VIET NAM NATIONAL UNIVERSITY IN HCMC

THE UNIVERSITY OF ECONOMICS AND LAW

INTERNATIONAL TRADE LAW

ASSESSMENT TASK 2

Major: Business Law

Class: K20501C
Group Members: Group 22

Name Student ID Email

1. Nguyễn Ngọc Hân K205010707 hannn20501c@st.uel.edu.vn

2. Nguyễn Lê Tuyết Oanh K205010715 oanhnlt20501c@st.uel.edu.vn

3. Nguyễn Anh Thư K205010719 thuna20501c@st.uel.edu.vn

4. Elouan Raguet IE20230008 elouanrie23@st.uel.edu.vn

Ho Chi Minh City, 18 April 2023

 ISSUES

(1) Does Moolan violate Article III.2 of GATT 1994 by imposing a tax rate of 8% on
Ououa wine while it is 32% on wine and grape sparkling wine?
(2) Does Moolan violate Article III.4 1994 by dividing the area for goods that can be
purchased with alcoholic beverages?
(3) Does Moolan violate Article III.4 of GATT 1994 by not applying the ban on the
sale of alcohol in general food stores and supermarkets, except Ououa wine?

RULE

Articles III.2 of GATT 1994:

“The products of the territory of any contracting party imported into the territory of
any other contracting party shall not be subject, directly or indirectly, to internal taxes or
other internal charges of any kind in excess of those applied, directly or indirectly, to like
domestic products. Moreover, no contracting party shall otherwise apply internal taxes or
other internal charges to imported or domestic products in a manner contrary to the
principles set forth in paragraph 1.”
Articles III.4 of GATT 1994:
“The products of the territory of any contracting party imported into the territory of
any other contracting party shall be accorded treatment no less favourable than that
accorded to like products of national origin in respect of all laws, regulations and
requirements affecting their internal sale, offering for sale, purchase, transportation,
distribution or use. The provisions of this paragraph shall not prevent the application of
differential internal transportation charges which are based exclusively on the economic
operation of the means of transport and not on the nationality of the product.”

APPLICATION

(1) Issue 1:
“Scope of application of Article III.2 of GATT 1994”
A third (tax) measure is introduced as a form of domestic tax or internal charge on
luxury food items, covered by the first sentence of Article III.2 of GATT 1994. The VAT
rate on Ououa wine is 8%, which is a domestic product, and VAT rate on wine and
sparkling wine made of grapes is 32%, which are luxury imported products. It indicates
that the government is treating these two categories of products differently for tax
purposes and can be seen as a form of internal taxation or charge on luxury food items,
which are subject to a higher VAT rate than basic food items.
Section 1: ‘Like product”
The term “like product” is not specifically defined or defined in Article I:1 of
GATT 1994. However, its definition appeared in the Appellate Body report of Japan -
Alcoholic Beverages II (1996)1, specifies four factors to determine the “likeness” of a
product:
*The product's physical characteristics:
Ououa wine is made from Ououa fruit, similar to the red Dragon Green Fruit of
Vietnam. Meanwhile, Sauvignon wine, usually made from apples or grapes.
*The Product's end-uses: Drinks in the meal.2
*Consumers' tastes and habits:
Based on price, if consumers don’t find a suitable Ououa wine, they will use
Sauvignons instead. However, Sauvignons wines with usage criteria at high-end clubs and
lounges servicing the top quartile of the market.
Ououa has long been an inseparable part of Moola's millennial history, as Moolan
people in key restaurants and nightclubs can easily buy Sauvignons because it's the drink.
the most luxurious, or can be substituted with the base Ououa. In contrast, in popular
shops, if people can't find Ououa-wine, they can't buy Sauvignons wine. Because the
average price for Sauvignons is five times higher than the average price for Ououa wines.
The people of Newland use Ououa wine for meals as a part of their culture. If there
is no Moola, it is difficult for them to choose another product.
3
*The Products' tariff classification
Article III.2 of GATT 1994 stipulates: “Neither Contracting Party shall impose any
other kind of domestic tax or revenue…”. Meanwhile, “Ououa wines is taxed at 8%,
while S wine is classified as a luxury item with a tax rate of 32%. Molan violated when
taxing Sauvignons wines (imported goods) was 4 times higher than Ououa wine
(domestic goods).
Thus, through the analysed criteria, it can be confirmed that Ououa and
Sauvignons wines are not “like product” within the scope of Article III.2, because, when
1
Appellate Body, Japan - Alcoholic Beverages II (1996), para.114
2
Prove “like product” - The Product's end-uses
3
Prove “like product” - Consumers' tastes and habits
considered under this article, it requires that “like product” be understood in a narrow
sense.
Section 2: “Directly competitive or substitutable product”
From the large difference in tax rates with Ououa wines (Sauvignons wines have a
4 times higher tax rate than Ououa wines), while it is with the end use and consumer and
market tastes. Therefore, this can be considered as a directly competitive product.
Thus, Moolan considered levying a tax that was considered to be unequal on a
domestic product. And it is large enough to be considered as protecting the domestic
industry, specifically for Ououa wines.
This will lead to a change in shopping attitudes, consumers will tend to choose a
wine that suits their pocket better instead of a wine that is too expensive. It is therefore
covered by Article III.2 of GATT 1994.
(2) Issue 2
“Like product”
“Like products” in Article III.4 in a broader sense than those in Article III.2.
However, “Like product” does not have a broader meaning than “directly competitive or
substitutable product”. “Directly competitive or substitutable products” in the broadest
sense and “like product” in Article III.2 in the narrowest sense. With comparison criteria
mentioned above, it can be determined that Ououa wine and Sauvignons are a “like
product” in the terms of Article III.4, which means that they are “directly competitive or
substitutable products” within the scope of Article III.2. Therefore, proving “Like
products” in III.4 requires only 2 factors discussed above:
(i) End-use;4
(ii) Consumer taste and habits5.
Leading to “less favourable treatment”
Pursuant to the provisions of Moola's draft law, the country would separate shops
selling alcoholic beverages from other shops. Maintaining this alcohol sales allocation
may limit the market access of this wine. There is a distinction in sales area between
premium and casual wines, specifically, consumers can purchase both Ououa wines and
imported wine in bottle shops of upscale neighbourhoods 6. On contrast, shops in normal
neighbourhoods will have a large amount of Ououa wine with a wide selection and
4
Issue 1, para 4, footnote no.2
5
Issue 1, para 8, 9, footnote no. 3
6
Line 2, para 2 of IRAC question Assessment task 2
possibly just one or two types of imported Sauvignons 7. Since it is not sold in all areas
and stores equally, this creates discrimination against imported alcohol products.
This changed the way Sauvignons products are distributed, transported and
displayed, which are sold in large supermarkets and are subject to special government
regulation. Furthermore, this separation can change consumer tastes, specifically where to
buy these products. Instead of consumers being able to buy alcohol at supermarkets and
normal shops, the draft regulations stipulate that these alcoholic beverages can only be
purchased at bottle shops. Apparently, there is a restriction on Sauvignons wine while
Ououa wines can be purchased in any shops, supermarkets.
In case this country keeps its regulations, they will be detrimental to imported
alcohol products, and at the same time promote opportunities for domestic goods, this is a
way to protect the domestic industry. Therefore, the new regulations introduced in
Moola's draft law have created less favourable treatment for imported wine than for
domestic wine.
The tax rate that applied to two products is very different, the Newland
government has imposed an extremely high tax rate Savignor has a double tax rate 4 times
Moola8. While consumer tastes and characteristics of these two wines can be two direct
competition product categories. So that Newland considered levying a tax that was
considered non-relative to a domestic product. Therefore, the application of these
provisions is inconsistent with Articles III.2 and III.4.
(3) Issue 3
Meaning of “Like product”
According to what was specified just before, in particular on the notion of “similar
product” in the terms of Article III.4, Ououa Liquor and Sauvignon can be considered as
“commercially directly competing products”.
After the decision of the Moolan trade minister, introduced by the “Comprehensive
Law on Food & Beverage” (CLFB), the Ououa wine is categorised as a cultural product
and can therefore be sold in “normal” supermarkets. Whereas the CLFB prohibits the sale
of any other type of alcohol outside “Bottle Shops”.
Nevertheless, under Article III.4, laws should not impede commercial competition
between domestic and international goods. When Moolan banned the sale of Sauvignon

7
Ibid, line 3.
8
See Issue 1, para 8
(and other types of alcohol) in regular supermarkets, but kept Ououa in them, the country
created unfair competition by a less favourable treatment.
The separation of selling two types of products, Ououa wine and Sauvignons wine,
will change the way Newland consumers go to buy. If before, consumers could buy both
types of products at the same supermarket, but now, people in supermarkets or shops can
only buy Ououa wine, which is considered a place where many consumers gather. Most
used, this creates an unfairness with Sauvignons wines. Restricting consumer access, has
created inequality for Sauvignons wines, while increasing accessibility for Ououa wines,
in other words Ououa wines are being enhanced. the location of goods in the country.
This is also a way to protect domestic products compared to imported goods.
Therefore, the unbanning of the Ououa wine from the normal stores and therefore
by extension the proposals of the CLFB is not compatible with article III.4; Even if this
new regulation is made in an effort to consume domestic products.

CONCLUSION

The following conclusions can be obtained from the above analysis:

(1) Moolan violates Article III.2 of GATT 1994 by imposing a tax rate of 8% on
Ououa wine while it is 32% on wine and grape sparkling wine. It would
correspond to article 3 of the CLFB act.
(2) Moolan violates Article III.4 by dividing the upscale and normal sales areas for
wines, leading to “less favourable treatment”.
(3) Moolan violates Article III.4 of the GATT 1994 by not applying the alcohol sales
ban to Ououa liquor.
 REFERENCE
1. General Agreement on Tariffs and Trade (GATT) 1994
2. Report of the Appellate Body, Japan - Alcoholic Alcoholic Beverages II,
WT/DS8/AB/R, WT/DS10/AB/R, WT/DS11/AB/R, adopted 1 November 1996
3. World Trade Organizations, ‘WTO Dispute Settlement: One-Page Case
Summaries’
<https://www.wto.org/english/tratop_e/dispu_e/cases_e/1pagesum_e/ds8sum_e.pd
f > accessed 15 April 2023
4. Korea - Alcoholic Beverages (1999), para. 118. In a footnote, the Appellate Body
referred to the Appellate Body Report, Japan - Alcoholic Beverages II (1996), and
Appellate Body Report, Canada - Periodicals (1997)