WT/DS371/22  
 
16 March 2018  
(18-1612) Page: 1/6 
  Original: English  
 
THAILAND – CUSTOMS AND FISCAL M EASURES ON CIGARETTE S 
FROM THE PHILIPPINES  
SECOND RECOURSE TO A RTICLE 21.5 OF THE D SU BY THE PHILIPPINE S 
REQUEST FOR THE ESTA BLISHMENT OF A PANEL  
The following communication, dated 14 March 2018, from the delegation of the Philippines to the 
Chairperson of the Dispute Settlement Body, is circulated pursuant to Article 21.5 of the DSU.  
 
_______________  
 
 On 21 February 2018, the Philippines requested consultations with the Kingdom of Thailand 
("Thailand ") 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 General 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 between 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 Settlement Body ( "DSB") in Thailand – Customs and Fiscal Measures on 
Cigarettes from the  Philippines  ("Thailand – Cigarettes (Philippines) ") (WT/DS371).2  That request 
replaced and superseded the Philippines ' request for consultations in its second recourse to 
Article  21.5 of the DSU in these proceedings, which was dated 6 July 2017.  
 Paragr aph 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 co nsultations within 
15 days.  
 Consultations were held on 12 March 2018, with a view to reaching a mutually satisfactory 
solution.  These consultations failed to resolve the dispute.  
 Accordingly, pursuant to paragraph 1 of the Sequencing Arrangement, Articl es 6 and 21.5 of 
the DSU, Article XXIII of the GATT 1994 and Article 19 of the CVA, the Philippines respectfully 
requests that the DSB establish a panel to examine this matter, with the standard terms of 
reference described in Article 7.1 of the DSU.  The Philippines notes that, pursuant to paragraph 2 
of the Sequencing Arrangement, Thailand committed not to object to the establishment of a panel 
at the first DSB meeting at which the request appears on the agenda.  
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) .3  In these reports, 
various Thai measures were found to be inconsistent with provisions of t he GATT 1994 and the  
Customs Valuation Agreement , as follows:  
                                                
1 WT/DS371/16.  
2 The request for consultations was circulated on 26 February 2018 in document WT/DS371/21/Rev.1  
3 WT/DSB/M/299.  WT/DS371/22  
 
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  (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 ");4 
(ii)  Thailand acted inconsistently with Article 1.2(a) of the CVA by failing to communicate 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;5 
(iii) Thailand acted inconsistently with Article 16 of the CVA by failing to provide an adequate 
explanation as to how the Thai Customs Department ( "Thai Customs ") determined the 
customs values f or the imported cigarettes;6 
(iv) Thailand acted inconsistently with Article 7.1 of the CVA by improperly assessing the 
customs values of the imported cigarettes using a deductive method;7  
(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;8  
(vi) Thailand acted inconsistently with Article 10 of the CVA by disclosing to the Thai media 
confidential cu stoms valuation information provided by PM  Thailand to Thai Customs;9 
(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 domestic 
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;10 
(viii) Thailand acted inconsistently with Article  III:2 of the GATT 1994 by subjecting impo rted 
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;11  
(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 liab ility, upon resale of 
domestic cigarettes, and not imported cigarettes;12 
(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;13 
(xi) Thailand acted inconsistently w ith Article X:1 of the GATT 1994 by failing to publish the 
general rule pertaining to the release of guarantees collected pending the determination of 
customs value;14 
(xii) Thailand acted inconsistently with Article X:3(a) of the GATT 1994 by failing to ad minister, 
in a reasonable manner, its laws and regulations 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 de cisions taken by Thai 
Customs in respect of 210 entries imported by PM Thailand in 2002;15 
(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 revie w and correction of 
customs valuation determinations;16 and,  
                                                
4 Panel Report, para. 8.2(b).  
5 Panel Report, para. 8.2(c).  
6 Panel Report, para. 8.2(d).  
7 Panel Report, para. 8.2(e).  
8 Panel Report, para. 8.2(f).  
9 Panel Report, para. 8.2(g).  
10 Panel Report, para. 8.3(a).  
11 Panel Report, para. 8.3(b).  
12 Panel Report, para. 8.3(c).  
13 Panel Report, para. 8.4(a).  
14 Panel Report,  para. 8.4(c).  
15 Panel Report, para. 8.4(e).  
16 Panel Report, para. 8.4(f).  WT/DS371/22  
 
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  (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 review and correction of 
guarantees collected pending the determination of customs value.17 
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.18  
Pursuan t to Article 21.3(b) of the DSU, the Philippines and Thailand 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.19 
3. On 1 June 2012, the Philippines and Thailand agreed upon the Sequencing Arrangement 
regarding the procedur es that would apply under Articles 21 and 22 of the DSU for purposes of 
this dispute.20  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.21  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 21.5.22 
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.   
6. On 29 November 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 Thailan d's WTO obligations.  Consequently, on 21 February 2018, the Philippines 
requested 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 ma tters of 
disagreement are addressed in a single compliance proceeding.  These consultations were held on 
12 March 2018, but failed to resolve the dispute.  
7. The Philippines therefore requests the establishment of a panel to examine the matter 
described in  this request.  
II. MEASURES AT ISSUE AN D CLAIMS MADE IN THE SE PROCEEDINGS  
8. In the paragraphs to follow, the Philippines identifies the measures taken to comply at issue 
in this second recourse to Article 21.5, and provides a brief summary of the legal ba sis for claims 
against those measures.  
A. Notices of Assessment for Underpayment of Taxes and Duties on 1,052 Entries 
Imported in 2001 -2003  
9. On 29 November 2017, PM Thailand received 1,052 Notices of Assessment from Thailand 's 
Customs Department, to pay add itional duties, taxes, penalties and surcharges ( "duties and 
taxes ") in a total amount of approximately THB 25,480,317,518 (approximately USD 812  
                                                
17 Panel Report, para. 8.4(g).  
18 WT/DS371/12.  
19 WT/DS371/14.  
20 WT/DS371/16.  
21 WT/DS371/17.  
22 WT/DS371/18.  WT/DS371/22  
 
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  million),23 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 
Philippines ' second recourse to Article 21.5 of the DSU.  
10. 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 cas es 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 Article 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 dispu te.  The Notices of 
Assessment impose higher assessed customs values than Thailand previously assessed in respect 
of the same entries.   
11. The Notices of Assessment state that the Customs Department 's valuation is based on 
findings by the Department of Special Investigation ( "DSI") regarding the "actual 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 obtai ned 
from the Indonesian government, but provide no further explanation of the valuation 
methodology.  
12. 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, ba sed 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 re spect of all notices is approximately THB 25,480,317,518 (approximately 
USD 812 million).   
13. 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 opportuni ties during the re -
assessment process.  The first information that the company received that such a process was 
underway was when it received the new Notices of Assessment on 29 November 2017.    
14. 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 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 a nd 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;  
 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) o n 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 
                                                
23 All USD amounts of current THB amounts are based on the USD/THB exchange r ate of 9 March 2018.  
The amounts were calculated on 9 March 2018, using the online currency conversion tool available at 
www.xe.com/currencyconverter .   WT/DS371/22  
 
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  goods that is dissimilar to the taxation of directly comp etitive or substitutable domestic 
goods, which affords protection to the domestic manufacturer, 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 domestic 
law, without process of law, when the claim for payment is time -barre d under the 
applicable Thai law.  
15. 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 original 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 Articles X:3(a) and X:3(b) of the GATT 
1994.24  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,25 and which is a measure at issue in the 
Philippines ' first recourse to Article 21.5 in this dispute.26   
16. 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 concerning 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 It s Former Employee Regarding 
Customs Valuation on Entries Imported in 2002 -2003  
17. 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 Tha iland 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 2006 (the "2003-2006 Charges ").27 
18. In August 2006, when the 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 T hai 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.  
19. Specifically, the 2002 -2003 Charges allege that PM Thailand under -declared the customs 
value s 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 Ja nuary 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 th e 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).   
20. The 2002 -2003 Charges constitute a "measure taken to comply " which is inconsistent with 
the following provisions:  
                                                
24 Panel Report, paras. 8.4(e) -(g). 
25 WT/DS371/15/Add.8.  
26 See WT/DS371/18, paras. 9 -10. 
27 See WT/DS371/18, paras. 11 -16. WT/DS371/22  
 
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   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 between the buyer and seller influenced the p rice; 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 t he 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 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 i n taxation of these goods in excess of that applied to like domestic goods and/or 
taxation of imported goods that is dissimilar to the taxation 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.  
21. 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 ori ginal 
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 wa s inconsistent with Articles X:3(a) and 
X:3(b) of the GATT 1994.28  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,29 and which is a 
measure at issue in the Phil ippines ' first recourse to Article 21.5 in this dispute.30   
22. 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 wit h 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 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  
23. This request for consultations  also concerns any measures that amend, modify, replace, 
supersede, or implement the measures identified above, as well as any subsequent closely 
connected measures taken to comply that are adopted by Thailand, including, but not limited to, 
acts or omissi ons taken in relation to the measures (acts and/or omissions) and/or entries 
mentioned above by:  the Attorney 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.  
*** 
24. The Philippines asks that this request be placed on the agenda for the meeting of the DSB 
scheduled to take place on 27 March 2018.  
__________  
                                                
28 Panel Report, paras. 8.4(e) -(g). 
29 WT/DS371/15/Add.8.  
30 See WT/DS371/18, paras. 9 -10.