Dispute settlement | Brussels, 13 January 2016
EU requests WTO consultations over Colombia’s discrimination against imported spirits
The EU today requested consultations with the Government of Colombia under the dispute settlement provisions of the World Trade Organization (WTO) on a number of tax and regulatory measures that discriminate against imported spirits.
The EU's concerns about discrimination in the Colombian market are longstanding. In Colombia, EU spirits face higher taxes than local brands through higher national consumption tax and higher local charges. In addition, Colombia’s regional authorities or departmentos impose market-access restrictions for imported spirits.
These measures raise the cost of doing business in Colombia and place EU spirits at a competitive disadvantage on the Colombian market. This is in contravention of Colombia's non-discrimination obligations under WTO rules.
Under the bilateral Trade Agreement with the European Union, in application since 2013, Colombia committed itself to ending the discrimination by 1 August 2015. Today, almost half a year later, the discrimination still persists. The EU has raised the issue with Colombia on numerous occasions, including in bilateral meetings, WTO meetings and OECD membership discussions. The European Union will continue to engage with the Colombian authorities to try to find an amicable solution to the dispute that brings about a level playing field and fair conditions of competition for EU spirits in the Colombian market.
Trade facts and figures
The EU is the number one exporter of spirits to the Colombian market and, as a result, the trading partner most affected by these measures (followed by Mexico, Costa Rica and the United States). In 2014, EU exports of spirits to Colombia – valued at 43 million EUR – represented approximately 14% of total agricultural exports to Colombia and 77% of total Colombian imports of spirits. Within the different spirits exported by the EU to Colombia, whiskies represent the highest shared (36 million EUR) followed by liqueurs and cordials (4 million EUR). Colombia produces mainly rums and aguardientes, which account for 83% of spirits consumption in Colombia in 2013 figures (10.8 million 9LC (9 litre case or a case with 12 bottles of 75cl), in comparison with 2.3 million cases of imported spirits).
The national consumption tax on spirits was split in two tax brackets in 1995 and has been ‘specific’ since 2002 (Law no 788 of 27 December 2002), meaning that the tax is calculated by percentage point of alcohol content per unit of 0.75 litres. An artificial breakup point is established at 35% of alcoholic content, with the result that most imported products fall into the higher taxation bracket, whereas most locally produced spirits fall into the lower taxation bracket. The situation is similar in the departments (departamentos) – administrative sub-divisions of Colombia – where a local charge is levied instead of the national consumption tax.
Moreover, in Colombia a number of departments exercise the so-called fiscal monopoly over the introduction and commercialisation of spirits. As a result, the entry of imported spirits is subject to the conclusion of ‘introduction contracts’ with the department that contain trade restrictive clauses, impose maximum values and minimum selling prices, and requiring traders to secure the payment of the amount of a future fiscal debt, etc. In addition, the departments enjoy great discretion to arbitrarily deny access to imported brands.
Next steps in WTO dispute settlement procedures
The request for consultations formally initiates proceedings under the WTO dispute settlement understanding with a view to finding a solution to the dispute. If consultations do not reach a satisfactory solution within 60 days, the EU may request the WTO set up a Panel to rule on the compatibility of Colombia's measures with WTO rules.
WTO dispute settlement in a nutshell