CASE DIGEST: EUROPEAN COMMUNITIES CUSTOMS CLASSIFICATION OF CERTAIN COMPUTER EQUIPMENT (LAN CASE) FACTS: The United States

s filed a complaint against the European Communities, Ireland, and the United Kingdom for classifying LAN equipment as a telecommunications equipment and not an automatic data processing machine (ADP). ADPs under the Schedule LXXX of the European Communities are imposed a lower tariff rate compared to telecommunications equipment. The Panel reached the conclusion that the meaning of a tariff concession in a members schedule may be determined in the light of the legitimate expectations of an exporting member. It also stated that the US was not required to clarify the scope and definition of the tariff concessions. Therefore, the European Communities acted inconsistently with the requirements of Article II:1 of the GATT of 1994 and recommended that the Dispute Settlement Body request the European Communities to conform with its obligations under GATT of 1994. The European Communities appealed from this. ISSUE: Whether or not a members schedule may be determined in the light of the legitimate expectation of an exporting member DECISION: 1. The appellate body reverses the Panels conclusion that the meaning of a tariff concession in a members schedule may be determined in the light of the legitimate expectation of an exporting member. The concept of legitimate expectations or reasonable expectations was developed under the context of nonviolation complaints, which United States complaint isnt. 2. It further states that tariff negotiations are a process of reciprocal demands and concessions. In the Uruguay round, participants were given an opportunity to clarify the scope and definition of tariff concessions. Based on these facts, the appellate body also reverses the Panels finding that the US was not required to clarify the scope of the ECs tariff concessions on LAN equipment.

CASE: JAPAN TAXES ON ALCOHOLIC BEVERAGES (JAPANESE SHOCHU II) FACTS: The European Communities, Canada, and the United States filed a complaint against Japan for discriminating against spirits exported to Japan under the Japanese liquor tax law. The Japanese liquor tax law imposes a generally higher tax rates for spirits, brandy/whisky, and liqueurs relative to the Japanese product shochu. The complainants argue that spirits and Shochu A and B are like products within the meaning of the first sentence of Article III:2. The United States supports its contention by stating that white spirits and brown spirits have similar physical characteristics and end-uses making them like products. In the alternative, they also argue that spirits, whisky/brandy, and liqueurs are directly competitive and substitutable products. Japan contends on the other hand that there are sufficiently large differences between brandy/whisky and shochu. It also went on to enumerate a list of differences between spirits and both categories of shochu. The EC, in response, stated that these differences enumerated by Japan could be summed up into only two main differences: the alcohol content and packaging. ISSUE: 1. Whether or not spirits and shochu A and B are like products. 2. Whether or not brandy/whisky and liqueurs are directly competitive and substitutable products. DECISION: 1. The panel ruled that vodka and shochu shared most physical characteristics. The only major differences are the filtration and the alcoholic strength. However, alcoholic strength is considered irrelevant because alcoholic beverages are often drunk in diluted form. The same conclusion was reached in a 1987 Panel Report concerning the same products, which was not refuted by Japan. a. The panel in its consideration of the case stated that like products need not be identical in all respects. Nevertheless, previous panels had used different criteria to establish likeness such as the products properties, nature and quality, and its end-uses; consumers tastes and habits and the products classification in tariff nomenclatures. 2. For the rest of the alcoholic products, the panel ruled that they are directly competitive and substitutable products. To support its ruling, the Panel cited the ASI study submitted by the complaints proving that there is a high degree of price elasticity between shochu and the other alcoholic products. 3. Given that the mentioned alcoholic products are either like products or directly competitive and substitutable products, the Panel ruled that Japan violated its obligations under the GATT of 1994 and recommended that the DSB request Japan to conform to their treaty obligations.