On 12 July 2019, a World Trade Organization (WTO) Panel issued its report in the second compliance proceeding in Thailand – Customs and Fiscal Measures on Cigarettes from the Philippines (Second Recourse to Article 21.5 of the DSU by the Philippines) (DS371). This was the Philippines’ second recourse to Article 21.5 of the Understanding on Rules and Procedures Governing the Settlement of Disputes (DSU) concerning the alleged failure by Thailand to comply with the recommendations and rulings of the Dispute Settlement Body (DSB) in the original proceeding. Specifically, the Philippines challenged the consistency of certain Thai measures relating to the customs valuation of imported cigarettes (for the purposes of levying ad valorem customs duties) with the WTO Agreement on Implementation of Article VII of the General Agreement on Tariffs and Trade 1994 (i.e., the “Customs Valuation Agreement” or CVA).
The measures at issue in this second compliance proceeding included: (i) criminal charges filed by the Public Prosecutor in Thailand against an importer of cigarettes from the Philippines, alleging that the importer under-declared the customs values of cigarettes imported in 780 entries between 2002-2003 (the “2002-2003 Charges”); and (ii) 1,052 revised Notices of Assessment (NoAs) issued by Thailand’s Customs Department which rejected the importer’s declared transaction values for cigarettes imported in 1,052 entries between 2001-2003 and determined revised customs values for same.
The Panel found that the 2002-2003 Charges were inconsistent with Articles 1.1, 1.2(a), 6.1, and 7.1 of the CVA due to defects in both (i) the examination of the customs value of the imported cigarettes, and (ii) the information had been used for this purpose. In addition, the Panel found that the Public Prosecutor had acted inconsistently with the obligation to sequentially apply the customs valuation methods in Articles 2 through 7 of the CVA when determining the revised customs values of the imported cigarettes.
Thailand attempted to argue that the 2002-2003 Charges were nonetheless justified under Article XX(d) of the General Agreement on Tariffs and Trade 1994 (GATT 1994) as measures “necessary to secure compliance with laws or regulations” and under Article XX(a) as measures “necessary to protect public morals”. However, this was the same defence that Thailand had raised unsuccessfully in the first compliance proceeding, and the Panel again ruled that the general exceptions in Article XX of the GATT 1994 are not applicable to the obligations set forth in the CVA.
Finally, the Panel declined to rule on the 1,052 NoAs because they had all been withdrawn prior to the Panel’s establishment or within a few months thereafter.
Some of the points of interest in the Panel’s reasoning include the following:
Tereposky & DeRose LLP regularly provides advice and acts as counsel in international trade disputes, including WTO dispute settlement proceedings.