The United States claimed that the Japanese tax system applicable to distilled spirits has been devised so as to afford protection to production of shochu. For this reason and because “white spirits” and “brown spirits” have similar physical characteristics and end-uses, the United States claimed that “white spirits” and “brown spirits” are “like products” in the sense of the first sentence of Article III:2, and therefore the difference in tax treatment between shochu and vodka, rum, gin, other “white spirits”, whisky/brandy and other “brown spirits” is inconsistent with Article III:2, first sentence. If the Panel were not able to make such a finding, the United States requested, in the alternative, that the Panel find that all “white spirits” are “like products” in terms of Article III:2 first sentence, and that all distilled spirits are “directly competitive and substitutable” in terms of Article III:2, second sentence for the same reasons. The United States concluded that irrespective of the legal analysis the Panel adopts, the Liquor Tax Law should be found to be inconsistent with Article III:2.
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