This is an appeal by Korea from certain issues of law and legal interpretation developed in the Panel Report, That Panel was established by the Korea Taxes on Alcoholic Beverages. – DisputeSettlement Body (the "DSB") to examine the consistency of two Korean tax laws: the Korean LiquorTax Law of 1949 and the Korean Education Tax Law of 1982, both as amended (the "measures"),with Article III:2 of the GATT 1994. The Liquor Tax Law imposed an tax on all distilledspirits. The rate of that tax depends on which of the ad valorem eleven fiscal categories a particular alcoholicbeverage falls within. The Education Tax Law imposed a surtax on the sale of most distilled spirits,the rate of the surtax being a percentage of the liquor tax rate applied to the spirit in question. The Panel considered claims made by the European Communities and the United States that the contested measures were inconsistent with Article III:2 of the GATT 1994 because they accordedpreferential tax treatment to soju, a traditional Korean alcoholic beverage, as compared with certainimported "western-style" alcoholic beverages. The Panel Report was circulated to the Members of theWorld Trade Organization (the "WTO") on 17 September 1998. The Panel reached the conclusion that soju (diluted and distilled), whiskies, brandies, cognac, rum, gin, tequila, liqueurs and admixturesare directly competitive or substitutable products. The Panel also concluded that Korea has taxedthe imported products in a dissimilar manner and the tax differential is more than andthat the dissimilar taxation is de minimis applied in a manner so as to afford protection to domestic production. The Panel recommended that the Dispute Settlement Body request Korea to bring the Liquor Tax Law and the Education Tax Law into conformity with its obligations under the General Agreement on Tariffs and Trade 1994. Korea raised the following issues against the report of the Panel before the Appellate Body:
This is an appeal by Korea from certain issues of law and legal interpretation developed in the Panel Report, Korea – Taxes on Alcoholic Beverages. That Panel was established by the DisputeSettlement Body (the "DSB") to examine the consistency of two Korean tax laws: the Korean LiquorTax Law of 1949 and the Korean Education Tax Law of 1982, both as amended (the "measures"),with Article III:2 of the GATT 1994. The Liquor Tax Law imposed an ad valorem tax on all distilledspirits. The rate of that tax depends on which of the eleven fiscal categories a particular alcoholicbeverage falls within. The Education Tax Law imposed a surtax on the sale of most distilled spirits,the rate of the surtax being a percentage of the liquor tax rate applied to the spirit in question. The Panel considered claims made by the European Communities and the United States that the contested measures were inconsistent with Article III:2 of the GATT 1994 because they accordedpreferential tax treatment to soju, a traditional Korean alcoholic beverage, as compared with certainimported "western-style" alcoholic beverages. The Panel Report was circulated to the Members of theWorld Trade Organization (the "WTO") on 17 September 1998. The Panel reached the conclusion that soju (diluted and distilled), whiskies, brandies, cognac, rum, gin, tequila, liqueurs and admixturesare directly competitive or substitutable products. The Panel also concluded that Korea has taxedthe imported products in a dissimilar manner and the tax differential is more than de minimis andthat the dissimilar taxation is applied in a manner so as to afford protection to domestic production. The Panel recommended that the Dispute Settlement Body request Korea to bring the Liquor Tax Law and the Education Tax Law into conformity with its obligations under the General Agreement on Tariffs and Trade 1994. Korea raised the following issues against the report of the Panel before the Appellate Body: