Canada — Tax Exemptions and Reductions for Wine and Beer

Consultations

Complaint by the European Communities.

On 29 November 2006, the European Communities requested consultations with Canada regarding Canada's tax exemptions and reductions for wine and beer. The issues which the European Communities would like to raise are:

• Canada's exemption from federal excise duties of wine produced in Canada and composed wholly of agricultural or plant products grown in Canada, in accordance with Canada Revenue Agency Notice EDN 15 of June 2006; and 
• Canada's reduction of excise duty rates on the first 75,000 hl of beer and malt liquor produced and packaged in Canada per year by a licensed brewer, in accordance with Canada Revenue Agency Notice EDBN 9 of July 2006.

The European Communities considers that these measures are inconsistent with Canada's obligations under the SCM Agreement and the GATT 1994 as follows:

• As regards wine, Canada is acting inconsistently with Article III:2 (national treatment) of the GATT 1994; 
• As regards agricultural and plant products (from which wine is made), Canada is acting inconsistently with Articles 3.1(b) (prohibition of local content subsidies) and 3.2 of the SCM Agreement, Article III:2 and III:4 (national treatment) of the GATT 1994; 
• As regards beer and malt liquor, Canada is acting inconsistently with Article III:2 (national treatment) of the GATT 1994.

Mutually agreed solution

On 17 December 2008, the European Communities and Canada informed the DSB of a mutually agreed solution under Article 3.6 of the DSU.  The mutually agreed solution entails the reduction, on a most-favoured nation basis, of applied customs duties on certain products imported in Canada.