IN a recent ruling, the WTO Dispute Settlement Body (DSB) has found that the Excise Regime of Philippines is less favourable to imported spirits than domestic spirits. The Philippine measure, while facially neutral, is nevertheless discriminatory and thus violates the obligations under the first and second sentences of Article III:2 of the GATT 1994, adds the DSB Report.

In the Philippines, all domestic distilled spirits (mostly gins, brandies, rums, vodkas, whiskies and tequila-type spirits) are made from one of the designated raw materials, cane sugar, whereas the vast majority of imported spirits are made from non-designated materials (e.g. cereals or grapes). Consequently, all domestic spirits are subject to the low flat tax, while the vast majority of imported spirits are subject to one of the higher tax rates.

On 29 July 2009, the EU requested consultations with the Philippines concerning its current Excise Tax regime on distilled spirits, which has been in place since 1997. The EU contended that the regime discriminated against imported distilled spirits by taxing them at a substantially higher rate than domestic spirits. The EU found that these measures were inconsistent with the Philippines' obligations under GATT 1994, in particular Article III:2. On 10 August 2009, the United States requested to join the consultations. Subsequently, the Philippines informed the DSB that it had accepted the request of the United States to join the consultations.

On December 10, 2009, the EU requested the establishment of a panel. And the DSB Panel has now ruled against the Philippines.