India blocked a World Trade Organisation investigation of its import duties on American wine and spirits on Monday, temporarily delaying a US government complaint over allegations that Indian rules discriminate against products such as Napa Valley wine and Jack Daniel's whiskey.
The Geneva-based trade referee is already reviewing a European legal challenge of wine and liquor restrictions in a number of Indian states. A second investigative panel examining Washington's arguments will almost certainly be established at a meeting later this month of the WTO's dispute settlement body.
"The layers of customs duties India applies to US products, in particular to wine and distilled spirits, are not in line with its WTO commitments," US Trade Representative Susan Schwab said last month while announcing plans to seek litigation. "We must ensure a level playing field for US products around the world."
India's basic import duties on wine are 100 per cent, while the tariff on spirits is 150 per cent, both within WTO limits. However, various government surcharges take the tariffs up to levels reaching as high as 550 per cent, depending on the Indian state.
Tamil Nadu goes further still, shutting out foreign alcohol and allowing shops to sell only Indian-made spirits and wines.
The United States, the European Union and Japan, by contrast, allow nearly all spirits to enter their markets duty-free. China tacks on only a 10 per cent charge on foreign liquor.
Under WTO rules, a second request for a formal investigation is automatically approved. A case can result in punitive sanctions being authorised, but panels take many months, and sometimes years, to reach a decision.