By Bernie Cahiles-Magkilat

Thailand has lost all three panel and appellate rulings before the World Trade Organization (WTO) on the cigarette tax dispute against the Philippines prompting Trade and Industry Secretary Ramon M. Lopez to challenge a fellow ASEAN country to accept the decision and implement the tax valuation reforms that are inimical to Filipino tobacco farmers.

wto - WTO upholds PH anew in cigar dispute vs Thailand

On July 12, 2019, the WTO circulated the panel report upholding anew the Philippines’ claims initiated in 2008 that Thailand violated WTO law on Customs violation. In the case, the Philippines protested Thailand’s discriminatory tax imposed on cigarette exports by Philip Morris Philippines.
“This WTO dispute has been going on for more than ten years now, Thailand has lost all three panel and appellate rulings, and it is about time that Thailand accepts the rulings and implement the Customs valuation reforms called for by those rulings,” said Lopez in a statement.

This dispute was initiated by the Philippines in 2008, and is still ongoing because of Thailand’s repeated allegations of under-declaration of the Customs value of cigarettes, which are all based on valuation determinations consistently ruled as illegal under WTO’s Customs Valuation Agreement (CVA).

“These unlawful measures threaten criminal prosecution and even the imprisonment of a number of employees of the importer in Thailand, Philip Morris International Thailand (PMTL),” said Lopez in a strongly-worded statement.

He added that, Thailand’s insistence on these measures also “threaten the viability of the private sector both in the Philippines and in Thailand, harm Philippine tobacco farmers, and are inimical to the overall export interests of the Philippines.”

“It also places bilateral relations on a sour note,”Lopez noted adding that, “Thailand is a strong supporter of the WTO multilateral trading system, and currently chairs the WTO General Council. Thailand is also ASEAN host for 2019. Accepting the panel report in this dispute would be a clear demonstration of Thailand’s responsibility and leadership in the WTO and in ASEAN.”

With the recent WTO ruling, Thailand has now lost three WTO panel proceedings. In the original proceedings, a WTO panel and the Appellate Body ruled in 2010 that the Thai customs valuation measures violated the CVA and other WTO rules.

Following this ruling, Thailand brought further new, WTO-inconsistent customs valuation measures against Philippine cigarettes and filed criminal charges against PMTL for under-declaration. The Philippines successfully brought a first set of WTO compliance proceedings; in November 2018, the WTO compliance panel found that the new customs valuation measures and the first criminal charges violate the CVA.

While these proceedings were ongoing, Thailand issued a second set of criminal charges, forcing the Philippines to initiate second WTO compliance proceedings. This latest WTO panel ruled on 12 July that these second charges also violate the CVA.

Thailand has yet to implement the WTO rulings, amend its customs valuations policy and practices, and withdraw the two criminal charges which based, in the first instance, on WTO-illegal measures.

The Panel said that to the extent that the measures at issue are inconsistent with the Customs Valuation Agreement, they have nullified or impaired benefits accruing to the Philippines under that agreement. 8.4.

“The Panel therefore concludes that Thailand has failed to implement the recommendations and rulings of the DSB to bring its measures into conformity with its obligations under the Customs Valuation Agreement. The recommendations and rulings of the DSB in the original proceeding in DS371 remain operative, to the extent that Thailand has failed to comply with them,” the WTO ruling stated.

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