GD/269
United States - Taxes on Automobiles
Other titles
US Taxes on Automobiles (Source: GATT Analytical Index)
Products at Issue
| Products at issue |
Automobiles
|
| Type of product |
Non-agricultural
|
| Product sub-type |
Vehicles, aircraft, vessels
|
Related disputes
| GATT | |
| WTO |
Key legal aspects
| Legal basis |
|
| Claims raised |
|
| Defences raised |
|
Adjudicators
| Type | Panel |
| Chairperson | Thomas Cottier (Switzerland) |
| Other members | Carlos M. Cozendey (Brazil), Adrian Macey (New Zealand) |
| Type | Panel |
| Legal basis at issue |
|
| Claims at issue |
|
| Defences at issue |
|
| No of Pages (total / legal reasoning) | 119 (and 6 annex) |
|
|
|
|
|
|
Timeline
| Request for consultations | |
| Request for establishment | |
| Establishment | |
| Composition | |
| Report |
Outcome
| Outcome of the proceedings |
Report issued
|
| Additional Info | DS31/R (30/09/1994) United States - Taxes on Automobiles - Report of the Panel: First, with regard to the luxury tax, the Panel noted that Article III could not be interpreted as prohibiting government policy options, based on products, that were not taken "so as to afford protection" to domestic production. The term "so as to" suggested both aim and effect. A measure could be said to have the aim of affording protection if an analysis of the circumstances in which it was adopted, in particular an analysis of the instruments available to the contracting party to achieve the declared domestic policy goal, demonstrated that a change in competitive opportunities in favour of domestic products was a desired outcome and not merely an incidental consequence of the pursuit of a legitimate policy goal. A measure could be said to have the effect of affording protection to domestic production if it accorded greater competitive opportunities to domestic products than to imported products. The effect of a measure in terms of trade flows was not relevant for the purposes of Article III, since a change in the volume or proportion of imports could be due to many factors other than government measures. In the view of the Panel, the policy objective apparent in the legislation, to raise revenue from sales of perceived "luxury" products, was consistent with setting a price threshold, and setting it at a level at which only a small proportion of automobiles sold within the United States market were taxed. The fact that a large proportion of EC imports (but not necessarily a large proportion of imports from other countries) was affected by the measure did not demonstrate that the legislation was aimed at affording protection to domestic automobiles selling for less than $30,000. Turning to the effect of the measure, the Panel did not find that the sales data provided conclusive evidence of a change in the conditions of competition favouring United States automobiles, since, under either set of figures, the greater or lesser percentages could have been due to marketing and production decisions by EC manufacturers, by their United States or other foreign competitors, or by decisions of consumers in the market. No evidence had been advanced that EC or other foreign automobile manufacturers did not in general have the design, production, and marketing capabilities to sell automobiles below the $30,000 threshold, or that they did not in general produce such models for other markets. The Panel concluded that the threshold distinction of $30,000 in the luxury tax was not implemented so as to afford protection to the domestic production of automobiles, that automobiles above and below that threshold value could not, for the purposes of the luxury tax, be considered as like products under Article III:2, first sentence, and that different treatment could therefore be accorded under the luxury tax to automobiles above and below the threshold. Second, with regard to the gas guzzler tax, the Panel found that the application of the threshold distinction did not result in a change in the conditions of competition that afforded protection to the production of automobiles in the United States. In terms of Article III:2, and for the purposes of the gas guzzler tax, foreign automobiles below the 22.5 mpg threshold were not "like" domestic automobiles above the threshold, and different and less favourable treatment under the gas guzzler measure could therefore be accorded to them. Similarly, the Panel found that the regulatory distinctions made in the calculation of the fuel economy of individual models under the gas guzzler law and regulations did not result in a change in the conditions of competition that afforded protection to the production of automobiles in the United States, insofar as, in terms of Article III:2, and for the purpose of the gas guzzler tax, an individual imported automobile whose model type fuel economy was less than 22.5 mpg was not "like" an individual domestic automobile whose model type fuel economy was above 22.5 mpg, even if the fuel economy of the individual domestic automobile was below 22.5 mpg. Finally, the Panel concluded that the regulatory distinctions examined in the gas guzzler regulation were not applied so as to afford protection to domestic production, and thus did not distinguish between like products. Third, with respect to the Corporate Average Fuel Economy (CAFE) regulation, the Panel noted that the treatment of a particular car depended on the domestic or foreign source of the cars, which determined which fleet, domestic or foreign, they entered into, and on the control and ownership relationships of the producer/importer, which determined the size and composition of the fleet within which the cars were averaged. The Panel found that the separate foreign fleet accounting accorded less favourable conditions of competition to cars and car parts of foreign origin than those accorded to like domestic products, and was thus inconsistent with Article III:4. The Panel also found that Article III:4 did not permit treatment of an imported product less favourable than that accorded to a like domestic product, based on factors not directly relating to the product as such. To the extent that treatment under the CAFE measure was based on factors relating to the control or ownership of producers/importers (fleet averaging), it could not in accordance with Article III:4 be applied in a manner that also accorded less favourable treatment to products of foreign origin. It was therefore not necessary to examine whether treatment based on these factors was also applied so as to afford protection to domestic production. The Panel concluded that less favourable treatment, in terms of conditions of competition, accorded to large imported cars due to separate foreign fleet accounting and inconsistent with Article III:4 was not primarily aimed at the conservation of natural resources and therefore could not be justified by Article XX(g). It was therefore not necessary to examine whether separate foreign fleet accounting also met the requirement of being primarily aimed at rendering effective the restrictions imposed on domestic production, and whether it met the requirements of the introductory clause of Article XX. The Panel further considered that, in the absence of separate foreign fleet accounting, it would be possible to include in a revised CAFE regulation an averaging method that would render it consistent with the General Agreement. However, the Panel did not consider that it could or should make a finding on the consistency of a revised regulation. Finally, with respect to Article XX(d), the Panel considered that, even if the issue of the consistency of the penalty payments under the CAFE regulation as such were examined by the Panel, such payments could not be justified under Article XX(d) since, contrary to the requirements of that provision, the underlying measure was itself inconsistent with the General Agreement. |