The WTO Appellate Body released its findings in DS371 Thailand — Customs and Fiscal Measures on Cigarettes from the Philippines last 17 June 2011. Below is the summary of findings from the WTO website. The full report can be found here.
Summary of key findings
Thailand's appeal was limited to certain of the Panel's findings under Article III:2, Article III:4, and Article X:3(b) of the GATT 1994. The Appellate Body upheld the core findings challenged by Thailand on appeal.
The Appellate Body upheld the Panel's finding that Thailand acts inconsistently with Article III:2, first sentence, of the GATT 1994 by subjecting imported cigarettes to internal taxes in excess of those applied to like domestic cigarettes. The Thai measure at issue consists of an exemption from value added tax (“VAT”) liability for resellers of domestic cigarettes, together with the imposition of VAT on resellers of imported cigarettes when they do not satisfy prescribed conditions for obtaining input tax credits necessary to achieve zero VAT liability. The Appellate Body agreed with the Panel that this measure affects the respective tax liability imposed on imported and like domestic products. The Appellate Body therefore rejected Thailand's characterization of the measure as “administrative requirements”, as well as Thailand's argument that the measure should have been examined under Article III:4, and not Article III:2, of the GATT 1994.
The Appellate Body also upheld the Panel's finding that Thailand acts inconsistently with Article III:4 of the GATT 1994 by according less favourable treatment to imported cigarettes than to like domestic cigarettes. The Thai measure at issue consists of an exemption from three sets of VAT-related administrative requirements for resellers of domestic cigarettes, together with the imposition of these requirements on resellers of imported cigarettes. The Appellate Body found that the Panel properly analyzed this measure and its implications in the marketplace, and therefore agreed with the Panel that this measure accords less favourable treatment to imported cigarettes by imposing the additional administrative requirements only on resellers of imported cigarettes. The Appellate Body further found that the Panel did not fail to ensure due process or to comply with its duty under Article 11 of the DSU by accepting and relying upon evidence, submitted by the Philippines late in the Panel proceedings, relating to one of the administrative requirements. Due to an error in the Panel's identification of the basis for its finding, the Appellate Body reversed the Panel's finding that Thailand had not satisfied its burden of proving its defence under Article XX(d) of the GATT 1994. In completing the legal analysis, however, the Appellate Body found, as had the Panel, that Thailand failed to establish that the administrative requirements at issue are justified under Article XX(d) of the GATT 1994.
Finally, the Appellate Body upheld the Panel's finding that Thailand acts inconsistently with Article X:3(b) of the GATT 1994 by failing to maintain or institute independent tribunals or procedures for the prompt review of customs guarantee decisions. Thai Customs requires importers to provide a guarantee in order to obtain the release of goods from customs pending a final determination of customs value. The Appellate Body saw no error in the Panel's conclusion that Thailand's system for the review of guarantees does not comply with the obligation to ensure prompt review under Article X:3(b) because such review is not available until after a final determination of customs value has been made.
