Under the provisions of the GATT governing import charges and internal taxes, the Members of the WTO may levy internal taxes on imported products through their customs services. The relationship between the provisions governing import charges and those governing internal taxes was addressed for the first time by a panel and the Appellate Body in India–Additional Import Duties. I do not believe that this relationship was correctly analysed by the Panel. While the commentators describe correctly the rulings of the Panel and the modifications to those rulings by the Appellate Body, they do not provide an explanation of the function and interrelationship of the various provisions on import charges and internal taxes. I would like to complement their analysis by setting out my understanding of the function and interrelationship of these provisions in Section 2 below.
In the economic section of their paper, the commentators make a number of statements regarding the WTO rules governing border tax adjustments that I consider incorrect. In Section 3 below, I present my understanding of those rules and address those inaccuracies.
The relationship between the GATT provisions governing import charges and those governing internal taxes
The basic provisions of the GATT governing customs duties and other charges imposed on the importation of products of other Members are paragraphs 1(b) and 2 of Article II. The basic rules set out in Article II:1(b) read as follows:
The products described in …the Schedule …shall, on their importation …be exempt from ordinary customs duties in excess of those set forth and provided therein. […]