EU and Colombia Alcohol Import Row Escalates With Appeal For WTO to Step In

The EU’s concerns about discrimination of spirits imported from member states have been going on for quite some time, as they are subject to higher taxes and local charges than those applied to local brands.

 

Consultations were held in March between Colombia and EU representatives, but no solution was reached and despite Colombia’s efforts to bring about reform in the spirit’s regime, now the EU wants the WTO to step in.

 

Market restrictions apply in the departments or local subdivisions of Colombia which means departments impose market-access restrictions that distort the competitive conditions in the market to the detriment of EU spirits, contravening Colombia’s non-discrimination obligation under WTO rules.

 

The EU is the top exporter of spirits to Colombia and is most affected by these measures, followed by Mexico, Costa Rica and the US.

 

In 2014 EU exports of spirits to Colombia were worth €43 million (US$48.7million) which was around 14 percent of the total agricultural exports to Colombia and 77 percent of total Colombian imports of spirits.

 

Whiskies represent the highest share (US$40.8 million), then liqueurs and cordials (US$4.5 million). Colombia produces mostly rums and aguardientes, accounting for 83 percent of spirits consumption in Colombia in 2013, amounting to 10.8 million 9LC compared with 2.3 million cases of imported spirits.

 

The national consumption tax on spirits was split in two brackets in 1995 and has been ‘specific’ since 2002, meaning that the tax is calculated by percentage point of alcohol content per unit of 0.75 liters. An artificial breakup point is established at 35 percent of alcohol 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. There is also a similar situation in the administrative sub-divisions of Colombia where a local charge is levied instead of the national consumption tax.

 

Furthermore, several Colombian departments exercise the so-called fiscal monopoly over the introduction and commercialization of spirits which results in the entry of imported spirits subject to what are known as “introduction contracts’ with the department that contain trade restrictive clauses, impose maximum values and minimum selling price and requiring traders to secure the payment of the amount of a future fiscal debt. On top of this, the departments have discretion to arbitrarily deny access to imported brands.

 

Colombia had committed to ending this discrimination more than one year ago on August 1, 2015, under the bilateral trade agreement with the EU. In addition, the EU has raised the issue with Colombia several times including in bilateral and WTO meetings.

 

What happens next? The EU’s request for a WTO panel will be next discussed in early September. At any stage, Colombia can reform the spirits’ regime in the country and put an end to discriminatory practices without the need for adjudication by a WTO panel.