WORLD TRADE  
ORGANIZATION  RESTRICTED 
WT/DSB/M/299 
1 September 2011 
 (11-4276) 
Dispute Settlement Body 
15 July 2011  
 
 
 
MINUTES OF MEETING 
 
Held in the Centre William Rappard 
on 15 July 2011 
 
Chairperson:  Mrs. Elin Østebø Johansen (Norway) 
 
 
1. Thailand – Customs and fiscal measures on cigarettes from the Philippines 
(a) Report of the Appellate Body (WT/DS371/AB /R) and Report of the Panel (WT/DS371/R) 
1. The Chairperson drew attention to the comm unication from the Appellate Body contained in 
document WT/DS371/10 transmitting the Appellate Body  Report on:  "Thailand – Customs and Fiscal 
Measures on Cigarettes from the Philippines", which had been circulated on 17 June 2011 in document WT/DS371/AB/R, in accordance with Articl e 17.5 of the DSU.  She reminded delegations 
that the Appellate Body Report and the Panel Report pertaining to this dispute had been circulated as 
unrestricted documents.  She said that, as Members were aware, Article 17.14 of the DSU required 
that:  "An Appellate Body report shall be adopt ed by the DSB and unconditionally accepted by the 
parties to the dispute unless the DSB decides by consensus not to adopt the Appellate Body report 
within 30 days following its circulation to Members.   This adoption procedure is without prejudice to 
the right of Members to express their views on an Appellate Body report".  
2. The representative of the Philippines said that hi s country thanked the Panel, the Appellate 
Body and their respective Secretariats for their hard  work in this dispute.  The Philippines welcomed 
the adoption of the Panel and the Appellate Body Reports and expressed its deep satisfaction with the 
outcome in this dispute.  He said that the Philippi nes had prevailed on virtually all the claims it had 
made in this dispute.  However, the dispute was not about counting victories.  It was about exports 
that directly and indirectly benefitted many Filipi nos, from leaf growing through to manufacturing.  It 
was about exports that continued to suffer arbitrar y and discriminatory treatment at a tremendous cost, 
and not only in economic terms.  The objective of initiating dispute settlement proceedings had been, 
and remained, to end such treatment and to put tr ade back on the secure and predictable ground of the 
rules of the WTO law.  In that regard, the Panel and the Appellate Body had done an excellent job in 
outlining that terrain.  
3. As Members were aware, this was the first disput e to interpret, in deta il, the substantive rules 
on customs valuation.  Therefore, the fact that the Panel's findings on this issue had not been appealed 
spoke for itself.  The Panel had set out, in clear and concise terms, the obligations imposed on an 
importing Member in a situation where buyers and se llers were related.  In such a situation, the 
declared transaction value constituted the customs value, unless the authority had positive evidence 
that the relationship influenced the import price.  Before rejecting the declared customs value, 
customs authorities must conduct a critical and searchi ng examination of all information before it, and 
work cooperatively with the importer.  Before taking a decision, they must communicate their 
grounds for doubting the declared transaction va lue, including explaining why the importer's WT/DSB/M/299 
Page 2  
 
  information was deficient.  The importer must be given an opportunity to respond with further 
information and explanation.  An y confidential information obtaine d during this process must be 
protected.  Finally, following the final customs valu e assessment, the customs authority must provide 
an explanation of how the customs value had been assessed, if so requested.  This was clear guidance 
for Thailand's authorities as well as for their counterparts world-wide.   
4. The Panel and the Appellate Body had also made rulings under Article X:3(b) of the 
GATT 1994 concerning Thailand's failure to provide fo r prompt and effective independent review of 
guarantees collected, pending the assessment of customs value and of customs valuation decisions.  The Philippines hoped that recourse to effective domes tic procedures would help ensure that disputes 
could be settled locally in the first instance.  Gi ven the narrow scope of Thailand's appeal, and the 
absence of a cross-appeal by the Philippines, the Appellate Body was in the comfortable position of 
being able to concentrate on a limited set of issues concerning the interpretation of Articles III:2 and 
III:4, as well as Article X:3(b) of the GATT 1994.  The Appellate Body's findings on these issues 
were entirely in line with the Philippines' position that its goods suffered unwarranted discrimination 
that protected domestic production.  In conclusion,  the Philippines recalled its objective in pursuing 
this dispute and said that international trade must be based on the rules to which all Members had 
agreed.  The Reports provided Members with clea r guidance as to what those rules were.  The 
Philippines expected Thailand to promptly and fully implement the DSB's recommendations and 
rulings, as adopted at the present meeting, and to  afford the goods from the Philippines treatment 
required under the WTO rules. 
5. The representative of Thailand said that her country was grateful for the opportunity to 
comment on the adoption of the Panel and Appellate Body Reports.  Thailand  thanked the Panel and 
the Appellate Body, as well as the secretariat for thei r hard work on this dispute, which involved a 
large number of claims.  Thailand disagreed with some aspects of the Appellate Body Report.  For 
example, Thailand was puzzled by the Appellate Bo dy's statement that it was not appropriate for 
Thailand to refer to the Panel's inte rim report in its appeal, given that the interim report formed part of 
the record of the panel proceedings.  Thailand also had concerns regarding the Appellate Body's view 
that a panel could make an objective finding on the basis of evidence on which one party had not had 
any opportunity to comment.  Furthermore, Tha iland was of the view that, in some areas, the 
Appellate Body could have addressed  Thailand's arguments in more detail.  For example, the question 
of whether VAT liability under Thailand's VAT sy stem should be calculated as the difference 
between input and output tax and whether input tax credits were automatic under Thai law was a key 
issue in Thailand's appeal.  This had been discussed  at length in Thailand's submission and during the 
Appellate Body's hearing.  However, the Appellate Body had discussed this issue only very briefly in 
its Report.  Nevertheless, Thaila nd was strongly supportive of the existence of a binding system of 
dispute settlement in the multilateral trading syst em, which Thailand had successfully relied upon in 
the past to vindicate its rights under WTO law.  As  the highest tribunal under the dispute settlement 
system, the Appellate Body bore both the privilege a nd the responsibility of having the final word on 
the clarification of the rights and obligations of Members under the covere d agreements.  Thailand 
looked forward to working cooperatively with the Philippines in the next phase of this dispute. 
6. The representative of the European Union said that  the EU had participated as a third party in 
this dispute because of its systemic interest in th e correct interpretation of important provisions of the 
Customs Valuation Agreement and of the GATT 1994.  The EU was satisfied with the findings of the 
Panel concerning certain obligations enshrined in th e Customs Valuation Agreement.  The Panel set in 
stone that the Customs Valuation Agreement im posed an obligation on national authorities to 
determine the customs value of imported goods on the basis of their transaction value and, if that was 
not possible, to sequentially apply the other custom s valuation methods.  Furthermore, the Panel had 
usefully clarified the respective responsibilities of  the customs authorities and of importers in 
determining the acceptability of the transaction value in related-party transactions.  The EU was also 
pleased with the analysis carried out by the Panel and the Appellate Body under certain provisions of  WT/DSB/M/299 
 Page 3 
 
 
  the GATT 1994.  In particular, the Panel and the Appellate Body had correctly found that the 
obligation to maintain or institute tribunals or procedures for the prompt review and correction of 
administrative actions related to customs matters, as contained in Article X:3(b) of the GATT 1994, 
was not limited to particular types of actions a nd covered decisions on the imposition of guarantees. 
7. The representative of Australia said that her c ountry welcomed the adoption of the Panel and 
the Appellate Body Reports relating to this dispute,  in which Australia had participated as a third 
party due to its systemic interest in the interp retation and application of  the Customs Valuation 
Agreement.  Australia thanked the Appellate Body , the Panel and their supporting Secretariats for 
their work in this dispute, as evidenced by th e Reports being proposed for adoption.  However, 
Australia had reservations about the reasoning appa rently applied by the Appellate Body in its 
application of the "necessity" test under Article XX of the GATT 1994.  In its Report, the Appellate 
Body indicated that the analysis of an Article XX(d) of the GATT 1994 exception should, in this case, 
focus on whether the differential tr eatment afforded to imported vers us domestic cigarettes under the 
measure was "necessary", rather than considering whether the measure as a whole was "necessary".  
Australia noted the Appellate Body's previous reasoning in "US - Gasoline", as followed by the 
Appellate Body in "China - Publi cations and Audiovisual Products"1 and a number of subsequent 
panel reports2, that the "necessity" of a measure must be c onsidered as a whole and that aspects of a 
measure "can scarcely be understood if scrutinized strictly by themselves".3  Not only did this latter 
approach appear more logical, it more faithfully reflected the language of Article XX of the GATT 1994, which was drafted in terms of the necessity of the measure, rather than the necessity of a 
particular treatment.  Australia looked forward to the clarification of this issue in future disputes.   
8. At a broader level, Australia noted that, as stated in the DSU, the prompt settlement of 
disputes was essential for the effective functioning of  the WTO.  This principle was reflected in 
Article 17.5 of the DSU, which provided that in no case shall appellate proceedings exceed 90 days.  
In Australia's view, there may be circumstances wher e the legal and factual complexity of an appeal 
required additional time for appropria te consideration to ensure the quality of the reports.  Australia 
would not wish to see quality compromised through enforced adherence to unreasonable time-frames 
for appellate proceedings.  Having said that, where the facts and legal issues of an appeal were limited in complexity, Australia considered that, where possi ble, efforts should be made to respect the time-
frames provided under the DSU.  Australia was concer ned that delays in less complex proceedings 
would contribute to delays in pending appeals.  Au stralia looked forward to the timely implementation 
of the DSB's recommendations and rulings pertaining to this dispute. 
9. The representative of the United States said that  his country had followed this dispute as a 
third party, in particular with regard to the i ssues raised with respect to the interpretation and 
application of Article X:3(b) of the GATT 1994 and Article 11 of the DSU.  The United States thanked the Panel, the Appellate Body and their S ecretariats for their work on this dispute.  The 
United States agreed that the obligat ions of Article X:3(b) served an important purpose.  However, the 
United States was concerned about the Appellate Bo dy's statement that "[a] basic object and purpose 
of the GATT 1994, as reflected in Article X:3(b), is  to ensure due process in relation to customs 
matters".
4  While Article X:3(b) may reflect such a due  process objective, it did not follow that this 
                                                      
1 Appellate Body Report, "China – Measures Affecting Trading Rights and Distribution Services for 
Certain Publications and Audiovisual Entertainment Products" ("China - Audiovisual Products").   
(WT/DS363/AB/R) 21 December 2009 at para. 309. 
2 See for example:  Panel Report, "Brazil – M easures Affecting Imports of Retreaded Tyres"  
(WT/DS332/R) 12 June 2007 at paras. 7.106-7;  Panel Report, "Colombia – Indicative Prices and Restrictions on Ports of Entry" (WT/DS366/R) 27 April 2009 at paras. 7.511-2;  and "United States – Measures Relating to 
Shrimp from Thailand"  (WT/DS343/R) 29 February 2008 at paras 7.171-4. 
3 Appellate Body Report, "United States – Standards for Reformulated and Conventional Gasoline" 
("US - Gasoline") (WT/DS2/AB/R) 29 April 1996 at p. 19. 
4 Appellate Body Report, para. 202. WT/DSB/M/299 
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  was an object and purpose of the GATT 1994 itself.  Th e customary rules of interpretation reflected in 
the Vienna Convention on the Law of Treaties spoke of the object and purpose of the treaty, not an individual provision, as relevant fo r purposes of interpretation.  Refe rences to the object and purpose 
of an individual provision may encourage an interp reter to paraphrase the text of a provision and refer 
to that paraphrase as the "object and purpose" of that  provision, which then in turn risked substituting 
that paraphrase for the actual text of the provision.   
10. In its analysis of Thailand's defence under Article XX(d) of the GATT 1994, the Appellate 
Body had stated that it was the differential treatme nt that must be "necessary" to secure compliance.
5  
However, this seemed at odds w ith the Appellate Body's prior reports in which it had found that it was 
the "measure" that must be "necessary".6  Like Australia, the United States was concerned with 
respect to this different approach, which appeared to depart from the text of Article XX(d) of the 
GATT 1994.  Members would also benefit from a better explanation of how the discussion of, and focus on, "due process" in connection with Thaila nd's appeal under Article 11 of the DSU related to 
the text of Article 11, in particular the provision for an "objective assessment of the matter before it".  The discussion did not seem to indicate why views as to what constituted "due process" in a panel 
proceeding were necessarily part of an analysis  of whether a panel ha d conducted an "objective 
assessment" of the matter.  
11. Finally, the United States noted that, although the communication from the Appellate Body to 
the DSB Chair transmitting the Report stated that the Report "will be circulated to Members … in 
accordance with paragraph 5 of Article 17" of the DSU
7, in fact the Report of the Appellate Body had 
been circulated outside the 90-day period stipulated  in Article 17.5 of the DSU.  The United States 
understood from the parties to the dispute that the Appellate Body had consul ted with the parties on 
this issue and that each party had agreed to accept a report circulated outside the 90-day period.  The 
United States further understood that the parties had provided a letter to the Appellate Body to that 
effect.  However, contrary to past practice8, this agreement by the parties had not been mentioned in 
the Appellate Body's Article 17.5 notification to th e DSB that it could not provide its report within 
60 days.9  Further, this agreement by the parties was no t reflected in the Report of the Appellate Body, 
as had been the practice of the Appellate Body in prior disputes.10  The approach followed in this 
dispute resulted in less transparency for Members on the circumstances leading to the consideration 
by the DSB of a report circulated  outside the 90-day period in Ar ticle 17.5 of the DSU.  The 
United States did not see how less transparency fo r the DSB was desirable.  In future disputes, 
Members should be provided with the level of tran sparency provided by the Appellate Body in the 
past.  
12. The representative of Mexico said that his count ry thanked the Panel, the Appellate Body and 
the Secretariat for the Reports and wished to ma ke a procedural comment.  Mexico was not making 
any value judgement as to whether or not it was positiv e for the system that the Appellate Body could 
extend the 90-day time-period for completion of an appeal and continued to examine this matter.  
Mexico noted that the Appellate Body Report had been issued 115 days following the filing of the 
notice of appeal.  The notice of appeal had been filed on 22 February 2011 and, 58 days later, on 21 April 2011, the Appellate Body had issued a communication informing Members that the time-
                                                      
5 Appellate Body Report, para. 179. 
6 Appellate Body Report, "Korea – Measures Affec ting Imports of Fresh, Frozen and Chilled Beef", 
WT/DS161/AB/R, WT/DS169/AB/R, paras. 158 , 162-165, 178-182 ( 12 December 2000). 
7 Communication from the Appellate Body, WT/DS371/10 (21 June 2011). 
8 See, e.g., Communication from the Appellate Body, "US - Continued Suspension/Canada - Continued 
Suspension", WT/DS320/14, WT/DS321/14 (24 July 2008). 
9 WT/DS371/9 (26 April 2011). 
10 See, e.g., "Canada - Continued Suspension", WT/DS321/AB/R at para. 29;  "EC - Export Subsidies 
on Sugar", WT/DS265/AB/R at para. 7.  WT/DSB/M/299 
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  frame for completion of the appeal would be extended to 115 days.  Mexico noted that although the 
time-frame had been extended beyond  90 days stipulated in Article 17.5 of the DSU, there was no 
reference to this fact in the Appellate Body Report. 
13. The representative of Japan said that his count ry shared the concerns expressed by the 
United States and Mexico about the lack of transpar ency.  It appeared that the Appellate Body had 
departed from the practice that it had established.  Less transparency was undesi rable, to say the least, 
because Article 17.5 of the DSU was drafted in categor ical terms.  Japan wished to reserve its rights 
to express its views on the issue of "due pro cess" in connection with Thailand's appeal under 
Article 11 of the DSU because the issue would have implications for the future operation of the DSU. 
14. The DSB took note of the statements, and adopt ed the Appellate Body Report contained in 
WT/DS371/AB/R and the Panel Report contained in WT/DS371/R, as modified by the Appellate 
Body Report. 
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