Memorandum from the World Trade Organization
1. We acknowledge receipt of your letter
dated 25 July 2000 requesting information on any difficulties
or questions that have arisen in international trade with respect
to the export of Scotch Whisky and what is being done to resolve
them. Your queries cover a large number of issues and we have
had to coordinate the responses from the various WTO Divisions
specialising in those areas of interest to you. For further information
on any specific area we would advise you to contact directly the
Division concerned. We hope that the response provided will be
useful for the future work of the Committee.
2. In terms of background information, whisky
is classified under the six-digit tariff line number 2208.30 of
the Harmonised System Convention, which is the nomenclature used
by the majority of WTO Members. Under the WTO Agreement on Agriculture,
products contained within Chapters 1 to 24 of the Harmonised System
are considered to be agricultural with some exceptions including
fish and fish products (Chapter 3). During the Uruguay Round of
negotiations, it was agreed that Members should bind all products
covered by the Agreement on Agriculture. In GATT/WTO parlance,
a bound rate or binding is defined as the maximum level of duty
that may be applied by a Member on a product.
3. To examine the commitments made by WTO
Members on whisky, you will need to consult Members' Uruguay Round
schedules which are available in electronic form (CD-ROM format)
and hard copy. In this connection, I have taken the liberty of
enclosing a brochure which lists WTO publications which may be
of some interest to you such as the "CD-ROM: Complete Results
of the Uruguay Round" on page 11 or the volumes containing
the Uruguay Round Schedules on pages 13-14. If, however, the information
you seek targets specific markets and is not required urgently,
then we would be pleased to prepare the documentation for you
and send it to you by fax or by post, as necessary.
4. In parallel with the multilateral tariff
negotiations under the Uruguay Round, countries interested in
certain sectors participated in what were called "sectoral
initiatives" which were tariff cutting schemes targeting
certain sectors. One such sector pertained to distilled spirits,
more particularly brown spirits. Under this agreement, tariffs
on whisky were to be reduced in stages to zero in 10 years. From
the information available to us, it would appear that Canada,
EU, Hong Kong, China, Iceland, Norway and the US were among the
countries which participated either fully or partially in this
initiative. For those countries participating fully in this initiative,
it is expected that by 2004 at the latest, tariffs on whisky will
be at zero per cent. However, nothing prevents a country from
implementing reductions at an accelerated pace and for example,
whisky imported into Canada is to be bound at zero per cent as
5. Lastly on this subject, you are also
perhaps aware that agricultural negotiations have been launched
and further liberalising results may be achieved in this area.
6. From the information available to us
which is based on notifications made by Members themselves, it
would appear that certain Members continue to maintain import
restrictions on the import of whisky. Such restrictions have been
justified on the basis of religious or moral grounds, permissible
under Article XX of GATT 1994 or for balance-of-payments reasons
under Article XVIII:B of GATT. Unfortunately due to the confidential
nature of this information we are unable to be more specific.
7. Members are pursuing their exploratory
and analytical work on this issue. Delegations are in agreement
that the simplification of trade procedures has the potential
for considerable savings in time, money, as well as human and
other resources and could result in substantial benefits for each
and every economy. Numerous proposals are under discussion regarding
concrete measures that would enhance transparency and reduce red
tape in the trading process. However, no clear-cut conclusions
of the work programme should be expected in the near future.
8. With respect to dispute settlement, you
might recall that there are three WTO dispute settlement cases
involving distilled alcoholic beverages in which the European
Communities was the complainant. These are: JapanTaxes
on Alcoholic Beverages (WT/DS8); KoreaTaxes on Alcoholic
Beverages (WT/DS75); and ChileTaxes on Alcoholic Beverages
(WT/DS87 and 110).
9. In all three of these disputes, Scotch
Whisky was determined to be directly competitive with or substitutable
for the products of the domestic industry within the meaning of
Article III:2, second sentence, of the GATT 1994. As such only
de minimis differences in levels of taxation of the imported
and domestic products is permissible. There has been compliance
with the DSB rulings and recommendations in the first two cases
and Chile is still within its "reasonable period of time"
for implementing a system in accordance with its obligations under
10. Of course, the dispute settlement system
is only invoked by a complaining WTO Member. As such, it is impossible
to determine at this time whether further complaints will arise
or whether they would be determined to be justified.
11. The TRIPS Agreement is an integral part
of the Marrakesh Agreement establishing the WTO, and all Members
are bound to implement it in full, although least-developed country
Members may delay implementation of the substantive provisions
until 2006, with the possibility of an extension.
12. The TRIPS Agreement sets out minimum
standards for the protection of intellectual property rights and
requires governments to put in place procedures and remedies to
enforce those rights when they are infringed. It also creates
a forum for further negotiations. Disputes between Member governments
about implementation of the TRIPS Agreement can be settled through
the WTO dispute settlement mechanism just like disputes under
GATT or GATS.
13. Two intellectual property rights of
particular interest to Scotch whisky exporters are trade marks
and geographical indications, because they are critical to the
way in which they market their products and distinguish their
products from their competitors'. The TRIPS Agreement sets the
minimum standards that permit Scotch whisky exporters to protect
the rights to their trade marks and geographical indications in
other WTO Member jurisdictions against counterfeiters and other
14. Trade marks can refer to producers,
such as "William Grant & Sons", as well as product
ranges, such as "Ballantine's", or particular products,
such as "The Famous Grouse". They can consist of words
or images, such as the picture of Johnnie Walker, combinations
of both, or any other distinctive sign.
15. In the area of trade marks, the Agreement
requires all Member governments to permit private parties to apply
to register their marks. It sets out what may be protected as
a trade mark, lists the exclusive rights conferred by registration,
provides that trade marks shall be renewable for terms of at least
seven years indefinitely, and deals with certain other matters.
It also incorporates pre-existing provisions on registration procedures
contained in the Paris Convention. See Articles 15 to 21 of the
TRIPS Agreement (attached).
16. Well-known marks are of particular interest
to exporters of famous brands of Scotch whisky. Article 6bis
of the Paris Convention, and two provisions of the TRIPS Agreement
address the problem of third parties registering a trade mark
in a country where the true foreign owner has not yet used or
registered it, and then demanding payment when the owner wants
to expand into that market. The provisions ensure that promotion
of the product, and not just actual use in the country concerned,
should be taken into account, and extends the rules to dissimilar
goods or services, not just identical or similar goods or services.
See Article 16.2 and 16.3 (attached).
17. Geographical indications identify goods
by their geographical origin where a given quality, reputation
or other characteristic is essentially attributable to that origin.
These can refer to a whole country or region, such as "Scotch
whisky", and places and regions, such as "Campbeltown",
"Islay" and perhaps "Highland" and "Lowland".
18. In the area of geographical indications,
the Agreement requires all Member governments to provide the legal
means to prevent certain uses of geographical indications and
to prevent their registration as a trade mark. There is one standard
of protection relevant to goods generally in Article 22, which
is basically intended to prevent use which would be misleading
or constitute an act of unfair competition. It also requires Member
governments to refuse or invalidate the registration of a trade
mark which contains or consists of a geographical indication with
respect to goods not originating in the territory indicated, if
use of the indication in the trade mark would be misleading as
to the true place of origin. There is a higher standard of protection
for geographical indications for wines and spirits in Article
23, which is intended to prevent use of geographical indications
on goods not having the origin indicated, without having to prove
that it is misleading or constitutes an act of unfair competition.
It also requires Members to refuse or invalidate the registration
of a trade mark which contains or consists of a geographical indication
identifying wines or spirits with respect to wines or spirits
not having this origin, without having to prove that it is misleading.
This would apply to so-called "Scotch whisky" that is
not actually from Scotland. See Articles 22 to 24 of the TRIPS
19. The TRIPS Agreement "grandfathers"
certain practices, so that users of geographical indications and
owners of registered trade marks that consist of geographical
indications since before the Agreement entered into force may
continue to enjoy these rights, even for wines and spirits. See
Article 24.4 and 24.5. Trade marks and geographical indications
can become "generic" and cease to be protected if buyers
come to understand them as an ordinary trade description, rather
than an indication of a particular trade source or geographic
source. See Article 24.6.
20. These exceptions to the protection of
geographical indications took a great deal of negotiation in order
to find a suitable balance among competing interests. However,
to date, there has only been one complaint formally notified to
the WTO dispute settlement system concerning these exceptions.
That is a complaint by the United States alleging that EC regulation
2081/92, as amended, does not provide national treatment with
respect to geographical indications concerning agricultural products
and foodstuffs, and does not provide sufficient protection to
pre-existing trade marks that are similar or identical to a geographical
indication. The complaint was filed on 1 June 1999 but there have
been no request for the establishment of a panel.
21. Other intellectual property rights protected
under the TRIPS Agreement, such as patents, industrial designs
and copyright, are also of value to Scotch whisky exporters. In
fact, the mass production of grain whisky was made possible by
the continuous still, which appears to have been patented. Whilst
any patent on that invention has long since expired, new inventions
useful in the production of Scotch whisky can also be patented.
Original or novel bottle shapes, such as the Dimple bottle, can
be registered as industrial designs. Labels and the shape of bottles
can be protected by copyright: in one famous case the producer
of Bailey's Irish Cream prevented infringement of its rights in
Australia by enforcing its copyright in the drawing on its label.
Naturally, labels and shapes of bottles can also be protected
by trade marks.
22. In respect of all intellectual property
rights covered by the Agreement, including trade marks and geographical
indications, Part III of the Agreement requires Member governments
to permit right holders to take legal action against infringement
to obtain injunctions, damages and disposal or destruction of
infringing goods. These should include provisional or urgent measures
in suitable circumstances. It also requires Member governments,
in respect of counterfeit goods, to put in place criminal procedures
and remedies, and allow right holders to obtain the assistance
of customs in preventing importation of goods.
23. All Member governments are required
to notify the legislation by means of which they implement all
the provisions of the TRIPS Agreement, at the latest by the time
at which the corresponding obligation enters into force. Developed
country Members were required to implement the Agreement by 1996
and all their notified implementing legislation has been circulated
to Members. Information on what they notified is available at
our website at http://www.wto.org using the document code IP/N/.
Legislation on trade marks and geographical indications is coded
"T" and "G", or "I" where it is
part of general industrial property legislation. Developing country
Members were required to implement the Agreement by the beginning
of 2000, and we are in the process of receiving and distributing
copies of their implementing legislation. Least-developed country
Members have until 2006 to implement their legislation, and we
have not yet received notifications from them. All legislation
notified to us is gradually being made available electronically
in full text by the World Intellectual Property Organization on
its website at http://clea.wipo.int.
Review of legislation
24. The TRIPS Council is the subsidiary
body of the WTO made up of all Member governments which is responsible
for the day-to-day operation of the TRIPS Agreement. It is in
the process of conducting a review of implementing legislation
in the form of questions and answers among Member governments.
These always include questions about the protection of trade marks
and geographical indications which could be relevant to Scotch
whisky brands. So far, the TRIPS Council has reviewed the legislation
of 51 Members and these records are made available after a period
of restriction on our website at http://www.wto.org using the
document code IP/Q/.
Review of the section on geographical indications
25. The TRIPS Agreement requires the TRIPS
Council to keep under review the application of the provisions
on geographical indications. It drew up a questionnaire (document
IP/C/13 and Add.1) to which Members were invited to respond indicating
how they protected geographical indications in their respective
jurisdictions. To date, 34 Members, mainly developed countries,
have responded. All these responses can be accessed at our website
http://www.wto.org using the document code IP/C/W/117.
26. The TRIPS Agreement also requires the
TRIPS Council to undertake negotiations on the establishment of
a multilateral system of notification and registration of geographical
indications for wines. The 1996 WTO Ministerial Conference decided
that these negotiations should include preparatory work on a system
for spirits as well. There have been two proposals so far as to
how this system might work. The EC proposal (document IP/C/W/107/Rev.1)
envisages a binding register for those Members choosing to participate,
which would oblige them to prevent the use and registration as
a trade mark of geographical indications included in the register
for wines, spirits and possibly other goods. The joint proposal
by the United States, Japan, Canada and Chile (document IP/C/W/133/Rev.1)
envisages a database of geographical indications to which trade
mark examiners would refer in deciding whether or not to register
a geographical indication as a trade mark.
27. The World Intellectual Property Organization
already administers an international register known as the Lisbon
Agreement for the Protection of Appellations of Origin and their
Intellectual Registration, but it only has 19 States parties to
28. Negotiations on both issues relevant
to geographical indications continue at the regular meetings of
the TRIPS Council, and were also a topic of much discussion at
the Seattle Ministerial Conference last year.
29. Another recent development, outside
the WTO, is important for those Scotch whisky producers who have
begun trading across the internet, (although we noticewith
regretthat many do not accept orders across the internet
from outside the United Kingdom). It is important that they retain
the rights to their trade marks in cyberspace as well as in the
real world, but there is no guarantee in the system for registering
internet domain names that third persons will not deliberately
attempt to register Scotch whisky producers' trade marks as domain
names without authorisation. The potential for such conflicts
has led to the establishment of a speedy administrative procedure
to resolve domain name disputes that involve trade marks. The
World Intellectual Property Organization is one of the bodies
that administers this procedure.
30. The objective of the Agreement on Technical
Barriers to Trade (TBT) is to ensure that regulations, standards,
testing and certification procedures adopted by the Members do
not create unnecessary obstacles to trade and do not discriminate
between the like products originating in any other country. Therefore,
while the Agreement acknowledges the right of WTO Members to develop
technical requirements and to ensure that they are complied with,
it also contains a number of provisions governing the preparation
and application of mandatory and voluntary requirements and conformity
assessment procedures. In order to prevent too much diversity,
the TBT encourages harmonisation through the use of international
standards where these are appropriate.
31. The TBT Agreement has a significant
featuretransparency, which comprises notification obligations
that provides possibility for the Members of WTO to follow the
development of the regulatory legislation and voluntary standards
for the product concerned in markets where they have export interests.
Notifications about the proposed technical regulation, standard
or conformity assessment procedure, together with a brief indication
of its objective and rationale, are channelled through the WTO
32. The TBT notifications received regarding
the trade in alcoholic beverages since WTO was established relate
labelling provisions (mostly but
not solely requiring the necessity to put warning statements for
health, driving ability or the prohibition to drink alcohol before
reaching certain age);
provisions on spirit production,
storage, registration and distribution to prevent deceptive practices;
the definition and classification
of alcoholic beverages (like defining that whisky belongs to the
group of distilled liquors obtained by ageing, or requiring by
definition that whisky should contain not less than 40 per cent
of alc/vol, or that Scotch whisky can be sold freely if it is
produced according to the domestic standard of a country of origin);
the container of alcoholic beverages
in order to avoid misleading of consumers;
product quality testing methods.
Detailed information is available directly from
notifications (with codification G/TBT/Notif...(example: G/TBT/Notif.95.205))
that are published and can be viewed in the http://www.wto.org/wto/ddf/ep/public.html.
Market Access Division
World Trade Organization