After the reduction of additional customs duty on wine and spirits to the WTO-mandated levels announced this week, US trade officials are discussing whether to continue their reference to the WTO for an inquiry against India.

The withdrawal was announced after both the EU and the United States filed challenges at the WTO''s dispute settlement body. (See: US to move WTO against Indian duties on wine and spirits)

Earlier India had managed to stall the EU''s attempt to refer the tariffs issue to the WTO settlement body (India stalls EU''s WTO probe attempt on Indian liquor) US trade representative Susan Schwab said in a statement, "We are studying India''s recent announcement that it has withdrawn the additional duty on imports of alcoholic beverages."

"Withdrawal of this duty would be a positive step in addressing US concerns," Schwab said.

Schwab''s spokesman Steve Norton said the Bush administration had not yet decided whether to press ahead with its challenge of Indian duties at the World Trade Organisation''s dispute settlement body.

However, India also increased the basic customs duty on wines to 150 per cent, which puts it on par with spirits and liquor duties as mandated by the WTO.

India has one of the world''s biggest spirits markets, valued at $16.2 billion at the retail level. US officials complain that India''s import tariffs can add up to 550 per cent to the cost of US exports and restrict the growth of US products in India''s lucrative market.

The US beverage industry wants greater access to the growing Asian market, where sales of US wine and spirit exports in duty-free zones, like airport shops, have grown rapidly in recent years.

The European Union is sceptical of the news, welcoming the "reported removal of the discriminatory duties" but also panning the decision to increase the basic customs duty on wines.