WORLD TRADE  
ORGANIZATION  WT/DS366/R 
27 April 2009 
 (09-1865) 
 Original:   English 
  
 
     
 
COLOMBIA – INDICATIVE PR ICES AND RESTRICTIONS 
ON PORTS OF ENTRY 
 
 
Report of the Panel  
 
     WT/DS366/R 
 Page i 
 
 
  TABLE OF CONTENTS 
Page  
I. INTRODUCTION ................................................................................................................... .1 
II. FACTUAL ASPECTS ..............................................................................................................1  
A. BACKGROUND .............................................................................................................................1  
B. THE USE OF INDICATIVE PRIC ES IN RELATION TO TEXTILE , APPAREL AND FOOTWEAR ..............3  
C. RESTRICTION ON PORTS OF ENTRY AND INTER NATIONAL TRANSIT RULES APPLICABLE 
TO  TEXTILES , APPAREL AND FOOTWEAR ARRIVING FROM PANAMA ..........................................6  
D. THE REQUIREMENT TO PRESENT AN ADV ANCE IMPORT DECLARATION AND PAY 
CUSTOMS DUTIES AND SALES TAX ON TH E BASIS OF THE ADVANCE DECLARATION 
APPLICABLE TO IMPORTS OF TEXTILES , APPAREL AND FOOTWEAR ARRIVING FROM 
PANAMA ............................................................................................................................... .......8  
E. THE REQUIREMENT TO PAY A FEE TO RECTIFY AN IMPORT  DECLARATION APPLICABLE 
TO TEXTILE  IMPORTS ARRIVING FROM PANAMA ........................................................................9  
III. PARTIES' REQUESTS FOR FIND INGS AND RECOMMENDATIONS.........................9  
IV. ARGUMENTS OF THE PARTIES ......................................................................................10  
A. EXECUTIVE SUMMARY OF THE FIRST WRITTEN SUBMISSION OF PANAMA ................................10  
1. Introduction................................................................................................................... ..........10  
2. The measures at issue .......................................................................................................... ...12 
(a) Customs valuation of textiles, footwear a nd other products on the basis of "indicative 
prices" ........................................................................................................................ ...............12  
(b) Port of entry and transit restrictions and customs regulations for textiles from Panama..........12  
3. Legal argument ................................................................................................................. ......12  
(a) Colombia's use of indicative prices to de termine the customs value of textiles, 
footwear and other products is  inconsistent with Articles 1,  2, 3, 5, 6 and 7.2 (b), (f) 
and (g) of the Customs Valuation Agreement ...........................................................................12  
(i) Colombia's use of indicative prices is in consistent with Article 1 of the Customs 
Valuation Agreement ............................................................................................................ ....12  
(ii) Colombia's use of indicative prices is inc onsistent with the methodologies set out in 
Articles 2, 3, 5, and 6 of th e Customs Valuation Agreement ....................................................13  
(iii) Colombia's use of indicative prices is incons istent with Articles 7.2(b), (f) and (g) of 
the Customs Valuation Agreement............................................................................................14  
(iv) The payment of customs duties based on indicative prices is not a "guarantee" within the meaning of Article 13 of the Customs Valuation Agreement ..............................................14
 
(b) Colombia's reservation under the Customs Valuation Agreement  to use minimum 
values has expired............................................................................................................. ........15  
(c) Colombia's use of indicative prices to de termine the value of imported textiles, 
footwear and other products for the purpose of levying sales tax when the transaction 
value is used to determine the value of like domestic products for that purpose is 
inconsistent with Article III:2, first sentence, of the GATT 1994 .............................................15  WT/DS366/R 
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  (d)
 Colombia's prohibition of the importation of the importation of textiles from Panama 
except at the ports of Bogota and Barranquilla is  inconsistent with Article XI:1 of the 
GATT 1994 ............................................................................................................................... .16 
(e) The port of entry restrictions are applied in a manner that is inconsistent with 
Article XIII:1 of the GATT 1994 ..............................................................................................16  
(f) Colombia's suspension of the transit regime  for textiles from Panama is inconsistent 
with Article V:2 of the GATT 1994 ..........................................................................................16  
(g) The port of entry restrictions that accord tr eatment less favourable to goods in transit 
through Panama than that which they w ould have been accorded had they been 
transported from their place of origin wit hout going through Panama are inconsistent 
with Article V:6 of the GATT 1994 ..........................................................................................17  
(h) The requirement to present an advance declaration and pay customs duties and sales 
tax for textiles originating in Panama is  inconsistent with Article I:1 of the 
GATT 1994 ............................................................................................................................... .17 
4. Panama's request for findings and recommendations.........................................................18  
B. EXECUTIVE SUMMARY OF THE FIRST WRITTEN SUBMISSION OF COLOMBIA ............................18  
1. Request for preliminary ruling..............................................................................................18  
2. Panama's claims with respect to the indi cative price measure are to be rejected ............19  
(a) Panama's claims under the Customs Valuation Agreement  are to be rejected as 
indicative prices are not a customs valuation method but only a customs control and verification mechanism......................................................................................................... ....19
 
(b) Panama's claim of discrimination under GATT Article III:2 is to be rejected as it 
lacks a factual and legal basis ................................................................................................ ...20 
3. Panama's claims in respect of the port of entry measure are to be rejected .....................21  
(a) Panama's claim under GATT Article XI is w ithout merit as the port of entry measure 
does not constitute a prohibited quantitative restriction ...........................................................21  
(b) Panama's claim that the port of entry measure is applied in a manner that is 
inconsistent with GATT Article XIII:1 is to be rejected because Article XIII:1 does 
not apply to the situation at hand ............................................................................................. .21 
(c) Panama's claim that the port of entry measur e is inconsistent with the requirements of 
GATT Articles V.2 and V.6 lacks a factual basis as the port measure does not apply 
to goods in transit............................................................................................................ ..........22  
(d) Panama's claim that the requirement to present an advance import declaration and pay 
customs duties and sales taxes for textiles or iginating in Panama violates Colombia's 
MFN obligation under GATT Article I:1 lacks merit...............................................................22  
4. Colombia's port of entry measure is in any case justified under the general 
defence of GATT Article XX(d).............................................................................................23  
(a) The port measure is provisionally justified under paragraph (d) of GATT Article XX ...........24  
(i) The port of entry measure concerns a very important set of interests or values ......................24  
(ii) The port of entry measure is apt to contribute in a material way to the achievement of 
the objective .................................................................................................................. ............24  
(iii) The port of entry measure does not have a significant adverse impact on legitimate 
trade.......................................................................................................................... ................25   WT/DS366/R 
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  (iv) There were no reasonably available alternative measures.......................................................25  
(b) The port of entry measure complies with the chapeau of Article XX ......................................25  
5. Request for findings........................................................................................................... .....26  
C. EXECUTIVE SUMMARY OF THE REBUTTAL SUBMISSION OF PANAMA .......................................26  
1. Legal argument ................................................................................................................. ......26  
(a) Colombia has failed to demonstrate that it uses indicative prices as a customs control 
mechanism and not for customs valuation purposes.................................................................26  
(b) Colombia has failed to demonstrate that th e correction of the import declaration and 
the payment of the customs taxes provided for in Article 128.5 e) of Decree No. 2685 are a guarantee mechanism within the meaning of Colombian Law and Article 13 of 
the Customs Valuation Agreement ............................................................................................28
 
(c) Colombia has failed to demonstrate that its use of indicative prices is an action taken 
pursuant to Article 17 of the Customs Valuation Agreement  and the Decision 
Regarding Cases Where Customs Administrations Have Reasons to Doubt the Truth or Accuracy of the Declared Value...........................................................................................29
 
(d) Colombia has failed to rebut Panama's argument that the indicative prices are a continuation of minimum customs values ................................................................................30
 
(e) Colombia has failed to demonstrate that  it does not use indicative prices for the 
determination of the base for the sales tax for imported products in a manner inconsistent with Article I II:2 and Article III:4 of the GATT 1994 ..........................................30
 
(f) Colombia has failed to rebut Panama's clai m that the port of entry restrictions are 
inconsistent with Article XI:1 of the GATT 1994 .....................................................................32  
(i) The port of entry restrictions do not have the characteristics of a genuine customs 
enforcement measure ............................................................................................................ ....32  
(ii) Colombia's interpretation that Article X I:1 prohibits only measures that impose a 
restriction on the quantity of imports is not su pported by the text of Article XI:1 or the 
jurisprudence .................................................................................................................. ..........32  
(g) Colombia has failed to rebut Panama's claim that the ports of entry restrictions are 
inconsistent with Article XIII:1 of the GATT 1994 ..................................................................33  
(h) If the Panel were to find that Article XI:1 is  not applicable, then Panama requests that 
the Panel find that the discriminatory feat ures of the port of entry measures are in 
violation of Article I:1 of the GATT 1994 .................................................................................33  
(i) Colombia has failed to rebut Panama's claim that it imposes limitations on freedom of 
transit in a manner inconsiste nt with Article V:2 of the GATT 1994 ........................................34  
(j) Colombia has failed to rebut Panama's clai m that it accords treatment less favourable 
to goods that have been in transit throu gh Panama in a manner inconsistent with its 
obligations under Article V:6 of the GATT 1994 ......................................................................34  
(k) Colombia has failed to rebut Panama's claim that the requirements to present an 
advance declaration and pay customs duties for textiles originating in Panama are 
inconsistent with Article I:1 of the GATT 1994 ........................................................................35  
(l) Colombia has failed to demonstrate that its  port of entry restrictions are justified 
under Article XX(d) of the GATT 1994 ....................................................................................36  
(i) The ports of entry restrictions are not pr ovisionally justified under paragraph (d) of 
Article XX..................................................................................................................... .............36  WT/DS366/R 
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  (ii)
 The ports of entry restrictions do not meet the requirements set out in the chapeau to 
Article XX..................................................................................................................... .............38  
D. EXECUTIVE SUMMARY OF THE REBUTTAL SUBMISSION OF COLOMBIA ....................................39  
1. Claims relating to Colombia's indicative pricing mechanism as a customs 
valuation method under the Customs Valuation Agreement ................................................39  
(a) Panama fails to meet its burden of proof ..................................................................................39  
(b) A proper interpretation of the challenged provisions concerning indicative prices 
shows that the indicative prices are not used for customs valuation purposes .........................40  
2. Panama's claims on indicative  prices under GATT  Article III ..........................................41  
(a) Panama's claim under GATT Article III:2 is flawed ................................................................41  
(b) Panama's unsubstantiated new claim under GA TT Article III:4 is to be rejected ....................41  
3. Panama's claims in respect of the ports of entry measure ..................................................42  
(a) Panama's claim under GATT Article XI is w ithout merit as the port of entry measure 
does not constitute a prohibited quantitative restriction. ..........................................................42  
(b) The Panel should reject Panama's claim that the port of entry measure is applied in a 
manner that is inconsistent with GATT Ar ticle XIII:1 because Article XIII:1 does not 
apply to the situation at hand ................................................................................................. ...43 
(c) Panama's new claim of inconsistency of th e ports measure with GATT Article I:1 is 
to be rejected................................................................................................................. ............43  
(d) Panama's claim that the port measure is inconsistent with the requirements of 
GATT Articles V:2 and V:6 lacks a factual and legal basis .....................................................43  
(e) The requirement to present an advance import declaration and pay customs duties and sales taxes for textiles originating in Panama does not violate Colombia's MFN obligation under GA TT Article I:1 ...........................................................................................44
 
4. Colombia's general defen ce under GATT Article XX(d)....................................................44  
(a) The port measure is provisionally justified under paragraph (d) of GATT Article XX ...........45  
(b) The ports measure complies with the chapeau of Article XX ..................................................47  
5. Request for findings........................................................................................................... .....48  
V. ARGUMENTS OF THE THIRD PARTIES ........................................................................48  
A. ECUADOR ............................................................................................................................... ...48 
B. EUROPEAN COMMUNITIES ........................................................................................................49  
1. Customs valuation methods based on indicative prices ......................................................49  
(a) The measure at issue ........................................................................................................... ......49  
(b) Indicative Prices and the Customs Valuation Agreement .........................................................50  
(c) Indicative Prices and Article III:2 of the GATT 1994 ...............................................................51  
2. Restrictions on ports of entry................................................................................................. 51 
(a) Restrictions on the number of ports available for imports of textiles from Panama: 
Article XI of the GATT 1994 ....................................................................................................51  
(b) Requirement to present an advance declaration to pay customs duties and sales tax for 
textiles originating in Panama: Article I of the GATT 1994 .....................................................52   WT/DS366/R 
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  (c) Restrictions on the transit regime for textiles from Panama:  Article V:2 and V:6 of 
the GATT 1994 ..........................................................................................................................53  
(d) Justification of the ports of entry restrictions based on Article XX(d) of the 
GATT 1994 ............................................................................................................................... .53 
C. GUATEMALA .............................................................................................................................53  
D. HONDURAS ............................................................................................................................... .57 
E. SEPARATE CUSTOMS TERRITORY OF TAIWAN , PENGHU , KINMEN AND MATSU ......................58  
1. Introduction................................................................................................................... ..........58  
2. Claims relating to the indicative prices used by Colombia .................................................58  
3. Colombia's measures restricting ports of entry for certain Panama products 
cannot be justified under the GATT 1994 .............................................................................58  
4. Members should resolve di sputes in good faith....................................................................59  
F. UNITED STATES .........................................................................................................................60  
VI. INTERIM REVIEW...............................................................................................................61  
A. PANAMA 'S COMMENTS ON THE INTERIM REPORT ......................................................................61  
1. Descriptive part............................................................................................................... ........61  
2. Panama's claims under the Customs Valuation Agreement .................................................62  
3. Panama's claim under Article III:2 of the GATT 1994 ........................................................62  
4. Panama's claim under Article XI:1 of the GATT 1994 ........................................................63  
5. Colombia's defence under Article XX(d) of the GATT 1994 ...............................................63  
6. Miscellaneous .................................................................................................................. ........65  
A. COLOMBIA 'S COMMENTS ON THE INTERIM REPORT ..................................................................65  
1. Descriptive part............................................................................................................... ........65  
2. Panama's claims under the Customs Valuation Agreement .................................................65  
3. Panama's claim under Article III:2 of the GATT 1994 ........................................................66  
4. Panama's claim under Article XI:1 of the GATT 1994 ........................................................66  
5. Panama's claim under Article I:1 of the GATT 1994 ...........................................................67  
6. Panama's claim under Article V:6 of the GATT 1994 .........................................................67  
7. Colombia's defence under Article XX(d) of the GATT 1994 ...............................................67  
VII. FINDINGS....................................................................................................................... ........69  
A. PRELIMINARY ISSUES ................................................................................................................69  
1. Colombia's request for a preliminary ruling........................................................................69  
(a) Background..................................................................................................................... ..........69  
(b) Main arguments of the parties.................................................................................................. .69 
(i) Timing of the preliminary ruling request..................................................................................69  
(ii) Scope of the measures.......................................................................................................... .....70  
(iii) Type of claims: "as such" and/or "as applied" .........................................................................71  WT/DS366/R 
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  (c)
 Consideration by  the Panel ..................................................................................................... ..71 
(i) General considerations......................................................................................................... ....71  
(ii) Timing of the preliminary ruling request..................................................................................72  
(iii) Adequacy to Article 6.2 requirements.......................................................................................73  
Identification of the specific measures at issu e concerning the use of indicative prices ......................... 74  
Panama's claims  "as applied" ................................................................................................... ............... 77  
2. Other issues concerning the scope of the matter subject to dispute ...................................79  
(a) Measures potentially outside  the Panel's mandate ....................................................................79  
(b) Admissibility of Panama's second claim under Article I:1 of the GATT 1994 .........................81  
B. WHETHER COLOMBIA 'S USE OF INDICATIVE PRICES IS INCONSISTENT WITH 
ARTICLES  1, 2, 3, 5, 6 AND 7.2( B), (F) AND (G) OF THE CUSTOMS VALUATION 
AGREEMENT ............................................................................................................................... 82 
1. Main arguments of the parties...............................................................................................82  
2. Consideration by the Panel ....................................................................................................8 6 
(a) Legislation authorizing the use of indicative prices..................................................................86  
(b) Order of analysis.............................................................................................................. .........87  
(c) The concept of customs valuation within the Customs Valuation Agreement ..........................88  
(d) Whether the use of indicative prices by Co lombia constitutes customs valuation ...................89  
(i) The legal nature of the payment under Article 128.5 e) ...........................................................90  
Arguments of the parties ....................................................................................................... .................. 90  
The Panel's approach to examining Colomb ia's domestic law – burden of proof ................................... 91  
Analysis of the "very terms" of the challeng ed provisions...................................................................... 93 
Contextual analysis of the challenged provisions  within Colombian domestic legislation ..................... 93  
Analysis of Article 128.5 e) of Decree No. 2685 and Article 172.7 of 
Resolution No. 4240 in the context of other paragraphs of the same and other relevant 
provisions..................................................................................................................... .................... 94  
The placement of the challenged provision s within Colombia's Customs Code and 
Resolution No. 4240 ............................................................................................................ ............ 96  
Analysis of the challenged provisions in the context of Andean Community law .......................... 98  
Analysis of the specific cases of application of in dicative pr ices............................................................ 9 9 
(ii) Conclusion ..................................................................................................................... .........102  
(e) Whether the use of indicative prices for cu stoms valuation purposes is inconsistent 
with Articles 1, 2, 3, 5, 6 and 7.2(b), (f) and (g) of the Customs Valuation Agreement .........102  
(i) Main arguments of the parties ................................................................................................10 2 
(ii) The text of Articles 1, 2, 3, 5, 6 and 7.2(b), (f) and (g) of the Customs Valuation 
Agreement ...................................................................................................................... .........103  
(iii) The primacy of the transaction value and sequential nature of the valuation methods 
provided in Articles 1 to 7 of the Customs Valuation Agreement ...........................................107   WT/DS366/R 
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  (iv) Whether the use of indicative prices constitu te any of the valuation methods provided 
for in Articles 1, 2, 3, 5 and 6 of the Customs Valuation Agreement......................................107  
(v) Whether the use of indicative prices is consistent with the obligation to conduct customs valuation according to  the sequential methods laid down in Articles 1, 2, 3, 5 
and 6 of the Customs Valuation Agreement............................................................................108
 
(vi) Whether the use of indicative prices is incons istent with Article 7(b), (f) and (g) of the 
Customs Valuation Agreement................................................................................................109  
(f) Conclusion ..................................................................................................................... .........110  
C. WHETHER COLOMBIA 'S USE OF INDICATIVE PRICES TO DETERMINE THE VALUE OF 
IMPORTED TEXTILES , FOOTWEAR AND OTHER PRODUCTS FOR THE PURPOSE OF 
LEVYING SALES TAX IS INCONSISTENT WITH ARTICLE  III:2,  FIRST SENTENCE OF THE 
GATT 1994 ..............................................................................................................................1 11 
1. Main arguments of the parties.............................................................................................111  
2. Consideration by the Panel ..................................................................................................112  
(a) Legislation applicable to the calculation of sales tax for imports subject to indicative 
prices......................................................................................................................... ..............112  
(b) The Panel's approach to Panama's clai m under Article III:2, first sentence ...........................113  
(c) The interaction of Articles 447, 453, 459 a nd 468 of Decree 624 in connection with 
Article 128.5 e) of Decree No. 2685 and Article 172.7 of Resolution No. 4240....................114  
(d) The obligations in Article  III:2, first sentence ........................................................................115  
(e) Whether subject imports and domes tic products are like products.........................................116  
(f) Whether subject imports are taxed in excess ..........................................................................117  
(g) Conclusion ..................................................................................................................... .........120  
D. WHETHER COLOMBIA 'S USE OF INDICATIVE PRICES TO DETERMINE THE VALUE OF 
IMPORTED TEXTILES , FOOTWEAR AND OTHER PRODUCTS FOR THE PURPOSE OF 
LEVYING SALES TAX IS INCONSISTENT WITH ARTICLE  III:4  OF THE GATT 1994 ....................121  
1. Arguments of th e parties......................................................................................................1 21 
2. Consideration by the Panel ..................................................................................................121  
E. WHETHER THE RESTRICTION ON PORTS OF ENTRY APPLICABLE TO TEXTILE , APPAREL 
AND FOOTWEAR ARRIVING FROM PANAMA IS INCONSISTENT WITH ARTICLE  XI:1  OF 
THE GATT 1994 .......................................................................................................................122  
1. Main arguments of the parties.............................................................................................122  
2. Consideration by the Panel ..................................................................................................124  
(a) Legislation authorizing restrictions on ports of entry .............................................................124  
(b) The text of Article XI of the GATT 1947 ................................................................................126  
(c) The ports of entry measure as an "other measure"..................................................................127  
(d) The ports of entry measure as a "restriction on importation" .................................................128  
(i) The concept of a restriction on im portation under Article XI:1 .............................................128  
(ii) Colombia's contextual arguments on interpret ation of Article XI:1 of the GATT 1994 .........132  
(iii) De jure versus de facto restrictions on importation ...............................................................134  WT/DS366/R 
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  (iv)
 Whether the ports of entry measu re affects competitive opportunities ...................................137  
(e) Conclusion ..................................................................................................................... .........144  
F. WHETHER THE RESTRICTION ON PORTS OF ENTRY APPLICABLE TO TEXTILE , APPAREL 
AND FOOTWEAR ARRIVING FROM PANAMA IS INCONSISTENT WITH ARTICLE  XIII:1  OF 
THE GATT 1994 .......................................................................................................................144  
1. Main arguments of the parties.............................................................................................144  
2. Consideration by the Panel ..................................................................................................145  
(a) Legislation authorizing restrictions on ports of entry .............................................................145  
(b) The text of Article XIII:1 of the GATT 1994 ..........................................................................146  
(c) The Panel's approach to examining Pana ma's claim under Article XIII:1 of the 
GATT 1994 ..............................................................................................................................1 46 
G. WHETHER THE RESTRICTION ON PORTS OF ENTRY APPLICABLE TO TEXTILE , APPAREL 
AND FOOTWEAR ARRIVING FROM PANAMA IS INCONSISTENT WITH ARTICLE  I:1 OF 
THE GATT 1994 .......................................................................................................................148  
1. Main arguments of the parties.............................................................................................148  
2. Consideration by the Panel ..................................................................................................149  
(a) Legislation authorizing restrictions on ports of entry .............................................................149  
(b) Panel's approach to examining Panama 's second claim under Article I:1 of the 
GATT 1994 ..............................................................................................................................1 49 
H. WHETHER THE ADVANCE DECLARATION AND LEGALIZATION DECLARATION 
REQUIREMENTS APPLICABLE TO TEXTILES , APPAREL AND FOOTWEAR IMPORTS 
ARRIVING FROM PANAMA ARE INCONSISTENT WITH ARTICLE  I:1 OF THE GATT 1994 ..........150  
1. Main arguments of the parties.............................................................................................150  
2. Consideration by the Panel ..................................................................................................152  
(a) Legislation related to the advance decl aration and legalization requirements........................152  
(b) The text of Article I of the GATT 1994 ...................................................................................155  
(c) Panama's right to bring a claim under Article I of the GATT 1994 .........................................155  
(d) Whether Colombia confers an advantage of the type covered by Article I:1 of the 
GATT 1994 ..............................................................................................................................1 57 
(e) Whether like products from other Members are granted an advantage within the 
meaning of Article I:1 of the GATT 1994 ...............................................................................162  
(f) Whether Colombia confers an advantage that is not extended "immediately and 
unconditionally" to imports from Panama ..............................................................................164  
(g) Conclusion ..................................................................................................................... .........166  
I. WHETHER THE PORTS OF ENTRY MEASURE DENIES FREEDOM OF TRANSIT TO 
TEXTILES , APPAREL AND FOOTWEAR ARRIVING FROM PANAMA IN INTERNATIONAL 
TRANSIT IN CONTRAVENTION OF ARTICLE  V:2  OF THE GATT 1994 .......................................166  
1. Main arguments of the parties.............................................................................................166  
2. Consideration by the Panel ..................................................................................................167  
(a) Legislation related to Colombia's  international transit regime ...............................................167   WT/DS366/R 
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  (b) Article V of the GATT 1994 ....................................................................................................171  
(c) Interpretation of Article V:2 of the GATT 1994 .....................................................................172  
(i) The scope of the concept of traffic  in transit in Article V:2....................................................172  
(ii) The substantive obligations in Artic le V:2, first and second sentences ..................................174  
Article V:2, fi rst sentence.................................................................................................... .................. 174  
Article V:2, second sentence................................................................................................... .............. 175  
(iii) Whether the ports of entry measure violates Article V:2 of the GATT 1994 ..........................175  
Whether the ports of entry meas ure is inconsistent with Artic le V:2, first sentence............................. 175  
Whether the ports of entry meas ure is inconsistent with Artic le V:2, second sentence ........................ 181  
(iv) Conclusion ..................................................................................................................... .........182  
J. WHETHER THE RESTRICTION ON PORTS OF ENTRY APPLICABLE TO TEXTILES , APPAREL 
AND FOOTWEAR ARRIVING FROM PANAMA IS INCONSISTENT WITH ARTICLE  V:6  OF 
THE GATT 1994 .......................................................................................................................182  
1. Main arguments of the parties.............................................................................................182  
2. Consideration by the Panel ..................................................................................................183  
(a) Legislation related to Colombia's  international transit regime ...............................................183  
(b) Article V of the GATT 1994 ....................................................................................................184  
(c) Interpretation of Article V:6 of the GATT 1994 .....................................................................184  
(d) The scope of application of the MFN obligation in Article V:6 of the GATT 1994 ...............184  
(e) The substantive obligations in Article V:6 of the GATT 1994 ................................................192  
(f) Whether the ports of entry measure complies with the obligations in Article V:6 of 
the GATT 1994 ........................................................................................................................193  
(i) Conclusion ..................................................................................................................... .........193  
K. COLOMBIA 'S DEFENCE UNDER ARTICLE  XX( D) OF THE GATT 1994  TO PANAMA 'S 
CLAIMS AGAINST THE PORTS OF ENTRY MEASURE ..................................................................193  
1. Main arguments of the parties.............................................................................................194  
2. Consideration by the Panel ..................................................................................................197  
(a) Legislation applicable to Colomb ia's Article XX(d) defence .................................................197  
(b) The measure relevant for purpose of analysis  of Colombia's Artic le XX(d) defence.............198  
(c) Article XX of the GATT 1994 .................................................................................................199  
(d) Order of analysis under Article XX(d) ...................................................................................199  
(e) Whether the ports of entry measure is necessary to secure compliance with 
Colombian laws and regulations as provided in Article XX(d) of the GATT 1994 ................200  
(i) First element: Whether the ports of en try measure has been "designed" to secure 
compliance with Colombian laws and re gulations that are not themselves WTO-
inconsistent ................................................................................................................... ..........200  
Identification of Colombia n laws and regulations............................................................................... .. 200 
Whether the laws or regulations are not themselves WTO- inconsistent ............................................... 204  WT/DS366/R 
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  Whether the ports of entry measur e is designed to secure compliance with Colombian laws or 
regulations which are not them selves WTO-inconsistent ..................................................................... 205  
(ii) Second element:  Whether the ports of  entry measure is "necessary" to secure 
compliance with Colombian customs enforcement laws and regulations ..............................209  
The relative importance of the common interests or values that the laws or regulations to be 
enforced are inte nded to protect ............................................................................................... ............. 210  
The extent to which the measure contributes to the realization of the end pursued, the securing 
of compliance with the laws or regulations  at issue ............................................................................ .. 215 
The restrictive impact  of the measure .......................................................................................... ......... 224  
Preliminary conclusions on whether the ports of  entry measure is provisionally justified as 
necessary under Article XX(d).................................................................................................. ............ 231  
(iii) Conclusion ..................................................................................................................... .........233  
VIII.  CONCLUSIONS AND RECOMMENDATIONS..............................................................234  
  WT/DS366/R 
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  TABLE OF WTO CASES CITED IN THIS REPORT 
 
Short Title Full Case Title and Citation 
Argentina – Footwear (EC)  Appellate Body Report, Argentina – Safeguard Measures on Imports of 
Footwear , WT/DS121/AB/R, adopted 12 January 2000, DSR 2000:I, 515 
Argentina – Footwear (EC)  Panel Report, Argentina – Safeguard Measur es on Imports of Footwear , 
WT/DS121/R, adopted 12 January 2000, as modified by Appellate Body Report, 
WT/DS121/AB/R, DSR 2000:II, 575 
Argentina – Hides and Leather  Panel Report, Argentina – Measures Affecting the Export of Bovine Hides and 
Import of Finished Leather , WT/DS155/R and Corr.1, adopted 16 February 2001, 
DSR 2001:V, 1779 
Australia – Salmon  Appellate Body Report, Australia – Measures Affecting Importation of Salmon , 
WT/DS18/AB/R, adopted 6 November 1998, DSR 1998:VIII, 3327 
Australia – Salmon  Panel Report, Australia – Measures Affecting Importation of Salmon , 
WT/DS18/R and Corr.1, adopted 6 November 1998, as modified by Appellate 
Body Report, WT/DS18/AB/R, DSR 1998:VIII, 3407 
Brazil – Desiccated Coconut  Appellate Body Report, Brazil – Measures Affe cting Desiccated Coconut , 
WT/DS22/AB/R, adopted 20 March 1997, DSR 1997:I, 167 
Brazil – Desiccated Coconut  Panel Report, Brazil – Measures Affecting Desiccated Coconut , WT/DS22/R, 
adopted 20 March 1997, upheld by Appellate Body Report, WT/DS22/AB/R, 
DSR 1997:I, 189 
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 – Aircraft  Appellate Body Report, Canada – Measures Affecting the Export of Civilian 
Aircraft , WT/DS70/AB/R, adopted 20 August 1999, DSR 1999:III, 1377 
Canada – Aircraft  Panel Report, Canada – Measures Affecting the Export of Civilian Aircraft , 
WT/DS70/R, adopted 20 August 1999, upheld by Appellate Body Report, WT/DS70/AB/R, DSR 1999:IV, 1443 
Canada – Autos  Appellate Body Report, Canada – Certain Measures Affecting the Automotive 
Industry , WT/DS139/AB/R, WT/DS142/AB/R, adopted 19 June 2000, 
DSR 2000:VI, 2985 
Canada – Autos  Panel Report, Canada – Certain Measures Affecting the Automotive Industry , 
WT/DS139/R, WT/DS142/R, adopted 19 June 2000, as modified by Appellate 
Body Report, WT/DS139/AB/R, WT/DS142/AB/R, DSR 2000:VII, 3043 
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 – Second 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, DSR 2003:I, 213 
Canada – Dairy  
(Article 21.5 – New Zealand and US II)
  Panel Report, Canada – Measures Affecting the Importation of Milk and the 
Exportation of Dairy Products – Second Recourse to Article 21.5 of the DSU by New Zealand and the United States , WT/DS103/RW2, WT/DS113/RW2, adopted 
17 January 2003, as modified by Appellate Body Report, WT/DS103/AB/RW2, 
WT/DS113/AB/RW2, DSR 2003:I, 255 
Canada – Periodicals  Appellate Body Report, Canada – Certain Measures Concerning Periodicals , 
WT/DS31/AB/R, adopted 30 July 1997, DSR 1997:I, 449 WT/DS366/R 
Page xii  
 
  Short Title Full Case Title and Citation 
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, DSR 1997:I, 481 
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, 
DSR 2004:VI, 2739 
Canada – Wheat Exports and 
Grain Imports Panel Report, Canada – Measures Relating to Exports of Wheat and Treatment of 
Imported Grain , WT/DS276/R, adopted 27 September 2004, upheld by Appellate 
Body Report, WT/DS276/AB/R, DSR 2004:VI, 2817 
Chile – Alcoholic Beverages  Appellate Body Report, Chile – Taxes on Alcoholic Beverages , WT/DS87/AB/R, 
WT/DS110/AB/R, adopted 12 January 2000, DSR 2000:I, 281 
Chile – Alcoholic Beverages  Panel Report, Chile – Taxes on Alcoholic Beverages , WT/DS87/R, WT/DS110/R, 
adopted 12 January 2000, as modified by Appellate Body Report, 
WT/DS87/AB/R, WT/DS110/AB/R, DSR 2000:I, 303 
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, DSR 2002:VIII, 3045, and Corr.1 
Chile – Price Band System  Panel Report, Chile – Price Band System and Safeguard Measures Relating to 
Certain Agricultural Products , WT/DS207/R, adopted 23 October 2002, as 
modified by Appellate Body Report, WT/DS207AB/R, DSR 2002:VIII, 3127 
Chile – Price Band System 
(Article 21.5 – Argentina) Appellate Body Report, Chile – Price Band System and Safeguard Measures 
Relating to Certain Agricultural Products – Recourse to Article 21.5 of the DSU 
by Argentina , WT/DS207/AB/RW, adopted 22 May 2007 
Chile – Price Band System 
(Article 21.5 – Argentina) Panel Report, Chile – Price Band System and Safeguard Measures Relating to 
Certain Agricultural Products – Recourse to Article 21.5 of the DSU by 
Argentina , WT/DS207/RW and Corr.1, adopted 22 May 2007, upheld by 
Appellate Body Report, WT/DS207/AB/RW 
China – Auto Parts Panel Reports, China – Measures Affecting Imports of Automobile Parts , 
WT/DS339/R, WT/DS340/R, WT/DS342/R and Add.1 and Add.2, adopted 
12 January 2009, as upheld (WT/DS339/R) , and as modified (WT/DS340/R, 
WT/DS342/R) by Appellate Body Reports WT/DS339/AB/R, 
WT/DS340/AB/R, WT/DS342/AB/R 
Dominican Republic – Import 
and Sale of Cigarettes Appellate Body Report, Dominican Republic – Measures Affecting the 
Importation and Internal Sale of Cigarettes , WT/DS302/AB/R, adopted 19 May 
2005, DSR 2005:XV, 7367 
Dominican Republic – Import and Sale of Cigarettes Panel Report, Dominican Republic – Measures 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, DSR 2005:XV, 7425 
EC – Bananas III  Appellate Body Report, European Communities – Regime for the Importation, 
Sale and Distribution of Bananas , WT/DS27/AB/R, adopted 25 September 1997, 
DSR 1997:II, 591 
EC – Bananas III (Ecuador)  Panel Report, European Communities – Regime for the Importation, Sale and 
Distribution of Bananas, Complaint by Ecuador , WT/DS27/R/ECU, adopted 
25 September 1997, as modified by Appellate Body Report, WT/DS27/AB/R, 
DSR 1997:III, 1085 
EC – Bananas III (Guatemala 
and Honduras)  Panel Report, European Communities – Regime for the Importation, Sale and 
Distribution of Bananas, Complaint by Guatemala and Honduras , 
WT/DS27/R/GTM, WT/DS27/R/HND, adopted 25 September 1997, as modified 
by Appellate Body Report, WT/DS27/AB/R, DSR 1997:II, 695  WT/DS366/R 
 Page xiii 
 
 
  Short Title Full Case Title and Citation 
EC – Bananas III (Mexico)  Panel Report, European Communities – Regime for the Importation, Sale and 
Distribution of Bananas, Complaint by Mexico , WT/DS27/R/MEX, adopted 
25 September 1997, as modified by Appellate Body Report, WT/DS27/AB/R, 
DSR 1997:II, 803 
EC – Bananas III (US)  Panel Report, European Communities – Regime for the Importation, Sale and 
Distribution of Bananas, Complaint by the United States , WT/DS27/R/USA, 
adopted 25 September 1997, as modified by Appellate Body Report, 
WT/DS27/AB/R, DSR 1997:II, 943 
EC – Bananas III   
(Article 21.5 – 
Ecuador II / US) Appellate Body Reports, European Communities – Regime for the Importation, 
Sale and Distribution of Bananas – Second Recourse to Article 21.5 of the DSU 
by Ecuador  / Recourse to Article 21.5 of the DSU by the United States , 
WT/DS27/AB/RW2/ECU / WT/DS27/AB/RW/USA, adopted 11 December 2008,  
EC – Bananas III   
(Article 21.5 – Ecuador II)  Panel Report, European Communities – Regime 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 Reports, WT/DS27/AB/RW2/ECU / WT/DS27/AB/RW/USA 
EC – Bananas III   
(Article 21.5 – US) Panel Report, European Communities – Regime for the Importation, Sale and 
Distribution of Bananas – Recourse to Article 21.5 of the DSU by the United 
States , WT/DS27/RW/USA and Corr.1, adopted 11 December 2008, as modified 
by Appellate Body Reports, WT/DS27/AB/RW2/ECU / WT/DS27/AB/RW/USA 
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, DSR 1998:V, 1851 
EC – Computer Equipment  Panel Report, European Communities – Customs 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, DSR 1998:V, 1891 
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, 
DSR 1998:I, 135 
EC – Hormones (Canada)  Panel Report, EC Measures Concerning Meat and Meat Products (Hormones), 
Complaint by Canada , WT/DS48/R/CAN, adopted 13 February 1998, as 
modified by Appellate Body Report, WT/DS26/AB/R, WT/DS48/AB/R, 
DSR 1998:II, 235 
EC – Hormones (US)  Panel Report, EC Measures Concerning Meat and Meat Products (Hormones), 
Complaint by the United States , WT/DS26/R/USA, adopted 13 February 1998, as 
modified by Appellate Body Report, WT/DS26/AB/R, WT/DS48/AB/R, 
DSR 1998:III, 699 
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, DSR 2005:VIII, 
3499 
Guatemala – Cement I  Appellate Body Report, Guatemala – Anti-Dumping Investigation Regarding 
Portland Cement from Mexico , WT/DS60/AB/R, adopted 25 November 1998, 
DSR 1998:IX, 3767 
Guatemala – Cement I  Panel Report, Guatemala – Anti-Dumping Investigation Regarding Portland 
Cement from Mexico , WT/DS60/R, adopted 25 November 1998, as modified by 
Appellate Body Report, WT/DS60/AB/R, DSR 1998:IX, 3797 
India – Autos  Appellate Body Report, India – Measures Affecting the Automotive Sector , 
WT/DS146/AB/R, WT/DS175/AB/R, adopted 5 April 2002, DSR 2002:V, 1821 WT/DS366/R 
Page xiv  
 
  Short Title Full Case Title and Citation 
India – Autos  Panel Report, India – Measures Affecting the Automotive Sector , WT/DS146/R, 
WT/DS175/R and Corr.1, adopted 5 April 2002, DSR 2002:V, 1827 
India – Patents (US)  Appellate Body Report, India – Patent Protection for Pharmaceutical and 
Agricultural Chemical Products , WT/DS50/AB/R, adopted 16 January 1998, 
DSR 1998:I, 9 
India – Patents (US)  Panel Report, India – Patent Protection for Pharmaceutical and Agricultural 
Chemical Products, Complaint by the United States , WT/DS50/R, adopted 
16 January 1998, as modified by Appellate Body Report, WT/DS50/AB/R, 
DSR 1998:I, 41 
India – Quantitative Restrictions
  Appellate Body Report, India – Quantitative Restrictions on Imports of 
Agricultural, Textile and Industrial Products , WT/DS90/AB/R, adopted 
22 September 1999, DSR 1999:IV, 1763 
India – Quantitative 
Restrictions  Panel Report, India – Quantitative Restrictions on Imports of Agricultural, Textile 
and Industrial Products , WT/DS90/R, adopted 22 September 1999, upheld by 
Appellate Body Report, WT/DS90/AB/R, DSR 1999:V, 1799 
Indonesia – Autos  Panel Report, Indonesia – Certain Measures Affecting the Automobile Industry , 
WT/DS54/R, WT/DS55/R, WT/DS59/R, WT/DS64/R and Corr.1 and 2, adopted 
23 July 1998, and Corr. 3 and 4, DSR 1998:VI, 2201 
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, DSR 1996:I, 97  
Japan – Alcoholic Beverages II  Panel Report, Japan – Taxes on Alcoholic Beverages , WT/DS8/R, WT/DS10/R, 
WT/DS11/R, adopted 1 November 1996, as modified by Appellate Body Report, 
WT/DS8/AB/R, WT/DS10/AB/R, WT/DS11/AB/R, DSR 1996:I, 125 
Japan – Apples  Appellate Body Report, Japan – Measures Affecting the Importation of Apples , 
WT/DS245/AB/R, adopted 10 December 2003, DSR 2003:IX, 4391 
Japan – Apples  Panel Report, Japan – Measures Affecting the Importation of Apples , 
WT/DS245/R, adopted 10 December 2003, upheld by Appellate Body Report, WT/DS245/AB/R, DSR 2003:IX, 4481  
Japan – Film  Panel Report, Japan – Measures Affecting Consumer Photographic Film and 
Paper , WT/DS44/R, adopted 22 April 1998, DSR 1998:IV, 1179 
Korea – Alcoholic Beverages  Appellate Body Report, Korea – Taxes on Alcoholic Beverages , WT/DS75/AB/R, 
WT/DS84/AB/R, adopted 17 February 1999, DSR 1999:I, 3 
Korea – Alcoholic Beverages  Panel Report, Korea – Taxes on Alcoholic Beverages , WT/DS75/R, WT/DS84/R, 
adopted 17 February 1999, as modified by Appellate Body Report, 
WT/DS75/AB/R, WT/DS84/AB/R, DSR 1999:I, 44 
Korea – Dairy  Appellate Body Report, Korea – Definitive Safeguard Measure on Imports  
of Certain Dairy Products , WT/DS98/AB/R, adopted 12 January 2000, 
DSR 2000:I, 3 
Korea – Dairy  Panel Report, Korea – Definitive Safeguard Measure on Imports of Certain Dairy 
Products , WT/DS98/R and Corr.1, adopted 12 January 2000, as modified by 
Appellate Body Report, WT/DS98/AB/R, DSR 2000:I, 49 
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, 
DSR 2001:I, 5 
Korea – Various Measures on 
Beef  Panel Report, Korea – Measures Affecting Imports 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, DSR 2001:I, 59  WT/DS366/R 
 Page xv 
 
 
  Short Title Full Case Title and Citation 
Mexico – Anti-Dumping 
Measures on Rice Appellate Body Report, Mexico – Definitive Anti-Dump ing Measures on Beef 
and Rice, Complaint with Respect to Rice , WT/DS295/AB/R, adopted 
20 December 2005, DSR 2005:XXII, 10853 
Mexico – Anti-Dumping 
Measures on Rice Panel Report, Mexico – Definitive Anti-Dumping Me asures on Beef and Rice, 
Complaint with Respect to Rice , WT/DS295/R, adopted 20 December 2005,  
as modified by Appellate Body Report, WT/DS295/AB/R, DSR 2005:XXIII, 
11007 
Mexico – Corn Syrup  
(Article 21.5 – US)  Appellate Body Report, Mexico – Anti-Dumping Investigation of High Fructose 
Corn Syrup (HFCS) from the United States – Recourse to Article 21.5 of the DSU  
by the United States , WT/DS132/AB/RW, adopted 21 November 2001, 
DSR 2001:XIII, 6675 
Mexico – Corn Syrup  
(Article 21.5 – US)  Panel Report, Mexico – Anti-Dumping Investigation of High Fructose Corn Syrup 
(HFCS) from the United States – Recourse to Article 21.5 of the DSU  by the 
United States , WT/DS132/RW, adopted 21 November 2001, upheld by Appellate 
Body Report, WT/DS132/AB/RW, DSR 2001:XIII, 6717 
Thailand – H-Beams  Appellate Body Report, Thailand – Anti-Dumping Duties on Angles, Shapes and 
Sections of Iron or Non-Alloy Steel and H-Beams from Poland , 
WT/DS122/AB/R, adopted 5 April 2001, DSR 2001:VII, 2701 
Thailand – H-Beams  Panel Report, Thailand – Anti-Dumping Duties on Angles, Shapes and Sections 
 of Iron or Non-Alloy Steel and H-Beams from Poland , WT/DS122/R, adopted 
5 April 2001, as modified by Appellate Body Report, WT/DS122/AB/R, DSR 2001:VII, 2741 
Turkey – Rice Panel Report, Turkey – Measures Affecting the Importation of Rice , 
WT/DS334/R, adopted 22 October 2007 
Turkey – Textiles  Appellate Body Report, Turkey – Restrictions on Imports of Textile and Clothing 
Products , WT/DS34/AB/R, adopted 19 November 1999, DSR 1999:VI, 2345 
Turkey – Textiles  Panel Report, Turkey – Restrictions on Imports  of Textile and Clothing Products , 
WT/DS34/R, adopted 19 November 1999, as modified by Appellate Body Report, 
WT/DS34/AB/R, DSR 1999:VI, 2363 
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, DSR 2000:X, 
4793 
US – 1916 Act (EC)  Panel Report, United States – Anti-Dumping Act of 1916, Complaint by the 
European Communities , WT/DS136/R and Corr.1, adopted 26 September 2000, 
upheld by Appellate Body Report, WT/DS136/AB/R, WT/DS162/AB/R, 
DSR 2000:X, 4593 
US – 1916 Act (Japan)  Panel Report, United States – Anti-Dumping Act of 1916, Complaint by Japan , 
WT/DS162/R and Add.1, adopted 26 September 2000, upheld by Appellate Body Report, WT/DS136/AB/R, WT/DS162/AB/R, DSR 2000:X, 4831 
US – Carbon Steel  Appellate Body Report, United States – Countervailing Duties on Certain 
Corrosion-Resistant Carbon Steel Flat Products from Germany , 
WT/DS213/AB/R and Corr.1, adopted 19 December 2002, DSR 2002:IX, 3779 
US – Carbon Steel  Panel Report, United States – Countervailing Duties on Certain Corrosion-
Resistant Carbon Steel Flat Products from Germany , WT/DS213/R and Corr.1, 
adopted 19 December 2002, as modified by Appellate Body Report, WT/DS213/AB/R, DSR 2002:IX, 3833 
US – Certain EC Products  Appellate Body Report, United States – Import Measures on Certain Products 
from the European Communities , WT/DS165/AB/R, adopted 10 January 2001, 
DSR 2001:I, 373 WT/DS366/R 
Page xvi  
 
  Short Title Full Case Title and Citation 
US – Certain EC Products  Panel Report, United States – Import Measures on Certain Products from the 
European Communities , WT/DS165/R and Add.1, adopted 10 January 2001, as 
modified by Appellate Body Report, WT/DS165/AB/R, DSR 2001:II, 413 
US – Corrosion-Resistant 
Steel Sunset Review  Appellate Body Report, United States – Sunset Review of Anti-Dumping Duties 
on Corrosion-Resistant Carbon Steel Flat Products from Japan , 
WT/DS244/AB/R, adopted 9 January 2004, DSR 2004:I, 3  
US – Corrosion-Resistant 
Steel Sunset Review  Panel Report, United States – Sunset Review of Anti-Dumping Duties on 
Corrosion-Resistant Carbon Steel Flat Products from Japan , WT/DS244/R, 
adopted 9 January 2004, as modified by Appellate Body Report, WTDS244/AB/R, DSR 2004:I, 85  
US – DRAMS  Panel Report, United States – Anti-Dumping Duty on Dynamic Random Access 
Memory Semiconductors (DRAMS) of One Megabit or Above from Korea , 
WT/DS99/R, adopted 19 March 1999, DSR 1999:II, 521 
US – FSC  Appellate Body Report, United States – Tax Treatment for "Foreign Sales 
Corporations" , WT/DS108/AB/R, adopted 20 March 2000, DSR 2000:III, 1619 
US – FSC  Panel Report, United States – Tax Treatment for "Foreign Sales Corporations" , 
WT/DS108/R, adopted 20 March 2000, as modified by Appellate Body Report, 
WT/DS108/AB/R, DSR 2000:IV, 1675 
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, DSR 2005:XII, 5663, 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, DSR 2005:XII, 5797 
US – Gasoline  Appellate Body Report, United States – Standards for Reformulated and 
Conventional Gasoline , WT/DS2/AB/R, adopted 20 May 1996, DSR 1996:I, 3 
US – Gasoline  Panel Report, United States – Standards for Reformulated and Conventional 
Gasoline , WT/DS2/R, adopted 20 May 1996, as modified by Appellate Body 
Report, WT/DS2/AB/R, DSR 1996:I, 29 
US – Oil Country Tubular 
Goods Sunset Reviews Appellate Body Report, United States – Sunset Reviews of Anti-Dumping 
Measures on Oil Country Tubular Goods from Argentina , WT/DS268/AB/R, 
adopted 17 December 2004, DSR 2004:VII, 3257 
US – Oil Country Tubular 
Goods Sunset Reviews Panel Report, United States – Sunset Reviews of Anti-Dumping Measures on Oil 
Country Tubular Goods from Argentina , WT/DS268/R and Corr.1, adopted 
17 December 2004, as modified by Appellate Body Report, W/DS/268/AB/R, DSR 2004:VIII, 3421 
US – Section 301 Trade Act  Panel Report, United States – Sections 301-310 of the Trade Act of 1974 , 
WT/DS152/R, adopted 27 January 2000, DSR 2000:II, 815 
US – Shrimp  
(Article 21.5 – Malaysia)  Appellate Body Report, United States – Import 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, DSR 2001:XIII, 6481 
US – Shrimp  
(Article 21.5 – Malaysia)  Panel Report, United States – Import Prohibition of Certain Shrimp and Shrimp 
Products – Recourse to Article 21.5 of the DSU by Malaysia , WT/DS58/RW, 
adopted 21 November 2001, upheld by Appellate Body Report, 
WT/DS58/AB/RW, DSR 2001:XIII, 6529 
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  WT/DS366/R 
 Page xvii 
 
 
  Short Title Full Case Title and Citation 
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 – 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, DSR 2004:II, 571 
US – Softwood Lumber IV Panel Report, United States – Final Countervailing Duty Determination with 
Respect to Certain Softwood Lumber from Canada , WT/DS257/R and Corr.1, 
adopted 17 February 2004, as modified by Appellate Body Report, WT/DS257/AB/R, DSR 2004:II, 641  
US – Steel Safeguards Panel Reports, United States – Definitive Safeguard Measures on Imports of 
Certain Steel Products , WT/DS248/R, WT/DS249/R, WT/DS251/R, 
WT/DS252/R, WT/DS253/R, WT/DS254/R, WT/DS258/R, WT/DS259/R, and Corr.1, adopted 10 December 2003, as modified by Appellate Body Report, 
WT/DS248/AB/R, WT/DS249/AB/R, WT /DS251/AB/R, WT/DS252/AB/R, 
WT/DS253/AB/R, WT/DS254/AB/R, WT /DS258/AB/R, WT/DS259/AB/R, 
DSR 2003:VIII, 3273  
US – Upland Cotton Appellate Body Report, United States – Subsidies on Upland Cotton , 
WT/DS267/AB/R, adopted 21 March 2005, DSR 2005:I, 3 
US – Upland Cotton Panel Report, United States – Subsidies on Upland Cotton , WT/DS267/R, Corr.1, 
and Add.1 to Add.3, adopted 21 March 2005, as modified by Appellate Body Report, WT/DS267/AB/R, DSR 2005:II, 299 
US – Wool Shirts and Blouses  Appellate Body Report, United States – Measure Affecting Imports of Woven 
Wool Shirts and Blouses from India , WT/DS33/AB/R, adopted 23 May 1997, and 
Corr.1, DSR 1997:I, 323  
US – Wool Shirts and Blouses  Panel Report, United States – Measure Affecting Imports of Woven Wool Shirts 
and Blouses from India , WT/DS33/R, adopted 23 May 1997, upheld by Appellate 
Body Report, WT/DS33/AB/R, DSR 1997:I, 343 
 WT/DS366/R 
Page xviii  
 
  TABLE OF GATT CASES CITED IN THIS REPORT 
 
Short Title Full Case Title and Citation 
Canada – Provincial Liquor 
Boards (EEC) Panel Report, Canada – Import, Distribution and Sale of Alcoholic Drinks by 
Canadian Provincial Marketing Agencies , adopted 22 March 1988, 
BISD 35S/37 
Canada – Provincial Liquor Boards (US) Panel Report, Canada – Import, Distribution and Sale of Certain Alcoholic 
Drinks by Provincial Marketing Agencies , adopted 18 February 1992, 
BISD 39S/27 
EEC – Animal Feed Proteins Panel Report, EEC – Measures on Animal Feed Proteins , adopted 
14 March 1978, BISD 25S/49 
EEC – Apples (US) Panel Report, European Economic Community – Restrictions on Imports of 
Apples – Complaint by the United States , adopted 22 June 1989, BISD 36S/135 
EEC – Apples I (Chile) Panel Report, EEC Restrictions on Imports of Apples from Chile , adopted 
10 November 1980, BISD 27S/98 
EEC – Apples II (Chile)  Panel Report, EEC – Restrictions on Imports of Apples , 20 June 1994, 
unadopted, DS39/R 
EEC – Minimum Import Prices Panel Report, EEC – Programme of Minimum Import Prices, Licences and 
Surety Deposits for Certain Processed Fruits and Vegetables , adopted 
18 October 1978, BISD 25S/68 
EEC – Oilseeds I  Panel Report, European Economic Community – Payments and Subsidies Paid 
to Processors and Producers of Oilseeds and Related Animal-Feed Proteins , 
adopted 25 January 1990, BISD 37S/86 
Japan – Leather II (US) Panel Report, Panel on Japanese Measures on Imports of Leather , adopted 
15 May 1984, BISD 31S/94 
Japan – Semi-Conductors Panel Report, Japan – Trade in Semi-Conductors , adopted 4 May 1988, 
BISD 35S/116 
US – Canadian Tuna Panel Report, United States – Prohibition of Imports of Tuna and Tuna 
Products from Canada , adopted 22 February 1982, BISD 29S/91 
US – Non-Rubber Footwear Panel Report, United States – Countervailing Duties on Non-Rubber Footwear 
from Brazil , adopted 13 June 1995, BISD 42S/208 
US – Tobacco  Panel Report, United States Measures Affecting the Importation, Internal Sale 
and Use of Tobacco , adopted 4 October 1994, BISD 41S/I/131 
US – Section 337 Panel Report, United States Section 337 of the Tariff Act of 1930 , adopted 
7 November 1989, BISD 36S/345 
US – Superfund Panel Report, United States – Taxes on Petroleum and Certain Imported 
Substances , adopted 17 June 1987, BISD 34S/136 
 
  WT/DS366/R 
 Page 1 
 
 
  I. INTRODUCTION 
1.1 On 12 July 2007, Panama requested consultations  with Colombia pursuant to Article 4 of the 
Understanding on Rules and Procedures Govern ing the Settlement of Disputes ("DSU"), 
Article XXII:1 of the General Agr eement on Tariffs and Trade 1994 (" GATT 1994 ") and Article 19.1 
and 19.2 of the Agreement on Implem entation of Article VII of the GATT 1994 ("Customs Valuation 
Agreement ") with respect to enacted Colombian customs regulations on the importation of certain 
textiles, apparel and footwear classifiable under HS Chapters 50-64 of Colombia's Tariff Schedule 
and arriving from Panama.1  Panama and Colombia held consultations on the measures on 
31 July 2007.  However, no mutually agreed solution was found. 
1.2 On 14 September 2007, Panama requested th e establishment of a panel pursuant to 
Article 19.1 of the Customs Valuation Agreement , and Article 6.2 of the DSU.  
1.3 At its meeting on 22 October 2007, the DSB established a panel pursuant to the request of 
Panama in document WT/DS366/6, in accordance with Article 6 of the DSU. 
1.4 The Panel's terms of reference are the following: 
"To examine, in the light of the relevant provisions of the covered agreements cited 
by Panama in document WT/DS366/6, the ma tter referred to the DSB by Panama in 
that document, and to make such findings as will assist the DSB in making the recommendations or in giving the rulings provided for in those agreements."
2 
1.5 The parties agreed to the following composition of the Panel effective as of 8 February 2008: 
 Chairman: Mr Gary Horlick 
 
 Members: Mr Gonzalo Biggs 
   Mr Miguel Rodriguez Mendoza  1.6 China, Ecuador, the European Communities, Gu atemala, Honduras, India, Chinese Taipei, 
Turkey and the United States reserved their rights to participate in the Panel proceedings as third 
parties. 
1.7 The Panel held its first substantive meeting with the parties on 21 and 22 May 2008.  The 
session with the third parties was held on 22 May 20 08.  The second substantive meeting was held on 
29 July 2008. 
1.8 On 10 October 2008, the Panel issued the descriptiv e part of its Panel report to the parties in 
both English and Spanish.  The Panel issued its in terim report to the parties on 4 March 2009.  The 
Panel issued its final report to parties on 15 April 2009. 
II. FACTUAL ASPECTS 
A. B
ACKGROUND  
2.1 This dispute concerns several Colombian custom s measures affecting certa in textiles, apparel 
and footwear classifiable under HS Chapters 50–64 of  Colombia's Tariff Schedule that are exported 
and re-exported from the Colon Free Zone  ("CFZ") and Panama to Colombia.3  These measures 
                                                      
1 WT/DS366/1. 
2 WT/DS366/7. 
3 The CFZ, which is located at th e Caribbean entrance to the Panama Canal nearest the Atlantic Ocean, 
plays a central role in the re-export of goods to markets in Central and South America and the Caribbean region.  WT/DS366/R 
Page 2  
 
  include the use of indicative prices in customs proc edures and restrictions on ports of entry available 
to subject textiles, apparel and footwear. 
2.2 On 29 June 2005, Colombia's customs authority, the Dirección de Impuestos y Aduanas 
Nacionales de Colombia ("DIAN"), issued the first of several resolutions establishing indicative Free 
On Board ("f.o.b.") prices for a number of products , including certain textiles, apparel and footwear 
classifiable under HS Chapters 50–64, and arri ving from Panama, China and other countries.
4  Shortly 
thereafter, on 12 July 2005, Colombia introduced a measure requiring those subject textiles, apparel 
and footwear originating in or arriving from Pana ma and China to enter only at Bogota airport or 
Barranquilla seaport.5    
2.3 On 20 July 2006, Panama requested consultati ons under the DSU with Colombia concerning 
the use of indicative prices and restrictions on ports of entry.6  On 1 December 2006, Panama notified  
the DSB that it had reached a Mutu ally Agreed Solution with Colomb ia in accordance with Article 3.6 
of the DSU7, under which Colombia repealed the measur es at issue and the parties concluded a 
customs cooperation agreement, entitled the "Protocol of Procedure for Cooperation and Exchange of 
Customs Information between Customs Authorities of  the Republic of Panama and the Republic of 
Colombia" ("Customs Cooperation Protocol").8  Under the Customs Cooperation Protocol, which 
entered into force in November 20069, the parties agreed to launch a programme of cooperation and 
mutual assistance for the purpose of investigati ng and preventing customs law infringements in both 
countries.  Additionally, officials agreed to hold periodic meetings to assess the effectiveness of the 
Customs Cooperation Protocol.   
2.4 On 26 June 2007, Colombia enacted several cust oms measures similar in nature to those 
enacted previously in June and July of 2005 , despite the earlier enactment of the Customs 
Cooperation Protocol.  These measures also establish ed indicative prices for textiles, apparel and 
footwear arriving into Colombia from all countri es, except those with which Colombia had signed 
free trade agreements, as well as port restrictions on importation of textiles,  apparel and footwear 
arriving from the CFZ and Panama.  On 12 July 2007,  Panama requested consul tations with Colombia 
concerning the latest application of indicative prices and restrictions on entry of textiles, apparel and 
footwear arriving from Panama and the CFZ.  Pa nama also requested consultations concerning a 
requirement that importers provide an advance decl aration and clear customs for all textiles, apparel 
and footwear arriving from Panama prior to their arrival in Colombia.10  These measures are the 
subject of the present dispute and are discussed in further detail below. 
                                                                                                                                                                     
The CFZ is considered the largest duty-free zone in th e Americas, and by Panamanian estimates, it generates 
more than US$15 billon annually (see Panama's first written submission, para. 2). 
4 See Resolution No. 05474 of 29 June 2005 (footwear);  Resolution No. 08628 of 20 September 2005 
(stockings and socks);  Resolution No. 08743 of 22 September 2005 (textiles);  and Resolution No. 11439 of 
29 November 2005 (textile articles).  Indicative prices we re also applied to other categories of imports via the 
following resolutions: Resolution No.07908 of 1 September 2005 (balls);  Resolution No. 09477 of 12 October 2005 (electrical and gas domestic appliances);  Resolution No. 10760 of 15 November 2005 (matches and 
lighters);  Resolution No. 10953 of 18 November 2005 (blankets and travelling rugs);  Resolution No. 11285 of 
25 November 2005 (exercise books);  Resolution No. 3218 of 6 April 2006 (paper);  and Resolution No. 4953 of 
18 May 2006 (toys of pile fabrics, stuffed or unstuffed). 
5 Resolution No. 05796 of 7 July 2005, Resolution No. 1 2465 of 21 December 2005 and 
Resolution No. 06691 of 22 June 2006. 
6 WT/DS348/1. 
7 WT/DS348/10. 
8 Exhibit PAN–1. 
9 Exhibit PAN–1. 
10 Resolution No. 7373 of 2007.  WT/DS366/R 
 Page 3 
 
 
  2.5 Textiles, apparel and footwear imported fro m the CFZ and Panama into Colombia are 
significant both in terms of volume and value.11  Colombia has reported significant ongoing problems 
with under-invoicing and smuggling in relation to th ese products, with particular emphasis placed on 
those arriving from the CFZ and Panama.12  The Colombian Unidad de Información y Analisis 
Financiero (UIAF)13 has established links between m oney-laundering, contraband and under-
invoicing in Colombia arising from the introducti on of goods into Colombia purchased in the CFZ 
with illicit US currency.14  The United Nations, International Monetary Fund and other Member 
countries have also assessed the relationship between  the CFZ and the Colombian Black Market Peso 
Exchange, a trade-based laundering mechanism.15 
B. THE USE OF INDICATIVE PRIC ES IN RELATION TO TEXTILE , APPAREL AND FOOTWEAR  
2.6 Colombia amended its Customs Statute and intr oduced indicative prices as a subcategory of 
reference prices on 30 December 2004.16  On 29 June 2005 and subsequently, on 26 June 2007, 
Colombia enacted a number of resolutions mandati ng the use of indicative prices with respect to 
certain textile, apparel and footwear imports orig inating in all countries, except those with which 
Colombia had signed free trade agreements.17   
                                                      
11 However, both parties disagree as to the value of these imports. For instance, Panama reports that re-
exports of subject goods from the CF Z to Colombia reached US $413,290 millions (60,79 2 tonnes) in 2005 and 
US$483,587 million (67,486 tonnes) in 2006 (see Exhibit PAN–56).  Colombia, in turn, reports imports of 
subject goods from Panama of US$104,926 million (47,226 tonnes) in 2005 and US$132,584 million (38,486 
tonnes) in 2006 (see Exhibit COL–45). 
12 Colombia cites the wide discrepancies between Panama's reported volume and value of bilateral 
trade with Colombia in comparison to Colombian figures.   Colombia considers this discrepancy, which it terms 
as "distortions", as evidence of the existence of the under-invoicing and smuggling pertaining to goods arriving from the CFZ and Panama into Colombia.  In this regard, Colombia reports US$381 million for the whole 
universe of products from Panama in 2005 and US$415 million in 2006 (see Exhibit COL–38).  Colombia notes 
that Panama has reported exports to Colombia of almost three times this value (US$1,055 million and US$1,241 million, respectively) during this same period (see Exhibit PAN–56).  Based on these discrepancies, Colombia 
reports that, while exports arriving from Panama account for approximately 2.1 per cent of the total imports into 
Colombia, these exports represent 10 per cent of the total distortions of the value of imports that entered Colombia in 2006. Colombia reports that exports from the United States represented 32.2 per cent of distortions, 
goods from ALADI, 27.7 per cent, goods from Europe, 20.4 per cent and goods from Asia, 9.7 per cent (see 
Exhibit COL-48, pp. 15-16).  Data referred to in footnote 11 above shows a similar phenomenon in relation to 
textiles, apparel and footwear.  For instance, in 2006 the reported value of Panamanian exports of these goods to 
Colombia was almost four times higher than the reported value of Colombian imports from Panama for the same period (see Exhibits COL–38, COL–16 and Exhibit PAN–56).  Generally, Colombia has claimed that 
84.27 per cent of the total trade with Panama and the CFZ in the course of 2006, was contraband trade, and that 
that figure rises to 89 per cent in the case of tex tiles (see Colombia's first written submission, para. 196).  
13 The UIAF is the "Unidad de Informacion y Analisis Financiero," an entity of the Colombian 
Government created by Ley 526 of 1999 for the purpose of preventing, detecting and fighting money laundering 
and financial terrorism (See Colombia's first written submission, para. 200, footnote 172). 
14 Colombia's first written submission, para. 203;  Exhibit COL-21.  
15 See United Nations, Office on Drugs and Crime, Crime and Development in Central America , p. 69 
(May 2007), quoted in Colombia's first written submission, para. 192, footnote 162;  International Monetary Fund, Panama: Detailed Assessments of Observance of Standards and Codes for Banking Supervision, 
Insurance Supervision, and Securities Regulation, IMF Country Report No 07/67 , at 198-9 (Feb. 2007);  
International Narcotics Control Strategy Report, 200 8, US Bureau of International Narcotics and Law 
Enforcement Affairs, Volume 2, Money Laundering and Law Enforcement Affairs. 
16 See Article 2 of Decree No. 4431 of 30 D ecember 2004, that modified Article 128.5 of 
Decree No. 2685 of 1999 (Exhibit COL–1). 
17 Colombia has implemented indicative prices with re spect to fabrics classifiable under Chapters 52, 
54, 55, 56, 58, 59, 60, under Resolution No. 7510 of 26 June 2007, as modified by Resolution No. 11412 of 
28 September 2007 (Exhibit PAN–9);  garments classifiable under Chapters 61, 62, 63, under 
Resolution No. 7511 of 26 June 2007 (Exhibit PAN–10);  footwear classifiable under Chapter 64, under WT/DS366/R 
Page 4  
 
  2.7 Colombian legislation defines an indicative price as a reference price
18 established by 
administrative act for use as a c ontrol mechanism on the declared f.o.b. value of imported goods.19  
Indicative prices are applied according to the type of goods and are calculated based on the average production costs of the imported goods, when available, or otherwise, on the lowest price actually negotiated or offered for importation of the good into  Colombia.  Indicative prices may be imposed (i) 
upon petition by domestic producers or importers of  like products that are affected by unfair 
competition; (ii) when customs authorities identify unfair competition practices; or (iii) when the DIAN or the Directorate for Customs determines that indicative prices are necessary, based on 
sectoral studies, risk profiles or in pursuance of a particular policy.
20   
2.8 Indicative prices are used at the time of presentati on of the customs declaration.  Pursuant to 
Colombian customs law, foreign goods imported into Colombia must remain in  customs custody, and 
thus will not be released, until an importer presents  an import declaration and pays customs duties, 
sales tax and penalties.21  Under Colombian tax law, sales ta x on imported goods is calculated based 
on the same value used to determine customs duties.22  Sales tax for domestic goods is based on the 
transaction value.23  Upon presentation of the import declarati on for goods subject to indicative prices, 
if the declared f.o.b. value is lower than th e indicative price, release of the goods will not be 
authorized unless the importer corrects the value on th e declaration on the basis of the indicative price 
and pays customs duties and sales tax on this basis.24   
2.9 An importer is allotted a maximum of five days to correct the declared value and pay customs 
duties and sales tax, and is not given any opportunity  at this time to submit evidence to demonstrate 
that the declared value represents the actual transaction value of the goods.25  If the importer does not 
                                                                                                                                                                     
Resolution No. 7509 of 26 June 2007, as modified by Resolution No. 11414 of 28 September 2007 
(Exhibit PAN–8);  and sports footwear classifiable under Chapter 64, under Resolution No. 7512 of 26 June 
2007, as modified by Resolution No. 11415.  Indicative prices are also applied to other products, including 
paper and cartons, under Resolution No. 7513 of 26 June 2007 (Exhibit PAN-12);  tyres under 
Resolution No. 2671 of 18 March 2008 (Exhibit COL–48, pg. 5);  jet-skies, under Resolution No. 2672 of 18 
March 2008 (Exhibit COL–48);  polyethylene and polypropylene, under Resolution No. 4449 of 20 May 2008 
(Exhibit COL–48, p. 5);  electrical appliances, under Resolution No. 11413 of 28 September 2007 
(Exhibit COL-48);  and automobile piston rings, under Resolution No. 2820 of 28 March 2006 
(Exhibit COL-48). 
18 "Reference prices", in turn, are defined in Article 237 of Decree No. 2685 of 1999 as "the prices 
established by the Customs Directorate taken with an indi cative character in order to control the value declared 
for identical or similar goods during the inspection process" (Exhibit COL–1). 
19 See Article 237 of Decree No. 2685 of 1999 (Exhibit COL–1).     
20 See Methodology for the Determination of Reference Prices, sections 2.1, 2.2, 2.3 and 3.1 
(Exhibit PAN-18). 
21 See Articles 112 and 120-124 of Decree No. 2685 of 1999 (Exhibit COL–1). The definition of the 
term release ("levante") is set forth in Article 1 of that Decree as the act by the customs authority that allows the 
interested parties to dispose of the goods, once that the legal requirements have been met or, if so required, the 
guarantee has been paid. 
22 Article 459 of Colombia's Tax Statute (Exhibit COL–3). 
23 Article 447 of Colombia's Tax Statute (Exhibit COL–3).  An exception to that general rule is 
established in Article 453. According to this provision, in the cases in which there is no invoice or equivalent 
document, or the invoice or equivalent document shows a price lower than the market price, the taxable base 
shall be determined on the basis of the market price, unless proven otherwise. 
24 See Article 128.5 e) of Decree No. 2685 of 1999 (Exhibit COL-1) and Article 172.7 of 
Resolution No. 4240 of 2000 (Exhibit COL-2). 
25 See Article 128.5 e) of Decree No. 2685 of 1999 (Exhibit COL-1) and Article 172.7 of 
Resolution No. 4240 of 2000 (Exhibit COL-2).  In cases of goods not subject to indicative prices, an importer 
may have the opportunity to present additional documents to support the declared va lue, post a guarantee or 
correct the import declaration, in order to obtain the rel ease of the goods (see, e.g., Article 128.5(a), (b) and (c) 
of  Decree No. 2685 of 1999 (Exhibit COL-1) and Article 172.3, 172.4 and 172.5 of Resolution No. 4240 of 
2000 (Exhibit COL-2);  see also Colombia's response to Panel question No. 26).  As explained, in the case of  WT/DS366/R 
 Page 5 
 
 
  correct the declared value or pay customs duti es and sales tax based on the indicative price, the 
importer will need to reship the goods in questi on within a period of one month or the goods will be 
considered "legally abandoned".26  Whenever an importer opts to correct the import declaration and 
pays customs duties and sales tax based on indicative prices, the goods will be released and the relevant documents are submitted to th e División de Fiscalización Aduanera.
27  This initiates the 
"control posterior" process.28   
2.10 The declared purpose of the " control posterior " process is to verify, after the release of the 
goods, the customs value declared by the importer, in order to determine the correct dutiable base.29  
Upon receipt of the declaration and documentation, the División de Fiscalización will conduct the 
"estudio de valor " in order to assess the declared customs value of the imported goods.30  According 
to Colombian legislation, this assessment is based on the value at the time of physical inspection or 
presentation of the import declaration31 and is conducted in accordance w ith the principles set forth in 
Articles 1 to 8 of the Customs Valuation Agreement .32  The conclusions of the " estudio de valor " are 
presented in a report which includes, inter alia , the "definitive" customs value resulting from that 
assesment and an explanation of the methods applied in determining such customs value.33   
2.11 The " control posterior " process allows for two possible outcomes.  If the División de 
Fiscalización determines through the estudio de valor that the final customs value corresponds to the 
value originally declared by the importer, the impor ter will be entitled to a refund of the payment in 
excess made at the time of the release.34  The importer must file a request for reimbursement.35  No 
timeline is provided for provision of the refund, al though in three specific cases presented in this 
                                                                                                                                                                     
goods subject to indicative pr ices, when the importer has declared a pr ice lower than the indicative price, the 
only option available is to correct the impor t declaration when a controversy arises. 
26 See Article 115 of Decree No. 2685 of 1999 (Exhibit COL-1) as modified by Article 10 of 
Decree No. 2557 of 6 July 2007 (Exhibit PAN–30).  Under Article 115 of Decree No. 2685 of 1999 
(Exhibit COL-1), as modified, goods which arrive in Colombia for importation may remain in storage for up to 
one month during completion of customs procedures, or for two months in exceptional cases authorized by 
customs authorities.  Upon expiry of this period, goods  that are not removed are considered to be legally 
abandoned,  One month after the goods are deemed to be legally abandoned, DIAN is authorized to dispose of 
the goods in question.  See also Colombia's response to  question No. 4(a)(ii) from Panama;  Exhibit PAN–66. 
27 Article 128.5 e) of Decree No. 2685 of 1999 (Exhibit PAN–6). 
28 Paragraph 3 of Article 172 of Resolution No. 4240 of 2000 (Exhibit COL-2). This provision 
indicates that the "control posterior" starts automatically.  This automatic nature of the control posterior is 
reflected in an example submitted by Colombia, where the Grupo Importaciones de la Administración Local de 
Aduanas de Medellín sent ex officio  the importer's file to the División de Fiscalización (see Exhibit COL-9).  
However, in two separate cases submitted to the Panel by the parties, the "control posterior" was initiated upon 
request of the importer (see Exhibit COL-8 and PAN-53).  
29 Article 3.1. of the Manual de Valoración – Orden Administrativa 0005 (Exhibit COL–36);  see also 
Colombia's response to Panel question No. 28. 
30 See paragraph 3 of Article 172 of Resolution No. 4240 of 2000 (Exhibit COL-2);  Article 3.6 of the 
Manual de Valoración – Orden Administrativa 0005 (Exhibit COL–36);  see also Exhibit COL-41. 
31 Article 222 of Resolution No. 4240 of 2000 (Exhibit PAN–21). 
32 See Articles 3.6.4 and 3.6.5 of the Manual de Valoración – Orden Administrativa 0005 
(Exhibit COL-36). Articles 237, 247 and 259 of Decree No. 2685 of 1999 and Articles 174-217 of Resolution No. 4240 of 2000 also make direct reference to the methods provided for in the Customs Valuation 
Agreement  (see Exhibit COL–1 and  Exhibit COL–2).  Furthermore, the valuation methods provided for in the 
Customs Valuation Agreement  are explicitly referenced in Article s 1-5 of Andean Community ("CAN") 
Decision 571 (Exhibit COL–5) and Articles 3-47 of CAN Resolution 846 (Exhibit COL-6). 
33 Article 3.8 of the Manual de Valoración – Orden Administrativa 0005 (Exhibit COL-36). 
34 Article 548(a) of Decree No. 2685 of 1999 (Exhibit COL-1).  It is worth noting, as Colombia 
acknowledged, the customs value determined during the cont rol posterior will in almost all cases be different 
from the indicative price.  This is so because indicativ e prices are established for broad categories of products 
and do not take into account all factors determining th e customs value, such as transportation charges (see 
Colombia's response to question No. 4 from Panama). 
35 Article 548(a) of Decree No. 2685 of 1999 (Exhibit COL-1). WT/DS366/R 
Page 6  
 
  dispute, importers did not receive refunds for more than two years since the initiation of the control 
posterior .
36  Alternatively, if the División de Fiscalización  determines that the final customs value is 
higher than the value originally declar ed by the importer, it will issue a " Requerimiento Especial 
Aduanero "37 including a proposed " Liquidación Oficial ".38  At this time, the importer may dispute the 
proposed liquidation and provide further evidence supporting the value originally declared.39  If the 
importer successfully disputes the proposed liquidation, the importer is entitled to a refund of the 
sums paid in excess during the initial presentation of the import declaration.40  However, if the 
importer does not respond to the Requerimiento, or the response is considered to be unsatisfactory, the 
Customs Administration will issue a " Liquidación Oficial de Revisión de Valor ", which contains the 
final determination of the customs value.41  To the extent that the importer is not satisfied with the 
Customs Administration's determination as published in the " Liquidación Oficial de Revisión de 
Valor ", the importer may challenge this administra tive act before the administrative authorities 
through a " Recurso de Reconsideración ".42 
C. RESTRICTION ON PORTS OF ENTRY AND INTERNATIONAL TRANSIT RULES APPLICABLE TO  
TEXTILES , APPAREL AND FOOTWEAR ARRIVING FROM PANAMA  
2.12 Colombian customs law permits customs authoriti es to limit access to ports of entry whenever 
authorities are not satisfied of their ability to full y exercise their powers of control and verification.43  
On these grounds, although Colombia has 26 ports of entry for international trade44, it has limited 
imports of textile and apparel imports to 11 ports of entry.45   
2.13 Textiles, apparel and footwear classifiable under Chapters 50-64 of the Colombian Tariff 
Schedule originating in or arriving from Panama a nd the CFZ, which are imported into Colombia, are 
subject to additional temporary limitations.  Under Article 2 of Resolution No. 7373 of 
22 June 200746, as modified by Resolution No. 7637 of 28 June 200747, subject textiles, apparel and 
footwear may only be entered at Bo gota airport or Barranquilla seaport.48  However, the general 
                                                      
36 In Exhibit COL-8, the importer requested initiation of the control posterior in 28 April 2006, which 
concluded on 22 February 2008.  In a separate case, discussed in Exhibit PAN-53 and Exhibit COL–49, the importer requested initiation of the co ntrol posterior on 10 July 2005 and concluded on 18 December 2007. 
37 Article 3.10 of the Manual de Valoración – Orden Administrativa 0005 (Exhibit COL-36). 
38 Article 509 of Decree No. 2685 of 1999 (Exhibit COL-1). 
39 Articles 510-511 of Decree No. 2685 of 1999 (Exhibit COL-1). 
40 Article 548(a) of Decree No. 2685 of 1999 (Exhibit COL-1). 
41 Article 129 of Decree No. 2685 of 1999 (Exhibit COL-1) and Article 173 of Resolution No. 4240 of 
2000 (Exhibit COL-2).  According to Article 514 of De cree No. 2685 of 1999, the "Liquidación Oficial de 
Revisión de Valor" act proceeds in cases of "errors" in aspects of the Import Declarati on such as f.o.b. value and 
customs value or "when the declared value does not correspond to the value of the goods as established by customs authorities". 
42 Articles 515-518 Decree No. 2685 of 1999 (Exhibit COL-1). 
43 Article 41 of the Customs Statute (Exhibit COL–1). 
44 Colombia's first written submission, para. 185. 
45 See Article 39 of Resolution No. 4240 of 2000  (Exhibit PAN–38). These ports are: Barranquilla, 
Bucaramanga, Buenaventura, Cali, Cartagena, Cúcuta, Ipiales, Leticia, Medellín, San Andrés and Bogota. 
46 See Exhibit PAN-34. 
47 See Exhibit PAN-36. 
48 Exhibit PAN-34.  The parties originally disagreed on the application of the ports of entry measure to 
footwear classifiable under Chapter 64.  Under Resolution No. 8603 of 24 July 2007, goods classifiable under 
heading 64.06 of Colombia's Customs Tariff Schedule are declared exempt from the ports of entry restrictions (see Exhibit PAN-35).  In its request for establishment of  panel, Panama submitted that Resolution No. 7373 of 
22 June 2007, as modified by Resolution No. 7637 of 28 June 2007, covered all goods classifiable under 
Chapters 50 to 64 of Colombia's Tariff Schedule.  Panama noted, however, in para. 62, footnote 64 of its first written submission that Article 4 of Resolution No. 7373 of 2007 exempted goods classifiable under headings 
64.01 to 64.05, and Resolution 8603 of 2007 exempted products falling under heading 64.06.  In light of these 
provisions, Panama argued that the port of entry measure only applied to textile products falling under  WT/DS366/R 
 Page 7 
 
 
  restriction on ports of entry under Article 2 is subject  to several exceptions.  In relation to goods with 
a destination outside of Colombia, Article 4 of  Resolution No. 7373 provides that goods in transit 
from Panama, which are submitted for trans-shipme nt and do not have Colombia as their final 
destination may enter at any of the 11 authorized  ports open for textile , apparel and footwear 
imports.49  Additionally, Article 4 further exempts goods consigned or endorsed to the State50; goods 
imported for specific state or emergency uses: goods arri ving by travellers or post al traffic, or in route 
to Leticia, San Andrés or Santa Catalina51; goods consigned to industrial users of free trade zones52; 
and goods classifiable under subheadings 64.01 to 64.05 of Colombia's Tariff Schedule that arrive at 
any of  the 11 ports designated in Article  39, paragraph 1 of Resolution No. 4240.53  
Resolution No. 8603 of 24 July 200754 establishes an additional exem ption for footwear classifiable 
under sections 6406 of Colombia's Customs Schedul e, and Resolution No. 7637 of 28 June 200755 
further exempts goods consigned to "Highly Expor ting Users" and "Permanent Customs Users".56 
2.14 The stated aim of Resolution No. 7373, as ame nded, is to strengthen and improve customs 
controls related to the importation of certain tex tile, apparel and footwear goods, which are described 
as constituting an important national industry in Colombia.57  Non-compliance with the obligation to 
enter and import goods from Panama and the CFZ exclusively at those ports, will subject the goods to 
seizure and forfeiture.58 
2.15 Resolution No. 7373, as amended, supersedes the regular transit regime under Colombian 
law, which permits the transportation of merchandise  of national or foreign origin from one customs 
office to another located within the national territory of Colombia.59  Resolution No. 7373 was 
orignially implemented for a period of appr oximately six months beginning 1 July 2007.60  However, 
the period of application of the measure has b een extended on two occasions at the time of this 
writing 61, and is currently set to expire on 31 December 2008. 
                                                                                                                                                                     
Chapters 50 to 63 and not to footwear classifiable under Chapter 64.  Subsequently, however, Colombia stated 
in its answer to Panel question 46, that Resolution No. 7373 of 2007 does not provide for a general exception for 
footwear products and thus, products classifiable under headings 64.01–64.05 can only enter Colombia at the 
ports of Barranquilla and Bogota, as well as through the points of entry listed in subparagraphs 5 and 6 of 
paragraph 1 of Article 39 of Resolution No. 4240 (Exhibit CO L-12).  In light of Colomb ia's clarification that it 
applied the ports of entry restrictions to footwear, Pana ma confirmed that it was challenging the application of 
the measure to all footwear goods which are deemed to fall with in the scope of the measure (see Panama's 
Answer to First Set of Panel Questions, answer to ques tion 45;  Panama's second written submission, para. 109, 
footnote 80). 
49 Resolution No. 7373, Article 4, para. 3, (Exhibit PAN-34). 
50 Resolution No. 7373, Article 4, para. 1, (Exhibit PAN-34). 
51 Resolution No. 7373, Article 4, para. 2, (Exhibit PAN-34). 
52 Resolution No. 7373, Article 4, para. 3, (Exhibit PAN-34). 
53 Resolution No. 7373, Article 4, para. 4, (Exhibit PAN-34). 
54 Exhibit COL-35. 
55 Exhibit COL-36. 
56 Exhibit PAN–36. 
57 See Resolution No. 7373 (Exhibit PAN-36). 
58 See Article 5 of Resolution No. 7373 of 2007 and Article 502.1.2 of Decree No. 2685 of 1999 
(Exhibit PAN-41). 
59 Article 1 of Decree No. 2685 of 1999 (Exhibit PAN-20). 
60 Exhibit COL-34, para. Article 8. 
61 Resolution No. 16100 of 27 December 2007;  Colombia's resp onse to Panel question No. 122;  
Resolution No. 5542 of 2008. WT/DS366/R 
Page 8  
 
  D. T
HE REQUIREMENT TO PRESENT AN ADVANCE IMPORT DECLARATION AND PAY CUSTOMS 
DUTIES AND SALES TAX ON THE BASIS OF TH E ADVANCE DECLARATION APPLICABLE TO 
IMPORTS OF TEXTILES , APPAREL AND FOOTWEAR ARRIVING FROM PANAMA  
2.16 Under Article 119 of Decree No. 2685  of 1999, applicable to impor ted goods of all origins, an 
importer may present an import declaration as early as 15 days prior to arrival of the goods, or may 
delay presentation of the import declaration until one month after the goods' arrival into Colombia or 
up to two months following arrival, subject to authorization by Colombia's customs authority.62  In 
combination with the requirement to present an impo rt declaration, importers of goods are required to 
pay customs duties and sales tax at the time an import declaration is presented.63  Under this regime, 
importers therefore are generally not required to presen t an import declaration in advance of arrival of 
the goods, and as such, are not required to pay cust oms duties and taxes prior to the goods' release 
from customs, although the option exists to do so.64 
2.17 In the case of textile, apparel and f ootwear imports arriving from Panama, 
Resolution No. 7373 of 22 June 2007, as modified by Resolution No. 7637 of 28 June 2007, requires 
importers of textile, apparel a nd footwear goods classifiable unde r Chapter 50–64 of Colombia's 
Tariff Schedule and arriving from Panama or the CF Z to present an advance import declaration not 
more than 15 days prior to the goods' arrival in Colombia65 and accordingly pay customs duties and 
taxes in advance.66  Article 1 of Resolution No. 9859 of  23 August 2007 a dditionally requires 
importers of all goods from Panama or the CFZ th at are subject to the 15-day advance import 
declaration requirement to declare the goods not less th an five days prior to the arrival of the goods in 
Colombia.67  Since all importers must pay customs duties and sales tax at the time an import 
declaration is presented, importers of subject goods  from Panama and the CFZ, which are required to 
present an import declaration in advance, therefor e, must also pay customs duties and sales tax in 
advance. 
2.18 An importer of textile, apparel and footwear goods arriving from Pa nama or the CFZ that fails 
to present an advance import declaration upon entr y at Bogota or Barranquilla may only proceed with 
importation if he or she submits a legalization declaration and pays a fee for the "rescate" of the goods 
in addition to all customs duties and any accrued wa rehouse storage charges.  Otherwise, the importer 
may elect to re-ship the goods from Colombian territory.68 69  If the importer does not submit a 
legalization declaration and pay a fee, or does not re-ship the goods in question, the goods will be 
considered as legally abandoned and subject  to seizure within a one month period.70  An importer may 
                                                      
62 Article 119 of Decree No. 2685 of 1999 (Exhibit COL-1);  Article 115 of Decree No. 2685 of 1999 
(Exhibit COL-1).   
63 Article 119 of Decree No. 2685 (Exhibit COL-1). 
64 In its answers to question 154 by the Panel, Co lombia confirmed that this advanced declaration 
requirement is an option for all other goods 
65 Article 1 of Resolution No. 7373 of 2007 (Exhibit PAN–34).  Article 1 of Resolution No. 7637 of 28 
June 2007 (Exhibit PAN–36) extends the scope of this oblig ation to all listed textile, apparel and footwear goods 
from Panama, and not only to those from the CFZ.  Under Article 119 of Decree No. 2685, paragraph 3 
(Exhibit COL-1), Colombia's DIAN may require importers to present an advance import declaration taking into 
account criteria of, inter alia , the origin of the good. 
66 In its responses to Panel questions Nos. 73, 74 and 154, Colombia has confirmed that the 
requirement to present an import advance declaration only applies to textile, apparel and footwear goods classifiable under Chapters 50-64 of Colombia's Tariff Schedule and arriving from Panama. 
67 Article 1 of Resolution No. 9859 of 23 August 2007 (Exhibit PAN–46). 
68 Article 6 of Resolution No. 7373 (Exhibit PAN-34);  Article 231 of Decree No. 2685 
(Exhibit PAN-32). 
69 Article 231 of Decree No. 2685 (Exhibit PAN-32). 
70 Article 115 of Decree No. 2685 of 1999 (Exhibit PAN-1).  WT/DS366/R 
 Page 9 
 
 
  pay a "rescate" fee equal to 15 per cent of the value of the goods to recover goods that are classified as 
legally abandoned.71   
E. THE REQUIREMENT TO PAY A FEE TO RECTIF Y AN IMPORT DECLARATION APPLICABLE TO 
TEXTILE  IMPORTS ARRIVING FROM PANAMA  
2.19 In addition to the requirement to present an a dvance import declaration, importers of textiles 
classifiable under Chapters 50-60 of Colombia's Ta riff Schedule that arrive from Panama, are also 
required to pay a fee to correct certain errors ap pearing in the advance import declaration.  In 
particular, under Article 3 of Resolution No. 7373 , importers of subject goods must pay a fee to 
correct an import declaration in situations where di fferences in the weight per square metre or width 
of the textile exceed 7 and 10 per cent, respectively.72  Article 128.7 of Decree No. 2685 of 1999, as 
modified by Decree No. 1232 of 2001, generally established a fee of three per cent of the value of the 
goods to correct errors in the description of the goods,  within a period of five days after a declaration 
is presented.73  Under Article 153 of Resolution No. 4240 of 2000, as modified by Article 1 of 
Resolution No. 8038 of 2005, all imports classifiab le under Chapters 50–60 of Colombia's Tariff 
Schedule for which an advance import declaration is  submitted, are subject to the same legalization 
requirement (and are similarly exempt in cases where differences in the weight per square metre or 
width of the textile do not exceed 7 and 10 per cent, respectively).74  However, as noted in paragraphs 
2.16 and 2.17 above, only importers of subject te xtiles arriving from Panama are required to submit 
and advance import declaration.  A ll other importers of subject textiles retain the option to submit an 
advance declaration. 
III. PARTIES' REQUESTS FOR FINDINGS AND RECOMMENDATIONS 
3.1 Panama requests the Panel to find that: 
(a) Colombia's determination of the customs value of textiles, footwear and other 
products on the basis of indicative prices is inconsistent with Articles 1, 2, 3, 5, 6 
and 7.2 (b), (f) and (g) of the Customs Valuation Agreement ; 
(b) Colombia's use of indicative prices to determine the tax base for the purpose of 
levying the sales tax on imported textiles,  footwear and other products, when the 
transaction value is used to determine the tax base of like domestic products for the same purpose, is inconsistent with Article III: 2, first sentence, or, alternatively, with 
Article III:4 of the GATT 1994
75; 
(c) Colombia's prohibition of the importation of textiles, footwear and apparel from 
Panama except at the ports of Bogota and Barranquilla is inconsistent with 
Article XI:1 of the GATT 1994 ; 
(d) Colombia's prohibition of the importation of textiles, footwear and apparel from 
Panama except at the ports of Bogota a nd Barranquilla, while the importation of like 
products from other countries is not simila rly restricted, is inconsistent with 
                                                      
71 Article 231 of Decree No. 2685 (Exhibit PAN-32). 
72 Article 3 of Resolution No. 7373 of 22 June 2007 (Exhibit PAN–34). 
73 Article 128.7 of Decree No. 2685 of 1999 (Exhibit COL-1), as modified by Decree No. 1232 of 
2001. 
74 Article 153 of Resolution No. 4240 of 2000 (Exhibit COL-2), as modified by Article 1 of 
Resolution No. 8038 of 2005. 
75 Panama first formally requested a finding under Article III:4 in its second written submission, 
para. 226.  In its first written submission, footnote 110, and in its request for establishment of a Panel, Panama 
expressed its view that Colombia's use of indicative pric es to determine the tax base for imported products was 
inconsistent with Article III:4. WT/DS366/R 
Page 10  
 
  Article XIII:1 of the GATT 1994
76, or alternatively, with Article I:1 of the 
GATT 199477; 
(e) Colombia's suspension of the transit regime for textiles, footwear and apparel coming 
from Panama is inconsistent with Article V:2 of the GATT 1994 ; 
(f) Colombia's imposition of ports of entry and tr ansit restrictions to textiles, footwear 
and apparel that have been in transit thr ough Panama, while no such restrictions are 
imposed on these  products when transported from their country of origin to Colombia without going through Panama, is  inconsistent with Article V:6 of the 
GATT 1994 ; 
(g) The requirements that importers of textil es, footwear and apparel originating in 
Panama submit an advance import declara tion and pay customs duties before the 
arrival of the products at customs and the limited options available for the 
presentation of the legalization declaration without payment of a fee, when no such 
requirements or limitations are imposed on im porters of like products originating in 
other countries, are inconsiste nt with Article I:1 of the GATT 1994 ; 
3.2 Colombia requests that the Panel reject all of Panama's claims for the reasons provided in its 
submissions.
78 
3.3 In the event that the Panel were to uphold some  or all of Panama's claims under Articles I:1, 
V:2, V:6, XI:1 or XIII:1 of the GATT 1994 ,  Colombia requests the Panel to find that the measure is 
justified under the general de fence of GATT Article XX(d). 
IV. ARGUMENTS OF THE PARTIES 
A. EXECUTIVE SUMMARY OF THE FIRST WRITTEN SUBMISSION OF PANAMA  
1. Introduction 
4.1 The following table provides a brief summary of  the specific measures at issue, their legal 
basis in Colombian law, and the relevant provisions of the Customs Valuation Agreement  and the 
GATT 1994  under which Panama challenges each of the measures. 
                                                      
76 Although Panama did not formally request fi ndings in relation to Article XIII:1 of the GATT 1994 in 
its first written submission, Panama attributed this omissi on to a clerical error, an d subsequently requested a 
finding of violation of Article XIII:1 in its second writte n submission, para. 226 (see Pa nama's response to Panel 
question No. 10). 
77 Panama first requested findings that Colombia's restriction on the entry of textiles, apparel and 
footwear violates Article I:1 of the GATT 1994  in its first oral statement, paras. 52-53.  In its request for 
establishment, Panama also referred to Article I:1 of the GATT 1994  in relation to the ports of entry measure.  
Colombia has challenged this claim as falling outside the Panel's mandate (see Colombia's second written 
submission, paras. 148-172). 
78 Colombia's second written submission, para. 325.  WT/DS366/R 
 Page 11 
 
 
  Issue Specific measure at 
issue Legal basis under domestic law Applicable WTO 
law 
A.  Customs valuation methods 
and procedures for 
textile, footwear 
and other products 
subject to "indicative prices".  Customs valuation of 
textile, footwear and 
other products is based 
on indicative prices. Article 128.5 e) of Decree No. 2685 
Article 172.7 of Resolution No. 4240. Articles 1, 2, 3, 5, 6 
and 7.2(b), (f) and 
(g) of the Customs 
Valuation 
Agreement . 
 The sales tax for 
imported products 
subject to indicative 
prices is based on the indicative price, 
whereas the sales tax 
for like domestic products is based on the 
transaction value. Article 447 of the Tax Statute in 
connection with Article 128.5 e) of 
Decree No. 2685. Article III:2 of the 
GATT 1994 . 
B.  Port of entry 
and transit 
restrictions and customs 
regulations for 
textile products coming from 
Panama.  The entry and 
importation of textile 
products from Panama is restricted to the ports 
of Bogota and 
Barranquilla. Article 2 of Resolution No. 7373 
(modifying Article 39 of 
Resolution No. 4240). Articles XI:1 and 
XIII:1 of the 
GATT 1994 . 
 The transit regime is 
suspended for textile 
products coming from 
Panama. Article 2 of Resolution No. 7373 
(modifying Article 39 of 
Resolution No. 4240). Article V:2 of the 
GATT 1994 . 
 The port of entry 
restrictions accord 
products that have been in transit through 
Panama treatment less 
favourable than that accorded to products 
that have not been in 
transit through Panama. Article 2 of Resolution No. 7373 
(modifying Article 39 of 
Resolution No. 4240). Article V:6 of the 
GATT 1994 . 
 The requirement to 
complete customs 
procedures and pay 
customs duties prior to 
the arrival of the goods at customs, and the 
limited options 
available for the 
presentation of a 
legalization declaration without the payment of 
a fee, are applied only 
to textile products from Panama.   Articles 1 and 3 of 
Resolution No. 7373, Article 119 of 
Decree No. 2685 and Article 1 of 
Resolution No. 9859. Article I:1 of the 
GATT 1994 . 
 WT/DS366/R 
Page 12  
 
  2. The measures at issue 
(a) Customs valuation of textiles, footwear and ot her products on the basis of "indicative prices" 
4.2 Colombia's Schedule of Concessions to the GATT 1994  provides that its customs duties shall 
be applied on an ad valorem basis.  An ad valorem customs duty is based on the customs value of the 
goods.  Colombia does not use the transaction value as the basis for the determination of the customs 
value of those goods.  Instead, it uses indicative prices,  which are unrelated to the transaction value of 
the goods.   
4.3 According to Article 128.5 e) of Decree No. 2685 of 1999 and Article 172.7 of 
Resolution No. 4240 of 2000, an importer whose goods have a transaction value lower than the 
indicative price must correct the import declaration to reflect the indicative price or a higher amount 
to obtain release of the goods.  The failure to corr ect the transaction value to reflect the indicative 
price within a period of five-days from the presentation of the import declaration leads to the subsequent legal abandonment of the goods, and their eventual forfeiture. 
4.4 Furthermore, the sales tax on imported products is  determined on the basis of the indicative 
price when the transaction value is below the indica tive price.  In contrast, for domestic products, the 
sales tax is based on the actual value of the sale. 
(b) Port of entry and transit restrictions and customs regulations for textiles from Panama 
4.5 Out of the 11 ports of entry that are enabled for the importation of textiles in Colombia, 
textiles originating in, or transiting through, Panama  may be imported and ente red at only two of these 
11 ports; namely, the airport of Bogota and the sea port of Barranquilla.  In terms of transportation 
costs, these ports are not always the most convenien t and viable entry points for textiles from Panama 
destined for different locations in Colombia. 
4.6 Furthermore, textiles from Panama are prohibite d from transiting through Colombia.  Even if 
the final destination is a country other than Colo mbia, textiles from Panama cannot be transported by 
land through Colombia.  Instead they must be cleared  for importation as soon as they arrive in Bogota 
or Barranquilla. 
4.7 In addition, only with respect to textiles from Panama, all customs formalities must be 
completed and customs duties and sales tax must be paid in full prior to the arrival of the goods. 
3. Legal argument 
(a) Colombia's use of indicative prices to determin e the customs value of textiles, footwear and 
other products is inconsistent with Articles 1, 2, 3, 5, 6 and 7.2 (b), (f) and (g) of the Customs 
Valuation Agreement  
(i) Colombia's use of indicative prices is inconsis tent with Article 1 of the Customs Valuation 
Agreement 
4.8 Article 1 of the Customs Valuation Agreement  provides that the customs value of imported 
goods "shall" be the transaction value (i.e. the pr ice actually or payable), as the primary means of 
determining the customs value of imported goods.  
4.9 In principle, the price actually paid or payable for the goods can be known with certainty only 
by the parties to the transaction, i.e. the buyer and the seller.  It is, therefore, necessary for customs 
authorities to rely upon the information provided by the buyer, (normally the importer) as to the  WT/DS366/R 
 Page 13 
 
 
  transaction value of the goods.  The determination of  the transaction value of goods must take into 
account the specific circumstances of the purchase and sale of those particular goods. 
4.10 A WTO Member could argue that it cannot use th e transaction value to determine the custom 
value of goods because the conditions set out in the relevant sub-paragraphs (a) to (d) of Article 1 
have not been met.  However, such a conclusi on could be reached only after customs has conducted 
an assessment of the individual circumstances surroundi ng the transaction in question.  It cannot be 
based on an a priori  assumption that, for all imports, the relevant conditions have not been met.  
Panama understands that Colombia is not basi ng its non-acceptance of the transaction value for 
textiles, footwear and other products and its use of  indicative prices on the grounds that the conditions 
set out in sub-paragraphs (a) to (d ) of Article 1 have not been met 
4.11 Article 128.5 e) of Decree No. 2685 of 1999 a nd Article 172.7 of Resolution No. 4240 of 
2000, DIAN systematically rejects the transaction va lue for goods subject to indicative prices on an 
a priori  basis without any examination of the particular circumstances surrounding the sale.  Indeed, it 
departs from the transaction value in every single case involving goods subject to indicative prices.   
4.12 For such goods, an importer is not afforded any opportunity to demonstrate that the declared 
value (when lower than the indicative price) corre sponds to the transaction value of the product.  
Rather, Article 128.5 e) of Decree No. 2685 of 199 9 and Article 172.7 of Resolution No. 4240 of 
2000 state that a declarant of goods subject to indicative prices can only: (i) "correct" the declared value in the import declaration to reflect the appli cable indicative price and (ii) pay the customs duties 
and sales tax based on that price. 
4.13 If, at the end of the five-day period establis hed in Article 128.5 e), the declarant does not 
"correct" the import declaration accordingly, and does not pay the corresponding customs duties and 
sales tax thereon, the importation process is consider ed to be terminated and the goods are kept in a 
warehouse.  In the absence of any subsequent acti on by the declarant, the goods are considered as 
legally abandoned after a period of one month.  On e month after the expiry of the period of legal 
abandonment, the goods may be disposed of by DIAN. 
4.14 In the light of the consequences that would r esult if an importer does not "correct" the import 
declaration to reflect the indicative price, an impor ter is effectively forced to declare the indicative 
price, instead of the transaction value of the goods , and pay customs duties and sales tax thereon.  
This is confirmed by the fact that in 87 per cent of  relevant cases, the importer has opted to "correct" 
the import declaration. 
4.15 Panama notes that, in any event, Colombia does not follow the appropriate procedures in 
situations where there are doubts as to the truth or ac curacy of the declared the transaction value, as 
stated in the Decision Regarding Cases Where the Customs Administrations Have Reasons to Doubt 
the Truth or Accuracy of the Declared Value.  This Decision is based on the assumption that those 
doubts arise in the context of case-by-case assess ments of the declared transaction value.  
Furthermore, it provides for opportunities to the im porter in order to present arguments and evidence 
demonstrating the truth and accuracy of the declared  value.  In contrast, DIAN rejects the declared 
transaction value on a systematic basis.  It do es not undertake a case-by-case assessment of the 
circumstances surrounding the tran saction at issue in order to determine whether there are valid 
grounds to doubt the truth or accuracy of the declared value. 
(ii) Colombia's use of indicative prices is inconsistent with the methodologies set out in 
Articles 2, 3, 5, and 6 of the Customs Valuation Agreement 
4.16
 In those cases where Article 1 cannot be used, Articles 2, 3, 5 and 6 of the Customs Valuation 
Agreement  provide a series of sequential and hierarch ical alternative means for determining the WT/DS366/R 
Page 14  
 
  customs value of goods.  The application of these subsidiary methods of valuation must be carried out 
on a case-by-case basis. 
4.17 The methodologies established in Articles 2, 3, 5 and 6 to determine the custom value of a 
consignment require the assessment of multiple fact ors, such as the transaction value of identical 
goods sold at about the same time as the transaction in question, taking into account sales at the same 
commercial level, or sales at similar levels, or th e unit price at which imported goods are sold in the 
greatest aggregate quantity, at or about the time of  the importation of the goods being valued.  Time 
specifications in alternative customs valuations im plies that the methodologies must be used in the 
appropriate sequence on a case-by-case basis so as to re plicate most closely the conditions of the sale 
of the product in question.   
4.18 Indicative prices applied by Colombia for Cust oms Valuation purposes are neither based on 
the transaction value nor determined using any of the methodologies set out in Articles 2, 3, 5 and 6 of 
the Customs Valuation Agreement .  Instead, they are determined based on surveys carried out by 
DIAN on a fixed basis, in accordance with the "M ethodology for the Determination of Reference 
Prices".  These prices are not determined using any of the methodologies set out in Articles 2, 3, 5 and 
6 of the Customs Valuation Agreement , as DIAN does not undertake an examination of the specific 
circumstances surrounding the transaction at issue.   
4.19 Furthermore, Article 128.5 e) of D ecree 2658 of 1999 and Article 172.7 of 
Resolution No. 4240 of 2000 do not permit DIAN to use the methodologies set out in Articles 2, 3, 5 and 6 of the Customs Valuation Agreement  at the time of inspection.  Each of these methodologies 
requires that customs authorities conduct their inv estigations on a case-by-case basis, a possibility that 
is not contemplated in those provisions of Colombian law. 
(iii) Colombia's use of indicative prices is inconsis tent with Articles 7.2(b), (f) and (g) of the 
Customs Valuation Agreement 
4.20 Article 7.1 provides that if the customs valu e of the imported goods cannot be determined 
under the provisions of Articles 1 through 6, the cust oms value shall be determined using reasonable 
means consistent with the principl es and general provisions of the Customs Valuation Agreement  and 
Article VII of the GATT 1994 , and on the basis of data available in the country of importation.  The 
flexibility granted under Article 7.1 are subject to certa in limitations under Article  7.2.  In particular, 
WTO Members cannot resort to: (i) a system which provides for the acceptance for customs purposes 
of the higher of two alternative values (Article 7. 2 (b)), (ii) minimum customs values (Article 7.2(f)), 
or arbitrary or fictitious values (Article 7.2(g)). 
4.21 In this case, Colombia determines the cust oms value of goods on the basis of either the 
indicative price (if the declared value is lower than  the indicative price), or the transaction value (if 
the price negotiated for the product is higher than the indicative price).  Furthermore, indicative prices 
are also minimum customs values because products s ubject to indicative prices will not be permitted 
to be imported in Colombia unless this minimum valu e is declared by the declarant.  In addition, 
indicative prices are arbitrary and fictitious values as the customs value of goods subject to those 
prices is not based on the actual circumstances of the sale, but rather on the basis of a general survey 
based on the grouping of various products within the applicable tariff heading. 
(iv) The payment of customs duties based on indica tive prices is not a "guarantee" within the 
meaning of Article 13 of the Customs Valuation Agreement 
4.22 Panama notes that, on several occasions, Colombia has argued that the payment of customs 
duties based on indicative prices merely constitutes a "guarantee." Colombia's characterisation of such 
payments may be considered as an attempt to bring its measure within the scope of Article 13 of the 
Customs Valuation Agreement .    WT/DS366/R 
 Page 15 
 
 
  4.23 However, the payment of customs duties based on indicative prices is not a "guarantee" 
within the meaning of Article 13 of the Customs Valuation Agreement .  As noted above, a declarant 
correcting its import declaration must pay the relevant customs duties and sales tax on the basis of the indicative prices.  Under Colombian law, a paym ent is the primary means of extinguishing a tax 
obligation.  Once this payment is made, the im portation process is term inated, and the goods are 
released.  In contrast, a guarantee is a provisional instrument that secures the ultimate payment of 
customs duties for which the goods may be liable duri ng the period of the valuation controversy.  The 
guarantee does not, in and of itself, liquidate the tax obligations at issue.  Therefore, the payment of 
the customs duties based on the in dicative price cannot be considered as the posting of a guarantee. 
4.24 Furthermore, Colombian law itself distinguish es between the correction of an import 
declaration and payment of the customs duties and taxes owing on that basis and the posting of a 
guarantee. 
(b) Colombia's reservation under the Customs Valuation Agreement  to use minimum values has 
expired 
4.25 On the basis of Article 20.1 and Annex III of the Customs Valuation Agreement , on 30 March 
2000 Colombia made a request for a reservation allowing it to maintain officially-established 
minimum values for a period of five years for certain products. 
4.26 On 10 May 2000, the Committee on Customs Valu ation noted "good cause for Colombia's 
request and its intention to make this reservation on a limited and transitional basis" and "that this 
reservation will apply only to the products identifie d in Annex I, Annex II and Annex III".  It further 
noted "Colombia's indication that this would be a single request to maintain minimum values" and, 
therefore, decided that "Colombia may continue to  maintain officially-established minimum values 
for the valuation for customs purpo ses" until 30 April 2001, 30 April 2002 and 30 April 2003 for the 
goods listed in Annexes I, II and III, respectively. 
4.27 The reservation, now lapsed, applied to many of the same products that are now subject to 
indicative prices. 73 per cent of the products (59 out of 81 products) for which Colombia was granted 
a waiver to maintain minimum prices until 30 Apri l 2002 (Annexes I and II) are currently subject to 
indicative prices. 
(c) Colombia's use of indicative prices to determin e the value of imported textiles, footwear and 
other products for the purpose of levying sales tax when the transaction value is used to determine the value of like domestic products  for that purpose is inconsistent with 
Article III:2, first sentence, of the GATT 1994  
4.28 Article III:2 of the GATT 1994  prohibits WTO Members from subjecting imports to internal 
taxes in excess of those applied, directly or indir ectly, to like domestic products.  Panama notes that 
imported products subject to indicative prices have  at least a potential like domestic product that may 
be treated more favourably than the imported product.   
4.29 An imported product with a transaction value lowe r than the applicable indicative price will 
be taxed on the basis of the higher indicative price pl us the customs duties charged on the basis of that 
indicative price.  On the other hand, like domestic pr oducts are subject to sales tax on the basis of the 
actual sale price of the product.  Thus, imported products subject to indicative prices incur sales tax in excess of that imposed on like domestic products. WT/DS366/R 
Page 16  
 
  (d) Colombia's prohibition of the importation of th e importation of textiles from Panama except 
at the ports of Bogota and Barranquilla is inconsistent with Article XI:1 of the GATT 1994  
4.30 Article XI:1 of the GATT 1994  provides that no prohibition or restriction, other than duties, 
taxes or other charges, shall be instituted or ma intained by any Member on the importation of any 
product of the territory of any other Member. 
4.31 In the light of Resolutions No. 7373 of 2007 an d No. 7637 of 2007, the importation of textiles 
in Colombia is prohibited unless the goods are ente red and imported at the two designated ports of 
Bogota and Baranquilla.  This requirement to enter and import textiles at these two ports constitutes a 
"restriction" within the meaning of Article XI:1 of the GATT 1994 .  Furthermore, it is a "limiting 
condition" on the importation of the listed produc ts in Colombia, and makes importation more 
onerous than if the condition had not existed. As  noted above, Colombia has 11 customs offices at 
which textiles normally may be entered.  However,  textiles coming from Panama are prohibited from 
being imported at 9 out of these 11 customs offices. 
4.32 Panamanian exporters of goods destined for ma rkets such as Cali incur additional costs as the 
goods can only be entered at Bogota (for air ship ments) or Baranquilla (for sea shipments). Goods 
arriving by sea need to be transported from the port of Barranquilla to Cali.  The cost of transporting 
cargo up to 7 tons for a 20 ft container by truck from Buenaventura to Cali is US$350 as compared to US$990 to transport the same goods by truck from Ba ranquilla to Cali.  These additional costs create 
significant transaction costs and a disincentive to im port textiles from Panama destined for Colombian 
cities that are not located near the two designated ports. 
(e) The port of entry restrictions are applied in a ma nner that is inconsistent with Article XIII:1 of 
the GATT 1994  
4.33 Article XIII:1 provides that any quantitative rest rictions applied by a WTO Member must be 
imposed on a non-discriminatory basis.  
4.34 In this case, the requirement to enter and impor t textiles at the ports of Bogota or Baranquilla 
constitutes a restriction on imports.  Colombia app lies the restrictions in Resolutions 7373, 7637 and 
16100 only to textile imports from Panama.  Colomb ia does not require that textiles originating in 
third countries be imported at the ports of Bogot a and Barranquilla.  Therefore, Colombia does not 
similarly restrict the importation of such products from third countries.    
(f) Colombia's suspension of the transit regime fo r textiles from Panama is inconsistent with 
Article V:2 of the GATT 1994  
4.35 Article V:2, first sentence, provides that there sh all be freedom of transit through the territory 
of each Member, via the routes most convenient for inte rnational transit, for traffic in transit to or 
from the territory of other Members.  In turn "tra ffic in transit" is defined as the transit across the 
territory of a Member when the passage across such territory, w ith or without trans-shipment, 
warehousing, breaking bulk, or change in the mode of transport, is only a portion of a complete 
journey beginning and terminating beyond the frontie r of the Member across whose territory the 
traffic passes.  This definition applies to goods st arting their journey in Panama, transiting through the 
territory of Colombia, and reaching thei r final destination in another country. 
4.36
 Article 2 of Resolution No. 7373 of 2007 provi des that for textiles coming from Panama and 
entering Bogota or Barranquilla, authorization will not be granted under the normal customs transit 
regime.  Instead, Colombia requires that textiles coming from Panama must be entered and imported 
at the ports of Barranquilla or Bogota.  Thus, Colombia restricts the ability of these products to transit 
through Colombia.   WT/DS366/R 
 Page 17 
 
 
  4.37 Furthermore, the port of entry restrictions make  distinctions based on the place of origin or 
departure of the goods.  Article V:2, second sentence provides that no distinction shall be made based 
on, inter alia , the place of origin, departure, entry, ex it or destination, or on any circumstances 
relating to the ownership of  goods, of vessels or of other means of transport.  In this case, if textiles 
originate in, or transit through, Panama, they must be entered at Bogota or Baranquilla.  However, if 
the same goods come directly from third countries without going through Panama, they may be 
entered at any eligible port in Colombia. 
(g) The port of entry restrictions that accord treat ment less favourable to goods in transit through 
Panama than that which they would have been accorded had they been transported from their 
place of origin without going through Panama are inconsiste nt with Article V:6 of the 
GATT 1994  
4.38 Article V:6 of GATT 1994  provides that products which have been in transit through the 
territory of any other Member shall be accorded treatment no less favourable than that which would 
have been accorded to such products had they been  transported from their place of origin to their 
destination without going through the territory of such other Member.  
4.39 Colombia permits textiles from other WTO Member s to be entered at any eligible port in 
Colombia, but prohibits the importation of the same products except at the ports of Bogota and Baranquilla if they were in transit through Panama.  For example, a textile product going directly to 
Colombia from a third country may be entered at any eligible port in Colombia.  However, if the same 
textiles were transported through Panama, they would have to be entered and imported at the ports of 
Bogota or Barranquilla. 
(h) The requirement to present an advance declar ation and pay customs duties and sales tax for 
textiles originating in Panama is in consistent with Article I:1 of the GATT 1994  
4.40 Article I:1 of the GATT 1994  obliges Members to provide non-discriminatory treatment with 
respect to the matters falling within the scope of that Article, such as "rules and formalities in connection with importation and exportation".  In this case, the requirement to present an advance 
import declaration and to pay customs duties and sales tax on the basis of the advance declaration is a 
rule in connection with importation.   
4.41 Importers of products originating in countries ot her than Panama are permitted to import into 
Colombia without having to submit an advance decl aration and without having to pay customs duties 
and sales tax on that basis.  This is an adva ntage within the meaning of Article I:1 of the GATT 1994 .  
In contrast, Article 1 of Resolution No. 7373 of 2007 provides that the import declaration for the 
listed products must be presented in advance of th e arrival of the goods in Colombia.  Moreover, the 
customs duties and sales tax must be paid in full for those products.   
4.42 Furthermore, Article 3 of Resolution No. 7373 of 2007 restricts the options available for the 
rectification of the import declaration without the payment of a fee ( rescate ) where the differences 
between the actual goods and what is stated in the import declaration with respect to the weight per 
square metre or the width exceed 7 per cent and 10 per cent, respectively.  This is a rule in connection 
with importation.  The importation of like produc ts from other countries is not subject to this 
limitation, and they therefore enjoy an advantage.    
4.43 In the light of the above, products originati ng in Panama are not accorded immediately and 
unconditionally the advantages that are accorded to lik e products originating in other countries.    WT/DS366/R 
Page 18  
 
  4. Panama's request for fi ndings and recommendations 
4.44 In the light of the considerations set out above, Panama requests the Panel to make the 
following findings: 
• Colombia's determination of the customs value of textiles, footwear and other 
products on the basis of indicative prices is in consistent with Articles 1, 2, 3, 5, 6 and 
7.2 (b), (f) and (g) of the Customs Valuation Agreement . 
 
• Colombia's use of indicative prices to determine the value of imported textiles, 
footwear and other products for the purpo se of levying the sales tax, when the  
transaction value is used to determine the value of like domestic products for that 
purpose, is inconsistent with Artic le III:2, first sentence, of the GATT 1994 . 
 
• Colombia's prohibition of the importation of  textiles from Panama except at the ports 
of Bogota and Barranquilla is inconsis tent with Article XI: 1 of the GATT 1994 . 
 
• Colombia's suspension of the transit regi me for textiles coming from Panama is 
inconsistent with Article V:2 of the GATT 1994 . 
 
• Colombia's imposition of ports of entry and tr ansit restrictions to textiles that have 
been in transit through Panama, while no such restrictions are imposed on these  
products when transported from their country  of origin to Colombia without going 
through Panama, is inconsiste nt with Article V:6 of the GATT 1994 . 
 
• The requirements that importers of textiles originating in Panama submit an advance 
import declaration and pay customs duties before the arrival of the products at customs and the limited options availabl e for the presentation of the legalization 
declaration without payment of a fee, when no such requirements or limitations are 
imposed on importers of like products origina ting in other countries, are inconsistent 
with Article I:1 of the GATT 1994 . 
 
4.45 Panama requests the Panel to recommend, in acco rdance with Article 19.1 of the DSU, that 
the DSB request Colombia to bring the meas ures at issue into conformity with the Customs Valuation 
Agreement  and the GATT 1994 . 
B. E
XECUTIVE SUMMARY OF THE FIRST WRITTEN SUBMISSION OF COLOMBIA  
1. Request for preliminary ruling 
4.46 Colombia submits that Panama's Request for Esta blishment of a Panel (the "Request") fails to 
comply with the due process requirements of Article 6.2 DSU.  Colombia requests a preliminary ruling by the Panel to exclude such claims from its  terms of reference that are not set forth in a 
sufficiently clear manner in the Request for Establishm ent or that were not the subject of consultations 
between the Members. 
4.47 First, Colombia considers that Panama's requ est challenging the indicative price measure on 
an "as such" and "as applied
" basis is inconsistent with Article 6.2 DSU.  Panama's Request fails to 
refer to any specific application of such a measure.  Colombia thus requests the Panel to rule that 
Panama's Request in respect of the "as applied" clai m fails to "identify the specific measure at issue" 
as required by Article 6.2 DSU.  WT/DS366/R 
 Page 19 
 
 
  4.48 Second, Colombia submits that the Request furt her fails to identify the specific measures at 
issue as it refers to indicative prices that are est ablished and applied in accordance with, inter alia, 
"framework legislation such as Colombia's Custom s Statute (Decree No. 2685 of 1999, in particular 
Titles V and VI), Resolution No. 4240 of 2000 and Colombia's Tax Code (Decree No. 624 of 1989)".  It is clear that these "measures" cover several hundred s of pages and a wide range of legal provisions, 
the relationship of which to indicative prices is not always obvious, to say the least.  Colombia thus 
requests that the Panel rule that Panama's genera l references to "framework legislation such as 
Colombia's Customs Statute and Colombia's Tax Code " do not satisfy the requirements of Article 6.2 
DSU. 
2. Panama's claims with respect to the indi cative price measure are to be rejected 
(a) Panama's claims under the Customs Valuation Agreement  are to be rejected as indicative 
prices are not a customs valuation method but  only a customs control and verification 
mechanism 
4.49 Panama's "as such" allegation that Article 128.5 e) of the Decree No. 2685 of 1999 (the 
"Customs Statute") and Article 172.7 of Resolution No . 4240 of 2000 violate Articles 1, 2, 3, 5, 6 and 
7.2 (b), (f) and (g) of the Agreement on Implementa tion of Article VII of the General Agreement on 
Tariffs and Trade 1994 (the " Customs Valuation Agreement ") is unsubstantiated. 
4.50 First, Panama errs in its allegation that Colombia uses the indicative prices as a mechanism to 
value goods.  Colombia uses indicative prices as a customs control mechanism, not as a customs 
valuation method.  Indicative prices are used to test the veracity of the declared value in the course of 
a "control previo," while the customs value of the goo ds is determined using one of the methods of the 
Customs Valuation Agreement  in a "control posterior". 
4.51 The challenged provisions of the relevant Colo mbian legal instruments, Article 128.5 e) of 
Colombia's Customs Statute and Article 172.7 of Reso lution No. 4240 of 2000 provide that if an issue 
or dispute (a "controversia") arises as a consequence of the fact that the declared f.o.b. value is below 
the indicative price as established by DIAN, the Colombian customs authority, the goods will be 
released if the importer corrects its import declar ation to reflect indicative prices and provisionally 
pays, by way of deposit, customs duties and relevant  taxes on the basis of those indicative prices.  
Article 128 of Colombia's Customs Statute and Article 172.7 of Resolution No. 4240 deal with the 
"release" ("levante") of the goods, not with the fina l "liquidation" ("liquidación") of the goods for 
customs purposes.  It is only following release of the goods and the posting of this deposit that the 
División de Fiscalización Aduanera will determine the actual customs value of the imported good for 
the purpose of assessing the duties.  Such customs va luation will always be conducted on the basis of 
the methods provided for by the Customs Valuation Agreement , and following the hierarchy of such 
methods established by the Customs Valuation Agreement .  Colombia presents specific examples of 
cases in which, following the posting of a deposit on th e basis of indicative prices, the customs value 
was determined to correspond with the declared valu e and the deposit was refunded.  Such a customs 
control and verification mechanism which does not a ffect the determination of the customs value of 
imported goods cannot be incons istent with Articles 1 to 7 Customs Valuation Agreement , which 
clearly relate to the "determination of the customs value" of imported goods.  Pa nama's claims in this 
respect are therefore to be rejected. 
4.52 Colombia submits that Panama's legal argum ents based on the text of the challenged 
provisions are flawed.  First, the requirement of Article 128.5 e) of the Customs Statute and 
Article 172.7 of Resolution No. 4240 to correct the import declaration and provisionally pay duties accordingly only constitutes a " guarantee" mechanism and does not represent valuation, as 
erroneously submitted by Panama.  This becomes evident from reading the challenged provisions in 
their proper legal context.  Both provisions are in cluded in the sections of Colombia's laws and 
regulations dealing with customs c ontrol and verification, and are not part of the separate provisions WT/DS366/R 
Page 20  
 
  dealing with customs valuation.  Moreover, th e definition of the term "indicative prices" in 
Colombia's Customs Statute confirms that indi cative prices are a customs control mechanism.  
Practical examples demonstrate that the system  actually operates as a guarantee mechanism. 
4.53 Second, Panama does not provide even one specific example in which duties were finally 
assessed on the basis of the indicative prices.  Rather, it presents its claims exclusively on the basis of 
its understanding (incorrect) of the challenged provi sions.  Panama has assumed the risk that its 
understanding of the legal provisions might be incorrect , and that its claim would therefore fail.  This 
is what has occurred.  By not providing exampl es of how the laws and regulations are actually 
applied, Panama has failed to establish a prima facie case. 
4.54 Third, Panama's suggestion that indicative prices are a continuation of a terminated system of 
minimum import values is equally without merit.  Th ere is an important distinction between the way 
indicative values operate and the way minimum cu stoms values operated in the transition period 
following Colombia's accession to the WTO.  Colo mbia urges the panel not to accept the simplistic 
argument presented by Panama based on a perceive d but misguided resemblance between indicative 
prices and minimum import values. 
4.55 In sum, Panama has not demonstrated that the identified measures are inconsistent with the 
Customs Valuation Agreement .  The challenged provisions of Co lombia's laws and regulations 
relating to indicative prices do not govern valuation, they do not require WTO-inconsistent behavior, 
and they do not prevent WTO-consistent actions.  Co lombia thus requests the Panel to reject all of 
Panama's claims in this respect. 
(b) Panama's claim of discrimination under GATT Article III:2 is to be rejected as it lacks a 
factual and legal basis 
4.56 Panama's claim under Article III:2 in respect of the use of indicative prices as the basis for 
assessing internal taxes is to be rejected.  First, Panama fails to identify exactly which legal provision 
of Colombia's laws and regulations it considers to  be the "measure" which is allegedly inconsistent 
with GATT Article III:2.  As this implies that the matter is not clearly identified, the Panel is unable 
to make an objective assessment of the matter before it, as required by Article 11 DSU. 
4.57 Second, Panama has failed to meet its burde n of proof.  Panama merely alleges that a 
different taxable base is used for the determin ation of internal taxes, without attempting to 
demonstrate that such a difference results in the im position of internal taxes with respect to imports 
"in excess of" the tax burden on domestic products as required by GATT Article III:2. 
4.58 Third, Panama's legal argument is built on the same flawed premise as its claims under the 
Customs Valuation Agreement :  that indicative prices are used to determine the customs value.  
Nothing in Colombian law requires the sales tax on im ported products to be imposed on the basis of 
indicative prices, even in those cases in which th e declared value is below the indicative price.  
Article 459 of the Tax Code merely states that th e taxable base for imported products shall be the 
same as the dutiable base for liquidation of impor t duties.  Article 468 of Colombia's Tax Code 
imposes the same 16% tax on both domestic and impor ted products.  There is therefore no "obvious" 
violation of Article III:2, first sentence.  Moreove r, Panama errs when it alleges that for domestic 
products the internal taxes are always determined on  the basis of the transaction value, while this is 
not the case with respect to imported products.  Ar ticle 453 of Colombia's Tax Code permits the 
Colombian tax authorities to equally disregard th e transaction value or sales price of domestic 
products as the taxable base in the event that such products are undervalued.  Therefore, the premise 
that discrimination exists is incorrect.  With r espect to both imported and domestic products alike, 
undervaluation can lead to tax assessments based on a value othe r than the declared value.  WT/DS366/R 
 Page 21 
 
 
  4.59 For all of the above reasons, Colombia request s the Panel to reject Panama's claim that 
Colombia's use of indicative prices to determine the value of certain products for the purpose of 
levying the sales tax is inconsistent with  Article III:2, first sentence, of the GATT 1994 . 
3. Panama's claims in respect of the port of entry measure are to be rejected 
4.60 Panama's second set of claims relates to Colo mbia's specification of the ports of entry for 
imports of textile, apparel a nd footwear products imported fro m Panama as provided for in 
Resolution No. 7373 of 22 June 2007, as modified by Resolution No. 7637 of 28 June 2007 (the "port 
of entry" measure).  Colombia took this measure for reasons relating to customs control and customs 
specialization and in response to the persistent problem of contraband trade in such products from 
Panama.  The evidence reveals that smuggling and under-invoicing are particularly problematic with 
respect to imports shipped from Panama, and that c ontraband involving textiles, apparel, and footwear 
is particularly important in this respect.  The probl em is exacerbated by the lack of control exercised 
over Panama's Free Trade Zone of Colon, which is recognized internationally as a focal point of illicit 
trade. 
(a) Panama's claim under GATT Article  XI is without merit as the port of entry measure does not 
constitute a prohibited quantitative restriction 
4.61 Panama's claim that the port of entry measure  makes importation more burdensome and thus 
constitutes a de facto  import restriction, in violation of Article XI of the GATT 1994  should be 
rejected. 
4.62 First, GATT Article XI provides for the elimination of quantitative  restrictions.  While the 
terms used at the beginning of the paragraph 1 of Ar ticle XI are "prohibitions or restrictions" without 
further qualification, it is clear from the context in which these terms are used that the kind of 
"limitation" or restriction addressed in this provision refers to a limitation on the quantity  of imports.  
Colombia therefore submits that Panama's interpre tation of  the GATT Article XI as setting forth "a 
comprehensive ban of all types of limitations on the importation of products other than duties, taxes or 
other charges" is overly broad.  Panama's interpreta tion is not consistent with the text of Article XI 
and is not supported by the case law referred to by Panama when read in its proper context. 
4.63 Second, Panama fails to meet its  burden of proof.  Panama has failed to provide any evidence 
that the referenced measures restrict trade.  Pana ma only offers one quotation by one transporter about 
internal transportation costs in Colombia, and it  makes no attempt to show that the internal 
transportation cost differential affects trade.  This is simply insufficient to establish a prima facie case 
in respect of a measure which, on its face, do es not impose a quantitative limitation on imports.  In 
addition, Colombia presents evidence that shows th at the value of imports of the relevant products 
from Panama actually increased in the course of the period in time during which the measure was in place, further disproving Panama's allegation. 
4.64 For all of the above reasons, Colombia requests th e Panel to reject Pana ma's claim in respect 
of the port of entry measure under GATT Article XI:1. 
(b) Panama's claim that the port of entry measure is applied in a manner that is inconsistent with 
GATT Article XIII:1 is to be rejected because Ar ticle XIII:1 does not apply to the situation at 
hand 
4.65 Panama's claim that the port of entry measure is  inconsistent with GATT Article XIII:1 is to 
be rejected because GATT Article XIII is not applicable to the case at hand.  A proper reading of GATT Article XIII in its context shows that this provision prohibits discrimination in the 
administration of quantitative restrictions that (1) would normally be prohibited by Article XI; but (2) 
are expressly permitted by the provisions of GATT Ar ticles XI.2 and XII (as well as the relevant part WT/DS366/R 
Page 22  
 
  of Article XVIII for developing countries).  In othe r words, there are a limited number of situations 
described mainly in the two Articles preceding Ar ticle XIII that allow for the use of otherwise 
prohibited quantitative restrictions.  Article  XIII adds a non-discrimination obligation  with respect to 
such permitted quantitative restrictions . 
4.66 Colombia considers that GATT Article XIII does not apply to measures, such as the 
challenged port of entry measure, that are not  quantitative restrictions prohibited by GATT 
Article XI:1 (Colombia's view) or those that are in  fact prohibited by Article XI:1, but not otherwise 
authorized (Panama's view).  Any other interpreta tion of the scope and coverage of this provision 
would conflict with the text and defy common sen se.  There simply is no reason to provide for a 
detailed and specific requirement of non-discriminator y administration of a measure which is already 
prohibited by GATT Article XI:1. 
4.67 As the port of entry measure is not covered by  GATT Article XIII:1, Colombia submits that 
Panama's claim of inconsistency with GATT Article XIII is to be rejected. 
(c) Panama's claim that the port of entry measure is inconsistent with the requirements of GATT 
Articles V.2 and V.6 lacks a factual basis as the port measure does not apply to goods in 
transit 
4.68 Panama's claim that the port of entry measure restrict the freedom of transit through the 
Colombian territory inconsistently with Articles V:2 and V:6 of the GATT 1994  must be rejected.  The 
port of entry measures do not apply to goods in tr ansit within the meaning of Article V.  GATT 
Article V applies only to goods destined for sale outside of the country through which it is passing 
and the obligations of Article V, such as those set forth in GATT Articles V.2 and V.6, are thus 
limited to goods that are destined fo r sale outside the transiting country. 
4.69 However, the challenged port of en try measure does not apply to traffic in transit in the sense 
of GATT Article V.  The entries of textiles and other covered products that are in international transit 
through Colombia in the sense that their final des tination lies outside of Colombia are exempted from 
the measure and can enter Colombia at any port of entry.  Panama errs when it relies on Article 2 of 
the challenged Resolution No. 7373, which states th at the normal customs transit regime no longer 
applies to the covered goods from Panama.  This is merely a reference to the internal transit  regime 
which concerns transportation of goods from one customs house to another customs house "located 
within the national territory of Colombia".  It does not restrict international transit .  In order to avoid 
any misunderstanding, Article 4,  paragraph 3 of Resolution No. 7373 provides that Article 2 
disallowing the normal transit regime to covered go ods "does not apply to goods that are submitted 
for transshipment, since those goods do not have as  their final destination Colombia".  Colombia 
provides a specific example to confirm that the measure is not applied to goods in  international transit.  
This contrasts with the fact th at Panama has failed to provide  even one case in which a good in 
international transit from Panama was not allowed to enter Colombia through a port other than the 
two ports designated by Resolution No. 7373. 
4.70 For these reasons, Colombia requests the Pa nel to reject Panama's claim under GATT 
Articles V:2 and V:6. 
(d) Panama's claim that the requirement to present an advance import declaration and pay 
customs duties and sales taxes for textiles originating in Panama violates Colombia's MFN obligation under GATT Ar ticle I:1 lacks merit 
4.71
 Panama's argument of violation of GATT Artic le I:1 due to a specific aspect of the port 
measure relating to the requirement to complete customs procedures and to pay customs duties prior 
to the arrival of the goods at customs, and the li mited options available for the presentation of the 
legalization declaration without the payment of a fee, is without merit.  WT/DS366/R 
 Page 23 
 
 
  4.72 First, Panama fails to demonstrate that this aspect of the measure constitutes "an advantage" 
in the sense of GATT Article I:1.  Panama does not provide any evidence with respect to the alleged 
negative impact of such requirements on compe titive opportunities for c overed products imported 
from Panama.  Colombia considers that GATT Article  I:1 does not prohibit any and all differences in 
conditions that apply to Members' imports as l ong as such differences do not offer imports from 
certain Members a competitive advantage over other Members' imports.  Panama simply assumes that 
these requirements  affect a product's "competitive opportunities", but does not present any evidence 
to this effect.  There is nothing "obviously" adva ntageous in terms of co mpetitive opportunities about 
the very limited conditions imposed on Panama in this respect. 
4.73 Second, and even assuming that the exemption of  such requirements with respect to products 
from other Members, constituted an advantage, this does not per se  imply that such an advantage was 
not "extended unconditionally" to Pa nama.  Panama's argument is based on the erroneous assumption 
that GATT Article I does not allow a Member to impose legitimate conditions on importation.  The 
MFN obligation of GATT Article I requires Members  to extend any advantage immediately and 
unconditionally to all WTO Members.  Colombia submits that the requirement to extend such 
advantages unconditionally does  not imply that no conditions may be attached to the granting of the 
advantage in the first place.  Colombia's laws and re gulations condition the formalities and ordinary 
customs procedures on the need for the customs author ities to be able to control and verify imported 
merchandise and to avoid circumvention of such laws and regulations through under-invoicing, fraud 
and smuggling.  This is a genera l policy condition which applies to all goods irrespective of their 
origin.  Article 41 of the Customs Statute provides that DIAN has the power to take measures relating 
to the entry of the products for reasons of customs control.  This provision of the Customs Statute is 
of general application and cond itions the formalities on the discretionary authority of DIAN to 
determine what is necessary for customs control and verification purposes.  The specific aspects of the 
port measure challenged by Panama in the context of its GATT Article I:1 claim were simply the 
result of the fact that certain textile, apparel, and footwear products from Panama proved problematic 
in this light.  The alleged advantage was grante d under certain conditions ( satisfaction of customs 
control and verification), and since these conditions were not met in respect of the covered products 
from Panama, the alleged advantage was amended with respect to such products from Panama.  Since 
it is not so that an advantage was conf erred to other Members, which was not extended 
unconditionally  to products from Panama, Colombia consider s that Panama's claim is to be rejected. 
4.74 Also, Colombia considers that GATT Article I:1 applies to products originating in a Member 
and that GATT Article I:1 is thus based on the origin  of the product, not on its place of exportation.  
Panama trades in the covered goods but does not pr oduce all of the goods under discussion, and their 
origin thus lies elsewhere.  For that reason as we ll, Panama cannot claim that an advantage was not 
extended unconditionally and immediately to products originating in  Panama. 
4.75 For all of the above reasons, Colombia request  the Panel to reject Panama's claim under 
GATT Article I:1 with respect to the challe nged aspects of the port of entry measure. 
4. Colombia's port of entry measure is in any case justified under the general defence of 
GATT Article XX(d) 
4.76 Colombia is of the view that it has sufficiently rebutted the arguments made by Panama in 
respect of its port of entry measure and considers that all of Panama's claims should therefore be 
rejected by the Panel. 
4.77 However, in the event that the Panel were to be  of a different view and were to uphold some 
or all of Panama's claims in respect of the port of entry measure, Colombia submits that the general 
defence of GATT Article XX(d) justifies the port of entry measure, which is a temporary measure necessary to secure compliance with Colombia's customs laws and regulations.  The specific 
application of such a measure in respect of impor ts from Panama is justified on the basis of the WT/DS366/R 
Page 24  
 
  evidence available to Colombia, and the measure  is therefore not applied in a manner which 
constitutes arbitrary or unjustifiable discrimination. 
(a) The port measure is provisionally justifie d under paragraph (d) of GATT Article XX 
4.78 Colombia considers that the port of entr y measure meets the conditions for being 
provisionally justified under para graph (d) of Article XX as it is (i) a measure designed to secure 
compliance with Colombia's customs laws and re gulations which themselves are deemed to be 
WTO-consistent; and (ii) is necessary to secure such compliance. 
4.79 First, as becomes clear from the preamble of R esolution No. 7373 of 2007, the port of entry 
measure is clearly designed to secure complianc e with Colombia's laws relating to customs 
enforcement. 
4.80 Second, Colombia submits that the port of entr y measure is "necessary" to secure compliance 
with Colombia's laws relating to customs enforcemen t.  In its most recent assessment of the meaning 
of the term "necessary" in Article XX, the Appellate Body in its report on Brazil – Tyres  stated that a 
measure is to be considered as "necessary" if it is "l ikely to bring a material contribution" or "apt to 
produce a material contribution" to the achievement  of the policy objective.  The determination of 
whether a measure is "necessary" involves in ever y case a process of weighing and balancing a series 
of factors which prominently include the importance of the common interests or values protected by that law or regulation, the contribution made by th e compliance measure to the enforcement of the law 
or regulation at issue, and the accompanying impact of the law or regulation on imports or exports. 
(i) The port of entry measure concerns a ve ry important set of interests or values 
4.81 There can be no dispute about the importan ce of combating under-invoicing, tax evasion, 
smuggling, and money laundering, which are all relevant in this context.  Colombia notes that in the 
case of Dominican Republic – Import and Sale of Cigarettes , the fight against tax evasion and 
smuggling was accepted as "a most important inte rest for any country and particularly for a 
developing country".  Unfortunately, the revenue lost due to contraband from Panama is very 
significant.  In addition to a loss of revenue whic h is of key importance to a developing country like 
Colombia, these illegal activities unde rmine the political and economic stability of Colombia in its 
present context.  Colombia is not like every other countr y in this respect.  It is faced with an important 
domestic problem of drug trafficking and public or der.  The values protected by the measure in 
question are clearly very important. 
(ii) The port of entry measure is apt to contribute in a material way to the achievement of the 
objective 
4.82 The port of entry measure contributes significantly to customs enforcement through improved 
customs control and specialization.  First, it is di fficult to deny that a measure which requires that 
products be imported through the limite d number of ports that are best equipped to control imports in 
the most effective manner is a measure which, in th e words of the Appellate Body, is "apt to make a 
material contribution" to the achie vement of the policy objective of combating smuggling.  Second, 
the positive effects that the measure has had thus far, as demonstrated by the significant increase in 
contraband related seizures with r espect to textile related products from Panama in 2007 compared to 
2006, confirms the potential significant contribution of the measure to the achievement of the policy objective.  In sum, the challenged measure clea rly has the potential to be very effective in 
strengthening customs enforcement as it leads to further specialization and an increased focus and 
improved knowledge in a limited number of ports.  WT/DS366/R 
 Page 25 
 
 
  (iii) The port of entry measure does not have a significant adverse impact on legitimate trade 
4.83 The port of entry measure does not have a significant negative impact on legitimate trade, 
while it is effective in combating smuggling and under-invoicing.  First, Colombia emphasizes the 
limited character of the restriction imposed.  The por t of entry measure is not an import ban; it simply 
requires that certain products be shipped through tw o specific ports.  Second, the two specified ports 
are among the most modern ports of Colombia, wh ich, even before the port measure was adopted, 
were among the most important ports of entry for tr ade in the covered products from Panama.  Third, 
there are a number of exemptions from the applica tion of the measure which ensure that legitimate 
trade in the covered products from Panama is, to the ex tent possible, not at all affected by the measure 
imposed to curb illegal trade.  Finally, the availa ble evidence shows that the value of imports of the 
covered products from Panama a nd its Free Zone de Colon did not actually decrease due to the 
implementation of the measure; the value increased over the period. 
(iv) There were no reasonably available alternative measures 
4.84 Colombia considers that it has sufficiently est ablished that the port of entry measure is 
necessary to secure compliance with Colombia's  laws and regulations relating to customs 
enforcement.  The Appellate Body has stated that it  is for the complainant, in this case Panama, to 
demonstrate that other alternative measures were r easonable available to Colombia which would be as 
effective as the measure taken. 
4.85 Nevertheless, Colombia points to two alterna tives which either proved to be unsuccessful or 
were not practicable in the context of the products in  question.  First,  Colombia has consistently tried 
to improve the cooperation with Panama's customs authorities in order to secure compliance with its 
customs laws and regulations.  However, both in  the multilateral context of the Convention on 
Cooperation and Mutual Assistance between the Cust oms Administrations of Latin America, Spain 
and Portugal ("COMALEP"), and under the Octobe r 2006 bilateral Protocol for the Exchange of 
Information between the Customs authorities of Co lombia and Panama (the  "Customs Cooperation 
Protocol") with Panama, such efforts proved to be fruitless.  The frequent failures of the authorities of 
Panama to respond to requests for assistance, and the numerous inconsistencies in respect of the 
answers received affected the credibility of the c ooperation offered by Panama  and thus undermined 
an important element of the regional system of customs enforcement. 
4.86 Second, in other sectors also prone to smugg ling and under-invoicing such as cigarettes and 
electrical appliances, Colombia was able to conclu de agreements with the private sector to jointly 
fight contraband.  The limited nu mber of importers and distributo rs of such products allowed the 
government to require the cooperation of these priv ate parties in combating smuggling, something 
which is not possible in the case of the covered prod ucts due to the number of importers and traders in 
such products. 
4.87 For all of the above reasons, Colombia su bmits that the port measure satisfies the 
requirements to be considered provisiona lly justified under GATT Article XX(d). 
(b) The port of entry measure complies with the chapeau of Article XX 
4.88 Colombia submits that, as required by the chap eau of GATT Article XX, the port measure is 
not applied in a manner that constitutes arbitrary or unjustifiable discrimination or a disguised 
restriction on trade.  The evidence demonstrates th at Colombia's concern over the covered imports 
from Panama is justifiable and that the exclusive focus on Panama bears a clear "rational connection" 
to the objective falling within the purview of para graph (d) of Article XX.  Colombia faces a serious 
problem of contraband coming from Panama, linked to money-laundering and drug trafficking which 
has an obvious destabilizing effect on the country's economy.  The difference in the data from the export side compared to what has been declared by  the importer reveals that the amount of contraband WT/DS366/R 
Page 26  
 
  from Panama to Colombia is two to three times the value of the formal trade between the two 
countries.  Colombia considers that the differentiati on in the application of the measure is therefore 
clearly justifiabl e. 
4.89 Colombia submits that for much the same reasons, the port of entry measure cannot be 
considered to have been applied in a manner which would constitute a disguised restriction on trade.  
Colombia refers once again to the objective of  customs enforcement, customs control and 
specialization pursued by the port measure, whic h even Panama acknowledges to underlie the 
measure.  The measure is thus clearly not about rest ricting trade for protectionist purposes at all.  And, 
again, the statistics show that the meas ure has not, in fact, restricted trade. 
4.90 For all of the above reasons, the port measure challenged by Panama is a measure necessary 
to secure compliance with Colombia's laws and regu lations relating to customs enforcement which is 
not applied in a manner which would constitute ar bitrary or unjustifiable discrimination between 
countries where the same conditions prevail or a disguised restriction on international trade.  
Therefore, even if the Panel were to uphold some or all of Panama's claims  in respect of the port 
measure, Colombia requests the Panel to find that  the measure is justified under GATT Article XX(d). 
5. Request for findings 
4.91 For all of the above reasons, Colombia requests the Panel to reject all of Panama's claims. 
C. E
XECUTIVE SUMMARY OF THE REBUTTAL SUBMISSION OF PANAMA  
1. Legal argument 
(a) Colombia has failed to demonstrate that it uses indicative prices as a customs control 
mechanism and not for customs valuation purposes  
4.92 Colombia notes that Article 128 is part of Ch apter VI "Ordinary Importation" in Title V 
"Regimen de Importación" and not part of Title VI "C ustoms Valuation";  and that Article 172.7, is in 
Chapter II "Control of Customs Valuation" and not in Chapter III "Determination of Customs 
Valuation".  It uses the placement of these provisi ons to argue that they are a customs control 
mechanism and not a customs valuations method. In Panama's view, the placement of a provision in a 
particular chapter is not determina tive of the nature of that measure.  As the Appellate Body has made 
clear, for purposes of WTO law, a domestic instrument  must be assessed on the basis of its content 
and substance and not the label given to it under domestic law.  Therefore, the manner in which 
Colombia classifies the challenged provisions in its  law cannot be determinative of their consistency 
with the Customs Valuation Agreement .  It is necessary for the Panel to examine the design, structure 
and architecture of the law itself in order to make such a determination. 
4.93 The purpose of customs valuation is to determ ine the value of the goods for the purpose of 
levying ad valorem custom duties on imported goods.  Generall y, goods will be valued as soon as 
they are presented for customs clearance so that the appropriate duties may be levied and the goods 
may be released.  For products subject to indicativ e prices, the value of the goods for the purpose of 
levying ad valorem custom duties on imported goods is dete rmined when the importer submits its 
import declaration.  The customs valuation of such  products is based on the values established in the 
applicable Resolutions and not on the declared transaction value.  It is at this point that the customs 
value is determined as Customs reviews the declared  value to ascertain whether it is above or below 
the indicative price for that product.  If the declared  value is equal to or above the indicative prices, 
then that declared value will be accepted as the value of the goods for the purpose of levying 
ad valorem custom duties.  The documents are not sent to the División de Fiscalización Aduanera for 
further review as valuation takes place at the time of inspection.  Accordingly, the customs duties for 
such goods are levied on the basis of the indicative price or a higher amount.    WT/DS366/R 
 Page 27 
 
 
  4.94 If, however, the declared value is lower than th e indicative price, then the declared value is 
not accepted as the customs value for the purpose of le vying customs duties.  The importer is required 
to "correct" the value of the goods in the import declaration and pay the customs duties based on that corrected custom value.  
4.95 If an importer decides not to "correct" the impor t declaration, the documents are not sent to 
the División de Fiscalización Aduanera for review.  In these circumstances, Customs has already 
made a determination that it will not accept the decl ared transaction value and thus, valuation of the 
product has taken place.  Colombia confirms that "if the importer decides not to comply with the legal 
requirements ... the goods will have to be removed fro m the port (i.e., re-shipped), and, if not, after 
1 month, they will be considered as abandoned".  Th e fact that the documents are not sent to the 
División de Fiscalización Aduanera demonstrates that, in such cases there is no valuation undertaken 
at a later stage.    
4.96 Colombia argues that "the release of the goods [subject to indicative prices] is subject to 
further verification/post-importation control ("cont rol posterior") during which the actual customs 
value for the purpose of assessing the duties will be dete rmined."  However, despite a specific request 
from the Panel to identify the le gal basis for the "control posterior" or liquidation procedure, 
Colombia failed to do so.  Furthermore, the Pane l asked Colombia to indicate which legal provisions 
govern the "estudio de valor".  In its response, Colomb ia stated that Title VI of Decree No. 2685 deals 
with customs valuation ("estudio de valor").  Howe ver, the term "estudio de valor" does not appear 
anywhere in Title VI, so the basis for Colombia's assertion is unclear.   
4.97 Even though Colombia did not identify the legal basis for the "control posterior" or the 
"estudio de valor", it provided a narrative explana tion that the "control posterior" starts with the 
"estudio de valor" (valuation) and ends with either th e "liquidación oficial" (Article 514) or the refund 
of the cash payment made at the time of the releas e (Article 548).  Article 514, which provides for the 
"liquidación oficial de revisión de valor correspon diente", is for the review of the customs value 
determined at the time of inspection.  The term used is that of revisión or review of the value. 
Consequently, the forwarding of the documents to the División de Fiscalización Aduanera is for the 
review of the customs value in the corrected import declaration and not for the purpose of conducting the original determination of the customs value.  Moreover, by its very terms, a "control posterior" 
would serve as a "control" mechanism and not as a valuation mechanism.   
4.98 Article 548 contemplates the possibility of an importer requesting DIAN for the 
reimbursement of customs taxes and other amounts paid in excess in the following situations:  
(a) When the import declaration has been liqui dated and an amount higher than that due 
for custom taxes has been paid;  
(b) When an amount higher than that liquidated and due for customs taxes has been paid; 
(c) When the import declaration has been pr esented and the customs taxes have been 
paid without obtaining the authorization for the release of the merchandise or if the 
authorization has been partially obtained;  or,  
(d) When the payment for provisional anti-dumping or countervailing duties has been 
effected and these duties are not definitively imposed.  
4.99 First, Article 548 applies only in situations where the importer seeks the reimbursement of 
custom taxes  that have been paid.  Most significantly, Ar ticle 548(a) applies in situations where the 
importer has liquidated the import declaration and has paid an amount higher than that due for 
customs taxes.  As noted by Colombia, Article 548 a) applies to situations involving indicative prices.  
This confirms that Article 128.5 e) contemplates the payment of customs taxes for which the importer WT/DS366/R 
Page 28  
 
  may seek reimbursement at a later stage.  It does not refer to the refund of a guarantee.  Second, 
Colombia claims that when "the declared f.o.b.  value is below the indicative price established by 
DIAN, the goods will be released (levante) ... if the importer provisionally posts a deposit on the basis 
of those indicative prices."  The text of Article 128. 5 e) does not contain a reference to a "provisional" 
payment.  Article 548 clearly distinguishes be tween payments and provisional payments.  
Article 548(d) is applicable in situations invol ving payment of provisional anti-dumping duties.  
Therefore, when the reimbursement applies to a provisional payment, Article 548 specifically notes 
the provisional nature of the payment.   
(b) Colombia has failed to demonstrate that the correction of the import declaration and the 
payment of the customs taxes provided for in Article 128.5 e) of Decree No. 2685 are a 
guarantee mechanism within the meaning of  Colombian Law and Article 13 of the Customs 
Valuation Agreement  
4.100  Colombia argues that the "correction" of the import declaration followed by the payment of 
duties "is no more than the imposition of a requirement to provide a guarantee in the form of a deposit".  Colombia's reasoning is as follows: Ande an law provides that a guarantee can be provided 
in the form of a "fianza, depósito u otro medi o apropiado".  Andean Community Regulation 846 
implementing Andean Decision 571 which is directly  applicable in Colombian law expressly states 
that an importer is always allowed to obtain the release of the goods, if the importer provides a guarantee in the form of a security, deposit or any other form.  Article 128.5 e) provides that an importer must correct and make a payment.  Colomb ia construes this payment as a "deposit".  As a 
guarantee may be provided in the form of a depos it under Andean law, Colombia submits that the 
payment referred to in Article 128.5 e) is a deposit  which is the form that the guarantee takes.  
Colombia's reasoning is flawed.  First, it assumes that the payment made is a "deposit" and not a payment.  However, there is no textual basis for Co lombia to argue that the payment of the customs 
duties in Article 128.5 e) is merely a deposit.  The clear wording of Article 128.5 e) is that the importer must correct the import declaration and pay the customs taxes on the basis of the indicative 
price.  It does not say that the importer must "provide a deposit" or "provisionally pay the customs 
taxes pending final determination."  Most signifi cantly, it does not offer an importer the opportunity 
to post a "guarantee".  
4.101  Second, Colombia refers to various provisi ons of Andean law and Colombian law to 
demonstrate that the guarantee may take the form of  a "fianza, depósito u otro medio apropiado" and 
that the guarantee may constitute 100 per cent of the duties owing.  However, Panama notes that all 
the provisions cited by Colombia specifically re fer to the posting of a "guarantee".  The term 
"guarantee" is a technical term.  Thus, these provisions only a pply in those cases where the law 
specifically allows an importer to post a "guarantee", such as in Article 128.5 a) to d).  They do not apply when the term "guarantee" is not used in th e law, as in the case of Article 128.5 e). Moreover, 
although the provisions of Andean law cited by Co lombia contemplate a guarantee being provided in 
the form of a bond, deposit or other appropriate means, Article 496 of Resolution No. 4240 provides 
for only two types of guarantees:  global or sp ecific that can be bank or insurance company 
guarantees.  It does not contemplate the possibility of a "deposit".   
4.102  Colombia claims that the challenged provisions "clearly set forth a guarantee mechanism as 
allowed for by Article 13 and 17 of the Customs Valuation Agreement ".  Colombia bears the burden 
of proof in this regard, which it has not met.  A car eful examination of the facts and the law at issue 
demonstrates that the correction and payment required in Article 128.5 e) do not meet the 
requirements of Article 13 of the Customs Valuation Agreement .  A condition precedent for the 
application of Article 13 is that it is "necessary to de lay the final determination of [the] custom value".  
Colombia asserts that it is up to the "domestic customs authorities to decide when they consider that 
such a delay is necessary.  Such discretion has to  be exercised within reason of course."  Panama 
considers that Article 13 cannot be construed in such a deferential manner.  It is not solely up to the 
customs authorities to decide at their discretion that  a delay is necessary.  Whether it is necessary to  WT/DS366/R 
 Page 29 
 
 
  delay the final determination of the customs value must be decided on an objective basis, taking into 
account the particular facts of the case at hand.  Colombia refers to Exhibit COL-6 to submit that the Technical Committee of the WCO has noted that "delay s" in determining the final customs value of a 
product are "very frequently the case."  Panama notes th at this assertion made by Colombia in the text 
of its submission does not correspond to the text  in Advisory Opinion 18.1 of the Technical 
Committee of the WCO.  There is no reference in Opin ion 18.1 to delays in th e final determination of 
the customs value occurring frequently.  The Adviso ry Opinion provides an example of when it may 
be considered "necessary" to delay the final dete rmination: where adjustments in accordance with 
Article 8 should be made but the rele vant data at the time of importa tion is not available.  Thus, an 
objective criterion to determine whether it is "necessary" to delay the final determination of the 
customs value would be whether the relevant data or  documents were not available. This is not the 
situation with respect to the imports of products subject to indicative prices.   
4.103  Article 13 provides that where a Member allo ws the withdrawal of goods from customs 
subject to the provision of a guarantee, that guarant ee must be sufficient to cover the ultimate payment 
of customs duties for which the goods may be liable.  In order to determine whether a guarantee is 
"sufficient", a Member is obliged to assess the "ultimate payment of customs duties for which the 
goods may be liable".  In Panama's view, the asse ssment of the ultimate payment for which the goods 
may be liable must be carried out in the light of the specific circumstances of each case and must be undertaken in accordance with the rul es on customs valuation set out in the Customs Valuation 
Agreement .  For the purposes of Article 128.5 e), the "ultimate payment of the customs duties for 
which the goods may be liable" intended to be secure d by the alleged guarantee is not determined on 
the basis of any of the methods of customs valuation set out in the Customs Valuation Agreement  for 
each specific importation involving goods subject to i ndicative prices. Rather, it is determined on the 
basis of a minimum customs values or arbitrary or fictitious values. Colombia itself notes that it has 
the "right to examine whether the declared value is  truthful or accurate, including through the use of 
objective benchmarks  to indicate whether undervaluation has taken place for example through the use 
of indicative prices".  Thus, Colombia acknowledg es that it uses objective benchmarks of indicative 
prices to determine the ultimate payment of cust oms duties for which the goods may be liable and 
does not follow the valuation methods set out in the Customs Valuation Agreement .  Furthermore, as 
Colombia does not conduct a case-by-case analysis, it requires the payment of customs duties in all 
instances including those in which the payment of a smaller amount would constitute a sufficient 
guarantee.    
4.104  The payment of customs taxes or "deposit" does not qualify as an appropriate instrument to 
provide a guarantee. Colombian law limits the form  in which guarantees may be made.  Article 496 of 
Resolution No. 4240 in Title XVIII (Garantías) only provides for two types of guarantees: global or 
specific, which can be bank or insurance compan y guarantees.  Thus, the specific provision of 
Colombian law governing guarantees does not contem plate the possibility of a "deposit" as a 
guarantee.  This is further confirmed by the text of Articles 523 and 527 of Resolution No. 4240 
which provide that the validity of a guarantee w ill be for a period of one year.  This qualification 
would only be applicable to bank or insurance company guarantees, and not to cash deposits.   
(c) Colombia has failed to demonstrate that its use of indicative prices is an action taken pursuant 
to Article 17 of the Customs Valuation Agreement  and the Decision Regarding Cases Where 
Customs Administrations Have Reasons to Doubt the Truth or Accuracy of the Declared 
Value 
4.105  Colombia claims that "the use of the transacti on value of the good for the determination of its 
customs value does not restrict or call into questio n the right of Colombia to examine whether the 
declared value is truthful or accurate, including by using objective benchmarks to indicate whether 
undervaluation has taken place for example through the use of indicate prices."  In Panama's view, 
while nothing in Article 17 of the Customs Valuation Agreement  limits the right of customs 
authorities to satisfy themselves as to the truth and accu racy of the declared value, it is also clear that WT/DS366/R 
Page 30  
 
  nothing in Article 17 suggests that, in the exercise of that right, customs au thorities can automatically 
reject the declared value and instruct the impor ter to use a different value without previously 
examining, on a case-by-case basis, the facts to determine the truth and accuracy of the declared 
value. 
4.106  The right of customs authorities to satisfy themselves as to the truth or accuracy of the 
declared value must be construed in the light of paragraph 6 of Annex III of the Customs Valuation 
Agreement  and the Decision Regarding Cases Where Customs Administrations Have Reasons to 
Doubt the Truth or Accuracy of the Declared Value (the "Decision") which confirms that the right 
provided under Article 17 of the Customs Valuation Agreement  must be exercised on a case-by-case 
basis.  Colombia admits that when a declared va lue is below the indicative price, it has doubts about 
the veracity of that declared value (i.e. "suspici ously low").  In such ci rcumstances, Colombia's 
customs authorities should satisfy themselves as to the truth or accuracy of the declared value in 
accordance with paragraph 6 of Annex III of the Customs Valuation Agreement  and the special 
procedures set out in the Decision.  Instead, Co lombia improperly opts to reject the declared 
transaction value on its face , and requires its automatic correction to reflect the indicative price. 
4.107  Colombia claims that the Decision must be app lied "at the time of valuation of the goods" and 
that such a time is "when the declared value … is being rejected and the decision is made to base the 
valuation on one of the othe r methods of Articles 2-7 Customs Valuation Agreement ".  It further 
argues that "[i]n the Colombian system of custom s valuation, this decision is taken for some 
transactions only at the time of the control posterior , and not at the time of the release of the goods 
under a guarantee".  Panama considers that the Decision must be applied in accordance with the 
conditions set out therein, i.e.  as soon as "a declaration has been presented and … the customs 
administration has reason to doubt the truth or accur acy of the particulars or of documents produced 
in support of this declaration."  This must refe r to the moment of importation or presentation of the 
import declaration for customs clearance, and not an  alleged control posterior  that may take place 
afterwards, even months or years later.   
(d) Colombia has failed to rebut Panama's argument  that the indicative prices are a continuation 
of minimum customs values 
4.108  Panama made a claim in its first submission that Colombia had requested a reservation to 
maintain minimum values for textile and footwear pr oducts until 30 April 2002.  Despite the fact that 
the reservation has now lapsed, Colombia continu es to impose indicative prices on 73 per cent of the 
products that were previously subject to the reservati on.  Colombia's only response is that "there is an 
important distinction between … a system of minimum import values that existed in the as a customs 
valuation method and the current mechanism of using indicative prices as benchmarks only".  
Although Colombia has attempted to cast the indicativ e prices system as one of "custom control" or a 
"benchmark", it is clear from the analysis provided above  that the system is one of customs valuation.  
In that sense, it is the same as the previous syst em of minimum customs values, for which Colombia 
considered it necessary to request a re servation from its obligations under the Customs Valuation 
Agreement . 
(e) 
Colombia has failed to demonstrate that it do es not use indicative prices for the determination 
of the base for the sales tax for imported products  in a manner inconsistent with Article III:2 
and Article III:4 of the GATT 1994  
4.109  Colombia claims that Panama failed to identify the measure with sufficient clarity.  Panama's 
challenge under Article III:2 of the GATT 1994  is based on the ground that the sales tax on imported 
goods subject to indicative prices (when the declared value is below the relevant indicative price) is "in excess" of the sales tax imposed on like domes tic goods.  The difference in tax burdens arises 
from the application of different rules for the dete rmination of the tax base for imported and domestic 
goods. It is evident from Colombia's first written subm ission that Colombia has been able to identify  WT/DS366/R 
 Page 31 
 
 
  the measure at issue as Colombia's use of indicative prices to determine the value of imported textiles, 
footwear and other products for the purpose of levying the sales tax, as implemented by Article 459 of 
the Tax Code in connection with Article 128. 5 e) of Decree No. 2685 and Article 172.7 of 
Resolution No. 4240, whereas for like domestic products, Colombia uses the valor de operación  
pursuant to Article 447 of the Tax Code.  Furthermore, third parties such as the European 
Communities, Guatemala and Ecuador have also been  able to identify the measure at issue, and 
accordingly, have put forward arguments with respect to Panama's claim.  
4.110  Colombia argues that Panama has failed to meet its  burden of proof with respect to its claims 
that the use of indicative prices as the basis for taxing imported products is inconsistent with 
Article III:2.  Panama recalls that in Argentina – Hides and Leather,  the Panel found that "even where 
imported and like domestic products ar e subject to identical tax rates, the actual tax burden can still be 
heavier on imported products.  This could be the case, for instance, where different methods of 
computing tax bases lead to a greater actual tax burden for imported products." 
4.111  For Panama, it is clear that if the tax base for domestic goods is the actual sales value, 
whereas for imported goods the tax base is a higher i ndicative price, the application of the same tax 
rate of 16 per cent will lead to the imposition of a sales tax on imported goods greater than the sales 
tax on the like domestic products.  As noted by  the European Communitie s, a system whereby 
indicative prices are systematically used to dete rmine the value of imported products for the purpose 
of levying sales taxes when the transaction value is used instead to determine the value of domestic 
like products for that purpose is, on its face , contrary to Article III:2, first sentence, of the GATT 1994 . 
Therefore, contrary to Colombia's assertion, Pana ma has met its burden of proof with respect to its 
challenge under Article III:2 of GATT 1994 . 
4.112  Colombia also argues that Panama has faile d to submit evidence of specific instances of 
violation of Article III:2.  Panama notes that a pr evious panel has made clear that the "quantum and 
nature" of the evidence required for a complainin g party to discharge its burden of establishing a 
violation of Article III:2 depends "on the structure a nd design of the measure in issue".  The panel in 
Indonesia – Autos stated that "an origin-based distinction in respect of internal taxes suffices in itself 
to violate Article III:2, without the need to demonstr ate the existence of actually traded like products".  
In the present case, the different tax treatment is pr ovided on the basis of the origin of the goods.  
Therefore, Panama submits in this instance that th e challenged provisions in themselves are sufficient 
evidence of discriminatory treatment inconsistently with Article III:2 of GATT 1994 . 
4.113  The tax base for imported goods is always based on the indicative prices whereas the tax base 
for domestic goods is based on the actual sales price unless demonstrated otherwise.  As noted by the 
European Communities, "the fact that, as a result of a posteriori  verification procedure, the invoiced 
transaction value of domestic products can be cons idered inaccurate due to likely undervaluation, 
does not change the basis for the application of th e general rule, i.e., sale tax on imports is based on 
indicative prices, whereas like domestic products are levied on the basis of transaction values." 
4.114  If the Panel were to consider that the meas ure at issue does not fall under Article III:2 of 
GATT 1994 , the Panel should find that  the measure is inconsistent with Article III:4 of GATT 1994 .  
Panama submits that Article 459 of the Tax Code, Article 128.5 e) of Decree No. 2685 and 
Article 172.7 of Resolution No. 4240 accord to im ported products subject to indicative prices 
treatment less favourable than th at accorded to domestic products under Article 453 of the Tax Code, 
within the meaning of Article III:4 of the GATT 1994 .  In Korea – Various Measures on Beef , the 
Appellate Body stated that, in order to establish a violation of Article III:4, three elements must be 
satisfied "that the imported and domestic products at issue are 'like products'; that the measure at issue 
is a 'law, regulation, or require ment affecting their internal sale, offering for sale, purchase, 
transportation, or use'; and that the imported pr oducts are accorded 'less favourable' treatment than 
that accorded to like domestic products". First, Pa nama notes that, with respect to the question of 
likeness between imported and domestic products, Colo mbia has conceded that the indicative price WT/DS366/R 
Page 32  
 
  measures apply to imported products that are like dom estic products.  Second, Panama claims that the 
provisions of Colombia's law according differe ntial treatment between imported products and 
domestic products are in the nature of "laws, regula tions and requirements" affecting the internal sale, 
offering for sale, purchase, and use of the imported products subject to indicative prices.  Third, the differential treatment that is accorded to importe d products subject to indicative prices pursuant to 
Article 459 of the Tax Code in connection with Article 128.5 e) of Decree No. 2685 and Article 172.7 
of Resolution No. 4240 is less favourable than th at accorded to like domestic products under the 
regular rules and procedures of the Tax Code.  When  an imported product that is subject to indicative 
prices is presented for the liquidation of custom s taxes, Article 128.5 of Decree No. 2685 and 
Article 172.7 of Resolution No. 4240 contemplate the sole possibility of correcting the declared value 
if it is lower than the applicable indicative pri ce, and requires the payment of the customs taxes on 
that basis.  In contrast, in the case of the like domestic products, a taxpayer is entitled to base its tax 
declaration on the actual sales price or value of the transaction, as he determines, and liquidate and 
pay the sales tax on this basis.  Furthermore, Artic le 453 allows the demonstration of the transaction 
value, a possibility that is precluded for imported go ods subject to indicative prices.  Therefore, the 
rules and procedures governing the determination of the tax base for the sales tax on imported 
products subject to indicative prices are inconsistent with Article III:4 of the GATT 1994 . 
(f) Colombia has failed to rebut Panama's claim that the port of entry restrictions are inconsistent 
with Article XI:1 of the GATT 1994  
(i) The port of entry restrictions do not have the characteristics of a genuine customs 
enforcement measure 
4.115  Colombia claims that the port of entry restri ctions were implemented in order to ensure 
compliance with Colombian customs law and combat  contraband and money- laundering.  However, 
the limited product coverage of the port of entry r estrictions, their exclusive application to Panama 
and the many exemptions serving domestic economic interests clearly demonstrate that the measure is not a genuine customs enforcement measure.  More over, there is no justification for singling out 
Panama as the target of the port of entry restri ctions.  Chart 3 in Exhibit COL-38 indicates that 
imports from Panama with incidents of "disto rsions" amount to US$906,354 while those from the 
United States amount to US$2,902,809 and those fro m ALADI as a whole US$2,500,876.  Colombia 
has stated that "when a government is faced with information that shows that particular imports from 
one particular country were particularly problemat ic, it is only reasonable and appropriate that this 
government takes particular measures in order to im prove the customs control in respect of measures 
from that particular country".  Applying this reas oning, it is not clear why Colombia has not applied 
the port of entry restrictions to other countri es that have proven to be "problematic".   
(ii) Colombia's interpretation that Article XI:1 pr ohibits only measures that impose a restriction 
on the quantity of imports is not supported by th e text of Article XI:1 or the jurisprudence 
4.116  Colombia submits that the title and the text of Article XI:1 make clear that this provision 
applies only to the elimination of quantitative restrictions. It reasons that because the port of entry 
restrictions do not impose a quantitative  restriction on imports, they cannot fall within the scope of 
Article XI:1.  Thus, Colombia's whole defence re sts on the issue of whether the ports of entry 
restriction impose a quantitative restriction. Colombia  does not offer a defence to Panama's claim that 
the ports of entry restrictions constitute a "restrictio n" within the meaning of Article XI:1.  Thus, if 
Panama can demonstrate that Article XI :1 is not limited in its coverage to 
quantitative  restrictions, 
then Colombia's whole defence must fail.  
4.117  The term "quantitative restrictions" appears only in  the heading of Article XI.  The text itself 
uses the terms "prohibitions" and "restrictions". Pa nama notes the existence of the term "quantitative" 
to modify restrictions in the heading of Article XI  is not determinative of the scope of Article XI:1. 
There are several GATT articles in which the heading does not fully describe the scope of the article.   WT/DS366/R 
 Page 33 
 
 
  For example, Article X is entitled "Publication and Administration of Trade Regulations".  
Nevertheless, the text in Article X: 1 refers to "laws, regulations, j udicial decisions and administrative 
rulings of general application".  Similarly, Artic le XIII is entitled "Non-discriminatory administration 
of quantitative restrictions" but it contains provisi ons on the administration of tariff rate quotas which 
are not quantitative restrictions.    
4.118  Colombia's argument that Article XI is limited  to quantitative restrictions does not find any 
support in GATT/WTO jurisprudence.  Contrary to Colombia's argument, th ere have been several 
cases in which panels have found that a non-quantita tive restriction was in violation of Article XI.  
Most recently, in Brazil – Retreaded Tyres , the panel stated that "fines" were a restriction within the 
meaning of Article XI:1.  In EEC – Minimum Import Prices , a GATT panel found that the "minimum 
import price system was a restriction within the mean ing of Article XI:1", even through imports were 
not restricted on a quantitative basis.  In Canada – Provincial Liquor Boards , the panel found that 
limitations on the points of sale available to importe d beer were restrictions within the meaning of 
Article XI:1.  
(g) Colombia has failed to rebut Panama's claim that the ports of entry restrictions are 
inconsistent with Article XIII:1 of the GATT 1994  
4.119  Colombia states that a "proper reading ... clearly  limits the application of Article XIII to those 
quantitative restrictions that are in principle prohibited by Article XI:1, but which are covered by the exceptions to this prohibition under Article XI:2, Ar ticle XIII and Article XVIII". However, the text 
of Article XIII:1 does not qualify its application to permitted  restrictions.  It provides that no 
prohibition or restriction shall be applied by any WTO Member on the importation of any product 
from another WTO Member unless the importation of the like product of all third countries is 
similarly prohibited or restricted. As is clear fro m the text of Resolution No. 7373, the port of entry 
restrictions apply only to goods from Panama. They do not apply to goods from other sources.  Thus, 
the measure is applied on a discriminatory basis.  In the light of the above clarifications, Panama asks 
the Panel to find that the port of entry restrictions ar e restrictions within the meaning of Article XI and 
that like products from other countries are not similarl y restricted within the meaning of Article XIII:1 
of the GATT 1994 . 
(h) If the Panel were to find that Article XI:1 is not applicable, then Panama requests that the 
Panel find that the discriminatory features of the port of entry measures are in violation of Article I:1 of the GATT 1994  
4.120  In its request for the establishment of a Pane l, Panama claimed that the port of entry 
restrictions were inconsistent with Articles XI :1 and XIII:1 as well as  Article I:1 of the GATT 1994 .  
If the discriminatory aspects of the measure were f ound to be inconsistent with Article XIII, there 
would be no need to have recourse to Article I:1.   However, should the Panel find that the port of 
entry restrictions do not fall within Article XI (a nd consequently Article XIII), then Panama requests 
that the Panel find that discriminatory aspects of the port measures are inconsistent with Article I:1. 
The requirement to enter textile and footwear products at Barranquilla and Bogota is a rule in 
connection with importation.  While textiles and f ootwear coming from Panama are limited to entry 
and importation at these two ports, textiles and f ootwear coming from other countries may enter at 
any eligible port in Colombia.  Thus, products of non-Panamanian orig in enjoy the advantage of being 
able to be entered and imported at several ports.  The advantage of being able to enter and import 
textiles and footwear at more than two desi gnated ports is not extended immediately and 
unconditionally to imports from Panama.   The port of entry restrictions that are applicable 
exclusively to goods from Panama are, theref ore, inconsistent with Article I:1 of the GATT 1994 . WT/DS366/R 
Page 34  
 
  (i) Colombia has failed to rebut Panama's claim th at it imposes limitations on freedom of transit 
in a manner inconsistent with Article V:2 of the GATT 1994  
4.121  Article 4 of Resolution No. 7373 provides that  "[t]he provisions of Article 2 of this 
Resolution No. shall not apply to goods that are to  be subjected to the transhipment procedures, 
considering that in this case the goods do not ha ve Colombia as their final destination."  
"Transhipment" is a defined term in Colombian la w which means that the goods must be transferred 
from the means of transportation used for the arriva l of the goods in Colombia to another means of 
transportation used for the departure of those goods  from Colombia. The transfer must take place 
within the same customs office.  However, Colo mbia appears to focus on whether the goods in 
question have Colombia as their final destination or  not.  However, by virtue of Article 4, the 
provisions of Article 2 do not apply when the goods are subject to the transhipment procedure , as, in 
that case, the goods do not have Colombia as their fina l destination.  The question to be answered is 
whether the goods in question are subject to the transhipment procedure, not whether the goods in question do not have Colombia as their final destina tion.  If transhipment were not a limitation, then 
Article 4 would have read that the ports of entry r estrictions would not apply to "goods that do not 
have Colombia as a final destination".  It does not so read.  The failure of Colombia to permit freedom 
of transit to all goods in transit, not only those that are transhipped, is inconsis tent with its obligations 
under Article V:2.    
(j) Colombia has failed to rebut Panama's claim th at it accords treatment less favourable to goods 
that have been in transit through Panama in a manner inconsistent with  its obligations under 
Article V:6 of the GATT 1994  
4.122  As noted in Panama's first written submissi on, Colombia permits textiles from other WTO 
Members to be entered and imported at any eligib le port in Colombia, but prohibits the entry and 
importation of the same products except at the ports of Barranquilla or Bogota if they had been in 
transit through Panama.   
4.123  Colombia has interpreted Article V:6 to  apply to goods that are in transit through  Colombia. 
Article V:1 provides that the term "traffic in tran sit" describes goods that begin and terminate their 
journey beyond the frontier of the WTO Member acr oss whose territory the traffic passes. Thus, 
goods may originate in Member A, transit through Me mber B and terminate in Member C.  Colombia 
assumes that Article V contains obligations for Member B only as it is the country of transit.  However, while Article V:2 (as well as paragraphs 3, 4 and 5) refers to the obligation imposed on 
Member B to provide freedom of transit through its  territory, Article V:6 refers to the obligation 
imposed on Member C to not discriminate against goods arriving in its territory that have been in 
transit through Member B.  The fact that Article V:6 imposes an obligation on the Member in whose territory the goods terminate their journey (i.e., th e country of importation) is made clear by the 
second sentence of Article V:6 which refers  to the conditions of "eligibility for entry  of goods".  In 
effect, Article V:6 is a provision that establishes that a most-favoured-nation-requirement that must be 
observed by the country of destination.   
4.124  Thus, Article V:6 provides that a Member cannot  provide treatment less favourable to goods 
"that have been in transit" through Member B.  Th e obligation set out in Article V:6 as applied to the 
facts of this case would be as follows: Colombia  (Member C) (the country in which the goods 
terminate) cannot accord products that have been in transit through Panama (Member B) treatment 
less favourable than it would have accorded those pr oducts had they come from the country where the 
goods began their journey (Member A). Thus, the descrip tion of "traffic in transit" in Article V:1 is 
still applicable.   WT/DS366/R 
 Page 35 
 
 
  (k) Colombia has failed to rebut Panama's claim that the requirements to present an advance 
declaration and pay customs duties for textiles or iginating in Panama are inconsistent with 
Article I:1 of the GATT 1994  
4.125  Colombia agrees that the customs requirements of the ports measures are covered by 
Article I:1 as they are "rules and formalities connected with importation". Colombia, however, 
disagrees that the customs requirements constitu te an "advantage".  Even though Colombia 
acknowledges that WTO panels and the Appellate Body  have given a wide interpretation to the term 
"advantage" based on a textual interpretation, it insi sts that an  "advantage" must "affect commercial 
opportunities" in such a way as to create "more fa vourable opportunities for certain products." There 
is no textual basis in Article I:1 for this conclusi on.  The text refers to "any" advantage; not any 
"commercial" advantage.  Indeed, as the Appellate Body stated in Canada – Autos , "[t]he words of 
Article I:1 refer not to some  advantages granted ... , but to ' any advantage '; not to some  products, but 
to 'any product '; and not to like products from some  other Members, but to like products originating in 
or destined for ' all other ' Members".  While the Appellate Body has made clear that Article I:1 should 
be interpreted in a broad and expa nsive manner, Colombia rejects th is interpretation in favour of a 
narrow and restrictive reading of this Article. 
4.126  It is important to note that importers of  products originating elsewhere have the option  to 
decide whether or not to file an import declara tion, whereas importers of products originating in 
Panama are required  to do so.  Under normal importation procedures, Article 119 provides that an 
import declaration shall be presented within the tim e frame provided in Article 115 [up to one or two 
months after the goods arrive, if approved by Cust oms authorities] or in advance, no earlier than 
15 days prior to entry of the goods.  There is flex ibility afforded to importers to determine when to 
present the import declaration. The importer can wait to verify the goods that have actually arrived 
before submitting the import declaration for those goods.   
4.127  However, for goods subject to the restrictions on the ports of entry, the importer has no 
choice – it is obliged to present the import declaration within a short window of opportunity, namely 
10 days.  Therefore, the importer is deprived of the flexibility to choose when to present the import 
declaration.  A practical consequen ce of this is that the importer is not able to inspect goods before 
submitting the import declaration.  This is particular ly problematic for two reasons. First, if there are 
any discrepancies between the information declared  on the import declaration and the goods actually 
entered, then the importer has to file a Declaración de Legalización (Article 6 of Resolution No. 7373).  Second, if those discrepan cies are above 7 per cent (weight) or 10 per cent 
(width), the importer will also have to pay a rescate  or fee of 15 per cent of the customs value of the 
merchandise (Article 231 of Decree No. 2685).  These consequences indicate that importers of 
products subject to the ports of entry restrictions ar e disadvantaged as a result of being forced to file 
their import declaration in advance.  Importers of products from Panama must present an advance 
declaration and must comply with the other cust oms requirements while importers of like products 
from other countries do not.  That advantage that  is accorded to other countries is not accorded 
immediately and unconditionally to Pana ma.  In the light of previous jurisprudence, that is sufficient 
to demonstrate a violation of Article I:1.   
4.128  Colombia argues that Article I:1 is based on the origin of the product, not on its place of 
exportation, and as Panama does not produce the goods in question that it exports to Colombia it has 
no grounds to claim a violation of Article I:1.  On ce again, Colombia focuses on the trade effects of 
the measure, rather than the design, structure a nd architecture of the measure itself and its potential 
consequences. The amount of goods of Panamanian or igin that are currently exported to Colombia is 
not relevant in determining whether the measure at i ssue is inconsistent with Article I:1.  Article I:1 
governs the regulatory framework that government s must apply.  This provision protects the 
conditions of competition between suppliers of different origin, irrespective of actual volumes of 
trade; it protects not only current but also potential future trade.   WT/DS366/R 
Page 36  
 
  (l) Colombia has failed to demonstrate that its port of entry restrictions are justified under 
Article XX(d) of the GATT 1994  
4.129  Colombia submits that if the Panel were to uphold some or all of Panama's claims, then it 
further submits that the "general defence of Article  XX(d) justifies the port of entry measure, which is 
a temporary measure necessary to secure compliance with Colombia's laws and regulations".  
Colombia acknowledges that it bears the burden of  proof as the party invoking the Article XX 
exception.  Panama considers that Colombia has not discharged that burden.  In order for Colombia to 
establish that the ports of entry restrictions are ju stified under Article XX(d), it must demonstrate that 
it meets the "two-tiered" test established by the A ppellate Body: it must fall within paragraph (d) in 
order to be provisionally justified and it mu st meet the conditions of the chapeau.   
(i) The ports of entry restrictions are not provisionally justified under paragraph (d) of 
Article XX 
4.130  In its first written submission, Colombia states that the ports of entry measures were designed 
to secure compliance with its customs laws as well as its laws against smuggling and money-laundering.  However, Colombia has not identified any specific laws or regulations  related to 
combating contraband or fighting money-laundering with which the ports of entry restrictions are 
intended to secure compliance.  Colombia's failure to do so is in stark contrast with the actions taken 
by other respondents that have invoked an Ar ticle XX(d) defence in WTO dispute settlement 
proceedings, for example, in Canada – Wheat Exports and Grain Imports and in  US – Shrimp.   In an 
Article XX(d) defence, it is necessary for a panel to identify the laws or regulations the compliance 
with which the measure is aimed at securing, to de termine whether those laws and regulations are not 
themselves WTO-inconsistent, and whether the measu re is designed to secure compliance with the 
relevant laws or regulations.   
4.131  Colombia repeatedly refers to the port meas ure as "clearly designed to secure compliance 
with Colombia's laws related to custom s enforcement", or "clearly a measure designed to secure 
compliance  with Colombia's laws relating to custom s enforcement".  However, Colombia never 
identifies the precise  customs laws and regulations with whic h the ports of entry restrictions are 
designed to secure compliance. Thus, it is not possi ble for the Panel to complete the analysis required 
in the first part of the test in an Article XX(d) defence.   
4.132  The identification of the specific laws and regula tions is a pre-requisite to assist the Panel in 
determining whether the laws and regulations are themselves GATT-consistent.  In its first written 
submission, Colombia claimed that "a WTO Memb er's laws and regulations are presumed to be 
GATT/WTO-consistent" and that, as Panama has no t challenged Colombia's laws and regulations, 
"Colombia's laws and regulations are therefore deem ed to be consistent with the provisions of the 
GATT".  However, a mere claim of a presumption of WTO-consistency is not sufficient to demonstrate that all Colombia's customs laws and regulations in question are themselves GATT-
consistent.  Moreover, it may be safely assumed that  Colombia's customs laws and regulations total 
thousands of pages, therefore, it is not possible fo r the Panel to know which provisions of Colombia's 
customs laws and regulations it must examine in order to determine whether they are GATT-
consistent.   
4.133  As the party bearing the burden of proof in an Article XX(d) defence, the respondent must 
demonstrate that all conditions of the defence are met, in cluding the condition that the laws and 
regulations with which the measure at issue is designed to secure compliance are not themselves 
GATT-inconsistent. This Colombia has not demonstrat ed.  Therefore, it is not possible for the Panel 
to complete the second part of the test set out in Ar ticle XX(d) namely, the determination that the laws 
or regulations that the measure is intended to  secure compliance with are themselves not GATT-
inconsistent.   WT/DS366/R 
 Page 37 
 
 
  4.134  Even if the Panel were to find that Colombia has correctly identified laws and regulations for 
customs enforcement generally, Panama submits that Colombia has not demonstrated how the ports of 
entry restrictions are designed to secure complian ce with those laws and regulations.  The ports of 
entry restrictions apply only to  a limited range of products  whereas Colombia has customs 
enforcement problems with respect to a wide ra nge of products such as "máquinas y aparatos 
eléctricos" and vehicles and vehicle parts that are not subject to the ports of entry restrictions.  A 
measure truly designed to secure compliance with customs enforcement would apply to all products 
known to be problematic.  Furthermore, Colombia applies the port of entry restrictions only to 
Panama, even though it experiences significant probl ems with contraband técnico, subfacturación and  
sobrefacturación with the United States, Europe, Asia and the rest of the ALADI countries as 
indicated by the data contained in Chart 3 of Exhi bit COL-38. If Colombia's intention were to secure 
compliance with its customs laws and regulations, it would apply the measures to all imports giving 
rise to customs irregularities.  
4.135  In accordance with the Appella te Body's statements in Korea – Various Measures on Beef , 
there are three relevant factors in determining wh ether a measure is "necessary" to secure compliance 
with a WTO-consistent law or regulation within th e meaning of Article XX(d), namely: the relative 
importance of the common interests or values that th e underlying law or regulation to be enforced is 
intended to protect; the extent to which the measu re contributes to securing compliance with the end 
pursued, namely the underlying law or regulation at i ssue;  and the extent to which the measure has a 
restrictive impact on international commerce, i.e ., intense or broad restrictive effects on imported 
goods. 
4.136  In order for a measure to be considered as "n ecessary" within the meaning of Article XX(d), it 
must be close to "indispensable" to secure complia nce with GATT-consistent laws and regulations.  
As demonstrated below, given the lack of effec tiveness of previous similar measures in combating 
contraband, Colombia cannot demonstrate the port of en try restrictions are close to "indispensable" to 
securing compliance with its customs laws and regul ations.  While the fight  against tax evasion and 
smuggling may be an important interest for a deve loping country, Panama considers that Colombia 
has not established how the restrictions contribute in a material way to securing compliance with the 
applicable laws.  Colombia maintained similar port of entry restrictions from 7 July 2005 to 
31 October 2006. Resolution No. 5796 of 7 July 2005 provided that all goods classifiable under 
Chapters 50 to 64 of the Customs Tariffs (textil es and footwear) coming from or originating in, 
Panama had to be entered and imported exclusivel y at the ports of Bogota (if by air) and Barranquilla 
(if by sea).  Evidence cited by  Colombia shows that, for 10 months in  2006, when the previous ports of 
entry restrictions were in force, the percentage of  contraband trade was over 84.27 per cent generally 
and 89 per cent for textiles.  These statistics demons trate that the ports of entry restrictions are 
completely ineffective in combating contraband.   In these circumstances, Co lombia's argument that its 
ports of entry restrictions are now necessary to ensu re compliance with its customs law and to combat 
contraband is unsustainable.  
4.137  In the light of these statistics, the Panel asked  Colombia how it would consider the "port of 
entry restrictions imposed at that time as "necessar y" and "mak[ing] a material contribution to the 
objective of securing compliance with Colombian la ws relating to customs enforcement against 
customs fraud".  In its response, Colombia merely noted that it disagreed that the figures showed that 
the similar measures in place between July 2005 and October 2006 were not effective.  In addition, 
Colombia argues that "it is not because a measure is not immediately able to resolve the problem, 
especially in a case as complex and persistent as this one, that the measure is ... not apt to materially 
contribute to the achievement of the objective".  It not es that "it is only normal that it takes some time 
for such measures to have the intended effect" a nd that "the challenged measure clearly has the 
potential to be very effective in strengthening cust oms enforcement".  In Panama's view, the measure 
is of such a nature – the prohibition of the entry of textiles at all ports except Baranquilla and Bogota - 
that it should be possible to detect the immediate impa ct of the measure and to assess its effectiveness.  
The fact that contraband was continuing at high leve ls in the 10 months of 2006 when the previous WT/DS366/R 
Page 38  
 
  port restrictions were in place clearly demonstrates that such port restrictions do not make a material 
contribution to the policy objectives of combat ing contraband trade and enhancing customs 
enforcement. It is for a very similar reason that the Panel in Dominican Republic – Import and Sale of 
Cigarettes  found that the measure at issue was not effec tive because despite the efforts made to curb 
smuggling though the imposition of the tax stamp, th ere were still documented cases of smuggling.  
The Panel concluded therefore that the tax stamp was of limited effectiveness in preventing tax 
evasion and cigarette smuggling.  Colombia cannot  convincingly argue that the ports of entry 
restrictions make a material contribution to the policy objective of combating contraband when the 
levels of contraband at the time the previous  measures were in place were so high.   
4.138  Colombia refers to the Appellate Body's stat ement that the "[a] measure with a relatively 
slight impact upon imported products might more easily  be considered as 'ne cessary' than a measure 
with intense or broader restrictive effects", and su bmits that the measure "does not have a significant 
negative impact on legitimate trade, while it is effective in combating smuggling and under-
invoicing".  Colombia notes that imports of the covered products from Pana ma and its Colon Free 
Zone have increased. Colombia recalls that the Appellate Body stated that "a measure with a 
relatively slight impact upon imported products might more easily be construed as 'necessary' than a 
measure with intense or broader restrictive effects. "  Panama submits that Colombia's approach to 
what constitutes an "adverse impact on trade" or "r estrictive effects on trade" is flawed.  This phrase 
cannot be used as a test to assess whether levels of  imports have increased despite the imposition of 
the measure at issue.  In Panama's view, therefore, the "restrictive effects" referred to by the Appellate 
Body in Korea – Various Measures on Beef  must be viewed as meaning the effects on the conditions 
of competition of the imported product, rather than  the restrictive effects on the trade flows of 
imported products.   
4.139  The Appellate Body in Korea – Various Measures on Beef  stated: "It was clear to the Panel 
that a contracting party cannot justify a measure  inconsistent with a nother GATT provision as 
"necessary" in terms of Article XX(d) if an alternative measure which it could reasonably be expected 
to employ and which is not inconsistent with ot her GATT provisions is available to it."  Panama 
agrees that it has the burden of identifying other less trade-restrictive alternatives reasonably available 
that would achieve the desired level of protection wi th respect to the objectiv e pursued by Colombia.  
However, it is not possible to provide specific a lternatives as Colombia has not clearly identified 
which of its customs laws and regulations it is seekin g to ensure compliance w ith through the ports of 
entry restrictions.  Panama notes that Colombia has experienced problems of contraband, under-
invoicing, money-laundering, and smuggling with many countries as indicated in Chart 3 of 
Exhibit COL-38.  It applies its general customs laws and regulations to all other countries.  Therefore, 
a reasonably available less-trade restrictive alterna tive to the port of entry restriction would be for 
Colombia to apply its general customs laws and regul ations to Panama.  This would of course be an 
alternative that is reasonably available and would not impose an undue burden on Colombia.  
(ii) The ports of entry restrictions do not meet the requirements set out in the chapeau to 
Article XX 
4.140  If the Panel were to conclude that the ports of  entry restrictions fall within the scope of 
Articles XX(d) of the GATT 1994 , it would then need to carry out an analysis of the measure in 
accordance with the requirements of the chapeau  of Article XX of the GATT 1994 . 
4.141  The port of entry restrictions are a "disguised restriction" on international trade.  Panama 
considers that port of entry restrictions were imposed  in order to protect fragile domestic industries.  
As indicated in the introduction to the First Submission of Panama, the design, structure and architecture of the port of entry restriction reveal that its true purpose it to protect domestic industries, not to enforce customs law.  That conclusion is confirmed by the statements made by the Ministry of Commerce, Industry and Tourism in several Fina l Anti-Dumping Determinations.  The Ministry 
further found that despite the application of trad e remedies on the importation of the subject products  WT/DS366/R 
 Page 39 
 
 
  originating in China which was complemented  from October 2005 with the adoption of customs 
controls for the entry into Colombia of these products , which allowed the domestic industry to show 
certain signs of recovery especially in 2005, overa ll the domestic industry continues to show evidence 
of serious injury which was aggravated during the fi rst semester of 2006. The statements made by the 
Ministry of Commerce, Industry and Tourism are an admission that the port of entry restrictions do 
not serve customs enforcement purposes but constitute a "disguised restriction on international trade". 
4.142  The discrimination in the application of the por ts of entry restrictions between goods from 
Panama and those from other countries is "arbitrary"  and "unjustifiable" within the meaning of the 
chapeau of Article XX.  As noted from Exhibit CO L-36, Colombia has experienced various customs 
problems, such as technical contraband, under-in voicing, over-invoicing, and open contraband from 
many countries including the United States and the rest  of ALADI countries.  Yet, Colombia applies 
the port of entry restrictions only to Panama.  This  is clearly "arbitrary" within the meaning of the 
chapeau. 
4.143  That type of discrimination cannot be justifiable under the chapeau of Article XX. The 
chapeau refers to discrimination "between countries where the same conditions prevail".  This makes 
clear that discrimination between imports fro m different countries can be justified only if it is based 
on differences in conditions prevailing in those countries,  such as discrimination against imports of 
plants from countries with a plant disease.  The law instituting the port of entry restrictions makes no 
distinction related to conditi ons prevailing in Panama a nd the exempted countries.  
D. EXECUTIVE SUMMARY OF THE REBUTTAL SUBMISSION OF COLOMBIA  
1. Claims relating to Colombia's indicative pricing mechanism as a customs valuation 
method under the Customs Valuation Agreement  
4.144  Colombia has explained on several occasions the role played by indicative prices.  They are 
not, as erroneously stated by Panama, used "to determine the value  of products for the purpose of 
levying customs duties and internal taxes."79  Rather, indicative prices are used as a customs control 
mechanism, which does not affect customs valuati on.  Customs valuation in Colombia is entirely 
consistent with the principles of Articles 1-7 of the Customs Valuation Agreement , and is not related 
to indicative prices.80   
(a) Panama fails to meet its burden of proof 
4.145  Colombia recalls that from the standpoint of in ternational law, "municipal laws are merely 
facts".81  Determining the meaning of a Member's dom estic law may require more than simply a 
reading of the text; it may require recourse to other interpretative aids, such as evidence of the law's 
consistent application in practice, the pronouncemen ts of domestic courts, or the opinions of legal 
experts and the writings of recognized scholars.  This principle is well-established in GATT jurisprudence, including the GATT panel on US – Tobacco .  In this case, Panama has limited 
itself to the text of the Colombian measures, and, as a result, has misinterpreted Colombia's indicative 
prices.  Panama has failed to adduce any evidence of the practical application of the challenged laws 
and regulations, and therefore has faile d to meet its burden of proof.  
                                                     
 
79 WT/DS366/6, p. 1.  Emphasis added. 
80 Colombia refers in particular to paras. 50-66 of its first written submission, paras. 33-50 of its oral 
statement and its answer to question 35 of the Panel in  the form of Exhibit COL-41, which offers a narrative 
explanation as well as a flowchart to explain the importation process, which includes in all cases  customs 
valuation based on the princi ples of Articles 1-7 of the Customs Valuation Agreement . 
81 Appellate Body Report, India – Patents (US) , para. 65.    WT/DS366/R 
Page 40  
 
  (b) A proper interpretation of the challenged provis ions concerning indicative prices shows that 
the indicative prices are not used for customs valuation purposes 
4.146  Panama has even misinterpreted the text.  The text of Article 128.5 e) of Decree No. 2685 and 
Article 172.7 of Resolution No. 4240 does not su pport Panama's argument that these provisions 
provide for the use of indicative prices as a customs valuation method. An ordinary reading of the text 
of these provisions leads to the following conclusions. First
, these provisions deal with customs 
inspection ("inspección aduanera") and the release of  the goods ("el levante"), not the determination 
of the customs value for purposes of duty assessment.  Second , the challenged provisions themselves 
expressly require the customs inspector to forward all documentation to the División de Fiscalización 
Aduanera in order to determine the customs va lue of the imported good for the purpose of assessing 
the duties.82  Third , both of the challenged legal provisions ar e included in the sections of Colombia's 
laws and regulations dealing with customs control  and verification, and are not part of the separate 
provisions of the Customs Statute or Resolution No. 4240 setting forth the provisions dealing with customs  valuation . Colombia is of the view that this is a "significant" element in determining the 
meaning of the domestic legal provisions challenged.
83  Fourth , the definition of the term "indicative 
prices" in Article 237 of Colombia's Customs Statute confirms that indicative prices are a customs 
control mechanism ("mecanismo de control"), and not a customs valuation method.  Fifth , the relevant 
provisions in the Customs Statute (Title VI, Artic les 237-259) and the Resolution No. 4240 (Chapter 
III, Articles 174-217) that do actually deal with cust oms valuation clearly state that customs valuation 
will be conducted on the basis of the methods provided for by the Customs Valuation Agreement . The 
"correction" called for by Articles 128.5 e) and 172.7 imply a ticking of the box "ajustes" in the 
import declaration and does not imply a requirement  to amend the all-important Declaración Andina 
del Valor. The "payment" of duties ("paga los tribut os") is a general reference to a cash payment in 
the amount of the duties under discussion and does not refer to the final liquidation of duties as referred to in other provisions, such as Article 128.8 in respect of precios oficiales ("se liquide los 
mayores tributos dejados de pagar").   
4.147  Moving beyond the text further shows the inte rpretative errors committed by Panama.  
Andean Community law forms the legal context
 in which to read the challenged provisions of 
Decree No. 2685 and Resolution No. 4240 and confirms that indicative prices operate as a customs 
control and guarantee mechanism only.  Andean Community ("CAN") Decisions and Resolutions are 
directly applicable and enforceable in Colombia and even prevail over domestic laws in case of 
conflict. Most importantly, they are part of the legal framework in which to analyse the challenged 
provisions.  When read in this legal context, th e reference in Article 128.5 (a provision dealing 
exclusively with the release of goods) to the term "correction" and "payment of duties" alongside a 
bank or insurance guarantee suggests strongly that this cash payment is the kind of cash deposit 
envisaged by the Customs Valuation Agreement , and by the CAN Decisions and Resolutions which 
allow for such a type of guarantee.   
4.148  Also, the consistent application of the challenged provisions fu lly supports the interpretation 
of these provisions offered by Colombia.  Panama failed to produce any example of a case in which 
the customs value of the good was determined on the basis of the indicative prices.  The one specific 
example (PAN-53) that Panama did provide in response to question 33 from the Panel confirms all of Colombia's arguments in this respect, and clear ly contradicts its assertion that the challenged 
provisions "prevent the DIAN from using the methodologies" of the Customs Valuation Agreement .  
Panama's evidence demonstrates only that, in Colomb ia, release of the subject goods from customs is 
conditioned upon an administrative correction and th e payment of a cash guarantee if the declared 
price is below the indicative price.  Colombia has not  asserted otherwise.  But, that does not mean that 
                                                     
 
82 In an important change of its position, Panama now acknowledges as much when it states in its 
answer to question 33 of the Panel that "the text of Article 128.5 e) provides that the documents are sent 
automatically to the División de Fiscalización Aduanera".  Panama's  response to Panel question No. 33. 
83 GATT Panel Report, US – Tobacco , para. 76.  WT/DS366/R 
 Page 41 
 
 
  indicative prices are used as a customs valuation method.  Quite the contrary is shown by all  of the 
examples provided by Colombia (including COL-49 , which includes documents which Panama did 
not include in PAN-53).  In each case, after the importer made the required payment to release the goods, the Colombian authorities conducted a va luation of the merchandise, applied the Customs 
Valuation Agreement , and found that the importer was entitled to a refund. 
4.149  Colombia requests that the Panel rej ect all of Panama's claims under the Customs Valuation 
Agreement  in respect of the challenged provisions, Article 128.5 e) of Decree No. 2685 and 
Article 172.7 of Resolution No. 4240.  These provisi ons do not determine the customs value of the 
subject goods on the basis of the indicative price, as erroneously asserted by Panama. 
2. Panama's claims on indicative  prices under GATT Article III 
4.150  Panama's claim in respect of indicative prices under GATT Article III is built on the same 
flawed premise as its  claims under the Customs Valuation Agreement :  that indicative prices are used 
to determine the customs value.  The Panel should reject this claim.  
(a) Panama's claim under GATT Ar ticle III:2 is flawed 
4.151  First, there is no provision in Colombian law which requires the sales tax on imported 
products to be imposed on the basis of indicative pr ices, even in those cases in which the declared 
value is below the indicative price.  Article 459 of Colombia's Tax Code, which in response to 
question 6 from the Panel Panama has clarified to be the basis for its GATT Article III claim, merely 
states that the basis for assessing in ternal taxes on imported products is the same as the basis that is 
used to determine customs duties.   Because it is clear from the above explanation that the dutiable 
value is determined on the basis of one of the methods of the Customs Valuation Agreement , and not 
on the basis of indicative prices, Panama's argument  fails.  Second, Panama fails to prove that the 
sales tax on imported products imposes  a tax burden in excess of that imposed on domestic products. 
Colombia emphasizes that this h as nothing to do with the ques tion whether Article III protects 
competitive opportunities or is based on trade effects; this is simply a question which relates to the 
determination of whether a violation exists in a case where the nominal tax rate imposed on like 
domestic and imported products  is identical, and yet a complainant alleges a violation of Article III:2, 
first sentence, which prohibits imported products  from being taxed in excess of like domestic 
products. 
(b) Panama's unsubstantiated new claim under GA TT Article III:4 is to be rejected  
4.152  In its oral statement, Panama introduced a cl aim under GATT Article III:4 as an alternative to 
its GATT Article III:2 claim.
84  In essentially one paragraph in the oral statement, Panama "develops" 
the argument.85  First, Colombia submits that this statem ent in one paragraph of the oral statement, 
repeating in the body of the text what was a footnote in Panama's first written submission86, is not 
sufficient to establish a prima facie case.  Panama fails to develop any lega l or factual arguments.  
Second, even the one-paragraph argument offered by Panama demonstrates a problem:  the legal basis 
for Panama's argument is once again the errone ous assertion that in the case of imported products 
subject to indicative prices, importe rs cannot demonstrate that the d eclared value corresponds with the 
transaction value, while such an opportunity is offe red for sellers of domestic  products.  This is not 
correct.  As explained by Colombia and demonstr ated through Colombia's evidence, importers have 
the same opportunities as domestic producers, as customs valuation is not determined by indicative prices, and such declared prices may equally preva il over the "corriente en plaza".  For all of the 
above reasons, Colombia requests the Panel to rej ect all of Panama's claims under GATT Article III. 
                                                     
 
84 This much is clear from Panama's response to Panel question No. 6. 
85 Panama's first oral statement, para. 141.   
86 See footnote 110 of Panama's first written submission. WT/DS366/R 
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  3. Panama's claims in respect of the ports of entry measure 
(a) Panama's claim under GATT Article XI is without merit as the port of entry measure does not 
constitute a prohibited quantitative restriction.  
4.153  First, Colombia disagrees with th e legal interpretation given by Panama to the prohibition of 
quantitative restrictions under GATT Article XI.  Colo mbia considers that Panama's interpretation of 
GATT Article XI as setting forth "a  comprehensive ban of all types of limitations on the importation 
of products other than duties, taxes or other charg es" is overly broad. Panama's interpretation is not 
consistent with the text of  Article XI, which prohibits quantitative  restrictions, and is not supported by 
the case law referred to by Panama when read in its proper context. A correct interpretation of 
Article XI allows Members to impose certain jus tified conditions on access to their markets as long as 
the fundamental thrust and effect of these measures is not to limit the amount of imports in terms of 
volume or value.   
4.154  Second, Panama's challenge of the ports of entry measure as de facto  imposing a quantitative 
restriction is not supported by su fficient evidence, as Panama has fa iled to provide any evidence that 
the measure which is not designed or structured in such a way as to limit the amount of imports 
actually restricts trade between Panama and Colomb ia or has the alleged limiting effect on trade. 
Panama's de facto  challenge of the measure requires Panama to demonstrate that the "total 
configuration of facts" leads to the conclusion that  the measure is in fact a quantitative restriction.
87  
Panama does not meet this burden of proof because it does not even refer to any alleged low levels of 
imports or to the causal link between the specific measure challenged and such low level of exports. 
Actually, in response to question 56 of the Panel,  Panama submits exhibit PAN-56 which tends to 
confirm that there is no restrictive effect as imports increased in terms of value during the period of 
application of the measure.  Nor does the measure impose higher shipping costs.  Colombia presents 
in COL-50 two different estimates of shipping cost s which it obtained from independent sources.  The 
UPS estimate shows that the "all in" cost of shi pping goods from the Free Zone de Colon to Cali by 
two different routes is roughly the same, with the a dditional cost of the Panama Canal and additional 
ocean freight costs even making th e Buenaventura route seemingly preferred by Panama slightly more 
expensive. 
4.155  Third, even if Panama had submitted some eviden ce of a restrictive effect, that evidence is not 
necessarily sufficient  to establish a de facto violation of GATT Article XI.  Colombia considers that 
the showing of trade effects will not be sufficient without showing a causal link between this measure 
which does not present such a restrictive design and its alleged effects.88   
4.156  In sum, looking at the "fundamental thrust and effect of the measure" or its "design, 
architecture, and revealing structure", the ports of  entry measure is designed to ensure effective 
customs control.  It is "quantity-neutral" by desi gn.  The choice of the two ports is perfectly in line 
with the aim of customs control and the strengt hening of customs enforcement.  Moreover, the 
proximity of these ports to the Free Zone de Colon,  their state-of-the art equipment and efficient 
processing of imports, and the fact that these were precisely the ports most used by Panamanian 
exporters even prior to the measure argue agains t the allegation that the ports of entry measure 
imposes a quantitative restriction on imports.  Quite the contrary is true, the structure of the ports of entry measure is indeed "revealing" of the fact th at the ports of entry measure is a genuine customs 
enforcement measure, and not a quantitative restrict ion.  The Panel should therefore reject Panama's 
claim under GATT Article XI:1.  
                                                     
 
87 Appellate Body Report, Canada – Aircraft , paras. 167-169.   
88 Panel Report, Argentina – Hides and Leather , para. 11.21.  WT/DS366/R 
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  (b) The Panel should reject Panama's claim that the port of entry measure is applied in a manner 
that is inconsistent with GATT Article XIII: 1 because Article XIII:1 does not apply to the 
situation at hand 
4.157  GATT Article XIII does not apply to measures, su ch as the challenged port of entry measure, 
that are not quantitative restrictions prohibited by GATT Article XI:1 (Colombia's view) or those that 
are in fact prohibited by Article XI:1, but not otherw ise authorized (Panama's view).  In sum, the port 
of entry measure is not covered by  GATT Article XIII:1 and cannot ther efore be inconsistent with this 
provision. Panama's claim in respect of Article XIII must therefore fail. Colombia notes that, at the oral hearing, Panama was basically unable to respond to Colombia's common sense arguments in 
respect of the non-applicability of GATT Article  XIII to the ports of entry measure.  
(c) Panama's new claim of inconsistency of the por ts measure with GATT Article I:1 is to be 
rejected 
4.158  At the oral hearing, Panama introduced through a short, one paragraph statement a new claim 
in respect of the ports of entry measure under GATT Article I:1.
89 Colombia objects to the inclusion 
of this new claim and considers that the failure to  develop any legal and factual arguments in respect 
of such claims implies that Panama failed to make a prima facie case of violation under 
GATT Article I:1.  Colombia will not present any subs tantive rebuttal arguments at this stage as there 
simply is no case to answer at the moment in the absence of any development of this new claim by 
Panama.  Colombia reserves the right to present su ch rebuttal arguments at a later stage in the 
proceedings, if necessary.   
4.159  Colombia considers that the Panel should not ex amine this claim, as it is not properly before 
the Panel.  First , Colombia submits that this claim was not part of Panama's request for establishment 
and is therefore not part of the Panel's term s of reference.  Colo mbia acknowledges that 
GATT Article I:1 is mentioned in Panama's request for establishment.  However, such an Article I:1 
claim was developed in a particular and different manner in Panama's first written submission, which 
clarified the extent to which the narrative present in the request for establishment was linked to each 
of the legal provisions listed in the request.  Second , Colombia submits that Panama was required to 
have presented its claims and arguments in its first written submission, and it failed to do so.  
Paragraph 4 of the panel's working procedures clear ly required Panama to do so, in line with well-
established WTO case law that a part y must present its arguments at the earliest opportunity, which, 
in this case was at the time of the first written submission.90 The absence of any legal or factual 
arguments in the first stage of the proceedings is a third  reason why the Panel should refuse to 
entertain Panama's claim under Article I:1.  Pa nama merely asserts that the ports measure is 
inconsistent with Article I.1 but  does not provide any factual or legal arguments in support of its 
specific claims tying the description of the measur e to the specific elemen ts that need to be 
demonstrated in order to establish a prima facie  case of violation under Article  I.1.  Colombia recalls 
that the Appellate Body has made it clear in its report on US – Gambling  that Article 11 DSU prevents 
a panel from ruling on a claim in the absence of supporting arguments.91  
(d) Panama's claim that the port measure is inconsistent with the requirements of 
GATT Articles V:2 and V:6 lacks a factual and legal basis 
4.160  The basic premise of Panama's claims under GATT Article V is erroneous because the ports 
of entry measure does not apply to goods in tran sit; rather, the measure applies only to those goods 
which are shipped from Panama and have Colombia  as their final destination.  Thus, the ports 
measure does not apply to traffic in transit as defined in GATT Article V, and therefore, it does not 
                                                      
89 Panama's first oral statement, para. 53. 
90 Appellate Body Report, US – Gambling , para. 269. 
91 Appellate Body Report, US – Gambling , para. 281. WT/DS366/R 
Page 44  
 
  violate Article V, which relates to traffic in inte rnational transit.  This is clear from Article 4, 
paragraph 3 of the Resolution, whic h expressly adds that the measure "does not apply to '[b]ienes que 
se pretendan someter a la modalidad de transbordo, considerando que en este caso la mercancia no 
tiene como destino final Colombia ' ('goods that are submitted for trans-shipment, since those goods 
do not have as their final destination Colombia' )."
92  The choice of the term "trans-shipment" in 
respect of this Panama-specific m easure can be explained easily if one takes into account the reality in 
respect of trade with Panama.  Any product from Pa nama that is in international transit through 
Colombia will have to be trans-shipped.  
4.161  Furthermore, Colombia considers that Artic le V:6 forms no exception to the scope of 
Article V and does not impose on Members the obligati on described by Panama relating to goods that 
are not in transit.  In Colombia's view, the text of Article V:6 when read in its context applies, like the 
rest of Article V, only to goods in "transit". Colombia 's interpretation of Article V:6 is not novel.  In 
fact, as recently as 2005, the WTO Secretariat set forth the same view as Colombia.93  Scholars have 
taken a similar position.94  This was also the view taken by Tu rkey, a third party in this case to whom 
the Article V issues have a special significance.95  In sum, Resolution No. 7373 does not apply to 
merchandise that transits Colombia for consumpti on elsewhere.  Therefore, Resolution No. 7373 is 
not inconsistent with Articles V:2 or V:6, as Panama alleges. 
(e) The requirement to present an advance import declaration and pay customs duties and sales 
taxes for textiles originating in Panama does not violate Colombia's MFN obligation under 
GATT Article I:1 
4.162  Panama fails to demonstrate that the advanced  import declaration and consequent payment of 
duties constitutes "an advantage" (or disadvantage) in the sense of GATT Article I:1.  Colombia does 
not dispute the fact that the term "advantage" has to  be interpreted in a broad manner.  However, in 
the context of an economic agreement such as GAT T, this term has an economic meaning which 
implies that it refers to an advantage in economic terms, i.e. , in terms of economic, competitive 
opportunities. It therefore should come as no surpri se that the Appellate Body in its report on EC – 
Bananas III  equated the term advantage to that of a "competitive advantage".96   Panama has failed to 
demonstrate that the advanced declaration requireme nt, which is optional for other importers as well 
and which is regularly used by importers to accelerate the importation process, imposes such a competitive disadvantage.  
4.163  Colombia adds that the advanced paymen t requirements and the limited legalization 
opportunities do not apply on an origin basis, and the latte r is not even Panama-specific.  It is for these 
reasons that Colombia argued that Panama should do  more to demonstrate that "products originating 
from certain Members" are granted alleged advant ages that are not immediately and unconditionally 
extended to those originating from other Members. 
4. Colombia's general defence under GATT Article XX(d) 
4.164  In the event that the Panel were to uphold some or  all of Panama's claims  relating to the port 
of entry measure, Colombia submits that GATT Article XX(d) justifies the measure. 
                                                     
 
92 Resolution No. 7373 of 2007, Article 4, para. 3. PAN- 34.  Exhibit PAN -43, p.3 confirms that this is 
how DIAN applies the measure, and demonstrates that the measure does not apply to goods in international transit.   
93 Article V of GATT 1994 – Scope and Application, Note by the Secretariat,  TN/TF/W/2, 12 January 
2005, para. 25. 
94 John H. Jackson, World Trade and the Law of GATT 511 (The Bobbs-Merrill Company, Inc. 1969). 
95 Oral statement of Turkey, meeting of the Panel with the third parties, 22 May 2008. 
96 Appellate Body Report, EC – Bananas III,  para. 207.  WT/DS366/R 
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  (a) The port measure is provisionally justifie d under paragraph (d) of GATT Article XX 
4.165  Colombia's laws and regulations relating to cust oms enforcement are deemed to be consistent 
with the provisions of the GATT.  As explained in the first written submission, the preamble of 
Resolution No. 7373 of 200797 makes clear that the port measure was designed to secure compliance 
with Colombia's laws relating to customs enforcement.   The fact that Colombia agreed to remove the 
first ports measure on the basis of the promise of increased customs cooperation shows that the 
concern of the Colombian Government is customs enforcement.  The purpose of the ports of entry 
measure and the Protocol is the same, ensuri ng compliance with Colombia's customs laws. 
4.166  Panama suggests that the Government of Colo mbia is somehow more constrained to act 
against a problem that affects important industrial secto rs as to do so would be "protectionist".  Such a 
suggestion is contradicted by the evidence submitted, which all points in the same direction:  it was 
the fight against contraband and thus a design to secure compliance with customs laws that drove the Colombian Government to take these actions.  If non-compliance with its customs law affects both 
"important" and "non-important" sectors, a government is not somehow limited in its ability to take action in the important sector. 
4.167  In addition, the ports measure is "necessary" to  secure compliance with Colombia's customs 
laws and regulations.  
4.168  First, the ports measure concerns a very impor tant set of interests or values. Combating 
under-invoicing, tax evasion, smuggling, and money laundering are important to the Colombian 
Government.  In addition to a loss of revenue wh ich is of key importance to a developing country 
such as Colombia, these illegal activities undermine the political and economic stability of Colombia 
in its present context.  The conversion of illicit fund s outside of Colombia into pesos often involves 
the importation of goods into Colombia and, as noted  in the UIAF analysis in COL-43, the imported 
merchandise is typically consumer items that can be sold easily, including apparel and footwear.  It is 
noteworthy that these are precisely the products that ar e also listed in exhibit COL-38 in respect of the 
"Caso Panama" as being among the most important  products subject to contraband from Panama.
98  In 
this respect, Exhibit COL-51 provided in the second submission provides more detailed information, 
showing that in 2006, imports from Panama unde r chapter 62 (certain textile products) and 64 
(footwear) alone accounted for about $160 million of  under-invoicing, and approximately the same 
amount was of other textile and apparel products that arrived in Colombia as "contrabando abierto" or 
smuggling.    
4.169  Second, the ports measure is apt to contribute in a material way to the achievement of the 
objective as demonstrated through evidence subm itted in the first written submission, the oral 
statement and in response to questions from the Pa nel.  The ports of entry measure is only one 
measure that has to be seen as part of a comprehensive strategy and as part of a set of measures that have been put in place by the Colombian government  to attack contraband trade.  Other measures 
include the use of customs observers, the requireme nt to make an advanced import declaration, 
automatic licensing, contraband agreements with  the private sector, customs cooperation, 
modernization of ports and various measures to fi ght internal corruption. Panama has acknowledged 
the seriousness of the problem of contraband trade, ad mitting that most of its trade with Colombia can 
be characterized as contraband.  Colombia consid ers that the Panel should not lose sight of this 
concession when examining the contribution potentia lly and actually made by the ports of entry 
measure.  
4.170  The ports measure contributes significantly to customs enforcement through improved 
customs control and specialization.  No one disputes that it is easier to control importation and verify 
                                                     
 
97 Exhibit PAN-34. 
98 Exhibit COL-38, pp. 17-19. WT/DS366/R 
Page 46  
 
  the accuracy of the import declaration when imports  are entering the country at two points of entry 
only, compared to eleven such points.  The incr eased exposure of customs officials to potential 
contraband products also provides important experien ce in respect of the techniques applied by the 
contrabandistas. Colombia considers that this qualitative assessment of the potential of the measure should already suffice to establish a prima facie case that this measure is apt to contribute in a 
material way to the achievement of the policy obj ective.  In addition, however, Colombia considers 
that there are sufficient indications that the ports of entry measure is having a positive effect in terms 
of combating contraband.  In addition to the ev idence discussed in the first written submission, 
Colombia refers to the fact that in its response to  question 83 from the Panel, Colombia presented as 
Exhibit COL-42 a number of reports pursuant to the "Seguimiento Resolución 7373" – monitoring 
that it performs regularly to gauge the effectiveness of this particular measure in the fight against 
contraband.  Panama asserted in the oral hearing that the high level of contraband trade coming from 
Panama during the operation of a similar measure in  2006 shows that such a measure is "completely 
ineffective in combating contraband".
99  This is a simplistic and static analysis of the situation.  The 
evidence provided in COL-42 shows that progress is being made.  In addition, as explained in the 
answers to questions, it is inevitable that certain measures will take some ti me before they become 
effective.100 
4.171  Third, the ports measure does not have a signifi cant adverse impact on legitimate trade.  The 
ports of entry measure is not in any way a ban on im ports, or even a restriction on imports. It simply 
requires that certain products be shipped through a certain number of ports.  Also, the two ports of 
entry imposed by the ports measure are among the most  modern ports of Colombia and are the closest 
to Panama's Free Zone de Colon, which, like the po rt of Barranquilla, is located on the Atlantic coast.  
Further, the ports measure provides for a number of exemptions from the application of the measure.  
The reason for these exemptions is linked to the obj ective pursued by the measure as it is considered 
that importation by certain importers or "users" or under certain circumstances does not present a customs risk. Finally, the available evidence shows th at there simply is no negative impact on trade in 
respect of the covered products from Panama.  In  response to question 56 of the Panel, Panama 
submits exhibit PAN-56 which confirms that the valu ed of the goods subject to the measure sold in 
2007 (503 million USD) was higher than in 2006 (4 83 million USD), and higher than ever before.  
4.172  Fourth, there were no reasonably available and equally effective alternative measures that 
Colombia could have taken.  The burden of proof of the existence of equally effective reasonably 
available alternative measures rests with Panama.
101  Colombia made a conscious decision in 2005 to 
attack contraband trade and, while it had no illusion that it would be able to eradicate contraband 
completely and immediately, its efforts are clearly intended to have a meaningful impact.  In this 
respect, the port measure cannot be examined in isol ation from the other measures that are taken at the 
same time to combat customs fraud.  Colomb ia requests the Panel to examine any potential 
alternatives also in this context of a comprehens ive policy of combating customs fraud.  Colombia 
discusses two types of measures which seem to have  been suggested as a lternatives, increased 
customs cooperation and agreements with the private sector.   
4.173  First, Colombia recalls the failed attemp t at increased cooperation between customs 
authorities. In its first written submission, Colomb ia discussed the lack of cooperation received from 
the Panamanian authorities under COMA LEP as evidenced in exhibit COL-32:102  of the 455 
Colombian requests for assistance from Panama from 2001-2005, only 3 responses were provided, a 
cooperation rate of 0.65 per cent.  Of the tota l 1234 requests for assistance made between 2001 and 
2007, only 372 responses were pr ovided by the Panamanian aut horities.  The COMALEP customs 
cooperation process was not working.  This conclusi on is implicit in the fact that the two countries 
                                                      
99 Panama's first oral statement, para. 5. 
100 Appellate Body Report, Brazil – Retreaded Tyres, para. 151. 
101 Appellate Body Report, Brazil – Retreaded Tyres , para. 156. 
102 Exhibit COL-32.  WT/DS366/R 
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  signed a bilateral Protocol for the Exchange of  Information between the Customs authorities of 
Colombia and Panama (the "Customs Cooperation Protocol"), which was concluded in October 2006. 
The Protocol is not a separate agreement that ope rates in a vacuum; rather, it was an attempt at 
enhanced commitments and the accep tance of specific guidelines for cooperation by Panama in light 
of the unsuccessful cooperation under the COMALEP.  With no other COMALEP country has it been 
necessary to conclude such a supplemental Protocol  to ensure a proper understanding of the customs 
cooperation obligations of COMALEP countries.  Un fortunately, the data for the entire period of 
customs cooperation including that of the Protocol rev eal the failure of such attempts at addressing the 
problem through increased customs cooperation.103  At any rate, in Colombia's view, customs 
cooperation is not really an alternative, but rath er a supplementary means of fighting contraband. 
Actually, such customs cooperation has existed since 1990 between the two countries, and it has 
clearly not been able to prevent or even contai n the problem of contraband trade from Panama.  
Customs cooperation still exists unde r COMALEP, and Colombia conti nues to seek the assistance of 
the Panamanian authorities.  
4.174  Second, and while Panama has not referred to th is alternative, Colombia informed the panel 
in its first written submission of the way it has dea lt with similar problems of contraband in respect of 
other products.  Colombia never suggested that  smuggling, under-invoicing and money laundering are 
limited to the covered products.104 As part of its set of measure to combat contraband in other 
products, Colombia has sometimes reso rted to agreements with the pr ivate sector.  Such agreements 
are not, however, feasible in the context of textile, ap parel, and footwear products.  Colombia adds in 
this respect that one must be careful with making comparisons in respect of the treatment of a similar 
problem in respect of entirely different products that operate under different conditions and present 
different customs enforcement problems.105  
(b) The ports measure complies with the chapeau of Article XX 
4.175  The ports measure is not applied in a manne r that constitutes arbitrary or unjustifiable 
discrimination between countries where the same c onditions prevail. Colombia submits that the 
evidence clearly demonstrates that Colombia's concern over the covered imports from Panama is 
justifiable and that the exclusive focus on Panama bears a clear "rational connection" to the objective 
falling within the purview of paragraph (d) of Artic le XX.  This evidence was set forth in detail in 
paragraphs 193 and following of the first written submission and in the answers to various questions 
of the Panel to which Colombia refers the Panel.  The problem of contraband with Panama has taken 
such forms and is practiced at su ch a scale that an additional and particular country-specific measure 
was considered necessary to gain control over the situation and bring this problem within normal 
proportions such that this country-specific measure will no longer be necessary.  That is why the 
measure is of a temporary nature, while the indi cative prices and other measures relating to customs 
control that have been taken (and which are not country-specific) may well be in place for a longer 
period of time.  Exhibit COL-38 that Colombia su bmitted at the oral hearing discusses in detail the 
particular problem raised by trade from Panama, addressing specifically the "Caso Panama".  
4.176  Second, the ports measure is not applied in a manner that constitutes a disguised restriction on 
trade. Colombia has already referred to the object ive of customs enforcemen t, customs control and 
specialization pursued by the ports measure, which even Pana ma acknowledges to underlie the 
measure.  The measure is thus clearly not about restricting trade for protectionist purposes.  The choice of the products in question relates to the rationale of the measure of fighting contraband as 
these products are among the most important products  subject to contraband and money-laundering. 
                                                     
 
103 Colombia provides a database in electronic version only in COL-52 in which all these cases of lack 
of cooperation or delayed responses are listed for the Panel's information. 
104 However, it should be noted that, as extensively discussed in Colombia's submissions, currently, the 
major problem in this respect concerns the specific products covered by the measure. 
105 Appellate Body Report, Korea – Various Measures on Beef , para. 172. WT/DS366/R 
Page 48  
 
  5. Request for findings 
4.177  For all of the above reasons, Colombia requests the Panel to reject all of Panama's claims. 
V. ARGUMENTS OF THE THIRD PARTIES 
A. E
CUADOR  
5.1 Ecuador takes no position on the measures at issue.   However, Ecuador does have a systemic 
interest in the questions under consideration by the Panel.   
5.2 Ecuador understands that the measures cha llenged by Panama in this proceeding are 
Colombia's use of indicative prices to determine th e custom value of textiles, footwear and other 
products, and the restriction of the import of certa in products from Panama into Colombia unless they 
are made through the airport of Bogota and the sea port of Barranquilla. 
5.3 According to Panama, the use of indicative prices by Colombia is incompatible with 
Articles 1, 2, 3, 5, 6 and 7.2 (b), (f) and (g) of th e Agreement on the Implementa tion of Article VII of  
the General Agreement on Tariffs and Trade, also known as the Customs Valuation Agreement  and 
Article III:2 of the GATT 1994 .  The port of entry restrictions, on the other hand, would be 
incompatible with a number of provisions of the GATT 1994 , in particular Articles I, V, XI and XIII.  
In Ecuador's view, the panel's findings of the Articles of the GATT 1994  and the Customs Valuation 
Agreement  issues before it in this dispute will be of significance for Members. 
5.4 Although Ecuador will not refer to each of the articles above mentioned, we will make the 
following general comments. 
5.5 With regard to the use of indicative prices, there seems to be a disagreement between the 
Parties as to an appropriate description and functio ning of this measure.  While Panama states that 
Colombia uses the indicative prices as a mechanism to value goods (when lower that the indicative 
price), with the consequent liquidation of the goods for customs purposes, Colombia argues that they serve as a custom control mechanism to test the ve racity of the declared value in the course of a 
"control previo".  Moreover, Colombia affirms that after the "control previo" there is a procedure in 
place by which the importer is entitled to demonstrate to the custom authority the correct value of the 
goods; in this "control posterior" the custom value of the goods is determined using one of the 
methods of the Customs Valuation Agreement .  Panama refutes this assertion as the importer is not 
offered any opportunity to demonstrate that the decl ared value (when lower that the indicative price) 
corresponds to the transaction value of the product.     
5.6 Although there are other elements the Panel s hould take into account when determining the 
consistency of the use of indicative pr ices with certain provisions of the Customs Valuation 
Agreement  and the GATT, is Ecuador's view that the central point on this issue is whether the 
payment made by the importer when the declared pr ice of the good is lower than the list of indicative 
prices constitutes a guarantee mechanism, or represents in fact a valuation, regardless of the existence 
of a posteriori mechanism to repay the duties paid in excess.   
5.7 It is not our intention to decide which of the above stated possibilities is correct.  The 
resolution of this question will require the Panel to  determine complex factual and legal issues.  In 
undertaking this task, Ecuador encourages the Panel to  evaluate carefully the factual evidence before 
it. 
5.8 Panama's second set of claims relates to Colomb ia's prohibition of the importation of textiles, 
apparel and footwear products from Panama except at the airport of Bogota and the seaport of 
Barranquilla.  According to Colombia, this prohibiti on is aimed at fighting contraband, smuggling and  WT/DS366/R 
 Page 49 
 
 
  under-invoicing and therefore is not inconsistent with  Articles I:1, V:2-6, XI:1 and XIII:1 of the 
GATT.  Furthermore, it would be justified under paragraph (d) of GATT Article XX.   
5.9 In relation to this claim, Ecuador considers that the Panel's work should concentrate in 
determining whether the measure being challenge d meets the conditions for being provisionally 
justified under paragraph (d) of GATT Article XX as well as the two requirements set forth on its 
"chapeau".  Due to the critical significance of Ar ticle XX of the GATT, which permits a Member to 
deviate from the GATT rules on trade in goods, we encourage the Panel to make a careful 
examination of its proper application. 
5.10 Ecuador would also like to note the negative effects contraband, smuggling, under-invoicing 
and circumvention by exporting through a third country (triangulation) have in the economy of all 
WTO Members, especially among developing count ries.  Unfortunately, many developing countries 
do not have the resources nor the capacity to put in place an adequate mechanism to tackle these 
issues in all its ports of entry.  Ecuador considers that this fact should be taken into account by the 
Panel when issuing its ruling.   
B. EUROPEAN COMMUNITIES  
1. Customs valuation methods based on indicative prices 
(a) The measure at issue 
5.11 The European Communities notes that there is disagreement between the parties to this 
dispute as to the correct description and functioning  of the measure at issue.  On the one hand, 
Panama considers that Colombia has a system whereby customs duties and sales tax due on imports of textiles, footwear and some other products are not based on the actual value  of the products (i.e., the 
transaction value as declared in the customs declaration); rather, with respect to these products 
Colombia has a list of indicative prices which acts as minimum values of reference  to impose customs 
duties and collect sales tax.  
5.12 On the other hand, Colombia considers that th e indicative prices are a mechanism of control 
in order to detect products which have been the subject of under-invoicing, smuggling and money-
laundering.  
5.13 The European Communities considers that , in accordance with Article 11 of the Dispute 
Settlement Understanding  ("DSU"), this Panel should make an objective assessment of the matter 
before it, including an objective assessment of the f acts.  While not taking a final position on the facts 
of this case – task which corresponds to this Pa nel – the European Communities observes that the 
crucial element in question is wh ether, in order to obtain their release in the Colombian market, 
imports of textiles, footw ear and other products must pay customs duties based on indicative prices 
(rather than on the declared values), regardless of any other a posteriori  mechanisms to repay the 
duties paid in excess.  If that is the case, those i ndicative prices would be used as the basis for customs 
valuation in the sense of the Agreement on Implementation of Article VII of the General Agreement on 
Tariffs and Trade 1994 , also known as the Customs Valuation Agreement .  
5.14 A preliminary analysis of the provisions invo ked in this case shows that imports subject to 
indicative prices must pay customs duties and sale tax in order to be released.  Then, a posteriori  
mechanism allows for the repaymen t of the duties paid in excess, if the importer provides evidence 
that the transaction price paid was actua lly lower than the indicative price. WT/DS366/R 
Page 50  
 
  (b) Indicative Prices and the Customs Valuation Agreement  
5.15 A first question which arises from the measure at issue is whether indicative prices are used to 
establish customs values in the sense of the Customs Valuation Agreement .  In this respect, the 
European Communities observes that Article 15.1(a) of the Customs Valuation Agreement  defines 
"customs value of imported goods" as " the value of the goods for the purposes of levying ad valorem 
duties of customs on imported goods ".  In the case of imports subject to indicative prices, goods can 
only be released (and, thus, effectively imported into Colombia) if the importer pays customs duties 
based on those prices.  Therefore, it can be concluded that those indicative prices serve as relevant values to impose customs duties and ob tain the release of the products. 
5.16 In view of the European Communities, a syst em where the value of the goods for levying 
customs duties is based on indicative prices, as the one described above, can be examined in light of 
the provisions contained in the Customs Valuation Agreement .  
5.17 The European Communities is of the view th at the text, context and purpose of the Customs 
Valuation Agreement  show that the transaction value is the first method for customs valuation which 
WTO Members must apply.  Whenever the conditi ons are such that the customs value cannot be 
determined under the transaction value method, Articles 2 to 7 of the Customs Valuation Agreement  
provide for alternative customs va luation methods which ma y be applicable, but always respecting the 
sequential order therein.  
5.18 The use of indicative prices as the basis for levying ad valorem customs duties (i.e., for the 
purpose of customs valuation in the sense of Article 15.1(a) of the Customs Valuation Agreement)  is 
contrary to Articles 1 to 6 of the Customs Valuation Agreement .  Indeed, the reference to indicative 
prices (or minimum values) as a valid customs valuation method does not even appear in Articles 1 
to 6 of the Customs Valuation Agreement  and, thus, their use as an alternative to Article 1 of the 
Customs Valuation Agreement  (which appears to be the case of th e system in place in Colombia), is 
inconsistent with the Customs Valuation Agreement .  Furthermore, such a customs valuation method 
cannot be regarded as a reasonable test  provided for in Article 7 of the Customs Valuation Agreement .  
5.19 Consequently, the European Communities consid ers that the use of indicative prices as the 
basis for levying customs duties is contrary to Articles 1 to 7 of the Customs Valuation Agreement . 
5.20 Finally, Article 13 of the Customs Valuation Agreement  allows for delays in the final 
determination of customs values if it is necessary for the customs authority to establish the correct 
values.  However, in those cases, the importer must be able to release the goods by providing 
sufficient guarantee to cover the ultimate paymen t of customs duties for which the goods may be 
liable.  
5.21
 In view of the European Communities, as explained above, Colombia requires the full 
payment of the duties based on indicative prices to release the goods in the Colombian market, while 
a posteriori  customs review proceeding allows for subse quent reimbursement of the duties paid in 
excess.  Should the importer provide sufficient evid ence that the actual value of the goods is lower 
than the indicative price, the result of such a proceeding is the repaym ent of the duties paid in excess.  
Since the importer in any way cannot seek the rele ase of the goods by providing a guarantee, this 
would also be contrary to Article 13 of the Customs Valuation Agreement . 
5.22 In light of the foregoing, while not taking a definite position on the facts of this case, the 
European Communities considers that , in the case at hand, the key element to establish whether the 
measure at issue amounts to a customs valuation method contrary to the provision of the Customs 
Valuation Agreement  is the payment of customs duties and sale tax based on indicative prices as a 
condition to have the imports released in the Colomb ian market. In contrast, if the imports subject to 
indicative prices can be released in the Colombian market by providing sufficient guarantee and, then,  WT/DS366/R 
 Page 51 
 
 
  the correct values are promptly liquidated in light of the evidence of actual values provided by the 
importer to the competent customs authorities, the payment of customs duties would take place at a 
later stage.  
(c) Indicative Prices and Article III:2 of the GATT 1994  
5.23 The European Communities understands that the amount of sales tax levied on imported 
products subject to indicative prices is also calcu lated on the basis of the same indicative prices, 
whereas the sales tax for like domestic produc ts is based on actual transaction values. 
5.24 In the European Communities' view, a system whereby indicative prices are systematically 
used to determine the value of imported products  for the purpose of levying sales taxes when the 
transaction value is used instead to determine the value of like domestic products for that purpose is, 
on its face , contrary to Article III:2, first sentence, of the GATT 1994 . 
5.25 In this respect, in cases where the imported produc t is based on indicative prices higher than 
the transaction value originally decl ared by the importer, the sales tax levied on those imports is "in 
excess of those applied … to the like domestic pr oducts" based on a transaction value lower than the 
indicative price, in the sense of Artic le III:2, first sentence, of the GATT 1994 . 
5.26 Therefore, in the European Communitie s' view, in cases where the measure on its face  
(because of its structure and design) necessarily results in imported products being subject to internal 
taxes in excess of those applied to like domestic products, Article III:2, first sentence, of the 
GATT 1994  is infringed.  This is the case when indica tive prices are taken as the basis for levying 
sales tax on imported products, whereas lower actual va lues are considered as the basis for levying the 
same tax on like domestic products.  
5.27 The same conclusion stands even if there ma y be cases where the indicative price of the 
imports is the same as either the transaction value of  those imports or the transaction value of the like 
domestic products. In other words, even if there are some  imports which are not levied in excess of 
the sales tax levied on like domestic products, the st ructure and design of the measure result in the 
violation of Article III:2, first sentence, of the GATT 1994 .  
5.28 The European Communities therefore considers that  the use of indicative prices to determine 
the value of imported products for the purpose of levying sales taxes when the transaction value is 
used instead to determine the value of like domestic products for that purpose is, on its face , contrary 
to Article III:2, first sentence, of the GATT 1994 . Therefore, the examination as to whether a measure 
violates Article III:2, first sentence, of the GATT 1994  should take into account its design and 
structure, which should lead to a discrimination between imported products and (potential) like 
domestic products. 
2. Restrictions on ports of entry 
(a) Restrictions on the number of ports available for imports of textiles from Panama: Article XI 
of the GATT 1994  
5.29 The European Communities understands that im ports of textiles from Panama can only be 
imported through two ports in Colombia: the airpor t of Bogota and the sea port of Barranquilla. Since 
imports of textiles from Panama have to be channe lled through these two ports  (rather than through 
the 11 ports normally available for imports of textil es from other countries), Panama claims that this 
measure amounts to a restriction contrary to Articles XI and XIII of the GATT 1994 . 
5.30 According to Panama, the term "restriction" in Article XI of the GATT 1994  also covers 
situations where a measure amounts to a "limiting c ondition" on the importation of products in broad WT/DS366/R 
Page 52  
 
  terms. Panama bases its conclusions on statements made by the panels in India – Quantitative 
Restrictions  and India – Autos , suggesting that the term "restriction" requires identifying a " condition 
that has a limiting effect … on importation itself ".  In the case at hand, Panama claims that the ports of 
entry restrictions impose a limiting condition (i.e., there are only two ports of entry available) and 
make importation more onerous. 
5.31 Colombia, on the other hand, is of the view th at "Panama's interpretation of Article XI is 
overly broad as it would imply that any measure which imposes a condition on importation is considered to be a prohibited quan titative import restriction". In order to argue against Panama's broad 
interpretation of the term "restriction" in Article XI , Colombia points out that Panama accepts that the 
fact that textile products may be imported throug h 11 ports only, whereas Colombia has 26 ports of 
entry for international trade, does not amount to a "restriction" in the sense of Article XI of the 
GATT 1994 . Through reference to the title and text of Article XI as well as the panels mentioned by 
Panama, Colombia argues that, in its view, Article XI of the GATT 1994  only provides for the 
elimination of quantitative  restrictions, i.e., if a measure imposes de iure  or de facto  a limitation on 
the amounts of imports that are allowed into a country. 
5.32 In this respect, the European Communi ties observes that Article XI of the GATT 1994  does 
not define the term "restr ictions".  The panel in India – Autos  suggested that the types of measures 
which can fall under this provision is broad. 
5.33 The panel in that case also stressed that, d espite this broad scope of the measures falling 
within Article XI of the GATT 1994 , not any condition placed on importa tion is relevant for a measure 
to fall under this provision. 
5.34 Thus, although Article XI:1 of the GATT 1994  has undoubtedly a broad scope, not any 
condition on importation is capable of falling under this provision.  There must be a particular kind of 
condition , i.e., one which has a limiting effect on importation itself. 
5.35 It may appear strange that imports of textiles from Panama must pass through two ports while 
imports of the same products from other WTO count ries can use other ports as well.  However, the 
European Communities considers that this is an issue to be considered in the context of Article I of 
the GATT 1994  and is not relevant to an analysis of the measure under Article XI of the GATT 1994 . 
5.36 Therefore, without entering into the factual details of this case, the European Communities 
considers that the term "restriction" in Article XI of GATT 1994  does not refer to "any" condition on 
importation, but rather to those having a limiting effect  on importation itself.  
(b) Requirement to present an advance declaration to  pay customs duties and sales tax for textiles 
originating in Panama: Article I of the GATT 1994  
5.37 The European Communities understands that Pa nama challenges the requirement to present 
an advance declaration (between 15 and 5 days prior to the arrival of the goods in Colombia) to pay 
customs duties and sales taxes for textiles originating in Panama.  If no advance declaration is submitted on time, importers must pay a special fee to obtain the release of the goods. Minor 
discrepancies in the customs declaration (i.e., less than  7% in the weight per square meter or less that 
10% in the width of the fabrics) are allowed to be corrected without paying any special fee. Otherwise, the special fee is also levied in order to import th e goods. Panama claims that this measure 
violates Article I:1 of the GATT 1994 . 
5.38 As the Appellate Body confirmed in EC – Bananas III , in order to establish a violation of 
Article I:1, (i) there must be an advantage, of th e type covered by Article I, and (ii) which is not 
accorded unconditionally to all like products of al l WTO Members.  The object and purpose of 
Article I:1 supports this interpretation.  That object and purpose is to prohibit discrimination  among  WT/DS366/R 
 Page 53 
 
 
  like products originating in or destined for different countries.  Thus, Article I:1 of the GATT 1994  
does not permit balancing more favourable treatment  under some procedure against a less favourable 
treatment under others. Following this analysis, it should be examined in the case at hand whether 
there are advantages of the types covered by Article  I, and whether the advantages are offered to all 
like products unconditionally. 
5.39 In light of the description given to the me asures by Panama and Colombia, the European 
Communities considers that the requirement to pr esent advance import declarations as well as the 
penalties imposed otherwise in order to have the im ports cleared amount to a violation of Article I:1 
of the GATT 1994 . 
(c) Restrictions on the transit regime for textil es from Panama:  Article V:2 and V:6 of the 
GATT 1994  
5.40 The European Communities understands that there is disagreement between the parties as to 
whether the transit regime applies to textiles fro m Panama in Colombia.  The European Communities 
agrees with the interpretations made by Panama of these provisions.  
5.41 First, Article V:2 of the GATT 1994  allows for choosing the "routes most convenient for 
international transit". If a measure limits the entry ports for goods in transit to two, such a measure 
will restrict the freedom of transit in the sense of Article V:2 of the GATT 1994 . 
5.42 Second , it follows from Article V:6 of the GATT 1994  that Member must apply MFN 
treatment. In the case at hand, the contested measur e seems to imply that a product in transit in 
Panama originating from a third country is subject to the ports of entry restrictions when arriving in Colombia, whereas the same product directly importe d (or in transit) from any other Member would 
escape from them.  Thus, this would be contrary to Article V:6 of the GATT 1994 . 
(d) Justification of the ports of entry restrictions based on Article XX(d) of the GATT 1994  
5.43 Colombia argues that Article XX(d) of the GATT 1994  justifies the port of entry measure, in 
particular because it is necessary to secure compliance with Colombia's customs laws and regulations. 
In this respect, the European Communities would li ke to comment on one specific element of the 
justification under Article XX(d) of the GATT 1994  provided by Colombia. 
5.44 The European Communities does not dispute th e fundamental importance of tackling such 
illegal activities.  However, the European Communities expresses doubts on the phenomenon of money-laundering necessarily falling within the sc ope of the enforcement of customs laws and 
regulations.  It would appear to the European Communities that in relation to the phenomenon of 
money-laundering, the relevant laws and regula tions the measures might be designed to secure 
compliance with are those relating to general law enforcement rather than customs enforcement, 
unless money laundering is an illegal activity criminali sed or otherwise addressed in the customs laws 
of Colombia.  Whether this is the case has not been identified by Colombia.  
C. G
UATEMALA  
5.45 Guatemala observes that the relevant provi sions invoked by Panama in this case are 
Article 128.5 e) of Colombia's Customs Code a nd Article 172.7 of Resolution No. 4240 of 2000 and 
Article 447 of the Tax Statute in connection with Article 128.5 e) of Decree No. 2685.106 
5.46 In Panama's view, according to these provisions, an importer whose goods have a transaction 
value lower than the indicative pri ce must correct the import declarati on to reflect the indicative price 
                                                      
106 Panama's first written submission, para. 13. WT/DS366/R 
Page 54  
 
  or a higher amount to obtain the release of the goods from customs.  The failure to correct the 
transaction value and the failure to reflect the indi cative price (or a higher amount) in the declaration 
within a period of five-days from the presentation of the import declaration, leads to the legal 
abandonment of the goods, and their eventual forfeiture.
107  Furthermore, Panama claims that the sales 
tax on imported products is determined on the basis of the indicative price when the transaction value 
is below the indicative price. Panama adds that, in contrast, for domestic products, the sales tax is 
based on the actual value of the sale.108  In this regard, according to Panama, Colombia's use of 
indicative prices is inconsistent with Articles 1,  2, 3, 5, 6, 7.2 b), (f), (g) and 13 of the Agreement on 
Implementation of Article VII of the General Agreement on Tariffs and Trade 1994 , also known as the 
Customs Valuation Agreement  (hereinafter the " Customs Valuation Agreement "), as well as with 
Article III:2, first sentence of GATT 1994 .  
5.47 Guatemala understands that the main reasoning of Panama is that Colombia does not accept 
the transaction value as the primary mean of dete rmining the customs value of imported goods and 
fails to follow the methodologies set out in Articles 2 through 6 of the Customs Valuation Agreement . 
Moreover, Panama argues that payment of cust oms duties based on indicative prices is not a 
"guarantee" within the meaning of Article 13 of the Customs Valuation Agreement .  Finally, Panama 
also asserts that the use of indica tive prices is inconsistent with the first sentence of Article III:2 of 
GATT 1994  since the calculation of internal taxes based  on indicative prices are "in excess" of those 
applied, directly or indirectly, to like domestic products, calculated on the basis of the actual sale 
price.  
5.48 In response, Colombia considers that Panama errs in its allegation that Colombia uses the 
indicative prices as a mechanism to value goods. A ccording to Colombia, the indicative prices are 
used "to test the veracity of the declared value in the course of a 'control previo' while the customs 
value of the goods are determined using one of the methods of the Customs Valuation Agreement  in a 
'control posterior'. In other words, Colombia asserts that the indicative prices are a "control 
mechanism" and not a "customs valuation method".109  Moreover, Colombia equates the payment of 
taxes to the guarantee provided for in Article 13 of the Customs Valuation Agreement  by asserting 
that it is in the form of a surety or deposit while the final determination of value is done.110  Finally, 
regarding Article III:2 claim, Colombia argues th at Colombia's Tax Code does not require that 
indicative prices be used as the taxable base for the imported products in question. According to 
Colombia, the mere fact that a difference in th e taxable base between impor ted and domestic products 
may exist in some cases does not suffice for a violation of Article III to be established.  Colombia 
considers that Panama failed to demonstrate that  this difference necessarily leads to a higher tax 
burden on imported products distorting co mpetitive opportunities for such products.111 
5.49 In this respect, Guatemala acknowledges th at Members of the WTO should have the 
necessary policy space to address their particular c oncerns or even, as asserted by Colombia, to 
"prevent illicit trade from distorting normal trading relations".  However, such policy space must be 
framed within WTO Agreements and this is, precisely, the task of the Panel in this case.  Guatemala 
remains unconvinced with Colombia's characterizat ion of its customs control mechanism, for the 
following reasons: 
5.50 Firstly, Colombia asserts that indicative prices are not a "customs valuation method" but a 
"customs control mechanism" and, ther efore that they do not violate the Customs Valuation 
Agreement  rules governing customs valuation.  In that regard, Colombia argues that: 
                                                      
107 Panama's first written submission, paras. 49-53. 
108 Panama's first written submission, paras. 54-61. 
109 Colombia's first written submission, para. 12. 
110 Colombia's first written submission. 
111 Colombia's first written submission, paras. 142-161.  WT/DS366/R 
 Page 55 
 
 
  "Indicative prices are used to detect under-invoicing and customs fraud and are used 
as the basis of a deposit paid to secure re lease of the goods pending a determination 
of the actual customs value of the good in question based on the methods set forth in the Customs Valuation Agreement ."
112 
5.51 Colombia adds that Article 128 of Colombia 's Customs Statute deals with the "release" 
("levante" in Spanish) of the goods, not with the final "liquidation" of the goods for customs purposes 
or the determination of their customs value for such purposes.113 Moreover, Colombia asserts that a 
proper reading of the relevant provisions in their lega l context reveal that the "correction" requirement 
is simply a guarantee requirement in the form of a deposit before the release of the goods and does not 
impact on the determination of the customs value. According to Colombia, the word "correction" has 
a different meaning in Article 128.5 e) of Colombia's Customs Statute.  Also, Colombia is of the view 
that this Article and Article 172.7 of Resolution No. 4 240 of 2000 provide that if an issue or dispute (a 
"controversia" in Spanish) arises as a consequence of the fact that the declared  f.o.b. value is below 
the indicative price as established by DIAN, the goo ds will be released if the importer corrects its 
import declaration to reflect indicative prices and provisionally posts a deposit on the basis of those 
indicative prices.114 
5.52 If Guatemala understands correctly, Colombia is arguing with regard to indicative prices the 
following: 
(a) Firstly, that the indicative prices are a "control mechanism" and not a "customs 
valuation method".115 
(b) Secondly, that the "correction" of the decl aration is a guarantee requirement, in the 
form of deposit, and does not affect the determination of the customs value.116 
(c) Thirdly, that the custom valuation occurs in  a "control posterior", after the payment of 
the "guarantee" and the release of the goods.117  
5.53 While Guatemala does not intend to interpret Co lombia's legislation, Guatemala considers 
that Article 128.5 e) of Colombia's Customs Statute,  read in conjunction with Articles 1, 112, 234, 
252, 254, 514, 515, 548, 551, 554 and 555 of the same Statute, among others, may give another 
characterization of the distinction made by Colomb ia with regard to "control previo" and "control 
posterior". 
5.54 Article 1 of Colombia's Customs Statute provi des for some definitions.  Two of them are 
important to mention here:  
"PROCESO DE IMPORTACIÓN: Es aquel que se inicia con el aviso de llegada del 
medio de transporte y finaliza con la autoriz ación del levante de la mercancía, previo 
el pago de los tributos y sanciones , cuando haya lugar a ello.  Igualmente finaliza con 
el vencimiento de los términos establecidos en este Decreto para que se autorice su levante. 
LIQUIDACIÓN OFICIAL: Es el acto mediante el cual la autoridad aduanera 
determina el valor a pagar e impone las san ciones a que hubiere lugar, cuando en el 
proceso de importación  o en desarrollo de programas de fiscalización se detecte que 
                                                     
 
112 Colombia's first written submission, para. 74. 
113 Colombia's first written submission, para. 75. 
114 Colombia's first written submission, para. 100. 
115 Colombia's first written submission, paras. 67-77. 
116 Colombia's first written submission, paras. 97-130. 
117 Colombia's first written submission, paras. 78-96. WT/DS366/R 
Page 56  
 
  la liquidación de la Declaración no se ajusta a las exigencias legales aduaneras . La 
liquidación oficial también puede efectuarse para determinar un menor valor a pagar 
en los casos establecidos en este Decreto." 
5.55 The definition of "proceso de importación" is used in Article 112 of Colombia's Customs 
Statute which provides that: 
"Sin perjuicio de lo previsto en el artíc ulo 101 de este Decreto, la mercancía de 
procedencia extranjera permanecerá durante el proceso de su importación , en 
depósitos habilitados para el efecto." 
5.56 According to the last cited Article, read in conjunction with the definition of "PROCESO DE 
IMPORTACIÓN", it is clear that the payment of duties and the "release" of the goods finalize the 
importation process. In this regard, Guatemala do es not see how these provisions could be reconciled 
with Colombia's argument that there is  a "control posterior" during which the " actual customs value 
for the purpose of assessing the duties will be determined ", if the importation process has already 
finished.
118 
5.57 Guatemala neither sees what would be the difference between "corrección" in Article 128.5 e) 
of Colombia's Customs Statute and the "Declaraci ón de Corrección" mentioned in other relevant 
provisions in Article 128.  
5.58 Article 234 of Colombia's Customs Statute pr ovides in its relevant part the following: 
"DECLARACIÓN DE CORRECCIÓN: La Declaración de Importación se podrá 
corregir voluntariamente  sólo para subsanar los siguientes errores: subpartida 
arancelaria, tarifas, tasa de cambio, sanciones, operación aritmética, modalidad, 
tratamientos preferenciales, valor f.o.b. , fletes, seguros, otros gastos, ajustes y valor 
en aduana , y sólo procederá dentro del térmi no previsto en el artículo 131 del 
presente decreto. 
… La Declaración de Corrección provocada  por la autoridad aduanera  procederá, 
como consecuencia de los resultados de  una inspección aduanera, o cuando se 
notifique requerimiento especial aduanero de corrección o de revisión del valor, en 
cuyo caso, la base para corregir será la dete rminada oficialmente por la autoridad 
aduanera, o a solicitud del declarante o de l importador, cuando se pretenda corregir 
errores en el diligenciamiento de la Declaración de Importación, diferentes a los contemplados en el inciso primero del presen te artículo, en cuyo caso, deberá mediar 
autorización previa por parte de la autoridad aduanera. 
No procederá Declaración de Corrección cuando la autoridad aduanera hubiere 
formulado liquidación oficial de corrección o de revisión del valor." 
5.59 According to this provision, Guatemala c onsiders that the provocation by the customs 
authorities to submit a "Declaración de Corrección" is  one of the cases provided for in Article 128.5 e) 
of the Customs Statute. If that is not the case , Guatemala also has difficulties in reconcile 
Articles 128.5 e) and 234 of Colombia's Customs Statute. 
5.60 Regarding the alleged payment of the guarant ee under Article 128.5 e), Guatemala observes 
that Article 252 of Colombia's Custom Statute provides for "valores provisionales" meaning, the cases where the custom value may be provisionally declar ed. Looking at this provision, Guatemala does not 
see reflected, as one of these cases, the so-calle d "control previo" alleged by Colombia.  
                                                     
 
118 Colombia's first written submission, para. 55.  WT/DS366/R 
 Page 57 
 
 
  5.61 Moreover, Article 254 states the following: 
"Cuando exista controversia respecto al  valor en aduana declarado y/o los 
documentos que lo justifican, o cuando no sea posible la determinación del valor al 
momento de la importación, se podrá otorgar el levante de las mercancías, previa constitución de garantía, en los términos del Artículo 13 del Acuerdo y artículo 128º 
numeral 5 de este Decreto y conforme a la s condiciones y modalidades que señale la 
autoridad aduanera." 
5.62 Although it seems that the reference made in th is provision to Article 128.5 would permit the 
interpretation advanced by Colombia, a further read ing of Article 128.5 allows to see that, unlike the 
rest of the provisos in this particular provision, paragraph e) requires the "payment" of custom duties 
instead of constituting "garantía bancaria o de compañía de seguros".  
5.63 Finally, Guatemala considers that the so-called "c ontrol posterior" alleged by Colombia is, in 
fact, a set of legal proceedings provided for in Colombia's legislation to review  administrative 
resolutions, instead of being part of a "customs va luation method". As a matter of fact and at least on 
its face, the custom valuation method provided for in Articles 237 to 259 of Colombia's Customs 
Statute seems to be different from the proceedi ngs established in Articles 514, 515, 548, 551, 554 
and 555.  
5.64 The Articles just mentioned establish a proceed ing for the devolution or compensation when 
an amount of money has been paid in excess.  
5.65 Consequently, for the reasons expressed before , Guatemala sees difficulties in considering 
that the payment of customs duties may be considered as a guarantee and that "control posterior", as 
described by Colombia, is the moment when the cu stoms authorities determine the value of the goods. 
5.66 To the contrary, Guatemala considers, at least on its face, that Colombia, whatever 
characterization it may give to this issue, in f act is requesting the payment of customs duties on a 
minimum amount equal to the indicative prices and allo wing, if the interested so it wish, the challenge 
of the decision through administrative proceedings.  
5.67 For this particular reason, Guatemala would conc ur with Panama in the sense that Colombia's 
use of indicative prices is inconsistent with Articles 1, 2, 3, 5, 6, 7.2(b), (f), (g) and 13 of the Customs 
Valuation Agreement , since Colombia does not accept the transaction value as the primary mean for 
determining the customs value of imported goods and,  consequently that Colombia fails to follow the 
methodologies set out in Articles 2 through 6 of the Customs Valuation Agreement .  Moreover, in the 
light of what has been expressed before, it is diffi cult for Guatemala to accept that the payment of 
custom duties, even providing legal administrative means to request the devolution of the duties paid 
in excess, could be considered as "guarantee"  within the meaning of Article 13 of the Customs 
Valuation Agreement . 
D. H
ONDURAS  
5.68 Honduras is grateful for the opportunity to attend this meeting of the third parties with the 
parties and the Members of the Panel. 
5.69 Honduras is not taking position on the substance of  this matter.  Our decision to participate 
was motivated by our systemic interest in the matter,  bearing in mind that this was the first time that a 
panel would be making an interpretation of the Ag reement on Implementation of Article VII of the 
General Agreement on Tariffs and Trade 1994 ( Customs Valuation Agreement ).  We are also highly 
interested in the outcome of this case as regards the interpretation of Article V of the GATT, which WT/DS366/R 
Page 58  
 
  deals with the subject of the freedom of transit, and the possible relationship with the negotiations to 
conclude a trade facilitation agreement. 
E. S
EPARATE CUSTOMS TERRITORY OF TAIWAN , PENGHU , KINMEN AND MATSU  
1. Introduction 
5.70 The Separate Customs Territory of Taiwan, Penghu, Kinmen and Matsu ("Chinese Taipei") 
appreciates this opportunity to present its views as a third party.  Chinese Taipei will, in this 
submission, address some issues of legal interpre tation, in particular those relating to the Agreement 
on Implementation of Article VII of the General Agreement on Tariffs and Trade 1994 ("Customs 
Valuation Agreement "), the General Agreement on Tariffs and Trade 1994 ("GATT 1994 "), and the  
Understanding on Rules and Procedures Governing the Settlement of Dispute  ("DSU").   
2. Claims relating to the indicati ve prices used by Colombia  
5.71 Panama in this dispute asserted that the indi cative prices at issue ("Indicative Prices") were 
employed to determine customs values and that th e payment based on the calculation of the Indicative 
Prices was final in character. By contrast, Colombia  stated in its defence that the Indicative Prices 
simply acted as an administrative mech anism allowed under Article 13 of the Customs Valuation 
Agreement  and that the payment based thereon was provi sional. In view of the conflicting assertions 
of the role of the Indicative Prices, Chinese Taip ei would encourage both Panama and Colombia to 
produce further evidence in order to demonstrate the exact nature of the Indicative Prices at issue.  
5.72 Moreover, should the Panel find that the Indica tive Prices were only a control mechanism and 
were not for determining customs values, Chinese Ta ipei would maintain that Colombia was in any 
case not allowed to establish the Indicative Prices in an arbitrary manner that was inconsistent with 
Article 13 of the Customs Valuation Agreement .  
5.73 Panama in its submission explained at great length that Colombia's establishment of the 
Indicative Prices was inconsistent with the Customs Valuation Agreement , in particular Articles 1 
through 7 thereof. In this regard, Chinese Taipei is inclined to find that Colombia's Indicative Prices 
were not established in conformity with the methodol ogies set out in Articles 1, 2, 3, 5 and 6 of the 
Customs Valuation Agreement . The only possibility left to justify the employment of the Indicative 
Prices was for them to be categorized as the methodology provided under Article 7 of the Customs 
Valuation Agreement .  
5.74 However, were Colombia allowed to invoke Article 7 to establish the Indicative Prices, 
Chinese Taipei observed that Colombia not only may have failed to first demonstrate that customs 
values cannot be determined under Articles 1 through 6, but also may have misused Article 7 by 
violating the positive condition in Article 7.1 and negative conditions in Article 7.2.  
3. Colombia's measures restricting ports of en try for certain Panama products cannot be 
justified under the GATT 1994  
5.75 It was not disputed that Colombia enacted reso lutions restricting the import of certain textiles 
from Panama into Colombia unless they we re made through Bogota and Barranquilla. These 
restrictions not only created significant transaction costs to textile imports from Panama, but also 
brought about unavailability of delivery in "real time" which would certainly discourage customers 
who are not located near the two designated ports from purchasing these products.  
5.76 All these facts indicated that Colombia's restrictions on ports of entry made the importation of 
certain Panama textiles much more onerous than if  these restrictions had not existed, and therefore 
were inconsistent with Articles XI:1 and XIII:1 of the GATT 1994 .   WT/DS366/R 
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  5.77 Colombia tried to employ Article XX(d) of the GATT 1994  in order to justify its restrictions 
on ports of entry. In this respect, Chinese Taipei  suggests that the Panel should first examine the 
factors including the importance of the interests prot ected by these restrictions, their trade impact and 
their contribution to the realization of the end pursued. The Panel should also consider whether a 
WTO-consistent alternative measure was reasonabl y available to secure compliance with laws or 
regulations that were not themselves inc onsistent with some provisions of the GATT 1994  appropriate 
to the level of enforcement pursued by Colombia.  
5.78 However, even if the Panel finds that these r estrictions were provisi onally consistent with 
Article XX(d), these restrictions undoubtedly could not be justified under Article XX due to a clear 
inconsistency between these restrictions and the chapeau of Article XX which prohibits a measure 
from being applied in a manner that  would constitute arbitrary or unjustifiable discrimination.  
5.79 Colombia in this case adopted resolutions rest ricting ports of entry only for certain products 
from Panama. It follows that discrimination was r esulted from the application of these resolutions.   
5.80 Colombia argued that these restrictions were taken as part of a series of measures for the 
purposes of combating under-invoicing, smuggling, m oney-laundering and other illicit activities. In 
consideration of the relationship between Colomb ia's comprehensive purposes of these restrictions 
and the manner in which Colombia implemente d them, Chinese Taipei would add that any 
discrimination caused by these restrictions was random. Consequently, the discrimination resulting from these restrictions could be constituted as arbitr ary in the sense of the ch apeau of Article XX.  
5.81 On the issue of whether the discrimination caused  by Colombia's restrictions at issue was 
unjustifiable, Chinese Taipei notes the above-m entioned objectives could not be reached by 
introducing these restrictions alone. It is difficu lt to understand how the discrimination caused by 
Colombia's restrictions might be viewed as comply ing with the chapeau of Article XX when they do 
not relate to the pursuit of Colombia's declared  objectives. Chinese Taipei therefore submits that 
Colombia's restrictions at issue constituted unjustifia ble discrimination in the sense of the chapeau of 
Article XX.  
4. Members should resolve disputes in good faith 
5.82 In view of Articles 3.7 and 3.10 of the DSU,  Chinese Taipei submits that the WTO dispute 
settlement mechanism prefers a mu tually agreed solution to litigation. In addition, a Member 
intending to reach a settlement with another Memb er in a proceeding sha ll conduct consultation or 
negotiation in "good faith." Following the application of the good-faith principle, Chinese Taipei is of 
the view that any Member party to an agreed settlement shall perform all terms and conditions 
contained in that settlement in a bona fide  manner. 
5.83 This case lodged by Panama against Colombia was a particular case. It was the second time 
that Panama had filed a WTO case against Colombia, and on measures almost identical to those in the previous proceeding. However, the previous proceed ing ended shortly after its  initiation on the ground 
that Panama and Colombia had arrived at a mutually agreed settlement.  
5.84 Viewed from the perspective of Articles 2 and 26 of the Vienna Convention on the Law of 
Treaties ("VCLT"), this mutually agreed settlement is an international agre ement concluded between 
Panama and Colombia and shall be construed as an tr eaty that must be performed by both Parties in 
good faith. Without new facts contrary to the circumstan ces, the failure of either party to enforce it is 
not only inconsistent with the principles of "positiv e solution to a dispute" and "good faith" provided 
in Articles 3.7 and 3.10 of the DSU, but also have violated the party's obligation under the VCLT and 
the customary international law embodi ed in its relevant provisions.  WT/DS366/R 
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  5.85 Chinese Taipei is aware that Panama and Colomb ia provided opposite scenarios with respect 
to the enforcement of the above-mentioned settlement . For the benefit of the Panel, it is Chinese 
Taipei's suggestion that both Colombia and Panama should produce more convincing evidence 
demonstrating new facts in support of their arguments , rather than merely maintaining the set of facts 
currently put forward. 
F. U
NITED STATES  
5.86 It is a pleasure to appear before you toda y to present the views of the United States 
concerning certain issues in this dispute.  We would like to make a few brief points on Panama's 
claims related to Colombia's use of indicative pr ices and the proper legal interpretation of certain 
provisions of the Agreement on Implementation of Article V II of the General Agreement on Tariffs 
and Trade 1994 (the " Customs Valuation Agreement ").  We recognize that many of the issues in this 
dispute are factual in nature, and from the outset we would like to emphasize that the United States takes no position as to whether Colombia has or has not complied with its obligations under the 
Customs Valuation Agreement . 
5.87 This dispute raises an important issue concerning the proper application of the Customs 
Valuation Agreement .  The provisions of the Agreement addressed by Panama have not previously 
been analysed by a WTO dispute settlement pane l nor by the Appellate Body, and the issue of 
indicative prices has not been a subject of a panel or Appellate Body report. 
5.88 Reports of widespread use by WTO Members of indicative prices (or database prices) in 
connection with customs valuation are troubling a nd a source of serious concern.  Reliance on 
indicative prices or database prices as a substitu te for following the cu stoms valuation process 
prescribed by the Customs Valuation Agreement  is inconsistent with the Agreement.  
5.89 The United States welcomes the general agreement of Panama and Colombia in this dispute 
on the legal interpretation of the Customs Valuation Agreement .  In particular, Panama and Colombia 
both note that "[t]he primary basis for customs valu e under this Agreement is 'transaction value' as 
defined in Article 1."
119  Article 1 of the Agreement provides that "[t]he customs value of imported 
goods shall be the transaction value, that is the pric e actually paid or payable when sold for export to 
the country of importation" except under certain specified conditions.  Where customs value cannot be determined under Article 1, Articles 2 through 7 of the Customs Valuation Agreement  establish a 
hierarchical process for determining customs value on  the basis of alternative means, including the 
transaction value of identical or similar goods (Artic les 2 and 3), the unit price of identical or similar 
goods sold in the country of importation (Article 5), a computed price (Article 6), or other "reasonable 
means" (Article 7).
120   
5.90 Using an indicative price to determine cu stoms value is not permitted under Articles 1 
through 6 of the Customs Valuation Agreement .  Each of these articles prescribes a specific 
methodology for determining customs value that excludes the possibility of using indicative prices.  Only where customs value cannot be determined under Articles 1 through 6 may customs value be 
determined, under Article 7, "using reasonable me ans consistent with the principles and general 
provisions of [the Customs Valuation Agreement ] and of Article VII of GATT 1994  and on the basis 
of data available in the country of importation."
121  
5.91 Article 7 goes on to prohibit certain practices, for example, the use of minimum customs 
values (Article 7.2(f)) and the use of arbitrary or fi ctitious values (Article 7.2(g)).  If an indicative 
                                                      
119 Customs Valuation Agreement , General Introductory Commentary , para. 1 (first sentence);  
Panama's first written submission, para. 90,  Colombia's first written submission, para. 69. 
120 See, e.g., Customs Valuation Agreement , General Introductory Commentary, paras. 2-4. 
121 Customs Valuation Agreement , Article 7.1.  WT/DS366/R 
 Page 61 
 
 
  price is used to determine customs value, and it is impossible for imports to clear customs at any value 
lower than the indicative price, this would constitute a minimum value inconsistent with 
Article 7.2(f).  If an indicative price is based on data insufficient to determine customs value under 
Articles 2 through 6 of the Customs Valuation Agreement , this would strongly suggest that the 
indicative price is arbitrary or fictitious, whic h would be inconsistent  with Article 7.2(g). 
5.92 While it is not necessary for the Panel to determin e in this dispute the precise scope of what 
would be permissible under Article 7 of the Customs Valuation Agreement , in any event, the United 
States recalls that Colombia appears to agree with  Panama that, as a general legal matter, substituting 
an indicative price for declared value to determ ine customs value would be inconsistent with 
Articles 1 through 7 of the Customs Valuation Agreement .122  
5.93 In this dispute, Panama and Colombia differ pr imarily on the nature and extent of Colombia's 
use of indicative prices, with Panama alleging th at Colombia uses indicative prices to determine 
customs value and Colombia responding that it does not  use indicative prices for that purpose.  This is 
a factual matter on which the United States does not take a position.  The United States looks forward 
to the Panel's examination of these factual questions and to the Panel's report.   
5.94 Mr. Chairman, I wanted to add one thought briefl y on an issue related to Article 6.2 of the 
DSU.  As I understood a comment by the EC in its thir d-party oral statement, the EC explained that it 
would be sufficient to satisfy Ar ticle 6.2 of the DSU to say in a panel request that a measure is 
challenged "as such" and "as applied", without any further reference to those applications of the 
measure on which findings are sought.  A preliminar y reaction would be that the United States does 
not agree with the approach set out by the EC 
5.95 Specifically, it is not clear that measures that are applications of another measure would 
themselves, if not identified in the panel request at all, be measures within the Panel's terms of 
reference and therefore susceptible to findings and possible recommendations under Article 19.1 of 
the DSU by the Panel.  We therefore invite the Panel to consider this issue further. 
VI. INTERIM REVIEW 
6.1 On 4 April 2009, the Panel issued its Interim Report to the parties.  On 18 April 2009, both 
parties submitted written requests for the review of pr ecise aspects of the Interim Report.  The parties 
submitted written comments on the other party's comm ents on 25 April 2009.  Neither party requested 
an interim review meeting. 
6.2 In accordance with Article 15.3 of the DSU , this section of the Panel's Report sets out the 
Panel's response to the arguments made at the inte rim review stage, wherever the Panel felt that 
explanations were necessary.  The Panel has also mo dified certain aspects of its Report in light of the 
parties' comments wherever it considered appropria te.  Finally, the Panel ha s made a limited number 
of editorial corrections to the Interim Report for the purposes of clarity and accuracy.  References to 
sections, paragraph numbers and footnotes in this Section VI relate to the Interim Report.  Where 
appropriate, references to para graphs and footnotes to the Final Report are included. 
A. PANAMA 'S COMMENTS ON THE INTERIM REPORT  
1. Descriptive part 
6.3 Regarding paragraph 2.5 of the Interim Repor t, Panama requests the Panel to include 
additional statements by the United States Drug En forcement Agency describing the Black Market 
Peso Exchange operations to more fully reflect its arguments.  The Panel considers the Panel's 
                                                      
122 See Colombia's first written submission, paras. 68-74. WT/DS366/R 
Page 62  
 
  description within this section is ade quate and thus declines to do so.  In addition, the Panel notes that 
Panama had a previous opportunity to request changes to the Descriptive Part of the report. 
6.4 Regarding footnote 14 of the Interim Report, Panama requests the Panel to delete text 
discussing findings by the Colombian Unidad de Información y Análisis Financiero  (UIAF) regarding 
participants in contraband activities.  The Pane l does not consider this deletion appropriate. 
2. Panama's claims under the Customs Valuation Agreement  
6.5 Regarding paragraph 7.9 of the Interim Repor t, Panama suggests replacing in the second line 
"to the best of its ability" with "as well as the legislation and regulatory framework giving effect to the indicative prices."  The Panel does not c onsider this change appropriate.   
6.6 Regarding paragraph 7.10 of the Interim Re port, Panama suggests adding the following 
sentence: "In particular, Panama refers to Thailand – H-Beams that clarified the fundamental issue in 
a claim of prejudice is whether the defendant party was made aware of the claims presented by the complainant party sufficient to allow it to defend itself".  Panama also suggests adding a footnote to 
include the relevant reference.  The Panel does not consider this change appropriate. 
6.7 Regarding paragraph 7.88 of the Interim Repor t, Panama suggests At the beginning of the 
paragraph, add "Panama argued that without any te xtual basis in Article 128.5 e), Colombia equates 
the notion of a payment with that of a guarantee or  deposit."  Panama further suggests to insert at the 
end of this sentence a footnote with the text: "P anama's second written submission, para. 43."  The 
Panel does not consider these changes appropriate. 
6.8 Regarding paragraph 7.128 of the Interim Report,  Panama requests the Panel to replace "there 
is a review mechanism in which Colombian cust oms authorities determine a customs value" with 
"there is a review mechanism in which Colombia n customs authorities determine a revised customs 
value".  Colombia however rejects characterization of  the review mechanism as a revision.  The Panel 
declines to make the requested changes as it considers the statement adequate. 
3. Panama's claim under Article III:2 of the GATT 1994  
6.9 Panama has commented on the Panel's decisi on not to make findings under Article III:2 on 
the grounds that its finding that the use of indi cative prices to determine the customs value is a 
prohibited method, has a direct impact on the Artic le III:2 claim.  Without a specific ruling by the 
Panel that indicative prices may not be used to determine the taxable base  for textile, apparel and 
footwear products, Panama considers that it would be possible for Colombia to amend its legislation 
to allow indicative prices to be used to determin e the taxable base for such  products.  Panama notes 
that the Panel has already considered arguendo that both tests establishing a violation of Article III:2, 
first sentence, have been met.  Thus, Panama request s the Panel to consider completing its analysis by 
making a finding that the use of indicative prices, ra ther than the transaction value, as the basis for 
assessing the sales tax results in the imposition of ta x in excess of that levied on like domestic 
products, violates Article III:2, first sentence.   
6.10 In response, Colombia considers it inappropriate  for the Panel to make the requested findings 
given that Panama's challenge was limited to the particular provisions of Decree No. 2685 and 
Resolution No. 4240.  In Colombia's view, Panama's c oncern at this late stage with the application of 
Article 459 of the Tax Code falls outside of the Panel's mandate.  Taking issue with the Panel's 
decision to apply judicial economy is inappropriate since Panama did not challenge this provision of 
Colombia's Tax Code.  Colombia further considers that Panama's argument relating to implementation 
is speculative in nature and fails to recognize the well-established principle that  it is for each Member 
to decide the most appropriate way to bring its measu re into conformity with the relevant Agreement.   WT/DS366/R 
 Page 63 
 
 
  If Panama considers that Colombia has failed to br ing its measure into conformity, Colombia argues 
that Panama must request an implementation Panel to examine the matter. 
6.11 Having considered the comments of both parties, the Panel declines Panama's request to make 
findings under Article III:2.  As explained in the Interim Report (paragraph 7.169), the Panel's 
findings pertaining to the WTO-inconsistency "as su ch" of the legal provisions imposing the use of 
indicative prices provide a positive solution to the dispute and thus the Pa nel considers it unnecessary 
to continue its analysis and make specific findings on the consistency "as such" of Article 128.5 e) of 
Decree No. 2685 and Article 172.7 of Resolution No. 4240 with Article III:2 of the GATT 1994 .  As 
noted, Panama did not challenge Article 459 of the Tax Code or any other tax provision, but instead 
referred to the provisions as relevant context for th e interpretation of the indicative prices provisions.  
In line with the concerns expressed by Colomb ia, the Panel considers that, having found that 
indicative prices are a prohibited method of customs valuation, additional fi ndings under Article III:2 
would be tantamount to ruling on future contingencies. 
4. Panama's claim under Article XI:1 of the GATT 1994  
6.12 Regarding paragraph 7.210 of the Interim Report,  Panama suggests adding at the beginning of 
the paragraph: "Panama notes that in GATT and WTO jurisprudence, panels ha ve interpreted Article 
XI:I as a comprehensive ban of all types of limita tions on the importation of products, other than 
duties, taxes and other charges".  Panama further requ ests the Panel to add at the end of the paragraph: 
"Panama considers that Colombia's argument that Arti cle XI is limited to quantitative restrictions does 
not find any support in GATT/WTO jurisprudence. There have been several cases in which panels 
have found a non-quantitative restriction to be a violat ion of Article XI."  The Panel does not consider 
these changes appropriate. 
6.13 Regarding paragraph 7.230 of the Interim Re port, Panama commented that the Panel may 
wish to cite more fully to Panama's detailed argu ments that were set out in Panama's second written 
submission, paragraphs 113-126 a nd Panama's second oral statement, paragraphs 30-34.  The Panel 
considers that Panama's argumentation is sufficien tly reflected in its report and thus declines to 
consider Panama's suggestion. 
6.14 Regarding paragraph 7.250 of th e Interim Report, Panama suggests replacing in the last 
sentence, "in response to Colombia's allega tion that Panama's challenge is necessarily de facto  in 
nature" with "if the Panel were to consider othe rwise".  The Panel does not consider this change 
appropriate. 
6.15 Regarding paragraph 7.252 of the Interim Report,  Panama suggests adding at the beginning of 
the paragraph, "Panama considers that Colombia's reference to Argentina – Hides and Leather  is 
misplaced. In that case, the EC challenged the measu re at issue on a de facto basis whereas Panama is 
challenging the measure on the basis of the text of the law."  The Panel does not consider these 
changes appropriate. 
5. Colombia's defence under Article XX(d) of the GATT 1994  
6.16 Regarding the Panel's Article XX(d) analysis, Pa nama requests the Panel to modify its finding 
that Colombia has met its burden to identify the la ws and regulations with which its ports of entry 
measure seeks to ensure compliance, namely, D ecree No. 2685, including Article 41 and Article 87 
and Resolution No. 4240 (paragraph 7.524 of the In terim Report).  In Panama's view, a careful 
reading of Colombia's response to question No. 14 5 from the Panel reveals that Colombia did not 
initially refer to Article 87 as cons tituting legislation for which the ports of entry measure seeks to 
ensure compliance.  Panama considers that Colombia merely referred to this provision as an example 
of a law that sets forth a customs obligation.  Ther efore, Panama submits that Colombia has failed to 
discharge its burden to identify the laws and regulati ons.  In light of this view, Panama requests the WT/DS366/R 
Page 64  
 
  Panel to refrain from making positive findings on the question of whether Colombia has properly 
identified the laws and regulations, but instead assume arguendo  that Colombia has done so in order 
to proceed with its analysis under Article XX(d).   
6.17 Panama additionally notes in the section of  the Interim Report on whether the laws or 
regulations are not themselves WTO-inconsistent, th e Panel states "the Appellate Body has stressed 
that a responding Member's law will be treated as WTO-consistent until proven  otherwise" (paragraph 
7.531).  While acknowledging the correctness of the st atement, Panama argues it is applicable only in 
those cases where a complaini ng party claims that a responding party's measures are WTO-
inconsistent.  Panama considers that the burden of proof is on the complaining party asserting the 
inconsistency to introduce evidence to substantiate that assertion.  Thus, the disputes referred to in 
footnote 852, in particular, US – Carbon Steel , refer to the type of evidence a complaining party must 
adduce in order to prove its assertion that a respondi ng party's measure is inc onsistent.  In Panama's 
view, it is not possible to apply this reasoning by the Appellate Body in a situation involving an 
affirmative defence, such as Article XX(d).  Wh en a responding party invokes an exception, it bears 
the burden of proof to demonstrate that the laws or regulations it seeks to secure compliance with are 
not themselves GATT-inconsistent.  It cannot seek to benefit from a presumption of consistency in 
this regard.  As the Appellate Body stated in India – Wool Shirts and Blouses , "Article XX … [is] in 
the nature of an affirmative defence.  It is onl y reasonable that the burden of establishing such a 
defence should rest on the party asserting it." (para. 16).  
6.18 In this case, Panama argues that Colombia ha s not met its burden of proof as the respondent 
to present a prima facie case that its laws and regulations are not themselves inconsistent with the 
GATT.  Once again, Panama requests the Panel to assume arguendo  that Colombia has done so in 
order to proceed with its analysis of whether th e ports of entry measure is "necessary" to secure 
compliance with Colombia's customs laws and regulations. 
6.19 Colombia submits that Panama is re-arguing the same points it made in the course of the 
proceedings based on identical arguments that were re jected by the Panel.  Colombia contends that it 
is well established that the purpose of the interim re view stage is not for parties to re-argue their 
case.
123  Colombia therefore requests that the Panel decl ine to make the requested changes to its report 
in respect of its findings. 
6.20 The Panel considers it has already adequately  addressed the issue of whether Colombia 
properly identified the relevant laws and regula tions for which compliance was sought, and whether 
these laws and regulations are themselves WTO-consis tent.  In particular, the Panel referred to a 
statement by the Appellate Body explained in US – Shrimp (Thailand)  that a panel is free to use the 
various arguments made and provis ions cited by the parties in or der to assess objectively which laws 
and regulations were relevant  to the defendant's defence.124  As explained in paragraphs 7.516-7.521 
of the Interim Report, the Panel is of the view  that Colombia identified laws and regulations, 
including Article 41 and Article 87 of Decree No. 2685 and Resolution No. 4240, which together set 
forth rules on the designation of ports for importation and clearance of goods, and the requirement to 
present an import declaration and pay duties and f ees.  With respect to whether the laws and 
regulations identified by Colombia are themselves WT O-consistent, the Panel e xplained in paragraphs 
7.529-7.532 of the Interim Report that it does not c onsider that Panama has challenged the whole of 
Colombia's right to enforce its customs laws and obligations contained in Decree No. 2685 or 
                                                      
123 Colombia refers to the Panel Report, Japan – DRAMS (Korea) , para. 6.2: "In addressing Korea's 
comments, we note that Korea has sought to re-argue many of the points that it made during its submissions.  
This is not necessarily the purpose of the interim review mechanism set forth at Article 15.2 of the DSU .  In 
particular, we do not consider  that Article 15.2 of the DSU  requires us to provide a de fence of our findings at the 
Interim Review stage".  
124 Panama refers to footnote 844 of the Interim Report, citing Appellate Body Report, US – Shrimp 
(Thailand) , para. 302.  WT/DS366/R 
 Page 65 
 
 
  Resolution No. 4240.  Nor does the Panel consider the specific provisions referred to by Colombia to 
be WTO-inconsistent.  Accordingly, the Panel dec lines to modify its findings under Article XX(d) of 
the GATT 1994 , which would not affect the Panel's overa ll conclusions regarding Article XX(d) in 
any case. 
6.21 Regarding footnote 836 of the Interim Report, Panama requests the Panel to include 
arguments pertaining to the inclusion of Co lombia's reference to Article 319 of its Código Penal , 
when addressing Colombia's identification of laws  and regulations for which the ports of entry 
measure seeks to secure compliance.  Colombia requ ests the Panel to reject Panama's proposed text.  
The Panel declines to make changes, noting that footnote 836 serves to provide background to the 
Panel's question 145 to the parties.  The Pane l did not consider Article 319 of Colombia's Código 
Penal  as a relevant law or regulation for purposes of its Article XX(d) analysis. 
6.22 Regarding footnote 868 of the Interim Report,  Panama suggests deleting the sentence "For 
instance, a UIAF study claims that 89 firms incor porated in the Colon Free Zone were identified by 
Colombian intelligence as regularly participants in the purchase of goods with contraband US 
dollars."  The Panel does not cons ider this change appropriate. 
6. Miscellaneous 
6.23 In addition to the substantive comments pr esented above, Panama offered a number of 
typographical and stylistic suggestions, further requ esting the Panel to make conforming changes to 
the Spanish version of the interim report.  The Panel has accommodated and commented on Panama's 
suggestions where appropriate.  Parallel changes to the translation into Spanish of the Panel Report 
have similarly been introduced.  
A. COLOMBIA 'S COMMENTS ON THE INTERIM REPORT  
1. Descriptive part 
6.24 Regarding paragraph 2.4 of the Interim Report, Colombia requests the Panel to refer to the 
"failed cooperation" under the Cust oms Cooperation Protocol, and to characterize the measures at 
issue as "similar in nature" to earlier enacted measur es.  The Panel considers that the wording of the 
paragraph accurately reflects the facts as presented to it but has nevertheless amended the text of 
paragraph 2.4 of the Final Report to ta ke the Colombia's comments into account. 
2. Panama's claims under the Customs Valuation Agreement  
6.25 Regarding paragraph 7.63 of the Interim Repor t, Colombia disagrees with the following 
characterization of Panama's argument by the Pa nel: "In Panama's view, Colombia has failed to 
demonstrate that customs valuation takes place during the 'control posterior' or ' estudio de valor '."  In 
Colombia's view, Panama argued that customs valuati on takes place for the first time at the time of 
the release of the goods subject to indicative pr ices.  Panama however agrees with the Panel's 
characterization of its argument and correctly re fers Colombia to para graphs 16-21 of its second 
written submission to that effect.  The Panel dec lines to amend the wording in paragraph 7.63.   
6.26 Regarding paragraph 7.71 of the Interim Report, Colombia considers that the last sentence of 
this paragraph does not clearly state wh y Colombia considers the GATT Panel's US – Tobacco ruling 
to be relevant and requests the Panel to replace this sentence following paragraph 42 of Colombia's 
second written submission.  The Panel has amended th e text of paragraph 7.71 of the Final Report 
accordingly. WT/DS366/R 
Page 66  
 
  6.27 Regarding paragraph 7.76 of the Interim Report,  Colombia has requested the Panel to add the 
text of paragraph 3 of Article 172 of Resolution No . 4240.  The Panel has done so in paragraph 7.76 
of its Final Report.   
6.28 Regarding footnote 270 of the Interim Report, Colombia requests the Panel to complete its 
quote of Article 128.5 e) of Decree No. 2685.  The Panel has accordingly completed the text of the 
corresponding footnote 274 in the Final Report.   
6.29 Regarding paragraph 7.91 of the Interim Report,  Colombia requests that the Panel add the 
word "textual" before "context" as the arguments th at Colombia presented are all based on the text of 
Colombian law as such.  Colombia further requests the Panel to replace some of the language in that 
paragraph for some additional text.  After carefu l consideration, the Panel has added the word 
"textual" to qualify the word "context" in paragraph 7.91 of the Final Report, as requested by 
Colombia.  The Panel, however, declines to further amend the text of paragraph since it considers that 
the existing text does reflect Colo mbia's arguments adequately.  
6.30 Regarding paragraph 7.113 of the Interim Repor t, Colombia requests the Panel to replace the 
term "determinative" in the first sentence of that paragraph with "significant".  The Panel has made 
the suggested change in paragraph 7.113 of the Final Report. 
3. Panama's claim under Article III:2 of the GATT 1994  
6.31 Regarding paragraph 7.196 of the Interim Report,  Colombia requests the Panel to delete the 
second part of that paragraph as, in its view, it reach es a conclusion which is not in any way based on 
an argument presented by Panama.  For Colombia , the Panel would be making Panama's case by 
addressing the issue of the greater tax burden on imported goods resulting from the additional 
financial cost that the importer must incur in the interval between the collection of sales tax based on 
the indicative price, and the reimbursement of the taxes paid in excess during the post-importation 
control.  On this issue the Panel disagrees with  Colombia.  In paragraph 7.196, the Panel has 
explained its conclusion in paragr aph 7.195, that Colombia taxes im ported products in excess of the 
like domestic products each time that the factual conditions set out in paragraph 7.175 are met, 
regardless of the amount of the difference betwee n the declared and indicative prices.  This 
conclusion is not affected by the fact that the importer may obtain a reimbursement during the 
so-called post-importation process of the taxes paid in excess of that which would have been paid 
absent the use of indicative prices,.  The Panel does not consider it has made the case for Panama but 
rather, has been conscientious in considering wh ether the existence of the post-importation process 
would affect such a conclusion.  
6.32 Also in respect of paragraph 7.196 of the In terim Report, Colombia objects to the Panel's 
characterization of the post-importation control process as occurring as many as two years or more following entry of the goods.  Colombia notes that it  has also presented evidence of a case in which 
post-importation control terminated only three months after entry.  Panama considers that Colombia's 
objection is baseless.  In Panama's view, the Panel merely stated that the post-importation control 
process "may
 take more than two years" (underlining adde d).  For Panama, the fact that in one case 
that process was shorter does not undermine the valid ity of the Panel's appreciation of the timing 
evidenced in other cases of post-importation contro l.  The Panel agrees with the views expressed by 
Panama in this respect and thus declines to  make the change requested by Colombia. 
4. Panama's claim under Article XI:1 of the GATT 1994  
6.33 Colombia argues that paragraph 7.210 of the In terim Report does not reflect the paragraphs 
cited in the relevant citations.  Panama notes that footnote shoul d refer to paragraphs 18-22 of 
Panama's second oral statement.  The Panel has co rrected the typographical error in the footnote of 
paragraph 7.210 of the Final Report to accurately reflect Panama's argument.  WT/DS366/R 
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  6.34 Regarding paragraph 7.212 of th e Interim Report, Colombia re quests the Panel to cite to 
paragraph 10 of its second written submission in  summarizing its arguments as presented in 
paragraph 10 of its second written s ubmissions.  The Panel considers that Colombia's arguments are 
accurately reflected and declines to modify the text .  The Panel notes additionally that Colombia has 
provided its own summary of arguments in the Descriptive part. 
6.35 Regarding paragraph 7.217 of the Interim Report,  Colombia considers that the Panel has not 
accurately reflected its argument that Panama do es not meet the burden of proof under Article XI:1 
because it does not refer to any alleged low levels of  imports or to the causal  link between the specific 
measure challenged and such low level of exports.  Panama considers the paragraph to accurately 
reflect Colombia's views.  The Panel has clarified the language in paragraph 7.217 of its Final Report 
and corrected its reference to Colombia's first writte n submission, paragraph 254, to reflect the parties' 
arguments. 
6.36 Regarding paragraph 7.258 of th e Interim Report, Colombia argues that it is not aware of 
arguments by Panama that additional costs arising from the imposition of the ports of entry measure 
create disincentives and uncertainty in connection wi th importation to various markets in Colombia.  
Panama has referred to pa ragraphs 160-162 of its first written su bmission, and paragraphs 132-134 of 
its second written submission.  The Panel has updated its citations accordingly. 
5. Panama's claim under Article I:1 of the GATT 1994  
6.37 Regarding paragraphs 7.295-7.296 of the Inte rim Report, Colombia requests the Panel to 
clarify its position regarding Panama's claim under Artic le I:1 as concerns the ports of entry measure.  
In addition to other changes to language, Colombia asks the Panel to include  the language, "Colombia 
submits that the way Panama developed its claim unde r Article I:1 in respect of the advanced import 
declaration aspect of the ports measures, implies that the claim of violation of Article I:1 by the restriction of the number of ports of entry was not part of Panama's request ...".  The Panel considers 
the paragraph and citations in their present form refl ect Colombia's argument as or iginally stated in its 
submissions, and therefore declines to modify the text. 
6. Panama's claim under Article V:6 of the GATT 1994  
6.38 Regarding paragraphs 7.314 and 7.318 of the In terim Report, Colombia requests the Panel to 
use the phrase "arriving from" in place of "imports fro m other origins" for the sake of consistency.  
The Panel has modified the language in paragraphs  7.314 and 7.318 of the Final Report consistently. 
6.39 Regarding paragraph 7.451 of the Interim Report,  Colombia requests the Panel to clarify the 
language summarizing its arguments re lated to Article V:6.  The Pa nel has corrected a typographical 
error by adding "do not" in para graph 7.451 of the Final Report. 
7. Colombia's defence under Article XX(d) of the GATT 1994  
6.40 
Regarding paragraph 7.488 of the Interim Report,  Colombia requests the Panel reflect the full 
extent of its arguments as to how the ports of entry measures makes a material contribution to the 
prevention of smuggling and underinvoicing, not simply through specialization of customs officials.  
The Panel has corrected a typographical error in paragr aph 7.488 of the Final Report to reflect that the 
measures contribute in more ways than by strictly  allowing for specialization of customs officials. 
6.41 Regarding paragraph 7.500 of the Interim Report, Colombia argues that it presented a 
common defence to all aspects of the ports of entry measure due to the fact that Panama challenged 
aspects of the measure as one single measure.  Colomb ia cites to Panama's request for establishment, 
p. 2 in support of its argument.  Thus, Colombia requests the Panel to deem Panama's challenge as a 
"common challenge".  Panama argues that it has made  separate and distinct claims in its submissions, WT/DS366/R 
Page 68  
 
  which Colombia should have rebutted separately.  In light of the language in the request for 
establishment, which refers to im portation "exclusively through the two designated ports", the fact 
that the requirement "does not apply to goods arrivi ng in Colombia directly from third countries", and 
reference to the requirement to present and import d eclaration "in advance of [the goods'] arrival in 
Colombia", the Panel does not agree with Colombia 's position.  Additionally, the Panel notes that 
Panama made separate claims under various GATT pr ovisions with respect to the ports of entry 
measure.  The Panel accordingly declines Colombia's request. 
6.42 Regarding paragraph 7.556 and footnote 890 of the Interim Report, Colombia requests the 
Panel to modify the text to more accurately reflect  the data available in the exhibits.  Colombia 
contends that the basis for this paragraph (Col ombia's first written submission, paragraph 194) was 
not presented "as clear as could be".  In addition, Colombia requests the Pane l to delete footnote 890 
in its entirety, stating that terminology used in  different exhibits submitted to the panel was not 
prepared for these WTO proceedings but for other pur poses and thus, may have lead to confusion.  
Based on Colombia's argument as presented in its firs t submission, and the presentation of data in the 
relevant exhibits, including Exhibit COL-15, the Pa nel concludes there is no basis for the changes 
proposed by Colombia.  The Panel theref ore declines to make any changes. 
6.43 Regarding paragraph 7.568 and footnote 913 of the Interim Report, Colombia requests the 
Panel to cite to paragraph 232 of  its second written submission, and Exhibit COL-18, instead of the 
original citations.  The Panel acknowledges this c itation error and has made the correct changes in 
paragraph 7.568 and footnote 939 of the Final Report. 
6.44 Colombia requests the Panel to modify language appearing in paragraph 7.577 of the Interim 
Report to reflect that Colombia did not suggest th at the implicit price was the "primary way" of 
measuring effectiveness, but instead served as a "good indicator" of effectiveness.  In light of paragraph 235 of Colombia's second written submission,  the Panel has made minor modifications to 
paragraph 7.577 of the Final Report to reflect Colombia's position. 
6.45 Regarding paragraph 7.602 of the Interim Repor t, Colombia argues that the Panel has not 
accurately reflected its arguments in relation to  the choice of ports in the period between the 
imposition of the first and second ports of entry meas ures.  Colombia submits that it referred to the 
general positive aspects of the modern state of the ports chosen, and the ports' significance in terms of 
trade in general in 2006 and 2007.  Colombia thus re quests the Panel to remove the language that data 
"bluntly contradict[s] Colombia's proposition".  Th e Panel notes that its reference to Colombia's 
"proposition" referred to Colombia's broad argument that the ports of entry measure has not had a 
significant negative impact on legitimate trade, as oppo sed to its own specific arguments regarding the 
time period between implementation of two separate  measures.  In making its findings, the Panel 
considers it is not limited to the parties' arguments , but may reach its findings in light of the evidence 
presented by both parties.  The Panel has reflecte d Colombia's proposition that the ports of entry 
measure has not had a significant negative impact on  legitimate trade within paragraph 7.602 of the 
Final Report. 
  WT/DS366/R 
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  VII. FINDINGS 
A. PRELIMINARY ISSUES  
1. Colombia's request for a preliminary ruling 
(a) Background 
7.1 In its first written submission125, Colombia requested the Panel to issue a preliminary ruling 
regarding the scope of its mandate  on the grounds that Panama's re quest for establishment failed to 
meet the criteria set forth in Article 6.2 of the DSU .  Colombia asked the Panel to "exclude such 
claims that are not set forth in a sufficiently clear manner in the request for establishment" and/or "for 
which no consultations were held".   Further to paragraph 11 of th e Working Procedures, the Panel 
accorded Panama a ten-day deadline to respond to Colombia's request and informed the parties that 
they would be heard on this issue at the first substa ntive meeting.  Having heard the parties, the Panel 
decided to withhold ruling on matters until issuance of the Interim Report. 
7.2 Colombia has raised two issues relating to the sc ope of the Panel's mandate in relation to the 
claims concerning the use of indicative prices.  The first issue regards the scope of the statutory and 
regulatory provisions challenged by Panama.  With re spect to the second issue,  Colombia alleges that 
Panama has not sufficiently identified specific cases of  application of the challenged provisions in the 
context of its "as applied" claims.  Panama cont ests Colombia's allegations as well as the timing of 
Colombia's request.126  
(b) Main arguments of the parties 
(i) Timing of the preliminary ruling request 
7.3 Panama has requested the Panel to dismiss Colo mbia's request for a preliminary ruling on the 
grounds that it had not been submitted in a timely manner, i.e. at the earliest possible opportunity.127  
Supporting this statement, Panama refers  to the Appellate Body's findings in US – FSC  where the 
Appellate Body stated that:  
"The ... principle of good faith requires that the responding Members seasonably and 
promptly bring claimed procedural deficiencies to the attention of the complaining 
Member, and to the DSB or the Panel, so th at corrections, if needed, can be made to 
resolve disputes.  The procedural rules of WTO dispute settlement are designed to 
promote, not the development of litigation t echniques, but simply the fair, prompt and 
effective resolution of trade disputes."128   
7.4 According to Panama, the Appellate Body's juri sprudence leaves no doubt that a party must 
communicate its objections at the earliest opportuni ty and certainly before filing its first written 
submission, if it is in a position to do so.  In its vi ew, Colombia's concerns relate exclusively to the  
wording  of Panama's request for establishment rather th an to any discrepancy between the request  for 
establishment and Panama's first written submission.  Panama thus considers that Colombia did not 
need to wait until filing its first written submission to submit its request for a preliminary ruling.   
7.5 As Panama notes, paragraph 11 of this Panel' s Working Procedures provides that "[a] party 
shall submit any request for a preliminary ruling not la ter than its first submission to the Panel".  For 
                                                      
125 Colombia's first written submission, paras. 26-41. 
126 Panama's submission on the Request for a Preliminary Ruling by Colombia, paras. 3-8. 
127 Panama's submission on the Request for a Preliminary Ruling by Colombia, para. 8. 
128 Appellate Body Report, US – FSC , para. 166. WT/DS366/R 
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  Panama, this deadline is the outer time-limit under which a party may submit a request for a 
preliminary ruling.  According to Panama, this deadline applies in situations where a respondent 
raises objections based on a discrepancy between the complainant's first written submission and the 
terms of reference set out in the request for establishment.
129  Since Colombia's objection is based on 
grounds that were known prior to the filing of its first submission, Panama contends that Colombia 
should have submitted its request for a preliminary ruling at the earliest possible opportunity, i.e. 
sometime before filing its first written submission.  In support of its view , Panama refers to the 
Appellate Body Report on Canada – Wheat Exports and Grain Imports , in which the Appellate Body 
explained that the timeliness of an objection raised under Article 6.2 must be examined in the light of 
the particular circumstances of the grounds for the objection.130  
7.6 Colombia  contests Panama's objection to the timing of its request for a preliminary ruling, 
citing to WTO jurisprudence that preliminary issues should be addressed "promptly", but not 
necessarily "as soon as possible".  Colombia indicat es that a request for a preliminary ruling should 
not be used as a litigation tactic to delay panel proceedings.131  Moreover, Colombia disputes 
Panama's interpretation of the Appellate Body's findings in Canada – Wheat Exports and Grain 
Imports .  According to Colombia, the Appellate Body cl early established that it is up to each panel to 
decide whether a request for preliminary ruling was submitted in a timely manner, especially 
considering the fact that panels set their own timet ables.  In this respect, Colombia notes that the 
Panel had decided that requests for preliminary ruli ngs should be submitted at the latest, at the first 
written submission.  Colombia points out that its  request was presented within that time-frame.132   
(ii) Scope of the measures 
7.7 Regarding the scope of the measures, Colombia claims that Panama's request for 
establishment fails to identify the specific measures at issue, as the re quest refers to indicative prices 
established and applied in accordance with framework legislation such as Colombia's Customs Statute 
(Decree No. 2685 of 1999, in particular, Titles V and VI), Resolution No. 4240 and Colombia's Tax 
Code (Decree No. 624 of 1989), which, together , cover hundreds of pages and of which their 
relationship with indicative prices is not obvious .  Colombia requests that the Panel limit its 
examination to Resolutions No. 07509, No. 07510, No. 07511, No. 07512, No. 07513, and No. 07530 of 26 June 2007 of the DIAN, Article 128.5 e) of Colombia's Customs Statute and Article 172.7 of 
Resolution No. 4240 of 2000, Article 115 of Colomb ia's Customs Statute and Articles 447 and 459 of 
Colombia's Tax Code.  Colombia claims that onl y these provisions are identified with the level of 
clarity required by Article 6.2 of the DSU .
133   
7.8 Moreover, Colombia contends that Panama h as failed to identify any specific legal provision 
that it considers to be in violation of Article III:2,  and did not provide for any specific application of 
this alleged difference in tax bases.134  According to Colombia, there seems to be a "clear disconnect" 
between the various measures that are being ch allenged by Panama in its Article III:2 claim.135 
7.9 Contrary to Colombia's allegations, Panama  argues that it has clearly identified the measure at 
issue "to the best of its ability".136  Panama submits that its request  for establishment makes clear that 
the measure at issue is the use of "indicative pr ices", which "apply to specific goods from all countries 
except those with which Colombia has signed free tr ade agreements" for the purpose of determining 
the value of those goods to be used as the basis for levying (a) import duties and (b) sales tax.  
                                                      
129 Panama's submission on the Request for a Preliminary Ruling by Colombia, para. 7. 
130 Appellate Body Report, Canada – Wheat Export and Grain Imports , para. 206. 
131 Colombia's first oral statement, para. 14. 
132 Colombia's first oral statement, para. 16. 
133 Colombia's first written submission, para. 37. 
134 Colombia's first written submission, para. 140. 
135 Colombia's first written submission, para. 141. 
136 Panama's submission on the Request for a Preliminary Ruling by Colombia, para. 11.  WT/DS366/R 
 Page 71 
 
 
  Panama submits that it identified the regulatory sch eme used by the DIAN to establish the mechanism 
of indicative prices to the best of its ability, including Resolutions Nos.  07509, 07510, 07511, 07512, 
07513, and 07530.  Thus, Panama argues that it identified not just the measure at issue, but also the legislative and regulatory framework giving effect to  the indicative prices.  Panama notes that under 
Article 6.2, it is required simply to "identify" th e measure at issue, not to explain in detail its 
operation.
137  In this respect, Panama recalls that it has specified its intention "to include within the 
measure at issue any other related act, amendmen ts, or extensions, or any related practices".  
According to Panama, this language has been found to  provide a sufficient basis to include additional 
unlisted acts in a panel's terms of reference.138   
7.10 In any case, Panama considers that even if the re quest were to be considered "insufficient on 
its face", Colombia has failed to demonstrate that  it has suffered a "prejudice" as a result of this 
allegedly unsound formulation of the claims.139  Panama draws the Panel's attention to the fact that, as 
evidenced by its extensive written submission, Colomb ia appears to have been able to identify the 
precise measure at issue and, thus, Colombia 's ability to defend itself was not curtailed.140  
(iii) Type of claims: "as such" and/or "as applied" 
7.11 Colombia  argues that, while Panama's request for establishment refers to the legal provisions 
at issue, it does not refer to one single specific application of indicative prices to subject imports at 
issue.  Colombia thus submits that  Panama's case in respect of the use of indicative prices should be 
limited to an "as such" challenge of  Colombia's laws and regulations. 
7.12 Panama contests Colombia's allegations and argues that it is not required to list any individual 
importation in its request for establishment.  Pa nama submits that, since it has challenged the 
application of the system of indicative prices to all subject imports, it is not necessary to identify 
individual transactions.141  Moreover, Panama disputes Colombia's  interpretation of the concepts of 
"as applied" and "as such".  In a view that Pa nama considers is supported by the practice of WTO 
Members142, a complainant is not required to list par ticular imports subject to a measure when 
presenting an "as applied" challenge.143   
(c) Consideration by the Panel 
(i) General considerations 
7.13 While the DSU  does not expressly envision preliminary rulings by panels, it has become an 
occurrence in the past few years.  The Appellate Body has commented that panel working procedures 
should allow for the possibility of requests for preliminary rulings.144  Paragraph 11 of this Panel's 
Working Procedures has therefore b een included to address such a possibility.  This paragraph reads 
as follows: 
"A party shall submit any request for preliminary ruling not later than its first 
submission to the Panel.  If the compla ining party requests such a ruling, the 
respondent shall submit its response to the re quest in its first submission.  If the 
                                                      
137 Panama's submission on the Request for a Preliminary Ruling by Colombia, paras. 10-12. 
138 Panama refers to the Appellate Body Report in Chile – Price Band System , para. 135.  Panama's 
submission on the Request for a Preliminary Ruling by Colombia, paras. 13 and 17. 
139 Panama refers to the Appellate Body Report in Thailand – H-Beams and the Panel Report on EC – 
Bed Linen.  
140 Panama's submission on the Request for a Preliminary Ruling by Colombia, paras. 18-20. 
141 Panama's submission on the Request for a Preliminary Ruling by Colombia, para. 22. 
142 Panama refers to the Appellate Body Report in EC – Computer Equipment . 
143 Panama's submission on the Request for a Preliminary Ruling by Colombia, paras. 23-27 and 29. 
144 Appellate Body Report, EC – Bananas III , para. 144. WT/DS366/R 
Page 72  
 
  respondent requests such a ruling, the complaining party shall submit its response to 
the request prior to the first substantive meeting of the Panel, at a time to be 
determined by the Panel in light of the re quest.  Exceptions to this procedure will be 
granted upon a showing of good cause." 
7.14 The Panel notes that there is no established jurisp rudence nor is there any established practice 
on whether panels need to rule on the scope of thei r mandate on a preliminary basis, i.e. before the 
issuance of its Interim Report to the parties.  Nume rous panels have reserv ed ruling on preliminary 
issues until issuing a Final Report.
145  Accordingly, the Panel concludes that it may exercise its own 
discretion on to how to proceed in addressing Colomb ia's preliminary ruling request, while taking into 
consideration the due process rights of the parties.   Having heard the parties' views on Colombia's 
request for a preliminary ruling, the Panel thus deci ded not to rule on a preliminary basis and withhold 
ruling on matters until issuance of the Interim Report.  As the Appellate Body ruled in US – Carbon 
Steel, "in considering the sufficiency of a panel requ est, submissions and statements made during the 
course of the panel proceedings, in particular the first written submission of the complaining party, 
may be consulted in order to confirm the meaning of  the words used in the panel request and as part 
of the assessment of whether the ability of the respondent to defend itself was prejudiced.146"147  The 
Panel therefore considered that the scope of Pana ma's request for establishment could be clarified 
through appropriate questioning during and furt her to the first substantive meeting.   
7.15 Having withheld issuing a preliminary ruling, the Panel will now consider Panama's objection 
pertaining to the admissibility of Colombia's prel iminary ruling request due to its alleged late 
submission.  If the Panel decides to dismiss Pa nama's objection, the Panel will then address the 
substance of Colombia's request.   
(ii) Timing of the preliminary ruling request 
7.16 The Panel will first consider whether Colombia's  request for a preliminary ruling was raised 
in a timely manner.  The Panel notes that paragra ph 11 of the Panel's Working Procedures, which is 
reproduced in paragraph 7.13 above, specifically provides for a deadline for preliminary ruling 
requests:  "A party shall submit any request for preliminary ruling not later than  its first submission to 
the Panel" (emphasis added).  As noted by Colombia, Article 12 of the DSU  allows panels to 
determine their working procedures and timetable.  To be precise, the Appellate Body stated, "under 
Article 12 of the DSU, it is the panel that sets the ti metable for the panel proceedings and, therefore, it 
is the panel that is in the best position to determ ine whether, under the particular circumstances of 
each case, an objection is raised in a timely manner."148  As indicated above, the Appellate Body has 
further recommended panels to foresee the possibility  of requests for preliminary rulings in their 
working procedures.149  The Panel has done so by way of including paragraph 11 in its Working 
Procedures.  The Panel is also of the view that, where the Panel has specified a given deadline in its 
Working Procedures, that deadline s hould prevail.  The wording of paragraph 11 is clear: the request 
for a preliminary ruling has to be filed not later than  the first written submission.  This could be 
interpreted as meaning that such a request can be filed before or at the time of the first written 
submission.  The Panel considers that Colombia has abided by that deadline since Colombia's request 
for a preliminary ruling was submitted to the Panel as part of its first written submission.150 
                                                      
145 See, for example, Panel Report, Canada – Aircraft , para. 9.15;  Panel Report, India – Autos , 
para. 7.7;  Panel Report, EC – Bananas III ;  Panel Report, EC – Computer Equipment . 
146 (footnote original ) See, for example, Appellate Body Report, Korea – Dairy , para. 127,  Appellate 
Body Report, Thailand – H-Beams , para. 95. 
147 Appellate Body Report, US – Carbon Steel, para. 127. 
148 Appellate Body Report, US – Wheat Exports and Grain Imports , para. 206. 
149 Appellate Body Report, EC – Bananas III , para. 144.  See para. 7.13. 
150 Colombia's first written submission, pp.12-15.  WT/DS366/R 
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  7.17 The Panel is not persuaded by Panama's argu ment to dismiss Colombia's request for a 
preliminary ruling on the basis that Colombia 's concerns relate exclusively to the  wording of Panama's 
Request for the establishment of a panel rather th an to any discrepancy between that Request and 
Panama's first written submission.  Since Colombia's c oncerns are exclusively related to the text of the 
Request, Panama argues that no need existed for Co lombia to wait until the filing of its first written 
submission to submit its request.  The Panel acknowledges that the Appellate Body has ruled that 
"[w]hen a Member wishes to raise an objection in dispute settlement proceedings, it is always 
incumbent on that Member to do so promptly.  A Member that fails to raise its objections in a timely 
manner, notwithstanding one or more opportunities to do so, may be deemed to have waived its right 
to have a panel consider such objections."151  The Panel does not consider this to be the case with 
Colombia's request.   
7.18 As a general rule, the Appellate Body has gr anted panels broad discr etion to conduct Panel 
proceedings as appropriate, subject to the following  considerations: (i) the Panel must respect the 
wording of the DSU  unless the parties mutually agree to der ogate from it and (ii) the Panel must fully 
take into account the due process rights of the par ties.  Panama was given the opportunity to present 
its response in writing before the first substantiv e meeting and was also given the opportunity to 
comment on Colombia's request at the first substa ntive meeting.  In the Panel's view, it has not 
impaired Panama's due process rights or its right to a defence.  The Panel will therefore address the substance of Colombia's request. 
(iii) Adequacy to Article 6.2 requirements 
7.19 The Panel will now consider Colombia's objecti ons pertaining to the adequacy of Panama's 
request for establishment to the requirements of Article 6.2 of the DSU .  According to Colombia, 
Panama's request for establishment fails to identify the specific measure at issue in two respects.  
First, Colombia argues that Panama's broad referen ce to "framework legisla tion" is not sufficiently 
precise, as the legislation covers hundreds of pa ges and a wide range of legal provisions whose 
relationship with indicative prices is not always clea r.  Second, Colombia contends that Panama has 
failed to identify any individual applications of the challenged provisions to imports arriving from 
Panama.  According to Colombia, this specific applic ation of a provision constitutes a legally distinct 
measure, which must be identified separately in  the context of Panama's "as applied" claim.
152 
7.20 The Panel understands, as argued by Panama 153, that Colombia's concerns appear to relate 
exclusively to the  wording of Panama's request for establis hment rather than to any discrepancy 
between that Request and Panama's first written submission. 
7.21 Article 6.2 reads as follows: 
"The request for the establishment of a pane l shall be made in writing.  It shall 
indicate whether consultations were held, identify the specific measures at issue  and 
provide a brief summary  of the legal basis of the complaint sufficient to present the 
problem clearly .  In case the applicant requests the establishment of a panel with 
other than standard terms of reference, th e written request shall include the proposed 
text of special terms of reference." (emphasis added) 
7.22 Therefore, Article 6.2 provides inter alia  that a request for estab lishment must identify the 
specific  measures at issue and provide a brief summary of the legal basis of the complaint sufficient  to 
present the problem clearly.  In US – Carbon Steel, the Appellate Body summarized its previous 
jurisprudence on the requirements of Article 6. 2 and noted the importance of the two distinct 
                                                      
151 Appellate Body Report, Mexico – Corn Syrup (Article 21.5 – US) , para. 50. 
152 Colombia's first written submission, paras. 36-38. 
153 Panama's submission on the Request for a Preliminary Ruling by Colombia, para. 6 WT/DS366/R 
Page 74  
 
  requirements, namely, identification of the specific measures at issue, and the inclusion of a brief 
summary of the claims.  Referring to Guatemala – Cement I
154, the Appellate Body concluded that 
both requirements "together ... comprise the 'matter re ferred to the DSB', which forms the basis for a 
panel's terms of reference under Article 7.1 of the DSU".  
7.23 The Panel recalls that, in EC – Bananas III , the Appellate Body explained why a panel 
request must be "sufficiently precise":  "first, it ofte n forms the basis for the terms of reference of the 
panel pursuant to Article 7 of the DSU;  and, second, it informs the defending party and the third parties of the legal basis of the complaint."
155  In US – Carbon Steel, the Appellate Body reiterated 
that the underlying requirements of Article 6.2 are firs t, to define the scope of a dispute, and second, 
to "serve the due process  objective of notifying the parties a nd third parties of the nature of a 
complainant's case."156 
Identification of the specific measures at i ssue concerning the use of indicative prices  
7.24 Colombia argues inter alia  that Panama's request for establishment fails to identify the 
specific measures at issue as required in Article 6.2 of the DSU , in respect of the use of indicative 
prices by Colombia's customs authorities.  Accord ing to Panama, its request for establishment makes 
clear that the measure at issue is the use of "i ndicative prices", which "apply to specific goods from all 
countries except those with which Colombia has signed free trade agreemen ts" for the purpose of 
determining the value of those goods to be used as the basis for levying (a) import duties and (b) sales 
tax.157 
7.25 The Appellate Body has found that the degree of specification required in identifying the 
measure at issue must be assessed on a case-by-case basis.158  Whether the specific measure at issue 
has been sufficiently identified in the request for establishment will depend upon the ability of the 
respondent to defend itself given the description of the measure in the Request.159  
7.26 Panama contends that it has not just identified the measures at issue, but also the legislative 
and regulatory framework giving effect to the i ndicative prices.  Specifically, Panama cited to 
Resolution No. Nos. 07509, 07510, 07511, 07512, 07 513 and 07530 and noted a dditionally that some 
provisions of the resolutions and decrees listed in the request for establishment are more pertinent to 
the operation of indicative prices than others.  Sub sequently, in response to a question from the Panel, 
Panama explained that it is challenging the specifi c provisions of Article 128.5 e) of Decree No. 2685 
and Article 172.7 of Resolution No. 4240 as well as the operation of the import regime related to 
indicative prices, which has been liste d in its request for establishment as: 
(a) Resolutions No. 07509, No. 07510, No. 07511, No. 07512, No. 07513, and No. 
07530 of 26 June of the DIAN, 
(b) framework legislation such as Colombia's Customs Statute (Decree No. 2685 of 1999, 
in particular, Titles V and VI),  
(c) Resolution No. 4240 of 2000 and Colombia's Tax Code (Decree No. 624 of 1989).160 
                                                      
154 Appellate Body Report, Guatemala – Cement I , paras. 69-76. 
155 Appellate Body Report, EC – Bananas III , para. 142. 
156 Appellate Body Report, US – Carbon Steel, para. 126. 
157 Panama's submission on the Request for a Preliminary Ruling by Colombia, paras. 10-12. 
158 Appellate Body Report, US – Carbon Steel, para. 127. 
159 Appellate Body Report, EC – Computer Equipment , para. 70. 
160 Panama's response to Panel question No. 3.  WT/DS366/R 
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  7.27 In response to a follow-up question from the Panel, Panama further clarified that:  
"Panama is seeking a finding by the Panel on the inconsistency of Article 128.5 e) of 
Decree No. 2685, Article 172.7 of Resolutio n No. 4240 and the specific resolutions, 
as amended or modified, establishing indicative prices that were listed in paragraph 29 of Panama's first written submission.  Panama seeks a ruling that those measures 
are, as such, inconsistent with Articles 1, 2, 3, 5, 6, 7(b), (f) and (g) of the CVA, as 
well as with Article III:2 and, in the a lternative, Article III:4 of GATT 1994."
161 
7.28 Panama also disputes Colombia's argument that it has not identified with sufficient clarity the 
measure in dispute with respect to its claim under Article III:2 and III:4 of GATT 1994 .  It notes that 
its request for establishment refers to "indicative prices established and applied in accordance with ... 
Colombia's Tax Code", particularly to Article 459 of the Tax Code, as the basis for the establishment 
of the tax base for imported goods, and to Artic le 447 of the Tax Code, as the basis for the 
establishment of the tax base for domestic goods.162  Panama argues that it is the application of 
Article 459 of the Tax Code in connection with the relevant provisions govern ing the determination of 
customs value for subject products that results in less favourable treatment being accorded to 
imported products.163  Panama specifically says that it is ch allenging "Article 496 of the Tax Code in 
connection with Article 128.5 e) of Decree No. 2685 and Article 172.7 of Resolution No. 4240".164  
The Panel notes, however, that in response to a late r question by the Panel quoted in paragraph 7.27 
above, Panama does not mention Article 496 of the Tax Code as a measure it is challenging as such  
but rather Article 128.5 e) of Decree No. 2685 an d Article 172.7 of Resolution No. 4240 as being 
inconsistent inter alia  with Article III:2 (and III:4 in the alternative) of the GATT 1994 . 
7.29 Panama notes that both Colombia and the third pa rties have been able to identify the measure 
at issue and to put forward arguments with respect to Panama's claim.165  Finally, Panama contends 
that, even if the request for establishment were to be considered "insufficient on its face", Colombia 
has failed to demonstrate any "prejudice" aris ing as a result of this allegedly unsound claim.166  
7.30 As the request for the establishment defines a nd limits the scope of the dispute and thereby 
the extent of a panel's jurisdiction, the Panel will begin with Panama's request for establishment as its 
starting point.167  A panel may review the dispute only in the light of the provisions cited in the 
Request.  Therefore, the Panel's terms of reference in  this dispute are limited to the specific measures 
and legal claims raised by Panama in document WT/DS366/6.   
7.31 The relevant portion of Panama's Request reads as follows: 
"Colombia establishes indicative prices to determine the value of products for the 
purpose of levying customs duties and internal taxes.  These prices apply to specific 
goods from all countries except those with which Colombia has signed free trade agreements.  These prices are established a nd applied in accordance with Resolutions 
No. 07509, No. 07510, No. 07511, No. 07512, No. 07513, and No. 07530 of 26 June 2007 of the Directorate of Taxes and Na tional Customs ("DIAN"), as well as 
framework legislation such as Colombia's Customs Statute (Decree No. 2685 of 1999, 
in particular, Titles V and VI), Resolution No. 4240 of 2000 and Colombia's Tax Code (Decree No. 624 of 1989).  
                                                     
 
161 Panama's response to Panel question No. 91. 
162 Panama's second written submission, para. 82. 
163 Panama's response to Panel question No. 6. 
164 Panama's response to Panel question No. 6,  Panama's second written submission, para. 84. 
165 Panama's second written  submission, paras. 79-80. 
166 Panama's submission on the Request for a Preliminary Ruling by Colombia, para.19. 
167 Appellate Body Report, EC – Bananas III , para. 142,  Appellate Body Report, Brazil – Desiccated 
Coconut , p. 21. WT/DS366/R 
Page 76  
 
  Colombia requires that importers of certain  goods pay customs duties and other duties 
or charges and taxes based on the indica tive prices, instead of on the valuation 
methods set out in Article VII of the GATT 1994 and the Agreement on Customs Valuation.  Panama is challenging the indi cative price measures on an 'as such' and 
'as applied' basis. 
Under Article 128.5 e)of Colombia's Customs Statute and Article 172.7 of 
Resolution No. 4240 of 2000, an importer declaring a f.o.b. value that is below the indicative price can obtain the release of merchandise only if it corrects its import declaration to reflect indicative prices and pays customs duties, other duties or charges and relevant taxes on the basis of those indicative prices.  Article 115 of 
Colombia's Customs Statute further provides th at if an importer fails to obtain release 
of the merchandise within the custody period,  the merchandise shall be considered as 
legally abandoned and will eventually  become the property of the State." 
7.32 Within the cited text, Panama appears to challenge Resolutions No. 07509, No. 07510, 
No. 07511, No. 07512 and No. 07513 of the Directorate of Taxes and National Customs ("DIAN"), as 
well as framework legislation such as Colombia 's Customs Statute (Decree No. 2685 of 1999, in 
particular, Titles V and VI), Resolution No. 4240 of 2000 and Colombia's Ta x Code (Decree No. 624 
of 1989).  And, in particular, Article 128.5 e) of  Colombia's Customs Statute and Article 172.7 of 
Resolution No. 4240 of 2000.  The Panel notes that in its responses to the questions by the Panel, 
Panama clarified that: (a) it was not seeking a separate ruling on Article 115 of Decree No. 2685 of 
1999, but referred to it in its request for establishm ent and its first written s ubmission to demonstrate 
the adverse consequences faced by an importer that failed to "correct" the import declaration and pay 
the customs duties and sales tax as required by Article 128.5 e)
168; (b) it was not seeking a ruling on 
Resolution No. 07530 of 26 June 2007, which refers to products subject to "reference prices" and not 
to "indicative prices"169; and (c) it was challenging the provisions  governing the determination of the 
tax base for imported goods, i.e. Article 459 of the Tax Code applied in conjunction with 
Article 128.5 e) of Decree No. 2685 an d Article 172.7 of Resolution No. 4240. 170 
7.33 The Appellate Body has ruled that panels can use the parties' submissions to interpret the 
terms of the request for establishment.171  In its first written submission, Panama refers to a number of 
provisions within those legal instruments.  The Pane l has thus sought to further clarify the scope of 
the measures at issue by way of questions to the parties. 
7.34 Panama's arguments and the corresponding Colombian counter-arguments are mainly 
focussed on Article 128.5 e) of Decree No. 2685 an d Article 172.7 of Resolution No. 4240.  Panama 
also refers to the operation of the import regime rela ted to indicative prices.  In this context, Panama 
refers to "the specific Resolutions in the context of the entire framework legislation, that give effect to 
indicative prices", and specifically Resolutions No. 07509, No. 07510, No. 07511, No. 07512, No. 
07513, and No. 07530 of 26 June of the Director ate of Taxes and National Customs ("DIAN"); 
Colombia's Customs Statute (Decree No. 2685 of 1999, in particular, Titles V and VI), 
Resolution No. 4240 of 2000 and Colombia's Tax Code (Decree No. 624 of 1989).172  
7.35 A review of Colombia's first and further submi ssions shows that Colombia has been able to 
identify Article 128.5 e) of Decree No. 2685, Article 172.7 of Resolution No. 4240 and the series of 
resolutions establishing and amending indicative pr ices as the relevant measures for the claims 
                                                      
168 Panama's response to Panel question No. 4. 
169 Panama's response to Panel question No. 5. 
170 Panama's response to Panel question No. 6. 
171 Appellate Body Report, US – Carbon Steel , para. 127,  Appellate Body Report, Thailand – 
H-Beams , para. 95. 
172 Panama's response to Panel question No. 3.  WT/DS366/R 
 Page 77 
 
 
  concerning its indicative prices regime.173  Since these provisions were identified by Panama in its 
request for establishment174, those provisions form part of the "measure" at issue.  The Panel notes 
that Colombia's ability to defend itself does not appear  to have been impaired by Panama's definition 
of the measures at issue.175  
7.36 The Panel therefore finds that Panama's request for establishment complies with the 
requirements of Article 6.2 of the DSU  as far as the definition of the measures at issue regulating 
Colombia's use of indicative prices is concerned.  Th e Panel thus establishes that the measure relevant 
to Panama's claims under the Customs Valuation Agreement and Article III of the GATT 1994 
comprises: Article 128.5 e) of Decree No. 2685 and Article 172.7 of Resolution No. 4240 as well as 
Resolution No. 7510 of 26 June 2007, as modified by Resolution No. 11412 of 28 September 2007; 
Resolution No. 7511 of 26 June 2007; Resolution No. 7509 of 26 June 2007, as modified by Resolution No. 11414 of 28 September 2007; Resolution No. 7512 of 26 June 2007, as modified by Resolution No. 11415 and Resolution No. 7513 of 26 June 2007.  The issue of whether a number of these resolutions which have been enacted after th e establishment of this Panel are part of our 
mandate will be dealt with in Section VII.A.2(a) below. 
7.37 The Panel further declines to make findings on the WTO-consistency of Article 459 of the 
Tax Code.  The Panel has taken such a decision on the basis of the text of Panama's request for 
establishment and its response to question No. 91 of th e Panel, where Panama indicated that it is not 
challenging the WTO-consistency of  Article 459 of the Tax Code as such but rather referred to the 
provision as context to establishing the WTO-inconsis tency of Article 128.5 e) of Decree No. 2685 
and Article 172.7 of Resolution No . 4240 with Article III:2 (and III:4 in the alternative) of the 
GATT 1994 . 
Panama's claims "as applied"
 
7.38 Colombia has additionally requested the Panel to reject Panama's "as applied" claims due to a 
failure by Panama to identify individual cases of appli cation of the indicative prices measure at issue.  
7.39 In its request for establishment, Panama indicat ed that it is challenging those measures 
relating to the use of indicative prices both "as such" and "as applied".  Hence, Panama is challenging 
the WTO-compatibility of the legal instruments th emselves as well as the application of the various 
legal instruments cited in its request.   
7.40 Colombia argues that the application of the challe nged provisions in partic ular situations with 
respect to particular imported products is a distinct measure that needs to be identified with clarity in 
the context of an "as applied" claim.  While Pana ma's request for establishment refers to the legal 
provisions at issue, Colombia argues that it does not refer to any single specific application of 
indicative prices.176  As a result, Colombia argues that Panama 's case must be limited to its "as such" 
challenge to Colombia's laws and regulations  that establish the indicative prices regime.177   
                                                      
173 Colombia's first written submission, para. 37,  Colombia's first oral statement, para. 12,  Colombia's 
second written submission, para. 10. 
174 WT/DS366/6, p. 1. 
175 Appellate Body Report, Korea – Dairy , para. 127;  Appellate Body Report, Thailand – H-Beams , 
para. 88;  Appellate Body Report, EC – Bananas III , para. 142. 
176 Colombia's first written submission, para. 38. 
177 Colombia notes that the request for establishmen t referred to yet another legal basis by challenging 
Articles 447 and 459 of the Tax Code.  WT/DS366/6, p. 2.  See para. 141 of Colombia's first written 
submission. WT/DS366/R 
Page 78  
 
  7.41 Panama has clarified that it is challenging the general and systemic application of indicative 
prices and not individual customs determinations.
178  Panama argues that the distinction between an 
"as applied" and an "as such" challenge does not rela te to the identification of the measures at issue, 
but to the nature of the complainant's legal claims.  Generally, it argues, an "as such" challenge refers 
to a complainant's view that the identified measure – typically a legislative act – is per se WTO-
inconsistent, in that every application of the measure would necessarily be WTO-inconsistent.  
According to Panama, such a challenge involves lega l and factual issues that do not arise with respect 
to an "as applied" challenge.  Panama contends th at, an "as applied" challenge, on the other hand, 
refers to all other challenges that do not  involve an allegation that an act is per se WTO-inconsistent.  
While this may involve a challenge with respect to  an individual importation, there is no limitation 
that such challenges must be made only with respect to specific entries.  In Panama's view, to impose 
such a limitation and require Members to list all im ports to which a measure is applied would render 
access to dispute settlement virtually impossible.179  Panama submits that the past practice of 
Members supports this interpretation.  For instance, in EC – Computer Equipment , Panama argues 
that the complainant successfully challenged the a pplication of a measure without describing specific 
transactions.180  
7.42 The question before the Panel is whether Panama  is required to submit specific applications 
of the laws regulating indicative prices in order to properly raise an "as applie d" challenge to the use 
of indicative prices in accordance with Article 6.2 of the DSU .  
7.43 Under WTO law, an "as such" claim challenges "l aws, regulations, or other instruments of a 
Member that have general and prospective appli cation, asserting that a Member's conduct – not only 
in a particular instance, but in future situations  as well – will necessarily be inconsistent with that 
Member's WTO obligations."181  It is the Panel's understanding that, leaving aside the issue dealt with 
in the previous section of whether the identificati on of the indicative prices measures in Panama's 
request for establishment complied with Article 6.2 of the DSU , both parties agree that Panama has 
put forward an "as such" claim concerning the WTO- compatibility of Colombia's laws regulating its 
indicative prices regime.  Therefore, Colombia is onl y challenging the consistency of the "as applied" 
claims with Article 6.2 of the DSU . 
7.44 Notwithstanding Colombia's concern, the Panel c onsiders that it is not obliged, as a threshold 
matter, to find on whether Panama's "as applied" claims are part of its mandate.  In the event of a 
finding of violation in respect of Panama's "as such " claims, the Panel considers a finding of violation 
"as applied" would be unnecessary since it stands to reason that each prospective individual 
                                                      
178 Panama nevertheless referred to examples of the application of the indicative prices regime.  In 
particular, Panama draws the Panel's attention to: (i) an example of a case in which an importer at first did not correct the import declaration (Exhi bit PAN-51) and then subsequently  corrected the import declaration 
(Exhibit PAN-52);  (ii) a case in which the importer co rrected and paid, and then requested a refund of the 
customs duties paid in excess, which was refused (Exhibit PAN-53 );  and (iii) the specific examples submitted 
by Colombia in Exhibits COL 7-9.  According to Panama, Exhibit COL-8, Exhibit COL-9 (complemented by 
Exhibit COL-64) and Exhibit PAN-53 (partially complemented by Exhibit COL-49) show a complete picture of 
the "post-importation" process.  Thes e Exhibits include docume ntary evidence from all the stages involved in 
the procedure, including requests by the importers for the official liquidation, responses by the División de 
Fiscalización and the División de Liqu idación, and the final decisions by th e Legal Division on the "recurso de 
reconsideración" presented by the importe rs to challenge the decision by the División de Liquidación.  Panama 
has also submitted Exhibit PAN-23 which alleges that im porters have corrected declarations and paid duties 
based on indicative prices in 87 per cent of all cases concerning textiles, apparel and footwear.  Panama believes 
that this evidence illustrates and confirms that the legisl ation as applied operates in a manner inconsistent with 
the Customs Valuation Agreement . 
179 Panama's submission on the Request for a Preliminary Ruling by Colombia, paras. 23-24. 
180 Panama refers to the Appellate Body Report in EC – Computer Equipment .  Panama's submission 
on the Request for a Preliminary Ruling by Colombia, paras. 26-27.  
181 Appellate Body Report, US – Oil Country Tubular Goods Sunset Reviews , para. 172.  WT/DS366/R 
 Page 79 
 
 
  application of indicative prices to import tran sactions would be based on WTO-inconsistent 
legislation.  The fact that a panel makes a finding that a measure "as such" is inconsistent with the 
covered agreements also covers every inst ance of application of the same measure.182  The Panel notes 
that the parties agree on the admissibility of Pana ma's "as such" claims.  Thus, the Panel will first 
address Panama's "as such" claims.  Only if the Panel rejects Panama's "as such" claims, will it 
consider whether Panama's "as applied" claims co mply with the requirements of Article 6.2 of the 
DSU . 
2. Other issues concerning the scope of  the matter subject to dispute 
(a) Measures potentially outside  the Panel's mandate 
7.45 In its first written submission, Panama indicates that Colombia has replaced or modified a 
series of resolutions authorizing the application of indicative prices to a number of subject products, 
following the submission of  its request for establishment.  The specific resolutions, which authorize 
the imposition of indicative prices on a per unit basis are the following : 
Resolutions in force at the time of the 
request for the establishment of the PanelSubsequent legislative action 
Resolution No. 7509 Replaced or modified by Resolution No. 11414 of 
28 September 2007.183 
Resolution No. 7510 Replaced or modified by Resolution No. 11412 of 
28 September 2007.184 
Resolution No. 7511 No modification. 
Resolution No. 7512 Replaced or modified by Resolution No. 11415 of 
28 September 2007.185 
Resolution No. 7513 No modification. 
 7.46 Panama asks the Panel to make findings on the measures currently in force on the ground that, 
in its request for establishment, in addition to identif ying the specific provisions at issue, it referred to 
"any amendments or extensions to these measu res as well as any related acts, practices and 
implementing measures".   
7.47 Colombia stated in its first written submission th at it did not object to Panama's reference to 
the measures that replaced or modified the originally challenged provisions.
186  Nevertheless, the 
Panel recalls that the Appellate Body has ruled th at panels have a duty to examine issues of a 
"fundamental nature", issues that go to the root of their jurisdiction, on their own motion if the parties to the dispute remain silent on those issues.
187   Whether a measure falls within the Panel's terms of 
reference is clearly an issue that goes to the root of  the Panel's jurisdiction.  Therefore, even though 
Colombia does not contest the inclusion of these various regulations, the Panel must determine 
whether Resolutions 11414, 11412 and 11415 fall within its terms of reference.   
                                                      
182 Appellate Body Report, US – Oil Country Tubular Goods Sunset Reviews , para. 172. 
183 Resolution No. 11414 of 28 September 2007, referring to footwear classifiable under Chapter 64 
(Exhibit PAN-14). 
184 Resolution No. 11412 of 28 September 2007, referring to fabrics classifiable under Chapters 52, 54, 
55, 56, 58, 59, 60 (Exhibit PAN-15). 
185 Resolution No. 11415 of 28 September 2007, referring to footwear classifiable under Chapter 64 
(Exhibit PAN-16). 
186 Colombia's first written submission, para. 52, footnote 35. 
187 Appellate Body Report, Mexico – Corn Syrup (Article 21.5 – US) , para. 36;  Appellate Body Report, 
US – Carbon Steel , para. 123. WT/DS366/R 
Page 80  
 
  7.48 The Panel considers Article 7 of the DSU , governing the Panel's terms of reference, Article 4 
of the DSU , governing a complainant's request for consultations, and Article 6 of the DSU , governing 
a complainant's request for establishment of a panel, are relevant to this issue.  Article 7.1 of the DSU  
provides: 
"Panels shall have the following terms of reference unless the parties to the dispute 
agree otherwise within 20 days from the establishment of the panel: 
To examine, in the light of the relevant provisions in (name of the 
covered agreement(s) cited by the parties to the dispute), the matter referred to the DSB by (name of party) in document ... and to make such findings as will assist the DSB in making the recommendations 
or in giving the rulings provided  for in that/those agreement(s)." 
7.49 Article 4.4 of the DSU  provides: 
"All such requests for consultations shall be notified to the DSB and the relevant 
Councils and Committees by the Member wh ich requests consultations. Any request 
for consultations shall be submitted in writing and shall  give the reasons for the 
request,  including identification of the measures at issue and an indication of the 
legal basis for the complaint." (emphasis added) 
7.50 Article 6.2 of the DSU  provides: 
"The request for the establishment of a pa nel shall be made in writing. It shall 
indicate whether consultations were held, identify the specific measures at issue and 
provide a brief summary of the legal basis of the complaint sufficient to present the 
problem clearly. In case the applicant request s the establishment of a panel with other 
than standard terms of reference, the writte n request shall include the proposed text of 
special terms of reference." (emphasis added) 
7.51 The Appellate Body affirmed in US – Upland Cotton  that, "pursuant to Article 7 of the DSU , 
a panel's terms of reference are governed by  the request for establishment of a panel".
188   
7.52 The Panel believes that the Appellate Body's findings in Chile – Price Band System are 
relevant to the present dispute.  On that o ccasion, the Appellate Body considered whether an 
amendment to a measure enacted after  the Panel had been established should nevertheless be 
considered as within the Panel's terms of reference.189  In that case, the Appellate Body determined 
that the amendment at issue should be considered as part of the measure at issue since it clarified the 
legislation that established the measure at issue and did not change the original measure into 
something different than what wa s in force before the amendment.190  This determination was 
considered consistent with earlier jurisprudence191 and was also found to be consistent with the object 
                                                      
188 See e.g. Appellate Body Report, US – Upland Cotton , para. 284, citing to Appellate Body Report, 
US – Carbon Steel , para. 124. 
189 Appellate Body Report, Chile – Price Band System, para. 137. 
190 Appellate Body Report, Chile – Price Band System, para. 137. 
191 The Appellate Body in Chile – Price Band System  cited to a passage from the Panel Report on 
Argentina – Footwear (EC)  which concluded that modifications made to the measure at issue during the panel 
proceedings did:  
"… not constitute entirely new safeguard measur es in the sense that they were based on a 
different safeguard investigation, but are instead modifications of the legal form of the original definitive measure, which remains in force in substance and which is the subject of 
the complaint."   
Appellate Body Report, Chile – Price Band System , para. 138.  WT/DS366/R 
 Page 81 
 
 
  and purpose of the WTO dispute settlement system, as set forth in Article 3.7 of the DSU .  The 
Appellate Body explained: 
"If the terms of reference in a dispute ar e broad enough to include amendments to a 
measure – as they are in this case – and if it is necessary to consider an amendment in 
order to secure a positive solution to the disput e – as it is here – then it is appropriate 
to consider the measure as amended  in coming to a decision in a dispute."192 
7.53 The Panel agrees with the Appellate Body's ra tionale.  In the dispute before the Panel, 
Colombia enacted the aforementioned Resoluti ons 11414, 11412 and 11415 after the Panel was 
established.  In the Panel's view, the terms of the Panama's request for establishment include the 
relevant amendments and replacements.   
7.54 The Panel therefore finds that Resolutions 11414, 11412 and 11415 are properly part of the 
measure at issue and within the Panel's terms of refe rence.  In the Panel's view, a failure to consider 
these additional resolutions would inhibit the Pane l from securing a positive solution to the dispute. 
(b) Admissibility of Panama's second claim under Article I:1 of the GATT 1994  
7.55 In its first oral statement193, Panama requested the Panel to find that the restriction on 
importation of textiles, apparel and footwear arriving from Panama to two ports, is inconsistent with 
Article I:1 of the GATT 1994 , in the event of a finding that the ports of entry restrictions do not fall 
within "Article XI (and consequently Article XIII)".  However, Panama did not raise this claim in its 
first written submission.  Instead, in its first writte n submission, Panama exclusively argued that the 
requirement to present an advance import declarati on, pay customs duties and sales tax on the basis of 
an advance declaration, and legalization f ee requirements violate Article I:1 of the GATT 1994 .  
Panama has argued that this late claim is justifie d on the ground that the claim was identified in its 
request for establishment.  Panama explained that  "[i]n its first written submission, [it] did not 
elaborate on its Article I:1 claim because it seemed indisputable that the ports of entry measure falls under Articles XI and XIII."
194  
7.56 Colombia  objects to the inclusion of what it considers a new claim and argues that the failure 
to develop any legal and factual arguments in resp ect of such claim implies that Panama failed to 
make a prima facie case of violation under GATT Article I:1.195  Colombia submits that this claim 
was not part of Panama's request for establishment and is therefore not part of the Panel's terms of 
reference.  While Colombia acknowledges that Article I:1 of the GATT 1994 is mentioned in 
Panama's request for establishment, Colombia cons iders that Panama has strictly referred to the 
Article I:1 claim developed in its first written su bmission in relation to advance import declaration 
and legalization requirements in the ports of entry measure.196     
7.57 Assuming arguendo  that Panama's additional claim under Article I:1 is part of the Panel's 
terms of reference, Colombia further submits th at Panama was required under paragraph 4 of the 
Panel's Working Procedures197 to have presented its claims and arguments in its first written 
submission.198  Colombia argues that it is a well-establish ed principle in WTO case law that a party 
                                                      
192 Appellate Body Report, Chile – Price Band System, para. 144. 
193 Panama's first oral statement, para. 53. 
194 Panama's second written submission, para. 141. 
195 Colombia's second written submission, para. 149. 
196 Colombia's second written submission, paras. 148-149. 
197 Paragraph 4 provides that:  "Before the first subs tantive meeting of the Panel with the parties, the 
parties to the dispute shall transmit to the Panel written submissions in which they present the facts of the case 
and their arguments". 
198 Colombia's second written submission, para. 155. WT/DS366/R 
Page 82  
 
  must present its arguments at the earliest opport unity:  the first written submission in this case.
199  
Colombia also contends that the Panel should no t rely on the ruling by the Appellate Body in EC – 
Bananas III that "[t]here is no requirement in the DS U or in GATT practice for arguments on all 
claims relating to the matter referred to the DSB to be set out in a complaining party's first written 
submission to the panel".200  In Colombia's view, the Appellate Body authorized the introduction of a 
new claim after the first written submission due to th e "very peculiar procedural developments" in that 
case and, thus such criteria would not be applicable to the case at hand.201  Furthermore, Colombia 
notes that in EC – Sardines , the Appellate Body limited this reasoning to the development of new 
"arguments" rather than new "claims".  In the inst ant case, Colombia contends, Panama is not simply 
developing an argument, but introducing a whole new claim.202  Colombia has thus not presented any 
substantive rebuttal arguments as it considers there si mply is no case to answer in the absence of any 
development of this new claim by Panama.203    
7.58 Panama  considers there can be no doubt that the cl aim under Article I:1 is within the panel's 
terms of reference.  While it did not elaborate upon this claim in its first written submission, Panama 
argues that it did so at the next available opportunity, in its oral statement at the first meeting of the 
Panel with the parties.  Panama contends that the fact that it advanced arguments regarding this claim 
in its oral statement at the first meeting of the Pa nel does not in any way affect the Panel's ability or 
obligation to resolve this claim.  Moreover, Pana ma argues, Colombia had the opportunity to respond 
to Panama's Article I:1 claim in its second written submission as well as in its oral statement at the 
second meeting of the Panel, and in its answers to qu estions from the Panel.  Thus, in Panama's view, 
no basis exists to suggest that Colombia has been  in any way prejudiced by Panama's inclusion of 
arguments on this claim in its first oral statement.  Panama notes that its claims under Article I:1 has, 
in any event, only been advanced in  the alternative, in the event that the Panel rules against it on its 
claims under Article XIII:1.204 
7.59 The question before the Panel is thus whet her this second claim under Article I:1 of the 
GATT 1994  is part of its mandate.   
7.60 The Panel considers that, notwithstanding Colo mbia's contention, it is not obliged, as a 
threshold matter, to find on whether Panama's second claim under Article I:1 is part of its mandate.  
The Panel notes that Panama has formulated this claim as an alternative to its Article XI and 
Article XIII claims.  Thus, were the Panel to find a violation under Article XI and Article XIII, it 
would not need to examine Panama's  alternative claim under Article I: 1.  Only if the Panel rejects 
Panama's claims under Article XI and Article XIII,  will it consider whether Panama's second claim 
under Article I:1 is part of its mandate. 
B. WHETHER COLOMBIA 'S USE OF INDICATIVE PRICES IS INCONSISTENT WITH ARTICLES  1, 2, 3, 
5, 6 AND 7.2( B), (F) AND (G) OF THE CUSTOMS VALUATION AGREEMENT  
1. Main arguments of the parties 
7.61 Panama requests the Panel to find that Colomb ia's determination of the customs value of 
textiles, apparel and footwear on the basis of indicative prices is inconsistent with Articles 1, 2, 3, 5, 6 
and 7.2(b), (f) and (g) of the Customs Valuation Agreement .  Panama submits that Article 128.5 e) of 
                                                      
199 Colombia's second written submission, para. 156.  In  support of this statement, Colombia refers to 
the Appellate Body Report, US – Gambling , para. 269 and to the Appellate Body Report, India – Patents , 
para. 94. 
200 Colombia's second written submission, para. 161. 
201 Colombia's second written submission, para. 162. 
202 Colombia's second written submission, paras. 164-165. 
203Colombia's second written submission, para. 150, and Colombia's second oral statement, 
paras. 44-45. 
204 Panama's second oral statement, para. 44.  WT/DS366/R 
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  Decree No. 2685 and Article 172.7 of Resolution No. 424 0 require that, in cases in which the importer 
has declared a value lower than the indicative price, the importer has to either correct the import 
declaration and pay customs duties and sales tax based  on indicative prices, or re-ship the goods.  In 
Panama's view, Colombian authorities determine the customs value based on the application of 
indicative prices to subject goods arriving from Panama .  Panama argues that this method of customs 
valuation is inconsistent with the methodologies set out in the Customs Valuation Agreement . 
7.62 Panama recalls that Article 15.1(a) of the Customs Valuation Agreement  provides that the 
"customs value of imported goods" is defined as the value of a good for the purpose of levying 
ad valorem  customs duties on imported goods.  In the case of products subject to indicative prices, 
Panama argues that the customs valu e used for the purpose of levying ad valorem  custom duties on 
imported goods is determined when the importer subm its its import declaration.  Panama considers 
that customs valuation occurs at this point when cu stoms officials review the declared value in order 
to determine whether that value is greater or less than the relevant indicative price for a particular 
product under review. In accordance with Article 128. 5 e) of Decree No. 268 5 and Article 172.7 of 
Resolution No. 4240, if the declared value is lower than the indicative price, this value is not accepted 
and the importer is required to "correct" the value to reflect the indicative price.  Since Colombian 
customs authorities have made a determination not  to accept the declared customs value, Panama 
argues that this value based on an indicative pri ce serves as the customs value for the purpose of 
levying customs duties.  An importer is not permitte d to contest the value used or submit any further 
evidence.  The importer must pay the customs duties based on that "corrected" value, or otherwise re-
ship the goods from Colombia.205  In the vast majority of cases (87 per cent of the total cases), 
according to Panama, importers have decided to "c orrect" the declared value and pay customs duties 
based on that value.206 
7.63 Panama rejects Colombia's contention that cu stoms valuation is postponed until the later 
"control posterior" stage.  In Panama's view, Co lombia has failed to demonstrate that customs 
valuation takes place during the "control posterior" or " estudio de valor ".  Moreover, Panama 
contends that Colombia has not identified the speci fic legal basis for the "control posterior" or the 
"estudio de valor " for products subject to indicative prices during the post-importation process.207 
7.64 According to Panama, Article 128.5 e) prescribes that the relevant importation documents are 
forwarded to the División de Fiscalización  for the purpose of initiating official liquidation.  Panama 
notes that the definition of this " proceso de liquidación oficial de revisión de valor " provided by 
Article 514 of Decree No. 2685 refers to a "review" of the value aimed at amending "errors" in the 
import declaration, thus implying that there has al ready been a determination of the customs value 
that is being reviewed.208  Panama argues this conclusion is further reinforced by the wording of 
Article 548 of Decree No. 2685, which permits import ers to request the reimbursement of the sums 
paid in excess.  Foremost, Panama submits, Article 548 of Decree No. 2685 refers to the 
reimbursement of customs duties "that have been paid", and not to the "refund of a guarantee".  
Additionally, Panama argues that Article 548 di stinguishes between "payments" and "provisional 
payments".  Panama notes that paragraph (d), in Article 548 refers to payment of provisional anti-
dumping duties; however paragraph (a) of the same pr ovision, does not refer to "provisional payment" 
but instead provides the basis upon which importers may seek a " devolución " of funds, or "refund".209  
7.65 Panama further argues that Article 222 of R esolution No. 4240 demonstrates that customs 
valuation always takes place at the time of insp ection.  Article 222 of Resolution No. 4240 provides 
that, the date of physical inspection or the date  of presentation of the import declaration shall be 
                                                      
205 Panama's second written submission, paras. 14-16. 
206 See Exhibit PAN-23. 
207 Panama's second written submission, paras. 17-21. 
208 Panama's second written submission, paras. 22-26. 
209 Panama's second written submission, paras. 29-33. WT/DS366/R 
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  considered as the date of valuation, for the pur poses of determining the customs value for imports.
210  
For Panama, Colombia's allegation that this Article  merely establishes a "legal fiction" amounts to a 
"distinction without a difference".211  Panama considers this view is also contradicted by other 
provisions, such as Articles 254 and 237 of Decree No . 2685, which similarly provide that valuation 
should take place at the moment of importation.212 
7.66 Panama considers its interpretation of the point  at which custom valuation takes place is not 
contradicted by the fact that the challenged provisi ons form part of sections of Colombian legislation 
that are not contained in the general s ection dealing with "customs valuation".213  Panama submits that 
the placement of a provision in a particular chapte r is not determinative of the nature of that 
measure.214  In this regard, Panama notes that Colomb ia has itself confirmed that Article 128.8 of 
Decree No. 2685, authorizes official prices and in Colombia's words, serves the purpose of "mak[ing] 
sure that the government set price would be  used as the basis for customs valuation".215  Panama notes 
that Article 128.8 appears in the same section as Article 128.5 e) of Decree No. 2685.  Thus, Panama 
argues if another provision alongside Article 128.5 e)  in Chapter VI entitled "Ordinary Importation" 
concerns the determination of the dutiable base ( base gravable ) for customs valuation purposes216, 
then Article 128.5 may also be an applicable prov ision for customs valuation.  Neither of these 
provisions appears in Title VI entitled "Customs Valuation".   
7.67 On the basis of its view that customs valua tion takes place at the time of presentation of the 
import declaration, Panama  claims that Colombia's use of indi cative prices to determine the customs 
value of textiles, apparel and footwear  is inconsistent with Articles 1, 2, 3, 5, 6 and 7.2(b), (f) and (g) 
of the Customs Valuation Agreement.217  According to Panama, the customs value should whenever 
possible be based on the transaction value except where not appropriate in accordance with the 
Customs Valuation Agreement.218  When not based on transaction value, the value must be based on 
the methods laid out in Articles 2 to 7 of the Customs Valuation Agreement .219  Panama contends that 
Colombia's use of indicative prices for purposes of customs valuation violates each of the sequential 
methodologies set forth in Articles 1 to 6 of the Customs Valuation Agreement .  Additionally, Panama 
argues the use of indicative prices violates Article 7.2(b), (f) and (g) of the Customs Valuation 
Agreement , since: (i) the customs value is determined on the basis of "a system which provides for the 
acceptance for customs purposes of the higher of two alternative values"; (ii) the customs value is 
determined on the basis of "minimum customs valu es"; and (iii) the customs value is determined on 
the basis of "arbitrary or fictitious prices" .220 
                                                      
210 Panama's second written submission, para. 12. 
211 Panama's second written submission, para. 12. 
212 Panama's second written submission, para. 12. Ar ticle 254 provides that when there is a dispute 
regarding the declared customs value and/or the supporting documents or when it is not possible to determine 
the value at the moment of importation , the release can be authorized upon  posting a guarantee (emphasis added 
by Panama) (" Levante de la Mercancía. Cuando exista controver sia respecto al valor en aduana declarado y/o 
los documentos que lo justifican, o cuando no sea posible la determinación del valor al momento de la importación, se podrá otorgar el levante de las mercancías, previa constitución de garantía, en los términos del 
Artículo 13 del Acuerdo y artículo 128o. numeral 5 de es te Decreto y conforme a las condiciones y modalidades 
que señale la autoridad aduanera ") Article 237 provides that the "moment of importation" is the date of arrival 
of the merchandise to the national customs territory (" Momento de la importación La fecha de llegada de la 
mercancía al territorio aduanero nacional, establecida  de conformidad con las normas aduaneras vigentes "). 
213 Panama's first written submission, para. 78. 
214 Panama's second written submission, para. 9. 
215 Colombia's first written submission, para. 87. 
216 Colombia's response to question No. 5(d) from Panama. 
217 Panama's first written submission, Section IV.A , p. 24;  Panama's second written submission, 
para. 226. 
218 Panama's first written submission, paras. 91-98. 
219 Panama's first written submission, paras. 110-115. 
220 Panama's first written submission, paras. 122-128.  WT/DS366/R 
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  7.68 Colombia does not deny the primacy of the tran saction value or the sequential nature of the 
valuation methods in the Customs Valuation Agreement .  However, Colombia submits that the use of 
indicative prices does not constitute customs valuati on but instead is a control mechanism which takes 
place prior  to the actual customs valuation.  Colombia asserts that indicative prices are used to assess 
whether there is a reason to doubt the veracity of th e declared f.o.b.f.o.b. value of products "that are 
known to have been the subject of under-i nvoicing, smuggling and money laundering".221  Colombia 
asserts that its post-importation valuation method is c onsistent with the sequen tial order provided for 
in the Customs Valuation Agreement . 
7.69 Colombia  submits that its importation process takes pl ace in two separate stages.  In the first 
stage, referred to as the " control previo ", goods are inspected and subsequently released.  In the 
second stage, referred to as the " control posterior ", Colombian customs officials determine the 
"customs value" of imported goods .  Under this scheme, Colombia argues that indicative prices only 
play a role during the inspection process as a "custo ms control mechanism".  Consequently, indicative 
prices do not factor into the final determination of the customs value which is assessed during the 
control posterior , according to Colombia.222   
7.70 In Colombia's view, Article 128.5 e) of Decree No. 2685 and Article 172.7 of 
Resolution No. 4240 strictly regulate the release of goods (" levante ") if the importer "provisionally 
pays, by way of deposit" customs duties and sales tax.223  This provisional payment is subject to a 
post-importation control ( control posterior ) at which time the customs value is determined.224  A s  
evidence that valuation does not occur until the contro l posterior, Colombia notes that Article 128.5 e) 
of Decree No. 2685 and Article 172.7 of Resolution No. 4240 require that the importer's declaration 
and supporting documents are sent to the División de Fiscalización  for customs valuation.225  
Moreover, Colombia submits that the relevant provisi ons that "actually deal with customs valuation" 
are contained in Title VI of Decree No. 2685 a nd Chapter III of Resolution No. 4240, and specifies 
that valuation must be conducted in accor dance with the criteria set forth in the Customs Valuation 
Agreement .226 
7.71 Colombia argues that its inte rpretation that Article 128.5 e) of Decree No. 2685 and 
Article 172.7 of Resolution No. 4240 deal with the "release" of the goods and not with customs valuation is confirmed by an "ordinary readi ng" of the text of the challenged provisions.
227  Colombia 
submits that  "indicative prices" are clearly defi ned in Article 237 of Decree No. 2685 as a "control 
mechanism".228  Furthermore, Colombia stresses that both Article 128.5 e) and Article 172.7 appear in 
sections of Decree No. 2685 and Resolution No. 4240, respectively, that address matters of "customs 
control" as opposed to "customs valuation".229  Colombia notes in this respect that the GATT Panel 
Report on US – Tobacco  clearly considered that the position o ccupied by the contested provisions in a 
Member's legal system is very relevant in de termining the meaning of a Member's domestic law.230 
                                                      
221 Colombia's first written submission, para. 53. 
222 Colombia's first written submission, paras. 50-61,  Colombia's second written submission, para. 30. 
223 Colombia's first written submission, para. 55. 
224 Colombia's first written submission, para. 55. 
225 Colombia's second written submission, paras. 35-36. 
226 Colombia's second written submission, paras. 51-54. 
227 Colombia's second written submission, paras. 29-31. 
228 Colombia's second written submission, para. 45 -46. Article 237 of Decree No. 2685 reads as 
follows: " Precio Indicativo. Es aquel precio de referencia establecido (…) para. ser utilizado como mecanismo 
de control (…)". 
229 Article 128.5 e) is part of Title V Ch apter  IV of Decree No. 2685 (entitled " Proceso de 
Importación ") and Article 172.7 is part of Title VI  Chapter II of Resolution No. 4240 (entitled " Controles en 
Valoración Aduanera ") 
230 Colombia's second written submission, paras. 37-39. WT/DS366/R 
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  7.72 While Colombia argues that importation terminat es with the release of the good, this is not 
the case for the determination of the customs value.  Thus, Colombia submits that the reference to the 
"momento de valoración " in Article 222 of its Customs Statute operates as a simple "legal fiction" to 
establish the proper point in time when the customs value should be recognized, but does not imply that the customs value of the goods has been de termined at that stage in the proceedings.
231   
7.73 In addition to consideration of the ordinary meaning of Article 128.5 e) of Decree No. 2685 
and Article 172.7 of Resolution No. 4240 in their c ontext, Colombia submits that the "consistent 
application" of these provisions confirms that indi cative prices are not used to determine the customs 
value of imported goods. Colombia conte nds that Exhibit COL-8, Exhibit COL-9232 and Exhibit PAN-
53233 demonstrate that the "correction" of the im port declaration simply involves ticking of the box 
"Ajustes " on the Import Declaration.  According to Colombia, the payment of duties effectively serves 
as a cash deposit, wherein all relevant docum ents are subsequently transmitted to the División de 
Fiscalización  for customs valuation purposes.  At this later time, the División de Fiscalización  
determines the customs value based on the methods of the Customs Valuation Agreement  and refunds 
any cash payment made in excess of the amount due.234 
2. Consideration by the Panel 
(a) Legislation authorizing the use of indicative prices 
7.74 In addressing Colombia's challenge to Panama's identification of the measure relevant to its 
claims under the Customs Valuation Agreement  and Article III of the GATT 1994235, the Panel 
established that the measure at issue comprises Arti cle 128.5 e) of Decree No. 2685 and Article 172.7 
of Resolution No. 4240 as well as Resolution No. 7510 of 26 June 2007, as modified by 
Resolution No. 11412 of 28 September 2007; Resolution No. 7511 of 26 June 2007; 
Resolution No. 7509 of 26 June 2007, as modified by Resolution No. 11414 of 28 September 2007; Resolution No. 7512 of 26 June 2007, as modified by Resolution No. 11415 and Resolution No. 7513 of 26 June 2007 (hereafter referred to as th e resolutions establishing indicative prices).
236 
7.75 Article 128 of Decree No. 2685 reads,  in its relevant part, as follows: 
"ARTICULO 128. AUTORIZACIÓN DE LEVANTE . La autorización de levante 
procede cuando ocurra uno de los siguientes eventos:  
…  5. Cuando practicada la inspección aduanera física o documental, se suscite una 
controversia de valor en razón a que: … e) el valor f.o.b. declarado está por debajo 
de los precios indicativos establecidos por el Director de Aduanas y el declarante 
dentro de los cinco (5) días siguientes a la  práctica de dicha diligencia, corrige la 
declaración de importación y paga los tr ibutos aduaneros con base en el precio 
indicativo en los términos y condiciones señalados por la DIAN, debiéndose en todo caso remitir las diligencias a la División de  Fiscalización Aduanera con el fin de que 
se adelante el proceso de liquidación oficial de revisión de valor correspondiente ." 
                                                     
 
231 Colombia's second written submission, para. 32;  See also Colombia's first written submission, 
para. 96. 
232 See also Exhibit COL-64. 
233 See also Exhibit COL-49. 
234 Colombia's second written submission, paras. 67-69. 
235 See para. 7.36. 
236 WT/DS366/6, pp. 1-2,  Panama's first written submission, para. 29,  Panama's responses to Panel 
questions Nos. 3 and 91.  WT/DS366/R 
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  7.76 Article 172 of Resolution No. 4240 reads, in its relevant part, as follows:  
"ARTICULO 172. CONTROVERSIAS. Durante la diligencia de inspección aduanera 
en el proceso de importación, la cont roversia de valor puede ser originada por 
cualquiera de las situaciones descritas a c ontinuación, en las cuales se actuará de la 
manera prevista en el numera l respectivo, teniendo en cuenta lo dispuesto en los 
artículos 128 del Decreto 2685 de 199 9 y 17 de la Decisión Andina 571:  
… 3) Cuando el importador hay a constituido garantía para obtener el levante o haya 
corregido la base gravable a partir del precio de referencia establecido, el 
funcionario inspector deberá remitir, en el menor tiempo posible a través de su jefe 
inmediato, fotocopia de la Declaración de Corrección, de la documentación aportada por el importador y de la garantía a la Divisi ón de Fiscalización Aduanera, 
para el correspondiente estudio de valor. 
…  7) Cuando la controversia se origine en raz ón a que el valor f.o.b. declarado está por 
debajo del precio indicativo … solo se autorizará el levante si dentro de los cinco (5) 
días siguientes a la práctica de la diligencia, el declarante corrige el precio 
declarado con el precio indicativo que co rresponda al producto importado, o con el 
precio real de negociación, siempre que sea superior al indicativo. " 
(b) Order of analysis 
7.77 Panama has requested the Panel to determine wh ether Colombia's use of indicative prices is 
inconsistent with Articles 1, 2, 3,  5, 6 and 7.2(b), (f) and (g) of the Customs Valuation Agreement .  As 
the Panel discussed in paragraph 7.44 above, given th at Panama has made "as such" and "as applied" 
claims, the Panel has decided to defer its decision on  the admissibility of Panama's "as applied" claims 
until making findings on Panama's "as such" claims.  This does not mean, however, that the Panel is 
prevented from examining instances where indicative pri ces have been applied as part of the operation 
of the measures at issue.  
7.78 The Panel notes that the parties' arguments re lated to Colombia's use of indicative prices 
focus almost exclusively on a series of factual determinations concerni ng the actual nature and 
functioning of indicative prices within Colombia's  customs procedures.  The parties' understanding of 
those facts differ radically.  Panama  considers that the use of indicative prices for the payment of 
customs duties and taxes constitutes customs valuation th at is inconsistent with Articles 1, 2, 3, 5, 6 
and 7.2(b), (f) and (g) of the Customs Valuation Agreement .  Colombia, on the other hand, argues that 
the indicative prices regime does not constitute customs valuation but is used as a customs control 
mechanism.  Colombia argues that the payment of  duties resulting from the use of indicative prices 
amounts to a guarantee, and that customs valuation takes place only at a later stage. 
7.79 The Panel recalls that both parties have adva nced a series of arguments concerning whether 
the " pago de tributos " within the indicative prices measure is in fact a guarantee under Article 13 of 
the Customs Valuation Agreement .
237  However, the Panel will onl y address this question if it 
                                                      
237 Colombia's first written submission, paras. 119-124;   Panama's responses to Panel questions Nos. 37 
and 38,  Colombia's responses to Panel questions Nos.  37 and 38;  Colombia's second written submission, 
para. 85,  Panama's first oral statement, paras. 123- 127,  Panama's second written submission, paras. 46-64,  
Colombia's response to Panel question No. 94.  Article 13 of the Customs Valuation Agreement  reads as 
follows: "If, in the course of determining the customs value of imported goods, it becomes necessary to delay 
the final determination of such customs value, the importer of the goods shall nevertheless be able to withdraw WT/DS366/R 
Page 88  
 
  determines that Colombia is not collecting cust oms duties at the time of inspection, based on 
indicative prices.  Indeed, a finding that Colombia  uses indicative prices to conduct customs valuation 
at the time of inspection would obviate such an an alysis, since Article 13 addresses situations where a 
customs authority realizes the need to delay th e final determination of the customs value. 
7.80 The first question before the Panel is theref ore whether indicative prices are used for the 
purpose of customs valuation within the meaning of the Customs Valuation Agreement .  In order to 
answer that question, the Panel will examine the concept of customs valuation pursuant to the 
Customs Valuation Agreement .  Having done so, the Panel will consider, under the facts of this case, 
whether Colombia's use of indicative prices amounts to customs valuation within the meaning of the 
Customs Valuation Agreement .  If the Panel finds that Colombia's use of indicative prices does indeed 
constitute customs valuation as contemplated by the Customs Valuation Agreement , it will proceed to 
analyse Panama's claims under Articles 1, 2, 3, 5, 6 and 7.2(b), (f) and (g) of the Customs Valuation 
Agreement .   
(c) The concept of customs valuation within the Customs Valuation Agreement   
7.81 The Panel notes that the Customs Valuation Agreement  does not provide a definition for 
customs valuation.  Article 15 of the Customs Valuation Agreement  does however include a definition 
of "customs value".  The term "customs value of imported goods" is defined in  Article 15.1(a) of the 
Customs Valuation Agreement as "the value of the goods for the purposes of levying ad valorem  
duties of customs on imported goods".  The Panel be lieves that this definition of customs value is 
useful in understanding what customs valuation means within the Customs Valuation Agreement .  
Following Article 31 of the Vienna Convention on the Law of Treaties " ("VCLT")
238, the Panel shall 
look at the ordinary meaning of the relevant concepts present in this definition.   
7.82 The Panel will first assess the c oncept of "valuation" which is  defined as "[t]he action of 
estimating or fixing the monetary value of something"239 or as "[t]he process of determining the value 
of a thing or entity".240  The term "value", in turn, is defined in the Oxford English Dictionary  as 
"[t]hat amount of a commodity, medium of excha nge, etc., considered to be an equivalent for 
something else"241 and the term "value" is defined in the Black's Law Dictionary  as "[t]he monetary 
worth or price of something; the amount of goods, services or money that something will command in an exchange".
242   
7.83 In light of the dictionary definitions of va luation and value, as well as the definition of 
customs value provided in Article 15 of the Customs Valuation Agreement , the Panel considers that 
the ordinary meaning of the concept of customs va luation is straightforward.  Essentially, customs 
valuation involves the process of determining the m onetary worth or price of imported goods for the 
purpose of levying customs duties.  With this unders tanding of the meaning of customs valuation, the 
                                                                                                                                                                     
them from customs if, where so required, the importer pr ovides sufficient guarantee in the form of a surety, a 
deposit or some other appropriate instrument, covering the ultimate payment of customs duties for which the 
goods may be liable.  The legislation of each Member  shall make provisions for such circumstances".   
238 Article 3.2 of the DSU  provides that Members recognize that the WTO dispute settlement system 
serves to clarify the provis ions of the covered agreements "in accordan ce with customary rules of interpretation 
of public international law".  Article 31 of the Vienna Convention on the Law of Treaties " ("VCLT"), 
recognized as one such rule (Appellate Body Report, US – Gasoline , p. 17.  See also Appellate Body Report, 
India – Patents (US) , para. 46,  Appellate Body Report, Japan – Alcoholic Beverages II , pp. 10-12;  and Panel 
Report, US – DRAMS , para. 6.13.), provides that "[a] treaty shall be  interpreted in good faith 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." UN Doc. A/Conf.39/27;  1155 UNTS 331;  8 ILM 679 (1969).    
239 Shorter Oxford English Dictionary , 5th edition (2002), p. 3499. 
240 Black's Law Dictionary , 7th edition (2000), p. 1548. 
241 Shorter Oxford English Dictionary , 5th edition (2002), p. 3500. 
242 Black's Law Dictionary , 7th edition (2000), p. 1549.  WT/DS366/R 
 Page 89 
 
 
  Panel will consider whether Colombia determines the customs value of imports through the use of its 
indicative prices regime. 
(d) Whether the use of indicative prices by Colombia constitutes customs valuation 
7.84 In the Panel's view, the two central aspects with in the concept of customs valuation are (i) the 
value of the goods, which is used (ii) for the purposes of levying  ad valorem customs duties.   
7.85 The first question is whether the indicativ e prices set by Colombia represent the " value of the 
goods ".  In light of the ordinary meaning of custom s valuation, indicative prices whenever higher than 
the declared value reflect the "value of the goods" imported into Colombia.  Accordingly, the question 
arises whether the value assigned to goods entering Colombia is used for the purposes of levying 
customs duties.  The Panel notes that the term "levy" is defined in the Oxford English Dictionary as 
"the collection of an assessment, duty or tax", while the Black's Law Dictionary  defines "levy" as "the 
imposition of a fine or tax".243  The key issue is thus whether Colombia's customs authorities collect 
customs duties on the basis of indicative prices.   
7.86 In the Panel's view, the value of goods can onl y be used for one of two possible purposes, 
either: (a) to determine the amount of  ad valorem  duties and sales tax that the importer must pay in 
order to obtain the release of the goods, as Panama  argues; or (b) to determine the amount of a 
"guarantee in the form of a cash deposit" that w ill secure the future payment of customs duties and 
sales tax as determined in a latter stage, as Colombia  argues.  Therefore, if this disbursement by the 
importer constitutes a "payment" of ad valorem  duties, as opposed to a "guarantee", it follows that the 
Customs Administration is in fact collecting cust oms duties and sales tax based on indicative prices, 
regardless of any other a posteriori  mechanism that may be made av ailable to refund duties paid in 
excess.   
7.87 The parties disagree on whether Colombia coll ects duties based on indicative prices.  This 
raises the larger issue of whether the "p ayment" of duties is in fact a payment strictu sensu or instead 
a guarantee in the form of a cash deposit, as cl aimed by Colombia.  Throughout these proceedings, 
Colombia has consistently maintained that th e concept of payment under Article 128.5 e) of 
Decree No. 2685 refers to a "guarantee  in the form of a cash deposit".244  However, Colombia has 
subtly evolved its position through a series of responses to the Panel's questions.  In particular, 
Colombia submitted that: 
"[T]he payment [made under Article 128.5 e)  of Decree No. 2685] functions like a 
cash deposit but no separate deposit figure is created in Colombian law to deal with such payments, which are simply provisi onal payments in an amount sufficient to 
cover the ultimate payment of customs duties for which the goods may be liable. 
... Irrespective of the form the guarantee ta kes, a cash payment can and must be 
considered as a guarantee if it complies with  the basic test relating to the timing and 
function of the payment made: first, that it is  made prior to the final determination of 
the duty liability ... and, second, that its func tion is to secure the ultimate payment of 
customs duties."
245 
                                                      
243 Black's Law Dictionary , 7th edition (2000), p. 737. 
244 See for instance Colombia's first written submission, paras. 55-56, 104, 108, 130;  Colombia's first 
oral statement, paras. 29, 40, 41, 52, 54, 57;  Colombia's second written submission, paras. 57, 66, 69, 85,  Colombia's responses to Panel questions Nos. 14 and 22,  and Colombia's responses to questions Nos. 2(a), 2(b), 
5(a)(i), 6(a) and 6(b) from Panama. 
245 Colombia's response to Panel question No. 94(a). WT/DS366/R 
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  7.88 In the Panel's view, "payment" and "guarantee" are two different legal concepts that may not 
be equated lightly.  This is true irrespective of the form that the guarantee may take, whether a bank 
guarantee, guarantee provided by an insurance company,  cash deposit, or any other kind of guarantee.  
The term "guarantee" is referred to in the Black's Law Dictionary  as "something given or existing as 
security, such as to fulfil a future engagement or a condition subsequent".
246   T he  Shorter Oxford 
English Dictionary  defines "guarantee" as "[a] thing ... given or existing as security for the fulfilment 
... of certain conditions" and guarant ee fund as "a sum pledge as a contingent indemnity for future 
loss".247  In contrast, the word "payment" is defined in the Black's Law Dictionary  as the delivery of 
money for the "performance of an obligation" or the "satisfaction of an obligation".248  Thus, as 
emphasized by both parties, the aim of a guarantee is  to secure the future payment of an obligation.  
Hence, the future obligation of payment that is secured by a guarantee cannot be confused with the 
obligation to provide that guarantee.249   
7.89 In order to decide whether the use of indi cative prices by Colombian authorities constitutes 
customs valuation in the sense of the Customs Valuation Agreement , or instead serves as a guarantee 
to secure the future collection of customs duties,  the Panel will examine the legal nature of the 
disbursement that importers must make in or der to obtain the release of the goods under 
Articles 128.5 e) of the Customs Statute and Article 172.7 of Resolution No. 4240. 
(i) The legal nature of the payment under Article 128.5 e) 
Arguments of the parties  
7.90 The Panel recalls the parties' views on the le gal nature of payment under Article 128.5 e).  
Panama  argues that the customs duties for goods subject to the indicative prices measure are levied on 
the basis of the indicative price or, in cases where the declared value is higher than the indicative 
price, that higher amount.  Therefore, Panama consid ers that customs valuation takes place at the time 
of inspection, whether or not based on the indicative price, when that price is higher than the original 
declared value, or based on the declared value when that price is  higher than the indicative price.250   
7.91 Colombia contends that the " pago " mentioned in the text of Article 128.5 e) of the Customs 
Statute is not in fact an actual payment but a guarantee in the form of a cash deposit, and that 
valuation takes place at a later procedural stage known as the control posterior .251  In support of its 
view, Colombia argues that the terms of this pr ovision are not "self-explanatory" and, thus, they 
should be given their meaning in their specific text ual context.  This specific context includes the 
overall location of Article 128.5 e) of Decree No. 268 5 governing in the larger context of Colombia's 
customs laws, the definition of the terms "referen ce prices" and "indicative prices" on which this 
payment is based; the requirement that documents are transmitted to the División de Fiscalización  "to 
determine the customs value" of the goods in qu estion; and the requirement in Colombian law to 
conduct customs valuation in accordan ce with the principles of the Customs Valuation Agreement .252  
Moreover, Colombia emphasizes the importance of Andean Community law as part of the legal 
context in which to read the challenged provisions. It notes that Articles 51(1) and 61(1) of Andean 
Community Resolution 846 require that goods be rel eased in case of a controversy over the customs 
                                                      
246 Black's Law Dictionary , 7th edition (2000), p. 565 
247 Shorter Oxford English Dictionary , 5th edition (1993), p. 1165. 
248 Black's Law Dictionary , 7th edition (2000), p. 922. 
249 Panama's response to Panel question No. 110. 
250 Panama's first written submission, paras. 26-53;  Panama's first oral statement, paras. 88-113;  
Panama's second written submission, paras. 8-77. 
251 Colombia's first written submission, paras. 49-61;  Colombia's first oral statement, paras. 18-60,  
Colombia's second written submission, paras. 18, 24-86. 
252 Colombia's second written submission, paras. 55-59.  WT/DS366/R 
 Page 91 
 
 
  value, but provide that such release may be made s ubject to the payment of a guarantee in the form of 
a bank or insurance guarantee, a cash de posit or any other appropriate form.253  
7.92 In Panama's view, Colombia is requiring the Panel to read in Articles 128.5 e) of 
Decree No. 2685 and in Article 172.7 of Resolution No. 4240 "words that are not found in those 
provisions".254  Panama refers to the "clear wording"  of Article 128.5 e) of Decree No. 2685 and 
submits that there is no textual basis for Colombia to argue that the payment of the customs duties is 
merely a deposit or a guarantee.255  Moreover, Panama notes that Article 496 of Resolution No. 4240 
provides for only two types of guarantees: global or specific, which may only take the form of a bank 
or insurance company guarantee.256  Panama also submits that the time limitation provided for in 
Articles 523 and 527 of Resolution No. 4240 is only applicable to bank or insurance company 
guarantees and not to a cash deposit.257  As concerns the identified Andean Community regulations, 
Panama contends that Colombia's reasoning is flawed.  According to Panama, Colombia wrongly 
assumes that because a deposit is one form of guara ntee, the "deposit" made in Article 128.5 e) of 
Decree No. 2685 must be a guarantee.258   In addition, Panama contends  that Colombia's invocation of 
Articles 51(1) and 61 of Andean Community Resolu tion 846 is irrelevant as this Resolution has not 
been implemented at the national level in Colombia  via enabling domestic legislation, in accordance 
with Article 61, fourth paragraph.259  Thus, Panama argues, indivi dual importers do not have the 
option to post a guarantee in the form of a "deposit". 
The Panel's approach to examining Colombia's domestic law – burden of proof  
7.93 WTO jurisprudence has established that munici pal law is to be approached as a "factual 
issue".260  In making an "objective assessment" of mu nicipal legislation, a panel should begin its 
analysis by considering the very terms of the law.261  This examination should also include a reading 
of the provisions in their proper context.262  A panel is not however required to limit its examination 
solely to the text or wording of the norm under review.263  A panel's analysis should be 
complemented, whenever necessary, with additio nal sources, which may include proof of the 
consistent application of such laws, the pronouncem ents of domestic courts on the meaning of such 
laws, the opinions of legal experts a nd the writings of recognized scholars.264   
7.94 The Panel will thus look at the "very terms"  of Article 128.5 e) of Decree No. 2685 and 
Article 172.7 of Resolution No. 4240, and will subse quently examine these provisions in their legal 
context.  We note that neither party has offered the Panel any rulings of Colombian courts that 
interpret Article 128.5 e) of Decree No. 26 85 and Article 172.7 of Resolution No. 4240.265  T h e  
                                                      
253 Colombia's second written submission, paras. 60-66. 
254 Panama's second written submission, para. 1. 
255 Panama's second written submission, para. 38. 
256 Panama's second written submission, para. 40. 
257 Panama's second written submission, para. 40. 
258 Panama's second written submission, para. 36. 
259 Panama's response to Panel question No. 95(a). 
260 Appellate Body Report, India – Patents (US) , para. 66;  See also Panel Report on US – Section 301 
Trade Act , para. 7.18,  See also PCIJ, Certain German Interests in Polish Upper Silesia , PCIJ, 1926, Rep., 
Series A, No. 7, p. 19. 
261 Appellate Body Report, Dominican Republic – Import and Sale of Cigarettes , para. 112;  See also 
Panel Report, US – 1916 Act (EC) , para. 16.   
262 Panel Report, US – Section 301 Trade Act , para. 7.27. 
263 Appellate Body Report, Dominican Republic – Import and Sale of Cigarettes , para. 112. 
264 Appellate Body Report, US – Carbon Steel , para. 157. 
265 In fact, in its response to Panama's question No. 1 a), Colombia states that  it is not aware of any 
court decisions that have treated payments made in accordance with Article 128.5 e) as provisional deposits 
serving as guarantees.  WT/DS366/R 
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  parties have nevertheless provided the Panel with three examples of application of the relevant 
provisions of Colombian law.   
7.95 Before commencing the analysis of the very term s of the relevant provisions, the Panel wishes 
to address Colombia's argument that Panama has not satisfied its burden of proof to support its 
interpretations of Colombia's legislation.  In par ticular, Colombia contends that Panama has failed to 
provide relevant evidence necessary to sustain its "as such" claim by limiting its arguments to "an 
erroneous and restrictive reading" of Colombia's legislation.
266  According to the defendant, the 
demonstration of the actual application of the law is "part and parcel" of the kind of evidence that Panama needs to provide.  In having failed to do so, Colombia submits that Panama has fallen short of 
meeting its burden of proof requirement in a double se nse: the "burden of production" of the evidence 
necessary to make a prima facie case, and the "burden of persuasion".
267  In support of its argument, 
Colombia argues that in Dominican Republic – Import and Sale of Cigarettes , the Appellate Body 
"clearly rejected" an attempt by Honduras to impose a limited analysis of its "as such" claim based on 
the text of the relevant Dominican  Republic legislation in isolation.268   
7.96 The Panel agrees that in an "as such" claim th e initial burden to establish the meaning of the 
respondent's municipal law lies with the complainant.   As the Appellate Body stated "[t]he party 
asserting that another party's municipal law, as such, is inconsistent with relevant treaty obligations 
bears the burden of introducing evidence as to the scope  and meaning of such law to substantiate that 
assertion."269  However, the Panel is not persuaded by Colo mbia's argument that Panama has failed to 
meet that burden by limiting itself to presenting an in terpretation based on the sole text of the legal 
provisions at issue.  The Panel notes that the facts of the Dominican Republic – Import and Sale of 
Cigarettes  case cited by Colombia are quite different from the case at hand.  Indeed, on that occasion, 
Honduras sought the exclusion of supplementary means of evidence of municipal legislation, other than its text.  The Panel rejected this request on th e basis that it was not bound to decide "exclusively" 
on the basis of the wording of the legislation.  This finding, which was confirmed by the Appellate 
Body, does not mean that a Panel must rely on supplementary means when examining a Member's 
municipal legislation.  It only means that the Panel is not precluded from doing so. 
7.97 We recall that the Appellate Body has repeatedly stated that the sole production of the text of 
the measure under dispute may be considered  adequate to establish a prima facie  case.
270  Were the 
Panel to establish that the provisions of Colombian legislation at issue are clear on their face, Panama would have established a prima facie case solely  through production of the relevant domestic 
provisions.  The burden would thus be on Colombia to demonstrate that its legislation is not applied in 
the manner that is indicated by its very terms.  
7.98 In any case, the Panel notes that, the nature and extent of the evidence required to satisfy the 
burden of proof varies from case to case.
271  In this respect, the Appellate Body recognized that a 
panel maintains a margin of discretion in wei ghing the relevance of certain types of evidence.272  
                                                      
266 Colombia's first written submission, para. 116. 
267 Colombia's second written submission, para. 23. 
268 Colombia's first written submission, para. 117. 
269 Appellate Body Report, US – Carbon Steel, para. 157.  See also Appellate Body Report, US – 
Corrosion-Resistant Steel Sunset Review , para. 168. 
270 Appellate Body Report, US – Oil Country Tubular Goods Sunset Reviews , para. 263. Appellate 
Body Report, US – Carbon Steel , para. 157;  Appellate Body Report, Chile – Price Band System (Article 21.5 – 
Argentina) , para. 135,  Appellate Body Report, Mexico – Anti-Dumping Measures on Rice , para. 269. 
271 Appellate Body Report , US – Carbon Steel , para. 157. 
272 Appellate Body Report, Dominican Republic – Import and Sale of Cigarettes , para. 112.   WT/DS366/R 
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  Analysis of the "very terms" of the challenged provisions  
7.99 In order to determine whether Colombian Cust oms authorities "collect" customs duties (and 
sales tax) in the application of Article 128.5 e)  of Decree No. 2685, the Panel will commence its 
analysis by examining the very terms of the releva nt provisions of Colombia's domestic legislation.  
In doing so, the Panel recalls that it is not obliged  to accept at face value Colombia's interpretation of 
its own legislation, but rather, the Panel mu st make an "objective assessment" of the matter.273 
7.100  An objective reading of Colombia's legislation st rongly supports the conclusion that customs 
duties are collected at the time indicative prices are applied and goods are released.  Under Article 128.5 e) of Colombia's Customs Statute and Article 172.7 of Resolution No. 4240, when a "controversia " arises as a result of the determination that  the declared value is below the indicative 
prices, the importer can only obtain the release of the goods if he or she corrects the import 
declaration and pays customs duties and sales tax on the basis of the indicative price.
274  The Panel 
considers that the use of the phrase "p ay customs duties and sales tax" (" paga los tributos aduaneros ") 
within Article 128.5 e)275, on its face leaves no room for any te xtual interpretati on other than the 
following: that the collection of customs duties calcu lated on the basis of indicative price takes place 
at the time of release of the goods.   
7.101  Having considered the terms of Article 128. 5 e) of Decree No. 2685 and Article 172.7 of 
Resolution No. 4240, the Panel preliminarily conclud es that an importer subject to indicative prices is 
required to make a payment for the purpose of colle cting customs duties.  The Panel will proceed to 
consider whether this interpreta tion is supported within the cont ext of Colombian legislation. 
Contextual analysis of the challenged provis ions within Colombian domestic legislation  
7.102  As noted by the Panel in US – Section 301 Trade Act , the elements of national laws are often 
inseparable and "should not be read independent ly from each other when evaluating the overall 
conformity of the law with WTO obligations."276  In this sense, Colombia argued in its responses to 
the Panel's questions that:  
"[T]he terms used in Article 128.5 e) have to be read in the light of their textual 
context of the other provisions of the D ecree No. 2685 and their legal context which 
consists of the relevant provisions of A ndean Community law (which have direct 
                                                      
273 Panel Report, EC – Trademarks and Geographical Indications (US) , para. 7.55.  See also Panel 
Report, US – 1916 Act (EC) , para. 19. 
274 Article 128.5 e) states that " Cuando practicada la inspección aduanera física o documental, se 
suscite una controversia de valor en razón de que: e) el valor f.o.b. declarado está por debajo de los precios indicativos establecidos por el Director de Aduanas y el declarante dentro de los cinco (5) días siguientes a la 
práctica de dicha diligencia, corrige la declaración de importación y paga los tributos aduaneros con base en 
el precio indicativo  en los términos y condiciones señalados por la DIAN, debiéndose en todo caso remitir las 
diligencias a la División de Fiscalización Aduanera con el fin de que se adelante el proceso de liquidación 
oficial de revisión de valor correspondiente ." (emphasis added). Article 172.7, in turn, prescribes that " Durante 
la diligencia de inspección aduanera en el proceso de  importación, la controversia de valor puede ser 
originada por cualquiera de las situaciones descritas a c ontinuación, en las cuales se actuará de la manera 
prevista en el numeral respectivo, teniendo en cuenta lo dispuesto en los artículos 128 del Decreto 2685 de 
1999 y 17 de la Decisión Andina 571: … 7) Cuando la controversia se origine en razón a que el valor f.o.b. 
declarado está por debajo del precio indicativo … solo se autorizará el levanto si dentro de los cinco (5) días 
siguientes a la práctica de la diligencia, el declarante corrige el precio declara do con el precio indicativo  que 
corresponda al producto importado, o con el precio real de negociación, siempre que sea superior al 
indicativo " (emphasis added). 
275 It is noteworthy that Article 1 of Decree No. 2685 defines " tributos aduaneros " as " los derechos de 
aduana y el impuesto sobre las ventas ". Thus, the term " tributos aduaneros " encompasses both customs duties 
and sales tax.   
276 Panel Report, US – Section 301 Trade Act , para. 7.27. WT/DS366/R 
Page 94  
 
  effect in Colombia and have the status of Colombian law), the Customs Valuation 
Agreement  as incorporated into Colombia law by Law No. 170 of 1994, and 
Resolution No. 4240."  
7.103  The Panel will therefore examine the other para graphs of Article 128.5 e) of Colombia's 
Customs Statute and Article 172.7 of Resolution No . 4240 as well as any other relevant provisions of 
both legal instruments.
277  The Panel will also analyse Colombia's argument pertaining to the 
relevance of the actual position of these two provisi ons within the relevant legislation for their 
interpretation. 
Analysis of Article 128.5 e) of Decree No. 2685 and Article 172.7 of 
Resolution No. 4240 in the context of other pa ragraphs of the same and other relevant 
provisions 
7.104  It is the Panel's understanding that a contextual reading of Article 128.5 e) of 
Decree No. 2685 should, in the first place, look at the "closest" textual context, i.e. other paragraphs 
of the same provision.  A reading of the provision at hand in the light of paragraphs (a) to (d) of Article 128 of Decree No. 2685 seems to indicate, c ontrary to Colombia's interpretation, that the 
silence of Article 128.5 e) of Decree No. 2685 rega rding the possibility of providing a guarantee in 
order to obtain the release of the goods, was purposeful.  
7.105  Articles 128.5 a) to e) of Decree No. 2685 describe different situations in which a controversy 
results from a discrepancy between the importer and the Administration about the declared value of 
the goods.  In most of these situations, the importe r has the opportunity to either present additional 
documents to support the declared value or provide a guarantee or correct the import declaration in 
order to obtain the release of the goods.
278  In fact, the latter two options are available in all scenarios 
addressed under Article 128.5, except in the case of  controversies involving the use of indicative 
prices at issue in this dispute.279  The same conclusions can be drawn from Article 172 of 
Resolution No. 4240.  Indeed, while Article 172.7 of  Resolution No. 4240 omits any reference to the 
possibility of posting a guarantee, all paragraphs in this Article that concern controversies regarding 
the declared price, i.e., paragraphs 2, 3, 4,  5, 6 and 8, explicitly provide for that option.280  Against this 
background, the Panel considers that, whenever Co lombian legislation intends to contemplate the 
posting of a guarantee as a means to obtain the rele ase of the goods, it explicitly provides for such 
option.  Hence, since Article 128.5 e) of Decr ee No. 2685 and Article 172.7 of Resolution No. 4240 
leave out that possibility, the Panel considers it reaso nable to conclude that the posting of a guarantee 
was purposefully excluded as an op tion in situations where the decl ared value is lower than the 
indicative price.  
7.106  Colombia has argued that, in fact, the possib ility to provide a guarantee in the form of a 
deposit is also implicitly present in Article 128.5 a) to d) of Decree No. 2685.  According to Colombia, the only difference between the latter provis ions and Article 128.5 e) is that paragraphs a) 
to d) allow importers to provide either a bank secur ity, an insurance security or a cash deposit, while 
paragraph e) only permits impor ters to provide a guarantee in  the form of a cash deposit.
281  However, 
                                                      
277 The Panel notes that it is Article 128.5 e) of Decree No. 2685 rather than Article 172.7 of 
Resolution No. 4240 and the various resolutions establishing indicative prices, which specifically deals with the 
"pago" of customs duties and sales tax.  This explains that the focus of the Panel's examination in the next 
paragraphs will be on Article 128.5. 
278 Article 128.5 a), b) and c) of Decree No. 2685.  Panama's first written submission, para. 44. 
279 Article 128.5 a), b), c), d) and e) of Decree No. 2685. 
280 Article 172 of Resolution No. 4240.  The Panel note s that paragraph 1 of Article 172 is not relevant 
as context, as this paragraph envisions controversies arising from a failure of an importer to submit any import 
declaration whatsoever. 
281 Colombia's response to Panel question No. 14.  WT/DS366/R 
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  this account appears in conflict with other relate d provisions and, in particular, Article 496 of 
Resolution No. 4240, considered below.   
7.107  Article 496 of the Resolution No. 4240 provides that only two types of guarantees may be 
posted to secure the compliance with customs obligations: bank guarantees and guarantees provided 
by insurance companies.282  As such, no reference is made to a "guarantee in the form of a cash 
deposit".  Colombia has advanced an explanation for th is silence.  Colombia argues that in the past it 
used cash deposits with a separate system of accoun ting, but decided to discontinue their use due to 
administrative issues.  Thus, according to Colombia , at the time of Decree No. 2685 in 1999, the 
separate figure of a "cash deposit" was not provided as a possible guarantee.  Subsequently, however, Colombia instituted the use of cash deposits to cope  with the problems related to contraband through 
the use of references prices beginning in 2000.  Co lombia claims the use of a "cash deposit" system 
became necessary "as a pure accounting matter".  Th e same solution was later adopted in 2002 for 
estimated prices and in 2005 for indicative prices.
283 
7.108  Colombia has not produced any evidence to suppor t this explanation, however.  In fact, this 
explanation seems unpersuasive in view of several other factors.  First, both Colombia's Customs 
Statute and Resolution No. 4240 have been amended several times since their respective 
enactments.284  Notably, Colombia did not amend or otherwise modify Article 496 of 
Resolution No. 4240, so as to allow for the use of  a cash deposit as a form of guarantee additional to 
bank guarantees and guarantees provi ded by an insurance company.  Second, DIAN's " Manual de 
Valoración - Orden Administrativa 0005 ", dated 29 December 2004, which has the stated aim of 
standardizing and harmonizing the prior and post- importation control processes, prescribes that when 
so requested, the importer shall post a bank guarantee or a guarant ee provided by an insurance 
company  equal to 100 per cent of the customs duties and sales tax arising from the difference between 
the declared value and the reference price.285  Again, no mention whatsoever is made to a "guarantee 
in the form of a cash deposit".  Third, a similar conclusion can be drawn from DIAN Memorando 00274
286, which establishes guidelines for the application of Article 128.5.  As in the case of the 
"Manual de Valoración ", this document was issued many year s after this new interpretation of the 
word "correction" was introduced by Colombian customs authorities.287  Again, no mention can be 
found in this document to the possibility for the impor ter to provide a guarantee in the form of a cash 
deposit in order to obtain the release of its goods.288  Finally, as will be seen in the following sections, 
                                                      
282 This provision prescribes that " Las garantías constituidas para. asegurar el cumplimiento de las 
obligaciones aduaneras, serán globales o específicas y podrán ser bancarias o de Compañía de Seguros ".  It is 
noteworthy that Resolution No. 4240 expressly states in its preamble that its aim is to precise the procedures, 
requirements and terms us ed in Decree No. 2685. 
283 Colombia's responses to questions Nos. 5(a)(i) and 6(b) from Panama. 
284 Decree No. 2685 was amended almost 40 times wh ile Resolution No. 4240 was amended almost 70 
times.  Some of these modifications dealt specifically w ith the regime governing guarantees. That is the case, for 
instance, with Resolution No. 7002 of 2001, Resolution No. 7179 of 2000,  Resolution 904 of 2004, 
Resolution No. 2795 of 2004, all of which amend article s included under Title XVII of Resolution No. 4240, 
referring to "guarantees". 
285 Article 2.6.2, Orden Administrativa  00005/2004 (" Cuando así se requiera, el importador deberá 
constituir ante la División Servicio al Comercio Exterior o a la dependencia que haga sus veces, de la Administración Aduanera por donde se realiza el trámite de nacionalización , una garantía bancaria o de 
compañía de seguros  a favor de la Nación – U.A.F. Dirección de Aduanas, por el término de un año, así:  1. 
Por el cien por ciento de los tri butos aduaneros que pudieran causarse, por la diferencia entre el valor 
declarado por el importador y el precio de referencia o el que el inspector establezca con base en datos 
objetivos y cuantificables "). 
286 Exhibit PAN-24. 
287 Memorando 00274 is dated 5 May 2006. 
288 Article 2.f of Memorando 00274.  In fact, Article 2. f. of this Memorando states that, in the case that 
a "controversia " arises due to the fact that the declared f.o.b. value is lower than the indicative price, the sole 
option that the importer has is to correct the import decl aration so as to reflect the corresponding indicative 
price. WT/DS366/R 
Page 96  
 
  no reference to the ability to post a "guarantee in the form of a cash deposit" can be found in the 
specific cases of application of the challenged measure submitted by the parties.
289 
7.109  When confronted with this silence in its  legislation, Colombia acknowledged that no 
administrative instrument using the term "guarantee" or "cash deposit" exists.290  Furthermore, 
Colombia admitted that a separate concept with the name "cash deposit" has not been introduced 
anywhere in Colombian law.  However, Colombia considers its use of the existing concept of the 
correction plus payment to constitute a guarantee in the form of a cash deposit as a condition for the 
release of the goods is an acceptable substitute.291  Thus, Colombia considers it irrelevant that 
Article 128.5 e) of Decree No. 2685, Artic les 172.7 and 496 of Resolution No. 4240, the Manual de 
Valoración , the DIAN Memorando 00274 do not use the words "cash deposits".292   
7.110  In the absence of any evidence to support th e existence of a cash deposit as a form of 
guarantee within any single piece of legislation, the Panel cannot accept Colombia's assertion that it 
employs a " de facto " guarantee in the form of a cash deposit among the options available to importers 
to secure future payment of customs duties and sales tax, where indicative prices apply.  Furthermore, 
the absence of these "cash deposits" as a permitted form of guarantee under Colombian customs laws 
reinforces the Panel's interpretation that the "p ayment of customs duties and sales tax" under 
Article 128.5 e) is in fact a payment strictu sensu  and not a mere "cash deposit" aimed at securing the 
future payment of those charges. 
7.111  The Panel's reading of the challenged provisions  is further confirmed by the wording of 
Article 542 and Article 548 a) of Decree No. 2685.  The Panel notes that the word "payment" has a 
specific technical meaning under Colombian legislati on.  As Panama notes, Article 542 provides that 
the collection of customs duties shall be governed by the procedures set down in Decree 624 of 1989 
(the "Tax Statute").293  Within the Tax Statute, Panama notes that Section V, Title 7, Chapter 2 of the 
Tax Statute, which is entitled "Termination of the tax obligation" contemplates payment as the primary means to terminate the tax obligation.
294  Article 548 a) of Decree No. 2685 provides the legal 
basis upon which an importer may obtain a reimbursement of the sums paid in excess to obtain the 
release of goods under Article 128.5 e) of Decree No. 2685.295  As pointed out by Panama, this 
provision applies to cases where (i) the import declar ation has been "liquidated"; (ii) customs duties 
and sales taxes have been paid; and (iii) the impor ter seeks to obtain a reimbursement for customs 
duties and sales taxes paid in excess.296  It is thus reasonable to conclude through reference to the 
termination of tax obligations and liquidation duri ng the "post-importation control", that importers 
seek reimbursement of customs duties and sales taxes that have already been liquidated and paid at 
the time of inspection, and not the refund of a "guarantee in the form of a cash deposit".  
The placement of the challenged provisions  within Colombia's Customs Code and 
Resolution No. 4240  
7.112  Colombia has argued that the placement of  the challenged provisions provides further 
contextual evidence that they do not  deal with customs valuation, bu t with customs control.  It notes 
that Article 128 of Decree No. 2685 is part of title V "Importation Regime", Chapter VI, "Ordinary 
Importation", and not part of Title VI, entitled "Cus toms Valuation" (Articles 237-259).  Similarly, 
                                                      
289 See para. 7.123. 
290 Colombia's response to Panel question No. 94(a). 
291 Colombia's response to Panel question No. 94(c). 
292 Colombia's response to Panel question No. 94(b). 
293 Panama's first written submission, para. 48 and footnote 51.   
294 The Panel further notes that Article 1626 of Colombia's Civil Code also prescribes that payment is 
one of the means to extinguish obligations. 
295 See Colombia's response to Panel question No. 99.  See also para. 2.11. 
296 Article 548 a) of Decree No. 2685. See Panama's second written submission, para. 33.  WT/DS366/R 
 Page 97 
 
 
  Article 172 is part of Chapter II of Resolution No . 4240, entitled "Control of Customs Valuation" and 
not Chapter III on "Determination of Customs Valuation" (Articles 174-217).297 
7.113  According to Colombia, it is "well established" in case law that the placement of a domestic 
provision is a significant factor when assessing the meaning of that provision.298  In support of that 
statement, Colombia cites a GATT Panel Report, US – Tobacco , in which the panel considered as 
"significant" that the provision under discussion was entitled "Penalties", in order to conclude that 
certain additional assessment and purchase requireme nts mandated by the norm were treated under 
United States domestic law as "penalties" and not as a "separate fiscal measure".299 
7.114  The Panel agrees that the placement of a domestic provision may be "significant" when 
establishing its meaning.  Still, as acknowledged by both parties, the position of a provision cannot be 
deemed as "determinative".300  In the case at hand, the Panel is not persuaded by the argument that the 
placement of Article 128.5 e) of Decree No. 2685 and Article 172.7 of Resolution No. 4240 entails 
that these provisions refer exclusively to customs cont rol and not to customs valuation.  First, in the 
GATT panel on US – Tobacco referred to by Colombia, the title of the provision at stake was only 
one out of many factors that were taken into accoun t to interpret its meaning.  Additionally, all the 
factors considered by the panel in US – Tobacco  were in themselves not contradictory thereby 
confirming that the additional assessment and pur chase requirements mandated by the measure at 
stake were considered as "penalties".301  In contrast, the various factors considered by the Panel thus 
far in this dispute suggest that indicative prices ar e in fact used to determine the custom value of 
subject goods.  Additionally, as noted by Panama302, Colombia's reasoning is contradicted by the fact 
that an adjacent provision, Article 128.8 of Decr ee No. 2685, which authorizes official prices, has 
been described by Colombia as "m ak[ing] sure that the government set price would be used as the 
basis for customs valuation".303  Both Article 128.5 e) and Article 128.8 of Decree No. 2685 are 
placed under the title "Ordinary Importation".  As Co lombia has admitted that Article 128.8 addresses 
a controversy in which customs va luation (and not only customs cont rol) takes place at the time of 
inspection304, it is conceivable that Article 128.5, whic h is part of that same Article, does not 
exclusively address matters of "customs control", but may also concern customs valuation. 
7.115  The Panel thus considers that the placement of Article 128.5 e) of Decree No. 2685 and 
Article 172.7 of Resolution No. 4240 cannot be cons idered as sufficient evidence to rebut all the 
                                                      
297 Colombia's first written submission, paras. 78-80. 
298 Colombia's second oral  statement, para. 22. 
299 GATT Panel Report, US – Tobacco , para. 76. 
300 Colombia's second oral statement, para. 22.  Panama quotes two instances in which the Appellate 
Body found that the manner in which the municipal law of a WTO Member classifies or labels an item cannot be determinative of the interpretation of a WTO agreements and that, instead, such determination must be based 
on the "content and substance" of the instrument (see Appellate Body Report, US – Corrosion-Resistant Steel 
Sunset Review , para. 87, footnote 87 and Appellate Body Report, US – Softwood Lumber IV , para. 65).   The 
Panel agrees with Colombia that these two decisions are no t applicable to the specifics of this case.  While these 
Appellate Body decisions refer to the placement of a domestic provision as a factor in determining the meaning 
of the terms of a WTO Agreement, th e present case refers the placement of Article 128.5 e) within the context 
of Colombia's domestic legal system.  See Panama's firs t oral statement, para. 94,  Panama's second written 
submission, para. 10. 
301 GATT Panel Report, US – Tobacco , paras. 78-81. 
302 Panama's second written submission, para. 9. 
303 Colombia's first written submission, para. 87. 
304 See Colombia's second written submission, para. 59  (Colombia explained that  "[t]he 'payment' of 
duties (' paga los tributos ') [referred to in Article 128.5 e)] is a general reference to a cash payment in the amount 
of the duties under discussion and does not refer to the final liquidation of duties as referred to in for example Article 128.8 in respect of precios oficiales  ('se liquide los mayores tributos dejados de pagar ')");  See also 
Colombia's response to question No. 5(d) from Panama  and Colombia's first written submission, paras. 87 
and 110. WT/DS366/R 
Page 98  
 
  textual and contextual evidence which suggest th at these provisions address matters of customs 
valuation.  
Analysis of the challenged provisions in  the context of Andean Community law 
7.116  Colombia further submits that the context in which the challenged provisions must be read 
should also include Articles 51(1) and 61(1) of A ndean Community Resolution 846 which, Colombia 
argues, have direct effect in Colombia and prevail over Colombian domestic law.
305   
7.117  Article 51(1) of Andean Community Resoluti on 846 prescribes that the importer may obtain 
the release of the goods if he provides a guarantee in the form of a " fianza, depósito u otro medio 
apropiado ".306  Similarly, Article 61(1) states that, when the final determination of the customs value 
needs to be delayed, the importer may obtain the release of the goods if he provides a sufficient 
guarantee in the form of " fianzas bancarias o de compañías de seguros, depósito u otro medio 
apropiado ".307  Based on these provisions, which Colombia c ontends form part of its domestic law, 
Colombia argues "the importer is always allowed to obtain the release of the goods if he provides a guarantee in the form of a security, deposit or in any other form".
308 
7.118  Preliminarily, the Panel considers it necessary to address whether Andean Community 
Resolutions form part of Colombia's domestic law, before determining whether an importer is eligible 
to submit a guarantee to obtain release of the goods.  In the Panel's view, Colombia has demonstrated 
that Andean Community legislation has "direct eff ect" in Colombia and thus, as a general principle, 
Community law provisions do not require "implementing"  or "enabling" legislation so as to be applied 
at the national level.309  Nevertheless, in the light of the explicit wording of Andean Community 
Resolution 846, the Panel considers that further re gulation is necessary at the national level in order 
for guarantees to be considered as an acceptabl e form of a deposit.  Indeed, Article 61 of 
Resolution 846 – the " lex specialis " that governs the posting of guarantees in Andean Community 
Resolution 846 – provides that the customs legisl ation of each Member shall identify the form, 
procedures and opportunity for the posting of a guarantee.310  Accordingly, the Panel understands that, 
in the absence of any explicit reference in Colombia n domestic legislation to "cash deposits" as a form 
of guarantee, and in the absence of  any details concerning their " forma, procedimientos y 
oportunidad ", the "cash deposit" is not an acceptable form of guarantee within Colombian law, on the 
basis of Article 51(1) of Andean Community Resolution 846.   
7.119  In the Panel's view, Colombia has had many opp ortunities to provide for the "form, procedure 
and opportunity" of guarantees in the form of a cash deposit, as required by the relevant Andean 
Community legislation, but appears thus far not to have done so.  As noted before, several 
amendments were made to the Colombian Custom s Statute and Resolution No. 4240 after Andean 
Community Resolution 846 was published in the Gaceta Oficial del Acuerdo de Cartagena .  None of 
                                                      
305 See Exhibit COL-39. 
306 Exhibit COL-6 (Article 51 reads: "… las Administraciones Aduaneras de  los Países Miembros de la 
Comunidad Andina, harán uso del procedimiento que se establece a continuación para. la verificación y 
comprobación del valor declarado … En los casos en que este control se realice durante el despacho, el importador podrá retirar las mercancías, si presta una garantía suficiente en forma de fianza, depósito u otro 
medio apropiado, que cubra el pago de los Derechos "). 
307 Exhibit COL-6 (" En los casos en que resu lte necesario demorar la determinación definitiva del 
valor en aduana de las mercancías importadas, el impo rtador podrá retirar sus mercancías si, cuando así se lo 
exija, presta garantía suficiente que cobra el pago de los Derechos Aduaneros y demás gravámenes a los que eventualmente estarían sujetas tales mercancías, median te fianzas bancarias o de compañías de seguros, 
depósitos u otro medio apropiado "). 
308 Colombia's first written submission, paras. 102-10 3;  Colombia's second written submission, paras. 
60-66;  Colombia's first oral statement, para. 29;  Colombia's response to Panel question No. 14. 
309 Exhibit COL-39;  Exhibit COL-62. 
310 Article 61, para. 4, Andean Community Resolution 846.  WT/DS366/R 
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  these modified the Colombian domestic provisions governing the available types of guarantees.  
Furthermore, Colombia's " Manual de Valoración - Orden Administrativa 0005 ", dated 29 December 
2004 (almost five months after Andean Co mmunity Resolution 846 entered into force)311, similarly 
does not envision the instrument of the "cash depos it' as an appropriate form of guarantee, instead 
prescribing the posting of a bank guarantee or a guarantee provided by an insurance company.312   
7.120  Accordingly, the Panel is not persuaded that Colombia's own laws are WTO-consistent on the 
basis of a provision of Andean Community law that  allows importers to obtain the release of goods 
subject to constituting a guarantee as either a " fianza, depósito u otro medio apropiado ".313   
Analysis of the specific cases of application of indicative prices  
7.121  As discussed above, a Panel may examine a Me mber's municipal law whenever necessary, by 
considering evidence beyond the text of the legislatio n, including proof of the consistent application 
of such laws.314  The parties have provided the Panel with  three specific cases of application of the 
challenged provisions that the Panel will now consider: Exhibit COL-8, Exhibit COL-9 (as 
complemented by Exhibit COL-64) and Exhibit PAN-53 (as partially complemented by Exhibit COL-49).  The Panel would like to stress that it is not conducting an analysis of Panama's "as 
applied" claims, but rather looking at the specific examples provided by the parties in order to better 
ascertain the operation of Article 128.5 e) of Decree No. 2685 and Article 172.7 of 
Resolution No. 4240. 
7.122  The examples provided by the parties include doc umentary evidence of all the stages in the 
so-called "post-importation" procedure, i.e request s by the importers for the official liquidation, 
responses by the División de Fiscalización  and the División de Liquidación , and final decisions by the 
Legal Division of the relevant customs administration on the " recurso de reconsideración " that were 
presented by the importers to challenge the decision by the División de Liquidación .  The parties 
submitted additional evidence of applications of indi cative prices to specific importers within Exhibit 
COL-7, Exhibit PAN-51 and Exhibit PAN-52; however , the Panel will not consider these within its 
analysis as the evidence is incomplete.
315 
7.123  As a principal matter, Colombia argues that the cases in Exhibit COL-8, Exhibit COL-9 and 
Exhibit PAN-53 illustrate that the "payment" of the duties under discussion are in effect cash deposits.  
                                                      
311 Article 1.1.2, Orden Administrativa  00005/2004 (" Fundamento Legal … Reglamento Comunitario 
de la Decisión 571 adoptado por la Resolución 846 "). 
312 Article 2.6.2, Orden Administrativa  00005/2004 (" Cuando así se requiera, el importador deberá 
constituir ante la División Servicio al Comercio Exterior o a la dependencia que haga sus veces, de la 
Administración Aduanera por donde se realiza el trámite de nacionalización , una garantía bancaria o de 
compañía de seguros  a favor de la Nación – U.A.F. Dirección de Aduanas, por el término de un año, así:  1. 
Por el cien por ciento de los tri butos aduaneros que pudieran causarse, por la diferencia entre el valor 
declarado por el importador y el precio de referencia o el que el inspector establezca con base en datos objetivos y cuantificables ". 
313 Additionally, as noted by Panama, the figure of a "guarantee in the form of a cash deposit", which 
Colombia claims to have adopted, does not seem to reflect the type of guarantee that is required under Andean Community law.  First, Panama submits that Colombia's obligation under Resolution 846 only applies to 
individuals. (The Panel notes that Article 61 of Andean Community Resolution 846 states that in the case of 
individuals or " personas naturales ", who are not eligible to post a bank or insurance bond, individuals should 
nonetheless be allowed to constitute a guarantee in the fo rm of a deposit).   Second, Panama emphasizes that the 
cited norm refers to "bank deposits" and not to "cash depo sits" or direct payments to the customs administration.  
See also Panama's response to Panel question No. 95(a). 
314 See para. 7.93. 
315 Exhibit COL-7 includes a brief narrative summary of a series of cases in which importers were 
required to correct the declared valu e.  Exhibit PAN-51 and Exhibit PAN- 52 provide an example of a case in 
which an importer at first did not correct the import d eclaration, and then subsequently did.  These latter 
Exhibits only provide the respectives "Actas de Inspección", however. WT/DS366/R 
Page 100  
 
  However, this does not appear to be reflected in  the documentation included among the Exhibits.  In 
fact, the language of the Exhibits strongly suggests that both the importer and the customs officials treat the sums paid in excess as a "payment" and not  as a "guarantee in the form of a deposit".  For 
instance, in Exhibit COL-8, the importer filed a request for official liquidation for the purpose of 
obtaining a reimbursement of " customs taxes paid in excess ".
316  The importer further explains that the 
adjustment of the value resulted in a " payment  of customs duties and sales tax in excess".317  T h e  
División de Liquidación , in turn, found that the total value of the customs taxes  liquidated and paid  
based on the customs value resulted in a benefit for the importer in terms of the income tax.318  
Similarly, when considering the " recurso de reconsideración " filed by the importer, the Legal 
Division of the relevant customs administration noted that the División de Liquidación failed to 
acknowledge the value paid in excess  and, consequently, did not recognize the importer's right to 
obtain the reimbursement of the liquidated and paid customs duties .319  Even more telling, the Legal 
Division acknowledges that the importer has disbursed Col$19,898.891 as the " valor pagado en 
exceso en los tributos aduaneros liquidados y cancelados ".320   
7.124  Moreover, in the two cases included as Exhibi t COL-8 and Exhibit PAN-53, the customs 
authorities found that, since the importer had already received a benefit in the form of a deduction in 
its income tax, any refund of the sums paid in  excess would amount to an "undue increase in the 
patrimony of the importer".321  The Panel notes that if the disbursement were in fact a "guarantee", it 
would not have left the importer's patrimony in the first place.  Thus, a refund of this sum would have 
never amounted to an (due or undue) increase in hi s or her patrimony.  In the Panel's view, this 
exchange further indicates that the nature of the disbursement was a "payment" and not a "guarantee 
in the form of a cash deposit".  In addition, both the importer and the customs authorities consider the 
request for refund of the sums paid in excess  is based on Article 548 a) of Decree No. 2685.322  As 
argued by Panama (see paragraph 7. 64 above), Article 548 a) refers to the reimbursement of customs 
duties "that have been paid", and not to the "r efund of a guarantee".  T hus, the references to 
Article 548 a) of Decree No. 2685 further confirm that payments made under Article 128.5 e) of 
Decree No. 2685 are payments strictu sensu , and not "guarantees in the form of a cash deposit". 
7.125  As an additional matter, the Panel considers th at the lengthy delay and non-automatic nature 
of the post-importation process mitigates against cons idering the payment based on indicative prices 
as a type of guarantee.  Both Exhibit COL-8 and PAN-53 reveal that the length of the so-called "post-
                                                      
316 Exhibit COL-8, p. 1 ("... me dirijo respetuosamente a ustedes con el objeto de solicitar la 
liquidación Oficial de Revisión de valor para. la devolución  de los tributos pagado s en exceso … toda vez que 
el valor en aduanas fue ajustado con los precios indicativos  …". 
317 Exhibit COL-8, p. 3 (" En el momento de nacionalizar la mercancía con el fin de obtener el levante 
de la misma se ajustó el valor … generándose un pago de tributos aduaneros en exceso …"). 
318 Exhibit COL-8, p. 126 ("…  encontrando que el valor total de los tributos liquidados y pagados 
sobre el valor en aduana una vez ef ectuado el ajuste al precio f.o.b. … se contabilizó en lo referente al arancel 
como mayor valor del inventario … obtuvo un beneficio en el pago del impuesto sobre la renta  …"). 
319 Exhibit COL-8, p. 155 (" La controversia versa en la negativa por parte de la División de 
Liquidación en expedir el acto administrativo correspondiente que reconozca el valor pagado en exceso  de 
$19.898.890 y en consecuencia, se le permita solicitar la devolución de la parte correspondiente al sobrearancel liquidado y pagado en cuantía de $10.152.495  ..."). 
320 Exhibit COL-8, p. 160 (" Resuelve… Artículo Tercero. Recono cer … la suma de … como valor 
pagado en exceso en los tributos aduaneros liquidados y cancelados  …"). 
321 Exhibit PAN-53 (" al aceptar la expedición de una Liquidación Oficial de Revisión de Valor 
para. los efectos de devolución en los términos señalados por el peticionario estaríamos frente a un indebido incremento en su patrimonio toda vez que se beneficia ría doblemente de una suma de dinero que ya utilizó 
como quedó demostrado en el estudio técnico ");  Exhibit COL-8, p. 128 ("... al aceptar la expedición de una 
Liquidación Oficial de Revisión de Valor para. efectos devolutivos, en los términos señalados por el peticionario, estaríamos frente a un indebido incremento en su patrimonio, toda vez que se beneficiaría 
doblemente de una suma  …"). 
322 Exhibit COL-8, pp. 4-5, p. 127;  Exhibit PAN-53.  WT/DS366/R 
 Page 101 
 
 
  importation" process is two years or more.323  As noted in Section II.B above, the case described in 
Exhibit COL-8 began, upon request of the importe r, on 2 April 2006 and concluded on 22 February 
2008, almost two years later.  In turn, the case described in Exhibit PAN-53 (and Exhibit COL-49) was initiated on 10 July 2005 and di d not conclude until 18 December 2007, almost two and a half 
years later.
324 
7.126  In these cases, the proceedings were initiated upon request of the importer.325  Colombia 
suggested that these cases were initia ted by the importer on the basis of a "special procedure" aimed at 
accelerating the ordinary process, called " Proceso de Petición ".326  However, no mention whatsoever 
can be found in the exhibits to this " Derecho de Petición  ".  Colombia argued that this silence in the 
exhibits results from the fact that there is no specific form for an importer to exercise the " derecho de 
petición ".  Colombia contends that this " Derecho de Petición  " is a constitutional right, according to 
Article 23 of the Colombian Constitution and that, as a fundamental right, it is protected by the special 
constitutional injunction called " Tutela ", which originates in Article 86 of Colombia's Constitution.327  
According to Colombia, "all that the importer has to do is request, on its own initiative, that the 
authorities review a specific issue, and the Colombian authorities are then obligated to treat this as a 
'Derecho de Petición ' ".328  The Panel is not persuaded by th is argument.  The parties have not 
provided the Panel with convincing evidence of an y decision by the Administration to treat the 
requests by the importers as a " Derecho de Petición " and none of the articles that govern this 
"Derecho de Petición " are quoted by the customs authorities when dealing with the importers' 
requests.329  The Panel thus understands that the plea by the importer in this process was not filed as a 
"Derecho de Petición " aimed at accelerating a process that had started automatically and ex officio , 
but rather as a request to initiate the process that would lead to the Liquidación Oficial de Revisión de 
Valor and, subsequently, to the refund of the sums paid in excess.  
7.127  In contrast to the examples presented in Exhibit COL-8 and PAN-53, Exhibit COL-9 appears 
to indicate that the importation documents were sent to the División de Fiscalización by the Grupo 
                                                      
323 Exhibit COL-9 does not have the necessary time references to determine the length of the whole 
process and, thus, it is not possible to make an assessment of its duration. 
324 Exhibit PAN-53.  See also footnote 36 above. 
325 See Exhibit COL-9, p. 1 and Exhibit PAN-53. 
326 Colombia's response to question No. 5(b)(iii) from Panama. 
327 Colombia's response to Panel question No. 101(a). 
328 Colombia's response to Panel question No. 101(b).   
329 Instead, the decision in Exhibit COL-8 by the Administración Especial de Aduanas  of Bogota, dated 
16 August 2007, cites as the legal basis to forward the importer's request to the División de Fiscalización 
Aduanera a series of customs regulations that refer to the División de Liquidación 's competence to entertain 
processes initiated upon request of the interested party  that seek the issuing of Liquidaciones Oficiales de 
Corrección o Revisión de Valor (emphasis added).  In the same vein, the legal basis for the request by the 
importer in Exhibit COL-8 are Articles 514 and 548(a) of Decree No. 2685 and Article 6.3 of 
Resolution No. 5634 of 1999, as modified by Article 1 of Resolution No. 2200 of 25 March 2003.  The relevant 
part of the decision reads as follows: "... de acuerdo al  Memorando No. 00297 de 15 de Mayo de 2007 y del 
Concepto No. 53001-35 del 04 de Mayo de 2007 ... en los cuales se hace precisión sobre la competencia que 
tiene la División de Liquidación para. adelantar lo s procesos iniciados a so licitud de parte para. la 
expedición de liquidaciones oficiale s de corrección o de revisión de valor (…). Por lo expuesto en los casos 
de devolución por pago en exceso, el estudio de valor y la práctica de pruebas previos a la liquidación oficial de 
corrección debe realizarlo la Divisi ón de Liquidación, por lo cual de procede al traslado a la mencionada 
División." (emphasis added).  Notably, the latter provision establishes that the División de Liquidación shall be 
competent to decide in processes initiated upon request of the interested party , which seek the issuing of 
Liquidaciones Oficiales de Corrección o de Revisión de Valor (emphasis added).  Exhibit COL-8, pp. 1 and 4.    WT/DS366/R 
Page 102  
 
  Importaciones de la Administraci ón Local de Aduanas de Medellín without any request from the 
importer.
330 
7.128  In sum, these three specific cases of applicati on of the challenged provisions seem to confirm 
the view that the disbursement that the importer must  make in order to obtain the release of the goods 
subject to indicative prices is in fact a "payment" and not a "guarantee in the form of a cash deposit".  
These three examples show that, after such a paym ent, there is a review mechanism during which 
Colombian customs authorities determine a custom value according to the criteria established by the 
Customs Valuation Agreement , and decide on that basis whether th e importer is entitled to a refund of 
the sum that it had paid in excess.  The evid ence produced by the pa rties, however, seems 
inconclusive as to whether this review process takes place automatically in all cases.  At any rate, the 
review process itself appears quite lengthy, taki ng two years or more for an importer to obtain a 
refund.   
(ii) Conclusion 
7.129  The Panel's analysis in the previous sections demonstrates that payments made by importers 
in the situation described by Article 128.5 e) of Decree No. 2685 and Article 172.7 of 
Resolution No. 4240 are payments strictu sensu  and not "guarantees in the form of a cash deposit".  
The very terms of Article 128.5 e) of Decree No. 2685 ar e revealing:  in order to obtain the release of 
the goods in the situation described by this provision, the importer must pay customs duties and sales 
tax on the basis of indicative prices.  A contextual  reading of the challenged provisions as well as the 
examples provided by the parties confirm this view.   
7.130  Accordingly, the Panel concludes that Colomb ia's use of indicative prices as mandated by 
Article 128.5 e) of Decree No. 2685 and Article  172.7 of Resolution No. 4240 constitutes customs 
valuation within the meaning of the  Customs Valuation Agreement .  Having reached this conclusion, 
the Panel will proceed to analyse Panama's claims unde r Articles 1, 2, 3, 5, 6 and 7.2(b), (f) and (g) of 
the Customs Valuation Agreement .   
(e) Whether the use of indicative prices for cust oms valuation purposes is inconsistent with 
Articles 1, 2, 3, 5, 6 and 7.2(b), (f) and (g) of the Customs Valuation Agreement  
7.131  The Panel will now examine whether the use of indicative prices in the determination of the 
customs value of subject imports complies with Arti cles 1, 2, 3, 5, 6 and 7.2(b), (f) and (g) of the 
Customs Valuation Agreement .  The Panel notes that this Agreem ent has never been interpreted by 
GATT/WTO panels or the Appellate Body.   
7.132  The Panel also recalls that it is addressing Panama's claims "as such".  The Panel therefore 
will not examine the application by Colombian customs authorities of the sequential valuation 
methods provided by the Customs Valuation Agreement in each individual instance.  Rather, the Panel 
will examine whether the use of indicative prices as provided for in Article 128.5 e) of Decree No. 2685 and Article 172.7 of Resolution No. 42 40 is inconsistent with the above-mentioned 
provisions. 
(i) Main arguments of the parties 
7.133  As discussed above, Panama contends that Colombia's use of indicative prices for the 
purposes of customs valuation violates each of the sequential methodologies set forth in Articles 1-6 of the Customs Valuation Agreement .  Additionally, Panama argues the use of indicative prices 
                                                     
 
330 The Administración de Aduanas de Medellín, pursuant to para. 3 of Article 172 of 
Resolution No. 4240,  sent the file to the División de Fiscalización ex officio , with the purpose of initiating the 
"estudio de valor ". Exhibit COL-64, p. 1.  WT/DS366/R 
 Page 103 
 
 
  violates Article 7.2(b), (f) and (g) of the Customs Valuation Agreement , since: (i) the customs value is 
determined on the basis of "a system which pr ovides for the acceptance fo r customs purposes of the 
higher of two alternative values"; (ii) the custom s value is determined on the basis of "minimum 
customs values"; and (iii) the customs value is de termined on the basis of "arbitrary or fictitious 
prices" .331  
7.134  Colombia maintains its earlier position that it does not conduct customs valuation based on 
indicative prices.332  Accordingly, Colombia does not consider  the use of indicative prices to violate 
Articles 1, 2, 3, 5, 6 and 7(b), (f) and (g) of the Customs Valuation Agreement . 
(ii) The text of Articles 1, 2, 3, 5, 6 and 7.2(b) , (f) and (g) of the Customs Valuation Agreement 
7.135  Panama's claims relate to a number of provisions of the Customs Valuation Agreement , 
namely Articles 1, 2, 3, 5, 6 and 7.2(b), (f) and (g).  The text of these provisions reads as follows: 
"Article 1 
1.  The customs value of imported goods shall be the transaction value, that is 
the price actually paid or payable for the goods  when sold for export to the country of 
importation adjusted in accordance with the provisions of Article 8, provided:  
(a) that there are no restrictions as to the disposition or use of the goods by the 
buyer other than restrictions which:  
(i) are imposed or required by law or by the public authorities in 
the country of importation;  
(ii) limit the geographical area in which the goods may be resold;  
or  
(iii) do not substantially affect the value of the goods;  
(b) that the sale or price is not subject to some condition or consideration for 
which a value cannot be determined with  respect to the goods being valued;  
(c) that no part of the proceeds of any subsequent resale, disposal or use of the 
goods by the buyer will accrue directly or indirectly to the seller, unless an 
appropriate adjustment can be made in accord ance with the provisions of Article 8;  
and  
(d) that the buyer and seller are not related, or where the buyer and seller are 
related, that the transaction value is  acceptable for customs purposes under the 
provisions of paragraph 2.  
2. (a) In determining whether the tr ansaction value is acceptable for the 
purposes of paragraph 1, the fact that the buyer and the seller are related within the 
meaning of Article 15 shall not in itself be  grounds for regarding the transaction value 
as unacceptable.  In such case the circum stances surrounding the sale shall be 
examined and the transaction value shall be accepted provided that the relationship did not influence the price.  If, in the light  of information provided by the importer or 
otherwise, the customs administration has grounds for considering that the 
                                                     
 
331 Panama's first written submission, paras. 122-128. 
332 See Section VII.B.1. WT/DS366/R 
Page 104  
 
  relationship influenced the price, it shall communicate its grounds to the importer and 
the importer shall be given a reasonable opportunity to respond.  If the importer so requests, the communication of the grounds shall be in writing.  
(b) In a sale between related persons, th e transaction value shall be accepted and 
the goods valued in accordance with the provisions of paragraph 1 whenever the 
importer demonstrates that such value closely approximates to one of the following 
occurring at or about the same time:  
(i) the transaction value in sales to  unrelated buyers of identical 
or similar goods for export to the same country of importation;  
(ii) the customs value of identical or similar goods as determined 
under the provisions of Article 5;  
(iii) the customs value of identical or similar goods as determined 
under the provisions of Article 6;  
In applying the foregoing tests, due account shall be taken of demonstrated 
differences in commercial levels, quantity levels, the elements enumerated in 
Article 8 and costs incurred by the seller in sales in which the seller and the buyer are 
not related that are not incurred by the selle r in sales in which the seller and the buyer 
are related.  
(c) The tests set forth in paragraph 2(b) are to be used at the initiative of the 
importer and only for comparison purposes.  S ubstitute values may not be established 
under the provisions of paragraph 2(b). 
Article 2  
1. (a) If the customs value of the imported goods cannot be determined 
under the provisions of Article 1, the customs value shall be the transaction value of identical goods sold for export to the same country of importation and exported at or 
about the same time as the goods being valued.  
(b) In applying this Article, the transac tion value of identical goods in a sale at 
the same commercial level and in substan tially the same quantity as the goods being 
valued shall be used to determine the cu stoms value.  Where no such sale is found, 
the transaction value of identical goods sold at a different commercial level and/or in 
different quantities, adjusted to take account  of differences attributable to commercial 
level and/or to quantity, sha ll be used, provided that such adjustments can be made on 
the basis of demonstrated evidence which clearly establishes the reasonableness and 
accuracy of the adjustment, whether the adju stment leads to an increase or a decrease 
in the value.  
2. Where the costs and charges referred to in paragraph 2 of Article 8 are 
included in the transaction value, an adjust ment shall be made to take account of 
significant differences in such costs and charges between the imported goods and the 
identical goods in question arising from  differences in distances and modes of 
transport.   WT/DS366/R 
 Page 105 
 
 
  3. If, in applying this Article, more th an one transaction value of identical goods 
is found, the lowest such value shall be u sed to determine the customs value of the 
imported goods.  
Article 3 
1. (a) If the customs value of the imported goods cannot be determined 
under the provisions of Articles 1 and 2, the customs value shall be the transaction 
value of similar goods sold for export to the same country of importation and exported at or about the same time as the goods being valued.  
(b) In applying this Article, the transac tion value of similar goods in a sale at the 
same commercial level and in substantia lly the same quantity as the goods being 
valued shall be used to determine the cu stoms value.  Where no such sale is found, 
the transaction value of similar goods sold at  a different commercial level and/or in 
different quantities, adjusted to take account  of differences attributable to commercial 
level and/or to quantity, sha ll be used, provided that such adjustments can be made on 
the basis of demonstrated evidence which clearly establishes the reasonableness and 
accuracy of the adjustment, whether the adju stment leads to an increase or a decrease 
in the value.  
2. Where the costs and charges referred to in paragraph 2 of Article 8 are 
included in the transaction value, an adjust ment shall be made to take account of 
significant differences in such costs and charges between the imported goods and the 
similar goods in question arising from differences in distances and modes of 
transport.  
3. If, in applying this Article, more than one transaction value of similar goods 
is found, the lowest such value shall be u sed to determine the customs value of the 
imported goods.  
Article 5 
1. (a) If the imported goods or identical or similar imported goods are sold 
in the country of importation in the cond ition as imported, the customs value of the 
imported goods under the provisions of this Ar ticle shall be based on the unit price at 
which the imported goods or identical or si milar imported goods are so sold in the 
greatest aggregate quantity, at or about the time of the importation of the goods being 
valued, to persons who are not related to  the persons from whom they buy such 
goods, subject to deductions for the following:  
(i) either the commissions usually paid or agreed to be paid or 
the additions usually made for profit and general expenses in 
connection with sales in such country of imported goods of the same class or kind;  
(ii) the usual costs of transport and insurance and associated 
costs incurred within the country of importation;  
(iii) where appropriate, the costs and charges referred to in 
paragraph 2 of Article 8;  and  WT/DS366/R 
Page 106  
 
  (iv) the customs duties and other national taxes payable in the 
country of importation by reason of the importation or sale of the goods.  
(b) If neither the imported goods nor id entical nor similar imported goods are 
sold at or about the time of importation of the goods being valued, the customs value 
shall, subject otherwise to the provisions of  paragraph 1(a), be based on the unit price 
at which the imported goods or identical or  similar imported goods are sold in the 
country of importation in the condition as imported at the earliest date after the 
importation of the goods being valued but befo re the expiration of 90 days after such 
importation.  
2. If neither the imported goods nor id entical nor similar imported goods are 
sold in the country of importation in the condition as imported, then, if the importer 
so requests, the customs value shall be b ased on the unit price at which the imported 
goods, after further processing, are sold in the greatest aggregate quantity to persons 
in the country of importation who are not re lated to the persons from whom they buy 
such goods, due allowance being made for the value added by such processing and 
the deductions provided for in paragraph 1(a).  
Article 6  
1. The customs value of imported goods under the provisions of this 
Article shall be based on a computed value.  Computed value shall consist of the sum 
of:  
(a) the cost or value of materials and fabrication or other processing employed in 
producing the imported goods;  
(b) an amount for profit and general expens es equal to that usually reflected in 
sales of goods of the same class or kind as the goods being valued which are made by 
producers in the country of exportation for export to the country of importation;  
(c) the cost or value of all other expenses necessary to reflect the valuation 
option chosen by the Member unde r paragraph 2 of Article 8 .  
2. No Member may require or compel any person not resident in its own 
territory to produce for examination, or  to allow access to, any account or other 
record for the purposes of determining a co mputed value.  However, information 
supplied by the producer of the goods for the purposes of determining the customs 
value under the provisions of this Article may be verified in another country by the 
authorities of the country of importation with the agreement of the producer and provided they give sufficient advance noti ce to the government of the country in 
question and the latter does not object to the investigation. 
Article 7  
1. If the customs value of the importe d goods cannot be determined under the 
provisions of Articles 1 through 6, inclusive,  the customs value shall be determined 
using reasonable means consistent with the principles and general provisions of this 
Agreement and of Article VII of GATT 1994 a nd on the basis of data available in the 
country of importation.   WT/DS366/R 
 Page 107 
 
 
  2. No customs value shall be determined under the provisions of this Article on 
the basis of:  
(a) ...  (b) a system which provides for the acceptance for customs purposes of the 
higher of two alternative values;  
....  
(f) minimum customs values;  or  (g) arbitrary or fictitious values." 
(iii) The primacy of the transaction value and sequen tial nature of the valuation methods provided 
in Articles 1 to 7 of the Customs Valuation Agreement 
7.136  As evidenced by the text of the relevant provisions, the Customs Valuation Agreement 
provides for sequential valuation me thods in Articles 1 through 7.1.  Article 1 establishes the primacy 
of the transaction value as the valuation method.  Whenever customs author ities consider that the 
transaction value of the imported good, as defined in  Article 1, cannot be used, authorities must 
follow, in a sequential manner, the valuation methods  provided for in Article 2 (transactional value of 
identical goods), Article 3 (transaction value of  similar goods), Article 5 (deductive method) and 
Article 6 (computed value) of the Customs Valuation Agreement .  Where none of the methods in 
Articles 1 to 6 are available, Article 7 allows cu stoms authorities to resort to any other reasonable 
means to determine the customs value, provided such  methods are consistent with the principles and 
general provisions of the Customs Valuation Agreement  and of GATT 1994 .  In doing so, customs 
authorities must not use any of the methods prohibited in paragraph 2 of Article 7. 
7.137  The primacy of the transaction value as a custom s valuation method and the sequential nature 
of the valuation methods derives from the "General Introductory Comment" to this Agreement.  This 
Comment explains that the "primary basis for cu stoms value under this Agreement is 'transaction 
value' as defined in Article 1", while also indi cating that "Articles 2 through 7 provide methods of 
determining the customs value whenever it cannot be determined under the provis ions of Article 1".  
In addition, the Preamble to the Agreement make s explicit reference to the crucial role of the 
transaction value in customs valuation.  
7.138  The Panel therefore understands that the Customs Valuation Agreement  imposes an obligation 
on national authorities to determine the customs va lue of imported goods based on the "transaction 
value" and, whenever that is not possible, to  sequentially apply the customs valuation methods 
provided for in Articles 1, 2, 3, 5, 6 and 7.1 of the Agreement. 
7.139  In order to determine whether Colombia comp lies with this obligation, the Panel must 
determine whether the use of indicative prices reflects the "transaction value", or any of the methodologies set out by those articles. 
(iv) Whether the use of indicative prices constitute any  of the valuation methods provided for in 
Articles 1, 2, 3, 5 and 6 of the Customs Valuation Agreement 
7.140  The Panel will first examine whether the us e of indicative prices reflects any of the 
methodologies provided for in Articles 1, 2, 3, 5 and 6 of the Customs Valuation Agreement . 
7.141  The Panel recalls that, as explained in Secti on II.B above, indicative prices are determined 
a priori, for broad categories of products, as a result of surveys undertaken by the DIAN on the basis WT/DS366/R 
Page 108  
 
  of past imports.
333 They are calculated based on the average production costs of the imported goods, 
when available, or otherwise, on the lowest price actually negotiated or offered for importation of the 
good into Colombia.   
7.142  The Panel considers that national customs au thorities are required to apply the various 
customs valuation methods laid down in Articles 1, 2, 3, 5 and 6 of the Customs Valuation Agreement  
on a case-by-case basis, so as to reflect the particular  conditions of the sale of the product in question.  
The Panel considers that, inasmuch as the custom s values for subject goods are established on a fixed 
basis for broad categories of products without any examination of the specific circumstances 
surrounding the transaction at issue, indicative prices do not reflect any of the methodologies set out in the referred provisions.
334  In fact, as acknowledged by Colombia, "the customs value as 
determined following the methods of the [ Customs Valuation Agreement ] will indeed be different 
from the indicative price in practically all cases".335   
(v) Whether the use of indicative prices is consis tent with the obligation to conduct customs 
valuation according to the sequential methods laid down in Articles 1, 2, 3, 5 and 6 of the Customs Valuation Agreement 
7.143  The Panel acknowledges that the sequential nature  of the various valuation methods permits 
national customs authorities to proceed from one met hod to the next without violating the previous 
method, provided the former cannot be used.  Ho wever, the structure and design of the indicative 
prices system as provided in Article 128.5 e) of Decree No. 2685 and Article 172.7 of Resolution No. 4240 as well as the various resolutio ns establishing indicative prices, prevents 
Colombian customs authorities from sequentially appl ying the customs valuation methods provided in 
Articles 1 through 6.  Indeed, when determini ng the value of subject goods imports, Colombian 
customs authorities are required to systematically apply a methodology that does not reflect any of the methods provided for in these provisions, i.e. the use of indicative prices, unless the transactional value is higher than the indicative price.   
7.144  The Panel therefore finds that Article 128.5 e) of Decree No. 2685 and Article 172.7 of 
Resolution No. 4240 as well as the various resolutions  establishing indicative prices, which together 
mandate the use of indicative prices for customs valuation purposes, are inconsistent with the 
obligation to conduct customs valuation of subject  goods based on the sequential application of the 
methods established by Articles 1, 2, 3, 5 and 6 of the Customs Valuation Agreement . 
                                                     
 
333 See Methodology for the Determination of Reference Prices, pp. 12-15 (Exhibit PAN-18).  See also 
para. 2.7. 
334 Thus, as noted by Panama, indicative prices have no relation with the price actually paid or payable 
for the good, taking into account the specific circumstances surrounding the transaction at issue.  Hence, the 
Panel is of the opinion that indicative prices do not reflect  the "transaction value" as defined by Article 1 of the 
Customs Valuation Agreement .  In addition, Colombia's customs officers do not assess the transaction value of 
identical or similar goods sold for export to Colombia at approximately the same time as the product in question, in compliance with Articles 2 and 3 of the Customs Valuation Agreement .  Colombian authorities similiarly do 
not conduct an inquiry into the unit price at which the imported goods or identical or similar imported goods are 
sold in the greatest aggregate quantity, at or about the time of the importation of the goods being valued, to unrelated persons, in accordance with th e methodology set forth in Article 5.   Finally, indicative prices are not 
established taking into account the factors listed in Ar ticle 6, such as the cost or value of materials and 
fabrication;  an amount for profit and general expenses;  and other expenses including cost of transport, loading, 
unloading and handling charges and insurance.  Although in determining indicative prices, Colombian customs 
authorities factor "the costs and expenditures of produc tion" and "profit", these variables are considered on 
"average" and for broad categories of products.  Article 6, in contrast, clearly refers to the costs of production of 
the specific products that are being imported, as can be inferred from Article 6.1(a) and its Note. 
335 Colombia's response to question No. 5 from Panama.  Colombia further states that "the likelihood 
that the customs value [determined on the basis of the methods of Articles 1–7 of the Customs Valuation 
Agreement ] is identical to the indicative price which is an averag e price is so small that indeed it is correct to say 
the customs values will, practically speaking, be different from the indicative price in all cases".  WT/DS366/R 
 Page 109 
 
 
  (vi) Whether the use of indicative prices is incons istent with Article 7(b), (f) and (g) of the 
Customs Valuation Agreement 
7.145  Additionally, Panama argues the use of indicativ e prices violates Article 7.2(b), (f) and (g) of 
the Customs Valuation Agreement , since: (i) the customs value is determined on the basis of "a system 
which provides for the acceptance for customs purposes of the higher of two alternative values"; (ii) 
the customs value is determined on the basis of "minimum customs values"; and (iii) the customs 
value is determined on the basis of "arbitrary or fictitious prices" .336  
7.146  The Panel notes that Article 7.1 of the Customs Valuation Agreement allows national customs 
authorities to resort to reasonable means of va luation where the customs value of imported goods 
cannot be determined under the methods provided for in Article 1 through 6.337  Paragraph 2 of 
Article 7 further provides that those reasonable means cannot be determined using a series of 
prohibited customs valuation methods.   
7.147  With respect to Article 7.2(b) of the Customs Valuation Agreement , Panama contends that the 
requirement established in Article  172.7 of Resolution No. 4240 to use an indicative price for customs 
valuation purposes whenever the transaction value is lower than the indicative price is tantamount to 
the acceptance of the higher of two alternative values.338  In relation to Article 7.2(f) of the Customs 
Valuation Agreement , Panama claims that the indicative prices are minimum customs values because 
importation of products subject to indicative prices  will not be permitted unless this minimum value is 
declared by the importer.339  Panama also claims that, since the customs value of the goods is not 
based on the actual circumstances of the sale, but rath er on the basis of a general survey, indicative 
prices are, in effect, arbitrary and fictitious pri ces, in contravention of Article 7.2(g) of the Customs 
Valuation Agreement .340 
7.148  Colombia has not submitted any specific counter argument with respect to Panama's claims 
under Article 7.2 of the Customs Valuation Agreement other than the general contention that 
indicative prices are not used fo r customs valuations purposes. 
7.149  The Panel considers that Article 128.5 e) of Decree No. 2685 and Article 172.7 of 
Resolution No. 4240, as well as the various resoluti ons establishing indicative prices, impose "the 
acceptance for customs purposes of the higher of two alternative values".  As explained in Section II.B above, for products subject to indicativ e prices, customs duties and sales taxes are levied 
at the time of inspection on the basis of the higher of two values: the declared value or the indicative 
price.
341  The Panel therefore finds that Article 128.5 e) of Decree No. 2685 and Article 172.7 of 
Resolution No. 4240 as well as the various resolutio ns establishing indicative prices, which mandate 
the use of indicative prices for customs valuation pur poses are inconsistent with Article 7.2(b) of the 
Customs Valuation Agreement .   
7.150  Moreover, as also explained above, in cases in which the declared value is lower than the 
indicative price, an importer has to "correct" the import declaration and pay custom duties and sales tax based on the indicative price.
342  If the importer refuses to do so, the importer has no choice but to 
re-ship the goods or abandon them.  As a result, only two possible scenarios exist when subject goods 
                                                      
336 Panama's first written submission, paras. 122-128. 
337 Article 7.1 provides as follows: "If the customs value of the imported goods cannot be determined 
under the provisions of Articles 1 through 6, inclusive, the customs value shall be determined using reasonable 
means consistent with the principles and general provisions of this Agreement and of Article VII of GATT 1994  
and on the basis of data available in the country of importation." 
338 Panama's first written submission, paras. 125-126. 
339 Panama's first written submission, para. 127. 
340 Panama's first written submission, para. 128. 
341 See para. 2.8. 
342 See paras. 2.8-2.9. WT/DS366/R 
Page 110  
 
  are submitted for customs clearance: either customs duties and sales tax are collected on the basis of a 
value equal or higher than the indicative price; or  the goods are not imported into Colombian customs 
territory at all.  In practice, this results in a system in which customs duties and sales tax are never 
levied on the basis of a value lower than the one provi ded by the indicative price.  For this reason, the 
Panel concludes that indicative prices amount to "minimum prices" and, therefore, finds that 
Article 128.5 e) of Decree No. 2685 and Article 172.7 of Resolution No. 4240 as well as the various 
resolutions establishing indicative prices which ma ndate the use of indicative prices for customs 
valuation purposes are also inconsistent with Article 7.2(f) of the Customs Valuation Agreement . 
7.151  Having found that Article 128.5 e) of Decree No. 2685 and Article 172.7 of 
Resolution No. 4240 as well as the various resolutio ns establishing indicative prices which mandate 
the use of indicative prices for customs valuation pu rposes are inconsistent with Articles 7.2(b) and 
7.2(f) of the Customs Valuation Agreement , the Panel does not consider it necessary to further rule on 
the consistency of these Colombian domestic provisions with Article 7.2(g) of the Customs Valuation 
Agreement . 
(f) Conclusion 
7.152  For the reasons discussed above, the Panel finds that Articles 128.5 e) of Decree No. 2685 
and 172.7 of Resolution No. 4240, as well as the vari ous resolutions establishing indicative prices, by 
mandating the use of indicative prices for customs va luation purposes are inconsistent "as such" with 
the obligation established in the Customs Valuation Agreement  to apply, in a sequential manner, the 
methods of valuation provided in Articles 1, 2, 3, 5 and 6 of the Agreement.   
7.153  The Panel further finds that Articles 128.5 e) of Decree No. 2685 and 172.7 of 
Resolution No. 4240, as well as the various resolu tions establishing indicative prices, by mandating 
the use of the higher of two valu es or a minimum price as the customs value of subject goods, are 
inconsistent "as such" with Article 7.2(b) and (f) of the Customs Valuation Agreement.  Therefore, 
notwithstanding the Panel's finding that Colombia's u se of indicative prices is not inconsistent with 
Article 7.2(g), the Panel finds that such met hodology does not constitute a "reasonable means [of 
customs valuation] consistent with the principles and general provisions of the Customs Valuation 
Agreement " permissible under Article 7.1.   
7.154  Having found that Articles 128.5 e) of Decree No. 2685 and 172.7 of Resolution No. 4240, as 
well as the various resolutions establishing indicat ive prices are "as such" inconsistent with the 
Customs Valuation Agreement , the Panel considers it unnecessary to further examine Panama's "as 
applied" claims.  As discussed in Section VII.A.1(c )(iii) above, as each of the individual applications 
of indicative prices to import transactions has been  based on WTO-inconsistent legislation, such an 
analysis would be unnecessary
343  
7.155  In reaching its conclusions, the Panel recognizes that WTO Members have a legitimate right 
to apply measures aimed at combating under-invoi cing, smuggling and money laundering. However, 
these measures should be WTO-consistent or fall with in the exceptions included in Article XX of the 
GATT 1994 which allow WTO Members to justify an otherwise WTO-inconsistent measure.  
                                                      
343 See para. 7.44.  WT/DS366/R 
 Page 111 
 
 
  C. WHETHER COLOMBIA 'S USE OF INDICATIVE PRICES TO DETERMINE THE VALUE OF IMPORTED 
TEXTILES , FOOTWEAR AND OTHER PRODUCTS FOR TH E PURPOSE OF LEVYING SALES TAX IS 
INCONSISTENT WITH ARTICLE  III:2,  FIRST SENTENCE OF THE GATT 1994  
1. Main arguments of the parties 
7.156  Panama  claims that the use of indicative prices as the basis to determine the value of imported 
textiles, footwear and other products for the pur pose of levying sales tax is inconsistent with 
Article III:2, first sentence, of the GATT 1994 .  In Panama's view, the sales tax is imposed "in excess 
of" the sales tax imposed on like domestic products  as the potentially like domestic products are 
subject to sales tax on the basis of the actual sale price of the product.344  Notwithstanding the 
application of the same tax rate , Panama asserts that imported products can still be taxed "in excess" 
of like domestic products if the application of diffe rential tax bases leads to the imposition of higher 
taxes for imported products.345  Furthermore, since Article III protects the "equal competitive 
relationship between impor ted and domestic products"346 and depends on the "potential impact rather 
than on the actual consequences"347, Panama submits that there is at least potentially a like domestic 
product.348 
7.157  Panama contends that Colombia has admitted that the tax base for domestic goods is the 
transaction value.349  In contrast, Panama notes that importers  subject to indicative prices do not have 
the option under Article 459 of the Tax Code to de monstrate that the invoiced value is the actual 
transaction value, but must instead apply a higher value based on the indicative price.350  Thus, 
whenever indicative prices are applied, imports are taxed in excess of like domestics products.  Due to 
the possibility of a violation, Panama argues that exceptional situations where the indicative price is 
the same as the transaction value are not relevant to the determination under Article III:2, as the 
"exposure of a particular imported pr oduct to a risk of discrimination"351 already constitutes a form of 
discrimination.352  Panama further argues that it is not required to show specific instances of 
Article III:2 violations because differential tax treatme nt is itself sufficient evidence of discriminatory 
treatment to show inconsistency with Article III:2.353   
7.158  Colombia  contends that there is no provision in Colombian law requiring the sales tax on 
imported products to be imposed on th e basis of indicative prices.  Colombia notes that Article 459 of 
Colombia's Tax Code only provides that the basis for assessing internal taxes on imported products is 
the same as that used to determine customs duties.354  Thus, Colombia contends, the basic premise of 
Panama's claim is flawed, as the tax base for impor ted goods is not the indicative price of the product 
but the value of the goods used to determine cu stoms duties which, according to Colombia, is not 
determined based on indicative prices, but on the basis of methods set out in the Customs Valuation 
Agreement .355  Moreover, Colombia draws the Panel's atten tion to the fact that Panama has failed to 
offer "even one specific application" of the Colombia's law that would support its argument.356  
                                                      
344 Panama's first written submission, para. 149. 
345 Panama refers to the Appellate Body Report in Argentina – Hides and Leather .  Panama's second 
written submission, para. 86. 
346 Panama refers to the Appellate Body Report in Japan – Alcoholic Beverages II . 
347 Panama refers to the GATT Panel Report on US – Section 337 . 
348 Panama's first written submission, para. 146. 
349 Panama's second written submission, para. 95. 
350 Panama's second written submission, para. 98. 
351 Panama refers to the GATT Panel Report on EEC – Oilseeds I . 
352 Panama's first written submission, para. 150. 
353 Panama refers to the Panel Report on Indonesia – Autos . 
354 Colombia's second written submission, para. 91. 
355 Colombia's first written submission, paras. 162 -166;  Colombia's second written submission, 
para. 91. 
356 Colombia's first written submission, para. 167 WT/DS366/R 
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  Colombia further disputes Panama's assertion that  the sales tax of domestic products will always be 
calculated on the basis of the transaction value.  According to Colombia, just as in the case of 
imported goods, the sales tax on domestic products ma y, in cases of undervaluation, be based on a 
value different from the declared value.
357 
7.159  Colombia further argues that Panama has failed to meet its burden of proof under 
Article III:2.  In Colombia's view, Panama fails to  demonstrate that the sales tax on imported products 
is not just "different in a neutral sense of the word"358, but that the difference leads to imported goods 
being taxed "in excess" of like domestic products.359  Colombia notes that Panama does not contest 
the fact that the same tax rate is appl ied for both domestic and imported products.360  Further, any 
difference in the application of differential ta x bases is not considered determinative as such .361  In 
addition, Colombia states that Panama failed to explain the alleged negative impact on competitive 
opportunities.362  
2. Consideration by the Panel 
(a) Legislation applicable to the calculation of sal es tax for imports subject to indicative prices 
7.160  In addressing Panama's claims under the Customs Valuation Agreement  in Section VII.B.2(a) 
above363, the Panel established that the legislation mandating the use of indicative prices comprises 
Article 128.5 e) of Decree No. 2685 and Article 172.7 of Resolution No. 4240 as well as a series of resolutions establishing indicative prices.
364  The Panel understands that Panama, under the present 
claim, is challenging "as such" the consistency of all these provisions with Article III:2 of the 
GATT 1994 .   
7.161  In addition, Panama has identified a number of tax provisions within Decree 624 of 1989 that 
it considers relevant to the present claim, a lthough Panama has not explicitly challenged these 
provisions.   
7.162  Article 447 of Decree 624, in turn defines the taxable base (" base gravable ") applicable to the 
calculation of sales tax for all goods sold in Colombia: 
"En la venta y prestación de servicios, la  base gravable será el valor total de la 
operación, sea que ésta se realice de contado  o a crédito, incluyendo entre otros los 
gastos directos de financiación ordinaria, extraordinaria, o moratoria, accesorios, 
acarreos, instalaciones, seguros, co misiones, garantías y demás erogaciones 
                                                      
357 Colombia's first written submission, paras. 168-173. 
358 Colombia's first written submission, para. 156. 
359 Colombia refers to the Appellate Body Reports in Japan – Alcoholic Beverages II and Canada – 
Periodicals.  Colombia's first written submission, paras. 147-149. 
360 Colombia's second written submission, para. 92. 
361 Colombia refers to the Panel Report on Dominican Republic – Import and Sale of Cigarettes.  
Colombia's second written submission, para. 94. 
362  Colombia refers to the Panel Report on Dominican Republic – Import and Sale of Cigarettes  and 
the Appellate Body Report in Argentina – Hides and Leather.   Colombia's first written submission, para. 159. 
363 See also para. 7.36, discussing Colombia's challe nge to Panama's identification of the measure at 
issue.  Additionally, the Panel has included Article 453 of  Decree 624 above as Colombia has referred to this 
provision in defence of its methodology applied to domestically-produced goods. 
364 The various resolutions establishing the applicable  indicative prices are:  Resolution No. 7510 of 
26 June 2007, as modified by Resolution No. 11412 of 28 September 2007;  Resolution No. 7511 of 26 June 2007;  Resolution No. 7509 of 26 June 2007, as modified by Resolution No. 11414 of 28 September 2007;  
Resolution No. 7512 of 26 June 2007, as modified by Resolution No. 11415 and Resolution No. 7513 of 26 
June 2007.  WT/DS366/R 
 Page 113 
 
 
  complementarias, aunque se facturen o convengan por separado y aunque, 
considerados independientemente, no se  encuentren sometidos a imposición ." 
7.163  Article 459 of Decree 624, which establishes the basis for the imposition of sales tax on 
imported goods, provides in relevant part as follows: 
"La base gravable, sobre la cual se liquida el  impuesto sobre las ventas en el caso de 
las mercancías importadas, será la misma que se tiene en cuenta para liquidar los 
derechos de aduana, adicionados co n el valor de este gravamen ." 
7.164  Article 468 of Decree 624 establishes a sales tax rate of 16 per cent applicable to all goods 
sold in Colombia: 
"La tarifa general del impuesto sobre las ven tas es del dieciséis por ciento (16%), la 
cual se aplicará también a los servicios, con excepción de los excluidos expresamente.  Igualmente, la tarifa genera l será aplicable a los bienes de que tratan 
los artículos 446, 469 y 474 y a los servicios de  que trata el artículo 461 del Estatuto 
Tributario ." 
7.165  Panama is therefore not challenging the WTO- consistency of Articl es 447, 459 and 468 of 
Decree 624 "as such", but considers these provisions as relevant context for the Panel's examination 
of the WTO-consistency of the use of indicative prices with Article III:2 (and Article III:4 in the 
alternative) of the GATT 1994 .
365 
(b) The Panel's approach to Panama's cl aim under Article III:2, first sentence  
7.166  Panama has requested the Panel to determine wh ether the use of indicative prices rather than 
the transaction value as the basis for assessing th e sales tax on subject imports results in the 
imposition of tax in excess of that levied on like domestic products in  violation of Article III:2, first 
sentence.  As indicated above, the Panel has estab lished that the legal provisions at issue are 
Article 128.5 e) of Decree No. 2685 and Article 172. 7 of Resolution No. 4240, as well as a number of 
resolutions establishing indicative prices.  Panama  is not challenging the various tax provisions 
identified above but has simply referred to them as  relevant context for the interpretation of the 
indicative prices provisions.  
7.167  The Panel recalls its findings concerning the c onsistency of the challe nged provisions with the 
Customs Valuation Agreement in Section VII.B.2(f) above as it considers them relevant to the present 
claim under Article III:2, first sentence.  The Pane l found that Article 128.5 e) of Decree No. 2685 
and Article 172.7 of Resolution No. 4240, as well as  the various resolutions establishing indicative 
prices, by mandating the use of indicative prices for customs valuation purposes, are inconsistent "as 
such" with the obligation established in the Customs Valuation Agreement  to apply, in a sequential 
manner, the methods of valuation provided in Ar ticles 1, 2, 3, 5 and 6 of the Agreement.  
Furthermore, the Panel found that Articl es 128.5 e) of Decree No. 2685 and 172.7 of 
Resolution No. 4240, as well as the various resolu tions establishing indicative prices, by mandating 
the use of the higher of two valu es or a minimum price as the customs value of subject goods, are 
inconsistent "as such" with Article 7.2(b) and (f) of the Customs Valuation Agreement.   
7.168  In this respect, the Panel recalls that Article  459 of Decree 624, which establishes the taxable 
base for the imposition of sales tax on imported goods, provides in relevant part as follows: " La base 
gravable, sobre la cual se liquida el impuesto sobre las ventas en el caso de las mercancías 
importadas, será la misma que se tiene en cuenta  para liquidar los derec hos de aduana, adicionados 
con el valor de este gravamen ."  The Panel notes that Article 459 si mply refers the determination of 
                                                      
365 Panama's response to Panel question No. 91. WT/DS366/R 
Page 114  
 
  the relevant base gravable  to the legislation establishing the customs value of imported goods, and 
does not address the use of indicative prices.  Th is provision provides that the taxable base or base 
gravable  for the purposes of collecting sales tax on impor ted goods will be the same as the one used 
for levying customs duties, which is to say, the cust oms value.  The Panel considers that its finding 
that the use of indicative prices as the cust oms value is a prohibited method under the Customs 
Valuation Agreement has a direct impact on the present claim.  Indeed, if Colombia is not allowed to 
use indicative prices in order to determine the cu stoms value of imported goods, it will also not be 
permitted to use indicative prices as the basis fo r taxing imported goods.  As noted, Article 459 of 
Decree 624 establishes that the basis to calculate sa les tax will be the same as the customs value.  
Consequently, in the Panel's view, the exclusion of indicative prices as a customs valuation method 
will automatically result in the elimination of i ndicative prices as a valid means to determine the base 
gravable for calculating sales tax. 
7.169  Hence, the Panel concludes that its findings pe rtaining to the WTO-inconsistency "as such" of 
the legal provisions imposing the use of indicative prices provide a positive solution to the dispute.  
Accordingly, the Panel concludes that it is not requ ired to continue its analysis and make specific 
findings on the consistency "as such" of Artic les 128.5 e) of Decree No. 2685 and 172.7 of 
Resolution No. 4240 as well as the relevant resolution imposing indicative prices with Article III:2 of 
the GATT 1994 .  
7.170  The Panel recalls that its findings in relation to Articles 1 through 7 of the Customs Valuation 
Agreement provide a positive solution to the dispute.  However, notwithstanding this decision, 
assuming arguendo  the permissibility of the use of indicative prices, the Panel will examine whether 
the fact that importers are obliged to pay the sales tax on the basis of the relevant indicative price, 
whenever the indicative price is higher than the de clared transaction value, results in taxation of 
imported subject imports in excess of th at levied on domestically like products,  contrary to 
Article III:2, first sentence, as claimed by Panama.   
7.171  The Panel recalls that Panama has made both an "as such" and "as applied" challenge under 
Article III:2.  Consistent with the approach ta ken with respect to Panama's claims under the Customs 
Valuation Agreement , the Panel considers it appropriate to fi rst consider Panama's claim "as such" 
under Article III:2, first sentence, and will defer its consideration of the admissibility of Panama's "as 
applied" claim until after having concluded its arguendo assessment of Panama's "as such" claim. 
(c) The interaction of Articles 447, 453, 459 a nd 468 of Decree 624 in connection with 
Article 128.5 e) of Decree No. 2685 an d Article 172.7 of Resolution No. 4240 
7.172  As noted by the panel in Dominican Republic – Import and Sales of Cigarettes , in an 
ad valorem  system, the tax payable at any given time is a function of the tax rate and the tax base.  
The Panel notes that Panama's cl aim does not relate to the sales tax rate imposed on imported goods.  
Instead, Panama claims that the use of indicativ e prices as the basis to determine the value of 
imported textiles and other products for the purpose of  levying sales tax, results in taxation in excess 
of that imposed on like domestic products.   
7.173  The Panel recalls from Section VII.B.2(d)(ii) above that the payment by the importer of 
customs duties and sales tax on the basis of the indicative price at issue constitutes a payment stricto 
sensu  rather than a guarantee in the form of a cash deposit.  Therefore, whenever the indicative price 
is higher than the declared value, the indicative pric e is used to determine the customs value of subject 
imports.   
7.174  Bearing this in mind, the Panel understands that, pursuant to Article 459 of Colombia's Tax 
Statute, the taxable base for imports subject to indi cative prices is the addition of (i) the value listed 
on the import declaration (which itself is based on th e applicable indicative price, or the transaction  WT/DS366/R 
 Page 115 
 
 
  value if higher366); and (ii) the amount of customs duties (which is the applicable duty rate multiplied 
by the listed value).367  In contrast, the taxable base fo r the relevant like domestic products as 
prescribed under Article 447 of Decree 624, is the value established based on the transaction value 
("valor de operación ") or, in exceptional circumstances, on the market price.368  In accordance with 
Article 468 of Decree 624, a sales tax rate of 16 per cent is applie d to both imported goods and like 
domestic products. 
7.175  Therefore, whenever the value listed on the im port declaration is the indicative price, the 
method used to determine the taxable base in order to calculate the sales tax applicable to imported 
products will differ from the method used to est ablish the taxable base for domestic like products.369  
The Panel understands that the use of a different methodology to calculate sales tax on imports will 
result in a higher taxable base for imported subject  goods than the taxable base determined for like 
domestic products whenever three conditions are met:  (i) the value declared by the importer is less 
than the corresponding indicative price; (ii) the se lling price of the like domestic product is also less 
than the corresponding indicative price; and (iii) the transaction price of the like domestic product is 
higher than the "market price".  In these cases, the im porter is required to correct the declared price so 
as to adjust it to the higher indicative price, and the importer will have to pay the tax on that basis.  In 
contrast, the seller of a domestic like product will be taxed on the basis of its selling price.  This latter 
price will, under these circumstances,  be lower than the indicative pri ce and, consequently, lower than 
the importer's corrected price. 
(d) The obligations in Article III:2, first sentence 
7.176  Article III:2 embodies one of the basic principles of the GATT 1994 , the National Treatment 
principle.  In the words of the Appellate Body, "t he broad and fundamental pur pose of Article III is to 
avoid protectionism in the application of  internal tax and regulatory measures".370  
7.177  Article III:2, first sentence reads as follows: 
"The products of the territory of any contr acting party imported into the territory of 
any other contracting party shall not be subject , directly or indirectly, to internal taxes 
or other internal charges of any kind in ex cess of those applied, di rectly or indirectly, 
to like domestic products." 
                                                      
366 The Panel recalls that, upon presentation of the import declaration for goods subject to indicative 
prices, if the declared f.o.b. value is lower than the i ndicative price, release of the goods will not be authorized 
unless the importer corrects the value on the declaration on  the basis of the indicativ e price and pays customs 
duties and sales tax on this basis. See Article 128.5 e) of Decree No. 2685 of 1999 (Exhibit COL-1) and 
Article 172.7 of Resolution No. 4240 of 2000 (Exhibit COL-2). 
367 Colombia confirmed the method for calculating the taxable base for imports subject to indicative 
prices in its response to question No. 41 by the Panel.  In its response, Colombia urged the Panel to limit its finding to the aspects referred to by Panama.  In par ticular, Colombia argues that Panama's claim is focused 
exclusively on the fact that indicativ e prices are allegedly used as the basis for determining customs value, 
which is a component of the taxable base used to determine the amount of internal sales tax.  Thus, Colombia considers that Panama's claim does not concern the aspect of adding the amount of the customs duty to the 
customs value of the product.  Panama has not rebutted Colombia's statement. 
368 See Exhibit COL–3.  In accordance with Article 453  of Decree 624, in cases  in which there is no 
invoice or equivalent document, or the invoice or equivalent document shows a price lower than the market 
price, the taxable base shall be determined on the basis of the market price, unless proven otherwise. 
369 The Panel additionally notes that the taxable base used to calculate sales tax applicable to imported 
products will differ from the taxable base for domestic like products in all cases due to the fact that the taxable 
base for imported products includes the amount of customs duties assessed upon entry of the goods.  However, as Panama has not claimed a violation based on the inclusion of the amount of customs duties, the Panel 
declines to consider this issue. 
370 Appellate Body Report, Japan – Alcoholic Beverages II , p. 16. WT/DS366/R 
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  7.178  The Appellate Body in Canada – Periodicals  clarified that two elements must be satisfied in 
order to establish a violation of the first sentence of Article III:2:  a panel must establish that (i) imported and domestic products are like products ; and (ii) imported products are subject to internal 
taxes or charges in excess of taxes assessed on domestic products.
371  In the case at hand, Panama, as 
the complainant, must demonstrate that both tests have been met.372 
7.179  Assuming arguendo  the permissibility of the use of indi cative prices, the Panel will consider 
whether Panama has presented sufficient evidence to  demonstrate that imported goods subject to 
indicative prices are alike to domestic Colombian products.  Only if subject imports and domestic 
products are like products would it be  appropriate to consider under the second test whether the sales 
tax for imported subject goods is in excess of th e sales tax imposed on like domestic products.  
(e) Whether subject imports and dome stic products are like products 
7.180  The Panel notes that Panama has not identif ied individual cases of alleged like products or 
argued on the basis of the recognized likeness criteria.373  According to Panama, all imported goods 
have potential "like" products.  As mentione d above, Colombia has not disputed Panama's 
contentions.  Accordingly, no controversy appears to exist as to whether Panama has discharged its 
burden of proof in this respect.   
7.181  Notwithstanding the absence of disagreement betw een the parties, a panel is still bound by 
Article 11 of the DSU  to make an "objective assessment of the facts of the case and the applicability 
of and conformity with the rele vant covered agreements, and make such other findings as will assist 
the DSB in making the recommendations or in gi ving the rulings provided for in the covered 
agreements".  Therefore, the Panel considers it necessary to examine whether subject imports and 
domestic products are like products. 
7.182  In the Panel's view, where a WTO Member impos es an origin-based distinction with respect 
to internal taxes, imported and domestic products  may be considered as like products, and a case-by-
case determination of "likeness" between the foreig n and domestic would be unnecessary.  The Panel 
recalls that both the Appellate Body and panels ha ve previously recognized the possibility of the 
existence of hypothetical like products, and thus, considered that a likeness analysis would not be 
required, in cases similar to the one before this Panel.374  The Panel considers particularly relevant to 
the present case the following finding of the panel in Indonesia – Autos : 
"Under the Indonesian car programmes the di stinction between the products for tax 
purposes is based on such factors as the nationality of the producer or the origin of the parts and components contained in the product.  Appropriate hypotheticals are 
therefore easily constructed.  An imported motor vehicle alike in all aspects relevant 
to a likeness determination would be taxed at  higher rate simply because of its origin 
or lack of sufficient local content ...  In our view, such an origin-based distinction in 
respect of internal taxes suffices in itself to  violate Article III:2, without the need to 
                                                     
 
371 Appellate Body Report, Canada – Periodicals,  p. 20.   See also Appellate Body Report, Japan – 
Alcoholic Beverages II , pp. 18-19. 
372 Panel Report, Japan – Alcoholic Beverages II , para. 6.14.  In a finding subsequently not reviewed 
by the Appellate Body, the Panel stated that "complainants have the burden of proof to show first that products 
are like and second, that foreign products  are taxed in excess of domestic ones". 
373 In Canada – Periodicals , the Appellate Body found that "the proper [likeness] test is that a 
determination of 'like products' for the purposes of Article III:2, first sentence, must be construed narrowly, on a 
case-by-case basis, by examining releva nt factors including: (i) the product's end-uses in a given market;  (ii) 
consumers' tastes and habits,  and (iii) the product's properties, nature and quality."  Appellate Body Report, 
Canada – Periodicals , pp. 21-22.   
374 Appellate Body Report, Canada – Periodicals , pp. 20-21.  See also Panel Report, Indonesia – 
Autos , para. 14.113.  WT/DS366/R 
 Page 117 
 
 
  demonstrate the existence of actually traded  like products. This is directly in accord 
with the broad purposes of Article III:2, as outlined by the Appellate Body ... ".375 
7.183  This view was further confirmed by the panel in Argentina – Hides and Leather .376  In this 
latter dispute, the panel explained that the "quantum  and nature of the evidence" required for a finding 
under Article III:2, first sentence, would depend on the "structure and design" of the measure at issue.  
Since the level of tax in that case was not determin ed on the basis of the physical characteristics or 
end-uses of the goods at issue, the Panel conclude d that a comparison of specific products was not 
required and, therefore, it did not see fit to exam ine the various criteria relevant to determine the 
likeness between the imported and domestic products.377 
7.184  In the Panel's view, it is also not necessary to determine through a lengthy analysis whether 
imported goods subject to the indicative prices in this  dispute are in fact like products to domestically 
produced Colombian goods.  Based on the desi gn and structure of Article 128.5 e) of 
Decree No. 2685, which authorizes the use of indicative prices, any imported good that arrives from Panama and is subject to indicative prices could potentially have a corresponding like domestically 
produced counterpart.  Indeed, the distinction between products, which determines whether or not 
customs duties and sales tax are assessed, is not b ased on the physical characteristics or end-uses of 
products per se , but rather, the distinction is made based on the fact that imports arrive from Panama.   
7.185  Therefore, assuming arguendo  the permissibility of the use of indicative prices, the Panel 
considers that the first test of Article III:2, firs t sentence is met on the basis of the existence of 
potential "like products" produced in Colombia.   
(f) Whether subject imports are taxed in excess 
7.186  Again assuming arguendo  the permissibility of the use of indicative prices, the Panel will 
next consider whether, under the second  test, imported subject goods are taxed in excess of  domestic 
like products. 
7.187  Under Article III:2, the imposition of internal taxes or charges in excess of taxes assessed on 
domestic products has typically resulted fro m Members' imposition of different tax rates on domestic 
and imported products.  In this case, howe ver, Panama is claiming that taxation in excess  results from 
the use of a different tax base for imported products than that u sed for domestic goods, which leads to 
the imposition of higher sales tax on imported goods.   
7.188  In Argentina – Hides and Leather , the panel evaluated the actual tax burdens at issue as 
opposed to nominal tax burdens: 
"Article III:2, first sentence, requires a comparison of actual tax burdens rather than 
merely of nominal tax burdens.  Were it otherwise, Members could easily evade its 
disciplines.  Thus, even where imported a nd like domestic products are subject to 
identical tax rates, the actual tax burden can still be heavier on imported products.  
This could be the case, for instance, where different methods of computing tax bases 
lead to a greater actual tax burden for imported products."
378   
7.189  The panel in that dispute further considered th at the measure at issue imposed an "actual tax 
burden", despite the fact that the amounts disbursed by importers as "prepayments" in excess of 
                                                      
375 Panel Report, Indonesia – Autos , para. 14.113. 
376 Panel Report, Argentina – Hides and Leather , paras. 11.168-11.170. 
377 Panel Report, Argentina – Hides and Leather , para. 11.169. 
378 Panel Report, Argentina – Hides and Leather , paras. 11.182-11.184.  See also GATT Panel Japan – 
Alcoholic Beverages I , para. 5.8. WT/DS366/R 
Page 118  
 
  amounts paid by domestic sellers were treated as credits against definitive tax liability (and, 
consequently, the additional payments did not give ri se to "net tax payment" in excess).  According to 
the panel, the actual tax burden at issue arose fro m the fact that taxable entities were required to 
commit disposable working capital to finance the requi red prepayments and, therefore, were forced to 
forego interest on that working capital in the interval  between the tax prepayment  and its crediting.  In 
situations where taxable entities did not have a ccess to disposable working capital to finance 
prepayments, the "burden" would result from the fact that taxable entities would need to raise 
additional capital in the interval between tax prep ayment and the ultimate determination of a tax 
credit, and pay interest on additi onal capital during that interval.
379 
7.190  Similarly, the panel in Dominican Republic – Import and Sales of Cigarettes found that the 
Dominican Republic Tax Code created a distincti on in the treatment between domestic and imported 
cigarettes as a result of the application of di fferent methods to calculate the taxable base.380  In that 
dispute, the panel considered whether the levy  of different tax rates on imported and domestic 
cigarettes of identical retail prices on the basis of on average retail selling prices, was inconsistent 
with Article III of the GATT 1994 .  The taxable base for domestic  products was determined on the 
basis of average-price surveys conducted by the Central Bank of the Dominican Republic, whereas, 
the tax base for imported cigarettes was calculated based on the retail price of the "nearest similar 
product on the domestic market".  The complainant al leged that the determination of the taxable base 
based on different criteria resulted in a higher rate  assessed on certain imported cigarettes than on like 
domestic products sold at the same retail price.381  The panel, however, found that the determination 
of the taxable base based on the retail price used  for the nearest similar product "did not lead per se  to 
imported cigarettes being subject to internal ta xes in excess of those applied to like domestic 
cigarettes".  Therefore, the panel analysed whether discrimination occurred "in practice".382   
7.191  The Panel agrees with the view expressed in Dominican Republic – Import and Sale of 
Cigarettes that, in principle, there is no reason to presume that the determination of the taxable base 
under a methodology dependent on the "nearest similar product" would lead to taxation of imports in 
excess of that applied to domestic products.  Indeed, in the light of the facts of that  case, it was 
reasonable to assume that, as long as Dominican cust oms officers made an accurate determination on 
the "similarity" of the imported and the domestic pr oducts, an imported product would not be taxed in 
excess.  In addition, the panel in that case noted that the rules contained in the Dominican Republic 
Tax Code would presumably be interpreted in the light of the implementing legislation.  
Implementing legislation set out a different methodol ogy, which did not distinguish between imported 
and domestic goods. 383   
7.192  The Panel further concurs with the view set forth in Dominican Republic – Import and Sale of 
Cigarettes that a panel should look at whether in practice  authorities tax imported goods on the basis 
of a taxable base that is calculated as highe r than the one applied to domestic products.384 
                                                      
379 Panel Report, Argentina – Hides and Leather , paras. 11.186-11.187. 
380 Panel Report, Dominican Republic – Import and Sale of Cigarettes , paras. 7.351 and 7.354-7.358. 
381 Panel Report, Dominican Republic – Import and Sale of Cigarettes , paras. 7.317-7.319. 
382 Panel Report, Dominican Republic – Import and Sale of Cigarettes , paras. 7.351 and 7.354-7.358. 
383 Panel Report, Dominican Republic – Import and Sale of Cigarettes , para. 7.352.  The Dominican 
Republic had declared that the method actually applied was one contained in this implementing legislation. 
384 In Dominican Republic – Import and Sales of Cigarettes , the Panel based its findings of violation 
under Article III:2 on the specific application by Dominican customs officials, rather than on the design of the 
methodology itself.  As established in that case, Dominican tax authorities determined that Marlboro cigarettes 
were the nearest similar product to imported Viceroy cigarettes, for the 2003 year.  Thus, although Viceroy cigarettes had the same average selling price as the domestic-brand Lider cigarettes, Viceroy cigarettes were 
taxed based on the higher average retail price of Marlboro brand.. See Panel Report, Dominican Republic – 
Import and Sale of Cigarettes , paras. 7.354-7.358.  WT/DS366/R 
 Page 119 
 
 
  7.193  Nevertheless, the Panel considers that the facts of  the case at hand, in spite of their apparent 
similarity, are actually quite different from those in Dominican Republic – Import and Sale of 
Cigarettes .  Whether imported goods under HS Chapters 50-64 will be subject to a sales tax in excess 
of that applied to like domestic products will not de pend on the specific determination by tax officials 
of the likeness of the domestic and the imported goods, as was the case of Dominican Republic – 
Import and Sales of Cigarettes .  Instead, in each and every case in  which the value declared by the 
importer is lower than the corresponding indicative price and the transaction price of the like domestic 
product is both lower than the indicative price a nd higher than the "market price", Colombian tax 
officers are required by Article 459 (in connectio n with Article 128.5 e) of Decree No. 2685 and 
Article 172.7 of Resolution No. 4240) to collect sales tax on the basis of a taxable base that will be 
necessarily higher than the one that would have been used had the product been a domestic like 
product.  Thus, unlike the case of the tax measure in Dominican Republic – Import and Sale of 
Cigarettes , in the present case the application of a taxable base for imported goods higher than the one 
used for domestic like products is inherent in the d esign and structure of the legislation that authorizes 
the application of indicative prices.   
7.194  Therefore, the Panel is not persuaded by Co lombia's argument that Panama should have 
provided specific evidence of how the difference in  the taxable base operates in practice.   
7.195  The Panel recalls that in Japan – Alcoholic Beverages II , the Appellate Body clarified "[e]ven 
the smallest amount of 'excess' is too much".  The Appellate Body further found that "[t]he 
prohibition of discriminatory taxes in Article III:2, fi rst sentence, is not conditional on a 'trade effects 
test' nor is it qualified by a de minimis standard.'"385  Accordingly, the Panel concludes that Colombia 
taxes imported products in excess of the like domestic  products each time that the factual conditions 
set out in paragraph 7.175 above are met, regard less of the amount of the difference between the 
declared and indicative prices. 
7.196  In the Panel's view, such a conclusion is not a ffected by the fact that the importer may obtain 
a reimbursement of the taxes paid in excess during the so-called post-importation process.  First, as 
noted above386, Colombia has failed to substantiate its c ontention that this post-importation control 
process takes place automatically and for each and ev ery instance where the importer is required to 
correct the declared value and pay customs duties and sales tax based on indicative prices.  Second, 
even if that were the case, Colombia's taxati on system would still impose a greater tax burden on 
imported goods than the one imposed on domestic li ke products.  This higher tax burden results from 
the additional financial cost that the importer must incur in the interval between the collection of sales 
tax based on the indicative price and the reimburse ment of the taxes paid in excess during the post-
importation control.387  As established above388, post-importation reimbursem ent may take more than 
two years.  
7.197  Additionally, the Panel would li ke to address Panama's contenti on that exceptional situations 
where the indicative price is the same as or less th an the transaction value are not relevant to the 
determination under Article III:2.  In instances wh ere the transaction value is higher than the 
indicative price, there is no difference in the taxabl e base arising from the use of indicative prices, as 
the transaction value serves as the basis to calcula te sales tax applicable to the import.  Panama 
submits that the "exposure of a particular imported product to a risk of discrimination"389 in itself 
                                                      
385 Appellate Body Report, Japan – Alcoholic Beverages II , p. 23.  This finding was followed by the 
Panel in Argentina – Hides and Leather,  para. 11.243. 
386 See para. 7.126. 
387 As noted in paragraph 7.189 above, the Panel on Argentina – Hides and Leather  found that a tax  
burden may arise based on additional working capital committed to pay higher taxes (including interest 
payable), as well as interest that is forgone on any additional working capital. See Panel Report, Argentina – 
Hides and Leather , paras. 11.187-11.188. 
388 See para. 7.125. 
389 Panama refers to the GATT Panel Report on EEC – Oilseeds I . WT/DS366/R 
Page 120  
 
  constitutes a form of discrimination and is enough to trigger a violation of Article III:2.
390  I n  
examining whether a purchase regulation which does not necessarily discriminate against imported products but is capable of doing so was incons istent with Article III:4, the GATT panel on EEC – 
Oilseeds I concluded that the "exposure of a particular imported product to a risk of discrimination" 
already constitutes a form of discrimination.
391  The Panel agrees with this interpretation and 
considers it applicable to the case of  the specific type of discrimination envisaged in Article III:2, i.e. 
discrimination that results fro m taxation on imported goods in  excess of the like domestic products.  
Accordingly, the Panel considers particular situati ons where the indicative price is the same as the 
transaction value irrelevant to its de termination under Article III:2.   
7.198  As a final matter, the Panel notes Colombia's ar gument that Panama failed to "explain the 
alleged negative impact on competitive opportunities of any difference that exists in the determination 
of the taxable base".392  The Panel does not find support for this position within WTO jurisprudence.  
In Japan - Alcoholic Beverages II , the Appellate Body explained that consideration of trade effects is 
irrelevant for the purpose of determin ations under Article III, stating:  
"[I]t is irrelevant that 'the trade effects'  of the tax differential between imported and 
domestic products, as reflected in the volum es of imports, are insignificant or even 
non-existent; Article III protects expectations  not of any particular trade volume but 
rather of the equal competitive relati onship between imported and domestic 
products"393   
7.199  Moreover, the Appellate Body ruled in Canada – Periodicals that: "[i]t is a well-established 
principle that the trade effects of a difference in tax treatment between imported and domestic 
products do not have to be demonstrated for a measure to be found to be inconsistent with 
Article III".394 
7.200  Therefore, having assumed arguendo the permissibility of the use of indicative prices, the 
Panel is satisfied that the second test in Artic le III:2, first sentence has also been met. 
(g) Conclusion 
7.201  As discussed in Section VII.C.2(b) above, th e Panel does not consider it necessary to make 
findings under Article III:2, first sentence.  However, assuming arguendo  the permissibility of the use 
of indicative prices, the Panel considered whether Article 128.5 e) of Decree No. 2685 and 
Article 172.7 of Resolution No. 4240, as well as the various resolutions establishing indicative prices, 
by mandating the use of indicative prices to dete rmine the taxable base for textile, apparel and 
footwear imports arriving from Panama, would be "as such" inconsistent with Article III:2, first 
sentence since imported subject goods are taxed in excess of  domestic like products. 
7.202  In light of the above, the Panel declines to ex amine Panama's "as app lied" claims under this 
same provision. 
                                                      
390 Panama's first written submission, para. 150. 
391 GATT Panel Report, EEC – Oilseeds I , para. 141. 
392 Colombia's first written submission, para. 159. 
393 Appellate Body Report, Japan – Alcoholic Beverages  II, p. 16. This statement was endorsed in 
Korea – Alcoholic Beverages . Appellate Body Report, Korea – Alcoholic Beverages , para. 119.  See also Panel 
Report, Indonesia – Autos , para. 14.108. 
394 Appellate Body Report, Canada – Periodicals , p. 18.  WT/DS366/R 
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  D. WHETHER COLOMBIA 'S USE OF INDICATIVE PRICES TO DETERMINE THE VALUE OF IMPORTED 
TEXTILES , FOOTWEAR AND OTHER PRODUCTS FOR TH E PURPOSE OF LEVYING SALES TAX IS 
INCONSISTENT WITH ARTICLE  III:4  OF THE GATT 1994  
1. Arguments of the parties 
7.203  In the alternative to its claim under Article III:2 of the GATT 1994 , Panama argues that the 
use of indicative prices as the basis to determine the value of imported textiles, footwear and other 
products for the purpose of levying sales ta x is inconsistent with Article III:4 of GATT 1994 , as this 
methodology is based on laws and regulations affec ting the sale, offering for sale, use and purchase of 
imported products. Notwithstanding the fact that it di d not address its claim under Article III:4 in its 
first written submission, Panama submits that its claim is valid.395 
7.204  Panama submits that in order to establish a vi olation of Article III:4, the Panel must satisfy 
itself that; the imported and domestic products at issue are like products; that the measure at issue is a 
law, regulation or requirement aff ecting their internal sale, offering for sale, purchase ,transportation, 
or use; and that the imported products are accorded  "less favourable" treatment than that accorded to 
like domestic products.  Panama submits that Colo mbia has conceded that the indicative price 
measures apply to imported products  that are like domestic products.396  Additionally, by increasing 
the tax base for imported products only, Panama argues that Colombia provides imported products 
treatment less favourable than that accorded to lik e domestic products and thus, the difference in the 
tax bases is inconsistent with Article III:4 of the GATT 1994 .  
7.205  Colombia responds that Panama has failed to present a claim under Article III.4 in a 
sufficiently clear manner, and that the claim should be rejected by the Panel.397  In this respect, 
Colombia argues that "merely dropping a footnote" in the first submission is not enough to discharge 
its burden of proof of establishing a prima facie case  of violation of the provision at hand as it does 
not develop any legal or factual arguments.398 
7.206  Colombia submits that, in any event, Panama erroneously asserts that only domestic products, 
and not imported products subject to indicative prices, can demonstrate that the declared value 
corresponds with the transaction value.  Colombia submits that importers have the same opportunities 
as domestic producers since it does not conduct custom s valuation on the basis of indicative prices.399  
7.207  Colombia submits that Panama's "less favourab le treatment" claim is poorly developed as is 
does not link the particular facts to the alleged protective discrimination. Colombia argues that 
Panama ignores the fact that customs authorities may have reason to doubt the declared invoiced 
value is the taxable base and would thus use an alternative value for bot h domestic and imported 
products alike. Colombia asserts that there is  no discrimination between domestic and imported 
products, as the starting point for both imported a nd domestic products is the declared transaction 
price.400 
2. Consideration by the Panel 
7.208  As discussed in Section VII.C.2(b) above, the Panel considered it unnecessary to examine 
Panama's claim under Article III:2, first sentence, in  light of its finding that indicative prices are a 
prohibited method of customs valuation.  Notwith standing the decision not to make findings under 
                                                      
395 Panama's second written submission, para. 100. 
396 Panama's second written submission, para. 104. 
397 Colombia's second written submission, para. 97. 
398 Colombia's second written submission, para. 98;  Colombia's first written submission, para. 146. 
399 Colombia's second written submission, para. 101. 
400 Colombia's second written submission, para. 102. WT/DS366/R 
Page 122  
 
  Article III:2, first sentence, the Panel examined Panama's claim assuming arguendo  the permissibility 
of the use of indicative prices, and concluded that the use of indicative prices to determine the taxable 
base for textile, apparel and footwear imports arriving from Panama would be inconsistent as such 
with Article III:2, first sentence.  Since Panama's  claim under Article III:4 is an alternative claim to 
that under Article III:2, first sentence, the Panel doe s not consider it necessary to examine this claim 
further, and thus declines to make a finding under Art III:4 of the GATT 1994. 
E. W
HETHER THE RESTRICTION ON PORT S OF ENTRY APPLICABLE TO TEXTILE , APPAREL AND 
FOOTWEAR ARRIVING FROM PANAMA IS INCONSISTENT WITH ARTICLE  XI:1  OF THE 
GATT 1994  
1. Main arguments of the parties 
7.209  Panama claims that the requirement in the ports  of entry measure to import certain textiles, 
apparel and footwear arriving from Panama excl usively at ports in Bogota and Barranquilla is a 
prohibited restriction within the meaning of Article XI:1 of the GATT 1994 .  Panama submits that the 
ports of entry measure modifies competitive opportunities by increasing overall delivery costs for transportation for goods destined for markets othe r than those near Bogota and Barranquilla, and thus 
constitutes a restriction on importation in violation of Article XI:1.
401  
7.210  According to Panama, Article XI:1 covers a br oad category of "other measures", and not just 
measures such as quotas and export or import restrictions that limit competitive opportunities for imported products.
402  Panama notes that the ordinary meaning of the term "restriction" is "[a] thing 
which restricts someone or something, a limita tion on action, a limiting condition or regulation".403  In 
light of the ordinary meaning of the term "restricti on", Panama argues that a restriction arises within 
the meaning of Article XI:1 where imports are tec hnically allowed into the market without express 
quantitative restrictions, but are only allo wed under conditions which are "limiting".404  P a n a m a  
submits that references to "quantitative  restrictions" in certain portions of  Article XI but not the rest of 
the Article support a broad interpretation, as the references are intentional and demonstrate that 
negotiators intended any reference to quantitative restriction would apply only when "quantity" was 
specifically mentioned.405  In Panama's view, an interpretation that Article XI:1 applies only to 
measures which expressly set limits on quantity or value would undermine the scope of Article XI:1 
and would allow circumvention of tariff concessions by permitting the introduction of restrictions that 
are not quantitative in nature, but are nevertheless restrictions.406   
7.211  As an evidentiary matter, Panama considers its challenge against the ports of entry restriction 
is based on the structure, architecture and design of the measure itself.  As such, Panama argues it has 
not alleged a de facto  restriction on importation, and therefor e is not required to demonstrate a causal 
link between the ports of entry measure and a low level of imports.407  Furthermore, as a practical 
matter, Panama submits that it is not possible to de termine that a decline in imports resulted from the 
ports of entry measure in isolation from other factors.408  Nevertheless, if the Panel were to consider 
that Panama has made a de facto  challenge, Panama argues that evidence reveals an actual decline in 
the volume of textile imports from Panama at the ti me the ports of entry measure came into force.409  
Specifically, Panama submits that textile quantiti es imported from Panama declined in March 2005 
                                                      
401 Panama's first written submission, para. 160;  Panama's second oral statement, para. 33. 
402 Panama's second oral statement, paras. 18 - 22. 
403 Panama's second oral statement, para. 19, citing The New Oxford English Dictionary , Vol. 2, 
p. 2569. 
404 Panama's second written submission, para. 35. 
405 Panama's first oral statement, para. 28. 
406 Panama's second oral statement, para. 26. 
407 Panama's second written submission, paras. 42-45. 
408 Panama's second oral statement, para. 33. 
409 Panama's second oral statement, para. 34, citing to Exhibit COL-42, chart 3.  WT/DS366/R 
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  when a measure similar to the ports of entry meas ure was in place, and imports declined again in 
March 2008 when the ports of entry measure at issue was imposed.   
7.212  Colombia requests the Panel to reject Panama's interpretation of Article XI:1.  According to 
Colombia, the text throughout Article XI, including  its title establishes that Article XI:1 applies 
exclusively to limitations placed on the quantity or va lue of imports or exports, either as an absolute 
prohibition or a partial limitation.410  Thus, Members may impose certain justified conditions on 
access to their markets as long as the fundamental thru st and effect to these measures is not to limit 
the amount of imports in terms of volume or value.411  The term "other measures" is included in the 
text to ensure that the goal of Article XI applies to measures that set limitations on quantity or value, 
other than strictly quotas or export/import licences.412  Colombia submits that Panama's interpretation 
of Article XI is overly broad as it implies that an y government regulation relating to importation be 
considered a prohibited quantitative import restricti on.  Colombia considers Panama's interpretation 
would convert Article XI into a ge neral elimination of all "conditions",  since any regulation related to 
importation necessarily imposes some conditions wh ich make importation more burdensome to a 
certain extent.413 
7.213  Colombia argues that a narrow interpretation of the term "restriction" in Article XI is further 
confirmed from the context provided by Articles XII and XIII of the GATT 1994  and the TRIMs 
Agreement .  In particular, Colombia considers the referen ce to restrictions on the "quantity or value of 
merchandise permitted to be imported"  under Article XII:1 and to "Qua ntitative Restrictions" in the 
title of Article XIII confirm that some limitation on quantity or value must arise.414  In support of its 
interpretation of Article XI:1, Colomb ia also refers to language in Pa ragraph 2 of the Illustrative List 
of the Annex of the TRIMs Agreement  which describes those TRIMs that are inconsistent with 
Article XI:1, notably measures which "restrict ... impo rtation ... generally or to an amount related to 
the volume or value of local production that it exports".415 
7.214  Colombia additionally considers that Article  XI, by prohibiting Members from imposing any 
numerical limitation on imports, is compa tible with the goal inherent in the GATT 1994  of liberalizing 
trade and securing an open and predictable trading sy stem.  Moreover, Colombia considers its view  
complements the obligations presented in Articles II and III of the GATT 1994 .416  According to 
Colombia, historical international trade ag reements which preceded the advent of the GATT 1947  also 
distinguished between prohibited import or export rest rictions and regulations related to the form or 
place of importation that were not used as a means of disguised protection or arbitrary restriction.417 
7.215  In light of its interpretation, Colombia argues th at Panama must demonstrate that the ports of 
entry measure places limitations on the qua ntity or value of imports or exports.418  Colombia considers 
Panama cannot establish the existence of a de jure violation as the ports of entry measure does not per 
se limit the amount of imports in terms of value or volume.419  Colombia argues that, while placing a 
condition on importation by directing imports through two specific ports of entry, the ports of entry 
measure does not impose any express limitation on th e volume or value of imports that are allowed 
                                                      
410 Colombia's second written submission, para. 108. 
411 Colombia's second oral  statement, para. 37. 
412 Colombia's second written submission, para. 109.   
413 Colombia's second written submission, para. 110.   
414 Colombia's first written submission, paras. 221-223. 
415 Colombia's first written submission, para. 223. 
416 Colombia's first written submission, para. 224. 
417 Colombia's second oral  statement, footnote 27. 
418 Colombia's second written submission, para. 111. 
419 Colombia's second written submission, para. 120. WT/DS366/R 
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  into Colombia.
420  Colombia submits that the measure is in stead "quantity-neutral" by design and aims 
to ensure effective customs control.421   
7.216  Colombia further argues that Panama has failed to meet its burden of proof to establish the 
existence of a de facto restriction under Article XI:1422, which requires a complainant to demonstrate a 
low level of imports and establish a causal link between the contested measure and the low import 
levels.423  Colombia submits that Panama cannot demonstrate a decrease in imports during the ports of 
entry measure's imposition, as the value of textile, apparel and footwear imports increased between 
2006 and 2007, while shipment in terms of weight declined only slightly during those years.424  
Colombia also disputes Panama's argument that shipping costs provided in a single quotation reveal 
that importers incur higher transportation costs unde r the ports of entry measure, and that these higher 
shipping costs negatively affect trade levels.425 
7.217  While Colombia considers the available trade statistics demonstrate the absence of adverse 
trade effects, and thus the absence of any restriction426, Colombia nevertheless offers other 
explanations as to why the ports of entry measure has not contributed to a decline in imports.  In this 
regard, Colombia disputes Panama's argument that the ports of entry measure has hindered traders' 
competitive opportunities or negatively affected te xtile, apparel or foot wear import volumes.  
Primarily, Colombia notes that the ports of entry meas ure allows entry of text ile, apparel and footwear 
at the two ports that are closest in proximity to the CFZ and main markets of Colombia – Bogota and 
Medellin.427  Colombia also claims that Barranquilla seaport operates 24 hours per day428 and that 
Bogota airport has more customs official s than any other office in Colombia.429  Colombia describes 
the ports at Bogota and Barranquilla as "among the mo st modern and important ports of Colombia", 
which staff officials specialized in handling cont raband concerns related to  textiles, apparel and 
footwear and offer improved container processing.430  According to Colombia, Bogota and 
Barranquilla are ranked as the number one and two ports  for footwear, the number one and three ports 
for apparel, and the number two and three ports for textiles.431 
7.218  For all these reasons, Colombia asks the Panel to reject Panama's claim under Article XI:1 of 
the GATT 1994 .  
2. Consideration by the Panel 
(a) Legislation authorizing restrictions on ports of entry 
7.219  The parties have referred to legislation authoriz ing restriction on ports of entry as the ports of 
entry measure.  Specifically, Article 2 of Resolution No. 7373 of 22 June 2007432, as modified by 
                                                      
420 Colombia's second oral  statement, para. 39. 
421 Colombia's second oral  statement, para. 40. 
422 Colombia's first written submission, para. 243. 
423 Colombia's first written submission, paras. 244-245.   
424 Colombia's second oral  statement, para. 41. 
425 Colombia's second written submission, para. 124. 
426 Colombia's first written submission, para. 254. 
427 Colombia's second written submission, para. 135. 
428 Colombia's second written submission, para. 137. 
429 Colombia's second written submission, para. 137. 
430 Colombia's second written submission, para. 137. 
431 Colombia's second written submission, para. 138,  Exhibit COL-28. 
432 Exhibit PAN-34.  Resolution No . 7373 was implemented in accord ance with Article 41 of the 
Customs Statute (Exhibit COL–1), which permits Colombia n customs authorities to restrict access to ports of 
entry whenever authorities are not satisfied that they will be able to fully exercise their powers of control and 
verification.  On this basis, under see Article 39 of Resolution No. 4240 of 2000 (Exhibit PAN–38), for 
instance, Colombia has restricted access for all textiles, apparel and footwear  classifiable under Chapters 50 64  WT/DS366/R 
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  Resolution No. 7673 of 28 June 2007433, authorizes Colombian customs officials to restrict entry of 
textile, apparel and footwear goods classifiable under Chapters 50-64 of the Colombian Tariff 
Schedule434 that arrive from Panama to either the Bogota airport or Barranquilla seaport: 
"Las mercancías clasificables por los cap ítulos 50 al 64 del Arancel de Aduanas, 
procedentes de la Republica de Pana má, deberán ser ingresadas e importadas 
exclusivamente por la jurisdicción de la Administración Especial de Aduanas de 
Bogotá, si se transportan por vía aérea y por la jurisdicción de la Administración Local de Aduanas de Barranquilla, si se transportan por vía marítima, y por tanto, 
no procederá para estas mercancías la autorización del régimen de tránsito 
aduanero ."
435 
7.220  The general restriction on ports of entry under Ar ticle 2 of Resolution No. 7373 is subject to 
several exceptions.  Under Article 4 of Resoluti on No. 7373, restrictions will not apply to the 
following categories:  goods consigned or endorsed to the State436; goods imported for specific state 
or emergency uses, to travellers or postal traffic, or in route to Leticia, San Andrés o Santa Catalina437; 
goods submitted for trans-shipment that do not have  Colombia as their final destination, and goods 
consigned to industrial users of free trade zones438; and goods classifiable under sections 6401 to 6405 
of Colombia's Customs schedule that arrive at any of  the 11 ports designated in Article 39, paragraph 
1 of Resolution No. 4240 of 2000.439  Resolution No. 8603 of 24 July 2007440 establishes an additional 
exemption for goods classifiable under sections 6406 of Colombia's Customs schedule, and 
Resolution No. 7637 of 28 June 2007441 further exempts goods consigned or endorsed to "Usuarios 
Altamente Exportadores" and "Usuarios Aduaneros Permanentes". 
7.221  Non-compliance with the obligation to enter a nd import goods from Panama exclusively at 
Bogota airport or Barranquilla seaport will subj ect the goods to seizure and forfeiture.442 
7.222  Resolution No. 7373 was implemented for a peri od of approximately six months beginning 1 
July 2007.443  The period of application of the measure has been extended on two occasions at the 
time of this writing 444, and is currently set to expire on 31 December 2008.  
7.223  Resolution No. 7373 and its amendments are hereaf ter in this section referred to as the "ports 
of entry measure". 
                                                                                                                                                                     
of the Colombian Tariff Schedule from all countries to  11 ports of entry.  Thes e ports are: Barranquilla, 
Bucaramanga, Buenaventura, Cali, Cartagena, Cúcuta, Ip iales, Leticia, Medellín, San Andrés and Bogota.   
433 Exhibit PAN-36. 
434 As explained in Section II.C, Panama has clarif ied that it is challenging the application of the 
measure to all textile, apparel and  footwear goods which are deemed to fall within the scope of the ports of entry 
measure. 
435 Exhibit PAN-36.   
436 Exhibit PAN-34, Article 4, para. 1. 
437 Exhibit PAN-34, Article 4, para. 2. 
438 Exhibit PAN-34, Article 4, para. 3. 
439 Exhibit PAN-34, Article 4, para. 4. 
440 Exhibit COL-35. 
441 Exhibit COL-36. 
442 Article 5 of Resolution No. 7373 (Exhibit PAN-34) 
443 Exhibit COL-34, para. Article 8. 
444 Resolution No. 16100  of 27 December 2007;  Colombia's re sponse to Panel question No. 122;  
Resolution No. 5542 of 2008. WT/DS366/R 
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  (b) The text of Article XI of the GATT 1947  
7.224  The Panel is called upon to examine whether the ports of entry measure as described above is 
inconsistent with Article XI:1 of the GATT 1994 .  Article XI of the GATT 1994  provides as follows: 
"General Elimination of Quantitative Restrictions  
1. No prohibitions or restrictions other than duties, taxes or other charges, 
whether made effective through quotas, im port or export licenses or other measures, 
shall be instituted or maintained by any contracting party on the importation of any 
product of the territory of any other contrac ting party or on the exportation or sale for 
export of any product destined for the territory of any other contracting party." 
2. The provisions of paragraph 1 of this Article shall not extend to the 
following:  
(a) Export prohibitions or restri ctions temporarily applied to 
prevent or relieve critical shor tages of foodstuffs or other 
products essential to the exporting contracting party;  
(b) Import and export prohibitions or restrictions necessary to the 
application of standards or regulations for the classification, 
grading or marketing of commodities in international trade;  
(c) Import restrictions on any agricultural or fisheries product, 
imported in any form
445, necessary to the enforcement of 
governmental measures which operate:  
(i) to restrict the quantities of the like domestic product 
permitted to be marketed or produced, or, if there is 
no substantial domestic production of the like product, of a domestic product for which the imported product can be directly substituted; or  
(ii) to remove a temporary surplus of the like domestic 
product, or, if there is no substantial domestic 
production of the like product, of a domestic product for which the imported product can be directly substituted, by making the surplus available to certain groups of domestic consumer s free of charge or at 
prices below the current market level; or  
(iii) to restrict the quantities permitted to be produced of 
any animal product the production of which is directly dependent, wholly or mainly, on the imported commodity, if the domestic production of that commodity is relatively negligible.  
Any contracting party applying rest rictions on the importation of any 
product pursuant to subparagraph (c ) of this paragraph shall give 
                                                     
 
445 The Ad Note to Article XI:2(c) provides as follows : "The term 'in any form' in this paragraph covers 
the same products when in an early stage of processing and still perishable, which compete directly with the 
fresh product and if freely imported would tend to make the restriction on the fresh product ineffective."  WT/DS366/R 
 Page 127 
 
 
  public notice of the total quantity or value of the product permitted to 
be imported during a specified future period and of any change in such quantity or value. Moreover, any restrictions applied under (i) 
above shall not be such as will reduce the total of imports relative to the total of domestic production, as compared with the proportion 
which might reasonably be expected to rule between the two in the 
absence of restrictions. In determining this proportion, the contracting party shall pay due regard to the proportion prevailing during a previous representative period and to any special factors
446 
which may have affected or may be affecting the trade in the product 
concerned." 
7.225  Article XI thus foresees the elimination of impor t or export restrictions or prohibitions.  The 
Panel will proceed to examine whether the ports of entry measure is a restriction on importation of the 
type prohibited by Article XI of the GATT 1994 . 
(c) The ports of entry measure as an "other measure" 
7.226  As per its text, Article XI:1 covers prohibiti ons and restrictions "made effective through 
quotas, import or export licenses or other measures".  The ports of entry measure is clearly not a quota 
or an import/export licence.  Nevertheless, the ports of  entry may fall within the scope of Article XI:1 
to the extent that it qualifies as an "other measure".  In Japan – Semi-Conductors , the GATT panel 
recalled that: 
"Article XI:1, unlike other provisions of the General Agreement, did not refer to laws 
or regulations but more broadly to measures.  This wording indicated clearly that any 
measure instituted or maintained by a contracting party which restricted the 
exportation or sale for export of products was covered by this provision, irrespective 
of the legal status of the measure."447 
7.227  WTO panels have also concluded that the language "other measures" in Article XI:1 is meant 
to encompass a "broad residual category"448, and that the concept of a restriction on importation 
covers any measures that result in "any form of limitation imposed on, or in relation to  
importation".449   
7.228  In this dispute, the ports of entry measure is  a measure instituted and maintained by a WTO 
Member that is imposed on importation of textiles,  apparel and footwear arriving from Panama.  The 
Panel therefore preliminarily concludes that the po rts of entry measure, while not a quota or import 
licence, could fall within the residual category of  "other measure" that may be challenged under 
Article X1:1.450  The Panel will thus proceed to consider  whether the ports of entry measure is a 
"restriction" on importation within the meaning of Article XI:1. 
                                                      
446 The Ad Note to Article XI:2 last subparagraph pr ovides as follows: "The term 'special factors' 
includes changes in relative productive efficiency as be tween domestic and foreign producers, or as between 
different foreign producers, but not changes artificially br ought about by means not permitted under the 
Agreement." 
447 GATT Panel Report, Japan – Semi-Conductors , para. 106. 
448 Panel Report, Argentina – Hides and Leather , para. 11.17. 
449 Panel Report, India – Autos , paras. 7.254-7.263 and 7.265;  Panel Report, Brazil – Retreaded Tyres , 
para. 7.371. 
450 The Panel notes that Colombia has not disputed whether the ports of entry measure is a government 
measure, nor does it dispute that government measures may properly be challenged under Article XI (see 
Colombia's first written submission, para. 230). WT/DS366/R 
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  (d) The ports of entry measure as a "restriction on importation" 
(i) The concept of a restriction on importation under Article XI:1 
7.229  In order to determine whether the ports of entr y measure violates Article XI:1, the Panel must 
establish whether the measure imposes a "restriction" within the meaning of Article XI:1.   
7.230  The Panel recalls Panama's argument that Article  XI:1 covers a broad category of measures 
that limit competitive opportunities for imported products.
451  In essence, based on the ordinary 
meaning of "restriction", Panama considers that Ar ticle XI broadly covers situations where imports 
are technically allowed into the market without express quantitative restrictions, but are only allowed 
under conditions which are "limiting".452  This includes circumstances where imports are not limited 
absolutely or by a specific amount.453  Despite the various references to "quantitative  restrictions" in 
certain provisions of Article XI, Panama argues that  Article XI:1 should nevertheless be interpreted 
broadly. Panama argues that the references are intentional and only serve to demonstrate that 
negotiators intended any reference to quantitative restriction would apply only when "quantity" was 
specifically mentioned.454  Moreover, Panama submits that an in terpretation that Article XI:1 applies 
only to measures which expressly set limits on quan tity or value would un dermine the scope of 
Article XI:1 by allowing circumvention of tariff concessions through the introduction of restrictions 
that are not quantitative in nature, but are nevertheless restrictions.455 
7.231  Colombia argues that Article XI:1 should be interpreted more narrowly.  According to 
Colombia, Members are only prohibited from imposing measures which limit the amount of imports that may be entered by quantity or value of imports.  Thus, a Member may condition access to its 
market as long as the measure by design does not set a limit on the amount or value of imports.
456  
Colombia considers this view supported by the text  and title of Article XI:1 as well as Articles XII 
and XIII of the GATT 1994 , and Article 2 and the Illustrative List of the TRIMs Agreement .  In 
particular, Colombia has cited to the inclusion of th e term "Quantitative" in the title of Article XI and 
in several provisions in Article XI:2.  Colombia also  notes the reference to restrictions of the "quantity 
or value of merchandise perm itted to be imported" under Artic le XII:1 and to "Quantitative 
Restrictions" in the title of Article XIII.457  Finally, Colombia notes that Paragraph 2 of the Illustrative 
List of the Annex of the TRIMs Agreement  describes the type of TRIMs that should be considered 
inconsistent with Article XI:1, in particular , among other measures, those which "restrict ... 
importation ... generally or to an amount related to  the volume or value of local production that it 
exports".458  Colombia concludes that each of these refe rences reveals that only measures which limit 
imports by value or amount are covered under Article XI:1.   
7.232  The Panel will first consider the concept of r estriction as it has been interpreted in WTO and 
GATT jurisprudence, and subsequently address the pa rties' views to the extent necessary in reaching 
its conclusion as to the meaning of  restriction under Article XI:1. 
                                                      
451 Panama's second oral statement, paras. 18 and 33. 
452 Panama's second written submission, para. 35. 
453 Panama's second oral statement, para. 19;  Panama's second written submission, para. 35. 
454 Panama's first oral statement, para. 28. 
455 Panama's second oral statement, para. 26. 
456 Colombia's second oral  statement, para. 37. 
457 Colombia's first written submission, paras. 221-2 23.  The Panel notes that Article XI of the 
GATT 1994 is entitled "General Elimination of Quantitative Rest rictions".  Moreover, several subparagraphs of 
Article XI:2 refer to restrictions of permitted quantities of specific types of products.  Furthermore, the concluding paragraph of Article XI:2 refers to the need to "give public notice of the total quantity or value of the 
products permitted  to be imported". 
458 Colombia's first written submission, para. 223.  WT/DS366/R 
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  7.233  WTO panels have interpreted the term "restricti on" in Article XI:1 broadly.  The panel in 
India – Quantitative Restrictions  discussed the scope of the notion of "restriction" in terms of its 
ordinary meaning: 
"[T]he text of Article XI:1  is very broad in scope, pr oviding for a general ban on 
import or export restrictions or prohibitions 'o ther than duties, taxes or other charges'.  
As was noted by the panel in Japan – Trade in Semi-conductors , the wording of 
Article XI:1 is comprehensive: it applies 't o all measure instituted or maintained by a 
[Member] prohibiting or restricting the impor tation, exportation, or sale for export of 
products other than measures that take the form of duties, taxes or other 
charges.'[footnote omitted]  The scope of the te rm 'restriction' is also broad, as seen in 
its ordinary meaning, which is 'a lim itation on action, a limiting condition or 
regulation'."459 
7.234  The panel in India – Autos subsequently endorsed the view set forth in India – Quantitative 
Restrictions  that a measure which imposes a "limiting condition" or imposes a "limitation on action" 
constitutes a "restriction" within the meaning of Article XI:1: 
"The question of whether [the] measure can appropriately be described a restriction 
on importation turns on the issue of whether Article XI can be considered to cover 
situations where products are technically a llowed into the market without an express 
formal quantitative restriction, but are only allowed under certain conditions which 
make the importation more onerous than if the condition had not existed, thus 
generating a disincentive to import. 
On a plain reading, it is clear that a 'restriction' need not be a blanket prohibition or a 
precise numerical limit. Indeed, the term 'restriction' cannot mean merely 'prohibitions' on importation, since Article XI :1 expressly covers both 'prohibition or 
restriction'. Furthermore, the Panel considers that the expression ' limiting condition
' 
used by the India – Quantitative Restrictions  panel to define the term 'restriction' and 
which this Panel endorses, is helpful in id entifying the scope of the notion in the 
context of the facts before it. That phrase suggests the need to identify not merely a 
condition placed on importation, but a condition that is limiting, i.e. that has a limiting effect. In the context of Article XI, that limiting effect must be on importation itself."
 460 
7.235  In terms of the ordinary meaning of the term "restriction", the Panel notes that the discussion 
in India – Quantitative Restrictions  and India – Autos correlates closely with dictionary definition of 
the term "restriction", which is "a thing which r estricts someone or something, a limitation on action, 
a limiting condition or regulation".461  Several subsequent panels have coalesced around this 
interpretation of the scope of Article  XI:1, citing to the language set fo rth by these earlier panels while 
factoring in the circumstances of each dispute.462   
                                                      
459 Panel Report, India – Quantitative Restrictions , para. 5.128. 
460 Panel Report, India – Autos , paras. 7.269-7.270.  In that particular dispute, the Panel considered 
whether a trade balancing condition which did not set an ab solute numerical limit on the amount of imports that 
could be made, but limited the value of imports that could be made to the value of exports a particular entity intended to make, constituted a restriction on importation within the meaning of Article XI:1.   
461 The New Oxford English Dictionary , Vol. 2, p. 2569. 
462 The Panels in Brazil – Retreaded Tyres and Dominican Republic – Import and Sale of Cigarettes , 
for instance, cited, with approval, to key passages from India – Quantitative Restrictions  and India – Autos , 
which delineated this standard:  see Panel Report, Brazil – Retreaded Tyres , para. 7.371;  Panel Report, 
Dominican Republic – Import and Sale of Cigarettes , paras. 7.252 and 7.258. WT/DS366/R 
Page 130  
 
  7.236  Panels have also considered the concept of "r estriction" in light of factors other than the 
ordinary meaning of the term.  Notably, panels  have also considered whether a measure makes 
effective a restriction by evaluating the measur e's impact on competitive opportunities available to 
imported products.  In this respect, the panel in Argentina – Hides and Leather  recalled that 
"Article XI:1, like Articles I, II and III of the GATT 1994 , protects competitive opportunities of 
imported products not trade flows".
463  Consideration of a measure's effect on competitive 
opportunities, instead of effects on trad e volumes, was earlier discussed in Japan – Leather , in which 
a GATT panel rejected the view that a quota should not  be considered as restraining trade or causing 
nullification or impairment of benef its accruing under Article XI of the GATT 1947  simply because 
the quota had not been fully utilized and thus could not have negatively affected trade volumes.  The 
panel explained that nullification or impairment arises from prohibited quantitative restrictions, not 
only due to effects on trade volumes, but also because importers investment plans would be affected negatively and transaction costs would increase: 
"[T]the existence of a quantitative restriction should be presumed to cause 
nullification or impairment not only because of  any effect it had had on the volume of 
trade but also for other reasons, e.g. it w ould lead to increased transaction costs and 
would create uncertainties which could affect investment plans."
464 
7.237  More recently, the panel in Brazil – Retreaded Tyres  found a violation of Article XI:1 where 
fines did not impose a per se  restriction on importation, but act ed as an absolute disincentive to 
importation by penalizing it and ma king it "prohibitively costly".465  The panel concluded that the 
fines of R$400, which exceeded the normal per unit value of a typical retreaded tyres (R$100-280), 
were "significant enough" to have a restrictive e ffect on importation in violation of Article XI:1.466  
The fines were applied in addition to, and in su pport of, an actual prohibition on importation as an 
enforcement measure.467 
7.238  In addition to considering a measure's impact on transaction costs, when assessing its effect 
on competitive opportunities and, as such, its compa tibility with Article XI:1, panels have also 
                                                      
463 Panel Report, Argentina – Hides and Leather , para. 11.20.  The importance of upholding 
competitive opportunities has also been di scussed in connection with Article XI :1 prior to the establishment of 
the WTO.  In EEC – Oilseeds I , the GATT Panel stated that "the CONTRACTING PARTIES have consistently 
interpreted the basic provisions of the General Agreement on restrictive trade measures as provisions 
establishing conditions of competition.  Thus they decided that an import quota constitutes an import restriction 
within the meaning of Article XI:1 whether or no t it actually impeded imports: see GATT Panel Report, EEC – 
Oilseeds I .  Additionally, the notion of protecting competitive opportunities has been discussed extensively in 
the context of claims under Articles I and III of the GATT :  see , for example , Appellate Body Report, Dominican 
Republic – Import and Sale of Cigarettes , para. 5.141;  Appellate Body Report, Korea – Various Measures on 
Beef, paras. 135-137;  Appellate Body Report, Korea – Alcoholic Beverages , paras. 119-120, 127;  Appellate 
Body Report,  Japan – Alcoholic Beverages II , p. 16,  Panel Report, Turkey – Rice , para. 7.252,  Panel Report, 
US – FSC (Article 21.5 – EC) , para. 8.128,  Panel Report, Chile – Alcoholic Beverages , para. 7.158,  Panel 
Report, Korea – Alcoholic Beverages , para. 10.81,  Panel Report, Indonesia – Autos , para. 14.108,  Panel 
Report, Japan – Film , para. 10.739,  Panel Report, EC – Bananas III , para. 7.50;  GATT Panel Report US – 
Superfund , para. 5.19. 
464 GATT Panel Report, Japan – Leather II (US) , para. 55.  In relation to claims under Article III of the 
GATT 1994 , panels have also considered increases in transportation costs, or shifts in consumption due to 
discriminatory taxes that affected the cost of importe d products were important factors affecting competitive 
opportunities:  see Panel Report, Canada – Wheat Exports and Grain Imports , para. 6.348 (upheld by the 
Appellate Body);  Panel Report, US – Section 301 Trade Act , paras. 7.83-7.84. 
465 Panel Report, Brazil – Retreaded Tyres , para. 7.370. 
466 Panel Report, Brazil – Retreaded Tyres , para. 7.372. 
467 Colombia considers the linkage of the fines to the import prohibition measure essential to the 
finding of a violation, since the fines did not per se  limit imports: see Colombia's second written submission, 
para. 118.  The Panel notes, however, that separate fi ndings were made concerning the import ban, on the one 
hand, and the fines, on the other hand.  WT/DS366/R 
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  considered restrictions on market access.  In re lation to claims brought under Article XI of the 
GATT 1994 , the GATT panel in Canada – Provincial Liquor Boards (EEC) concluded that 
listing/delisting requirements and limitations  on the availability of points of sale468 which 
discriminated against imported alcoholic beverages were "restrictions made effective through 'other 
measures' contrary to the provisions of Article XI:1."469  In a subsequent Report, a separate GATT 
panel examined a number of similar aspects of the m easure from this dispute under Article III:4 of the 
GATT 1947  and concluded that "by allowing the access of domestic beer to points of sale not 
available to imported beer, Canada accorded dom estic beer competitive opportunities denied to 
imported beer".470   
7.239  The notion of protecting market access for impor ts was also taken into consideration in EEC – 
Minimum Import Prices , where a GATT panel found that a minimum import price and security 
system for tomato concentrate resulted in a restri ction under Article XI:1 even though it did not 
impose a per se quantitative limit on the amount of imports.471   
7.240  Thus, as evidenced above, a number of GA TT and WTO panels have recognized the 
applicability of Article XI:1 to measures which cr eate uncertainties and affect investment plans, 
restrict market access for imports or make impor tation prohibitively costly, all of which have 
implications on the competitive situation of an importe r.  Moreover, it appears that findings in each of 
these cases were based on the design of the measure and its potential to adversely affect importation, 
as opposed to a standalone analysis of the actual impact of the measure on trade flows.   
7.241  The Panel agrees with the interpretation of th e term restriction taken by previous WTO and 
GATT panels as well as their decision to base findi ngs on the design of the measure, as opposed to 
resulting trade effects.   
                                                      
468 The importation of alcoholic beverages into Canada, at the time of the dispute, was regulated by the 
federal government.  Under federal legislation, the Cana dian Parliament restricted the importation of alcoholic 
beverages into a province except to pr ovincial agencies vested with the right to sell alcoholic beverages. This 
restriction applied whether the importation was from a foreign country or from another province.   Additionally, 
each Canadian province required a license obtained from th e designated provincial au thority to manufacture or 
store and sell beer in the province. No foreign brewer was permitted to sell beer in a province except through the liquor board.  On the basis of the provincial legislation governing the right to sell beer, each province had 
developed its own system for the delivery and sale at retail outlets.  While circumstances varied from province 
to province, generally any supplier of alcoholic beverages, domestic or imported, wishing to sell a product in a province first needed to obtain a "listing" from the provin cial marketing agency.  See, e.g., GATT Panel Report, 
Canada – Provincial Liquor Boards (EEC) , paras. 2.1-2.5. 
469 GATT Panel Report, Canada – Provincial Liquor Boards (EEC) , paras. 4.24-4.25. 
470 GATT Panel Report, Canada – Provincial Liquor Boards (US) , para. 5.6. 
471 GATT Panel Report, EEC – Minimum Import Prices , para. 4.9.  Under the measure at issue, 
importers of tomato concentrates were required to pr ovide additional security to guarantee that the free-at-
frontier price of the products to be imported plus the customs duty payable would together be equal to or more 
than a determined minimum price or sp ecial minimum price, whichever was ap propriate.  The s ecurity would be 
forfeit in proportion to any quantities imported at a price lower than the minimum price or special minimum 
price.  If an importer were able to guaranty that produ cts originating in third countries that the price on import 
into the Community would not be less than the minimum price for the product in question, the importer would not be required to provide additional security (see GATT Panel Report, EEC – Minimum Import Prices , 
para. 2.6).  In a dissenting opinion, one panelist out of a panel of five in this dispute considered that, while the 
minimum price system, operating in tandem with the additional security "could well be applied in a way which would qualify it as a restriction 'other than duties, ta xes or other charges' under Article XI:1", interested 
exporters could still import tomato concentrates below the minimum price (see GATT Panel Report, EEC –
Minimum Import Prices , para. 4.9).   WT/DS366/R 
Page 132  
 
  (ii) Colombia's contextual arguments on interp retation of Article XI:1 of the GATT 1994 
7.242  Before proceeding, the Panel would like to a ddress arguments by Colombia pertaining to the 
relevance of the additional provisions in Article XI:1 and Article XI:2, as well as surrounding Articles 
and the TRIMs Agreement  in the interpretation of the term "restriction". 
7.243  Colombia has argued that the concept of "restri ction" in Article XI should be interpreted 
narrowly as only concerning restrictions imposing quantity limitations in light of the title of 
Article XI:1, and the context provided by other provisions in Article XI:2 and provisions in 
surrounding Articles.  The Panel does not consider  the limited language appearing in the title of 
Article XI ("General Elimination of Quantitative R estrictions") as determinative in interpreting the 
ensuing specific provisions.  In the Panel's view, its approach is consistent with the notion that 
Article XI of the GATT 1994  (and the GATT 1947 ) was intended for the general elimination of 
quantitative restrictions.  The Panel feels it is appropriate to consider a measure's effect on 
competitive opportunities, as negative effects on the competitive landscape for importers of a 
particular product in relation to domestic producers or other importers will inevitably pose damaging 
consequences for importation.  In this sense, the panel in India – Autos stated that "it is clear that a 
'restriction' need not be a blanket prohibition or a precise numerical limit."
472  More broadly, in the 
Panel's view, a measure that has identifiable ne gative consequences on the importation of a product 
will result in a restriction on importation under Article XI:1. 
7.244  The appearance of the term "quantitative" in Artic le XI:2 does not run contrary to the Panel's 
interpretation of the term "restriction" within Ar ticle XI:1.  The Panel first notes that the term 
"quantitative restrictions" is not used in any paragr aph of Article XI and only appears in the general 
title to Article XI.  Article XI:1 does not refer to restrictions of quantity .  While certain provisions in 
Article XI:2 refer to "quantities permitted", such as in subparagraphs 2(c)(i) and 2(c)(iii), as well as in 
the concluding paragraph of Article XI:2, the Pa nel notes that other subpara graphs do not refer to 
quantities at all.  Indeed, the various subparagraphs of Article XI:2 are each specific and thus limited 
in scope, for instance, regulating restrictions te mporarily applied to prevent or relieve critical 
shortages of food in the case of subparagraph 2(a), or  restrictions on agricultural or fisheries products 
in the case of subparagraph 2(c).  Article XI:1  inherently reads more broadly, applying to 
"prohibitions or restrictions other than duties, ta xes or other charges".  In consideration of the 
selective use of the terms "quantities" and "quantita tive", the Panel thus declines to attribute that 
restriction refers to a limitation on quantity where th at term does not appear in the text.  By way of 
example, although Article XI:2(c)(i) is concerned wi th restrictions on quantities of agricultural or 
fisheries products, Article XI:1 should not be interpreted narrowly as applying exclusively to 
agricultural or fisheries products as it is understood to  apply more broadly to restrictions on all types 
of imports or exports.  Similarly,  Article XI:1 should not be interp reted as concerning only restrictions 
on quantity, as the word "quantity" does not appear in the text of Article XI:1, and in the Panel's view, 
applies to a broader array of measures wh ich restrict importation or exportation. 
7.245  Colombia has also argued that that a narrow interpretation of the term "restriction" in 
Article XI is further confirmed from the cont ext provided by Articles XII and XIII of the GATT 1994 .  
In particular, Colombia has referre d to the language "may restrict th e quantity or value of merchandise 
permitted to be imported" under Artic le XII:1 and to "Quantitative Rest rictions" appearing in the title 
of Article XIII.  The Panel is not persuaded by Colombia's arguments.   As the Panel earlier noted with 
respect to the specific subparagraphs in Article XI:2473, Articles XII and XIII address specific 
circumstances and do not apply in all instances in wh ich some form of restriction arises as a result of 
domestically imposed legislation.  In particular, Ar ticle XII is entitled "Restrictions to Safeguard the 
Balance of Payments" and its first paragraph expressly states: 
                                                      
472 Panel Report, India – Autos , para. 7.270. 
473 See para. 7.243.  WT/DS366/R 
 Page 133 
 
 
  "Notwithstanding the provisions  of paragraph 1 of Article XI , any contracting party, 
in order to safeguard its external fi nancial position and its balance of payments , may 
restrict the quantity or value of merchandise permitted to be imported, s ubject to the 
provisions of the following  paragraphs of this Article ." [emphasis added] 
7.246  As is evident from the text, although Article X II allows Members to restrict the quantity or 
value of imports, in contravention of Article XI:1, this provision only permits doing so in 
circumstances related to balance-of-payment problems.  Due to the limited application of Article XII:1, this provision does not offer much  insight into the scope of Article XI:1.   
7.247  Article XIII of the GATT 1994  is entitled "Non-discriminatory Administration of Quantitative 
Restrictions".  In identical fashion to Artic le XI:1, the title in Article XIII uses the phrasing 
"Quantitative Restrictions"; however, as with Article  XI:1 that phrase does not appear in any of the 
specific paragraphs of Article XIII.  Moreover, th e same broad language app earing in Article XI:1 
("No prohibition or restriction ...") also appears in Article XIII:1, without reference to "quantities" or 
"quantitative".  While various provisions in Article  XIII refer to the terms "quantity" or "quota", 
Article XIII:1 does not.  Hence, the Panel declines to  make conclusions on the scope of Article XI on 
the basis of the language appear ing in Article XIII or its title. 
7.248  Colombia has lastly referred to Paragraph 2 of the Illustrative List of the Annex of the TRIMs 
Agreement as informing the scope of Article XI:1.  The TRIMs Agreement  states in Article 2 that "no 
Member shall apply any TRIM that is inconsiste nt with the provisions of ... Article XI of 
GATT 1994 ".  Paragraph 2 of the Illustrative List of the Annex of the TRIMs Agreement  further 
provides in part that "TRIMs that are inconsiste nt with the obligation of general elimination of 
quantitative restrictions provided for in paragraph 1 of Article XI of GATT 1994  include those ... 
which restrict: ... the importation ... generally or to an amount related to the volume or value of local 
production that it exports".
474  On a plain reading, the Annex expressly recognizes that Article XI:1 
contains an obligation to genera lly eliminate quantitative restrictions.  The Illustrative List then 
identifies various type of TRIMs measures that should be considered pr ohibited import or export 
restrictions, i.e. each subparagraph of the Illustra tive List refers to restriction based on specified 
amounts, such as the types of products used in or re lated to production; the volume or value of local 
production; the volume or value of products, in te rms of product type; or to an amount related to 
foreign exchange flows.  In the Panel's view, Articl e XI:1 is not restricted to such a finite list of 
possible measures.  On the contrary, Article XI:1 ap plies to "prohibitions or restrictions other than 
duties, taxes or other charges" and does not include fi nite categories.  Accordingly, the Panel declines 
to consider the Illustrative List of the Annex of  the TRIMs Agreement in interpreting the scope of 
Article XI:1. 
                                                      
474 Paragraph 2 of the Illustrative List of the Annex of the TRIMs Agreement  provides in full as follows: 
"TRIMs that are inconsistent with the oblig ation of general elimination of quantitative 
restrictions provided for in paragraph 1 of Article XI of GATT 1994 include those which are 
mandatory or enforceable under domestic law or under administrative rulings, or compliance 
with which is necessary to obtain an advantage, and which restrict: 
(a) the importation by an enterprise of products used in or related to its local production, 
generally or to an amount related to the volume or value of local production that it exports; (b) the importation by an enterprise of products used in or related to its local production 
by restricting its access to foreign exchange to  an amount related to the foreign exchange 
inflows attributable to the enterprise;  or (c) the exportation or sale for export by an ente rprise of products, whether specified in terms of 
particular products, in terms of volume or value of products, or in terms of a proportion of volume or value of its 
local production." WT/DS366/R 
Page 134  
 
  (iii) De jure versus de facto restrictions on importation 
7.249  The Panel would also like to address Colombia 's argument that Panama must establish the 
existence of a de facto  restriction within the meaning of Article XI:1, since the ports of entry measure 
does not per se  limit the volume or value of imports.  T hus, Colombia considers that Panama must 
establish the existence of a de facto  restriction in order to prove a vi olation of Article XI:1.  Colombia 
argues that Panama carries the burden of proof to demonstrate a lower level of imports and prove the 
existence of a causal link between this lower level a nd the ports of entry measure.  Colombia contends 
that the evidence before the Panel does not demons trate a low level of imports nor any link between 
the measure and an alleged decline in imports.  Ra ther, Colombia claims that evidence presented by 
Panama reflects an increase in the value of te xtile, apparel and footwear  imports between 2006 and 
2007 when the current ports of entry measure was in effect.
475 
7.250  As noted above, Panama submits that it is cha llenging the ports of entry measures on the basis 
of its design, structure and underlying architecture.   Panama thus asserts that is not claiming the 
existence of a de facto  restriction.  Although Panama considers it is not making a de facto  challenge, 
in response to Colombia's allegation that Panama's challenge is necessarily a de facto  one, Panama 
cites to data provided by Colombia indicating a dec line in the weight of textile imports shipped from 
Panama during the time the ports of entry measure was in force.476 
7.251  The Panel notes that Colombia's argument is  primarily based on statements made in 
Argentina – Hides and Leather .  In that case, the panel had to determine, inter alia , whether the 
presence of representatives of the domestic hide ta nning industry in the Argentine customs inspection 
procedures for hides des tined for export was a de facto  export restriction.  In particular, the panel 
discussed the evidentiary weight that should be attach ed to actual trade effect of the measure and the 
need to establish a causal link between the measure and a limitation on exports: 
"Finally, as to whether Resolution No. 2235 mak es effective a restric tion, it should be 
recalled that Article XI:1, like Articles I, II and III of the GATT 1994, protects competitive opportunities of imported products not trade flows.  In order to establish 
that Resolution No. 2235 infringes Article XI:1, the European Communities need not 
prove actual trade effects.  However, it must be borne in mind that Resolution No. 2235 is alleged by the Eu ropean Communities to make effective a de 
facto  rather than a de jure  restriction.  In such circum stances, it is inevitable, as an 
evidentiary matter, that greater weight attaches to the actual trade impact of a 
measure. 
Even if it emerges from trade st atistics that the level of exports is unusually low, this 
does not prove, in and of itself, that that le vel is attributable, in whole or in part, to 
the measure alleged to constitute an export rest riction.  Particularly in the context of 
an alleged de facto  restriction and where, as here, there are possibly multiple 
restrictions, it is necessary for a complaining party to establish a causal link between 
the contested measure and the low level of e xports.  In our view, whatever else it may 
                                                     
 
475 Colombia notes that the value of imports from the CFZ falling under Chapters 50-64 increased 
between 2006 and 2007 from US$483,587,075,000 to US$503,461,216,000: see Exhibit PAN-56.  Although 
Panama presented imports figures in Exhibit PAN-56 in Panamanian balboas, since the balboa has been tied to 
the United States dollar at an exchange rate of 1:1, the values are equivalent.  The Panel notes further to the 
information contained in this Exhibit, the weight declined during these years from 67,486 to 60,871 metric tonnes. 
476 Panama's second oral statement, para. 34.  Pana ma has noted that between March 2007 and March 
2008, the quantity of textiles imported into Colombia declined from 3,339,527 to 2,119,524 square meters.  Panama has also noted a decline in 2005, from 5,169,008  to 4,481,075 square meters when a previous measure 
similar to the current ports of entry measure was in place.  See Panama 's second oral statement, para. 34, citing 
to Exhibit COL-42.  WT/DS366/R 
 Page 135 
 
 
  involve, a demonstration of causation must consist of a persuasi ve explanation of 
precisely how the measure at issue causes or contributes to the low level of exports.  
In our view, whatever else it may involve, a demonstration of causation must consist of a persuasive explanation of precisely how the measure at issue contributes to the low level of exports."
477 (footnotes omitted) 
7.252  With the respect to the issue discussed in Argentina – Hides and Leather , the Panel first notes 
that the European Communities characterized its claim as a de facto  one, unlike Panama in this 
dispute.  In the context of this characterization, the panel in Argentina – Hides and Leather  explained 
that the complainant would need to demonstrate the existence of a low level of imports and a link 
between the measure and the low import level.  In  light of the unique circumstances surrounding the 
European Communities' characterization of its claim, to the extent Panama were able to demonstrate a 
violation of Article XI:1 based on the measure's design, structure, and architecture, the Panel is of the view that it would not be necessary to consider trade volumes or a causal link between the measure and its effects on trade volumes.   
7.253  In support of its approach, the Panel recalls  that a number of panels have previously 
determined the existence of a restriction on importation based on the design of the measure and its 
potential to adversely affect importation, as opposed to the actual resulting impact of the measure on 
trade flows.
478  The Panel notes further that more than one panel has declined to make a determination 
based on the alleged trade effects of a measure.  In Turkey – Textiles , the respondent sought to rebut 
arguments of nullification and impair ment under Article XI:1 based on the fact that imports of textiles 
and clothing had increased under the measure at issue,  resulting in no adverse trade impact.  Recalling 
an earlier view expressed by the Appellate Body, th e panel in that dispute explained that reliance on 
the level of imports was not sufficient to rebut a presumption of nullificati on and impairment due to 
the impact of multiple factors on trade flows: 
"We recall that in EC –  Bananas III479, the Appellate Body confirms that the 
principles established in US – Superfund : 
'… a demonstration that a measure has no or insignificant effects 
would not be a sufficient demonstrat ion that the benefits accruing 
under that provision had not been nullified or impaired even if such a rebuttal were in principle permitted.
480' 
are still most relevant to viola tions of provisions of GATT 1994. 
... 
We are of the view that it is not possible to segregate the impact of the quantitative 
restrictions from the impact of other factors.  While recognizing Turkey's efforts to liberalize its import regime on the occasion of  the formation of its customs union with 
the European Communities, it appears to us th at even if Turkey were to demonstrate 
that India's overall exports of clothing and textile products to Turkey have increased 
from their levels of previous years, is would not be sufficient to rebut the presumption 
of nullification and impairment caused by the existence of WTO incompatible import 
restrictions.  Rather, at minimum, the qu estion is whether exports have been what 
they would otherwise have been, were  there no WTO incompatible quantitative 
restrictions against imports from India.  C onsequently, we consider that even if the 
                                                     
 
477 Panel Report, Argentina – Hides and Leather , paras. 11.20-11.21. 
478 See Section VII.E.2(d)(i). 
479 (footnote original ) Appellate Body Report, EC - Bananas III , para. 253. 
480 (footnote original ) Panel Report, US – Superfund , para. 5.1.9 . WT/DS366/R 
Page 136  
 
  presumption in Article 3.8 of the DSU were rebuttable, Turkey has not provided us 
with sufficient information to set aside th e presumption that the introduction of these 
import restrictions on 19 categories of tex tile and clothing products has nullified and 
impaired the benefits accruing to India under GATT/WTO."
481 
7.254  Furthermore, in EEC – Oilseeds I , a GATT panel held similar reservation about the ability to 
isolate the trade effects of a particular measure from other factors, stating that "changes in trade 
volumes result not only from governmental policies, but  also from other factors, and that, in most 
circumstances, it is not possible to determine wh ether a decline in imports following a change in 
policies is attributable to that change or to other factors".482 
7.255  In the present dispute, a number of variables complicate the picture, creating difficulties in 
interpreting trade statistics.  As Colombia itself has pointed out, a number of measures have been 
implemented in the past decade in addition to th e ports of entry measure to address problems with 
under-invoicing, money laundering and smuggling.483  Colombia has also imposed a series of other 
measures in addition to the ports of entry measure, including, but not limited to, the imposition of indicative prices on textile, apparel and footw ear imports, for which the effects are unclear.
484  Even 
considering the ports of entry measure in isolation,  the Panel notes that Co lombia has in the past 
applied a measure similar to the ports of entry measure, and then removed it for a time before 
imposing the current measure.  Finally, the Panel not es that while the ports of entry measure applies to 
subject goods arriving from Panama, it does not regul ate identical goods that arrive from other 
countries, further clouding the picture.  The Panel w ould need to assess these realities, in addition to 
considering the large number of economic factors at play, such as worldwide supply and demand 
shocks and variations, the influence of worldwide ev ents, and other factors.  As such, it is extremely 
difficult, if not impossible to attribute changes in th e level of imports of textile, apparel and footwear 
into Colombia specifically to  the ports of entry measure.485  Wide-ranging fluctuations in the implicit 
                                                      
481 Panel Report, Turkey – Textiles , paras. 9.202-9.204. 
482 GATT Panel Report, EEC – Oilseeds I , para. 151. 
483 See, e.g. Colombia's response to Panel question No. 149.  Colombia indicates that a number of 
measures have been applied in addition to the restrictions on ports of entry, including but not limited to a 
requirement to present an advance import/export declarati on;  restrictions on transit;  cooperative agreements 
with other countries' customs administrations and the pr ivate sector;  indicative and reference prices;  and 
certain documentation and invoice requirements. 
484 Colombia has asserted that increases in values of textile imports during the periods of imposition of 
indicative prices to textile imports is based entirely on th e increase in the declared values, and does not factor in 
indicative price values: see Colombia's response to Panel question No. 127.  Panama disputes this view, arguing 
that no textual basis exists to support Colombia's assertion, and is sceptical as to why calculated implicit prices increased due to auto-declared values during periods when indicative prices were applied: see Panama's 
response to Panel question No. 127;  Question No. 1(d)(iv) of Colombia to Panama;  Panama's comment on 
Colombia's response to Panel question No. 131. 
485 Colombia itself seems to have recognized that unknown factors affect import volumes and prices of 
textiles, apparel and footwear.  For instance, when comm enting on the possibility of a "knock-on effect" arising 
following an earlier measure restricting port access, Colo mbia stated the following:  "[Panama] is unwilling to 
accept the logical conclusions of the fact  that the statistics equally show a decrease in volume in a period when 
no ports measure was in effect.  This strongly suggests that the ports measure does not affect the volume of 
imports, but that such volumes are determined by ot her factors."  See Colombia's comment on Panama's 
response to question 4(b) from Colombia's second set of questions.  Additionally, Colombia also appears to 
acknowledge that clear-cut conclusions cannot be drawn from statistics on implicit prices for textiles.  In 
response to a question from the Panel, Colombia discussed the problem of mixed signals:  "In respect of textiles, 
the conclusions are not as clear cuts as the statistics s how mixed signals.  On the one hand, the average implicit 
price in 2007 (0.82 USD) and 2008 (0.67 USD) is much higher than in 2004 -2006 (when this average implicit price hovered around 0.17 – 0.24 USD).  On the other hand, the comparison between the second half of 2007 
and the first half of 2007 shows that the implicit price range stayed more or less th e same (on average around 
0.80 USA), and this trend continued n the first half of 2008 .  What is interesting, however, is that this stagnation  WT/DS366/R 
 Page 137 
 
 
  price and volume of textile, appare l and footwear imports into Colombia over the past decade reflect 
this difficulty.486  It is also difficult to accept Colombia's  allegation that the "measure is working"487 
due to the wide array of factors at play.488 
7.256  The Panel believes a thorough examination of trade effects would be unnecessary and 
unwarranted due to the inherent difficulty in interp reting trade statistics, in which a wide variety of 
economic and other factors complicate the picture.  Accordingly, the Panel will determine whether the 
ports of entry measure is a restriction on importati on within the meaning of Article X:1, based on 
whether the measure has a limiting effect on importation by negatively affecting the competitive opportunities available to textile, apparel and footwear products a rriving from Panama.  The Panel 
will base its assessment on the terms of the measure as opposed to any previous or ongoing effect on 
the level of imports, in terms of volume or value.  In light of this approach, Colombia cannot rely on 
evidence of an increase in imports to rebut arguments of a restriction on importation.  Similarly, Panama cannot point solely to evidence demonstrating a decline in the level of imports to establish the 
existence of a restriction on importation or exportation.   
(iv) Whether the ports of entry meas ure affects competitive opportunities 
7.257  The Panel will therefore examine whether the port s of entry measure has a limiting effect on 
importation by negatively affecting the competiti ve opportunities related to  textile, apparel and 
footwear products imported from Panama.   
7.258  Panama has argued that the imposition of the por ts of entry measure has limited competitive 
opportunities by forcing importers to incur higher shipping costs to reach a number of important markets in Colombia other than those near Bogot a and Barranquilla.  Panama contends that these 
costs create disincentives to export subject goods to  Colombia and create unnecessary uncertainty to 
importation to numerous important markets in Colombia.
489  Panama considers this restriction on 
entry points, which leads to higher transportation costs, is an inherent aspect of the design, 
architecture and structure of the measure.  Due to  increased overall delivery costs and uncertainty, 
Panama considers that the ports of entry meas ure constitutes a restriction on importation in 
contravention of Article XI:1.   
7.259  Panama has submitted a set of quotations by DHL Global Forwarding490 as evidence that 
transportation costs to certain markets in Colombia have increased under the ports of entry measure.  
Specifically, Panama has provided two estimates of  the transportation costs involved for exporters, 
depending on whether the subject goods are exported through Buenaven tura or Barranquilla.  The first 
                                                                                                                                                                     
of the implicit price is due to a large extent to the increase in quantities sold since the imposition of the ports 
measure."  See Colombia's response to Panel question No. 158. 
486 For instance, Colombia has provided monthly data in Exhibit COL-61 and Exhibit COL-65 which 
reveals high variability in implicit price, volumes and values for textiles, apparel and footwear products. 
487 Colombia's second written submission, para. 241. 
488 In relation to this discussion of whether the ports of entry measure has negatively affected import 
volumes and/or values, Panama has referred to docume ntation from a Colombian anti-dumping investigation on 
products from China (Exhibit PAN-75) in alleging that a link exists between the ports of entry measure and a 
decline in imports from Panama.  The Panel declines to address Panama's arguments derived from this 
investigation for several reasons, primary among them is the fact that the anti-dumping investigation exclusively 
concerned trade from China.  In addition, as discussed above, at the time of the anti-dumping investigation, a 
number of additional measures were imposed on imports from China, including but not limited to an indicative prices regime.  The Panel is unable to precisely determin e, and does not wish to sp eculate on the effects any 
particular measure has had based on consideration of imports from an altogether different trading partner. 
489 Panama's first written submission, paras. 160-162. 
490 Exhibit PAN-63.  Panama has provided quotations by DHL Global Forwarding from CFZ to Cali 
via a route through Balboa and Buenaventura in one document dated 9 June 2008, and a second quotation, also 
by DHL Global Forwarding, from CFZ to Cali via MIT and Barranquilla dated 6 June 2008. WT/DS366/R 
Page 138  
 
  quote is for the route from the CFZ to Cali via a route through Balboa and Buenaventura.
491  T h e  
second quote estimates the delivery cost for a route originating in the CFZ and arriving at Cali via Manzanillo International Terminal (MIT) and Barr anquilla.  Both quotes are based on an identical 
shipping weight, c.i.f. value and container size.
492  Panama's quotations comparatively indicate that 
transportation costs from the CFZ to Cali via Ba rranquilla seaport would be more expensive than 
shipment through Buenaventura, which is a prohibite d port under the ports of entry measure.  A table 
comparing shipping costs, originally  presented by Panama, appears below:493 
CFZ-Cali 
(via Balboa and Buenaventura) Costs (US$) CFZ-Cali 
(via MIT and Barranquilla) Costs (US$) 
CFZ – Balboa (by truck): 380.00 CFZ – Manzanillo (MIT) (by 
truck) 110.00 
Handling (exportation) 
Documentation 
Courier Port security 
Carrier security 35.00
75.00
50.0020.00
6.00 Handling (exportation) 
Documentation 
Courier Port security 
Carrier security 35.00 
75.00 
50.00 20.00 
6.00 
Balboa – Buenaventura (20' container) 1250.00 MIT – Barranquilla  
(20' container) 1490.00 
Handling (importation) 
Filing 
Collect fee (minimum) 
CAF (minimum) 
Shipping cost (container) 
Shipping cost (BL documentation 
fee) 100.00
35.00
35.00
35.0050.00
50.00 Handling (importation) 
Filing 
Collect fee (minimum) 
CAF (minimum) 
Shipping cost (container) 
Shipping cost (BL documentation 
fee) 100.00 
35.00 
35.00 
35.00 50.00 
50.00 
                                                      
491 Panama characterizes the shipping route it selected, in which goods are shipped by truck from the 
CFZ to Balboa on the Pacific coast of Panama, before tr avelling to Buenaventura and ultimately Cali, as a "more 
practical, business-oriented approach" than the route proposed by Colombia in Exhibit COL-50.  Panama claims 
that the distance from MIT to Balboa is 80 km and takes roughly one hour to cover by land transport, including 
train or truck options, at a cost of US$380 (for a 20 feet or 40 feet container).  According to Panama, it would be more expensive and inconvenient to ship goods from CFZ to MIT and then pass through the Panama Canal 
before embarking for Buenaventura, since the importer/exporter would have to pay canal toll fees, and would 
incur long waiting periods due to the high volume of traffic through the canal:  see Panama's response to Panel question No. 123;  see also Exhibit PAN-63.  In response to an argument by Colombia that it does not make 
sense for goods shipped from China to  pass through the Canal to reach the CFZ, and then return through the 
Canal a second time in route to Buenaventura, Panama has argued that the "sheer magnitude of the CFZ operations" makes it worthwhile for Asian exporters to deli ver products directly to the CFZ.  Panama submits 
that manufacturers/exporters prefer to sell to distributors, and not end customers, and thus do not know where 
products will be sold when first entering into contract s.  According to Panama, this practice is followed as 
manufacturers do not want to be involved in dealing with the business practices and handle transactions in more 
than 30 different countries, each with their own currencie s.  Panama also notes th at CFZ entities pay in US 
dollars via globally-recognized banks, and payments are guaranteed by competitively-priced letters of credit.  
See Panama's response to Panel question No. 125. 
492 The Panel notes that the deliver y cost for each route is calculate d based on the same shipment 
weight, which is unknown (" desconocido "), and container size (20 feet).  As a result, the Customs Agent's 
Commission of $669.35 is the same for both routes. 
493 Panama included this table in its response to Panel question No. 124.  The Panel has reproduced the 
table and verified the accuracy of the data included in th is table in relation to the data that was originally 
presented in Exhibit PAN-63.  No discrepancies were id entified;  however the Panel inserted clarifications 
(appearing in italics ) where it considered them helpful.  WT/DS366/R 
 Page 139 
 
 
  CFZ-Cali 
(via Balboa and Buenaventura) Costs (US$) CFZ-Cali 
(via MIT and Barranquilla) Costs (US$) 
Customs Agent's Commission  
(0.35% of c.i.f. value) 
Paperwork expenditures 
Preparation and process of 
obtaining VUCE registration 
Forms ( approximate ) 
Preparation ( cost/unit ) 669.38
30.00
30.00
+15.00
10.00
5.00 Customs Agent's Commission 
(0.35% of c.i.f. value) 
Paperwork expenditures 
Preparation and process of 
obtaining VUCE registration 
Forms ( approximate ) 
Preparation ( cost/unit ) 669.38 
 
30.00 
30.00 
+15.00 
10.00 
5.00 
Buenaventura – Cali (by truck up to 30 tonnes for a 20' container) 700.00 Barranquilla – Cali (by truck up 
to 30 tonnes for a 20' container)  2100.00 
Total  US$3580.38  US$4950.38 
 
7.260  The DHL Global Forwarding Quotation submitted by Panama separately lists estimates of the 
ocean freight delivery costs for 20 feet and 40 feet  delivery from Balboa to Buenaventura:494 
Origen POL Destino POD 20' BAF 40'ST BAF 40'HC BAF 
Zona Libre 
de Colon Balboa Cali Buenaventura $1,250 Incl. $1,350 Incl. $1,350 Incl. 
 
7.261  The DHL Global Forwarding Quotation also incl udes estimates of the ocean freight delivery 
costs for 20 feet and 40 feet delivery from MIT to Barranquilla:495 
Origen POL Destino POD 20' BAF 40'ST BAF 40'HC BAF 
Zona Libre 
de Colon MIT Cali Barranquilla $1,490 $165 $1,590 $310 $1,590 $310 
 
7.262  For reference, the DHL quotations also co mpare the local costs of delivery from 
Buenaventura to Cali, by land; and from Barranquilla to Cali, also by land:496 
Trayecto Carga 
suelta 
hasta 4 
tons 
(turbo) Hasta 7 
tons por 
20 ft Hasta 17 
tons por 
20 ft Hasta 24 
tons por 
20 ft Hasta 18 
tons por 
20 ft Hasta 30 
tons port 
20 ft Serv. de 
Escolta 
Buenaventura/
Cali $280 $350 $465 $680 $680 $700 Opcional 
Barranquilla/ 
Cali $725 $990 $1,350 $1,850 $1,930 $2,100 Opcional 
 
7.263  Colombia disputes the accuracy of the shipper quot ation due to the fact that Panama compares 
the cost of a shipment from the CFZ to Cali via th e port at Barranquilla, with the cost of shipment 
from the CFZ to Cali via the port at Buenaventura, w ithout including toll charges arising from use of 
the Panama canal.  Colombia has submitted two se parate quotations from different shipping providers 
for the Panel's consideration.497  Based on its quotations, Colombia argues that the cost of shipment 
from the CFZ to Cali via Buenaventura seaport would be slightly more expensive when Panama canal 
toll charges are included in the estimate.498  The Panel notes that Colombia has provided in its first 
                                                      
494 Exhibit PAN-63.   
495 Exhibit PAN-63.   
496 Exhibit PAN-63.   
497 Exhibit COL-50.  This exhibit includes one quotation provided by TransBorder, SA, dated 25 June 
2008, and a second one by UPS Supply Chain Solutions, dated 28 May 2008. 
498 Colombia's second written submission,  paras. 126-127;  Exhibit COL-50. WT/DS366/R 
Page 140  
 
  quotation the "free on board" rate for delivery from MIT to Barranquilla for several container sizes, 
delivered on a weekly basis, and the price for deliv ery from MIT to Buenaventura for several sizes, 
also on a weekly basis.  This data appears as follows:
499 
Origen Destino 20 std 40 std 40 hc T/T Salidas Linea 
naviera 
Manzanillo B/quilla USD 900 USD 975 USD 975 1 dia Semanal Cosco 
Manzanillo B/ventura USD 1300 USD 1400 USD 1400 1 dia Semanal Maersk 
 7.264  Colombia's also has provided a second quota tion from UPS Supply Chain Solutions that 
outlines the total shipping charges to deliver textiles, as stated, "port to  door".  The table appearing in 
the submitted quotation compares the cost of delivery fr om Cristobal, Panama, to Cali, via Cartagena, 
with the cost of delivery from Cristobal, Panama  to Cali via Buenaventura.  The costs are broken 
down and summarized below:
500 
Application 40' std 40' std 
 via Cartagena via Buenaventura 
Origin Service Fee $125.00 $125.00 
Documentation $25.00 $25.00 
Manifest Entry $35.00 $35.00 
Courier Fee $65.00 $65.00 
Security $25.00 $25.00 
Origin Port Fees $299.00 $299.00 
Ocean Freight Charges $2,100.00 $3,673.00 
Customs Entry $150.00 $150.00 
Destination Port Fees $210.00 $210.00 
Delivery $2,324.00 $941.00 
TOTAL CHARGES USD: $5,358.00 $5,548.00 
 
7.265  Before proceeding in its analysis, the Pane l would like to make several preliminary 
observations concerning the evidence submitted by the parties.  Foremost, the quotations submitted by 
each party are from different transportation provide rs, i.e. DHL Global Forwarding in the case of 
Panama, and TransBorder SA and UPS Supply Chai n Solutions in the case of Colombia.  Several 
interpretative problems arise from these quotations. 
7.266  In Panama's submitted quotation, DHL Global Forwarding estimates a cost of US$1,590 to 
ship goods by sea from MIT to Barranquilla, in addition to a Bunker Adjustment Factor (BAF) of between US$310 per 40 feet container, while estimat ing a cost of US$1,350 to ship the goods from 
Balboa to Buenaventura, and listing BAF charges as  included for the Buenaventura route.  Panama 
does not offer any explanation why this charge is included in the former route but not the latter.  In 
addition, the Panel notes that while Panama indi cates in its summary table presented in paragraph 
above that the quotation is for a shipment with a weight of 24000kg, c.i.f. value of US$191,250 and container size of 20 feet, the actual copy of the quotation lists the weight as "unknown" and does not 
refer to a c.i.f. value.  Also, the Panel notes that the local transport costs from either Buenaventura or 
Barranquilla ports to Cali list escort service as "optional", making a final precise estimate difficult.
501  
                                                      
499 Exhibit COL-50.  The Panel has reproduced this table for inclusion in the report. 
500 Exhibit COL-50.  The Panel has reproduced this table for inclusion in the report. 
501 The Panel considers Panama's omission of an estima te of security/escort service especially troubling 
in light of the fact that Panama in open discussions during the Second Substantive meeting expressed concern  WT/DS366/R 
 Page 141 
 
 
  Finally, Panama has asserted that a proper es timate of the cost of delivery from the CFZ to 
Buenaventura would include transport of the goods  from the CFZ to Balboa, on the Pacific coast of 
Panama, by train or truck, before shipping the goods to Buenaventura by ship.  As argued by 
Colombia, Panama has merely asserted this is the case without presenting any ev idence to substantiate 
this assertion.502 
7.267  Regarding the quotations provided by Colombia, the Panel is also troubled as to why 
Colombia has in one quotation provided separate estimates of ocean freight rates from MIT to 
Barranquilla and MIT to Buenaventura, but in a second quotation from UPS Supply Chain Solutions, 
compares costs of delivery from the CFZ to Cali via Cartagena , with the cost of delivery from CFZ to 
Cali via Buenaventura.  Cartagena is a prohibited port under the ports of entry measure, and Colombia 
has provided no explanation for this selection.  At a minimum, this selection calls into question the 
choice to submit ocean freight charges from MIT to Barranquilla in the first place, if Colombia later 
relies on a different route quotation for its cost compar ison.  It is also troubling that the ocean rate for 
delivery from MIT to Buenaventura provided in th e TransBorder SA quote (US$1,400) is vastly lower 
than the ocean freight charge from Cristobal to Buenaventura referred to in its UPS quotation 
(US$3,673).503  The Panel is concerned by the fact that the TransBorder SA estimates from MIT to 
Barranquilla and from MIT to Buenaventura are lis ted as "all-in fees", but these estimates do not 
appear to include land transportation costs from CFZ to MIT, nor land transportation charges from 
Buenaventura to Cali, or Barranquilla to Cali.504  In addition, the UPS Supply Chain Solutions 
quotation is labelled as a "port to door" estimate; however, it is unclear whether land transportation 
charges from the CFZ to Cristobal have been  assessed, as only port origin fees are included.505  
Finally, Panama has raised the issue of how the ch arge to ship a 40 feet container from Cristobal to 
Cartagena could be so high (US$2,100) relative to the cost to ship the same size container from MIT 
to Barranquilla (US$975) when the distance between Cristobal and MIT is approximately 3 km, and 
the distance between Cartagena and Barranquilla is 114 km.506  Panama has asked the Panel to factor 
in the inconsistencies when evaluating the releva nce of the quotations presented by Colombia.   
7.268  Regardless of whether one estimate is more ac curate than the other, the Panel notes that 
quotations have been provided in both cases without re ference to the weight or the c.i.f. for the 
container, although Panama has alleged a specific weight and c.i.f. value. 
                                                                                                                                                                     
about the fact that Colombia's estimated costs for deliv ery from the CFZ to either Cartagena or Buenaventura 
both included identical security char ges of US$25. Thus, while questioning the accuracy of delivery estimates 
provided by Colombia, due to a low estimate for security fees, Panama has not included  an appropriate estimate 
for security charges apart from refere nce to a port security charge of US$2 0, both in the cas e of delivery via a 
Barranquilla and Buenaventura route.  The Panel is ther efore unclear on the accuracy  of Panama's estimates. 
502 Colombia's comment on Question No. 1(d)(iii) to Panama from Colombia.  Panama's assertion must 
also be weighed against written testimony provided by  Colombian transportation specialist, Fabian Garcia 
Castañeda, who stated that he had never heard of goods being transported from the CFZ to the Pacific coast over 
land: Exhibit COL-63. 
503 In relation with the Panel's concerns, Panama  has also expressed concern about the large 
discrepancy between the UPS quotation from Cristobal to Buenaventura (US$3,673) and the TransBorder SA 
quotation from MIT to Buenaventura (US$1,400), despite  what Panama claims is a distances of a "few 
kilometers" between Cristobal and MIT.   
Panama has also commented that the TransBorder SA estimates from MIT to Barranquilla and from 
MIT to Buenaventura are listed as "all- in fees", but these estimates do not ap pear to include land transportation 
costs from CFZ to MIT, nor land transportation charges from Buenaventura  to Cali, or Barranquilla to Cali.  In 
addition, Panama express doubt regarding the designation of the UPS Supply Chain Solutions quotation as a 
"port to door" estimate, arguing that land transportation charges from the CFZ to Cristobal are not assessed (as 
only port origin fees are included):  see Panama's response to Panel question No. 123. 
504 Panama raised a similar concern in its response to Panel question No. 123. 
505 See also Panama's response to Panel question No. 123. 
506 Panama's response to Panel question No. 123.  The Panel notes, however, that Panama's DHL 
Global Forwarding estimate from MIT to Barranquilla (US$1,900 including the indicated BAF surcharge) is 
comparable with the estimate from Cr istobal (in the CFZ) to Cartagena. WT/DS366/R 
Page 142  
 
  7.269  Despite confusion that may arise from the wide va riations in prices revealed in the quotations 
submitted by the parties, the Panel does not consider  it appropriate to base its findings exclusively on 
a finite amount of shipping price quotations for several other important reasons.  As Colombia has 
generally suggested, it is complicated to compare quotations provided by different freight suppliers.
507  
Colombia has also recognized that it is also difficult  to estimate other factors, such as logistical and 
security needs, when trying to understand the effect on importers.508  In addition to these inherent 
problems, prices charged to ship goods are dependant  on many additional factors that are specific to 
particular customers, such as prior commercial re lationships, the size of a shipping order, economies 
of scale, the frequency of business solicited, vol ume discounts, capacity availability and other 
factors.509  Moreover, an initial quotation may only provide a basis for negotiating a lower price.  
Finally, the Panel notes that while estimated costs to  deliver goods to one Colombian city, Cali, have 
been informative, the circumstances of many other important markets/destinations in Colombia could 
vary widely.  These factors do not even address the concern, identified on multiple occasions by both 
parties, as corresponds with their respective argum ents, that neither DHL Global Forwarding or UPS 
Supply Chain Solutions are major players in ocean freight shipment between the CFZ and Colombian 
seaports.510 
7.270  The quotations provided by Panama and Colombia alike are based on one metric – the 
container size (20 feet in the case of Panama's extensive example, and 40 feet standard in the case of Colombia's).  Colombia's example makes no reference to  weight or c.i.f. value.  While Panama refers 
to weight and c.i.f. value in its response to a question from the Panel
511, this information is not 
acknowledged in Colombia 's submitted quotation.512  It has also proven difficult to verify any of the 
figures submitted by the parties.  For instance, Panama has submitted in its price quotation that in 
practice it is preferable to transport goods from the CFZ on the Atlantic coast of Panama to Balboa on 
the Pacific coast, rather than to transport goods  by boat through the Panama Canal (and pay canal 
fees), and thus bases its estimation of delivery cost s to Cali via Buenaventura on this practice.  
Colombia contests this approach.  On the other ha nd, Colombia has provided a comparison of costs to 
ship via Buenaventura, presumably factoring in canal  fees, and the Panel observes that the final cost 
of delivery is similar to a rate to deliver goods ship ped to Cali via a route that arrives at Cartagena (on 
the Atlantic coast of Colombia).  By Panama's estim ates, the cost of shipping from the CFZ to Cali via 
Balboa and Buenaventura (US$3, 580.38) is nearly US$2,000 less than the number proposed by 
Colombia in its UPS quotation (US$5,548).  He nce, the Panel finds it difficult to draw any 
conclusions. 
7.271  We recall the view discussed above that increased  transaction costs, market access restrictions 
or uncertainties affecting investment plans have prev iously been considered relevant in determining 
whether a measure resulted in a r estriction which rose to a level to cause nullification or impairment 
of a Member's rights under Article XI:1. 
7.272  Although the quotation data available is difficult to compare, Panama has also argued that the 
Panel should assess the existence of a restriction mo re broadly than in terms of increased shipping 
                                                      
507 Colombia acknowledged, based on a written te stimony submitted by transportation specialist, 
Fabian Garcia Castañeda at Colombia's request, that "g reat care" must be taken when comparing quotations 
provided by different freight suppliers: see Exhibit COL-63;  Colombia's comment on Panama's response to 
Panel question No. 123.    
508 Colombia acknowledges complications like these in comments responding to one of Panama's 
responses to a question by the Panel:  see Colombia's comment on Panama's response to Panel question No. 124. 
509 The Panel notes that transportation specialist, Fa bian Garcia Castañeda, identified many of these 
factors as relevant in determining actual transportation costs: see Exhibit COL-63. 
510 See, e.g. comments by specialist, Fabian Ga rcia Castañeda appearin g in Exhibit COL-63. 
511 See Panama's response to Panel question No. 124. 
512 Instead the quotation lists weight as "unknown" and does not refer to a c.i.f. value: see 
Exhibit COL-63.  WT/DS366/R 
 Page 143 
 
 
  costs.513  In this regard, Panama has submitted an o cean shipping delivery schedule which indicates a 
limited schedule of fortnightly deliveries from the CFZ (specifically, Colon) to Barranquilla.514  This 
same schedule reveals that deliveries occur betw een Colon and Cartagena on a weekly basis, for 
instance, thereby increasing the frequency of opportuniti es available to ship to Colombia for exporters 
of goods from Panama.  Although sche dules were not provided for additi onal ports in Colombia, it is 
evident from the delivery schedules provided for Cart agena and Barranquilla that the ports of entry 
measure, by limiting entry of goods, exclusively to  Barranquilla seaport and no other seaport, restricts 
the number of opportunities for importers to deliver  goods into Colombia.  The Panel does not have 
information before it comparing the volume of imports  into Colombia, in relation to the total capacity 
available on ships travelling fortnightly between Colon and Barranquilla; however, it is clear that 
deliveries can only by shipped on fewer occasions and to fewer destinations, to the detriment of 
entities importing goods from Panama. 
7.273  In the Panel's view, business and investment plans of entities importing goods from Panama 
are negatively affected in another way.  As Colomb ia has indicated, a measure nearly identical to the 
ports of entry measure at issue in th is dispute was imposed on 7 July 2005515 for approximately six 
months until 31 December 2005, and was extended on two occasions516, such that the measure did not 
expire until 31 December 2006, nearly one and a half years later.  The current ports or entry measure 
was instituted on 22 June 2007 for approximately si x months until 31 December  2007, but this date 
was extended twice517, and the ports of entry measure is currently set to expire on 31 December 
2008518, one and a half years later.  On every occasion the measure is in place, importers of goods 
from Panama generally have one seaport option available to enter goods – Barranquilla seaport, 
subject to certain exceptions for qualifying importe rs.  When the measure is removed, all entities 
importing goods from Panama are permitted to en ter any other of 11 designated ports and may 
rearrange their shipping schedules to do so.  Da ta presented by Colombia indicates that import 
patterns to particular Colombian ports have shifted whenever a measure restricting port access was imposed, supporting the view that importers adjust their shipping patterns.
519 
7.274  The uncertainties that arise from the ports of entry measure are substantial since importers' 
may only access one seaport and one airport whenever the measure is temporarily imposed, instead of 
the 11 ports open to importers of goods from  points of departure other than Panama.520  In addition to 
the disadvantages that arise from restriction to two ports of entry, the Panel notes that both parties 
have recognized the substantial a dditional expense of using air transport as a long-term solution to 
high-volume importation of tex tiles, apparel and footwear.521  When also considering the fact that the 
                                                      
513 Panama's response to Panel question No. 84. 
514 Exhibit PAN-64. 
515 Resolution No. 05796 of 7 July 2005. 
516 Resolution No. 12465 of 21  December 2005;  Resolution No . 06691 of 22  June 2006. 
517 Resolution No. 16100 of 27 Decembe r 2007, Resolution No . 5542 of 2008. 
518 Colombia's response to Panel question No. 122;  Resolution No. 5542 of 2008. 
519 For instance, Buenaventura was the first port of entry in terms of value for textiles, apparel and 
footwear during the period before the first measure was established (January 2004 – June 2005), but fell to third 
place in the case of footwear, and forth place in the cas e of textiles and apparel, following the imposition of the 
first measure betweent July 2005 and October 2006.  Moreover, in terms of volume, 68 per cent of apparel imports and 77 per cent of footwear  imports that arrived in Colombia during the period before the imposition of 
the first port of entry measure entered at Buenaven tura.  After the imposition of the first measure, only 
7 per cent of apparel and 21 per cent of footwear were shipped to Buenaventura.  See, e.g. Exhibit COL-61.   
520 As noted in footnote 432, textile, apparel and footw ear arriving from all points ofdeparture, except 
Panama are required to enter at any of the following 11  ports:  Barranquilla, Bucaramanga, Buenaventura, Cali, 
Cartagena, Cúcuta, Ipiales, Leticia, Medellín, San Andrés and Bogota. 
521 By way of an example, Panama has presented a ta ble comparing the total cost  to ship goods by air 
from CFZ to Bogota and then by truck to Cali (US$26,261),  with the total cost to ship goods by boat from CFZ 
to Barranquilla and then by truck to Cali (US$6,366):  see Panama's response to Panel question No. 125;  
Exhibit PAN-63,  Exhibit PAN-77.  While not providin g factual evidence, Colomb ia acknowledged that sea 
transport would be cheaper than air tr ansport which is "substantially more expensive":  Colombia's response to WT/DS366/R 
Page 144  
 
  restrictions on port access have been imposed, extende d and removed, then subsequently reinstated, 
importers' expectations and pla nning have undoubtedly been affected, which has led importers to 
rearrange shipping schedules, in turn affecting scheduled importation of subject goods arriving from 
Panama.  In the Panel's view, all of these uncer tainties, including access to one seaport for extended 
periods of time and the likely increased costs th at would arise for importers operating under the 
constraints of the port restrictions, limit comp etitive opportunities for imports arriving from 
Panama.
522   
(e) Conclusion 
7.275  In light of the Panel's conclusion that r estrictions on ports of entry limit competitive 
opportunities for subject textiles, apparel and foot wear arriving from Panama , the Panel concludes 
that the ports of entry measure has a limiting effect on imports arriving from Panama.  On this basis, 
the Panel finds that the restriction to two ports  of entry for subject goods arriving from Panama 
imposed under the ports of entry measure constitut es a restriction on importation within the meaning 
of Article XI:1 of the GATT 1994 . Accordingly, the Panel finds th at ports of entry measure is 
inconsistent with Article XI:1 of the GATT 1994 . 
F. WHETHER THE RESTRICTION ON PORT S OF ENTRY APPLICABLE TO TEXTILE , APPAREL AND 
FOOTWEAR ARRIVING FROM PANAMA IS INCONSISTENT WITH ARTICLE  XIII:1  OF THE 
GATT 1994  
1. Main arguments of the parties 
7.276  Panama argues that the ports of entry measure violates Article XIII:1 of the GATT 1994  as it 
constitutes a restriction on importation prohibited by Article XI of the GATT 1994523 that is not 
administered on a non-discriminatory basis.  Since th e ports of entry measure on its face only applies 
to textile, apparel and footwear goods arriving from Panama, and does not similarly restrict entry of 
textile, apparel and footwear goods  arriving from third countries or other WTO Members, Panama 
contends that the measure is administered di scriminatorily in violation of Article XIII:1.524   
7.277  Panama rejects the view that the text of Article  XIII:1 only applies to permitted restrictions, 
i.e. those import restrictions which are not prohibited pursuant to Article XI; but applies to any 
                                                                                                                                                                     
Panel question No. 125.  In light of Panama's assertion that air shipment of subject goods is cost-prohibitive, the 
Panel also sought to clarify why textile imports totaling US$3.19 million entered Bogota during the second semester of 2007 (Exhibit COL-28).  In response to this question, Panama commented that the apparent high 
value may be explained by the fact that the ports of en try measure exempts several categories of textiles, apparel 
and footwear from the measure, thus permitting goods falling under any of the exceptions to be entered at any of 11 ports and then shipped to Bogota by land to clear customs.  As an example, Panama refers to 
Exhibit COL-29:  see Panama's response to Panel ques tion No. 126.  While Colombia acknowledged that the 
data demonstrates subject goods are imported into Bogota, Colombia did not clarify whether this occurs as a result of the numerous exceptions or any other factors:  see Colombia's response to Panel question No. 126. 
522 The Panel is of the view that a finding whereby Colombia were allowed to restrict access to two 
ports of entry for goods arriving from a particular Member or Members, would open the door for other WTO 
Members to do the same. For example, one GATT Contracti ng Party required all VCRs to enter its territory at a 
small inland customs office in the town of Poitiers .   See Wilson B. Brown, Jan S. Hogendorn, International 
Economics in the Age of Globalisation , Broadview Press, 2000, pp. 197-198,  Patrick A. Messerlin, Measuring 
the costs of protection in Europe , Peterson Institute for International Economics, 2001, pp. 270-271;  Miroslav 
N. Javanovic, The Economics of International Integration , Edward Elgar Publishing, 2006, pp. 187. 
523 Panama's first written submission, para. 167. 
524 Panama's second written submission, paras. 136 and 139.  WT/DS366/R 
 Page 145 
 
 
  prohibition or restriction which is administered discriminatorily.525  Panama also notes that earlier 
panels have determined violations of both Article XI:1 and Article XIII.526 
7.278  Colombia argues that Article XIII is not app licable to the ports of entry measure as it 
considers that Article XIII only applies to certain  quantitative restrictions that are in principle 
prohibited by Article XI:1, but which are cove red by the exceptions to this prohibition under 
Article XI:2, Article XII or Article XVIII.527  Colombia submits that Article XI:2 allows for a number 
of situations in which Members are allowed to  maintain what would otherwise be prohibited 
quantitative restrictions.528  Additionally, Colombia considers that Article XII provides a specific 
exception for balance-of-payment purposes, and Ar ticle XVIII:2 provides an exception for developing 
countries to impose quantitative restrictions.529  In Colombia's view, the text of Article XIII clarifies 
that only measures which are permitted quantitative  restrictions are subject to the additional 
requirement that such a measure be administered and applied non-discriminatorily.530  In this sense, 
Colombia refers to references in the second and thir d paragraphs of Article XIII which discuss the use 
of import licences, and the use of quotas which are properly notified to Members.531   
7.279  In addition to the text of Article XIII, Colomb ia considers the fact that Article XIV provides 
for a limited exception to the non-discrimination requirem ent in Article XIII, with respect to measures 
covered by Article XII and Article XVIII, further confirms that the scope of Article XIII is limited to 
measures allowed under Articles XI.2, XII and XVIII.532  Finally, since Article XIII follows two other 
provisions dealing with quantitative restrictions – Article XI and Article XII – Colombia considers 
that Article XI:1 and Article XIII:1 are meant to address the same type of "prohibition or 
restriction".533  Colombia notes the similarity in terms and structure between Article XI.1 and 
Article XIII:1 as well as in the title to Article  XIII, as confirmation that Article XI:1 and 
Article XIII:1 address the same restrictions.534 
7.280  Colombia argues that Panama has failed to dem onstrate that the port of entry measure is a 
prohibited quantitative restriction in the sense of Article XI:1.535  To the extent that the measure is not 
a prohibited restriction, Colombia subm its that Article XIII would not apply.536  Even if the Panel 
were to find that the port of entry measure constitu tes a quantitative restriction within the meaning of 
Article XI:1, as explained above, Colombia argues that Article XIII:1 does not apply to what are 
deemed prohibited restrictions.537 
2. Consideration by the Panel 
(a) Legislation authorizing restrictions on ports of entry  
7.281  The measure at issue for this claim, referred to as the ports of entry measure, is discussed in 
detail in relation to Panama's claim under Article XI:1 of the GATT 1994  in Section VII.E.2(a) above.  
                                                      
525 Panama's second written submission, para. 137. 
526 Panama's first oral statement, para. 50. 
527 Colombia's first written submission, para. 258. 
528 Colombia's first written submission, para. 260. 
529 Colombia's first written submission, para. 260. 
530 Colombia's first written submission, para. 261. 
531 Colombia's first written submission, para. 262. 
532 Colombia's first written submission, para. 263. 
533 Colombia's first written submission, para. 266. 
534 Colombia's first written submission, para. 266. 
535 Colombia's first written submission, para. 266. 
536 Colombia's first written submission, para. 267. 
537 Colombia's first written submission, para. 268. WT/DS366/R 
Page 146  
 
  (b) The text of Article XIII:1 of the GATT 1994  
7.282  The Panel is called upon to examine whether the ports of entry measure as above described is 
inconsistent with Article XIII:1 of the GATT 1994.  Article XIII:1 of the GATT 1994  provides: 
"No prohibition or restriction shall be a pplied by any contracting party on the 
importation of any product of the territory of any other contracting party or on the 
exportation of any product destined for the territory of any other contracting party, 
unless the importation of the like product of all third countries or the exportation of the like product to all third countries is similarly prohibited or restricted." 
(c) The Panel's approach to examining Pana ma's claim under Article XIII:1 of the GATT 1994  
7.283  The Panel recalls its finding in Section VII.E.2(e)  above that the ports of entry measure is a 
restriction on importation which is pr ohibited under Article XI:1 of the GATT 1994.   In light of this 
finding, the Panel is faced with the issue of determining whether a m easure deemed to be a 
WTO-inconsistent import restric tion under Article XI:1 may also violate Article XIII:1 of the 
GATT 1994 .  
7.284  Panama submits that the ports of entry meas ure plainly violates Article XIII:1 since the 
measure on its face applies only to textile, apparel and footwear  goods arriving from Panama, and 
does not similarly restrict entry of textile, appare l and footwear goods arriving from other Members.  
Colombia, however, has argued that Article XIII:1 onl y applies to quantitative restrictions that are 
permitted under the GATT 1994 .  In this sense, Colombia has st ated that it simply does not "make 
sense" to apply Article XIII to measures which are determined to be prohibi ted import restrictions 
under Article XI:1.
538  Panama rejects Colombia's interpretati on, noting that the text does not indicate 
that Article XIII:1 only applies to permitted restric tions.  Thus, Panama submits that Article XIII:1 
covers any prohibition or restriction which is administered discriminatorily.   
7.285  In relevant part, Article XIII:1 prohibits  Members from imposing any "restriction ... on 
importation of any product of the territory of any other contracting party ... unless the importation of 
the like product of all third countries  ... is similarly prohibited or restricted."    
7.286  WTO panels have previously recognized that th e protections under Article XIII:1 extend to 
restrictions authorized as exceptions to the general ba n on non-tariff restrictions within Article XI:1 of 
the GATT 1994 .  The panel in EC – Bananas III stated:  
"In interpreting the terms of Article XIII, it is  important to keep their context in mind.  
Article XIII is basically a provision relating to the administration of restrictions authorized as exceptions to one of the most  basic GATT provisions –  the general ban 
on quotas and other non-tariff restrictions contained in Article XI."
539 
7.287  The panel in Turkey – Textiles , which both parties referenced in their submissions, also 
discussed the relationship between Article XI:1 and Article XIII:1 of the GATT 1994 : 
                                                      
538 See, e.g. Colombia's first written submission, para . 268.  In this regard, Colombia has also referred 
to the views of two noted scholars in GATT/WTO law, John H. Jackson and Petros Mavroidis.  As Colombia 
notes, John H. Jackson commented that "[i]n case exceptions are utilized and quotas applied, they must be 
applied 'non discriminatorily,' i.e ., similar to a Most-Favoured-Nation ba sis, and in accord ance with certain 
other rules" (see Jackson, J., World Trade And the Law of GATT (1969) at 308).  Additionally, Petros 
Mavroidis wrote that "the ambit of Article XIII of the GATT should not be extended so as to cover issues of 
substantive consistency of a [quantita tive restriction] with the GATT;  it should be narrowed down to issues 
consistency in the administration  of an otherwise GATT-consistent [qua ntitative restriction]" (see Mavroidis, 
Trade in Goods , Oxford University Press, 2007, p. 64). 
539 Panel Report, EC – Bananas III , para. 7.68.  WT/DS366/R 
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  "The wording of Articles XI and XIII is clear.  Article XI provides that as a general 
rule (we note the wording of the title of Article XI:  " General Elimination  of 
Quantitative Restrictions"), WTO Members shall not use quantitative restrictions against imports or exports. 
... 
Article XIII provides that if and when quantitative restrictions are allowed by the 
GATT/WTO, they must, in addition, be imposed on a non-discriminatory basis."
540 
7.288  This particular statement by the panel in Turkey – Textiles  must be taken into consideration in 
the face of its findings of violation both of Article XI:1 and Article XIII.541  The panel in that dispute 
concluded that the measures at issue, on their f ace, imposed quantitative restrictions on imports that 
were only applicable to the complainant.542 
7.289  Colombia submits that the panel's ultimate finding in Turkey – Textiles  is not reflective of the 
proper interpretation of the relati onship between Articles XI:1 and XIII:1.  Colombia notes that the 
panel issued a finding at a time when the Agreement on Textiles and Clothing  was still effective and 
allowed for certain quantitative restrictions.543  Colombia notes as well that the defendant, Turkey, did 
not present any arguments rebutting a violation of either Article XI:1 and Article XIII.544  F i n a l l y ,  
Colombia submits the panel's rationale as opposed to  its findings are the proper guideline, as the panel 
itself clarified that Article XIII should only be applie d to permitted quantitative restrictions due to its 
statement that restrictions "must, in addition , be imposed on a non-discriminatory basis".545   
7.290  Without prejudice to the views of earlier panels, in this dispute, the Panel, after careful 
consideration, refrains from ruling on Pana ma's claim under Article XIII:1 of the GATT 1994 on the 
basis of judicial economy.  The Panel recalls that the principle of judicial economy is recognized in 
WTO law.  The Appellate Body has ruled that a pa nel has discretion to determine which claims it 
must address in order to resolve the dispute between the parties, provided that those claims are within 
its terms of reference.546  The Appellate Body has emphasized th at the basic aim of dispute settlement 
in the WTO is to secure a positive solution to a dis putes and not to "make law" by clarifying existing 
provisions of the WTO Agreement  that fall outside the context of resolving a particular dispute: 
"[G]iven the explicit aim of dispute settlement that permeates the DSU, we do not 
consider that Article 3.2 of the DSU is meant to encourage either panels or the 
Appellate Body to 'make law' by clarifying existing provisions of the WTO Agreement outside the context of resolving a particular dispute. A panel need only 
address those claims which must be addressed in order to resolve the matter in issue 
in the dispute.
547"548  
                                                      
540 Panel Report, Turkey – Textiles , paras. 9.61-9.62.   
541 Panel Report, Turkey – Textiles , para. 9.66.   
542 Panel Report, Turkey – Textiles , para. 9.66.   
543 Colombia's first written submission , para. 270. 
544 Colombia's first written submission , para. 270.  In Turkey – Textiles , the Panel concluded that India 
had made a prima facie case of violation of Articles XI and XIII of the GATT 1994 . after first noting the absence 
of a defence by Turkey (other than its defence based on Article XXIV of the GATT 1994 ) to India's claims that 
discriminatory import restrictions had been imposed: see Panel Report, Turkey – Textiles , para. 9.66. 
545 Colombia's first written submission , para. 270. 
546 Appellate Body Report, India – Patents (US), para. 87. 
547 (footnote original ) The "matter in issue" is the "matter referred to the DSB" pursuant to Article 7 of 
the DSU . 
548 Appellate Body Report, US – Wool Shirts and Blouses , DSR 1997:I, 323 at 340. See also Panel 
Report, US – Steel Safeguards , para. 10.701.  The Panel bears in mind that, in Australia – Salmon , the Appellate WT/DS366/R 
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  7.291  In making findings under Article XI:1 of the GATT 1994 , the Panel considers it unnecessary 
to make findings in relation to Pa nama's Article XIII:1 claim in or der to secure a positive solution to 
this dispute.  In the Panel's view, the determina tion of a violation under Article XIII:1 would not assist 
the DSB in making the recommendations or in gi ving the rulings provided for in the covered 
agreements.  The Panel observes that, in addition to  being a prohibited restriction within the meaning 
of Article XI:1, the ports of entry measure is im posed only on certain textile, apparel or footwear 
goods arriving from Panama, independent of th e products' origin, and not like-product imports 
originating in, and shipped from, any other Memb er or third country.  Whether or not it is 
discriminatory in its design, the restrictions on ports of entry are prohibited under Article XI:1.
549  
7.292  For the above reasons, the Panel concludes that  it is not necessary to proceed and rule on 
Panama's claim under Article X III:1, and declines to do so. 
G. WHETHER THE RESTRICTION ON PORT S OF ENTRY APPLICABLE TO TEXTILE , APPAREL AND 
FOOTWEAR ARRIVING FROM PANAMA IS INCONSISTENT WITH ARTICLE  I:1 OF THE GATT 1994  
1. Main arguments of the parties 
7.293  In addition to its claims under Artic le XI:1 and Article XIII:1 of the GATT 1994 , Panama 
requested the Panel to find th at the ports of entry measure violates Article I:1 of the GATT 1994 , in 
the event the Panel were to find Article XI:1 inapplicable.550  In Panama's view, if the discriminatory 
aspects of the measure could not be fo und to be inconsistent with Artic le XIII, there would need to be 
recourse to Article I:1 of the GATT 1994 .551  Panama justifies this late  claim on the grounds that "[i]n 
its first written submission, [it] did not elaborate on its Article I:1 claim because it seemed indisputable that the port of entry restrictions fall under Articles XI and XIII."
552  Panama notes, 
however, in its request for establishment, that it clai med the ports of entry measure to be inconsistent 
with Article I:1 in addition to Article XI:1 and Article XIII:1.553 
7.294  Panama considers the ports of entry measure is  discriminatory and thus, inconsistent with 
Article I:1, as textiles, apparel and footwear of non-Panamanian origin may enter at any of 11 ports, 
as long as the goods do not transit through Panama, while identical goods arriving from Panama may 
only enter at two ports.554  Panama considers the right to enter pr oducts at Colombian ports is a rule in 
                                                                                                                                                                     
Body cautioned panels against exercising judicial economy where only a partial resolution of a dispute would 
result: 
"The principle of judicial economy has to be applied keeping in mind the aim of the dispute 
settlement system. This aim is to resolve the matter at issue and 'to secure a positive solution to a dispute'. To provide only a partial resolution of the matter at issue would be false judicial 
economy. A panel has to address those claims on which a finding is necessary in order to 
enable the DSB to make sufficiently precise recommendations and rulings so as to allow for prompt compliance by a Member with those recommendations and rulings 'in order to ensure 
effective resolution of disputes to the benefit of all Members.'" 
See Appellate Body Report, Australia – Salmon , para. 223. See also Panel Report, EC – Sardines , 
paras. 7.148-7.152;  Panel Report, US – Steel Safeguards , para. 10.703. 
549 In light of its decision to exercise judicial economy in relation to Panama's Article XIII:1 claim, the 
Panel does not comment as to whether the fact that the ports of entry measure applies with respect to goods 
arriving from Panama, regardless of origin, but not to goods arriving into Colombia without previously 
transiting through Panama, qualifies as the type of disc rimination discussed within the text of Article XIII:1. 
550 Panama's first oral statement, para. 52 et se q;  Panama's second writte n submission, paras. 141 
et seq. 
551 Panama's first oral statement, para. 52. 
552 Panama's first oral statement, para. 52;  Panama's second written submission, para. 141. 
553 Panama's second written submission, para. 141. 
554 Panama's first oral statement, para. 53.  WT/DS366/R 
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  connection with importation.555 Moreover, Panama argues that access to additional ports is an 
advantage that is not immediately and unc onditionally extended to imports from Panama.556 
7.295  Colombia objects to the inclusion of what it c onsiders a new claim and argues that the failure 
to develop any legal and factual arguments in resp ect of such claim implies that Panama failed to 
make a prima facie case of violation under GATT Article I:1.557  While Colombia acknowledges that 
Article I:1 of the GATT 1994 is mentioned in Panama's request for establishment, Colombia submits 
that this claim was not part of Panama's request for establishment and is therefore not part of the Panel's terms of reference.
558  As such, Colombia has not presente d any substantive rebuttal arguments 
at this stage as it considers there simply is no case to answer at the moment in the absence of any 
development of the claim by Panama.559  Nevertheless, Colombia notes that the ports of entry measure 
is not origin-based and does not fail to extend "imm ediately" and "unconditiona lly" an "advantage" to 
products originating from Panama.560 
7.296  Despite its protest at the inclusion of a sec ond claim under Article I:1, Colombia submits, 
assuming arguendo  that this new claim was part of the Pane l's terms of reference, that Panama was 
required by paragraph 4 of th e Panel's Working Procedures561 to have presented its claims and 
arguments in its first written submission.562  However, in the event the Panel were to consider 
Panama's Article I:1 claim, Colombia has argued th at it has a right to present rebuttal arguments at a 
later stage in the proceedings.563   
2. Consideration by the Panel 
(a) Legislation authorizing restrictions on ports of entry  
7.297  The measure at issue for this claim, referred to as the ports of entry measure, is discussed in 
detail in relation to Panama's cl aims under Article XI:1 of the GATT 1994  in Section VII.E.2(a) above 
(b) Panel's approach to examining Panama 's second claim under Article I:1 of the GATT 1994  
7.298  The Panel notes that Panama has argued in the alternative that the ports of entry measure 
violates Article I:1 of the GATT 1994 .  Furthermore, the Panel acknowledges Colombia's extensive 
arguments in relation to whether this claim should be  considered within the Pa nel's terms of reference 
and thus, within the Panel's mandate.564 
7.299  As indicated in Section VII.A.2(b) above, se tting aside any doubts about its admissibility due 
to its late formulation, the Panel has decided not to  examine this claim in light of the Panel's findings 
that the ports of entry measure is a prohibited import restriction within the meaning of Article XI:1 of 
the GATT 1994, and in consideration of fact that this is an alternative claim.  In the Panel's view, the 
determination of a violatio n under Article I:1 in respect of the ports of entry measure at issue would 
                                                      
555 Panama's second written submission, para. 143. 
556 Panama's second written submission, para. 143. 
557 Colombia's second written submission, para. 149. 
558 Colombia's second written submission, para. 152. 
559 Colombia's second written submission, para. 150. 
560 Colombia's second written submission, para. 150. 
561 Paragraph 4 provides that:  "Before the first subs tantive meeting of the Panel with the parties, the 
parties to the dispute shall transmit to the Panel written submissions in which they present the facts of the case 
and their arguments". 
562 Colombia's second written submission, para. 155. 
563 Colombia's second written submission, para. 150. 
564 Colombia's second written submission, paras. 148-172. WT/DS366/R 
Page 150  
 
  not assist the DSB in making the recommendations or in giving the rulings provided for in the covered 
agreements.
565 
H. WHETHER THE ADVANCE DECLARATION AND LEG ALIZATION DECLARAT ION REQUIREMENTS 
APPLICABLE TO TEXTILES , APPAREL AND FOOTWEAR IMPORTS ARRIVING FROM PANAMA ARE 
INCONSISTENT WITH ARTICLE  I:1 OF THE GATT 1994  
7.300  In addition to a separate claim under Article I: 1, discussed in Section VII.G above, Panama 
argues that a requirement to present an advance import  declaration applicable to imports of textiles, 
apparel and footwear arriving from Panama, pay cu stoms duties and sales tax on the basis of the 
advance declaration and the obligation to pay a fee to correct the import declaration whenever weight 
per square meter or width exceed 7 a nd 10 per cent, respectively, is inc onsistent with Article I:1 of the 
GATT 1994 . 
1. Main arguments of the parties 
7.301  Panama argues that importers of textiles, appa rel and footwear arriving from Panama or the 
CFZ are subject to several additiona l requirements under the ports of entry measure, each of which is 
a rule in connection with importation that resu lts in an advantage be ing conferred on imports 
originating in countries other then Panama.   
7.302  Panama further argues that textile, apparel a nd footwear importers arriving from Panama or 
the CFZ are required to present an advance import d eclaration for imports of textiles, apparel and 
footwear, and to pay customs duties and sales tax on the basis of the advance declaration.566  Panama 
contends that importers of textil es, apparel and footwear originating in countries other than Panama 
are permitted to import into Colombia without subm itting an advance declaration and without paying 
customs duties and sales tax on that basis.567 
7.303  Panama additionally argues that importers of textiles arriving from Panama and the CFZ are 
required to pay a fee for the legalization of goods  and to correct import declarations in cases where 
discrepancies in the declared weight per square  meter and width exceed 7 per cent or 10 per cent, 
respectively.568  Panama claims that imported like products from other countries are not subject to the 
legalization declaration and fee requirement.569   
7.304  In light of the requirement to present an advance importation declaration, pay customs duties 
and sales tax on the basis of the advance declaratio n, and the obligation to pay a fee to correct the 
import declaration whenever differences in wei ght per square meter, or width exceed 7 and 
10 per cent, respectively, Panama argues that produ cts originating in the CFZ or Panama are not 
accorded immediately and unconditionally the adva ntages accorded to like products originating in 
other countries.570  By granting advantages to like products originating in other countries, and not 
extending them immediately and unconditionally to products originating in Panama or the CFZ, 
Panama considers the relevant Colombian customs la ws to be in violation of Article I:1 of the 
GATT 1994 . 
                                                      
565 In light of its decision to exercise judicial economy in relation to Panama's Article XIII:1 claim, the 
Panel does not comment as to whether the fact that the ports of entry measure applies with respect to goods 
arriving from Panama, regardless of origin, but not to goods arriving into Colombia without previously transiting through Panama, qualifies as the type of disc rimination discussed within the text of Article XIII:1. 
566 Panama's first written submission, para. 186. 
567 Panama's first written submission, para. 185. 
568 Panama's first written submission, para. 187. 
569 Panama's first written submission, para. 187. 
570 Panama's first written submission, para. 188.  WT/DS366/R 
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  7.305  Colombia does not challenge Panamas characte rization of the advance import declaration 
requirement under the port of entry measure, or  customs duty, tax and legalization declaration 
requirements as rules and formality connected with importation.  However, Colombia argues that the 
concept of "advantage" in Article I:1 of the GATT 1994  only extends to those advantages that affects 
commercial opportunities in a way that creates more favourable competitive opportunities for 
products of a certain origin.571  In Colombia's view, Panama has not presented any information to 
support its claim that an advanced import decl aration, the requirement to pay customs duties572 and 
taxes in advance, or the limitation of legalization without a fee, confers an advantage that affects a 
product's competitive opportunities.573  Colombia considers that the fact that many importers elect to 
use this advanced legalization option, and pay fees in advance attests to the fact that no competitive 
disadvantage arises from such use.574  
7.306  To the extent an advantage were deemed to exis t, Colombia argues that Panama has failed to 
demonstrate that such advantage is not exte nded "immediately and unconditionally" to all 
Members.575  Colombia argues that Members are entitled to condition access to its market on 
compliance with, and respect for, the Member's laws and regulations, including customs laws.576  
Colombia argues that importers of goods arriving from Panama were originally extended the same 
rights related to presentation of an import declarati on, payment of duties and taxes, and legalization 
fee requirements.  However, since these importers did not comply with customs control and verification processes, these advantages were amended.
577   
7.307  Finally, Colombia argues that Article I:1 protection does not apply to goods arriving into 
Colombia from Panama since Article I:1 is based on the origin of the product, not on its place of 
exportation.578  Since Panama does not produce the textile , apparel, and footwear goods for export, 
Colombia considers that Panama do es not confer origin of the goods.579   
                                                      
571 Colombia's first written submission, para. 299;  Colombia's second written submission, 
paras. 193-195. 
572 Colombia cautions the Panel against the incorrect us e of the term "paid".  In response to a question 
from the Panel, Colombia submitted that provisional payment occurs on the basis of the auto-declared value of the good at the time of submission of an import declaration.  Regardless of whether the declaration is presented 
in advance or at the border  upon entry, Colombia argues that the customs valuation for goods subject to 
indicative prices, does not occur upon entry of the goods.  See Colombia's Answers to First Set of Panel Questions, question 74.  For purposes of addressing Panama's Claim under Article I:1 of the GATT 1994 , the 
Panel will not assess the characterization of the term "payment", but will only address the issue of whether 
importers are granted an advantage of the type contemplated under Article I:1 based on the application of advance import declaration, duty, tax and legalization requirements to importers from Panama.  The nature of 
the term "payment" forms part of th e Panel's analysis of Panama's clai m in relation to indicative prices, 
discussed above.   
573 Colombia's first written submission, para. 300,  Colombia's second written submission, para. 196,  
Colombia's second oral  statement, para. 50. 
574 Colombia's first written submission, para. 300. 
575 Colombia's second written submission, para. 198. 
576 Colombia's first written submission, para. 306,  Colombia's second written submission, para. 197. 
577 Colombia's first written submission, paras. 307-308. 
578 Colombia's first written submission, para. 311. 
579 In response to a question from the Panel, the Panel notes that Panama submitted evidence 
demonstrating that one Panamanian Company exports at least one type of apparel, known as Panamanian 
guayaberas .  Panama further explained that it does not currently produce footwear for export, and does not 
produce textiles.  See Panama's response to Panel question No. 141. WT/DS366/R 
Page 152  
 
  2. Consideration by the Panel 
(a) Legislation related to the advance d eclaration and legalization requirements 
7.308  As discussed in Section II.D above, importers  of textile, apparel and footwear imports 
classifiable under Chapter 50–64 of Colombia's Tari ff Schedule and arriving from Panama are subject 
to special advance importation declaration and legali zation requirements.  The parties have referred to 
the advance declaration and legalization requirements as forming part of the ports of entry measure.  
Specifically, Article 1 of Resolution No. 7373 of 22 June 2007, as modified by Resolution No. 7637 of 28 June 2007, requires importers of subject goods  arriving from Panama to present an advanced 
import declaration not more than 15 days prior to the goods' arrival in Colombia
580 and accordingly 
pay customs duties and taxes in advance.581    
"Artículo 1o. Declaración de importación de m ercancías.  En aplicación de lo 
previsto en el inciso 3o del artículo 199 del Decreto 2685 de 1999, adicionado por el 
artículo 2o del Decreto 2373 de 2004, la decl aración de importación de las 
mercancías clasificables por los capítulos 50 a 64 del Arancel de Aduanas procedentes de la Zona Li bre de Colon – República de Panamá, deberá presentarse 
en forma anticipada a su llegada al territo rio aduanero nacional con una antelación 
no superior a quince (15) días. "
582 
7.309  Article 1 of Resolution No. 9859 of 23 Augus t 2007 additionally requi res importers of all 
goods from Panama or the CFZ that are subject to the 15-day advance import declaration requirement 
to declare the goods not less than five days prior to the arrival of the goods in Colombia:  
"Artículo 1º .Oportunidad para declarar, Las mercancías que en desarrollo del inciso 
tercero del artículo 119 del Decreto 2685 de 1999, estén obligadas a presentar declaración de importación en forma an ticipada a la llegada de la mercancía, 
deberán hacerlo con una antelación no superi or a quince (15) días calendario y no 
inferior a cinco (5) días calendario. 
Para las demás mercancías, la declarac ión de importación deberá presentarse 
dentro del término previsto en el artíc ulo 115 del Decreto 2685 de 1999, o en forma 
anticipada a la llegada de la mercancía, c on una antelación no superior a quince 
(15) días calendario. "
583 
7.310  In combination with the requirement to present an import declaration, all importers are 
generally required to pay customs duties and sales ta x at the time an import declaration is presented. 
                                                      
580 Exhibit PAN–34.  Article 1 of Resolution No. 7637 of 28 June 2007 (Exhibit PAN–36) extends the 
scope of this obligation to all listed textile, apparel and footwear goods from Panama, and not only to those from 
the CFZ. 
581 In its response to Panel questions Nos. 73, 74 and 154, Colombia has confirmed that the requirement 
to present an import advance declaration only applies to  textile, apparel and footwe ar goods classifiable under 
Chapters 50-64 of Colombia's Tariff Schedule and arriving from Panama. 
582 Resolution No. 7673 of 28 June 2007 (See Exhibit PAN-36) modifies paragraph 1 of 
Resolution No. 7373 to extend to goods arriving from any location in Panama, not strictly the CFZ as follows: 
"Articulo 1°. Declaración de importaci ón de mercancías. En aplicación de lo  previsto en el inciso 3° del 
artículo 119 del Decreto 2685 de 1999, adicionado por el artículo 2° del Decreto 2373 de 2004, la declaración 
de importación de las mercancías clas ificables por los capítulos 50 al 64 del Arancel de Aduanas, procedentes 
de la República de Panamá, deberá presentarse en forma anticipada a su llegada al territorio aduanero nacional 
con una antelación no superior a quince (15) días." 
583 Exhibit PAN–46.  WT/DS366/R 
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  "Artículo 119. Oportunidad para declarar.  La declaración de importación deberá 
presentarse dentro del término previsto en el  artículo 115 del presente decreto, o en 
forma anticipada a la llegada de la mercancía, con una antelación no superior a 
quince (15) días. 
Dentro del mismo plazo señalado en dicho artículo, deberán cancelarse los tributos 
aduaneros, cuando hubiere lugar a ello. "584 
7.311  Thus, under this regime, advance payment of cu stoms duties and sales tax is obligatory for 
imports of subject goods from Panama and the CFZ. 
7.312  Under Article 6 of Resolution No. 7373, an im porter of subject goods arriving from Panama 
and the CFZ that fails to present an advance im port declaration upon entry at Bogota or Barranquilla 
will only be able to proceed with importation if he or she submits a legalization declaration and pays a 
fee for the " rescate " of the goods in addition to all cust oms duties and any accrued warehouse storage 
charges; otherwise the importer may re -ship the goods from Colombian territory: 
"Artículo 6º. Cuando no se presente declar ación anticipada en los términos del 
artículo 1º de la presente resolución y si empre que la mercancía arribe por los 
lugares habilitados y se cumplan los requisitos legales establecidos, se podrá 
presentar declaración de legalización de  conformidad con lo previsto en el 
artículo 231 del Decreto 2685 de 1999, pagando el resca te correspondiente, o se 
podrá reembarcar mercancía "585   
7.313  If the importer does not submit a legalization decl aration to obtain release of the goods or the 
goods are not re-shipped, the goods will be consid ered as legally abandoned and subject to seizure 
within a one month period.586 A "rescate " fee of 15 per cent of the value of the goods will be required 
to recover goods within this one-month period.587   
7.314  Unlike subject imports arriving from Panama, im ports arriving from points of departure other 
than Panama or the CFZ are not subject to an a dvance import declaration requirement (as long as the 
goods do not arrive from Panama or the CFZ).  Under Article 119 of Decree No. 2685 of 1999, 
applicable to imported goods gene rally, an importer may present an import declaration as early as 15 
days prior to arrival of the goods, but may dela y presentation of the import declaration until one 
month after the goods' arrival into Colombia or up to two months following arrival, subject to 
authorization by Colombia's customs authority.588  In light of this flexibility, the advance payment of 
customs duties and sales tax is not mandatory, but is instead optional for imports of subject goods 
arriving from the territory of WTO Members other than Panama.589 
7.315  In addition to the advance import declarati on requirement imposed on imports arriving from 
Panama and the CFZ, and the concurrent advance customs duties and sales tax obligation, textile 
imports classifiable under Chapters 50-60 of Colombia 's Tariff Schedule that arrive from Panama, are 
subject to special legalization requirements.  In pa rticular, Article 3 of Resolution No. 7373 exempts 
imports arriving from Panama and the CFZ that have  been declared in advance from the requirement 
to pay a fee for "rescate" of goods in situations wh ere differences in the weight per square metre or 
width of the textile exceed 7 and 10 per cent, respectively: 
                                                      
584 Exhibit COL-1. 
585 Exhibit PAN-34;  see also Article 231 of Decree No. 2685 (Exhibit PAN-32). 
586 Article 115 of Decree No. 2685 of 1999 (Exhibit PAN-1). 
587 Article 231 of Decree No. 2685 (Exhibit PAN-32). 
588 Article 119 of Decree No. 2685 of 1999 (Exhibit COL-1);  Article 115 of Decree No. 2685 of 1999 
(Exhibit COL-1).   
589 In its response to Panel question No. 154, Colo mbia confirmed that this advanced declaration 
requirement is an option for all goods arriving from all other points of departure except Panama (and the CFZ). WT/DS366/R 
Page 154  
 
  "Artículo 3º. Adicionase el artículo 153 de la Resolución 4240 de 2000, modificado 
por el artículo 49 de la Resolución 7002 de 2001, con los siguientes incisos: 
'Podrán ser objeto de legalización sin el pago de rescate, las importaciones de telas y 
tejidos de materias textiles de los capítulo s 50 al 60 del Arancel de Aduanas, respecto 
de los cuales se hubiere presentado Declaración Anticipada, cuando se presenten 
diferencias en el peso por metro cuadrado o el ancho de la tela y las mismas no 
superen el 7% y el 10%, respectivamente.  
Para acogerse a lo señalado en el inciso anterior, la Declaración de Legalización 
deberá presentarse dentro de los cinco (5) días hábiles siguientes a la llegada de la 
mercancía al territorio aduanero nacional. "
590 
7.316  In relation to this requirement, Article 128.7 of Decree No. 2685 of 1999, as modified by 
Decree No. 1232 of 2001, generally imposes a fee of 3 per cent of the value of the goods to correct 
errors in the description of the goods that exceed 7 pe r cent, in terms of weight per square metre, or 
10 per cent in terms of width, within a period of  five days after a declaration is presented: 
"La autorización de levante procede cuando  ocurra uno de los siguientes eventos: 
Cuando practicada inspección aduanera física se detecten errores u 
omisiones en la descripción, diferentes de los señalados en el numeral 4 del presente artículo, o po r descripción incompleta de la 
mercancía que impida su individualizac ión y el declarante, dentro de 
los cinco (5) días siguientes a la práctica de dicha diligencia, presenta Declaración de Legalizac ión que los subsane, cancelando 
una sanción del tres por ciento (3%) del valor en aduana de la mercancía por concepto de rescate. "
591 
7.317  As noted in paragraph 7.308 a bove, all textile imports arriving from Panama and the CFZ are 
subject to an advance import declaration requireme nt.  Hence the special legalization requirement 
applies to all textile imports arriving from Panama and the CFZ.   
7.318  Under Article 153 of Resolution No. 4240 of 2000, as modified by Article 1 of 
Resolution No. 8038 of 2005, imports classifiab le under Chapters 50–60 of Colombia's Tariff 
Schedule arriving from all points of departure that ar e declared in advance are generally required to 
pay a fee to correct an import declaration in situa tions where differences in the weight per square 
metre or width of the textile exceed 7 and 10 per cent, respectively, and are similarly exempt when 
difference do not exceed these amounts.592  However, importers of goods arriving from points of 
departure other than Panama and the CFZ are not required to, but may inst ead optionally present an 
advance import declaration.  Thus, importers of goods from origins other than Panama or the CFZ are 
not mandatorily subject to the requirement to pay a fee of three per cent of the value of the goods to correct errors in the description of goods in ex cess of the 7 and 10 per cent margins explained above. 
                                                     
 
590 Exhibit PAN–34. 
591 Exhibit COL-1. 
592 Article 153 of Resolution No. 4240 of 2000 (Exhibit COL-2) provides:  
"[P]odrán ser objeto de legalización sin el pago de rescate, las importaciones de telas y tejidos de 
materias textiles clasificables por los capítulos 50 al 60 del Arancel de Aduanas, para. los cuales se hubiere 
presentado Declaración Anticipada, de conformidad con lo establecido en la Resolución 1513 de 2005, 
modificada por la Resolución 5482 del mismo año, cuando se presenten diferencias en el peso por metro cuadrado o el ancho de la tela, siempre que tales diferencias no superen el 7% y el 10%, respectivamente.  Para 
acogerse a lo señalado en el inciso anterior, la Declaración de Legalización deberá presentarse dentro de los 
cinco (5) días hábiles siguientes a la llegada de la mercancía al territorio aduanero nacional. "  WT/DS366/R 
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  7.319  The Panel will hereafter discuss the advance decl aration and legalization fee requirements in 
connection with the obligation set fo rth in the ports of entry measure. 
(b) The text of Article I of the GATT 1994  
7.320  In this instance, the Panel is called upon to examine whether simulta neous imposition of the 
advance import declaration and legalization re quirements under the ports of entry measure is 
inconsistent with Article I:1 of the GATT 1994 .  Article I:1 of the GATT 1994  contains the Most-
Favoured Nation (MFN) principle, considered as  "a cornerstone of the GATT and ... one of the 
pillars of the WTO trading system".593  Article I:1 provides as follows: 
"With respect to customs duties and charges of any kind imposed on or in connection 
with importation or exportation or imposed on the international transfer of payments 
for imports or exports, and with respect to the method of levying such duties and 
charges, and with respect to all rules a nd formalities in connection with importation 
and exportation, and with respect to all matte rs referred to in pa ragraphs 2 and 4 of 
Article III, any advantage, favour, privilege or immunity granted by any contracting 
party to any product originating in or destin ed for any other country shall be accorded 
immediately and unconditionally to the like pr oduct originating in or destined for the 
territories of all other contracting parties." 
7.321  The Appellate Body in Canada – Autos  discussed the object and purpose of Article I:1: 
"Th[e] object and purpose [of Article I] is to prohibit discrimination among like 
products originating in or destined for different countries.  The prohibition of 
discrimination in Article I:1 also serve s as an incentive for concessions, negotiated 
reciprocally, to be extended to all other Members on an MFN basis."594 
7.322  As recognized by other panels, the Appellate Body's ruling in EC – Bananas III  confirmed 
how to examine a measure under Article I:1: 
"The Appellate Body in Bananas III , confirmed that to establish a violation of 
Article I, there must be an advantage, of the type covered by Article I and which is 
not accorded unconditionally to all 'like products' of all WTO Members."595 
7.323  In accordance with the approach set out in EC – Bananas III (Article 21.5 – US) , and upheld 
by the Appellate Body, the Panel will conduct its anal ysis by first considering whether Colombia, by 
imposing the advanced import and legalization re quirements within the ports of entry measure, 
confers an advantage of the type covered by Article  I, and then determine whether the advantages are 
extended to all like products unc onditionally.  However, prior to doing so, the Panel must 
preliminarily establish whether Panama is eligible to bring a claim under Article I even though it does 
not currently export textiles, apparel and foot wear of Panamanian origin to Colombia. 
(c) Panama's right to bring a claim under Article I of the GATT 1994  
7.324  Before proceeding to assess whether Colombia confers an advantage that is not extended 
unconditionally to all like products, the Panel will fi rst address whether Panama may properly raise its 
claim under Article I:1 of the GATT 1994 .  Colombia has argued that it cannot be considered as 
having failed to meet its obliga tions under Article I:1 of the GATT 1994  since Panama does not 
                                                      
593 Appellate Body Report, Canada – Autos , para. 69. 
594 Appellate Body Report, Canada – Autos , para. 84. 
595 Panel Report, EC – Bananas III (Article 21.5 – US) , para. 7.555,  Panel Report, Indonesia – Autos , 
para. 14.138, citing to Appellate Body Report, EC – Bananas III , para. 206. WT/DS366/R 
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  actually produce the textile, apparel and footwear at  issue in this dispute.  Colombia argues that 
Article I:1 only applies to products originating in one Member's territory as the provision is based on 
the origin of the product, and not on the place of exportation.
596  In light of Panama's failure to 
demonstrate that it produces textile, apparel or foot wear products for export, Colombia considers it 
has not failed to meet its obligations under Article I.597 
7.325  In considering whether a measure violates Artic le I:1 based on its design, structure and 
architecture, Panama considers it legally irrele vant whether or not Panama produces the good in 
question.598  Panama considers that Article I:1 protects potential future trade, and the conditions of 
competition between suppliers of different  origin, irrespective of trade volumes.599  P a n a m a  
additionally notes that it currently produ ces at least one apparel product for export600, and has a 
potential export interest for other apparel as well as textiles and footwear.601   
7.326  The Appellate Body in EC – Bananas III  has previously considered  the issue of whether the 
United States had "standing" to bring a claim under th e GATT.  In that particular dispute, the United 
States filed a claim under the GATT against the Eu ropean Communities, even though it did not, at 
that time, export bananas.  The Appellate Body f ound the United States was sufficiently justified in 
raising its claim, stating: 
"We are satisfied that the United States was justified in bringing its claims under the 
GATT 1994 in this case. The United States is a producer of bananas, and a potential export interest by the United States cannot be excluded ...  We also agree with the 
Panel's statement that:  
... with the increased interdependence of the global economy, ... 
Members have a greater stake in enforcing WTO rules than in the 
past since any deviation from the negotiated balance of rights and obligations is more likely than ever to affect them, directly or indirectly.
602"603 
7.327  In reaching its conclusion, the Appellate Body noted that Members have broad discretion to 
bring a claim before the WTO: 
"[W]e believe that a Member has broad discretion in deciding whether to bring a case 
against another Member under the DSU. The language of Article XXIII:1 of the GATT 1994 and of Article 3.7 of the DSU suggests, furthermore, that a Member is expected to be largely self-regulating in deciding whether any such action would be 
'fruitful'."
604 
                                                      
596 Colombia's first written submission, para. 311. 
597 Colombia's first written submission, para. 311. 
598 Panama's first oral statement, para. 72. 
599 Panama's second written submission, para. 162.  Panama has stated it has a manufacturing industry 
with a potential interest in exporting to Colombia: see Pana ma's first oral statement, para. 74.  In response to a 
question from the Panel, Panama also indicated that no Panamanian companies presently produce textiles, and 
does not export domestically produced footwear. 
600 As mentioned in footnote 579, Panama submitte d in response to Panel question No. 141 that one 
Panamanian Company exports a particular type of apparel, which it referrs to as Panamanian guayaberas . 
601 Panama's first oral statement, para. 74;  Panama's response to Panel question No. 141;  Exhibits 
PAN 78(a) and (b). 
602 (footnote original ) Panel Reports, para. 7.50. 
603 Appellate Body Report, EC – Bananas III , para. 136. 
604 Appellate Body Report, EC – Bananas III , para. 135.  The Appellate Body considered the language 
in the chapeau of Article XIII ("If any Member should consider that an y benefit accruing to it directly or  WT/DS366/R 
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  7.328  The Panel further notes the notion of protecting be nefits that accrue to Members directly or 
indirectly within Article 3.3 of th e DSU, which has Article XXIII of the GATT 1994  as its basis: 
"The prompt settlement of situations in wh ich a Member considers that any benefits 
accruing to it directly or indirectly under the covered agreements are being impaired 
by measures taken by another Member is essential to the effective functioning of the 
WTO and the maintenance of a proper balan ce between the rights and obligations of 
Members." 
7.329  In line with the Appellate Body's decision in EC – Bananas III , the Panel is satisfied that a 
sufficient basis exists for Panama to bring its claim under Article I:1 of the GATT 1994 , with respect 
to subject textiles, apparel and footwear classi fiable under Chapters 50–64 of Colombia's Tariff 
Schedule.  As noted, Panama currently produces appare l for export, has stated its interest in exporting 
domestically produced footwear and ot her apparel in the future, and stated its potential to manufacture 
textiles in the future.  In the Panel's view, Panama  has sufficiently demonstrated its interest in a 
determination of rights and obligations under the WTO Agreement.  
7.330  Accordingly, the Panel concludes that Panama is  entitled to bring, and had sufficient interest 
to initiate and proceed, with an Article I:1 clai m against Colombia in relation to its advance 
declaration and legalization measure concerning impor ts of textile, apparel and footwear products. 
(d) Whether Colombia confers an advantage of the type covered by Article I:1 of the GATT 1994  
7.331  The Panel will first consider whether Colombia, by imposing the requirement to present an 
advance import declaration, the requirement to pay customs duties and taxes on the basis of this 
declaration, and the legalization declaration fees under the ports of entry measure, confers an 
advantage of the type covered by Article I:1 of the GATT 1994 . 
7.332  The Panel recalls that under Article 119 of D ecree No. 2685 of 1999, applicable to imported 
goods of all origins, an importer is generally permitted (but not required) to present an import 
declaration as early as 15 days prior to arrival of the goods, or may delay presentation of the import 
declaration until one month after the goods' arriva l into Colombia or up to two months following 
arrival, subject to authorization by Colombia's customs authority.605  In combination with the 
requirement to present an import declaration, impor ters of goods are also required to pay customs 
duties and sales tax at the time an import declaration is presented.606   
7.333  As explained in Section II:D, under the a dvance import declaration and legalization 
requirements within the ports of entry measure, im porters of textiles, apparel and footwear arriving 
from Panama or the CFZ are required to present an  advance import declaration not more than 15 
days607, but not less than five days prior to the arrival of the goods in Colombia.608  Those importers of 
subject goods from Panama or the CFZ are also required to pay customs duties and taxes in 
advance.609  Any importer that fails to present an advan ced import declaration upon entry will only be 
                                                                                                                                                                     
indirectly under this Agreement is be ing nullified or impaired or that th e attainment of any objective of the 
Agreement is being impeded ...") alongside that in Artic le 3.7 of the DSU ("Before bringing a case, a Member 
shall exercise its judgement as to whether action under these procedures would be fruitful.") 
605 Article 119 of Decree No. 2685 of 1999 (Exhibit COL-1);  Article 115 of Decree No. 2685 of 1999 
(Exhibit COL-1).   
606 Article 119 of Decree No. 2685 (Exhibit COL-1). 
607 Article 1 of Resolution No. 7373 of 2007 (Exhib it PAN–34);  Article 1 of Resolution No. 7637 of 
28 June 2007 (Exhibit PAN–36). 
608 Article 1 of Resolution No. 9859 of 23 August 2007 (Exhibit PAN–46). 
609 Since all importers are generally required to pay customs duties and sales tax at the time an import 
declaration is presented, importers of textiles and a pparel from Panama and the CFZ, which are required to 
present an import declaration in advance, therefore, must pay customs duties and sales tax in advance. WT/DS366/R 
Page 158  
 
  able to proceed with importation if the importer s ubmits a legalization declaration and pays a fee for 
the " rescate ", or recovery, of the goods (equal to 15 per cent of the value of the goods) in addition to 
all customs duties and any accrued warehouse storage charges.
610  Otherwise, the importer must 
remove the goods from Colombian territory611 or the goods will be subject to seizure.612 
7.334  In addition to the requirement to present an advance declaration and pay customs duties and 
sales tax on the basis of that declaration, importers of textiles from Panama or the CFZ are subject to a 
requirement to pay a fee equal to 3 per cent of the value of the goods to correct errors in the import 
declaration, whenever discrepanci es exceed 7 and 10 per cent of the value in terms of weight per 
square metre and width, respectively.613  This means that under the advance import declaration and 
legalization requirements, importers of textiles fro m Panama or the CFZ are exempt from the fee only 
in cases where errors do not exceed the 7 and 10 per cent discrepancies.614 
7.335  On the basis of the text of Article I:1 and in light of Appellate Body's jurisprudence, Panama 
considers that the term "advantage" in Article  I:1 should be interpreted broadly to include any 
advantage and not only those economic in nature, as the GATT  is intended to protect competitive 
opportunities and not trade flows.615  Panama considers the requirement to present an advance 
declaration and pay customs duties at that time cr eates a disadvantage for importers of textile from 
Panama, as importers are not able to inspect goods in advance. 616  If there are discrepancies between 
the information provided in the import declaration and the goods actually entered, then an importer 
will be required to file a legalization d eclaration under the ports of entry measure.617  Second, if the 
discrepancies or errors in the description of goods  exceed 7 per cent in terms of weight per square 
metre, or 10 per cent in terms of the width of the textile, the importer will be required to pay a fee for 
the " rescate ", or recovery, of the goods.618  Thus, the advantage granted to importers of textiles from 
other countries of being able to inspect the goods be fore submitting an import declaration is not an 
advantage extended to textil e importers from Panama.619 
7.336  Colombia has argued that the concept of advant age in Article I only extends to any advantage 
that affects commercial opportunities in a way that  creates more favourable competitive opportunities 
for products of a certain origin.620  In this sense, Article I:1 would not prohibit differences in 
conditions that apply to Members' imports as l ong as those differences do not extend a competitive 
advantage to other Members' imports.621   
7.337  Colombia argues that Panama has failed to demonstrate that the advance declaration 
requirement, which is optional for all importers and wh ich is regularly used by importers to accelerate 
                                                      
610 Article 231 of Decree No. 2685 (Exhibit PAN-32). 
611 Article 6 of Resolution No. 7373 (Exhibit PAN-34);  Article 231 of Decree No. 2685 
(Exhibit PAN-32). 
612 Article 115 of Decree No. 2685 of 1999 (Exhibit PAN-1). 
613 Article 128.7 of Decree No. 2685 of 1999 (Exhibit COL-1), as modified by Decree No. 1232 of 
2001.  The Panel notes under Article 153 of Resolution No. 4240 of 2000 (Exhibit COL-2), as modified by Article 1 of Resolution No. 8038 of 2005 all importers submitting an advance import declaration are required to 
pay a fee to correct an import declara tion, where differences between the actua l goods and what is stated in the 
import declaration exceed 7 per cent, in terms of weight per square metre, or 10 per cent in terms of width. 
614 Article 3 of Resolution No. 7373 of 22 June 2007 (Exhibit PAN–34). 
615 Panama's second oral statement, para. 61. 
616 Panama's second oral statement, para. 62. 
617 Resolution No. 7373, Article 6. 
618 Article 231 of Decree No. 2685. 
619 Panama's second oral statement, para. 62;  Panama's response to Panel question No. 75. 
620 Colombia's first written submission, para. 299, citing to EC – Bananas III , para. 7.239.  Colombia 
considers that in the context of an economic agreement such as the GATT , the term "advantage" must have an 
economic meaning which implies that it refers to an advantage in economic and competitive terms (see 
Colombia's second written submission, para. 193). 
621 Colombia's first written submission, para. 302.  WT/DS366/R 
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  the importation process, imposes a competitive disadvantage.622  Colombia considers the fact that 
many importers elect to use this advanced legaliz ation option signifies that it must be seen as an 
advantage rather than a disadvantage.623  Colombia also submits that the 7 and 10 per cent discrepancy 
rule is favourable to importers and is  intended to offset the fact that an importer is not able to inspect 
goods before importation.  In what Colombia deem s an "ordinary" situation, an importer is not 
allowed to legalize any discrepancies  without having a fee assessed, wh ereas importers are able to do 
so whenever submitting an advance import declaration.624 
7.338  Panama rejects Colombia's argument that im porters' use of an advance import declaration 
signifies that it must be seen as an advantage.625  Panama notes primarily that the majority of 
importers have the option to file an advance d eclaration when the importer is certain about the 
contents of a particular shipment, whereas importers  of textile from Panama  must file an advance 
declaration for all shipments regardless of whether the impor ter is certain about the content and 
specifications of the shipment.626  Panama further rejects the notion that other importers' use of an 
optional advance declaration mitigates against cons idering an advance declaration requirement as 
disadvantageous.  In this respect, Panama argues that it is not a requirement under Article I:1 to 
submit evidence in the form of adverse trade eff ects that these customs requirements create more 
favourable opportunities for other Members' imports.627  According to Panama, whether a measure 
violates Article I:1 does not depend on whether adverse trade effects result from the measure's imposition, but whether the measure is applicab le based exclusively on the product's origin.
628   
7.339  The first issue before the Panel is thus wh ether Colombia, by imposing the advance import 
declaration and legalization requirements under the ports of entry measure, confers an advantage 
within the meaning of Article I:1 of the GATT 1994 on textile, apparel and footwear imported from 
other WTO Members, as compared with like products imported from Panama or the CFZ. 
7.340  The term "advantage" within Article I:1 of the GATT 1994  has been interpreted broadly by 
the Appellate Body as well as GATT and WTO panels.629  In Canada – Autos , the Appellate Body 
discussed the significance of "any advantage … granted by any Member to any product": 
"We note next that Article I:1 requires that ' any advantage , favour, privilege or 
immunity granted by any Member to any product  originating in or destined for any 
other country shall be accorded immediat ely and unconditionally to the like product 
originating in or destined for the territories of  all other Members .'  (emphasis added)  
The words of Article I:1 refer not to some  advantages granted 'with respect to' the 
subjects that fall within the define d scope of the Article, but to ' any advantage ';  not 
to some  products, but to ' any product '; and not to like products from some other 
Members, but to like products originating in or destined for ' all other  ' Members."630  
                                                      
622 Colombia's first written submission, para. 302;  Colombia's second written su bmission, para. 191;  
Colombia's second oral  statement, para. 49. 
623 Colombia's second written submission, para. 196. 
624 Colombia's second oral  statement, para. 50. 
625 Panama notes that Colombia has not provided any evidence to substantiate this argument: Panama's 
second written submission, para. 153. 
626 Panama's response to Panel question No. 75;  Panama's second written submission, para. 154;  
Panama's second oral statement, para. 64. 
627 Panama's first oral statement, para. 69;  Panama's second written submission, para. 158. 
628 Panama's first oral statement, para. 70. 
629 The Appellate Body in EC – Bananas III  commented that "a broad definition has been given to the 
term 'advantage' in Article I:1 of the GATT 1994 by the Panel in United States – Non-Rubber Footwear ."  See 
Appellate Body Report, EC – Bananas III ¸ para. 206, citing to GATT Panel Report, US – Non-Rubber 
Footwear , para. 6.9. 
630 Appellate Body Report, Canada – Autos , para. 79. WT/DS366/R 
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  7.341  The panel in EC – Bananas III  considered that "advantages" within the meaning of Article I:1 
are those that create "more favourable competi tive opportunities" or affect the commercial 
relationship between products of different origins.
631 
7.342  The parties consider that th ese measures constitute "rules and formalities in connection with 
importation".632  As the Panel notes, Colombia has confirmed that importers of certain textiles, 
apparel and footwear originating in and/or arrivi ng from Panama or the CFZ must present an import 
declaration no earlier than 15 days but no later than fi ve days prior to the goods entry into Colombia, 
and pay customs duties and sales tax on the basis of this advance declaration.633  This requirement to 
present a declaration in advance applies only to impor ters of subject goods from Panama or the CFZ, 
as such an advance declaration re mains an option for other importers whose goods do not transit 
through Panama before arriving to Colombia.634  Colombia has additionally confirmed that all 
importers of textiles must pay a fee to rectify im port declarations, whenever the differences between 
the actual goods and what is stated in the import d eclaration with respect to the weight per square 
metre or the width exceed 7 and 10 per cent, respectively.635  While this latter requirement applies to 
all textile importers that elect to present an advance declaration, as Colombia has acknowledged that 
only importers of textiles arriving from Panama or the CFZ are obliged to present an advance 
declaration, the Panel concludes that only importers  from Panama or the CFZ are necessarily subject 
to this 7 and 10 per cent discrepancy rule.636 
7.343  As noted above, these requirements apply to subject goods originating in, or arriving from, 
Panama or the CFZ.  In other words, these measure s apply to goods originating in Panama or the CFZ 
as well as subject like-product goods originating in other countries which transit through Panama or 
the CFZ before arriving to Colombia.  Like-product goods originating in other countries which do not 
transit through Panama or the CFZ are not subject to any of the above requirements outright, as long 
as the importer does not elect as an option to  present an advance import declaration. 
7.344  In light of Colombia's factual confirmations, the Panel concludes that the flexibility to present 
an import declaration simultaneous with (or after) the arrival of the goods provides an advantage to 
imports eligible for advance declarations as compared  to imports that are not.  As to whether this 
advantage is the type of "advantage" within the meaning of Article I:1 of the GATT 1994 , the Panel 
notes the statement by the Appellate Body in Canada – Autos , discussed above: 
"The words of Article I:1 refer not to some  advantages granted 'with respect to' the 
subjects that fall within the defined scope of the Article, but to ' any advantage '; not to 
some  products, but to ' any product '; and not to like products from some other 
Members, but to like products originating in or destined for ' all other ' Members."637 
7.345  As demonstrated by this statement, the Appellate  Body attributed a broad interpretation to the 
notion of "advantage".   
7.346  In light of this broad view, the Panel disagrees with Colombia's contention that importers are 
not granted an advantage that affect commercial opportunities in a way that creates more favourable 
competitive opportunities for products of a certain orig in.  On the contrary, in the Panel's view, the 
measure has precisely that effect.  Colombia argues that Panama has not presented any information to support its claim that an advanced import declara tion, or the requirement to pay customs duties and 
                                                     
 
631 Panel Report, EC – Bananas III (Guatemala and Honduras) , para. 7.239;  Colombia's first written 
submission, para. 299;  Panama's first written submission, para. 185 
632 Panama's first written submission, para. 184,  Colombia's first written submission, para. 297. 
633 Colombia's response to Panel question No. 154. 
634 Colombia's response to Panel question No. 154. 
635 Colombia's response to Panel question No. 77. 
636 Colombia's response to Panel question No. 154. 
637 Appellate Body Report, Canada – Autos , para. 79.  WT/DS366/R 
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  taxes in advance, or the limitation of legaliza tion without a fee, affects a product's competitive 
opportunities or confers an advantage.638  However, the Panel disagrees. 
7.347  As Panama has noted, importers of goods arrivi ng from Panama are required to submit import 
declarations in advance, and accordingly, pay cust oms duties and taxes in advance.  Importers of 
goods from other destinations, however, are not require d to file import declarations in advance.  
Accordingly, those importers are granted flexibilit y to make customs duty and tax payments when 
they see fit.  In addition to this aspect, and possi bly more importantly, since importers of goods from 
Panama and the CFZ are required to present an ad vance declaration prior to the goods' arrival in 
Colombia, the importers are prevented from inspec ting goods prior to presenting the related import 
declaration.639  As is the case with all textiles importe rs, a fee is assessed to correct an import 
declaration in cases where discrepancies in the re ported weight per square metre or width are 
determined to exceed 7 and 10 per cent, respectiv ely.  In cases where differences are less than 7 and 
10 per cent, an importer who has filed an advance decl aration will be able to correct his declaration 
without being assessed a fee, just as an importer w ho has not presented an advance import declaration 
would.  However, in cases where the difference is greater than 7 and 10 per cent, respectively, an 
importer who has filed an advance declaration w ould be assessed a fee.  An importer who has not 
filed an advance import declaration would retain the option to inspect his goods on site upon arrival, 
verifying their dimension and weight, prior to su bmitting a declaration, thereby assuring himself of 
the accuracy of the declaration and avoiding the fees requi red to file a legalization declaration.  In this 
sense, such an importer not filing an import declarat ion in advance, although able to do so, may avoid 
the assessment of fees, whereas an importe r of goods arriving from Panama will not. 
7.348  The Panel notes Colombia's assertion that the requirement to present an advance import 
declaration should not be considered a disadvantag e to importers from Panama and the CFZ as many 
importers that are not required to do so neverthe less "regularly use" advance import declarations.640  
Panama disputes this argument on a number of grounds .  From a factual standpoint, Panama notes that 
Colombia has not presented any evidence to suppor t this statement.  In reference to the US – Certain 
EC Products dispute, Panama also argues that it is not a requirement under Article I:1 to submit 
evidence that these customs requi rements create more favourable opportunities for other Members' 
imports.641  Instead, a violation of Article I:1 can ari se because a measure extends an advantage only 
to one Member's imports, but not to all Members'  imports, and depends ex clusively on the product's 
origin.642  Colombia argues that Panama's reference to the case of US – Certain EC Products  is 
erroneous, as the panel in that dispute found that a negligible effect arising from an increased bonding 
requirement did not detract from the basic conclusion that a continuous bond requirement 
significantly increased the burden on certain Eur opean Community products in 93 per cent of cases.643 
                                                      
638 Colombia's first written submission, para. 300,  Colombia's second written submission, para. 196;  
Colombia's second oral  statement, para. 50. 
639 Colombia has confirmed in its response to Panel question No. 155 that importers may inspect goods 
before presenting an import declaration in ordinary situations, although Colombia asserted that inspection is not 
very common in practice.  Colombia considers that certain  importers are willing to file advance declarations in 
the interest of expediency, thereby taking on the risk that, in case of discrepancies, the importer will need to pay for the legalization of the goods. 
640 Colombia's first written submission, para. 300.  Colombia also notes that, by imposing this advanced 
import declaration, the two relevant customs administ rations will have received prior informat ion of the 
products that are being shipped to Colombia.  This allows DIAN to have special customs officials in these 
administrations to examine particular shipments and it enables the use of "observadores" (experts in the smuggling of goods) to perform their tasks adequately, thus allowing DIAN to be more effective in combating 
smuggling. 
641 Panama's first oral statement, para. 69. 
642 Panama's first oral statement, para. 70. 
643 Colombia's second written submission, para. 196, citing to Panel Report, US – Certain EC Products , 
para. 6.48. WT/DS366/R 
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  7.349  The Panel considers this argument unpersuasive fo r several reasons.  In the Panel's view, the 
conclusions in US – Certain EC Products , support the view taken by Pana ma.  In discussing the effect 
of a continuous bond requirement, the Panel noted: 
"We recall that approximately 93 per cent of the EC imports (and assuming therefore 
approximately 93 per cent of the EC listed imports) were subject to continuous entry 
bonds.  From the evidence before us, we be lieve that in most cases of EC listed 
imports the 3 March Measure led to increased bonding requirements. There may, however, be situations where the 3 Ma rch additional bonding requirements were 
negligible or did not increase. We consider, however, that the object of our examination is the mechanism put in place through the 3 March Measure as a 
whole."
644 (footnote omitted) 
7.350  Thus, the panel in US – Certain EC Products  recognized that although a measure may not 
have application in every situation, the relevant consideration remains the mechanism put in place by 
the measure, not its effect in a certain number of occasions or to a certain volume of imported products.   
7.351  In examining the measure in terms of its design, the fact remains that for all imports arriving 
in Colombia without previously transiting through Panama or the CFZ, importers are given a number 
of options: to present an import declaration in advance,  at the time of arrival or up to two months after 
arrival in certain cases.  Despite the frequency w ith which importers opt to inspect goods, Colombia 
agrees that importers may choo se to inspect goods before presenting an import declaration if 
permitted to do so.
645  Colombia has noted that importers would conduct an inspection in cases where 
they have doubts about the reliability of the expo rter or the specific shipment.  Colombia has 
additionally pointed out that certain importers are willi ng to file advance declarations in the interest of 
expediency, thereby taking on the "risk" that, in case of discrepancies, the importer will need to pay 
for the legalization of the goods.  In the Panel' s view, these statements alone demonstrate the 
existence of an advantage of the type  contemplated under Article I:1 of the GATT 1994 .  As Colombia 
notes, on certain occasions an importer may be w illing to declare in advance for the sake of 
expediency, at the risk of paying a fee in case of discrepancies uncovered at the time of inspection.  However, an importer in other occasions may percei ve a high risk and choose to withhold presenting a 
declaration until he has determined the contents an d specifications of the goods, in order to avoid 
discrepancies.  Inherently, an advantage arises for an importer that can choose how to operate his business in order to enhance his profitability and competitiveness, among other concerns.   
7.352  In light of the foregoing conclusions, the Pane l determines that Colombia, by imposing the 
advance import declaration and legalization requireme nts within the ports of entry measure confers an 
advantage within the meaning of Article I:1 of the GATT 1994 .  In particular, one advantage arises 
from the fact that importers of subject goods fro m territories other than Panama or the CFZ are 
granted flexibility to make customs duty and tax payments when they see fit.  Additionally, an 
importer that has not filed an advance import declar ation would retain the option to inspect his goods 
on site upon arrival, verifying its dimension and weight, prior to submitting a declaration, thereby 
assuring himself of the accuracy of the declaration and avoiding fees required to file a legalization declaration. 
(e) Whether like products from other Members are gr anted an advantage within the meaning of 
Article I:1 of the GATT 1994  
7.353  The Panel will next consider whether like products from other Members are granted an 
advantage which is not extended unc onditionally to subject goods from Panama.  The Panel notes that 
                                                     
 
644 Panel Report, US – Certain EC Products , para. 6.51. 
645 Colombia has confirmed this in its response to Panel question No. 155.  WT/DS366/R 
 Page 163 
 
 
  the advance import declaration and legalization requ irements do not apply strictly on the basis of 
origin, but also depend on the path of transit taken by particular tex tile, apparel and footwear 
products.  Thus, for instance, a textile product sh ipped from China with p assage through Panama or 
the CFZ will be subject to the advance import declar ation and legalization requirements.  However, if 
the same good is shipped from China directly to Co lombia that good will not be subject to these 
additional requirements, including the obligation to  declare goods in advance and pay customs duties 
and taxes on the basis of that advance declaration.   
7.354  The Panel further notes that the parties have not disputed whether textiles, apparel and 
footwear from other Members are like products to tho se arriving from Panama or the CFZ.  However, 
as mentioned above, Colombia has challenged whet her Panama has standing to bring a claim under 
Article I:1 on the basis of the fact that Panama does not export textiles, apparel or footwear 
products.646  We recall our finding that Panama is entitle d to bring, and had sufficient interest to 
initiate and proceed with, an Article I:1 claim ag ainst Colombia in relation to its advance import 
declaration and legalization requirements within the ports of entry measure. 
7.355  In the Panel's view, it is not necessary to determ ine through lengthy analysis whether textiles, 
apparel or footwear arriving from other countries ar e in fact like products to those goods originating 
in and arriving from Panama.  Based on the design of  the ports of entry measure, any textiles, apparel 
or footwear imported from territories other than Panama or the CFZ, are like products, and would 
necessarily be allowed entry at 11 ports of entry in Colombia without presenting an advance import 
declaration, as long as the product did not circulate through Panama or the CFZ prior to arrival in 
Colombia.647  The distinction between products, whic h determines whether or not an advance 
declaration is required (and hence whether customs duties and sales tax are assessed, and what rights 
are available to inspect merchandise and verify accuracy of the import declaration), is not based on the products per se , but rather on the territory from which the product arrives.  In this sense, a product 
originating in, or arriving from Panama, or the CFZ identical in all respects to a product arriving into 
Colombia from any other territory (that did not circulate through Panama or the CFZ prior to arrival in 
Colombia), would be subject to the advance impor t declaration and other requirements at issue. 
7.356  The Appellate Body has previously recognized the possibility of using hypothetical imports to 
determine whether a measure violates Article III:2 of the GATT 1994 .
648  Under the advance  import 
declaration and legalization requirements, the distin ction between products is based on the circulation 
and points of departure of textile, apparel and f ootwear products prior to the products' arrival in 
Colombia.  In particular, since Panama does not currently produce any of these products for export to 
Colombia, but in light of the fact that the Pane l views it as proper to consider Panama's claim, 
hypothetical imports from Panama or the CFZ are ap propriate for considerati on.  An advance import 
declaration, advance payment of customs duties a nd taxes, and special rules concerning legalization 
would be required simply because of the products' orig in.  In the Panel's view, the hypothetical origin-
based distinction that would arise if Panama we re to produce the subject goods and export those 
goods to Colombia is sufficient for the Panel to  proceed in considering Panama's claim under 
Article I:1 of the GATT 1994 . 
7.357  Therefore, the Panel considers it appropriate to  proceed in comparing hypothetical textile, 
apparel and footwear products orig inating in Panama or the CFZ w ith those "like products" arriving 
from other Members (which have not previously circulated through Panama or the CFZ prior to 
                                                      
646 See Section VII.H.2(c). 
647 Colombia has confirmed that while 26 ports of entry exist in its territory (see Colombia's first 
written submission, para. 185), textiles, apparel and footwe ar from all Members may only enter at 11 designated 
ports of entry (see Article 39 of Resolution No. 4240 of 2000 (Exhibit PAN–38)). 
648 Appellate Body Report, Canada – Periodicals , pp. 20-21;  see also Panel Report, Indonesia – Autos , 
para. 14.113. WT/DS366/R 
Page 164  
 
  arrival in Colombia).  Accordingly, the Panel concl udes that textile, apparel and footwear originating 
in Panama are like products to textiles, appare l and footwear originating in other countries. 
(f) Whether Colombia confers an advantage that is not extended "immediately and 
unconditionally" to imports from Panama 
7.358  The Panel will next determine whether the a dvantage discussed above has not been accorded 
"immediately and unconditionally" to goods from Pana ma.  The Panel recalls its finding that the 
imposition of the advance import d eclaration and legalization require ments, in combination with 
restrictions on ports of entry
649, grants an advantage to imports of  textiles, apparel and footwear from 
countries other than Panama or the CFZ, as importers of those goods are not required to present an advance import declaration, pay customs duties and sales tax on the basis of the advance declaration, 
or conform with particular legalization requirement s associated with the presentation of an advance 
declaration.  The Panel recalls that importers of textiles, apparel and footwear from Panama are required to make an advance declaration, while im porters of products from other territories maintain 
the option to do so, as long as those goods do not circ ulate through Panama or the CFZ prior to arrival 
in Colombia.  As the Panel explained, the advant age arises from the fact that importers from countries 
other than Panama or the CFZ are granted flexib ility to make customs duty and tax payments when 
they see fit.  Additionally, an importer that has not  filed an advance import declaration would retain 
the option to inspect his goods on site upon arrival,  verifying its dimension and weight, prior to 
submitting a declaration, thereby assuring himself of the accuracy of the declaration and avoiding fees required to file a legalization declaration.    
7.359  In light of these findings, the Panel must also establish that the discussed advantages have not 
been accorded "immediately and unconditionally" to goods from Panama.  Panama considers it self-
evident that the advantage has not been confe rred immediately and unconditionally on imports from 
Panama and the CFZ as only importers of products arriving from Panama are required to present an 
advance declaration and comply with other customs requirements.
650   
7.360  Colombia argues that Panama has failed to dem onstrate that such advantage is not extended 
"immediately and unconditionally" to imports from Panama.  As noted above, Colombia considers 
that Members are permitted to attach conditions when  granting an advantage in the first place, as long 
as additional conditions are not placed on certain Members while not on others.651  In this sense, 
Colombia argues that Members are entitled to cond ition access to its market on compliance with and 
respect for the Member's laws and regulations, including customs laws.652  Failure to respect the 
conditions may permit a Member to deny an advantag e to an importer, as the privilege is conditioned 
on requirements, which, if not respected or met, may be revoked.653  In Colombia's view, its customs 
procedures are conditioned on the need for customs authorities to be able to control and verify 
imported merchandise from Panama and to avoid circ umvention of such laws and regulation through 
under-invoicing, fraud and smuggling – general policy conditions that apply to all goods irrespective 
of their origin.654  
7.361  We recall that the panel in Canada – Autos considered that the issue of whether an advantage 
within the meaning of Article I:1 is accorded "unc onditionally" cannot be de termined independently 
of an examination of whether it involves discr imination between like products of different 
                                                      
649 As discussed above in Section VII.H.2(a), these m easures include Article 119 of Decree No. 2685 of 
1999, Resolution No. 9859 of 23 August 2007, Article 231 of Decree No. 2685, Article 128.7 of 
Decree No. 2685 of 1999, and Article 153 of Resolution No. 4240 of 2000. 
650 Panama's second written submission, para. 160. 
651 Colombia's first written submission, para. 304;  Colombia's second written submission, para. 197. 
652 Colombia's first written submission, para. 306. 
653 Colombia's first written submission, para. 306. 
654 Colombia's first written submission, para. 307. Colombia noted in the preceding paragraph of its 
first written submission that the test of Article I is about discrimination not deregulation.  WT/DS366/R 
 Page 165 
 
 
  countries.655  The panel found that "[w]hether conditions  attached to an advantage granted in 
connection the importation of a product offend Ar ticle I:1 depends upon whether or not such 
conditions discriminate with resp ect to the origin of products."656  The panel explained its view in 
light of the term "unconditionally" as it appears in Ar ticle I:1 in its context and in light of the object 
and purpose of Article I:1.  The panel commented as follows: 
"The word 'unconditionally' in Article I:1 does not pertain to the granting of an 
advantage per se , but to the obligation to accord to the like products of all Members 
an advantage which has been granted to an y product originating in any country.  The 
purpose of Article I:1 is to ensure unconditio nal MFN treatment.  In this context, we 
consider that the obligation to accord 'unc onditionally'  to third countries which are 
WTO Members an advantage which has been granted to any other country means that 
the extension of that advantage may not be made subject to conditions with respect to 
the situation or conduct of those countries.  This means that an advantage granted to 
the product of any country must be accord ed to the like product of all WTO Members 
without discrimination as to origin.  
In this respect, it appears to us that ther e is an important distinction to be made 
between, on the one hand, the issue of whet her an advantage within the meaning of 
Article I:1 is subject to co nditions, and, on the other, wh ether an advantage, once it 
has been granted to the product of any count ry, is accorded "unconditionally" to the 
like product of all other Members.  An advantage can be granted subject to conditions without necessarily implying that it is not accorded "unconditionally" to the like 
product of other Members.  More specifica lly, the fact that conditions attached to 
such an advantage are not related to th e imported product itself does not necessarily 
imply that such conditions are discriminatory with respect to the origin of imported 
products."
657    
7.362  In line with the approach elaborated in the Canada – Autos dispute, the Panel considers that it 
may thus assess whether the advantage is confe rred "immediately and unconditionally" based on 
whether an advantage granted to textiles, apparel or  footwear of any Member is not similarly accorded 
to those products originating in Panama for reasons  related to its origin or the conduct of Panama. 
7.363  Colombia has confirmed that the requirement to present an advance import declaration and 
pay customs duties and taxes on the basis of this ad vance declaration apply to subject textile, apparel 
and footwear goods arriving from Panama.658  This is also clear on the face of the legislative 
instruments, discussed above, which specify goods arriving from Panama and the CFZ as applicable 
merchandise.  Colombia has also cl arified that the products other than those under the ports of entry 
measure are not subject to the requirement to present an advance declaration.659  Other products may 
optionally submit an advance import declaration, but are not required to do so.   
7.364  The Panel notes Colombia's argument that the requirement to pay a fee to rectify import 
declarations outside the 7 and 10 per cent discrepancy rule, applies not just to Panamanian imports but 
to all textile imports.  However, as noted above660, the Panel has determined that this requirement is 
disadvantageous in combination with the requireme nt to present an advance declaration, which 
prevents an importer from inspecting goods and dete rmining its weight and width before submitting a 
customs declaration.   
                                                      
655 Panel Report, Canada – Autos , para. 10.22. 
656 Panel Report, Canada – Autos , para. 10.29. 
657 Panel Report, Canada – Autos , paras. 10.23-10.24. 
658 Colombia's response to Panel question No. 73. Colombia's response to Panel question No. 154. 
659 Colombia's response to Panel question No. 154. 
660 See para. 7.347. WT/DS366/R 
Page 166  
 
  7.365  Based on Colombia's clarifications, since th e option to present an import declaration in 
advance is denied to any textile, apparel or foot wear goods originating in Panama or the CFZ based 
on the goods' origin, the Panel concludes that th e advantages arising from the ability to present an 
import declaration in advance or withhold doing so until after the goods enter Colombia have not been 
extended unconditionally to imports from Panama.    
7.366  With respect to Colombia's view that it may condition its customs procedures on the need to 
control and verify imported merchandise from Panama  and to avoid circumvention of such laws and 
regulation through under-invoicing, fraud and smugglin g, without violating Article I:1, the Panel 
reiterates the view expressed in Canada – Autos
661 that conditions attached to an advantage granted in 
connection with the importation of a product w ill violate Article I:1 when such conditions 
discriminate with respect to the origin of products.  As such, in the Panel's view, Article I:1 prohibits 
Members from addressing such concerns through the u se of customs rules that are applied on the basis 
of origin.   
(g) Conclusion 
7.367  Accordingly, the Panel concludes that, by s ubjecting textile, apparel and footwear imports 
arriving from Panama and the CFZ to an advan ce import declaration requirement, which thereby 
requires payment of customs duties and sales tax in advance, and by preventing inspection of goods 
on site upon arrival in order to verify the accuracy of the declaration and avoid payment fees prior to 
submitting a declaration, where applicable, Colombia  confers advantages to like products from all 
other WTO Members and third countries that are not extended immediately and unconditionally to 
textile, apparel and footwear impor ts from Panama.  Therefore, th e Panel finds that Colombia's 
imposition of advance import declaration and legali zation requirements within the ports of entry 
measure on imports of textiles, appa rel and footwear arriving from Pana ma or the CFZ is inconsistent 
with Article I:1 of the GATT 1994 . 
I. WHETHER THE PORTS OF ENTRY MEASURE DENIES FREEDOM OF TRANSIT TO TEXTILES , 
APPAREL AND FOOTWEAR ARRIVING FROM PANAMA IN INTERNATIONAL TRANSIT IN 
CONTRAVENTION OF ARTICLE  V:2  OF THE GATT 1994  
1. Main arguments of the parties 
7.368  Panama argues that Colombia's failure to permit "freedom of transit" to all textiles, apparel 
and footwear in international transit, and not only tho se that are trans-shipped, is inconsistent with its 
obligations under the first sentence of Article V:2 of the GATT 1994 .  Panama submits that 
Colombian law requires that goods must be trans-shipped from the same customs office662, and not 
merely have their final destination outside of Colo mbia in order to be exempt from the port of entry 
restrictions.663  Thus, Colombian law only exempts textiles, apparel and footwear from port of entry 
and transit restrictions if the goods are trans-shipped.664  Panama argues that Article V:2, first 
sentence, as informed by Article V:1, obliges WTO Memb ers to grant freedom of transit to traffic in 
transit to a territory of a third country regard less of whether the goods are trans-shipped or 
warehoused, or whether the importer breaks bulk or  whether changes are made in the mode of 
transport.665   
7.369  Panama additionally argues that the ports of entry measure violates Article V:2, second 
sentence.  While textiles, apparel and footwear originating in, or tr ansiting through Panama must enter 
                                                      
661 Panel Report, Canada – Autos , para. 10.23. 
662 Panama's second written submission, para. 144. 
663 Panama's second oral statement, para. 49. 
664 Panama's second written submission, para. 146. 
665 Panama's second oral statement, para. 50.  WT/DS366/R 
 Page 167 
 
 
  and clear customs at Bogotá or Barranquilla, Panama  submits that goods arriving directly from other 
Member countries may enter at any of 11 eligible ports in Colombia (on the condition the goods did 
not first transit through Panama), and proceed in in ternational transit without clearing customs.  Under 
Article V:2, second sentence, Panama submits th at Members may not make distinction between 
products arriving from another Member based on th e place of origin or departure of goods.   
7.370  Colombia argues that Panama's claim under Article  V is invalid as the ports of entry measure 
does not apply to goods in international transit, but only goods, irrespective of their origin or point of 
shipment, which are shipped from Panama and have Co lombia as a final destination.  For this reason, 
Colombia submits that the ports of entry measure or any of its laws and regula tions are consistent with 
Article V:2 of the GATT 1994 . 
7.371  Colombia submits that Article V:2 applies to goods as traffic in transit when the goods' 
passage across the territory of another Member is only a portion of a complete journey beginning and terminating beyond the frontier of the contracti ng party across whose territory the goods pass.
666  
Under the ports of entry measure, Colombia argues that  textiles, apparel and fo otwear in international 
transit with a final destination outside Colombia are expressly exempt from restrictions on ports of 
entry, and can thus enter at any of 11 eligible ports.667   
7.372  Colombia further disputes that the reference to trans-shipment within the port of entry 
measure's exemption clause allows for viola tions of Article V, first or second sentence.668 In practical 
terms, Colombia submits that it is only possible for goods to enter Colombia from Panama by sea or 
air, as no road connects the countries, thereby necess itating that the goods undergo trans-shipment in 
order to enter Colombia and pr oceed in international transit.669  As such, a requirement to undergo 
trans-shipment does not inhibit freedom of trans it, as trans-shipment will always be necessary for 
goods arriving from Panama. 
7.373  Despite its view that Panama has failed to meet  its burden of proof to demonstrate that goods 
are not extended freedom of transit670, Colombia argues it is clear under its international obligations 
that freedom of transit is guaranteed  for all merchandise from all countries.671  Colombia has also 
stated that it is willing to make a public commitment that goods in internationa l transit are not covered 
by the measure in question.672 
2. Consideration by the Panel 
(a) Legislation related to Colombia's  international transit regime 
7.374  As explained in Section VII.E.2(a) above, unde r the ports of entry measure, Colombia has 
imposed temporary restrictions on the importation of certain textiles, apparel and footwear classifiable 
under Chapters 50-64 of the Colombian Tariff Sc hedule arriving from Panama into Colombia.  
Specifically, under Article 2 of Resolution No. 7373673, as modified by Resolution No. 7637674, 
subject textiles, apparel and footwear may only be  entered at Bogota airport or Barranquilla seaport:675 
                                                      
666 Colombia's first written submission, para. 278. 
667 Colombia's first written submission, paras. 282 -283;  Colombia's second written submission, 
paras. 174-175. 
668 Colombia's second written submission, para. 177;  Colombia's second oral statement, para. 46. 
669 Colombia's second written submission, para. 179;  Colombia's second oral statement, para. 46. 
670 Colombia's first written submission, para. 285;  Colombia's second oral statement, para. 47. 
671 Colombia's first written submission, para. 284. 
672 Colombia's first written submission, para. 287. 
673 See Exhibit PAN-34 
674 See Exhibit PAN-36. 
675 Exhibit PAN-34. WT/DS366/R 
Page 168  
 
  "Las mercancías clasificables por los cap ítulos 50 al 64 del Arancel de Aduanas, 
procedentes de la Republica de Pana má, deberán ser ingresadas e importadas 
exclusivamente por la jurisdicción de la Administración Especial de Aduanas de 
Bogotá, si se transportan por vía aérea y por la jurisdicción de la Administración Local de Aduanas de Barranquilla, si se transportan por vía marítima, y por tanto, 
no procederá para estas mercancías la autorización del régimen de tránsito 
aduanero ."
676 
7.375  In addition to other exemptions , Article 4, paragraph 3 of R esolution No. 7373 provides that 
the general restriction imposed under Article 2 will not apply to goods which are submitted for trans-
shipment, in consideration that goods that undergo trans-shipment do not have Colombia as a final 
destination: 
"Lo señalado en el articulo 2o, de la presente resolución no se aplicará sobre 
aquellos bienes que se pretendan someter a las modalidad de transbordo, 
considerando que en este caso la merc ancía no tiene como destino final 
Colombia. "677 
7.376  The restriction to two ports of entry, incl uding the exemption applicable to goods in 
international transit, supersedes the regular tr ansit regime under Colombian law.  Article 1 of 
Colombia's Customs Statute permits transit of g oods of foreign origin from one customs office to 
another located in the national territory.  Pursuant to  this provision, transport by transit, cabotage or 
trans-shipment is permitted: 
"TRANSITO ADUANERO 
Es el régimen aduanero que permite el transporte de mercancías nacionales o de 
procedencia extranjera, bajo control aduanero, de una Aduana a otra situadas en el territorio aduanero nacional." 
En este régimen se pueden dar las modali dades de transito, cabotaje y transbordo. " 
7.377  Article 370 of Colombia's Customs Statute furthe r defines the term "international transit" by 
reference to the relevant Andean Community provisions: 
"ARTICULO 370. TRÁNSITO ADUANERO INTERNACIONAL. 
Para la realización del tránsito aduanero in ternacional se aplicará lo previsto en las 
Decisiones 327 y 399 de la Comisión del Acuerdo de Cartagena o las normas que las sustituyan, modifiquen o adicionen y en lo pertinente, lo dispuesto en el presente 
Capítulo. 
7.378  Andean Community Decision 327 defines intern ational transit as the regime under which 
goods are transported from one port to another in a single operation, wherein goods cross one or more 
borders: 
                                                     
 
676 Exhibit PAN-36.   
677 Exhibit PAN-36. Additionally, Article 4 exempts goods consigned or endorsed to the State;  goods 
imported for specific state or emergency uses: goods arriving by travellers or postal traffic, or in route to Leticia, 
San Andrés or Santa Catalina;  goods consigned to industrial users of free trade zones;  and goods under subheadings 64.01 to 64.05 of Colombia's Tariff Schedule that arrive at any of  the 11 ports designated in 
Article 39, paragraph 1 of Resolution No. 4240.  Resolution No. 7637 further exempts goods consigned to 
"Highly Exporting Users" and "Permanent Customs Users": see Article 3 of  Resolution No. 7637.  WT/DS366/R 
 Page 169 
 
 
  Tránsito Aduanero Internacional : El régimen aduanero bajo el cual las mercancías 
sujetas a control aduanero son transport adas desde una aduana de partida hasta una 
aduana de destino en una misma operación de transporte internacional, en el curso 
de la cual se cruzan una o varias fronteras. " 
7.379  Andean Community Decision 327 applies to goods  in international transit between two ports 
in different Andean Member Countries as well as betw een two ports within the same Member country 
provided that the goods transit through another Member Country: 
"AMBITO DE APLICACION 
Artículo 2.- Las disposiciones de la presente Decisión regirán para las operaciones 
de transporte internacional de mercancías que circulen bajo el régimen de Tránsito 
Aduanero Internacional: 
- Desde una aduana de partida de un País Miembro hasta una aduana de destino de 
otro País Miembro; 
- Desde una aduana de partida de un País Mi embro con destino a un tercer país, en 
tránsito por uno o más Países Miembros di stintos del de la aduana de partida; y 
- Desde una aduana de partida hasta una adu ana de destino ubicadas en el mismo 
País Miembro, siempre que se transite por  el territorio de otro País Miembro ." 
7.380  Andean Community Decision 399 provides that goods transported by road to and from third 
countries, with passage through two or more Memb er Countries, will be subject to the national 
legislation of each of the Member Countries through which they pass or to the relevant provisions of 
international agreements in force: 
"Artículo 7.- Para el transporte inter nacional de mercancías por carretera, se 
establecen los siguientes tráficos: 
a) Entre dos Países Miembros limítrofes; b) Entre dos Países Miembros, con tránsito por uno o más Países Miembros; c) Desde un País Miembro hacia un tercer país, con tránsito por uno o más Países 
Miembros distintos del país donde se inicia el transporte; 
d) Desde un tercer país hacia un País Miembro, con tránsito por uno o más Países 
Miembros distintos del país donde termina el transporte; y, 
e) En tránsito a través de dos o más País es Miembros desde y hacia terceros países. 
En los tráficos señalados en los literales c) , d) y e) son aplicables las disposiciones 
de la presente Decisión y sus normas comple mentarias, sólo durante el recorrido por 
los Países Miembros. 
Artículo 8.- El transporte internaciona l que efectúen transportistas de terceros 
países por el territorio de uno o más Pa íses Miembros, se regirá por las normas 
nacionales de cada uno de los Países Miembr os por los cuales se transite o por lo 
establecido en los convenios internacionales vigentes. " (emphasis added) WT/DS366/R 
Page 170  
 
  7.381  In addition, Andean Community Decision 617 set s rules for free circulation of goods between 
Andean Community Member Countries from their place of origin to their destination without undergoing certain customs clearance procedures.  In particular, freedom of transit is guaranteed for 
non-community goods that begin or conclude tran sit in a Member Country.  Andean Community 
Decision 617 provides in relevant part: 
"Artículo 7 .- Los Países Miembros, con arreglo a los procedimientos establecidos en 
la presente Decisión, permitirán la circula ción al amparo del régimen de tránsito 
aduanero comunitario de: 
1. Mercancías Comunitarias 1.1 Desde una aduana de partida de un Pa ís Miembro hasta una aduana de destino 
del mismo País Miembro u otro País Mi embro, en tránsito por uno o más Países 
Miembros. 
1.2 Desde una aduana de parti da de un País Miembro con destino a un tercer país, 
en tránsito por uno o más Países Miembros distintos del de la aduana de partida. 
2. Mercancías No Comunitarias 
2.1 Desde una aduana de partida de un Pa ís Miembro hasta una aduana de destino 
de otro País Miembro, en tránsito por u no o más Países Miembros distintos del País 
Miembro de partida. 
2.2 Desde una aduana de parti da de un País Miembro con destino a un tercer país, 
en tránsito por uno o más Países Miembros distintos del País Miembro de partida. 
2.3 Desde un tercer país hasta una aduana de destino de un País Miembro, en 
tránsito por uno o más Países Miembros.  
Artículo 8 .- Las Aduanas de los Países Miembros permitirán la libre circulación de 
los medios de transporte y unidades de ca rga, con arreglo a las disposiciones 
establecidas en el ordenamiento jurí dico comunitario y los Convenios 
Internacionales y Convenios Bilaterales de  transporte suscritos por los Países 
Miembros que sean compatibles con el primero. " (emphasis added) 
7.382  Article 385 of Colombia's Customs Stat ute defines trans-shipment as follows: 
"Es la modalidad del régimen de tránsito que regula el traslado de mercancías del 
medio de transporte utilizado para la lle gada al territorio aduanero nacional, a otro 
que efectúa la salida a país extranjero, dentro de una misma aduana y bajo su 
control sin que se causen tributos aduaneros. " 
7.383  Article 387 specifies that trans-shipment may be  direct (i.e. without deposit in a warehouse) 
or indirect (when goods are deposited in  a warehouse during a period of storage): 
"El transbordo puede ser directo si se ef ectúa sin introducir las mercancías a un 
depósito habilitado, o indirecto cuando se realiza a través de éste. " 
7.384  Andean Community Decision 327 similarly defines trans-shipment under international transit 
as involving the transfer of goods from one containe r or vehicle to another, in which goods are then 
transported from one customs port to another in a si ngle operation, and where one or more borders are 
crossed.  WT/DS366/R 
 Page 171 
 
 
  "Transbordo: El régimen aduanero con arreglo  al cual se realiza, bajo control de 
una aduana, el traslado de las mercancías de una unidad de carga o de un medio de 
transporte a otro.  
Tránsito Aduanero Internacional: El régi men aduanero bajo el cual las mercancías 
sujetas a control aduanero son transport adas desde una aduana de partida hasta una 
aduana de destino en una misma operación de transporte internacional, en el curso de la cual se cruzan una o varias fronteras. " 
7.385  Andean Community Decision 617 additionally de fines trans-shipment as the transfer of 
goods, within the same customs office, from a means of transport to another, or to the same means of 
of transport in a separate trip, with or without unloading, with the objective of proceeding to the 
customs of destination: 
"Operación de Transbordo: Traslado de  mercancías, efectuado bajo control 
aduanero de una misma aduana, desde un me dio de transporte o unidad de carga a 
otro, o al mismo en distinto viaje, incluida o no su descarga a tierra, con el objeto de 
que continúe hasta la aduana de destino. " 
(b) Article V of the GATT 1994  
7.386  Article V is entitled "Freedom of Transit" and provides as follows: 
"1. Goods (including baggage), and also vessels and other means of transport, 
shall be deemed to be in transit across th e territory of a contracting party when the 
passage across such territory, with or w ithout trans-shipment, warehousing, breaking 
bulk, or change in the mode of transport, is only a portion of a complete journey 
beginning and terminating beyond the frontie r of the contracting party across whose 
territory the traffic passes. Traffic of this na ture is termed in this article 'traffic in 
transit'. 
2. There shall be freedom of transit th rough the territory of each contracting 
party, via the routes most convenient for intern ational transit, for traffic in transit to 
or from the territory of other contracting par ties.  No distinction shall be made which 
is based on the flag of vessels, the pl ace of origin, departure, entry, exit or 
destination, or on any circumstances relating to the ownership of goods, of vessels or of other means of transport. 
3. Any contracting party may require that traffic in transit through its territory 
be entered at the proper custom house, but, except in cases of failure to comply with 
applicable customs laws and regulations, such traffic coming from or going to the 
territory of other contracting parties shall not be subject to any unnecessary delays or 
restrictions and shall be exempt from customs duties and from all transit duties or other charges imposed in respect of transit,  except charges for transportation or those 
commensurate with administrative expenses en tailed by transit or with the cost of 
services rendered. 
4. All charges and regulations imposed by contracting parties on traffic in 
transit to or from the territories of other contracting parties shall be reasonable, 
having regard to the conditions of the traffic. 
5. With respect to all charges, regula tions and formalities in connection with 
transit, each contracting party shall accord to traffic in transit to or from the territory WT/DS366/R 
Page 172  
 
  of any other contracting party treatment  no less favourable than the treatment 
accorded to traffic in transit to or from any third country.
678 
6. Each contracting party shall accord to  products which have been in transit 
through the territory of any other contrac ting party treatment no less favourable than 
that which would have been accorded to su ch products had they been transported 
from their place of origin to their destination without going through the territory of 
such other contracting party. Any contracting party shall, however, be free to maintain its requirements of direct cons ignment existing on the date of this 
Agreement, in respect of any goods in rega rd to which such direct consignment is a 
requisite condition of eligibility for entry of the goods at preferential rates of duty or 
has relation to the contracting party's prescribed method of valuation for duty 
purposes. 
7. The provisions of this Article shall not  apply to the operation of aircraft in 
transit, but shall apply to air tran sit of goods (including baggage)." 
7.387  As its title indicates, Article V of the GATT 1994 thus generally addresses matters related to 
"freedom of transit" of goods.  This includes protection from unnecessary restrictions, such as 
limitations on freedom of transit, or unreasonable charges or delays (via paragraphs 2-4), and the 
extension of Most-Favoured-Nation (MFN) treatment to Members' goods which are "traffic in transit" 
(via paragraphs 2 and 5) or "have b een in transit" (via paragraph 6).
679   
(c) Interpretation of Article V:2 of the GATT 1994  
7.388  The Panel is called upon to determine whether the ports of entry measure is inconsistent with 
the first and second sentences of Article V:2 of the GATT 1994 .  As was the case with the Customs 
Valuation Agreement , Article V has never before been inte rpreted by the Appellate Body or a 
GATT/WTO panel.  The Panel's task is therefor e arduous since it will be necessary to interpret 
Article V of the GATT 1994  without any meaningful guidance. 
7.389  Accordingly, the Panel will proceed to analyse Panama's claim under Article V:2 in 
accordance with the principles of treat y interpretation set for the in the VCLT .  In particular, the Panel 
will consider Article V:2 in accordance with its ordi nary meaning in its context and in light of its 
object and purpose where necessary. To the extent  the meaning of any terms in Article V:2 are 
unclear, the Panel may also resort to supplem entary means of interpretation, including the travaux 
preparatoires  to inform its interpretation. 
(i) The scope of the concept of tra ffic in transit in Article V:2 
7.390  The Panel will proceed to examine the scope of th e term "traffic in transit" in Article V:2 by 
considering the text of this provision on its face and in light of the context provided by Article V:1.   
7.391  The Panel notes that the text of Article V:2, first sentence refers to "traffic in transit".  In 
particular, this provision reads: "There shall be  freedom of transit through the territory of each 
contracting party, via the routes most convenient for international transit, for traffic in transit to or 
from the territory of other contracting parties." (e mphasis added)  The second sentence of Article V:2 
provides that "[n]o distinction shall be made which is based on the flag of v essels, the place of origin, 
                                                      
678 The Ad Note to Article V:5 provides as follows: "With regard to transportation charges, the 
principle laid down in paragraph 5 refers to like products being transported on the same route under like conditions." 
679 Paragraph 7 clarifies that the provisions of Article V of the GATT 1994 apply equally to transit of 
goods by aircraft.  WT/DS366/R 
 Page 173 
 
 
  departure, entry, exit or destination, or on any circumstances relating to the ownership of goods, of 
vessels or of other means of transport."   
7.392  The Panel recalls that both parties have referre d to Article V:1 to inform the scope of the 
obligations under Article V:2.  In particular, Artic le V:1 defines goods as "traffic in transit" when 
their passage across the territory of a Member "with  or without trans-shipment, warehousing, breaking 
bulk, or change in the mode of transport, is only a portion of a complete journey beginning and 
terminating beyond the frontier of the Member  across whose territory the traffic passes".680   
7.393  In light of this definition, and in reference to  the obligations in Article V:2, first sentence, 
Panama argues that WTO Members are obliged to gran t freedom of transit to traffic in transit to a 
territory of a third country, via the route most c onvenient for international transit, regardless of 
whether the goods are trans-shipped or warehoused, or whether the importer breaks bulk or whether 
changes are made in the mode of transport.681  Colombia has argued in favour of a similar view, 
submitting that the obligations in Article V apply only to goods destined for sale outside of the 
country through which the goods pass. 682 
7.394  The Panel notes that the protections in Article  V:1 and the second sentence of Article V:2 are 
based on corresponding provisions of the 1921 Barcelona Convention.683  A draft text for all of 
Article V provisions was discussed at a 28 November 1946 meeting of the Preparatory Committee of the International Conference on Trade and Employm ent, after which the Technical Sub-Committee 
published a report commenting on the United States Suggested Charter for an International Trade 
Organization of the United Nations, including Ar ticle 10 of this report, entitled "Freedom of 
Transit".
684  While this report offers perhaps the mo st extensive discussion on the development of 
provisions at issue in Article V, commentary by part icipants to the meeting related to Article V:1 and 
Article V:2 is limited. 
7.395  Subsequent to the entry into force of the orig inal GATT in 1947, the provisions in Article V 
were also considered by the Interim Commission fo r the International Trade Organization at a 1948 
United Nations Conference on Trade and Employment.685  The draft Havana Charter for an 
International Trade Organization, which was reviewed and partly modified at the Conference, 
includes as its Article 33 a nearly verbatim copy of  Article V.  Several differences exist between the 
GATT and Havana Charter texts.  For instance, the Havana Charter does not include the interpretative 
note contained in the GATT, instead containing thr ee different interpretative notes to its Article 33, 
                                                      
680 Taken as a whole and read objectively, Article V:1 appears plainly definitional in purpose.  In its 
entirety, this provision defines when goods qualify as being "in transit across the territory of a contracting 
party". 
681 Panama's second oral statement, para. 50. 
682 Colombia's first written submission, paras. 277-278. 
683 See Articles 1 and 2 of the Convention and Statute on Freedom of Transit, Barcelona, April 29, 
1921.  See also UN doc. E/PC/T/C.II/54/Rev.1. 
684 UN doc.  #/PC/T/C.II/54/Rev.1, pp. 7-12.   The report of the Technical Subcommittee was entitled 
Preparatory Committee of the International Conference on Trade and Employment" and is dated 28 November 
1946.  The report notes that the mee ting served as "the occasion for a thorough examination and exchange of 
views upon the provisions of the United States Suggeste d Charter for an International Trade Organization of the 
United Nations in regard to the General Commercial Provisions, namely Articles 9-17 inclusive, and the General 
Exceptions, Article 32." (see p. 3).  Only slight diffe rences exist between Article 10 of the United States 
Suggested Charter, discussed above, and Article V of the GATT 1947/1994 .  For instance, paragraph 1 of 
Article 10 refers to "Baggage and goods, and also vessels, coaching and goods stock, and other means of transport", and specifies that "[t]he prov isions of this Article shall not apply to air traffic in transit".  Paragraph 1 
of Article V, on the other hand, refers to "Goods (including baggage), and also vessels and other means of 
transport", and does not exclude treatment of air traffic in transit (although Article V:7 now provides for this 
exclusion). 
685 United Nations Conference on Trade and Employm ent, Final Act and Related Documents, dated 
April 1948. WT/DS366/R 
Page 174  
 
  concerning transit.
686  Hence, while several differences exist between the GATT and Havana Charter 
texts, none inform interpretation of the provisions at issue.  Accordingly, the  preparatory work related 
to the first and second paragraphs of  Article V is not of assistance. 
7.396  In the Panel's view, the definition of "traffi c in transit" provided in Article V:1 seems 
sufficiently clear on its face.  When applied to Article  V:2, "freedom of trans it" must thus be extended 
to all traffic in transit when the goods' passage across the territory of a Member is a only a portion of a 
complete journey beginning and te rminating beyond the frontier of the Member across whose territory 
the traffic passes.  Freedom of transit must additiona lly be guaranteed with or without trans-shipment, 
warehousing, breaking bulk, or cha nge in the mode of transport. 
7.397  The Panel notes that the term "traffic in tran sit" does not appear in Article V:2, second 
sentence.  This provision reads: "No distinction shal l be made which is based on the flag of vessels, 
the place of origin, departure, entry, exit or des tination, or on any circumstances relating to the 
ownership of goods, of vessels or of other means of tr ansport."  In spite of the absence of an explicit 
reference to traffic in transit in this second sente nce of Article V:2, the Panel believes that it is 
sufficiently clear from its text that the MFN obliga tion in the second sentence is  closely related to the 
obligation to extend freedom of transit, in the firs t sentence.  In the Panel's view, the second sentence 
complements and expands upon the obligation to extend freedom of transit, stating additionally that 
distinctions must not be made based on the nationality , or place of origin, departure, entry, exit or 
destination of the vessel transporti ng goods.  Moreover, both obligations form part of the same textual 
provision. 
7.398  Accordingly, the Panel will now examine in deta il the substantive obliga tions in the first and 
second sentences of Article V:2.  
(ii) The substantive obligations in Article V:2, first and second sentences 
Article V:2, first sentence  
7.399  The Panel recalls that, while noting that Article V or any other provision of the GATT  1994  
do not provide a definition of the term "freedom of  transit", Panama submits that the definition of 
"freedom" means the "the unrestricted use of something".687  Therefore, Panama argues that traffic in 
transit must be allowed unrestricted through the territory of a Member.688  The Panel also recalls that 
Colombia has not commented on the significance of th is obligation, but has asserted that the ports of 
entry measure falls outside the scope of Article V,  as it exempts all goods in international transit.689 
                                                      
686 Article V of the GATT includes a single interpretativ e note while Article 33 contains three separate 
interpretative notes.  Consequently, Article V lacks the interpretative note providing that "[i]f, as a result of 
negotiations in accordance with paragraph 6, a Member gr ants to a country which has no direct access to the sea 
more ample facilities than those already provided for in other paragraphs to Article 33, such special facilities 
may be limited to the land-locked country concerned unless the Organization finds, on the complaint of any 
other Member, that the withholding of the special facilities from the complaining Member contravenes the most-favoured-nation provisions of this Charter."  Also noteworthy, Article V of the GATT 1947/1994  lacks a 
provision appearing in Article 33(6) of the Havana Ch arter, which allows the organisation to "… undertake 
studies, make recommendations and promote international agreement relating to the simplification of customs 
regulations concerning traffic in transit, the equitabl e use of facilities required for such transit and other 
measures designed to promote the obj ectives of this Article. Members shall co-operate with each other directly 
and through the Organization to this end."  This provisi on was incorporated into the Havana Charter at the 
Havana Conference.  See Havana Reports, UN Doc. ICITO/1/8, p. 3, para. 16. 
687 Panama's first written submission, para. 171, citing The New Oxford Dictionary of English , 
(Clarendon Press, 2nd Ed. 2001), p. 730.   
688 Panama's first written submission, para. 172. 
689 Colombia's first written submission, para. 275.  WT/DS366/R 
 Page 175 
 
 
  7.400  In addition to the definition of "freedom", th e Panel notes the significance of the rest of the 
text in Article V:2.  The opening te xt in Article V:2, first sentence (" There shall be freedom of transit 
through the territory of each contracting party ... ") introduces the obligation – the provision of 
"freedom of transit" by Members within their territo ry.  The intermediate clause in Article V:2, first 
sentence (" ... via the routes most convenient for international transit ... ") imposes a limiting condition 
on the obligation – that freedom of transit should be provided on the most convenient routes.  The 
remainder of Article V:2, first sentence (" ... for traffic in transit to or  from the territory of other 
contracting parties ") explains that "freedom of transit" must be provided for 'traffic in transit" 
entering and then subsequently departing from the Me mber's territory.  The Panel notes that the term 
of art "traffic in transit" has been defined in the preceding section to include goods when those goods' 
passage across the territory of a Member with or without trans-shipment, warehousing, breaking bulk, 
or change in the mode of transport, is only a por tion of a complete journey beginning and terminating 
beyond the frontier of the Member acro ss whose territory the traffic passes.690 
7.401  In light of the ordinary meaning of freedom a nd the text of Article V:2, the Panel concludes 
that the provision of "freedom of transit" pursuant to Article V:2, first sentence requires extending 
unrestricted access via the most convenient routes fo r the passage of goods in international transit 
whether or not the goods have been trans-shipped,  warehoused, break-bulked, or have changed modes 
of transport.  Accordingly, goods in internationa l transit from any Member must be allowed entry 
whenever destined for the territory of a third country.  Reasonably, in the Panel's view, a Member is 
not required to guarantee transport on necessarily any or all routes in its territory, but only on the ones 
"most convenient" for transport through its territory. 
Article V:2, second sentence  
7.402  The Panel shall now turn to examine the scope of the obligation in Article V:2, second 
sentence.  In this regard, the Panel considers th at the obligation in Artic le V:2, second sentence is 
clear on its face:  Members shall not make distinc tions between goods which are "traffic in transit" 
based on the flag of vessels; the place of origin, depa rture, entry, exit or destination of the vessel; or 
on any circumstances relating to the ownership of goods , of vessels or of other means of transport.  As 
noted, the first sentence in Article V:2 addresses freedom  of transit for goods in international transit.  
As a complement to this protection, the Panel c onsiders that Article V:2, second sentence further 
prohibits Members from making distinctions in th e treatment of goods, based on their origin or 
trajectory prior to arriving in thei r territory, based on their ownershi p, or based on the transport or 
vessel of the goods.  Accordingly, the Panel concl udes that Article V:2, second sentence requires that 
goods from all Members must be ensured an iden tical level of access and equal conditions when 
proceeding in international transit. 
(iii) Whether the ports of entry measure violates Article V:2 of the GATT 1994 
7.403  In light of the above conclusions on the interpre tation of the obligations in Article V:2, the 
Panel will examine whether the ports of entry measu re restricts the freedom of transit of goods 
arriving from Panama as "traffic in transit" in viol ation of the first sentence of Article V:2,.  In 
addition, the Panel will determine whether Colombia  violates Article V:2 by making distinctions in 
goods arriving from Panama based on any of th e conditions listed in the second sentence of 
Article V:2. 
Whether the ports of entry measure is inc onsistent with Article V:2, first sentence  
7.404  The Panel recalls Panama's argument that ports of entry measure denies freedom of transit to 
textile, apparel and footwear goods arriving from Panama by requir ing that all goods undergo trans-
shipment as a pre-requisite to proceeding in interna tional transit.  Panama has recognized, pursuant to 
                                                      
690 See para. 7.396. WT/DS366/R 
Page 176  
 
  Article 4, paragraph 3 of Resolution No. 7373, that  textiles, apparel and footwear from Panama in 
international transit which undergo trans-shipment ar e exempt from the ports of entry restrictions.  
Panama nevertheless disputes that those goods a rriving from Panama are granted the requisite 
freedom of transit.  Panama cons iders it a logical consequence that  goods subject to trans-shipment 
procedures will not have Colombia as their final destination.  However, Panama argues that the 
relevant factor at issue is that the goods are subj ect to trans-shipment procedures, not that the goods 
have a country other than Colombia as their final destination.
691   
7.405  Panama notes that Article 4 of Resolution No. 7373 does not allow  trans-shipment, but 
instead provides that transit restrictions w ill not apply to goods that are trans-shipped.692  Therefore, 
Panama concludes that goods must  be trans-shipped in order to qualify for the Article 4 exemption.  
Principally, Panama argues that Article V:2, as informed by Article V:1, obliges WTO Members to 
grant freedom of transit to traffic in internationa l transit regardless of whether the goods are trans-
shipped or warehoused, or whether the importer breaks  bulk or whether changes are made in the mode 
of transport.693  In addition, Panama notes that under Colo mbian law, trans-shipment refers to the 
transfer of goods from the means of transportation u sed for the arrival of the goods in Colombia to 
another means of transportation that will be used to take the goods out of Colombia.694  Under this 
definition, Panama considers that textiles, appa rel and footwear arriving from Panama must be 
transferred from one mode of transport to another at  the same customs office, and then goods must be 
transferred via a mode of transport that has its immediate destination outside of Colombia.695  A s  
such, Panama argues that goods arriving by sea woul d not be allowed to transit by land through 
Colombia to another country as the goods would not be  trans-shipped from ship to a vehicle that has 
an immediate destination beyond Colombian territory.696  Moreover, Panama cons iders it is irrelevant 
that both direct or indirect trans-shipment is perm itted, the latter of which allows for goods to be 
warehoused prior to trans-shipment, as those goods must be warehoused at the same customs office.697 
7.406  Panama dismisses Colombia's view that because transit involving trans-shipment is allowed, 
without condition, then a fortiori  transit without trans-shipment is allowed.  Panama notes, if this 
proposition were correct, and trans-shipment were not  intended as a limitation, then Article 4 would 
have read that the ports of entry restrictions woul d not apply to goods that do not have Colombia as 
their final destination, which is not how it reads.698   
7.407  Thus, in Panama's view, not all subject goods w ith a destination outside Colombia are exempt 
from the restrictions.  Only those goods in internati onal transit that undergo trans-shipment and depart 
by a mode of transport that has an immediate d estination beyond Colombian territory will be exempt 
from the ports of entry measure.  Otherwise, the ports of entry measure requires that those goods 
arriving in Colombia are restricted to entry at  Barranquilla or Bogota.  For these reasons, Panama 
submits that restrictions on ports of entry and the requirement to trans-ship goods violate the 
obligation under Article V:2, first sentence, to gu arantee freedom of transit via the most convenient 
routes for all goods that are traffic in international transit.699 
                                                      
691 Panama's second written submission, para. 145. 
692 Panama's second written submission, para. 146.     
693 Panama's second oral statement, para. 50. 
694 Panama's first oral statement, para. 56, citing to  Article 385 of Colombia's Customs Statute;  see 
also Section VII.I.2(a). 
695 Panama's first oral statement, para. 57;  Panama's second written submission, para. 144;  Panama's 
second oral statement, para. 49. 
696 Panama's second written submission, para. 145. 
697 Panama's second written submission, para. 146. 
698 Panama's second written submission, para. 147. 
699 Due to the fact that the terms of the ports of  entry measure apply only to goods arriving from 
Panama and the CFZ, Panama asserts that the ports of entry measure is also inconsistent with the obligations 
under Article V:2, second sentence, which prohibits Members from making distinctions on freedom of transit  WT/DS366/R 
 Page 177 
 
 
  7.408  As noted above700, Colombia has argued that the obligations in Article V apply only to goods 
in international transit that are d estined for sale outside of the country through which the goods transit.  
Colombia argues that the ports of entry measure only applies to textile, a pparel and footwear goods 
which have Colombia as their final destination, an d clearly exempts those g oods that enter Colombia 
from Panama but have a final destination outside of Colombia.701  In light of the port of entry 
measure's Article 4 exemption, Colombia thus subm its that all textile, appa rel and footwear goods in 
international transit that arrive from Panama may en ter unrestricted at any of Colombia's 11 eligible 
ports.702  Since all  textile, apparel and footwear products are not restricted, Colombia considers there 
cannot be any violation of Article V.703 
7.409  Colombia disputes that the reference to trans-sh ipment in the Article 4 exemption violates its 
obligations to extend freedom of transit to goods in  international transit.  In support of this view, 
Colombia insists that the whole rationale of the Article 4 exemption and the ports of entry measure 
relating to customs enforcement argues against such  a reading of the term "trans-shipment" as 
exempting only goods in internati onal transit that are trans-shipped.704  Moreover, Colombia submits 
that its international obligations make clear that fr eedom of international transit is guaranteed for all 
merchandise regardless of whether the goods are tran s-shipped, warehoused, the importer breaks bulk, 
or changes are made in the mode of transport.705  In particular, Colombia submits that Article 370 of 
its Customs Statute, by reference to Article 327,  399 and 617 of Andean Community legislation706, 
establishes that freedom of international transit is  guaranteed irrespective of the mode of transport.707  
Finally, Colombia argues that any requirement to trans-ship goods does not li mit freedom of transit 
for goods arriving from Panama, since the absence of a road connecting Panama with Colombia 
necessitates that all deliveries from Panama must  undergo trans-shipment to enter Colombian 
markets.708  Thus, Colombia submits that all goods en tering Colombia from Panama in international 
transit would necessarily meet the conditions of the Article 4 exemption. 
7.410  To the extent any further doubts exist that Colo mbia does not guarantee freedom of transit to 
goods arriving from Panama in international transit, Colombia submits that past practice reveals that 
textiles, apparel and footwear arriving from Pana ma have indeed been permitted to proceed in 
international transit without limitation whenever the importer complied with the requirements in 
Resolution No. 7373 and demonstrated goods would be consumed elsewhere.709  Colombia has also 
offered to make a public commitment that goods in  international transit are not covered by the 
measure in question.710 
7.411  While rejecting that it is necessary to demonstrate in practice that goods arriving from 
Panama have been allowed to proceed in internatio nal transit, Panama disputes the argument that the 
ports of entry measure is consistent with Article V:2, despite its trans-shipment requirement, based on 
the notion that any good in tran sit from Panama must necessarily undergo trans-shipment due to the 
unavailability of a road connecting Pa nama and Colombia.  Contrary to this claim, Panama has argued 
                                                                                                                                                                     
based on place of origin or departure, or on any circumstances relating to ownership of the goods (see Panama's 
First oral statement, para. 62).  The Pane l will consider this claim in Section VII.J 
700 See Section VII.I.1. 
701 Colombia's first written submission, para. 282. 
702 Colombia's first written submission, paras. 282 -283;  Colombia's second written submission, 
paras. 174-175. 
703 Colombia's second written submission, para. 177;  Colombia's second oral statement, para. 46. 
704 See Colombia's response to Panel question No. 71. 
705 Colombia's first written submission, para. 284;  Colombia's response to Panel question No. 69. 
706 The full text of these provisions appear in Section VII.I.2(a). 
707 See Colombia's response to Panel question No. 69. 
708 Panama's response to Panel question No. 66;  Colombia's second written submission, para. 179. 
709 Colombia's first written submission, para. 286;  Colombia's second written su bmission, para. 177;  
Exhibit COL-29. 
710 Colombia's first written submission, para. 287;  Colombia's response to Panel question No. 70.   WT/DS366/R 
Page 178  
 
  that goods may be shipped from Panama, arrive in  Ecuador, then transit through Colombia by truck 
with Venezuela as a final destination.
711  In this respect, Panama also notes that Andean Community 
law cited by Colombia, in particular Article 7 of  Andean Decision 617, does not govern the transit of 
goods from a non-Andean Community country (e .g. Panama) through an Andean Community 
Member (e.g. Colombia), that has a non-Andean Community country as the final destination (e.g. 
Venezuela).  Regardless, Panama argues that the circumstances prevailing in most cases cannot justify 
a failure to accord freedom of transit in all cases.712  
7.412  Panama also disputes that the examples provided by Colombia in Exhibit COL-29 
demonstrate that freedom of transit is guaranteed .  Panama argues that the goods in these examples 
were allowed transit based on other  special exemptions under Article 4 of Resolution No. 7373, thus 
failing to show that all goods arriving from Panama are assured freedom of international transit.  
Under Article 4 of Resolution No. 7373, Panama  notes that textile, apparel and footwear goods 
consigned or endorsed to the State, or to imports eff ected for processing, travellers or postal traffic, or 
to goods consigned to industrial users of free tr ade zones or to "Permanent Customs Users" are 
exempt from the port of entry restrictions.713  
7.413  The issue before the Panel is therefore whethe r freedom of transit is extended to subject 
textiles, apparel and footwear a rriving from Panama in international transit, via the exemption in 
Article 4, paragraph 3, of Resolution No. 7373.   
7.414  The Panel concluded above714 that the provision of "freedom of transit" requires extending 
unrestricted access via the most convenient routes for the passage of goods in international transit 
whether or not the goods have been trans-shipped,  warehoused, break-bulked, or have changed modes 
of transport.  While a Member is not required to  guarantee transport on necessarily any or all routes in 
its territory, transit must be provided on those routes "most convenient" for transport through its 
territory. 
7.415  Article 4 of Resolution No. 7373 indicates that exemption from the measure imposing the 
ports of entry restriction arises where goods are "subjected to trans-shipment".715  Article 385 of 
Colombia's Customs Statute, which Colombia has described as applicable to the ports of entry 
measure716, defines trans-shipment as the transfer of goods from the means of transportation used for 
the arrival of the goods in Colombia to another mean s of transportation that will be used to take the 
goods out of Colombia (as translated).717   
7.416  Based on the Panel's earlier interpretation that freedom of transit under Article V:2 must be 
extended to goods in international transit regardless of whether the goods have been trans-shipped or 
have changed modes of transport, the Panel pre liminarily finds that the language in Article 4, 
paragraph 3, when considered in light of the defin ition of "trans-shipment" as it appears in applicable 
Colombian legislation, denies freedom of transit to all textiles, apparel and footwear that are traffic in 
transit arriving from Panama or the CFZ.   
                                                      
711 See Panama's response to Panel question No. 66. 
712 See Panama's response to Panel question No. 66. 
713 See Panama's first oral statement, para. 58. 
714 See Section VII.I.2(c)(ii). 
715 In this sense, Article 4 provides "la presente re solución no se aplicará sobr e aquellos bienes que se 
pretendan someter a las modalidad de transbordo." 
716 Colombia's response to Panel question No. 69. 
717 Article 385 defines "transbordo", or trans-shipment, in its original text as follows: "Es la modalidad 
del régimen de tránsito que regula el traslado de mercancí as del medio de transporte utilizado para. la llegada al 
territorio aduanero nacional, a otro que efectúa la salida a país extranjero, dentro de una misma aduana y bajo su 
control sin que se causen tributos aduaneros".  WT/DS366/R 
 Page 179 
 
 
  7.417  The Panel is of the view that, on its face, the vi olation is clear.  As Panama noted, the right to 
proceed in international transit under the Article 4 exemption of the ports of entry measure is 
conditioned on whether goods arriving from Panama or the CFZ are trans-shipped, and not on 
whether the goods have a country other than Colomb ia as their final destination.  The applicable 
definition of "trans-shipment" in Colombian law indicates that goods must be transferred between 
means of transportation that will be used to re move the goods from Colombia.  As such, goods must 
be trans-shipped in order to proceed as traffic in tr ansit, in plain contraven tion of the definition given 
to the term of art "traffic in transit" in Article V:1. 
7.418  The Panel thus agrees with Panama's concern that Colombia's definition of trans-shipment 
fails to guarantee that goods arriving from Panama or  the CFZ will be permitted to transit through 
Colombia by land after arriving by sea or air in Colombia.  Article 385 of Colombia's Customs Statute 
indicates that arriving goods must be transferred from the means of transportation used for their 
arrival to another means of transportation that will be used to take the goods out of Colombia .  Under 
this definition, it is thus not clear whether goods arriving in Colombia by boat from Panama may be 
transferred to a truck to proceed in international transit, when that truck does not have a immediate 
direct route to a final destination outside Colombia .  Although the Panel shares this concern, the Panel 
reiterates that its finding is based on the express requ irement that goods be trans-shipped in order to 
proceed in international transit. 
7.419  The Panel further considers Colombia's add itional arguments insufficient to rebut the 
presumption of violation arising from the trans-ship ment requirement in the Article 4 exemption in 
Resolution No. 7373.  In particular, the Panel will address Colombia's arguments that its international 
commitments, geographic considerations and past pr actice reveal that Colombia ensures freedom of 
international transit for all tex tile, apparel and footwear goods a rriving from Panama or the CFZ. 
7.420  The Panel will first address Colombia's argument th at by virtue of its participation in the 
Andean Community, Colombia is obliged to guarant ee freedom of international transit to all covered 
goods arriving from non-Community members when in international transit through its territory.  The 
Panel notes under Decision 399, as indicated in its Article 8, international transportation provided by 
carriers from third countries through the territory of one or more member countries, shall be regulated 
by the national legislation of each of the memb er countries through which they pass or by the 
provisions of international agreements in force.  Andean Community Decision 617, in turn sets rules 
for free circulation of goods among Andean Communi ty member countries.  However, Article 7 of 
this Decision notably does not recognize transit of goods from a third country, such as Panama, 
through one or more members' territories (e.g. Colo mbia), to a final destination in another third 
country (e.g. Venezuela).  As such, the Andean  Community Decisions cited by Colombia do not 
regulate all conceivable transit trajectories for international transit by non-Community member 
countries.  Accordingly, the Panel disagrees th at Colombia's Andean Community commitments 
demonstrate that international transit is in all cases guaranteed for covered merchandise from Panama.  
Instead, Andean Community Decision 399 explains that transportation by third countries through 
member countries, such as Colombia, will be subject to national legislation, which, as the Panel noted 
above, has been deemed inconsistent with Ar ticle V:2 on its face.  Moreover, due to the 
inapplicability of Andean Community legislation to non-member to non-member transit matters, 
definitions of trans-shipment in Andean Comm unity Decisions 327 and 617 provided by Colombia 
are not relevant to the Panel's consideration. 
7.421  The Panel also finds unpersuasive Colombia's  arguments that past practice reveals that 
textiles, apparel and footwear arriving from Pana ma have indeed been permitted to proceed in 
international transit without limitation whenever the importer complied with the requirements in 
Resolution No. 7373 and demonstrated goods would be consumed elsewhere.718  Panama has argued 
                                                      
718 Colombia's first written submission, para. 286;  Colombia's second written su bmission, para. 177;  
Exhibit COL-29. WT/DS366/R 
Page 180  
 
  that examples presented by Colombia do not demonstr ate that international transit is guaranteed on 
the basis that goods in these exam ples were allowed transit based on other  special exemptions under 
Article 4 of Resolution No. 7373.
719  Setting aside Panama's argument, the Panel finds it difficult to 
conclude anything on the basis of examples presente d in Exhibit COL-29, referred to by Colombia.  
At most, each example indicates that the goods depa rted from China (Shanghai in the first example 
and Chiwan in the second example), arrived in Buen aventura, and have Bogota as a destination.  The 
Panel cannot identify any indication that the goods  will proceed to a destination beyond Colombia, 
thus calling into question how the exhibits demonstrat e that freedom of transit is ensured for "traffic 
in transit".  Based on the absence of adequate in formation, the Panel rejects the argument that 
Exhibit COL-29 sufficiently demonstrates that freedom  of international transit is ensured for all 
covered merchandise. 
7.422  Colombia has also argued that the requirement in  Article 4 of the ports of entry measure to 
trans-ship goods does not limit freedom of trans it for goods arriving from Panama, since the absence 
of a road connecting Panama with Colombia ne cessitates that all deliveries from Panama must 
undergo trans-shipment to enter Colombian markets.720  Essentially, Colombia is arguing that any 
goods arriving from Panama would never have th e occasion to transit through Colombia without 
undergoing trans-shipment (e.g. from boat or aircraft  to another vehicle, such as a truck or second 
airplane), thus necessarily meeting the conditions of the Article 4 exemption.  The Panel recalls that to 
rebut Colombia's claim, Panama has presented an example of a good first shipped to Ecuador, and 
then proceeding to Venezuela via a route that ente rs Colombia.,.  In response to Panama's example, 
Colombia has stated that such a route would be highly unrealistic due to business impracticalities, but 
submits that such entry would be permitted subj ect to the condition that the importer posted a 
guarantee and ensured that the goods were des tined for consumption outside of Colombia.721  In the 
Panel's view, Panama has not sufficiently demonstr ated to the Panel the possibility let alone the 
practicality of goods arriving in Colombia via a route through Ecuador.  Nor has Colombia provided 
any evidence to demonstrate that such a route is impo ssible, even if it is impractical.  However, in the 
Panel's view, whether or not Panama has done so  cannot in itself resolve the matter of whether 
Colombia ensures freedom of transit, within the meaning of Article V:2 to all goods arriving from 
Panama and proceeding in international transit.  As noted above, the text of the Article 4 exception 
within Resolution No. 7373 on its face is inconsistent  with the requirement set forth in Article V:2.  
Thus, the Panel is not persuaded that Colombia 's argument that all goods from Panama must 
necessarily undergo trans-shipment is adequate to re but our preliminary finding that the ports of entry 
measure fails to accord freedom of transit to goods arriving from Panama or the CFZ within the 
meaning of Article V:2. 
7.423  Accordingly, the Panel concludes that by requiring that goods undergo trans-shipment in 
order to proceed in international transit, Colombia has failed to extend freedom of transit via the most 
convenient routes to goods arriving from Panama in  international transit within the meaning of 
Article V:2 as informed by Article V:1 of the GATT 1994 .  The Panel therefore finds Colombia's port 
of entry measure is inconsiste nt with Article V:2 of the GATT 1994 . 
7.424  Having reached its finding, the Panel however  recognizes that as indicated by Colombia, 
most, if not all of the subject goods shipped from Pana ma, arrive in Colombia via sea or air transport, 
and thus undergo trans-shipment be fore proceeding in international transit or importation.     
                                                      
719 In particular, Panama emphasized that Article 4 of Resolution No. 7373 exempts textile, apparel and 
footwear goods consigned or endorsed to the State, or to imports effected for processing, travellers or postal 
traffic, or to goods consigned to industrial users of free trade zones or to "Permanent Customs Users" are exempt from the port of entry restrictions. 
720 Colombia's response to Panel question No. 67;  Colombia's second written submission, para. 179. 
721 Colombia's response to question No. 7 from Panama.  WT/DS366/R 
 Page 181 
 
 
  7.425  Colombia has expressed its willingness to make  a public commitment regarding the guarantee 
of freedom of transit to goods arriving from Panama.722  The Panel understands that this "public 
commitment" while commendable would not involve an amendment of the wording of Article 4 of 
Resolution No. 7373 to allow for an exemption from the measure imposing the ports of entry restriction to all goods in international transit.   
7.426  The Panel notes that in previous GATT/WTO dis putes, where a measure included in the terms 
of reference was otherwise amended or removed foll owing the initiation of panel proceedings, panels 
have nevertheless made findings in respect of such a measure.
723  Article 3.7 of the DSU provides that 
the aim of the dispute settlement mechanism is to s ecure a positive solution to a dispute.  Article 3.4 
of the DSU  provides that recommendations or rulings made  by the DSB shall be aimed at achieving a 
satisfactory settlement of the matter.  The Panel believes that declining to rule on this issue on the basis 
of Colombia's promise to publicly commit to allow all international transit,  would not allow it to 
secure a positive solution to  this dispute and to make sufficiently precise recommendations and 
rulings so as to allow for prompt compliance.724  The Panel's view may have been different if 
Colombia had amended the text of Article 4 to a llow all international transit.  In the current 
circumstances, though, the Panel believes that a pub lic commitment is not sufficient for the Panel to 
find otherwise. 
Whether the ports of entry measure is inc onsistent with Article V:2, second sentence  
7.427  Panama has additionally claimed that the ports of entry measure and Colombian legislation is 
inconsistent with the obligations in the second sentence of Article V:2 by making distinctions on 
freedom of transit based on place of origin or departure, or on any circumstances relating to 
ownership of the goods. 
7.428  The Panel recalls its conclusion that Article V:2 extends MFN obligations to goods based on 
the circumstances of their transit, and prohibits Me mbers from making distinctions in the treatment of 
goods, based on their origin or trajectory prior to arri ving in their territory, based on their ownership, 
or based on the transport or vessel of the goods.   
7.429  The Panel notes that the ports of entry measure  applies exclusively to textile, apparel and 
footwear goods originating in or arriving from Pa nama or the CFZ.  As such, only those goods 
arriving from Panama or the CFZ are subject to th e requirement within the Article 4 exemption in 
Resolution No. 7373 to trans-ship goods in order to pr oceed in international transit.  The Panel recalls 
its finding that Colombia has failed to extend freedom  of transit to goods a rriving from Panama due to 
this requirement.  Since this requirement is im posed on goods arriving from Panama, the requirement 
is based on the goods' origin (i.e. the goods origin ated in Panama or the CFZ), and based on its 
trajectory prior to arriving in Colombia (i.e. the goods originated in a third country but transited through Panama or the CFZ prior to arriving in Colombia). 
7.430  Accordingly, in light of the fact that only goods arriving from Panama or the CFZ are subject 
to the requirements under the Article 4 exemption,  while goods originating in or departing from a 
Member other than Panama are permitted to proceed in international transit, the Panel finds that 
Colombia makes distinctions based on the place of origin or departure of textiles, apparel and 
footwear arriving from Panama or the CFZ in vi olation of the second sentence of Article V:2. 
                                                     
 
722 Colombia's first written submission, para. 287;  Colombia's response to Panel question No. 70.   
723 Panel Report, Indonesia – Autos , para. 14.9,  Appellate Body Report, Argentina – Footwear , 
para. 64,  Panel Report, US – Wool Shirts and Blouses , para. 6.2, where the US measure was withdrawn shortly 
before the issuance of the Panel Report,  GATT Panel Report, EEC – Dessert Apples ,  GATT Panel Report, 
EEC – Apples (US) ,  GATT Panel Report, US – Canadian Tuna ,  GATT Panel Report, EEC – Apples I (Chile) ,  
GATT Panel Report, EEC – Animal Feed Proteins .   
724 Appellate Body Report, Australia – Salmon, para. 223,  Appellate Body Report, Chile – Price Band 
System, paras. 140-143. WT/DS366/R 
Page 182  
 
  (iv) Conclusion 
7.431  Accordingly, the Panel finds that the ports of en try measure is inconsistent with both the first 
and second sentences of Article V:2 of the GATT 1994 . 
J. W
HETHER THE RESTRICTION ON PORTS OF ENTRY APPLICABLE TO TEXTILES , APPAREL AND 
FOOTWEAR ARRIVING FROM PANAMA IS INCONSISTENT WITH ARTICLE  V:6  OF THE 
GATT 1994  
1. Main arguments of the parties 
7.432  Panama argues that Colombia's ports of entry measure accords treatment less favourable to 
goods in transit through Panama than that whic h would have been accorded had those same goods 
been shipped directly from their place of origin without transiting through Panama and therefore is 
inconsistent with Article V:6 of the GATT 1994 .   
7.433  Panama argues that Article V:6 requires WTO Me mbers in whose territory importation occurs 
to accord treatment not less favourable to goods th at have been in transit through another WTO 
Member than they would have accorded to thos e products had they not transited through that 
Member.725  In Panama's view, an examination of the ordinary meaning of the terms in Article V:6 
confirms that it applies to goods which "have been" in transit to a Member's territory in the sense that 
the journey of goods which were previously in transit has terminated.726  Panama considers the 
immediate context of the other terms in Article V:6, second sentence, notably the references to the 
terms "direct consignment', the "entry of goods" at  "preferential rates of duty" and the Member's 
"prescribed method of valuation for duty purposes", c onfirm that the obligation applies to the Member 
in whose territory the journey terminates.727  Panama further submits that the placement of this 
obligation in Article V:6 among the other provisions in Article V in its entirety is reasonable as the 
obligation present in Article V:6 establishes a most-f avoured-nation-requirement  to sanction practices 
by importing Members that may restrict or undermine the freedom of transit through other WTO Members.
728   
7.434  In light of its interpretation, and in considerati on of the fact that the ports of entry measure is 
exclusively applicable to goods which have arrive d in Colombia after transiting through Panama or 
the CFZ, Panama considers the violation of Article V:6 is clear. 
7.435  Colombia argues that Panama's claim under Article V:6 is invalid since the ports of entry 
measure does not apply to merchandi se in transit through Colombia with  a final destination elsewhere.  
As Colombia argued in relation to its claim under Ar ticle V:2, Colombia contends that the title and 
first paragraph of Article V provide context and cl early delineate the obligations in Article V:6.  
According to Colombia, Article V only contains oblig ations related to "freedom of transit" and as 
such, all provisions under Article V are limited in scope to goods in transit when the passage across a 
Members territory is a portion of a journey "beg inning and terminating beyond the frontier of the 
contracting party across whose territory the traffic passes".729   
7.436  Colombia reiterates its argument presented in relation to its claim under Article V:2 that all 
textiles, apparel and footwear arriving from Panama  in international transit through Colombia are 
exempted from restrictions.730  Due to the exemption, Colombia submits that textile, apparel and 
                                                      
725 Panama's second oral statement, para. 54,  Panama's second written submission, para. 151. 
726 Panama's first oral statement, para. 63,  Panama 's second written submission, para. 150,  Panama's 
second oral statement, para. 54. 
727 Panama's second oral statement, para. 55,  Panama's second written submission, para. 150. 
728 Panama's second oral statement, para. 57. 
729 Colombia's second written submission, para. 182,  Colombia's second oral statement, para. 48. 
730 Colombia's second written submission, para. 184.  WT/DS366/R 
 Page 183 
 
 
  footwear goods of any origin that have transite d through Panama may enter any of the 11 designated 
ports, when in transit to a final destination elsewhe re, just as if those goods had arrived directly from 
their place of origin. 
2. Consideration by the Panel 
(a) Legislation related to Colombia's  international transit regime 
7.437  In the preceding Sections VII.C.1-VII.I, the Pa nel discussed Colombian legislation applicable 
to textile, apparel and footwear  goods arriving from Panama, including the regulation of subject goods 
arriving for final consumption in Colombia as  well as those subject goods proceeding through 
Colombia in international transit to  destinations beyond Colombia.   
7.438  Panama considers that the port of entry measure is inconsistent with Article V:6 based on the 
requirement under Article 2 of Resolution No. 7373731, as modified by Resolution No. 7637732 
(explained in detail in Section VII.E.2(a) above), th at textiles, apparel and footwear classifiable under 
Chapters 50-64 of the Colombian Tariff Schedule arriving from Panama into Colombia may only be 
entered at Bogota airport or Barranquilla seaport: 
"Las mercancías clasificables por los cap ítulos 50 al 64 del Arancel de Aduanas, 
procedentes de la Republica de Pana má, deberán ser ingresadas e importadas 
exclusivamente por la jurisdicción de la Administración Especial de Aduanas de 
Bogotá, si se transportan por vía aérea y por la jurisdicción de la Administración Local de Aduanas de Barranquilla, si se transportan por vía marítima, y por tanto, 
no procederá para estas mercancías la autorización del régimen de tránsito 
aduanero ."
733 
7.439  Colombia, on the other hand, argues that the por t of entry measure is fully consistent with 
Article V:6, in light of the exemption in Ar ticle 4 of Resolution No. 7373 (explained in 
Section VII.I.2(a) above), which provides that th e general restriction imposed under Article 2 of 
Resolution No. 7373 does not apply to goods which ar e submitted for trans-shipment, in consideration 
that goods that undergo trans-shipment do no t have Colombia as a final destination: 
"Lo señalado en el articulo 2o, de la presente resolución no se aplicará sobre 
aquellos bienes que se pretendan someter a las modalidad de transbordo, 
considerando que en este caso la merc ancía no tiene como destino final 
Colombia ... "734 
7.440  The Panel will consider both parties' arguments in  relation to Article V:6 in the context of this 
legislation. 
                                                      
731 Exhibit PAN-34. 
732 Exhibit PAN-36. 
733 Exhibit PAN-34.   
734 Exhibit PAN-34.  Additionally, Article 4 exempts goods consigned or endorsed to the State;  goods 
imported for specific state or emergency uses: goods arriving by travellers or postal traffic, or in route to Leticia, 
San Andrés or Santa Catalina,  goods consigned to industrial users of free trade zones;  and goods under subheadings 64.01 to 64.05 of Colombia's Tariff Schedule that arrive at any of  the 11 ports designated in 
Article 39, paragraph 1 of Resolution No. 4240.  Resolution No. 7637 further exempts goods consigned to 
"Highly Exporting Users" and "Permanent Customs Users": see Article 3 of  Resolution No. 7637. WT/DS366/R 
Page 184  
 
  (b) Article V of the GATT 1994  
7.441  Article V:6 of the GATT 1994 provides as follows: 
"Each contracting party shall accord to produc ts which have been in transit through 
the territory of any other contracting party treatment no less favourable than that which would have been accorded to such products had they been transported from 
their place of origin to their destination without going through the territory of such 
other contracting party. Any contracting part y shall, however, be free to maintain its 
requirements of direct consignment existing on the date of this Agreement, in respect 
of any goods in regard to which such dir ect consignment is a requisite condition of 
eligibility for entry of the goods at preferential rates of duty or has relation to the 
contracting party's prescribed method of valuation for duty purposes." 
7.442  The full text of Article V appears above in Section VII.I.2(b) above.   
(c) Interpretation of Article V:6 of the GATT 1994  
7.443  The Panel is therefore called upon to determin e whether the ports of entry measure is 
inconsistent with Article V:6 of the GATT 1994 .  As the Panel noted in relation to Panama's claims 
under Article V:2
735, Article V addresses matters related to " freedom of transit" of goods.  This is 
reflected in the title of the provision.  Moreover, the Panel noted that Article V:6 generally extends 
MFN protection to Members' goods which "have been in transit".   
7.444  The parties dispute the proper interpretation of th is text as it informs the scope of coverage of 
Article V:6.  As was the case with Article V:2,  neither the Appellate Body nor a GATT/WTO panel 
has ever interpreted Article V:6.  Accordingly,  the Panel will again analyse Panama's claim under 
Article V:6 in accordance with the principl es of treaty interpretation set forth in the VCLT .  The Panel 
will thus consider Article V:6 in accordance with its or dinary meaning in its context and in light of its 
object and purpose, where necessary.  The Panel may also resort to supplementary means of 
interpretation, including the travaux preparatoire  to inform its interpreta tion, whenever the meaning 
of its term is ambiguous. 
(d) The scope of application of the MFN obligation in Article V:6 of the GATT 1994  
7.445  The Panel will first consider the ordinary meani ng of the terms in Article V:6 on its face and 
in its context.  As the parties' arguments indicat e, the central issue is whether Article V:6 extends 
MFN obligations to Members whose territory is th e ultimate destination of the good in transit, or 
whether the obligation only extends to Members whose territory a good passes through intermediately 
in route to a final destination elsewhere.   
7.446  Article V:6 provides in its first sentence that:  
"Each contracting party shall accord to products which  have been in transit  through 
the territory of any other contracting party treatment no less favourable than that which would have been accorded to such products had they been transported from 
their place of origin to their destination without going through the territory of such 
other contracting party." (emphasis added).   
7.447  The Panel recalls Panama's argument that the application of the principles of treaty 
interpretation to Article V:6 makes clear that Article  V:6 imposes obligations on the country in which 
                                                     
 
735 See Section VII.I.  WT/DS366/R 
 Page 185 
 
 
  the goods terminate their journey, in this case, Colombia.736  Panama notes that Article V:6, first 
sentence imposes an obligation on WTO Members to respect products that "have been" in transit 
through another Member.737  The reference to "have been" means th at the transit across the territory of 
another WTO Member has already taken place and the go ods are not longer in transit, but are in the 
country in which they terminate their journey.738  Panama notes that Article V:1 makes no 
qualification that goods in transit have to be sold outside the country through which the goods 
transit.739  In Panama's view, while paragraphs 2-5 of  Article V refer to the obligation to provide 
freedom of transit though its territory, Article V: 6 refers to the obligation imposed on the Member 
whose territory is the final destination not to discriminate against goods.740  Thus, Panama argues the 
obligation in Article V:6, first sentence is that  the WTO Member in whose territory the journey 
terminates must accord treatment no less favourable to  goods that have been in transit through another 
WTO Member than they would have accorded to th ose products had they not been in transit through 
that Member.741  In effect, Article V:6, first sentence, es tablished an MFN requirement that must be 
observed by the country of destination.742   
7.448  Panama considers the immediate context of the other terms in Article V:6, second sentence, 
confirm that the obligation appli es to the Member in whose territory the journey terminates.  In 
particular, Panama notes the second sentence includes the terms "direct consignment", the "entry of 
goods" at "preferential rates of duty" and the Me mbers "prescribed method of valuation for duty 
purposes."743  Panama submits that all these terms rela te to the final impor tation of goods in a 
Member's territory and make clear that the Memb er upon which the obligations are imposed is the 
importing country and not the country of transit.744   
7.449  As a matter of proper treaty interpretation, Pana ma considers the placement of paragraph 6 of 
Article V reasonable as it sanctions practices by importing Members that may restrict or undermine the freedom of transit through other WTO Members.
745  Moreover, Panama argues its interpretation of 
Article V:6 would not result in duplication of the pr otections provided in Article I:1.  In Panama's 
view, Article I:1 provides protection from discrimi nation on the basis of the origin of goods, while 
Article V:6 requires that Members do no discriminate on the basis of the country through which the 
goods have been in transit.746 
7.450  Colombia has argued that all the provisions in Article V contain obl igations related to 
"freedom of transit" for goods in transit when the passage across a Member's territory is a portion of a 
journey beginning and ending beyond the frontier of the Member across whose territory the traffic 
passes.   
7.451  Colombia argues that the context of Article V, including its title and the definition of goods in 
transit in Article V:1 guide interpretation of Article  V:6.  In the context of Article V:1, Colombia 
submits that Article V:6 does not impose on Members any obligations to goods that do not have another Member's territory as their final destination.
747  The phrase in Article V:1 that goods 
"beginning and terminating beyond the frontier of the contracting party across whose territory the 
                                                      
736 Panama's second oral statement, para. 53. 
737 Panama's second oral statement, para. 54. 
738 Panama's second oral statement, para. 54. 
739 Panama's second written submission, para. 150. 
740 Panama's second written submission, para. 150.   
741 Panama's second oral statement, para. 54. 
742 Panama's second written submission, para. 150. 
743 Panama's question No. 8 to Colombia,  Panama's second written submission, para. 150,  Panama's 
second oral statement, para. 55. 
744 Panama's second oral statement, para. 55. 
745 Panama's second oral statement, para. 57. 
746 Panama's second oral statement, para. 59. 
747 Colombia's second written submission, para. 181;  Colombia's second oral statement, para. 48. WT/DS366/R 
Page 186  
 
  traffic passes" informs that all subsequent oblig ations in Article V do not apply to goods which 
terminate in a Member's territory.
748  Colombia argues that this is the context in which Articles V:2 – 
6 must be read.749  The definition of goods "in transit" establishes the scope of Article V.750  While 
noting that Article V:6 has never been ruled upon  previously, Colombia argues that views expressed 
by the WTO Secretariat and academic scholars support its view.751  Moreover, Colombia argues that 
Panama's interpretation of MFN obligations in  Article V:6 would essentially undo the explicit 
limitation of MFN protections as provided to goods based  on their origin, set forth in Article I:1 of the 
GATT 1994 .752 
7.452  Colombia also disputes Panama's argument that the exemption for direct consignment in 
Article V:6, second sentence would be rendered inu tile by interpreting the scope of the first sentence 
as limited to goods in transit through  a Member's territory.753  Colombia argues that the direct 
consignment exemption merely indicates that Members were not prevented from maintaining 
historical consignment rules and has nothing to do wi th whether a Member is allowed to discriminate 
between goods in transit directly from their place  of origin as compared to goods which transit 
through other Member territories before arriving at their final destination.754  Instead, Colombia 
considers the second sentence to be out of place, as it  is unexpected that anything dealing with direct 
consignment, preferential duty rates and customs valu ation should appear in Article V.  According to 
Colombia, this is readily apparent since Article V de als with goods in transit that would not be subject 
to customs duties.755 
7.453  The Panel notes that Article V:6, first sentence includes the phrase " products  which  have been 
in transit  through the territory of any other contracting party" (emphasis added) when discussing the 
applicable goods regulated by the provision.  The Panel notes that the phrase  incorporates the present 
perfect tense of the verb "to be".  No other provi sions in Article V employ the present perfect verb 
tense, instead relying on the term of art "traffic in  transit", which is defined in Article V:1, when 
discussing the applicable goods regulated by the provision.756  In particular, Article V:5 addresses 
MFN protection requiring parties to accord "treatment no less favourable" to "traffic in transit through 
the territory of any other contracting party" "[w]ith  respect to all charges, regulations and formalities 
in connection with transit".  The text of Article V:6 does not provide that each contracting party shall 
accord treatment no less favourable to traffic in transit through the t erritory of any other contracting 
party .  Moreover, Members are not obliged to accord MFN protection to products which are in transit, 
or to products which were  in transit.  Instead, Article V:6 requires Members to extend MFN 
protection to " products  which  have been in transit  through the territory of any other contracting 
party". 
                                                      
748 Colombia's first written submission, para. 279;  Colombia's second written submission, para. 182. 
749 Question No. 8 from Panama to Colombia. 
750 Colombia's second written submission, para. 182. 
751 Colombia's second written submission, paras. 185-186. 
752 Colombia's second written submission, para. 188. 
753 Question No. 8 from Panama to Colombia. 
754 Question No. 8 from Panama to Colombia. 
755 Question No. 8 from Panama to Colombia. 
756 The Panel notes that Article V:1 defines the term "traffic in transit".  Subsequently, paragraphs 2-5 
employ this term.  Paragraph 2 reads in par t: "There shall be freedom of transit ... for traffic in transit  ..." 
(emphasis added).  Paragraph 3 reads in par t: "Any contracting party may require that traffic in transit  through 
its territory be entered at the proper custom house ..." (emphasis added).  Paragraph 4 reads in part: "All charges 
and regulations imposed by contracting parties on traffic in transit  ..." (emphasis added).  Paragraph 5 reads: 
"With respect to all charges, regulatio ns and formalities in co nnection with transit, each  contracting party shall 
accord to traffic in transit to or from the territory of any other contracting party treatment no less favourable 
than the treatme nt accorded to traffic in transit  to or from any third country" (emphasis added).  Paragraph 6 
does not refer to "traffic in transit" in its text.  WT/DS366/R 
 Page 187 
 
 
  7.454  The Panel thus considers it necessary to examine the meaning of the phrase " products  which  
have been in transit  through the territory of any other contracting party" in order to determine the 
scope of Article V:6, i.e. what goods are regulated  by the provision.  The Panel recalls that the 
Appellate Body in Chile – Price Band System  observed generally that requirements expressed in the 
present perfect tense impose obligations that came into  being in the past, but ma y continue to apply at 
present.757  Implicitly, the present perfect verb tense refers to an action that happened at an 
unspecified time in the past before the present moment.  In addition, th e perfect aspect refers to a past 
happening that is considered in relation to a late r event or time, although it is unclear whether the 
event referred to is understood to conti nue at present, or has recently concluded.758  As such, the 
ordinary meaning of products which " have been in transit" remains unclear.  On the one hand, the 
goods may have begun transit in the past, but are still continuing in transit until an unspecified time in 
the future.  On the other hand, the goods may have recen tly been in transit, but are no longer in transit.  
Due to these opposing possibilities for interpretation, the Panel considers it is not possible to clearly 
determine the meaning of the phrase "to products which have been  in transit" simply by reference to 
the text.  Accordingly, the Panel will consider Arti cle V:6 in light of context provided elsewhere in 
Article V. 
7.455  As discussed above and in relation to Panama's  Article V:2 claim, Ar ticle V is generally 
entitled "Freedom of Transit".  Moreover, the Pane l notes that a definition of the term "traffic in 
transit" appears in Article V:1.  Colombia argues that the scope of Article V is informed by its title 
("Freedom of Transit") and the definition of "traffic in transit" provided in Article V:1 that goods are "deemed to be in transit across the territory of  a contracting party when the passage across such 
territory ... is only a portion of a complete jour ney beginning and terminating beyond the frontier of 
the contracting party across whose territory the traffic passes."
759  Colombia argues that this definition 
of "traffic in transit" informs the definition of "t ransit" for the entire Article, including Article V:6.760  
Thus, Colombia argues that the scope of Article V is  limited to goods destined for sale outside of the 
country through which it is passing.761 
7.456  While Colombia considers that "freedom of tran sit" is one and the same for all provisions, the 
Panel does not agree.  The Panel notes that neither  "freedom" nor "transit" are defined anywhere in 
Article V or the WTO Agreement .  The Panel recalls that the dic tionary definition of "freedom" as 
referred to in relation to Panama 's Article V:2 claim is "the unrestricted use of something".762  
Moreover, the Panel notes that the dictionary defin ition of "transit" is "the action of passing across or 
through; passage or journey from one place or point to another"763, or "[t]he passage or carriage of 
people or goods from one place to another."764  Taken in combination, consideration of the dictionary 
or ordinary meaning of these terms does not shed light on the issue of whether Article V:6 only concerns goods which are in passage through a te rritory with a destination outside/beyond that 
                                                     
 
757 Appellate Body Report, Chile – Price Band System , para. 206, citing G. Leech and J. Svartvik, A 
Communicative Grammar of English , (Longman, 1979), paras. 112-119. R. Quirk and S. Greenbaum, A 
University Grammar of English , (Longman, 1979), paras. 328-330. 
758 G. Leech and J. Svartvik, A Communicative Grammar of English , (Longman, 3rd edition, 2002), 
paras. 122 and 125.  The authors comm ent that the present perfect tense has four related possible uses: (i) a past 
event with results in the present time;  (ii) an indefinite  event in a period leading up to the present time;  (iii) a 
habit in a period leading up to the present time;  and (iv) a state leading up to the present time.  In uses (i), (iii), 
and (iv) the authors note that  events may be understood to continue at the present time.  However in use (ii), the 
authors note that the present pe rfect tense often refers to the recent  indefinite past, i.e. the event has recently 
concluded.   
759 Colombia's comment on Panama's response to Panel question No. 116. 
760 Colombia's comment on Panama's response to Panel question No. 116. 
761 Colombia's first written submission, para. 279. 
762 See Panama's first written submission, para. 171, citing The New Oxford Dictionary of English , 
(Clarendon Press, 2nd Ed. 2001), p. 730.   
763 The New Shorter Oxford English Dictionary  (Clarendon Press, 4th Ed. 1993), p. 3327. 
764 The New Shorter Oxford English Dictionary  (Clarendon Press, 4th Ed. 1993), p. 3327. WT/DS366/R 
Page 188  
 
  territory, whether it concerns goods which have arrived at their final destination, or both.
765  Thus, the 
title and the ordinary meaning of th e term "transit" do not inform the scope of all the provisions of 
Article V. 
7.457  Additionally, the Panel rejects the view that th e definition of "traffic in transit" provided in 
Article V:1 necessarily informs the definition of tr ansit for the entire article, in particular, the 
reference to "products which have been  in transit" in Article V:6.  As the Panel has noted, while the 
term of art "traffic in transit" appears in paragraphs 1-5 of Article V, the term is not used in paragraph 
6.  Contrary to Colombia's argument, Article V:1 clearly indicates that "[t]raffic of this nature is termed in this Article 'traffic in transit'" (emphasis added) when referring to goods in which "passage 
across such territory ... is only a portion of a co mplete journey beginning and terminating beyond the 
frontier of the contracting party across whose territo ry the traffic passes".  Moreover, Article V:1 does 
not expressly state that the concept of "t raffic in transit" is applicable to all provisions in Article V.  
Therefore, the Panel declines to conclude based eith er on the definition of traffic in transit appearing 
in Article V:1 that the scope of Article V:6 only concerns goods which pass through a territory of a 
Member as a portion of a larger trajectory that begi ns and ends in beyond the frontier of the Member 
across whose territory the goods pass. 
7.458  In the Panel's view, the immediate context pr ovided by Article V:6, second sentence helps to 
inform the intended scope and application of Article  V:6.  The Panel recalls that the second sentence 
in Article V:6 provides as follows:  
"Any contracting party shall, however be free to maintain its requirements of direct 
consignment existing on the date of this Agre ement, in respect of any goods in regard 
to which such direct consignment is a requi site condition of eligibility for entry of the 
goods at preferential rates of duty or has relation to the contracting party's prescribed method of valuation for duty purposes".   
7.459  The Panel notes the inclusion of the terms "direc t consignment" as "a requisite condition of 
eligibility for entry of the goods at preferential rates of duty" and "method of valuation for duty 
purposes".  As argued by Panama, these terms are irrelevant for countries that are intermediary 
destinations for goods in transit, since "eligibility fo r entry", "valuation" and "duty" collection are not 
undertaken for goods in transit through a Member's territory that will not be subject to importation 
and customs valuation requirements.  In light of the focus on activities in the second sentence 
commonly associated with importation of goods, Panama argues that the requirements of the second sentence of Article V:6 would be unnecessary if the first sentence of Article V:6 were limited in 
application to goods that are in transit through a Member's territory.  Panama submits that such an 
interpretation is impermissible as it cannot be reconciled with the prin ciple that interpreters may not 
reduce whole clauses to inutility.
766   
7.460  Colombia has argued that the second sentence is of historical relevance only, as the 
requirement is linked to historical preferen tial schemes that are no longer relevant today.767  Colombia 
additionally argues that the reference to direct consignment requirements in paragraph 6 simply 
clarifies that direct consignment requirements are not affected by the obligation to extend MFN treatment to goods in international transit through a Member's territory.
768  Finally, Colombia 
                                                      
765 For instance, in the Panel's view, these terms may be construed to mean "the unrestricted passage or 
journey of goods through a territory", but also "the unrestricted passage or journey from one location to another 
location".   
766 Question No. 8 from Panama to Colombia. 
767 Question No. 8 from Panama to Colombia. 
768 Question No. 8 from Panama to Colombia.  The Panel notes that Colombia has argued as follows:  
"[T]he second part of Article V:6 remains entir ely valid and useful as a clarification that 
nothing in this provision limits the right of Members to maintain their pre-existing direct 
consignment requirements.  In othe r words, what this says I that it is not because a Member is  WT/DS366/R 
 Page 189 
 
 
  characterizes the second sentence as misplaced769 since issues related to direct consignment, 
preferential duty rates and customs valuation are not relevant with goods in transit, which are not 
subject to customs duties.770  In light of this misplacement, Colombia argues that the second sentence 
should not read as context to interpret Article V:1.   Otherwise, interpretation would render the first 
sentence equally out of place, despite that fact th at the first sentence makes complete sense in the 
context of provisions dealing with goods in intern ational transit.  Colombia argues this form of 
interpretation would "impos[e] cons istency on the basis of an oddity" and would lead to an "absurd 
result", an approach which is not permitted under the principles of treaty interpretation within the 
VCLT .771 
7.461  The Panel does not agree with Colombia's appr oach to interpretation of the second sentence 
of Article V:6.  The Appellate Body in US – Gasoline explained as fundamental to the principle of 
effective treaty interpretation ( ut res magis valeat quam pereat ) that meaning and effect should be 
given to all terms in a treaty: 
"One of the corollaries of the 'gener al rule of interpretation' in the VCLT  is that 
interpretation must give meaning and effect to  all the terms of a treaty.  An interpreter 
is not free to adopt a reading that would result in reducing whole clauses or 
paragraphs of a treaty to redundancy or inutility."772   
7.462  In the Panel's view, treatment of language app earing in the second sentence  as "out of place" 
or historically outdated seems inconsistent with th e intent of the drafters of the Agreement, as it 
suggests reading an entire clause out of the Agreemen t.  In accordance with th e rules of interpretation 
as set forth in the VCLT , the Panel considers itself obliged to consider the text of Article V:6 as it 
exists in its entirety. 
7.463  The Panel will therefore consider the second sen tence both in terms of its placement and in 
terms of substance.  Panama has submitted that  discussion of a requirement related to direct 
consignment as a condition for entry of goods at preferential duty rates would be illogical if the 
second as well as the first sentence were not addressed to Members whose territory served as the final 
destination for importation of a good.  As a structur al matter, aside from the fact that both sentences 
appear in the same paragraph, the use of the c onjunction "however" in the opening clause of the 
second sentence serves to grammatically and logically  link the first and second sentences.  Thus, to 
the extent the second sentence may only address conc erns related to a Member whose territory serves 
as a final destination for goods in transit, the placement of the second sentence and its grammatical 
link to the first sentences defies interpreting the firs t sentence as extending obligations to intermediary 
destinations for goods in  international transit. 
7.464  In terms of substance, the Panel notes that th e second sentence permits a Member to maintain 
any direct consignment requirements that existed in 1947, whenever those direct consignment requirements were a mandatory condition for entry  of the goods at preferential rates of duty or related 
to the Member's prescribed method of customs duty valuation.  Requirements related to the direct 
                                                                                                                                                                    
 
not allowed to discriminate between transiting goods that are shipped directly from their 
country of origin and transiting goods with the same origin that arrive  at the border after 
having been in transit through another Member, that Members cannot maintain direct 
consignments [sic] requirements that pre-dated the entry into force of the GATT for that Member." 
769 Colombia refers to the second sentence of Article V:6 as the "odd one out": see Question No. 8 from 
Panama to Colombia. 
770 Question No. 8 from Panama to Colombia. 
771 Question No. 8 from Panama to Colombia. 
772 See Appellate Body Report, US – Gasoline , p. 23. WT/DS366/R 
Page 190  
 
  consignment of goods have previously been discussed in a 1981 Note by the WTO Secretariat.
773  In 
that Note, the Secretariat indicated that direct c onsignment rules for goods require that a product must 
be transported directly from the place of productio n to its preferential destination in order to be 
eligible for origin treatment.  Moreover, the Note e xplains (as relevant at that point in time) that a 
good under direct consignment could only be transported through territory other than that of its origin 
or final destination, if justified for geographical reasons, and if the goods in question have remained 
under customs surveillance and have  not entered into the commerce of the transit country.   
7.465  Though not binding on Members' rights and oblig ations, the Panel considers the Secretariat's 
commentary consistent with the view that the sec ond sentence of Article V:6 is intended to clarify 
that, in complying with requirements of the first sentence of Article V:6, a Member is nevertheless 
permitted to maintain any direct consignment requirements that ex isted in 1947 (when commitments 
among Members were negotiated) without violating th e obligation in the first sentence.  In other 
words, Article V:6, first sentence requires Members to extend MFN treatment to all goods that have 
been in international transit, except with resp ect to specific, pre-existing direct consignment 
commitments.   
7.466  In light of the fact that direct consignment re quirements are discussed in the context of being 
a prerequisite for the eligibility for entry of goods at  preferential rates of duty or that relate to that 
Member's method of valuation for duty purposes, the Panel thus considers that both the first and 
second sentences of Article V:6 apply to a Member's territory which serve as the final destination of 
the goods.774 
7.467  In reaching its conclusion, the Panel consider s that its interpretation conforms with the 
principles of treaty interpretation set forth by the Appellate Body in US – Gasoline  to avoid 
interpretations that reduce certain other provisions to inutility.  The Panel recalls its findings above775, 
that Article V:2, second sentence imposes an MFN obligation by prohibiting Members from making distinction based on the flag of vessels, the place of or igin, departure, entry, exit or destination, or on 
any circumstances relating to the ownership of goods, of vessels or of other means of transport of 
"traffic in transit".  The definition of "traffic in  transit" from Article V: 1 include those goods "when 
the passage across such territory, ... is only a portion of a complete journey beginning and terminating 
beyond the frontier of the contracting party across whose territory the traffic passes".  Thus, Article V:2 extends MFN protection to goods in tr ansit through Member countries, while Article V:6 
extends MFN protection from discrimination based on the geographic course of goods in transit upon 
reaching their final destination. 
7.468  The Panel additionally notes that Article V:5 extends MFN protection to "traffic in transit" 
"[w]ith respect to all charges,  regulations and formalities in connection with transit " (emphasis 
added).  In accordance with the Ad  Note to this provision, MFN protection extends to "like products 
being transported on the same route under like cond itions" in relation to transportation charges.  
Setting aside transportation charges, the protec tion under Article V:5 broadly extends to all 
regulations and formalities for all "traffic in trans it".  As Article V:6 extends MFN protection broadly 
to "treatment" (i.e. "Each contracting party shall accord  to products which have been in transit through 
the territory of any other contracting party treat ment no less favourable..."), an interpretation that 
                                                     
 
773 See Rules of Origin, Note by the Secretariat, Consultative Group of  Eighteen, Fourteenth Meeting, 
25-27 March 1981, CG.18/W.48, 6 March 1981, Special Distribution, p. 5. 
774 In resorting to the second sentence of Article V:6 as context to interpret the first sentence of the 
same provision, the Panel does not reach any finding in regard to the provisions in the second sentence.  The 
Panel recognizes that the second se ntence provides a lim ited and time-bound exception to the requirements set 
forth in the first sentence.  Furthermore, the Panel is no t aware of the existence of any direct consignment rules 
that comply with th e second sentence. 
775 See Section VII.I.2(c)(iv).  WT/DS366/R 
 Page 191 
 
 
  Article V:6 governs treatment extended to "traffic in transit" would overlap with the broad protection 
already ensured by Article V:5. 
7.469  Finally, while the Panel is satisfied that its interpretation conforms w ith well-established rules 
governing treaty interpretation, the Panel neverthe less notes that preparatory work to Article V does 
not offer any conclusive guidance regarding interp retation.  In Section VII.I.2(c)(i), the Panel 
summarized the travaux preparatoires involved in the development of Article V of the GATT 1947 .  
The Panel noted that the first and second paragr aphs of Article V were  derived from parallel 
provisions in the 1921 Barcelona Convention.  These provisions do not shed light on the significance of Article V:6.  In addition, during a 1946 meeting of the Preparatory Committee of the International 
Conference on Trade and Employment, the Tec hnical Subcommittee published a report commenting 
on the United States Suggested Charter for an Intern ational Trade Organization of the United Nations, 
which included proposed text and comments regardi ng Article 10 of the suggested Charter, entitled 
"Freedom of Transit".   
7.470  Comments in the report of the Technical Sub- Committee reveal disagreement on the correct 
interpretation of the provisions in  paragraph 6 of Article 10, whic h reads nearly identically to 
Article V:6 of the GATT 1947 (and consequently GATT 1994 ).
776  As both Panama and Colombia 
have acknowledged777, in discussing paragraphs 2-6 of the report of the Technical Sub-Committee 
commented that:    
"It is understood that paragraphs 2 – 5 of th is Article cover the treatment to be given 
by a member country to products in transit through  its territory between any other 
member country and any third country, and paragraph 6 covers the treatment to be 
given by a member country to products cleared from customs within its territory after  
transit through any other member country".778 (emphasis added) 
7.471  However, in light of the distinction made betw een coverage in paragr aphs 2-5 and that in 
paragraph 6, the report also notes that "several de legates believed that para graph 6 should be excluded 
from Article 10 and set forth elsewhere in the Ch arter because it does not deal with products in 
transit."779 
7.472  The 12 January 2005 WTO Secretariat Negotiating Group on Trade Facilitation 
acknowledged the earlier disagreement surrounding th e various possibilities for interpretation of 
Article V:6 of the GATT 1994 :  
"Paragraph 6 requires each party to treat pr oducts, which have been in transit through 
the territory of another Member, no less fa vourably than products transported from 
their place of origin to their destination without going through the territory of such 
other Member.  The text might be read to imply that a country V would have to treat goods transported through its territory from country X with a destination in country Z, after having already been carried through country Y, in the same manner that would treat goods passing through its territory from X directly to Z, without 
having passed through Y.  It may be open to discussion, however, whether 
paragraph 6's equal treatment  requirement only covers products passing through a 
party's territory after having already passed  through another country, or whether it 
                                                     
 
776 Paragraph 6 of Article 10 differs only slightly  from Article V:6, substituting the phrases "member 
country" and "other member country" w ith the phrases "territory of any other contracting party" and "territory of 
such other contracting party", respectively;  and substituting the word "origin" with "place of origin". 
777 Panama's second oral statement, paras. 56-57;  Colombia's second written submission, para. 187. 
778 Report of the Technical Sub-committee of the Preparatory Committee of the International 
Conference on Trade and Employme nt, Committee II, UN doc.  # E/PC/T/C.II/54/Rev.1, p. 11. 
779 Report of the Technical Sub-committee of the Preparatory Committee of the International 
Conference on Trade and Employme nt, Committee II, UN doc.  # E/ PC/T/C.II/54/Rev.1, p. 11.   WT/DS366/R 
Page 192  
 
  extends to products, which, having passed through a country, enter another party's 
territory to remain there as their final destin ation.  In other words, it may be debatable 
whether paragraph 6 applies only to c ases where the goods are shipped from X 
through Y and V to Z, or whether it also  covers goods coming from X through Y to V 
(without continuing to Z)".
780   
7.473  Although the Panel understands that commentary by the WTO Secretariat does not have an 
impact upon rights and obligations  under the covered agreements781, the quotation reflects the lack of 
consensus regarding the proper in terpretation of Article V:6. 
7.474  Colombia has raised the question of whether,  since the provisions in Article V:6 were 
ultimately not moved elsewhere, the delegates intended that Article V:6 should indeed be read in its 
context of goods in transit and to apply th erefore only to goods proceeding in transit.782  The Panel 
declines to speculate in such a manner. 
7.475  For all of the foregoing reasons, the Panel concl udes that the obligations in Article V:6, first 
and second sentences apply to Members whose territo ry is the final destination for goods in 
international transit.   
(e) The substantive obligations in Article V:6 of the GATT 1994  
7.476  In light of its determination that Article V:6 extends obligations with respect to goods that 
have been in transit, but have reached their final destination, the Panel will consider the obligation to 
provide "treatment no less favourable" to those go ods in comparison to the same goods "had they 
been transported from their place of origin to thei r destination without going through the territory of 
such other contracting party". 
7.477  The Panel considers the obligation in Article V:6 first sentence is straightforward:  all 
treatment extended to goods that were transporte d from their place of origin to their destination 
without going through the territory of other contr acting party, must be extended to goods that have 
been transported from their place of origin, an d passed through the territories of such other 
contracting countries as "traffic in transit" prior to reaching their final destination.  Such "treatment" 
must strictly be "no less favourable".  As the comparison is made based on a hypothetical, identical 
set of goods, i.e. the passage a good that was shipped from its origin via its actual route through one or 
more Member countries prior to arrival at its final destination is compared to the hypothetical passage 
of that good directly from its place of origin to its final destination, no like product analysis is 
required.783 
                                                      
780 Doc. TN/TF/W/2, "Article V of the GATT 1994 – Scope and Application, No te by the Secretariat", 
12 January 2005, para. 25. 
781 The Panel notes that the 2005 Note by the Secretariat expressly provides that it is "without prejudice 
to the positions of Members and to their rights and obligations under the World Trade Organization".  See 
TN/TF/W/2, "Article V of the GATT 1994 – Scope and A pplication, Note by the S ecretariat", 12 January 2005, 
p. 1. 
782 Colombia's second written submission, para. 187. 
783 In this respect, the Panel would like to address Colombia's argument that adherence to Panama's 
interpretation of MFN obligations in Article V:6 would essentially undo the explicit limitation of MFN 
protections set forth in Article I:1 of the GATT 1994.  As explained above, Article V:6 requires a Member to treat a good shipped from its origin via its actual route th rough one or more Member co untries prior to arrival at 
its final destination, identically had that same good hypothetically passed fr om its place of origin to its final 
destination without traversing a pa rticular territory in question.  In contrast, Article I:1 of the GATT 1994  
broadly ensures that any advantage exte nded to a product of a particular or igin must be extended immediately 
and unconditionally to the like product originating in or de stined for the territories of all other Members.  Thus, 
Article I:1 ensures MFN treatment to like products of all origins, whereas Article V:6 ensures MFN treatment  WT/DS366/R 
 Page 193 
 
 
  7.478  Thus, products that are transported from thei r place of origin which pass through any other 
Member country on the route to their final destina tion must be treated no less favourably than had 
those same products been transporte d from their place of origin to their final destination without ever 
passing through that other Member's territory. 
(f) Whether the ports of entry measure complies wi th the obligations in Article V:6 of the 
GATT 1994  
7.479  In accordance with its findings in relation to  the scope and substantive obligations in 
Article V:6, first sentence, the Panel's mandate requi res it to determine whether, by imposing the ports 
of entry measure, Colombia provides treatment no less  favourable to goods of a particular origin that 
arrive in Colombia after passage through Panama, th an it would have provided those goods had those 
goods arrived directly from their place of origin.   
7.480  The Panel recalls that Article 2 of Re solution No. 7373 mandates simultaneous entry and 
customs clearance exclusively at Bogota airport or  Barranquilla seaport of all subject textiles, apparel 
and footwear that have arrived fro m Panama and the CFZ.  The Panel notes that the restriction applies 
exclusively to textile, apparel and footwear goods originating in or arriving from Panama or the CFZ.  
Goods which do not arrive from Panama or the C FZ are not required to simultaneously enter and 
customs clear goods at two ports, but may do so at 11 eligible ports.  Since the restriction is imposed 
on goods of all origins that have passed through Panama or the CFZ prior to their arrival in Colombia 
as their final destination, while the restriction would not apply to those same goods, had they not 
entered Panama, Colombia does not extend "treat ment no less favourable" to goods arriving from 
Panama and the CFZ in comparison to the same goods  had they been transported from their place of 
origin to Colombia without circulating through Pa nama and the CFZ.  Accordingly, the Panel finds 
that the ports of entry measure is inconsistent with the obligation in the first sentence  of Article V:6. 
(i) Conclusion 
7.481  Accordingly, the Panel finds that, by failing to  extend "treatment no less favourable" to goods 
arriving from Panama and the CFZ in comparison to the same goods had they been transported from 
their place of origin to Colombia without circulati ng through Panama and the CFZ, the ports of entry 
measure is inconsistent with the fi rst sentence of Article V:6 of the GATT 1994 . 
K. COLOMBIA 'S DEFENCE UNDER ARTICLE  XX( D) OF THE GATT 1994  TO PANAMA 'S CLAIMS 
AGAINST THE PORTS OF ENTRY MEASURE  
7.482  The Panel recalls its findings that the requirement  within the ports of entry measure to enter 
subject textiles, apparel and footwear arriving from Panama exclusively at Bogota and Barranquilla is 
inconsistent with Articles XI:1 and V:6 of the GATT 1994 ; the requirement to submit an advance 
import declaration, pay taxes on the basis of that advance declaration, and comply with legalization rules is inconsistent with Article I:1 of the GATT 1994 ; and the requirement to trans-ship goods in 
order to proceed in international transit is inconsistent with Article V:2 of the GATT 1994 .  In light of 
these findings, the Panel will proceed to examine Colombia's defence under Article XX(d) of the 
GATT 1994 in relation to these violations.  As the Pa nel has not made findings with respect to 
Panama's additional claims against the ports of en try measure under Article XI II:1 and Article I:1 of 
the GATT 1994
784, Colombia's defence will not be considered in relation to these claims. 
                                                                                                                                                                     
based on its transit trajectory regardless of the existence of a like product of a different origin.  In the Panel's 
view, the obligations in these two provisions are not th e same and should not be treated as redundant.   
784 ''The Panel exercised judicial economy with respect to  both claims, albeit for separate reasons.  See 
Sections VII.F.2(c)and VII.G.2(b). WT/DS366/R 
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  1. Main arguments of the parties 
7.483  Colombia submits that in the event that the Pa nel were to uphold some or all of Panama's 
claims under Articles I:1, V:2, V:6, XI:1 or XIII: 1 concerning the ports of entry measure, then the 
Panel should find the ports of entry measure is ju stified under Article XX(d).  Colombia argues that 
the ports of entry measure is a temporary measur e necessary to secure compliance with Colombia's 
customs laws and regulations, and is not applie d in a manner which constitutes arbitrary or 
unjustifiable discrimination.
785  Colombia submits that it f aces problems of smuggling and under-
invoicing, which are particularly problemati c with respect to imports from Panama.786  Colombia 
argues that a clear link exists between the probl ems of customs fraud and smuggling and criminal 
activities such as money-laundering and drug trafficking.787 
7.484  Colombia submits that two conditions must be  met for the ports of entry measure to be 
justified under Article XX:  the measure at issue mu st come under one of the exceptions in paragraphs 
(a) to (j), and the measure must satisfy the re quirements imposed by the chapeau of Article XX.788  In 
relation to paragraph (d), the measure must be one to "secure compliance" with laws or regulations 
that are themselves not inconsistent with the GATT 1994 , and the measure must be "necessary" to 
secure such compliance.789 
7.485  Colombia submits that the ports of entry m easure meets the conditions to be provisionally 
justified under paragraph (d) of Article XX.  First, Colombia asserts that its customs laws and regulations are not inconsistent with the GATT 1994.   Second, the ports of entry measure is designed 
to secure compliance with those laws and regulations .  Third, the ports of entry measure is necessary 
to secure such compliance.
790  
7.486  Colombia deems its customs laws and regula tions to be GATT -consistent as none of its 
customs laws and regulations have be en found to be GATT-inconsistent.791  Moreover, Colombia 
considers that the administration of the ports of en try measure by the DIAN and the preamble of the 
Customs Statute, demonstrate that the measure is  designed to secure compliance with Colombia's 
customs enforcement, a fact Colombia argues has been acknowledged by Panama.792   
7.487  In assessing whether the measure is "necessary"  to secure compliance with those laws, 
Colombia argues that the Panel should weigh and balance a series of factors, including the contribution made by the compliance measure to the enforcement of those laws and regulations.
793  
7.488  Colombia argues that the ports of entry measure concerns a very important set of interests or 
values.  In this regard, Colombia argues that the fight against illegal and criminal activities, such as 
tax evasion and smuggling which contribute to the lo ss of public revenue has been accepted to be a 
"most important interest for any country  and particularly a developing country".794  Second, the ports 
of entry measure makes a material contribution to customs control through limiting the entry of goods 
from Panama to two ports and by allowing for the specialization of customs officials.795  Colombia 
                                                      
785 Colombia's first written submission, para. 314. 
786 Colombia's first written submission, paras. 193 -210;  Colombia's second written submission, 
para. 219. 
787 Colombia's first written submission, paras. 336 -340;  Colombia's second written submission, 
paras. 220-223. 
788 Colombia's first written submission, para. 316. 
789 Colombia's first written submission, para. 317. 
790 Colombia's first written submission, para. 319. 
791 Colombia's first written submission, para. 320;  Colombia's second written submission, para. 202. 
792 Colombia's first written submission, para. 325. 
793 Colombia's first written submission, para. 329. 
794 Colombia's first written submission, para. 331;  Colombia's second written submission, para. 217. 
795 Colombia's second written submission, para. 228.  WT/DS366/R 
 Page 195 
 
 
  submits this is evidenced by the significant increase in contraband related seizures, the increase in the 
"implicit" declared prices of subject goods and th e decrease in the level of trade distortions.796  Third, 
Colombia argues that the ports of entry measure  does not have a significant negative impact on 
trade.797  Colombia emphasizes that it is not imposing a ban or limiting trade but merely regulating the 
entry of goods through a certain number of ports. This  measure is narrow relative to those imposed by 
other countries such as import bans which ha ve been considered justified under Article XX.798   
7.489  In addition to satisfying the requirements that the ports of entry measure is provisionally 
justified as necessary to secure compliance with Co lombian customs laws and regulations related to 
customs enforcement matters, Colombia argues that  there are no reasonably available alternative 
measures to achieve compliance.  Colombia not es that previous attempts at closer customs 
cooperation were unsuccessful.799 Furthermore, Colombia considers it is not feasible to conclude 
agreements with the private sector for textil es, apparel and footwear products because the " casas 
matrices " or producers of these products are numerous and difficult to identify.800 
7.490  Colombia argues that the ports of entry measu re also satisfies the requirements imposed by 
the chapeau of Article XX as the measure is not applied in a manner which constitutes arbitrary or 
unjustifiable discrimination, or a disguised restriction on trade.801  
7.491  Colombia considers the meaning of the word "arbitrary" to be "capricious, unpredictable, 
inconsistent".802 Additionally, the measure must have a "rational connection" to the objective of the 
relevant paragraph of Article XX.803  In Colombia's view, the test is whether such discrimination is 
"justifiable" in the sense that it is "defensible"  or "able to be shown to be just, reasonable."804 
Colombia argues that evidence illustrates the probl em of contraband coming from Panama, which is 
linked to money-laundering and drug trafficking.  Th is shows that the situation in respect of Panama 
is unique from that of other countries, and therefor e Colombia's ports of entry measure, which is 
applied only to Panama, bears a "rational connection" to the objective of paragraph (d) of Article XX.  
Thus, Colombia argues that the measure ther efore is not arbitrary and unjustifiable.805  
7.492  Colombia argues that the question before the Panel of whether the ports of entry measure 
constitutes a disguised restriction on trade excl udes the question of whether the measure has a 
restrictive effect on trade.806  Colombia submits that the term "disguised restriction" may be read 
together with "arbitrary discrimination" and "u njustifiable discrimination", which also means 
concealed or unannounced restriction or discrimination.807  Colombia also submits that the term 
"disguised restriction" is really about "avoiding a buse or illegitimate use of the exceptions", and that a 
study of the intent of the measure is important in analysing the measure.808  Colombia reiterates that 
                                                      
796 Colombia's first written submission, paras. 344 -346;  Colombia's second oral statement, 
paras. 60-62;  Colombia's second written submission, para. 232. 
797 Colombia's first written submission, para. 350. 
798 Colombia's first written submission, para. 351;  Colombia's second written submission, para. 250. 
799 Colombia's second written submission, paras. 267-287. 
800 Colombia's second written submission, para. 292.  
801 Colombia's first written submission, para. 386. 
802 Colombia's first written submission, para. 390;  Colombia's second written submission, paras. 296. 
803 Colombia's first written submission, para. 392. 
804 Colombia's second written submission, para. 296. 
805 Colombia's first written submission, paras. 395 -398;  Colombia's second written submission, 
paras. 299-310. 
806 Colombia's first written submission, para. 400. 
807 Colombia's first written submission, para. 401. 
808 Colombia's first written submission, para. 404. WT/DS366/R 
Page 196  
 
  the measure was applied in good faith with the inte nt of customs enforcement, and does not restrict 
trade for a protectionist purpose.
809 
7.493  Panama considers that Colombia has not di scharged the necessary bu rden to invoke the 
Article XX defence by failing to present a separate defence for each and every measure and respective 
violation which it seeks to justify under Article XX(d).810  Panama further argues that Colombia 
cannot demonstrate that the measure is one desi gned to secure compliance with specific laws and 
regulations as it has not properly identified those laws and regulations.811  In addition to Colombia's 
failure to identify the rele vant laws and regulations , Panama argues that a mere claim of a 
presumption of WTO-consistency is insufficient to demonstrate that all of Colombia's customs laws and regulations are themse lves consistent with the GATT 1994 .
812  
7.494  Panama argues that Colombia has not demonstrated how the ports of entry measure secures 
compliance with its customs laws and regulations as the restrictions only apply to a limited range of 
products, despite the fact Colombia has customs en forcement problems with respect to a wide range 
of other products.813  Panama also notes that Colombia only a pplies these restrictions to Panama, even 
though it experiences problems with contrabando técnico , subfacturación and sobrefacturación with 
the United States, Europe, Asia and Asociación Latinoamericana de Integración  (ALADI) 
countries.814  As such, Panama asserts that the ports of  entry measure has been imposed to protect 
certain domestic industries from competition.815  
7.495  Panama considers that in order for a measure to  be considered "necessary", it must be close to 
"indispensable".816  Panama argues that Colombia cannot dem onstrate that its ports of entry measure 
is close to "indispensable" because previous simila r measures have been ineffective in combating 
contraband.817  Panama also considers that Colombia's ports of entry measure has not contributed in a 
material way in securing compliance with its customs laws and regulations.  Panama submits that the 
requirement to contribute to securing compliance with the law or regulation at issue referred to by the Appellate Body in Korea – Various Measures on Beef  was not aimed at the policy objective of the 
law or regulation, but at securing compliance with the law or regulation at issue itself.
818  Panama 
submits that Colombia's argument that its measure  contributes to the policy objective of its customs 
laws and regulations has been rejected by the GATT panel in EEC – Parts and Components.819  
Additionally, Panama consid ers Colombia's reliance on Brazil – Retreaded Tyres  is flawed as the 
Appellate Body in that case considered Article XX (b), which is a purpose-oriented exception, and not 
Article XX(d), which is a functional exception.820  In Panama's view, the fact that contraband has 
continued at high levels after Co lombia first imposed restrictions on the ports of entry clearly 
demonstrates that the measure does not make a material contribution to the policy objectives of 
customs enforcement and combating contraband trade.821  Instead, Panama submits that Colombia's 
ports of entry measure has an adverse impact on trad e from Panama.  In Panama's view, it is irrelevant 
                                                      
809 Colombia's first written submission, para. 404;  Colombia's second written submission, 
paras. 318-323. 
810 Panama's second oral statement, para. 66, citi ng Colombia's second written submission, para. 199. 
811 Panama's second written submission, paras. 168-175. 
812 Panama's second written submission, para. 176;  Panama's second oral statement, para. 67. 
813 Panama's second written submission, para. 179. 
814 Panama's second written submission, para. 180. 
815 Panama's first oral statement, para. 77. 
816 Panama's second oral statement, paras. 68-69. 
817 Panama's second written submission, paras. 184-185. 
818 Panama's second written submission, para. 186;  Panama's second oral statement, paras. 70-71. 
819 Panama's second written submission, para. 190. 
820 Panama's second written submission, para. 193. 
821 Panama's second written submission, para. 196.  WT/DS366/R 
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  that the trade effects of the measure are insignifican t or even non-existent.  Panama submits that the 
"restrictive effects" must refer to the e ffects on the trade flows of imported products.822  
7.496  In regards to the requirements set out in the chapeau to Article XX, Panama submits that 
Colombia's ports of entry measure constitutes a "dis guised restriction" on international trade as the 
design, structure and architecture of the measure re veals that its true purpose is to protect fragile 
domestic industries and not to enforce customs laws.823  According to Panama, statements made by 
Colombia's Ministry of Commerce, Industry and Tourism and Colombia's introduction of quotas on the importation of garments from China, illustrate  a relation between protection for Colombia's 
domestic industry and its ports  of entry restrictions.
824 
7.497  Panama further submits that Colombia's ports of  entry measure is applied in a manner that is 
"arbitrary" and "unjustifiable".  Th e application of the measure is "a rbitrary" because it is only applied 
to Panama despite the fact that Colombia has experienced various similar customs problems from 
many other countries.825  Panama notes that all imports of the covered items from Panama are subject 
to restrictions while all imports of like products from all other countries are exempted.826  In Panama's 
view, such discrimination can only be justifiable if  it is based on differences in conditions prevailing 
in those countries.  Panama submits that Colombia's  argument that its application of the measure to 
Panama only is justifiable because customs irregul arities occur less frequently in respect of goods 
from other countries is flawed as this appro ach was rejected by the Appellate Body in Brazil – 
Retreaded Tyres .827  Panama therefore submits that Colombia's measure is also "unjustifiable".828 
2. Consideration by the Panel 
7.498  At the outset, the Panel wishes to recall its view stressed earlier that WTO Members are 
entitled to enforce policies aimed at combati ng under-invoicing, smuggli ng and money laundering, 
and any related problems, provided however, that measures implemented for these purposes are 
themselves WTO-consistent.  In any cases where a measure may violate a particular provision of the WTO Agreements, a number of exceptions – notably those included in Article XX of the GATT 1994  
– allow WTO Members to justify a WTO-inconsistent measure. In this light, the Panel will consider 
Colombia's affirmative defence ra ised under Article XX(d) of the GATT 1994 . 
(a) Legislation applicable to Colombia's Article XX(d) defence 
7.499  The principal aspects of the ports of entry measur e, which form the basis for Panama's claims 
under Articles I:1, V:2, V:6, XI:1 or XIII:1 include:  (i) the requirement to enter and customs clear goods exclusively at Bogota (for air shipments)  and Barranquilla (for sea shipments); (ii) the 
exception for goods that undergo trans-shipment to enter at any of 11 eligib le ports when proceeding 
in international transit; and (iii) the requirement to  submit an advance import declaration, pay taxes on 
the basis of that advance declaration, and comply  with special legalization requirements (in the case 
of textiles only).  These requirements are discussed in detail in Sections VII.H, VII.I, VII.J, VII.E and 
VII.F above, respectively. 
7.500  The Panel notes that Colombia has presented a general defence to all of these claims, 
referring to them collectively as the ports of entry measure.  Panama h as also structured its arguments 
in response to Colombia's Article XX(d) defence by referring to the ports of entry measure broadly 
and generally.  However, Panama has argued that Colombia has not met its burden of proof by failing 
                                                     
 
822 Panama's second written submission, para. 206. 
823 Panama's second oral statement, para. 76. 
824 Panama's second written submission, para. 216. 
825 Panama's second written submission, para. 217;  Panama's second oral statement, para. 76. 
826 Panama's second written submission, para. 218. 
827 Panama's second written submission, para. 221. 
828 Panama's second written submission, para. 219. WT/DS366/R 
Page 198  
 
  to present evidence to demonstrate that each of the aspects in the ports of entry measures are 
necessary and in compliance with the require ments of the chapeau to Article XX.   
7.501  The Panel will next consider the implications  of Colombia's general defence approach. 
(b) The measure relevant for purpose of analysis of Colombia's Article XX(d) defence 
7.502  As noted above
829, Colombia has presented a general defence under Article XX(d) to 
Panama's claims of violation of Articles I:1, V:2,  V:6, XI:1 and XIII:1.  Accordingly, the Panel 
understands that Colombia is arguing that the vari ous requirements in the ports of entry measure in 
unison (and not independently of each other) are necessary to secure compliance with laws or 
regulations which are not themselves WTO-incons istent, and thus are justified collectively. 
7.503  As a consequence of structuring its arguments  in this manner, Colombia has not presented 
evidence to demonstrate how each requirement (i.e. the requirement to enter and customs clear goods 
exclusively at Bogota and Barranquilla airport, the exception for goods that undergo trans-shipment to 
enter at any of 11 eligible ports when proceeding in international transit, and the requirement to 
submit an advance import declaration, pay taxes on th e basis of that advance declaration, and comply 
with special legalization requirements), as the object  of a separate claim, is individually necessary to 
secure compliance.  In response to a question fro m the Panel, Colombia has submitted that the 
requirements within the ports of entry measure, al ongside a number of other measures, are "part of a 
comprehensive set of measures to combat this persistent problem of fraudulent under-invoicing and 
contraband."830 
7.504  Panama has questioned whether, by taking such  a global approach, Colombia has met its 
burden to present its Article XX(d) defence in a manner clear enough for Panama to respond to 
Colombia's arguments.  In this regard, Panama refers to recent findings in the Panel Report on China 
– Auto Parts , where the panel in that case questione d the validity of China's defence under 
Article XX(d) due to the fact that China failed to distinguish its justification of the measures with 
regards to possible violations of different provisions of the GATT 1994 .831  Panama considers 
Colombia's failure to present a separate defence for each and every measure and respective violation 
which it seeks to justify under Article XX(d) is analogous.832  
7.505  In China – Auto Parts , the respondent, China, had not initially distinguished its justification 
of the relevant measures under Article XX(d) in re spect of the separate claims of violation under 
Articles II and III of the GATT 1994 .  Later in the proceedings, however, China changed in its 
position and clarified that the Article XX(d) analysis  would depend on whethe r a violation were found 
under either  Article II or Article III of the GATT 1994 .  From the information provided in that Report, 
it appears that China offered limited argumentation.  Recalling that China held the burden to prove its 
defence  under Article XX(d) , the Panel questioned the overall validity of China's defence.  Nevertheless, 
the Panel considered that "[i]t is not for the Panel to  advance or presume specific arguments or analysis for 
a claim made by a party to the dispute833", and thus proceeded to examine China's global defence under 
Article XX(d) .834   
                                                      
829 See para. 7.499. 
830 Colombia's response to Panel question No. 159. 
831 Panama's second oral statement, pa ra. 66, referring to the Panel Report on China – Auto Parts,  
paras.  7.283 and 7.287. 
832 Panama's second oral statement, para. 66, citi ng Colombia's second written submission, para. 199. 
833 (footnote original ) The Appellate Body states in US – Gambling : "In the context of affirmative 
defences, then, a responding party must invoke a defence and put forward evidence and arguments in support of 
its assertion that the challenged measure satisfies the re quirements of the defence.  When a responding party 
fulfils this obligation, a panel may rule on whether th e challenged measure is justified under the relevant 
defence, relying on arguments advanced by the parties or developing its own reasoning.  The same applies to  WT/DS366/R 
 Page 199 
 
 
  7.506  The present case is similar to China – Auto Parts  in the sense that Colombia has not presented 
an individual defence per claim of violation.  No teworthy differences exist, however.  Primarily, 
Colombia has not modified its position during the proceedings as China appears to have done in 
China – Auto Parts .  Additionally, Colombia has provided s ubstantial argumentation in support of its 
defence.   
7.507  In the Panel's view, Colombia has not met its burden (nor has it attempted) to demonstrate 
that each of the requirements within the ports of entry measure contributes to enforcement of its 
customs laws.  As the arguments and evidence provide d by Colombia are of a general nature, it is not 
possible to evaluate, for instance, the extent to which the restriction on entry to Bogota and 
Barranquilla contributes to enforcement, as separat e from the contribution of the advance import 
declaration requirement, and so forth.  Hence,  the Panel will not examine whether each of the 
requirements in the ports of entry measure whic h have been separately found inconsistent with 
different provisions of the GATT 1994 , are nevertheless justified by Article XX(d).   
7.508  Notwithstanding the difficulty in assessing the requi rements within the ports of entry measure 
individually, in light of Colombia's approach and in line with the panel's approach in China – Auto 
Parts , the Panel will address Colombia's global defence th at the ports of entry measure is justified as 
necessary to secure compliance with the relevant laws  or regulations by considering the requirements 
under the ports of entry measure collectively, without attempting to evaluate the individual 
contributions of each requirement in  the ports of entry measure.   
(c) Article XX of the GATT 1994  
7.509  The text of Article XX(d) and the chapeau of Article XX provide as follows: 
"Subject to the requirement that such me asures are not applied in a manner which 
would constitute a means of arbitrary or unjustifiable discrimination between 
countries where the same conditions prev ail, or a disguised restriction on 
international trade, nothing in this Agre ement 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 enfo rcement, the enforcement of 
monopolies operated under paragraph 4 of Article II and Article XVII, the protection of patents, trade marks and copyrights, 
and the prevention of deceptive practices." 
(d) Order of analysis under Article XX(d) 
7.510  In US – Gasoline , the Appellate Body concluded that the analysis of a measure under one of 
the paragraphs of Article XX is a "two-tiered" approach: 
"In order that the justifying protection of  Article XX may be extended to it, the 
measure at issue must not only come under one or another of the particular exceptions  
-- paragraphs (a) to (j) – listed under Article  XX; it must also satisfy the requirements 
                                                                                                                                                                    
 
rebuttals. A panel may not take upon itself to rebut the claim (or defence) where the responding party (or 
complaining party) itself has not done so " (emphasis added) (Appellate Body Report, US – Gambling , 
para. 282). 
834 Panel Report, China – Auto Parts,  paras. 7.283 and 7.287. WT/DS366/R 
Page 200  
 
  imposed by the opening clauses of Article XX.   The analysis is, in other words, two-
tiered: first, provisional justification by reason of characterisation of the measure under [in that case] XX(g); second, further appraisal of the same measure under the 
introductory clauses of Article XX ..."
835 
7.511  The Appellate Body has explained that two elemen ts must be satisfied in order for a measure 
to be provisionally justified under paragraph (d) of Article XX: 
"For a measure ... to be justified provisiona lly under paragraph (d) of Article XX, two 
elements must be shown.  First, the measure must be one designed to 'secure 
compliance' with laws or regulations that are not themselves inconsistent with some 
provision of the GATT 1994 .  Second, the measure must be 'necessary' to secure such 
compliance.  A Member who invokes Article XX(d) as a justification has the burden 
of demonstrating that these two requirements are met."836 
7.512  The Panel agrees with the approach taken by  the Appellate Body and will follow it in 
addressing Colombia's defence under Article XX(d) of the GATT 1994 .  Therefore, the Panel will first 
look at whether the requirements in the ports of  entry measures are necessary to secure compliance 
with the relevant Colombian laws  and regulations that are not th emselves WTO-inconsistent; if the 
response to this question is positive, the Panel will ne xt consider whether the ports of entry measure is 
necessary to secure such compliance.  The Panel will onl y proceed to analyse whether the ports of 
entry measure meets the requirements of the chapeau  to Article XX, i.e. whether the measure allows 
for "arbitrary or unjustifiable discrimination between  countries where the same conditions prevail", or 
constitute a "disguised restriction on international trade", if the Pane l has first determined that the 
measure has met the requirements under paragraph (d) of Article XX. 
(e) Whether the ports of entry measure is necessary to secure compliance with Colombian laws 
and regulations as provided in Article XX(d) of the GATT 1994  
7.513  The Panel will first examine whether the ports  of entry measure is designed to secure 
compliance with Colombian laws and regulations  that are not themselves WTO-inconsistent.  
Thereafter, the Panel will consider whether the ports of entry measure is necessary to secure such 
compliance. 
(i) First element: Whether the ports of entry me asure has been "designed" to secure compliance 
with Colombian laws and regulations that are not themselves WTO-inconsistent 
7.514  In determining whether a measure is designed to  secure compliance with laws and regulations 
as provided in Article XX, the panel in US – Shrimp (Thailand)  explained that  a WTO Member 
raising a defence should identify the laws or re gulations for which it seeks to secure compliance, 
establish that those laws or regulations are not themselves WTO-inconsistent , and demonstrate that 
the particular measure at issue is itself designed to secure compliance with the relevant laws or 
regulations.837   
Identification of Colombian laws and regulations  
7.515  The Panel will therefore examine whether Colo mbia has properly identified the laws and 
regulations relevant to its Article XX(d) defence.  In Mexico – Taxes on Soft Drinks , the Appellate 
Body confirmed that the terms "laws or regulations" re fer to rules that form part of the domestic legal 
                                                      
835 Appellate Body Report, US – Gasoline , p. 22. 
836 Appellate Body Report, Korea – Various Measures on Beef , para. 157. 
837 Panel Report, US – Shrimp (Thailand) , para. 7.174.  See also Panel Report, US – Customs Bond 
Directive , para. 7.295.  WT/DS366/R 
 Page 201 
 
 
  system of a WTO Member and thus encompass the rules adopted by a WTO Member's legislative or 
executive branches of government, further noting that "m atters 'relating to customs enforcement' will 
generally involve rights and obligations that apply to importers or exporters".838 
7.516  Throughout its main written submissions, Colo mbia referred generally to its "laws and 
regulations relating to customs enforcement"839 and indicated that the "port of entry measure on 
certain products from Panama were implemented ... in order to ensure compliance with Colombian 
customs law and combat cont raband and money-laundering."840  When questioned by the Panel, 
Colombia referred more specifically to laws and regulations for which it seeks to secure compliance 
though the ports of entry measure: 
"In the case of the ports measure, the measure itself, through its preamble, 
demonstrates that it is designed to strengthen customs controls and customs 
enforcement.  The express reference to  Decree No. 2685 and the fact that the 
challenged Resolution No. 7373 is issued by the customs authority, the DIAN, in 
exercise of its authority under Article 41 of Decree No. 2685 clearly show that Decree No. 2685 and the implementing regula tion Resolution No. 4240 are the laws 
and regulations relating to customs enforc ement the compliance with which is being 
sought by the ports measure.  Colombia does not consider it necessary to identify 
specific provisions in such laws and regulations for the purposes of its Article XX d) defence but it is clear that a number of provisions such as for example Article 87 of Decree No. 2685 expressly set forth the customs obligations that exists in respect of 
any goods that is being introduced into Colombia, including the requirement to make 
a declaration supported by documentary evid ence and to comply with all obligations 
set forth in Colombia's laws and regulations."
841  
7.517  As reflected through its response, Colombia c ontends that the ports of entry measure is 
intended to secure compliance with Article 41 of Decree No. 2685 and Resolution No. 4240.  More 
specifically, Colombia also referre d to Article 87 of Decree No. 2685. 
7.518  The Panel has considered each of these legislative provisions and instruments in turn.  
Article 41 of Decree No. 2685 sets forth rules on the designation of ports for importation and 
clearance of goods.842  Among other aspects, this provision allows the DIAN to prohibit or restrict the 
                                                      
838 Appellate Body Report, Mexico – Taxes on Soft Drinks , paras. 69-70. 
839 For example, Colombia's first written submission, paras. 321, 323, 325, 326, 330, 343, 348 etc.  
Colombia's first oral statement, paras. 90-91.  Colo mbia's second written submission, paras. 203, 205-207, 213 
etc.   
840 Colombia's first written submission, para. 188. 
841 Colombia's response to Panel question No. 145.  The Panel would like to stress that Colombia 
provided this identification of the laws and regulations  in response to a question from the Panel relating to 
Article 319 of Colombia's Código Penal .  In footnote 142 of its second written submission, Colombia had 
referred to Article 319 of its Código Penal  when discussing evidence to demonstrate that the ports of entry 
measure is effective in addressing contraband-related seizures.  The Panel thus asked the parties whether they consider this Article a specific law or regulation relate d to combating contraband, for which the ports of entry 
measure is designed to secure compliance.  Colombia indi cated that "[I]t is by enforcing respect and compliance 
with such customs laws that in an indirect manner action is taken against criminal activities - whether the 
criminal act of smuggling as such, or the use of smuggled or under-invoiced goods in order to launder money.  
DIAN is not a criminal enforcement agency and a DIAN Resolution is th erefore not a measure that secures 
compliance with Colombia's criminal laws such as th e one referred to by the Panel. However, Colombia 
considers that this does not imply that customs enfo rcement does not protect interests that go beyond mere 
revenue protection for the government. Colombia has explained its position in this respect in previous submission and has pointed to the specific situation of Colombia and its problems of drug trafficking and public 
order." 
842 The text of Article 41 of Decree No. 2685 provides as follows: WT/DS366/R 
Page 202  
 
  entry of certain goods into designated ports for customs control purposes.  Within 
Resolution No. 4240, referred to broadly by Colombia, Article 39 serves as the corresponding 
implementing provision and thus regulates (i) the admini stration of the restriction of textiles, apparel 
and footwear to 11 ports of entry imposed pursuant to Article 41 of Decree No. 2685, and (ii) the administration of the restriction to two ports appli cable to textile, apparel and footwear arriving from 
Panama.
843  Article 87 of Decree No. 2685 does not deal dir ectly with ports restrictions or prohibitions 
but sets forth the general customs obligations linked to the importation of goods, including the 
                                                                                                                                                                     
"ARTICULO 41. LUGARES HABILITADO S PARA EL INGRESO Y SALIDA DE 
MERCANCÍAS BAJO CONTROL ADUANERO. 
Son aquellos lugares por los cuales la Dirección de Impuestos y Aduanas Nacionales permite 
el ingreso y salida de mercancías bajo control aduanero del territorio aduanero nacional. En el acto administrativo de habilitación deberán delimitarse claramente los sitios que 
constituyen Zona Primaria Aduanera, disponiendo si fuere del caso, su demarcación física y 
señalización. Para la habilitación de puertos y aeropuer tos, la Dirección de Impuestos y Aduanas 
Nacionales exigirá que las instalaciones destinadas a las operaciones de cargue, descargue, 
custodia, almacenamiento y traslado de las mercancías bajo control aduanero y aquellas áreas destinadas a la realización de las operaciones aduaneras, cuenten con la debida 
infraestructura física y con los sistemas y dispositivos de seguridad que garanticen, a 
satisfacción de dicha entidad, la seguridad de las mercancías y el pleno ejercicio del control aduanero. 
La autoridad aduanera, en coordinación con las autoridades portuarias y aeroportuarias y 
con los administradores de los puertos y aeropuertos habilitados, dispondrá de las medidas y procedimientos tendientes a asegurar en la Zona Primaria Aduanera, el ejercicio sin 
restricciones de la potestad aduanera, donde además de lo previsto en el inciso anterior, 
deberá reglamentar conjuntamente con las autoridades competentes, la circulación de 
vehículos y personas y disponer de sistemas de identificación de los mismos. 
El incumplimiento de lo previsto en este artículo por parte de los titulares de la habilitación podrá ocasionar la pérdida de la habilitación para. la entrada y salida de mercancías del 
territorio aduanero nacional. 
PARAGRAFO. La Dirección de Impuestos y Adua nas Nacionales podrá por razones de 
control, prohibir o restringir el ingreso o salida de determinadas mercancías por los lugares 
habilitados."  
843 The text of Article 39 of Resolution No. 4240 provides in relevant part as follows: 
"ARTICULO 39. PROHIBICIONES Y RESTRICCIONES PARA EL INGRESO DE 
MERCANCIAS. 
En desarrollo de lo dispuesto en el parágrafo del artículo 41 del Decreto 2685 de 1999, la importación de materias textiles y sus manufacturas, clasificables en la Sección XI (Capítulos 
50 a 63, ambos inclusive) del Arancel de Aduanas, únicamente podrá realizarse por los 
puertos, aeropuertos y lugares de arribo, de servicio público, ubicados en la jurisdicción de las siguientes administraciones aduaneras de: Barranquilla, Bucaramanga, Buenaventura, 
Cali, Cartagena, Cúcuta, Ipiales, Leticia, Medellín, San Andrés, Santa Marta y Bogotá. Lo 
dispuesto en este inciso, se aplica igualmente a las importaciones de mercancías procedentes de las Zonas Francas Industriales de Bienes y de Servicios. 
… 
PARÁGRAFO 2o. <Parágrafo adicionado por el artíc ulo 1 de la Resolución 5796 de 2005. 
Rige hasta el 30 de junio de 2006. El nuevo texto es el siguiente:> Las mercancías 
clasificables por los Capítulos 50 al 64 del Arancel de Aduanas, correspondientes a materias textiles y sus manufacturas, y calzado y sus partes, originarias y/o provenientes de la 
República de Panamá y de la República Popular China, deberán ingresar e importarse 
exclusivamente por las jurisdicciones de la Admi nistración Especial de Servicios Aduaneros 
Aeropuerto El Dorado y la Administración Especial de Aduanas de Bogotá, si se transportan 
vía aérea;  y por la Administración Especial de Aduanas de Barranquilla, si es por vía 
marítima… "  WT/DS366/R 
 Page 203 
 
 
  requirement to present an import declaration and pay duties and fees, as required, and generally 
comply with all relevant obligations set forth in Colombia's laws and regulations.844 
7.519  Panama argues that Colombia has not met its bur den to adequately identify which are the laws 
and regulations that are not th emselves inconsistent with the GATT 1994 .845  In its view, Colombia's 
assertion that its general customs laws and regula tions are presumed to be GATT-consistent is 
inadequate to discharge its burden of identifying th e specific laws and regulations, and demonstrating 
that those provisions are "not inconsistent" with the GATT 1994 .846  Panama argues that the practice in 
previous panels establishes that the respondent in a dispute is required to identify the specific  
domestic laws or regulations that are not themselves inconsistent with the GATT 1994 .  To emphasize 
the necessary specificity that is required, Panama refers to China – Auto Parts,  where the panel 
expressed concern that China "inter changeably referred to various items as the law or regulation the 
measures are securing compliance with" such as "China's  customs laws or regulation, China's customs 
laws, including its tariff provisions, its tariff sche dule" and other general laws and regulations.847 
7.520  The Panel agrees with Panama that Colombia b ears the burden to identify the domestic laws 
or regulations relevant to its Article XX(d) defe nce.  However, the Panel does not consider the 
reference to China – Auto Parts  is pertinent in this instance.  During the course of proceedings, China 
had indicated that the law or regulation for the purpose of its Article XX(d) defence was China's 
alleged valid interpretation of its tariff provisions for motor vehicles.  The panel in that dispute 
indicated that China's interpretation of its concess ions on motor vehicles could not form part of 
China's tariff schedule itself, and found that such an  interpretation was not a la w or regulation relevant 
to its Article XX(d) defence.848   
7.521  In this Panel's view, although it would have been desirable for Colombia to have clarified this 
issue much earlier in the proceedings, it has neve rtheless referred to legal provisions of Colombian 
law as opposed to an interpretation by national cust oms authorities of how the national schedule must 
be interpreted.849 
                                                      
844 Article 87 of Decree No. 2685 provides as follows: 
"ARTICULO 87. OBLIGACIÓN ADUANERA EN LA IMPORTACIÓN 
La obligación aduanera nace por la introducción de la mercancía de procedencia extranjera 
al territorio aduanero nacional 
La obligación aduanera comprende la presentación de la Declaración de Importación, el pago de los tributos aduaneros y de las sanciones a que haya lugar, así como la obligación de 
obtener y conservar los documentos que soportan la operación, presentarlos cuando los 
requieran las autoridades aduaneras, atender las solicitudes de información y pruebas y en general, cumplir con las exigencias, requisitos y condiciones establecidos en las normas 
correspondientes. " 
845 Panama's second written submission, paras. 173-178. 
846 Panama's second oral statement, para. 67. 
847 Panama's second oral statement, pa ra. 67, referring to the Panel Report on China – Auto Parts,  
para. 7.290.  
848 Panel Report, China – Auto Parts , paras. 7.293-7.296. 
849 The Panel recalls that it may consider a wide array of provisions cited by either of the parties in 
determining the relevant laws and regulations relevant to Colombia's Article XX(d) defence.  The Appellate 
Body explained in US – Shrimp (Thailand)  that a panel is free to use the various arguments made and provisions 
cited by the parties in order to assess objectively which laws and regulations were relevant to the defendant's 
defence: 
"In our view, the Panel was free to use the arguments made and provisions cited by all the 
parties—including Thailand and India—in order to assess objectively which laws and regulations were relevant to the United States' defence.  We do not believe that, in doing so, 
the Panel exceeded its jurisdiction."  
Appellate Body Report, US – Shrimp (Thailand) , para. 302. WT/DS366/R 
Page 204  
 
  7.522  The pertinent question is thus whether the legal instruments and particular provisions 
identified by Colombia can be considered by th e Panel as laws or regulations relevant for 
Article XX(d).  As explained above, when qu estioned by the Panel, Colombia referred to 
Decree No. 2685, and in particular Articles 41 and 87, and to Resolution No. 4240, as the relevant 
laws or regulations for the Panel to consider.  In reference to D ecree No. 2685, Panama at the outset 
argued that Article 41 is the enabling legislation  pursuant to which Colombia enacted the ports of 
entry restrictions and thus the ports of entry restrictions cannot be said to secure compliance  with 
Article 41 as that would be tantamount to concluding that the ports of entry restrictions are designed 
to secure compliance with a provision allowing port of entry restrictions.
850   
7.523  While the Panel agrees with Panama that Artic le 41 of Decree No. 2685 is the provision 
authorizing Colombia to impose restrictions on ports of entry, whenever it considers further regulation 
necessary, the Panel does not consider Colombia's re ference to this provision, or Resolution No. 4240, 
as problematic to its identification of the relevant laws and regulations.  Although Article 41 provides 
authority to impose restrictions, it also refers more broadly to the objective of ensuring the security of 
goods and ability of customs authority to exercise c ontrol.  Additionally, Article 41 is one of the 
various provisions in Decree No. 2685 addressing matte rs related to ensuring customs control and 
enforcement.  For instance, Colomb ia has identified Article 87 of D ecree No. 2685 as well, which sets 
forth several obligations, including the requirement  to present an import declaration and pay duties 
and fees, as required, and generally comply with all relevant obligations set forth in Colombia's laws 
and regulations.  Resolution No. 4240 similarly addresses matters of  customs control broadly.  
7.524  As noted, the concept of laws and regulations in Article XX refers to rules that form part of 
the domestic legal system of a WTO Member a nd thus encompass the rules adopted by a WTO 
Member's legislative or executive branches of gove rnment, including those relating to the rights and 
obligations applicable to imports.851  In the Panel's view, Colombia has identified to the satisfaction of 
the Panel the array laws and regulations for which the ports of entry measure seeks to ensure compliance.  These broadly include the provisions in Decree No. 2685, including its Article 41 and 
87, and Resolution No. 4240.   
7.525  The Panel will therefore consider whether Decree No. 2685, and Resolution No. 4240 are 
laws and regulations not th emselves WTO-inconsistent. 
Whether the laws or regulations are not themselves WTO-inconsistent
 
7.526  The Panel will thus next consider whether the la ws and regulations identified by Colombia in 
Decree No. 2685, and Resolution No. 4240 are in them selves consistent with the provisions of the 
WTO Agreements.   
7.527  Colombia argues that the laws and regulations for which the ports of entry measure seeks to 
ensure compliance are not inconsistent with the GATT 1994 .  In Colombia's view, a WTO Member's 
laws and regulations are presume d to be GATT/WTO-consistent.852  Colombia argues that Panama 
has not challenged Colombia's customs laws and re gulations in a general manner, having only made 
claims in respect of certain specific aspects of Colombia's customs laws and regulations.853  As such, 
Colombia deems its laws and regula tions relating to customs enforcem ent to be consistent with the 
provisions of the GATT 1994 .854 
                                                      
850 Panama's second written submission, para. 174. 
851 See para. 7.515. 
852 Colombia's second written submission, para. 202, citing to Appellate Body Report, US – Carbon 
Steel , para. 157. 
853 Colombia's second written submission, para. 202. 
854 Colombia's first written submission, para. 320;  Colombia's second written submission, para. 202.  WT/DS366/R 
 Page 205 
 
 
  7.528  Panama has contested Colombia's assertion that its customs enforcement laws and regulation 
are deemed WTO-consistent.  In Panama's view, a mere claim of a presumption of WTO-consistency 
is not sufficient.  As Colombia's customs laws and regulations total thou sands of pages, Panama 
submits that it would not be possible for the Panel to  satisfy itself that all the relevant customs law and 
regulations are GATT-consistent.855   
7.529  The Panel again agrees with Panama that Colo mbia has the burden of proof to demonstrate 
that all conditions of the defence are met, includi ng the condition that the laws and regulations for 
which the ports of entry measure is designed to secure compliance are not in themselves GATT-inconsistent.
856  The Panel does not, however, consider that Colombia must demonstrate that 
each and all of the provisions of Decree  No. 2685 and the implementing regulation 
Resolution No. 4240 are WTO-consistent, in order to meet its burden of proof.   
7.530  In the present dispute, the Panel has found in Sections VII.B and VII.C above that 
Article 128.5 e) of Decree No. 2685 and Article 172. 7 of Resolution No. 4240 are inconsistent with 
several provisions of the Customs Valuation Agreement and, arguendo , Article III:2 of the 
GATT 1994 .  Notwithstanding these findings, the Panel does not consider the fact that one provision 
in a country's customs regulations is WTO-incons istent, means that necessarily any or all other 
individual provisions are incompatible as well.  Fo r instance, Colombia has identified Article 87 of 
Decree No. 2685 which, as explained above, comprises the importers' general customs obligations.  
As far as the Panel understands, Panama's claim that the ports of entry measure is not justified under 
Article XX(d) does not mean that Panama is challe nging Colombia's right to enforce its customs laws 
and, in particular, the importers' general customs obl igations of the type provided for in Article 87 of 
Decree No. 2685.   
7.531  As Panama points out, Colombia's customs laws  and regulations total thousands of pages and 
therefore, it is not possible for the Panel to examin e every provision of Colombia's customs laws and 
regulations in order to determine whether they are GATT-consistent.  However, the Panel does not 
consider it necessary to complete a comprehensive review.  As pointed out by Colombia, the 
Appellate Body has stressed that a responding Me mber's law will be treated as WTO-consistent  until 
proven otherwise.857   
7.532  Accordingly, the Panel concludes that, for the purpose of its analysis of Colombia's defence 
under Article XX(d) of the GATT 1994 , Decree No. 2685 and Resolution No. 4240, with the 
exception of Article 128.5 e) of Decree No. 2685 and Article 172.7 of Resolution No. 4240 (which 
have been determined WTO-inconsis tent in Section VII.B.2(e) above ) are not themselves inconsistent 
with any provision of the GATT 1994 .  
Whether the ports of entry measure is designed to secure compliance with Colombian laws or 
regulations which are not themselves WTO-inconsistent  
7.533  Having established that generally Decree No. 2685 and, in particular Article 87, and 
Resolution No. 4240, are the laws and regulations with which the ports of entry measure aims at 
securing compliance are not on the whole WTO-incons istent, the Panel will therefore determine 
whether the ports of entry measure is designed to secure compliance with those laws and regulations. 
7.534  Colombia argues that the preamb le in Resolution No. 7373 makes clear that the ports of entry 
measure has been implemented to strengthen and make more effective customs controls, thus 
                                                      
855 Panama's second written submission, para. 176. 
856 Panama's second written submission, para. 178. 
857 Appellate Body Report, US – Carbon Steel , para. 157.  See also Appellate Body Report, Dominican 
Republic – Import and Sale of Cigarettes , para. 111 and Appellate Body Report, US – Gambling , para. 138. WT/DS366/R 
Page 206  
 
  demonstrating that the measure is designed to secure compliance with Colombia's laws relating to 
customs enforcement.  The Preamble of  Resolution No. 7373 provides as follows: 
"Que el artículo 41 del Decreto 2685 de 1999 establece en la Dirección de Impuestos 
y Aduanas Nacionales la facultad de restringir, por razones de control, el ingreso de 
determinadas mercancías por algunos lugares de arribo; 
Que el inciso 3º del artículo 119 de l Decreto 2685 de 1999, adicionado por el 
artículo 2° del Decreto 2373 de 2004, prevé que la Dirección de Impuestos y 
Aduanas Nacionales puede establecer la oblig ación de presentar la declaración de 
importación en forma anticipada para determinadas mercancías; 
Que para el fortalecimiento y agilizaci ón de los controles aduaneros y para la 
prestación de un mejor servicio, es preciso tener información previa sobre algunos 
bienes que se pretenden ingresar al país; 
Que para lograr controles más eficientes es importante que las administraciones 
aduaneras se especialicen en el manejo técnico de determinadas mercancías, que hacen parte de importantes sect ores productivos nacionales; 
Que el conocimiento previo de la info rmación relativa a las mercancías que se 
pretenden ingresar al país, así como la especialización técnica de las aduanas, permitirán contar con elementos para el fo rtalecimiento del control aduanero sobre 
las mismas ". 
7.535  Colombia notes that the preamble expressly refe rs to Article 41 of Decree No. 2685, which, it 
argues, allows the DIAN to impose limitations on the ports of entry whenever necessary for purposes 
of customs control.  In addition, as discussed in th e preamble, Colombia submits that prior knowledge 
of the information of merchandise to be importe d and the technical specialization of customs 
authorities are linked to the objective of enhancing customs controls with respect to subject merchandise.
858   
7.536  In addition to its preamble, Colombia argues that  the design and purpose of the ports of entry 
measure is clear from circumstances surrounding its implementation.  Colombia considers that the 
fact that it had agreed to remove an earlier, simila r ports restriction measure following the entry into 
force of a Customs Cooperation Protocol demonstrat es problems exist with customs control and that 
Colombia is not simply addressing protectionist ends.859  Colombia argues that the ports of entry 
measure's entry into force at a time of widespr ead contraband problems that have been acknowledged 
by Panama through its participation in cooperation efforts, supports the rationale that the measure was 
designed and implemented to secure compliance with customs regulations.860 
                                                      
858 Colombia's second written submission, para. 204.  Colombia argues that further confirmation of this 
policy objective can be found in a letter from the DIAN, submitted by Panama as Exhibit PAN-43, which 
provides: 
"En este orden de ideas y a efecto de lograr controles más eficientes, es importante que las 
administracionesaduaneras se especialicen en el manejo técnico de determininadas 
mercancías, que hacen parte de importantes sectores productivos nacionales y para. lo cual, conociendo la infraestructura operative, ténica y humana que tiene disponible la DIAN en las 
administracinoes de Bogotá y Barranquilla, se determine que fueran las administraciones de 
Bogotá y Barranquilla ... por donde ingresen las mercancías clasficables por los capítulos 50 al 64 del Arancel de Aduanas... ". 
859 Colombia's second written submission, para. 207. 
860 Colombia's second written submission, para. 211.  WT/DS366/R 
 Page 207 
 
 
  7.537  Panama has argued that Colombia has not dem onstrated how the ports of entry measure is 
designed to secure compliance with all the provisi ons of its customs laws.  Panama notes that 
Colombia experiences similar, serious infringements of its customs laws by other trading partners, 
including the United States and Europe.  However, Colombia only applies the ports of entry measure 
to certain products from Panama.  Additionally, Pana ma notes, in 2004, when none of the restrictions 
at issue in this dispute were in place, other regions accounted for a much larger share of contrabando 
técnico and sobrefacturación  problems than Panama.861  Panama also submits that Colombia has 
customs enforcement problems with respect  to a wide range of products, such as " máquinas y 
aparatos eléctricos " and vehicles and vehicle parts, apar t from subject textiles, apparel and 
footwear.862  Panama considers that if Colombia's in tention were to secure compliance with its 
customs laws and regulations, then it should apply th e requirements in the ports of entry measure to 
imports from all trading partners th at have had customs irregularities,  not simply on a country-specific 
and narrow product-specific basis.863  In light of the ports of entry measure's application solely to 
textiles, apparel and footwear products arriving fro m Panama and the CFZ, Panama argues that the 
"obvious function [of the measure] is to pr otect certain domestic industries from import 
competition".864 
7.538  The Appellate Body in Mexico – Taxes on Soft Drinks  explained that the burden to 
demonstrate that a measure is designed to "secure  compliance" must focus on the "design of the 
measure sought to be justified".865  This has been described to me an "to enforce obligations" rather 
than "to ensure the attainment of the objectives of laws and regulations."866  Moreover, the Appellate 
Body clarified that a measure may be considered  as securing compliance regardless of whether it is 
certain to achieve results: "In our view, a measure can be said to be designed 'to secure compliance' 
even if the measure cannot be guaranteed to achieve its result with absolute certainty".867 
7.539  As pointed out by Colombia, the preamble of Resolution No. 7373 refers to Article 41 of 
Decree No. 2685, which generally authorizes Colombian customs authorities to restrict access to ports 
of entry whenever authorities are not satisfied that they will be able to fully exercise their powers of 
control and verification.  On this basis, Colombia  has generally restricted  access for all textiles, 
apparel and footwear classifiable under Chapters  50-64 of the Colombian Tariff Schedule from all 
countries to 11 ports of entry.868  On this same basis, Colombia additionally restricts entry of subject 
goods arriving from Panama to ports at Bogota and Barranquilla. 
                                                      
861 Panama's second oral statement, para. 67;  According to Chart 3 of Exhibit COL-38, the United 
States accounted fo r US$959,228 of contrabando técnico , while ALADI countries (including Panama) 
accounted for US$625,1 15.  As concerns subfacturación , Panama notes that Europe accounted for US$455,981, 
while ALADI accounted for US$ 372,359.  With respect to sobrefacturación , the United States accounted for 
US$776,136, while Panama (separate from other ALADI countries) accounted for US$137,657. 
862 Panama's second written submission, para. 179.  Panama notes that " máquinas y aparatos 
eléctricos " accounted for $189,907 of unde r-invoicing, whereas under-invoice d textiles and footwear amounted 
to $82,254 and $98,666, respectively. (Panama's first oral statement, para. 7). 
863 Panama's second oral statement, para. 68. 
864 Panama's first oral statement, para. 77.  In support of this view, Panama notes a DIAN letter 
describing the goods at issue as "goods that form part of an important domestic industry" (Panama's first oral 
statement, para. 78). 
865 Appellate Body Report, Mexico – Taxes on Soft Drinks . para. 72,  Appellate Body Report, Korea – 
Various Measures on Beef , para. 157. 
866 Panel Report, Canada – Periodicals , para. 5.9.  Panel Report, Mexico – Taxes on Soft Drinks,  
para. 8.175;  GATT Panel Report, EEC – Parts and Components, para. 5.17.   
867 Appellate Body Report, Mexico – Taxes on Soft Drinks , para. 74.  
868 In accordance with Article 39 of Resolution No. 4240 of 2000 (Exhibit PAN–38), textiles, apparel 
and footwear classifiable under Chapters 50-64 of Colombia's Tariff Schedule must enter exclusively at 
Barranquilla, Bucaramanga, Buenaventura, Cali, Cartagena,  Cúcuta, Ipiales, Leticia, Medellín, San Andrés and 
Bogota. WT/DS366/R 
Page 208  
 
  7.540  Resolution No. 7373 further refers to Article  119 of Decree No. 2685 in its preamble, which 
generally allows Colombian Customs authoriti es to impose an advance customs declaration 
requirement to imports.   
7.541  We note that both Article 41 and Article 119 authorize Colombian customs officials to 
impose the various requirements that comprise the ports of entry measure.  Apart from the above 
provisions, the preamble to Resolution No. 7373 also refers generally to the need to strengthen and 
improve customs controls related to  the importation of subject textiles,  apparel and footwear arriving 
from Panama, which are described  as constituting an important national industry in Colombia.
869 
7.542  The Panel notes that the circumstances surrounding the imposition of the ports of entry 
measure support the view that that the measure wa s imposed at a time wh en customs fraud-related 
problems existed.870  As Colombia notes, Panama previous ly agreed to launch a programme of 
cooperation and mutual assistance for the purpose of investigating and preventing customs law 
infringements in both countries, which led to the removal of earlier restrictions on ports of entry.871  
The panel agrees that this coordinated effort is s uggestive of the existence of a problem with customs 
fraud that may have formed the basis for imposi ng restriction on importation in the first place.872  
Colombia has submitted quantitative assessment of the existence of significant ongoing problems with 
under-invoicing and smuggling in relation to textiles, apparel and footwear, with particular emphasis 
placed on those arriving from the CFZ and Panama.873   
7.543  On the basis of the foregoing evidence and ci rcumstances surrounding the implementation of 
the ports of entry measure, and in light of the f act that the measure was imposed with a view to 
addressing the need to strengthen and improve custom s controls related to the importation of subject 
textiles, apparel and footwear arriving from Pa nama, the Panel considers that Colombia has 
                                                      
869 As noted above, the preamble provides in relevant part as follows: 
"Que para. lograr controles más eficientes es importante que las administraciones aduaneras 
se especialicen en el manejo técnico de determinadas mercancías, que hacen parte de importantes sectores productivos nacionales ." 
870 As noted by Colombia in paragraph 210 of its second written submission, the Appellate Body in 
Korea – Various Measures on Beef  has considered the prevailing circumstances surrounding implementation, in 
assessing whether a measure is designed to secure compliance with applicable laws and regulations': 
"[T]he dual retail system was put in place, at l east in part, in order to secure compliance with 
the Korean legislation against deceptive practices to the extent that is serves to prevent acts inconsistent with the Unfair Competition Act.  First, the system was established at the time 
when, as stated by Korea and not refute d by the Complaining parties, acts of 
misrepresentation were widespread in the beef sector.  Second, it must be conceded that the 
dual retail system does appear to reduce the opportunities and thus the temptations for 
butchers to misrepresent foreign beef for dome stic beef, when compared with the situation 
where all domestic and imported beef could offi cially be supplied to the same shop."  
Panel Report, Korea – Various Measures on Beef , para. 658. 
871 As explained in Section II.A, on 20 July 2006, Panama requested consultations under the DSU with 
Colombia concerning, inter alia,  the imposition of restrictions on ports of entry similar to those at issue in this 
dispute.   Colombia had imposed these earlier restrictions between July 2005 and October 2006, on the basis of 
Resolution No. 05796 of 7 July 2005, Resolution No. 1 2465 of 21 December 2005 a nd Resolution No. 06691 of 
22 June 2006.  On 1 December 2006, Panama notified  the DSB that it had reached a Mutually Agreed Solution 
with Colombia in accordance with Article 3.6 of th e DSU, under which Colombia repealed the earlier 
restrictions and .the parties concl uded a customs cooperation agreement, en titled the "Protocol of Procedure for 
Cooperation and Exchange of Customs Information between Customs Authorities of the Republic of Panama 
and the Republic of Colombia". 
872 Colombia's second written submission, para. 207. 
873 Colombia's first written submission, para. 203;  Exhibit COL-21. For instance, a UIAF study claims 
that 89 firms incorporated in the Colon Free Zone were identified by Colombian intelligence as regularly 
participants in the purchase of goods with contraband US dollars.  WT/DS366/R 
 Page 209 
 
 
  demonstrated to its satisfaction that the ports of entry measure is designed to secure compliance with 
Decree No. 2685 and Resolution No. 4240.874   
7.544  Accordingly, the Panel will proceed to determ ine whether the ports of entry measure is 
necessary to secure compliance with the aforementioned laws and regulations. 
(ii) Second element:  Whether the ports of ent ry measure is "necessary"  to secure compliance 
with Colombian customs enforcement laws and regulations 
7.545  Having established that the ports of entry measure has been designed to secure compliance 
with Decree No. 2685 and the implementing regu lation Resolution No. 4240, the Panel will next 
examine whether the ports of entry measure is "n ecessary" to ensure compliance with these domestic 
provisions.   
7.546  The Appellate Body when examining the concept of "necessary" in the context of 
Article XX(d) of the GATT 1994  in Korea – Various Measures on Beef , concluded that, in order to be 
considered "necessary" to secure compliance, a m easure does not need to be "indispensable", but 
should constitute something more than strictly "making a contribution to": 
"We believe that, as used in the context of Article XX(d), the reach of the word 
'necessary' is not limited to that which is 'i ndispensable' or 'of absolute necessity' or 
'inevitable'. Measures which are indispensab le or of absolute necessity to secure 
compliance certainly fulfil the requirements of Article XX(d).  But other measures, too, may fall within the ambit of this exception. As used in Article XX(d), the term 'necessary' refers, in our view to a range of degrees of necessity.  At one end of this continuum lies 'necessary' understood as 'indispensable'; at the other end, is 
'necessary' taken to mean as 'making a contri bution to'.  We consider that a 'necessary' 
measure is, in this continuum, located significantly closer to the pole of 'indispensable' than to the opposite pole of simply 'making a contribution to'."
875 
7.547  In assessing the "necessity" of a measure within the meaning of Article XX(d), in particular, 
whether the measure is "necessary to ensure comp liance with laws and re gulations … , including 
those relating to customs enforcement", the Appellate  Body explained that several criteria should be 
taken into consideration, including a weighing and balancing of these aspects: 
"It seems to us that a treaty interpreter assessing a measure claimed to be necessary to 
secure compliance of a WTO-consistent law or regulation may, in appropriate cases, take into account the relative importance of  the common interests or values that the 
law or regulation to be enforced is intende d to protect. The more vital or important 
those common interests or values are, the ea sier it would be to accept as 'necessary' a 
measure designed as an enforcement instru ment.  There are other aspects of the 
enforcement measure to be considered in evaluating that measure as 'necessary'. One 
is the extent to which the measure contributes to the realization of the end pursued, the securing of compliance with the law or  regulation at issue. The greater the 
contribution, the more easily a measure might be considered to be 'necessary'. 
Another aspect is the extent to which the compliance measure produces restrictive 
effects on international commerce, that is, in  respect of a measure inconsistent with 
Article III:4, restrictive effects on importe d goods. A measure with a relatively slight 
                                                     
 
874 The Panel notes that it is not yet making an assessment of whether the port of entry measure has 
been effective in securing compliance of Colombian customs enforcement laws.  The Panel is strictly evaluating 
whether Colombia designed the ports of entry measure in order to secure compliance with such laws and 
regulations. 
875 Appellate Body Report, Korea – Various Measures on Beef , para. 161. WT/DS366/R 
Page 210  
 
  impact upon imported products might more easily  be considered as 'necessary' than a 
measure with intense or broader restrictive e ffects.  In sum, determination of whether 
a measure, which is not 'indispensable', ma y nevertheless be 'necessary' within the 
contemplation of Article XX(d), involves in every case a process of weighing and balancing a series of factors which prominen tly include the contribution made by the 
compliance 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 accompanying impact of the law or regulation on imports or exports."
876 
7.548  The weighing and balancing of factors shoul d be conducted through c onsideration of the 
factors individually and in relation to each other: 
"The weighing and balancing is a holistic  operation that involves putting all the 
variables of the equation together and eval uating them in relation to each other after 
having examined them individually, in order to reach an overall judgement."877 
7.549  Finally, the Appellate Body has clarified that  a measure will not be considered "necessary" 
within the meaning of Article XX(d) of the GATT 1994 "if an alternative measure which [a Member] 
could reasonably be expected to employ and which is not inconsistent with  other GATT provisions is 
available to it".878  The complaining Member has the burden to identify possible alternatives to the 
measure at issue that the respondent could have taken.879   
7.550  Thus, in evaluating whether the ports of entr y measure is necessary within the meaning of 
Article XX(d), the Panel will consider:  (i) the rela tive importance of the common interests or values 
that the law or regulation to be enforced is intende d to protect; (ii) the extent to which the measures 
contribute to the realization of the end pursued; and,  (iii) the restrictive impact of the measure on 
imported goods. 
The relative importance of the common interests or  values that the laws or regulations to be 
enforced are intended to protect  
7.551  Colombia has requested the Panel to examine th e measures in light of the important interests 
involved in securing compliance with its customs laws, both in terms of revenue lost, and in terms of 
                                                      
876 Appellate Body Report, Korea – Various Measures on Beef , paras. 162-164.  In a more recent 
assessment of the meaning of the term  "necessary" in connection with a defence raised under Article XX(b), the 
Appellate Body indicated that a panel may evaluate wh ether a measure is "necessary" based on the extent to 
which the measure is "apt to produce a material contribution to the achievement of its objective": 
"Thus, a panel might conclude that an import ban is necessary on the basis of a demonstration 
that the import ban at issue is apt to produce a material contribution to the achievement of its 
objective."  Appellate Body Report, Brazil – Retreaded Tyres , para. 151.  The Panel considers the well-established 
approach set forth in Korea – Various Measures on Beef  relevant to its analysis of Colombia's Article XX(d) 
defence. 
877 Appellate Body Report, Brazil – Retreaded Tyres , para. 182. 
878 Appellate Body Report, Korea – Various Measures on Beef , para. 165, citing to GATT Panel 
Report, US – Section 337 , footnote 69, para. 5.26: 
"It was clear to the Panel that a contracting pa rty cannot justify a measure inconsistent with 
another GATT provision as "necessary" in terms of Article XX(d) if an alternative measure 
which it could reasonably be expected to employ and which is not inconsistent with other 
GATT provisions is available to it. By the same  token, in cases where a measure consistent 
with other GATT provisions is not reasonably available, a contracting party is bound to use, among the measures reasonably available to it, that which entails the least degree of 
inconsistency with other GATT provisions." 
879 Appellate Body Report, Brazil – Retreaded Tyres , para. 156.   WT/DS366/R 
 Page 211 
 
 
  illegal and criminal activities linked to  contraband and smuggling in general.880  Colombia further 
argues that the problem of contraband is significant,  as contraband trade plays a proven role in certain 
types of money-laundering, wherein money-la undering is linked to other illegal activities.881  Due to 
its status as a developing country, Colombia emphasi zes that a loss of revenue and threats to political 
and economic stability are of even greater importance.882  Colombia characterizes itself as unlike any 
other country as it is faced with an important domest ic problem of drug trafficking and public order. 
7.552  In relation to revenue collection, Colombia h as provided estimates of the loss of revenue 
arising from the entry of contraband from Panama at US$300 million annually.883   
7.553  Colombia views the link between customs fra ud and smuggling and other criminal activities, 
including money laundering and drug trafficking, has been clearly established, and, in particular, in 
relation to the CFZ.  As Colombia notes, a Memorandum of Understanding between the World 
Customs Organization and the International Crimin al Police Organization linked customs fraud with 
other criminal activities, including money-laundering and terrorism.884  Colombia additionally notes 
publications by the United Nations885 and the International Monetary Fund886, which also refer to 
problems with smuggling in the CFZ.887 Colombia's own UIAF888 has referred to a close relationship 
between contraband and money-laundering.889   
7.554  In response to a question from the Panel, Colombia described the problem of money 
laundering in the specific context of the Black Market Peso Exchange (BMPE), which utilizes a 
recognized money-laundering technique to convert illi cit funds outside of Colombia into Colombian 
pesos via the importation of goods into Colombia.890  The United Nations describes the CFZ as a 
"integral part" of the BMPE.891  Colombia submits that the BMPE typically employs consumer 
merchandise such as those arriving from Panama to facilitate the exchange.892   
                                                      
880 Colombia's second written submission, para. 218. 
881 Colombia's second written submission, para. 220. 
882 Colombia's response to Panel question No. 151, Colombia's second written submission, para. 218. 
883 Colombia's first written submission, para. 333. 
884 Colombia's second written submission, para. 221. 
885 United Nations, Office on Drugs and Crime, Crime and Development in Central America , at 69 
(May 2007), available at http://www.unodc.org/docum ents/data-and-analysis/Cen tral-america/study/en.pdf-
2007-11-02. 
886 International Monetary Fund, Panama: Detailed A ssessments of Observance of Standards and Codes 
for Banking Supervision, Insurance Supervision, and Se curities Regulation, IMF Country Report No. 07/67, at 
198-199 (Feb. 2007), available at http://www.i mf.org/external/pubs/cat/longres.cfm?sk=20450.0. 
887 Colombia's first written submission, para. 192. 
888 The Unidad de Información y Análisis Financiero (UIAF) is an entity of the Colombian government 
created by Ley 526 of 1999 for the purpose of preventing detecting and fighting money laundering and financial 
terrorism. 
889 Colombia's second written submission, para. 221;  Exhibit COL-30. 
890 Colombia's second written submission, para. 222. 
891 United Nations, Office on Drugs and Crime, Crime and Development in Central America , at 69 
(May 2007), available at http://www.unodc.org/docum ents/data-and-analysis/Cen tral-america/study/en.pdf-
2007-11-02 
892 Exhibit COL-43, Exhibit COL-30.  Colombia cites to the International Narcotics Control Strategy 
Report – 2008, released by the Bureau of International Narcotics and Law Enforcement Affairs, in order to 
explain the operations of the Black  Market Peso Exchange (BMPE): 
"Panama's sophisticated international banki ng sector, Colon Free Zone (CFZ), US dollar-
based economy, and legalized gambling sector are utilized to facilitate potential money 
laundering. The CFZ is the world's second larges t free zone after Hong Kong, and serves as an 
originating or transshipment point for some goods purchased with narcotics proceeds (mainly 
dollars obtained in the United States) throu gh the Colombian Black Market Peso Exchange. 
The CFZ has over 2,600 business, 25 bank branches, and employs approximately 25,000 WT/DS366/R 
Page 212  
 
  7.555  Apart from that discussion of problems ge nerally among interna tional organizations, 
Colombia argues that problems with customs fraud and under-invoicing are clearly demonstrated 
through trade statistics.  Citing to both Colombia n and Panamanian export statistics for the period 
2000-2006, Colombia notes that its reported import figures from Panama are lower amounts than export figures reported by Panama.  In particul ar, Colombia notes a difference of US$629.642 million 
and US$848.317 million in 2005 and 2006, respectively.
893  As a result of these discrepancies in 
reported figures, which Colombia terms distortions , Colombia has concluded by its own estimates, 
that Panama contributes 10 per cent in distortions  while only representing a pproximately 2.1 per cent 
of total imports into Colombia, representing US$877.3 million of " contrabando abierto " in 2006.894   
7.556  In relative terms, as a component of total annua l distortions, Colombia estimates that in 2006, 
contraband from Panama was respons ible for 83.8 per cent of all contrabando abierto and 62 per cent 
of all contrabando técnico entering Colombia.895  Additionally, Colombia submits that more 
irregularities have been found in respect of declarati ons of goods from Panama (6.8 per cent) than the 
average from other countries (4.8 per cent).896   
7.557  Colombia considers these figures depict a seri ous overall problem with under-invoicing and 
smuggling.  As pertains to subject goods to this  dispute, Colombia argues that 84.27 per cent of 
products imported from Panama we re contraband trade, increasing to 89 per cent in the case of 
textiles.897  Colombia submits that textiles accounted fo r 27.9 per cent of all seizures, and footwear, 
9.2 per cent.898  Between 2001 and 2007, Colombia alleg es that 121 million pairs of shoes were 
imported from Panama of which 82.5 million (or 68 per cent) were imported at a price below US$1, 
which, in Colombia's view, strongly suggests that  this trade is affected by under-invoicing and 
                                                                                                                                                                     
personnel. The CFZ is estimated to have im ported and re-exported over US $15 billion in 
goods during 2007. The ports of Panama handle over 4 million twenty-foot equivalent units 
(TEUs) of container traffic per year. The CFZ has limited resources to conduct supervisory 
programs and monitor for illegal activities, with a legal staff of approximately five people 
who, among other things, oversee efforts to detect money laundering, trans-shipment, goods 
smuggling, counterfeit products and intellectual property rights violations." 
See http://www.thepanamanews.com/pn/v_14/issue_05 /news_07.html. See also Colombia's second 
written submission, para. 222;  Exhibit COL-38;  Exhibit COL-51. 
893 Colombia's first written submission, para. 193.  Figures for all years are as follows: 
 
 2000 2001 2002 2003 2004 2005 2006 
Importations from Panama               
Colombian Registry 291,090 391,201 431,285 290,476 383,331 381,050 412,091 
Panamanian Registry 873,656 783,741 744,889 691,459 903,302 1,010,692 1,260,408 
                
Difference   582,566   392,540   313,604   400,983   519,971   629,642   848,317 
Source: Contraloria de Panama;  DIAN. 
Note: In its original presentations, Colombia's calculation of the difference contained an arithmetic 
error, which has been corrected here. 
894 Exhibit COL-38. 
895 Colombia's first written submission, para. 194.  The Panel notes that these figures seem to be 
contradicted by ones presented in Exhibit COL-38.  This exhibit, which contains a report by the DIAN on the 
measurement of import value distortions in 2006, shows that almost all trade distortion with Panama in 2006 
correspond to the modality of " contrabando abierto " (96.8 per cent of the total) and, to a much lesser extent, 
"sobrefaturación " (3.2 per cent of the total).  See Table 4, p. 10;  Table 1, p. 11 and Table 8, p. 16.  In fact, 
Table 4 reports problems of " contrabando técnico " with United States (49 per cent);  Europe (24.2 per cent);  
ALADI (16.9 per cent) and Asia (11.2 per cent).  Moreover, the Section of the report dedicated to the analysis of 
the "Panama case" refers excl usively to the problem of " contrabando abierto ", and does not even mention 
problems of " contrabando técnico ".  See Exhibit COL-38, pp. 17-19.  
896 Exhibit COL-17. 
897 Exhibit COL-16. 
898 Exhibit COL-18;  Exhibit COL-31.  WT/DS366/R 
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  contraband.899  In 2007, Colombia claims that, of nine million pairs imported below US$1, 
seven million (77.7%) were imported from Panama.900 
7.558  Based on internal studies901, Colombia asserts that Panamanian exporters were involved in 
40 per cent of the cases in which money-laundering was linked to international trade.  Colombia 
argues the number rises to nearly two-thirds in cases in which Panamanian exporters that are 
indirectly involved are factored.902 
7.559  Colombia has presented a series of data showi ng criminal investigations into companies 
located in Panama and the CFZ that have allegedl y participated in contraband trade operations in 
Colombia.903  In Exhibit COL-21, Colombia lists 89 compan ies registered in the CFZ, which it alleges 
to be involved in these activities.904  In Exhibit COL-66, Colombia has submitted a list of 106 cases 
involving textiles, apparel and footwear imports from Panama that were criminally prosecuted 
between 2005 and 2007, based on information submitted by each of the country's customs 
administration.  In Exhibit COL-67, Colombia lists 150 cases that concern false invoices by two shoe major importers of footwear imports from Panama into Colombia.
905   
7.560  Colombia argues that the scope of its efforts to date demonstrate the existence of a severe 
problem with under-invoicing and customs fraud with respect to Panama.906  Measures identified by 
Colombia include a requirement to present an ad vance import declaration or export declaration, 
restrictions on domestic transit, the establishment of  a "Customs Observer" post, the incorporation of 
Fiscal and Customs police in the structure of the DIAN, modifications to the structure of customs 
administrations, the adoption of an indicative and reference prices regime, special document 
requirements, and agreement with other countri es' customs authorities and the private sector.  
Colombia further notes that Panama 's willingness to participate in the Customs Cooperation Protocol 
provides further evidence that Panama  has also recognized the problem. 
7.561  Panama has not called into question the inci dence of money laundering or contraband in 
relation to goods arriving to Colombia.  Panama, how ever, calls into question Colombia's attribution 
                                                      
899 Colombia's first written submission, para. 206. 
900 Colombia's first written submission, para. 206. 
901 Exhibit COL-19. 
902 The UIAF report in Exhibit COL-19 provides as follows: 
"Es así como, entre el 1 de julio de 2005 hasta el 20 de febrero de 2008 el G.I.T. de Control y 
Prevención de Lavado de Activos a remitido a la  UIAF doscientos setent a y siete (277) casos, 
de los cuales ciento cuarenta y nueve (149 ) corresponden a actividades económicas que 
incluyen importaciones, correspondiendo a PANAMA cincuenta y nueve (59) casos como 
principal país de procedencia, lo que representa un 40% del total casos;  sin embargo PANAMA aparece en un menor porc entaje como país de proced encia en más de 30 casos 
adicionales. 
El valor f.o.b. total de los 149 casos es de USD$499.287.988 y a PANAMA le corresponde el 19% de este valor, es decir USD$95.758. 038, comparado como el principal país de 
procedencia. " 
In Panama's first oral statement, footnote 15, Panama disputes the arithmetic, noting that 89 of 149 cases totals 59.73 percent, which is less than 66.66 per cent or two thirds.  Colombia notes 
further that the report refers to five specifi c cases in which a typical situation of money 
laundering involving Panamanian exporters involves warning signals that include contraband, 
under-invoicing, fraud, and the use of falsified documents, among other indicators. 
(Exhibit COL-19) 
903 Exhibit COL-52. 
904 In Exhibit COL-22, Colombia provides results of an investigation, which concluded that buyers of 
merchandise in the CFZ can choose wh ether they want goods with or without invoices, and whether they want 
the goods to go into a "normal" or "special" container. 
905 Colombia's response to Panel question No. 159. 
906 Colombia's first written submission, para. 211. WT/DS366/R 
Page 214  
 
  of the severity of the problem in light of the f act that the anti-fraud a nd anti-money laundering steps 
have not been imposed at all ports of entry.
907  Moreover, Panama refers to the general nature of 
information included in reports by the United Nations908, the International Monetary Fund909, the US 
Drug Enforcement Administration910, and the US State Department.911  Panama notes that several of 
these reports designate the BMPE as the root cause of the problem.912  Panama additionally 
characterizes Colombia's assessment of a GIT- UIAF report, in which Colombia argues that 
transactions involving Panama amounted to 19 per cent of total in terms of value of contraband goods 
as flawed.  Panama argues that value is the relevant consideration, and not the number of investigated 
cases: 59 out of 149.913  In this light, if value is the focus, Panama argues that the vast majority of 
problems are connected with other countries.  For these reasons, Panama considers that the CFZ is 
only tangentially related to the problem of smugg ling, money laundering and drug trafficking.   
7.562  In addressing a Member's right to raise an  affirmative defence under Article XX(d), no 
previous panel has directly addressed measures designed to address problems of under-invoicing in 
relation to the payment of customs duties.  However, in Dominican Republic – Import and Sale of 
Cigarettes , the panel recognized the important interest for the Dominican Republic in its efforts to 
curb tax evasion and smuggling: 
"The Panel finds no reason to question th e Dominican Republic's assertions in the 
sense that the collection of tax revenue (and, conversely, the prevention of tax 
evasion) is a most important interest for an y country and particularly for a developing 
country such as the Dominican Republic."914 
7.563  While the relative importance of the common inte rests or values that may be addressed within 
the gamut of Article XX of the GATT 1994  (including all its subparag raphs) do not adhere to any 
hierarchical ranking or prioritization of interests therein, an assessment of the importance of interest 
or values must take into account the evidence pr esented as well as the prevailing circumstances faced 
by the respondent.  This proposition holds true in relation to measures necessary to secure compliance 
with laws or regulations relati ng to customs enforcement.   
7.564  With respect to the defence raised by Colombia, the Panel is of the view that the fight against 
under-invoicing and smuggling must be assessed in the proper context in consideration of the 
particular realities faced by Colombia.  In th e Panel's view, evidence submitted by Colombia 
demonstrates that problems exist with contra band, smuggling and under-invoicing in Colombia, in 
particular, in connection with the CFZ as well as the BMPE.  Colombia has presented additional 
evidence in an effort to demonstrate the effect s of these problems in relation to goods arriving from 
Panama, and has referred to these problems in relati on to what it considers the affiliated problem of 
drug trafficking.   
7.565  Despite reservations by Panama concerning the general nature of evidence to demonstrate 
problems with money laundering and contraband g oods in the region and the link between these 
phenomenon and drug-trafficking, it has nevert heless acknowledged the problem through its own 
                                                      
907 Panama's first oral statement, para. 14. 
908 Colombia's first written submission, footnote 162. 
909 Colombia's first written submission, footnote 163. 
910 Colombia's first written submission, footnote 179. 
911 Colombia's first written submission, footnote 179.  Panama argues that State Department report cites 
to 2005-2006 period when former ports of entry measure wa s in place.  Yet, Panama argues that problems with 
money laundering still existed.  Thus, Panama considers th e argument that the ports of entry measure combats 
money-laundering is unsubstantiated when statistics do not indicate a decline in money laundering. 
912 Panama's first oral statement, para. 13. 
913 Panama's first oral statement, para. 16. 
914 Panel Report, Dominican Republic – Import and Sale of Cigarettes , para. 7.215, as upheld by the 
Appellate Body, Appellate Body Report, Dominican Republic – Import and Sale of Cigarettes , para. 71.  WT/DS366/R 
 Page 215 
 
 
  participation in a Customs Cooperation Protocol w ith Colombia in an atte mpt to address these exact 
problems.  Moreover, evidence of ongoing and comple ted investigations submitted by Colombia shed 
light on Colombia's broad efforts to address these problems. 
7.566  In the Panel's view, combating under-invoici ng and money laundering associated with drug 
trafficking is a relatively more important reality  for Colombia than for many other countries. 
The extent to which the measure contributes to the realization of the end pursued, the securing 
of compliance with the laws or regulations at issue  
7.567  Through presentation of quantitative and qualita tive evidence, Colombia submits that the 
ports of entry measure is apt to make a mate rial contribution to the objective of combating 
contraband.915  Colombia argues that a genuine relations hip of ends and means exists between the 
objective pursued and the measure at issue.916   
7.568  Colombia draws the Panel's attention to a serie s of quantitative indicators to demonstrate that 
the ports of entry measure is contributing to reduc ing smuggling.  First, Colombia argues that the 
evolution of the implicit price of textiles, apparel and footwear, i.e. price per unit, demonstrates that 
the measure has materially contributed to combating contraband.917  Second, Colombia points to the 
notable increase in the number of contraband-related seizures with respect to textiles products coming 
from Panama in 2007, as compared to 2006.918  Finally, Colombia argues th at the fact that the "level 
of distortion" has decreased since the introduction of the measure, provides further evidence of the 
measure's effectiveness.919 
7.569  Colombia acknowledges that not all the data in  these indicators point in the same direction, 
and that there are many intervening factors that must be taking into account.  However, Colombia 
considers it inevitable that certain measure might take some time before become effective.  In support 
of this statement, Colombia notes in Brazil – Retreaded Tyres  that the Appellate Body found effective 
contribution of certain measures can only be made clear  with the benefit of time, especially in the case 
of complex and multi-layered problems.920 
7.570  Apart from price and trade flow data, Colombia submits that "it is difficult to deny" that  
requiring products be imported through a limited num ber of ports equipped to control imports in a 
most effective manner is apt to make a material contribution to combat smuggling.921  C o l o m b i a  
submits that it is easier to control importation and verify the accuracy of the import declaration when imports are entering at two points of entry only.  Moreover, Colombia argues that the increased 
exposure of customs officials to potential cont raband products provides them with important 
experience in respect of the techniques applied by the smugglers.
922 
7.571  Panama argues that Colombia erroneously submits that the ports of entry measure is "apt to 
make a material contribution" to the policy objec tive of combating smuggling.  Panama submits that 
                                                      
915 Colombia's first written submission, para. 344,  Colombia's second written submission, para. 224.  
Colombia explained in its response to Panel's question No. 118 that "contraband" is a "general term that refers to 
products that are not declared or are improperly declared and are thus entering the country in an illegal manner".  
The Panel thus understands that "contraband" is a term that encompasses all customs irregularities, inter alia ,  
open smuggling,  technical smuggling and  under-invoicing.  See also Colombia's first written submission, 
para. 196, in which Colombia suggests that the term "contraband" includes under-invoicing and smuggling. 
916 Colombia's second oral st atement, para. 63, citing to Brazil – Retreaded Tyres , para. 7.119. 
917 Colombia's second written submission, paras. 235 and 240.  
918 Exhibit COL-18;  Colombia's second written submission, para. 232. 
919 Colombia's second oral  statement, para. 63. 
920 Colombia's second written submission, para. 244. 
921 Colombia's first written submission, para. 344. 
922 Colombia's second written submission, para. 229. WT/DS366/R 
Page 216  
 
  Article XX(d) does not require an assessment of wh ether the measure at issue secures the attainment 
of the objectives of those laws and regulations, but an examination of whether the measure secures 
compliance with the laws or regulations themselves.
923  Moreover, Panama considers the finding in 
Brazil – Retreaded Tyres  that a measure may be considered as "necessary" if it brings about "a 
material contribution to the achievement of its ob jective ... of the protection of human health or 
environmental objectives pursued"924 is inapplicable to defences ra ised under Article XX(d).  Panama 
notes that the protection of "human, animal or plant life or health" in Article XX(b) is a purpose-oriented exception.  In contrast, Panama c onsiders that Article XX(d) provides that a measure 
is necessary to secure compliance with specific laws  and regulations, which is a functional exception.  
In Panama's view, Colombia has confused its a pproach with the test under Article XX(b) which 
requires an assessment of whether a measure brings about a material contribution to the achievement 
of its objective.
925     
7.572  While Panama concedes that the fight agai nst tax evasion and smuggling is an important 
interest for a developing country, it considers that Colombia has not established how the restrictions 
contribute in a material way to secure compliance with the applicable laws.926  Panama notes that, as 
stated by Colombia, the ports of entry measure is part of a "comprehensive strategy", which includes 
the use of customs observers, the requirement to ma ke an advance declaration, automatic licensing, 
pre-shipment inspection, contraband agreemen t with the private sector, customs cooperation, 
modernization of ports and various me asures to fight internal corruption.927  Due to such a 
comprehensive approach, Panama argues that Colo mbia cannot establish a direct cause and effect 
relationship to determine that the ports of entry measure has materially contributed to the policy 
objective of combating contraband, at least in respect of under-invoicing.928  
7.573  Apart from what Panama considers Colombia 's erroneous interpretative approach to 
Article XX(d) and its failure to demonstrate a cau sal link between the measure and its contribution, 
Panama considers the ports of entry measure has not been effective in combating contraband.  Panama 
notes between July 2005 and October 2006, Colombia im posed restrictions on ports of entry similar to 
those at issue in this dispute.  During 10 months in  2006, when the restrictions were in force, Panama 
notes Colombia's estimation that the percentage of  contraband trade exceeded 84 per cent generally, 
and 89 per cent in the case of textiles.929   In Panama's view, these statistics demonstrate that the ports 
of entry restrictions are completely  ineffective at combating contraband.930  In addition, Panama notes 
that, according to the data submitted by Colombia , Cartagena was responsible for seizing 17 billon 
pesos of contraband in 2007, whereas Barranquilla was responsible for seizing only 10 billon pesos.931  
In Panama's view, this raises the question as to th e relative effectiveness of one of the primary ports 
                                                      
923 Panama's second written submission, paras. 186-191;  Panama's second oral statement, para. 69. 
Panama notes the following statement in GATT Panel Report, EEC – Parts and Components : 
"If the qualification 'to secure compliance with la ws and regulations' is interpreted to mean 'to 
ensure the attainment of the objectives of the laws and regulations', the function of 
Article XX(d) would be substantially broader.  Whenever the objective of a law consistent with the General Agreement cannot be attained by enforcing the obligations under the law, the 
imposition of further obligations inconsistent with the General Agreement could then be 
justified under Article XX(d) on the grounds that this secures compliance with the objectives of that law.  This cannot, in the view of the Panel, be the purpose of Article XX(d) …" (GATT 
Panel Report, EEC – Parts and Components , para. 5.17). 
924 Appellate Body Report, Brazil – Retreaded Tyres , para. 151. 
925 Panama's second oral statement, para. 69. 
926 Panama's second written submission, para. 186. 
927 Colombia' second written submission, para. 226. 
928 Panama's second oral statement, para. 71. 
929 Panama's first oral statement, paras. 5, 12 and 81,  Panama's second written submission, para. 194. 
930 Panama's first oral statement, para. 5.  Panama notes as well that indicative prices were in place in 
2006 when some of the highest levels of customs irregularities were reported (para. 6). 
931 Panama's first oral statement, para. 82,  Panama's second written submission, para. 198.  WT/DS366/R 
 Page 217 
 
 
  under the measure in carrying out seizures of contraband textiles.932  In reaching its conclusion, 
Panama disputes the argument put forth by Colombia that measures normally take time to have effect. 
Considering the nature of the measure, Panama subm its it should be possible to detect the immediate 
impact of the measure and to assess its effectiveness. 933  Panama considers that the ports of entry 
measure by its design is ineffective at combating contraband.  First, Panama notes that the measure 
only applies to a subject textiles, apparel and foot wear despite the fact that Colombia has customs 
enforcement problems with respect to a wide range of products, including" máquinas y aparatos 
eléctricos " and vehicles and vehicle parts, which are not subject to the ports of entry restrictions.934  
As discussed in paragraph 7.537 abov e, for instance, Panama notes that " máquinas y aparatos 
eléctricos " accounted for US$189,907 of under-invoicing, whereas subject textiles and footwear 
accounted for US$82,254 and US$98,666, respectively.935  Furthermore, Panama notes that the ports 
of entry measures are applied only to textiles, apparel and footwear arriving from Panama, even 
though Colombia experiences significant problems with contrabando técnico, subfacturación and 
sobrefacturación with other regions.  As noted in pa ragraph 7.494 above, Colombian evidence 
indicates the United States accounted for US$959,228 of contrabando técnico , while ALADI 
countries (including Panama) accounted for US$625,115.936  With respect to subfacturación , Europe 
accounted for US$455,981, while ALADI accounted for US$372,359, and with respect to sobrefacturación , the United States accounted for US$776,1 36, while Panama (separate from other 
ALADI countries) accounted for US$137,657.
937  Panama considers that a measure designed to secure 
compliance with customs enforcement would appl y to all products known to be problematic, and 
would address the most significant contraband problems stemming from trade with all trading 
partners.938   
7.574  Panama disputes that any basis exists to jus tify targeting textiles, apparel and footwear 
arriving from Panama.  Panama notes Colombia's cl aim that the frequency of irregularities found in 
declaration of goods from Panama (6.8 per cent) exceeded the aver age from other countries 
(4.8 per cent).939  Panama considers the fact that irregularities were 2 per cent  higher does not justify 
imposing measures exclusively against goods arriving from Panama.940   
7.575  Panama argues that it is ina ppropriate to focus on the relativ e proportion of contraband from a 
particular country as opposed to the absolute amount of contraband from a particular country.941  In 
Panama's view, if Colombia seeks to combat contra band  to ensure that revenues are not foregone, in 
addition to addressing problems with under-invoicing  and securing compliance with its customs laws 
and regulations broadly, Colombia should apply th e measures to all imports giving rise to customs 
irregularities.  If this is not possible, Panama argu es it would only be logical for Colombia to combat 
contraband in trade from its larger trading partne rs, including the United States and Europe, because 
                                                      
932 Panama's second written submission, para. 198.  Panama notes that Colombian data is not broken 
down on a monthly basis, so it is not possible to determine whether the seizures in Cartagena were conducted 
before or after the re-introduction of the ports of entry measure. 
933 Panama's second written submission, para. 196. 
934 Panama's first oral statement, para. 179.   
935 Panama's first oral statement, pa ra. 7.  Furthermore, Panama notes that, although not subject to the 
port of entry measure, vehicles and vehicle parts accounts for 16.2 per cent of seizures.  In contrast, footwear 
accounted for only 9.2 per cent of seizur es between 2005 and 2007.  See Panama 's first oral statement, para. 9,  
Panama's second written submission, para. 109. 
936 Chart 3 of Exhibit COL-38. 
937 Chart 3 of Exhibit COL-38. 
938 Panama's second written submission, paras. 179-180. 
939 Exhibit COL-17;  Colombia's first written submission, paras. 197 and 199. 
940 Panama's first oral statement, para. 8. 
941 Panama's first oral statement, para. 8. WT/DS366/R 
Page 218  
 
  the amount of contraband (and therefore revenue for gone) in absolute terms is higher than that of 
Panama.
942  
7.576  The Panel will thus assess the extent to which the ports of entry measure contributes to the 
realization of the end pursued in light of the quantitative and qualitative assessment advanced by 
Colombia.  Preliminarily, the Panel notes that Co lombia has not presented any evidence whether the 
measure contributes to combating problems alle gedly related to contraband, such as money-
laundering and drug trafficking.  The Panel analys is will thus be limited to corroborating whether 
Colombia has succeeded in establishing that the measure is apt to contribute to tackling under-
invoicing and smuggling, which Colombia consider s to be linked to illicit activities, including 
problems with money-laundering and drug traffick ing.  The Panel will not address the broader 
question of whether the measure is also apt to combat money-laundering and drug trafficking.  
7.577  Colombia has presented a series of quantitative i ndicators to confirm the effectiveness of the 
ports of entry measure.  Colombia argues that an appropriate way of monitoring the effectiveness of 
the measure is to analyse the "implicit price", or th e declared price per unit.  According to Colombia, 
an increase in the implicit price demonstrates that the ports of entry measure is effective in addressing 
under-invoicing, since under-valuation is being curtailed due to increased controls.943  Based on data 
submitted as Exhibit COL-42, Colombia contends that implicit prices for textiles, apparel and 
footwear have increased during the periods of application of the measure.944  For Colombia, this 
demonstrates that the measure is effective in combating under-invoicing.945   
7.578  The Panel will evaluate whether implicit prices  for textiles, apparel and footwear have 
increased during the imposition of the ports of entry measure.  Before addressing Colombia's analysis 
of the data, the Panel would like to comment on se veral observations concerning the accuracy of the 
data.  The Panel notes that Colombia's analysis of  the evolution of the implicit price draws almost 
exclusively from data submitted in Exhi bit COL-42 and, in particular, from the Boletín 12 
Seguimiento Resolución 7373 / 2007  (hereinafter "Bulletin 12").946  However, a critical portion of the 
imports arriving to Colombia from Panama, i.e. text ile, apparel and footwear imports originating in 
                                                      
942 Panama's comment of Colombia's response to Panel question No. 138. 
943 Colombia's second written submission, para. 235;  Co lombia's second oral statement, paras. 60-62. 
944 Colombia's second written submission, para. 235. 
945 See Colombia's second written submission, paras. 235-242.  The Panel wishes  to note that it does 
not agree with Colombia's account of the evolution of the implicit price.  Thus, Colombia's proposition that 
implicit prices of textiles imports arriving from Panama  ranged from US$1.01 to US$0 .84 during the period of 
application of the port of entry measure  is not reflected by the numbers provided by Colombia in 
Exhibit COL-42 and Exhibit COL-61.  In fact, during the periods of application of the measure, the implicit price of textiles coming from Panama r eached such low levels as 0.12 in December 2005, during application of 
the restrictions on ports of entry, and 0.61 in May 2008, during the application of the ports of entry measure.   
Colombia's assertion that implicit prices of textiles good s "just prior to the imposition of the first ports measure 
were at a range of 0.19 to 0.30" is not supported by the data.  According to Exhibits COL-42 and COL-61 the 
implicit prices during the months preceding the first measure were: US$0.26 (May-2005);  US$0.35 
(April-2005);  US$0.36 (March-2005);  US$0.39 (Feb-2005);  US$0.25 (Jan-2005).  There are also some minor discrepancies between the numbers presented by Colombia and the figures appearing in the databases with 
respect to apparel. Thus, during the application of the challenged measure, implicit prices ranged from US$1.98 
(July-2007) to US$4.15 (Sept-2007),  and not a range of US$1.95 and US$3.89 as stated by Colombia. 
946 See Colombia's second written submission, paras. 234-241. Bulletin 12 contains monthly data for 
the period 2004-2008 on the value, volume and implicit price of imports of textiles, apparel and footwear arriving from Panama and other points of departure (Statistical Annex No. 4).   Bulletin 12 charts the evolution 
of these variables over time (Charts 1-12).  In addition, data is included on  the value, volume and implicit price 
of imports by port of entry (Table 2 and Statistical Annexes Nos. 5, 6 and 14) and by type of importer (Table 3 and Statistical Annex Nos. 7, 8, 11 and 12).  At the Panel's request, Colombia additionally submitted 
Exhibit COL-61, which provi des the value, volume and implicit pr ice for each of the subject goods, on a 
monthly basis, in total and per port of entry.  WT/DS366/R 
 Page 219 
 
 
  China, seem to have been excluded from  Bulletin 12.947  In response to an inquiry from the Panel, 
several months after submitting Bulletin 12, Colombia  informed the Panel that imports arriving from 
Panama of Chinese origin were reflected in the data, contrary to labels and column headings 
indicating otherwise.948  The Panel is troubled by Colombia's explanation in two respects.  As a 
procedural matter, Colombia informed the Panel of this significant purported mislabelling of data at a 
very late point in the proceedings, and only then in comments in response to a letter submitted by 
Panama.949  Substantively, this late correction seems to contradict the data presented in earlier 
submissions.  In this respect, the Panel notes that  the alleged mistakes in column headings in 
Bulletin 12 are reproduced in a section of the Report specifically aimed at explaining the methodology 
adopted for the whole Report.950   
7.579  Notwithstanding the aforementioned concerns with the accuracy of evidence submitted by 
Colombia, the Panel will nevertheless proceed to as sess Colombia's interpretation of the data.  As 
Colombia itself acknowledged, examining and inte rpreting the statistics in Exhibit COL-42 is a 
complex task due to the "many intervening factors that must be taken into account".951  Indeed, 
                                                      
947 Indeed, Section 3 of Boletín 12. Seguimiento. Resolución 7373/2007, p. 5, states that, following the 
methodology established in 2005, the Report presents a se ries of charts for imports of textiles, apparel and 
footwear that: (a) arrived from Panama but did not originate in China;  (b) originated in China but did not arrive 
from Panama;  and (c) originated in countries other than China and arrived from countries other than Panama (Bulletin 12 reads in relevant part as follows: " A continuación se describe el comportamiento de las 
importaciones de los tres productos sensibles (textile s, confecciones y calzado) con la metodología que se 
introdujo en julio de 2005... En tal sentido se han construido cuadros y gráficos de seguimiento en donde se muestran las importaciones mensuales desde el 2005 para. estos tres productos sensibles de la siguiente 
manera: importaciones con origen China, con todas las procedencias menos Panamá;  Importaciones 
procedentes de Panamá, sin origen China;  y las demás importaciones procedentes del resto del mundo, sin origen China ni procedencia Panamá. De esta manera se logra captar el comportamiento de las importaciones 
con criterios que aíslan y clarifican las tendencias de l comercio con China (según origen), Panamá (según 
procedencia) y el resto del mundo (según procedencia) para. estos tres tipos de producción. ") 
(Exhibit COL-42).  The column headings read as follows: "China (origin)", "Panama (arriving from, not 
originating in China)", "Rest of the World".  In Spanish, the columns read as follows: " China (origen)";  
"Panamá (Procedencia, sin origen China)" and "Resto del Mundo ") (See Statistical Annex No. 4, 
Exhibit COL-42). 
948 According to Colombia, certain columns in the provided table were mislabelled, but in fact included 
imports arriving from Panama of Chinese origin.  Colombia explained that subsequent versions of Bulletin 12 
had been amended to clearly indicate the inclusion of Chinese-origin goods. (Comments by Colombia in respect 
of Panama's letter of 15 October 2008, p. 3). 
949 See Communication to Colombia requesting its comments on an unsolicited letter submitted by 
Panama.  Through an unsolicited letter submitted to the Panel, Panama commented on Colombia's interpretation 
of certain arguments made by Panama in relation to the indicative prices measure.  In response to a request for comments from the Panel, Colombia addressed Panama's comments;  however, in addition, Colombia provided 
additional comments regarding monthly data on import volumes and value for subject textiles, apparel and 
footwear, which had been submitted earlier. 
950 See footnote 947.  In addition, the Panel disagrees with the arguments set forth in Exhibit COL-68, 
attached to the note.  The DIAN's Director proposes in th at exhibit to analyse the implicit price in four periods: 
January 2004 – June 2 005 (when no ports of entry restrictions we re in place);  July 2005 – November 2005 
(during imposition of the first set of restriction on port of entry);  December 2006 (fo llowing removal of the first 
set of restrictions) and July 2007 until present (see Exhibit COL-68, p. 3).  The Panel notes that the first measure 
was repealed in 1 November 2006, and not in December 20 06, as suggested by the  time periods put forward by 
the DIAN's Director.   In fact, th e original measure imposing restrictio ns on ports of entry was repealed by 
Resolution No. 13034 of 31 October 2006.  Article 2 of this Resolution states that the Resolution "shall take 
effect from the date of its publication for goods dispatched  to Colombia subsequent to its entry into force" (See 
WT/DS348/10, p. 4).  The Resolution was published on 1 November 2006 (see "nota de vigencia" No. 70 of 
Resolution No. 4240).  Accordingly, in the Panel's view, the relevant periods for comparison should be: January 
2004 – June 2005;  July 2005 – October 2006;  November 2006 – June 2007;  and July 2007 – present.   
951 Colombia's second written submission, para. 242;  Colombia's  second oral statement, para. 62. See 
also Panama's second oral statement, paras. 70-71. WT/DS366/R 
Page 220  
 
  Colombia argues that the ports of entry measure is "part of a comprehensive set of measures to 
combat this persistent problem of fraudulen t under-invoicing and contraband".  According to 
Colombia, this "set" of measure includes, the requi rement to present an advance import declaration; 
the requirement to present an export declaration or similar documents in support of the import 
declaration; restriction on domestic transit; creation of the position of Customs Observer;  incorporation of the Fiscal and Customs Policy in th e organizational structure of DIAN; strengthening 
of cooperation between various customs administratio ns; adoption of indicative and references prices 
as a control mechanism; additional documentary re quirements that accompany the invoice; and the 
conclusion of agreements with other countries' cust oms administrations and with the private sector.
952  
Preliminarily, the Panel is concerned as to what individual effect this wide array of policies 
implemented in addition to the requirements with in the ports of entry measure may have on the 
evolution of implicit prices calculated for subject textiles, apparel and footwear imported into 
Colombia.  Additionally, the Panel notes that ma ny market factors influence implicit prices, beyond 
the effects of the various measures imposed by Colombia.953 
7.580  In the Panel's view, Colombia has failed to set  forth a methodology capable of controlling all 
the factors that influence implicit prices.  In th e absence of an adequate methodology, the Panel is 
unable to rely on provided data on the implicit va lue of subject goods imports  in order to determine 
the contribution of the ports of entry measure to  reduce the incidence of under-invoicing and/or 
smuggling.   
7.581  In any case, the Panel is of the opinion that th e data submitted by Colombia does not show a 
strict correlation between the implementation of the ports of entry measure and the implicit price, but 
is inconclusive.  As Colombia itself recognized, not all the data in Exhibit COL-42 points in the same 
direction.954 Indeed, an analysis of the data in Exhib it COL-42 and of the more detailed and updated 
data in Exhibit COL-61 reveal many "anomalies" in th e evolution of the implicit price, in clear depart 
from Colombia's general conclusion that the implic it prices of subject products have increased during 
the periods of application of the port of entry measures.955  Colombia has not provided any 
                                                      
952 Colombia's response to Panel question No. 149. 
953 To illustrate the problems inherent in interpreting implicit price data provided by Colombia in 
isolation of other market factors, such as changes in consumer tastes or demand, the Panel, for example, notes  
the possible effect on implicit price that may arise fro m a change in the composition of the products imported 
within the category of  footwear. The Panel notes for instance, that the product cat egory "footwear" as 
designated broadly by Colombia, includes a wide array of specific products, falling within a wide range of 
prices.  According to the estimated values assigned by the DIAN, the category "footwear" comprises goods with prices ranging from US$1.40 to US$63.40  (See Exhibit PAN-14).  Thus, an increase in the volume of the 
imported products at the latter price would have an upward influence on the "implicit price" for the average 
price per unit for the whole footwear category.  However, this increase would not necessarily result from any improvement in customs enforcement. 
954 Colombia's second written submission, para. 242;  Colombia's second oral statement, para. 62. 
955 For instance, the Panel notes that the implicit pri ce of textiles arriving from Panama did not surpass 
the implicit price of textiles arriving from rest of the world until a period when restrictions were not applied: 
December 2007 – July 2007, ex cept for one month during the imposition of Colombia's first set of restrictions 
(September 2006), in which the imp licit price of goods arri ving  from Panama briefly exceeded the one of 
textiles arriving from the rest of the world .  While implicit prices of apparel arriving from Panama increased 
dramatically during the two ports of entry measures, th ere was an spectacular collapse of the implicit price 
during the period of application of the first measure restricting port of entry (August 2006).  In that one-month 
period, the implicit price plunged from US$2.77 in July 2006 to US$0.39.  Subsequently, the implicit price 
surged during the period following Colombia's original restriction and prior to imposition of the ports of entry measure, from US$0.21 in January 2007 to US$2.06 in April 2007.  This significant fluctuations cannot be 
explained as a result of a general trend,  as evidenced by the fact that the im plicit price for apparel arriving from 
the rest of the world stayed relatively constant during this period (During the period August 2006 – April 2007, the implicit price for apparel imports oscillated between US$0.49 and US$0.88).  Finally, the Panel also notes a 
sharp increase in the implicit price of footwear imports arriving from Panama during both periods where 
restrictions were imposed (July 2005–October 2006 and July 2007–present).  As in the case of apparel, a sharp  WT/DS366/R 
 Page 221 
 
 
  explanation for the possible causes of these anomalies.   In the absence of explanation, the Panel lacks 
the necessary elements to assess wh ether these irregularities arise from the ineffectiveness of the ports 
of entry measure, or to the fact that other interv ening variables may have influenced these prices.  The 
Panel therefore finds that there is no correlation, mu ch less causal link, demonstrated between implicit 
prices and the ports of entry measure.  For the reasons discussed in the preceding paragraphs, the 
Panel considers that Colombia has failed to substan tiate its statement that an analysis of the implicit 
price of subject goods arriving from Panama demonstr ates that the measure is effective in combating 
under-invoicing.  Even setting aside concerns on wh ether or not the data submitted by Colombia 
includes imports of Chinese origin arriving from Panama, the Panel does not consider Colombia had 
provided evidence sufficient to conclude that unde r-invoicing has diminished during the periods of 
implementation of the port of entry measure.   
7.582  The Panel will also address Colombia's argument  that the effectiveness of the measure is 
demonstrated through the "significant increase in contraband related seizur es … with respect to 
textiles products from Panama in 2007 compared to 2006".956  In order to substantiate this claim, 
Colombia submitted Exhibit COL-31, which contains  the total value of seizures of textiles products 
for the years 2006 and 2007, and Exhibit COL-18, which details the total value of seizures per 
category of product for the same years.  Colombia su bmits that the total number  of seizures of textiles 
nearly doubled from 2006 to 2007.957  In Colombia's view, this subs tantial increase demonstrates that 
the port of entry measure is "clearly having a pos itive effect in terms of combating contraband".958   
7.583  The Panel observes, as pointed out by Panama, that the information contained in Exhibit 
COL-31 and Exhibit COL-18 is not provided on a monthly basis.  Hence, it is not possible to determine whether the seizures were conducted before  or after the reintroduction of the measure in 
July 2007.  Moreover, the Panel observes that th e value of textiles imports arriving from Panama 
increased by 50 per cent between 2006 and 2007.
959  An important portion of the increase in seizures 
could therefore be attributable to the increase in trad e, rather to the strengthening of customs controls.  
In any case, the Panel observes th at the increase in seizures of footwear goods (around 12 per cent) 
was smaller than the increase in te xtile seizures.  More importantly, the Panel notes that textiles 
accounted for only 13 per cent and 18 per cent of the total value of subject goods imports arriving 
from Panama in 2006 and 2007, respectively, whil e apparel imports represented 38 per cent and 
42 per cent of the total value of subject imports.960 However, Colombia has not provided any data 
regarding seizures of apparel.  In light of these di screpancies, the Panel considers that Colombia has 
                                                                                                                                                                     
increase in the implicit price of footwear arriving from Panama occurred during the period in-between the two 
measures, from US$1.41 in Jan-2007 to US$8.12 in May-2007.  Again, the implicit price for footwear arriving from the rest of the world shows a much softer increase: it grew from US$3.85 in January 2007 to US$5.18 in 
March 2007 and then fell to US$4.66 in May 2007. 
956 Colombia's first written submission, para. 346. 
957 Colombia's first written submission, para. 346,  Colombia's second written submission, para. 232. 
958 Colombia's second written submission, para. 230. 
959 See Exhibit COL-61.  Based on data presented in that exhibit, the Panel calculates that the total 
value of imported textiles arriving from Panama was US$18,811,236 in 2006 and US$28,099,040 in 2007. 
960 Exhibit COL-61.  Based on data in that exhibit, the Panel has determined the following distribution 
by category of product: 
Total value of subject goods arriving from Panama - distribution by 
category of product (2006 and 2007) 
 2006 2007 
Product Value US$ % Value US$ % 
Textiles 18,811,237.00 13 28,285,929.00 18 
Apparel 56,525,328.00 38 66,951,932.00 42 
Footwear 71,984,506.00 49 63,366,809.00 40 
 WT/DS366/R 
Page 222  
 
  failed to demonstrate that the value of seizures of  subject goods (which includes textiles, but also 
footwear and apparel) has increased since the imposition of the measure at issue. 
7.584  Finally, Colombia submits that the "level of distortion", i.e. the difference between the value 
of exports reported by Panama and the value of im ports reported by Colombia, for textiles, apparel 
and footwear has decreased since the introduction of  the measure, thus demonstrating the measure has 
been effective at reducing under-invoicing and smuggling.
961  The Panel considers that its approach 
used when assessing the pertinence of Colombia's impl icit prices analysis and the number of seizures, 
is also applicable to the examine Colombia's argu ments concerning trade distortions.  First, the Panel 
notes that Colombia calculates trade distortions on an annual basis.962  Thus, it is not possible to 
determine the extent to which the alleged decrease in  this indicator correlates with the introduction of 
measures imposed on goods arriving from Panama ( both in the periods July 2005-October 2006 and 
July 2007-present).  Second, as noted many variabl es beyond the ports of entry measure may affect 
the evolution of trade distortions, the application of indicative prices being the most obvious.963  The 
Panel therefore concludes that Colombia has not dem onstrated that the alleged diminution on the level 
of distortions was caused by the imposition of the ports of entry measure.964 
                                                      
961 Colombia's second oral statemen t, para. 63.  Colombia calculates trade distortions as the difference 
between the data on Panamanian exports presented in Exhibits PAN-56 (Re-exports from the Colon Free Zone 
to Colombia, for the goods under HS Chapters 50-64, between 2000-2007) and the figures on Colombian imports in Exhibit COL-45 (Official Statistics, Imports  of Textiles, Apparel and Footwear from Panama, 
between 2000-2008).  Based on these two exhibits, the Panel has determined trade distortions as follows:   
Difference between subject goods exports to Colombia reported by Panama 
and subject goods imports from Panama rep orted by Colombia – thousands of US$ 
  2000 2001 2002 2003 2004 2005 2006 2007 
Values reported by Panama 241,400    231,255   229,526   199,458   324,114   413,290    483,587   503,461 
Values reported by Colombia  46,172      69,847     57,869     53,625     75,312   104,926    132,854    158,300 
                  
Trade distortions 195,228   161,408   171,657   145,833   248,802   308,364    350,733  345,161 
 
962 See Exhibit COL-57. 
963 The Panel acknowledges that, as Colombia explained in its responses to Panel questions Nos. 127, 
128 and 129, Colombian official statistics reflect the value declared by the importer and not the value based on 
the indicative price.  Regardless, the Panel is of the opinion that there is a strong incentive for importers to 
declare a value above the indicative pr ice as a result of the imposition of th e indicative prices measure.  The 
Panel therefore recognizes that the imposition of the i ndicative prices measure may have affected the prices 
declared by the importers.  Furthermore, the Panel notes that the amount of "trade distortion" is inherently 
affected by two factors: (a) the value declared by Panamanian exporters;  and (b) the value declared by Colombian importers.  It is possible that only the latter fi gure may be affected by the po rts of entry measure.  In 
this respect, Colombia has not demonstrated the extent to which the alleged decrease in trade distortions is 
attributable to the value declared to customs officials upon arrival to Colombia, and not to a relative decline in the prices declared by Panamanian exporters. 
964 According to Exhibit COL–16, the distortion that  corresponds to textiles, apparel and footwear 
represents US$350,996,000 out of a total distortion for all products of US$844,858,000.  The Panel is concerned 
about the accuracy of the data provided by Colombia in this exhibit.  First, Colombia has not provided a source 
of the data presented therein.  Second, that data contai ned in this exhibit seems to be inconsistent with data 
presented in Table 9 of Exhibit COL-48.  For instance, Exhibit COL-48 shows that  "contrabando abierto" of 
Máquinas y aparatos eléctricos  for the year 2006 was US$192,337,000, while, Exhibit COL-16 states an 
amount of US$2,430,000.  Third, Exhibit COL-16 also seems to be inconsistent with Exhibit COL-51.  There are discrepancies among the figures of contrabando  and under-invoicing of goods classifiable under HS chapter 
64 in 2006 presented in Exhibit COL-51 (US$5,175,000 and 119,734,000, respectively), and data included in 
Exhibit COL-16 (US$5,204,000 and US$98,666,000, respectively).  Fourth, the figure corresponding to "sobrefacturación " for the same products and year in Exhibit COL-51, i.e. US$21,073,000, exactly matches 
figures in Exhibit COL-16 as "contrabando técnico ".  Finally, as noted by Panama in its second written 
submission, para. 111, a discrepancy exists between the figure cited in Exhibit COL-16 as the value of imports  WT/DS366/R 
 Page 223 
 
 
  7.585  For the reasons set forth above, the Panel cons iders that Colombia has failed to meet its 
burden to substantiate that the measure at issue has contributed to the fight against smuggling and 
under-invoicing.  In fact, as Panama noted, Colomb ia reported during these proceedings that between 
July 2005 and October 2006 the pe rcentage of contraband trade arriving from Panama exceeded 
84 per cent in general and 89 per cent in the case of tex tiles, at a time when a restriction highly similar 
to the ports of entry measure at issue was in force.965  This appears to suggest that the ports of entry 
measure does not contribute to reducing contraband and smuggling.966 
7.586  In addition to its consideration of implic it price data, contraband seizures and trade 
distortions, Colombia has advanced arguments of a qualitative nature to demonstrate that the measure 
is effective in combating contraband.  Colombia cont ends that, due to its "thrust and architecture",  the 
ports of entry measure is apt to  contribute to securing better compliance with Colombia's customs 
laws.967  Colombia recalls that the Appellate Body has stated in Brazil – Retreaded Tyres  that a 
demonstration of such contri bution could consist of "qualitative reasoning based on a set of 
hypotheses that are tested and s upported by sufficient evidence".968  The Panel notes, however, that 
Colombia has not provided evidence to demonstrat e increased compliance arising from the measure, 
but instead speculates that this must be the case.  As noted above, evidence on price data, seizures and 
trade distortions has not demonstrated the measure is effective.   
7.587  Furthermore, the Panel considers that the scope  of application of the port of entry measure, 
both in terms of the categories and origin of subject  goods, entails structural shortcomings that limit 
its potential to contribute to tackling problems w ith smuggling and under-invoicing.  Exhibit COL-38 
shows that Colombia had greater trade distortions  in 2006 with other trading partners, such as the 
United States (US$2,902 million), ALADI (US$2,500 million) and Europe (US$1,837 million), than 
with Panama (US$906 million).969  In fact, Exhibit COL-38 shows that distortions with Panama in 
2006 were almost exclusively related to " contrabando abierto ", and not to other trade-related 
problems that the measure also aims to tackle, such as " contrabando técnico ", "subfacturación ", 
"sobrefacturación " and " cambio de procedencia ".970  
7.588  Without further evidence that the measure has enhanced enforcement related to problems of 
under-invoicing and contraband, the Panel is not able to conclude that the ports of entry measure has 
contributed in the past or currently contributes to combating customs fraud and contraband in 
Colombia. 
                                                                                                                                                                     
in 2006 (US$415,550,000) and the figure cited in the ta ble included in Colombia's first written submission, 
para. 193 (US$412,091,000). 
965 Colombia's first written submission, para. 196.  Exhibit COL-18. 
966 Despite its reference to the reports that the percentage of contraband trade arriving from Panama 
exceeded 84 per cent in general and 89 per cent in the ca se of textiles between July 2005 and October 2006, the 
Panel declines to place too much emphasi s on the figures.  The Panel notes that these figures concern only one 
of the three product categories and concern only the period between July 2005 and October 2006.  In addition, 
the Panel was not able to determine the basis for calculating these figures. 
967 Colombia's second written submission, para. 229. 
968 Colombia's second written submission, para. 230. 
969 Table 7 of Exhibit COL-38, p. 15 
970 Table 4 of Exhibit COL-38, p. 10.  The Panel additionally notes Panama's argument that evidence 
submitted by Colombia in Exhibit COL-16 demonstrates, for instance that " máquinas y aparatos eléctricos " are 
more frequently connected with under-invoicing practices than are textiles, apparel and footwear. Despite this 
fact, Panama notes that the ports of entry measures does not apply to " máquinas y aparatos eléctricos ".  
Colombia responded in its response to Panel question No. 48 that it has imposed a series of measures, including 
most notably, the conclusion of "con traband agreements" with the private sector, in order to closely monitor 
under-invoicing problems with " máquinas y aparatos eléctricos ".   According to Colombia, this type of 
agreeement provides an effective way to address contraband occuring in this section,  due to the limited number 
of importers and distributors of such products (only six), and their clear willigness to cooperate and fight 
contraband.  While declining to decide on this issue, the Panel notes that Colombia did not submit any evidence 
to support its reasoning. WT/DS366/R 
Page 224  
 
  The restrictive impact of the measure
 
7.589  The Panel will next consider the restrictive impact of the measure on imported goods in its 
evaluation of whether the ports of entry measure may be considered "necessary" within the meaning 
of Article XX(d).  In the context of this assessment,  the Panel would first like to recall its finding that 
the ports of entry measure constitutes a prohibited r estriction on importation under Article XI:1 of the 
GATT 1994 .971  More specifically, the Panel established that  the ports of entry measure has a limiting 
effect on imports arriving from Panama, and thus co nstitutes a restriction on importation.  While the 
Panel's analysis under Article XI:1 considers the d esign, structure and architecture of the measure and 
its potential to restrict importation, the Panel will he re examine the extent of the restrictive impact on 
trade resulting from the measure's application. 
7.590  Colombia argues that the various requirements in the ports of entry measure have not had a 
significant negative impact on legitimate trade, while the measure overall has been effective in 
combating smuggling and under-invoicing.972  In support of that view, Colombia notes that the value 
of subject imports arriving from Panama and th e CFZ increased during the implementation of the 
measure.973 In this respect, Colombia observes that the panel in Dominican Republic – Import and 
Sale of Cigarettes  considered relevant the fact that the tax stamp requirement did not prevent 
Honduras from exporting cigarettes to the Dominican Republic and that its exports had increased 
significantly over recent years.  Accordingly, Colombia mentions, the Panel assumed "that the 
measure has not had any intense restrictive effects on trade."974   
7.591  Furthermore, Colombia contends that prior to  the imposition of the measure in 2007, trade 
flow data supports the conclusion that Barranquilla and Bogota were important  ports for Panamanian 
traders.  As no negative effects have arisen from the measure, due to the fact that the value of imports 
increased during the measure's implementation975, Colombia argues that the ports of entry measure 
should not be considered as having an intensive restrictive effect on trade.976   
7.592  Colombia offers additional qualita tive explanations on why the por ts of entry measure has not 
adversely affected textile, apparel and footwear im ports from Panama.  Colombia offers a series of 
reasons why the two available ports, Barranquilla a nd Bogota, are to be considered as the most 
convenient ports of entry for subject goods arrivi ng from Panama.  Accord ing to Colombia, these 
ports are "among the most modern and important ports  of Colombia"977 and the closest in proximity to 
the CFZ and main markets of Colombia.978  Moreover, they are staffed with customs officials 
specialized at handling contraband concerns and they  have a more substantia l industrial and transit 
                                                      
971 See Section VII.E. 
972 Colombia's first written submission, para. 351. 
973 Colombia's first written submission, para. 356;  Colombia's second written submission, para. 258. 
974 Panel Report, Dominican Republic – Import and Sale of Cigarettes , para. 7.215. 
975 Colombia's first written submission, para. 356,  Colombia's second written submission, para. 258. 
976 Colombia's first written submission, para. 357.  According to Colombia, the closure of other ports 
logically has not had a significant trade impact on export s from Panama.  Colombia notes in 2004, for instance, 
that Buenaventura, Barranquilla and Bogota were three principal ports for imports from Panama, constituting 
63 per cent of net weight of imports of subject goods, and 87 per cent of value (Colombia's second oral 
statement, para. 67).  According to Colombia, Bogota a nd Barranquilla rank as the number one and two ports for 
footwear, the number one and three ports for apparel,  and the number two and three ports for textiles 
(Colombia's second written submission, para. 138;  Exhibit COL-28). 
977 Colombia's second written submission, para. 137.  In particular, Colombia submits that Barranquilla 
has a more substantial  industrial and transit network including high  capacity cargo processing, an airport, 
financial, commercial and telecommunication services, in  comparison to Buenaventura seaport.  Colombia 
points out that Barranquilla seaport operates 24 hours per day as well. 
978 Colombia's second written submission, paras. 1 35 and 137.  According to Colombia, more than 
80 per cent of goods imported from Panama to Colombia arrive from the CFZ, which is situated along the 
Atlantic ocean.  WT/DS366/R 
 Page 225 
 
 
  capacity.979  Foremost, Colombia submits that the ports of  entry measure has not restricted trade as the 
measure by design allows entry of textile, apparel and footwear at the two ports that are closest in 
proximity to the CFZ and main market s of Colombia – Bogota and Medellin.980 
7.593  In addition to these factors, Colombia argues th at the impact of the ports of entry measure 
must be assessed in light of a series of exempti ons existing in the measure, which are linked to the 
objective pursued by the measure.  Under the ports  of entry measure, exception from the requirement 
to enter at Bogota or Barranquilla is provided for go ods consigned to the State or territorial entities; 
imports effected for processing or assembly, trave llers, postal traffic or ur gent consignments; goods 
that are trans-shipped; goods that are consigned to  industrial users of free trade zones whose economic 
activity involves the industrial processing of those goods ; goods that enter Leticia, or imports in San 
Andrés, Providencia or Santa Ca talina; and goods imported by "Permanent Customs Users" or 
"Highly Exporting Users".981  In regard to this last category, Colombia points out that the "Permanent 
Customs Users" represented 62 per cent of the va lue of Panamanian trade in textiles in 2006, 
50 per cent of Panamanian trade in footwear a nd 48 per cent of Panamanian trade in apparel.982   
7.594  Panama disputes Colombia's interpretation that  the ports of entry measure does not have a 
significant negative impact on legitimate trade.983  With respect to the alleged increase in the volume 
of imports during the period of impos ition of the measure, Panama disagrees with Colombia's view of 
what constitutes "restrictive effects on trade".  Pana ma cites to findings by the Appellate Body in 
Japan – Alcoholic Beverages II  that "it is irrelevant that the 'trade effects' of the [measure at issue], as 
reflected in the volumes of imports, are insignificant or even non-existent".984  Accordingly, for 
Panama, the "restrictive effects" referred to by the Appellate Body in Korea – Various Measures on 
Beef must be viewed as meaning the effects on the conditions of competition of the imported products 
rather than the restrictive effects on the trade flows of imported goods.985  Notwithstanding this view, 
Panama disagrees with Colombia's statement that im ports of textile, apparel and footwear goods from 
Panama have increased under the ports of entry m easure.  According to Panama, the volume of 
imports of such goods declined from 67,486 metric tonnes in 2006 to 60,871 metric tonnes in 2007.986  
7.595  Panama further argues that data relied on by Colombia in Exhibit COL-28, which 
incorporates data from 2006 and 2007 is unreliable, as r estrictions on ports of entry were in place for a 
portion of the time under review.  Thus, trade vol umes and values today cannot be compared with 
figures that were affected by the previous ports of  entry measure.  Moreover, Panama notes that the 
measure restricts trade by limiting access to ports which have been important points of access for traders of goods from Panama.  Based on data from 2003–2004, before any restrictions were imposed 
on ports of entry, Panama argues that Cartagen a accounted for 41.3 and 40.5 per cent, whereas 
Buenaventura accounted for 22.1 and 22.4 per cent, respectively.
987  Furthermore, even though trade 
                                                      
979 Colombia's second written submission, para. 137. 
980 Colombia's second written submission, para. 137.  Colombia has also offered various justifications 
as to why Buenaventura was not a logical selection to include as an available port under the ports of entry 
measure.  Broadly, Colombia argues that the efficiency  of Bogota and Barranquilla exceed that of Buenaventura 
with respect to customs control.  In addition, Colombia reiterates that more than 80 per cent of goods imported 
from Panama to Colombia arrive from the CFZ, situated  along the Atlantic Ocean, as opposed to the Pacific 
Ocean, to which Buenaventura is nearest.  Finally, Co lombia cites to a number of documented structural 
problems with Buenaventura, including an inadequate roadway connecting Buenaventura with the national 
highway system and a concentration of guerrilla activities and security problems (Colombia's response to Panel 
question No. 58;  Exhibit COL-58). 
981 Resolution No. 7373 (Exhibit PAN-36);  Resolution No. 7637 (Exhibit PAN-36). 
982 Colombia's second written submission, paras. 255-256. 
983 Panama's second written submission, paras. 199-206. 
984 Panama's first oral statement, para. 43,  Panama's second written submission, para. 131. 
985 Panama's second written submission, para. 206. 
986 Panama's response to Panel's question No. 136;  Exhibit PAN-56 (Revised). 
987 Exhibit PAN-71. WT/DS366/R 
Page 226  
 
  may have continued between Panama  and Colombia since restricti ons were first imposed, Panama 
stresses that trade may well have increased by ev en greater quantities had the measure not been 
enacted at all.
988 
7.596  The Panel will therefore look at to what exte nt the ports of entry measure affects trade 
between Panama and Colombia.   
7.597  The Panel agrees with the panel in Dominican Republic – Import and Sale of Cigarettes989 
that the fact that exports of the subject products increased during the application of the measure at 
issue is one appropriate parameter to establish whether the measure at issue has a restrictive impact on 
relevant trade, provided it is put in its proper context.  In this respect, as argued by Panama, a comparison of the import data of subject goods befo re and after the imposition of the ports of entry 
measures may not by itself prove helpful if that da ta mostly reflects the import volumes pertaining to 
the time where the prior ports of entry restrictions  were in force.  Indeed, the data presented by 
Colombia in Exhibit COL-28 incorporates data from 2006 and 2007, during which time restrictions were in place.  Moreover, the Panel considers that  the relevant question is not whether Panamanian 
imports increased in absolute terms, but whethe r or not importation was suppressed, in other words, 
whether the imports would have increased to an ev en greater extent had the measure not been in 
place.  The Panel notes that Colombia has not pr ovided any analysis to address the question of 
whether the measure had a suppressing effect or not. 
7.598  The Panel considers the growth (in terms of va lue) of imports arriving in Colombia from the 
points of departure from the rest of the world (which are thus not subject to the ports of entry measure) provides a useful point of comparison in assessing what might have been a reasonable 
growth rate for imports arriving from Panama.
990  Chart 1 below depicts graphically the growth in  
aggregate value of textiles, apparel and footwear arriving from Panama in comparison to growth in 
aggregate value from the rest of the worl d, between January 2004 and July 2008.991  As evident from 
Chart 1, abrupt fluctuations in the value of imports arriving from Panama are present both during 
periods of application of restriction on entry, and during periods without restriction, and they are of a 
similar nature than in the case of imports from th e rest of the world making it difficult to discern any 
general pattern.  Accordingly, th e Panel is unable to establish on the basis of the evidence submitted 
by the parties whether the increase in the value of textiles, apparel and footwear imports arriving from 
Panama to Colombia would have been greater in the absence of the ports of entry measure. 
                                                      
988 Panama's comments on Colombia's response to Panel question No. 158. 
989 Panel Report, Dominican Republic –Import and Sale of Cigarettes , para. 7.215. 
990 The Panel has opted to consider rates of import growth in terms of value for all subject textiles, 
apparel and footwear arriving from the rest of the world, in comparison to imports arriving from Panama.  Thus 
the Panel considered the aggregated value of textile, apparel and footwear imports.  The Panel considers it 
impractical to make an overall comparison of growth rates in terms of import volumes however, due to the fact 
that units of import volumes are different among textile, apparel and footwear imports. 
991 Chart 1 is based on data provided in Exhibit COL-61.  WT/DS366/R 
 Page 227 
 
 
  Chart 1 - Value of goods classifiable under HS 50-64 (Panama and Rest of World)
 (Source:  Exhibit COL-61)
0.0010,000,000.0020,000,000.0030,000,000.0040,000,000.0050,000,000.0060,000,000.0070,000,000.0080,000,000.0090,000,000.00
Jan-04
Mar-04
May-04
Jul-04 Sep-04
Nov-04
Jan-05 Mar-05May-05Jul-05 Sep-05 Nov-05
Jan-06 Mar-06 May-06Jul-06
Sep-06
Nov-06
Jan-07
Mar-07 May-07Jul-07
Sep-07
Nov-07
Jan-08
Mar-08
May-08
Jul-08
Panama (Value FOB US($)) Rest of World (Value FOB US($))
 
 
7.599  The Panel recalls that importation of subject goods from Panama is not absolutely prohibited, 
but entry is restricted to two out of 11 eligible ports available for imports of textile, footwear and 
apparel from points of departure other than Panama.  Panama argues that the measure restricts trade by restricting access to those ports which have prev iously been used heavil y by traders arriving from 
Panama.  Based on data from 2003–2004, for instance, before any restrictions were imposed on ports 
of entry, Panama submits that Cartagena accounted for 41.3 and 40.5 per cen t, whereas Buenaventura 
accounted for 22.1 and 22.4 per cent, respectively.
992  Colombia asserts that the ports of Bogotá and 
Barranquilla were very important in the importati on of the subject goods from Panama prior to the 
implementation of the ports of entry measure.993  Based on the data submitted in Exhibit COL-28994, 
Colombia advances a series of propositions to suppor t this statement.  The Panel will analyse each of 
these propositions below.  In doing so, the Panel will also consider the more detailed and updated data 
contained in Exhibit COL-61, s ubmitted upon the Panel's request.995  
7.600  First, Colombia argues that "Barranquilla was the most important port for goods under 
HS 50–64 from Panama in the year 2006, even during the second semester of 2006 when, for an important period of the time (November–D ecember), no measures were in place".
996  During 10 out of 
12 months of the period referred to by Colombia (" year 2006"), the Panel notes that Colombia had in 
place restrictions and importation requirements on imports arriving from Panama, similar to those 
imposed under the ports of entry measure.  In light of these restrictions, the Panel considers that it is 
only appropriate to consider those two months wh ere no restrictions were imposed (November and 
December, 2006) to evaluate whether the measure in f act restricted trade.  Otherwise, the Panel notes 
                                                      
992 Exhibit PAN-71. 
993 Colombia's first written submission, para. 353;  Colombia's second oral statement, para. 68. 
994 As a result of a clerical error, Colombia referr ed in its first written submission, para. 353, to 
Exhibit COL-32.  This was amended in subsequent submissions. See, e.g. Colombia's second written 
submission, para. 259, footnote 154. 
995 Exhibit COL-61 provides  import data in terms of value and volume, per port of entry on a monthly 
basis for the period 2004-2008. Exhibit COL-28, referred to by Colombia, relies on the same data, but is 
aggregated on a semester basis). 
996 Colombia's first written submission, para. 353. WT/DS366/R 
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  that there are two relevant periods where unrestricted import flows can be observed:  (i) between the 
two impositions of restrictions on the ports of  entry, which extends from November 2006 to 
June 2007; and (ii) prior to impos ition of any of the aforementioned restrictions, from January 2004 to 
June 2005.  A comparative analysis (Table 1 below)  of the value and volume of subject goods imports 
arriving from Panama per port of entry during th ese two periods, as well as during the two periods 
when port of entry measures were imposed, (thus totalling four separate periods) reveals a very 
different picture to the one depicted by Colombia:  
   WT/DS366/R
 Page 229Table 1 - Volume and value of imports per port of entry and period of application of  the ports of entry measure 
Textiles, Apparel and Footwear  
(Source: Exhibit COL-61)  
 Volume Value 
 Jan 04-Jun 05 Jul 05-Oct 06 Nov 06-Jun 07 Jul 07-today Jan 04-Jun 05 Jul 05-Oct 06 Nov 06-Jun 07 Jul 07-today 
         
1. Textiles         
Barranquilla 31,631,139.90 70,560,929.42 5, 882,622.82 31,814,779.54 2,196,747.75 12 ,042,947.46 4,822,988.11 22,695,060.12 
Bogota 19,203,267.02 6,334,135.03 2,820,178.39 6,925,141. 48 4,615,003.16 5,851,357.37 2,274,261.23 7,016,691.29 
Buenaventura 28,539,767.11 2,240,066.73 8,890,089.11 371, 531.83 5,941,926.38 946,169.64 6,462,773.18 319,137.38 
Cali 755,761.76 0.00 15,464.29 4,714.58 269,401.92 0.00 17,624.55 4,092.31 
Cartagena 7,860,830.04 4,577,662.35 4,359,292.98 3,146,538.98 5,926,338.61 2,336,703.67 2,088,853.90 2,350,455.25 
Medellin 605,630.89 39,698.17 175,743.60 141,318. 25 607,160.30 32,689.18 242,004.74 167,135.32 
         
2. Apparel         
Barranquilla 29,923,249.22 100,643,699.62 31 ,775,841.00 10,173,577.00 12,052,608.76 31 ,402,525.89 14,977,406.14 25,823,446.35 
Bogota 5,464,798.26 3,201,055.68 11,126,448.00 2,235,682. 56 7,768,629.16 11,280,262.50 8,685,484.98 14,373,745.15 
Buenaventura 109,975,872.73 9,719,650.12 11,018,975.00 614,43 3.00 14,187,577.75 2,505,263.65 3,585,391.03 1,324,823.06 
Cali 4,469,860.00 237,186.00 235,535.00 14,044. 00 2,762,735.01 27,913.91 191,788.97 125,332.04 
Cartagena 9,859,514.20 17,901,626.00 33,851,356.00 6,149,312. 00 5,344,856.26 6,508,784.98 10,837,691.66 15,788,042.25 
Medellin 1,001,570.09 543,936.00 1,294,810.00 1,510,889.00  4,174,041.09 2,078,413.83 3,691,275.50 6,538,005.94 
         
3. Footwear         
Barranquilla 830,844.00 7,831,074.00 3,919,866.00 4,419,293. 28 1,587,131.20 38,117,939.28 11,683,228.12 28,815,544.77 
Bogota 1,155,351.50 2,133,302.50 1,317,781.00 1,953,763. 50 9,665,395.24 30,342,190.73 15,012,637.68 33,353,741.11 
Buenaventura 16,304,768.41 3,184,278.00 2,378,213.00 102,25 5.00 9,836,275.37 5,148,052.90 4,585,310.63 1,427,203.13 
Cali 964,438.00 6,121.00 207,531.00 54,768.00 2,628,376.47 73,981.98 604,839.66 1,063,637.03 
Cartagena 1,487,621.00 1,929,124.00 4,769,067.00 515,517. 00 1,443,375.23 2,232,255.99 4,737,942.85 2,530,092.26 
Medellin 403,282.58 116,207.00 300,988.00 217,215.00 5,895,371.25 1,333,231.32 4,726,158.37 2,472,726.05 
 WT/DS366/R 
Page 230  
 
  7.601  As can be observed in Table 1, Buenaventura was the preferred port of entry for textiles, 
apparel and footwear in terms of value during the period before the first measure was imposed 
(January 2004–June 2005), and it was the preferre d port of entry for textiles during the period in-
between the two measures (November 2006–June 2007) .  Moreover, Cartagena was the second most-
used port of entry for textiles during January 2004–June 2005 and the second most-used port of entry 
for apparel during the period in-between the two measures (November 2006–June 2007). 
7.602  Colombia's proposition that the ports of entry measure has not had a significant negative 
impact on legitimate trade is even more bluntly contra dicted in terms of the volume of subject imports 
arriving from Panama.  In terms of volume, 68 per cen t of apparel imports and 77 per cent of footwear 
imports that arrived in Colombia during the period  before the imposition of the first measure arrived 
at the port of Buenaventura.  Moreover, Cartagen a was the preferred port of entry for apparel and 
footwear during the period falling be tween Colombia's imposition of restri ctions on ports of entry.  In 
the case of textiles, Buenav entura was the preferred port of en try in terms volume during the period 
prior to imposition of the ports of entry measure  at issue, and the second most-used port during the 
period before  the first measure w as imposed (January 2004–June 2005). 
7.603  Second, Colombia states that "[f]or apparel, Barranquilla re mained the number one port for 
shipments from Panama during the first semester of 2007 – the period of time that no measures were 
in place", and that "[w]ith respect to footwear, Barra nquilla was a close second, in the same period of 
2007, second only to Bogotá".  The Panel disagrees w ith Colombia's arbitrary determination of the 
period of time during which the impact of the measure is to be examined.  Th e Panel observes that the 
duration of the last period when no restrictions were  in place (the one to which Colombia appears to 
refer to) was much longer than suggested by Colombia (it extended from November 2006–June 2007, 
and not only from January 2007–June 2007, as Colombia suggests).  Moreover, the Panel recalls that 
there was another period of time when "no measures were  in place", i.e. prior to the enactment of the 
first ports of entry measure (see paragraph 7.600 above ). Even if the Panel assumes that restrictions 
were not in place from January 2007 to June 2007, as Colombia suggests, Colombia's assertions only 
holds true with respect to the value of apparel im ports (and not textiles or footwear).  In terms of 
volume, Cartagena was the preferred port of entr y for both apparel and footwear during the first 
semester of 2007 (see Table 2 below).  Additionall y, Colombia affirms that "... Barranquilla and 
Bogota ... were the number two and three ports of choice with respect to textiles during this period".  As Colombia acknowledges, the Panel notes that the preferred port of entry in terms of value for 
textiles is neither Barranquilla nor Bogotá, but Buen aventura.  Furthermore, Cartagena is in a close 
fourth place.  In terms of value, the two most-u sed ports of entry are Buenaventura and Cartagena 
(See Table 2 below). 
Table 2 - Volume and value of imports per port of entry - First Semester 2007 
Textiles, Apparel and Footwear  
(Source: Exhibit COL-61) 
 Textiles Apparel Footwear 
 Value Volume Value Volume Value Volume 
Barranquilla 2,635,512. 28 2,897,265.26 10, 331,461.51 19,418,9 73.00 6,743,254. 70 2,708,016.00 
Bogota 2,191,839.53 2,763,622.81 5,083,377.95 4,789,745.00 8,091,935.52 663,388.00 
Buenaventura 4,621,946.03 5,527,218.32 1,691,139.30 3,302,263.00 2,540,680.79 998,404.00 
Cali 17,624.55 15,464.29 119,165.74 223,821.00 449,622.04 197,243.00 
Cartagena 1,857,844.95 3,166,273.80 8,146,024.42 23,748,771.00 3,377,889.21 3,374,954.00 
Medellin 210,871.57 157,38 5.60 2,659,576.26 922,606.00 3,037,04 2.87 203,833.00 
 
7.604  In the Panel's view, a careful analysis of the volume and value of textile, apparel and footwear 
imports, per port of entry, presents a more accurate picture to inform Colombia's statement that the 
ports of Bogota and Barranquilla were "very importa nt" in the importation of the subject goods from 
Panama prior to the implementation of the ports of en try measure.  The Panel is of the view that such  WT/DS366/R 
 Page 231 
 
 
  a careful analysis shows that the Panamanian expor ters' choice of port was substantially affected by 
the imposition of the ports of entry measure.    
7.605  Finally, Colombia has argued that the ports  of entry measure provides for a number of 
exemptions that should be taken into account when assessing the restrictive impact of the ports of 
entry measure.  The various exceptions ar e listed in paragra ph 7.592 above.   
7.606  In this respect, Colombia states that "the 'P ermanent Customs Users' (UAPs) represented 62 
[per cent] of the value of Panamanian trade in tex tiles in 2006, 50 [per cent] of Panamanian trade in 
footwear and 48 [per cent] of Panamanian trade in apparel."997  In support of this contention, 
Colombia refers to Exhibit COL–46, which break s down volumes of textile, apparel and footwear 
imports by exempted importers of goods arriving from Panama in comparison to non-exempt 
importers, for the years 2006 and 20 07; and to Bulletin 12, which presents similar data for the period 
January–March 2006, as well as an analysis of these data by the DIAN.998    
7.607  With respect to Colombia's comments on Pe rmanent Customs Users' involvement in 
importations arriving from Panama (62 per cent of th e value for textiles, 50 per cent for footwear and 
48 per percent for apparel), the Panel notes that  these percentages correspond exclusively to one 
month, March 2006, and not the entire year 2006, as Colombia seems to suggest.999  In fact, according 
to the annual data presented in Exhi bit COL-46, the UAPs represented 41 per cent of the total value of 
Panamanian trade in textiles, 62 per cent of tr ade in apparel and only 26 per cent of trade in 
footwear.1000  During 2007, UAPs comprised 54 per cent of the value of apparel, 26 per cent of  
textiles and 24 per cent of footwear.1001 
7.608  In any case, the Panel finds it difficult to gauge th e restrictive impact on trade of the ports of 
entry measure.  As noted above, the Panel is una ble to conclude whether the imposition of the 
measure has had a suppressing effect on trade volumes, in  terms of value or volume.  In addition, the 
Panel noted that the measure has caused shifts in trade from prohibited ports to eligible ports.  The 
Panel questions why such shifts would have occurred if such substantial percentages of trade were to 
benefit from the exemptions.  As such, while the ex istence of exemptions have perhaps lessened the 
restrictive impact of the measure, the significance of  this lessening is difficult to measure overall.   
7.609  Despite uncertainty, the Panel nevertheless recalls, as the Appellate Body set forth in Korea – 
Various Measures on Beef , it is necessary to weigh and balance th ese factors, and not solely consider 
a particular factor, such as the contribution made by th e measure, or its restrictive impact in isolation.  
Accordingly the Panel will consider whether Colomb ia has met its burden to establish provisionally 
that the ports of entry measure is "necessary"  to secure compliance with Colombian customs 
enforcement laws and regulations. 
Preliminary conclusions on whether the ports of  entry measure is provisionally justified as 
necessary under Article XX(d)  
7.610  In addition to weighing and balancing the im portance of the common interests or values 
protected by that law or regulation, the contribution made by the compliance measure to the enforcement of the law or regulation at issue, a nd the accompanying impact of the law or regulation 
on imports or exports, the Appellate Body has stated  that a measure may only be considered necessary 
if no alternative measure is available that could r easonably be employed and wh ich is not inconsistent 
                                                     
 
997 Colombia's second written submission, paras. 255-256. 
998 See Exhibit COL-46 and Bulletin 12, pp. 15-16 (Exhibit COL-42). 
999 See Table 3 of Bulletin 12, p. 16 (Exhibit COL-42). 
1000 Exhibit COL-46. 
1001 Exhibit COL-46. WT/DS366/R 
Page 232  
 
  with other GATT  provisions.
1002  While Panama initially proposed that a reasonably available less-
trade restrictive alternative would be for Colombia and Panama to enter into a formal agreement to 
cooperate in the fight against c ontraband-related problems, similar to an approach taken under an 
earlier Customs Cooperation Protocol1003, Panama subsequently retracted its proposal.1004   
7.611  The Panel recalls that the complaining me mber has the burden to identify possible 
alternatives.1005  However, since Panama has solely propo sed the application of Colombia's general 
customs laws to subject imports arriving from Pa nama, which is essentially the same result as would 
be obtained if the Panel were to uphold some or al l of Panama's various claims under Articles I:1, 
V:2, V:6, XI:1, and or XIII:1, the Panel concl udes that Panama has not identified any reasonably 
available specific measure for the Panel to consider in relation to Colombia's Article XX(d) defence.  
Thus, the Panel is left to consider whether Colombia  has sufficiently established that the ports of entry 
measure is provisionally justified as necessary to en sure compliance with the applicable laws and 
regulations.  Were Colombia to succeed in this r espect, the Panel would proceed to examine whether 
the measure meets the requirements of the chapeau to Article XX. 
7.612  The Panel recalls its earlier conclusions that  the fight against under-invoicing and smuggling 
is an important interest in consideration of the pa rticular conditions faced by Colombia.  The Panel is 
satisfied that problems with under-invoicing and cont raband occur in connection with the CFZ, which 
falls within Panama's jurisdiction.  The Panel is also aware that smuggling and contraband are 
practices commonly affiliated with money laundering and drug trafficking.   
7.613  Colombia has submitted evidence in an attempt to  demonstrate that the ports of entry measure 
is effective in reducing under-invoicing and contra band, and that it has been narrowly designed to 
limit its trade restrictiveness, due to its focus on  goods arriving from Panama and the multitude of 
exceptions for approved users and goods in internationa l transit.  As discussed above, the Panel finds 
it difficult to gauge the restrictive impact on trade of the ports of entry measure.  Primarily, Colombia 
has not demonstrated and thus, the Panel is unable to conclude whether the imposition of the measure 
has had a suppressing effect on trade, in terms of value or volume.  What is clear, however, is that the ports of entry measure has forced significant shifts in trade from prohibited ports to eligible ports.  
Even taking into consideration textiles, apparel a nd footwear that may enter Colombia unaffected due 
to express exemptions contained in the measure, th e full extent of the measure's restrictiveness is 
unclear. 
7.614  Aside from the measure's restrictiveness, the Panel considers more relevant the fact that, in its 
view, Colombia has not provided sufficient evidence to demonstrate that the ports of entry measure, 
which sets forth various requirements imposed ex clusively on imports arriving from Panama, has 
contributed to reducing under-invoicing and the en try of smuggling.  As discussed at length, 
Colombia failed to demonstrate a strict correlati on between the implementation of the ports of entry 
measure and shifts in the implicit price (the aver age price per unit per month) of subject textiles, 
apparel and footwear.  Due to many anomalies in the evolution of the implicit price, and the fact that 
Colombia did not attempt to control for other market  factors which may influence prices, the Panel is 
unable to conclude whether these irregularities aris e from the ineffectiveness of the ports of entry 
measure, or due to other intervening variabl es that may have influenced these prices.   
                                                     
 
1002 Appellate Body Report, Korea – Various Measures on Beef , para. 165, citing to GATT Panel 
Report, US – Section 337 , footnote 69, para. 5.26. 
1003 See Exhibit PAN-1. 
1004 In light of its view that Colombia has a "far wo rse" customs problems with many trading partners 
other than Panama, to which Colombia applies its general customs laws and regulations, Panama explained to 
the Panel its view that the only reasonable course of action would be for Colombia to apply its general customs 
laws and regulations to Panama.  Panama considers that Colombia could apply these same conditions to Panama as they are a reasonably available and less-trade rest rictive alternative.  Panama's second written submission, 
para. 211;  Panama's second oral statement, paras. 72-73.  
1005 Appellate Body Report, Brazil – Retreaded Tyres , para. 156.  WT/DS366/R 
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  7.615  Colombia further argued that a higher incidence of seizures of contraband goods has occurred 
since the ports of entry measure's imposition, thus demonstrating its effectiveness.  The Panel noted 
that it is not possible to determine whether th e seizures were conducted before or after the 
reintroduction of the measure, or whether the increas ed incidence of seizures arose due to an overall 
increase in trade, rather than simply due to a st rengthening of customs controls.  Moreover, Colombia 
did not provide any data on seizures of apparel im ports, which is the most significant of the three 
categories of products in terms of volume.  Hence,  the Panel considers that Colombia has failed to 
demonstrate that the value of seizures of subject  goods has increased since the imposition of the 
measure at issue.  
7.616  The Panel further concluded that Colombia did not demonstrate that the alleged diminution on 
the level of distortions caused by contraband a nd under-invoicing of goods arriving from Panama 
resulted from the imposition of the ports of entry meas ure.  Broadly, the Panel is concerned about the 
possibility that other variables may also have a ffected the prices declared by Colombian importers, 
such as the application of indicative prices.  In  addition, the Panel considers data provided by 
Colombia is in part inconclusive, as Colombia pre sented data on an annual basis, during periods when 
restrictions on importation and related measures were  at times in place, and other times not.  Thus, the 
Panel is unable to ascertain the extent to which th e alleged decrease in this levels of distortion 
correlates with the introduction and removal of measures imposed on goods arriving from Panama.   
7.617  When considering the ports of entry measure's effectiveness, the Panel lastly addressed 
aspects of the measure's design, notably that the por ts of entry measure applies exclusively to goods 
of various origins arriving from Panama.  As su ch, the measure is narrowly targeted.  However, 
evidence reveals that Colombia has experienced greater distortions in relation to smuggling and 
contraband involving the United States (US$2,902 million), ALADI countries (US$2,500 million) and 
Europe (US$1,837 million), than  with Panama (US$906 million).1006   
7.618  For these reasons, the Panel considers that Colomb ia has failed to substantiate its statement 
that under-invoicing has diminished during the periods of implementation of the port of entry measure, possibly due to the influence of a wide array of market factors, which Colombia did not 
account for in its argumentation presented to the Panel, or due to the fact that Colombia has under-
invoicing and smuggling problems with respect to te xtiles, apparel and footwear arriving from many 
trading partners.  Without further evidence that the measure has enhanced enforcement related to 
problems of under-invoicing and contraband, the Panel is  not able to conclude that the ports of entry 
measure has contributed in the past or currently  contributes to combating of customs fraud and 
contraband in Colombia. 
7.619  Accordingly, the Panel finds that Colombia ha s failed to establish that the ports of entry 
measure is necessary to ensure compliance with Colombian customs laws and regulations. 
(iii) Conclusion  
7.620  In light of the Panel's findings that Colombia has failed to establish that the ports of entry 
measure is necessary to ensure compliance with Co lombian customs laws and regulations, the Panel 
therefore finds that the ports of entry measure  is not justified under Article XX(d) of the GATT 1994 .  
As such, the Panel will not proceed to examine wh ether the measure meets the requirements of the 
chapeau to Article XX.   
                                                     
 
1006 Table 7 of Exhibit COL-38, p. 15. WT/DS366/R 
Page 234  
 
  VIII.  CONCLUSIONS AND RECOMMENDATIONS 
8.1 In light of the above findings, the Panel upholds Panama's claims that that Articles 128.5 e) of 
Decree No. 2685 and 172.7 of Resolution No. 4240, as well as the various resolutions establishing indicative prices, are inconsistent "as su ch" with the obligation established in the Customs Valuation 
Agreement  to apply, in a sequential manner, the methods of valuation provided in Articles 1, 2, 3, 5 
and 6 of the Customs Valuation Agreement .   
8.2 The Panel further upholds Panama's claims that Article 128.5 e) of Decree No. 2685 and 
Article 172.7 of Resolution No. 4240 as well as the various resolutions establishing indicative prices, 
are inconsistent "as such" with Article 7.2(b) and (f) of the Customs Valuation Agreement.   
8.3 In light of the above findings, the Panel declines to rule separately on Panama's claims that 
Article 128.5 e) of Decree No. 2685 and Article 172. 7 of Resolution No. 4240, as well as the various 
resolutions establishing indicative prices, are "as su ch" inconsistent with Article 7.2(g) of the Customs 
Valuation Agreement and Article III:2, first sentence, and III:4 of the GATT 1994 .   
8.4 The Panel also declines to rule  separately on Panama's "as applied" claims pertaining to the 
consistency of Colombia's indicative prices regime with the Customs Valuation Agreement , as well as 
Article III:2, first sentence, and III:4 of the GATT 1994 .   
8.5 The Panel upholds  Panama's claims that the ports of entry measure is inconsistent with 
Article I:1, the first and second sentences of Articl e V:2, the first sentence of Article V:6, and 
Article XI:1 of the GATT 1994 .  
8.6 The Panel declines to rule  separately on Panama's claims that the port of entry measure is 
inconsistent with Articles I:1 and XIII:1 of the GATT 1994 . 
8.7 The Panel further rejects  Colombia's defence that the ports of entry measure is justified under 
Article XX(d) of the GATT 1994 . 
8.8 Under Article 3.8 of the DSU , in cases where there is infringement of the obligations assumed 
under a covered agreement, the action is considered prima facie to cons titute a case of nullification or 
impairment of benefits under that agreement.  A ccordingly, we conclude that to the extent that 
Colombia has acted inconsisten tly with the provisions of the Customs Valuation Agreement and the 
GATT 1994 , it has nullified or impaired benefits accruing to Panama thereunder.  
8.9
 Article 19.1 of the DSU is explicit concerning the recommenda tion a panel is to make in the 
event it determines that a measure is in consistent with a covered agreement: 
"[I]t shall recommend that the Member con cerned bring the measure into conformity 
with that agreement." (footnotes omitted) 
8.10 The Panel therefore recommends that Colombia bring its measures into conformity with its 
obligations under the Customs Valuation Agreement and the GATT 1994 . 
 
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