SITE INDEX  
E N F O R C E M E N T   AND   C O M P L I A N C E
  SEARCH  
   

Click here for the Trade Agreement

U.S.-JAPAN AGREEMENT ON DISTILLED SPIRITS

What is this Agreement and what does it do?

Who benefits from this Agreement?

How can this Agreement help my company?

Can the U.S. Government help me if I have a problem?

How can I get more information?

What is this Agreement and what does it do?

Under this Agreement, Japan confirmed that it was revising its liquor tax law so that imports of distilled spirits from the United States and other countries would no longer be taxed at a discriminatory level compared with Japanese shochu (a traditional distilled spirit similar to vodka). Japan also agreed to eliminate tariffs on all brown spirits (including whisky and brandy) and on vodka, rum, liqueurs, and gin by April 1, 2002. In addition, Japan confirmed that it would neither grant nor maintain subsidies on behalf of shochu producers that impede or displace distilled spirit imports.

The Agreement followed the resolution of a dispute settlement case brought before the World Trade Organization (WTO) by the European Communities, the United States and Canada in 1995. A WTO dispute settlement panel found in July of 1996 that Japan's liquor tax regime discriminated against imported distilled spirits and was therefore inconsistent with Japan's obligations under Article III of the General Agreement on Tariffs and Trade, 1994. The United States was forced to seek binding arbitration when it became apparent that Japan did not intend to bring its tax system into WTO compliance within the "reasonable period" provided under WTO rules. A WTO arbitration award was issued in February, 1997, that supported the position of the United States, and further bilateral consultations between the United States and Japan led to this Agreement.

The Agreement consists of an exchange of letters dated December 15, 1997, between the Japanese Ambassador to the United States and the U.S. Trade Representative. It has no expiration date.

Who benefits from this Agreement?

The Agreement can benefit any U.S. or other foreign producer of whisky, rum, gin, vodka, brandy or liqueurs who wishes to export to Japan.

How can this Agreement help my company?

Japan agreed to revise its liquor excise tax system in three stages: October 1, 1997; May 1, 1998; and October 1, 2000. Taxation rates for all distilled spirits were brought into WTO conformity by May 1998, with the exception of low-grade shochu. By then, the liquor tax for imported whiskey and brandy had been reduced by 58 percent, while the tax on high-grade shochu had been raised by 59 percent. The tax on lower-grade shochu B will be harmonized on October 1, 2000. (In return for this longer transition period for shochu B, Japan agreed to accelerate the reduction of its tariffs on distilled spirts to zero by 2002.)

The effect of these changes has been substantial. In September 1997, for example, the tax on whiskey was between four to six times higher than the tax on high-grade shochu. Now there is only a difference of three percent.

The following table describes the changes that Japan agreed to make:

Revision of Current Liquor Tax Scheme

(Rates in yen per kilolitre per degree of alcohol)

 

30 Sep. 1997

1 Oct. 1997

1 May 1998

1 Oct. 1998

1 Oct. 2000

Whiskies

24, 558

13, 775

10, 225

10, 225

10, 225

Spirits
(e.g. rum, gin, vodka)

9,927

9,924

9,924

9,924

9,924

Liqueurs

8,217

9, 924

9, 924

9, 924

9, 924

Shochu A

6,228

8,076

9,924

9,924

9,924

Shochu B

4,084

6,028

6,028

7,976

9,924

Can the U.S. Government help me if I have a problem?

Yes. If your company is experiencing difficulties exporting distilled spirits to Japan under this Agreement, contact the Office of Trade Agreements Negotiations and Compliance's hotline at the U.S. Department of Commerce. The Center can help you understand your rights under this Agreement, and can alert the relevant U.S. Government officials to make inquiries, if appropriate, with Japanese authorities that could help you resolve your exporting problem.

How can I get more information?

The complete text of the U.S.-Japan Agreement on Distilled Spirits is available from the Office of Trade Agreements Negotiations and Compliance's web site. WTO documents relating to the dispute settlement case on the liquor tax issue can be found on the WTO's web site.

[This link has been deactivated while the WTO reorganizes their site]

If you have questions about this Agreement or how to use it, you can e-mail the Office of Trade Agreements Negotiations and Compliance (TANC) which will forward your message to the Commerce Department's Designated Monitoring Officer for the Agreement. You can also contact the Designated Monitoring Officer at the following address:

Designated Monitoring Officer

U.S.-Japan Distilled Spirits Agreement

Office of Consumer Goods Industries

U.S. Department of Commerce

14th Street & Constitution Avenue, N.W.

Washington, D.C. 20230

Phone: (202) 482 - 3346

Fax: (202) 482 - 0975

The Designated Monitoring Officer can also provide you with useful trade leads and contacts.

You can also contact the Office of the U.S. Trade Representative

information on the U.S.-Japan Distilled Spirits Agreement.


TANC offers these agreements electronically as a public service for general reference. Every effort has been made to ensure that the text presented is complete and accurate. However, copies needed for legal purposes should be obtained from official archives maintained by the appropriate agency.