WT/DS461/R  
27 November 2015  
(15-6254)  Page: 1/130  
 Original: Spanish  
 
  COLOMBIA – MEASURES RELATI NG TO THE IMPORTATION OF 
TEXTILES, APPARE L AND FOOTWEAR 
REPORT OF THE PANEL WT/DS461/R 
 
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  TABLE OF CONTENTS 
1  INTRODUC TION ......................................................................................................... 16  
1.1   Complain t by Panama ............................................................................................... 16 
1.2   Panel establishm ent and comp osition .......................................................................... 16 
1.3   Panel proceedings ..................................................................................................... 16 
2  THE MEASURE AT ISSUE ............................................................................................. 17  
3  PARTIES' REQUESTS FOR FINDINGS, RECOMMENDATIONS AND SUGGESTIONS ........ 18  
4  ARGUMENTS OF THE PARTIES .................................................................................... 19  
5  ARGUMENTS OF TH E THIRD PA RTIES ......................................................................... 19  
6  INTERIM REVIEW ....................................................................................................... 19  
7  FIND INGS .................................................................................................................. 20 
7.1   Preliminary considerations ......................................................................................... 20 
7.1.1   Function of the Pane l and standard of review ............................................................. 20 
7.1.2   Interpretation of the relevant rules of the agreements ................................................. 21 
7.1.3   Burden  of proof ..................................................................................................... 22 
7.1.4   Order of analysis ................................................................................................... 23 
7.2   The meas ure at issue ................................................................................................ 24 
7.2.1   The compound ta riff imposed by Colombia................................................................. 24 
7.2.2   The Panel's terms of reference ................................................................................. 26 
7.3   Analysis of Panama's claims under Articles II:1(a) and II:1(b), first sentence, of the 
GATT 1994 .....................................................................................................................  28 
7.3.1   Main argume nts of the parties ................................................................................. 28 
7.3.1.1   Compla int by Panama .......................................................................................... 28 
7.3.1.2   Colomb ia's defence ............................................................................................. 32 
7.3.2   Main arguments of the thir d parties .......................................................................... 35 
7.3.2.1   United States ..................................................................................................... 35 
7.3.2.2   Philippi nes .........................................................................................................  36 
7.3.2.3   Honduras ........................................................................................................... 37 
7.3.2.4   European Union .................................................................................................. 37 
7.3.3   Order of analysis of the claim concerning Article II:1(a) and Article II:1(b), 
first sentence, of  the GA TT 1994  ........................................................................................ 38 
7.3.4   The question of the applicability of Article II:1(a) and Article II:1(b), 
first sentence, of the GA TT 1994 to "illici t trad e" .................................................................. 39 
7.3.4.1   Main arguments of the parties ............................................................................... 39 
7.3.4.2   Analysis by the Panel ........................................................................................... 39 
7.3.5   The stan dard of proof ............................................................................................. 44 
7.3.5.1   Main arguments of the parties ............................................................................... 44 
7.3.5.2   Analysis by the Panel ........................................................................................... 44 
7.3.6   The question of whether the compound tariff is inconsistent with Article II:1(b), 
first sentence, of  the GA TT 1994  ........................................................................................ 46 
7.3.6.1   The treatment accorded to the products concerned in Colombia's Schedule of 
Concessi ons ................................................................................................................... . 48 WT/DS461/R 
 
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  7.3.6.2   The treatment accorded to the products concerned pursuant to the measure at 
issue .............................................................................................................................. 48 
7.3.6.3   The question of whether the compo und tariff gives rise to the imposition of 
ordinary customs duties in excess of those provided for in Colombia's Schedule of 
Concessi ons ................................................................................................................... . 49 
7.3.6.4   The question of the exis tence of a "legisla tive ceiling" .............................................. 55 
7.3.6.5   Conclusion ......................................................................................................... 56 
7.3.7   The question of whether the compound tariff is inconsistent with Article II:1(a) of 
the GATT 1994 ................................................................................................................ 57 
7.3.8   General conclusion with regard to the claims concerning Article II:1(a) and 
Article II:1(b), first sent ence, of the GATT 1994 ................................................................... 57 
7.4   Colombia's defence under  Article XX of the GATT 1994................................................... 57 
7.4.1   Summary of the arguments of the parties and third parties .......................................... 58 
7.4.1.1   Summary of Colombia's main arguments ................................................................ 58 
7.4.1.2   Summary of the main arguments of Panama ........................................................... 64 
7.4.1.3   Summary of the main arguments of the third parties ................................................ 69 
7.4.2   Colombia's defence under Article XX(a) of the GATT 1994 ............................................ 73 
7.4.2.1   General aspects concerning the analysis of Article XX of the GATT 1994  ...................... 73 
7.4.2.2   The text of Arti cle XX(a) of th e GATT 1994 ............................................................. 74 
7.4.2.3   Measures necessary to protect public morals ........................................................... 74 
7.4.2.4   Structure of the analysis ...................................................................................... 75 
7.4.2.5   The question of whether the compound tariff is a measure necessary to protect 
public morals ................................................................................................................. . 80 
7.4.2.6   As to whether the compound tariff is a measure "necessary" to protect public 
morals ........................................................................................................................ ... 95 
7.4.2.7   Conclusion as to whether the compound tariff is a measure necessary to protect 
public morals within the meaning of  Article XX(a) of the GATT 1994 ...................................... 106  
7.4.3   Colombia's defence under Article XX(d) of the GATT 1994 .......................................... 106  
7.4.3.1   The legal standard of Article XX(d) of the GATT 1994 ............................................. 106  
7.4.3.2   The question of whether the compound tariff is a measure necessary to secure 
compliance with laws or regulations which are not inconsistent with the provisions of the 
GATT 1994 ................................................................................................................... 1 11 
7.4.3.3   Conclusion as to whether the compound tariff is a measure necessary to secure 
compliance with laws or regulations which are not inconsistent with the GATT 1994, 
within the meaning of Articl e XX(d) of the GATT 1994 ......................................................... 117  
7.4.4   The chapeau  (introductory clause) of Ar ticle XX of the GATT 1994 .............................. 118  
7.4.4.1   The legal standard of the chapeau  ....................................................................... 118  
7.4.4.2   The question of whether the comp ound tariff meets the requirements of the 
chapeau  of Article XX of the GATT 1994 ............................................................................ 120  
7.4.4.3   Conclusion as to whether the compound tariff meets the requirements of the 
chapeau  of Article XX of the GATT 1994 ............................................................................ 126  
7.4.5   Conclusion as to whether Colomb ia's compound tariff is justified under 
Article XX of the GATT 1994 ............................................................................................ 127  
7.5   Suggestion for the implementation  of recommendations  and rulings .............................. 127  
7.6   Final comments ...................................................................................................... 128  
8   CONCLUSIONS AND RECOMMENDATIONS ............................................................... 129  WT/DS461/R 
 
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LIST OF ANNEXES 
 
ANNEX A 
WORKING PROCEDURES OF THE PANEL 
 Contents Page 
Annex A-1 Working Procedures of the Panel A-1 
ANNEX B 
ARGUMENTS OF THE PARTIES 
PANAMA 
 Contents Page 
Annex B-1 First part of the executive summary of the arguments of Panama B- 
Annex B-2 Second part of the executive summary of the arguments of Panama B- 
 
COLOMBIA 
 Contents Page 
Annex B-3 First part of the executive summary of the arguments of Colombia B- 
Annex B-4 Second part of the executive summary of the arguments of Colombia B- 
 
ANNEX C 
ARGUMENTS OF THE THIRD PARTIES  
 Contents Page 
Annex C-1 Executive summary of the ar guments of the United States C- 
Annex C-2 Executive summary of the arguments of the Philippines C- 
Annex C-3 Executive summary of the arguments of Honduras C- 
Annex C-4 Executive summary of the arguments of the European Union C- 
 WT/DS461/R 
 
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  CASES CITED IN THIS REPORT 
Short Title Full Case Title and Citation 
Argentina – Import 
Measures Appellate Body Reports, Argentina – Measures Affecting the Importation of 
Goods , WT/DS438/AB/R / WT/DS444/AB /R / WT/DS445/AB/R, adopted 
26 January 2015 
Argentina – Textiles and 
Apparel Appellate Body Report, Argentina – Measures Affect ing Imports of Footwear, 
Textiles, Apparel and Other Items , WT/DS56/AB/R and Corr.1, adopted 
22 April 1998 
Argentina – Textiles and 
Apparel Panel Report, Argentina – Measures Affecting Imports of Footwear, Textiles, 
Apparel and Other Items , WT/DS56/R, adopted 22 April 1998, as modified by 
Appellate Body Repo rt WT/DS56/AB/R 
Australia – Apples Appellate Body Report, Australia – Measures Affectin g the Importation of Apples 
from New Zealand , WT/DS367/AB/R, adopted 17 December 2010 
Australia – Salmon Appellate Body Report, Australia – Measures Affecting Importation of Salmon , 
WT/DS18/AB/R, adopted 6 November 1998 
Brazil – Retreaded Tyres Appellate Body Report, Brazil – Measures Affecting Imports of Retreaded Tyres , 
WT/DS332/AB/R, adopted 17 December 2007 
Brazil – Retreaded Tyres Panel Report, Brazil – Measures Affecting Imports of Retreaded Tyres , 
WT/DS332/R, adopted 17 December 2007, as modified by Appellate Body Report WT/DS332/AB/R 
Canada – Dairy 
(Article 21.5 – New 
Zealand and US II) Appellate Body Report, Canada – Measures  Affecting the Importation of Milk and 
the Exportation of Dairy Products – Seco nd Recourse to Article 21.5 of the DSU 
by New Zealand and the United States, WT/DS103/AB/RW2, WT/DS113/AB/RW2, 
adopted 17 January 2003 
Canada – Periodicals Panel Report, Canada – Certain Measures Concerning Periodicals, WT/DS31/R 
and Corr.1, adopted 30 July 1997, as modified by Appellate Body Report 
WT/DS31/AB/R 
Canada – Renewable 
Energy / Canada – 
Feed-in Tariff Program  Appellate Body Reports, Canada – Certain Measures Affecting the Renewable 
Energy Generation Sector / Canada – Measures Relating to the Feed-in Tariff 
Program , WT/DS412/AB/R / WT/DS426/AB/R, adopted 24 May 2013 
Canada – Wheat Exports 
and Grain Imports Appellate Body Report, Canada – Measures Relating to Exports of Wheat and 
Treatment of Imported Grain , WT/DS276/AB/R, adopted 27 September 2004 
Canada – Wheat Exports 
and Grain Imports Panel Report, Canada – Measures Relating to Ex ports of Wheat and Treatment of 
Imported Grain , WT/DS276/R, adopted 27 September 2004, upheld by Appellate 
Body Report WT/DS276/AB/R 
Chile – Price Band System Appellate Body Report, Chile – Price Band System and Safeguard Measures 
Relating to Certain Agricultural Products, WT/DS207/AB/R, adopted 
23 October 2002 
China – Auto Parts Appellate Body Reports, China – Measures Affecting Imports of Automobile Parts, 
WT/DS339/AB/R / WT/DS340/AB/R / WT /DS342/AB/R, adopted 12 January 2009 
China – Publications and 
Audiovisual Products Appellate Body Report, China – Meas ures Affecting Trading Rights and 
Distribution Services for Certain Publ ications and Audiovisual Entertainment 
Products, WT/DS363/AB/R, adopted 19 January 2010 
China – Publications and 
Audiovisual Products Panel Report, China – Measures Affecting Tr ading Rights and Distribution Services 
for Certain Publications and Audiovisua l Entertainment Products, WT/DS363/R 
and Corr.1, adopted 19 January 2010, as modified by Appellate Body Report 
WT/DS363/AB/R 
China – Rare Earths Panel Reports, China – Measures Relate d to the Exportation of Rare Earths, 
Tungsten, and Molybdenum, WT/DS431/R and Add.1 / WT/DS432/R and Add.1 / 
WT/DS433/R and Add.1, adopted 29 August 2014, upheld by Appellate Body Reports WT/DS431/AB/R / WT/D S432/AB/R / WT/DS433/AB/R 
Colombia – Ports of Entry Panel Report, Colombia – Indicative Prices  and Restrictions on Ports of Entry, 
WT/DS366/R and Corr.1, adopted 20 May 2009 
Dominican Republic – 
Import and Sale of 
Cigarettes Appellate Body Report, Domi nican Republic – Measures Affecting the Importation 
and Internal Sale of Cigarettes,  WT/DS302/AB/R, adopted 19 May 2005 WT/DS461/R 
 
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  Short Title Full Case Title and Citation 
Dominican Republic – 
Import and Sale of 
Cigarettes Panel Report, Dominican Republic – Me asures Affecting the Importation and 
Internal Sale of Cigarettes, WT/DS302/R, adopted 19 May 2005, as modified by 
Appellate Body Report WT/DS302/AB/R 
Dominican Republic – 
Safeguard Measures Panel Report, Dominican Republic – Safeguard Measures on Imports of 
Polypropylene Bags and Tubular Fabric, WT/DS415/R, WT/DS416/R, WT/DS417/R, WT/DS418/R, and Add.1, adopted 22 February 2012 
EC – Asbestos Appellate Body Report, European Commun ities – Measures Affecting Asbestos 
and Asbestos-Containing Products, WT/DS135/AB/R, adopted 5 April 2001 
EC – Asbestos Panel Report, European Communities – Measures Affect ing Asbestos and 
Asbestos-Containing Products, WT/DS135/R and Add.1, adopted 5 April 2001, as 
modified by Appellate Bo dy Report WT/DS135/AB/R 
EC – Bananas III Appellate Body Report, European Commun ities – Regime for the Importation, 
Sale and Distribution of Bananas, WT/DS27/AB/R, adopted 25 September 1997 
EC – Bananas III 
(Article 21.5 – Ecuador II) / 
EC – Bananas III 
(Article 21.5 – US) Appellate Body Reports, European Comm unities – Regime for the Importation, 
Sale and Distribution of Bananas – Second  Recourse to Article 21.5 of the DSU by 
Ecuador, WT/DS27/AB/RW2/ECU, adopted 11 December 2008, and Corr.1 / European Communities – Regi me for the Importation, Sa le and Distribution of 
Bananas – Recourse to Article 21.5 of the DSU by the United States, WT/DS27/AB/RW/USA and Corr.1, adopted 22 December 2008 
EC – Bananas III 
(Article 21.5 – Ecuador II) Panel Report, European Communities – Re gime for the Importation, Sale and 
Distribution of Bananas – Second Recourse  to Article 21.5 of the DSU by Ecuador, 
WT/DS27/RW2/ECU, adopted 11 December 2008, as modified by Appellate Body 
Report WT/DS27/AB/RW2/ECU 
EC – Bed Linen 
(Article 21.5 – India) Appellate Body Report, European Communit ies – Anti-Dumping Duties on Imports 
of Cotton-Type Bed Linen fro m India – Recourse to Article 21.5 of the DSU by 
India, WT/DS141/AB/RW, adopted 24 April 2003 
EC – Chicken Cuts Appellate Body Report, European Communit ies – Customs Classification of Frozen 
Boneless Chicken Cuts, WT/DS269/AB/R, WT/DS286/AB/R, adopted 
27 September 2005, and Corr.1 
EC – Chicken Cuts (Brazil) Panel Report, European Communities – Cust oms Classification of Frozen Boneless 
Chicken Cuts, Complaint by Brazil, WT/DS269/R, adopted 27 September 2005, as 
modified by Appellate Body Report WT/DS269/AB/R, WT/DS286/AB/R 
EC – Chicken Cuts 
(Thailand) Panel Report, European Communities – Cust oms Classification of Frozen Boneless 
Chicken Cuts, Complaint by Thailand, WT/DS286/R, adopted 27 September 2005, 
as modified by Appellate Body Report WT/DS269/AB/R, WT/DS286/AB/R 
EC – Computer Equipment Appellate Body Report, European Communities – Customs Classification of 
Certain Computer Equipment , WT/DS62/AB/R, WT/DS67/AB/R, WT/DS68/AB/R, 
adopted 22 June 1998 
EC – Computer Equipment Panel Report, European Communities – Custom s Classification of Certain 
Computer Equipment , WT/DS62/R, WT/DS67/R, WT/DS68/R, adopted 
22 June 1998, as modified by Appellate Body Report WT/DS62/AB/R, 
WT/DS67/AB/R, WT/DS68/AB/R 
EC – Hormones Appellate Body Report, EC Measures Concerning Meat and Meat Products 
(Hormones) , WT/DS26/AB/R, WT/DS48/AB/R, adopted 13 February 1998 
EC – IT Products Panel Reports, European Communities an d its Member States – Tariff Treatment 
of Certain Information Technology Products, WT/DS375/R / WT/DS376/R / 
WT/DS377/R, adopted 21 September 2010 
EC – Sardines Appellate Body Report, European Commun ities – Trade Description of Sardines, 
WT/DS231/AB/R, adopted 23 October 2002 
EC – Seal Products Appellate Body Reports, European Co mmunities – Measures Prohibiting the 
Importation and Marketing of Seal Products, WT/DS400/AB/R / WT/DS401/AB/R, 
adopted 18 June 2014 
EC – Seal Products Panel Reports, European Communities – Measures Prohibiting the Importation 
and Marketing of Seal Products, WT /DS400/R and Add.1 / WT/DS401/R and 
Add.1, adopted 18 June 2014, as modified by Appellate Body Reports WT/DS400/AB/R / WT/DS401/AB/R 
EC – Selected Customs 
Matters Appellate Body Report, European Comm unities – Selected Customs Matters, 
WT/DS315/AB/R, adopted 11 December 2006 WT/DS461/R 
 
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  Short Title Full Case Title and Citation 
EC – Tariff Preferences Appellate Body Report, European Communities – Conditions for the Granting of 
Tariff Preferences to Developing Countries , WT/DS246/AB/R, adopted 
20 April 2004 
EC – Trademarks and 
Geographical Indications 
(US) Panel Report, European Communities – Protection of Trademarks and 
Geographical Indications for Agricultural  Products and Foodstuffs, Complaint by 
the United States, WT/DS174/R, adopted 20 April 2005 
EC – Tube or Pipe Fittings Appellate Body Report, European Comm unities – Anti-Dumping Duties on 
Malleable Cast Iron Tube or Pipe Fittings from Brazil, WT/DS219/AB/R, adopted 
18 August 2003 
India – Additional Import 
Duties Appellate Body Report, India – Additional and Extra-Additional Duties on Imports 
from the United States, WT/DS360/AB/R, adopted 17 November 2008 
Japan – Agricultural 
Products II Appellate Body Report, Japan – Measur es Affecting Agricultural Products, 
WT/DS76/AB/R, adopted 19 March 1999 
Japan – Alcoholic 
Beverages II Appellate Body Report, Japan – Taxes on  Alcoholic Beverages, WT/DS8/AB/R, 
WT/DS10/AB/R, WT/DS11/AB/R, adopted 1 November 1996 
Japan – Apples Appellate Body Report, Japan – Measures  Affecting the Importation of Apples, 
WT/DS245/AB/R, adopted 10 December 2003 
Japan – Film Panel Report, Japan – Measures Affect ing Consumer Photographic Film and 
Paper, WT/DS44/R, adopted 22 April 1998 
Korea – Alcoholic 
Beverages Appellate Body Report, Korea – Taxes on Alcoholic Beverages , WT/DS75/AB/R, 
WT/DS84/AB/R, adopted 17 February 1999 
Korea – Dairy Appellate Body Report, Ko rea – Definitive Safeguard Measure on Imports of 
Certain Dairy Products, WT/DS98/AB/R and Corr.1, adopted 12 January 2000 
Korea – Various Measures 
on Beef Appellate Body Report, Korea – Measures Affecting Imports of Fresh, Chilled and 
Frozen Beef , WT/DS161/AB/R, WT/DS169/AB/R, adopted 10 January 2001 
Korea – Various Measures 
on Beef Panel Report, Korea – Measures Affecting Import s of Fresh, Chilled and Frozen 
Beef, WT/DS161/R, WT/DS169/R, adopted 10 January 2001, as modified by 
Appellate Body Report WT /DS161/AB/R, WT/DS169/AB/R 
Mexico – Taxes on Soft 
Drinks Appellate Body Report, Mexico – Tax Measures on Soft Drinks and Other 
Beverages, WT/DS308/AB/R, adopted 24 March 2006 
Mexico – Taxes on Soft 
Drinks Panel Report, Mexico – Tax Measures on  Soft Drinks and Other Beverages, 
WT/DS308/R, adopted 24 March 2006, as modified by Appellate Body Report 
WT/DS308/AB/R 
Peru – Agricultural 
Products Panel Report, Peru – Additional Duty on Imports of Certain Ag ricultural Products, 
WT/DS457/R and Add.1, circulated to WTO Members 27 November 2014  
Thailand – Cigarettes 
(Philippines) Appellate Body Report, Thailand – Custom s and Fiscal Measur es on Cigarettes 
from the Philippines, WT/DS371/AB/R, adopted 15 July 2011 
US – 1916 Act Appellate Body Report, United States – Anti-Dumping Act of 1916, 
WT/DS136/AB/R, WT/DS162/AB/R, adopted 26 September 2000 
US – Anti-Dumping and 
Countervailing Duties 
(China) Appellate Body Report, United Stat es – Definitive Anti-Dumping and 
Countervailing Duties on Certain Produc ts from China, WT/DS379/AB/R, adopted 
25 March 2011, DSR 2011:V, p. 2869 
US – Anti-Dumping 
Measures on Oil Country Tubular Goods Appellate Body Report, United States – Anti-Dumping Measures on Oil Country 
Tubular Goods (OCTG) from Mexico, WT/DS282/AB/R, adopted 28 November 2005 
US – Carbon Steel Appellate Body Report, United States – Countervai ling Duties on Certain 
Corrosion-Resistant Carbon Stee l Flat Products from Germany , WT/DS213/AB/R, 
adopted 19 December 2002 
US – Carbon Steel Panel Report, United States – Countervailing Duties on Certain Corrosion-
Resistant Carbon Steel Fl at Products from Germany , WT/DS213/R and Corr.1, 
adopted 19 December 2002, as modified by Appellate Body Report WT/DS213/AB/R 
US – Carbon Steel (India)  Appellate Body Report, United States – Countervai ling Measures on Certain 
Hot-Rolled Carbon Steel Flat Products from India , WT/DS436/AB/R, adopted 
19 December 2014 
US – Clove Cigarettes Appellate Body Report, United States – Measures Affecting the Production and 
Sale of Clove Cigarettes, WT/DS406/AB/R, adopted 24 April 2012 WT/DS461/R 
 
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  Short Title Full Case Title and Citation 
US – Continued Zeroing Appellate Body Report, United States – Continued Existence and Application of 
Zeroing Methodology, WT/DS350/AB/R, adopted 19 February 2009 
US – COOL Appellate Body Reports, Un ited States – Certain Country of Origin Labelling 
(COOL) Requirements, WT/DS384/AB/R / WT/DS386/AB/R, adopted 23 July 2012 
US – Countervailing and 
Anti-Dumping Measures 
(China) Appellate Body Report, United States  – Countervailing and Anti-Dumping 
Measures on Certain Products from China, WT/DS449/AB/R and Corr.1, adopted 
22 July 2014 
US – Customs Bond 
Directive Panel Report, United States – Customs Bo nd Directive for Merchandise Subject to 
Anti-Dumping/Countervailing Duties, WT /DS345/R, adopted 1 August 2008, as 
modified by Appellate Body Repo rt WT/DS343/AB/R / WT/DS345/AB/R 
US – FSC (Article 21.5 – 
EC) Appellate Body Report, United States – Tax Treatment for "Foreign Sales 
Corporations" – Recourse to Article 21.5 of the DSU by the European 
Communities, WT/DS108/AB/RW, adopted 29 January 2002 
US – Gambling Appellate Body Report, United States – Measures Affecting the Cross-Border 
Supply of Gambling and Betting Services, WT/DS285/AB/R, adopted 20 April 2005, and Corr.1 
US – Gambling Panel Report, United States – Measures Affecting the Cross-Border Supply of 
Gambling and Betting Services, WT/DS285/R, adopted 20 April 2005, as modified 
by Appellate Body Report WT/DS285/AB/R 
US – Gasoline Appellate Body Report, United States  – Standards for Reformulated and 
Conventional Gasoline, WT/DS2/AB/R, adopted 20 May 1996 
US – Hot-Rolled Steel Appellate Body Report, United States – Anti-Dumping Measures on Certain 
Hot-Rolled Steel Products from Japan , WT/DS184/AB/R, adopted 23 August 2001 
US – Oil Country Tubular 
Goods Sunset Reviews Appellate Body Report, United States – Sunset Reviews of Anti-Dumping 
Measures on Oil Country Tubular G oods from Argentina, WT/DS268/AB/R, 
adopted 17 December 2004 
US – Oil Country Tubular 
Goods Sunset Reviews 
(Article 21.5 – Argentina) Appellate Body Report, United States – Sunset Reviews of Anti-Dumping 
Measures on Oil Country Tubular Goods fro m Argentina – Recourse to Article 21.5 
of the DSU by Argentina, WT/DS268/AB/RW, adopted 11 May 2007 
US – Shrimp Appellate Body Report, United States – Im port Prohibition of Certain Shrimp and 
Shrimp Products, WT/DS58/AB/R, adopted 6 November 1998 
US – Shrimp (Article 21.5 
– Malaysia) Appellate Body Report, United States – Im port Prohibition of Certain Shrimp and 
Shrimp Products – Recourse to Article 21.5 of the DSU by Malaysia, 
WT/DS58/AB/RW, adopted 21 November 2001 
US – Shrimp (Thailand) / 
US – Customs Bond Directive Appellate Body Report, United States – Measures Relating to Shrimp from 
Thailand / United States – Customs Bond  Directive for Merchandise Subject to 
Anti-Dumping/Countervailing Duties, WT/DS343/AB/R / WT/DS345/AB/R, 
adopted 1 August 2008 
US – Shrimp (Thailand) Panel Report, United States – Measures  Relating to Shrimp from Thailand, 
WT/DS343/R, adopted 1 August 2008, as modified by Appellate Body Report 
WT/DS343/AB/R / WT/DS345/AB/R 
US – Shrimp II (Viet Nam) Appellate Body Report, United States – Anti-Dumping Measures on Certain 
Shrimp from Viet Nam, WT/DS429/AB/R, adopted 22 April 2015, and Corr.1 
US – Softwood Lumber IV Appellate Body Report, United States – Final Countervailing Duty Determination 
with Respect to Certain Softwood Lumber from Canada, WT/DS257/AB/R, 
adopted 17 February 2004 
US – Tuna II (Mexico) Appellate Body Report, United States – Measures Concerning the Importation, 
Marketing and Sale of Tuna and Tuna Products, WT/DS381/AB/R, 
adopted 13 June 2012 
US – Upland Cotton Appellate Body Report, United States – Subsidies on Upland Cotton , 
WT/DS267/AB/R, adopted 21 March 2005 
US – Upland Cotton 
(Article 21.5 – Brazil) Appellate Body Report, United States – Subsidies on Upland Cotton – Recourse to 
Article 21.5 of the DSU by Brazil , WT/DS267/AB/RW, adopted 20 June 2008 
US – Wool Shirts and 
Blouses Appellate Body Report, United States – Measure Affe cting Imports of Woven Wool 
Shirts and Blouses from India , WT/DS33/AB/R, adopted 23 May 1997, and Corr.1 
US – Zeroing (EC) 
(Article 21.5 – EC) Appellate Body Report, United States – Laws, Regulations and Methodology for 
Calculating Dumping Margins ("Zeroing") – Recourse to Article 21.5 of the DSU 
by the European Communities , WT/DS294/AB/RW and Corr.1, adopted 
11 June 2009 WT/DS461/R 
 
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GATT CASES CITED IN THIS REPORT 
Short Title Full Case Title and Citation 
EEC – Parts and 
Components  GATT Panel Report, European Economic Community – Regulation on Imports of 
Parts and Components , L/6657, adopted 16 May 1990, BISD 37S/132 
US – Superfund  GATT Panel Report, United States – Taxes on Pe troleum and Certain Imported 
Substances , L/6175, adopted 17 June 1987, BISD 34S/136 
 WT/DS461/R 
 
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  EXHIBITS REFERRED TO IN THIS REPORT 
Exhibit Title Short title 
PAN-1 Decreto del Presidente de la República de Colombia No. 4927 
del 26 de diciembre de 2011, Por el cual se adopta el Arancel de Aduanas y otras disposiciones  (Decree of the President of 
the Republic of Colombia No. 4927 of 26 December 2011, adopting the Customs Tariff and other provisions) (extracts) Colombian Customs Tariff 
(extracts) 
PAN-2 Decreto del Presidente de la República de Colombia No. 074 
del 23 de enero de 2013, Por el cual se modifica parcialmente 
el Arancel de Aduanas (Decree of the President of the 
Republic of Colombia No. 074 of 23 January 2013, partially 
amending the Customs Tariff)  Decree No. 074 
PAN-3 Decreto del Presidente de la República de Colombia No. 456 
del 28 de febrero de 2014, Por el cual se modifica parcialmente el Arancel de Aduanas (Decree of the President 
of the Republic of Colombia No. 456 of 28 February 2014, partially amending the Customs Tariff) Decree No. 456 
PAN-4 Cuadro ilustrativo del arancel consolidado de Colombia para 
los productos sujetos al arancel compuesto (Illustrative table 
of Colombia's bound tariff for products subject to the 
compound tariff) Illustrative table of Colombia's 
bound tariff 
PAN-5 Administración de la Zona Libr e de Colón, comunicación a la 
viceministra de negociaciones comerciales de Panamá  (Colón 
Free Zone Administration, communication to the Vice-Minister of Trade Negotiations of Panama), 25 August 2014 Colón Free Zone Administration, 
communication, 25 August 2014 
PAN-6 Presidencia de la República de Colombia, El Presidente Santos 
anuncia medidas para impu lsar el sector textile  (Office of the 
President of the Republic of Colombia, President Santos 
announces measures to boost the textiles sector), 
22 January 2003 Information note: Office of the 
President of the Republic, 
President announces measures 
to boost the textiles sector, 
22 January 2003 
PAN-7 Presidencia de la República de Colombia, Gobierno firmó 
Decreto para fortalecer sectores de confecciones y calzado  
(Office of the President of the Republic of Colombia, Government signs Decree to strengthen clothing and footwear sectors), 23 January 2013 Information note: Office of the 
President of the Republic, Government signs Decree to strengthen clothing and footwear sectors, 23 January 2013 
PAN-8 Centro de Prensa Internacional, Presidente Santos destaca 
beneficios de las medidas adoptadas para proteger la 
industria textil  (International Press Centre, President Santos 
highlights benefits of measur es taken to protect textiles 
industry), 22 July 2013 Information note: International 
Press Centre, President 
highlights benefits of measures 
taken to protect textiles 
industry, 22 July 2013 
PAN-9 Presidencia de la República de Colombia, Palabras del 
Presidente Juan Manuel Santos, en el Gran Encuentro Nacional "Tejiendo a Colombia", de la Cámara Colombiana de la Confección  (Office of the President of the Republic of 
Colombia, Statement by President Juan Manuel Santos at the national "Weaving Colombia" event organized by the Colombian Chamber of Clothing, 28 November 2012 Information note: Office of the 
President of the Republic, Statement by the President at the national "Weaving Colombia" event, 28 November 2012 
PAN-10 Presidencia de la República de Colombia, Palabras del 
Presidente Juan Manuel Santos al término de los Diálogos de 
Gestión en el Ministerio de Comercio, Industria y Turismo  
(Office of the President of the Republic of Colombia, 
Statement by President Juan Manuel Santos at the close of 
the Management Dialogues in the Ministry of Trade, Industry 
and Tourism), 20 January 2014 Information note: Office of the 
President of the Republic, 
Statement by the President at 
the close of the Management 
Dialogues in the Ministry of 
Trade, Industry and Tourism, 
20 January 2014 
PAN-11 Presidencia de la Federación Nacional de Comerciantes de 
Colombia (FENALCO), El arance l específico al calzado: una 
decisión controversial y con muchos daños colaterales  
(Presidency of the National Federation of Merchants of 
Colombia (FENALCO), The specific tariff on footwear: a 
controversial decision entailing considerable collateral damage), 5 February 2013 National Federation of 
Merchants, The specific tariff on footwear: a controversial decision entailing considerable 
collateral damage, 
5 February 2013 
PAN-12 El Nuevo Siglo , Fenalco pide bajar arancel a textiles y calzado  
(El Nuevo Siglo , "Fenalco asks for lower tariff on textiles and 
footwear"), 1 March 2013 News item: El Nuevo Siglo , 
"Fenalco asks for lower tariff on 
textiles and footwear", 
1 March 2013 WT/DS461/R 
 
- 11 - 
 
  Exhibit Title Short title 
PAN-13 El Economista , Controversia por decret o de importaciones de 
calzado  (El Economista , "Controversy over decree on 
footwear imports"), 6 September 2013  News item: El Economista , 
"Controversy over decree on footwear imports", 
6 September 2013 
PAN-14 La República , Fenalco y la Cámara de Confecciones llegan a 
acuerdo para modificar aranceles  (La República , "Fenalco and 
the Chamber of Clothing reach ag reement to modify tariffs"), 
7 December 2013 News item: La República , 
"Fenalco and the Chamber of 
Clothing reach agreement to 
modify tariffs", 7 December 
2013 
PAN-15 La República , El acuerdo entre los confeccionistas y Fenalco 
no convence a los importadores  (La República , "Importers not 
convinced by agreement between clothing manufacturers and 
Fenalco"), 9 December 2013 News item: La República , 
"Importers not convinced by 
agreement between clothing 
manufacturers and Fenalco", 9 December 2013 
PAN-16 Presidencia de la Federación Nacional de Comerciantes de 
Colombia (FENALCO), FENALCO rechaza decreto de aranceles 
para ropa y calzado que marcaría  un primer paso del cierre 
de la economía  (Presidency of the National Federation of 
Merchants of Colombia (FENAL CO), FENALCO rejects decree 
on clothing and footwear tariffs  which would mark a first step 
towards closing the economy) National Federation of 
Merchants, FENALCO rejects 
decree on clothing and footwear 
tariffs 
PAN-17 Protocolo de Procedimiento de Cooperación e Intercambio de 
Información Aduanera entre las Autoridades Aduaneras de la 
República de Panamá y la  República de Colombia  (Protocol of 
Procedure for Cooperation and Exchange of Customs Information between th e Customs Authorities of the Republic 
of Panama and the Republic of Colombia), signed on 31 October 2006 Protocol of Procedure for 
Cooperation and Exchange of Customs Information between the Customs Authorities of Panama and Colombia, 31 October 2006 
PAN-18 Declaración de  importación (Import declaration) Import declaration 
PAN-19 Declaración de importación  (Import declaration) Import declaration 
PAN-20 Ministerio de Comercio e Indu strias de Panamá y Autoridad 
Nacional de Aduanas de Panamá, comunicaciones  (Ministry of 
Trade and Industry of Panama and National Customs 
Authority of Panama, communications), 25 November 2014 
(including annexes) Ministry of Trade and Industry 
and National Customs Authority 
of Panama, communications, 
25 November 2014 
PAN-21 Autoridad Nacional de Aduana s de Panamá y Dirección de 
Impuestos y Aduanas Nacionales de Colombia, comunicaciones (con anexos) (National Customs Authority of 
Panama and National Customs and Excise Directorate of Colombia, communications, including annexes) National Customs Authority of 
Panama and National Customs and Excise Directorate of Colombia, communications 
PAN-28 Ministerio de Comercio, Industria y Turismo de Colombia, 
Propuestas para modificación del Decreto 074 de 2013 
(Ministry of Trade, Industry and Tourism of Colombia, 
Proposed amendments to Decree No. 074 of 2013) Ministry of Trade, Industry and 
Tourism of Colombia, Proposed 
amendments to Decree No. 074 
of 2013 
PAN-29 Constitución Política de Colombia, Preámbulo y artículos 188 
y 189  (Political Constitution of Colombia, Preamble and 
Articles 188 and 189) Political Constitution of 
Colombia, Preamble and Articles 188 and 189 
PAN-30 Ley No. 7 de 1991, Por la cual se dictan normas generales a 
las cuales debe sujetarse el Gobierno Nacional para regular el 
comercio exterior del país, se crea el Ministerio de Comercio 
Exterior, se determina la composición y funciones del Consejo 
Superior de Comercio Exterior, se crean el Banco de Comercio 
Exterior y el Fondo de Moderniz ación Económica, se confieren 
unas autorizaciones y se dictan otras disposiciones  (Law 
No. 7 of 1991 establishing general rules to be observed by 
the Government in regulating the country's foreign trade, 
creating the Ministry of Foreign Trade, determining the 
composition and functions of the Higher Council for Foreign 
Trade, creating the Foreign Trade Bank and the Economic 
Modernization Fund, granting certain authorizations and 
establishing other provisions), 16 January 1991 Law No. 7 of 1991 WT/DS461/R 
 
- 12 - 
 
  Exhibit Title Short title 
PAN-31 Ley No. 1609 de 2013, Por la cual se dictan normas generales 
a las cuales debe sujetarse el gobierno para modificar los aranceles, tarifas y demás disposiciones concernientes al 
régimen de aduanas  (Law No. 1609 of 2013 establishing 
general rules to be observed  by the Government when 
modifying duties, tariffs and other provisions concerning the customs regime), 2 January 2013 Law No. 1609 of 2013 
PAN-34 Dirección de Impuestos y Aduanas Nacionales de Colombia,  
Base de datos de precios de referencia (National Customs and 
Excise Directorate of Colombia, Reference price database) National Customs and Excise 
Directorate of Colombia, 
Reference price database 
COL-1 Centro Nacional de Memoria Hist órica, ¡Basta Ya!, Colombia: 
Memorias de Guerra y Dignidad: Informe general Grupo de 
Memoria Histórica (National Historical Memory Centre, 
Enough Already! Colombia: Memories of War and Dignity , 
General Report, Historical Memory Group), 2013 National Historical Memory 
Centre, Enough Already! , 
General Report, Historical Memory Group, 2013 
COL-2 S e m a n a ,  S e i s  m i l l o n e s  d e  v í c t i m a s  d e j a  e l  c o n f l i c t o  e n  
Colombia  (Semana , "Colombian conflict claims six million 
victims"), 2 February 2008 News item: Semana , "Colombian 
conflict claims six million 
victims", 2 February 2008 
COL-3 El Tiempo, Guerra contra el na rcotráfico: 20 años de dolor, 
muerte y corrupción  (El Tiempo , "The war against drug 
trafficking: 20 years of pa in, death and corruption"), 24 
November 2013 News item: El Tiempo , "The war 
against drug trafficking", 24 November 2013 
COL-4 Ricardo Rocha García, Las Nuevas Dimensiones del 
Narcotráfico en Colombia, Oficina de las Naciones Unidas 
contra la Droga y el Delito - UNODC, Ministerio de Justicia y 
del Derecho de Colombia  (Ricardo Rocha García, New 
dimensions of drug trafficking in Colombia , United Nations 
Office on Drugs and Crime - UNODC, Colombian Ministry of 
Justice and Law), 2011 Rocha García, New dimensions 
of drug trafficking in Colombia , 
2011 
COL-6 Ministerio del Interior y de Justicia de la República de 
Colombia, Política Nacional contra las Drogas (Ministry of the 
Interior and Justice of the Republic of Colombia, National Anti-Drug Policy)  Ministry of the Interior and 
Justice, National Anti-Drug Policy 
COL-8 World Customs Organization, Illicit Trade Report 2012  World Customs Organization, 
Illicit Trade Report 2012  
COL-10 Ministerio de Hacienda y Cr édito Público, Dirección de 
Impuestos y Aduanas Nacionales, Unidad de Información y Análisis Financiero de Colombia,  Tipologías de Lavado de 
Activos Relacionadas con Contrabando (Ministry of Finance 
and Public Credit, National Customs and Excise Directorate, Information and Financial Analysis Unit, Money Laundering 
Typologies Related to Smuggling ), January 2006 National Customs and Excise  
Directorate, Information and Financial Analysis Unit, Money 
Laundering Typologies Related to Smuggling , January 2006 
COL-11 Financial Action Task Force, Trade-Based Money Laundering , 
23 June 2006 Financial Action Task Force, 
Trade-Based Money Laundering , 
23 June 2006 
COL-12 Financial Action Task Force, Money Laundering Vulnerabilities 
of Free Trade Zones , March 2010 Financial Action Task Force, 
Money Laundering Vulnerabilities of Free Trade Zones , March 2010 
COL-15 Juan Ricardo Ortega, Contrabando y Lavado de Activos, 
Dirección de Impuestos y Aduanas Nacionales de Colombia  
(Juan Ricardo Ortega, Smuggling and Money Laundering , 
National Customs and Excise Directorate of Colombia), 
July 2013 Ortega, Smuggling and Money 
Laundering , July 2013 
COL-16 Decreto del Presidente de la República de Colombia No. 074 
del 23 de enero de 2013, Por el cual se modifica parcialmente el Arancel de Aduanas  (Decree of the President of the 
Republic of Colombia No. 074 of 23 January 2013, partially amending the Customs Tariff) Decree No. 074 
COL-17 Decreto del Presidente de la República de Colombia No. 456 
del 28 de febrero de 2014, Por el cual se modifica 
parcialmente el Arancel de Aduanas  (Decree of the President 
of the Republic of Colombia No. 456 of 28 February 2014, 
partially amending the Customs Tariff) Decree No. 456 
COL-18 Claudia Rincón, Contrabando y La vado de Activos, Dirección 
de Impuestos y Aduanas Nacionales de Colombia  (Claudia 
Rincón, Smuggling and Money Laundering , National Customs 
and Excise Directorate of Colombia), April 2014 Rincón, Smuggling and Money 
Laundering , April 2014 WT/DS461/R 
 
- 13 - 
 
  Exhibit Title Short title 
COL-19 República de Colombia, Cons ejo Nacional de Política 
Económica y Social, Política Nacional Anti-Lavado de Activos y 
Contra la Financiación del Terrorismo, Documento Conpes 
3793 (Republic of Colombia, National Council for Economic 
and Social Policy (CONPES), National Policy against Money 
Laundering and the Financing of Terrorism , CONPES 
document 3793), 18 December 2013 National Council for Economic 
and Social Policy, National Policy 
against Money Laundering and 
the Financing of Terrorism , 
18 December 2013 
COL-20 Proyecto de ley, Por medio del cual se adoptan instrumentos 
para prevenir, controlar y sancionar la competencia desleal derivada de operaciones ilegales de comercio exterior, comercio interno, lavado de activos y evasión fiscal  (Draft 
Law adopting instruments to prevent, control and punish unfair competition deriving from illegal foreign trade, internal trade, money laundering and tax evasion operations)  Draft Law adopting instruments 
to prevent, control and punish unfair competition deriving from illegal foreign trade, internal trade, money laundering and tax evasion operations 
COL-21 Informe de Ponencia para primer  debate del Proyecto de ley 
94 de 2013 – Senado, Por medio del cual se adoptan 
instrumentos para prevenir, controlar y sancionar el 
contrabando, el lavado de activos y la evasión fiscal (Report 
for the first discussion of Draft Law No. 94 of 2013 - Senate, 
adopting instruments to prevent, control and punish 
smuggling, money laundering and tax evasion)  Report for the first discussion of 
Draft Law No. 94 of 2013 
COL-22 República de Colombia, Co misión de Coordinación 
Interinstitucional para el Contro l del Lavado de Activos, Acta 
Sesión XXI, 22 de julio de 2013  (Republic of Colombia, 
Inter-Institutional Coordination Commission for the Control of 
Money Laundering, Minutes of the 21st session, 22 July 2013)  Inter-institutional Coordination 
Commission for the Control of Money Laundering, Minutes of the 21
st session, 22 July 2013 
COL-23 República de Colombia, Cons ejo Superior de Comercio 
Exterior, Acta de la sesión 94, 1 de abril de 2013  (Republic of 
Colombia, Higher Council for Foreign Trade, Minutes of the 
94th session, 1 April 2013) Higher Council for Foreign Trade, 
Minutes of the 94th session, 
1 April 2013 
COL-24 Oficina de las Naciones Unidas contra la Droga y el Delito, 
Convención de las Naciones Unidas contra la Delincuencia Organizada Transnacional y sus Protocolos  (United Nations 
Office on Drugs and Crime, United Nations Convention 
against Transnational Organi zed Crime and the Protocols 
thereto ) (signed in December 2000), 2004 United Nations Convention 
against Transnat ional Organized 
Crime and the Protocols thereto , 
December 2000 
COL-25 Convenio Internacional para la Represión de la Financiación 
del Terrorismo  (International Convention for the Suppression 
of the Financing of Terrorism ), approved in December 1999 International Convention for the 
Suppression of the Financing of 
Terrorism , December 1999  
COL-26 GAFISUD,  Estándares Internacionales sobre la Lucha contra el 
Lavado de Activos y el Financiamiento del Terrorismo y la 
Proliferación: Las Recomendaciones del GAFI  (GAFISUD, 
International Standards on Combating Money Laundering and the Financing of Terrorism & Proliferation: The FATF Recommendations ), February 2012  GAFISUD, International 
Standards on Combating Money 
Laundering and the Financing of 
Terrorism & Proliferation , 
February 2012  
COL-27 Ministerio de Justicia y del Derecho, Observatorio de Drogas 
de Colombia,  El Problema de las Drogas en Colombia – 
Acciones y Resultados 2011-2013 (Ministry of Justice and 
Law, Colombian Drugs Observatory, The Drug Problem in 
Colombia - Actions and Results 2011 - 2013 ) Ministry of Justice and Law, 
Drugs Observatory, The Drug 
Problem in Colombia  
COL-28 Disposiciones sobre intercambio de información aduanera en 
los TLC vigentes con Colombia (Provisions on exchange of 
customs information in existing FTAs with Colombia) Provisions on exchange of 
customs information in existing FTAs with Colombia 
COL-29 The Wall Street Journal,  Llega la hora de la "nueva China" 
(The Wall Street Journal , "The New China"),  Leslie Norton, 
20 November 2014 News item: The Wall Street 
Journal, "The New China", 
20 November 2014 
COL-30 Charts submitted by Colombia  with its opening statement at 
the first meeting of the Panel Charts submitted by Colombia 
with its opening statement at the first meeting of the Panel 
COL-31 List of signatory countries to the United Nations Convention 
against Transnational Organized Crime List of signatory countries to the 
United Nations Convention 
against Transnational Organized 
Crime WT/DS461/R 
 
- 14 - 
 
  Exhibit Title Short title 
COL-33 República de Colombia, Departamento Nacional de 
Planeación, Plan Nacional de Desarrollo 2010-2014  (Republic 
of Colombia, National Planning Department, National 
Development Plan 2010-2014) (extracts) National Planning Department, 
National Development Plan 2010-2014) (extracts) 
COL-34 República de Colombia, Comi té de Asuntos Aduaneros, 
Arancelarios y de Comercio Exte rior – Comité Triple A, Acta 
de la Sesión 269 Ordinaria, 23 de enero de 2014  (Republic of 
Colombia, Committee on Customs,  Tariffs and Foreign Trade - 
"Triple A Committee", Minutes of the 269th regular session, 23 
January 2014) Committee on Customs, Tariffs 
and Foreign Trade, Minutes of 
the 269th regular session, 
23 January 2014 
COL-35 Portafolio.co,  Decreto de arancel mixto en el sector textil se 
mantendrá (Portafolio.co , "Decree on the mixed tariff in the 
textiles sector will be maintained"), 21 January 2014 News item: Portafolio.co , 
"Decree on the mixed tariff in 
the textiles sector will be maintained", 21 January 2014 
COL-39 La Prensa, "Paralizan TLC con Colombia"  (La Prensa , "FTA 
with Colombia paralysed"), Luis Burón-Barahona, 
7 January 2015 News item: La Prensa , "FTA with 
Colombia paralysed", 
7 January 2015 
COL-42 Comité Preparatorio sobre Facilitación del Comercio, 
Notificación de los compromisos designados en la Categoría A 
del Acuerdo sobre Facilitación de l Comercio, Comunicación de 
Colombia  (Preparatory Committee on Trade Facilitation, 
Notification of commitments de signated under Category A of 
the Agreement on Trade Facilitation, Communication by Colombia), Document WT/PCTF/N/COL/1, 13 June 2014 Preparatory Committee
 
on Trade Facilitation,  
Communication by Colombia,  
document WT/PCTF/N/COL/1, 
13 June 2014 
COL-43 Análisis de Operaciones, Análisis de Selectividad Capítulos (61 
al 64), años 2012 y 2013  (Analysis of Operations, Selectivity 
Analysis Chapters (61 to 64), years 2012 and 2013) Analysis of Operations, 
Selectivity Analysis Chapters 
(61 to 64), years 2012 and 2013 
COL-45 Ley No. 1609 de 2013, Por la cual se dictan normas generales 
a las cuales debe sujetarse el gobierno para modificar los aranceles, tarifas y demás disposiciones concernientes al régimen de aduanas  (Law No. 1609 of 2013 establishing 
general rules to be observed  by the Government when 
modifying duties, tariffs and other provisions concerning the customs regime), 2 January 2013 Law No. 1609 of 2013 
 WT/DS461/R 
 
- 15 - 
 
  ABBREVIATIONS USED IN THIS REPORT 
Abbreviation Description 
COMALEP Multilateral Convention on Cooperation and Mutual Assistance between the 
National Customs Directorates of Latin America, Spain and Portugal 
Customs Valuation 
Agreement Agreement on Implementation of Article VII of the General Agreement on 
Tariffs and Trade 1994 
Decree No. 074 Decreto del Presidente de la República de Colombia No. 074, de 23 de enero de 
2013 (Decree of the President of the Republic of Colombia No. 074 of 
23 January 2013) 
Decree No. 456 Decreto del Presidente de la República de Colombia No. 456, de 28 de febrero 
de 2014  (Decree of the President of the Republic of Colombia No. 456 of 
28 February 2014) 
DIAN Dirección de Impuestos y Adua nas Nacionales de Colombia  (National Customs 
and Excise Directorate of Colombia) 
DSB Dispute Settlement Body 
DSU Understanding on Rules and Procedures  Governing the Settlement of Disputes 
FATF Financial Action Task Force 
f.o.b. Free on board 
GAFILAT Grupo de Acción Financiera de América Latina  (Latin American Financial Action 
Task Force) 
GAFISUD  Grupo de Acción Financiera de Sudamérica  (South American Financial Action 
Task Force) 
GATS General Agreement on Trade in Services  
GATT 1994 General Agreement on Tariffs and Trade 1994 
kg Kilograms 
US$ United States dollars 
Vienna Convention  Vienna Convention on the Law of Treaties 
WCO World Customs Organization  
WTO World Trade Organization 
WTO Agreement Marrakesh Agreement Esta blishing the World Trade Organization 
 WT/DS461/R 
 
- 16 - 
 
  1  INTRODUCTION 
1.1   Complaint by Panama 1.1.  On 18 June 2013, Panama requested consultations with Colombia pursuant to Article 4 of the 
Understanding on Rules and Procedures Governing the Settlement of Disputes (DSU) and 
Article XXII of the General Agreement on Tariffs and Trade 1994 (GATT 1994) with respect to the 
imposition by Colombia of a compound tariff affecting the importation of textiles, apparel and footwear from Panama.
1 
1.2.  Consultations were held on 24 July 2013 but failed to resolve the dispute.2 
1.2  Panel establishment and composition 1.3.  On 19 August 2013, Panama requested the Dispute Settlement Body (DSB) to establish 
a panel pursuant to Articles 4.7 and 6 of the DSU and Article XXIII:2 of  the GATT 1994, with the 
standard terms of reference provided for in Article 7.1 of the DSU.
3 At its meeting 
on 25 September 2013, the DSB established a panel pursuant to the request of Panama in document WT/DS461/3, in accordance with Article 6 of the DSU.
4 
1.4.  The Panel's terms of reference are the following: 
To examine, in the light of the relevant pr ovisions of the covered agreements cited by 
the parties to the dispute, the matter refe rred to the DSB by Panama in document 
WT/DS461/3 and to make such findings as will assist the DSB in making the 
recommendations or in giving the rulings provided for in those agreements.5 
1.5.  At Panama's request, on 15 January 2014 the Director-General composed the Panel 
as follows: 
Chairman:  Mr Elbio Rosselli 
 Members: Mr Carlos Véjar Borrego 
  Mr Fabián Villarroel Ríos 
1.6.  China, Ecuador, El Salvador, the European  Union, Guatemala, Honduras, the Philippines and 
the United States reserved their right to participate in the Panel proceedings as third parties. 
1.3  Panel proceedings 
1.7.  After consultations with the parties, the Panel adopted its working procedures
6 and a partial 
timetable on 7 February 2014. Under the partial timetable the first written submissions of the 
parties were to be submitted no later than 29 August 2014 (for the complaining party) and 
24 October 2014 (for the responding party). Subsequent dates for the proceedings were to be 
decided at a later stage. The Panel adopted a timetable for the remaining stages of the proceedings on 23 October 2014 after consulting with the parties.
7 
1.8.  In conformity with the timetable, Pa nama presented its first written submission 
on 29 August 2014, and Colombia presented its first written submission on 24 October 2014. On 7 November 2014, the Panel received third-pa rty written submissions from the Philippines and 
the European Union. 
                                               
1 See Panama's request for consultations, document WT/DS461/1 (20 June 2013). 
2 See Panama's request for the establishment of a panel, document WT/DS461/3 (20 August 2013). 
3 Ibid. 
4 See the minutes of the DSB meeting held in the Centre William Rappard on 25 September 2013, 
document WT/DSB/M/337 (13 January 2014) and the Constitution of the Panel established at the request of Panama, document WT/DS461/4 (16 January 2014). 
5 Constitution of the Panel established at the Request of Panama. 
6 See the Panel's working procedures in Annex A-1. 
7 See also Communication from the Panel, document WT/DS461/5 (6 November 2014). WT/DS461/R 
 
- 17 - 
 
  1.9.  The Panel held its first substantive meeting with the parties on 25 and 26 November 2014. 
A session with the third parties took plac e on 26 November 2014, during which the 
European Union, Honduras, the Philippines and the United States made oral statements. Prior to the substantive meeting, on 19 November 2014, the Panel sent the parties a list of topics for 
discussion. The Panel also addressed written questions to the parties and third parties after the 
meeting, which were transmitted to them on 2 December 2014. On that same date, Colombia submitted written questions to Panama. On 16 December 2014, the Panel received written replies 
from the parties, as well as from the European Union, the Philippines and the United States as 
third parties. On the same date, Panama transmitted its response to the questions of Colombia. 
1.10.  The parties presented their second written submissions to the Panel on 28 January 2015. 1.11.  The Panel held its second substantive meeting with the parties on 24 February 2015. Prior 
to the second substantive meeting, on 19 February  2015, the Panel sent the parties a list of topics 
for discussion. The Panel also addressed written qu estions to the parties after the meeting, which 
were transmitted to the parties on 4 March 2015. On 25 March 2015, the parties furnished written 
responses to the Panel's questions, and on 7 April 2015 each party submitted comments on the 
responses provided by the other party. 
1.12.  The Panel provided the parties with the de scriptive (factual and argument) sections of its 
Final Report on 30 April 2015. On the same date, the Panel informed the European Union, 
Honduras, the Philippines and the United States that the descriptive part of the Report would contain a summary of the arguments of each of them. On 18 May 2015, the parties submitted 
their comments on the descriptive section of the report. The Panel issued its Interim Report to the 
parties on 18 June 2015. On 2 July 2015, Colombia submitted a written request for the Panel to 
review specific aspects of the Interim Report. Neither of the parties requested a further meeting with the Panel to discuss the issues identified by Colombia in its written comments. On 
16 July 2015, Panama submitted written comments to the Panel on Colombia's request for review. 
1.13.  The Panel issued its Final Report to the parties on 6 August 2015. 2  THE MEASURE AT ISSUE 
2.1.  In its request for establishment of a panel, Panama identified the measure at issue in this 
dispute as "the compound tariff" imposed by Decr ee of the President of the Republic of Colombia 
No. 074 of 23 January 2013 on the importation of certain textiles, apparel and footwear 
(Decree No. 074). Specifically, Panama stated that the challenged compound tariff was composed 
of an ad valorem  levy, expressed as a percentage of the customs value of the goods, and a 
specific levy, expressed in units of currency per unit of measurement. With respect to products classified in Chapters 61, 62 and 63 and under heading 64.06 of Colombia's Customs Tariff, the 
compound tariff was equal to 10% of the customs value of the goods, plus five US dollars per 
gross kilo (US$5/kg). With respect to products classified in Chapter 64, with the exception of heading 64.06, the compound tariff was equal to 10% of the customs value, plus five US dollars 
per pair (US$5/pair). The compound tariff was in force for a period of one year starting 
on 1 March 2013, and did not apply to imports originating in the countries with which Colombia had free trade agreements in force. The specific levy of US$5/kg or US$5/pair was included in the tax base for the value added tax (VAT).
8 
2.2.  In its panel request, Panama identified the following legal instruments in which it understood 
the measure at issue to be contained: 
a. Decree No. 074; 
b. Decree No. 4297/2011 ( sic) of 26 December 2011 as regards the definition of the 
products covered by the nomenclature of Chapters 61, 62, 63 and 64 of Colombia's Customs Tariff; 
c. Memorandum No. 000165 as regards measures of compliance, customs control and 
administration under Decree 074/2013 and the compound tariff; 
                                               
8 See Panama's request for the establishment of a panel. WT/DS461/R 
 
- 18 - 
 
  d. Any other rules, administrative or legal decisions, acts, practices, guidance or guidelines 
issued by Colombia that may be relevant in examining the dispute, as well as any possible amendments, extensions or additions where applicable. 
2.3.  In its first written submission, Panama pointed out that Decree No. 074 had been amended 
by Decree of the President of the Republic  of Colombia No. 456 of 28 February 2014 
(Decree No. 456), and that thenceforward "Panam a [would] focus on the measure currently in 
force".
9 
2.4.  Panama indicated that Colombia's compound tariff is composed of an ad valorem  levy 
expressed as a percentage of the customs value of the goods, and a specific levy, expressed in units of currency per unit of measurement.
10 The products that would be affected are textiles, 
apparel and uppers (parts of footwear), classified respectively in Chapters 61, 62 and 63 and 
under tariff line 6406.10.00.00 of Colombia's Customs Tariff, as well as most of the footwear 
products classified in Chapter 64.11 
2.5.  Panama referred to Articles 1 and 2 of Decree No. 456, noting that under those provisions, 
the ad valorem  component of the compound tariff is 10%, while the specific component varies 
according to the product and the de clared f.o.b. price as follows: (i) with respect to the products 
classified in Chapters 61, 62 and 63 and under tariff line 6406.10.00.00, the specific levy 
is US$5/kg when the declared f.o.b. price is US$10/kg or less, and US$3/kg when the declared 
f.o.b. price is greater than US$10/kg; (ii) with respect to products classified in Chapter 64, with the exception of heading 64.06, the specific levy is US$5/pair when the declared f.o.b. price is US$7/pair or less, and US$1.75/pair when the declared f.o.b. price is greater than US$7/pair.
12 
2.6.  Panama also indicated that when products classified under the same tariff subheading enter 
as part of the same process of importation, some at prices below and others at prices above the respective thresholds (i.e. US$10/kg for textiles and apparel and US$7/pair for footwear), 
the specific levy of US$5/kg will be applied to textiles and apparel, or US$5/pair to footwear. 
2.7.  Panama points out that Decree No. 456 has a two-year period of application, starting 
on 30 March 2014.
13 Furthermore, the compound tariff is not applicable to imports originating in 
countries with which Colombia has free trade agreements in force, and the specific component of 
the tariff "shall be included in the tax base for the value added tax".14 
3  PARTIES' REQUESTS FOR FINDINGS , RECOMMENDATIONS AND SUGGESTIONS 
3.1.  Panama requests the Panel to find that the compound tariff imposed by Colombia is 
inconsistent with:15 
a. Article II:1(b), first sentence, of the GATT 1994 and Colombia's Schedule of 
Concessions; 
b. Article II:1(a) of the GATT 1994 and Colombia's Schedule of Concessions. 
3.2.  In response to the defences invoked by Colombia, Panama requests the Panel to reject the 
argument that the measure at issue is justified under the general exceptions of Articles XX(a) 
and XX(d) of the GATT 1994. 
3.3.  Panama further requests the Panel to sugge st, in accordance with Article 19.1 of the DSU, 
that Colombia introduce a cap mechanism that would guarantee compliance with the relevant bound tariffs, or alternatively that it revert to an ad valorem  tariff system, without exceeding the 
bound levels of 35% and 40% ad valorem  depending on the product. 
                                               
9 Panama's first written submission, para. 3.2. 
10 Ibid. para. 3.3. 
11 Ibid. para. 3.6. 
12 Ibid. paras. 3.4-3.6. 
13 Ibid. para. 3.9. 
14 Ibid. para. 3.10. 
15 Although Panama included Articles VII:1(a) and X: 3(a) of the GATT 1994 in its panel request, it has 
not referred to those legal provisions, nor has it made any arguments in relation to them. WT/DS461/R 
 
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  3.4.  Colombia, for its part, requests the Panel to reject Panama's claims in their entirety. 
Colombia asserts that Decree No. 456 is a measure designed to combat illegal trade operations that are not covered by Article II of the GATT 1994. Colombia further asserts that Panama has not presented any evidence to support a prima facie  case that the compound tariff results in a breach 
of the levels bound in Colombia's Schedule of Concessions. Should the Panel conclude that the 
compound tariff is inconsistent with any of the obligations under Article II:1 of the GATT 1994, Colombia requests the Panel to find that the measure is justified under the general exceptions of 
Articles XX(a) and XX(d) of the GATT 1994. 
3.5.  Finally, in the event that the Panel finds that the measure at issue is inconsistent with the 
obligations contained in Articles II:1(a) or II:1(b), first sentence, and is not justified under Articles XX(a) or XX(d) of the GATT 1994, Colombia requests the Panel to refrain from making 
suggestions as to the way in which Colombia could comply with the DSB's recommendation to 
bring the measure at issue into conformity with its obligations. 
4  ARGUMENTS OF THE PARTIES 
4.1.  The arguments of the parties are reflected in the executive summaries provided to the Panel 
in accordance with paragraph 20 of the Working Procedures (see Annexes B-1, B-2, B-3 and B-4). 
5  ARGUMENTS OF THE THIRD PARTIES 
5.1.  The arguments of the European Union, Hond uras, the Philippines and the United States are 
reflected in the executive summaries provided to the Panel in accordance with paragraph 21 of the Working Procedures (see Annexes C-1, C-2, C-3 and C-4). China, Ecuador, El Salvador and Guatemala did not submit written or oral arguments to the Panel. 
6  INTERIM REVIEW 
6.1.  In accordance with Article 15.3 of the DSU,  this section of the Report sets out the Panel's 
response to the parties' arguments made at th e interim review stage, providing explanations 
where necessary. This section forms an integral part of the Panel's findings in the present case. 
The Panel thoroughly examined Colombia's request for the review of precise aspects of the Interim 
Report, as well as Panama's comments on Colombia's request, before issuing this Final Report. As 
explained below, the Panel modified specific aspects of its Interim Report in the light of Colombia's 
comments when it considered that it was appropriate to do so.
16 
6.2.  Colombia requests that the following paragraphs of the Interim Report be amended to reflect 
its arguments more accurately: 7.85; 7.86; 7.87; 7.89; 7.94; 7.105; 7.107; 7.113; 7.118; 7.123; 
7.199; 7.210; 7.335; 7.339; 7.349; 7.350; 7.384; 7.405; 7.445; 7.455; 7.549; and footnote 219 
to paragraph 7.102.17 For the same reason, Colombia requests the inclusion of new paragraphs 
following paragraph 7.200 and preceding paragraph 7.209 of the Interim Report.18 
6.3.  Colombia also requests amendments to paragraphs 7.200, 7.222, 7.359, 7.370, 7.377 and 
7.381 of the Interim Report, which describe the exhibits provided by Colombia.19 Finally, Colombia 
requests amendments to paragraphs 7.26, 7.359, 7.373 and 7.408 of the Interim Report in order 
to clarify some of the Panel's statements.20 
6.4.  Panama takes the view that the amendm ents requested by Colombia are unnecessary, but 
nevertheless leaves it up to the Panel to determine whether the amendments are relevant. Panama expresses concern about the way in which Colombia proposes to characterize some of its 
                                               
16 The numbering of paragraphs and footnotes in th e Final Report has changed in relation to the 
numbering in the Interim Report. The text of this section re fers to the paragraph numbers of the Interim 
Report. 
17 Colombia's request for review of th e Interim Report, paras. 3, 4, 5, 6, 7, 8, 9, 10, 11, 12, 16, 18, 19, 
20, 21, 28, 29, 31, 32 and 33. 
18 Colombia's request for review of the Interim Report, paras. 14 and 15. 
19 Colombia's request for review  of the Interim Report, paras. 13, 17, 22, 24, 26 and 27. 
20 Colombia's request for review of the Interim Report, paras. 2, 23, 25 and 30. WT/DS461/R 
 
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  arguments, and asks the Panel to reject these am endments if they "seek to put in the Panel's 
words Colombia's reading of the facts".21 
6.5.  In the light of Colombia's request, the Pane l amended the text of the following paragraphs of 
the Interim Report in order to improve the descrip tion of the arguments put forward by Colombia 
in the course of the proceedings: 7.85; 7.86;  7.87; 7.89; 7.94; 7.107;  7.113; 7.118; 7.123; 
7.200; 7.201; 7.210; 7.212; 7.213; 7.335; 7.350; 7.373; 7.445; 7.455 and 7.549. For the same reason, the Panel inserted new paragraphs after paragraph 7.199, before paragraph 7.209 and 
after paragraph 7.444 of the Interim Report. In some cases, the amendments were less than what 
Colombia had requested, since certain arguments had already been described in other sections of the report. 
6.6.  In the light of Colombia's request, the Panel also amended paragr aphs 7.200, 7.222, 7.359 
and 7.377 describing the exhibits provided by Colombia during the proceedings. 
6.7.  In addition, the Panel amended paragraph 7. 26 of the Interim Report in order to clarify the 
description of the operation of the measure, as well as paragraphs 7.359, 7.362, 7.384 and 7.408 
of the Interim Report, to clarify some of the Panel's statements contained therein. 
6.8.  The Panel did not deem it necessary to am end the first sentence of paragraph 7.105 of the 
Report, or paragraphs 7.349 and 7.350, as requested by Colombia. These sections do not refer to 
arguments of Colombia, but to the Panel's analysis. Nor was it considered necessary to amend 
paragraphs 7.339 and 7.405 of the Report, since Colombia's arguments identified in its request had already been described in other sections of the Report. The amendments requested by 
Colombia to paragraphs 7.370 and 7.384 were incorporated, respectively, in paragraphs 7.362 and 
7.201, which correspond to the sections containi ng the description of Colombia's arguments. 
Finally, the Panel felt that it was unnecessary to change the position of footnote 219 to paragraph 7.102 of the Report. 
6.9.  Lastly, the Panel also made typographical corrections to the following paragraphs: 1.12; 
7.49; 7.370; and 7.560. 
7  FINDINGS 
7.1  Preliminary considerations 
7.1.1  Function of the Panel and standard of review 7.1.  According to Article 11 of the DSU, the functi on of panels is "to assist the DSB in discharging 
its responsibilities under this Understanding and the covered agreements." The same Article 
establishes the standard of review, according to which a panel should: 
[M]ake an objective assessment of the matter before it, including an objective 
assessment of the facts of the case and the applicability of and conformity with the 
relevant covered agreements, and make such other findings as will assist the DSB in 
making the recommendations or in giving the rulings provided for in the covered agreements. 
7.2.  Regarding the "objective assessment" of the facts, the Appellate Body has stated that it is 
not for panels to undertake " de novo  review", but also not to show "t otal deference" to the findings 
of the national authorities.
22 On the specific subject of the a ssessment of evidence, the Appellate 
Body stated that: 
[I]n accordance with Article 11 of the DSU, a panel is required to "consider all the 
evidence presented to it, assess its credibility, determine its weight, and ensure that its factual findings have a proper basis in that evidence".
23 It must further provide in 
                                               
21 Panama's comments on Colombia's requ est for review of the Interim Report. 
22 Appellate Body Report, EC – Hormones , para. 117. 
23 (Footnote original) Appellate Body Report, Brazil – Retreaded Tyres , para. 185 (referring, inter alia , to 
Appellate Body Report, EC – Hormones , paras. 132 and 133). See also Appellate Body Reports, Australia – 
Salmon , para. 266; EC – Asbestos , para. 161; EC – Bed Linen (Article 21.5 – India) , paras. 170, 177 and 181; WT/DS461/R 
 
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  its report "reasoned and adequate explanatio ns and coherent reasoning" to support its 
findings.24 Within these parameters, "it is generally within the discretion of the [p]anel 
to decide which evidence it chooses to utilize in making findings".25 Although a panel 
must consider evidence before it in its totality, and "evaluate the relevance and 
probative force" of all of the evidence26, a panel is not required "to discuss, in its 
report, each and every piece of evidence" put before it27, or to "accord to factual 
evidence of the parties the same meaning and weight as do the parties".28, 29 
7.3.  A panel 's obligation to make an objectiv e assessment of the matter also refers to the legal 
assessment, that is, the analysis of the consistency or inconsistency of the challenged measures with the applicable provisions.
30 To that end, a panel is free "to use arguments submitted by any 
of the parties – or to develop its own legal reasoning – to support its own findings and conclusions 
on the matter under its consideration."31 In other words, each panel must assess the provisions of 
the relevant agreements and reach its own conclusions without necessarily limiting itself to the arguments or approaches put forward by any of the parties.
32 
7.4.  Article 3.4 of the DSU, for its part, provides that recommendations or rulings made by 
the DSB "shall be aimed at achieving a satisfactory settlement of the matter in accordance with the rights and obligations under this Understanding and under the covered agreements." 
7.1.2  Interpretation of the relevant rules of the agreements 
7.5.  In its objective assessment of the matter before it, the Panel may be called upon to clarify 
the scope of certain provisions of the covered agre ements cited by the parties. In this connection, 
Article 3.2 of the DSU states that the WTO dispute settlement system serves to "clarify the 
existing provisions of those agreements in accord ance with customary rules of interpretation of 
public international law".  
7.6.  The "customary rules of interpretation of pu blic international law" referred to by the DSU are 
the rules of interpretation that have attained th e status of general customary international law, 
as codified in the Vienna Convention on th e Law of Treaties of 1969 (Vienna Convention).
33 
The Appellate Body has explained that:  
[T]he rules of treaty interpretation in Articles 31 and 32 of the Vienna  Convention 
apply to any treaty, in any field of public international law, and not just to the WTO 
agreements. These rules of treaty interpretation impose certain common disciplines upon treaty interpreters, irrespective of the content of the treaty provision being 
examined and irrespective of the field of international law concerned.
34 (emphasis 
original) 
7.7.  The purpose of the interpreta tion of treaty rules is to ascertain the common intentions of the 
parties.35 Article 31 of the Vienna Convention contains a general rule of interpretation to the effect 
                                                                                                                                               
EC – Sardines , para. 299; EC – Tube or Pipe Fittings , para. 125; Japan – Apples , para. 221; 
Japan - Agricultural Products II , paras. 141 and 142; Korea – Alcoholic Beverages , paras. 161 and 162; 
Korea – Dairy , para. 138; US – Carbon Steel , para. 142; US – Gambling , paras. 330 and 363; US – Oil Country 
Tubular Goods Sunset Reviews , para. 313; and EC – Selected Customs Matters , para. 258. 
24 (Footnote original) Appellate Body Report, US – Upland Cotton (Article 21.5 – Brazil) , fn 618 to 
para. 293. 
25 (Footnote original) Appellate Body Report, EC – Hormones, para. 135. 
26 (Footnote original) Appellate Body Report, US – Continued Zeroing , para. 331; and Appellate Body 
Report, Korea – Dairy , para. 137. 
27 (Footnote original) Appellate Body Report, Australia – Apples , para. 271; and Appellate Body Report, 
Brazil – Retreaded Tyres , para. 202. 
28 (Footnote original) Appellate Body Report, Australia – Salmon , para. 267. 
29 Appellate Body Reports, US – COOL , para. 299. 
30 Appellate Body Report, EC – Hormones , para. 118. 
31 Ibid. para. 156. 
32 Appellate Body Reports, Canada – Renewable Energy / Canada - Feed-in Tariff Program , para. 5.215. 
33 Appellate Body Reports, US – Gasoline, p. 17; Japan - Alcoholic Beverages II, p. 10. See also Vienna 
Convention on the Law of Treaties (Vienna Convention), done at Vienna on 23 May 1969, United Nations 
document A/CONF.39/27. 
34 Appellate Body Report, US – Hot-Rolled Steel, para. 60. 
35 Appellate Body Report, EC – Computer Equipment,  para. 84. WT/DS461/R 
 
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  that "[a] treaty shall be interpreted in good fait h in accordance with the ordinary meaning to be 
given to the terms of the treaty in their context and in the light of its object and purpose".36 Under 
the terms of Article 31.2 of the Vienna Conv ention, the context for the purpose of the 
interpretation of a treaty shall comprise the text of the relevant agreement, including its preamble 
and annexes. 
7.8.  Article 32 of the Vienna Convention provid es that recourse may be had to supplementary 
means of interpretation, including the preparatory work of the treaty and the circumstances of its 
conclusion, in order to confirm the meaning resulting from the application of Article 31, or to 
determine the meaning when the interpretation according to Article 31 leaves the meaning ambiguous or obscure, or leads to a result that is manifestly absurd or unreasonable.
37 
The Appellate Body has stressed that Article 32 do es not define exhaustively the supplementary 
means of interpretation, so that an interpreter has a certain flexibility in considering relevant 
supplementary means in a given case so as to assist in ascertaining the common intentions of the parties.
38 
7.9.  Article XVI of the Marrakesh Agreement Establishing the World Trade Organization 
(WTO Agreement) indicates that the legal texts of the WTO are equally authentic in their English, French and Spanish versions.
39 In view of the foregoing, and in accordance with the provisions of 
Article 33 of the Vienna Convention, the terms of  the covered agreements are presumed to have 
the same meaning in each authentic text, and in the event that a difference of meaning is 
disclosed between the different language versions, the meaning that best reconciles the three texts, having regard to the object and purpose of the treaty, shall be adopted.
40 
7.1.3  Burden of proof 
7.10.  The DSU does not contain any express provision governing the burden of proof. However, 
by application of the general principles of law the WTO dispute settlement system has traditionally 
recognized that the burden of proof lies with the party asserting a fact, whether that party be the 
complainant or the defendant.41 
7.11.  In the light of the foregoing, the burden  of proving in a preceeding that the impugned 
measure is inconsistent with the relevant provisions of the covered agreements initially lies with 
the complaining party. Once the complaining party has made a prima facie  case for such 
inconsistency, the burden shifts to the defending party, which must in turn refute the alleged inconsistency.
42 A prima facie  case is one which, in the absence of effective refutation by the 
defending party, requires a panel, as a matter of law, to rule in favour of the complaining party.43 
In the words of the Appellate Body: 
[A]s a general matter, the burden of proof rests upon the complaining Member. That 
Member must make out a prima facie  case by presenting sufficient evidence to raise a 
presumption in favour of its claim. If the complaining Member succeeds, the responding Member may then seek to rebu t this presumption. Therefore, under the 
usual allocation of the burden of proof, a responding Member's measure will be 
                                               
36 With respect to good faith, the Appellat e Body has indicated that "[t]hat means, inter alia , that terms 
of a treaty are not to be interpreted based on the assumption that one party is seeking to evade its obligations and will exercise its rights so as to cause inju ry to the other party". Appellate Body Report, US – Anti-Dumping 
and Countervailing Duties (China),  para. 326. 
37 Appellate Body Report, EC – Chicken Cuts , para. 282. 
38 Ibid. para. 283. 
39 See also the explanatory note to paragraph 2(c)(i) of the GATT 1994. 
40 The Appellate Body explained: "Article 33 of the Vienna Convention reflects the principle that the 
treaty text is equally authoritative in each language, unless the treaty provides or the parties agree that, 
in case of divergence, a particular text shall prevai l. For the covered agreements, Article XVI of the WTO 
Agreement provides that the English, French, and Span ish language each are authentic. Consequently, the 
terms of Article III:8(a) of the GATT 1994 are presumed to  have the same meaning in  each authentic text." 
Appellate Body Reports, Canada – Renewable Energy / Canada – Feed-in Tariff Program,  fn 512 to para. 5.66. 
See also, for example, Appellate Body Reports, Chile – Price Band System,  para. 271; EC – Bed Linen  
(Article 21.5 - India ), fn 153 to para. 123; US – Softwood Lumber IV , fn 50 to para. 59; EC – Tariff 
Preferences , para. 147; and US – Upland Cotton,  fn 510 to para. 424. 
41 Appellate Body Report, US – Wool Shirts and Blouses , pp. 12-16. 
42 Appellate Body Report, EC – Hormones, para. 98. 
43 Ibid. para. 104. WT/DS461/R 
 
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  treated as WTO- consistent , until sufficient evidence is presented to prove the 
contrary.44 (emphasis original) 
7.12.  Precisely how much and precisely what kind of evidence will be required for the complaining 
party to establish its case will necessarily vary from measure to measure, provision to provision 
and case to case.45 In any event, it should be borne in mind that, in the context of the WTO 
dispute settlement system: 
A prima facie case must be based on "evidence and legal argument" put forward by 
the complaining party in relation to each of the elements of the claim. A complaining 
party may not simply submit evidence and expect the panel to divine from it a claim of WTO-inconsistency. Nor may a complaining party simply allege facts without relating them to its legal arguments.
46 (emphasis original, footnotes omitted) 
7.13.  Similarly, a party that invokes an exception under Article XX of the GATT 1994 has the 
burden of demonstrating both that its measure is justified as being an exception under one of the 
paragraphs of the Article, and that it complies with the chapeau  of that Article.47 
7.14.  In the matter before us, and by application of the foregoing criteria, it lies with Panama to 
make a prima facie  case for its claim that the measure at issue is inconsistent with Articles II:1(a) 
and II:1(b) of the GATT 1994. If Panama is able to make a prima facie  case for its claim, it would 
then be for Colombia to rebut the claim. Since Colombia invoked the general exceptions under 
Articles XX(a) and XX(d) of the GATT 1994, it lies with Colombia to adduce evidence and legal argument to prove that the measure at issue is justified under those exceptions. If Colombia is able to make a prima facie  case for the exceptions claimed, it would then be for Panama to rebut 
them. 
7.1.4  Order of analysis 7.15.  As a general principle, panels are free to structure the order of their analysis as they see fit. 
Except insofar as there may be a mandatory sequence of analysis, deviation from which would 
lead to an error of law and/or affect the substance of the analysis itself, a panel has discretion to structure the order of its analysis.
48 Although in structuring their analysis, panels may take 
account of the manner in which a complainant presents its claims, they may also follow a different 
sequential order.49 
7.16.  Panama has made claims of inconsistency with Articles II:1(a) and II:1(b), first sentence, of 
the GATT 1994. Colombia, for its part, has rejected Panama's claims. Colombia believes that 
Article II of the GATT 1994 does not cover illegal trade operations, and hence, does not apply to 
the measure at issue. Colombia adds that in the event that the Panel finds that the measure at issue is inconsistent with any of the obligations under Article II:1, that measure is justified under 
Article XX of the GATT 1994. In this connection, it  is logical and a matter of common practice that 
in disputes in which the complaining party alleges an inconsistency with any of the obligations under the GATT 1994 and the responding party invokes any of the general exceptions under 
Article XX to justify its measure, the order of an alysis should begin with an examination of the 
claims of inconsistency with the GATT 1994, to be followed, if such inconsistency is found to exist, with an assessment of whether the measure at i ssue is justified under Article XX of the GATT 
1994.
50 
7.17.  The Panel will therefore begin with the an alysis of the measure at issue in this dispute 
(i.e. the compound tariff), and examine whether that measure falls within its terms of reference 
                                               
44 Appellate Body Report, Canada – Dairy (Article 21.5 – New Zealand and US II), para. 66. 
45 Appellate Body Report, US – Wool Shirts and Blouses , p. 14. 
46 Appellate Body Report, US – Gambling,  para. 140. 
47 Appellate Body Reports, US – Wool Shirts and Blouses , p. 16; US – Gasoline , p. 22-23; EC – Seal 
Products , paras. 5.169 and 5.297; and Korea – Various Measures on Beef , para. 157. 
48 Appellate Body Report, Canada – Wheat Exports and Grain Imports , paras. 126-127. 
49 Ibid.; Appellate Body Report, US – Zeroing (EC) (Article 21.5 – EC) , para. 277. 
50 See Appellate Body Report, Thailand – Cigarettes (Philippines ), para. 173 (in which the 
Appellate Body states that "[a]n analysis of whether a measure infringes an obligation necessarily precedes, and is distinct from, the 'further an d separate' assessment of whether such  measure is otherwise justified"). WT/DS461/R 
 
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  under Article 6.2 of the DSU. The Panel will then address Colombia's argument that Article II of the 
GATT 1994 does not apply to the measure at issue. Depending on its findings, the Panel will assess Panama's claim that the compound tariff applied by Colombia is inconsistent with the obligations under Articles II:1(a) and II:1(b), first sentence, of the GATT 1994. Should the Panel find that 
there is such an inconsistency, it will then proceed with the analysis of whether, as Colombia 
argues, the measure at issue is justified under Articles XX(a) or XX(d) of the GATT 1994. 
7.18.  Finally, if it is found that the measure at issue is inconsistent with the obligations of the 
GATT 1994 and is not justified under Article XX, th e Panel will address Panama's request that it 
make suggestions for the implementation of possible DSB recommendations and rulings in the light of Article 19.1 of the DSU. 
7.2  The measure at issue 
7.2.1  The compound tariff imposed by Colombia 
7.19.  In its panel request, Panama identified as the measure at issue in this dispute the 
"compound tariff" imposed by Colombia pursuant  to Decree of the President of the Republic 
No. 074 of 23 January 2013 ("Decree No. 074") on impo rts of certain textile products, apparel and 
footwear.
51 Panama also identified what it considered to be the characteristics of the compound 
tariff.52 In its first written submission, Panama indicated that Decree No. 074 had been amended 
by Decree No. 456 of 28 February 2014 ("Decree  No. 456"), and that thenceforward "Panama 
would focus on the measure currently in force".53 
7.20.  The main characteristics of the compound tariff, as regulated by Decree No. 074 and Decree 
No. 45654, are described below. 
7.21.  Decree No. 074 and Decree No. 456 have the same title: "Partially amending the Customs 
Tariff". Both Decrees indicate that they were issu ed by the President of the Republic of Colombia 
"in exercise of his constitutional and legal powers, more particularly those conferred by 
Article 189, paragraph 25, of Colombia's Political Constitution, subject to the provisions of Laws 
Nos. 7a of 1991 and 1609 of 2013". Article 189, paragraph 25, of Colombia's Political Constitution 
provides that it is the responsibility of the President of the Republic, "as Head of State, Head of 
Government, and Supreme Administrative Authority": 
To organize public credit; recognize the national debt and arrange for its servicing; 
modify customs duties, tariffs, and other provisions concerning the customs regime; regulate foreign trade; and intervene in financial, stock market, insurance, and any 
other activities connected with the management, use and investment of resources 
originating from the savings of third parties, in accordance with the law.
55 
7.22.  Law No. 7 of 1991 contains general rules to be followed by the National Government in 
regulating the country's foreign trade, creates the Ministry of Foreign Trade, determines the 
composition and functions of the Higher Council for Foreign Trade, creates the Foreign Trade Bank and the Economic Modernization Fund, grants certain authorizations and enacts other provisions.
56 
Law No. 1609 of 2013, on the other hand, contains general rules to be followed by the 
Government in modifying duties, tariffs and other provisions concerning the customs regime.57 
7.23.  Both Decree No. 074 and Decree No. 456 indica te that they were adopted by the President 
of the Republic of Colombia pursuant to a recommendation by the Committee on Customs, Tariffs 
and Foreign Trade. In the case of Decree No. 074, the Committee's recommendation was made at 
session 251 of 17 December 2012; while for Decree No. 456, the recommendation was made at session 269 in 2014. 
                                               
51 See Panama's request for the establishment of a panel. 
52 Ibid. 
53 Panama's first written submission, para. 3.2. 
54 Decree No. 074 (Exhibits PAN-2 and COL-16); Decree No. 456 (Exhibits PAN-3 and COL-17). 
55 Political Constitution of Colombia, Preamble and Articles 188 and 189 (Exhibit PAN-29). 
56 Law No. 7 of 1991 (Exhibit PAN-30). 
57 Law No. 1609 of 2013 (Exhibits PAN-31 and COL-45). WT/DS461/R 
 
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  7.24.  Decree No. 074 established a compound tariff on the import of goods classified in Chapters 
61, 62, 63 and 64 of the Customs Tariff58, consisting of59: 
a. An ad valorem component of 10% plus a specific  component of US$5/kg for goods 
classified in Chapters 61, 62 and 63 of the Customs Tariff (textiles and articles of 
apparel) and under heading 64.06 (parts of footwear); and 
b. An ad valorem component of 10% plus a specific component of US$5/pair for goods 
classified in Chapter 64 of the Customs Tariff (footwear), except for those classified 
under heading 64.06 (parts of footwear). 
7.25.  Decree No. 456, on the other hand, establishes that the compound tariff on the import of 
goods classified in Chapters 61, 62, 63 and 64 of the Customs Tariff consists of60: 
a. An ad valorem component of 10% plus a specific  component of US$5/kg for goods 
classified in Chapters 61, 62 and 63 of the Customs Tariff (textiles and articles of 
apparel) and under tariff line 6406.10.00.00 (uppers of footwear and parts thereof, other than stiffeners), when the f.o.b. price declared on importation is US$10/kg or less; 
b. An ad valorem component of 10% plus a specific  component of US$3/kg for goods 
classified in Chapters 61, 62 and 63 of the Customs Tariff (textiles and articles of apparel) and under tariff line 6406.10.00.00 (uppers of footwear and parts thereof, other 
than stiffeners), when the f.o.b. price declared on importation exceeds US$10/kg; 
c. An ad valorem component of 10% plus a specific component of US$5/pair for goods 
classified in Chapter 64 of the Customs Tariff (footwear), except for those classified under heading 64.06 (parts of footwear), when the f.o.b price declared on importation is 
US$7/pair or less; and 
d. An ad valorem component of 10% plus a specific component of US$1.75/pair for goods 
classified in Chapter 64 of the Customs Tariff (footwear), except for those classified 
under heading 64.06 (parts of footwear), when the f.o.b price declared on importation 
exceeds US$7/pair. 
7.26.  Decree No. 456 provides that, when in a single transaction some goods of the same 
subheading are imported at prices below and others at prices above the respective threshold, the 
compound tariff payable is 10% ad valorem  plus the highest specific levy applicable, i.e. US$5 per 
kilo or per pair, as applicable depending on the classification of the goods.
61 
7.27.  Both Decree No. 074 and Decree No. 456 provide that the specific component of the 
compound tariff shall be included in the basis for calculating value added tax (VAT).62 Both decrees 
exempt from application of this measure imports from countries with which Colombia has trade agreements in force, for which purpose the corre sponding proof of origin is required; Decree 
No. 456 clarifies that such exemption only applies if  the tariff subheading has been the subject of 
negotiations.
63 
7.28.  The compound tariff does not apply to imports entering Colombia under certain special 
regimes, although this is not explicitly indi cated in either Decree No. 074 or Decree No. 456. 
                                               
58 Colombia's Customs Tariff was adopted pursuant to Decree No. 4927 of 26 December 2011. 
Colombia's Customs Tariff (extracts)  (Exhibit PAN-1). The chapters to  which the compound tariff applies 
concern the following products: (i) Chapter 61 – "Article s of apparel and clothing accessories, knitted or 
crocheted"; (ii) Chapter 62 – "Artic les of apparel and clothing accessories, not knitted or crocheted"; 
(iii) Chapter 63 – "Other made up textile articles; se ts; worn clothing and worn textile articles; rags" and 
(iv) Chapter 64 – "Footwear, gaiters an d the like; parts of such articles". 
59 Decree No. 074 (Exhibits PAN-2 and COL-16), Articles 1 and 2. 
60 Decree No. 456 (Exhibits PAN-3 and COL-17), Articles 1 and 2. 
61 Ibid. Article 1, para. 4; and Article 2, para. 4. 
62 Decree No. 074 (Exhibits PAN-2 and COL-16), Article 3, para. 2; Decree No. 456 (Exhibits PAN-3 and 
COL-17), Article 3. 
63 Decree No. 074, Article 3, para. 1; Decree No. 456, Article 5, paragraph, point 1. WT/DS461/R 
 
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  7.29.  For example, the compound tariff does not apply to goods entering certain regions 
designated by Colombia as Special Customs Regime Zones. These zones (of which there are currently three, located respectively in the region of Urabá, Tumaco and Guapi; in the region of Maicao, Uribia and Manaure; and in the region of Leticia) have been created by the Government of 
Colombia for the purpose of supporting and promot ing development in areas with very low levels 
of development or areas that are isolated or integrated with other states, so that "they need to be managed differently from the rest of the national customs territory".
64 Decree No. 456 clarifies 
that, in the case of imports into a Special Customs Regime Zone, the measure will only be applied 
when the goods are to be introduced into the rest of the national customs territory.65 
7.30.  Nor does the compound tariff apply to goods entering Colombia under Special Import-Export 
Systems (SIEX), known in Colombia as the "Plan Vallejo ". Under these systems, the import of 
certain goods, especially inputs for production which are subsequently processed or used to 
produce goods for export, is exempt from customs duty.66 Decree No. 456 further provides that 
the compound tariff also does not apply to the import into the customs territory of residues or 
waste of commercial value from the clothing industry and resulting from production processes 
developed under the SIEX (Plan Vallejo).67 
7.31.  Decree No. 074 came into effect on 1 March 2013 and was to remain in force for one year.68 
Decree No. 456 provides that it will enter into force 30 days after its publication in the Official 
Journal, that it repeals Decree No. 074, and that it will remain in force for two years.69 Both 
Decree No. 074 and Decree No. 456 provide that, wh en they expire, the Customs Tariff in Decree 
No. 4927 of 2011 and amendments thereto will once again enter into force.70 
7.2.2  The Panel's terms of reference 
7.32.  As explained above, in its panel request Panama challenged the compound tariff provided 
for in Decree No. 074, which was composed of: (i) an ad valorem component of 10% plus a 
specific component of US$5/kg for goods classified in Chapters 61, 62 and 63 and under heading 
64.06 (parts of footwear); and an ad valorem component of 10% plus a specific component of 
US$5/pair for goods classified in Chapter 64 (footwe ar), except for those classified under heading 
64.06. 
7.33.  Following the constitution of the Panel, Co lombia modified the compound tariff by means of 
Decree No. 456. The following table shows and comp ares the compound tariff as regulated by 
Decrees Nos. 074 and 456. 
                                               
64 Colombia's response to Panel question No. 16. S ee also response to Pane l questions Nos. 133 and 
141. 
65 Decree No. 456 (Exhibits PAN-3 and COL-17), Article 4. 
66 Panama's response to Panel question No. 89; Colombia's response to Panel question No. 89. 
67 Decree No. 456 (Exhibits PAN-3 and COL-17), Article 5, paragraph, point 2. See also Colombia's 
response to Panel question No. 18. 
68 Decree No. 074 (Exhibits PAN-2 and COL-16), Articles 3 and 5. 
69 Decree No. 456 (Exhibits PAN-3 and COL-17), Articles 5, 6 and 7. Decree No. 456 was published in 
Official Journal of the Republic of Colombia No. 49.078 of 28 February 2014. See the Official Journal website at 
http://www.imprenta.gov.co , viewed on 30 April 2015. 
70 Decree No. 074 (Exhibits PAN-2 and COL-16), Article 3; Decree No. 456 (Exhibits PAN-3 and 
COL-17), Article 5. WT/DS461/R 
 
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   Chapters Declared f.o.b. prices Compound tariff 
Decree 
No. 074 61, 62, 63 and 
heading 64.06 All prices 10% ad valorem  and US$5/kg 
64, except 
heading 64.06 All prices 10% ad valorem  and US$5/pair 
Decree 
No. 456 61, 62, 63 and 
subheading 6406.10.00.00 US$10/kg or less 10% ad valorem  and USS5/kg 
Over US$10/kg 10% ad valorem  and US$3/kg 
Products imported under the same 
subheading, some at prices above and others at prices below US$10/pair 10% ad valorem  and US$5/kg 
64, except 
heading 64.06 US$7/pair or less 10% ad valorem  and US$5/pair 
Over US$7/pair 10% ad valorem  and US$1.75/pair  
Products imported under the same 
subheading, some at prices above and others at prices below US$7/pair 10% ad valorem  and US$5/pair 
 
7.34.  Panama's arguments refer to the compound tariff in its current form (regulated by 
Decree No. 456). Colombia has not indicated that the amendments to the compound tariff introduced by Decree No. 456 are outside the Panel's terms of reference. 
7.35.  As the Appellate Body has stated, a pane l's terms of reference may include "amendments" 
to the measures described in the panel request as long as the terms of reference are broad enough and the amendments do not change  the essence of the original measures.
71 A panel may 
also consider whether it is necessary to take account of amendments to the measure in order to 
secure a positive solution to the dispute.72 
7.36.  In this connection, it is relevant to note  that, even though Panama's panel request does not 
refer to Decree No. 456, it includes "amendments, extensions or additions" to the aforementioned 
measure, that is, the compound tariff as regulated by Decree No. 074.73 The preamble 
("Considerandos" ) to Decree No. 456 mentions that the Committee on Customs, Tariffs and 
Foreign Trade "recommended evaluating and, where relevant, amending Decree No. 074 of 
2013".74 As confirmed by Colombia in the course of these proceedings, Decree No. 456 is an 
"amendment" to Decree No. 074.75 
7.37.  Even more important, the compound tariff provided for in Decree No. 456 maintains the 
essence and nature of that established by Decree No. 074 for the following reasons. First, both 
decrees provide for a compound tariff consisting of a 10% ad valorem component plus a specific 
component. Second, both decrees apply to practi cally the same range of products, Chapters 61, 
62, 63 and 64 of the Customs Ta riff, which cover textiles, apparel and footwear. The only 
difference in product coverage is that, whereas Decree No. 074 included the goods of the whole of  
tariff heading 64.06 (parts of footwear), Decree No. 456 applies to the tariff line 6406.10.00.00 (uppers of footwear and parts thereof) but not to other tariff lines under heading 64.06. Third, 
both decrees contain similar regulations, including with regard to the main exemptions from the 
measure's scope and use of the tariff in the basis for calculating value added tax (VAT) Fourth, both decrees were issued by the President of the Republic of Colombia citing the same legal basis 
                                               
71 See Appellate Body Reports, Chile – Price Band System , para. 139; EC – Chicken Cuts , 
paras. 156-161. See also Panel Reports, EC – IT Products , para. 7.139. 
72 Panel Reports, EC – IT Products , para. 7.139. 
73 A general reference to "amendments", "additions" or "implementing measures" in a panel request 
may meet the "specificity" requirement in Article 6.2 of the DSU if the measure in question "improves", "implements" or is "clearly related" to the principal measure that has in fact been explicitly included in the request. In order to meet this requirement, howeve r, such references must not be so vague as not to allow 
identification of the specific instruments the measure aims to cover. Appellate Body Report, EC – Selected 
Customs Matters , fn 369 to para. 152. See also Appellate Body Report, EC – Bananas III , para. 140; Panel 
Reports, Japan – Film , para. 10.8; US – Carbon Steel , para. 8.11; and China – Raw Materials, Communication 
from the Panel, document WT/DS394/9, WT/DS395/9, WT/DS398/8 (18 May 2010), paras. 17 and 18. 
74 Decree No. 456 (Exhibits PAN-3 and COL-17), third preambular paragraph. 
75 See Colombia's closing statement at the first meeting of the Panel, para. 8. WT/DS461/R 
 
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  (the constitutional and legal powers of the President of the Republic, especially those conferred by 
Article 189, paragraph 25, of Colombia's Political Constitution and Laws No. 7 of 1991 and No. 1609 of 2013). Fifth, both decrees have the same title ("Partially amending the Customs 
Tariff") and were adopted by the President of the Republic of Colombia following a 
recommendation by the Committee on Customs, Tariffs and Foreign Trade. Sixth, both decrees 
have a limited period of validity (one year for Decree No. 074 and two years for Decree No. 456), after which they both specify that the Customs Tariff provided for in Decree No. 4927 of 2011 and 
amendments thereto will be restored. Seventh, during the proceedings, Colombia stated that both 
decrees have the same objective (constituting "an instrument within [the] State strategy [of the Colombian Government] for combating smuggling and money laundering").
76 Eighth, as already 
mentioned, Decree No. 456 replaces and repeals Decree No. 074.77 
7.38.  All the foregoing elements, taken together, lead the Panel to conclude that the compound 
tariff provided for in Decree No. 456 is closely related to that regulated by Decree No. 074 and maintains its essence and nature. 
7.39.  Consequently, Colombia's compound tariff as  currently imposed (i.e. taking into account the 
amendments incorporated by Decree No. 456) comes within the Panel's terms of reference. 
7.40.  In any event, in the circumstances of this dispute, findings which take into account the 
compound tariff with the amendments incorporated by Decree No. 456 are necessary to help 
resolve this dispute. The usefulness of any finding would be limited if the Panel were to disregard these amendments and base itself solely on the compound tariff as established by the previous 
Decree No. 074. 
7.3  Analysis of Panama's claims under Articl es II:1(a) and II:1(b), first sentence, of the 
GATT 1994 
7.41.  In this section, the Panel will examine Panama's claim that the compound tariff is 
inconsistent with Colombia's obligations under Articles II:1(a) and II:1(b), first sentence, of the 
GATT 1994. 
7.3.1  Main arguments of the parties 
7.3.1.1  Complaint by Panama 
7.42.  Panama requests the Panel to find that th e compound tariff applied by Colombia is "by its 
design, structure and architecture … incons istent with Article II:1 of the GATT 1994".
78 Panama 
argues that the compound tariff is an "ordinary customs dut[y]" within the meaning of the first 
sentence of Article II:1(b) of the GATT 1994 and that it exceeds the tariff bound in Colombia's 
Schedule of Concessions.79 Panama does not contest the fact that Colombia has adopted the 
compound tariff modality for products in Ch apters 61, 62, 63 and 64 of its Customs Tariff.80 
Rather, Panama claims that the methods of calculating this tariff sometimes cause the rates bound 
by Colombia for the products concerned (40% ad valorem for most of the products and 35% ad 
valorem for "some specific products") to be exceeded.81 Panama considers that the compound 
tariff applied by Colombia is a measure which pursues a policy for the protection of domestic 
production, seeking to increase sales, create jobs, benefit a priority sector and, to a large extent, redistribute wealth in favour of domestic producers "at the expense of international competition".
82 
7.43.  Panama points out that the compound tariff applied by Colombia and the tariff that 
Colombia bound in its Schedule of Concessions are not directly comparable because the former 
consists of an ad valorem component and a specific component, whereas the latter has been 
                                               
76 See Colombia's closing statement at the first meeting of the Panel, para. 8. 
77 See Decree No. 456 (Exhibits PAN-3 and COL-17), Article 7. See also Committee on Customs, Tariffs 
and Foreign Trade, Minutes of Regular Session 269, 23 January 2014 (Exhibit COL-34), pp. 9-12. 
78 Panama's response to Panel question No. 91. 
79 Panama's first written subm ission, paras. 4.1 and 4.2. 
80 Ibid. para. 1.4. 
81 Ibid. para. 4.6. 
82 Panama's opening statement at the fi rst meeting of the Panel, para. 1.7. WT/DS461/R 
 
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  expressed in ad valorem terms.83 In order to determine the consistency of the compound tariff 
with Colombia's bound tariffs, Panama indicates that an " ad valorem equivalent" of the compound 
tariff has to be obtained.84 Panama has calculated a "break-even price", that is, an import price 
level in relation to which the ad valorem bound tariff would be the same as the ad valorem 
equivalent of the compound tariff. Panama contends that any import price above the break-even 
price calculated would never exceed the level bound by Colombia, whereas any price below the break-even price would lead to the application of a tariff above the bound level.
85 
7.44.  Panama estimates an break-even price for each of the hypotheses provided for in Decree 
No. 456 in relation to the products in Chapters 61, 62, 63 and tariff line 6406.10.00.0086: 
Declared f.o.b. price Formula for calculating the 
compound tariff Bound tariff Break-even 
price 
Price of US$10/kg or less 10% ad valorem  and US$5/kg 40% US$16.67 
Price of US$10/kg or less  10% ad valorem  and US$5/kg 35% US$20 
Price above US$10/kg 10% ad valorem  and US$3/kg 40% US$10 
Price above US$10/kg 10% ad valorem  and US$3/kg 35% US$12 
 
7.45.  With regard to Chapter 64, except for heading 64.06, Panama estimates the following break-even prices: 
Declared f.o.b. price  Formula for calculating the 
compound tariff Bound tariff Break-even 
price 
Price of US$7/pair or less  10% ad valorem  and US$5/pair 40% US$16.67 
Price of US$7/pair or less  10% ad valorem  and US$5/pair  35% US$20 
Price above US$7/pair 10% ad valorem  and US$1.75/pair 40% US$5.83 
Price above US$7/pair  10% ad valorem  and US$1.75/pair 35% US$7 
 
7.46.  Panama states that the compound tariff is in excess of the level bound in Colombia's 
Schedule of Concessions in the following cases: 
a. Imports of products in Chapters 61, 62 and 63 and tariff line 6406.10.00.00, when the 
declared f.o.b. import prices are US$10/kg or less. In such cases, the compound tariff 
includes a 10% ad valorem component plus a specific component of US$5/kg.87 The 
US$10/kg threshold is below the break-even price of US$16.67/kg and US$20/kg for goods with bound tariffs of 40% and 35% ad valorem , respectively
88; 
b. Imports of products under subheading 6305.32 (sacks and bags, of a kind used for the 
packing of goods, of man-made textile materials; flexible intermediate bulk containers) at prices higher than US$10/kg but lower than US$12/kg. In such cases, the compound 
tariff includes a 10% ad valorem component plus a specific component of US$3/kg.
89 
This subheading has a bound tariff of 35% ad valorem , so Panama has estimated the 
break-even price to be US$12/kg. Any import price above US$10/kg but below 
US$12/kg would be subject to a tariff whose ad valorem equivalent would exceed the 
bound level of 35% ad valorem90; 
c. Imports of products in Chapters 61, 62 and 63 and tariff line 6406.10.00.00, when in a 
single transaction some products of the same subheading are imported at prices above 
and others at prices below US$10/kg.91 In such cases, the compound tariff includes a 
10% ad valorem component plus a specific component of US$5/kg. Goods below the 
break-even prices of US$16.67/kg and US$20/kg would be subject to a tariff whose ad 
                                               
83 Panama's first written submission, para. 4.15. 
84 Ibid. 
85 Ibid. para. 4.49. 
86 See ibid. paras. 4.18-4.47. 
87 Ibid. paras. 4.20-4.26. See also response to Panel question No. 19. 
88 Panama's first written submission, para. 4.22. 
89 Ibid. paras. 4.30-4.32. See also response to Panel question No. 19. 
90 Panama's first written submission, para. 4.26. 
91 Ibid. para. 3.8. See also response to Panel question No. 19. WT/DS461/R 
 
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  valorem equivalent would exceed the bound levels of 40% and 35% ad valorem, 
respectively92; 
d. Imports of products in Chapter 64 (except for heading 64.06) when the declared f.o.b. 
import prices are US$7/pair or less. In such cases, the compound tariff includes a 10% 
ad valorem component plus a specific component of US$5/pair.93 The US$7/pair 
threshold is below the break-even prices of US$16.67/pair and US$20/pair for goods with bound tariffs of 40% and 35% ad valorem , respectively
94; and 
e. Imports of products in Chapter 64 (except for heading 64.06) when in a single 
transaction some products of the same subh eading are imported at prices above and 
others at prices below US$7/pair. In such cases, the compound tariff includes a 10% ad 
valorem component plus a specific component of US$5/pair .95Goods below the 
break-even prices of US$16.67/pair and US$20/pair would be subject to a tariff whose 
ad valorem equivalent would exceed the bound levels of 40% and 35% ad valorem, 
respectively.96 
7.47.  Regarding Colombia's argument that "illicit trade" lies outside the scope of Article II of the 
GATT 199497, Panama points out that such an interpretation seeks to add to the word 
"commerce*" the qualifying adjective "illicit", which is not to be found in Article II.98 In Panama's 
opinion, if Colombia's argument were accepted, a Member could unilaterally introduce distinctions 
between what would be licit or illicit trade and thus circumvent the multilateral obligations of the WTO.
99 Panama states that, on the contrary, a "good faith" interpretation of Article II:1(a) of the 
GATT 1994 indicates that "the term 'trade' covers  any type of international trade operation".100 
7.48.  In response to Colombia's argument that the GATT 1994 has to be interpreted in its context 
and especially taking into account the recognition in its preamble that trade and economic relations among Members should be conducted "with a view to raising standards of living", Panama 
states that the reference to this objective could also be taken to mean that "the creation of trade" 
through observance of bound tariff levels, without distinction "between purportedly legal or illegal trade sectors" could help to raise the living st andards of workers in exporting countries and of 
consumers in importing countries.
101 
7.49.  Panama also asserts that Colombia misinterprets the term "illicit trade", because it covers 
activities with an illicit purpose such as "the sale of illegal, counterfeit or pirated goods"102, and not 
imports of apparel and footwear, legally subject to an import procedure, at prices below certain 
thresholds unilaterally established by Colombia.103 Panama considers that the fact that apparel and 
footwear import operations are sometimes directed by criminals does not make such operations illegal or illicit in themselves.
104 Although activities deriving from illicit operations or customs or 
intellectual property violations must be sanctioned under domestic legal systems, Panama points 
out that when such sanctions result in the imposition of measures that may be inconsistent with the GATT 1994, Article XX of the GATT provides fo r exceptions to the obligations which enable 
                                               
92 Panama's response to Panel question No. 19. 
93 See Panama's first written submission, paras. 4.35- 4.41. See also response to Panel question No. 19. 
94 Panama's first written submission, paras. 4.37 and 4.41. 
95 Ibid. para. 3.8. See also response to Panel question No. 19. 
96 Panama's response to Panel question No. 19. 
97 See paras. 7.57.  to 7.65.  below. 
* [Translator's note] In the English language text of the GATT 1994, the terms "commerce" (as used in 
the preamble and Articles II and IX) and "trade" (as used in various articles) are both rendered as " comercio " 
in the Spanish language text and as " commerce " in the French language text. 
98 Panama's opening statement at th e first meeting of the Panel, para . 1.11; second written submission, 
para. 2.4, p 6; and opening statement at the second meeting of the Panel, para. 2. See also response to Panel 
question No. 96. 
99 Panama's opening statement at th e first meeting of the Panel, para . 1.11. See also second written 
submission, para. 2.6, p. 7; and closing statement at the second meeting of the Panel, para. 2. 
100 Panama's response to Panel question No. 4. 
101 Panama's response to Panel question No. 22. See also Panama's response to Panel question No. 94. 
102 Panama's opening statement at the fi rst meeting of the Panel, para. 1.12. 
103 Ibid. and second written submission, paras. 2.1 and 2.7. 
104 Panama's opening statement at the fi rst meeting of the Panel, para. 1.13. WT/DS461/R 
 
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  measures that are necessary to be justified.105 In Panama's opinion, the foregoing does not imply 
questioning the applicability of the GATT 1994.106 
7.50.  Panama also rejects Colombia's reference to certain awards by foreign investment arbitral 
tribunals.107 Panama states that there is no "interpr etative criterion" based on the rules of 
interpretation of the Vienna Convention on the Law of Treaties under which it would be relevant to 
take such decisions into account when interpreting the word "trade".108 I n  P an a m a ' s  v i e w  s u c h  
decisions concern procedural issues relating to the jurisdiction of the tribunal in question and do 
not provide "any interpretation or guidance for interpreting the word 'trade'".109 Panama also 
states that, in the investment cases cited by Colombia, the awards refer to the legality of "specific investments", whereas the present dispute concerns a "trade policy measure .. independently of 
specific trade transactions ".
110 
7.51.  Even if one accepts the argument that Article II:1(a) and Article II:1(b) of the GATT 1994 
do not apply to illicit trade, Panama points out that Colombia has not proved that such illegality exists in the present case. In its opinion, Colombia has only referred to "a high risk, a likelihood, 
follow-up action taken after importation in order to determine possible illegality", but Colombia 
"does not know at the time of importation" whether illegal activity is involved in the transactions subject to the compound tariff.
111 Panama indicates that if all imports at prices below the threshold 
were for money laundering purposes, that would mean "as a minimum, implementing control and 
follow-up measures to prevent an offence being committed in Colombian territory", but "Colombia 
has not identified any measure that serves that purpose".112 Furthermore, after the compound 
tariff has been paid, "the goods enter Colombian territory" and the alleged money laundering 
operation "goes ahead without further consequences".113 In any event, a mere indication cannot 
lead to the imposition of a tariff raising the tax burden on imports because there is no link between 
the indication of a possible criminal offence and the levy applicable.114 Panama concludes that 
Decree No. 456 does not establish that the import of apparel or footwear below certain prices is 
illicit but, on the contrary, that such products "are subject to the normal import procedure".115 
7.52.  With regard to Colombia's argument that  the examples of import prices presented by 
Panama are purely hypothetical, Panama states that its complaint is based on the "design, 
structure and architecture of the compound tariff" and that it does not have "the burden of proving adverse economic effects" or of "presenting actual cases".
116 In any event, Panama considers that 
the examples it has given "may actually occur in light of the scope and content of Decree 
No. 456".117 In this connection, Panama points out that the compound tariff is in force, is 
mandatory and results in the application of duties above Colombia's bound tariff.118 In Panama's 
opinion, the design, structure and architecture of the measure at issue "result in the imposition of 
tariffs in violation of those bound by Colombia in the WTO".119 Panama also states that the import 
documents presented as Exhibits PAN-18 and PA N-19 show "Colombia's application of a tariff 
above its bound tariff".120 
                                               
105 Panama's response to Pane l questions Nos. 98 and 99. 
106 Panama's opening statement at the first meeting of the Panel, para. 1.14; response to Panel 
question No. 3; and closing statement at the second meeting of the Panel, para. 2. See also response to Panel question No. 94. 
107 Panama's response to Panel question No. 101. 
108 Ibid. 
109 Panama's response to Panel questions Nos. 101 and 102. 
110 Panama's response to Panel question No. 101 (emphasis original). 
111 Panama's closing statement at the fi rst meeting of the Panel, para. 1.6. 
112 Panama's response to Panel question No. 122. 
113 Ibid. 
114 See Panama's closing statement at the first meeting of the Panel, paras. 1.6 and 1.7. 
115 Panama's second written submission, para. 2.2. 
116 Ibid. para. 2.3. 
117 Panama's response to Panel question No. 23. 
118 Panama's opening statement at th e first meeting of the Panel, para. 1.16; and closing statement at 
the first meeting of the Panel, para. 1.5. 
119 Panama's opening statement at the fi rst meeting of the Panel, para. 1.17. 
120 Panama's response to Panel question No. 23. See also second written submission, para. 2.3; opening 
statement at the second meeting of the Panel, para. 4; response to Panel questions Nos. 156-158; import 
declarations (Exhibits PAN-18 and PAN-19). WT/DS461/R 
 
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  7.53.  From the foregoing Panama concludes that "[t]he structure and design of Colombia's 
compound tariff are such that, below certain break-even prices" the resulting tariff "clearly exceeds the ad valorem  rate bound in Colombia's Schedule" in a manner inconsistent with the first 
sentence of Article II:1(b) of the GATT 1994.
121 Moreover, Panama considers that the compound 
tariff is inconsistent with Article II:1(a) of th e GATT 1994. Panama claims in this regard that 
panels and the Appellate Body have indicated th at a measure contrary to Article II:1(b) "will 
always be inconsistent" with Article II:1(a).122 
7.54.  Accordingly, Panama requests the Panel to find that the compound tariff imposed by 
Colombia is inconsistent with Articles II:1(a) and II:1(b), first sentence, of the GATT 1994. 
7.3.1.2  Colombia's defence 7.55.  Colombia, for its part, claims that Panama has not established a prima facie  case that the 
compound tariff is inconsistent with Articles II:1(a) and II:1(b), first sentence, of the GATT 1994. 
It puts forward three arguments in this regard. 
7.56.  First, Colombia asserts that Decree No. 456 has incorporated a "legislative ceiling"
123 by 
setting a tariff comprising an ad valorem  component of 10% and a specific component of US$3/kg 
for imports of textiles and apparel at an f.o.b. price exceeding US$10/kg; as well as a tariff comprising an ad valorem component of 10% and a specific component of US$1.75/pair for 
imports of footwear when the f.o.b. price is greater than US$7/pair. For Colombia, the legislative 
ceiling introduced by Decree No. 456 "prevents the compound tariff from exceeding Colombia's bound levels" of 35% and 40% ad valorem , as applicable.
124 
7.57.  Secondly, Colombia argues that Article II of the GATT 1994 only covers licit trade and 
cannot refer to illicit trade transactions.125 Colombia states that f.o.b. prices below US$10/kg (in 
the case of apparel) and US$7/pair (for footwear) "are  artificially low" and involve "a high risk that 
[the imports] are being used to launder money".126 Colombia indicates that, in order to determine 
the thresholds provided in Decree No. 456 for import s of textiles, apparel and footwear, it used a 
series of benchmarks such as national and intern ational market prices; the average producer price 
at the different stages of production; and unit import prices for representative importers in 
Colombia.127 Furthermore, for the threshold in respect of footwear, Colombia also took into 
account the average import price in three other countries (Chile, China and the United States).128 
In all these cases, the prices obtained using thes e benchmarks were said to be higher than the 
thresholds established in Decree No. 456.129 
7.58.  In addition, Colombia states that "around 45% of imports of textiles, apparel and footwear 
entering Colombia from Panama, but originating in other countries, are priced below the prices at which they were exported to Panama".
130 In its opinion, this shows that imports at prices below 
the prescribed thresholds are not effected at prices which "reflect market conditions", but have 
"artificially low" prices, and the purpose of the transactions is to launder money.131 Colombia 
asserts that, as a response to money laundering through the underinvoicing of imports, the 
compound tariff seeks "to discourage imports at artificially low prices, reduce the artificial profit 
                                               
121 Panama's first written submission, para. 4.49. 
122 See Ibid. paras. 4.56-4.58. 
123 Colombia's first written submission, para. 64. 
124 Ibid. See also closing statement at the second meeting of the Panel, para. 9; response to Panel 
question No. 93, paras. 36 and 37; and comments on Pa nama's response to Panel question No. 91, para. 11. 
125 Colombia's first written submission, paras. 51, 54 and 67. 
126 Ibid. para. 66. 
127 Colombia's second written submission, paras. 31-33. See also response to Panel question No. 104, 
paras. 58 and 59. 
128 Colombia's second written submission, para. 34. 
129 See Ibid, paras. 31-35. 
130 Colombia's opening statement at the second meeting of the Panel, para. 41. 
131 Colombia's second written submission, para. 36. See also opening statement at the second meeting 
of the Panel, para. 40. WT/DS461/R 
 
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  margin which the importer may obtain by selling the goods in Colombia, and prevent criminal 
groups from continuing with such money laundering operations".132 
7.59.  Colombia argues that Article II of the GATT 1994 only "covers licit trade and cannot cover 
operations where there are indications that they ar e being conducted at artificially low prices in 
order to launder money".133 In its opinion, the word "importation" in the phrase "on their 
importation" in Article II:1(b) of the GATT 1994 ca nnot be extended to "foreign trade operations 
conducted for the purpose of laundering money or for other illicit purposes".134 In this connection, 
the term "commerce" in Article II:1(a) "refers to licit trade" and only covers "the exchange of 
goods whose purpose and reason are licit".135 On the contrary, the term "commerce" does not 
cover "exchanges of goods for reasons which the international community considers illicit".136 
Colombia contends it would make no sense for Article II to be intended to oblige "a Member to 
accord favourable treatment to the entry of goods which violate the legal formalities and 
requirements of the country of destination".137 
7.60.  In support of its argument, Colombia maintains that Article VII of the GATT 1994 and the 
Customs Valuation Agreement, used as context, confirm that, when imports are effected "at 
artificially low prices and for the purpose of laund ering money, they cannot be considered as being 
imported at their 'actual value'".138 Thus, "arbitrary or fictitious" prices would bear no relation 
whatsoever to the "commercial reality" because they are not the result of "market operations".139 
7.61.  Colombia cites the preambles to the GATT 1994140 and the Marrakesh Agreement 
Establishing the World Trade Organization141 i n  o r d e r  t o  a f f i r m  t h a t  t h e  o b j e c t  a n d  p u r p o s e  o f  
these Agreements is, inter alia , to raise living standards, ensure full employment and increase real 
income. Money laundering helps criminal groups gain access to financial resources in order to carry 
out activities such as drug trafficking, murder, kidnapping, terrorist attacks and other criminal activities.
142 Likewise, imports at artificially low prices "lower the living standards of Colombia's 
population"143 because there are no increases in income or gains in productivity, and at the same 
time the government revenue normally used for health, education and other social programmes is reduced. In Colombia's opinion, all of the foregoing is clearly contrary to the objective of raising 
the population's living standards and also crea tes "distortions of real income and aggregate 
demand".
144 
7.62.  Colombia also argues that one of the rule s of interpretation enshrined in Article 31 of the 
Vienna Convention is the "principle of good fa ith", which means that activities covered by an 
international obligation must be "of a lawful nature", i.e. be consistent with "the values 
underpinning any society".145 In its opinion, "to interpret Article II in such a way that its benefits 
extend to import operations that fail to comply with a country's legislation would be manifestly 
absurd and unreasonable".146 Colombia states that broadening  the scope of the WTO agreements 
                                               
132 Colombia's first written submission, para. 66. See also closing statement at the first meeting of the 
Panel, para. 11; and response to Pane l question No. 39, paras. 95 and 96. 
133 Ibid. para. 67; and second written submission, para. 37. 
134 Ibid. para. 53. 
135 Colombia's opening statement at the second meeting of the Panel, para. 13. See also closing 
statement at the second meeting of the Panel, para. 5. 
136 Colombia's opening statement at the second meeting of the Panel, para. 16. See also comments on 
Panama's response to Panel question No. 94, para. 14. 
137 Colombia's first written submission, para. 54; and opening statement at the first meeting of the 
Panel, para. 48. 
138 See Colombia's first written submission, paras. 56-59. 
139 Ibid. para. 58; and opening statement at th e first meeting of the Panel, paras. 49-51. 
140 Ibid. para. 60. 
141 Colombia's second written submission, para. 7. 
142 Colombia's response to Panel question No. 22, para. 57. 
143 Ibid. paras. 56 and 57. 
144 Colombia's first written submission para. 60; an d opening statement at the first meeting of the 
Panel, para. 53. See also opening statement at the seco nd meeting of the Panel, para. 27; and response to 
Panel question No. 96, paras. 44-49. 
145 Colombia's opening statement at the second meeting of the Panel, para. 18. 
146 Colombia's first written submission, para. 61 (referring to Panel Report, US – Gambling , para. 6.49); 
opening statement at the first meeting of the Panel, para . 54; and response to Panel question No. 4, para. 10. 
See also comments on Panama's response to Panel questions Nos. 94 and 96, paras. 16 and 19. WT/DS461/R 
 
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  to "illicit" trade transactions could result in including, for example, trade in human organs obtained 
illegally147; the import or export of narcotics148; or "trafficking in persons".149 
7.63.  Colombia also states that the concern in relation to "illicit trade" is recognized by the 
international community, as can be seen from various international instruments such as the 
Framework Convention on Tobacco Control; the Arms Trade Treaty; the UNESCO Convention on 
the Means of Prohibiting and Preventing the Illicit Import, Export and Transfer of Ownership of Cultural Property; the Inter-American Convention against the Illicit Manufacturing of and 
Trafficking in Firearms, Ammunition, Explosives, and Other Related Materials; and the Convention 
on International Trade in Endangered Species of Wild Fauna and Flora, among others.
150 Colombia 
also points out that international organizations such as INTERPOL, GAFI-SUD and the OECD have 
expressed their concern at money laundering and its effects on countries' economies.151 
7.64.  Colombia submits that international foreign investment tribunals "have repeatedly refused 
to extend the protection" of the investment ag reements concerned "to illegal investment, even 
when the respective treaty does not include a specific clause requiring that the investment be 
made in accordance with the laws of the receiving country".152 Colombia mentions in particular the 
award of the arbitral tribunal in the Plama Consortium v. Bulgaria case, in connection with the 
European Energy Charter, in which it was stated that protection of investment does not extend to 
"illegal investment".153 The arbitral tribunal based its decision on the following considerations: the 
principle of good faith should govern the interpre tation of treaties; the object and purpose of the 
European Energy Charter includes strengthening the rule of law; there is a legal principle according to which nobody may benefit from his own wrong; and respect for the law is a principle 
of "international public policy".
154 Colombia also states that, even though the European Energy 
Charter contains a general exceptions clause, the tribunal did not base its decision on denying protection under this clause but determined that "illegal investments are excluded from the scope 
of protection of the agreement".
155 
7.65.  Colombia considers that the prices of textile, apparel and footwear imports below the 
thresholds set in Decree No. 456 are "artificially low" and "do not reflect market conditions", and 
that the purpose of such imports cannot be commercial "but money laundering".156 Colombia 
considers that there is a "high likelihood" or "high risk" that imports at artificially low prices are linked to money laundering.
157 Such trade transactions are theref ore illicit "from the outset", that 
is, from the time at which a "consignment of narcotics … is sold abroad" and the illicit earnings 
repatriated to Colombia.158 Colombia concludes that the obligations stemming from Articles II:1(a) 
and II:1(b) of the GATT 1994 cannot be extended to imports entering at artificially low prices and violating the rules of the importing country.
159 
7.66.  Thirdly, Colombia contends that Panama has not established a prima facie case because in 
its first written submission it only put forward "some hypothetical examples" and no "actual cases" showing that Colombia was exceeding the bound tariff levels for imports of textiles, apparel and 
                                               
147 Colombia's opening statement at the second meeting of the Panel, para. 20. 
148 Ibid. para. 55. 
149 Ibid. para. 19. 
150 Ibid. paras. 22-25; response to Panel question No. 93, paras. 40 and 42; and comments on 
Panama's response to Panel question No. 94, para. 15. 
151 Colombia's opening statement at the second meeting of the Panel, paras. 23, 27 and 28. See also 
response to Panel question No. 93, para. 39; and comments on Panama's response to Panel question No. 94, 
para. 14. 
152 Colombia's opening statement at the second meeting of the Panel, para. 29. See also comments on 
Panama's response to Panel question No. 101, paras. 24-28. 
153 Colombia's opening statement at the second meeting of the Panel, para. 30. 
154 Ibid. para. 31. 
155 Ibid. paras. 30 and 31 (citing the Award of the Arbitral Tribunal, Plama Consortium Limited – 
Republic of Bulgaria , ICSID No. ARB/03/24, 27 August 2008, para. 138). 
156 Colombia's opening statement at the second meeting of the Panel, paras. 40, 42, 47, 60, 66, 68, 69, 
78 and 95. 
157 Colombia's first written submission, paras. 60,  66 and 73; and opening statement at the first 
meeting of the Panel, paras. 53 and 57. 
158 Colombia's response to Panel question No. 38, para. 92. 
159 Colombia's opening statement at the first meeting of the Panel, para. 56. See also opening 
statement at the second meeting of the Panel, paras. 42-44; closing statement at the second meeting of the 
Panel, paras. 7 and 8; and respon se to Panel questions Nos. 122 and 144, paras. 89 and 129, respectively. WT/DS461/R 
 
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  footwear.160 Moreover, to the extent that Article II:1(b) of the GATT 1994 only applies to "licit 
trade", Colombia asserts that Panama must prove that the compound tariff in the measure at issue exceeds the bound level for imports "introduced at market prices and not at artificially low prices".
161 Colombia refers to the reports of the panel and the Appellate Body in Argentina – 
Textiles and Apparel , in which the complainant presented "actual examples and a little more than 
95 pages of customs documents showing that the bound tariff was systematically breached".162 On 
this basis, Colombia concludes that both th e panel and the Appellate Body "founded their 
conclusions and recommendations on this evidence and not, as is attempted in this case, solely on 
the basis of hypotheses".163 
7.67.  Furthermore, Colombia contends that the hypothetical cases presented by Panama "are not 
well formulated and therefore have no probative value".164 The reason is that these examples do 
not correspond to the reality of international trade in the products mentioned; or they do not 
specify the tariff heading to which the hypothetical case refers or do not describe the product with sufficient precision, which makes it difficult for Colombia to exercise its right of defence.
165 
Colombia thus considers that Panama has not responded to the questions raised by Colombia 
regarding these hypothetical examples.166 
7.68.  With regard to the customs declarations  submitted by Panama as Exhibits PAN-18 and 
PAN-19, Colombia submits that the first one is illegible, while the second contains information that 
may give rise to doubts. This information includes: the long period of time between the dates of purchase, shipment and import of the goods (more than one year's difference between purchase and import); the low declared freight charge from China (US$34.39); and the declaration on the 
number of shoes and loads imported (84 pairs of shoes in 35 loads, which would mean 2.4 pairs 
per load). Moreover, in both exhibits the form serial number and the information identifying the importer have been blacked out.
167 As they cannot be verified, Colombia concludes that these 
documents have no probative value.168 
7.69.  In the light of the foregoing, Colombia requests the Panel to reject Panama's claim that the 
compound tariff is inconsistent with Article II:1(b) of the GATT 1994. Colombia also requests that 
the claim concerning Article II:1(a) be rejected inasmuch as it is subsidiary to the claim concerning 
Article II:1(b).169 
7.3.2  Main arguments of the third parties 7.3.2.1  United States 
7.70.  The United States affirms that Colombia has not denied that the categories of imports 
identified by Panama are subject to duties in excess of the levels bound in its Schedule of 
Concessions.
170 With regard to Colombia's argument that Articles II:1(a) and II:1(b) of the 
GATT 1994 do not apply to illicit trade, the United States considers that Article II:1 cannot be 
interpreted in such a way as to leave a measure outside its scope simply because a Member's domestic legislation considers a transaction or form of trade to be "illegal".
171 Such an 
interpretation would mean that the scope of a Member's obligations varies when it unilaterally 
determines that trade in a product is "illegal", which would not be consistent with the ordinary 
                                               
160 Colombia's second written submission, paras. 17- 18; opening statement at the second meeting of 
the Panel, paras. 37-39; and comments on Panama's  response to Panel question No. 91, para. 12. 
161 Colombia's opening statement at the first meeting of the Panel, paras. 61 and 62. See also response 
to Panel question No. 1, paras. 3 and 4. 
162 Colombia's response to Panel question No. 1, para . 2. See also second written submission, para. 19. 
163 Colombia's response to Panel question No. 1, para. 2. 
164 Colombia's first written submission, para. 70. 
165 Ibid. 
166 Colombia's second written submission, para. 18. 
167 Ibid. paras. 21, 23 and 25. See also closing statement at the second meeting of the Panel, para. 10; 
and response to Panel question No. 156, paras. 165 and 166. 
168 Colombia's first written submission, para. 74; an d second written submission, para. 27. See also 
comments on Panama's response to Panel question No. 158, para. 77. 
169 Colombia's first written submission, para. 75; open ing statement at the first meeting of the Panel, 
para. 63; and second written submission, para. 28 
170 United States' third-pa rty statement, para. 9. 
171 Ibid. para. 4. WT/DS461/R 
 
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  meaning of Article II:1. On the contrary, a proper in terpretation of Article II:1, made in good faith 
and based on the ordinary meaning of the terms, in their context and in light of the treaty's object 
and purpose, suggests that Article II:1 of the GATT covers any commerce in the products included in a Member's schedule, regardless of the legal status of such commerce under that Member's 
domestic laws.
172 In the opinion of the United States, the Panel, in its examination of Article II:1, 
need not determine whether the transactions covered by Decree 456 are illegal.173 
7.71.  The United States argues that, in any event,  it is not clear that the measure at issue only 
applies to illegal trade inasmuch as the compound tariff provided for in Decree No. 456 applies "to 
all covered products imported at certain prices" and does not describe the import of products as an illegal activity as such.
174 The United States indicates that there may be situations in which imports 
at prices below the prescribed thresholds are le gal and not underinvoiced, for example, dumped 
imports or products whose actual price is lower than US$10/kg for textiles or apparel and 
US$7/pair for footwear.175 
7.72.  With regard to Colombia's argument that Panama has only presented "hypothetical 
examples" instead of actual cases in which the bound tariff has been exceeded, the United States 
considers that when the meaning of a measure "as such" is unequivocal and is not contested by the parties, an analysis of the text of the measure itself may be sufficient and it is not necessary to 
prove its application in specific situations.
176 In the present dispute, the United State indicates 
that, as a factual issue, Panama must provide evidence of the scope and meaning of the challenged measure and, based on this, show that "in certain circumstances" Decree No. 456 "will necessarily impose tariffs in excess of those provided in Colombia's Schedule".
177 
7.3.2.2  Philippines 
7.73.  The Philippines indicates that a compound tariff which includes an ad valorem  duty and a 
specific levy results in an equivalent ad valorem rate that is inversely proportional to the change in 
the price of the goods. In other words, the ad valorem equivalent will be higher for lower-priced 
products than for higher-priced products. It is thus possible that there may be a price below which the compound tariff exceeds the level bound by Colombia.
178 The Philippines points out that, to 
ensure that the compound tariff does not exceed the bound level, a cap could be imposed on the 
ad valorem equivalents, or there could be a "floor" import price below which the compound tariff 
would not apply.179 The Philippines states that, in the situations described by Panama, it would 
appear that the compound tariff is in excess of the levels bound in Colombia's Schedule of 
Concessions.180 
7.74.  With regard to Colombia's argument that Articles II:1(a) and II:1(b) do not apply to illicit 
trade, the Philippines points out that the GATT 1994 coverage cannot be extended to imports 
entering at artificially low prices and violating the rules of the importing country.181 The Philippines 
indicates, however, that the claim that the GATT 1994 does not apply to certain goods, not 
because of their nature or physical characteristics, but because of the manner in which the trade 
has been financed and their use as conduits for illegal activity, is not as straightforward as for 
other goods that are inherently dangerous or produc e ill effects, such as illicit drugs or chemical 
weapons.182 A WTO Member which uses higher tariffs to sanction or discourage the import of 
                                               
172 United States' third-party stat ement, para. 4; and response to  Panel questions Nos. 3 and 4, 
paras. 14-15 and 16-19. 
173 United States' responses to Panel questions Nos. 2, 4 and 5, paras. 9, 19 and 20, respectively. 
174 United States' third-party statemen t, paras. 5 and 6; and response to  Panel question No. 2, para. 10. 
175 United States' response to Pa nel question No. 6, para. 21. 
176 See United States' response to Panel question No. 1, paras, 1-8. In cases where the measure at 
issue supports two or more meanings or is contested by the parties, the United States considers that the 
complainant would need to prove how the measure at issue is applied or interpreted by the responding 
Member. In its opinion, this would have to be done in accordance with the responding Member's domestic legal system, including the rules of interpretation in  its own legislation. Ibid. paras. 2 and 3. 
177 United States' third-party stat ement, paras. 10-12. See also Un ited States' response to Panel 
question No. 1, paras. 1 and 8. 
178 Philippines' third-party writte n submission, para. 4.14; and third-party statement, para. 3.3. 
179 Philippines' third-part y written submission, para. 4.16.; and th ird-party statement, paras. 3.4 and 
3.5. 
180 Philippines' third-party stat ement, paras. 3.7 and 3.8. 
181 Philippines' third-party wr itten submission, para. 4.26. 
182 Ibid. para. 4.29; and third- party statement,  para. 4.4. WT/DS461/R 
 
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  products, basing itself on a price threshold below which the goods are assumed to be illegally 
traded, has the burden of showing that "all items below the threshold" have artificially low prices, and are illegally traded.
183 
7.75.  Concerning Colombia's argument that Panama has used hypothetical examples that are 
unrealistic or insufficiently clear, the Philippines asserts that, although Panama is challenging the 
design and structure of the measure, it might be useful to establish the reasonableness or existence of particular items used as examples.
184 
7.76.  Lastly, the Philippines considers that a finding of a measure's inconsistency with 
Article II:1(b) of the GATT 1994 necessarily entails inconsistency with Article II:1(a).185 
7.3.2.3  Honduras 7.77.  Honduras considers the distinction proposed by Colombia regarding the legality of trade as a 
criterion for application of the GATT 1994 throws doubt on the validity and enforceability of the 
tariff concessions granted by WTO Members during numerous negotiating rounds. In Honduras' opinion, if the Panel were to uphold Colombia's argument, this would create uncertainty during 
trade negotiations within the WTO.
186 
7.3.2.4  European Union 7.78.  The European Union points out that, in order to compare Colombia's bound tariff and the 
compound tariff provided for in Decree No. 456, the latter has to be converted into an ad valorem  
equivalent.
187 As a result of this exercise, the European Union concludes that the compound tariff 
exceeds the level bound by Colombia in the case of  goods classified: (i) in Chapters 61, 62, 63 and 
tariff line 64.06.10.00.00, when their f.o.b. import price is US$10/kg or less and their bound 
ad valorem level is either 35% or 40%; (ii) under tariff subheading 6305.32, when their bound 
ad valorem level is 35% and their f.o.b. import price is higher than US$10/kg but lower than 
US$12/kg; and (iii) under tariff subheading 6405.20, when their f.o.b. import price is US$7/pair or 
less and their bound ad valorem level is either 35% or 40%.188 
7.79.  The European Union also states that the parties do not challenge the description of the 
compound tariff and that Colombia appears to accept that, in some cases, the tariffs applied are 
higher than those established in its Schedule of Concessions.189 Furthermore, the European Union 
considers that, in "as such" challenges of measures, the complainant does not need to show that the measure at issue has been applied in a manner that results in an inconsistency with a WTO obligation.
190 Moreover, the European Union observes that the complainant has to show that the 
measure at issue, in view of its design, structur e and expected operation, necessarily leads to an 
inconsistency.191 Even if, as Colombia contends, Panama has only presented hypothetical cases, 
the design, structure and expected operation of the measure are capable of including such cases, 
thus leading to the imposition of ordinary customs duties that are higher than the bound level.192 
7.80.  The European Union rejects Colombia's argument that transactions aimed at money 
laundering cannot be covered by Articles II:1(a) and II:1(b) of the GATT 1994. In the European 
Union's opinion, misrepresenting the price of goods or the fact that a transaction is used to launder 
money does not render the trade operation illegal in itself. In such cases, what is illegal under domestic law is the money laundering activity per se, but not the trade transaction. In this 
connection, the European Union states that the material scope of what is covered under the 
GATT 1994 cannot be circumscribed to what a WTO Member unilaterally determines is legal or not 
                                               
183 Philippines' third-party written submission, paras. 4.28 and 4.30; third-party statement, para. 4.5; 
and response to Panel question No. 5, para. 1.2. 
184 See Philippines' third-party written submission, paras. 4.34-4.39. 
185 Ibid. paras. 4.21-4.24; and third party statement, para. 3.9. 
186 Honduras' third-party statement. 
187 European Union's third-party written submission, para. 22. 
188 Ibid. para. 14. 
189 Ibid. and third-party statement, para. 3. 
190 European Union's response to Panel question No. 1, para. 1. 
191 Ibid. 
192 European Union's third-party written submission, para. 23. WT/DS461/R 
 
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  under its own jurisdiction, since this would entail a high risk of circumvention of the WTO rules.193 
The European Union points out that Article XX of the GATT 1994 contains general exceptions to cater for legitimate policies, including the enforcement of customs measures.
194 
7.81.  The European Union also considers that the "natural consequence" of inconsistency with 
Article II:1(b) of the GATT 1994 would be inconsistency with Article II:1(a).195 
7.3.3  Order of analysis of the claim conc erning Article II:1(a)  and Article II:1(b), 
first sentence, of the GATT 1994 
7.82.  Article II:1(a) and the first sentence of Article II:1(b) of the GATT 1994 provide as follows: 
Article II 
Schedules of Concessions  
1. ( a) Each contracting party shall accord to the commerce of the other 
contracting parties treatment no less favourable than that provided for in the 
appropriate Part of the appropriate Schedule annexed to this Agreement. 
(b) The products described in Part I of the Schedule relating to any contracting 
party, which are the products of territories of other contracting parties, shall, on their 
importation into the territory to which the Sc hedule relates, and subject to the terms, 
conditions or qualifications set forth in that Schedule, be exempt from ordinary 
customs duties in excess of those set forth and provided therein. 
7.83.  The two provisions are very closely linked: while Article II:1(a) "requires that a Member 
must accord to the commerce of the other Members 'treatment no less favourable than that provided for''' in its Schedule of Concessions
196, Article II:1(b), first sentence, requires that 
products "on their importation" be exempt from ordinary customs duties "in excess of those set 
forth" in the importing Member's Schedule of Concessions. 
7.84.  In Argentina – Textiles and Apparel , the Appellate Body explained the relationship that 
exists between the two provisions in the sense th at "[p]aragraph (b) [of Article II:1] prohibits a 
specific kind of practice that will always be inconsistent with paragraph (a): that is, the application of ordinary customs duties in excess of those provided for in the Schedule."
197 In that case, taking 
into account the circumstances of the dispute,  as well as the relationship between the 
two provisions, the Appellate Body began its inte rpretative analysis with Article II:1(b) and 
focused on that provision.198 Moreover, a measure that is inconsistent with Article II:1(b) "will 
always be inconsistent" with Article II:1(a).199 In other words, a finding of inconsistency with 
Article II:1(b) necessarily results in an inconsistency with Article II:1(a) of the GATT 1994. 
7.85.  The analysis of Panama's claim in relation to Article II:1(a) and (b), first sentence, of the 
GATT 1994 will commence with the preliminary question raised by Colombia as to whether the 
scope of this provision extends to "illicit trade" transactions. Secondly, and depending on the 
finding in relation to the preceding question, the Panel will address Colombia's argument concerning the standard of proof applicable in the circumstances of this dispute. Thirdly, the Panel 
will examine whether the compound tariff is inconsistent with Article II:1(b), first sentence, of the 
GATT 1994. Lastly, it will consider Panama's claim of inconsistency with Article II:1(a) of the GATT 1994. 
                                               
193 Ibid. 
194 European Union's third-party wr itten submission, para. 23, and th ird-party statement, para. 5. 
195 European Union's third-party written submission, para. 31. 
196 Appellate Body Report, Argentina – Textil es and Apparel , para. 47. 
197 Ibid. para. 45. 
198 Ibid. 
199 Appellate Body Report, Argentina – Textil es and Apparel , para. 45. See also Panel Reports, EC – 
IT Products , para. 7.747; EC – Bananas III (Article 21.5 – Ecuador II) , para. 7.394; EC – Chicken Cuts (Brazil) , 
para. 7.63; and EC – Chicken Cuts (Thailand) , para. 7.63. WT/DS461/R 
 
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  7.3.4  The question of the applicabilit y of Article II:1(a) and Article II:1(b), 
first sentence, of the GATT 1994 to "illicit trade" 
7.86.  First of all, the Panel will address Colomb ia's argument that Article II:1 of the GATT 1994 
does not apply to illicit trade. 
7.3.4.1  Main arguments of the parties 
7.87.  Colombia argues that imports of textiles, apparel and footwear at prices below the 
thresholds prescribed in Decree No. 456 are imports at prices which "are artificially low", so that 
there is a "high likelihood"200, a "greater likelihood"201 or a "high risk"202 that such imports are 
being used to launder money through the underinvoicing of imports.203 Colombia states that the 
thresholds provided for in Decree No. 456 were determined in the light of a comparative analysis using certain benchmarks which "in every case" exceeded the thresholds established in Decree 
No. 456.
204 According to Colombia, these benchmarks, together with evidence of the use of 
imports of the products concerned at artificially low prices to launder money, show that imports below the respective thresholds are "operations wh ose objective is not commercial but to launder 
money".
205 Colombia also argues that, according to the principle of good faith and the object and 
purpose of the GATT 1994 reflected in its preamble, as well as in the preamble to the WTO Agreement
206, "Article II:1(b) covers licit trade and cannot cover operations where there are 
indications that they are being concluded at artificially low prices in order to launder money".207 
7.88.  In response, Panama contends that the term "illicit trade" refers to activities with an illicit 
objective such as "the sale of illegal, counterfeit or pirated goods" and not to imports of textiles, apparel or footwear, legally subject to import procedures and whose prices are below certain 
thresholds unilaterally established by Colombia.
208 Panama considers that the fact that criminals 
may sometimes be behind import transactions involving textiles, apparel or footwear does not make such transactions illegal or illicit in themselves.
209 Moreover, Panama argues that the term 
"commerce" in Article II:1(a) of the GATT 1994 does not have any qualifying adjective and it 
cannot therefore be argued that this provision does not apply to situations that Colombia unilaterally determines to be illicit.
210 Panama states that the issue raised by Colombia in relation 
to the alleged illegality of trade operations shou ld be transposed to the context of Colombia's 
defence under Article XX of the GATT 1994.211 In any event, Panama contends that Colombia has 
not shown that it has knowledge of the illegalit y of all imports of goods at prices below the 
thresholds established in Decree No. 456.212 
7.3.4.2  Analysis by the Panel 
7.89.  Colombia argues that the obligations under Article II of the GATT 1994 do not extend to 
"illicit trade" and especially to imports which reflect "conduct which both Colombia and the 
                                               
200 Colombia's first written submission, para. 60. 
201 Ibid. para. 73. 
202 Ibid. para. 66 
203 Ibid. paras. 60, 66 and 73; and opening statemen t at the first meeting of  the Panel, paras. 53 
and 57. See also closing statement at the first meeting of the Panel, para. 8. Colombia also clarified that 
"underinvoicing" refers to "imports at artificially low pr ices which do not correspond to  actual or market prices". 
Response to Panel question No. 41, para. 98. 
204 Colombia's second written submission, paras. 33- 35; opening statement at the second meeting of 
the Panel, para. 40. 
205 Colombia's second written submission, para. 36; opening statement at the second meeting of the 
Panel, para. 42. 
206 Colombia's second written submission, para. 7. 
207 Colombia's first written submission, para. 67. See also opening statement at the first meeting of the 
Panel, para. 56. 
208 Panama's opening statement at the fi rst meeting of the Panel, para. 1.12. 
209 Ibid. para. 1.13. 
210 Panama's second written submission, para. 2.4. Se e also opening statement at the first meeting of 
the Panel, para. 1.11. 
211 Panama's opening statement at th e first meeting of the Panel, para . 1.11. See also Panama's second 
written submission, para. 2.5; opening statement at the second meeting of the Panel, para. 2; and closing 
statement at the second meeting of the Panel, para. 2. 
212 Panama's closing statement at the first meeting of the Panel, para. 1.6; and response to Panel 
question No. 5. WT/DS461/R 
 
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  international community have determined to be illegal".213 Colombia's contention relates to the 
applicability of Articles II:1(a) and II:1(b) of the GATT 1994 to the measure at issue. The Panel 
should therefore address this issue before emba rking upon a substantive analysis of the claim 
regarding the alleged inconsistency with the obligations under the GATT 1994. 
7.90.  In order to comply with its terms of refe rence under the DSU, a panel has to rule on the 
legal issues necessary for the resolution of the matter between the parties. As stated by the Appellate Body with reference to Article 11 of the DSU: 
Nothing in this provision or in previous GATT practice requires a panel to examine all 
legal claims made by the complaining party. Previous GATT 1947 and WTO panels 
have frequently addressed only those issues that such panels considered necessary for the resolution of the matter between th e parties, and have declined to decide 
other issues. … In recent WTO practice, pane ls likewise have refrained from examining 
each and every claim made by the complaining party and have made findings only on those claims that such panels concluded were necessary to resolve the particular 
matter. 
… Furthermore, such a requirement [that a panel examine all legal claims made by the 
complaining party] is not consistent with the aim of the WTO dispute settlement 
system. Article 3.7 of the DSU explicitly states: 
The aim of the dispute settlement mechanism is to secure a positive 
solution to a dispute. A solution mutually acceptable to the parties to a 
dispute and consistent with the covered agreements is clearly to be 
preferred.
214 
(emphasis original; footnotes omitted) 
7.91.  Accordingly, the Pa nel will begin by considering whether, in order to resolve this dispute, it 
is necessary or useful to issue a finding as to whether the obligations contained in Articles II:1(a) and II:1(b) of the GATT 1994 do or do not apply to "illicit trade". Colombia's argument would only 
be pertinent if the Panel were to make two determinations. First, the Panel would have to 
determine whether, as a factual matter, as affirmed by Colombia, the trade affected by the measure at issue is "illicit trade". Secondly, the Panel would have to find that the obligations contained in Articles II:1(a) and II:1(b) of the GATT 1994 do not apply to "illicit trade". 
7.92.  Below, the Panel will examine the first of these issues, that is, whether, as Colombia 
contends, the trade affected by the measure at issue is "illicit trade". 
7.93.  The Panel points out that the WTO covere d agreements contain no definition of "illicit 
trade", and do not employ this expression. Nor has Colombia proposed a single definition of the 
term for the purposes of its argument in this dispute. 
7.94.  However, Colombia has stated that the "c oncept of illicit trade" "is recognized by the 
international community, which in various international instruments has jointly decided to suppress 
this phenomenon in its different forms".
215 Specifically, Colombia has referred to the definition of 
"trafficking in illicit goods" used by the International Criminal Police Organization – INTERPOL, which refers to "all types of illicit trade"; it includes such practices as counterfeiting (trademark 
infringements), piracy (copyright infringements), smuggling of legitimate products and tax 
evasion"
216; as well as the definition of "illicit trade" used in the Framework Convention on Tobacco 
                                               
213 Colombia's opening statement at the second meetin g of the Panel, para. 35. See also first written 
submission, para. 62. 
214 Appellate Body Report, US – Wool Shirts and Blouses , pp. 18 and 19. 
215 Colombia's opening statement at the second meet ing of the Panel, para. 22; response to Panel 
question No. 94, para. 38. 
216 Colombia's opening statement at the second meetin g of the Panel, para. 23; and response to Panel 
question No. 94, para. 39 (c iting INTERPOL's website, WT/DS461/R 
 
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  Control of the World Health Organization (WHO), which refers to "any practice or conduct 
prohibited by law and which relates to production, shipment, receipt, possession, distribution, sale or purchase, including any practice or conduct intended to facilitate such activity".
217 
7.95.  Colombia has also mentioned as examples of "illicit trade" practices combated by other 
international instruments such as the Convention on the Means of Prohibiting and Preventing the 
Illicit Import, Export and Transfer of Ownership of Cultural Property 1970 of the United Nations 
Educational, Scientific and Cultural Organization (UNESCO); the Arms Trade Treaty; the 
Inter-American Convention against the Illicit Manufacturing of and Trafficking in Firearms, 
Ammunition, Explosives, and Other Related Material s; and the Convention on International Trade 
in Endangered Species of Wild Fauna and Flora.218 
7.96.  Lastly, Colombia referred to the definition of  "illicit trade" used by an author, according to 
which "[i]llicit trade [is] trade that infringes the rules – the laws, regulations, licenses, taxation 
system, embargoes and all the procedures that countries use to organize trade, protect their citizens, raise the standard of living and enforce codes of ethics."
219 
7.97.  In a report by the World Customs Organization (WCO) on illicit trade provided by Colombia 
as an exhibit, it is stated that: 
Illicit trade involves money, goods or value gained from illegal and otherwise unethical 
activity. It encompasses a variety of illegal trading activities, including human 
trafficking, environmental crime, illegal trade in natural resources, intellectual property infringements, trade in certain subs tances that cause health or safety risks, 
smuggling of excisable goods,  trade in illegal drugs and a variety of illicit financial 
flows.
220 
7.98.  Colombia clarified that its argument concerning illicit trade refers to "conduct considered 
illegal by the international community" and not to "minor offences or misdemeanours" which 
"would not constitute illicit trade".221 It indicates, in particular, that the trade affected by the 
measure that is the subject of this dispute is "trade used to launder money".222 Colombia adds that 
"money laundering is conduct deemed illegal by the international community, as can be seen from 
the United Nations Convention on  Transnational Organized Crime".223 
7.99.  Colombia concludes that foreign trade operations carried out for the purpose of laundering 
money or for other illicit ends cannot be covered by Article II:1(a) and Article II:1(b), first sentence, of the GATT 1994.
224 
7.100.  Despite the fact that, as previously mentioned, the WTO covered agreements do not 
contain any definition of "illicit trade" and do not employ this expression, several of the situations 
referred to by Colombia are covered by provis ions of the covered agreements. For example, 
Article 41.1 of the Agreement on Trade-Related As pects of Intellectual Property Rights (TRIPS) 
provides that Members must ensure that their domestic legislation establishes procedures to 
                                                                                                                                               
http://www.interpol.int/en/Internet/Cr ime-areas/Trafficking-in-illicit-goods-and-counterfeiting/Trafficking-in-illi
cit-goods-and-counterfeiting, viewed on 30 April 2015). 
217 Colombia's opening statement at the second meetin g of the Panel, para. 24; and response to Panel 
question No. 94, para. 40 (citing the website of the WHO Framework Convention on Tobacco Control, 
http://www.who.int/tobacco/framework/WHO_FCTC_english.pdf, viewed on 30 April 2015). 
218 Colombia's opening statement at the second meeting of the Panel, para. 25. 
219 Moses Naim, Illicit: How Smugglers, Traffickers, and Copycats Are Hijacking the Global Economy  
(Doubleday, 2005), p. 16. Cited by Colombia in English, first written submission, footnote 7. 
220 World Customs Organization, Illicit Trade Report 2012  (Exhibit COL-8), p. 2. 
221 Colombia's response to Panel question No. 95, para. 43. 
222 Colombia's comments on Panama 's response to Panel question No. 94, para. 15. See also first 
written submission, paras. 25, 28, 35, 37, 38, 50, 66, 80, 87, 88, and 93; opening statement at the first meeting of the Panel, paras. 11, 26, 65; and response to Panel questions Nos. 1, 6, 48, paras. 4, 14, 105, 
respectively 
223 Colombia's comments on Pana ma's response to Panel question No. 94, para. 15. See also 
first written submission, paras. 80 an d 81; opening statement at the first meeting of the Panel, para. 65; and 
response to Panel question  No. 3, paras. 6 and 7. 
224 See Colombia's first written submission, pa ras. 53 and 67; and opening statement at the 
first meeting of the Panel, para. 47. WT/DS461/R 
 
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  permit effective action against infringements of intellectual property rights, including trademarks 
and copyright225: 
Members shall ensure that enforcement procedures as specified in this Part are 
available under their law so as to permit effective action against any act of 
infringement of intellectual property rights covered by this Agreement, including 
expeditious remedies to prevent infringements and remedies which constitute a deterrent to further infringements. … 
7.101.  Article VII of the GATT 1994, as well as the Customs Valuation Agreement, establish 
disciplines for determining customs value, including cases in which a Member's authorities have doubts about the truth or accuracy of information, documents or declarations submitted for customs valuation purposes. 
7.102.  Article XX of the GATT 1994 provides for general exceptions to the obligations under the 
Agreement, including with respect to the obligations contained in Article II of the GATT 1994. The exceptions provided for in Article XX include, for example: measures necessary to protect public 
morals; measures necessary to protect human, animal or plant life or health; measures necessary 
to secure compliance with laws or regulations which are not inconsistent with the GATT 1994, inter alia  for purposes of customs enforcement, the protection of patents, trademarks and 
copyrights, as well as the prevention of deceptiv e practices; measures imposed for the protection 
of national treasures of artistic, historic or archaeological value; and measures relating to the conservation of exhaustible natural resources.
226 Similarly, Article XXI of the GATT 1994 provides 
for exceptions in respect of, inter alia , measures relating to the traffic in arms, ammunition and 
implements of war; and measures relating to fissionable materials or the materials from which 
they are derived.227 
7.103.  In other words, the provisions of the co vered agreements cited above refer to several of 
the situations identified by Colombia as exam ples of "illicit trade" practices regulated by 
international instruments. 
7.104.  In any event, as previously mentioned, Colombia's argument would only be pertinent if the 
Panel determines as a factual issue that, as asserted by Colombia, the trade affected by the 
measure at issue is "illicit trade". In order to be  able to make an objective assessment of this 
matter, the Panel must consider the meaning and sco pe of the measure in question. In this case, 
the starting point for the Panel's analysis will be the text of the relevant provision itself.228 
7.105.  The factor common to the various definitions of  "illicit trade" cited by Colombia is that they 
all refer to "illegal" activities, that is, activities that have been prohibited by law. In the light of the actual terms of the measure that is the subject of this dispute, however, the compound tariff 
applies to all imports of products classified in Chapters 61, 62, 63 and 64 of Colombia's Customs 
Tariff (except for some tariff lines of heading 64.06). For each category of product, the compound tariff has two different levels, one that is lower (10% ad valorem and US$3/kg or 10% ad valorem 
and US$1.75/pair, depending on the products concerned) and one that is higher (10% ad valorem 
and US$5/kg or 10% ad valorem and US$5/pair, depending on the products concerned). In the 
specific case of the highest levels of the co mpound tariff, which correspond to some of the 
instances identified by Panama as inconsistent wi th Articles II:1(a) and II:1(b) of the GATT 1994, 
the compound tariff applies to all imports of the products concerned when they are effected at 
prices below the thresholds provided for in Decree No. 456. Imposition of the compound tariff on imports is not preceded by any declaration on the part of the judicial or administrative authorities 
that the operation constitutes an unlawful act, nor is it even associated with the commission of any 
                                               
225 Article 41.1 of the TRIPS also provides that the enforcement procedures me ntioned "shall be applied 
in such a manner as to avoid the creation of barriers to  legitimate trade and to pr ovide for safeguards against 
their abuse". 
226 Concerning the general exceptions in Article XX of the GATT 1994, Colombia indicated that there is a 
difference between "illicit conduct" and "licit conduct subj ect to regulation". In its opinion, illicit conduct "is 
prohibited" and therefore the Article II:1 obligations do no t apply. On the other hand, the general exceptions in 
Article XX of the GATT 1994 "enable measures affecting licit trade to be justified". Colombia's response to Panel question No. 99, para. 54; an d comments on Panama's response to  Panel question No. 98, para. 20. 
227 Articles XIV and XIV bis of the General Agreement on Trade in Se rvices contain exceptions similar to 
those provided for in Articles XX and XXI of the GATT 1994, in respect of measures affecting trade in services. 
228 See Appellate Body Report US – Shrimp II (Viet Nam) , paras. 4.31 and 4.32. WT/DS461/R 
 
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  unlawful act. Moreover, Colombia has not identified any legal rule prohibiting the import of goods 
at prices lower than the thresholds determined in Decree No. 456. 
7.106.  Consequently, the terms of the subject meas ure themselves show that the compound tariff 
is applied to all imports of the products in question, without distinguishing as to whether the 
operations are lawful or unlawful. The measure is not structured or designed to apply solely to 
operations which have been classified as "illicit trade". 
7.107.  The Panel also notes that the compound tariff is not applicable to imports from countries 
with which Colombia has signed trade agreements in which the subheadings subject to Decree 
No. 456 have been negotiated.229 Nor does the compound tariff apply to goods entering certain 
zones in Colombia called "Special Customs Regi me Zones", unless the goods subsequently enter 
other parts of Colombia's customs territory.230 Likewise, the compound tariff is not applicable to 
goods entering Colombian territory under the Special Import-Export Systems (Plan Vallejo).231 
Accordingly, goods classified in Chapters 61, 62, 63 and 64 (except for heading 64.06 but including tariff line 6406.10.00.00) at prices below the thresholds provided for in Decree No. 456 
may freely enter Colombia under all these modalities, subject to tariffs lower than the compound 
tariff, or even duty free. In the Panel's opinion, this supports the conclusion that in Colombia's legal system there is no rule prohibiting or restricting what Colombia considers "illicit trade", that 
is, the import of goods whose declared prices ar e below the thresholds provided for in Decree 
No. 456 (prices which, according to Colombia, are ar tificially low for money laundering purposes). 
7.108.  In the light of the foregoing, in the contex t of this dispute, a finding as to whether or not 
the obligations in Articles II:1(a) and II:1(b) of the GATT 1994 are applicable to "illicit trade" 
would be merely theoretical and would be neither necessary nor of practical use in achieving a 
satisfactory settlement of the matter placed before this Panel. Consequently, it is not necessary for 
the Panel to issue a finding on whether or not the obligations of Article II:1 of the GATT 1994 can 
be extended to "illicit trade". 
7.109.  That having been said, the Panel notes that  Colombia has stated that the compound tariff 
could be useful in discouraging the underinvoicing of imports and the use of such practices for 
money laundering purposes. In the Panel's view, this statement is related to Colombia's argument 
that the compound tariff is in this respect a measure necessary to protect public morals or to secure compliance with rules against money laundering. Such arguments are therefore not the same as asserting that imports at prices lower than the thresholds provided for in Decree No. 456 
necessarily constitute "illicit trade". 
7.110.  The Panel is aware that the GATT 1994 is structured in such a way as to strike an effective 
balance between obligations under the Agreement, on the one hand, and the right of Members to 
promote and apply measures seeking to achieve legi timate public policy objectives, on the other. 
The GATT 1994, and other WTO agreements, thus contain exceptions to the obligations they contain, which may be invoked if there is any legitimate reason justifying the possible 
inconsistency of a measure with the obligations enshrined in the agreements.
232 
7.111.  As was indicated above, in the specific case of the GATT 1994, the exceptions may include, 
inter alia : measures necessary to protect public morals; measures necessary to protect human, 
animal or plant life or health; measures relating to the conservation of exhaustible natural 
resources; measures necessary to secure compliance with laws or regulations consistent with the 
GATT 1994; and measures necessary to protect a Me mber's essential security interests. In the 
Panel's opinion, it does not appear that the grounds invoked by Colombia in defence of the 
measure at issue should be considered in the analysis of compliance with the specific obligations in 
Article II of the GATT 1994.233 
                                               
229 Decree No. 074 (Exhibits PAN-2 and COL-16), Article 3, para. 1; Decree No. 456 (Exhibits PAN-3 and 
COL-17), Article 5, paragraph, point. 1. 
230 Decree No. 456 (Exhibits PAN-3 and COL-17), Article 4. 
231 Panama's response to Panel question No. 89; Colo mbia's response to Panel question No. 89, paras. 
30-32. 
232 See Appellate Body Report, US – Clove Cigarettes , paras. 96 and 109. 
233 See Appellate Body Report EC – Seal Products , para. 5.125. WT/DS461/R 
 
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  7.112.  For the foregoing reasons, the Panel co uld, if necessary, examine the public policy 
arguments advanced by Colombia in relation to the import of goods at prices below certain thresholds in the light of the defences invoke d by Colombia under Article XX of the GATT 1994. 
7.3.5  The standard of proof 
7.3.5.1  Main arguments of the parties 
7.113.  Colombia claims that Panama has not established a prima facie  case because it has only 
put forward hypothetical examples and has not pr ovided any evidence to show "that apparel and 
footwear are being imported at prices which violate the levels bound by Colombia".
234 In support of 
its argument, Colombia points out that in Argentina – Textiles and Apparel , the Panel and the 
Appellate Body both founded their conclusions and recommendations on "actual examples and 
rather more than 95 pages of customs documents showing that the bound level was systematically 
breached by Argentina".235 Colombia states that Panama has not "presented evidence showing that 
the bound levels were being violated for goods de clared at actual and not hypothetical prices".236 
7.114.  Panama, for its part, argues that its complaint in this dispute focuses on "the design, 
structure and architecture of the compound tariff" and that, consequently, "it does not have the 
burden of proving adverse economic effects or presenting actual cases".237 Nevertheless, Panama 
also refers to the import documents submitted as Exhibits PAN-18 and PAN-19, which, in its 
opinion, show "Colombia's application of the tariff above its bound level".238 
7.3.5.2  Analysis by the Panel 7.115.  With regard to this aspect, the disagreement between the parties concerns what evidential 
elements Panama has to submit in order to establish a prima facie  case that the measure is 
inconsistent with Article II:1(a) and Article II:1(b), first sentence, of the GATT 1994. It is relevant 
to note that, as has been explained by the Appella te Body, "it is well established" that measures 
containing rules or norms can be challenged "a s such" "independently of whether or how those 
rules or norms are applied in particular instances".
239 
7.116.  In cases where a measure is challenged "as such" (i.e. independently of any application), 
the complaining party bears the burden of introd ucing evidence as to the scope and meaning of 
the measure in order to substantiate its assertion.240 As the Appellate Body pointed out, "in some 
cases the text of the relevant legislation may suffice to clarify the scope and meaning of the relevant legal instruments".
241 In other cases the complaining party will also need to support its 
understanding of the scope and meaning of the lega l instruments challenged with "evidence of the 
consistent application of such laws, the pronouncements of domestic courts on the meaning of 
such laws, the opinions of legal experts and the writings of recognized scholars".242 In any event, 
the complaining party has to prove that the measure challenged "not only in a particular instance 
                                               
234 Colombia's opening statement at the first meetin g of the Panel, para. 60. See also first written 
submission, para. 68; opening statement at the first meet ing of the Panel, paras. 61 and 62; response to Panel 
question No. 1, para. 2; second written submission, para. 18; and comments on Panama's response to Panel question No. 91, para. 12. 
235 Colombia's response to Panel question No. 1, para . 2. See also second written submission, para. 19. 
236 Colombia's opening statement at the first meeting of the Panel, para. 60. 
237 Panama's second written submission, para. 2.3.  See also first written submission, para. 5.3. 
238 Panama's response to Panel question No. 23. See also second written submission, para. 2.3. 
239 Appellate Body Reports, Argentina – Import Measures , para. 5.101. See also Appellate Body Report, 
US – 1916 Act , para. 61. The Appellate Body indicated that th e possibility of challenging measures "as such" 
independently of any application is part of the GATT and WTO acquis . The panel in US - Superfund  stated that 
"the very existence of mandatory legislation providing for an internal tax, without it being applied to a 
particular imported product, should be regarded as falling within the sc ope of Article III:2,  first sentence". 
GATT Panel Report, US – Superfund , para. 5.2.2. 
240 Appellate Body Report, US – Carbon Steel , para. 157. 
241 Appellate Body Report, US – Countervailing and Anti-Dumping Measures (China) , para. 4.100 
(referring to Appellate Body Report US – Carbon Steel , para. 157). 
242 Appellate Body Report, US – Carbon Steel , para. 157. See also Appellate Body Reports, US – 
Countervailing and Anti-Dumping Measures (China) , para. 4.100; US – Shrimp II (Viet Nam) , para. 4.32; and 
US – Carbon Steel (India) , para. 4.446. WT/DS461/R 
 
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  t h a t  h a s  o c c u r r e d ,  b u t  i n  f u t u r e  s i t u a t i o n s  a s  w e l l  …  w i l l  n e c e s s a r i l y  b e  i n c o n s i s t e n t  w i t h  t h a t  
Member's WTO obligations".243 
7.117.  In US – FSC (Article 21.5 – EC) , the Appellate Body noted that the examination of whether 
a measure involves "less favourable treatment" of imported products within the meaning of 
Article III:4 of the GATT 1994 must be grounded in  close scrutiny of the fundamental thrust and 
effect of the measure itself. "This examination cannot rest on simple assertion, but must be founded on a careful analysis of the contested measure and of its implications in the marketplace. 
At the same time, however, the examination need not be based on the actual  effects of the 
contested measure in the marketplace."
244 In EC – IT Products , the Panel referred to this 
explanation by the Appellate Body and considered that the same held true for purposes of its analysis with respect to Article II:1(a) of the GATT 1994.
245 
7.118.  In the instant case, Panama has explained its understanding of the structure, design and 
architecture of the compound tariff. It has also presented arithmetical calculations in an attempt to show how the compound tariff affects the duties payable on imports of the goods subject to the 
measure. As a factual issue, Colombia has not obje cted to the description of the operation or the 
meaning and scope of the compound tariff's variou s formulas submitted by Panama in the course 
of the Panel's proceedings.
246 
7.119.  Colombia states that the panel and the Appellate Body in Argentina – Textiles and Apparel 
founded their conclusions and recommendations on "actual examples and rather more than 95 pages of customs documents showing that the bound tariff was systematically breached".
247 In 
that dispute, the issue was whether the minimum specific import duties (DIEM) imposed by 
Argentina were inconsistent with Article II of the GATT 1994.248 In its defence, Argentina argued 
that the United States' allegations were "too general, hypothetical and theoretical" and that the panel should not consider "such 'hypothetical' situations without evidence of specific transactions 
where breaches occurred".
249 
7.120.  In Argentina – Textiles and Apparel , the Panel observed that GATT/WTO case law made it 
clear that a mandatory measure could "be brought before a panel, even if such an adopted 
measure is not yet in effect".250 On that basis, it analysed "the nature" of the minimum specific 
duty system and concluded that the United Stat es had "established a presumption that the very 
nature" of the measure at issue "violate[d] the provisions of Article II of GATT"251 inasmuch as "in 
many cases" the specific duties at issue "[would] ne cessarily result in a duty in excess" of the level 
bound in Argentina's Schedule of Concessions.252 The Panel subsequently examined an "average 
import price" for certain products in relation to the total amount of duties collected, which in the Panel's opinion was evidence of "a sufficient number of transactions which were subject to duties" 
above the bound rate.
253 Lastly, the Panel examined "approximately 90 invoices and customs 
documents" in which the bound level of 35% ad valorem had been exceeded .254 In the light of this 
                                               
243 Appellate Body Report - US – Oil Country Tubular Goods Sunset Reviews , para. 172. 
244 Appellate Body Report, US – FSC (Article 21.5 – EC) , para. 215. (emphasis original; footnote 
omitted) 
245 Panel Report, EC – IT Products , para. 7.762. 
246 In response to the Panel's question asking Colombia to comment on the relevance and usefulness of 
the break-even prices put forward by Panama in its first written submission, Colombia stated that "the 
parameters of Decree No. 456 represent the legislative ceil ing of the measure" and that such "legislative caps 
… prevent licit trade entering the country from being subject to a tariff higher than the tariff bound by Colombia" (Colombia, response to Panel question No. 93, para. 36). Colombia also indicated that "Panama [had] not presented any proof of import s at prices below the thresholds [o r that] imports at prices below the 
thresholds reflect market conditions  and are not imports for the purpose of laundering money" (Colombia's 
response to Panel question No. 93, para. 37). 
247 Colombia's first written submission, para. 69. See also response to Panel question No. 1, para. 2; 
and second written submission, para. 19. 
248 Panel Report, Argentina – Textil es and Apparel , para. 2.6; Appellate Body Report, Argentina – 
Textiles and Apparel , para. 49. 
249 Panel Report, Argentina – Textil es and Apparel , para. 6.42. 
250 Ibid. para. 6.45. 
251 Ibid. para. 6.47. 
252 Ibid. para. 6.43. 
253 Ibid. para. 6.51. 
254 Appellate Body Report, Argentina – Textil es and Apparel , para. 77. See also Panel Report, Argentina 
– Textiles and Apparel , paras. 6.52-6.63. WT/DS461/R 
 
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  analysis, the Panel concluded that the United States had provided sufficient evidence that 
Argentina had effectively imposed duties on import s above its bound rate and that "in any case … 
the very nature of the minimum specific duty system imposed … will inevitably lead, in certain instances, to the imposition of duties above" the rate bound in the Schedule of Concessions.
255 
7.121.  The Appellate Body, for its part, found in that dispute that, for a certain range of import 
prices (those below the break-even price), the "s tructure" and "design" of the measure at issue 
resulted in specific duties which exceeded the tariff bound in Argentina's Schedule of 
Concessions.256 In arriving at this conclusion, the Appellate Body did not have recourse to 
empirical evidence on the application of the measure in order to confirm its finding that the measure at issue violated Article II of the GATT 1994. 
7.122.  Accordingly, in Argentina – Textiles and Apparel, in reaching a finding of inconsistency with 
Article II:1 of the GATT 1994, the panel and the A ppellate Body based themselves on the "very 
nature" (in the words of the panel) or the "structure and design" (in the words of the Appellate Body) of the measure at issue. The empirical evid ence on the application of the measure examined 
by the Panel did not constitute indispensable eviden ce for its analysis but rather served to confirm 
the previous conclusions regarding the "nature" of the measure. 
7.123.  In the context of the present dispute, the Panel understands that the meaning and scope 
of the measure at issue (i.e. the compound tariff) can be determined from the actual text of 
Decree No. 456, in addition to being confirmed by  the additional explanations furnished by the 
parties. As a factual matter, Colombia has not rejected Panama's description of the operation, meaning and scope of the various examples of the compound tariff. Decree No. 456 is sufficient in 
itself to conduct an analysis of whether Panama has established a prima facie  case that the 
compound tariff is inconsistent with Article II:1(a) and Article II:1(b), first sentence, of the GATT 1994. 
7.124.  The Panel also notes that, in its responses to questions after the first meeting, Panama 
submitted Exhibits PAN-18 and PAN-19, which contain two "import documents for the products affected" by Decree No. 456.
257 Colombia, for its part, challenged these items of evidence because 
one of them was illegible; another contained information which "gives rise to doubts concerning 
the goods"258; and, in any event, information essential to enabling Colombia to verify the truth of 
the two items of evidence had been expunged.259 In the light of the Panel's finding that the text of 
Decree No. 456 is sufficient in itself to proceed with the examination of inconsistency with 
Article II:1(a) and Article II:1(b), first sentence, of the GATT 1994, the Panel does not consider it 
necessary to examine the relevance of Exhibits PAN-18 and PAN-19. 
7.3.6  The question of whether the compound tariff is inconsistent with Article II:1(b), 
first sentence, of the GATT 1994 
7.125.  In the light of the arguments put forward by  the parties, this dispute requires examination 
of whether the compound tariff exceeds the levels  bound in Colombia's Schedule of Concessions 
with respect to the relevant products and, cons equently, whether it is inconsistent with the 
obligations contained in Article II:1(b), first sentence, of the GATT 1994. 
7.126.  Pursuant to Article II of the GATT 1994, entitled "Schedules of Concessions", Members 
have undertaken commitments on access to their respective markets by establishing specific 
obligations in their Schedules annexed to the WTO Agreement. Article II:1(a) requires Members to 
"accord to the commerce of the other [Members] treatment no less favourable than that provided for in the appropriate Part of the appropriate Schedule …". Article II:1(b), first sentence, on the 
other hand, provides that "the products of territories of other [Members] shall, on their 
importation … be exempt from ordinary customs du ties in excess of those set forth and provided 
[in the Schedule]". Both provisions refer to the "Schedule", that is, the "appropriate Schedule 
                                               
255 Panel Report, Argentina – Textil es and Apparel , para. 6.65. 
256 Appellate Body Report, Argentina – Textil es and Apparel , paras. 53, 55 and 62. 
257 Panama's response to Panel question No. 23; second written submission para. 2.3; opening 
statement at the second meeting of the Panel, para. 4; import declarations (Exhibits PAN-18 and PAN-19). 
258 Colombia's second written submission, para. 25. 
259 Ibid. paras. 20-25. See also closing statement at the second meeting of the Panel, para. 10; and 
comments on Panama's response to Panel question No. 158, para. 77. WT/DS461/R 
 
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  annexed" to the GATT 1994, in which WTO Members have determined their specific commitments 
with regard to trade and the import of goods. These Schedules are "an integral part of Part I" of the GATT 1994, as provided in Article II:7 thereof, and in the WTO Agreement.
260 The 
commitments provided for therein are thus part of the terms of the treaty, in this case the 
GATT 1994.261 
7.127.  The preamble to the GATT 1994 affords co ntextual support regarding the importance to 
the multilateral trading system of the tariff concessions to which each Member has committed 
itself in its Schedule of Concessions. In this connection, the Panel agrees with Colombia that the 
preamble to the GATT 1994 reflects the recognition by the Contracting Parties to the GATT, and currently the Members of the WTO, that their trade and economic relations "should be conducted with a view to raising standards of living, ensuring full employment and a large and steadily 
growing volume of real income".
262 The preamble to the GATT 1994 also expresses the "desire" of 
WTO Members that the contribution to these objectiv es should be made effective "by entering into 
reciprocal and mutually advantageous arrangements directed to the substantial reduction of tariffs 
and other barriers to trade and to the elimination of discriminatory treatment in international 
commerce".263 In the Panel's opinion, this means that the commitments agreed under the WTO 
agreements are the mechanism by which the Members have agreed to promote goals and 
objectives such as raising standards of living, ensuring full employment and increasing the 
population's real income. 
7.128.  In the same vein, Articles II:1(a) and II:1(b), first sentence, of the GATT 1994 reflect the 
result of the successive negotiations concluded by the GATT Contracting Parties and, more 
recently, by the WTO Members, which led to specific commitments on market access through the 
establishment of bound levels for ordinary customs duties. As a result of these negotiations, each 
Member agrees to set its bound ta riffs at a certain level, in the expectation that the other Members 
will also comply with their respective tariff comm itments. As the Appellate Body has indicated, a 
basic object and purpose of the GATT 1994, as reflected in Article II, is "to preserve the value of tariff concessions negotiated by a Member with its trading partners, and bound in that Member's 
Schedule".
264 Conversely, failure to comply with the commitments undertaken in a Member's 
Schedule could upset the balance of concessions negotiated among WTO Members.265 In this 
connection, the Appellate Body warned that "the se curity and predictability of 'the reciprocal and 
mutually advantageous arrangements directed to the substantial reduction of tariffs and other 
barriers to trade' is an object and purpose of the WTO Agreement , generally, as well as of the 
GATT 1994".266 
7.129.  The obligations contained in Article II:1(a) and II:1(b), first sentence, are complementary 
a n d  m u s t  b e  i n t e r p r e t e d  i n  h a r m o n y .  A s  s t a t e d  a b o v e ,  A r t i c l e  I I : 1 ( a )  r e f e r s  t o  e a c h  M e m b e r ' s  
obligation to accord to the "commerce" of other Members treatment no less favourable than that provided for in the importing Member's Schedule of  Concessions. Article II:1(b), first sentence, on 
the other hand, sets out the obligation to exempt products of other Members, "on their importation 
… from ordinary customs duties" in excess of those set forth in the Schedule of Concessions.
267 
This means, therefore, that the commitments esta blished in a Member's Schedule of Concessions 
must be observed in respect of commerce in a product for which concessions have been made, 
                                               
260 Appellate Body Reports, EC – Computer Equipment , para. 84; and EC – Chicken Cuts , para. 145. See 
also Panel Reports, EC – IT Products, para. 7.16. 
261 Appellate Body Report, EC – Computer Equipment , para. 84. 
262 Colombia's first written submission, para. 60. 
263 The text of the preamble to the WTO Agreement employs language very similar to that of the 
GATT 1994, indicating that the parties to the Agreement reco gnize that "their relations in the field of trade and 
economic endeavour should be  conducted with a view to raising standa rds of living, ensuri ng full employment 
and a large and steadily growing volume of real income  and effective demand, and expanding the production of 
and trade in goods and services" by "entering into reciprocal and mutually ad vantageous arrangements 
directed to the substantial reduct ion of tariffs and other barriers to trade and to the elimination of 
discriminatory treatment in international trade relation s". By virtue of the foregoing, WTO Members resolved 
"therefore … to develop an integrat ed, more viable and durable multilateral trading system encompassing the 
General Agreement on Tariffs and Trade, the results of past trade liberalizatio n efforts, and all of the results of 
the Uruguay Round of Multilateral Trade Negotiations". 
264 Appellate Body Report, Argentina, Textiles and Apparel , para. 47. 
265 Ibid. 
266 Appellate Body Report EC – Computer Equipment , para. 82 (referring  to Panel Report, EC - Computer 
Equipment , para. 8.25). See also Appellate Body Report, EC – Chicken Cuts , para. 243. 
267 Appellate Body Report, India – Additional  Import Duties , para. 157. WT/DS461/R 
 
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  pursuant to Article II:1(a), and in respect of products imported from another Member, pursuant to 
Article II:1(b), first sentence. 
7.130.  Panama claims that, in some instances it has identified, the compound tariff is inconsistent 
with Article II:1(b), first sentence, of the GATT 1994. An analysis of whether the compound tariff 
is inconsistent with Article II:1(b), first sentence, of the GATT 1994 requires that the following be 
determined: 
a. The treatment accorded to imports of the products concerned in Colombia's Schedule of 
Concessions; 
b. The treatment accorded to imports of the products concerned under the compound tariff; 
and 
c. Whether the compound tariff gives rise to the imposition of ordinary customs duties on 
the products concerned in excess of those provided for in Colombia's Schedule of 
Concessions.268 
7.3.6.1  The treatment accorded to the prod ucts concerned in Colombia's Schedule of 
Concessions 
7.131.  Panama challenges the treatment accorded by Colombia, by means of the compound tariff, 
to imports of goods classified in Chapters 61, 62,  63 and 64 of Colombia's Customs Tariff (except 
for heading 64.06 but including tariff line 6406.10.00.00). 
7.132.  In Exhibit PAN-4, Panama submitted a table showing the tariff rates bound by Colombia, 
broken down by subheading.269 Panama states that, with regard to Chapters 61, 62 and 63, all the 
subheadings except one (i.e. 294 subheadings) have a bound tariff of 40% ad valorem  in 
Colombia's Schedule of Concessions. The sole exception is subheading 6305.32 (sacks and bags, 
of a kind used for the packing of goods, of man-made textile materials, flexible intermediate bulk containers), which has a 35% ad valorem  bound tariff. With regard to Chapter 64 (except for 
heading 64.06), Panama points out that 24 subheadings have a bound tariff of 35% ad valorem , 
while subheading 6405.20 (other footwear with uppers of textile materials) has a bound tariff of 40% ad valorem . Panama also points out that the bound level for products of tariff line 
6406.10.00.00 is 40% ad valorem .
270 Colombia, for its part, has not disputed Panama's description 
of the bound tariffs established in Co lombia's Schedule of Concessions. 
7.133.  The following table summarizes Colombia's bound duties on the goods concerned, 
according to Colombia's Schedule LXXVI: 
Bound level Product 
40% ad valorem  All subheadings of Chapters 61, 62 and 63, except for those in subheading 6305.32  
Subheading 6405.20 
Subheading 6406.10 
35% ad valorem  Headings 64.01, 64.02, 64.03, 64.04 and 64.05, except for subheading 6405.20 
Subheading 6305.32 
 
7.3.6.2  The treatment accorded to the prod ucts concerned pursuant to the measure at 
issue 
7.134.  Once the bound levels for the products concerned have been identified in Colombia's 
Schedule of Concessions, the next step is to determine the treatment accorded by Colombia, by means of the compound tariff, to imports of produc ts classified in Chapters 61, 62, 63 and 64 of its 
Customs Tariff (except for heading 64.06 but including tariff line 6406.10.00.00). 
                                               
268 Panel Reports, EC – IT Products , para. 7.100; EC – Chicken Cuts (Brazil) , para. 7.65; and EC – 
Chicken Cuts (Thailand) , para. 7.65. 
269 Illustrative table of Colombia's  bound tariff (Exhibit PAN-4). 
270 Panama's first written submission, para. 4.13. WT/DS461/R 
 
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  7.135.  In the preceding paragraphs, the Panel described the various circumstances in which the 
compound tariff is applied. It should be recalled that the compound tariff makes the goods concerned subject to the following tariff treatment: 
7.136.  With regard to the import of goods classified in Chapters 61, 62, 63 and tariff line 
6406.10.00.00: 
a. Tariff consisting of an ad valorem component of 10% plus a specific component of 
US$5/kg when the f.o.b. import prices are US$10/kg or less; 
b. Tariff consisting of an ad valorem component of 10% plus a specific component of 
US$3/kg when the f.o.b. import prices exceed US$10/kg; and 
c. Tariff consisting of an ad valorem component of 10% plus a specific component of 
US$5/kg when some goods under the same subheading are imported at f.o.b. import 
prices lower than US$10/kg and others at higher prices. 
7.137.  With regard to the import of goods classified in Chapter 64, except for heading 64.06: 
a. Tariff consisting of an ad valorem component of 10% plus a specific component of 
US$5/pair when the f.o.b. import prices are US$7/pair or less; 
b. Tariff consisting of an ad valorem component of 10% plus a specific component of 
US$1.75/pair when the f.o.b. import prices exceed US$7/pair; and 
c. Tariff consisting of an ad valorem component of 10% plus a specific component of 
US$5/pair when some goods under the same subheading are imported at f.o.b. import prices lower than US$7/pair and others at higher prices. 
7.3.6.3  The question of whether the compo und tariff gives rise to the imposition of 
ordinary customs duties in excess of those provided for in Colombia's Schedule of 
Concessions 
7.138.  In the preceding paragraphs, the Panel identified the levels bound in Colombia's Schedule 
of Concessions in respect of the products concerned, as well as the tariff treatment to which 
imports of these products are made subject by means of the contested compound tariff. The next step is therefore to determine whether the compound tariff gives rise to the imposition of ordinary 
customs duties higher than those provided for in Co lombia's Schedule of Concessions. To that end, 
the Panel will examine whether: (i) the duties pr ovided for by the measure at issue constitute 
"ordinary customs duties" pursuant to Article II:1(b), first sentence, and (ii) such "ordinary customs duties" exceed the bound levels to which Colombia committed itself in its Schedule of 
Concessions. 
7.3.6.3.1  Do the different forms of the compound tariff constitute "ordinary customs 
duties"? 
7.139.   For the obligation under Article II:1(b), first sentence, to be applicable it must be 
determined whether the compound tariff, in th e various instances described, constitutes an 
"ordinary customs duty". In this connection, the Appellate Body has held that, for a charge to 
constitute an ordinary customs duty, "the obligation to pay it must accrue at the moment and by 
virtue of or, in the words of Article II:1(b), 'on', importation" of the products.
271 
7.140.  The term "ordinary customs duties" has been compared to the term "all other duties or 
charges of any kind" used in the second sentence of Article II:1(b). The Appellate Body has 
indicated that these two types of duty may, or may not, "pertain to the same event of importation" 
because while both concepts relate to duties or charges applied "on the importation", the "other duties or charges" in Article II:1(b), second sentence, also refer to duties or charges "in 
connection with the importation".
272 The Appellate Body also explained that because the "other 
                                               
271 Appellate Body Reports, China – Auto Parts , para. 158. (emphasis original) 
272 See Appellate Body Report, India – Additional Import Duties , para. 157. WT/DS461/R 
 
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  duties or charges" in the second sentence of Article II:1(b) may be "of any kind", they may be of a 
similar kind to OCDs [ordinary customs duties]" or "different".273 Consequently, the distinction 
between these two types of duties or charges do es not necessarily depend on their "kind" or 
nature. The panel in Dominican Republic – Safeguard Measures considered that "a 'derecho de 
aduana propiamente dicho' [ordinary customs duty] would be a duty that possesses the essential 
attributes or qualities of customs duties"274, that is to say, the term "refers [only] to …'customs 
duties' in the strict sense of the term ( stricto sensu )" and not to "possible extraordinary or 
exceptional duties collected in customs".275 
7.141.  In the case before us, the following facts are not disputed. The compound tariff has been 
established pursuant to Articles 1 and 2 of Decree No. 456 "for the import of products classified" in Chapters 61, 62, 63 and 64, except for heading 64.06 but including the tariff line 
6406.10.00.00.
276 Decree No. 456 modifies the tariff regime established in Colombia's Customs 
Tariff, that is, the regime which normally establishes ordinary customs duties in Colombia.277 As 
long as Decree No. 456 remains in force, the customs duty payable on the import of goods 
covered by Chapters 61, 62, 63 and 64 (except for heading 64.06 but including the tariff line 
6406.10.00.00) shall be the compound tariff established in the Decree. The obligation to pay the compound tariff arises at the moment and by virtue of the importation. All of the foregoing 
suggests that the compound tariff is similar in nature to the tariff provided for in the Customs 
Tariff for the products concerned. Lastly, there is no evidence whatsoever that the compound tariff 
forms part of possible extraordinary or exceptional duties collected in customs or that the compound tariff lacks the essential attributes or qualities of duties collected in customs. 
7.142.  In any event, Panama has stated and Colombia has not denied that the duties resulting 
from the compound tariff are "ordinary customs duties" for the purposes of Article II:1(b), first sentence, of the GATT 1994. 
7.143.  The Panel therefore concludes that the co mpound tariff constitutes an "ordinary customs 
duty" for the purposes of Article II:1(b), first sentence, of the GATT 1994. 
7.3.6.3.2  The question of whether the co mpound tariff exceeds the levels bound in 
Colombia's Schedule of Concessions 
7.144.  Article II:1(b), first sentence, of the GATT 1994 lays down the obligation to exempt the 
products of other Members, on their importation, from ordinary customs duties in excess of those 
set forth and provided in the importing Member's Schedule of Concessions.
278 Panama does not 
challenge the fact that Colombia, despite having established tariff commitments in its Schedule of 
Concessions in ad valorem terms, has adopted the modality of a compound tariff (which consists of 
an ad valorem  component and another specific component).279 Panama contends, however, that in 
certain cases which it has identified280, the ad valorem equivalent of the compound tariff exceeds 
the bound levels established in Colombia's Schedule of Concessions. 
7.145.  The examination of a measure's consistency with Article II:1(b), first sentence, of the 
GATT 1994 necessarily requires a comparison between the tariff treatment accorded by the 
                                               
273 Ibid. 
274 Panel Report, Dominican Republic – Safeguard Measures , para. 7.82. 
275 Ibid. para. 7.85. Along the same lines, the Panel in Peru – Agricultural Products  found that "the 
concept of 'other duties or charges of any kind' corresponds  to a residual category". Hence, a measure will be a 
"duty or charge" pursuant to the second sentence  of Article II:1(b) provided that it is not inter alia an ordinary 
customs duty under the terms of Article II:1(b), first sentence, of the GATT 1994. Panel Report, Peru – 
Agricultural Products , para. 7.408. 
276 Decree No. 456 (Exhibits PAN-3 and COL-17), Articles 1 and 2. 
277 Ibid. Article 7. 
278 Article II:1(b) of the GATT 1994 does not attempt to eliminate the imposition of "ordinary customs 
duties" on imported products; rather, the purpose of Arti cle II:1(b), first sentence, is that Members should not 
apply to imported products customs duties in excess of the rates bound in their respective Schedules of 
Concessions. The Appellate Body has stated that WTO Members have the right to impose ordinary customs duties (also called "tariffs" by the Appellate Body) an d that these are not "somehow unfair or prejudicial" 
provided that they do not exceed the bound rates. Moreover, under the GATT 1994, tariffs are "legitimate instruments to accomplish certain trade policy or othe r objectives such as to generate fiscal revenue". 
Appellate Body Report, India – Additional  Import Duties , para. 159. 
279 Panama's first written submission, para. 1.4. 
280 Para. 7.46.  above. WT/DS461/R 
 
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  challenged measure to imports of the products concerned, on the one hand, and the bound level 
established in the responding Member's Schedule of Concessions, on the other. Where both the tariff provided for in the measure at issue and the tariff bound in the Schedule are expressed in the same terms (for example, in ad valorem terms or in specific terms), the comparison may be 
straightforward. This dispute, however, has the complex feature that the level bound in Colombia's 
Schedule of Concessions is expressed in ad valorem terms (35% or 40% depending on the goods 
concerned), whereas the compound tariff challenged by Panama contains an ad valorem 
component (10% in both cases) plus a specific component which varies according to the customs 
classification of the goods and their import price. 
7.146.  The Appellate Body has explained in this co nnection that "for any specific duty, there is an 
ad valorem  equivalent deduced from the ratio of the absolute amount collected to the price of the 
imported product".
281 When the duty in question consists of a specific tariff and the level bound in 
the Member's Schedule is expressed in ad valorem terms, there is a "break-even price" by virtue 
of which the ad valorem equivalent of the specific duty at issue is equal to the bound level 
expressed in ad valorem terms. Any import price below the break-even price will cause the 
ad valorem equivalent of the specific duty to exceed the bound tariff, whereas any import price 
above the break-even price will result in the ad valorem equivalent of the specific duty being lower 
than the bound rate.282 It is also possible to estimate a "break-even price" when, as in the present 
case, the tariff consists of an ad valorem  and a specific component. 
7.147.  An example will usefully elucidate the co ncept of the "break-even price". Let us assume 
that the bound tariff for a product is 15% ad valorem  and the specific tariff is US$1.50/unit. If the 
product is imported at a price of US$10 per unit, the applicable specific tariff (US$1.50) will be 
precisely 15% of the value of the good; in other words, the ad valorem equivalent of the specific 
duty would be the same as the bound tariff. In th is example, therefore, the "break-even price" is 
US$10.283 However, if a product is imported at US$9.99 (i.e. below the break-even price), the ad 
valorem equivalent of the specific duty of US$1.50 would be 15.01% of the import price, which 
would exceed the bound level. Conversely, if the import price were US$10.01 (i.e. higher than the 
break-even price), the specific duty of US$1. 50 would be 14.98% of the product's value in ad 
valorem terms, that is, lower than the bound level.284 
7.148.  In the present dispute, Panama has submitted a series of "break-even prices" calculated in 
relation to the various compound tariff scenarios in order to show that the compound tariff 
necessarily leads to ordinary customs duties higher than the corresponding bound level. Colombia, 
for its part, did not put forward any arguments seeking to rebut Panama's calculations.285 In this 
context, it is necessary to analyse the compound tariff and assess whether the levy imposed by 
the measure at issue on imports of the products concerned exceeds the bound levels established in 
Colombia's Schedule of Concessions. More specifically, the Panel will review Panama's arithmetical calculations and verify whether they are of value in resolving this dispute. 
7.3.6.3.2.1  Products classified in Chap ters 61, 62, 63 and tariff line 6406.10.00.00 
7.149.  With regard to the tariff treatment of impo rts of products classified in Chapters 61, 62, 63 
and tariff line 6406.10.00.00, the tariff bound in Colombia's Schedule of Concessions is 40% ad 
valorem , except for subheading 6305.32, for which the bound rate is set at 35% ad valorem . For 
these products, Decree No. 456 establishes three scenarios, which are examined below. 
                                               
281 Appellate Body Report, Argentina – Textil es and Apparel , para. 50. 
282 Ibid. para. 53. In that dispute, the customs authority calculated a representative international price 
for each tariff category, which was mu ltiplied by the bound rate of 35% ad valorem . The result, known as the 
"minimum specific import duty" (or "D IEM"), worked as a specific tariff. The customs authorities thus had to 
collect either the result of this operation or the ad valorem rate on the value of the product, whichever was 
higher. Panel Report, Argentina – Textiles and Apparel , para. 2.6. 
283 Appellate Body Report, Argentina – Textil es and Apparel , para. 50 (where the Appellate Body gave a 
similar example to explain "the meaning and implications" of the measure at issue in that dispute). 
284 The lower the import price, the greater the increase in the ad valorem equivalent of the specific 
tariff; conversely, the higher the import price, the greater the decrease in the ad valorem equivalent of the 
compound tariff. 
285 In fact, Colombia has argued that the import pr ice thresholds for textiles and apparel (US$10/kg) 
and for footwear (US$7/pair) constitute "legislative caps which prevent tariffs higher than Colombia's bound 
rate from being applied to lawful trad e entering the country". Colombia's response to Panel question No. 93, 
para. 36. WT/DS461/R 
 
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  7.150.  First, goods with an import price of US$10/kg or less are subject to a compound tariff 
consisting of an ad valorem component of 10% plus a specific component of US$5/kg. 
7.151.  With regard to products for which the bound rate is 40% ad valorem , Panama has put 
forward a "break-even price" of US$16.67/kg.286 The compound tariff applicable to imports at a 
price of US$16.67/kg would be US$6.67 (US$1.67 plus US$5), i.e. the equivalent of 40% of the 
price. 
7.152.  With regard to subheading 6305.32, for which the bound rate is 35% ad valorem , the 
break-even price indicated by Panama is US$20/kg.287 The compound tariff applicable to imports 
at a price of US$20/kg would be US$7/kg (US$2 plus US$5), which corresponds to 35% of the price of US$20/kg. 
7.153.  The Panel considers that the calculation of the break-even prices of US$16.67/kg and 
US$20/kg is correct for products for which the bound tariff is 40% and 35% ad valorem , 
respectively. However, the compound tariff of 10% ad valorem plus US$5/kg only applies to 
imports entering at a price of US$10/kg or less. Products subject to this form of the compound 
tariff will, therefore, necessarily have prices lo wer than the break-even prices of US$16.67/kg and 
US$20/kg for goods with bindings of 40% and 35% ad valorem , respectively. This means that this 
variant of the compound tariff will always result in the application of an ad valorem  equivalent 
higher than the bound levels of 35% and 40% ad valorem for the products concerned. For 
example, if the import price were US$10/kg, the compound tariff payable would be US$6/kg (US$1 plus US$5), which is equivalent to 60% ad valorem  of the import price. If the import price were 
US$8/kg the compound tariff payable would be US$5.80/kg (US$0.80 plus US$5), corresponding 
to 72.5% ad valorem  of the import price. If the import price were US$5/kg, the compound tariff 
payable would be US$5.50/kg (US$0.50 plus US$5), which is equivalent to 110% of the import price. 
7.154.  To conclude, the compound tariff of 10% ad valorem , plus US$5/kg for goods classified in 
Chapters 61, 62, 63 and tariff line 6406.10.00.00 whose import price is US$10/kg or less necessarily exceeds the levels of 40% and 35% ad valorem bound in Colombia's Schedule of 
Concessions. 
7.155.  Secondly, goods whose import price exceeds US$10/kg are subject to a compound tariff 
consisting of an ad valorem component of 10% plus a specific component of US$3/kg. 
7.156.  With regard to the subheadings for which the bound level is 40% ad valorem , Panama has 
submitted a break-even price of US$10/kg.
288 The calculation of this break-even price is correct, 
as the compound tariff applicable to an import  with a price of US$10/kg would be US$4/kg (US$1 
plus US$3), i.e. the ad valorem equivalent of 40% of the price. As the compound tariff of 10% ad 
valorem  plus US$3/kg only applies to imports at prices exceeding US$10/kg, that is, prices higher 
than the break-even price, this ex ample of the compound tariff would never exceed the 40% 
ad valorem  tariff bound in Colombia's  Schedule of Concessions. 
7.157.  As regards goods classified under subheading 6305.32, the bound level is 35% ad 
valorem. Panama has presented a break-even price of US$12/kg.289 The calculation of this 
break-even price is correct, since with an import price of US$12/kg the compound tariff payable would be US$4.20/kg (US$1.20 plus US$3), i.e. the equivalent of 35% ad valorem of the price of 
US$12/kg. 
7.158.  The break-even price of US$12/kg indicates that the compound tariff of 10% ad valorem  
plus US$3/kg is higher than the rate bound in Colombia's Schedule of Concessions for goods 
included in subheading 6305.32 when they en ter at import prices above US$10/kg but below 
US$12/kg. By way of illustration, if the import price is US$11.95/kg, the compound tariff would be US$4.195/kg (US$1.195 plus US$3), which is equivalent to 35.10% of the import price; if the 
import price is US$11/kg, the compound tariff would be US$4.10/kg (US$1.10 plus US$3), which 
is equivalent to 37.27% of the import price; likewise, if the import price is US$10.05/kg, the 
                                               
286 Panama's first written submission, para. 4.21. 
287 Ibid. para.4.25. 
288 Panama's first written submission, para. 4.28. 
289 Ibid. para. 4.31. WT/DS461/R 
 
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  compound tariff would be US$4.005/kg (US$1.005 plus US$3), which is equivalent to 39.85% of 
the import price. 
7.159.  In conclusion, the compound tariff of 10% ad valorem  plus US$3/kg for goods classified in 
subheading 6305.32 at import prices above US$10/kg but below US$12/kg necessarily exceeds 
the rate of 35% ad valorem bound in Colombia's Sche dule of Concessions. However, if these goods 
are imported at a price of US$12/kg or more, the bound rate of 35% ad valorem would not be 
exceeded. 
7.160.  Thirdly, in the case of products import ed under the same subheading, some at prices 
below and others at prices above the threshold of US$10/kg, the compound tariff applicable to all the goods is 10% ad valorem  plus US$5/kg. 
7.161.  In paragraph 7.153 of this Report, the Panel indicated that the break-even price is 
US$16.67/kg for imports of goods under Chapters 61, 62, 63 and tariff line 6406.10.00.00 (for 
which the compound tariff is 10% ad valorem  plus US$5/kg and the bound rate is 40% ad 
valorem ) and US$20/kg for goods imported under subheading 6305.32 (for which the compound 
tariff is 10%  ad valorem  plus US$5/kg and the bound rate is 35% ad valorem ). Imports of goods 
at prices below the corresponding break-even pr ices are therefore necessarily subject to the 
imposition of a tariff higher than the bound rate. 
7.162.  It should be noted that under this compound tariff scenario there will always be at least 
some goods with import prices below the break-even price, since this scenario requires that at least some of the goods be imported at prices below US$10/kg, i.e. below the break-even price of US$16.67/kg or US$20/kg. 
7.163.  This being the case, when some imports under the same subheading are declared at prices 
below and others at prices above the threshold of US$10/kg, the compound tariff of 10% ad 
valorem  plus US$5/kg for goods in Chapters 61, 62 and 63 or tariff line 6406.10.00.00 necessarily 
exceeds the bound levels of 40% and 35% ad valorem for those goods whose import prices are 
lower than US$16.67/kg and US$20/kg, respectively. 
7.164.  In the light of the foregoing, the followin g instances of the compound tariff applicable to 
imports of goods classified in Chapters 61, 62, 63 and tariff line 6406.10.00.00 exceed the level 
bound in Colombia's Sche dule of Concessions: 
a. The tariff consisting of an ad valorem  component of 10% plus a specific component of 
US$5/kg, when the f.o.b. import price is US$10/kg or less; 
b. The tariff consisting of an ad valorem component of 10% plus a specific component of 
US$5/kg, in the case of products imported under the same subheading, some at f.o.b. prices above and others at f.o.b. prices below the threshold of US$10/kg. 
c. With regard to subheading 6305.32, the tariff consisting of an ad valorem  component of 
10% plus a specific component of US$3/kg, when the f.o.b. import price is higher than US$10/kg but lower than US$12/kg. 
7.165.   On the other hand, the compound tariff consisting of an ad valorem component of 10% 
plus a specific component of US$3/kg, applicable to goods with f.o.b. import prices above US$10/kg, does not exceed the level bound in Colombia's Schedule of Concessions (except, as discussed earlier, in the case of imports under subheading 6305.32 at prices higher than US$10/kg 
but lower than US$12/kg). 
7.3.6.3.2.2  Products classified in Chapter 64, except for heading 64.06 
7.166.  With regard to the tariff treatment of imports of products classified under the various tariff 
headings of Chapter 64 subject to the measure at issue (except for heading 64.06), the compound 
tariff also provides for three variants, which are discussed below. The bound tariff for these products in Colombia's Schedule of Concessions is 35% ad valorem , except in the case of 
subheading 6405.20, for which the bound rate is 40% ad valorem . WT/DS461/R 
 
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  7.167.  First, goods with an import price of US$7/pair or less are subject to a compound tariff 
consisting of an ad valorem component of 10% plus a specific component of US$5/pair. 
7.168.  With regard to the subheadings in Chapter 64 for which the bound level is 35% ad 
valorem , Panama has presented a break-even price of US$20/pair.290 In fact, an import price of 
US$20/pair results in the imposition of a compound tariff of US$7/pair (US$2 plus US$5), which is 
equivalent to 35% of that price. Consequently, a compound tariff of 10% ad valorem plus 
US$5/pair applied to any price below US$20/pair is higher than the bound level of 35% 
ad valorem . Because this example of the compound tariff applies to prices of US$7/pair or less, the 
Panel concludes that the compound tariff of 10% ad valorem plus US$5/pair necessarily exceeds 
the bound level of 35% ad valorem . 
7.169.  In the case of subheading 6405.20, for which the binding has been set at 40% ad valorem , 
the break-even price presented by Panama is US$16. 67/pair. In this connection, an import price of 
US$16.67/pair would result in the imposition of a compound tariff of US$6.67/pair (US$1.67 plus US$5), equivalent to 35% of the import price. Consequently, as the compound tariff of 10% ad 
valorem plus US$5/pair applies only to goods with  prices below the break-even price of 
US$16.67/pair, this compound tariff necessarily exceeds the level bound in Colombia's Schedule of 
Concessions in relation to subheading 6405.20. 
7.170.  As a way of illustrating that the compound tariff exceeds the bound rates of 35% and 40% 
ad valorem in Colombia's Schedule of Concessions for products classified in the various tariff 
headings of Chapter 64 subject to the measure at issue, if the import price were US$7/pair, the applicable compound tariff would be US$5.70/pair (US$0.70 plus US$5), equivalent to 81.42% of 
the price; if the import price were US$5/pair, the compound tariff would be US$5.50/pair 
(US$0.50 plus US$5), equivalent to 110%; and if the import price were US$3/pair, the applicable compound tariff would be US$5.30/pair (US$0.30 plus US$5), equivalent to 176.67%. 
7.171.  Thus, the compound tariff applicable to g oods classified under the various tariff headings 
of Chapter 64 subject to the measure at issue, at prices of US$7/pair or less, necessarily exceeds 
the bound levels of 35% and 40% ad valorem.  
7.172.  Secondly, goods with an import price above US$7/pair are subject to a compound tariff 
consisting of an ad valorem component of 10% plus a specific component of US$1.75/pair. 
7.173.  Panama has presented a break-even price of US$7/pair with respect to the subheadings 
for which the bound rate is 35% ad valorem . In the Panel's opinion, this break-even price is 
correct, inasmuch as the compound tariff applicable to imports priced at US$7/pair would be 
US$2.45/pair (US$0.70 plus US$1.75), i.e. the equivalent of 35% of that price.
291 As the 
compound tariff of 10% ad valorem plus US$1.75/pair applies only to imports at prices higher than 
US$7/pair, i.e. prices above the break-even price, this variant of the compound tariff never 
exceeds the 35% ad valorem tariff bound in Colombia's Schedule of Concessions. 
7.174.  As regards subheading 6405.20, for which the bound tariff is 40% ad valorem , Panama 
has submitted a break-even price of US$5.83/pair, which the Panel considers to be correct. This 
means that the compound tariff applicable to imports priced at US$5.83/pair would be US$2.33/pair (US$0.58 plus US$1.75), equivalent to 40% of the price. Since the compound tariff of 10% ad valorem plus US$1.75/pair only applies to imports with prices higher than US$7/pair, 
that is, prices above the break-even price of US $5.83/pair, this variant of the compound tariff 
never exceeds  the 35% ad valorem tariff bound in Colombia's Schedule of Concessions. 
7.175.  In conclusion, the compound tariff of 10% ad valorem plus US$1.75/pair never exceeds 
the levels of 35% and 40% ad valorem  bound in Colombia's Schedule of Concessions with respect 
to goods classified in Chapter 64 of Colombia's Customs Tariff. 
7.176.  Thirdly, in the case of products classifi ed in the various tariff headings of Chapter 64 
subject to the measure at issue, which are declared under the same subheading, some at import 
                                               
290 Panama's first written submission, para. 4.40. 
291 Ibid. para. 4.46. WT/DS461/R 
 
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  prices below and others at prices above the threshold of US$7/pair, the applicable compound tariff 
is 10% ad valorem  plus US$5/pair. 
7.177.  As indicated above, the break-even price is US$20/pair for imports of goods classified in 
the various tariff headings of Chapter 64 subject to the measure at issue, where the compound 
tariff is 10% ad valorem plus US$5/pair, except in the case of subheading 6405.20, for which the 
break-even price is US$16.67/pair. In this instan ce (importation of products under the same 
subheading, some at prices below and others at prices above US$7/pair), the importation of 
products below the corresponding break-even prices will result in the imposition of a tariff in 
excess of the bound level. 
7.178.  It should be noted that, under this compound tariff scenario, there will always be some 
goods with import prices below the break-even price, inasmuch as this scenario requires that at 
least some of the goods be imported at prices below US$7/pair, that is, below the break-even 
prices of US$16.67/pair or US$20/pair. 
7.179.  Consequently, where some imports under the same subheading are declared at prices 
below and others at prices above the threshol d of US$7/pair, the compound tariff of 10% 
ad valorem plus US$5/pair for the goods classified in the various tariff headings of Chapter 64 
subject to the measure at issue necessarily exceeds the bound level of 35% and 40% ad valorem 
for those goods with import prices below US$20/pair and US$16.67/pair, respectively. 
7.180.  Thus, the level bound in Colombia's Schedule of Concessions is exceeded by the following 
variants of the compound tariff applicable to imports of products classified in the various tariff headings of Chapter 64 subject to the measure at issue: 
a. The tariff consisting of an ad valorem component of 10% plus a specific component of 
US$5/pair, when the f.o.b. import price is US$7/pair or less; and 
b. The tariff consisting of an ad valorem component of 10% plus a specific component of 
US$5/pair, when some products of the same subheading are imported at f.o.b. prices 
above and others at prices below the threshold of US$7/pair. 
7.181.  On the other hand, the compound tariff consisting of an ad valorem component of 10% 
plus a specific component of US$1.75/pair, applicable to goods in Chapter 64 imported at f.o.b. 
prices above US$7/pair, does not exceed the level bound by Colombia in its Schedule of Concessions. 
7.3.6.4  The question of the existence of a "legislative ceiling" 
7.182.  Before concluding the analysis of the complaint in relation to Article II:1(a) and 
Article II:1(b), first sentence, of the GATT 1994, th e Panel deems it relevant to address Colombia's 
statement that specific tariffs can be prevente d from exceeding the bound levels expressed in 
ad valorem" terms through the adoption of a "legislative ceiling".
292 On this basis, Colombia 
indicates that "Decree No. 456 incorporates a legislative ceiling that prevents the levels bound [in its Schedule of Concessions] from being exceeded".
293 According to Colombia, the maximum ad 
valorem equivalent of the compound tariff of 10% ad valorem  plus US$3/kg for imports of goods 
under Chapters 61, 62 and 63 and tariff line 6406.10.00.00 at prices exceeding US$10/kg is 40%, i.e. the same as the level bound in its Schedule of Concessions. Colombia also points out that the maximum ad valorem equivalent of the compound tariff of 10% ad valorem plus US$1.75/pair 
applicable to imports of goods under Chapter 64 at prices exceeding US$7/pair is 35%, i.e. the 
same as the bound level.
294 
                                               
292 Colombia's first written submission, para . 63 (referring to Appellate Body Report, Argentina – 
Textiles and Apparel , para. 46). 
293 Ibid. para. 64 
294 Ibid. See also response to Panel question No. 93, para. 36. WT/DS461/R 
 
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  7.183.  In response to Colombia's argument, Panama points out that Colombia has not expressed 
an opinion regarding the "alleged cap mechanism" in respect of imports of the products concerned at prices below the thresholds provided for in Decree No. 456.
295 
7.184.  In its report in Argentina – Textiles and Apparel , the Appellate Body indicated that it is 
possible, under certain circumstances, for a Member to designate a legislative "ceiling" or "cap" on 
the level of duty applied "which would ensure that, even if the type of duty applied differs from the 
type provided for in that Member's Schedule, the ad valorem  equivalents of the duties actually 
applied would not exceed the ad valorem  duties provided for in the Member's Schedule".296 
7.185.  Despite the foregoing, Colombia's argument that Decree No. 456 incorporates a "legislative 
ceiling" for goods with import prices above the respective thresholds does not affect the findings that the compound tariff, as regards the examples set out in paragraphs 7.164.  and 7.180.  , 
exceeds the levels bound in Colombia's Schedule of Concessions. First of all, the "legislative 
ceiling" mentioned by Colombia refers to the level of the compound tariff that applies only to imports at prices above the prescribed thresholds . Such a "legislative ceiling" would not apply to 
other imports and, more specifically, to imports priced below the thresholds or imports under the 
same subheading, some priced above and others priced below the thresholds. Secondly, even in respect of imports entering at prices above the respective thresholds, the Panel has found that at 
least in the case of imports classified in heading 6305.02, when these enter at prices higher than 
US$10/kg but lower than US$12/kg, the compound tariff of 10% ad valorem plus US$3/kg 
breaches the rate bound in Colomb ia's Schedule of Concessions. 
7.186.  For the foregoing reasons, the Panel is not convinced by Colombia's argument that Decree 
No. 456 incorporates a "legislative ceiling" which prevents the compound tariff resulting in duties 
that exceed the levels bound in Colombia's Schedule of Concessions. 
7.3.6.5  Conclusion 
7.187.  The table below summarizes the variou s examples of the compound tariff whose ad 
valorem equivalents necessarily exceed the levels bound in Colombia's Schedule of Concessions. 
As can be seen, the range of import prices to whic h each of the examples applies is lower than the 
respective break-even price. 
Products covered  Declared f.o.b. price  Formula for calculating 
the compound tariff Break-even price 
Chapters 61, 62, 
63 and tariff line 6406.10.00.00 Prices of US$10/kg or less 
 10% ad valorem  and 
US$5/kg  US$16.67 
(40% bound) 
US$20 (35% bound) 
Subheading 6305.32 Prices above US$10 and 
below US$12/kg 10% ad valorem  and 
US$3/kg US$12 
(35% bound) 
Chapters 61, 62 and 63 and tariff line 6406.10.00.00 Some prices above and 
others below US$10/kg when imported under the same subheading  10% ad valorem  and 
US$5/kg US$16.67 
(40% bound) 
US$20 (35% bound) 
Chapter 64, except for heading 64.06 Prices of US$7/pair or less 10% ad valorem  and 
US$5/pair US$16.67 
(40% bound) 
US$20 (35% bound) 
Chapter 64, except for heading 64.06 Some prices above and 
others below US$7/pair when imported under the same subheading  10% ad valorem  and 
US$5/pair US$16.67 
(40% bound) 
US$20 (35% bound) 
 
7.188.  On the other hand, the compound tariff applic able to products classified in Chapters 61, 62 
and 63 (except subheading 6305.32) and in tariff line 6406.10.00.00, when goods are imported 
exclusively at prices above the threshold of US$10.kg, does not exceed the bound level of 40% 
ad valorem , inasmuch as these prices are necessarily the same as or higher than the respective 
                                               
295 Panama's opening statement at th e first meeting of the Panel, para . 1.17. See also second written 
submission, para. 2.1; and respon se to Panel question No. 91. 
296 Appellate Body Report, Argentina – Textil es and Apparel , para. 54. WT/DS461/R 
 
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  break-even price. Likewise, the compound tariff applicable to products classified under the various 
tariff headings of Chapter 64 subject to the measure at issue, when goods are imported exclusively 
at prices above the threshold of US$7/pair, does not exceed the bound levels of 35% and 40% ad 
valorem , inasmuch as the import prices are necessarily the same as or higher than the respective 
break-even price. 
7.189.  In conclusion, the Panel has reviewed the arithmetical calculations furnished by Panama in 
respect of each example of the compound tariff and confirmed that they are correct. The Panel 
therefore finds that the compound tariff, as regards the examples set out in paragraphs 
7.164.  and 7.180.  , necessarily exceeds the levels bound in Colombia's Schedule of Concessions 
of 35% and 40% ad valorem (depending on the subheading) and are thus inconsistent with 
Article II:1(b), first sentence, of the GATT 1994. 
7.3.7  The question of whether the compound tariff is inconsistent with Article II:1(a) of 
the GATT 1994 
7.190.  Panama also claims that, inasmuch as the compound tariff is inconsistent with Article II(b), 
first sentence, of the GATT 1994, it is "necessarily  inconsistent with Article II:1(a) of the GATT and 
Colombia's Schedule of Concessions".297 Colombia, for its part, requests the Panel to reject 
Panama's claim regarding Article II:1(a) inasmuch as it is subsidiary to the claim relating to 
Article II:1(b), first sentence, and the latter is inadmissible. 
7.191.  The Appellate Body considered it "evide nt … that the application of customs duties in 
excess  of those provided for in a Member's Schedule, inconsistent with the first sentence of 
Article II:1(b), constitutes 'less favourable' treatment under the provisions of Article II:1(a)".298 
Several panels considered that inconsistency with Article II:1(b), first sentence, of the GATT 1994 
"necessarily results in less favourable treatment which is inconsistent with the obligations in Article II:1(a)".
299 
7.192.  Thus, a finding that the measure at issue is inconsistent with Article II:1(b), first sentence, 
of the GATT 1994 may lead this Panel to conclude, without the need for further analysis, that the compound tariff accords less favourable treatment th an that provided for in Colombia's Schedule of 
Concessions, in a manner inconsistent with Articl e II:1(a). Consequently, the Panel finds that, in 
respect of the examples set out in paragraphs 7.164.  and 7.180.  , the compound tariff is also inconsistent with Article II:1(a) of the GATT 1994. 
7.3.8  General conclusion with regard to the claims concerning Article II:1(a) and 
Article II:1(b), first sentence, of the GATT 1994 
7.193.  As a result of the foregoing analysis, the Panel finds that the compound tariff, as regards 
the examples set out in paragraphs 7.164.  and 7.180.  , exceeds the levels bound in Colombia's 
Schedule of Concessions and is therefore inconsistent with the obligation in Article II:1(b), first 
sentence, of the GATT 1994 not to impose on the import of products of other Members "ordinary customs duties in excess of those set forth and provided" in Colombia's Schedule of Concessions. 
7.194.  Likewise, the Panel finds that, in the cases referred to in paragraphs 7.164.  and 7.180.  , 
the compound tariff is also inconsistent with Colombia's obligation under Article II:1(a) of the GATT 1994, inasmuch as it exceeds the applicab le tariff bindings, and therefore accords less 
favourable treatment than that to which Colombia committed itself in its Schedule of Concessions. 
7.4  Colombia's defence under Article XX of the GATT 1994 
7.195.  Colombia has requested the Panel, should it conclude that the compound tariff is 
inconsistent with the obligations contained in Article II:1(b), first sentence, or in Article II:1(a) of 
the GATT 1994, to determine that the measure is justified under Articles XX(a) and XX(d) of the 
GATT 1994 as a measure necessary to protect public morals or as a measure necessary to secure 
                                               
297 Panama's first written submission, para. 4.59. 
298 Appellate Body Report, Argentina – Textil es and Apparel , para. 47 (emphasis original). 
299 Panel Reports, EC – IT Products , para. 7.1504. WT/DS461/R 
 
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  compliance with laws or regulations which are not inconsistent with the provisions of the 
GATT 1994.300 
7.196.  As the Panel has found that the compound tariff is inconsistent with obligations contained 
in Article II:1(b), first sentence, and in Article II:1(a) of the GATT 1994, it will proceed to analyse 
Colombia's defence under Article XX of the GATT 1994. 
7.197.  To this end, the Panel will assess Colombia's defence under Article XX of the GATT 1994, 
by analysing, first, whether the compound tariff is justified under either of the two paragraphs 
invoked by Colombia, beginning with paragrap h (a) and continuing with paragraph (d); and 
secondly, if so, whether the compound tariff meets the requirements of the chapeau  (introductory 
clause) of Article XX.301 
7.4.1  Summary of the arguments of the parties and third parties 
7.4.1.1  Summary of Colombia's main arguments 
7.4.1.1.1  Decree No. 456 is a measure necessary to protect public morals 7.198.  Colombia claims that Decree No. 456 is a measure necessary to protect public morals 
within the meaning of Article XX(a) of the GATT 1994.
302 
7.4.1.1.1.1  Concerning "t o protect public morals" 
7.199.  Colombia maintains that Decree No. 456 is a measure designed to combat money 
laundering.303 Colombia asserts that money laundering is linked with drug trafficking and the 
financing of groups operating outside the law, so that Decree No. 456 also seeks to reduce the operational capacity of drug traffickers and criminal groups. Colombia adds that Decree No. 456 is likewise intended to combat tax evasion and unfair competition. Colombia points out that the 
money laundering operation is a chain of illicit acts that includes the importation of goods.
304 
7.200.  Colombia asserts that it has presented arguments and evidence to show that Decree 
No. 456 is an anti-money laundering measure.305 Colombia points out that criminal groups use 
imports of apparel and footwear at artificially low prices to launder money.306 It states that the use 
of imports of apparel and footwear at artificially low prices to launder money has been confirmed by Colombia's competent authorities (such as the DIAN and the UIAF), as well as by international 
organizations that monitor the issue (such as the FATF and the OECD).
307 Colombia adds that, due 
to Colombia's foreign exchange controls, the money laundering operation depends on the use of declared import prices that are artificially low,  which enables the importer to open up a foreign 
exchange channel to legalize the assets.
308 Colombia asserts that Decree No. 456 "discourages 
imports at artificially low prices … as a vehicle for money laundering".309 
                                               
300 Colombia's first written submission, paras. 2, 83, 89, 105; second written submission, paras. 12, 38, 
61, 62, 97, 98, 107, 108; opening statement at the first meeting of the Panel, paras. 14, 64, 73, 74, 77; closing statement at the first meeting of the Panel, para. 21; opening statement at the second meeting of the Panel, paras. 10, 45, 63, 82, 107, 117. 
301 Appellate Body Report, US – Gasoline , p. 22. See also Appellate Body Reports, Brazil – Retreaded 
Tyres , para. 139; Dominican Republic – Importat ion and Sale of Cigarettes , para. 64. 
302 Colombia's first written submission, para. 89;  second written submission, para. 97; opening 
statement at the first meeting of the Panel, para. 73;  and opening statement at the second meeting of the 
Panel, para. 82. 
303 Colombia's first written submission, paras. 80-81;  second written submission, paras. 1, 38, 53, 
56-59, 104; opening statement at the first meeting of th e Panel, paras. 11 and 65; and opening statement at 
the second meeting of the Panel, para. 47. 
304 Colombia's second written submission, para. 2; and response to Panel questions Nos. 37 and 43. 
305 Colombia's second written submission, para. 53. 
306 Colombia's second written submission, para. 53. See also first written submission, paras. 22-24; 
opening statement at the first meeting of the Panel, paras. 15-25. 
307 Colombia's second written submission, para. 53; response to Panel question No. 36. 
308 Colombia's second written submission, para. 54; cl osing statement at the first meeting of the Panel, 
paras. 13-19. 
309 Colombia's opening statement at the fi rst meeting of the Panel, paras. 26-28. WT/DS461/R 
 
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  7.201.  Colombia maintains that the lack of explicit  identification of the objective of the challenged 
measure does not, in itself alone, have any probative value for purposes of the analysis required under Article XX of the GATT 1994. Colombia notes that every WTO Member has its own legal system and not all of these systems require that legal instruments include a statement of reasons. 
In Colombia's opinion, it cannot be a requirem ent that every measure which a Member seeks to 
justify under Article XX of the GATT 1994 must explicitly identify the objective pursued by that measure. Colombia affirms that its administrative law does not require legal instruments to specify 
the reasons for their adoption or contain an explanatory statement and asserts that the absence of 
express identification of the objective in the text of its measure has no probative value. Colombia points out that in previous WTO cases it has not been required that the objective of a measure be expressly mentioned in its text.
310 
7.202.  Colombia maintains that the objective of its measure is obvious from its design and 
structure, since Decree No. 456 discourages apparel and footwear imports at artificially low prices, and by reducing such imports, in turn reduces money laundering.
311 Colombia has presented 
statements by the President of Colombia and minutes of the discussions of the Committee on 
Customs, Tariffs and Foreign Trade (Triple A Committee) during its review of Decree No. 456 prior to its adoption, which, in Colombia's opinion, confirm that the purpose of Decree No. 456 is to 
combat money laundering through imports of apparel and footwear at artificially low prices.
312 
7.203.  Colombia refers to Panama's questions with regard to the limitations and exclusions of the 
measure.313 With respect to the exclusion of imports corresponding to tariff heading 64.06 (parts 
of footwear), Colombia points out that thes e products are raw materials for manufacturing 
footwear and not products to be sold directly to the consumer, which makes it difficult to use them 
for money laundering.314 With respect to the exclusion for Special Customs Regime Zones, 
Colombia asserts that these are border areas with very low levels of development or in situations 
of isolation or economic integration with other states, which need to be managed differently from 
the rest of Colombian territory.315 With regard to the exemption from the application of the 
measure for waste and scrap from apparel production under special import/export systems (Plan 
Vallejo), Colombia points out that this exemption is for environmental reasons and is an incentive 
for the use of waste in other products.316 With respect to the two-year duration of the measure, 
Colombia maintains that there is nothing inherently protectionist about a time-limited measure and that Panama has not shown that there is a necessary link between the limited duration of the 
measure and protectionism. Colombia also asserts that the limited duration enables it, if 
necessary, to make adjustments to the tariff, as it  did upon the expiration of the previous Decree 
No. 074.
317 
7.204.  Colombia points out that, in addition to imports of textiles, apparel and footwear, criminal 
groups use imports of petrol, cigarettes, spirits and rice and exports of gold, scrap and raw hides for money laundering purposes. Colombia notes, however, that in these cases overt smuggling is 
used, so that the controls with respect to these products are basically of a law enforcement or 
military nature.
318 Colombia adds that it has never been required that a measure to protect public 
morals should have universal coverage.319 
                                               
310 Colombia's second written submission, para. 60; opening statement at the second meeting of the 
Panel, paras. 50-51; response  to Panel question No. 17. 
311 Colombia's second written submission, para. 55; opening statement at the first meeting of the Panel, 
paras. 26-28. 
312 Colombia's second written submission, paras. 56- 60; opening statement at the second meeting of 
the Panel, paras. 50-55; and response to Panel questi on No. 17; Committee on Customs, Tariff and Foreign 
Trade Affairs, Minutes of the 269th regular session, 23 January 2014 (Exhibit COL-34); and News item: 
Portafolio.co , "Decree on the mixed tariff in the textiles sector will be maintained", 21 January 2014 
(Exhibit COL-35). 
313 See para. 7.233 below. 
314 Colombia's opening statement at the second meetin g of the Panel, para. 61; and response to Panel 
question No. 14. 
315 Colombia's response to Panel question No. 16. 
316 Colombia's response to Panel question No. 18. 
317 Colombia's opening statement at the second meetin g of the Panel, para. 62; and response to Panel 
questions Nos. 76 and 78. 
318 Colombia's first written submission, para. 43; open ing statement at the second meeting of the Panel, 
para. 56; and response to Panel questions Nos. 34 and 35. 
319 Colombia's opening statement at the second meeting of the Panel, paras. 57-60. WT/DS461/R 
 
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  7.205.  Colombia asserts that money laundering is criminal conduct in Colombia, defined as an 
offence in Article 323 of the Colombian Criminal  Code. Thus, Colombia points out that Decree 
No. 456 is related to the "standards of right and wrong conduct" as defined by Colombian society. 
Colombia adds that both money laundering and the financing of terrorism are activities censured 
at international level, so that the Decree also reflects the "standards of right and wrong conduct" 
of the international community. Colombia asserts that, accordingly, Decree No. 456 protects public morals.
320 
7.206.  Colombia maintains that, as public morals involve highly sensitive issues integral to 
Members' sovereignty, panels have acted with a high degree of deference and have refrained from second-guessing a Member which declares that its measure was adopted or is being enforced to protect public morals.
321 Colombia adds that the panel in US — Gambling  recognized that 
measures which address concerns relating to money laundering and organized crime are measures 
designed to protect public morals and that, as Decree No. 456 pursues similar aims, it must also be regarded as a measure to protect public morals.
322 
7.4.1.1.1.2  Concerning the "necessity" of the measure 
7.207.  Colombia maintains that the measure is "necessary" to protect public morals within the 
meaning of Article XX(a) of the GATT 1994.323 
7.208.  Colombia maintains that the interests and va lues at stake in this dispute are vital and of 
maximum importance. Colombia asserts that illicit drug trafficking is a criminal phenomenon which has particularly afflicted Colombia, and affects the lives of thousands of Colombians and the stability of Colombian democracy. Colombia contends that money laundering is a vital link in the 
drug trafficking chain, which enables criminal groups to finance their operations and carry out their 
criminal activities.
324 
7.209.  Colombia asserts that it was recognized in other disputes that measures which addressed 
concerns relating to money laundering and organized crime protected values and interests that 
could be considered vital and important in the highest degree. Colombia maintains that Decree 
No. 456 pursues similar aims and that, due to the importance for Colombia of the fight against 
drug trafficking and money laundering, the interests and values protected by Decree No. 456 could 
not be regarded as less vital and important.325 Colombia asserts that the importance of the fight 
against money laundering as an objective of Colombian public policy is reflected in statements made by high-ranking officials, in its Nation al Development Plan, in the commemoration of 
National Money Laundering Prevention Day, in the recognition of money laundering as a crime, and 
in the adoption of a National Policy against Money Laundering and the Financing of Terrorism.
326 
7.210.  Colombia refers to a DIAN study which estimates that in 2012, in Colombia, smuggling of 
textile products and apparel generated business worth between US$2.5 billion and US$4 billion, 
which would mean that in that year between 30 % and 60% of the textiles and apparel sold in 
Colombia were smuggled into the country. In the case of footwear, the same study estimates that, 
of the 116 million pairs of shoes consumed in Colombia, approximately 70 million were imported 
and that, of these, 30 million pairs entered the co untry at prices between US$0.50 and US$5. The 
                                               
320 Colombia's first written submission, paras. 80-83,  second written submission, paras. 41-47; and 
opening statement at the first meeting of the Panel, para. 65. 
321 Colombia's second written submission, paras. 49-51; and opening statement at the second meeting 
of the Panel, para. 51 (ref erring to Panel Reports, China – Publications and Audiovisual Products , para. 7.766 
and Brazil – Retreaded Tyres , para. 7.101). 
322 Colombia's first written submission, para. 82; second written submission , para. 52; and opening 
statement at the first meeting of the Pane l, para. 66 (referring to Panel Report, US – Gambling , paras. 
6.486-6.487). 
323 Colombia's first written submission, para . 89; second written submission, para. 62. 
324 Colombia's first written submission, para. 85; second written submission, paras. 63-64 and 97; 
opening statement at the first meeting of the Panel, para. 67; opening statement at the second meeting of the Panel, para. 82; and response  to Panel question No. 7. 
325 Colombia's first written submission, para. 86; and response to Panel question No. 7 (referring to 
Panel Report, US – Gambling , paras. 6.486-6.487). 
326 Colombia's second written submission, paras. 65-69; and response to Panel question No. 7. WT/DS461/R 
 
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  study also estimates that, of the 30 million pairs of shoes that entered Colombia at these prices, 
20 million pairs could have been technically smuggled.327 
7.211.  Colombia asserts that it has presented arguments and evidence to show that Decree 
No. 456 is an appropriate measure for making an  important contribution to the fight against 
money laundering, by preventing the utilization of one of the mechanisms used for this purpose by 
criminal groups (namely, the use of imports of ap parel and footwear at artificially low prices to 
launder assets). Colombia states that, by discouraging imports of apparel and footwear at 
artificially low prices, Decree No. 456 prevents crim inal groups from using these imports for money 
laundering and therefore makes an important contribution to the anti-money laundering 
campaign.328 
7.212.  Colombia suggests that the analysis of the contribution of Decree No. 456 to the fight 
against money laundering should be broadly similar to the analysis carried out by the panel and 
the Appellate Body in Brazil – Retreaded Tyres.329 
7.213.  Colombia has also provided a table of seizures relating to imports of textiles, apparel and 
footwear as evidence of the use of such imports for money laundering330: 
 Seizures 2013 Seizures 2014 (to 6 July) 
Chapter/Tariff description Number Value Number Value 
50-60 / Textiles 254 9,797,049,958 141 6,006,390,574 
61-63 / Made up articles of apparel 9,750 69,210,464,697 5,573 38,762,634,794 
64 / Footwear and the like 2,625 17,506,422,438 2,120 13,125,875,989 
 
7.214.  Colombia also asserts that it has provided quantitative evidence showing that Decrees Nos. 074 and 456 have significantly reduced the oppo rtunities for criminal groups to use apparel 
and footwear imports at artificially low prices for money laundering purposes or to generate 
financial resources for other criminal activities, as shown by the trend in imports. Colombia states that it has also submitted charts that show a reduction in the underinvoicing of imports since 
Decrees Nos. 074 and 456 were issued.
331 
7.215.  Colombia asserts that the measure has a moderate effect on trade because it opens up 
opportunities for parties importing at market pr ices, does not impose quantitative limits on 
imports, and is carefully calibrated to affect imports likely to be used for money laundering.332 
Colombia adds that the factors which are affecting Panama's sales are a slowdown in demand and the depreciation of the Colombian currency.
333 
7.216.  With respect to the proposed alternative of using the disciplines of the Customs Valuation 
Agreement 334, Colombia asserts that the Colombian authorities are already applying the disciplines 
of that Agreement; thus, the applicatio n of that Agreement and Decree No. 456 are 
complementary, not substitute measures. Colombia states that pre-existing measures applied in 
parallel with the measure challenged do not constitute alternative measures for purposes of the 
necessity test under Article XX of the GATT 19 94, as was determined by the panel and the 
Appellate Body in Brazil – Retreaded Tyres . Colombia points out that the Panel should therefore 
                                               
327 Ortega, Smuggling and Money Laundering , July 2013 (Exhibit COL-15), pp. 29-30; Rincón, 
Smuggling and Money Laundering , April 2014 (Exhibit COL-18), p. 6. See also Colombia's first written 
submission, para. 22. 
328 Colombia's first written submission, para. 87; second written submission, paras. 70-79 and 97; 
opening statement at the first meeting of the Panel, paras. 26-28 and 68; and opening statement at the second meeting of the Panel, paras. 82, 88-93. 
329 Colombia's second written submission, paras. 75-79; response to Panel question No. 120 (referring 
to Appellate Body  Report, Brazil  – Retreaded Tyres , para. 153). 
330 Colombia's response to Panel question No. 36. 
331 Colombia's first written submission, para. 37; se cond written submission, paras. 70-74; opening 
statement at the first meeting of the Panel, paras. 26-36; Exhibit COL-30. 
332 Colombia's first written submission, para. 88; second written submission, paras. 80-81 and 97; 
opening statement at the first meeting of the Panel, para. 69; and opening statement at the second meeting of the Panel, paras. 82 and 95. 
333 Colombia's opening statement at the second meet ing of the Panel, paras. 96-97; closing statement 
at the second meeting of the Panel, para. 15; and response to Panel question No. 121. 
334 See paras. 7.249 and 7.281 below. WT/DS461/R 
 
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  conclude that the application of the Customs Valuation Agreement is not an alternative to Decree 
No. 456.335 
7.217.  Colombia also claims that this suggestion disregards the magnitude of the problem. 
Colombia points out that the instruments envisaged in the Customs Valuation Agreement make it 
possible to question individual imports and were defined in the light of isolated situations of 
customs fraud; they would therefore not provide effective tools for tackling a problem as generalized, massive and serious as that facing Colombia, which is caused by transnational 
criminal groups with huge financial resources operating on a large scale. Colombia adds that this 
alternative would not provide the same level of protection as Decree No. 456, and would not be less trade-restrictive; moreover, it would not be appropriate to consider that Colombia could, within a short space of time, create a customs service with sufficient capacity to deal with the 
problem effectively.
336 
7.218.  With respect to the proposed alternative of using customs cooperation and information 
exchange instruments337, Colombia maintains that, being an existing measure, the Protocol of 
Procedure for Cooperation and Exchange of Cust oms Information between the Customs Authorities 
of the Republic of Panama and the Republic of Colombia does not constitute an alternative measure for the purposes of the necessity analysis under Article XX of the GATT 1994.
338 
Moreover, Colombia states that it has had difficulties in the area of customs cooperation with 
Panama under the Protocol. Colombia maintains that, out of 329 requests submitted to Panama in 2007, only 79 elicited a reply; that the pattern of response was similar in the years 2008 to 2010; that in the years 2011 and 2012 the proportion of  replies rose to 74%; but that in 2013 and 2014 
the proportion fell to 15.6%. Colombia adds that, despite the fact that the above-mentioned 
Protocol establishes a time-limit of 20 days for replies, Panama had, on average, taken 50 days to respond to its requests. Colombia stresses that the Protocol does not have a dispute settlement 
mechanism to ensure enforcement and there is no certainty as to whether the Panamanian 
authorities will collaborate.
339 Colombia adds that it has signed a free trade agreement with 
Panama which incorporates customs cooperation and information exchange instruments and has a 
dispute settlement mechanism, but Panama has not submitted the agreement to its legislature for 
approval.340 
7.219.  With respect to the proposed alternativ e of using the mechanisms of the Agreement on 
Preshipment Inspection341, Colombia maintains that this would be a more restrictive and less 
effective alternative. Colombia points out that it applied this mechanism up to the year 2000, but 
eliminated it because of corruption in the inspection agencies. Colombia adds that the World Customs Organization (WCO), the WTO and other bodies have expressed concerns about the 
restrictive nature and ineffectiveness of this mechanism and that WTO Members agreed to 
abandon it under Article 10.5 of the Agreement on Trade Facilitation.
342 
7.4.1.1.2  Decree No. 456 is a measure necessary to secure compliance with Colombia's 
anti-money laundering legislation 
7.220.  Colombia maintains that Decree No. 456 is a measure necessary to secure compliance with 
laws or regulations which are not inconsistent with the provisions of the GATT 1994 (i.e. the 
                                               
335 Colombia's opening statement at the second meet ing of the Panel, para. 101 (referring to Panel 
Report, Brazil – Retreaded Tyres , paras. 7.169, 7.171-7.172 and 7.178; and Appellate Body Report, Brazil – 
Retreaded Tyres , paras. 159 and 181). 
336 Colombia's second written submission, paras. 84- 86; opening statement at the first meeting of the 
Panel, paras. 71 and 72; opening statement at the seco nd meeting of the Panel, para. 101; and response to 
Panel questions Nos. 30 and 31. 
337 See para. 7.250.  below. 
338 Colombia's opening statement at the second meeting of the Panel, para. 104. 
339 Colombia's second written submission, paras. 87- 89; opening statement at the second meeting of 
the Panel, paras. 104-106; and response to Panel questions Nos. 61, 63 and 65. 
340 Colombia's second written submission, paras. 6, 116-118; News item: La Prensa , FTA with Colombia 
paralysed, 7 January 2015 (Exhibit COL-39). 
341 See para. 7.252 below. 
342 Colombia's second written submission, paras. 90-93; and opening statement at the second meeting 
of the Panel, paras. 102-103. WT/DS461/R 
 
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  Colombian anti-money laundering legislation), within the meaning of Article XX(d) of the GATT 
1994.343 
7.4.1.1.2.1  Concerning "to secure complianc e with laws or regulations which are not 
inconsistent with the provisions of the GATT 1994" 
7.221.  Colombia asserts that Decree No. 456 is designed to secure compliance with the 
Colombian legislation against money laundering and the financing of other criminal activities, because it reduces the incentives for criminal groups to use imports of apparel and footwear for 
money laundering by means of artificially low prices. Colombia maintains that the compound tariff 
reduces the profit margin between the declared pr ice of the goods and their selling price on the 
domestic market, which leads to a reduction in th e amount of money that can be laundered in any 
given import operation.
344 
7.222.  Colombia identifies Articles 323 and 345 of its Criminal Code (which, as Colombia 
indicates, create the crimes of money laundering and financing terrorism, respectively) as the laws and regulations with which it seeks to secu re compliance through its compound tariff.
345 
7.223.  Colombia points out that these are not the only provisions whose enforcement Decree 
No. 456 is intended to secure. It notes that, inter alia , the following provisions are also relevant346: 
(i) Article 321 of the Criminal Code  (customs revenue fraud); (ii) Articles 25, 128, 238, 239, 240, 
241, 249, 254, 255, and 501-2 of the Customs Statute – Decree No. 2685 of 1999  (rules of 
conduct for administrators, legal representatives, customs brokers and auxiliaries; authorization of the release of imported goods and doubts regarding the declared value of imports; import declaration and Andean Declaration of Value, customs value, commercial invoices and supporting 
documents; currency conversion; and customs offences on the part of international trading 
companies); (iii) Articles 102, 103, 104 and 107 of the Organic Statute of the Financial System – 
Decree 663 of 1993  (administrative control regulations for combating money laundering), and 
Article 43 of Law 190 of 1995  (extending the requirements of Articles 102 to 107 of the Organic 
Statute of the Financial System to persons engaged in foreign trade, casino or gambling activities); (iv) Decree 1071 of 1999  (relating to the functions of the Colombian National Customs 
and Excise Directorate (DIAN) with regard to th e fiscal security of the Colombian State and the 
protection of national public order, through the administration and control of due compliance with 
tax, customs and foreign exchange requirements and facilitation of foreign trade operations); 
(v) Articles 14, 15, 17, 18 and 25 of Andean Community Decision 571  (on customs value) and 
Articles 48, 49, 51 and 61 of the Regulations contained in Andean Community Resolution 846  (on 
customs valuation controls); (vi) Law 808 of 27 May 2003 , approving the International Convention 
for the Suppression of the Financing of Terrorism ; and (vii) Law 800 of 13 March 2003 , approving 
the United Nations Convention against Transnational Organized Crime.
347 
7.224.  Colombia maintains that its legislation against money laundering and the financing of 
terrorism is not in itself inconsistent with the GATT 1994 and ensures compliance with its 
international commitments. Colombia adds that a Member's law is considered to be 
WTO-consistent until proven otherwise.348 
7.4.1.1.2.2  Concerning the "necessity" of the measure 
7.225.  Colombia maintains that its measure is "necessary" to secure compliance with laws or 
regulations which are not inconsistent with the pr ovisions of the GATT 1994, within the meaning of 
Article XX(d), and refers to the arguments put forward in the context of its defence under 
                                               
343 Colombia's first written submission, para. 105; second written submission, para. 107 and opening 
statement at the first meeting of the Panel, para. 74. 
344 Colombia's first written submission, paras. 93, 97- 100; second written submission, para. 99; opening 
statement at the first meeting of the Panel, paras. 74-75; and opening statement at the second meeting of the Panel, paras. 65-66. 
345 Colombia's first written submission, paras. 93 an d 94; and second written submission, paras. 41-42, 
99. 
346 Colombia's response to Panel questions Nos. 51 and 52. 
347 Colombia's response to Panel question No. 52. 
348 Colombia's first written submission, para. 95; second written submission, para. 100; and opening 
statement at the second meeting of the Panel, para. 75 (referring to Appellate Body Report, US – Carbon Steel , 
para. 157). WT/DS461/R 
 
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  Article XX(a). In short, Colombia points out that: (i) the interests and values at stake are vital and 
of the utmost importance; (ii) the measure is capable of making a material contribution to combating money laundering, because it reduces the incentives for using imports of apparel and footwear for money laundering purposes; and (iii) the measure has a moderate restrictive effect 
on importers operating under market conditions.
349 
7.4.1.1.3  Decree No. 456 complies with the introductory clause ( chapeau ) of 
Article XX of the GATT 1994 
7.226.  Colombia maintains that Decree No. 456 complies with the introductory clause of 
Article XX of the GATT 1994 because it is not a pplied in a manner which constitutes a means of 
arbitrary or unjustifiable discrimination or a disguised restriction on trade. Colombia affirms that Decree No. 456 is applicable to all imports of textiles, apparel and footwear, except for those 
arriving from countries with which Colo mbia has signed a free trade agreement.
350 
7.227.  With respect to this exclusion, Colombia  affirms that in combating money laundering, and 
in particular the use of imports for money laundering purposes, it has sought to extend 
cooperation with the customs authorities of its trading partners and has adopted customs 
cooperation and information exchange mechanisms with several of them, mainly in the context of free trade agreements signed since 2004.
351 Colombia has submitted a table showing "[p]rovisions 
on exchange of customs information in existing FTAs with Colombia".352 Colombia also maintains 
that, because imports from its trading partners are exempt from payment of the tariff, there is less incentive to price those imports at artificially low levels for money laundering purposes. Colombia adds that this exemption is justified under Article XXIV of the GATT 1994.
353 Colombia also 
maintains that Decree No. 456 is a measure to protect public morals and/or secure compliance 
with Colombian anti-money laundering laws and regulations and is therefore not a disguised restriction on trade.
354 
7.228.  Colombia also points out that at the end of 2013 it signed a free trade agreement with 
Panama, which contains provisions on customs cooperation and information exchange and adds that, when this agreement enters into force, Colombia will exempt imports originating in that 
country from the provisions of Decree No. 456. Colombia notes, however, that Panama has not 
completed the legislative procedures necessary for the agreement to enter into force. Colombia adds that, meanwhile, it has attempted to nego tiate, without success, a separate agreement on 
customs cooperation and information exchange with Panama.
355 
7.4.1.2  Summary of the main arguments of Panama 
7.4.1.2.1  Concerning the objective of the measure 
7.229.  Panama contends that the compound tariff is not a measure designed or necessary to 
protect public morals or to secure compliance with Colombian anti-money laundering legislation.356 
Panama asserts that the measure seeks to protect a sector of Colombia's domestic industry which 
                                               
349 Colombia's first written submission, paras. 102-105; second written submission, para. 108; and 
opening statement at the first meeting of the Panel, paras. 76-77. 
350 Colombia's first written submission, para. 110; second written submission, para. 112; and opening 
statement at the first meeting of the Panel, para. 78. 
351 Colombia's first written submission, paras. 111-113. 
352 Provisions on exchange of customs information in existing FTAs with Colombia (Exhibit COL-28). This 
table relates to provisions in the free trade agreements  signed by Colombia with: the European Union; the 
United States; the European Free Trade Association (EFT A); Canada; Chile; Mexico; the Northern Triangle of 
Central America (El Salvador, Guatemala an d Honduras); and the Andean Community. 
353 Colombia's second written submission, paras. 112- 115; opening statement at the first meeting of the 
Panel, paras. 78-80; opening statement at th e second meeting of the Panel, paras. 108-110. 
354 Colombia's opening statement at the second meeting of the Panel, para. 116. 
355 Colombia's first written submission, para. 114; second written submission, paras. 6 and 116; 
opening statement at the first meeting of the Panel, pa ra. 81; and response to Panel questions Nos. 13, 60 and 
62. 
356 Panama's opening statement at the fi rst meeting of the Panel, para. 1.26. WT/DS461/R 
 
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  is experiencing problems of competitiveness with imports, and serves a purpose similar to that of a 
structural adjustment mechanism.357 
7.230.  Panama asserts that, following an obje ctive examination of the design, structure and 
architecture of Decree No. 456, it is questionable whether the measure can, as such, be linked to 
morals, be a measure for securing compliance with a criminal code, or be designed to combat 
money laundering.358 Panama maintains that the objective of combating money laundering has 
been introduced into this dispute by Colombia  ex post facto .359 
7.231.  Panama maintains that Decree No. 456 lacks a statement of reasons and that nowhere in 
the Decree, or in the internal debate in Colombia relating to its adoption, was any reference made to money laundering as one of the reasons for the Decree.
360 Panama points out that the exhibits 
it has submitted illustrate how the imposition of the tariff was a consequence of an internal debate 
between the Government, clothing manufacturers, importers and traders, which sought to protect 
the domestic industry without making products not manufactured in Colombia more expensive.361 
Panama points out that the only documents submitted by Colombia, i.e. the minutes of the Triple 
A Committee and a statement by Colombia's Presid ent, are subsequent to the initiation of the 
dispute362, in addition to which the minutes indicate that the proposal to amend Decree No. 074 
came from the vice-ministry responsible for fo rmulating development and industrial promotion 
policy in Colombia.363 
7.232.  Panama adds that the scope of the measure is limited to a specific import sector and does 
not extend to other products that could be used for money laundering.364 Furthermore, it has only 
a two-year duration, despite the importance of the stated objective.365 
7.233.  Panama also asserts that the measure exempts parts of footwear, an input required by the 
domestic industry366; excludes imports that enter special customs regime zones367; does not apply 
                                               
357 Ibid. para. 1.20; and opening statement at the second meeting of the Panel, para. 6. 
358 Panama's opening statement at the first meeting of the Panel, paras. 1.20-1. 21; and closing 
statement at the first meetin g of the Panel, para. 1.8. 
359 Panama's second written submission, para. 3.19; and response to Panel qu estions Nos. 17 and 39. 
360 Panama's second written submission, para. 3.20;  opening statement at the first meeting of the 
Panel, para. 1.21; and closing statement at the first meeting of the Panel, para. 1.8. 
361 Panama's opening statement at the first meeting of the Pa nel, para. 1.6; response to Panel question 
No. 118. See also Information note: Office of the President of the Republic, President announces measures to boost the textiles sector, 22 January 2003 (Exhibit PAN-6) ; Information note: Office of the President of the 
Republic, Government signs Decree to strengthen clothing and footwear sectors, 23 January 2013 (Exhibit PAN-7); Information note: International Press Centre, Pr esident highlights benefits of measures taken to 
protect textiles industry, 22 July 2013 (Exhibit PAN-8); Information note: Office of the President of the 
Republic, Statement by the President at the national "Weaving Colombia" event, 28 November 2012 (Exhibit PAN-9); Information note: Office of the President of the Republic, Statement by the President at the close of the Management Dialogues in the Ministry of Trade, Industry and Tourism, 20 January 2014 (Exhibit PAN-10); 
National Federation of Merchants, The specific tariff on footwear: a controversial decision entailing considerable 
collateral damage, 5 February 2013 (Exhibit PAN-11); News item: El Nuevo Siglo , "Fenalco asks for a lower 
tariff on textiles and footwear", 1 Ma rch 2013 (Exhibit PAN-12); News item: El Economista , "Controversy over 
decree on footwear imports", 6 September 2013 (Exhibit PAN-13); News item: La República , "Fenalco and the 
Chamber of Clothing reach agreement to modify tariffs", 7 December 2013 (Exhibit PAN-14); News item: La 
República , "Importers not convinced by agreement between clothing manufacturers and Fenalco", 
9 December 2013 (Exhibit PAN-15); National Federation of  Merchants, FENALCO rejects decree on clothing and 
footwear tariffs (Exhibit PAN-16). 
362 Panama's opening statement at the second meeting of the Panel, para. 5. 
363 Panama's response to Panel question No. 118. 
364 Panama's second written submission, paras. 3.22-3. 23; closing statement at the first meeting of the 
Panel, para. 1.8; opening statement at the second me eting of the Panel, para. 6; and response to Panel 
questions Nos. 8 and 39. 
365 Panama's second written submission, para. 3.26;  opening statement at the first meeting of the 
Panel, para. 1.23; closing statement at the first meeting of the Panel, para. 1.8; and opening statement at the second meeting of the Panel, para. 6. 
366 Panama's second written submission, para. 3.24; cl osing statement at the first meeting of the Panel, 
para. 1.8; opening statement at the second meeting of the Panel, para. 6; and re sponse to Panel question 
No. 14. 
367 Panama's second written submission, para. 3.25;  opening statement at the first meeting of the 
Panel, para. 1.22; closing statement at the first meeting of the Panel, para. 1.8; opening statement at the 
second meeting of the Panel, para. 6; and response to Panel question No. 16. WT/DS461/R 
 
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  to imports from trading partners, which could also present a risk of money laundering; and does 
not establish mechanisms for prosecuting persons suspected of committing criminal offences.368 
7.234.  Panama maintains that the fact that the production cost of the products in question in 
Colombia was the basis for determining the thresholds shows that the real parameter for the 
thresholds was the extent to which the import prices reflect the production costs for the domestic 
products and their ability to compete.369 Panama asserts that the thresholds were established not 
for technical reasons but to maintain a balance of interests between the different sectors 
involved.370 Panama adds that the compound tariff provides for a single threshold for apparel and 
footwear, without taking into account the differe nces between the products classified in each 
subheading, although the database of Colombia's National Customs and Excise Directorate (DIAN) 
itself contains numerous reference prices and many below 10 US$/kilo (for apparel) and US$7/pair 
(for footwear).371 
7.235.  Panama also maintains that Colombia's defence is based on a chain of presumptions which 
cannot withstand objective scrutiny. Panama asserts that, out of the whole range of generic and 
quick-selling goods, Colombia considers that it is imports of textiles, apparel and footwear that are 
used for money laundering. Panama adds that the Colombian authorities unilaterally fixed certain thresholds below which Colombia considers that imports would be entering at artificially low prices 
and presumes that they would be used for money laundering purposes. For Panama, this 
presumption is unacceptable.
372 
7.4.1.2.2  Concerning "t o protect public morals" 
7.236.  For Panama, there is no question that problems relating to money laundering fall within 
the scope of the notion of public morals. Panama adds that, in any event, it would be for Colombia 
to show that combating money laundering is one of the policies designed to protect public morals 
in Colombia.373 
7.4.1.2.3  Concerning "to secure complianc e with laws or regulations which are not 
inconsistent with the provisions of the GATT 1994" 
7.237.  Panama asserts that Colombia has been imprecise in identifying the laws and regulations 
with which it seeks to secure compliance by means of Decree No. 456. Due to this imprecision and 
the lack of supporting evidence, in Panama's opinion, neither it nor the Panel would be able properly to identify the provisions cited by Colombia.
374 
7.238.  Panama maintains that Colombia has made a general reference to Articles 323 and 345 of 
its Criminal Code, but has not submitted the text of  the provisions, or exhibits that would make it 
possible to verify the existence, scope and meaning of their terms.375 Panama also asserts that, 
after having submitted a defence relating to compliance with its anti-money laundering legislation, 
Colombia broadened its scope to include laws against the financing of other criminal activities and 
provisions against the financing of terrorism.376 
7.239.  With respect to the provisions cited by Colombia in its responses to the Panel's questions, 
Panama asserts that the references are belated, apart from which Colombia has not submitted 
evidence that would make it possible to evaluate these provisions. Panama points out that the provisions cited by Colombia contain numerous obligations and Colombia has not identified those 
                                               
368 Panama's closing statement at the fi rst meeting of the Panel, para. 1.8. 
369 Panama's response to Panel question No. 29. 
370 Panama's closing statement at the second meeting of  the Panel, para. 5. Mini stry of Trade, Industry 
and Tourism of Colombia, Proposed amendments to Decree No. 074 of 2013 (Exhibit PAN-28). 
371 Panama's response to Panel question No. 118. Nati onal Customs and Excise Directorate of Colombia, 
Reference price database (Exhibit PAN-34). 
372 Panama's response to Panel questions Nos. 5, 6 and 39. 
373 Panama's second written submission, para. 3.18; response to Panel question No. 7. 
374 Panama's second written submission, paras. 3.45-3.54. 
375 Ibid. paras. 3.48 and 3.52. 
376 Ibid. para. 3.47. WT/DS461/R 
 
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  obligations whose fulfilment requires the existence of the measure at issue377 or explained how the 
compound tariff would ensure that  those obligations are fulfilled.378 
7.240.  Panama maintains that the International Convention for the Suppression of the Financing 
of Terrorism and the United Nations Convention against Transnational Organized Crime, cited by 
Colombia, are international instruments which do not qualify as "laws or regulations" within the 
meaning of Article XX(d) of the GATT 1994.379 
7.241.  Panama also states that no relationship between Decree No. 456 and the Colombian 
money laundering legislation, in particular Articles 323 and 345 of the Criminal Code, can be 
discerned from the text of the Decree or Colombia's arguments.380 Panama asserts that what is 
important is the relationship between the compou nd tariff and Articles 323 and 345 of the Criminal 
Code, and not the relationship between the Decree as a whole and the money laundering 
legislation in general.381 Panama maintains that Colombia mu st demonstrate that, in the absence 
of the compound tariff, there would be a concern about violations of Articles 323 and 345 of the 
Criminal Code.382 Panama adds that it is not clear that a border measure in the nature of an 
indirect tax could be converted into a t ool for enforcement of a criminal code.383 
7.242.  Accordingly, Panama argues that there is no genuine relationship of ends and means 
between the compound tariff provided for in Decree No. 456 and Articles 323 and 345 of the 
Criminal Code. In its opinion, the compound tariff is not a measure designed to secure compliance 
with Colombian anti-money laundering legislation.384 
7.243.  Moreover, Panama asserts that Colombia has made no attempt to show that the domestic 
laws it has invoked are consistent with the GATT 1994.385 
7.4.1.2.4  Concerning the "necessity" of the measure 
7.244.  Panama maintains that the compound tariff is not a measure "necessary" to protect public 
morals or to secure compliance with the laws and regulations cited by Colombia.386 
7.4.1.2.4.1  Evaluation of factors 
7.245.  With respect to the importance of the interests or values protected, Panama does not deny 
that the fight against money laundering and the financing of terrorism may be deemed to be social 
interests of great importance. However, Panama does not consider that the compound tariff has 
been introduced to secure compliance with the legislation aimed at upholding these values.387 
7.246.  With respect to the contribution of the me asure to Colombia's declared objective, Panama 
maintains that the only thing which Colombia has succeeded in demonstrating is that it has 
created a disincentive for importing goods at prices which Colombia itself considers to be low, by 
making imports more expensive.388 Panama maintains that the measure does not prevent money 
laundering, but, at most, reduces the amount of money that can be laundered in a given 
operation. In Panama's opinion, the reduction of the margin that can be legalized through the 
domestic sale of the imported goods would not per se  entail a reduction in imports for money 
laundering purposes. Panama adds that the measure penalizes legitimate imports, while allowing 
money laundering to continue.389 
                                               
377 Ibid. paras. 3.49-3.51 and 3.53. 
378 Ibid. para. 3.56. 
379 Ibid. para. 3.54. 
380 Ibid. para. 3.56; and response to Panel question No. 8. 
381 Panama's response to Panel question No. 8. 
382 Panama's second written submission, para. 3. 41; and response to Panel question No. 54. 
383 Panama's response to Panel question No. 8. 
384 Panama's second written submission, para. 3. 57; and response to Panel question No. 8. 
385 Panama's second written submission, para. 3.55. 
386 Ibid. 3.28 and 3.59. 
387 Ibid. paras. 3.32 and 3.64. 
388 Ibid. para. 3.61. 
389 Panama's response to Panel questions Nos. 39 and 45; and opening statement at the second 
meeting of the Panel, para. 7. WT/DS461/R 
 
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  7.247.  Panama also maintains that, where there is an intention to launder money, the payment of 
the compound tariff does not prevent the sale of the goods being used to legalize money of illicit origin and, indeed, would create an incentive to try and compensate for the loss of profit margin by increasing the volume of imports.
390 Panama adds that the limited coverage of the compound 
tariff, its limited duration and its exclusions confirm that the measure cannot contribute and is not 
contributing to the objective of combating money laundering.391 
7.248.  With respect to the trade-restrictiveness of the measure, Panama asserts that the measure 
is having a highly restrictive impact on international trade and that Colombia itself has 
acknowledged that imports of apparel and footwear  have been reduced. Panama maintains that, 
taking into account the volume of re-exports to Colombia under the four chapters covering apparel 
and footwear, at the end of 2013, these re-exports reflected a fall of up to 18%. Panama asserts 
that in just one year after the entry into force of the measure, Panama's re-exports of apparel and 
footwear to Colombia fell from 41 million to 33.67 million kilograms.392 
7.4.1.2.4.2  The possibl e alternative measures 
7.249.  Panama argues that a more targeted and effective alternative solution to the problem of 
imports at artificially low prices (allegedly being used for money laundering) would be to use the disciplines of the Customs Valuation Agreement. Panama points out that the Customs Valuation 
Agreement is intended to achieve the correct determination of customs value. In Panama's 
opinion, any instance of undervaluation or underinvoicing could be made subject to the methodologies for which that Agreement provides, without cross-penalizing legitimate imports entering at more competitive prices.
393 
7.250.  Panama also maintains that, as Colombia has acknowledged, the mechanisms of customs 
cooperation and information exchange are a clear and less restrictive alternative which would make it possible to combat the use of imports for money laundering. Panama asserts that this 
option is already available, because since 2006 Panama and Colombia have had the Protocol of 
Procedure for Cooperation and Exchange of Cust oms Information between the Customs Authorities 
of the Republic of Panama and the Republic of Colombia, within the framework of the Multilateral 
Convention on Cooperation and Mutual Assistance  between the National Customs Directorates of 
Latin America, Spain and Portugal (COMALEP), under which the parties may request cooperation or mutual assistance for the purpose of exchangi ng information conducive to the prevention, 
investigation, suppression and control of customs offences.
394 
7.251.  According to Panama, COMALEP and the Protocol give the parties broad powers to request 
customs information, and the high volume of use is an indication of their effectiveness.395 Panama 
maintains that, between 2012 and 2013, its customs authority received 721 requests for 
information from DIAN and between January an d November 2014, 696 requests. Panama asserts 
that its customs authorities' response rate to  r e q u e s t s  f r o m  D I A N  i s  8 5 % ,  a l t h o u g h  i t  
acknowledges that the prescribed 20-day time-limit has not been sufficient. Panama also indicates 
that the existence of requests still awaiting a resp onse is due to factors such as the inaccuracy of 
the request or companies having ceased operations.396 
7.252.  Panama maintains that another alternative would be to apply the disciplines of the 
Agreement on Preshipment Inspection, which provides  for inspection procedures on the territory of 
the exporting Member, thereby making it possible to verify the price of the imported goods. 
Panama maintains that Colombia could contract out preshipment inspection activities or require 
                                               
390 Panama's second written submission, paras. 3.29 and 3.61; and opening statement at the second 
meeting of the Panel, para. 7. 
391 Panama's second written submission, paras. 3.30 and 3.62. 
392 Panama's first written submission, paras. 5.3-5.4; second written submission, paras. 3.31 and 3.63; 
and opening statement at the second meeting of th e Panel, para. 7; Colón Free Zone Administration, 
communication, 25 August 2014 (Exhibit PAN-5). 
393 Panama's second written submission, para. 3.34;  opening statement at the first meeting of the 
Panel, para. 1.24; and response  to Panel question No. 66. 
394 Panama's second written submission, para. 3.35;  opening statement at the first meeting of the 
Panel, para. 1.25; and response  to Panel question No. 63. 
395 Panama's response to Panel question No. 63. 
396 Panama's second written submission, para. 3.35;  and response to Panel questions Nos. 65, 145 
and 146. WT/DS461/R 
 
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  their use. For Panama, the price verification tool s of the aforementioned agreement would be more 
effective and less restrictive than the compound tariff.397 
7.4.1.2.5  Concerning the chapeau  of Article XX of the GATT 1994 
7.253.  Panama maintains that the compound tariff is applied in a manner which constitutes a 
means of arbitrary or unjustifiable discrimination between countries where the same conditions 
prevail, because it excludes imports from countries with which Colombia has trade agreements in force. Panama asserts that a trade agreement does not lessen the concern about money 
laundering and, indeed, the non-existence of a tariff would increase the incentive to enter more 
imports at lower prices.
398 
7.254.  Panama asserts that, if the intention is to launder money through low-priced imports, it 
matters little whether or not the imports enter through trade partners. Panama points out that, 
since under the trade agreements there is no requirement to pay a tariff or value the goods for 
customs purposes, anyone trying to introduce goods linked to illicit activities would be perfectly free to declare those goods at a zero price and obtain an even greater profit margin.
399 
7.255.  Panama also considers that the compound tariff is a disguised restriction on trade, as it 
has no raison d'être  in regard to the fight against money laundering and the financing of terrorism, 
as is evidenced by the fact that goods entering  free zones are exempted from the application of 
the tariff.400 
7.4.1.3  Summary of the main arguments of the third parties 7.4.1.3.1  United States 7.256.  The United States points out that the Appellate Body has affirmed that a Member asserting 
a defence under Article XX(a) of the GATT 1994 mu st show that it has adopted the measure to 
protect public morals and that the measure is necessary to protect such public morals.
401 
7.257.  The United States agrees with Colombia that the objective of combating illicit drug 
trafficking and transnational organized crime, in cluding by combating money laundering, could be 
among the policy objectives covered by Article XX(a ) of the GATT 1994, but points out that this is 
a question that must be considered on a case-by-case basis.402 
7.258.  The United States is of the opinion th at Colombia must show, based on the text and 
legislative history, or other evidence pertaining  to the design, structure and operation of the 
measure, that the primary objective of Decree No. 456 is to prevent money laundering.403 The 
United States considers that Colombia has not referred to the text of the measure, its legislative 
history, any official statements, reports, or other evidence supporting its assertion that the 
measure is intended to prevent money laundering. The United States questions whether the alleged effect of the measure, a rise in the price of  these goods, alone is sufficient to show that the 
objective of the measure is the reduction or prevention of money laundering.
404 
7.259.  The United States considers that the Panel must analyse whether and to what extent 
Colombia has shown that this rise in prices contributes to the objective of preventing money 
laundering, and if it does, whether that contribution warrants the restrictive effect of the measure. 
                                               
397 Panama's second written submission, para. 3.36; and response to Panel questions Nos. 67 and 152. 
398 Panama's second written submission, paras. 3.77- 3.78; and opening statement at the first meeting 
of the Panel, para. 1.27. 
399 Panama's second written submission, para. 3. 79; and response to Panel question No. 9. 
400 Panama's second written submission, para. 3.82. 
401 United States' third-party st atement, para. 14 (referring to Appellate Body Reports, 
EC - Seal Products , para. 5.169). 
402 United States' response to Panel question No. 7. 
403 United States' third-party st atement, paras. 16-17 (referring  to Appellate Body Report, 
EC - Seal Products , fn 913). 
404 United States' third-pa rty statement, para. 18. WT/DS461/R 
 
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  The United States notes that several examples of alternative measures have been suggested that 
the Panel might evaluate.405 
7.260.  The United States points out that, to be justified under Article XX(d), a measure must be 
designed to secure compliance with laws or re gulations not inconsistent with the GATT 1994 and 
must be necessary to secure such compliance.406 
7.261.  For the United States, it is unclear whether the relationship that Colombia has described 
between Decree No. 456 and its anti-money launderin g law falls within the scope of to "secure 
compliance". In the United States' view, the text of Article XX(d) would not support an 
interpretation that enforcement measures having any relationship, even if only coincidental, with a WTO-consistent measure can be considered necess ary to secure compliance with such measure. 
The United States considers that it is not clear that the arguments and evidence in relation to 
Decree No. 456 establish that it is apt to secure compliance with the anti-money laundering law 
through its price effects.
407 
7.4.1.3.2  Philippines 
7.262.  In the opinion of the Philippines, Decree No. 456, being a measure to combat money 
laundering, a criminal activity in Colombia, is clearly related to standards of right and wrong conduct as defined by Colombian society, and also reflects the rules of right and wrong conduct of 
the international community.
408 To the Philippines it appears that the interests or values that the 
measure seeks to address are at least as important or vital as those addressed in US – Gambling 
(money laundering and organized crime) and Dominican Republic – Import and Sale of Cigarettes 
(tax evasion and smuggling), and more important than the commercial interests involved in 
Canada – Wheat Exports and Grain Imports .409 
7.263.  The Philippines also consid ers that Decree No. 456 is design ed to secure compliance with 
Colombian regulations against money laundering because, by reducing the profit margins, it 
reduces the amount of money laundered, and thus the incentives for criminal groups to use 
imports of the products in question to launder money.410 
7.264.  With respect to the measure's contribution to the achievement of Colombia's objective, it is 
unclear to the Philippines whether the increase in the prices of imports can be considered a proxy 
for the reduction of laundered imports. In the opinion of the Philippines, it should be established that this increase can be directly attributed to  the reduction in the quantity of money-laundered 
imports, and not just by mere correlation, since an increase in prices is a natural consequence of 
raising tariffs.
411 The Philippines adds that money laundering might still exist even with higher 
tariff rates, perhaps even above the threshold values.412 
7.265.  The Philippines therefore considers that sh owing an increase in import prices, without any 
evidence that money laundering has been curtailed, would not be sufficient to prove 
contribution.413 For the Philippines, if it were not shown that the measure contributes to the 
achievement of the objective, there is a possibility that as money laundering persists, legitimate 
imports are being penalized, and consumers are being made to bear the brunt of an erroneously 
targeted measure.414 
7.266.  Moreover, for the Philippines, the empiri cal basis for Colombia's determination of the 
thresholds for distinguishing imports at artificially low prices is unclear. The Philippines considers 
                                               
405 Ibid. para. 20. 
406 United States' third-party st atement, para. 21; and response to Panel question No. 8. 
407 United States' third-pa rty statement, para. 23. 
408 Philippines' third-party wr itten submission, para. 4.46. 
409 Philippines' third-party writte n submission, para. 4.54; and third-party statement, para. 4.7. 
410 Philippines' third-party wr itten submission, para. 4.88. 
411 Ibid. para. 4.58; and third- party statement,  para. 4.8. 
412 Philippines' third-party writte n submission, para. 4.59; and third-party statement, para. 4.9. 
413 Philippines' third-pa rty written submission, paras. 4.60 and 4.94. 
414 Ibid. para. 4.61. WT/DS461/R 
 
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  that, to conclude that artificially low-priced im ports have been reduced, the quantity of such 
imports would have to be determined prior to the entry into force of the measure.415 
7.267.  With regard to the restrictiveness of the measure, in the opinion of the Philippines, the 
increase in import prices may be due to the incr ease in duties on legitimate low-priced goods.416 
The Philippines considers that Colombia itself, in referring to imports "likely to be used for money 
laundering", has acknowledged that legitimate imports at competitive prices may have been affected.
417 
7.268.  The Philippines asserts that the goods at issu e are legal and that it is not their nature that 
makes them illicit but the manner in which they are used, so that care must be taken in dealing with them to ensure that legitimately traded products are not restricted. For the Philippines, the design of the measure should reflect a greater degree of care.
418 
7.269.  The Philippines is also of the opinion th at the systemic impact of the measure must be 
considered, since, although the objective is important, the use of tariffs that might go beyond the bound rates to achieve public policy object ives could have wide-ranging consequences.
419 
7.270.  Where possible alternative measures are concerned, the Philippines takes the view that a 
more effective solution for dealing with underinvoicing could be through customs valuation, on a case-by-case basis, by applying the methodologies of the Customs Valuation Agreement, which 
would ensure that imports with proper valuation would not be penalized with higher duties.
420 The 
Philippines also considers that an effective import licensing regime that weeded out the perpetrators of illegal activities from the legitimate importers would achieve the desired outcome.
421 The Philippines also notes that the Agreement on Trade Facilitation contains provisions 
which, once adopted, would address Colombia's concerns.422 
7.271.  As another alternative the Philippines identifies the confiscation or banning of the goods in 
question. The Philippines notes that, following Colombia's reasoning, these products are used for 
money laundering but continue to enter the market. The Philippines adds that raising tariffs on 
illicitly traded goods would not make these importations any more legitimate.423 For the 
Philippines, "reducing the risk" of the imports being used for money laundering should be 
distinguished from reducing or eliminating the illicit activity itself, so that alternatives that directly 
address the criminal activity itself and not just  the aforementioned risk should be considered.424 
7.272.  The Philippines considers that the fact that Colombia uses customs cooperation and 
information exchange mechanisms with its trading partners challenges the rational relationship 
between the measure and its objective. If Colombia considers that these mechanisms are 
effective, it could have used them with other countries.425 If Colombia considers that all imports 
below the threshold are being used for money laundering, it could have included its trading 
partners in the measure, using the exceptions in each agreement426, since, even though these 
mechanisms exist, there could be imports with  declared values below the threshold prices.427 
7.273.  The Philippines considers that, if there is less incentive to use imports from trading 
partners for money laundering, it would seem that money laundering is conducted by importing 
high-value products and declaring them at artificial ly low prices to save on duties paid. Therefore, 
there could be a greater incentive to import higher-value products.428 For the Philippines, the key 
would be to determine which particular products command the highest profit margins, and focus 
                                               
415 Ibid. para. 4.60. 
416 Ibid. para. 4.64. 
417 Ibid. paras. 4.66 and 4.72; and third-party statement, paras. 4.12-4.13. 
418 Philippines' third-party writte n submission, paras. 4.67-4.71. 
419 Ibid. para. 4.73. 
420 Ibid. para. 4.81; and third- party statement,  para. 4.15. 
421 Philippines' third-party writte n submission, para. 4.82; and third-party statement, para. 4.15. 
422 Philippines' third-party wr itten submission, para. 4.83. 
423 Ibid. para. 4.84; and third- party statement,  para. 4.15. 
424 Philippines' third-party wr itten submission, para. 4.92. 
425 Ibid. para. 4.104; and third- party statement, para. 4.18. 
426 Philippines' third-party written submission, para. 4.107. 
427 Philippines' third-part y statement, para. 4.19. 
428 Philippines' third-party written submission, para. 4.108. WT/DS461/R 
 
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  efforts on those products.429 The Philippines adds that there is a possibility that perpetrators would 
prefer to source their goods from trading partners, in order not to pay duties, rather than to undervalue them, in order to pay lower duties.
430 
7.274.  The Philippines considers that upholdin g the measure under Arti cle XX of the GATT 1994 
would run counter to the spirit of Article XXIV, as the effect of the measure is to maintain 
duty-free treatment of imports from Colombia's trading partners while increasing the duties on imports from non-trading partners, an outcome that Article XXIV seeks to avoid.
431 
7.275.  The Philippines concludes that the measure is aimed at protecting public morals and is 
intended to ensure compliance with laws and re gulations against money laundering, but does not 
appear to pass the necessity test or comply with the chapeau  of Article XX of the GATT 1994.432 
7.4.1.3.3  European Union 
7.276.  With respect to the defence under Article XX(a) of the GATT 1994, the European Union 
submits that the measure should genuinely address the value protected, so that Colombia has to 
prove how money laundering associated with drug trafficking affects public morals and whether 
Decree No. 456 has sufficient nexus with those protected interests.433 In this connection, the 
European Union takes the view that, while fighting against money laundering could possibly and in principle fall under Article XX(a) of the GATT 1994, it leaves open the question as to whether 
Colombia has demonstrated that the measure at issue is in fact necessary to protect public moral 
concerns related to money laundering.
434 The European Union considers that it needs to be 
examined whether there is a sufficient nexus between the measure and the interest protected and notes that Decree No. 456 makes no referenc e to fighting against money laundering.
435 
7.277.  With regard to the defence under Article XX(b) of the GATT 1994, the European Union 
considers that Colombia has to prove that Decree No. 456 reduces the incentive for using imports of the products in question to launder money, thus securing compliance with Colombian laws and 
regulations against money laundering.
436 
7.278.  With regard to the necessity test, the European Union considers that, to prove that the 
measure makes a material contribution to the objective, Colombia would have to show more than 
an increase in import prices, which may have affected legitimate imports as well, and establish a 
direct link between the compound tariff and a decrease in money laundering. This contribution could be assessed as part of a wider set of measures which Colombia might be taking to address the same concerns. The European Union adds that the Panel might look into whether Colombia 
imposes the same requirements on products ot her than textiles, apparel and footwear, where 
money laundering risks may also exist.
437 
7.279.  With regard to the increase in the unit price of the imports mentioned by Colombia, the 
European Union wonders how those prices were calc ulated and whether they relate to declared or 
actual values. The European Union adds that, in any event, Colombia would need to show that there is some correlation between the adoption  of the measure and the decrease in money 
laundering.
438 
7.280.  The European Union considers it necessary to analyse how the established thresholds 
relate to the objective pursued by the measure, as it is important for Colombia to clarify how it 
                                               
429 Ibid. para. 4.109. 
430 Ibid. para. 4.110; third-party statement, para. 4.20; and response to Panel question No. 9. 
431 Philippines' third-party written submission, paras. 4.111-4.112. 
432 Philippines' third-party st atement, paras. 5.2-5.3. 
433 European Union's third-pa rty statement,  para. 9. 
434 European Union's third-party written submission, para. 40. 
435 Ibid. para. 44. 
436 European Union's third-pa rty statement, para. 10. 
437 European Union's third-party wr itten submission, para. 44; and third-party statement, para. 12. 
438 European Union's third-party written submission, para. 52. WT/DS461/R 
 
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  reached the conclusion that the products with below-threshold prices were artificially low-priced, 
and that the undervaluation of those products was in fact linked to money laundering.439 
7.281.  The European Union is of the opinion th at a possible alternative measure would be to 
tackle undervaluation by using the provisions of the Customs Valuation Agreement. For the 
European Union, these procedures might be an appropriate tool for customs officials to ascertain 
the correct transaction value and play a preventive role in curbing money laundering.440 
7.282.  The European Union considers that another alternative might be the conclusion of customs 
cooperation agreements, including: (i) an anti -money laundering agreement between Colombia 
and Panama, or between Colombia, Panama and other affected countries; or (ii) a customs cooperation and information exchange agreement between Colombia and Panama, or between Colombia, Panama and other affected countries, with provisions similar to those contained in 
Colombia's trade agreements, in which case Article 12 of the Trade Facilitation Agreement might 
serve as a model.
441 
7.283.  The European Union has doubts about the appropriateness of applying customs duties in 
excess of Colombia's bindings on the basis of low declared customs values. The European Union 
could imagine situations where there are genuine low import prices unrelated to money laundering.
442 The European Union also refers to the different treatment for countries having 
preferential agreements with Colombia, and indi cates that it might be appropriate to examine 
whether the difference in treatment is based on objective factors that contribute to the objective pursued by the measure.
443 
7.284.  The European Union concludes that the key points in this case are the contribution of 
Decree No. 456 to its alleged objectives, the availability of alternative measures and the 
application of the measure in a manner consistent with the chapeau  of Article XX of the 
GATT 1994.444 
7.4.2  Colombia's defence under Article XX(a) of the GATT 1994 
7.4.2.1  General aspects concerning th e analysis of Article XX of the GATT 1994 
7.4.2.1.1  Nature and purpose of Article XX of the GATT 1994 
7.285.  The Appellate Body has indicated that para graphs (a) to (j) of Article XX of the GATT 1994 
comprise measures that have been recognized as exceptions to substantive obligations established in the Agreement "because the domestic policies embodied in such measures have been recognized as important and legitimate in character."
445 
7.286.  The Appellate Body has also explained that the chapeau  of Article XX of the GATT 1994 
embodies the recognition on the part of Members of the need to maintain a balance between the 
right of a Member to invoke one or another of the exceptions contained in that article and the 
substantive rights of the other Members under the Agreement.446 This seeks to ensure that neither 
of the competing rights will cancel out the othe r and thereby distort and nullify or impair the 
balance of rights and obligations that the Member s themselves have agreed. The location of the 
line of equilibrium between these rights is not fixed and unchanging but moves as the measures 
and the facts in specific cases vary.447 
                                               
439 European Union's third-pa rty statement, para. 13. 
440 European Union's third-party writ ten submission, paras. 45 and 53; third-party statement, para. 16. 
441 European Union's third-party writ ten submission, paras. 46 and 53; third-party statement, para. 16. 
442 European Union's third-party written submission, para. 58. 
443 Ibid. para. 59. 
444 European Union's third-pa rty statement, para. 17. 
445 Appellate Body Report, US – Shrimp , para. 121. 
446 Ibid. para. 156. 
447 Ibid. para. 159. WT/DS461/R 
 
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  7.4.2.1.2  Applicability 
7.287.  The Appellate Body has indicated that th e exceptions listed in Article XX of the GATT 1994 
relate to all of the obligations under the Agreement, so that these exceptions are applicable, 
inter alia , to the obligations contained in Article II.448 
7.4.2.1.3  Structure of the analysis 
7.288.  As the Appellate Body has pointed out, in order that the protection of Article XX of the 
GATT 1994 may be extended to a measure, that measure must not only come under one or 
another of the particular exceptions listed in the paragraphs of the Article, but must also satisfy 
the requirements imposed by its opening clause.449 I n  o t h e r  w o r d s ,  a  p a n e l  c a l l e d  u p o n  t o  
determine the merits of a defence under this Article must carry out a two-tiered analysis. Firstly, it 
must determine whether the measure is provisionally justified by reason of being comprehended in 
any of the situations provided for in the various paragraphs and, secondly, it must appraise the 
measure in the light of the introductory clause.450 
7.289.  The Appellate Body has observed that this order of analysis reflects not random choice, but 
rather the fundamental structure and logic of Article XX of the GATT 1994451, since "the task of 
interpreting the chapeau  so as to prevent the abuse or misuse of the specific exemptions provided 
for in Article XX is rendered very difficult, if indeed it remains possible at all, where the interpreter 
... has not first identified and examined the specific exception threatened with abuse."452 
7.4.2.1.4  Burden of proof 7.290.  As the Appellate Body has confirmed, the burden of proving any of the defences contained 
in paragraphs (a) to (j) of Article XX of the GATT 1994 rests on the party invoking that defence.
453 
The party invoking the defence is also responsible for showing that a measure which it has 
provisionally justified as falling within one of the paragraphs of Article XX does not, in its application, constitute abuse of such exception under the chapeau .
454 
7.4.2.2  The text of Arti cle XX(a) of the GATT 1994 
7.291.  The chapeau  and paragraph (a) of Article XX of the GATT 1994 read as follows: 
Article XX 
General Exceptions 
Subject to the requirement that such measures are not applied in a manner which 
would constitute a means of arbitrary or unjustifiable discrimination between countries where the same conditions prevail, or a disguised restriction on international trade, 
nothing in this Agreement shall be construe d to prevent the adoption or enforcement 
by any contracting party of measures: 
(a) necessary to protect public morals; 
7.4.2.3  Measures necessary to protect public morals 
7.292.  Article XX(a) of the GATT 1994 justifies measures adopted or enforced by a Member which 
are necessary to protect public morals. 
                                               
448 Appellate Body Report, US – Gasoline , p. 24. 
449 Ibid. p. 22; see also Appellate Body Report, Korea – Various Measures on Beef , para. 156. 
450 Appellate Body Report, US – Gasoline , p. 22. See also Appellate Body Reports, Brazil – Retreaded 
Tyres , para. 139; Dominican Republic – Import  and Sale of Cigarettes , para. 64. 
451 Appellate Body Report, US – Shrimp , para. 119. 
452 Ibid. para. 120. 
453 Appellate Body Report, US – Wool Shirts and Blouses , p. 16. 
454 Appellate Body Report, US – Gasoline , pp. 22-23. WT/DS461/R 
 
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  7.4.2.4  Structure of the analysis 
7.293.  Provisional justification under one of the paragraphs of Article XX of the GATT 1994 
requires that a challenged measure address the part icular interest specified in that paragraph and 
that there be a sufficient nexus betwee n the measure and the interest protected.455 In the context 
of Article XX(a), this means that a Member wishing to justify its measure must demonstrate: (i) 
that it has adopted or enforced the measure "to prot ect public morals", and (ii) that the measure is 
"necessary" to protect such public morals.456 
7.4.2.4.1  Adopted or enforced "to protect public morals" 
7.294.  For the purpose of determining whether a measure had been adopted or enforced to 
protect public morals, the panel in US – Gambling  examined whether the party that had invoked 
the defence had demonstrated that the measure was designed to "protect public morals".457 The 
Appellate Body did not question this approach.458 
7.295.  In order to assess whether a measure has been adopted or enforced "to protect public 
morals" or, in other words, whether it is designed to "protect public morals", it is first necessary to 
know the measure's objective. 
7.296.  As the Appellate Body has pointed out, in seeking to identify the objective of a measure, a 
panel may be faced with conflicting arguments by the parties as to the nature of the objective 
pursued. Although a panel should take into account the respondent's articulation of the objective it 
pursues through its measure, it is not bound by that characterization but must make an objective and independent assessment. To this end, the pa nel should take into account all the evidence 
available to it, including the texts of statutes, legislative history, and other evidence regarding the 
structure and operation of the measure.
459 The Appellate Body has also suggested that the 
objective of a measure could be discerned from its design, architecture and revealing structure, with consideration given to all the relevant facts and all the relevant circumstances of the case.
460 
7.297.  In addition, in assessing a measure in the light of Article XX(a) of the GATT 1994, it is not 
enough to identify the objective of the measure, since not every policy objective is related to the protection of public morals. Thus, it is also necessary to assess whether the policy objective 
pursued by the measure is included among the se ries of policies designed to protect public 
morals.
461 For this it is necessary to explore the meaning of "public morals". 
                                               
455 Appellate Body Reports, EC – Seal Products , para. 5.169 (referring to Appellate Body Report, 
US - Gambling , para. 292). 
456 Appellate Body Reports, EC – Seal Products , para. 5.169 (referring to Panel Report, US – Gambling , 
para. 6.455). 
457 Panel Report, US – Gambling , para. 6.455. The finding of the panel in US – Gambling was made in 
the context of a defence under Article XIV(a) of the General Agreement on Trade in Services, a provision 
equivalent to Article XX(a) of the GATT 1994. The expression "designed to 'protect public morals'" in the original English language text of the panel report was translated into Spanish as " destinada a 'proteger la 
moral '" and into French as " conçue pour 'la protection  de la moralité publique '". In the course of the 
proceedings, which were conducted in Spanish, parties used the expressions " diseñada para " and " destinada a " 
interchangeably. The original Spanish language text  of the present Panel report uses the expression 
"destinada a ". 
458 See Appellate Body Report, US – Gambling , paras. 294-295. See also Appellate Body Report, 
EC - Seal Products , para. 5.169. 
459 Appellate Body Report, EC – Seal Products , para. 5.144. See also Appellate Body Report, US - COOL , 
para. 371; US - Tuna II (Mexico) , para. 314. 
460 In Japan — Alcoholic Beverages II , the Appellate Body stated that: "Although it is true that the aim 
of a measure may not be easily asce rtained, neverthe less its protective application can most often be 
discerned from the design, the architecture, and the reveal ing structure of a measure ... Most often, there will 
be other factors to be considered as well. In conducting this inquiry, panels should give full consideration to all the relevant facts and all the relevant circumstan ces in any given case." Appellate Body Report, 
Japan - Alcoholic Beverages II , p. 29. 
461 Panel Reports, EC – Seal Products , para. 7.631. See also Appellate Body Report, EC – Seal Products , 
para. 5.179. The expression "designed to protect public morals" in the original English language text of the 
panel reports was translat ed into Spanish as " destinadas a proteger la moral pública " and into French as 
"conçues pour protéger la moralité publique ". In the course of the proceedings, which were conducted in 
Spanish, parties used the expressions " diseñadas para " and " destinadas a " interchangeably. The original 
Spanish language text of the present Panel report uses the expression " destinadas a ". WT/DS461/R 
 
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  7.298.  The panel in US – Gambling  assessed whether the measures imposed by the United States 
to restrict gambling and betting services were necessary to protect public morals within the meaning of Article XIV(a) of the General Agreemen t on Trade in Services (GATS), a provision that 
contains language similar to that of Article XX(a) of the GATT 1994.
462 In the context of its 
analysis, the panel examined whether the measures were designed to "protect public morals" or to 
"maintain public order".463 
7.299.  In interpreting the concept of "public morals" for the first time, that panel pointed out that 
the expression "denotes standards of right and wr ong conduct maintained by or on behalf of a 
community or nation"464, and that its content for Members "can vary in time and space, depending 
upon a range of factors, including prevailing social, cultural, ethical and religious values".465 The 
panel also noted that Members, in applying similar societal concepts, have the right to determine 
the level of protection that they consider appropriate466 and added that Members should be given 
some scope to define and apply for themselves the concept of "public morals" in their respective territories, according to their own systems and scales of values.
467 
7.300.  The panel in China – Publications and Audiovisual Products , in interpreting Article XX(a) of 
the GATT 1994 for the first time, adopted the interp retation of "public morals" proposed by the 
panel in US – Gambling . The panel considered that Article XX(a) of the GATT 1994 and 
Article XIV(a) of the GATS use the same concept and saw no reason to depart from the 
interpretation proposed in US – Gambling .468 
7.301.  The panel in EC – Seal Products  also interpreted the term "public morals" within the 
meaning of Article XX (a) of the GATT 1994. Th e panel pointed out that the assessment of the 
scope of the expression suggests that "WTO Member s are afforded a certain degree of discretion in 
defining the scope of 'public morals' with respect to various values prevailing in their societies at a given time."
469 The panel added that: 
[T]he question of whether a measure aims to address public morals relating to a 
particular concern in the society of a regula ting Member requires ... an assessment of 
two issues: first, whether the concern in question indeed exists in that society; and, 
second, whether such concern falls within the scope of "public morals" as "defined and 
applied" by a regulating Member "in its territory, according to its own systems and scales of values".
470 
7.302.  However, the Appellate Body in EC – Seal Products  made it clear that it did not consider 
that the term "to protect", when used in relation to "public morals" under Article XX(a), required 
the panel to identify the existence of a risk to public moral concerns, and that it had difficulty in accepting that a panel is required to identify the exact content of the public morals standard at 
issue.
471 
7.303.  The US – Gambling  case, for example, concerned measures prohibiting gambling and 
betting services which addressed problems related to money laundering, organized crime, fraud, 
under-age gambling, and pathological gambling. The panel in that case concluded that measures 
prohibiting gambling and betting services could fall within the scope of Article XIV(a) of the GATS 
                                               
462 Article XX(a) of the GATT 1994 speaks of measures "necessary to protect public morals"; 
Article XIV(a) of the GATS speaks of measures "necessary to protect public morals or to maintain public order". 
In Spanish Article XX(a) of the GATT 1994 speaks of measures " necesarias para proteger la moral pública "; 
Article XIV(a) of the GATS speaks of measures " necesarias para proteger la moral o mantener el orden 
público ". In French, Article XX(a) of the GATT 1994 speaks of measures " nécessaires à la protection de la 
moralité publique "; Article XIV(a) of the GATS speaks of measures " nécessaires à la protection de la moralité 
publique ou au maintien de l'ordre public ". 
463 Panel Report, US – Gambling , paras. 6.455 and 6.457-6.474. 
464 Ibid. para. 6.465. 
465 Ibid. para. 6.461. 
466 Panel Report, US – Gambling , para. 6.461 (referring to Appellate Body Report, 
Korea - Various Measures on Beef , para. 176, and EC - Asbestos , para. 168). 
467 Panel Report, US – Gambling , para. 6.461. 
468 Panel Report, China – Publications and Audiovisual Products , para. 7.759. 
469 Panel Reports, EC – Seal Products , paras. 7.380–7.381. 
470 Ibid. para. 7.383. 
471 Appellate Body Reports, EC – Seal Products , paras. 5.198 and 5.199. WT/DS461/R 
 
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  if they were enforced in pursuance of policies, the object and purpose of which was to "protect 
public morals" or "to maintain public order".472 
7.4.2.4.2  Measures necessary  – The necessity analysis 
7.304.  The term "necessary" (referring to "measures necessary") is mentioned in paragraphs (a), 
(b) and (d) of Article XX of the GATT 1994 and in paragraphs (a), (b) and (c) of Article XIV of the 
GATS.473 The interpretation of this term in the context of any one of these paragraphs has been 
used for purposes of analysis under other paragraphs474, including those relevant to the present 
case. 
7.305.  The first time the Appellate Body interpreted the term " necessary " was in Korea – Various 
Measures on Beef , in the context of Article XX(d) of the GATT 1994. The Appellate Body noted 
that, in principle, the word "necessary" could refer to a range of degrees of necessity, being 
understood at one end as "measures indispensable " and at the other end as "measures making a 
contribution to ". The Appellate Body considered that, in the context of Article XX(d) of the 
GATT 1994, a necessary  measure is located significantly closer to the pole of indispensable  than to 
the pole of making a contribution to  and pointed out that a measure which is indispensable or of 
absolute necessity certainly fulfils that requirement.475 
7.306.  The Appellate Body added that the dete rmination of whether a measure which is not 
"indispensable" may nevertheless be "necessary" invo lves in every case a process of weighing and 
balancing a series of factors which prominently include: (i) the importance of the objective or the common interests or values protected; (ii) the contribution of the measure to the realization of the ends pursued; and (iii) the extent to which the measure restricts imports or exports.
476 
7.307.  The Appellate Body also considered that the weighing and balancing process for 
determining whether a measure is necessary encompassed the determination of whether a WTO-consistent alternative measure, which the Me mber concerned could "reasonably be expected 
to employ", was available, or whether a less WTO-inconsistent measure, which would make an 
equivalent contribution to the achievement of th e objective pursued, was "reasonably available".
477 
The comparison between the challenged measure and possible alternatives should take into 
account the importance of the interests at issue.478 
7.308.  On the basis of this process of "wei ghing and balancing" factors and comparing the 
challenged measure with possible alternatives, taking into account the interests or values at stake, a panel may determine whether the measure is "n ecessary" or, if not, whether other measures 
which are WTO-consistent, or less inconsistent than the challenged measure, are "reasonably 
available" to the responding Member.
479 
                                               
472 Panel Report, US – Gambling , para. 6.474. 
473 Appellate Body Report, Brazil – Retreaded Tyres , para. 141. 
474 For example, the Appellate Body in  China – Publications and Audiovisual Products  stated that: "In 
articulating the proper approach in Brazil – Retreaded Tyres , the Appellate Body referred to its report in 
US - Gambling without distinguishing that case or suggesti ng any intention to depart from the approach 
articulated in US – Gambling (or, for that matter, Korea – Various Measures on Beef )". Appellate Body Report,  
China – Publications and Audiovisual Products , fn 455. 
475 Appellate Body Report, Korea – Various Measures on Beef , para. 161. See also Appellate Body 
Report, US – Gambling , para. 310; Appellate Body Report, Brazil – Retreaded Tyres , para. 141; Appellate Body 
Reports, EC – Seal Products , fn 1300; and Panel Report,  China – Publications and Audiovisual Products , 
para. 7.782. 
476 Appellate Body Report, Korea – Various Measures on Beef , para. 164. See also Appellate Body 
Report, US – Gambling , paras. 305-306; Appellate Body Report,  Brazil – Retreaded Tyres , para. 143; 
Appellate Body Report, China – Publications and Audiovisual Products , paras. 241-242; Appellate Body Reports, 
EC - Seal Products , para. 5.214; Panel Report,  China – Publications and Audiovisual Products , para. 7.783. 
477 Appellate Body Report, Korea – Various Measures on Beef , para. 166. See also Appellate Body 
Reports, Brazil – Retreaded Tyres , para. 156; China – Publications and Audiovisual Products , paras. 241-242; 
EC – Seal Products , para. 5.214. 
478 Appellate Body Report, US – Gambling , para. 307. See also Appellate Body Report,  
Brazil - Retreaded Tyres , para. 156; Panel Report,  China – Publications and Audiovisual Products , para. 7.784. 
479 Appellate Body Reports, EC – Seal Products , para. 5.214 (referring to Appellate Body Reports, 
US - Gambling , para. 307; Korea – Various Measures on Beef , para. 166). WT/DS461/R 
 
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  7.309.  The Appellate Body has added that "[t]he weighing and balancing [of these factors] is a 
holistic operation that involves putting all the va riables of the equation together and evaluating 
them in relation to each other after having examined them individually, in order to reach an overall judgement."
480 
7.310.  In short, examining whether a measure is "necessary" is a process in which the following 
factors should be weighed and balanced holistically: 
a. The importance of the objective; 
b. The contribution of the measure to the ac hievement of the objective pursued; and 
c. The trade-restrictiveness of the measure. 
d. If the preliminary conclusion is that the measure is necessary, the result should be 
confirmed by comparing the challenged meas ure with possible, reasonably available, 
WTO-consistent or less inconsistent alternatives that could have less trade-restrictive 
effects while making an equivalent contribution to the achievement of the objective pursued. 
7.4.2.4.2.1  The importance of the objective 
7.311.  The first factor to be considered in exam ining the necessity of a measure is the importance 
of the objective in question, which should be investigated by taking into account the facts specific 
to each case. In Korea – Various Measures on Beef , the Appellate Body sugg ested that the more 
vital or important the interests or values it is wished to protect, the easier it is to accept a measure as "necessary".
481 
7.312.  For example, the panel in US – Gambling  considered that the interests and values 
protected by the measure at issue, which addressed problems related to money laundering, 
organized crime, fraud, under-age gambling, and pathological gambling, served very important societal interests which could be characterized as vital and important in the highest degree.
482 
7.4.2.4.2.2  The contribution of the measure to the achievement of the objective pursued 
7.313.  As a second factor in the examination of necessity, a panel must analyse the contribution 
of the measure to the achievement of the objective pursued. This should also involve taking into 
account the facts specific to each case and the importance of the interests or values at stake. 
7.314.  In Korea – Various Measures on Beef , the Appellate Body suggested that the greater the 
contribution of a measure to the realization of the ends pursued, the more easily the measure 
might be considered to be "necessary".483 
7.315.  In  Brazil – Retreaded Tyres , the Appellate Body explained that a measure contributes to 
the achievement of the objective when there is a genuine relationship of ends and means between 
the objective pursued and the measure at issue.484 In analysing the import ban in question, the 
Appellate Body explained that, to justify a ban, or a measure that produces trade-restrictive 
effects as serious as those that follow from a ban, a panel must be satisfied that it brings about a material  contribution to the achievement of its objective. A panel might conclude that a ban is 
necessary, "on the basis of a demonstration that the import ban at issue is apt to produce a 
                                               
480 Appellate Body Report,  Brazil – Retreaded Tyres , para. 182. The expression "is a holistic operation" 
in the original English language text of the Appell ate Body Report was transl ated into Spanish as " debe 
efectuarse en forma íntegra ". See also Appellate Body Report, EC – Seal Products , para. 5.214. 
481 Appellate Body Report, Korea – Various Measures on Beef,  para. 162. See also Appellate Body 
Report, EC – Asbestos , para. 172; Panel Report, US — Gambling , para. 6.477. 
482 Panel Report, US — Gambling , para. 6.492. See also Appellate Body Report, US — Gambling , 
para. 301. 
483 Appellate Body Report, Korea – Various Measures on Beef,  para. 163. See also Panel Report, 
US - Gambling , para. 6.477. 
484 Appellate Body Report, Brazil – Retreaded Tyres , para. 145. WT/DS461/R 
 
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  material contribution to the achievement of its objective."485 In its report in EC – Seal Products , 
the Appellate Body indicated that its approach in Brazil – Retreaded Tyres  did not set out a 
generally applicable standard requiring the use of  a pre-determined threshold of contribution in 
analysing the necessity of a measure.486 
7.316.  The Appellate Body in Brazil – Retreaded Tyres  also made it clear that the selection of a 
methodology to assess a measure's contribution was a function of the nature of the risk, the objective pursued, and the level of protection sought, and depended on the nature, quantity, and 
quality of evidence existing at the time.
487 As there is no requirement to quantify the contribution, 
the analysis can be done in either quantitative or qualitative terms.488 In other words, the 
contribution can be demonstrated by means of quantitative data pertaining to the past or the present, or by means of quantitative projections into the future, but also by means of qualitative 
reasoning based on a set of hypotheses tested and supported by sufficient evidence.
489 
7.317.  The Appellate Body also expressed the view th at panels, as triers of the facts, should enjoy 
a certain latitude in designing the appropriate methodology and deciding how to structure the 
analysis of the contribution, a latitude limited by the text of Article XX of the GATT 1994 and 
Article 11 of the DSU.490 
7.318.  The panel in US – Gambling  concluded, for example, that the measures at issue, given that 
they prohibited the remote supply of gambling and betting services, must contribute, "at least to 
some extent", to addressing the problems identified.491 
7.319.  The panel in EC – Seal Products  analysed the contribution of the ban on the import and 
placing on the market of seal products to the ob jective of reducing the global demand for these 
products and protecting the European Union public  from being exposed to them. The panel, having 
also considered the diminution in the degree of th e contribution caused by the exceptions to the 
ban, concluded that the seal regime, as a whole, contributed "to a certain extent" to its objective 
of addressing the European Union's public moral concerns on seal welfare.492 
7.4.2.4.2.3  The trade-restrictiveness of the measure 7.320.  As the third factor in examining necessi ty, a panel must assess the degree to which the 
measure restricts international trade. This should involve taking into account the facts specific to 
each case and the importance of the interests or values at stake. 
7.321.  In Korea – Various Measures on Beef, the Appellate Body suggested that a measure with a 
relatively slight impact on the trade in imported products might more easily be considered as 
"necessary" than a measure with broader restrictive effects.
493 
7.322.  In  China – Publications and Audiovisual Products , the Appellate Body added that "if a 
Member chooses to adopt a very restrictive measure, it will have to ensure that the measure is 
carefully designed so that the other elements to be taken into account in weighing and balancing 
the factors relevant to an assessment of the 'necessity' of the measure will 'outweigh' such restrictive effect".
494 
                                               
485 Ibid. para. 151. The expression "apt to produce a material contribution" in the original English 
language text of the Appellate Body re port was translated into Spanish as " adecuada para hacer una 
contribución importante ". 
486 Appellate Body Reports,  EC – Seal Products , para. 5.213. 
487 Appellate Body Report, Brazil – Retreaded Tyres , para. 145. 
488 Ibid. para. 146. 
489 Ibid. para. 151. 
490 Ibid. para. 145. 
491 Panel Report, US – Gambling , para. 6.494. 
492 Panel Reports, EC – Seal Products , para. 7.638. 
493 Appellate Body Report, Korea – Various Measures on Beef,  para. 163. See also Appellate Body 
Report, Brazil – Retreaded Tyres , para. 150; Appellate Body Report,  China – Publications and Audiovisual 
Products , para. 310; Panel Report, US – Gambling , para. 6.477. 
494 Appellate Body Report,  China – Publications and Audiovisual Products , para. 310. WT/DS461/R 
 
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  7.323.  The Appellate Body indicated that, while in principle a panel must assess the restrictive 
effect of a measure on international commerce, this test must be applied in the light of the specific obligations that the measure infringes and the defence being invoked.
495 
7.324.  The panel in US – Gambling , for example, considered that the United States' laws 
restricting online gambling and betting services  had "a significant restrictive trade impact".496 
7.4.2.4.2.4  Comparison of the me asure with possible alternatives 
7.325.  If a panel arrives at a preliminary conclusion that the measure is necessary, this result 
must be confirmed by comparing the measure with its possible alternatives.497 
7.326.  It rests upon the complaining Member to identify possible alternatives that the responding 
Member could have taken.498 If the complainant succeeds in identifying an alternative measure 
which, in its view, the respondent could have taken and which provides an equivalent contribution 
to the achievement of the objective pursued, the respondent will be required to demonstrate why 
its challenged measure nevertheless remains necessary  or, in other words, why the proposed 
alternative is not, in fact, "reasonably available". If the complainant fails to identify an appropriate 
alternative measure or if the respondent demonstrates that the alternative is not "reasonably 
available", in the light of the interests or values being pursued and the desired level of protection, the panel will be able to confirm its preliminary conclusion that the measure is necessary .
499 
7.327.  The Appellate Body has accepted as a fundamental principle that Members of the WTO 
have the right to determine the level of protection that they consider appropriate in each particular 
situation500, so that an alternative measure must be a measure that would preserve for the 
responding Member its right to achieve its desired level of protection with respect to the objective 
pursued.501 
7.328.  The Appellate Body has also stated that "[a]n alternative measure may be found not to be 
'reasonably available' [to the responding Member], however, where it is merely theoretical in 
nature, for instance, where the responding Member is not capable of taking it, or where the 
measure imposes an undue burden on that Memb er, such as prohibitive costs or substantial 
technical difficulties."502 
7.329.  In EC – Asbestos, the Appellate Body, in analysing the ban on asbestos and 
asbestos-containing products in France, considered that, in determining whether a suggested alternative measure is "reasonably available", several factors must be taken into account, besides the difficulty of implementation. The Appellate Body  referred to the following factors: (i) that the 
measure proposed should be WTO-consistent or less inconsistent than the measure challenged; (ii) 
the extent to which the alternative measure contributes to the realization of the end pursued; and (iii) that the measure proposed should be less trade-restrictive than the measure challenged.
503 
7.4.2.5  The question of whether the compound  tariff is a measure necessary to protect 
public morals 
7.4.2.5.1  Introduction to the analysis  under Article XX(a) of the GATT 1994 
7.330.  The Panel will analyse whether Colombia has succeeded in demonstrating that the 
compound tariff is a measure necessary to protect public morals within the meaning of Article XX(a) of the GATT 1994. The Panel will structure its analysis by assessing whether Colombia has shown, first, that the compound tari ff has been adopted or enforced, or is designed, 
                                               
495 Ibid. para. 306. 
496 Panel Report, US – Gambling , para. 6.495. 
497 Appellate Body Report, Brazil – Retreaded Tyres , para. 156. 
498 Appellate Body Report, US – Gambling , para. 309; Brazil – Retreaded Tyres , para. 156. 
499 Appellate Body Report, US – Gambling , para. 311. 
500 Appellate Body Reports, Korea – Various Measures on Beef, para. 176; Brazil – Retreaded Tyres , 
para. 210; EC – Asbestos , para. 168. 
501 Appellate Body Report, US – Gambling , para. 308. 
502 Ibid. 
503 Appellate Body Report, EC – Asbestos , paras. 170-172. WT/DS461/R 
 
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  to protect public morals; and, secondly, whether the compound tariff is necessary to protect public 
morals.504 
7.4.2.5.2  As to whether the compound tari ff is a measure "designed to protect public 
morals" 
7.331.  To assess whether the compound tariff has been adopted or enforced, or is designed, to 
protect public morals, the Panel will consider whether Colombia has shown, first, that its declared policy objective, i.e. to combat money laundering
505, is one of the policies designed to protect 
public morals in Colombia; and, secondly, whether the compound tariff is itself designed to combat 
money laundering. 
7.4.2.5.2.1  Has Colombia shown that the fi ght against money laundering is one of the 
policies designed to protect public morals in Colombia? 
7.332.  Colombia asserts that money laundering is criminal conduct in Colombia. Therefore, 
according to Colombia, the compound tariff is related to the "standards of right and wrong conduct" as defined by Colombian society. Colombia adds that money laundering is conduct 
censured at the international level, so that the Decree also reflects the "standards of right and 
wrong conduct" of the international community. Colombia asserts that, accordingly, the compound tariff protects public morals.
506 
7.333.  Panama, for its part, does not question that problems related to money laundering fall 
within the scope of public morals. Panama adds that, in any event, it would be for Colombia to show that the fight against money laundering is one of the policies designed to protect public morals in Colombia.
507 
7.334.  As recognized in previous cases, the term "public morals" denotes standards of right and 
wrong conduct maintained by or on behalf of a community or nation, and its content may vary in time and space, depending on the prevailing factors.
508 Members have the right to determine the 
level of protection that they consider appropriate and some scope to define and apply for 
themselves the concept of "public morals" in their respective territories, according to their own systems and scales of values.
509 
7.335.  Colombia has shown that money laundering is criminal conduct in Colombia, defined as an 
offence under Article 323 of its Criminal Code.510 Colombia has submitted documents which show 
that combating money laundering is an important policy objective for the Colombian State. These documents include: (i) the National Development Plan 2010-2014 which, in a section on the fight 
against illicit drug trafficking and illegality, refers to the control of money laundering
511; (ii) the 
National Anti-Drug Policy, which includes a reference to an anti-money laundering policy512; 
(iii) the National Policy against Money Laundering and the Financing of Terrorism513; and 
(iv) Draft Law No. 94 of 2013, currently at the discussion stage, which would lead to the adoption 
of instruments to prevent, control and punish smuggling, money laundering and tax evasion.514 
                                               
504 Appellate Body Reports, EC – Seal Products , para. 5.169. 
505 Colombia's first written submission, paras. 38, 66, 80-81, 88, 93, 97, 100 and 113; second written 
submission, paras. 1, 6, 38, 53, 56-59, 104; and open ing statement at the first meeting of the Panel, 
paras. 11 and 65. 
506 Colombia's first written submission, paras. 80-83;  second written submission, paras. 41-47; and 
opening statement at the first meeting of the Panel, para. 65. 
507 Panama's second written submission, para. 3. 18; and response to Panel question No. 7. 
508 Panel Report, US – Gambling , paras. 6.461 and 6.465. 
509 Ibid. para. 6.461. 
510 Colombia's second written submission, para. 41; National Customs and Excise Directorate, 
Information and Financial Analysis Unit, Money Laundering Typologies Related to Smuggling , January 2006 
(Exhibit COL-10), p. 8. 
511 National Planning Department, National Development Plan (2010-2014)  (extracts) (Exhibit COL-33). 
512 Ministry of the Interior and Justice, National Anti-Drug Policy (Exhibit COL-6). 
513 National Council for Economic and Social Policy, National Policy against Money Laundering and the 
Financing of Terrorism , 18 December 2013 (Exhibit COL-19). 
514 Draft Law, adopting instruments to prevent, co ntrol and punish unfair competition deriving from 
illegal foreign trade, internal trade, money laundering an d tax evasion operations (Exh ibit COL-20); Report for 
the first discussion of Draft Law No. 94 of 2013 (Exhibit COL-21). WT/DS461/R 
 
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  Colombia has also referred to other actions, such as the decision to establish a National 
Anti-Money Laundering Day.515 
7.336.  Colombia has presented information on th e consequences of illicit drug trafficking and 
armed conflict for Colombian society.516 Several of the documents submitted by Colombia refer to 
the relationship between money laundering and drug trafficking in Colombia517, as well as to the 
relationship between those two activities and the financing of Colombia's internal armed conflict.518 
7.337.  In addition, Colombia has identified international instruments, to which Colombia is party, 
relating to the fight against money laundering and the financing of terrorism, including the 
United Nations Convention against Transnational Organized Crime519 and the International 
Convention for the Suppression of the Financing of Terrorism.520 Colombia has also referred to the 
International Standards on Combating Money Laundering and the Financing of Terrorism & 
Proliferation, drawn up by the Financial Action Task Force521, as well as to Colombia's participation 
in the Latin American Financial Action Task Force (GAFILAT), previously known as the South American Financial Action Task Force (GAFISUD), an intergovernmental organization set up 
to combat money laundering and the financing of terrorism.
522 
7.338.  In the opinion of this Panel, in the ci rcumstances of this case, Colombia has presented 
sufficient evidence to demonstrate the existenc e of a real and present concern in Colombian 
society and the Colombian State with regard to mo ney laundering, as well as with regard to the 
way in which money laundering is linked with drug trafficking and other criminal activities and with Colombia's internal armed conflict. Consequently, the Panel concludes, as a matter of fact, that combating money laundering is one of the policies designed to protect public morals in Colombia. 
This conclusion recognizes the freedom of WTO Members to define their own concept of public 
morals, in the light of factors such as the social, cultural, ethical and religious values prevailing in a society at a given moment in time. In addition, this conclusion is consistent with the analysis 
made by other panels which have recognized that measures that address concerns related to 
money laundering can be characterized as measures designed to protect public morals.
523 
7.339.  The Panel therefore concludes that Colombia has demonstrated that combating money 
laundering is one of the policies designed to protect public morals in Colombia. 
7.4.2.5.2.2  Has Colombia shown that the co mpound tariff is designed to combat money 
laundering? 
7.340.  Throughout this dispute, Colombia has ma intained that the compound tariff is a measure 
designed to combat money laundering.524 Colombia asserts that this objective is obvious from the 
                                               
515 Colombia's response to Panel question No. 7. 
516 National Historical Memory Centre, Enough Already! , General Report, Historic al Memory Group, 2013 
(Exhibit COL-1), p. 20; News item: Semana , "Colombian conflict claims six million victims", 2 February 2008 
(Exhibit COL-2); News item: El Tiempo , "The war against drug trafficking", 24 November 2013 (Exhibit COL-3). 
517 Rocha García, New dimensions of drug trafficking in Colombia , 2011 (Exhibit COL-4), pp. 89-105 
and 199-206; Ministry of Justice and Law, Drugs Observatory, The Drug Problem in Colombia  (Exhibit COL-27), 
pp. 142-155. 
518 National Historical Memory Centre, Enough Already! , General Report, Historic al Memory Group, 2013 
(Exhibit COL-1), p. 20; National Planning Department, National Development Plan 2010-2014) (extracts) (Exhibit COL-33). 
519 United Nations Convention against Transnatio nal Organized Crime and the Protocols thereto , 
December 2000 (Exhibit COL-24); List of signatory co untries to the United Na tions Convention against 
Transnational Organized Crime (Exhibit COL-31). See al so Colombia's first written submission, para. 45; 
response to Panel questions Nos. 94 and 129. 
520 International Convention for the Suppr ession of the Financing of Terrorism , December 1999 
(Exhibit COL-25). Colombia's first written submission, para. 47; response to Panel question No. 129. 
521 GAFISUD, International Standards on Combating Money Laundering and the Financing of Terrorism 
& Proliferation , February 2012 (Exhibit COL-26). 
522 Colombia's first written submission, para. 48. 
523 Panel Report, US – Gambling , para. 6.492. See also Appellate Body Report, US – Gambling , 
para. 301. 
524 Colombia's first written submission, paras. 38, 66, 80-81, 88, 93, 97, 100 and 113; second written 
submission, paras. 1, 2, 6, 38, 53, 56-59, 104; opening statement at the first meeting of the Panel, paras. 11 and 65; opening statement at the second meeting of the Panel, para. 47. WT/DS461/R 
 
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  design and structure of its measure, since the co mpound tariff discourages imports at artificially 
low prices that are used for money laundering.525 
7.341.  For its part, Panama maintains that the compound tariff is not designed to protect public 
morals against money laundering. According to Panama, nothing in the design, structure or 
architecture of Decree No. 456 suggests that the measure is designed to combat money 
laundering operations.526 In Panama's opinion, the objective of combating money laundering has 
been introduced into this dispute by Colombia  ex post facto .527 
7.342.  In response to a question from the Panel, Colombia added that the compound tariff also 
seeks to reduce the operational capacity of  the drug traffickers and criminal groups528, and is 
intended to combat tax evasion and unfair competition, on the understanding that money laundering is part of a single chain of illicit acts that includes the importation of goods.
529 Be that 
as it may, Colombia has based its arguments on the compound tariff's purported objective of 
combating money laundering, so that the Panel lacks the elements necessary to analyse the measure in relation to additional objectives, such as combating tax evasion and unfair competition. 
The Panel will therefore focus on the objective that Colombia has identified, namely, combating 
money laundering. 
7.343.  The parties disagree with respect to the objective of the compound tariff. Nevertheless, 
this Panel will make an objective assessment as to whether the compound tariff is, in fact, 
designed to combat money laundering. To this end, the Panel will consider the design, architecture and revealing structure of the compound tariff, taking into account all the relevant facts and relevant circumstances of the case, beginning with the analysis of the text of the measure itself, 
and assessing all the evidence available.
530 
7.4.2.5.2.3  Analysis of the text of Decree No. 456 7.344.  This Panel begins its assessment by analysing the text of Decree No. 456, the legal 
instrument that regulates the measure at issue. Without intending to repeat its description of the 
measure, this Panel observes that Decree No. 456 establishes an ad valorem  tariff of 10% plus a 
specific tariff of US$5/kg on imports of textiles  and apparel, when the declared f.o.b. price is 
US$10/kg or less, and an ad valorem  tariff of 10% plus a specific tariff of US$3/kg on imports of 
textiles and apparel, when the declared f.o.b. price is greater than US$10/kg.
531 Decree No. 456 
establishes an ad valorem  tariff of 10% plus a specific tariff of US$5/pair on imports of footwear 
whose declared f.o.b. price is US$7/pair or less, and an ad valorem  tariff of 10% plus a specific 
tariff of US$1.75/pair on imports of footwear whose declared f.o.b. price is greater than 
US$7/pair.532 If an import declaration includes products of the same subheading, some priced 
above and others below these thresholds, the tariff applicable to all the products in that 
declaration will be that which is highest.533 
7.345.   Decree No. 456 excludes from the application of the compound tariff: products of 
heading 64.06 (parts of footwear)534; imports originating in countries with which Colombia has 
trade agreements in force, if the relevant subheadings have been negotiated535; and imports of 
clothing industry waste and/or scrap resulting from production processes carried out under Special Import-Export Systems (SIEX), known as the "Plan Vallejo".
536 Nor is the compound tariff applied 
to goods entering certain regions which Colombia has designated as Special Customs Regime 
Zones or to goods entering Colombia under the "Plan Vallejo". 
                                               
525 Colombia's second written submission, para. 55. 
526 Panama's opening statement at the first meeting of the Panel, paras.  1.20-1.21; closing statement at 
the first meeting of the Panel, para. 1.8. 
527 Panama's second written submission, para. 3.19;  response to Panel questions Nos. 17 and 39. 
528 Colombia's response to Panel question No. 37. 
529 Colombia's second written submission, para. 2; and response to Panel questions Nos. 37 and 43. 
530 See Appellate Body Reports, EC – Seal Products , para. 5.144, US - COOL , para. 371; 
US - Tuna II (Mexico) , para. 314, Japan — Alcoholic Beverages II , p. 29. 
531 Decree No. 456 (Exhibits PAN-3 and COL-17), Article 1. 
532 Ibid. Article 2. 
533 Ibid. paragraph of Article 1 and paragraph 1 of Article 2. 
534 Ibid. second paragraph of Article 1. 
535 Ibid. paragraph of Article 5. 
536 Ibid. paragraph of Article 5. WT/DS461/R 
 
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  7.346.  Decree No. 456 stipulates that the measure will remain in force for a period of two years, 
after which the customs tariff envisaged in De cree No. 4927 of 2011 and its amendments will be 
re-established.537 
7.347.  Neither Decree No. 456 nor the previous Decree No. 074538 contains any statement of 
reasons or recitals indicating that the objective of the compound tariff is to combat money 
laundering. Neither of these decrees refers elsewhere in its text to the objective of combating money laundering or to its being applicable to imports used for money laundering. 
7.348.  Nor do the legal underpinnings cited in Decrees Nos. 074 and 456 (Article 189, 
paragraph 25 of the Political Constitution and Laws Nos. 7 of 1991 and 1609 of 2013) make it 
possible to confirm whether the compound tariff is designed to combat money laundering. As already mentioned, Article 189 of Colombia's Polit ical Constitution lists the functions of the 
President of the Republic and paragraph 25 specific ally refers, among other things, to the authority 
of the President to "modify duties, tariffs and ot her provisions concerning the customs regime; to 
regulate foreign trade; and to intervene in financial, stock market, and insurance activities and any 
other activity related to the management, utilizati on and investment of resources derived from the 
savings of third parties in accordance with the law". For its part, Law No. 7 of 1991 is Colombia's framework law for foreig n trade, establishing, inter alia , general standards to be observed by the 
Government in regulating the country's foreign trade, creating the Ministry of Foreign Trade and 
the Foreign Trade Bank, and determining the composition and functions of the Higher Council for Foreign Trade. Finally, Law No. 1609 of 2013 is Colombia's framework customs law, establishing general standards to be observed by the Gove rnment in modifying duties, tariffs and other 
provisions concerning the customs regime. 
7.349.  Neither Article 189, paragraph 25, of the Political Constitution nor Law No. 7 of 1991 
contains any reference to the functions of the President of the Republic in the area of combating 
money laundering or, more generally, combating criminal activities or maintaining public order.
539 
Both Article 189, paragraph 25, of the Political Constitution and Laws Nos. 7 of 1991 and 1609 of 2013 refer rather to the powers of the Presiden t of the Republic to regulate foreign trade and 
modify tariffs, fees and other provis ions concerning the customs regime. 
7.350.  In the case of Law No. 1609 of 2013, paragraph 2 of Article 4 and Article 6 refer to money 
laundering in relation to risk management in the customs service. Article 6 also states that "[p]ublic officials and customs users shall seek  to guard against, prevent and frontally and 
decisively attack corruption, smuggling and money laundering, as well as any conduct that runs 
counter to the faithful and correct performance of customs functions".
540 H o w e v e r ,  f r o m  t h e  
reference to money laundering in these provisions it is not possible to establish a link between 
Decree No. 456 and the compound tariff's purported aim of combating money laundering. 
7.4.2.5.2.4  Other aspects re lating to the design, architecture and structure of the 
compound tariff 
7.351.  In addition to the fact that the texts of Decrees Nos. 074 and 456 make no express 
reference to the objective of combating money laundering, the design, architecture and revealing structure of the compound tariff do not support Colombia's claim that the measure is designed for t h a t  p u r p o s e .  W h a t  f o l l o w s  f r o m  t h e  t e x t  o f  D e c r e e  N o .  4 5 6  i s  t h a t ,  b y  v i r t u e  o f  i t s  d e s i g n ,  
architecture and structure, the measure imposes a heavier tax on imports at prices below certain 
specified thresholds. In other words, the measure is  designed to impose a higher levy on imports 
of relevant products entering at low prices, without distinguishing and determining whether those 
low prices include actual cases of undervaluation, or whether such undervaluation is in any way 
connected with money laundering. 
                                               
537 Ibid. Articles 3, 5, 6 and 7. See also Colombia's response to Panel questions Nos. 76 and 78. 
538 Decree No. 074 (Exhibits PAN-2 and COL-16). 
539 By contrast, the functions described in other paragraphs of Article 189 of the Political Constitution, 
not mentioned as being part of the legal basis of Decrees Nos. 074 and 456, relate to aspects such as: preserving and restoring public order (para. 4); ensuring that laws are strictly enfo rced (para. 10); and issuing 
decrees necessary for laws to  be fully implemented (para.  11). Political Constitution of Colombia, Preamble and 
Articles 188 and 189 (Exhibit PAN-29). 
540 Colombia's response to Panel question No. 81. Law No. 1609 of 2013 (Exhibits PAN-31 and COL-45). WT/DS461/R 
 
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  7.352.  The Panel understands that Colombia's argument is that import prices that are below the 
thresholds established in Decree No. 456 are "artificially low" and do not reflect market conditions, so that any importation taking place at declared prices below the thresholds would be being undervalued for money laundering purposes.
541 In Colombia's own words, "imports at prices lower 
than those established in the thresholds of Decree No. 456 are imports effected at artificially low 
prices which are used for money laundering".542 In some parts of its statements, however, 
Colombia has used different language and ha s referred to the "high risk" of imports at 
below-threshold prices being used for money laundering.543 The Panel put several questions to 
Colombia with a view to confirming that its argument was that any importation taking place at declared prices below the thresholds would be being undervalued for money laundering purposes.
544 In its responses to these questions, Colombia did not indicate that its argument was 
any different. 
7.353.  Colombia's argument makes a series of interconnected assumptions that require 
verification, namely: (i) that the thresholds established in Decree No. 456 reflect "market 
conditions" and any price below them is "artificially low"; (ii) that products imported at prices 
below the thresholds established in Decree No. 456 are being undervalued; and (iii) that imports of goods subject to the compound tariff at prices below the thresholds established in 
Decree No. 456 are being used for money laundering purposes. 
7.4.2.5.2.5  Is there evidence that the thre sholds established in Decree No. 456 reflect 
"market conditions" and that any pric e below them is "artificially low"? 
7.354.  With respect to the first point (that is, whether there is evidence that the thresholds 
established in Decree No. 456 reflect "market conditions" and that any price below them is 
"artificially low"), Colombia has indicated that the studies and calculations it used as a basis for determining the thresholds "consist of [calculati on] sheets and internal working documents. Being 
internal working documents, they are confidential."
545 However, Colombia has offered a general 
explanation of the methodology used for determining these price thresholds. According to Colombia, the thresholds are based on domestic and international market prices. In order to 
establish these prices, Colombia determined critical points ( puntos de quiebre ) or benchmarks 
(puntos de referencia ), including: (i) the average import prices of the relevant products; (ii) the 
average production prices of the raw materials used in making the products, as compared with production costs in Colombia; (iii) the unit import prices for representative importers in Colombia; 
and (iv) in the case of footwear, the average th ird-country import prices and the average import 
price for representative importers in Colombia.
546 Colombia asserts that, in all cases, the 
thresholds are lower than the critical points or benchmarks obtained from the calculations547, as 
well as that, in the case of apparel, the threshol d is "significantly less … than the average cost of 
production … and is very close to the average import price", which would prevent the domestic 
industry from being protected.548 
7.355.  It is therefore impossible for this Panel, on  the basis of the information available, to verify 
that, as Colombia asserts, the thresholds established in Decree No. 456 reflect the prices of transactions under normal market conditions for the products in question. In any event, neither has Colombia explained how the calculation of single price thresholds established on a fixed basis 
for each of the two broad categories of products covered by this dispute can be useful, without an 
examination of the specific characteristics of the particular transaction concerned, for determining market prices and the levels below which import prices must be considered "artificially low". At the 
                                               
541 Colombia's first written submission, paras.  29-36; second written submission, para. 36. 
542 Colombia's response to Panel questions Nos. 1 and 6, paras. 4 and 14. See also first written 
submission, para. 96; second written submission, para s. 29 and 36; response to Panel questions Nos. 28 
and 104. 
543 See, for example, Colombia's first writte n submission, paras. 35, 60, 66, 73 and 93. 
544 See, for example, Panel questions Nos. 5, 6, 27, 32, 33, 40, 46, 88, 100, 104, 108, 109, 110, 111. 
545 Colombia's response to Panel question No. 25. 
546 See Colombia's second written submission, paras. 31-35; opening statement at the first meeting of 
the Panel, paras. 37-44; opening statement at the second  meeting of the Panel, pa ra. 40; response to Panel 
question No. 29. 
547 Colombia's second written submission, para. 31; opening statement at the second meeting of the 
Panel, para. 40. 
548 See Colombia's opening statement at the first me eting of the Panel, para . 44; response to Panel 
question No. 29, paras. 69-70. WT/DS461/R 
 
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  same time, the Panel takes note of Colombia's argument that Decree No. 456 covers around 
300 tariff lines (at ten-digit level), so that the use of different thresholds would make them much harder to administer and would create incentives  for criminal groups to declare the subheadings 
corresponding to the goods incorrectly.
549 
7.356.  In fact, the Panel notes that the compo und tariff operates on the basis of two price 
thresholds, a first threshold for textile products and apparel (more precisely, for the products of Chapters 61, 62 and 63 and the tariff line 6406.10.00.00) and a second threshold for footwear 
(more precisely, for the products of Chapter 64, with the exception of tariff heading 64.06). 
7.357.  In particular, it is not clear how the meth odology used by Colombia takes into account the 
possible differences that could exist between the im port prices of the different products imported, 
within each of the broad categories covered by these thresholds, in terms of factors such as: 
production costs; component materials; quality levels; trademarks; seasonality, consumer tastes 
and preferences; and the actual natu re of the products in question.
550 Nor has Colombia explained 
how these individual thresholds would take into account the possible differences in import prices 
that might arise, including with respect to imports of identical products, depending on the 
circumstances of the import operations, including the conditions of sale and quantities. 
7.358.  Furthermore, it is evident from the information provided by Colombia it follows that, at 
least as far as footwear is concerned, the price threshold established in Decree No. 456 
(US$7/pair) is higher than the cost of producin g the footwear in Colombia (US$6.2/pair) and the 
import price of one of Colombia's two main footwear importers (US$6.9/pair).551 In this 
connection, Colombia has stated that the costs of production in Colombia do not include additional 
costs (such as transport, marketing and profit) an d that the importer in question imported at 
prices higher than US$7/pair, while other importers had even higher import prices.552 
Nevertheless, the prices used by Colombia for calculating its benchmarks are average prices. For 
this reason, it may be assumed that, in practice, the average cost of produc tion of US$6.2/pair for 
footwear in Colombia means that for some footwear products and for some producers in Colombia the price may be lower or higher. Moreover, Colombia's argument relates to the costs of producing 
footwear in Colombia and does not rule out the possibility of the production costs in other 
countries being significantly lower. Similarly, the import price of US$6.9/pair corresponds to one of the two main footwear importers which, according to Colombia, were considered representative for the determination of the price threshold in De cree No. 456. Where average import prices are 
concerned, Colombia's argument that the importer in question imported at prices higher than 
US$7/pair necessarily means that it also imported at prices lower than the price threshold in Decree No. 456. In any event, the foregoing contradicts Colombia's statement to the effect that, in 
all cases, the thresholds established in Decree No. 456 are lower than the critical points or 
benchmarks obtained from the calculations.
553 
7.359.  In short, it cannot be ruled out that the importation of goods at prices below the 
thresholds established in Decree No. 456 could, in practice, reflect "artificially low" prices that do 
not reflect market conditions. However, nothing in Colombia's arguments or the available evidence serves to show that the thresholds laid down in Decree No. 456 could be decisive in establishing that the  importation of goods at prices below those thresholds is necessarily  taking place at 
"artificially low" prices that do not reflect real prices or market conditions. 
7.360.  In addition, Colombia has stated that, in the case of imports of apparel and footwear made 
in China, import prices have been found to be lower when the products pass through Panama than 
when the same products are exported directly from China to Colombia. In Colombia's opinion, this 
shows that these imports from Panama are being undervalued and are entering Colombia at "artificially low" prices.
554 Colombia initially explained that its calculations were made by 
                                               
549 Colombia's response to Panel question No. 112. 
550 See Colombia's response to Panel question No. 27. 
551 Colombia's opening statement at the first meeting of  the Panel, para. 43; resp onse to Panel question 
No. 29, para. 71. 
552 Colombia's response to Panel questions Nos. 114 and 115. 
553 Colombia's second written submission, para. 31; opening statement at the second meeting of the 
Panel, para. 40. 
554 Colombia's second written submission, para. 74; opening statement at the first meeting of the Panel, 
paras. 21-25; opening statement at the first meeting of  the Panel, para. 67; response to Panel questions WT/DS461/R 
 
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  determining "the percentage of tariff subheadings which, while originating in China, are cheaper to 
purchase in Panama than to purchase directly from China".555 These calculations were said to be 
based on the prices of imports of goods of Chap ters 61, 62, 63 and 64 subject to the compound 
tariff "per ten-digit tariff subheading".556 Later, Colombia stated that its determination was also 
based on: (i) comparing the prices of exports from  China to Colombia with the prices of exports 
from China to three other countries (Chile, the Un ited States and Panama) and then comparing the 
result with the prices of exports from China to Colombia via Panama; and (ii) comparing export 
prices from China to Panama with re-e xport prices from Panama to Colombia.557 Panama maintains 
that Colombia's remarks are a mere assertion and that, apart from the charts contained in Exhibit COL-30, Colombia has failed to produce the data on which its calculations were based.
558 
7.361.  In fact, Colombia has not submitted the indi vidual data on which it based its observations, 
but only charts that summarize the prices detected. In any event, judging from the information 
supplied by Colombia, the price comparisons do not reflect the tracking of a single consignment or relate to the same goods. Moreover, in the Panel's opinion, comparing import or export prices for 
categories of products classified at ten-digit level does not ensure that the goods imported are 
comparable. Nor is it clear how such a comparison, even if the products concerned were the same or identical, would take into account any possibl e price differences resulting from the specific 
characteristics of the transaction in question, including factors such as differences in the conditions 
and terms of sale or in quantities. 
7.4.2.5.2.6  Is there evidence that the produc ts imported at prices below the thresholds 
established in Decree No. 456 are being undervalued? 
7.362.  With respect to the second point (that is, whether there is any evidence that the products 
imported at prices below the thresholds established in Decree No. 456 are being undervalued), Colombia has stated that "it uses the term 'underinvoicing' to refer in shorthand form to imports at 
artificially low prices that do not correspond to real or market prices. Imports at artificially low 
prices commonly use fictitious invoices that do not reflect the price paid for the goods".
559 
7.363.  The notion of underinvoicing or undervaluat ion pertains to a situation in which the price 
declared on the invoice for a particular transaction is lower than the price actually paid or payable. 
As indicated above, there is no evidence that the importation of goods at prices below the thresholds contained in Decree No. 456 is necessarily  taking place at "artificially low" prices that 
do not reflect real or market prices or the price actually paid or payable in the transaction in 
question. Furthermore, considering the wide rang e of products subject to the compound tariff, 
neither does the importation of goods at prices above  the thresholds contained in Decree No. 456 
necessarily  mean that the prices reflect real or market prices or that the goods are not being 
undervalued. 
7.364.  The studies contributed by the parties are not conclusive with respect to whether the 
undervaluation occurs exclusively or even preponderantly in connection with imports of products 
with "low" prices. A study carried out jointly by DIAN and Colombia's Information and Financial 
Analysis Unit concerning smuggling-related money laundering operations states that "the incidence 
of smuggling [associated with money laundering operations] is greater in the case of articles in high demand and without minimum descriptions that enable them to be distinguished, since these 
characteristics facilitate rapid marketing".
560 However, a study by the Financial Action Task Force 
(FATF) suggests that the more complex and the more highly priced the goods being traded, the 
more difficult it could be for the customs authorities to identify overvaluation or undervaluation 
                                                                                                                                               
Nos. 104 and 105, paras. 58 and 60-64. See also the charts submitted by Colombia with its opening statement 
at the first meeting of the Panel (Exhibit COL-30). 
555 Colombia's second written submission, para. 74;  response to Panel question No. 77, para. 3. 
See also response to Panel question No. 106; comments  on Panama's response to Panel question No. 162. 
556 Colombia's response to Panel question No. 105, para. 61. 
557 Ibid. paras. 60-64. 
558 Panama's comments on Colombia's response to Panel question No. 105. 
559 Colombia's response to Panel question No. 41. 
560 National Customs and Excise Directorate, Information and Financial Analysis Unit, Money Laundering 
Typologies Related to Smuggling , January 2006 (Exhibit COL-10), pp. 9-10. WT/DS461/R 
 
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  and correctly assess the duties or taxes payable.561 In the opinion of the Panel, undervaluation in 
relation to imports of products of greater complexity and value could not only be more difficult to identify but would also have the additional ince ntive of making it possible to launder a larger 
amount of money per unit of merchandise. 
7.365.  In any event, insofar as the thresholds established in Decree No. 456 were determined on 
a fixed basis for broad categories of products and without examining the specific characteristics of the transaction concerned, there is no indication  that products imported at prices below the 
thresholds established in Decree No. 456 are necessarily being undervalued. 
7.4.2.5.2.7  Is there evidence that goods imported at prices below the thresholds 
established in Decree No. 456 are being used for money laundering purposes? 
7.366.  With respect to the third point (that is, whether there is any evidence that the 
undervaluation of goods subject to the compound tariff on importation into Colombia is being used 
for money laundering purposes), the information available suggests that the undervaluation of imports is, in fact, one of the methods used for money laundering detected by the Colombian 
authorities. 
7.367.  As defined by the World Customs Organization, trade-based money laundering is the 
process of legitimizing the proceeds of crime by disguising them in the form of a payment for an 
international trade transaction.
562 An FATF study defines trade-based money laundering as the 
process of disguising the proceeds of crime and moving value through the use of trade transactions in an attempt to legitimize their illicit origin.
563 The same study warns that 
trade-based money laundering is an important channel of criminal activity and, given the growth in 
world trade, represents an increasingly important money laundering and terrorist financing 
vulnerability.564 
7.368.  A joint study by DIAN and the Colombian Information and Financial Analysis Unit identifies 
some of the most commonly used methods, among those detected by the Colombian authorities, 
for laundering money and financing terrorism through "smuggling" (the document refers to these various methods as "typologies").
565 
7.369.  The typologies identified in the study incl ude "payment in kind for illicit activities with 
goods smuggled into the national territory". According to Colombia, this typology corresponds to the sort of practices that the compound tariff seeks to combat.
566 The study describes this 
typology as follows: 
The purpose of this type of operation is to bring goods into Colombia from abroad as 
an indirect means of entering the proceeds of criminal activities carried out wholly or partially in Colombia or in other countries. 
The operation to which this typology relates begins with the delivery abroad to a 
member of the criminal organization established in country (A) of easily marketable goods, in payment for illicit activities. Thes e goods are then brought into the national 
territory by means of overt or technical smuggling operations and subsequently 
distributed and sold inside the national territory. To carry out these activities the criminal organizations concerned require the know-how and infrastructure of 
                                               
561 Financial Action Task Force, Trade-Based Money Laundering , 23 June 2006 (Exhibit COL-11), p. 5. 
See also Financial Action Task Force, Money-Laundering Vulnerabilities of Free Trade Zones , March 2010 
(Exhibit COL-12), pp. 17-18. 
562 World Customs Organization, Illicit Trade Report 2012  (Exhibit COL-8), p. 34. See also 
Financial Action Task Force, Trade-Based Money Laundering , 23 June 2006 (Exhibit COL-11), p.3. 
563 Financial Action Task Force, Trade-Based Money Laundering , 23 June 2006 (Exhibit COL-11), p. 3. 
564 Financial Action Task Force, Trade-Based Money Laundering , 23 June 2006 (Exhibit COL-11), p. 25. 
565 National Customs and Excise Directorate, Information and Financial Analysis Unit, Money Laundering 
Typologies Related to Smuggling , January 2006 (Exhibit COL-10), pp. 13-14 and 33; Colombia's response to 
Panel question No. 44, para. 101. 
566 Colombia's response to Pane l question No. 44, para. 101. WT/DS461/R 
 
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  transnational smuggling organizations, which receive part of the proceeds for illegally 
transporting, introducing and distributing the goods.567 
7.370.  The other typology which, according to Colombia, corresponds to the kind of practices that 
the compound tariff seeks to combat is called in the study the "transport of money of illicit origin 
to another country to purchase goods which are introduced into the local country by means of 
technical smuggling based on underinvoicing".568 The study describes this typology as follows: 
In this typology the main aim is to interleave several successive operations which help 
to obscure the trail of the illicit money. The process begins with the transport of 
foreign currency from Colombia (country (A)) to another country (B) through unauthorized channels, that is, without using a security services company or a money transfer through a foreign exchange market intermediary, as the legislation requires. 
This money is exported for the purpose of purchasing goods which are subsequently 
introduced into the country using some means of smuggling. Finally, the goods are marketed in Colombia, and the capital initially sent abroad is recovered and 
legitimized within the national economic system. The goods may be purchased in 
country (B) to which the money was first sent or in a third country (C). 
As a result of this process, the organization obtains cash in the local currency, which 
can be represented to the authorities and third parties as the proceeds of a 
commercial activity. This money could, in turn, be used to make lawful investments in the stepwise process of giving it the semblance of legality and disguising its true origin. A possible alternative is to repeat  the aforementioned operation once or 
twice more.
569 
7.371.  The joint study by DIAN and the Colombian Information and Financial Analysis Unit also 
includes descriptions of other technical typo logies used for laundering money by means of 
smuggling operations, such as: (a) smuggling inputs for "piracy" networks570; (b) exporting 
overinvoiced merchandise and then smuggling it back into Colombian territory571; (c) change of 
destination of raw materials entering the country under the Special Import–Export Systems Plan 
Vallejo572; (d) imports effected by a customs intermediary impersonating a recognized importer 
and using a programme approved under the Special Import–Export Systems Plan Vallejo573; 
(e) smuggling and trademark fraud574; (f) technical smuggling by overvaluing goods575; and 
(g) smuggling by means of triangulated goods traffic.576 
7.372.  Likewise, a Financial Action Task Force (FATF) study identifies overvaluation and 
undervaluation of imports or exports as trade-ba sed money laundering techniques, in addition to 
others such as: (a) multiple invoicing of transactions involving the same goods or services; (b) the 
declaration of quantities less than or greater than the goods or services actually traded; and 
(c) the fraudulent description of the qualit y or type of goods or services traded.577 
7.373.  A study by the World Customs Organization (WCO) identifies the overvaluation and 
undervaluation of imports or exports as the most basic and oldest of the schemes involving the 
use of international trade transactions for money laundering purposes. The core component of these techniques is the fraudulent declaration of the value of the goods or services in question, for the purpose of transferring resources between the importer and the exporter. By invoicing a 
                                               
567 National Customs and Excise Directorate, Information and Financial Analysis Unit, Money Laundering 
Typologies Related to Smuggling , January 2006 (Exhibit COL-10), p. 15. 
568 Colombia's response to Pane l question No. 44, para. 101. 
569 National Customs and Excise Directorate, Information and Financial Analysis Unit, Money Laundering 
Typologies Related to Smuggling , January 2006 (Exhibit COL-10), p. 19. 
570 National Customs and Excise Directorate, Information and Financial Analysis Unit, Money Laundering 
Typologies Related to Smuggling , January 2006 (Exhibit COL-10), pp. 17-18. 
571 Ibid. pp. 21-22. 
572 Ibid. pp. 23-24. 
573 Ibid. pp. 25-26. 
574 Ibid. pp. 27-28. 
575 Ibid. pp. 29-30. 
576 Ibid. pp. 31-32. 
577 Financial Action Task Force, Trade-Based Money Laundering , 23 June 2006 (Exhibit COL-11), 
pp. 5-7. WT/DS461/R 
 
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  product or service at a price lower than its market value, the exporter can transfer resources to 
the importer, since the payment for the good or serv ice is less than the price that the importer will 
receive when it is sold on the open market. On the other hand, by overinvoicing goods or services at prices above their market value, the exporter can receive resources from the importer, since the 
payment for the good or service will be greater than  the price the importer will receive when it is 
sold on the open market.
578 The same study points out that, in addition to the overvaluation and 
undervaluation of imports or exports, there are more complicated schemes that integrate 
fraudulent trade practices into a web of complex transactions which may also involve the 
movement of value through the financial system or the physical cross-border movement of bank notes, all with a view to "further obscur[ ing] the money trail and complicat[ing] detection".
579 
7.374.  In any event, the information availa ble suggests that not every overvaluation or 
undervaluation operation in an international trade transaction is for money laundering purposes. In 
many cases, the purpose may be to evade taxes or controls on trade or the movement of capital.
580 
7.375.  At the same time, as already mentioned, the undervaluation of imports is just one of the 
many methods used for money laundering. In fact, as indicated in a document of the Colombian Ministry of Justice: "[p]rominent among  the modi operandi  most often used, according 
to investigations carried out by the Office of th e Attorney-General of the Nation, are unjustified 
financial transactions, the transport of cash, the use of legal persons and the creation of shell companies to do the laundering."
581 Citing figures from the Office of the Attorney-General of the 
Nation for November 2013, this document estimates that out of 2,267 money laundering 
investigations, classified by modus operandi , 910 (40.1%) involved unjustified financial 
transactions; 472 (20.8%) were "unestablished"; 192 involved persons transporting money in 
suitcases or clothing (8.5%); 170 involved money laundering through legal persons (7.5%); 
161 used shell companies (7.1%); 139 used goods in the charge of third parties (frontmen) 
(6.1%); 85 used split money transfers (3.7%); 41 involved the financing of groups operating outside the law (1.8%), and 39 consisted in smuggling (imports and exports) (1.7%).
582 In this 
connection, Colombia states that "[t]he number of  investigations conducted by the Office of the 
Attorney-General of the Nation is not a valid  indicator of the relative prevalence of a 
modus operandi . If the number of investigations of smuggling as a modus operandi  is small as 
compared with the number of investigations relating to other modi operandi , it may be because, as 
pointed out by the FATF583, smuggling is difficult to detect." In any event, the Ministry of Justice 
document provided by Colombia indicates not only that the number of investigations of smuggling involving  imports or exports as a  modus operandi  for money laundering is low but also that, 
according to the  Office of the Attorney-General of the Nation , this modus operandi  does not 
constitute one of those most commonly employed for money laundering purposes . 
7.376.  In conclusion, even assuming, for the sake of argument, that products imported at prices 
below the thresholds established in Decree No. 456 are being undervalued, there is no evidence 
that this necessarily means that the undervaluation in question is for money laundering purposes. 
7.4.2.5.2.8  Exemptions from the compound tariff 7.377.  As previously noted, Decree No. 456 exempts from the compound tariff, inter alia : 
(i) goods entering certain regions which Colombia has designated as Special Customs Regime 
                                               
578 World Customs Organization, Illicit Trade Report 2012  (Exhibit COL-8), p. 35; Financial Action Task 
Force, Trade-Based Money Laundering , 23 June 2006 (Exhibit COL-11), p. 4. 
579 World Customs Organization, Illicit Trade Report 2012  (Exhibit COL-8), p. 35. See also Financial 
Action Task Force, Trade-Based Money Laundering , 23 June 2006 (Exhibit COL-11), pp. 4-5; Financial Action 
Task Force, Money Laundering Vulnerabilities of Free Trade Zones , March 2010 (Exhibit COL-12), p. 19. 
580 Rocha García, New dimensions of drug trafficking in Colombia , 2011 (Exhibit COL-4), 
pp. 94 and 199; World Customs Organization, Illicit Trade Report 2012  (Exhibit COL-8), p.34; Financial Action 
Task Force, Trade-Based Money Laundering , 23 June 2006 (Exhibit COL-11), pp. 2-3. Likewise, not every 
undeclared cross-border transportation operation involving currency or bearer-negotiable instruments should necessarily be considered to be money laundering. World Customs Organization, Illicit Trade Report 2012  
(Exhibit COL-8), p. 34. 
581 Ministry of Justice and Law, Drugs Observatory, The Drug Problem in Colombia  (Exhibit COL-27), 
p. 145. 
582 Ibid. 
583 See Colombia's response to Panel question No. 73. WT/DS461/R 
 
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  Zones; (ii) goods entering Colombia under the "Plan Vallejo"; and (iii) imports originating in 
countries with which Colombia has trade agreements in force, if the subheadings covered were negotiated in the respective agreement. In this  connection, Colombia has not explained how these 
exemptions might be consistent with the purported objective of the compound tariff of combating 
money laundering. 
7.378.  With respect to the Special Customs Regime Zones, Colombia has stated that imports into 
these zones are exclusively for local use in border areas where there are conditions of extreme 
poverty.
584 This, however, does not rule out the possibility of imports into Special Customs Regime 
Zones being used for money laundering in acco rdance with the methodologies described by 
Colombia. On the other hand, apart from pointing out that imports into Special Customs Regime Zones are exclusively for local consumption, Colombia has not indicated what measures it is taking 
to deal with the risk of money laundering in connection with these imports.
585 
7.379.  With respect to the Special Import–Export Systems (Plan Vallejo), Colombia has stated 
that the companies participating in this programme "are formal companies with a business track 
record, which pay taxes, are listed in the commercia l register, and can be followed up if there are 
disputes over their business transactions".586 This, however, does not rule out the possibility that 
one of the companies participating in this programme might use imports for money laundering in 
accordance with the methodologies described by Colo mbia. In fact, as stated in an FATF document 
submitted by Colombia, given that, in most cases, the customs authorities pay special attention to preventing smuggling and ensuring that taxes are properly collected, they commonly subject 
duty-free products to fewer controls, which makes these products especially vulnerable to 
undervaluation, including for money laundering purposes.
587 Furthermore, a joint study by DIAN 
and the Colombian Information and Financial Analysis Unit identifies the use of imports under Special Import–Export Systems (Plan Vallejo) as one of the "typologies" detected by the 
Colombian authorities in relation to money laundering and the financing of terrorism through 
smuggling operations.
588 
7.380.  With respect to imports originating in countries with which it has trade agreements in 
force, Colombia has stated that the reason for this exemption is that these agreements contain 
customs cooperation and information exchange mechanisms which would make the goods and the importers more easily traceable and optimize the work of verifying foreign trade transactions. All of the foregoing, in Colombia's opinion, means that "the risks of duty-free imports being used for 
money laundering [are] significantly reduced".
589 However, it is not clear from the text of 
Decree No. 456 that the exemption from the compound tariff is linked with the existence of mechanisms for customs cooperation and information exchange with the country of exportation. 
7.381.  First, the text of Decree No. 456 refers explicitly to goods originating in countries with 
which Colombia has international trade agreements in force, provided that the tariff subheadings have been negotiated.
590 In other words, the Decree does not refer in its text to countries with 
which Colombia has mechanisms for customs cooperation and information exchange. 
7.382.  Second, despite the various questions posed by the Panel in this respect, and apart from 
having presented a table with "[p]rovisions concerning the exchange of customs information in Colombia's existing FTAs", Colombia has not shown that all the countries with which it has 
international trade agreements in force, which cover the relevant tariff subheadings, and under 
                                               
584 See Colombia's response to Panel questions Nos. 16, 133 and 141. 
585 See Colombia's response to Panel questions Nos. 16, 133 and 141. 
586 Colombia's response to Panel question No. 90, para. 33. See also response to Panel questions 
Nos. 18, 89, 90 and 133. 
587 Financial Action Task Force, Trade-Based Money Laundering , 23 June 2006 (Exhibit COL-11), p. 5. 
588 National Customs and Excise Directorate, Information and Financial Analysis Unit,  Money Laundering 
Typologies Related to Smuggling , January 2006 (Exhibit COL-10), pp. 23-26. See also Panama's comments on 
Colombia's response to Panel questions Nos. 90 and 133. 
589 Colombia's first written submission, para. 36. See also second written submission, para. 115; 
opening statement at the first meeting of the Panel, para. 79; opening statement at the second meeting of the 
Panel, paras. 111-115; response to Panel questions Nos. 9, 59, 133, 134, 137 and 138. 
590 Decree No. 456 (Exhibits PAN-3 and COL-17), Article 5, paragraph, point 1. See also, Decree No. 074 
(Exhibits PAN-2 and COL-16), Article 3, paragraph 1. WT/DS461/R 
 
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  which Colombia grants exemptions from the compound tariff, make provision for customs 
cooperation and information exchange mechanisms.591 
7.383.  Third, Panama has identified certain trade agreements signed by Colombia which contain 
customs cooperation and information exchange mechanisms, but in which the relevant tariff 
subheadings are not duty-free, and asserts that in these cases Colombia applies the compound 
tariff.592 This would confirm what is indicated in the text of Decree No. 456, i.e. that Colombia 
exempts from the compound tariff imports from count ries with which it has negotiated the relevant 
subheadings, irrespective of the existence of a customs cooperation and information exchange 
mechanism. 
7.384.  Fourth, only products originating  in countries with which Colombia has signed trade 
agreements are exempted from the compound tariff, as opposed to products coming  from those 
countries. In this connection, Colombia has stated that the customs cooperation mechanisms "are 
focused on those goods with respect to which a party has undertaken to ensure compliance with 
the provisions of the agreement".593 However, Colombia has not identified any evidence that would 
confirm this assertion and, more specifically, that the customs cooperation mechanisms agreed by 
Colombia cannot be used to deal with requests relating to imports of products that come from , but 
do not originate in , the other party. For its part, Panama has questioned whether all the free trade 
agreements signed by Colombia limit customs cooperation to goods originating in the other party 
and asserts that this does not follow, for exampl e, from the free trade agreement signed between 
Colombia and Chile.594 Therefore, in actual fact, it has not been proven that the customs 
cooperation mechanisms signed by Colombia cannot be used to deal with requests relating to 
imports of products that come from , but do not originate in , the other party. 
7.385.  Fifth, as a matter of fact, Colombia and Panama signed a customs cooperation and 
information exchange mechanism in 2006.595 Colombia and Panama have also signed a free trade 
agreement containing provisions on customs cooperation and information exchange. Colombia has 
pointed out that, once this free trade agreement ente rs into force, the compound tariff will not be 
applied to imports of the products in question originating in Panama.596 Colombia and Panama 
have also negotiated a separate agreement on  customs cooperation and information exchange, 
which has not, to date, been signed.597 
7.386.  Colombia has also asserted that "the risks of duty-free imports being used for money 
laundering are significantly less".598 As has been indicated, however, there is no evidence of this. 
On the contrary, a FATF document submitted by  Colombia suggests that duty-free imports are 
especially vulnerable to undervaluation, including for money laundering, due to the fact that, in most cases, they are subjected to fewer controls  by the customs authorities, which pay special 
attention to preventing smuggling and ensuring that taxes are properly collected.
599 
7.387.  In short, the available evidence, beginning with the text of Decree No. 456 itself, indicates 
that the exemption from the compound tariff for imports from countries with which Colombia has 
trade agreements in force is related to the negotiation of the relevant tariff subheadings in the 
respective agreement, and not to the existenc e or non-existence of customs cooperation and 
information exchange mechanisms. 
                                               
591 See Colombia's response to Panel questions Nos. 59, 133, 138 and 139. Provisions on exchange of 
customs information in existing FTAs with Colombia (Exhibit COL-28). 
592 Panama's response to Panel question No. 139. 
593 Colombia's response to Panel question No. 137. 
594 Panama's comments on Colombia's response to Panel question No. 137. 
595 Protocol of Procedure for Cooperation and Exch ange of Customs Informat ion between the Customs 
Authorities of Panama and Colombia, 31 October 2006 (E xhibit PAN-17). See also Panama's second written 
submission, para. 3.35; opening statement at the first meeting of th e Panel, para. 1.25. 
596 Colombia's first written submission, para. 114. See also second written submission, 
paras. 6 and 116; opening st atement at the first meetin g of the Panel, para. 81. 
597 Colombia's first written submission, para. 114. See also opening statement at the first meeting of the 
Panel, para. 81; and paras. 7.562.  -7.564.  below. 
598 Colombia's first written submission, para. 35. See also first written submission, para. 112. 
599 Financial Action Task Force, Trade-Based Money Laundering , 23 June 2006 (Exhibit COL-11), p. 5 
and fn 6. WT/DS461/R 
 
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  7.388.  In conclusion, all these factors, including the text of Decree No. 456 and the other 
evidence and arguments presented by the parties, taken together, allow the Panel to conclude that the exemptions from the compound tariff for wh ich Decree No. 456 provides are unrelated to and 
inconsistent with the measure's alleged objective of combating money laundering. 
7.4.2.5.2.9  Period of validity of the compound tariff 
7.389.  With regard to the measure's temporal validity, Decree No. 456 stipulates that it will 
remain in force for a period of two years, after which the customs tariff envisaged in 
Decree No. 4927 of 2011 and its amendments will be re-established.
600 This limited validity of the 
compound tariff is not in keeping with the measure's alleged objective of combating money laundering, especially in view of the seriousness of the conduct which the measure is said to seek 
to address. 
7.4.2.5.2.10  Legal consequences of importin g goods at prices below the thresholds of 
Decree No. 456 
7.390.  Despite the fact that the compound tariff subjects imports of products at prices below the 
thresholds established in Decree No. 456 to higher duties, such imports are not prohibited under 
Colombian legislation. Colombia has stated that, under its legislation, customs must report any suspicious transaction that might be linked with money laundering to the Information and Financial 
Analysis Unit.
601 However, there is no indication that the importation of products at prices below 
the thresholds established in Decree No. 456 automatically results in the imposition of some other type of measure (distinct from the compound tariff ) or any particular follow-up of the products or 
importers involved. At the same time, Colombia's statement to the effect that customs must report 
any suspicious transaction that might be linked with money laundering does not appear to be 
related to the importation of products at prices below the thresholds established in Decree No. 456. In other words, this obligation wo uld seem to be the same for customs regardless 
of the price at which the suspicious transaction is being carried out. 
7.391.  All of the foregoing would appear to be inconsistent with the compound tariff's stated 
purpose of combating money laundering. Considering the high priority that Colombia assigns to 
combating money laundering, it seems incongruous that imports presumed to be used for money 
laundering are freely admitted to Colombian territory, subject only to the payment of the compound tariff, and that neither the corresponding transaction nor the parties involved are automatically subject to investigation. 
7.4.2.5.2.11  Additional evidence furnished by the parties 
7.392.  In addition to the above, the parties have submitted certain documentary evidence relating 
to the alleged objective of the compound tariff. Thus, Panama has submitted five official press 
releases from the Office of the President of th e Republic of Colombia (dated November 2012, 
January 2013, July 2013 and January 2014), which reflect statements made by high-ranking Colombian officials, including the President of the Republic and the Minister of Foreign Trade, 
suggesting that the compound tariff was imposed to protect the textiles sector from unfair 
competition, revitalize industry and protect domestic production.
602 Panama has also submitted 
two online press releases and four press releases  from Colombian private business groups (dated 
                                               
600 Decree No. 456 (Exhibits PAN-3 and COL-17), articles 3, 5, 6 and 7. See also Colombia's response to 
Panel questions Nos. 76 and 78. 
601 Colombia's response to Panel questions Nos. 84 and 86. 
602 Panama's opening statement at the first meeting of the Pa nel, para. 1.6; Information note: Office of 
the President of the Republic, President announces measures to boost the textiles sector, 22 January 2003 (Exhibit PAN-6); Information note: Office of the President of the Re public, Government signs Decree to 
strengthen clothing and footwear sectors, 23 January 2013 (Exhibit PAN-7); Information note: International Press Centre, President highlights benefits of measures taken to protect textiles industry, 22 July 2013 (Exhibit PAN-8); Information note: Office of the President of the Republic, Statement by the 
President at the national "Weaving Colombia" event, 28 November 2012 (Exhibit PAN-9); Information note: 
Office of the President of the Republic, Statement by the President at the close of the Management Dialogues in the Ministry of Trade, Industry and Tourism, 20 January 2014 (Exhibit PAN-10). WT/DS461/R 
 
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  February 2013, March 2013, September 2013 and December 2013), describing the compound 
tariff.603 
7.393.  Although this documentary evidence should be treated with caution, we note that none of 
it suggests that the compound tariff is intended to combat money laundering. The releases speak 
mainly of the objective of dealing with unfair competition and protecting the domestic industry. 
Although some of these press releases refer to additional measures to strengthen the campaign against money laundering and smuggling, the statements do not demonstrate any link between 
the compound tariff and the objective of combating money laundering. Panama has also submitted 
a document from the Colombian Ministry of Trade, Industry and Tourism which is said to contain proposals for amending Decree No. 074, introduced before the adoption of Decree No. 456.
604 This 
document also fails to establish any link between the compound tariff, or the price thresholds, and 
the anti-money laundering objective. 
7.394.  For its part, Colombia has submitted as an exhibit a press article (dated January 2014) 
with statements made by the President of Colombia before the adoption of Decree No. 456605, as 
well as the minutes of a session of the Colombian Government's Committee on Customs, Tariffs 
and Foreign Trade, held on 23 January 2014, at which the draft amendment of Decree No. 074 
was discussed.606 Both the press article and the Committee's minutes suggest that Decree No. 456 
seeks to punish imports introduced at artificially low prices or by smuggling for money laundering 
purposes. However, the Panel notes that both these items of evidence date from the end of January 2014, after the Panel in this dispute had been composed. Accordingly, the Panel will be 
extremely cautious about assigning probative value to this documentary evidence for the purpose 
of confirming whether the compound tariff is intended to combat money laundering. 
7.395.  Another Colombian exhibit, Draft Law No. 94 of 2013 adopting instruments to prevent, 
control and punish smuggling, money laundering and tax evasion
607, submitted by the 
Vice-Ministry of Business Development of the Ministry of Trade, Industry and Tourism and 
currently at the discussion stage, states that smuggling and money laundering are closely interconnected and contains a reference to Decree No. 074. However, the reference to 
Decree No. 074 indicates that "[t]he purpose of  the measure was to tackle the abnormally 
low prices which this sector's imports had been recording during recent years"
608, without 
specifically mentioning the fight against money laundering in relation to that Decree. 
7.396.  According to Colombia, Decree No. 456 is part of a broader strategy which the Government 
is developing against the various links in the drug trafficking supply chain609 and, where money 
laundering is concerned, the actions are part of the so-called  National Policy against Money 
Laundering and the Financing of Terrorism.610 H o w e v e r ,  i n  n o n e  o f  t h e  f o l l o w i n g  d o c u m e n t s  
submitted by Colombia, in relation to its strategy to counter drug trafficking and money 
laundering, is there any reference to the compound tariff, or similar measures, as part of the 
                                               
603 Panama's opening statement at th e first meeting of the Panel, para . 1.21; National Federation of 
Merchants, The specific tariff on f ootwear: a controversial decision entailing considerable collateral damage, 
5 February 2013 (Exhibit PAN-11); News item: El Nuevo Siglo , "Fenalco asks for lower tariff on textiles and 
footwear", 1 March 2013 (Exhibit PAN-12); News item: El Economista , "Controversy over decree on footwear 
imports", 6 September 2013 (Exhibit PAN-13); News item: La República , "Fenalco and the Chamber of Clothing 
reach agreement to modify tariffs", 7 December 2013 (Exhibit PAN-14); News item: La República , "Importers 
not convinced by agreement between clothing manufacturers and Fenalco", 9 December 2013 (Exhibit PAN-15); National Federation  of Merchants, FENALCO rejects decree on clothing  and footwear tariffs 
(Exhibit PAN-16). 
604 Ministry of Trade, Industry and Tourism of Colombia, proposed amendments to Decree No. 074 
of 2013 (Exhibit PAN-28). 
605 News item: Portafolio.co , "Decree on the mixed tariff in the te xtiles sector will be maintained", 
21 January 2014 (Exhibit COL-35). 
606 Committee on Customs, Tariff and Fore ign Trade Affairs, Minutes of the 269th Regular Session, 
23 January 2014 (Exhibit COL-34). 
607 Draft Law adopting instruments to prevent, co ntrol and punish unfair competition deriving from 
illegal foreign trade, internal trade, money laundering and tax evasion operations (Exhibit COL-20), p. 32; Report for the first discussion of Draft Law No. 94 of 2013 (Exhibit COL-21). 
608 Draft Law adopting instruments to prevent, co ntrol and punish unfair competition deriving from 
illegal foreign trade, internal trade, money laundering and tax evasion operations (Exhibit COL-20), p. 32. 
609 Colombia's first written submission, paras. 38-39. 
610 Ibid. para. 41. WT/DS461/R 
 
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  anti-money laundering strategy: the National Anti-Drug Policy611; the National Policy against 
Money Laundering and the Financing of Terrorism612; the minutes of the Inter-institutional 
Coordination Commission for the Control of Money Laundering613; the Minutes of the 94th session 
of the Higher Council for Foreign Trade614; and the Report on Actions and Results of the Drugs 
Policy of the Directorate of Anti-Drug Policy and Related Activities.615 
7.4.2.5.2.12  Conclusion as to whether the co mpound tariff is intended to combat money 
laundering 
7.397.  As indicated in the preceding paragraphs, the Panel has considered the text of 
Decree No. 456 and the other available evidence co ncerning the structure and application of the 
compound tariff. The Panel has comprehensively examined all the available pieces of evidence, including those mentioned in the preceding paragrap hs, taking into account their individual worth. 
In examining the evidence, the Panel has consider ed whether it has the appropriate relevance, 
credibility, weight and probative value. The Panel has proceeded cautiously in evaluating the facts. 
7.398.  Decree No. 456 provides for certain single pr ice thresholds on a fixed basis for each of the 
two broad categories of products covered by the present dispute, without any examination of the 
specific characteristics of the particular transaction concerned. 
7.399.  In the opinion of this Panel, and on the basis of the totality of the evidence, including the 
text of Decree No. 456 and the other evidence prov ided by the parties, a connection between the 
compound tariff and the alleged objective of combating money laundering has not been demonstrated. When the relevant facts and relevant circumstances of the case are taken into account, the design, architecture and revealing structure of the compound tariff, including the way 
in which the price thresholds were determined, the way in which the compound tariff is applied, 
the tariff exemptions, the period of validity of the measure, and the lack of automatic measures for following up the imports affected, do not make it possible to conclude that there is a relationship 
between the compound tariff and the declared  objective of combating money laundering. 
7.400.  Accordingly, this Panel concludes that Colombia has failed to demonstrate that the 
compound tariff is designed to combat money laundering. 
7.4.2.5.3  Conclusion as to whether the co mpound tariff is a measure "to protect public 
morals" 
7.401.  For the reasons given, this Panel concludes that, although Colombia has demonstrated that 
combating money laundering is one of the policies designed to protect public morals in Colombia, it 
has not shown that the compound tariff is desi gned to combat money laundering. Consequently, 
neither has Colombia shown that the compound tari ff is, in this respect, a measure designed to 
protect public morals. 
7.4.2.6  As to whether the compound tariff is a measure "necessary" to protect public 
morals 
7.402.  Since the Panel has concluded that Colombia has failed to demonstrate that the compound 
tariff is designed to combat money laundering, in the light of the specific circumstances of the 
present case, there should be no need to examine whether the compound tariff is necessary  to 
protect public morals. However, in order to be exhaustive in its analysis, the Panel will continue with its evaluation by assuming, for the sake of argument, that the compound tariff is designed to 
combat money laundering. 
                                               
611 Ministry of the Interior and Justice, National Anti-Drug Policy (Exhibit COL-6). 
612 National Council for Economic and Social Policy, National Policy against Money Laundering and the 
Financing of Terrorism , 18 December 2013 (Exhibit COL-19). 
613 Inter-Institutional Coordination Commission for the Control of Money Laundering, Minutes of the 
21st Session, 22 July 2013 (Exhibit COL-22). 
614 Senior Foreign Trade Council, Minutes of the 94th Session, 1 April 2013 (Exhibit COL-23). 
615 Ministry of Justice and La w, Drug Monitoring Centre, The Drug Problem in Colombia  (Exhibit COL-27). WT/DS461/R 
 
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  7.403.  To determine whether the compound tariff is necessary  to combat money laundering, this 
Panel will weigh and balance the following factors616: (i) the importance of the fight against money 
laundering in Colombia; (ii) the contribution of the compound tariff to the achievement of the 
objective of combating money laundering; (iii) th e trade-restrictiveness of the compound tariff; 
and (iv) if the Panel reaches a preliminary conclusion that the measure is necessary, it will confirm 
the result by comparing the compound tariff with the alternatives identified by Panama.617 
7.4.2.6.1  The importance of the anti-money laundering campaign in Colombia 
7.404.  Colombia maintains that the interests and values at stake in the present dispute are vital 
and important in the highest degree. According to Colombia, drug trafficking is a criminal phenomenon which has had a negative impact on the country and is adversely affecting the lives of thousands of its inhabitants and the stability of Colombian democracy. Colombia maintains that 
money laundering is an essential link in the drug trafficking chain which enables criminal groups to 
finance their operations and carry out their unlawful activities.
618 
7.405.  Panama does not deny that for Colombia the fight against money laundering is a social 
interest that could be described as vital and important in the highest degree. Panama adds that, in 
any event, it is for Colombia to show that the fight against money laundering is one of the policies designed to protect public morals in Colombia.
619 
7.406.  As mentioned above, Colombia has submitted evidence concerning the existence of a 
relationship between money laundering and drug trafficking in Colombia, activities which, in turn, are related to the financing of the internal armed conflict in the country. Colombia has also provided information concerning the grave conseq uences of the illicit drug trade and the armed 
conflict for Colombian society.
620 
7.407.  Colombia has also shown that money laun dering is criminal conduct in Colombia; has 
identified international instruments relating to the combating of money laundering and the 
financing of terrorism to which Colombia is party; and has submitted documents which show that 
combating money laundering is an important policy objective for the Colombian Government.621 
7.408.  After considering the available evidence, in the circumstances of the present case, the 
Panel concludes that in Colombia the objective of combating money laundering reflects social 
interests that can be described as vital and important in the highest degree. 
7.4.2.6.2  The contribution of the compound  tariff to the objective of combating money 
laundering 
7.409.  The Panel will now assess the compound tariff's contribution to the objective of combating 
money laundering, taking into account the fact th at combating money laundering reflects social 
interests that can be described as vital and important in the highest degree for Colombia. 
7.410.  Colombia maintains that the compound tariff reduces the incentives for using textile, 
apparel and footwear imports to launder money. According to Colombia, the compound tariff is an appropriate instrument and is apt to produce a material contribution to the achievement of 
Colombia's objective, because it has led to an increase in the unit price of apparel and footwear 
imports, thereby reducing the artificially high profit margin which is the incentive for using these imports to launder money.
622 Colombia also points out that the compound tariff has resulted in a 
change in the composition of imports of the products in question, which would indicate that the 
                                               
616 Appellate Body Report,  Brazil – Retreaded Tyres , para. 182. 
617 See, for example, Appellate Body Report,  Brazil – Retreaded Tyres , para. 156; China –Publications 
and Audiovisual Products , paras. 241-242. 
618 Colombia's first written submission, paras. 85 and 102; second written submission, para. 63; 
opening statement at the first meeting of the Panel, paras. 67 and 76; opening statement at the second meeting of the Panel, para. 82;  response to Panel question No. 7. 
619 Panama's second written submission, paras. 3. 18 and 3.32; response to Panel question No. 7. 
620 See para. 7.336.  above. 
621 See paras. 7.335.  and 7.337.  above. 
622 Colombia's first written submission, paras. 37, 87 and 99; opening statement at the first meeting of 
the Panel, paras. 31 and 33. WT/DS461/R 
 
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  measure has discouraged the undervaluation of such imports.623 Colombia maintains that, viewed 
from the broader perspective of the overall anti -money laundering strategy, the compound tariff 
can be characterized as indispensable.624 
7.411.  Panama, for its part, contends that Colombia has only managed to show that the 
compound tariff has raised the price of imports.625 Panama maintains that the measure does not 
prevent money laundering, but, at most, may have reduced the amount of money that can be laundered in each transaction. In Panama's opin ion, the reduction of the margin that can be 
legalized through the domestic sale of the imported goods does not per se  mean a reduction in 
imports for money laundering purposes.
626 
7.412.  As this Panel understands it, Colombia's argument is that the way in which the compound 
tariff helps to combat money laundering is by reducing the incentives which lead criminal groups to 
use textile, apparel and footwear imports to launder money by means of "artificially low" or 
undervalued prices. This, Colombia argues, is due to the fact that the compound tariff increases the price of the imports, which reduces the artificially high profit margin obtainable in each import 
operation and hence the amount of money that can be laundered. 
7.413.  To demonstrate the contribution of the compound tariff to the objective of combating 
money laundering, Colombia has presented arguments and evidence by means of which it seeks to 
demonstrate the existence of undervaluation in te xtiles, apparel and footwear, as well as the 
effects that the compound tariff has had in reducing undervaluation in connection with imports of the relevant products. 
7.4.2.6.2.1  Undervaluation in textiles, apparel and footwear 
7.414.  Colombia provides figures on imports effected prior to the entry into force of 
Decrees Nos. 074 and 456 and arriving from countries with which Colombia did not have a trade agreement in force. Colombia points out that between 2009 and February 2013 there were more 
than 480,000 import operations, of which 390,000 involved apparel and 90,000 footwear. 
According to Colombia, the average price of appa rel imports during this period was US$56.6/kg, 
while the average price for footwear was US$24.2/pair. Colombia maintains that the range of 
prices per kilogram represents a significant dispersion, with the variation being between 
US$0.01/kg and US$224,000/kg for apparel and between US$0.01/pair and US$1,844/pair for footwear. Colombia maintains that such a high dispersion is unjustified and that the prices at the bottom of the range (US$0.01/kg for apparel and US$0.01/pair for footwear) cannot be real 
prices, because they would not cover the transaction costs or the costs of transport or wages. By 
introducing this information, Colombia seeks to show that imports of apparel and footwear are entering Colombia at "artificially low" or undervalued prices.
627 
7.415.  Colombia has not submitted the individual data on which it based its observations. In any 
event, in the Panel's opinion, a comparison of import or export prices within such broad categories of products, and without taking into account the possible price differences resulting from the 
specific characteristics of the transaction concerned, cannot ensure that the imported goods are 
comparable or allow definitive conclusions to be drawn with regard to the range of dispersion of the prices observed. Although it cannot be ruled out that some imports with low declared prices 
are being undervalued, on the basis of the informat ion available and in view of the great diversity 
of the products considered, it is not possible to arrive at a general conclusion as to the degree of 
undervaluation of the imports prior to the entry into force of the compound tariff. 
                                               
623 Colombia's opening statement at the first meeting of the Panel, paras. 30 an d 32; response to Panel 
question No. 57; charts submitted by Colombia with its opening statement at the first meeting of the Panel (Exhibit COL-30). 
624 Colombia's second written submission, para s. 79 and 97; and opening statement at the 
second meeting of the Panel, para. 82. 
625 Panama's second written submission, para. 3.61. 
626 Panama's response to Panel questions Nos. 39 and 45; and opening statement at the 
second meeting of the Panel, para. 7. 
627 Colombia's opening statement at the first meeting of the Panel, paras. 17- 20. See also News item: 
The Wall Street Journal , "The New China", 20 November 2014 (Exhibit COL-29). WT/DS461/R 
 
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  7.416.  As previously noted628, Colombia also asserts that it has found evidence that, in many 
cases, the declared prices of imports of the products in question originating in China (which, in the case of apparel, would account for 65% of the total imports subject to the compound tariff) are lower when they arrive via Panama than when imported directly from China.
629 According to 
Colombia, this assertion is based on three different statistical exercises that it has carried out. 
7.417.  First, using information supplied by DIAN, Colombia compared the unit prices of imports 
originating in China but coming from Panama with the prices of products of Chinese origin 
imported directly from China.630 Colombia used the results of this first exercise to construct "an 
underinvoicing index at ten-digit national tariff level, consisting of the percentage of tariff subheadings which, while being of Chinese origin , are purchased more cheaply in Panama than 
when bought directly from China".
631 Colombia referred to this first statistical exercise in its oral 
statement at the first meeting of the Panel, and su bsequently in its responses to Panel questions, 
in its second written submission and in its oral statement at the second meeting of the Panel. 
7.418.  Secondly, using information from the World Integrated Trade Solution  (WITS) database, 
Colombia compared the implicit prices (value over quantity) of exports from China to Colombia 
with the prices of exports from China to three other countries (Chile, United States and Panama) 
and contrasted the result with the prices of exports from China to Colombia via Panama. From this 
exercise Colombia concluded that the prices relating  to goods of Chinese origin exported directly to 
Chile, the United States and Panama were all simila r. By contrast, the implicit prices of the goods 
when exported to Colombia via Panama were lower.632 
7.419.  Thirdly, using information for indivi dual ten-digit tariff subheadings from the 
COMTRADE database, Colombia compared the unit pr ices for exports from China to Panama with 
the unit prices for exports from Panama to Colombia. From this exercise Colombia concluded that the imports from Panama entered Colombia at prices lower than the prices recorded at entry into 
Panama.
633 Colombia first referred to the second and third statistical exercises in its oral statement 
at the second meeting of the Panel and then, more  specifically, in its responses to the Panel's 
questions after that second meeting. 
7.420.  From these three exercises Colombia concludes that "imports of Chinese origin entering 
Colombia from Panama are systematically priced lower than imports, also of Chinese origin, entering other countries, as well as with respect to imports entering Colombia directly from China".
634 In Colmbia's opinion, this shows that the imports coming from Panama are entering 
Colombia at "artificially low" or undervalued prices.635 
7.421.  In short, it cannot be ruled out that the existence of lower prices for some of the imports 
considered by Colombia indicates the existence of undervaluation practices. 
7.422.  However, as the Panel has already noted, Colombia has not submitted the individual data 
on which it based its observations, but only charts which summarize the prices detected. According to the information provided by Colombia, the price comparisons do not reflect the tracking of a 
particular consignment or relate to the same goods. Moreover, in the Panel's opinion, a 
comparison of import or export prices for categori es of products classified at ten-digit level cannot 
ensure that the goods imported are comparable. Nor is it clear how such a comparison, even if the products concerned were the same or identical, would take into account possible price differences 
                                               
628 See para. 7.360.  above. 
629 Colombia's opening statement at the first meeting of the Panel, para. 34. 
630 Colombia's second written submission, para. 74; opening statement at the first meeting of the Panel, 
paras. 21-25; opening statement at the second meet ing of the Panel, para. 67; response to Panel 
questions Nos. 74, 77, 104 and 105; charts submitted by Colombia with its opening statement at the first meeting of the Panel (Exhibit COL-30). 
631 Colombia's opening statement at the first meeting of the Panel, para. 34. See also second written 
submission, para. 74; response to Panel questions Nos.  77 and 104; charts submitted by Colombia with its 
opening statement at the first meeting of the Panel (Exhibit COL-30). 
632 Colombia's response to Panel question No. 105. 
633 Ibid. See also opening statement at the second meeting of the Panel, para. 67. 
634 Colombia's response to Panel question No. 105. 
635 Colombia's second written submission, para. 74; opening statement at the first meeting of the Panel, 
paras. 21-25; opening statement at the second meetin g of the Panel, para. 67; and response to Panel 
question No. 105. WT/DS461/R 
 
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  resulting from the specific characteristics of the transaction concerned, including factors such as 
differences in the terms and conditions of sale and in quantities. 
7.423.  For the reasons indicated, the available information does not make it possible to arrive at a 
general conclusion concerning the degree to which, as Colombia asserts, the entry into force of the 
compound tariff has resulted in a decrease in th e undervaluation index of imports of the relevant 
products. 
7.4.2.6.2.2  Effect of the compound tariff on import prices 
7.424.  Colombia asserts that the compound tariff has resulted in a significant increase in the 
tariffs payable with a consequent increase in transaction costs, which is discouraging the use of foreign trade operations for money laundering.
636 According to Colombia, this has had two results: 
(i) an increase in the unit price of imports of the products in question; and (ii) a change in the 
composition of imports of these products. 
7.425.  First, Colombia points out that, as a cons equence of the entry into force of the compound 
tariff, the unit price of apparel imports rose from  an average of US$12.6/kg for the period between 
January 2011 and March 2013 (before the decrees took effect) to US$23.5/kg for the period 
between April 2013 and June 2014 (once the decrees had entered into force), which represents an increase of 86.7%. Colombia notes that the average price of footwear imports rose from 
US$7.2/pair between January 2011 and March 2013 to US$11.9/pair for the period between 
April 2013 and June 2014, which is equivalent to an increase of 65.3%.
637 
7.426.  Second, Colombia states that the compound tariff has resulted in a decrease in imports of 
the products in question. Colombia offers information in this respect, contrasting the variation in 
imports of textiles and footwear, in terms of value and volume, over the same periods as those 
used in the previous paragraph. Colombia points out that, in the case of apparel, the monthly average volume of imports was reduced by 52.2%, while the reduction in value was 8.5%. In the 
case of footwear, the reduction in the monthly av erage was 57.1% in volume and 30.1% in value. 
Colombia asserts that, accordingly, the compound tariff has resulted in a change in the composition of the imports, since despite imports having fallen in terms of both volume and value, 
the most significant decrease has been in import volume. In Colombia's opinion, this shows that 
the compound tariff has resulted in the diminished use of "artificially low" or undervalued import prices, which constitutes additional evidence that  the compound tariff reduces the incentives to 
use imports of these products for money laundering.
638 
7.427.  Through this information, Colombia seeks to demonstrate that the compound tariff has led 
to an increase in the unit price of imports, which has reduced the artificially high profit margins obtainable in each import operation and hence the amount of money that can be laundered. This, 
in turn, would discourage the use of foreign trade operations for money laundering.
639 
7.428.  The information provided by Colombia can be accepted as evidence that, since the 
compound tariff entered into force, Colombian imports of the products in question have declined 
and average import prices have increased. It can also be taken as evidence that, as Colombia 
asserts, the compound tariff has resulted in a ch ange in the composition of the imports. In fact, 
although imports have fallen both in volume and in value, the most significant decrease has been in the value of the imports. 
7.429.  The foregoing suggests that the compound tariff has affected imports of lower-priced 
products to a greater extent than imports of high er-priced products. This is to be expected, since 
by definition any tariff that contains a specific component will be higher, in terms of its ad valorem 
                                               
636 Colombia's response to Panel question No. 39. 
637 Colombia's first written submission, paras. 37, 87 and 99; opening statement at the first meeting of 
the Panel, paras. 31 and 33. 
638 Colombia's opening statement at the first meeting of the Panel, paras. 30 an d 32; response to Panel 
question No. 57; charts submitted by Colombia with its opening statement at the first meeting of the Panel (Exhibit COL-30). 
639 Colombia's first written submission, paras. 37, 87 and 99; opening statement at the first meeting of 
the Panel, paras. 31 and 33; response to Panel question No. 128; charts submitted by Colombia with its opening statement at the first meeting of the Panel (Exhibit COL-30). WT/DS461/R 
 
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  equivalent, for lower-priced than for higher-priced products. Furthermore, in the present case the 
compound tariff comprises two different levels and the higher level applies only to lower-priced products, with the result that the impact on the lower-priced products is even more pronounced. 
7.430.  However, the fact that the compound tariff has had a greater effect on lower-priced, as 
compared with higher-priced, products does not in  itself prove that the compound tariff has helped 
to discourage the use of "artificially low" prices or undervaluation for money laundering purposes. In fact, as has been indicated, there is no evidence  that all imports of the products in question at 
low prices correspond to "artificially low" prices or are being undervalued. Furthermore, even 
assuming, for the sake of argument, that all imports of the products in question at low prices correspond to "artificially low" prices or are being undervalued, there is still no evidence that these imports are necessarily being used to launder money. 
7.4.2.6.2.3  Conclusion concerning the cont ribution of the compound tariff to the 
objective of combatin g money laundering 
7.431.  It is reasonable to assume that the compound tariff may have the effect of reducing the 
incentives for importers to declare prices below the thresholds laid down in Decree No. 456. In 
fact, in those cases where an importer declares a price lower than the threshold, the goods immediately become subject to the higher tari ff level. Moreover, even though, as already 
mentioned, there is no indication that the importation of products at prices below the thresholds 
established in Decree No. 456 automatically results in  the imposition of any other type of measure 
(different from the compound tariff) or any partic ular form of follow-up of the products or the 
importers involved
640, some importers might presumably be motivated not to declare prices below 
the thresholds which might be regarded by the Colombian authorities as an indication that the 
operation in question is being used for money laundering. 
7.432.  However, judging from its design, architecture and revealing structure, the compound 
tariff does not directly target undervalued imports, still less imports used for money laundering, 
but all imports declared at below-threshold prices, regardless of whether or not there is undervaluation and whatever the purpose of the transaction. That is to say, the compound tariff 
affects imports which enter at prices below the thre sholds even if there is no undervaluation. At 
the same time, the compound tariff would not be applied to an undervalued import if the declared price is above the threshold in question. 
7.433.  In fact, as previously pointed out
641, the notion of undervaluation pertains to a situation in 
which the value declared on the invoice for a particular transaction is lower than the price actually 
paid or payable. In other words, there may be undervaluation in respect of imports at prices above a given threshold, or even at very high prices, if the price actually paid or payable is higher than 
the price declared to customs. At the same time , there is nothing to exclude the possibility of 
imports having prices below a given threshold that do not reflect undervaluation practices, if those 
low prices correspond to the prices actually paid or payable. 
7.434.  On the other hand, as has also already been pointed out
642, it has been shown that the 
undervaluation or overvaluation of imports or exports can be used for money laundering purposes. However, money laundering can be based on ot her practices or methodologies, including 
non-undervalued imports and overt smuggling. More over, the practice of undervaluation may have 
purposes other than money laundering, including tax evasion in particular.
643 
7.435.  In the light of the available evidence, the Panel can only conclude that the compound tariff 
could reduce the incentives for importing textile products, apparel and footwear at prices below 
the thresholds laid down in Decree No. 456. 
7.436.  In any event, even assuming that imports declared at prices below the thresholds 
established in Decree No. 456 were considered to be necessarily undervalued and used for money 
laundering purposes, the compound tariff does not prevent the importation of such goods, nor 
does it subject the importer of the goods, or th e goods themselves, to any other type of measure 
                                               
640 See para. 7.390.  above. 
641 See para. 7.363.  above. 
642 See para. 7.366.  above. 
643 See para. 7.374.  above. WT/DS461/R 
 
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  or any particular follow-up process. On the cont rary, once the compound tariff had been paid, the 
products would be freely admitted into Colombia's  domestic market. Thus, at best, the effect of 
the compound tariff would be limited to reducing th e profit margin of the persons intending to use 
imports for money laundering purposes. 
7.437.  For all these reasons, and on the basis of the totality of the evidence, including the text of 
Decree No. 456 and the other evidence provided by th e parties, this Panel does not consider that 
Colombia has demonstrated the existence of an au thentic relationship of means and ends between 
the compound tariff and the alleged objective of combating money laundering. Taking into account 
the relevant facts and the relevant circumstances of the case, including the design, architecture and revealing structure of the compound tariff, the Panel concludes that Colombia has failed to demonstrate the contribution of the compound tariff to the objective of combating money 
laundering. 
7.4.2.6.3  The trade-restrictiv eness of the compound tariff 
7.438.  According to Colombia, the compound tariff has a moderate effect on trade because it 
opens up opportunities for those who import at market prices, does not impose quantitative limits 
on imports, and is carefully calibrated to affect only imports likely to be used for money laundering.
644 Colombia adds that the factors that are affecting Panama's exports to Colombia are 
a slowdown in demand and the depreciation of the Colombian currency.645 
7.439.  For its part, Panama asserts that the compound tariff is having a highly restrictive impact 
on international trade and that Colombia itself has acknowledged that the entry into force of the measure was followed by a decline in imports of apparel and footwear. Panama maintains that, 
having regard to the volume of re-exports to  Colombia in the four chapters covered by 
Decree No. 456, at the end of 2013, such re-exports reflected a fall of up to 18%. Panama asserts that one year after the entry into force of the co mpound tariff, Panama's re-exports of apparel and 
footwear to Colombia fell from around 41 million kg to 33.67 million kg.
646 Panama maintains that 
the contraction in value during this period was 5% . Panama presents as evidence of this impact a 
letter from the general manager of the administration of the Colón Free Zone describing the effect 
of the compound tariff on operations in the zone.647 
7.440.  In assessing the trade-restrictiveness of the compound tariff, the Panel starts from the 
consideration that the most restrictive measure that can exist in trade is a ban, or a measure that has the same effects as a ban.
648 The measure at issue in the present case does not ban imports 
or have the effects of a ban, but is in the nature of a tariff. 
7.441.  By its very nature, a tariff can reduce th e capacity of imports to compete in the domestic 
market of the country of importation, by increasing  the price of the products. If the tariffs are too 
high, they can have a very restrictive, even prohibitive effect. However, ordinary customs duties 
are a form of protection accepted by the rules of  the WTO, provided that they are applied in a 
manner consistent with the requirements set out in the WTO agreements and, inter alia , do not 
accord treatment less favourable than that envisaged in the schedule of concessions of the 
importing Member or exceed the tariffs set out in  that schedule. Ordinary customs duties that 
exceed those set out in a Member's schedule of concessions affect the negotiated balance of concessions. 
7.442.  In the case that concerns us, as has already been found
649, in some circumstances the 
compound tariff exceeds the levels bound in Colo mbia's Schedule of Concessions. The compound 
tariff has definite effects on intern ational trade, by reducing the capacity of the products concerned 
                                               
644 Colombia's first written submission, para. 88; se cond written submission, paras. 80-81; opening 
statement at the first meeting of the Panel, para. 69;  and opening statement at the second meeting of the 
Panel, paras. 82 and 95. 
645 Colombia's opening statement at the second meet ing of the Panel, paras. 96-97; closing statement 
at the second meeting of the Panel, para. 15; and response to Panel question No. 121. 
646 Panama's first written submission, paras. 5.3-5.4; second written submission, paras. 3.31 and 3.63; 
and opening statement at the second meeting of the Panel, para. 7. 
647 Colón Free Zone Administration, communic ation, 25 August 2014 (Exhibit PAN-5). 
648 Appellate Body Report, Brazil – Retreaded Tyres , paras. 150-151. 
649 See paras. 7.189 and 7.193 above. WT/DS461/R 
 
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  to compete on the Colombian market, particularly  when the imports are subject to the highest 
levels of the tariff. 
7.443.  This is confirmed by the figures submitted by the parties, which indicate increases in 
import prices, as well as reductions in imports, mainly in terms of volume, but also in terms of 
value.650 
7.444.  For these reasons, bearing in mind the specific facts of the present case, the Panel 
concludes that the trade-restrictiveness of the co mpound tariff is undeniable and is recognized by 
both parties. At the same time, as has already been indicated, the compound tariff is less 
restrictive on international trade than an import ban or a measure having the effects of a ban. 
7.4.2.6.4  Preliminary conclusion conc erning the assessment of the factors 
7.445.  Assuming, for the sake of argument, that  the compound tariff was intended to combat 
money laundering, this Panel concludes that, even though Colombia has demonstrated that the 
objective of combating money laundering in Colombia serves social interests that could be described as vital and important at the highest degree, Colombia has not demonstrated the 
contribution of the compound tariff to the alleged objective of combating money laundering. For 
this reason, and taking into account the restriction on international trade caused by the compound tariff, Colombia has failed to show that the compound tariff is a measure necessary to combat 
money laundering. 
7.4.2.6.5  Has Panama identifi ed possible alternatives reason ably available to Colombia? 
7.446.  The Appellate Body has explained that, if in the course of weighing and balancing factors a 
panel arrives at the preliminary conclusion that a measure is necessary, it must confirm that result 
by comparing the measure with its possible alternatives, which may be less trade-restrictive while 
providing an equivalent contribution to the achievement of the objective pursued.
651 
7.447.  As a result of its weighing and balancing of factors, this Panel has arrived at the 
preliminary conclusion that Colombia has failed to demonstrate that the compound tariff is a 
measure necessary to combat money laundering. Hence, it is neither necessary nor appropriate to compare the compound tariff with the alternatives identified by Panama.
652 However, for the sake 
of an exhaustive analysis, the Panel will recall the arguments of the parties while confining itself to 
making the factual findings that it considers relevant. 
7.448.  Panama has identified three alternative measures which it considers to be reasonably 
available to Colombia and which could contribute to the achievement of the objective pursued: 
(i) the use of the disciplines of the Customs Valuation Agreement; (ii) the use of customs 
cooperation and information exchange mechanisms; and (iii) the use of the disciplines of the Agreement on Preshipment Inspection. We will  now deal with each of these in turn. 
7.4.2.6.5.1  The use of the disciplines  of the Customs Valuation Agreement 
7.449.  Panama argues that a targeted and effective alternative solution, for dealing with imports 
at artificially low prices (that are considered to be used for money laundering purposes), is the use 
of the disciplines of the Customs Valuation Agreement. Panama points out that the 
Customs Valuation Agreement is designed to permit the correct determination of the customs value in those cases where imports are undervalued or entered at artificially low prices. In Panama's opinion, every instance of undervaluation or underinvoicing could be subjected to the 
                                               
650 See para. 7.426 above. 
651 Appellate Body Report, Brazil – Retreaded Tyres , para. 156; China – Publications  and Audiovisual 
Products , para. 241. 
652 It is not always necessary to analyse the possible alternative measures. For example, in US – Tuna II 
(Mexico) , in the context of Article 2.2 of the TBT Agreement, the Appellate Body gave the following 
explanation: "[w]e can identify at least two instance s where a comparison of the challenged measure and 
possible alternative measures  may not be required. For example, it woul d seem to us that if a measure is not 
trade restrictive, then it may not be inconsistent with Article 2.2. Conversely, if a measure is trade restrictive 
and makes no contribution to the achievement of the legitimate objective, then it may be inconsistent with Article 2.2." Appellate Body Report, US – Tuna II (Mexico) , fn 647 to para. 322. (emphasis original) WT/DS461/R 
 
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  methodologies envisaged in that Agreement, without penalizing legitimate imports entering at 
more competitive prices.653 
7.450.  Colombia asserts that the Colombian authorities are already applying the disciplines of the 
Customs Valuation Agreement, so that the app lication of that agreement and Decree No. 456 are 
complementary and not substitute measures. Colombia points out that pre-existing measures 
applied in parallel with the measure challenged do not constitute alternatives for the purpose of testing necessity under Article XX of the GATT 1994, as was determined by the panel and the 
Appellate Body in Brazil – Retreaded Tyres . According to Colombia, the Panel should therefore 
conclude that the application of the Customs Valuation Agreement is not an alternative to Decree No. 456.
654 
7.451.  Colombia also asserts that this suggestion disregards the magnitude of the problem. 
Colombia notes that the instruments provided for in the Customs Valuation Agreement make it 
possible to question individual imports and were defined in the light of isolated situations of 
customs fraud; hence they would not provide effective tools to address the widespread, massive 
and serious problem faced by Colombia, which is caused by transnational criminal groups 
operating on a large scale. Colombia adds that this alternative would not achieve the same level of protection as the compound tariff and would not be less restrictive, apart from which it would be 
unrealistic to suppose that Colombia could in the short term have a customs service with sufficient 
capacity to deal with the problem effectively.
655 
7.452.  Colombia maintains that, as footwear and apparel are high-risk goods, customs controls 
cover 30% rather than 10% of imports of the produc ts in question, and it would not be possible to 
increase customs controls on these products fu rther because, in addition to overwhelming 
DIAN's capacity, this would delay all foreign trade operations, generating high costs for the whole of the national economy, and would run counter to trade facilitation.
656 
7.453.  Colombia also maintains that, even while applying the compound tariff, it continues to 
apply the Customs Valuation Agreement and the Decision Regarding Cases where Customs Administrations Have Reasons to Doubt the Truth or  Accuracy of the Declared Value, but explains 
that in conformity with Colombian law value checks are carried out declaration by declaration, as 
required by the Customs Valuation Agreement and confirmed by paragraph 1 of the Decision in 
question. Colombia affirms that the mechanisms envisaged in the Customs Valuation Agreement and the above-mentioned Decision are not appropriate to Colombia's problems.
657 
7.454.  The Panel asked Colombia whether it had considered improving the selectivity of the 
systems applied by its customs authority in relation  to those imports of apparel and footwear that 
posed a certain degree of risk of undervaluation or any other risk associated with money 
laundering, so as to make it possible to detect the entry of goods for illicit purposes with greater 
precision and accuracy.658 
7.455.  Colombia responded to this question as follows: 
Colombia's selectivity systems are improving every day and the Government is 
making huge efforts to acquire the best possible risk management system. The level of effectiveness of the controls, i.e. the number of finds (inconsistencies in the documentation or inconsistencies between the load and the documentation) as 
compared with the total number of import declarations inspected is 16%. This 
percentage reflects an improvement in effectiveness during the period of application 
                                               
653 Panama's second written submission, para. 3.34;  opening statement at the first meeting of the 
Panel, para. 1.24; and response  to Panel question No. 66. 
654 Colombia's opening statement at the second meeting of the Panel, para. 101 (referring to 
Panel Report, Brazil – Retreaded Tyres , paras. 7.169, 7.171-7.172 and 7.178; Appellate Body Report, 
Brazil - Retreaded Tyres, paras. 159 and 181). 
655 Colombia's second written submission, paras. 84- 86; opening statement at the first meeting of the 
Panel, paras. 71 and 72; opening statement at the seco nd meeting of the Panel, para. 101; and response to 
Panel questions Nos. 30 and 31. 
656 Colombia's second written submission, para. 86; and opening statement at the second meeting of 
the Panel, para. 72. 
657 Colombia's response to Panel question No. 31. 
658 See Panel question No. 80. WT/DS461/R 
 
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  of the measure, with respect to the period before it was applied, when the percentage 
did not exceed 10%. However, we recall that the challenge facing Colombia is an enormous one due to the presence of drug trafficking and organized criminal groups.
659 
7.456.  In support of its response, Colombia submitted Exhibit COL-43, which indicates as its 
source "Analysis of Operations" and which sets out effectiveness percentages by chapter of the Customs Tariff for 2012 and 2013. According to this exhibit, whereas in 2012 the effectiveness 
percentages were 7% for Chapter 61, 10% fo r Chapter 62, 12% for Chapter 63 and 13% for 
Chapter 64, in 2013 the percentages were 17% for Chapter 61, 16% for Chapter 62, 13% for Chapter 63 and 14% for Chapter 64.
660 
7.457.  Panama did not make any comment on this response. 
7.458.  The Panel has no additional information with respect to this alternative measure suggested 
by Panama. 
7.4.2.6.5.2  Customs cooperation an d information exchange mechanisms 
7.459.  Panama maintains that, as it says Colombia has acknowledged, customs cooperation and 
information exchange mechanisms are a clear and less restrictive alternative means of combating the use of imports for money laundering purposes. Panama asserts that this option is already 
available, because of the signature in 2006 of the Protocol of Procedure for Cooperation and 
Exchange of Customs Information between the Customs Authorities of the Republic of Panama and the Republic of Colombia, within the framework of  the Multilateral Convention on Cooperation and 
Mutual Assistance between the National Customs Di rectorates of Latin America, Spain and Portugal 
(COMALEP), under which the parties may request cooperation or mutual assistance for the purpose 
of exchanging information conducive to the preven tion, investigation, suppression and control of 
customs offences.
661 
7.460.  According to Panama, COMALEP and the Protocol give the parties broad powers to request 
customs information, and the high volume of utiliza tion of the mechanisms of the Protocol is an 
indication of its efficacy.662 Panama states that, between 2012 and 2013, its customs authority 
received 721 requests for information from DIAN and, from January to November 2014, 
696 requests. Panama asserts that its customs auth orities respond to 85% of the requests they 
receive from DIAN, although it admits that the 20-day time-limit has been insufficient due to the nature of the requests themselves and the numer ous formalities that have to be completed to 
obtain the information requested. According to Panama, Colombia acknowledges that the 20-day 
time-limit is extremely short, which is why the period envisaged in the free trade agreement signed by Panama and Colombia, which has not yet entered into force, is between 
90 and 120 days. Panama also points out that if there are requests still awaiting a response, it is 
because of factors such as the inaccuracy of the request or companies having ceased operations.
663 Panama has submitted a note from its national customs authority providing 
information regarding the utilization of the protocol mechanisms664, together with some examples 
of its national customs authority's replies to requests from DIAN.665 
7.461.  Colombia maintains that, being a measure that is in force, the Protocol of Procedure for 
Cooperation and Exchange of Customs Information between the Customs Authorities of the 
Republic of Panama and the Republic of Colombia does not constitute an alternative for the 
                                               
659 Colombia's response to Panel question No. 80. 
660 Analysis of Operations, Selectivity Analysis Chapters (61 to 64), years 2012 and 2013 
(Exhibit COL-43). 
661 Panama's second written submission, para. 3.35;  opening statement at the first meeting of the 
Panel, para. 1.25; and response  to Panel question No. 63. 
662 Panama's response to Panel question No. 63. 
663 Panama's second written submission, para. 3.35;  and response to Panel questions Nos. 65, 145 
and 146. 
664 Ministry of Trade and Industry and National  Customs Authority of Panama, communications, 
25 November 2014 (Exhibit PAN-20). 
665 National Customs Authority of Panama and Nation al Customs and Excise Directorate of Colombia, 
communications (Exhibit PAN-21). WT/DS461/R 
 
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  purposes of the necessity analysis under Article XX of the GATT 1994.666 Colombia also asserts 
that it has had difficulties in the area of customs cooperation with Panama under the Protocol. On the basis of information provided by DIAN, Colombia claims that only 79 of 329 requests submitted to Panama in 2007 received replies; that the pattern of response was similar in the 
years from 2008 to 2010; and that, although in 2011 and 2012 the proportion of replies rose to 
74%, in 2013 and 2014 it fell to 15.6%. Colombia adds that, despite the fact that the Protocol establishes a time limit of 20 days for replies, on average Panama had taken 50 days to respond to 
its requests and had exceeded the four-month limit that the customs legislation gave the 
Colombian customs authorities to gather evidence abroad. Colombia points out that the Protocol does not have a dispute settlement mechanism for enforcing compliance, and that there is no certainty as to whether the Panamanian authorities will collaborate in response to a particular 
request. Colombia also questions the quality of the information provided by Panama in response to 
its requests.
667 Colombia adds that it has signed a free trade agreement with Panama, which 
incorporates customs cooperation and information exchange mechanisms and has a dispute 
settlement mechanism, but Panama has not submitted the agreement for legislative approval.668 
7.462.  This Panel notes the existence of agreement between the parties that a customs 
cooperation and information exchange mechanism coul d, in principle, serve as an alternative to 
the application of the compound tariff. 
7.463.  Colombia has indicated that the aspects it considers necessary for a customs cooperation 
and information exchange mechanism to be an alternative to the application of the compound tariff would be: (i) that it has a dispute settlement mechanism which makes it possible to suspend 
concessions if the other party fails to cooperate; (ii) that it is effectively implemented; (iii) that the 
cooperation covers both goods that qualify on the basis of origin and goods that qualify on the basis of provenance; and (iv) that the cooperation is as comprehensive and as thorough as 
possible.
669 
7.464.  However, the parties disagree about the effectiveness of the customs cooperation and 
information exchange mechanism currently in force between Colombia and Panama.670 This Panel 
notes that, according to the information provided  by Panama in its Exhibit PAN-20, in 2012 the 
Panamanian authorities received around 373 requests from Colombia, and replied to 238 of them (between 2012 and November 2014), which signif ies an average response rate of about 64%. 
In 2013, the Panamanian authorities received around 428 requests, and replied to 290 
(between 2013 and November 2014), which signif ies an average response rate of about 68%. 
In 2014, up to the date of the communication (25 November 2014), around 673 requests were received and elicited 173 replies, which signifies an average response rate of about 26%. The 
aggregate numbers from 2012 to 2014 amount to 1,474 requests and 701 replies, which 
corresponds to an average response rate of about 47%.
671 The Panel also notes that, as Panama 
acknowledges, it took more than the 20 days envisaged in the Protocol for the replies to be 
received. 
7.4.2.6.5.3  The use of the disciplines of  the Agreement on Preshipment Inspection 
7.465.  Panama maintains that another alternative measure would be to apply the disciplines of 
the Agreement on Preshipment Inspection, which provides for inspection procedures on the 
territory of exporter Members that make it possi ble to verify the price of the imported goods. 
Panama maintains that Colombia could contract for preshipment inspection services or require their use. As far as Panama is concerned, the price verification tools of the above-mentioned 
Agreement would be more effective and le ss restrictive than the compound tariff.
672 
                                               
666 Colombia's opening statement at the second meeting of the Panel, para. 104. 
667 Colombia's second written submission, paras. 87- 89; opening statement at the second meeting of 
the Panel, paras. 104-106; and response to Pane l questions Nos. 61, 63, 65, 145, 146 and 147. 
668 Colombia's second written submission, paras. 6, 116-118. News item: La Prensa , "FTA with Colombia 
paralysed", 7 January 2015 (Exhibit COL-39). 
669 Colombia's response to Panel question No. 147. 
670 Protocol of Procedure for Cooperation and Exch ange of Customs Informat ion between the Customs 
Authorities of Panama and Colombia, 31 October 2006 (Exhibit PAN-17). 
671 Ministry of Trade and Industry and National  Customs Authority of Panama, communications, 
25 November 2014 (Exhibit PAN-20). 
672 Panama's second written submission, para. 3.36; and response to Panel questions Nos. 67 and 152. WT/DS461/R 
 
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  7.466.  Colombia maintains that this would be an alternative more restrictive and less effective 
than the compound tariff. Colombia points out that it applied preshipment inspection up until 2000, but abandoned it because of corruption problems with inspection agencies. Colombia adds that the World Customs Organization, the WT O and other entities have expressed concerns 
about the restrictive nature and lack of effectiveness of this mechanism and that the Members of 
the WTO agreed to eliminate it under Article 10.5 of the Agreement on Trade Facilitation.
673 
7.467.  Panama acknowledges that Article 10.5 of the Agreement on Trade Facilitation stipulates 
that Members shall not require the use of preshipment inspections in relation to customs valuation. 
However, Panama points out that the agreement in question is not yet in force and therefore, at 
this time, preshipment inspection is a measure available under the WTO Agreements. Panama adds that rather than preshipment inspection th e Agreement on Trade Facilitation envisages the 
use of a customs cooperation mechanism that takes some of these concerns into account 
(Article 12).
674 
7.468.  This Panel notes that Article 10.5 (Pre shipment Inspection) of the WTO Agreement on 
Trade Facilitation, which has not yet entered into force, reads as follows: 
5.1 Members shall not require the use of preshipment inspections in relation to tariff 
classification and customs valuation. 
5.2 Without prejudice to the rights of Me mbers to use other types of preshipment 
inspection not covered by paragraph 5.1, Me mbers are encouraged not to introduce or 
apply new requirements regarding their use. 
7.469.  This Panel also notes that on 5 June 2014 Colombia notified the Preparatory Committee on 
Trade Facilitation of the designation of all the pr ovisions in Section I of the Agreement on Trade 
Facilitation, including the provisions of Article 10.5, as Category A commitments for implementation upon its entry into force.
675 
7.4.2.6.6  Conclusion as to whether the comp ound tariff is "necessary" to combat money 
laundering 
7.470.  Assuming, for the sake of argument, that  the compound tariff was designed to combat 
money laundering, this Panel concludes that Colombia has not demonstrated that its compound 
tariff is necessary to combat money laundering. 
7.4.2.7  Conclusion as to whether the compo und tariff is a measure necessary to protect 
public morals within the meaning of Article XX(a) of the GATT 1994 
7.471.  As indicated in the preceding paragraphs, the Panel has considered the text of 
Decree No. 456 and the other available evidence co ncerning the structure and application of the 
compound tariff. In the light of all the evidence available, this Panel concludes that Colombia has 
not demonstrated that the compound tariff is a me asure necessary to protect public morals within 
the meaning of Article XX(a) of the GATT 1994. 
7.4.3  Colombia's defence under Article XX(d) of the GATT 1994 
7.4.3.1  The legal standard of Article XX(d) of the GATT 1994 
7.4.3.1.1  The text of Arti cle XX(d) of the GATT 1994 
7.472.  The chapeau  (introductory clause) and paragraph (d) of Article XX of the GATT 1994 read 
as follows: 
                                               
673 Colombia's second written submission, paras. 90-93; and opening statement at the second meeting 
of the Panel, paras. 102-103. 
674 Panama's response to Panel question No. 152. 
675 Preparatory Committee on Trade Facilitation, Communication by Colombia, 
Document WT/PCTF/N/COL/1, 13 June 2014 (Exhibit COL-42). WT/DS461/R 
 
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  Article XX 
General Exceptions  
 
Subject to the requirement that such measures are not applied in a manner 
which would constitute a means of arbitrary or unjustifiable discrimination 
between countries where the same conditions prevail, or a disguised restriction on international trade, nothing in this Agreement shall be construed to prevent 
the adoption or enforcement by any contracting party of measures: 
 
(d) necessary to secure compliance with laws or regulations which are not inconsistent with the provisions of this Agreement, including those relating to 
customs enforcement, the enforcement of monopolies operated under 
paragraph 4 of Article II and Article XVII, the protection of patents, trade marks and copyrights, and the preventi on of deceptive practices; 
 
7.4.3.1.2  Measures necessary to secure co mpliance with laws or regulations which are 
not inconsistent with the GATT 1994 
7.473.  Article XX(d) of the GATT 1994 justifies measures adopted or enforced by a Member that 
are necessary to secure compliance with laws or regulations which are not inconsistent with the provisions of the GATT 1994. The same paragrap h includes, as examples of such laws or 
regulations, laws or regulations relating to cu stoms enforcement, the enforcement of monopolies 
operated under paragraph 4 of Article II and Article XVII, the protection of patents, trademarks 
and copyrights, and the preventi on of deceptive practices. 
7.4.3.1.3  Structure of the analysis 
7.474.  In Korea – Various Measures on Beef , the Appellate Body analysed, for the first time within 
the framework of the WTO, a defence under Article XX(d) of the GATT 1994. The Appellate Body explained that, for a measure inconsistent with th e GATT 1994 to be justified provisionally under 
paragraph (d) of Article XX, it must be shown that: (i) the measure is one designed to "secure 
compliance" with laws or regulations that are not themselves inconsistent with some provision of the GATT 1994; and (ii) the measure is "n ecessary" to secure such compliance.
676 The Member 
invoking Article XX(d) as a justification has the burden of demonstrating that these 
two requirements are met.677 
7.4.3.1.4  To secure compliance with laws or  regulations which are not inconsistent with 
the GATT 1994 
7.475.  With respect to the assessment of whether the measure is designed to secure compliance 
with laws or regulations which are not inconsistent with the GATT 1994, the panel in US - Shrimp (Thailand)  considered that the WTO Member which invokes the defence must: 
(i) identify the laws or regulations with which it is desired to secure compliance; (ii) establish that 
these laws or regulations are not themselves WTO-inconsistent; and (iii) demonstrate that the measure at issue is itself designed to secure compliance with the relevant laws or regulations.
678 
                                               
676 Appellate Body Report, Korea – Various Measures on Beef, para. 157. See also Appellate Body 
Report, Mexico – Taxes on Soft Drinks , para. 67. The expression " designed to 'secure compliance' " in the 
original English language text of the Appellate Body report was translated into Spanish as " destinada a  'lograr 
la observancia '" and into French as " avoir pour objet d' 'assurer le respect '". In the course of the proceedings, 
which were conducted in Spanish, parties used the expressions " diseñada para " and " destinada a " 
interchangeably. The original Spanish language text  of the present Panel report uses the expression 
"destinada a ". 
677 Appellate Body Report, Korea – Various Measures on Beef, para . 157. 
678 Panel Report, US – Shrimp (Thailand) , para. 7.174. See also Panel Report, US – Customs Bond 
Directive , para. 7.295; Colombia – Ports of Entry , para. 7.514. WT/DS461/R 
 
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  7.4.3.1.4.1  "Laws or regulations which are not inconsistent with the GATT 1994" 
7.476.  The Appellate Body has pointed out that Article XX(d) is applicable to a broad range of 
"laws or regulations" with which compliance has to be secured.679 
7.477.  In Mexico – Taxes on Soft Drinks , the Appellate Body made it clear that the expression 
"laws or regulations" encompasses rules adopted by a WTO Member's legislative or executive 
branches of government that form part of that Member's domestic legal system.680 
7.478.  Moreover, such laws or regulations must not themselves be inconsistent with the 
GATT 1994.681 
7.4.3.1.4.2  "To secure compliance" 7.479.  As in the analysis relating to Article XX(a) of the GATT 1994, where the party invoking the 
defence must demonstrate that its measure has been adopted or enforced to protect public 
morals, or, in other words, whether it is designed to protect public morals, in the analysis relating 
to Article XX(d) the party invoking the defence must demonstrate that its measure is designed to secure compliance with laws or regulations which are not inconsistent with the GATT 1994. 
7.480.  To assess whether a measure is designed to secure compliance with laws or regulations 
not inconsistent with the GATT 1994, a panel must co nfirm that that is, in fact, the objective of the 
measure. In performing this task, a panel may be faced with conflicting arguments of the parties. 
In any event, the panel must make an objective and independent assessment of the objective of 
the measure. To that end, the panel must take acco unt of all the evidence available to it, including 
the texts of statutes, legislative history, and ot her evidence regarding the structure and operation 
of the measure.
682 
7.481.  The Appellate Body has explained that the requirement to demonstrate that a measure is 
designed to secure compliance with laws or regulations which are not inconsistent with the GATT 1994 must focus on "the design" (in Spanish " el destino ") of the measure it is sought to 
justify.
683 The Appellate Body added that a measure can be said to be "designed to" secure such 
compliance even if the measure cannot be guaranteed to achieve its result with absolute certainty, b e c a u s e  w h a t  t h i s  s t e p  i n  t h e  a n a l y s i s  r e q u i r e s  i s  t h a t  t h e  m e a s u r e  b e  d e s i g n e d  t o  s e c u r e  
compliance.
684 In any event, the assessment of the contribution of the measure comes under the 
analysis concerning the necessity of the measure. 
7.482.  In a GATT 1947 case, EEC – Regulation on Imports of Parts and Components , the panel 
observed that Article XX(d) does not refer to the obje ctives of laws or regulations, but only to laws 
or regulations, which indicates that this provisio n covers measures designed to secure compliance 
with laws or regulations as such and not with their objectives. In other words, "secure compliance"  
means enforcing the obligations stipulated in the laws or regulations and not securing the 
attainment of the objectives of those laws or regulations.685 
7.483.  Various WTO panels have referred to the above interpretation in their reports.686 For 
example, the panel in Colombia – Ports of Entry  pointed out that "to secure compliance" means "to 
enforce obligations" rather than "to ensure the attainment of the objectives of laws and 
regulations".687 The panel in Mexico – Taxes on Soft Drinks , for its part, explained that "to secure 
                                               
679 Appellate Body Report, Korea – Various Measures on Beef, para . 162. 
680 Appellate Body Report,  Mexico – Taxes on Soft Drinks , paras. 69–70. 
681 Panel Report, Brazil – Retreaded Tyres , para. 7.388. 
682 Appellate Body Report, EC – Seal Products , para. 5.144. See also Appellate Body Report, US – COOL , 
para. 371; US – Tuna II (Mexico) , para. 314. 
683 Appellate Body Report, Mexico – Taxes on Soft Drinks , para. 72. See also Appellate Body Report, 
Korea – Various Measures on Beef , para. 157. 
684 Appellate Body Report, Mexico – Taxes on Soft Drinks , paras. 74 and 79. 
685 GATT Panel Report, EEC – Regulation on Imports of Parts and Components , paras. 5.14-5.18. 
686 See, for example, Panel Reports, Korea – Various Measures on Beef , para. 658, Canada – Periodicals , 
para. 5.9; Canada – Wheat Exports and Grain Imports , para. 6.248; EC – Trademarks and Geographical 
Indications (US) , para. 7.445. 
687 Panel Report, Colombia – Ports of Entry , para. 7.538. WT/DS461/R 
 
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  compliance" means to enforce compliance and addresses compliance with laws or regulations, 
which characteristically concern obligations rather than requests.688 
7.484.  In  Korea – Various Measures on Beef , the panel found, for example, that Korea's dual 
retail system, which prohibited the sale of domestic  and imported beef in the same shop, or on the 
same shelf in large shops, despite some tr oublesome aspects, had been put in place, at least in 
part, in order to secure compliance with the Korean legislation against deceptive practices, to the 
extent that it served to prevent acts inconsistent with the Unfair Competition Act.689 
7.485.  In Colombia – Ports of Entry , Colombia presented a defence under Article XX(d) with 
respect to its measures relating to ports of entry.690 The panel, in a report that was not appealed, 
concluded that Colombia had demonstrated that the measure concerning ports of entry was designed to secure compliance with the laws related to ensuring customs control and enforcement, 
on the basis of the existing evidence and the ci rcumstances surrounding the implementation of the 
measure, and in the light of the fact that the me asure had been imposed with a view to addressing 
the need to strengthen and improve customs controls related to the importation of textiles and 
footwear coming from Panama.
691 
7.4.3.1.5  "Necessary" – The necessity analysis 7.486.  As mentioned previously
692, the standard for examining necessity has been developed by 
the Appellate Body in the course of analysing the various paragraphs of Article XX of the 
GATT 1994 and Article XIV of the GATS which contain the term "necessary" (in the context of "measures necessary"). Since the necessity analysis  has already been described in connection with 
Article XX(a), in this section the Panel will confine itself to mentioning the distinctive aspects of the 
necessity analysis in the context of Article XX(d) of the GATT 1994, and briefly recalling the 
relevant principles. 
7.487.  The Appellate Body has explained that the determination of whether a measure is 
"necessary" within the meaning of Article XX(d) of the GATT 1994 involves a process of weighing 
and balancing a series of factors which prominently include the contribution of the measure to the enforcement of the law or regulation at issue, the importance of the common interests or values 
protected by that law or regulation, and the acco mpanying impact of the law or regulation on 
imports or exports.
693 In addition, the process includes the determination of whether a 
WTO-consistent alternative measure is reasonably available to the Member concerned, or whether a less WTO-inconsistent measure is reasonably available.
694 
7.488.  In the light of the above, this Panel note s that in examining necessity in the context of 
Article XX(d) of the GATT 1994 the following factors should be comprehensively weighed and balanced: 
a. The importance of securing compliance with the law or regulation at issue; 
b. The contribution of the measure to securing  compliance with the law or regulation at 
issue; and 
c. The trade-restrictiveness of the measure. 
                                               
688 Panel Report, Mexico – Taxes on Soft Drinks , para. 8.175. 
689 Panel Report, Korea – Various Measures on Beef , para. 658. 
690 The measures consisted of (i) the requiremen t to enter and clear goods coming from Panama 
exclusively through Bogota (in the ca se of air shipments) or Barranquill a (in the case of sea shipments); 
(ii) the exception allowing transhi pped goods to enter through any of th e 11 designated ports when proceeding 
in international transit; and (iii) the requirement to present an advance import declaration, pay taxes on the basis of that advance declaration and satisfy special legalization requirements (only in the case of textiles). 
691 Panel Report, Colombia – Ports of Entry , para. 7.543. 
692 See para. 7.304.  above. 
693 Appellate Body Report, Korea – Various Measures on Beef , para. 164. See also Appellate Body 
Report, US – Shrimp (Thailand) / US – Customs Bond Directive , para. 316. 
694 Appellate Body Report, Korea – Various Measures on Beef , para. 166. WT/DS461/R 
 
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  d. If the preliminary conclusion is that the measure is necessary, the result should be 
confirmed by comparing the measure with possible, reasonably available alternatives that could have less trade-restrictive effects and make an equivalent contribution to securing compliance with the law or regulation at issue. 
7.4.3.1.5.1  The importance of the interests or  values protected by the law or regulation 
at issue 
7.489.  The first factor to be considered in exam ining the necessity of a measure is the importance 
of the interests or values promoted by the law or regulation at issue, which should take account of 
the specific facts of each case. The more vital or important the interests or values it is sought to protect, the more easily a measure can be accepted as "necessary".
695 
7.490.  In Colombia – Ports of Entry , for example, the panel was of the view that the fight against 
underinvoicing and smuggling should be assessed in the proper context, in consideration of the 
particular realities faced by Colombia. The panel added that the evidence submitted by Colombia 
demonstrated that problems existed with contraband, smuggling and underinvoicing, particularly 
in connection with the Colón Free Zone, besides which Colombia had presented additional evidence 
to demonstrate the effects produced by goods arriving from Panama in relation to the associated problem of drug trafficking. The panel concluded that combating underinvoicing and money 
laundering associated with drug trafficking was a relatively more important reality for Colombia 
than for many other countries.
696 
7.4.3.1.5.2  The contribution of the measur e to securing compliance with the law or 
regulation at issue 
7.491.  As a second factor in the necessity analysis, a panel should analyse the contribution of the 
measure to securing compliance with the law or regulation at issue. This should also be done in the light of the facts specific to each case and taking into account the importance of the interests 
or values at stake. 
7.492.  A measure contributes to the objective when there is genuine relationship of ends and 
means between the objective pursued and the measure at issue.
697 Furthermore, the greater the 
contribution of the measure to securing compliance with the law or regulation in question, the 
more easily the measure might be considered to be necessary.698 
7.4.3.1.5.3  The trade-restrictiveness of the measure 7.493.  As a third factor in the necessity analysis, a panel should assess the trade-restrictiveness 
of the measure. This should be done in the light of the facts specific to each case and taking into 
account the importance of the interests or values at stake. 
7.494.  A measure with a relatively slight impact on imported products can more easily be 
considered as necessary than a more restrictive measure.
699 Likewise, when a measure produces 
restrictive effects as severe as those resulting from an import ban, it would be difficult for a panel to find that measure necessary unless it is satisfied that the measure is apt to make a material 
                                               
695 Appellate Body Report, Korea – Various Measures on Beef , para. 162. See also Appellate Body 
Report, EC – Asbestos , para. 172; Panel Report, US – Gambling,  para. 6.477. 
696 In that case, Colombia requested the Panel to examine the measures in light of the important 
interests involved in securing compliance with its custom s laws, both in terms of revenue lost, and in terms of 
illegal and criminal activities linked to contraband and smuggling in genera l. Colombia argued that the problem 
of contraband was significant, as contraband trade played  a role in certain types of money laundering, linked to 
other illegal activities. Colombia also asserted that it  was unlike any other country as it was faced with an 
important domestic problem of drug tra fficking and public order. Panel Report, Colombia – Ports of Entry , 
paras. 7.551-7.566. 
697 Appellate Body Report, Brazil – Retreaded Tyres , para. 145. 
698 Appellate Body Report, Korea – Various Measures on Beef , para. 163. See also Panel Report, 
US - Gambling , para. 6.477. 
699 Appellate Body Report, Korea – Various Measures on Beef , para. 163. See also Appellate Body 
Report, Brazil – Retreaded Tyres , para. 150; Appellate Body Report,  China – Publications and Audiovisual 
Products , para. 310; Panel Report, US – Gambling , para. 6.477. WT/DS461/R 
 
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  contribution to the achievement of its objective,  without this being a requirement for a specific 
contribution threshold.700 
7.495.  In Dominican Republic – Import and Sale of Cigarettes , for example, the panel observed 
that the tax stamp requirement, which made it comp ulsory to affix tax stamps to cigarette packets 
in the Dominican Republic, had not prevented Honduras from exporting cigarettes to the 
Dominican Republic, and that its exports had increased quite significantly in recent years, so that the measure had not had any intense restrictive effects on trade.
701 
7.4.3.1.5.4  Comparison of the me asure with possible alternatives 
7.496.  If a panel reaches a preliminary conclusion that the measure is necessary , as the next step 
it should confirm the result by comparing the measure with the alternatives identified by the complainant. 
7.497.  An alternative measure must be one that preserves for the responding Member its right to 
achieve its desired level of protection with respect to the objective pursued and is reasonably available to it.
702 Moreover, in addition to the difficulty of implementing a measure, consideration 
should be given to the following: (i) whether it is a WTO-consistent measure or entails a lesser 
degree of inconsistency; (ii) the extent to which it contributes to the realization of the end pursued; and (iii) whether it has effects less trade-restrictive than the measure at issue.
703 
7.4.3.2  The question of whether the compound  tariff is a measure necessary to secure 
compliance with laws or regulations which ar e not inconsistent with the provisions of 
the GATT 1994 
7.4.3.2.1  Introduction on the analys is under Article XX(d) of the GATT 1994 
7.498.  The Panel will analyse whether Colombia has succeeded in demonstrating that the 
compound tariff is, within the meaning of Articl e XX(d) of the GATT 1994, a measure necessary to 
secure compliance with laws or regulations which are not inconsistent with the provisions of the 
GATT 1994. The Panel will structure its analysis by assessing whether Colombia has demonstrated, 
first, that the compound tariff is designed to secure compliance with laws or regulations which are not inconsistent with the provisions of the GATT 1994; and, second, that the compound tariff is 
necessary to secure such compliance.
704 
7.4.3.2.2  As to whether the compound tariff is a measure designed to "secure 
compliance with laws or regulations whic h are not inconsistent with the GATT 1994" 
7.499.  To assess whether the compound tariff is designed to secure compliance with laws or 
regulations which are not inconsistent with the GATT 1994, the Panel will first enquire whether 
Colombia has succeeded in identifying the laws or regulations with which it wishes to secure compliance; second, determine whether these laws or regulations are not themselves inconsistent 
with the GATT 1994; and, third, analyse whether the compound tariff is itself designed to secure 
compliance with those laws or regulations. This is in line with the structure of analysis used by previous panels.
705 
7.4.3.2.2.1  Has Colombia identified the money laundering legislation with which it 
wishes to secure compliance? 
7.500.  In its first written submission, Colombia stated that Decree No. 456 "is designed to secure 
compliance with the Colombian laws and regulations against money laundering and the financing 
                                               
700 Appellate Body Report, Brazil – Retreaded Tyres , paras. 150 and 151. 
701 Panel Report, Dominican Republic – Importat ion and Sale of Cigarettes , para. 7.215. 
702 Appellate Body Report, US – Gambling , para. 308. 
703 Appellate Body Report, EC – Asbestos , paras. 170-172. 
704 Appellate Body Report, Korea – Various Measures on Beef, para. 157. See also Appellate Body 
Report, Mexico – Taxes on Soft Drinks , para. 67. 
705 Panel Report, US – Shrimp (Thailand) , para. 7.174. See also Panel Report,  US – Customs Bond 
Directive , para. 7.295; Colombia – Ports of Entry , para. 7.514. WT/DS461/R 
 
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  of other criminal activities".706 In the same submission, Colombia referred to Article 323 of the 
Criminal Code on money laundering and Article 345 of the Criminal Code on the financing of terrorism.
707 
7.501.  In response to the Panel's questions, Colombia pointed out that these were not the only 
provisions with which Decree No. 456 seeks to secure compliance. Colombia indicated that, 
inter alia , the following provisions were also relevant: (i) Article 321 of the Criminal Code (customs 
tax fraud); (ii) Articles 25, 128, 238, 239, 240, 241, 249, 254, 255, 501-2 of the Customs 
Statute - Decree No. 2685 of 1999 (rules of conduct for administrators, legal representatives, 
customs brokers and auxiliaries; authorization of  the release of imported goods and suspicions 
regarding the declared value of imports; import declaration and Andean Declaration of Value, customs value, commercial invoices and supporting documents; currency conversion; and customs 
offences on the part of international trading co mpanies); (iii) Articles 102, 103, 104 and 107 of the 
Organic Statute of the Financial System – Decree No. 663 of 1993 (administrative control regulations for combating money laundering), and Article 43 of Law No. 190 of 1995 (extending 
the requirements of Articles 102 to 107 of the Or ganic Statute of the Financial System to persons 
engaged in foreign trade, casino or gambling activities); (iv) Decree No. 1071 of 1999 (which relates to the functions of the National Customs and Excise Directorate of Colombia (DIAN) with 
regard to the fiscal security of the Colombian State and the protection of national public order, 
through the administration and control of due comp liance with tax, customs and foreign exchange 
requirements and facilitation of foreign trade operations); (v) Articles 14, 15, 17, 18 and 25 of Andean Community Decision 571 (customs value) and Articles 48, 49, 51 and 61 of the Regulation 
contained in Andean Community Resolution 846 (c ustoms valuation controls); (vi) Law No. 808 of 
27 May 2003, approving the International Conventi on for the Suppression of the Financing of 
Terrorism; and (vii) Law No. 800 of 13 March 20 03, approving the United Nations Convention 
against Transnational Organized Crime.
708 
7.502.  Colombia has referred to all these legal provisions in general terms as the Colombian 
legislation against money laundering and the financing of terrorism.709 
7.503.  Subsequently, in its second written submission and at the second substantive meeting with 
the Panel, Colombia referred to Articles 323 and 3 45 of the Criminal Code as the provisions against 
money laundering and the financing of terrorism with which it wished to secure compliance by means of the compound tariff. 
7.504.  Panama asserts that Colombia has been imprecise in identifying the laws and regulations 
with which compliance would be secured by means of the compound tariff. In Panama's opinion, because of this imprecision and the lack of supporting evidence, neither Panama nor the Panel 
would be able to verify the proper identifi cation of the provisions cited by Colombia.
710 
7.505.  This Panel notes that, throughout its written submissions and oral statements, Colombia 
has referred principally to Articles 323 and 345 of its Criminal Code as the laws or regulations with 
which it seeks to secure compliance by means of it s compound tariff, and that it has organized its 
arguments around these two provisions.711 As regards the other legislation cited by Colombia in 
response to Panel questions, Colombia itself has explained that these provisions were cited by Colombia in response to a question from the Panel.
712 Therefore, in assessing the identification of 
the laws and regulations with which Colombia is seeking to secure compliance, the Panel will focus 
on Articles 323 and 345 of the Colombian Criminal Code. 
                                               
706 Colombia's first written submission, para. 93. 
707 Ibid. paras. 93 and 94; and second written submission, paras. 41-42 and 99. 
708 Colombia's response to Panel questions Nos. 51 and 52. 
709 Colombia's first written submission, paras. 93 and 94. 
710 Panama's second written submission, paras. 3.45-3.54. 
711 Colombia's first written submission, paras. 93-95;  second written submission, para. 99; and opening 
statement at the second meeting of the Panel, para. 65. 
712 Colombia's opening statement at the second meeting of the Panel, para. 73. WT/DS461/R 
 
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  7.506.  The first of these provisions, Article 323 of the Colombian Criminal Code, was reproduced 
by Colombia in its second written submission.713 The text of the provision is also contained in 
Exhibit COL-10, presented by Colombia together with its first written submission.714 
Money laundering. Anyone who acquires, holds, invests, transports, converts, keeps 
custody of or administers assets that originate, directly or indirectly, in activities of 
extortion, unlawful increase in wealth, kidnapping for ransom, rebellion, arms trafficking, or offences against the financial system or public administration or linked 
with the proceeds of offences partaking of a criminal conspiracy, in relation to the 
traffic in toxic drugs, narcotics or psychotropic substances, or which seek to legalize or give a cloak of legality to assets derived from the said activities, or to conceal or disguise the true nature, origin, location, destination or movement of such assets or 
rights therein, or takes any other action to conceal or disguise their illicit origin, shall 
be liable, for this conduct alone, to a term of imprisonment of six (6) to fifteen (15) years and a fine of five hundred (500) to fifty thousand (50,000) times 
the legal minimum monthly wage in force. 
The same penalty shall apply if the behaviour described in the preceding paragraph 
involves assets that have been declared forfeit. 
Money laundering shall be punishable even if the activities from which the assets are 
derived, or the acts punished under the previous paragraphs, were wholly or partly carried out abroad. 
The custodial sentences provided for in this article shall be increased by one third to 
one half if the conduct concerned involved foreign exchange or foreign trade 
operations, or the introduction of goods into the national territory. 
The increase in the penalty envisaged in th e preceding paragraph shall also apply if 
contraband goods were introduced into the national territory. 
7.507.  As far as Article 345 of the Colombian Criminal Code is concerned, Colombia has not 
reproduced its text in any of its submissions or statements, nor has it presented any exhibit 
containing the text. In other words, the content of Article 345 of the Colombian Criminal Code is 
not on the record. Moreover, Colombia has stated that this provision relates not specifically to money laundering but to the offence of financing terrorism. In its various written submissions, Colombia has developed arguments to show that the compound tariff seeks to secure compliance 
with its anti-money laundering legislation. On the other hand, Colombia has not argued that the 
compound tariff seeks to secure compliance with its legislation against the financing of terrorism. 
7.508.  This Panel therefore finds that Colombia has identified Article 323 of its Criminal Code, 
which creates the crime of money laundering, as the anti-money laundering legislation with which 
it seeks to secure compliance by means of the compound tariff. 
7.4.3.2.2.2  Has Colombia demonstrated that its anti-money laundering legislation is not 
inconsistent with the provisions of the GATT 1994? 
7.509.  Colombia maintains that the anti-money  laundering provisions of Article 323 of the 
Colombian Criminal Code are not, in themselves, inconsistent with the GATT 1994 and, moreover, fulfil international commitments undertaken by Colombia and other member countries of the 
international community.
715 
7.510.  Panama maintains that, apart from the above assertion, Colombia has made no attempt to 
show that its domestic laws are consistent with the GATT 1994.716 However, Panama has not 
introduced any arguments or evidence to suggest that Article 323 of the Colombian Criminal Code, 
                                               
713 Colombia's second written submission, para. 41. 
714 National Customs and Excise Directorate, Information and Financial Analysis Unit, Money Laundering 
Typologies Related to Smuggling , January 2006 (Exhibit COL-10), p. 8. 
715 Colombia's first written submission, para. 95. 
716 Panama's second written submission, para. 3.55. WT/DS461/R 
 
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  which defines the offence of money laundering, is inconsistent with any of the provisions of the 
GATT 1994. 
7.511.  This Panel finds no reason why it could or should consider Article 323 of the Colombian 
Criminal Code, in itself, to be inconsistent with the provisions of the GATT 1994. The Panel recalls 
that the Appellate Body has made it clear that a responding Member's law should be treated as 
WTO-consistent until proven otherwise.717 
7.512.  This Panel therefore concludes that there is  no reason to consider that Article 323 of the 
Colombian Criminal Code is itself inconsistent with the provisions of the GATT 1994. 
7.4.3.2.2.3  Has Colombia demonstrated that the compound tariff is itself designed to 
secure compliance with the Colombian anti-money laundering legislation? 
7.513.  Colombia asserts that Decree No. 456 is designed to secure compliance with the 
Colombian anti-money laundering legislation, because it reduces the incentives for criminal groups 
to use imports of apparel and footwear for money laundering purposes by setting artificially low prices.
718 
7.514.  Panama asserts that neither the text of Decree No. 456 nor Colombia's arguments show 
any relationship between the Decree and Colombia's money laundering legislation, particularly Articles 323 and 345 of the Criminal Code.
719 Panama argues that there is no genuine relationship 
of ends and means between the compound tariff provided for in Decree No. 456 and Articles 323 
and 345 of the Criminal Code. In its opinion, the compound tariff is not a measure that has been 
designed to secure compliance with the Colombian legislation on money laundering.720 
7.515.  This Panel notes that, in the course of the present dispute, Colombia has used the same 
arguments to try to show that its compound tariff seeks to combat money laundering as to try to 
show that its compound tariff seeks to secure compliance with Article 323 of the Colombian Criminal Code, that is to say, that the compound tariff, by its design, reduces the incentives for 
criminal groups to use imports of apparel and footwear for money laundering purposes, by means 
of artificially low prices. Colombia refers to the same evidence in support of its arguments in both cases. 
7.516.  In analysing Colombia's defence under Article XX(a) of the GATT 1994, this Panel carried 
out an objective and independent assessment with  regard to whether the compound tariff was 
designed to combat money laundering. The Panel considered that Colombia had not demonstrated a connection between the compound tariff and the alleged objective of combating money 
laundering. The Panel indicated that, taking into account the relevant facts and relevant 
circumstances of the case, the design, architecture and revealing structure of the compound tariff, including the way in which the price thresholds were determined, the way in which the compound 
tariff is applied, the tariff exemptions, the period  of validity of the measure, and the lack of 
automatic measures for following up the imports af fected, it was unable to conclude that there was 
a link between the compound tariff and the declared objective of combating money laundering. For 
these reasons, the Panel concluded that Colombia had failed to demonstrate that the compound 
tariff was designed to combat money laundering.
721 
7.517.  The same considerations also enable the Panel to conclude that Colombia has failed to 
demonstrate that the compound tariff is designed to secure compliance with Article 323 of its 
Criminal Code. The same elements that led the Panel to conclude that Colombia has failed to 
demonstrate that the compound tariff is designed to  combat money laundering, lead it to conclude 
that Colombia has also failed to demonstrate that the measure is designed to secure compliance 
with the Colombian anti-money laundering legislation and, more specifically, with Article 323 of the 
Criminal Code. 
                                               
717 Appellate Body Report,  US – Carbon Steel , para. 157. 
718 Colombia's first written submission, paras. 97-100; second written submission, para. 99; opening 
statement at the first meeting of the Panel, paras. 74-75; and opening statement at the second meeting of the Panel, paras. 65-66. 
719 Panama's second written submission, para. 3. 56; and response to Panel question No. 8. 
720 Panama's second written submission, para. 3. 57; and response to Panel question No. 8. 
721 See paras. 7.399.  -7.400.  above. WT/DS461/R 
 
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  7.518.  In fact, on the basis of the totality of th e evidence, including the text of Decree No. 456, 
and the other evidence submitted by the parties,  no connection has been shown to exist between 
the compound tariff and the alleged objective of securing compliance with the Colombian anti-money laundering provisions, and more specif ically Article 323 of the Criminal Code. Taking 
into account the relevant facts and relevant circumstances of the case, the design, architecture 
and revealing structure of the compound tariff, including the way in which the price thresholds were determined, the way in whic h the compound tariff is applied, the tariff exemptions, the 
period of validity of the measure, and the lack of automatic measures for following up the imports 
affected, do not make it possible to conclude that there is a link between the compound tariff and the declared objective of securing compliance with the Colombian anti-money laundering legislation. 
7.4.3.2.2.4  Conclusion as to whether the compound tariff is a measure "to secure 
compliance with laws or regulations whic h are not inconsistent with the GATT 1994" 
7.519.  This Panel concludes that, even though Colombia has identified Article 323 of its Criminal 
Code, which is not in itself inconsistent with the provisions of the GATT 1994, as the anti-money 
laundering provision with which it seeks to secure compliance by means of the compound tariff, Colombia has failed to demonstrate that its compound tariff is designed to secure compliance with 
Article 323 of its Criminal Code. 
7.4.3.2.3  As to whether the compound tariff is a measure "necessary" to secure 
compliance with the Colombian anti-money laundering legislation 
7.520.  As the Panel has concluded that Colombia has failed to demonstrate that the compound 
tariff is designed to secure compliance with the Colombian anti-money laundering legislation that it 
has identified, there is no need, in the light of the specific circumstances of this case, to assess whether the compound tariff is necessary  to secure compliance with the Colombian anti-money 
laundering legislation. However, in order to be exhaustive in its analysis, the Panel will continue 
with its assessment, assuming, for the sake of argument, that the compound tariff is designed to secure compliance with the Colombian anti-money laundering legislation. 
7.521.  In order to determine whether the compound tariff is necessary  to secure compliance with 
the Colombian anti-money laundering legislation, this Panel will weigh and balance the following factors
722: (i) the importance of securing compliance with the Colombian anti-money laundering 
legislation; (ii) the contribution of the compound  tariff to securing compliance with the Colombian 
anti-money laundering legislation; (iii) the trade-re strictiveness of the compound tariff; and (iv) if 
the Panel reaches a preliminary conclusion that the measure is necessary, it will confirm the result by comparing the compound tariff with the alternatives identified by Panama.
723 
7.4.3.2.3.1  The importance of securing compliance with the Colombian anti-money 
laundering legislation 
7.522.   With respect to the importance of the ob jective of securing compliance with the Colombian 
anti-money laundering legislation, Colombia, referring to the same arguments that it used in the 
context of its defence under Article XX(a), maintain s that the interests or values at stake in this 
dispute are vital and important in the highest degree.724 For its part, Panama does not question 
that the fight against money laundering is a social interest that could be characterized as vital and 
important in the highest degree.725 
                                               
722 Appellate Body Report,  Brazil – Retreaded Tyres , para. 182; US – Gambling , paras. 306-307. 
723 Appellate Body Report, Korea – Various Measures on Beef, para. 166; Brazil – Retreaded Tyres , 
para. 156; China – Publications an d Audiovisual Products , paras. 241-242, EC – Seal Products , paras. 5.214 
and 5.169. 
724 Colombia's first written submission, para. 102; second written submission, para. 108; and opening 
statement at the first meeting of the Panel, para. 76. 
725 Panama's second written submission, para. 3.32; response to Panel question No. 7. WT/DS461/R 
 
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  7.523.  The Panel has previously concluded that, co nsidering the evidence available, the objective 
of combating money laundering in Colombia reflects social interests that could be characterized as vital and important in the highest degree.
726 
7.524.  Applying the same considerations that led to the conclusion that the objective of 
combating money laundering in Colombia reflects social interests that can be characterized as vital 
and important in the highest degree, this Panel concludes that the objective of securing compliance with the Colombian anti-money laundering legislation reflects social interests that can 
be characterized as vital and important in the highest degree. 
7.4.3.2.3.2  The contribution of the compo und tariff to securing compliance with the 
Colombian anti-money laundering legislation 
7.525.  With respect to the contribution of the measure to securing compliance with the Colombian 
anti-money laundering legislation, Colombia, referring to the same arguments that it put forward 
in the context of its defence under Article XX(a) (t o the effect that the compound tariff would help 
to combat money laundering), maintains that its compound tariff contributes to securing 
compliance with the Colombian anti-money laundering legislation because it reduces the incentives 
for using imports of textiles, apparel and footwear for money laundering purposes.
727 
7.526.  This Panel concluded previously that it did not consider that the existence of a genuine 
relationship of means and ends between the compound tariff and the alleged objective of 
combating money laundering had been demonstrated, and that, taking into account the relevant facts and relevant circumstances of the case, including the design, architecture and revealing structure of the compound tariff, Colombia had not demonstrated that the compound tariff 
contributed to the objective of combating money laundering.
728 
7.527.  For the same reasons that led this Panel to conclude that Colombia has failed to 
demonstrate the contribution of the compound tariff to the objective of combating money 
laundering, this Panel concludes that Colombia has failed to demonstrate the contribution of the 
compound tariff to the objective of securing co mpliance with the Colombian anti-money laundering 
legislation and, more specifically, with Article 323 of the Criminal Code. 
7.528.  In fact, on the basis of the totality of th e evidence, including the text of Decree No. 456, 
and the other evidence submitted by the parties, this Panel does not consider that Colombia has 
demonstrated the existence of a genuine relationship of ends and means between the compound tariff and the alleged objective of securing compliance with the Colombian anti-money laundering 
legislation. Taking into account the relevant facts and relevant circumstances of the case, including 
the design, architecture and revealing structure of the compound tariff, the Panel concludes that Colombia has failed to demonstrate the contribution of the compound tariff to the objective of 
securing compliance with the Colombian anti-money laundering legislation. 
7.4.3.2.3.3  The trade-restrictiv eness of the compound tariff 
7.529.  With respect to the trade-restrictiveness of the measure, Colombia, referring to the same 
arguments as it used in relation to Article XX(a), asserts that the measure has a moderate effect 
on trade because it opens up opportunities for those who import at market prices, does not impose quantitative limits on imports, and is carefully calibrated to affect imports likely to be used for money laundering.
729 Panama, for its part, asserts that the compound tariff has a highly restrictive 
impact on international trade.730 
7.530.  This Panel has previously concluded, in the necessity analysis under Article XX(a) of the 
GATT 1994, that, considering the facts of the presen t case, the restrictive effect of the compound 
                                               
726 See para. 7.408.  above. 
727 Colombia's first written submission, para. 103; second written submission, para. 108; and opening 
statement at the first meeting of the Panel, para. 76. 
728 See para. 7.437.  above. 
729 Colombia's first written submission, para. 104; second written submission, para. 108; and opening 
statement at the first meeting of the Panel, para. 76. 
730 Panama's first written submission, paras. 5.3-5.4; second written submission, paras. 3.31 and 3.63; 
and opening statement at the second meeting of the Panel, para. 7. WT/DS461/R 
 
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  tariff on international trade is certain and recognized by both parties, and that the compound tariff 
is less trade-restrictive than a ban on imports, or a measure having the effects of a ban.731 
7.531.  This conclusion is also applicable to the necessity analysis under Article XX(d) of the 
GATT 1994. 
7.4.3.2.3.4  Preliminary conclusion co ncerning the assessment of the factors 
7.532.  Assuming, for the sake of argument, that  the compound tariff was designed to secure 
compliance with the Colombian anti-money laundering legislation, this Panel concludes that, even 
though the objective of securing compliance with the Colombian anti-money laundering legislation 
reflects social interests that could be characterized as vital and important in the highest degree, Colombia has failed to demonstrate the contribution of the compound tariff to the alleged objective of securing compliance with the Colombian anti-money laundering legislation. For this reason, and 
taking into account the restriction on internationa l trade caused by the compound tariff, Colombia 
has failed to demonstrate that the compound tariff is a measure necessary to secure compliance with the Colombian anti-money laundering legislat ion and, more specifically, Article 323 of the 
Criminal Code. 
7.4.3.2.4  Has Panama identifi ed possible alternatives reason ably available to Colombia? 
7.533.  As a result of its weighing and balancing of factors, this Panel has arrived at the 
preliminary conclusion that Colombia has failed to demonstrate that the compound tariff is a 
measure necessary to secure compliance with the Colombian anti-money laundering legislation. Accordingly, it is neither necessary nor appropriate to compare the compound tariff with the alternatives identified by Panama. 
7.534.  In order to be exhaustive in its analysis in relation to Article XX(a) of the GATT 1994, the 
Panel confined itself to recalling the arguments of the parties with respect to the alternatives identified by Panama and making the factual findings it considered relevant. 
7.535.  Panama has identified the same alternatives both for combating money laundering within 
the scope of Article XX(a) of the GATT 1994 an d for securing compliance with the Colombian 
anti-money laundering legislation within the scope of Article XX(d). Accordingly, the factual 
findings made by this Panel under Article XX(a) of the GATT 1994
732 are equally applicable under 
Article XX(d). 
7.4.3.2.5  Conclusion as to whether the compound tariff is "necessary" to secure 
compliance with the Colombian anti-money laundering legislation 
7.536.  Assuming, for the sake of argument, that the compound tariff is designed to secure 
compliance with the Colombian anti-money laundering legislation, this Panel concludes that Colombia has failed to demonstrate that its compound tariff is necessary to secure compliance with 
the Colombian anti-money laundering legislation an d, more specifically, with Article 323 of the 
Criminal Code. 
7.4.3.3  Conclusion as to whether the compo und tariff is a measure necessary to secure 
compliance with laws or regulations which are not inconsistent with the GATT 1994, 
within the meaning of Article XX(d) of the GATT 1994 
7.537.  The Panel has considered the text of Decree No. 456 and the other available evidence 
concerning the structure and application of the compound tariff. In the light of all the evidence 
available, this Panel concludes that Colombia has failed to demonstrate that the compound tariff is 
a measure necessary to secure compliance with laws or regulations which are not inconsistent with the GATT 1994, within the meaning of Article XX(d) of the GATT 1994. 
                                               
731 See para. 7.444.  above. 
732 See paras. 7.448.  -7.469.  above. WT/DS461/R 
 
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  7.4.4  The chapeau  (introductory clause) of Article XX of the GATT 1994 
7.4.4.1  The legal standard of the chapeau  
7.4.4.1.1  The text of the chapeau  
7.538.  The chapeau  of Article XX of the GATT 1994 reads as follows: 
Article XX 
General Exceptions 
Subject to the requirement that such measures are not applied in a manner which 
would constitute a means of arbitrary or unjustifiable discrimination between countries 
where the same conditions prevail, or a disguised restriction on international trade, nothing in this Agreement shall be construe d to prevent the adoption or enforcement 
by any contracting party of measures … 
7.4.4.1.2  Object and purpose of the chapeau  
7.539.  The object and purpose of the chapeau  of Article XX of the GATT 1994 is to prevent abuse 
of the exceptions for which the article provides. Thus, the chapeau  incorporates the principle that, 
although the exceptions for which Article XX provides  can be invoked as legal rights, they must not 
be applied in such a way as to frustrate or nullify the legal obligations contained in the Agreement. In other words, "the measures falling within the particular exceptions must be applied reasonably, 
with due regard both to the legal duties of the pa rty claiming the exception and the legal rights of 
the other parties concerned."
733 
7.540.  The Appellate Body has explained that the chapeau  is an expression of the principle of 
good faith, a general principle of international law that prohibits the abusive exercise of a 
State's rights. This principle enjoins that whenever  the assertion of a right impinges on the field 
covered by a treaty obligation, that right must be exercised bona fide , that is to say, 
reasonably.734 
7.4.4.1.3  The requirements of the chapeau  
7.541.  In accordance with the chapeau  of Article XX of the GATT 1994, the parties may adopt or 
enforce measures justified by any of the paragraphs  of that article, provided that such measures 
are not applied in a manner which would constitute a means of arbitrary or unjustifiable 
discrimination between countries where the same conditions prevail, or a disguised restriction on international trade.
735 The burden of demonstrating that a measure also complies with the 
provisions of the chapeau  rests on the party invoking an exception under Article XX of the 
GATT 1994.736 
7.542.  The Appellate Body has also made it clear that the chapeau  addresses not so much the 
questioned measure or its specific contents as such, but rather the manner in which that measure 
is applied.737 For example, the panel in Brazil  – Retreaded Tyres  explained that it would not, in its 
necessity analysis under Article XX(b) of the GATT 1994, examine the manner in which the measure was implemented in practice, including an y elements extraneous to the measure itself 
that could affect its ability to perform its function, or consider situations in which the ban did not 
apply. The panel explained, however, that those elements would be especially relevant to its assessment under the chapeau  of Article XX, where the focus would be, by contrast, primarily on 
the manner in which the measure was applied.
738 
                                               
733 Appellate Body Report, US – Gasoline , p. 22. 
734 Appellate Body Report, US – Shrimp , para. 158. 
735 See, for example, Appellate Body Report, Brazil – Retreaded Tyres , para. 215. 
736 Appellate Body Report, US – Gasoline , pp. 22-23. 
737 Ibid. p. 22. 
738 Panel Report, Brazil – Retreaded Tyres , para. 7.107. WT/DS461/R 
 
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  7.4.4.1.4  Arbitrary or unjustifiable discri mination between countries where the same 
conditions prevail 
7.543.  The Appellate Body has explained that, in order for a measure to be applied in a manner 
which would constitute "arbitrary or unjustifiable discrimination between countries where the same 
conditions prevail", three elements must exist: (i ) the application of the measure must result in 
"discrimination"; (ii) the discrimination must be "arbitrary or unjustifiable in character"; and (iii) this discrimination must occur "between countries where the same conditions prevail".
739 
7.544.  With regard to the element of "arbitrary  or unjustifiable discrimination", the analysis 
relates primarily to the cause or the rationale of the discrimination, that is, whether the discrimination that results from the application of some measure has a legitimate cause or basis in the light of the guidelines laid down in the paragraphs of Article XX. In other words, there is 
arbitrary or unjustifiable discrimination "when a Member seeks to justify the discrimination 
resulting from the application of its measure by a rationale that bears no relationship to the accomplishment of the objective that falls within the purview of one of the paragraphs of 
Article XX, or goes against this objective."
740 That is, the assessment of whether discrimination is 
arbitrary or unjustifiable should be made in the light of the objective of the measure.741 
7.545.  With regard to the words "between countries where the same conditions prevail", the 
Appellate Body has stated that the discrimination may occur not only between different exporting 
Members, but also between exporting Members and the importing Member concerned.742 
The Appellate Body has also explained that Article XX does not require a Member to anticipate and provide explicitly for the specific conditions prev ailing and evolving in every individual Member.
743 
7.4.4.1.5  Disguised restrict ion on international trade 
7.546.  With respect to the phrase "disguised restriction on international trade", the 
Appellate Body has explained that: 
"[A]rbitrary discrimination", "unjustifiable discrimination" and "disguised restriction" 
on international trade may, accordingly, be read side-by-side; they impart meaning to one another. It is clear to us that "disguised restriction" includes disguised  
discrimination  in international trade. It is equally clear that concealed or unannounced  
restriction or discrimination in international trade does  not exhaust the meaning of 
"disguised restriction." We consider that "disguised restriction", whatever else it covers, may properly be read as embracing restrictions amounting to arbitrary or 
unjustifiable discrimination in international trade taken under the guise of a measure 
formally within the terms of an exception listed in Article XX. Put in a somewhat different manner, the kinds of considerations pertinent in deciding whether the 
application of a particular measure amounts to "arbitrary or unjustifiable 
discrimination" may also be taken into account in determining the presence of a "disguised restriction" on international trade. The fundamental theme is to be found in 
the purpose and object of avoiding abuse or  illegitimate use of the exceptions to 
substantive rules available in Article XX.
744 (emphasis original) 
7.547.  In that same case, the Appellate Body found a disguised restriction on international trade 
for the same reasons as it fo und unjustifiable discrimination.745 
7.548.  On the basis of the foregoing, the panel in China – Rare Earths considered that 
unjustifiable discrimination can constitute a disguised restriction on trade, but that a disguised restriction on trade may exist even if there is no discrimination.
746 
                                               
739 Appellate Body Report, US – Shrimp , para. 150. 
740 Appellate Body Report, Brazil – Retreaded Tyres , para. 246. 
741 Ibid. paras. 225-227 and 246. 
742 Appellate Body Report, US – Shrimp , para. 150. 
743 Appellate Body Report, US – Shrimp (Article 21.5 – Malaysia) , para. 149. 
744 Appellate Body Report, US – Gasoline , p. 25. 
745 Ibid. pp. 28-29. 
746 Panel Reports,  China – Rare Earths , paras. 7.826 and 7.952. WT/DS461/R 
 
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  7.549.  For its part, the panel in EC – Asbestos  interpreted the phrase "disguised restriction on 
international trade" as follows: 
[T]he key to understanding what is covered by "disguised restriction on international 
trade" is not so much the word "restricti on", inasmuch as, in essence, any measure 
falling within Article XX is a restriction on international trade, but the word 
"disguised". In accordance with the approach defined in Article 31 of the Vienna Convention, we note that, as ordinarily understood, the verb "to disguise" 
implies an intention. Thus, "to disguise" ( déguiser ) means, in particular, "conceal 
beneath deceptive appearances, counterfeit", "alter so as to deceive", "misrepresent", "dissimulate".
747 Accordingly, a restriction which formally meets the requirements of 
Article XX(b) will constitute an abuse if such compliance is in fact only a disguise to 
conceal the pursuit of trade-restrictive objectives.748 
7.4.4.2  The question of whether the comp ound tariff meets the requirements of the 
chapeau  of Article XX of the GATT 1994 
7.550.  The Panel has previously concluded that Colombia has failed to demonstrate that its 
compound tariff is justified under Article XX(a) or Article XX(d) of the GATT 1994, so that it would not be necessary for the Panel to analyse whether the compound tariff meets the requirements of 
the chapeau . 
7.551.  However, in order to be exhaustive in its analysis, the Panel will conduct its assessment of 
the chapeau  by assuming, for the sake of argument, that Colombia has succeeded in showing that 
its measure is provisionally justified under Ar ticle XX(a) or Article XX(d) of the GATT 1994. 
7.4.4.2.1  Introduction on the examination of the chapeau  
7.552.  As already mentioned, under the chapeau  of Article XX, the parties may adopt measures 
justified by any of the paragraphs of the article, provided that such measures are not applied in a 
manner which would constitute a means of arbitrary or unjustifiable discrimination between 
countries where the same conditions prevail, or a disguised restriction on international trade. 
7.553.  Panama gives two reasons why the application of the compound tariff would be arbitrary or 
unjustifiable discrimination or a disguised restriction on international trade: (i) the exclusion of 
imports originating in countries with which Colombia has existing trade agreements would constitute arbitrary or unjustifiable discrimination
749; and (ii) the exclusion of free zones would 
constitute a disguised restriction on international trade.750 The Panel will assess these 
two situations separately. 
7.4.4.2.2  The exclusio n of trading partners 
7.554.  Colombia maintains that Decree No. 456 complies with the chapeau  of Article XX of the 
GATT 1994. Colombia asserts that Decree No. 456 is applicable to all imports of textiles, apparel 
and footwear, "except those arriving from countries with which Colombia has signed a free trade agreement".
751 
7.555.  With respect to this exclusion, Colombia asserts that, in combating money laundering, and 
in particular the use of imports for money laundering purposes, it has sought to extend cooperation with the customs authorities of its trading partners and has adopted customs cooperation and information exchange mechanisms with several of them, mainly within the 
                                               
747 (Footnote original) Petit Larousse illustré (1986), p. 292; Le Nouveau Petit Robert (1994), p. 572. 
748 Panel Report, EC – Asbestos , para. 8.236. 
749 Panama's second written submission, paras. 3.77- 3.78; and opening statement at the first meeting 
of the Panel, para. 1.27. 
750 Panama's second written submission, para. 3.82. 
751 Colombia's first written submission, para. 110. See also first written submission, paras. 110-113; 
second written submission, para. 112; and opening stat ement at the first meeting of the Panel, para. 78. WT/DS461/R 
 
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  framework of free trade agreements signed since 2004.752 Colombia also contends that, due to the 
fact that imports coming from its trading partners  are exempt from payment of the tariff, there is 
less incentive for them to be entered at artificially low prices for money laundering purposes.753 
Colombia claims that, for this reason, the exemption from the compound tariff in favour of imports 
from countries with which it has signed free trade agreements is "rationally related" to the policy 
objective pursued by Decree No. 456, that is, to the fight against money laundering.754 Colombia 
adds that this exclusion is justified under Article XXIV:5 of the GATT 1994. Colombia asserts that 
Panama has characterized the challenged measure as "ordinary customs duties". In 
Colombia's opinion, Panama should consequently acknowledge that the elimination of these customs duties with respect to countries with which Colombia has agreements establishing free trade areas or customs unions is explicitly permi tted by Article XXIV:5 of the GATT 1994. Colombia 
expresses the view that something which is explicitly permitted by Article XXIV of the GATT 1994 
cannot in turn be prohibited by Article XX.
755 
7.556.  Colombia also states that at the end of 2013 it signed a free trade agreement with 
Panama, which contains provisions on customs cooperation and information exchange, and adds 
that, when this agreement enters into force, the compound tariff will not be applied to imports originating in Panama.
756 
7.557.  Panama maintains that the compound tariff is being applied in a manner which constitutes 
a means of arbitrary or unjustifiable discrimination between countries where the same conditions prevail, because it excludes imports coming from countries with which Colombia has free trade agreements in force.
757 Panama asserts that, if the intention is to launder money through 
low-priced imports, it matters little whether or not the imports enter through trading partners. 
Panama points out that, since the trade agreements contain no requirement to pay a tariff or value the goods for customs purposes, anyone seeking to introduce goods linked with illicit activities 
would be perfectly free to declare those goods at a zero price and obtain an even greater profit 
margin.
758 In Panama's opinion, a trade agreement does not reduce concerns about money 
laundering and, indeed, the absence of a tariff would increase the incentive to enter more imports 
at lower prices.759 
7.558.  Point 1 of the paragraph to Article 5 of Decree No. 456 excludes the following imports from 
the application of the compound tariff: 
Those originating in countries with which Colombia has International Trade 
Agreements in force, provided that the tariff subheadings have been negotiated, for 
which purpose the evidence of origin specif ied by the respective Agreement must be 
presented. 
7.559.  The above-mentioned exclusion establishes different treatment between products 
originating in countries with which Colombia has trade agreements in force, in which the tariff subheadings subject to the compound tariff have been negotiated, and products originating in 
those countries with which Colombia does not have a trade agreement in force. Thus, in 
accordance with the very terms of the measure, there is discrimination in the application of the compound tariff. 
                                               
752 Colombia's first written submission, para. 111; second written submission, para. 115; opening 
statement at the first meeting of the Panel, para. 79; opening statement at the second meeting of the Panel, para. 108; and response to Panel questions Nos. 9 and 136. 
753 Colombia's first written submission para. 112; open ing statement at the first meeting of the Panel, 
para. 79. 
754 Colombia's first written submission, para. 113; second written submission, para. 115; opening 
statement at the first meeting of the Panel, pa ra. 79; and response to Panel question No. 136. 
755 Colombia's second written submission, paras. 112- 115; opening statement at the first meeting of the 
Panel, para. 78; opening statement at the second meetin g of the Panel, paras. 108-110; and response to Panel 
questions Nos. 9 and 136. 
756 Colombia's first written submission, para. 114; second written submission, paras. 6 and 116; 
opening statement at the first meeting of the Panel, para. 81; and response to Panel questions Nos. 13, 60 
and 62. 
757 Panama's second written submission, paras. 3.77- 3.78; and opening statement at the first meeting 
of the Panel, para. 1.27. 
758 Panama's second written submission, para. 3. 79; and response to Panel question No. 9. 
759 Panama's second written submission, paras. 3.77- 3.78; and opening statement at the first meeting 
of the Panel, para. 1.27. WT/DS461/R 
 
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  7.560.  Colombia tries to justify this discrimination by indicating that the free trade agreements 
are the means through which it has sought to extend cooperation with the customs authorities of its trading partners and that it has adopted customs cooperation and information exchange mechanisms with several of them. However, as previously noted, the exclusion mentioned in 
Decree No. 456 relates not to countries with whic h Colombia has signed customs cooperation and 
information exchange mechanisms, either within or outside a trade agreement, but to countries with which Colombia has trade agreements in force, in which the respective tariff subheadings 
have been negotiated.
760 
7.561.  Therefore, judging by the terms of Decr ee No. 456, the discrimination resulting from the 
compound tariff's exclusion in favour of the countries with which Colombia has trade agreements in force is not directly related to the existence of customs cooperation and information exchange 
mechanisms or, in consequence, to Colombia's de clared objective of combating money laundering. 
7.562.  The Panel has sought to clarify with the parties the manner in which this exclusion 
operates. To that end, after the first substant ive meeting with the parties, the Panel asked 
Colombia to identify in a list: (i) the countries whose exports are exempt from the application of 
the compound tariff, because they have a trade agreement in force with Colombia; and (ii) the 
countries with which Colombia has signed cooperation and information exchange mechanisms for 
the prevention, investigation and suppression of customs offences, that were in force at the 
time.
761 In response to this request, Colombia provided a table of provisions concerning the 
exchange of customs information included in the trade agreements in force between Colombia and 
the European Union, the United States, the European Free Trade Association, Canada, Chile, 
Mexico, the Northern Triangle and the Andean Community.762 According to Colombia, this table 
constitutes a list of "the trade agreements that Colombia has in force and which include cooperation and information exchange mechanisms".
763 The table supplied by Colombia does not 
make it clear whether there are countries whose exports are exempt from the application of the 
compound tariff because they have a trade agre ement in force with Colombia, but which do not 
have a cooperation and information exchange mechanism, nor whether there are countries with 
which Colombia has agreed existing customs cooperation and information exchange mechanisms, 
but with which it does not maintain a current international trade agreement in which the relevant tariff subheadings have been negotiated. 
7.563.  Following the second substantive meeting with the parties, the Panel asked Colombia to 
clarify: (i) whether it was maintaining any trade agreement in force that did not contain a customs 
cooperation and information exchange mechanism; and (ii) whether there were countries with which Colombia had agreed existing customs cooperation and information exchange mechanisms, 
but with which it did not maintain a current international trade agreement in which the relevant 
tariff subheadings had been negotiated and, in that event, to clarify whether imports originating in those countries were excluded from th e application of the compound tariff.
764 In response to these 
further questions, Colombia referred to the previously submitted Exhibit COL-28, which contains a 
list of Colombia's existing trade agreements that include cooperation and information exchange mechanisms.
765 As already mentioned, the list contained in this exhibit does not make it clear 
whether Colombia maintains any trade agreement in force that does not contain a customs 
cooperation and information exchange mechanism nor whether there are countries with which 
Colombia has agreed a customs cooperation and information exchange mechanism currently in force, but with which it does not maintain a valid international trade agreement in which the 
relevant tariff subheadings have been negotiated. 
7.564.  For its part, Panama has claimed that Colombia maintains customs cooperation and 
information exchange mechanisms in force with countries with which it has not negotiated the 
tariff subheadings relevant to this dispute. Specifically, Panama has claimed that the trade 
agreements signed by Colombia with countries such as Chile, El Salvador, Honduras and Nicaragua exclude a large proportion of the products of Ch apters 61 to 64 of the tariff. However, Colombia 
maintains customs cooperation mechanisms with these countries under the Multilateral Convention 
                                               
760 See para. 7.381.  above. 
761 See Panel question No. 59. 
762 Provisions on the exchange of customs information in existing FTAs with Colombia (Exhibit COL-28). 
763 Colombia's response to Panel question No. 59. 
764 See Panel questions Nos. 138 and 139. 
765 Colombia's response to Panel questions Nos. 138 and 139. WT/DS461/R 
 
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  on Cooperation and Mutual Assistance between the National Customs Directorates of 
Latin America, Spain and Portugal (COMALEP). Pana ma also asserts that Colombia's existing trade 
agreements with the European Free Trade Association, the United States and the European Union contain provisions concerning customs assistance but exclude a significant number of subheadings 
subject to the compound tariff. Panama points  out that, despite the existence of customs 
information exchange mechanisms, apparel and footwear products that were not negotiated in these agreements are subject to the compound tariff. Panama concludes from this that there is no 
support for Colombia's argument to the effect that exclusion from the compound tariff is related to 
the existence of a customs information exchange mechanism.
766 Colombia considers that the 
examples cited by Panama are inappropriate for the purpose of answering the Panel's question, 
but has not submitted arguments or evidence that might invalidate the claims made by Panama.767 
7.565.  In addition, as mentioned before, Colombia has not explained why, if exclusion from the 
application of the compound tariff is linked  with the existence of a customs cooperation 
mechanism, that exclusion covers only imports of products originating in , but not coming from , the 
other party.768 
7.566.  As previously mentioned, Colombia also maintains that imports co ming from its trading 
partners are exempt from payment of the tariff, so that there is less incentive for them to be 
priced at artificially low levels for money laundering purposes. In response to a question from the 
Panel, Colombia did not explain its argument. However, Colombia stated that the reason for excluding its trading partners is the existence of customs cooperation and information exchange mechanisms and that the exclusion is justified by Article XXIV of the GATT.
769 The existence or 
non-existence of tariffs does not appear to be one of the considerations in the typologies of 
undervaluation for money laundering purposes described by Colombia.770 Moreover, as stated in 
an FATF document submitted by Colombia, given that, in most cases, the customs authorities pay 
special attention to preventing smuggling and ensuring that duties and taxes are properly 
collected, it is common for products exempt from tariffs to be subjected to fewer controls, which makes these products especially vulnerable to undervaluation, including for money laundering 
purposes.
771 
7.567.  Colombia also maintains that the exclusion is justified under Article XXIV of the 
GATT 1994. However, Colombia has not developed a defence under Article XXIV of the GATT 1994, 
nor has it claimed that the exclusion of its tradin g partners from the application of the compound 
tariff is necessary insofar as, if it were not authorized, the functioning of the agreed free trade 
area would be impeded. To assess whether the exclusion of trading partners from the compound tariff is justified under Article XXIV of the GATT 1994 would be to go beyond the terms of 
reference of this Panel. The question facing this Panel is different and relates to whether Colombia 
has shown that the reason for discriminating in favour of its trading partners in the application of the compound tariff is related to the purported objective of the measure, namely to combat money 
laundering. 
7.568.  Taking into account the arguments and the evidence available, the Panel does not consider 
that Colombia has shown that the reason for discriminating in favour of its trading partners in the application of the compound tariff is related to th e purported objective of the measure, namely to 
combat money laundering. As a matter of fact, Colombia has not shown that exclusion from the 
compound tariff is related to the existence of a customs cooperation and information exchange mechanism. The arguments and the evidence put fo rward by Colombia do not alter the fact that, 
as indicated by the terms of Decree No. 456, the exclusion from the compound tariff is related to 
the existence of a trade agreement in force, in which the relevant tariff subheadings have been negotiated. Consequently, Colombia has not shown that the discrimination in the application of the 
compound tariff is justified. 
                                               
766 Panama's response to Panel question No. 139. 
767 Colombia's comments on Panama's response to Panel question No. 139. 
768 See para. 7.384.  above. 
769 See response to Panel question No. 9. 
770 See National Customs and Excise Directorat e, Information and Financial Analysis Unit, 
Money Laundering Typologi es Related to Smuggling , January 2006 (Exhibit COL-10), p. 13; Financial Action 
Task Force, Trade-Based Money Laundering  (23 June 2006) (Exhibit COL-11), p. 4. 
771 Financial Action Task Force, Trade-Based Money Laundering , 23 June 2006 (Exhibit COL-11), p. 5. WT/DS461/R 
 
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  7.569.  For all the above reasons, this Panel co ncludes that, due to the exclusion of imports 
originating in countries with which Colombia has trade agreements in force, the compound tariff is applied in a manner which constitutes a means of arbitrary or unjustifiable discrimination between countries where the same conditions prevail. 
7.4.4.2.3  The exclusion of free zones 
7.570.  Panama considers that the compound tariff is a disguised restriction on trade, since it has 
no raison d'être  in regard to the fight against money laundering and the financing of terrorism. 
Panama considers that this is evidenced by the fact that Colombia excludes goods entering free 
zones from the application of the tariff.
772 
7.571.  Colombia, for its part, maintains that Decree No. 456 is a measure to protect public morals 
and secure compliance with the Colombian anti-money laundering legislation, so that there is no 
disguised restriction on trade.773 
7.572.  It is this Panel's understanding that Panama's argument relates both to the exclusion from 
the compound tariff of imports entering regions which Colombia has designated as Special 
Customs Regime Zones and to the exclusion from the compound tariff of goods entering Colombia 
under the Special Import–Export Systems (SIEX)  procedure, known as the "Plan Vallejo". 
7.573.  This Panel will analyse each of these exclusions in turn. 
7.4.4.2.3.1  Special customs regime zones 
7.574.  Article 4 of Decree No. 456 reads as follows: 
The provisions of this Decree shall appl y to goods of Chapters 61 to 64 of the 
Customs Tariff coming from a Special Customs Regime Zone only at the moment at 
which they are going to be introduced into the rest of the national customs 
territory.774 
7.575.  As the Panel has previously found, the compound tariff is not applied to goods entering 
certain regions which Colombia has designated as Special Customs Regime Zones unless those 
goods are going to be introduced into the rest of the national customs territory.775 
7.576.  According to Colombia, there are three special customs regime zones on its territory: 
(i) the Special Customs Regime Zone of Urabá, Tumaco and Guapi; (ii) the Special Customs 
Regime Zone of Maicao, Uribia and Manaure; and (iii) the Special Customs Regime Zone of Leticia. Colombia maintains that the three zones correspon d to border zones with very low levels of 
development, or in a situation of isolation or economic integration with another state, which need 
to be managed differently from the re st of the national customs territory.
776 
7.577.  The above-mentioned exclusion establishes a difference in treatment between products 
entering the Special Customs Regime Zones and products entering the rest of the Colombian 
customs territory. Therefore, there is discrim ination in the application of the measure. 
7.578.  Colombia tries to justify this discrimination by pointing out that imports into these zones 
are for local consumption, because they are border zones with a population living in conditions of 
extreme poverty, and that the goods would not be marketed in the rest of the national territory. 
However, Colombia has not shown that imports of textiles, apparel and footwear that enter these zones, and are consumed inside the zone, cannot be used for money laundering, nor that they pose a lower risk of being used for money laundering. Even if there is a different risk, Colombia 
                                               
772 Panama's second written submission, para. 3.82. 
773 Panama's oral statement at the second meeting of the Panel, para. 116. 
774 Decree No. 456 (Exhibits PAN-3 and COL-17), Article 4. 
775 Ibid. Article 4. 
776 Colombia's response to Panel questions Nos. 16, 133 and 141. WT/DS461/R 
 
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  has not explained what other measures it is taking in these zones to reduce the incentives for 
imports to be used for money laundering.777 
7.579.  Taking into account the arguments and the evidence available, the Panel does not consider 
that Colombia has shown that the discrimination resulting from the application of the compound 
tariff, with respect to the exemption of goods en tering Special Customs Regime Zones, bears any 
relation to the pursuit of the declared objective of combating money laundering. As a matter of fact, Colombia has not shown that imports into Special Customs Regime Zones cannot be used for 
money laundering in accordance with the methodologies that Colombia has described.
778 
Consequently, in view of the stated objective of the measure, Colombia has not demonstrated that 
the discrimination in the application of the compound tariff, with respect to the exemption of goods entering Special Customs Regime Zones, is justified. 
7.580.  This Panel therefore concludes that, due to  the exclusion of Special Customs Regime Zones 
from the application of the compound tariff, the measure is applied in a manner that constitutes a means of arbitrary or unjustifiable discrimination and, in the light of the circumstances of the 
present case, a disguised restriction on international trade. 
7.4.4.2.3.2  Plan Vallejo 7.581.  Article 5.2 of Decree No. 456 excludes from the application of the compound tariff imports 
of clothing industry residues and/or waste of commercial value resulting from production processes 
carried out under the Plan Vallejo. 
7.582.  With respect to this excl usion, Colombia maintains that: 
[T]he process of producing made-up clothing generates waste that can be recycled in 
the manufacturing of various goods such as, for example, toys. The tariff exemption is 
an incentive to use this waste in other products instead of treating it as refuse or rubbish. This is an environmental measure. At the same time, the exclusion of waste 
from the measure does not affect its purpose, which is to discourage the importation 
of made-up clothing at artificially low prices, as a means of money laundering.
779 
7.583.  Moreover, as this Panel has already explained, even though Decree No. 456 does not 
explicitly mention this point, Colombia has made it clear that the compound tariff also does not 
apply to goods entering Colombia under the Special Import–Export Systems (SIEX) procedure, known in Colombia as "Plan Vallejo". Under these systems, imports of certain goods, especially 
production inputs, which are subsequently processe d or used to manufacture goods for export, are 
exempt from the payment of tariffs.
780 
7.584.  The general tariff exemption under the "Pla n Vallejo" establishes differential treatment for 
products entering under the Plan Vallejo and products that enter the rest of the Colombian 
customs territory. Therefore, there is discrim ination in the application of the measure. 
7.585.  With respect to this exemption, Colombia maintains that: 
The users of Plan Vallejo are formal-sector enterprises with an economic track record, 
which pay taxes, are listed in the companies register, and can be followed up in the 
event of disputes over their business tran sactions, as distinct from importers of 
apparel and footwear at artificially low prices which disappear once the goods have entered the national customs territory. These characteristics of the SIEX make it 
difficult for them to be used for money laundering operations.
781 
7.586.  However, as previously indicated, this does not rule out the possibility of a company that 
participates in this programme being able to use imports for money laundering in accordance with 
the methodologies that Colombia has described. In fact, as stated in an FATF document submitted 
                                               
777 Colombia's response to Panel question No. 141. 
778 See Panama's comments on Colombia's response to Panel question No. 133. 
779 Colombia's response to Panel question No. 18. 
780 Panama's response to Panel question No. 89; Colombia's response to Panel question No. 89. 
781 Colombia's response to Panel question No. 90. WT/DS461/R 
 
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  by Colombia, given that, in most cases, the customs authorities pay special attention to preventing 
smuggling and ensuring that duties and taxes are properly collected, it is common for products 
exempt from the payment of tariffs to be subjected to fewer controls, which makes these products especially vulnerable to undervaluation, including for money laundering purposes.
782 
7.587.  Moreover, a joint study by DIAN and the Colombian Information and Financial Analysis Unit 
identifies the use of imports under Special Impo rt-Export Systems (Plan Vallejo) as one of the 
"typologies" detected by the Colombian authorities for laundering money and financing terrorism 
by means of smuggling operations.783 As one of the typologies, this document mentions 
"[c]hanging the destination of raw materials entering the country under the Special Import-Export Systems Plan Vallejo" procedure. This  typology is described as follows: 
A company in Colombia obtains authorization from the competent body to implement 
a non-reimbursable Plan Vallejo raw materials programme. It subsequently brings the 
goods into the national territory but fails to fulfil its commitments to export finished products acquired under the procedure and uses the imported goods for a purpose 
different from that for which they were entered into the country.
784 
7.588.  Another typology mentioned relates to "[i]mports effected by a customs intermediary 
fraudulently replacing a recognized importer and using a programme approved under the Plan 
Vallejo Special Import-Export Systems". This typology is described as follows: 
A recognized importer with a programme approved under the Plan Vallejo Special 
Import-Export Systems is fraudulently replaced by a declarant who passes himself off as the importer's legal representative, for the purpose of bringing goods with false 
import registrations into the country and clearing them for domestic consumption.
785 
7.589.  Taking into account the arguments and the evidence available, the Panel does not consider 
that Colombia has shown that the discrimination resulting from the application of the compound 
tariff, with respect to the exemption for goods en tering Colombia under the "Plan Vallejo", bears 
any relation to the pursuit of the declared objective of combating money laundering. As a matter of fact, Colombia has not shown that imports entering under the Plan Vallejo cannot be used for 
money laundering in accordance with the methodologies that Colombia has described.
786 
Consequently, in view of the stated objective of the measure, Colombia has failed to demonstrate 
that the discrimination in the application of the co mpound tariff, with regard to the exemption of 
goods entering Colombia under the "Plan Vallejo", is justified. 
7.590.  For the foregoing reasons, this Panel concludes that, due to the exclusion of imports 
entering Colombia under the "Plan Vallejo" from the application of the compound tariff, the measure is applied in a manner that constitutes a means of arbitrary or unjustifiable discrimination 
and, in the light of the circumstances of the present case, a disguised restriction on international 
trade. 
7.4.4.3  Conclusion as to whether the comp ound tariff meets the requirements of the 
chapeau  of Article XX of the GATT 1994 
7.591.  This Panel concludes that, because of the various exclusions from the application of the 
measure for imports originating in countries with which Colombia has trade agreements in force, for imports into Colombia's Special Customs Regime Zones and for imports under the "Plan 
Vallejo", even assuming that Colombia had succeeded in showing that its measure was 
provisionally justified under Article XX(a) or Articl e XX(d) of the GATT 1994, the compound tariff is 
not applied in a manner such that it meets the requirements of the chapeau  of Article XX of the 
GATT 1994. 
                                               
782 Financial Action Task Force, Trade-Based Money Laundering , 23 June 2006 (Exhibit COL-11), p. 5. 
783 National Customs and Excise Directorate, Information and Financial Analysis Unit, Money Laundering 
Typologies Related to Smuggling , January 2006 (Exhibit COL-10), pp. 14 and 23-26. See also Panama's 
comments on Colombia's response to Panel questions Nos. 90 and 133. 
784 National Customs and Excise Directorate, Information and Financial Analysis Unit, Money Laundering 
Typologies Related to Smuggling , January 2006 (Exhibit COL-10), p. 14. 
785 Ibid. 
786 See Panama's comments on Colombia's response to Panel question No. 133. WT/DS461/R 
 
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  7.4.5  Conclusion as to whether Colombia's compound tariff is justified under 
Article XX of the GATT 1994 
7.592.  For all the reasons indicated, this Panel concludes that Colombia has failed to demonstrate 
that its measure is justified under Article XX of the GATT 1994. 
7.5  Suggestion for the implementation of recommendations and rulings 
7.593.  Panama has requested the Panel, in the ev ent that it finds that the measure at issue is 
inconsistent with Article II:1(a) and Article II:1(b), first sentence, of the GATT 1994, to formulate 
a suggestion for the implementation of the recommend ations and rulings of the DSB. In particular, 
Panama requests the Panel to suggest the introduction of a "capping mechanism that ensures the observance of the relevant bound tariffs, or a return to the ad valorem tariff system, without 
exceeding the limits of 35% and 40% ad valorem depending on the product, as required in 
Colombia's Schedule of [C]oncessions".
787 
7.594.  Colombia, for its part, has asked the Panel to reject Panama's request on the ground that 
such a suggestion would not be binding788, in addition to which a Member is free to choose the 
method of implementation it deems most appropriate.789 Therefore, Colombia argues that "it would 
be pointless" for the Panel to formulate a sugge stion under the terms of Article 19.1 of the DSU.790 
7.595.  Article 19.1 of the DSU stipulates that: 
Where a panel or the Appellate Body concludes that a measure is inconsistent with a 
covered agreement, it shall recommend that the Member concerned791 bring the 
measure into conformity with that agreement.792 In addition to its recommendations, 
the panel or Appellate Body may suggest ways in which the Member concerned could 
implement the recommendations. 
7.596.  The Appellate Body has recognized that the second sentence of Article 19.1 "does not 
oblige panels to make such a suggestion"793, since this power is "discretionary".794 Furthermore, 
the Member concerned may "choose whether or not to follow a suggestion"795, and is ultimately 
free to choose the measure that implements (complies with) the recommendations and rulings of the DSB in a manner consistent with WTO obligations.
796 
                                               
787 Panama's first written submission, para. 5.2; an d second written submission, para. 4.2. See also 
opening statement at the first meeting of the Panel, para . 1.28. In Panama's opinion,  it would help the parties 
"to dispel doubts with respect to the legality of different ways of implementation", and enable the Colombian 
Government "to relieve internal pr essures from the industrial sectors that benefit from the measure in 
question" with regard to possible implementation me asures. Panama's response to Panel question No. 153. 
788 Colombia's first written submission, para. 117; and second written submission, para. 122 (citing 
Appellate Body Report, EC – Bananas III (Article 21.5 – Ecuador II)  / EC – Bananas III (Article 21.5 – US) , 
para. 321. See also response to Panel question No. 155,  para. 164; and comments on Panama's response to 
Panel question No. 153, paras. 69 and 70. 
789 Colombia's first written submission, para. 117; and second written submission, para. 122 (citing 
Appellate Body Report, US – Oil Country Tubular Goods Sunset Reviews (Article 21.5 – Argentina) , para. 184). 
See also response to Panel question No. 155, para. 164; and comments on Panama's response to Panel 
question No. 154, para. 71. 
790 Colombia's response to Panel question No. 154, para. 163. 
791 (Footnote original) The "Member concerned" is the party to the dispute to which the panel or 
Appellate Body recommen dations are directed. 
792 With respect to recommendations in cases not involving a violation of GATT 1994 or any other 
covered agreement, see Article 26. 
793 Appellate Body Report,  US – Anti-Dumping Measures on Oil Country Tubular Goods , para. 189. 
794 Appellate Body Report, US – Oil Country Tubular Goods Sunset Reviews (Article 21.5 – Argentina) , 
para. 183. 
795 Appellate Body Report, EC – Bananas III (Article 21.5 – Ecuador II) / EC – Bananas III (Article 21.5 
– US) , para. 321. 
796 Appellate Body Report, US – Oil Country Tubular Goods Sunset Reviews (Article 21.5 – Argentina) , 
para. 184. Furthermore, the fact that the party concerned or complained against has carefully followed the 
panel's suggestion does not create a presumption that the new measure is in compliance with WTO rules. 
Appellate Body Report, EC – Bananas III (Article 21.5 – Ecuador II) / EC – Bananas III (Article 21.5 – US) , 
para. 325. WT/DS461/R 
 
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  7.597.  In this dispute, the Panel has found that the measure at issue is in the nature of an 
"ordinary customs duty". Colombia has various options that would allow it to bring the compound tariff into conformity with its obligations under  the GATT 1994. In this respect, a "capping 
mechanism" is an option that the Appellate Body has considered possible "under certain 
circumstances" to ensure that the ad valorem  equivalents of specific duties would not exceed the 
tariff bindings provided for in the Member's Schedule.
797 Since the Appellate Body has already 
indicated that the option of a "ceiling" or "cap" could, under certain circumstances, be a viable 
measure for bringing a tariff into conformity with the obligations set out in Article II of the GATT 
1994, the Panel does not see what further purpose would be served by making a suggestion in this respect in the present report.
798 
7.598.  Alternatively, the other measure suggested by Panama is that Colombia should 
re-establish the previous ad valorem  tariff system without exceeding the levels bound in its 
Schedule. An implementation measure in ad valorem terms whose tariff impact does not exceed 
the levels bound in Colombia's Schedule of Concessions (also expressed in ad valorem  terms) 
would be an appropriate application measure in the circumstances of this dispute. However, as 
explained throughout this report, even if it were to opt for a specific tariff or a compound tariff, Colombia could adopt certain mechanisms to ensure that the ad valorem equivalent of those tariffs 
do not exceed the levels bound in its Schedule of Concessions. Therefore, since Colombia is 
maintaining its prerogative of determining the most appropriate means of implementing the DSB's recommendations and rulings, the Panel refrains from suggesting that Colombia should re-establish the previous ad valorem  tariff system for the relevant products. 
7.599.  Finally, the Panel is not convinced that the options which Panama has proposed are the 
only two ways in which Colombia could comply with the DSB's recommendations and rulings. 
7.600.  For the above reasons, the Panel refrains from making a suggestion concerning the way in 
which Colombia could implement the DSB's recommendations and rulings in the present dispute. 
7.6  Final comments 7.601.  In accordance with Article 12.11 of the DSU: 
Where one or more of the parties is a deve loping country Member, the panel's report 
shall explicitly indicate the form in which account has been taken of relevant provisions on differential and more-favou rable treatment for developing country 
Members that form part of the covered agreements which have been raised by the 
developing country Member in the course of the dispute settlement procedures. 
7.602.  Article 12.10 of the DSU states that: "in examining a complaint against a developing 
country Member, the panel shall accord sufficient time for the developing country Member to 
prepare and present its argumentation." 
7.603.  In the course of the present procedure, th e parties have not invoked any of the provisions 
that envisage differential and more favourable treatment for developing countries. In the Panel's 
opinion, neither does it seem that any of these provisions are relevant for resolving the specific 
issues that form the subject of the present dispute. 
7.604.  In any event, in adopting the timetable for the proceedings, the Panel took into account 
the need to give all the parties sufficient time to prepare and present their respective arguments. 
7.605.  Finally, the Panel notes that in the course of the procedure Colombia has made reference 
to the priority it assigns to the fight against mone y laundering and offences related to that activity, 
including the traffic in illicit drugs. Colombia has developed arguments and provided evidence 
                                               
797 Appellate Body Report, Argentina – Textil es and Apparel , para. 54. 
798 The Panel notes that Colombia has acknowledged that  a "legislative ceiling" could prevent specific 
tariffs from exceeding the bound ad valorem  levels. Colombia's first written submission, para. 63. The Panel 
has found that Decree No. 456 does not provide for a "l egislative ceiling" that would prevent the compound 
tariff from resulting in duties that exceed the levels bound in Colombia's Schedule of Concessions. See 
para. 7.186.  above. WT/DS461/R 
 
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  concerning the serious effects that money laundering is having on its society and concerning the 
costs which combating that activity has imposed on Colombian society and the Colombian State. 
7.606.  As indicated in the preceding sections, the Panel's findings in this report do not question 
the right of WTO Members to implement measures necessary to combat money laundering and 
related offences, in a manner consistent with international anti-crime commitments, as well as 
those which derive from the WTO Agreements. 
8  CONCLUSIONS AND RECOMMENDATIONS 
8.1.  With respect to the issue of the applicability of Article II of the GATT 1994 raised by 
Colombia, the Panel has found that the measure at issue is structured and designed to be applied to all imports of the products concerned, without distinguishing between "licit" and "illicit" trade. 
Moreover, no legal provision that bans the import ation of goods whose declared prices are below 
the thresholds established in Decree No. 456 has been identified. For these reasons, in the context 
of the present dispute, it is unnecessary for the Panel to issue a finding with regard to whether the obligations contained in Articles II:1(a) and II:1(b) of the GATT 1994 are applicable to "illicit 
trade". 
8.2.  With respect to imports of products classified in Chapters 61, 62, and 63 and tariff 
line 6406.10.00.00, the compound tariff constitute s an ordinary customs duty which exceeds the 
levels bound in Colombia's Schedule of Concessions and is therefore inconsistent with 
Article II:1(b), first sentence, of the GATT 1994, in the following circumstances: 
a. The tariff consisting of an ad valorem  component of 10% plus a specific component of 
US$5/kg, when the f.o.b. import price is US$10/kg or less; 
b. The tariff consisting of an ad valorem  component of 10% plus a specific component of 
US$5/kg, when products of the same subheading are imported, some at f.o.b. import prices above and others at f.o.b. import prices below the threshold of US$10/kg; and 
c. With respect to subheading 6305.32, the tariff consisting of an ad valorem  component of 
10% plus a specific component of US$3/kg, when the f.o.b. import price is greater than US$10/kg but less than US$12/kg. 
8.3.  With respect to imports of products classifi ed in various tariff headings of Chapter 64 subject 
to the measure at issue, the compound tariff cons titutes an ordinary customs duty which exceeds 
the levels bound in Colombia's Schedule of Concessions and is therefore inconsistent with Article II:1(b), first sentence, of the GATT 1994, in the following circumstances: 
a. The tariff consisting of an ad valorem  component of 10% plus a specific component of 
US$5/pair, when the f.o.b. import price is US$7/pair or less; and 
b. The tariff consisting of an ad valorem  component of 10% plus a specific component of 
US$5/pair, when products of the same subheading are imported, some at f.o.b. import 
prices above and others at f.o.b. import prices below the threshold of US$7/par. 
8.4.  In the circumstances indicated in the preced ing paragraphs, the compound tariff also accords 
treatment less favourable than that envisaged in Colombia's Schedule of Concessions, in a manner 
inconsistent with Article II:1(a) of the GATT 1994. 
8.5.  Colombia has failed to demonstrate that the compound tariff is a measure necessary to 
protect public morals within the meaning of Article XX(a) of the GATT 1994. 
8.6.  Colombia has also failed to demonstrate that the compound tariff is a measure necessary to 
secure compliance with the Colombian anti-money laundering legislation, and more specifically Article 323 of the Criminal Code, within the meaning of Article XX(d) of the GATT 1994. 
8.7.  Even assuming that Colombia had succeeded in demonstrating that its measure is 
provisionally justified under Article XX(a) or Article XX(d) of the GATT 1994, the compound tariff is WT/DS461/R 
 
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  not applied in a manner that meets the requirements of the chapeau  of Article XX of the GATT 
1994. 
8.8.  In accordance with Article 3.8 of the DSU, in cases where there is an infringement of the 
obligations assumed under a covered agreement, the action is considered prima facie  to constitute 
a case of nullification or impairment of benefits accruing under the agreement in question. In view 
of the foregoing, the Panel concludes that, insofar as Colombia has acted in a manner inconsistent with the provisions of the GATT 1994, it has nullified or impaired benefits accruing to Panama 
under that agreement. 
8.9.  For the reasons indicated in the report, the Panel refrains from making a suggestion as to the 
way in which Colombia could implement the DSB's recommendations and rulings in the present dispute. 
8.10.  In accordance with the provisions of Ar ticle 19.1 of the DSU, the Panel recommends that 
Colombia bring the disputed measure into conformity with its obligations under the GATT 1994. 
__________