with favorable
treatment and therefore covers even those products which are not covered under the later
provision39. It is held in the case of EC – Asbestos 40, that scope of Article 3:4 can be considered
equivalent to scope term ‘like product’ for combining first and second sentence of the Article III:
241.

In the first issue it has been established that EVDs and cigarettes are ‘like product’ for both first
and second sentence of Article III:2. Since ‘likeliness’ of two products has been proved with in
narrower concept, it is submitted that by same arguments both the products are like products for
the issue in hand.

37
Italian Discrimination against Imported Agricultural Machinery, L/833, adopted on 23 October 1958, 7S/60, 63-
64, para. 11.
38
Id
39
Id
40
European Communities – Measures Affecting Asbestos and AsbestosContaining Products (EC‒Asbestos),
WT/DS135/AB/R, adopted 5 April 2001, para. 93
41
Id.
 [B] There is De Jure discrimination based on place of origin
The Article III:4 (The Article) ask member nations not to discriminate or treat imported goods
lees favorably than like domestic goods42. It is submitted that any measure adopted by a member
nation against a like product based on its source of origin 43 violates the obligation set under this
Article.

In the present case it is given that the policy measure of compulsorily placing all products above
5 feets is adopted only against EVDs and not against cigarettes 44. It is important to note that
Konaha does not have technology to build EVDs and almost 90% of EVDs imported in Konaha
are from Sharinga45. Thus, this is a case of unfavorable regulation being applied only on those
products which have its origin outside the country. Therefore, it is submitted that there is De Jure
discrimination against EVDs.

[B.1] Effect becomes immaterial in De jure Discrimination

It is submitted that in case of De Jure discrimination there is a strong case of unfavorable
treatment against imported products46. It implies that in such cases ‘the harm cause’ or ‘purpose
behind’ the policy can be over looked till an extent. Reason being discrimination based on origin
in itself symbolize violation of the Article. Therefore, in instant case when the policy measures
have been implemented only against imported goods (EVDs) and not against like domestic
product (Cigarettes) violates Kanoha’s obligation under the Article.

[C] THERE IS DE FACTO DISCRIMINATION AGAINST EVDS

Even if like products are not explicitly made subject to different policies because of the source of
origin, still there exist a case of De Facto discrimination 47. When a policy measure gives
treatment less favorable48 to an imported product than a like domestic product, it can be said as
violation of the Article. It submitted that in instant case Konaha has violated its obligation under

42
General Agreement on Tariffs and Trade 1994, April 15, 1994, Marrakesh Agreement Establishing the World
Trade Organization, Annex 1A, 1867 U.N.T.S. 187, Article III:4.
43
Korea – Measures Affecting Imports of Fresh, Chilled and Frozen Beef, WT/ DS161/R, WT/DS169/R, adopted 10
January 2001
44
Factsheet Para no.8
45
Factsheet Para no.8
46
Supra note 45.
47
Thailand–Cigarettes, Supra note 12.
48
European Communities – Measures Prohibiting the Importation and Marketing of Seal Products (EC–Seal
Products), WT/DS400/AB/R, adopted on 18 June 2014
the Article as Konaha policy measure has affected less favorable treatment to EVDs [C.1] and
this measure has resultant in adverse impact on competitive opportunities of EVDs [C.2].

[C.1] Konaha policy measure has affected less favorable treatment to EVDs
The aim of the Article is to protect effective equality of competitive49 conditions between these
like products in respect of the application of laws, regulations, and requirements. It is submitted
that any measure which can affect ‘fair field50’ of play for like imported product will be
considered invalid under the Article.

It was decided in the case of United States - Measures Affecting Alcoholic and Malt Beverage 51,
that less favorable treatment can also be made by placing restriction on sales of a particular
product. In the present case the guideline issued by the Konaha makes it compulsory that to offer
EVDs, which are new products, for sale it is mandatory to keep 5 feet height restrictions 52. This
measure has potential to affect sale of EVDs and affect can affect competitiveness in market.

[C.2]This measure has resultant in adverse impact on competitive opportunities of EVDs

To prove that a measure has adverse impact on potential market competition it is necessary to
show that there is genuine link between distorted market situation and measure adopted 53. It is
submitted that the measure of imposing 5 feet height restriction can affect market competition
because:

[C.2.1] The measure will affect marketing strategy

In the given case when government made it compulsory to place EVDs 5 feet of the ground level
this measure will affect ‘offering for sale’ of EVDs. It is submitted that marketing strategy of
placing goods at counter or at certain level affects sales of that commodity 54. Mostly in cases of
tobacco products when a particular product is placed just before the eyes of the consumer it has
better chances of being selected by an addictive consumer55.

49
Id.
50
Id
51
United States - Measures Affecting Alcoholic and Malt Beverage, DS23/R, adopted 19 June 1992, 39S/206, 270
52
Id
53
Thailand Cigarettes case, supra note 12
54
Tobacco Production Display Policy, Center For Public Health and Tobacco Policy,
file:///C:/Users/xyz/Desktop/Win/nycenter-syn-tobproductdisplaybans-2013.pdf
(Last visited, 27/09/2019).
55
Id
Studies in Canada have shown that by changing latitude of tobacco products 67% of demand for
such products can be manipulated 56. In such situation when a new product that is EVDs which is
already in competition with another product i.e. cigarettes adopting such measure will unduly
affect.

[C.2.2] EVPs will find difficult to get new consumer:

It is submitted that the position of the goods in shop is a well accepted measure of advertisement.
It is important to note that EVDs are yet not become fully known to the world and is ‘recently
getting popularity57’. In this situation if it is competing against traditional cigarette it need more
chances for advertisement.

It is submitted that by placing EVPs at above 5 feet that in shelve restrict display of the product.
By restricting display the government Konaha is affecting opportunity of offering EVDs for sale.
Therefore, it is submitted that the said measure is inconsistent with

III. THAT THE PROHIBITION IN CONSUMPTION OF EVDS IMPOSED BY KONAHA IS IN

VIOLATION OF ITS OBLIGATION UNDER ARTICLE III: 4

56
Id
57
Factsheet Para no.4
It is submitted before this Hon’ble Dispute Settlement Body that measure of prohibiting smoking
EVDs at public places in the territory of Konaha violates its obligation under the GATT. The
measure adopted by Konaha is inconsistent with the Article III: 4 of the GATT and it can’t claim
exception for inconsistencies under Article XX. The measure adopted is inconsistent with
GATT as Firstly, It gives unfavorable treatment to EVDs as compare to Cigarettes[A], Second ,
It does not fits under general exception for protection of health and environment[B], Third, The
said measure is not necessary [C]

[A] It gives unfavorable treatment to EVDs as compare to Cigarettes

It is submitted that Article III: 4 of the GATT restricts measures giving ‘less favorable measures’
to like imported products as compared domestic products. It is already proved in previous issues
that EVDs and cigarettes are like products. The measure of prohibiting smoking of EDVs in
public affects EDVs less favorably than cigarettes as it have adverse impact on competitive
opportunities58 of EVDs.

[A.1.1] Prohibition in smoking EDVs in public space will affect demand of EDVs.

It is submitted that prohibiting smoking EDVs in public amounts to restriction in ‘use of a

product59’. The Article III: 4 say that laws affecting use of like products can be considered as
unfavorable treatment. It given in that the measure is applicable only upon EVDs and not on
cigarettes60. Therefore, it is submitted that this will affect demand of EDVs in market.

[A.1.2] The Penalty imposed on smoking EDVs in public can affect market competiveness
for EDVs.

It is held in the report of Canada - Import, Distribution and Sale of Alcoholic Drinks by
Canadian Provincial Marketing Agencies 61, that higher penalties on a product as compared to its
similar products can be considered as less favorable measures. It is submitted that in the present
case penalty of 50 day social work has been imposed on consuming EVDs in public 62. This will

58
Thailand Cigarettes Case, Supra note 12.
59
Article III: 4, The GATT Supra note 44.
60
Factsheet Annexure.
61
Canada - Import, Distribution and Sale of Alcoholic Drinks by Canadian Provincial Marketing Agencies, DS23/R,
adopted 19 June 1992, 39S/206, 290, para. 5.59.
62
Fact Sheet Guidelines
create a sense of restriction among the consumers. Therefore, it is submitted that this will affect
trade competition in the market.

[B]. the Measure fits under general exception for protection of health and environment
The general exception given under Article XX of the GATT set provides for conditions under
which a measure contrary to obligations under the GATT can be adopted 63. However, the said
Article can’t be used to justify restrictive trade practices adopted by member nations 64 . The
Article XX (b) provides an exception for where said measures are cases necessary to protect
human, animal or plant life or health. However, in the present case Konaha has adopted such
measures when there exits scientific uncertainty and that to only against EVDs and not against
Cigarettes65.

It was held by the Appellate Body in report of US – Gasoline Case 66, that in order to avail benefit
of exception under Article XX (b) a measure need to satisfy two tier test that is “first, provisional
justification by reason of characterization of the measure under XX (b); second, further appraisal
of the same measure under the introductory clauses of Article XX”. It is submitted that second
criteria is not met in instant case as:

[B.1] Policy is inconsistent with introductory clauses of Article XX.

It is submitted that the adopted policy is not in consonance with introductory clause of Article
XX. The introductory clause prohibits arbitrary or unjustifiable discrimination and disguised
trade practices67. However, in instant case there is arbitrary discrimination made between
cigrattes and EVDs.

It is submitted that both cigarettes and EVDs can be used to consume tobacco and both the
products were available in Konaha. Certain reports and findings claims that the harmful effect of
consuming EVDs is less than harmful effect of consuming cigarettes 68. Further, WTO in its
report has suggested that under regulations EVDs can be used to help in reducing consumption
of cigarettes69.
63
Article XX, the GATT.
64
US – Gasoline, WT/DS2/10/Add.7
65
Id
66
Id
67
Article XX(b), The GATT, supra note 44.
68
Fact Sheet Para no. 4.
69
Supra note 15.
The government of Konaha has not considered any of the fact and put restriction on consumption
of EVDs. It is submitted that in Konaha cigarettes are consumed at greater rate than EVDs still
the government took such an arbitrary and disguised trade action. Therefore, it is submitted that
the defense under Article XX (b) can’t be claimed.

[C]The said measure is not necessary.

To avail the relief under the said exception it is necessary to prove that the measure adopted are
‘necessary70’. A measure is said to be necessary if "weighing and balancing" a number of
distinct factors relating both to the measure sought to be justified as "necessary" and to possible
alternative measures that may be reasonably available to the responding Member to achieve its
desired objective71. In the given situation when harmful impact of product is uncertain and it can
be nicotine or non nicotine in such situation putting ban on EVDs is unnecessary.

It is submitted that the measures were necessary as it passes weighing and balancing Test and as
there is no other less serious alternative measures.

[c.1]Weighing and balancing Test

A measure adopted is said to be necessary when after a careful comparison between objective it
seeks to achieve and measure's trade-restrictiveness72. It is submitted the measure adopted is
prohibiting smoking EVDs at public place is trade restrictive aspect of the measure. This
measure has been adopted only against EVDs and not against conventional cigarettes 73. Further,
EVDs can be used without tobacco. What distinguish two EVDs is nicotine solution and not
physical body74 . Thus, to control smoking habits restriction should have been put on cigarettes
and tobacco solution. But government has put restrictions on both types of EDVs.

There are certain reports which claim that EVDs can be used to help in reducing consumption of
tobacco75. Such reports suggest that harmful effect of consuming EVDs are less than of
traditional cigarettes76. Further, Sharinga is a developing nation and measures adopted by
Konaha will unduly affect its external trade.
70
China – Publications and Audiovisual Products, WT/DS363/19 |
71
Id
72
Fact Sheet Annexure A
73
Supra Note 11.
74
Supra Note 15.
75
Id
76
Id
Thus, there are many serious and important considerations which government of Konaha has not
considered before putting restrictions on consumption of EVDs. Therefore, it is submitted that
the measure adopted fails in weight taste.

[c.2]Alternative measures
A measure adopted is said to be necessary when there is no alternative measure which it could
reasonably be expected to employ and which is not inconsistent with other GATT provisions is
available to it.77It is submitted that the measure adopted by the state of Konaha is not reasonable
and there exist better alternatives than it. It is submitted that mostly to restrict consumption of a
product it is generally either given a warning on it package or there are fine on it.

However, the government of Konaha put 50 day community service as a punishment for
consuming EVDs in public and therefore it is submitted that the measure adopted is restrictive
and unnecessary.

77
Thailand - Restrictions on Importation of and Internal Taxes on Cigarettes, DS10/R, adopted on 7 November
1990, 37S/200