WTO Panel Decides India’s Measures Concerning Tariff Increases on ICT Products Are Inconsistent with the WTO Agreement

1. Outline

Since 2014, India has increased the tariff rates by 10% to 20% on various ICT products, such as mobile phones, base stations and telecommunication equipment for which India promised to provide duty-free treatment under the WTO Agreement (the tariff rates vary depending on the items).

On May 10, 2019, Japan requested consultations with India under the WTO Agreement regarding the measures, and held a consultation with India on May 23, 2023. However, as the bilateral consultation failed to settle the matter, a panel was established on July 29, 2020.

Oral hearings were held in October 2021 and from March to April 2022. Japan claimed that India’s measures concerning tariff increases on ICT products were inconsistent with the General Agreement on Tariffs and Trade (GATT).

The panel report circulated by the WTO thoroughly upheld Japan’s claims and recommended that India bring its measures into conformity with the WTO Agreement.

In addition, panels were also established for the EU and Taiwan respectively regarding the same measures of tariff increases by India.

2. Details of the decision

The panel report thoroughly upheld Japan’s claims and recommended that India bring into conformity with the WTO Agreement as follows:

• India imposes tariffs on the ICT products concerned even though India promised to unconditionally provide duty-free treatment for those products, which is inconsistent with Article II:1(a) (obligation to accord the other members treatment no less favorable than that provided for in the schedule) and (b) (obligation to exempt ordinary customs duties in excess of those provided in the schedule) of the GATT

The rebuttals by India are rejected as follows:

1. The Information Technology Agreement (ITA)* is not a covered agreement of the WTO, and does not constitute a legal basis, which limits the scope of the tariff commitments provided in India’s schedule.
   * The Ministerial Declaration on Trade in Information Technology Products, which was concluded at the Singapore Ministerial Conference in December 1996.
2. India does not satisfy the requirements of an error as stipulated in Article 48 of the Vienna Convention on the Law of Treaties.
3. India’s claim that some members, including Japan, inappropriately objected to India’s request in 2018 to rectify technical errors regarding the tariff rates of the items concerned in India’s schedule is not within the panel’s terms of reference.
4. The duty-free treatment under the Japan-India Comprehensive Economic Partnership Agreement (CEPA) is conditioned upon meeting the preferential rules of origin under the CEPA, and does not grant unconditional duty-free treatment to all Japanese products concerned.

3. Future schedule

The parties concerned may appeal to the Appellate Body within 60 days from the circulation of the panel report. If no appeal is filed, the panel’s decision will become the WTO’s final decision.

Japan will proceed with future procedures to seek an appropriate solution to this case in accordance with the WTO rules. Japan expects India to agree to adopt the panel report and swiftly correct the measures in accordance with the findings and recommendations in the report.

4. References

(1) Scope of items and the tariff rates subject to Japan’s panel request

Scope of items (India’s HS code (at the time of panel establishment))	Tariff rate
[ⅰ] Feature phones (HS85171219)	Raised from 0% to 20%
[ⅱ] Smartphones (HS85171211)	Raised from 0% to 20%
[ⅲ] Base stations for cellular mobile phones (HS85176100)	Raised from 0% to 20%
[ⅳ] Digital microwave communication equipment (HS85176290)	Raised from 0% to 20%
[ⅴ] Printed-circuit board assemblies (HS85177010)	Raised from 0% to 10%
[ⅵ] LCD modules for smartphones, etc. (HS85177090)	Raised from 0% to 15%

Note: India commits 0% tariff for all items above as the WTO bound rate.

(2) Panels under the WTO Agreement

If consultations between the governments fail to settle the dispute, following the request of the WTO member, a panel (first instance), which is a quasi-judicial third-party organization, examines the measures in question and gives rulings regarding consistency with the WTO Agreement. If any inconsistencies with the WTO Agreement are confirmed, the panel recommends correction of the measures. Any party which is not satisfied with the panel rulings may appeal to the Appellate Body (second instance).

(3) Suspended functions of the WTO Appellate Body

The WTO Appellate Body is a standing body established under the Dispute Settlement Body which “shall hear appeals from panel cases” and “be composed of seven persons, three of whom shall serve on any one case” (Article 17.1 of the Understanding on Rules and Procedures Governing the Settlement of Disputes). However, since June 2017, no new members have been selected in place of members whose terms came to an end, and since December 2019 this situation has been causing the Appellate Body to become unable to hear new appeals.

For pending cases which have been appealed to the Appellate Body, no advance can be made with procedures until the functions of the body are restored.

Related Link

• Panel Established under the WTO Agreement Regarding India’s Measures Concerning Tariff Increases on ICT Products (July 30, 2020)News Release

Divisions in Charge

Information on WTO dispute settlement in general:

Office for WTO Compliance and Dispute Settlement, Multilateral Trade System Department, Trade Policy Bureau

Information on the information communication equipment industry:

IT Industry Division, Commerce and Information Policy Bureau

Information on the Japan-India economic relationship:

Southwest Asia Office, Trade Policy Bureau