INTRODUCTION

The Dominican Republic and Honduras each appeals certain issues of law and legal interpretations developed in the Panel Report, Dominican Republic – Measures Affecting the Importation and Internal Sale of Cigarettes (the “Panel Report”). The Panel was established on 9 January 2004 to consider claims by Honduras in respect of five measures taken by the Dominican Republic in connection with the importation and internal sale of cigarettes. Honduras made claims in respect of these measures under various provisions of Articles II, III, X, and XI of the General Agreement on Tariffs and Trade 1994 (the “GATT 1994”). The Dominican Republic requested the Panel to dismiss all of Honduras' claims, and also submitted that certain of the Dominican Republic's measures could be justified under the terms of Articles XX(d) and XV:9(a) of the GATT 1994.

The Panel Report was circulated to Members of the World Trade Organization (the “WTO”) on 26 November 2004. The Panel found that: the imposition by the Dominican Republic of a two percent transitional surcharge for economic stabilization is an “other duty or charge” that is inconsistent with Article II:1(b) of the GATT 1994; the imposition by the Dominican Republic of a foreign exchange fee constitutes an “other duty or charge” that is inconsistent with Article II:1(b) of the GATT 1994 and that cannot be justified as an exchange restriction within the meaning of Article XV:9(a) of the GATT 1994; and, that the requirement of the Dominican Republic that a tax stamp be affixed to all cigarette packets in its territory and under the supervision of the local tax authorities is inconsistent with Article III:4 of the GATT 1994, which cannot be justified under Article XX(d) of the GATT 1994. The Panel recommended that the Dispute Settlement Body (the “DSB”) request the Dominican Republic to bring these measures into conformity with its obligations under the GATT 1994.

The Panel made additional findings of inconsistency with respect to certain rules and administrative practices used by the Dominican Republic to determine the tax base for the purpose of applying the Selective Consumption Tax, which were no longer in force at the time of the Panel Report. The Panel, however, declined to make any recommendations to the DSB regarding these measures as they were no longer in force.