WT/DS371/21/Rev.1  
 
26 February 2018  
(18-1223) Page: 1/6 
  Original: English  
 
THAILAND – CUSTOMS AND FISCAL MEASURES  ON CIGARETTES  
FROM THE PHILIPPINES  
SECOND RECOURSE TO ARTICLE 21.5 OF THE DSU BY T HE PHILIPPINES  
REQUEST FOR CONSULTA TIONS  
Revision  
The following communication, dated 21 February 2018, from the delegation of the Philippines to 
the delegation of Thailand and to the Chairperson of the Dispute Settlement Body, is circulated in 
accordance with Article  21.5 of the DSU.  
 
_______________  
 
 
 My authorities have instructed me to request the Kingdom of Thailand ( "Thailand ") to enter 
into consultations pursuant to Articles 4 and 21.5 of the Understanding on Rules and Procedures 
Governing the Settlement of Disputes ("DSU"), Article XXII:1 of the Ge neral Agreement on Tariffs 
and Trade 1994 ( "GATT 1994 "), Article 19 of the Agreement on Implementation of Article VII of 
the General Agreement on Tariffs and Trade 1994 (the "Customs Valuation Agreement " or "CVA"), 
and paragraph 1 of the Understanding betw een the Philippines and Thailand of 1 June 2012 
regarding Procedures under Articles 21 and 22 of the DSU ( "Sequencing Arrangement "),1 in 
connection with a disagreement concerning Thailand 's implementation of the recommendations 
and rulings of the Dispute S ettlement Body ( "DSB") in Thailand – Customs and Fiscal Measures on 
Cigarettes from the Philippines  ("Thailand – Cigarettes (Philippines) ") (WT/DS371). This request 
replaces and supersedes the Philippines ' request for consultations in  its second recourse to 
Article  21.5 of the DSU in these proceedings, which is dated 6 July 2017.  
I. BACKGROUND TO THIS R EQUEST  
1. On 15 July 2011, the DSB adopted the Appellate Body Report, and the Panel Report, as 
modified by the Appellate Body Report, in Thailand – Cigarettes (Philippines) .2 In these reports, 
various Thai measures were found to be inconsistent with provisions of the GATT 1994 and the 
Customs Valuation Agreement , as follows:  
(i) Thailand acted inconsistently with Articles 1.1 and 1.2 of the CVA by rejecting the 
declared transaction values for entries of cigarettes imported by the Thailand  
branch office of Philip Morris (Thailand) Limited ( "PM Thailand ");3 
(ii)  Thailand acted inconsistently with Article 1.2(a) of the CVA by failing to 
communicat e its "grounds " for considering that the relationship between PM 
Thailand and Philip Morris  Philippines Manufacturing Inc. ( "PM Philippines ") 
influenced the price paid by PM Thailand;4 
                                                
1 WT/DS371/16.  
2 WT/DSB/M/299.  
3 Panel Report, para. 8.2(b).  
4 Panel Report, para. 8.2(c).  WT/DS371/21/Rev.1  
 
- 2 - 
 
  (iii) Thailand acted inconsistently with Article 16 of the CVA by faili ng to provide an 
adequate explanation as to how the Thai Customs  Department ( "Thai Customs ") 
determined the customs values for the imported cigarettes;5 
(iv) Thailand acted inconsistently with Article 7.1 of the CVA by improperly assessing 
the customs valu es of the imported cigarettes using a deductive method;6  
(v) Thailand acted inconsistently with Article  7.3 of the CVA by failing properly to 
inform PM  Thailand in writing of the customs values determined under Article  7 
and the method used to determine these values;7  
(vi) Thailand acted inconsistently with Article 10 of the CVA by disclosing to the Thai 
media confidenti al customs valuation information provided by PM  Thailand to Thai 
Customs;8 
(vii) Thailand acted inconsistently with Article  III:2 of the GATT 1994 by subjecting 
imported cigarettes to value added tax ( "VAT") liability in excess of that applied to 
like dome stic cigarettes with respect to the Maximum Retail Selling Prices 
("MRSP ") determined in the MRSP Notices of December 2005, September 2006, 
March 2007, and August 2007;9 
(viii) Thailand acted inconsistently with Article  III:2 of the GATT 1994 by subjecting  
imported cigarettes to VAT liability in excess of that applied to like domestic 
cigarettes by granting an exemption from VAT solely upon resale of domestic 
cigarettes, and not imported cigarettes;10  
(ix) Thailand acted inconsistently with Article  III:4 of  the GATT 1994 by subjecting 
imported cigarettes to less favorable treatment than like domestic cigarettes by 
exempting resellers of cigarettes from certain administrative requirements, related 
to VAT liability, upon resale of domestic cigarettes, and not imported cigarettes;11 
(x) Thailand acted inconsistently with Article X:1 of the GATT 1994 by failing to publish 
the methodology used to determine the tax base for VAT;12 
(xi) Thailand acted inconsistently with Article X:1 of the GATT 1994 by failing to publ ish 
the general rule pertaining to the release of guarantees collected pending the 
determination of customs value;13 
(xii) Thailand acted inconsistently with Article X:3(a) of the GATT 1994 by failing to 
administer, in a reasonable manner, its laws and regu lations pertaining to customs 
valuation due to delays by the Board of Appeals ( "BoA"), an administrative tribunal 
within the Ministry of Finance,  in resolving administrative appeals of customs 
valuation decisions taken by Thai Customs in respect of 210 ent ries imported by 
PM Thailand in 2002;14 
(xiii) Thailand acted inconsistently with Article X:3(b) of the GATT 1994 by failing to  
maintain or institute independent tribunals or procedures for the prompt review 
and correction of customs valuation determinatio ns;15 and,  
(xiv) Thailand acted inconsistently with Article  X:3(b) of the GATT 1994 by failing to 
maintain or institute independent review tribunals or procedures for the prompt 
                                                
5 Panel Report, para. 8.2(d).  
6 Panel Report, para. 8.2(e).  
7 Panel Report, para. 8.2(f).  
8 Panel Report, para. 8.2(g).  
9 Panel Report, para. 8.3(a).  
10 Panel Report, para. 8.3(b).  
11 Panel Report, para. 8.3(c).  
12 Panel Report, para. 8.4(a).  
13 Panel Report, p ara. 8.4(c).  
14 Panel Report, para. 8.4(e).  
15 Panel Report, para. 8.4(f).  WT/DS371/21/Rev.1  
 
- 3 - 
 
  review and correction of guarantees collected pending the determination of 
customs value.16 
2. On 11 August 2011, Thailand informed the DSB that it intended to comply with its 
WTO obligations in this dispute, but that it would require a reasonable period of time to do so.17  
Pursuant to Article 21.3(b) of the DSU, the Philippines and Tha iland agreed that there would be 
two reasonable periods: first, a period of 10 months, expiring on 15 May 2012, with respect to the 
findings addressed in points (i) through (vii) and (x) through (xiv) above; and, second , a period of 
15 months, expiring on 15 October 2012, with respect to the findings addressed in points (viii) and 
(ix) above.18 
3. On 1 June 2012, the Philippines and Thailand agreed upon the Sequencing Arrangement 
regarding the procedures that would apply under Articles 21 and 22 of the DSU for purposes of 
this dispute.19  Paragraph 1 of the Sequencing Arrangement provides that, should the Philippines 
consider that the situation described in Article 21.5 of the DSU exists, the Philippines may request 
consultations at any time, and that the parties  to the dispute will hold those consultations within 
15 days.  
4. On 4 May 2016, the Philippines requested consultations in its first recourse to Article 21.5 
in this dispute.20 Those consultations failed to resolve the dispute, and therefore, on 29 June 2016, 
the Philippines requested the establishment of a panel in its first recourse to Article 21.5.21 
5.   On 26 January 2017, Thailand took the additional measure described in Section II.B 
below.  This measure is properly regarded as a measure taken to comply, and is inconsistent with 
Thailand 's WTO obligations.  Consequently, on 6 July 2017, the Philippines requested consultations 
in a second recourse to Article 21.5. These consultations were held on 1 September 2017, but 
failed to resolve the dispute.  On 29 Novem ber 2017, Thailand took the further additional measure 
described in Section II.A below, which is also properly regarded as a measure taken to comply, 
and is also inconsistent with Thailand 's WTO obligations.  
6. The Philippines requests consultations in this second recourse to Article 21.5 regarding 
both sets of additional measures described in Sections II.A and II.B below, to ensure that the 
outstanding matters of disagreement are addressed in a single compliance  proceeding.  
II. MEASURES AT ISSUE AN D CLAIMS MADE IN THE SE PROCEEDINGS  
7. In the paragraphs to follow, the Philippines identifies the measures taken to comply at 
issue in this second recourse to Article 21.5, and indicates the legal basis for claims against thos e 
measures.  
A. Notices of Assessment for Underpayment of Taxes and Duties on 1,052 
Entries Imported in 2001 -2003  
8. On 29 November 2017, PM Thailand received 1,052 Notices of Assessment from 
Thailand 's Customs Department, to pay additional duties, taxes, penalti es and surcharges ( "duties 
and taxes ") in a total amount of approximately THB 25,480,317,518 ( approximately 
USD 809 million),22 within 30 days.  The Notices of Assessment cover 1,052 entries of cigarettes 
that were imported by PM Thailand between 2001 -2003.   All but one of the entries cover sales 
made by PT Philip Morris Indonesia ( "PTPMI "), a related seller. The remaining entry covers a sale 
made by PM Philippines, also a related seller. These 1,052 Notices of Assessment are measures 
subject to the Philippi nes' second recou rse to Article 21.5 of the DSU.  
                                                
16 Panel Report, para. 8.4(g).  
17 WT/DS371/12.  
18 WT/DS371/14.  
19 WT/DS371/16.  
20 WT/DS371/17.  
21 WT/DS371/18.  
22 All USD amounts of current THB amounts are based o n the USD/THB exchange rate of 21  February 
2018.   The amounts were calculated on 21 February 2018, using the online currency conversion tool available 
at www.xe.com/currencyconverter .   WT/DS371/21/Rev.1  
 
- 4 - 
 
  9. The Notices of Assessment reject PM Thailand 's declared transaction values, and provide 
revised customs valuation determinations, for entries made up to, and in some cases more than, 
15 years ago. In respect  of 208 entries, the customs values were previously assessed by a ruling 
of the Board of Appeals on 16 November 2012 ( "BoA Ruling "), which Thailand has declared as a 
measure taken to comply and which is the subject of the Philippines ' first recourse to Art icle 21.5 
of the DSU. In respect of the other entries, the customs values were assessed between ten and 
15-plus years ago, with duties and taxes definitively collected at that time. Thailand declared the 
BoA Ruling to be a measure taken to comply with the DSB's recommendations and rulings in item 
(xii) in paragraph 1 above. The BoA Ruling is currently under review by Thailand 's Supreme Court 
and also by a panel established under Article 21.5 of the DSU in this dispute. The Notices of 
Assessment impose highe r assessed customs values than Thailand previously assessed i n respect 
of the same entries.  
10. The Notices of Assessment state that the Customs Department 's valuation is based on 
findings by the Department of Special Investigation ( "DSI") regarding the "actua l value " of each 
entry, which was higher than the declared value. The Notices of Assessment provide that the DSI 
calculated the "actual value " on the basis of documents completed by PTPMI, which were obtained 
from the Indonesian government, but provide no further explanation of the valuation 
methodology.  
11. The Notices of Assessment impose liability on PM Thailand for: (1) payment of the 
difference in import duties, excise tax, VAT and health taxes due, based on the alleged under -
declaration; (2) a "surcharge " based on the alleged underpayment of import duties, excise tax, 
VAT and health taxes; and (3) a "penalty " relating to the alleged under -payment of excise tax and 
VAT. The total of these amounts in respect of all notices is approximately THB 25,480,317,518  
(approximately USD 809 million).  
12. The Customs Department did not inform PM Thailand that it was re -assessing the 
company 's customs values and, therefore, gave the company no procedural opportunities during 
the re -assessment process. The first information t hat the company received that such a process 
was underway was when it received the new Notices of Assessment  on 29 November 2017.  
13. The Notices of Assessment constitute "measures taken to comply " which are inconsistent  
with the following provisions:  
 Articles  1.1 and 1.2(a) of the CVA, because, among others,  Thailand rejected the 
transaction values without valid basis; failed to conduct a proper examination of the 
circumstances of sale; failed to communicate its grounds for considering that the 
relationship be tween the buyer and seller influenced the price; and, thereby, failed to give 
the importer any opportunity to comment on the information under consideration;  
 Articles 2, 3, 4, 5, 6 and 7 of the CVA, because, among others, Thailand failed to comply 
with the  relevant valuation rules in establishing the alleged "actual values " of the imported 
goods;  
 Article 16 of the CVA because, among others, Thailand has failed to provide, upon written 
request, a written explanation as to how the customs values of the imported goods were 
determined; and,  
 Article III:2 of the GATT 1994, first and second sentences, because, among others, 
Thailand has imposed internal taxes (excise tax, VAT, and health taxes) on imported goods 
on a basis that exceeds the properly established customs value, which results in taxation 
of these goods in excess of that applied to like domestic goods and/or taxat ion of imported 
goods that is dissimilar to the taxation of directly competitive or substitutable domestic 
goods, which affords protection to the domestic mnaufacturer, the Thailand Tobacco 
Monopoly, which is owned by the Ministry of Finance; and,  
 Article X:3(a) of the GATT 1994, because Thailand fails to administer its customs and tax 
laws in a manner that is uniform, impartial, and reasonable by, among others, imposing 
taxes and duties on imported goods in an arbitrary manner, without legal basis in domes tic 
law, without process of law, when the claim for payment is time -barred under the 
applicable Thai law.  WT/DS371/21/Rev.1  
 
- 5 - 
 
  14. The 1,052 Notices of Assessment are "measures taken to comply " because they have a 
close nexus with the DSB 's recommendations and rulings in the origi nal proceedings in this dispute 
and Thailand 's declared measure taken to comply. To recall, in the original proceedings, the DSB 
found that the long delay in the BoA 's consideration of the appeals concerning 210 entries 
imported by PM Thailand in 2002 was inconsistent with Article s X:3(a) and X:3(b) of the 
GATT  1994.23 On 16 November 2012, the BoA finally issued its ruling in respect of these 210 
entries, which Thailand declared to be a measure taken to comply,24 and which is a measure at 
issue in the Philippines ' first recourse to Article 21.5 in this dispute.25 
15. The 1,052 Notices of Assessment share a close nexus with the DSB 's recommendations 
and rulings regarding the BoA 's delay in its treatment of the appeals c oncerning the 210 entries 
just mentioned and with the BoA Ruling because they involve: the same importer and same 
importing country (PM Thailand and Thailand); the same exporter and same exporting country 
(PTPMI and Indonesia); the same product and brand ( Marlboro  cigarettes produced by PTPMI); 
and overlapping entries.  
B. Criminal Charges against PM Thailand and Its Former Employee Regarding 
Customs Valuation on Entries Imported in 2002 -2003  
16. In its first recourse to Article 21.5, the Philippines raised claims with respect to criminal 
charges, filed on 18 January 2016, by the Thai Public Prosecutor against PM Thailand and seven of 
its current and former employees in respect of 272 entries of cigarettes that cleared Thai Customs 
between 28 July 2003 and 24 June 2 006 (the "2003-2006 Charges ").26 
17. In August 2006, when the Department of Special Investigation ( "DSI") initiated the 
investigation that resulted in the 2003 -2006 Charges, it also commenced a second criminal 
investigation into entries imported by PM Thailand in the 2000 -2003 period.  That second 
investigation resulted in the Thai Public Prosecutor filing a second  set of criminal charges, on 
26 January 2017, against PM Thailand and one of its former employees in respect of 779 entries of 
cigarettes that cleared Thai Customs between 22 January 2002 and 14 August 2003 (the "2002-
2003 Charges "). The competent Thai criminal court accepted and issued these Charges on the 
same day.  It is these 2002 -2003 Charges that are at issue in this second recourse to Article 21.5 . 
18. Specifically, the 2002 -2003 Charges allege that PM Thailand under -declared the customs 
values of imported cigarettes, with the declared transaction values described as "false" prices that 
were lower than the alleged "actual " prices. The 2002 -2003 Charges state that they pertain to 779 
entries of cigarettes that cleared Thai Customs between 22 January 2002 and 14 August 2003. For 
each entry, an annex attached to the Charges states both the "declared " price (the alleged "false" 
price) and the "found " price (the alleged "actual " price). However, neither the 2002 -2003 Charges 
nor the annex state the basis for the conclusions that the declared prices are "false" and that the 
declared prices should be replaced by alternative "actual " customs values.  Based on the alleged 
"actual " prices, the 2002 -2003 Charges and annex specify that the duty -paid value of the 
cigarettes imported by PM Thailand is THB 4,953,456,655.93 (USD 157 million).  
19. The 2002-2003 Charges  constitute a "measure taken  to comply " which is inconsistent with 
the following provisions:  
 Articles 1.1 and 1.2(a) of the CVA because, among others, Thailand rejected the 
transaction values without valid basis; failed to conduct a proper examination of the 
circumstances of sale; fa iled to communicate its grounds for considering that the 
relationship between the buyer and seller influenced the price; and, thereby, failed to give 
the importer any opportunity to comment on the information under consideration;  
 Articles 2, 3, 4, 5, 6 and  7 of the CVA, because, among others, Thailand failed to comply 
with the relevant valuation rules in establishing the alleged "actual values " of the imported 
goods;  
                                                
23 Panel Report, paras. 8.4(e) -(g). 
24 WT/D S371/15/Add.8 . 
25 See WT/DS371/18, paras. 9 -10. 
26 See WT/DS371/18, paras. 11 -16. WT/DS371/21/Rev.1  
 
- 6 - 
 
   Article 16 of the CVA because, among others, Thailand has failed to provide, upon written 
request, a written explanation as to how the customs values of the imported goods were 
determined; and,  
 Article III:2 of the GATT 1994, first and second sentences, because, among others, 
Thailand calculates the tax base for internal taxes (excise tax, VAT, and health taxes) on 
imported goods on a basis that exceeds the properly established customs value, which 
results in taxation of these goods in excess of that applied to like domestic goods and/or 
taxation of imported goods that is dissimilar to the taxati on of directly competitive or 
substitutable domestic goods, which affords protection to the domestic manufacturer, the 
Thailand Tobacco Monopoly, which is owned by the Ministry of Finance.  
20. The 2002 -2003 Charges are a "measure taken to comply " because, like  the 1,052 Notices 
of Assessment, they have a close nexus with the DSB 's recommendations and rulings in the 
original proceedings in this dispute and Thailand 's declared measure taken to comply.  As noted, in 
the original proceedings, the DSB found that the  long delay in the BoA 's consideration of the 
appeals concerning 210 entries imported by PM Thailand in 2002  was inconsistent with 
Articles  X:3(a) and X:3(b) of the GATT 1994.27 On 16 November 2012, the BoA  finally issued its 
ruling in respect of these 210 entries, which Thailand declared to be a measure taken to comply,28 
and which is a measure at issue in the Philippines ' first recourse to Article 21.5 in this dispute.29   
21. The 2002-2003 Charges  share a close  nexus with the DSB 's recommendation and rulings 
regarding the BoA 's delay in its treatment of the appeals concerning the 210 entries just 
mentioned, and with the BoA Ruling, because they involve: the same importer and same importing 
country (PM Thailand a nd Thailand); the same exporter and same exporting country (PTPMI and 
Indonesia); the same product and brand ( Marlboro  cigarettes produced by PTPMI); and some 
overlapping entries (205 of the entries at issue are identical). The Philippines also notes that 2002-
2003 Charges also cover 779 of the entries subject to the 1,052 Notices of Assessment.  
C. Other Subsequent Measures  
22. This request for consultations also concerns any measures that amend, modify, replace, 
supersede, or implement the measures identified ab ove, as well as any subsequent closely 
connected measures taken to comply that are adopted by Thailand, including, but not limited to, 
acts or omissions taken in relation to the measures (acts and/or omissions) and/or entries 
mentioned above by: the Attorn ey General, the Customs Department (including the BoA), the DSI, 
the Excise Department, the Public Prosecutor, the Revenue Department, Thai courts, and any 
other institutions or agencies whose conduct is attributable to Thailand.  
III. CONCLUSION  
23. In accordance w ith paragraph 1 of the Sequencing Arrangement, the Philippines looks 
forward to Thailand 's response to this request, and to holding consultations within 15 days. If 
consultations are not held within 15 days, the Philippines intends to exercise its right un der the 
Sequencing Arrangement to request a panel.  
24. The Philippines reserves all of its rights in respect of Thailand 's compliance with its 
WTO obligations in this dispute. It also reserves its rights to raise additional factual and legal 
claims during the course of the consultations and in any request for the establishment of a panel.  
 
__________  
                                                
27 Panel Report, paras. 8.4(e) -(g). 
28 WT/DS371/15/Add.8 . 
29 See WT/DS371/18, paras. 9 -10.