WORLD TRADE  
ORGANIZATION  WT/DS371/R 
15 November 2010 
 (10-5924) 
 Original:   English 
  
 
     
THAILAND – CUSTOMS AN D FISCAL MEASURES ON 
CIGARETTES FROM THE PHILIPPINES 
 
 
Report of the Panel 
 
  WT/DS371/R 
 Page i 
 
 
  TABLE OF CONTENTS 
Page  
I. INTRODUCTION ................................................................................................................... .1 
A. COMPLAINT OF THE PHILIPPINES ................................................................................................1  
B. ESTABLISHMENT AND COMPOSITION OF THE PANEL ..................................................................1  
C. PANEL PROCEEDINGS ..................................................................................................................2  
II. FACTUAL ASPECTS ..............................................................................................................2  
A. THE MEASURES AT ISSUE ............................................................................................................2  
B. PROCEDURAL HISTORY ...............................................................................................................5  
1. Additional procedures for the protection of business confidential information 
("BCI" procedures) ............................................................................................................. .....5 
2. Amicus curi ae briefs ........................................................................................................... ......5  
3. The Philippines' request to the Panel to seek certain documents from Thailand 
pursuant to Article 13 of the DSU ...........................................................................................5  
III. PARTIES' REQUESTS FOR FIND INGS AND RECOMMENDATIONS.........................6  
A. THE PHILIPPINES .........................................................................................................................6  
B. THAILAND ............................................................................................................................... ....7 
IV. ARGUMENTS OF THE PARTIES ........................................................................................8  
A. EXECUTIVE SUMMARY OF THE FIRS T WRITTEN SUBMISSION OF THE PHILIPPINES ......................8  
1. Introduction................................................................................................................... ............8  
2. Thailand violates Article X:3(a) of the GATT 1994 by failing to administer its 
customs and internal tax rules in a "reasonable" and "impartial" manner.......................8  
(a) The dual role of TTM Officials as Senior Th ai Government Officials is inconsistent 
with Article X:3(a) of the GATT 1994 .......................................................................................8  
(b) Thailand violates Articles X:3(a) and X:3(b) of the GATT 1994 because of undue delays in the BoA's administrative decision-making ..................................................................9
 
(c) Thailand fails to respect Article X:3(b) because no mechanism exists under Thai law 
for the review of guarantee values ............................................................................................1 0 
3. Thailand violates numerous provisions of the Customs Valuation Agreement ................10  
(a) Thailand acted inconsistently with Articl es 1.1 and 1.2 of the Customs Valuation 
Agreement by improperly rejecting PM Tha iland's declared transaction values for a 
number of entries .............................................................................................................. ........10  
(i) Thailand violated Article 1.1 by imprope rly rejecting PM Thailand's transaction 
values as the basis fo r customs values......................................................................................10  
(ii) Thailand violated Article 1.2(a) because it failed to inform PM Thailand of the 
grounds for considering that the rela tionship between PM Philippines and 
PM Thailand influenced the price.............................................................................................11  
(iii) Thailand violated Article 16 of the Customs Valuation Ag reement by not providing an 
adequate explanation of its customs value determination for entries at issue..........................11  WT/DS371/R 
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  (iv)
 Thai Customs violated Article 5 of the Cu stoms Valuation Agreement by declining to 
use a deductive valuation methodology without an adequate reason.......................................12  
(v) Thailand violated Article 7 of the Customs Valuation Agreement  by failing to apply 
"reasonable means" to value PM Thailand's cigarettes and instead relying on "arbitrary and fictitious values" .............................................................................................. .12
 
(vi) Thailand violated Article 10 of the Customs Valuation Agreement by disclosing in the 
Thai media confidential customs valuation information provided by PM Thailand.................12  
4. Claims pertaining to VAT......................................................................................................1 3 
(a) Thailand violates Article X:1 of the GATT 1994 by not publishing the methodology 
used to determine the tax base for VAT, i.e., the government-fixed MRSP ............................13  
(b) Thailand imposes higher VAT on imported products than on domestic products, 
thereby violating Article III:2 of the GATT 1994 ....................................................................13  
(c) Thailand's de jure  exemption of resellers of domestic cigarettes from VAT violates 
Articles III:2 and III:4 of the GATT 1994, because the same exemption is not afforded to resellers of imported cigarettes...............................................................................14
 
(d) Thailand administers the VAT system for one set of MRSPs for imported cigarettes in a manner that is not uniform, reasonable a nd impartial, as required by Article X:3(a) 
of the GATT 1994............................................................................................................... ......14
 
5. Claims pertaining to the excise, health, and television taxes...............................................15  
(a) Thailand violates Article X:1 of the GATT 1994 by failing to publish the rules 
regarding the determination of the ex factory price..................................................................15  
(b) Thailand violates Article X:1 by failing to pu blish laws and regulations governing the 
release of guarantees for potential liability fo r health, excise and television taxes ..................15  
(c) Thailand violates Article X:3(a) of the GA TT 1994 by administering its excise, health 
and television taxes in a non-uniform , unreasonable and partial manner .................................15  
6. Request to the Panel to seek specific  documents from Thailand pursuant to 
Article 13 of  the DSU .......................................................................................................... ....16  
B. EXECUTIVE SUMMARY OF THE FIRST WRITTEN SUBMISSION OF THAILAND .............................16  
1. Introduction................................................................................................................... ..........16  
2. Legal argument ................................................................................................................. ......16  
(a) Claims under the Customs Valuation Agreement.....................................................................16  
(i) Thai Customs acted consistently with Ar ticles 1.1 and 1.2 of the Customs Valuation 
Agreement ...................................................................................................................... ...........16  
Thai Customs had "doubts about the acceptability of  the price"............................................................. 16  
PM Thailand failed to establish that the relationship did not influence the price.................................... 17  
Because PM Thailand failed to establish that th e relationship did not influence the price, Thai 
Customs properly declined to use the tran saction value as the customs value........................................ 17  
Thai Customs properly informed PM Thailand of the grounds for not using PM Thailand's 
transfer price as the customs value............................................................................................ .............. 18  
(ii) Thai Customs acted consistently with Artic le 16 of the Customs Valuation Agreement...........18   WT/DS371/R 
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  (iii) Thai Customs acted consistently with Articles 5 and 7 of the Customs Valuation 
Agreement in using the deductive method to determine the customs value for 
PM Thailand's imports.......................................................................................................... ....18  
(b) Claims under Article III of the GATT 1994 .............................................................................19  
(i) Thailand acted consistently w ith Article III:2 by using the MRSP as the VAT tax base ..........19  
The Philippines has failed to establish that all imported cigarettes and all domestic cigarettes 
are "like pr oducts"............................................................................................................ ....................... 19  
The Philippines has failed to establish that Thaila nd discriminates agains t imported cigarettes ............ 20  
(ii) Thailand acted consistently with Article III:2 of the GATT 1994 with respect to the 
taxation of resales of cigarettes .............................................................................................. ..21 
(iii) Thailand acted consistently with Article III:4 of the GATT 1994 with respect to the 
administrative requiremen ts for its VAT system .......................................................................21  
(c) Claims under Article X of the GATT 1994 ..............................................................................22  
(i) Thailand acted consistently with  Article X:3(a) with respect to its ownership of TTM............22  
(ii) Thailand acted consistently  with Article X:3(a) and X:3(b) with respect to 
"administrative tribunals for the purpose of prompt review" ...................................................23  
(iii) Thailand acted consistently w ith Article X:3(b) with respect to appeals against the 
imposition of guarantees....................................................................................................... ....24  
(iv) Thailand acted consistently with Article X:3(a) in its administration of the VAT 
system......................................................................................................................... ...............24  
(v) Thailand acted consistently w ith Article X:1 with respect to rules relating to VAT and 
ex factory prices.............................................................................................................. ..........25  
(vi) Thailand acted consistently with Article X:1 with respect to rules relating to 
guarantees..................................................................................................................... ............25  
(vii) Thailand acted consistently w ith Article X:3 in its administration of the excise, health 
and television taxes........................................................................................................... ........26  
3. Conclusion ..................................................................................................................... ..........26  
C. EXECUTIVE SUMMARY OF THE ORAL STATEMENT BY THE PHILIPPINES AT THE FIRST 
SUBSTANTIVE MEETING OF THE PANEL .....................................................................................26  
1. Conflicting roles of TTM direct ors violate Article X:3(a)...................................................26  
2. Appeal delays violate Articles X:3( a) and X:3(b) of the GATT 1994.................................27  
3. Customs Valuation Agreement  violations for rejected declared transaction 
values......................................................................................................................... ...............27  
4. Thailand's violations of Articles 5 and 7 of the Customs Valuation Agreement...............28  
5. Thailand's violation of Article X:3(b) of the GATT 1994 ...................................................28  
6. Article X:1 claims pertaining to VAT ...................................................................................28  
7. Thailand violates Article III:2 of the GATT 1994 ...............................................................28  
8. Thailand violates Article III:4 of the GATT 1994 ...............................................................29  
9. Thailand's VAT system violates Article X:3(a) of the GATT 1994 ....................................29  
10. Failure to publish basis for ex factory price violates Article X:1 .......................................29  WT/DS371/R 
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  11.
 Requested fact-finding under Article 13 of the DSU ...........................................................30  
D. EXECUTIVE SUMMARY OF TH E ORAL STATEMENT BY THAILAND AT THE FIRST 
SUBSTANTIVE MEETING OF THE PANEL .....................................................................................30  
1. Introduction................................................................................................................... ..........30  
2. Claims under the Customs Valuation Agreement ...............................................................30  
3. Claims under Article III of the GATT 1994.........................................................................31  
4. Claims under Article X of the GATT 1994...........................................................................31  
(a) Article X:3 claim relating to TTM's Board of Directors...........................................................31  
(b) Article X:3 claim relating to appeals ........................................................................................31  
(c) Article X:3 claims relating to the uniform administration of VAT, excise, health and 
television tax laws............................................................................................................ .........32  
(d) Article X:1 claims............................................................................................................. ........33  
5. Claims relating to completed acts and expired measures....................................................33  
6. Claim under Article 10 of the Customs Valuation Agreement ...........................................34  
7. Request for documents .......................................................................................................... .34 
E. EXECUTIVE SUMMARY OF THE SEC OND WRITTEN SUBMISSION OF THE PHILIPPINES ...............35  
1. Violation of Article X:3(a) of the GATT 1994 because of dual role of TTM 
directors ...................................................................................................................... .............35  
2. Claims pertaining to customs valuation................................................................................35  
(a) Standard of review with respect to customs valuation decisions..............................................35  
(b) Violation of Articles 1.1 and 1.2 of the Cu stoms Valuation Agreement by maintaining 
and applying a general rule requiring th e rejection of transaction value ..................................36  
(c) Violation of Articles 1.1 and 1.2 of the Customs Valuation Agreement by improperly 
rejecting PM Thailand's declared transac tion values in [[xx.xxx.xx]] transactions..................36  
(d) Violation of Article 1.2(a) of the Cu stoms Valuation Agreement by failing to 
communicate "grounds" before re jecting transaction value......................................................37  
(e) Violation of Article 16 of the Customs Va luation Agreement by failing to provide an 
adequate explanation as to how th e customs value was determined.........................................37  
(f) Violation of Articles 5 and/or Article 7 of the Customs Valuation Agreement by 
incorrectly assessing the deductive value of PM Thailand's [[xx.xxx.xx]] transactions...........38  
(g) Violation of Article 10 of the Customs Valuation Agreement by disclosing business 
confidential data.............................................................................................................. ..........39  
3. Violation of Article X:3(b) of the GATT 1994 by failing to provide a right to 
challenge guarantees........................................................................................................... ....39  
4. Claims pertaining to VAT......................................................................................................4 0 
(a) Violation of Article X:1 of the GATT 1994 by failing to publish the methodology and 
data used to determine and revise MRSPs................................................................................40  
(b) Violation of Article III:2 of the GATT 1994 by taxing imported cigarettes in excess of like domestic goods as a result of the MRSP levels .............................................................40
  WT/DS371/R 
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  (c) Violation of Article III:2 of the GATT 1994 by exempting resales of domestic 
cigarettes from VAT liability.................................................................................................. ..41 
(d) Violation of Article III:4 of the GATT 1994 by imposing more onerous VAT 
administrative requirements on resales of imported cigarettes.................................................42  
(e) Thailand's failed defence under Ar ticle XX(d) of the GATT 1994 ..........................................42  
(f) Violation of Article X:3(a) of the GATT 1994 by failing to administer its VAT 
regime in a uniform, reasonabl e, and impartial manner............................................................42  
5. Claims pertaining to the excise, health, and television tax..................................................43  
(a) Violation of Article X:1 of the GATT 1994 by failing to publish the methodology and 
data used to determine the ex factory price...............................................................................43  
(b) Violation of Article X:1 of the GATT 1994 by  failing to publish rules concerning the 
release of guarantees for excise, health, and television taxes ...................................................43  
(c) Violation of Article X:3(a) of the GATT 1994 by failing to administer the excise, 
health, and television taxes in a uniform , reasonable, and impartial manner ...........................43  
6. Violation of Articles X:3(b) and X: 3(a) of the GATT 1994 because of undue 
delays in the BoA's decision-making .....................................................................................44  
F. EXECUTIVE SUMMARY OF THE SECOND WRITTEN SUBMISSION OF THAILAND .........................44  
1. Introduction................................................................................................................... ..........44  
2. Legal argument ................................................................................................................. ......45  
(a) Standard of review ............................................................................................................. .......45  
(b) Claims under the Customs Valuation Agreement.....................................................................45  
(i) Thai Customs acted consistently with Articles 1.1 and 1.2(a) of the Customs 
Valuation Agreement in rejecting the transacti on value for the [[xx.xxx.xx]] entries at 
issue .......................................................................................................................... ................45  
The obligation under Article 1.1 to use the transaction value is dependent on it being 
established that the relationship between buye r and seller did not influence the price ........................... 45  
Thai Customs acted consistently with Article 1.2( a) with respect to its "doubts" regarding the 
reliability of the tr ansaction value ........................................................................................... ................ 45  
The legal standard governing "doubts".......................................................................................... .. 45 
PM Thailand did not  provide any evidence to disp el Thai Customs' doubts ................................... 45  
Thai Customs fulfilled the obligation in Article 1. 2(a) that the "circumstances surrounding the 
sale shall be examined" ........................................................................................................ ................... 46  
The nature of the obligation to examine the circumstances surr ounding the sale............................ 46  
How Thai Customs examined the circumstan ces surrounding the sales at issue............................. 46  
Thai Customs properly communicated the "grounds for considering that the relationship 
influenced the price".......................................................................................................... ...................... 47  
It was not established that "the rela tionship did not infl uence the price"................................................ 47  
(ii) Thai Customs acted consistently with Articles 5 and 7 of the Customs Valuation 
Agreement ...................................................................................................................... ...........47  
(iii) Thai Customs acted consistently with Artic le 16 in providing an explanation of how 
the customs value was determined............................................................................................48  WT/DS371/R 
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  (iv)
 The release of guarantees for the [[xx.xxx.xx]] entries ............................................................48  
(c) Claims under Article III of the GATT 1994 .............................................................................48  
(i) Thailand acted consistently with Article III:2 of the GA TT 1994 in using the MRSPs 
as the tax base for its VAT system............................................................................................. 48 
Like produc t issu es............................................................................................................ ...................... 48  
The use of the MRSPs as the tax base for cigarettes does not result in imported cigarettes 
being taxed "in excess" of domestic cigarettes................................................................................. ....... 48  
(ii) Thailand acted consistently with Article III:2 of the GATT 1994 with respect to the 
taxation of resales of cigarettes .............................................................................................. ..49 
(iii) Thailand acted consistently with Article III:4 of the GATT 1994 with respect to the 
administrative requiremen ts for its VAT system .......................................................................49  
(d) Claims under Article X of the GATT 1994 ..............................................................................50  
(i) Thailand acted consistently with Article X:3 with respect to the composition of the 
TTM Board...................................................................................................................... ..........50  
The Philippines has failed to show unreasonable or partial acts ............................................................. 51  
The Philippines has failed to demons trate inadequate  safeguards........................................................... 51  
The Philippines has failed to demonstrate that the presence of government officials on the 
board of TTM is irrelevant ..................................................................................................... ................. 51  
(ii) Thailand acted consistently with Articles X:3(a) and X:3(b) with respect to the 
conduct of appeals of customs valuation determinations .........................................................52  
Thailand's conduct of these appeals is "reasona ble" within the meaning of Article X:3(a) .................... 52  
Article X:3(b) does not impose obligations regard ing the completion of particular appeals .................. 52  
(iii) Thailand acted consistently w ith Article X:3(b) with respect to appeals against the 
imposition of guarantees....................................................................................................... ....52  
(iv) Thailand acted consistently with Article X:3(a) in its administration of the VAT 
system and its excise, televi sion and health taxes.....................................................................53  
Generally-applicable crite ria to calcu late MRSPs............................................................................... .... 53 
Use of guarantee value data to calculate MRSPs for Marlboro  and L&M .............................................. 53  
Tax bases used to assess excise, television and health taxes................................................................... 53 
(v) Thailand acted consistently w ith Article X:1 with respect to the publication of rules 
and data relating to VAT, ex factory prices and the release of guarantees..............................54  
The overall MRSP calculation methodology and data used to calculate MRSPs.................................... 54  
Ex-factory price calculation methodology and data used to calculate ex factory prices for TTM 
Brands ......................................................................................................................... ............................ 54  
Rules relating to the re lease of gu arantees .................................................................................... .......... 54  
(e) Issues relating to the Panel' s terms of reference .......................................................................54  
(i) The Philippines' claim under the Customs Valuation Agreement regarding a "general 
rule or methodology" ........................................................................................................... .....54  
(ii) The Philippines' claims regarding expired measures and completed acts ...............................55  
(iii) The Philippines' claims under Article X:3(a)  regarding Thailand's administration of 
its VAT system and the excise, television and health taxes.......................................................55   WT/DS371/R 
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  G. EXECUTIVE SUMMARY OF THE ORAL STATEMENT BY THE PHILIPPINES AT THE 
SECOND SUBSTANTIVE MEETING OF THE PANEL .......................................................................55  
1. Article X:3(a) claim relating to  the role of TTM Directors.................................................55  
2. Thailand violated the Customs Valuatio n Agreement in rejecting PM Thailand's 
declared transaction values and in determining higher deductive values .........................55  
(a) Articles 1.1 and 1.2: general rule requi ring rejection of transaction value ...............................55  
(b) Articles 1.1 and 1.2: improper rejection of  PM Thailand's declared transaction values 
in [[xx.xxx.xx]] entries ....................................................................................................... ......56  
(c) Article 1.2(a): communication of "grounds"  before rejecting transaction value ......................57  
(d) Article 16: adequate explanation of how customs value was determined.................................57  
(e) Articles 5 and/or 7: incorrect assessment of deductive value of PM Thailand's 
[[xx.xxx.xx]] transactions ..................................................................................................... ....57  
(f) Article 10: disclosure of business confidential data..................................................................57  
3. Thailand violates Article X:3(b) of the GATT 1994 by failing to provide a right 
to challenge guarantees........................................................................................................ ...57 
4. GATT 1994 claims pertaining to VAT..................................................................................57  
(a) Article X:1: publication of methodology and data used to determine MRSPs .........................57  
(b) Article III:2, first sentence: excess taxation of imported cigarettes, as a result of the 
MRSP........................................................................................................................... .............58  
(c) Article III:2, first sentence: de jure  exemption of resales of domestic cigarettes from 
VAT ............................................................................................................................ ..............59  
(d) Article III:4: more onerous VAT administrative burdens on resales of imported 
cigarettes ..................................................................................................................... ..............59  
(e) Article X:3(a): administration of VAT regime .........................................................................59  
5. Claims pertaining to the excise, health, and television taxes...............................................60  
(a) Article X:1: publication of methodology and data used to determine the ex factory 
price .......................................................................................................................... ................60  
(b) Article X:1: publication of rules concerning the release of guarantees for excise, 
health, and television taxes ................................................................................................... ....60  
(c) Article X:3(a): administration of the ex cise, health, and television taxes ................................60  
(d) Articles X:3(b) and X:3(a): undue dela ys in the BoA's decision-making.................................60  
H. EXECUTIVE SUMMARY OF THE ORAL ST ATEMENT BY THAILAND AT THE SECOND 
SUBSTANTIVE MEETING OF THE PANEL .....................................................................................61  
1. Claims under the Customs Valuation Agreement ...............................................................61  
2. Claims under Article III of the GATT 1994.........................................................................63  
(a) Claim under Article III:2 with respect to the setting of MRSPs...............................................63  
(b) Claim under Article III:2 regarding VAT on resellers..............................................................63  
(c) Claim under Article III:4 regarding VAT forms.......................................................................64  
3. Claims under Article X of the GATT 1994...........................................................................64  WT/DS371/R 
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  (a)
 Article X:3 claim relating to TTM's Board of Directors...........................................................64  
(b) Article X:3 claims relating to the BoA's treatment of appeals on Marlboro  cigarettes 
landed in 2002................................................................................................................. ..........65  
(c) Claim regarding appeals against the imposition of guarantees.................................................65  
(d) Administration of the VAT system and excise, television and health taxes.............................65  
V. ARGUMENTS OF THE THIRD PARTIES ........................................................................66  
A. ORAL STATEMENT BY AUSTRALIA AT THE FIRST SUBSTANTIVE MEETING OF THE 
PANEL ............................................................................................................................... ........66  
1. Introduction................................................................................................................... ..........66  
2. Transparency issues in  customs valuation............................................................................66  
3. Australia's practice in case of doubt re garding declared transaction values ....................67  
4. The Philippines' claims under Ar ticle III:2 of the GATT 1994..........................................67  
5. Conclusion ..................................................................................................................... ..........68  
B. THIRD PARTY SUBMISSION BY CHINA .......................................................................................68  
C. THIRD PARTY SUBMISSION BY THE EUROPEAN UNION .............................................................69  
1. Introduction................................................................................................................... ..........69  
2. Claims under the Customs Valuation Agreement ...............................................................69  
3. Claims under Articles III:2 a nd III:4 of the GATT 1994....................................................71  
4. Claims under Article X of the GATT 1994...........................................................................72  
5. Request pursuant to Article 13 of the DSU...........................................................................73  
D. THIRD PARTY SUBMISSION BY INDIA ........................................................................................73  
E. ORAL STATEMENT BY CHINESE TAIPEI AT THE FIRST SUBSTANTIVE MEETING OF THE 
PANEL ............................................................................................................................... ........73  
1. Introduction................................................................................................................... ..........73  
2. Legal standard under the first sentence of Article III:2 of the GATT 1994......................74  
(a) The structure and the limits of the first sentence of Article III:2 of the GATT 1994 ...............74  
(b) Like products .................................................................................................................. ..........74  
(c) In excess of t hose applied ..................................................................................................... ....74  
3. Examining the operation of Thai VAT under the first sentence of Article III:2 of 
the GATT 1994.................................................................................................................. ......75  
(a) Whether imported cigarettes and domestic cigarettes are like products ...................................75  
(b) Whether  imported cigarettes are taxed in excess of domestic cigarettes under Thai 
VAT ............................................................................................................................ ..............75  
4. Conclusion ..................................................................................................................... ..........76  
F. ORAL STATEMENT BY THE UNITED STATES AT THE FIRST SUBSTANTIVE MEETING OF 
THE PANEL ............................................................................................................................... .76 
1. Introduction................................................................................................................... ..........76  
2. Article 1.2 of the Customs Valuation Agreement.................................................................77   WT/DS371/R 
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  3. Article 5 of the Custom s Valuation Agreement....................................................................78  
4. Article 10 of the Customs Valuation Agreement..................................................................79  
5. Letter from the WC O Secretariat .........................................................................................79  
6. Article X of the GATT 1994...................................................................................................79  
7. Terms of reference ............................................................................................................. .....80  
VI. INTERIM REVIEW...............................................................................................................80  
A. THE PANEL 'S FINDINGS AND RECOMMENDATIONS ....................................................................81  
1. Paragraph 8.8 of the Interim Panel Report – the Philippines' comments .........................81  
2. Customs valuation determinations as "c ompleted acts" (paragraphs 7.40-7.51) – 
Thailand's comments............................................................................................................ ..87 
B. CUSTOMS VALUATION AGREEMENT ..........................................................................................90  
1. The Panel's analysis of the "substantive aspects" of Thai Customs' application of 
the deductive value method  (paragra phs 7.332-7.382) – Thailand's comments...............90  
(a) Standard of review for the Panel's evalua tion of the Philippines' claim under Article 7 
of the Customs Valuation Agreement.......................................................................................90  
(b) Other issues regarding the Panel's analysis of  the Philippines' claim under Article 7 of 
the Customs Valuation Agreement ...........................................................................................91  
2. Aspects of the Panel's analysis of the Philippines' claim under Articles 1.1 and 1.2 (paragraph 7.194) – Thailand's comments .....................................................................93
 
3. The Philippines' comments ....................................................................................................94  
(a) Footnote 272, pa ragraph 7.91 ................................................................................................... 94 
(b) Paragraph 7.91 ................................................................................................................. .........94  
(c) Paragraph 7.158 ................................................................................................................ ........95  
(d) Footnote 390, pa ragraph 7.184 .................................................................................................9 5 
(e) Paragraph 7.193 ................................................................................................................ ........95  
(f) Paragraph 7.265 ................................................................................................................ ........96  
(g) Paragraph 7.267 ................................................................................................................ ........96  
(h) Paragraph 7.298 ................................................................................................................ ........96  
(i) Paragraph 7.314 ................................................................................................................ ........97  
(j) Paragraph 7.406 ................................................................................................................ ........97  
C. ARTICLE  III:2,  FIRST SENTENCE OF THE GATT 1994 ...............................................................97  
1. MRSPs – The Philippines' comments....................................................................................97  
(a) Paragraph 7.413 ................................................................................................................ ........97  
(b) The May 2009 MRSP Notice....................................................................................................99  
2. VAT exemption for re-sales of domestic ci garettes (paragraphs 7.629 to 7.634) – 
Thailand's comments............................................................................................................ 100 
D. ARTICLE  III:4,  FIRST SENTENCE OF THE GATT 1994  – THAILAND 'S COMMENTS ...................105  
1. Form Por.Por.30 reporting requirements...........................................................................105  WT/DS371/R 
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  (a)
 The Panel's reliance on the expert testim ony provided in Exhibit PHL-289 for the 
purpose of its conclusion in paragraph 7.698 of the Interim Panel Report.............................106  
(b) The Panel's assessment of all the eviden ce submitted by Thailand for the purpose of 
its analysis and conclusion in paragraphs 7.694-7.698 of the Interim Panel Report ..............107  
(c) The Panel's analysis of certain evidence submitted by Thailand for the purpose of 
paragraphs 7.694-7.698 of th e Interim Panel Report. .............................................................109  
(d) The Panel's weighing of the evidence rela ting to the interpretation of Thailand's 
domestic law in reaching the c onclusion in paragraph 7.698. ................................................113  
2. Record-keeping requirements – paragraphs 7.702-7.715 of the Interim Panel 
Report ......................................................................................................................... ...........114  
E. ARTICLE  X:3( B) OF THE GATT 1994:   CUSTOMS VALUATION DETERMINATIONS – 
THAILAND 'S COMMENTS .........................................................................................................117  
1. Factual aspects ................................................................................................................ ......117  
2. Legal aspects.................................................................................................................. ........117  
F. OTHER REQUESTS FOR REVIEW ...............................................................................................119  
1. Paragraph 7.39 – Thailand's comments..............................................................................119  
2. [[xx.xxx.xx]] import entries as business confidential information – Thailand's 
comments ....................................................................................................................... ........119  
3. Paragraph 7.436 – The Philippines comments ...................................................................120  
4. Paragraph 7.467 – The Philippines comments ...................................................................120  
5. Typographical errors and clerical observations ................................................................120  
VII. FINDINGS....................................................................................................................... ......120  
A. OVERVIEW OF THE MATTERS BEFORE THE PANEL ..................................................................120  
B. PRELIMINARY MATTERS ..........................................................................................................121  
1. Terms of reference ............................................................................................................. ...121  
(a) The Philippines' claim under Article X:3(a) of the GATT 1994 with respect to 
Thailand's administration of the VAT system ........................................................................121  
(i) Main arguments of the parties ................................................................................................12 1 
(ii) Analysis by the Panel.......................................................................................................... ....123  
(b) The Philippines' claim under Article X:3(a) of the GATT 1994 with respect to 
Thailand's administration of the exci se, health and television taxes.......................................128  
(i) Main arguments of the parties ................................................................................................12 8 
(ii) Analysis by the Panel.......................................................................................................... ....129  
(c) Thai Customs' valuation determinations for the cigarettes at issue that were cleared 
between 11 August 2006 a nd 13 September 2007..................................................................129  
(i) Main arguments of the parties ................................................................................................12 9 
(ii) Analysis by the Panel.......................................................................................................... ....131  
(d) The September 2006 and March 2007 MRSP Notices issued by Thai Excise to 
PM Thailand .................................................................................................................... .......135   WT/DS371/R 
 Page xi 
 
 
  (i) Main arguments of the parties ................................................................................................13 5 
(ii) Analysis by the Panel.......................................................................................................... ....136  
2. Standard of review............................................................................................................. ...139  
C. CUSTOMS VALUATION AGREEMENT ........................................................................................140  
1. Overview of the Customs Valuation Agreement................................................................140  
2. Products at issue.............................................................................................................. ......141  
3. Measures at  issue .............................................................................................................. ....142  
4. Overview of the factual events surrou nding the rejection of PM Thailand's 
declared transaction values of the [[xx.xxx.xx]] entries at issue .......................................143  
5. Article 1.1 and 1.2 of the Customs Valuation Agreement .................................................145  
(a) Introduction................................................................................................................... ..........145  
(b) Standard of review for the clai ms under Article 1.1 and 1.2(a)..............................................146  
(i) Main arguments of the parties ................................................................................................14 6 
(ii) Analysis by the Panel.......................................................................................................... ....147  
(c) Whether Thailand maintained and applied a general rule requiring the rejection of 
transaction values and the use of the deductive valuation method in violation of 
Articles 1.1 and 1.2 ........................................................................................................... ......149  
(i) Main arguments of the parties ................................................................................................14 9 
(ii) Analysis by the Panel.......................................................................................................... ....151  
(d) Whether Thailand improperly rejected PM Th ailand's declared transaction values of 
the imported cigarettes at issue inconsis tently with Articles 1.1 and 1.2 ...............................157  
(i) Obligations under Article 1.2(a).............................................................................................15 7 
Main arguments of the parties .................................................................................................. ............. 157  
Analysis by the Panel .......................................................................................................... .................. 159  
(ii) Thai Customs examination of the circumstances of the transaction between 
PM Thailand and PM Philippines ..........................................................................................168  
Main arguments of the parties .................................................................................................. ............. 168  
Analysis by the Panel .......................................................................................................... .................. 170  
(iii) Thai Customs' reasons for rejecting the transaction values of PM Thailand's 
cigarettes..................................................................................................................... ............177  
Main argument of the parties................................................................................................... .............. 177  
Analysis by the Panel .......................................................................................................... .................. 178  
(e) Whether Thailand failed to communicate to  PM Thailand grounds for rejecting 
declared transaction values incons istently with Article 1.2....................................................179  
(i) Main arguments of the parties ................................................................................................17 9 
(ii) Analysis by the Panel.......................................................................................................... ....181  
6. Article 16 of the Customs Valuation Agreement................................................................185  
(a) Obligations under Article 16................................................................................................... 185 WT/DS371/R 
Page xii  
 
  (i)
 Main arguments of the parties ................................................................................................18 5 
(ii) Analysis by the Panel.......................................................................................................... ....186  
(b) Whether Thailand failed to provide an ex planation for its determination of the 
customs value of the imported cigarettes at issue inconsistently with Article 16...................189  
(i) Main arguments of the parties ................................................................................................18 9 
(ii) Analysis by the Panel.......................................................................................................... ....191  
7. Articles 5 and 7 of the Customs Valuation Agreement......................................................196  
(a) The Philippines' claims under Articles 5 and 7.......................................................................196  
(i) Evolvement of the Philippines' arguments w ith respect to its claims under Articles 5 
and 7 .......................................................................................................................... .............196  
(ii) Scope of the Philippines' claims..............................................................................................1 97 
(b) The provision under which to assess the valuation methodology used by Thai 
Customs to determine the customs value of the [[xx.xxx.xx]] entries at issue.......................200  
(i) Main arguments of the parties ................................................................................................20 0 
(ii) Analysis by the Panel.......................................................................................................... ....201  
(c) Whether Thai Customs determined the cust oms value of the imported cigarettes at 
issue inconsistently with the obligations  of the Customs Valuation Agreement ....................203  
(i) The Philippines' claim under Article 5 ...................................................................................203  
(ii) The Philippines' claim under Article 7.1 ................................................................................204  
(iii) Whether Thai Customs applied the deductive valuation method inconsistently with 
Article 7.1.................................................................................................................... ............205  
Introduc tion ................................................................................................................... ........................ 205  
Factual ba ckground ............................................................................................................. .................. 206  
Thai Customs' application of the deductive valuation method – sta ndard of review ............................ 207  
Main argument of the parties ................................................................................................... ...... 207  
Analysis by the Panel.......................................................................................................... ........... 208  
Thai Customs' application of the deductive valuation method – procedural aspect .............................. 208  
Main arguments of the parties .................................................................................................. ..... 208  
Analysis by the Panel.......................................................................................................... ........... 211  
Thai Customs' application of the deductive valuation method – su bstantive aspect ............................. 213  
Introduc tion ................................................................................................................... ................ 213  
Deductibility of sales allowances, provinc ial taxes and transp ortation co sts................................. 214  
Thai Customs' decision not to deduct sales allowances, provincial taxes and 
transportatio n costs ........................................................................................................... ............. 219  
(d) Whether Thai Customs acted inconsistently with Article 7.3.................................................225  
(i) Main arguments of the parties ................................................................................................22 5 
(ii) Analysis by the Panel.......................................................................................................... ....226  
8. Article 10 of the Customs Valuation Agreement................................................................227  
(a) Main arguments of  the parties................................................................................................2 27  WT/DS371/R 
 Page xiii 
 
 
  (b) Analysis by the Panel.......................................................................................................... ....229  
D. ARTICLE  III:2,  FIRST SENTENCE OF THE GATT 1994  – VAT  FOR CIGARETTES ......................230  
1. Introduction................................................................................................................... ........230  
2. Measures at  issue .............................................................................................................. ....231  
3. Like product analysis.......................................................................................................... ..233  
(a) Whether the like product analysis under Article III:2, first sentence, requires a 
comparison between "all" importe d and "all" domestic products...........................................233  
(i) Main arguments of the parties ................................................................................................23 3 
(ii) Analysis by the Panel.......................................................................................................... ....233  
(b) Whether the imported and domestic cigarett es within particular price segments are 
"like" within the meaning of Article III:2, first sentence........................................................234  
(i) Main arguments of the parties ................................................................................................23 4 
(ii) Analysis by the Panel.......................................................................................................... ....235  
4. Excess taxation analysis....................................................................................................... .240 
(a) The Thai VAT  system............................................................................................................ .240 
(i) Introduction ................................................................................................................... .........240  
(ii) Tax rate....................................................................................................................... ............241  
(iii) Tax base – MRSP................................................................................................................ ....242  
Overview....................................................................................................................... ........................ 242  
Establishment of the MRSP ...................................................................................................... ............ 243  
(b) Whether imported cigarettes are subject to  excess taxation – the higher absolute level 
of the MRSPs for imported cigarettes than for domestic cigarettes........................................245  
(i) Main arguments of the parties ................................................................................................24 5 
(ii) Analysis by the Panel.......................................................................................................... ....246  
(c) Whether imported cigarettes are subject to  excess taxation – an alleged difference in 
the determination of the MRSPs for imported and domestic cigarettes..................................247  
(i) Legal standard ................................................................................................................. .......247  
Main arguments of the parties .................................................................................................. ............. 247  
Analysis by the Panel .......................................................................................................... .................. 249  
(ii) Establishment of the "marketing costs" component of the MRSP...........................................251  
(iii) Establishment of the MRSP for TTM brands ..........................................................................253  
Main arguments of the parties .................................................................................................. ............. 253  
Analysis by the Panel .......................................................................................................... .................. 253  
(iv) Establishment of the 7 December 2005 MRSP for Marlboro and L&M.................................255  
Main arguments of the parties .................................................................................................. ............. 255  
Marlboro ............................................................................................................................... ......... 256  
L&M ............................................................................................................................... ................ 258  
Analysis by the Panel .......................................................................................................... .................. 259  WT/DS371/R 
Page xiv  
 
  Overview ....................................................................................................................... ................ 259  
Marlboro ............................................................................................................................... ......... 261  
L&M ............................................................................................................................... ................ 263  
(v) Establishment of the 2006-2007 MRSPs for Marlboro and L&M ..........................................265  
Main arguments of the parties .................................................................................................. ............. 265  
Analysis by the Panel .......................................................................................................... .................. 266  
5. Conclusion ..................................................................................................................... ........267  
E. ARTICLE  III:2  OF THE GATT 1994  – VAT  EXEMPTION FOR RESELLERS OF DOMESTIC 
CIGARETTES ............................................................................................................................268  
1. Introduction................................................................................................................... ........268  
2. Measures at  issue .............................................................................................................. ....268  
3. Description of the Thai VAT system – a pplication of VAT to cigarette resale ...............268  
(a) General provisions ............................................................................................................. .....269  
(b) Provisions on the imposition and the exemption of VAT.......................................................269  
(i) Imposition of VAT on cigarette resale ....................................................................................269  
(ii) Exemption of VAT for domestic cigarette resale ....................................................................271  
(c) Operation of the Thai VAT system with respect to cigarette resale .......................................271  
(d) Other relevant provisions...................................................................................................... ..273  
4. Like product analysis.......................................................................................................... ..273  
(a) Main arguments of the parties.................................................................................................2 73 
(b) Analysis by the Panel.......................................................................................................... ....274  
5. Excess taxation analysis....................................................................................................... .274 
(a) Whether the scope of Article III:2, first sentence is confined to the VAT amount 
applied to cigarettes at th e final consumer level .....................................................................274  
(i) Main arguments of the parties ................................................................................................27 4 
(ii) Analysis by the Panel.......................................................................................................... ....276  
(b) Whether Thailand's VAT exemption on th e resale of domestic cigarettes subjects 
imported cigarettes to an excess VAT liability in violation of Article III:2, first 
sentence....................................................................................................................... ............278  
(i) Main arguments of the parties ................................................................................................27 8 
(ii) Analysis by the Panel.......................................................................................................... ....279  
(c) Whether the VAT exemption for domestic cigare tte resellers is otherwise justified..............283  
(i) Main arguments of the parties ................................................................................................28 3 
(ii) Analysis by the Panel.......................................................................................................... ....284  
(d) Conclusion ..................................................................................................................... .........284  
F. ARTICLE  III:4  OF THE GATT 1994  – VAT  EXEMPTION FOR RESELLERS OF DOMESTIC 
CIGARETTES ............................................................................................................................285  
1. Introduction................................................................................................................... ........285   WT/DS371/R 
 Page xv 
 
 
  2. Measures at  issue .............................................................................................................. ....285  
3. Description of the me asures at issue....................................................................................286  
4. Like product analysis.......................................................................................................... ..287  
(a) Main arguments of the parties.................................................................................................2 87 
(b) Analysis by the Panel.......................................................................................................... ....288  
5. "Affecting the internal sale, offering for sale, purchase, transportation, 
distribution or use of imported cigarettes" ........................................................................288  
(a) Main arguments of the parties.................................................................................................2 88 
(b) Analysis by the Panel.......................................................................................................... ....288  
6. "Less favourable treatment" ...............................................................................................289  
(a) Whether an additional administrative burde n is imposed on resellers of imported 
cigarettes ..................................................................................................................... ............289  
(i) Main argument of the parties..................................................................................................2 89 
VAT Form Por.Por.30............................................................................................................ ............... 290  
Tax invoices and other reco rd-keeping requirements............................................................................ 2 91 
Income tax reports, input/output reports, goods and raw material records, alternative records, 
and books and records fo r accounting purposes.................................................................................. .. 291 
Preparation and maintenance of  documents for auditing ...................................................................... 293  
Consequences of failure to comply w ith the administrativ e requirem ents ............................................ 293  
(ii) Analysis by the Panel.......................................................................................................... ....293  
VAT form Por.Por.30............................................................................................................ ................ 294  
Tax invoices and other reco rd-keeping requirements............................................................................ 2 98 
Various records to be maintained............................................................................................... ........... 299  
Preparation and maintenance of  documents for auditing ...................................................................... 301  
Penalties and ot her sanctions.................................................................................................. ............... 301  
Overall a ssessment ............................................................................................................. ................... 301  
(b) Whether imported cigarettes are subject to less favourable treatment than domestic 
cigarettes within the mean ing of Article III:4.........................................................................303  
(i) Main arguments of the parties ................................................................................................30 3 
(ii) Analysis by the Panel.......................................................................................................... ....304  
(c) Whether an additional administrative bur den can otherwise be justified under 
Article III:4 .................................................................................................................. ...........307  
(i) Main arguments of the parties ................................................................................................30 7 
(ii) Analysis by the Panel.......................................................................................................... ....308  
(d) Whether an additional administrative burden can be justified under Article XX(d) of 
the GATT 1994.................................................................................................................. .....309  
(i) Main arguments of the parties ................................................................................................30 9 
(ii) Analysis by the Panel.......................................................................................................... ....310  WT/DS371/R 
Page xvi  
 
  G.
 CLAIMS UNDER ARTICLE  X OF THE GATT 1994 ....................................................................311  
1. Claims under Article X:1 of the GATT 1994 .....................................................................311  
(a) Introduction................................................................................................................... ..........311  
(b) Obligations under Article  X:1 of the GATT 1994..................................................................311  
(c) Methodology for determining MRSPs....................................................................................312  
(i) Introduction ................................................................................................................... .........312  
(ii) Methodology for determining the MRSP ................................................................................313  
Whether the methodology for determining the MRSP falls within the scope of "laws, 
regulations or administrative rulings of ge neral application" u nder Article X:1................................... 313  
Main arguments of the parties .................................................................................................. ..... 313  
Analysis by the Panel.......................................................................................................... ........... 314  
Whether Thailand "published" the general methodology for determining the MRSP in such a 
manner as to enable governments and trad ers to become acquainted with it ........................................ 316  
Main arguments of the parties .................................................................................................. ..... 316  
Analysis by the Panel.......................................................................................................... ........... 318  
(iii) Data used to calculate MRSPs for individual cigarette brands..............................................319  
Whether the data used for determining the MRSP for individual cigarette brands falls within 
the scope of "laws, regulations or administrative rulings of general application" under 
Article X:1.................................................................................................................... ......................... 319  
Main arguments of the parties .................................................................................................. ..... 319  
Analysis by the Panel.......................................................................................................... ........... 321  
Whether the publication of the data used to calculate MRSPs for individual cigarette brands 
would amount to disclosing "confidential informa tion" within the meaning of Article X:1................. 322  
Main arguments of the parties .................................................................................................. ..... 322  
Analysis by the Panel.......................................................................................................... ........... 324  
(d) Methodology and data for determining ex factory prices .......................................................324  
(i) Introduction ................................................................................................................... .........324  
(ii) Ex-factory prices – whether the ex factory pr ice determination is an administrative 
ruling of general application within  the meaning of Article X:1............................................324  
Main arguments of the parties .................................................................................................. ............. 324  
Analysis by the Panel .......................................................................................................... .................. 325  
(e) Rules relating to the release of guarantees placed for health, excise and television 
taxes .......................................................................................................................... ..............326  
(i) Introduction ................................................................................................................... .........326  
(ii) Whether Thailand maintains rules of gen eral application relating to the release of 
guarantees..................................................................................................................... ..........327  
Main arguments of the parties .................................................................................................. ............. 327  
Analysis by the Panel .......................................................................................................... .................. 328  
(iii) Whether the rules relating to the relea se of guarantees were published within the 
meaning of Article X:1......................................................................................................... ...331   WT/DS371/R 
 Page xvii 
 
 
  Main arguments of the parties .................................................................................................. ............. 331  
Analysis by the Panel .......................................................................................................... .................. 332  
H. ARTICLE  X:3(A) OF THE GATT 1994 ......................................................................................333  
1. Overview of the Philippines' claims under Article X:3(a).................................................333  
2. Nature and scope of the obligations under Article X:3(a).................................................334  
3. Appointment of certain Thai government customs and tax officials as TTM 
directors ...................................................................................................................... ...........337  
(a) Introduction................................................................................................................... ..........337  
(b) Whether the appointment of selected customs and tax officials as TTM directors is an 
act of "administration" under Article  X:3(a)...........................................................................337  
(i) Main arguments of the parties ................................................................................................33 7 
(ii) Analysis by the Panel.......................................................................................................... ....337  
(c) Whether Thailand administers the laws, regul ations, decisions and rulings of the kind 
described in Article X:1 in a "partial and unreasonable" manner through the 
appointment of dual function officials....................................................................................340  
(i) "Impartial" administration..................................................................................................... .340 
Main arguments of the parties .................................................................................................. ............. 340  
Analysis by the Panel .......................................................................................................... .................. 343  
(ii) "reasonable" administration...................................................................................................3 47 
Main arguments of the parties .................................................................................................. ............. 347  
Analysis by the Panel .......................................................................................................... .................. 349  
4. Delays in the BoA's decision-making co ncerning PM Thailand's appeals against 
Thai Customs' determinations.............................................................................................351  
(a) Introduction................................................................................................................... ..........351  
(b) Whether the BoA's review of customs valuation determinations constitutes 
"administration" within the meaning of Article X:3(a)...........................................................352  
(c) Whether Thailand administered its cust oms laws in an "unreasonable" manner 
through delays caused in the BoA's review process ...............................................................352  
(i) Main arguments of the parties ................................................................................................35 2 
(ii) Analysis by the Panel.......................................................................................................... ....355  
5. Determination of the excise, health and television taxes ...................................................361  
(a) Introduction................................................................................................................... ..........361  
(b) Main arguments of the parties.................................................................................................3 61 
(c) Analysis by the Panel.......................................................................................................... ....364  
I. ARTICLE  X:3(B) OF THE GATT 1994 ......................................................................................366  
1. Appeals against custom valuation determinations.............................................................366  
(a) Introduction................................................................................................................... ..........366  
(b) Nature of the obligations  under Article X:3(b).......................................................................367  WT/DS371/R 
Page xviii  
 
  (c)
 Whether the BoA is an independent tribunal within the meaning of Article X:3(b) ..............368  
(i) Main arguments of the parties ................................................................................................36 8 
(ii) Analysis by the Panel.......................................................................................................... ....369  
(d) Whether an independent tribunal or proce dure maintained by Thailand within the 
meaning of Article X:3(b) provides for the prompt review of customs value 
determinations................................................................................................................. ........370  
(i) Main arguments of the parties ................................................................................................37 0 
(ii) Analysis by the Panel.......................................................................................................... ....371  
2. Appeals against the guar antee decisions.............................................................................373  
(a) Introduction................................................................................................................... ..........373  
(b) Whether the imposition of a guarantee falls w ithin the scope of "administrative action 
relating to customs matters " under Article X:3(b)..................................................................373  
(i) Main arguments of the parties ................................................................................................37 3 
(ii) Analysis by the Panel.......................................................................................................... ....375  
(c) Whether Thailand maintains tribunals or pr ocedures for prompt review and correction 
of guarantee decisions......................................................................................................... ....383  
(i) Main arguments of the parties ................................................................................................38 3 
(ii) Analysis by the Panel.......................................................................................................... ....387  
VIII.  CONCLUSIONS AND RECOMMENDATIONS..............................................................391  
 
ANNEX A Working Procedures and Additional Working Procedures 
  for Business Confidential Information..................................................................395   WT/DS371/R 
 Page xix 
 
 
  TABLE OF WTO AND GATT 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 – 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 
Argentina – Textiles and 
Apparel Panel Report, Argentina – Measures Affecting Imports of Footwear, Textiles, 
Apparel and Other Items , WT/DS56/R, adopted 22 April 1998, as modified 
by Appellate Body Report WT/DS56/AB/R, DSR 1998:III, 1033 
Brazil – Retreaded Tyres  Appellate Body Report, Brazil – Measures Affec ting Imports of Retreaded 
Tyres , WT/DS332/AB/R, adopted 17 December 2007, DSR 2007:IV, 1527  
Canada – Periodicals Appellate Body Report, Canada – Certain Measures Concerning Periodicals , 
WT/DS31/AB/R, adopted 30 July 1997, DSR 1997:I, 449 
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 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 – 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 
Colombia – Ports of Entry  Panel Report, Colombia – Indicative Prices and Restrictions on Ports of 
Entry , WT/DS366/R and Corr.1, adopted 20 May 2009  
Dominican Republic – Import 
and Sale of Cigarettes Appellate Body Report, 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 – Asbestos Appellate Body Report, European Communities – Measures Affecting 
Asbestos and Asbestos-Containing Products , WT/DS135/AB/R, adopted 
5 April 2001, DSR 2001:VII, 3243 
EC – Bananas III   
(Article 21.5 – Ecuador II) / 
EC – Bananas III   
(Article 21.5 – 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 , WT/DS27/AB/RW2/ECU, adopted 11 December 2008, and 
Corr.1 / 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/AB/RW/USA and Co rr.1, adopted 22 December 2008 
EC – Poultry Appellate Body Report, European Communities – Measures Affecting the 
Importation of Certain Poultry Products , WT/DS69/AB/R, adopted 23 July 
1998, DSR 1998:V, 2031 
EC – Poultry Panel Report, European Communities – Measures Affecting the Importation of 
Certain Poultry Products , WT/DS69/R, adopted 23 July 1998, as modified by 
Appellate Body Report WT/DS69/AB/R, DSR 1998:V, 2089 
EC – Selected Customs Matters  Appellate Body Report, European Communities – Selected Customs Matters , 
WT/DS315/AB/R, adopted 11 December 2006, DSR 2006:IX, 3791  WT/DS371/R 
Page xx  
 
  Short Title Full case title and citation 
EC – Selected Customs Matters Panel Report, European Communities – Selected Customs Matters , 
WT/DS315/R, adopted 11 December 2006, as modified by Appellate Body Report WT/DS315/AB/R, DSR 2006:IX-X, 3915 
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 
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 – 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 – 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 – Certain Paper Panel Report, Korea – Anti-Dumping Duties on Imports of Certain Paper 
from Indonesia , WT/DS312/R, adopted 28 November 2005, DSR 2005:XXII, 
10637 
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 
Turkey – Rice Panel Report, Turkey – Measures Affecting the Importation of Rice , 
WT/DS334/R, adopted 22 October 2007, DSR 2007:VI, 2151 
US – Anti-Dumping Measures on Oil Country Tubular Goods Appellate Body Report, United States – Anti-Dumping Measures on Oil 
Country Tubular Goods (OCTG) from Mexico , WT/DS282/AB/R, adopted 
28 November 2005, DSR 2005:XX, 10127 
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  
US – Cotton Yarn Appellate Body Report, United States – Transitional Safeguard Measure on 
Combed Cotton Yarn from Pakistan , WT/DS192/AB/R, adopted 5 November 
2001, DSR 2001:XII, 6027 
US – Countervailing Duty Investigation on DRAMS Appellate Body Report, United States – Countervailing Duty Investigation on 
Dynamic Random Access Memory Semiconductors (DRAMS) from Korea , 
WT/DS296/AB/R, adopted 20 July 2005, DSR 2005:XVI, 8131 
US – FSC 
(Article 21.5 – EC) Appellate Body Report, United States – Tax Treatment for "Foreign Sales 
Corporations" , WT/DS108/AB/R, adopted 20 March 2000, DSR 2000:III, 
1619  WT/DS371/R 
 Page xxi 
 
 
  Short Title Full case title and citation 
US – Hot-Rolled Steel  Panel Report, United States – Anti-Dumping Measures on Certain Hot-Rolled 
Steel Products from Japan , WT/DS184/R, adopted 23 August 2001 modified 
by Appellate Body Report WT/DS184/AB/R, DSR 2001:X, 4769  
US – Lamb Appellate Body Report, United States – Safeguard Measures on Imports of 
Fresh, Chilled or Frozen Lamb Meat from New Zealand and Australia , 
WT/DS177/AB/R, WT/DS178/AB/R, adopted 16 May 2001, DSR 2001:IX, 
4051 
US – Section 211 
Appropriations Act Appellate Body Report, United States – Section 211 Omnibus Appropriations 
Act of 1998 , WT/DS176/AB/R, adopted 1 February 2002, DSR 2002:II, 589 
US – Section 337 Tariff Act GATT Panel Report, United States Section 337 of the Tariff Act of 1930 , 
L/6439, adopted 7 November 1989, BISD 36S/345. 
US – Shrimp Appellate Body Report, United States – Import Prohibition of Certain 
Shrimp and Shrimp Products , WT/DS58/AB/R, adopted 6 November 1998, 
DSR 1998:VII, 2755 
US – Shrimp  Panel Report, United States – Import Prohibition of Certain Shrimp and 
Shrimp Products , WT/DS58/R and Corr.1, adopted 6 November 1998, as 
modified by Appellate Body Report WT/DS58/AB/R, DSR 1998:VII, 2821  
US – Shrimp (Thailand) / 
US – Customs Bond Directive Appellate Body Report, United States – Measures Relating to Shrimp from 
Thailand / United States – Customs Bond Directive for Merchandise Subject to Anti-Dumping/Countervailing Duties , WT/DS343/AB/R, 
WT/DS345/AB/R, adopted 1 August 2008 
US – Stainless Steel (Korea)  Panel Report, United States – Anti-Dumping Measures on Stainless Steel Plate 
in Coils and Stainless Steel Sheet and Strip from Korea , WT/DS179/R, adopted 
1 February 2001, DSR 2001:IV, 1295  
US – Stainless Steel (Mexico)  Panel Report, United States – Final Anti-Dumping Measures on Stainless 
Steel from Mexico , WT/DS344/R, adopted 20 May 2008, as modified by 
Appellate Body Report WT/DS344/AB/R  
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 – Tobacco GATT Panel Report, United States Measures Affecting the Importation, 
Internal Sale and Use of Tobacco , DS44/R, adopted 4 October 1994, 
BISD 41S/131. 
US – Underwear Appellate Body Report, United States – Restrictions on Imports of Cotton 
and Man-made Fibre Underwear , WT/DS24/AB/R, adopted 25 February 
1997, DSR 1997:I, 11 
US – Upland Cotton 
(Article 21.5 – Brazil)  Appellate Body Report, United States – Subsidies on Upland Cotton – 
Recourse to Article 21.5 of the DSU  by Brazil , WT/DS267/AB/RW, adopted 
20 June 2008  
US – Upland Cotton Appellate Body Report, United States – Subsidies on Upland Cotton , 
WT/DS267/AB/R, adopted 21 March 2005, DSR 2005:I, 3 
US – Wheat Gluten Appellate Body Report, United States – Definitive Safeguard Measures on 
Imports of Wheat Gluten from the European Communities , 
WT/DS166/AB/R, adopted 19 January 2001, DSR 2001:II, 717 WT/DS371/R 
Page xxii  
 
  Short Title Full case title and citation 
US – Zeroing (EC) Appellate Body Report, United States – Laws, Regulations and Methodology 
for Calculating Dumping Margins ("Zeroing") , WT/DS294/AB/R, adopted 
9 May 2006, and Corr.1, DSR 2006:II, 417 
US – Zeroing (EC) 
(Article 21.5 – EC)  Appellate Body Report, United States – Laws, Regulations and Methodology 
for Calculating Dumping Margins ("Zeroing") – Recourse to Article 21.5 of 
the DSU  by the European Communities , WT/DS294/AB/RW and Corr.1, 
adopted 11 June 2009  
  WT/DS371/R 
 Page xxiii 
 
 
  TABLE OF ABBREVIATIONS 
 
Abbreviation Description 
ACC Appeals Consideration Committee, now the Board of Appeals 
AFTA Association of South East Asian Nations (ASEAN) Free Trade 
Agreement 
Anti-Dumping Agreement Agreement on Implementation of Article VI of the General 
Agreement on Tariffs and Trade 1994 
ASEAN Association of South-East Asian Nations 
B baht 
BoA Thai Board of Appeals within the Ministry of Finance 
CEPT Common Effective Preferential Tariff  
c.i.f. cost, insurance and freight 
Customs Valuation Agreement Agreement on Implementation of Article VII of the General 
Agreement on Tariffs and Trade 1994 
Customs Value Decision Decision Regarding Cases where Customs Administrations Have 
Reasons to Doubt the Truth or A ccuracy of the Declared Value 
CVA Customs Valuation Agreement 
DDG Deputy Director-General 
DG Director-General 
DG Customs Director-General of Customs 
DG Excise Director-General of Excise 
DG Revenue Director-General of Revenue 
DG Treasury Director-General of Treasury 
DSB Dispute Settlement Body 
DSI Department of Special Investigations 
DSU Dispute Settlement Understanding 
Duty-Paid c.i.f. Price c.i.f. prices of the cut tobacco or tobacco plus duties on imports 
FY financial year 
GAAP generally accepted accounting principles WT/DS371/R 
Page xxiv  
 
  Abbreviation Description 
GATT 1994 General Agreement on Tariffs and Trade 1994 
GM gross margin 
MFN Most Favoured Nation 
MRSP Maximum Retail Selling Price 
OFAC U.S. Office of Foreign Assets Control 
PG&E Profit and General Expenses 
PMI Philip Morris International Inc. 
PM Philippines Philip Morris Philippines Manufacturing Inc. 
PM Thailand The Thailand branch office of Philip Morris (Thailand) Limited 
PMTL The Thailand branch office of Philip Morris (Thailand) Limited 
PWC PricewaterhouseCoopers 
RPT Reasonable Period of Time 
RRSP Recommended Retail Selling Price 
RSP Retail Selling Price 
SCM Agreement Agreement on Subsidies and Countervailing Measures 
Thai Customs The Customs Department of the Kingdom of Thailand 
TNS Market Study Taylor Nelson Sofres Market Study 
TTM Thailand Tobacco Monopoly 
TTM officials Thailand Tobacco Monopoly Board of Directors 
TV transaction value 
VAT Value Added Tax 
Vienna Convention Vienna Convention on the Law of Treaties 
WCO World Customs Organization 
WTO Agreement Marrakesh Agreement Establishing the WTO 
  WT/DS371/R 
 Page 1 
 
 
  I. INTRODUCTION 
A. COMPLAINT OF THE PHILIPPINES  
1.1 On 7 February 2008, the Philippines requested  consultations with Thailand pursuant to 
Articles 1 and 4 of the Understanding on Rules and Procedures Governing the Settlement of Disputes  
("DSU"), Article XXII:1 of the General Agreem ent on Tariffs and Trade 1994 (the "GATT 1994"), 
and Article 19 of the Agreement on Implementati on of Article VII of the General Agreement on 
Tariffs and Trade 1994 (the "Customs Valuation Agre ement") with respect to the measures and claims 
set out below.1   
1.2 Consultations were held on 23 April 2008 and on 9 September 2008, but failed to produce a 
mutually agreed solution. 
B. ESTABLISHMENT AND COMPOSITION OF THE PANEL  
1.3 On 29 September 2008, the Philippines requested th e establishment of a panel.  At its meeting 
on 17 November 2008, the Dispute Settlement B ody ("DSB") established a panel in accordance with 
Article 6 of the DSU (WT/DSB/M/259), with standard  terms of reference, to examine the matter 
referred to the DSB by the Philippines in document WT/DS371/3. 
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 the parties to the dispute, the matter  referred to the DSB by the Philippines in 
document WT/DS371/3 and to make such findings as will assist the DSB in making the recommendations or in giving the rulings provided for in those agreements." 
1.5 On 16 February 2009, the parties agreed to the following composition of the Panel:
2 
 Chairman: Mr Roberto Carvalho de Azevedo 
  Members: Mr Richard Gottlieb    Mr Alvaro Hansen  
1.6 Australia, China, th e European Union
3, India, Chinese Taipei and the United States have 
reserved their rights to participate in the Panel proceedings as a third party. 
                                                      
1 WT/DS371/1 of 12 February 2008. 
2 WT/DS371/4 of 17 February 2009. 
3 On 1 December 2009, the Treaty of Lisbon amendi ng the Treaty on Europe an Union and the Treaty 
establishing the European Community (done at Lisb on, 13 December 2007) en tered into force.  On 
29 November 2009, the WTO received a Verbal Note (WT/L/779) from the Council of the Eu ropean Union and 
the Commission of the European Communities stating that, by virtue of the Treaty of Lisbon, as of 1 December 2009, the European Union replaces and succeeds the European Community.  The third party 
submission in this case dated 18 May 2009 and statement at the third party session on 11 June 2009 were made 
by the delegation of the European Communities. On 8 January 2010, the European Union requested that in its report, the Panel change instances of "European Communities" to "European Union", and instances of "EC" to 
"EU", except for prior case titles and quotations. WT/DS371/R 
Page 2  
 
  C. P
ANEL PROCEEDINGS  
1.7 The Panel held the first substantive meeting with the parties on 10 and 12 June 2009.  The 
session with the third parties took place on 11 June 2009.  The second substantive meeting with the 
parties was held on 4-6 November 2009. 
1.8 On 16 December 2009, the Panel issued the descriptive part of its Panel Report.  The Panel 
issued its Interim Panel Report to the parties on 30 June 2010.  The Panel issued its Final Report to 
the parties on 4 August 2010. 
II. FACTUAL ASPECTS 
A. THE MEASURES AT ISSUE  
2.1 This dispute concerns Thailand's customs a nd fiscal measures on cigarettes imported from the 
Philippines. 
2.2 The Philippines identified the following as th e measures at issue in this dispute: 
(a) Measures pertaining to customs valuation: 
• the general rule and/or methodology provi ding for the systematic rejection of 
transaction value and the systematic use of a deductive valuation method; 
• individual determinations made by Th ai Customs for entries of cigarettes 
exported from the Philippines and entered between 4 August 2006 and 
19 March 2008, including: 
o the Notices of Assessment for the entrie s listed in Annex I to the Philippines' 
request for the establishment of a panel; and 
o the assessment of value for purposes of  setting the guarantee or cash deposit 
at the time of entry for the entries liste d in Annex II to the Philippines' request 
for the establishment of a panel; 
• Customs Act, B.E. 24694 (1926), including all amendments; 
• Ministerial Regulation No. 132 B.E. 2543 (1990) issued under authority of the 
Customs Act B.E. 2469 (1926) and the am ending Ministerial Regulation No. 145 
B.E. 2547 (2004) and Ministerial Regulation No. 146 B.E. 2550 (2007); 
• Notification No. 23/2549 (2006) of Thai Customs, containing guidelines on 
customs valuation; 
• Customs Regulation No. 2/2550 (2007) Re: amendment of the Customs 
Formalities and Guidelines Code B.E. 2544 (2001) re: Customs formalities to 
prevent Customs value duty evasion, a nd amendment of Customs Department 
Regulation No. 14/2549 (2006) re: Guideline for Fixing of Customs Value;  
                                                      
4 The "B.E." year number design ates the year in the Buddhist cal endar.  The year number in 
parentheses designates the corresponding year A.D.  WT/DS371/R 
 Page 3 
 
 
  • Customs Regulation No. 14/2549 (2006), re Guideline for Fixing of Customs 
Value, as amended by Customs Regulation No. 2/2550 (2007); 
• Customs Notification No. 29/2549 (2006) Procedure in requesting duty fee 
assessment; and  
• any amendments, implementing measures, or other related measures. 
(b) Measures pertaining to Thailand's Value-Added Tax ("VAT") regime: 
• Sections 79/5, 81, 82/7, 88, 88/2, 88/5, 88/6, 89(4), and 89/1 of the Revenue 
Code of Thailand;  
• Section 23 of the Tobacco Act B.E. 2509 (1966);  
• Royal Decree, issued under the Revenue Code, Governing the Reduction of the 
Value Added Tax Rates (No. 479), B.E. 2551 (2008); 
• Royal Decree issued under the Revenue Code Governing Exemption from Value 
Added Tax (No. 239) B.E. 2534 (1991); 
• Order of the Revenue Department No. Por 85/2542 (1999);  
• Notification of the Director-General  of the Revenue Department on VAT 
(No. 10);  
• MRSP Notices issued by the Director-Gen eral for Excise.  The currently 
applicable MRSPs are set out in the Notice B.E. 2550 (2007) of 29 August 2007 (for domestic products) and in the Noti ce B.E. 2551 (2008) of 19 August 2008 
(for imported products); and 
• any amendments, implementing measures, or other related measures. 
(c) Thailand's VAT-related requirements on whol esale and retail sellers of cigarettes that 
are contained in the following measures: 
• Sections 81 and 82/7 of the Thai Revenue Code; 
• Royal Decree issued under the Revenue Code Governing Exemption from Value 
Added Tax (No. 239) B.E. 2534 (1991);  
• Order of Revenue Depa rtment Por 85/2542; and 
• any amendments, implementing measures, or other related measures. 
(d) Measures pertaining to Thailand's other fiscal measures: 
• Thailand's excise tax regime operated through the following measures: 
o the Tobacco Act B.E. 2509 (1966), Sec tions 5, 5 ter, and 5 quinquies;  WT/DS371/R 
Page 4  
 
  o Notices of Director-General for Excise, setting out the ex factory prices.  The 
currently applicable ex factory pri ces are set out in the Notice B.E. 2550 
(2007) of 29 August 2007; and 
o any amendments, implementing measures, or other related measures. 
• Thailand's health tax regime operate d through the following measures: 
o the Health Promotion and Foundation Ac t, B.E. 2544 (2001), in particular 
Sections 11, 12, and 13 thereof; and  
o any amendments, implementing measures or other related measures. 
• Thailand's television tax regime ope rated through the following measures: 
o the Thai Public Broadcasting Service Ac t 2551 (2008), in particular Sections 
12, 13, and 14 thereof; and 
o any amendments, implementing measures, or other related measures. 
(e) Thailand's administration of its customs a nd fiscal measures as listed in (a)-(d) above 
(f) Thailand's administration of its legal provi sions pertaining to guarantees, including 
the following: 
• the provisions of the Customs Act B.E. 2469 (1926) (as amended) in respect of 
guarantees (specifically, Sections 112, 112 bis, 112 ter, and 112 quater);  
• Customs Regulation No. 2/2550 (2007) Guideline to determine customs price 
valuation; and 
• any amendments, implementing measures, or other related measures. 
(g) An investigation by Thailand's Department of Special Investigation ("DSI") of the 
Thailand branch office of Philip Morris (Thaila nd) ("PM Thailand") in relation to the 
declared customs value of imports from the Philippines 
(h) Undue delay in Thailand's administrative decision making: 
• delays in decision making by the Board of Appeals ("BoA"), which operates 
under Section 112 sexies to Section 112 undevicies of the Customs Act; and 
• failure to meet the 90-day deadline set in Thai law in Section 45 of the 
Administrative Procedure Act B.E. 2539 (1996) for administrative decisions in appeals against the maximum retail selling prices ("MRSPs") set by the Thai Excise Department. 
(i) Failure to provide for judicial or admini strative review of the customs authorities' 
decisions relating to the imposition a nd collection of guarantees, pending the 
issuance of a notice of assessment, coveri ng the customs duties and excise, health 
and television taxes that may become payable  WT/DS371/R 
 Page 5 
 
 
  B. PROCEDURAL HISTORY  
1. Additional procedures for the protection of business confidential information ("BCI" 
procedures) 
2.3 On 19 February 2009, the Philippines submitted a letter to the Panel requesting it to establish 
special procedures to protect BCI.  In the Annex to  this letter, the Philippines proposed a draft of 
suggested BCI procedures.  Following an exchange of views on issues relating to BCI procedures at 
the organizational meeting held on 25 February 200 9, the parties submitted their comments in writing 
on 27 February 2009.  Thailand also provided th e Panel with its own draft of suggested BCI 
procedures on the same day.  The Philippin es submitted, on 2 March 2009, its comments on 
Thailand's written comments of 27 February 2009.   In response, Thailand provided additional 
comments on the Philippines' comments on 3 March 2009.  On the same day, the Philippines made 
further comments on Thailand's comments of 3 March 2009.  Having considered, inter alia , the draft 
versions of the BCI procedures submitted by the parties, their comments on each other's draft BCI 
procedures and the BCI procedures adopted in pr evious disputes, the Panel adopted additional 
working procedures concerning BCI on 11 March 2009.  These procedures are set forth in Annex A-1. 
2.4 In accordance with paragraph 2 of the BCI  procedures, on 16 March 2009, the parties 
submitted Approved Persons lis ts to the Panel and the other party.  In the absence of objection from 
the parties to the designation of an individual, incl uded in the list submitted by the other party, as an 
Approved Person, the Panel designated these indi viduals as Approved Pers ons on 18 March 2009. 
2. Amicus curiae briefs 
2.5 On 27 March 2009, the Panel received a request  from a private entity wishing to submit 
information to the Panel with regard to this dispute.  On 17 April 2009, the Panel responded by 
requesting that such amicus curiae briefs be addressed  directly to the parties and third parties to the 
dispute.  Upon receiving such briefs, the parties and third parties would decide whether and how to 
use such briefs and/or any information contained therein in their submissions and arguments to the 
Panel in these proceedings. 
3. The Philippines' request to the Panel to seek  certain documents from Thailand pursuant 
to Article 13 of the DSU 
2.6 The Philippines requested in its first written submission5 that, pursuant to Article 13 of the 
DSU, the Panel seek certain documents from Thailand  to facilitate the Panel's objective assessment of 
the claims, arguments and evidence before it.  The Panel informed the parties on 1 April 2009 of its 
decision to render its ruling in this regard after it has had an opportunity to review Thailand's first 
written submission.  Thailand noted at the first substa ntive meeting with the Panel, that some of the 
documents on the Philippines' document list had alread y been submitted by the parties as part of their 
first written submissions.  Thailand further provide d the Panel with a number of other documents on 
the Philippines' list as part of its first oral st atement.  Further, Thailand also commented on the 
relevance of several other documents  on the Philippines' list.  During the first substantive meeting, the 
Panel asked the Philippines to clarify the remain ing documents on its list and any other additional 
documents that it still considered necessary for th e Panel to seek from Thailand.  The Philippines 
submitted an updated list of doc uments on 15 June 2009. 
2.7 The Panel considered the parties' views on the documents/information requested by the 
Philippines in the light of the matters presented in this  dispute.  Pursuant to the authority vested in 
panels under Article 13.1 of the DS U, the Panel sent a letter on 24 A ugust 2009, requesting the parties 
                                                      
5 The Philippines' first written submission, paras. 685-713. WT/DS371/R 
Page 6  
 
  to submit certain documents/information as indicated in  the Annex to the letter.  The parties submitted 
the requested documents/information on 4 Septembe r 2009.  Pursuant to these submissions, comments 
were received from the Philippines on 16 Septem ber 2009 and from Thailand on 25 September 2009. 
III. PARTIES' REQUESTS FOR FINDINGS AND RECOMMENDATIONS  
A. T
HE PHILIPPINES  
3.1 The Philippines requests that the Panel find that: 
(a) with respect to the administration of cu stoms and fiscal rules, Thailand violates: 
• Article X:3(a) of the GATT 1994 because persons responsible for administering 
Thailand's customs and tax rules are officers of Thailand Tobacco Monopoly ("TTM"); 
• Articles X:3(a) and X:3(b) of the GATT 1994 because of delays in its 
administrative decision-making, particularly undue delays in the BoA's decision-
making; and 
• Article X:3(b) of the GATT 1994 because Thailand provides no legal mechanism 
whatsoever for the administrative or judici al review of decisions taken by Thai 
Customs to collect guarantees for custom s duties and internal taxes potentially 
due of the finally assessed customs value. 
(b) with respect to customs valuation issues, Thailand violates: 
• Articles 1.1 and 1.2 of the Customs Valuation Agreement  by maintaining and 
applying a general rule requiring th e rejection of transaction value; 
• Articles 1.1 and 1.2 of the Customs Valuation Agreement  by improperly 
rejecting PM Thailand's declared transaction values for [[xx.xxx.xx]] entries; 
• Article 1.2(a) of the Customs Valuation Agreement by failing to communicate 
"grounds" before rejecting transaction value; 
• Article 16 of the Customs Valuation Agreement by failing to provide an 
adequate explanation as to how the customs value was determined; 
• if the Panel finds that Thailand valued  PM Thailand's goods under Article 7 of 
the Customs Valuation Agreement: 
o Thailand improperly applied Article 5 of the Customs Valuation Agreement 
by declining to use that provision for impermissible reasons; 
o Thailand violated Article 7.1 of the Customs Valuation Agreement  by 
improperly incorrectly assessing the deductive value of PM Thailand's transactions, specifically by failing to deduct three claimed items and by 
deducting incorrect amounts for VAT and excise tax for certain transactions; 
and  WT/DS371/R 
 Page 7 
 
 
  o Thailand violated Article 7.3 of the Customs Valuation Agreement  by failing 
to inform PM Thailand in writing of the customs value determined under Article 7 and the method used to determine such value; 
• if the Panel finds that Thailand valued  PM Thailand's goods under Article 5 of 
the Customs Valuation Agreement, Thaila nd violated Article 5 of the Customs 
Valuation Agreement  by improperly incorrectly assessing the deductive value of 
PM Thailand's transactions; and 
• Article 10 of the Customs Valuation Agre ement by disclosing in the Thai media 
confidential customs valuation informati on provided by PM Thailand to Thai 
Customs. 
(c) with respect to VAT, Thailand violates: 
• Article X:1 of the GATT 1994 by failing to publish the methodology and data 
that it uses to determine the tax base for VAT, i.e., the government-fixed MRSP; 
• Article III:2 of the GATT 1994 by imposing a higher VAT burden on imported 
products than on like domestic products as a result of the level of the MRSPs; 
• Article III:2 of the  GATT 1994  by exempting resales of domestic cigarettes from 
VAT liability; 
• Article III:4 of the GATT 1994 by imposing more onerous administrative 
requirements for VAT in connection with the resale of imported cigarettes; and 
• Article X:3(a) of the GATT 1994 by failing to administer the VAT system in a 
uniform, reasonable and impartial manner. 
(d) with respect to excise, health and television taxes, Thailand violates: 
• Article X:1 of the GATT 1994 by failing to publish the methodology and data 
that it uses to determine the exci se tax base for domestic cigarettes, i.e., the 
government-fixed ex factory price;  
• Article X:1 of the GATT 1994 by faili ng to publish laws and regulations 
governing the release of guarantees for pot ential liability for health, excise and 
television taxes; and 
• Article X:3(a) of the GATT 1994 by faili ng to administer the excise, health and 
television taxes in a manner that is  uniform, reasonable and impartial. 
3.2 The Philippines requests that the Panel recommend that Thailand bring its measures found to 
be WTO-inconsistent into confor mity with its WTO obligations.  
B. T
HAILAND  
3.3 Thailand requests the Panel to find that with r espect to the measures within the Panel's terms 
of reference, the Philippines has failed to establis h that Thailand has acted inconsistently with its 
obligations under any of the provisions of the covered agreements cited by the Philippines. WT/DS371/R 
Page 8  
 
  3.4 Thailand notes that this dispute is unusual in  that the Philippines is complaining about 
individual completed acts (including, inter alia , the valuation of the [[xx.xxx.xx]] entries listed in the 
panel request, the alleged breach of Article 10 of the Customs Valuation Agreement, and the use of 
guarantee values in determining superseded MRSPs alle gedly in breach of Article X:3(a)), rather than 
measures that have ongoing effect as of the date of establishment of the Panel.
6  In the event that the 
Panel makes findings that Thailand has acted inconsis tently with its WTO obligations with respect to 
any of these completed acts, the Panel should, consis tent with the guidance provided by prior panels 
and the Appellate Body,7 refrain from making recommendations with respect to those completed acts.   
IV. ARGUMENTS OF THE PARTIES 
4.1 The arguments presented by the parties in thei r written submissions and oral statements are 
reflected below.8 
A. EXECUTIVE SUMMARY OF THE FIRS T WRITTEN SUBMISSION OF THE PHILIPPINES  
1. Introduction 
4.2 This dispute concerns a series of inter-rela ted customs and internal tax measures taken by 
Thailand regarding cigarettes imported into Tha iland from the Philippines by PM Thailand.  These 
customs and tax measures have been both formulated and applied by Thailand in ways that serve to 
protect the interests of the State-owned monopoly producer of cigarettes, TTM.  In addition to 
protecting TTM's domestic cigarettes, these measures ar e characterized by a lack  of transparency that 
deprives the importer of the most basic informati on regarding the regulatory treatment of its goods, 
and also by chronic delays in decision-making. 
4.3 The Philippines in no way questions Thailand's pr erogative to regulate its domestic cigarettes 
market, including through health measures, and la belling and advertising restrictions.  No such 
regulations or policies are at issue in this dispute.   
2. Thailand violates Article X:3(a) of the GATT 1994 by failing to administer its customs 
and internal tax rules in a "rea sonable" and "impartial" manner 
(a) The dual role of TTM Officials as Senior Thai Government Officials is inconsistent with 
Article X:3(a) of the GATT 1994 
4.4 Thailand violates Article X:3(a) because of pe rvasive institutional and personal links between 
the Government of Thailand and TTM, which is a "Sta te Enterprise" under Thai law.  Since at least 
1995, persons responsible for managing TTM's co mmercial activities as members of the TTM Board 
of Directors, have also held senior government po sitions in the Ministry of Finance as Director-
General ("DG") of Customs, DG Excise and DG Revenue.   
4.5 These individuals have been responsible for admi nistering the customs and tax rules to which 
imported and TTM's own cigarettes are subject.  Through their governmental functions, these 
individuals:  improperly rejected PM Thailand's de clared transaction values;  imposed non-reviewable 
guarantee values;  substituted PM Thailand's transa ction values with higher assessed customs values;  
subjected imported cigarettes to discriminatory VAT treatment;  levied excise, health and television 
                                                      
6 Exhibit THA-36. 
7 E.g., Panel Report, Dominican Republic – Import and Sale of Cigarettes , paras. 7.363, 7.393, 7.419; 
Appellate Body Report, US – Certain EC Products , paras. 81 and 129. 
8 The summaries of the parties' arguments are ba sed on the executive summa ries submitted by the 
parties to the Panel.  Footnotes in th is section are those of the parties.  WT/DS371/R 
 Page 9 
 
 
  taxes on a tax basis that is inconsistent with the pr escribed tax basis and that is without foundation in 
Thai law;  systematically failed to meet basic transparency requirements, failing to publish rules 
governing decision-making and explanations for d ecisions in relation to the customs and tax 
measures;  and systematically delayed decision-making. 
4.6 Even in the context of a public monopoly, this involves an unacceptable conflict of interest.  
By definition, the TTM officials' public powers profoundly influence the relative competitive 
situation of domestic and imported cigarettes.  Yet, the officials in question, as part of the domestic 
producer's senior management, have incentives, including personal financial incentives – and, 
moreover, are obliged  by Thai law – to promote the domestic producer's interests, maximizing its 
market share, revenues, and profits.  Furthermore,  the Minister of Finance himself has made public 
statements that TTM should be protected to prevent imported cigarettes from eroding TTM's market 
position and expressed concerns that PM Thailand's br ands would "snatch all of TTM's share if the 
volume of imports is not reduced".9  
4.7 The dual role of senior Government o fficials as senior TTM executives constitutes 
"unreasonable" and "partial" administration of Tha iland's customs and tax laws  under Article X:3(a).  
First , it is not "reasonable" – "appropriate" or "suitabl e" – or "impartial" to vest government officials 
that are TTM Directors with decision-making power  over imported and domestic  cigarettes, and over 
domestic producers and importers of these goods .  Doing so creates an "inherent danger"10 that the 
TTM Directors could use their governmental powers in a manner that confers a competitive advantage on their own company, TTM, and its products.  By any standard, such administration is neither "reasonable" nor "impartial", as confirmed by the panel report in Argentina – Hides and Leather . 
4.8 Second , Thailand's administration of its customs and tax laws is unreasonable and partial 
because, in their capacity as government officials,  TTM Directors have access to BCI provided by 
PM Thailand in connection with the importation of cigarettes.  Wearing a government "hat", the TTM 
officials are vested with the power  to request and, indeed, routinely request, sensitive BCI from their 
competitors.  This state of affairs creates an unacceptable risk – an "inherent danger"
11 – that TTM 
could derive an unfair advantage from information th at should not be in TTM's hands.  The situation 
in this dispute is, again, similar to the situation in Argentina – Hides and Leather . 
(b) Thailand violates Articles X:3(a) and X:3(b) of the GATT 1994 because of undue delays in 
the BoA's administrative decision-making 
4.9 Thailand has failed to ensure that administrativ e appeals against customs valuation decisions 
are resolved promptly, as required by Articles X:3( a) and X:3(b) of the GATT 1994.  Administrative 
appeals filed by PM Thailand to the BoA betw een March 2002 and March 2003 have still not been 
resolved, more than seven years later.  It is not "reasonable" within the meaning of Article X:3(a) to 
fail to decide customs valuation appeals for a period of six to seven years, thereby leaving an importer without a prompt remedy against decisions taken by the customs authority.  These delays are especially unreasonable given that the BoA has not convened for over a year to consider 
PM Thailand's appeals.  Moreover, these delays are inconsistent with Article X:3(b), which requires a 
WTO Member to maintain "tribunals or procedures" to ensure " prompt review and correction  of 
administrative action relating to customs matters" (emphasis added).  By any standard, a process in which the first administrative step  towards the "review and correction" of valuation decisions lasts for 
more than six years is not "prompt". 
                                                     
 
9 "Thanong presses to raise tax on imported cigarettes ", Khao Hun, 31 August 2006.  Exhibit PHL-1. 
10 Panel Report, Argentina – Hides and Leather , para. 11.100. 
11 Panel Report, Argentina – Hides and Leather , para. 11.100. WT/DS371/R 
Page 10  
 
  (c) Thailand fails to respect Article X:3(b) becau se no mechanism exists under Thai law for the 
review of guarantee values 
4.10 Thailand fails to respect Article X:3(b) of the GATT 1994 because it provides no legal 
mechanism whatsoever for the administrative or judi cial review of decisions taken by Thai Customs 
to collect guarantees for customs duties and intern al taxes potentially due on the finally assessed 
customs value.  Article X:3(b) requires a WTO Memb er to maintain "tribunals or procedures" to 
ensure "prompt review and correction of administ rative action relating to customs matters".  Under 
Thai law, an importer is unable to seek any "review and correction" of the imposition of guarantee 
values, let alone a prompt "review and correction".  Therefore, Thailand violates Article X:3(b) of the 
GATT 1994. 
3. Thailand violates numerous provisions of the Customs Valuation Agreement 
(a) Thailand acted inconsistently with Articles 1. 1 and 1.2 of the Customs Valuation Agreement 
by improperly rejecting PM Thailand's declared transaction values for a number of entries 
(i) Thailand violated Article 1.1 by improperly rej ecting PM Thailand's transaction values as the 
basis for customs values   
4.11 Thailand acknowledged that PM Thailand's declar ed transaction values were the "price paid 
or payable".
12  However, Thailand rejected PM Thailand' s declared transaction value for two reasons, 
namely because:  (1) the importer and exporter are re lated;  and, (2) another, unspecified importer 
imports "the same type of goods" at "3 – 4 times"  the value of PM Thailand's declared transaction 
value. 
4.12 Article 1 of the Customs Valuation Agreemen t provides that the customs value is, in 
principle, the transaction value declared by an im porter.  An authority may disregard the transaction 
value, and apply other valuation methods under th e Customs Valuation Agreement, only if a valid 
basis is available to do so.  Neither of the two reasons relied on by Thailand provides such a valid 
basis.   
4.13 Thailand's first reason – that the importer and exporter are related – is expressly excluded in 
Article 1.2(a) as the sole reason for rejecting transac tion value.  Thus, the existence of a relationship 
between the buyer (PM Thailand) and the seller (Philip Morris Philippines Manufacturing Inc ["PM Philippines"]) is not, in itself, a legitimate ground for rejecting declared transaction values.  Moreover, this relationship has been known to the Thai author ities for a number of years before Thailand began 
rejecting PM Thailand's declared transaction values. 
4.14 Thailand's second reason – that another, unspeci fied importer imports "the same type of 
goods" at "3-4 times" higher prices – is also flawed .  The price declared by one importer cannot, in 
itself, be the grounds for rejecting the declared tr ansaction value of another importer.  Thailand's 
reliance on this benchmark is also logically in consistent, because Thailand relied on the other 
operator's prices to reject PM Thailand's declared  transaction value, but then assessed PM Thailand's 
customs value at a much lower value than the other operator's prices. 
4.15 The Philippines believes that the unspecified "[ ]other importer" is a duty-free operator.  
However, the purchase prices of the operator at issu e are not a permissible benchmark because this 
operator:  does not import goods into the Thai customs territory;  is exempt from internal taxes, which 
                                                     
 
12 Minutes of Meeting "Re Prescription of Import Prices of Cigarettes for Solving the Problem 
regarding Prescription of Cigarette Prices According to the Policy of the Ministry of Finance," dated 14 March 
2007 – Annex 8 to Thai Government Submission in Thai Central Tax Court Case.  Exhibit PHL-74.  WT/DS371/R 
 Page 11 
 
 
  influences the selling price to the du ty-free operator;  and, is in a very different position in the value 
chain than PM Thailand.  Importantly, an Opinion by the World Customs Organization, requested by 
Thailand itself before it began rejecting PM Tha iland's declared transaction values in August 2006, 
confirms that values declared by a duty-paid im porter and a duty-free operator are not comparable, 
without extensive adjustments.  Thailand  did not perform any such adjustments. 
(ii) Thailand violated Article 1.2(a) because it fa iled to inform PM Thailand of the grounds for 
considering that the relationship between PM Philippines and PM Thailand influenced the price  
4.16 Thailand failed to comply with its duty unde r Article 1.2(a) of the Customs Valuation 
Agreement to communicate the "ground s" for considering that the re lationship between PM Thailand 
and PM Philippines influenced the price.  First,  Thailand failed to communicate adequate grounds.  
As previously explained, Thailand's stated grounds  for rejecting the declared transaction values are 
inconsistent with Article 1.1.  The communi cation of WTO-inconsistent grounds for doubting 
transaction values cannot satisfy the requirement under Article 1.2(a). 
4.17 Second, when Thailand provided a statement in  December 2006 to PM Thailand why it was 
doubting the declared transaction value, it failed to state that PM Thailand's prices were 3-4 times 
lower than the prices declared by another operator.  There is evidence showing that Thailand relied on 
the other operator's prices in doubting PM Th ailand's transaction values before December 2006.  
Nonetheless, Thailand informed PM Thailand of that  ground only 5 months later, in April 2007.   
4.18 Third, Thailand failed to inform PM Thailand of its doubts in a timely fashion.  Thai Customs 
began rejecting transaction values on 4 August 20 06, and PM Thailand requested a statement of 
grounds on 8 August 2006.  Thaila nd did not respond to that requ est until 19 December 2006, i.e., 
four-and-a-half months later.  During this exte nded period, PM Thailand was required to provide 
onerous bank and cash guarantees, and had no opport unity to defend its declared transaction value.  
Thus, for almost two thirds of the time that Thailand took to assess PM Thailand's customs values, 
PM Thailand was given no indication as to why its declared transaction values were being rejected.  
During this time, PM Thailand was deprived of any opportunity to respond effectively to the 
authority's concerns and to inform its decision-making process.   
(iii) Thailand violated Article 16 of the Custom s Valuation Agreement by not providing an 
adequate explanation of its customs value determination for entries at issue 
4.19 Thailand's 12 April 2007 letter also violated Artic le 16 of the Customs Valuation Agreement.  
First,  Thailand failed to explain adequately w hy it rejected PM Thailand's declared transaction 
values.  Thailand's stated ground was that PM Thaila nd and PM Philippines are related, but it did not 
explain how this relationship allege dly influenced the price between th e parties.  Moreover, Thailand's 
one-sentence reference to imports from another impor ter "with 3-4 times price difference" is vague 
and unclear, and failed to explain:  who that "impor ter" is;  from where it imports its goods;  why its 
prices serve as an indicator of what PM Thailand declared transaction values should be;  and what 
adjustments, if any, were made for that comparison. 
4.20 In addition, the other "importer" appears to be a duty-free operator.  PM Thailand informed 
Thailand in August 2006 that a comparison of its prices with those of a duty-free operator was not relevant or appropriate.  In its April 2007 communica tion, Thailand failed to explain, in the light of 
that comment, why it nevertheless considered that th e prices of a duty-free operator were pertinent.  
Thailand also failed to explain why the "3-4 times" higher values of the other operator served as a 
benchmark to reject PM Thailand's transaction va lues, but not as a benchmark to assess the customs 
values. WT/DS371/R 
Page 12  
 
  4.21 Second, the communication's bald reference to the use of a "Fall Back" valuation method, 
based on a deductive method, failed to explain precisely how and on what basis Thai Customs calculated the assessed values.  Third, Thailand al so failed to explain why the assessed values are 
internally inconsistent.  Thailand assessed at diffe rent values shipments entered at the same time, 
sometimes on the same day, and under the same ci rcumstances.  This erratic and arbitrary decision-
making demonstrates the crucial impor tance of adequate explanations. 
(iv) Thai Customs violated Article 5 of the Customs Valuation Agreement by declining to use a 
deductive valuation methodology without an adequate reason 
4.22 Assuming that Thailand was entitled to reject PM Thailand's declared transaction values 
under Article 1 of the Customs Valuation Agreement (quod non), Thailand violated Article 5 of the 
Customs Valuation Agreement because it had no va lid reasons for declining to use the deductive 
valuation method under this provision.  Thailand's reason was that PM Thailand could not submit 
audited financial statements for 2006 .  However, Article 5 does not require that the importer's "profits 
and general expenses" be based on th e audited financial statement for the year of importation.  Indeed, 
in an internal government document, Thai Cu stoms stated on 6 March 2007 that PM Thailand's 
audited financial statement for 2005 – which were available to Thai Customs – provided a reliable 
statement of profit and general expenses and could be used for valuation purposes.  As a result, 
Thailand violated Article 5 of the Customs Valua tion Agreement by failing to value PM Thailand's 
goods using the deductive method under that provision. 
(v) Thailand violated Article 7 of the Customs Valuation Agreement  by failing to apply 
"reasonable means" to value PM Thailand's cigarettes and instead relying on "arbitrary and 
fictitious values" 
4.23 Thailand valued PM Thailand's imports using th e "Fall Back" method under Article 7 of the 
Customs Valuation Agreement, although it failed to disclose the specific methodology used.  Under 
Article 7, customs value must be determined us ing "reasonable means", which requires the use of 
objective criteria that generate transparent, consiste nt, and predictable results.  Thailand failed to use 
"reasonable means" in its valuation of PM Thailand 's entries as evidenced by its inconsistent and 
erratic decisions for PM Thailand's entries.  Although these entries were made under the same 
circumstances, Thailand valued the entries differently , including entries that were cleared on the same 
day.   
4.24 Further, Thailand's inconsistent and erratic  decision-making demonstrates that Thailand 
violated Article 7.2(g) by using "arbitrary or fictitio us values".  For example, in a situation where two 
entries cleared on the same day, Thailand accepted the transaction value for one of these entries, but 
rejected it for the other entry, and then assessed a value above the transaction values. 
4.25 Thailand also violated Article 7.3 by failing to provide an adequate  explanation of the 
valuation method used.  Although Thailand disclosed  that it had used a deductive method, Thailand 
did not disclose:  the starting point of the deductive calculations, the nature or amount of the 
deductions made, the data sources used, and how the deductive method differed from deductive 
valuation under Article 5.   
(vi) Thailand violated Article 10 of the Customs Va luation Agreement by disclosing in the Thai 
media confidential customs valuation information provided by PM Thailand  
4.26 During August 2006 and for some weeks thereaft er, Thai Government officials repeatedly 
disclosed to the Thai Press, PM Th ailand's declared transaction valu es.  These repeated disclosures of 
highly confidential information violated Article 10 of the Customs Valuation Agreement, which 
requires that all information which is by nature confidentia l, or which is provided on a confidential  WT/DS371/R 
 Page 13 
 
 
  basis for purposes of customs valuation, be treated as "strictly confidential".  Authorities must "not 
disclose [that information] without the specific perm ission of the person" providing the information.  
PM Thailand never authorized the disclosure of this information.   
4. Claims pertaining to VAT 
(a) Thailand violates Article X:1 of the GATT 1994 by not publishing the methodology used to 
determine the tax base for VAT, i.e., the government-fixed MRSP 
4.27 Under Thai law, the tax basis for VAT is  a government-fixed MRSP determined for each 
domestic and imported brand.  To comply with Artic le X:1 of the GATT 1994, and consistent with the 
Dominican Republic – Import and Sale of Cigarettes , Thailand must publish the "essential 
information" concerning (a) the overall methodology u sed to determine the MRSPs for each brand;  
(b) the methodology used to obtain data, including price surveys in Thailand and other countries, and 
(c) the data relied upon by DG Excise in making its re gulations or rulings, including the results of any 
surveys.  Contrary to Article X:1 of the GATT 1994, Thailand has not published laws or regulations addressing any of this information. 
(b) Thailand imposes higher VAT on imported pro ducts than on domestic products, thereby 
violating Article III:2 of the GATT 1994 
4.28 Thailand violates Article III:2 of the GATT 1994 because it imposes VAT on imported 
cigarettes "in excess" of VAT imposed on "like" domestic cigarettes.  Imported and domestic cigarettes are "like products" within the meaning of Article III:2 for the following reasons.  They have 
the same essential physical characteristics consisting of a paper tube, a mix of tobacco and additives, 
and a filter.  They have the same "end uses", and Thai consumers treat and perceive imported and 
domestic brands as substitutable products satisfying the same demand.  There is also market-based 
evidence demonstrating that consumers "switch"  between domestic and imported brands.  The 
cigarettes also fall under the same tariff heading,  and Thailand makes no regulatory distinctions 
between different types of manufactured cigarettes. 
4.29 Imported cigarettes are taxed "in excess" of domestic cigarettes because MRSPs are higher 
for imported than for domestic cigarettes.  Consider ing the totality of the Thai cigarette market, over 
90 per cent of imported cigarettes have a higher MR SP than over 95 per cent of domestic cigarettes.  
Excess taxation of imported cigarettes also ar ises because Thailand established the MRSPs for 
domestic cigarettes at the level of the retail selli ng price ("RSP"), whereas the MRSPs for imported 
cigarettes are typically above the RSP.  Because of this "gap" between the MRSP and RSP, imported 
cigarettes are subject to a higher relativ e VAT burden than domestic cigarettes. 
4.30 Thailand has not published the general rules used  to calculate the MRSPs.  Nonetheless, the 
methodology used to calculate the September 2006 and March 2007 MRSPs has been disclosed and 
involves discrimination prejudicial to imported bran ds.  The methodology involved the addition of a 
gross margin, which was 250 per cent higher for imported brands ( Marlboro  and L&M ) than for 
domestic brands.  For these imports, Thailand declined  to use the importer's actual gross margin, even 
though Thai Customs expressly found that this margin was "reliable" and, instead, Thailand 
constructed a margin based on alle ged and undisclosed price surveys.  In contrast, for domestic 
brands, Thailand used TTM's actual gross margin. WT/DS371/R 
Page 14  
 
  (c) Thailand's de jure  exemption of resellers of domestic cigarettes from VAT violates 
Articles III:2 and III:4 of the GATT 1994, because the same exemption is not afforded to resellers of imported cigarettes 
4.31 Thailand also violates Article III:2 of the GATT 1994 by exempting resellers of domestic 
cigarettes from VAT liability but not so exempting r esellers of imported cigarettes.  Thus, resales of 
imported products are subject to VAT, whereas resal es of domestic products are not.  This constitutes 
less favourable treatment, and excess taxation, of impor ted products that are "like" domestic products. 
4.32 Thailand's exemption from VAT of domestic cigarettes also results in a violation of 
Article III:4 of the GATT 1994.  There are two elements  to this violation.  First, because resellers of 
imported cigarettes are liable to pay VAT, they are also subject to VAT-related administrative 
requirements from which resellers of domestic cigarettes are exempt.  These administrative 
requirements include the requirement to prepare and de liver a tax invoice;  to maintain VAT records;  
and to accept tax audits.  These administrative requi rements constitute less favourable treatment for 
imported cigarettes than for domestic cigarettes. 
4.33 Second, if a reseller of imported cigarettes wishes to eliminate its VAT liability on resales, it 
must claim a tax credit for VAT paid by the entity from which it bought the cigarettes.  To obtain the 
tax credit, the reseller is subject to an administrative procedure.  Resellers of domestic cigarettes are not subject to VAT, and are therefore not subject to  this procedure.  Again, this constitutes less 
favourable treatment for imported cigare ttes than for domestic cigarettes. 
(d) Thailand administers the VAT system for one set of MRSPs for imported cigarettes in a 
manner that is not uniform, reas onable and impartial, as require d by Article X:3(a) of the 
GATT 1994 
4.34 Thailand fails to administer its VAT system in  a uniform, reasonable a nd impartial manner, as 
required by Article X:3(a) of the GATT 1994.  Th e Philippines' claim focuses  on the VAT base, i.e., 
the MRSP.  Thailand's administration of the VAT sy stem has not been "uniform", because the MRSP 
tax base for imported cigarettes has been administered  using different criteria and different calculation 
inputs.  Sometimes the calculations have been  notional amounts, never actually paid, based on a 
guarantee value.  At other times, the calculati ons have been actual amounts based on the assessed 
customs value.  The guarantee value and the assessed customs value are legally different and serve 
different purposes.  Thailand's use of these different approaches has had an impact on the level of the 
tax base and, hence, the tax burden.  Because the MRSP lies at the heart of Thailand's VAT system, 
the calculation of the MRSP using different criteri a means that a key component of Thailand's VAT 
system is not uniformly administered. 
4.35 Thailand's administration of the VAT system is also not "reasonable" and "impartial".  
Specifically, the September 2006 MRSPs evidence unr easonable and partial administration, because 
Thailand used a guarantee value as the starting-point  for the MRSP calculation.  This guarantee value 
was described by Thailand as the "highest rate to  which the products would be subject [to customs 
duties]".  It is not "reasonable" within the meani ng of Article X:3(a) to use an estimate of the 
"highest" possible customs value to calculate a definitiv e tax.  Indeed, even in Thai law, the guarantee 
value is not treated as having a definitive character , and is instead used only to collect guarantees for 
customs duties, as well as the excise, health and television taxes that may become due following the 
assessment of the customs value.   
4.36 Thailand's administration is also not "reasonable", because the amounts added in the MRSP 
calculation are purely notional, and not the actual am ounts ultimately paid on the basis of the assessed 
customs value.  To the extent that domestic law ca lls for the tax base to be established by the addition 
of amounts for customs duties and internal taxes, reasonable administration under Article X:3(a)  WT/DS371/R 
 Page 15 
 
 
  precludes the addition of speculative, notional amounts.   Moreover, Thailand also engages in "partial" 
administration, because the starting-point for the MRSP calculation for domestic cigarettes is not 
based on a "highest" estimated value but is, instead , the actual ex factory prices published in MRSP 
Notices. 
4.37 Finally, Thailand's administration of its VAT sy stem is not "reasonable" because Thailand 
fails to establish and apply generally applicable  criteria for determining the MRSP.  Reasonable 
administration of a tax requires that generally app licable rules be established to regulate the way in 
which a tax base is determined with respect to subject  products.  The need for such rules has particular 
importance in the case of taxes because they impose a direct pecuniary charge on subject persons and goods.   
5. Claims pertaining to the excise, health, and television taxes 
(a) Thailand violates Article X:1 of the GATT 1994 by  failing to publish the rules regarding the 
determination of the ex factory price 
4.38 Under Thai law, the government-determined ex fact ory price is the basis for the excise, health 
and television tax on domestic cigarettes.  The de termination of ex factory prices falls within the 
scope of Article X:1, because it is a "regulation" or "administrative ruling" pertaining to "taxes or 
other charges".  Thailand publishes only the amount of the ex factory price, without providing any further information on how that price is de termined.  However, as the Panel found in Dominican 
Republic – Import and Sale of Cigarettes , Article X:1 requires Thailand to publish the methodologies, 
formulae and data used to determine the ex fact ory prices.  Because Thailand has not done so, it 
violates Article X:1. 
(b) Thailand violates Article X:1 by failing to pub lish laws and regulations governing the release 
of guarantees for potential liability for health, excise and television taxes 
4.39 When Thailand delays the assessment of cust oms value, an importer may withdraw its 
cigarettes from customs if it provides guarantees for its potential liability for customs duties, and for 
excise, health and television tax.  The guarantees are based on a guarantee va lue determined by Thai 
Customs.  If the subsequently assessed customs value is lower than the guarantee value, the importer's 
liability for customs duty, excise, health and televi sion tax is lower than the guaranteed amount.  In 
that case, as occurred in July 2008, Thailand releases  the guarantees to the extent that they exceed the 
customs duties and taxes payable on the customs valu e.  However, Thailand has published no laws or 
regulations governing the release of these guarantees.  This is contrary to Article X:1 because rules 
concerning the release of guarantees are "[l]aws" or "regulations" "pertaining to … the valuation of 
products for customs purposes", within the meaning of that provision. 
(c) Thailand violates Article X:3(a) of the GATT 1994 by administering its excise, health and 
television taxes in a non-uniform,  unreasonable and partial manner 
4.40 Thailand's administration of its excise, health, and television taxes is not uniform, reasonable 
and impartial, contrary to the requirements of Artic le X:3(a) of the GATT 1994.  Under Thai law, for 
imported cigarettes, the base for the imposition of these taxes is the assessed customs value plus the 
applicable customs duties ("Duty-P aid c.i.f. Price").  In some circumstances, however, Thailand 
administers the taxes using a tax base that is without foundation in Thai law.   
4.41 Specifically, in cases where:  (1) Thai Custom s rejects the declared customs value and 
assesses a higher value, and subsequently (2) that  assessment is reversed and reduced following an 
administrative or judicial ruling, Thailand does not collect the excise, health and television taxes on 
the basis of the Duty-Paid c.i.f.  Price.  Instead, Thailand uses an  unlawful tax base to collect the WT/DS371/R 
Page 16  
 
  excise tax, because it collects the tax on the basis of an initial incorrect valuation decision by Thai 
Customs, which is then revised downwards on app eal.  By definition, following administrative or 
judicial reversal, the authorities' incorrect valua tion decision has no basis in Thai law and is not 
warranted by the facts. 
4.42 Thailand's administration is not uniform within  the meaning of Article X:3(a), because the 
excise tax is sometimes administered on the basi s of the assessed customs value (where that 
assessment is correctly made by Thai Customs) and sometimes on the basis of another value that is 
not the correctly assessed customs value (where Thai  Customs has been found to have incorrectly 
assessed the customs value).  Thailand's administration is also not reasonable.  As the Panel in Dominican Republic – Import and Sale of Cigarettes  found, it is not reasonable, under Article X:3(a), 
to administer a consumption tax using a tax base that has no foundation in domestic law.   
4.43 Finally, Thailand's administration of the excise, health and television taxes on imported 
cigarettes is not impartial, because it lacks ev en-handedness.  In particular, whereas imported 
cigarettes are sometimes taxed in excess of the lawful tax base, domestic cigarettes are taxed on the basis of the ex factory price, and never taxed in excess of that price. 
6. Request to the Panel to seek specific docume nts from Thailand pursuant to Article 13 of 
the DSU 
4.44 The Philippines requests the Panel to exercise its  authority to seek 21 specifically identified 
documents (or categories of documents) from Thailand , pursuant to Article 13 of the DSU.  Access to 
these documents will facilitate the Panel's objectiv e assessment of the ar guments and evidence 
presented by the Philippines 
B. E
XECUTIVE SUMMARY OF THE FIRST WRITTEN SUBMISSION OF THAILAND  
1. Introduction  
4.45 This executive summary of Thailand's first written submission of 11 May 2009 responds to 
the claims set out in the Philippines' fi rst written submission of  23 March 2009.   
4.46 The Philippines argues at length that Thailand improperly structures its governmental 
operations, including the state-owned enterprise, TTM, and, as a result, acts inconsistently with its 
obligations under the WTO Agreements, including  under the Customs Valuation Agreement and 
Article III of the GATT 1994.  The real question before this Panel, however, is whether the 
Philippines has proven that Thailand has applied its  customs valuation and domestic taxation laws 
improperly to cigarettes from the Philippines.  Th is question must be addressed by reference to 
Thailand's WTO obligations with respect to cu stoms valuation, under the Customs Valuation 
Agreement, and with respect to national tr eatment, under Article III of the GATT 1994  
2. Legal argument  
(a) Claims under the Customs Valuation Agreement  
(i) Thai Customs acted consistently with Articles 1.1 and 1.2 of the Customs Valuation 
Agreement  
Thai Customs had "doubts about the acceptability of the price"  
4.47 The Customs Valuation Agreement does not e xplain or qualify what kind of information 
constitutes "doubts" about the acceptability of the price.  Thai Customs had legitimate doubts about  WT/DS371/R 
 Page 17 
 
 
  the acceptability of the transfer price between PM Thailand and PM Philippines as the customs value.  
These doubts were based on the information that another importer was importing the same Philip Morris brand cigarettes at c.i.f. prices approximately three times PM Thailand's transfer price.  Thai 
Customs communicated these doubts to PM Thailand in  August 2006, when it first ceased to accept 
automatically the transaction value and began to re quire guarantees on imports of PM Thailand.   
PM Thailand failed to establish that the relationship did not influence the price
  
4.48 The Philippines argues that "the rejection of customs value is based on speculation that the 
relationship might have influenced the price, and it has not been proved otherwise".13  However, the 
importer, not the customs administration, bears the burden of establishing that the relationship 
between buyer and seller did not influence the price.   As the WCO informed Thai Customs, "since the 
acceptance of the transaction value is prima facie ba sed on the condition that the buyer and seller are 
not related, the burden of proof is generally considered to  be on the importer to demonstrate that the 
transaction value is otherwise acceptable in spite of the fact that the buyer and seller are related" .14  
In addition, in response to the question "is the impor ter responsible for ensuring  that the price has not 
been influenced by the relationship...?", the WTO Technical Committee stated, "[y]es.  When 
declaring the customs value under the transaction value method the importer has an obligation to 
ensure to the greatest extent possibl e that the price is not influenced".15  
4.49 When Thai Customs communicated its doubts rega rding the transfer price to PM Thailand, 
PM Thailand bore the burden of establishing that the relationship did not influence the price.  However, in the period between 4 August 2006, wh en Thai Customs notified PM Thailand of its 
doubts as to the acceptability of the transfer price,  and 6 March 2007, when Thai Customs met with 
PM Thailand's representatives to resolve en bloc outstanding issues regarding the valuation of 
PM Thailand's imports, PM Thailand presented no evidence or otherwise took no steps to discharge its burden of proving that the relationship did not in fluence the price.  In addition, even after the 6 
March 2007 meeting, PM Thailand fa iled to establish that the relationship had not influenced the 
price.  For example, in a letter to Thai Cust oms dated 14 March 2007, PM  Thailand asserted that it 
"negotiates with the exporter in the foreign country on  an arm's basis in a manner consistent with the 
normal practice in the cigarette industry ...".
16  However, PM Thailand offered no supporting evidence 
whatsoever for this assertion.  In these circumstances, Thai Customs could not rely on the transaction 
value as the basis for customs value for the [[xx. xxx.xx]] entries listed in the Philippines' panel 
request, because the importer had failed to resolve the doubts about the acceptability of the price.   
Because PM Thailand failed to establish that the relationship did not influence the price, Thai 
Customs properly declined to use the transaction value as the customs value  
4.50 PM Thailand failed to establish that its relations hip with PM Philippines did not influence the 
price.  Consistently with Articles 1.1 and 1.2 of the Customs Valuation Agreement, Thai Customs did 
not use the transaction value as the customs valu e for the [[xx.xxx.xx]] entries listed in the 
Philippines' panel request.  Instead, Thai Cust oms used the deductive method to determine the 
customs value.  Thus, the grounds on which Thai Customs did not use the transaction value as the 
customs value were that PM Thailand failed to est ablish that the relationship did not influence the 
transfer price.  Contrary to the Philippines' argument, Thai Customs did not rely on a comparison between PM Thailand's c.i.f. prices and the c.i.f. prices for duty-free imports as a ground for rejecting the transaction value.  The c.i.f. prices for duty -free imports constituted the reason why Thai Customs 
had doubts about the acceptability of the price, but were not the ultimate grounds for not using the 
                                                     
 
13 Philippines' first written submission, para. 227. 
14 Exhibit THA-9, p. 2 (emphasis added). 
15 Technical Committee, Commentary 14 .1, para. 16, Exhibit THA-26.   
16 Exhibit THA-28. WT/DS371/R 
Page 18  
 
  transaction value as the customs value.  Accordingly,  Thai Customs did not act inconsistently with 
Articles 1.1 or 1.2 of the Customs Valuation Agreemen t in not using PM Thailand's transfer price as 
the customs value.   
Thai Customs properly informed PM Thailand of the grounds for not using PM Thailand's 
transfer price as the customs value  
4.51 By letters dated 19 December 2006 and 12 Apr il 2007, Thai Customs clearly explained in 
writing to PM Thailand that the transaction values we re not being used as the basis for customs value 
"because the importer has yet to prove if the said relationshi p influences the customs value 
determination or not" and "it cannot be proven wh ether the relationship has an influence on the 
determination of customs value or not".17  The minutes of the 6 March 2007 meeting also make clear 
that Thai Customs acted because the importer "could no t prove" that the relationship did not affect the 
price.18  In addition, as indicated in the notice of  assessment provided in Exhibit THA-15, Thai 
Customs informed PM Thailand that the entry at issue was being valued pursuant to the "price 
assessment methodology number 6 deductive value pur suant to the minutes of the meeting dated 
6 March".  Thus, Thailand acted c onsistently with Article 1.2 of the Customs Valuation Agreement by 
informing PM Thailand of the grounds.   
(ii) Thai Customs acted consistently with Artic le 16 of the Customs Valuation Agreement  
4.52 The Philippines claimed that Thai Customs ac ted inconsistently with Article 16 of the 
Customs Valuation Agreement by failing to provide an  adequate explanation of the determination of 
the customs value of the [[xx.xxx.xx]] entries at issue.19  As noted above with respect to the 
Philippines' claim under Article 1.2, Thai Custom s fully informed PM Thailand of the grounds on 
which it was acting.   
4.53 In addition, Thai Customs fully informed PM  Thailand how the customs value was actually 
determined.  In the 12 April 2007 letter, Thai Custom s explained that "in the determination of customs 
values, Method 6, which is the 'fall back' method, using the deductive method, was used (according to 
the Ministerial Regulation no. 132/2545, Clause 3) under Article 7 of the GATT 1994  ...  Please be 
informed accordingly".  In addition, PM Thailand was also provided with a detailed explanation of 
why the deductive value was used and how it was calcu lated at the 6 March 2007 meeting, at which it 
was represented by its accountants.20  
(iii) Thai Customs acted consistently with Articles 5 and 7 of the Customs Valuation Agreement in 
using the deductive method to determine the customs value for PM Thailand's imports  
4.54 Thailand used the "deductive method" under Ar ticle 5 of the Customs Valuation Agreement 
to determine the customs value of PM Thailand' s imports.  Thailand explained this clearly to 
PM Thailand at the meeting of 6 Marc h 2007 and in its letter of 12 April 2007.21  In the minutes of the 
6 March 2007 meeting, Thai Customs stated that it was using the deductive value method pursuant to 
Method 6 of Thai Customs' regulations, which corr esponds to the "fall back" method of Article 7, 
                                                      
17 See Exhibits PHL-66 and PHL-70. 
18 Exhibit PHL-74, p. 4. 
19 Philippines' first written submission paras.  287-324 and para. 715, third bullet. 
20 Exhibit PHL-74, list of attendees. 
21 See Exhibits PHL-70 and PHL-74.  WT/DS371/R 
 Page 19 
 
 
  rather than pursuant to Method 4 of its regulations22, which would correspond to Article 5 of the 
Customs Valuation Agreement.23 
4.55 Thai Customs considered that its own regula tions prevented it from using the deductive value 
under Article 5 of the Customs Valuation Agreemen t where current financial information was not 
available but permitted it to use the deductive valu e under Method 6 using the most recent available 
financial information.  It is largely irrelevant  how that method was described under municipal law24:  
the question is whether the deductive value method actually used by Thai Customs was consistent 
with Article 5 of the Customs Valuation Agreemen t.  The Philippines argues that Article 5 of the 
Customs Valuation Agreement does not require that the customs administration use company data 
from the year of importation in determining the deductive value.25  This means that Thai Customs' 
determination of the deductive value using the most recent available financial information was 
consistent with Article 5 of the Customs Valuation Agreement.   
4.56 Since this is the only ground on which the Philippines challenges Thai Customs' 
determination of customs value as inconsistent with Article 5, the Panel should reject the Philippines' 
claim under that article.26  Because Thai Customs acted consistently with Article 5 in using the 
deductive method, the Philippines' claim under Arti cle 7 of the Customs Valuation Agreement is 
moot.   
(b) Claims under Article III of the GATT 1994  
4.57 Thailand's VAT system for cigarettes was designed so that Thailand would be able to ensure 
collection of taxes on all sales of all cigarettes,  both domestic and imported, thereby furthering 
Thailand's revenue and public health objectives with  respect to the sale of cigarettes in the Thai 
market.  For these reasons, Thailand decided to use a fixed price for each brand of cigarettes as the tax 
base for VAT purposes.  This fixed price is the MR SP, which is determined and used in the same 
manner for both domestic and imported brands.   
4.58 The Panel's terms of reference with respect to  the use of MRSPs as the tax base for VAT are 
limited to the MRSP notices in effect at the time of  the establishment of the Panel, as listed in the 
Philippines' request for the establishment of a pa nel.  Previous MRSP notices (including those for 
imported cigarettes in 2006 and 2007) that had been supe rseded and had ceased to have legal effect as 
of the date of the establishment of the panel and that  were not listed in the pa nel request are not within 
the Panel's terms of reference.   
(i) Thailand acted consistently w ith Article III:2 by using the MRSP as the VAT tax base  
The Philippines has failed to establish that all imported cigarettes and all domestic cigarettes 
are "like products"  
4.59 The Philippines argues that all imported cigarettes and all domestic cigarettes are "like 
products" within the meaning of the first sentence of Article III:2.27  The Philippines does not make 
the claim that imported and domestic cigarettes are "directly substitutable or competitive" under the 
second sentence of Article III:2.  The concept of "like products" under Article III:2, first sentence, 
must be distinguished from products that are mere ly "directly substitutable or competitive".  The 
                                                      
22 Thailand notes that due to a typographical error, Me thod 4 was inadvertently referred to as Method 5 
in paras. 184-186 of its first written submission. 
23 Exhibit PHL-74, p. 5. 
24 See, e.g.  Panel Report, US – Hot-Rolled Steel , para. 7.267. 
25 Philippines' first written submission, paras. 342-353. 
26 Philippines' first written submission, para. 359. 
27 Philippines' first written submission, paras. 464-486. WT/DS371/R 
Page 20  
 
  Appellate Body has clarified that the definition of  "like products" in Article III:2, first sentence, 
should be construed narrowly
28;  and only " perfectly substitutable products fall within Article III:2, 
first sentence".29 
4.60 There are a total of 19 domestic brands30 and 86 imported brands31 in the Thai market.  
However, the evidence on consumer preferences supplied by the Philippines relates only to three 
domestic brands and two im ported brands.  The Philippines has, thus  far, failed to supply the evidence 
on consumers preferences regarding all of these brands  necessary to discharge its burden of proof.   
4.61 The Philippines' evidence regarding the five "m ajor cigarette brands" consists primarily of 
data on so-called "switch in" and "switch out" ratios32, which are poor indicators of consumer 
perceptions of substitutability.  The sw itch in and switch out ratios between Marlboro  and domestic 
brands also appear to be relatively low.  This ev idence does not support a finding that the five "major 
cigarette brands" are "perfectly substitutable" "lik e products" within the meaning of the first sentence 
of Article III:2.  Also, the fact that there are si gnificant price differences between cigarette brands 
indicates that all of these brands cannot  be deemed to be "like" products.33  Thus, the Philippines has 
failed to discharge its burden of proving that all imported cigarettes and all domestic cigarettes are 
"perfectly substitutable" and, th erefore, "like products".   
The Philippines has failed to establish that Th ailand discriminates against imported cigarettes  
4.62 The Philippines claims that imported cigarettes are taxed "in excess" of domestic cigarettes 
because the MRSPs for virtually all imported cigarettes are above the MRSPs for virtually all domestic cigarettes.  However, it does not matter whether the MRSPs of imported cigarettes exceed those of domestic cigarettes.  The determination of  whether an internal tax discriminates against 
imported goods within the meaning of Article III:2 depends on whether the tax base for imported and 
domestic cigarettes is established and applied in  a manner that affords protection to domestic 
cigarettes.  The fact that the tax base for some cigarettes may be higher than the tax base for other cigarettes does not reveal anything about whether the tax base is discriminatory within the meaning of 
Article III:2.   
4.63 The Philippines also argues that imported ci garettes are taxed "in excess" of domestic 
cigarettes because the MRSP for imported brands exceeds the actual retail price while "such gaps have never arisen for domestic cigarettes".
34  Actually, the Philippines' evidence does not support this 
assertion with respect to domestic cigarettes.  Even if  it did, it would not establish that the MRSPs are 
established in a discriminatory manner.  First, Artic le III:2 does not prescribe a particular system of 
internal taxation and it is not inc onsistent with Article III:2 to use a fixed price as the VAT tax base.  
A comparison between the tax base chosen by a Me mber (e.g., the MRSPs) and a tax base that was 
not chosen by the Member (e.g., the retail price) cannot  in itself establish that a Member's tax base is 
applied inconsistently w ith Article III:2.  Both ad valorem and specific taxes (and a mix of the two) 
are permissible under Article III:2.  Thus, the Phili ppines' argument simply attempts to show that 
there is a difference between the MRSP and the retail price for one impor ted brand and not for 
domestic brands.  It is not evidence of discrimination.  Finally, Marlboro  cigarettes are being sold at 
                                                      
28 Appellate Body Report, Japan – Alcoholic Beverages II , p. 20. 
29 Appellate Body Report, Korea – Alcoholic Beverages , para. 118. 
30 See Exhibit PHL-105. 
31 See Exhibit PHL-77. 
32 Philippines' first written submission, para. 477. 
33 To illustrate, imported cigarettes marketed under the brand Marlboro  have a recommended RSP that 
is [[xx.xxx.xx]] per cent higher than that of the domestic brand Wonder  and [[xx.xxx.xx]] per cent higher than 
that of the domestic brands Krongthip  and Falling Rain .  See, Philippines' first written submission, para. 498, 
table 4. 
34 Philippines' first written submission, pa ra. 499 (emphasis in original).    WT/DS371/R 
 Page 21 
 
 
  below the MRSP because PM Thailand took a business decision to do so.35  The business decisions of 
private companies cannot give rise to violations by  Members of their GATT obligations.  Article III:2 
does not require Thailand to change its tax base simply because PM Thaila nd chooses to reduce its 
prices.   
4.64 Finally, the Philippines argues that imported cigarettes are taxed "in excess" of domestic 
cigarettes because there were diffe rences in the methodologies used to determine the 2006 and 2007 
MRSPs.  As noted, the MRSPs for 2006 and 2007 (for imported cigarettes) are not within the Panel's 
terms of reference.  For these reasons, the Philippi nes has failed to make a prima facie case that, under 
Thailand's VAT system, imported cigarettes are taxe d "in excess" of domestic cigarettes within the 
meaning of Article III:2 of the GATT 1994 and the Pa nel should reject the Philippines' claims.   
4.65 In any case, the MRSPs are calculated in the same manner for both imported and domestic 
brands.  The starting points for imported (the duty pa id c.i.f. price) and domestic brands (the ex 
factory price) are equivalent as each is the price at which the cigarettes are first introduced to the Thai 
market.  The MRSP is initially based on the MR SP proposed by the manufacturer and updated 
whenever the applicable tax rates are changed, or to  reflect changes in the manufacturer's c.i.f. or ex 
factory price or where the manufacturer proposes a change in the light of market circumstances.36 
4.66 The Philippines argues that because MRSPs are periodically adjusted, the VAT burden is 
sometimes increased for imported cigarettes but left unaltered for domestic cigarettes.  This is because 
the MRSPs may be adjusted in response to a requ est by the manufacturer (of either domestic or 
imported brands), and is not evidence of any discr imination in the setting of the MRSPs.  In these 
circumstances, nothing in the use of the MRSPs as  the tax base in Thailand's chosen VAT system 
gives rise to discrimination between imported a nd domestic cigarettes and hence a violation of 
Article III:2.   
(ii) Thailand acted consistently with  Article III:2 of the GATT 1994 wi th respect to the taxation of 
resales of cigarettes  
4.67 The Philippines claims that by [allegedly] ta xing the resale of imported cigarettes, but not 
taxing the resale of domestic cigarettes, Th ailand acts inconsistently with Article III:2.37  However, the 
Philippines has failed to make a prima facie  case.  As illustrated in Exhib it THA-20, the tax burden on 
imported and domestic cigarettes is exactly the same.  The Philippines' explanations of the Thai VAT 
system also reach the same conclusion, i.e., that the amount of VAT paid is exactly the same for both 
imported and domestic cigarettes.38  In addition, in practice, wholesalers and retailers incur no net 
VAT liability with respect to resales of either imported or domestic cigarettes.39  Accordingly, the 
Panel should reject this claim.   
(iii) Thailand acted consistently with Article III:4 of the GATT 1994 with respect to the 
administrative requirements for its VAT system  
4.68 The Philippines claims that Thailand acts inc onsistently with Article III:4 because a reseller 
of imported cigarettes is subject to administrative requirements that are not imposed on resellers of 
domestic cigarettes.40  However, the Philippines has failed to  establish that any differences between 
the reporting requirements modify the conditions of  competition in favour of domestic cigarettes or 
                                                      
35 See Philippines' first written submission,  para. 498, n. 385. 
36 The examples provided in Exhibits THA-19 illustra te how this works with respect to examples based 
on both domestic and imported brands. 
37 Philippines' first written submission, paras. 517 and 546. 
38 Philippines' first written submission,  paras. 529-537. 
39 See Exhibit THA-20.   
40 Philippines' first written submission, para. 553. WT/DS371/R 
Page 22  
 
  results in "less favourable" treatment of imported cigarettes.  First, any differences are minimal:  
wholesalers and retailers are required to include sales of imported cigarettes (as well as all other 
domestic and imported products subject to VAT) on their monthly VAT return and to maintain tax 
invoices and input/output reports with respect to sales subject  to VAT while wholesalers and retailers 
that deal exclusively in VAT-exempt domestic ci garettes are not required to submit and maintain 
these documents.  However, these wholesalers a nd retailers must maintain equivalent 
revenue/expenses reports with respect to sales of dom estic cigarettes.  In addition, wholesalers and 
retailers generally buy and sell bot h domestic and imported cigarettes.  Since there are no different 
chains of distribution with wholesalers and retailers  dedicated uniquely to either domestic or imported 
cigarettes, all wholesalers and retailers are subject to the same administrative requirements.   
4.69 The reason for this minor difference in treatment  is that because TTM is legally responsible 
for all taxes on the cigarettes they sell and, as a governme nt entity subject to government control and 
audit, presents no risk of tax underpayment, there is  no need to submit resellers to the normal VAT 
reporting, collection and enforcement mechanisms.  Since importers such as PM Thailand are not 
legally responsible for all taxes on their cigarettes,  the resellers of those cigarettes present the same 
risk of underpayment as any other sale of a produc t – domestic or imported – subject to VAT.  The 
resales of the imported cigarettes are, therefore, subject to the same normal VAT reporting, collection and enforcement mechanisms as ot her products subject to VAT.  The Philippines fails to explain how 
this difference "modifies the conditions of competiti on in the relevant market to the detriment of 
imported products".
41  
4.70 If the Panel considers that the minor differences in reporting requirements for sales of 
imported and domestic cigarettes modify the conditions of competition to the detriment of imported 
products, Thailand submits that these differences are justifiable under paragraph (d) and the chapeau 
of Article XX of the GATT 1994.  Imported cigare ttes are subject to the basic reporting, collection 
and enforcement mechanisms of Thailand's VAT law.  These measures are necessary to secure 
compliance with VAT law in that it is difficult to see how Thailand could administer its VAT system 
without requiring VAT payers to maintain and submit the requested documents.  Given that these 
measures are applied to all products , imported or domestic, subject to  VAT, they are not applied in a 
manner that constitutes an arbitrary or unjustifiable discrimination or a disguised restriction on international trade.  Thailand's VAT reporting requi rements represent a minimal level of bureaucracy 
for any tax system and, therefore, fall squarely within the scope of Article XX(d) and the chapeau to 
Article XX.   
(c) Claims under Article X of the GATT 1994  
(i) Thailand acted consistently with  Article X:3(a) with respect to its ownership of TTM  
4.71 The Philippines asserts that Thailand acts inco nsistently with Article X:3(a) because 
government officials that are TTM directors also have decision-making power over imported and domestic cigarettes.
42  The Philippines argues that this creates an  inherent danger that those officials 
"could  use their governmental powers in a manner that confers a competitive advantage on their own 
company, TTM, and its products".43  However, Article X:3(a) must be interpreted to address only how 
Members actually administer their laws and not to address perceptions or risks as to how Members could administer their laws.   
4.72 The Philippines' claim does not refer to the manner in which Thailand actually administers 
any of its "laws, regulations, decisions, and rulings ".  The Philippines' claim relates exclusively to 
                                                     
 
41 Appellate Body Report, Dominican Republic – Import and Sale of Cigarettes , para. 93. 
42 Philippines' first written submission, paras. 69-87 and para. 714, first bullet.   
43 Philippines' first written submissi on, para. 79 (emphasis added).  WT/DS371/R 
 Page 23 
 
 
  how Thailand could administer its customs laws a nd regulations rather than to how Thailand actually 
does so.  Moreover, the only evidence provided by  the Philippines is two quotes from Thailand's 
Minister of Finance in the press.  These statements  are not sufficient evidence to support a claim that 
Thailand has failed to administer its customs and ta x laws in a reasonable and impartial manner under 
Article X:3(a).   
4.73 The Philippines' proposed interpretation of Artic le X:3(a) to address "risks" of how Members 
"could" administer their laws would broaden th e scope of that provision to impose additional 
obligations with which Members, including the Philippines, could not possibly comply.  
Article X:3(a) was intended to address situations in  which the risk of improper action by governments 
became a reality, not to eliminate entir ely the possibility of such risk.   
4.74 Under Article XVII of the GATT 1994, Thailand en joys the right to maintain and operate 
state-owned enterprises such as TTM.  Article X:3(a)  does not regulate the manner in which Members 
exercise their sovereign rights with regard to the structure of their state enterprises or, indeed, their 
customs and excise departments.  In this sense, the Philippines' claim is, in e ffect, an attack on the 
sovereign right of the Thai government to maintain  and operate a state-owned enterprise.  The Panel 
should not read into that provision additional oblig ations limiting the rights of Members to maintain 
state enterprises and to decide fo r themselves how they will exercise c ontrol over those enterprises.   
4.75 The panel report on Argentina – Hides and Leather  does not support the Philippines' position.  
That case involved the presence of private sector indivi duals at the export clearance process.  As that 
Panel noted, however, the government has a relevant lega l interest in the transaction.  In addition, that 
case involved actual access to information rather than the risk of access.  Finally, there are several 
controls requiring Thai government officials to act  consistently with the law in the course of their 
duties.   
(ii) Thailand acted consistently with  Article X:3(a) and X:3(b) with respect to "administrative 
tribunals for the purpose of prompt review"  
4.76 The Philippines claims that Thailand acted incons istently with Articles X:3(a) and X:3(b) of 
the GATT 1994 "because Thailand has failed to ensure that administrative appeals against customs 
valuation decisions are resolved promptly".44  However, the Philippines does not explain how the text 
of Article X:3(a) imposes a specific time limit on the completion of administrative proceedings.  Article X:3(a) was not intended to impose absolute  deadlines on Members within which to complete 
such administrative proceedings.  Absent any such deadline in Article X:3(a), the Panel should not 
interpret the term "reasonable" to impose specifi c deadlines on Members' administrative proceedings 
where none is prescribed in the text.   
4.77 Even if Article X:3(a) could be interpreted to  contain standards governing the completion of 
administrative proceedings, the Philippines has fail ed to establish that any delays in Thailand's 
administrative proceedings are "unreasonable" in the context of the time taken by other similarly-situated WTO Members to complete similar proceedi ngs or in the context of the backlog of appeals 
faced by Thailand following the coming into effect of the Customs Valuation Agreement.  Moreover, 
the Philippines has failed to provide any guidan ce as to how the Panel should determine what 
timeframes would be inconsistent with Article X:3 based on any of the methods of interpretation 
provided in Articles 31 and 32 of the Vienna Conven tion.  Accordingly, the Philippines has failed to 
establish that the BoA's processing of PM Thailand' s appeals is "unreasonable" conduct within the 
meaning of Article X:3(a).   
                                                     
 
44 Philippines' first written submission, paras. 94-100 and para. 714, second bullet. WT/DS371/R 
Page 24  
 
  4.78 The Philippines also argues that the time taken to process these appeals constitutes a violation 
of Article X:3(b).  However, Artic le X:3(b) applies only to tribun als or procedures "independent of 
the agencies entrusted with administrative enforcement".
45  Article X:3(b) does not apply to the BoA 
as it is not "independent" of Thai Customs.   
(iii) Thailand acted consistently w ith Article X:3(b) with respect to appeals against the imposition 
of guarantees  
4.79 The Philippines argues that Thailand acted in consistently with Article X:3(b) of the 
GATT 1994 by failing to provide for an appeal agai nst the imposition of guarantees pending the final 
assessment of duties.46  However, the Philippines offers no ev idence whatsoever in support of its 
claim, which therefore must be rejected.  In fact , Article 42 of Thailand's Act on Establishment of 
Administrative Court and Administrative Court Procedures, BE 2542 (1999) provides a right to 
challenge all Thai government administrative actions  (as described in Article 9), including orders 
requiring guarantees.  Therefore, contrary to the Ph ilippines' assertion, Thai law provides importers 
with ways to contest guarantees.   
4.80 In any event, Article X:3(b) of the GATT 1994, read in the light of the provisions of the 
Customs Valuation Agreement, does not confer a right to appeal regarding amounts of guarantees 
required pending final assessment of customs duties on imports.  While Article 11.1 of the Customs 
Valuation Agreement provides a right to appeal with  respect to "a determination of customs value", 
Article 13 does not contain any prov ision for an appeal of guarantees similar to that provided in 
Article 11.   
(iv) Thailand acted consistently with  Article X:3(a) in its administration of the VAT system  
4.81 The Philippines claims that Thailand fails to ad minister its VAT system consistently with 
Article X:3(a).47  According to the Philippines, this is inc onsistent with Article X:3(a), because the use 
of different starting points in determining MRSPs  in different periods does not constitute uniform, 
reasonable and impartial administration of the law.  This claim is not within the Panel's terms of 
reference because it is not made in the Philippines' panel request.  There is nothing in the Philippines' 
panel request to suggest that it intended to make  a claim under Article X:3 regarding how Thailand 
calculated the MRSPs.  The Philippines has not "pla inly connect[ed]" the use of guarantee values to 
calculate MRSPs with obligations under Article X:3( a) of the GATT 1994 in a manner that "presents 
the problem clearly".48  In addition, the factual basis for this cl aim consists primaril y of the September 
2006 and March 2007 MRSP notices, which are not w ithin the Panel's terms of reference.  
Accordingly, the Panel should find that it cannot a ddress this claim because it is not within the Panel's 
terms of reference.  However, even if the Panel we re to address this claim, it should find that it lacks 
legal merit.   
4.82 The Philippines claims that Thailand was compelled under Article X:3(a) to use the 
transaction value as the basis fo r the MRSP even when Thai Customs had doubts about the transaction 
value and thus was requiring guarantees from PM Thailand pending final determination of the 
customs value.   
4.83 Article X:3(a) is not intended to limit the discretion of administrative agencies to apply their 
rules on a case-by-case basis where different entities pr esent different factual circumstances.  As the 
Appellate Body has stated, "[d]ifferent results in the application of a law or provision do not 
                                                      
45 Panel Report, EC – Selected Customs Matters , footnote 894 (emphasis added). 
46 Philippines' first written submission, para s. 101-113 and para. 714, third bullet. 
47 Philippines' first written submission, paras.  562-611 and para. 716, fourth bullet. 
48 See Appellate Body Report, US – Oil Country Tubular Goods Sunset Reviews , para. 162.    WT/DS371/R 
 Page 25 
 
 
  necessarily reflect non-uniform administration of the law itself, but may stem as well from the 
exercise of discretion in the application of the law or circumstances of the case".49  The Appellate 
Body has also noted that "Article X:3(a) of the GATT 1994 does not require uniformity of administrative processes".
50  Accordingly, if the Panel considers this claim, it should find that the 
Philippines has not established as a matter of either fact  or law that Thailand acted inconsistently with 
Article X:3(a) with respect to the administration of its VAT system.   
(v) Thailand acted consistently w ith Article X:1 with respect to rules relating to VAT and ex 
factory prices  
4.84 The Philippines claims that Th ailand acted inconsistently w ith Article X:1 of the GATT 1994 
by failing to publish the methodology for determining MRSPs51 and rules regarding the determination 
of the ex factory price (which are used in the determination of MRSPs).52  However, the Appellate 
Body has said that "Article X:1 of the GATT 1994 ma kes it clear that Article X does not deal with 
specific transactions, but rather with rules 'of general application'".53  For this reason, "the particular 
treatment accorded to each individual shipment  cannot be considered a measure 'of general 
application' within the meaning of Article X".54 
4.85 The Philippines argues that Thailand must publish both the "overall methodology" used and 
"data relied upon" in the determination of the MRSPs a nd the ex factory price that  is used as the basis 
for the excise, health and television taxes for dom estic cigarettes.  With respect to the "overall 
methodology" used to determine the MRSPs, this me thodology is stated in the beginning of every 
published MRSP notice.  Regarding the "overall methodol ogy" used to determine the ex factory price, 
Thailand has published Sections 5 ter and 5 quater of the Tobacco Act BE 2509 and the Notice of 
Tobacco and Chew Tobacco Ex Factory Price that describe how the ex factory price is to be 
calculated.  Thus, the Philippin es' claim that Thailand has not published the "overall methodology" 
used to determine MRSPs and ex factory prices must be rejected.   
4.86 In addition, the Philippines claims that "the published rules and data must enable traders to 
understand how a particular ex factory  price has been established and to verify the calculations 
underpinning that price"55 and that Thailand must publish the " methodologies, formulae and data used 
to determine the MRSPs".56  However, Article X:1 does not require the publication of company- or 
transaction-specific determinations such as the determ ination of a particular ex factory price or the 
calculation of brand-specific MRSPs.  The Philippin es' claim with respect to the publication of 
detailed, company-specific or confidential aspect s of these calculations must be rejected.   
(vi) Thailand acted consistently w ith Article X:1 with respect to rules relating to guarantees  
4.87 The Philippines claims that Th ailand acted inconsistently w ith Article X:1 of the GATT 1994 
by failing to publish laws or regulations governing the release of guarantees for potential liability for 
health, excise and television taxes.57  The release of guarantees is gove rned by the provisions of the 
Customs Act governing the final assessment of customs duties (i.e., Sections 112 bis and 112 quad of 
the Customs Act).  Because the release of guarantees takes place in the context of the final 
assessment, there is no need for a provision of  law other than the provisions governing final 
                                                      
49 Appellate Body Report, EC – Selected Customs Matters , para. 216. 
50 Appellate Body Report, EC – Selected Customs Matters , para. 227. 
51 Philippines' first written submission, para s. 446-457 and para. 716, first bullet. 
52 Philippines' first written submission, para s. 639-648 and para. 717, first bullet. 
53 Appellate Body Report, EC – Poultry , para. 111, citing Panel Report, EC – Poultry , para. 269. 
54 Appellate Body Report, EC – Poultry , para. 113. 
55 Philippines' first written submission, paras. 646 (emphasis added) and 448. 
56 Philippines' first written submission , para. 448 (emphasis in original). 
57 Philippines' first written submission, paras. 649-653, 717, second bullet. WT/DS371/R 
Page 26  
 
  assessment to address separately the release of guara ntees.  As the Philippines in effect acknowledges, 
this is what happens under Thai Customs' practice.   
4.88 Article X governs the publication and administratio n of rules, not the substantive content of 
the rules themselves.
58  The Philippines fails to identify an exis ting rule of general application under 
Thai law that Thailand has failed to publish.  Instead, the Philippines argues that Thailand should have 
a rule of general application regarding the rel ease of guarantees and should publish it.  The Panel 
should not permit the Philippines to convert the publication obligation in Article X:1 into an 
obligation to have particular subs tantive laws.  Accordingly, the Pa nel should reject the Philippines' 
claim.   
(vii) Thailand acted consistently with  Article X:3 in its administration of the excise, health and 
television taxes  
4.89 The Philippines claims that Thailand acted in consistently with Article X:3(a) of the 
GATT 1994 in its administration of its excise, health, and television taxes59, arguing that in cases in 
which Thai Customs rejects the declared custom s value and assesses duties based on a higher c.i.f. 
value and, subsequently, the customs value is redu ced on administrative or judicial appeal, the basis 
on which the taxes were initially assessed  allegedly becomes "unlawful".60  If the Philippines is 
arguing that Thailand administers its laws inconsistent ly with Article X:3(a) simply because the c.i.f. 
value is sometimes revised, this cannot be a viola tion of a WTO obligation.  In any event, exporters 
may request refunds whenever the c. i.f. value used as the basis for the excise, health and television 
taxes is revised downward.  The Philippines also ar gues that the administration of these laws is not 
"impartial" under Article X:3(a) because while the ta x base for imported cigarettes may be revised as 
part of the customs process, the tax base for domestic cigarettes may not be revised in a similar 
fashion.  However, the Philippines pr esents no evidence for this claim.   
3. Conclusion  
4.90 Thailand requests the Panel to find that the Ph ilippines has failed to establish that Thailand 
has acted inconsistently with its  obligations under any of the provi sions of the covered agreements 
cited by the Philippines.  This dispute is unus ual because the Philippines is complaining about 
individual completed acts (including, inter alia , the valuation of the [[xx.xxx.xx]] entries listed in the 
panel request and the alleged breach of Article 10 of  the Customs Valuation Agreement), rather than 
measures that have ongoing effects as of the date of establishment of the Panel.  In the event that the 
Panel makes findings that Thailand has acted inconsis tently with its WTO obligations with respect to 
any of these completed acts, the Panel should, consis tent with the guidance provided by prior panels 
and the Appellate Body61, refrain from making recommendations with respect to those completed acts. 
C. EXECUTIVE SUMMARY OF THE ORAL STATEMENT BY THE PHILIPPINES AT THE FIRST 
SUBSTANTIVE MEETING OF THE PANEL  
1. Conflicting roles of TTM directors violate Article X:3(a) 
4.91 Thailand violates Article X:3(a) of the GATT 1994 because senior Thai Government officials 
administering customs and tax rules for cigarettes are simultaneously Directors of TTM.  These 
                                                      
58 Appellate Body Report, EC – Poultry , para. 115.  See, also, Panel Report, Dominican Republic – 
Import and Sale of Cigarettes , para. 7.400. 
59 Philippines' first written submission, para s. 654-684 and para. 717, third bullet. 
60 Philippines' first written submission, paras. 659-660. 
61 See, e.g., Panel Report, Dominican Republic – Import and Sale of Cigarettes , paras. 7.363, 7.393, 
7.419;  Appellate Body Report, US – Certain EC Products , paras. 81 and 129.  WT/DS371/R 
 Page 27 
 
 
  positions require them to promote TTM's commercial interests in competition with foreign cigarettes 
and rewards them with a persona l financial bonus based on TTM's performance.  Excise Director-
General and TTM Chairman Mr. Tamwatin asserted publicly that, inter alia, government powers 
should be exercised to protect TTM by banning imported cigarettes unless prices were raised to the level of the new maximum RSPs announced by his department.  Further, Mr. Tamwatin publicly 
disclosed, in violation of Article X:3(a) and Article 10 of the Customs Valuation Agreement, 
PM Thailand's confidential declared transaction values.   
4.92 This pattern of administration is neither "r easonable" nor "impartial" and could negatively 
impact the competitive situation of imported ciga rettes through higher customs duties and taxes.  
Article X:3(a) requires that decision-makers have no commercial or personal financial interests in the 
decisions they are making.  Contrary to Thailand's arguments, the manner of structuring and 
organizing government is the very essence of "admin istration" under Article X:3(a) as found by the 
Panel in Argentina – Hides and Leather.  Thailand also incorrectly claims that Article X:3(a) requires 
a showing of trade damage;  rather, it calls for "an examination of whether there is a possible impact  
on the competitive situation  [of imports] due to alleged par tiality, unreasonableness or lack of 
uniformity in the application of customs rules".   
2. Appeal delays violate Articles X:3(a) and X:3(b) of the GATT 1994 
4.93 Thailand also violates Articles X:3(a) and X:3(b)  by failing to maintain independent tribunals 
that promptly review customs decisions.  Thaila nd unreasonably delayed deciding a large number of 
appeals filed with the BoA, between March 2002 an d March 2003.  In fact, the last BoA meeting on 
these appeals occurred in September 2005.  These exte nsive 6-7 year delays establish prima facie that 
Thailand has not satisfied its obligation to mainta in procedures that achieve the required goal of 
"prompt review" under Article X:3(b) consistent with the panel report in  Colombia – Ports of Entry.  
And even if the BoA is not an independent tribunal within the meaning of Article X:3(b), the claim 
under Article X:3(b) still stands because of the delay in permitting indepe ndent review of an initial 
decision .  In that case, these 6-7 year delays and coun ting in reaching an initial valuation decision 
capable of being appealed to an independent tribunal is also all the more unreasonable under 
Article X:3(a). 
3. Customs Valuation Agreement  violations for rejected declared transaction values 
4.94 Thailand rejected validly declared transaction values for a large number of entries without 
satisfying the conditions of Customs Valuation Agreement  Articles 1.1, 1.2, 1.2(a) and 16.  Thailand 
failed to provide sufficient "grounds" under Article 1. 2(a) to reject such declared values when it relied 
on PM Thailand's alleged failure to meet its "bur den" to prove that its relationship with PM 
Philippines did not influence the price of its ciga rettes.  Further, Thailand's new argument that 
"PM Thailand presented no evidence  or otherwise took no steps  to discharge its burden of proving the 
relationship did not influence the price" is c ontradicted by the considerable evidence that 
PM Thailand provided to Thailand to support its decl ared transaction values.  And even assuming that 
Thai Customs had legitimate "doubts" about PM Thailand's declared transaction values in August 
2006, several factors show that Thai Customs failed to examine the circumstan ces of sale in violation 
of Article 1.2(a) of the Customs Valuation Agreement, including the minutes of the 6 March 2007 
meeting;  an analysis of Thai Customs deductive t esting;  and Thai Customs acceptance of transaction 
value for [[xx.xxx.xx]] entries that occurred at  or around the same time as entries for which 
transaction value was rejected.   
4.95 The evidence also shows that prior  to taking a final decision, Thailand failed to inform 
PM Thailand of its "grounds for considering that th e relationship influenced the price", as required by 
Article 1.2(a).  Contrary to Thailand's arguments , neither the 12 April 2007 letter nor the minutes 
(which were never given in writing) provided the required notice of such grounds enabling WT/DS371/R 
Page 28  
 
  PM Thailand to respond.  The authority's finding that  the burden of proof had not been satisfied does 
not qualify as "grounds" under Artic le 1.2(a).  Instead, the "grounds" must address the specific facts 
and evidence before the authority, and explain the de ficiencies the authority has found to exist in the 
evidence.  Moreover, the Philippines disputes Tha iland's assertion that PM Thailand was represented 
at the 6 March 2007 meeting.  Finally, the evidence shows that, after taking a final decision, Thailand 
did not provide PM Thailand with an "explanation in writing … as to how the customs value of the 
importer's goods was determined", or provide a suffi ciently detailed and reas oned explanation of its 
final decision to permit the importer to understand how and why the authority determined the assessed 
customs values, as required by Article 16  of the Customs Valuation Agreement . 
4. Thailand's violations of Articles 5 a nd 7 of the Customs Valuation Agreement  
4.96 Having rejected the transaction values, Thailand violated Articles 5 and/or 7 of the Customs 
Valuation Agreement .  Although Thailand argues that it used Ar ticle 5 to value PM Thailand's goods, 
the evidence suggests it used Article 7.  If Thailand u sed Article 5, it violated that provision by failing 
to deduct:  sales allowances, internal transportation co sts, and amounts paid for the Provincial Tax.  If 
Thailand used Article 7, it violated Article 5 by failing to use that provision when it should have, and 
also Article 7.1 because it failed to assess th e customs value using "reasonable means". 
5. Thailand's violation of Article X:3(b) of the GATT 1994 
4.97 Thailand violates Article X:3(b) of the GATT 1994 because, under Thai law, an importer is 
not afforded a right to appeal a decision by Th ai Customs imposing a "guarantee value" on imported 
goods.  The order imposing a guarantee is a final and complete action relating to customs matters, and 
has an immediate impact on the competitive situati on and market access for imports.  Thai judicial 
decisions, legal opinions from experts in Thai law,  and scholarly writings, establish that an importer 
has no independent right to seek review of orders imposing a guarantee value .   
6. Article X:1 claims pertaining to VAT 
4.98 Thailand violates Article X:1 of the GATT 1994 by not publishing the calculation 
methodology and data used to calculate MRSPs, wh ich serve as the tax base.  The Philippines takes 
issue with evidence submitted by Thailand on the calculation of MRSPs. 
4.99 MRSP notices are administrative rulings of general application within the meaning of 
Article X:1 because they establish prospective rules governing the maximum price and VAT paid on future cigarettes sales.  The protection of confid ential data under Article X:1 does not provide an 
excuse for not publishing non-confidential  data constituting an "essential element" of an 
administrative ruling. 
7. Thailand violates Article III:2 of the GATT 1994 
4.100  The evidence demonstrates that all domestic and imported cigarettes in Thailand are "like" 
products based on evidence of physical characteristics;  end uses;  consumers' tastes and preferences;  
and tariff classification.  Further, all cigarettes are subject to identical regulatory treatment.  The evidence of consumers switching between differently  priced cigarette brands, predominantly in 
response to price changes, shows the products are s ubstitutable.  The evidence also shows a strong 
correlation between changes in consumer demand fo r domestic and imported br ands, and changes in 
the prices of these brands.  This confirms that all cigarettes are "like". 
4.101  Discrimination within the meaning of Article III:2 exists because imported cigarettes bear a 
higher tax burden than like domestic cigarettes due to the Thai Government's decision to fix a higher  
tax base for imports coupled with the same  tax rate.  Further, the Thai Government systematically  WT/DS371/R 
 Page 29 
 
 
  values imports higher than the market, while system atically valuing domestic products at the market 
level.  The MRSP calculation methodology discrimin ates in favour of domestic products because it 
systematically adds a higher amount for ma rketing costs of imported products.   
4.102  Additionally, Thai law exempts resellers of domestic cigarettes from VAT, but does not so 
exempt resellers of imported cigarettes.  Such de jure  discrimination against imports is not a " basic 
feature  of any VAT system", as Thailand argues, but rather is a text-book case of discrimination under 
Article III:2, first sentence.   
8. Thailand violates Article III:4 of the GATT 1994 
4.103  Thailand imposes more onerous administrative requirements in connection with resales of 
imported cigarettes than with resa les of domestic cigarettes.  This  is because resales of imported 
cigarettes are subject to VAT, whereas resales of dom estic cigarettes are not.  An expert legal opinion 
confirms the more onerous requirements imposed  on imported cigarettes th an domestic cigarettes 
which, if not met, results in the denial of tax credits for VAT paid on imported cigarettes and 
penalties.  Finally, Thailand has offered no va lid justification under Article XX(d) for this 
discriminatory VAT exemption or lesser reporting requirements for domestic cigarettes.   
9. Thailand's VAT system violates Article X:3(a) of the GATT 1994 
4.104  There is no basis for Thailand's procedur al claim under Article 6.2 of the DSU  concerning the 
Philippines' panel request.  There was no obligatio n for the Philippines to explain why various VAT 
measures are administered contrary to Article X:3(a) .  Consistent with Appellate Body jurisprudence, 
such a statement is not required by Article 6.2 as it sets out an argument, and not a measure or claim. 
4.105  Thailand fails to administer VAT in a unifo rm, reasonable and impartial manner.  Its 
alternative use of  both the assessed customs value and a guarantee value as the starting point for the 
MRSP calculation results in non-uniform administration.  Thailand's use of a guarantee value, which is a provisional estimate of potential liability for customs duties, is not a "reasonable" basis for 
calculating a definitive  MRSP tax base.  Under this approach, a guarantee value is treated as having a 
definitive character that is inconsistent with its pr ovisional legal status.  Further, Thailand's failure to 
calculate the MRSPs using generally applicable criteria set forth in domestic law is also unreasonable.  
Finally, Thailand's calculation of the MRSP usi ng guarantee values, and notional customs duties and 
internal taxes, results in partial administration.  Evidence demonstrates that imported cigarettes alone 
are subject to an MRSP calculated using a provisional  value as the starting-point for the calculation. 
10. Failure to publish basis for ex factory price violates Article X:1 
4.106  Thailand violated Article X:1 of the GATT 1994 by failing to publish the methodology and 
data used to calculate the ex factory price – th e tax base for domestic ci garettes under the excise, 
health and television taxes.  The remarkably consis tent determinations of TTM's ex factory prices 
over the past eight years highlights th e need for, and impact of, Thailand' s failure to publish the rules.   
4.107  Thailand also violates Article X:1 by failing to publish rules governing the release of 
guarantees collected for excise, health and television taxes.  Expert testimony confirms, as a matter of 
Thai law, that the provisions of the Customs Act cited by Thailand do not include rules and 
procedures on the release of guarantees.  Thus, alth ough Thailand argues that "guarantees are to be 
refunded", it has failed to publish rules addressi ng the basic procedural questions surrounding a 
refund. 
4.108  Thailand violates Article X:3(a) of the GA TT 1994 because, where the customs value initially 
assessed by Thai Customs is reduced on appeal, Th ailand engages in (a) non-uniform administration WT/DS371/R 
Page 30  
 
  by using two different  tax bases with respect to the same goods :  sometimes the correct  duty-paid c.i.f. 
price and sometimes an amount based on an incorrect customs valuation ;  (b) unreasonable 
administration by collecting taxes using an incorre ct customs value as a tax base, which is without 
foundation in Thai law;  and (c) partial administration by administering the excise, health and television taxes with respect to im ported cigarettes on an inflated basis that has no foundation in Thai 
law;  in contrast, domestic cigarettes are never ta xed on a base in excess of the ex factory price. 
4.109  The expert legal opinions explain that the lega l provisions cited by Thailand do not afford 
importers a right to secure a refund of excise, health  and television tax where the tax base is reduced, 
as Thailand alleges.  They note that the Tobacco Ac t, which imposes the excise tax, also provides no 
such right.  Further, no published rules set forth procedures governing an excise tax refund.  The 
statutory right to a refund of health and television ta x is contingent on a refund of excise tax, and there 
are also no procedures for refunds of these taxes.  Thailand's defence is, therefore, not supported by 
the facts. 
11. Requested fact-finding under Article 13 of the DSU 
4.110  The Philippines reiterates its request that the Panel seek information listed in paragraph 712 
of its first written submission pursuant to Article 13 of the DSU . 
D. E
XECUTIVE SUMMARY OF TH E ORAL STATEMENT BY THAILAND AT THE FIRST SUBSTANTIVE 
MEETING OF THE PANEL  
1. Introduction  
4.111  Thailand questions the extent to which disput e settlement proceedings may be fruitful to 
address issues that, in effect, have already been resolved.  To the extent  that the Philippines had 
concerns regarding actions taken in the past by Th ailand, those concerns had been resolved by the 
time the Philippines requested the establishment of a panel.  For example, Thai Customs has used 
PM Thailand's declared entered values as the customs value since September 2007, well over a year before the request for the establishment of a panel.  Si milarly, to the extent that the Philippines' claims 
regarding the MRSPs are based on the MRSPs fo r 2006 and 2007, those MRSPs were revised and 
replaced before the panel request.   
2. Claims under the Customs Valuation Agreement  
4.112  In resolving the claims under the Customs Valuation Agreemen t, the Panel will need to 
address the question of which party, the importer (in this case, a major multinational corporation) or 
the customs administration bears the burden of estab lishing the reliability of a transfer price as the 
basis for the customs value.  The text of the Cu stoms Valuation Agreement and, indeed, supplemental 
sources such as the WTO Technical Committee on Cu stoms Valuation make clear that when doubts 
arise, this burden lies with the importer.  As Thaila nd explained in its first submission, in this case, the 
importer failed to discharge that burden.   
4.113  The importer's failure to discharge its burden means that the customs administration is no 
longer required to accept the transaction value as th e customs value.  In addition, this failure may 
affect the kind of information that is before th e customs administration and can be relied on to 
determine the customs value under the alternative methodologies provided for in the Customs Valuation Agreement.  In considering how a customs administration must proceed when a multinational corporation fails to discharge its bur den of establishing that its transaction value is 
reliable, the Panel should ensure that it does not ad opt interpretations that would limit the right of 
Members' customs administrations to seek and obtain information from importers or that would  WT/DS371/R 
 Page 31 
 
 
  provide importers with incentives not to cooperate with customs administrations in resolving doubts 
about the reliability of a transfer price as the customs value.   
3. Claims under Article III of the GATT 1994 
4.114  Thailand uses the same methodology to estab lish the VAT tax base for both domestic and 
imported cigarettes.  Because there is no discrimina tion against imports inherent in that methodology, 
Thailand cannot be found to be ac ting inconsistently with Articl e III:2 as long as the methodology is 
applied even-handedly to both domestic and imported products.  Moreover, the Philippines bears the 
burden of proving that that methodology is not app lied even-handedly and in a manner such as to 
discriminate against imports.  In its first submissi on, the Philippines did not discharge this burden.  
The Philippines' core argument was that the MRSPs are discriminatory because the MRSP for 
Marlboro  cigarettes was greater than the actual retail price of those cigarettes.  This does not show 
that the methodology for determining MRSPs is app lied in a discriminatory manner.  Thailand is not 
required under Article III:2 to use the actual selling price of the cigarettes as the tax base.  And 
Thailand is not required to reduce the tax base simply because PM Thailand – or even a wholesaler or 
retailer – makes a business decision to sell PM cigarettes at prices below the MRSP. 
4.115  The MRSPs for both domestic and importe d cigarettes are based initially on the 
manufacturer's own recommended retail price for eac h brand.  Thus, the determination of the MRSP 
is necessarily a company-specific and, indeed, brand-specific determ ination.  The MRSPs are updated 
to reflect changes in any of the tax rates applicable to cigarettes, changes in the c.i.f. or ex factory 
price, or other requests for changes by the ma nufacturer.  This system is not in any way 
discriminatory.  The mere fact that PM Thailand woul d like to reduce its tax liability and is not able to 
do so does not constitute discrimination ag ainst imported products or a prima facie  case of a violation 
of Article III:2. 
4. Claims under Article X of the GATT 1994 
(a) Article X:3 claim relating to TTM's Board of Directors 
4.116  Article X:3 does not regulate the manner in which Members exercise their sovereign rights 
with regard to the structure of th eir state enterprises.  Moreover, th e Philippines' claim appears to be 
based entirely on the risk of how Thailand might administer its laws, rather than the actual 
administration as contemplated under Article X:3(a).  Even assuming that the scope of Article X:3 
should be expanded to cover the risk of improper administration, the factual basis of the Philippines' 
claim remains vague and unsubstantiated.  For exampl e, the Philippines alleges a conflict of interest 
because two officials of the Revenue and Excise De partments currently serve on the board of TTM, 
but fails to show that either official has any res ponsibility in the course of their duties in the Revenue 
or Excise Departments for determining the tax bases or customs values for imported cigarettes.  In 
fact, neither Mrs.  Sirisaengtaksin, who works fo r the Revenue Department and is currently seconded 
to the Bureau of the Permanent Secretary of the Mi nistry of Finance, nor Mr. Keesiri, who works at 
the Excise Department, has any direct responsibility for tax policy affecting imported cigarettes.   
(b) Article X:3 claim relating to appeals 
4.117  The Philippines claims that Thailand acts inconsis tently with Articles X:3(a) and X:3(b) of 
the GATT 1994 because [[xx.xxx.xx]] appeals filed by PM Thailand before the BoA have not been 
resolved promptly.  In accepting Article X:3, Members of the WTO hardly anticipated that 
Articles X:3(a) and X:3(b) would be interpreted to require them to conclude internal administrative 
processes "promptly" and, therefor e, to reallocate resources away from other priorities to meet 
deadlines derived from Article X:3.  In any event,  these appeals have not been resolved in part WT/DS371/R 
Page 32  
 
  because PM Thailand has presented revised data relati ng to these appeals that must be reviewed for 
accuracy and sufficiency.   
(c) Article X:3 claims relating to the uniform administration of VAT, excise, health and 
television tax laws 
4.118  Both of the Philippines' claims under Article X: 3(a) regarding non-uniform administration of 
Thailand's VAT laws
62 and its excise, television and health taxes63 are outside the Panel's terms of 
reference.  The Philippines' panel request contains  no mention of a failure to administer laws and 
regulations "uniformly".  In addition, both of these claims are based on the unworkable premise that 
WTO Members can never  change their administrative policies.  This premise could be interpreted to 
mean that in order to achieve "uniform" administra tion, Thailand should stick with its approach in the 
period September 2006 to March 2007 of using guarantee values to calculate MRSPs.   
4.119  The Philippines also claims that by using guarantee values to calculate the September 2006 
MRSPs, Thailand failed to administer its laws re asonably and impartially within the meaning of 
Article X:3(a).64  Here again, the Philippines' interpretati on is unworkable.  Administrators do not 
operate in situations of perfect and complete in formation and, therefore, must be able to use 
reasonable estimates or proxy info rmation when they have valid grounds to doubt the reliability of 
information on which they would normally rely.  Artic le X:3(a) should not be interpreted to prevent 
Members from making reasonable decisions in this manner. 
4.120  The Philippines argues that Thailand must administ er its laws through "transparent, objective 
and generally applicable criteria"65, that it must create "generally applicable rules"66 and that "[a]bsent 
such rules, the administration of the tax cannot be justified under the rule of law".67  Thailand has 
explained that the MRSPs are determined according to  generally-applicable criteria.  Accordingly, the 
Philippines' claim lacks the requisite factual basis.   Also, Article X:3 is not intended to prevent 
governments from conferring discretion on relevant o fficials to administer the laws.  Many WTO 
Members choose to implement their laws and po licies through the conferral of discretion on 
administrative agencies and officers rather than thro ugh the adoption of explicit rules that attempt to 
address every possible contingency.  Article X:3(a)  should not be interpreted so as to make this 
method of administration GATT-inconsistent.   
4.121  The Philippines also claims that Thailand violat es Article X:3(a) because, in the event that the 
originally-assessed c.i.f. value is later revised on appeal, the tax base for the excise, television and 
health taxes would become retroactively incorrect.68  The Philippines has not provided any evidence 
indicating that in the circumstances to which it refe rs in paragraph 659 of its  first written submission, 
Thai officials actually did or would  collect excise, health and television taxes using a tax base that is 
"unlawful"69 and "has no basis"70 as a matter of Thai domestic law.  To the extent that the Philippines 
is complaining about what may occur in the event that duty assessments are revised in the future, the 
Philippines' claim is not ripe and cannot be addressed by the Panel.  Even if the factual basis of this 
claim were clear, it would not suffice to establish a breach of WTO law.  Article X:3(a) should not be 
                                                      
62 Philippines' first written submission, paras. 580-594 
63 Philippines' first written submission, paras. 663-671. 
64 Philippines' first written submission, paras. 605-610. 
65 Philippines' first written submission, para. 605. 
66 Philippines' first written submission, para. 608. 
67 Philippines' first written submission, para. 609. 
68 Philippines' first written submission, paras. 672-683. 
69 Philippines' first written submission, para. 659. 
70 Philippines' first written submission, para. 660.  WT/DS371/R 
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  interpreted in a manner that converts every failure to  comply with domestic law into a breach of WTO 
law.71  
4.122  Also, as a matter of fact, Thai law provides fo r refunds of overpaid excise, television and 
health taxes, although PM Thailand appears never to have requested such refunds from the Excise 
Department.  The Philippines has not explained how  Article X:3(a) compels WTO Members to create 
mechanisms to refund indirect taxes.  Several Member s refuse to grant refunds of indirect taxes that 
would confer windfall benefits on producers and sellers that have already collected the larger tax 
amount from their consumers and, therefore, have not suffered any loss.  Article X:3 should not be 
interpreted to impose an obligation on Me mbers to grant such windfall gains.   
(d) Article X:1 claims 
4.123  Thailand considers that the general methodologi es for MRSPs have been published.  Thailand 
also notes that the last sentence of Article X:1 clarifies that there is no obligation to disclose 
confidential information.  The data us ed to determine MRSPs and ex factory  prices are clearly 
confidential.  The laws or regulations governing th e release of guarantees collected by Customs have 
also been published, and the Philippines has not  explained precisely which existing laws and 
regulations relating to this matter remain unpublished.   
5. Claims relating to completed acts and expired measures  
4.124  Many of the Philippines' claims relate to completed acts and measures that no longer exist.72  
This raises the question of whether the Panel can ma ke recommendations with respect to these claims.  
These expired measures and past acts include the va luation and assessment of duties with respect to 
the [[xx.xxx.xx]] entries listed in the panel requ est, the setting of MRSPs for 2006, and the alleged 
violation of Article 10 of the Custom s Valuation Agreement.  A list of the relevant claims is set out in 
Exhibit THA-36.   
4.125  Under Article 19.1 of the DSU, where a panel conc ludes that a measure "is" inconsistent with 
a covered agreement, it shall recommend that the Member concerned bring the measure into conformity with that agreement.  The Panel ca nnot issue recommendations pursuant to Article 19.1 
that Thailand bring expired measures or completed acts  into conformity with the covered agreements.  
As the Appellate Body has clarified, it amounts to  legal error for a panel to make an Article 19.1 
recommendation with respect to measures which no longer exist.
73  Following the Appellate Body's 
guidance, numerous panels have refrained fro m making Article 19.1 recommendations regarding 
measures that are no longer in force.74  This rule applies with equal fo rce to "measures" that consisted 
of individual, completed governmental acts. 
4.126  By adopting Articles 19.1 and 21. 3 of the DSU, WTO Members accepted that they would not 
have to undo past actions in response to a finding of violation of the cove red agreements and are 
required only to cease the WTO-inconsistent conduct by  the end of the reasonable period of time for 
implementation.  For this reason, remedies unde r the DSU are generally described as being 
                                                      
71 See Panel Report,  US – Stainless Steel (Korea) , para. 6.50. 
72 See Thailand's first written submission, para. 335. 
73 Appellate Body Report , US – Certain EC Products , para. 81;  Appellate Body Report, EC – Bananas 
III (Article 21.5 – Ecuador II) / EC – Bananas III (Article 21.5 – US) , para. 479. 
74 See, e.g., Panel Report, Chile – Price Band System , para.8.3;  Panel Report, Dominican Republic – 
Import and Sale of Cigarettes , para. 8.3;  Panel Report, Turkey – Rice , para. 8.4;  Panel Report, US – Stainless 
Steel (Mexico) , para. 8.3. WT/DS371/R 
Page 34  
 
  "prospective", rather than retrospective, in nature.
75  It would serve no purpose to allow a WTO 
Member to obtain recommendations from panels with  respect to past and consummated actions.   
4.127  Because the conduct on which the relevant claims of the Philippines, as listed in 
Exhibit THA-36, are based took place entirely in the past and has ceased or b een completed, in the 
event that the Panel were to find violations with  respect to these claims, there would be nothing 
further that Thailand could do in order to achieve  compliance with its WTO obligations.  The Panel 
should not issue recommendations under Article 19.1 of the DSU that Thailand bring itself "into conformity" with its WTO obligations with respect to  any of the claims listed in Exhibit THA-36.   
4.128  In addition, because the Panel cannot make any recommendations with respect to the claims 
listed in Exhibit THA-36, it is not clear whether any purpose at all is served by making findings 
regarding these claims.  Panels  have a responsibility to prevent the WTO's dispute settlement 
procedures from being used to obtain purely declaratory judgments or to address matters that are completely moot by the time the panel is established.   The Panel should decline to make findings with 
respect to the claims listed in Exhibit THA-36 that would serve no clear purpose and would not contribute to the resolution of any current and conc rete dispute between the Philippines and Thailand 
regarding these matters.   
6. Claim under Article 10 of the Customs Valuation Agreement 
4.129  Regarding the Philippines' claim under Article  10 of the Customs Valuation Agreement, 
Thailand is still studying this claim and reserves the right to provide further information at a later 
date.  This claim is one of those relating to past  completed acts discussed above and listed in Exhibit 
THA-36.  The Panel should not make recommendati ons with respect to this claim and, in the 
circumstances, Thailand questions whether there is  any purpose to be served in making any findings 
with respect to this claim.   
7. Request for documents 
4.130  In paragraph 712 of its first written submission, the Philippines requested the Panel to seek 
certain documents or categories of documents.  Th ailand's first written submission contained most of 
the documents and categories of doc uments referred to by the Philippines.  Two of the documents 
requested by the Philippines were ac tually provided by the Philippines itself in its first submission.  
These were item 6, Memorandum 0519/1605, dated 14 March 2007, which was the cover memo for 
the minutes of the 6 March 2007 meeting, and item 9, the minutes of that meeting.  Both of these documents were attached as Exhibit PHL-74 to the Philippines' first written submission.  Thailand 
notes that those minutes were revised and re-circu lated one week later, on 21 March 2007.  The 
revised minutes, which Thailand now submits as Exhi bit THA-37, make clear that the customs value 
for the [[xx.xxx.xx]] entries listed in the Philippi nes' panel request was determined using the 
deductive value method in accordance with Artic le 5 of the Customs Valuation Agreement.  
4.131  Thailand has reviewed the Philippines' list to see whether there were any remaining listed 
documents that might assist the Panel.  Accordi ngly, Thailand is submitti ng as Exhibit THA-38 the 
documents referred to in items 1 and 8 of the Phili ppines' list.  Item 1 contains instructions for 
customs officers to act carefully in making customs valuation determinations and item 8 relates to the 
approval of the amounts of guarantees used for PM Thailand's imports.  Several other documents on 
the Philippines' list, including items 2-5, relate to products other than cigare ttes and have no relevance 
to this case.  Thailand will, of course, be happy to  provide any other inform ation the Panel considers 
necessary. 
                                                     
 
75 See, e.g., Appellate Body Report, US – Upland Cotton (Article 21.5 – Brazil) , footnote 494.  See also 
Appellate Body Report, US – Zeroing (EC) (Article 21.5 – EC) , para. 299.    WT/DS371/R 
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  E. EXECUTIVE SUMMARY OF THE SEC OND WRITTEN SUBMISSION OF THE PHILIPPINES  
1. Violation of Article X:3(a) of the GATT 1994 because of dual role of TTM directors 
4.132  Thailand violates Article X:3(a) through the act of vesting governmental power to apply Thai 
customs and tax rules concerning domestic and impor ted cigarettes in indivi duals who simultaneously 
serve as Directors of TTM and as senior officials in  DG Excise, DG Customs, and DG Revenue.  This 
pattern of administration is an act that, in and of itself, creates an inherent conflict of interest and 
constitutes partial and unreasonable administration, contrary to Article X:3(a). 
4.133  In administering Thai customs and tax rules, these Thai Government officials are responsible 
for, inter alia , assessing the customs value of imported cigarettes and fixing the tax base for VAT, 
excise, health, and television taxes.  As a matter of fact, TTM Directors have been directly involved in 
the application of Thai customs and tax measures to cigarettes, inter alia , by signing the orders 
imposing decisions, and by participating in and supervising the decision-making process.  Their 
decisions, therefore, have a considerable infl uence on the tax burden of imported and domestic 
cigarettes and, as a result, the relative competitive situation of these cigarettes.  The TTM Directors 
also have access to BCI regarding imported cigarettes. 
4.134  In fulfilling their role as TTM Directors, the sa me Thai Government officials have a financial 
incentive and legal obligation to maximize TTM's co mpetitive advantage and to "make any decision 
for the utmost benefit of" TTM.  In making such decisions, they can rely on BCI about TTM's competitors, available to them because of their role in the Thai Government.   
4.135  The manner of structuring and organizing governme nt is the very essence of "administration" 
under Article X:3(a), as found by the Panel in Argentina – Hides and Leather .  In this dispute, the 
Philippines has provided quantitativ e and qualitative evidence of th e unreasonable and impartial 
pattern of administration, as well as of acts by individuals serving both as TTM Directors and Thai Governmental officials resulting in unreasonable and impartial administration.  Thailand also 
mischaracterizes the decision in Argentina – Hides and Leather  in arguing that the partiality and 
unreasonableness in its administration must be balan ced against safeguards adopted to avoid abuses.  
In fact, the safeguards asserted by Thailand neither  remedy the conflict of interest facing Thai 
Government officials simultaneously serving on th e Board of TTM, nor prevent abuses such as the 
inappropriate flow of importers' BCI   to the domestic industry.   
2. Claims pertaining to customs valuation 
(a) Standard of review with respect to customs valuation decisions 
4.136  In reviewing a series of Thai customs valu ation decisions under the Customs Valuation 
Agreement, the Panel must make an objective assess ment of the facts, and apply the appropriate 
standard of review.  The appropriate standard of re view is neither de novo revi ew, nor total deference.  
Instead, panels are required to conduct a critical revi ew of a national authority's determination to see 
whether the authority explained how the facts support its decision.  In reviewing an authority's decision to reject transaction value, a panel cannot  simply accept the authority's conclusion that the 
importer failed to show that the re lationship between buyer and seller did not affect the price, nor can 
a panel decide for itself, on a de novo basis, whether the transaction value should be accepted.  
Instead, a panel must review whether the authority has provided an objective and coherent explanation 
as to how it complied with its WTO obligations, and how the underlying facts support its decision. WT/DS371/R 
Page 36  
 
  (b) Violation of Articles 1.1 and 1.2 of the Customs Valuation Agreement by maintaining and 
applying a general rule requiring the rejection of transaction value 
4.137  Thailand violates Articles 1.1 and 1.2 by main taining and applying, from 4 August 2006 until 
19 March 2008, a general rule regarding the rejec tion of transaction value, consisting of (1) the 
systematic refusal, at the time of importation, to accept transaction value for entries of imported 
cigarettes, with the collection of guarantees as a condition for allowing customs clearance;  and, (2) 
the systematic valuation of imported cigarettes us ing the deductive valuation methodology, instead of 
transaction value, at the time of final assessment.   
4.138  By maintaining such a general rule, Thailand viol ated the obligation to use "transaction value" 
as the "primary basis for customs va lue", provided for in Article 1.1 and paragraph 1 of the General 
Introductory Commentary of the Customs Valuati on Agreement.  A WTO Member may depart from 
its primary valuation obligation solely in the circ umstances set forth in paragraphs (a) to (d) of 
Article 1.1.  Under Article 1.1(d), where the buyer and seller are related, the customs value "shall be" 
the transaction value, "provided" that the tr ansaction value is acceptable under Article 1.2.  
Article 1.2(a) provides that the "fact" that the partie s are related is insufficient "grounds" to reject the 
transaction value.  In such a case, the customs aut hority must examine the circumstances of sale to 
establish whether other "facts", besides the relationshi p, demonstrate that the relationship influenced 
the price.  Thailand's general rule violates Artic les 1.1 and 1.2 by providing for the systematic 
rejection of transaction value without examination of the circumstances of sales. 
(c) Violation of Articles 1.1 and 1.2 of the Customs Valuation Agreement by improperly 
rejecting PM Thailand's declared trans action values in [[xx.xxx.xx]] transactions 
4.139  Thailand violates Articles 1.1 and 1.2 by rejec ting PM Thailand's declared transaction values 
for [[xx.xxx.xx]] entries, without:  (1) examining the circumstances of sale;  and, (2) identifying adequate grounds, other than the relationship, warranting the rej ection of transaction value.   
4.140  The Philippines' claim that Thailand failed to examine the circumstances of sales is supported 
by:  (1) the minutes of the 6 March 2007 meeting;  (2) Thailand's failure to examine PM Thailand's 
evidence, including annual filings with deductive cal culations showing that the declared transaction 
values enabled it to earn a sufficient amount to cove r its usual costs and profits, and an amount for 
costs and profits similar to the amount earned by si milarly-situated distributors in transactions with 
unrelated suppliers;  (3) Thailand's failure to seek  information concerning PM Philippines' costs and 
profits – information which PM Thailand had identifi ed as being relevant if Thai Customs were to 
apply a cost-plus testing methodology under Article 1. 2(a);  (4) Thailand's incoherent and arbitrary 
deductive methodology to test the declared transact ion values for all of PM Thailand's transactions 
throughout 2006 and 2007;  and,  (5) Thai Customs' acceptan ce of the transaction values for 
[[xx.xxx.xx]] entries in March and September 2007 hi ghlights the arbitrariness of the rejection of 
transaction values for other entries occurring at the same time. 
4.141  Thailand makes certain rebuttal arguments.  On  issue (1), Thailand's argument that the 
minutes address sales in 2003 is contradicted by the express terms of the minutes, which state that 
Thai Customs did not examine the circumstances of  sale with respect to entries "since 1 August 
2006".  On issue (2), Thailand's ex post  argument is that PM Thailand' s calculations were not in the 
proper form and not supported by other evidence.   However, Thai Customs never informed 
PM Thailand of these points, and never gave PM  Thailand an opportunity to respond to them, 
contrary to Article 1.2(a).  In any event, the cal culations were in the proper form and PM Thailand 
could have provided additional support upon request.  On issue (5), the Philippines provides 
documentary evidence to counter Thailand's argument that [[xx.xxx.xx]] of the entries never occurred;  
and it shows that Thailand's asserted clearance date  for the other [[xx.xxx.xx]] entries was just three 
days before an entry for which Tha iland rejected the transaction value.  WT/DS371/R 
 Page 37 
 
 
  4.142  Thailand also violated Articles 1.1 and 1.2 by  rejecting PM Thailand's declared transaction 
values without valid reasons, as evidenced by Thai Cu stoms' letter of 12 April 2007, which informed 
PM Thailand of Thai Customs' decision to reject  transaction value.  The letter states two invalid 
grounds of rejection and evidences Thai Customs' fa ilure to critically examine all of the relevant 
evidence.  First, the "fact" that "another im porter" purchases cigarettes at a higher price than 
PM Thailand is not a valid ground for considering that the relationship between PM Thailand and PM 
Philippines influenced the price becau se, for a variety of reasons, the prices of the other party are not 
comparable.  During these panel proceedings, Tha iland has accepted that this first "ground" for 
rejecting transaction value was flawed, and not relied upon by Thai Customs.   
4.143  Second, Thai Customs' statement that PM Th ailand has not proven whether the relationship 
had influenced the price is not a "ground" for re jecting transaction value because:  (1) the Customs 
Valuation Agreement does not establish a legal presumption and burden of proof against the 
transaction value;  (2) even if doubts could trigger a presumption and burden of proof against the transaction value, the doubts must be reasonable at  the time when the alleged burden of proof is 
invoked as the basis to reject transaction value, whic h was not the case here;  and, (3) even if a burden 
of proof on the importer were to apply, the custom s authority should explain its decision rejecting 
transaction value, and why the submitted evidence w as insufficient to allow the importer to meets its 
burden of proof, which Thai Customs failed to do. 
(d) Violation of Article 1.2(a) of the Customs Valuation Agreement by failing to communicate 
"grounds" before rejecting transaction value 
4.144  Thailand violated Article 1.2(a) by failing to  inform PM Thailand of its "grounds for 
considering that the relationship influenced the price"  prior to Thai Customs' final decision to reject 
transaction value.  PM Thailand submitted evidence that allowed Thai Customs to establish that the 
transaction values enabled PM Thailand:  (1) to ear n a sufficient amount to cover its usual costs and 
profits;  (2) to earn an amount for costs and profits similar to the amount earned by unrelated distributors.   
4.145  Under Article 1.2(a), Thailand was obliged to  communicate the objective facts that supported 
Thai Customs' conclusions on the burden of proof in the light of this evidence.  Such communication 
would have offered PM Thailand "a reasonable opportunity to respond" to the customs authority's 
dissatisfaction with the evidence.  Absent an expl anation, PM Thailand is deprived of a reasonable 
opportunity to address whatever deficiencies the authority perceived in the evidence. 
4.146  Contrary to Thailand's assertion, Thai Cust oms' 19 December 2006 letter failed to inform 
PM Thailand of the grounds for considering that  the relationship influenced the price.  An 
unexplained, unsubstantiated,  and conclusory statement that PM Thailand failed to meet its burden of 
proof does not satisfy the requirement to communi cate "grounds".  Until prompted by the Panel, 
Thailand had never communicated its reasons for disregarding the evidence submitted by 
PM Thailand. 
(e) Violation of Article 16 of the Customs Valu ation Agreement by failing to provide an 
adequate explanation as to how the customs value was determined 
4.147  Thailand violated Article 16 by failing to pr ovide PM Thailand with an "explanation in 
writing … as to how the customs value of the impor ter's good was determined" in its final assessment 
decision.  Under Article 16, Thailand is required to  explain why it rejected the declared transaction 
value, and to provide a sufficiently detailed and reasoned explanation permitting the importer to 
understand how and why the authority de termined the assessed customs value. WT/DS371/R 
Page 38  
 
  4.148  Thailand failed to explain the objective basis for rejecting transaction value and how it 
proceeded in valuing PM Thailand's goods.  Without an explanation of how the authority reached its 
decision, importers and foreign governments are unable to exercise their respective rights under Articles 11 and 19 of the Customs Valuation Agreem ent, and domestic courts  and WTO panels are 
deprived of a basis to review the authority's decisions. 
4.149  Contrary to Thailand's assertion, the 12 Apr il 2007 letter does not sufficiently explain the 
basis for Thai Customs' rejection of the declared  transaction values because it contains an unexplained 
statement that the burden of proof was not met.  Furthermore, this letter does not explain how Thai 
Customs determined the assessed cust oms values, because, for example,  it does not reveal the starting 
point of the deductive calculation allegedly used by  Thai Customs, the specific elements and amounts 
deducted;  the sources of the data used;  and ot her supporting calculations for the assessed values.  
The minutes of the 6 March meeting also failed to satisfy the requirement under Article 16 because 
they were insufficiently detailed. 
(f) Violation of Articles 5 and/or Article 7 of the Customs Valuation Agreement by incorrectly 
assessing the deductive value of PM Thailand's [[xx.xxx.xx]] transactions 
4.150  The Philippines' primary claim is that, if the Pa nel finds that Thailand used Article 7 to value 
PM Thailand's goods, Thailand improperly declined to use Article 5 for impermissible reasons, i.e., a 
lack of contemporaneous financ ial information, and improperly applied Article 7.1 because Thai 
Customs failed to make deductions for sales allowa nces, internal transportation costs, and Provincial 
taxes.  Thailand admits that PM Thailand clai med deductions for sales a llowances and Provincial 
taxes, but contests that the information available to Thai Customs justified a deduction for either 
amount.  With respect to the deduction for internal transportation costs, Thailand disputes that 
PM Thailand claimed such a deduction, and also c ontends that the available evidence did not support 
the deduction.  A proper deduction of these three it ems would have resulted in significantly lower 
customs values than the values a pplied by Thai Customs.   
4.151  PM Thailand submitted all information required to  make the requested deductions.  Although 
Thai Customs requested additional information on certain issues, it requested no such information 
regarding sales allowances and Provincial taxes, sugg esting that Thai Customs was satisfied that it 
had all necessary supporting informati on available to make these deductions. 
4.152  Before this Panel, Th ailand now makes certain ex post  arguments regarding the sufficiency of 
the information PM Thailand provided.  If Thai Cust oms had raised these concerns at the time of its 
valuation, PM Thailand easily coul d have responded to them.  The criticisms focus on information on 
sales allowances and Provincial taxes provided with PM Thailand's letter of 7 March 2007.  However, 
the information with this letter responded to re quests regarding the greatest aggregate quantity 
("GAQ") sales price, and not sales allowances and Pr ovincial taxes.  Again, if Thai Customs had 
requested additional information on sales allowances  and Provincial taxes, PM Thailand would have 
provided it.  Indeed, on 12 March 2007, PM Tha iland provided information to the BoA on Provincial 
taxes paid in 2002.   
4.153  With respect to internal transportation costs, Thailand incorrectly argues that PM Thailand did 
not claim a deduction for these costs, overlooking that each of PM Thailand's annual filings for 
financial years 2003, 2004, 2005 and 2006 included a de duction for either inland freight or domestic 
transportation.  Even if PM Tha iland's letter of 21 February 2007 did not mention transportation costs, 
Thai Customs was put on notice that deductions for such items were required, and, in doubt, could 
have requested further information in its letter of 27 February 2007. 
4.154  Thailand argues that PM Thailand should have provided information to show that the claimed 
deductions were made in connection with the sales on which the GAQ price was based.  However,  WT/DS371/R 
 Page 39 
 
 
  Article 5 permits a deduction for the amounts "usually " incurred on sales in general, not least because 
the transaction being valued is not the GAQ sale.  It is also the approach ad opted by the BoA in its 
decisions on the 2000-2002 appeals.  In any event, if Thai Customs insisted on information showing 
the deductions to be made from the sales on which the GAQ price was based, it was required to request this information. 
4.155  With respect to the alleged significance of PM  Thailand's letter of 7 March 2007, Thailand's 
arguments on the meeting of 6 March 2007 show that, by 6 March, Thai Customs had already 
finalized its deductive calculation.  Thus, before the 7 March letter arrive d, Thailand had already 
decided not to deduct sales allowances, internal transpor tation costs, and Provincial taxes.  As a result, 
the sufficiency of the information submitted by PM Thailand in its 7 March letter was not the decisive 
factor in Thai Customs' decision. 
4.156  If the Panel finds that Thailand used Article 7 to value PM Thailand's goods, Thailand acted 
contrary to Article 7.3 by failing to inform PM Thailand in writing "of the customs value determined 
under the provision of this Article and th e method used to determine such value". 
4.157  Alternatively, if the Panel finds that Thaila nd used Article 5 to value PM Thailand's goods, 
Thailand violated Article 5 because it failed to ma ke the required deductions for sales allowances, 
internal transportation costs, and Provincial taxes.   The arguments in support of the Philippines' 
alternative claim are th e same as the arguments in support of its primary claim under Article 7 
because the methodology and elements in a deducti ve calculation under Articles 5 and 7 do not, in 
principle, differ.   
(g) Violation of Article 10 of the Customs Va luation Agreement by disclosing business 
confidential data 
4.158  Thailand violated Article 10 because Thai Gove rnment officials disclosed PM Thailand's 
business confidential data, in particular its decl ared transaction value and import volumes.  
PM Thailand never gave "specific permission" to th e Thai Government to allow such disclosure and 
repeatedly opposed the disclosur es.  As a result, the Philippines has made a prima facie case of a 
violation of Article 10.   
3. Violation of Article X:3(b) of the GATT 1994 by failing to provide a right to challenge 
guarantees 
4.159  Thailand violates Article X:3(b) by failing to pr ovide for a right to seek the prompt review 
and correction of administrative action by Thai Customs to impose guarantees on imported goods.  
Pursuant to Article X:3(b), Th ailand is obliged to provide, inter alia , for the prompt review and 
correction by an independent tribunal of guarantee orders, which are administrative actions relating to 
customs matters.  An order imposing a guarantee is a complete and final legal act that is conceptually 
distinct from the final assessment of customs valu e.  It imposes a definitive guarantee, and its 
imposition is the culmination of an administrative process to establish the appropriate level of the 
guarantee and, as such, is "the final manifestation of the application of a law in a particular case".   
4.160  The obligation to furnish a guarantee is linked to, though conceptually distinct from, the 
obligation to pay duties.  A guarantee establishes an  immediate legal obligation to furnish cash or 
security, and thus imposes an immediate financia l burden on importers, producing also immediate 
repercussions on market access and competitive oppor tunities.  Allowing a challenge to an assessed 
customs value cannot repair the harm caused in  the interim by a guarantee, and may undermine 
competitive opportunities.  The severity of a guarant ee may even completely exclude imported goods 
from the market or delay clearance.  This underscores the need to provide for an independent right to 
challenge a guarantee.  Under Tha iland's interpretation, market access would be permanently lost as a WT/DS371/R 
Page 40  
 
  result of the guarantee, because the guarantee order c ould only be challenged as part of a challenge 
against the final assessed customs value.  If no final assessment follows, the importer would be 
stripped of any opportunity to challenge the guarantee.   
4.161  The Philippines also submits that Thailand is mi staken in its understanding of the relationship 
between Article X:3(b), on the one hand, and the Anti-Dumping Agreement and the Customs 
Valuation Agreement, on the other hand.  First,  guarantees collected in anti-dumping cases may be 
challenged under Article X:3(b), and the WT O proceedings initiated by Thailand in US – Shrimp 
(Thailand)  confirm that a WTO Member can challenge a guarantee order at the WTO.  The domestic 
law of WTO Members should likewise provide for a ri ght to challenge guarantees.  Second, Article 11 
of the Customs Valuation Agreement, which provides fo r a right to appeal against "a determination of 
customs value", and Article X:3(b) of the GA TT 1994 can be applied together in a harmonious 
fashion, which is consistent with the Interp retative Note to Annex 1A and settled WTO law. 
4.162  Furthermore, obliging WTO Members to provide a right of appeal against a guarantee order 
would neither interfere with a Member's right to  collect a guarantee pending the assessment of the 
customs value, nor would it interfere with the responsibility of customs authorities to determine 
customs value.   
4. Claims pertaining to VAT 
(a) Violation of Article X:1 of the GATT 1994 by failing to publish the methodology and data 
used to determine and revise MRSPs 
4.163  Thailand violates Article X:1 by failing to publish the methodology and data used to 
determine the MRSPs, which is the base for VAT.  The Philippines has demonstrated that none of the 
key features of Thailand's MRSP methodology, as descr ibed by Thailand, has been published.  These 
elements are:  (1) "the primary source for the MRSPs is the manufacturer's recommended retail price" ("RRSP");  (2) DG Excise reviews the proposed MRSP/RRSP to decide whether to accept it as the 
MRSP;  (3) DG Excise "normally" revises MRSPs follo wing tax changes impacting the MRSP;  (4) 
when MRSPs are revised, DG Excise calculates a new MRSP adding:  (a) the ex factory/c.i.f. price;  
(b) the latest tax amounts;  and (c) marketing cost s, which are "derived from information provided by 
the manufacturers themselves". 
4.164  Thailand also violates Article X:1 by failing to publish any data that forms an integral or 
essential element of the determination of specific MRSPs.  As the Panel in Dominican Republic – 
Import and Sale of Cigarettes  stated, Article X has a due process objective and the "essential 
elements" or "essential parts" of an administrative ruling must be published.  This interpretation is 
consistent with the text of Article X:1, requi ring publication "in such a manner as to enable 
governments and traders to become acquainted with them", and gives effect to the transparency 
obligations in Article X:1.  In this dispute, Th ailand should have published the price surveys it relied 
on to determine the marketing costs for imported br ands in 2006 and 2007.  It could also have 
published indexed data, to protect the confid ential character of certain information. 
(b) Violation of Article III:2 of the GATT 1994 by  taxing imported cigarettes in excess of like 
domestic goods as a result of the MRSP levels 
4.165  Thailand violates Article III:2 by imposing a VAT on imported cigarettes "in excess" of VAT 
imposed on like domestic cigarettes.   
4.166  The Philippines has demonstrated that all domestic and imported cigarettes are like.  This 
evidence pertains to physical characteristics, e nd uses, consumers' tastes and preferences, tariff  WT/DS371/R 
 Page 41 
 
 
  classification, and identical regulatory treatment.  So far, Thailand has not put forward argument or 
evidence to dispute the Philippines' overall asse ssment, based on the evidence as a whole.   
4.167  Thailand incorrectly requires that the Pane l perform 1,634 separate comparisons between 
each domestic and imported brand to establish likeness on a brand-by-brand basis.  This approach 
lacks support in the text of Article III:2 or the case law.  Thailand also misinterprets the Appellate 
Body report in Canada – Periodicals .  In that report, the Appellate Body did not establish perfect 
substitutability as the decisive legal standard under Article III:2, first sentence, as Thailand alleges.  
Instead, it merely explained that perfectly substituta ble products fall within the scope of Article III:2, 
first sentence. 
4.168  Even if the Panel were to find that not all imported and domestic cigarettes are like, the 
Philippines maintains that imported and domestic cigare ttes within a particular price segment are like.  
Although price is not a decisive criterion in estab lishing likeness, the Philippines has demonstrated 
likeness within price segments. 
4.169  Thailand imposes VAT on imported cigarettes in excess of VAT imposed on like domestic 
cigarettes because (1) the MRSPs for imported cigare ttes are higher than for like domestic cigarettes, 
and (2) the MRSPs for imported cigarettes are systematically higher than the RRSPs for imported 
cigarettes, whereas the MRSPs for like domestic cigarettes are systemically equal to the RRSPs.  Thus, the tax burden on imports is higher in absolute  terms and also higher relative to the retail price. 
4.170  Thailand has attempted to offer an explanati on for the excess tax burden imposed on imported 
cigarettes.  The essence of  this explanation is that DG Excise is not responsible for the level of the 
MRSP, because the MRSP is based on information provided by the importer.  However, the facts 
contradict this explanation.  Among othe rs, the evidence shows that the MRSPs for Marlboro  and 
L&M  have systematically been higher than they  would have been if based on PM Thailand's 
information.   
4.171  Thailand is also mistaken in arguing that the key question before the Panel is whether the 
design, structure, and architecture of the measure discriminate against imported cigarettes.  The 
Philippines' claim in this dispute is brought under the first sentence of Article III:2.  Under that 
sentence, the issue is whether imported products ar e subject to any taxation "in excess" of the tax 
applied to like domestic products.   
(c) Violation of Article III:2 of the GATT 1994 by exempting resales of domestic cigarettes from 
VAT liability 
4.172  Thailand violates Article III:2 because it exempts resales of domestic cigarettes from VAT, 
but grants no such exemption to resales of like im ported cigarettes.  Thailand does not dispute this 
different fiscal treatment but responds that resellers  of imported cigarettes can offset their additional 
VAT liability with a tax credit, leaving a zero "net" liability.   
4.173  Thailand's defence fails.  First, Thailand's compliance with Article III:2 cannot depend on 
private parties' action.  The fact that a reseller of imported cigarettes is given an opportunity to 
mitigate the impact of a discriminatory tax thro ugh a tax credit does not cure the discriminatory 
character of Thailand's VAT regime.  Second, the ta x credit granted to resellers of imported cigarettes 
will not always match perfectly their tax liability.  A reseller may incur a "net" liability of greater than 
zero if the volume of cigarettes sold in a given month exceeds the volume of cigarettes bought in that month.  Even if in certain months the tax credit might exceed the tax liability, it is well established in the case law that more favourable treatment of im ported products in some instances does not justify 
less favourable treatment in other instances.  Third, the tax credit is not granted automatically but is 
subject to legal conditions concerning VAT administrative requirements.  The grant of a non-WT/DS371/R 
Page 42  
 
  automatic tax credit cannot ensure equal treatme nt where domestic cigarettes are automatically 
subject to no tax liability.  This is particularly so because penaltie s may be imposed on resellers for a 
failure to comply with the administrative requirements regarding resales of imported cigarettes.   
(d) Violation of Article III:4 of the GATT 1994 by  imposing more onerous VAT administrative 
requirements on resales of imported cigarettes 
4.174  Thailand violates Article III:4 by subjecting r esales of imported cigarettes to more onerous 
VAT administrative requirements, set out in Chapter IV of the Thai Revenue Code, than are imposed 
in connection with resales of like domestic cigarett es.  The detailed evidence showing the likeness of 
imported and domestic cigarettes within the meaning of  Article III:2, first sentence, also supports that 
the products are like for purposes of Article III:4. 
4.175  Under Thai law, VAT registrants are subject  to different obligations depending on the 
particular goods or services supplied.  Chapter IV  includes obligations to prepare and maintain 
detailed tax invoices, tax input records, tax output  records, goods and raw materials records, and 
alternative records;  filing VAT Form Por.Por.30;  and accepting an audit process and sanctions in 
case of non-compliance.  None of these requirements apply in connection with resales of domestic 
cigarettes.  This is because Section 3(1) of Ro yal Decree No.  239 exempts resales of domestic 
cigarettes from VAT.  As a result, pursuant to S ection 81/2 of the Revenue Code, wholesalers and 
retailers are exempt from the administrative require ments in Chapter IV in connection with their 
resales of domestic cigarettes. 
4.176  The more onerous VAT administrative requirements imposed in connection with resales of 
imported cigarettes "affect" the sale and distribution of  cigarettes within the meaning of Article III:4, 
because they impose regulatory burdens on all selling parties in the distribution chain. 
4.177  Thailand fails "to provide equa lity of competitive conditions fo r imported products in relation 
to domestic products" – which is the ge neral thrust of the principle in Article III:4.  Thailand's maze 
of administrative procedures, requirements, and san ctions modifies the conditions of competition by 
imposing extra hurdles in connection with resales of imported cigarettes.  The resulting additional 
costs and risks must be taken into account by a co mmercial operator in deciding which cigarettes to 
supply and promote.  Given the regulatory environmen t, retailers selling only do mestic cigarettes – of 
which there are around 68,000 – have a disincentive to start supplying imported cigarettes, because 
they would then be subject to additional costs and ri sks.  The Philippines adds that, in an Article III:4 
analysis, the Panel need not determine the actual trade and competitive effects of the more onerous 
VAT administrative burdens.   
(e) Thailand's failed defence under Article XX(d) of the GATT 1994 
4.178  Thailand has failed to justify its exemption of resales of domestic cigarettes from the VAT 
administrative requirements in Chapter IV, under Arti cle XX(d).  Thailand has not demonstrated that 
the de jure  exemption of resales of domestic cigarettes from VAT administrative requirements is 
"necessary" to secure compliance with any domes tic laws and regulations, WTO-consistent or 
otherwise. 
(f) Violation of Article X:3(a) of the GATT 1994 by failing to administer its VAT regime in a 
uniform, reasonable, and impartial manner 
4.179  Thailand violates Article X:3(a) by failing to  administer its VAT regime in a uniform, 
reasonable, and impartial manner.  WT/DS371/R 
 Page 43 
 
 
  4.180  First, Thailand does not apply its VAT regime on the basis of generally-applicable criteria set 
forth in Thai law, in particular the determination of the MRSPs.  It is unreasonable to administer taxes 
on an ad hoc, case-by-case basis, without criteria set forth in law.  By way of example, in 2006 and 
2007, DG Excise decided to calculate (discriminatory)  marketing costs for imported cigarettes using 
an international price survey and by using guar antee values as the starting point for its MRSP 
calculations for imported cigarettes.  These decisions were not grounded in Thai law, but were merely 
the product of DG Excise's discretion. 
4.181  Second, Thailand's use of a guarantee value, and not a customs value, as the starting point for 
the calculation of MRSPs results in non-uniform a nd unreasonable administration.  The practice of 
administering VAT through two different starting points lacks uniformity because sometimes actual 
tax amounts are added based on the actual duty-paid  customs values, and sometimes notional amounts 
based on the guarantee values are added.  This al so involves unreasonable administration because the 
notional amounts added for excise, health, and televi sion taxes are "the highest" possible and based on 
a provisional estimate of potential liability for cust oms duties.  Furthermore, it constitutes partial 
administration because such notional amounts are added only to the MRSPs for imported cigarettes 
given that only those cigarettes are subject to provisional guarantee values.  The starting point for the 
MRSPs for domestic cigarettes, by contrast, is the ex factory price.  Because provisional guarantees 
can be collected to preserve the ability to collect taxes, there is no justification for transforming a 
provisional guarantee into a definitive tax base.   
5. Claims pertaining to the excise, health, and television tax 
(a) Violation of Article X:1 of the GATT 1994 by failing to publish the methodology and data 
used to determine the ex factory price 
4.182  Thailand violates Article X:1 by failing to publis h the methodology and data used to calculate 
the ex factory price, which is the tax base for the excise, health, and television taxes imposed on 
domestic cigarettes and the starting point for the MRSP calculation.  The methodology must address 
the manner by which costs are calculated for purposes of determining the ex factory price, including 
which costs are included and how costs are allo cated, among others, across different brands and 
business activities.  Concerns regarding the confiden tiality of data may be met by publishing indexed 
data.   
(b) Violation of Article X:1 of the GATT 1994 by failing to publish rules concerning the release 
of guarantees for excise, health, and television taxes 
4.183  Thailand violates Article X:1 by failing to pub lish rules concerning the release of guarantees 
collected to cover potential liability for excise, h ealth, and television taxes.  Thailand has asserted 
that, as a general matter, guarantees are released.  Ho wever, it has failed to publish rules addressing 
the basic procedural questions surrounding the release of a guarantee, such as:  to which authority an 
importer can apply for a guarantee release and within what deadline;  what documents are required to 
obtain such release;  how and when the authorit y communicates its decision;  how the guarantees are 
released;  whether interest is payable on cash guarant ees;  and, which Thai courts have jurisdiction to 
hear appeals regarding the release of guarantees. 
(c) Violation of Article X:3(a) of the GATT 1994 by failing to administer the excise, health, and 
television taxes in a uniform, r easonable, and impartial manner 
4.184  Thailand violates Article X:3(a) by failing, in some circumstances, to  use a tax base for the 
excise, health, and television taxes that has a basis in  Thai law.  Under Thai law, the tax base for the 
excise tax on imported cigarettes is the duty-paid c.i. f. price;  the health and television taxes are 
a percentage of the excise tax payable.  Thailand do es not rely on this tax base for imported cigarettes WT/DS371/R 
Page 44  
 
  if the customs value assessed by Thai Customs is re duced on appeal.  In that event, the incorrectly 
assessed customs value serves as the tax base. 
4.185  Such administration is non-uniform because the taxes are administered using two different tax 
bases for the same goods:  sometime s the correct customs value and sometimes an incorrect customs 
value.  Such administration is also unreasonable because it has no basis in Thai law.  Finally, it is 
partial because Thailand only collects taxes using an  incorrect customs value for imported, and not 
domestic, cigarettes. 
4.186  Thailand's WTO-inconsistent administration is not rendered WTO-consistent by an alleged 
right to seek a refund, because it is not reasonable to subject importers to an additional procedure to secure a refund of a tax imposed on a base that has al ready been found to be improper.  In any event, 
Thailand merely alleges that a refund is available.  It has not provided evidence of the legal basis for 
that right in Thai law.  The opinions of two Thai  legal experts confirm the lack of such right under 
Thai law. 
6. Violation of Articles X:3(b) and X:3(a) of  the GATT 1994 because of undue delays in the 
BoA's decision-making 
4.187  Thailand violates Article X:3(b) by failing to ma intain procedures for the prompt review and 
correction of customs decision by the BoA.  So fa r, the BoA has taken more  than seven years, and 
counting, to resolve [[xx.xxx.xx]] appeals filed by PM Thailand regarding entries landed in 2002.  
The considerable delays are caused by the BoA's ow n tardiness in administering the appeals, and not 
PM Thailand, which has consisten tly responded promptly to the BoA's requests for information.   
4.188  Even if the BoA is not an independent tribunal within the meaning of Article X:3(b), as 
Thailand alleges, the claim under Article X:3(b) st ands because Thailand prevents the prompt review 
and correction of Thai Customs' decision by an independent tribunal by interjecting a very slow 
review process by a non-independent agency betw een Thai Customs' decision and the independent 
tribunal.   
4.189  Thailand also violates Article X:3(a) because th e delays of more than seven years in the 
BoA's decision-making give rise to unreasonable administration.  The duration of the process gives 
rise to administration that is not appropriate or su itable to the circumstances.  The Philippines rejects 
the view that the word "reasonable" in Article  X:3(a) imposes no obligations whatsoever on the 
duration of the administrative process.  Thailand has not explained why the drafters would attach importance to "prompt review" of administrative deci sions in Article X:3(b) but impose no disciplines 
on the time taken to reach the initial decision. 
F. E
XECUTIVE SUMMARY OF THE SECOND WRITTEN SUBMISSION OF THAILAND  
1. Introduction 
4.190  This executive summary of Thailand's rebuttal submission of 20 July 2009 responds to the 
arguments put forward by the Philippines in its fi rst written submission of 23 March 2009, its opening 
statement at the first meeting of the Panel with th e parties on 10 June 2009 and in its responses to the 
Panel's questions, submitted on 1 July 2009.  WT/DS371/R 
 Page 45 
 
 
  2. Legal argument  
(a) Standard of review 
4.191  The correct standard of review means that Thai  Customs' determinati ons must be reviewed 
only in the light of the evidence provided by PM Thailand at the time at which Thai Customs made 
the determinations at issue in this review.   
(b) Claims under the Customs Valuation Agreement  
4.192  The Philippines' claims under the Customs Valu ation Agreement can be summarised in two 
simple propositions:  first, Thai Customs should not have inquired into PM Thailand's transaction 
values and, second, when it did, Thai Customs s hould have accepted the transaction values.  Based on 
the evidence and argument now before the Panel, neither of these propositions can be sustained. 
(i) Thai Customs acted consistently with Articl es 1.1 and 1.2(a) of the Customs Valuation 
Agreement in rejecting the transaction value fo r the [[xx.xxx.xx]] entries at issue  
The obligation under Article 1.1 to use the transaction value is dependent on it being 
established that the relationship between bu yer and seller did not influence the price  
4.193  The use of the transaction value is legally depe ndent on the proviso in Article 1.1(d) and the 
second sentence of Article 1.2(a) being satisfied .  Thus, the transaction value shall be accepted only 
"provided the relationship [between buyer a nd seller] did not influence the price".   
Thai Customs acted consistently with Article 1. 2(a) with respect to its "doubts" regarding the 
reliability of the transaction value  
4.194  Paragraph 2 of the Interpretative Note to Article  1.2(a) provides that an examination of the 
circumstances of sale and the reliability of the tran sfer price "will only be required where there are 
doubts about the acceptability of the price".  
The legal standard governing "doubts" 
4.195  The Customs Valuation Agreement does not define  or limit the quality or quantity of "doubts" 
that the customs administration must have in order to initiate an examination of the reliability of the 
transfer price.  The reason why the term "doubts" as used in Article 1.2(a) and its Interpretative Note 
is not qualified by a standard such as "reasonable" is  that the purpose of the "doubts" is, at first, 
simply to initiate an examination of whether the relationship between the buyer and the seller 
influenced the price, as happened in this case.   
4.196  Under the  Decision Regarding Cases Where Customs Administrations Have Reasons to 
Doubt the Truth or Accura cy of the Declared Value  (the "Decision"), the customs administration need 
have "reasonable" doubts only when, under the second sen tence of paragraph 1 of the Decision, "if, 
after receiving further information, or in the absen ce of a response, the customs administration still 
has reasonable doubts about the truth or accuracy of the declared value, it may [reject the transaction 
value]".  Thus, under the Decision, the doubts need only be "reasonable" at the time of a final decision to reject the transaction value.  
PM Thailand did not  provide any evidence to dispel Thai Customs' doubts 
4.197  PM Thailand did not provide any evidence to dispel the doubts generated by the difference of 
over 300 per cent between the c.i.f. prices for PM Th ailand's imports and imports  by another importer. WT/DS371/R 
Page 46  
 
  4.198  It is a fact that anot her importer was bringing Marlboro  cigarettes into Thailand at c.i.f. 
Bangkok prices more than three times PM Thailand's c. i.f. prices.  This objectively-grounded fact 
(Exhibit THA-7) clearly raises a doubt as to whether PM Thailand's c.i.f. prices were affected by the 
relationship between buyer and seller.  
4.199  Merely pointing out that there are some differe nces between the circumstances of sale for two 
different sales that affects price comparability betw een the two does not establish that doubts based on 
a price difference of over 300 per cent are "groundless" .  Any differences in circumstances of sale 
might have accounted for only, for example, half of the price difference between the other importer 
and PM Thailand, which would still leave legitimat e doubts as to whether PM Thailand's price was at 
arm's length.  But PM Thailand provided no information or proof in this regard and, therefore, did not 
dispel the doubts that had arisen or otherwise satisfied the proviso in Article 1.2(a).  
Thai Customs fulfilled the obligation in Article 1.2(a) that the "circumstances surrounding the 
sale shall be examined"  
The nature of the obligation to exam ine the circumstances surrounding the sale 
4.200  The customs administration's examination of th e circumstances of sale must be based on a 
claim and allegations by the importer.  It is for the importer, not the customs administration, to decide 
by what means it wishes to establish that the relations hip did not influence the price.  This is because 
the importer, not the customs administration, possesses the necessary information and evidence to 
enable the importer to select its preferred method of  establishing that the relationship did not influence 
the price.  Once the importer makes its claim, the importer bears the burden of proof with respect to 
evidence relating to that claim.  
4.201  If the burden were on the customs administration to establish that the relationship influenced 
the price, the customs administration w ould have to collect evidence regarding all of the methods 
contemplated in Article 1.2(a) and the Interpretativ e Notes.  This would be a completely unworkable 
burden to place on the customs administration and w ould have repercussions for Members' practices 
far beyond this case.  
How Thai Customs examined the circ umstances surrounding the sales at issue 
4.202  In the circumstances summarised  below, Thai Customs fully complied with its obligations 
under Article 1.2(a) of the Customs Valuation Agr eement in initiating and conducting its examination 
of the circumstances of sale and, ultimately, in  rejecting the transaction value for the [[xx.xxx.xx]] 
entries at issue in this case: 
• Thai Customs had doubts regarding the re liability of those doubts and notified 
PM Thailand that additional information was required. 
• Between August 2006 and mid-February 20 07, PM Thailand provided no new or 
additional information to establish that th e relationship did not influence the price 
other than to rely on its past [[xx.xxx.xx]] filings. 
• The [[xx.xxx.xx]] filings did not provide a deductive value calculation or provide any 
supporting evidence for the GAQ price and othe r adjustments referred to therein. 
• To the extent that the [[xx.xxx.xx]] filings advanced a "cost plus" approach, they did 
not provide information regarding the seller's (i.e., PM Philippines') cost plus profits.  WT/DS371/R 
 Page 47 
 
 
  • Information about the importer's profits on the resale does not establish the reliability 
of the transfer price between exporter and related importer (though it may be one 
element in the deductive value calculation). 
• When Thai Customs wrote to PM Thailand on 19 December 2006, it had no evidence 
before it to establish the reliability of the transfer price. 
• After PM Thailand indicated in its letter  of 5 February 2007 that it wanted the 
valuation expedited, Thai Customs conti nued its examination of the circumstances 
surrounding these sales.   
• Thai Customs sought and received inform ation from PM Thailand in extensive 
correspondence, phone calls, and meetings between 16 February and 6 March 2007. 
• This information was used to determine de ductive values for the entries at issue that 
were ultimately used to arrive at  the customs value for these entries. 
Thai Customs properly communicated the "grounds for considering that the relationship 
influenced the price"  
4.203  Article 1.2(a) of the Customs Valuation Agre ement means that the customs administration 
must give the importer preliminary notice if it cons iders that the proviso in the second sentence of 
Article 1.2(a) has not been met.  This notice must be provided in writing and an opportunity to respond must be given before fina l valuation takes place.  Thai Customs provided this written notice 
when it informed PM Thailand on 19 December 2006 th at it had "yet to prove" that the relationship 
did not influence the price.  
4.204  Thailand disagrees with the Philippines' interpreta tion that the term "grounds" is limited to the 
factual basis on which the customs administration acts.  It would make no sense that the customs 
administration would not be required to inform the importer how that factual basis provided a 
sufficient legal basis for the customs administration to  act.  Furthermore, contrary to the Philippines' 
argument, the absence of evidence also constitutes a factual basis on which the customs 
administration may act.  A notification that the fa ctual record does not contain sufficient evidence 
clearly communicates information regarding the "i nformation or otherwise" on which the customs 
administration is considering rejecting the transaction value.  
4.205  PM Thailand's response on 5 February 2007 to the notification by Thai Customs on 19 
December 2006 makes clear that the importer wa s fully informed and that its due process 
requirements were fully respected.   
It was not established that "the relationship did not influence the price"
 
4.206  PM Thailand failed to discharge its burden to est ablish that the relationship between itself and 
PM Philippines did not influence the transfer price between the two.  In these circumstances, Thai 
Customs properly concluded that the proviso in the second sentence of Article 1.2(a) had not been met 
and PM Thailand had failed to establish that its rela tionship with PM Philippines did not influence the 
price.  Accordingly, Thai Customs' decision to reje ct the transaction value was fully consistent with 
the obligations in Articles 1.1 and 1.2 of the Customs Valuation Agreement.  
(ii) Thai Customs acted consistently with Artic les 5 and 7 of the Customs Valuation Agreement 
4.207  For the reasons explained in paragraphs 75-86 of Thailand's answers to the Panel's questions, 
Thailand's calculation of the deductive value was fu lly consistent with Article 5 of the Customs WT/DS371/R 
Page 48  
 
  Valuation Agreement.  As a deductive value calcula tion, its WTO-consistenc y should be determined 
by reference to Article 5 rather than Artic le 7 of the Customs Valuation Agreement.   
(iii) Thai Customs acted consistently with Artic le 16 in providing an explanation of how the 
customs value was determined  
4.208  As Thailand explained in paragr aphs 172-178 of its first submission, Thai Customs provided 
a written explanation in its letter of 12 April 2007 th at the customs value had been determined "using 
the deductive method".  In addition, Thailand ex plained that PM Thailand was provided with a 
detailed explanation of why and how the deductive value was used at the 6 March 2007 meeting (see 
Exhibits THA-64 and THA-65).   
4.209  Anti-dumping/CVD investigations are far more  complex investigations than a customs 
valuation determination and it is to be expected that the standards for explaining anti-dumping or 
CVD determinations would be much higher than th e standards governing explanations of customs 
valuation determinations.   
(iv) The release of guarantees for the [[xx.xxx.xx]] entries 
4.210  Given that the Philippines has not made a claim with respect to the release of these 
guarantees, and that PM Thailand has never raised th is issue with Thai Cust oms in an effort to 
reconcile the figures in question, there is no reaso n why the Panel should dedicate its time to this 
issue.  Once PM Thailand is sure of its figures,  Thai Customs would be happy to discuss with the 
company any outstanding issues it may have  regarding the release of guarantees.   
(c) Claims under Article III of the GATT 1994  
(i) Thailand acted consistently with  Article III:2 of the GATT 1994 in using the MRSPs as the tax 
base for its VAT system  
Like product issues
 
4.211  The Philippines must establish th at every possible pair of imported and domestic cigarette 
brands is "perfectly substitutable".  The Phili ppines has not provided evidence establishing that 
consumers perceive all of these pairs of brands to be "perf ect substitutes".  Th e evidence regarding 
consumer switching behaviour in the study subm itted as Exhibit PHL-111a does not cover all brands 
and is of limited value.  Moreover, significant pri ce differences between par ticular pairs of imported 
and domestic brands undermine any conclusion that th ese pairs of brands are perfect substitutes.  The 
evidence submitted in Exhibits PHL-148 and PH L-149 is of limited value because it does not 
establish relevant elasticities of demand and subst itution for particular brands of imported and 
domestic cigarettes.   
4.212  In any event, the key issue in this case is  not whether particular cigarettes are fully 
substitutable, but whether Thailand's system of de termining the tax base for VAT is applied in a 
manner that discriminates against imported cigarettes within the meaning of Article III:2. 
The use of the MRSPs as the tax base for cigarettes does not result in imported cigarettes 
being taxed "in excess" of domestic cigarettes  
4.213  Article III:2 does not require that all imported cigarettes must bear the same absolute tax 
amount  as all domestic cigarettes.  This w ould imply that both price-based and ad valorem tax 
systems would be per se inconsistent with Article III:2 of the GATT 1994.  To the contrary, Members 
are free to use both fixed price systems and ad valorem systems of internal taxation.  Moreover, under  WT/DS371/R 
 Page 49 
 
 
  Article III:2 a comparison between the fixed price and the actual retail price  cannot be used to 
establish discrimination.  If a difference between the fixed price and the retail price was sufficient to 
establish discrimination, Members would, in effect, be compelled to use the actual retail price as the tax base. 
4.214  The proper test of whether Thailand's use of the MRSPs as the tax base for its VAT system is 
inconsistent with Article III:2 is whether Thai Excise determines the MRSPs in the same manner for 
both domestic and imported cigarettes.  As Thailand has previously explained, the same methodology 
is used to establish MRSPs for both domestic and imported cigarettes.  The Philippines has yet to 
make a prima facie case that Thai Excise establishes the MRSPs differently for imported and domestic cigarettes or applies the methodology described above  in a manner that affords protection to domestic 
cigarettes.   
4.215  The evidence before the Panel shows that the starting point for the determination of the 
MRSP is the manufacturer's recommended retail pri ce and that Thai Excise does not independently 
determine the "marketing cost" element of the MR SP.  It also shows that exactly the same 
methodology is used for domestic and imported cigare ttes.  Furthermore, the fact that PM Thailand 
and other importers were able to request and receive a change in the MRSPs for their brands shows 
that there is no basis for the Philippines to argue th at there has "never been a transparent way for an 
importer to provide information for the authority' s decision-making process" or that PM Thailand was 
not "encouraged ... to provide input into the MRSP determination process".  Thailand notes that the 
methodology used to arrive at the MRSPs in the 2006-2007 notices was very different from the 
methodology used before and after that period, on wh ich the Panel must rule.  Accordingly, Thailand 
urges the Panel to take care to ensure that its ru lings with respect to the MRSP methodology before it 
are based on evidence relating to the methodology applied during the time of establishment of the 
Panel and not on evidence relating to a different MRSP methodology that is not within the Panel's 
terms of reference. 
(ii) Thailand acted consistently with  Article III:2 of the GATT 1994 wi th respect to the taxation of 
resales of cigarettes  
4.216  As Thailand explained in paragr aphs 241-244 of its first submission, the amount of VAT paid 
by the ultimate consumer on a pack of imported ciga rettes and a pack of domestic cigarettes is exactly 
the same and is not affected by any difference in the VAT reporting requirements for imported and domestic cigarettes.   
4.217  The Philippines now argues that the issue is  whether the tax burden "imposed on like 
imported products exceeds the tax bur den imposed on like domestic products at any point in the 
distribution chain ".  There is no support for this interpreta tion in the text of Article III:2.  The 
emphasis in Article III:2 is on the taxes imposed on  the product, without any reference to different 
points in the distribution chain.  The context provi ded by Article II:2(a) and Ad Article III of the 
GATT 1994 also supports this reading of Article III:2.  Moreover, as a practical matter, the 
Philippines' argument would mean that all VAT systems are WTO-inconsistent because it is 
inevitable that under VAT systems the tax burden w ill vary at different points in the distribution 
chain, so that at some point the imported produc t may pay more tax than the domestic product (or vice 
versa).   
(iii) Thailand acted consistently with Article III:4 of the GATT 1994 with respect to the 
administrative requirements for its VAT system 
4.218  While the Philippines argues that the different  administrative requirements for resales of 
imported cigarettes imposed additional regulatory burdens on these sales that are not imposed on 
resales of domestic cigarettes, the Philippines ignor es that (i) wholesalers and retailers of domestic WT/DS371/R 
Page 50  
 
  cigarettes that are VAT-registrants are subject to exactly the same regulatory requirements as 
wholesalers and retailers of imported cigarettes that are VAT-registrants;  (ii) any wholesalers and retailers of imported cigarettes that are not VAT-registrants are subject to the same regulatory burdens 
as wholesalers and retailers of domestic cigarettes that are not VAT-registrants;  and (iii) for every 
regulatory burden imposed on VAT-registered wholesal ers and retailers of imported cigarettes, there 
is an equivalent regulatory bur den imposed on any wholesalers and retailers of domestic cigarettes 
that are not VAT-registrants.   
4.219  There is no compelling evidence before the Panel indicating that these different 
administrative requirements create significant ince ntives for retailers or wholesalers to stock only 
domestic cigarettes.  The only evidence submitted by the Philippines is an opinion by a tax lawyer, 
Mr. Veraphong, that the reporting and book-keeping re quirements for resellers of imported cigarettes 
are "more onerous"
76 than those imposed on resellers of domestic cigarettes.  Much of this analysis 
amounts to a restatement of the differences in the reporting requirements imposed on VAT-registrants and non-VAT registrants without any further expl anation of how these differences give rise to 
incentives not to stock imported cigarettes.  Moreove r, the analysis relies on alleged differences in 
penalties for non-compliance with applicable reporting requirements.
77  Thailand does not accept that 
Mr. Veraphong's analysis of penalties is complete or accurate.  More importantly, Thailand does not 
understand the Philippines to have advanced a claim th at any differences in the penalties applicable to 
wholesalers and retailers that are VAT-registrants unde r Thai law when compared to those applicable 
wholesalers and retailers that are not VAT-registrants would give rise to a violation of Article III:4 of 
the GATT 1994.   
4.220  In addition, Thailand contends that to the exte nt that the regulatory requirements for imported 
cigarettes constitute less favourable treatment, those requirements are justified under Article XX(d) of 
the GATT 1994.  As Thailand explained in more de tail in its answers to the Panel's questions, 
Thailand's VAT system, including the system of monthl y input/output tax reporting, is similar to that 
used by many other WTO Members.78  Accordingly, these reporting requirements are necessary, as 
that term has been interpreted by the Appellate Body in Brazil – Retreaded Tyres , for the enforcement 
of Thailand's VAT system.   
(d) Claims under Article X of the GATT 1994 
(i) Thailand acted consistently w ith Article X:3 with respect to the composition of the TTM 
Board 
4.221  The issue before this Panel is whether dual roles of governmental officials that create 
potential conflicts of interest constitute in and of themselves "unreasonable" or "partial" 
administration within the meaning of Article X:3(a) of the GATT 1994. 
4.222  As Thailand has explained79, situations of dual roles and potential conflicts of interest are not 
in and of themselves  sufficient to demonstrate inconsistenc y with Article X:3(a).  Jurisprudence 
confirms that a complainant must demonstrate a number of additional  elements for a violation of 
Article X:3(a), including:  (i) qualitative evidence of  particular unreasonable or impartial acts by the 
relevant public officials;80 (ii) evidence that there are inade quate safeguards to ensure against 
unreasonable or impartial administration by those officials;81 and (iii) evidence that the dual role of 
                                                      
76 See Veraphong Affidavit, Exhibit PHL-182, paras. 15.1-15.2. 
77 See Veraphong Affidavit, Exhibit PHL-182, para. 15.2, items 1, 2, and 5. 
78 Thailand's answers to the Panel's questions, paras. 146-153. 
79 Thailand's answers to the Panel's questions, paras. 202-207. 
80 Appellate Body Report, US – Oil Country Tubular Goods Sunset Reviews , para. 219. 
81 Panel Report, Argentina – Hides and Leather , paras. 11.99 and 11.86.  WT/DS371/R 
 Page 51 
 
 
  the government officials is irrelevant for the administration of the legislation at issue.82 There are 
sound policy reasons for these additional elements.  To prohibit all potential administrative actions 
flowing from officials in such circumstance s would reverse the presumption of good faith 
implementation of the discretion vested in the executive branches of government when implementing 
WTO obligations.  Furthermore, if the mere fact of  public officials having dual roles or supervising 
authority over competing interests was sufficient to establish a violation of Article X:3(a), the 
regulatory capacity of governments would be severely curtailed.   
4.223  In this case, the Philippines has not met its bur den of proving these three additional elements.  
In fact, the Philippines has not provided any so lid evidence of a pattern of TTM Directors 
simultaneously making customs or fiscal dete rminations regarding imported cigarettes. 
The Philippines has failed to show unreasonable or partial acts  
4.224  The Philippines concedes that it is not able to pr ovide evidence that "specific decisions taken 
by TTM Directors in their capacity as government of ficials have actually been motivated by bias".83 
The Philippines merely re-submits its evidence that some TTM Directors have simultaneously been employees of the Ministry of Finance.
84 This evidence fails to satisfy the requirement of qualitative 
evidence of particular unreasonable or impartia l acts by the relevant public officials. 
The Philippines has failed to dem onstrate inadequate safeguards  
4.225  Thailand submits that any risk of partial administration of customs and tax laws by 
government officials is mitigated by significant statutory safeguards governing the conduct of Thailand's public officials (e.g., Thai Civil Service Act and Thai Criminal Code).  Where government 
officials are involved in the wrongful, dishonest, or inadequate exercise of their functions they shall 
be subject to imprisonment (of one to ten years)  and/or fines (of between two thousand and twenty 
thousand baht).
85  The Philippines argues that paragraph 2.6.2 of the Ethical and Moral Guidebook for 
Executives and Employees of Thailand Tobacco Monopoly would take precedence over these statutory 
civil and criminal obligations and sanctions.86  Thailand disputes the interpretation of the guidebook 
given by the Philippines, which, furthermore was issued by the Human Resources Department of 
TTM and has no legal status.   
The Philippines has failed to demonstrate that  the presence of government officials on the 
board of TTM is irrelevant  
4.226  The involvement of government officials in the administration of customs valuation and tax 
laws is relevant .  There are also legitimate reasons why individuals from these departments might be 
appointed to the TTM Board to ensure that TTM itself  complies efficiently with Thai tax and customs 
laws. 
                                                      
82 Panel Report, Argentina – Hides and Leather , para. 11.86. 
83 Philippines' answers to the Panel's questions,  paras. 460, 462 and 463. 
84 Philippines' answers to the Panel's questions, para. 460. 
85 Thailand's first written submission, para. 274. 
86 Philippines' answers to the Pane l's questions, paras. 437-439. WT/DS371/R 
Page 52  
 
  (ii) Thailand acted consistently with  Articles X:3(a) and X:3(b) with respect to the conduct of 
appeals of customs valuation determinations  
Thailand's conduct of these appeals is "reasonable" within the meaning of Article X:3(a)
 
4.227  The parties agree that the determination of what is "reasonable" requires an analysis of all 
relevant circumstances surrounding the administra tion at issue, including "whether the undecided 
appeals can be distinguished from those already decided".87 
4.228  Thailand considers that there are several distinguishing fact ors between the resolved and 
unresolved appeals.  First, the [[xx.xxx.xx]] appeals that remain under consideration relate to entries 
of Marlboro  cigarettes landed in the year 2002.  Thus , all [[xx.xxx.xx]] appeals relating to entries 
landed in the years 2000 and 2001 have been addressed .  Second, PM Thailand requested, by letter 
dated 15 December 2005, that the BoA's determin ations for the [[xx.xxx.xx]] ongoing appeals be 
based on revised profit and general expense inputs resulting in information exchange between the 
BoA and PM Thailand through to mid-2007.  Third, PM Thailand subsequently requested, in July 2007, that its appeals lodged in  2006 and 2007 be prioritised ove r the [[xx.xxx.xx]] ongoing appeals.
88 
These extenuating circumstances explain why these appeals have not yet been completed. 
Article X:3(b) does not impose obligations rega rding the completion of particular appeals  
4.229  The parties disagree on the scope of the legal ob ligation in Article X:3( b).  Thailand submits 
that Article X:3(b), unlike Article X:3(a), does not set standards governing individual instances of 
review of administrative action.  Instead, Article X:3(b) contains only an obligation to create an 
institutional or procedural framework.  In this  context, Thailand notes that the Philippines has 
presented no evidence of delays in processing appe als other than the [[xx.xxx.xx]] appeals (which 
remain pending due to extenuating circumstances).  In fact, the BoA has ruled on [[xx.xxx.xx]] of the 
[[xx.xxx.xx]] appeals lodged by PM Thailand between 2000 and 2002.   
4.230  Furthermore, the [[xx.xxx.xx]] ongoing appeals do not  fall within the scope of application of 
Article X:3(b) as the BoA is not a tribunal or procedure " independent  of the agencies entrusted with 
administrative enforcement".  Section 112 sexies a nd septies of the Customs Act confirm that the BoA 
includes representatives of and is staffed by the same  administrative agency – Thai Customs – whose 
decisions are the subject of review. 
4.231  Even if Article X:3(b) applied to the BoA, fo r the same reasons explained above with respect 
to the Philippines's claim unde r Article X:3(a), in the particular circumstances of this case, the BoA's 
administration of the [[xx.xxx.xx]] appeals lodged by PM Thailand's for entries landed in 2002 is not 
inconsistent with Article X:3(b).   
(iii) Thailand acted consistently w ith Article X:3(b) with respect to appeals against the imposition 
of guarantees  
4.232  Thailand is not under an obligation to provide for appeals against the imposition of guarantee 
values because a decision by a customs official to re quire a guarantee is not an "administrative action 
relating to customs matters" within the meaning of Article X:3(b) of the GATT 1994.  This is because 
guarantees have only a "provisional legal status " and requiring a guarantee does not constitute 
separate administrative action affecting the rights and obligations of importers.   
                                                      
87 European Communities' third party written submission, para. 62. 
88 Thailand provided a detailed explanation of the ev idence relating to these extenuating circumstances 
in its answers to the Panel's questions, paras. 221-225.  WT/DS371/R 
 Page 53 
 
 
  4.233  Even assuming that Thailand has to provide for the review of decisions requiring guarantees, 
Article X:3(b) neither mandates that this revi ew be instantaneous nor prohibits it from being 
conditioned on the exhaustion of internal procedur es.  Contrary to the Philippines' arguments, 
Article X:3(b) does not contain any language re quiring WTO Members to confer "independent and 
immediate" rights to challenge all administrative ac tion relating to customs matters.  The Philippines 
appears to accept that, under Thai law, importers can seek independent judicial review of orders 
requiring guarantees by the Tax Court after exhausting internal procedur es.  Thus, Thailand complies 
with the requirements of Article X:3(b).   
(iv) Thailand acted consistently with  Article X:3(a) in its adminis tration of the VAT system and its 
excise, television and health taxes 
Generally-applicable criteria to calculate MRSPs  
4.234  Contrary, to the Philippines' assertion, Article  X:3(a) does not require Members to adopt 
generally applicable rules that attempt to address ev ery possible contingency in advance;  instead they 
are free to rely on discretion to administer their laws  and regulations.  It is perfectly "reasonable" for 
Members to administer their laws through the conf erral of discretion on administrative agencies.   
4.235  In any case, even assuming that Article X:3(a) contains a requirement to administer laws and 
regulations using "generally applicable criteria" , Thailand has complied with this requirement.  
MRSPs are determined according to generally-applicable criteria.   
Use of guarantee value data to calculate MRSPs for Marlboro  and L&M   
4.236  Thailand responds to the three claims advanced by the Philippines as follows: 
4.237  The use of different data sources to calculate the c.i.f. price component of MRSPs does not 
amount to non-uniform administration because the difference can  be explained by reference to 
differences in the circumstances of the case.  In September 2006 Customs had legitimate doubts about 
the reliability of PM Thailand's declared values and Th ai Excise had to resort to estimates;  by August 
2008 Customs was satisfied that PM Thailand's declar ed values were reliable and, at that point in 
time, Thai Excise utilised the declared/assessed values.   
4.238  The use of guarantee values in September 2006 was reasonable given the legitimate doubts 
expressed by Thai Customs regarding the reliability of PM Thailand's declared  values and the absence 
of any credible alternative.  The fact that th e guarantee values were based on a BoA ruling and were 
not much higher than the declared or eventually asses sed values also indicates that the actions of Thai 
Customs were not unreasonable.   
4.239  The use of estimates was impartial because th e Philippines has not established that Thai 
Excise would not use estimates to calculate the ex  factory price component of MRSPs for domestic 
brands if there were any doubts about th e reliability of figures furnished by TTM. 
Tax bases used to assess excise, television and health taxes  
4.240  Thailand contests the Philippines' factual asserti ons that excise, television and health taxes 
have been or will be collected by Thai official s in contravention of existing Thai laws.  The 
Philippines has not submitted any evidence in support of its assertions that Thai Excise has used 
"unlawful" tax bases to assess excise, television and health taxes.  The Philippines bears the burden of 
proof on this matter and has failed to discharge its bur den.  Accordingly, the Ph ilippines' claims must 
be rejected.   WT/DS371/R 
Page 54  
 
  4.241  Furthermore, even assuming that Thai official s somehow act inconsistently with Thai law 
when they levy excise, television and health taxes, it  does not follow that this gives rise to a breach of 
Article X:3(a) of the GATT 1994.  Article X:3(a) cannot be used to convert every failure by domestic authorities to comply with domestic laws into breach es of international law.  Article X:3(a) does not 
impose an overarching requirement on WTO Members to ensure that their administrative actions 
remain based on  applicable domestic laws. 
(v) Thailand acted consistently with  Article X:1 with respect to the publication of rules and data 
relating to VAT, ex factory prices and the release of guarantees 
The overall MRSP calculation methodology and data used to calculate MRSPs
 
4.242  From August 2007 onwards, Thailand has published the overall MRSP calculation 
methodology in the preamble to all MRSP notices issu ed by the Excise Depart ment.  This description 
enables governments and traders to become acquainte d with the methodology used by Thai Excise.  
Contrary to the Philippines' assertions, this descrip tion adequately explains the manner in which the 
VAT amount and the marketing margin are calculated – at least sufficiently clearly that PM Thailand 
and other importers are regularly able to request changes in their MRSPs.   
4.243  Thailand is not under an obligation to publish data utilised to calculate MRSPs because this 
material is not a law, regulation, judicial deci sion or administrative ruling of general application 
within the meaning of Article X:1 of the GATT 1994 , or, alternatively this material is not an 
"essential element" of any relevant law, regulatio n, judicial decision or administrative ruling of 
general application.  Concerning the data used in MRSP calculations for imported cigarettes , Thailand 
cannot publish this material because publication would result in the disclosure of confidential 
information.   
Ex-factory price calculation methodology and data used to calculate ex factory prices for 
TTM Brands  
4.244  Ex-factory price determinations are not "administrative rulings of general application".  The 
relevant ex factory price determination applies to a single  entity – TTM – and is used to set tax bases 
for excise, health and television taxes paid by this single  entity.  Accordingly, the ex factory price 
calculation methodology is not a measure of general a pplication.  In the even t that the Panel accepts 
that ex factory prices have general application, then publication of data used in arriving at these prices 
is not required because (i) this data falls outside the scope of Article X:1 of the GATT 1994, and (ii) 
publication of this data would result in the disclosure of confidential information.   
Rules relating to the release of guarantees  
4.245  The starting point of the analysis under Article X:1 must be the identification by the 
complainant of an existing rule of general application that the respondent  has failed to publish.  In this 
case, the Philippines has failed to identify any existing instrument or set of instruments relating to the 
release of guarantees made effective by Tha iland that Thailand has failed to publish.   
(e) Issues relating to the Panel's terms of reference 
(i) The Philippines' claim under the Customs Val uation Agreement regarding a "general rule or 
methodology" 
4.246  In its response to the Panel's question 1, the Ph ilippines attempts to resu scitate its claim that 
Thai Customs had a "general rule and/or methodolog y" regarding the rejecting of transaction values 
for PM Thailand's imports.  The Panel should not ru le on this claim because (i) the Philippines has  WT/DS371/R 
 Page 55 
 
 
  failed to establish that a "general rule and/or me thodology" existed as that term is understood in WTO 
jurisprudence;  (ii) even if the general rule alleged by the Philippines ever existed, it is clear that it had 
expired, at the latest, in September 2007 – long befo re the establishment of the Panel;  and (iii) there 
is no need for the Panel to rule on this claim in order to resolve the dispute before it.   
(ii) The Philippines' claims regarding expired measures and completed acts 
4.247  Thailand urges the Panel to consider carefully (i) whether each of the Philippines' claims 
identified in Exhibit THA-36 are properly within its te rms of reference such that the Panel can rule on 
those claims;  (ii) whether and to what extent it is appropriate or useful for the Panel to rule on claims 
that relate either to expired measures or completed acts;  and (iii) whether the Panel is permitted under 
Article 19.1 of the DSU to make recommendations with respect to such claims.   
(iii) The Philippines' claims under Article X:3(a) regarding Thailand's admin istration of its VAT 
system and the excise, television and health taxes   
4.248  The Philippines makes two separate request s for findings and seven claims under 
Article X:3(a) of the GATT 1994 regarding the manner in which Thailand administers its VAT 
regime and its excise, television and health tax es.  None of these claims is described in the 
Philippines' panel request in a manner that suffices to  present the relevant problems clearly because (i) 
the Philippines fails to "plainly connect" the absence of generally applicable criteria to calculate 
MRSPs, the use of guarantee values to calculate MR SPs, or the utilisation of unlawful tax bases to 
assess excise, television and health taxes with Th ailand's obligations under Article X:3(a) of the 
GATT 1994, and (ii) the panel request does not cont ain any reference to claims that Thailand 
administers the VAT measures and the excise, television and health tax measures in a non-uniform  
manner. 
G. EXECUTIVE SUMMARY OF THE ORAL STATEMENT BY THE PHILIPPINES AT THE SECOND 
SUBSTANTIVE MEETING OF THE PANEL  
1. Article X:3(a) claim relating to the role of TTM Directors  
4.249  Thailand violates Article X:3(a) by vesting govern mental authority to apply Thai customs and 
tax measures concerning domestic and imported cigarettes in government officials simultaneously 
serving as TTM Directors, which results in partial and unreasonable administration of these measures.  As government officials, these individuals are ch arged with administering Thai customs and tax 
measures for domestic and imported cigarettes.  As TTM Directors, they have a duty and financial 
incentive – in the form of significant bonuses – to advance TTM's competitive interests.  The act of 
vesting authority to apply Thai customs and tax meas ures in this manner is an act of administration, 
distinct from additional acts such as the adoption of discriminatory MRSPs.  TTM Directors are not 
subject to an effective safeguard, explicitly provi ded in the Thai Civil Service Act, prohibiting 
government officials from being a manager or managi ng director in a company.  Thailand's other 
safeguards have proven ineffective in practice an d have not prevented the disclosure of highly 
sensitive BCI  to TTM Directors and acts of  partial and unreasonable administration. 
2. Thailand violated the Customs Valuation Agreement in rejecting PM Thailand's 
declared transaction values and in determining higher deductive values 
(a) Articles 1.1 and 1.2: general rule re quiring rejection of transaction value 
4.250  Thailand has not rebutted the Philippines' prim a facie claim regarding the existence of a 
general rule requiring the rejection of transaction valu e.  In addition to five pieces of evidence already 
submitted, the Philippines can now also rely on a series of memoranda, submitted by Thailand in WT/DS371/R 
Page 56  
 
  response to the Panel's Article 13 DSU request, c onfirming that, in August 2006, Thailand adopted a 
general rule providing for the rejection of transac tion value without examination of the circumstances 
of sale, and for the use of a deductive value as the minimum or reference price irrespective of 
particular circumstances.  This general rule applie d to importers of cigarette s and alcoholic beverages, 
and was not company-specific.  Even if the rule is company-specific, a panel has jurisdiction to 
consider a rule or norm prescribing that a particul ar company will be subjected to specific regulatory 
treatment on a general and prospective basis. 
4.251  The general rule falls within the Panel's terms of reference and may be the subject of findings 
and recommendations.  It has not expired and c ontinues to have effects through the [[xx.xxx.xx]] 
valuation decisions, taken pursuant to the rule, that  are pending before the BoA.  Even if the Panel 
were to find that the general rule has fully expired,  it may make findings regarding expired measures.   
(b) Articles 1.1 and 1.2: improper rejection of PM Thailand's declared transaction values in 
[[xx.xxx.xx]] entries 
4.252  Thailand violated Articles 1.1 and 1.2 by rej ecting PM Thailand's declared transaction values 
in [[xx.xxx.xx]] transactions, without (1) examining the circumstances of sale, and (2) valid grounds, 
other than the relationship between the buyer and seller.   
4.253  The Philippines has advanced five pieces of ev idence, showing that no examination of the 
circumstances of sale occurred and that Thailand di d not examine the relevant evidence, such as 
deductive calculations, submitted by PM Thailand.   Thailand has responded with contradictory ex post  
reasons for why PM Thailand's evidence was inade quate; it has yet to provide evidence showing that 
Thai Customs ever examined PM Thailand's evid ence.  In fact, the minutes of the 6 March 2007 
meeting expressly state that Thai Customs did not ex amine the circumstances of sale.  Thai Customs' 
explanation of its determination, in the 12 April 20 07 letter, also does not reveal an examination of 
PM Thailand's evidence.  Thailand now argues, ex post , that it did not use deductive testing in the 
relevant period.  However, the evidence before the Panel shows that Thai Customs used deductive 
values as minimum test prices for the 2006 and 2007 entries at issue; when transaction value was 
below the deductive test value, it was rejected w ithout a proper examination of the circumstances of 
sale.  Thai Customs also failed to examine PM Thailand's gross margin ev idence.  This evidence 
allowed Thai Customs to compare the gross margin s earned by PM Thailand with the gross margins 
of similarly-situated distributors in transactions with unrelated suppliers.  Thailand has advanced contradictory reasons for not addressing that eviden ce.  At the relevant time, however, Thai Customs 
never communicated that its grounds for doubting th e transaction value included concerns over the 
gross margin data for unrelated distributors.  Thailand also argues, ex post , that at that time Thai 
Customs was only required to examine "new" eviden ce, and not other evidence, such as the gross 
margin evidence that PM Thailand previously submitted, and resubmitted after 4 August 2006.  
However, an authority must exam ine any evidence, unless it has previ ously rejected it.  Moreover, 
alleged and unspecified telephone conversations a nd meetings, without a documentary record, are 
insufficient, under the Customs Valu ation Agreement, to establish that  the circumstances of sale were 
examined. 
4.254  Thailand also violated Articles 1.1 and 1.2 by failing to provide valid grounds for rejecting 
transaction value.  With respect to  the first fact mentioned in the letter of 12 April 2007, Thailand has 
expressly stated in these proceedings that Thai Customs did not rely on a comparison between [[xx.xxx.xx]] (hereafter: "Importer A") prices and PM Thailand's prices.
89  At the relevant time, 
PM Thailand explained why these prices were inco mparable, and Thai Customs did not ask it to 
account further for the differences between these incomparable prices.   With respect to the second 
fact, also mentioned in the 12 April letter, the Philippines submits that a WTO Member cannot evade 
                                                      
89 Thailand's first written submission, para. 165.  WT/DS371/R 
 Page 57 
 
 
  its primary valuation obligation with a bald statemen t that the burden of proof was not met, without 
also explaining why the evid ence submitted was deficient. 
(c) Article 1.2(a): communication of "ground s" before rejecting transaction value 
4.255  Thailand violated Article 1.2(a) by failing to  communicate grounds for considering that the 
relationship influenced the price before rejecting transaction value.  A communication of solely the 
legal conclusion that PM Thailand "had ‘yet to prove ' that the relationship did not influence the price" 
is insufficient to communicate the factual "grounds " for the authority's conclusion, and deprives the 
importer of a "reasonable opportunity to respond" to those "grounds". 
(d) Article 16: adequate explanation of how customs value was determined 
4.256  Thailand violated Article 16 by failing to provi de PM Thailand with a written and sufficiently 
reasoned explanation, enabling the importer to understand how and why the authority rejected 
transaction value and determined the assessed custom s value.  Neither the 12 April letter nor the 
minutes of the 6 March meeting provide an adequate  explanation of Thai Customs' determination 
because they rely on an improper comparison with  Importer A's prices (upon which Thailand alleges 
Thai Customs did not rely) and a bald, unsubstantiate d statement that the burden of proof was not met. 
(e) Articles 5 and/or 7: incorrect assessment of deductive value of PM Thailand's [[xx.xxx.xx]] 
transactions 
4.257  Thailand violated Article 5 by determining, fo r impermissible reasons, that it could not value 
PM Thailand's goods using that provision, and/or  Article 7 by incorrectly assessing the deductive 
value of PM Thailand's [[xx.xxx.xx]] entries.  Th ailand now admits that it deducted incorrect amounts 
for excise tax, causing inflated customs value, and VAT for certain entries.  The fact that 
PM Thailand may have benefited from the deduc tion of an incorrect VAT amount does not render 
Thailand's actions WTO-consistent. 
(f) Article 10: disclosure of business confidential data 
4.258  Thailand violated Article 10 by disclosing BCI.  Thailand accepts that c.i.f. prices for 
imported cigarettes are BCI, and that their disclos ure would prejudice legitimate commercial interest 
of importers of cigarettes. 
3. Thailand violates Article X:3(b) of the GATT 1994 by failing to provide a right to 
challenge guarantees 
4.259  Thailand violates Article X:3(b) by failing to  provide an unconditional right to appeal a 
guarantee order, independently from the final notice of assessment.  A guarantee order is a complete 
and final act that is distinct from the final assess ment, and is administrative action in the sense of 
Article X:3(b).  Making the review of a guarantee conditional on the existence of final assessment of 
customs value risks depriving importers of any re view of a guarantee, inflicting on them immediate 
financial harm.  An unconditional right to review of a guarantee is also needed in cases where the 
guarantee excludes market access entirely, in whic h case there is no assessed customs value.  
4. GATT 1994 claims pertaining to VAT 
(a) Article X:1: publication of methodology and data used to determine MRSPs 
4.260  Thailand violates Article X:1 by failing to pub lish the overall methodology used to establish 
and revise MRSPs.  Contrary to Thailand's ar gument, individual MRSP notices do not provide WT/DS371/R 
Page 58  
 
  adequate publication of the MRSP methodology, no r do they explain the methodology that Thailand 
described before this Panel.  PM Thailand complain ed about this lack of transparency in its ongoing 
internal appeals against three MRSP notices.  W ith respect to the December 2005 MRSP, Thailand 
now argues that the "marketing costs", one of the elem ents in the calculation, are not "calculated" but 
instead "derived" from the latest MRSP proposed by the importer.  The available evidence and 
calculations relating to the December 2005 marketing costs, which were applied again in the 2008 and 
2009 MRSPs, contradict Thailand's explanation.  In fact, Thailand's contradictory explanations 
regarding the December 2005 MRSPs serve to emphasi ze the urgent need for published rules.   
4.261  Thailand also violates Article X:1 by failing to publish data, in indexed format where needed, 
used to calculate MRSPs.  Timely publication of  essential data underlying the MRSPs would prevent 
errors from infecting the tax base, allow trad ers and foreign governments to review MRSP 
calculations, and ensure that calculation disputes can be addressed immediately at the domestic level.  
The repeated errors in the calculations submitted by  Thailand to the Panel demonstrate the need for 
publication of the data underlying the MRSPs. 
(b) Article III:2, first sentence: excess taxation of imported cigarettes, as a result of the MRSP 
4.262  The MRSP Notices of 7 December 2005, 18 September 2006, 30 March 2007, 29 August 
2007, and 19 August 2008 fall within the Panel's terms of reference be cause they were identified in 
the Panel Request as "MRSP Notices [in the plural] is sued by the Director-General for Excise" and 
the Philippines indicated that the dispute concer ned MRSP Notices from the past "two and a half 
years".  The earlier MRSP Notices have not ceased to have effects; but, in any event, an expired and 
superseded measure is covered by Ar ticle 6.2 of the DSU, as shown in EC – Bananas III (21.5)  and 
US – Zeroing (Japan) (21.5) .   
4.263  The Philippines has already demonstrated that all domestic and imported cigarettes are like, 
through evidence pertaining to physical characteristi cs, end uses, consumers' tastes and preferences, 
tariff classification, and regulatory treatment.  Thailand has submitted neither argument nor evidence 
disputing the Philippines' assessment.  Thailand' s argument that the Panel must make 1,634 
comparisons between different bra nds of imported and domes tic cigarettes is not supported by the text 
of Article III:2 or the case law.   
4.264  Thailand's objections to the Philippines' ev idence measuring behavioural changes resulting 
from relative price movements are unfounded.  First,  surveys of consumer opinion provide helpful 
evidence of consumers' tastes and preferences, a nd were previously relied on by the Panel in Japan – 
Alcoholic Beverages .  Second, the fact that the evidence does not show calculations for 1,634 separate 
elasticities of substitution and income-compensated cr oss-price elasticities of demand is irrelevant.   
4.265  Thailand imposes VAT on imported cigarettes in excess of VAT imposed on domestic 
cigarettes, because (1) the MRSPs for imported ci garettes are systematically higher than for like 
domestic cigarettes;  and, (2) the MRSPs for impor ted cigarettes are systematically higher than the 
RRSPs for imported cigarettes, whereas the MRSPs for like domestic cigarettes are systematically 
equal to the RRSPs.  A table in each of PM Tha iland's three internal appeals against the 2006-2007 
MRSPs shows that (1) MRSPs for all 13 major impor ted brands were higher than the MRSPs for the 
three major domestic brands, and (2) a sizeable  gap between the MRSP and RRSP exists for only 
imported brands.  The evidence before the Panel s hows that since December 2005, the MRSPs have 
been consistently higher than they would have been  if based on PM Thailand's information, and have 
been consistently higher for imported brands than for like domestic brands, resulting in a gap between 
the retail price and the MRSP for imported, but not domestic, brands.    WT/DS371/R 
 Page 59 
 
 
  (c) Article III:2, first sentence: de jure  exemption of resales of domestic cigarettes from VAT 
4.266  Thailand also violates Article III:2, first sentence, by de jure  exempting resales of domestic 
cigarettes from VAT while subjecting resales of imported cigarettes to VAT and a non-automatic, 
conditional tax credit.  Thailand applies different VAT systems to domestic and imported cigarettes.  
It applies a single stage VAT system to domestic cigarettes, involving a de jure  VAT exemption of 
resales of domestic cigarettes.  In that system, only TTM is VAT-liable, and VAT is due on sales at 
only one stage of the distribution chain.  In cont rast, a multi-stage VAT system applies to resales of 
imported cigarettes, whereby VAT is due at each of  the multiple stages in the distribution chain of 
imported cigarettes. 
4.267  Although Thailand argues that the additional VAT liability can be offset by a tax credit, a 
Member cannot rely on action by a private party to m itigate the effects of a discriminatory tax.  Also, 
the tax credit is subject to conditions, and not  granted automatically as Thailand alleges. 
(d) Article III:4: more onerous VAT administra tive burdens on resales of imported cigarettes 
4.268  Thailand violates Article III:4 by subjecting resales of imported cigarettes to the VAT 
administrative requirements set out in Chapter IV of  the Thai Revenue Code, while exempting resales 
of domestic cigarettes from those requirements.  The Philippines has submitted expert statements 
supporting its claim.  Thailand's argument that resales of domestic cigarettes are, nevertheless, subject to income tax administrative requirements, which it claims are "exactly the same" as the VAT administrative requirements, fails because Thai law also de jure  exempts income earned by resellers 
of TTM cigarettes from income tax.   
(e) Article X:3(a): administration of VAT regime  
4.269  The Panel has jurisdiction to consider the Phili ppines' claim under Article X:3(a) because the 
measures being administered, and the relevant lega l provision, were identified and connected in the 
Panel Request.   
4.270  Thailand violates Article X:3(a) by using a guarantee value as the starting point for 
calculating MRSPs.  Thailand effectively converts a provisional guarantee into a definitive tax base, 
which is neither reasonable nor unif orm administration.  Such administration is also partial because 
Thai law does not authorize DG Excise to issue a provisional ex factory price, whereas an express 
power exists to issue a provisional guarantee value.   The Philippines further objects to a definitive tax 
that is based on the highest estimated guarantee value. 
4.271  Thailand also administers its VAT system in an unreasonable fashion by failing to base its 
MRSP calculations on generally-applicable criteria set  forth in domestic law.  The Philippines has 
shown, and Thailand has admitted, that MRSPs are ca lculated on an ad hoc basis, without criteria set 
forth in law, allowing DG Excise to add, since De cember 2005, marketing costs that have not been 
based on the importer's information.  This is contrary to the objectives underlying Article X:3(a).  Moreover, Thailand's methodology used to calculate  the 2006 marketing costs, which involved giving 
arbitrary and differing weights to different retail pr ices in different countries, is also unreasonable – 
especially in the light of the fact that MRSPs calculated for domestic bra nds during the same period 
were based on TTM's information.  WT/DS371/R 
Page 60  
 
  5. Claims pertaining to the excise, health, and television taxes 
(a) Article X:1: publication of methodology and data  used to determine the ex factory price 
4.272  Thailand violates Article X:1 by failing to publish the methodology and data, indexed if 
necessary, used to determine the ex factory pr ices.  This methodology is a ruling establishing 
"principle or criteria applicable in future cases", affecting an unidentified number of economic 
operators.  First, the ex factory price constitutes the tax base for the excise, health, and television 
taxes, and, therefore, affects the taxes and prices paid by all purchasers of domestic cigarettes.  Second, the ex factory price is the starting poin t for calculating MRSPs for domestic brands, and, 
therefore, applies generally to all of TTM's VAT-liable sales.   
(b) Article X:1: publication of rules concerning the release of guarantees for excise, health, and 
television taxes 
4.273  Thailand violates Article X:1 by failing to pub lish rules concerning the release of guarantees 
collected to cover the potential liab ility for excise, health, and televi sion taxes.  Neither the Customs 
Act, nor statutes imposing these taxes, provide ru les on the release of guarantees for these internal 
taxes.  Thailand's assertion that it has not adopted general rules concerning the release of guarantees is 
contradicted by its description before this Panel of  a "departmental practice" governing the release of 
guarantees, applied "routinely" and "[i]n the overw helming majority of cases … without incident".  
The Philippines urges the Panel to consider the ci rcumstances surrounding the tardy release date of 
the health tax guarantees for [[xx.xxx.xx]] en tries, occurring between 18 August 2006 and 16 
February 2007, in objectively assessing its claim that published rules are needed to protect importers. 
(c) Article X:3(a): administration of the excise, health, and television taxes  
4.274  The Panel has jurisdiction, on the same groun ds as those described in paragraph 21 with 
respect to the Article X:3(a) VAT claim, to cons ider the Philippines' claim that Thailand violates 
Article X:3(a) by failing to administer the excise, health, and television taxes in a uniform, reasonable, 
and impartial manner.  If the assessed customs value is reduced, following a successful appeal against Thai Customs' valuation, Thailand refunds the ex cess customs duties collected but does not refund the 
excess excise, health, and television taxes, which are based on the initial assessed customs value plus 
customs duties.  It is not reasonable to administer these three taxes on the basis of a customs value that, as here, was found to be incorrect by a domestic court or tribunal, and that does not reflect the statutory tax base.  Finally, it is also partial admi nistration to impose tax on the basis of an incorrect 
customs value, because this administration a ffects imported, but not domestic, cigarettes. 
(d) Articles X:3(b) and X:3(a): undue delays in the BoA's decision-making 
4.275  Thailand violates Articles X:3(b) and X:3(a) by failing, after more than seven years, to 
resolve [[xx.xxx.xx]] appeals brought by PM Thailand.  This delay is not jus tified by PM Thailand's 
request that the BoA use a revised P&GE ratio for these [[xx.xxx.xx]] appeals.  The issue of whether 
to adjust the audited P&GE ratio to account for Th ai Customs' higher assessed  customs value has been 
resolved in each of the four previous BoA ruli ngs regarding hundreds of entries from 2000-2002:  the 
BoA decided to adjust the company-wide P&GE ra tio by treating the extra customs duties and taxes 
paid on the uplifted customs value as income.  As  shown in Exhibit PHL-251, for all entries from 
April 2000 to December 2002, the BoA uniformly used  a single, adjusted company-wide P&GE ratio 
of [[xx.xxx.xx]] per cent.  In these circumstances,  PM Thailand's request from June 2004 for an 
adjustment to the audited P&GE involved the BoA pursuing a consistent approach, without requiring 
it to re-start its analysis.  Instead, it is the BoA that indicated, at a meeting on 28 September 2005, that 
it would depart from its previous rulings; any attend ant delay caused by that decision is attributable 
solely to the BoA.  WT/DS371/R 
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  H. EXECUTIVE SUMMARY OF THE ORAL STATEMENT BY THAILAND AT THE SECOND 
SUBSTANTIVE MEETING OF THE PANEL  
1. Claims under the Custom s Valuation Agreement 
4.276  The Panel must not conduct a de novo review: it "cannot conduct a new inquiry into the facts 
to decide for itself what conclusions it would have  reached; nor can it substitute its own judgment for 
that of a domestic authority. ... In a WTO customs valuation dispute, a panel's role is, therefore, not to 
conduct a new examination into the facts, and to decide for itself the proper valuation of the goods."90  
The Appellate Body has said that a panel "has to put itself in the place of [the customs administration] 
at the time that it makes its determination".91  The Philippines has failed to show that any of 
Thailand's arguments before the Panel are ex post in that they differ from the grounds on which Thai 
Customs acted.  The Philippin es seeks to use the concept of ex post justification – which is not found 
in the DSU – to read into th e Customs Valuation Agreement  procedural obligations similar to those in 
the trade remedy agreements, even though there ar e significant differences between the everyday 
process of customs valuation and the extr aordinary remedy of anti-dumping measures.92  Even if the 
Panel agrees that some of Thailand's arguments are ex post,  the Panel would not be able to rule that 
the determination was substantivel y inconsistent with the Customs Valuation Agreement.  The Panel 
could rule only that Thai Customs had failed to provide a reasoned explanation of its actions.   
4.277  Thai Customs had "doubts" within the meaning of Article 1.2(a) and its interpretative notes.93  
There is no requirement that the customs administra tion must either justify its doubts or even notify 
the importer of the nature of the doubts.94  There is no requirement that the subsequent examination of 
the circumstances of sale must focus on the nature  of the original doubts.  PM Thailand did not 
"dispel" the doubts in this case.95 
4.278  The evidence presented by PM Thailand did no t establish that the relationship between PM 
Philippines and PM Thailand did not influence the price between the two.  The importer bears the burden of proof on this.
96  The [[xx.xxx.xx]] evidence addresses only the relationship between 
PM Thailand and its resellers  in Thailand and says nothing about the relationship between 
PM Thailand and its affiliated supplie r, PM Philippines.  The amount of profit made by the importer 
on its resale does not establish that the price at which the importer bought from the related exporter was at arm's length.
97  The fact that the profit ratio falls w ithin certain ranges also does not establish 
that the price paid was at arm's length.  Also, th e source and probative value of the profit ranges relied 
on by PM Thailand are too vague to be reliable.  In March 2007, PM Thailand expressly requested 
Thai Customs to use a "deductive method" "in testing the acceptance of the imported value".98  It was 
therefore reasonable for Thai Customs to use th e deductive method, as proposed by PM Thailand and 
as "akin" to the method in the [[xx.xxx.xx]].   
                                                      
90 Philippines' second written submission, para. 58 (emphasis in original). 
91 Appellate Body Report, US – Cotton Yarn , para. 78. 
92 See Thailand's second written submission, para s. 116-118; Thailand's answers to the Panel's 
questions, paras. 14-16. 
93 See Thailand's first written submission, paras 130-134; Thailand's second written submission, 
paras. 23-35. 
94 See Thailand's first written submission, para. 134; Thailand's second written submission, 
paras. 26-30. 
95 See Thailand's second written submission, paras. 31-35. 
96 See Thailand's first written submission, paras. 135- 139; Thailand's answers to the Panel's questions, 
paras. 4-8; Thailand's second written submission, paras. 39-47.   
97 See Thailand's second written submission, para. 63; Thailand's answers to the Panel's questions, 
para. 44. 
98 PM Thailand letter to Thai Customs, 6 March 2007, Exhibit THA-92, p. 1. WT/DS371/R 
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  4.279  Thai Customs provided the necessary notificatio n of the grounds to consider that the 
relationship between PM Philippines and PM Tha iland influenced the price in its 19 December 2006 
letter.
99  Subsequent correspondence also makes clear th at PM Thailand was fully informed as to the 
basis on which Thai Customs was acting and its op portunities to provide additional information.100 
4.280  Thai Customs' examination of the circumstance s of these sales was also consistent with the 
requirements of the Customs Valuation Agreement.  This examination was a "process of consultation" 
including the following events: (i) Oral communication on 15 February 2007101; (ii) 16 February letter 
from PM Thailand to Thai Customs102; (iii) Request for information preceding 21 February 2007 
letter103; (iv) 21 February 2007 letter from PM Thailand to Thai Customs104; (v) 26 February 2007 
letter from Thai Customs to PM Thailand's accountants105; (vi) 27 February 2007 letter from Thai 
Customs to PM Thailand106; (vii) 2 March 2007 letter from Thai Customs to PM Thailand107; (viii) 
2 March 2007 letter from Thai Customs to PM Thailand's accountants108; (ix) Thai Customs' meeting 
with PM Thailand's accountants, 2 March 2007; (x ) Meeting of 6 March 2007; (xi) 6 March 2007 
letter109; and (xii) 7 March 2007 letter.110 
4.281  The 6 March 2007 meeting was part of the examination of these sales, requested by the 
importer, and part of the process of consultation.  When the Panel "has []put itself in the place of 
[Thai Customs] at the time that it makes its determination"111 it should conclude that Thai Customs 
acted reasonably by valuing PM Thailand's entries using precisely the approach requested by the 
company in its letter of 5 February 2007.  Artic le 6 of the Customs Valuation Agreement provides 
that Members cannot compel persons in other coun tries to provide information for the purposes of 
determining customs value under that Article sugg esting that the customs administration is not 
required to seek information from foreign sources in determining customs value even under other 
methods.  Moreover, when Thai Customs asked PM  Thailand for information regarding the costs 
incurred by PM Philippines, PM Thailand expressly told Thai Customs to use the deductive method 
instead.112   
4.282  Thai Customs fully examined th e circumstances of sale in the light of the evidence presented 
by PM Thailand and found that:  (i) there was no evidence provided regarding the circumstances of 
sale such as how PM Thailand and PM Philippine s negotiated their prices; (ii) the [[xx.xxx.xx]] 
method did not provide the customs administration with any basis to conclude that the price between 
PM Philippines and PM Thailand was at arm's length,  and (iii) even when viewed as "akin" to a 
deductive value, the evidence did not establish that the related transfer price was at arm's length.  
Accordingly, the Panel should find that Thai Cu stoms reasonably determined that the transaction 
value was not acceptable for the reasons stated in Ar ticles 1.1(d) and 1.2(a) of the Customs Valuation 
Agreement. 
                                                      
99 See Thailand's second written submission, para s. 93-107; Thailand's first written submission, 
paras. 167 et seq.  
100 See, e.g., PM Thailand's letter dated 21 February 2007, Exhibit THA-39B. 
101 Exhibit PHL-137B ("we wish to confirm our advice yesterday ..."). 
102 Exhibit PHL-137B. 
103 Exhibit THA-39B ("our company has been informed ... "). 
104 Exhibit THA-39. 
105 Exhibit THA-10. 
106 Exhibit THA-11. 
107 Exhibit THA-12 (Ref. 0519/540). 
108 Exhibit THA-12 (Ref. 0519/539). 
109 Exhibit THA-92. 
110 Exhibit PHL-169. 
111 Appellate Body Report, US – Cotton Yarn , para. 78. 
112 PM Thailand letter to Thai Customs, 6 March 2007, Exhibit THA-92, p. 2.  WT/DS371/R 
 Page 63 
 
 
  4.283  With respect to the deductiv e value calculation, discounts, rebates and similar price 
adjustments are not expenses, but instead form part of the price itself.  Articles 5.1(a)(i)-(iii) of the 
Customs Valuation Agreement do not require disc ounts to be deducted on the basis of "usual" 
amounts.  Deductions are required only for discounts that are tied to the particular unit price for the GAQ sale.  Provincial taxes are deductible " if included in the resale price on which the [deductive 
value] is based ".
113  PM Thailand made no claims for a deduction for transportation costs.  
Accordingly, Thai Customs properly calculated the deductive value.   
4.284  The customs administration is not required to  continue to make repeated requests for 
information as part of its examination of the circumstances of sale.  Even under the Anti-Dumping Agreement , the respondent does not have a right to unlimited opportunities to present additional 
data.
114   
4.285  Thai Customs provided a written explanation of how the customs value was determined in its 
12 April 2007 letter and by means of the minutes of  the 6 March 2007 meeting, which were provided 
to PM Thailand and referred to in at least one  of the notices of assessment for these entries.115  Thai 
Customs acted reasonably and consistently with th e Customs Valuation Agreement in rejecting the 
declared value and using the deductive method to value these entries in accordance with 
Articles 1.1(d) and 1.2 of the Customs Valuation Agreement. 
2. Claims under Article III of the GATT 1994 
(a) Claim under Article III:2 with respect to the setting of MRSPs 
4.286  The key issue is whether the tax base – the MRSPs – is established in the same manner for 
imported and domestic cigarettes.116  The 2006 and 2007 MRSPs were not included in the Philippines' 
panel request and are not within the Panel's terms of reference.117 Instead, this dispute concerns the 
2008 and 2009 MRSP notices and there is no evidence s howing that those MRSPs were established in 
a manner that discriminated against imported cigare ttes.  Rather, the evidence is clear that the 2008 
and 2009 MRSPs were set using the same methodology for both domest ic and imported cigarettes and 
that the importers that actually made company-sp ecific requests for changes in their MRSPs relating 
to those notices were treated in the same manner as domestic producers.   
(b) Claim under Article III:2 regarding VAT on resellers 
4.287  VAT is a tax on consumers, who pay exac tly the same tax on imported and domestic 
cigarettes.118  The key issue is that the total tax on th e imported and domestic product is the same, not 
whether the tax is collected uniformly from differe nt merchants at each stage of the distribution 
process.   
4.288  The Philippines' claim also fails because:  (i) a reseller never pays more VAT on imported 
cigarettes than on domestic cigarettes; (ii) a reselle r always obtains an input tax credit on its purchases 
of cigarettes before it incurs the obligation to pa y output tax on its sales of cigarettes; and (iii), 
resellers can use VAT paid on their purchases of services and equipment to increase their offset 
                                                      
113 Exhibit PHL-206, p. 223, para. 743. 
114 See, e.g., Panel Report, Korea – Certain Paper , para. 7.85. 
115 See Thailand's first written submission, paras.  172-178; Thailand's second written submission, 
paras. 113-119. 
116 See Thailand's second written submission, paras. 134-135. 
117 See Thailand's first written submission, paras. 194-203; Thailand's answers to the Panel's questions, 
paras. 243-245; Thailand's second written submission, paras. 144-145. 
118 See Thailand's second written submissi on, paras. 156-161; Exhibit THA-61. WT/DS371/R 
Page 64  
 
  against VAT output tax payable on sales of imported cigarettes.
119  If the Philippines' argument were 
accepted, Members would not be able to use VAT sy stems based on input/output tax offsets, because 
such systems inevitably result in different taxes bein g collected at different points in the distribution 
process.120   
(c) Claim under Article III:4 regarding VAT forms 
4.289  The requirement to file a Por.Por.30 depends on the entity's total sales, not on whether it sells 
imported or domestic cigarettes.  Thailand att aches as Exhibit THA-89 samples of Por.Por.30s 
submitted by TTM and by a convenience store th at show amounts for both VAT and VAT-exempt 
sales. Furthermore, the Revenue Department's Instruction No. Paw. 86/2542, published in 1999, 
regarding the types of documents required for VAT compliance, makes clear that sales receipts may 
double as tax invoices, thereby avoiding duplication of requirements under the Accounting Acts and 
the Revenue Code (Exhibit THA-90, clause 6). In ac cordance with this instruction, many companies 
produce a single document that serves as a receipt and a tax invoice.  
3. Claims under Article X of the GATT 1994 
(a) Article X:3 claim relating to TTM's Board of Directors 
4.290  A complainant must show actual acts  of partial or unreasonable administration in order to 
prove a violation of Article X:3(a). The Philippines concedes that it is not able to provide evidence 
that "specific decisions taken by TTM Director s in their capacity as gove rnment officials have 
actually been motivated by bias."121 Press reports of alleged "statements of intent by the conflicted 
individuals to protect the domestic producer"122 do not constitute acts of unreasonable or partial 
administration. A claim under Article X:3(a) generally requires evidence of "a pattern of decision-
making".123  In this case, the sole alleged act , the disclosure of confidential declared values to the Thai 
press in 2006124, has not had a significant impact on the overall administration of the Thai Customs 
Code. Specific statutory safeguards prevent such a result.125   
4.291  Even if Article X:3(a) were read to regula te how governments structure their administrative 
processes, rather than how they actually administer their laws and regulations, the Philippines' claims 
must fail. An "administrative structure" whereby government officials are simultaneously on the TTM 
Board does not "compromise all" or "taint the entirety" of the government's administration in 
individual cases.126  
4.292  As a matter of fact, Thai law contains strict st atutory safeguards, which take priority over the 
TTM Guidebook and which protect against improper administration of Thai law by government 
officials serving on the TTM Board.127 Financial incentives for TTM Directors are modest, based as 
much on attendance at meetings as profits128, and calibrated to ensure that Directors act consistently 
with those statutory controls. This case therefore differs from Argentina – Hides and Leather , in 
                                                      
119 See Thailand's answers to the Panel's questions, paras. 159-160. 
120 See Thailand's second written submission, paras. 150-155. 
121 See Philippines' answers to the Panel's questions , paras. 460, 462 and 463. Also, Philippines' second 
written submission, para. 25. 
122 Philippines' second written submission, para. 28. 
123 Panel Report, US – Hot-Rolled Steel , WT/DS184/R, para. 7.268. 
124 Philippines' answers to the Pane l's questions, paras. 469-470. 
125 Exhibit THA-85. 
126 Philippines' second written submission, paras. 23 and 26. 
127 Thai Civil Service Act and Criminal Code. 
128 Thailand's second written submission, footnote 17 1; see also Exhibit THA-3, pages 44-45, and 
Exhibits PHL-6 and PHL-7.  WT/DS371/R 
 Page 65 
 
 
  which there were no controls on the treatment of c onfidential information available to private industry 
representatives present at export inspections.129 
(b) Article X:3 claims relating to the BoA's treatment of appeals on Marlboro  cigarettes landed in 
2002 
4.293  There are three circumstances that justify th e BoA's treatment of the pending appeals as 
"reasonable": (i) the spike in appeals due to Th ailand's implementation of new Customs Valuation 
Agreement disciplines in 2000; (ii) PM Thailand itself  requested that the BoA use new information 
regarding P&GE ratios into account in those a ppeals (by letters dated 15 December 2005 and 
12 March 2007); and (iii) PM Thailand requested that  the subsequent appeals be prioritised over the 
pending appeals. Thailand submits, in  addition to the 19 July 2007 le tter, a statement confirming that 
"PM Thailand's company representatives also came to me et our officials and told them, verbally, that 
they would prefer Thai Customs to prioritise the appeals of the [[xx.xxx.xx]] entries landed in 2006 
and 2007 ahead of the appeals of [[xx.xxx.xx]] entries landed in 2002".130 Since that letter of 19 July 
2007, PM Thailand "has not submitte d any additional communications to Thai Customs" regarding 
delays of the appeals of the entries landed in 2002.131   
4.294  Article X:3(b) does not apply to the BoA as it is not "independent". The context of 
Article X:3(c) confirms that procedures subject to  Article X:3(b) must be "fully and formally 
independent" of the agency being reviewed. Thaila nd's BoA is not. It is headed by the Director-
General of Customs and has a Customs civil servant as secretary. It is supported by a "team of officers 
[of the Customs Department] that acts as secretariat".132 The Sub-Committee for Customs Valuation 
of the BoA, charged with the "power and respons ibility to ... consider the appeal" and to present a 
"conclusion" to the BoA, is composed en tirely of Customs Department officials.133  
(c) Claim regarding appeals against the imposition of guarantees 
4.295  An administrative decision requiring an im porter to furnish a guarantee is not an 
"administrative action relating to customs matters" w ithin the meaning of Article X:3(b). Under Thai 
law, importers have unconditional rights to appeal decisions imposing guarantees directly  to the Thai 
Tax Court.134  Article X:3(b) of the GATT 1994 does not require that WTO Members provide 
"immediate and independent" rights of appeal to affected importers.135  Instead, WTO Members are 
permitted to impose requirements to await the comple tion of internal proceedings and the exhaustion 
of alternative remedies before rights of appeal can be exercised. 
(d) Administration of the VAT system and excise, television and health taxes 
4.296  The Philippines argues that a failure to coll ect refundable guarantees for VAT liability from 
cigarette sellers is a breach of Article X:3(a).136  Article X:3(a) requires only that Members' 
administration of their laws be "reasonable". It is i rrelevant that the Philippines may be able to think 
of a different way of doing things. The relevant question is whether Thai authorities administered 
Thailand's VAT laws and regulations irrationally  by utilising guarantee value data to calculate 
MRSPs.  In the light of the doubts regarding the re liability of the declared customs value, it was not 
                                                      
129 Panel Report, Argentina – Hides and Leather , para. 11.101. 
130 Exhibit THA-87, para. 7. 
131 Exhibit THA-87, para. 8. 
132 Exhibit THA-87, para. 1. 
133 Exhibit THA-88, paras. 2 and 3 (Order of the Appeal Committee No. 1/2552). 
134 Exhibit THA-91, letter from the Attorney Genera l's Office, and Exhibit PHL-183, response to 
Question 4.1. 
135 Thailand's second written submission, paras. 233-236. 
136 Philippines' second written submission, paras. 507-508. WT/DS371/R 
Page 66  
 
  irrational to use the guarantee values. Also, VAT is a tax on consumption ultimately paid by 
consumers.
137  Any refund would be due to consumers, not  to importers or domestic manufacturers.   
V. ARGUMENTS OF THE THIRD PARTIES 
A. ORAL STATEMENT BY AUSTRALIA AT THE FIRST SUBSTANTIVE MEETING OF THE PANEL  
5.1 Australia did not file a written third party submission in the dispute Thailand – Customs and 
Fiscal Measures on Cigarettes from the Philippines  (DS371).  Australia did however make an oral 
statement at the third-party session of the first substantive meeting of the Panel. 
1. Introduction 
5.2 Chair, Members of the Panel, parties and third parties, Australia welcomes this opportunity to 
present its oral statement today.  As a general re mark, Australia considers that where customs duties 
are applied by WTO Members, the security and pr edictability of the multilateral trading system is 
contingent upon the correct application of the WT O Customs Valuation Agreement.  Central to the 
Customs Valuation Agreement is the importance of transparency in determining the customs 
valuation methodology used by the customs authorities of WTO Members. 
5.3 In our statement, Australia will address the following issues: 
• The obligation to maintain transparency in de termining the methodology used to arrive at 
a customs value; 
• Australia's practice in the event of doubt  on declared customs valuations;  and 
• The Philippines claims under Article III:2 of the GATT 1994. 
2. Transparency issues in customs valuation 
5.4 It is apparent that the complainant  and respondent in this case have divergent views on the 
obligations of importers and customs authorities to  communicate with each other, as provided for in 
the Customs Valuation Agreement.  This is nowhere  more evident than in their respective positions 
when grounds exist to doubt the d eclared value claimed by an importer where the buyer and seller are 
'related' for the purposes of Customs Valuation Agreemen t Article 1(d).  Australia recalls that it is not 
contested that PM Thailand and PM Philippines ar e 'related' within the meaning of the Customs 
Valuation Agreement.138 
5.5 Australia considers full transparency should be  provided in such cases to prove that the 
relationship between the importer and the seller has not influenced the price.  In Australia's view, the 
importer can only effectively attempt to prove that its relationship with the seller has not influenced 
the price if the customs authority fully communicates its doubts to the importer in writing.  It is only 
then that the importer can meaningfully 'respond' to those doubts as provided for in Article 1.2(a) of 
the Customs Valuation Agreement.  This response should also be provided in writing.  Australia 
agrees with the European Union in its written submi ssion that it is only after the customs authority has 
examined the 'relevant aspects of  the transaction … in order to determine whether the relationship 
influenced the price' that customs authorities can properly reject the declared value and consider 
                                                      
137 Thailand's second written submission, paras. 156-159. 
138 Australia understands PM Thailand and PM Philippi nes are 'related' pursuant to Article 15.4(f) of 
the Customs Valuation Agreement.  See footnote 86  to first written submission of the Philippines.  WT/DS371/R 
 Page 67 
 
 
  alternative customs valuation methods.139  In order to ensure full transparency, if the importer requests 
the grounds for rejecting the customs value in writing the customs authority should provide it even though the Customs Valuation Agreement  does not require it to do so. 
5.6 Australia therefore considers that Article 1.2(a) of the Customs Valuation Agreement 
establishes a clear obligation on the customs authority to communicate its grounds that the 
relationship between the impor ter and the seller has influenced the pr ice.  In addition, if an importer 
requests the grounds for considering that the relationshi p influenced the price in writing, the failure to 
communicate these grounds in writing would be inconsistent with this Article.   
5.7 A further provision in the Customs Valuati on Agreement relevant to transparency and 
communication is Article 16.  Article 16 contains  an obligation on the customs authorities of the 
importing country to provide an explanation in writing as to how the importer's goods were valued 
whenever the importer makes a request in writing fo r this information.  This obligation applies 
irrespective of which valuation method is used.   
3. Australia's practice in case of doubt regarding declared transaction values 
5.8 In the light of what I have just said, it may assi st the Panel for Australia to spend a moment to 
outline its practice in the application of Austra lian law giving effect to the Customs Valuation 
Agreement,  in situations where the transaction value may have been influenced by the relationship 
between the buyer and seller.  Firstly, a written noti ce is sent to the buyer outlining the Australian 
Customs' concerns.  This notice will include the view  that the relationship may have affected the price 
rendering the Australian Customs unable to use the transaction value method.  The buyer is 
then invited to respond and provide sufficient ev idence to satisfy Australian Customs that the 
relationship has not affected the price.  A period of no less than 28 days is provided for a response.   
5.9 If Australian Customs is satisfied that the information provided has established that the 
relationship has not affected the price, then the d eclared transaction value is applied.  However, if 
Australian Customs is not satisfied with the explana tion or no reply is received, the transaction value 
method is held to be inapplicable and an alternat e method is used following the requisite sequence in 
the Customs Valuation Agreement.
140  Australian Customs will then convey this determination in 
writing to the importer and secondly, when a new cu stoms valuation is determined, this methodology 
is also provided in writing to the importer. 
4. The Philippines' claims under Article III:2 of the GATT 1994 
5.10 Australia will now address the Philippines' clai ms under Article III:2 of the GATT 1994.  In 
order for the Philippines to establish that Thailand h as acted inconsistently with Article III:2, it must 
demonstrate that Thailand subjected imported cigarett es to a tax 'in excess of' that applied to 'like 
domestic products.'  In the present case, it appears likely that domestic and imported cigarettes are 
'like products' within the meaning of Article III:2.   Further, Australia notes Thailand acknowledges 
that this " may' be the case.141  However, Australia recognises the need for the Panel to undertake a 
thorough analysis on this point. 
                                                      
139 Third party written submission of the European Communities, para. 36. 
140 As noted by the Panel in Colombia – Ports of Entry , paras. 7.136-7.142, where the customs value 
cannot be determined under the provisions of Article 1 of the Customs Valuation Agreement, the Customs Valuation Agreement provides a set of procedures that are to be applied to determine this value.  Under the 
Customs Valuation Agreement, customs authorities are to a pply sequentially Article 1 through Article 7 in order 
to determine a customs valuation. 
141 Australia recalls the statement of Thailand that it "does not dispute that particular pairs of imported 
and domestic cigarettes may be like products ...", Thailand's first written submission, para. 221. WT/DS371/R 
Page 68  
 
  5.11 As established by the Appellate Body in Japan – Alcoholic Beverages II
142, the Panel must 
then determine whether dissimilar taxation has been applied so as to afford protection to domestic 
products.  This may be done through an analysis of  "the design, the architecture, and the revealing 
structure of a measure".143 
5.12 Australia understands that Thailand applies VAT that is proportional to the retail sales price 
of goods.  While VAT is normally payable on the actu al retail sale price of goods, for both domestic 
and imported cigarettes, the VAT tax base is th e MRSP which is set by the Thai Government.144  This 
VAT-MRSP value is therefore fixed and is payable i ndependently of the actual sale price.  Thailand 
states that 'the VAT burden on the domestic and imported product is the same' (emphasis in 
original).145    
5.13 As this absolute VAT-MRSP value is fixed, th e effective or marginal VAT rate increases as 
a percentage when imported or domestic cigarettes are sold at prices below the MRSP.  The factual question before the Panel is therefore whether the d esign, architecture or structure of the tax measure 
operates so as to afford protection to domestic produ cts.  That is, does the ev idence show that the tax 
burden on imported cigarettes is higher because they ar e more often sold at prices below the MRSP.   
5.14 While Australia understands that imported cigarettes are commonly sold below their 
MRSP
146, the Philippines claim that the retail price for domestic cigarettes had ' never ' been below the 
MRSP for the three year period prior to this dispute.147  If this factual situati on is found to be the case 
by the Panel, then the marginal VAT rate may, on occasion, be higher for imported cigarettes than 
that for domestic cigarettes and t hus may constitute an internal tax 'in excess of those applied … to 
like domestic products.'148  Australia notes that Thailand claims in its first written submission that 
Exhibit PHL-127 shows exceptions to this assertion.149  In the view of Australia this, in itself, does not 
invalidate the claims of the Philippines. 
5.15 As a final point, Australia recalls that there is no prohibition that would prevent Thailand 
from regulating the sale price of particular products .  However, where a Member opts to set a sale 
price, it must ensure that it does not apply measures  to imported or domestic pr oducts so as to afford 
protection to domestic production contra ry to Article III of the GATT 1994. 
5. Conclusion 
5.16 Australia would like to thank the Panel for the opportunity to provide its views in this case.  
This dispute has highlighted the importance of tr ansparency in the application of the Customs 
Valuation Agreement,  which, when applied correctly, is an inte gral part in the maintenance of security 
and predictability of the multilateral trading system. 
B. THIRD PARTY SUBMISSION BY CHINA  
5.17 China did not file a written third party submission in the dispute Thailand – Customs and 
Fiscal Measures on Cigarettes from the Philippines  (DS371).  China reserved its right but did not 
                                                      
142 Appellate Body in Japan – Alcoholic Beverages II , p. 29, cited in the Thailand's first written 
submission, paras. 206-207. 
143 Ibid. 
144 Thailand's first written submission, paras. 97-101. 
145 Thailand's first written submission, para. 100. 
146 Philippines' first written submission, see para. 459 and paras. 493-498. 
147 Philippines' first written submission, para. 499. 
148 Article III:2 of the GATT 1994. 
149 Thailand's first written submission, para. 227.  WT/DS371/R 
 Page 69 
 
 
  make a statement at the third party hearing, nor di d it file responses to the Panel's questions following 
that hearing. 
C. THIRD PARTY SUBMISSION BY THE EUROPEAN UNION  
1. Introduction  
5.18 Whilst not taking a final position on the specific facts of this case, the European Union will 
provide its views on the legal claims advanced by the parties to the dispute.   
2. Claims under the Customs Valuation Agreement  
5.19 The European Union understands that in its first written submission the Philippines makes a 
series of substantive and procedural claims under the Customs Valuation Agr eement with respect to 
the assessment of customs value by Thai Customs for a particular number of entries of Marlboro  and 
L&M  cigarettes imported into Thailand from the Ph ilippines and cleared between 11 August 2006 and 
13 September 2007.  In this respect, even if the Philippines does not expressly request a finding against Thailand's general practice or methodology pr oviding for the systemic rejection of transaction 
values and the imposition of higher pre-determined va lues "as such", in the European Union's view, a 
finding that Thailand failed to comply with the Cu stoms Valuation Agreement with respect to the 
assessment of customs value of the entries concerned ("as applied" claims) would also cover a finding 
against Thailand's general rule or  methodology to disregard declared transaction values in similar 
circumstances. 
5.20 The Customs Valuation Agreement is one of the multilateral agreements on trade in goods 
contained in Annex 1A of the WTO Agreement.  Thus, the Customs Valuation Agreement, a covered 
agreement, must be interpreted in the light of  the customary rules of interpretation of public 
international law, as required by Article 3.2 of  the DSU.  The European Union observes that, 
following these interpretative principles, the Custom s Valuation Agreement primarily sets out that the 
basis for valuation of imported goods for customs pur poses is the transaction value of the goods being 
valued.   
5.21 More importantly, the Customs Valuation Agre ement also establishes a sequential order for 
the application of alternative customs valuatio n methods.  The text, context and purpose of the 
Customs Valuation Agreement confirm that there is a hierarchy which WTO Members must respect 
when applying methods of customs valuation to ot her Members' imports.  The transaction value is the 
first method for customs valuation which WTO Members must apply.  Whenever the conditions 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 valuation methods which may 
be applicable, but always respecting the sequential order therein.   
5.22 In cases of related importers, Article 1.2 of the Customs Valuation Agreement provides for 
criteria to assess customs values and contains di fferent means of establishing the acceptability of 
declared transaction values ( i.e., the influence test and the referenced values test).  It is only through 
these criteria and means that a customs authority can  accept or reject declared transaction values.  
Indeed, both the relevance of transaction values as  the preferred customs valuation method and the 
sequencing order of other customs valuation met hods provided by the Customs Valuation Agreement 
indicate that, in order to move down to the next method, the first alternative should be explored 
thoroughly.  In the European Union's view, this calls for a strict interpretation of the conditions 
contained in Article 1 of the Customs Valuation Agreement before having recourse to other customs 
valuation methods. WT/DS371/R 
Page 70  
 
  5.23 The key issue in examining the declared transac tion value of related importers is whether the 
relationship between the seller and the relate d buyer influenced the transaction price ( i.e., influence 
test) rather than the accuracy or reality of the decl ared price.  This is the central inquiry on which 
customs authorities should focus and the basis for rej ecting the declared transaction price of related 
importers.  Customs authorities do not need to examine the particularities of all transactions.  
However, where the customs administration is una ble to accept the transaction value without further 
inquiry, it should give the importer an opportunity to supply such further detailed information as may 
be necessary to enable it to ex amine the circumstances surrounding the sale.  Thus, the European 
Union considers that customs authorities are entitled to request further information from the importer 
to examine the circumstances surrounding the sale.  This may occur as part of the normal process to 
obtain customs clearance or in any other context of customs administration procedures. 
5.24 If in the light of information provided by the importer following that initial inquiry or 
"otherwise" the customs administration has "grounds" for considering that the relationship influenced 
the transaction price, such information or "grounds " must be communicated to  the related importer, 
which should be given reasonable opportunity to res pond and demonstrate that such a relationship has 
not affected the transaction price.  In the Europ ean Union's view, Article 1.2(a) of the Customs 
Valuation Agreement does not limit the source or t ype of information which may trigger a further 
inquiry by the customs authorities as to whether th e relationship between the seller and the related 
importer influenced the transaction price.  The te rm "otherwise" is general enough to support the 
conclusion that customs authorities may proceed to  a further inquiry in cases of higher declared 
transaction values by unrelated importers with resp ect to the same product fro m the same seller.   
5.25 The purpose of the exchange between the custom s authorities and the related importer in the 
context of that inquiry is to examine the circumstances surrounding the sale and clarify whether the transaction price has, or has not, been influenced by the relationship with the seller.  In this exercise, 
the customs authorities communicate its reasons for c onsidering that the relationship has influenced 
the transaction price, whereas the related importer has to show that such a relationship has not 
affected the transaction price.  Only if followi ng an inquiry into the circumstances surrounding the 
sale it results that the relationship between the bu yer and the related importer has influenced the 
transaction price, customs authorities can reject th e declared value and move on to other customs 
valuation methods.  However, where it can be show n that the buyer and seller, although related under 
the provisions of Article 15 of the Customs Valua tion Agreement, buy from and sell to each other as 
if they were not related, this would demonstrat e that the price had not been influenced by the 
relationship.   
5.26 As an alternative to examinin g whether the relationship between the seller and the related 
buyer influenced the declared transaction price,  Article 1.2(b) of the Customs Valuation Agreement 
states that the related importer may show that the declared transaction value is acceptable if such a 
value "closely approximates" to othe r referenced values at or about the same time.  In comparing the 
declared transaction value with the other values,  due account shall be taken of demonstrated 
differences in commercial levels, quantity levels, the elements enumerated in Article 8.  If the 
declared transaction value closely approximates to t hose values, then the declared transaction price 
should be considered as acceptable, and the influen ce test cannot serve as the basis for rejecting the 
declared transaction value.   
5.27 Consequently, without entering into the facts of this case, the European Union agrees with the 
Philippines that the rejection by the customs aut horities of a WTO Member of declared transaction 
values of related importers must respect the cond itions warranting such a rejection as provided in 
Articles 1.1 and 1.2 of the Customs Valuation Agreement.   
5.28 Finally, the European Union considers that the relevance of transaction values as the preferred 
customs valuation method and the sequencing order of the other customs valuation methods provided  WT/DS371/R 
 Page 71 
 
 
  by the Customs Valuation Agreement once more impl y that, when the custom s authorities reject the 
transaction value and determine the customs value on another basis, such explanation should include:  
the reasons for rejecting the transaction value;  the reasons for using a particular valuation method;  
how the value has been calculated pursuant to that method;  and the reasons for not using any other 
valuation method prior to the one effectively used following the sequencing order of Articles 2 to 7 of 
the Customs Valuation Agreement.   
3. Claims under Articles III:2 and III:4 of the GATT 1994 
5.29 As regards the claims made under Article  III of the GATT 1994, Thailand raises a 
preliminary issue concerning the references made by the Philippines to MRSP's notices for imported 
cigarettes for 2006 and 2007 to support its claim against the MRSP's calculation methodology.  On 
this point, the European Union observes that th e Panel Request contains a reference to "any 
amendments (…) or other measures related to [the MRSP Notices expressly mentioned therein]", which related to the years 2007 and 2008.  Conseque ntly, the broad scope of the Panel Request would 
suggest that the Philippines intended to cover other notices and used them, at least, as evidence of the 
methodology used in this case. Furtherm ore, as the Appellate Body found in US – Upland Cotton , 
measures which expired before the request for esta blishment of the panel can also be measures at 
issue in the sense of Article 6.2 of the DSU and, thus , form part of the terms of reference of a panel.  
In this respect, it should not be excluded that an expired measure could be the subject of an 
appropriately worded recommendation or suggestion. 
5.30 On the substance of the claims concerning Article III:2 of the GATT 1994, the European 
Union understands that the core of the Philippines'  claims under Article III:2 relates to the calculation 
of the MRSP under Article 23 of the Tobacco Act of Thailand.  This calculation is also one of the 
subject matters of the Philippines' claims under Ar ticle X:1 of the GATT 1994 for the alleged failure 
to publish promptly trade regulations of general application.  In the absence of the precise published 
basis for the calculation of the MRSP at least with  regard to the entries subject to this case, the 
Philippines has attempted to provide evidence that the basis of calcula tion is discriminatory at least in 
relation to the imports of PM Thailand and at le ast during a given period.  However, the European 
Union points out that the Panel's examination of the claims made under Article X:1 of the 
GATT 1994 may reveal facts that may be relevant  for its analysis of the claims made under 
Article III:2.  Therefore, the Panel may consider it appropriate to examine the claims made under 
Article X:1 before those made under Article III:2 of the GATT 1994. 
5.31 In the present case, it would appear that importe d cigarettes can generally be considered as 
like products to Thai cigarettes within the meani ng of the first sentence of Article III:2 of the 
GATT 1994.  Provided that this is the case, the ke y issue would be to determine whether the taxes 
applied on imported cigarettes are "in excess of" those a pplied to domestic cigarettes.  It would appear 
to the European Union that th e Philippines has limited its clai ms under Article III:2 of the 
GATT 1994 to certain specific imports by PM Thaila nd.  Indeed, the situation would seem to be 
analogous to the situation examined by the Panel in Dominican Republic – Import and Sale of 
Cigarettes  where, after the examination of detailed evid ence, it was concluded that there was evidence 
to indicate that during a given period imported a nd domestic cigarettes were not taxed on the same 
basis with the result that certain imported cigare ttes were taxed in excess to the rates applied to 
domestic cigarettes.  To what extent this has been  the case in the present challenge requires a careful 
analysis by the Panel taking into account all the facts and evidence presented.   
5.32 In addition, the Philippines claims that Th ailand violated Articles III:2 and III:4 of the 
GATT 1994 by exempting resellers of domestic ciga rettes from VAT liability, whereas resellers of 
imported cigarettes continue to be subject to VAT  and related administrative requirements.  In 
contrast, Thailand maintains that, in practice, im ported cigarettes are treated exactly the same since 
wholesalers and retailers do not have to pay any VAT on sales of imported cigarettes.  While not WT/DS371/R 
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  entering into the facts of this case, the European  Union considers that an exemption to pay VAT 
exclusively granted to resellers and resales of  domestic cigarettes would imply that imported 
cigarettes are "subject to an internal tax ... of any kind in excess of those a pplied ... to like domestic 
products" contrary to the first sentence of Article III: 2 of the GATT 1994.  On this point, our analysis 
does not extend to Article III:4 of the GATT 1994 b ecause in the view of the European Union the 
latter is purely consequential to the alleged violation of Article III:2. 
5.33 Finally, the European Union would also like to draw the Panel's attention to the recent panel 
report in Colombia – Ports of Entry .  On the basis of the analysis  by the Panel in that case, the 
European Union considers that, in sofar as the MRSP for imposing VAT, the Excise tax, the Health tax 
and the Television tax are calculated on the basis of customs values determined contrary to the 
provisions of the Customs Valuation Agreement, th e basis for taxing imported products would not be 
compatible with Thailand's obligations under Article  III:2 of the GATT 1994 to the extent such basis 
would be higher than the declared transaction value.   
5.34 Finally, as regards Thailand's claim that any differences in the treatment of imported and 
domestic cigarettes can be justified under Artic le XX(d) of the GATT 1994, the European Union 
points the Panel towards the analysis of the "necessity " of the measure as carried out by the Appellate 
Body in Brazil – Retreaded Tyres  and invites the Panel to apply that analysis to the facts of this case 
in order to examine whether the measure adopted by  Thailand is justified according to Article XX(d) 
of the GATT 1994. 
4. Claims under Article X of the GATT 1994 
5.35 As regards the claims concerning the publicati on of trade regulations under Article X:1 of the 
GATT 1994, without entering into the specific fact s of the case, the Europ ean Union emphasises the 
importance of the obligations contained in Article  X:1 of the GATT 1994.  In the European Union's 
view, the Panel's analysis should concentrate on exam ining whether the relevant rules in question are 
indeed "laws, regulations, judicial decisions and administrative rulings of general application"  
(emphasis added).  If that is the case and if Thaila nd has failed to publish them promptly, there would 
necessarily be a violation of Article X:1 of the GATT 1994.   
5.36 As regards the Philippines' claims under Artic le X:3(a) of the GATT 1994, the European 
Communities notes that the Panel in Argentina – Hides and Leather  observed that the three 
requirements in Article X:3(a) – namely "uniformity", "reasonableness" and "impartiality" – are legally independent in that "[c] ustoms laws regulations and rules must satisfy each of the three 
standards".  The European Union agrees with this interpretation.  Thus, a claim under Article X:3(a) 
and its legal assessment by a panel must identify which of the three requirements is at stake in relation 
to the facts that are presented as evid ence of a breach thereof.  It may well be that in a given situation 
the same or interrelated facts are relevant in relati on to one or more of three requirements.  In this 
respect, the European Union would like to point to the established case law according to which the 
covered agreements that are more specific to the ma tter before the Panel should be considered first.  
In the European Union's view, the same logic applies between legally independent requirements 
contained within the same provision of the same c overed agreement.  The Eu ropean Union invites the 
Panel to carefully distinguish between the requirement s and their analysis under the facts of the case. 
5.37 On the Philippines' claims concerning Article  X:3(b) of the GATT 1994 dealing with the 
prompt review and correction of administrativ e action, the European Union agrees with the 
Philippines that the length of time that an appeal ta kes in a given case is an important factor to be 
taken into account for the purposes of examining that appeal in the light of the word "prompt" in 
Article X:3(b) of the GATT 1994.  Although the Eur opean Union cautions the Panel to impose a clear 
cut numerical limit for what could be consider ed as "prompt review and correction" under the 
provision, an appeal in the first instance that rema ins to be decided after six-seven years since being  WT/DS371/R 
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  lodged would appear not to fulfil the requirements of the Article X:3(b), absent very good reasons 
justifying the length of time.  However, in addition to the mere time an appeal takes, the European 
Union observes that the term "prompt review" is followed by "and correction".  In the European 
Union's view, this appears to allow also consider ation relating to the intensity of the review and 
correction process.  In other words, in case the fact s and evidence demonstrate that a given appeal is 
actively examined, the mere overall length of time ta ken should not be exhaustive of what is covered 
by the requirement of "prompt review and co rrection" under Article X:3(b) of the GATT 1994. 
5.38 Moreover, the European Union agrees with the Philippines that decisions on the imposition of 
guarantee values comes within the scope of the no tion "administrative action relating to customs 
matters".   
5. Request pursuant to Article 13 of the DSU 
5.39 The European Union observes th at the Philippines has requested  that the Panel seeks certain 
documents in the possession of Thailand pursuant to Article 13 of the DSU.  With respect to each 
document, the Philippines has explained in detail the relevance for the Panel to obtain such documents 
to carry out a proper examination of all claims.  In this respect, the Euro pean Union would like to 
make the following comments. 
5.40 The discretion granted to panels under Article 13 of the DSU is modulated by the obligation 
to make "an objective assessment of the matter" pursu ant to Article 11 of the DSU.  Thus, the Panel 
should request the information it deems necessary to  fully examine the matter before it.  In the 
European Union's view, where there is a refusal to reply to any request for information made by the 
panel, such a panel may draw inferences from this  behaviour.  More generally, where assertions of a 
complaining party could be confirmed or refuted by  the defending party providing information that is 
available to it, but the defending party declines to do so, a panel can legitimately presume these 
assertions to be true.  In other words, an invitation to draw such inferences can be part of the making 
of a prima facie case by a complaining party.   
D. THIRD PARTY SUBMISSION BY INDIA  
5.41 India did not file a written third party submission in the dispute Thailand – Customs and 
Fiscal Measures on Cigarettes from the Philippines  (DS371).  India reserved its right but did not 
make a statement at the third party hearing, nor di d it file responses to the Panel's questions following 
that hearing. 
E. ORAL STATEMENT BY CHINESE TAIPEI AT THE FIRST SUBSTANTIVE MEETING OF THE PANEL  
5.42 Chinese Taipei did not file a written third party submission in the dispute Thailand – Customs 
and Fiscal Measures on Cigarettes from the Philippines  (DS371).  Chinese Taipei did however make 
an oral statement at the third-party session of  the first substantive meeting of the Panel. 
1. Introduction 
5.43 The Separate Customs Territory of Taiwan, Pe nghu, Kinmen and Matsu (hereinafter referred 
to as "Chinese Taipei"), as a third party in this proceeding, would like to thank the Panel for the 
opportunity to present its views in this dispute.  Chinese Taipei makes this oral statement because of 
its systemic interests in the interpretation of rele vant provisions in the GATT 1994, in particular, its 
Article III:2.   
5.44 While not taking a final position on specific factual issues in this dispute, Chinese Taipei 
would like to provide its views on the issue of whet her an internal tax app lied on imported products is WT/DS371/R 
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  in excess of those on like domestic products calculate d on certain tax bases is subject to interpretation 
within the wording of Article III:2 of the GATT 1994.   Chinese Taipei hopes that this submission will 
help determine whether, in the present dispute, the internal duty, or the inte rnal charges, are being 
imposed in excess of those on like domestic products.   
2. Legal standard under the first sentence of Article III:2 of the GATT 1994  
(a) The structure and the limits of the first sentence of Article III:2 of the GATT 1994 
5.45 The first sentence of  Article III:2 of the GATT 1994 provides that:  "[t]he products of the 
territory of any contracting party imported into the te rritory of any other contracting party shall not be 
subject, directly or indirectly, to internal taxes or other internal ch arges of any kind in excess of those 
applied, directly or indirectly, to like domestic pr oducts".  To examine whether a contested measure is 
consistent with this requirement, well-established WTO jurisprudence requires the application of a 
two-tier test.   
5.46 In the first tier, one must examine whether the imported and domestic products at issue are 
like products.  In the second tier, it must be dete rmined whether the imported products are taxed in 
excess of like domestic products.  If, and only if, bot h questions are answered in the affirmative, has 
there been a violation of the first sentence of Article III:2.
150 Compared with the second sentence of 
Article III:2, the first sentence of Article III:2 can be satisfied by applying the two-tier test 
aforementioned.  As such, this passage does not require  the claimant to demonstrate that the measures 
at issue aim at affording protection for domestic production.151 
(b) Like products 
5.47 According to the Appellate Body in Japan – Alcoholic Beverage II , the criteria for 
determining "likeness" between an imported and a domestic product may incl ude the product's end 
use, consumer tastes and habits (which vary from c ountry to country), the product's properties, nature 
and quality (including the actual price of the product), and tariff classification.152 Appropriate criteria 
are selected on a case-by-case basis and such cr iterion would eventually determine whether the 
measure at issue constitutes a violation.153 
(c) In excess of those applied  
5.48 In the same dispute, the Appellate Body also ru led that even the smallest amount of excess is 
too much.  The Appellate Body specifically ruled that "the prohibition of discriminatory taxes in 
Article III:2, first sentence, is [n either] conditional on a 'trade eff ect test' nor is it qualified by a de 
minimis  standard".154  
5.49 Moreover, on the judgment of whether other inte rnal taxes or charges are applied in excess of 
those applied to like domestic products, first sente nce of the Article III:2 requires a comparison of 
actual tax burdens rather than merely nominal tax burdens.  Even in situations where imported and 
                                                      
150 Appellate Body Report, Canada – Periodicals, p. 20;  see also  Appellate Body Report, Japan – 
Alcoholic Beverage II , p. 18-19.   
151 Thailand asserts that the Philippines shall demonstrate that the measures involved afford protection 
for domestic industries, see Thailand's first written submission, para. 205.   
152 Appellate Body Report, Japan – Alcoholic Beverages II , p. 20.   
153 Appellate Body Report, Japan – Alcoholic Beverages II , p. 20.   
154 Appellate Body Report, Japan – Alcoholic Beverages II , p. 23.    WT/DS371/R 
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  like domestic products are subject to identical tax ra tes, it is possible that actual tax burdens are 
heavier on imported products.155 
3. Examining the operation of Thai VAT under the first sentence of Article III:2 of the 
GATT 1994  
(a) Whether imported cigarettes and domestic cigarettes are like products  
5.50 In this dispute, all imported and domestic cigarettes comprise a paper tube containing a mix 
of tobacco and additives and a filter:  a physical lik eness.  In addition, since the opening of the Thai 
tobacco market in 1991, imported cigarettes have gr adually built up their market share.  The market 
share of domestically produced Thai cigarettes has simultaneously eroded.  The fact that the market 
share has transferred from one product to the othe r demonstrates the interchangeability or "likeness" 
between the products insofar as consumer tastes and habits are concerned.156  It also follows that all 
imported and domestic cigarettes share identical e nd-uses on the Thai market.  Moreover, imported 
and domestic cigarettes are both classified under th e same heading within the Customs Tariff of 
Thailand.157  Thus, in this dispute, imported and domest ic cigarettes are like products when interpreted 
through the lens of the GATT 1994 Article III:2, first sentence.   
(b) Whether  imported cigarettes are taxed in excess of domestic cigarettes under Thai VAT   
5.51 We now turn towards examining whether the Thai government taxes imported cigarettes in 
excess of like domestic products.  To begin with, an in ternal tax has two major components:  a tax rate 
and a tax base.  When determining whether importe d products are taxed in excess of like domestic 
products, it is necessary to examine both the tax rate and the tax base.   
5.52 Secondly, Chinese Taipei is of the view that the primary object and purpose of Article III:2 is 
to prohibit discrimination against imported products.  An investigati on of discrimination first requires 
a comparison of actual tax burdens.  Even if im ported and like domestic products are subject to 
identical tax rates, actual tax burdens on imported pro ducts can still be heavier if a different method is 
used to compute the tax base. 
5.53 In this dispute, it must be determined wh ether the VAT that Thailand imposes on imported 
cigarettes is in excess of the tax imposed on domestic cigarettes.  Whereas the MRSP serves as a 
standard of determining the tax base for the Thai  VAT, it is necessary to go a step further and 
examine how Thailand determines MRSPs fo r individual brands themselves.   
5.54 In the present case, Thailand has not published the methodologies, formulae, price surveys, or 
the data used to calculate MRSPs for domestic a nd imported cigarettes.  Given that MRSPs are used 
in calculating VAT tax bases, one would assume that Thailand uses the same methodologies to 
compute MRSPs of both imported and domestic cigarettes.   Otherwise, Thailand would have to justify 
its compliance with Article III:2, first sentence. 
5.55 Having stated the above, we wish to note that Article III:2, first sentence, does not dictate 
how Members impose internal taxes on products, so l ong as the applications of the internal taxes does 
not afford less favourable treatment to imported ciga rettes.  Members are free to prescribe the kinds of 
taxes, elements and parameters used to com pute the tax base, as well as whatever methodologies 
employed to determine tax rates and to levy tax es, as long as such differentiated taxation methods do 
not result in discriminatory taxation inconsis tent with the relevant WTO rules.   
                                                      
155 Panel Report, Argentina – Hide and Leather, paras. 11.182-11.183.   
156 Philippines' first written submission, para. 472. 
157 Heading 2402.20.90, see Harmonized Tariff Schedule of Thailand, Chapter 24.   WT/DS371/R 
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  5.56 It is difficult to prove the existence of discrimination against imported cigarettes by merely 
comparing tax bases of imported and domestic cigarettes since the tax bases are not always the same.   
5.57 For example, the Thai MRSPs for imported cigarettes are based on the customs value 
(including maritime transportation cost), customs duti es, health taxes, excise taxes, television taxes, 
and marketing costs (including selling expenses and profits).  The Thai MRSPs for domestic 
cigarettes, by contrast, involve neither maritime tr ansportation costs, nor customs duties.  Domestic 
MRSPs reflect only the ex factory price before calcu lation of marketing costs and other taxes.  Thus, 
the MRSPs for imported and domestic cigarett es are subject to different parameters.   
5.58 Given the fact that Thai MRSPs are unilate rally and artificially determined by Thai 
government, it seems reasonable that Thailand bears the burden to prove that the Thai VAT does not 
impose an internal tax burden on im ported cigarettes heavier than that imposed on like domestic ones.  
Thailand has to explain the value gap between MR SPs and retail prices on imported cigarettes, and 
prove that this gap is not the result of a discriminat ory application of MRSPs.  In particular, Thailand 
must clarify how it determines the marketing cost s, including selling expenses and profits, imbedded 
in MRSPs. 
4. Conclusion  
5.59 In conclusion, Chinese Taipei would like to hi ghlight the relevant aspects of the scope and 
certain limits under the first sentence of Article III:2 of the GATT 1994.  As an internal tax is 
generated from two components:  a tax rate and a ta x base, it follows that the comparison of tax bases 
falls within the scope of Article III:2, first sentence.   In addition, Article III:2 is limited to prohibiting 
Members from treating imported products less favour ably than like domestic products.  It does not 
aim at intervening in Member's internal fiscal  matters.  Members are free to pursue their own 
domestic policy through the imposition of  internal taxes or charges, so long as they do not do so in a 
manner inconsistent with relevant provisions of the WTO covered agreements, in particular, the first 
sentence of Article III:2 of the GATT 1994.   
5.60  Mr. Chairman and distinguished Members of the Panel, we thank you again for the 
opportunity to present our view in this dispute.   
F. O
RAL STATEMENT BY THE UNITED STATES AT THE FIRST SUBSTANTIVE MEETING OF THE 
PANEL  
5.61 The United States did not file a written third party submission in the dispute Thailand – 
Customs and Fiscal Measures on Cigarettes from the Philippines  (DS371).  The United States did 
however make an oral statement at the third-party session of the first substantive meeting of the Panel 
1. Introduction 
5.62 The United States appreciates the opportunity to present this oral statement as a third party in 
these proceedings.  We recognize that a number of issu es in this dispute are factual in nature, and the 
United States takes no position on the measures at issue.  The United States does, however, have a substantial interest in the interpretation of provision s in the covered agreements raised in this dispute 
and would like to comment in particular on certain issues regarding the Customs Valuation 
Agreement  and Article X of the GATT 1994.   
5.63 The United States would first like to address four specific issues relating to the Customs 
Valuation Agreement:  (1) the approach to related- party transactions under Article 1.2 of the Customs 
Valuation Agreement;  (2) the application of the deductive value method under Article 5;  (3) the 
importance of the obligations to protect confiden tial information under Article 10;  and, (4) the  WT/DS371/R 
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  references made by the parties to a letter from th e World Customs Organization Secretariat.  The 
United States would then like to address whether Article X:3(b) of the GATT 1994 requires a Member to maintain tribunals or procedures for the review and correction of guarantees.  Finally, the United States would like to comment briefly on the scope of the Panel's term s of reference in this 
dispute.  
2. Article 1.2 of the Customs Valuation Agreement 
5.64 The United States is concerned by certain stat ements in Thailand's first written submission 
regarding the responsibilities of a customs authority examining a related party transaction.  By way of background, the United States notes that the determin ation of customs value is a transaction-specific 
process.   
5.65 The Customs Valuation Agreement sets forth a sp ecific sequence of methods of valuation that 
customs authorities must follow.  The Custom s Valuation Agreement clearly establishes the 
transaction value as the primary basis for valuation.   Article 1 of the Customs Valuation Agreement 
provides, "The customs value of imported goods shall be  the transaction value, that is the price 
actually paid or payable ..." (emphasis added), except under certain specified circumstances.   
5.66 Article 1 provides further that, even where the buyer and seller are related, the customs value 
shall be the transaction value, provided that the transaction value is acceptable under Article 1.2.  
Article 1.2(a) explicitly states: "the fact that the buy er and the seller are related ...  shall not in itself be 
grounds for regarding the transaction value as unacceptable.  In such case the circumstances 
surrounding the sale shall be examined and the trans action value shall be accepted provided that the 
relationship did not influence the price". 
5.67 Article 1.2(a) must be "read a nd applied in conjunction with"
158 the Interpretive Notes to 
Article 1.  Those notes make clear that a customs authority need not examine the relationship between 
the buyer and seller in every case.159  The customs valuation pro cess typically begins when the 
importer presents a declaration.  In most cases, the customs authority accepts  the value submitted in 
the declaration.  In other cases, where the buyer an d seller are related and the customs authority has 
"doubts" about the acceptability of the price, the cu stoms authority may conduct an examination into 
the relationship between the buyer and the seller.160  
5.68 Where the buyer and seller are related and the cu stoms authority considers that further inquiry 
is necessary, as just noted, Article 1.2(a) provid es that the customs aut hority shall examine the 
circumstances of the sale.  Article 1.2(a) provides further th at if the customs authority "has grounds 
for considering that the relationship influenced the price, it shall communicate its grounds to the 
importer and the importer shall be given a reasonabl e opportunity to respond".  These "grounds" must 
be communicated in writing if the importer so requests.   
5.69 In the light of this background, the Unite d States generally agrees with Thailand161 that the 
"doubts" that give rise to further inquiry by the customs authority, and the "grounds" on which the customs authority bases its conclusion that the rela tionship between the buyer and seller influenced 
the price, are distinct concepts.  However, the United States is concerned by certain statements in 
Thailand's first written submission – such as that the "importer [must] establish  that the relationship 
did not influence the price"
162 – and in the April 12, 2007, response of Thailand's customs authority to 
                                                      
158 Customs Valuation Agreement, Article 14. 
159 Customs Valuation Agreement, Annex I, Note to Article 1, para. 2. 
160 Customs Valuation Agreement, Annex I, Note to Article 1, para. 2. 
161 Thailand's first written submission, paras. 146, 165. 
162 Thailand's first written submissi on, para. 142 (emphasis added). WT/DS371/R 
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  the importer that "it cannot be proven whether the relationship has an influence on the determination 
of customs value or not".
163  The United States wishes to emphasize that the relevant inquiry for the 
Panel under Article 1.2(a) is whether "the custom s administration ha[d] grounds for considering that 
the relationship influenced the price". 
5.70 Bearing in mind that Article 1.2(a) provides that "the transaction value shall be accepted 
provided that the relationship did not influence the pr ice," and that "the fact that the buyer and the 
seller are related ...  shall not in itself be grounds  for regarding the transac tion value as unacceptable," 
a customs authority is obligated to accept the tr ansaction value unless it has "grounds" – in other 
words, a sufficient reason or reasons164 – for concluding that the relationship influenced the price.  
While the United States takes no position on whethe r all of the facts before Thailand's customs 
authority constituted "grounds" for rejecting transac tion value, the United States would note that the 
language in the customs authority's 12 April 2007, response165 calls into question of whether the 
authority identified any grounds to reach its conclusi on or in fact applied the correct standard.  The 
failure by an importer to prove a negative, specifical ly to prove that the relationship did not influence 
the price, does not relieve the customs authority of its obligation to accept the transaction value unless 
it has grounds for considering that the relationship in fluenced the price.  As noted in Article 1.2(a), 
after considering the information provided by th e importer or otherwise, it is incumbent on the 
customs authority to have grounds for not accep ting transaction value and to communicate those 
grounds to the importer.   
3. Article 5 of the Customs Valuation Agreement 
5.71 If, after undertaking all of the necessary steps,  the customs authority determines that the 
transaction value is not acceptable, the customs au thority must follow the sequence of valuation 
methods set forth in the Customs Valuation Agre ement in determining the final customs value. 
5.72 Where valuation is not possible under Article 2 or 3, the Customs Valuation Agreement 
dictates that the customs authority next proceed to the deductive value method set forth in Article 5 (unless the importer requests that the valuation met hod of Article 6 be applied).  Article 5 provides 
that the value of imported goods shall be based on th e unit price of identical or similar imported goods 
sold in the country of importation in the condition as imported in the greatest aggregate quantity, or 
the unit price at which the imported goods, after furt her processing, are sold in the greatest aggregate 
quantity in the country of importati on, subject to certain specified deductions, including "the additions 
usually made for profit and general expenses". 
5.73 If valuation is not possible under Article 5 of the Customs Valuation Agreement, the customs 
authority must proceed to the computed value method set forth in Article 6 (unless the importer has 
requested that the order of Articles 5 and 6 be reve rsed).  If valuation is not possible under Article 6, 
then the customs authority may use the last valua tion method in the sequence set forth in the Customs 
Valuation Agreement, f ound in Article 7.   
5.74 Paragraphs 184 through 187 of Thailand's first written submission indicate that Thailand's 
customs authority applied the deductive method under  the method corresponding to Article 7 in its 
domestic law, rather than Article 5, because the importer had not provided audited financial 
statements for the year of importation.  However, the United States agrees with the Philippines (as set 
forth in paragraph 338 of the Philippines' first wr itten submission) that Article 5 of the Customs 
                                                     
 
163 Exhibit PHL 70-B;  Thailand's first written submission, paras. 168-69.   
164 See New Shorter Oxford English Dictionary , L. Brown (ed.) (Clarendon Press, 1993, 4th ed.), 
Volume 1, p. 1150, meaning 6b;  (Exhibit US-1). 
165 Exhibit PHL 70-B;  Thailand's first written submission, paras. 168-69.    WT/DS371/R 
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  Valuation Agreement does not permit a WTO Member to  make the use of the method set out in that 
article contingent on the submission of audited fina ncial statements from the year of importation.   
4. Article 10 of the Customs Valuation Agreement 
5.75 With respect to the claims brought by th e Philippines under Article 10 of the Customs 
Valuation Agreement, the United States does not expr ess a view as to whether officials in Thailand in 
fact provided information to the press that was by its nature confidential or  provided on a confidential 
basis.  However, the United States considers that  the obligations of Article 10 are an important 
element supporting the entire customs valuation sy stem, as a failure to protect confidential 
information may prevent customs authorities from obtain ing proprietary information that is critical to 
making the valuation decision, particularly in related party transactions.  
5. Letter from the WCO Secretariat 
5.76 The United States notes that both the Philippines and Thailand have cited a letter from the 
World Customs Organization Secretariat in presen ting their respective positions.  Specifically, the 
Philippines argues that this letter contradicted what  the Philippines characterizes as one of Thailand's 
justifications for rejecting transaction value.166  Thailand explains, in cont rast, that Thailand's customs 
authority determined that it would be appropriate  to make further inquiries into the relationship 
between the buyer and the seller "in the li ght of" the letter from the WCO Secretariat.167  The United 
States appreciates the work of the WCO, including  its cooperation with the WTO.  However, the 
United States submits that the rele vant inquiry in this dispute is whether Thailand complied with the 
obligations of the Customs Valuation Agreement, not to what extent Thailand acted consistently with 
a letter from the WCO Secretariat. 
6. Article X of the GATT 1994 
5.77 The United States would now like to turn to an issue relating to the GATT 1994.  In 
particular, we would like to comment on the ques tion of whether Article X:3(b) of the GATT 1994 
requires a Member to maintain tribunals or proce dures for the review and correction of guarantees 
imposed in accordance with Article 13 of  the Customs Valuation Agreement. 
5.78 Article X:3(b) requires each contracting party to maintain "judicial, arbitral or administrative 
tribunals or procedures for the purpose, inter alia , of the prompt review and correction of 
administrative action relating to customs matters".   
5.79 The United States is aware that the parties dis pute, as a factual matter, whether Thailand in 
fact provides for an appeal of guarantee values, a nd, again, the United States does not take a position 
with respect to the facts in disput e.  However, Thailand's suggestion168 that the lack of any reference 
to an appeal in Article 13 of the Customs Valua tion Agreement with respect to guarantees means that 
Members have no obligation to provide such an appeal merits comment.   
5.80 The United States does not agree th at the absence of a reference to an appeal in Article 13 of 
the Customs Valuation Agreement resolves the question of whether Article X:3(b) of the GATT 1994 
requires such appeals.  The relevant inquiry under Ar ticle X:3(b) is whether the determination of the 
amount of the guarantee is within the scope of th e term "administrative action related to customs 
matters," and, if so, whether a Member has provide d tribunals or procedures for the prompt review 
and correction of that action.   
                                                      
166 Philippines' first written submission, paras. 247-51. 
167 Thailand's first written submission, para. 39. 
168 Thailand's first written submission, paras. 299-300. WT/DS371/R 
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  5.81 In support of its argument that Article X:3(b) of the GATT 1994 does not apply to the 
determination of guarantee values, Thailand contrast s the lack of any reference to an appeal in 
Article 13 in the Customs Valuation Agreement with  the explicit obligation in Article 11 to provide 
for an appeal of the "determination of customs value".
169  It is true that the only decision as to which 
the Customs Valuation Agreement explicitly requires Members to provide the right to appeal is the 
determination of customs value.  The language of Article X:3(b) of the GATT 1994 is not so limited, 
however.  The meaning of "administrative actions related to customs matters " should not be equated 
with "a determination of customs value". 
7. Terms of reference  
5.82 Finally, the United States notes that the request  by the Philippines for the establishment of a 
Panel in this dispute identifies one of the measures at issue as "the general rule and/or methodology 
providing for the systematic rejection of transaction value, and the imposition of a higher pre-determined value, including any calculation met hodology underpinning the pre-determined value, 
applicable at the time of entry as well as at the time of final assessment".
170  The United States notes 
that when bringing a challenge against an unwr itten measure, a complaining party must clearly 
establish, through arguments and supporting evidence, both the existence of the alleged measure, and 
its precise content.171  The United States does not express a view  as to whether, in either its first 
written submission or its first oral statement to the Panel (which, of course, the United States has not 
seen), the Philippines has done so.  However, such  a methodology would appear to be within the 
Panel's terms of reference. 
5.83 Mr. Chairman, members of the Panel, this concl udes the oral statement of the United States.  
Thank you for your attention, and we hope that the comments provided by the United States will 
prove to be useful to the Panel. 
VI. INTERIM REVIEW 
6.1 On 30 June 2010, the Panel submitted its In terim Panel Report to the parties.  On 
14 July 2010, the Philippines and Th ailand submitted written requests for review of precise aspects of 
the Interim Panel Report.  The Philippines requested, on the same day, an interim review meeting with 
the Panel regarding its decision not to make  a recommendation on the September 2006 MRSP, the 
March 2007 MRSP and the August 2007 MRSP Notices.  The Philippines' written comments of 
14 July 2010 also included its specific views on the Pane l's decision in this regard.  The Panel granted 
the Philippines' request for an interim review meeting and provided Thailand an opportunity to 
provide its written comments on this specific issue prior to the interim review meeting.  On 
19 July 2010, Thailand submitted its written comme nts on the Philippines' comments on the Panel's 
decision not to make a recommendation with respect to the concerned MRSP Notices.  The Panel held 
an interim review meeting on 20 July 2010 to ex clusively address the question  whether the Panel 
should make a recommendation with respect to these MRSP Notices.  On 21 July 2010, the Philippines and Thailand submitted written comments on each others' requests for interim review on 
the issues other than the question addressed  at the 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, providing explanations where 
necessary. The Panel has modified aspects of its report  in the light of the parties' comments where it 
considered these appropriate, as explained below. The Panel has also made certain technical and 
editorial corrections and revisions to the Inte rim Panel Report for the purposes of clarity and 
                                                     
 
169 Thailand's first written submission, paras. 299-300. 
170 Request for the Establishment of a panel by the Philippines, WT/DS371/3, para. 13. 
171 Appellate Body Report, US – Zeroing (EC) , paras. 196-198 .  WT/DS371/R 
 Page 81 
 
 
  accuracy. References to sections, paragraph numbers a nd footnotes in this section relate to the Interim 
Panel Report, except as otherwise noted. 
A. THE PANEL 'S FINDINGS AND RECOMMENDATIONS  
1. Paragraph 8.8 of the Interim Panel Report – the Philippines' comments 
6.3 Regarding the September 2006, Ma rch 2007 and August 2007 MRSP Notices,  although 
agreeing with the Panel's finding that these MRSP Notices have been superseded by subsequent 
Notices, the  Philippines disagrees with the Panel's conclusion th at these measures thus have expired 
and ceased to exist for purposes of Article 19.1 of the DSU.172  It also contests th at it agreed to this 
understanding during the proceedings.173  On the contrary, the Phili ppines argues that these MRSPs 
continue to exist and therefore requests that th e Panel recommend Thailand to bring them into 
conformity.174 
6.4 The Philippines contends that "for purposes of  Article 19.1 of the DSU, the case-law shows 
that a measure that is no longer in force, for exam ple, because it has been superseded or replaced, may 
continue to 'exist' ... , if the respondent Member will take further action in relation to the measure or if 
the measure will otherwise continue to have effects in domestic law".175  The Philippines refers to the 
panel rulings in EC – Commercial Vessels  and India – Autos  to underline its position that only when 
measures have "ceased to have an effect", there is no obligation to bring them into conformity.176 
6.5 First, the Philippines argues that the three MRSP Notices at issue are still in existence because 
they are being challenged in domestic legal proceedi ngs.  To explain its stance, the Philippines refers 
to the Appellate Body report in US – Zeroing (Article 21.5 – Japan) , which concerned "administrative 
reviews that superseded each other, similar to  the way in which the MRSP Notices do" and these 
reviews had been "challenged in domestic lega l proceedings, which effectively prolonged the 
existence of the reviews".177  In that case, the Appellate Body clarified that any WTO-inconsistent 
action taken in relation to a measu re found to be WTO-inconsistent  "must cease by the end of the 
reasonable period of time".178  Subsequently, the Philippines explains that the August 2007 MRSP 
Notice first continues to exist through Thai admini strative proceedings in which DG Excise "must still 
take action to decide whether to insist upon enforcem ent of the discriminatory Notice or to correct the 
discrimination" and that second, the Notice also conti nues to exist because Thai courts "may also be 
called upon to take action in relation to the measure".179  In addition, the September 2006 and March 
2007 MRSP Notices continue to exist through Thai  judicial proceedings in which "Thailand's 
judiciary must rule whether the two WTO-inconsis tent measures may be enforced given that they 
involve, inter alia , unlawful discrimination against cigarettes imported from the Philippines".180  
6.6 Hence, according to the Philippi nes, since Thailand still has to decide on the final tax base of 
the WTO-inconsistent measures, " the tax base continues to have effects on the financial burden to be 
imposed  [and] [s]o long as the final tax base is undecide d, the measure still exists".  Therefore, the 
Philippines wants the Panel to make a recommend ation regarding the three MRSP Notices, since a 
recommendation would ensure that "if the final tax base is decided after the end of the [reasonable 
                                                      
172 Philippines' comments on the Interim Panel Report, paras. 94-97. 
173 Philippines' comments on the Interim Panel Report, paras. 96. 
174 Philippines' comments on the Interim Panel Report, para. 98. 
175 Philippines' comments on the Interim Panel Report, para. 99. 
176 Philippines' comments on the Interim Panel Report, paras. 100-101. 
177 Philippines' comments on the Interim Panel Report, paras. 102-104. 
178 Philippines' comments on the Interim Panel Report , para. 103, referencing Appellate Body Report, 
US – Zeroing (Japan) (Article 21.5 – Japan) , para. 160. 
179 Philippines' comments on the Interim Panel Report, para. 106. 
180 Philippines' comments on the Interim Panel Report, paras. 106 and 109 and Annex C. WT/DS371/R 
Page 82  
 
  period of time], [Thailand] cannot con tinue violating WTO law by giving continued effect  to a 
WTO-inconsistent tax base ".
181   
6.7 Second, the Philippines contends that the Pa nel should make a recommendation regarding the 
three MRSP Notices, because MRSP Notices are "replacement measures": they are replaced by a subsequent measure that has "very similar substan tive characteristics".  According to panels and the 
Appellate Body in some of the zeroing cases it was stated that such replacement measures can be 
regarded as forming part of the same dispute.
182  In addition, in its opening statement at the interim 
review meeting, the Philippines explained that the MRSP Notices form a "chain of inter-connected 
measures" that are part of a single dispute, and that therefore implementation obligations assumed in relation to one measure in the chain impose simila r obligations in relation to subsequent measures.
183 
6.8 Consequently, the Philippines requests the Pa nel to make a recommendation regarding the 
three MRSP Notices at issue, to ensure that if, af ter the reasonable period of time, Thailand has not 
terminated its WTO-inconsistent measures, the Ph ilippines can resort to compliance procedures under 
Articles 21 and 22 of the DSU.184 
6.9 Thailand  argues that the September 2006, March 2007 and August 2007 MRSP Notices have 
been superseded and are no longer used to assess or collect VAT on sales of imported cigarettes, 
hence they ceased to exist.185  Consequently, under Article 19.1 of the DSU, the Panel cannot make 
recommendations in relation to measures that no longer exist.186  The right to make a recommendation 
under Article 19.1 of the DSU should not be used to  create a retrospective remedy that is not 
otherwise available under the DSU.187 
6.10 Regarding the domestic legal/administrative pr oceedings, Thailand first states that these 
proceedings are not within the Panel's terms of re ference and, therefore, cannot themselves be the 
subject of recommendations by the Panel.188  Second, Thailand claims that the Philippines 
misinterprets the zeroing jurisprudence and explains  that the main issue in those cases was whether 
the implementation obligation also applied to impor ts that had entered the United States before the 
end of the reasonable period of time ("RPT"), but for which duties had not been finally assessed 
("liquidated") by the end of the RPT.  The Unite d States claimed that challenges of the duties in 
domestic proceedings delayed the liquidation of these duties, and that therefore these should not be taken into account in checking whether the impl ementation obligation had been fulfilled.  The 
Appellate Body found that the implementation obliga tion applied to entries for which liquidation took 
place after the end of the RPT, regardless of when the calculation of the dumping margin took place.  According to Thailand, therefore, "continuing effects"  were found in that case because  "liquidation of 
entries at WTO-inconsistent rates would continue after the end of the RPT, not because the measure 
had been challenged in domestic proceedings " (italics in original).  This can be contrasted to the case 
                                                     
 
181 Philippines' opening statement at the interim revi ew meeting, para. 5; comments on the Interim 
Panel Report, paras. 107 and 110; answer to Panel ques tion No. 9 at the interim review meeting; concluding 
remarks at the interim review meeting. 
182 Philippines' comments on the Interim Panel Report, paras. 114-115, referring to Appellate Body 
report on US – Zeroing (Japan) (Article 21.5 – Japan) , para 160; Panel Report, US – Zeroing (Japan) 
(Article 21.5 – Japan) , paras. 7.148-7.149 and 7.154; Panel Report, US – Continued Zeroing , para. 7.28, upheld 
by the Appellate Body report, para. 236. 
183 Philippines' opening statement at the interim review meeting, para. 13; answer to Panel question 
Nos. 3 and 4 at the interim review meeting. 
184 Philippines' answer to Panel ques tion Nos. 1, 4 and 9 at the interim review meeting; concluding 
remarks at the interim review meeting. 
185 Thailand's comments on issues for the interim review meeting, para. 8. 
186 Thailand's comments on issues for the interim review meeting, para. 6. 
187 Thailand's comments on issues for the interim review meeting, para. 25. 
188 Thailand's comments on issues for the interim review meeting, para. 8.  WT/DS371/R 
 Page 83 
 
 
  at hand in which the three MRSPs will never be used  again to collect VAT and hence there is no such 
continuing effect.189 
6.11 Moreover, Thailand explains that the scope of  the administrative proceeding regarding the 
August 2007 MRSP Notice was limited to a request  from PM Thailand to DG Excise to amend the 
August 2007 MRSP and to provide details on its calculation.  Since the August 2007 MRSP Notice 
has been superseded by the August 2008 MRSP Notice, the remedy sought by PM Thailand was 
granted and there is no remaining action to be take n by Thailand regarding this measure.  The mere 
possibility that importers may have recourse to do mestic court proceedings "at some indeterminate 
point in the future" cannot change Thailand's implem entation obligations with respect to this MRSP 
Notice.190  Regarding the September 2006 and March 2007 MRSP Notices, Thailand states that the 
Philippines has failed to show that the existence of these domestic court proceedings gives rise to 
"anything like the situation in the zeroing cases".  To the contrary, the remedies sought in these 
appeals were originally limited to a request for revocation of the Notices.  The Philippines' new and 
untimely evidence regarding th e appeal of these proceedings191 before the Thai Supreme Court does 
not explain how these proceedings could serve to delay the application of these MRSP Notices until 
after the Panel's ruling or the end of the reasonable period of time in this case.  Moreover, if the 
Supreme Court would rule that these MRSP Notices should indeed be revoked, PM Thailand will 
have to start a different procedure before DG Revenue to seek a refund. Thailand believes it is 
unlikely that PM Thailand will be able to obtain this refund.192     
6.12 In relation to the Philippines' argument th at the MRSP Notices form a chain of inter-
connected measures, Thailand puts forward that in the zeroing cases there was one single anti-
dumping order under which several administrative re views took place that were thus interconnected, 
while in this case there is no connection between the collection of VAT on particular sales from 
MRSP Notice to MRSP Notice: they do not form part of the same proceeding, they are not subject to 
collective review, and they do not form part of th e same continuum of events.  If the Philippines' 
reasoning was followed, all VAT and classification decisions would form a chain.193 
6.13 As indicated in paragraph 7.563 of the Interim Panel Report, the  Panel  found that the 
September 2006, the March 2007, and the August  2007 MRSP Notices were inconsistent with 
Thailand's obligations under Article III:2, first sentence of the GATT 1994.  We decided, however, 
not to make a recommendation with respect to these MRSP Notices as they had already ceased to 
exist at the time of the establishment of the Panel.  This decision is set out in paragraph 8.8 of the 
Interim Panel Report.194   
6.14 The Philippines requests in its interim review comments that, pursuant to Article 19.1 of the 
DSU, the Panel recommend that these Notices be br ought into conformity with the obligations under 
the first sentence of Article III:2 of the GATT 1994.  In making this request, the Philippines argues 
                                                      
189 Thailand's comments on issues for the interim review meeting, paras. 9-11. 
190 Thailand's comments on issues for the interim review meeting, paras. 36-39. 
191 In paras. 48-51 of its written comments of 19 July 2010, Thailand refers to para. 15 of the Panel's 
working procedures in which it is provided that all eviden ce other than rebuttal evidence, was to be provided "to 
the Panel no later than the first substantive meeting, expect with respect to f actual evidence necessary for 
purposes of rebuttals, answers to questions or comments on answers provided by each other".  Subsequently, Thailand explains that Annex C of the Philippines' comments on the Interim Panel Report contains new 
evidence, which the Panel therefore should not take into account at this stage of the proceedings. 
192 Thailand's comments on issues for the interim review meeting, para. 46; answer to Panel question 
No. 6 at the interim review meeting. 
193 Thailand's comments on issues for the interim review meeting, para. 17; answer to Panel question 
No. 4 at the interim review meeting. 
194 The Philippines does not dispute that the December 2005 MRSP No tice has expired and ceased to 
exist for the purposes of Article 19.1 of the DSU. WT/DS371/R 
Page 84  
 
  that a measure that is no longer in force because, fo r example, it has been superseded or replaced, may 
still continue to exist for purposes of Article 19.1 of  the DSU if the respondent Member takes further 
action in relation to the measure later on, or if the measure will otherwise continue to have effects in 
domestic law.  Thailand also does not argue, in our  understanding, that a pa nel should never make a 
recommendation with respect to a measure that wa s superseded or replaced.  Thailand appears to 
agree that in determining whether a panel must make a recommendation with respect to such a 
measure, the legal standard to be applied is whet her the measure continues to exist after it has been 
superseded or replaced.  The parties' disagreement th erefore lies in the application of that principle to 
the factual circumstances of this case, namely whet her the concerned MRSPs must be considered as 
continuing to exist for purposes of  Article 19.1 of the DSU.   
6.15 In paragraphs 7.42-7.43, 7.46-7.47, 7.62-7.66 of the Interim Panel Report, we addressed 
issues relating to the panels' examination  of the measures which had been completed before or have 
expired at the time of the establishment of a pane l.  Although the parties do not take issue with the 
Panel's conclusion that the so-called expired and/or  completed measures may still be subject to panels' 
examination and rulings depending on the factual circumstances in each case, they have differing 
views on whether panels also must make a recomme ndation pursuant to Article 19.1 of the DSU with 
respect to such expired measures.  Although a meas ure can normally be considered to have ceased to 
exist if it has been superseded or replaced by a s ubsequent measure or reaching the end of the period 
of effect, we consider that the measure's expirati on in such circumstances would not in itself make it 
automatically fall outside the scope of pane ls' obligation to make a recommendation under 
Article 19.1.  As the Philippines submits, there may be  situations where despite the expiry nature of a 
measure, it must still be brought into compliance to the extent that the measure continues to exist by 
being subject to a further action by the responding Member or by continuing to have effects on the 
concerned imported goods. 
6.16 Before turning to the specific factual s ituation presented in this case based on our 
understanding of the nature of the panels' obliga tion under Article 19.1 as set out in the previous 
paragraph, we will first address the premise of the Philippines' position.  The Philippines' request for 
the Panel's recommendation with respect to the three MRSP Notices found inconsistent with 
Article III:2 of the GATT 1994, appears to be  based on the premise that the Philippines needs 
recommendations to pursue compliance proceedings, if necessary, under, inter alia , Articles 21.5 and 
22.6 of the DSU as, in the absence of a recommendation under Article 19.1 of the DSU, the Philippines' right to pursue compliance proceedings under Articles 21.5 and 22 would be undermined.  
The Philippines submits that only recommendations by the DSB would impose positive obligations in 
relation to the subject measures.
195   
6.17 We do not however find any language in the rele vant provisions of Articles 21 and 22 of the 
DSU indicating that an implementing Member's  compliance obligation arises only from panels' 
recommendations .  Rather, most of the provisions relating to compliance obligations under Articles 21 
and 22 of the DSU refer to both recommendations and rulings .196  For example, Article 21.1 provides, 
"prompt compliance with recommendations or rulings  of the DSB is essential in order to ensure 
effective resolution of disputes to the benefit of  all Members".  In our view, the scope of the 
compliance requirement under these provisions is ther efore broader than just "recommendations".  In 
any event, it is difficult to envision a situation where the Philippines will a priori be precluded from 
resorting to the compliance proceedings with respec t to any future action taken by Thailand if it can 
be shown that such action is re lated to the Panel's findings on th e inconsistency of the concerned 
MRSP Notices with Thailand's obligations under Ar ticle III:2 of the GATT 1994.  As noted in 
paragraphs 7.42 and 7.43 of the In terim Panel Report, previous pane ls considered it necessary and 
important to make findings even with respect to measures that have expired at the time of making 
                                                      
195 Philippines' response at th e interim review meeting. 
196 See also Articles 21.3, 21.5, 21.6, and 22.2 of the DSU.  WT/DS371/R 
 Page 85 
 
 
  such findings in certain situations.  Among those are situations where a measure was still impairing 
benefits accruing to a complaining Member or s ituations where there remained the prospect of 
reintroduction of the measure, and thus making fi ndings with respect to expired measures would 
contribute to resolving a particular dispute.   If only recommendations were to guarantee the 
complaining Member's right, as granted under the DSU, to seek compliance proceedings, there would 
be no meaning in even making findings for expired measures, which has not been the view of the 
Appellate Body and previous panels.197  We also do not believe that such an understanding would 
serve the spirit and purpose of the WTO dispute settlement mechanism. 
6.18 Specifically in the factual context of the current  dispute, the Philippines' position that these 
MRSPs continue to exist even though they have been superseded by subsequent MRSP Notices rests 
on two lines of arguments: first, the concerned MRSP Notices are all subject to ongoing domestic 
proceedings in which Thai executive and judicial au thorities will take action in  relation to them; and, 
second, to the extent that existing MRSPs continue  to be replaced by new MRSPs under Thai law, 
which according to the Philippines are a chain of closely connected, succeeding MRSP measures, 
Thailand's obligation under Article III:2 of the GATT 199 4, as clarified by the Panel with respect to 
the September 2006 and the March and August 2007 MRSPs, should equally extend to those future 
MRSPs through the Panel's recommendation.198  We will evaluate these two lines of arguments in 
turn. 
6.19 First, we examine whether the domestic pro ceedings in which the three MRSP Notices at 
issue are being reviewed can be considered as the Thai government action affecting these Notices.199  
The factual aspect of the current proceedings pe nding before both DG Excise and the Thai Supreme 
Court are described in paragraph 6.5 above.  Th e Philippines submits that  the concerned MRSP 
Notices continue to exist because they are subj ect to these ongoing domestic proceedings in which 
Thai executive and judicial authorities will take action in relation to them.200  In its oral statement at 
the interim review meeting, the Philippines explained th at the types of actions to be taken by different 
branches of the Thai government in cluded the following actions:  (i) deciding whether to continue 
enforcing the discriminatory tax base and, possibly, (ii) establishing a new tax base, and (iii) granting 
a refund.201   
6.20 We do not consider that the Philippines' descrip tion of the so-called future actions yet to be 
taken by the Thai government, however, correctly reflects the exact status of the concerned MRSP 
Notices.  For example, the Philippines stat es that Thailand still has to decide the final tax base, which 
we understand refers to the concerned MRSPs, beca use of the domestic proceedings in which the 
concerned MRSPs are being challenged.  As the Phi lippines confirmed at the interim review meeting, 
however, Thai Excise had completed the collecti on of the VAT amount for imported cigarettes, 
calculated based on the concerned MRSPs, until new MRSPs came into effect in August 2008.  The 
September 2006 and the March and August 2007 MRSP Notices therefore no longer form the tax base 
for the imported cigarettes at issue.  Further,  even if these MRSPs were found inconsistent by 
domestic review authorities, it is not clearly shown to  us that such findings will necessarily lead to a 
revocation of the concerned MRSPs and/or a ref und of any excess VAT paid based on those MRSPs.  
                                                      
197 Appellate Body Report, EC – Bananas III  (Article 21.5 – Ecuador II)  / EC – Bananas III 
(Article 21.5 – US) , paras. 261-273; Panel Report, EC – Commercial Vessels , para. 8.4; Panel Report, Columbia 
– Ports of Entry , paras. 7.45-7.54. 
198 Philippines' interim comments of 14 July 2010, para. 105; response to Panel question at the interim 
review meeting. 
199 In framing the issue before us as  above, we are not questioning the understanding, as clarified by the 
Appellate Body, that government actions also cover those of domestic judicial bodies.  Our question pertains to 
whether the subject government actions, the domestic executiv e as well as judicial proceedings in this case, are 
making the measures at issue continue to have effects. 
200 Philippines' interim comments of 14 July 2010, paras. 105, 106 and 109. 
201 Philippines' oral statement at the interim review meeting, paras. 2 and 10. WT/DS371/R 
Page 86  
 
  In these circumstances, we cannot ag ree with the Philippines' description that the MRSPs at issues are 
not enforced yet and did not form the final tax b ase for the VAT for the imported cigarettes at issue. 
6.21 In this connection, the Philippines heavily relies on the Appellate Body's statements in US – 
Zeroing (Article 21.5 – Japan) to support its position.  We co nsider, however, that the factual 
circumstances of that dispute must be distinguished  from those in the present dispute.  As Thailand 
explains, in US – Zeroing (Article 21.5 – Japan), the issue was whether the implementation obligation 
also applied to imports that had entered the Unite d States before the end of the reasonable period of 
time, but for which the anti-dumping duties had not been finally assessed and collected ("liquidated") 
by the end of the reasonable period of time due to  the injunction imposed by the domestic court on the 
liquidation of the anti-dumping duties.  The Appellate Body in that dispute found that the 
implementation obligation did apply to those imports because their liquidation (final assessment ) took 
place after the end of the reasonable period of time.   The Appellate Body's finding in that case, 
therefore, provides guidance that an important f actor in determining the point in time when a 
government action can be considered as completed is the final assessment and collection of the anti-
dumping duties, which include the original determin ation of the dumping margin and the rulings by a 
domestic review body, if such a review is warrante d under the domestic law, on the adequacy of the 
original determination.  
6.22 In contrast to such factual circumstances, in  the present dispute, Thai Excise had completed 
not only the calculation, but also the collection of VAT based on the MRSPs at  issue.  To that extent, 
we do not consider that the Appellate Body's reasoning in US – Zeroing (Article 21.5 – Japan) , as 
relied upon by the Philippines, can be equally applied to the situation in our case.
202  Furthermore, as 
noted earlier, it is not clear to us whether the MR SPs, once determined, can be re-determined in the 
same sense as the anti-dumping duties or customs va luation determinations ma y be re-determined.  
We understand that once MRSP Notices are issued, ci garette importers and TTM may request for new 
MRSPs.203  In our view, however, a request for new MRSPs cannot be equated to a proceeding in 
which duties or customs values are challenged for re -determination.  The main difference, in our 
view, can be found in that as for anti-dumping duties and customs values, a concerned Member 
government must take action, be it re-determination and/or refund, with respect to such duties and 
customs values if they were found by domestic revi ew bodies to have been incorrectly determined.  
This feature is also related to the nature of ob ligations under the relevant WTO Agreements such as 
the Anti-dumping Agreement and the Customs Valuation Agreement.204  With respect to the MRSPs 
at issue, however, it seems uncertain at best whethe r an importer would be able to have the expired 
MRSPs re-determined and/or to recover a refund for any excess tax paid because of an incorrectly 
determined tax base (MRSPs).  Thailand submits that  even if the Thai Supreme Court were to rule 
that these MRSP Notices should be revoked, PM Tha iland will have to start a different procedure 
before DG Revenue to seek a refund.  In any event,  Thailand believes it is unlikely that PM Thailand 
will be able to obtain this refund.  In these circ umstances, we are not convinced by the Philippines' 
argument that the concerned MRSP Notices are subjec t to further actions by the Thai government. 
6.23 The Philippines further submits that MRSP Noti ces form a chain of inter-connected measures 
that are part of a single dispute, under which im plementation obligations assumed in relation to one 
measure in the chain impose similar obligations in rela tion to subsequent measures.  As we laid out in 
paragraphs 7.459-7.468 of the In terim Panel Report, DG Excise determines MRSPs based on its so-
called general methodology, as described by Thaila nd in this proceeding.  We understand that the 
expired MRSPs may be considered to be connected  to the current and subsequent MRSPs to the 
                                                      
202 Philippines' comments on the Interim Panel Report , para. 103, referencing Appellate Body Report, 
US – Zeroing (Japan) (Article 21.5 – Japan) , para. 160. 
203 See para. 7.469. 
204 See Article 11.2 of the Anti-Dumping Agreement and Article 11 of the Customs Valuation 
Agreement.   WT/DS371/R 
 Page 87 
 
 
  extent that the same methodology continues to be  applied to the determination of MRSPs for the 
imported cigarettes at issue.  We also note the Philippines' argument that the Appellate Body's 
guidance in the zeroing cases that replacement measur es with similar substantive characteristics can 
be regarded as forming part of the same dispute ca n equally apply to this case.  In the Philippines' 
view, MRSP Notices are replaced by a subsequent measure that has "very similar substantive 
characteristics".   
6.24 We do not agree, however, that MRSP Notices are necessarily comparable to anti-dumping 
orders in the context of the zeroing cases.  As Th ailand points out, the subject measure in the zeroing 
cases was one single anti-dumping order pursuant to  which several inter-connected administrative 
reviews took place.  In the case of MRSP determin ations, DG Excise replaces existing MRSPs by new 
ones either when there is a change to any of th e components of the MRSP (including tax rates) or 
upon request from an importer.  We therefore consider that the link between successive MRSP determinations is not similar to  the link observed between a series of anti-dumping duties which stem 
from one single anti-dumping order.   
6.25 Having said this, however, we are mindful of the particular nature of the general methodology 
used in determining MRSPs.  Specifically, we not e that, in its calculation of new MRSPs, DG Excise 
generally refers back to the amount of "marketing co sts" included in the latest MRSP or in the MRSP 
previously requested by the domestic manufacturer or the importer.
205  Thus, we cannot eliminate the 
possibility that specific aspects of the MRSPs at is sue in this dispute, which were found to render 
these MRSPs inconsistent with Thailand's obligati on under Article III:2, would continue to have 
effects on future determinations of  MRSPs for imported cigarettes.  We note the panel's observation in 
EC – Commercial Vessels  that "the notion of a measure that no longer 'exists' is not always 
straightforward".  That panel then concluded that as it could not determine with certainty whether and 
to what extent it would be possible for subsidies to continue to be provided pursuant to applications 
made before the expiry of those schemes, its r ecommendation did not apply to the subsidy schemes 
that have expired, except to the extent that those schemes continued to be operational.  Following the 
guidance by the panel in EC – Commercial Vessels and in the light of the particular circumstances in 
this dispute, we have modified the conclusion in para graph 8.8 to reflect our c onsiderations above.     
2. Customs valuation determinations as "c ompleted acts" (paragraphs 7.40-7.51) – 
Thailand's comments 
6.26 Thailand requests review of certain aspects of paragraphs 7.40-7.51 of the Interim Panel 
Report, because (i) it does not accurately reflect Tha iland's arguments and (ii) it does not fully address 
the arguments with respect to whether, or in what circumstances, the Panel should make 
recommendations with respect to comple ted customs valuation determinations.206   
6.27 With respect to the first reason, Thailand s ubmits that the Panel incorrectly states in 
paragraph 7.41 that Thailand argue d that it should not "rule" with respect to the [[xx.xxx.xx]] entries 
listed in the Philippines' request. Thailand only requ ests that the Panel revise the final sentence of 
paragraph 7.41 to state that "Thailand tak es the position that the Panel should not make 
recommendations with respect to the claims relating to these entries". 
6.28 Regarding the second reason, Thailand states that  in paragraphs 7.40-7.51 the Panel focuses 
on the issue of whether it may make findings regarding the [[xx.xxx.xx]] entries at issue, but does not separately address whether it would be appropriate to also make recommendations.  In paragraph 7.51, however, the Panel concludes, wit hout any further explanation, that it will make 
recommendations regarding these entries. Therefore,  Thailand requests the Panel to revise these 
                                                     
 
205 Interim Panel Report, paras. 7.465 and 7.494-7.499. 
206 Thailand's comments on the Interim Panel Report, para. 3. WT/DS371/R 
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  paragraphs and to explain whether and why it c onsiders it appropriate to make recommendations 
regarding customs valuation de terminations (in general).
207   
6.29 Regarding the issue whether or not the Pane l should make a recommendation, Thailand puts 
forward an argument that there is a difference between "completed acts" that give rise to ongoing "measures" within the meaning of Articles 3.3 and 6.2 of the DSU (such as the measures at issue in 
Chile – Price Band System ), and "completed acts" that do not give rise to an ongoing measure, such as 
the valuation and assessment of customs duties in th is case.  The customs duties and other internal 
taxes have been finally assessed and paid with resp ect to the [[xx.xxx.xx]] entries at issue before the 
establishment of the Panel. Hence the Panel has not  specified a factual basis on which these entries 
can be characterised as having continuing effects that may be relevant for the Panel to make 
recommendations with respect to them.
208  
6.30 The Panel's failure to explain why it consider s it appropriate to make recommendations could 
be interpreted to mean that the Panel considers that all customs valuation dete rminations that have 
been completed could be subject to recommendations in dispute settlement proceedings.  In that case, 
Members could be retrospectively required to revi se these determinations with respect to which all 
domestic legal proceedings had been completed long before the establishment of a panel. Therefore, 
Thailand requests the Panel to explain why it cons idered it appropriate to make recommendations 
with respect to the customs valuation determinations for the [[xx.xxx.xx]] entries at issue.209 
6.31 The Philippines points out that this issue is linked to its request on revision of the Panel's 
analysis of findings and recommendations on the MRSP Notices.  It states, as the Panel noted in paragraph 7.46 of its Interim Panel Report, that the issue is not whether an act is "completed", but 
whether a measure found to be inconsistent continues to exist.
210  The Philippines then explains that 
one way in which a measure can continue to exist is  where it is subject to domestic legal proceedings.  
The Philippines subsequently provides the same e xplanation as it gave for its arguments on domestic 
proceedings in respect of the MRSP Notices. 
6.32 In addition, the Philippines discusses Thaila nd's assertion that it would be subject to a 
retrospective remedy if it had to revise measures that were applied to transactions that occurred before 
the end of the reasonable period of time. The Philippi nes refers to the Appellate Body statements in 
US – Upland Cotton and US – Zeroing (Japan) (Article 21.5 – Japan)  to explain that after the end of 
the reasonable period of time, WTO-incons istent conduct must cease completely.211 
6.33 The Philippines agrees with Thailand's request th at the Panel clarify the factual circumstances 
that support its decision to make a recommendati on regarding the [[xx.xxx.xx]] entries at issue. 
However, the Philippines also contests some argume nts put forward by Thailand.  Specifically, it 
disagrees with the idea that "all domestic legal proceedings had been completed long before the 
establishment of a panel".212  The Philippines points at the fact th at it appealed the transaction value of 
the [[xx.xxx.xx]] entries and that these appeals are still pending before the BoA, a fact that has been 
recognized by the Panel in its Interim Panel Report.213  The BoA is reviewing Thai Custom's 
assessment of the customs value of the [[xx.xxx.xx ]] entries and may revise that value. If the BoA 
                                                      
207 Thailand's comments on the Interim Panel Report, para. 3. 
208 Thailand's comments on the Interim Panel Report, para. 7. 
209 Thailand's comments on the Interim Panel Report, para. 8. 
210 Philippines' comments on the Interim Panel Report, para. 3. 
211 Philippines' comments on the Interim Panel Report, paras. 11-15. 
212 Philippines' comments on Thailand's comments on the Interim Panel Report, para. 19. 
213 Philippines' comments on Thailand's comments on the Interim Panel Report, paras. 19-20, referring 
to para. 7.92, footnote 281 of the Interim Panel Report.  WT/DS371/R 
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  reduces Thai Custom's valuation, DG Customs gr ants a refund of excess customs duties and excess 
payments of excise, health, and television taxes.214   
6.34 Hence, domestic legal proceedings regardi ng the [[xx.xxx.xx]] valuation decisions are 
ongoing and in those proceedings, Thailand is still  to take action to determine the final assessed 
customs value, and to determine " whether to enforce the WTO-inc onsistent measures at issue " (italics 
in original).  The Philippines cont ends that these actions in the domestic proceedings will determine 
the legal effects of the measures at issue, including the customs duties and internal taxes to be paid 
under the measures, and in these circumstances, the [[xx.xxx.xx]] customs valuation measures have 
not ceased to exist.  Therefore, the Panel must make a recommendation under Article 19.1 of the DSU 
regarding these measures.215      
6.35 First, in the light of Thailand's request that Thailand's arguments be revised because they are 
not correctly reflected in paragraph 7.41, the  Panel has slightly modified the last sentence of 
paragraph 7.41 as it deemed appropriate. 
6.36 We now address Thailand's second request that the Panel explain why it considered it 
appropriate to make recommendations, as stated in  paragraph 7.51, with respect to the customs 
valuation determinations for the [[xx.xxx.xx]] entries at issue.   
6.37 As the Philippines notes, we find this issue to be  closely related to the question we addressed 
in the previous section regarding whether we mu st make a recommendation with respect to certain 
MRSP Notices.  First, we agree th at in determining whether pane ls should make a recommendation 
for expired measures, the applicable legal standard  should be the same regardless of the measure at 
issue.  The nature and characteristics of the meas ure being assessed, however, may lead panels to a 
different conclusion as to whether to make a recommendation.   
6.38 We recall our discussion above that the legal st andard in this regard should be whether a 
measure, despite its expiry nature , continues to exist.  There may indeed be different circumstances 
under which the continuing effect of an expired meas ure can be found.  To that extent, it is not our 
task here to draw up an exhaustive list of such ci rcumstances.  However, as indicated above, we agree, 
and the parties do not appear to dispute, that an expired measure may be considered as having a 
continuing existence if that measure is still subject to a government action(s) and/or if it still has an 
effect(s) on imported goods or on measures currently in force. 
6.39 Regarding Thai Customs valuation determinati ons in respect of the [[xx.xxx.xx]] entries at 
issue, Thailand underlines the fact that the customs dut ies and other internal taxes, calculated based on 
these customs valuation determinations, have been finally assessed and paid prior to the establishment 
of the Panel.  As such, according to Thailand, these determinations constitute completed acts and do 
not give rise to ongoing measures, which is a f act distinguishable from other measures such as the 
ones at issue in Chile – Price Band System . 
6.40 In respect of Thailand's arguments relating to the concerned customs valuation determinations 
as "completed acts", we consider our discussion in paragraphs 7.40-7.51 of the Interim Panel Report 
to be sufficient.  We agree with Thailand that these customs valuation determinations have been 
finally assessed and collected by Thai Customs.  To  such an extent and given that the WTO dispute 
                                                      
214 Philippines' comments on Thailand's comments on the Interim Panel Report, paras. 22.23, in its 
explanation the Philippines' points at in [[xx.xxx.xx]] appeals regarding entries in 2000-2003, the BoA reduced the customs value and accordingly DG Customs refunded customs duties.  The Philippines also refers to 
Thailand's answers to Panel question No. 145 and Philip pines' question No. 3 in which Thailand acknowledges 
that excess customs duties and excise, health and television  taxes will be refunded after determination of a lower 
customs value by the BoA. 
215 Philippines' comments on Thailand's comments on  the Interim Panel Report, paras. 25-26. WT/DS371/R 
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  settlement system does not generally provide for a retrospective remedy, they are completed acts 
which cannot practically be brought into compliance.   
6.41 However, the Philippines has shown that the pending domestic review proceedings may result 
in an obligation for the Thai government to revise or re-determine the con cerned customs valuation 
determinations. As descri bed in paragraph 7.92 of the Interim Pa nel Report, Thai law provides for the 
right to appeal the customs valuation determinations , first before the BoA an d then before the Thai 
Tax Court.  Thus, those determinations must be distinguished from the MRSP  Notices that were the 
subject of our considerations above.  As for the MRSP Notices, we were not presented with evidence 
establishing that a domestic review of a given MRSP determination, either before DG Excise or before the Thai Supreme Court, could result in a revision or re-determination as in the case of customs 
valuation determinations.  In other words, cust oms valuation determina tions challenged by an 
importer will be subject to specific government actions  if they are found to be incorrect by domestic 
review bodies.  We also find support for our unders tanding in the nature of the obligations under the 
Customs Valuation Agreement, particularly those in Article 11 of this agreement, which requires 
Member governments to provide for the right to appeal  determinations of the customs value.  Hence, 
this agreement specifically envisages situations wh ere the adequacy of a given customs valuation 
determination is reviewed by the Member's administrative and judicial authorities.  We therefore agree that the ongoing domestic proceedings in rela tion to the [[xx.xxx.xx]] valuation determinations 
will determine the legal effects of the measures at issue.  This, in our view, renders the customs 
valuation determinations at issue subject to furthe r actions by the Thai government and consequently 
to continue to exist for the purposes of Article 19.1 of the DSU. 
6.42 In the light of our considerations above, we ha ve decided to maintain our conclusion to make 
recommendations for Thai Customs' customs valu ation determinations with respect to the 
[[xx.xxx.xx]] entries at issue.  We have modified th e text of paragraph 7.51 and added a footnote to 
explain our decision in this regard. 
B. C
USTOMS VALUATION AGREEMENT  
1. The Panel's analysis of the "substantive asp ects" of Thai Customs' application of the 
deductive value method  (paragraphs 7.332-7.382) – Thailand's comments 
(a) Standard of review for the Panel's evaluation of the Philippines' claim under Article 7 of the 
Customs Valuation Agreement 
6.43 Thailand  claims that in this section of its analysis, the Panel improperly conducted a de novo 
review of Thai Customs' determination of the de ductive value for [[xx.xxx.xx]] entries at issue. By 
referring to several parts of the Interim Panel Repor t, Thailand explains that the Panel adopted a 
standard of review whereby its review was limite d to whether Thai Customs provided a reasoned and 
adequate explanation to support its determination.216  However, it contends that the Panel did not 
follow this standard consistently  in the Interim Panel Report and that the Panel should have stopped 
its analysis after its conclusion in  paragraph 7.336 of the Interim Pa nel Report that Thailand "failed to 
apply the deductive valuation method consistently with Article 7.1".  Instead, the Panel continued "for 
the sake of completeness" to examine de novo  the information and evidence on the record to 
determine whether these deductions were warranted.  Therefore, Thailand requests that the Panel 
delete this analysis regarding the "substan tive aspect" of the deductive value from the report.217  
6.44 The Philippines  does not share Thailand's point of view. Instead, it argues that if the Panel 
had only examined the procedural aspect of the Ph ilippines' claim on this issue, it would not have 
                                                      
216 Thailand's comments on the Interim Panel Report, para. 19. 
217 Thailand's comments on the Interim Panel Report, paras. 15-25.  WT/DS371/R 
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  resolved the dispute.218  Moreover, the Philippines does not read the Panel's statements as implying 
that it conducted a de novo review.  Rather, in the Philippines' vi ew, the Panel properly stated that its 
role was "limited to determining whether there was an evidentiary basis for Thai Custom's decision – 
not the Panel's – not to deduct certain items".219  The analysis put forward by the Panel is an 
interpretative framework  on the substantive aspects of the deduction of sales allowances, provincial 
taxes, and transportation costs, which does not involve any review  of Thailand's valuation 
decisions.220  
6.45 However, to avoid confusion, the Panel coul d consider incorporating this interpretative 
framework into an earlier part of its reasoning.  In paragraphs 7.332 to 7. 336 of its Interim Panel 
Report, the Panel provides an introductory section to the claims on the deduction of the three items.  
After drawing a conclusion at the end of the introduc tory section, the Panel continues with its analysis 
of the substantive aspects. The Philippines notes that it is unusual for a Panel to reach a conclusion in 
an introduction and that by moving this conclusion to  the end of the section, Thailand's standard of 
review objection will be taken away.  Furthermore, in  its analysis of the deduction of the three items, 
the Panel could make clear that it is reviewing the authority's decision consiste ntly with the standard 
of review, by adding a phrase "in light of the explana tion given by the authority and of the evidence 
before the authority".221  
6.46 Finally, the Philippines notes that to make cl ear that it did hear and examine Thailand's 
arguments, the Panel might consider addressing Thailand's explanations be fore the Panel to show  that 
they are without merit.  The Philippines su ggests that if the Panel's reasoning following 
paragraph 7.336 is intended to achie ve these ends, it expressly state so at the beginning of the section 
instead of at the end.222 
6.47 The Panel notes that Thailand is correct in stating that the standard of review of this Panel is 
limited to whether Thai Customs provided a r easoned and adequate explanation to support its 
determination.  We also confirm that no de novo  review has been conducted.  As stated by the 
Philippines, our analysis consisted of an interpreta tion of the substantive aspects of the deduction of 
the three items at issue and not of a review of the evidence to determine ourselves whether these items 
should have been deducted.  Therefore, the Panel declines to delete the paragraphs as requested by 
Thailand.  However, as the Philippines suggests, we ha ve changed the order of the paragraphs at issue 
and added sentences to clarify the standard of review  applied to our relevant  analysis contained in 
paragraphs 7.332-7.382. 
(b) Other issues regarding the Panel's analysis of  the Philippines' claim under Article 7 of the 
Customs Valuation Agreement 
6.48 Thailand argues that if the Panel declines to dele te paragraphs 7.332-7.382, it should make 
several revisions to it.223  Regarding the Panel's analysis on the deduction of sales allowances, it states 
that it is unclear what the Panel means with th e statement "we are not presented with any evidence 
that can guide us on the question of whether the amount of sales allowances claimed for a brand of 
imported cigarettes must match the amount of sales al lowances provided in each month to the relevant 
company at issue" in paragraph 7.370.  Thailand clai ms that the Panel's suggestion that Thai Customs 
should have been able to adjust the amounts illustrat es the dangers inherent in the Panel attempting to 
                                                      
218 Philippines' comments on Thailand's comments on the Interim Panel Report, para. 33. 
219 Philippines' comments on Thailand's comments on the Interim Panel Report, paras. 35-38, referring 
to para. 7.313 of the Interim Panel Report. 
220 Philippines' comments on Thailand's comments on the Interim Panel Report, para. 40. 
221 Philippines' comments on Thailand's comments on  the Interim Panel Report, paras. 42-45. 
222 Philippines' comments on Thailand's comments on  the Interim Panel Report, paras. 54-56. 
223 Thailand's comments on the Interim Panel Report, para. 26. WT/DS371/R 
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  conduct a de novo review.  Second, Thailand does not unde rstand what claim the Panel thinks 
Thailand put forward when it states: "Thailand, as th e party who puts forward this claim, had the 
burden of proving it with supporting evidence" in the same paragraph.
224 
6.49 Regarding the deduction of provincial taxes, Tha iland requests the Panel to clarify to which 
finding it refers in paragraph 7.376 of the Interim Panel Report.  In addition, Thailand notes that a 
"finding that provincial taxes payable , and not merely paid", must be deducted does not resolve the 
factual issues arising in this case.  It explains th at the evidence in the case did not indicate whether the 
GAQ price was based on sales for Bangkok or sales to ot her provinces, or a mix of the two; it did not 
indicate whether sales to this customer usually incl uded payments for provincial taxes; and it did not 
allow for a calculation of a precise adjustment fo r provincial taxes in the event that the GAQ price 
consisted of a mix of sales on which provincial ta xes were and were not payable or usually paid.225 
6.50 In relation to the transportation costs, Tha iland maintains that paragraphs 7.377-7.382 are 
"simply duplicative" of paragra phs 7.329-7.331 of the Interim Pa nel Report and should therefore be 
deleted.226 
6.51 With respect to the deduction of sales allowances, the Philippines  notes that in 
paragraph 7.370 of the Interim Panel Repor t the Panel expressly states that it is " unable to examine 
evidence, because there is none " (italics in original), and that it is therefore hard to see how the Panel 
could have conducted a de novo  review. Instead, the Panel concluded that the authority's 
determination was WTO-inconsistent because there was " no basis in the evidence before the 
authority " (italics in original) for a re fusal to deduct any sales allowa nces. The Philippines states that 
the Panel may wish to clarify that its co nclusions are based on such an approach.227 
6.52 Regarding the deduction of provincial taxes, the Philippines states that the Panel does not 
appear to provide any review of the facts surround ing the authority's decisi ons.  In its comments, 
Thailand appears to re-argue the substance of the interpretative point. The Philippines urges the Panel 
to maintain its position, despite Tha iland's repetition of its failed arguments.228 
6.53 The Philippines disagrees with Thailand that paragraphs 7.377-7.38 2 on the deduction of 
transportation costs are a duplication of paragraphs  7.329-7.331, as they answer a different legal 
question. 
6.54 Regarding the deduction of sales allowances, the Panel has made changes to paragraph 7.370 
to clarify the issues put forward by Thailand. 
6.55 In respect of provincial taxes, we have modifi ed paragraph 7.376 to further clarify our point 
in light of Thailand's comments.  
6.56 In paragraph 31 of its comments on the Interim Panel Report, Thailand repeats its arguments 
without making a specific request that for the deduc tion of provincial taxes, the evidence available, 
did not provide clear information as to whether the GAQ price was based on sales for Bangkok, which 
are excluded from provincial taxes; or on sales to provinces; or a mix of the two.  First, we observe that these arguments have been reflected in paragr aph 7.351 of the Interim Panel Report.  We recall 
that in our analysis of the procedural aspects of  the deductive valuation method we concluded that 
Thai Customs should have requested further inform ation on provincial taxes if it considered the 
                                                     
 
224 Thailand's comments on the Interim Panel Report, paras. 28-29. 
225 Thailand's comments on the Interim Panel Report, paras. 30-31. 
226 Thailand's comments on the Interim Panel Report, paras. 32-33. 
227 Philippines' comments on Thailand's comments on  the Interim Panel Report, paras. 48-49. 
228 Philippines' comments on Thailand's comments on  the Interim Panel Report, paras. 50-51.  WT/DS371/R 
 Page 93 
 
 
  available information to be insufficient in deci ding whether to deduct pr ovincial taxes (and sales 
allowances).229  Furthermore, in our analysis of the substantive aspects of the deductive valuation 
method, we concluded that "provincial taxes payable  must be deducted if the information shows usual 
payments made for local taxes even if they are not included in the sales price based on which the 
deductive valuation method will be applied under Article 5".230  We therefore confirm that it is not 
necessary to determine whether or not provincial taxes were included in the GAQ price. 
6.57  Finally, the Panel does not consider paragr aphs 7.377-7.382 on transportation costs to be 
"simply duplicative" of paragra phs 7.329-7.331, since they answer different legal questions, as 
pointed out by the Philippines.  Paragraphs 7.32 9-7.331 focus on the procedural aspect of the 
deductions and answer the question whether Thai Customs properly consulted the importer; while 
paragraphs. 7.377-7.382 address the substantive aspect of the deductions in relation to transportation 
costs.  Therefore, the Panel declin es to accept Thailand's request to delete paragraphs  7.377-7.382, but 
made a slight modification to paragraph 7.384 of the Final Report to clarify this point.  
2. Aspects of the Panel's analysis of the Philippines' claim under Articles 1.1 and 1.2 
(paragraph 7.194) – Thailand's comments 
6.58 Thailand  disagrees with the Panel's analysis in pa ragraph 7.194 of the Interim Panel Report 
and requests that the Panel review the content and th e conclusions contained in the paragraph.  First, 
Thailand states that the Panel's analysis is incorrect to the extent that it gives the impression that Thai 
Customs determined that the transaction value was not acceptable after it received the 
5 February 2007 letter. To the c ontrary, Thailand has argued that rejecting the transaction value and 
using the deductive value instead was "part of a si ngle process" that included all contacts between the 
importer and Thai Customs between the date of the 5 February letter and the 6 March letter and 
meeting.231  At the end of this process Thai Customs compared the transaction value to the deductive 
test value and at that point it rejected th e transaction value, and not before that time. 
6.59 Second, Thailand contends that the Panel's stat ement reads as if PM Thailand never requested 
Thai Customs to use a deductive testing methodolog y.  Even if the 5 February letter does not 
explicitly request the use of this methodology, it must be read in the context of the subsequent 
exchanges between the importer and Thai Customs.   Specifically PM Thailand's 6 March 2007 letter 
should be taken into account as in this letter "P M Thailand clearly and unambiguously asked Thai 
Customs to use a deductive testing methodology".232 
6.60 The Philippines  does not subscribe to Thailand's point of view. First, it states that the Panel's 
statement on the 5 February letter is literally q uoted from Thailand's answer to Panel question 
No. 99(3), and thus the Philippines sees no reason to revise passages that have been directly taken 
from Thailand's response to a specific question.233  Second, the Philippines disagrees with Thailand's 
reading of the 6 March 2007 letter. In the letter, PM  Thailand states that it is providing information in 
response to a request by Thai Customs to allow the authority to determine the customs value 
"correctly", following the "hierarchical order" of the sequential valuation methods set forth in Thai 
law and indicates that deductive testing may be a ppropriate in certain circumstances. However, 
PM Thailand nowhere "requests" that the acceptability  of the transaction value be tested exclusively 
                                                      
229 Interim Panel Report, para. 7.328. 
230 Interim Panel Report, para. 7.374. 
231 Thailand's comments on the Interim Panel Report, paras. 10-11. 
232 Thailand's comments on the Interim Panel Report, para. 12; Exhibit THA-92. 
233 Philippines' comments on Thailand's comments on the Interim Panel Report, para. 29. WT/DS371/R 
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  by such testing or that Thailand abandon any e ffort to conduct a proper examination of the 
circumstances of sale.
234   
6.61 First, the Panel  notes that its reproduction of Thailand's statement on the 5 February 2007 
letter was not quoted verbatim from Thailand's answer to Panel question No. 99(3).  In its answer to 
that question, Thailand described a process at the e nd of which Thai Customs decided to reject the 
transaction value after having compared it to the de ductive test value subsequent to the letter and 
meeting of 6 March 2007.  We have  revised paragraph 7.194 to correctly reflect Thailand's arguments 
in this regard.  
6.62 Second, regarding the content of the 6 March letter, we understand that in this letter, 
PM Thailand pointed to the fact that Thai Custom s was asking PM Thailand to provide information to 
be used to calculate the computed value, while the hierarchical order of Ministerial Regulation 
No. 132/2000 (and of the Customs Valuation Agre ement) prescribes that the calculation of a 
deductive value predates the calculation of a computed value.  Hence, we do not consider this as 
amounting to be a request specifically to use the de ductive value instead of the transaction value.  
Rather, this is a general request to follow the hierarchical order according to which the valuation 
method to be used should be chosen.  While we disag ree with Thailand's reading of the letter, we have 
modified and made additions to paragraph 7.194 to provide a more  accurate/complete explanation on 
the issue.   
3. The Philippines' comments 
(a) Footnote 272, paragraph 7.91  
6.63 The Philippines requests that the Panel use the name [[xx.xxx.xx]] instead of "Importer A" in 
footnote 272 of the Interim Panel Report to reflect the Philippines' arguments that [[xx.xxx.xx]] is not 
technically an importer because its goods transit th rough duty free areas, and have not formally 
entered Thailand or been cleared through Thai Customs.235  Thailand is of the opinion that the Panel 
should "refer to the duty-free importer by name the first time it uses it, following by the notation ("Importer A") and then use the designation 'Impor ter A' on every following occasions". This would 
make the reading of the non-BCI version easier according to Thailand. 
6.64 The Panel has modified footnote 272 as commented by  the Philippines because the reference 
in the footnote to "Importer A" is not entirely corr ect and also included the Philippines' arguments on 
[[xx.xxx.xx]] (Importer A) in the footnote.  We have  changed the other references to [[xx.xxx.xx]] as 
suggested by Thailand.   
(b) Paragraph 7.91  
6.65 The Philippines  requests the Panel to modify its statem ent in paragraph 7.91 of the Interim 
Panel Report, as this statement is factually incorre ct.  It clarifies that on 28 March 2008, Thai 
Customs started accepting the transaction values as cust oms values for all new entries. Concerning the 
[[xx.xxx.xx]] entries made between 13 September 2007 and 19 March 2008 on the other hand, Thai 
Customs only began accepting the transaction values as the correct customs values on or after 14 July 
2008. For these entries however, transaction values ha d not been accepted at the time of clearance, 
and guarantee values had been collected in resp ect of potential customs and fiscal liabilities.  
                                                     
 
234 Philippines' comments on Thailand's comments on  the Interim Panel Report, paras. 30-31. 
235 Philippines' comments on the Interim Panel Report, paras. 7-10.  WT/DS371/R 
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  Concerning the three entries that cleared on 10 a nd 13 September 2007, Thai Customs also accepted 
the transaction values as the correct customs values on or after 14 July 2008.236 
6.66 Thailand  proposes that the statement by the Panel in paragraph 7.91 be kept, and that the 
words "subject to guarantee" be added to explai n that, while Thai Customs began accepting the 
transaction values as the correct customs values for the entries at issue, guarantees had already been 
collected in relation to these entries. 
6.67 As the information provided by the Philippines in its comments on the Interim Panel Report is 
accurate, the Panel  has modified paragraph 7.91 of th e Interim Panel Report accordingly. 
(c) Paragraph 7.158  
6.68 The Philippines  takes issue with the wording of para graph 7.158 of the Interim Panel Report 
in which its is stated that "[w]hile not dispu ting the overall sequence of the procedural steps as 
described above ...".  It states that it agrees with the order of steps set forth in paragraph 7.156, but it 
"does not agree that a customs authority need not request information from an importer if the 
authority is unable to accept the transaction value without further enquiry".237  The Philippines 
therefore requests that the Panel avoid suggesting th at the Philippines agrees wi th the procedural steps 
described in paragraphs 7.152-7.156  of the Interim Panel Report. 
6.69 Thailand  does not read paragraph 7.158 or 7.152 as suggesting that "a customs authority 
need not request information from an importer if th e authority is unable to accept the transaction value 
without further enquiry", and states that no change appears to be warranted. 
6.70 The Panel considers that, on the contrary to the Phili ppines' statement, paragraph 7.152 of the 
report does not state that a customs authority need not request additional information.  Instead, it 
states that the customs authority may "choose to ask the importer to provide information".  The third 
sentence of paragraph 7.158 then reflects the Philippi nes' view on this issue by stating that "the 
Philippines' position is that a customs authority is ob liged to undertake an active investigative role ...".  
We have therefore decided to maintain  the current paragraphs at issue. 
(d) Footnote 390, paragraph 7.184  
6.71 The Philippines  requests the Panel to revise footnote 390 of the Interim Panel Report where 
the Panel pointed to an inaccurate reference by th e Philippines to Thailand's submissions.  Seeking to 
show that Thai Customs had acknowledged a letter by PM Thailand  asking Thai Customs to (i) accept 
the declared values; or (ii) explain in writing why it was not clearing the goods at the declared values, 
the Philippines referred to paragraph 24 of Th ailand's second written submission. The correct 
reference was paragraph 24 of Tha iland's second opening statement. As Thailand  did not present any 
objection to this request, the  Panel  has modified footnote 390 of the Interim Panel Report 
accordingly. 
(e) Paragraph 7.193  
6.72 The Philippines takes issue with the second to last sen tence in paragraph 7.193, which states 
"[t]here may ... between the same parties turn out to be the same".  In its first oral statement, the 
Philippines has noted that the circumstances surrounding transactions in 2002-2003 were very 
                                                      
236 Philippines' comments on the Interim Panel Report, paras. 11-16, referring to its first written 
submission, para, 187. 
237 Philippines' comments on the Interim Panel Report, para. 17, referring to para. 7.152 of the Interim 
Panel Report. WT/DS371/R 
Page 96  
 
  different from those surrounding transactions in 2 006-2007.  The Philippines requests the Panel to 
include a footnote referencing this assertion.  Thailand did not comment on this issue. The Panel  has 
modified the paragraph at issue and included a reference to the Philippines' statement. 
(f) Paragraph 7.265  
6.73 The Philippines ' contends that in paragraph 7.265 of  the Interim Panel Report, the Panel 
misinterpreted paragraph 50, footnote 80 of the Philippines' second oral statement.  From this 
footnote, the Panel understood that "the revised mi nutes were submitted to the Thai Tax Court for the 
first time in the context of PM Thailand's app eal before the court concerning the September 2006 
MRSPs".  According to the Philippines, however, in the footnote at issue, it referred to the original 
version of the minutes and notes that DG Customs sent this version of the Minutes to PWC ABAS.  
According to the Philippines, Thailand has not provi ded any documentary evidence to show that the 
revised version of the Minutes was provided to the Thai Tax Court. Therefore, the Philippines requests that the Panel modify paragraph 7.265 accordingly.
238  Thailand did not provide comments 
on this issue.   
6.74 The Panel  has modified paragraph 7.265 of the Interim Panel Report to correct its mistaken 
statement about paragraph 50, footnote 80 of the Phil ippines' second oral statement as pointed out by 
the Philippines.   
(g) Paragraph 7.267  
6.75 The Philippines  requests that the Panel modify the first sentence of paragraph 7.267 to record 
that the evolution of its arguments occurred as a response to Thailand's changing description of its 
customs valuation decisions in the revised Minut es that were submitted at the first substantive 
meeting with the Panel.239   
6.76 Thailand does not object to a change of this senten ce.  It nonetheless notes that even before 
the revised minutes were provided to the Panel, Thailand had already argued in its first written 
submission that regardless of what provision of do mestic law was cited, Thai Customs had used a 
deductive value method within the meaning of Ar ticle 5 of the Customs Valuation Agreement. 
6.77 The Panel  agrees that the Philippines changed its  arguments because of a change in 
Thailand's description of its cu stoms valuation decisions, and changed the first sentence of 
paragraph 7.267 of the Inte rim Panel Report accordingly. 
(h) Paragraph 7.298  
6.78 The Philippines' states that in regard to Article 7.1 of the CVA, it put forward two claims, 
only one of which was discussed by the Panel.  Ther efore, the Philippines requests the Panel to also 
examine its claim that Thailand acted inconsiste ntly with Article 7.1 of the CVA "by deducting 
incorrect amounts for VAT and excise tax for certain transactions".240  
6.79 Thailand  does not object to this request, but it di sagrees with the Philippines assertion that 
"Thailand 'had not previously disclosed' the calcula tions of the deductive value for entries in the 
                                                      
238 Philippines' comments on the Interim Panel Report, paras. 27-31. 
239 Philippines' comments on the Interim Panel Report, paras. 32-35. 
240 Philippines' comments on the Interim Panel Report, paras. 36-42.  WT/DS371/R 
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  period 1 January 2007 -13 September 2007 prio r to its submission of 4 September 2009".241  Thailand 
claims that it already put forward those calculations in Exhibit THA-13. 
6.80 The Panel  added a paragraph in Section VII.C.7( c)(iii) of the Report to clarify the 
Philippines' position in this regard.  Regarding Th ailand's statement that it already disclosed the 
calculations for the entries in the period 1 Ja nuary 2007-13 September 2007 in Exhibit THA-13, the 
Panel notes that this exhibit covers the calculations  for the year 2006 and that Exhibit THA-71, which 
was submitted on 4 September 2009, covers the calculati ons for the first half of the year 2007.  A 
factual description to this effect has been added in a footnote to the newl y added paragraph 7.304. 
(i) Paragraph 7.314 
6.81 The Philippines  requests the Panel to add to the paragraph the argument that Thai Customs 
knew that PM Thailand had included a deduction for inte rnal transport costs in its annual filings for 
the years 2003 to 2005, as the Panel also included in  paragraph 7.353 of its  Interim Panel Report. 
Moreover, the Philippines' invites the Panel to consid er whether a reference to this factor should be 
included in the Panel's reasoning on this issue in paragraph 7.329. Thailand does not comment on this 
issue. 
6.82 The Panel has included the argument, as requested by the Philippines, in paragraphs 7.314 
and 7.329 and made the necessary modifications. 
(j) Paragraph 7.406  
6.83 The Philippines notes that the Panel has not included a conclusion expressing its findings at 
the end of its findings under Article 10 of the CVA as in other sections.  It requests that the Panel add 
its conclusion in this regard.  Thailand has not commented on this issue.  The  Panel  has modified the 
paragraph by adding its conclusion. 
C. ARTICLE  III:2,  FIRST SENTENCE OF THE GATT 1994   
1. MRSPs – The Philippines' comments 
(a) Paragraph 7.413 
6.84 The Philippines  submits that in its analysis of the August 2008 Notice, the Panel made two 
mistakes. First, the Panel misinterpreted the Philip pines' statement in its comments of 9 November 
2009, in which the Philippines stated that in listi ng the MRSP Notices that  form part of these 
proceedings, the Philippines omitted to include th e MRSP Notice of August 2008.  As also becomes 
clear from the text of its comments of 9 November, the Philippines specifically made this statement in connection to its opening statement at the second pane l meeting, and hence it only wanted to correct a 
clerical error and it did not refer to a genera l omission of the MRSP Notice in its previous 
submissions.
242   
6.85 Secondly, the Philippines disagrees with the Panel that it "never put forward a claim, not to 
mention specific arguments, in this proceedi ng that the 19 August 2008 Notice itself violates 
Article III:2 until its comments of 9 November 2009".243  The Philippines contends that during the 
proceedings, it put forward several arguments and pi eces of evidence that underline its claim that the 
                                                      
241 Thailand's comments on the Philippines comments on the Interim Panel Report, para. 26. referring 
to para. 37 of the Philippines' comments on the Interim Panel Report. 
242 Philippines' comments on the Interim Panel Report, paras. 49-55. 
243 Philippines' comments on the Interim Panel Report, para. 57, referring to para. 7.413 of the Interim 
Panel Report. WT/DS371/R 
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  Notice is violating Article III:2.  In Annexes A a nd B to its comments, the Philippines has included an 
overview of all arguments and evidence relate d to the August 2008 MRSP Notice submitted during 
the proceedings.  In its comments, the Philippines points at the fact that  the Notice was expressly 
identified in its Panel request and subsequently  it puts forward the instances in which it made 
arguments regarding the Notice during the pro ceedings by referring to its Annexes A and B.
244   
6.86 Based on this information, the Philippines urg es the Panel to rule on the Notice, as required 
by Article 11 of the DSU.  Further, it demands that if the Panel denies to rule on the Notice, it 
includes a reference to all of the paragraphs of the Philippines' submissions  and exhibits addressing 
the August 2008 MRSP Notice as part of its clai ms under Article III:2 of the GATT 1994.  If the 
Panel does decide to rule on the Notice, the Ph ilippines asks it to make a recommendation for the 
same reasons as it re quests a recommendation on the Sept ember 2006, March 2007 and August 2007 
MRSP Notices.245  
6.87 Thailand  does not respond to the Philippines' first comment that the Panel misinterpreted its 
statement of 9 November 2009. Regarding the Philippines' second statement that it did provided arguments and evidence regarding the August 2008 MR SP Notice, it puts forward that in its Interim 
Panel Report, the Panel did not state that th e Philippines did not refer to the August 2008 MRSP 
Notice, instead the Panel concluded that it did not ma ke "specific" arguments or a claim with respect 
to this Notice.
246  Thailand notes that the examples the Philippines provides appear to be general 
examples of how Thailand calculated MRSPs, instea d of a specific argument on the 2008 one; and 
secondly all of the arguments referred to by the Ph ilippines seem to relate to the difference between 
the MRSP and RRSP for this Notice.247 Therefore, Thailand sees no reason for the Panel to change 
this paragraph. 
6.88 If, nonetheless, the Panel decides to examine th e Philippines' claim and arguments regarding 
the Notice, the Panel should find that the Philippin es has failed to establish that Thai Excise acted 
inconsistently with Article III:2 with respect to that Notice, unless the Panel finds that the evidence 
establishes that "DG Excise determined the mark eting cost component of the MRSP for imported 
cigarettes in a manner different from th e general methodology" for that Notice.248  Regarding the 
Philippines' request for a recommenda tion on the Notice, Thailand requests the Panel to deny to make 
recommendations for the same reasons as it reque sted the Panel to not make recommendations 
regarding the September 2006, Marc h 2007 and August 2007 MRSP Notices.249  
6.89 Regarding the Philippines' first comment, that the  Panel  misinterpreted its statement of 9 
November 2009, the Panel agrees that the Philippines specifically made this statement in connection 
with its opening statement at the second panel meetin g, and not with regard to the panel proceedings 
as a whole. The Panel has revised the fi rst sentence of paragraph accordingly. 
6.90 Second, the Panel disagrees with the Philippines'  comment that it did put forward arguments 
and evidence regarding the August 2008 MRSP Notice.  The Panel agrees with Thailand that the 
examples the Philippines provides appear to be ge neral examples of how Thailand calculated MRSPs, 
instead of a specific argument on the 2008 one; and secondly all of the arguments referred to by the 
Philippines seem to relate to the difference between the MRSP and RRSP for this Notice. 
Consequently, the Panel denies to rule on this MR SP Notice. However, the Panel has modified the 
                                                      
244 Philippines' comments on the Interim Panel Report, paras. 57-74. 
245 Philippines' comments on the Interim Panel Report, paras. 75-79. 
246 Thailand's comments on the Philippines' comments on the Interim Panel Report, para. 12, referring 
to para. 7.413 of the Interim Panel Report. 
247 Thailand's comments on the Philippines' comments on the Interim Panel Report, para. 13. 
248 Thailand's comments on the Philippines' comments on the Interim Panel Report, para. 13. 
249 Thailand's comments on the Philippines' comments on the Interim Panel Report, paras. 15-20.  WT/DS371/R 
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  second sentence of paragraph 7.413 to clarify why it deems the Philippines' references to the 2008 
MRSP Notice to be insufficient to make a ruling on this Notice. The information provided by the 
Philippines in Annexes A and B to its interim revi ew comments has been specifically used in this 
clarification. 
(b) The May 2009 MRSP Notice  
6.91 The Philippines  explains that during the proceedings, it requested that the Panel not make 
findings regarding this measure "because it did not wi sh to litigate against a moving target", since at 
that stage "it was not clear how many more re placement MRSP Notices Thailand would adopt during 
the dispute".250  The Philippines states that during the pr oceedings, it submitted expressly that this 
Notice violates Article III:2.  Moreover, the Philippi nes notes that in its analysis, the Panel has 
focused on situations where Thailand has been unable to provide an explanation for a gap between the 
MRSP and RRSP for imported cigarettes, and that su ch a gap also exists for the May 2009 MRSP for 
Marlboro , and Thailand has been unable to explain this gap.251 
6.92 In its report, the Panel does not address the pa rties' arguments regarding the May 2009 MRSP 
Notice, and the Philippines therefore requ ests that the Panel does address the Notice.252  In addition, 
the Philippines urges the Panel to take into account  whether a ruling on this measure is necessary to 
resolve the dispute, and enable the DSB to make  sufficiently precise recommendations and rulings.  
The Philippines states that the dispute has not been resolved, because th e May 2009 MRSP Notice, 
which is currently in force, violates Article III:2 of  the GATT 1994.  If the Panel finds that this Notice 
is indeed inconsistent with Article III:2, the Philippines requests that it makes a recommendation 
under Article 19.1 of the DSU.253 
6.93 Thailand  notes that the request by the Philippine s for the Panel to make findings and 
recommendation regarding the May 2009 MRSP is an extr aordinary one.  In addition to the parts of 
the second written submission quoted by the Philippin es in its comments, Thailand refers to the parts 
in which the Philippines states that it " objects  to a ruling" on the May 2009 MRSP Notice and that 
"ruling on the 'new' [May 2009] MRSP Notices would not resolve the dispute that properly forms part 
of the Panel's term of reference".254  Thailand points at the fact that during the proceedings, the 
Philippines did not change its point of view until its comments on the Interim Panel Report, and therefore Thailand "fails to see any possible con ception of the due process requirements for a panel 
proceeding that would permit the Panel, at the interim review stage, to rule on a measure with respect 
to which the complainant never once, ..., requested the Panel to rule on and, ... to which the 
complainant expressly objected the Panel making a ruling".
255  Furthermore, it argues that at this point 
in the proceedings, the Panel cannot know what ar guments or evidence would have been put forward 
by either party. Consequently, Thailand urges the Pa nel to deny the Philippines' request that it makes 
findings or recommendations regarding the May 2009 MRSP Notice.256 
6.94 Moreover, Thailand wants to correct the assertion by the Philippines that the Panel focused its 
analysis on "situations where Thailand has been una ble to provide adequate explanation for a gap 
between the MRSP and RRSP for imported cigarettes".  To the contrary, according to the Panel "the 
                                                      
250 Philippines' comments on the Interim Panel Report, para. 80. 
251 Philippines' comments on the Interim Panel Report, para. 81. 
252 Philippines' comments on the Interim Panel Report, para. 82. 
253 Philippines' comments on the Interim Panel Report, paras. 83-84. 
254 Thailand's comments on the Philippines' comments on the Interim Panel Report, para. 4. 
255 Thailand's comments on the Philippines' comments on the Interim Panel Report, para. 7. 
256 Thailand's comments on the Philippines' comments on the Interim Panel Report, paras. 7-8. WT/DS371/R 
Page 100  
 
  mere existence" of such a gap was not automatic pr oof of an inconsistency with the obligation under 
Article III:2.
257  
6.95 First, the Panel  notes that the May 2009 MRSP Notice w as issued during the course of these 
proceedings, so after the establishment of this Pa nel. As the Philippines and Thailand note, during the 
proceedings, the Philippines specifically requested the Panel not to rule on this MRSP Notice, and it 
did not change its stance until its comments on the Interim Panel Report.258  The Panel agrees with 
Thailand that the due process rights of  Thailand would not be respected if  the Panel were to decide to 
rule on the May 2009 MRSP Notice only at this stage,  since the parties have not been able to put 
forward substantive arguments and/or evidence regard ing this Notice.  In particular, given that the 
May 2009 MRSP Notice did not exist at the time of  the establishment of the Panel and came into 
existence only during the course of this proceedi ng, the Philippines should have put forward robust 
arguments if it intended to make a claim with respect to this Notice. 
6.96 Further, the Philippines argues that in its anal ysis, the Panel has focused on situations where 
Thailand has been unable to provide an explan ation for a gap between the MRSP and RRSP for 
imported cigarettes, and that such a gap also exists for the May 2009 MRSP for Marlboro , and 
Thailand has been unable to explain this gap.259  As Thailand points out, however, the Philippines' 
understanding of the Panel's analysis of the Philippine s' claim with respect to  the concerned MRSPs in 
this dispute is not correct.  As stated in paragr aphs 7.488 and 7.489 of the Interim Panel Report, we 
rather found that "the mere existence" of a ga p between the MRSP and RRSP was not automatic proof 
of an inconsistency with th e obligation under Article III:2.260 
6.97 Therefore, the Panel rejects the request by the Philippines to rule on the May 2009 MRSP 
Notice.  However, we agree that our decision not to examine the May 2009 MRSP Notice still needs 
to be explained.  We have a dded paragraph 7.420 to reflect our decision in this regard.  
2. VAT exemption for re-sales of domestic cigarettes (paragraphs 7.629 to 7.634) – 
Thailand's comments 
6.98 In paragraphs 7.629-7.634 of the Interim Pane l Report, the Panel considered whether "input 
tax credits under the Thai regulations are gran ted automatically and simultaneously with the 
obligation to pay output taxes in every case so as not to create even the potential risk of an excess tax 
for imported cigarettes".261  The Panel concluded that Thailand's input tax/output tax VAT system for 
resale of imported cigarettes gave rise to a "pot ential liability [that] does not exist for domestic 
cigarette resellers under the Thai law [and] le ads to excess taxation for imported cigarettes and 
consequently a de jure violation of the first sentence of Article III:2".262  Thailand requests review of 
this section of the Interim Panel Repor t, for the reasons provided below. 
6.99 First, Thailand states that while in paragraph 7.631 the Panel notes that resellers must submit 
a form Por.Por.30 in order to receive an input tax credit263, it fails to point out that resellers do not 
incur the liability for output tax until they file the same form Por.Por.30.  Thus, no liability for output 
tax collected can arise before th e time at which the importer applies for and obtains its input tax 
                                                      
257 Thailand's comments on the Philippines' comments on the Interim Panel Report, paras. 9-10. 
258 Philippines' second written submission, paras. 431 and 434. 
259 Philippines' comments on the Interim Panel Report, para. 81. 
260 Interim Panel Report, para. 7.488. 
261 Interim Panel Report, para. 7.629.   
262 Interim Panel Report, para. 7.634. 
263 Interim Panel Report, para. 7.631.  WT/DS371/R 
 Page 101 
 
 
  credit.264  Thailand requests that the Panel clarify its description of the system to reflect this factual 
point correctly. 
6.100  Second, Thailand takes issue with the assertion th at a "potential risk of excess taxation" as 
identified by the Panel can give rise to excess taxation on the resale of imported cigarettes. The Panel describes this potential risk as stemming both from the f act that a form has to be filed by resellers of 
imported cigarettes to apply for VAT credits, and that  there are circumstances in which this credit 
may not be granted. Thailand argues that this risk either does not exist or, alternatively, cannot give 
rise to a violation of Article III:2.
265  Thailand then puts forward several arguments to support this 
statement: 
6.101  Thailand first asserts that once resellers submit the form Por.Por.30, they have a "right" and 
are "entitled" to an input tax credit.266  Consequently, Thailand argues that there can be neither a 
"risk" of excess taxation compared to the VAT imposed for resale of domestic cigarettes nor a corollary violation of Article III:2,  first sentence.  Instead, there is, at most, a difference in reporting 
requirements that ought to be addressed under Article  III:4, rather than Article III:2, first sentence.
267  
6.102  Moreover, the essential element of the Panel's fi nding of a "risk of excess taxation" appears to 
be the circumstance in which a reseller does not  receive a tax credit that it claimed on form 
Por.Por.30. In its analysis, however, the Panel omit s to include Thailand's explanation that this can 
only happen in circumstances in which the reseller is not  able to show that the claimed input tax credit 
relates to an actual purchase of imported cigarettes.268 Hence, the evidence regarding the availability 
of input tax credits for legitimate, documente d purchases of imported cigarettes does not support a 
finding that there is a "risk" that resellers may not obtain a credit with respect to these transactions, 
and Thailand requests the Panel to revise the Inte rim Panel Report to reflect Thailand's arguments on 
this issue. 
6.103  Thailand further notes that the Panel seems to suggest that the requirement to file form 
Por.Por.30 can, in itself, give rise to a violation of Article III:2, first sentence.269 Since, as explained 
above, there is no actual risk of losing the tax cr edit,  Thailand sees no basis on which a requirement 
to file a VAT tax report can, in itself, constitute a violation of Article III:2, first sentence.  Instead, 
this is an issue to be addressed under Article III:4.270  
6.104  In this context, Thailand notes that the requireme nt of a private action in the form of filing 
input/output VAT tax reports to obtain input tax cr edits against output tax VAT liability is a common 
feature of many WTO Members' VAT systems. Under these systems, importers risk losing credits if they do not file their input tax credit claims. In it s final report, the Panel may wish to clarify whether 
these VAT systems are consistent with Article III:2, first sentence, under its ruling. 
6.105  Finally, Thailand notes that once the Panel finds the reporting requirements to be inconsistent 
with Article III:4, there appears to be little fu rther purpose to be served by considering these 
requirements under Article III:2.  In these circumstances, it may be appropriate for the Panel to 
                                                     
 
264 Thailand's comments on the Interim Panel Report, para. 38. 
265 Interim Panel Report, para. 7.629. 
266 Thailand's 8 December 2009 comments, para. 75; Interim Panel Report, para. 7.613. 
267 Thailand's comments on the Interim Panel Report, para. 39. 
268 Thailand's comments on the Interim Panel Report, para. 40, referring to its comments of 8 
December 2009, paras. 77-83. 
269 Thailand's comments on the Interim Panel Report, para. 42, referring to para. 7.633 of the Interim 
Panel Report: "... the failure to comp ly with these obligations  will in turn deprive importers of tax credits 
necessary to offset their VAT liability...". 
270 Thailand's comments on the Interim Panel Report, para. 42. WT/DS371/R 
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  exercise judicial economy in its final report with respect to the Philippines'  claim under Article III:2, 
first sentence.
271   
6.106  In response to Thailand's request that the Pa nel clarify in paragraph 7.631 that no VAT 
liability arises for the resale of imported ci garettes until form Por.Por.30 is filed, the  Philippines  
presents two arguments. First, the Philippines under lines that this assertion is contrary to Thai law 
which states that tax liability for the sale of goods arises as a results of acts such as: "the delivery of 
goods"; "when payment of price becomes due for each payment period"; "when the agent delivers 
goods to the purchaser"; and so on.272 Moreover, Section 82/4, para. 1 of the Thai Revenue Code 
provides that a "registrant shall collect value a dded tax from a purchaser of goods or a recipient of 
services at the time the liability to value added tax arises".273  In other words, under Thai law, VAT 
liability does not arise when filing a form but at an earlier point in a sales transaction ( e.g., upon 
delivery, payment, or transfer of ownership).274  Second, Thailand appears to imply that a failure to 
file form Por.Por.30 would enable the reseller to  avoid taxation altogether. The Philippines however 
notes that such evasion would constitute a breach of Section 83 of the Thai Revenue Code and thereby 
be sanctioned pursuant to Section 89(2) of the Code  with a "penalty ... twice the amount of tax 
payable or remittable in the tax month".275 However, the Philippines does not object to a minor change 
in the wording of paragraph 7.631 to clarify that fo rm Por.Por.30 is also used to request a tax credit. 
6.107  Furthermore, concerning Thailand's assertion that a potential risk of excess taxation as 
identified by the Panel, does not exist or cannot give  rise to a violation of Article III:2, first sentence 
of the GATT 1994276, the Philippines contends that the Panel correctly relied on previous Appellate 
Body and GATT interpretations to the effect that  the mere possibility or risk of discriminatory 
treatment is sufficient to violate Article III:2, first sentence.277  The Philippines argues that the Panel 
may support its findings furthe r by citing the panel in US – Exports Restraints , which made clear that 
for a violation of Article III:2, it suffices to show that discrimination will arise in certain defined 
circumstances .278  
6.108  Subsequently, the Philippines argues that a pot ential risk of excess taxation for imported 
cigarettes does exist.279 To rebut Thailand's argument that th ere is no excess taxation because resellers 
of imported cigarettes are "entitled"280 to a refund, the Philippines argu es that the Panel has correctly 
examined and rejected Thailand's arguments, deciding that a reseller would be taxed in excess if it 
failed to file the form, or subsequently failed to prove that the purchase took place.281   
                                                      
271 Thailand's comments on the Interim Panel Report, para. 44. 
272 Philippines' comments on Thailand's comments on the Interim Panel Report, para. 88, referring to 
several sections of the Thai Revenue Code in Exhibit PHL-94. 
273 Philippines' comments on Thailand's comments on the Interim Panel Report, para. 88, referring to 
the Thai Revenue Code, Chapter IV, Division 2, Section 82/4, para. 1, Exhibit PHL-94. 
274 Philippines' comments on Thailand's comments on the Interim Panel Report, para. 88. 
275 Philippines' comments on Thailand's comments on the Interim Panel Report para. 89, referring to 
Exhibit PHL-94. 
276 Philippines' comments on Thailand's comments on  the Interim Panel Report paras. 74-76. 
277 Philippines' comments on Thailand's comments on the Interim Panel Report para. 75, referring to 
paras. 7.622-7.624 of the Interim Panel Report, citing Appellate Body Report, US – Section 211 Appropriations 
Act, Panel Report, US – Tobacco , and Panel Report, US  – Section 337  Tariff Act.  
278 Philippines' comments on Thailand's comments on the Interim Panel Report para. 76, referring to 
Panel Report, US – Exports Restraints , para. 8.78. 
279 Philippines' comments on Thailand's comments on the Interim Panel Report, para. 61. 
280 Interim Panel Report, para. 7.613. 
281 Philippines' comments on Thailand's comments on the Interim Panel Report, para. 62, referring to 
para. 7.631of the Interim Panel Report.  WT/DS371/R 
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  6.109  Likewise, according to the Philippines, the Pane l correctly rejected Thailand's argument that 
only the failure of a reseller – a private party – to  secure a tax credit can trigger excess taxation. The 
Panel indeed explained that Thai laws and regulations at issue, rather than so lely the action of private 
parties, gave rise to obligations for resellers of imported cigarettes only. In particular, the Philippines 
contends that the Panel correctly relied on the Appellate Body's statement in Korea – Various 
Measures on Beef  that "the intervention of some element of private choice does not relieve [a WTO 
Member] of responsibility under the GATT 1994 fo r the resulting establishment of competitive 
conditions less favourable for the imported product than for the domestic product".282 In this vein, the 
Philippines agrees with the Panel's approach rejec ting Thailand's argument that VAT liability imposed 
on resale of imported cigarettes may be offset by a tax credit so as to be in compliance with 
Article III:2, first sentence.283  In addition, the Philippines states that the Panel may want to consider 
to modify the text of paragraphs 7.63 3-7.634 to clarify its point even more. 
6.110  Moreover, the Philippines states that in para graph 7.633, the Panel has also answered 
Thailand's concern that Thailand's VAT exemption system, not the simple requirement to file 
Por.Por.30, establishes an additional tax liability c ontrary to Article III:2, first sentence of the 
GATT 1994.284  
6.111  Finally, the Philippines states that other WTO Members' VAT systems have no bearing on the 
WTO-inconsistency of Thailand's de jure  discriminatory treatment of the resale of imported 
cigarettes.  
6.112  First, regarding Thailand's argument that the Pa nel failed to point out that resellers do not 
incur the liability for output tax until they file (the same) form Por.Por.30, the  Panel  notes that its 
factual description of the imposition of VAT on ciga rettes resellers in Tha iland is provided in 
paragraphs 7.573-7.580 and 7.584-7.589  of the Interim Panel Report.285  Under Thai law, specifically 
Section 82/7 of Division 6 of the Thai Revenue C ode, every VAT registrant cigarette reseller is 
required to collect VAT from the purchaser in resp ect of every stage of sale.  Accordingly, all 
cigarette resellers in the distribution chain incu r VAT liabilities.  Further, when considering the 
applicable provisions of the Thai Revenue Code,286 it appears that VAT liability does not arise when 
filing a form but at an earlier point in a sales transaction.   
6.113  We also observed the manner in which a fina l VAT liability is determined based on the 
difference between output tax (sale to purchaser) a nd input tax credit (purchase from reseller) in the 
paragraphs cited above.  In our view, Thailand's argument that resellers do not incur the liability for 
output tax until they file form Por.Por.30 pertains more to the administrative steps linked to the 
imposition of VAT for imported cigare tte resellers than to the tax lia bility itself that arises upon the 
sale of imported cigarettes. To that extent, the Pa nel agrees with the Philippines that Thailand's 
argument would appear to imply that no tax liability arises so long as no form is filed.  Hence, the 
Panel does not find that Thai law supports the statemen t that no liability for output tax collected arises 
before the importer applies for and obtains its input  tax credit by filing form Por.Por.30.  However, 
                                                      
282 Philippines' comments on Thailand's comments on the Interim Panel Report paras. 66 and 67, 
referring to para. 7.734 of the Interim Panel Report, and citing Appellate Body Report, Korea – Various 
Measures on Beef , para. 146. 
283 Philippines comments on Thailand's comments on the Interim Panel Report para. 68. 
284 Philippines' comments on Thailand's comments on the Interim Panel Report, paras. 64-65, referring 
to para. 7.633 of the Interim Panel Report. 
285 We note that neither party has provided any comments on the Panel's description of the Thai VAT 
system as set forth in these paragraphs. 
286 Thai Revenue Code, Chapter IV, Division 2, Sections 78 and Division 6, Sections 82/4 and 82/7, 
Exhibit PHL-94.  For example, Section 78(1) of the Revenue Code states that tax liability on the sale of goods 
arises upon the delivery of the goods. WT/DS371/R 
Page 104  
 
  the Panel accepts that with the sa me form Por.Por.30, the importer can  request for a tax credit.  The 
Panel has changed the text of para graph 7.631 to clarify this point. 
6.114  Second, regarding Thailand's comment that the "potential risk of excess taxation" identified 
by the Panel either does not exist or, alternatively, cannot give rise to a violation of Article III:2, the 
Panel is of the opinion that this potential risk does exist and that a potential risk can give rise to a 
violation of Article III:2.   
6.115  In relation to "potential risks", as was stated in  paragraphs 7.622-7.62 4 of the Interim Panel 
Report, the Appellate Body in US – Section 211 Appropriations Act  and the GATT Panels in US – 
Tobacco and US – Section 337 Tariff Act  explained that the national treatment obligation assumed 
under Article III:4 also applies to the mere possibility of risk of discriminatory treatment of imported 
goods, and we considered this finding to be of e qual relevance for the national treatment obligation 
under Article III:2.  We therefore confirm our opinion  that a potential risk of excess taxation can give 
rise to excess taxation under Article III:2.
287   
6.116  Regarding the existence of a potential "risk" of  excess taxation, Thailand puts forward, that 
resellers have a "right" or "entitlement" to an input tax credit and therefore no such "risk" exists.  The 
Panel confirms that it did address this specific asp ect of Thailand's arguments in its Interim Panel 
Report.  First, in paragraphs 7.61 3, 7.621 and 7.627 of the Interim Panel Report, the Panel refers to 
Thailand's argument that when filing form Por.Por.30,  a reseller is "entitled" to an input tax refund, 
however in paragraph 7.631 it makes clear that from the information available, it concludes that the 
reseller of imported cigarettes is indeed entitled to receive a tax credit, but it will not receive this 
credit, if it does not submit form Por.Por.30 or if it is not able to prove that the purchase took place 
despite the submission of the form.  Therefore, alt hough a reseller has a "right" to obtain a tax refund, 
in our view, the reseller will not be able to obtain  that refund automatically, without taking any further 
procedural steps.288  Second, Thailand claims that in discussing the fact that in certain circumstances 
the reseller will not receive a tax credit although he submitted form Por.Por.30, the Panel did not 
address Thailand's explanation that th is only happens in cases in which th e reseller is not able to prove 
that the claimed input tax credit relates to an actual purchase of imported cigarettes.  The Panel 
considers that it did specifically address Thailand' s explanation in paragraphs 7.633-7.634 of the 
Interim Panel Report.  However, the Panel has clar ified the content of these paragraphs by slightly 
modifying their text. 
6.117  Thailand also noted that in paragraph 7.633, the Panel appears to state that the requirement to 
file the form Por.Por.30 can, in itsel f, give rise to a violation of Article III:2, first sentence, as it states 
that "the failure to comply with these obligations  will in turn deprive importers of tax credits 
necessary to offset their VAT liability".289  We do not agree with Thailand's reading of this paragraph, 
as the sentence that follows states that this potential liability does not exist for resellers of domestic 
cigarettes, and it is this difference that establishe s the additional liability for resellers of imported 
cigarettes.  Hence, we consider that this issu e was correctly addressed under Article III:2, but to 
clarify our point, we made the necess ary amendments to paragraph 7.633. 
                                                      
287 Moreover, we agree with the Philippines that our conclusion is also supported by the panel's 
reasoning in US – Export  Restraint  that a measure is inconsistent with WTO obligations if it "mandates action 
inconsistent with WTO rules in particular circumstances, even in other circumstances the action might not be 
inconsistent with WTO rules".  In other words, to es tablish a violation of Article III:2, it suffices if 
discrimination will arise in defined  circumstances .  In this dispute, discrimination arises in defined 
circumstances, namely, whenever a reseller of imported ciga rettes is unable to secure a tax credit to offset its 
discriminatory tax liability (Panel report on US – Export Restraints , para. 8.78). 
288 See also para. 7.632 of the Interim Panel Report. 
289 Thailand's comments on the Interim Panel Report, para. 42, referring to para. 7.633 of the Panel 
Report.  WT/DS371/R 
 Page 105 
 
 
  6.118  Further, the Panel does not agree with Thaila nd's statement that the Panel has to clarify 
whether other WTO Members' VAT systems in which impor ters risk losing credits if they do not file 
their input tax credit claims are consistent with Artic le III:2, first sentence, under its ruling.  First, as 
we explained in paragraph 7.604, we are not stating th at the existence of a tax credit system as such is 
inconsistent with Article III:2 of the GATT, in stead what "distinguished the VAT-related measures 
maintained by Thailand from other so-called normal VAT measures is ... the VAT exemption accorded 
to domestic cigarettes only " (emphasis added).  Second, there is  no need for the Panel to clarify 
whether its ruling with respect to Article III:2 of the GATT 1994 in this dispute concerning Thailand's 
de jure  discriminatory VAT system applies to other WTO Members' VAT systems for two reasons: 
first, as a matter of law, the Panel's terms of refe rence are limited to the measures specified in the 
Panel Request and the Panel's report is solely bind ing upon the parties to this dispute. Second, as a 
matter of fact, the examples of other WTO Member 's VAT system have no bearing on the Panel's 
analysis of Thailand's de jure  tax exemption, because there is no evidence that any of these Members 
exempts resale of domestic cigarettes from VAT, while not providing the same exemption for resale of imported cigarettes.
290  
6.119  For these reasons, we consider that a potential risk of excess taxation exists under the Thai 
VAT system, which can give rise to a violation of Article III:2, first sentence. 
6.120  Finally, we consider Thailand's statement that if the Panel finds the reporting requirements to 
be inconsistent with Article III:4,  it might consider exercising judicial economy with respect to the 
Philippines' claim under Article III:2, first sentence.  We note in this respect the statement by the 
Appellate Body in Australia – Salmon that: "[t]he principle of judicial economy has to be applied 
keeping in mind the aim of the dispute settlement sy stem. This aim is to r esolve the matter at issue 
and "to secure a positive solution to a dispute. ... A panel has to address those claims on which a 
finding is necessary in order to enable the DS B 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".291  In the light of the 
Appellate Body's guidance, we must consider wh ether separate findings on the Philippines' claims 
under Article III:2, first sentence and Article III:4 are necessary for the DSB to make sufficiently 
precise recommendations and rulings, or whether only findings on Article III:4 would be enough.  We 
are of the view that the Philippines' claim unde r Article III:2 addresses an obligation that is 
distinguished from that under Article III:4.  It also pe rtains to different aspects of the Thai measures at 
issue.  For example, under Article III:2, what is at issue is whether the VAT exemption on the resale 
of domestic cigarettes leads to an excess VAT liability  for the resale of imported cigarettes; while the 
Philippines' claim under Article III:4 goes to the question of whether the Thai administrative 
requirements lead to an additional administrative burden  on resellers of imported cigarettes and 
consequently less favourable treatment for importe d cigarettes.  Therefore, we decline to accept 
Thailand's request that the Panel exercise judicial  economy with respect to the Philippines' claim 
under Article III:2, first sentence.  
D. ARTICLE  III:4,  FIRST SENTENCE OF THE GATT 1994  – THAILAND 'S COMMENTS  
1. Form Por.Por.30 reporting requirements 
6.121  In paragraph 7.698 of the Interim Panel Report, the Panel concluded that  resellers of imported 
cigarettes are subject to a heavier administrative bur den in respect of the obligation to complete and 
submit form Por.Por.30 in part because "a suppl ier who is a VAT registrant need not include 
                                                      
290 This argument was made by the Philippines in its comments on Thailand's comments on the Interim 
Panel Report paras. 77-84, referring to Interim Panel Report, paras. 7.604 and 7.629-7.634, also referring to 
Section 81(1)(v) of the Thai Revenue Code, Exhibit PHL-94. 
291 Appellate Body Report, Australia – Salmon , para. 223. WT/DS371/R 
Page 106  
 
  information on sales of domestic cigarettes in comp leting form Por.Por.30".  Thailand provided its 
comments on certain aspects of the Panel's analysis a nd conclusion in this regard .  We address them in 
turn. 
(a) The Panel's reliance on the expert testimony provided in Exhibit PHL-289 for the purpose of 
its conclusion in paragraph 7.69 8 of the Interim Panel Report. 
6.122  Thailand  submits that the Panel cannot make an objective and impartial assessment of the 
facts within the meaning of Article 11 of the DSU based on evidence provided by the Philippines only "at the last opportunity afforded to the parties to submit their views".
292  Thailand therefore requests 
the Panel not to take into account this evidence.  Paragraph 15 of the Panel's working procedures 
provided that all evidence, other than rebuttal eviden ce, was to be provided "to the Panel no later than 
the first substantive meeting, except with resp ect to factual evidence necessary for purposes of 
rebuttals, answers to questions or comments on an swers provided by each other". Thailand points to 
the Panel's understanding that the expert testimony  submitted by the Philippines is the only evidence 
relating to the alleged change in DG Excise's prac tice regarding the recording of VAT exempt sales in 
line 3 of form Por.Por.30. Given also that the Philippines had numerous oppo rtunities to submit this 
expert testimony293 earlier in the proceedings, which would have allowed Thailand to timely respond, 
Thailand argues that its due process rights would be denied if the Panel used this evidence for its 
determination.294 
6.123  The Philippines does not deny that it has submitted its expert opinion in Exhibit PHL-289 at 
the latest stage of the proceedings such that Th ailand had no further opportuni ty to respond in this 
regard. Nonetheless, the Philippines offers a histor y of Thailand's position rega rding form Por.Por.30 
throughout the panel proceedings to show two thi ngs: first, Thailand's position shifted, as it first 
considered in its first written submission that "r etailers that deal exclusively in VAT-exempt 
cigarettes are not required to submit and maintain [form Por.Por.30]"295, while it later contended that 
"sales exempted from VAT are reported in line 3 [of Por.Por.30], including sales of domestic cigarettes"
296; second, the Philippines contends that the Philippines submitted its expert opinion only 
at the latest stage of the proceeding in orde r to rebut the 1995 DG Revenue ruling which Thailand 
submitted only in its written responses to the Panel ques tions after the second substantive meeting.  In 
this regard the Philippines underlines that Thailand had many opportunities to submit this evidence earlier on, which would have allowed the Philippines to  present its rebuttal evidence at an earlier stage 
too. Thus, Thailand, not the Philippines, is respons ible for the late submis sion of the Philippines' 
expert opinion.  This evidence can therefore be fully taken into account by the Panel.
297 
6.124  The Panel notes Thailand's position that the expert opinion provided by the Philippines as 
Exhibit PHL-289 was submitted at the latest stage of the proceedings (i.e. comments on each other's 
written responses to the Panel questions after th e second substantive meeting), which deprived 
Thailand of an opportunity to respond.  Thailand is th us of the view that this  evidence is inadmissible 
and should not be taken into account  by the Panel for the purpose of its analysis and conclusions.  
6.125  However, there are no provisions in the DS U or the Panel's Working Procedures that 
unconditionally preclude the Panel from accepting evidence submitted by a party at the latest stage of the proceedings.  Article 11 of the DSU requires th e Panel to make an objective assessment of the 
                                                     
 
292 Thailand's comments on the Interim Panel Report, para. 48. 
293 Exhibit PHL-289. 
294 Thailand's comments on the Interim Panel Report, para. 48, referring to Appellate Body Report, 
Australia – Salmon , para. 272. 
295 Thailand's first written submission, para. 258. 
296 Thailand's response to Panel question No. 51. 
297 Philippines' comments on Thailand's comments on  the Interim Panel Report, paras. 93-95.  WT/DS371/R 
 Page 107 
 
 
  matter before it, including an objective assessment of  the facts of the case. In this context, the 
Appellate Body in Argentina – Textiles and Apparel  stated that "Article 11 of the DSU does not 
establish time limits for the submission of evidence to a panel."298  Further, the Appellate Body noted 
that "the Working Procedures in their present form do not constrain panels with hard and fast rules on 
deadlines for submitting evidence".299 
6.126  For the purpose of the current Panel proceedi ngs, paragraph 15 of the Panel's Working 
Procedures establishes that all evid ence, other than rebuttal evidence, was to be provided to the Panel 
no later than the first substantive meeting, except  with respect to factual evidence for purposes of 
rebuttals, answers to questions or comments on an swers provided by each other". Thailand submitted 
a new piece of evidence, namely the 1995 DG Revenue  Ruling as part of its response to the Panel's 
questions after the second substantive meeting.  E ach party was subsequently granted the possibility 
to submit comments on each other's responses pursu ant to paragraph 9 of the Panel's Working 
Procedures. In an attempt to rebut Thaila nd's argument on the 1995 DG Revenue ruling, the 
Philippines then submitted the concerned expert opinion.  
6.127  We note that the first sentence of this opinion reads "I have been asked to provide an opinion 
on [the 1995 DG Revenue Ruling]", suggesting that the intended purpose of this evidence was to 
rebut Thailand's arguments in relation to this ruling.  Therefore, to the extent  that the Panel's Working 
Procedures envisaged the submission of evidence at a later stage than the first substantive meeting 
when it could be characterized as rebuttal evidence, or comments on answers provided by parties, we 
are of the view that the concerned expert opinion  submitted by the Philippines falls within the scope 
of such evidence.   
6.128  In the light of this, and notwithstanding a gene ral preference to receive evidence at an early 
stage of the panel proceeding rather than at a later or the last stage of the proceeding, we confirm our 
view that accepting the Philippines' evidence that was provided as part of its comments on Thailand's 
response to Panel question No. 142 was in accordance with paragraph 15  of the Working Procedures.  
The Panel therefore declines to accept Thailand's request. 
(b) The Panel's assessment of all the evidence su bmitted by Thailand for the purpose of its 
analysis and conclusion in paragraphs 7.694-7.698 of the Interim Panel Report 
6.129  Thailand  submits that the Panel is incorrect in  suggesting that Thailand adduced only two 
pieces of evidence (namely the Textbook on the Revenue Code ,300 and a 1995 DG Revenue Ruling301) 
to support its position that exempted sales must be reported in line 3 ("exempted sales") of form Por.Por.30.  In addition to these two pieces of ev idence referred to by the Panel, Thailand provided 
the instructions for form Por.Por.30, which ma ke unambiguously clear that in completing line 3 
("exempted sales") in the form, "a taxpayer shall f ill [in] the amount of exempted sales that [are] 
reported in [its] revenue account". Those instructi ons clearly state that the amounts corresponding to 
the sale of VAT exempt products must be reported in line 3 of form Por.Por.30. Nonetheless, the 
Panel has not provided any analysis for its choice not to interpret those official instructions to mean 
what they plainly state on their face.
302 Thailand also submits that samples of form Por.Por.30 which 
it provided303 – forms filled out by TTM and a convenience store that sells both imported and 
domestic products, as well as other products – indicate that sales exempted of VAT must be reported 
                                                      
298 Appellate Body Report, Argentina – Textiles and Apparel , para. 79.  
299 Appellate Body Report, Argentina – Textiles and Apparel , para. 80.  
300 Exhibit THA-95. 
301 Exhibit THA-96. 
302 Thailand's comments on the Interim Panel Report, para. 49. 
303 Exhibit THA-89. WT/DS371/R 
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  in line 3 of form Por.Por.30, even though the form does not require a breakdown of these amounts.
304 
Accordingly, Thailand requests the Pa nel to revise paragraphs 7.694 et seq. of the Interim Panel 
Report to refer to and to address these additional pieces of evidence. 
6.130  The Philippines  contends that the Panel has duly taken into account all the evidence before it 
in relation to form Por.Por.30. In particular, the Philippines stresses that the instructions for form 
Por.Por.30 were addressed by the Panel at para graph 7.690 of the Interim Panel Report where the 
Panel found that "[t]he introductory statement containe d in the instructions for filling in and the filing 
of Por.Por.30 attached to form Por.Por.30 also confirms [the] understanding [that] the obligation to 
file [this] form hinges on the supplier's status as a VAT registrant, not the specific type of goods".305 
Similarly, the Philippines states that the Panel pr operly took into account the form filled in by TTM 
and a convenience store submitted as Exhibit THA-89. In particular, at footnote 1033 to 
paragraph 7.694, the Panel noted that sample fo rms Por.Por.30 had been submitted by Thailand, 
including those in Exhibit THA-89, but that those pieces did not inform it on which exempted sales  
must be recorded in line 3 of the form.306 Overall therefore, the Panel has taken into account all the 
evidence before it to decide that resellers of both domestic and imported cigarettes would not have to 
report the sale of domestic cigarettes under line 3 of Form Por.Por.30 which the Philippines had 
explained to be reserved to amounts that are exem pted from the VAT tax base pursuant to Section 79, 
third paragraph of the Revenue Code307 (PHL-94) and Notification No.40.308 In this vein, the Panel 
considered all of (i) the text of form Por.Por.30, (ii) the Thai Revenue Code, (iii) the excerpt of the 
Textbook on the Revenue Code, (iv) the 1995 DG ru ling, (v) the 2000 DG Ruling and (vi) expert 
statements about the meaning of the phrase "less ex empted if any" in line 3 of Form Por.Por.30.309  
The Philippines suggests that the Panel slightly modify the current text of the relevant sections in this 
regard to clarify that it consid ered all the evidence before it.310 
6.131  Thailand submits that the Panel failed to cons ider the sample Por.Por.30 forms produced by 
Thailand as Exhibit THA-89 and the instructions to fill Form Por.Por.30 provided as Exhibit THA-42.  The Panel , however, concluded, based on its examination of  all the relevant evidence, that they do not 
clearly establish that the amount corresponding to the retail sale of domestic cigarettes must be 
reported in line 3 of the form. 
6.132  Specifically, regarding the instructions to fill out Form Por.Por.30, based on the text of the 
instructions and having considered the parties' argu ments, we could not find any clear indication that 
the sale of domestic cigarettes falls within the scope of the category of sales that must be reported in line 3 of form Por.Por.30.  Further, we found that  the two sample Por.Por.30 forms filled out by TTM 
and a convenience store selling domestic cigarettes as well as other goods did not clarify whether 
VAT-exempt sales reported in line 3 specifically correspond to the sale of domestic cigarettes.  
6.133  In light of the above considerations, the Panel h as decided to maintain its current analysis and 
conclusions.  We have nonetheless revised the relevant  paragraphs to further clarify our reasoning in 
this regard. 
                                                     
 
304 Thailand's comments on the Interim Panel Report, paras. 49 and 50. 
305 Philippines' comments on Thailand's comments on the Interim Panel Report, para. 124. 
306 Philippines' comments on Thailand's comments on the Interim Panel Report, para. 133. 
307 Exhibit PHL-94. 
308 Philippines' comments on Thailand's comments on the Interim Panel Report, para. 128, referring to 
Exhibit PHL-283. 
309 Philippines' comments on Thailand's comments on the Interim Panel Report, para. 130. 
310 Philippines' comments on Thailand's comments on the Interim Panel Report, paras. 132 and 135.  WT/DS371/R 
 Page 109 
 
 
  (c) The Panel's analysis of certain evidence submitted by Thailand for the purpose of 
paragraphs 7.694-7.698 of the Interim Panel Report. 
6.134  Thailand  argues that the Panel's analysis of some evidence regarding the alleged change in 
reporting practice does not fully or accurately reflec t the content of that ev idence. Specifically, the 
Panel misinterpreted the evidence related to the 2000 DG Revenue ruling submitted by the 
Philippines311, and failed to substantiate its rejection of arguments based on an excerpt from a 
Textbook submitted by Thailand.312 
6.135  First, Thailand considers that the Panel fa iled to adequately discuss the 2000 DG Revenue 
ruling submitted by the Philippines as Exhibit PHL-253 because a careful analysis of this evidence 
does not support the Philippines' explanations.313  Thailand submits that the 2000 DG Revenue ruling 
presented two questions: (i) whether income from legal advocacy services was exempt from VAT 
under Section 81(1)(i) of the Revenue Code, and (ii) whether "in submitting and paying VAT the 
company does not have to include the income fro m advocacy or defending the case in courts for 
calculation in order to pay for value added tax".314  These questions only relate to whether income 
from legal services was exempt from the VAT and, therefore, not included in the calculation  of the 
VAT.  Contrary to the Philippines' expert's statem ent therefore, these questions do not refer to what 
must be reported in lines 1 and 3 of form Por.Por.30 and the ruling does not make any direct reference 
to that issue. 
6.136  Thailand also notes that the calculation of VAT, to which the 2000 ruling actually relates, 
does not change depending on whether exempt sales are reported in lines 1 and 3 of Form Por.Por.30.  This is because, as the Panel's summary of form Por.Por.30 at paragraph 7.693 of the Interim Panel 
Report makes clear, the taxable sales amount is the amount reported in line 4 of sales net of exempted 
sales and sales at the 0% rate.  This amount will be  the same regardless of whether exempt sales are 
reported in lines 1 and 3.
315 
6.137  The Panel therefore mistakenly concluded that this evidence supported the view that the sale 
of VAT exempt cigarettes need not be reported in li ne 3 of form Por.Por.30.  In particular, the Panel 
based its conclusion that "DG Revenue, how ever, subsequently changed the rule ..."316 regarding the 
recording of VAT exempt sales from its past  practise as evidenced by the 1995 ruling317 on both the 
2000 ruling and the statement of the Philippines’ expe rt that the banks have "never been required" to 
include income from activities that are not subj ect to VAT such as th e income "from non-VAT 
banking services" in their VAT reporting. Given that the 2000 ruling makes no direct reference to form Por.Por.30, and that, in contrast, the 199 5 ruling on which Thailand relied expressly addressed 
the issue of what must be reported on lines 1 and 3 of form Por.Por.30 and expressly stated that "the 
company is required to include income arising fro m the transport of goods, which is a VAT-exempted 
activity, in the gross sales to be  shown in item 1 of form Por.Por.30 and this income is to be listed as 
exempted sales under item 3 of Form Por.Por.30"
318, Thailand requests the Panel to reconsider its 
conclusion that the amounts for the sales of VAT exem pt cigarettes do not have to be recorded in lines 
1 and 3 of form Por.Por.30.319  
                                                      
311 Exhibit PHL-253. 
312 Exhibit THA-95. 
313 Thailand's comments on the Interim Panel Report, para. 51. 
314 Exhibit PHL-253. 
315 Thailand's comments on the Interim Panel Report, para. 53. 
316 Interim Panel Report, para. 7.696. 
317 Exhibit THA-96. 
318 Thailand's comments on the Interim Panel Report, para. 55. 
319 Thailand's comments on the Interim Panel Report, para. 57. WT/DS371/R 
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  6.138  Further, Thailand argues that both the Panel and the Philippines’ expert appear to be 
confusing two types of income in their combined  readings of Section 77/2 and 79 of the Revenue 
Code  and the 2000 ruling discussed above. The first type is income that is not within the scope of the 
Thai VAT system because it is subject to another Thai tax, the Specific Business Tax, rather than 
VAT. This income is not subject to any kind of VAT reporting and, therefore, has never been required 
to be reported on form Por.Por.30.  This is clear from Section 77/3 of the Revenue Code.
320  I n  
contrast, income that is within the scope of the VAT system, including sales of cigarettes pursuant to 
Section 77/2 of the Revenue Code , is required to be reported on the appropriate line of form 
Por.Por.30. Contrary to the Panel’s discussion and the Philippines' expert's statement, as explained 
above, nothing in the 2000 ruling changed this.  Mo reover, the Panel and the Philippines’ expert are 
incorrect to refer to "Section 79 income" as a categor y of income which would need to be reported in 
form Por.Por.30, because Section 79 only deals with the tax b ase for VAT, not the VAT exempt 
income.321 
6.139  Accordingly, the Panel's statement in paragra ph 7.696 that (i) so-called "Section 79 income 
must be reported" and (ii) this re presents a change in practice with respect to the reporting of income 
that is within the scope of the VAT system but "exempt" on lines 1 and 3 of form Por.Por.30 is 
incorrect in both respects. Thailand requests the pa nel to reconsider its conclusion that the amounts 
for the sales of VAT-exempt cigarettes do not have  to be recorded in line 1 and 3 of form 
Por.Por.30.322 
6.140  Second, Thailand states that, even though the Pa nel referred to the excerpt from the leading 
textbook on the Thai Revenue Code, it did not ad equately discuss the content of this excerpt.323 This 
excerpt strongly supports Thailand's position as it mak es unequivocally clear that the "VAT registrant 
must report all sales occurring in a tax month in Form Por.Por.30, consisting of gross sales or services 
subject to the standard rate, sales and the zero rate, and sales exempted from VAT".324 The Panel 
chose not to rely on the excerpt arguing that, wh ile the textbook post-dated the 2000 Ruling submitted 
by the Philippines, it did not mention the change of  practice alleged by the Philippines' expert. The 
Panel failed to provide any other objective assessme nt of why the textbook would be inaccurate. In 
particular, the Panel failed to consider that the ch ange alleged by the Philippines may not have taken 
place, which would of course be a good reason why it  is not discussed in the concerned textbook. 
6.141  The Philippines  understands Thailand's comments to include  two types of arguments: (i) old  
and new arguments concerning the interpretation of  evidence related to the 2000 DG Revenue ruling 
and (ii) new arguments regarding the type of income to be reported in form Por.Por.30.  
6.142  Concerning the 2000 DG Revenue Ruling, the Philippi nes first replies to old arguments which 
it rebutted earlier in the proceedings.325  Thailand refers back to its arguments provided in its response 
to Panel question No. 142(2) that the 2000 DG Re venue Ruling does not directly address the issue 
whether sales of exempted cigarettes must be reported in line 3 of form Por.Por.30. The Philippines cites an excerpt from the ruling st ating that the "operator providing  such [VAT-exempt service] does 
not have to include the income received from such provision of service for calculation in order to pay 
the value added tax".
326 The Philippines explains that the word "calculation" must be understood to 
mean that the VAT-exempt amounts do not have to be reported under line 3 of form Por.Por.30 
because (i) the DG ruling answered the question "whe ther or not it is correct that submitting and 
                                                      
320 Exhibit PHL-94. 
321 Thailand's comments on the Interim Panel Report, para. 60. 
322 Thailand's comments on the Interim Panel Report, para. 57. 
323 Thailand's comments on the Interim Panel Report, para. 56. 
324 Exhibit THA-95. 
325 Philippines' comments on Thailand's comments on the Interim Panel Report, para. 130. 
326 Philippines comments on Thailand's response to Panel's question No. 142, paras. 277 and 288.  WT/DS371/R 
 Page 111 
 
 
  paying value added tax under form Por.Por.30 in respect of each tax month, the company does not 
have to include the income from [the sale of the VAT exempt service in question] for calculation  in 
order to pay for value added tax", which shows that  inclusion in the calculation and reporting in line 3 
of form Por.Por.30 were intertwined, and (ii) form Por.Por.30 is headed "VAT Calculation " and the 
form sets forth the registrant's calculation  for payment of the monthly VAT.327  
6.143  The Philippines is of the view therefore that th e Panel should reject Thailand's objection to the 
Panel's assessment that the 2000 DG Revenue ruling shows that the sale of products exempted from 
VAT do not have to be recorded in line 3 of form  Por.Por.30.  The Philippi nes considers in addition 
that the terms of the 2000 DG Revenue ruling are suff icient in themselves, without the clarifications 
from the expert opinion in Exhibit PHL-254, to sup port the Panel's findings. However, the Philippines 
would not object to the inclusion of "further discu ssion of the text of this ruling" as requested by 
Thailand.328 
6.144  The Philippines also addresses Thailand's new argument in relation to the 2000 DG Revenue 
ruling that, irrespective of whether the exempt sales ar e reported in form Por.Por.30, "the taxable sales 
amount ... will be the same".329 Through this argument Thailand seems to suggest that the more 
onerous administrative requirement of reporting th e sale of domestic cigarette would be acceptable 
because it does not affect the tax base. Thailand how ever confuses the obligations under Article III:4 
and Article III:2. 
6.145  Finally, the Philippines answers Thailand's new argument that the Panel and the Philippines 
confuse two types of income: income from non-VAT  (i.e. banking services exempted from VAT)  
banking services and income from the sale of domestic cigarettes. Thailand seems to make a 
particular reference to the Panel's finding that  "VAT registrants need not include income from 
VAT-exempt sales under Section 81, but must include income from VAT-liable sales that is exempt 
from the tax base under Section 79 in line 3 of form Por.Por.30".330 The Philippines argues that, in any 
case, income from "non-VAT banking services" and income from the resale of domestic cigarettes are both exempt from VAT, and, for that reason, need not be reported in lines 1 and 3 of form Por.Por.30.  
The Philippines contends that the fact that income from "non-VAT banking services" is subject to a 
specific business tax does not alter the fact that this is VAT-exempt income ,
331 and, thus, it needs not 
be reported in form Por.Por.30.332 
6.146  Regarding Thailand's request that the Panel's analysis and conclusion in paragraphs 7.694-
7.698 of the Interim Panel Report be modified because,  in its view, the Panel has failed to adequately 
examine both the evidence related to the 2000 DG Revenue ruling submitted by the Philippines and 
the excerpt from a textbook on the Reve nue Code submitted by Thailand, the Panel first notes that the 
evidence and explanations before it suggest that not all sales exempted from VAT should be reported 
on form Por.Por.30.   
6.147  In the Interim Report, we found that a 2000 DG Revenue ruling suggests that certain 
VAT-exempt amounts do not have to be "included for calculation in order to pay the value added tax" 
so that they do not have to be reported on Form Por.Por.30.  
                                                      
327 Philippines' comments on Thailand's comments on the Interim Panel Report, para. 140. 
328 Philippines' comments on Thailand's comments on the Interim Panel Report, para. 143. 
329 Philippines' comments on Thailand's comments on the Interim Panel Report, para. 144, referring to 
Thailand's comments on the Interim Panel Report, para. 53. 
330 Philippines' comments on Thailand's comments on the Interim Panel Report, para. 147. 
331 Exhibit PHL-94:  Thai Revenue Code, Chapter IV, Division 1, Section 77/3. 
332 Philippines' comments on Thailand's comments on the Interim Panel Report, para. 148. WT/DS371/R 
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  6.148  We note Thailand's argument that the 2000 DG Revenue ruling that VAT exempt amounts 
should not be included in the calculation only means that they should no t be counted towards line 4 of 
the form, but must otherwise be reported in lines 1 and 3.  Form Por.Por.30 includes line 1 ("sales 
amounts this month") and line 3 ("exempted sales").  Logically, an amount that would be included in 
line 1 in order to calculate VAT will be subject to th e subtraction of an amount included in line 3.  In 
other words, when an amount is added and then s ubtracted for the purpose of a VAT calculation, it 
has been included in the mathematical calculation of the VAT liability.  A contrario , if an amount 
need not be included for calculation in principle, it is neither added nor subtracted for the purpose of 
the calculation process. Thus, we understand that in  requiring that transactions exempted from VAT 
by virtue of Section 81(1)(i) of the Revenue Code be excluded from the calculation of the VAT 
payable, DG Revenue indicated that the amounts corresponding to those transaction need not be 
added in line 1, which consequently eliminates the need for it to be incl uded in line 3 of form 
Por.Por.30.  We therefore understand the 2000 DG Reve nue ruling to mean that the sale of domestic 
cigarettes, which is exempted from VAT under Section 81(1)(v) of the Revenue Code
333, need not be 
reported either in line 1 or in line 3 of Form Por.Por.30. 
6.149  Thailand further argues that the Panel334 and the Philippines335 confuse two different types of 
income (i.e. income exempted by virtue of Article 81 and income exempted by virtue of Article 77/3) 
and are both incorrect in considering that income  exempted from VAT under Section 79 of the Thai 
Revenue Code should be reported in Form Por. Por.30.  Specifically, Thailand points out that 
"Section 79 income" is a category of income that n eed not be reported in Form Por.Por.30, because 
Section 79 only deals with the tax base fo r VAT, not the VAT exempt income.   
6.150  Based on our understanding of the 2000 DG Re venue ruling as discussed above, however, we 
are not persuaded by Thailand's position that opera tions exempted from VAT under Section 77/3 need 
not be reported on form Por.Por.30 while operati ons exempted from VAT under Section 81 must be 
reported.  Furthermore, we are of the view, that even if Thailand's arguments were to be accepted, 
they relate to the identification of other cate gories of VAT-exempted products the sales for which 
need not be reported on form Por.Por.30.  In other wo rds, whether this other type of income must be 
reported or not does not answer the question whether the income from the sales of domestic cigarettes, 
which is exempted from VAT by virtue of Article 81( 1)(v) of the Revenue Code, has to be reported in 
Form Por.Por.30.  For the same reason, we do not  consider that Thailand's arguments relating to 
Section 77/3 of the Thai Revenue Code ar e relevant to the question before us. 336 
6.151  Regarding Thailand' comments that the Panel in correctly refers to "Section 79" income, the 
main point by the Panel's analysis in paragraph 7.6 96 is that its reading of an expert opinion submitted 
by the Philippines supported the understanding of the 2000 DG Revenue ruling as changing its past 
practice of requiring VAT-exempt income under Secti on 81 of the Revenue Code  to be reported in 
Form Por.Por.30.337  Although we did refer to the expert's vi ew that this change in practice also had 
                                                      
333 Philippines' first written submission, pa ra. 534, referring to Exhibit PHL-95. 
334 Interim Panel Report, para. 7.696. 
335 Philippines' comments on Thailand's answer to Panel question No. 142. 
336 Thailand's comments on the Interim Panel Report, paras. 57 and 58.  An expert opinion presented by 
the Philippines (Exhibit PHL-254) explains that income from non-VAT banking services does not have to be 
reported in form Por.Por.30, even when the operator al so carries banking activities subject to VAT. The expert 
then establishes an analogy between non-VAT banking services and the sale of domestic cigarettes, and 
concludes that the amounts corresponding to the sale of domestic cigarettes never have to be reported on Form 
Por.Por.30, even when the operator also carries busi ness subject to VAT. Thailand replies that this reasoning 
must fail because non-VAT banking services are exempt from VAT reporting requirements by virtue of  
Section 77/3 of the code, not Section 81. 
337 Philippines' comments on Thailand's answer to Panel question No. 142; Expert Statements by Mr. 
Piphob Veraphong, Exhibits PHL-207, PHL-254, and PHL-289, stating that "income from VAT-liable sales that 
is exempt from the tax base under Section 79 must be reported [in form Por.Por.30]".  WT/DS371/R 
 Page 113 
 
 
  the implication of requiring that any income exem pt from the tax base under Section 79 be reported 
[in Form Por.Por.30], we consider that issues relating to the existence or non-existence of a 
"Section 79" category of income are irrelevant to the question whether the sales of domestic cigarettes 
need to be reported in Form Por.Por.30.  As the Philippines submits, our reading of the 2000 DG 
Revenue ruling as submitted by the Philippines suffici ently shows that income exempted by virtue of 
Section 81 need not be calculated for the purpose of  deriving at VAT liability and thus consequently 
need not reported in Form Por.Por.30.   
6.152  Finally, Thailand takes the position that the Pane l failed to provide an objective assessment of 
the excerpt from a textbook submitted by Thailand as Exhibit THA-95.  This excerpt describes the 
obligation to file Form Por.Por.30 as one to "r eport all sales occurring in a tax month" and then 
"subtracting [...] sales exempted from VAT."  It also explains that "sales which are not within the 
scope of VAT" (for example, the sale of goods or th e provision of services outside Thailand) need not 
be reported on the Form Por.Por.30.  We consider  sufficient our examination of Thailand's arguments 
in this regard in paragraphs 7.694 to 7.698, and footnote 1038 of the Interim Panel Report.   
6.153  For the foregoing reasons, we decline to accept Thailand's request.  We have, however, made 
modifications to relevant paragraphs to clarif y the basis for our conclusion in this regard.  
(d) The Panel's weighing of the evidence relating to  the interpretation of Thailand's domestic law 
in reaching the conclusion in paragraph 7.698. 
6.154  Thailand  claims that the Panel incorrectly wei ghed the evidence before it concerning the 
requirements to file form Por.Por.30.  Thailand poi nts to the Panel's statement in paragraph 7.901 of 
the Interim Panel Report relating to an Article X:3(a) claim, to the effect that " in the absence of 
convincing evidence  to prove that the said Act also applies to a public company such as TTM, we do 
not have the authority to interpret a Member governm ent's law in a manner contrary to Thailand's 
explanation of its own law " (emphasis added). Given this sta ndard, Thailand requests the Panel to 
clarify how, in the context of the Philippines' clai m regarding the requirements to fill Por.Por.30, the 
expert's testimony provided by the Philippines as Exhibit PHL-283, which is unsupported by any 
other evidence, constitutes "convincing evidence" that would confer on the Panel authority to interpret 
the Por.Por.30 reporting requirements in a manner cont rary to Thailand's explanation of its own law in 
this instance.338  
6.155  The Philippines relies on the Appellate Body US – Carbon Steel  decision to argue that the 
meaning of municipal law has to be determined by panels as a question of fact, taking into account not 
only the assertions of the regulating country, but also, necessarily, evidence provided as grounds for 
those assertions (typically including judicial rulings, opinions of legal experts, writings of recognized 
scholars). In other words, the assertions of the regulating country do not enjoy a presumption of correctness unless they are supported by convincing evidence.
339 The Philippines contends that panels 
therefore have a margin of discretion in assessing th e evidence before them, which the Panel correctly 
used in its analysis of the form Por.Por.30 requirements.  
6.156  The Philippines therefore considers that the Pa nel's statement in paragraph 7.901 of the 
Interim Panel Report may not be fully in keeping with  the requirements of Article 11 of the DSU, as 
clarified by the Appellate Body statement in US – Carbon Steel .  Also, the Philippines argues that 
there is no reason of principle under Article 11 of the DSU why a Panel should necessarily prefer the meaning of municipal law advanced by the regulati ng country to the meaning advanced by an expert 
                                                     
 
338 Thailand's comments on the Interim Panel Report, para. 62. 
339 Philippines' comments on Thailand's comments on the Interim Panel Report, paras. 117. WT/DS371/R 
Page 114  
 
  in municipal law. Furthermore, an expert's statemen t prepared on a specific legal question is before a 
panel may also be preferred by a panel to  general statements made in a textbook.
340  
6.157  The Panel  recalls that the Appellate Body has clarif ied the appropriate approach that panels 
must adopt in their analysis of municipal law.  Th e cases cited in paragraph 7.681 of the Interim Panel 
Report and the Appellate Body statements in US – Carbon Steel  confirm that, while deference may 
be given to a Member's interpretation of its own la ws, this interpretation mu st be substantiated by 
adequate evidence. As the Appellate Body stated in US – Carbon Steel , "the nature and extent of the 
evidence required to satisfy the burden of proof will vary from case to case".341 The Appellate Body in 
that case also acknowledged the relevance of expe rt opinions as supporting evidence to clarify the 
meaning of municipal law.342  We have accordingly modified our statement in paragraph 7.901 to 
clarify this interpretative principle as clarified by the Appellate Body.  We ha ve also made additional 
statements following paragraph 7.697 of the Interim Pa nel Report to clarify that we have fully and 
appropriately weighed the evidence before us.343 
2. Record-keeping requirements – paragraphs 7.702-7.715 of the Interim Panel Report 
6.158  Thailand  argues that the Panel has mistakenly es tablished a link between the income tax 
exemption for individuals reselling domestic cigarette s and VAT-related record keeping requirements.  
In paragraph 7.702 of the Interim Panel Report, the Panel refers to the Philippines' argument that an 
individual that resells domestic cigarettes is exempt from personal income tax by virtue of 
Article 2(19) of Ministerial Regulation No. 126, Section 17(1) of the Revenue Code and Director 
General's Notification No. 161 on income tax.  As a consequence, the Panel concludes that they need 
not prepare and maintain revenue and expense reports while resell ers of imported cigarettes on the 
other hand must prepare input/output tax reports  and goods/raw material reports because of VAT 
liability.  However, as the Panel noted in paragraph 7.703 of the In terim Panel Report, there is no 
evidence to show "the link between  the income tax legislation and the VAT measures at issue".  As 
such, the Philippines failed to provide prima facie ev idence of this link.  Thailand argues that there 
was nothing for it to rebut.344 
6.159  In any event, Thailand considers that, contrary to  what the Panel stated in paragraph 7.703 of 
the Interim Panel Report, it has adduced sufficient evidence to rebut the Philippines' expert opinion 
allegedly showing that additional reports have to be prepared by resellers of imported cigarettes.345 
Thailand explained that resellers of domestic ciga rettes must maintain revenue and expense reports 
under Section 17(1) of the Revenue Code346, provided a copy of a reselle r's output tax report showing 
that sales of cigarettes were reported347, and explained that corporate resellers of domestic cigarettes 
are required to maintain sales accounting record s under the Accounting Act (BE 2543). Thailand 
notes that the Panel has failed to discuss those sal es records in the context of the obligation to 
maintain revenue and expense records.  Thailand sees no evidence to support the conclusion drawn by 
the Panel that VAT registrants do not have to maintain revenue and expense reports. 
6.160  In addition, Thailand requests the Panel to make  two clarifications. First, Thailand requests 
the Panel to make clear that the reason why resellers of domestic cigarettes are exempt from income 
tax is because TTM is responsible for income ta xes incurred with respect to resales of domestic 
                                                      
340 Philippines' comments on Thailand's comments on the Interim Panel Report, paras. 116-119. 
341 Appellate Body Report, US – Carbon Steel , para. 157. 
342 Appellate Body Report, US – Carbon Steel , para. 157. 
343 Philippines' comments on Thailand's comments on the Interim Panel Report, para. 110. 
344 Thailand's comments on the Interim Panel Report, para. 65. 
345 Thailand's comments on the Interim Panel Report, para. 67. 
346 Thailand's comments on the Interim Panel Report, para. 67, referring to Thailand's first written 
submission, para. 252. 
347 Thailand's comments on the Interim Panel Report, para. 67, referring to Exhibit THA-30.  WT/DS371/R 
 Page 115 
 
 
  cigarettes.  Specifically, Thailand suggests that th e Panel modify paragraphs 7.703-7.705 of the 
Interim Panel Report accordingly.348  Second, Thailand considers that the Panel's conclusions in 
paragraphs 7.702-7.715 regarding the record-keepi ng requirements for VAT fail to properly explain 
that many of the reporting requirements apply to all VAT registrants and that only resellers of 
exclusively domestic cigarettes that were not VAT re gistrants would not be subject to these 
requirements.349 
6.161  The Philippines recalls that Thailand, not the Philippin es, tried to establish a link between the 
income tax legislation and VAT measures at issue.350 Since Thailand adduced this argument first in 
support of its position, the Philippines considers that  it did not bear the burden of showing the link 
between the income tax legislation and the VAT me asures at issue. Thus, the Philippines requests the 
Panel to revise paragraph 7.703 of the Interim Pa nel Report accordingly.  In addition, and in any 
event, the Philippines submits that it has sufficien tly substantiated the only important link between the 
income tax legislation and the VAT measures at issue: resellers of domestic cigarettes are exempt from both, and are spared the corollary record keep ing efforts, while resellers of imported cigarettes 
are subject to both, and must therefore comply with the related administrative requirements.
351 
6.162  Moreover, the Philippines contends that the argum ents put forward by Thailand to show that 
it has adduced sufficient evidence to rebut the Philippines' expert testimony have no relevance because, as Thailand accepts
352, the Philippines has established that resellers of domestic cigarettes are 
not liable to income tax.  In any event, the Ph ilippines had stressed in its comments of 8 December 
2009 that the issue was that only resellers of domestic cigarettes were exempt from VAT-related 
administrative requirements, a " discrimination [which] cannot be cured or offset by the respective 
regulatory treatment afforded to the two categories of goods in other areas."353 
6.163  Regarding Thailand's comments that the Panel h as mistakenly established a link between the 
income tax exemption for individuals reselling dom estic cigarettes and VAT-related record keeping 
requirements, the Panel first notes the Appellate Body's clarification that a party who asserts a fact 
bears the burden of showing its existence.354  In the course of the proceedings, Thailand first argued 
that, as resellers of domestic cigarettes are subject to  income tax, they are subject to administrative 
requirements that are similar to those imposed on resellers of imported cigarettes.355  In response, the 
Philippines subsequently relied on an expert opinion to  establish that individual resellers of domestic 
cigarettes are exempt not only from VAT, but also from income tax and hence any administrative requirements linked to income tax.  As provided in paragraph 7.702 of the Interim Panel Report, 
based on our consideration of the relevant parti es' arguments and evidence in this regard, we 
                                                     
 
348 Thailand's comments on the Interim Panel Report, para. 66. 
349 Thailand's comments on the Interim Panel Report, para. 69. 
350 Philippines' comments on Thailand's comments on the Interim Panel Report, paras. 152, referring to 
Thailand's second written submission, para. 175 where Th ailand argued that resellers of domestic cigarettes 
were required to file income tax revenue and expense repo rts that are "virtually identical" to the input/output tax 
reports that need be filed in connection with resales of imported cigarettes. 
351 Philippines' comments on Thailand's comments on the Interim Panel Report, para. 153. 
352 Philippines' comments on Thailand's comments on the Interim Panel Report, para. 156, referring to 
Thailand's comments on the Interim Panel Report, para.66. 
353 Philippines' comments on Thailand's comments on the Interim Panel Report, paras. 156, referring to 
Philippines' comment of 8 December 2009, para. 297, third bullet point. 
354 Appellate Body Report, US — Wool Shirts and Blouses , para. 335:  "[V]arious international 
tribunals, including th e International Court of Justice, have gene rally and consistently accepted and applied the 
rule that the party who asserts a fact, whether the claimant or the respondent, is responsible for providing proof 
thereof." 
355 Thailand's second written submission, para. 175.  It is also Thailand that pointed to the fact that 
being subject to income tax triggered the obligation to fill the revenue and expense reports (Thailand's first 
written submission, para. 252). WT/DS371/R 
Page 116  
 
  concluded that  resellers of exclusively  domestic cigarettes are exempt from income tax.  Nonetheless, 
even if we were to accept that resellers of domestic  cigarettes are subject to income tax, we are not 
presented with any evidence establishing that the administrative requirements attached to the 
obligation to pay income tax can be equated to the administrative requirements relating to goods and 
raw material reports and VAT-related reports.  The Pa nel has modified its analysis in paragraph 7.703 
of the Interim Panel Report to clarify this point. 
6.164  Thailand also argues, in any event, that it h as produced sufficient evidence and explanations 
to rebut the Philippines' expert opinion which affirmed  (i) that resellers of domestic cigarettes are not 
subject to income tax and (ii) that the resellers of imported cigarettes therefore bear an additional administrative burden linked to their VAT liability. Th ailand first contends that resellers of domestic 
cigarettes must maintain revenue and expense re ports under Section 17(1) of the Revenue Code.
356 As 
indicated in paragraph 7.708, we considered th at the Philippines rebutted Thailand's argument by 
putting forward an expert opinion as provided in Exhibit PHL-254: "I ... can confirm that an 
individual who resells domestic cigarettes is ex empt from personal income tax by virtue of 
Article 2(19) of the Ministerial Regulation No.126, [as this] is not assessable income".357   
6.165  We also note Thailand's argument that it has provided a copy of an output tax report in 
Exhibit THA-30 which shows that resellers of domes tic cigarettes also have to complete output tax 
reports.  We note, however, that this evidence in cludes three columns: "cigarettes, other products, 
VAT exempt product".  From the fact that a figure is shown in the "cigarettes" column of this report, we can assume that this output tax report comes from a business reselling at least some imported cigarettes because any figure corresponding to the sal e of domestic cigarettes would logically appear 
in the "VAT exempt product" category.  Thus, in  our view, this evidence does not establish that 
resellers of exclusively  domestic cigarettes face the same administrative burden as resellers of 
imported cigarettes only or resellers of both domestic and importe d cigarettes.  We have made an 
additional statement in paragraph 7.709 to address our consideration of this evidence as put forward 
by Thailand. 
6.166  Finally, Thailand contends that corporate re sellers of domestic ciga rettes are required to 
maintain sales accounting records under the Accounting Act (BE 2543).
358 We note that the 
Philippines does not contest that corporate resellers must maintain those accounts.359 Nevertheless, the 
Panel is unable to compare the accounts to be  maintained under the Accounting Act with the 
VAT-related administrative requirements imposed on resellers of imported cigarettes because no 
evidence has been produced to inform the content of  the accounts to be maintained.  We only know 
from Exhibit PHL-182 that the content of the acc ounts to be maintained under the Accounting Act 
differs from that of the input/output reports and the goods and raw materials reports that resellers of imported cigarettes must fill out.  We are therefore not in a position to accept Thailand's position that the administrative burden linked to the VAT-related record keeping requirements can be equated to 
that related to the sales accounting records.  We ha ve added a sentence in paragraph 7.709 to reflect 
our view in this regard. 
6.167  Overall, we are not convinced by the evidence pr oduced by Thailand to show that resellers of 
exclusively  domestic cigarettes bear an administrative burden that is similar to the one for resellers of 
imported cigarettes.  We have a dded a concluding statement to th is effect in paragraph 7.715. 
                                                     
 
356 Thailand's first written submission, para. 251. 
357 Exhibit PHL-254, para. 11. 
358 We note that the Philippines did not dispute that resellers of domestic cigarettes may have a 
corporate status. In its second written submission, at fo otnote 467 under para.494, the Philippines stated: "Even 
if resellers of domestic cigarettes cannot use some or a ll of their utilities-related VAT as an input tax, they may 
nevertheless claim this VAT as a deductible expense for corporate income tax purposes". 
359 Exhibit PHL-182, table under para. 15.2, p. 9.  WT/DS371/R 
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  E. ARTICLE  X:3( B) OF THE GATT 1994:   CUSTOMS VALUATION DETERMINATIONS – THAILAND 'S 
COMMENTS  
1. Factual aspects 
6.168  Thailand  requests that the Panel delete the italics, the underlining and the prefix "THA" in 
the table under paragraph 7.946 of the Interim Panel Report.  Thailand explains that the use of italics 
and the prefix "THA" to emphasize the facts alleged by Thailand is not adequate because those facts 
are non-controversial, and no similar emphasis is used in relation to the facts alleged by the 
Philippines.  Concerning the underlining, it is not clear to Thailand why the Panel has used them.360  
6.169  The Philippines  finds it useful to italicize and use the prefix "THA" in front of facts alleged 
by Thailand.  It is not clear to the Philippines why the Panel underlined some dates. The Philippines 
suggests that the Panel include a key or narrative to explain the different features of the chart.361   
6.170  The Panel  agrees with Thailand that the absence of italics, underlining and prefix would 
make the chart under paragraph 7.946 of the Inte rim Panel Report clearer, and has modified it 
accordingly. 
2. Legal aspects 
6.171  Thailand requests the Panel to review its conclusion  that the Thai system for the purpose of 
reviewing customs value determinations runs  foul of Article X:3(b) of the GATT 1994. 
6.172  First, Thailand notes that the Panel established that  a violation of Article X:3(b) requires "the 
process that a Member maintains for review of ad ministrative actions relating to customs matters, 
when viewed in its entirety, presents a systemic fl aw that prevents such actions from being reviewed 
by an independent tribunal without delay".362  Thailand is of the view that the Philippines has not 
produced sufficient evidence to show such a sy stemic flaw. In particular, the Philippines only 
established that [[xx.xxx.xx]] appeals lodged by a single importer (PM Thailand) and presenting 
similar legal issues have been delayed.  In th e meantime, however, [[xx.xxx.xx]] of the [[xx.xxx.xx]] 
appeals lodged by this importer between 2000 and 2002 had been completed in a prompt manner.363 
Thailand requests the Panel to clarify how in thos e circumstances the BoA appeals process can be 
considered as presenting "in its entirety, ... a systemic  flaw that prevent actions from" prompt review 
by the Tax Court.364 
6.173  Specifically, Thailand requests the Panel to clarify the meaning of its statement in 
paragraph 7.1009 that "the interposing process lead ing to the review by the Thai Tax Court has the 
capacity to impede a prompt review by an independent tribunal of administrative actions".365 Thailand 
argues that every administrative proceeding indeed has the capacity to delay individual cases. Hence, 
the Panel's statement could be read to mean th at the mere existence of administrative review 
proceedings constitutes a "systemic flaw that pr events actions from review." Thailand therefore 
requests the Panel to clarify (i) that it does not s uggest that the mere existence of administrative 
reviews as intermediate steps before judicial review violates Article X:3(b) and (ii) whether it is the 
                                                      
360 Thailand's comments on the Interim Panel Report, paras. 71-73. 
361 Philippines' comments on Thailand's comments on the Interim Panel Report, para. 167. 
362 Interim Panel Report, para. 7.1005. 
363 Thailand's second written submission, para. 219; Exhibit THA-97. 
364 Thailand's comments on the Interim Panel Report, para. 77, citing Interim Panel Report, 
para. 7.1005. 
365 Thailand's comments on the Interim Panel Report, para. 78. WT/DS371/R 
Page 118  
 
  mere capacity for delays, or rather actual delays, that give rise to a "systemic flaw" in the Thai 
system.
366 
6.174  The Philippines  does not object to further clarificati ons on paragraph 7.1 005. The Philippines 
contends that in assessing a systemic failure to pr ovide for prompt appeals within the meaning of 
Article X:3(b), the Panel must take into account both the nature and the extent of the delays. Here, the 
evidence at issue does not involve isolated appeals but several hundreds, the delays are considerable 
as they sometimes reach 7 years, and they are due to  a series of actions by the BoA, which proved 
dilatory both in seeking information, and in hold ing meetings with PM Thailand. The Philippines 
considers that such delays would not have been possible in a system of review that would be 
consistent with Article X:3(b) of the GATT 1994.367 
6.175  Concerning paragraph 7.1009, the Philippines does not share Thailand's reading of the Interim 
Panel Report, and rather understands  that unchecked delays in interposing steps, not the mere 
existence of administrative review procedures as interposing steps, constitute a breach of 
Article X:3(b) of the GATT 1994. 
6.176  First, the  Panel  does not consider that the mere existe nce of an intermediate administrative 
review of the customs value decisions can violate X:3(b). The Panel recalls its statement in 
paragraph 7.1009 of the In terim Panel Report that: 
"Members may have a system under which an  initial appeal of an administrative 
action must be made to an authority with in the agency entrusted with enforcement 
prior to an independent body.  We do not therefore consider that the existence of 
interposing steps prior to an independent review in itself is a systemic flaw that 
prevents Thailand from maintaining procedures for the prompt  review of 
administrative actions under Article X:3(b)."  
6.177  In our view, this statement clearly reflects our consideration that the existence of interposing 
steps prior to an independent review in itself is not a systemic flaw that prevents Thailand from 
maintaining procedures for the prompt  review of administrative ac tions consistently with the 
obligations under Article X:3(b). 
6.178  Second, the Panel confirms its view that a viola tion of Article X:3(b) occurs when a systemic 
flaw in the procedures and institutions established a nd/or maintained for the purpose of the review of 
administrative decisions impede prompt review thereof.  Under the factual circumstances of this case, 
we considered that the number of appeals subject to the concerned delays ([[xx.xxx.xx]] appeals) and 
the duration of such delays (to the maximum of 7 years) warranted the conclusion that the system 
maintained by Thailand for the review as set forth in Article X:3(b) was flawed.  Therefore, our 
finding of a violation of Article X:3(b) in respect  of Thailand's review process maintained for such 
purpose lies in the fact that the extent of the de lays caused in the BoA a ppeal process was excessive 
and significant enough to show a certain systemic flaw in that very review process.  In other words, 
the mere fact that the actual delays were found in the appeal process was not conducive to our 
conclusion. 
6.179  Thailand also contends that [[xx.xxx.xx]] a ppeals by the same importer have been duly 
reviewed. However, this does not affect our c onclusion because the fact that those [[xx.xxx.xx]] 
appeals were promptly reviewed cannot negate the fact that under the same system, excessive delays 
have been caused in a significant number of other appeals.   
                                                      
366 Thailand's comments on the Interim Panel Report, para. 79. 
367 Philippines' comments on Thailand's comments on the Interim Panel Report, paras. 162-164.  WT/DS371/R 
 Page 119 
 
 
  6.180  In the light of the foregoing considerations, we have modified para graphs 7.1005 and 7.1009 
of the Interim Report to further clarif y our reasoning as requested by Thailand. 
F. OTHER REQUESTS FOR REVIEW  
1. Paragraph 7.39 – Thailand's comments 
6.181  Thailand requested the panel to correct paragraph 7.39 of the Interim Panel Report as it 
summarizes the Philippines' arguments regarding the Panel's terms of reference with respect to 
superseded or expired MRSP measures instead of those on the August 2006-September 2007 MRSP 
Notices. The  Philippines  submits that the Panel should not acc ept Thailand's request to make this 
change.   
6.182  The Panel  observes that paragraph 7.39 reflects th e submissions by the Philippines on the 
August 2006-September 2007 MRSP No tices and therefore has not modified this paragraph. 
2. [[xx.xxx.xx]] import entries as business confid ential information – Thailand's comments 
6.183  Thailand  requested the Panel not to treat as business confidential the number of import 
entries at issue, i.e. [[xx.xxx.xx]], as business confidential information.  Thailand sees no ground for 
treating the number of entries, already publicly disclosed in the Philippines' panel request, as 
"financially or commercially sensitive information" that is "not otherwise available in the public 
domain" within the meaning of paragraph 1 of th e Panel's Additional Working Procedures Concerning 
BCI.  Thailand is also concerned that deleting the references to the [[xx. xxx.xx]] entries from the non-
BCI version of the final report may cause confus ion as to whether the Panel was ruling on the 
measures actually identified in the Philippines' panel request.368  
6.184  The Philippines  considers that the specific number of entries that occurred during a defined 
period of time is BCI, and it states that although the panel request lists the [[xx.xxx.xx]] entries, it 
does not specify the precise number of entries that occurred in a defined period, because the request 
does not exclude the possibility that other entries occurred in the period mentioned.369 
6.185  The Panel considers that paragraph 1 of the Pa nel's Additional Working Procedures 
Concerning BCI states: "BCI is defined as fina ncially or commercially sensitive information 
submitted to the Panel in the course of these proceedi ngs that is (i) not otherwise available in the 
public domain, and (ii) clearly designated as BCI by the Philippines or Thailand in their submissions 
to the Panel".  First, we note that in all its su bmissions the Philippines treated the [[xx.xxx.xx]] entries 
as BCI.  Second, we recognize that, as Thailand puts forward, this number of entries was disclosed in 
the Philippines' Panel request. However, we note that  in that request, the Ph ilippines referred to these 
entries as being "included" into "individual determ inations made by Thai Customs for entries of 
cigarettes exported from the Philippines ...", hence the Panel request does not make clear whether 
these were all the entries made during the period at i ssue or whether more entries existed.  Hence, the 
Panel agrees with the Philippines that although the panel request listed the [[xx.xxx.xx]] entries, it did 
not state that these were the only entries in a sp ecific period and therefore the information is not 
available in the public domain.  Regarding Thaila nd's fear that deleting the references to the 
[[xx.xxx.xx]] entries from the non-BCI version of the final report may cause confusion as to whether 
the Panel was ruling on the measures actually identified in the Philippi nes' panel request, we note that 
in our report and in our findings we refer to the [[xx.xxx.xx]] entries at issue  and that therefore, it is 
clear that we are dealing with the entries listed in  the Philippines' panel request and not to any other 
                                                      
368 Thailand's comments on the Interim Panel Report, para. 90-91. 
369 Philippines' comments on Thailand's comments on the Interim Panel Report, para. 167. WT/DS371/R 
Page 120  
 
  entries. Consequently, the Panel decides to not make changes to its fi nal report and treat the 
[[xx.xxx.xx]] entries as confidential.  
3. Paragraph 7.436 – The Philippines comments 
6.186  The Philippines  argues that, in examining the TNS study provided by the Philippines as 
Exhibit PHL-111a, the Panel has mixed the numbers th e switch in and switch out rates applicable to 
Marlboro  and L&M. The Philippines requests the Panel to modify paragraph 7.436 of the Interim 
Panel Report to reflect the correct number applicab le to each brand respectively, and to add the 
relevant reference to the page numbers of the study.
370 In the absence of any comment by Thailand, 
the Panel  has modified paragraph 7.436 of its Interim Panel Report accordingly. 
4. Paragraph 7.467 – The Philippines comments 
6.187  The Philippines  contests the statement in paragraph 7.467 of the Interim Panel Report that 
"the Philippines does not appear to take issue with the methodology to be applied to establish 
MRSPs". The Philippines underlines that Thailand ha d not published a methodology to be applied, it 
has only described an overall methodology, but as th e Philippines has shown, it departed from it to 
determine MRSPs at issue in this dispute. As a result, the Philippines is unaware of the overall 
methodology to be applied by Thailand.371 The Philippines therefore requests the Panel to modify 
paragraph 7.467 of its Interim Pane l Report, and suggests some language in this regard. In the absence 
of objection by Thailand, the Panel  has modified paragraph 7.467 accordingly.  
5. Typographical errors and clerical observations 
6.188  The Philippines requested modifications to footnote 428 to paragraph 7.916, 
paragraphs 7.444, 7.445 and 7.446 of the Interim Pane l Report, and made some clerical observations, 
which it made in track changes to the Interim Panel Report.   
6.189  Thailand did not object to any of these requests and observations, although it noted that some 
of the Philippines' comments appear to involve stylistic changes instead of mere typos and it 
requested the Panel not to work from the Philippines' track changed version.   
6.190  Thailand also requested modifications to para graphs 7.51, 7.60, 7.61, 7.999, 8.3(a), and 
heading VII.E of the Interim Panel Report and made some clerical observations.   
6.191  The Panel  has worked from the original version of  the Interim Panel Report, not from the 
Philippines' track changed version.  Further, as noted above, the Panel has incorporated all other 
comments by the parties on typographical errors in  the Interim Panel Report and has modified the 
Report to the extent it deemed necessary.   
VII. FINDINGS 
A. OVERVIEW OF THE MATTERS BEFORE THE PANEL  
7.1 In this dispute, the Philippines advances clai ms against certain Thai customs and fiscal 
measures affecting cigarettes imported from the Ph ilippines.  The Philippines claims that these 
measures violate Thailand's obligations under various provisions of the Customs Valuation 
Agreement  and Articles III:2, III:4 and X of the GATT 1994.   
                                                      
370 Philippines' comments on the Interim Panel Report, paras. 85-87. 
371 Philippines' comments on the Interim Panel Report, paras. 88-93.  WT/DS371/R 
 Page 121 
 
 
  7.2 Under the Customs Valuation Agreement, th e Philippines submits that Thai Customs 
improperly rejected the transaction values of the ciga rette entries that were cleared between 11 August 
2006 and 13 September 2007 in violation of Articles 1.1 and 1.2(a).  The Philippines further claims that Thai Customs applied the deductive valuation method inconsistently with the obligations under 
Articles 5 and 7 in determining the customs value of the subject cigarettes.  The Philippines also takes 
the position that Thailand violated procedural obligations under both Article 10 not to disclose 
confidential information and Article 16 to provide an explanation for the determination of the final 
customs value. 
7.3 The Philippines also challenges a number of measures imposed on imported cigarettes under 
the Thai VAT regime.  It argues that Thailand determines the tax base for VAT imposed imported 
cigarettes in the manner in which imported cigarettes are subject to a VAT in excess of that imposed 
on like domestic cigarettes in violation of the fi rst sentence of Article III:2 of the GATT 1994.  The 
Philippines further claims that imported cigarettes are also subject to the VAT liability in excess of 
that applied to like domestic cigarettes in viola tion of the first sentence of Article III:2 through the 
VAT exemption afforded only to domestic cigarett e resellers.  The excessive tax liability imposed on 
the imported cigarette resellers also allegedly en tail additional administrative requirements for those 
selling imported cigarettes.  This results in l ess favourable treatment for imported cigarettes in 
violation of Article III:4. 
7.4 Finally, the Philippines asserts that Thailand vi olates various obligations under Article X of 
the GATT 1994  in connection with its customs and fiscal measures.  The Philippines claims that 
Thailand violates Article X:1 by failing to pub lish laws and regulations pertaining to the 
determination of a VAT for cigarettes and the release of a guarantee imposed in the customs valuation 
process.  The Philippines also challenges the Thai government system under which certain 
government officials simultaneously serve on the boa rd of TTM, a state-owned domestic cigarette 
manufacturer, which, according to the Philippines,  is inconsistent with the obligations under 
Article X:3(a) to administer customs matters in a reasonable and impartial manner.  It is also claimed 
that Thailand violates Article X:3(a) through the alleged unreasonable delays caused in the BoA 
review process for appeals against customs determin ations. Thai Excise's determinations of the tax 
base for VAT as well as its use of a guarantee value in calculating the excise, health and television 
taxes, the Philippines argues, are non-uniform, unreas onable and partial, and therefore in violation of 
Article X:3(a).  The Philippines further claims that Thailand failed to maintain an independent 
tribunal or process for the prompt review of ad ministrative actions relating to customs matters, 
particularly customs value decisions and guarantee d ecisions inconsistently with the obligations under 
Article X:3(b). 
B. P
RELIMINARY MATTERS  
1. Terms of reference 
(a) The Philippines' claim under Article X:3(a) of the GATT 1994 with respect to Thailand's 
administration of the VAT system 
(i) Main arguments of the parties 
7.5 Thailand  submits that the Philippines' claim that Th ailand fails to administer its VAT system 
consistently with Article X:3(a) is outside the Pane l's terms of reference because it is not made in the 
Philippines' panel request.372  Thailand argues that the Philippi nes' claims under Articles X:3(a) 
and X:3(b) of the GATT 1994 were set out in S ection II, paragraphs 3- 11 of its panel request373, in 
                                                      
372 Thailand's first written submission, paras. 304-305. 
373 See WT/DS371/3, 6 October 2008, paras. 3-11. WT/DS371/R 
Page 122  
 
  which the only reference to the Thai VAT system is ma de in paragraph 5.  Acco rding to Thailand, this 
section of the Philippines' panel request, however, refe rs to a measure different from the VAT system, 
namely the allegedly improper "links" betw een TTM and other Thai government agencies.
374  In other 
words, this claim has nothing to do with the qu estion of whether Thailand's establishment of the 
MRSPs (VAT system) was consistent with Article X:3(a).   
7.6 While the Philippines sets out its claims relating to Thailand's VAT system in Section V, 
paragraphs 25-30 of the panel request, none of these paragraphs  contains any reference to 
Article X:3(a) of the GATT 1994.  Thus, there is nothing in the Philippines' panel request to suggest 
that it intended to make a claim under Article X: 3(a) regarding how Thailand calculated the MRSPs.  
Thailand submits that the Philippines has not "p lainly connect[ed]" the absence of generally 
applicable criteria and the use of guarantee values to calculate MRSPs with the obligations under 
Article X:3(a) of the GATT 1994 in a manner that "presents the problem clearly".375  Specifically, the 
panel request does not contain any reference to clai ms that Thailand administers the VAT measures in 
a non-uniform  manner.376  While Article X:3(a) sets out th ree distinct and legally independent 
obligations – an obligation to admi nister laws and regulations in a uniform , impartial and reasonable  
manner377, the Philippines' panel request fails to set ou t that Thailand has violated its obligation to 
administer laws and regulations in a "non-uniform" manner.378  From a reading of the Philippines' 
panel request, Thailand could not have been expected  to be aware that the Philippines would advance 
these specific requests. 
7.7 Thailand further submits that the factual basis fo r this claim consists entirely of the September 
2006 and March 2007 MRSP Notices, which are not themselves within the Pa nel's terms of reference 
because they are not listed in the Philippines' panel re quest and were not in effect as of the date of 
establishment of the Panel.379 
7.8 The Philippines  asserts that its panel request compli es with Article 6.2 of the DSU as it 
plainly connected the administration of the listed VAT measures with Article X:3(a), which is " an 
identified provision of a particular agreement ".380  According to the Philippines, Article 6.2 
establishes two requirements for a panel request:  it mu st "identify the specific measures at issue"; and 
"provide a brief summary of the legal basis of the complaint sufficient to present the problem clearly".  
The Philippines submits that Thailand does not argue that the Philippines has failed to "identify the 
specific [VAT] measures ".  These measures are listed in paragraph 26 of the panel request, and cross-
referenced in paragraph 5.   
                                                      
374 Thailand's first written submission, para. 305. 
375 Thailand's first written submission, para. 305; sec ond written submission, para. 311.  Thailand refers 
to the Appellate Body's statement in US – Oil Country Tubular Goods Sunset Reviews : 
"It follows, therefore, that in order for a panel request to 'present the problem clearly', it must 
plainly connect the challenged measure(s) with the provision(s) of the covered agreements 
claim to have been infringed, so  that the respondent party is aw are of the basis of the alleged 
nullification and impairment of the complaining party's benefits.  Only by such connection between the measure(s) and the relevant provision(s) can a respondent know what case it has 
to answer, and … begin preparing its defence." (para. 162).  
376 Thailand's second written submission, para. 312. 
377 Thailand refers to the Panel Report, Dominican Republic – Import and Sale of Cigarettes , 
para. 7.383. 
378 Thailand's second written submission, para. 312. 
379 Thailand's first written submission, para. 306, re ferring to paras. 194-202 of the same submission. 
380 Philippines' first oral statement, para. 232 (italics in original).  The Philippines also refers to the 
Appellate Body statement in US – Oil Country Tubular Goods Sunset Reviews  that a panel request must plainly 
connect the challenged measure(s) with the provisions(s) of the covered agreements claimed to have been 
infringed.  WT/DS371/R 
 Page 123 
 
 
  7.9 The Philippines argues that Thailand conf uses the Philippines' Article X:3(a) claim against 
the Thai VAT system with arguments substantiating that, and other, claims.381  Therefore, according 
to the Philippines, Thailand incorrect ly asserts that the Philippines' pa nel request fails to satisfy the 
requirements under Article 6.2 because the panel re quest does not "suggest" that the Philippines 
"intended to make a claim unde r Article X:3(a) regarding how Thailand calculated the MRSPs ".382  In 
the Philippines' view, such a statement is not re quired by Article 6.2 of the DSU as it is an argument , 
and not a measure or claim .383  Referring to a finding by the Appellate Body in EC – Selected 
Customs Matters , the Philippines argues that Article 6.2 does not require an explanation to be 
provided in a panel request concerning why the legal instruments listed in a panel request are 
administered in a manner that is inconsistent with Article X:3(a).   
(ii) Analysis by the Panel 
7.10 In this Panel proceeding, the Philippines has advanced four claims under Article X:3(a), 
including its claim that Thailand violates Article X:3(a) by administering the VAT system  in a non-
uniform, unreasonable and partial manner.384  Thailand claims that the Philippines' Article X:3(a) 
claim with respect to Thailand's administration of the VAT system is outside the Panel's terms of 
reference because it is inconsistent with the obli gations set forth in Article 6.2 of the DSU.  
Specifically, Thailand argues that the Philippines fa iled to plainly connect the absence of generally 
applicable criteria and the use of guarantee values to calculate MRSPs with the obligations under 
Article X:3(a) of the GATT 1994 in a manner that "presents the problem clearly".385  The Philippines 
asserts that its panel request complies with Article 6.2 of the DSU as it plainly connected the administration of the listed VAT measures with Article  X:3(a), which is "an identified provision of a 
particular agreement".
386 
7.11 Article 7.1 of the DSU defines pane ls' terms of reference as follows: 
"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)." 
7.12 The document on the constitution of the panel estab lished at the request of the Philippines in 
this case provides: 
                                                     
 
381 Philippines' first oral statement, para. 229. 
382 Philippines' first oral statement, paras. 230-231. 
383 Philippines' first oral statement, para. 233, referring to Appellate Body Report, EC – Selected 
Customs Matters , para. 153. 
384 Philippines' first written submission, heading V.C.(iv); Philippines' first oral statement, 
heading VII.D.2; Philippines' second written submission , heading V.F; Philippines' second oral statement, 
heading V.F. Section V of the Philippines' first written submission covers its claims pertaining to the Customs 
Valuation Agreement.  The Philippines designates a separa te section (Section III) in its first written submission 
for its claims under Article X of the GATT 1994 with respect to the dual role of Thai senior government 
officials, undue delays in the BoA process, and Thailand's alleged failure to provide for an appeal against the 
imposition of guarantees. 
385 Thailand's first written submission, para. 305; second written submission, para. 311.   
386 Philippines' first oral statement, para. 232.   WT/DS371/R 
Page 124  
 
  "At its meeting on 17 November 2008, the Dispute Settlement Body (DSB) 
established a panel in accordance with Article 6 of the DSU (WT/DSB/M/259), with standard terms of reference, to examin e the matter referred to the DSB by the 
Philippines in document WT/DS371/3."
387 
7.13 Therefore, the Panel in the present dispute has the standard terms of reference, which are 
governed by the Philippines' request for the establishmen t of a panel.  As Article  6.2 of the DSU is the 
provision governing the standards for a panel request, we will first examine the text of Article 6.2.   
7.14 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 re quests 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." 
7.15 In Korea – Dairy , the Appellate Body clarified that Article  6.2 contains four distinct elements 
with respect to the panel request: 
"The request must:  (i) be in writing; (ii)  indicate whether consultations were held; 
(iii) identify the specific measu res at issue; and (iv) provide a brief summary of the 
legal basis of the complaint suffici ent to present the problem clearly."388 
7.16 The Appellate Body further clarified that in  the fourth requirement above, Article 6.2 
demands only a summary – and it may be a brief one – of the legal basis of the complaint, but the 
summary must, in any event, be one that is  "sufficient to present the problem clearly".389  In order for 
a panel request to "present the problem clearly", the complainant must plainly connect  the challenged 
measure(s) with the provision(s) of the covered agreem ents claimed to have been infringed, so that the 
respondent party is aware of the basis for the alle ged nullification or impair ment of the complaining 
party's benefits.390 
7.17 We will examine the Philippines' request for the establishment of a panel to determine 
whether its claim under Article X:3(a) in respect of  the administration of the Thai VAT system is 
properly made in accordance with the standard u nder Article 6.2 of the DSU.  The Philippines 
identifies its claims pertaining to the Thai VAT syst em in Section V of its panel request as follows:  
"V. CLAIMS PERTAINING TO THAILAND'S VALUE-ADDED TAX 
("VAT") REGIME 
26. The Philippines understands that Th ailand operates the VAT regime for 
cigarettes through measures including:  
... 27. The MRSPs for imported brands of ci garette, including those exported by the 
Philippines, are set at significantly higher levels than the MRSPs for like and/or 
                                                     
 
387 WT/DS371/4 (circulated on 17 February 2009). 
388 Appellate Body Report, Korea – Dairy , para. 120. 
389 Appellate Body Report, Korea – Dairy , para. 120. 
390 Appellate Body Report, US – Oil Country Tubular Goods Sunset Reviews , para. 162.  WT/DS371/R 
 Page 125 
 
 
  directly competitive or substitutable domes tic brands.  Moreover, the MRSPs for 
imported cigarettes are set significantly above the actual retail selling price of those cigarettes, whereas the MRSPs for domestic cigarettes are set at the level of the actual retail selling price of those cigarettes.  The higher MRSPs for imported products 
result in a higher fiscal burden for these products than for like and/or directly 
competitive or substitutable domestic products , and thereby afford protection to the 
domestic products.  Therefore, the Philippi nes considers that the VAT imposed on 
imported products as a result of these measures is inconsistent with Article III:2, first 
and second sentence, of the GATT 1994. 
28. Thailand also has not published the regulations pertaining to the 
determinations of the MRSPs, which constitutes the tax base for Thailand's 
imposition of VAT on domestic and imported cigarettes.  This failure is a violation of 
Article X:1 of the GATT 1994.  Moreover, Thailand has not published any rules 
governing VAT refunds in the event of a revision of the MRSP or of an element thereof, giving rise to another violation of Article X:1 of the GATT 1994.  Finally, 
Thailand's failure to grant refunds in these circumstances for overpaid amounts of 
VAT is contrary to Article III:2 of the GATT 1994."  
7.18 After setting out in paragraph 26 the Thai m easures through which Thailand operates the Thai 
VAT regime, the Philippines identifies, in paragr aphs 27 and 28 of the request, Article X:1 and 
Article III:2 of the GATT 1994 as the legal provisions that it alleges Thailand violates with respect to various aspects of the Thai VAT regime.  Article X:3(a) is therefore not listed in Section V of its 
panel request, the specific section in which Th ailand identifies the relevant VAT measures. 
7.19 The Philippines argues that it plainly connect ed the administration of the listed VAT 
measures with Article X:3(a).
391  We recognize that the Philippines did identify the specific VAT 
measures at issue in Section V of its panel requ est as noted above.  In respect of the alleged 
connection between these VAT measures and the provisi on of a particular agreement with which the 
Philippines argues Thailand is acting inconsistently, Ar ticle X:3(a) in this instance, we understand the 
Philippines to be referring to Article X:3(a) that is listed in Section II of the panel request.   
7.20 Section II, as cited in paragraph 7.24 below, how ever indicates that the Philippines' claims 
under Articles X:3(a) and X:3(b) therein concern, inter alia , the following three Thai government 
actions: (i) the pervasive instituti onal and personal links between TTM  and the Thai government; (ii) 
undue delays in the BoA process, and (iii) Thailand's  failure to provide for an appeal against the 
imposition of guarantees.  Therefore, the objects of  the Philippines' challenges under Articles X:3(a) 
and X:3(b) in Section II of the Philippines' request do not include the VAT measures as identified in Section V of the Philippines' panel request.   
7.21 In this regard, the Appellate Body in EC – Selected Customs Matters further clarified the two 
distinct requirements under Article 6.2 of the DSU, namely identification of the specific measures at 
issue  and the provision of a brief summary of the legal basis of the complaint (or the claims ).  
According to the Appellate Bo dy, the measure at issue is what is being challenged by the complaining 
Member, whereas, in contrast, the legal basis of the complaint, namely, the 'claim', pertains to the 
specific provision of the covered agreement that cont ains the obligation alleged to be violated.  The 
Appellate Body explains that a brief summary of the legal basis of the complaint required by 
Article 6.2 of the DSU aims to explain succinctly how or why the measure at issue is considered by 
                                                     
 
391 Philippines' first oral statement, para. 232.   WT/DS371/R 
Page 126  
 
  the complaining Member to be violating the WTO ob ligation in question and that this brief summary 
must be sufficient to present the problem clearly.
392 
7.22 In paragraph 5 of Section II in particular, th e Philippines claims that the alleged pervasive 
institutional and personal links be tween TTM and the Thai government393 lead to conflicts of interest, 
and partial and unreasonable administration of Thai fi scal and customs measures.  It further states in 
the same paragraph that "in particular, Thailand administers in a partial and unreasonable manner … 
the value added tax ("VAT") measures in paragraph 26".  Read together, the Thai government action 
being challenged by the Philippines in paragraph 5 of  Section II of the panel request is the alleged 
institutional and personal links be tween TTM and the Thai government, which allegedly lead to a 
partial and unreasonable administration of the VAT me asures identified in paragraph 26.  In our view, 
this reference to the VAT measures is what qualifie s as a brief summary of the legal basis of the 
Philippines' claim under Article X:3(a):  the Philippi nes is explaining how the concerned link between 
TTM and the Thai government, the object of its challenge, leads to a violation of Thailand's obligations under Article X:3(a).  On the other hand, the Thai VAT measures, as one of the objects of 
the Philippines' challenges in this dispute, are identified in Section V of the panel request.   
7.23 In this light, we do not consider that the Philippines explained succinctly how or why 
Thailand must be considered to be violating Article  X:3(a) through its VAT measures as identified in 
a different section of the panel request.  In other words, the problem relating to the VAT system or 
Thailand's administration of such a system in the cont ext of Article X:3(a) is not clearly presented to 
satisfy the requirements under Article 6.2 of the DSU. 
7.24 This disconnection between the identification of  what is being challenged (the Thai VAT 
system) and  how  or why the Philippines considers such sp ecific measures to be violating 
Article X:3(a) is all the more obvious when we compare the way the Philippines presented this claim 
against the overall structure of the Philippines' panel request and the Philippines' other claim under 
Article X:3(a) with respect to other internal taxes.
394  For instance, the Philippines divided its panel 
request into five sections mainly according to the type of the Thai measures it challenges in this panel 
proceeding.395  Apart from the introductory section, the only section deviating from this structure is 
Section II in which the Philippines presents its general claims under Article X:3(a) as follows: 
                                                      
392 Appellate Body Report, EC – Selected Customs Matters , paras. 129-130. 
393 We recall the Appellate Body's statement in EC – Selected Customs Matters  that "a complainant is 
entitled to include in its panel request an allegation of inconsistency with a covered agreement of any measure 
that may be submitted to WTO dispute settlement".  Also  referring back to guidance provided in this regard by 
the Appellate Body in US – Corrosion Resistant Steel Sunset Review  that "in principle, any act or omission 
attributable to a WTO Member can be a measure of that Member for purposes of dispute settlement 
proceedings", the Appellate Body underlined that "as long as the specificity requirements of Article 6.2 are met, 
we see no reason why a Member should be precluded from setting out in a panel request 'any act or omission' 
attributable to another Member as the m easure at issue". (Appellate Body Report, EC – Selected Customs 
Matters , para. 133, referring to Appellate Body Report, US – Corrosion Resistant Steel Sunset Review , para. 81). 
394 The Appellate Body in EC – Selected Customs Matters confirmed its previous clarification that 
"determining the scope of the claims that are set out in a panel request requires that the panel request be 
construed as a whole".  (Appellate Body Report, EC – Selected Customs Matters , para. 168, referring to the 
Appellate Body Reports on US – FSC (Article 21.5 – EC II ), paras. 66-68; US – Carbon Steel , para. 127).  The 
Appellate Body therefore stated that it would be able to conclude that the panel request included a challenge to 
the European Communities' system of customs administration as a whole or overall only if it was convinced that the panel request, read as a whole, states this claim in a way that is "sufficient to present the problem clearly". 
395 The Philippines' panel request (WT/DS371/3) is structured as follows: Section I (introduction); 
Section II (claims under Articles X:3(a) and X:3(b) of the GATT 1994); Section III (claims pertaining to customs valuation); Section IV (claims pertaining to the excise tax, health tax and television tax regimes); and 
Section V (claims pertaining to Thailand's value-added tax ("VAT") regime).  WT/DS371/R 
 Page 127 
 
 
  "II. CLAIMS UNDER ARTICLES X:3(A) AND X:3(B) OF THE GATT 1994 
... 5. These pervasive institutional and pers onal links between TTM and the Thai 
government lead to conflicts of interest , and partial and unreasonable administration 
of Thai fiscal and customs measures.  In particular, Thailand administers in a partial 
and unreasonable manner: 
• the customs valuation measures in paragraph 13; 
• the excise tax measures in paragraph 19; 
• the health tax measures in paragraph 20; 
• the television tax measures in paragraph 21; and 
• the value added tax ("VAT") measures in paragraph 26.
396 
... 8. Furthermore, Thailand does not administer the customs valuation measures 
and the VAT measures in a reasonable manner because of undue delays in its 
administrative decision making.  For inst ance, the Board of Appeals (BoA), an 
administrative tribunal within the Ministry of Finance, which operates under Section 112 sexies to Section 112 undevicies of the Customs Act, to which an appeal against a customs valuation decision is in itially made, has a substantial backlog of 
appeals filed by the importer dating as far b ack as March 2003.  The excessive delays 
violate Articles X:3(a) and also X:3(b), which requires WTO Members to maintain 
tribunals for the purpose of the "prompt review and correction of administrative 
action relating to customs matters. 
... 10. Finally, Thailand does not provide for judicial or administrative review of the 
customs authorities' decisions relating to the imposition and collection of guarantees, 
pending the issuance of a notice of asse ssment, covering the customs duties and 
excise, health and television taxes that ma y become payable.  Given that Thailand has 
taken 16 months to issue Notices of Assessment, and that guarantees are collected as either bank guarantees or in cash for the full amount of duties potentially payable, it is not reasonable administration under Article X:3(a) to deny recourse to judicial or 
administrative review.  Equally, this failure is  contrary to the duty in Article X:3(b) to 
provide for "prompt review" of administra tive actions relating to customs matters." 
7.25 In Section II of its panel request, therefore, the Philippines has clearly presented its other 
Article X:3(a) claims that it pursues in this proceed ing by connecting them to the particular measures 
at issue that are allegedly violating the obligations under the provision.   
7.26 Moreover, unlike in the case of the VAT system as a measure, we observe that the Philippines 
presented an Article X:3(a) claim with respect to th e Thai excise, health and television tax regimes in 
section IV of the panel request.  Specifically, in paragraph 23 of the panel request, the Philippines 
                                                     
 
396 Philippines' panel request (WT/DS371/3), para. 5. WT/DS371/R 
Page 128  
 
  states that "the failure of Thailand to provide for su ch procedures, as well as Thailand's failure to grant 
refunds for amounts of these taxes that have b een overpaid, ... also constitutes partial and 
unreasonable administration of the measures referred to in paragraph 19, 20, and 21, contrary to Article X:3(a) of the GATT 1994".  This illustrate s that when the Philippines intended to make a 
specific claim concerning a certain measure, it did so  with clarity under the relevant section of the 
panel request.  As for the Thai VAT measures, the Philippines did not clearly present the problem that 
the VAT measures present in the light of the oblig ations under Article X:3(a).  We do not consider 
that on the basis of the Philippines' panel request , Thailand could have been made aware of the 
Philippines' claim under Article X:3(a) with respect  to the Thai VAT measures, specifically how or 
why the Thai VAT measures identified in paragraph 26 must be considered to be violating 
Article X:3(a).
397  Therefore, we find that the Philippines' claim under Article X:3(a) with respect to 
the Thai VAT system is outside the Panel's terms of reference. 
(b) The Philippines' claim under Article X:3(a) of the GATT 1994 with respect to Thailand's 
administration of the excise, health and television taxes 
(i) Main arguments of the parties 
7.27 In its second written submission, Thailand claims that the Philippines fails to "plainly 
connect" the utilization of unlawful tax bases to assess excise, television and health taxes with 
Thailand's obligations under Article X:3(a) of the GATT 1994.398  Thailand argues that these matters 
are not even mentioned in the Philippines panel re quest.  By omitting any reference to these matters, 
the Philippines has failed to describe its claims in  a manner that suffices to present the relevant 
problems clearly.  From a reading of the panel requ est, Thailand could not have been expected to be 
aware that the Philippines would advance these specific claims. 
7.28 Specifically, the panel request does not contai n any reference to claims that Thailand 
administers the excise, television and health tax measures in a non-uniform  manner.399  While 
Article X:3(a) sets out three distinct and legally i ndependent obligations – an obligation to administer 
laws and regulations in a uniform , impartial and reasonable  manner400, the Philippines' panel request 
fails to set out that Thailand has violated its oblig ation to administer laws and regulations in a "non-
uniform" manner.401  On a reading of the panel request, Tha iland could not be able to discern that it 
would have to respond to two cl aims regarding the "non-uniform"  administration of the excise, 
television and health taxes.  Thailand asserts that in this case, the "mere listing" of Article X:3(a) does 
not provide a description of the legal basis of th e Philippines' claims in a manner that suffices to 
                                                      
397 The Appellate Body stated that "the fundamental i ssue in assessing claims of prejudice is whether a 
defending party was made aware of the claims presented by the complaining party, sufficient to allow it to 
defend itself" (Appellate Body Report, Thailand – H-Beams , para. 95). The Appellate Body in that dispute 
found: 
"In assessing Thailand's claims of prejudice, we consider it relevant that, although Thailand 
asked the Panel for a preliminary ruling on the sufficiency of Poland's  panel request with 
respect to Articles 5 and 6 of the Anti-Dumping Agreement at the time of filing of its first 
written submission, it did not do so at that time with respect to Poland's claims under 
Articles 2 and 3 of that Agreement.  We must, therefore, conclude that Thailand did not feel at 
that time that it required additional clarity with respect to these claims, particularly as we note 
that Poland had further clarified its claims in its first written submission.  This is a strong 
indication to us that Thailand did not suffer any prejudice on account of any lack of clarity in 
the panel request." 
398 Thailand's second written submission, paras. 309-314. 
399 Thailand's second written submission, para. 312. 
400 Thailand refers to the Panel Report, Dominican Republic – Import and Sale of Cigarettes , 
para. 7.383. 
401 Thailand's second written submission, para. 312.  WT/DS371/R 
 Page 129 
 
 
  "present the problem clearly" and for Thailand to  understand the case it had to answer.  Thailand 
points out that in similar circumstances, prior WT O panels have ruled that the mere listing of a 
provision containing multiple obligations is insufficien t to meet the requirements of Article 6.2 of the 
DSU.402 
(ii) Analysis by the Panel 
7.29 For the reasons explained in paragraph 7.25 abov e, we are of the view that the Philippines 
identified the specific measures relating to the Thai  excise, health and television tax regimes and 
plainly connected these measures to its claim under Article X:3(a) within the standard of Article 6.2 
of the DSU.   
7.30 Thailand further argues, however, that the Phili ppines' claim under Article X:3(a) with respect 
to the Thai internal tax regime falls outside the Panel's terms of reference because, while 
Article X:3(a) sets out three distinct and legally i ndependent obligations – an obligation to administer 
laws and regulations in a uniform , impartial and reasonable  manner – the Philippines' panel request 
fails to set out that Thailand has violated its oblig ation to administer laws and regulations in a "non-
uniform" manner.   
7.31 We recall the Appellate Body's statement in Korea – Dairy that the mere listing of an article , 
in and of itself, may fail to satisfy the standard of clarity.  Rather, the sufficiency of the Panel request 
in terms of a particular claim must be considered  on a case-by-case basis, taking into account whether 
"the ability of the respondent was prejudiced" by the fact that only the Article was listed.403  We are 
not convinced, however, that the standard set by the Appellate Body with respect to a claim is equally 
applicable to specific elements and/or obligations within an Article of a WTO covered agreement.  
While the uniformity, impartiality and reasonableness are the three distinct and legally independent 
obligations within Article X:3(a), in our view, each obligation does not constitute an independent 
claim that needs to be identified in the panel request  to satisfy the requirements of Article 6.2 of the 
DSU.  Although it would be desirable for the comp lainant to present as precise and clear a claim as 
possible, we do not consider that its failure to sp ecify a particular obligation under Article X:3(a) 
renders the panel request inconsiste nt with Article 6.2 of the DSU.404 
(c) Thai Customs' valuation determinations for the cigarettes at issue that were cleared between 
11 August 2006 and 13 September 2007 
(i) Main arguments of the parties 
7.32 Thailand  claims that many of the Philippines' claims relate to expired measures and 
completed acts.405  Thailand is of the view that to the extent that the Philippines had concerns 
                                                      
402 Thailand's second written submission, para. 312, referring to the Panel Report, US – Countervailing 
Measures on Certain EC Products (Article 21.5 – EC) , para. 7.50. 
403 Appellate Body Report, Korea – Dairy , paras. 124 and 127. 
404 Previous panels that were presented with claims under Article X:3(a) appear to have taken a similar 
approach.  For example, the Panel in Dominican Republic – Import and Sale of Cigarettes  analyzed the 
framework of Article X:3(a) claim with regard to a ll three obligations, despite the omission of an explicit 
reference to the uniformity and impartiality obligations (Panel Report, Dominican Republic – Import and Sale of 
Cigarettes , paras. 7.375 and 7.383).  In Argentina – Hides and Leather , the panel request listed Article X:3(a) 
and referred to the uniformity and impartiality obliga tions.  Nonetheless, the complainant and the Panel 
proceeded to address all three obligations (Panel Report, Argentina – Hides and Leather , para. 11.86). 
405 Thailand's first oral statement, para. 23; second written submission, para. 308.  In its first oral 
statement, Thailand states that the expired measures an d past acts include the valuation and assessment of duties 
with respect to the [[xx.xxx.xx]] entries listed in the panel request, the setting of MRSPs for 2006, and the WT/DS371/R 
Page 130  
 
  regarding actions taken in the past by Thailand, those concerns had been resolved by the time the 
Philippines requested the establishment of a panel.
406  For example, Thai Customs has used 
PM Thailand's declared transaction values as the customs value since September 2007, well over a year before the request for the establishment of a panel. 
7.33 Thailand submits that in these circumstances, it questions the extent to which dispute 
settlement proceedings may be fruitful to address issu es that, in effect, have already been resolved.
407  
Thailand argues that as a practical matter, had Tha iland intended to protect its domestic cigarette 
industry from competition from imports, there were – and still are – perfectly legitimate means by 
which it could do so, such as by raising its applied tariff rate for cigarettes or by renegotiating its tariff 
bindings.  Thailand has not done so and, as the Philippines' own evidence indicates, cigarettes are 
currently being imported freely and in increasing quantities into Thailand.  Thailand therefore 
questions the utility of these proceedings. 
7.34 Thailand urges the Panel to consider carefully: (i) whether each of the Philippines' claims 
identified in Exhibit THA-36 are properly within its terms of reference such that the Panel can rule on 
those claims; (ii) if the claims are within the Panel' s terms of reference, whether and to what extent it 
is appropriate or useful for the Panel to rule on claims that relate either to expired measures or 
completed acts; and (iii) whether the Panel is permitted under Article 19.1 of the DSU to make 
recommendations with respect to such claims.408 
7.35 Particularly with respect to panels' recomme ndations under Article 19.1 of the DSU in WTO 
dispute settlement proceedings, Thailand submits th at under Article 19.1 of the DSU, where a panel 
concludes that a measure "is" inconsistent with a covered agreement, it shall recommend that the 
Member concerned bring the measure into conformity with that agreement.  Thailand submits that the 
Panel cannot issue recommendations pursuant to Artic le 19.1 that Thailand bring expired measures or 
completed acts into conformity with the covered agreements because it amounts to legal error for a 
panel to make an Article 19.1 recommendation w ith respect to measures that no longer exist.409  
Thailand states that following the Appellate Body's  guidance, numerous panels have refrained from 
making Article 19.1 recommendations regardi ng measures that are no longer in force.410  T h i s  r u l e  
applies with equal force to "measures" that cons isted of individual, comp leted governmental acts. 
7.36 Thailand argues that there are good reasons for th is rule.  By adopting Articles 19.1 and 21.3 
of the DSU, WTO Members accepted that they would not have to undo past actions in response to a finding of violation of the cove red agreements.  Instead, Members are required only to cease the 
WTO-inconsistent conduct by the end of the re asonable period of time for implementation.  
According to Thailand, for this reason, remedi es under the DSU are generally described as being 
"prospective", rather than retrospective, in nature.
411  Given this feature of the DSU, it would serve no 
purpose to allow a WTO Member to obtain recommenda tions from panels with respect to past and 
consummated actions.   
                                                                                                                                                                     
alleged violation of Article 10 of the Customs Valuation Agreement.  Thailand also refers to a list of the 
relevant claims as set out in Exhibit THA-36. 
406 Thailand's first oral statement, para. 3. 
407 Thailand's first oral statement, para. 4. 
408 Thailand's first oral statement, paras. 23-27; second written submission, para. 308. 
409 Thailand's first oral statement, para. 24.  Thailand refers to Appellate Body Report, US – Certain EC 
Products , para. 81 and Appellate Body Report, EC – Bananas III (Article 21.5 – Ecuador II) / EC – Bananas III 
(Article 21.5 – US) , para. 479. 
410 Thailand refers to the Panel Report, Chile – Price Band , para. 8.3; Panel Report, Dominican 
Republic – Import and Sale of Cigarettes , para. 8.3; Panel Report, Turkey – Rice , para. 8.4; and Panel Report, 
US – Stainless Steel (Mexico) , para. 8.3. 
411 Thailand refers to the Appellate Body Report, US – Upland Cotton (Article 21.5 – Brazil) , 
footnote 494 and the Appellate Body Report, US – Zeroing (EC) (Article 21.5 – EC) , para. 299.  WT/DS371/R 
 Page 131 
 
 
  7.37 Because the conduct on which the relevant clai ms of the Philippines are based, as listed in 
Exhibit THA-36, took place entirely in the past a nd has ceased or been completed, Thailand submits 
that were the Panel to find violations with respect  to these claims, there would be nothing further that 
Thailand could do in order to achieve compliance with its WT O obligations.  In these circumstances, 
the Panel should not issue recommendations under Ar ticle 19.1 of the DSU that Thailand bring itself 
"into conformity" with its WTO obligations with respect to any of the claims listed in 
Exhibit THA-36.  
7.38 Further, in Thailand's view, because the Panel cannot make any recommendations  with 
respect to the claims listed in Exhibit THA-36, it is not clear whether any purpose at all is served by 
making findings regarding these claims.  Even assuming, for the sake of argument, that the Panel may 
make findings with respect to measures that no longer exist on the date of its establishment412, the 
Panel should exercise its discretion and decline to ma ke such findings.  Thaila nd submits, panels have 
a responsibility to prevent the WTO's dispute settle ment procedures from being used to obtain purely 
declaratory judgments or to address matters that are completely moot by the time the Panel is 
established.  In these circumstances, Thailand submit s that the Panel should decline to make findings 
with respect to the claims listed in Exhibit T HA-36 that would serve no clear purpose and would not 
contribute to the resolution of any current and conc rete dispute between the Philippines and Thailand 
regarding these matters. 
7.39 The Philippines  submits that in previous cases, the Appellate Body accepted that expired 
measure may be subject to dispute settlement proceedings413, "in particular where a risk of 
reintroduction exists".414  According to the Philippines, such a risk of reintroduction exists in this case 
as there are no published generally applicable rules on how MRSPs are calculated, and the 
methodology can change any time at the discretion of DG Excise.415  In fact, the methodology was 
suddenly changed in September 2006 and March 2007 for no apparent re ason and without notice.  In 
the light of these facts, according to the Philippin es, the Panel should rule on the September 2006 and 
March 2007 MRSP Notices. 
(ii) Analysis by the Panel 
7.40 In the current dispute, we are presented with the Philippines' claims pertaining to various 
customs and fiscal measures.  Among the measures at issue are Thai Customs' valuation determinations for the [[xx.xxx.xx]] entries of im ported cigarettes as well as certain MRSP Notices 
for the imported cigarettes, as identified in Exhibit THA-36.  Thailand characterizes these particular 
measures as "completed acts" and "expired measures" that had been resolved by the time the 
Philippines requested the establishment of a panel.  In this light, Thailand urges the Panel to consider: 
(i) whether each of the Philippines' claims identifie d in Exhibit THA-36 are pr operly within its terms 
of reference such that the Panel can rule on those clai ms; (ii) if the claims are within the Panel's terms 
of reference, whether and to what extent it is appropr iate or useful for the Panel to rule on claims that 
relate either to expired measures or completed act s; and (iii) whether the Panel is permitted under 
Article 19.1 of the DSU to make recommendations with respect to such claims.
416 
                                                      
412 Thailand's first written submission, paras. 194-203; first oral statement, para. 27. 
413 Philippines' first oral statement, para. 219, referring to Appellate Body Report, US – Upland Cotton , 
paras. 263 and 268ff, and Panel Report, Argentina – Textiles and Apparel , para. 6.14; Philippines' second oral 
statement, para. 76, referring to Appellate Body Report, EC – Bananas (21.5 – US) , paras. 267-269, and 
Appellate Body Report, US – Zeroing (21.5) , paras. 182 and 194. 
414 Philippines' first oral statement, para. 219, referring to Panel Report, Argentina – Textiles and 
Apparel , para. 6.14. 
415 Philippines' first oral statement, para. 219. 
416 Thailand's first oral statement, paras. 23-27; second written submission, para. 308. WT/DS371/R 
Page 132  
 
  7.41 We will first consider Thailand's proposition w ith respect to Thai Customs' individual 
valuation determinations for the entries at issue.  Thailand does not dispute that these determinations 
are specifically identified in the Ph ilippines' panel request within the meaning of Article 6.2 of the 
DSU and thus fall within the scope of the Panel's terms of reference.
417  Thailand nonetheless takes 
the position that the Panel should not and cannot  make recommendations with respect to the 
concerned customs valuation determinations.  Con sequently, according to Thailand, because the Panel 
cannot make any recommendations  with respect to these claims, it is not clear whether any purpose at 
all is served by making findings regarding these claims.  .   
7.42 In US – Upland Cotton , the Appellate Body  addressed the question of whether measures 
whose legislative basis had expired at the time of establishment of a panel could nonetheless fall 
within the scope of the panel's te rms of reference under Article 6.2 of the DSU.  The Appellate Body 
reasoned that the text of Article 6.2, considered in  the light of the relevant context (i.e. Articles 3.3 
and 4.2 of the DSU), does not preclude a Member from making representations with respect to measures whose legislative basis has expired, if that  Member considers, with reason, that benefits 
accruing to it under the covered agreements ar e still being impaired by those measures.
418  
Furthermore, according to the Appellate Body, a lthough the fact that a measure has expired may 
affect what recommendation a panel makes, it is not dispositive of the preliminary question of 
whether a panel can address claims in respect of th at measure.  In reaching this conclusion, the 
Appellate Body noted that GATT and WTO panels  in previous disputes have frequently made 
findings with respect to measures withdrawn after the establishment of the panel.  The Appellate 
Body observed therefore that its conclusion was consis tent with the approach ta ken by those panels to 
questions relating to the expiry of measures "after  the initiation of dispute settlement proceedings, but 
before those proceedings were completed".419  In none of those cases, the Appellate Body points out, 
had a panel or the Appella te Body premised its decision on the view that, a priori , an expired measure 
could not be within a panel's terms of reference.   
7.43 The Appellate Body's guidance above therefore suggests that the mere fact that a certain 
measure was no longer in force at the time of establi shment of a panel would not in itself provide a 
basis for excluding such a measure from the scope of  the Panel's terms of reference and consequently 
from the Panel's examination of the measure.  At the same time, we are mindful that the expired 
measure at issue in US – Upland Cotton concerned payments under a subsidy programme.  The 
Appellate Body considered it important to recognize the particular characteristics of subsidies and the 
nature of the complainant's claims  against the particular payments under the subsidies concerned.  
Particularly, in the light of the language of Artic le 7.8 of the SCM Agreement, the Appellate Body 
considered that there could be a time-lag between  the payment of a subsidy and any consequential 
adverse effects.  As a consequen ce, the Appellate Body found that if expired measures underlying past 
payments could not be challenged in WTO disput e settlement proceedings, it would be difficult to 
seek a remedy for such adverse effects. 
7.44 Thai Customs' valuation process leading to the issuance of the Notices of Assessment for the 
subject cigarette imports took place between 11 A ugust 2006 and 13 September 2007.  The last 
Notices of Assessment for the concerned entries of cigarettes were issued on 10 October 2007, which 
precedes 17 November 2008 – the date of establishment of this Panel.  Given the Appellate Body's 
guidance, we do not consider that just because thes e valuation determinations had been completed at 
                                                      
417 These measures are identified in para. 13 of the Philippines' panel request (WT/DS371/3). 
418 Appellate Body Report, US – Upland Cotton , para. 270. 
419 Appellate Body Report, US – Upland Cotton , footnote 214.  In this footnote the Appellate Body 
cites to: GATT Panel Report, EEC – Apples I (Chile) , paras. 2.4 and 4.1 ff; Panel Report, India – Autos , 
para. 7.29; GATT Panel Report, EEC – Animal Feed Proteins , para. 2.4; GATT Panel Report, US – Canadian 
Tuna , para. 4.3; Panel Report, US – Wool Shirts and Blouses , para. 6.2; and Panel Report, Indonesia – Autos , 
para. 14.9.  WT/DS371/R 
 Page 133 
 
 
  the time of establishment of the panel in itself pr ecludes them from falling within the scope of our 
terms of reference.  We therefore turn to the qu estion of whether it is then for any other reasons 
inappropriate for us to examine the Philippines' claims under the Customs Va luation Agreement with 
respect to Thai Customs valuation determinations. 
7.45 Thai Customs' valuation determinations at issue are, as Thailand describes it, "individual, 
completed governmental acts" in the sense that they  reflect Thai Customs' final decisions on the 
customs values of the concerned imported cigarettes.   The concerned determ inations consequently 
formed the basis for the calculation of customs du ties and other various tax liabilities for the imported 
cigarettes.  The Philippines' claims in this relati on cover both substantive and procedural obligations 
imposed on customs authorities under the Customs Va luation Agreement.  The Philippines' main 
contention is that Thai Customs failed to comply  with certain procedural requirements under the 
Customs Valuation Agreement, which led to the final valuation determinations being also inconsistent 
with Thailand's obligations under the Customs Valuation Agreement. 
7.46 The Customs Valuation Agreement sets out the principles to be observed by WTO Members 
in assessing the customs value of imported goods as well as the procedural requirements relating to 
the assessment process.  In the light of the natu re of the obligations under the Customs Valuation 
Agreement, we consider that in the context of the WTO dispute settlement proceedings, claims under 
the Customs Valuation Agreement would inevitably encompass individual valuation determinations 
and the assessment processes, which would have normally been completed by the time such claims 
are brought before a WTO panel.  To that exte nt, customs valuation determinations can be 
distinguished from other types of measures, be it le gislation or specific government acts, which can be 
described as having expired or ceased to exist at the time of establishment of a panel or during the 
panel proceedings.  Customs valua tion determinations, once complete d and finalized, will be applied 
to a specific entry of imported goods as the basis fo r the customs duties as well as other internal taxes 
for which the importer is held liable.  In that sense, customs valuation determinations cannot be 
characterized as having expired or cease d to exist just for the reason that  they are completed and final.  
We underline this distinction because it addresses the question of whether it is appropriate for the 
Panel to rule on claims that relate to completed acts.420  The procedural requirements linked to the 
process of the relevant determinations may also  affect the operation of the Customs Valuation 
Agreement.   
7.47 In this connection, although the measure con cerned was a provisional safeguard measure, we 
agree with the Panel's observation in Chile – Price Band System :  "if a Member cannot have the 
conformity of valuation determinations made under the auspices  of the Customs Valuation Agreement 
[provisional safeguard measures in that dispute] re viewed solely because they are completed before 
the establishment of a panel, then customs value determinations generally will escape panel scrutiny 
as they are generally completed before the matter reaches the panel stage".421  Panels would then 
never be allowed to examine the WTO-consistency of  such customs determinations.  We also share 
the view of the Panel in Chile – Price Band System that the drafters of the DSU cannot have meant to 
                                                      
420 The Panel in EC – Trademarks and Geographical Indications (Australia)  also noted that distinction 
between provisions of the Regulation which established procedures, but are no longer in force, and individual 
registrations effected u nder them (Panel Report, EC – Trademarks and Geographical Indications (Australia) , 
para. 7.14).  The Panel considered that because individual GI registrations effected under prior versions of the Regulation remained in force, there was,  in principle, no reason why it should not be possible to challenge them 
under the TRIPs Agreement.  According to the Panel, they were measures wh ich may affect the operation of that 
agreement.  The Appellate  Body's analysis in US – Upland Cotton  also supports this reasoning:  "the relevant 
context for Article 6.2 in this regard includes Artic les 3.3 and 4.2 of the DSU. ... those provisions do not 
preclude a Member from making representations with respect  to measures whose legislative basis has expired, if 
that Member considers, with reason , that benefits accruing to it under the covered agreements are still being 
impaired by those measures".   
421 Panel Report, Chile – Price Band System , para. 7.114. WT/DS371/R 
Page 134  
 
  exclude, in such a manner, governmental acts such  as customs determinations from its scope.  The 
absence of such intention is manifested in, fo r example, Article 16 of the Customs Valuation 
Agreement, a provision requiring customs authorities to provide an explanation of their customs valuation determinations.  As bot h parties acknowledged in the context of the Philippines' claims 
under the Customs Valuation Agreement, the obliga tions imposed under Article 16 is to serve the 
principles of transparency and due process, including the need to provide a basis for a domestic court 
and/or a WTO panel to review the customs authority 's determination.  As we address in detail in 
Section VII.C.6 below, a request for explanations pursuant to Article 16 can be made only once the 
valuation process is completed.  This means that va luation determinations will by definition be final 
and completed acts by the time they are subject to a review process. 
7.48 We note that the United States, a third party pa rticipant in these proceedings, also shares this 
view.  In its response to a question from the Panel, it states: 
"An 'act' would appear by its nature to be time limited.  The argument that a panel is 
unable to make a recommendation with respect to a 'complete act' would therefore raise significant issues.  In particular, it is difficult to see how an 'a ct' that is within a 
panel's terms of refe rence would not be 'completed' prior to the end of the panel 
proceedings.  Accordingly, the argumen t that a panel is unable to make a 
recommendation with respect to a 'complet ed act' would appear to mean that no
 panel 
could ever  make a recommendation with respect to an 'act'.  There is nothing in the 
DSU or the covered agreements that would support such an approach."422 
7.49 Further, we observe that the right of WTO Me mbers to resort to the WTO dispute settlement 
proceeding pertaining to customs matters is cont ained in Article 19 of the Customs Valuation 
Agreement.  Article 19.2 in particular provides: 
"If any Member considers that any benefit accruing to it, directly or indirectly, under 
this Agreement is being nullified or impa ired, or that the achievement of any 
objective of this Agreement is being impeded, as a result of the actions of another 
Member  or of other Members, it may, with a view to reaching a mutually satisfactory 
solution of this matter, request consulta tions with the Member or Members in 
question. ..." (emphasis added)423 
7.50 In this case, the Philippines considers that  Thailand's customs determinations and the 
valuation process leading to such de terminations led to a nullification or impairment of the benefits 
accruing to it.  The Philippines also asserts that the concerned Thai Customs' acts impede the 
objectives of the Customs Valuation Agreement, partic ularly the objective to respect transaction value 
as the primary basis for customs value.  Article 3. 8 of the DSU provides further contextual basis for 
the understanding that "in cases where there is an infringement of the obligations assumed under a covered agreement, the action is considered prim a facie to constitute a case of nullification or 
impairment".  
7.51 In the light of the foregoing considerations, we find it necessary to examine the individual 
valuation determinations and the processes leading to the determinations as part of the matter before 
us.
 424 
                                                      
422 United States' response to Panel question No. 1 to all third parties. 
423 This is a provision equivalent to  Article XXIII of the GATT 1994. 
424 As for the Panel's decision to make a reco mmendation for the concerned customs valuation 
determinations, see Section VI.A.2 and para. 8.7 of this Report for its reasoning and conclusion.  In contrast to 
our decision with respect to the MRSP Notices at issu e, in the Interim Panel Report (paras. 8.2 and 8.8  WT/DS371/R 
 Page 135 
 
 
  (d) The September 2006 and March 2007 MRSP Notices issued by Thai Excise to PM Thailand 
(i) Main arguments of the parties 
7.52 Thailand claims that the 2006 and 2007 MRSP Notices for imported cigarettes are outside 
the Panel's terms of reference because they were neith er listed in the panel request nor in existence as 
of the date of establishment of the Panel.425   
7.53 Thailand argues that the Panel's terms of reference are limited to the MRSP Notices actually 
listed in paragraph 26 of th e Philippines' panel request426 and that the MRSP Notices for imported 
cigarettes for 2006 and 2007 are not listed in the panel request and t hus are not within the Panel's 
terms of reference.427   
7.54 Further, Thailand asserts that the 2006 and 2007 MRSP Notices were superseded and ceased 
to have any legal effect once Thai Excise publishe d the 2008 MRSP Notice for imported products that 
was listed in the Philippines' panel request as "Notice B.E. 2551 (2008) of 19 August 2008".428  Thus, 
the 2006 and 2007 Notices did not exist as of the date of  the establishment of the Panel.  According to 
Thailand, it is well established that, in general, panels cannot consider measures that have ceased to 
exist as of the date of the establishment of th e panel.  Thailand submits that it would greatly 
undermine the security and predictability of the disp ute settlement system were  this Panel to permit 
the Philippines to pursue such claims.429   
7.55 In support of its position, Thailand refers to the Appellate Body's statement in EC – Selected 
Customs Matters that "the term 'specific measures at issue'  in Article 6.2 suggests that, as a general 
rule, the measures included in a pane l's terms of reference must be measures that are in existence at 
the time of establishment of the panel".430  The Appellate Body went on to identify two exceptions 
from this general rule: (i) amendments enacted af ter the establishment of the panel which do not 
change the essence of the measures identified in the panel request; and (ii) a measure whose 
legislative basis has expired but whose effects conti nue to impair benefits accruing to the complainant 
under the covered agreements.  Thailand argues that the 2006 and 2007 MRSP Notices pre-date the 
establishment of the Panel (i.e. 17 November 2008) a nd thus do not fall within the scope of the two 
exceptions identified by the Appellate Body.  Thaila nd further submits that a number of panels have 
refused to rule on measures which expired before th e establishment of the panel.  It refers to the 
Panel's decision in Argentina – Textiles and Apparel in which the Panel declined to consider a 
measure on the ground that "the Argentine measure under consideration was re voked before the Panel 
                                                                                                                                                                     
combined), we decided to make a reco mmendation for these customs valuation determinations even if they were 
final decisions that had been completed prior to the time of the panel establishment.  Having considered the parties' arguments at the interim review stage on the question of whether the Panel should make a 
recommendation with respect to these determinations, we decided to maintain our decision in this relation.  We 
have clarified our reasoning for the decision to make  a recommendation for these customs determinations as 
provided in Section VI.A.2 and para. 8.7 of this Report. 
425 Thailand's first written submission, paras. 202-203. 
426 Thailand's first written submission, para. 197. 
427 Thailand's first written submission, para . 197; Exhibits PHL-61 and PHL-100. 
428 Thailand's first written submission, paras. 198-203. 
429 Thailand refers to the Panel Report, EC – Approval and Marketing of Biotech Products Products , 
para. 7.1652 (in determining whether to make findings on a measure no longer in existence on the date of 
establishment of a panel, panels should take into account the object and purpose of the dispute settlement system 
"to secure a positive solution to a dispute", as stated in Article 3.7 of the DSU). 
430 Thailand's first written submission, para. 199 , referring to the Appellate Body Report, EC – Selected 
Customs Matters , para. 184. WT/DS371/R 
Page 136  
 
  was established and its terms of reference set, i.e.  before the Panel started its adjudicative process", 
even though the measure had been listed in the panel request.
431   
7.56 Thailand does not contest, however, the use of the MRSP Notices as evidence because the use 
of evidence does not raise any temporal lim itations as opposed to the measures at issue.432  Thailand 
argues, however, that even if the Panel were to  consider these Notices as evidence regarding the 
WTO-consistency of the MRSP Notices that are within  the Panel's terms of reference, these Notices 
would be of very limited probative value because the methodology used to arrive at the MRSPs in the 
2006-2007 Notices was very different from the methodol ogy used before and after that period, on 
which the Panel must rule.433  Thailand therefore urges the Panel to take care to ensure that its rulings 
with respect to the MRSP methodology before it are not based on evidence relating to a different 
MRSP methodology that is not within the Panel's terms of reference. 
7.57 The Philippines  argues that the measures identified in the panel request are the "MRSP 
Notices issued by the Dire ctor-General for Excise".434  Moreover, paragraph 26 of the panel request 
further clarifies the measures at issue by re ferring to the August 2007 and August 2008 MRSP and 
separately noting the inclusion of "any amendments, implementing measures or other measures 
related to the measures listed in this paragraph". 
7.58 In response to Thailand's argument that th e 2006 and 2007 MRSP Notices are outside the 
Panel's terms of reference because they expired at  the time of the establishment of the panel, the 
Philippines  submits that in previous cases, the Appellate Body accepted that expired measures may be 
subject to dispute settlement proceedings435, "in particular where a risk of reintroduction exists".436  
According to the Philippines, such a risk of reintr oduction exists in this case as there are no published 
generally applicable rules on how MRSPs are calcul ated, and the methodology can change any time at 
the discretion of DG Excise.437  In fact, the methodology was suddenly changed in September 2006 
and March 2007 for no apparent reaso n and without notice.  In the light of these facts, according to 
the Philippines, the Panel should rule on the September 2006 and March 2007 MRSP Notices.  The 
Philippines submits that in any even t, they are evidence that supports the view that the MRSP system 
is discriminatory. 
(ii) Analysis by the Panel 
7.59 Thailand claims that the September 2 006 and March 2007 MRSP Notices for imported 
cigarettes are outside the Panel's terms of reference fo r two reasons:  first, they were not listed in the 
                                                      
431 Thailand's first written submission, para . 199, referring to the Panel Report, Argentina – Textiles 
and Apparel,  para. 6.13.  Thailand also refers to the Panel Report, US – Gasoline (para. 6.19) in which the Panel 
states that "it had not been the usual practice of a panel established under the General Agreement to rule on measures that, at the time the panel's terms of reference were fixed, were not and would not become effective". 
432 Thailand's response to Panel question No. 90.  
433 Thailand's second written submission, paras. 144-145. 
434 Philippines' panel request, para. 26; Phili ppines' first oral statement, para. 218. 
435 Philippines' first oral statement, para. 219, referring to Appellate Body Report, US – Upland Cotton , 
paras. 263 and 268, and Panel Report, Argentina – Textiles and Apparel , para. 6.14; Philippines' second oral 
statement, para. 76, referring to Appellate Body Report, EC – Bananas (Article 21.5 – US) , paras. 267-269, and 
Appellate Body Report, US – Zeroing (Article 21.5 – EC) , paras. 182 and 194. 
436 Philippines' first oral statement, para. 219, referring to Panel Report, Argentina – Textiles and 
Apparel , para. 6.14. 
437 Philippines' first oral statement, para. 219.  WT/DS371/R 
 Page 137 
 
 
  panel request; and, second, they expired as of  the date of establishment of the Panel.438  W e  w i l l  
address these arguments in turn. 
7.60 As explained above, in order to comply with Article 6.2 of the DSU, it is necessary for the 
complaining party to identify the specific measures at issue.  While identifying a measure by the 
name, number, date and place of promulgation of a law, regulation may be sufficient, identification 
through other means may also satisfy the identifi cation obligation within Article 6.2 of the DSU.439  
For instance, a measure may be identified through substance440, by providing a narrative description 
of the nature of the measure so that what is re ferred to adjudication by a panel may be discerned from 
the panel request.441  We also note the clarification by the Panel in Japan – Film in this regard: 
"To fall within the terms of Article 6.2, it seems clear that a 'measure' not explicitly 
described in a panel request must have a clear relationship to a 'measure' that is 
specifically described therein, so that it can  be said to be 'included' in the specified 
'measure'.  In our view, the requirements of Article 6.2 would be met in the case of a 'measure' that is subsidiary or so closely re lated to a 'measure' sp ecifically identified, 
that the responding party can reasonably be found to have receive d adequate notice of 
the scope of the claims asserted by the complaining party.  The two key elements – 
close relationship and notice – are inter-relate d:  only if a 'measure' is subsidiary or 
closely related to a specifically identif ied 'measure' will notice be adequate."
 442 
7.61 With respect to the administration of the VAT system, the Philippines' panel request provides: 
"25. In the last two and a half years, the MRSPs for imported cigarettes have been 
changed more frequently than those for domestic cigarettes. 
26. The Philippines understands that Th ailand operates the VAT regime for 
cigarettes through measures including: 
... 
• MRSP Notices issued by the Director-Gen eral for Excise.  The currently 
applicable MRSPs are set out in the Notice B.E. 2550 (2007) of 29 August 2007 (for domestic products) and in the Notice B.E. 2551 (2008) of 19 
August 2008 (for imported products); and 
• any amendments, implementing measures or other measures related to the 
measures listed in this paragraph." 
In our view, the phrase "MRSP Notices issued by th e Director-General for Excise", considered 
together with "in the last two and a half year s", is broad enough to encompass the MRSP 2006 and 
2007 Notices in the scope of the Philippines' panel re quest.  We do not find any factual circumstances 
that make us question whether Thailand, as the res ponding party in this dispute, could not reasonably 
                                                     
 
438 Thailand's first written submission, paras. 202-203.  We note that Thailand did not include the 
December 2005 MRSP Notice and the Augu st 2007 MRSP Notice in its claims  relating to the Panel's terms of 
reference.  To the extent that the December 2005 MRSP were also not in force at the time of the establishment 
of the Panel, however, our analysis in this section as regards the September 2006 and the March 2007 MRSP 
Notices will equally apply to the December 2005 MRSP Notice and the August 2007 MRSP Notice.   
439 Panel Report, Canada – Wheat Exports and Grain Imports , para. 6.10, point 36. 
440 Panel Report, Argentina – Footwear (EC) , para. 8.40; Panel Report, EC – Approval and Marketing 
of Biotech Products , para. 7.47. 
441 Appellate Body Report, US – Continued Zeroing , para. 168. 
442 Panel Report, Japan – Film , para. 10.8. WT/DS371/R 
Page 138  
 
  be found to have received adequate notice of the scope of the clai ms asserted by the Philippines in this 
regard.    7.62 Furthermore, we are not convinced by Thailand's argument that the September 2006 and the 
March 2007 MRSP Notices are outside the Panel's terms of reference because they expired at the time 
of the establishment of the panel.  We recall th at in addressing the issue of whether an expired 
measure can be a "measure at issue" within the meaning of Article 6.2 of the DSU, the Appellate Body in US – Upland Cotton rejected the United States' argument that because an expired measure is 
not susceptible to a recommendation under Article 19.1 of the DSU, it cannot be a "measure at issue" under Article 6.2.
443  The Appellate Body considered that the text of Article 6.2 of the DSU, 
considered in its relevant context (Articles 3.3 a nd 4.2 of the DSU), does not suggest that measures 
whose legislative basis has expired could not be the subject of a panel request as "specific measures at 
issue".444  As such, the Appellate Body in that dispute ru led that the fact that a measure has expired is 
not dispositive of the preliminary question of whether a panel can address claims in respect to that 
measure, although it may affect what  recommendation a panel may make.  
7.63 As the Appellate Body noted in US – Upland Cotton , GATT and WTO panels have 
frequently made findings with respect to measures withdrawn after the establishment of the panel.  
The Appellate Body in US – Upland Cotton states:  
"We find contextual support for this interpretation in Article 3.3 of the DSU, which 
underscores the importance of the prompt settle ment of certain situations that, in the 
absence of settlement, could undermine the effective functioning of the WTO and the 
maintenance of a proper balance between th e rights and obligations of Members.  We 
note, first, that Article 3.3 focuses not upon existing measures, or measures that are 
currently in force but, rather, upon "measu res taken" by a Member, which includes 
measures taken in the past.  We also observe  that Article 3.3 envisages that disputes 
arise when a Member "considers" that benefits accruing to it are being impaired by 
measures taken by another Member.  By usin g the word considers, Article 3.3 focuses 
on the perception or understanding of an a ggrieved Member.  This does not exclude 
the possibility that a Member requesting c onsultations may have  reason to believe 
that a measure is still impairing benefits  even though its legislative basis has 
expired."445 
7.64 The panel on Argentina – Textiles and Apparel observes certain common factors that can be 
found in those cases where panels made findings in respect of the measures that were no longer in 
force.446  These factors include the following: (i) whether either party raised an objection to the panel's 
                                                      
443 Appellate Body Report, US – Upland Cotton , paras. 271-272.  Further following up on the 
Appellate Body's reasoning in US – Upland Cotton , the Appellate Body in EC – Selected Customs Matters  
stated: 
"... In [ US – Upland Cotton ], the Appellate Body had to address the issue of whether an 
expired measure can be a 'measure at issue' with in the meaning of Article 6.2 of the DSU.  
The Appellate Body rejected the United States' argument that, because an expired measure is 
not susceptible to a recommendation under Article 19.1 of the DSU, it cannot be a 'measure at 
issue' under Article 6.2.  For the Appellate Body, the question of whether a panel can address claims in respect of an expired measure is to be distinguished from the question of whether 
that measure is susceptible to a recommendation under Article 19.1. ...the Appellate Body's 
reasoning in US – Upland Cotton  supports our position that Article 19.1 of the DSU does not 
place restrictions on the type of measure that  can be identified in a panel request under 
Article 6.2 of the DSU"  (paras. 134-135). 
444 Appellate Body Report, US – Upland Cotton , para. 270. 
445 Appellate Body Report, US – Upland Cotton , para. 264.   
446 Panel Report, Argentina – Textiles and Apparel , para. 6.12.  WT/DS371/R 
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  consideration of the expired measure; (ii) if th ere was an objection, whether there remained the 
prospect of the reintroduction of the measure; an d (iii) whether making findings with respect to 
expired measures would contribute to resolving a particular dispute.   
7.65 In Argentina – Textiles and Apparel , Argentina objected to the Panel's examination of the 
Argentine measure – Argentina's specific duties on f ootwear – that used to be imposed on footwear 
and were revoked before the Panel was established.447  Despite the United States' argument that there 
was a serious threat of recurrence of the measure,  the Panel decided that in the absence of clear 
evidence that Argentina would reintroduce the specific duties, it would not review the WTO 
compatibility of the duties.448   
7.66 The factual circumstances presented in the curre nt dispute must be distinguished from those 
in Argentina – Textiles and Apparel .  We do recognize that the MRSP Notices at issue had been 
replaced by the August 2008 MRSP Notice and thus were no longer in force at the time of 
establishment of the Panel.  Despite the expiry nature of the subject MRSP Notices, however, we 
consider our review of these Notices to prove usef ul.  For one, as the Philippines points out, Thailand 
does not maintain the general methodology, which Thailand claims it normally uses in determining 
MRSPs, in a written form.  To the extent that this  could provide a certain degree of uncertainty to 
importers regarding how the tax base for VAT on their products is determined, we find it important to 
review the conformity of the specific MRSP Noti ces and the methodology allegedly used by Thai 
Excise to determine those MRSPs with Th ailand's obligations under the GATT 1994. 
7.67 We find further support for our decision on the need for the examination of these Notices in 
Thailand's explanation that in revising existing MRSPs, under the general methodology, Thai Excise 
could choose to rely on the same marketi ng cost component of the current MRSPs.449  Therefore, the 
assessment of the marketing costs comprising the current MRSPs may have implications on the marketing cost component to be used for the determination of the new MRSPs.
450   
2. Standard of review 
7.68 As the Appellate Body has observed, there are two aspects of panels' standard of review:  
panels' formulation of the legal standard to be used in revi ewing the parties' legal and factual claims, 
and panels' application of the formulated standard of review.451  Regarding the formulation of the 
proper standard for the Panel's review of the matter before it, we recall the Appellate Body's finding in 
                                                      
447 Panel Report, Argentina – Textiles and Apparel , paras. 6.13-6.15. 
448 The Panel stated that it must assume that WTO Members would perform their treaty obligations in 
good faith, as they were required to do by WTO Agreement and by international law pursuant to Article 3.10 of the DSU and Article 26 of the Vienna Convention on the Law of Treaties (Pacta Sunt Servanda ) (Panel Report, 
Argentina – Textiles and Apparel , paras. 6.14). 
449 We also note that although not as common as m easures withdrawn after the establishment of a 
panel, panels have also made findings with respect to measures that had expired before the establishment of the 
panel (Panel Report US – Upland Cotton , paras. 7.128, 7.529 and 8.1, upheld in Appellate Body Report, US – 
Upland Cotton , para. 272; Panel Report EC – Trademarks and Geographical Indications , paras. 7.12-7.17). 
450 In the Interim Panel Report (para. 8.8), we decided not to make a recommendation with respect to 
these Notices as they had ceased to ex ist at the time of the panel establishment.  Having considered the parties' 
arguments at the interim review stag e on the question of whether the Panel should make a recommendation with 
respect to these MRSP Notices, we modified our decision in this relation so as to make a recommendation to the 
extent that the concerned MRSP Notices will continue to have effects on the subsequent MRSP Notices that are 
currently in force.  See Section VI.A.1 and para. 8.8 of this Report for the detailed reasoning and our conclusion in this regard. 
451 Appellate Body Report, US – Lamb , para. 99. WT/DS371/R 
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  Argentina – Footwear (EC) that "[f]or all but one of the covered agreements (Anti-Dumping 
Agreement), Article 11 of the DSU sets forth the appropriate standard of  review for panels".
452   
7.69 Article 11 of the DSU provides: 
"Function of Panels  
The function of panels is to assist the DSB in discharging its responsibilities under 
this Understanding and the covered agreement.   Accordingly, a panel should make an 
objective assessment of the matter before it, including an objective assessment of the facts of the case and the applicability of a nd conformity with th e relevant covered 
agreements, and make such other findi ngs as will assist the DSB in  making the 
recommendations or in giving the rulings pr ovided for in the covered agreements ..." 
7.70 The Philippines' claims in this dispute c oncern certain obligations under the Customs 
Valuation Agreement  and the GATT 1994.  Article 11 of the DSU therefore sets forth the standard of 
review for this Panel, namely to "make an obj ective assessment of the facts of the case and the 
applicability of and conformity with the relevant covered agreements".  A ccording to the Appellate 
Body, this means "neither de novo  review as such, nor 'total deference'".
453 
7.71 In this connection, we also recall the Appellate Body's statement in US – Countervailing Duty 
Investigation on DRAMS : 
"An objective assessment under Article 11 of  the DSU must be understood in the 
light of the obligations of the particular c overed agreement at issue in order to derive 
the more specific contours of the appropriate standard of review."454 
7.72 Following this guidance, we will make an objectiv e assessment of the matter before us in the 
light of the relevant obligations of the Customs Valuation Agreement  and the GATT 1994. 
C. CUSTOMS VALUATION AGREEMENT  
1. Overview of the Customs Valuation Agreement 
7.73 The Customs Valuation Agreement  comprises a "General Introductory Commentary"; Part I 
(Rules on Customs Valuation (Articles 1 through 17 )); Part II (Administration, Consultations and 
Dispute Settlement (Articles 18 and 19)); Part III (Sp ecial and Different Treatment (Article 20)); Part 
IV (Final Provisions (Articles 21-24)); Annex I (Inte rpretative Notes [to certain provisions of Part I]); 
Annex II (Technical Committee on Customs Valuation); and Annex III. 
7.74 The General Introductory Commentary section provides for general principles of customs 
valuation of goods.  Paragraph 1 states, inter alia , that "the primary basis for customs value under [the 
Customs Valuation Agreement] is 'transaction value'  as defined in Article 1" and that "Articles 2 
through 7 provide methods of determining the cust oms value whenever it cannot be determined under 
the provisions of Article 1".  The methods of valu ation under Articles 1 through 7 are set out in a 
                                                      
452 Appellate Body Report, Argentina – Footwear (EC) , para. 118. 
453 Appellate Body Report, EC – Hormones , para. 117; Appellate Body Report, US – Lamb , para. 1. 
454 Appellate Body Report, US – Countervailing Duty Investigation on DRAMS , para. 184.  The 
Appellate Body states that the standard of review developed under the Agreement on Safeguards  was instructive 
for cases under the SCM Agreement.  WT/DS371/R 
 Page 141 
 
 
  sequential order of application.  General prin ciples underlying the Customs Valuation Agreement  are 
further elaborated in the subsequent recitals.455   
7.75 We also note that Annex I to the Customs Valuation Agreement  contains the interpretative 
notes to certain provisions of the Customs Valuation Agreement.  In this regard, Article 14 of the 
Customs Valuation Agreement  reads:  
"The notes at Annex I to this Agreement form  an integral part of this Agreement and 
the Articles of this Agreement are to be read and applied in conjunction with their 
respective notes.  Annexes II and III also form  an integral part of this Agreement." 
7.76 Therefore, in considering the complainant's claims under the Customs Valuation Agreement, 
we will clarify the obligations under the releva nt provisions, read in conjunction with the 
Interpretative Notes corresponding to those provisions. 
2. Products at issue 
7.77 The Philippines claims that the products at i ssue for its claims under the Customs Valuation 
Agreement  are Marlboro and L&M cigarettes manufactured in the Philippines by PM Philippines and 
imported into Thailand by PM Thailand456 in [[xx.xxx.xx]] separate customs entries (the "subject 
entries") that were cleared457 between 11 August 2006  and 13 September 2007.  These cigarettes are 
classifiable under Thailand's tariff nomenclature, the "Customs Tariff of Thailand" under heading 
2402.20.90. "[c]igars, cheroots, cigarillos and ciga rettes, of tobacco or of tobacco substitutes ... 
cigarettes containing tobacco ... other".458  Thai Customs determined the final customs value of these 
entries between 15 March 2007 and 10 October 2007.459   
7.78 The Philippines describes that both PM Tha iland and PM Philippines are wholly owned 
subsidiaries of Philip Morris International Inc. (" PM International"), a corporation organized under 
the laws of the Commonwealth of Virginia in the United States.  The Philippines accepts that 
PM Thailand and PM Philippines are related fo r purposes of the Customs Valuation Agreement.460   
                                                      
455  The WTO Members recognize, inter alia , "the importance of the provisions of Article VII of 
GATT 1994" and desire "to elaborate rules for their application in order to provide greater uniformity and 
certainty in their implementation".  The Members also recognize that "the basis for valuation of goods for 
customs purposes should, to the greatest extent possible,  be the transaction value of the goods being valued". 
456 Philippines' first written submission, para. 128. PM Thailand is the Thailand branch of Philip Morris 
(Thailand) Ltd., a corporation organized under the laws of  the U.S. State of Delaware, and was established in 
[[xx.xxx.xx]] and began distributing cigarettes in Thailand in [[xx.xxx.xx]]. 
457 The New Shorter Oxford English Dictionary , (Fifth Edition) Oxford Univer sity Press, Vol. I, p. 423 
(2002). "Clear" is defined as "9. Settle , discharge (a debt, a bill, etc) ... 14 . Pass through the formalities of (a 
customs office etc.)". 
458 Philippines' first written submission, para. 130,  footnote 87; Exhibit PHL-29 (Harmonized Tariff 
Schedule of Thailand, Chapter 24).  The Philippines explains that the bound tariff rate for the cigarettes at issue is 80 baht/kilogram (volume) or 60 per cent ad valorem , i.e. Thailand applies a MFN duty of 80 baht/kilogram, 
provided that this is no less than 60 per cent of the va lue of the cigarettes (Philippines' first written submission, 
footnote 88).  However, under the Association of South-East Asian Nations ("ASEAN") Free Trade Agreement, to which both Thailand and the Philippines are parties, imports under subheading 2402.20.90 qualify for the 
preferential rate of five per cent ad valorem (Philippines' first written submission, para. 130). 
459 Philippines' first written submission, paras. 128 an d 167.  See also Table 2 (History of Values) 
(Philippines' first written submission, p. 61).  The Phili ppines explains that "[u]nder Thai law, Notices of 
Assessment constitute the definitive determination of customs value for a particular shipment, subject to 
administrative and judicial appeal." (Philippi nes' first written submission, footnote 146). 
460 The Philippines agrees that PM Thailand and PM Philippines are related within the meaning of 
Article 15.4(f) of the Customs Valuation Agreement, because they ar e both directly or indirectly controlled by a WT/DS371/R 
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  3. Measures at issue 
7.79 In its request for establishment of a Panel, the Philippines identified the following as the 
measures pertaining to customs valuation: 
• "the general rule and/or methodology providing for the systematic rejection of transaction 
value and the systematic use of  a deductive valuation method; 
• individual determinations made by Thai Cust oms for entries of cigarettes exported from 
the Philippines and entered between 4 A ugust 2006 and 19 March 2008, including: 
o the Notices of Assessment for the entries lis ted in Annex I to the Philippines' request 
for the establishment of a panel; and 
o the assessment of value for purposes of setting the guarantee or cash deposit at the 
time of entry for the entries listed in Annex II to the Philippines' request for the establishment of a panel; 
• Customs Act, B.E. 2469
461 (1926), including all amendments; 
• Ministerial Regulation No. 132 B.E. 2543 (19 90) issued under authority of the Customs 
Act B.E. 2469 (1926) and the amending Mini sterial Regulation No. 145 B.E. 2547 (2004) 
and Ministerial Regulation No. 146 B.E. 2550 (2007); 
• Notification No. 23/2549 (2006) of Thai Customs, containing guidelines on customs 
valuation; 
• Customs Regulation No. 2/2550 (2007) Re: amendment of the Customs Formalities and 
Guidelines Code B.E. 2544 (2001) re: Customs formalities to prevent Customs value duty 
evasion, and amendment of Customs Department Regulation No. 14/2549 (2006) re: 
Guideline for Fixing of Customs Value;  
• Customs Regulation No. 14/2549 (2006), re Guideline for Fixing of Customs Value, as 
amended by Customs Regulation No. 2/2550 (2007); 
• Customs Notification No. 29/2549 (2006) Pr ocedure in requesting duty fee assessment; 
and  
• any amendments, implementing measures, or other related measures." 
7.80 In the course of the Panel proceedings, th e Philippines claimed that Thailand's customs 
valuation of Marlboro and L&M cigarettes, imported by PM Thailand from the Philippines in the 
subject entries and cleared between 11 August 20 06 and 13 September 2007, w as inconsistent with 
Articles 1.1, 1.2(a), 5, 7, 10, and 16 of the Customs Valuation Agreement.462  The Philippines also 
claims that Thailand acts inconsistently with Artic le 1.1 and 1.2(a) by maintaining an unpublished 
                                                                                                                                                                     
third person, PM International (Philippines' first written submission, para. 129, footnote 86).  See 
Section VII.C.5. 
461 The "B.E." year number designates the year in  the Buddhist calendar.  The year number in 
parentheses designates the corresponding year A.D. 
462 Philippines' first written submission, para. 167.  WT/DS371/R 
 Page 143 
 
 
  general rule requiring the rejection of transacti on value and the use of the deductive valuation 
method.463 
7.81 In the light of the Philippines' claims presen ted in the Panel proceedings, the measures at 
issue with respect to the Philippines' cl aims under the Customs Valuation Agreement  are Thai 
customs valuation determinations of the subject entr ies of cigarettes imported by PM Thailand and an 
alleged general rule requiring th e rejection of the transaction va lue and the use of the deductive 
valuation method.  It is therefore our understandi ng that the Philippines is not challenging Thailand's 
customs laws and regulations as such.   
4. Overview of the factual even ts surrounding the rejection of PM Thailand's declared 
transaction values of the [[xx.xxx.xx]] entries at issue 
7.82 The Philippines states that, on 4 August 2006, Thai  Customs refused to clear the cigarettes at 
issue at the declared transaction valu es of ([[xx.xxx.xx]] baht/pack for Marlboro cigarettes and 
[[xx.xxx.xx]] baht/pack for L&M cigarettes).464  The parties appear to agr ee that, prior to that date, 
Thai Customs had been accepting the declared transaction values without any further inquiry.465  
PM Thailand was orally informed on 4 August 20 06 that, pursuant to the memorandum by Thai 
Customs of 3 August 2006466, the acceptable transaction values would be [[xx.xxx.xx]] baht/pack for 
Marlboro cigarettes and [[xx.xxx.xx]] baht/pack for L&M cigarettes.467 
7.83 On 7 August 2006, Thai Customs orally advised  PM Thailand to submit further information 
confirming its declared transaction values of the cigarettes at issue.468 
7.84 On 11 August 2006, Thai Customs informed PM Thailand in writing that the guarantee 
values469 for Marlboro cigarettes and L&M cigarettes were set at [[xx.xxx.xx]] baht/pack and 
[[xx.xxx.xx]] baht/pack respectively.470  Upon receiving this letter, PM  Thailand began clearing the 
concerned cigarettes at these guarantee values.  For the cigarettes subsequently imported in new shipments, PM Thailand continued declaring the transaction values of [[xx.xxx.xx]] baht/pack for 
Marlboro  cigarettes and [[xx.xxx.xx]] baht/pack for L&M cigarettes, which were not accepted by 
Thai Customs.
471  In order to clear the cigarettes at issue,  PM Thailand paid the relevant taxes on the 
declared transaction values and posted bank or cash gua rantees for the relevant taxes in respect of the 
difference between the declared transaction values and the guarantee values as set by Thai Customs, 
pending the definitive assessme nt of the customs value.472 
                                                      
463 Philippines' response to Panel question No. 16. 
464 Philippines' first written submission, para. 143. 
465 Philippines' first written submission, paras. 131-13 6; Thailand's first written submission, para. 32.  
According to the Philippines, Thailand relied on "indicativ e" prices for customs valuation of imported cigarettes 
between January 2000 and March 2003.  The Philippines explains that in March 2003, Thailand began accepting 
PM Thailand's declared transaction values and abandon ed the use of minimum/indicative prices for cigarettes 
(Exhibit PHL-33).  Thailand submits that betwee n 2003-2006, Thai Customs has consistently accepted 
PM Thailand's declared transaction valu es as the basis for the customs value. 
466 Exhibit PHL-38.  See also para. 7.183 for the sequence of events in this regard. 
467 Philippines' first written submission,  paras. 143-150.  We note that the Philippines refers to these 
figures as both the new customs values and the guarantees. 
468 Exhibit PHL-56, p. 1. 
469 For a definition of the term guarant ee see Section VII.I.2, para. 7.1039. 
470 Philippines' first written submission, paras. 151-152;  Exhibit PHL-59.  Thailand submits that "these 
[guarantee] values were derived by the deductive values for certain PM Thailand imports covered by the Board 
of Appeals ruling of June 2006." Exhibit PHL-36. 
471 Philippines' first written submission, para. 154. 
472 Philippines' first written submission, para. 155, footnotes 131 and 132.  We note that PM Thailand 
was also required to post bank or cas h guarantees for the relevant internal taxes that are calculated on the basis WT/DS371/R 
Page 144  
 
  7.85 In the meantime, by letters to Thai Customs, PM Thailand requested Thai Customs to provide 
its reasons for questioning the acceptability of the declared transaction values in writing.
473  O n  
9 December 2006, Thai Customs sent PM Thailand a letter communicating its reasons for considering 
that the acceptability of the declared  transaction values was questionable.474   
7.86 On 16 February 2007, Thai Customs decreas ed the guarantee values to [[xx.xxx.xx]] 
baht/pack for Marlboro cigarettes and [[xx.xxx.xx]] baht/pack for L&M cigarettes.475  PM Thailand 
continued to clear the cigarettes from PM Philippines by paying the relevant taxes on the declared transaction values and by posting bank or cash guarantees. 
7.87 On 16 March 2007, Thai Customs further decreased the guarantee values to [[xx.xxx.xx]] 
baht/pack for Marlboro cigarettes and [[xx.xxx.xx]] baht/pack for L&M cigarettes.
476 
7.88 Between 16 March 2007 and 10 Oct ober 2007, Thai Customs issued Notices of Assessment 
for the [[xx.xxx.xx]] entries of the PM Thailand ci garettes at issue.  Thai Customs assessed the 
[[xx.xxx.xx]] entries cleared between 11 August 2006 and 22 September 2006 at [[xx.xxx.xx]] baht/pack for Marlboro  and [[xx.xxx.xx]] baht/pack for L&M .
477  For the rest of the [[xx.xxx.xx]] 
entries cleared between 27 September 2006 and 13 September 2007, the final assessed customs values 
were [[xx.xxx.xx]] baht/pack for Marlboro and [[xx.xxx.xx]] baht/pack for L&M .   
7.89 On 5 April 2007, PM Thailand sent a letter to Thai Customs requesting that Thai Customs 
provide, inter alia , the reason for the rejection of the declar ed transaction values, the method used to 
determine the customs value and how the final customs values were derived.478  Thai Customs 
responded to this request in a letter dated 12 April 2007.479 
7.90 On 28 March 2008, Thai Customs began to  accept transaction values declared by 
PM Thailand as the customs value for entries made on or after that date.480  Hence, for these new 
entries, no guarantees were collected, and the trans action values were accepted on clearance. On or 
after 14 July 2008, Thailand assessed the customs value of [[xx.xxx.xx]] entries that cleared between 
                                                                                                                                                                     
of the duty-paid landed cost of imported products in respect of the difference between the declared transaction 
values and the guarantee, pending the definitive assessment of customs value.  The relevant internal taxes are 
customs duties, excise, health and television taxes.   
473 Philippines' first written submissi on, para. 157, footnote 134 (Exhibits PHL-56, PHL-60,  PHL-268, 
and PHL-65).  Thailand does not contest this either.   
474 Philippines' first written submission, para. 161;  Thailand's first written submission, para. 49; 
Exhibit PHL-66.  The parties do not app ear to dispute that the doubts of Thai Customs about the acceptability of 
the declared transaction values were in relation to the c. i.f. Bangkok prices of Philip  Morris cigarettes, imported 
by "Importer A" (imports destined for duty free shops), that were over 300 per cent of the c.i.f. Bangkok values 
declared by PM Thailand (Thailand first written submission, paras. 33-39; Exhibit THA-7).  The Philippines 
also does not contest that PM Thailand was aware of the nature of doubts of Thai Customs doubts. It should be noted though, that the Philippines' is of the opinion that Importer A is not technically an importer because its 
goods transit through duty free areas, and have not formally entered Thailand or been cleared through Thai 
Customs (Philippines' first written submission, paras. 234-235). 
475 Philippines' first written submission, para. 164. 
476 Philippines' first written submission, para. 166. 
477 Philippines' first written submission, para. 168; Exhibits PHL-27 and PHL-129.  The Philippines 
points out that four entries of the PM Thailand cigarettes at  issue that cleared in the sa me period (i.e. 11 August 
2006-13 September 2007) as the [[xx.xxx.xx]] entries at issue were assessed by Thai Customs on 16 July 2008 
and 3 October 2008, later than the dates of assessments for the [[xx.xxx.xx]] entries.  Furthermore, Thai Customs accepted the declared transac tion values for these four entries,  namely [[xx.xxx. xx]] baht/pack for 
Marlboro and [[xx.xxx.xx]] baht/pack for L&M . 
478 Philippines' first written submissi on, para. 182; Exhibit PHL-69. 
479 Philippines' first written submissi on, para. 183; Exhibit PHL-70. 
480 Philippines’ first written submission, para. 187.  WT/DS371/R 
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  13 September 2007 and 19 March 20 08, accepting the transaction values.481  For these entries, 
transaction values were not accepted at the time of cl earance, and guarantees were collected in respect 
of potential customs and fiscal liabilities.  These [[xx. xxx.xx]] entries include one entry that cleared 
on 13 September 2007, and that was assessed on or after 14 July 2008.482 On or after 14 July 2008, 
Thailand also assessed the customs value of [[xx.xx x.xx]] entries that cleared, respectively, on 
28 March 2007 ([[xx.xxx.xx]] entry) and 10 Sept ember 2007 ([[xx.xxx.xx]] entries), accepting the 
transaction values.483  For these entries, the transaction valu es were not accepted at the time of 
clearance, and guarantees were collected in respect of potential customs and fiscal liabilities. Finally, 
on or before 10 October 2007, Thailand assessed the customs value of [[xx.xxx.xx]] entries that 
cleared between 11 August 2006 and 13 Septem ber 2007, rejecting the transaction values.484  F o r  
these entries also, the transaction values were not accepted at the time of clearance, and guarantees 
were collected in respect of potential custom s and fiscal liabilities.  These [[xx.xxx.xx]] entries 
include [[xx.xxx.xx]] entries that cleared on, respectively, 28 March 2007 ([[xx.xxx.xx]] entry) and 13 September 2007 ([[xx.xxx.xx]] entry), and that were assessed on or before 10 October 2007.
485 
7.91 An importer can appeal final customs duties to  the Thai Board of Appeals ("BoA") pursuant 
to Section 112 sexies of the Customs Act.486  An importer can then appeal  the decision of the BoA to 
the Thai Tax Court pursuant to Section 7(1) of the Tax Court Act.487 
5. Article 1.1 and 1.2 of the Customs Valuation Agreement 
(a) Introduction 
7.92 With respect to Article 1.1 and 1.2 of the Customs Valuation Agreement, the Philippines 
claims that Thailand violates:  (i) Article 1.1 a nd 1.2 by maintaining and applying a general rule 
requiring the rejection of the transaction value and th e application of the deductive valuation method; 
(ii) Article 1.1 and 1.2 by imprope rly rejecting PM Thailand's declared the transaction values for the 
[[xx.xxx.xx]] entries; and (iii) Article 1.2(a) by fa iling to communicate "grounds" before rejecting the 
transaction values for these entries. 
7.93 Before we examine the Philippines' claims in turn , we first clarify the standard appropriate for 
our review of the claims under Article 1.1 and 1.2(a) of the Customs Valuation Agreement. 
                                                      
481 Philippines’ first written submission, para. 195, Ta ble 2; second written submission, paras. 120-137. 
482 Philippines’ first written submission, para. 195, Table 2, Row 4; second written submission, paras. 
120-137. 
483 Philippines’ first written submission, para. 195, Table 2, Row 4; second written submission, paras. 
120-137. 
484 Philippines’ first written submission,  para. 195, Table 2, Rows 1-4. 
485 Philippines’ first written submission, para. 195, Table 2, Row 4; second written submission, paras. 
120-137. 
486 Thailand's first written submission, para. 74.  Between 2000 and 2003, PM Thailand appealed 
[[xx.xxx.xx]] customs valuation decisions by Thai Custom s, [[xx.xxx.xx]] of which ar e still pending today.  In 
addition, between August 2006 and September 2007, Thai Customs rejected the transaction value of 
[[xx.xxx.xx]] imports of cigarettes from the Philippines im ported by PM Thailand. PM Thailand appealed these 
rejections at the BoA, these appeals are still pending as  well.  (Philippines' first written submission, paras. 90-
91; response to Panel question No. 80; Thailand's response to Panel question No. 82).  
487 Thailand's response to Panel question No. 145 citing Exhibit THA-88; Exhibit PHL-281.  WT/DS371/R 
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  (b) Standard of review for the claims under Article 1.1 and 1.2(a) 
(i) Main arguments of the parties 
7.94 The Philippines  submits that the WTO standard of re view requires a panel to "objectively 
assess" under Article 11 of the DSU whether the aut hority's explanation demonstrates that it complied 
with its obligation to examine the circumstances of sale by critically examining the evidence.
488  As 
with other covered agreements, the explanation must show, among other things, how the authority 
treated the evidence and how the evidence supporte d its conclusion.  The Panel cannot assess the 
WTO-consistency of Thai Customs'  decision on the basis of reasons developed by Thailand in these 
proceedings, which may or may not reflect the view of Thai Customs at the time.489   
7.95 Further, in deciding whether an authority has properly examined the circumstances of sale, a 
panel must also objectively assess other relevant evidence that addresses the legitimacy of the 
authority's conclusion, in particular where th at conclusion does not explain the factual grounds 
supporting it.  Given that Thai Customs never men tioned the evidence at the time of its rejections, 
Thailand has failed to demonstrate that it w as entitled to reject the transaction values under 
Articles 1.1 and 1.2 of the Customs Valuation Agreement.490 
7.96 Thailand generally agrees with the Philippines that th e appropriate standard with respect to 
the claims under the Customs Valuation Agreement  is whether the valuation decision by Thai 
Customs valuation was reasonable given the facts and evidence before Thai Customs at the time of its 
determination.491  Thailand also agrees that the Panel must not conduct a de novo review.492   
7.97 Thailand disagrees, however, with the Philippines on how to apply this sta ndard to the current 
dispute.  Thailand argues that the Ph ilippines has failed to show that any of Thailand's arguments 
before the Panel are ex post  in that they differ from the grounds on which Thai Customs acted.  In 
Thailand's view, while the explanations provided to  the Panel are much more detailed than those 
provided to PM Thailand at the time of determination, the explanations  before the Panel are consistent 
with the grounds on which Thai Customs acted and th e explanations provided to PM Thailand at the 
time.493 
7.98 Furthermore, Thailand cont ests that the theory of ex post  justifications can be applied to the 
current dispute dealing with the customs valuati on measures, since it has been largely derived from 
disputes relating to trade remedy measures.494  Unlike the Anti-Dumping Agreement  or the SCM 
Agreement, the Customs Valuation Agreement does not  require the customs administration to disclose 
"all issues of fact and law considered material" at  the time it makes a customs value determination.  
Nor does it require the customs administration to in form all interested parties of the essential facts 
under consideration which form the basis for the decision, as do Article 6.9 of the Anti-Dumping 
Agreement  and Article 12.8 of the SCM Agreement.  In these circumstances, Thailand argues, there is 
no logical or legal basis for a reviewing panel to  decline to consider arguments by a defending 
Member on the ground that they were not among the "issues of fact and law"  or "essential facts" 
disclosed at the time of the customs valuation.  A ccording to Thailand, were the Panel to decline to 
consider arguments put forth by  Thailand in this dispute on ex post  grounds, the Panel would, in 
effect, be reading the disclosure provisions of the Anti-Dumping  and the SCM Agreements  into the 
                                                      
488 Philippines' response to Panel questions Nos. 4 and 6. 
489 Philippines' response to Panel question No. 108. 
490 Philippines' response to Panel question No. 16. 
491 Thailand's second written submission, para. 15; second oral statement, paras. 3-8. 
492 Thailand's combined response to Panel questions Nos. 4 and 6. 
493 Thailand's response to Panel question No. 93(1). 
494 Thailand's response to Panel question No. 93(2).  WT/DS371/R 
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  Customs Valuation Agreement, thereby improperly adding to or diminishing the rights and 
obligations provided in the covered agreements.495 
(ii) Analysis by the Panel 
7.99 We recall our consideration in Section VII. B.2 above that an objective assessment under 
Article 11 of the DSU, the proper standard of review for this Panel, must be understood in the light of 
the relevant obligations of the s ubstantive agreement at issue, the Customs Valuation Agreement.  In 
this connection, the Appellate Body in US – Upland Cotton stated:  
"Unlike in certain other instances under the WTO agreements, a panel conducting an 
analysis under Article 6.3(c) of the SCM Agre ement is the first trier of facts, rather 
than a review of factual determinations ma de by a domestic investigating authority.  
Bearing this in mind, we underline the r esponsibility of panels in gathering and 
analyzing relevant factual data and information in assessing claims under 
Article 6.3(c) in order to a rrive at reasoned conclusions."496 
7.100  This statement suggests that the precise standard a pplicable to a panel's review of a claim, and 
in particular to the factual aspects of a claim, de pends on whether the panel must conduct an analysis 
of the facts as the first trier of facts or as a reviewer of factual determinations made by domestic 
authorities.  We understand this distinction to be ba sed on the nature of the specific obligations under 
the particular provision of a given WTO-covered agre ement.  We are also mindful of the Appellate 
Body's view that the principles of the standard of  review based on Article 11 of the DSU with respect 
to one WTO-covered agreement can equally be  applied to other WTO-covered agreements.497  W e  
will therefore be guided by the Appellate Body's cl arification of the standard of review under other 
WTO-covered agreements in previous disputes. 
7.101  The Philippines' claim under Articles 1.1 and 1.2( a) of the Customs Valuation Agreement that 
Thai Customs improperly rejected the declared trans action values of the subject entries of cigarettes, 
requires us to make an objective assessment of wh ether Thai Customs examined the circumstances of 
the sale between PM Thailand and PM Philippines within the meaning of Article 1.2(a).  As 
summarized in Section VII.C.5(d) below, the parties'  arguments in this regard are focused on whether 
Thai Customs examined the evidence submitted by PM  Thailand at the time of determination and 
whether the Thai Customs' determination not to accep t the transaction value of the cigarettes at issue 
can be justified by such evidence.  Our mandate in  examining the claims under Article 1.1 and 1.2(a) 
is therefore to  assess whether the Thai Customs determination under Article 1.2(a) is supported by the 
factual evidence before it, but not to determine as the first trier of facts whether the relationship 
between PM Thailand and PM Philippines influenced  the price based on the information submitted by 
PM Thailand at the time of th e valuation determination. 
                                                      
495 Thailand further notes that the practice of declining to consider arguments or evidence on ex post  
grounds is not as clear cut as the Philippines might suggest, even in disputes under the Anti-Dumping 
Agreement  (Thailand's response to Panel question No. 93(2)).  Thailand cites to the Appellate Body Report, US 
– Countervailing Duty Investigation on DRAMS , paras. 162 and 164.  The Appellate Body stated at para. 162: 
"The panel itself did not explain what it understood by a prohibition on " ex post rationalization", nor on what 
basis such a prohibition would limit a Member's right to present evidence —as opposed to reasoning—in dispute 
settlement proceedings" and at para. 164 "we are of the view that Article 22.5 does not require the agency to cite 
or discuss every piece of supporting record ev idence for each fact in the final determination"). 
496 Appellate Body Report, US – Upland Cotton , para. 458. 
497 Specifically, the Appellate Body st ated that the standard of review  principles with respect to the 
Safeguards Agreement "apply equally to a panel's review of a Member's determination under Article 6 of the 
ATC" (Appellate Body Report, US – Cotton Yarn, para. 75) and are "instructiv e for cases under the SCM 
Agreement that also involve agency determinations" (Appellate Body Report, US – DRAMs CVD Investigation , 
para. 184). WT/DS371/R 
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  7.102  The substantive obligation under th e Customs Valuation Agreement  that is relevant to the 
formulation of the applicable standard of review  of the Philippines' claims under Articles 1.1 and 
1.2(a), is the obligation imposed on a customs admi nistration under Article 1.2(a) to communicate its 
grounds for considering that, in the light of the in formation provided by the importer, the relationship 
influenced the price.  Further, under Article  16, upon request from the importer, the customs 
administration must provide a written explanation as  to how the customs value was determined, as 
addressed in Section VII.C.6 below.   
7.103  Consequently, an objective assessment of wh ether Thai Customs properly rejected the 
transaction value by examining the circumstances of sal e within the meaning of Article 1.2(a) must be 
based on the grounds as well as on the explanation provided by Thai Customs under Articles 1.2(a) 
and 16 respectively.
498  We find support for our view in the Appellate Body's statement in US – Lamb : 
"It follows that the precise nature of the examination to be conducted by a panel, in 
reviewing a claim under Article 4.2 of the Agreement on Safeguards , stems, in part, 
from the panel's obligation to make an 'objective assessment of the matter' under 
Article 11 of the DSU, and, in part, from th e obligations imposed by Article 4.2, to 
the extent that those obligations are part of  the claim.  Thus, as with any claim under 
the provisions of a covered agreement, pane ls are required to examine, in accordance 
with Article 11 of the DSU, whether the Member has complied with the obligations imposed by the particular provisions identif ied in the claim.  By examining whether 
the explanation given by the competent authorities in their published report is 
reasoned and adequate, panels  can determine whether those authorities have acted 
consistently with the obligations imposed by Article 4.2 of the Agreement of 
Safeguards ."
499 
7.104  The Appellate Body also emphasized that a panel must critically examine a domestic 
authority's explanation "in depth, and in the light of the facts before the panel".500  Although the 
concerned provision in that dispute (Article 4. 2(a)) was under the Agreement on Safeguards, which 
has a more detailed obligation to provide a "reasone d and adequate" explanation, we do not see the 
                                                      
498 We recognize that there may be a situation where the importer does not request a written 
explanation under Article 16.  We do not consider it necessary for the purpose of resolving this dispute to 
determine the proper standard of  review in such a situation. 
499 Appellate Body Reports on US – Lamb , para. 105; US – Countervailing Duty Investigation on 
DRAMs , para. 184.  The Appellate Body in US – Steel Safeguards further states:  
"[A] panel must not be left to wonder why a safeguard measure has been applied. ... As we 
have said before, a panel may not conduct a de novo review of the evidence or substitute its 
judgment for that of the competent authorities.  Therefore, the "reasoned conclusions" and 
"detailed analysis" as well as "a demonstration of the relevance of the factors examined" that 
are contained in the report of a competent auth ority, are the only bases on which a panel may 
assess whether a competent authority has complied with its obligations under the Agreement 
on Safeguards  and Article XIX:1(a) of the GATT 1994.  This is all the more reason why they 
must be made explicit by a competent authority. (paras. 298-299) 
 
....  However, where a competent authority ha s not provided a reasoned and adequate 
explanation to support its determination, the panel is not in a position to conclude that the 
relevant requirement for applyi ng a safeguard measure has been fulfilled by that competent 
authority...." (para. 303).  
500 Appellate Body Report, US – Lamb , para. 106.  WT/DS371/R 
 Page 149 
 
 
  reason why the same principle would not apply to a panel reviewing the provisions under the Customs 
Valuation Agreement  that contains obligations of a similar nature.501 
7.105  In this connection, we further recall the Appe llate Body's reasoning that panels need not 
necessarily confine their review of a domestic aut hority's determination to an examination of that 
determination in terms of the fact ual and legal arguments put forward by the interested parties during 
the domestic investigation.502 The Appellate Body in US – Countervailing Duty Investigation on 
DRAMS also stated, "this is not to say that a panel is prohibited from examining whether the agency 
has given a reasoned and adequate explanation for it s determination, in particular, by considering 
other inferences that could reasonably be drawn fr om – and explanations th at could reasonably be 
given to – the evidence on record.  Indeed, a panel must undertake such an inquiry".503  
7.106  We therefore conclude that in the light of th e nature of obligations under Articles 1.2(a) and 
16 the Customs Valuation Agreement, the standard appropriate for our review of the Philippines' 
claims under Articles 1.1 and 1.2(a) of the Custom s Valuation Agreement is to assess, based on the 
grounds as well as the explanation provided by Thai  Customs, whether Thai Customs' decision to 
reject the transaction value of the imported cigare ttes at issue was consistent with the Customs 
Valuation Agreement. 
7.107  We will now commence our review of the parties' claims under the Customs Valuation 
Agreement  by applying the standard of review as set above. 
(c) Whether Thailand maintained and applied a gene ral rule requiring the rejection of transaction 
values and the use of the deductive valuation method in violation of Articles 1.1 and 1.2  
(i) Main arguments of the parties 
7.108  The Philippines submits that "[a] WTO Member is entitled to bring claims against any 
general rules of prospective application that are attributable to another WTO Member, whether the 
rule is formally published or not".504  The Philippines argues that Tha iland's general rule, applied from 
4 August 2006 until 19 March 2008, incl uded the following two elements: (i) the systematic refusal, 
at the time of importation, to accept the transaction values for all entries of imported cigarettes, with 
the collection of guarantees as a condition for allowing customs clearance505; and (ii) the systematic 
valuation of imported cigarettes using the deductive valuation method, instead of the transaction 
value, at the time of final assessment.506  All entries that have been assessed after 19 March 2008 have 
                                                      
501 The Appellate Body further stated that "panel s must, therefore, review whether the competent 
authorities' explanation fully addresses the nature, and, es pecially, the complexities, of the data, and responds to 
other plausible interpretations of that data.  A panel must find, in particular, that an explanation is not reasoned, 
or is not adequate, if some alternative explanation of the facts is plausible, and if the competent authorities' 
explanation does not seem adequate in the light of that alternative explanation. ..." (Appellate Body Report, US 
– Lamb , para. 106). 
502 Appellate Body Report, US – Lamb , paras. 110-116, referring to its report on Thailand – H-Beams, 
para. 94.    
503 Appellate Body Report, US – Countervailing Duty Investigation on DRAMS, footnote 278. 
504 Philippines' response to Panel question No. 1, citing the Appellate Body Report, US – Zeroing (EC) , 
para. 198. 
505 The Philippines submits that "with respect to aspect  (1) (systematic refusal of transaction valuation) 
of the general rule, Thailand refuse d to accept transaction value at the time of importation, and collected 
guarantees for all [[xx.xxx.xx]] entries that were imported  between 4 August 2006 until 19 March 2008, without 
exception." (Philippines' response to Panel question No. 1) (emphasis added). 
506 Philippines' response to Panel qu estion Nos. 1 and 96(1).  The Philippines submits that "with respect 
to aspect (2) (systematic use of deductive valuation) of the general rule, Thailand valued imported cigarettes 
using the deductive valuation methodology, instead of transaction value for all [[xx.xxx.xx]] entries  for which 
Thailand issued a notice of assessment  for these entries between 11 August 2006 and 19 March 2008, again WT/DS371/R 
Page 150  
 
  been valued using the transaction value, even if th eir date of entry was during the same period as the 
[[xx.xxx.xx]] entries for which transaction values were rejected. 
7.109  The Philippines requests the Panel to find that Th ailand's general rule is  inconsistent with 
Articles 1.1 and 1.2 of the Customs Valuation Agr eement because it involves the systematic rejection 
of the transaction value in related party sales both at the time of importation and at the time of 
assessment, without examination of the circumstances of sale.
507  The Philippines asserts that various 
Thai government documents demonstrate the existence or establishment  of the general rule508, 
whereas Thailand's rejection of the transaction va lue and valuation using the deductive valuation 
method in the [[xx.xxx.xx]] entries at issue is evidence of the application of the general rule.509  
Although Thailand is not appl ying its general rule today, it is unclear to the Philippines whether the 
rule has been fully repealed or whether Thailand h as simply decided not to apply the rule for the time 
being.  Therefore, the Philippines requests that the Panel recommends th at, to the extent that the rule 
continues to exist, Thailand bri ngs it into conformity with its obl igations under the Customs Valuation 
Agreement.510 
7.110  Thailand submits that the Philippines failed to est ablish that a "general rule and/or 
methodology" existed as that term is understood in WT O jurisprudence, in particular according to the 
threshold, as set by the Appellate Body in US – Zeroing (EC) , to be met to establish a general rule.  
Thailand objects to the classification of the Thai customs valuation determinations at issue as a 
general rule/methodology because the determinations  challenged are not general and prospective in 
nature:  they only apply to a specific corporati on (i.e. PM Thailand), and the Philippines itself has 
argued that such calculations are actually random and unpredictable in nature under different claims.  
Thailand therefore submits that it does not have any practice of systematically rejecting the 
transaction value for cigarettes.511   
7.111  Thailand further argues that there is no need fo r the Panel to rule on this claim in order to 
resolve the dispute before it.  Th is is because the Philippines' claims  with respect to the [[xx.xxx.xx]] 
entries listed in the Philippines' panel request are with in the terms of reference.  As long as the entries 
listed in the Philippines' panel requ est constitute the measures at issue,  there is no need for the Panel 
to consider the general rule because no purpose woul d be served by also ruling on the revised claim 
regarding a general methodology.512  Finally, Thailand asserts that the Philippines misinterprets the 
Thai Customs' memorandum dated 3 August 2006 in or der to prove the existence of the general rule. 
This memorandum, which the Philippines alleges dictates general rules for the collection of 
guarantees, clearly explains that the guarantees to  be collected on PM Thailand's imports will be 
based on the deductive valuation method used in the June 2006 Board of Appeals decision from 
which the guarantee values were derived.513  This memorandum therefore re lates directly to a specific 
instance, and does not show the existence of a general rule.514 
                                                                                                                                                                     
without exception" (emphasis added).  These [[xx.xxx.xx]] entries are a sub-set of the [[xx.xxx.xx]] entries, 
cleared  between 11 August 2006 and 19 March 2008.   
507 Philippines' response to Panel question No. 1. 
508 Philippines' response to Panel question No. 96(1) (emphasis added).  
509 Philippines' response to Panel question No. 96(1).   
510 The Philippines refers to the Panel Report, EC – Approval and Marketing of Biotech Products , 
paras. 8.16 and 8.36. 
511 Thailand's first written submission, para. 126. 
512 Thailand's second written submission, para. 305. 
513 Exhibit THA-38 includes a Thai Customs memo dated 9 August 2006, in which it states that the 
customs valuation of cigarettes "needs to be valued by Method 4" and that PM Thailand is "facing the question 
of how much guarantee should be imposed on such products".  The memo goes on to explain that the "maximum customs valuation" is the "deductive price"  in accordance with the Bo A's "Decision No. Gor.Or. 
19/2549".  This refers to the BoA decision of June 2006, provided as Exhibit PHL-36, from which the values  WT/DS371/R 
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  (ii) Analysis by the Panel 
7.112  The Philippines claims that Thailand maintains a general rule or norm of systematically 
rejecting transaction values for certain imported goods and using the deductive valuation method for 
customs valuation inconsistently with Article 1.1 and 1.2(a) of the Customs Valuation Agreement.  
We will begin our analysis of the Philippines' clai m by recalling the Appellate Body's consideration in 
previous disputes of whether "general rules" can constitute a "measure" for the purpose of a WTO 
dispute settlement proceeding. 
7.113  The Appellate Body stated that measures that may be subject to WTO dispute settlement 
include acts applying a written law in a specific cont ext and "acts setting forth rules or norms that are 
intended to have general a nd prospective application".515  Regarding whether unwritten rules or norms 
can also constitute a measure, the Appellate Body clarified in US – Zeroing (EC)  that there is "no 
basis to conclude that 'rules or norms' can be challenged, as such, only if they are expressed in the 
form of a written instrument".516 
7.114  In this connection, the Appellate Body has not ed that "a panel must not lightly assume the 
existence of a 'rule or norm' constituting a measure of general and prospective application, especially 
when it is not expressed in the form of a written document.  If a panel were to do so, it would act 
inconsistently with its obligati ons under Article 11 of the DSU to  'make an objective assessment of 
the matter' before it".517  The Appellate Body thus emphasized  the need for clearly distinguishing 
"between the issue of ascertaining the existence of the challenged measure, which is especially 
important when unwritten measures are at issue; and the separate examination of its consistency with 
the relevant provisions of the covered agreement".518 
7.115  In particular, the Appellate Body states: 
"When an 'as such' challenge is brought against a 'rule or norm' that is expressed in 
the form of a written document – such as la w or regulation – there would, in most 
cases, be no uncertainty as to the existence or content of the measure that has been 
challenged.  The situation is  different, however, when a ch allenge is brought against a 
'rule or norm' that is not expressed in the form of a written document.  In such cases, 
the very existence of the challenge d 'rule or norm' may be uncertain."519 
7.116  The Appellate Body stated that to support a finding of the existence of an unwritten rule or 
norm, a complaining party must therefore show: (i) the rule or norm attributable to the responding 
Member; (ii) its precise content; and (iii) its general and prospective application.520  F u r t h e r ,  t o  
determine whether the complaining party has proved the existence of an unwritten rule or norm, a 
panel must examine the concrete instrumentalities that evidence the existence of the purported rule or 
                                                                                                                                                                     
used as the guarantees required on PM Thailand's imports from August 2006 were derived.  Thus, it is clear that 
this memo refers to the issue of the establishment of the guarantee values, which were based on a previous 
deductive value and were required as of the date of the memo, and not to the final valuation of the [[xx.xxx.xx]] 
entries at issue, which did not take place until March 2007,  after extensive further co ntact between PM Thailand 
and Thai Customs. 
514 Thailand's second written submission, para. 306. 
515 Appellate Body Report, US – Oil Country Tubular Goods Sunset Reviews , para. 187. 
516 Appellate Body Report, US – Zeroing (EC) , para. 193. 
517 Appellate Body Report, US – Zeroing (EC) , para. 196. 
518 Appellate Body Report, US – Zeroing (EC) , para. 203. 
519 Appellate Body Report, US – Zeroing (EC) , para. 197. 
520 Appellate Body Report, US – Zeroing (EC),  para. 198. WT/DS371/R 
Page 152  
 
  norm to conclude that such rule or norm can be challenged as such.
521  This evidence may include 
proof of the systematic application of the challenged rule or norm.522 
7.117  Given that the general rule allegedly maintained  by Thailand is not in the form of a written 
document523, our analysis of the Philippines' claim will be guided by the criteria, set out by the 
Appellate Body as above, to be app lied in examining an as such cha llenge against an unwritten rule or 
norm as a measure.  We will therefore first exam ine whether the Philippines has established the 
existence of the unwritten rule or norm, namely the syst ematic rejection of the declared transaction 
value and the systematic use of the deductive valu ation method.  Only if we find, based on the 
evidence before us, that the Phili ppines established the existence of the unwritten rule or norm, will 
we continue with an examination of the consistency of such an unwritten rule or norm. 
7.118  The Philippines claims that the existence or establishment of the alleged general rule is 
demonstrated by the following eight categories of evidence:524 
• A Thai Customs memorandum of 3 August 2006, a day before Thai Customs started 
doubting declared transaction values of imported cigarettes, that states that Prime Minister Thaksin instructed Thai Custom s to take action with respect to "very 
unusually low declared values" for certain  categories of imported goods, including 
cigarettes
525; 
 
• A Thai Customs memorandum of 9 August 200 6 that instructs Thai customs officers 
to value all imported cigarettes using th e deductive valuation method526, which 
allegedly shows that Thailand adopted a policy of systematically rejecting the 
transaction value, and using the deduc tive valuation method to value imported 
cigarettes; 
 
• The minutes of the 6 March 2007 meeting, stating that Thailand did not examine the 
circumstances of sale, which is consistent  with the fact that Thailand adopted a 
general rule involving the systematic rejec tion of transaction value irrespective of the 
circumstances of sale527; 
                                                      
521 Appellate Body Report, US – Zeroing (EC) , paras. 197-198. 
522 Further, the Appellate Body in US – Zeroing (EC)  recognized the following factors as relevant to 
determining the existence of an unwritten rule/norm:  (i) the United States (the responding party) did not contest 
that a certain instrument proved the application of the concerned rule for an extended period of time; (ii) the 
United States had been unable to identify any instance wher e the rule was not applied; and (iii) the United States 
had not contested in that proceeding that the rule reflect s a deliberate policy.  The Appellate Body noted that the 
Panel concluded, based on its assessment of the evidence mentioned above, that "the zeroing methodology 
manifested in the 'Standard Zeroing Procedures' [an instrumentality] represents a well-established and well-
defined norm followed by the USDOC and that it is possible based on this evidence to identify with precision the specific content of that norm and the future conduct that it will entail."  (Appellate Body Report, US – 
Zeroing (EC) , paras. 199-200, citing the Panel Report, paras. 7.103-7.104).  The Appellate Body further 
observed that the evidence before the Panel consisted of the following:  (i) USDOC determinations in the "as applied" cases challenged by the European Communities; (ii) the standard programs used by the USDOC to 
calculate margins of dumping; (iii) expert opinions regarding the use and the content of the rule; (iv) the United 
States' indication at the Appellate Body oral hearing that  it will soon be publicly announcing that it no longer 
will engage in the rule at issue in certain circumst ances; and (v) the Anti-Dumping Manual as evidence of the 
standard character of the rule. 
523 Philippines' response to Panel question Nos. 96(2)(iii) and (iv). 
524 Philippines' response to Panel question Nos. 1, 4, 6 and 96(1). 
525 Exhibit THA-38. The Philippines states that this memorandum was the source of the events within 
the Thai government that led to this dispute (its response to Panel question No. 1). 
526 See supra  footnote 513 
527 Exhibit PHL-74.  WT/DS371/R 
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• An analysis of Thai Customs' deductive tes ting, which indicates that the motivation of 
Thai Customs' decisions was not the gap between the transaction values and the deductive test values
528 and hence suggests the existence of a general rule involving 
the systematic rejection of transaction valu e irrespective of the circumstances of sale;  
 
• Thailand's acceptance of the transaction values fo r four entries that were cleared at or 
around the same time as the [[xx.xxx.xx]] entries at issue (i.e. 11 August 2006 and 13 September 2007), but assessed after 19 March 2008, which shows that the basis for 
accepting or rejecting transaction value was not the circumstances of sale, but the Thai government policy prevaili ng at the time of assessment
529;  
 
• A Thai Customs memorandum of 23 August 20 06, entitled "guide price consideration 
of liquor and beer products"530; 
 
• A Thai Customs memorandum of 27 Sept ember 2006, entitled "Guideline on the 
Customs Valuation of Alcoholic Beverages and Beer"531; and  
 
• A Thai Customs meeting report of 24 Oct ober 2006 regarding the customs valuation 
of "cigarettes, liquor, beer and wine products".532 
 
7.119  In examining the Philippines' claim, we will assess whether these exhibits  individuall y and/or 
as a whole demonstrate the existence of  the alleged general rule or norm. 
7.120  The first element that needs to be established to  prove the existence of an unpublished rule or 
norm is that the alleged rule or norm is attributable  to the responding Member.  The alleged Thai 
Customs' systematic refusal of transaction value and use of the deductive valuation method at issue is 
attributable to Thailand as Thai Customs and Thai Excise both consist of appointed government officials who are accountable to the Thai government .  WTO Members are responsible for the actions 
of their government officials, where their action is inconsistent with the WTO covered agreements.
533 
7.121  Next, regarding the precise content of the alle ged general rule, the Philippines submits that 
the Thai government's internal documents as listed  above, show the applicability of the rule to 
imported cigarettes, liquor, beer, and wine.534  We also understand from the Philippines' claim that the 
general rule includes two elements: first, the syst ematic rejection of importers' declared transaction 
value without properly examining the circumstances of the sale in related-party transactions; and, 
second, the systematic use of the deductive valua tion method in determining the customs value of 
imported goods.   
                                                      
528 The Philippines puts forward that this argument is based on its analysis that "when the gap between 
the value was at its largest, Thailand  accepted the declared transaction values; and, when the gap was at its 
smallest, Thailand rejected the declar ed transaction values" (Philippines' combined response to Panel question 
Nos. 4 and 6). 
529 Philippines' second written submission, paras.  126-129; Exhibits PH L-200, PHL-201, PHL-202, 
PHL-203, and PHL-219.  
530 Exhibit THA-69. 
531 Exhibit THA-70. 
532 Exhibit THA-72. 
533 Article 4(1) of the Articles on Responsibility of Stat es for Internationally Wrongful Acts, annexed to 
UN GA Resolution 56/83 (12 Decembe r 2001); Appellate Body Report, U.S. – Gasoline , p. 28. 
534 Philippines' response to Panel question No. 96(2)(i). WT/DS371/R 
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  7.122  As regards whether the alleged rule or norm has general and prospective application, the 
Philippines refers to the following Thai government  documents: (i) four Thai Customs memoranda 
concerning customs valuation of cigarettes and alco holic beverages; (ii) the 24 October 2006 meeting 
report; and (iii) the minutes of the 6 March 2007 meeting.   
7.123  The Thai Customs memorandum of 3 August 2006 instructs, according to the order of the 
Prime Minister, Thai Customs "to act carefully in  making a customs valua tion for imported products" 
with "very unusually low declared values", including wine and cigarettes.
535  The language and 
content of the memorandum, however, appears too broa d and vague to be cons idered as constituting a 
rule or norm systematically rejecting declared  transaction values or using the deductive valuation 
method.   
7.124  Further, the Thai Customs' memorandum of 9 August 2006 instructs Thai Customs officers to 
value Marlboro and L&M imports by PM Thailand using the deductive valuation method.536  T h i s  
falls short of evincing a rule or norm requiring to systematically  use the deductive valuation method 
because the instruction in the subject memorandum appears to have been made because of the doubts 
on the acceptability of PM Thailand's declared transa ction values that were triggered by the purchase 
price of Importer A, not because of the existing norm or rule.  In other words, the content of the 
memorandum shows that Thailand was responding to a particular set of circumstances where an 
importer's declared transaction value raised doubts as to its acceptability rather  than systematically 
applying a norm or rule.  We are not presented with any evidence to understand otherwise.  Similarly, 
the minutes of the 6 March 2007 meeting also concer n customs valuation issues relating to cigarette 
imports by PM Thailand only, not cigarettes in general.   
7.125  Finally, Thailand based the customs value fo r PM Thailand's entries in the period August 
2006-March 2007 on the deductive va luation method and it used these values as "test values" to 
determine whether transaction values would be accepte d with respect to future entries.  Thailand 
states that it used these test valu es, because there was a gap between the declared transaction values 
and the calculated deductive values.537  The Philippines argues that the r esults of this testing show that 
Thailand's decision-making was arbitrary, and not based on the circumstances surrounding 
PM Thailand's imports, since, when the gap between the declared transaction value and the test value 
was at its largest, Thailand accepted the declared va lue; and, when the gap between the declared 
transaction value and the test value was at its smallest, Thailand rejected the declared value.538   
7.126  We note that all of the above mentioned memoranda, the 6 March 2007 meeting minutes and 
Thailand's deductive testing concern valuation issues so lely relating to PM Thailand.  The question is 
therefore whether these government documents th at specifically concern PM Thailand can be 
considered as showing the general and prospective application of th e alleged general rule or norm. 
7.127  In this connection, in previous disputes where claims under Article X:1 of the GATT 1994 
were at issue, panels had an opportunity to addr ess the meaning of laws, re gulations and rulings "of 
general application". In essence, a domestic agency's  determination or ruling that concerns a 
particular importer only was not considered per se  determinative to deciding whether such a 
determination or ruling should be considered as c onstituting a rule or norm of general and prospective 
application.  The Panel in Japan – Film , for example, found that "inasmuch as the Article X:1 
requirement applies to all administrative rulings of general application, it also should extend to 
administrative rulings in individual cases where such  rulings establish or revise principles or criteria 
                                                      
535 Exhibit THA-38. 
536 Exhibit THA-38. 
537 Thailand's first written submission, paras. 62-63. 
538 Philippines' combined response to Panel question No. 4 and 6, referring to its response to Panel 
question No. 1.  WT/DS371/R 
 Page 155 
 
 
  applicable in future cases". 539  The Panel considered that, in such a case, it is incumbent upon the 
complainant to clearly demonstrate the existence of such unpublished administrative rulings in 
individual matters which establish or revise principles applicable in future cases.   On the basis of the 
text of the concerned official memoranda and the me eting minutes in this dispute, we do not find the 
content therein to be applied gene rally and prospectively in future cases where similar issues arise. 
7.128  The Philippines further submits that Thai Custom s' valuation of the [[xx.xxx.xx]] entries at 
issue constitutes evidence of the ex istence of the general rule.  Tha iland argues that "the concept of a 
'general rule' applicable to all determinations cannot be extended to  company-specific determinations 
such as the valuation decisions under the Customs Valuation Agreement  at issue in this case, even 
where those determinations cover multiple entries".540  As noted in the previous paragraph, we 
consider that administrative rulings in individual  cases could constitute rulings  of general application 
where such rulings establish or revise principles or criteria applicable in future cases.  We further 
consider that showing that an unwritten rule or norm has consistently been applied for an extended 
period of time could also demonstrate the exis tence of the general rule.  The panel in US – Zeroing 
(EC) found that the evidence before it indicated that  the concerned practice (zeroing) had been 
invariably performed by the United States' government "for an extended period of time", as also 
acknowledged by the Appellate Body.541  In another zeroing dispute, the Appellate Body found that a 
practice of zeroing was applied for approximately 20 years.542  In the current dispute, the subject 
valuation determinations were made for [[xx.xxx. xx]] entries assessed between 16 March 2007 and 10 
October 2007, and cleared between 11 August 20 06 and 13 September 2007.  The parties do not 
dispute that Thai Customs is no longer rejecting the declared transaction values of PM Thailand's 
cigarettes.543  We note that this is, for example, in contrast to the factual circumstances in US – 
Zeroing (EC)  where the United States could not point to  any instance where the concerned practice 
was not used.  The Philippines is also not certain whethe r the alleged general rule may be applied to 
imports in the future.544   
7.129  Neither has the Philippines been able to point to a specific instance in which the alleged 
general rule was in fact app lied to imported products other than the cigarettes imported by 
PM Thailand.  In the Philippines' view, because th e concerned general rule is challenged as such 
"independently from the application" of the rule in  any given case, evidence of the actual application 
of a general rule is not required.545  We do not agree with the Philippines.  As set out above, an 
allegation that an unwritten rule or norm violates WTO obligations requires the complaining party to 
first show the existence of such a rule or norm for the very r eason that the concerned rule or norm is 
unwritten .  In these circumstances, the actual applica tion of an unwritten general rule will clearly 
qualify as evidence of the exis tence of such a rule.   
                                                      
539 Panel Report, Japan – Film , para. 10.388.  Previously, the Panel in US – Underwear considered that 
an administrative order targeting a specific country did not preclude the possibility of it being a measure of 
general application, whereas the same measure (general  application of the initial date of calculation for a 
safeguard measure, regarding silence of ATC interpreted as prohibition of practice) would not have qualified as 
a measure of general application if it was addressed to  a specific company or app lied to a specific shipment 
(Panel Report, US – Underwear , para. 7.65). 
540 Thailand's second written submission, para. 302. 
541 Appellate Body Report, US – Zeroing (EC) , para. 191. 
542 Panel Report, US – Zeroing (Japan) , para. 7.51-7.52. 
543 Based on the fact that Thai Customs stopped reject ing the declared transaction values, the European 
Communities, a third-party participant, also commen ts that "the existence of a general rule with prospective  
effect would appear not to be at issue in this dispute. " (emphasis added) (the European Communities' third party 
oral statement, para. 3).   
544 Philippines' response to Panel question No. 96(iv). 
545 The Philippines refers to the Appellate Body finding in US – 1916 Act , paras. 60-61, (Philippines' 
response to Panel question No. 96(2)(i), footnote 63).  However, unlike in this case, in that dispute the 
concerned measure was "legislation", not an unwritten rule or norm. WT/DS371/R 
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  7.130  The Philippines refers to the meeting report of  24 October 2006, which in the Philippines' 
view shows that the general rule was applied to cigarettes of two other importers because the meeting 
addressed how to calculate a deductive value for im ports from these two companies for use as a test 
value.
546  The meeting report indicates that the discu ssion concerned the valuation of cigarettes, 
liquor, beer and wine imports and profit rates and gene ral expenses of these products.  It then provides 
specific case considerations:  first, the current guarantees used for Marlboro and L&M imports; and, 
second, the direction according to which the proper profit rates and general expenses are applied in 
calculating deductive values to test the declared transaction values of other cigarette importers such as 
[[xx.xxx.xx]] company and [[xx.xxx.xx]] company.  We do not find in the meeting report, however, a government rule or policy directing Thai customs offi cers to systematically reject declared transaction 
values for these imports or to use the deductive valuation method to determine – not to test – the 
customs value of cigarette imports.  We do not consid er that this meeting report shows the application 
of the alleged general rule or norm to othe r cigarette imports as the Philippines submits. 
7.131  The Philippines also argues that the statements by the Scotch Whisky Association and the 
European Spirits Association demonstrate that the gene ral rule has been applied to products other than 
cigarettes.
547  These statements are press releases made by the above two associations.  In these press 
releases, using almost identical language, both associ ations welcome the European Union's decision in 
January 2008 to request consulta tions with Thailand in the context of the WTO dispute settlement 
regarding Thailand's customs valuation system548 The associations state that Thailand has 
systematically rejected product values declared by  importers since September 2006 and has instead 
calculated the value of imports according to an  arbitrary, standard margin, breaching the WTO 
Customs Valuation Agreement.  We agree that certa in statements in the press releases, as pointed out 
by the Philippines, echo the Philippines' position in  this dispute with respect to Thai Customs 
valuation determinations during the same period at issue.  They also do indicate that certain alcoholic 
beverage imports faced similar customs valuation issues in Thailand as the concerned cigarettes in 
this dispute.  Although we do not find these statements alone sufficient to prove the existence of an 
unwritten general rule or norm, particularly given thei r nature as a secondary evidentiary source, we 
do not eliminate the possibility that they may, cons idered together with other evidence, show the 
existence of such a rule.549 
7.132  Further, there is also no evidence showing a deliberate policy by the Thai Government of 
maintaining a general rule.  Thailand's acceptance of  the transaction values for four entries that were 
cleared at or around the same time as the [[xx.xxx. xx]] entries at issue (i.e. 11 August 2006 and 13 
September 2007), but assessed after 19 March 2008, woul d not be sufficient to prove the existence of 
a Thai government's deliberate policy of general and prospective app lication, although it might have 
been a prevailing practice at the time of assessment.  On the contrary, it illustrates the instances where 
the alleged rule has not been applied, which goes against the Philippines' very position that Thailand 
maintains a general rule or norm thr ough the concerned valuation practice. 
                                                      
546 Philippines' response to Panel question No. 96(2)(ii), referring to Exhibit THA-72, pp. 2-3.  We 
understand based on this exhibit that Thai Customs undertakes a deductive value calculation, the result of which 
is called 'test value'. If the test value is approximately the same as the declared value, then Thai Customs will accept the declared transaction value. 
547 Exhibits PHL-267 ("WTO talks on Thai customs rules welcomed" News Release by Scotch Whisky 
Association, 28 January 2008), PHL-269 ("EU spirits producers welcome decision to file WTO talks on Thai customs rules" Press Release by the European Spirits Organization (CEPS), 27 January 2008). 
548 Thailand –  Customs Valuation of Certain Products from the European Communities , WT/DS370, 
request for consultations 30 January 2008.  
549 The Philippines states that "the statements by the two associations demonstrate that the general rule 
has been applied to products other than cigarettes" (Phili ppines' response to Panel question No. 96(2)(ii)).  It is 
our view that these statements may rather be referenced to assess the existence of the alleged general rule, not the other way around.  If the general rule were found to exist, we would not see any particular need to confirm 
that the general rule applied to products other than cigarettes.  WT/DS371/R 
 Page 157 
 
 
  7.133  We are mindful that the burden of proving the existence of an unwritten norm or rule, as 
elaborated by the Appellate Body, is rather high, sp ecifically because of the very fact that it does not 
exist in the form of a written document.  In th is case, we do not consider that the Philippines has 
discharged its burden of proving that Thailand maintains an unwritten rule according to which Thai 
Customs is required to reject the declared tran saction values and to use the deductive valuation 
method.  Given the high standard required to prove th e existence of such an unwritten general rule, we 
cannot uphold the Philippines' claim as the Philippines could not even refer to any instance in which 
the alleged rule was applied to ot her concerned imports or any other cigarette brands.  Nor did the 
Philippines itself  know whether the alleged general rule  would apply in future cases.  In this light, its 
reference to a secondary evidentia ry source such as the press releases by other industry associations, 
although raising certain doubts with respect to the circumstances surrounding the customs value 
decision in Thailand during the period at issue, is no t sufficient in itself to prove the existence of the 
alleged unwritten general rule.  
(d) Whether Thailand improperly rejected PM Th ailand's declared transaction values of the 
imported cigarettes at issue inconsis tently with Articles 1.1 and 1.2  
7.134  The Philippines claims that Thai Customs reject ed PM Thailand's declared transaction values 
for the [[xx.xxx.xx]] entries at issue inconsistently with Article 1.1 and 1.2(a) because (i) it failed to 
"examine" the circumstances of transaction betw een PM Thailand and PM Philippines within the 
meaning of Article 1.2(a) and (ii) it rejected the transaction values base d on "invalid reasons".  
Thailand contests the Philippines' claim.  Thailand asser ts that the importer, PM Thailand in this case, 
failed to establish to the satisfaction of the Thai customs authority that the relationship between the 
importer and the exporter did not influence the transaction price. 
7.135  We will begin our analysis by clarifying th e nature of obligations imposed on customs 
authorities under Article 1.2(a) of the Customs Valuation Agreement. 
(i) Obligations under Article 1.2(a)  
Main arguments of the parties  
7.136  The Philippines  argues that in cases in which the parties are related and the customs 
administration has doubts about the acceptability of the transaction value, Article 1.2(a) imposes an 
obligation on the customs authority to investigate whether the relationship did have an effect on the 
price.550  Pursuant to Article 1.2(a) and the Interpretativ e Note to Article 1.2, paragraph 3, in a related-
party transaction, an authority cannot reject the prop osed transaction value if it sits idly and does not 
take active steps to establish that the relati onship did, indeed, influence the price.   
7.137  Specifically regarding the meaning of the phrase "shall be examined" in Article 1.2(a), the 
Philippines argues that the requirement imposed on a cu stoms authority to look into the circumstances 
of sale entails two elements: (i) the requirement to seek and gather relevant information from the 
importer and, if necessary, from other WTO Members; and (ii) the requirement to critically analyze 
the gathered information and, upon request, explain how the facts, other than the relationship, justify 
the rejection of the transaction value.551  In the Philippines' view, the requirement to seek and gather 
relevant information from the importer includes the obligation to request information from the 
importer.  To satisfy this requirement, customs au thorities, in accordance with Article 1.2(a), must 
communicate "grounds", which should be based on facts and evidence, not legal conclusions, for 
considering that the relationship influenced the pri ce, to the importer and provide the importer with a 
reasonable opportunity to respond. 
                                                      
550 Philippines' first written submission, para. 207. 
551 Philippines' response to Panel questions Nos.  4 and 6; second written submission, para. 76. WT/DS371/R 
Page 158  
 
  7.138  Thailand takes the position that once the customs administration decides to examine the 
transfer price between the importer and the re lated seller, the importer, not the customs 
administration, bears the burden of establishing that the relationship did not influence the price.
552  
Thailand submits that the burden of proof is importa nt in understanding the responsibility of customs 
administrations.553  Thailand argues that in every instan ce in which an individual or enterprise 
complies with the disclosure requirements of tax, customs, and fiscal authorities of any WTO 
Member, the burden is on the declarant to prove th e accuracy or reliability of the information he 
provides to the authorities.554  Thailand considers that this rule  and the notion of a burden of proof 
equally apply to the situation provided for in Ar ticle 1.2(a) of the Customs Valuation Agreement .  
Imposing the burden of proof on the importer is consistent with the ru le that the burden of proof lies 
with the party in possession of the facts.  Therefore,  when issues arise as to whether the negotiation of 
prices between related buyers and selle rs were at arm's length, it is clearly the importer and its related 
seller that are in possession of the facts and, therefor e, bear the burden of proving that the relationship 
did not influence the price.  In support of its position, Thailand refers to the Decision Regarding 
Cases Where Customs Administrations Have Reasons to  doubt the Truth or Accuracy of the Declared 
Value (the "Decision"), Article 1.2(b) of  the Customs Valuation Agreement,  the WTO Technical 
Committee Commentary, as well as a letter from the WCO Secretariat.555 
7.139  Given that the importer has the burden of estab lishing that the relationship between the buyer 
and the seller did not influence the price, the na ture of the examination to be conducted by the 
customs administration is necessarily affected by  how the importer chooses to discharge its burden 
and by what evidence the importer submits.556  Accordingly, the customs authority's requirement to 
"examine" under Article 1.2(a) is satisfied by:  (i ) notifying the importer that it has preliminarily 
determined that there are grounds to consider that  the relationship influenced the price and that 
additional information is required; and (ii) review ing that information when such information is 
provided.557  Thailand is of the view that its positio n is supported by Case Study 10.1 by the WTO 
Technical Committee on Customs Valuation concerning the application of Article 1.2558 and 
documents by the customs authorities of the United States and Canada.559 
7.140  Furthermore, Thailand points out that Article 1. 2(a) contemplates a very different type of 
examination by the customs administration than that by the anti-dumping authority as envisaged under the Anti-Dumping Agreement  because, unlike the Customs Valua tion Agreement, the Anti-Dumping 
Agreement  imposes significant procedural obligations on investigating authorities.
560  For example, 
Article 6.1 of the Anti-Dumping Agreement  stipulates that parties in an anti-dumping investigation 
shall be given notice of the information which the authorities require , whereas, under the Customs 
Valuation Agreement, the customs administration shou ld give the importer an opportunity to provide 
such additional information as may be necessary.  Pu rsuant to the Customs Valuation Agreement, the 
importer has the right to choose the kind of informati on and the method used.  Thailand submits that 
the Panel should not interpret the Customs Valuation Agreement  to contain either substantive or 
                                                      
552 Thailand's first written submission, paras. 135, 149 and 151. 
553 Thailand's response to Panel question No. 6.  
554 Thailand's response to Panel question No. 5(3). 
555 Thailand's first written submission, paras. 127-136; response to Panel question No. 5. The Decision 
provides, in relevant part, that in such cases, "the customs administration may ask the importer to provide 
further explanation, including documents or further evidence, that the declared value represents the total amount actually paid ...". 
556 Thailand's response to Panel question No. 6. 
557 Thailand's response to Panel question No. 4; second written submission, paras. 37-47.  In this 
connection, Thailand considers that communicating doubts  does not, in itself, constitute the extent of the 
customs administration's responsibilities (Thailand's response to Panel question No. 6). 
558 Thailand's response to Panel question No. 6; Exhibit THA-41. 
559 Thailand's first written submission, para . 138; Exhibits THA-27 and THA-62.  
560 Thailand's response to Panel question No. 6.  WT/DS371/R 
 Page 159 
 
 
  procedural obligations regarding the examination of  an importer's declarati ons and the determination 
of customs values that the drafters did not incl ude in that Agreement and which would make it 
impossible for all but the WTO Members with the gr eater amount of resources to comply with the 
Customs Valuation Agreement.561 
7.141  The Philippines  considers it unnecessary for the Panel in this dispute to decide whether the 
Customs Valuation Agreement  imposes a burden of proof in  related-party situations.562  If the Panel 
were to consider it necessary to decide the issue, the Philippines questions the applicability of the 
concept of "burden of proof" in the valuation settin g, particularly given that the Customs Valuation 
Agreement does not use the term "burden of proof" or contains express treaty language on the legal 
presumption to describe the evidentiary obligations  imposed on importers.  Specifically, the Customs 
Valuation Agreement does not establish any legal pres umption that the transaction value is influenced 
by the relationship in a related party transacti on, unless the importer proves the contrary.  The 
Customs Valuation Agreement  provides that the fact that parties are related is not a sufficient reason 
to reject the transaction value, which means that there is no legal presumption against the sales price 
in a related-party transaction.  A neutral "examina tion" under Article 1.2(a) of the Customs Valuation 
Agreement  can therefore be conducted w ithout any legal presumption.563  The Philippines is of the 
view that even if there is no burden of proof requirement, the importer's role, and the evidence it 
provides, is extremely important and may even be decisive.   
7.142  Thailand notes that there is a difference between the responsibility of the customs 
administration to examine the facts, on the one  hand, and the burden on the importer to produce 
evidence that is sufficient to demons trate that the relationship did not influence the price.  Thailand is 
of the view that placing the burden of proof on the importer is not the same as establishing a "legal 
presumption" against the transaction value.  Requiring the importer to play its proper role in ensuring 
that the provision in the second sentence of Article 1.2( a) is met is fully consistent with the ordinary 
meaning and object and purpose of Articles 1.1 a nd 1.2(a) of the Customs Valuation Agreement  and 
does not amount to creating an impermissible "legal presumption" against the transaction value.  
Thailand notes that this is also consistent with the second sentence of paragraph 1 of the Decision, 
which states that in cases of doubt as to the truth or  accuracy of declared values, "if, after receiving 
further information, or in the absence of a response , the customs administration still has reasonable 
doubts" it may reject the transaction value (emphasis by Thailand).  Thailand submits that the reference to "the absence of a response" makes clear that the burden of proof lies with the importer.  
The textual analogy to Article 1.2(a) is to the reference in that provision to "information provided by 
the importer or otherwise " because the reference to "otherwise" necessarily encompasses a failure by 
the importer to provide information. 
Analysis by the Panel
 
7.143  In this section, we address the parties' argu ments on the nature of obligations imposed on 
customs authorities under Article 1.1 and 1.2(a), specifically the obligation to examine the 
circumstances of sale in a related-party transaction.   In this regard, we recall that the Interpretative 
Notes contained in Annex I of the Customs Valuation Agreement  are also an integral part of the 
Customs Valuation Agreement .  Accordingly, we will also refer to the Interpretative Notes in 
                                                      
561 Thailand also notes that the Customs Valuation Agreement does not contain any provisions 
equivalent to Articles 6.9 and 12.2 of the ADA that provide for detailed substantive and procedural standards 
with which a final anti-dumping determination must comply. 
562 Philippines' response to Panel question No. 5. 
563 Philippines' response to Panel question No. 5.  The Philippines refers to examples in the WTO 
covered agreements of provisions that establish legal presumptions with explicit language – Article 10.3 of the Agreement on Agriculture, Article 6.2 of the SCM Agreemen t, Article 3.2 of the SPS Agreement, Article 2.5 of 
the TBT Agreement. WT/DS371/R 
Page 160  
 
  interpreting the concerned provisions of the Customs Valuation Agreement  with respect to the parties' 
claims and arguments.   
7.144  Article 1.1 of the Customs Valuation Agreement  reads: 
"PART I 
RULES ON CUSTOMS VALUATION 
 
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: 
... 
(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 provisi ons of paragraph 2." 
 
7.145  Article 1 sets out the principle under the Customs Valuation Agreement  that the customs 
value of imported goods must be the transaction value provided that the conditions set out in 
paragraphs (a) – (d) are met.
564   
7.146  Sub-paragraph (d) of Article 1 stipulates,  as one of the conditions for accepting the 
transaction value, that the buyer and the seller should not be related.565  In a situation where they are 
related within the meaning of Article 15, the cu stoms value of the concerned imported goods will be 
the transaction value if that transaction value is acceptable for customs pur poses under Article 1.2.  
Therefore, the obligation under Article 1.1 of the Customs Valuation Agreement  to use the transaction 
value as the customs value of imported goods is linked to Article 1.2(a) in a situation where the buyer 
and the seller are related.566   
7.147  Article 1.2(a) provides: 
"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 
                                                      
564 The general principle under the Customs Valuation Agreement  that the primary basis for customs 
value is "transaction value", as indicated in paragraph 1 of the General Introductory Commentary of the 
Agreement , is also reaffirmed in the recitals to the Customs Valuation Agreement  by "recognizing that the basis 
for valuation of goods for customs purpo ses should, to the greatest extent possible, be the transaction value of 
the goods being valued."  The preamble to the Ministerial "Decision Regarding Cases Where Customs 
Administrations Have Reasons to Doubt the Truth or Accu racy of the Declared Valu e" also states that the 
Ministers reaffirmed that "the trans action value is the primary basis of valuation under the [Customs Valuation 
Agreement]". 
565 Paragraphs (a)-(c) of Article 1.1 are not at issue in this dispute. 
566 The European Union, a third party participant in this dispute, noted in its third-party submission that 
the Philippines' request for a finding from the Panel in its first written submission refe rred only to Article 1.1, 
and not to Article 1.2(a), with respect to Thai Customs'  rejection of the declared transaction values for the 
[[xx.xxx.xx]] entries at issu e.  The European Union was of the view  that the Panel should make a finding 
pursuant to both Articles 1.1 and 1.2 of the Customs Valuation Agreement  (European Communities' third party 
written submission, footnote 22).  The Philippines agrees with the European Union and points out that the 
Philippines' panel request included claims under both Articles 1.1 and 1.2 in this relation and the Philippines arguments set forth in its first writte n submission references both Articles 1.1 and 1.2, which are inter-related 
provisions (Philippines' response to Panel question No. 18).  WT/DS371/R 
 Page 161 
 
 
  within the meaning of Article 15 shall not in itself be grounds for regarding 
the transaction value as unacceptable.  In such case, the circumstances 
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 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. 
..."
567 
7.148  Article 1.2(a) stipulates in the first two sentences th at in a related-party situation, the fact that 
the parties are related is not a sufficient basis fo r the customs authorities to reject the transaction 
value.  Under this circumstance, Article 1.2(a)  imposes an obligation on customs authorities to 
"examine" the circumstances of the sale.  Based on the results of the examination, the customs 
authorities must then accept the transaction value provi ded that the relationshi p did not influence the 
price.  We review first the procedural steps that the customs authorities' examination entails under 
Article 1.2(a), and then the nature of the "examina tion" to be conducted by the customs authorities to 
fulfil the obligations under Article 1.2(a).   
7.149  In relevant part, the Interpretative Note to Article 1.2 provides: 
"1. Paragraph 2(a) and (b) provide different means of establishing the 
acceptability of a transaction value. 
2. Paragraph 2(a) provides that where the buyer and the seller are related, the 
circumstances surrounding the sale sha ll be examined and the transaction 
value shall be accepted as the customs value provided that the relationship did not influence the price.  It is not intended that there should be an examination of the circumstances in al l cases where the buyer and the seller 
are related.  Such examination will only be required where there are doubts 
about the acceptability of the price.  Where the customs administration has no doubts about the acceptability of the pr ice, it should be accepted without 
requiring further information from the importer.  For example, the customs administration may have previously examined the relationship, or it may 
                                                     
 
567 Article 15 provides for definitions of the terms used in the Customs Valuation Agreement.  
Particularly, Article 15(4) provides: 
 "4. For the purposes of this Agreement, persons shall be deemed to be related only if: 
(a) they are officers or director s of one another's businesses; 
(b) they are legally recogni zed partners in business; 
(c) they are employer and employee; 
(d) any person directly or indirectly owns, controls or holds 5 per cent or more of the 
outstanding voting stock or shares of both of them; (e) one of them directly or indirectly controls the other; 
(f) both of them are directly or indirectly controlled by a third person; 
(g) together they directly or indirectly control a third person; or (h) they are members of the same family. 
 
5. Persons who are associated in  business with one another in that one is the sole agent, 
sole distributor or sole concessionaire, however described, of the other shall be deemed to be 
related for the purposes of this Agreement if they fall within the criteria of paragraph 4." WT/DS371/R 
Page 162  
 
  already have detailed information concerning the buyer and the seller, and 
may already be satisfied from such examination or information that the relationship did not influence the price." 
7.150  Therefore, paragraph 2 sets out that in a re lated-party situation, an examination of the 
circumstances surrounding the sale is not requi red in all cases, but only when there are doubts about 
the acceptability of the price.  Article 1.2(a), take n together with paragra ph 2 of the Interpretative 
Notes to Article 1.2, indicates that only when cu stoms authorities have doubts about the transaction 
value in a related-party transaction, they will need  to inquire into the accep tability of the transaction 
value.
568 
7.151  Paragraph 3 of the Interpretative Notes to Artic le 1.2(a) then provid es that "if the customs 
administration is unable to accept the transaction value without further inquiry, it should give the 
importer an opportunity to supply such further detailed information as may be necessary  to enable 
[the customs administration] to examine the ci rcumstances surrounding the sale".  In examining the 
circumstances of the sale, therefore, the customs ad ministration may, if and to the extent necessary, 
choose to ask the importer to provide information re levant to the customs authorities' examination.  
Paragraph 3 of the Interpretative No tes to Article 1.2(a) illustrates sp ecific examples of the aspects of 
the transactions that the customs admini stration should be prepared to examine.569   
7.152  Article 1.2(a) further requires that if the customs administration has grounds for considering 
that the relationship influenced the price "in light of the information provided by the importer or otherwise", the customs administration shall communi cate such grounds to the importer so as to "give 
the importer a reasonable opportunity to respond".  The phrase "in light of the information provided 
by the importer or otherwise " indicates that Article 1.2(a) does not impose an obligation on the 
customs administration to seek information or clarif ication from the importer when it decides to look 
further into the circumstances of sale.  Particularly, the term " or otherwise " in the subject sentence 
and the absence of the requirement to seek informat ion from the importer in Article 1.2(a) confirms 
that a customs administration may reach the deci sion on whether it has grounds for preliminarily 
considering that the relationship influenced the pric e without informing the concerned importer of its 
need for further inquiry or seeking information from the importer.
570  In other words, while a customs 
administration may choose to inform the importer of its decision to examine the circumstances of sale, 
                                                      
568 We understand, and the parties do not dispute, th at customs authorities' ' doubts' on the acceptability 
of the declared transaction value need not be communicat ed to the importer. (Thailand's first written submission, 
para. 134; second written submission, para. 27. The Ph ilippines does not contest this in its submissions). 
569 The examples listed in paragraph 3 of the Interp retative Notes to Article 1.2(a) are as follows: 
• the way in which the buyer and seller organize their commercial relations; 
• the way in which the price in question was arrived at, in order to determine whether the relationship 
influenced the price; 
• where it can be shown that the buyer and seller, ..., buy from and sell to each other as if they were 
not related, this would demonstrate that the price had not been influenced by the relationship.  For 
example:   
o if the price had been settled in a manner consiste nt with the normal pricing practises of the 
industry in question or with the way the seller settles prices for sales to buyers who are not 
related to the seller; or 
o where it is shown that the price is  adequate to ensure recovery of  all costs plus a profit which is 
representative of the firm's over all profit realized over a represen tative period of time (e.g. on an 
annual basis) in sales of goods of the same class or kind. 
570 The European Union also appears to support this view.  It states in its third party submission that 
"Article 1.2(a) of the CVA does not limit the source or type of information which may trigger a further inquiry 
by the customs authorities as to whether the relationship between the seller and the related importer influenced 
the transaction price.  The term 'oth erwise' is general enough to support the conclusion that customs authorities 
may proceed to a further inquiry in cases of higher de clared transaction values by  unrelated importers with 
respect to the same product from the same seller." (European Union's third party submission, para. 33)  WT/DS371/R 
 Page 163 
 
 
  it is not required  to do so in the light of the absence of language to that effect in Article 1.2(a).  This is 
in contrast to the phrase in Article 1.2(a) – "[the customs administration] shall communicate its 
grounds to the importer" – that imposes an explicit obligation on the customs administration to communicate its grounds regarding its consideration to the importer.   
7.153  Despite the absence of the explicit obligation to inform the importer of its decision to examine 
the circumstances of the sale, however, we wish to  emphasize that it may still be highly desirable for 
the customs administration to do so in order to facilitate the valuation process by respecting the 
transparency principle underlying the process.  We observe such an example in the clearance 
procedures of Thai Customs according to which,  if Thai Customs has grounds to question the 
acceptability of the transaction value based on initia l clarification by the importer, a further 
opportunity for additional clarifica tion is provided to the importer.
571 
7.154  Although Article 1.2(a) does not further ela borate on specific procedures subsequent to 
customs authorities' communication of grounds, it is logical to understand that the scope of 
Article 1.2(a) extends to the submission by the im porter of further information in response to the 
customs authorities' communication of grounds for its consideration and the customs authorities' 
subsequent determination to accept or reject the de clared transaction value.  If a customs authority 
decides to reject the transaction value, anothe r valuation method must be used by observing the 
sequential order of the methods stipulated  in Articles 2, 3, 5, 6 and 7.   
7.155  Overall, therefore, the determination of whet her to accept the transaction value as the customs 
value in a related-party situation under Article  1.2(a) entails the following procedural steps:572 
• The importer declares a transaction value for the goods imported; 
 
• The customs authority is required to examin e the circumstances of the sale only if it 
has doubts about the validity of the transaction value of the imported goods, because the fact that the buyer and seller are re lated should not in itself be grounds for 
regarding the transaction value as unacceptable
 573; 
 
• The customs authority shall examine the circ umstances of the sale in the light of the 
information provided by the importer or ot herwise and communicate to the importer 
the grounds for preliminarily considering that the relationship influenced the price; 
 
• The customs authority gives the importer a reasonable opportunity to respond.  Given 
the opportunity, the importer submits further information; and 
 
• The customs authority makes a final d ecision on whether to accept the transaction 
value. 
 
                                                      
571 Exhibit THA-4. 
572 The parties also generally agree on the procedural  steps required under Ar ticle 1.2(a).  Parties' 
responses to Panel questions Nos. 2 and 103; Exhibit THA-4 ("Flowchart of Thai Customs' Procedures for Entry 
and Valuation").  The parties appear to agree that once importers provide initial information regarding the 
acceptability of the transaction value,  customs authorities must then comm unicate grounds based on such initial 
information, which is distinguished from the information that the importers may subsequently provide in 
response to the customs authorities' grounds (Parties' re sponses to  Panel question No. 103) (emphasis added). 
573 The parties appear to agree that customs authoritie s are not obliged under Article 1.2(a) to notify the 
importer of the nature of their doubts about the acceptabi lity of the transaction value. (Thailand's first written 
submission, para. 134; second written submission, para. 27. The Philippines does not contest this in its submissions)  This understanding is based on the text of Article 1.2(a) read together with paragraph 2 of the 
Interpretative Note to Article 1.2. WT/DS371/R 
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  7.156  Based on the procedural steps required in th e customs authorities' examination of the 
circumstances of the sale as above, we can infer that the temporal scope of an examination under 
Article 1.2(a) begins when a customs authority's doubts on the validity of the transaction value trigger 
the need for an examination of th e acceptability of the transaction va lue, and ends when the customs 
authority makes a final decision on the accepta bility of that transaction value.  Once that 
determination is made, either the transaction valu e will be accepted as declared by the importer under 
Article 1.1 or another method will be used according to the sequential order of the valuation methods 
to determine the value of the goods imported.  Article s 2, 3, 5, 6 and 7 set out the respective method to 
be used under each provision and describes how to apply such a method. 
7.157  We now consider the substantive nature of the customs authorities' examination under 
Article 1.2(a).  While not disputing the overall se quence of the procedural steps as described above, 
the parties disagree on the nature of the examination of the circumstances of the sale that the customs 
administration must conduct under Article 1.2(a).  In essence, the Philippines' position is that a customs authority is obliged to undertake an activ e investigative role by requesting and gathering 
information from the importer as well as other WTO Members and by analysing information 
pertaining to the circumstances of the concerned tr ansaction.  On the other hand, Thailand emphasizes 
that an obligation imposed on customs authoriti es to examine the circumstances of sale under   
Article 1.2(a) must be considered in the light of the fact that the burden is on the importer to prove 
that the relationship did not influence the price.  As  such, Thailand is of the view that the obligation 
on the customs authority will be met as long as it notif ies the importer of its preliminary determination 
and reviews the information provided by the im porter before reaching a final conclusion on the 
acceptability of the transaction value. 
7.158  Turning first to ordinary meaning, the term "examine" can be defined as "2 verb trans. 
Investigate the nature, condition, or qualities of (s omething) by close inspection or tests; inspect 
closely or critically...; scrutinize; ... 3 verb trans. I nquire into, investigate, (a subject); consider or 
discuss critically; try to ascertain ( whether, how, etc. )".
574  The dictionary definition of the term 
"examine" therefore indicates that to examine a gi ven matter means to "inquire into, investigate or 
consider critically" that matter.  The dictionary m eaning of the term "examine" also suggests its link 
to the word "investigate", which in turn is defined as " 1. verb trans. Search or inquire into; examine 
(a matter) systematically or in detail; make an (official) inquiry into".575   
7.159  The ordinary meaning of the term "examine" signifies that the customs authorities must 
carefully consider, investigate and inquire into the information provided by importers concerning the 
circumstances of the transaction.  We also consider that the pr inciple under the Customs Valuation 
Agreement  that the primary basis of valuation is the tr ansaction value sheds light on the nature of 
examination to be conducted concerning the circumstan ces of sale in a related-party situation.  Given 
that the transaction value should norm ally form the basis of a valuation, any situation giving rise to a 
reason(s) for questioning the transaction value w ould naturally demand the customs authorities' 
critical consideration of, inquiry into, and investigation of, the relevant situation. 
7.160  At the same time, we understand that the pr incipal responsibility of providing relevant 
information that may show the acceptability of th e transaction value, in accordance with the method 
under either Article 1.2(a) or 1.2(b), rests upon the im porter.  This is related to the fact that the 
importer and, in certain situations, its related sel ler in an exporting country are in possession of the 
facts relevant to the question before the customs authorities and therefore responsible for providing 
customs authorities with sufficient information to  enable them to assess the acceptability of the 
                                                      
574 The New Shorter Oxford English Dictionary , ( Fifth Edition)  Oxford University Press, 2002, Vol. I, 
p. 878 (2002).  
575 The New Shorter Oxford English Dictionary , (Fifth Edition) Oxford University Press, 2002, Vol. I, 
p. 1417 (2002).  WT/DS371/R 
 Page 165 
 
 
  transaction value. Specifically, for example, Article 1.2(a) refers to "in the light of information 
provided by the importer".  The Interpretative Note to Article 1.2(a) also stipulates in paragraph 3 that 
the customs administration should "give the importer an opportunity to supply such further detailed information as may be necessary to enable it to ex amine the circumstances surrounding the sale".  The 
text of paragraph 3 of the Interpretative Note to  Article 1.2(a) therefore makes it clear that the 
responsibility imposed on importers for providing sufficient informa tion is directly linked to the 
objective of enabling the customs authorities to examin e the circumstances of the sale.
576   
7.161  In this connection, in US – Wheat Gluten , a dispute concerning certain obligations under the 
Agreement on Safeguards,  the Appellate Body clarified the nature  of the investigation to be conducted 
by the competent authorities:  "[t]he focus of the investigative steps mentioned in Article 3.1 is on 
'interested parties', who must be notified of the inv estigation, and who must be given an opportunity to 
submit 'evidence', as well as their 'views', to  the competent authorities. ... The Agreement on 
Safeguards, therefore, envisages that  the interested parties [importers , exporters and other interested 
parties] play a central role in the investigation a nd that they will be a primary source of information 
for the competent authorities".577  To the extent that it is also th e importers that are responsible for 
providing information to the customs authorities u nder Article 1.2(a) of the Customs Valuation 
Agreement, we consider that the above observation ma de by the Appellate Body in the context of the 
Agreement on Safeguards  can assist us in clarifying the nature of the examination to be conducted by 
customs authorities under Article 1.2(a).  In our vi ew, therefore, as in the investigative process 
necessary for the imposition of safeguard measures, importers "play a central role" in the customs 
authorities' examination of the circumstances of sale in related-party transactions as importers are also 
a primary source of information for the customs authorities. 
7.162  In the same dispute,  the Appellate Body also elaborated on "the scope of the obligation of 
competent authorities to conduct an investigation".  In essence, the Appellate Body underlined that 
"competent authorities have an independent duty of investigation and that they cannot 'remain[] 
passive in the face of possible short-comings in the evidence submitted, and views expressed, by the 
interested parties .'"578  Specifically, the Appellate Body states in relevant part: 
"[T]he ordinary meaning of the word 'i nvestigation' suggests that the competent 
authorities should carry out a 'systematic inquiry ' or a 'careful study' into the matter 
before them.579  The word, therefore, suggests a proper degree of activity on the part 
of the competent authorities because authorities charged with conducting an inquiry or a study – to use the treaty language, an 'investigation' – must actively seek out 
pertinent information. 
... [T]he competent authorities must, in ever y case, carry out a full investigation to 
enable them to conduct a proper evaluation of all of the relevant factors expressly 
mentioned in Article 4.2(a)...  Moreover,  Article 4.2(a) requires the competent 
authorities – and not the interested parties – to evaluate fully the relevant, if any, of 
'other factors'.  If the competent authorities consider that a particular 'other factor' 
                                                     
 
576 The negotiating history of the Customs Valuation Agreement  also shows that certain developing 
WTO Members expressed the view that in the light of th e limited resources of their customs offices, the primary 
responsibility of establishing the accep tability of the transaction value in a related-party situation should be 
placed on importers. (T.P. Stewart, The GATT Uruguay Round: A Negotiating History  (Kluwer Law 
International, 1999), pp. 1128-1129). 
577 Appellate Body Report, US – Wheat Gluten , para. 54. 
578 Appellate Body Report, US – Lamb , para. 114 (emphasis in original), referring to Appellate Body 
Report, US – Wheat Gluten , para. 55.  
579 (original footnote )  The New Shorter Oxford English Dictionary, supra , footnote 43, Vol. I, p. 1410. WT/DS371/R 
Page 166  
 
  may be relevant to the situation of the domestic industry, under Article 4.2(a), their 
duties of investigation and evaluation preclude them from remaining passive in the face of possible shortcomings in the evidence submitted, and views expressed, by the interested parties.  Ther efore, the competent author ities must undertake additional 
investigative steps, when the circumstan ces so require, in order to fulfil their 
obligation to evaluate all relevant factors."
580 
7.163  Although the Appellate Body's statement is not directly on the customs authorities' obligation 
to "examine" under the Customs Valuation Agreem ent, we find its clarification above of the 
obligation to "investigate" relevant to our analysis  of the nature of "examination".  For one, as noted 
above, the terms "examine" and "investigate" cross-re fer to each other in their dictionary meaning, 
which indicates a substantive similarity, if not identic al, in their ordinary meanings.  Further, both the 
obligation to examine the validity of the transaction value under Article 1.2(a) of the Customs 
Valuation Agreement  and the obligation to carry out a full investigation to conduct a proper 
evaluation of all of the relevant factors unde r Article 3.1 of the Agreement on Safeguards  are imposed 
on "domestic authorities".   
7.164  As the Appellate Body inferred from the term "i nvestigate", we consider therefore the word 
"examine" also suggests "a proper degree of activity on the part of the [customs authorities] because 
authorities charged with conducting an inquiry or  a study ... must actively seek out pertinent 
information".  To that extent, in order to proper ly examine the circumstances of a given transaction, 
the customs authority must clearly indicate to the importer how it evaluates the information submitted 
by the importer, including the insufficiency of  the information submitted and, if necessary and 
feasible, any further particular type of informa tion that may help them assess the validity of the 
transaction value.  This must, in our view, be carried out at the communication of grounds stage  (the 
required step under Article 1.2(a) identified in para graph 7.102 above) whereby the customs authority 
will explain the grounds for consider ing preliminarily that the relationship influenced the price so as 
to give a reasonable opportunity for the importer to respond.   
7.165  We note Thailand's position that there is no ob ligation in the Customs Valuation Agreement  
on the customs administration to communicate with  the importer regarding deficiencies in the 
information provided by the importer.581  However, as explained in Section VII.C.5(e) below, 
although not explicitly spelled out in the text of  Article 1.2(a), we consider that the customs 
authorities' obligation to communicate its evaluation of  the evidence submitted as part of its "grounds" 
is inherent in the meaning and the context of the term "examine".  Otherwise, the importer would not 
be able to effectively "enable" the customs admi nistration to examine the circumstances of the sale.582 
7.166  We underline in this regard that the oblig ations imposed on the customs authorities to 
examine the circumstances of sale under the Customs Valuation Agreement  at the same time need to 
be understood against the succinct language of Article  1.2(a) of the Customs Valuation Agreement.  
                                                      
580 Appellate Body Report, US – Wheat Gluten , paras. 53-55. 
581 Thailand's response to Panel question No. 100. 
582 Besides, we note the Philippines' argument that, in its examination  of the customs value, a customs 
authority bears the obligation to seek information from other Members when the importer is unable to provide it. 
The Decision relied on by the Philippines, however, does not suggest that information beyond what the importer is able to provide must  be sought by the customs authority.  The Decision provides that in case of doubts as to 
the accuracy of the transaction value, 
"the customs administration may ask the importer  to provide further explanation, including 
documents or other evidence, .... If, after receiving further information, or in the absence of 
a response, the customs administration still has reasonable doubts about the truth or 
accuracy of the declared value, it may ... be d eemed that the customs value of the imported 
goods cannot be determined under the provisions of Article 1 [of the Customs Valuation 
agreement].  WT/DS371/R 
 Page 167 
 
 
  Particularly, for this reason, we are mindful that the extent and scope of the obligations imposed on 
customs authorities to "examine" under Article 1.2(a) of the Customs Valuation Agreement  cannot be 
the same as that imposed on domestic investigativ e authorities under the WTO agreements concerning 
trade remedy measures.   
7.167  As Thailand submits, the procedural obligati ons imposed on investigating authorities under 
the Anti-Dumping Agreement , the SCM Agreement  and the Agreement on Safeguards  are much more 
detailed and specific than those imposed on customs authorities under Article 1.2(a) or Article 16 of 
the Customs Valuation Agreement.  For exampl e, Article 6.1 of the Anti-Dumping Agreement  
stipulates that parties in an anti-dumping investiga tion "shall be given notice of the information which 
the authorities require " and " ample opportunity to present in writing a ll evidence which they consider 
relevant".  Article 6.9 obliges the authorities to inform all interested parties of the essential facts under 
consideration which form the basis for the decision whether to apply definite measures before a final 
determination is made, whereas such requirements cannot  be found in the text of Article 1.2(a) of the 
Customs Valuation Agreement .  Furthermore, Article 3.1 of the Agreement on Safeguards  requires 
the competent authorities to publish a report setting forth their findings and reasoned conclusions 
reached on all pertinent issues of fact and law  after the completion of their investigation. 
7.168  Article 1.2(a) of the Customs Valuation Agreement, by contrast,  uses less stringent language 
in requiring that the customs administration give the importer a " reasonable opportunity to respond" 
to the customs authority's consideration.  The Inte rpretative Note to Article 1.2(a), in paragraph 2, 
contains similar language stating that "[the cust oms administration] should give the importer an 
opportunity to supply such further detailed informat ion as may be necessary to enable it to examine 
the circumstances surrounding the sale".   
7.169  The particular nature of the examination to  be conducted by the customs authorities can 
further be inferred from Case Study 10.1 on the appl ication of Article 1.2 of the Customs Valuation 
Agreement by the WTO Technical Committee on Customs Valuation: 
"Under Article 1.2 of the Agreement th e responsibility for demonstrating that 
relationship [between buyer and seller] has not influenced price [sic] lies with the 
importer.  While the Agreement requires Customs to provide reasonable opportunity 
to the importer to provide information that would indicate that prices are not influenced by the relationship, it does not require the Customs administration to conduct an exhaustive enquiry for the purpo se of justifying the price difference.  
Thus, any decision in this regard must, to  a significant degree, be based on the 
information provided by the importer."  
7.170  The WTO Technical Committee's comment supports the understanding that while customs 
authorities are responsible for providing a "reasonable opportunity" to the importer to provide information, once given this opportunity, importers are in principle liable for supplying the customs authorities with information that would indicate that the relationship did not influence the price.   
7.171  In sum, we consider that the customs authorities and importers have respective 
responsibilities under Article 1.2(a).  The customs aut horities must ensure that importers be given a 
reasonable opportunity to provide information th at would indicate that the relationship did not 
influence the price.  Importers are responsible for providing information that would enable the 
customs authority to examine and assess the circum stances of sale so as to determine the acceptability 
of the transaction value.  Provided with such in formation, the customs authorities must conduct an 
"examination" of the circumstance of sale, whic h would require an active, critical review and 
consideration of the information before them. WT/DS371/R 
Page 168  
 
  7.172  We find that the above understanding of the natu re of the respective obligations imposed on 
customs authorities and importers under Article 1.2(a) is consistent with the objective of the Customs 
Valuation Agreement  to promote "a fair, uniform and neutral system for the valuation of goods for 
customs purposes".  As indicated in the Minist erial "Decision Regarding Cases Where Customs 
Administrations Have Reasons to Doubt the Truth or  Accuracy of the Declar ed Value", the Customs 
Valuation Agreement  aims at striking the balance between resp ecting the customs authorities' need to 
address cases where it has reason to doubt the truth or  accuracy of the particulars or of documents 
produced by traders in support of a declared value and protecting the legitimate commercial interests 
of traders.  The process of examining the circum stances of the sale under Article 1.2(a) therefore 
resembles that of consultation as both the importer and the customs administration respectively need 
to make a good faith effort on the one hand to prov ide relevant information and on the other hand to 
provide a reasonable opportunity to the importer to  submit information and review the information 
provided in reaching a final determination. 
7.173  As a final observation, we note that in the course of this dispute, the parties have contested the 
applicability of the principle of the burden of proof to the Customs Valuation Agreement, in particular 
with respect to the examination of the circumst ances of sale in a related-party transaction.  As our 
analysis above illustrates, the nature of the oblig ations under Article 1.2(a) can be clarified on the 
basis of the text of Article 1.2(a)  considered in its context and in the light of the objective and purpose 
of the Customs Valuation Agreement.  Therefore, to that extent, we do not consider it necessary to 
address the applicability of the notion of burden of proof in the context of the Customs Valuation 
Agreement  for the purpose of resolving the present dispute.
583 
(ii) Thai Customs examination of the circumstances of the transaction betw een PM Thailand and 
PM Philippines 
Main arguments of the parties  
7.174  The Philippines  submits that the arguments and evidence before the Panel show that Thailand 
failed to conduct an examination of the circumstances of sale within the meaning of   Article 1.2(a).  
To support its claim, the Philippines relies on the fo llowing five factors: (i) the minutes of the 6 
March 2007 meeting, which state that Thailand did not examine the circumstances of sale; (ii) Thailand's failure to examine the evidence submitted by PM Thailand regarding its costs and profits 
(e.g. "referencing to" annual filings for FY 2003-2 005, further data on GAQ prices, a copy of 2005 
Financial Statements...); (iii) Thailand's failure to seek cost information from PM Philippines; (iv) an 
analysis of Thailand's deductive testing showing it is  incoherent; and (v) Thailand's valuation of four 
entries in March and September 2007 confirming that Th ailand's valuation decisions were arbitrary.   
                                                     
 
583  In sum, Thailand has asserted before the Panel that the burden of proof is important in 
understanding the responsibility of customs administrations and that importers bear the burden of proving that the relationship did not influence the price.  The Philippines questions whether the concept of burden of proof is 
applicable to the valuation setting and, even if the concept were applicable, the Philippines argues that the 
burden is on the customs authorities to establish that the relationship influenced the price before rejecting transaction value. 
We observe Thailand's reference to a letter from the WCO Secretariat to the Thai government [office of 
customs counsellor at the Thai Embassy in  Brussels] explicitly mentions the burde n of proof.  In relevant part, it 
states that "since the acceptance of the transaction value is prima facie base d on the condition th at the buyer and 
seller are not related, the burden of proof is generally c onsidered to be on the importer to demonstrate that the 
transaction value is otherwise acceptable in spite of  the fact that the buyer and seller are related." 
(Exhibit THA-9, p. 2;  Thailand's first written submission, para. 136).  Setting aside the legal status of the letter 
for the purpose of interpreting the obligations under Article 1.2(a), we do not find the WCO Secretariat's 
reference to the term "burden of proof" dispositive of th e question of whether the burden of proof is applicable 
to the Customs Valuation Agreement.  The reference to the term in the letter appears to have been made more in 
a general sense rather than as a legal concept as described above.   WT/DS371/R 
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  7.175  The Philippines argues that it is false for Th ailand to contend that PM Thailand made no 
effort whatsoever and presented no evidence to est ablish that the relationship did not influence the 
price.584  PM Thailand made repeated efforts to satisfy Thai Customs of that very fact.585  
7.176  The Philippines also accepts that, in assessing Thailand's compliance with its substantive 
obligations, the Panel may review the explanation given in the minutes of the 6 March 2007 meeting, 
as a contemporaneous statement of the determination.586  The Philippines points out that the 
explanation given in the minutes, sent to PWC ABAS, for rejecting the transaction value is substantively the same as the explanation given in th e 12 April letter:  (i) PM Thailand's prices are 
lower than Importer A's prices; and (ii) PM Thaila nd and PM Philippines are related.  According to 
the Philippines, in one respect, the minutes add to  the 12 April letter because,  in the minutes, Thai 
Customs states that it did not examine the circumstances of sale.
587 
7.177  Thailand submits that once Thai Customs informed  PM Thailand that it had doubts about the 
transfer price, PM Thailand took no steps and offered no supporting evidence to establish that the 
relationship did not influence the price.588  According to Thailand, the grounds for Thai Customs not 
using the transaction value as the customs value were  that PM Thailand failed to establish that the 
relationship did not influence the transfer price.589   
7.178  Thailand's position that Thai Customs did "exa mine" the circumstances of sale between PM 
Philippines and PM Thailand within the meaning of Article 1.2(a) rests on the following three points: (i) Thai Customs notified PM Thailand that furt her information was necessary; (ii) PM Thailand 
failed to provide new or additional information/ev idence (other than its past [[xx.xxx.xx]] filings) 
necessary to establish that the relationship between PM Philippines and PM Thailand did not 
influence the price under one of the methods pr ovided in the Customs Valuation Agreement – 
moreover, none of the evidence provided by PM  Thailand in the course of the Thai Customs 
examination of the circumstances surrounding the sal es at issue was su fficient; and (iii) Thai Customs 
continued to examine the circumstances even afte r fulfilling its obligations under Article 1.2(a), 
including the obligation to communicate its grounds for considering that the relationship influenced 
the price by sending the 19 December 2006 letter, a nd after receiving the 5 February 2007 letter from 
PM Thailand indicating that it wa nted the valuation expedited. 
7.179  Thailand argues that even after its 19 Decemb er 2006 letter, and in the absence of further 
claims or evidence regarding the circumstances of  sale by PM Thailand, Thai Customs continued to 
examine the sales by regularly interacting with , and requesting information from, PM Thailand.
590  In 
this connection, Thailand refers to oral co mmunications, correspondence, and meetings with 
PM Thailand and its representatives (PWC) that  took place during February-March 2007, including 
Thai Customs' contacts with PWC.591  Although there is no documentary record of the content of 
                                                      
584 Philippines' first oral statement, para. 47, citing Th ailand's statements in its first written submission, 
paras. 54 (see also 48, 69 and 70) and 158. 
585 Philippines' first oral statement, para. 47. 
586 Philippines' response to Panel question No. 108. 
587 Philippines' second oral st atement, para. 49; response to Panel question No. 108. 
588 Thailand's first written submission, paras. 153-160. 
589 Thailand's first written submission, para. 162.  Thai Customs did not rely on a comparison between 
PM Thailand's c.i.f. prices and the c. i.f. prices for duty-free purchases as a ground for rejecting the transaction 
value. 
590 Thailand's second written submission, paras. 77-84. 
591 Thailand submitted a new piece of  evidence in this connectio n – statement of Mrs. Natina 
Santiyanont (Exhibits THA-64 and TH A-65) regarding the circumstances of  Thai Customs' interaction with 
PWC and its attendance at the 6 March 2007 meeting on behalf of PM Thailand.  Thailand argues that this 
evidence proves that the minutes of the 6 March 2007 meeting were mailed to PWC on behalf of PM Thailand 
(Thailand's second written submission, para 79, footnote 57). WT/DS371/R 
Page 170  
 
  some of the telephone conversati ons and meetings between Thai Customs and PM Thailand, it does 
not appear to be contested that these extensive c ontacts between Thai Customs and the importer took 
place.  Therefore, unless the Philippines proves that these contacts were not an examination of the 
circumstances surrounding these sales within the meaning of Article 1.2(a), Thai Customs must be 
presumed to have acted in accordance with  its obligations under that provision. 
7.180  Regarding the fact that Thai Customs is now accepting PM Thailand's declared values using 
the deductive values at which the [[xx.xxx.xx]] entrie s were valued as "test" values, Thailand rejects 
entirely the implication that Thai Customs' d ecision to accept transaction values is in any way 
evidence that prior non-acceptance was incons istent with Thaila nd's WTO obligations.
592 
Analysis by the Panel  
7.181  Based on the nature of the obligations impos ed on customs authorities to "examine" the 
circumstances of the sale under Article 1.2(a) as clarified in the previous section, we will now 
evaluate the Philippines' claim that Thai Customs failed to examine the circumstances of the 
transaction between PM Thailand and PM Philippi nes within the meaning of Article 1.2(a). 
7.182  In this connection, we recall our discussion in Section VII.B.2 above that the standard 
appropriate for our review of the Philippines' cl aims under Articles 1.1 and 1.2(a) was an objective 
assessment of the matter before us in the light of  the substantive obligations under Articles 1.1 and 
1.2(a).  We further clarified that customs author ities are obliged under Article 1.2(a) to communicate 
their grounds for their consideration before making a final decision on whether to reject the transaction value and under Article 16 to explain their final valuation determinat ion after the valuation 
process is complete.
593  Given these obligations, which are also pa rt of the Philippines' claims in this 
dispute, our objective assessment whether Thai Cu stoms properly examined the circumstances of sale 
must be based on Thai Customs' grounds and explanations provided.  In other words, we must 
evaluate, based on Thai Customs' communication of grounds and explanations, whether Thai Customs 
properly examined the circumstances of sale between  PM Thailand and PM Philippines in the light of 
the information before it at the time of the determ ination.  If Thai Customs is found to have conducted 
a proper examination under Article 1.2(a), its dete rmination to reject the transaction values of the 
entries at issue will also be considered consistent with its obligations under Article 1.1 and 1.2(a).   
7.183  We start our analysis with a description of th e main interactions between Thai Customs and 
PM Thailand for the period of August 2006-April 2007.  In so doing, we will bear in mind the 
procedural steps to be taken under Article 1.2(a) as discussed in the previous section. 
CORRESPONDENCE SURROUNDING THE VAL UATION OF THE ENTRIES AT ISSUE  
(AUGUST 2006–A PRIL 2007) 
 
DATE PM THAILAND THAI  CUSTOMS 
4 August 2006 Sent a letter to Thai Customs replying to Thai 
Customs doubts on the transaction value of  the same day referencing to its annual data 
filings for FY 03, 04, 05 and [[xx.xxx.xx]].
594 Started questioning the acceptability of the 
transaction value of the cigarettes at issue  
                                                      
592 Thailand's second written submission, para. 92. 
593 An analysis of the differen ce between the obligations under Article 1.2(a) and Article 16 
respectively is at para. 7.213 
594 Exhibit PHL-55.  WT/DS371/R 
 Page 171 
 
 
  DATE PM THAILAND THAI  CUSTOMS 
7 August 2006 
 Sent a letter to Thai Customs advising that 
Thai Customs could examine the cost 
structure of PM Thailand through the supporting documentation for Form D.
595 Orally advised PM Thailand that further 
information was required. 
8 August 2006 
 Sent a letter to Thai Customs 
− referencing [[xx.xxx.xx]] 
− asking Thai Customs to (i) accept the 
declared values; or (ii) explain in writing 
why it was not clearing the goods at the declared values
596; 
− providing a copy of PM Thailand's most 
recent annual filing to Thai Customs (FY 05), showing PG&E of [[xx.xxx.xx]] and 
deductive value calculation.
597  
11 August 2006   Sent a "written notice" of the guarantee 
amounts to PM Thailand.598  
15 Sept. 2006   Thai Customs Audit Bureau sent a letter to 
PM Thailand requesting additional 
financial info.599 
25 Oct. 2006  Sent a letter to Thai Customs  
− requesting a "written confirmation" of the 
reasons for Thai Customs' rejection of 
PM Thailand's decl ared invoice prices600; 
− asserting that Thai Customs' deductive 
testing methodology demonstrated the 
acceptability of its d eclared transaction 
value; - referencing to annual filings.  
 
8 Nov. 2006 Sent a letter to Thai Customs 
− requesting to accept the declared 
transaction values; 
− if not, requesting to notify the assessed 
value and to clarify how the values were 
assessed.601  
20 Nov. 2006  Sent a letter to Thai Customs 
− complaining about the guarantees being 
required to clear its goods; 
− requesting for "an explanation" for 
rejecting the declared transaction 
values602; 
− requesting to notify the assessed value 
and to clarify how the values were 
assessed.  
                                                      
595 Exhibits PHL-57 and PHL-76. 
596 The Philippines submits that by this letter, it made a first request for Thai Customs' "grounds" for its 
consideration under 1.2(a) (Philippines' response to Panel question No. 114; Exhibit PHL-56).  The Philippines 
also refers to Thailand's second oral statement, para. 24.   
597 Exhibit PHL-56. 
598 Exhibit PHL-59. 
599 Exhibits PHL-19  and PHL-138. 
600 Exhibit PHL-60.  The Philippines submits that this was the second request for Thai Customs' 
grounds under 1.2(a). 
601 Exhibit PHL-268.  The Philippines submits that this was the first request for an explanation under 
Article 16 (Philippines' response to Panel question No. 114). 
602 Exhibit PHL-65.  The Philippines submits that this  was the second request for an explanation under 
Article 16. WT/DS371/R 
Page 172  
 
  DATE PM THAILAND THAI  CUSTOMS 
19 Dec. 2006  Sent a letter "communicating its grounds" 
under Article 16 that "the importer has yet 
to prove if the said relationship influenced the customs value determination or not".
603 
5 Feb. 2007  Sent a letter to Thai Customs asking Thai 
Customs to expedite its examination and 
valuation of the entries at issue and to use a 
testing methodology.604  
15 Feb. 2007  Orally  advised PM Thailand to provide its 
2006 financial statements to assist in the valuation process.
605 
16 Feb. 2007  Sent a letter to Thai Customs606  
− confirming that the 2006 statements were 
not yet ready, and instead indicated that it was pleased to submit 2005 statements; 
− submitting financial statements for FY 05 
and PG&E.  
21 Feb. 2007  Sent a letter to Thai Customs with new 
information on the sales price of its GAQ sale 
and certain adjustments, which was ultimately 
used in the calculation of the deductive values 
for the cigarettes at issue.607  
26 Feb. 2007   Sent an invitation letter to PWC (ABAS) to 
meetings on 2 and 6 March.608 
27 Feb. 2007   Sent a letter to managing director of 
PM Thailand requesting information 
relevant to the determination of the customs 
value of the company's imports.609 
2 March 2007   Sent a letter to PWC (ABAS) requesting 
additional info;610 and  
Held a meeting with two PWC entities. 
6 March 2007  Sent a letter to Thai Customs requesting the 
use of a "deductive method".611 Held a meeting, and invited PWC (ABAS) 
to discuss the financial data that had been provided and Thai Customs' subsequent 
calculations of deductive values. 
7 March 2007  Following a request from Thai Customs, sent 
a letter Thai Customs providing further information supporting the information 
provided in the 21 Feb. 07 letter.
612  
                                                      
603 Exhibit PHL-66. 
604 Exhibit PHL-68. 
605 Thailand's response to Panel question No. 10; Tha iland's first oral statement, para. 31. Thailand 
submits that the sentence "we wish to confirm our advice yesterday" in the 16 February letter (Exhibit PHL-137) 
by PM Thailand confirms the fact that on 15 February oral communicati ons took place, the Philippines does not 
rebut this. 
606 Exhibit PHL-137. 
607 Exhibit THA-39. 
608 Exhibit THA-10. 
609 Exhibit THA-11. 
610 Exhibit THA-12. 
611 Exhibit THA-92. 
612 Philippines' response to Panel question No. 29; Exhibit PHL-169.  WT/DS371/R 
 Page 173 
 
 
  DATE PM THAILAND THAI  CUSTOMS 
14 March 2007 In response to a further request from Thai 
Customs, sent a letter to Thai Customs 
providing further info, including information relating to PM Thailand's payments to PM 
Philippines.
613  
15 March 2007  Started issuing the notices of assessment 
for the entries at issue  
5 April 2007 
 Sent a letter to Thai Customs.614  
12 April 2007 
  Sent a letter to PM Thailand - providing an 
explanation as to how the customs value was determined.
615 
 
7.184  Regarding the above sequence of events, the Ph ilippines does not appear to take issue with 
whether Thai Customs had formally taken the overall procedural steps envisaged under 
Article 1.2(a).616  In other words, the Philippines does not c ontest the fact that Thai Customs sent the 
letters of 19 December 2006 and of 12 April 2007  to PM Thailand, which respectively form the 
communication of grounds and the explanation of its determination in the formalistic sense.  Rather, 
the Philippines' claims are focused  on the substantive aspect of the requirements under Article 1.2(a).  
Particularly, the Philippines alleges that Thai Cust oms failed to "examine" the circumstances of sale 
within the meaning of Article 1.2(b) because it i gnored the evidence submitted by PM Thailand at the 
time of determination.  According to the Philippine s, Thai Customs' explanations in its letter of 
12 April 2007 and the minutes of the 6 March 2007,  allegedly invalid and insufficient, show the 
inadequate examination of the circumstances of the sale. 
7.185  Thailand argues that Thai Customs properly examin ed the circumstances of sale.  Contrary to 
the Philippines' argument, once Thai Customs informed PM Thailand that it had doubts about the 
transfer price, PM Thailand took no steps and o ffered no supporting evidence to establish that the 
relationship did not influence the price.617  According to Thailand, the grounds for Thai Customs not 
using the transaction value as the customs value were  that PM Thailand failed to establish that the 
relationship did not influence the transfer price.618 
7.186  First, it is not disputed that PM Thailand presented Thai Customs with information that, in the 
Philippines' view, was sufficient to establish that  its relationship with PM Philippines did not 
influence the price.  The table above shows that PM Thailand submitted a numb er of letters, together 
with financial data and information, to Thai Cu stoms during the period at issue.  In sum, the 
Philippines appears to have largely relied on the documents and financial data relating to Thai 
Customs' deductive testing method that were memorialized in the [[xx.xxx.xx]].619  Specifically, the 
                                                      
613 Philippines' response to Panel question No. 29; Exhibit PHL-170. 
614 Exhibit PHL-69.  The Philippines submits that this  was a further request for an explanation under 
Article 16 and a request for an explanation under Article 7.3 (Philippines' response to Panel question No. 114). 
615 Exhibit PHL-70.   
616 We note Thailand's argument that Thai Customs pr operly examined the circ umstances of transaction 
at issue by notifying the importer of its grounds for considering that the relationship influenced the price and of 
the need for additional information and by reviewing the additional information provided by PM Thailand.  However, what is contested by the Philippines is whether Thai Customs examined all the relevant evidence 
provided by PM Thailand at the time of determination. 
617 Thailand's first written submission, paras.  153-160, referring to Exhibit THA-28. 
618 Thailand's first written submission, para. 162.  Thai Customs did not rely on a comparison between 
PM Thailand's c.i.f. prices and the c. i.f. prices for duty-free purchases as a ground for rejecting the transaction 
value. 
619 The Philippines' response to the Panel question No . 16, also referring to its first oral statement 
(paras. 36-56). Exhibit PHL-39. Regarding the [[xx.xxx.xx]], the Philippines states that [[xx.xxx.xx]] WT/DS371/R 
Page 174  
 
  information provided by PM Thailand up un til 19 December 2009, when Thai Customs 
communicated its grounds, includes the following: (i) annual data filing for FY  2003, 2004, and 2005; 
(ii) annual filings to Thai Customs for FY 2005, which contains the company's PG&E [gross margin]
620 of [[xx.xxx.xx]] and a deductive calculation showing the sales prices to the first 
independent buyer in the GAQ621 price as well as certain deductions to be made from this price 
(including sales allowances, the costs of transporta tion in Thailand, and the provincial tax); (iii) a 
copy of the [[xx.xxx.xx]] together with informati on on gross margin calculations which had already 
been submitted to Thai Customs on 17 July 2006622; (iv) evidence that the company has ordered and 
made payments according to invoice prices without  any additional payment either directly or 
indirectly (import tickets for the three most re cent shipments, remittance document for the same)623; 
(v) a table comparing the declared import price (invoi ce c.i.f. value) to the new import price (Customs 
imposed new reference c.i.f. value) orally re ported to PM Thailand ( no written confirmation).624  To 
the extent that PM Thailand provided in good faith  the above-mentioned evidence to establish that the 
relationship did not influence the price, we cons ider that PM Thailand did fulfil its procedural 
responsibility under Article 1.2(a) to provide in formation to the customs administration.   
7.187  Whether the information actually submitted by PM Thailand pertained to the acceptability of 
the transaction value and, if so, whether it was su fficient to establish the acceptability is of course 
another matter.  Thailand asserted before this Pane l that the information provided by PM Thailand as 
above did not prove that the rela tionship did not influence the pric e because information showing the 
accuracy of the declared value was neither at issue at that time nor probative of whether that price was 
at arm's length.  Thailand argues that Articles 1.2( a) and 1.2(b) and the Interpretative Notes describe 
several methodologies whereby the importer can establis h that its relationship with the foreign seller 
did not influence the price between the tw o within the meaning of Article 1.2(a).625  According to 
Thailand, however, PM Thailand did not provide evidence relating to any of these methods, or any 
other method, that was sufficient to establish th at the relationship between PM Philippines and 
PM Thailand did not influence the price within the meaning of Article 1.2(a).626  The financial data 
and information of the kind provided by PM Tha iland, according to Thailand, does not establish the 
"costs plus" approach listed in pa ragraph 3 of the Interpretative Notes to Article 1.2(a).  Nor is the 
information appropriate to c onduct the deductive value calculation within the meaning of 
Article 1.2(b) and 5. 
                                                                                                                                                                     
(Exhibit PHL-34, point 5) and that [[xx.xxx.xx]] Thailand contests this and states that the [[xx.xxx.xx]] has not 
formal status and that Thai Custom s never accepted or agreed to be bound  by the [[xx.xxx.xx]]. Moreover, 
Thailand holds that Thai Customs never used the methodology allegedly contained in the [[xx.xxx.xx]] as the basis either for the customs value for any of PM Thailand's imports or even as test values for PM Thailand's 
imports during the period 2003-2006. (Philippines' response to Panel question Nos. 8, 11 and 17; Thailand's 
response to Panel question No. 11).
 
620 The parties appear to use these two terms interchangeably.  Exhibit PHL-42. 
621 Article 5.1 of the Customs Valuation Agreement refe rs to the "unit price at which ... goods are sold 
in the greatest aggregate quantity", the G AQ price. In the Note to this Article it is explained that this GAQ price 
means "the price at which the greatest number of units is sold in sales to persons who are not related to the 
persons from whom they buy such goods at the first commercial level after importation at which such sales take 
place".  
622 The Philippines' response to the Panel question No . 16, also referring to its first oral statement 
(paras. 36-56). 
623 Exhibit PHL-57.  
624 Exhibit PHL-58.  
625 Thailand's second written submission, para. 49. 
626 Thailand's second written submission, paras. 50-51.  Thailand refers to the evidence provided by 
PM Thailand that the Philippines summarized in para. 45 of its first oral statement and in its response to Panel 
question No. 16.  WT/DS371/R 
 Page 175 
 
 
  7.188  In the light of the nature of the obligation to  "examine" under Article 1.2(a), as clarified in 
paragraphs 7.158-7.159 ab ove, upon receiving information and da ta from PM Thailand, Thai Customs 
was required to inquire into, investigate and criti cally consider such information and data and 
communicate its grounds and explain th e final determination.  In this  regard, we wish to emphasize 
that this question should be distinguished from the question of whether the content of the information 
provided by PM Thailand did not establish the va lidity of the transaction value as explained by 
Thailand [before the Panel].  Addressing the latte r would amount to acting outside our mandate to 
make an objective assessment of the matter at issue.627   
7.189  Turning back to the question before us, we re cognize that it may well be that Thai Customs 
critically considered the information and data s ubmitted based on the reasons it has provided to the 
Panel in this proceeding.  However, we would not be in the position to find that Thai Customs did in 
fact examine such information unless such reasoni ng is provided in its communication of grounds and 
its explanations to the importer in accordance w ith the obligations under the Customs Valuation 
Agreement.  In its explanation given in the 12 April 2007 letter, Thai Customs does not elucidate the reason why it reached the conclusion that the relati onship influenced the price with respect to the 
entries at issue.  We therefore do not have the evidence confirming that Thai Customs did in fact 
examine the circumstances of the sale by critically cons idering all information a nd data before it at the 
time of determination, as it claims in this proceeding.
628  We do not find any other explanation in the 
subject letter than that the importer and the exporte r are related and that the importer failed to meet 
the burden of proof.  As explicitly stipulated in Artic le 1.2(a), however, the mere fact that an importer 
is related to an exporter is not sufficient in itself for a customs administration to reject the transaction 
value.  Article 1.2(a) requires the customs administ ration to examine the circumstances of the sale in a 
related-party transaction.  Consequently, it follows  that Thai Customs was under an obligation to 
explain why it decided to reject the transaction va lue, including the basis fo r considering that the 
relationship influenced the price, after it ha d examined the circumstances of the sale.  
7.190  Thailand further submits that the grounds for Thai Customs not using the transaction value as 
the customs value were communicated in its lette r of 19 December 2006, namely that PM Thailand 
failed to establish that the relationship did not influence the transfer price.629  Other than this 
statement, the concerned letter does not include any of the other explanations that Thailand provided 
in this proceeding, as noted in the previous paragr aph. Without informing the importer of the basis for 
its consideration that the information provided up until that stage of the process did not establish the 
validity of the transaction value, the importer would not  have been able to effectively, if at all, 
respond to the authority's consideration.  This  would further hinder the ability of the customs 
authorities to properly examine the circum stances of sale under Article 1.2(a).   
7.191  Furthermore, Thai Customs' explanation for the final determination of the final customs value 
for the entries at issue is contained in its lette r dated 12 April 2007 and the minutes of the 6 March 
                                                      
627 See Section VII.B.2 . 
628 We recall the Appellate Body's statement in US – Steel Safeguards : 
 "[A]s stated above, because a panel may not conduct a de novo review of the evidence before 
the competent authority, it is the explanation given by the competent authority for its 
determination that alone enables panels to determine whether there has been compliance with the requirements of Article XIX of the GATT 1994 and of Articles 2 and 4 of the Agreement 
on Safeguards.  It may well be that, as the United States argues, the competent authorities 
have performed the appropriate analysis correc tly.  However, where a competent authority has 
not provided a reasoned and adequate explanation to support its determination, the panel is not 
in a position to conclude that the relevant requirement for applying a safeguard measure has 
been fulfilled by that compet ent authority...." (para. 303) 
 
629 Thailand's first written submission, para. 162.   WT/DS371/R 
Page 176  
 
  2007 meeting.  We address the consistency of Thai Customs' explanations in these instruments with 
the obligation under Article 16 in Section VII.C.6 belo w.  Thai Customs indicates in the letter as the 
reason for its decision to reject the transaction valu e the following statement: "[t]he company and the 
overseas seller are related parties, and it cannot be pr oven whether the relationship has an influence on 
the determination of customs values or not".  Ho wever, none of the explanations provided by 
Thailand in this Panel proceeding were set out in the Thai Customs' letter of 12 April 2007.  In 
response to the Panel question of whether Thai Cu stoms ever communicated the same explanations 
that were given in this Panel proceeding to PM  Thailand during the domestic proceedings, Thailand 
submits that although its explanati ons before the Panel are much more detailed, they are fully 
consistent with the grounds on which Thai Cust oms acted and the explanations provided to 
PM Thailand at the time.
630  As already addressed above, however, in the light of the nature of the 
obligation to "examine" the circumstances of the sa le, considered in the due process objective of 
Article 1.2(a) as well as the Customs Valuation Agreement  in its entirety, the absence of any 
explanations on why the information provided was c onsidered insufficient and consequently led Thai 
Customs to reject the transaction value renders Thai Customs' examination inconsistent with 
Article 1.2(a). 
7.192  We address next the minutes of the 6 March 2007 meeting.  The minutes include the 
description of Thai Customs' examination of the circ umstances of the sale; its determination to reject 
the transaction value; and the alternative valuation me thods considered to be used for valuation of the 
cigarettes at issue.631  For the purpose of our analysis here , we will assess whether the minutes explain 
the basis for Thai Customs' determination to reject the transaction value in the light of the information 
and evidence provided by PM Thailand.  In the rele vant part, the minutes provide that "Regarding the 
relationship, it is found that the Company has a re lationship with the seller abroad ([i]t is found that 
the relationship had an effect on the prices in 2003) ...  It is a case where the Customs Department has 
already had the information and there is no need to examine other circumstance s ... ".  This therefore 
shows that Thai Customs considered it unnecessary to examine the circumstances of the sale in 
respect of the cigarettes at issue imported in Au gust 2006 based on its examination and consequent 
determination in 2003 that the relationship between PM Thailand a nd PM Philippines influenced the 
price of the cigarettes imported at that time.  As the Philippines points out, we do not consider that the requirement to examine the circumstances of the sal e under Article 1.2(a) can be satisfied by simply 
referring back to the examination conducted and de termination reached in respect of the transaction 
that took place three years before the current transac tion at issue.  There may indeed be a situation 
where despite the gap in time, the circumstances of  both transactions between the same parties turn 
out to be the same.
632  Even in such a case, however, in our  view, the customs authorities are obliged 
under Article 1.2(a) to explain the basis for findi ng the current transaction to be the same as the 
previous transaction which it had already examined. 
7.193  Finally, we note Thailand's argument that it continued to examine the circumstances of the 
sale even after sending out the 19 December 2006 letter in which it communicated its grounds.  
Specifically, Thailand refers to oral communi cations, correspondence, and meetings with 
PM Thailand and its representatives (PWC) that  took place during February-March 2007, including 
Thai Customs' contacts with PWC.633  Evidence relating to the correspondence between Thai Customs 
                                                      
630 Thailand's response to Panel question No. 93(1). 
631 Exhibits THA-37 (revised minutes), PHL-74 (original minutes) and PHL-173. 
632 We note that in its first oral statement, the Phili ppines stated that in the case at issue, "the BoA’s 
conclusions regarding the 2000-2002 sales provide no basis for conclusions regarding the 2006 sales.  The 
circumstances surrounding th e 2000-2002 sales were very different, b ecause the goods came from Malaysia, and 
involved a different seller.  Thus, the relationship was between different parties.  Moreover, for some of the 
2000-2002 entries, the BoA found that the price was not influenced by the relationship" (Philippines' first oral 
statement, para. 82). 
633 Thailand submitted a new piece of  evidence in this connectio n – statement of Mrs. Natina 
Santiyanont (Exhibits THA-64 and TH A-65) regarding the circumstances of  Thai Customs' interaction with  WT/DS371/R 
 Page 177 
 
 
  and PM Thailand, as summarized in the table abov e, indicates that after 19 December 2009, Thai 
Customs focused on considering an alternative valua tion method to be used for the entries at issue, 
rather than continuing to examine the circumstanc es of the sale to determine whether the relationship 
influenced the price or not.  In response to our  question concerning the point in the examination 
process at which Thai Customs determined that the transaction value was not acceptable, Thailand 
stated that it was a process starting with the Ph ilippines' request to use a testing methodology to 
determine whether the transaction value was affected  by the relationship between PM Philippines and 
PM Thailand in its 5 February 2007  letter. After some consultations between the parties in between, 
this process ended when Thai Customs, usi ng the deductive testing method as requested by 
PM Thailand in its letter of 6 March 2007, found that  the transaction value w as lower than the test 
deductive value.   
7.194  Contrary to Thailand's position, however, our examination of the letter of 5 February 2007 
from PM Thailand does not reveal that PM Tha iland expressly requested Thai Customs to use a 
testing methodology to determine whether the transaction value was affected by the relationship, while it pointed out that Thai Customs rejected the transaction value without proper examination of 
the circumstances of sale.
634  PM Thailand ends the letter with f our specific requests: (i) revocation of 
the guarantees notified by the letter of 11 A ugust 2006; (ii) expeditious assessment process and 
issuance of an assessment notice; (iii) establishmen t of a common understanding going forward; and 
(iv) formation of an inter-ministerial co mmittee comprising representatives from different 
governmental departments.  Regarding the est ablishment of a common understanding of going 
forward, PM Thailand indicated that it 'also would lik e to explore the possibility of an agreement with 
Customs for a correct, unambiguous and definitive pr ocedure and method to test and reconcile the 
import value of goods for further transactions'.  We do not read this sentence to be a request for Thai 
Customs to decide on a testing method to be u sed without any further consultations with the 
Philippines. In addition, we do not read the 6 March 2007 letter to be a request  by PM Thailand to use 
the deductive value method as a testing method either.  Instead, the Panel  understands that in this 
letter, PM Thailand pointed at the fact that Thai Customs was asking PM Thailand to provide 
information to be used to calculate the computed value, while the hierarchical order of Ministerial 
Regulation No. 132/2000 (and of the Customs Valu ation Agreement), prescribes that the calculation 
of a deductive value predates the calculation of a computed value. 
7.195  In conclusion, we find that Thai Customs failed to examine the circumstances of the sale with 
respect of the entries at issue w ithin the meaning of Article 1.2(a).  Consequently, Thailand acted 
inconsistently with Articles 1.1 and 1.2(a) in rej ecting the transaction value of the concerned entries. 
(iii) Thai Customs' reasons for rejecting the trans action values of PM Thailand's cigarettes  
Main argument of the parties  
7.196  The Philippines  submits that Thailand's improper rej ection of the transaction values of the 
imported cigarettes at issue is also proved by the invalid reason for such rejection as provided in the 
12 April 2007 letter from Thai Customs.635  The Philippines argues that the statement, "it cannot be 
                                                                                                                                                                     
PWC and its attendance at the 6 March 2007 meeting on behalf of PM Thailand.  Thailand argues that this 
evidence proves that the minutes of the 6 March 2007 meeting were mailed to PWC on behalf of PM Thailand (Thailand's second written submission, para. 79, footnote 57). 
634 Exhibit PHL-68. 
635 Philippines' first written submission, paras. 184,  225-230, and 234-253; second written submission, 
para. 139. The Philippines also stated that a second argument put forward by Thai Customs, namely a 
comparison between the transaction value for PM ciga rettes and the price of Importer A's cigarettes, was 
irrelevant and invalid (Philippines' first written submissi on, paras. 231-253; first opening statement, paras. 55 
and 72).  Thailand confirmed that this comparison had not constituted a ground for the rejection of the 
concerned transaction values (Thailand's first written submission, para. 162).  WT/DS371/R 
Page 178  
 
  proven whether the relationship has an influence on  the determination of customs values or not", 
cannot constitute a valid reason for rejection under Article 1.2(a) for the following reasons: (i) the 
Customs Valuation Agreement  does not establish a legal presumption against the transaction value or 
impose a burden of proof under Article 1.2(a) of th e Customs Valuation Agreement; (ii) if "doubts" 
trigger a presumption, the authority must ensure  that the "doubts" are "still reasonable" when 
transaction value is rejected; and ( iii) even if there were a burden of proof, an authority's grounds for 
rejecting transaction value cannot be a statement that the burden was not met.
636  From the perspective 
of Articles 1.1 and 1.2(a), this statement in the 12 April letter does not demonstrate that there were facts before the authority, other than the parties' relationship, supporting the conclusion that the transaction value was unacceptable.
637  Under Articles 1.1 and 1.2(a), an authority cannot reject 
customs value in the absence of such an additional fact.   
7.197  Thailand did not directly respond to this aspect of  the Philippines' argument under Article 1.1 
and 1.2(a) although it provided counterarguments in relation to the Philippines' claim under Article 16 
to provide an explanation in writing as to how the customs value of the importer's goods was determined.  Thailand holds the position that Thai Cu stoms' explanation provide d in its letter of 12 
April 2007 and the minutes of the 6 March 2007 meet ing was sufficient to satisfy the obligation under 
Article 16. 
Analysis by the Panel
 
7.198  The Philippines argues that Thai Customs' imprope r rejection of the transaction values of the 
cigarette entries at issue is also proved by the invalid  and insufficient reasons for rejection.  These 
reasons are set out in Thai Customs' letter of 12 April 2007. 
7.199  To recall, in support of its claim concerning Thai  Customs' rejection of the transaction values 
of the entries at issue, the Philippines raised two arguments: first, Thai Customs did not examine the 
circumstances of sale within the meaning of Article  1.2(a) and, second, Thai Customs' rejection was 
based on invalid reasons.  We addressed in the previous sec tion the Philippines' first argument and 
found that Thai Customs' rejection was inconsistent  with Article 1.1 and 1.2(a) because it failed to 
examine the circumstances of sale under Article 1.2(a) .  To the extent that we have already reached 
our finding on the Philippines' claim regarding Thai Customs' rejection of the transaction values of the 
[[xx.xxx.xx]] entries at issue, we need not con tinue to examine the Philippines' second line of 
arguments.   
7.200  In any event, however, in the context of our an alysis of the Philippines' first argument, which 
in our view is connected to its argument based on th e alleged invalid and insufficient reason given, we 
addressed the substantive adequacy of the reas ons provided in the 12 April 2007 letter for Thai 
Customs' rejection of the transaction values for th e cigarettes at issue.  We found that they are 
substantively insufficient to justify Thai Customs' de termination with respect to the entries at issue.  
In this regard, we note that the nature of the r eason given by Thai Customs – the importer failed to 
establish the acceptability of the transaction value – may not necessarily be considered invalid  in itself 
if that is the conclusion reached by a customs au thority solidly based on the examination of the 
evidence submitted before it.  Setting aside the qu estion of the precise extent and scope of the 
explanations to be given under Article 16, such a conclusion nevertheless needs to be supported with  
substantive reasons that are linked to the evid ence submitted by the importer or otherwise.   
                                                      
636 Philippines' second written submission, paras. 143-156. 
637 Philippines' response to Panel question No. 108.  WT/DS371/R 
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  (e) Whether Thailand failed to communicate to PM  Thailand grounds for rejecting declared 
transaction values inconsistently with Article 1.2  
(i) Main arguments of the parties 
7.201  The Philippines claims that prior to  taking the decision to reject the transaction value, 
Thailand failed to inform PM Thailand of its "grounds  for considering that the relationship influenced 
the price", as required by Article 1.2(a).638  According to the Philippines, this part of the dispute boils 
down to a disagreement over the ordinary meaning of the term "grounds", read in context and in the 
light of the stated object and purpose of the provisi on: Thailand alleges that the statement, "it cannot 
be proven whether the relationship has an influence on the determination of customs values or not", 
communicates the "grounds", whereas the Philippin es considers that the word "grounds" requires 
communication of objective facts or information that support the authority's own conclusions on the 
burden of proof and on the acceptability of the transaction value.639   
7.202  The Philippines submits that the text, context and object and purpose confirm that the word 
"grounds" in Article 1.2(a) refers to the objective basis in the facts or  information before the authority 
that provides support for the authority's conclusions; the "grounds" are not the authority's own 
ultimate or intermediate legal conclusions, such as a conclusion that the burden of proof has not been 
met.  As for the immediate context, the Phili ppines refers to the first and second sentences of 
Article 1.2(a) where the Philippines claims the dr afters equated the word "fact" with the word 
"grounds", and indicated that "grounds" must be base d in the "information" before the authority.  The 
Philippines also points to the last sentence of th e Decision that allegedly explicitly distinguishes 
between an authority's "decision" and "the grounds therefore". 
7.203  The Philippines is of the view that a crucial c onsideration in interpreting the word "grounds" 
is the stated due process objective of the provision:  the authority's communicat ion of "grounds" must 
"give[] the importer a reasonable opportunity to respond " (emphasis in original).  The due process 
objective of Article 1.2(a) would be frustrated were the Panel to accept Thailand's view that a 
statement that the burden of proo f has not been met is a sufficient communication of "grounds".  This 
is because if an authority does not a ddress the evidence before it, the im porter is left completely in the 
dark as to why the burden of proof has not been met.  The importer cannot explain the relevance of the evidence it has submitted, for example, the sour ces and robustness of the data and calculations in 
that evidence. The importer is, in sum, deprived  of an opportunity to address whatever specific 
deficiencies the authority perceives in the eviden ce.  The Philippines also submits that the WCO 
Technical Committee's case-study is instructive in this regard.
640   
7.204  The Philippines considers that its interpretati on of the word "grounds" prevents customs 
valuation from becoming a secret process, by ensuri ng that the authority is required to communicate 
its views on the evidence as part of the decision-making process, and by giving the importer a reasonable opportunity to comment on those views in an informed manner. 
                                                     
 
638 Philippines' second written submission, paras. 163-186. 
639 The Philippines also notes that several third parties share the same view, namely that the word 
"grounds" in Article 1.2(a) refers to the substantive co nsiderations (reasons) in the record before the authority 
that provide the basis for the authority's conclusion. 
640 Philippines' second written submission, para. 15 8, referring to Exhibit THA-41. The Philippines 
submits that in the case study, "the importer and exporter were given a "reasonable opportunity" to explain the 
specific "price differences" that formed the basis for th e authority's doubts, but were unable to do so. ... The 
authority in the case gathered and analyzed information; it relied on objective facts, besides the relationship, to reject transaction value; and the importer was given an opportunity to explain these specific facts, but could not 
do so.  The authority did not rely on spurious and unsubstantiated grounds, but on objective facts".  WT/DS371/R 
Page 180  
 
  7.205  Thailand  submits that the customs authority's obligation to communicate its grounds to the 
importer under Article 1.2(a) means that it must give the importer preliminary notice regarding its 
consideration that it has not been established that  the relationship between buyer and seller did not 
influence the price.
641  This notice must be provided in writing and an opportunity to respond must be 
given before the final valuation takes place.  The only ground under Article 1.2(a) under which the 
transaction value may be rejected is a finding that it  is not established that "the relationship [between 
buyer and seller] did not influence the price".642  If the importer fails to discharge the burden of 
establishing that the price is not influenced by the relationship, the "'customs administration has 
grounds for considering that the relationship influe nced the price ... in light of information provided 
by the importer or otherwise' within the meaning of Article 1.2(a)".643   
7.206  Thailand contests the Philippines' interpretati on of the word "grounds" as described above.  
Thailand understands the Philippines' argument to be: (i) the term "grounds" refers only to the factual 
basis on which the customs administration acts, rather  than the legal basis; and (ii) the absence of 
factual evidence establishing that the relationship did not influence the price is a legal basis, not a 
factual basis, for action.  Thailand does not agree th at the term "grounds" is limited to the factual 
basis.  Rather, it incorporates both.644  Further, contrary to the Philippines' argument, the absence of 
evidence also constitutes a factual basis on which the customs administration may act.645  Thailand 
argues that the Philippines fails to explain how the "grounds" are not "based in the information before 
the authority" when the facts are that there is not  enough information before the authority.  Thailand 
sees no logical reason why the presence of certain info rmation constitutes an appropriate factual basis 
on which the customs administration may act but th e absence of that information would not.  The 
Philippines' interpretation of grounds would make it legally impossible for a customs administration 
to communicate the factual grounds properly in cases in which the importer had provided no 
evidence.  Even accepting the Philippines' argument on grounds, a notification that the factual record 
does not contain sufficient evidence to establish that the relationship did not influence the price, 
communicates information regarding the "infor mation or otherwise" on which the customs 
administration is considering to reject the transaction value.646 
7.207  Thailand further submits that Artic le 1.2(a) contains no language  regarding the detail in which 
the grounds must be explained.  Thailand contrast s this with Article 16 of the Customs Valuation 
Agreement, which calls for an "explanation" of  the determination of customs value, and the 
provisions of the Anti-Dumping Agreement, which specify the detail in which anti-dumping determinations must be communicated to interested parties.
647  In the absence of any such 
requirements in the text of Article 1.2(a), the Pane l should take care not to impose any obligations to 
which Members have not agreed.   
7.208  Regarding the Philippines' argument that in order for the importer to have such a reasonable 
opportunity to respond, the notification must address  the evidence before the customs administration, 
Thailand again argues that when there is insu fficient evidence before the administration, 
communicating that fact satisfies the notification requirement.  This is related to the fact that the 
importer chooses the method and evidence to establis h that the relationship did not influence the 
price.  Where the customs administration notifies the importer of the insufficiency of information, the 
importers are in no doubt as to the grounds on which the customs administration is acting. 
                                                      
641 Thailand's second written submission, paras. 93-94. 
642 Thailand's response to Panel question No. 20. 
643 Thailand's response to Panel question No. 20. 
644 Thailand's second written submission, paras. 96-99. 
645 Thailand's second written submission, para. 100. 
646 Thailand's second written submission, para. 101. 
647 Thailand's second written submission, para. 102.  WT/DS371/R 
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  (ii) Analysis by the Panel 
7.209  The Philippines claims that Thailand's communica tion of the grounds for considering that the 
relationship between PM Thailand and PM Philippines influenced the price was inconsistent with the 
obligations under Article 1.2(a).  The rele vant part of Article 1.2(a) provides: 
"[I]f, in the light of information provided by the importer or otherwise, the customs 
administration has grounds for considering that the relationship [between the buyer 
and seller] influenced the price, it sha ll 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." 
7.210  Concerning Thai Customs' valuation of the entr ies at issue, the parties do not dispute that 
from 4 August 2006 until 19 December 2006, Thai Cu stoms continued to question the acceptability of 
the transaction value of those entries based on the relationship between PM Thailand and PM 
Philippines.  Nor is it disputed that PM Thailand made a request to Thai Customs by a letter dated 20 
November 2006 to provide in writing its  grounds for such consideration.
648  Thai Customs responded 
to PM Thailand's request with a letter dated 19 De cember 2006.  The parties agree that this letter is 
the written communication of grounds that Thai Cu stoms provided pursuant to Article 1.2(a).   
7.211  The Philippines claims, however, that the 19 December 2006 letter from Thai Customs does 
not meet the obligations to communicate its "gr ounds" within the meaning of Article 1.2(a).  The 
parties contest both the nature of "grounds" within the meaning of Article 1.2(a) and the consistency 
of the grounds allegedly provided by Thai Cust oms in its 19 December 2006 letter with the 
obligations under Article 1.2(a).  We will first ex amine the nature of the obligations imposed on 
customs authorities to communicate "grounds" under Article 1.2(a). 
7.212  The term "ground[s]" can be defined as " noun. ... 6 The basis of an opinion or argument, the 
reason or motive for an action, (now freq. in pl.).  In pl. also, sufficient reason or reasons for, that. 
ME".649  When used in plural, as in Article 1.2(a), "g rounds" thus means "sufficient reason or reasons" 
for an opinion or an action.  Under Article 1.2(a) , the grounds to be provided to the importer are the 
customs authorities' reasons for considering, in th e light of the information provided by the importer 
or otherwise, that the relationship influenced the pr ice.  In this regard, we recall our discussion above 
regarding the procedural steps to be taken by  customs authorities as well as importers under 
Article 1.2(a).  The importer is responsible for pr oviding information relevant to the acceptability of 
the transaction value once it has been notified by th e customs authority of the need to examine the 
circumstances of the sale in related-party situations .  Subsequently, the customs authority must assess 
the information initially provided by the importer and communicate its grounds for considering that 
the relationship influenced the price based on th e evidence provided if that is the preliminary 
conclusion reached at that point in the process.   
7.213  In this context, the obligation to communica te the grounds under Article 1.2(a) can be 
temporarily distinguished from the obligation to pr ovide an explanation under Article 16 for how the 
final customs value of the importer' s goods was determined.  As the parties have also clarified, the 
obligation to provide "grounds" under Article 1.2(a) arises during the valuation process.  The 
obligation to "explain" the determination of the customs value, on the other hand, does not arise until after the customs authority has ma de a final assessment of the cust oms value of the concerned goods.  
This temporal difference in the process, in our view, thus affects the substantive nature of the content 
of "grounds" under Article 1.2(a) and an "expl anation" under Article 16.  Given that under 
                                                     
 
648 Exhibit PHL-65.  
649 The New Shorter Oxford English Dictionary ,  (Fifth Edition), Oxford University Press, Volume 1, p. 
1158 (2002). WT/DS371/R 
Page 182  
 
  Article 1.2(a), the importer shall be given a reas onable opportunity to further respond to the customs 
authority's "grounds" for considering that the relations hip influenced the price, the "explanation" to be 
provided after the valuation process is completed must  therefore include the assessment of all relevant 
information, including that provided by the im porter as a response to the customs authority's 
communication of its grounds regarding its consideration. 
7.214  Moreover, we consider that the right of th e importer to have a reasonable opportunity to 
respond to the customs authority's grounds for it s consideration under Article 1.2(a) provides 
contextual basis for the term "grounds".  As the Ph ilippines suggests, in order for the importer to have 
a reasonable opportunity to respond to the customs authorities' consideration, particularly if the 
customs authority considers that there is insufficien t information, the importer must not be left to 
guess the reasons for the customs authorities' consider ation.  The right of the importer to have "a 
reasonable opportunity to respond" under Article 1. 2(a) would lose its meaning unless the importer is 
informed of at least the reason(s) why the custom s authority continues to question the acceptability of 
the transaction value despite the ev idence and information presented or otherwise in the possession of 
the customs authority until that point.  In this re gard, we do not find it necessary or useful for us to 
define the exact extent and scope of "grounds" to be provided under Article 1.2(a) as they may vary 
depending on the factual circumstances presented in each case.  We do agree, however, with the 
Philippines that without knowing the reasons for th e authority's consideration in relation to the 
specific evidence before it, the importer would not be in the position to effectively "respond", for example, by further elaborating on the relevan ce of the evidence it has already submitted and 
presenting additional information.  It would be desira ble if a customs authority could, to the extent 
possible, inform the importer of the kind(s) of a dditional factual information that it considers may 
prove useful in further assessing the acceptability of th e transaction value.  It is difficult to conceive 
any other way in which the importer can have a reasonable opportunity to respond to the customs 
authorities' consideration that the relationship did influence the price.   
7.215  We find support for our view above in a comment by the WTO Technical Committee on 
Customs Valuation in Commentary 14.1.
650  In response to the question of whether customs 
authorities must advise the importer of the reasons for believing that the price of goods in a transaction has been influenced by the rela tionship, the WTO Technical Committee states: 
"Yes.  Subparagraph 2(a) of Article 1 provides that, where Customs has grounds for 
considering that transaction value is unacceptable because the relationship has 
influenced the price and that Article 1 do es not therefore apply to the transaction, 
Customs shall communicate its grounds to th e importer.  Moreover the importer must 
be given a reasonable opportunity to res pond and is entitled to be advised in writing 
of the grounds for Customs' beliefs." 
                                                     
 
650 Exhibit THA-26. The Panel notes that the Commentary by the WTO Technical Committee is not 
legally binding upon the parties, however it is of the op inion that the Commentary is instructive and can provide 
guidance on the interpretation of the Customs Valuation Agreement, especially since it is the WTO Members 
that make up the Technical Committee. In this respect, we also refer to the Appellate Body ruling in EC – 
Computer Equipment , which discussed the legal status of non-binding decisions of the WCO HS Committee, 
and stated that in interpreting tariff concessions, these decisions may be relevant, and therefore they should be 
examined by the Panel (Appellate Body Report, EC – Computer Equipment , para. 90). Following this statement 
by the Appellate Body, the Panels in EC – Chicken Cuts  and China – Auto Parts  considered that decisions of the 
HS Committee, although not binding, "could well be a very useful source of information on the subsequent 
practice of WTO Members, a large proportion of whom are signatories to the HS Convention and, thus, are members of the HS Committee" (Panel Report, EC – Chicken Cuts , para. 7.298; Panel Report, China – Auto 
Parts , para. 7.423).  WT/DS371/R 
 Page 183 
 
 
  7.216  We now turn to the factual situation of this di spute.  In its letter of 19 December 2006, Thai 
Customs provided its grounds for considering that  the relationship between PM Thailand and PM 
Philippines influenced the price as follows: 
"Pertaining to the reference letter, PMTL wi shes to be informed about grounds and 
methodology of customs value determination.  
The Customs Department would like to inform you of the grounds and methodology 
of customs value determination as follows: 
1. The Customs Department rejected the declared price of PMTL because 
PMTL and the seller in a forei gn country are related parties , in accordance with the 
Ministerial Regulation No. 132 (B.E. 2543) Ar ticle 4, and the importer has yet to 
prove if the said relationship influences the customs value determination or not .  
2. After PMTL has placed a guarantee to  release goods from Customs' custody, 
the import entry will be returned to th e assessment officer who requested the 
guarantee placement. The assessment officer has the right to issue a letter requesting the importer to provide additional clarif ication as well as supporting evidence for 
further consideration. After the complete information has been submitted, the 
assessment officer will determine the custom s value in sequential order according to 
GATT, and subsequently issue a Notice of Assessment (Form KorSorKor 114) in 
accordance with the Custom s Notification No. 23/2549 dated 31 March 2006. 
3. Once PMTL has received the Notice of Assessment stated in 2, and 
completed the procedure of the Notice of Assessment, in the case where additional 
duty is required, or the guarantee does not cover the import duty amount, PMTL can 
file an appeal within 30 days from the date  of receipt of the assessment, at Customs 
Valuation Appeal Division, SCPVD, as instructed under Customs Notification 
No. 29/2549 dated 2 May 2006." (underline added) 
7.217  Thai Customs' grounds as provided in the above letter are that "PMTL and the seller in a 
foreign country are related parties ... and the impo rter has yet to prove if the said relationship 
influences the customs value determination or not".   
7.218  Based on the dictionary meaning of the term "grounds", we considered above that customs 
authorities' grounds under Article 1.2(a) were the customs authorities' reasons for considering , in the 
light of information provided by the importer or otherw ise, that the relationship influenced the price.  
As such, we do not consider that the relationship between the buyer and the seller in a foreign country 
itself can form the "grounds" within the meaning of Article 1.2(a).  Further, the first sentence of 
Article 1.2(a) states that the fact that the buyer a nd the seller are related shall not in itself be grounds 
for regarding the acceptability of the transaction valu e.  We understand that the parties do not dispute 
this either.   
7.219  Thailand asserts, however, that the letter of 19 December 2006  satisfies the obligation to 
communicate the "grounds" because it sets out that "the importer has yet to prove if the said 
relationship influences the customs value determin ation or not".  This statement means that 
PM Thailand, the importer in this case, did not prove at that stage of the process that its relationship 
with PM Philippines did not influence the decl ared transaction value.  Thai Customs does not, 
however, link this statement to the evidence that  PM Thailand had provided until that time or 
otherwise any other evidence that was before Thai Customs.  We do agree with Thailand that if the 
importer in a given case provided no evidence, it would be impossible for a customs authority to WT/DS371/R 
Page 184  
 
  communicate any other specific grounds than the f act that the importer did not demonstrate the 
acceptability of the transaction value.  That is, howev er, not the situation in the present dispute.   
7.220  The facts before us show that PM Thaila nd did provide Thai Customs with certain 
information and data to establish th e acceptability of the transaction value.
651  To the extent that Thai 
Customs was presented with certain evidence, the gr ounds for its consideration that the relationship 
between the buyer and the seller influenced the price must be linked to that concerned evidence so as 
to assist the importer in understanding the authority's consideration.652  Therefore, the subject 
statement contained in the [19 December 2006] lette r from Thai Customs falls short of satisfying the 
obligation to "communicate its grounds" w ithin the meaning of Article 1.2(a). 
7.221  We also observe Thailand's argument that PM Thailand's letter of 5 February 2007 to Thai 
Customs clarifies that PM Thailand was fully in formed of the basis on which Thai Customs was 
acting by Thai Customs' 19 December 2006 letter.653  Thailand is therefore of the view that 
PM Thailand's due process rights under Article 1.2( a) were fully respected.  The 5 February 2007 
letter from PM Thailand reads in relevant part that "Until the letter in refere nce (2) [the 19 December 
2006 letter], received some four months after Customs first refused to clear the company's goods at 
declared invoice prices, the company has never b een informed by any means or channels that 
Customs officers have reasons to believe that th e relationship between the company and the foreign 
seller may influence the price".  Thailand consider s that this statement in PM Thailand's letter 
supports its position that Thai Customs properly communicated in the 19 December 2006 letter its 
grounds to believe that the relationship between  PM Thailand and PM Philippines influenced the 
price.   
7.222  We do not find the concerned letter to evince PM Thailand's acknowledgment that 
PM Thailand was sufficiently informed of the grounds  of Thai Customs' consideration.  A plain 
reading of the above statement in the 5 Februa ry 2007 letter indicates that PM Thailand simply 
underlines the fact that the 19 December 2006 letter was the first communication from Thai Customs 
regarding its consideration of the related-party transaction at issue since Thai Customs started 
questioning the declared transaction value of th e cigarettes at issue on 4 August 2006.  More 
importantly, read together with PM Thailand's additi onal statement in the letter that the 19 December 
2006 letter from Thai Customs "does not provide suffi cient explanation of the reasons for Customs' 
price rejection and is inconsistent with the [Cus toms Valuation Agreement]", the 5 February 2007 
letter from PM Thailand does not indicate that PM  Thailand was sufficiently informed of Thai 
Customs' "grounds" Article 1.2(a). 
7.223  For the foregoing reasons, we therefore find that Thai Customs failed to communicate its 
grounds for considering that the relationship betw een PM Thailand and PM Philippines influenced the 
price within the meaning of Article 1.2(a). 
                                                      
651  For example, PM Thailand provided Thai Customs with information and data to establish the 
acceptability of the transaction value in its letters of 4, 7 and 8 August 2006. In the 4 August letter, PM Thailand 
referred to its annual filings of 2003, 2004 and 2005 (Exhibit PHL-55); in the 7 A ugust letter it advised Thai 
Customs how it could examine the cost structure of PM Thailand (Exhibits PHL-57 and PHL-76); and in the 
letter of 8 August, amongst others, PM Thailand provi ded a copy of the 2005 annual filing, PG&E, and 
deductive calculation (Exhibit PHL-56). 
652 In its case study 10.1, the WTO Technical Commi ttee stated that "any decision [on whether the 
relationship between two entities influenced the price] must, to a significant degree, be based on the information 
provided by the importer." (Exhibit THA-41).   
The United States also states in its  oral statement at the third party session with the Panel that "the 
failure by an importer to prove a negative, specifically to prove that the relationship did not influence the price, 
does not relieve the customs authority of its obligation to accep t the transaction value unless it has grounds for 
considering that the relationship influenced the price."  (United States' third party oral statement, para. 9). 
653 Thailand's second written submission, paras. 105-107; Exhibit PHL-68.  WT/DS371/R 
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  6. Article 16 of the Customs Valuation Agreement 
(a) Obligations under Article 16 
(i) Main arguments of the parties 
7.224  The Philippines submits that Article 16 requires an authority to explain properly (i) why the 
determination of the customs value was not based on th e transaction value; and (ii) what the basis is 
for the alternative valuation determinations.   
7.225  Regarding the legal basis for its position th at an explanation required under Article 16 
includes an explanation of the basis for the custom s authority's rejection of the importer's transaction 
value, the Philippines relies on the following three points to support its position: (i) the meaning of the words "how" and "explain" requires that the explan ation "makes clear the cause" and "reason" for the 
customs value; (ii) given the sequencing obl igation under the Customs Valuation Agreement,  an 
authority must explain how it satisfied the legal preconditions for using the valuation method used, 
including its failure to use Article 1; and (iii) th e Ministerial Decision provides contextual support for 
the Philippines' interpretation of Article 16 as it stipul ates that when the transaction value is rejected, 
an authority must "communicate to the importer in writing its [final] decision and the grounds 
therefore".  Thus, an explanation must be given of the objective "ground" justifying the rejection of a 
transaction value under Article 1 of the Customs Valuation Agreement.
654 
7.226  Further, the Philippines submits that an authorit y must also provide a sufficient statement of 
the particular valuation methodology, or "means", us ed to value the importer's goods.  To explain how 
the customs value was determined, the authority mu st also indicate how it derived the value from the 
information before it, providing any calculations  performed.  In a deductive value calculation, the 
authority must disclose the elements in Artic le 5.1 of the Customs Valuation Agreement  that were 
deducted and not deducted , and give reasons why.655   
7.227  The Philippines explains that Article 16 is inte nded to ensure that importers and foreign 
governments, as well as reviewing tribunals, courts and panels, understand how the authority reached 
its conclusion, thereby enabling these parties to exercise their respective rights under Articles 11 and 
19 of the Customs Valuation Agreement  in deciding whether the manner or means of valuation were 
consistent with the importing Member's WTO oblig ations.  This interpre tation provides domestic 
courts and panels with a basis to review the aut hority's decisions.  If the importing Member were not 
obliged to explain its failure to use valuation met hods other than the one used, the means by which the 
imported goods came to be valued as they were  and the means by which the importing Member 
complied with its sequencing obligations under the Customs Valuation Agreement, are never 
explained.  Such an interpreta tion would run counter to the due process and transparency purposes 
promoted by Article 16.   
7.228  Thailand refers back to its position that the obligations/standards under the Customs 
Valuation Agreement  differ from those under the Anti-Dumping Agreement.  Article 16 and the 
Customs Valuation Agreement  generally do not provide  detailed rules regarding the nature of the 
explanation to be provided under Article 16.656  Specifically, in response to the Philippines' position 
that the customs administration should provide, under  Article 16, an explanation of "what evidence 
the authority relied upon" and "why the authority disregarded certain evidence or assigned lesser 
evidentiary weight to evidence contradicting its assessed customs value", Thailand argues that this 
describes the substantive and procedural standa rds with which a final anti-dumping determination 
                                                      
654 Philippines' response to Panel question No. 24(1); second written submission, paras. 188-192. 
655 Philippines' response to Panel question No. 24(1); second written submission, paras. 193-194. 
656 Thailand's second written submission, para. 116. WT/DS371/R 
Page 186  
 
  must comply pursuant to Articles 6.9 and 12.2 of the Anti-Dumping Agreement, not a customs 
valuation determination.  Th e Customs Valuation Agreement  does not contain any such equivalent 
provisions and the Panel should not read such oblig ations into the Customs Valuation Agreement.  
Thailand emphasizes that given that anti-dumping and countervailing duty investigations are far more 
complex investigations than a cu stoms valuation determination, the standards for explaining anti-
dumping or countervailing duty inves tigations would be much higher than the standards governing 
explanations of customs valuation determinations.
657   
7.229  In any event, Thailand contends that even if Article 16 includes an oblig ation to be informed 
as to why the transaction value was rejected, Thai  Customs complied with this obligation in its 
12 April 2007 letter.658  Regarding the Philippines' position that the purpose of Article 16 is to ensure 
that importers and foreign governments understand ho w the authority reached its conclusion, and to 
enable, inter alia , importers to appeal decisions domestica lly or foreign governments to decide 
whether to bring WTO proceedings, Thailand asserts  that by those standards, Thai Customs' 
explanation was clearly sufficient to enable PM Tha iland to challenge the dete rminations domestically 
and the Philippines to challenge them at the WTO.659 
(ii) Analysis by the Panel 
7.230  Article 16 of the Customs Valuation Agreement  provides: 
"Upon written request, the importer shall have the right to an explanation in writing 
from the customs administration of the country of importation as to how the customs value of the importer's goods was determined." 
7.231  Article 16 sets forth two elements: (i) a written re quest from an importer for an explanation in 
writing; and (ii) a customs authority's obligation to provide an explanation in writing as to how the 
customs value of the importer's goods was determined .  Regarding the Philippines' Article 16 claim, 
the question before us concerns the second element,  namely the nature of an explanation to be 
provided as to how the customs value of  the importer's goods was determined.
660  Specifically, the 
parties disagree on the scope and extent of th e explanation to be provided under Article 16. 
7.232  To understand the nature of the explanation under Article 16, we first turn to the text of the 
provision.  The term "explanation" can be defined as " noun.  1 The action or act of explaining.  2 A 
statement, circumstance, etc., which mak es clear or accounts for something. ... ".661  T h e  w o r d  
"explain" can in turn be defined as follows:  "1 verb trans. & intrans.   Make clear or intelligible (a 
                                                      
657 Thailand's second written submission, paras. 116-1 17.  Thailand points to important policy reasons 
for which the drafters would not have wanted to apply the same detailed rules to Article 16 of the Customs 
Valuation Agreement :  (i) a customs valuation determination could pertain to a single entry or a series of entries 
relating to a single importer, as opposed to an anti-dumping or countervailing duty determination that may 
involve several exporters and importers and transactions covering a period extending up to three years; and (ii) 
anti-dumping and countervailing duty investigations are co nducted by centralized investigating authorities with 
extensive resources, whereas customs valuation determinati ons may be made by port or regional customs offices 
whose resources do not match those of anti-dumping investigating authorities. 
658 Thailand's response to Panel question No. 24(2), also referring to its response to Panel question 
No. 8 and paras. 294-296 of its first written submission. 
659 Thailand's second written submission, para. 118. 
660 PM Thailand made a written request to Thai Customs for an explanation in writing by the 5 
February 2007 letter.  Thai Customs responded to this request by the letter dated 12 April 2007 
(Exhibit PHL-69). See also the f actual summary of the communications between PM Thailand and Thai 
Customs, para. 7.183. 
661The New Shorter Oxford English Dictionary , (Fifth Edition) Oxford Univer sity Press, Vol. I, p. 895 
(2002).   WT/DS371/R 
 Page 187 
 
 
  meaning, difficulty, etc.); clear of obscurity  or difficulty; give details of (a matter, how, etc) ... 6 verb 
trans. account for; make clear the cause or origin of".662  The word "how" means " adverb 1. In what 
way or manner; by what means; in wh atever way; by whatever means ...".663  The dictionary meaning 
of the term "explanation", taken together with the wo rd "how", therefore indicates that the explanation 
to be provided under Article 16 requires customs aut horities to "make clear" and "give details" of the 
manner and means in which a customs authority de termined the customs value of imported goods.   
7.233  Further, considered in its context, as discu ssed above, the explanation under Article 16 is 
temporarily and substantively distinguished from th e authority's communication of its grounds for its 
consideration under Article 1.2(a) as the explanati on under Article 16 must be provided after the final 
assessment of customs value is made and thus must be based on complete information that formed the 
basis for the customs authority's decision.  Th is can be contrasted with the "grounds" under 
Article 1.2(a) that are based on the information initially provided by the importer or otherwise. 
7.234  We also heed the transparency and due pr ocess objective that Article 16 is intended to 
achieve.  As the Philippines submits, an explana tion under Article 16 enables importers and foreign 
governments to effectively exercise their respectiv e rights under Articles 11 and 19 of the Customs 
Valuation Agreement  when requesting domestic reviewing tribunals, courts and WTO panels  to 
determine whether the manner or means of valuation by a customs authority was consistent with the 
importing Member's WTO obligations.  It provid es a window through which domestic tribunals and 
WTO panels review and understand a customs author ity's valuation determination.  As observed in 
Section VII.C.5 above, our objective assessment of the Philippines' claims under Articles 1.1 and 
1.2(a) required us to base our evaluation of Thai Customs' examination of the circumstances of the 
sale on, inter alia , its explanation provided pursuant to Article 16. 
7.235  As regards the scope of the explanation to be provided under Article 16, the Philippines 
submits that Article 16 requires a customs authority to provide (i) the reason for rejecting transaction 
value and (ii) the basis for the alternative valu ation determination.  Although not expressly endorsing 
this view, Thailand does not appear to object to the Philippines' view in this regard either.  In its 
explanation provided to PM Thailand in the letter of 12 April 2007, Thai Customs in fact states that it 
informs PM Thailand of the reason and method which was used in the determination of customs 
values in response to PM Thailand's request for the explanation on the rejection  of the declared 
import prices and valuation method used.664  This suggests that in practice, Thailand itself also 
includes the basis for its rejection of the impor ter's declared transaction value as part of the 
explanation provided to the importer pursuant to Article 16.   
7.236  The Philippines also references the sequenc ing obligation under the Customs Valuation 
Agreement  to support its view that the explanation und er Article 16 encompasses both the reason why 
the transaction value was rejected and why and how the method applied for the determination of the 
customs value was used.  In its view, given that customs authorities are required to respect the sequencing obligation to apply the six different va luation methodologies, an authority's rejection of 
the transaction value under Article 1 is a necessary a nd integral element of its determination of the 
customs value under a different valuation method.  In this context, in making "intelligible" the "cause" 
or "reason" for valuation under a provision other th an Article 1, an authority must explain how it 
satisfied the legal preconditions for using the va luation method used, including its failure to use 
Article 1. 
                                                     
 
662 The New Shorter Oxford English Dictionary , (Fifth Edition) Oxford Univer sity Press, Vol. I, p. 895 
(2002). 
663 The New Shorter Oxford English Dictionary , (Fifth Edition) Oxford University Press, Vol. I, 
p. 1219 (2002). 
664 Exhibit PHL-70.  WT/DS371/R 
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  7.237  We share the Philippines' view.  As we noted  above, the primary basis for customs value 
under the  Customs Valuation Agreement  is the transaction value.  Wh enever the customs value cannot 
be determined based on the transaction value unde r Article 1 for the reasons authorized under the 
same provision, the methods under Articles 2 through 7 are to be used in the sequential order.  
Therefore, it seems logical for a customs authority to explain the basis for rejecting the transaction 
value in situations where the authority relies on a valuation method other than the transaction value 
under Article 1.  Interpreting otherwise, in our view, would defeat the procedural objective of 
Article 16 to preserve due process rights and tran sparency in the context of customs value 
determination.  This is particularly the case becau se, if not through an expl anation under Article 16, 
the importer would be deprived of an opportunity to understand the customs authority's determination 
of the final customs value for the concerned goods.
665  Therefore, we consider that the explanation 
under Article 16 must be understood to include in its scope the reason for rejecting the transaction 
value as well as the basis for the valuation method used. 
7.238  We now address the extent of an explanation to be provided under Article 16, namely how 
extensive and detailed an explana tion should be to satisfy the oblig ations under Article 16.  The 
ordinary meaning of the word "explanation", consider ed in its context and in the light of the object 
and purpose of Article 16 as discussed above, suggest s that customs authorities' explanation must 
include, at the minimum, the basis for rejecting th e transaction value in the light of the information 
provided by the importer, the identification of the method used and the illustration of how the method 
was applied in reaching the final customs value. 
7.239  In this connection, we observe that the exte nt of an explanation to be provided under 
Article 16 is not the same as that under the equivalent provisions of the WTO agreements on trade 
remedy measures.  The obligations imposed on domes tic authorities to explain determinations in the 
context of the trade remedy rules are much more de tailed and specific.  For example, Article 12.2 of 
the Anti-Dumping Agreement  refers to " sufficiently detailed explanations" and "a full explanation".  
Article 4.1(c) of the  Agreement on Safeguards  requires a detailed analysis of the case under 
investigation as well as a demonstration of the relevan ce of the factors examined.  In contrast to these 
provisions, Article 16 of the Customs Valuation Agreement  contains succinct language that the 
importer shall have the right to "an explanation ... as to how the customs value of the importer's goods 
was determined".  The absence of any modifying word s such as "detailed" or "full" before the term 
"explanation" in Article 16 should be taken into account in clarifying the extent of the explanation 
under Article 16.  Moreover, the obligation to prov ide "an explanation in writing" under Article 16 
arises only if there is a written request from the importer.666  This too shows that the standard for the 
explanation required under Article 16 of  the Customs Valuation Agreement  is less stringent than that 
under the Anti-Dumping Agreement , the SCM Agreement  or the Agreement on Safeguards. 
7.240  The above considerations lead us to concl ude that although not as extensive and detailed 
explanations as required under the WTO agreements on trade remedy measures, the explanation to be 
provided under Article 16 of the Customs Valuation Agreement  must be sufficient to make clear and 
give details of how the customs value of the im porter's goods was determined, including the basis for 
                                                      
665 Philippines' response to Panel question No. 24(1 ); second written submission, paras. 188-192. The 
Philippines also refers to the Ministerial Decision which allegedly provides contextual support for its 
interpretation of Article 16.  The Decision stipulates that when the transaction value is rejected, an authority must "communicate to the importer in writing its [fin al] decision and the grounds therefore".  Thus, an 
explanation must be given of the objective "ground" justifying the rejection of transaction value under Article 1 
of the Customs Valuation Agreement. 
666 We note in this regard that the Ministerial Decision provides, "[w]hen a final decision is made, the 
customs administration shall communicate to the importer in writing its decision and the grounds therefore."  
Therefore, unlike under Article 16 of the Customs Valuation Agreement , under the Ministerial Decision, the 
customs administration's obligation to communicate in writing its decision and the grounds for a final valuation 
decision does not depend on the importer's request.  WT/DS371/R 
 Page 189 
 
 
  rejecting the transaction value and other valua tion methods that sequentially precede the method 
actually used by the customs authorities.667   
7.241  Further, we recall that we considered the subs tantive content of the explanation provided by 
Thai Customs of its determination in the context of  reviewing the Philippines' claims with respect to 
Thailand's obligations under Article  1.1 and 1.2(a).  Our examination of the explanation in that 
context should be distinguished from our eval uation of whether the explanation satisfies the 
requirements within the meaning of Article 16.  As the Philippines responded to a question from the 
Panel, under a hypothetical in which an authorit y determines the customs value using a spinning 
wheel, the authority would be found to have comp lied with its obligations under Article 16 if an 
authority concluded that the transaction value was not acceptable and provided an adequate 
explanation for how the spinning wheel was applied in a specific case.  Th is will be the case even 
though the disclosed reasons would be insufficient to  prove a compliance with Articles 1.1 and 1.2(a) 
in rejecting the transaction value.  If, however, no (or insufficient) reasons, including, for example, 
how the spinning wheel was applied in a specific case, were disclosed in the explanation, the authority 
would violate both Articles 1.1 and 1.2(a) as well as Article 16.  In this light, our assessment of the 
Article 16 claim should be focused on whether an explanation is formally sufficient to make clear and 
give details of its decision to reject the transacti on value and how the valuation method was applied to 
derive the customs value. 
(b) Whether Thailand failed to provide an explanati on for its determination of the customs value 
of the imported cigarettes at issue inconsistently with Article 16  
(i) Main arguments of the parties 
7.242  The Philippines claims that Thailand violated Article 16 of the Customs Valuation 
Agreement  by failing to provide adequate explanation of its determination of the customs value for 
the entries at issue.668  The Philippines argues that Thailand failed to explain properly (i) why the 
determination of the customs value was not based on  the transaction value; and (ii) the basis for the 
alternative valuation determinations made.669   
7.243  The statement in the 12 April letter that PM Thailand failed to satisfy the burden of proof, 
without any explanation of how the evidence before the authority supports this legal conclusion, is 
inadequate to explain how and why the authority was entitled to reject the transaction value in 
determining the customs value of the importer's goods.670  In particular, the authority failed to provide 
any explanation for its decision to disregard PM Thailand's evidence.671 
                                                      
667 The European Union also supports this view.  In its third party submission, it states, "The European 
Union considers that the relevance of transaction values as the preferred customs valuation method and the 
sequencing order of the other customs valuation methods provided by the CVA once more imply that, when the 
customs authorities reject the transaction value and determine the customs value on another basis, such explanation should include: the reason for rejecting the transaction value; the reasons for using a particular 
valuation method; how the value has been calculated pursuant to that method; and the reasons for not using any 
other valuation method prior to the one effectively used following the sequencing order of Articles 2 to 7 of the CVA." (European Union's third part y written submission, para. 41).  
668 Philippines' first written submission, para. 287. 
669 Philippines' first written submission, paras. 297-323. 
670 Philippines' second written submission, para. 200. 
671 The Philippines refers back to its arguments under Article 1.1 and 1.2(a) regarding the "grounds" for 
its rejection of declared transaction value. Under Article 1.1 and 1.2(a), the Philippines argued that "it does not suffice for an authority to  communicate a legal determination, beca use the importer has no 'reasonable 
opportunity' to remedy the perceived de ficiencies in the evidence.  The auth ority must inform the importer of WT/DS371/R 
Page 190  
 
  7.244  Furthermore, in respect of the requirement to provide a sufficiently detailed and reasoned 
explanation to permit the importer to understand how and why the authority determined the assessed 
customs values, the explanation provided in the 12 April 2007 letter – namely, "Method 6, which is 
the 'fall back' method, using the deductive va luation method, was used" – is inadequate.
672  It does not 
reveal the starting point of the deductive value calculation; the specific elements and amounts 
deducted; and the sources of the data used.  It does not explain why certain deductions were not made; 
and fails to provide supporting calculations for th e assessed values.  The minimal content of the 12 
April 2007 letter may be contrasted with the cal culations provided in Exhibit THA-13 for the 
[[xx.xxx.xx]] transactions between 11 August and 31 December 2006. 
7.245  Thailand submits that the issue is whether the expl anation provided by Thai Customs in the 
letter of 12 April 2007 and the minutes of the 6 Marc h meeting was sufficiently detailed to satisfy the 
requirements of Article 16.673   
7.246  Thailand argues that it satisfied the requirements under Article 16.  First, regarding the 
alleged obligation to properly ex plain why the determination of customs value was not based on 
transaction value, Thailand is of the view that th e same response that it provided with respect to the 
claim under Article 1.2(a) also applies here, i.e. Th ailand clearly explained in writing by letters dated 
19 December 2006 and 12 April 2007.   
7.247  With respect to the basis for the alternative valuation determ inations made, Thailand submits 
that in the 12 April 2007 letter, Thai Customs expl ained that "in the determination of customs values, 
Method 6, which is the 'fall back' method, using the deductive method, was used under Article 7 of 
the GATT … Please be informed accordingly".674  Therefore, PM Thailand was clearly informed in 
the 12 April 2007 letter that the deductive valuation me thod was used to value the entries in question.  
If that explanation were to be cons idered insufficient, Thailand submits  that the Panel should also take 
into account the circumstances in which it was provi ded, including a more detailed explanation that 
had been provided at the 6 March 2007 meeting.675  Prior to the meeting on 6 March 2007, both 
PM Thailand and its accountants, PWC, were in regul ar correspondence with Thai Customs.  Thailand 
also refers to the minutes of the meeting which, according to Thailand, make clear that PM Thailand 
was informed in detail how the deductive value was used under Article 5 or Article 7 of the Customs 
Valuation Agreement.676  According to Thailand, the minutes of the 6 March 2007 meeting, referred 
to in the notice of assessment677, constitutes written notice of how the customs value was 
determined.678 
7.248  The Philippines contends that the minutes of the 6 March 2007 meeting cannot be used to 
supplement the explanation given in the 12 April 2007 letter.679  However, in its response to the Panel 
                                                                                                                                                                     
specific shortcomings in, or absence of, evidence." (Phili ppines' second written submission, para. 116, referring 
back to paras. 104-109). 
672 Philippines' second written submission, paras. 201-203. 
673 Thailand's second written submission, para. 115. 
674 Thailand's first written submission, para. 175. 
675 Thailand's first written submission, para. 178; response to Panel question No. 23; second written 
submission, para. 114; Exhibits THA-64 and THA-65.  
676 Thailand's first written submission, para. 178. 
677 Exhibit THA-15. 
678 Thailand's second written submission, para. 114; response to Panel question No. 23. 
679 The reasons for the Philippines' initial contention were as follows: (i) Thai Customs never provided 
the minutes to PM Thailand in writing as an explanation of its valuation.  The minutes were provided by DG 
Excise to the Central Tax Court, on  25 August 2008 , in the context of court proceedings regarding the 
September 2006 and March 2007 MRSPs, which served as the base for VAT (Exhibit PHL-108).  An oral explanation – even if given to the importer – cannot satis fy the requirement in Article 16 to provide a written 
explanation; (ii) the minutes do not explain crucial elemen ts of the calculation, such as the sales prices to the  WT/DS371/R 
 Page 191 
 
 
  questions following the second subs tantive meeting, the Philippines submits that it accepts that, in 
assessing Thailand's compliance with its substan tive obligations, the Panel may review the 
explanation given in the minutes, as a cont emporaneous statement of the determination.680  T h e  
Philippines is of the view that the explanation gi ven in the minutes is substantively the same as the 
explanation given in the 12 April 2007 letter and that, in one respect, the minutes add to the 12 April 
2007 letter because, in the minutes, Thai Customs st ates that it did not examine the circumstances of 
sale.681 
(ii) Analysis by the Panel 
7.249  In response to a written request from PM Thaila nd on 5 April 2007, Thai Customs provided, 
pursuant to Article 16 of the Customs Valuation Agreement,  an explanation for how the customs 
value of the cigarettes at issue was determined by a letter sent on 12 April 2007.  The Philippines 
claims that Thai Customs acted inconsistently  with Article 16 because the 12 April 2007 letter does 
not satisfy the requirements under Article 16.  Thaila nd argues that the explanation provided by Thai 
Customs in the 12 April 2007 letter, considered together with the minutes of the 6 March 2007 
meeting, was sufficiently detailed to satisfy the requirements of Article 16. 
7.250  The parties' arguments raise two issues:  first,  whether Thai Customs' letter of 12 April 2007 
satisfies the obligations under Article 16 of th e Customs Valuation Agreement; and, second, whether 
the explanation provided in the 6 March 2007 meeti ng and in its minutes should be considered as 
constituting the explanation provided pursuant to Article 16 and, if so, whether the minutes, considered together with the letter of 12 April 2007, satisfy the obligations under Article 16.  We will 
examine these two issues in turn. 
7.251  The 12 April 2007 letter provides: 
"According to the company's letter [dated 5 April 2007], requesting for the 
explanation on the rejection of the import prices declared by the company, including the method which was used in the determination of Customs values: 
The Bonded Warehouse Service Division I, Tax Incentives Bureau, Customs 
Department, hereby informs the company of the reason and method which was used 
in determination of customs values, having the following details: 
1. The rejection of the import prices comes from the fact that: 1.1 There is another importer importing th e same type of goods, with 3-4 times 
price difference. 
                                                                                                                                                                    
 
first independent buyer in the GAQ price to be used as the starting point for the calculation; and the nature and 
amount of the specific deductions that would, and would not, be made; (iii) the explanation must be given to the 
importer, i.e. PM Thailand (PWC ABAS on behalf PM  Thailand), but PM Thailand was not present at the 
meeting.  Regarding PM Thailand's auditors from PWC, th ey were invited by Thai Customs in a letter addressed 
to the auditors to the 2 and 6 March meetings only to discuss technical accounting questions regarding the 
audited financial statement for 2005 (Exhibit THA-10; Philippines' second written submission, paras. 204-212). 
680 Philippines' response to Panel question No. 108. 
681 Philippines' second oral st atement para. 49; response to Panel question No. 108.   
The Philippines also submits that the 19 December 2006 letter is not relevant to Article 16 because – as 
Thailand itself admits – the 19 December 2006 letter make s clear that customs valuation was not yet final, and 
hence, the letter cannot explain the basis for a valuatio n not "yet" made. (Philippines' second written submission, 
para. 198, footnote 162). WT/DS371/R 
Page 192  
 
  1.2 The company and the overseas seller ar e related parties, and it cannot be 
proven whether the relationship has an infl uence on the determination of customs 
values or not (according to the Ministerial Regulation no. 132/2545 Chapter 2, Clause 14). 
2. In the determination of customs valu es, Method 6, which is the "Fall Back" 
method, using the deductive va luation method, was used (according to the Ministerial 
Regulation no. 132/2545 Clause 3), under Article 7 of GATT.  
... "
682 
7.252  The parties do not dispute that the 12 April 2007 letter is the explanation provided by Thai 
Customs pursuant to Article 16.  The question is  whether the content of the letter satisfies the 
obligation to provide an "explanation" under Article 16.   
7.253  We clarified above that the scope of the explanation under Article 16 encompasses both the 
reason why the transaction value was rejected as well as why and how the method applied for the determination of the customs value was used.  Th e 12 April 2007 letter sets forth both the reason for 
rejecting the transaction value and the valuatio n method (fallback method) that was used in 
determining the customs value of the cigarettes at issu e.  Specifically, it states that the rejection of the 
import prices comes from the fact that PM Tha iland and PM Philippines are related parties and it 
cannot be proven whether the relationship has an in fluence on the determination of customs values.  
Further, in determining customs values, the letter provides that Method 6, which is the "Fall Back" 
method, using the deductive valuation method, was used.
683 
7.254  The relevant question is therefore whether the e xplanation is substantively sufficient to make 
clear and give details of the manner in which the customs value of the cigarettes at issue was 
determined.  We considered above that a sufficient explanation could include, for example, the basis 
for rejecting the transaction value, the type of th e method used and an illustration of why the method 
was selected and how the method was applie d in calculating the final customs value. 
7.255  First, the basis for rejecting the transaction va lue as provided in the 12 April 2007 letter is the 
same as Thai Customs' grounds that were comm unicated through the letter of 19 December 2006, 
namely that "it cannot be proven whether the relati onship has an influence on the determination of 
customs values or not".  We find the concerned stat ement in the Thai Customs' letter of 12 April 2007 
inadequate to explain the reason for rejecting the transaction value under Article 1.  If Thai Customs 
considered that it could not be pr oven whether the relationship influe nced the customs values declared 
by PM Thailand, Thai Customs should have specified  the precise basis for such a consideration to 
satisfy the obligation to "explain" its  final determination of the customs value.  For example, as noted 
above, PM Thailand presented Thai Customs with certain information and data to prove the 
acceptability of the declared transaction value.  In the concerned letter, however, Thai Customs refers 
to neither such evidence nor any other informati on that may have formed the basis for its final 
decision to reject the transaction value.  A mere statement that the importer could not prove whether 
its relationship with the exporter did not influence the price, in our view, does not fulfil the customs 
authority's obligation to explain the r eason for rejecting the transaction value. 
7.256  As regards the alternative valuation method used, the letter identifies Method 6 (Fallback 
method) under Thai law, a method equivalent to  that under Article 7 of the Customs Valuation 
                                                      
682 Exhibit PHL-70. 
683 The letter refers to Article 7 of the GATT in relation to the deductive valuation method used under 
the Fall Back method (Method 6 under the Thai domestic law).  We understand that by Article 7 of the GATT, 
Thai Customs meant Article 7 of the Customs Valuation Agreement.  WT/DS371/R 
 Page 193 
 
 
  Agreement, as the method used. It does not, how ever, further elaborate on why the method was 
selected and how the chosen method was applied in calculating the final customs value.  The 
statement that simply names the method used for valuation without any further elaboration, in our view, cannot constitute an "explanation" within the meaning of Article 16 as it fails to make clear or 
give details of the manner in which the customs va lue of the cigarettes at issue was determined.  
Thailand points to the fact that PM Thailand was informed that the deductive valuation method was 
used to value the cigarettes at issue.  However, the requirement imposed on customs authorities under 
Article 16 is to provide an explanation as to "how " the determination of the customs value of the 
imported goods was made, not to just inform the importer of the method used.   
7.257  Nonetheless, Thailand argues that in evalua ting the Philippines' Article 16 claim, the 
circumstances in which the 12 April 2007 letter was provided must also be taken into account should 
the Panel consider the information provided in this le tter insufficient.  The circumstances of the letter 
include the meeting on 6 March 2007 during which a more detailed explanation on the valuation 
determination was allegedly provided as well as the minutes of that meeting.   
7.258  Thailand's argument raises the question of whethe r a meeting and/or the minutes of a meeting 
that is not formally part of the written explanation pr ovided by a customs authority pursuant to 
Article 16 can nevertheless be considered as consti tuting the explanation.  In the context of the 
Agreement on Safeguards, we find an insight on this question in the reasoning of the Panel on US – 
Steel Safeguards concerning the form and timing of a re port required to be published by an 
investigating authority under Article 3.1 of the Ag reement on Safeguards.  Regarding the form of the 
report, the Panel in that case stated : 
"[N]othing in the requirement to publish a report dictates the form that the report 
must take, provided that the report complies with all of the other obligations contained in the Agreement on Safeguards and Article XIX of GATT 1994.  In the 
end, it is left to the discretion of the Memb ers to determine the format of the report, 
including whether it is published in parts, so long as it contains all of the necessary 
elements, including findings a nd reasoned conclusions on all pertinent issues of fact 
and law.  Together, these parts can form the report of the competent authority. 
The Panel believes that a competent authority' s report can be issued in different parts 
but such multi-part or multi-stage report must always provide for a coherent and integrated explanation proving satisfaction with the requirements of Article XIX of 
GATT 1994 and the Agreement on Safeguard s, ... Whether a report drafted in 
different parts or a multi-stage report constitutes "the report of the competent 
authority" is to be determined on a case -by-case basis and will depend on the overall 
structure, logic and coherence between the various stages or the various parts of the 
report. ... The publication of a report in many stages may produce added difficulties 
for the competent authorities to set forth cohe rent findings in a reasoned and adequate 
manner."
684 
                                                      
684 Panel Report, US – Steel Safeguards , paras. 10.49-10.50.  Regarding the timing of the report, the 
Panel states: 
"Given that the demonstration of unforeseen deve lopments is a prerequisite for the application 
of a safeguard measure, it cannot take place after the date as of which the safeguard measure is 
applied.  This has been confirmed by the Appellate Body, which noted, in US – Lamb , that 
although Article XIX provides no express guidance on where and when the demonstration of 
unforeseen developments is to be made, it is none theless a prerequisite, and 'it follows that this 
demonstration must be made before the safeguard measure is applied.  Otherwise, the legal 
basis for the measure is flawed .' (Appellate Body Report, US – Lamb , para. 72 (emphasis in 
original); see also Panel Report, US – Line Pipe , para. 7.296).  Any demonstration made after WT/DS371/R 
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  7.259  As in the case of the requirement to publish a report under Article 3.1 of the Agreement on 
Safeguards, Article 16 of the Customs Valuation Agreement  does not dictate the manner in which a 
written explanation must be provided.  To that exte nt, we agree that the question of whether a certain 
instrument can constitute an explanation under Ar ticle 16 will have to be decided on a case-by-case 
basis.  We also agree that if an explanation is to be given in multiple parts, factors such as "the overall 
structure, logic and coherence" among these variou s parts must be considered to determine the 
appropriateness of the explanation given on the de termination of the customs value of the goods 
imported.  Furthermore, if explanations are provide d in multiple parts, it must also be considered 
whether such a fact deteriorates the transpar ency and due process objective of Article 16. 
7.260  Before evaluating whether the minutes of the 6 March 2007 meeting should be considered as 
constituting the explanation under Article 16, we will first briefly explain the circumstances 
surrounding the 6 March 2007 meeting and the issuance of the minutes.   
7.261  Thai Customs sent a letter dated 26 February  2007 inviting a legal auditor, Mr. Prasit 
Yeungsrikal, for PM Thailand (PWC ABAS) to th e 2 and 6 March meetings  with Thai Customs 
officials.
685  Although the invitation refers to meeti ngs on 2 and 6 March, we understand that the 
relevant meeting for the purpose of this dispute is  the 6 March meeting as that is the meeting where 
the explanation of Thai Customs' valuation determ ination allegedly took place.  The letter states that 
the purpose of the 6 March 2007 meeting is to clar ify queries regarding the sale, expenditure and 
administration data contained in PM Thailand's 2005 financial statemen ts, which were submitted with 
PM Thailand's letter to Thai Customs dated 5 February 2007.686  The letter, however, does not explain 
the context in which the queries on those data ar e raised.  In this regard, Thailand presented a 
statement of a Thai Customs official (Mrs. Natina Santinyanont) that the invitation was to discuss the 
customs valuation of PM Thailand's imports and th at they had requested information directly from 
both PM Thailand and PWC to enable Thai Customs to  evaluate this determination.  A statement from 
PWC ABAS, submitted by the Philippines, shows that representatives from both PWC ABAS and 
PWC WMS attended the meeting on 2 March 2007.  As for the attendance by PW C officials of the 6 
March 2007 meeting, the parties agree that the sa me legal auditor from PWC ABAS was present at 
the meeting in the morning.  The parties present, however, contradicting statements regarding whether a representative from PWC WMS was allowed to be present at that morning meeting.  The minutes of the meeting were sent out to PWC ABAS on 15 March 2007.  The revised meeting minutes  have the mailing date of 21 March 2007. 
7.262  We will first consider whether the meeting of 6 March 2007 itself can form an explanation 
given by Thai Customs under Article 16.  Article  16 specifically requires an explanation to be 
provided "in writing".  In the light of this, we do not consider the discussion that took place during the 
meeting on 6 March 2007 as forming part of the written explanation provided in accordance with 
Article 16.  Furthermore, the subject meeting took place before the final assessment of the customs 
value for the entries at issue was made, while th e requirement to provide an explanation of the 
                                                                                                                                                                    
 
the start of the application of a safeguard measure would have to be disregarded automatically 
as it cannot afford legal justification for that measure. 
... Since the demonstration of unforeseen develo pments must be included in the published 
report of the competent authorities it is necessary to look for the demonstration of unforeseen 
developments in the 'report of the competent au thority', completed and published prior to the 
application of the safeguar d measures" (Panel Report, US – Steel Safeguards , paras. 10.52-
10.53). 
685 Exhibit THA-10. 
686 In the PM Thailand's letter of 5 February 2007, re ferred to in Thai Customs' invitation letter of 26 
February 2007, PM Thailand requests Thai Customs to ex pedite its examination and valuation of the entries at 
issue and to use a testing methodology for valuation (Exhibit PHL-68).  WT/DS371/R 
 Page 195 
 
 
  determination of the customs value arises once the final assessment is made.687  To recall, Thai 
Customs started issuing the Notices of Assessment  for these entries as of 16 March 2007.  In fact, 
evidence shows that further information was subm itted to Thai Customs between the 6 March 2007 
meeting and 16 March 2007.688  We are also mindful that it is not clear based on the evidence before 
us whether PM Thailand was properly represented in th is meeting in terms of both the capacity of the 
representatives, in particular auditors from PWC ABAS , who participated in th e concerned meeting as 
well as the nature of their participation in the m eeting.  The considerations above, taken together, 
suggest that although discussions at the 6 March 200 7 meeting may be viewed as part of the process 
of determining the customs value of the entries at issue, the meeting itself does not constitute a written 
explanation as to the final customs determination.   We consider that accepting the position that a 
discussion(s) before the final assessment of the cust oms value was even made forms an explanation, 
would not be in line with the purpose of Article 16 to maintain transparency  and due process in the 
customs valuation process.689   
7.263  Next, we examine whether the minutes of the 6 March 2007 meeting should be considered as 
forming the explanation under Article 16.690  We consider that this requires a consideration of both 
formalistic and substantive aspects of the explanation.   
7.264  We first address the formalistic aspect of the minutes.  The original minutes of the 6 March 
2007 meeting were sent to PWC ABAS, whereas the explanation provided in the 12 April 2007 letter 
was directed to PM Thailand.  All other written correspondences between Thai Customs and 
PM Thailand during the valuation process were also addressed to PM Thailand.  We also note that the 
minutes are not referred to in the official explana tion provided in the 12 April 2007 letter.  We recall 
our consideration above that although the manner in which a written explanation is provided is up to 
the discretion of each Member, an explanation give n in multiple parts or separate instruments must 
show structural and logical coherency so as not to deteriorate the transparency and due process 
objective of Article 16.  Considering also that the parties are contesting whether PM Thailand is 
officially represented by PWC ABAS on its customs matters, we do not find that an instrument, which 
was sent to a legal auditor for the importer rather than the importer itself and not referred to in the 
formal letter providing for an explanation pursua nt to Article 16, can form part of the written 
explanation.   
7.265  As regards to the substantive aspect of the minutes, the minutes address the rejection of the 
transaction value, the other alternative valuation methods and the deductive valuation method used.  
The minute explanation given in the minutes are also  much more detailed than those provided in the 
12 April 2007 letter.  However, as mentioned ab ove, the revised minutes identify Article 5 of the 
Customs Valuation Agreement  as the Article used, whereas the or iginal minutes, which were the 
version sent to PWC ABAS, refer to Article 7.  Th is is confirmed by the evidence showing that the 
original minutes have the date of 14 March 2007  and were sent out to PWC ABAS on 15 March 
                                                      
687 As the Panel in US – Steel Safeguard observed, under the Agreement on Safeguards, a report must 
be published prior to the imposition of a safeguard measure ("a necessary step in conducting an investigation"), 
whereas under the Customs Valuation Agreement,  an explanation is to be provided after the final assessment of 
the customs value. 
688 Exhibits PHL-169 and PHL-170. 
689 We recall that subsequent to the 6 March 2007 meeting, PM Thailand provided, upon the requests 
from Thai Customs, further information evidencing that th e transaction values were the prices actually paid; the 
GAQ prices; and its financial statements for 2003-2005 to Thai Customs by the letters dated 7 and 14 March 2007 (Philippines' response to Panel que stion No. 29; Exhibit PHL-169; PHL-170). 
690  The Philippines contends that the minutes cannot be used to supplement the explanation given in 
the 12 April 2007 letter.  The Philippines, however, accepts that the Panel may nonetheless review the 
explanation given in the minutes as a contemporaneous statement of the determination in assessing Thailand's 
substantive obligations. WT/DS371/R 
Page 196  
 
  2007
691, whereas the revised version has the mailing da te of 21 March 2007.  In these circumstances, 
we cannot consider the subject minutes as constitutin g part of the written explanation within the 
meaning of Article 16, even though they may ha ve provided sufficient explanations to meet the 
procedural requirements under this article, because of the existence of both the original and revised 
minutes, which respectively provide different method s without an adequate explanation, combined 
with the lack of evidence confirming that th e revised minutes were sent to PM Thailand.  
7.266  For the foregoing reasons, we find that Thai Cu stoms failed to provide an explanation as to 
how the customs value of the importer's goods was determined inconsistently with Thailand's 
obligations under Article 16.   
7. Articles 5 and 7 of the Customs Valuation Agreement 
(a) The Philippines' claims under Articles 5 and 7 
(i) Evolvement of the Philippines' arguments with  respect to its claims under Articles 5 and 7 
7.267  The Philippines' arguments concerning its claims under Articles 5 and 7 have evolved 
throughout the proceedings before this Panel.  The Philippines explains that this evolution took place, 
because in its first written submission and oral statemen t, Thailand denied that it had used Article 7 to 
value PM Thailand’s cigarettes, a nd asserted that it used Article 5.692  In its first written submission, 
the Philippines, therefore, essentially argued that: (i ) Thailand violated Article 5 because it failed to 
value the entries at issue using the deductive valuation method under th at provision; and (ii) Thailand 
violated Article 7, in particular 7.1, because it failed to use "reasonable means" in determining 
customs values by making erratic valuation decisions with respect to a series of entries that were made in the same circumstances.
693 
7.268  In its subsequent written submissions, th e Philippines submits that "[it] makes alternative 
claims under Articles 5 and 7 with respect to Thailand's valuation of the [[xx.xxx.xx]] entries at issue, 
and that the alternative that applies depends on wh ether the Panel finds that Thailand valued these 
entries using Article 5 or 7".694  In essence, the Philippines' alternative claims are as follows:  
"Depending on which provision the Panel finds  was used to value PM Thailand's 
goods, the Philippines makes the following alternative claims: 
(1) If the Panel finds that Thailand used  Article 7 of the Customs Valuation 
Agreement to value PM Thailand's cigarett es (the Philippines' primary claim), the 
Philippines claims that Thailand improperly applied: 
(a) Article 5 by declining to use th at provision for impermissible reasons, 
namely, a lack of contemporaneous financial information; and  (underline in 
original) 
(b) Article 7 of the CVA  because it failed to make deductions for three 
elements that it was required to deduct; sales allowances; internal 
transportation; and provincial taxes. 
                                                      
691 Exhibits PHL-74 and THA-64.  Thailand presented a copy of the registered mail addressed to PWC 
ABAS to prove that the 6 March meeting minutes were sent to PWC.  The copy shows 15 March 2007 as the 
mailing date. 
692 Philippines' response to Panel question No. 26. 
693 Philippines' first written submission, paras. 361 and 376. 
694 Philippines' second written submission, para. 214.  WT/DS371/R 
 Page 197 
 
 
  (2) In the alternative, if the Panel fi nds that Thailand used Article 5 of the CVA 
to value PM Thailand's cigarettes (the Ph ilippines' secondary claim), the Philippines 
claims that Thailand violated Article 5 b ecause it failed to make deductions for three 
elements that it was required to deduct: sales allowances; internal transportation, and 
provincial taxes.  Under this alternative, no claims are made under Article 7, because 
Article 7 is inapplicable."695 
7.269  The Philippines explains that its arguments th at Thailand failed to make certain deductions 
that it was required to make, are based on the calcu lations that Thailand provided in Exhibit THA-13, 
which Thailand disclosed for the first time through the current panel proceedings.  The Philippines 
submits that it revised its arguments with respect  to the WTO-inconsistent aspects of the deductive 
calculation (i.e. failure to deduct certa in items) based on this new evidence.696  
(ii) Scope of the Philippines' claims 
7.270  In the light of the clarification of the Philippi nes' alternative arguments concerning its claims 
under Articles 5 and 7 above, we understand that the Philippines' claims are under both Articles 5 
and 7 if the Panel decides that the valuation method used by Thai Customs was Article 7.  If the Panel 
finds that the method used was Article 5, the Philippines' claim is limited to Article 5. 
7.271  In its response to the Panel's second set of qu estions, the Philippines further submits that 
Thailand acted inconsistently with  Articles 4 and 7.1 by failing to respect the sequencing obligations 
under these provisions.  Given that the Philippines' clai m in this regard was introduced only at the last 
stage of the proceeding, we wish to address the question of whether the Philippines' claims under 
Articles 4 and 7.1 are properly presented.  We will first describe the Philippines' position with respect 
to Article 4 and the sequencing obligation under the Customs Valuation Agreement. 
7.272  Although it is clear that Article 4 of the Cust oms Valuation Agreement is identified in the 
Philippines' Panel request, the Philippines has not pursued a sequencing claim under Article 4 in the 
course of the Panel proceedings.  The question theref ore remains as to whether the Philippines made a 
specific claim in this respect. 
7.273  In US – Certain EC Products , the European Communities neith er requested nor argued for 
findings under Article 23.2(a) of the DSU.  There, the Appellate Body considered that although the 
inconsistent claim of a given provision may be w ithin a panel's terms of reference, the European 
Communities failed to actually make such a claim.  The Appellate Body ruled that in the absence of a 
specific claim of inconsistency by the complainant, the burden to present a prima facie case of violation would not be met: 
"[A]s the request for the establishment of  a panel of the European Communities 
included a claim of inconsistency with Ar ticle 23, a claim of inconsistency with 
Article 23.2(a) is within the Panel's terms of reference. 
However, the fact that a claim of inconsis tency with Article 23.2(a) of the DSU can 
be considered to be within the Panel's terms of reference doe s not mean that the 
European Communities actually made such a cl aim.  An analysis of the Panel record 
shows that, with the exception of two instances during the Panel proceedings, the European Communities did not refer specifica lly to Article 23.2(a) of the DSU.  
Furthermore, in response to a request from th e United States to clarify the scope of its 
                                                     
 
695 Philippines' second written submission, para . 217; response to Panel question No. 26. 
696 Philippines' response to Panel question No. 26, also referring to the Philippines' first oral statement, 
paras. 132-144 and 146.  WT/DS371/R 
Page 198  
 
  claim under Article 23, the European Communities asserted only claims of violation 
of Articles 23.1 and 23.2(c) of the DSU; no mention was made of Article 23.2(a).  Our reading of the Panel record shows us that, throughout the Panel proceedings in 
this case, the European Communities made ar guments relating only to its claims that 
the United States acted inconsistently with  Article 23.1 and Article 23.2(c) of the 
DSU. 
... As the European Communities did not make a specific claim of inconsistency with 
Article 23.2(a), it did not adduce any evidence or arguments to demonstrate that the United States made a 'determination as to the effect that a violation has occurred' in 
breach of Article 23.2(a) of the DSU.  And, as the European Communities did not 
adduce any evidence or arguments in support of  a claim of violation of Article 23.2(a) 
of the DSU, the European Communities c ould not have estab lished, and did not 
establish, a prima facie case of violation of Article 23.2(a) of the DSU.
697"698 
7.274  Similarly, in the present dispute, although Artic le 4 of the Customs Valuation Agreement was 
explicitly listed in the Panel request relating to the entries at dispute699, the Philippines neither 
specifically referenced a violation of Article 4 of the Customs Valuation Agreement, nor provided 
evidence or specific arguments to demonstrate a vi olation of that provision except for its passing 
statement in a response to the Panel question.700  On the contrary, the Philippines has maintained the 
position that Article 4 is not relevant to its claim relating to valuation methodologies under Articles 5 
and 7.  The Philippines stated the following in its first written submission:  
"This is not a sequencing claim , but a claim that Article 5 was improperly applied in 
deciding that the customs value could not be determined under this provision.  However, as a consequence of its improper failure to use Article 5, Thailand also 
failed to respect the proper sequencing of valuation methodologies in the CVA ."
701  
(italics added) 
7.275  Further, in response to a question from the Pa nel whether its claim that Thailand failed to 
respect the sequencing of valuation methodologies w ould be an issue that needed to be addressed 
under Article 4 of the Customs Valuation Agreement, the Philippines explicitly stated that it did not 
consider that Article 4 established a sequencing re lationship between Articles 5 and 7.  Specifically, 
the Philippines responded:  
"Moreover, the Philippines considers that Article 4, properly interpreted, does not 
establish a sequencing relationship between Articles 5 and 7.  Rather, Article 4 
establishes that importers have a choice as to whether the importing Member should 
                                                      
697 (footnote original) "We recall that in our Report in EC – Measures Concerning Meat and Meat 
Products  (Hormones ) ("European Communities – Hormones "), we held that: 
 
... a prima facie case is one which, in the absence of effective refutation by the defending party, 
requires a panel, as a matter of law, to rule in  favour of the complaining party presenting the prima 
facie case."  (WT/DS26/AB/R, WT/DS44/AB/R, adopted 13 February 1998, para. 104) 
 
698 Appellate Body Report, US – Certain EC Products , paras. 111, 112 and 114. 
699 Philippines' request for the esta blishment of a panel, para. 14. 
700 Philippines' response to Panel question 115. In the Philippines' list of claims included in its first and 
second written submission, reference to Article 4 canno t be found. (Philippines' first written submission, 
para. 25; second written submission, para. 604).  
701 Philippines' first oral statement, para. 125.  WT/DS371/R 
 Page 199 
 
 
  value goods under Article 5 before Article 6, or the reverse.  That sequencing 
obligation is expressed in pa ragraphs 1 to 4 of the General Introductory Commentary  
to the CVA .  [I]n any event, should the Panel consider that the sequencing obligation 
is found in Article 4, the Philippines not es that it made a claim under Article 4 in 
paragraph 14 of its Panel Request." 702   
7.276  The Philippines' position appears to have changed, however, when it provided written 
responses to a second set of questions from the Pa nel after the second substantive meeting.  In 
response to the Panel question to the Philippines to  clarify its claim under Articles 5 and 7 of the 
Customs Valuation Agreement, the Philippines, for the first time in the Panel proceedings, made 
explicit references to Article 4 violations:  
"Thailand violated the sequencing obligations in Articles 7.1 and 4 by declining, for 
impermissible reasons, to use Article 5 to value the [[xx.xxx.xx]] entries".   
... Thailand's determination not to use Article 5 also leads to violations of Articles 7.1 
and 4.  These provisions establish sequenc ing obligations, requiring Members to 
value goods under Article 5 before Article  7.  By failing to value goods under 
Article 5, when doing so was possibl e, Thailand violated these sequencing 
obligations."
 703 
7.277  In the light of the absence of reference to or arguments concerning Article 4 of the Customs 
Valuation Agreement until the last stage of the Pane l proceedings and given its  contradicting views on 
the relevance of Article 4 through the course of the proceeding, it does not appear to the Panel that the 
Philippines had properly established and was genuine ly pursuing a sequencing claim under Article 4 
of the Customs Valuation Agreement.  A change in the Philippines' position, expressed for the first 
time in this proceeding in response to a question fro m the Panel, is not specific enough to explain the 
sequencing obligation under Article 4 either.  Furthe r, in a footnote to its response, the Philippines 
continues to question whether Article 4 can be cons idered as setting forth a sequencing obligation.   
7.278  Overall, it is our view that the Philippines' claim regarding Article 4 was neither timely nor 
specific enough to warrant its inclusion in the Phili ppines' request for findings and recommendations 
with respect to its claims under the Customs Va luation Agreement.  Our view also reflects a 
consideration that Thailand's right to due process shou ld not be negatively affected by the Philippines' 
inclusion of the concerned claim only at  the last stage of the proceeding. 
7.279  Next, we address the Philippines' claim under Article 7.1 in respect of Thailand's alleged 
violation of the sequencing obligation.704  The text of Article 7.1 stipulates that resort to Article 7.1 
for customs valuation is conditioned on the situati on where "the customs value of the imported goods 
cannot be determined under the provisions of Article s 1 through 6".  As such, Article 7 may only be 
applied if the customs value of the imported go ods cannot be determined under the provisions of 
Articles 1 through 6.  We understand that the Ph ilippines' sequencing claim under Article 7.1 stems 
from this part of Article 7.1.  In our view, this phrase in Article 7.1 lays down a condition or 
requirement that needs to be met before a cust oms authority can use the valuation principles under 
Article 7.1.  As such, we do not consider that Article 7.1 can form the basis for an independent 
sequencing claim under the Customs Valuation Agreemen t.  We consider that the Philippines' claim 
                                                      
702 Philippines' response to Panel question No. 27. 
703 Philippines' response to Panel question No. 115. 
704 We also consider, as in the case of the Philippines' claim under Article 4 of the Customs Valuation 
Agreement, the Philippines' claim under Ar ticle 7.1 was not timely presented. WT/DS371/R 
Page 200  
 
  pertaining to this part of Article 7.1 rather falls within the Philippines' claim that Thailand improperly 
applied the deductive valuation met hod under Article 7.1, which is addressed in Section VII.C.7(c)(ii) 
below. 
7.280  In sum, with respect to the Thai Customs' va luation of the [[xx.xxx.xx]] entries at issue, the 
Philippines makes alternative claims under Articl es 5 and 7 depending on the provision under which 
the Panel finds Thai Customs to have valued the en tries at issue.  For the reasons explained above, 
however, we do not find that the Philippines has pr operly made its sequencing claims under Articles 4 
and 7.1. 
(b) The provision under which to assess the valuati on methodology used by Thai Customs to 
determine the customs value of the [[xx.xxx.xx]] entries at issue 
(i) Main arguments of the parties 
7.281  The Philippines is of the view that the Panel has to first decide whether Thailand valued the 
imported cigarettes at issue using Article 5 or Article  7; the Philippines' primary claim is that Thailand 
valued the entries at issue using Article 7.
705  The Philippines supports its position with the following 
evidence: (i) the original version of  the minutes of the 6 March meeting 706; (ii) Thai Customs' 
12 April 2007 letter to PM Thailand stating that the imports were valued using [the method under 
Article 7]707; and (iii) a written statement provided by Thai Customs on [[xx.xxx.xx]] of the 
[[xx.xxx.xx]]] notices of assessment that the im ports were valued us ing [the method under 
Article 7].708  The Philippines submits that Thailand's argument that Thai Customs used Article 5 of 
the Customs Valuation Agreement to value imported cigarettes is based on a revised version of the 
minutes of the 6 March meeting.709 
7.282  Thailand argues that it is clear that Thai Customs used a deductive valuation method within 
the meaning of Article 5 of the Customs Valuation Agreement (Method 4 under Thai law) and, to that 
extent, its WTO-consistency should be determined by reference to Article 5, which governs deductive 
value calculations.710  There was confusion which method under Thai law was being used to value the 
entries at issue.  Specifically, Thailand explains th at Thai Customs considered that its own regulations 
prevented it from using the deductive value under Method 5 where current financial information 
(financial statements for 2006 in this instance) was not available, but permitted it to use the deductive 
value under Method 6 using the most r ecent available financial information.711  Thailand does not 
contest, for the purpose of this dispute, that Article 5 of the Customs Valuation Agreement  does not 
require that the customs administration use compa ny data from the year of importation (financial 
statements for 2006 in this instance)  in determining the deductive value.712  The evidence is clear, 
however, that Thai Customs used a deductive valuation method.713   
7.283  Thailand submits that the only grounds for the Ph ilippines' claims appear to be the Thai 
Customs' rejection of adjustments for sales allowa nces, provincial taxes and inland transportation. In 
this respect Thailand showed that Thai Customs pr operly declined to make each of these adjustments 
                                                      
705 Philippines' second written submission, para . 213; response to Panel question No. 26. 
706 Philippines' response to Panel question No. 26; Exhibit PHL-74. 
707 Philippines' response to Panel question No. 26; Exhibit PHL-70. 
708 Philippines' response to Panel question No. 26; Exhibit PHL-179. 
709 Philippines' second written submission, para. 216. 
710 Thailand's response to Panel question No. 28; seco nd written submission, para. 112, also referring to 
its first written submission, paras. 175, 177 and 183-185. 
711 Thailand's first written submission, paras. 185-186. 
712 Thailand's first written submission, para. 188. 
713 Thailand's second written submission, para. 112, also referring to its first written submission, 
paras. 175, 177 and 183-185.  WT/DS371/R 
 Page 201 
 
 
  based on the evidence before it.714  Regarding the relationship between  Articles 5 and 7, Thailand is of 
the view that, depending on the grounds on which the Panel may find that Thai Customs acted 
inconsistently with Article 5, it may nevertheless s till need to consider Thai Customs' determination 
under Article 7 of the Customs Valuation Agreement.715 
(ii) Analysis by the Panel 
7.284  With respect to the Philippines' claim c oncerning Thai Customs' valuation of the 
[[xx.xxx.xx]] entries at issue, the parties do not dispute that the substantive content of the method used by Thai Customs is a deductive valuation method.
716  Because the valuation methods to be 
employed under Article 7 include a deductive valu ation method, both Articles 5 and 7 in principle 
cover the same disciplines for using a deductive valuation method.717   
7.285  However, as the Philippines submits, because a given deductive valuation method cannot be 
simultaneously subject to both Articles 5 and 7, we must address the question of whether Thai 
Customs used the deductive valuation method under Article  5 or Article 7.  We consider it important 
to determine the specific provision under which Th ai Customs used the deductive valuation method 
particularly because of the sequencing obligation envisaged under the Customs Valuation Agreement.  
As we mentioned in Section VII.C.1 above, the tr ansaction value is the primary basis for customs 
value determination under the Customs Valuation Ag reement.  If the transaction value is considered 
not applicable under Article 1, the customs admini stration is then required to use an alternative 
valuation method in the sequential order as provi ded in the Agreement, namely the respective 
valuation methods indicated in Articles 2, 3, 5, 6 and 7.  While each of Articles 1, 2, 3, 5 and 6 
provides a specific valuation method, Article 7 is sli ghtly different from other provisions in nature, as 
Article 7 allows the use of the valuation methods laid down in Articles 1 through 6 with a reasonable 
flexibility. 
7.286  In this connection, Thailand argues that, should the Panel find that a Member actually used a 
deductive  valuation method, the use of this method s hould then be examined under Article 5 because 
"Article 5 of the CVA provides rules governing th e deductive value method of customs valuation.  
Generally, therefore, the WTO-consistency of a deduc tive value determination is  to be determined by 
reference to Article 5 of the CVA".718  We may agree with Thailand that the provisions of Article 5 
must be referred to in examining whether the rules governing the deductive valuation method were 
properly applied in a given case.  However, we do not agree with Thailand's proposition that a 
                                                      
714 Thailand's second written submission, para. 110. 
715 Thailand's response to Panel question No. 33, re ferring back to its response to Panel question 
No. 28. 
716 The parties' response to Panel question No. 28; the Philippines' response to Panel question No. 30. 
Thailand's response in this regard is a bit more nuanced: it states that "Article 5 of the CVA provides rules 
governing the deductive valuation method of customs valua tion.  Generally, therefore, the WTO-consistency of 
a deductive value determination is to be determined by reference to Article 5 of the CVA.  That said, there may 
be circumstances in which the WTO-consistency of a de ductive valuation method may have to be also assessed 
under Article 7 of the CVA...".  See also, Thailand's response to Panel question No. 33. 
717 Philippines' second written submission, para. 282.  The Philippines therefore only refers back to its 
arguments under Article 7.1 (Thailand's failure to deduct three items) for its alternative claim under Article 5, in 
the event that the Panel finds that Thailand applied Artic le 5 of the Customs Valuation Agreement, as Thailand 
argues. 
718 Thailand's response to Panel question No. 28.  In its first written submission, Thailand states that 
"[T]he issue before the Panel is whether the deductive value method actually used by Thai Customs was consistent with Article 5 of the CVA.  It is largely irrelevant how that method was described under municipal 
law." (para. 187).  In this connection, Tha iland refers to the statement of the Panel on US – Hot-Rolled Steel that 
"[I]t is not, in our view, properly a panel's task to consider whether a Member has acted consistently with its own domestic legislation". (Panel Report, US – Hot-Rolled Steel , para. 7.267) (Thailand's first written 
submission, footnote 180).  WT/DS371/R 
Page 202  
 
  deductive valuation method used must be examined  under Article 5 regardless of the actual provision 
under which the customs administration used it.  Furthermore, if we we re to follow Thailand's 
reasoning, the obligations under the provisions of Ar ticle 7 will not be pr operly observed as parties 
may always be able to insist that the prope r provision of the Customs Valuation Agreement  under 
which a panel must examine a certain valuation me thod be the provision setting forth the substantive 
elements of that particular method, namely Articl es 1 through 6, but not Article 7 which, as explained 
above, refers back to the methods under Articles 1 through 6.  Therefore, we will now proceed to 
determine the provision under which Thai Cu stoms valued the entries at issue.   
7.287  The Philippines submits that the following  evidence demonstrates Thai Customs' 
determination in its own terms to use the deductive valuation method under Article 7: (i) the original 
version of the minutes of the 6 March meeting
719; (ii) Thai Customs 12 April 2007 letter to 
PM Thailand stating that the imports were  valued using [the method under Article 7]720; and (iii) a 
written statement provided by Thai Customs on [[xx.xxx.xx]] of the [[xx.xxx.xx]] notices of 
assessment that the imports were valu ed using [the method under Article 7].721  The evidence referred 
to by the Philippines does reveal that Thai Customs used the deductive valuation method under 
Article 7 because the documents referenced all spec ifically describe Article 7 as the provision under 
which the deductive valuation method was used in de termining the customs value of the cigarettes at 
issue.  Specifically, in the minutes of the 6 March meeting, Thai Customs stated: "the determination 
of customs values for the Company is calculated by Method 6, that is, the Fall Back method ( ... 
subject to provisions of Article 7 of GATT)"722; in the 12 April letter, it is stated that "[i]n the 
determination of custom values, Method 6, whic h is the "Fall Back" method, using the deductive 
method, was used ... under Article 7 of GATT"723; and the written statement by Thai Customs states 
for [[xx.xxx.xx]] out of the [[xx.xxx.xx]] notices of  assessment "no. 6 Fall Back Deductive Method ... 
" was used.724  Based on the evidence before us, therefore, we can preliminarily determine that 
Thailand used the deductive valuation method pursu ant to Article 7 of the Customs Valuation 
Agreement. 
7.288  In this connection, the only evidence that make s reference to the deductive valuation method 
under Article 5 is the revised minutes of the 6 March 2007 meeting.725  However, we note that 
Thailand also refers to the original minutes, not the revised minutes, in its first written submission in 
stating that "[i]n the minutes of the 6 March 2007 mee ting, Thai Customs stated that it was using the 
deductive valuation method pursuant to Method 6 of Thai Customs' regulations, which corresponds to 
the "fall back" method of Article 7, rather than pursuant to Method 5 of the regulations, which would 
correspond to Article 5 of the Customs Valuation Agreement.  Thus, while the deductive value was 
used, the provisions of municipal law relied upon were  those relating to the fall back method, not the 
provisions relating to the deductive valuation method as such".  Thailand then continues to explain 
that there was confusion which method under Thai law was being used to value the entries at issue.  
These circumstances show that despite the refe rence to the deductive valuation method under 
Article 5 in the revised minutes of the 6 Marc h 2007 meeting and regardless of Thai Customs' 
mistaken understanding of the nature of the requirements under Article 5, Thailand itself 
acknowledges that Thai Customs used the deductive valuation method under Article 7, not Article 5. 
                                                      
719 Philippines' response to Panel question No. 26; Exhibit PHL-74. 
720 Philippines' response to Panel question No. 26; Exhibit PHL-70. 
721 Philippines' response to Panel question No. 26; Exhibit PHL-179.  
722 Exhibit PHL-74, p. 5. 
723 Exhibit PHL-70. 
724 Exhibit PHL-179. No. 6 fall back deductive method is the method used under Article 7 GATT. 
725 Exhibit THA-37, pp. 7-8.   WT/DS371/R 
 Page 203 
 
 
  7.289  In the light of the foregoing, we conclude th at Thai Customs used the deductive valuation 
method pursuant to Article 7.  As such, the pr oper provision under which we must examine Thai 
Customs' valuation of the entries at issue is Article 7. 
(c) Whether Thai Customs determined the custom s value of the imported cigarettes at issue 
inconsistently with the obligations of the Customs Valuation Agreement 
7.290  Having found that Thai Customs' valuation deci sion must be evaluated under Article 7, we 
will now address the Philippines' claim that Tha iland improperly applied the following provisions:  
first, Article 5 by declining to use that provision  for impermissible reasons, namely, a lack of 
contemporaneous financial information; and (underline in original)  second , Article 7 because it failed 
to make deductions for three elements that it wa s required to deduct; sales allowances; provincial 
taxes; and internal transportation. 
(i) The Philippines' claim under Article 5 
7.291  The Philippines claims that if the Panel conc ludes that Thai Customs used the deductive 
valuation method under Article 7, it should find that  Thailand violated Article 5 by declining to use 
that provision for impermissible reasons, namely, a lack of contemporaneous financial information.  
Article 5.1(a) provides: 
"Article 5 
1. (a) If the imported goods or identical  or similar imported goods are sold 
in the country of importation in the condition as imported, the customs value of the imported goods under the provisions of this Article shall be based on the unit price at which the imported goods 
or identical or similar 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 pr ofit 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 
 (iv) the customs duties and other national taxes payable in the 
country of importation by reason of the importation or sale of the goods.   
..." 
7.292  We do not find in the text of Article 5 any specific obligation according to which Members 
must use the method under that provision rather than  the subsequent valua tion methods.  In other 
words, the provisions of Article 5 do not provide for the criteria to be used in deciding whether the WT/DS371/R 
Page 204  
 
  decision not to use the valuation method under Article 5 is consistent or not with the obligations under 
Article 5.  Rather, Article 5 prescribes the princi ples to be applied in using the deductive valuation 
method once the customs authority has decided to u se the deductive valuation method under Article 5.  
In our view, declining to use Article 5 for impermissible reasons, namely, a lack of contemporaneous financial information, would, for example, lead to a finding that the condition for resorting to a 
method under Article 7.1 is not satisfied in the light of the text of the provisions under Article 7.1.  
We address this question in the following section.  We therefore find that the Philippines failed to 
establish a prima facie case for its claim under Article 5.   
(ii) The Philippines' claim under Article 7.1 
7.293  The Philippines claims that Thai Customs valued  the entries at issue inconsistently with 
Article 7.1 because it failed to make deductions for sales allowances, provincial taxes and internal 
transportation costs.  Thailand argues that PM Th ailand did not provide sufficient evidence before 
Thai Customs at the time of determina tion to justify the requested deductions. 
7.294  We will start our analysis by examining the text of Article 7.1. 
7.295  Article 7.1 provides: 
"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 the GATT 1994 and on the basis of data available in 
the country of importation." 
7.296  Paragraph 2 of the Interpretative Note  to Article 7 in turn provides:  
"The methods of valuation to be employe d under Article 7 should be those laid down 
in Articles 1 through 6 but a reasonable flexibility in the application of such methods would be in conformity with the ai ms and provisions of Article 7." 
7.297  As noted above, Article 7.1 sets forth that the customs value shall be determined by a 
valuation method under Article 7 if the customs value of the importe d goods cannot be determined 
under the provisions of Articles 1 through 6 of the Customs Valuation Agreement.
726  This condition 
does not appear to have been met in the factual circumstances of this case because Thai Customs had 
necessary financial data (financial statement for FY 2005) on the basis of which it could have determined the customs value of the imported goods under the provisions of Article 5. As Thailand 
acknowledges, Thai Customs however decided to use a deductive valuation method under Article 7 
instead because it mistakenly believed that only the most current financial data, but not those from 
prior years, could be used under Article 5.  In our  view, this could have provided a basis for finding 
that Thai Customs' use of a deductive valuation me thod is not consistent with the requirements under 
Article 7.1.  However, given that the Philippines'  claim is not based on this particular aspect of 
Article 7.1
727, we will continue with our examination of whether Thai Customs otherwise complied 
with the requirements of Article 7.1 to use reas onable means consistently with the principles and 
general provisions of this Agreem ent and of Article VII of the GATT 1994 and on the basis of data 
                                                      
726 We recall our finding in para. 7.279 above that the Philippines' claim under Article 7.1 in respect of 
Thailand's alleged violation of the sequencing obligation must have been brought under the Philippines' claim 
that Thai Customs improperly applied the deductive valuation method under Article 7.1. 
727 As addressed in detail in the subsequent sections, the Philippines claims that Thailand violated 
Article 7.1 because it failed to make deductions for sale s allowances, provincial taxes and internal transportation 
costs.  WT/DS371/R 
 Page 205 
 
 
  available in the country of importation, in applyi ng the deductive valuation method to determine the 
customs value of the cigarettes at issue. 
(iii) Whether Thai Customs applied the deductive val uation method inconsisten tly with Article 7.1 
Introduction  
7.298  The text of Article 7.1, read together with para graph 2 of the Interpretative Note to Article 7, 
provides that when using a deductive valuation me thod under Article 7.1, a customs authority is 
required to apply the same principles that would be  applied under Article 5, with allowance for a 
reasonable flexibility where Article 5 cannot be applie d strictly.  The parties' arguments concerning 
Thai Customs' valuation of the entries at issue ar e therefore based on the specific principles to be 
applied in using the deductive valuati on method as prescribed in Article 5.   
7.299  The parties do not dispute that Thai Customs did not deduct three items – sales allowances728, 
provincial taxes and transportation costs.  The Philippines claims that Thailand's decision is 
inconsistent with the obligations  under Article 5.  Thailand takes the position that Thai Customs was 
not able to deduct the three items at issue b ecause the data provided by PM Thailand for the 
deductions were not sufficient.  In response, the Philippines puts forwards arguments relating to both 
procedural and substantive aspects of the Thai Customs' application of  the deductive valuation 
method to the entries at issue.   
7.300  Specifically, the Philippines submits that because  Thailand failed to explain the reason why it 
decided not to deduct the requested items at the ti me of determination pursuant to Article 16, the 
standard appropriate for this Pane l's review of the Philippines' cl aim under Article 7.1 prevents the 
Panel from basing its decision on ex post explanations provided by Thailand in this proceeding.729 
7.301  The Philippines further underlines the alleged procedural deficiency in the Thai Customs' 
determination:  Thai Customs failed to give the importer an opportunity to explain the information 
provided and/or to present Thai Customs with fu rther information and data that Thai Customs 
considered necessary for the requested deductions.730  
7.302  The Philippines also claims that Thai Custom s' decision not to deduct the three items is 
substantively inconsistent with the principles of the de ductive valuation method under Article 5.  
Essentially, the parties disagree on how Article 5.1(a) should be interpreted in respect of the deductibility of the three items at issue as well as on whether Thai Customs' decision not to deduct the 
concerned items is consiste nt with Article 5.1(a). 
7.303  We will start our analysis with the description of the valuation process by Thai Customs in 
assessing the customs values of the entries at issue.   
7.304  Before turning to the analysis, we observe that the Philippines takes the position that it has put 
forward another claim under Article 7.1, namely that Thailand acted inconsistently with Article 7.1 of 
the Customs Valuation Agreement by deducting incorrect amounts for VAT and excise tax for certain 
transactions .
731  According to the Philippines, this is a cl aim additional to the claim that Thai Customs 
violated Article 7.1 by failing to deduct certain items inconsistent with the principles under Articles 
7.1 of the Customs Valuation Agreement.  In our  view, while the alleged deduction of incorrect 
                                                      
728 We note that in their submissions the parties re fer to "sales allowances " and "sales discounts" 
interchangeably, in this report we will only refer to "sales allowances". 
729 Thailand's second written submission, paras. 232-279. 
730 Thailand's second written submission, paras. 264-267. 
731 Philippines' comments on the Interim Review Report, paras. 36-42  (para. 6.78 of the Interim 
Review section of this Report). WT/DS371/R 
Page 206  
 
  amounts for VAT and excise tax  may form an additional argument  for the Philippines' claim against 
Thai Customs' application of the deductiv e valuation method under Article 7.1, it does not constitute a 
separate claim as argued by the Philippines.
732  In the Descriptive Part of the Report, the Philippines 
requests that the Panel find that "Thailand violat ed Article 7.1 of the Customs Valuation Agreement 
by incorrectly assessing the deductive value of PM Thailand's transactions, specifically by failing to 
deduct three claimed items and by deducting inco rrect amounts for VAT and excise tax for certain 
transactions".733  In our view, this statement indicates th at the Philippines has made one claim under 
Article 7.1 based on two sets of arguments.  Having so  considered and to the extent that we examine 
and make a finding in the following sections with re spect to the Philippines'  claim under Article 7.1 
based on Thai Customs' decision not to deduct the th ree items at issue, we do not find it necessary to 
examine the same claim based on another set of arguments.734  
Factual background  
7.305  Following a communication with Thai Customs on 15 February 2007735, PM Thailand 
submitted to Thai Customs on 16 February 2007 its fi nancial statement for 2005 to be used by Thai 
Customs in calculating the deductive value.736  In its letter of 21 February 2007, PM Thailand then 
made a request for the deduction of sales allowances and provincial taxes.737  Thailand does not 
dispute this either.  The same letter also indi cates the GAQ price and the amounts to be deducted for 
VAT and profits and general expenses (i.e. gross marg in).  This letter does not include a request for 
the deduction of transportation costs. 
7.306  On 27 February 2007, Thai Customs sent PM  Thailand a letter in which it requested 
information regarding the import price per unit, the highest first-tier selling price (i.e. the GAQ price), 
the retail price between 1 January and 31 December  2006, and PM Thailand's gross margin for 2006, 
with a profit and loss statement certified by the auditor and copies of PND 50 for 2006.738  According 
to the Philippines, Thai Customs' letter of 27 February therefore sought additional information 
regarding two elements raised by PM Thailand in the 21 February letter, namely the GAQ price and 
                                                      
732 The Appellate Body made the following statement in this regard: 
"By ' claim ' we mean a claim that the respondent party has violated, or nullified or impaired 
the benefits arising from, an identified prov ision of a particular agreement. Such a claim of 
violation must, as we have already noted, be distinguished from the arguments adduced by a 
complaining party to demonstrate that the responding party's measure does indeed infringe 
upon the identified treaty provision. Argu ments supporting a claim are set out and 
progressively clarified in the first written subm issions, the rebuttal submissions and the first 
and second panel meetings with the parties" (Appellate Body Report, Korea – Dairy , para.139 
(footnote original omitted)). 
733 See para. 3.1 of this Report. 
734 Even if we were to consider it as a separate claim, we are of the view that the Philippines neither 
pursued nor substantiated its claim in a timely and sufficient manner to warrant the inclusion of the claim in our examination and findings.  Further, the same consideratio n also applies even if we decided to proceed with the 
examination of this additional set of arguments. 
735 The content of this communication are not on the record before the Panel (Thailand's response to 
Panel question No. 10; first oral statement (para. 31)).  Thailand submits that the sentence "we wish to confirm 
our advice yesterday" in the 16 February letter (Exhibit PHL-137) from PM Thailand confirms the fact that on 
15 February 2007, oral communications took place.  The Philippines does not dispute this either.  
736 Exhibit PHL-137. 
737 Exhibit THA-39. 
738 Exhibits THA-11; PHL-18.  We note that these two exhibits refer to the identical letter. "PND 50" is 
the income tax return form for companies or juristic  partnerships. (Philippines' second written submission, 
para. 234, footnote 197).  WT/DS371/R 
 Page 207 
 
 
  the gross margin.  PM Thailand responded to the Th ai Customs' request for additional information on 
the GAQ prices by a letter dated 7 March 2007.739   
7.307  We also note that on 2 March 2007 Thai Cust oms sent PWC ABAS (the auditors of 
PM Thailand) and PM Thailand respectively two sep arate letters requesting specific information to 
clarify PM Thailand's letter of 5 February 2007.740  PM Thailand responded by a letter of 6 March 
2007 wherein it submitted the trial balance of the y ear 2005 and forecasted the trial balance of the 
year 2006.741  As for the request for information on the computed value, PM Thailand stated in the 
letter that it did not have the information of produc tion, such as the price of material, production cost, 
profit and general expenses of the foreign manufactur er, as the company is the cigarette importer as 
well as the distributor in Thailand.  In the letter, PM Thailand also expresses its opinion that given the 
sequential obligation under the Customs Valuation Ag reement and as there are no identical or similar 
goods, the deductive valuation method is the next method used in testing the acceptance of the 
imported value.   
Thai Customs' application of the deducti ve valuation method – standard of review  
Main argument of the parties 
7.308  The Philippines  submits that the Panel cannot conduct a de novo review of the evidence 
before the customs authority.742  Instead, if PM Thailand claimed a deduction for a particular item, the 
Panel should establish whether the authority adequa tely explained how the evidence supported its 
decision to reject the claimed deduction.  The Ph ilippines notes that a customs authority cannot 
simply ignore  a requested deduction, without explaining,  when requested, why the evidence does not 
support a deduction.743  The Philippines considers that the WTO covered agreements, and the 
Customs Valuation Agreement in particular, are not formulated in such a way that an importer must 
find a route by using the WTO dispute settlement mechanism so as to obtain an explanation on why 
the domestic customs authority refused a claimed deduction. 
7.309  The Philippines argues that Thailand makes ex post objections to the sufficiency of the 
information which PM Thailand provided to Thai Customs in support of certain deduction claims.  
The Philippines contends that Thailand's argume nts to the Panel on the deductibility of the items 
claimed by PM Thailand are entirely ex post explanations which Thai Customs did not provide to 
PM Thailand at the time of determination.744  If Thai Customs had raised these queries, when they 
arose, PM Thailand could have produced supporti ng evidence for the figures.   According to the 
Philippines, the appropriate forum for a first dete rmination on the sufficiency of the evidence 
concerning items claimed for deduction from the cust oms values is not the WTO, even less if the 
arguments are based on ex post explanations which the authority failed to provide.745  The failure of 
Thai Customs to articulate its concerns about PM Thailand's evidence limits the examination of Thai 
Customs' reasoning and decision-making process.  In short, there is no Thai Customs determination or 
explanation that the Panel can review .746  For the Panel to now decide th at the evidence was, or was 
                                                      
739 Exhibit PHL-169. 
740 Exhibit THA-12.  Thai Customs sought to confirm with PWC ABAS whether the "reserve tobacco 
stamp tax" of a certain amount in the financial statement of 2005 was derived by following the accounting standard.  Thai Customs requested PM Thailand for information on the trial balance of 2005 and 2006 and the 
computed value of certain items (e.g. material  costs and labour costs in packaging goods). 
741 Exhibit THA-92. 
742 Philippines' second written submission, paras. 225-229. 
743 Philippines' second written submission, para. 226 (emphasis in original). 
744 Philippines' second written submission, paras. 228, 247 and 272. 
745 Philippines' second written submission, paras. 255, 272-273 and 278. 
746 Philippines' second written submission, paras. 228 and 272. WT/DS371/R 
Page 208  
 
  not, sufficient to warrant a deduction, it would have to conduct a de novo examination of the evidence 
based on Thailand's ex post explanations, which is not the task of a WTO panel. 
7.310  Thailand did not provide any specific counterargumen ts in this regard.  We understand, 
however, that its position on the standard appropriate for the Panel's review of the Philippines' claims 
under Article 1.1 and 1.2(a) of the Customs Valuation Agreement  would also stand with respect to the 
Article 7.1 claim. 
Analysis by the Panel 
7.311  Our mandate in examining the Philippines' clai m under Article 7.1 is to make an objective 
assessment of whether Thai Customs properly app lied the deductive valuation method in determining 
the customs values of the cigarettes at issue in accordance with the disciplines under Article 7.1 and 
the principles of the deductive valuation method as prescr ibed in Article 5.  We considered above that 
in objectively assessing the factual aspects of the cu stoms administration's determinations, we may 
neither conduct a de novo  review nor completely defer to th e administration's determination.   
7.312  In examining the Philippines' claim under Article 1.1 and 1.2(a) in respect of Thai Customs' 
rejection of the transaction value, we clarified that our objective assessment of the claims must be 
based on the grounds and explanations provided by  Thai Customs at the time of determination 
pursuant to Articles 1.2(a) and 16.  Under Article 16,  in particular, a customs authority is required to 
make clear and give details of not only the basis fo r rejecting the transaction value, but also how the 
chosen deductive valuation method was applied for the calculation of the final customs value.   
7.313  In applying a valuation method falling under Article 7, custom s authorities are required under 
Article 7.3 to inform the importer in writing of the customs va lue determined under Article 7 and the 
method used to determine such value if the importer so requests.  As we address in Section VII.C.7(d) 
below, the Philippines made a claim under Article 7.3 in this dispute.  In order to set the standard for 
our review of the Philippines' claim under Article 7.1, we consider the obligation imposed on the 
customs authority under Article 7.3 also relevant.  This is because our objective assessment of 
Thailand's compliance with its obligations under Artic le 7.1 requires us to base our review of the 
factual determinations made by Thai Customs when  it applied the valuation method under Article 7.1 
on Thai Customs' explanations and inform ation at the time of determination.   
7.314  Accordingly, we must assess whether Thai Cu stoms' application of the deductive valuation 
method was consistent with Article 7.1 and Article 5.  Particularly, in deciding whether Thai Customs' 
decision not to deduct certain items was supported by  the factual evidence befo re it at the time of 
determination, we will base our assessment on Thai  Customs' explanations provided pursuant to 
Article 16 as well as information given to the importer under Article 7.3. 
Thai Customs' application of the deducti ve valuation method – procedural aspect
 
Main arguments of the parties 
7.315  The Philippines  submits that on 21 February 2007, PM Thailand sent a letter to Thai 
Customs indicating the GAQ price and the amount s to be deducted for sales allowances, VAT, 
provincial tax, and prof its and general expenses.747  According to the Philippines, the letter of 
21 February 2007 mistakenly did not menti on the deduction of transportation costs,748 however, Thai 
Customs knew that PM Thailand had included a deduc tion for internal transportation costs in annual 
                                                      
747 Philippines' second written submission, para. 23 3; Exhibit THA-39.  In its submission, the 
Philippines mistakenly refers to Exhibit PHL-68. 
748 Philippines' second written submission, para. 277.  WT/DS371/R 
 Page 209 
 
 
  filings covering the three year period from 2003 to  2005 for either "inland freight" or "domestic 
transportation".749 
7.316  In response to this, Thai Customs sent PM Th ailand a letter on 27 February 2007 to request 
more information on import price per unit, the highest first-tier selling price (i.e. the GAQ price), the retail price between 1 January and 31 December 20 06, PM Thailand's gross margin for 2006 with a 
profit and loss statement certified by the auditor and copies of PND 50 for 2006 by 7 March 2007.
750  
The Philippines points out that in this letter of 27 Fe bruary 2007, Thai Customs did not request further 
information on the deductions for sales allowances and provincial taxes as presented in its letter of 
21 February.751   
7.317  In this connection, the Philippines underlines that  the customs authority and the importer must 
cooperate with a view to determining a proper ba sis of the value for customs purposes.  This is 
particularly important under Article 5 of the Customs Valuation Agreement  because the importer 
typically possesses the relevant information for a de ductive calculation, whereas  the customs authority 
knows what specific information it requires to make certain deductions.752  As such, the Philippines 
argues that if Thai Customs had queries concerning PM Thailand's claimed deductions, it should have 
engaged in a "process of consultation"  with PM Thailand.  Thai Customs' failure to indicate clearly 
the evidence it required and its failure to seek further information precludes Thailand from now 
relying on the fact that PM Thailand did not provi de the required supporting information.  If Thai 
Customs considered, at the time, that additional information was re quired to support the 21 February 
deductions claimed for sales allowances and provinc ial tax, it was required to include these items in 
its 27 February request for additional information. 753 
7.318  On 7 March 2007, PM Thailand sent a letter to Thai Customs in response to the request for 
information of 27 February.  In this letter, PM  Thailand submitted the additional information as 
requested by Thai Customs and it included a sp readsheet showing the GAQ price and additional 
information PM Thailand thought mi ght be relevant to the GAQ price, including absolute and relative 
volume amounts, total sales receivable and the net sal es receivable, with the deductions to account for 
the difference between the two ("Less VAT", "Les s Discount", "Less Other Sales Allowance", and 
"Less P. Tax").754  According to the Philippines, based on th e data in this spreadsheet, Thai Customs 
accepted the GAQ price shown in the spreadsheet.755 
7.319  The Philippines further argues that Exhibit THA-13 provides a deductive calculation for the 
entries at issue and that the heading of the Exhib it shows that the calculation was prepared by Thai 
Customs "for [the] 6 March Meeting".756  In the Philippines' view, this calculation shows that Thai 
Customs deducted customs duties, al l internal taxes, and an amount fo r profits and general expenses.  
According to the Philippines, therefore, all of the elements to be deducted in the calculation had been 
finalized by 6 March 2007, before  PM Thailand's requested response was even received on 7 March.  
                                                      
749 Exhibits PHL-40, PHL-41, PHL-42 and PHL-43. 
750 Philippines' second written submission, para. 234;  Exhibit PHL-18. "PND 50" is the income tax 
return form for companies or juristic partnerships . (Philippines' second written submission, para. 234, 
footnote 197).  
751 Philippines' second written submission, para. 235. 
752 Philippines' second written submission, para. 230. 
753 Philippines' second written submission, paras. 254 and 257. 
754 Philippines' second written submi ssion, para. 242; Exhibit PHL-169. 
755 Philippines' second written submission, para. 242. 
756 The Philippines refers to the meeting held on 6 March 2007 concerning the prescription of import 
prices of cigarettes between several Thai government departments and two accountants of 
PricewaterhouseCoopers (the "6 March Meeting") (Philippines' first written s ubmission, para. 336). It should be 
noted though the the parties disagree as to whether th e two accountants of PricewaterhouseCoopers represented 
PM Thailand during this meeting, see para. 7.261 above. WT/DS371/R 
Page 210  
 
  The Philippines asserts that therefore by 6 March, Thailand had already decided not to deduct sales 
allowances or provincial taxes.
757 
7.320  Thailand  submits that the Philippines' objection to the Thai Customs decision not to deduct 
sales allowances, provincial taxes and transporta tion costs are based largely on procedural, not 
substantive, grounds.758  Regarding the Philippines' position that Thai Customs should have continued 
to collect more information regarding the deduc tions, Thailand emphasizes that PM Thailand itself 
had twice requested Thai Customs to expedite  the assessments and use the deductive valuation 
method.759  In the light of this, in Thailand's view, under the standard of review proposed by the 
Philippines, the Panel should defer to Thai Custom s' exercise of its disc retion to expedite the 
assessments in the manner requested by the importer at that time. 
7.321  Thailand submits that in response to PM  Thailand's letter of 5 February 2007760, Thai 
Customs expedited its examinati on and began to issue assessment notices for the entries at issue 
within weeks.  Thailand argues that there we re several documented events in "a process of 
consultation" between Thai Customs and PM Thailand regarding th e entries at issue.761  According to 
Thailand, PM Thailand's letter of 5 February 2007 was first followed up by a meeting between Thai 
Customs and PM Thailand on 15 February 2007.762  Upon Thai Customs' requests for more 
information presented between 16 and 20 February 2007, PM Thailand then provided the requested 
information in its letter of 21 February 2007.763  Thailand emphasizes that the letter does not refer to 
the deduction of transportation costs.764 
7.322  In response to the 21 February 2007 letter by PM Thailand, Thailand sent a request for further 
information on 27 February 2007.765  Thailand acknowledges that PM  Thailand responded to this 
request by a letter on 7 March 2007 including a spreadsheet on the GAQ price.  However, Thailand 
asserts that the price adjustments requested by PM  Thailand were not supported by the information 
provided by PM Thailand in the spreadsheet.766  Moreover, the spreadsheet  does not contain any claim 
for deduction of transportation costs. 
7.323  Thailand argues that also in response to PM Th ailand's 5 February 2007 letter, Thai Customs 
sent a letter on 2 March 2007 to PM Thailand reques ting additional information on trial balance and 
computed value.767  In a letter dated 6 March 2007, PM Tha iland provided the requested information 
on the trial balance and explained that it could not provide information on the computed value.768  
                                                      
757 Philippines' second written submission, paras. 238-239. 
758 Thailand's second oral  statement, para. 45. 
759 Thailand's second oral statement, paras. 46-47, referring to Exhibits PHL-69 and THA-92. 
760 Thailand's first written submission, para. 50; s econd written submission, para. 51; Exhibit PHL-68. 
In its first written submission, Thailand mistakenly refers to exhibit PHL-69. In the 5 February letter, PM Thailand put forward its concerns regarding the guarantee values requested by Thai customs and the 
rejection of PM Thailand's import prices and the fact that the reason provided by Thai Customs was that the 
buyer and seller were related. Moreover, PM Thaila nd stated that it wanted to establish a common 
understanding for going forward and  to expedite the assessment process and issue an assessment notice.  
761 Thailand's first written submission, para. 157; second oral statement, para. 31. 
762 Thailand's response to Panel question No. 10;  second oral statement, para. 31; Exhibit PHL-137.  
Thailand states that this meeting of 15 February 2007 wa s also referred to by the Philippines in its letter of 16 
February 2007. 
763 Thailand's response to Panel question No. 10; Exhibit THA-39. 
764 Thailand's response to Panel question No. 29. 
765 Thailand's first written submission, para. 52; Exhibit THA-11. 
766 Thailand's response to Panel question No. 29; Exhibit PHL-169. 
767 Thailand's response to Panel question No. 10; Exhibit THA-12. 
768 Exhibit THA-92.  WT/DS371/R 
 Page 211 
 
 
  Thailand submits that at a meeting held on 6 Ma rch 2007, the method for calculating the deductive 
value was discussed with accountants fro m PWC ABAS (auditors for PM Thailand).769  
7.324  Contrary to the Philippines' argument that in  the light of the deductive value calculations 
available at the 6 March meeting (Exhibit THA-13), Thai Customs could not have taken into account 
information submitted by PM Thailand on 7 March 2007,  Thailand asserts that Thai Customs did not 
make adjustments because the 7 March 2007 inform ation did not warrant such changes.  Had 
PM Thailand submitted any informati on subsequent to that meeting th at warranted revisions to those 
calculations, Thai Customs could and w ould have made appr opriate revisions.770  Thailand agrees 
with the Philippines that from 16 March 2007 onwards, Thai Customs started issuing notices of assessment for entries by PM Thailand since Au gust 2006, in which it rejected the declared 
transaction values by PM Thailand. It also confir ms that PM Thailand wrote a letter on 5 April 2007 
asking for clarification.
771 Thai Customs responded by letter on 12 April 2007, explaining that the 
deductive valuation method was used.772 
Analysis by the Panel 
7.325  The parties do not dispute that PM Thailand made a request for the deduction of sales 
allowances and provincial taxes in  its letter dated 21 February 2007.773  Thailand asserts, however, 
that these items could not be deducted because the in formation and data submitte d together with this 
letter was not sufficient for Thai Customs to make  the requested deductions.  The Philippines argues 
that if Thai Customs considered the informa tion and the data submitte d on 21 February 2007 
insufficient, Thai Customs should have given PM  Thailand an opportunity to further explain the 
submitted data and to provide the further informa tion it considered necessary to make the requested 
deductions.   
7.326  Paragraph 2 of the General Introductory Comme ntary to the Customs Valuation Agreement 
provides: 
"[W]here the customs value cannot be dete rmined under the provisions of Article 1 
there should normally be a process of consultation between the customs 
administration and importer with a view to arriving at a basis of value under the 
provisions of Article 2 or 3. ... A process of consultation between the two parties will 
enable information to be exchanged, s ubject to the requirements of commercial 
confidentiality, with a view to determining a proper basis of value for customs purposes." 
7.327  Although the first sentence of paragraph 2 refers  to "value under the provisions of Article 2 
or 3", we consider that the spirit of the Customs Valuation Agreement  envisaged under this paragraph, 
namely the determination of customs value through a process of consultation  between the customs 
administration and importer , equally applies to other valuation methods.  The phrase "using 
reasonable means consistent with the principles and general provisions of this Agreement" in 
Article 7.1 also supports this view.  As the Phili ppines submits, while the importer is the party that 
typically possesses relevant information for a deductiv e calculation, it is the customs authority that 
knows the specific information necessary to accept the re quested deductions.  Viewed in this light, it 
                                                     
 
769 Thailand's response to Panel question No. 10. 
770 Thailand's second oral  statement, para. 45. 
771 Thailand's first written submission, paras. 61 and 70; Exhibit PHL-69. 
772 Thailand's first written submission, para. 64; Exhibit PHL-70. 
773 As for the transportation costs, the Philippines does not contest that PM Thailand did not include the 
item in the 21 February 2007 letter.  We address in Sec tion VII.C.7(c)(iii) the question of whether an importer 
must make a specific request for the deduction of transportation costs for a customs authority to make such a 
deduction. WT/DS371/R 
Page 212  
 
  is difficult to conceive that the drafters of  the Agreement would have intended a process of 
consultation between the customs administration and importer to be limited solely to the valuation 
process under Article 2 or 3.  Neither does Thailand a ppear to dispute that the process of determining 
a customs value under the principles of Article 5 s hould be "a process of consultation".  Rather, 
Thailand argues that there was in fact a process of consultation between Thai Customs and 
PM Thailand regarding the entries at issue.
774 
7.328  Following PM Thailand's letter of 21 February 2 007, Thai Customs requested PM Thailand to 
provide more information on the import price per unit , the highest first-tier selling price (i.e. the GAQ 
price), the retail price between 1 January and 31 December 2006, and PM Thailand's gross margin for 
2006, with a profit and loss statement certified by the auditor and copies of PND 50 for 2006, through 
its letter on 27 February 2007.775  Thai Customs, however, did not request any further information 
concerning sales allowances and provi ncial taxes.  We also understand that in a meeting subsequently 
held on 6 March 2007, Thai Customs addressed issues relating to the method for calculating the deductive value although it is not clear whether and,  if so, to what extent the representatives from 
PWC ABAS participated in the discussion.  Th e deductive calculation shown in Exhibit THA-13 
confirms that Thai Customs had considered prior to the 6 March 2007 meeting the valuation method 
to be applied to determine a cust oms value of the entries at issue.
776  The calculation in 
Exhibit THA-13, however, does not reflect the deduc tions requested by PM Thailand through its 21 
February 2007 letter.  This is despite the fact that the minutes of the 6 March 2007 meeting indicate that at the time of that meeting, Thai Customs wa s aware of questions relating to the deductibility of 
certain items.
777   
7.329  In the light of these circumstances, it is not cl ear to us why Thai Customs neither posed any 
question nor requested further information or data  relating to sales allowanc es and provincial taxes 
from PM Thailand.  This is particularly the case as Thai Customs did make a request for more information on other items through its 27 February 2007 letter to PM Thailand.  In our view, if upon 
receiving the specific request for the deduction of sales allowances and provincial taxes, Thai 
Customs had doubts about the deductibility of those items, as it explained to the Panel in this 
proceeding, it could and should ha ve communicated such views to the importer during the valuation 
process.
778   
7.330  Regarding the deduction of transportation co sts, we note that although PM Thailand 
(mistakenly) omitted to request deduction of these co sts, Thailand should have inquired as to whether 
such a deduction was needed.  First, deduction of "the usual costs of transport" is specifically 
mentioned in Article 5.1(a)(ii), and therefore a co mmon item to be deducted.  Second, the minutes of 
the 6 March meeting show that Thailand was aware of  the fact that in the calculation of the deductive 
value, transportation costs must be deducted.  Th ird, Thai Customs was aware of the fact that 
PM Thailand had included a deduction for internal tr ansportation costs in annual filings covering the 
                                                      
774 See para. 7.321. 
775 Exhibit THA-11. 
776 Exhibit THA-13 was revised by Exhibit THA-71, but the only changes incorporated in the revised 
version were the dates to which the calculations in the exhibit applied, hence those changes have no influence on 
the discussion in this section. 
777 The minutes of the 6 March 2007 meeting also read that "there was a weak poi nt in certain issues in 
determining customs values, that is, there should be clarification regarding the calculation methods, the meaning 
of the words 'normal commission and general expenses', 'insurance cost', 'other taxes from selling of things'" (original minutes, Exhibit PHL-74, p. 8). 
778 We note a general lack of definite and clear rules on the type of deductible items under Article and 
the kind and nature of evidence require d for the necessary deduction.  This, in our view, provides more reason 
for customs authorities to engage in the process of consultation with the importer in using the deductive 
valuation method.  WT/DS371/R 
 Page 213 
 
 
  three year period from 2003 to 2005 for either "inland freight" or "domestic transportation".779  We 
believe, therefore, that although PM Thailand did not specifically request deduction of the 
transportation costs, Thailand should have deducte d these costs based on the information put forward 
by PM Thailand, or if it considered this informati on to be insufficient, it again could and should have 
communicated such views to the importer during the valuation process.    
7.331  We note that in response to the Philippines' pos ition that Thai Customs should have continued 
to collect more information regarding the deductio ns if the information submitted was insufficient, 
Thailand emphasizes that Thai Customs exercised its  discretion to expedite the assessments because 
PM Thailand itself had twice requested Thai Cu stoms to expedite the assessments and use the 
deductive valuation method.780  It is our view that an importer' s request for expeditious assessments of 
the customs value of imported goods cannot justify the customs administration's failure to respect the 
due process principle inherent in a process of c onsultations between the administration and the 
importer.  In the factual circumstances of this case in particular, the Panel has taken note of the 
argument that Thai Customs could not ask for further information because of the request from 
PM Thailand to expedite the process. However, the Panel also notes that through its letter of 27 
February 2007, Thai Customs did request th e importer to provide more information on other items 
that were submitted at the same time as the in formation relating to sales allowances and provincial 
taxes.  Therefore, we are not co nvinced by Thailand's argument th at PM Thailand's request for an 
expeditious assessments prevented Thai Customs from seeking further information concerning sales 
allowances, provincial taxes and transportation costs. 
7.332  In the light of the foregoing, we conclude that  Thai Customs' failure to properly consult the 
importer on the information necessary for the requested  deductions renders its decision not to deduct 
sales allowances, provincial taxes and transportation costs in the determination of the customs value 
of the entries at issue inconsistent with Ar ticle 7.1 of the Customs Valuation Agreement. 
Thai Customs' application of the deducti ve valuation method – substantive aspect  
Introduction  
7.333  Regarding the deductions for sales allowances, pr ovincial taxes and transportation costs, the 
parties do not dispute that these items are, in principle, deductible under Article 5.1(a).  The parties also appear to agree that deductions under Article  5.1(a) are not automatic, but must be based on 
relevant information and data.  The parties, how ever, disagree on the type of evidence required from 
the importer for the deduction of these items, namely, first, whether, as a general matter, the importer 
is required to prove that these expenses are actu ally tied to the GAQ sales based on which the unit 
price was decided
781, and, second, whether Thai Customs act ed inconsistently with the principles 
under Article 5.1(a) in not deducting these items in th e light of the information and data before it at 
the time of determination.  
7.334  Particularly, Thailand takes the position that all these three items must be deducted only to the 
extent that they reflect documented expenses that are actually included in the GAQ price.  In support 
of its position, Thailand has provide d extensive arguments in the course of this proceeding on why the 
information and data submitted by  PM Thailand to Thai Customs was not sufficient to make the 
relevant deductions.  The Philippines argues that ther e is no requirement in Article 5 that deductions 
from the GAQ price be tied specifically to the GAQ sal e.  Further, the Philippines submits that the 
Panel should not take into account Thailand's explanations in this proceeding of Thai Customs' 
                                                      
779 Exhibits PHL-40, PHL-41, PHL-42 and PHL-43. 
780 Thailand's second oral statement, paras. 46-47, referring to Exhibits PHL-69 and THA-92. 
781 Thailand's response to Panel question No. 29.   WT/DS371/R 
Page 214  
 
  decision on the deductibility of th e claimed items because they are ex post explanations that were 
never provided to the importer at  the time of determination. 
7.335  In evaluating the parties' claims and arguments  in respect of the deductive valuation method, 
we will first address whether the importer is genera lly required to prove that expenses requested for 
deduction are actually tied to the GAQ sales ba sed on which the unit price was decided.  
Deductibility of sales allowances, provinc ial taxes and transportation costs  
Main arguments of the parties 
General 
7.336  The Philippines  claims that Thailand's ex post  calculations demonstrate a violation of 
Article 7.1 because Thailand failed to deduct sales  allowances, provincial taxes and transportation 
costs when it was obliged to deduct them b ecause they had been raised by PM Thailand.
782  T h e  
Philippines submits that a customs authority is re quired to apply the same principles for deductive 
calculations under Article 7 as would be applied unde r Article 5, with an allowance for "reasonable 
flexibility" where Article 5 cannot be strictly applied.783  Accordingly, Thailand should have deducted 
these three items, which would have resulte d in significantly lower customs values.784 
7.337  Regarding the specific calculation used for th e deductive valuation method, the Philippines 
argues that the GAQ price refers to the importer's unit resale price of the largest quantity sold to 
unrelated parties in the country of importation785, and that the items (i)-(iv) in Article 5 must be 
deducted from this GAQ price.786  There is no requirement in Article 5 that deductions from the GAQ 
price be tied specifically to the GAQ sale.787  Several provisions of Ar ticle 5 use language showing 
that deductions should be average amounts not tied to  one specific sale (e.g. Art. 5.1(a)(i) – deduction 
of "commissions usually paid" and the "additions usually made for profit and general expenses"; 
Article 5.1(a)(ii) – deduction of "usual costs of transport and insurance and associated costs ...").788  In 
further support of its position, the Philippines refers to a statement in a treatise that "the deductions 
[under Article 5] will in general not relate to the same resale(s) from which the price has just been 
derived".789  The Philippines argues that there is no logical reason to require that deductions be tied to 
the particular GAQ sale, because an authority does not determine the customs value of the GAQ sale.  
Rather, it determines the customs value of a particular import, and the GAQ price is taken from a resale made in the GAQ within 90 days of importation.  Therefore, that resale need not involve goods imported as part of the entry being valued.  Beca use many parameters relating to the entry are 
unknown at the time of valuation, an averaging a pproach is, at the very least, consistent with 
Article 5.
790 
                                                      
782 Philippines' response to Panel question No. 29; second written submission, para. 222. 
783 Philippines' response to Panel question No. 28; second written submission, para. 223. 
784 Philippines' first oral statement, para. 143; second written submission, para. 223. 
785 Philippines' first oral statement, para. 133. 
786 Philippines' first oral statement, para. 133. 
787 Philippines' second written submission, para. 263. 
788 Philippines' second written submission, para. 258. 
789 Philippines' second written submission, para. 264; Exhibit PHL-206, para. 695. 
790 Philippines' second written submission, paras. 2 65-267.  As examples of such parameters, the 
Philippines refers to "a very large volume of goods that will subsequently be broken down into smaller units, 
sold to different customers, across a wide geographical area, at different points in time, stocked at various points in the distribution chain for different periods of time, and sold subject to potentially divergent regional and local 
taxes".  WT/DS371/R 
 Page 215 
 
 
  7.338  Thailand claims that the Philippines has failed to make a prima facie case that the Thai 
Customs' determination of the deductive value, base d on the evidence before it at the time, was in any 
way inconsistent with Article 5 of the Customs Va luation Agreement.  Thailand does not contest that 
the three elements at issue are in principle deduc tible from the GAQ price, whether under Article 5 or 
Article 7.791  However, according to Thailand, deductions  are to be made from the GAQ price only to 
the extent that they reflect documented expenses th at are actually reflected in the GAQ price based on 
the evidence available to the customs admi nistration when it makes its determination.792 Thailand 
argues that the evidence provided by PM Thailand to the Thai authority in this case did not justify a 
deduction for any of the three items.  
Sales allowances 
7.339  Thailand  submits that with respect to sales allowa nces, there would be no basis to make 
adjustments to the GAQ price if that price we re based on a sale to a customer that did not benefit from 
a discount.793  Thailand argues that the starting point for the deductive value calculation under 
Article 5(1)(a) is the price for a particular sale of  the imported goods made at or about the time of 
importation of the goods being valued.794  Discounts, rebates and similar price adjustments are not 
expenses, but instead form part of the price itself.795  According to Thailand, Article 5.1(a)(i)-(iii) does 
not mention discounts as deductions that must be made on the basis of usual amounts, such as 
commissions or profits.796  Therefore, items such as discounts ma y only be deducted when tied to the 
particular unit price for the GAQ sale that is being used in the deductive value calculation.797 
7.340  The Philippines  submits that where the importer offers  an allowance or discount on the GAQ 
price, that allowance reduces the "unit price" at wh ich the goods "are sold", and must therefore be 
deducted under Article 5 to provide a proper starting-point for a deductive calculation.798  The failure 
to deduct sales allowances means th at the assessed customs value was inflated by discounts that were 
never part of the "unit price" at which the goods "[we]re sold" by the importer.799   
Provincial taxes 
7.341  Regarding provincial taxes, the  Philippines  submits that Article 5.1(a)(iv) requires the 
deduction of the national taxes payable , not the taxes paid on the GAQ sale as Thailand argues.800  
The amount of taxes "payable" may be determined on an average basis.801 
7.342  Thailand  takes the view that provincial taxes are different from national taxes as referred to 
in Article 5(a)(iv), and deductible  only if included in the resale price on which the [deductive value] is 
based.802  Thailand submits that the Philippines does not appear to argue in its second written 
submission that the evidence before Thai Customs established that provincial taxes were included in 
the GAQ price on which the deductive value is based.803 
                                                      
791 Thailand's response to Panel question No. 29. 
792 Thailand's response to Panel question No. 29. 
793 Thailand's response to Panel question No. 29. 
794 Thailand's second oral  statement, para. 42. 
795 Thailand's second oral  statement, para. 42. 
796 Thailand's second oral  statement, para. 42. 
797 Thailand's second oral  statement, para. 42. 
798 Philippines' first oral statement, para. 134. 
799 Philippines' first oral statement, para. 137. 
800 Philippines' second written submission, para. 265. 
801 Philippines' second written submission, paras. 265-267. 
802 Thailand's second oral statement, para. 43; Exhibit PHL-206, para. 743. 
803 Thailand's second oral  statement, para. 43. WT/DS371/R 
Page 216  
 
  Transportation costs 
7.343  The Philippines submits that Article 5.1(a)(ii) requires the deduction of the usual  costs of 
transportation, which means costs typi cally incurred, or average costs, not the costs linked to the sales 
on which the GAQ price was based.
804 
7.344  Thailand  argues that the treatise cited by the Phi lippines states that the "usual" cost of 
transportation should be, as far as possible in practi ce, the actual average inla nd cost incurred in the 
resale of the imported goods whose price is the first step in the calculation.805   
Analysis by the Panel 
General 
7.345  We will first review the general principles in  Article 5.1(a).  Article 5.1(a) provides: 
"If the imported goods or identical or similar imported goods are sold in the country 
of importation in the condition as imported , the customs value of the imported goods 
under the provisions of this Article shall be based on the unit price at which the 
imported goods or identical or similar 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 insu rance and associated costs incurred within 
the country of importation; 
(iii) where appropriate, the costs and ch arges referred to in paragraph 2 of 
Article 8; and 
(iv) the customs duties and other national taxes payable in the country of 
importation by reason of the importation or sale of the goods." 
7.346  The Interpretative Note to Article 5 in paragra ph 1 defines the term "unit price at which ... 
goods are sold in the greatest aggregate quantity" as "t he price at which the greatest number of units is 
sold in sales to persons who are not related to the persons from whom they buy such goods at the first 
commercial level after importation at which such sales take place".   
7.347  In this regard, we note that the terms "usually " and "usual" can be found in Article 5.1(a)(i) 
and (ii), which states, for example, "the commissions usually paid or agreed to be paid", "the additions 
usually made for profit and general expenses" and "the  usual costs of transport and insurance and 
associated costs".  A plain reading of these phrase s therefore suggests that the deductions of the 
commissions or the additions or the costs of transpor t as set out in Article 5.1(a)(i) and (ii) need not 
necessarily be tied to a particular unit price for the GAQ sale that is being used in the deductive value 
calculation.   
                                                      
804 Philippines' second written submission, para. 276. 
805 Thailand's second oral  statement, para. 43.  WT/DS371/R 
 Page 217 
 
 
  7.348  A treatise cited to by the parties also supports this view:  "It should be pointed out initially 
that the deductions will in general not relate to the same resale(s) from which the price has just been 
derived".806  At the same time, we note the phrase "in general" in this statement, which appears to 
imply that there may be exceptional situations .  We also observe the Technical Committee's 
commentary on Article 5.1 that "in general, the application of the deductive valuation method under 
Article 5 of the Customs Valuation Agreement  may differ on a set of circumstances from another and 
thus the practical application of Article 5 requi res a flexible approach, having regard to the 
circumstances in each case". 
7.349  Considered overall, therefore, we do not find a general requirement under Article 5.1, which 
can be applied to every situation, that deductions mu st be made only to the extent that they reflect 
documented expenses that are actually tied to the GAQ sale.  Particularly, items that fall within the 
categories of (i), (ii) and (iv) of Article 5.1(a) do not appear to require such a requirement in the light 
of the terms used in the text of the provisions such as "usual" and "payable"807 and the statements in 
reference sources.  Further, as the Philippines subm its, we do not see a logical reason to require that 
deductions be tied to the particular GAQ sale, beca use the customs value to be determined using the 
deductive valuation method under Article 5 is not the customs value for that specific GAQ sale.808  It 
is rather the customs value for a particular  import subject to the customs' valuation. 
7.350  Having the foregoing in mind, we will proceed to examine the parties' arguments on the 
deductibility of the three items under Article 5, na mely, sales allowances, provincial taxes and 
transportation costs. 
Sales allowances 
7.351  Regarding sales allowances, the parties' ar guments raise the question of whether the 
deductions of sales allowances can be made only if th ere is information and data showing that such 
allowances are tied to a particular unit price for the G AQ sale that is being used in the deductive value 
calculation. 
7.352  Thailand argues that items such as discounts, re bates and sales allowances are not expenses, 
but instead form part of the price itself.  As the unit price for a particular sale, which is the starting 
point for the deductive value calculation, is th e net revenue obtained by  the importer net of 
adjustments such as discounts and sales allowances, it  is reasonable for the customs administration to 
accept deductions of these items only for discounts that  are tied to the particular unit price for the 
GAQ sale that is being used in the deductive value ca lculation.  Thailand argues that this is consistent 
with the fact that Article 5.1(a)(i)-(iii) make no me ntion of discounts as deductions that must be made 
on the basis of usual amounts, such as commissions or profits.   
7.353  The Philippines submits that where the importer offers an allowance or discount on the GAQ 
price, that allowance reduces the "unit price" at wh ich the goods "are sold", and must therefore be 
deducted under Article 5 to provide a proper  starting point for a deductive calculation.  
7.354  We note that sales allowances, discounts and rebates are not one of the items listed in 
Article 5.1(a)(i)-(iv).  Nor do the interpretativ e notes to Article 5 provide any guidance on the 
deductibility of these expenses under Article 5.1(a).  We also observe a statement in the above-
mentioned treatise cited to by the parties that "[pr ice] means all direct and indirect net payments ... 
                                                      
806 Philippines' second written submission, para. 264 , referring to Exhibit PHL-206, para. 695. 
807 For the discussion on the term "payable" contai ned in Article 5.1(a)(iv), please see para. 7.358. 
808 Philippines' second written submission, para. 263. WT/DS371/R 
Page 218  
 
  excluding all rebates, discounts and similar reductions in the price payable".
809  We can infer from this 
statement that sales allowances are an item that mu st be deducted from the sales price in order to 
arrive at the unit price (GAQ price) within the meani ng of Article 5.  Therefore, to the extent that 
sales allowances are included in the sales price, th ey must be excluded from that sales price before 
deducting the items falling within the categories unde r Article 5.  We do not consider that the 
Philippines is necessarily putting forward a different vi ew on this either.  As its statement cited above 
in paragraph 7.340 shows, the Philippines submits that, as sales a llowances reduce the unit price at 
which the goods are sold, they must be deducted und er Article 5(1)(a), without specifying a specific 
category under Article 5.1(a), to provide a proper starting point for a deductive calculation.   
7.355  We therefore agree with Thailand that it is reasonable for the customs administration to 
accept deductions only for sales allowances that are tied  to the particular unit price for the GAQ sale 
that is being used in the deductive value calculation.   Although the Philippines asserts that the grant of 
sales allowances, and their amount, is a function of factors including events in the marketplace; the evolution of the business and marketing strategy; and,  considerations relating to particular customers 
(e.g. sales volumes), we do not see how this ass ertion can disprove of Thailand's position that 
deductions of sales allowances (e.g. discounts, reba tes and sales allowances) must be tied to a 
particular unit price for the GAQ sale that is being used in the deductive value calculation.
810 
Provincial taxes 
7.356  Thailand argues that unlike national taxes, which are deductible if they are payable  under 
Article 5.1(a)(iv), provincial taxes are deductible if included in the unit price on which the deductive 
value is based.  The Philippines asserts that Article  5.1(iv) requires the deduc tion of the national taxes 
payable , not the taxes paid on the GAQ sales.  
7.357  Article 5.1(a)(iv) refers to "the customs duti es and other national taxes payable in the country 
of importation by reason of the importation or sale of the goods", but not to provincial taxes.  "Local 
taxes" are however mentioned in the interpretative not e to Article 5, in paragraph 8, where it states, 
"local taxes payable by reason of the sale of th e goods for which a deduction is not made under the 
provisions of paragraph 1(a)(iv) of Article 5 sh all be deducted under the provisions of paragraph 
1(a)(i) of Article 5".  The phrase in the Interpretativ e Note to Article 5 "local taxes payable by reason 
of the sale of the goods" mirrors the phrase in Article 1(a)(iv).   
7.358  The term "payable" can be defined as " adj. (Of a sum of money or a negotiable instrument) 
that is to be paid.  An amount may be payable without being due.  Debts are commonly payable long 
before they fall due".811  It can also be defined as " adjective. 1 Of a sum of money, a bill, etc: that is to 
be paid; falling due (usu. at or on a specified date or to a specified person).  2 Able to be paid".812  
Therefore, the ordinary meaning of the term "payable " refers to both "a sum of money that is to be 
paid without being due" and "that is due to be paid ".  This suggests that national taxes and provincial 
taxes subject to the deduction under Article 5 need not be related to the GAQ sale.  The phrase "by 
reason of the importation or sale of the goods" also s upports the view that these taxes refer to those 
usually to be paid upon importation and upon sale in the market.   
                                                      
809 Exhibit PHL-206, para. 692.  We note that there appears to be a very limited number of treaties or 
reference materials concerning customs valuation issues. The definition of the term "payable" can be found infra  
para. 7.358. 
810 Gross margin calculations submitted by PM Thailand, inter alia , for FY 2003-2005 show that items 
such as VAT, provincial tax and sales allowances are deducted from the amount of income (GAQ) to derive at a net GAQ amount.  Subsequently, domestic transportation costs and warehouse costs are deducted from the net 
GAQ amount.  (See, for example, Exhibits PHL-40, PHL-41, and PHL-42). 
811 Black's Law Dictionary , 7th ed., B.A. Garner (ed.) (West Group, 1999), p. 1150. 
812 The New Shorter Oxford English Dictionary , (Fifth Edition) Oxford Un iversity Press, Vol. II, 
p. 2127 (2002).  WT/DS371/R 
 Page 219 
 
 
  7.359  Furthermore, paragraph 8 of the Interpretative Note to Article 5 states that "local taxes 
payable ... for which a deduction is not made under th e provisions of paragraph 1(a)(iv) of Article 5 
shall be deducted under the provisions of paragraph 1(a)(i) of Article 5".  Article 5.1(a)(i) refers to 
"either the commission usually paid or agreed to be paid or the additional usually made for profit and 
general expenses ...".  Therefore, we  consider that provincial taxes payable must be deducted if the 
information shows usual payments made for local taxes even if they are not included in the sales price 
based on which the deductive valuation met hod will be applied under Article 5.   
7.360  Further, we note the statement in the above-m entioned treatise, as Thailand points out, that 
"state and local taxes … are deductible if incl uded in the resale price upon which the [deductive 
value] is based". This statement, in our view, s upports our view as it stipulates that while state and 
local taxes are deductible if they are included in the resale pric e, it does not necessarily imply that that 
is the only situation in which state and local taxes can be deducted. 
Transportation costs 
7.361  Finally, the parties dispute whether the tran sportation costs, which were not included in 
PM Thailand's request made in its letter dated 21 February 2007, should have been deducted in 
determining the customs value of the cigarettes at issue.  Thailand argues that PM Thailand never 
claimed a deduction for transportation costs and in any event, the available evidence did not establish 
that PM Thailand itself incurred transportation cost s with respect to the sales on which the GAQ price 
was based.  The Philippines submits that although the 21 February 2007 letter mistakenly omitted 
transportation costs, Thai Customs should have  deducted such costs based on the information 
included in PM Thailand's annual filings for 2003-2005. 
7.362  Article 5.1(a)(ii) refers to "the usual costs of transport and insu rance and associated costs 
occurred within the country of importation".  As noted  in paragraph 7.347 above, we consider that the 
term usual in the provision indicates that the costs to be deducted may not be spec ifically linked to the 
GAQ sale at issue.  Thailand refers to a statement in  the treatise that the usual cost of transportation 
should be, as far as possible in practice, the actual average inland cost incurred in the resale of the 
imported goods.  The statement cannot however be understood as requiring transportation costs to be 
specifically linked to the GAQ sale at issue.  Furt hermore, it is not clear whether using the actual 
average inland cost incurred in the resale of th e imported goods was "possible" in practice in the 
situation at issue in this dispute.  This is partic ularly so given that Thai Customs did not seek any 
further information from PM Thailand in this re gard.  We therefore do not agree with Thailand's 
argument that transportation costs need to be specifi cally linked to the GAQ sale for a deduction to be 
made under Article 5. 
Thai Customs' decision not to deduct sales allowances, provincial taxes and 
transportation costs 
The standard for the Panel's review  
7.363  We clarified above that the proper standard fo r our review of the Philippines' claims under 
Article 7.1 requires an assessment, based on Thai  Customs' explanations provided pursuant to 
Article 16 as well as information given to the importe r under Article 7.3, of whether Thai Customs' 
application of the deductive valuation method w as consistent with Article 7.1 and Article 5.813   
                                                      
813 See supra paras. 7.311-7.314. WT/DS371/R 
Page 220  
 
  7.364  As for Thailand's explanations and informati on provided pursuant to Articles 16 and 7.3, the 
parties refer to the same 12 April 2007 letter from Thai Customs.
814  As noted earlier, however, the 
explanations in the 12 April 2007 letter are not very  detailed as they simply identify the valuation 
method used, Method 6 (Article 7) without any furt her elaboration.  In the context of examining 
Thailand's compliance with the substantive oblig ations under the Customs Valuation Agreement , we 
considered that the minutes of the 6 March 2007 m eeting may also be considered.  The minutes of the 
6 March 2007 meeting are relatively more elabora tive on the application of the deductive valuation 
method chosen to be used in determining the cust oms value of the imported cigarettes at issue.   
7.365  However, neither the 12 April 2007 letter nor the minutes explain why Thai Customs decided 
not to deduct sales allowances, provincial taxes and transportation costs.815  We note that  Thai 
Customs did not provide a basis for its final decision not to deduct these items at the time it took its 
decision. In the light of the standard of review formulated for our examination of the Philippines' 
claim under Article 7.1, therefore, we can concl ude based on the absence of such explanation that 
Thai Customs failed to apply the deductive valu ation method consistently with Article 7.1.  
Nonetheless,  during the course of the proceeding, bo th parties heavily substantiated their arguments 
related to the deductibility of the three items at issu e.  Particularly, Thailand explained in detail the 
reason why Thai Customs, at the time of the domes tic proceeding, decided not to deduct the three 
items at issue.  In these circumstances, we cons ider that making an assessment of Thai Customs' 
decision not to deduct these three items, as explained in  this proceeding based on  the evidence before 
Thai Customs at the time of the determination, help s to resolve the parties' dispute relating to the 
deductibility of the concerned items.816   
Main argument of the parties 
Sales allowances 
7.366  Regarding the spreadsheet attached to the Philippines' 7 March 2007 letter817, Thailand 
submits that in many of the months for whic h data was provided, no discount was provided to 
[[xx.xxx.xx]], a customer on which the GAQ price w as based.  Further, it shows a negative discount 
in a couple of months.  In September, the month in which the greatest single quantity was sold to this 
customer, the amount of the discount was about one fifth of the amount of the discount claimed by 
PM Thailand for Marlboro and about half of the discount claimed for L&M .  PM Thailand provided 
no method or breakdown of data to determine whether the discount was actually paid on Marlboro or 
L&M sales or, if on both, in what proportion.  For example, PM Thailand did not provide any invoice 
showing that these discounts had actually been paid.818  Thailand also points to the differences 
                                                      
814 As noted in Section VII.C.7(d)(ii) below, if the importer knows that a customs authority used a 
valuation method under Article 7 when it requests for the explanation under Article 16 as well as under Article 7.3, we understand that the same request may be used for both purposes.  The customs authority could 
then provide the requested explanation as well as information through the same instrument. 
815 As described above in para. 7.330, PM Thailand mistakenly omitted transportation costs in its letter 
of 21 February 2007. 
816 Panels in previous disputes addressed a similar issue.  In Argentina – Ceramic Tiles and Argentina – 
Poultry Anti-Dumping Duties , for instance, the panels considered that ex post facto  explanations provided by 
Argentina in the Panel proceedings should not be taken into account in the panels' analysis. (Panel Report, 
Argentina – Ceramic Tiles , para. 6.27; Panel Report. Argentina – Poultry Anti-Dumping Duties , para. 7.178).  
The panel in Argentina – Ceramic Tiles also refers to the panel's analysis in Guatemala – Cement (II) , 
para. 8.245.  We further note that the panels in Argentina – Ceramic Tiles and Guatemala – Cement (II) 
nonetheless continued to examine th e parties' claims based on the ex post facto  explanations.  The panel in 
Argentina – Poultry Anti-Dumping Duties , however, did not proceed to examine ex post explanations.   
817 Exhibit PHL-169. 
818 Thailand's response to Panel question No. 29.  WT/DS371/R 
 Page 221 
 
 
  between the GAQ prices reported in the July 2006 letter and the 21 Februa ry 2007 and 7 March 2007 
letters on which the deductive price was actually based.819  
7.367  On the topic of the copies of the annual filings  submitted by PM Thailand, in particular the 
FY 2005 filing made in the July 2006 letter, in cluding an explanatory note in PM Thailand's 
[[xx.xxx.xx]] document of July 2006820, Thailand  argues that the explanatory note consists merely of 
an assertion that "sales allowances are sales di scounts for [company name]".  Information about 
discounts on a different price reported on July 2006 do not establish the existence or amount of 
discounts that might have been paid on the pri ce reported in the 21 February 2007 letter that was 
actually used to establish the deductive value.821 
7.368  Regarding the information submitted in the spre adsheet attached to its 7 March 2007 letter,  
the Philippines submits that the grant of sales allowances, and their amount, is a function of factors 
including events in the marketplace; the evolu tion of the business and ma rketing strategy; and, 
considerations relating to particular customers (e.g . sales volumes).  As a result, sales allowances are 
not granted automatically on each sale, or in each month, and allowances do not simply track sales volumes.
822  Negative allowances account fo r sales allowances that were granted in relation to goods 
subsequently returned.  The allowance initially gr anted was, therefore, cancelled and appears as a 
negative number.823  As regards the lack of a breakdown of sales allowances between Marlboro and 
L&M , an aggregate sales allowances was given because PM Thailand was not asked to provide 
additional information on the sales allowances.824  It was not aware that brand-specific amounts for 
sales allowances and proof thereof, were requested as part of its 7 March response.  In any event, 
brand-specific amounts were provided in the 21 February 2007 letter.825  
7.369  In response to Thailand's statement that there is  a lack of invoice showing actual payment of 
these discounts, the Philippines holds that Thailand's ex post  explanation suggests that Thai Customs' 
treatment of the evidence in the 7 March letter wa s not even-handed.  Thai Customs accepted the 
GAQ price shown in the spreadsheet, without in formation such as "invoices" to support the GAQ 
prices shown in the spreadsheet.  However, Thaila nd now asserts that Thai Customs could not accept 
other information, shown in the same spreadsheet , regarding sales allowances because there were no 
supporting "invoices".  Differences between the GAQ prices reported in PM Thailand's letters of 17 
July 2006, 21 February 2007, and 7 March 2007 are explained by the fact that the July 2006 letter 
concerned the GAQ for FY 2005, whereas the other letters concerned the GAQ for FY 2006.  The 
differences have no bearing on sales allowances.826 
7.370  Moreover, the Philippines argues that annual filin gs, in particular the FY 2005 filing made in 
July 2006, explicitly provided a breakdown of the deduction values for sales allowances, provincial 
tax and domestic transportation (the most recen t filing before Thailand began conducting assessments 
in March 2007).827  This information was resubmitted by le tter of 8 August 2006 and referred to in a 
separate letter of 25 October 2006.828 
                                                      
819 Thailand's response to Panel question No. 29. 
820 Exhibit PHL-42. 
821 Thailand's response to Panel question No. 29. 
822 Philippines' second written submission, para. 248. 
823 Philippines' second written submission, para. 249. 
824 Philippines' second written submission, para. 250. 
825 Philippines' second written submi ssion, para. 251; Exhibit THA-39. 
826 Philippines' second written submission, para. 252. 
827 Philippines' first oral statement, para. 135; Exhibits PHL-40, PHL-41, and PHL-42. 
828 Philippines' first oral statement, pa ra. 136; Exhibits PHL-56 and PHL-60. WT/DS371/R 
Page 222  
 
  Provincial taxes 
7.371  The Philippines  claims that the spreadsheet attached to its 7 March 2007 letter provided 
information related to the GAQ price, including th e total sales receivable ("Sales A/R") and the net 
sales receivable ("Net Sale to PM"), with deductio ns to account for the difference between the two 
("Less VAT", "Less Discount", "Less Other S.A.", and "Less P. Tax").  This last element is the 
provincial tax.
 829   
7.372  The Philippines further argues that PM Thailand's distribution agreements provide that the 
provincial tax is payable by PM Thailand and p assed on to its customers through a higher price.830  
The GAQ price is inclusive of this amount.  PM Thailand deducted the provincial tax in each of the 
filings made for FYs 2003, 2004, 2005, and 2006.  The FY 2005 fili ng was submitted on 6 July 2006, 
resubmitted on 8 August 2006, and referenced in a letter on 25 October 2006.  The provincial taxes 
were also mentioned in a letter of 28 June 2007.  Thai Customs sought no additional information on 
this issue and, as Exhibit THA-13 shows, failed to deduct the provincial tax.831  Given Thai Custom's 
failure to seek additional information regarding th ese items in its 27 February 2007 request, Thailand 
cannot now rely on the fact that PM Thailand di d not provide the required supporting information.832 
7.373  Thailand  argues that provincial taxes are payable only on sales in provinces outside the 
Bangkok area.833  Specifically concerning PM Thailand's cigarette sales, Thailand estimates that one 
half of all cigarette sales, including sales of imports, are made outside Bangkok.834  Based on the 
national figures, it could not be assumed that PM Thailand paid provincial ta xes on the sales on which 
the GAQ price was actually based. Regarding the information put forward in the spreadsheet 
accompanying the 7 March 2007 letter, Thailand subm its that the printout from PM Thailand's sales 
records lists total provincial taxes paid during each  month (in the column headed "less P Tax"), but 
that it shows no values for provincial taxes for sales to individual customers, including, in particular, 
the sales to the customer on which the GAQ price was based. In these circum stances, the evidence 
before Thai Customs, when it made its valuati on determinations for these entries, did not support 
adjustment.835   
7.374  In relation to the Philippines' argument on the distribution agreements, Thailand  argues that to 
support its argument that an adjustment should ha ve been made, the Philippines relies on evidence 
that does not appear to have been provided to Thai Customs at the time it made its valuation 
determinations.836  This evidence includes a sample provi ncial tax return filed by PM Thailand837 and 
a standard distribution agreement with a clause providing that PM Thailand would pay provincial 
taxes.838  Thailand stresses that the Panel should ensure that it reviews the Thai Customs' 
determination in the light only of the contemporan eous evidence before Thai Customs and not of 
evidence submitted ex post facto  to the Panel.839  However, even if this ev idence had been before Thai 
Customs at the time it made its determinations, it does not establish that PM Thailand paid provincial 
taxes on the sales on which the GAQ prices were based.  The provincial tax retu rn does not appear to 
                                                      
829 Philippines' second written submission, para. 258. 
830 Philippines' first oral statement, para. 141. 
831 Philippines' first oral statement, para. 141. 
832 Philippines' second written submission, paras. 248-253. 
833 Thailand's response to Panel question No. 29. 
834 Thailand's response to Panel question No. 29. 
835 Thailand's response to Panel question No. 29. 
836 Thailand's response to Panel question No. 29. 
837 Exhibit PHL-144. 
838 Exhibit PHL-146. 
839 Thailand's response to Panel question No. 29.  WT/DS371/R 
 Page 223 
 
 
  have anything to do with to whom the GAQ sal es were made, and there was no evidence that 
PM Thailand had a distribution agreement requiring it to pay provincial taxes with that customer.840   
Transportation costs 
7.375  In respect of transportation costs, the  Philippines  submits that although the 21 February 2007 
letter mistakenly omitted transportation costs, Th ai Customs knew that PM Thailand had included a 
deduction for internal transportation costs in annua l filings covering the three year period from 2003 
to 2005 for either "inland freight " or "domestic transportation".841  In particular, the FY 2005 filing 
shows such a deduction, this is the most recent f iling before the current year in which the customs 
value of the entries at issue we re assessed, and it was submitted on 7 July and 8 August 2006 and also 
referenced in a letter of 25 October 2006.842  Therefore, if Thai Customs had queries regarding the 
facts surrounding this deduction, Thai Customs s hould have clarified whether PM Thailand pursued 
such a deduction or requested additional information for clarification.843 
7.376  The Philippines also points out that PM Thailand requested a deduction for transportation 
costs in its letter of 28 June 2007.844 Although Thailand argues that this letter was not before Thai 
Customs at the time it made its valuation decisi ons, the letter was submitted before Thai Customs 
assessed the customs value for [[xx.xxx.xx]] of  the [[xx.xxx.xx]] entries at issue.845    
7.377  Thailand  submits that PM Thailand never clai med a deduction.  Specifically, neither 
PM Thailand's letter of 21 February 2007, nor the sp readsheet attached to the 7 March 2007 letter, nor 
any other correspondence from PM Thailand regarding th e deductive value for these entries refers to a 
claim for a deduction for inland transportation costs.846 
7.378  Thailand further contends that in any event,  the documents submitted by the Philippines in 
previous years do not establish that PM Thailand it self incurred transportation costs with respect to 
the sales on which the GAQ price w as based.  Further, although the Philippines also refers to 
documents submitted in the context of appeals of these entries before the BoA, these documents were 
not before Thai Customs at the time of the valuation decision and thus cannot be used in this dispute.  
Besides, Thailand asserts that nothing in the 28 Ju ne 2007 letter cited by the Philippines constitutes 
evidence that PM Thailand incurre d inland transportation costs.847  
Analysis by the Panel 
Sales allowances 
7.379  Regarding the actual data submitted, Thailand re fers to the spreadsheet attached to the 
Philippines' 7 March 2007 letter.  Thailand argues th at this evidence does not prove that the sales 
allowances claimed for the deduction were provide d to the company on which the GAQ price was 
based.  Thailand points to the following elements in support of its position:  in many of the months for 
which data was provided, no discount was provided to  this company; in September, the month in 
which the greatest single quantity was sold to this customer, the amount of the discount was not equal 
to, but was actually less than the amounts of the discount claimed respectively for Marlboro and 
                                                      
840 Thailand's response to Panel question No. 29. 
841 Exhibits PHL-40, PHL-41, PHL-42 and PHL-43. 
842 Philippines' second written submission, para . 274; Exhibits PHL-55, PHL-57 and PHL-60. 
843 Philippines' second written submission, para. 277. 
844 Exhibit PHL-142.   
845 Philippines' second written submi ssion, para. 275; Exhibit PHL-198. 
846 Thailand's response to Panel question No. 29. 
847 Thailand's response to Panel question No. 29; Exhibit PHL-142, p. 13. WT/DS371/R 
Page 224  
 
  L&M ; and PM Thailand provided no me thod or breakdown of data to determine whether the discount 
was actually paid on Marlboro or L&M sales or, if on both, in what proportion.  
7.380  The Philippines does not dispute that the subject  spreadsheet in Exhibit THA-39 shows that 
the actual amount of sales allowances given to th e company on which the GAQ price was based was 
less than the actual deductions claimed for Marlboro and L&M .  The Philippines, however, asserts 
that sales allowances are not granted automatically on each sale, or in each month, and allowances do 
not simply track sales volumes and that negative a llowances account for sales allowances that were 
granted in relation to goods subsequently returned.   
7.381  In assessing the parties' arguments in respect of  the deduction of sales allowances, we are not 
presented with any evidence that clarifies whethe r the amount of sales allowances that a company 
declares for deduction to the customs authorities mu st exactly match the amount of sales allowances 
actually provided by the company in the period under evaluation.  Thailand, as the party claiming that sales allowances may only be deducted when tied to th e particular unit price for the GAQ sale, had the 
burden of proving its position with supporting evidence.   Thailand, however, failed to do so.  Further, 
Thailand is not disputing the fact that sales allo wances were provided to the company on which the 
GAQ price was based for the valuation of the imported cigarettes at issue.  What is contested by 
Thailand is that the amounts of sales allowances s hown on the spreadsheet provided by PM Thailand 
are less than the amounts requested for the deduction for Marlboro and L&M .  In the light of these 
circumstances, we do not see how the Thai Customs' decision not to deduct sales allowances at all, as 
opposed to adjusting the deductible amount for the sales allowances of the imported cigarettes at 
issue, can be justified.  Even if Thailand's pos ition concerning the determination of the deductible 
amount for sales allowances were correct, this does not render the Thai Customs' decision not to 
deduct sales allowances consistent with Article  5.1 of the Customs Valuation Agreement. 
Provincial taxes 
7.382  In the light of our finding above in paragraph 7.360 that provincial taxes payable must be 
deducted if the information shows us ual payments made for local taxes even if they are not included 
in the sales price, we consider that it is not necessar y for us to continue with the parties' arguments on 
whether the evidence submitted by PM Thailand to Th ai Customs show the inclusion of the requested 
provincial taxes in the GAQ price used for the deductive calculation. 
Transportation costs 
7.383  The next issue raised by the parties in rela tion to transportation costs is whether Thai 
Customs' decision not to deduct this item was not inc onsistent with the principles of Article 5 because 
PM Thailand failed to make a specific request for its  deduction.  In respect of the transportation costs 
at issue in this case, as the Philippines acknowle dges, PM Thailand mistakenly omitted them in its 
letter of 21 February 2007.  Thailand argues that due to PM Thailand's failure to claim a deduction for 
transportation costs, it did not have to deduct these co sts, but even if the deduction had been claimed, 
the documents submitted by PM Thailand do not estab lish that PM Thailand incurred transportation 
costs with respect to the sales on which the GAQ  price was based.  Nonetheless, we note the 
following Thai Customs' statement relating to the deductive valuation method in the original minutes 
of the 6 March 2007 meeting: 
"To prescribe customs prices by using deductive value, the deductive value must 
comprise the following:  selling price of the imported thing per unit sold at the first 
sale in the country, and sold in the biggest volume to the person with no relationship less commission or normal profit and ge neral expenses less insurance cost
,  WT/DS371/R 
 Page 225 
 
 
  transportation cost in the country  and less import tariff, other taxes for the import and 
the sale of such things."848   
7.384  This shows that Thai Customs understood a nd discussed at the 6 March 2007 meeting that 
transportation costs in the country of importation, as  one of the items that are subject to deductions 
under Article 5, had to be deducted in calculating the customs value of the cigarettes at issue.  As we 
explained above, a valuation process must be that of consultation between an importer and a customs 
administration.  To the extent that transportation costs usually are incurred in the resale of goods in the country of importation, Thai Customs had to re ly on the available evidence or, if not, consult 
PM Thailand as regard this item if it ha d queries on the available evidence.   
7.385  As such, it is not necessary for us to proceed  with the parties' argument on whether Thai 
Customs had sufficient information and data to make the deduction for transportation costs.   
Conclusion 
7.386  As noted above in paragraph 7.365, we decide d to examine the parties' arguments on Thai 
Customs' decision not to deduct sales allowances, pr ovincial taxes and transportation costs despite our 
earlier conclusion based on the absence of an adequate  explanation in the record that Thai Customs 
acted inconsistently with its obligations under Article  7.1 of the Customs Valuation Agreement.  This 
was to help resolve the parties' dispute on the de ductibility of these items.  Our examination of the 
arguments and evidence leads to th e conclusion that even if we were to base our findings in respect of 
the Philippines' claim under Article 7.1 on Thailand's explanations as provided in this proceeding, 
Thai Customs' decision not to deduct the three items at issue is not supported by the evidence before it 
at the time of determination. 
(d) Whether Thai Customs acted inconsistently with Article 7.3  
(i) Main arguments of the parties 
7.387  The Philippines claims that contrary to the obligations  in Article 7.3, despite PM Thailand's 
request, Thailand did not inform PM Thailand in writing of the customs value determined under the 
provision of this Article and the method used to de termine such value.  Article 7.3 requires that the 
customs authority explain to the importer, upon requ est, "the method used to determine such value".  
The term "method" is defined, inter alia , as "a way of doing anything, esp. according to a defined and 
regular plan; a mode of procedure in any activity, business, etc".
849  The Philippines therefore argues 
that Article 7.3 requires the customs authority to  inform the importer of its "defined" "mode of 
procedure" – that is, the particular procedural steps to be followed in  assessing the customs value 
under Article 7.  Thai Customs did not do this at the time of the valuation at issue here. 
7.388  PM Thailand requested information on the met hod used in assessing its customs values by its 
letter of 5 April 2007.850  The Philippines acknowledges that Thai Customs responded to its request by 
the 12 April 2007 letter, in which it provides that it  applied, "Method 6, whic h is the deductive value 
under the 'Fall Back' method".  However, in the light of the nature of the obligation under Article 7.3, 
the Philippines is of the view that PM Thailand was not notified of the "method used" within the 
meaning of Article 7.3, because merely stating the method used is not adequate information regarding 
                                                      
848 Exhibit PHL-74, p. 6 (emphasis added). This statement is not included in the revised minutes 
(Exhibit THA-37).  
849 Exhibit PHL-87. Oxford English Dictionary , J.A. Simpson and E.S.C. Weiner (eds.) (Clarendon 
Press, 1989, 2nd ed.), p. 690. 
850 PM Thailand's letter to Thai Customs of 5 April; Exhibit PHL-69. See also  Philippines' first written 
submission, para. 182; response to Panel question No. 112.  WT/DS371/R 
Page 226  
 
  the procedural steps that comprised the deduc tive valuation method used.  Specifically, the 
Philippines claims that Thailand omitted to show th e starting point for the deductive value calculation; 
the sources of the data used to determine the st arting point; which components were deducted; how 
the amounts to be deducted for these components we re calculated; and how this "deductive value 
under the 'Fall Back' method" differed from the deduc tive valuation approach under Article 5, which 
Thailand rejected.
851  The Philippines provides that, with the omission of such "basic information, it 
cannot understand how Thailand valued  PM Thailand's imports or how Thailand arrived at its erratic 
and arbitrary valuation results".  Therefore, Tha iland acted inconsistently with Article 7.3 of the 
Customs Valuation Agreement.852 
7.389  In response to a question from the Panel, however , the Philippines submits that an explanation 
under Article 7.3 is more limited in scope than that  under Article 16 because it relates solely to the 
valuation process under Article 7.  Under Artic le 7.3, there is no obligation to explain how the 
determination as a whole was made, as there is under Article 16.  Therefore, the Philippines explains 
that no requirement exists under Article 7.3 to expl ain how the facts support the rejection of the prior 
valuation methods under Articles 1, 2, 3, 5, and 6.853 
7.390  Thailand has not submitted any counter-arguments against this claim.854 
(ii) Analysis by the Panel 
7.391  Article 7.3 provides: 
"If the importer so request, the importer shall be informed in writing of the customs 
value determined under the provisions of  this Article and the method used to 
determine such value." 
7.392  Under Article 7.3, therefore, when there is a request from an importer, the customs authority 
must inform the importer of the customs value de termined and the method used to determine such 
value.   
7.393  We observe that the obligation to inform the customs value determined under the provisions 
of Article 7.3 and the method used to determine su ch value can be compared to the obligation under 
Article 16 to provide an explanation as to how the customs value was determined.  We clarified above 
that the explanation to be provided under Article 16 must be sufficient to make clear and give details 
of how the customs value of the importer's goods was determined, including the basis for rejecting the 
transaction value, the identification of the method used and the illustration of how the method was applied in reaching the final customs value.  The information to be provide d under Article 7.3 on the 
other hand may be different from the expl anation to be given under Article 16, inter alia , in its scope, 
as the Philippines submits.  In other words, as Arti cle 7 is a provision addressing how to determine the 
customs value when it cannot be determined under the provisions of Articles 1 through 6, the information to be delivered to an importer under Artic le 7.3 may be confined to the specific valuation 
method used within the meaning of Article 7 and may not include, for example, the basis for rejecting 
the transaction value.   
7.394  We also consider that the request for inform ation under Article 7.3 would become possible 
only if the importer was already aware at the time of requesting that the customs authority had relied 
on a valuation method under Article 7.  Given the pa rticular nature of Article 7, i.e. allowing the 
                                                     
 
851 Philippines' first written submission, para. 384. 
852 Philippines' first written submission, para. 385. 
853 Philippines' response to Panel question No. 112. 
854 Philippines' second written submission, para. 280.  WT/DS371/R 
 Page 227 
 
 
  customs authority to use any of the valuation methods under Articles 2 through 6 with a reasonable 
flexibility, we can envisage a situation where th e importer wishes to clarify the exact method used 
under Article 7 once it is known that the customs aut hority used one of the methods falling within the 
scope of Article 7.   
7.395  To the extent that the information to be provi ded under Article 7.3 is linked to a particular 
method used under Article 7, the content of the info rmation, in our view, needs to be specific and 
elaborative on the method chosen as well as the app lication of that method to derive at the final 
customs value.  The term "method" in Article 7.3 is defined as " noun . I. Procedure for attaining an 
object.  2. A mode of procedure; a (defined or sy stematic) way of doing a thing, esp. (with specifying 
word or words) in accordance with a particular th eory or as associated with a particular person".855  
The ordinary meaning of the word "method" therefor e indicates that more than a mere identification 
of the type of valuation method used must be pr ovided, including how a given method was applied to 
calculate the customs value of the imported goods concerned.   
7.396  The Philippines refers to the 5 April 2007 lette r as PM Thailand's request made to Thai 
Customs pursuant to Article 7.3 for the customs valu e and the method.  This is the same letter in 
which PM Thailand requested an explanation pur suant to Article 16 of the Customs Valuation 
Agreement.856  We note in this regard th at Thailand did not dispute the Philippines' characterization of 
this letter as the written request for information su bmitted to Thai Customs under Article 7.3.  The 
Philippines further submits that Thai Customs' respon se to this request was made in the 12 April 2007 
letter, which is the very letter in which, the pa rties agree, Thai Customs provided an explanation 
pursuant to Article 16 of the Customs Valuation Agreement.   
7.397  We noted above that the 12 April 2007 letter did not satisfy the requirements of the 
explanation to be provided under Article 16.  As ex amined in detail in Section VII.C.6 above, we do 
not consider that the mere identification of a va luation method used by a customs authority as Thai 
Customs did in the 12 April 2007 letter (i.e. th e Fall Back method) without setting out the actual 
application of the particular method to arrive at the customs value, is su fficient for the purpose of 
Article 7.3. 
7.398  Accordingly, we find that the Philippines estab lished a prima facie case that Thai Customs 
acted inconsistently with the obligations under Ar ticle 7.3 of the Customs Valuation Agreement. 
8. Article 10 of the Customs Valuation Agreement 
(a) Main arguments of  the parties 
7.399  The Philippines  claims that Thailand has breached Article 10 of the Customs Valuation 
Agreement by repeatedly revealing to the press PM Th ailand's c.i.f. price, tr ansaction values and 2005 
import volumes.857  
7.400  The Philippines argues that import prices and import volume are confidential information "by 
nature" within the meaning of Article 10 of the Cu stoms Valuation Agreement. It points out that 
Thailand admitted that "there is no dispute that c. i.f. prices for imported cigarettes are confidential 
information and that the disclosure of this in formation would prejudice the legitimate commercial 
                                                      
855 The New Shorter Oxford English Dictionary , (Fifth Edition) Oxford University Press, Vol. I, 
p. 1762 (2002). 
856 If an importer already knows that the customs authority used a method under Article 7, it is not 
inconceivable that the importer may request through the same communication for both the information under Article 7.3 as well as the e xplanation under Article 16. 
857 Philippines' first written submission, paras. 386-409. WT/DS371/R 
Page 228  
 
  interests of importers of cigarettes".
858  Thus, Article 10 prohibits the disclosure of such information 
by customs authorities, unless the company agr ees to have its information made public. The 
Philippines argues that PM Thailand considered this information as confidential: it repeatedly 
exhorted the Thai government to stop releasing such  information, for instance by requests dated 
27 September 2006859 and 27 April 2007.860 The Philippines submits that, although the aggregate 
quantities of imported cigarettes are commonly made  public, no company-specific information should 
be made available by Thai authorities. 
7.401  The Philippines claims that on 9 August 2006861, 29 August 2006862, 31 August 2006863, and 
again on 27 September 2006864, Thai Government officials have discl osed PM Thailand's c.i.f. price to 
the press.  Moreover, the Philippines argues that  on 10 August 2006, "unnamed sources from the 
Customs department" declared to the Post Today  that " Marlboro 's import price is Bt.[[xx.xxx.xx]] and 
retail selling price Bt. 65 while L&M 's import price [is] Bt.[[xx.xxx. xx]] per pack and retail selling 
price is Bt. 47 per pack.  In 2005, [[xx.xxx.xx]] of Marlboro  and [[xx.xxx.xx]] packs of L&M were 
imported to Thailand for domestic sale".865  Thus both PM Thailand's c.i.f. price and imports volume 
were made public. 
7.402  The Philippines contends that another breach of confidentiality occurred on 1st June 2009866, 
as Thai officials revealed PM Tha iland's transaction values to the press.867 This contradicts Thailand's 
argument that those claims concern past acts on which the Panel needs not make recommendations or findings. 
7.403  Thailand considers that the Philippines' claim unde r Article 10 of the Customs Valuation 
Agreement relates to past completed acts. Hen ce the Panel should not make any finding thereof.
868  
7.404  With regards to import volumes and the declar ed transaction value, Thailand alleges that 
import statistics are generally not confidential and, th erefore, in a situation in which an importer was 
the sole importer of a particular commodity, and th is importer decides to reveal this information, its 
import volumes would not be confidential statistics.869  More generally, Thailand claims that the 
Philippines has not discharged its burden of est ablishing that the information at issue had a 
confidential status at the time is was disclosed.870 
                                                      
858 Philippines' second oral statement, para. 55, c iting Thailand's second written submission, para. 286. 
859 Exhibit PHL-180, para. 6. PM Thailand requested the Thai Government to "refrain from releasing 
any o the Company's confidential and price sensitive information to the media". 
860 Exhibit PHL-112, p. 10. 
861 "Thailand Considers Pulling Wine, Cigarettes out of AFTA as Loopholes Exploited ", Bangkok Post, 
9 August 2006. Exhibit PHL-54.  " Customs Agreed to Adjust Prices of Cigarettes - Wine ", Daily News, 
9 August 2006.  Exhibit PHL-64.   
862 "A proposal will be made to the Cabinet to fix tax evasion by foreign cigarette importers ", 
Matichon, 29 August 2006. Exhibit PHL-85.   
863 "Thanong presses to raise tax on imported cigarettes ", Khao Hun, 31 August 2006. Exhibit PHL-1.   
864 "Excise Plans to Ban Importation of Cigarettes ", Krungthep Turakij, 27 September 2006. 
Exhibit PHL-86.   
865 "Customs put pressure on ‘Marlboro'" , Post Today, 10 August 2006.  Exhibit PHL-48.   
866 Philippines first oral statement, para. 20. " Authorities Plan to Plug Loopholes" , Bangkok Post, 
1 June 2009. Exhibit PHL-159. 
867 Philippines first oral statement, para. 20. 
868 Thailand's first oral statement, para. 30. 
869 Thailand's response to question No. 35. 
870 Thailand's response to question No. 35.  WT/DS371/R 
 Page 229 
 
 
  (b) Analysis by the Panel 
7.405  The Philippines claims that Thailand breach ed Article 10 of the Customs Valuation 
Agreement when Thai government officials disc losed the c.i.f. price, transaction values of 
PM Thailand for the year 2006, and PM Thaila nd's import volumes for the year 2005 to the press.871  
The Philippines argues that this information is confid ential by nature within the meaning of Article 10 
of the Customs Valuation Agreement.872 
7.406  Article 10 of the Customs Valuation Agreement provides: 
"All information which is by nature confidential or which is provided on a 
confidential basis for the purposes of custom s valuation shall be treated as strictly 
confidential by the authorities concerned w ho shall not disclose it without the specific 
permission of the person or government providing such information, except to the 
extent that it may be required to be disclosed  in the context of judicial proceedings."  
7.407  We therefore understand that Article 10 of the Customs Valuation Agreement prohibits 
Customs authorities from disclosing information whic h is in essence confidential when an importer 
provided it for the purpose of customs valuation. 
7.408  The Customs Valuation Agreement neither defi nes confidential information nor provides a 
specific list of information that qualifies as confidentia l information.  We find useful guidance in the 
discussions of the Ad Hoc Group on Implementati on in the Committee on Anti-Dumping Practices.  
The record of the discussions indicates that informati on can be considered as confidential if it is not in 
the public domain and if its disclosure would be likely inter alia : "to be of significant competitive 
advantage to a competitor ... , to have a signifi cant adverse effect upon the party who submitted the 
information ... , to prejudice the commercial position of a person who supplied or who is the subject 
of the information, ...".873 
7.409  Both parties agree that the PM Thailand's c.i.f. price, transaction values and imports volume 
were revealed to the press by Thai officials.  The evidence before us shows that Thai government 
officials were involved in the revealing of this info rmation to Thai newspapers , both in the months of 
August and September 2006, and in June 2009.874  For instance, "unnamed sources from the Customs 
department" declared on 10 August 2006 to the Post Today  that " Marlboro 's import price is 
Bt.[[xx.xxx.xx]] and retail selling price Bt. 65 while L&M 's import price [is] Bt.[[xx.xxx.xx]] per 
pack and retail selling price is Bt. 47 per pack.  In 2005, [[xx.xxx.xx]] of Marlboro  and [[xx.xxx.xx]] 
packs of L&M were imported to Tha iland for domestic sale".875  Ms. Kanyanuch Sorthip, the Thai 
Department of Special Investigation deputy direct or-general revealed on 29 August 2006 that "as for 
the imported cigarette L&M , the c.i.f. price is Bt[[xx.xxx.xx]], retail selling price is Bt47 each. Royal 
Deluxe's and Krongthip Deluxe's factory price is  Bt7.946, with the retail selling price of Bt53. 
Marlboro  is priced at Bt[[xx.xxx.xx]], retail selling price of Bt65".876  
7.410  Thailand does not dispute that PM Thailand's c.i.f. price is classified as confidential 
information.877  Thailand also admits that PM Thailand's customs value is confidential information.878  
                                                      
871 Philippines' first written submission, para. 386. 
872 Philippines' first written submission, para. 407. 
873 G/ADP/AHG/W/65 
874 Exhibits PHL-1, PHL-48, PHL-54, PHL-64, PHL-85, PHL-86, PHL-112, PHL-159 and PHL-180. 
875 "Customs put pressure on ‘Marlboro'" , Post Today, 10 August 2006.  Exhibit PHL-48.   
876 Exhibit PHL-85, p. 2. 
877 Philippines' second written submission, para. 286 ("th ere is no dispute that c.i.f. prices for imported 
cigarettes are confidential information and that the disclosure of this information would prejudice the legitimate 
commercial interests of importers of cigarettes"). WT/DS371/R 
Page 230  
 
  Concerning import volumes, however, Thaila nd submits that although import volumes may be 
confidential information, they would not be confid ential either when a company is the sole importer 
of a given good, or when the company has agreed that the information shall be publicly disclosed.
879  
In this regard, we note that PM Thailand is  not the sole cigarette importer in Thailand.880  
Furthermore, at no point has PM Thailand agreed to make its confidential information available to the 
public.  On the contrary, PMTL has insisted on mu ltiple occasions that this information should be 
kept confidential.881  Moreover, we agree that the very disclosure of PM Thailand's c.i.f. price, 
transaction values and imports volume information could cause commercial damages to PM Thailand 
by giving its competitors access to its sensitive business information.  For example, the nature of such 
information could give competitors useful indica tions on PM Thailand's business strategy, including 
profit margins.  Thailand did not specifically respon d to this argument.  Rather, it acknowledged that 
"the disclosure of [the c.i.f. price] information would prejudice the legitimate commercial interests of 
importers of cigarettes".882 
7.411  Therefore, the Panel concludes that Thailand acted inconsistently with Article 10 of the 
Customs Valuation Agreement by disclosing confiden tial customs valuation information provided by 
PM Thailand to Thai Customs in the Thai media. 
D. ARTICLE  III:2,  FIRST SENTENCE OF THE GATT 1994  – VAT  FOR CIGARETTES  
1. Introduction 
7.412  The Philippines claims that Thailand acts incons istently with Article III:2, first sentence, 
because Thailand imposes a VAT on imported cigarettes "in excess of" the VAT imposed on like domestic cigarettes by establishing a discriminatory tax base for VAT imposed on imported 
cigarettes.
883  Thailand argues that the tax base for a VAT is established in the same manner for both 
imported and domestic cigarettes and that the Philippines has not established a prima facie  case that 
imported cigarettes are taxed "in excess of" domestic cigarettes. 
7.413  Article III:2 of the GATT 1994 provides: 
"Article III 
National Treatment on Internal Taxation and Regulation  
2. The products of the territory of an y contracting 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 excess of those applied, directly 
or indirectly, to like domestic products.   Moreover, no contracting party shall 
otherwise apply internal taxes or other in ternal charges to imported or domestic 
products in a manner contrary to the principles set forth in paragraph 1." 
                                                                                                                                                                     
878 Philippines' first oral statement, para. 197 ("With respect to imported cigarettes, the customs value is 
confidential and cannot be published"). 
879 Thailand's response to Panel question No. 35. 
880 Exhibit PHL-77. 
881 Exhibit PHL-159 and PHL-112, p. 10. 
882 Philippines' first oral statement, para. 197 ("With respect to imported cigarettes, the customs value is 
confidential and cannot be published"). 
883 Philippines' first written submission, paras. 458-459 and 493-516; first oral statement, 
paras. 208-220;  second written submission, paras. 369- 427; comments of 16 September 2009, para. 19; second 
oral statement, para. 74.  WT/DS371/R 
 Page 231 
 
 
  7.414  As clarified by the Appellate Body in Canada – Periodicals , the question of whether a 
measure is consistent with the first sentence of  Article III:2 of the GATT 1994 requires a two-step 
analysis:  first, whether imported and domestic products are like and, second, whether imported 
products are subject to an internal tax in excess of that applied to the domestic products.  If the 
answers to both questions are affirmative, then th ere is a violation of Article III:2, first sentence.884 
7.415  We will commence our analysis by identifying the specific VAT-related measure(s) that the 
Philippines claims are in violation of Article III:2, first sentence. 
2. Measures at issue 
7.416  In its panel request, the Philippines identifi es the following as the measures through which the 
Thai VAT system operates: 
• Sections 79/5, 81, 82/7, 88, 88/2, 88/5, 88/6,  89(4), and 89/1 of the Revenue Code of 
Thailand; 
 
• Section 23 of the Tobacco Act B.E. 2509 (1966);  
 
• Royal Decree, issued under the Revenue C ode, Governing the Reduction of the Value 
Added Tax Rates (No. 479), B.E. 2551 (2008); 
 
• Royal Decree issued under the Revenue Code Governing Exemption from Value 
Added Tax (No. 239) B.E. 2534 (1991); 
 
• Order of the Revenue Department No. Por 85/2542 (1999);  
 
• Notification of the Director-General of the Revenue Department on VAT (No. 10);  
 
• MRSP Notices issued by the Director-General  for Excise.  The currently applicable 
MRSPs are set out in the Notice B.E. 2550 (2007) of 29 August 2007 (for domestic 
products) and in the Notice B.E. 2551 (2008) of 19 August 2008 (for imported 
products); and 
 
• any amendments, implementing measures, or other related measures. 
 7.417  The Philippines requests that the Panel finds that  Thailand violates Article III:2, first sentence 
of the GATT 1994 by imposing a VAT on imported cigarettes "in excess of" the VAT imposed on 
like domestic cigarettes through the level of the MR SPs (i.e. the tax base for VAT).  Specifically, the 
Philippines claims that the MRSP Notices issued for Marlboro and L&M on 7 December 2005, 18 
September 2006, 30 March 2007,  and 29 August 2007 violat e Article III:2 of the GATT 1994.
885   
7.418  The Panel notes that the Philippines submitte d in its comments of 9 November 2009 on 
Thailand's second oral statement, that by mistake, in its second oral statement, it omitted to include 
the MRSP Notice of 19 August 2008 as part of the MR SP Notices that form part  of this proceeding.886  
                                                      
884 Appellate Body Report, Canada – Periodicals , pp. 22-23, DSR 1997-I, 449, at  468.  The Panel in 
this case laid down the two step test, which was referred  to and upheld by the Appellate Body (Panel Report, 
Canada – Periodicals , para. 5.21). 
885 Philippines' comments of 16 September 2009, para. 19;  second oral statement, para. 75; response to 
Panel question No. 128.  In Section VII.B.1(c) above, we  explained that these notices are within our terms of 
reference. 
886 Philippines' comments on Thailand's second oral statement, para. 16. WT/DS371/R 
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  The Panel observes that  while this specific Notice is  identified in the Philippines' Panel request  and 
is referred to as an example of Thailand's MRSP calculation in certain parts of  the Philippines' 
written submissions,  the Philippines  never put forward a claim, not to mention specific arguments, in this proceeding that the 19 August 2008 Notice itself violates Article III:2  until its comments of 9 November 2009.  In its comments on the Interim Pa nel Report, the Philippines provided a table which 
presents an overview of all its submissions related to  this MRSP Notice, we consider that the referred 
submissions can be divided into three types: (i) submissions referring to the marketing cost 
calculation for the 18 August 2008 MRSP Notice; (ii) s ubmissions related to the absolute difference in 
MRSPs between domestic and imported cigarettes; a nd (iii) submissions referring to other aspects of 
the 18 August 2008 MRSP Notice.  
7.419  We consider that submissions of type (ii) and (iii) are too general to be considered 
"arguments" or "evidence" specifically put forwar d in connection with the Philippines' claim under 
Article III:2, first sentence, as in those subm issions the 2008 MRSP Notice is  simply used as an 
example to endorse a different claim.
887  We agree that submissions of type (i), on the contrary, deal 
with the calculation of the marketing costs, and are of a more substantive nature. In these submissions, 
the Philippines puts forth that the December 2005 MR SP Notice is inconsistent with Article III.2 of 
the GATT 1994 because the marketing costs for this Notice have been incorrectly calculated, and 
since these costs are al so used for the calculation of the 2008 (and 2009) MRSP, the 2008 MRSP is 
also in violation of Article III:2. However, despite  the fact that the Philippines is referring several 
times to the August 2008 MRSP Notice and also provides information on the Notice in several exhibits,
888 we do not consider this information to cons ist of claims or arguments on the Notice, and 
accordingly, we are not in a position to make a fi nding on the consistency of the 19 August 2008 
Notice with the obligations under Article III:2, first sentence. 
7.420  During the Panel proceedings, in May 2009, a new MRSP Notice was issued. During the 
proceedings, the Philippines speci fically requested the Panel not to rule on this MRSP Notice by 
stating that: "the Panel should not base its fi ndings on the May 2009 MRSP Notices.  WTO dispute 
settlement should not involve a moving target that  changes through revised measures adopted during 
panel proceedings, possibly in light of ar gument and evidence presented to a panel".889  Thailand did 
not contest this either.  As the MRSP Notice was is sued after the establishment of the Panel, and as 
the parties did not want the Panel to consider this new Notice in its analysis, the Panel decided to not 
include it. 
7.421  As explained in Section VII.D.4(a)(iii) below,  the specific methodology and procedural steps 
that Thai Excise follows to determine the MRSP is  not set forth in the Thai law or regulations 
although the elements for the calculation of the MRSP are indicated in the MRSP Notices issued as 
from August 2007 onwards.  In the course of this  dispute, Thailand presented to the Panel the 
methodology that Thai Excise uses to establish the MRSP.  As we understand, the Philippines has not 
challenged this general methodology that is allegedly used by Thai Excise in determining MRSPs  
per se .  The Philippines states, for example, "the  dispute concerns the MRSPs established on 
                                                      
887 Philippines' first written submission, paras. 493-50 2, including table 4 in para. 498, para. 708, item 
19 and para. 712; first oral statement, paras. 208, 210 and 212-216; request of 15 June 2009, para. 6 and table of 
documents, item 19; question to Thailand following the fi rst panel meeting, para. 2 and table of documents, item 
19; response to Panel question No. 79; second written submission, paras. 414-424, including graphs 1-4; 
comments on Thailand's answers to Panel questions (second meeting), paras. 90, 117-121 and 126-130. 
888 Exhibits PHL-77, PHL-127, PHL-155, PHL-171, PHL-172, PHL-204, PHL-208, PHL-210, 
PHL-211, PHL-212, PHL-213, PHL-238, PHL-270 and PHL-208. 
889 Philippines' second written submission, para. 431.  WT/DS371/R 
 Page 233 
 
 
  7 December 2005, 18 September 2006, 30 March 2007, and 29 August 2007".890  Therefore, the 
Philippines' claim under Article III:2, first sen tence, is confined to these MRSP Notices.  
3. Like product analysis 
(a) Whether the like product analysis under Article  III:2, first sentence, requires a comparison 
between "all" imported and "all" domestic products  
(i) Main arguments of the parties 
7.422  The Philippines  submits that its primary claim under Article III:2, first sentence, pertains to 
all imported and all domestic cigarettes, across all price segments.891  In the alternative, the 
Philippines argues that all domestic and imported cigarettes within each price segment are "like 
products".892 
7.423  The Philippines is, however, of the view that a fi nding of a violation under Article III:2, first 
sentence, does not require a finding that a ll imported and domestic cigarettes are like.893  Thailand 
violates Article III:2 whenever a given imported brand of cigarettes is "like" a given domestic brand, 
and the former is subject to taxation in excess of th e latter.  The Philippines po ints out that Thailand 
accepted in its first written submission that cigarettes in the same price bracket are "like" products. 
7.424  Thailand  understands that which categories of im ported and domestic products need to be 
compared for the likeness analysis under the Artic le III:2 claim depends on how the complainant 
structures its claims.894  To the extent that the Philippines' claim is that all imported cigarettes are like 
all domestic cigarettes and that any difference in taxation between the two constitutes a violation of 
Article III:2, the Panel cannot conclude that Thailand violates Article III:2 unless it finds that all 
imported cigarettes are like all domestic cigarettes.  Nonetheless, Thailand does not dispute that 
particular pairs of imported and dome stic cigarettes may be like products.895 
(ii) Analysis by the Panel 
7.425  The Philippines' primary claim on "like products " is that "all" imported cigarettes are like 
"all" domestic cigarettes. Thailand therefore submits  that the Panel cannot conclude that Thailand 
violates the first sentence of Article III:2 unless it finds that all imported cigarettes are like all 
domestic cigarettes, to the extent that the Philippi nes' claim is structured in such a manner. The 
Philippines' claim in respect of likeness between imported and domestic ci garettes is, however, not 
confined to its primary claim.  The Philippines also claims that domestic and imported cigarettes within each price segment  are like products.
896 It submits that Thailand violates Article III:2 whenever 
                                                      
890 Philippines' second oral statement, para. 75.  The Philippines also states that "the Philippines 
indicated that the dispute concerns MRSP Notices from the past 'two and a half years', which includes the 
December 2005 MRSP Notice, in force at the beginning of that period, and the 2006 and 2007 MRSP Notices, 
which were already contested in Thai  proceedings when the Panel Request was prepared."  The Philippines also 
refers to its panel request, para. 25. 
891 Philippines' first written submission, paras. 464-4 86; first oral statement 369; response to Panel 
question No. 39. 
892 Philippines' response to Panel question No. 39. 
893 Philippines' response to Panel question No. 48. 
894 Thailand's response to Panel question No. 48(2). 
895 Thailand's first written submission, para. 221. 
896 We note the Panel's statement in Dominican Republic – Import and Sale of Cigarettes that 
"imported cigarettes can generally be considered as like products to domestic Dominican Republic cigarettes within the meaning of the first sentence of Article III: 2 of the GATT".  In the light of the Panel's further 
elaboration on its like product  analysis, however, we understand that the above statement was made more as a WT/DS371/R 
Page 234  
 
  a given imported brand of cigarettes is "like" a gi ven domestic brand, and the former is subject to 
taxation in excess of the latter.
897    
7.426  Given the arguments above, the Panel will firs t identify the scope of imported and domestic 
products that are to be compared in the pr esent dispute for the like product analysis under 
Article III:2, first sentence. 
7.427  The first sentence of Article III:2 states that "t he products ... imported ... shall not be subject 
... to internal taxes or other internal charges ... in excess of those applied ... to like domestic products".  
Therefore, the language of Article III:2, first sente nce, does not indicate that "all" imported products 
should be found like "all" domestic products.  In previous disputes involving a likeness analysis under 
Article III:2, first sentence, panels found that th e imported products concerne d were "like" domestic 
products within the meaning of this provision, so far as the imported product[s] at issue in a given 
dispute was [were] considered "like" to at least some  domestic products.898   
7.428  In the light of the above, we do not consider  that a comparison between "all" imported 
cigarettes and "all" domestic cigarettes is required fo r the analysis of likeness under Article III:2, first 
sentence.  Although presenting evidence showing likeness between all imported and all domestic 
cigarettes will definitely satisfy the likeness requirement  of Article III:2, first sentence, we do not find 
it necessary to conduct such an analysis for the purpose of this dispute.  Therefore, we will proceed to 
examine whether the Philippines has established with  supporting evidence that the imported cigarettes 
at issue are like at least some domestic cigarettes within the meaning of Article III:2, first sentence. 
(b) Whether the imported and domestic cigarettes within particular price segments are "like" 
within the meaning of Article III:2, first sentence 
(i) Main arguments of the parties 
7.429  The Philippines  submits that if the Panel does not make a finding with respect to all 
cigarettes, the Philippines maintains that all cigarettes within particular price segments are like.899  
The Panel must then assess which domestic brands are like imported L&M cigarettes, and which 
domestic brands are like imported Marlboro cigarettes.  The Philippines also notes that Thailand 
concedes that domestic and imported cigarette brands  within a price segment are "like" products.900  
In any event, the Philippines has adduced  the necessary evidence to show that all imported and 
domestic cigarettes are like products.901  Specifically, the Philippines relies on three pieces of 
                                                                                                                                                                     
general remark than as a finding on the likeness between  the imported and domestic cigarettes at issue in that 
dispute (Panel Report, Dominican Republic – Import and Sale of Cigarettes , para. 7.330).  Specifically, the 
Panel stated in the following paragraph: 
"However, for the purpose of th e analysis within the first sentence of Article III:2 of the 
GATT, a narrowly construed interpretation of the likeness requirement, would require the 
Panel to additionally consider the fact that, w ithin the general product description, cigarettes 
are presented to consumers distinguished by brands.  Under the identification of these brands, cigarettes compete within specific  price segments against each ot her.  The distinction between 
different price segments may be particularly important for the analysis under Article III:2 of 
the GATT, since the Selective Consumption Tax was applied on an ad valorem  basis, i.e. was 
related to the price of the product" (Panel Report, Dominican Republic – Import and Sale of 
Cigarettes , para. 7.331). 
897 Philippines' response to Panel question No. 48. 
898 See, for example, Panel Report, Indonesia – Autos , para. 14.110.  
899 Philippines' second written submission, para. 388 ; response to Panel question Nos. 39 and 48. 
900 Philippines' second written submission, para. 388; response to Panel question No. 48, referring to 
Thailand's first written submission, para. 221. 
901 Philippines' response to Panel question No. 48.  WT/DS371/R 
 Page 235 
 
 
  evidence – (i) a TNS Market Study on switching rat es between cigarette brands as well as the cross-
price elasticity of demand902; (ii) research on the elasticity of substitution between cigarette brands903; 
and (iii) an expert statement on income-com pensated cross-price elasticity of demand904 – to 
demonstrate that all imported and all domestic ciga rettes are like.  The Philip pines argues that this 
same evidence also supports its position that impor ted and domestic cigarettes within the same price 
segments are like.905 
7.430  According to the Philippines, L&M cigarettes are priced similarly to Krongthip, Gold City 
FF 90, Falling Rain, Krongthip FF 90, Roya l Standard FF Regular, Samit FF 90, and Krongthip 
Lights ; and Marlboro  cigarettes are priced similarly to Krongthip FF Deluxe and Royal Standard 
FF Deluxe .906   
7.431  Thailand  does not dispute that particular pairs of imported and domestic cigarettes may be 
like products.907  Moreover, Thailand did not respond to the Philippines' argument that L&M and 
Marlboro cigarettes are like domestic cigarettes within th eir specific price segments.  To the extent 
that the Philippines claims that all imported and all domestic cigarettes are like products, Thailand 
takes the view that the Philippines must establish that every possible pair of imported and domestic 
cigarette brands is "perfectly substitutable".908  Thailand argues that the Philippines bears the burden 
of establishing that particular imported and domes tic brands are "perfectly substitutable" and, 
therefore, "like products".   
(ii) Analysis by the Panel 
7.432  For the likeness analysis under Article III:2, fi rst sentence, we decided to compare the 
likeness between the imported cigarette brands at issue (i.e. Marlboro and L&M ) and the domestic 
cigarette brands that are within the same price segments.  The Philippines submits that premium 
Marlboro cigarettes are priced similarly to two domestic cigarette brands, Krongthip FF Deluxe and 
Royal Standard FF Deluxe , and mid-priced L&M cigarettes are priced similarly to Krongthip, Gold 
City FF 90, Falling Rain, Krongthip FF 90,  Royal Standard FF Regular, Samit FF 90, and Krongthip 
Lights .  Thailand does not object to this categorization by the Philippines.909  As noted above, 
Thailand agrees that particular pair s of imported and domestic cigarettes may be like products.  We 
will therefore examine in this section whether the Philippines has established that Marlboro cigarettes  
are "like" Krongthip FF Deluxe and Royal Standard FF Deluxe  cigarettes  and whether L&M 
cigarettes are like Krongthip, Gold City FF 90, Falling Rain, Krongthip FF 90, Royal Standard FF 
Regular, Samit FF 90, and Krongthip Lights  cigarettes. 
                                                      
902 Exhibit PHL-111(a) and PHL-111(b). 
903 Exhibit PHL-148. 
904 Exhibit PHL-149. 
905 Philippines response to Panel question Nos. 39 and 48. 
906 Philippines' response to Panel question No. 48, re ferring to Exhibits THA-19 and PHL-148; second 
written submission, para. 390, Table 2. 
907 Thailand's first written submission, para. 221.   
908 Thailand's second written submission, para. 126.  Thailand argues that given that there were 19 
domestic brands and 86 imported brands present in the Thai market at the time of the establishment of the Panel, 
there are 1,634 possible pairings of imported and domestic brands that the Philippines must demonstrate to be 
"perfectly substitutable".  
909 The Philippines submits that the only difference between the argument and evidence for likeness 
within price categories, and the argume nt and evidence for likeness across categ ories, concerns the retail price.  
The Philippines maintains that for all other likeness criteria, its argument and evidence is the same. (Philippines' second written submission, para. 389).  Thailand has not ob jected to this characterization of the Philippines' 
argument and evidence.  WT/DS371/R 
Page 236  
 
  7.433  We begin our analysis by recalling the Appellate Body's guidance on the like product analysis 
under Article III:2, first sentence.  The Appellate  Body considered that the proper test for 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 re levant factors including the following:  (i) the 
product's end-uses in a given market; (ii) consumers'  tastes and habits; (iii) the product's properties, 
nature and quality; and (iv) tariff classification.
910  We are also mindful of the Appellate Body's 
observation in EC – Asbestos that "having adopted an approach b ased on the four criteria set forth in 
Border Tax Adjustments , the Panel should have examined the evidence relating to each of those four 
criteria and, then, weighed all of that evidence, along with any other relevant evidence, in making an 
overall determination of whether the products at issue could be characterized as 'like'".911  We will 
therefore examine the evidence re lating to the likeness of the imported and domestic cigarettes at 
issue based on each of the four criteria above, as well  as on any other relevant evidence, and evaluate 
all the evidence in its entirety before reaching a final conclusion. 
7.434  In this connection, we note Thailand's argumen t that only "perfectly substitutable products" 
fall within the definition of "like products" in Ar ticle III:2, first sentence.  Thailand supports its 
position by referring to the Appe llate Body's explanation in Korea – Alcoholic Beverages .  The 
Appellate Body stated: 
"Like products are a subset of directly competitive or substitutable products: all like 
products are, by definition, directly co mpetitive or substitutable products, whereas not 
all 'directly competitive or substitutable' products are 'like'.  The notion of like products must be construed narrowly but the category of directly competitive or 
substitutable products is broader.  While perfectly substitutable products fall within 
Article III:2, first sentence , imperfectly substitutable products can be assessed under 
Article III:2, second sentence."
912  (emphasis added) 
7.435  Thailand appears to rely on the last sentence in  the paragraph quoted above to argue that only 
perfectly substitutable products will satisfy the lik e products standard under Article III:2, first 
sentence.   
7.436  We find Thailand's reading of the Appellate B ody's statement above unnecessarily restrictive.  
Although we agree that perfectly substitutable prod ucts will clearly be "like products" within the 
meaning of Article III:2, first sente nce, we do not consider that the Appellate Body meant to restrict 
the scope of like products to identical  products. While this interpretati on may be consistent with the 
economic definition of "perfectly substitutabl e", it would render a finding of likeness under 
Article III:2, first sentence, almost impossible. 
7.437  As noted above, a determination of like produc ts must be carried out on a case-by-case basis 
taking into account, inter alia , the four criteria cited in Border Tax Adjustments as well as any other 
criteria that may also be relevant in a given case.913  Our view is also supported by the Appellate 
Body's following statements: 
"[W]e agree with the Panel that the first sentence of Article III:2 must be construed 
narrowly so as not to condemn measures that its strict terms are not meant to condemn ... 
                                                     
 
910 Appellate Body Reports on Japan – Alcoholic Beverages II , pp. 19-21, DSR 1996-I, 97, at 112-114; 
Canada – Periodicals , p. 21, DSR, 1997-I, 449, at 466.  
911 Appellate Body Report, EC – Asbestos, para. 109.   
912 Appellate Body Report, Korea – Alcoholic Beverages , para. 118. 
913 Appellate Body Report, Japan – Alcoholic Beverages II , pp. 19-21, DSR 1996-I, 97, at 112-114.   WT/DS371/R 
 Page 237 
 
 
  How narrowly is a matter that should be de termined separately for each tax measure 
in each case.  We agree with the practice under the GATT 1947 of determining whether imported and domestic products are 'like' on a case-by-case basis ..."
914 
"Panels can only apply their best judgment in determining whether in fact products 
are 'like'.  This will always involve an unavoidable element of individual, 
discretionary judgment ... it is a discretionary decision that must be made in 
considering the various characteristics of products in individual cases."915 
7.438  Therefore, while the scope of likeness between  imported and domestic  products is to be 
construed very narrowly, we understand that, as th e Appellate Body indicated, the proper test for a 
panel's determination of like products for the purpos es of Article III:2, first sentence requires a case-
by-case analysis taking into account the factual circ umstances in each case and discretionary decision 
by panels.   
7.439  Bearing the above in mind, we will examine wh ether the Philippines has established that the 
imported cigarettes at issue are like the domestic cigarettes within the same price segments.  We note that the parties tend to agree that all imported and domestic cigarettes are like at least in terms of 
physical characteristics, end-uses and classification under the Harmonized System.  In the following 
paragraphs, we will therefore first evaluate th e likeness of the imported and domestic cigarettes 
concerned based on these three criteria.  We will th en analyze the likeness based on consumer habits 
and preferences. 
7.440  First, with respect to the physical properties and characteristics of cigarettes, the Philippines 
submits that imported and domestic cigarettes have the same essential physical characteristics:  they 
are all composed of a paper tube; a mix of tobacco a nd additives that fills the tube ("filler"); a filter 
through which the smoke is inhaled
916; and they are presented and packed in a virtually identical 
manner in all relevant aspects (i.e. the number of cigarettes contained in each pack and each carton 
and the size of the packs).917  We find that an expert's statem ent based on a laboratory analysis on 
nature and composition of cigarette s, submitted by the Philippines, supports the view that physical 
characteristics of the imported and domestic cigarettes at issue are essentially the same.918  Thailand 
has not provided any opposing views to this.  While noting that, as a factual matter, different brands 
of cigarettes have different physical properties and qualities919, Thailand does not explain or support 
its observation with any evidence.  Rather, Thailand ar gues that the physical di fferences caused by the 
varieties of tobacco and favouring agents used in  cigarette brands are reflected in consumer 
preferences and in varying prices charged for different  brands of cigarettes.  In the light of this, 
Thailand's position appears to be that any differen ces in physical qualities or characteristics that exist 
between imported and domestic cigarettes will be elements relevant to consumer habits and 
preferences.   
7.441  The very similar physical characteristics of all domestic and imported cigarettes then confirm, 
according to the Philippines, that cigarettes serve the same end-uses, namely smoking.920  
Furthermore, the imported and domestic cigarettes are classified under the same tariff heading of the 
                                                      
914 Appellate Body Report, Japan – Alcoholic Beverages II , p. 20, DSR 1996-I, 97, at 113. 
915 Appellate Body Report, Japan – Alcoholic Beverages II , pp. 20-21, DSR 1996-I, 97, at 113. 
916 Philippines first written submission, para. 465. 
917 Philippines first written submission, para. 469. 
918 Exhibit PHL-199.  The Annex to the Exhibit shows the brands that have been analyzed for the 
comparison. The Panel notes that not all domestic cigarette brands are covered, but that a substantial part is (6 
brands and 10 types are included), and therefore the Panel is of the opinion that the comparison in the Exhibit is 
representative for the Thai cigarette market as a whole. 
919 Thailand's response to Panel question No. 38. 
920 Philippines' first written submission, para. 470; second written submission, para. 379. WT/DS371/R 
Page 238  
 
  Customs Tariff of Thailand, namely heading 2402.20. 90, "[c]igars, cheroots, cigarillos and cigarettes, 
of tobacco or of tobacco substitutes ... cigarettes containing tobacco ... other".
921  The Philippines also 
points out that the imported and domestic cigarettes at issue in this dispute are all subject to not only 
the same types of tax (i.e. excise tax, VAT, health  tax, and television tax), applied at the same 
nominal rate; but also to the same domestic regulati ons on advertising, marketing, distribution, as well 
as labelling; and to the same health regulations.922  We see no reason to question that Marlboro and 
L&M cigarettes and the corresponding domestic cigare tte brands have the same end-uses; are 
classified under the same tariff heading; and subject to  the same types of tax and domestic regulations.   
7.442  We find, based on the above analysis, that the imported and domestic cigarettes at issue are 
like in terms of (i) physical quality and characteristics;  (ii) end-uses; (iii) tariff classification; and (iv) 
Thai internal taxes and regulations.  As these four  elements are not the only criteria that may be 
considered in the determination of  likeness between the imported and domestic cigarettes at issue, and 
since the parties have also put forward arguments regarding consumer behavi our, we now turn to the 
question of whether the Philippines discharged its burden of proving that Marlboro and L&M brand 
cigarettes can be considered like the domestic coun terpart cigarette brands in terms of consumer 
habits and preferences.923  The Philippines presented three pi eces of evidence – switching evidence 
and price elasticity924 and two economic studies on the elasticity  of substitution and the cross-price 
elasticity of demand925 – to support its position that importe d and domestic cigarettes are close 
substitutes, which in turn establishes that accord ing to the consumer habits and preferences the 
imported and domestic cigarettes at issue are alike.926   
7.443  The Philippines first refers to a study c onducted by Taylor Nelson Sofres ("TNS").927  
According to the Philippines, this study shows:  (i) a high degree of inter-changeability among all 
major cigarette brands in the light of the switch in  and switch out rates for cigarette brands such as 
Marlboro [[xx.xxx.xx]], L&M [[xx.xxx.xx]] and  certain domestic cigarette brands [[xx.xxx.xx]]928; 
(ii) a high degree of switching between importe d and domestic cigarette brands based on the 
switching rates between imported and domestic cigarettes (e.g. the switching rates between L&M  
cigarettes and TTM cigarettes within the same price segments)929; (iii) close substitutability between 
imported and domestic cigarettes: when the price of an imported brand increases by 10 per cent, purchases of that brand decreases by 27.6 per cent, whereas when the prices of two domestic brands also increase by 8.7 per cent at the same time, purchases of the same imported brand decreases by 19.5 per cent.  This mitigated response in demand for the imported brand suggests that the price of 
domestic cigarettes impacts demand for imported ci garettes and, hence, domestic and imported 
cigarettes are close substitutes.   
                                                     
 
921 Philippines' first written submission, para. 483,  referring to Harmonized Tariff Schedule of 
Thailand, Chapter 24 (Exhibit PHL-29). 
922 Philippines' first written submission, para. 484. 
923 We note that given our approach to the scope of  imported and domestic cigarettes that are compared 
for the like products analysis (i.e. comparison between those in the same price segments), it would not be 
necessary to address Thailand's argume nt that significant price differences between cigarette brands indicate that 
all of these brands cannot be deemed to be like products (Thailand's first written submission, para. 220). 
924 Philippines' first written submission, paras. 474-481;  first oral statement, paras. 201-205; second 
written submission, para. 380. 
925 Philippines' first oral statement, paras. 206-207. 
926 Philippines' second written submission, paras. 380-381. 
927 Exhibit PHL-111a; PHL-111b; Philippines' response to Panel question No. 48. 
928 Exhibit PHL-111a. The switch out  rate for cigarette brand A over a certain period of time is 
the percentage of consumers that regularly smoke brand A, but switch to regularly smoking another brand in 
that period.  The switch in  rate for cigarette brand A over a certain pe riod of time is the percentage of consumers 
that regularly smoke another brand, but switch to regularly smoking brand A in that period (Philippines' first written submission, para. 475).   
929 Exhibit 111(b), p. 6.  WT/DS371/R 
 Page 239 
 
 
  7.444  Thailand criticizes the Philippines' interpreta tion of this study for the following reasons: 
(i) the switch in and switch out ratios are low, which makes it difficult to conclude that the five major 
cigarette brands are perfectly substitutable; (ii) si gnificant price differences between cigarette brands 
makes it difficult to consider them being "like prod ucts"; (iii) the data on changes in demand for a 
particular brand of cigarettes following price increases is of limited value because it simply shows 
consumer perceptions of whether they would purchase L&M under these scenarios and does not 
contain measurements of actual cha nges in demand at given price points.930   
7.445  Another study, submitted by the Philippines, a llegedly shows the elasticity of substitution 
between domestic and imported cigarettes:  if pr ices for imported cigarettes increase, purchases of 
domestic cigarettes would also increase.931  Thailand questions the rele vance of this evidence to the 
like product analysis with respect to all domestic and all imported cigarette br ands on the grounds that 
all cigarettes are treated as a single unit.932 
7.446  Finally, the Philippines relies on an economic study conducted by an economics professor, 
Jamie de Melo, on the cross-price elasticity betw een imported and domestic cigarettes in Thailand 
between 2007 and 2009.933  The study concludes that "the estimate increase of market share of 
domestic cigarettes pursuant to an increase in the relative RSP of imported cigarettes strongly 
suggests that the two products are close s ubstitutes in the eyes of Thai consumers".934  Thailand is of 
the view that this evidence is of limited value because it treats all brands of domestic and imported 
cigarettes respectively as a single unit and uses a composite price index in its calculations.935 
7.447  We will evaluate the a bove evidence in turn.936  As noted earlier, the econometric studies put 
forward by the Philippines purport to prove the subs titutability between all imported and all domestic 
cigarettes.  The more convincing the evidence show s the substitutability between the cigarette brands 
concerned, the more likely that imported and dom estic cigarettes are like within the meaning of 
Article III:2, because they show consumer habits  and preferences that treat them alike.   
7.448  First, the market study prepared by TNS alle gedly showing the consum ers' switching patterns 
between cigarette brands, alt hough providing evidence compatible with substitutable products, it 
cannot per se  be considered a sufficient proof that consumers consider these products to be 
interchangeable.  The switching ratios calculated in the study could also have been obtained as the 
outcome of, for example, changes in consumers' income  levels or in the conditions of distribution of a 
certain brand.   
7.449  Similar concerns can be raised with respect  to the study on the elasticity of substitution 
between domestic and imported cigare ttes. The relationship shown by the figures in the study may be 
spurious because they are calculated without various  controlling factors that may also have affected 
this relationship. 
                                                      
930 Thailand's second written submission, para. 128. 
931 Exhibit PHL-148; Philippines' response to Panel question No. 48. 
932 Thailand's second written submission, para. 128. 
933 Exhibit PHL-149.  
934 Exhibit PHL-149, p. 9.   
935 Thailand's second written submission, para. 128. 
936 The Appellate Body has clarified that in the co ntext of an Article III:2, first sentence analysis, 
"substitution implies interchangeability" of the products. Article III:2 requires direct  substitutability between 
products. (Appellate Body Report, Canada – Periodicals , p. 25, DSR 1997-I, 449 at 470). It has clarified that 
"the word 'substitutable' indicates that the requisite relationship may exist between products that are not, at a 
given moment, considered by consumers to be substitutes but which are, nonetheless, capable  of being 
substituted for one another" (Appellate Body Report, Korea – Alcoholic Beverages , para. 114). In this context, 
panels have recognized that quantitative studies of cross- price elasticity are relevant, but not exclusive or even 
decisive in nature (Panel Report, Korea – Alcoholic Beverages , para. 10.44). WT/DS371/R 
Page 240  
 
  7.450  The study on cross-price elasticity addresses some of the limitations of the other two studies  
by, for instance, taking income into account.  In pa rticular, since the overall price index is built by 
weighing each price by the market share, we consider  that the results of the study may be driven by 
the pair of cigarette brands with the highest market share.  This means that if the estimations made in 
the study are assumed to have been conducted corr ectly, the study can be understood as showing that 
at least one pair of imported and domestic cigarettes are substitutable. 
7.451  In sum, we are of the view that the TNS market study and the study on the elasticity of 
substitution are inconclusive to show the substitu tability between imported and domestic cigarettes 
because of the incomplete control of all relevant  variables.  The economic study on cross-price 
elasticity, although insufficient to show likeness between all imported and all domestic cigarettes, as 
the Philippines intended to show, indicates that at least Marlboro and L&M cigarettes are substitutable 
with like domestic cigarettes within the same pr ice segments.  Considered together with our 
conclusion above on the likeness between the imported and domestic cigarettes at issue related to their 
physical characteristics, end-uses and tariff classifi cation, the Philippines has established a prima facie 
case that Marlboro and L&M cigarettes are at least like the domestic cigarettes within the same price 
segments.  Therefore, given that Thailand di d not prove otherwise, we conclude that Marlboro 
cigarettes are "like" Krongthip FF Deluxe and Royal Standard FF Deluxe  cigarettes  and that L&M 
cigarettes are like Krongthip, Gold City FF 90, Falling Rain, Krongthip FF 90, Royal Standard FF 
Regular, Samit FF 90, and Krongthip Lights  cigarettes within the meaning of Article III:2, first 
sentence. 
4. Excess taxation analysis 
7.452  The Philippines argues that Thailand imposes VAT on imported cigarettes in excess of VAT 
imposed on like domestic cigarettes because: (i) the tax base (the MRSP) for imported cigarettes in absolute terms is higher than for like domestic cigarettes
937; and (ii) the tax base (the MRSP) for 
imported cigarettes is systematically higher than the actual retail selling price (the RRSP/RSP) for imported cigarettes, whereas the tax base (the MRSP) for domestic cigarettes is systematically equal 
to the actual retail selling price (the RSP).
938   
7.453  We will begin our analysis by examining the Thai VAT system as it is applied to cigarettes.  
We will then proceed to address the two argum ents advanced by the Philippines in turn. 
(a) The Thai VAT system 
(i) Introduction 
7.454  A value added tax can be defined as "a tax assessed at each step in the production of a 
commodity, based on the value added at each st ep by the difference between the commodity's 
production cost and its selling price.  A value added tax ... effectively acts as a sales tax on the ultimate 
consumer".939  The OECD defines it as follows:  "value added taxes (VAT) are consumption taxes. 
They have three distinctive characteristics: they ar e levied on a broad base (as opposed to excise taxes 
which cover specific products), the collection system  is organised in stages where each agent may 
deduct input taxes on purchases and must account for output tax on sales, and, ultimately, the burden 
                                                      
937 Philippines' first written submission, paras. 493- 496; first oral statement, paras. 208-209 and 
212-220; second written submission, paras. 392-393 and 397- 424; second oral statement, paras. 83-84 and 87.   
938 Philippines' first written submission, paras. 497-50 2 and para. 498, Table 4; first oral statement, 
paras. 210-211; second written submission, paras. 394-39 6; second oral statement, paras. 83-84 and 87. The 
Panel notes that the Philippines initially submitted three r easons in this regard.  The third reason was that in 
calculating the MRSP, Thailand applied a discrimina tory calculation method (P hilippines' first written 
submission, paras. 503-513; first oral statement, para. 212). 
939 Black's Law Dictionary, 7th ed., B.A. Garner (ed.) (West Group, 1999), p. 1472.  WT/DS371/R 
 Page 241 
 
 
  will be borne by consumers who, as end-users,  cannot operate immediate deduction operations. In 
practice, three tax collection mech anisms are mainly used: (a) under a registration system, the vendor 
registers with the tax authorities and is responsible  for paying/collecting the tax; (b) the tax may, 
alternatively, be collected directly by the cust oms authorities at the border; (c) under the reverse 
charge/self-assessment system, the customer  pays directly to the tax authorities".940 
7.455   The rules pertaining to the imposition and operatio n of the Thai VAT system are set forth in 
Title II (Revenue Taxes and Duties), Chapter IV (Value Added Tax) of the Thai Revenue Code 
B.E. 2481 (1938) (the "Revenue Code).941  Chapter IV is then divided into 14 divisions according to 
the subject matter relating to the VAT system. 
7.456  Section 77, Division 1 (General Provisions) of Ch apter IV  provides that "Value added tax is 
an assessment tax and duty".  In accordance with  Section 77/2, VAT under the provisions of 
Chapter IV is charged on the sale of goods or provision of a service by a supplier and the import of goods by an importer in Thailand.
942   
(ii) Tax rate  
7.457  The tax rate for VAT is provided for in Section 80 of the Revenue Code, which in turn refers 
to the "Royal Decree Issued Under the Revenue Code Governing Reduction of  Rate of Value Added 
Tax (No. 440) B.E. 2548 (2005)" ("Royal Decree 440") for new rates.943  The Royal Decree prescribes 
two VAT tax rates – 7 per cent [6.3 per cent]944 for the period of 1 October 2005 – 30 September 2007 
and 9.0 per cent for the period of 1 October 2007 onwards.  The parties do not dispute that the 
                                                      
940 Organisation for Economic Co-operation and Development, International VAT/ GST Guidelines , 
February 2006, p. 7. 
941 Exhibit PHL-94, Chapter IV (Value Added Tax) of Title II (Revenue Taxes and Duties) of the 
Revenue Code is divided into 14 divisions:  General Provisions (Division 1 (Section 77-77/5)); Tax Liability (Division 2 (Section 78-78/2)); Tax Base (Division 3 (Section 79-79/7)); Tax Rates (Division 4 
(Section 80-80/2)); Exemption from Value Added Tax (Division 5 (Section 81-81/3)); Persons Liable to Tax 
and Tax Computation (Division 6 (Section 82-82/18)); Filing of Returns and Payment of Tax (Division 7 (Section 83-83/10)); Tax Credit and refund of Value Added Tax (Division 8 (Section 84-84/4)); Value Added 
Tax Registration (Division 9 (Section 85-85/19)); Tax Invoice, Debit Note, Cr edit Note (Division 10 
(Section 86-86/14)); Preparation of Records and Maintenance of Vouchers and Documents (Division 11 (Section 87-87/3); Power of the Assessment Officer (D ivision 12 (Section 88-88/6); Penalties and Surcharges 
(Division 13 (Section 89-89/2); and Punishment (Division 14 (Section 90-90/5)). 
942 Thailand explains that VAT is administered by the Revenue Department.  In the case of imports, 
however, VAT is collected by Thai Customs on behalf of the Revenue Department (Thailand's response to Panel 
question No. 41, citing to http://www.rd.g o.th and http://www.customs.go.th).  The Thai VAT system applicable 
to cigarettes differs from the system applied to other products in that for cigarettes  every reseller collects VAT 
from the purchaser in respect of every stage of sale. Subsequently, the supplier deducts so-called "input tax" 
already paid to the previous seller, from "output tax" collected from the next purchaser of goods in each tax 
month.  The VAT registrant supplier thus pays VAT equal to output tax deducted by input tax. However, this 
system only applies to the (re)sales of imported cigarettes,  since for domestic cigarettes TTM directly pays all 
VAT liable to the Thai Government and resellers are exempted from VAT liability. See paras. 7.579-7.592 below. 
943 Exhibit PHL-93.   
944 Section 5 of Royal Decree 440 identifies 6.3 per cent as the VAT tax rate for 1 October 2005–
30 September 2007 (Exhibit PHL-93).  In a Note to Subs cribers, however, Royal Decree 440 explains that the 
actual tax rate is 7 per cent: 
 "Note to Subscribers:  Section 80 of the Revenue Code fixes the value added tax at 
10.0 per cent, which is exclusive of municipal tax at 1/9 thereof.   Thus, when the value added 
tax is reduced to 6.3 per cent, the said rate must be added by the municipal tax at 1/9 thereof when collected.  Therefore, the applicable ra te is (6.3+(6.3x1/9)=0.7) = 7.00 per cent." 
 WT/DS371/R 
Page 242  
 
  relevant VAT tax rate for cigarettes is 7 per cent ad valorem
945, which is the rate applied in computing 
VAT on the sale of goods, the provision of services and imports, including imports of cigarettes and sales of both imported and domestic cigarettes, on the Thai market. 
(iii) Tax base – MRSP 
Overview
 
7.458  Division 3 of Chapter IV of the Revenue Code contains provisions relating to the tax base for 
the calculation of VAT.  It contains separate sections  for the tax base that applies in general and for 
the tax base that applies to cigarettes in particular .  Section 79 defines the tax base that applies in 
general:  "the tax base for sale of goods or provision of services means total value received or receivable by a supplier from such sales or provisions ...".  As the Philippines explains, the total value 
received or receivable, used as the tax base for the v ast majority of products, is the retailer's chosen 
selling price.
946 
7.459  The tax base for cigarettes  is provided in Section 79/5 of the Revenue Code:   
"[T]he tax base for the sale shall be the valu e of tobacco arrived at by deducting the 
amount of value added tax from the full amount  of its retail price, such tax amount 
being computed at the rate of value added tax where the tax has been included in the 
full amount of the retail price." 
7.460  The parties explain that the VAT tax base fo r cigarettes is the MRSP liability, a reference 
price fixed by the Thai government.947  To be exact, as set out in Section 79/5, the VAT tax base is the 
MRSP minus the VAT because the MRSP is inclusive of VAT.  This can be put in an equation as 
follows: 
VAT = 7%*(MRSP-VAT) or 
 
7/107*MRSP 
 
7.461  For ease of reference, in this section, we will generally refer to the MRSP as the tax base for 
VAT, which in fact means the MRSP minus the VAT. 
7.462  Although the exact term "MRSP" is not stipulat ed in Section 79/5 of the Revenue Code, we 
understand that "the full amount of its retail price" referred to in the provision means the MRSP.  The 
concept of MRSP is provided for in Section 23 of  the Tobacco Act B.E. 2509 (1966) (the "Tobacco 
Act").948  Section 23 provides: 
"The Director-General shall have the power to make announcements fixing the price 
of tobacco.  It is forbidden to sell tob acco at prices exceeding those fixed in the 
announcement of the Director-General." 
                                                      
945 The parties refer to 7 per cent as the VAT tax ra te in the following submissions: Philippines' first 
written submission, para. 415; Thailand's first written submission, para. 76; response to Panel question No. 41. 
946 Philippines' first written submission, para. 415. 
947 Philippines' first written submission, para. 416; Thailand's response to Panel question No. 41; 
Exhibit PHL-93.  The difference between VAT imposed on cigarettes and VAT imposed on other products thus 
lies in the fact that for cigarettes, the VAT is based on the MRSP, which is set by the Thai Government, while for other products the VAT is based on the actual selling price of the product. 
948 Philippines' first written submission,  para. 419; Exhibit PHL-119.    WT/DS371/R 
 Page 243 
 
 
  7.463  The text of Section 23 thus indicates that th e Director-General of the Excise Department 
("DG Excise") determines maximum prices (i.e. the de finitive MRSP, which is here a price inclusive 
of the VAT amount) at which a particular brand of cigarettes may be sold on the Thai market.949  This 
implies that although a brand of cigarettes cannot be sold at prices exceeding the MRSP, it may be 
sold at prices below the MRSP.   
Establishment of the MRSP  
7.464  Given that the MRSP is the tax base for VAT, the MRSP must be established first to calculate 
the VAT amount for a particular brand of cigarettes.   
7.465  The text of Section 23 of the Tobacco Act do es not set out the specific manner in which the 
MRSP is determined.  The components comprising the MRSP are explained in the preambles of the 
MRSP Notices issued after August 2007.950  The preambles read: 
"[T]he Excise Department therefore fixes the [MRSP] ... by making a computation as 
based on the c.i.f. price, customs duty, tobacco stamp (i.e. excise tax), value added tax, contributions to the health promotion fund, contributions to the Thai Public Broadcasting of Sound and Picture Foundation, contributions to provincial 
administration organization development,  and marketing margin combined." 
7.466  In sum, the MRSP consists of the following eight variables: 
MRSP =   c.i.f. or ex factory price  
 + [Customs duties (c.i.f. price*5%)]
951 
 + Excise tax ((c.i.f. price + customs duties)*400%)  + Health tax (excise tax*2%) 
 + Television tax (excise tax*1.5%) 
 + Local tax (currently 1.86 baht per pack)  + VAT  + Marketing costs
952 
                                                      
949 Section 4 of the Tobacco Act provides that "Dir ector-General" means the Director-General of the 
Excise Department.  Philippines' first written submi ssion, para. 420; Thailand's first written submission, 
para. 83; response to Panel question No. 41.  Thailand states that "Thai Excise is responsible for the 
determination and publication of the MRSPs for all brands  of cigarettes, both domestic and imported" and that 
"the MRSPs are determined by Thai Excise".  Thailand also submits that it is within Thai Excise's discretion to 
administer the MRSPs, under Section 23  of the Tobacco Act, to accept sugges tions as to revisions of the MRSPs 
from both TTM and importers (Thailand's  first written submission, para. 89). 
950 Exhibits PHL-77, PHL-104, PHL-105, PHL-106 and PHL-118.  
951 Customs duties are added for the calculation of the MRSP for imported cigarettes only. 
952 Furthermore, Thailand submitted a sample calculation of how the amount of an MRSP is calculated 
in Exhibit THA-47.  As the worksheet in Exhibit THA-47  shows, with the exception of marketing costs, all 
other variables comprising the MRSP (i.e. customs duties, excise tax, health tax, television tax) can be derived 
on the basis of the c.i.f. or ex factor y price.  The c.i.f./ex factory price th erefore forms the st arting points for the 
calculation of MRSPs for domestic and imported cigarettes (Thailand's first written submission, para. 85; 
Exhibit THA-48).   WT/DS371/R 
Page 244  
 
  7.467  According to Thailand, new MRSPs are established and existing MRSPs are revised
953 in the 
following manner:954 
7.468  The primary source of the MRSP is the importe r's or the domestic manufacturer's proposed 
MRSP/RRSP.  Importers and the domestic manufacturer inform Thai Excise of the proposed MRSP/RRSP when they want to introduce a new brand or revise an existing MRSP.
955 
7.469  Importers and domestic manufacturers may request changes in the MRSPs at any time to 
reflect changes in their c.i.f. or ex factory prices, desired retail prices, or other factors such as changed 
market conditions.  Subject to a review as to whether the proposed MRSP/RR SP is consistent with 
Thai Excise's dual objectives of protecting consumer s from excessive pricing and preventing any tax 
avoidance by the manufacturer/importer understating the proposed retail price, Thai Excise will then 
accept or reject the proposed MRSP/RRSP.  If it accepts the proposed MRSP/RRSP, it publishes this 
price as the MRSP for that brand.  Thai Exci se may reject proposed changes or make other 
adjustments956 consistent with the dual function of the MRSP as a maximum price to protect 
consumers and as the tax base for VAT. 
7.470  Thai Excise may also, and normally does, calcula te a new MRSP if any of the applicable tax 
rates changes, necessitating a revision in the MRSP.   In these cases, Thai Excise calculates the new 
MRSP by changing the relevant c.i.f. or ex factory prices, updating the tax amounts that are based on those figures, and holding the so-called "marketing costs" constant.  Thai Excise generally uses the 
same amount of "marketing costs" as included in the latest MRSP or in the MRSP previously requested by the domestic manufacturer or the impor ter, which is derived by subtracting all other 
elements (i.e. the c.i.f./ex factory price plus all applicable taxes) from the MRSP.
957 
7.471  Once a new MRSP is determined, Thai Exci se publishes a notice, reflecting the new 
MRSP.958   
7.472  The Philippines does not appear to take issue with the overall methodology to be applied to 
establish the MRSPs for cigarettes as described by Th ailand above.  To that extent and in the absence 
of any specific written rules in Thai law indicating how the MRSP is established, we will undertake 
our analysis of the parties' claims and argumen ts in this section on the understanding that the 
methodology set out above is the general method ology applied in determining the MRSP for a 
specific brand of cigarettes.959 
7.473  We note in this connection that the parties c ontest how the "marketing costs" component of 
the MRSP is determined .  Thailand defines the "marketing costs" as the total selling expenses and 
                                                      
953 Philippines' second written submission, paras. 324 and 326. The Philippines argues, in the context of 
its Article X:1 claim with respect to Thailand's alleged failure to publish rules for determining MRSPs, that the 
methodology used to revise an MRSP is more important than the methodology first used to establish an MRSP, 
because the MRSPs are regularly revised, usually at least once per year.  It further states that for Marlboro and 
L&M , the initial MRSP was determined, respectively, approximately 20 and 10 years ago, and the MRSP 
revision methodology has determined the MRSPs ever si nce.  The Philippines contends, however, that MRSPs 
have not been revised following the methodology that Thailand has presented to the Panel. 
954 Thailand's first written submission, paras. 83-96;  Philippines' second written submission, para. 135. 
955 Exhibits THA-18, THA-31 and THA-100. 
956 Thailand's first written submission, para. 89. 
957 Thailand's first written submission, paras. 85-86 and 88; response to Panel question No. 41; second 
written submission, para. 245; comments of 25 September 2009, paras. 42 and 45. 
958 Thailand's first written submission, paras. 83 and 87; Exhibit THA-59 and THA-63. The MRSP is 
issued separately for each brand, fo r both domestic and imported cigarettes, which is for example shown in 
Exhibit THA-19, in which Thailand shows MRSP determinations for several foreign and domestic brands.  
959 See Section VII.G.1(c)(ii) below.  WT/DS371/R 
 Page 245 
 
 
  profits associated with selling the cigarettes to  the final consumer in the Thai market.960  This amount 
represents the selling expenses and profits of not ju st the manufacturer or importer (e.g. TTM or 
PM Thailand), but also of all the wholesalers and retailers in the chain of distribution until the 
cigarettes are sold to the final consumer (who ultimately pays the VAT).961  We will address the 
parties' arguments on the determin ation of the marketing costs in the context of our analysis of 
whether imported cigarettes are subject to excess taxation through the alle ged gap existing between 
the MRSP and the RRSP/RSP for imported cigarettes. 
(b) Whether imported cigarettes are subject to excess taxation – the higher absolute level of the 
MRSPs for imported cigarettes than for domestic cigarettes  
(i) Main arguments of the parties 
7.474  The Philippines submits that Thailand applies a higher tax base for imported cigarettes than 
for like domestic cigarettes, while simultaneously main taining an identical tax rate applicable to all 
cigarettes, resulting in the imposition of a tax on imported cigarettes in excess of like domestic 
cigarettes.962  The data before the Panel indicate that  the absolute MRSPs for imported cigarette 
brands ( i.e Marlboro  and L&M)  are almost always higher than the MRSPs for domestic cigarette 
brands ( i.e. TTM).963  The Philippines argues that this data illustrate that Marlboro  and L&M  are 
taxed in excess of their respective like domestic brands in absolute te rms because the VAT for 
cigarettes in Thailand is based on the MRSP value.964  Therefore, the Philippines claims that this 
excess tax burden for imported cigarettes in absolute te rms violates Article III:2, first sentence, of the 
GATT 1994.965 
7.475  Thailand argues that Article III:2, first sentence do es not require that all imported cigarettes 
bear the same absolute tax amount as all domestic cigarettes.966  Moreover, Members are permitted to 
use fixed price systems and ad valorem  systems of internal taxation.967  Thailand asserts that its ad 
valorem system explains the natural result of a diffe rential tax basis (MRSP) for domestic and 
imported cigarettes.968  Thailand references the Panel in Dominican Republic – Import and Sale of 
Cigarettes, which provided that the fact that different ci garette brands are priced differently may be 
especially important for the analysis under Article III:2 [of the GATT 1994].969  Furthermore, if the 
Philippines' absolute ta xation test were accepted, WTO Memb ers would be precluded from applying 
ad valorem  internal taxes altogether.970  Thailand submits that a system of taxation where more 
expensive imported brands are taxe d higher, in absolute terms, than less expensive domestic brands, 
may be consistent with WTO obligations.971  
                                                      
960 Thailand's first written submission, paras. 86 and 89. 
961 Thailand's first written submission, para. 86. 
962 Philippines' second written submission, para. 393. 
963 Philippines' first written submission, paras. 49 3-496; second written submission, para. 392. 
964 Philippines' second written subm ission, para. 390, see Table 2. 
965 Philippines' second written submission, para. 393. 
966 Thailand second written submission, para. 131. 
967 Thailand first written submission, para. 210,  referring to the French VAT system in 
Exhibit THA-29; second written submission, para. 131. 
968 Thailand's first written submission, paras. 223-224. 
969 Thailand's first written submission , para. 223; referencing Panel Report, Dominican Republic – 
Import and Sale of Cigarettes , para. 7.331. 
970 Thailand's first written submission, para. 224. 
971 Thailand's second written submission, para. 132. WT/DS371/R 
Page 246  
 
  (ii) Analysis by the Panel 
7.476  The Philippines argues that becau se the VAT is calculated on the basis of the MRSP, a higher 
MRSP translates into a higher VAT burden.  Based on the data that shows higher absolute MRSP figures for imported cigarettes compared to domestic cigarettes, the Philippines asserts that Thailand 
imposes a higher tax burden on imported cigarettes by applying a higher MRSP to imported cigarettes 
than to domestic cigarettes.
972  
7.477  In Thailand's view, the MRSP numbers in abso lute terms are irrelevant to the Panel's 
analysis.973  This is because the determination of whet her an internal tax discriminates against 
imported goods within the meaning of Article III:2 depends on whether the tax base for imported 
cigarettes is established and applied  in a manner that affords protec tion to domestic cigarettes, and 
not on whether the tax base in itself is higher fo r imported cigarettes than domestic cigarettes.  
Thailand further points out that under an ad valorem  tax system, the absolute amounts collected on 
differently-priced like products w ill be different; greater absolute amounts will be collected on higher-
priced goods.974   
7.478  The question before us is, therefore, whethe r the higher absolute MRSP figures for imported 
cigarettes can in themselves be considered as proving a VAT imposed on imported cigarettes in 
excess of that applied to domestic cigarettes with in the meaning of Article III:2, first sentence. 
7.479  Examining issues relating to the excess taxation of imported products under Article III:2, first 
sentence, the Appellate Body in Japan – Alcoholic Beverages II  stated that "even the smallest amount 
of 'excess' is too much.  The prohibition of discrimin atory taxes in Article III:2, first sentence, is not 
conditional on a 'trade effects test' nor is it qualified by a de minimis standard".975  The Appellate 
Body's statement thus clarifies that an internal tax will be found discriminatory against imported 
products within the meaning of Article III:2, firs t sentence, if the tax imposed on imported products 
exceeds, even in the smallest amount, the tax imposed on domestic products. 
7.480  Turning to the factual circumstances of the pr esent dispute, the parties do not contest that 
higher MRSPs result in higher VAT amounts.  We not e that the data presented to us do indeed 
illustrate that the MRSPs, the tax base for VAT amounts, for Marlboro and L&M are higher than 
those for domestic cigarette brands.  The table below shows a comparison between the MRSPs for 
Marlboro and L&M and those for the domestic cigarettes within the same price segments between 
2005 and 2007. 
                                                      
972 As stated in paras. 7.417-7.421 above, the MRSP notices at issue are the ones of 7 December 2005, 
18 September 2006, 30 March 2007 and 29 August 2007.  
973 Thailand's first written submission, para. 223. 
974 Thailand's first written submission, para. 223. 
975 Appellate Body Report, Japan – Alcoholic Beverages II , p. 23, DSR 1996:I, 97, at 115.  The 
Appellate Body also found that, given the absence of a reference to Article  III:1 (the provis ion setting forth a 
general principle and informing the rest of Article III) in  the first sentence of Article III:2, "the presence of a 
protective application need not be established separately from the specific requirements that are included in the 
first sentence in order to show that a tax measure is inc onsistent with the general principle set out in the first 
sentence" (Appellate Body Report, Japan – Alcoholic Beverages II , p. 18, DSR 1996:I, 97, at 111-112).  The 
Appellate Body further elaborates that "this does not mean that the general principle of Article III:1 does not 
apply to this sentence.  To the contrary, ... the first sentence of Article III:2 is, in effect, an application of this general principle".  WT/DS371/R 
 Page 247 
 
 
  MRSPs of domestic and imported brands in premium and mid-price segments 
 
[[The deleted table contains business confidential information976, 977]] 
 
 7.481  Specifically, the MRSPs for Marlboro in December 2005, September 2006 and March and 
August 2007 are respectively [[xx.xxx.xx]], [[xx.xxx.xx]], [[xx.xxx.xx]] and [[xx.xxx.xx]] baht, whereas the MRSPs for Krongthip FF Deluxe and Royal Standard FF Deluxe  are [[xx.xxx.xx]], 
[[xx.xxx.xx]], [[xx.xxx.xx]] and [[xx.xxx.xx]] baht for the same time period.  As for L&M , MRSPs 
were [[xx.xxx.xx]], [[xx.xxx.xx]], [[xx.xxx.xx ]] and [[xx.xxx.xx]] baht, whereas MRSPs for Gold 
City FF 90, Falling Rain, Kronthip FF 90 and Royal Standard FF Regular, Samit FF 90 and 
Krongthip Lights were [[xx.xxx.xx]], [[xx.xxx.xx]], [[xx.xxx.xx]] and [[xx.xxx.xx]] baht.  As noted 
above, higher MRSP figures will result in higher VAT amounts because the VAT is calculated on the basis of the MRSP.  The question that we have to  answer is whether higher MRSP figures in absolute 
terms can be interpreted as excess  taxation within the meaning of Article III:2, first sentence.  As 
described above, the MRSP is the tax base for the VAT and derived by adding up c.i.f. or ex factory 
prices, internal taxes and marketing costs.  Am ong these components, the internal taxes are derived 
from the c.i.f. price plus customs duties for importe d cigarettes and the ex factory price for domestic 
cigarettes. These figures are determined by the importer and the domestic manufacturer, not by the Thai government.
978  If an importer's c.i.f. price is therefore higher than the ex factory price of a 
domestic manufacturer, the higher c.i.f. price can contribute to a higher MRSP for an imported 
cigarette brand compared to the MRSP for a domestic cigarette brand to the extent that the marketing 
cost component is kept at the same level for both imported and domestic cigarettes.  The evidence 
before us illustrates that the c.i.f. prices for importe d cigarettes are usually high er than the ex factory 
prices for domestic cigarettes.979  Moreover, in the case of the MRSP for imported cigarettes, customs 
duties, which are not added for domestic cigarettes, are also included in deriving the final MRSP and 
added to the c.i.f. price to provide a basis for the calculation of the internal taxes.  This will also 
increase the absolute level of MRSPs for imported cigarettes. 
7.482  In our view, a comparison of the absolu te MRSP numbers for imported and domestic 
cigarettes, without considering the specific nature of the MRSP, including how MRSPs are established and/or revised under the Thai VAT system , is not sufficient to demonstrate an allegedly 
discriminatory VAT applied to imported cigarettes.   Therefore, we do not consider that higher 
MRSPs, in absolute terms, for imported cigare ttes compared to MRSPs for domestic cigarettes 
establish that imported cigarettes are taxed in excess of  like domestic cigarettes within the meaning of 
Article III:2, first sentence. 
(c) Whether imported cigarettes are subject to ex cess taxation – an alleged difference in the 
determination of the MRSPs for imported and domestic cigarettes 
(i) Legal standard 
Main arguments of the parties
 
7.483  The Philippines submits that the MRSPs for imported cigarettes have typically been higher 
than the RRSPs/RSPs, whereas the MRSPs for domestic cigarettes are always equal to the RSPs for 
those cigarettes.980  This gap between the MRSPs and RRSPs for imported cigarettes results in a VAT 
                                                      
976 [[xxx.xx.xxx]]. 
977 [[xxx.xx.xxx]]. 
978 See para. 7.824. 
979 Exhibits THA-76, THA-81 and THA-82. 
980 Philippines' second written submission, paras. 394-396. WT/DS371/R 
Page 248  
 
  for imported cigarettes which is systematically in excess of the VAT for like domestic cigarettes.  The 
Philippines emphasizes that the gap between the tax base (the MRSP) and the actual retail selling 
price (the RRSP/RSP) for imported products will resu lt in a higher tax burden on  imported products if 
the gap is not the result of a decision of the impor ter to sell at a lower price than the MRSP.  The 
MRSP will exceed the RRSP/RSP if the Thai government uses an inflated starting-point for the 
MRSP calculation for imported products or adds an inflated amount for marketing costs for imported 
products.
981   
7.484  Specifically, the Philippines submits that there is a significant difference in the marketing 
costs used for the MRSP calculation, as the mark eting costs used for the MRSP calculation for 
imported brands are typically higher than the mark eting costs used in the MRSP calculations for like 
domestic brands.982  In practice, when DG Excise rejects the proposed MRSP for Marlboro  or L&M , 
it creates its own proxy for the actual marketing costs derived from the importer's information.983  
Assuming that DG Excise properly determines the ot her elements of the MRSP (i.e. c.i.f. price, 
customs duties and internal taxes), the difference between the proposed MRSP (i.e. the RRSP) and the 
imposed MRSP is the extra amount that DG Excise adds  to the actual marketing costs.  Moreover, the 
Philippines submits that Thailand has failed to offe r a legitimate countervailing explanation that the 
excess taxation can be explained with objective factor s relating to the methodology used to calculate 
the MRSPs.984 
7.485  Thailand  submits that the Philippines' claim does not establish a prima facie case that 
imported cigarettes are systematically taxed in excess of domestic cigarettes.985  To the extent that the 
WTO Members are free to use both fixed price systems and ad valorem systems of internal taxation, 
the fact that an imported brand may pay more  tax than a domestic brand cannot constitute 
discrimination within the meaning of Article III:2.986  Rather, Thailand maintains that the proper test 
to determine whether Thailand's use of the MRSP as the tax base for its VAT, is inconsistent with 
Article III:2, first sentence, requires an examinatio n of the measure's criteria, structure and overall 
application, to determine if it is applied in a way that affords protection to domestic products.987  The 
key issue is therefore whether Thai Excise dete rmines the MRSP for both domestic and imported 
cigarettes in the same manner.988  Thailand submits that the same methodology is used to establish the 
MRSP for both domestic and imported cigarettes and that the Philippines failed to make a prima facie  
case that Thai Excise establishes the MRSPs diffe rently for imported and domestic cigarettes or 
applies the methodology described in a manner th at affords protection to domestic cigarettes.989   
7.486  In this connection, the  Philippines  does not consider that Thailand's taxation of cigarettes can 
be examined on the basis that it is an ad valorem  tax system because the Thai VAT system is not a 
                                                      
981 Philippines' response to Panel question No. 49. 
982 Philippines' first written submission, para. 498; fi rst oral statement, para. 185; second written 
submission, para. 395. 
983 Philippines' comments on Thailand's response to Panel question Nos. 122 and 123. 
984 Philippines' first written submission, para. 498, Ta ble 4; second written submission, para. 397. The 
Philippines also submits that in 2006 and 2007, Thailand used guarantees th at exceeded the customs value as the 
starting point to calculate MRSPs; and the percentage amount added for marketing costs has been higher for 
imported cigarettes (Philippines' first oral statement, paras. 169-173 and 213-216; response to Panel question 
Nos. 49 and 128). The Philippines did, however, not effec tively pursue this line of arguments in relation to its 
claim under Article III:2. 
985 Thailand's first written submission, paras. 222-233, second written submission, para. 130. 
986 Thailand's second written submission, paras. 131-133. 
987 Thailand's first written submission, para. 206, quoting Appellate Body Report, Japan – Alcoholic 
Beverages II , p. 29, DSR 1996-I, 97, at 120; second written submission, para. 134. 
988 Thailand's second written submission, paras. 135-136. 
989 Thailand's response to Panel question No. 41.  WT/DS371/R 
 Page 249 
 
 
  typical ad valorem  system.990  The Thai government fixes both the tax rate and the tax base since the 
tax base is not the seller's price or the manufacturer's RRSP, but rather the MRSP, which is a figure determined by the government using an unpublished methodology.
991  The Philippines does not 
dispute Thailand's right to impose VAT on the basis of a government-fixed price  per se .992  However, 
under Article III:2, imported goods  cannot be subject to any "e xcess" taxation through a higher 
government-fixed tax base than the tax base applie d to like domestic goods.  For imported cigarettes, 
however, the government-fixed tax base – the MRSP – is systematically higher than the RRSP.  By 
fixing both the tax rate and the tax base according to its own criteria, Thailand effectively imposes a 
specific tax that is differentiated by brand, and not an ad valorem  tax based on the 
seller/manufacturer's chosen retail price. This sp ecific tax effectively imposed on imported cigarettes 
is higher than the specific tax imposed on domest ic cigarettes because of the Thai government's 
decision to fix a higher tax base for imports coupled with the same tax rate. 
7.487  Thailand  asserts that because PM Thailand, and no t Thai Excise, initially determines the 
"marketing costs" element of the MRSP, stating the marketing costs as a percentage of the MRSP is not a measure of whether the MRSP methodology is a pplied so as to afford protection to the domestic 
industry.
993  Thailand points out that a request by  PM Thailand for new MRSPs for certain L&M  
brands in 2008 was granted by Thai Excise and th at the MRSPs for these brands were further updated 
in 2009 based on the 2008 Notice.994  This evidence shows that the st arting point for the determination 
of the MRSP is the manufacturer's RRSP/RSP and th at Thai Excise does not independently determine 
the "marketing costs" element of the MRSP.995  The same methodology is used for domestic cigarettes 
as demonstrated through the changes made to the MRSPs following requests by TTM.996 
7.488  Furthermore, Thailand points out that, contrary to what the Philippines appears to suggest, in 
a fixed price tax system, the government is not re quired to automatically  accept the manufacturer's 
proposed tax base.  To prevent the manufacturers' pot ential avoidance or evasion of their tax liability, 
Thailand uses the maximum price as the tax base.997  This means that the manufacturers cannot 
propose a low MRSP simply to minimize their tax es without also foregoing considerable sales 
revenue.   
Analysis by the Panel  
7.489  The Philippines' second ground for its claim under Ar ticle III:2, first sentence, with respect to 
the Thai VAT system can be summarized as follows:  the imported cigarettes at issue are subject to excess VAT taxation through a higher government-fixed tax base than the tax base applied to like 
domestic cigarettes.  A higher tax base for impor ted cigarettes is fixed by establishing marketing 
costs, one of the components of the tax base, in a manner discriminatory against imported cigarettes.  
                                                     
 
990 Philippines' response to Panel question Nos. 49; Exhibit PHL-188. The Ph ilippines refers to the 
French system of taxation to exemplify ad valorem  taxation systems. According to the Philippines, France 
prescribes a tax base for cigarettes, but automatically  accepts the manufacturer/impor ter's recommended retail 
selling price as the prescribed price. Th ailand rebuts this factual assertion, and claims that the French text, which 
states that the relevant Minister must "homologuer le prix", actually requires the minister to register the proposed price after examination.  
991 Philippines' response to Panel question No. 49. 
992 Philippines' second oral statement, para. 85. 
993 Thailand's second written submission, para. 138. 
994 Thailand's second written submission, para. 139. 
995 Thailand's first written submission, paras. 83-87; response to Panel question No. 41; second written 
submission, para. 139.  
996 Thailand's first written submission, paras. 236-2 37; response to Panel question No. 41; second 
written submission, para. 140; Exhibit THA-19 and THA-51. See also Exhibit THA-45 for a list of all changes in MRSPs having affected PM Thailand between 2003-2006. 
997 Thailand's second written submission, para. 137. WT/DS371/R 
Page 250  
 
  Thailand's position is that Thai Excise establishes the tax base for VAT in the same manner for both 
domestic and imported cigarettes and that the importers and the manufacturer, not the Thai 
government, initially determine the marketing cost co mponent of the tax base.  Thailand claims that 
the Philippines failed to make a prima facie  case that Thai Excise establishes the MRSPs differently 
for imported and domestic cigarettes. 
7.490  In support of its argument, th e Philippines focuses on the fact that the MRSPs for imported 
cigarettes have typically been higher than the RRSPs/RSPs, whereas the MRSPs for domestic 
cigarettes are always equal to the RSPs of those cigarettes
998, and this gap between the MRSPs and 
RRSPs for imported cigarettes results in a VAT for imported cigarettes systematically in excess of like domestic cigarettes.  It is also not disputed that, for the MRSP Notices at issue, a gap exists 
between the MRSPs and the RRSPs for imported cigare ttes only, but not for domestic cigarettes, as 
illustrated in the table below.   
7.491  We observe that the parties have interchang eably referred to the terms "RRSPs" and "RSPs" 
in this dispute.  We understand th at for imported cigarettes, the RRSP figures are virtually the same as 
the RSP figures as the retailers will normally accept the retail selling price proposed by PM Thailand 
(i.e. the RRSP (Recommended Retail Selling Price)) as their actual retail selling price (i.e. the RSP 
(Retail Selling Price)).  For domestic cigarettes, Thailand explained at the second substantive meeting 
with the Panel that TTM branded cigarettes only k now an RSP, not an RRSP.  Therefore, unless 
specified otherwise, our references in this Repor t to RRSP and RSP will relate to the same figure. 
MRSPs and RRSPs of domestic and imported brands in premium and mid-price segments 
 
[[The deleted table contains business confidential information
999, 1000]] 
 
7.492  Thailand argues that given that the VAT tax base can be a fixed price, which may not always 
be equal to the actual retail price, a difference in tax amounts caused by the gap between the actual 
retail price and the fixed-price tax base (e.g. MRSP ) cannot, in itself, give rise to a violation of 
Article III:2.1001  We are also of the view that the mere existence of a gap between such a fixed tax 
base and the actual retail price cannot be an automatic  proof of an inconsistency with the obligation 
under Article III:2.  This is because the company determines the RSP based on business 
considerations, which can be lower than the government-fixed MRSP.   
7.493  However, what the Philippines contends in this  dispute is that Thai Excise establishes the 
MRSP in a manner which discriminates against imported cigarettes by inflating the marketing cost 
element of the MRSP for imported cigarettes.  Th erefore, the question presented to us goes beyond 
the mere existence of a gap between the fixed-price VAT tax base (MRSP) and the actual retail price.  The Philippines' claim raises issues relating to th e manner in which Thai Excise establishes the 
government-fixed tax base, the MRSP, particularly in respect of its marketing cost component, for 
imported and domestic cigarettes.   
7.494  Both parties do not dispute that a government is free to fix a tax base.  It will be WTO-
consistent as long as the government determines the tax base in the same manner for both imported 
and like domestic goods concerned.  In Thailand, DG Excise has the authority to determine the tax 
base (MRSP) for VAT imposed on cigarettes.  For the purpose of addressing the Philippines' claim in 
this section, therefore, we will have to examin e whether DG Excise has equally applied the general 
methodology, as described by Thailand in this dis pute, in determining the MRSPs for both imported 
                                                     
 
998 Philippines' second written submission, paras. 394-396. 
999 [[xx.xxx.xx]]. 
1000 [[xx.xxx.xx]]. 
1001 Thailand's response to Panel question No. 124.  WT/DS371/R 
 Page 251 
 
 
  and domestic cigarettes.  Particularly, in the light of the parties' arguments, we will evaluate whether 
DG Excise determines the marketing cost com ponent of the MRSP for imported cigarettes in a 
manner different from the general methodology, such that imported cigarettes are subject to a VAT 
liability in excess of that applie d to domestic cigarettes.   
7.495  We find support for our approach in the Panel's analysis in Argentina – Hides and Leather : 
"Article III:2, first sentence, requires a comparison of actual tax burdens rather than 
merely of nominal tax burdens ... Thus, even where imported and 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 ta x burden for imported products."
1002 (emphasis 
added)   
7.496  We underline in this relation that in the light  of the obligations under Article III:2, first 
sentence, a VAT system under which the tax base is  determined by a government, is more susceptible 
to a potential violation of this provision than a sy stem under which the tax base is determined solely 
by figures provided by a company. 
7.497  Therefore, in order to determine whether Thaila nd acted inconsistently with Article III:2, first 
sentence, by subjecting imported cigarettes to a VAT in excess of that applied to domestic cigarettes, 
we must address the following questions:  (i) how marketing costs are determined under the general 
methodology; (ii) whether DG Excise departed from the general methodology in establishing the marketing costs for the MRSPs of the imported ciga rettes contained in the MRSP Notices at issue; 
and, if so, (iii) whether DG Excise's departur e from the general methodology resulted in subjecting 
the imported cigarettes to excess taxation compared to like domestic cigarettes.  
(ii) Establishment of the "marketing costs" component of the MRSP  
7.498  We recall that "marketing costs" was the only component of the MRSP that was not based on 
the c.i.f. or ex factory price and/or any fixed formula.  Provincial tax is also not based on the 
c.i.f./ex factory price, but it is a fixed-figure th at is determined by the government.  Thailand has 
maintained that marketing costs represent the ab solute "residual difference" between the proposed 
MRSP and other known elements of the MRSP and that these costs are determined in the same manner for both imported and domestic cigarettes.
1003   
7.499  Thailand's further elaboration on the nature of the marketing costs informs us, however, that 
there are, in practice, two different ways of establishing the marketing costs: (i) from the top-down perspective, the marketing costs represent the di fference between the MRSP or maximum price of a 
brand of cigarettes and the sum of the already-k nown components of the MRSP (which is Thailand's 
initial explanation above); and (ii) from the bottom- up perspective, the marketing costs represent the 
amounts incurred in bringing cigarettes to the consumer market in Thailand on top of the 
c.i.f./ex factory price and all applicable taxes.
1004  In other words, the marketing costs represent the 
selling expenses and profits of all entities in the sales distribution chain – including the 
importers/manufacturers, wholesalers, and retailers.1005 
                                                      
1002 Panel Report, Argentina – Hides and Leather , para. 11.183, referring to GATT Panel Report, Japan 
– Alcoholic Beverages I , para. 5.8. 
1003 Thailand's response to Panel question No. 41. 
1004 Thailand's 4 September 2009 response, para. 11. 
1005 Thailand's response to Panel question No. 122. WT/DS371/R 
Page 252  
 
  7.500  Based on Thailand's explanation, we understand that the top-down perspective of establishing 
the marketing costs pertains to situations where Th ai Excise revises an MRSP for a cigarette brand on 
its own initiative because of a change(s) in the tax rate (s).  In such a case, Thai Excise calculates the 
new MRSP by changing the relevant c.i.f. and ex  factory prices, updating the tax amounts that are 
based on those figures, and holding the so-called "m arketing costs" constant.  The same marketing 
costs are derived from the latest MRSP for that brand or the MRSP previously requested by the 
importers or the domestic manufacturer.  The marketing costs of the revised MRSP are calculated by deducting the sum of the already-known components of the MRSP from the MRSP figure, which conforms to the so-called top-down perspective.  If Thai Excise simply accepts a revised MRSP for a certain cigarette brand that is proposed by an impor ter or the domestic manufacturer, then there will 
be no need for any calculation. 
7.501  On the other hand, however, the bottom-up perspe ctive of explaining marketing costs, which 
appears to involve a consideration of various el ements, may become relevant when Thai Excise 
rejects a revised MRSP figure proposed by an importer or the domestic manufacturer.  Thai Excise may reject proposed changes or make other adjustments
1006 consistent with the dual function of the 
MRSP as a maximum price to protect consumers and as the tax base for VAT.  Thailand explains that 
Thai Excise reviews the proposed MR SP in the light of the information provided by the importer or 
the domestic manufacturer to ensure that the pr oposed MRSP reflects the reasonable maximum selling 
price of those cigarettes in the light of the market conditions and the information provided.1007  As the 
Philippines points out1008, Thailand has not specifically explained what market conditions it is 
referring to and how Thai Excise evaluates them.   
7.502  Thailand submits that requests for increases in MRSPs are generally accepted, whereas 
requests for reductions in MRSPs are not automatically accepted.1009  Requests for reductions in 
MRSPs are reviewed to ensure that they are ju stified and that the proposed reduced MRSP will not 
lead to cigarettes being illegally sold above the MRSP.1010  In cases of a request for reduction of the 
MRSP, the commercial interests at stake are not just those of the importer or the domestic 
manufacturer because the ability of the reseller to make  a profit on the sale of the cigarettes may also 
be affected.1011  Thailand alleges that Thai Excise can ensure that it does not favour certain 
commercial interests over others by warranting th at requests for reductions in MRSPs are supported 
by information about changes or reductions in co sts, such as c.i.f. costs, selling expenses, or 
marketing strategies that properly reflect the reaso nable maximum selling price of the cigarettes.  
Thailand submits that because the expenses and pr ofits of wholesalers and retailers are not known, 
Thai Excise has only two possible sources of information for the marketing costs – the 
importers/manufacturers and the market itself.1012 
7.503  Overall, we understand from Thailand's expl anation above that Thai Excise does not 
automatically accept MRSPs proposed by the importers  or the domestic manufacturer.  When Thai 
Excise revises the existing MRSPs on its own initiative to  reflect changes in the c.i.f. or ex factory 
prices and/or tax rates, Thai Excise calculates th e new MRSP by changing the relevant c.i.f. or 
ex factory prices, updating the tax amounts that ar e based on those figures, and holding the so-called 
"marketing costs" constant.  When it rejects an  MRSP proposed by an importer or the domestic 
manufacturer, however, Thai Excise determines the ma rketing costs component of a new MRSP based 
                                                      
1006 See para. 7.469 above. 
1007 Thailand's response to Panel question No. 123(1). 
1008 Philippines' combined comments on Thailand's re sponse to Panel question Nos. 122 and 123. 
1009 Thailand's response to Panel question No. 123(1). 
1010 Thailand's response to Panel question No. 123(1). 
1011 Thailand's response to Panel question No. 123(1). 
1012 Thailand's response to Panel question No. 122.  WT/DS371/R 
 Page 253 
 
 
  on the current MRSP/RRSP; or on the one previously  proposed by an importer or by the domestic 
manufacturer; or on information from the market, as the starting point. 
(iii) Establishment of the MRSP for TTM brands 
Main arguments of the parties  
7.504  The Philippines asserts that the methodology used to calculate TTM's marketing costs is 
different from the general methodology that Thailand cl aims is used to calculate the marketing costs 
for both imported and dom estic cigarette brands.1013  The DG Excise's description to the Thai Tax 
Court of the calculation of the marketing costs a pplied to TTM brands demonstrates that Thailand 
calculated marketing costs as a percentage  (i.e. [[xx.xxx.xx]] per cent) of TTM's own "genuine 
income" for TTM brands.1014  The Philippines argues that this is different from the methodology 
explained by Thailand in this proceeding that th e marketing costs represent the absolute "residual 
difference" between the proposed MRSP a nd other known elements of the MRSP.1015  According to 
the Philippines, this is another example of Thaila nd's failure to provide a coherent and objective 
explanation of its determination of MRSPs that might explain ra tionally the higher tax burden on 
imported cigarettes.1016 
7.505  Thailand argues that its description before the Panel is correct and thus the marketing costs 
for TTM brands are calculated in the same way as for imported brands.1017  This is proved by the fact 
that Thai Excise accepted TTM's proposed MRSPs wit hout any adjustment to reflect a percentage of 
the marketing costs.1018  The MRSPs for TTM have always been accepted because TTM has only 
requested increases in its MRSPs.1019  There are no instances of TTM requesting a reduction in its 
MRSPs.  The only instance in which PM Thaila nd's proposed MRSPs were not accepted, in 
December 2005, involved a request for a reduction in the MRSPs.  This request was not accepted 
because the importer did not provide adequate support and its desire to "absorb" taxes does not justify 
reducing those taxes.1020  Thai Excise's explanation before th e Thai Tax Court was that marketing 
costs can be stated as a percentage of the MRSP afte r calculating the MRSP.  Thailand does not 
interpret that statement as intended to state that  Thai Excise has independently determined the 
marketing costs as a percentage of the genuine income and used these prospectively to establish 
MRSPs.1021   
Analysis by the Panel  
7.506  The Philippines argues that the DG Excise's d escription to the Thai Tax Court of the 
calculation of the marketing costs applied to TTM br ands ("DG Excise's description to the Thai Tax 
Court") demonstrates that the methodology used to  calculate TTM's marketing costs (calculating 
marketing costs as a percentage  (i.e. [[xx.xxx.xx]] per cent) of TTM's own "genuine income" for TTM 
brands) is different from the general me thodology applied to imported cigarettes.1022  We will examine 
                                                      
1013 Philippines' second written submission, paras. 408-413. 
1014 Exhibit PHL-109. 
1015 Thailand's response to Panel question No. 41. 
1016 Philippines' second written submission, para. 413. 
1017 Thailand's response to Panel question No. 127. 
1018 Thailand's response to Panel question No. 127, referring to Exhibit THA-80 which contains the 
letters from TTM. 
1019 Thailand's response to Panel question No. 123(2). 
1020 Thailand's response to Panel question No. 123(2) , also referring to Thailand's comments of 25 
September 2009, paras. 23-25 and 42-45.  
1021 Thailand's response to Panel question No. 127, referring to Exhibit THA-49. 
1022 Philippines' second written submission, paras. 408-413. WT/DS371/R 
Page 254  
 
  whether the subject exhibit shows, as the Philippi nes argues, that Thai Excise did not follow the 
general methodology to determine the marketing costs for TTM. 
7.507  The document at issue was DG Excise's submission to the Thai Tax Court in an appeal 
proceeding initiated by PM Thailand concerning the 2006 and 2007 MRSP Notices.   Relevant parts of 
the DG Excise's description to th e Thai Tax Court are as follows: 
"3. Fact 
  3.1 Imported Cigarette   Principle and Reason
 
  ... 
(4) The minimum margin percentage of 32.60 which is used for 
calculating the retail price of imported cigarettes, as per the Notification of the Excise Depa rtment ..., dated 18 September, 
has reflected the situation of the competition, cost and marketing of the imported cigarettes.  This results in the 
increase of imported cigarette's market share (Attachment 6). 
 
3.2 Domestic Cigarette 
Principle and Reason
 
... (2) The price for domestically produced cigarette at the 
manufacturer remains unchanged. 
 (3) On 7 December 2005, Thailand Tobacco Monopoly increased 
the marketing margin of domestic cigarette.  For example, Krongthip 90 brand was increased from baht [[xx.xxx.xx]] per 
pack to baht [[xx.xxx.xx]] per pack (Attachment 7) 
 (4) In order to determine th e maximum retail price as per 
Section 23, the Excise Department  has inspected the marketing 
margin of the domestic cigarette and believed that the marketing margin which was adjusted on 7 December 2005 is 
still acceptable.  There are 2 methods of inspection
: 
  Method 1:  Inspection of sale price at each particular selling 
period, it is found that the No tification ..., dated 9 March 2007 
has been complied. 
 
 Method 2:  Inspection of the marketing margin from the 
financial statement which was endorsed by the Office of the Auditor General of Thailand.  In  this regard, it is found that 
the percentage of the marketing margin to the income, as per 
the retail price structure, of Thailand Tobacco Monopoly is 
equivalent to [[xx.xxx.xx]] .  This amount is [[xx.xxx.xx]] than 
the percentage of marketing marg in, to the income as appeared 
in the financial statement of 2006 which is [[xx.xxx.xx]].  In this connection, if the maximum retail price was calculated 
from the percentage of marketi ng margin to the income as 
appeared in the financial statement , it will be lower than the 
price announced by the Excise Department. 
  WT/DS371/R 
 Page 255 
 
 
   By the way, the percentage of the marketing margin to the 
income each year can be changed depending on the quantity of production.  In any case, the change should not exceed the percentage of marketing marg in to the genuine income of 
the Thailand Tobacco Monopoly.  Therefore, there is no 
ground to adjust the marketing margin (Attachment 8)."  
(underline added) 
 7.508  The text of DG Excise's explanation as cited above indicates that the percentage of the 
marketing costs
1023 to TTM's income was used as one of the two methods of inspecting the 
acceptability of the marketing margin at issue, not the method of calculating the marketing costs itself.  
This understanding is also confirmed by an  additional statement on Method 2 that " if the maximum 
retail price was calculated from the percentage of ma rketing margin to the in come as appeared in the 
financial statement, it will be lower than the price announced by the Excise Department".  This 
illustrates that the actual calculation of marketing co sts was not based on the percentage of marketing 
costs to TTM's income.  In the light of this, we agree with Thailand that DG Excise's explanation 
before the Thai Tax Court should be interpreted as m eaning that the marketing costs can be stated as 
a percentage amount after an MRSP is determined.  Th erefore, we are not persuaded that DG Excise's 
explanation before the Thai Tax Court proves that Thai Excise calculates marketing costs for domestic cigarettes in a manner different from the general methodology.
1024 
(iv) Establishment of the 7 December 2005 MRSP for Marlboro and L&M 
Main arguments of the parties  
7.509  The Philippines claims that the 7 December 2005 marketing costs for Marlboro and L&M , 
which were applied again in the 2008 and 2009  MRSPs, were not derived from the information 
PM Thailand provided to DG Excise and the marketing cost value was set four times higher than the 
appropriate requested level.1025  This resulted in higher MRSPs  for imported cigarettes than for 
domestic cigarettes, which in turn explains th e gap between the MRSP and the RRSP for imported 
cigarettes.1026  The Philippines submits that the Decem ber 2005 MRSPs therefore illustrate that 
Thailand does not apply its stated methodology in practice. 
7.510  Thailand submits that the December 2005 MRSP Notice, the only instance in which 
PM Thailand's proposed MRSPs were not accepted,  involved a request for a reduction in the 
MRSPs.1027  The request was not accepted because PM Tha iland did not provide ad equate support and 
a desire to "absorb" taxes does not justify reducing those taxes.1028  PM Thailand has not requested 
                                                      
1023 We understand "marketing margin" used in Exhibit PHL-109 to mean "marketing costs". 
1024 Additionally, we note from the above document submitted by DG Excise that Thai Excise relied on 
the percentage of a marketing margin  to TTM's income to ex amine the acceptability of the marketing costs level 
for the concerned MRSP.  It states th at such a method is endorsed by the Office of the Auditor General of 
Thailand.  Therefore, although Thai Excise did not use a percentage of TTM's genuine income per se  to 
establish the marketing costs of TTM brand cigarettes, th e evidence indicates that such a method was applied to 
inspect the adequacy of the "marketin g costs" component of TTM's MRSP. 
1025 Philippines' second written submission, paras. 335-337 and 402 ( L&M ), paras. 346-350 and 403-
404 ( Marlboro ); comments of 16 September 2009, paras. 17-23 and 45-49; second oral statement, paras. 63-67.  
1026 Philippines' second written submission  , para. 402. 
1027 Thailand's response to Panel question No. 123(2). 
1028 Thailand's response to Panel question No. 123(2), referring to its 25 September 2009 comments, 
paras. 23-25 and 42-45.  Thailand also points to examples of other instances in which importers have made 
properly-documented requests for and have duly received reductions of their MRSPs (Exhibit THA-80). WT/DS371/R 
Page 256  
 
  any change in its MRSPs for existing Marlboro  and L&M  brands since December 2005, although it 
has requested new MRSPs for two new L&M  brands in August 2008.
1029  
7.511  The parties' arguments on the determination of marketing costs for the 7 December 2005 
MRSP Notice of Marlboro and L&M are summarized below. 
Marlboro 
7.512  Regarding the MRSP calculated for Marlboro in December 2005, in its comments of 
25 September 2009, Thailand  explained that Marlboro's marketing costs were derived from the 
figure provided in PM Thailand's letter of 19 July  2005, in which PM Thailand proposed an MRSP of 
[[xx.xxx.xx]] baht for provinces without provincial tax.1030  Following the Philippines' explanation 
that PM Thailand's letter of 19 July 2005 proposed an MRSP of [[xx.xxx.xx]] baht inclusive of 
provincial tax, Thailand submitted a second explanation that it calculated marketing costs based on 
Marlboro 's current  RRSP/RSP of [[xx.xxx.xx]] baht, which did not apply in provinces that imposed 
provincial tax.1031  PM Thailand's current marketing costs for Marlboro are illustrated in the left-hand 
column on page 2 of the 19 July 2005 letter, wh ich shows [[xx.xxx.xx]] baht as PM Thailand's selling 
price (the RSP) in provinces w ithout provincial tax (e.g. Bangkok).1032  In the absence of any grounds 
to reduce the marketing costs for Marlboro  cigarettes, Thai Excise used  the current marketing costs 
([[xx.xxx.xx]] baht) based on current sales in areas without provincial taxes, such as Bangkok, as the 
basis for the marketing costs for the single nationwide MRSP by rounding it up to [[xx.xxx.xx]] baht.
1033  As a result, DG Excise issued an MRSP of  65 baht.  DG Excise subsequently refused 
PM Thailand's request of 13 December 2005 for the MRSP to be reduced to [[xx.xxx.xx]] baht.   
7.513  The Philippines argues that neither of these ex post explanations is supported by a 
contemporaneous explanation by DG Excise.  Th e Philippines points out three key elements for 
Thailand's second explanation of the December 2005 marketing costs for Marlboro . 1034   
7.514  First, DG Excise did not follow its "normal prac tice" in choosing not to base the marketing 
costs on the importer's latest information.  U nder DG Excise's "normal practice", it should have 
adopted one of two approaches in determining the MRSP for December 2005:  (i) carry over 
marketing costs derived from an MRSP for provinces with provincial tax that was based on a proposal 
by the importer; or (ii) rely on the marketing co sts derived from a subsequent proposal by the 
importer.  DG Excise followed neither approach.  If DG Excise followed the first approach, it should 
have carried forward [[xx.xxx.xx]] baht, which is th e actual marketing costs used in the previous 
Marlboro MRSP (i.e. December 2004 MRSP) inclusive of provincial tax of 1.86 baht for provinces 
with provincial tax.  In the alternative, DG Ex cise could have relied on PM Thailand's July 2005 
MRSP proposal of [[xx.xxx.xx]] baht inclusive of provincial tax for provinces with provincial tax, 
which would have resulted in mark eting costs of [[xx.xxx.xx]] baht.1035   
                                                      
1029 Thailand's response to Panel question No . 123(2), referring to Exhibit THA-66.   
1030 Thailand's comments of 25 September 2009, paras. 42-47; Exhibit THA-82. 
1031 Thailand's response to Panel question No. 130. 
1032 Thailand's response to Panel question No. 130; Exhibit THA-18, pp. 6-7. 
1033 Thailand explains that a marketing cost of [[xx.xxx.xx]] baht was rounded up by approximately one 
baht to [[xx.xxx.xx]] baht, which resulted in a total pre-rounded up MRSP of [[xx.xxx.xx]] baht.  To arrive at a 
published MRSP of 65 baht, a marketing cost of [[xx.xxx.xx]] was then further rounded up by [[xx.xxx.xx]] 
baht.  The marketing cost of [[xx.xxx.xx]] therefore represents the sum of the marketing cost of [[xx.xxx.xx]]. 
1034 Philippines' comments on Thailand's response to Panel question No. 130. 
1035 Philippines' comments on Thailand's response to Panel question No. 130; Exhibit PHL-282.  WT/DS371/R 
 Page 257 
 
 
  7.515  Instead, DG Excise chose to base the December 2005 Marlboro MRSP on Marlboro 's RSP in 
July 2005 of [[xx.xxx.xx]] baht.1036  Although this RSP equalled the MRSP proposed in July 2005, 
Thailand alleges a crucial difference between th ese two figures.  Thailand argues that, although 
PM Thailand proposed an MRSP of [[xx.xxx.xx]] baht for provinces with provincial tax in July 2005, 
its actual retail price of [[xx.xxx.xx]] baht did not  apply to provinces with provincial tax.  The 
Philippines submits that it is not clear why DG Excise decided to base its calculation on a retail price 
(RSP) it believed applied exclusively to the one area without provincial tax especially given that, in December 2005, DG Excise sought to calculate a single Marlboro MRSP that was inclusive of 
provincial tax.   
7.516  Specifically, the Philippines submits that Thailand is incorrect in stating that the marketing 
costs of an RSP of [[xx.xxx.xx]] baht did not appl y to provinces with provi ncial tax, and applied 
solely to Bangkok.  This allegation is not supporte d by any reference to evidence.  PM Thailand's 19 
July 2005 letter identifies a single, nationwide,  retail price of [[xx.xxx.xx]] baht, and proposes a 
single, nationwide MRSP of [[xx.xxx.xx]] baht.
1037  There is no indication that the price of 
[[xx.xxx.xx]] baht applied solely to Bangkok, and that PM Thailand applied a second unidentified, 
retail price in all 75 provinces besides Bangkok.  Th e Philippines alleges that PM Thailand has always 
maintained a single RRSP for Thailand as a whole, to ensure consistent retail pricing across the 
country.1038 
7.517  The Philippines takes the view that Thailand's ar gument has one practical consequence for the 
calculation of marketing costs:  if the RSP of [[ xx.xxx.xx]] baht applied to provinces with provincial 
tax, it would have reduced the marketing costs from [[xx.xxx.xx]] baht to [[xx.xxx.xx]] baht because 
in such a case, DG Excise was required to deduct all internal taxes, including  the provincial tax of 
1.86 baht, from the MRSP (RSP in this case) to derive the marketing costs.  Accordingly, by ignoring 
the importer's information on actual marketing cost s in provinces with provincial tax, and instead 
alleging that the RSP of [[xx.xxx.xx]] baht did not apply to provinces with provincial tax, Thailand 
inflated the December 2005 Marlboro marketing costs by 1.86 baht.   
7.518  In response to Thailand's position that PM Th ailand failed to provide sufficient supporting 
information to warrant a reduction in marketi ng costs, the Philippines points to an alleged 
inconsistency in Thailand's statements rega rding the calculation of the marketing costs.1039  I n  t h e  
Philippines' view, this  ex post argument by Thailand contradicts Thailand's earlier statements, such as 
"Thai Excise does not collect information from PM  Thailand or any other manufacturer or importer 
regarding 'gross margin percentages' or any other profit or marketing expenses".1040 
7.519  Further, regarding the rounding up of the Marlboro marketing costs of [[xx.xxx.xx]] baht to 
[[xx.xxx.xx]] baht, the Philippines does not consider that this involves any kind of rounding.  The rounding would actually have reduced [[xx.xxx.xx]] baht to [[xx.xxx.xx]] baht, not increased to a 
                                                     
 
1036 Philippines' comments on Thailand's response to Panel question No. 130, also referring to 
Exhibit THA-18. The Philippines explains that PM Thailand 's letter of 19 July 2005 showed a "retail price" of 
[[xx.xxx.xx]] baht for Marlboro , without distinguishing between the RRSP and the RSP.  According to the 
Philippines, at the time, the difference between the two was marginal.  
1037 Exhibit THA-18. 
1038 Philippines' comments on Thailand's response to Panel question No. 130. In footnote 163, the 
Philippines refers to Exhibit PHL-270, claiming that the exhibit shows a single RSP of [[xx.xxx.xx]] baht in 
2005, and also shows that the monthly Marlboro  RSP in 2005 was no more than a fraction higher than the 
[[xx.xxx.xx]] baht RRSP. 
1039 Philippines' comments on Thailand's response to Panel question No. 130. 
1040 Thailand's response to Panel question No. 50(1).  The Philippines also quotes Thailand's statement 
that "Thai Excise never requests any manufacturer or importer, of domestic or imported cigarettes, to provide 
information regarding marketing costs." (emphasis in or iginal) (Thailand's response to the Philippines' question 
No. 2). WT/DS371/R 
Page 258  
 
  larger number that still included a fraction (i.e. [[ xx.xxx.xx]] baht).  This arbitrary rounding exercise 
served only to inflate the MRSP and the ta x burden imposed on imported cigarettes. 
L&M 
7.520  As for L&M , as the Philippines points out
1041, Thailand  provided three different explanations:  
originally, Thailand presented the December 2005 L&M marketing costs as based on [[xx.xxx.xx]] 
baht, derived from PM Thailand's own proposal in October 2001, which were then simply added, 
unchanged , to the MRSPs calculated in December 2005 and August 20081042; second, in response to 
the Panel's request for information under Article  13 of the DSU, Thailand explained that the 
December 2005 L&M MRSP was based on PM Thailand's proposed MRSP of  [[xx.xxx.xx]] baht on 
19 July 20051043; and lastly, in the light of the Philippines' argument that in July 2005, PM Thailand 
proposed an MRSP of [[xx.xxx.xx]] baht, not [[xx.x xx.xx]] baht, inclusive of provincial tax (which 
results in the marketing costs of [[xx.xxx.xx]] baht , not [[xx.xxx.xx]] baht), Thailand then submitted 
that the marketing costs were derived from PM Thailand's current marketing costs for L&M included 
in the 6 October 2005 MRSP Notice, and not from PM Thailand's 19 July 2005 letter as previously explained.
1044   
7.521  According to Thailand, the 6 October 2005 MRSP Notice established an MRSP of 
[[xx.xxx.xx]] baht for provinces without provincia l tax.  A breakdown of this MRSP provides 
marketing costs of [[xx.xxx.xx]] baht, which is the same amount as previously explained in Thailand's 
comments of 25 September 2009 and as shown in the breakdown provided in Exhibit THA-82.  Thailand used [[xx.xxx.xx]] baht, the MRSP for prov inces without provincial tax, for the 7 December 
2005 MRSP Notice to ensure that no entity in the distribution chain – importer, wholesaler, or retailer 
– was punished by or had to bear the burden of the switch to a single nationwide MRSP and to avoid 
the "market turbulence" referred to by the Philippine s in its 19 July 2005 letter.  The marketing costs 
of [[xx.xxx.xx]] baht were then rounded up in orde r to arrive at the marketing costs used in the 
December 2005 MRSP Notices (i.e. [[xx.xxx.xx]] baht).
1045   
7.522  The Philippines  takes the position that none of these ex post explanations is supported by a 
contemporaneous explanation by DG Excise.  Regard ing Thailand's last explanation, the Philippines 
recalls that in July 2005, PM Thailand proposed a nationwide MRSP of [[xx.xxx.xx]] baht for L&M , 
inclusive of provincial tax.1046  In October 2005, DG Excise accepted the proposed MRSP of 
[[xx.xxx.xx]] baht for the 75 provinces with provincia l tax (and the actual marketing costs included in 
that proposal).  However, on its own initiative,  DG Excise also established an MRSP of [[xx.xxx.xx]] 
                                                      
1041 Philippines' comments on Thailand's response to Panel question No. 129. 
1042 Philippines' comments on Thailand's response to Panel question No. 129, referring to Thailand's 
first written submission, para. 93; Exhibit THA-18. 
1043 Philippines' comments on Thailand's response to Panel question No. 129, referring to Thailand's 
comments of 25 September 2009, paras. 42-47; Exhibit THA-82.  PM Thailand's letter of 19 July 2005 is 
contained in Exhibit THA-18. 
1044 Thailand's response to Panel question No. 129; Exhibit THA-94. 
1045 Thailand's comments of 25 September 2009, para. 44, referring to Exhibit THA-82. Thailand 
explains that to consequently ensure that MRSPs were  set at a level that would facilitate the provinces in 
collecting the full amount of the provincial taxes, Thai Excise rounded up the MRSP by approximately [[xx.xxx.xx]] baht for all major brands in the market.  For L&M  cigarettes, this resulted in a rounding up of the 
"marketing costs" element of th e MRSP from [[xx.xxx.xx]].  
If all the components comprising the December 2005 MRSP are adde d up, including the marketing 
costs of [[xx.xxx.xx]] baht as determined by Thai Excise, the total sum comes to [[xx.xxx.xx]] baht.  We 
understand that Thai Excise then decided to round up the MRSP by approximately [[xx.xxx.xx]] baht to arrive at 
the MRSP of [[xx.xxx.xx]] baht.  The difference of [[xx.xxx.xx]] baht between [[xx.xxx.xx]] baht and [[xx.xxx.xx]] baht was added to the marketing costs component of the MRSP. 
1046 Philippines' comments on Thailand's response to Panel question No. 129.  WT/DS371/R 
 Page 259 
 
 
  baht for Bangkok, the one area without provincial ta x.  The Philippines argues that in calculating the 
[[xx.xxx.xx]] baht MRSP in October 2005, DG Excise did not use the marketing costs of [[xx.xxx.xx]] baht taken from PM Thailand's July 2005 proposal as it should have done under the 
"normal practice", but increased them to [[xx.xxx.xx]] baht, which were then rounded up to [[xx.xxx.xx]] baht.
1047   
7.523  With respect to Thailand's reason for starting w ith the marketing costs of [[xx.xxx.xx]] baht 
(calculated for the one province without provincial ta x – Bangkok), namely that it had to ensure that 
no entity in the distribution chain was punished by or had to bear the burden of the switch to a single nationwide MRSP, the Philippines argues that no en tity, both in provinces with provincial tax and 
those operating in Bangkok, could have been punished by DG Excise's decision.
1048  As for provinces 
with provincial tax, the prior MRSPs had already b een adjusted to account for the provincial tax of 
1.86 baht/pack in order to ensure that importers  and resellers operating in these provinces were not 
punished by the collection of the tax.  Given Tha iland's explanation that, when tax rates change, the 
MRSP is revised to add an updated amount for the ta x concerned, but that other elements of the 
calculation, including the marketing costs, remain  unchanged, DG Excise had no basis to increase the 
marketing costs for reasons related to provincia l tax in calculating the MRSP for December 2005.  
Regarding Bangkok, the only province without provincial tax, the Philippines submits that because 
the MRSP for Bangkok was now calculated assuming that  provincial tax of 1.86 baht/pack was paid, 
the additional amount in the increased MRSP c onsequently increased the marketing costs. 
7.524  The Philippines stresses that the decisive element of the methodology applied by Thai Excise 
in determining the December 2005 MRSP for L&M was a "rounding" exercise because it added one 
baht to the MRSP, driving it above the prevaili ng RSP at the time:  PM Thailand requested on 13 
December 2005 that the December 2005 MRSP be reduced from 47 baht to [[xx.xxx.xx]] baht.  Regarding the rounding up of the marketing costs of [[xx.xxx.xx]] baht to [[xx.xxx.xx]] baht (an 
additional [[xx.xxx.xx]] baht), the Philippines notes that if DG Excise had simply added marketing costs of [[xx.xxx.xx]] baht/pack to the other elements of the December 2005 MRSP, the resulting 
MRSP would have been [[xx.xxx.xx]] baht.
1049  In the Philippines' view, DG Excise would have 
rounded this overall amount to a final MRSP of [[ xx.xxx.xx]] baht, which equalled PM Thailand's 
proposal of 13 December 2005.  Instead, DG Excise rounded up the marketing costs to [[xx.xxx.xx]] baht to arrive at a final MRSP of 47 baht, which exceeded the RRSP by [[xx.xxx.xx]] baht.  
Therefore, DG Excise's decision to "round up" the ma rketing costs was the decisive factor that drove 
the L&M MRSP beyond the RRSP. 
Analysis by the Panel
 
Overview 
7.525  We clarified earlier that in order to determine whether Thailand violated its obligations under 
the first sentence of Article III:2 by subjecting impor ted cigarettes to excessive taxation, we need to 
examine whether Thai Excise departed from the ge neral methodology that it has explained is normally 
applied in determining the MRSP for both  imported and domestic cigarettes.   
7.526  The Philippines argued that Thai Excise es tablished the 7 December 2005 MRSP, in 
particular its marketing cost component for Marlboro and L&M , so as to arrive at a higher level of 
MRSP than would have been calculated if Thai Excise had followed the "normal" methodology that applies to both imported and domestic cigarettes.   Thailand submits that PM Thailand's proposed 
                                                     
 
1047 Exhibit PHL-290. 
1048 Philippines' comments on Thailand's response to Panel question No. 129. 
1049 Philippines' comments on Thailand's response to Panel question No. 129, referring to 
Exhibit PHL-282. WT/DS371/R 
Page 260  
 
  MRSPs in December 2005 were not accepted because th ey involved a request for a reduction in the 
MRSPs and PM Thailand did not sufficiently justify its request.   
7.527  We will begin our analysis by first recalling Th ailand's description of how the marketing cost 
component of the MRSP is derived under the so-ca lled normal methodology and then we will describe 
the nature of the 5 December MRSP Notices. 
7.528  Thailand submitted that in revising the existing MRSPs because of changes in tax rates, Thai 
Excise generally uses the same amount of "marketing costs" as included either (i) in the latest MRSP or (ii) in the MRSP previously requested  by the domestic manufacturer/importer.
1050  However, in 
situations where Thai Excise rejects MRSPs proposed by the importer/manufacturer, Thailand 
explained that the marketing costs needed to de termine the MRSP will be calculated so that they 
represent the selling expenses and profits of all en tities in the sales distribution chain. For this 
calculation, Thailand uses information provided by the importer/manufacturer and information of the market itself.
1051 This, in our view, is the general methodol ogy used to derive the marketing cost 
component of MRSPs according to Thailand's explanation. 
7.529  Regarding the December 2005 MRSP for TTM, TTM requested an increase in the current 
MRSPs because of the increase in the excise tax rate and proposed its own revised MRSPs for its 
brands, which were accepted by Thai Excise.1052  Accordingly, it is uncontested that Thai Excise 
applied the general methodology to  determine the new MRSPs for dom estic cigarettes in December 
2005 by simply accepting the new MRSPs/RRSPs proposed by TTM.   
7.530  As for Marlboro and L&M , on the other hand, the evidence on the record shows that Thai 
Excise issued the revised MRSP Notices for Marlboro and L&M on 7 December 2005.1053  The reason 
for the revised MRSPs is indicated as a change in  the excise tax rate, which increased from 75 per 
cent to 79 per cent.  Therefore, it appears that Th ai Excise revised, on its own initiative, the current 
MRSPs for the Marlboro and L&M cigarette brands to reflect the changed excise tax rate in the 
MRSPs for imported cigarettes.   
7.531  Thai Excise rejected, however, PM Thailand's subsequent request for the reduction of the 
level of MRSPs as revised by Thai Excise.  Speci fically, on 13 December 2005, about a week from 
the issuance of the 7 December 2005 MRSP Notices, PM  Thailand submitted a letter to Thai Excise 
requesting a change of the MRSPs for Marlboro and L&M1054, referring to the 6 October 2005 MRSP 
Notice for L&M  and the 7 December 2005 Notice for Marlboro .1055  In the letter, PM Thailand 
proposes an MRSP of [[xx.xxx.xx]] baht for Marlboro and [[xx.xxx.xx]] baht for L&M .  As its 
reasons for the proposals, PM Thailand states:  as for Marlboro , "[t]he Company has always been 
conscious that Marlboro  retail prices are already expensive in  the current market according to a 
market survey by an independent consulting comp any.  Therefore, the Company proposes a retail 
price of [[xx.xxx.xx]] baht/pack"; and concerning L&M , "[a]s the excise tax burden of L&M group 
cigarettes increased from [[xx.xxx.xx]] baht/pack to  [[xx.xxx.xx]] baht/pack, the Company therefore 
proposes a retail price of [[xx.xxx.xx]] baht/pack".1056 
                                                      
1050 See paras. 7.498-7.501 above.  
1051 See para. 7.502 above. 
1052 Thailand's response to Panel question Nos. 123(2), 127 and 160. 
1053 Exhibits PHL-99 and THA-76. 
1054 Exhibit THA-18. 
1055 PM Thailand referred to these notices, so that Th ai Customs could use the marketing costs used in 
these notices  (Philippines comments on Thailand's response to Panel question No. 129; Exhibit PHL-190).  
1056 Exhibit PHL-221. The Exhib it shows a letter dated 23 Decembe r 2005, in which DG Excise 
rejected PM Thailand's request of 13 December 2005.  WT/DS371/R 
 Page 261 
 
 
  7.532  Against this factual background, we now tu rn to the parties' arguments on Thailand's 
determination of the marketing costs for the 7 December 2005 MRSPs for Marlboro and L&M . 
Marlboro 
7.533  The reason for a change of the current MRSPs for Marlboro in December 2005 was an 
increase in the excise tax rate.  To reflect th is change, Thai Excise revised the MRSPs for Marlboro .  
Under these circumstances, the general methodolog y used for determining marketing costs as 
described by Thailand would have required Thai Ex cise to base the amount of marketing costs for the 
7 December 2005 MRSP for Marlboro on the marketing costs as included in either (i) the 27 
December 2004 MRSP Notice, the latest MRSP for Marlboro prior to December 2005; or (ii) the 
MRSP previously requested by PM Thailand, which is the MRSP proposed in PM Thailand's letter of 
19 July 2005.   
7.534  It is clear, and Thailand does not dispute, that  Thai Excise did not use the marketing costs 
included in the 27 December 2004 MRSP (i.e. [[xx.xxx.xx]] baht).1057  Nor does Thai Excise appear to 
refer to the MRSP previously requested by PM Thailand because it relied on the actual retail price of 
Marlboro cigarettes as indicated in the 7 July 2005 letter from PM Thailand.  To the extent that Thai 
Excise was revising the existing MRSPs to simply reflect  the changes in tax rates, it is not clear to us 
why Thai Excise did not use the marketing cost s as included in the current MRSPs or in the 
previously proposed MRSPs, which we understand is  the normal rule for revising MRSPs under the 
general methodology.   
7.535  Thailand submits that Thai Excise reject ed PM Thailand's proposed MRSPs, which we 
understand as referring to those contained in the le tter of 13 December 2005, because they involved a 
request for a reduction in the MRSPs.  In this regard, we  recall that if Thai Excise decides to reject the 
proposed MRSPs, it determines the marketing costs in the light of market conditions and the information provided by the importer/manufacturer.   
7.536  Thailand argues that the marketing costs for the 7 December 2005 Marlboro MRSP were 
based on PM Thailand's current  marketing costs for Marlboro as illustrated in the left-hand column 
on page 2 of the 19 July 2005 letter from PM Thailand.
1058  According to Thailand, this shows 
PM Thailand's selling price, which we understand to mean the actual RSP, in areas with no provincial 
tax, was [[xx.xxx.xx]] baht.1059  A breakdown of the MRSP figure – [[xx.xxx.xx]] baht – into its 
components then results in marketing costs of [[xx.xxx.xx]] baht as provided in a worksheet contained in Exhibit THA-82.   
7.537  Prior to the issuance of the 7 December 2005 MRSP Notice, PM Thailand proposed an MRSP 
figure of [[xx.xxx.xx]] baht for Marlboro  in its letter of 19 July 2005.  Although both parties refer to 
this letter as the basis for de riving the marketing costs for the December 2005 MRSP, they put 
forward different views on the MRSPs indicated in the letter.   
                                                     
 
1057 Exhibit THA-76. 
1058 Thailand's response to Panel question No. 130; Exhibit THA-18.   
1059 As pointed out by the Philippines, we note that Thailand initially submitted that the marketing costs 
for the 7 December 2005 Notice were based on an MRSP of [[xx.xxx.xx]] baht as proposed by PM Thailand for 
provinces that had no provincial taxes in its letter of 19 July 2005 (Thailand's comments of 25 September 2009, 
para. 45).   WT/DS371/R 
Page 262  
 
  7.538  A table summarizing the relevant MRSPs leading to the 7 December 2005 is provided below. 
[[The deleted table contains business confidential information
1060, 1061, 1062, 1063, 1064, 1065, 1066]] 
 7.539  The Philippines has put forward several points to  rebut Thailand's argument.  The Philippines 
argues that Thailand's assertion that the marketing costs of an RSP of [[xx.xxx.xx]] baht applied only 
to provinces with no provincial tax is not supported by reference to any evidence.  The Philippines 
alleges that PM Thailand's 19 July 2005 letter id entifies a single, nationw ide, retail price of 
[[xx.xxx.xx]] baht, and proposes a single, nationwide MRSP of [[xx.xxx.xx]] baht for all provinces, in 
which case the marketing costs will be [[xx. xxx.xx]] baht (i.e. [[xx.xxx.xx]]-1.86).   
7.540  The table contained in PM Thailand's letter of 19 July 2005 can be summarized as follows:
1067 
[[The deleted table contains business confidential information]] 
 7.541  At page 3 of the letter, PM Thailand notes that th e table in the letter shows "current cigarette 
retail prices, retail prices according to the Exci se Notice, and the increased retail prices that the 
company is requesting, respectively". We understand that the categories identified by PM Thailand 
refer to the three main columns in the table, as reproduced above. 
7.542  Therefore, contrary to Thailand's argument, the column headings of the table as well as the 
explanation included in the letter do not suggest that the figure in the left-hand column of the table at 
page 2 of the letter, "retail price of authorized t obacco retailer type 3 at present", refers to the actual 
retail selling price of Marlboro cigarettes that was applied only in Bangkok (the only province in 
Thailand with no provincial tax).  In fact, the evidence submitted by the Philippines (an overview 
table of the MRSP, RRSP and monthly RSP values for Marlboro and L&M for 2005-2009) also 
confirms that there was indeed a single RRSP/RSP ([[xx.xxx.xx]] baht) nationwide in 2005.
1068 
7.543  The Philippines points out that Thailand's pos ition has one practical consequence for the 
calculation of the marketing costs, namely that, if  the RSP of [[xx.xxx.xx]] baht applied to provinces 
with provincial tax, it would have reduced the marketing costs from [[xx.xxx.xx]] baht to 
[[xx.xxx.xx]] baht because in such a case, DG Exci se was required to deduct all internal taxes, 
including the provincial tax of 1.86 baht, from the MRSP (RSP in this case) to arrive at the marketing 
costs (i.e. [[xx.xxx.xx]]–1.86=[[xx.xxx.xx]], compare the second and third columns in the table above).  The Philippines submits that by ignoring th e importer's information on actual marketing costs 
in provinces with provincial tax, and instead alleging that the RSP of [[xx.xxx.xx]] baht did not apply to provinces with provincial tax, Thailand inflated the December 2005 Marlboro marketing costs by 
1.86 baht.   
7.544  We consider that the Philippines' view provides a mathematical explanation of the gap in the 
amount of the provincial tax (i.e. 1.86 baht/pack) between the marketing costs derived from the RSP 
applied to the provinces without provincial tax and that derived from the RSP applied to provinces 
with provincial tax.  In the absence of any su pporting documentary evidence, however, we are not 
                                                     
 
1060 [[xx.xxx.xx]]. 
1061 [[xx.xxx.xx]]. 
1062 [[xx.xxx.xx]]. 
1063 [[xx.xxx.xx]]. 
1064 [[xx.xxx.xx]]. 
1065 [[xx.xxx.xx]]. 
1066 [[xx.xxx.xx]]. 
1067 Exhibit THA-18. 
1068 Exhibit PHL-270.  WT/DS371/R 
 Page 263 
 
 
  able to conclude that Thailand used the MRSP/R SP that was allegedly applied to the area with no 
provincial tax with the intention of inflating the marketing costs for Marlboro . 
7.545  Nonetheless, even if we were to follow Thaila nd's explanation as provided in this proceeding, 
it is not clear to us what the reason was for b asing the marketing costs for the 7 December 2005 
MRSP for Marlboro on the MRSP/RSP that was allegedly applie d to Bangkok only.  We do not see 
any particular logical link between DG Excise's deci sion to calculate a single national cigarette price 
that was inclusive of provincial tax and its decisi on to base the calculation of the marketing costs for 
Marlboro on the MRSP/RSP that allegedly applied to the area without provincial tax, and not the 
provinces with provincial tax.  This is particularly so given that the provincial tax of 1.86 baht is 
already included in the calculation of the MR SP for the MRSP/RSP applied to provinces with 
provincial tax.1069 
7.546  Thailand also explains that it rounded up the marketing costs of [[xx.xxx.xx]] baht, derived 
from the current RSP for Marlboro applied to Bangkok, to [[xx.xxx.xx]] baht to reflect the Thai 
government's decision to have a single nationwide MR SP by adding one baht to the MRSP.  We first 
note that the difference between [[xx.xxx.xx]] baht  and [[xx.xxx.xx]] baht – [[xx.xxx.xx]] baht – is 
more than the one baht that Thailand explains needed  to be added.  Furthermore, Thailand stated that 
the decision was to add one baht to the MRSP  figure, not to the marketing costs. Therefore, we do not 
understand why this additional one baht was included in the marketing costs for the 7 December 2005 
MRSP for Marlboro .  This is particularly difficult to comprehend as the marketing costs is a 
component of the MRSP that may be carried over for the establishment of the subsequent MRSPs 
when such MRSPs need to be revised.  In other wo rds, a change in the marketing costs can have a 
consequential effect on the subse quent  MRSPs.  Moreover, as the ta ble above shows, the provincial 
tax of 1.86 baht is already included in the 7 December 2005 MRSP for Marlboro .  In this 
circumstance, Thailand has not suffi ciently explained why an additi onal amount of one baht still had 
to be added.  
7.547  In the light of the above considerations, we find that Thailand failed to use the general 
methodology in determining the marketi ng costs for the December 2005 MRSP for Marlboro .  This 
resulted in increasing the marketing costs and consequently the MRSP for Marlboro so as to subject 
Marlboro to a VAT in excess of that imposed  on the like domestic cigarettes.   
L&M 
7.548  Regarding the 7 December 2005 MRSP for L&M , Thailand submits that the marketing costs 
were derived from PM Thailand's current marketi ng costs as included in the 6 October 2005 MRSP 
Notice.1070  According to Thailand, a breakdown of  the 6 October 2005 MRSP – [[xx.xxx.xx]] baht 
for provinces without provincial tax – provides marketing costs of [[xx.xxx.xx]] baht with "0" provincial tax.   
                                                     
 
1069 Furthermore, if Thai Excise rejected the proposed MRSPs becau se they were a request for a 
reduction in the current MRSPs, a question arises as to why it did not simply test the percentage of the 
marketing costs of PM Thailand's genuine income, the meth od used by Thai Excise to test the acceptability of 
the marketing costs component of th e proposed MRSPs for TTM brand cigare ttes.  In the context of Thai 
Excise's establishment of marketing costs for TTM bran ds above (Section VII.D.4(c)(iii)), we found that DG 
Excise's explanation before the Thai Tax Court showed th at Thai Excise used the pe rcentage of the marketing 
costs of TTM's genuine income based on its financial statement to inspect the acce ptability of the marketing 
margin at issue.  This also tends to show that Thai Excise did not apply the same methodology of establishing 
the marketing costs for the imported cigarettes at least in  the circumstance in which th e marketing costs included 
in the MRSPs proposed by the importer/manufacturer were being questioned. 
1070 Thailand's response to Panel question No. 129. WT/DS371/R 
Page 264  
 
  7.549  We note that the 6 October 2005 MRSP Notices included two separate MRSPs – one for the 
provinces with provincial tax (i.e. [[xx.xxx.xx]] ba ht) and the other for Bangkok without provincial 
tax (i.e. [[xx.xxx.xx]] baht).  The former – i.e. [[xx.xxx.xx]] baht – is the MRSP figure proposed by PM Thailand to be applied nati onwide.  Thai Excise then accepte d this figure as the MRSP for the 
provinces with provincial tax while establishing on  its own initiative [[xx.xxx.xx]] baht as the MRSP 
applied to Bangkok.  The MRSP data before us provides a breakdown of the [[xx.xxx.xx]] baht 
calculation only.  In the case of the 6 October 2005 MRSP for L&M , therefore, the "marketing costs" 
component of the MRSP of [[xx.xxx.xx]] baht is indicated as [[xx.xxx.xx]] baht.
1071  The Philippines 
argues that in deriving the marketing costs for the 5 December 2005 MRSP based on the October 
2005 MRSP, Thai Excise should have used the ma rketing costs of [[xx.xxx.xx]] baht under the 
alleged "normal practice" because that is the ma rketing costs as included in the MRSP previously 
requested by the domestic manufacturer/importer (i.e. a nationwide MRSP of [[xx.xxx.xx]] baht) 
through PM Thailand's July 2005 letter.   
7.550  A table summarizing the relevant MRSPs leading to the 7 December 2005 is provided below. 
[[The deleted table contains business confidential information1072, 1073, 1074]] 
 
7.551  Although we agree that [[xx.xxx.xx]] baht woul d have been the marketing costs if Thailand 
had relied on the marketing costs as included in th e previously requested MRSP, namely [[xx.xxx.xx]] 
baht, we recall Thailand's explanation that the lat est MRSP can also be referred to under the general 
methodology in order to derive the marketing cost s for the MRSP to be revised.  Thai Excise's 
reliance on the MRSP of [[xx.xxx.xx]] baht, the la test MRSP established by Thai Excise for Bangkok 
(the only province without provincial tax), therefor e would not necessarily have been a deviation from 
Thai Excise's general methodology  per se .  This means that Thai Excise's decision to use 
[[xx.xxx.xx]] baht, derived from [[xx.xxx.xx]] baht as shown in the table above, as the value of the 
marketing costs for the December 2005 MRSP can be  considered as compatible with its general 
methodology. 
7.552  The Philippines stresses, however, that, in order to arrive at a final MRSP of 47 baht for the 
L&M December 2005 MRSP, instead of [[xx.xxx.xx]] baht, which was the MRSP/RRSP proposed by 
PM Thailand, Thai Excise unnecessarily rounded up  the marketing costs of [[xx.xxx.xx]] baht to 
[[xx.xxx.xx]] baht.  In the Philippines' view, if DG Excise had simply added marketing costs of 
[[xx.xxx.xx]] baht to the other elements of the December 2005 MRSP, the resulting MRSP would have been [[xx.xxx.xx]] baht
1075, which would have been rounded to [[xx.xxx.xx]] baht.  Instead, 
Thailand rounded up [[xx.xxx.xx]] baht to 47 baht .  The difference of [[xx.xxx.xx]] baht (i.e. 
[[xx.xxx.xx]]) was subsequently added to the mark eting costs of [[xx.xxx.xx]] baht to make it 
[[xx.xxx.xx]] baht.   
7.553  In considering the Philippines' point on Thai Excise's rounding up of both the MRSP as well 
as the marketing costs, we recall Thailand's explan ation that when revising an existing MRSP, Thai 
Excise would add all the elements comprising the MR SP (bottom up approach) to arrive at the value 
of the revised MRSP, including the marketing cost  component that is derived by deducting all 
elements other than the marketing costs from e ither the current MRSP or the MRSP previously 
                                                      
1071 Thailand's response to Panel question No. 129 , referring to Exhibit THA-82, providing a 
breakdown of the MRSP calculation for L&M  in 2005. The calculation appear s as a computation of the ex 
factory price (5.88), the Customs tax (0.29), the Tobacco Stamp (18.52), VAT (2.55), Health Tax (0.37), Marketing costs (11.38) resulting in an MRSP of 39 baht. 
1072 [[xx.xxx.xx]]. 
1073 [[xx.xxx.xx]]. 
1074 [[xx.xxx.xx]]. 
1075 Philippines' comments on Thailand's response to Panel question 129; Exhibit PHL-282.   WT/DS371/R 
 Page 265 
 
 
  requested by the importers/manufacturer (top dow n approach).  As the Philippines points out, 
Thailand also explained that the marketing cost co mponent, as included in the current MRSP or in the 
MRSP previously requested by the importer/manufacturer, would remain constant .1076   
7.554  Regarding the rationale behind rounding up th e marketing costs and MRSP figures, Thailand 
asserts that both domestic manufacturers and importers of cigarettes expressed the concern that 
"different cigarette prices across various provi nces" would cause "market turbulence" and proposed 
that a single national cigarette price should be  achieved by a one baht increase in prices.1077  T o  
address these concerns, Thai Excise discontinue d the practice of publishing two MRSPs for each 
brand – one for provinces that collected provincial ta xes and one for provinces that did not.  Thailand 
then decided to round up the MRSP by approximately on e baht for all major brands in the market so 
that the change of its practice resulted in MRSPs  being set at a level that would facilitate the 
provinces in collecting the full amount of the provin cial taxes and discourage retailers from selling at 
prices in excess of the MRSP.  We are not convinced  by Thailand's explanation, however, as to why 
the MRSP needs to be rounded up by one baht to a ddress such concerns when the provincial/local tax 
component is already included in calculating a single national MRSP.   
7.555  In the light of the above considerations, we fi nd that Thai Excise failed to properly follow the 
general methodology in establishing the marketing costs for the December 2005 MRSP for L&M by 
rounding it up.  This resulted in increasing the marketing costs and consequently the MRSP for L&M, 
which forms the basis for a final VAT liability applied to L&M , which in turn led to taxation of L&M  
cigarettes in excess of like domestic cigarettes. 
(v) Establishment of the 2006-2007 MRSPs for Marlboro and L&M  
Main arguments of the parties  
7.556  The Philippines claims that, under Article III:2 of the GATT 1994, Thailand's use of 
marketing costs of [[xx.xxx.xx]] per cent for the September 2006, March 2007, and August 2007 
MRSPs is evidence supporting the Philippines' cl aims, because it helps to explain how the 
discrimination arose vis-à-vis  PM Thailand's brands.1078  According to the Philippines, these MRSPs 
demonstrate that DG Excise determined arbitrary a nd inflated marketing costs of [[xx.xxx.xx]] per 
cent that drove up PM Thailand's MRSPs.  The Ph ilippines points out that, based on PM Thailand's 
December 2005 information, proposing MRSPs of [[xx.xxx.xx]] baht and [[xx.xxx.xx]] baht respectively, the marketing costs in Sept ember 2006 – with unchange d RRSPs – were only 
[[xx.xxx.xx]] baht for Marlboro  and [[xx.xxx.xx]] baht for L&M , whereas DG Excise added 
marketing costs of [[xx.xxx.xx]] baht and [[xx.xxx. xx]] baht for the imported cigarettes at issue 
respectively.   
7.557  In contrast, the marketing costs used for TTM were much lower, at [[xx.xxx.xx]] per cent.
1079  
Thailand calculated Marlboro  and L&M  marketing costs in September 2006, March 2007 and August 
2007 through the use of price surveys conducted in other Asian countries instead of relying on PM Thailand's marketing cost figures
1080, while calculating TTM's marketing costs as a percentage of 
its own genuine income.1081  Compared to the marketing costs of TTM's brand at the time – i.e. 
                                                      
1076 Philippines' second written submission, para. 410,  referring to Thailand's response to Panel 
question No. 41.  
1077 Thailand's comments of 25 September 2009, para. 43, referring to Exhibits THA-18 (p. 5) and 
THA-75 (pp. 11-13) for the concerns expressed in the letters from PM Thailand and TTM respectively. 
1078 Philippines' response to Panel question No . 128, also referring to Exhibit PHL-282. 
1079 The Philippines refers to DG Excise's explana tion to the Thai Tax Court (Exhibit PHL-109). 
1080 Philippines' second written submission, para. 405. 
1081 Philippines' second written submi ssion, para. 408; Exhibit PHL-109. WT/DS371/R 
Page 266  
 
  [[xx.xxx.xx]] per cent, the imported PM Thailand brands were generated with a discriminatory 
[[xx.xxx.xx]] per cent, which is 61.2 per cent higher than marketing costs for TTM.
1082   
7.558  The Philippines understands that Thailand derive d the marketing cost figure for these three 
MRSP valuations as follows:  Thailand took the Marlboro retail prices in 12 countries, including 
Thailand, and possibly also the Thai retail prices of non-PM International im ported brands.  Thailand 
then developed a methodology that effectively gave the various retail prices in different countries 
various weights, based on four different averagi ng groups.  To produce the final Thai MRSP of 
[[xx.xxx.xx]] baht/pack, Thailand averaged the average retail prices derived from the four different 
groups.  The [[xx.xxx.xx]] per cent marketing co sts were then derived using the MRSP of 
[[xx.xxx.xx]] baht as the starting point in a deductive calculation.1083  This percentage was then 
applied to calculate the September 2006 MRSP for L&M  and the March and August 2007 MRSPs for 
Marlboro  and L&M .   
7.559  The Philippines argues that: (i) the Phili ppines fails to see the relevance of the Marlboro  retail 
price in 11 countries other than Thailand in fixing the Marlboro  and L&M  MRSPs; (ii) it is unclear 
why three different groups (i.e. "ASEAN", "ASEA N+3", "ASEAN+3+Thailand") were chosen and 
then combined, which seems random1084; (iii) it is unclear why the Marlboro  and L&M  MRSPs should 
be based, even partly, on the retail prices of these ot her competing non-PM International brands; (iv) 
it is not clear why DG Excise calcula ted an average Thai retail price using the non-PM International 
imported brands to the apparent exclusion of TTM 's domestic brands; and (v) Thailand did not apply 
this methodology to calculate the MRSPs for an y other imported or domestic Thai cigarettes.1085 
7.560  Thailand argues that the 2006-2007 MRSPs have little probative value, because the 
methodology used to determine those MRSPs varied  significantly from the methodology used for the 
MRSPs within the Panel's terms of reference.1086  Thailand has not provided detailed arguments 
regarding the Philippines' claim on the specifics of  the concerned methodology.  Thailand explains 
that the purpose of the methodology was to use re tail price information from other countries in the 
region to determine "marketing costs" for imported cigarettes in Thailand for circumstances in which 
Thai Excise had determined, in a departure from its normal methodology, that the c.i.f. values (which 
were rejected by Thai Customs) and "marketing costs", as contained in the proposed MRSPs by the importers, could not be relied upon.  Thai Excise used Marlboro's  retail sales prices in the other 
countries for this purpose because Marlboro  is a well-known brand that is sold throughout the 
region.
1087 
Analysis by the Panel  
7.561  We will now examine whether the Septembe r 2006, March 2007, a nd August 2007 MRSPs, 
demonstrate that DG Excise determined arbitrary a nd inflated marketing costs of [[xx.xxx.xx]] per 
cent that drove up PM Thailand's MRSPs.   
7.562  Thailand's main position in respect of the Philip pines' claim has been that these MRSPs are 
outside the Panel's terms of re ference and hence have little proba tive value in deciding whether 
Thailand violated Article III:2.  We recall our finding above that the September 2006, March 2007, 
                                                      
1082 Philippines' second written submission,  para. 405; Exhibit PHL-74 and PHL-109. 
1083 Exhibit THA-78. 
1084 Philippines comments on Thailand's Article 13 DSU re sponse, paras. 59-93; Thailand's Article 13 
DSU response, para. 17; response to Panel question 50; Exhibits THA-44 and THA-78. 
1085 Philippines' second written submission, para. 407.   
1086 Thailand's comments on the Philippines' Article 13 DSU response, paras. 52-58. 
1087 Thailand's comments on the Philippines' Article 13 DSU response, paras. 52-58.  WT/DS371/R 
 Page 267 
 
 
  and August 2007 MRSPs are within our  terms of reference.  Therefore, we will proceed with our 
examination of the Philippines' claim. 
7.563  We note that Thailand does not dispute that the methodology used to determine these MRSPs 
significantly departed from the general methodology.  It is also not disputed that this methodology 
was used for the determination of the MRSPs, par ticularly their "marketing cost" component, for the 
imported cigarettes concerned only, and not for domes tic cigarettes.  The evidence also shows that the 
resulting MRSPs were much higher than the RSPs fo r the imported cigarettes for the two year period 
during which these MRSPs were in effect (October 2006 – August 2008).  During this period, we also 
note that the MRSPs for domestic cigarettes matche d their RSPs.  The gap between the MRSPs and 
the RSPs, existing for the imported cigarettes only,  is translated into a higher VAT burden on the 
imported cigarettes than on the domestic cigarett es, because the VAT is based on the MRSP and not 
on the RSP.1088 
7.564  In our view, therefore, this proves that the imported cigarettes were taxed in excess of the 
domestic cigarettes for the relevant period.  We ar e not convinced by Thailand's explanation as to why 
a different methodology was used for the MRSPs fo r the imported cigarettes during this period.  
Thailand argues that because the c.i.f. values, which we re being rejected by Thai Customs at that time, 
and "marketing costs" built into the proposed MRSPs  by the importers could not be relied upon, it 
used retail price information from other countries in  the region to determine "marketing costs" for 
imported cigarettes in Thailand in  a departure from its normal methodology.  Setting aside the c.i.f. 
values that were being questioned by Thai Customs at that time, it is not clear to us what was the basis for considering that the marketing cost component of the proposed MRSPs could not be relied upon.   
7.565  Even if there was a legitimate basis for doubti ng the current marketing costs, the marketing 
costs determined based on the retail price survey ([[xx.xxx.xx]] baht for Marlboro  and [[xx.xxx.xx]] 
baht for L&M ) are drastically higher than the previous mark eting costs.  Thailand explains that Thai 
Excise used Marlboro's  retail sales prices in the other countries for this purpose because Marlboro  is 
a well-known brand that is sold throughout the region.   In the light of Thailand's previous description 
of "marketing costs" as "the total selling expenses and profits associated with selling the cigarettes to 
the final consumer in the Thai market", we are not persuaded that Marlboro's  retail sales prices in the 
other countries could have provided Thai Excise with the correct marketing costs for Marlboro in the 
Thai market, not to mention those for L&M in the Thai market. 
7.566  For the foregoing reasons, we conclude that  Thai Excise departed from the general 
methodology in determining the 2006 and 2007 MRSPs fo r the imported cigarettes.  This in turn 
resulted in a VAT imposed on the imported cigarettes in excess of that on like domestic cigarettes 
inconsistently with Article III:2, first sentence. 
5. Conclusion 
7.567  In conclusion, with respect to the 7 December 2005, 18 September 2006, 30 March and 29 
August 2007 MRSP Notices for the imported cigarettes, we  consider that in fixing the VAT tax base 
for imported cigarettes, Thai Excise failed to fo llow its general methodology, which resulted in 
marketing costs  for the imported cigarettes being hi gher than they would have been if the general 
methodology had been followed. This combined w ith the fact that no similar departure from the 
methodology was found with respect to the determin ation of the marketing costs for like domestic 
cigarettes, we find that the Philippines has establ ished that the imported ci garettes were taxed in 
excess of like domestic cigarettes in violation of Ar ticle III:2, first sentence, with respect to the 7 
December 2005, 18 September 2006, 30 Ma rch and 29 August 2007 MRSP Notices.   
                                                     
 
1088 See para. 7.460 above. WT/DS371/R 
Page 268  
 
  E. A
RTICLE  III:2  OF THE GATT 1994  – VAT  EXEMPTION FOR RESELLERS OF DOMESTIC 
CIGARETTES  
1. Introduction 
7.568  The Philippines claims that Thailand acts inconsis tently with Article III:2, first sentence, of 
the GATT 1994 because Thailand imposes a VAT on imported cigarettes in excess of that applied to 
like domestic cigarettes by exempting resale of domestic cigarettes from the VAT obligations.  
Thailand argues that the Philippines has not established a prima facie  case that imported cigarettes are 
taxed "in excess" of domestic cigarettes. 
7.569  As discussed in the previous section, the questi on of whether a measure is consistent with 
Article III:2, first sentence requires a two step an alysis: (i) whether importe d and domestic products 
are like; and (ii) whether the measure subjects the im ported products to an internal tax or charge in 
excess of the domestic products.  If the answers to these questions are affirmative, then there is a 
violation of the first sentence of Article III:2.1089 
2. Measures at issue 
7.570  In its panel request, the Philippines identifi es the following as the measures through which the 
Thai VAT exemptions operate: 
• Sections 81 and 82/7 of the Thai Revenue Code; 
 
• Section 3(1) of Royal Decree No. 239; 
 
• Order of Revenue Department No. Por. 85/2542; and 
 
• any amendments, implementing measures or other related measures. 
 
7.571  The Philippines claims that the VAT exemp tion provided for domestic cigarettes in the 
above-mentioned Thai regulations is a de jure violation of Article III:2.  In addition to these 
provisions, which were listed in its  panel request, in its written submissions to the Panel, the 
Philippines also referred to certain other provisions of  the Thai regulations it considered relevant to its 
claims. 
3. Description of the Thai VAT system – application of VAT to cigarette resale 
7.572  In this section, we will describe how a VAT is applied to cigarette resale under the Thai VAT 
system.1090  As indicated above, the Thai measures specifically identified in the Philippines' panel 
request are Sections 81 and 82/7 of the Thai Reve nue Code, Section 3(1) of Royal Decree No. 239, 
and Order of Revenue Depa rtment No. Por. 85/2542.1091 In the course of the dispute, however, the 
parties have also referred to other provisions pe rtaining to the imposition and exemption of the VAT 
liability.  To the extent necessary to fully unders tand how the Thai VAT system operates with respect 
to cigarette resale, we will also d escribe these other relevant provisions. 
                                                      
1089 Appellate Body Report, Canada – Periodicals , pp. 22-23, DSR 1997-I, 449, at 468.  
1090 We addressed the Philippines' claim under Article III:2, first sentence, in respect of the manner in 
which the VAT, specifically, the tax base for VAT, is calculated in Section VII.D.4(a)(iii) above. 
1091 Exhibits PHL-94, PHL-217 and PHL-95, respectively.  WT/DS371/R 
 Page 269 
 
 
  7.573  Thai Revenue administers VAT pursuant to Chapter IV (Value Added Tax) of the Thai 
Revenue Code.1092  We will first describe the general provisions governing VAT and then proceed to 
consider those relating to the appli cation of VAT to cigarette resellers. 
(a) General provisions  
7.574  Thailand imposes VAT, inter alia , on the sale of goods.  Under Thai law, suppliers of goods 
are liable for the actual payment of VAT. 
7.575  Section 77/2 of Division 1 (General Provisions) sets out the general rule on the imposition of 
VAT: 
"Value added tax under the provisions of this Chapter shall be charged on the 
following transactions that are performed in Thailand: 
(1) Sale of goods  or provision of a service by a supplier. 
(2) Import of goods  by an importer."1093 (emphasis added) 
7.576  Division 6 of the Thai Revenue Code then sets forth the rules on "Persons Liable to Tax and 
Tax Computation".  Section 82 provides: 
"The following persons shall be liable to  value added tax under this Chapter: 
(1) a supplier, 
(2) an importer." 
(b) Provisions on the imposition and the exemption of VAT 
(i) Imposition of VAT on cigarette resale 
7.577  Regarding cigarettes, Section 82/7 of Divi sion 6 of the Thai Revenue Code provides: 
"In the case of the sale of tobacco … every registrant  shall collect value added tax 
from the purchaser  by reference to the tax base under Section 79/5(2) in Division 3 
and the tax rates under Division 4 in respect of every stage of sale ." (emphasis added) 
7.578  Therefore, as a general rule, every cigarette reseller in the distribu tion chain incurs VAT 
liabilities. 
7.579  Under Section 82/3 of the Thai Revenue Code, a VAT registrant1094 supplier deducts the so-
called "input tax" already paid to the previous se ller, from the "output tax" collected from the next 
purchaser of goods in each tax month.  The VAT registrant supplier thus pays VAT equal to the output tax deducted by the input tax.  Division 1 (G eneral Provisions) defines the terms "output tax" 
and "input tax" as follows: 
                                                     
 
1092 Exhibit PHL-94. 
1093 Exhibit PHL-94 (footnotes in original are omitted).  
1094 Exhibit PHL-94. "Registrant" is defined in Section 77/1 of Division 1: "'Registrant' means a 
supplier who has been recorded for value added tax registration under Section 85 or 85/1 or for temporary value 
added tax registration under Section 85/3."  Section 85 provides: 
"A supplier about to commence a business of selli ng goods or providing services shall file an 
application for value added tax registration be fore the date of commencing business ...".  WT/DS371/R 
Page 270  
 
  "(17) "Output tax
" means value added tax which a registrant collects or is liable to 
collect from a purchaser of goods or a recipient of services under the first paragraphs of Section 82/4… 
(18) "Input tax
" means value added tax which a registrant is called upon to pay to 
another registrant under Section 82/4,  fourth paragraph, and includes- 
 (a) Value added tax paid by a registrant at the time of import; …" 
7.580  The VAT liability  incurred by resellers of imported ciga rettes in the distribution channel can 
thus be put in the following equation:   
VAT liability = Output tax (sale to purchaser) – Input tax (purchase from reseller) 
 
7.581  Section 82/3 of the Thai Revenue Code further sets forth that if the output tax liability, which 
arises by selling cigarettes in a given month, exceed s the input tax, which was already received in the 
form of a tax credit when cigarettes were purchased, the tax payable shall be equal to the difference 
between the two.  If input tax exceeds output tax, th e difference shall be treated as tax credit, and the 
supplier is entitled to receive a ta x refund or to apply the credit fo r paying value added tax under 
Division 8 (Tax Credit and Refund of Value Added Tax).   
7.582  In terms of collection of VAT, Section 82/4 of Division 6 provides: 
"[A] registrant shall collect value added tax from a purchaser of goods … at the time 
the liability to value added tax arises by re ference to the tax base under Division 3 
and the tax rates under Division 4… 
The value added tax that a registrant [i.e. reseller of goods] collects from a purchaser 
of goods … shall be taken as output tax  of such registrant. 
The value added tax that is collected from a registrant by another registrant under this 
section by reason of purchasing goods … shall be taken as input tax  of the first 
mentioned registrant [i.e. purchaser  of goods]"  (underline added) 
7.583  Specifically, tax credit and refund of VAT  is administered in the following manner under 
Division 8 of the Thai Revenue Code. 
"Section 84. A registrant shall have the ri ght to apply tax credit resulting from the 
computation of tax under Section 82/3 in each tax month for payment of value added 
tax according to the rules, procedures a nd conditions prescribed by a Royal Decree 
[No. 242], or to claim for a refund at the ti me of filing a tax return for the tax month 
under Section 83 or 83/1, … 
Section 84/1. A claim for refund of value added tax on sale of goods or provision 
of services may be made under the following conditions: 
 (1) In the case where a tax refund is due on sale of goods …, but the 
registrant fails to claim a refund in accordan ce with Section 84, he is entitled to enter 
a claim for a tax refund within three years fro m the expiry of the time limit for filing 
a tax return for that tax month. 
 (2) In respect of sale of goods and provision of services in other cases, a 
claim for a tax refund shall be entered within  three years from the date of paying tax."  WT/DS371/R 
 Page 271 
 
 
  (ii) Exemption of VAT for domestic cigarette resale  
7.584  Section 81(1)(v) of Division 5 (Exemption from Value Added Tax) provides for VAT 
exemptions for sales of goods or services designated by Royal Decree No. 239.   
7.585  Section 3(1) of Royal Decree No. 239 in turn provides for VAT exemptions for the sale of 
domestic cigarettes.  It provides:1095 
"Section 3.  There shall be exempt from va lue added tax for the following businesses:  
(1) Sale of cigarettes produced by a manuf acturer which is an organization of a 
government where the seller is not such manufacturer who produces such cigarettes:  provided that this shall not include th e seller who is a bonded ware house duty free 
shop." 
As noted above, TTM is the only manufacturer of cigarettes in Thailand and an organization of the 
Thai government.  Therefore, the resellers of TTM  brand cigarettes will be exempt from value added 
tax pursuant to the above provisions.  7.586  The Order of Revenue Department No. Por. 85 -2542 provides, in relevant part, that a 
registered operator who buys cigarettes and receiv es a tax invoice from the tobacco industrial operator 
that is a State's organization is exempted from VAT in Section 81(1)(v) of the Revenue Code.
1096   
(c) Operation of the Thai VAT system with respect to cigarette resale 
7.587  Based on the above provisions pertaining to the VAT liability under Thai law, the process of 
collecting and exempting VAT imposed on the resale of cigarettes can be explained as follows.   
7.588  As for domestic cigarettes, when TTM sells cigarettes to the wholesaler, TTM incurs a VAT 
liability of 7 per cent of the MRSP (exclusive of VAT) to the Thai government.1097  Upon resale of 
imported cigarettes, the importer also incurs a VAT liability of 7 per cent of the MRSP (exclusive of 
VAT) to the Thai government.   
7.589  Given that both TTM and the importer incur a VAT liability of 7 per cent of the MRSP upon 
the sale of cigarettes to wholesalers and upon importation, it can be assumed that they would want to 
include this VAT amount in their sales price to the wholesaler.  We can also assume that the 
wholesaler and the subsequent retailers of both do mestic and imported cigarettes in the distribution 
chain would want to pass on the VAT to the next retailer by including it in their retail price.  This is in 
line with the VAT system in general, namely that the VAT liability ultimately passes to the 
consumers.  It is not inconceivable, however, that TTM, an importer, and an individual wholesaler or 
a retailer in the distribution chain can also make a business decision to not include the VAT amount in 
their retail price.   
7.590  As noted above, however, Section 82/7 of Division 6 of the Thai Revenue Code requires that 
in the case of cigarettes, every registrant collects VA T from the purchaser in respect of every stage of 
sale.  According to this provision, therefore, TTM as  well as an importer and all the other resellers of 
cigarettes in the subsequent distribution chain ar e under an obligation to collect VAT from their 
                                                      
1095 Exhibit PHL-217. 
1096 Exhibit PHL-95, p. 6, No. 7. 
1097 Philippines' first written submission, para. 415; Thailand's response to Panel question No. 41; 
Exhibit PHL-93.   WT/DS371/R 
Page 272  
 
  purchasers, independently from the VAT included in the actual sales price, until the transaction 
reaches the consumer level.   
7.591  When the wholesaler sells domestic cigarettes to retailers and so forth under each subsequent 
transactional stage, however, these wholesal er and subsequent resellers incur no VAT liability 
because of the exemption given under Section 81(1)(v ) of the Thai Revenue Code, Section 3(1) of 
Royal Decree No. 239 and the Order of Revenu e Department No. Por. 85-2542 as mentioned 
above.
1098  No such exemption is available for importe d cigarettes.  As such, when the wholesaler 
subsequently resells imported cigarettes to the re tailer, for example, the wholesaler incurs a VAT 
liability of 7 per cent of the MRSP.  This VAT liabi lity arises at each subsequent transactional stage 
until consumers purchase imported cigarettes. Each ag ent subject to VAT in the imported cigarettes 
distribution chain can claim a refund of the VAT  amounts paid in excess, based on the amount of 
VAT credits acquired upon the purchase of cigarettes from a previous seller, by filing form Por.Por.30 
with the Thai authorities.1099  
7.592  The following chart explains the Thai VAT system for domestic manufacturers and importers 
respectively.  The chart is based on the calculation examples provided by both parties.1100  However, it 
should be noted that we are using this chart for the purpose of illustrating the Thai VAT system and 
that the figures shown in the graph are not based on real figures.  Hence, for the purpose of explaining 
the difference in VAT liability between the resale of imported and domestic cigarettes under the Thai 
law, we assume that the MRSP including VAT is 1 07 baht/pack and equals the RSP for both imported 
and domestic cigarettes.1101  This then results in a VAT of 7 baht/pack (107*(7/107)), which means 
that the MRSP excluding VAT is 100 baht/pack.1102  The transaction in the chart involves the sale of 
one cigarette pack for both imported and domestic cigarettes with the same VAT-inclusive transaction 
prices for resellers in the distribution chai n, namely 67, 77 and 87 baht/pack.   
                                                      
1098 Philippines' first written submission, paras. 534-539; response to Panel question No. 138; 
Thailand's first written submission, para. 98; response to Panel question No. 41; E xhibits PHL-217 and PHL-95. 
1099 Philippines' first written submission, paras. 529-53 3; Thailand's first written submission, paras. 99-
100; response to Panel question No. 41. 
1100 Philippines' response to Panel question No. 138; Exhibit THA-20. 
1101 The MRSP excluding VAT is made up of the c.i.f. /ex factory price, customs duties, excise tax, 
health tax, television tax, local tax and marketing costs (Exhibit THA-47), see para. 7.466 above.  The MRSP 
including VAT is the maximum price a retailer can charge  a consumer. The RSP is the price which a retailer 
chooses to ask from a consumer, the actual retail price,  this price cannot exceed the MRSP (parties' response to 
Panel question No. 119).  Hence, as the Philippines submits, in reality the retailer can choose, for various reasons, to set the RSP at a lower level than the MRSP.  Thailand does not contest this (Philippines' first written 
submission, para. 417; response to Panel question No. 52 and 119; Thailand's first oral statement, para. 11; 
response to Panel question No. 119; Exhibit THA-48).  
1102 Philippines' first written submission, para. 418; response to Panel question 138; Thailand's first 
written submission, para. 77; second oral statement, para. 61.  WT/DS371/R 
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  (d) Other relevant provisions 
7.593  Section 82/5 of the Revenue Code notes six potential instances in which a VAT registrant 
reseller would not be allowed to deduct output tax paid to its prev ious seller in computing tax under 
Section 82/3:  (i) a tax invoice is absent or cannot be produced to prove that input tax has been 
collected, except where there is a reasonable excu se according to the rules and conditions prescribed 
by the Director-General; (ii) a tax invoice contains information which is incorrect or inadequate in the 
matter of substance according to the rules and condi tions prescribed by the Director-General; (iii) the 
input tax is not directly connected with the busin ess carried on by a supplier according to the rules and 
conditions prescribed by the Director-General; (i v) the input tax originated from entertainment 
expenses or expenses of a similar nature accordi ng to the rules and conditions prescribed by the 
Director-General; (v) input tax under a tax invoice issued by a person not authorized to do so under Division 10; or (vi) input tax designated by the Director-General with the approval of the Minister. 
7.594  Section 86/5(2) of the Thai Revenue Code, in re levant part, provides that the Director-General 
may vary the particulars in respect of a tax invoice for tobacco under Section 79/5.
1103  Moreover, 
Sections 89 and 90 provide for penalties, surcharges and punishment if forms and information to Thai 
authorities are incorrectly, inappropriately or fraudulently submitted.1104 
4. Like product analysis 
(a) Main arguments of the parties 
7.595  The Philippines claims that imported cigarettes and dom estic cigarettes are like products for 
the same reasons that it presented in relation to its other claim under Article III:2, first sentence.1105  
Moreover, the Philippines submits that because of th e distinctions between products purely based on 
national origin in the Thai law at issue, the Phili ppines, as a complainant, n eed not separately establish 
                                                      
1103 Exhibit PHL-94, p. 93. 
1104 Exhibit PHL-94, pp. 101-103. 
1105 Philippines' first written submission, paras. 543-54 4; second written submission, paras. 370-390.  77 TTM  
Price = 60+7 Importer (PMTL)  
Price = 60+7 
Wholesaler  
Purchase price = 77 
(70+7) Wholesaler  
Purchase price =77 
(70+7) 
 
Retailer  
Purchase price = 87 
(80 + 7)    Retailer  
Purchase price = 87   
(80 + 7) 
Final Consumer  
Purchase price = 107 
(100+7) Final Consumer  
Purchase price = 107 
(100+7) Thai Govt.
7 
7VAT liability  - 
 
 
VAT credit  - 
VAT = 7  
ÆPor.Por.30 
ÆPor.Por.30  ex factory  
60 c.i.f. 
60 WT/DS371/R 
Page 274  
 
  the likeness between imported and domestic cigarettes.
1106  Specifically, Section 2 of the Order of the 
Revenue Department refers expressly to tobacco a nd cigarettes "imported from abroad".  In contrast, 
the Philippines points out that Section 7 of the Orde r of the Revenue Department refers to cigarettes 
"from the tobacco industrial operator that is a Stat e [] organization", which refers exclusively to 
domestic cigarettes. 
7.596  Thailand  has not specifically responded to the likeness element of Article III:2, first 
sentence, in the context of the Philippine s' claim concerning the VAT exemption. 
(b) Analysis by the Panel 
7.597  We recall our finding above that Marlboro and L&M cigarettes at issue are like the domestic 
cigarettes within the same price segments unde r Article III:2, first sentence, of the GATT.1107  A s  
such, we find that the imported cigarettes at issue, Marlboro and L&M are "like" domestic cigarettes 
within the same price segments. 
5. Excess taxation analysis 
7.598  We address in this section the question of whether the VAT exemption available only for 
domestic cigarette resellers under th e Thai regulations subjects import ed cigarettes to  an excess VAT 
liability compared to domestic ciga rettes and consequently leads to a de jure violation of the first 
sentence of Article III:2.  In this regard, the Phili ppines submits that the VAT at issue under Thai law 
is an internal tax within the mean ing of Article III:2 of the GATT 1994.1108  Thailand has not disputed 
this either.  We also find that value added tax es, and hence the VAT at issue imposed on cigarettes 
under the Thai law, are an internal tax covered by Article III:2.  We will begin our analysis by first 
examining the VAT in general and Thailand's position th at the scope of Article III:2, first sentence is 
confined to the VAT amount applied to cigarettes at the final consumer level. 
(a) Whether the scope of Article III:2, first senten ce is confined to the VAT amount applied to 
cigarettes at the final consumer level 
(i) Main arguments of the parties 
7.599  Thailand  argues that the Panel should only examine whether domestic and imported 
cigarettes are ultimately  subject to equal amounts of internal taxes at the final consumer level.1109  
Thailand argues that there is no basis on which to conclude that imported cigarettes are taxed in 
excess of domestic cigarettes within the meaning of  Article III:2 because VAT is a tax on consumers, 
who pay exactly the same tax on imported and domestic cigarettes.1110  The key issue is that the total 
tax on the imported and domestic product be the same , and not whether the tax is collected uniformly 
from different merchants at each stage of the distribution process.1111  Thailand notes that the text of 
Article III:2(a) and Ad Article III of the GATT 1994 st ates that internal taxes can be imposed on 
imported products at the time of importation.  Internal taxes on domestic products are however 
collected later in the distribution chain.  Thailand therefore concludes that Article III:2 does not focus 
on when  the taxes are collected, but rather on how much  is collected.  The fact that VAT for domestic 
cigarettes is collected at the manufacturer leve l, while VAT for imported cigarettes is passed on 
                                                      
1106 Philippines' first written submission, paras. 543-544. 
1107 See Section VII.D.3 above. 
1108 Philippines' first written submission, paras. 463 and 542. 
1109 Thailand's second written submission, para. 149. 
1110 Thailand's second oral statement, para. 59, referring to Thailand's second written submission, 
paras. 156-161; Exhibit THA-61. 
1111 Thailand's second oral  statement, para. 60.  WT/DS371/R 
 Page 275 
 
 
  through the distribution chain to the consumer, therefore cannot constitute grounds for a violation 
claim under Article III:2, first sentence.1112   
7.600  In this connection, Thailand argues that the OE CD clarified that VAT is a consumption tax, 
which is ultimately paid by the final consumers.1113  This, in turn, has the aim of achieving neutrality 
of taxation.1114  As such, it is highly unlikely that many Members understood Article III:2 of the 
GATT 1994, to render multi-stage VAT systems WTO-in consistent.  Thailand is of the view that 
input tax credit constitutes a basic feature of every VAT system1115, and the practice of offsetting 
output tax liability against the input tax credit is a basic feature of Members' VAT systems.1116  
Thailand provides examples of several WTO Members using exactly the same system as its VAT system ( i.e. the Philippines, Canada, France,  Ireland, Peru and Australia).
1117  Thailand asserts that if 
the Philippines' argument concerning the WTO-incons istency of the Thai VAT system was accepted, 
every WTO Member's VAT system which is based on input/output tax offsets would also be found 
inconsistent with WTO obligations where in "at leas t some circumstances" the reseller of an imported 
product does not obtain the credit.1118   
7.601  The Philippines  claims that, contrary to Thailand' s assertions, the final consumer does not 
always bear the ultimate VAT burden.1119  As a matter of Thai law, the VAT is imposed on importers 
and the domestic manufacturer of cigarettes, alik e. However, VAT is automatically passed on to 
wholesalers, retailers and, ultimately, consumers in the commercial chain for  imported  products only. 
On the other hand, VAT may be imposed on domestic  cigarette consumers only if  TTM chooses to 
reflect its VAT burden in the retail price of the product.  The Philippines argues that, from an economic perspective, and for a variety of commerc ial reasons, there might be instances where an 
importer, a manufacturer or a reseller may decide to absorb the VAT burden rather than to increase its 
RSP.
1120  As a consequence, the Thai consumers may not be ultimately liable to pay VAT.1121 
7.602  The Philippines argues that, the taxation of the products at issue throughout the distribution 
chain should be assessed, not just at the consumer level.1122  The Philippines agrees that both TTM 
and PM Thailand pay the same VAT amount on their initial sale transaction.  The Philippines 
however points out that the relevant test is wh ether, through the chain of distribution, imported 
cigarettes are subjected to taxes in excess of tho se on domestic cigarettes. The Philippines argues that 
                                                      
1112 Thailand's second written submission, para. 149. 
1113 Thailand's second written submission, para. 156, referring to Exhibit THA-61. 
1114 Thailand's second written submission,  para. 161. 
1115 Thailand's first written submission, para. 242, footnote 247; response to Panel question No. 54. 
1116 Thailand's second written submission, para. 160. 
1117 Thailand's response to Panel  question No. 54; Exhibit THA-43. 
1118 Thailand's first written submission, para. 242, footnote 247; comments on the Philippines' response 
to Panel questions, para. 71.  Furthermore, Thailand argu es that PM Thailand adds the same amount for VAT in 
determining its RRSPs as Thai Excise uses to determine the MRSPs.  Thailand uses the example of RRSPs for L&M  since 2005, which is the same as MRSP, with the exception of the 2006-2007 period (Exhibit PHL-270). 
Therefore, there is no cumulative tax burden, as PM Thailand's practice is consistent with Thailand's calculation 
of the total VAT in the distribution chain (Thailand's comments on the Philippines' response to Panel questions, paras. 85-86). 
1119 Philippines' response to Panel question No. 52. 
1120 Philippines' response to Panel question No. 52. The Philippines notes that PM Thailand's 
commercial policy is to pass on the increases in the tax rate to consumers, which ha ve affected domestic and 
imported cigarettes similarly, however, not to pass on increases in the tax base, which have typically affected 
only imported cigarettes (para. 335).  The Philippines cites two examples (September 2006 and August 2007) where Thailand increased PM Thailand's MRSPs, and therefore the VAT amount due, and the company chose to 
absorb the increase in VAT rather than to pass it on to the consumer. As a result, PM Thailand, accepted a lower 
profit margin, and the tax increase burden was not ultimately borne by the consumer. 
1121 Philippines' response to Panel question No. 52. 
1122 Philippines' response to Panel question No. 138. WT/DS371/R 
Page 276  
 
  at each subsequent stage in the distribution chain, r esellers of imported cigarettes, alone, are subject to 
a cascading VAT.  Therefore the cumulative VAT bur den on like imported and domestic cigarettes is 
not the "same", and imported cigarettes are taxed in excess of like domestic cigarettes.
1123 
7.603  The Philippines claims that none of the c ountries of which Thailand says it has a WTO-
consistent system similar to its own, recognizes ex emptions for domestic cigarettes.  Thailand is the 
only country to apply different rules for the coll ection of VAT for domestic  and imported cigarettes 
respectively:  a single stage system where only the manufacturer bears VAT liability for domestic 
cigarettes, and a multi-stage system where VAT is passed on through all economic agents in the resale 
chain for imported cigarettes.  The Philippines poi nts out that normal multi-stage VAT systems are 
premised on the principle of fiscal neutrality, where all goods in the same situation are treated equally 
and any variation in tax burdens is due to  factual variations of the goods and not de jure  exemptions 
granted to domestic goods.1124  The Philippines concludes first th at the rules implemented in the 
countries mentioned by Thailand should have no bearing on the Pa nel's analysis of Thailand's 
exemption system.1125 
7.604  Thailand submits that the Philippines' assertions are incorrect because TTM is also entitled to 
a tax credit on VAT paid on its purchases of raw materials and other VAT-liable inputs, in addition to 
the output payment on its sales of cigarettes.1126  Even if the treatment of domestic cigarettes under the 
Thai VAT system is "single stage", Thailand's VAT system for both imported and domestic cigarettes 
is therefore consistent with the basic features co mmon to VAT because a tax credit for input tax paid 
remains the same for imported and domestic cigarettes.1127 
(ii) Analysis by the Panel 
7.605  The Panel notes that, in general, VAT is included in the final price of the product because 
VAT is a consumption tax, which is ultimately paid  by the final consumers.  As referred to by 
Thailand, in the "International VAT/GST Guide lines (February 2006)", the OECD observes that 
although there are many differences in the way va lue added taxes are implemented around the world 
and across OECD countries, there are some common core features.1128  These features include the 
following: 
7.606  "Value added taxes are taxes on consumption, paid, ultimately, by final consumers.  In 
principle, businesses should not bear the burden of the tax itself since there are mechanisms in place that allow for a refund of the tax levied on intermed iate transactions between firms.  The system is 
based on tax collection in a staged process, with successive taxpayers entitled to deduct input tax on 
purchases and account for output tax on sales.  Each business in the supply chain takes part in the 
process of controlling and collecting the tax, … .  In  general, OECD countries with value added taxes 
impose the tax at all stages and normally allow immediate deduction of ta xes on purchases by all but 
the final consumer." 
                                                     
 
1123 Philippines' second oral statement, para. 95. 
1124 Philippines' second oral statement, para. 95; response to Panel question No. 140(1).  The 
Philippines states that "[it] agree[s] with Thailand that non WTO-inconsistency arises in a multi-stage VAT 
system that has the following basic features: (1) domestic and imported goods are both su bject to tax 'at each 
stage of distribution'; (2) the tax base is chosen by the se ller or reseller and, hence, is non-discriminatory, and, 
(3) the tax rate is equal for all goods."  Th e Philippines underlines that this, however, is not the VAT system that 
Thailand operates. 
1125 Philippines' second written submission, para. 458. 
1126 Thailand's second written submission, para. 164.  
1127 Thailand's second written submission, para. 164, referring to Exhibit THA-61, p. 1; response to 
Panel question No. 134. 
1128 Exhibit THA-61, paras. 1-2.  WT/DS371/R 
 Page 277 
 
 
  7.607  It is further stated that the above featur es give value added taxes their main economic 
characteristic, that of neutrality.  According to the guidelines, the full right to deduction of input tax 
through the supply chain, with the exception of the final consumer, ensures the neutrality of the tax, whatever the nature of the product, the structure of  the distribution chain and the technical means used 
for its delivery. 
7.608  The Thai system as applied to  imported  cigarettes appears to fit within the general description 
of VAT systems as observed in the OECD guidelin es.  What distinguishes the VAT-related measures 
maintained by Thailand from other so-called nor mal VAT measures is, however, the VAT exemption 
accorded to domestic cigarette resale only.  In our view, this distinguishing feature of the Thai VAT 
system for the cigarettes resale is directly relevant  to the question of whether the concerned measure 
imposes excess taxation on imported cigarettes incons istently with Article III:2, first sentence. 
7.609  The Appellate Body has established a strict st andard for the term "in excess of" found in 
Article III:2, first sentence, with even the smallest  amount of excess taxation considered inconsistent 
with WTO obligations.
1129  The purpose of Article III:2, first sen tence is to ensure the equality of 
competitive conditions between im ported and like domestic products.1130  The obligation to respect 
this most fundamental principle enshrined in Artic le III:2, first sentence is also well illustrated in 
GATT disputes.  For example, the GATT panel in US – Tobacco , found a violation of Article III:2 
because the measure concerned in that dispute "carried with it the risk of discriminatory treatment of 
imports in respect of internal taxes".1131   
7.610  We do not therefore consider that the scope of scrutiny of a given measure for its consistency 
with Article III:2, first sentence, can simply be lim ited to whether the final consumer ultimately pays 
the same VAT for imported and domestic cigarettes.  In our view, the fact that VAT is in principle a 
consumer tax that normally is passed on to the fi nal consumer does not eliminate the possibility that 
imported cigarettes may still be exposed to poten tial excess taxation under a Member's specific VAT 
system through the manner in which resellers of impo rted cigarettes in the distribution chain are held 
liable for the VAT obligations.  Further, we do not find that the VAT exemption granted only to the 
resale of domestic cigarettes under the Thai VAT system is a typical feature of VAT or a common 
practice shared by other countries.1132 
7.611  Finally, we do not agree with Thailand's view that the obligations under Article III:2, first 
sentence, are not concerned with the issue whethe r the tax is collected uniformly from different 
merchants at each stage of the distribution process.  We agree that the issue is not whether the tax is 
collected uniformly from distributors at each stage of the transaction chain.  However, to the extent 
that the manner in which the tax is collected aff ects the tax liability applied to imported goods, we are 
of the opinion that a measure falls within the scope of Article III:2, first sentence.  We also find 
support for our view from the statement of the Appellate Body in Canada – Periodicals  that "[a]ny 
measure that indirectly affects the conditions of competition between im ported and like domestic 
                                                      
1129 Appellate Body Report, Japan – Alcoholic Beverages II , p. 23 and 26, DSR 1996:I, 97, at 115 and 
118; Panel Report, Argentina – Hides and Leather , para. 11.243. 
1130 Appellate Body Report, Canada – Periodicals , p. 18, DSR 1997:I, 449, at 468. 
1131 GATT Panel Report, US – Tobacco , para. 97 (emphasis added).  In the context of Article III:4, the 
GATT Panel in EC – Oilseeds I also reasoned that the exposure of a pa rticular imported product to simply the 
risk of discrimination within legal provisions constitute s, by itself, a form of discrimination (para. 141). 
1132 For instance, in the examples provided by Thailand in Exhibit THA-43 regarding VAT systems in 
the Philippines, Canada, France, Ireland, Peru and Australi a, we find that although these countries have similar 
VAT systems to the Thai VAT system, they do not have an exemption system regarding domestic cigarettes as 
used by Thailand. WT/DS371/R 
Page 278  
 
  products would come within the provisions of Article  III:2, first sentence, or by implication, second 
sentence, given the broader application of the latter".
1133 
7.612  We now proceed to examine whether Thailand' s VAT exemption on the resale of domestic 
cigarettes subjects imported cigarettes to an excess VAT liability in violation of Article III:2, first 
sentence. 
(b) Whether Thailand's VAT exemption on the resale of domestic cigarettes subjects imported 
cigarettes to an excess VAT liability in viol ation of Article III:2, first sentence  
(i) Main arguments of the parties 
7.613  The Philippines  claims that the VAT exemption for resellers of domestic cigarettes contained 
in Thai law, which is not available to imported cigarette resellers, is a de jure  violation of 
Article III:2, first sentence because the Thai Re venue Code explicitly ca lls for the taxation of 
imported cigarettes in excess of domestic cigarettes.1134  Moreover, the fact that the Thai VAT law 
offers a tax credit, does not mean that resellers of imported cigarettes will always be left – in Thailand's words – "automatically and simu ltaneously" with a zero "net" VAT liability.
1135  
7.614  The Philippines contests that the input tax cred it balances the net VAT liability to zero at the 
time the obligation to pay output tax VAT liability ar ises.  There could be instances where the net 
VAT liability will be greater than zero after the output tax is levied on the resale of imported 
cigarettes, which would constitute excess taxation.1136  The Philippines argues that even if there is a 
perfect match between the input tax credit and the ou tput tax liability, the input tax credit could not 
occur if wholesalers/retailers do not comply with  their obligations to submit Form Por.Por.30.1137  
According to the Philippines therefore, the tax credit mechanism is conditional, not available 
automatically and simultaneously to offset VAT liability imposed on foreign cigarettes resellers,  
which is never imposed on the resale of domestic cigarettes.1138  The Philippines cites certain 
situations where an input tax credit shall not be allowed1139, and submits that these examples are 
sufficient to show that the VAT measures a pply excess taxation to imported cigarettes. 
7.615  Furthermore, the Philippines claims that providing a private party the opportunity to offset 
statutorily-imposed less favourable treatment cannot  cure the government's failure to ensure the 
                                                      
1133 Appellate Body Report, Canada – Periodicals , p. 19, DSR 1997:I, 449, at 464. 
1134 Philippines' first written submission, paras. 528, 541-542; second written submission, 
paras. 439-441; Exhibit PHL-94. 
1135 Philippines' second written submission, para. 442. 
1136 Philippines' second written submission, para. 448.  
1137 Thailand's response to Panel question No. 57. 
1138 Philippines' second written submission, para. 452. 
1139 Philippines' comments on Thailand's response to Panel question Nos. 137 and 138; Philippines' 
response to Panel question Nos. 133 and 138; refere ncing Exhibits PHL-94, Section 82/5 and PHL-271.  The 
following are the relevant situations: (i) a tax invoice cannot  be produced and there is no reasonable excuse; (ii) 
a tax invoice contains incorrect or in adequate information; (iii) output ta x is not directly connected with the 
supplier's business; (iv) input tax orig inated from entertainment expenses; (v ) input tax invoice issued by a non-
authorized agent; and (vi) input tax designated by the DG  with the approval of the Minister.  The Philippines 
also notes that pursuant to Notification No. 42, Clause 1(2) and Section 82/5(6) of the Thai Revenue Code, a reseller of imported cigarettes who chooses to use retail business right to submit a summary tax invoice to ease 
the administrative burden, cannot deduct the input tax stated therein from the output tax in connection with 
resale of imported cigarettes; and regular tax invoices, under Section 86/4 of the Thai Revenue Code do not contain the word "Tax invoice" (Philippines' respon se to Panel question Nos. 133 and 138, para. 211, 
referencing Exhibits PHL-280 and PHL-271).  WT/DS371/R 
 Page 279 
 
 
  equality of competitive conditions.  A Member's re spect for the national treatment obligation cannot 
be contingent upon merely private party actions.1140   
7.616  Thailand  argues that TTM pays the entire VAT amount for resale up front and that in 
practice, imported cigarette resellers have the sa me VAT liabilities as domestic cigarette resellers.1141  
Thailand maintains that imported cigarettes do not  bear a greater VAT burden than domestic 
cigarettes, since wholesalers and retailers do not pay any net VAT to the Thai government on sales of 
domestic or imported cigarettes.1142  Moreover, wholesalers and retailers typically buy both domestic 
and imported cigarettes, which are all subject to the same administrative requirements.1143  Thailand 
characterizes the Thai VAT system as a mere reporting requirement because the imported and 
domestic cigarettes are taxed equally in practice.1144  Thailand argues that the VAT payable is 
automatically neutralized with a ta x credit before the liability is due.1145   
7.617  Thailand submits that a VAT exemption for the resellers of domestic cigarettes is balanced 
with a tax credit automatically available to the r esale of imported cigarettes.  The comparison of tax 
imposed on the cigarettes at issue under Article III:2, first sentence, should only be determined at the 
stage of the transaction when the final consumer purchases the cigarettes.1146  The VAT is calculated 
as 7 per cent of the MRSP (output tax liability) minus 7 per cent of the MRSP (input tax credit) = 0 
(net VAT liability) for imported cigarette resal e and simply "0" for domestic cigarette resale.1147  
Thailand notes that the Philippines' own expert pr ovided that the VAT calculation is achieved by 
crediting input tax against output tax liability1148 and that VAT registrants are "entitled" to input tax 
credits as a "right" and the cumulative VAT tax bur den would be calculated in connection with the 
supply of a pack of imported cigarettes.1149  The VAT liability for the resale of imported cigarettes 
would therefore be equal to that of domestic cigarettes.1150   
7.618  Thailand argues that a private party does not have  to take any additional steps to receive the 
tax credit.  Thailand maintains that the right to  an input tax credit arises when the goods are 
purchased, at the same time or before the liability to pay an output tax is incurred, therefore the 
liability to pay an output tax can never pre- date the entitlement to an input tax credit.1151   
(ii) Analysis by the Panel 
7.619  The Philippines claims that the VAT exempti on for the resale of domestic cigarettes under 
Thai law is a de jure  violation of Article III:2, first sentence.  Thailand asserts that the Philippines 
misinterprets the Thai VAT system and that there is no excess taxation for imported cigarettes because the VAT payable by imported cigarette resellers  is automatically neutralized with a tax credit 
before the liability is due. 
                                                     
 
1140 Philippines' response to Panel question No. 52. 
1141 Thailand's first written submission, para. 99; Exhibit THA-20. 
1142 Thailand's first written submission,  para. 101. 
1143 Thailand's first written submission,  para. 102. 
1144 Thailand's first written submission, paras. 99, 101 and 242-243; Exhibit THA-20. 
1145 Thailand's first written submission,  para. 103. 
1146 Thailand's second written submission, para. 147; first written submission paras. 241-244; 
Exhibit THA-20. 
1147 Thailand's first written submission, para. 103. 
1148 Thailand's comments on the Philippines' response to Panel questions, para. 86. 
1149 Thailand's comments on the Philippines' response  to Panel questions, para. 86, referencing the 
Philippines' response to Panel question Nos. 133 and 138. 
1150 Thailand's comments on the Philippines' response  to Panel questions, para. 86, referencing the 
Philippines' response to Panel question Nos. 133 and 138. 
1151 Thailand's comments on the Philippines' response to  Panel questions, para. 72; response to Panel 
question No. 132(3). WT/DS371/R 
Page 280  
 
  7.620  A de jure  inconsistency of a measure with the WTO obligations can be demonstrated if the 
relevant legal instrument explicitly provides for the words that result in a violation of certain 
obligations.
1152  For the purpose of the obligation under Article III:2, first sentence, of the 
GATT 1994, the Panel in Indonesia – Autos  recognized that origin-based distinctions for internal 
taxes leading to excess taxation for imported goods is in itself inconsistent with Article III:2 of the 
GATT 1994: 
"[A]n 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. This is directly in accord w ith the broad purposes of Article III:2, as 
outlined by the Appellate Body."1153 
7.621  Turning to the facts of this dispute, it is not di sputed that imported cigarette resellers are liable 
for VAT under Section 82/7 of the Thai Revenue Code  and that  an exemption from this VAT liability 
is provided only to the resale of domestic cigarettes pursuant to Section 3(1) of Royal Decree No.239 
and the Order of Revenue Department No. Por. 85- 2542.  To recall, Section 3(1) of Royal Decree 
No.239 reads:   
"Section 3.  There shall be exempt from va lue added tax for the following businesses:  
(1) Sale of cigarettes produced by a manuf acturer which is an organization of a 
government where the seller is not such manufacturer who produces such cigarettes:  provided that this shall not include th e seller who is a bonded ware house duty free 
shop."
1154 
7.622  The Order of Revenue Department No. Por. 85-2 542 also provides, in relevant part, that a 
registered operator who buys cigarettes and receiv es a tax invoice from the tobacco industrial operator 
that is a State organization is exempted from  VAT in Section 81(1)(v) of the Revenue Code.1155 
7.623  The text of the above measures pertaining to th e VAT exemption therefore specifically refers 
to cigarettes produced by a manufacturer which is  an organization of a government, namely TTM – 
the only domestic cigarette manufactur er in Thailand.  Consequently , if the VAT liability arises only 
with respect to the resale of imported cigarettes because of the exemption given to domestic cigarette 
resale under the relevant provisions, the Thai measures at issue, on their face, lead to applying a VAT 
to imported cigarettes in excess of that imposed on like domestic cigarettes. 
7.624  Thailand, however, argues that the resellers of imported cigarettes are not subject to excess 
taxation because the tax credit is available automa tically and simultaneously on the submission of a 
required form (Form Por.Por.30):  the VAT registrant  reseller is automatically entitled to deduct VAT 
paid on purchases in calculating its VAT liability for the month.1156  The Philippines contends that a 
de jure  VAT exemption for the resellers of domestic ciga rettes cannot be cured by the availability of a 
tax credit that is contingent upon an action from a pr ivate party and that does not necessarily offset the 
tax liability in a given tax period. 
                                                      
1152 In the context of an export subsidy under the Subsidies Agreement, the Appellate Body in Canada 
– Aircraft stated on de jure export contingency: "… There is difference, however, in what evidence may be 
employed to prove that a subsidy is export contingent.  De jure  export contingency is demonstrated on the basis 
of the words  of the relevant legislation, regulation or othe r legal instrument …" (underline added) (Appellate 
Body Report, Canada – Aircraft , para. 167). 
1153 Panel Report, Indonesia – Autos , para. 14.113; noting  Appellate Body Report, Canada – 
Periodicals , pp. 21-22, DSR 1997-I, 449 at 468; see also Panel Report, Colombia – Ports of Entry , para. 7.182. 
1154 Exhibit PHL-217. 
1155 Exhibit PHL-95, p. 6, No. 7. 
1156 Thailand's response to Panel question No. 137.  WT/DS371/R 
 Page 281 
 
 
  7.625  We recall our earlier discussion that the obliga tion under Article III:2, first sentence, not to 
tax imported products in excess of like domestic pr oducts, prohibits even the smallest amount of 
excess taxation on imported products.  We furthe r recall the statement by the GATT Panel in US – 
Tobacco :   
"[T]he Panel thus considered that the system for calculation of the BDA on imported 
tobacco itself, not just the manner in which it was currently applied, was inconsistent 
with Article III:2 because it carried with it the risk of discriminatory treatment of 
imports in respect of internal taxes."1157  (emphasis added) 
7.626  The obligation not to tax imported products in excess of like domestic products under the first 
sentence of Article III:2 therefore extends to a pote ntial risk of excess taxation.  By definition, the 
existence of a mere possibility or potential risk of such excess taxation under a given measure cannot 
be equated to a real risk.  The Appellate Body's finding in US – Section 211 Appropriations Act 
provides guidance in this regard.  By first noti ng that the jurisprudence on Article III:4 of the 
GATT 1994 [in particular, the Panel report on US – Section 337 Tariff Act ] may be useful in 
interpreting the national treatment obligation in the TRIPS Agreement , the Appellate Body agreed 
with a previous panel's view that the national tr eatment obligation must be interpreted strictly: 
"And that panel [Panel on US – Section 337 Tariff Act ], importantly for our purposes, 
concluded that: 
…while the likelihood of having to  defend imported products in two 
fora is small, the existence of the possibility  is inherently less 
favorable than being faced with having to conduct a defense in only 
one of those fora.  
… 
again echoing that panel, even the possibility  that non-United States 
successors-in-interest face two hurdles is inherently less favorable than the 
undisputed fact that United states su ccessors-in-interest face only one."1158 
7.627  We are of the view that the standard set for th e national treatment obligation in the context of 
Article III:4 and the TRIPS Agreement  could therefore be equally relevant to the national treatment 
obligation under Article III:2.  U nder Article III:4, a violation of the obligation not to treat imported 
products less favourably than like domestic pr oducts will be found if the measure concerned 
negatively affects the conditions of competition of  the imported products in the importing Member's 
market.  Given that the existence of the mere po ssibility of less favourable treatment was considered 
sufficient to find a violation of Article III:4, the mere risk of discriminatory treatment of imported 
products in respect of "internal taxes" would be su fficient to find a violation of the national treatment 
obligation under Article III:2, first sentence.  With  this principle in mind, we will examine VAT tax 
credits granted to the resellers of imported cigarettes under the Thai law. 
7.628  The Thai Revenue Code allows the resellers of imported cigarettes to offset their VAT 
liability arising from the resale of imported cigarettes against VAT input tax already paid to a 
previous reseller.  As explained above, this can be put into an equation:   
                                                      
1157 GATT Panel Report, US – Tobacco , para. 97. 
1158 Appellate Body Report, US – Section 211 Appropriations Act , paras. 261-265, referencing the 
GATT Panel Report, US – Section 337 Tariff Act , para. 5.19. WT/DS371/R 
Page 282  
 
  VAT liability = Output tax (sale to a next purchaser) – Input tax (purchase from a 
previous reseller)   
7.629  Tax amounts are calculated by multiplying the VAT amount (i.e. 7%*(MRSP-VAT)) by the 
number of cigarette packs sold.  Section 82/3 of th e Thai Revenue Code then provides that if output 
tax exceeds input tax, the tax payable shall be equal to the difference.  If input tax exceeds output tax, 
the difference shall be treated as a tax credit, and th e supplier is entitled to r eceive a tax refund or to 
apply the credit for paying value added tax later on.   
7.630  Thailand argues that the entitlement to deduction of an input tax under the Thai Revenue 
Code is automatic and simultaneous with the obligati on to pay output tax, which arises at the time of 
submission of a VAT return form, Form Por.Por.30 .  Thailand asserts that no additional step by a 
reseller is involved in this process for the tax cred it to be granted to the reseller.  Based on this, 
Thailand maintains that the net VAT liability is the sa me – i.e. "zero" – for resellers of both domestic 
and imported cigarettes.  Therefore, according to Thailand, the resellers of imported cigarettes can 
never incur a net liability on the resale of a particular pack of cigarettes for the year to date or for the 
total amount of cigarettes sold because the credit fo r input tax paid on the purchase of a pack of 
cigarettes will always come before the liability for output tax payable on the sale of the pack.
1159   
7.631  The Philippines, however, points to instances wher e the net VAT liability will be greater than 
zero for imported cigarette resellers, which amounts to an excess tax for imported cigarettes.1160  
Specifically, the Philippines' position is that the inpu t tax credits are not automatically available and 
thus a reseller of imported cigarettes will be subj ect to excess taxation under certain circumstances, 
including when any of the administrative re quirements linked to the input and output VAT 
mechanism for imported cigarette resale are not met. 
7.632  In these circumstances, we must  clarify whether input tax cred its under the Thai regulations 
are granted automatically and simultaneously with th e obligation to pay output taxes in every case so 
as not to create even the potential risk of an excess tax for imported cigarettes. 
7.633  We note Thailand's explanation that the reselle r of imported cigarettes can never incur a net 
liability on the resale of a particular pack of cigarettes:  the input tax credit always precedes the 
liability because the credit is provided at the time of the purchase of imported cigarettes.  Although 
the text of the relevant provisions of the Thai Reve nue Code does not explicitly spell out that the input 
tax credit "always precedes" the liability, it is logi cal to understand that the purchase, entailing an 
input tax credit, occurs before the sale of importe d cigarettes, resulting in an output tax liability.  
However, in our view, this does not mean that a reseller of imported cigare ttes can never incur a net 
liability on the resale of a particular pack of cigarettes for the following reasons.   
7.634  As addressed in more detail in the following section relating to the Philippines' claim under 
Article III:4, certain administrative requirements are imposed on imported cigarette resellers in 
obtaining tax credits for the tax liability arising from sales of imported cigarettes.  For example, 
resellers of imported cigarettes must submit a VAT re turn form, Por.Por.30;  this is also the form 
through which they can request a tax credit.1161  As the Philippines has submitted, and Thailand 
acknowledges, the reseller of imported cigarettes would not receive a tax credit to which it was 
entitled if it did not file the form or  if the reseller files the form but subsequently cannot prove that the 
                                                      
1159 Thailand's response to Panel question No. 123(3). 
1160 Philippines second oral statement, paras. 92 and 96. 
1161 Exhibit THA-42. DG Notification No. 65 re: Pres cription of VAT Forms, dated 22 November 
BE2538 (1995) requiring the use of Form Por.Por.30, pursuant to paragraph 1 of Section 83 of the Thai Revenue 
Code.  WT/DS371/R 
 Page 283 
 
 
  purchase took place, for example,  by losing the purchasing invoice.1162  These resellers are also 
obliged to complete and maintain tax invoices, ta x input/output reports and goods and raw material 
records for VAT purposes.1163  A tax credit will also not be availa ble if a reseller is unable to produce 
an invoice as proof of purchase or if its invoices are incomplete or inaccurate.1164  Further, as 
described above in paragraph 7.59 3, Section 82/5 of the Thai Revenue Code sets forth six specific 
situations where a reseller of imported cigarettes woul d not be allowed to deduct output tax paid to its 
previous seller in computing tax under Section 82/3. 
7.635  Therefore, we are not persuaded by Thaila nd's argument that the tax credit granted to 
imported cigarette resellers is automatically granted under the Thai law, without the need for resellers 
to take any procedural steps.   
7.636  Thailand argues that, as the only conceivable instances of alleged excess taxation relied on by 
the Philippines do not depend on the law, but rather on th e reseller's own failure to exercise its right to 
claim a tax credit, this cannot give rise to a viol ation of Article III:2.  We do not find Thailand's 
argument convincing.  It is the Thai laws and regula tions at issue that give rise to certain obligations 
on resellers of imported cigarett es, which the Panel describes at paragraph 7.634 above and in 
Section VII.F  of its report.  The failure to co mply with these obligations will in turn deprive 
importers of tax credits necessary to offset thei r VAT liability; yet, this potential liability for VAT 
payment does not exist for resellers of domestic ci garettes under the measures at  issue due to the tax 
exemption described in paragraph 7.623. 
7.637  As emphasized by the Appellate Body in Korea – Various Measures on Beef , what is relevant 
in assessing the consistency of a measure with the WTO obligations is whether the concerned measure 
itself imposes "the legal necessity" of certain action on private parties.1165  In that case, the Appellate 
Body underlined that given the restrictive nature of a choice given to retailers, "the intervention of 
some element of private choice does not relieve Korea of responsibility under the GATT 1994 for the 
resulting establishment of competitive conditions less favourable for the imported product than for the 
domestic product".1166  In Thailand, the law imposes VAT on resellers of imported cigarettes for the 
sale of imported cigarettes. This liability is not off set automatically and requires resellers to satisfy 
certain administrative requirements.  Failure to sa tisfy these requirements means that the reseller of 
imported cigarettes remains subject to VAT.  In our view, the fact that this potential liability does not 
exist for domestic cigarette resellers und er the Thai law, by virtue of a de jure  exemption of resale of 
domestic cigarettes, leads to excess taxati on for imported cigarettes and consequently a de jure  
violation of the first sentence of Article III:2. 
(c) Whether the VAT exemption for domestic ciga rette resellers is otherwise justified 
(i) Main arguments of the parties 
7.638  Thailand  argues that the different regulatory tr eatment of resale of imported and domestic 
cigarettes serves an important role in ensuring tax collection and preventing fraud such as black 
market sales, contraband and counterfe iting in the Thai cigarette market.1167   
                                                      
1162 Thailand's response to Panel question No. 138; the Philippines' response to Panel question Nos. 133 
and 138. 
1163 See paras. 7.669-7.776. 
1164 Thailand's response to Panel question No. 137, referencing Section 82/5(1) and (2) of the Thai 
Revenue Code (Exhibit PHL-94). 
1165 Appellate Body Report, Korea – Various Measures on Beef , para. 146. 
1166 Appellate Body Report, Korea – Various Measures on Beef , para. 146. 
1167 Thailand's response to Panel question No. 135. WT/DS371/R 
Page 284  
 
  7.639  Thailand contends that there is no risk of unde rpayment of tax for domestic cigarettes resale 
as TTM is a government entity responsible for all ta xes on the cigarettes they sell.  As a practical 
matter, a state owned cigarette manufacturer will al ways pay its taxes, since its revenues ultimately 
rest in the government accounts.
1168 
7.640  Further, smuggling of cigarettes is a signifi cant problem in Thailand with some estimates 
showing that consumption of contra band imported cigarettes is three tim es larger than consumption of  
legally imported cigarettes.1169  Since imported brands may enter the market illegally, less VAT may 
be paid on the resale of those imported cigarettes overall.1170  There is no equivale nt risk of smuggling 
VAT free domestic cigarettes because VAT for domestic  cigarettes is acquitted by the sole domestic 
manufacturer.1171  Furthermore, TTM monitors Thailand's public health objectives, but has no bearing 
on such objectives in exporting countries.1172   
7.641  The Philippines  argues that under WTO law, a Member's justification for subjecting 
imported goods to discriminatory taxation must be  assessed under the specifi c exceptions listed in 
Article XX of the GATT 1994.1173  The respondent, Thailand in this case, bears the burden of proving 
that its measures are justified pursuant to one of those exceptions.  Thailand has, however, elected not 
to advance its arguments under Article XX.   
(ii) Analysis by the Panel 
7.642  We note that the applicability of the first sen tence of Article III:2 is not conditional upon the 
policy purposes of the tax measures at issue.1174  Article XX of the GATT 1994 exists to cover certain 
public policy exceptions including measures necessar y to secure compliance with domestic law.  
However, Thailand has not raised Article XX in th is dispute for us to assess the policy goals that 
would be achieved by the VAT exemption under the Thai law. 
7.643  In our view, therefore, Thailand's ju stifications as cited above for its de jure  VAT exemption 
for domestic cigarette resellers do not bear on the deci sion of the Panel that such an exemption results 
in imposing a VAT on imported cigarettes in excess of that on domestic cigarettes in violation of Article III:2, first sentence. 
(d) Conclusion 
7.644  For the foregoing reasons, we conclude that th e measures at issue subject imported cigarettes 
to excess taxation compared to like domestic cigarett es in violation of Article III:2, first sentence, of 
the GATT 1994.  Under the relevant provisions of Th ai laws and regulations, resellers of domestic 
cigarettes are de jure  exempt from the VAT liability, whereas th e same exemption is not granted to 
resellers of imported cigarettes as tax credits do not automatically and irrevocably offset tax liabilities 
incurred by retailers of imported cigarettes in every case.   
                                                     
 
1168 Thailand's first written submission, paras. 21-30; response to Panel question No. 61. 
1169 Thailand's first written submission, para. 29; Exhibit THA-1, p. 26.  
1170 Thailand's first written submission, paras. 21-30 and 254-255; response to Panel question No. 61. 
1171 Thailand's first written submission, para. 24. 
1172 Thailand's first written submission, paras. 21, 25, 27 and 30; response to Panel question No. 61. 
1173 Philippines' comments on Thailand's response to Panel question No. 135 and to the Philippines' 
question No. 1. 
1174 Panel Report, US – Superfund , para. 5.2.4, Panel Report, EEC – Parts and Components , para. 5.6; 
Panel Report, Argentina – Hides and Leather , paras. 11.143-11.144.  WT/DS371/R 
 Page 285 
 
 
  F. ARTICLE  III:4  OF THE GATT 1994  – VAT  EXEMPTION FOR RESELLERS OF DOMESTIC 
CIGARETTES  
1. Introduction 
7.645  The Philippines claims that Thailand violates Article III:4 of the GATT 1994 because its 
VAT system accords less favourable treatment to imported cigarettes by imposing more onerous 
administrative requirements on resellers of imported cigarettes than on resellers of domestic 
cigarettes.  Thailand argues that resellers of both imported and domestic cigarettes are subject to the 
same regulatory treatment and that  the minor difference that exists in relation to the VAT reporting 
requirements does not modify the conditions of competition for imported cigarettes in the Thai 
market. 
7.646  Article III:4 of the GATT 1994 provides:  
"The products of the territory of any contr acting party imported into the territory of 
any other contracting party shall be accord ed treatment no less favourable than that 
accorded to like products of national origin  in respect of all laws, regulations and 
requirements affecting their internal sale, offering for sale, purchase, transportation, 
distribution or use. ... " 
7.647  The Appellate Body clarified that three requireme nts must be satisfied to establish a violation 
of Article III:4: (i) the imported and domestic product s at issue are "like products"; (ii) the measure at 
issue is a "law, regulation, or requirement affecting their internal sale, offering for sale, purchase, transportation, distribution, or use"; and (iii) the imported products are accorded "less favourable" 
treatment than that accorded  to like domestic products.
1175   
7.648  We will examine the Philippines' claim under Ar ticle III:4 on the basis of the three elements 
identified above. 
2. Measures at issue 
7.649  In its request for the establishment of a panel,  the Philippines identified the following as the 
relevant measures in connection with Thailand' s VAT-related administrative requirements for 
wholesale and retail sellers of cigarettes: 
• Sections 81 and 82/7 of the Thai Revenue Code; 
 
• Royal Decree issued under the Revenue Code Governing Exemption from Value 
Added Tax (No. 239) B.E. 2534 (1991);  
 
• Order of Revenue Depa rtment Por 85/2542; and 
 
• any amendments, implementing measures, or other related measures. 
 7.650  The Philippines claims that these Thai regulati ons are as such in violation of Article III:4.
1176 
                                                      
1175 Appellate Body Report, Korea – Various Measures on  Beef , para. 133. 
1176 Philippines' first written submission, para. 553. WT/DS371/R 
Page 286  
 
  3. Description of the measures at issue 
7.651  Chapter IV (Value Added Tax) of the Thai Revenue Code provides for the administrative 
requirements that businesses subject to VAT must comply with.  Specifically, Divisions 7-14 of 
Chapter IV include  provisions concerning the filing of VAT tax returns and invoices and describe the 
auditing and sanctioning procedures in case of non-co mpliance with the requirements.  The specific 
obligations included in Chapter IV are as follows: 
7.652  VAT registrants
1177 must obtain, complete, and file the VAT Filing Form (VAT Form, 
Por.Por.30).  Division 7, Section 83 of the Thai Revenue Code states that the form must be sent 
monthly "whether or not goods are sold or services are provided in the tax month", and must be filed 
locally at each place of business unless the Director-G eneral has authorized joint filing with the 
central authority1178; this same form is also used to obtain a VAT credit1179, provided the credit is 
claimed at the time of filing the VAT form.  Otherwis e, an additional form (Kor. 10) would have to be 
filed for tax credit purposes.1180  
7.653  VAT registrants must prepare, for every resale, a detailed tax invoice1181, which must be 
delivered to the purchaser of the good.  A copy thereo f must be kept for a period of no less than five 
years from the date of filing of returns or preparing the records.1182  
                                                      
1177 Exhibit PHL-94,  Chapter IV, Division 1, Section 77/1 defines "registrants" as "a supplier who has 
been recorded for value added tax registration under Section 85 or 85/1 or for temporary tax registration under 
Section 85/3". The same section defines "supplier" as "a person who sells goods or provides a commercial 
service whether in doing so he receives any benefit or co nsideration". Sections 85 a nd 85/1 explain that persons 
commencing or carrying on a business of selling goods or providing a commercial service in Thailand are 
required to register for VAT purposes.  Exhibit PHL-94 ("Thai Revenue Code, B.E. 2481 (1938)"). 
1178 Exhibit PHL-94,  Chapter IV, Division 7, Section 83. 
1179 Exhibit PHL-94,  Chapter IV, Division 8, Section 84 to 84/4 sets out the requirements to claim tax 
credits and VAT refunds: 
 "A registrant shall have the right to apply tax credit resulting from the computation of tax 
under Section 82/3 in each tax month for paymen t of value added tax according to the rules, 
procedures or conditions prescribed by a Royal D ecree, or to claim for a refund at the time of 
filling a tax return for the tax month under Section 83 or 83/1, except in the cases where a 
supplementary tax return is filed because of  an incorrect or inadequate filling under 
Section 83/4, a refund may be claimed at the time of filing such a supplementary tax return." 
 
1180 Exhibit THA-89.  
1181 Exhibit PHL-94,  Chapter IV, Division 10, Section 86/4: 
 
"Subject to Section 86/5 and 86/6, a tax invoice shall contain at least the following particulars: (1) the word, "Tax invoice" , in a conspicuous spot, 
(2) name, address and tax-payer identification, number of the registrant issuing a tax invoice, ... 
(3) name, address of the purchaser of th e goods and the recipient of services, 
(4) serial number of the tax in voice, and of the pad, if any, 
(5) name, type, category, quantity, and value of the g oods and services, which shall be clearly separated 
from such a value, (7) date of issuance of the tax invoice, 
(8) Any other information specified by the Director-General." 
 Division 10, Section 86/5 of the Thai Revenue Code  states that the Direct or-General may "vary the 
particulars in respect of [tax invoices for imported tobacco]".  Division 10, Section 86/6 of the Thai 
Revenue Code reserves the possibility that the Dir ector-General authorize VAT registrants selling by 
retail to a large number of customers to file only a summary tax invoice. 
  WT/DS371/R 
 Page 287 
 
 
  7.654  VAT registrants must prepare tax records:1183 a tax input record (recording VAT amounts 
which a registrant pays when purchasing goods or  acquiring services in the course of his business) 
and a tax output record (recording VAT amounts a registrant collects/is liable to collect from a purchaser of goods or a recipient of services); a goods and raw materials record (required only from 
VAT registrant selling goods).  In addition, Division 11, Section 87/1 of the Thai Revenue Code states 
that the Director-General may require that a "registr ant prepare records other than or at variance with" 
the documents hereinabove, where necessary or approp riate.  Those records mu st be maintained for a 
period of at least 5 years from the filing.
1184 
7.655  VAT registrants may be subject to audit pro cedures.  The powers of the assessment officer 
include both asking the administered to "do any act as necessary for the examination of the various 
pertinent documents", and "seizing those documents for examination".1185  
7.656  VAT registrants may be subject to  penalties, criminal sanctions, su rcharges, and/or denial of a 
VAT credit in the event of non-compliance with the provisions of Chapter IV of the Thai Revenue 
Code.1186  
7.657  Unless specifically exempted under the relevant Thai law, businesses selling any good liable 
to VAT are required to comply with the VAT-related administrative requirements.  
7.658   Neither party disputes that the measure at issue – Chapter IV of the Thai Revenue Code -  is 
a "law, regulation, or requirement" within the meaning of Article III:4. 
4. Like product analysis  
(a) Main arguments of the parties 
7.659  The Philippines  submits that the distinction drawn by Thailand with respect to the 
VAT-related administrative requirements are ba sed purely on the origin of the cigarettes.1187  T h e  
Philippines relies on the principle established in Argentina – Hides and Leather  that where domestic 
legislation draws distinctions between products pu rely on the basis of national origin, it is not 
incumbent on the complainant to compare specific products or to address the criteria relevant to 
determining likeness.1188  The Philippines notes that the distinc tion is evidenced in section 2 of the 
Order of the Revenue Department where it refe rs expressly to imported tobacco and cigarettes1189 and 
                                                                                                                                                                     
1182 Exhibit PHL-94, Chapter IV, Division 10, Section 86.  
1183 Exhibit PHL-94,  Chapter IV, Division 11, Section 87.  
1184 Exhibit PHL-94,  Chapter IV, Division 11, Section 87/1.  
1185 Exhibit PHL-94,  Chapter IV, Division 12, Sections 88-88/6 enumerates the powers of the 
assessment officer.  The list includes th e power to conduct periodic tax audits  if doubts exist as to the accuracy 
of the information declared  in Form Por.Por.30.  
1186 Exhibit PHL-94,  Chapter IV, Division 13 and 14, Sections 89-90/5. 
1187 Philippines' first written submission, para. 544. 
1188 Philippines' first written submission, pa ras. 543 and 550, citing Panel Report, Argentina – Hides 
and Leather , para. 11.168. 
1189 Order of the Revenue Department No.Po.85/2542 Re Computation of Tax Base for Importation and 
Sale of Tobacco According to Category and Type Prescribed by Director-General and Approved by Minister 
Under Section 79/5 of Revenue Code, and Preparation of Tax Invoice in Case of Sale of Tobacco Under 
Section 86/5/2) of Revenue Code. Section 2 of the Order of the Revenue Department states: 
 
"In case the registered operator has sold tobacco  imported from abroad to a buyer, irrespective 
of whether it be the registered operator who imports the tobacco himself or the registered operator who buys same from the importer or the sellers of every level, the tax base of the 
value added tax shall be computed." WT/DS371/R 
Page 288  
 
  Section 7 of the Order where it refers to cigarettes "from the tobacco industrial operator that is a State 
organization".
1190 
7.660  Thailand did not provide any countera rgument in this regard. 
(b) Analysis by the Panel 
7.661  As the Philippines submits, in previous disputes, products that are distinguished solely on the 
basis of their origin were found to be "like"  products within the meaning of Article III:4.1191  As we 
concluded above1192, the Thai measures at issue do disti nguish between cigarettes based on their 
origin.  In the light of this and i n the absence of any counterarguments from Thailand, the Panel 
concludes that imported and domes tic cigarettes are like products. 
7.662  Furthermore, we also recall our finding above that Marlboro and L&M cigarettes at issue are 
like the domestic cigarettes within the same price se gments under Article III:2, first sentence, of the 
GATT.  The Appellate Body clarified that the scope of "like" in Article III:4 is broader than that in the 
first sentence of Article III:2.1193  Accordingly, to the extent that the imported and domestic products 
compared are found "like" within the meaning of the first sentence of Article III:2, they can also be 
deemed to meet the likeness requirement unde r Article III:4.  Therefore, we find that Marlboro and 
L&M are "like" domestic cigarettes within the meaning of Article III:4.  
5. "Affecting the internal sale, offering for sa le, purchase, transportation, distribution or 
use of imported cigarettes"  
(a) Main arguments of the parties 
7.663  The Philippines  refers to the statement by the Appellate Body in US – FSC (Article 21.5)  that 
the term “affecting” is to be interpreted so as to ha ve a “broad scope of application" and to the finding 
of the Panel in  India – Autos , which stated that the term "affecti ng" covers any laws  or regulations 
"which might adversely modify the conditions  of competition between domestic and imported 
products".1194  Thailand did not respond to the Philippines' argument in this regard. 
(b) Analysis by the Panel 
7.664  The second element under Article III:4 concerns whether the VAT requirements imposed on 
imported cigarettes which are laws, regulations or requirements under Article III:4 are "affecting the 
internal sale, offering for sale, purchase, transporta tion, distribution, or use of" imported cigarettes.  
                                                      
 
1190 According to Section No.7 of the Order of the Revenue Department: 
 
"The registered operator who buys cigarett e and receives a tax invoice from the tobacco 
industrial operator that is a State's organization under No.6, when selling cigarette, shall be exempted from the value added tax under Section 81(1)(v) of the Revenue Code. Likewise, it 
needs not prepare tax invoice and shall have no right to collect value added tax from the buyer 
thereof."  
1191 See, for example, Panel Report, Canada – Wheat Exports and Grain Imports , para, 6.164; Panel 
Report, China – Publications and Audiovisual Products , para. 7.1446. 
1192 See Section VII.D.3 above. 
1193 Appellate Body Report, EC – Asbestos , para. 99. 
1194 Philippines' first written submission, para. 551, referring to Appellate Body Report, US – FSC 
(Article 21.5) , para. 210  and Panel Report, India – Autos , para. 7.196; second written submission, 
paras. 477-479, referring to Panel Report, India – Autos , para. 7.196.  WT/DS371/R 
 Page 289 
 
 
  We recall that the word "affecting" is understood to  mean "to have an effect on, which indicates a 
broad scope of application".1195  The Appellate Body also stated that "the word 'affecting' assists in 
defining the types of measure that must conform to the obligation not to accord 'less favourable 
treatment' to like imported products, which is set out in Article III:4.  The word 'affecting' ... does not, 
in itself, impose any obligation ...".1196  The Panel in Dominican Republic – Import and Sale of 
Cigarettes also found that a tax stamp imposed on th e sale of imported cigarettes qualified as a 
measure affecting the sale of the cigarettes.1197   
7.665  In the light of the term "affecting" as underst ood by the Appellate Body  and previous panels 
and given the absence of any objection from Thailand,  we find that the Thai regulations at issue, 
which concern the VAT-related administrative requi rements, can be considered as affecting the 
internal sale of imported cigarettes within the meaning of Article III:4.   
6. "Less favourable treatment" 
7.666  As regards the "less favourable treatment" require ment in Article III:4, the Appellate Body 
states: 
"A formal difference in treatment between  imported and like domestic products is 
thus neither necessary, nor sufficient, to show a violation of Article III:4.  Whether or 
not imported products are treated 'less fa vourably' than like domestic products should 
be assessed instead by examining whether a measure modifies the conditions of 
competition in the relevant market to the detriment of imported products."1198 
7.667  In addressing the question of whether the imported cigarettes are subject to treatment less 
favourable than the like domestic cigarettes, theref ore, we will examine the following three issues: (i) 
whether the Thai regulations at issue impose an ex tra-administrative burden on resellers of imported 
cigarettes; (ii) whether this alleged extra-burden,  if found to exist, has any negative impact on the 
competitive conditions for imported cigarettes in the Thai market, and; (iii) whether Thailand 
demonstrated that this alleged modification of th e competitive conditions coul d still be justified under 
Article III:4. 
(a) Whether an additional administrative burden is  imposed on resellers of imported cigarettes 
(i) Main argument of the parties 
7.668  The parties disagree on the existence of an a lleged additional admini strative burden imposed 
on the resellers of imported cigarettes.  The Philippines argues that Thailand violates Article III:4 on 
the grounds that only resellers of imported cigare ttes are subject to the VAT-related administrative 
requirements.1199  Thailand  submits that the Philippines ignores that wholesalers and retailers of 
imported and domestic cigarettes are all subject to equivalent treat ment.  In Thailand's view, the 
minor differences of treatment existing under Thai law do not amount to unequal treatment.1200 
Thailand further argues that the Philippines has not  provided any actual evidence of the forms or 
records required to be maintained by sellers of im ported cigarettes other than lawyers' statements 
describing the administrative requirements of Thai law.1201  According to Thailand, without any direct 
                                                      
1195 Appellate Body Report, EC – Bananas III , para. 220. 
1196 Appellate Body Report, US – FSC (Article 21.5 – EC) , paras. 208-210. 
1197 Panel Report, Dominican Republic – Import and Sale of Cigarettes , paras. 7.170 and 7.171. 
1198 Appellate Body Report, Korea – Various Measures on Beef , para. 137. 
1199 Philippines' first written submission, paras. 553 and 555; Philippines' response to Panel question 
No. 59; Philippines' second oral statement, para. 101. 
1200 Thailand's first written submission, paras. 250-251; second written submission para. 169. 
1201 Thailand's second oral  statement, para. 65. WT/DS371/R 
Page 290  
 
  evidence regarding the administrative burdens allege d by the Philippines, the Panel cannot evaluate 
whether these alleged burdens constitute less favourable treatment under Article III.4.
1202  
VAT Form Por.Por.30  
7.669  The Philippines  submits that Section 81/2 of the Thai Revenue Code exempts VAT 
registrants from complying with all VAT administrative requirements in connection with the resales 
of VAT-exempt goods and services, and it underlines that only sales of imported cigarettes are subject 
to the obligation to file Form Por.Por.30.1203  Resellers are spared the burden of completing and filing 
the said form if they carry only domestic cigarett es.  Even if a supplier carries both imported and 
domestic cigarettes, such a supplier does not report sales of domestic cigarettes in Form Por.Por.30.
1204  In support of its position, the Philippines has presented expert testimony on Thai 
law1205 and a 2002 DG Revenue's ruling on the requirement to file Form Por.Por.30.1206  Filing Form 
Por.Por.30 is all the more burdensome because one fo rm must be completed for each individual place 
of business operation.   
7.670  Thailand  explains that the legal obligation to f ile Form Por.Por.30 arises under Section 83, 
paragraph 1 of the Thai Revenue Code and Notifi cation No. 65 re: Prescription of VAT Forms, dated 
22 November BE2538 (1995) ("Notification No. 65").1207  Thailand argues that in accordance with the 
instructions for Form Por.Por.30, all VAT regi strants (i.e. entities with sales of more than 
1.8 million baht) are required to file Form Por.Por.30.1208 
7.671  Thailand further submits that sales of both im ported and domestic cigare ttes must be reflected 
on Form Por.Por.30 – the sales of domestic cigarette s (as all other VAT exempted goods) both under 
line 1 ("sales amount this month") and 3 ("exempted sales"), and the sale of imported cigarettes under 
line 1 only.1209  Thailand also presented an excerpt from the textbook on the Thai Revenue Code as 
well as a 1995 DG Revenue ruling to support its position.1210  Therefore, the compliance burden 
associated with the filing of Form Por.Por.30 is very similar for both imported and domestic cigarette resellers.  The  requirement to file Form Por.Por. 30 depends on the entity's total sales, not on whether 
it sells imported and domestic cigarettes.
1211  As an example, Thailand submitted samples of Form 
Por.Por.30 filed by TTM and by a convenience stor e that sells both imported and domestic cigarettes 
as well as other products.1212  According to Thailand, these forms show amounts for both VAT and 
VAT-exempt sales. In response to the 2002 DG Re venue filing put forward by the Philippines1213, 
Thailand explains that regarding certain advocacy services the ruling stated, correctly, that income 
from such services is exempt from VAT and is, th erefore, not included in the calculation of the 
company's VAT liability.  However, the ruling does not go on to say that this VAT-exempt sales need 
not be reported as VAT-exempt sales on line 3 of Form Por.Por.30. In fact, the portion of the ruling 
                                                      
1202 Thailand's second written submission, para. 176. 
1203 Philippines' first written submission, para. 525; re sponse to Panel question No. 59; second written 
submission, paras. 467-468; second oral statement, para. 102. 
1204 Philippines' first written submission, para. 5 54-555; second oral statement, para. 102. 
1205 Exhibits PHL-207 and PHL-254. 
1206 Exhibit PHL-253. 
1207 Thailand's response to Panel question No. 142(1); Exhibit PHL-94. Section 83, paragraph 1 of the 
Thai Revenue Code provides that "a VAT registrant shall file taxes using the form prescribed by the Director General."  Thailand submits that pursuant to this au thority, the Director General issues the above-mentioned 
Notification. 
1208 Thailand's second oral statem ent, para. 66; response to Panel question Nos. 62 and 142. 
1209 Thailand's response to Panel question No. 51.  
1210 Thailand's response to Panel question No. 142(1); Exhibit THA-95, para. 1. 
1211 Thailand's second oral  statement, para. 66. 
1212 Exhibit THA-89. 
1213 Exhibit PHL-253.  WT/DS371/R 
 Page 291 
 
 
  titled "Ruling" makes no reference whatsoever to Form Por.Por.30.  Thailand therefore does not 
understand how this ruling can be construed to su pport the proposition that VAT-exempt sales need 
not be reported on the line on Form Por.Por.30 for "exempted sales".1214 
Tax invoices and other record-keeping requirements  
7.672  The Philippines  submits that VAT registrants reselli ng imported cigarettes are required to 
prepare and maintain a detailed tax invoice and a copy  thereof for every resale.  Under Section 3(1) of 
Revenue Order No. Por. 85/2542, the tax invoice to  be drafted when reselling imported tobacco is 
even more detailed  than the standard one provided for under Chapter IV, Division 10 of the Thai 
Revenue Code.1215  The additional complexity stems from the use of MRSP as the VAT base 
applicable to imported cigarettes pursuant to  Section 79/5 of the Thai Revenue Code.1216  More 
information is required to calculate the MRSP price in  the first place.  Therefore, the administrative 
burden on the reseller of imported ci garettes is higher than the one resellers of domestic cigarettes 
have to bear. 
7.673  Thailand responds that reporting procedures applying to resellers of domestic cigarettes 
mirror the ones that resellers of imported cigare ttes must comply with.  Resellers of domestic 
cigarettes must provide a receipt to the purchaser.1217  Resellers of imported cigarettes must provide a 
receipt and a tax invoice to the purchaser (which must be filed by all VAT registrants), but both may 
be filed on the same form.1218 Moreover, Revenue Department 's Instruction No.Paw.86/25421219 states 
that sales receipts may serve as tax invoices, ther eby avoiding duplication of requirements under the 
Accounting Acts and the Revenue C ode.  Thailand therefore considers that resellers of domestic 
cigarettes and resellers of imported cigarettes face a similar administ rative burden with regard to tax 
invoices.1220 
Income tax reports, input/output reports, goods and raw material r ecords, alternative records, 
and books and records for accounting purposes  
7.674  The Philippines  relies on an expert's opinion to argue that individual resellers of domestic 
cigarettes are exempt from income tax.1221  It takes the view that th e income from such sales does not 
qualify as "assessable income" under the Ministerial Declaration No.126.1222  As a consequence, 
                                                      
1214 Thailand's response to Panel question No. 142(2). 
1215 Philippines' second written submi ssion, para. 474; Exhibit PHL-95. 
1216 Exhibit PHL-207, p. 4. 
1217 Exhibit PHL-94, Section 105, 105 bis and 105 ter.  
1218 Thailand's first written submission, para. 251, re ferring to Exhibit PHL-94, Sections 86/5(2) 105, 
105bis, 105 ter, and Exhibit PHL-95. 
1219 Exhibit THA-90. Clause 6 of the Departmental Instruction No.Paw.86/2542 states: 
 "The registrant under Clause 4 may prepare tax invoices together with other commercial 
documents such as receipts, invoices or deb it notes, which are comprised of many documents 
in the same set."  
1220 Thailand's second oral  statement, para. 67. 
1221 Philippines' second oral statement, para. 104; comments on Thailand's response to Philippines' 
question No. 2. 
1222 Exhibit PHL-254, p. 3; Exhibit PHL-94. The Philippines states that income earned from the sale of 
domestic cigarettes is not "assessable" income under Section 42(17) of the Thai Revenue Code, which reads: 
 
"Section 42. The assessable income of the following description shall be excluded for the 
purpose of computing income tax: (17) Income specified for exemption by Ministerial Regulations (See M.R. No.126,230 and 254)." 
 WT/DS371/R 
Page 292  
 
  resellers of domestic cigarettes do not have to fill out and maintain either revenue/expense reports or 
books and records for accounting purposes.
1223 If the Panel does not find the exemption from income 
tax, the Philippines' subsidiary argument is that  the reports required fro m resellers of imported 
cigarettes (input/output, raw materials) are more " onerous" than the revenue /expense reports required 
from resellers of imported cigarettes.1224   
7.675  The Philippines underlines that resellers of impor ted cigarettes, who are liable to VAT, have 
to maintain books and records for VAT a uditing purposes, and tax input/output records.1225  As stated 
above, resellers of domestic cigarettes are exempt from this requirement.  The Philippines therefore 
concludes that a heavier administrative burden is  imposed on resellers of imported cigarettes.  
7.676  Thailand  submits that no one may be exempt from the obligation to fill tax input/output 
reports.1226  It stresses that reports required from resellers of imported cigarettes are "virtually 
identical"1227 to revenue/expenses reports that resellers of domestic cigarettes must provide under 
Section 17(1) of the Revenue Code1228 and Revenue's DG Notification No. 161 on Income Tax.  The 
only discrepancy lies in the fact that input/output tax report must include the registrant's amount of 
VAT payable and tax invoice number.1229   
7.677  In relation to books and records to be ma intained for accounting and auditing purposes, 
Thailand alleges that they are identical, whether one is subject to VAT or to income tax.  In both 
cases, books and records consist of the sale journa ls and ledgers, purchase records, and other normal 
accounting records maintained by most commercia l businesses in most countries that rely on 
generally-accepted accounting principles.1230  In addition, Thailand stresses that many businesses 
resort to software programs which automatically prepare income tax and VAT reports and may 
                                                                                                                                                                     
Article 2(19) of the Ministeria l Regulation No.126 provides: 
 
"Clause 2. The following income shall be income under (17) of Section 42 of the Revenue 
Code as amended by the Revenue Code Amendm ent Act (No.10) BE. 2496: (19) Income from 
sale of tobacco products on which the Thai Tob acco Monopoly has paid taxes for all stages of 
the sellers under Section 48 bis of the Revenue Code." 
 
1223 Philippines' first written submission, para. 52 5, referring to Exhibit PHL-94, Section 87. 
1224 Exhibit PHL-182, footnote 2.  
1225 Exhibit PHL-182, para. 15.1. According to the Philippines:  
 
"[b]ecause the resale by subsequent sellers of  cigarettes purchased fr om the Thai Tobacco 
Monopoly (TTM) are exempted from VAT (Section 81(v) of the Revenue Code, in 
conjunction with Section 3(1) of the Royal Decree No.239), such seller is outside the scope of 
the VAT provisions. Such seller would only be required to comply with VAT reporting and book-keeping requirements if they sold goods other than domestic cigarettes." 
 
1226 Thailand's second written submission, para. 175. 
1227 Thailand's second written submission, para. 175. 
1228 Exhibit PHL-94. Section 17(1) esta blishes that individual sellers must maintain revenue/expenses 
report:  
 
"For the purpose of administration of taxes and duties: (1) The Director-General with the 
approval of the Minister shall have the power to issue a general order requiring persons to keep any special books of accoun t and to make any required entr ies therein. Such order shall 
be published in the Government Gazette." 
 
1229 Thailand's second written submission, para. 175. 
1230 Thailand's second written submission, para. 175.  WT/DS371/R 
 Page 293 
 
 
  process the related records and books as well.1231  In any case, Thailand considers that the Philippines 
has failed to demonstrate how the books and records to be maintained respectively by resellers of 
imported and domestic cigarettes va ry.  Hence no evidence was brought to show that a greater 
administrative burden is imposed on resellers of imported cigarettes. 
Preparation and maintenance of documents for auditing  
7.678  The Philippines argues that VAT registrants re-selling imported cigarettes are subjected to an 
auditing requirement that resellers of domestic cigarettes are not subject to.1232   
7.679  Comparing the reporting requirements for domestic and imported cigarettes, Thailand 
submits that both obligations are the same: "sellers are subject to audit".1233   
Consequences of failure to comply with the administrative requirements  
7.680  The Philippines puts forward that, should resellers of imported cigarettes fail to comply with 
the administrative requireme nts refered to hereinabove1234, high penalties, fines and surcharges will be 
imposed.1235  In the same vein, the failure to claim a VAT credit at the time of the Por.Por.30 filing 
results in additional requirements for resellers of im ported cigarettes: a supplementary form then has 
to be filed.  On the contrary, resellers of domestic  cigarettes are exempt from such penalties, fines and 
surcharges because they are not subject to VAT.  The risk of sanction associated to the VAT 
administrative requirements constitutes a burden wh ich is imposed only on resellers of imported 
cigarettes.1236 
7.681  In Thailand's view it is not clear why a difference in penalties between VAT registrants and 
non-VAT registrants would constitute excess taxation within the meaning of Article III:4 and therefore give rise to a violation of this article. Thailand argues that the penalties imposed for failure 
to comply with VAT related administrative requi rements cannot be qualified as "internal taxes or 
other internal charges" within the meaning of Article III:2, as they are only an administrative 
penalties.
1237  Furthermore Thailand contends that those penalties are applied to all VAT registrants, 
not to resellers of imported cigarettes only.1238  
7.682  In the same line of argument, Thailand explains  that the penalties are both gradual (the later 
one pays, the higher the amount) and flexible (fines may be reduced or waived by the Director 
General with the approval of the Minister of Finance).1239   
(ii) Analysis by the Panel 
7.683  In this section, we must determine whether Thailand's VAT-related requirements impose an 
additional administrative burden on resellers of impor ted cigarettes compared to resellers of domestic 
cigarettes.  We will examine whether each administra tive requirement as referred to by the parties as 
relevant to cigarette sales, separately and/or as a whole, impose an additional administrative burden 
on the resellers of imported cigarettes.  
                                                      
1231 Thailand's second written submission, para. 175. 
1232 Philippines' second written submission, para. 467; comments on Thailand's response to Philippines' 
question No. 2; Exhibit PHL-94. 
1233 Thailand's first written submission, para. 251. 
1234 Paras. 7.669-7.679. 
1235 Philippines' response to Panel question No. 59. 
1236 Philippines' response to Panel question No. 59. 
1237 Thailand's second written submission, para. 174. 
1238 Thailand response to Panel question No. 139. 
1239 Thailand's second written submission, para. 175. Exhibit PHL-94, Section 89, para. 2. WT/DS371/R 
Page 294  
 
  VAT form Por.Por.30
 
7.684  The main contention between the parties regardi ng the administrative requirements relating to 
the filing of a VAT return form (Form Por.Por.30)  concerns the scope of businesses subject to the 
requirement to submit the form and whether sales of do mestic cigarettes must be  reported in the form.  
Given that the issue here concerns obligations under Thailand's own domestic  law, Thailand should 
normally be in a position to explain the nature of such obligations.1240  However, to the extent that the 
parties disagree on the interpretation of relevant provisions, we are required to objectively examine 
the question at issue based on the text of the con cerned provision[s] as well as on the evidence before 
us.1241 
7.685  As Thailand has explained, paragraph 1 of S ection 83 of the Thai Revenue Code, read in 
conjunction with Notification No. 65, is the legal au thority that gives rise to the obligation to file 
Form Por.Por.30.  Paragraph 1 of Section 83 provides: 
"Every registrant  shall file a tax return in the form  prescribed by the Director-General 
every tax month and pay tax, if any, at the same time, whether or not goods are sold or services are provided in the tax month."
1242   
7.686  The text of paragraph 1 of Section 83 clearly indicates that it is "every [VAT] registrant" who 
has the obligation to file a tax return in Form Por. Por.30.  We do not see any language in the provision 
that limits the obligation to specific types of goods.  Therefore, the obligation to file a tax return 
applies to all VAT registrants regardless of the type of goods sold and/or services provided.   
7.687  "Registrant" is defined in Section 77/1(6) as "a supplier who has been recorded for value 
added tax registration under Section 85 or 85/1 or  for temporary value added tax registration under 
Section 85/3".  Section 85 of Division 9 (Value  Added Tax Registration) in turn provides: 
"Section 85. A supplier about to comme nce a business of selling goods or 
providing services shall file an application fo r value added tax registration before the 
date of commencing business." 
7.688  Therefore, any supplier who wishes to comme nce a business of selling goods is required to 
apply for VAT registration under Se ction 85 regardless of the kind of goods it carries.  In this 
connection, however, Section 81/2 provides as follows: 
                                                      
1240 Panel Report, EC – Trademarks and Geographical Indications (Australia) , para. 7.106; Panel 
Report, US – Section 301 Trade Act , paras. 7.17-7.20 stating "It follows that in making factual findings 
concerning the meaning of Sections 301-310 [ of the US Trade Act of 1 974], we are not bound to accept the 
interpretation presented by the US. That said, any Member can reasonably expect that considerable deference be 
given to its views on the meaning of its own law". 
1241 Article 11 of the DSU. Appellate Body Report, Dominican Republic – Import and Sale of 
Cigarettes , paras. 110-115; As the Panel on Columbia – Ports of Entry  noted (at para.7.93): 
 
"In making an 'objective assessment' of municipal legislation, a panel should begin its 
analysis by considering the very terms of the law. This examination should also include a reading of the provisions in their proper cont ext. A panel is not however required to limit 
its examination solely to the text or wording of the norm under review.  A panel's analysis 
should be complemented, whenever necessary, with additional sources, which may include proof of the consistent application of such laws, the pronouncements of domestic courts of 
the meaning of such laws, the opinions of legal experts and the writings of recognized 
scholars"  
1242 Exhibit PHL-94, Section 83 (emphasis added, footnote in original omitted).  WT/DS371/R 
 Page 295 
 
 
  "Section 81/2. If a business is exempt from value added tax under the provisions of 
this Division or of any other law, the supplier carrying on such business shall be 
exempted from compliance with the provisions of this Chapter , ..." (emphasis added) 
7.689  Section 81/2 therefore provides VAT-exempt businesses1243 under Division 5 with total 
exemption from compliance with the obligations unde r Chapter IV (Value Added Tax) of the Thai 
Revenue Code.  In the light of the language "exe mpted from compliance with the provisions of this 
Chapter", we consider that the scope of exempti on under Section 81/2 extends to all obligations under 
Chapter IV, including the requirement to apply for VAT registration before the date of commencing 
business under Section 85.  Therefore, if a business is qualified for exemption from VAT under 
Division 5, then such a business is also exempt from the requirement to become a VAT-registrant 
before commencing its business.   
7.690  In this connection, we recall that certain busin esses, including domestic cigarette resellers, are 
exempt from VAT under Division 5 of the Thai Re venue Code.  The above-m entioned provisions of 
the Thai Revenue Code, read together, indicat e that a supplier falling within the scope of 
VAT-exemption under Section 81 will be exempt fro m the obligation to apply for VAT registration 
before commencing its business if that supplier d ecides to carry only the VAT-exempt goods and/or 
services exclusive of other VAT-liable goods and/or services.  In our view, however, once a supplier 
becomes a VAT registrant in accordance with Secti on 85 of the Thai Revenue Code, the obligation 
under Section 83 to file a VAT tax return in Form  Por.Por.30 will remain regardless of the goods 
and/or services the supplier subsequently carries an d/or provides unless the supplier can qualify for 
withdrawal of VAT registration under Section 85/10(3).   
7.691  With the above understanding of the relevant pr ovisions of the Thai Revenue Code in mind, 
we will now consider the parties' speci fic arguments on Form Por.Por.30.   
7.692  The Philippines' position has been that sales of domestic cigarettes do not need to be reported 
in Form Por.Por.30 because they are exempt from VAT.1244  Thailand insists that, regardless of the 
VAT exemption, sales of both imported and domestic cigarettes must be reflected on Form 
Por.Por.30.   
7.693  Our examination of the Thai Revenue Code s hows that under Section 83, paragraph 1 of the 
Thai Revenue Code, the obligatio n to file Form Por.Por.30 hi nges on the supplier's status as a 
VAT-registrant, not the specific type of goods.  The introductory statement contained in "the 
instructions for filling in and the filing of Por.Por.30 " attached to Form Por.Por.30 also confirms this 
understanding.  It states that "[p]ersons required to file  Por.Por.30 – Por.Por.30 is a tax return to file 
particulars on a monthly basis for VAT registrant who is subject to calculate tax by offsetting Output 
                                                      
1243 Businesses exempted from VAT under Division 5 are categorized into two types – (i) specific 
transactions and import of certain goods and export of certain goods and provision of services as listed in 
Section 81 and (ii) small businesses (i.e. businesses wi th sales of more than 1.8 million baht) pursuant to 
Section 81/1. 
1244  Philippines' second written submission, paras. 472 and 475; Exhibit PHL-94. The Philippines first 
references a combination of Section 81(1)(v) and 81/2 of the Thai Revenue Code, and Section 3(1) of Royal 
Decree No 239 to explain that resellers carrying ex clusively domestic cigarettes are exempt from all VAT 
administrative requirements. In addition, the Philippines re fers to the expert statement by Mr. Piphob Verahpong 
dated 17 July 2009 (Exhibit PHL-207, para.12) to assert that resellers carrying both domestic and imported 
cigarettes are subject to VAT administrative requirements only in relation to imported products. Domestic products are exempted of all VAT administrative requirements pursuant to Section 81/2 of the Revenue Code. 
Specifically, this expert argues that domestic cigarettes do not fall under the heading "3. exempted sales" of 
Form Por.Por.30 because this category rather refers to  the products exempted unde r Section 79 of the Revenue 
Code, read in conjunction with DG Revenue Notification Re: VAT (No 40), which do not mention domestic 
cigarettes. WT/DS371/R 
Page 296  
 
  tax by Input tax arising in a tax month regardless of the status of the registrant be it individual, group 
of persons, ...".
1245  
7.694  Therefore, for example, there could indeed be a situation where a certain supplier decides to 
start a business carrying only domestic cigarettes or any other VAT-exempt goods and/or services 
falling within the scope of Section 81.  In such a case, we consider  that Section 81/2 renders that 
supplier exempt from the obligation to apply for VAT  registration and consequently the requirement 
to file Form Por.Por.30.  We also note that domest ic cigarette sales are not covered by Section 81/3 
either – a provision that gives supp liers carrying on exempt businesses th e right to elect to register and 
pay VAT on exempt businesses.1246  While Thailand's position has been that both imported and 
domestic cigarette sales must be re ported in Form Por.Por.30, it has never addressed a situation where 
a supplier sells only domestic cigarettes.  Similarly,  sample Por.Por.30 forms completed by resellers 
that sell both imported and domestic cigarettes, and other goods, as provided by Thailand in Exhibit 
THA-89,  do not address the situation where a reseller only carrying domestic cigarettes gets 
exempted even from the obligation to apply for VAT registration.1247  In our view, the fact that only 
resellers of domestic cigarettes can enjoy an ex emption from VAT registration and consequently are 
exempted from the obligation to file Form Por.Por. 30, subjects resellers of imported cigarettes to an 
additional administrative burden.    
7.695  We now turn to the question of whether a supplier must report income from domestic 
cigarette sales in Form Por.Por.30 when that su pplier also carries VAT-liable goods (e.g. imported 
cigarettes).  It is not disputed that the supp lier carrying both VAT-exempt and VAT-liable goods must 
register for VAT purposes under Section 85 and beco me a VAT-registrant.  This will consequently 
subject the supplier to the obligation to file Form  Por.Por.30.  The Philippi nes argues that such a 
supplier must report only the sale of goods subject to VAT in the form, but not VAT-exempt goods such as domestic cigarettes.  Thailand disagrees with the Philippines' position and submits that the 
sale of VAT-exempt items must be reported in line 3 of Form Por.Por.30. 
7.696  Form Por.Por.30 comprises of, inter alia , the following items: 
1.  Sales amount this month, or, in case of additional filing, (1.1) Under-declared sales (1.2) 
Over-declared sales 
2. Less sales subject to 0% tax rate (if any) 
3. Less exempted sales (if any) 
4. Taxable sales amount (1-2-3-) 
5. This month's output tax 
6.  Purchase amount that is entitled to a deduction of input tax from output tax in this month's tax 
computation or (6.1) Under-declared purchases (6.2) Over-declared purchase 
7.  This month's input tax (according to invoice of purchase amount in 6) 
8.  This month tax payable (if 5 is greater than 7) 
9. This month excess tax payable (if 5 is greater than 7) 
                                                      
1245 Exhibit THA-42 (emphasis added). 
1246 Section 81/3 provides that "a supplier carrying on the following exempt businesses may notify the 
Director-General in the form prescribed by the Director-General of his intention to be recorded for value added 
tax registration and to pay the tax under this Chapter by  computing tax in accordance with Section 82/3: (1) sale 
of goods specified under Section 81(1)(a) through (f); (2) a small business under Section 81/1; and (3) other businesses designated by a Royal Decree [No. 241] ...". Sale of domestic cigarettes is exempted from VAT 
under Section 81(1)(v) in conjunction with Royal Decree No. 239 and therefore not covered by  Section 81/3.  
See also Exhibit PHL-254, para. 10. 
1247 We note that sample Por.Por.30 forms have been submitted by Thailand (Exhibit THA-89) and the 
Philippines (Exhibit PHL-181).    WT/DS371/R 
 Page 297 
 
 
  10.  Excess tax payment carried forward from last month 
11.  Net Tax Payable (if 8 is greater than 10) 
12.  Net Excess Tax Payable (if 8 is greater than 10) or (9 plus 10) 
 
7.697  We first observe that line 3 "less exempted sales am ount (if any)" of Form Por.Por.30, read in 
light of the instructions to Form Por.Por.30 as al so noted above in paragraph 7.693, does not inform 
us which exempted sales must be recorded.  In other words, even  if we were to understand line 3 
"Less  exempted sales amount (if any)" as requiring that VAT exempted sales must be reported on 
Form Por.Por.30, it is still not clear to us which  exempted sales must be recorded.  The instructions 
included in Form Por.Por.30, particularly the part  stating that "a taxpayer shall fill the amount of 
exempted sales [that] were reported in the Reve nue account", do not clarify whether the sale of 
domestic cigarettes falls within the scope of the cate gory to be reported in line 3 of Form Por.Por.30.  
Neither do the sample Por.Por.30 forms completed by TTM and resellers that sell both imported and 
domestic cigarettes, and other goods, answer the question before us.1248  
7.698  In this connection, Thailand further relies on additional evidence to demonstrate that all 
exempted sales must also be reported in Form Por. Por.30.  First, Thailand relies on an excerpt from a 
Textbook on the Revenue Code , published in 2006, to explain that sales exempted from VAT should 
generally be reported, whereas sal es "not within the scope of VAT" (e.g. the sale of goods or the 
provision of services outside Thailand) need  not be reported in Form Por.Por.30.1249  A second piece 
of evidence submitted by Thailand is a 1995 DG Reve nue ruling in which it was decided that a 
company that conducts agency and shipping services is  "required to include income arising from the 
transport of goods, which is a VAT-exempt activity, in the gross sales to be shown in item 1 of Form 
Por.Por.30", and "to be listed as exempted sales under item 3 of Form Por.Por.30".1250   
7.699  On the other hand, the Philippines holds the view that businesses selling exempted domestic 
cigarettes never have to report their sales in Form Por.Por.30.1251  It relies on the expert opinion that 
the sale of VAT-exempt goods, such as domestic cigarettes, must not be reported in line 3 of Form Por.Por.30 because income from sale of VAT-exempt goods is not included either in line 1 as the 
VAT base in the monthly sale or in line 3 of the Fo rm which is reserved for the item that is deducted 
from the VAT base.  It has also submitted a DG Revenue ruling issued in 2000 which indicates that 
income from provision of VAT-exempt services need not be included as income for VAT 
calculation.
1252   
7.700  Regarding the two different rulings provided  by DG Revenue on whether VAT-exempt sales 
must be included in Form Por.Por.30 as noted above , the Philippines explains that this difference 
exists because of a change in DG Revenue's a pproach to the requirements for completing Form 
Por.Por.30.1253  According to the Philippines, DG Reve nue initially required that income from 
VAT-exempt sales under Section 81 be included in Fo rm Por.Por.30, which explains a DG Revenue 
                                                      
1248 Exhibits THA-89 and PHL-181.  We do not find a copy of the Form Por.Por.30 filled out by TTM 
relevant because, inter alia , TTM is a domestic manufacturer of cigarettes, not a reseller of domestic cigarettes.  
In any event, while the sample Por.Por.30 form f illed out by TTM shows that TTM reports certain amounts 
corresponding to exempted sales in the form, it does not indicate that these amounts correspond to the retail sale of domestic cigarettes.  The sample Por.Por.30 form fill ed out by a reseller of domestic cigarettes and other 
goods does not indicate either whethe r the exempted sales reported in th e form correspond to the sale of 
domestic cigarettes or to other goods exempted from VAT. 
1249 Exhibit THA-95. 
1250 Exhibit THA-96.   
1251 Exhibits PHL-253 and PHL-254, para. 10. 
1252 Exhibit PHL-253. 
1253 Philippines' comments on Thailand's response to Panel question No. 142; Exhibit PHL-289. WT/DS371/R 
Page 298  
 
  ruling in 1995 as submitted by Thailand.  DG Reve nue, however, subsequently changed the rule so 
that VAT registrants need not include income from VAT-exempt sales under Section 81.  
7.701  Thailand argues that the 2000 DG Revenue rulin g only addressed whether income exempted 
from VAT by virtue of Article 81 should be includ ed in the calculation fo r VAT, not whether this 
income should be reported in Form Por.Por.30.  Th e text of this ruling, however, indicates that DG 
Revenue was answering the question whether, in submitting and paying VAT by filing Form 
Por.Por.30 in each tax month, the company does not have to include the income from the [sale of the 
VAT-exempt service at issue] for calculation in order to pay for value added tax.
1254 Thus, we 
understood that DG Revenue was not only addressing  the question whether certain amounts should in 
fact be included in the calculation of the total VAT  liability, but also whether those amounts must be 
reported in Form Por.Por.30.  Given that Form Por.Por.30 is entitled "VAT Calculation", the 2000 DG 
Revenue ruling effectively clarified that income exempted under Section 81 need not be reported in 
Form Por.Por.30 for the calculation of VAT. 
7.702  The Philippines also points out that the authors of the textbook referred to by Thailand do not 
refer to this later ruling by DG Revenue and fail to explain the alleged change in DG Revenue's 
approach. 1255 Specifically, this textbook states that "the VAT registrant must report all sales occurring 
in a tax month in form Por.Por.30 ... and then s ubtracting ... sales exempted from VAT. ... However 
sales that are not within the scope of VAT (for exam ple, the sale of goods or provision of services 
outside Thailand) need not be reported on the form Por.Por.30".1256 This excerpt therefore fails to 
address specifically the sale of domestic cigarettes or other Section 81 VAT-e xempt product, and does 
not define "not within the scope of VAT".  Accord ing to the Philippines, therefore, the textbook is 
insufficient to rebut its interpretation of the 2000 DG Revenue ruling, even though it was published 
later than the subject ruling.  The Philippines' arguments therefore indicate that under the current  
requirement relating to Form Por.Por.30, income from sales of domestic cigarettes need not be 
included in Form Por.Por.30.  
7.703  While we are not presented with any official doc ument issued by the Thai government, we are 
nevertheless, based on our careful examination of all the evidence in its totality, convinced by the 
Philippines' argument that the resellers of domestic  cigarettes and other goods subject to VAT need 
not report their sales of VAT-exempted domestic cigare ttes in Form Por.Por.30.  This tends to further 
demonstrate that an additional administrative require ment is imposed on VAT registrant suppliers by 
reason of selling imported cigarettes.   
7.704  We therefore conclude that resellers of imported cigarettes are subject to a heavier 
administrative burden in respect of the obligation to complete and submit Form Por.Por.30 because: 
(i) a supplier who carries exclusively domestic cigare ttes and therefore is not required to register for 
VAT purposes, is exempted from the obligation to f ile Form Por.Por.30, wh ereas the same exemption 
is not provided to imported cigare tte suppliers; and (ii) a supplier w ho is a VAT-registrant need not 
include information on sales of domestic ci garettes in completing Form Por.Por.30. 
Tax invoices and other record-keeping requirements  
7.705  The Philippines' arguments relating to the requi rement to prepare and keep tax invoices are 
two-fold:  first, resellers of imported ciga rettes have to satisfy an additional formality1257 ("tax 
invoice"); and, second, a tax invoice to be prepar ed by resellers of imported cigarettes is more 
                                                      
1254 Exhibit PHL-253. 
1255 Philippines' comments on Thailand's response to Panel question No. 142. 
1256 Exhibit THA-95. 
1257 Exhibit PHL-182, table in para. 15.2.  WT/DS371/R 
 Page 299 
 
 
  burdensome than the standard tax invoice that ot her VAT registrants must provide because the MRSP, 
which allegedly requires more information, is the tax base for resellers of imported cigarettes.1258 
7.706  With regards to the Philippines'  first point, Thailand argues that sales receipts, which both 
VAT and non-VAT registrants must equally mainta in under the Accounting Code, could serve as a 
tax invoice.1259  The Philippines has not responded to th is argument.  In the absence of any 
counterargument from the Philippines in this regard, therefore, resellers of imported cigarettes do not 
appear to be subject to any extra burden at least with respect to the requirement to maintain tax 
invoices in itself. 
7.707  Regarding its second point, the Philippines has not  fully explained how the use of the MRSP 
as the tax base would make the requirement to prepare a tax invoice more difficult for resellers of 
imported cigarettes.  Even if the use of the MRSP as the tax base did make the preparation of a tax 
invoice more difficult compared to other businesse s that do not use the MRSP as the tax base, we 
found above that sales receipts can also be used fo r fulfilling the requirement to maintain tax invoices. 
Various records to be maintained  
7.708  Thailand argues that although domestic cigarette  resellers are exempt from VAT liability, 
they are still subject to the requirement to file re venue and expense reports that are linked to their 
income tax liability.  In response to this argume nt, the Philippines submits that domestic cigarette 
resellers are exempt from income tax.  As a con sequence, the Philippines ar gues that they need not 
prepare and maintain revenue and expense reports.  Resellers of imported cigarettes on the other hand 
must prepare input/output tax reports and goods /raw material reports because of VAT liability.1260  To 
support its position in this regard, the Philippines re lied exclusively on an expert opinion that an 
individual who resells domestic cigarettes is ex empt from personal income tax by virtue of 
Article 2(19) of the Ministerial Regulation No. 126, which in turn exempts such an individual from 
the obligation to fill revenue/expenses reports under S ection 17(1) of the Revenue Code and Director's 
General Notification.1261   
7.709  Although presentation of further evidence in add ition to its own expert's opinion would have 
made the Philippines' position more convincing, we are not presented with any evidence and/or 
arguments from Thailand that can rebut the expert opinion referred to by the Philippines.  Thailand 
submits without any supporting evidence that the expert opinion relied on by the Philippines is incorrect and that an individual who resells exclusively  domestic cigarettes is not exempted either 
from income tax or from the corollary oblig ation to complete revenue/expense reports.
1262  Thailand 
also argues that all corporate resellers, including r esellers of exclusively domes tic cigarettes, have to 
maintain accounts under the Accounting Act (BE 2543)1263, which the Philippines does not contest.1264 
However, we are not able to compare this obligation with the VAT-related record keeping 
requirements because no evidence has been presente d as to the content of the accounts to be 
maintained under the Accounting Act. In particular, there is no basis for us to decide whether the 
                                                      
1258 Philippines' second written submi ssion, para. 474; Exhibit PHL-95. 
1259 Thailand's first written submission, para. 251, re ferring to Exhibit PHL-94,  Sections 105, 105 bis 
and 105 ter. 
1260 Exhibit PHL-94, Sections 87(1) and 87(3) of the Revenue Code requires VAT registrants to 
maintain input/output tax records and goods/raw material reports. 
1261 Exhibit PHL-254, p. 3 (the e xpert declared "I ... can confirm that an individual who resells 
domestic cigarettes is exempt from personal income tax by virtue of Article 2(19) of the Ministerial Regulation No.126, [as this] is not assessable income") and Exhibit PHL-182, p. 9, combined; Exhibit PHL-256. 
1262 Thailand's second written submission, para. 175. 
1263 Thailand's first written submission, para. 251. 
1264 Philippines' second written submission, para. 494,  footnote 467; Exhibit PHL-182, table under 
para. 15.2, p. 9. WT/DS371/R 
Page 300  
 
  requirement to maintain accounts would constitute a burden on resellers of domestic cigarettes which 
is similar to the VAT-related requirements imposed on resellers of imported cigarettes. Finally, 
Thailand also submitted a copy of an out put tax report filled by a reseller of both VAT-exempt and 
VAT-subject products.
1265 Thus, as explained in paragraph 6.165 of the interim review section, this 
excerpt does not address the specific situation of resellers of exclusively domestic cigarettes. We are 
therefore not convinced that this report proves that  resellers of exclusively domestic cigarettes bear 
the same administrative burden as resellers of imported cigarettes. 
7.710  Therefore, in the light of the expert opinion, considered together with the text of the 
provisions, we find that resellers of domestic cigare ttes are exempt from income tax and consequently 
from the obligation to file revenue /expense reports.  Resellers of imported cigarettes are therefore 
subject to additional administrative requirements (i.e. preparing and maintaining both input/output 
reports and books and records for accounting purposes)  compared to domestic cigarette resellers.   
7.711  Even if domestic ciga rette resellers were not exempt from income tax liability, however, we 
find that imported cigarette resellers are still subj ect to additional administrative requirements because 
of the extent of the information to be provided in  relation to the concerned reports.  Input/output tax 
reports for imported cigarette sales require info rmation on the VAT amount payable and the tax 
invoice number, whereas revenue/expense r ecords do not require this information.1266   
7.712  Specifically, under the Notification of Directo r-General No.89, the data required for the 
purpose of the input/output tax reports, to be file d monthly by imported cigare ttes resellers, is as 
follows: (i) tax month and year; (ii) name, tax I.D.  of the VAT business operator, and check the box if 
the VAT business operator is the head office or bran ch (and the branch number, if any); (iii) tax 
invoice's date and number; and (iv) name of the cost umer for the purpose of the output record (subject 
to certain exceptions in respect of the requirement in (iv)) or name of the seller/ service provider for 
the purpose of the input record; (v) value of goods /services being sold (output record) or purchased 
(input record); and (vi) VAT amount.   
7.713  The Notification of Director-General Re: Income  Tax No.161, in contrast, illustrates that the 
data required for the purpose of the revenue/expenses  report requirement imposed on the sale of 
domestic cigarettes are limited to: (i) name and I. D. number of the business operator; and (ii) date, 
items and amount of each receipt of income  and payments relevant to the business.1267 
7.714  Furthermore, Thailand does not deny that only r esellers of imported cigarettes have to file 
goods/raw material reports.  These reports  must contain the following data: (i) tax month and year; (ii) 
name, tax I.D. of the VAT business operator, and ch eck the box if the VAT business operator is the 
head office or branch (and the br anch number, if any); (iii) name, type and size of goods/materials; 
(iv) number of the document that evidences the pur chase and distribution of goods or raw materials 
(e.g. the tax invoice or the receipt); (v) date of goo ds/raw materials receipt and distribution; and (vi) 
quantity of the goods/raw materials being received/distributed and their balance.1268   
7.715  Overall, after careful examination of the evidence before us, we are of the view that resellers 
of imported cigarettes have the obligation to fill and file reports that resellers of domestic cigarettes 
need not file. This tends to show that an add itional VAT-related administrative burden is imposed on 
the resellers of imported cigarettes. 
                                                      
1265 Exhibit THA-30. 
1266 Thailand's second written submission, para. 175. 
1267 Exhibit PHL-182, p. 10. 
1268 Exhibit PHL-182, p. 10.  WT/DS371/R 
 Page 301 
 
 
  Preparation and maintenance of documents for auditing  
7.716  The Philippines submits that resellers of im ported cigarettes must keep books and records 
relating to VAT, which can be used in the context of auditing, for five years pursuant to Section 87(3) of the Thai Revenue Act.
1269 Thailand however argues that those boo ks consist of the sale journals and 
ledgers, purchase records, and other normal accoun ting records maintained  by most commercial 
businesses in most countries that rely on generally -accepted accounting principles. Thailand also 
noted that many businesses prepared accounts usi ng readily available accounting software to produce 
both income tax and VAT reports.1270 
7.717  We note that the type of documents that mu st be maintained by resellers of imported 
cigarettes are normal accounting materials that commercial businesses in most countries readily 
possess. We also note Thailand's argument that most of this information is processed electronically, 
through accounting software. Nevertheless, to the ex tent that resellers of domestic cigarettes are 
exempt from VAT liability, the books and records that  resellers of domestic cigarettes must maintain 
under Article 87(3) for accounting and auditing purpo ses would require less information than that 
required from resellers of imported cigarettes.  
7.718  In terms of auditing procedures themselves, however, the Philippines does not dispute that 
resellers of both imported and dom estic cigarettes are subject to similar procedures.  The expert 
opinion cited to by the Philippines also recognizes that auditing procedures are "a provision of general 
application" in Thailand.1271  
Penalties and other sanctions  
7.719  The Philippines points at various penalties and sanctions that a VAT registrant faces under 
Division 13 of the Thai Revenue Act, when he fails to comply with the relevant VAT-related 
administrative requirements.  Thailand does not disput e that in case of failure to comply with the 
relevant VAT-related administrative requirements, penalties and sanctions can indeed be imposed on 
VAT registrants pursuant to Division 13 of the Thai Revenue Act.1272  Thailand only contests the 
extent of the said sanctions.1273   
Overall assessment  
7.720  Overall, the Philippines points to five aspect s of the Thai VAT system in support of its 
position that imported cigarette resellers are s ubject to additional administrative requirements 
compared to domestic cigarette resellers.  The following table summarizes those specific administrative requirements. 
                                                     
 
1269 Exhibit PHL-182, p. 9 and  Exhibit PHL-94. 
1270 Thailand's second written submission, para. 174. 
1271 Exhibit PHL-182, p. 11. 
1272 Exhibit PHL-94, p. 52. 
1273 Thailand's second written submission, para. 175. WT/DS371/R 
Page 302  
 
   
Resellers of Domestic Cigarettes  Resellers of Imported Cigarettes  
Filing Form Por.Por 30, 
pursuant to Section 83 of the Revenue Code
 No obligation to file.  Obligation to file except for small businesses. If domestic cigarettes are also sold, obligation to report them 
under item 3 of the Form.
 
No revenue/expense report must be 
filed.  Input/output tax reports must be filed (note: more burdensome than revenue/expense reports).
 
Goods and raw materials reports do 
not have to be prepared.  Goods and raw material reports must be prepared.
 Filing and maintaining 
of various reports pursuant to Section 87 
of the Revenue Code 
Books and records for accounting 
purposes must be prepared and maintained.
 Books and records for accounting purposes must be prepared and maintained, including VAT-related 
information.
 
Potential penalties, 
surcharges, and sanctions pursuant to 
Divisions 13 and 14 of 
the Thai Revenue Code No risk to be sanctioned due to 
general VAT exemption.
 Risk of undergoing sanctions and surcharges fro violation of VAT related administrative requirements: 
(i) monetary penalties in case of late 
or incomplete filing; (ii) submission of a supplementary form for VAT 
refund purposes in case of late filing; 
(iii) submission of supplementary forms for VAT recording purposes in 
case of late filing.
 
Auditing Procedures  Obligation to submit to auditing 
procedures.  Obligation to submit to auditing procedures.
 
Tax Invoice pursuant to Revenue Order No Por. 
85/2542
 No need to prepare tax invoices, but 
sales receipts must be submitted.  The sales receipt, which must be submitted, can also serve a tax 
invoice.
 
 
7.721  In relation to the obligation to submit to audit procedures pursuant to Division 12 of the Thai 
Revenue Code, and to prepare a tax invoice pursuan t to Revenue Order No Por. 85/2542, we do not 
find any additional requirements imposed only on the resellers carrying imported cigarettes only. 
7.722  However we agree with the Philippines that under Thai law, imported cigarettes are subject to 
additional administrative requirements in the followi ng three aspects:  First, resellers of imported 
cigarettes must file form Por.Por 30 pursuant to Section 83 of the Revenue Code, whereas resellers 
carrying only domestic cigarettes are exempted from th is obligation.  Second, the obligation to file 
and maintain various reports under Section 87 of  the Revenue Code such as input/output reports, 
goods and raw material reports, a nd books and records for accounting purposes is more complicated 
for imported cigarette resellers.  Specifically, we fi nd that domestic cigarette resellers are exempt 
from filing revenue and expense reports and need  not maintain VAT-related information for 
accounting and auditing purposes.  Resellers of impor ted cigarettes, on the other hand, must file both 
input/output tax reports and goods/raw materials reports and must maintain books and records for 
accounting and auditing purposes which include VAT-rela ted information.  Fina lly, only resellers of 
imported cigarettes are potentially subject to pena lties and surcharges for failure to comply with 
VAT-related requirements pursuant to Divisi on 14 of the Thai Revenue Code.   
7.723  We now turn to the question of whether these additional administrative requirements 
negatively affect the conditions of competition for th e imported cigarettes at issue in the Thai market.  WT/DS371/R 
 Page 303 
 
 
  (b) Whether imported cigarettes are subject to less  favourable treatment th an domestic cigarettes 
within the meaning of Article III:4 
(i) Main arguments of the parties 
7.724  The Philippines  argues that Thailand's imposition of an  additional administrative burden on 
suppliers of imported cigarettes violates Article III:4 because such an additional burden modifies the 
conditions of competition for impor ted cigarettes in the Thai market.  The Philippines relies on the 
Appellate Body's statement in Korea – Various Measures on Beef  that a finding of less favourable 
treatment under Article III:4 "should be assessed … by examining whether a measure modifies the 
conditions of competition in the relevant market to the detriment of the imported product".1274  The 
Philippines considers that government regulation is a factor that typically impacts the competitive 
position of a firm1275 by influencing the terms and conditions of supply and demand.1276  According to 
the Philippines, Article III:4 requires that those regula tions be neutral, which entails that they do not 
influence the choice made by consumers and supp liers in favour of domestic goods competing with 
imported goods. The Philippines argues that Thailand's re gulations fail to be perfectly neutral in this 
regard1277, as they impose "extra-hurdles" on resellers of imported cigarettes.1278  This in turn works as 
a disincentive for the supply/sale of the imported ci garettes, which is a negative modification of the 
competitive conditions. 
7.725  Furthermore, the Philippines underlines that resellers of any good subject to VAT are required 
to complete Form Por.Por.30.1279  As a result, stores that are not yet subject to VAT reporting 
requirements avoid selling any imported cigarettes.  This mechanism harms the competitive 
conditions of the imported cigarettes in the Thai ma rket.  As an illustration, the Philippines notes that, 
out of 310,389 cigarette retailers  operating in the Thai market, 68,000 have elected not to sell 
imported cigarettes.  One of the factors behind thei r decision is "that re-sal es of imported cigarettes 
give rise to additional VAT burdens that do not arise when they sell exclusively domestic cigarettes".
1280  The Philippines concludes that "for th ese retailers at least … the competitive 
conditions [are modified] in a very tangible way".1281 
7.726  Finally, the Philippines is of the view that the overall tax-related administrative burden 
imposed on TTM is irrelevant to a determina tion of the consistency of VAT measures with 
Article III:4.  In any event, the Philippines denies that TTM bears a heavier overall burden.1282 
                                                      
1274 Appellate Body Report, Korea – Various Measures on Beef , para. 137 (emphasis in original).  The 
Philippines also relies on the Japan – Alcoholic Beverages II  Appellate Body confirmation that only the 
conditions of competition must be examined, not the actual market effects (Appellate Body Report, Japan – 
Alcoholic Beverages II , p. 16, DSR 1997:1, 97, at 109-110). 
1275 Philippines' response to Panel question No. 59.  The Philippines states that 
 
"Government regulation imposes burdens on all aspects of the development, production, and 
marketing and sale of goods.  The relative impact of these burdens on competing goods influences the behaviour of suppliers an d consumers of goods in the marketplace." 
 
1276 Philippines' second written submission, footnote 459. 
1277 Philippines' second written submission, para. 481.  
1278 Philippines' first written submission, para. 558, referring to Appellate Body Report, US – Section 
211 Appropriations Act , para. 264. 
1279 As an illustration, a seller of domestic cigarettes who would also like to sell (even marginally) 
imported cigarettes would have to file Por.Por.30. 
1280 Philippines' response to Panel question No. 59; Exhibit PHL-185. 
1281 Philippines' response to Panel question No. 59. 
1282 Philippines' second written submission, para. 494, footnote 83.  WT/DS371/R 
Page 304  
 
  7.727  Thailand  submits that the Philippines clearly failed to demonstrate that the small discrepancy 
observed in VAT filing requirements between reselle rs of domestic and fore ign cigarettes had any 
negative impact on the competitive conditions of the latter product. In particular, it brought no 
convincing evidence to relate the assertion that 68 ,000 Thai cigarette retailers do not sell imported 
cigarettes due to the VAT regulations at issue.
1283 Thailand argues that the regulatory difference 
alleged by the Philippines could conceivably aff ect the conditions of competition only when a 
wholesaler/retailer (i) stocks only domestic cigarette s (and other VAT exempt goods), and (ii) has an 
annual turnover of over 1.8 million THB. The Philippi nes has adduced no eviden ce that there are any 
wholesaler/retailer falling within this category in the Thai market or evidence that the alleged 
difference in regulatory treatment creates an ince ntive for those agents to specialize in selling 
exclusively VAT-exempt goods.1284 
7.728  In addition, Thailand  emphasizes that, looking beyond the VAT requirements, the overall tax-
related administrative burden imposed on TTM far exceeds the one imposed on resellers of imported cigarettes.  Thailand submits a ta ble showing that TTM is subject to more demanding procedures with 
regards to income tax, corporate tax,  withholding tax and audit obligations.
1285  Moreover, Thailand's 
reporting requirements confer clear advantages on im ported cigarette resellers with respect to the 
availability of input tax credits on purchase of service and equipment.1286  
(ii) Analysis by the Panel 
7.729  The Philippines claims that the VAT-related measures imposing additional administrative 
requirements on resellers of imported cigarettes are as such inconsistent with the obligations under 
Article III:4 because they have a general impact  on the conditions of competition for imported 
cigarettes.  The task before us is therefore to determine whether the additional administrative 
requirements for imported cigarettes, as found ab ove, confer a negative impact on the competitive 
conditions of imported cigarettes in the Thai market.   
7.730  The Appellate Body in US – FSC (Article 21.5 – EC)  states: 
"The examination of whether a measure invol ves less favorable treatment of imported 
products under Article III:4 of the GATT 199 4 must be grounded in close scrutiny of 
the 'fundamental thrust of the measure itself' .  This examination cannot rest on simple 
assertion, but must be found on a careful analysis of the contested measure and of its implications in the marketplace.  At the same time, however, the examination need 
not be based on the actual effects  of the contested measure in the marketplace."
1287   
The Appellate Body's statement clarifies that th e implications of the contested measure in the 
marketplace can be assessed on its potential effects on the competitive conditions of the imported 
product concerned.1288  Referring to this statement for the pur pose of its analysis under Article 3.1 of 
the TRIPS Agreement, the Appellate Body in US – Section 211 Appropriations Act  (under Article 3.1 
of the TRIPS Agreement) clarified that:  
                                                     
 
1283 Thailand's second written submission, para. 172. 
1284 Thailand's response to Panel question No. 62. 
1285 Thailand's response to Panel question No. 63. 
1286 Thailand's second oral  statement, para. 66. 
1287 Appellate Body Report, US – FSC (Article 21.5 – EC) , para. 215, emphasis in original. 
1288 The GATT Panel in US – Section 337 Tariff Act  also found in the context of Article III:4 analysis 
that "to provide the complainant with the choice of forum where imported products are concerned and to 
provide no corresponding choice where domestically-produced products are concerned is in itself less 
favourable treatment of imported products". (GATT Panel Report, US – Section 337 Tariff Act , para. 5.18).  WT/DS371/R 
 Page 305 
 
 
  "The US may be right that the likelihood to overcome [both administrative] hurdles ... 
may be small. But again echoing [the Panel in US – Section 337 Tariff Act ], even the 
possibility that non-United States successo rs in interest face two hurdles in inherently 
less favorable  than the undisputed fact that Unite d States successors in interest face 
only one"1289   
7.731  The Panel in Canada – Wheat Exports and Grain Imports  also elaborated that there is "no de 
minimis exception to Article III:4" and therefore,  even practices not "very onerous in commercial 
and/or practical terms" may be banned where they are likely to put the imported product at a competitive disadvantage.
1290   
7.732  In previous disputes, therefore, a wide arra y of measures were found to impose an additional 
hurdle on imported products so as to modify the competitive conditions of such products in the 
marketplace in violation of Article III:4.  In US – Section 211 Appropriations Act , the Appellate Body 
stated that any kind of "limitation"1291 or "obstacle"1292 could be qualified as to modify the competitive 
conditions of im ported products.1293  The finding by the GATT panel in US – Tobacco  is also relevant 
to the issues presented in our dispute:  "determining that damages, fines, or imprisonment, which are 
imposed on persons, may accord less favorable tr eatment to imported products [in the Article III:4 
context] is not a priori  impossible".1294 In this manner, (i) a simple administrative authorization 
scheme1295; (ii) a differentiated distribution scheme1296; or (iii) the mere possibility that non-US 
nationals have to defend patent clai ms in front of two jurisdictions ra ther than only one were all found 
to constitute additional administrative burdens trig gering a modification of competitive conditions of 
imported products within the meaning of Article III:4. 
                                                      
1289 Appellate Body Report, US – Section 211 Appropriations Act , para. 265. 
1290 Panel Report, Canada – Wheat Exports and Grain Imports , para. 6.190 and footnote 281.   
1291 Appellate Body Report, US – Section 211 Appropriations Act , para. 264. 
1292 Appellate Body Report, US – Section 211 Appropriations Act , para. 268. 
1293 Panel Report, US – 1916 Act (EC) , para. 6.76, and GATT Panel Report, United States – 
Section 337 Tariff Act , para. 5.10. 
1294 Panel Report, US – 1916 Act (EC) , para. 6.76 referring to GATT Panel Report, United States – 
Section 337 Tariff Act , para. 5.10. The Panel found in relevant parts that "determining that damages, fines, or 
imprisonment, which are imposed on persons, may accord le ss favourable treatment to imported products [in the 
Article III:4 context] is not a priori  impossible". 
1295 Panel Report, Canada – Wheat Exports and Grain Imports, paras. 6.184-6.213.  Section 57(c) of 
the Canada Grain Act required subjected  elevator operators to a prior auth orization scheme to process imported 
grain, while no similar requirement existed for domestic gr ain. The panel found that this modified the conditions 
of competition in favour of domestic grain, notwithstanding the fact that the authorization had never been 
refused by Canadian authorities, or that advance authorization schemes were available. 
1296 GATT Panel Report, US – Malt Beverages , paras. 5.32 and 5.35. The panel found that "the 
requirement that beer imported into the United States be distributed through in-state wholesalers and other 
middlemen, when no such obligation to distribute throug h wholesalers exists with respect to in-state like 
domestic products results in treatment ... less favourable  than that accorded to like domestic products from 
domestic producers, inconsistent with Ar ticle III:4"; Appellate Body Report, Korea – Various Measures on 
Beef, paras. 143-151.  Korea implemented a dual retail syst em for beef products, whereby retail distributors had 
to choose between selling imported or foreign beef. The Appellate Body observed that eight years after the 
measure was taken:  
 
"the consequent reduction of commercial opportunity [for imported beef] was reflected in the much 
smaller number of specialized imported beef shops (approximately 5000 shops) as compared with the number of 
retailers (approximately 45 000) selling domestic beef. We  are aware that the dramatic reduction in number of 
retail outlets for imported beef followed from the decision of individual retailers who could choose freely to sell the domestic product or the imported product. The legal necessity of making a choice was. however, imposed by 
the measure itself. The restricted nature of that choice should be noted ..." WT/DS371/R 
Page 306  
 
  7.733  We consider that the findings by the Appellate  Body and previous pa nels above support the 
position that the VAT-related requirements under the Thai law may potentially modify the conditions 
of competition for the imported cigarettes in the Thai market.   
7.734  We recall our finding above that under Thai law, resellers of imported ci garettes are subject to 
the additional administrative requirements for VAT liabilities such as the filing of Form Por.Por.30, 
other various reporting requirements, and penalti es and sanctions in case of non-compliance.  
Although those individual requirements considered separately may not themselves be found to have an adverse effect on the conditions of competition of imported cigarettes in the Thai market, the 
accumulation of all those requirements could potentially  affect those conditions in a negative manner.  
This, in our view, will lead to according less favourable treatment to imported cigarettes under 
Article III:4 than to like domestic cigarettes.   
7.735  According to the parties' submissions, 96 per cent of the market shares are divided between    
five brands: two foreign a nd three domestic brands.
1297  TTM holds 78 per cent of the market shares 
while imported cigarettes account for the remaining 22 per cent.1298  Econometric evidence produced 
by the Philippines suggests a certain degree of price elasticity and switching patterns between 
imported and domestic cigarettes.1299  In our view, this would also indicate that additional 
administrative requirements, albeit slight, imposed  only on imported cigarettes can potentially have a 
negative impact on the competitive position of these cigarettes in the market.   
7.736  For example, additional administrative require ments imposed on resellers of domestic 
cigarettes and resellers of imported ones could affect  business decisions of cigarette suppliers because 
an additional administrative burden can be linked to the operating costs of their businesses.  This 
could in turn result in modifying the competitive conditions of the subject cigarettes in the Thai 
market by limiting business opportunities for the ciga rettes concerned if certain suppliers base their 
decision on which items to carry on potential operating costs associated with the additional administrative requirements.
1300 
7.737  We note Thailand's argument in this regard that despite a slight extra VAT burden imposed on 
resellers of imported cigarettes, resellers of impor ted cigarettes were not treated less favourably 
because the overall tax burden on the imported cigarettes was not hi gher.  We do not consider that the 
actual tax burden on the imported cigarettes is releva nt to the question we are examining here.  As 
noted above, we are obliged to scrutinize the "fundame ntal thrust of the measure itself", which are, for 
the purpose of the Article III:4 claim, the administrative requirements associated with the fiscal 
burden imposed in the form of VAT.   
7.738  We therefore conclude that Thailand acted in consistently with Article III:4 by subjecting 
imported cigarettes to le ss favourable treatment compared to  like domestic cigarettes through the 
VAT-related administrative requirements imposed  only on resellers of imported cigarettes.1301 
                                                      
 
1297 Thailand's response to Panel question No. 45. 
1298 Philippines' first submission, para. 480. 
1299 See Section VII.D.3 above. Thailand however ob serves that switching patterns are uneven across 
various pairs of domestic and foreign brands. 
1300 We are, however, of the view that the Philippines has not provided sufficient evidence to 
demonstrate that these additional administrative require ments were the sole factor that made the 68,000 
businesses decide not to sell imported cigarettes in their stores.  As Thailand points out, there could be other 
bases on which these resellers are exempt from VAT  and consequently the VAT-related administrative 
requirements.  In particular, the Philippines could not rebut Thailand's argument that many of those businesses are exempt by virtue of their turnover falling under 1.8 million baht. 
1301 Philippines' second written submission, para. 484, footnote 75.  WT/DS371/R 
 Page 307 
 
 
  (c) Whether an additional administrative burden can  otherwise be justified under Article III:4 
(i) Main arguments of the parties 
7.739  Thailand refers to the Dominican Republic – Import and Sale of Cigarettes standard1302 that 
Article III:4 only protects against differences of treatme nt based on the origin of the product. Thailand 
claims that, even if the Panel concluded that th ere was modification of the competitive conditions in 
favour of domestic cigarettes, this would not be related to the origin of the products.1303 
7.740  Thailand argues that the alleged difference of treatment between imported and domestic 
products can be explained by the unique regulatory status of TTM as the government's tax collector.
1304  Thailand explains that subjecting importers  of foreign cigarettes to VAT requirements 
was aimed at combating tax evasion, fraud,  and counterfeiting of foreign cigarettes.1305  By contrast, 
the Thai government underlines TTM's specific role  as a state enterprise and the government's tax 
collector in the cigarettes market.  The Thai governme nt retains all tax income related to TTM's sales 
at the source, a system which is efficient in comb ating tax evasion, fraud and counterfeiting.  In this 
regard, imposing VAT obligations on TTM is useless.   On the other hand, Thai authorities chose to 
impose VAT on importers of foreign cigarettes, sin ce taxation at the source would have been too 
burdensome.1306  Thai authorities have not refered to or used the foreign origin of the product as a 
basis for differential treatment.  Hence, the above standard is not met.1307  
7.741  Thailand also asserts that subjecting imported ci garettes to VAT is legal on the grounds that 
they face "the normal tax burdens and normal VAT reporting requirements" that any other VAT liable 
good is subject to.1308  By the same token, Thailand st resses that other states impose similar 
requirements on imported cigarettes.  
7.742  The Philippines "fails to see TTM's unique regulatory status".1309  But for the VAT 
exemption, TTM and other entities are indeed subject to similar taxation treatment by the government.
1310 The Philippines argues that, as illustrated in Dominican Republic – Import and Sale 
of Cigarettes  standard, the competitive disadvantage impo sed on imported cigarettes is exclusively 
based on their foreign origin because under the rele vant Thai legislation only resellers of domestic 
cigarettes benefit from a VAT exemption.1311 Thus, the Philippines argues that the origin of the 
cigarettes is the only applicable criterion in c onferring administrative advantages to resellers of 
domestic cigarettes. 
7.743  The Philippines  claims that under Article III:4, the " normative benchmark is the treatment 
currently afforded to like domestic products"1312 on the same market.  Neither the treatment of like 
products in other countries, nor the treatment of unl ike products in the same country are relevant in 
this regard. 
                                                      
1302 Thailand's first written submission, para. 249, referring to Appellate Body Report, Dominican 
Republic – Import and Sale of Cigarettes , paras. 93-96. 
1303 Thailand's first written submission, para. 256. 
1304 Thailand's first written submission, para. 256. 
1305 Thailand's response  to Panel question No. 135. 
1306 Thailand's response to Panel question No. 135. 
1307 Thailand's first written submission, para. 256. 
1308 Philippines' second written submission, para. 493. 
1309 Philippines' second written submission, para. 491. 
1310 Philippines' first oral statement, para. 227. 
1311 Exhibit PHL-217. 
1312 Philippines' second written submission, para. 493. WT/DS371/R 
Page 308  
 
  (ii) Analysis by the Panel 
7.744  Thailand asserts that the VAT regime imposed on resellers of imported cigarettes is unrelated 
to their origin.  Thailand argues that the approach in Dominican Republic – Import and Sale of 
Cigarettes  must be followed.  In that case, the Panel had to evaluate a tax measure (a bond) which, 
although non-discriminatory on its face, resulted in fore ign products being taxed at a higher rate.  This 
stemmed from the fact that "the importer of [foreign ] cigarettes [had] a smaller market share than two 
domestic producers
 (the per-unit cost of the bond requirement being the result of dividing the cost of 
the bond by the number of cigarettes sold on the Dominican Republic market)".1313  The Appellate 
Body confirmed the Panel's findings that the diffe rence in taxation was "unrelated" to the foreign 
origin of the product and therefore not in violation of Article III:4.1314 
7.745  The factual circumstances in the current disput e, however, must be distinguished from those 
in Dominican Republic – Import and Sale of Cigarettes .  As the Philippines submits, the regulatory 
exemption from the VAT requirements applies only to domestic cigarettes under the Thai law.  
Therefore, it is the foreign origin of the importe d cigarettes that distinguishes them from like domestic 
cigarettes for the purpose of applying the VAT-related requirements at issue.  For this reason, we are 
not convinced by Thailand's argument. 
7.746  Further, Thailand contends that the differentia ted VAT regime is legal because it serves the 
legitimate purpose of combating tax evasion, fraud, a nd counterfeiting of foreign cigarettes.  A state 
enterprise, TTM, is subject to a specific regime which is designed to promote those objectives.  
Thailand hence asserts that the grounds, motivations  and purposes behind the VAT regime make the 
regime legal under Article III:4.  However, the cons istency of the contested measure with Thailand's 
obligations under Article III:4 ca nnot be determined based on the purpose and intent behind the 
measure as clarified by Thailand.1315 As we  have explained above,  imported products must not be 
subject to less favourable treatment through a measure that negatively modifies the conditions of competition, regardless of the intent behind the meas ure. We consider that the alleged purposes of the 
measures  such as combating tax evasion, fraud an d counterfeiting of foreign products as listed by 
Thailand, could be more properly a ddressed under Article XX of the GATT 1994. 
7.747  Finally, Thailand explains that the VAT require ments applicable to imported cigarettes do not 
constitute "less favourable treatment" because they mirror "normal" VAT requirements imposed on 
other domestic products and simila r procedures implemented by other countries in respect of imported 
cigarettes.  In examining the consistency of Tha iland's VAT requirements on imported cigarettes with 
Article III:4, our analysis is confined to the tr eatment afforded to imported cigarettes and "like" 
domestic cigarettes, not other domestic products.  Likewise, measures or pr actices maintained by 
other countries are irrelevant to our analysis of Th ailand's treatment of imported cigarettes. Therefore, 
neither the treatment afforded by Thailand to other products, nor treatment afforded by other states to 
imported cigarettes,  is relevant for the purpose of our analysis. 
7.748  We conclude that Thailand has failed to produ ce sufficient elements to justify that imported 
cigarettes be treated less favourably  than domestic cigarettes within th e meaning of Article III:4 of the 
GATT 1994.  
                                                     
 
1313 Appellate Body Report, Dominican Republic – Import and Sale of Cigarettes , para. 96. 
1314 Appellate Body Report, Dominican Republic – Import and Sale of Cigarettes , para. 96.  
1315 Panel Report, Canada – Periodicals , para. 5.37, referring to Appellate Body Report, Japan –  
Alcoholic Beverages II , p.18, DSR 1996:I, 97, at 111-112. The Report states: "The purpose of Article III:1 is to 
establish this general principle as a guide to understanding and interpreting the specific obligations contained in 
Article III:2 and in the other paragraphs of Article III,  while respecting, and not diminishing in any way, the 
meaning of words actually used in the texts of those other paragraphs". We understand that Article III:4 is not an intent test per se . However, Article III:1 serves as a contextu al element to Article III:4 so that where a 
discriminatory measure is taken so as to afford protection,  it is contrary to the obligations under Article III:4.    WT/DS371/R 
 Page 309 
 
 
  (d) Whether an additional administrative burden can  be justified under Article XX(d) of the 
GATT 1994 
(i) Main arguments of the parties 
7.749  Thailand  argues that, even if the Panel found th at the VAT administrative requirements 
imposed on resellers of foreign cigarettes modify th e conditions of competition to their detriment, and 
therefore constitute less favourable treatment under Article III:4, those requirements would still be 
GATT consistent by virtue of Article XX(d) of the GATT 1994.1316  
7.750  In particular, Thailand submits that the rule s requiring resellers of imported cigarettes to 
submit reports (input/output and Por.Por.30) to the Thai authorities are necessary to secure compliance with the VAT laws.
 1317 Indeed, Thailand fails to see how it could administer its VAT 
system without requiring VAT payers to maintain and submit reports.1318 
7.751  The Philippines  claims that Thailand's defence under Article XX(d) must fail because it 
would only justify that all resellers subject to VAT must file the appropriate form. This is not addressing the Philippines' concern that resellers of domestic cigarettes are exempt from VAT filing requirements, and hence benefit fro m better conditions of competition.
1319  The Philippines contends 
that Thailand has not demonstrated that the de jure  exemption from VAT administrative requirements 
is "necessary" to secure compliance with any WTO-consistent domestic law as required under 
Article XX(d).1320 
7.752  Thailand  "notes" that Article XX(d) can justify that penalties be imposed on resellers of 
imported cigarettes for failure to comply with VAT filing requirements.1321 Thailand disagrees with 
the Philippines that those penalties qualify as excess ta xation within the meaning of Article III:2, first 
sentence.1322 However, were the Panel to find that those penalties fall under the scope of Article III:2, 
Thailand considers that they are authorized unde r Article XX(d), as they are necessary to impose 
compliance with normal reporting requirements. Thailand notes that the reporting requirements 
contribute to the fight against cigarettes smuggling, and therefore fall within the scope of the objectives contemplated under Article XX(d).
1323 
7.753  The Philippines  claims that Thailand fails to show how imposing an additional tax liability 
on resellers of domestic cigarettes (i.e. the penalty for failure to comply with VAT filing requirements) was necessary to combat tax evas ion and smuggling. The Philippines underlines first 
that the measures implemented by Thailand ar e not properly designed to address this risk.
1324 In 
particular, they fail to address the smuggling of domestic cigarettes, which is also a concern according 
to newspaper and TTM issued sources.1325  In the same vein, the Phi lippines stresses that other less 
                                                      
1316 Thailand's first written submission, paras. 25 8-261; Thailand's second written submission, 
paras. 176 and 177. 
1317 Thailand uses the definition in Appellate Body Report, Brazil – Retreated Tyres , para. 150: a 
measure is necessary if it is "apt to make a material contribution to the achievement of its objective". 
1318 Thailand's first written submission, para. 260. 
1319 Philippines' first oral statement, para. 228. 
1320 Philippines' second written submission, para. 500. 
1321 Thailand's response to Panel question No. 139.  
1322 Thailand's response to Panel question No. 139. 
1323 Thailand's response to Panel question No. 139. 
1324 Philippines' combined comments on Thailand's responses to Panel question No. 135 and to 
Philippines' question No. 1. 
1325 Compare Exhibit THA-1, which includes an analysis of the risks posed by smuggling of imported 
cigarettes only, to Exhibit PHL-284, p. 2 (Article Pu blished in the Economist) and Exhibit PHL-285, pp. 11 WT/DS371/R 
Page 310  
 
  restrictive means were availabl e to Thai authorities such as tracking and tracing requirements.
1326 
Overall, additional penalties imposed on resellers of  imported cigarettes for failure to comply with 
VAT filing requirements constitutes a dis guised restriction on trade under the chapeau  of 
Article XX.1327 
(ii) Analysis by the Panel 
7.754  Article XX provides: 
"Subject to the requirement that such meas ures are not applied in a manner which would 
constitute a means of arbitrary or unjustifia ble discrimination between countries where the 
same conditions prevail, or a disguised restri ction on international trade, nothing in this 
Agreement shall be construed to prevent the a doption or enforcement by any contracting party 
of measures: 
... 
(d) necessary to secure compliance with laws or  regulations which ar e not inconsistent 
with the provisions of this Agreement, including those relating to customs enforcement ..." 
7.755  In US – Gasoline , the Appellate Body enunciated th e appropriate method for applying 
Article XX of the GATT 1994: 
"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 
imposed by the opening clauses of Article XX. The analysis is, in other words, two-
tiered: first, provisional justification by rea son of characterization of the measure 
under XX(g); second, further appraisal of th e same measure under the introductory 
clauses of Article XX ."
1328 (emphasis added)  
7.756  As the Appellate Body also stated in US – Gasoline , the burden of proof to show that a given 
measure falls within the scope of one of the sub- paragraphs of Article XX rests on the party invoking 
the defence under Article XX.1329  Here, Thailand therefore bears the burden of proving that both the 
additional VAT filing requirement on resellers of  imported cigarettes and the penalties imposed on 
non-compliant resellers constitute measures necess ary to secure compliance with WTO-consistent 
laws within the meaning of Article XX(d). 
7.757  The Appellate Body in Korea – Various Measures on Beef has stated that two elements must 
be shown by the invoking party under Article XX(d ): "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".1330  
                                                                                                                                                                     
and 22 (Excerpt from TTM's annual report 2008) which illustrate  concerns related to the smuggling of domestic 
cigarettes. 
1326 Philippines' combined comments on Thailand's response to Panel question No. 135 and to 
Philippines' question No. 1. 
1327 Philippines' combined comments on Thailand's response to Panel question No. 135 and to 
Philippines' question No. 1. 
1328 Appellate Body Report, US – Gasoline , p. 22, DSR 1996:I, 3 at 20. 
1329 Appellate Body Report, US – Gasoline , p. 20, DSR 1996:I, 3 at 21.  
1330 Appellate Body Report, Korea – Various Measures on Beef , para. 157.  WT/DS371/R 
 Page 311 
 
 
  7.758  Regarding both the administrative requirements imposed on resellers of imported cigarettes as 
well as penalties imposed in case of failure to meet such administrative requirements, Thailand alleges that these requirements and penalty provisions are necessary to secure compliance with the Thai VAT laws.  According to Thailand, this is because the filing obligations are the only way to verify that 
importers comply with the VAT laws.  As addressed  in Section VII.F.6(b)(ii) above, however, we 
found that the Thai VAT laws that Thailand purports to secure compliance with through the 
administrative requirement at issue, were not WTO consistent.  Therefore, we find that Thailand has 
not discharged its burden of showing that the ad ministrative requirements and the imposition of 
penalties for failure to complete VAT filing require ments are necessary to secure compliance with the 
Thai VAT laws within the meaning of Article XX(d) of the GATT 1994. 
G. 
CLAIMS UNDER ARTICLE  X OF THE GATT 1994 
1. Claims under Article X:1 of the GATT 1994 
(a) Introduction 
7.759  Under Article X:1 of the GATT 1994, the Philippi nes advances three claims:  Thailand acts 
inconsistently with Article X:1 by failing to publish (i) the met hodology for determining MRSPs; (ii) 
the methodology for determining ex factory prices fo r TTM cigarettes; and (iii) laws and regulations 
governing the release of guarantees for potential liab ility arising from health, excise and television 
taxes.  Thailand argues that the Philippines has faile d to discharge its burden of proving the elements 
required to demonstrate a breach of Article X:1 of the GATT 1994 for each of these claims. 
(b) Obligations under Article X:1 of the GATT 1994 
7.760  Article X:1 of the GATT 1994 provides: 
"Article X 
Publication and Administration of Trade Regulations 
1. "Laws, regulations, judicial decisions  and administrative rulings of general 
application, made effective by any contracting party, pertaining to the classification or the valuation of products for customs purposes, or to rates of duty, taxes or other 
charges ... shall be published promptly in such a manner as to enable governments 
and traders to become acquainted with them  ... The provisions of this paragraph shall 
not require any contracting party to discl ose confidential information which would 
impede law enforcement or otherwise be c ontrary to the public interest or would 
prejudice the legitimate commercial interests of particular enterprises, public or private."  
7.761  The obligations under Article X:1 to publish trade regulations largely consist of the following 
elements: (i) the existence of laws, regulations, judi cial decisions and administrative rulings of general 
application made effective by a WTO Member that pertain to, inter alia , the classification or the 
valuation of products for customs purposes; and (ii) the obligation to publish such laws and 
regulations promptly in such a manner as to enab le governments and traders to become acquainted 
with them. 
7.762  We note that depending on the particular fact ual circumstances of each case, the obligations 
under Article X:1 can be considered in more detailed terms.  For the purpose of this dispute, however, 
the parties have focused on the above two elements, namely whether the concerned measures are laws 
or regulations of general application within the meaning of Article X:1; and whether Thailand WT/DS371/R 
Page 312  
 
  published such laws and regulations promptly in such a manner as to enable governments and traders 
to become acquainted with them.   
7.763  Furthermore, Article X:1 does not require  WTO Members to disclose confidential 
information which would impede law enforcement or ot herwise be contrary to the public interest or 
would prejudice the legitimate commercial interests of pa rticular enterprises, public or private.  In this 
dispute, Thailand's argument on the disclosure of confidential business-derived data has given rise to 
the additional question of whether the publication of  the concerned measures would indeed result in 
disclosing confidential information which would prejudice the legitimate commercial interests of 
particular enterprises, public or private, within the meaning of Article X:1.   
(c) Methodology for determining MRSPs 
(i) Introduction 
7.764  In Thailand, MRSPs for imported and domestic  cigarettes are determined by DG Excise.
1331 
Thailand alleges that the elements used by DG Exci se in its calculation are published in the preamble 
of all MRSP notices issued after August 2007.  The language used in all MRSP notices is identical 
and states that:  
"[T]he Excise Department therefore fixes the [MRSP] ... by making a computation as 
based on the c.i.f. price, customs duty, tobacco stamp (i.e. excise tax), value added tax, contributions to the health promotion fund, contributions to the Thai Public Broadcasting of Sound and Picture Foundation, contributions to provincial administration organization developmen t, and marketing margin combined."
1332 
7.765  Thailand also considers that the published inform ation enables the importers to calculate the 
VAT applicable to imported cigarettes. Acco rding to Section 79/5 of the Revenue Code1333 and 
Revenue Department Notification No. Por 85/25421334 (relating to VAT imposed on cigarettes) the 
VAT can simply be calculated as 7 per cent of all other elements of the MRSP (i.e. VAT-exclusive 
price).1335  
7.766  The Philippines claims that Thailand failed to sufficiently publish the methodology for 
determining the tax base for domestic and imported cigarettes (i.e. the MRSP).  Specifically, the 
Philippines bases its claim on Thailand' s alleged failure to publish the following two elements: (i) the 
overall methodology for determining MRSPs, includi ng any revision to its overall methodology; (ii) 
the data relied upon in order to calculate the MRSP fo r individual cigarette brands and any revisions 
to that data, including the methodology and results of price surveys conducted in various countries 
that were used for determining the MRSPs for Marlboro and L&M in 2006-2007.1336  We will 
evaluate the parties' arguments concerning these two elements in turn to determine whether Thailand 
acted inconsistently with Article X:1 by failing to p ublish the laws, regulations, judicial decisions and 
administrative rulings of general application used to determine the MRSP. 
                                                      
1331 See Section VII.D.4(a) for the explanations on the establishment of the MRSP under the Thai VAT 
system. 
1332 Exhibit THA-45, PHL-105 (Imported Cigarettes); and PHL-77 (Domestic Cigarettes). 
1333 Exhibit PHL-94.  
1334 Exhibit PHL-95. 
1335 Thailand's second written submission, paras. 271-272. 
1336 Philippines' first written submission, para. 456.  WT/DS371/R 
 Page 313 
 
 
  (ii) Methodology for determining the MRSP 
Whether the methodology for determining the MRSP falls within the scope of "laws, 
regulations or administrative rulings of general application" under Article X:1  
Main arguments of the parties 
7.767  The Philippines claims that Thailand acts inconsistently  with its transparency obligations 
under Article X:1 of the GATT 1994 by failing to publish the general rules governing the 
determination and revision of MRSPs.1337  The Philippines argues that the general methodology 
followed by Thailand to determine and revise MRSPs falls within the scope of Article X:1 because it 
involves a general rule pertaining to th e determination of various tax bases.  
7.768  The Philippines notes that Thailand has disclosed before the Panel a methodology which it 
allegedly applies to determine and revise MRSPs. In particular, the following set of rules has been 
identified as constituting Thailand's methodology to determine MRSPs: (i) the primary source for the 
MRSP is the manufacturer's recommended retail price1338; (ii) an alternative source for the MRSP is a 
guarantee determined by DG Excise1339; (iii) DG Excise exercises a review of the MRSP, and the 
criteria thereof1340; (iv) DG Excise "normally" revises the MRSP after tax changes impacting the 
MRSP1341; (v) when MRSPs are revised, Thailand calculates a new MRSP computing the c.i.f. price, 
the latest tax amounts and the marketing costs1342; and (vi) the marketing costs calculation is based on 
information given by the importer, unless this info rmation is doubtful, in which case it is established 
by Thai Excise.1343   
7.769  The Philippines underlines that this set of rul es applies generally and prospectively to the 
establishment and revision of the MRSP for any brand of cigarettes, either sold or to be sold in 
Thailand.1344 Therefore, it constitutes a regulation of genera l application pertaining to taxes within the 
meaning of Article X:1 of the GATT 1994.  
7.770  The Philippines asserts that publication of this methodology is necessary as Thailand has 
punctually departed from it, leaving the importers with doubts as to how the rules applied. For instance, Thailand has argued that it based its MRSP  determinations on information provided by the 
importer. But in 2006 and 2007 it periodically used guarantees as starting points, both for the 
Marlboro and L&M MRSP calculation.
1345 The Philippines argues that this alternative starting point 
should be published.1346 Secondly, Thailand argues that it b ases the marketing cost calculations on 
information provided by the importer and that it recycled the information provided in 2001 for the purpose of all later determinati ons. The Philippines asserts that Thailand often departed from those 
alleged rules. In particular, MRSP calculations for L&M  in March 2001, and for L&M  and Marlboro  
in December 2005, August 2008, and May 2009 were  not derived from PM Thailand's information 
                                                     
 
1337 Philippines' first written submission, paras. 456-457;  first oral statement, para. 163; second written 
submission, paras. 317-357; second oral statement, para. 59. 
1338 Philippines' second written submission, para. 318, Table 1, referring to Thailand's first written 
submission, paras. 83 and 87. 
1339 Philippines' second written submission, para. 327.  
1340 Philippines' second written submission, para. 318, Table 1. 
1341 Philippines' second written submission, para. 318, Table 1. 
1342 Philippines' second written submission, para. 318, Table 1, referring to Thailand's first written 
submission, paras. 86-88; Thailand's response to Panel question No. 41. 
1343 Philippines' first written submission, paras. 166-173. 
1344 Philippines' second written submission, para. 317. 
1345 Philippines' second written submission, para. 327. 
1346 Philippines' response to Panel question Nos. 157 and 158. WT/DS371/R 
Page 314  
 
  timely submitted before  each determination.
1347 Furthermore, Thailand admits that it departed from 
the 2001 data in 2006 and 2007.1348 By the same token, the information provided by Thailand shows 
that there is a divergence in marketing costs across brands.1349 The Philippines complains that 
marketing costs for international brands are system atically higher than those for domestic brands. The 
Philippines argues that the publication of the me thodology followed to determine those marketing 
costs is therefore necessary.1350  
7.771  Thailand  accepts that the overall methodology utilized by the Thai Excise Department to 
calculate MRSPs for imported and domestic cigarettes can be described as a "regulation" of "general 
application" within the meaning of Article X:1 be cause it is consistently used by Thai Excise to 
determine binding maximum price levels and tax bases for all cigarette manufacturers.1351   
7.772  Thailand however contends that the si x elements listed by the Philippines1352 do not constitute 
DG Excise's methodology, as the Ph ilippines argues, but rather stand as an enumeration of the 
explanations given by Thailand in its submissi ons to the Panel of how MRSPs are set. Thailand 
therefore argues that those elements do not constitute regulations or administrative rulings of general 
application within the meaning of Article X:1.1353  Thailand argues that Article X:1 does not require 
every statement that was made be fore a panel to be published.1354  
Analysis by the Panel 
7.773  The parties agree that the methodology used to determine MRSPs for importers constitutes 
"regulations ... of general appli cation" within the meaning of Article X:1. As the Appellate Body 
underlined in EC – Poultry , Article X only applies to rules of "general application".1355  I n  US – 
Underwear , the Appellate Body clarified that measures of general application are those which "affect  
... an unidentified number of economic operators".1356 The panel in Japan – Film  found that even 
"administrative rulings in individual cases [fall within the scope of Article X:1] where such rulings establish or revise principles or criteria applicable in future cases".
1357  In this dispute, the parties do 
not contest that the methodology for determining MR SPs applies prospectively and generally to all 
MRSP determinations and revisions, fo r all cigarettes sold in Thailand.1358 As the methodology 
applies to all potential sales of cigarettes, we ag ree that the methodology used to calculate MRSPs 
falls within the scope of Article X:1.  
                                                      
1347 Philippines' second written submission, paras. 333-344. 
1348 Philippines' first oral statement, para. 183. 
1349 Philippines' first oral statement, para. 185, referring to  Exhibit THA-19. 
1350 Philippines' first oral statement, para. 186. 
1351 Thailand's second written submission, para. 266. 
1352 Philippines' second written submission, para. 318, Table 1. 
1353 Thailand's response to Panel question No. 155, referring to Philippines' second written submission, 
para. 318 (Table 1). 
1354 Thailand's response to Panel question No. 155,  referring to Philippines' second written submission, 
para. 318 (Table 1). 
1355 Appellate Body Report, EC – Poultry , para. 111. 
1356 Panel Report, US – Underwear , para. 7.65; Appellate Body Report, US – Underwear , p. 21, DSR 
1997:I, 11, at 29.The Appellate Body upheld the Panel's reasoning , which provided in relevant parts: 
 
"[T]he mere fact that the restraint at issue was an administrative order does not prevent us 
from concluding that the restraint was a measure of general application. ... to the extent that 
the restraint affects an unidentified number of economic operators, including domestic and 
foreign producers, we find it to be a measure of general application." 
 
1357 Panel Report, Japan – Film , para. 10.388. 
1358 Philippines' second written submission, para. 317; Thailand's second written submission, para. 266.  WT/DS371/R 
 Page 315 
 
 
  7.774  The parties however disagree on the scope of th e methodology that must fall within the scope 
of laws and regulations of genera l application under Article X:1.  
7.775  The Philippines argues that all elements presente d by Thailand before the Panel to explain 
how MRSP determinations were conducted form a gene ral methodology within the meaning of 
Article X:1.  In Thailand's view, the term met hodology only requires that im porters know what data 
are taken into account towards the MRSP determination.1359  
7.776  The term "methodology" is defined as "noun. 2.  A body of methods used in a particular 
branch of study or activity".1360  "Method" in turn is defined as "noun.  I. Procedure for attaining an 
object. 2. A mode of procedure; a (defined or syst ematic) way of doing a thing, esp. (with specifying 
word or words) in accordance with  a particular theory or as associated with a particular person".1361  
Based on the ordinary meaning, we understand "methodol ogy" to mean a set of procedures that lay 
down a defined or systematic way of doing things. 
7.777  In the course of this Panel proceeding, partic ularly in the context of the Philippines' claim 
under Article III:2 in respect of the determinati on of MRSPs, Thailand described to the Panel the 
methodology it generally applies fo r the determination of MRSPs.1362  Thailand stated: 
"MRSPs are determined according to genera lly-applicable criteria.  For the sake of 
clarity, the methodology bears repeating:  
• The primary source of the MRSP is the manufacturer's/importer's 
recommended retail price.  When th e manufacturer/importer wants to 
introduce a new brand or revise an MRSP, the manufacturer/importer informs Thai Excise of the proposed MRSP. 
• Thai Excise publishes a notice reflecting the new MRSP. 
• If any of the applicable tax rates ch anges, necessitating a revision in the 
MRSP, Thai Excise calculates the new MRSP by changing the relevant tax 
rates and holding all other elements of the MRSP, including the so-called 'marketing costs', constant.  The 'marketi ng cost' is derived by subtracting all 
other elements from the existing MRSP. 
• Manufacturers/importers may request changes in the MRSPs at any time to 
reflect changes in their c.i.f./ex factory prices, desired retailed prices, or other factors.  In these cases also, Thai  Excise calculates the new MRSP by 
changing the relevant c.i.f./ex factory prices, updating the tax amounts that 
are based on those figures, and holding the so-called 'marketing costs' 
                                                     
 
1359 Thailand's second written submission, paras. 355-356. 
1360 The New Shorter Oxford English Dictionary , (Fifth Edition) Oxford University Press, Vol. I, 
p. 1762 (2002). 
1361 The New Shorter Oxford English Dictionary , (Fifth Edition) Oxford University Press, Vol. I, 
p. 1762 (2002). 
1362 We note that in its second written submission (para. 245), Thailand described its methodology as 
comprising all the elements listed by the Philippines in its second written submission (para. 318, Table 1), including the methods and procedures thereof, and not just the eight elements examined by Thai excise for the 
purpose of the MRSP determination. WT/DS371/R 
Page 316  
 
  constant.  Again, the 'marketing cost' is derived by subtracting all other 
elements from the existing MRSP."
1363 
7.778  Thailand also explained that when it rejected requests for changes in the MRSP, Thai Excise 
could make adjustments consistent with the dual function of the MRSP as a maximum price to protect 
consumers and as the tax base for the VAT.1364  In our view, the general methodology, as described in 
detail above, that Thailand alleges is used for de termining the MRSPs, falls within the scope of the 
laws and regulations of general a pplication under Article X:1.   
7.779  We note Thailand's argument in this relation th at Article X:1 does not require every statement 
that was made before the Panel to be published.  In  concluding that Thailand's explanation in this 
proceeding of how the MRSPs are determined qua lifies as a rule of general application under 
Article X:1, we are not saying that every statem ent that a party makes in a panel proceeding falls 
within the scope of Article X:1.  The factual circ umstances of this case, particularly the absence of 
written rules and Thailand's detailed explanation of su ch rules for the first time in this proceeding, 
confirm that what Thailand itself alleges to be  its general methodology fo r determining the MRSPs 
must be considered as a rule of general app lication within the meaning of Article X:1. 
7.780  Moreover, we note that DG Excise relied on average price surveys conducted in neighbouring 
countries to determine the marketing co st component of MRSPs in 2006 and 2007.1365  This shows 
that Thailand resorted to alternative sources of  information to determine the marketing cost 
component of the MRSP when information provided by the importer was rejected.  In our view, to the 
extent that DG Excise has the systemic discret ion to deviate from its general methodology in 
determining the MRSPs as illustrated in the instan ces in 2006 and 2007, such a fact should also form 
part of the general methodology under Article X:1.1366 
Whether Thailand "published" the general met hodology for determining the MRSP in such a 
manner as to enable governments and tr aders to become acquainted with it  
Main arguments of the parties 
7.781  The Philippines claims that in order to satisfy the transparency requirements of Article X:1, 
Thailand cannot merely publish the final MRSP valu es determined by DG Excise because Article X:1 
requires, inter alia , that all laws and regulations pertaining to taxes or other charges be published 
promptly in such a manner as to enable government s and traders to become acquainted with them.1367  
The methodology used to determine the MRSP is cen tral to the calculation of the final MRSP and the 
failure to publish the methodology does not permit governments and traders to become acquainted 
with the process by which the cigarette tax base is established, nor does it allow them to verify that 
taxes imposed on domestic cigarettes are appropria te in comparison with taxes imposed on imported 
cigarettes.1368   
                                                      
1363 Thailand's second written submission, para. 245.  All but the introductory sentence is also found in 
Thailand's first written submission, paras. 83-89 and 135.  
1364 Thailand's first written submission, para. 89. 
1365 Thailand's first written submission, para. 96. 
1366 We find support for our view in this regard in the Panel's analysis in Dominican Republic - Import 
and Sale of Cigarettes .  That panel considered that when another method of determination was used by the 
Dominican Republic authorities, Article X:1 required th e publication of both the decision not to conduct the 
surveys, and the alternative method used to determine the cigarette tax base (Panel Report, Dominican Republic 
– Import and Sale of Cigarettes , para. 7.414). 
1367 Philippines' first written submission, paras. 447-448. 
1368 Philippines' first written submission, para. 448.  WT/DS371/R 
 Page 317 
 
 
  7.782  The Philippines continues that none of the follo wing elements, which are part of DG Excise 
methodology, were subject to publication: (i) the manufacturer's recommended retail price, which is 
the primary source for the MRSP; (ii) a guarantee de termined by DG Excise, which is an alternative 
source for the MRSP; (iii) DG Excise's review of the MRSP, and the criteria thereof; (iv) DG Excise's 
"normal" revision of the MRSP after tax changes im pacting the MRSP; (v) DG Excise's calculation of 
a new MRSP, after a revision, including  the c.i.f. price, the latest tax amounts and the marketing 
costs; and (vi) the marketing costs calculation based  on information given by the importer, or when 
this information is considered doubtful, the marketing costs as established by Thai Excise.1369 
7.783  The Philippines also notes that out of 38 MRSP Notices for imported cigarettes issued 
between 2001 and 2009, five MR SP Notices only included a rudimentary description of the MRSP 
calculation. It was only explained that DG Excise co mputed the c.i.f. price, customs duty, tobacco 
stamp, VAT, contribution to the health, TV and provi ncial taxes, and marketing margin.  However, it 
remains unclear how the VAT or marketing costs are calculated.1370  Moreover, none of the MRSP 
notices actually sets forth the methodology that Thailand has stated it is applying.1371 
7.784  Thailand  argues that the overall methodology used by DG Excise to determine MRSPs has 
been published in conformity with Article X:1 of the GATT 1994 through: (i) the preamble to all 
MRSP notices issued after August 2007 (these notices mention all of the eight components used to 
calculate MRSPs)1372, read in conjunction with (ii) Section 79/5 of the Revenue Code and Revenue 
Department Notification No. Por 85/2542 (relating to VAT imposed on cigarettes). 1373  
7.785  Thailand asserts that, contrary to the Philippi nes' allegations, the published rules enable 
importers to correctly calculate the VAT and mark eting costs. Regarding the VAT amount included in 
the MRSP, Thailand submits that the VAT can simply be calculated as 7 per cent of all other elements 
of the MRSP (i.e. VAT-exclusive price in this case).1374 Thailand has published an enactment 
(Section 79/5 of the Revenue Code)1375 and a notification (Revenue department notification 
No. Por 85/2542)1376 that clearly indicate that VAT on cigarettes is to be calculated in this way.1377  
Regarding the marketing costs, Thailand asserts that  Thai Excise makes no "accounting choice" in its 
determination. The marketing costs are calculate d by deducting all other known elements from the 
MRSP. The MRSP is based on information provided by the importer. Thus, Thailand argues that DG 
Excise does not make any choice which could influe nce the determination of the marketing costs. 
                                                      
1369 Philippines' second written submission, para. 318, Table 1, referring to Thailand's first written 
submission, paras. 83 and 87 and response to Panel question No. 41. 
1370 Philippines' first oral statement, paras. 164- 181; second written submission, para. 320; MRSP 
Notices of the Excise Department are in Exhibits PHL-61 (18 September 2006), PHL-77 (19 August 2008), 
PHL-99 (7 December 2005), PH L-100 (30 March 2007), PHL-104  (29 August 2007), PHL-106 
(17 August 2007), PHL-117 (8 Ma rch 2007), PHL-118 (18 December 2007), PHL-134 (13 May 2005), 
PHL-168 (14 May 2009) and PHL-204 (Overview of MRSP Notices). 
1371 Philippines' second written submission, para. 321. 
1372 Exhibit THA-45, PHL-105 (MRSP Notice of 19 August 2008 for imported cigarettes), and PHL-77 
(MRSP Notice of 29 August 2007 for domestic cigarettes).  The language used in all MRSP notices is identical 
and states that: "the Excise Department therefore fixes the [MRSP] ... by making a computation as based on the c.i.f. price, customs duty, tobacco stam p (i.e. excise tax), value added tax, contributions to th e health promotion 
fund, contributions to the Thai Public Broadcasting of Sound and Picture Foundation, contributions to provincial 
administration organization development, and marketing margin combined".  
1373 Thailand's second written submission, pa ra. 272; Exhibits THA-94 and THA-95. 
1374 Thailand's second written submission, para. 271. 
1375 Exhibit PHL-94. 
1376 Exhibit PHL-95. 
1377 Thailand's second written submission, para. 272. WT/DS371/R 
Page 318  
 
  Thailand therefore maintains that it is not under an obligation to publish or disclose anything, as it is 
not DG Excise who determines the marketing costs.
1378 
7.786  More generally, Thailand maintains that PM Th ailand and other importers were sufficiently 
familiar with the said methodology to enable them  to request and obtain changes to the MRSPs.1379  In 
fact, PM Thailand requested a change to its MRSP just weeks before its request for establishment of 
this Panel.1380  Moreover, the Philippines demonstrated its  familiarity with determining its RRSP for 
imported cigarettes, which uses the same elements as the MRSP determination.1381 
Analysis by the Panel 
7.787  We concluded above that the me thodology used by Thai Excise for determining the MRSP, as 
described and explained by Thailand in this proceed ing, constitutes rules of general application under 
Article X:1.  Having so determined, the next ques tion for us is whether that methodology has been 
published in such a manner as to enable importers  to become acquainted with it as required by 
Article X:1.  
7.788  It is not disputed that Thailand does not publish the methodology used by Thai Excise for 
determining the MRSP, as described and explained by  Thailand in this proceeding.  Instead, Thailand 
argues that it fulfilled its obligation to publish th e concerned rules of general application under 
Article X:1 by listing in the MRSP notices the eight  components comprising a given MRSP.  These 
eight components are: (i) c.i.f. or ex factory price;  (ii) customs duties (for importers only); (iii) excise 
tax; (iv) health tax; (v) television tax; (vi) local taxes; (vii) VAT; and (viii) marketing costs. 
7.789  We do not find, however, the publication of these eight components sufficient to fulfil 
Thailand's obligations under Article X:1.  The listing of the components consisting of the MRSP 
would not enable importers to become acquainted w ith the detailed rules pertaining to the general 
methodology within the meaning of Article X:1.  We  are of the view that for importers to become 
acquainted with the methodology for determining th e MRSP, it is important for them to become 
familiar with, for instance, how the information th ey provide is processed. Also, they need to be 
informed on how Thai Excise determines the marke ting costs where the information provided by 
importers  is not accepted.   
7.790  We note Thailand's argument that importers , including PM Thailand, have sought, and 
successfully obtained, MRSP revisions since 2007.1382  This does not prove, however, that importers 
were apprised of the specific principles and methods  that Thailand explained in this proceeding as the 
general methodology.  On the contrary, while PM Thailand regularly requested MRSP modifications 
and submitted information thereof, PM Thailand had only a limited understanding of the methodology 
actually applied by DG Excise.1383  
                                                      
1378 Thailand's second written submission, para. 273. 
1379 Thailand's second written submission, para. 269. 
1380 Thailand's second written submission, para. 269; response to Panel question No. 155. 
1381Thailand's comments on the Philippines' response to Panel questions, para. 134, referring to 
Philippines' response to Panel question No. 120. 
1382 Thailand's comments on the Philippines' response to Panel questions, para. 134, referring to 
Philippines' response to Panel question No. 120. 
1383 Philippines' first written submission, para. 449.  The Philippines explains that, including the 
September 2006 MRSPs, DG Excise has issued six MRSP Notices for PM Tha iland's brands since August 2006.  
PM Thailand has run numerous calculations using data available to it, but cannot reproduce the MRSPs as calculated by DG Excise.  Even with the benefit of the descriptions given by DG Excise in its administrative 
ruling and rebuttal submission, PM Thailand still canno t recreate or otherwise verify the September 2006  WT/DS371/R 
 Page 319 
 
 
  7.791  We therefore conclude that Thailand fa iled to publish the general methodology for 
determining the MRSP, and to enable governments and traders to become acquainted with it under 
Article X:1. 
(iii) Data used to calculate MRSPs for individual cigarette brands 
Whether the data used for determining the MRSP for individual cigarette brands falls within 
the scope of "laws, regulations or administ rative rulings of general application" under 
Article X:1  
Main arguments of the parties 
7.792  The Philippines  relies on the Panel's reasoning in Dominican Republic – Import and Sale of 
Cigarettes  to substantiate its claim that the data u sed to determine the MRSP for both imported and 
domestic brands should be published, together with all laws, regulati ons and administrative rulings of 
general application. 
7.793  The Philippines alleges that, in Dominican Republic – Impor t and Sale of Cigarettes , the 
Panel interpreted Article X:1 to require the publicati on of an imported cigarette average-price survey. 
The panel explained that this survey had been used  to determine the tax base for imported cigarettes, 
and was essential to this determination.1384 It reasoned that tax base decisions for imported cigarettes 
were administrative rulings of general application within the meaning of Article X:1, which requires 
their publication. The panel considered that all elem ents which were essential to the determination of 
these tax base decisions shall also be published, so that traders and governments become acquainted 
with the process of establishi ng the tax base for cigarettes.1385 The panel added that when another 
method of determination was used by the Dominican  Republic authorities, Article X:1 required the 
publication of both the decision not to conduct the surveys, and the alternative method used to 
determine the cigarette tax base.1386  
7.794  The Philippines claims that similar to the facts in Dominican Republic – Import and Sale of 
Cigarettes , data used by DG Excise towards MRSP calcul ations constitute "essential elements" of the 
MRSP Notice, which is an administrative ruling within the meaning of Article X:1 of the 
GATT 1994.1387 In this regard, the Philippines explains that the nature and content of the MRSP 
Notices are fundamentally dependent on a particular data set. According to the Panel statements in 
Dominican Republic – Import and Sale of Cigarettes  therefore, the data itself must be published as an 
essential part of the administrative ruling, to en able importers to unde rstand the rule properly.1388   
7.795  Regarding imported cigarettes, the Philippines s ubmits that Thailand mu st publish the average 
retail price surveys used by DG Excise to determine the marketing costs for imported cigarettes when 
it refused information provided by PM Thailand in 2006 and 2007.1389   
                                                                                                                                                                     
MRSPs, because it lacks the necessary da ta, even though the data allegedly relates to one of its own cigarette 
brands, Marlboro . 
1384 Philippines' first written submission, para s. 451-457 referring to Panel Report, Dominican Republic 
– Import and Sale of Cigarettes, paras. 7.405, 7.407 and 7.414. 
1385 Philippines' first written submission, para. 453,  referring to Panel Report, Dominican Republic – 
Import and Sale of Cigarettes , para. 7.407. 
1386 Philippines' first written submission, pa ra. 454, referring to Panel Report, Dominican Republic – 
Import and Sale of Cigarettes , para. 7.414. 
1387 Philippines' first oral statement, para. 188. 
1388 Philippines' response to Panel question No. 69. 
1389 Philippines' first oral statement, paras. 188-198 ; second written submission, paras. 358-368.  The 
Philippines however accepts that (i) the c. i.f. price for imported cigarettes; (ii) the customs duties and internal WT/DS371/R 
Page 320  
 
  7.796  Regarding domestic cigarettes, the Philippines claims that Thailand must publish the taxes 
and marketing costs applicable to the determin ation of the MRSP for domestic cigarettes. The 
Philippines declares that the taxes for domestic  cigarettes should be published because they can 
already be derived from published tax rates and published tax bases.
1390 The Philippines similarly 
alleges that marketing costs for domestic ciga rettes can be derived from information already 
published.1391 
7.797  Thailand  contests that the essential elements doc trine as set forth by the Panel in  Dominican 
Republic – Import and Sale of Cigarettes  triggers an obligation to publish data necessary to the 
determination of MRSPs. 
7.798  Thailand first submits that the Panel on Dominican Republic – Impor t and Sale of Cigarettes 
only required that the "results"1392 and the methodology of the marketing costs study be published, not 
the underlying data. In the same manner, Article X: 1 does not require that Thailand reveal the data 
used for the purpose of its mark eting costs calculation, but only th e results of this calculation. 
7.799  In addition, and more fundamentally, Thailand is  of the view that the Panel's decision in 
Dominican Republic – Import and Sale of Cigarettes  finds no justification in either the covered 
agreements or the GATT/WTO case law.1393 Thailand underlines that the main objective of 
Article X:1 is that laws, regulations and administra tive decisions of genera l application be published 
so that importers can adapt their business behaviour.1394 Article X:1 does not require other elements to 
be made public.  Hence, WTO Members are not requi red to publish data on which the administration 
relied for its determination, even when this data is an essential element of the determination, unless 
the data itself can be characterized as a law, regulation or administra tive ruling of general 
application.1395   
7.800  In this connection, Thailand argues that the data used by DG Excise in the MRSP 
determination process is company-specific. Sinc e it lacks the level of generality required by 
Article X:1, it is not covered by this Artic le, and no obligation lies on Thailand to publish it.1396  
According to Thailand, the marketing costs used by  DG Excise were derived, at least in part, from 
company specific information.1397 Thailand therefore distinguishes the current set of facts from the 
Dominican Republic – Import and Sale of Cigarettes case where (i) the data used to conduct the price 
surveys were obtained from public external sources, not from the companies themselves1398; and (ii) 
the marketing cost studies conducted by the Domi nican Republic authorities were applied to an 
unidentified number of  companies generally.1399  
                                                                                                                                                                     
taxes applicable to imported cigarettes; and (iii) the mark eting costs for imported cigarettes when they are based 
on the importer's information, cannot be published by Thai  Excise for confidentiality reasons (Philippines' first 
oral statement, para. 197; combined response to Panel question Nos. 157 and 158). 
1390 Philippines' first oral statement, para. 194 and footnote 211. 
1391 Philippines' second written submission, para. 367. 
1392 Thailand's second written submission, para. 284, referring to Panel Report, Dominican Republic – 
Import and Sale of Cigarettes , para. 7.404. 
1393 Thailand's second written submission, paras. 277-283. 
1394 Thailand's response to Panel question No. 66. 
1395 Thailand's second written submission, para. 281. Th ailand recalls the Appellate Body statements in 
India – Patents , (Appellate Body Report, India – Patents , para. 45) cautioning panels against imputing into a 
treaty "words that are not there", and "concepts that were not intended". 
1396 Thailand's response to Panel question No. 67. 
1397 Thailand's comments on the Philippines' response to Panel questions, para. 136. 
1398 Thailand's response to Panel question No. 66 ; second written submission, paras. 276-278. 
1399Thailand's first written submission, para. 322, referring to Panel Report, Dominican Republic – 
Import and Sale of Cigarettes , paras. 7.404-7.408.  WT/DS371/R 
 Page 321 
 
 
  7.801  Thailand further asserts that price surveys used by the Thai administration in 2006 and 2007 
are not covered by Article X:1 of the GATT 1994, and therefore are not required to be published. 
7.802  The Philippines  argues that it is doubtful that actual co mpany data were used to calculate the 
marketing costs for the MRSPs, because the costs app ear to have been calculated indirectly, without 
data.1400  The Philippines also submits that  for the September 2006, March 2007 and August 2007 
MRSPs, the marketing costs for both L&M  and Marlboro  were based on international price 
surveys1401 regarding the cigarette markets in neighb ouring countries. These surveys were delivered 
by a private, independent commercial research or ganization (i.e. PricewaterhouseCoopers Worldtrade 
Management Services) and nothing indicates that  it had access to information provided by 
PM Thailand.1402  This suggests that for 2006-2007, the ma rketing costs used to calculate MRSPs for 
both L&M  and Marlboro  were not derived from inform ation provided by PM Thailand.1403   
Analysis by the Panel 
7.803  We now address the question of wh ether the data used to calcula te the MRSPs constitute rules 
of general application within the meaning of Article X:1.  
7.804  As recalled earlier, the Ap pellate Body underlined in EC – Poultry 1404 that Article X only 
applies to rules of "general application".  We also found that the methodology for determining the 
MRSP is a rule of general a pplication under Article X:1. 
7.805  The Philippines claims that data used by DG Excise to calculate MRSPs for both imported 
and domestic cigarettes must be published because they are essential elements for the MRSP 
determination and thus an administrative ruli ng of general application under Article X:1. 
7.806  As Thailand submits, however, we find that data  necessary for determining an MRSP, such as 
the c.i.f. price, customs duties, and internal taxes and marketing costs, are essentially company-
specific, rather than generally applicable to a ll companies.  We also note that the Philippines 
acknowledges that these four specific items are busi ness-derived confidential data, which are by 
definition company-specific.  As such, the data used for such components of the MRSP cannot be 
considered as rules generally and prospectively applicable. 
7.807  Regarding the Philippines' contention that we  should nonetheless follow the essential element 
test adopted by the Panel in Dominican Republic – Import and Sale of Cigarettes1405 to find that the 
average price surveys conducted in 2006 and 2007  were essential to the MRSP determination, we 
consider that the factual circumstances under which such a test was used in that dispute must be 
distinguished from the factual circumstances presented in the current dispute.  In Dominican Republic 
– Import and Sale of Cigarettes , the average price surveys used by the Dominican Republic Central 
Bank to determine the tax base for domestic cigarett es were based on publicly available information 
and could potentially be used to determin e the tax base for all domestic cigarettes.1406  Specifically, 
                                                      
1400 Philippines' first oral statement, pa ra. 195, referring to Exhibit THA-19. 
1401 Philippines' second written submission, para. 352. 
1402 Thailand's response to Panel question No. 50; Exhibit THA-44. 
1403 Philippines' second written submission, para. 352,  referring to Thailand's response to Panel 
question No. 41. 
1404 Appellate Body Report, EC – Poultry , para. 111. 
1405 Panel Report, Dominican Republic – Import and Sale of Cigarettes , paras. 7.400-7.406.  The panel 
found that "while the [average price] surveys may have  not been, in themselves, laws, regulations, judicial 
decisions or administrative rulings of general application, they would constitute an essential element of an 
administrative ruling: the determination of the tax base for cigarettes" (Panel Report, Dominican Republic – 
Import and Sale of Cigarettes , para. 7.405). 
1406 Panel Report, Dominican Republic – Import and Sale of Cigarettes , para. 7.318. WT/DS371/R 
Page 322  
 
  Article 367(b) of the Dominican Republic tax code authorized the central bank to resort to price 
surveys for this purpose.   
7.808  In this dispute, as Thailand submits, the pr ice surveys conducted in 2006 and 2007 were 
tailored based on the data concerning Marlboro cigarettes in the neighbouring countries.
1407  Thus, the 
surveys were conducted on a company-specific basi s, listing the average retail prices only for 
Marlboro  cigarettes in the neighbouring countries.  Furthermore, Thai Excise used the results of the 
price surveys to determine the marketing cost s applied to the calculation of the MRSPs for Marlboro 
and L&M , but not the marketing costs generally ap plicable to the MRSPs for all cigarettes.1408   
7.809  For the foregoing reasons, we find that the data  used for determining the MRSPs are not an 
administrative ruling of general applicati on within the meaning of Article X:1. 
7.810  Regarding the data necessary for the determin ation of the MRSP for domestic cigarettes, the 
Philippines argues that Thailand must publish the taxe s and marketing costs applicable to TTM.  The 
Philippines alleges that publicati on of this information should not be an issue because the relevant 
data was either published or  could be derived from publicly available information.1409  The Philippines 
however failed to demonstrate that the data curre ntly published was insufficient to satisfy the 
obligations under Article X:1.  In the absence of such arguments and as the data necessary for 
determining the MRSPs for domestic cigarettes are already available, either directly through publication or through simple deducti ons, we conclude that the data for domestic cigarettes are  
sufficiently published.  We therefore do not find it necessary to examine whether this data constitutes 
"laws, regulations, judicial decisions or administra tive rulings of general application" within the 
meaning of Article X:1. 
Whether the publication of the data used to cal culate MRSPs for individual cigarette brands
 
would amount to disclosing "confidential inform ation" within the meaning of Article X:1   
Main arguments of the parties 
7.811  Thailand  claims that even if the data used to determine the MRSPs fall within the scope of 
rules of general application under Article X:1, none  of the data mentioned by the Philippines should 
be published because Article X:1, third sentence carves out confidential information from the 
requirements of Article X:1 first and second sentence.1410  In response to th e Philippines' argument 
that Article X:1 imposes on Thailand the obligation to publish data related to imported and domestic 
cigarettes that form an essential part  of the determination of specific MRSPs1411,  Thailand argues that 
publication of such data would result in a confiden tiality breach, in violation of Article X:1, third 
sentence.  
7.812  In particular, Thailand distinguishes the price surveys at issue here from the ones examined 
by the Panel in Dominican Republic – Import and Sale of Cigarettes.  Thailand first underlines that 
                                                      
1407 Philippines' first written submission, para. 437. 
1408 In this connection, we recall our conclusion in para. 7.780 above that the use of price surveys, such 
as those conducted in 2006 and 2007, and the method adop ted for such price surveys may fall under the scope of 
rules of general application to the extent that they form part of the general methodology for determining the MRSP. 
1409 Philippines' first oral statement, para. 194; s econd written submission, para. 367. The Philippines 
declares that the ex factory price fo r domestic cigarettes is already published, and that the taxes for domestic 
cigarettes could be derived from published tax rates and pu blished tax bases. The Philippines also observes that 
marketing costs for domestic cigarettes can be derived from information already published. 
1410 Thailand's response to Panel question No. 66 , paras. 188-190; Thailand's second written 
submission, paras. 276-278. 
1411 Philippines' first oral statement, paras. 188- 198; second written submission, paras. 358-368.  WT/DS371/R 
 Page 323 
 
 
  the sources of the data respectively used for the purpose of the price surveys vary. Unlike the price 
surveys at issue in Dominican Republic – Import and Sale of Cigarettes , which consisted of data 
obtained from public external sources; in this disput e the data used to establish the MRSPs is provided 
by the companies themselves and access to other co mpanies' confidential data is not necessary to 
enable traders to become acquainted w ith the process of determining the MRSP.1412  Thailand explains 
that Thai Excise derives marketing costs by subtracti ng the c.i.f. price and duties and taxes paid to the 
government from the MRSP proposed by the manufacturer/importer.1413   
7.813  Thailand also points out the consequences of publishing the price surveys used by DG Excise, 
even in indexed format as required by the Philippi nes. Thailand names three main confidentiality risks 
connected with such publication. First, the figur es in the surveys could still be used to derive 
confidential information, such as previously-publishe d marketing costs, and s how trends and changes 
in those costs.  Second, since ex factory/c.i.f.  prices and the marketing costs are the only unknown 
variables in the MRSP calculation, the publication of marketing costs, even in indexed format, could 
allow competing firms to back into the calculation of  the c.i.f. values.  Finally, the fact that some 
importers had their determined marketing co sts replaced by a government-fixed proxy in itself  would 
show a disagreement with the government about th e tax base and could cause competitive harm to the 
importer.1414 
7.814  Regarding Thailand's position on the confidential nature of the data used to determine the 
MRSPs, the  Philippines argues that for imported cigarettes, Thailand should publish the amount of 
the proxy it uses, at the very least in indexed form at when the marketing cost information given by the 
importer is refused by DG Excise.1415  The Philippines however accepts that (i) the c.i.f. price for 
imported cigarettes1416; (ii) the customs duties and internal taxes applicable to imported cigarettes1417; 
and (iii) the marketing costs for imported ciga rettes when they are based on the importer's 
information1418, cannot be published by Thai Excise for confidentiality reasons. 
7.815  The Philippines also argues that a non-confidentia l version of an administrative ruling can 
still be characterized as a ruling under Article X:1 of the GATT 1994.1419 Therefore, even though it is 
in a different form than the original one, the non-c onfidential version of the administrative ruling must 
be published.1420  Hence, the Philippines argues that  non-confidential versions of MRSP 
determinations should be published, which would serve both the interests of transparency and the 
need to protect confidential business information.1421  
7.816  As for domestic cigarettes, the Philippines argue s that Article X:1 of the GATT requires that 
taxes and marketing costs in relation to domestic ciga rettes must be published, as this information can 
be drawn from data already made public.1422 
                                                      
1412 Thailand's second written submission, para. 283. 
1413 Thailand's responses to Panel question No. 114. 
1414 Thailand's comments on the Philippines response to Panel questions following the second 
substantive meeting, para. 136. 
1415 Philippines' combined response to Panel question Nos. 157 and 158. 
1416 Philippines' first oral statement, para. 197. 
1417 Philippines' first oral statement, para. 197. 
1418 Philippines' combined response to Panel question Nos. 157 and 158. 
1419 Philippines' combined response to Panel question Nos. 157 and 158. 
1420 Philippines' combined response to Panel question Nos. 157 and 158. 
1421 Philippines' combined response to Panel question Nos. 157 and 158. 
1422 Philippines' first oral statement, para. 194; s econd written submission, para. 367. The Philippines 
underlined that the ex factory price for imported cigarettes, and the tax rates and tax bases for imported 
cigarettes are already published.  WT/DS371/R 
Page 324  
 
  Analysis by the Panel 
7.817  As we found above that the data used to dete rmine the MRSP do not fall within the scope of 
administrative rulings of general application, it  is not necessary for us to continue with an 
examination of the question of whether the publi cation of such data would amount to disclosing 
"confidential information" within the meaning of Article X:1.   
7.818  However, even if we were to proceed to examin e the parties' arguments in this regard, we do 
not find, for the following reasons, that the Philippines has established its  prima facie case that even if 
Thailand were exempted from the obligation to pub lish the relevant data based on the confidential 
nature of such data, Thailand is nonetheless ob liged to publish such data under Article X:1. 
7.819  Thailand essentially argues that given that the th ird sentence of Article X:1 provides that the 
provisions of Article X:1 shall not require any WT O Member to disclose confidential information, 
Thailand is not obliged to publish the data used for determining the MRSPs because such data are 
confidential information.  The Philippines also appears to accept Thailand's position as it 
acknowledges that data such as the c.i.f. price, inte rnal taxes, the marketing costs, even in indexed 
format, are confidential information.
1423  In our understanding, the Philippines' sole remaining 
argument in this connection is that a non-confidential version of an administrative ruling still must be 
published.  We, however, do not find such an obligation in the text of Article X:1.  
(d) Methodology and data for determining ex factory prices 
(i) Introduction 
7.820  The Philippines claims that Thailand must pub lish the methodology and data for determining 
ex factory prices, one of the components of the MRSP for domestic cigarettes, because the 
methodology and data are essential elements for determ ining ex factory prices, which are themselves 
administrative rulings of general application within  the meaning of Article X:1.  The Philippines' 
claims with respect to the methodology and data  used for the determination of the MRSPs for 
domestic cigarettes are therefore premised on its position that ex factory prices are administrative rulings of general application under Article X:1.  Thailand argues that ex factory prices do not fall 
within the scope of Article X:1.   
7.821  We will therefore first examine whether ex factor y prices fall within the scope of Article X:1.  
If they are found to fall outside the scope of Article  X:1, the Philippines' claim with respect to the 
methodology and data necessary for the establishment of ex factory prices will also fail.  
(ii) Ex-factory prices – whether the ex factory price determination is an administrative ruling of 
general application within the meaning of Article X:1 
Main arguments of the parties 
 
7.822  The Philippines  submits that the ex factory price fa lls within the scope of Article X:1, 
because it is a "regulation" or "administrative ruling" pertaining to "taxes or other charges".1424  The 
Philippines relies on the Appellate Body statement in EC – Poultry  that a ruling has general 
                                                      
1423 Philippines' combined response to Panel question Nos. 157 and 158. 
1424 Philippines' first written submission, para. 641; first oral statement, para. 254.  WT/DS371/R 
 Page 325 
 
 
  application within the meaning of Article X:1 if it establishes "principles or criteria applicable in 
future cases ... [that] affect ... an unid entified number of economic operators".1425 
7.823  The Philippines argues that the ex factory pr ice establishes, on a general and prospective 
basis, a tax base for the imposition of the excise, health and television taxes on domestic cigarettes.1426  
In addition, the ex factory price serves as a basi s for the MRSP applicable to domestic cigarettes.1427  
By impacting the tax rates applicable to domestic ci garettes, the determination of the ex factory price 
prospectively "affects a large and undefined number of economic operators" within the meaning of the 
EC – Poultry  statement above. The affected agents include  wholesalers, retailers, and consumers of 
TTM's cigarettes.1428   
7.824  Thailand  contests that the ex factory price falls with in the scope of Article X:1. According to 
Thailand, ex factory prices are not administrative rulings of general app lication. Rather, they 
constitute private determinations bot h in their origin and application.  First, ex factory prices only have 
a company-specific, private applica tion. They only apply to and set the excise, heath and television 
tax base for a single entity, TTM.1429  The Appellate Body has clar ified that company-specific 
measures are not measures of general applicati on within the meaning of Article X:1 of the 
GATT 1994.1430 Thailand asserts that ex factory prices theref ore fall outside the scope of Article X:1. 
Second, regarding their origin, Thailand underlines that TTM itself, not the Thai administration, 
calculates the ex factory price.1431  TTM is only required to maintain its accounts in accordance with 
generally-accepted accounting principles ("GAAP").1432  Thai Excise is nowhere involved and does 
not have any methodology or rules prescribing a part icular accounting method or standard for TTM in 
determining the ex factory price.1433  Thus, the determination of ex factory prices cannot be qualified 
as an "administrative" act, and there cannot be  an obligation to publish it, or its underlying 
methodology. 
Analysis by the Panel  
7.825  To determine whether ex factory prices are administrative rulings of general application 
within the meaning of Article X:1, we will start our analysis with the ordinary meaning of the term.  
"ex factory" is defined in the ICC guide to In coterms as follows: "Ex work s means that the seller 
delivers when he places the goods at the disposal of  the buyer at the seller's premises or another 
named place (i.e.: works, factory, warehouse) not cleared for exports and not  loaded on any collecting 
vehicle".1434 The ex factory price is therefore the pr ice, exclusive of customs clearance and 
transportation costs, applicable to the merchandi se when the manufacturing process is completed and 
the goods are ready to be handed over to a buyer. 
7.826   The ex factory price, as a general concept, thus can be understood as the price of a good 
being decided by each individual firm in accordance with its own costs and business strategies.1435  In 
other words, it is the result of an internal decisi on-making process, conducted on a firm-by-firm basis.  
                                                      
1425 Philippines' second oral statement, para. 126, referring to Appellate Body Report, EC – Poultry , 
para. 113. 
1426 Philippines' first written submission, para. 641; first oral statement, para. 254. 
1427 Philippines' first oral statement, para. 251. 
1428 Philippines' response to Panel question No. 162. 
1429 Thailand's second written submission, para. 287. 
1430 Thailand's first written submission, para. 317 referring to Appellate Body Report, EC – Poultry , 
para. 110, citing  Panel Report, EC – Poultry , para. 269. 
1431 Thailand's response to Panel question No. 160(1); Exhibit THA-24. 
1432 Thailand's response to Panel question No. 160(1). 
1433 Thailand's response to Panel question No. 161. 
1434 Exhibit THA-23, p. 69. 
1435 Thailand's second written submission, para. 288. WT/DS371/R 
Page 326  
 
  Therefore, unless it can be shown, by supporting evid ence, that a government is somehow involved in 
determining the ex factory price of certain goods, the ex factory price cannot be characterized as an 
administrative ruling of general a pplication under Article X:1 as it is a business decision made by an 
individual company. 
7.827  In Thailand, TTM is the only domestic ciga rette manufacturer whose MRSP determination is 
based on, inter alia , the ex factory price figure.  While TTM is  a state enterprise, that does not in itself 
constitute a proof that the Thai government determin es ex factory prices of TTM's cigarettes.  Neither 
are we presented with evidence suggesting that this  is the case or TTM is bound by guidelines or rules 
imposed by the Thai administration in making its ex factory price determination .  On the contrary, the 
role of the Thai administration appears to recei ve and process ex factory prices declared by TTM.
1436 
7.828  We note the Philippines' argument that the ex  factory price determination falls under 
Article X:1 because it affects entities and consumers active in the cigarettes market.  The concerned 
determination indeed serves as a basis for the MRSP and the taxes applicable to domestic cigarettes. 
We are, however, of the view that this interpre tation goes beyond the intende d scope of the Appellate 
Body's statement in US – Underwear  that measures of general application are those which "affect ... 
an unidentified number of economic operators".1437  The Philippines' interpretation would 
impermissibly broaden the scope of this argument to virtually all ad ministrative determinations falling 
under Article X:1.  In this connection, we note that the MRSP, not the ex factory price, is the basis for taxes applicable to domestic cigarettes. The ex f actory price is only one component in the calculation 
leading to the MRSP determination.  The Philippin es has not clarified the consequential link between 
the ex factory price and its impact on operators activ e in the Thai domestic market for cigarettes.   
7.829  For the foregoing reasons, we conclude that ex factory prices are not administrative rulings of 
general application within the m eaning of Article X:1.  Having so  found, we need not address the 
Philippines' claim under Article X:1 that the methodology and data used for determining ex factory prices, as essential elements to such a determin ation, must be published in accordance with the 
obligations under Article X:1. 
(e) Rules relating to the release of guarantees pl aced for health, excise and television taxes 
(i) Introduction  
7.830  As explained in Section VII.I.2 below, in situ ations where it becomes necessary to delay the 
final determination of the customs value, Thaila nd enables an importer to withdraw its goods from 
customs if the importer provides sufficient guarant ees for payment of potential customs duty and 
excise, health, and television tax liabilities.
1438   
7.831  The amount of these guarantees is based on a guarantee value assigned by Thai Customs to 
each brand of imported cigarettes.1439  The importer pays the customs duties and internal taxes due on 
the declared customs values, and provides a guara ntee for the duties and internal taxes due on the 
difference between the declared transaction value and the guarantee value.1440  The guarantees remain 
                                                      
1436 Clause 1 of the Excise Department Notification on the "Declared Prices of Shredded Tobacco or 
Tobacco at the Tobacco Factory" states in this rega rd: "The tobacco manufacturer  shall declare prices of 
shredded tobacco or tobacco at [the] tobacco factory to the Director-General of the Excise Department on the 
form attached hereto" (Exhibit THA-24). 
1437 Panel Report, US – Underwear , para. 7.65; Appellate Body Report, US – Underwear , p. 21, DSR 
1997:I, 11, at 29. 
1438 Philippines' first written submissi on, para. 633; Exhibit PHL-20. 
1439 Philippines' first written submission, para. 634. 
1440 Philippines' first written submission, para. 634; first oral statement, para. 264, referring to 
Exhibit PHL-147.  WT/DS371/R 
 Page 327 
 
 
  in place until Thai Customs ha s assessed the customs va lue for a given shipment.1441  The definitive 
liability for customs duties, as well as for the excise, health and televisi on taxes, is then calculated on 
the basis of the assessed customs value.1442  When the assessed customs value is lower than the 
guarantee value, the importer’s final liability for cu stoms duty and internal taxes will be lower than 
the amount secured by the guarantee.1443   
7.832  The Philippines claims that Thailand violates Arti cle X:1 because it fails to publish its rules of 
general application relating to the release of guarantees.  To examine the Philippines' claim in this 
regard, we must consider the following two ques tions.  First, whether the Philippines proved the 
existence of laws, regulations, judicial decisions or administrative rulings  of general application 
relating to the release of guarantees made effectiv e by Thailand; and second, if they do exist , whether 
Thailand has promptly published these rules of gene ral application in such a manner as to enable 
governments and traders to become acquainted with them. 
(ii) Whether Thailand maintains rules of general application relating to the release of guarantees 
Main arguments of the parties  
7.833  The Philippines argues that a general rule on the release of guarantees appears to exist in 
Thailand.1444  The Philippines argues that although Thailand recognizes a right to a release of 
guarantees placed for excise, health, and television ta xes, it fails to publish its rules of general 
application relating to such a release.1445  The Philippines points to Th ailand's admission that Thai 
Customs does process the requests for the release of guarantees through a departmental practice.1446  
This, according to the Philippines, suggests that a rule of general application is generally being 
followed by Thai Customs in th e release process, which under Article X:1 of the GATT 1994 must be 
published.   
7.834  In particular, the Philippines submits that the basic procedural steps that an importer should 
follow to exercise its right to the release of those guarantees should be published.1447  Specifically, the 
Philippines requests the Panel to contrast the lack of published rules and procedures on the release of 
guarantees with the very detailed rules published on the refunds of customs duties which provide the 
following information: (i) the customs office to whic h a refund request must be  made; (ii) the personal 
identification documents the requesting person or entity  must present; (iii) the circumstances in which 
the person or entity can issue a power of attorney for third person representation; (iv) the documents 
and additional information that must be presented; (v) the form of the customs authority's response; 
and (vi) the precise manner in which the refund is  transferred to the requesting person or entity.1448  
7.835  The Philippines argues that if Thai law does not  provide a general rule on the release of 
guarantees, Thailand would violate its WTO oblig ations for an unreasonable and non-uniform 
administration.1449 
                                                      
1441 Philippines' first written submission, para. 635. 
1442 Philippines' first written submission, para. 635. 
1443 Philippines' first written submission, para. 635. 
1444 Philippines' first oral statement, para. 259. 
1445 Philippines' first written submission, para. 651. 
1446 Philippines' response to Panel question No. 166; se cond oral statement, pa ra. 128, referring to 
Thailand's second written submission, para. 296. The Philippines notes that a series of routine administrative 
decisions also constitutes a "measure" within  the meaning of Article 6.2 of the DSU. 
1447 Philippines' first written submission, para. 652; second written submission, para. 524. 
1448 Philippines' first oral statement, para. 259; response to Panel question No. 72.  
1449 Philippines' first oral statement, para. 258. WT/DS371/R 
Page 328  
 
  7.836  Thailand  claims that the release of guarantees is governed by the provisions of the Customs 
Act governing the final assessment of customs duties, namely Sections 112 bis and 112 quater of the 
Customs Act.
1450  In Thailand's view, because the release of  guarantees takes place in the context of 
the final assessment, there is no need for a provisi on of law other than the provisions governing final 
assessment to address separately the release of guarantees. 
7.837  Thailand argues that for an obligation under Article X:1 to publish a rule of general 
application to arise, there must exist a rule of ge neral application.  Article X:1 does not require WTO 
Members to promulgate particular laws; it requir es only that WTO Members publish existing laws of 
general application.  Thailand submits that the Philip pines, as a complainant, must meet the standard 
established by the panel in Japan – Film  to "clearly demonstrate th e existence of ... unpublished 
administrative rulings in individual matters which es tablish or revise principles applicable in future 
cases".1451  Thailand considers that the Philippines has fa iled to identify an existing rule of general 
application under Thai law that  Thailand has failed to publish.1452   
7.838  Thailand argues that while, "as a general matter", the guarantees are to be refunded on the 
final assessment of the goods1453, the release of guarantees is not gove rned by detailed rules of general 
application.  In particular, it has not promulgated any law or regulation of general application setting 
out the procedural steps that an importer must follow to claim a release of guarantees.1454  Rather, 
Thai customs administers the release of guarantees through departmental practice and through the exercise of administrative discretion as part of the process of final assessment of duties.  In the overwhelming majority of cases, the release  of guarantees occurs without incident.
1455  Thailand thus 
claims that the Philippines has failed to demonstrat e the existence of a law or regulation of general 
application made effective by the Thai administration.1456   
7.839  In Thailand's view, the Philippines' claim rath er requires the adoption or promulgation of a 
norm of general application concerning the release of guarantees.1457 Thailand takes the position that 
this claim falls outside the scope of Article X:1,  which only requires the publication of existing norms 
of general application.1458 
Analysis by the Panel  
7.840  As observed above, Article X:1 requires WTO Me mbers to promptly publish their trade laws 
and regulations of general appli cation in such a manner as to enable governments and traders to 
become acquainted with them.   
7.841  Regarding the release of guarantees deposited by importers for excise, health, and television 
taxes, the Philippines claims that Thailand shoul d publish both a rule concerning "an unambiguous 
right to the release of guarantees" as well as th e specific "procedural rules providing sufficient 
guidance on how guarantees are released".1459  Thailand submits that it does not maintain specific 
procedures or rules applied generally to the release of guarantees.  It argues that the Philippines, as a 
complainant bringing a claim under Article X:1, must  first demonstrate the existence of the relevant 
rules of general application in Thailand that th e Philippines argues Thailand failed to publish.   
                                                      
1450 Thailand's first written submission, para. 325.  
1451 Panel Report, Japan – Film , para. 10.388. 
1452 Thailand's first written submission, para. 326; response to Panel question No. 74. 
1453 Philippines' first oral statement,  para. 259 referring to Thailand's first written submission, para. 111. 
1454 Thailand's second written submission, para. 296. 
1455 Thailand's second written submission, para. 296. 
1456 Thailand's response to Panel question No. 74. 
1457 Thailand's response to Panel question No. 74. 
1458 Thailand's first written submission, para. 326; second written submission, para. 296. 
1459 Philippines' first oral statement, paras. 415-420.  WT/DS371/R 
 Page 329 
 
 
  7.842  We first recall the Appellate Body' statement in US – Wool Shirts and Blouses  regarding the 
burden of proof principle in WTO dispute settlement  proceedings that " a party who asserts a fact, 
whether the claimant or the respondent, is respons ible for providing proof thereof [...] If the party 
adduces evidence sufficient to raise a presumption that what is claimed is true, the burden then shifts 
to the other party, who will fail unless it addu ces sufficient evidence to rebut the presumption".1460  In 
the context of the Philippines' claim under Article X:3(a) relating to the release of guarantees, the 
Philippines is asserting that Thailand does mainta in rules of general application governing the 
procedures for the release of guarantees.  Therefore,  the Philippines, as a party asserting this specific 
claim, must demonstrate the existence of the unpubl ished rules or procedures that Thailand generally 
applies in releasing the guarantees. 
7.843  First, we will address whether the Philippin es has proved that Thailand maintains a general 
rule concerning a right to the release of guarantees  within the meaning of Article X:1.  To support its 
position that Thailand maintains a general rule in this regard, the Philippines refers to, inter alia , 
Thailand's statement that the "guarantees are to be refunded on the final assessment of the goods."1461  
Thailand does not dispute the existence of this gene ral rule, namely a rule governing the right to the 
release of guarantees, either.  Thailand specifically submits that Sections 112 bis and 112 quater  of the 
Customs Act constitute laws of general appli cation that govern the release of guarantees.1462  
Therefore, Thailand's contention is rather that its rules on the release of  guarantees are already 
"specifically" published in the provisions of th e Customs Act governing the final assessment of 
customs duties.  This is a question that we addres s in the subsequent part of this section regarding 
whether the relevant provisions in the Thai Customs Act are sufficient to enable traders to become 
acquainted with the rules on guarantee release.  
7.844  We now move on to the parties' arguments on the question of whether Thailand maintains 
specific procedural rules applied generally to the release of gua rantees.  The Philippines submits that 
basic procedural steps that an importer should follow to exercise its right to the release of those guarantees should be published.  Thailand argues that  it has not promulgated any law or regulation of 
general applications setting out the procedural steps that an importer must follo w to claim a release of 
guarantees and so consequently there are no generally  applicable procedural steps to be published.
1463   
7.845  The Philippines submits that PM Thailand has obtained the release of bank guarantees for 
excise, health and television taxes in the past, for example, in July 2008.1464  However, the Philippines 
does not explain the procedural step s that PM Thailand in fact follow ed in the process of obtaining the 
release of guarantees in such instances, while it ex emplified the specific procedural rules that it 
alleges Thailand must publish in relation to the release of guarantees.1465  Therefore, we are not 
presented with any evidence enabli ng us to identify the procedural rules of general application 
                                                      
1460 Appellate Body Report, US – Wool Shirts and Blouses , p. 335. 
1461 Philippines' first oral statement, para. 259, referring to Thailand's first written submission, 
para. 111. 
1462 Thailand's first written submission, para. 325; response to Panel question No. 74. 
1463 Thailand's second written submission, para. 296. 
1464 Philippines' first written submission, para. 651. 
1465 The Philippines, for example, contrasts the lack  of rules and procedures on the release of 
guarantees with the detailed procedural rules that exist for refunds of customs duties as laid out in the "Notification of Department of Cust oms No. 97/2542, Re: The procedures to receive the check refund, tax and 
duty and other income" provides published rules governing the refund of customs duties (Philippines' response 
to Panel question No. 72; Exhibit PHL-184).  The Philippines notes that the above Notification sets forth rules governing the refund of customs duties only. 
The only reference by the Philippines to an actual action taken by Thai Customs in relation to the 
release of guarantees for the internal  taxes is the instance where Thai Cu stoms handed over to PM Thailand the 
original document containing certain bank guarantees when it returned such guarantees (Philippines response to 
Panel question No. 73, footnote 26). WT/DS371/R 
Page 330  
 
  currently maintained by Thailand regarding the re lease of guarantees that should be subject to the 
publication requirement under Article X:1.   
7.846  In this connection, we also take note of certa in Philippines' statements  such as the following: 
"there are no procedural rules providing sufficien t guidance on how guarantees are released"; "it was 
instructive to contrast the lack of rules and procedures on the release of guarantees  with the very 
detailed procedural rules that exist for refunds of customs duties. "
1466  Expert opinions produced by 
the Philippines also tend to confirm that there is no provision in Thai law that governs the process for 
the release of guarantees.1467  Although it is not entirely clear to us, we assume the Philippines' 
arguments to imply that  no written rules exist on the procedures governing the release of guarantees.  
If that was the Philippines' position, however, it s hould have at least drawn our attention to the 
"practice" relied on by Thai Customs in previous instances where the guarantees were released.  This, 
in our view, would have helped to establish the exis tence of procedural rules of general application 
maintained by Thailand in releasing the guarantees.1468   
7.847  The Philippines points to Thailand's statement that  its operation of the release of guarantees is 
based on departmental practice which is routine a nd applied without incident in the overwhelming 
majority of cases.1469  The Philippines considers that this statement highlights Thailand's admission 
that a rule of general application is being follo wed by Thai Customs in the releasing process, which 
must be published under Article X:1.1470  Thailand did not, however, elaborate on its statement in this 
regard by, for example, specifying the content of its departmental practice.  Neither has the Philippines put forth any specific ex amples of such practice.  In the absence of evidence showing a 
practice or repeated actions that can be considered  as constituting a general rule, Thailand's reference 
to a "departmental practice" appears to mean th at decisions on the release of guarantees for the 
internal taxes are made, in practice, on a discretionary basis.   
7.848  In our view, as the Philippines itself acknowledges, if its own claim pertains to the absence of 
the specific procedural rules generally applicable to  the release of guarantees for the internal taxes,  
such a claim should have been brought more properl y under Article X:3(a).  For instance, referring to 
the procedural rules governing the refund of cust oms duties, provided in the "Notification of 
Department of Customs No. 97/2542, Re: The pro cedures to receive the check refund, tax and duty 
and other income", the Philippines submits that the existence of such detailed and explicit rules and 
procedures for customs duty refunds further high lights the absence of equivalent provisions for 
                                                     
 
1466 Philippines' response to Panel question No. 72 (italics in original, underline omitted). 
1467 Philippines' first oral statement, para. 259, referring to Exhibit PHL-151; response to Panel 
question 165, referring to Exhibits PHL-183 and PHL-265. See "Revised Expert Opinion of Mr. Piphob Verahpong", PHL-182, para.11.2 ("Based upon my review  of the Tobacco Act, Heath Tax Act and Television 
Tax Act, I find that there are no provisions governing the legal process by which release of guarantees for 
excise, health and television tax can be secured."), and "Revised Expert Opinion of Professor Dr. Prasit Aekaputra", PHL-183, para. 5 ("Based upon my review of the Tobacco Act, Heath Tax Act and Television Tax 
Act, I find that there are no provisions governing the legal process by which release of guarantees for excise, 
health and television tax can be secured."). 
1468 We find support for our view in this regard in the Appellate Body's statement in US – Zeroing (EC)  
that "a panel must not lightly assume the existence of a 'rule or norm' constituting a measure of general and 
prospective application, especially when it is not expr essed in a form of written document." (Appellate Body 
Report, US – Zeroing (EC) , para. 196). 
1469 Philippines' response to Panel question No. 166; comments on Thailand's response to Panel 
question No. 171(2). The Philippines underlines that in the context of its defence under Article III:2 and X:3(a), Thailand has also referred to the rules governing the rel ease of guarantees as the "n ormal practice".  Thailand's 
response to Panel question No. 74; second written submission, para. 296. 
1470 Philippines' response to Panel question No. 166; se cond oral statement, pa ra. 128, referring to 
Thailand's second written submission, para. 296. The Philippines notes that a series of routine administrative 
decisions also constitutes a "measure" within  the meaning of Article 6.2 of the DSU.  WT/DS371/R 
 Page 331 
 
 
  guarantee values.  We also note the Philippines' emphasis on the need for precise published rules for 
guarantee releases.  The obligation under Article X:1 is, however, to promptly publish rules of general 
application made effective by a Member in such a manner as to enable traders to become acquainted 
with them.  In fact, the Philippines submits that if  the Panel finds that Thai law does not provide a 
general rule on the release of guarantees, the Panel should find that Thailand violates Article X:3(a) 
by failing to provide rules that allow importers to secure, on a predictable basis, the release of 
guarantees collected when final liability proves to be less than the guarantee.1471  However, the 
Philippines never developed a claim under Article X:3( a) in respect of Thailand's failure to provide 
rules relating to the release of guarantees. 
7.849  Therefore, in respect of its claim that Tha iland failed to publish both a rule concerning "an 
unambiguous right to the release of guarantees" as  well as the specific "procedural rules providing 
sufficient guidance on how guarantees are released",  we conclude that the Philippines did not 
discharge its burden of proving the existence of the specific procedural rules generally applied to the 
release of guarantees within the meaning of Article  X:1.  Accordingly, in the following section, we 
will examine only the question of whether Thailand pub lished its general rule concerning the right to 
the release of guarantees consistent with Article X:1 of the GATT 1994. 
(iii) Whether the rules relating to the release of guarantees were published within the meaning of 
Article X:1 
Main arguments of the parties  
7.850  The Philippines submits that Sections 112 bis and 112 quater  of the Customs Act do not 
provide sufficient guidance with respect to the release of guarantees for customs duties and the 
applicable taxes because these provisions, inter alia , do not establish an unambiguous right to the 
release of the guarantee.1472  The Philippines argues that the last paragraph of Section 112 quater  in 
particular refers only to cash guarantees, and does not refer to other forms of guarantees collected by Thailand, such as bank guarantees.  In the Philippines view, Thailand's proposition that 
Sections 112 bis and 112 quater  provide for a general rule for guarantee release undermined its own 
assertion that "in order for there to be an obligation to  publish a rule of general application, there must 
exist a rule of general application."  The Phili ppines argues that this suggests that Sections 112 bis and 
112quater cannot be read to contain a general rule governing the release of guarantees. 
7.851  The Philippines further contends that Tha iland has not published its rules of general 
application concerning the release of guarantees as  required by Article X:1. The Philippines argues 
that relevant Thai laws do not include provisions duly informing importers of the rules governing the 
release of guarantees once the final customs determination is reached.
1473  Publication of those rules 
would have practical importance as, in this disput e, Thailand has failed to release guarantees for the 
health tax regarding [[xx.xxx.xx]] out of [[xx.xxx.xx ]] transactions that occurred between August 
2006 and March 20071474; for the same period, Thailand has clear ed a total of [[xx.xxx.xx]] entries, 
but has not released the guarantee concerning [[ xx.xxx.xx]] entries whose final customs value was 
lower than the guarantee posted; out  of those [[xx.xxx.xx]] cases, Tha iland has also failed to release 
guarantees given for health tax in [[xx.xxx.xx]] cases.1475   
                                                      
1471 Philippines' response to Panel question No. 166, referr ing to its statements to this effect in its first 
oral statement, para. 258. 
1472 Philippines' response to Panel question No. 71. 
1473 Philippines' first oral statement, paras. 259-260 ; response to Panel question No. 72; second written 
submission, para. 525.   
1474 The Philippines submits that the health tax guarant ees for these [[xx.xxx.xx]] entries were released 
by Thai Customs on 3 August 2009, after these WTO proceedings were prompted. 
1475 Philippines' second written submission, paras.  526-528, referring to Exhibit PHL-195. WT/DS371/R 
Page 332  
 
  7.852  Thailand  states that Sections 112 bis and 112 quater  of the Customs Act constitute laws of 
general application that govern the release of guarantees.
1476  Those Sections, which govern the final 
duty assessment, also provide that the excess guarant ees are to be refunded upon final assessment of 
the good.1477  Section 112 bis states that upon payment of a guarantee, "where cash has been deposited 
as a security and the cash deposit is sufficient to cover the amount of duty assessed, the assessed 
amount of duty shall be paid from such amount immediately". Section 112 quater  provides that in 
cases where the "duty paid or the cash deposit is to be refunded on account of it being demanded in 
excess of the amount or additional amount payable" , interest will be payable on the amount to be 
refunded.1478 Thailand claims that it has also produced notices of assessment which were published, 
and which show that refunds are available. For in stance, column 6 of the Notice of Assessment dated 
16 March 2007 shows that amounts are to be refunded to importers upon final assessment.1479  
Thailand considers that Sections 112 bis and 112 quater  of the Customs Act and those notices of 
assessment together provide enough transparency on the existing  rules followed by the DG Excise.1480 
7.853  The Philippines  contends that Sections 112 bis and 112 quater  of the Customs Act do not 
establish an unambiguous right to the release of guarantees, noting that the last paragraph of 
Section 112 quater  refers only to cash guarantees, and not to  other forms of guarantees, such as bank 
guarantees.1481  This point is of practical relevan ce because between 11 August 2006 and 28 March 
2008 PM Thailand posted bank guarantees to clear shipments of imported cigarettes.1482   
Analysis by the Panel  
7.854  In this section, we evaluate whether Thailand has published the general rules relating to the 
right to the release of guarantees, as identified by the Philippines, consistently with its obligations 
under Article X:1.   
7.855  Thailand alleges that it has satisfied its ob ligations through the Thai Customs Act and 
published notices of assessment.  In Thailand's vi ew, these legal instruments provide sufficient 
guidance to allow traders and governments to beco me acquainted with the rules governing the release 
of guarantees after a final customs determination is issued by the Thai Customs administration.   
7.856  The Philippines argues that Sections 112 bis and 112 quater  of the Customs Act do not provide 
sufficient guidance with respect to the release of  guarantees for customs duties and the applicable 
taxes because these provisions, inter alia , do not establish an unambiguous right to the release of the 
guarantee.  Section 112 bis of the Thai Customs Act provides: 
"In the case where a guarantee of the amount of duty is given under Section 112 and 
the Competent Officer has assessed the amount of duty payable and notified the 
importer or the exporter, as the case may be , the importer or the exporter shall pay the 
notified amount of duty within thirty days after the date of receiving the notice. 
                                                      
1476 Thailand's first written submission, para. 325; response to Panel question No. 74. 
1477 Thailand's response to Panel question No. 165. 
1478 Thailand's response to Panel question No. 165, referencing Exhibit PHL-20. 
1479 Thailand's response to Panel question No. 165, referring to Exhibit PHL-129. 
1480 Thailand's first written submission, para. 325; Exhibit PHL-20. 
1481 Philippines' response to Panel question No. 72; second written submission, para. 524. 
1482 Philippines' response to Panel question No. 72, re ferring to its first written submission, footnote 
145 explaining that Prior to 28 March 2007, PM Thailand posted bank guarantees for the customs duties and 
excise tax due on the difference between the declared tran saction value and the guarantee value.  For the health 
and television taxes (first imposed in January 2008) that  were due on this difference, PM Thailand posted cash 
guarantees. From 28 March 2007, PM Thailand posted cash guarantees for all items, that is, customs duties, 
excise tax, health tax and, after January 2008, also television tax.  WT/DS371/R 
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  In the case where cash has been deposite d as security and the cash deposit is 
sufficient to cover the amount of duty assessed by the Compet ent Officer, the 
assessed amount of duty shall be paid from such cash deposit immediately, and the importer or exporter shall be deemed to ha ve paid the notified amount or duty within 
the period specified in paragraph one."
1483 
7.857  Section 112 quater of the Thai Customs Act provides: 
"In the case where the duty paid or the cash deposit is to be refu nded on account of it 
being demanded in excess of the amount or additional amount payable, the interest shall be paid together with the refund at the rate, not on compound basis, of 0.625 per 
cent a month on the refund from the date of payment of duty or latest deposit of cash 
to the date of approval of the refund. In the case where cash has been deposited in 
substitution for guarantee after the release or  exportation of goods, the interest on the 
cash deposit to be refunded shall be calcula ted from the date of latest deposit of cash 
to the date of approval of the refund. In  the calculation of the interest under this 
paragraph, a fraction of one month shall be counted as one month, and the interest to 
be paid shall be treated as duty to be refunded."
1484 
7.858  The text of the Customs Act, cited above, indi cates that a guarantee may be requested towards 
the payment of the customs duty (Section 112 bis) and that in the case of releasing cash guarantees, 
interest shall be paid at  a fixed rate (Section 112 quater ).  Therefore, they refer only to guarantees 
made in cash and do not specify whether guarantees placed in other forms are also subject to these 
provisions in situations warranting such a release. 
7.859  The notices of assessment which Thailand alleges clarify that a refund for guarantee is 
available to importers only contain a column which states the "refund(+) or shortfall(-)" amounts for 
the importer.  In our view, this document does not  indicate whether such refunds are for guarantees 
placed in relation to excise, health and televisi on taxes.  Therefore, these notices of assessment 
produced by Thailand do not establish a sufficient link between importers' entitlement to a "refund" 
and the guarantees paid for excise, health and television taxes.   
7.860  Therefore, despite Thailand's acknowledgment th at "in essence, guarantees are to be refunded 
on the final assessment of the goods", the relevant documents referred to by Thailand in this dispute 
do not clearly indicate a definite right to the rel ease of guarantees for the internal taxes upon final 
assessment of the goods.  In such circumstances, impor ters will not be able to become acquainted with 
the exact nature of the right they have in respect  of the release of guarantees for the internal taxes 
within the meaning of Article X:1.   
7.861  In light of the foregoing, we conclude that th e general rules on the right to the release of 
guarantees as currently published by Thailand in th e Customs Act are not sufficient to satisfy the 
requirements under Article X:1 in relation to the guara ntees for the excise, health and television taxes.  
H. ARTICLE  X:3(A) OF THE GATT 1994 
1. Overview of the Philippines' claims under Article X:3(a) 
7.862  The Philippines advances four claims under Artic le X:3(a):  (i) Thailand acts inconsistently 
with the obligations under Article X:3(a) to admi nister its customs and internal tax rules in a 
"reasonable" and "impartial" manner by appointing ce rtain senior Thai government officials to serve 
                                                      
1483 Exhibit PHL-20. 
1484 Exhibit PHL-20. WT/DS371/R 
Page 334  
 
  on the board of directors of TTM; (ii) undue delays in the BoA's decision-making process are an 
"unreasonable" administration of the customs laws u nder Article X:3(a); (iii) the determination of the 
tax base for VAT (MRSP) for imported cigarettes is administered in a "non-uniform", "unreasonable" and "partial" manner; and (iv) the establishment of th e excise, health and television taxes in relation to 
imported cigarettes is administered in a "non-uniform", "unreasonable" and "partial" manner.   
7.863  We will first review the general nature and the scope of Article X:3(a) and then proceed to 
examine the Philippines' claims with respect to th e specific Thai government's acts of administration 
of its laws and regulations as described above. We recall our conclusion that the third claim 
concerning the determination of the tax base for VAT is outside our terms of reference, as discussed in Section VII.B.1(a). 
2. Nature and scope of the obligations under Article X:3(a) 
7.864  Article X:3(a) provides: 
Each contracting party shall administer in  a uniform, impartial and reasonable manner 
all its laws, regulations, decisions and rulings  of the kind described in paragraph 1 of 
this Article. 
7.865  Article X:1 in turn reads: 
Laws, regulations, judicial decisions and administrative rulings of general 
application, made effective by any contracting party, pertaining to the classification or the valuation of products for customs purposes, or to rates of duty, taxes or other 
charges, or to requirements, restrictions  or prohibitions on imports or exports ... 
7.866  To establish a violation of Article X:3(a), a co mplaining party must therefore show that the 
responding Member administers  the legal instruments of the kind described in Article X:1 in a manner 
that is non-uniform, partial  and/or unreasonable . 
7.867  The obligations of uniformity, impartiality an d reasonableness are legally independent and the 
WTO Members are obliged to comply with all three requirements.
1485  This means that, as the Panel in 
Dominican Republic – Import and Sale of Cigarettes noted, a violation of any of the three obligations 
will lead to a violation of the obligations under Article X:3(a).     
7.868  In this regard, it is important to recall the Appellate Body's observation that Article X:3 of the 
GATT 1994 establishes certain minimum standards for tr ansparency and procedural fairness in the 
administration of trade regulations.1486  In examining the Philippines' claims under Article X:3, we 
will therefore bear in mind that it is the principle of transparency, procedural fairness and due process 
that underpins the obligations embodied in Article X:3(a). 
7.869  Turning to the scope of Article X:3(a), it is  well established that the obligations under 
Article X:3(a) apply to the administration of the laws, regulations, decisions and rulings of the kind 
falling within the scope of Article X:1, but not to such laws and regulations themselves .1487  T h e  
                                                      
1485 Panel Report, Argentina – Hides and Leather , para. 11.86.  
1486 Appellate Body Report, US – Shrimp , para. 183.  The Appellate Body also underlined that 
"inasmuch as there are due process requirements gene rally for measures that are otherwise imposed in 
compliance with WTO obligations, it is only reasonabl e that rigorous complian ce with the fundamental 
requirements of due process  should be required in the application and administration of a measure ... " 
(Appellate Body Report, US – Shrimp , para. 182) (emphasis added). 
1487 Appellate Body Reports on EC – Bananas III , para. 200; EC – Poultry , para. 115.  The Panel in 
Argentina – Hides and Leather also stated that "Article X:3( a) refers specifically to the method of application of  WT/DS371/R 
 Page 335 
 
 
  Appellate Body states that to the extent that such laws and regulations are discriminatory, they can be 
examined for their consistency with th e relevant provisions of the GATT 1994.1488   F u r t h e r  
elaborating on the scope of Article X:3(a), the A ppellate Body clarified that a government's act of 
administration subject to the provisions of Article X:3(a) includes not only acts of administering the 
laws and regulations of the kind in Article X:1, but also legal instruments that regulate the application 
or implementation of such laws and regulations.1489  In other words, in determining the proper scope 
of Article X:3(a), the relevant  question is, as the Panel in Argentina – Hides and Leather correctly 
noted, "whether the substance of such a measure is administrative in nature or, instead, involves 
substantive issues more properly dealt with  under other provisions of the GATT 1994".1490 
7.870  In this connection, it has also been clarified th at the term "administer" in Article X:3(a) may 
include in its scope "administrative processes", wh ich in its broadest sense may be understood as a 
series of steps, actions, or events that are taken or  occur in relation to the making of an administrative 
decision.1491  In EC – Selected Customs Matters , the Appellate Body had an opportunity to address the 
obligation to administer laws and regulations in a "uniform" manner, and it expressed the view that 
the term "administer" in Article X:3(a) may include  in its scope "administrative processes".  However, 
the Appellate Body considered that given that the term "administer" in Article X:3(a) refers to 
"putting into practical effect", or "applying", a legal instrument of the kind described in Article X:1, it 
is the application of a legal instrument of the kind described in Article X:1 that is required to be 
uniform under Article X:3(a), but not the processes leading to administrative decisions, or the tools 
that might be used in the exercise of administration.   
7.871  The Appellate Body then added that the char acteristics of an administrative process were 
nonetheless relevant for purposes of assessing whether a legal instrument of the kind described in 
Article X:1 is uniformly applied or put into practical effect in particular cases.  Specifically, it states: 
"[T]he features of an administrative pro cess that govern the application of a legal 
instrument of the kind described in Article X:1 may constitute relevant evidence for 
establishing uniform or non-uniform administration of that legal instrument.  The 
probative value of such evidence will, howe ver, depend on the circumstances of each 
case and will necessarily vary from case to case.  Thus, we may conceive of cases where a panel might attach much weight to differences that exist at the level of the administrative processes, because it considers these differences to be so significant 
that they have caused, or are likely to cau se, the non-uniform application of the legal 
instrument at issue.  On the other hand , a panel might conclude, after an overall 
assessment of the evidence, that the consistent  nature of the results of the application 
of the legal instrument shows that the meas ure at issue is administered in a uniform 
                                                                                                                                                                    
 
measures identified in Article X:1." (emphasis added) (Panel Report, Argentina – Hides and Leather , 
para. 11.73)  The Panel in the same dispute further elaborated that "the relevant question is whether the 
substance of such a measure is administrative in nature  or, instead, involves substantive issues more properly 
dealt with under other provisions of the GATT 1994." (para. 11,70; also referred to in the Panel Report, US – 
Byrd Amendment , para. 7.143).  
1488 Appellate Body Report, EC – Bananas III , para. 200. 
1489 Appellate Body Report, EC – Selected Customs Matters , para. 200.  The Appellate Body states, 
"[u]nder Article X:3(a), a distinction must be made between the legal instrument being administered  and the 
legal instrument that regulates  the application or implementation of that instrument.  While the substantive 
content of the legal instrument being administered is not challengeable under Article X:3(a), we see no reason 
why a legal instrument that regulates the application or implementation of that instrument cannot be examined 
under Article X:3(a) if it is alleged to lead to a lack of  uniform, impartial, or reasonable administration of that 
legal instrument".  
1490 Panel Report, Argentina – Hides and Leather , para. 11.70 (emphasis added). 
1491 Appellate Body Report, EC – Selected Customs Matters , para. 224.   WT/DS371/R 
Page 336  
 
  manner, even though differences may exis t at the level of the administrative 
process."
1492  
7.872  We note that the Appellate Body's analysis a bove was made in the context of the uniformity 
requirement in Article X:3(a).  Although it is not entirely clear whether the Appellate Body intended 
its consideration of the scope of the term "administer"  in the above context to also be extended to the 
obligations of reasonableness and im partiality under Article X:3(a), the subsequent statement by the 
Appellate Body tends to support the view that it should also be applicable to these other two 
obligations.  While noting that evidence relating to the features of an administrative process can be 
adduced in support of a claim of a violation of Ar ticle X:3(a), the Appellate Body made the following 
concluding statement:  
"[I]n order to substantiate a claim of viol ation based on an administrative process, it 
is not sufficient that the complainant merely  recites the features of the administrative 
processes; it will also have to show how a nd why those features necessarily lead to a 
lack of uniform, impartial, or reasonable administration of a legal instrument of the 
kind described in Article X:1".1493 (emphasis added) 
7.873  In sum, the guidance provided by the Appellate Body suggests that Article X:3(a) dictates the 
disciplines governing the administration of the legal instruments of the kind described in Article X:1.  
The scope of administration that is subject to a challenge under Article X:3(a) includes both the 
manner in which the legal instruments of th e kind falling under Article X:1 are applied or 
implemented in particular cases as well as a legal in strument that regulates such application or 
implementation.  Further, administrative processes leading to administrative decisions may also be 
included in the scope of the term "a dminister" and hence Article X:3(a).  However, to the extent that a 
claim of violation under Article X:3(a) is based on an administrative process, the complainant must demonstrate how and why certain features of the admi nistrative processes necessarily lead to a lack of 
uniform, impartial, or reasonable administration of a legal instrument of the kind described in 
Article X:1.  
7.874  As a final note, we are mindful of the Appellate  Body's statement that as allegations that the 
conduct of a WTO Member is biased or unreasonable are serious under any circumstances, such allegations should not be brought light ly, or in a subsidiary fashion.
1494  The Appellate Body therefore 
cautioned that "a claim under Article X:3(a) of the GATT 1994 must be supported by solid evidence; 
the nature and the scope of the claim, and the evid ence adduced by the complainant in support of it, 
should reflect the gravity of the accusations i nherent in claims under Article X:3(a) of the 
GATT 1994".  Overall, our examination of the Phili ppines' claims under Article X:3 requires us to 
exercise a balanced judgment between the traders' fundamental right to procedural fairness and the 
sovereign right afforded to the Member governments in managing the manner in which they administer their own laws and regulations. 
7.875  Bearing the above in mind, we will begin ou r analysis of the Philippines' claims under 
Article X:3(a) relating to the dual function of Thai government officials as TTM directors. 
                                                     
 
1492 Appellate Body Report, EC – Selected Customs Matters , paras. 224-225. 
1493 Appellate Body Report, EC – Selected Customs Matters , para. 226. 
1494 Appellate Body Report, US – Oil Country Tubular Goods Sunset Reviews , para. 217.  WT/DS371/R 
 Page 337 
 
 
  3. Appointment of certain Thai government customs and tax officials as TTM directors  
(a) Introduction 
7.876  The Philippines claims that Thailand violates Ar ticle X:3(a) because Thailand administers its 
customs and tax laws and regulations in a partia l and unreasonable manner by appointing government 
officials responsible for administering Thailand's cu stoms and tax rules to TTM directors' position.  
Thailand argues that the Philippines has not establis hed that Thailand actually fails to administer 
particular laws in a reasonabl e and impartial manner given, inter alia , the existence of safeguards 
against the improper use of the authority to get invo lved in relevant customs and tax decisions as well 
as the improper use of confidential information on imported cigarettes. 
7.877  In examining the Philippines' claim, we will firs t evaluate whether the Thai government act of 
administration at issue, namely the appointment of dual function officials, falls within the scope of 
"administration" in Article X:3(a).  If so, we w ill then proceed to assess wh ether this act leads to 
unreasonable and/or partial administration of th e Thai customs and tax laws and regulations. 
(b) Whether the appointment of selected customs and tax officials as TTM directors is an act of 
"administration" under Article X:3(a) 
(i) Main arguments of the parties 
7.878  The Philippines  claims that vesting government offi cials that are TTM directors with 
decision making powers over im ported and domestic cigarettes1495 and giving them access to business 
confidential information1496 on TTM's direct competitors is administration contrary to Article X:3(a).  
The Philippines argues that dual function officials are "directly involved" in many decisions related to 
the application of the measures at issue.  The Philippines cites a number of tax/customs decisions 
where dual function individuals had a prominent role.1497  The Philippines argues that those officials 
who also act as TTM directors, achieve their admi nistrative mission in a way favourable to TTM.  
Hence, their nomination as TTM directors has an impact on the administration of the customs/tax 
measures at issue. 
7.879  Thailand  submits that the Philippines has failed to  produce elements to show that TTM 
directors are directly involved in the decision-ma king processes at issue, such as the determination of 
the customs value, and the tax base for VAT im posed on cigarettes and excise, health and TV 
taxes.1498  Thailand relies on Argentina – Hides  and Leather to argue that the mere fact of granting 
dual functions to customs officials is not conclu sive as "it all depends on what such persons are 
permitted to do".1499  Therefore, Thailand asserts that nominating customs/tax officials as TTM 
directors does not constitute "administration" of th e customs/tax measures at issue within the meaning 
Article X:3(a). 
(ii) Analysis by the Panel 
7.880  The Philippines claims that certain Thai govern ment officials serving at the same time as 
TTM directors (also referred to as "dual function officials") have a decision making role in administering the Thai customs and tax laws.  Th ailand accepts that the Minister of Finance has 
nominated selected government official s as members of the board of TTM.
1500  However, Thailand 
                                                      
1495 Philippines' first writte n submission, para. 77. 
1496 Philippines' first writte n submission, para. 83. 
1497 Philippines' second written submission, paras. 30-35. 
1498 Thailand's response to Panel question No. 75; second written submission, para. 192. 
1499 Panel Report, Argentina – Hides and Leather , para. 11.99. 
1500 As suggested in Thailand's first written submi ssion, paras. 18, 115 and 270; Exhibit PHL-10. WT/DS371/R 
Page 338  
 
  disagrees that those dual function officials are invol ved sufficiently in the administration of the tax 
and customs measures for their nomination as TTM directors to qualify as "administration" under 
Article X:3(a). 
7.881  The first question we need to examine in r espect of the Philippines' claim regarding dual 
function officials is thus whether the appointment of certain high-ranking Thai government officials 
as TTM directors constitutes "administration" within the meaning of Article X:3(a).   
7.882  Before beginning our analysis, we will firs t briefly address whether the Philippines, as a 
complainant claiming that Thailand administers legal instruments of the kind described in Article X:1 
in a manner contrary to Article X:3(a), has demonstrat ed that the relevant legal instruments are "of the 
kind described in Article X:1".  The Philippines s ubmits that the legal instruments of the kind 
described in Article X:1 for its claim with respect  to the dual function of Thai government officials 
are Thai measures pertaining to customs valuation, VAT and other tax measures.
1501  Specifically, the 
Philippines challenges the manner in which the Thai  government administers the following laws and 
regulations:1502   
• Customs Act, B.E. 2469 (1926), includi ng all amendments; the Tobacco Act B.E. 
2509 (1966), Section 5 ter; Health Promotion Foundation Act, B.E. 2544 (2001), in 
particular Sections 11, 12, and 13 th ereof, and any amendments, implementing 
measures or other related measures; Thai  Public Broadcasting Service Act 2551 
(2008), in particular Sections 12, 13, and 14 thereof, and any amendments, 
implementing measures or other related measures; 
 
• Ministerial Regulation No. 132 B.E. 2543 (1990) issued under authority of the 
Customs Act B.E. 2469 (1926) and the amending Ministerial Regulation No. 145 
B.E. 2547 (2004) and Ministerial Regulation No. 146 B.E. 2550 (2007); Customs 
Regulation No. 2/2550 (2007) Re: amendm ent of the Customs Formalities and 
Guidelines Code B.E. 2544 (2001) re: Cust oms formalities to prevent Customs value 
duty evasion, and amendment of Cust oms Department Regulation No. 14/2549 
(2006) re: Guideline for Fixing of Customs Value; Customs Regulation No. 14/2549 
(2006), re Guideline for Fixing of Customs Value, as amended by Customs 
Regulation No. 2/2550 (2007); 
 
• Royal Decree, issued under the Revenue C ode, Governing the Reduction of the Value 
Added Tax Rates (No. 465), B.E. 2550 (2007); Royal Decree issued under the Revenue Code Governing Exemption from Value Added Tax (No. 239) B.E. 2534 
(1991); 
 
• Notification No. 23/2549 (2006) of Thai Customs, containing guidelines on customs 
valuation; Customs Notification No. 29/2549 (2006) Procedure in requesting duty fee 
assessment; Notification of the Director-General of the Revenue Department on VAT (No. 10);  
 
• Sections 79/5 and 81 of the Re venue Code of Thailand;  
 
• Order of the Revenue Department No. Por 85/2542 (1999);  
 
                                                     
 
1501 Philippines' first written submission. paras. 63, 65 and 67. 
1502 Philippines' first written submission, paras. 61-67.  WT/DS371/R 
 Page 339 
 
 
  • MRSP Notices issued by the Director-General  for Excise.  The currently applicable 
MRSPs are set out in the Notice B.E. 2550 (2007) of 29 August 2007 (for domestic products) and in the Notice B.E. 2550 (2007) of 29 August 2007 together with Notice B.E. 2550 (2007) of 18 December 2007 (for imported products); and 
 
• Notices of Director-General for Excise, setting out ex factory  prices of domestic 
cigarettes.  The currently applicable ex factory  prices are set out in the Notice B.E. 
2550 (2007) of 29 August 2007. 
 7.883  Thailand does not object to the qualification of th e above-listed Thai laws and regulations as 
the legal instruments of the kind falling under Article  X:3(a).  We find that the subject measures do 
therefore fall within the scope of the laws, regulati ons, decisions and rulings of the kind described in 
Article X:1.  
7.884  Now turning to the main ques tion in this section, we note that the Philippines takes the 
position that the appointment of government offici als who allegedly have the authority to make 
decisions relating to the subject customs and fiscal laws as TTM directors, constitutes the 
administration of such laws within the meaning of Article X:3(a).  The Philippines appears to base its 
position on the understanding that the appointment of government officials as TTM directors affects 
the administration of the Thai customs and tax ru les, such as the customs valuation of imported 
cigarettes and the determination of the tax base  for VAT as well as other taxes, in a manner 
inconsistent with the obligati ons under Article X:3(a).  Thailand disagrees with the Philippines 
because, in its view, dual function officials are not sufficiently involved in the administration of the 
tax and customs measures for their nomination as TTM  directors to qualify as "administration" under 
Article X:3(a). 
7.885  We recall that Article X:3(a) governs the administration of laws and regulations, not the 
substance of the laws and regulations themselve s.  We also observed the Appellate Body's 
clarification that "administration" within the meani ng of Article X:3(a) may also include in its scope 
administrative processes .   
7.886  Considered against the standard of "administr ation" under Article X:3(a) as set out by the 
Appellate Body, we understand that the appointment  of dual function officials as TTM directors may 
not be an application of the Thai customs and fiscal laws and regulations because it is not an act of 
applying the substance of the customs and tax provi sions.  Nonetheless the broad scope of 
administrative processes falling within the scope of Article X:3(a) suggests that the appointment of 
government officials to the director position of TTM  (the only domestic company competing against 
imported cigarettes in the Thai market) may well be considered as part of the administrative process 
leading to the application and implementation of  the customs and fiscal measures insofar as these 
government officials are sufficiently involved in applying or implementing the Thai customs and tax laws.
1503   
7.887  To prove the substantial involvement of these dua l function officials in the relevant decision-
making procedures, the Philippines points to the fact  that in seven out of eight cases since 1995, the 
Chairman of TTM has been nominated as DG Customs, DG Excise, or DG Revenue.1504  T h e  
                                                      
1503  To recall, administrative processes can be defined as  "a series of steps, actions, or events that are 
taken or occur in relation to the making of an administrative decision" (Appellate Body Report, EC – Selected 
Customs Matters , para. 224). 
1504 Philippines' first written submission, para. 49.  The only exception is the current chairperson, 
Mrs. Chantima Sirisaengtaskin, who is an IT Consultant for the Revenue Department of the Ministry of Finance. WT/DS371/R 
Page 340  
 
  appointed DG Excise, DG Customs and DG Reve nue are responsible for determining and 
administering customs and tax rules applicable to importers of cigarettes under the Thai law.
1505   
7.888  The Philippines has also submitted evidence s howing that these dual function officials all 
have a degree of influence ranging from signature to substantive contribution authority.  The 
following are examples of the participation by th e subject dual function officials in the matters 
concerning customs and tax decisions for imported cigarettes: (i) the MRSP increase in September 
2006 was signed by Mr. Utid Tamwatin, then acting both as Chairman of the TTM Board and as DG of Excise
1506; (ii) a few days later, Mr. Tamwatin threatened to impose an import ban unless  
importers  raised their RSPs to the level of the new MRSPs1507; (iii) the March 2007 and August 2007 
MRSP Notices were signed by TTM Chairman Mr. Wisudh Srisuphan, who was also DG of Excise; 
(iv) the August 2008 MRSP Notice was issued when TTM Chairman Mr. Wisudh Srisuphan was the 
Deputy Permanent Secretary for Finance (Ministry of Finance); (v) the MRSP Notices in May 2009, 
were issued  when Ms. Chantima Sirisaengtaksin  was both TTM Chairman and consultant for the 
Revenue Department at the Ministry of Finance and when Arthon Keesiri, TTM Director, was Director of the Audit Prevention and Suppression at the Excise Department (Ministry of Finance); (vi) 
the decisions to reject the declared transaction values and to impose guarantees, concerning shipments 
cleared between 11 August and 30 September 2006, we re taken by Thai Customs when TTM Director 
Manus Kampakdee was Deputy-Director General for Customs (Ministry of Finance); (vii) the decisions to reject the declared transaction valu e, to impose guarantees on shipments cleared between 
1 October 2006 and 13 September 2007, as well as the definitive assessments of shipments cleared 
between 11 August 2006 and 13 Sept ember 2007, were taken when TTM  Director Manus Kampakdee 
was the "Principal Advisor on Duty Collection Management & Development" at the Customs 
Department (Ministry of Finance); and (viii) the dela ys in the BoA decision-making, and in particular 
the BoA's alleged inaction since July 2006, have  occurred while TTM Director Manus Kampakdee 
was Deputy-Director General of Customs or, alterna tively, was "Principal Advisor on Duty Collection 
Management & Development", at the Cust oms Department (Ministry of Finance).
1508 
7.889  The set of evidence as listed above, in our view , suggests the dual function officials' sufficient 
involvement in the process of applying and implemen ting the Thai customs laws and regulations.  As 
such, we consider that the appointment of govern ment officials as TTM directors constitutes an 
administrative process leading to the administra tion of the Thai customs and fiscal laws and 
regulations and consequently qualifies as "a dministration" under Article X:3(a).   
(c) Whether Thailand administers the laws, regula tions, decisions and rulings of the kind 
described in Article X:1 in a "partial and unr easonable" manner through the appointment of 
dual function officials 
(i) "Impartial" administration   
Main arguments of the parties  
7.890  The Philippines claims that TTM directors' dual role constitutes partial administration under 
Article X:3(a) as they are given both "the right to participate in an administrative process involving 
                                                      
1505 Philippines' first written submission, para. 48; Exhibit PHL-20. Chapter 1 bis, Section 2 bis states 
that "there should be a Customs Duty Ruling Commission composed of the under- Secretary of the Ministry of 
Finance as Chairman, the Director-Gen eral of the Customs Department, th e Director-General of the Revenue 
Department, the Director-Gen eral of the Excise Department, the Dire ctor- General of the Fiscal Economics 
Office, the Secretary General of the Royal Decrees Commission and three other qualified persons appointed by 
the Minister to be members".  
1506 Exhibit PHL-86. 
1507 Philippines' first written submission, para. 393. 
1508  Philippines' first written submission, para. 48, Table 1 "Overview of TTM directors 1995-2009".  WT/DS371/R 
 Page 341 
 
 
  TTM's competitors [and] decision making authority  in that administrative process".1509  TTM directors 
have the ability to affect the conditions of comp etition of PM Thailand cigarettes in many ways.1510  
In particular, they may and do request a wide range of confidential information from all market 
participants.1511  Using this information, they also have the incentive to take partial decisions since 
they are eligible for annual financial bonuses when TTM's net profit increases.1512  Therefore the role 
and powers  they are given, rather than simply their position itself, qualify as partial administration.  In 
support of its position, the Philippines relies on Argentina – Hides Leather , where the Panel found 
that the presence of representatives of the domestic  tanning industry in the customs clearance process 
was partial because it allowed administrators potential  access to commercially sensitive information 
and it failed to provide for adequate safeguards  against inappropriate use of this information.1513   
7.891  Furthermore, the Philippines contends that no safeguards against undue use of the information 
obtained are put in place.1514  In particular, the Philippines argues that the safeguards put forward by 
Thailand, namely the sanctions provided for in th e Thai Civil Service Act and the Thai Criminal 
Code, will not apply to TTM by virtue of the Ethical and Moral Guidebook of TTM.  This guidebook 
requires TTM Directors to maximise TTM benefits under all circumstances.1515  In other words, TTM 
directors are under the obligation to favour TTM, to the detriment of its direct co mpetitors.  As part of 
the regulatory framework applicable to official authorities1516, this guidebook trumps other Thai 
laws1517, thereby shielding TTM directors from the sanc tions of the Civil Service Act and Criminal 
Code.  Regarding the evidence produced by Thaila nd to show that administrative officers were 
sometimes sanctioned under the Civil Service Act an d the Thai Criminal Code, the Philippines argues 
that Thailand has not explained how those sanctions could be related to the specific acts at issue 
here.1518  In any event, according to the Philippines, th ey have proved inefficien t in halting the flow of 
confidential information to TTM directors, and do not prevent numerous acts of partial 
administration.1519   
7.892  The Philippines also underlines the general lack of transparency in the deliberative process 
with respect to important aspects of Thailand's cu stoms and tax laws.  As a result, administrative 
officers generally remain unchecked.1520  The Philippines concludes that no adequate safeguard is 
                                                      
1509 Philippines' response to Panel question No. 79.   
1510 Philippines' first writte n submission, para. 78. 
1511 Philippines' first written submission, para. 85; second written submission, para. 10. This 
information includes: pricing and expense information, de tails of PM Thailand's agreements with suppliers and 
purchasers, sales data, and internal accounting records and documents. 
1512 Philippines' first written submission, para . 79; Exhibit PHL-6, Section 1, p. 1. 
1513 Philippines' second written submission, paras. 44-47, referring to Panel Report, Argentina – Hides 
and Leather , para.11.99. 
1514 In its response to Panel question No. 151, the Philippines states that "the terms reasonable and 
impartial as interpreted and applied in the case-law s uggests that access to business  confidential information by 
TTM directors simultaneously serving as Thai Customs and tax officials makes Thailand's administration unreasonable while the lack of safeguards to prevent the flow of such information to TTM Directors makes 
unreasonable administration also impartial".   
1515 Philippines' response to Panel question No. 75.  The Guidebook requires that TTM Directors must 
"make any determination for the utmost benefit of [TTM]"; Exhibit PHL-4. 
1516 Philippines' response to Panel question No. 75;  Exhibit THA-35.  The Civil Service Act compels 
government officials expressly to "per form official duties in accordance with laws, regulations, rules of official 
authorities, Council of Ministers resolutions, government  policies, and act in accordance with the regulatory 
framework of official authorities." The Philippines consid ers that the Ethical and Moral Guidebook of TTM is 
one of the regulations thereof. 
1517 Philippines' response to Panel question No. 75. 
1518 Philippines' response to Panel question No. 153. 
1519 Philippines' response to Panel question No. 153; second oral statement, para. 12; second written 
submission, paras. 31-34 and 48. 
1520 Philippines' first written submission, paras. 81-82. WT/DS371/R 
Page 342  
 
  implemented by Thailand, in spite of the provisions  contained in its own laws.  Hence, Thailand's 
administrative process applicable to imports of fo reign cigarettes is partial under Article X:3(a). 
7.893  Further, the Philippines points out that although the Thai Civil Service Act
1521 could provide 
for an adequate safeguard as it bars government officers from holding managing positions in either 
public or private  companies, Thailand chose not to appl y these provisions to TTM, on the grounds 
that the prohibition under the Civil Se rvice Act applies with regards to  private  companies only.1522  
The Philippines disagrees and alleges that the Civi l Service Act also prohibits government officers 
from managing public  entities, like TTM.1523   
7.894  Thailand argues that the Philippines failed to prove that Thailand administers its customs and 
tax rules in a partial manner contrary to the oblig ations under Article X:3(a) through the appointment 
of government officials as TTM directors.  Thailand recalls that under the Argentina – Hides and 
Leather  test for impartiality, the mere presence of indivi duals at potentially conf licting positions is not 
enough to conclude that administration of laws is im partial within the meaning of Article X:3(a) and, 
as the Panel noted in that case, "it all depends on what such persons are permitted to do".1524  Thailand 
also adds that the financial incentives for TTM dir ectors are modest and based as much on attendance 
at meetings as on profits.1525   
7.895  Thailand argues that the Philippines has not shown that directors were directly involved in 
making decisions on customs and tax matters.  Wh ile Thailand does not deny that dual function 
individuals may also have access to confidential in formation on TTM's direct competitors, Thailand 
nevertheless asserts that it has enacted and implem ented the relevant safeguards to prevent biased 
decision making as well as improper use of confidential information by TTM directors.  Further, 
Thailand points out that the Philippines failed to show  that the allegedly biased decisions referred to 
by the Philippines are linked to the concerned government officials with a dual function. 
7.896  Thailand submits that under the Thai Civil Service Act heavy sanctions are imposed on 
government officials breaching their duties (incl uding confidentiality) and provides statistical 
evidence of adequate implementation of these provisions.1526  Second, civil servants are fully subject 
to the disciplines and penalties of the Criminal Code1527 while they serve on the TTM Board.  These 
include a possible ten years imprisonment for self-interested actions1528 and wrongful exercise of 
duties1529, as well as possible life imprisonment for di shonesty in collection of duties or taxes. 1530  
                                                      
1521 Exhibit THA-35. Section 83(6) of the Thai Civ il Service Act prohibits government officials from 
serving as "a managing director or manager or hold any other position entailing a similar nature of work in a 
partnership or a company". 
1522 Philippines comments on Thailand's responses to Panel questions (second meeting), para. 369. 
1523 Philippines comments on Thailand's responses to Panel questions (second meeting), para. 380. 
1524 Thailand's first written submission, pa ra. 274 referencing the Panel Report, Argentina –  Hides and 
Leather , para. 11.99. 
1525 Thailand's second oral statement, para. 83; Thailand's second written submission, footnote 171; 
Exhibits THA-3, pp. 44-45, PHL-6 and PHL-7. 
1526 Thailand's response to Panel question No. 153. 
1527 Thailand's second oral statement, para. 80; Exhibit THA-84. 
1528 Section 152 of the Criminal Code (where "an official having the duty of managing or looking after 
any activity, takes the interest for the benefit of himself", the official "shall be punished with imprisonment of 
one to ten years and fine of two thousand to twenty thousand baht") (Exhibit THA-84). 
1529 Section 157 of the Criminal Code (where "an of ficial, wrongfully exercise s or does not exercise 
any of his functions to the injury of any person, or dishonestly exercises or omits to exercise any of his 
functions" that official "shall be punished with imprisonment of one to ten years or fined of two thousand to 
twenty thousand baht, or both") (Exhibit THA-84). 
1530 Section 154 of the Criminal Code (where "an official having the duty … of collecting or checking 
taxes, duties, fees or any other money, dishonestly colle cts … such taxes, duties, fees or money" the official  WT/DS371/R 
 Page 343 
 
 
  Furthermore, the Ministerial Regulation Edition 145 (B.E. 2547)1531 provides that "the public 
authorities shall not disclose the confidential info rmation or [information] which is provided on a 
confidential basis for the benefit of customs valua tion without the specific permission of the person or 
government agency providing such information".1532  Thailand denies that the Ethical and Moral 
Guidebook of TTM should protect TTM directors from  legislative sanction regimes: it is only an 
internal code for the company's use, and cannot th erefore supersede any legislative or regulatory act.  
Thailand asserts that the sanction regime applicab le to administrative officers provides adequate 
safeguards as such,  and has been implemented accordingly.  Thailand concludes that as adequate 
safeguards are implemented to prevent undue use of  the confidential information obtained by dual 
function officials, its administration of the customs and tax laws at issue is therefore not partial. 
Analysis by the Panel  
7.897  The Philippines claims that a dual role perform ed by certain Thai government officials as 
TTM directors constitutes partial administration under Article X:3(a) because they have the authority to make customs and fiscal determinations in respect of the cigarette imports at issue in this dispute; 
have access to confidential information on TTM's co mpetitors; and are given financial incentives to 
promote TTM's profits.  Moreover, the Philippines ar gues that there are no safeguards appropriate to 
prevent the abuse of their capacity as government officials in making these decisions pertaining to 
customs and tax rules.  Thailand argues that the Ph ilippines failed to prove that Thailand administers 
its customs and tax rules in a partial manner contra ry to the obligations under Article X:3(a) through 
the appointment of government officials as TTM directors.  In particular, according to Thailand, the Philippines has not shown that directors were dir ectly involved in making decisions on customs and 
tax matters.  Thailand has also enacted safeguards sufficient to prevent improper use of confidential 
information by TTM directors. 
7.898  In order to determine whether the Thai govern ment's act of appointing certain government 
officials as TTM directors is an impartial administration of the Thai customs and tax laws, we first 
recall our conclusion above that the Thai govern ment act at issue may constitute part of the 
administrative processes leading to the administration of various customs and  tax rules, while it may 
not constitute the administration of such rules per se .  In the light of the Appellate Body's guidance 
concerning a claim under Article X:3(a) based on an administrative process , our task is to examine 
whether the Philippines has demonstrated how and why the features of the administrative process at 
issue, namely certain Thai government officials' dual role as TTM directors, necessarily leads to a 
lack of impartial administration.  We are also mindful of the Appellate Body's statement that given the 
gravity of the accusations inherent in claims unde r Article X:3(a), a complaining party must support 
its claim with solid evidence. 
7.899  The term "impartial" can be defined as  " adjective 1. not favouring one party or side more 
than other; unprejudiced, unbiased; fair".
1533  The word "partial" means "A. adjective. I 1 a Inclined 
beforehand to favour one party in a cause, or one side of a question, more than the other, prejudiced, 
biased.  Opp. Impartial".1534  Based on the ordinary meaning, therefore, impartial administration 
would appear to mean the application or implementati on of the relevant laws an d regulations in a fair, 
unbiased and unprejudiced manner.   
                                                                                                                                                                     
"shall be punished with imprisonment of five to twenty years or imprisonment for life, and fine of two thousand 
to forty thousand baht") (Exhibit THA-84). 
1531 Exhibit THA-85.  
1532 Thailand's second oral statement, paras. 84-86. 
1533 The New Shorter Oxford English Dictionary , (Fifth Edition) Oxford University Press, Vol. I, 
p. 1325 (2002). 
1534 The New Shorter Oxford English Dictionary , (Fifth Edition) Oxford University Press, Vol. I, 
p. 2107 (2002). WT/DS371/R 
Page 344  
 
  7.900  Argentina – Hides and Leather  is the only WTO dispute to date in which the impartiality 
requirement under Article X:3(a) was addressed. In th at dispute, the feature of the administrative 
process at issue was the presence of a private part y with conflicting commercial interests in the 
customs process. The panel considered that the consistency of the customs process with the 
impartiality requirement of Article X:3(a) woul d depend on what that party is permitted to do
1535  That 
panel found that the answer to this question wa s related directly to the question of access to 
information as part of the product classification process.   It was the view of the Panel that whenever a 
party with a contrary commercial interest, but no releva nt legal interest, is allowed to participate in the 
customs process, there is an inherent danger that the customs laws, regulations and rules will be applied in a partial manner so as  to permit persons with adverse commercial interests to obtain 
confidential information to which they have no right.
1536  The panel nevertheless considered that this 
situation could be remedied by ad equate safeguards to prevent an in appropriate flow of one private 
person's confidential information to another as a result of the administration of the implemented 
customs law at issue.   
7.901  We will now turn to the specific factual circum stances presented in this dispute.  As noted 
above, the Philippines describes the following four elem ents as the relevant f eatures of the dual roles 
that the Thai government has granted to certain government officials by simultaneously appointing 
them as TTM directors: (i) government officials w ith a dual function have the authority to make 
decisions relating to the Thai customs and tax laws  with respect to imported and domestic cigarettes; 
(ii) they have access to confidential information of imported cigarette companies, which are TTM's 
direct competitors in the Thai market; (iii) their ro le as TTM directors gives them financial incentives 
to maximize TTM's profits; and (iv) there are no safeguards appropriate to prevent any improper use 
of their capacity as government officials in making cu stoms and tax determinations for cigarettes.   
7.902  Following the approach of the Panel in Argentina – Hides and Leather , we consider that the 
relevant question is what these dual function govern ment officials arguably with an interest to 
promote TTM's profit level are permitted to do.  As  submitted by the Philippines, and illustrated in the 
evidence before us, their capacity as senior government officials holding high ranking positions in 
three divisions of the Ministry of Finance (i .e. DG Excise, DG Customs and DG Revenue) legally 
allows them to be involved in the decision making process for customs and fiscal matters and to have 
access to confidential information of imported cigare tte companies.  These factors, in conjunction 
with the financial incentives for TTM directors to maximize TTM's profits, as addressed below, would initially illustrate the circumstances that may lead to a lack of impartial administration of 
customs and fiscal matters in respect of imported cigarettes.   
7.903  In support of its position, the Philippines point s to instances where in its view partial 
administrative decisions were taken under the author ity or with the active contribution of these dual 
function government officials.
1537  In these instances, the Philippi nes has cited to a number of 
decisions that did not necessarily reflect the commerc ial interests of PM Thailand, which were made 
while dual government officials were serving as TTM directors.1538  The Philippines also points to 
confidential information that was unveiled to the Thai press between 2006 and 2009.1539 
7.904  We agree that at a theoretical level, evidence of  this kind, if properly substantiated, would 
help demonstrate that the administrative process at i ssue necessarily leads to a lack of an impartial 
                                                      
1535 Panel Report, Argentina – Hides and Leather , para. 11.99. 
1536 Panel Report, Argentina – Hides and Leather , para. 11.100 (emphasis added). 
1537 Philippines' second written submission, paras.  30-35; response to Panel question No. 79.  
1538 Philippines' response to Panel question No. 79; second written submission, para. 34.  
1539 Philippines' first written submission, para. 386; Exhibits PHL-1, 48, 54, 64, 85, 86 and 159. The 
information on the c.i.f. price and the import volume for PM Thailand cigarettes was revealed to the press by 
certain Thai government officials both in August- September 2007 and in June 2009.  See para. 7.926.  WT/DS371/R 
 Page 345 
 
 
  administration.  This is particularly so given th at the allegation under Article X:3(a) of a Member 
government's biased administration requires the pr esentation of solid evidence.  For example, 
therefore, a pattern of decisions would tend to show a lack of impartial administration.1540  However, 
we are not convinced that the determinations refere nced by the Philippines can necessarily be related 
to what the dual function officials do and/or what they are permitted to do in administering the Thai 
customs and tax rules.  In other words, unless it can be shown that these determinations are made 
because of the very presence of the government officials serving also as TTM directors, we are not in a position to find that the appointment of dual func tion officials led to a partial administration of 
customs and tax rules.  Moreover, it is also questionable whether these determinations can be 
considered consistent enough to s how a pattern of decisions amounting to a partial administration of 
customs laws and regulations. 
7.905  As regards financial incentives, we understand the Philippines' position to be that in the 
process of making customs and/or tax decisions, dua l function officials would act in a manner in 
which TTM's profits would be maximized, for exam ple, by negatively influencing the decisions for 
imported cigarettes, which in turn would incr ease the amount of bonuses granted to them as TTM 
directors.  We recognize that financial bonuses for TTM directors are indeed related to TTM's net 
profit results.
1541  This is still the case even if, as Thailand submits, only 50 per cent of the bonus is 
function of TTM's net result and the other 50 pe r cent is granted upon attending board meetings.1542  
As such, financial incentives could indicate that the dual function officials may be motivated to 
maximize TTM's profit level.  However, we are not  presented with solid evidence suggesting that the 
existence of such motivation itself would necessarily lead to an administration of the customs and tax 
rules which would favour TTM's cigarettes.1543   
7.906  Furthermore, the Philippines submits that Th ailand does not provide adequate safeguards 
against the alleged partial administration.  The Philippines bases its position on the argument that the 
Ethical and Moral Guidebook of TTM shields dual function officials fro m legislative sanctions that 
may be imposed when they act contrary to the di sciplines provided for in the Thai Civil Service Act 
and the Criminal Code.1544  Thailand responds that the Ethical and Moral Guidebook of TTM  does not 
                                                      
1540 Panel Report, US – Hot Rolled Steel , para. 7.268. 
1541 Philippines' first written submission, para . 79; Exhibit PHL-6, Section 1, p.1. 
1542 Thailand's second written submission, footnote 1 71; see also Exhibits THA-3, pp. 44-45; PHL-6 
and PHL-7. 
1543 In addition, we note that the Appellate Body has recognized that the good faith principle has an 
implication for the Panels' interpretation of the Members obligations. (Appellate Body Report,  US – Offset Act 
(Byrd Amendment) , para. 297).  The Panel in Canada – Continued Suspension  also found that one aspect of the 
good faith principle applied to the context of WTO disputes was to grant members a presumption of WTO consistency in the application of their domestic laws: 
 
"It is implicit from the duty to perform treaty obligations in good faith that a party to an international agreement should be deemed to have acted in good faith in the performance of its 
treaty obligations. More generally, even though Article 26 provides for an obligation and not a 
presumption, pacta sunt servanda is but only one expression of the principle of good faith. 
Good faith is a general principle of international law that governs all reciprocal actions of 
States. We are therefore inclined  to agree with the European Co mmunities that every party to 
an international agreement must be presumed to be performing its obligation under that agreement in good fa ith. " (Panel Report, Canada – Continued Suspension , para. 7.317) 
 
In the absence of solid evidence to prove the contrary, there is no reason  to assume that TTM directors, 
who are Thai government officials, would act in contradiction to their WTO obligations. 
1544 Philippines' response to Panel question No. 75, para. 439.  The Guidebook requires that TTM 
Directors must "make any determination for the utmost benefit of [TTM]". For example, the Philippines submits that, they would be exempt from the Thai Civil Service Act and Criminal Code provisions regarding the undue 
use of confidential information and impartial administration. WT/DS371/R 
Page 346  
 
  supersede any law in the sense that it is inferior to all statutes and codes in the hierarchy of norms.  It 
is a TTM's internal document and, as such, does not  carry with it any regulatory authority.   
7.907  We note that the Philippines does not dispute that safeguards do exist in the form of Thai 
Civil Service Act and the Criminal Code.  The Philippines contention is that no sanction can be 
adequately implemented under the Thai Civil Se rvice Act and the Criminal Code against dual 
function officials because the TTM's Ethical Guidebook allegedly supersedes these legal instruments.  
To prove that safeguards are available and eff ectively implemented, Thailand presented a table 
showing the instances where sanctions were imposed  on government officials under the Civil Service 
Act and the Criminal Code.
1545  In our view, although these examples  show that the concerned legal 
instruments are indeed enforceable, they fail to clar ify the issue raised by the Philippines, namely the 
applicability of the provisions under those legal instruments to dual function officials who are 
simultaneously governed by TTM's Ethical Guide .1546  Nevertheless, we accept Thailand's explanation 
that the Ethical Guidebook is a TTM internal document and, as  such, does not carry with it any 
regulatory authority to supersede legal authorities su ch as the Thai Civil Service Act and the Criminal 
Code.  Based on the hierarchy of norms as commonly established in states, and in the absence of any 
convincing argument or evidence presented by the Phili ppines to prove otherwise, we find that the 
Thai Civil Service Act and the Criminal Code are th e legal instruments that provide ethical disciplines 
to be respected by government officials including those with a dual function as TTM directors. 
7.908  Finally, the Philippines argues that Thailand do es not apply the Thai Civil Service Act to 
TTM1547, while this Act prohibits government official s from holding managing positions in companies 
like TTM.  Thailand submits that the said Act applies only to private companies, and not to public 
companies.1548  The text of the Thai Civil Service Act does not specify whether the concerned 
prohibition applies to both public and private companies.  We, however, consider the parties' arguments on this point irrelevant to our consider ation of the impartiality requirement.  This is 
because, even if the Thai Civil Service Act were to  apply to TTM so as to prohibit the appointment of 
government officials to TTM, whether Thailand comp lied with its own domestic  law is not relevant 
for the purpose of this dispute. 
7.909  In the light of the foregoing, we are of the view that the Philippines has not proved that the 
features relating to the appointment of certain gove rnment officials as TTM directors necessarily lead 
to a lack of impartial  administration of the Thai customs and fi scal rules.  In reaching this conclusion, 
we are mindful of the seriousness of the al legation concerning a sovereign government's 
administration of its laws and regulations.  We recognize that there may be situations where a 
government's measure or act is so egregiously flawed  that the unfairness inherent in such a measure or 
act may be sufficient to demonstrate an impartial ad ministration without the need to illustrate it with a 
concrete example(s) of decisions resulted from the concerned administration.  However, under the 
circumstances of this dispute, we do not find that  the appointment of government officials as TTM 
directors, considered in the light of the implemente d safeguards present, amounted to such a situation.   
7.910  At the same time, however, we wish to emphasi ze that the principle of transparency and 
procedural fairness that permeates the obligations un der Article X:3(a) and consequently the trading 
                                                     
 
1545 Thailand's response to Panel question No. 153. 
1546 Thailand's response to Panel question No. 153; Thailand's second written submission, 
paras. 193-198; Thailand's second oral statement, paras. 77-82.  Civil servants are subject to the obligations in 
the Civil Service Act (i) "to perform o fficial duties faithfully, honestly and fa irly"; (ii) not to use one's position 
for personal gain; and (iii) not to engage in prejudicial or  unfair acts or acts that dishonour the official's position 
(Sections 82-83 of the Civil Service Act). 
1547 Exhibit THA-35. Section 83(6) of the Thai Civ il Service Act prohibits government officials from 
serving as "a managing director or manager or hold any other position entailing a similar nature of work in a partnership or a company". 
1548 Thailand's response to the Philippines' questions Nos. 4a and b.   WT/DS371/R 
 Page 347 
 
 
  system in general must be respected by the Members with utmost effort.  Particularly, we are aware of 
the Philippines' concern that the general lack of tr ansparency in the deliberative process with respect 
to important aspects of Thailand's customs and tax laws result in administrative officers generally 
remaining unchecked.1549  In the light of the unusual factual circumstances in Thailand that certain 
government officials in charge of customs and tax de terminations also serve on the board of directors 
for TTM, the only domestic competitor against im ported cigarettes, it would be only prudent for 
Thailand to ensure that the administration of its cust oms and fiscal laws is carried out in a transparent 
and impartial manner. 
(ii) "reasonable" administration 
Main arguments of the parties  
7.911  The Philippines claims that TTM directors' dual role constitutes unreasonable administration 
because they are in a position where they may gather  and reveal confidential information on their 
direct competitor.1550  In this regard, the Philippines relies on Argentina – Hides and Leather , where 
the Panel found that the presence of representatives of the domestic tanning industry in the customs 
clearance process was unreasonable  because it " inherently  contain[ed] the possibility of revealing 
confidential business information".1551  
7.912  Furthermore, the Philippines points to the actua l instances in which several customs officials 
disclosed PM Thailand's declared transac tion value to the Thai media in 2006.1552  On 29 August 
2006, Mr. Varathep Ratanakorn, then Deputy Fi nance Minister, was quoted in the newspaper 
Matichon  as stating that "the estimated price of Marlboro  cigarette has been adjusted from 
Bt[[xx.xxx.xx]] to Bt[[xx.xxx.xx]] a pack".1553  Two days later, the Finance Minister himself, 
Dr. Thanong Bidaya, provided information on the basis of which the newspaper Khao Hun  could 
write that " L&M  declared the imported price (c.i.f.) at only Bt[[xx.xxx.xx]] per pack, while Marlboro  
is declared only Bt[[xx.xxx.xx]]".1554  On 27 September 2006 Mr. Utid Tamwatin, then DG Excise, 
discussed a potential import ban explaining how this threat impacted the import price of Marlboro  
cigarettes which  "had been at [[xx.xxx.xx]] baht per pack [and]was changed to [[xx.xxx.xx]] per pack 
for the past two to three months".1555   
7.913  In August 2006, three other breaches of  confidentiality occurred when (i) the Daily News  and 
the Bangkok Post  both reported statements made by V.  Ratanakorn (Deputy Finance Minister) 
                                                      
1549 Philippines' first written submission, paras. 81-82. 
1550 Philippines' first written submission, para. 85. The Philippines puts forward that the following 
confidential information can be accessed by dual ro le officials: pricing and expense information 
(Exhibit PHL-16); details of PM Thailand's agreements with suppliers and purchase rs (Exhibit PHL-16); sales 
data (Exhibits PHL-17 and PHL-18); and internal accounting records and documents (Exhibit PHL-19). The 
Notification of the Customs Department No. 23/2549 of 7 April 2006  (Exhibit PHL-21) also lists the 
information to be filed upon along with the import declaration including two copies of invoice, a packing List (if 
any), an insurance pr emium or other documents indicating the insu rance premium, a release order (Customs 
Form 100/1 or Form 469), a Bill of Lading or air waybill as the enclosed Attachment 1, a Customs Value-
Declaration Form (Customs Form No 170), an import licen se if the imported goods are restricted, a certificate of 
analysis, specifications of goods, material data sheet detailing sufficient information for Customs purpose, including production processes (if any), and guidelines on application of the goods where necessary,  a 
certificate of origin, and other documents as required by Customs e.g. documents detailing product mixtures, 
characteristics, guidelin es on application of goods, catalogue, etc. 
1551 Panel Report, Argentina – Hides and Leather , para.11.94 (italics added). 
1552 Philippines' first written submission, paras. 387-399; response to Panel question No. 152. 
1553 Exhibit PHL-85. 
1554 Exhibit PHL-1.   
1555 Exhibit PHL-86.   WT/DS371/R 
Page 348  
 
  revealing that the price of imported cigarettes would be increased 
1556 and discussing the impact of 
this measure on DG Customs revenues1557; (ii) the Post Today  reported information provided by an 
unnamed "source from Customs Department" which revealed PM Thailand's import prices and import quantities for both L&M  and Marlboro brands in 2005; and (iii) the 29 August 2006 edition of 
Matichon  published an Article containing the following ta ble that reveals the "c.i.f." price of three 
brands of cigarettes: Marlboro , L&M , and Mild Seven .
1558    
7.914  Thailand  explains that it could legally grant dual functions to government officials on two 
grounds.  First, Thailand was not c onstrained by the prohibition under Article 83(6) of the Thai Civil 
Code since it only prohibits government officials from also managing private companies.  
Government officials may however be appointed to  managing positions in public companies as is 
common practice.1559 
7.915  In addition, Thailand argues that granting dual pos itions to selected administrative officials is 
relevant as it promotes legitimate administrative objectives.  Thailand distinguishes the facts in Argentina – Hides and Leather  from the circumstances of this case.  In Argentina – Hides and 
Leather , the Panel found the appointment of private speci alists as customs offici als to be unreasonable 
administration under Article X:3(a) because the priv ate specialists were direct competitors to the 
importer and "had no legal relations hip" to the custom operations.
1560  On the other hand, Thailand 
emphasizes that that Panel recognized that, the " government has a relevant legal interest in the 
transaction based on the sovereign rights to regulate and tax [imports]".1561  Accordingly, Thailand 
argues, a government may appoint any public agent  to the administrative process relating to cigarettes 
imports.1562  Nominating the  same  agents as TTM directors also ma kes sense for three reasons: (i) 
they "have expertise relevant to the management of a state-owned enterprise" importing tobacco and 
collecting the related taxes; (ii) they can "play a role in ensuring that TTM itself  complies efficiently" 
with the Thai legislation1563; and (iii) they are making sure that TTM's activities are consistent with 
Thai public health policy (TTM Board includes an individual of the Ministry of Health).1564   
7.916  Thailand also observes that the Philippines h as not proffered any evidence to link the 2006 
confidentiality breach to an institutional "problem" of  the Thai administrative system as a whole.  
Thailand concludes that the Philippines has not discharged its burden of proof under Article X:3(a). 
7.917  Thailand also draws the Panel's attention to th e fact that there are "several policy reasons" 
why the Panel should not rule in favour of the Philippines.1565  According to Thailand if "a mere fact 
of public officials having dual roles or supervisor y authority over competing interests was sufficient 
to establish a violation of Article X:3(a) [then] the regulatory capacity of governments would be 
severely impaired".1566 In particular, Thailand maintains that  finding a violation of Article X:3(a) 
under these facts would make it impossible for Members to continue with the relatively common practice of having the same departments and offi cials conduct internal reviews of administrative 
decisions made by those same departments and officials.
1567   
                                                      
1556 Exhibit PHL-64.  
1557 Exhibit PHL-54.  
1558 Mild Seven  is a brand marketed by Japa n Tobacco International (JTI). 
1559 Thailand's response to Panel question No. 154; Exhibit THA-98. 
1560 Panel Report, Argentina – Hides and Leather , para.11.98. 
1561 Panel Report, Argentina – Hides and Leather , para.11.98 (replacing "exports" by "imports"). 
1562 Thailand's response to Panel question No. 151. 
1563 Thailand's second written submission, para. 200. 
1564 Thailand's second written submission, para. 200, footnote 175; response to Panel question No. 75.  
1565 Thailand's second written submission, para. 183. 
1566 Thailand's second written submission, para. 183. 
1567 Thailand's second written submission, para. 183.   WT/DS371/R 
 Page 349 
 
 
  Analysis by the Panel  
7.918  The Philippines claims that the appointment of dual function officials as TTM directors 
constitutes unreasonable administration under GATT Article X:3(a) because they are in a position 
where they may gather and reveal confidential in formation on their direct competitors.  Thailand 
argues that granting dual functions to government  officials is consistent with the reasonable 
administration requirement under Article X:3(a) be cause it is allowed in Thailand's domestic law1568 
and promotes Thailand's legitimate administrative objectives.   
7.919  The term "reasonable" is defined as "in accordan ce with reason", "not irrational or absurd", 
"proportionate", "sensible", and "within the limits of  reason, not greatly less or more than might be 
thought likely or appropriate".1569 The panel in Argentina – Hides and Leather  considered in the light 
of the factual circumstances in that dispute that "the requirement of reasonableness ... turns on the 
question of information flows and whether it is reasonable to allow persons access to certain 
information which is irrelevant to the stat ed purpose of the legislation in question".1570  It added that a 
feature of administration is unreasonable when it " inherently  contains the possibility of revealing 
confidential business information".1571   
7.920  We recall the Appellate Body's consideration in US – Shrimp that the provision of Article X:3 
of the GATT 1994 bears upon the chapeau of Article XX, which requires the application of a measure justifiable under one of the Article XX provisions not to be arbitrary or unjustifiable.  This may be 
linked to the fact that, as the Appellate Body in Brazil – Retreaded Tyres  states, the chapeau of 
Article XX also deals with the manner of application of the measure at issue.
1572  As such, we do not 
see why the principles underlying the requirements in the chapeau of Article XX would not equally be 
relevant to Article X:3(a), a provision also governing the manner in which WTO Members administer 
the legal instruments of the kind falling under Article X:1.   
7.921  To the extent that the obligations under the ch apeau of Article XX and Article X:3(a) can be 
considered as informing each other, the Appellate Body's clarification of the principles underlying the 
chapeau of Article XX provide guidance on the analysis of the reasonableness requirement under 
Article X:3(a).  For example, in examining whet her an import ban provisionally justified under 
Article XX(b) for the purpose of protecting human h ealth and life was applied in an unjustifiable or 
arbitrary manner, the Appellate Body in Brazil – Retreaded Tyres  reasoned that "the analysis of 
whether the application of a measure results in ar bitrary or unjustifiable discrimination should focus 
on the cause of the discrimination, or the rationale put forward to explain its existence".1573  W e  
consider that the rationale that can explain the gr anting of dual functions to selected customs and tax 
                                                      
1568 Exhibit THA-35. Thailand explains that Article  83(6) of the Thai Civil code only prohibits 
administrative officials from also holding managing positions in private companies. They may however hold simultaneous managing positions in public companies. Thailand also refers to Exhibit THA-98 listing 63 
administrative officials holding managing position in public companies. The list is non-exhaustive. 
1569 Panel Report, Dominican Republic – Import and Sale of Cigarettes , para. 7.385 referring to the The 
New Shorter Oxford English Dictionary , (Fifth Edition) Oxford University Press, Vol. II, p. 2482 (2002). 
1570 Panel Report, Argentina – Hides and Leather , para. 11.86. 
1571 Panel Report, Argentina – Hides and Leather , para. 11.94 (emphasis added). 
1572 Appellate Body Report, Brazil – Retreaded Tyres , para. 230. 
1573 Appellate Body Report, Brazil – Retreaded Tyres , para. 226 (emphasis added).  The Appellate 
Body explains, "the assessment of whether discrimination is arbitrary or unjustifiable should be made in the light of the objective of the measure.  We note, for exam ple, that one of the bases on which the Appellate Body 
relied in US – Shrimp for concluding that the operation of the measure at issue resulted in unjustifiable 
discrimination was that one particular aspect of the appli cation of the measure ... was 'difficult to reconcile with 
the declared objective of protecting and conserving sea turtles'" (para. 227, referring to the Panel Report, US – 
Shrimp , para. 7.287). WT/DS371/R 
Page 350  
 
  officials is also relevant to evaluating the question of whether it is an administrative process that leads 
to unreasonable administration of the Thai tax laws and regulations. 
7.922  Under the factual circumstances in this case, we co nsider that all three features, not just the 
information flow, of the dual function officials, as described in the context of the impartiality 
requirement, are relevant to the question before us.
1574  We found that the Thai government officials 
with a dual function as TTM directors have the authority to make decisions relating to the Thai 
customs and tax laws with respect to imported and domestic cigarettes, not to mention access to confidential information on imported cigarettes, whic h is information on TTM's direct competitors in 
the Thai market.  We also observed that their role as TTM directors gave dual function officials 
financial incentives to maximize TTM's profits.  These features, in our view, present an environment 
in which these dual function officials, when acting in  their capacity as customs and tax officers, could 
affect the manner in which they administer the rules given their simultaneous position at TTM, an entity with competing commercial interests to impo rted cigarette brands.  Therefore, granting dual 
function officials the power to make customs and fiscal decisions concerning cigarettes, both 
imported and domestic, as well as access to confid ential information on imported cigarettes would 
appear to constitute an act of inappropriate and/or not sensible administration unless there is a 
particular rationale that can explain the concerned act. 
7.923  Thailand nonetheless points out that granting dual positions to selected government officials 
promotes legitimate administrative objectives: (i) they "have expertise relevant to the management of a state-owned enterprise" importing tobacco and collecti ng the related taxes; (ii) they can "play a role 
in ensuring that TTM itself  complies efficiently" with the Thai legislation
1575; and (iii) they are making 
sure that TTM's activities are consistent with Th ai public health policy (TTM Board includes an 
individual of the Ministry of Health).1576   
7.924  A sovereign state has the discretion and authorit y to structure its government and manage and 
administer its own laws and regulations as it deems fit.  Accordingly, we can envision a situation 
where a government wants to utilize its resources to the maximum extent possible by, for example, 
granting officials dual functions.  To that extent, we are not in a position to second guess the specific 
needs of the Thai government in assigning selected customs and tax officials with a dual role as a 
director of a state enterprise, TTM.  We therefore recognize that the Thai government officials serving as DG Excise, DG Revenue, DG Commerce may indeed be  well equipped to apply their expertise in 
laws and regulations relating to customs and in ternal taxes to the management of TTM.   
7.925  The Philippines argues that, even though those obj ectives were legitimate, other avenues were 
available to reach identical results.  We agree that  there might be other means and ways to achieve 
Thailand's stated administrative objectives than the cu rrent administrative process at issue.  However, 
as noted above, it is our view that Thailand, as a sovereign state, may administer its laws and 
regulations in the way it considers most appropriate  in the particular circumstances in which it is 
situated.  It should be noted though, that a WTO Me mber's discretion to admini ster its own laws, must 
be exercised in a manner consistent with its obl igations under the WTO Agreement. Our task is, 
therefore, not to find the best administra tive means to achieve a Member's goal.   
7.926  The Philippines also draws the Panel's attenti on to the instances in which PM Thailand's 
confidential information was revealed by Thai go vernment officials.  By way of example, the 
Philippines points to the instances in 2006 in which several customs officials disclosed PM Thailand's 
declared transaction value to the Thai media.
1577  On 29 August 2006, Mr. Va rathep Ratanakorn, then 
                                                      
1574 See para. 7.901. 
1575 Thailand's second written submission, para. 200. 
1576 Thailand's second written submission, para. 200, footnote 175; response to Panel question No. 75.  
1577 Philippines' first written submission, paras. 387-399; response to Panel question No. 152.  WT/DS371/R 
 Page 351 
 
 
  Deputy Finance Minister, was quoted in the newspaper Matichon  as stating that "the estimated price 
of Marlboro  cigarettes has been adjusted from Bt[[xx.xxx.xx]] to Bt[[xx.xxx.xx]] a pack".1578  Two 
days later, the Finance Minister, Dr. Thanong Bida ya, provided information on the basis of which the 
newspaper Khao Hun  wrote that " L&M  declared the imported price (c.i.f.) at only Bt[[xx.xxx.xx]] per 
pack, while Marlboro  is declared only Bt[[xx.xxx.xx]]".1579  On 27 September 2006 Mr Utid 
Tamwatin, the then DG Excise discussed a potential im port ban explaining how this threat impacted 
the import price of Marlboro  cigarettes which  "had been at [[xx.xxx.xx]] baht per pack [and]was 
changed to [[xx.xxx.xx]] per pack for the past two to three months".1580  Thailand does not dispute 
these occurrences either.   
7.927  However, we find that the Philippines failed to make a connection between the concerned 
instances of the unauthorized publication of c onfidential information and the dual function 
government officials.  In other words, we are not presented with evidence indicating that such 
unauthorized publication of PM Thailand's confidentia l information can necessarily be related to the 
concerned government officials' dual role as TTM's directors. 
7.928  Furthermore, we recall our cons ideration above that these selected government officials with 
a dual function are subject to the obligations under the Thai Civil Service Code and the Criminal 
Code.  The Philippines argues that they are ineffective in preventing acts of unreasonable 
administration on the same grounds that safeguard s could not prevent impartial administration.1581  
However, the instances of the alleged breach of c onfidentiality would not necessarily disprove of the 
fact that these legal instruments can and do func tion as safeguards against the inappropriate use of 
their positions, access to confidential information, and financial incen tives to maximize TTM' profits.   
7.929  In conclusion, given the rationale behind it, a nd considered in conjunction with safeguards in 
the system, we find that the Philippines has not es tablished that the features of Thailand's granting 
selected customs and tax officials with a dual fu nction as TTM directors necessarily lead to an 
unreasonable administration of the Thai customs and tax laws and regulations within the meaning of 
Article X:3(a).   
4. Delays in the BoA's decision-making con cerning PM Thailand's appeals against Thai 
Customs' determinations 
(a) Introduction 
7.930  In Thailand, DG Customs takes customs valuation decisions.  These decisions can be 
appealed, which entails a two-step process: appeal s are first examined by the Sub-Committee for 
customs valuation, which then transmits the file  to the Board of Appeals ("BoA") for a decision.1582  
Determinations of the BoA may then  be appealed to the Tax Court.1583 
7.931  The Philippines argues that undue delays are observed in the processing of a certain number 
of appeals lodged by PM Thailand against Thai Cust oms' determinations.  The Philippines claims that 
this delay in the BoA's processing amounts to an unreasonable  administration within the meaning of 
Article X.3(a).  Thailand claims that Article X:3( a) was not intended to impose absolute deadlines on 
Members for the completion of such administrativ e proceedings, and therefore the Panel should not 
interpret the term "unreasonable" to impo se specific deadlines on Members' administrative 
                                                      
1578 Exhibit PHL-85. 
1579 Exhibit PHL-1.   
1580 Exhibit PHL-86.  
1581 Philippines' second written submission, paras. 42-48. 
1582 Thailand's response to Panel question No. 145 citing Exhibit THA-88. 
1583 Exhibit PHL-20, Section 112 octuordecies . WT/DS371/R 
Page 352  
 
  proceedings. In addition, Thailand states that the qu estion of what is "reasonable" administration of 
the law in a particular case necessarily depends on the circumstances of the case.  
(b) Whether the BoA's review of customs valuati on determinations constitu tes "administration" 
within the meaning of Article X:3(a) 
7.932  As the Panel noted in paragra ph 7.869 above, "administration" in  Article X:3(a) covers both 
the manner in which the legal instruments of the kind falling under Article X:1 are applied or 
implemented in particular cases as well as a legal instrument that regulates such application or 
implementation.   
7.933  The Philippines' claim concerns delays caused  in the BoA's review of certain customs 
valuation decisions for PM Thailand's cigarettes.  As noted above, appeals made against customs 
valuation decisions are first lodged with and examined  by the BoA, which is an administrative review 
body within the Ministry of Finance.
1584  Under the Thai law, the decisions of the BoA can then be 
appealed at the judicial level.  We consider that the review of customs valuation decisions at the BoA 
level is an act of "putting into practical effect, or  applying" the relevant Thai customs laws and thus 
falls within the meaning of the term "administer"  in Article X:3(a).  Moreover, the parties do not 
dispute that the appeals process of customs valua tion decisions constitutes "administration" of the 
customs laws.   
7.934  Therefore, we will proceed to examine whethe r the precise aspect of the Thai government's 
administration at issue here, namely the delays in the BoA process of reviewing certain customs 
valuation decisions at issue, resulted in an unreasonable administration of the Thai customs law.   
(c) Whether Thailand administered its customs laws  in an "unreasonable" manner through delays 
caused in the BoA's review process 
(i) Main arguments of the parties 
7.935  The Philippines claims that Thailand violates Article X:3(a) by unreasonably administering 
its customs laws applicable to imports of fo reign cigarettes by delaying the processing of 
[[xx.xxx.xx]] custom valuation appeals before the BoA for a period of six to seven years.  Those 
delays constitute a pattern of unreasona ble administration under Article X:3(a)1585 because they are 
"not appropriate or suitable to the circumstances"1586 and leave importers without a timely remedy 
against decisions by Customs authorities.1587  
7.936  The Philippines considers that a finding of  unreasonableness under Article X:3(a) requires 
that the totality of the circumstances be examined.1588  Yet, the duration of an administrative 
proceeding alone may be unreasonable administrati on, absent adequate countervailing explanations 
for the delays observed.1589  In this regard, the Philippines fi rst describes the pattern of delays 
                                                      
1584 As we address below in the context of our examination of the Philippines' claim under 
Article X:3(b), we find that the BoA is not independent of the agency entrusted with administrative 
enforcement, namely the Ministry of Financ e, within the meaning of Article X:3(b). 
1585 Philippines' second written submission, para. 560. 
1586 Philippines' first written submission, pa ra. 95, referring to the Panel Report, Dominican Republic – 
Import and Sale of Cigarettes , para. 7.385. 
1587 Philippines first written submission, paras. 95-96. 
1588 Philippines' second written submission, para. 545; Philippines' response to Panel question No. 80.  
"In this case, the factors to be consid ered are: (1) the duration of the proceed ings so far; (2) the nature of the 
appeals; (3) the BoA's treatment of sim ilar appeals; (3) the nature and intensity of the efforts undertaken by the 
BoA to resolve appeals; and (5) any explanation given by Thailand for the duration of the proceedings". 
1589 Philippines' response to Panel question No. 80.  WT/DS371/R 
 Page 353 
 
 
  concerning [[xx.xxx.xx]] claims, and then explains th at it is exclusively due to misadministration by 
the BoA. 
7.937  The Philippines recalls that [[xx. xxx.xx]] claims were originally  brought regarding the custom 
valuation determinations of ci garettes which entered Thailand between 2000 and 2002.  Of the 
appeals, [[xx.xxx.xx]] related to the entries of Marlboro  cigarettes in 2002.  Those [[xx.xxx.xx]] 
appeals were still undetermined at the time of the filing of the Philippines' second written submission 
in this proceeding.   
7.938  The Philippines submits a statistical table to  describe how the [[xx.xxx.xx]] claims were 
processed by the BoA:  the processing of the [[xx.xxx. xx]] claims at issue is unduly prolonged (the 
earliest and the most recent of these [[xx.xxx.xx]] appeals have been pending for almost 7.5 and 6.5 
years respectively); and the processing is extremely long compared to the average time taken for 
similar claims (as of the day of filing, the appeal s examination of the cases at issue had already taken 
4.55 years more than the average time necessary to resolve similar appeals).1590   
7.939  The Philippines relies on the Panel's statement in Colombia – Ports of Entry  that Colombia's 
post-importation review of customs values "appears qu ite lengthy, taking two years or more for an 
importer to obtain a refund".1591  The Philippines underlines that, on average, Thailand's review of 
custom valuation decisions has taken three time s longer than the period discussed in that case.1592  The 
Philippines concludes that this delay constitutes unreasonable administration within the meaning of 
Article X:3(a). 
7.940  Moreover, the Philippines states that no counterva iling  explanation justifies the BoA's delays 
in processing the [[xx.xxx.xx]] appeals at issue.  Fi rst, the Philippines contests that the [[xx.xxx.xx]] 
appeals presented particular difficulty compared to  other cases.  Through the [[xx.xxx.xx]] resolved 
appeals, the BoA has consiste ntly decided to apply the same  company wide  P&GE ratio1593 to all 
cigarettes (either L&M or Marlboro ) imported by PM Thailand and cleared on the Thai market during 
the 2000-2003 period.1594 The [[xx.xxx.xx]] entries at issue al so concerned PM Thailand cigarettes 
(Marlboro ) entering and being cleared on the Thai market between 2002 and 2003.  Hence no 
additional determination should have been  necessary to assess the applicable P&GE.1595  The same 
P&GE that applied to all other PM Thailand cigarettes for products entering and being cleared at the 
same dates should have been applied without further deliberation.1596  
7.941  Second, the Philippines disagrees that PM Thaila nd contributed to undue delays in processing 
the [[xx.xxx.xx]] claims at issue.  In particular, PM Thailand's 2005 request for a different adjusted 
P&GE ratio cannot justify the extraordinary delays observed.1597 The Philippines recalls that it 
submitted this alternative ratio in respon se to the intent indicated by the BoA1598 not to apply the 
                                                      
1590 Philippines' comments on Thailand's response to Panel questions Nos. 143-144. 
1591 Panel Report, Colombia – Ports of Entry , para. 7.128. 
1592 Philippines' response to Panel question No. 80. 
1593 Philippines' comments on Thailand's response to Panel questions Nos. 143-144. P&GE stands for 
"profit and general expenses", which equals the gross margin. 
1594 Exhibit PHL-273a, BoA Ruling 4, June 19, 2006.  See also the Philippines' response to Panel 
questions Nos. 143-144. This even included 6 entries cleared on the same day as two of the entries concerned by the [[xx.xxx.xx]] outstanding appeals. 
1595 Philippines' response to Panel question No. 143. 
1596 Philippines' comments on Thailand's  res ponse to Panel questions Nos. 143-144. 
1597 Exhibit PHL-154. By a letter dated 15 December 2005, PM Thailand requested that a ratio different 
from the company wide ratio be app lied to entries having occurred be tween January 2002 and December 2002. 
1598 Philippines' second oral statement, para. 145,  referring to a meeting held between BoA and 
PM Thailand on 28 September, 2005 where BoA allegedly stated its intent not to apply the company wide 
adjusted ration of [[xx.xxx.xx]] per cent to the [[xx.xxx.xx]] claims at issue. WT/DS371/R 
Page 354  
 
  adjusted company-wide P&GE ratio to 2002 Marlboro  entries
1599, [[xx.xxx.xx1600]].  While the BoA 
could reasonably require additional information, the BoA proved dilatory in the extreme as shown by 
the submitted chronology table.1601   
7.942  Third, the Philippines disputes that a modifi cation in PM Thailand' s net overall financial 
performance in the year 2002 can explain additional delays in the BoA's determination of the 
[[xx.xxx.xx]] claims at issue.  Thailand fails to explain how PM Thailand's financial performance may 
influence the BoA decisions and trigger delays .  Additionally, if any measure of financial 
performance should be used for the purpose of cust oms valuation, the BoA should have focussed on 
PM Thailand's gross margin (which deducts expens es) as provided in Article 5.1(a) of the Customs 
Valuation Agreement.  PM Thailand's gross ma rgin remained positive between 2000 and 2002: the 
BoA was therefore not facing any new situation compar ed to already decided appeals.  Finally, even 
assuming PM Thailand's overall financial performance  to be relevant, the BoA should have acted 
more rapidly and diligently throughout the six y ears since the PM Thailand's 2002 financial record 
was published.1602 
7.943  Last, the Philippines also contests that PM Thailand's 2007 request that [[xx.xxx.xx]] appeals 
be treated expeditiously1603  warranted that those appeals be prioritized over the [[xx.xxx.xx]] appeals 
at issue, thereby triggering additional delays.1604 
7.944  The Philippines fails to understa nd Thailand's argument that such a long review process was 
in PM Thailand's financial interest.  The Philippines insists that, even if this was accurate, it would by 
no means exempt Thailand from its obligations under Article X:3(a).1605  The Philippines concludes 
that no countervailing explanation w as convincingly substantiated by Thailand.  Thus, the extremely 
long time taken by the BoA to process the appeals of  the [[xx.xxx.xx]] customs valuation claims at 
issue constitutes unreasonable administration of the relevant customs laws. 
7.945  Thailand submits that it administers its customs laws  in compliance with the requirements of 
Article X:3(a).  It first points out that the Philippines' claim covers only 23 per cent of all PM Thailand's appeals reviewed since 2000
1606 while 77 per cent of the reviews were conducted in a 
timely manner.1607  This provides for a reasonable timeline for appeals review.  Thailand also alleges 
that an examination of the totality of the ci rcumstances surrounding the appeals at issue does not 
warrant the conclusion that they were unre asonably administered within the meaning of 
Article X:3(a).1608   
7.946  First, Thailand submits that PM Th ailand hindered the review proceedings1609 by requiring the 
BoA to apply a new P&GE calculation method1610 to the [[xx.xxx.xx]] claims at issue.  Thailand 
                                                      
1599 Philippines' second oral statement, paras. 145-149. 
1600 [[xx.xxx.xx]]. 
1601 Philippines' response to Panel questions Nos. 143-144. Table submitted in the Philippines' second 
written submission, para. 579. See also , Philippines' comments on Thailand's  response to Panel questions 
Nos. 143-144, explaining that PM Thailand's frequent requests for information through the period were not timely answered by BoA. 
1602 Philippines' response to Pa nel questions Nos. 143-144. 
1603 Exhibit THA-58, asking for expeditious treatm ent of [[xx.xxx.xx]] entries filed in 2006-7. 
1604 Philippines' comments on Thailand's response to Panel question  No. 145. 
1605 Philippines' comments on Thailand's response to Panel questions Nos. 143-144. 
1606 Thailand's response to Panel question No. 82, citing EC Third Party Written Submission, para. 61. 
1607 Exhibit THA-97 The average time necessary to co mplete the [[xx.xxx.xx]] reviews was 2 years, 6 
months, 28 days. 
1608 Thailand's response to Panel question No. 80, citing EC third party submission, para. 62. 
1609 Thailand's response to Panel question No. 80; Thailand's second written submission, para. 211. 
1610 Exhibit PHL-154.  WT/DS371/R 
 Page 355 
 
 
  declares that calculating the new ratio proved a diffi cult task since the data submitted by PM Thailand 
differed substantially from the information provided in  the context of other similar appeals.  Hence, 
Thailand disputes that the BoA h as been inactive in reviewing th e [[xx.xxx.xx]] appeals at issue.1611  
Moreover, Thailand  fails to understand the Philippin es' argument that an adjusted company-wide 
ratio should have been applied to the entries at issue.  PM Thailand had indeed requested that a 
distinct ratio be applied.1612  Thus, it was reasonable for the BoA: (i) not to apply the 
[[xx.xxx.xx]] per cent company wide ratio, and (ii) to use the time necessary to conduct an adequate 
review of PM Thailand's successive propositions for alternative ratios.1613 
7.947  In addition, Thailand underlines that examin ing the new ratio propos itions required that 
difficult calculation issues be resolved.  In partic ular, PM Thailand's financ ial statements regarding 
the critical period evolved to a profit (rather than a lo ss) situation.  This meant that Thailand had to 
adjust its custom valuation calculation met hod, which proved very time consuming.  
7.948  Third, Thailand argues that it was in PM Thailand's best financial interest that a different ratio 
be calculated and applied.  In support of its position, Thailand emph asizes that PM Thailand was then 
able to submit [[xx.xxx.xx]] per cent , a higher P&GE  ratio than [[xx.xxx.xx]] per cent, which would 
consequently lower the final customs value.1614 
7.949  Finally, the BoA could not follow its usua l timeline because PM Thailand asked it to 
prioritize [[xx.xxx.xx]] other claims over the [[xx .xxx.xx]] claims at is sue.  Both informal 
conversations1615 and PM Thailand's letter of June 2007 show that, by requiring that [[xx.xxx.xx]] 
other cases be treated expeditiously, PM Thailand unde rstood that other claims would be temporarily 
set aside.1616 
(ii) Analysis by the Panel 
7.950  In this section, we will examine whether the a lleged delays in the BoA process of reviewing 
the [[xx.xxx.xx]] appeals against the customs valua tion determinations for PM Thailand's cigarettes 
resulted in an unreasonable administration of the Thai customs laws under Article X:3(a). 
7.951  We recall our consideration above  of the reasonableness requirement in Article X:3(a).  The 
term "reasonable" is defined as "in accordance  with reason", "not ir rational or absurd", 
"proportionate", "sensible", and "within the limits of  reason, not greatly less or more than might be 
thought likely or appropriate".1617  We have also found guidance in WTO jurisprudence that the 
requirement of reasonableness should be examined based  on the features of the administrative act at 
issue in the light of  its objective, cause or the rationale behind it.1618   
7.952  Before we commence our analysis, we summarize the sequence of events relevant to the 
concerned appeals before the BoA as below. 
                                                      
1611 Thailand's response to Panel question No. 82, giving a chronology of events. 
1612 Thailand's comments on the Philippines' response to Panel questions (second meeting), para. 107, 
referring to the Philippines' resp onses to Panel question No. 143. 
1613 Exhibit PHL-154 and THA-86. Two alternative P&GE ratios were proposed by the Philippines 
respectively on 15 December, 2005 ([[x x.xxx.xx]] per cent instead of the company wide [[xx .xxx.xx]] per cent 
ratio and [[xx.xxx.xx]] per cent on 12 March 2007). 
1614 Thailand's response to Panel question No. 143. 
1615 Exhibit THA-58. 
1616 Thailand's response to Panel question No. 82. 
1617 Panel Report, Dominican Republic – Import and Sale of Cigarettes , para. 7.385, referring to the 
The New Shorter Oxford English Dictionary ,  (Fifth Edition) Oxford University  Press, Vol. II, p.  2482 (2002). 
1618 Panel Report, Argentina – Hides and Leather , para. 11.86; Appellate Body Report, Brazil – 
Retreaded Tyres , para. 227 (emphasis added). WT/DS371/R 
Page 356  
 
  Table 1.  Facts under Article X:3(a) claim Delay in BoA appeals 
 
Dates and time gaps PM Thailand's actions BoA acts 
March 2002 (1st 
appeal)1619 to March 
2003 (last appeal)1620 
2 years from 1st appeal 
 [[xx.xxx.xx]] appeals filed related to 
entries of Marlboro   
17 March 2004 
1 month 
 
  BoA requests  supplementary evidence 
to calculate the deductive value under 
the 2002-2003 appeals 
21 April 2004 
1.5 months 
 
 PM Thailand submits supplementary 
evidence related to 17 March request1621  
4 June 2004 
1.3 years 
 
 
  PM Thailand provides additional 
information related to 17 March  request 
(information still incomplete)
1622 
 
July 2004: PM Thailand writes a letter 
requesting [[xx.xxx.xx]] per cent for 
[[xx.xxx.xx]] claims.1623  
  
 
 
July 2005: BoA grants [[xx.xxx.xx]] 
per cent to 2002 L&M  entries
1624 
28 September 2005 
2.5 months 
 
 
  Meeting to discuss P&GE ratio. BoA 
says it would apply the company-wide 
ratio non-adjusted ([[xx.xxx.xx]] per 
cent) to [[xx.xxx.xx]] claims 
15 December 2005 
0.9 years 
 
 
 Letter to BoA requesting that new ratios 
be used ([[xx.xxx.xx]] per cent rather than 
[[xx.xxx.xx]] per cent)1625  
June 2006: BoA grants [[xx.xxx.xx]] 
per cent for [[xx.xxx.xx]] 2002 
Marlboro entries1626 
BoA request for more information 
10 November 2006 
4 months 
 
 3 successive responses to BoA's request 
for information 
  
24 November and 
12 December 2006; 
12 March 2007 
4 months 
 
 In March 2007, new P&GE ratio proposed 
([[xx.xxx.xx]] per cent)1627 
  
19 July, 2007 
1 year and 8 months 
 
 Letter asking for expeditious treatment of 
[[xx.xxx.xx]]other claims 
( previous informal talks were held)1628  Informal talks between November 
2006 and March 2007. THA-56, dated 
12 December 2006 
13 March 2009 
2 months  
 
  Meetings related to [[xx.xxx.xx]] other 
claims on 13 Sept. and 28 Nov. 2007. 
Subsequent request for information 
from BoA on 13 March 2009 
 
May 2009  
 PM Thailand answer to BoA 13 March 
request  
                                                      
1619 Exhibit PHL-22. 
1620 Exhibits PHL-23 and PHL-24.  WT/DS371/R 
 Page 357 
 
 
   
7.953  We will first briefly summarize the factual ev ents surrounding the concerned appeals before 
the BoA.  The parties do not dispute that out of  the [[xx.xxx.xx]] appeals lodged by PM Thailand 
between 2000 and 2002, [[xx.xxx.xx]] appeals relati ng to the entries lodged between 2000 and 2002 
have been decided.1629  This suggests that, on average, it took 2 years and 6 months for the BoA to 
process these [[xx.xxx.xx]] appeals.  The shortest period of time taken was [[xx.xxx.xx]], while the 
longest was [[xx.xxx.xx]].1630  On the other hand, however, the remaining [[xx.xxx.xx]] appeals at 
issue, which all relate to the Marlboro shipments that entered in 2002, have now been pending for 7 
years on average.1631   
7.954  Although we do not consider that the obligation for a WTO Member to administer its laws 
and regulations in a reasonable manner under Article X:3(a) sets a specific time limit for 
administrative review processes, such as the BoA revi ew in this dispute, a review process taking over 
7 years, particularly compared to the average time taken for other similar claims (i.e. 2.5 years), would appear to be, at least in the abstract sense, rather unusual.   
7.955  The Philippines argues that the BoA has consiste ntly been dilatory in all its official 
communications, taking at least a year (11 months in  the shortest instance) in each of its initiatives 
regarding the [[xx.xxx.xx]] claims at issue.
1632  In the aggregate, the total time attributable to the BoA 
in seeking information, as of the date of the submission, amounts to [[xx.xxx.xx]] from the first appeal, and [[xx.xxx.xx]] from the last appeal.
1633  Thailand does not appear to argue that the 
[[xx.xxx.xx]] duration taken for the BoA to review the [[xx.xxx.xx]] appeals at issue is not lengthy.  
Nevertheless, Thailand takes the position that the time  taken in reviewing these particular decisions is 
justified in the light of the particular circumstan ces attributable to these appeals.  Specifically, 
Thailand points to the following: (i) PM Thailand contributed to the delays because it hindered the 
BoA review of the claims by continuously making re quests for the use of new data (i.e. P&GE ratio), 
which necessitated complicated calculations; (ii) new calculations were in PM Thailand's interest in 
any event; and (iii) PM Thailand requested the BoA to  prioritize other appeals.  We will examine each 
of these elements in turn. 
7.956  First, regarding whether PM Thailand's successi ve requests for new calculations of the P&GE 
ratio prolonged its examination, the relevant fact s concerning the P&GE ratio are as follows: in July 
2004, the Philippines requested that a [[xx.xxx.xx]] pe r cent ratio be applied to  the claims at issue. 1634  
In July 2005, the BoA applied th e [[xx.xxx.xx]] per cent ratio to L&M 2002 entries.1635 On 18 
September 2005 the parties held a meeting, the outco me of which was "to add back the over-paid duty 
paid [for 2002 entries] to the gross profit initiall y submitted".  The new gross margin, as calculated by 
                                                                                                                                                                     
1621 Exhibit THA-52. 
1622 Exhibit THA-53. 
1623 Exhibit PHL-197. 
1624 Exhibit PHL-35. 
1625 Exhibit PHL-154. 
1626 Exhibit PHL-36. 
1627 Exhibit THA-86. 
1628 Thailand's response to Panel question No. 82; Exhibit THA-58. 
1629 Thailand's second written submission, para. 208. 
1630 Exhibit THA-97. 
1631 Exhibit PHL-23. 
1632 The initiatives include requesting information useful to ratio evaluations and convening meetings 
with PM representatives.  See Table 1 at page 355. 
1633 Philippines' second written submission, para. 581. 
1634 Exhibit PHL-197. 
1635 Exhibit PHL-35 and PHL-251. WT/DS371/R 
Page 358  
 
  PM Thailand, was [[xx.xxx.xx]] per cent.
1636  A year later, the BoA posed questions on the data used 
to establish the new ratio a year later to PM Thaila nd.  In a letter sent on 12 March 2007, PM Thailand 
proposed a third adjusted ratio of [[xx.xxx.xx]] per cent.1637  Since this date, no other communication 
regarding the appeals at is sue has been recorded.  
7.957  Thailand's understanding of the situation in this regard is as follows.  Although it had chosen 
to apply a constructed P&GE ratio of [[xx.xxx.xx]] per cent for the 2002 entries in the light of the 
increase in PM Thailand's profits since 2000, it consider ed that it was in the importers' interest to have 
an opportunity to request the BoA to use a highe r P&GE ratio to resolv e the pending appeals.  
Therefore, according to Thailand, to evaluate  the [[xx.xxx.xx]] per cent P&GE ratio proposed by 
PM Thailand by a letter of 15 December 2005, the Bo A was obliged to obtain substantive information 
from PM Thailand for this newly proposed P&GE ratio.1638  This process of obtaining the new 
information continued until March 2007, when it was interrupted by PM Thailand with a new 
proposal for an adjusted P&GE ratio of [[xx.xxx.xx]] per cent1639, which required examination of new 
documentation. 
7.958  Particularly with respect to the P&GE ratio  of [[xx.xxx.xx]] per cent, Thailand argues that 
PM Thailand's letter of 15 September 20051640, in which this P&GE ratio of [[xx.xxx.xx]] per cent is 
suggested, was not submitted  in response to a request from th e BoA.  Thailand argues that it was this 
request from PM Thailand that precipitated the a dditional delay in the appeals of the [[xx.xxx.xx]] 
entries.  As such, the request for the use of this  new P&GE ratio necessitated additional time for the 
BoA review of the customs valuation determinati ons on the subject entries. This consequently 
resulted in justifiably longer examination periods than under the usual circumstances.   
7.959  The Philippines argues that the new P&GE ra tio indicated in PM Thailand's letter of 
15 December 2005 was submitted as a result of the meeting with the BoA on 28 September 2005.  
The Philippines focuses on its allegation that th e BoA has been extremely tardy in seeking 
information from PM Thailand on the P&GE ratio of [[xx.xxx.xx]]per  cent submitted by PM Thailand 
in December 2005 following a request from the Bo A at the September 2005 meeting. Then it took the 
BoA almost a year to request specific informati on on this new proposal. PM Thailand then provided 
more information and new calculations r esulting in the [[xx.xxx.xx]] per cent ratio.1641  T h e  
Philippines has presented no specific comment in relation to the newly proposed [[xx.xxx.xx]] per 
cent P&GE ratio. 
7.960  The parties' disagreement on the circumstanc es surrounding PM Thailand's submission of the 
new P&GE ratio of [[xx.xxx.xx]] per cent on 15 Dece mber 2005 is related to the meeting held on 
28 September 2005 between the BoA and PM Thailand.  The parties do not dispute that the meeting 
took place and, at the meeting, issues relating to PM Thailand's P&GE ratios were discussed.  The 
parties present different views, however, on the re sult of the meeting.  In essence, the Philippines 
submits that its understanding of the meeting w as that the BoA was questioning whether it would 
continue to use an adjusted P& GE ratio rather than the actual company-wide P&GE ratio.  Such 
understanding subsequently prompted  PM Thailand to object to the use of the non-adjusted P&GE 
ratio and to request an adjusted company-wide P&GE  ratio through its letter of 15 December 2005.   
                                                      
1636 Exhibit PHL-154. 
1637 Exhibit THA-86. 
1638 This request was made in a letter dated 10 November 2006 (Exhibit PHL-54) and the replies 
trickled in from PM Thailand by  letters dated 24 November 2006 (E xhibit THA-55), 12 December 2006 
(Exhibit THA-56) and 12 March 2007 (Exhibit THA-86). 
1639 Exhibit THA-86. 
1640 Exhibit PHL-154. 
1641 Philippines' second written submission, para. 574.  WT/DS371/R 
 Page 359 
 
 
  7.961  We are not presented with specific evidence th at would clarify the exact content of the 
discussion that took place.  However, as Thailand ar gues, PM Thailand's letter of 15 December 2005 
does indicate that there was a certain understandi ng between the BoA and PM Thailand on the need 
for adjusting the P&GE expense for overpaid duties.1642  In the introductory paragraph of the 
concerned letter, PM Thailand states: 
"With reference to the meeting on 28th September 2005 between Philip Morris 
(Thailand) Co., Ltd. ("the company") ... in the subject of profit & general expense (gross margin) and DDV calculation for Marlboro  imported in 2002.  The meeting 
conclusion was to add back the over-pai d duty (based on the indicative value by 
officers during import formality) into the company's profit, in order to calculate the 
GM as it should be. 
The company has now completed the GM  and DDV calculations as per the above 
conclusion.  Therefore, the company woul d like to present the supporting reasons and 
calculation result as follows:"
1643 
7.962  Therefore, as Thailand submits, PM Thailand's letter of 15 December 2005 tends to show that 
the conclusion of the meeting was not whether the P& GE ratio should be adjusted, but by how much.   
7.963  In our view, however, this does not support Tha iland's position that PM Thailand contributed 
to the delays in the BoA review process by proposi ng a new data on its own initiative.  Furthermore, 
we consider that what is important in this rega rd is whether the P&GE ratio newly proposed by 
PM Thailand justifies in any manner the length of delays in the BoA review process of the 
[[xx.xxx.xx]] entries at issue.  Particularly, we  note that it was not until approximately a year from 
receipt of the letter from PM Thailand with the newly proposed P&GE ratio on 15 December 2005 
that the BoA requested additional information from PM Thailand  in this connection.   
7.964  Thailand further contends that the delays ar e explained by the complexities of the new 
calculations required to adjust the P&GE ratios.   Thailand underlines that PM Thailand's overall 
financial situation had changed, shifting from ne gative results in the years 2000 and 2001, to a 
positive result in 2002.  Thailand however never su fficiently explained ho w this new financial 
situation complicated the necessary calculations such that it took almost a y ear for the BoA to seek 
further information from PM Thailand in this regard. 
7.965  Thailand further asserts that the delays tr iggered by the new calculation were in 
PM Thailand's financial interest.  We understand this position to be based on the view that a higher 
P&GE ratio would have reduced the consequent custom s value for the entries at issue.  Although that 
it may actually have been in PM Thailand's inter est to conduct new calculations as requested by 
PM Thailand by using the newly proposed P&GE ratio1644;  whether a higher P&GE ratio as 
suggested by PM Thailand resulted in a lower customs va lue for the entries at issue is irrelevant to the 
issue of assessing whether the delays caused in the review process as a whole can be justified under 
Article X:3(a).  At the core of the reasona bleness requirement under Article X:3(a) is the manner in 
which Member governments administer relevant laws and regulations.   
7.966  Finally, Thailand argues that aside from th e new calculation issues, PM Thailand itself 
requested that the BoA prioritize other claims ove r the pending [[xx.xxx.xx]] claims.  According to 
Thailand, in 2007, PM Thailand asked the BoA to complete the [[xx.xxx.xx]] other claims 
                                                      
1642 Thailand's comments on the Philippines' responses to Panel questions (second meeting), para. 36. 
1643 Exhibit PHL-154, p. 1. 
1644 Exhibit PHL-154. In this regard, PM proposed a higher ratio than the company wide ratio when it 
was given the opportunity to bring in more arguments.  WT/DS371/R 
Page 360  
 
  expeditiously
1645 which, in its view, in the light of certa in oral communications between the BoA and 
PM Thailand1646, amounted to a request that they be prioritized  over the [[xx.xxx.xx]] appeals at 
issue.1647  The Philippines contests that a request fo r an expeditious treatment of the other 
[[xx.xxx.xx]] claims amounted to a request prior itizing those claims over the [[xx.xxx.xx]] pending 
appeals.1648   
7.967  The text of the letter that Thailand relies on to  support its position states in relevant part that 
"PMTL kindly requests the Customs Appeal sub-committee to expeditiously  submit PMTL's appeals 
and challenges against final assessment (Gor.S or.Gor 171) regarding the other [[xx.xxx.xx]] 
claims".1649 (emphasis added)  In the letter, PM Thaila nd also expresses its concerns about increasing 
"financial and procedural burdens as a result of ... final assessments ... To solve this issue, PMTL 
kindly request[ed] expeditious treatment of the [[xx. xxx.xx]] other claims".  From a plain reading of 
this letter, we cannot infer a specific request from PM Thailand that the [[xx.xxx.xx]] must be 
reviewed before the [[xx.xxx.xx]] entries at issue.  
7.968  Further, we note Thailand's assertion that the BoA ran into unusual difficulties in handling a 
high volume of appeals lodged in 2000, which was the first year for Thailand to commence the 
implementation of the disciplines under the Customs Valuation Agreement.1650  It argues that under 
these circumstances, the fact that the BoA had completed by December 2005 77 per cent of the [[xx.xxx.xx]] appeals lodged by PM Thailand in re lation to the entries "landed" between 2000 and 
2002, demonstrates that the BoA was making reasonable efforts to complete these reviews in a timely 
manner.  However, given that a relatively shorter period of time was taken in completing the other 
[[xx.xxx.xx]] entries that were lodged around the same time as the [[xx.xxx.xx]] entries at issue and 
apparently similar to these entries, it is difficult to  understand why such an unusually longer period of 
time was necessary to review the [[xx.xxx.xx]] claims  in the absence of a convincing explanation on 
some unique feature attributable only to th ese pending entries, which there is not.  
                                                     
 
1645 Exhibit THA-58. 
1646 Exhibit THA-87. Statement from Mrs Santinyaout, who was Director of the Customs standard 
procedure and valuation directorate from November 2005 to 2007, and deputy secretary to the board of appeals.  
Mrs Santinyaout declares that "PM Thailand company repr esentatives also came to me et our officials and told 
them, verbally, that they would prefer Thai Customs to prioritise the appeals of the [[xx.xxx.xx]] entries landed 
in 2006 and 2007 ahead of the appeals of [[xx.xxx.xx]] entries landed in 2002." The Appellate Body in US – 
Continued Zeroing (para. 331) held that  
 
"Article 11 requires a panel to consider evidence before it in its totality, which includes 
consideration of submitted evidence in relation to other evidence."  
It also considered that "the nature and scope of th e evidence that might be reasonably expected by an 
adjudicator in order to establish a fact or claim in a pa rticular case will depend on a range of factors, including 
the type of evidence that is made available by a Member's regulating authority" (para. 357).  
Here, we are trying to the determine what the intent of PM Thailand was when it addressed a letter 
asking for expeditious treatment of [[xx.xxx.xx]] claims to the BoA. We have to choose between a written piece 
of evidence addressed  by PM Thailand to Thai Custom s and the statements of one official contradicting both 
this letter and the statements made by the Philippines in fr ont of the Panel. In our evaluation of the weight of the 
respective evidence, we find that the written letter by PM Thailand is more convincing to reveal PM Thailand's intent.  
1647 Thailand's response to Panel question No. 145. 
1648 Exhibit PHL-279.  Mr. [[xx.xxx.xx]], country manager for the branch office of PM Thailand since 
August 2006 states that he "did not instruct any PM empl oyees  or representative to make such a [prioritisation] 
request verbally to Thai customs or th e BoA and to, the best of [his] knowledge, no such verbal request was ever 
made". 
1649 Exhibit THA-58. 
1650 Thailand's second oral  statement, para. 89.  WT/DS371/R 
 Page 361 
 
 
  7.969  Overall, although we are mindful of certain challenges that the BoA might have had to face 
under the circumstances, we are not convinced that the particular aspects pertaining to the review of 
the [[xx.xxx.xx]] entries at issue, taken together, can justify the current delays in the BoA's review of 
those claims.  Particularly, we observe that the claims concerning these [[xx.xxx.xx]] entries at issue have been pending before the BoA for close to seve n years.  The overall length of the administrative 
process, combined with less-than-prompt acti ons (for example requesting information from 
PM Thailand) taken by the BoA, also tends to show prejudice caused to other Member governments 
and traders under Article X:3(a).  The overall de lays shown throughout the course of the review 
process therefore are " not appropriate or proportionate" consid ered against the nature of the 
circumstances concerned.  We therefore find that the concerned delays in the BoA review process 
resulted in the administration of the Thai customs law in an unreasonable manner and are in violation 
of Article X:3(a) of the GATT 1994. 
5. Determination of the excise, health and television taxes 
(a) Introduction 
7.970  In Thailand, importers must pay the customs du ties and excise, health and television taxes on 
the imported goods.  The excise tax is based on the d eclared c.i.f. price (declared transaction value), 
and the health and TV taxes are calculated as a percentage of th e absolute amount of excise tax
1651, as 
respectively set out in the Tobacco Act1652, the Health Promotion foundation Act1653, and the 
Television and Public Broadcasting Act.1654 
7.971  In situations where Thai Customs questions the acceptability of the importer's declared c.i.f. 
price, it can examine the declared c.i.f. price be fore determining the final customs value through the 
issuance of the final Notice of Assessment.  Duri ng the examination process, the importer is given a 
right to withdraw the goods against payment of a guarantee.  This guarantee amounts to the difference 
between the declared c.i.f. price and the sum of an  elevated c.i.f. price (provisionally fixed by the 
customs authorities) plus the excise, health, televi sion taxes calculated based on this elevated c.i.f. 
price.  When the Notice of Assessment is publis hed, the importer may either accept its content or 
challenge it to the BoA.  The importer then can appeal  the BoA's determination to the Thai Tax Court.   
7.972  When the final determination of the c.i.f. pri ce is lower than the provisional guarantee value 
imposed by the Thai authorities, the importer is en titled to a refund corresponding to the discrepancy.  
In this regard, the parties initially disagreed on wh ether the importer may also obtain a refund for the 
additional excise, health and television taxes paid.  Later in the proceedings, however, the Philippines 
appear to agree at least that a refund mechanism does exist.   
(b) Main arguments of the parties 
7.973  The Philippines  argues that the imposition of the excise, health and television taxes on the 
basis of a guarantee value constitutes a non-unifo rm, unreasonable and partial administration under 
Article X:3(a) for the following reasons:  (i) two diffe rent tax bases (declared c.i.f. price or guarantee 
value) are applied to the same goods; (ii) the tax ba se is not grounded in Thai law; (iii) an incorrect 
customs value is only used for imported cigarett es; and (iv) no automatic refund of the overpaid 
amounts is available when the final customs value determined by Thai administrative or judicial 
                                                      
1651 Philippines' first written submission, paras. 617, 629 and 631. 
1652 Exhibit PHL-119.   
1653 Exhibit PHL-121.   
1654 Exhibit PHL-122.   WT/DS371/R 
Page 362  
 
  courts is lower than the guarantee value.
1655  The Philippines submits that using a guarantee value that 
is higher than the declared transaction value as th e base for the determination of excise tax, has a 
significant financial impact because the effective ta x rate of the excise tax is 400 per cent although the 
normal excise tax rate is currently 80 per cent.1656  Moreover, because the health and television taxes 
are calculated as percentages of the excise tax, whic h is based on a guarantee value when the declared 
transaction value is not accepted, the Philippines asserts that an excessive amount of health and 
television taxes is also collected if the final assessed customs value is lower than the guarantee 
value.1657   
7.974  The Philippines' claims are based on the prem ise that no automatic refund mechanism is 
available to importers for the excess payment of exci se, health and television taxes.  The Philippines 
points out that this can be contrasted to the exis tence of a process allowing a refund of the difference 
between the customs duties paid on the incorrectly  assessed customs value, and the customs duties 
due on the correct customs value.1658  In this connection, the Philippines initially argued that no refund 
mechanism existed.1659  Later in the proceeding, it elaborates on its argument and submits that for 
Thailand's administration of the excise, health  and television taxes to be reasonable, an automatic  
refund system must be available to the importer.1660  While acknowledging Thailand's evidence 
showing that other companies had received a refu nd, the Philippines argues that the refunds were 
available only when there was a BoA decisi on that reduced the assessed customs value.1661  T h e  
Philippines also argues that PM Thailand could not r ecover additional excise duty paid in relation to 
transactions between 2000 and 2003.1662 
7.975  According to the Philippines, non-uniform administration  arises because the taxes are 
administered using two different tax bases with respect to the same goods, Marlboro  and L&M  
cigarettes, that have been imported under the sa me circumstances.  Sometimes the excise tax is 
administered by using the correct  duty-paid c.i.f. price, and sometimes the excise tax is administered 
by referring to an amount based on an incorrect customs valuation by Thai Customs.1663 The 
Philippines refers to EC – Selected Customs Matters  in stating that the administration of the tax is not 
                                                      
1655 Philippines' first written submission, paras. 654- 684; second written submission, para. 532; second 
oral statement para. 135. If the BoA re verses Thai Customs' initial assessment of the customs valuations for the 
[[xx.xxx.xx]] entries at issue and rein states the declared transaction values, the excess excise taxes collected on 
these entries using an incorrect assessed customs value as the tax base would amount to THB [[xx.xxx.xx]] (USD [[xx.xxx.xx]]) (Philippines' first written submission, para. 625).  In 2007, the total amount of guarantees 
collected in relation with the excise, health and television taxes was USD [[xx.xxx.xx]]. 
1656 Philippines' first written submission, paras. 617-622 and footnote 470. 
1657 Philippines' first written submission, paras. 629-623.  The Philippines explains that the television 
tax has been imposed since 1 January 2008.  The percentages of the excise tax for the health and television taxes are respectively 2 per cent and 1.5 per cent of the excise tax amount.  
1658 Philippines' response to Panel question No. 86, citing to Customs Notification No. 97/2542, issued 
under the Customs Act (Exhibit PHL-20 and PHL-184). 
1659 Philippines' first written submission, para. 623; fi rst oral statement, para. 271; response to Panel 
question 86; second written submission, paras. 271-272.  See also  Exhibit PHL-182, expert opinion of Mr. 
Piphob Veraphong; and Exhibit PHL-183, expert opinion of Mr. Prasit Aekaputra, both explaining that Clause 7(3) of the Ministry of Finance Rule regarding the Deduction of Revenue Expenditure and the Refund of 
Revenue ("the Rule"), taken pursuant to section 4 of the Treasury Act, did not provide for a refund mechanism 
for the additional excise duty paid.  Likewise, section 14  of the Health Promotion Act  and section 15 of the 
Thai Public Broadcasting Act both make the repayment of the Health and Television tax contingent on the 
repayment of the excise tax.  In its second written submission, para. 539, the Philippines notes that those 
provisions are in stark contrast with other Thai la w provisions providing for express right to refunds. 
1660 Philippines' second oral  statement, para. 135. 
1661 Philippines' comments on Thailand's response to Philippines' question No. 3 (second meeting). 
1662 Philippines' first written s ubmission, para. 624.   
1663 Philippines' first written submission, paras. 663-667;  first oral statement, para. 265; second written 
submission, para. 532.  WT/DS371/R 
 Page 363 
 
 
  of "unchanging form, character, or kind", and does not  conform to "one standard, rule or pattern".1664  
In addition, the Philippines points at several occurre nces in the past in which Thailand administered 
the excise tax (and therefore the health and televisi on tax) on the basis of incorrect valuations. In 
some of these cases the BoA found that Thai Cust oms had taxed imports in excess of the correct 
value, but the Philippines had already paid excise tax on the basis of an incorrect valuation decision 
and did not receive a refund of the additional tax paid.1665  
7.976  The Philippines also submits that unreasonable administration  arises because Thailand 
collects taxes using a tax base that has no foundation in Thai law or in fact.  According to the 
Philippines, Thai law does not authorize the excise  tax to be levied on any basis other than the 
correctly assessed customs value plus customs duties.  Thailand's decision to disregard the tax basis 
prescribed in a tax law is not "reasonable", "appropriate", or "rational administration".1666 The 
Philippines cites to  Dominican Republic – Import and Sale of Cigarettes  to support its conclusion.1667  
7.977  The Philippines further claims that Thailand's ad ministration of the excise tax with respect to 
imported cigarettes is partial  because it lacks even-handedness, a nd is prejudicial as compared with 
its administration of the tax in co nnection with domestic cigarettes.1668 This partial administration 
arises because while the tax base for imported cigarett es is the c.i.f. price, which may be revised as 
part of the customs process; the tax base for domestic  cigarettes is always the ex factory price, and 
therefore taxes on imported and domestic cigarettes are  not revised in a similar fashion.1669  
7.978  Thailand  takes the position that all claims by the Philippines under Article X:3(a) regarding 
the administration of the Thai VAT system are outside the Panel's terms of reference.1670  However, if 
the Panel decides that the claims are within its te rms of reference, Thailand contests the Philippines' 
claim on factual and legal grounds. 
7.979  Regarding the Philippines' allegation that no refund mechanism for excise, health and 
television taxes exists, Thailand argues that refund mechanisms are available to importers and that 
PM Thailand appears to have never requested refunds.1671 Thailand submits evidence of 
correspondences confirming that three other im porters obtained refunds between 2006 and 2008.1672  
Thailand disagrees with the Philippines' reading of the expert opinions of Mr. Veraphong and Mr. 
Aekaputra.  Instead of disputing that a refund mech anism existed, they underlined that the relevant 
Acts did not include specific provisions as to  "how to make a refund application".1673  More generally, 
and in relation to the Philippines' argument that refunds are not automatic, Thailand considers that 
there is nothing irrational or inappropriate in Memb ers administering their laws through the conferral 
                                                      
1664 Philippines' first written submission, pa ra. 665, referring to Panel Report, EC – Selected Customs 
Matter , paras. 7.123-7.124. 
1665 Philippines' first written s ubmission, para. 667.   
1666 Philippines' first written submission, para. 677.  
1667 Philippines' first written submission,  paras. 672-679; first oral statement, para. 266;  second written 
submission, para. 532. 
1668 Philippines' first written submission, para. 681. 
1669 Philippines' first written submission, paras. 680-683;  first oral statement, para. 267; second written 
submission, para. 532. 
1670 Thailand's first written submission, paras. 305-307 and footnote 339; second written submission, 
paras. 241 and 309-314.  See section VII.B.1 for the di scussion on Thailand's claims on the terms of reference 
for this Panel. 
1671 Thailand's first written submission, para. 331; fi rst oral statement, para. 21; second written 
submission, para. 262; response to Philippines' question No. 3 (second meeting). 
1672 Thailand's response to Philippines' ques tion No. 3 (second meeting); Exhibit THA-99. 
1673 Thailand's comment on the Philippines' responses to Panel questions, para. 131; Exhibit PHL-183, 
paras. 6.2 and 6.3. WT/DS371/R 
Page 364  
 
  of discretion on administrative agencies.
1674  Thailand moreover states that it is inevitable in any 
jurisdiction that customs value will be revised upwards or downwards af ter importation and that 
Article X:3(a) should not be read as prohibiting such revisions.1675  When the assessed customs value 
is revised downwards, importers have the "optio n" to request refunds of any excess payments.1676 
7.980  In response to its alleged unreasonable, non-uni form and partial administration of excise, 
health and television taxes, Thaila nd contends that the use of different data sources to calculate the 
c.i.f. price component of MRSPs does not amou nt to non-uniform administration because the 
difference can be explained by differences in the circumstances of the case.1677  Second, Thailand puts 
forward that the use of guarantee values in September 2006 was reasonable given the legitimate 
doubts expressed by Thai Customs regarding the re liability of PM Thailand's declared values.1678  
Third, Thailand's use of estimates to calculate the c.i.f. price for imported cigarettes does not indicate 
partiality, because the Philippines has not established that Thai Excise would not use estimates to 
calculate the domestic ex factory price if there were doubts about the reliability of the figures put 
forward by TTM.1679   
7.981  Finally, Thailand states that the Philippines claimed in its first written submission that 
Thailand used an "unlawful" tax b ase to calculate the excise, health and television taxes; but it did not 
claim that Thailand's laws and regul ations relating to these taxes were inconsistent with Article X:3(a) 
because importers cannot claim refunds.  Thailand therefore holds that the Panel need not and should not address the issues of whether refunds can be granted under Thai law and whether Article X:3(a) requires WTO Members to confer rights to refunds of overpaid indirect taxes.
1680   
(c) Analysis by the Panel 
7.982  We concluded in Section VII.B.1(b) that the Philippines' claim under Article X:3(a) of the 
GATT 1994 with respect to Thailand's administration of  the excise, television and health taxes fell 
within our terms of reference. Therefore, we  will proceed to examine the Philippines' claim.1681  
7.983  In Section VII.H.2 above, we explained that the obligations under Article X:3(a) apply to the 
administration of the laws, regulations, decisions and rulings  of the kind falling within the scope of 
Article X:1, but not such laws and regulations themselves .1682  The Appellate Body clarified that to the 
extent such laws and regulations are discriminatory,  they can be examined for their consistency with 
                                                      
1674 Thailand's second written submission, para. 246. 
1675 Thailand's first written submission, para. 33 0;  second written submission, para. 261.  
1676 Thailand's first written submission, para. 331. 
1677 Thailand's second written submission, para. 250, referring to the Appellate Body report on EC – 
Selected Customs Matters , para. 261. 
1678 Thailand's second written submission, para. 250. 
1679 Thailand's second written submission, para. 250. The Panel notes that Thailand uses the same 
arguments to explain the consistency of its MRSP methodology under Article X:3(a). 
1680 Thailand's second written submission, para. 26 2, referring to the Philippines' first written 
submission, paras. 672-678. 
1681 The Thai laws and regulations at issue, as set out  in the Philippines' reque st for establishment of a 
Panel, are: the Tobacco Act B.E.  2509 (1966), sections 5, 5 ter, and 5 quinquies ; Notices of Dir ector-General for 
Excise, setting out the ex factory prices; the Health Promotion and Foundation Act, B.E. 2544 (2001); and the Thai Public Broadcasting Service Act 2551 (2008). 
1682 Appellate Body Reports on EC – Bananas III , para. 200; EC – Poultry , para. 115.  The Panel in 
Argentina – Hides and Leather also stated that "Article X:3( a) refers specifically to the method of application of 
measures identified in Article X:1"  (emphasis added) (Panel Report, Argentina – Hides and Leather , 
para. 11.73).  The Panel in the same dispute further elaborated that "the relevant question is whether the 
substance of such a measure is administrative in nature  or, instead, involves substantive issues more properly 
dealt with under other provisions of the GATT 1994" (para. 11,70; also referred to in the Panel Report, US – 
Byrd Amendment , para. 7.143).   WT/DS371/R 
 Page 365 
 
 
  the relevant provisions of the GATT 1994.1683  The relevant question for determining the proper scope 
of Article X:3(a) is therefore "whether th e substance of such a measure [or act] is administrative in 
nature or, instead, involves substantive issues more properly dealt with under other provisions of the 
GATT 1994".1684  We further recall that the term "administe r" means "putting into practical effect", or 
"applying", a legal instrument of the kind described in Article X:1.   
7.984  In respect to the Thai excise, health and te levision taxes, the Philippines claims that the 
determination of these taxes on the basis of a guarant ee value, instead of a declared transaction value, 
leads to a non-uniform, unreasonable and partial administration within the meaning of Article X:3(a). Further, the Philippines argues that the lack of an automatic refund mechanism of the excess tax paid 
(in the form of a guarantee) also leads to an unreas onable administration of the Thai excise, health and 
television tax laws and regulations.  
7.985  According to the Philippines, its claim regardi ng the use of the guarantee value as a tax base 
for the excise, health and television taxes is con cerned with the "very practice" of using different 
starting points for the MRSP calculation (i.e. declared value or guarantee value).  The Philippines submits that this practice is not in compliance with  Thai law, as Thai law, the Thai Tobacco Act,  
allegedly provides that the sole excise tax base fo r imported cigarettes is the duty-paid c.i.f. price.
1685  
Hence, in our understanding, the Philippines is arguing  that Thailand administers certain provisions of 
the Thai Tobacco Act in a non-uniform, unreasonable and partial manner way under Article X:3(a).   
7.986  In the provisions of the Thai Tobacco Act, however, we do not see the requirement that the 
sole excise tax base for imported cigarettes is the duty- paid c.i.f. price.  Specifically, Article 5 ter 2 
provides, in relevant part, that the c.i.f. price is indeed the basis for the exci se tax.  Point (B) in the 
same provision provide however that in cases of re -assessment of the price (of tobacco) by Thai 
Customs under the customs law, th e re-assessed prices will be used as a base for the c.i.f. price.1686  
Our reading of this provision indicat es that this part of Article 5 ter 2 implies that in case of a re-
assessment of the price of the goods (tobacco, cigare ttes), Thai Customs will determine a new c.i.f. 
price, which will then form the basis of the excise ta x, which in its part forms the basis for the health 
and television taxes.  Based on the plain text of th e provision, therefore, we consider that a guarantee 
value set as a c.i.f. price pending the final determina tion of the customs value could also fall within 
the type of re-assessed price envisaged under the provision.1687  In any event, our consideration of the 
Philippines' arguments leads to the conclu sion that such arguments pertain to the content of certain 
provisions of the Thai Tobacco Act, which are substa ntive in nature rather th an administrative within 
the meaning of Article X:3(a).   
7.987  The Philippines' claim regarding the absence of an automatic re fund mechanism in situations 
where the final customs value is later determined  to be lower than the guarantee value initially 
imposed on imported cigarettes is based on two premises:  (i) if there is no automatic refund 
mechanism, importers end up bearing the additional administrative burden of claiming the refund; or, 
(ii) if they do not claim the refund (for whatever reason), importers end up b earing the additional cost 
of the additional taxes paid on the difference betw een the final customs value and the guarantee value 
in the absence of an automatic re fund mechanism.  In our view, however, the object of this claim, 
namely the absence of an automa tic refund mechanism, is not administrative in nature .  Instead, it 
                                                      
1683 Appellate Body Report, EC – Bananas III , para. 200. 
1684 Panel Report, Argentina – Hides and Leather , para. 11.70 (emphasis added). 
1685 Philippines' first written submission, para. 617-622, referri ng to section 5 ter (2) of the Thai 
Tobacco Act (Exh ibit PHL-119).  
1686 Exhibit PHL-119. 
1687 section 112 of the Thai Customs Act authorizes Thai Customs to request a guarantee for imported 
goods that are under examination by Thai Customs (Exhibit PHL-20).  The Panel notes, that such a provision is 
explicitly allowed by Article 13 of the Customs Valuation Agreement. WT/DS371/R 
Page 366  
 
  involves substantive issues relating to certain Thai laws and regulations that should be properly dealt 
with under other provisions of the WTO-covered agreements.  
7.988  We therefore conclude that the alleged admi nistration of the Thai Excise, Health and 
Television taxes, namely the use of the guara ntee value as the tax base and the absence of an 
automatic refund mechanism, concern the substantive aspects of such laws and regulations rather than 
the manner in which they are put into practical e ffect.  Accordingly, we find that the Philippines' 
claim under Article X:3(a) in respect of the admi nistration of Thai Excise, Health and Television 
taxes was improperly brought under Article X:3(a).  We need not therefore proceed to examine the 
consistency of the concerned act with the requirement s to administer in a "reasonable, impartial and 
uniform" manner. 
I. A
RTICLE  X:3(B) OF THE GATT 1994 
1. Appeals against custom valuation determinations 
(a) Introduction 
7.989  The Philippines claims that Thaila nd violates Article X:3(b) by failing to maintain tribunals or 
procedures for the prompt review of appeals agai nst customs valuation decisions.  The Philippines' 
claim is based on the position that delays in the BoA's review of certain customs valuation 
determinations demonstrate that Th ailand failed to ensure that proc edures for the "prompt" review of 
administrative actions relating to customs matters  are maintained.  Thailand focuses on the argument 
that as the BoA is not an independ ent tribunal within the meaning of Article X:3(b), the relevant 
procedural aspects of the BoA are not subject to the disciplines under Article X:3(b).   
7.990  Article X:3(b) of the GATT 1994 provides: 
"Each contracting party shall maintain, or institute as soon as practicable, judicial, 
arbitral or administrative tribunals or procedures for the purpose, inter alia , of the 
prompt review and correction of administ rative action relating to customs matters. 
Such tribunals or procedures must be i ndependent of the agencies entrusted with 
administrative enforcement and their decisi ons shall be implemented by, and shall 
govern the practise of, such agencies unless an appeal is lodged with a court or 
tribunal of superior jurisdiction within the time prescribed for appeals to be lodged by importers." 
7.991  To establish a violation of Article X:3(b), a co mplaining party must therefore show that the 
responding party has not maintained or instituted in dependent tribunals or procedures for the purpose 
of the prompt review and correction of the ad ministrative action relating to customs matters.  
7.992  The parties do not dispute that customs valuati on determinations fall w ithin the scope of the 
"administrative action relating to customs matters" under Article X:3(b).  The parties' arguments are 
focused on the following two issues: first, whethe r the BoA is an independent tribunal within the 
meaning of Article X:3(b); and, second, if not, wh ether the time taken for the BoA review process, a 
process prerequisite to having access to review by  an independent tribunal (the Tax Court), 
particularly the delays caused in the [[xx.xxx.xx]] a ppeals at issue in this dispute, should still be taken 
into account in examining the requirements under Article X:3(b).   
7.993   Based on the parties' arguments, we note, however , that it is not clear whether Article X:3(b) 
encompasses not only an obligation for a Member to maintain or institute a system  for the prompt 
review and correction of administrative actions rela ting to customs matters, but also an obligation for 
relevant tribunals to in fact provide for a prompt review in specific instances.  As the parties'  WT/DS371/R 
 Page 367 
 
 
  arguments raise a question touching on the nature of  the obligations imposed by Article X:3(b), we 
will first address the nature of obligations under Article X:3(b). 
(b) Nature of the obligations  under Article X:3(b) 
7.994  Article X:3(b) requires that the WTO Members maintain  or institute independent tribunals or 
procedures for the purpose of the prompt review and correction of administrative action relating to 
customs matters.  The term "maintain" can be defined as "3. verb trans.  cause to continue (a state of 
affairs, a condition, an activity, etc.); keep vi gorous, effective, or unimpaired; guard from loss or 
deterioration".1688  Based on the ordinary meaning of the term "maintain", therefore, we understand 
that Article X:3(b) mandates WTO Members to c ontinue with and keep effective independent 
tribunals and procedures, if they are already in place in their domestic system, for the stated purposes.   
7.995  The term "institute" in turn can be defined as " verb trans . 2. set up, establish, found; bring 
into use or practice.  Article X:3(b), therefore, requires those Members that did not have independent 
review tribunals or procedures in place at the time of  the entry into force of the GATT 1994, to set up 
such review mechanisms for the prompt review of  administrative actions relating to customs matters 
as soon as practicable. 
7.996  The text of Article X:3(b), particularly th e phrase "shall maintain, or institute as soon as 
practicable, ... tribunals or procedures for the purpose, inter alia , of the prompt review and 
correction ...", raises the question of whether the sc ope of Article X:3(b) can be understood to include 
a Member's claim that an actual review conducted by  an independent tribunal or in a specific instance 
is not prompt.  In particular, the phrase " for the purpose  of the prompt review" suggests that the 
obligations envisaged under Article X:3(b) are of normative nature, namely the obligation to maintain 
or institute a system designed for the purpose of the prompt review of administrative actions.  The text 
of Article X:3(b), considered in the light of th e ordinary meaning of the terms "maintain" and 
"institute", therefore suggests that Article X:3(b) mandates Members to keep, or create if not already 
in place, in their domestic system the existing in dependent tribunals or procedures designed for the 
purpose of the prompt review of administrative actions.   
7.997  As such, it is our view that a claim on whether a tribunal maintained by a Member pursuant to 
Article X:3(b) does in fact promptly review an administrative action is a matter falling more properly 
within the scope of Article X:3(a).  As addres sed above, Article X:3(a) requires that Members 
administer  the legal instruments of the kind in Article  X:1 in a uniform, im partial and reasonable 
manner.  We also clarified that the term "adminis ter" under Article X:3(a) c overs the application or 
implementation of the relevant legal instruments, in cluding judicial decisions.  This understanding, in 
our view, ensures that the distinctive disciplines embodied in Article X:3(a) and X:3(b) are not 
blurred.  We further consider that showing specific instances where prompt review was not provided could nonetheless help to prove a violation of Article  X:3(b) to the extent that the non-promptness in 
the review process concerned can be linked to a system ic flaw in the tribunal or procedure maintained 
by a Member. 
                                                     
 
1688 The New Shorter Oxford English Dictionary ,  (Fifth Edition) Oxford Univer sity  Press, Vol. I, p.  
1647 (2002).  The Philippines submits that the term "maintain" means "practice habitually" (Oxford English 
Dictionary online, Exhibit PHL-209), which consequently  entails a dynamic obligation not only to write the 
relevant procedures and tribunals into law, but also to make sure that those laws are adequately applied (Philippines' second written submission, para. 559).  We note however that this particular meaning of the term 
"maintain" is preceded by an indication that that particular meaning is obsolete.  We also observe that the 
meaning relied on by the Philippines is absent in other authoritative dictionaries. For instance the Black's Law Dictionary defines  "maintain" as "1. to continue (something). 2. to continue in possession of (property, etc)"  
Black's Law Dictionary , 7
th ed., B.A. Garner (ed.) (West Group, 1999), p. 965. WT/DS371/R 
Page 368  
 
  (c) Whether the BoA is an independent tribuna l within the meaning of Article X:3(b) 
(i) Main arguments of the parties 
7.998  The Philippines  argues that the BoA is independent  from the customs administration.
1689  The 
Philippines submits that the BoA has been establishe d as a separate entity under Thai law as specific 
provisions of the Customs Act gove rn its composition and operations.1690  While recognizing that the 
BoA is composed of agents also acting as customs officials, the Philippines nonetheless considers that 
independence for the purpose of Article X:3(b) must be assessed in terms of a tribunal's role and composition, in the light of all relevant factors.
1691  Specifically, the Philippines refers to the 
following factors to support its position: (i) deta iled rules under Thai law on the constitution of the 
BoA, including the terms of its members; (ii) th e grounds for their removal; (iii) the number of 
members required at formal meetings; and (iv) the designation of a specially assigned secretariat.1692 
7.999  The Philippines also points out that Thailand has ad mitted that just because an official held a 
dual function did not per se  prevent independent behaviour by that official.1693  Similarly, the fact that 
customs agents involved in the customs value de termination also seat as BoA officers does not 
suffice, in the Philippines' view, to deny the BoA's independence.  The Philippines argues that 
Thailand did not provide any other argument to show that the BoA is a dependent authority.  Thus, the 
Philippines considers that the BoA is the first indepe ndent authority to review appeals against customs 
decisions taken by the Customs administration. 
7.1000  Thailand  argues that the BoA is not an independent authority within the meaning of    
Article X:3(b).  Thailand refers to the Panel's statement in EC – Selected Customs Matters that 
"independent" in the context of Article X:3(b) means "free of control or influence from the 
administrative agencies whose decisions are the subj ect of review, [so as to act] with freedom in 
institutional and practical terms from interferenc e by the agencies whose decisions are being 
reviewed".1694  Thailand also uses Article X:3(c) as cont ext for Article X:3(b) to assert that the 
tribunals or procedures under Article X:3(b) must be " fully and formally  independent".1695  Thailand 
argues that the BoA is not "fully or formally" independent from Th ai Customs, in either "institutional 
[or] practical terms".1696  Thailand observes that the BoA is composed almost entirely of Customs 
agents.1697  It is therefore not independent from the agency "entrusted with administrative 
enforcement" within the meaning of Article X: 3(b).  Thailand consider s, as the Panel in EC – Selected 
Customs Matters  found, that a "review [by such a dependent entity] would not qualify under 
Article X:3(b)". Thailand cites this Panel: 
"The Panel understands that, in some WT O Members, administrative action relating 
to customs matters may be reviewed by the same administrative authority that 
                                                      
1689 Philippines' first oral statement, para. 23. 
1690 Philippines' first oral statement, para. 23; s econd written submission, para. 550, referring to 
sections 112 sexies  to section 112 undevicies  of the Customs Act (Exhibit PHL-20). 
1691 Philippines' first oral statement, para. 23; response to Panel question No. 146. 
1692 Philippines' first oral statement, para. 23, referring to section 112 septies to section 112 decies of the 
Customs Act (Exhibit PHL-20). 
1693 Philippines' second written submission, paras. 551-552. The Philippines refers to Thailand's 
argument that dual function TTM directors could exercise both their functions independently. 
1694 Panel Report, EC – Selected Customs Matters , para. 7.520. 
1695 Thailand's second oral statement, para. 93 (empha sis added).  Thailand explains that Article X:3(c) 
provides a limited exception to the obligation to maintain independent tribunals, referring to procedures that are 
not "fully or formally independent of the agen cies entrusted with admi nistrative enforcement". 
1696 Thailand's second oral statement, para. 95 ; footnote 123, referring to the Panel Report, EC –
Selected Customs Matters , para. 7.520. 
1697 Thailand's first written submission, para. 289.  WT/DS371/R 
 Page 369 
 
 
  originally took the action. For example, two of the third parties to this dispute – 
namely, Japan and Chinese Taipei – indicated that administrative action may first be reviewed by the same administrative aut hority that took the action originally … Such 
review would not qualify under Article X:3( b) of the GATT 1994 because, in such 
cases, the reviewing body is not independe nt of the administrative authority whose 
decision is the subject of review".
1698 (emphasis added)  
7.1001  Thailand argues that the BoA falls under the description above and, as a result, does not 
conduct an independent review of appeals against cu stoms value determinations .  As a consequence, 
the BoA delays cannot be assessed in the context of Article X:3(b). 
(ii) Analysis by the Panel 
7.1002  The parties disagree on whether the BoA is an independent tribunal within the meaning of 
Article X:3(b).  We first recall the Panel's statement in EC – Selected Customs Matters that 
"independent" in the context of Article X:3(b) means "free of control or influence from the 
administrative agencies whose decisions are the subj ect of review, [so as to act] with freedom in 
institutional and practical terms from interferenc e by the agencies whose decisions are being 
reviewed".1699 
7.1003  The legal authority for the BoA is set forth in Section 112 of the Thai Customs Act.  
Section 112 sexies  provides that the importer or the exporter shall have the right to appeal against the 
duty assessment of the competent officer to the BoA.   The BoA, headed by DG Customs as chairman, 
comprises a representative from the Ministry of Fina nce, a representative from the Office of Juridical 
Council, and five to seven members appointed by DG Customs.  It is also provided that the BoA shall 
appoint a civil servant attached to the Customs De partment as secretary and as assistance secretary, 
and that the secretary shall be a committee member as well.1700  DG Customs, as chairman of the 
BoA, may vote and exercise the deciding vote in case of a tie in a given appeal.1701   
7.1004  The BoA is therefore at least partly staffed with agents from the Customs Department with 
the possibility that some of those agents might be  involved in deciding customs determinations that 
are subject to the BoA's review.  This means that mo st of the agents in charge of reviewing customs 
decisions are those involved in taking the very custom s decisions that are the subject of review by the 
BoA.  The specific aspects of the BoA as descri bed above therefore show a close link between 
customs officials making decisions on customs matters and the BoA – the entity reviewing such decisions.  As recalled above, for tribunals or pro cedures to be independent of the agencies entrusted 
with administrative enforcement, they should be " free of control or influence from the administrative 
agencies whose decisions are the subject of review".  The characteristics of the BoA, in particular, its 
composition, in our view are insufficient for it to be  considered free of control or influence from the 
Thai Customs Department – the Thai agency entr usted with customs determinations – within the 
meaning of Article X:3(b).   
7.1005  In this relation, as the Panel in EC – Selected Customs Matters noted, some Members require 
an initial appeal of an administrative action relating to customs matters to be made to an authority 
within the agency entrusted with enforcement pr ior to an independent body and/or a judicial 
                                                     
 
1698 Philippines' first written submission, para. 288, citing Panel Report, EC – Selected Customs 
Matters , footnote 894. 
1699 Panel Report, EC – Selected Customs Matters , para. 7.520. 
1700 section 112 septies  of the Customs Act (Exhibit PHL-20). 
1701 section 112 decies  of the Customs Act (Exhibit PHL-20). WT/DS371/R 
Page 370  
 
  authority.
1702  In the context of the Philippines' claim under Article X:3(b) here, our analysis is 
confined to the question of whether the BoA is i ndependent within the meaning of Article X:3(b).  
This question therefore does not relate to the issue of whether a non-independent authority within the 
agency entrusted with enforcement can provide for an objective review within the meaning of 
Article X:3(b).  We note Thailand's argument that under the above standard, the BoA is not an 
independent tribunal, but rather constitutes an ad ministrative tribunal for the purpose of the initial 
review of the administrative action, as envisaged by the Panel in EC – Selected Customs Matters .1703  
7.1006  For the foregoing reasons, we conclude that the BoA cannot be considered as a tribunal 
independent of the agencies entrusted with admi nistrative enforcement within the meaning of 
Article X:3(b).   
(d) Whether an independent tribunal or procedure ma intained by Thailand within the meaning of 
Article X:3(b) provides for the prompt review of customs value determinations 
(i) Main arguments of the parties 
7.1007  The Philippines submits that, even if the BoA is not considered an independent entity, the 
Thai procedures for the review of  customs decisions are still not "prompt" under Article X:3(b).1704  
The Philippines argues that Article X:3(b) requires the Panel to evaluate how much time is necessary 
after the administrative decision subject to appeal is  taken for an appeal against this decision to be 
heard by an independent  authority.1705  Should interposing administrative steps be necessary to have 
the decision reviewed by an independent authority, then the duration of those interposing steps would 
have to be taken into account.1706  Under Thai law, the Tax Court can only exercise jurisdiction after 
any applicable appeal pro cedures have been exhausted.1707  As Section 112 sexies of the Customs Act 
provides for such an appeal of assessments of cu stoms value to the BoA, the BoA review of the 
appeals is a necessary interposing step between the administrative decision and the first review by an independent tribunal, the Tax Court.  The Phili ppines argues that as a consequence, the delays 
triggered by the BoA review must be fully take n into account when examining whether Thailand 
maintains a prompt review mechanism for customs decisions within the meaning of Article X:3(b).
1708 
7.1008  The Philippines argues that th e BoA has been reviewing [[xx.xxx.xx]] appeals against 
customs value decisions on PM Thailand cigarettes for more than seven years.1709  The Philippines 
underlines that in Colombia – Ports of Entry , the Panel held that a two-year review process involved 
                                                      
1702 In fact, Article 11.2 of the Customs Valuation Agreement  provides that an initial right of appeal 
without penalty may be to an authority within the customs administration or to an independent body although 
the legislation of each Member must provide for the right of appeal without penalty to a judicial authority.  The panel in EC – Selected Customs Matters noted in this regard as follows: 
"The Panel understands that, in some WTO Members, administrative action relating to 
customs matters may be reviewed by the same administrative authority that originally took the action. ... Such review would not qualify under  Article X:3(b) of th e GATT 1994 because, in 
such case, the reviewing body is not independent of the administrative authority whose 
decision is the subject of review."  (footnote 894) 
1703 Thailand's second written submission, para. 224, referring to Panel Report, EC – Selected Customs 
Matters , para. 7.520. 
1704 Philippines' response to Panel question No. 84. 
1705 Philippines' comments on Thailand's response to Panel question Nos. 149 and 169. 
1706 Philippines' response to Panel question No. 149. 
1707 Philippines' response to Panel question No. 149; Exhibit PHL-281. 
1708 Philippines' comments on Thailand's response to Panel question Nos. 149 and 169. 
1709 Philippines' second oral  statement, para. 141.  WT/DS371/R 
 Page 371 
 
 
  "a lengthy delay".1710  In this regard, a 7-year delay is not pr ompt within the meaning of Article X:3(b) 
since it is neither "ready, quick ,... perfo rmed without delay, [or] immediate".1711 
7.1009  Thailand submits that to the extent that the firs t independent court within the meaning of 
Article X:3(b) is the Tax Court1712, the interposing administrative steps between the initial 
administrative decision (here the cu stoms value decision) and the first review by an independent court 
(here the tax court) may not be taken into account towards fulfilling the requirements under 
Article X:3(b).  This is because non-independent interposing steps qualify as administration of the 
customs laws, and are therefore governed by Article X:3(a).  Article X:3(b) on the other hand applies 
only to independent review procedures.1713  The only delays which can be assessed under 
Article X:3(b) are therefore those which separate the last non-independent administrative decision 
(here the BoA order) from the first independent re view procedure (here the Tax Court decision).  
(ii) Analysis by the Panel 
7.1010  We concluded in the previous section that the BoA is not an independent tribunal within the 
meaning of Article X:3(b).  The parties agree that  if the BoA is not found to be an independent 
tribunal, it is the Thai Tax Court that is the firs t independent authority to review customs decisions 
under the Thai system.1714  In this section, we will examine whether the Thai Tax Court, as an 
independent tribunal or procedure within the meaning of Article X:3(b), provides for the prompt 
review of customs value determin ations consistently with the obligations under Article X:3(b). 
7.1011  The term "prompt" can be defined as " adjective. 2 Of action, speech, etc.: ready, quick; done, 
performed, etc., without delay".1715  Article X:3(b) requires that Members maintain or institute 
independent tribunals or procedures for the pur pose of the prompt review and correction of 
administrative action relating to customs matters.  We understand that Article X:3(b) purports to 
ensure that Members maintain a revi ew system that can provide for the prompt redress of adverse 
impacts caused by administrative actions on traders.   Therefore, the review of administrative actions 
relating to customs matters by an independent tribuna l or process must be considered in the light of a 
given review system in its entirety from the mo ment when the process required to reach such a 
tribunal or procedure commences until the review  by the independent tribunal or process is 
completed.  This means that any interposing ad ministrative steps between the initial administrative 
decision and the first review by an independent trib unal must also be taken into account in assessing 
the fulfilment of the promptness requirement under Article X:3(b).  As such, a violation of Article X:3(b) will be found if the process that a Member maintains for review of administrative 
actions relating to customs matters, when viewed in  its entirety, presents a flaw that systemically 
prevents such actions from being reviewed by an inde pendent tribunal without delay.  In this regard, 
as noted in paragraph 7.1014 below, by stating that we  need to consider a Member's review system in 
its entirety, including any interposing administrative steps, we do not mean that the existence of 
interposing steps prior to an independent review in itself constitutes a systemic flaw that prevents the 
concerned Member from maintaining procedures for the prompt  review of administrative actions 
under Article X:3(b).  Bearing this in mind, we will review the review system maintained by Thailand 
for the purpose of Article X:3(b). 
                                                     
 
1710 Philippines' first oral statement, para. 26, referring to Panel Report, Colombia – Ports of Entry , 
para. 7.128. 
1711 Philippines' second written submission, para. 553, referring to Oxford English Dictionary , J.A. 
Simpson and E.S.C. Weiner (eds.) (Clarendon Press, 1989, 2nd ed.). 
1712 Thailand's response to Panel question No. 148. 
1713 Thailand's response to Panel question Nos. 84 and 149. 
1714 The parties' responses to Panel question No. 148.  
1715 The New Shorter Oxford English Dictionary ,  (Fifth Edition) Oxford Univ ersity  Press, Vol. II, p.  
2366 (2002). WT/DS371/R 
Page 372  
 
  7.1012  Under Thai law, specifically according to Secti on 7(1) and Section 8 of the Act of the Tax 
Court, the Tax Court can review an appeal against an administrative decision only once any 
applicable internal appeal pr ocedures have been exhausted.
1716  Concerning customs valuation 
decisions, Section 112 sexies  of the Customs Act provides for the right of appeal against customs 
officials' decisions to the BoA.  This means th at the Tax Court cannot re view an appeal against 
customs decisions unless an importer first br ought the customs decision to the BoA. 
7.1013  The Philippines argues that as importers are unabl e to seek review by the Tax Court until they 
have exhausted the review process at the BoA, wh ich the Philippines alleges is unjustifiably slow, 
Thailand fails to maintain procedures for prompt review and correction of action by Thai Customs.1717  
Thailand submits that because Article X:3(b) app lies only to independent review, interposing steps 
prior to independent review ca nnot be taken into account in de termining whether a WTO Member 
complies with its obligation under Article X:3(b) to maintain independent tribunals or procedures for 
prompt review and correction of administ rative action relating to customs matters.1718  In Thailand's 
view, interposing steps leading to independent review are subject to the disciplines of Article X:3(a). 
7.1014  As noted above in paragraph 7.1005, Member s may have a system under which an initial 
appeal of an administrative action must be made to an authority within th e agency entrusted with 
enforcement prior to an independent body.  We do not therefore consider that the existence of 
interposing steps prior to an independent review in itself is a systemic flaw that prevents Thailand 
from maintaining procedures for the prompt  review of administrative actions under Article X:3(b).   
7.1015  However, under the factual circumstances of the current dispute, the delays caused in the BoA 
appeal process concerning the [[xx.xxx.xx]] claims brought by PM Thailand clearly illustrate that the 
interposing process leading to the review by the Thai  Tax Court has the systemic capacity to impede a 
prompt  review by an independent tribunal of admini strative actions.  As we found above, whether the 
review process maintained by a Member under Article X:3(b) is prompt or not requires the scrutiny of 
the entirety of the review process from the moment an  administrative action is taken until the review 
by an independent tribunal is completed.  We do not consider the review system maintained by 
Thailand, when considered in its entirety in the light  of the factual circumstances as presented to us, to 
be prompt within the meaning of Article X:3(b).  In our view, the excessive delays that have been 
caused in the [[xx.xxx.xx]] appeals before the BoA (the  prerequisite step necessary to even reach the 
Thai Tax Court) are so significant in terms of their duration and frequency that these specific instances can be considered as an indication of the ca pacity for delays in the system.  Therefore, we 
conclude that Thailand failed to maintain an inde pendent tribunal for the prompt review of customs 
value determinations inconsiste ntly with Article X:3(b).  
                                                     
 
1716 Exhibit PHL-281;  Philippines' response to Panel question No. 149. 
section 7(1) of the Act of the Tax Court provides:   
"The tax courts have jurisdiction over the following civil matters: (1) Cases in respect of 
appeals against any decision of the competen t official or the committee relating to any 
taxation law; ..."   
section 8 of the Act of the Tax Court then provides: 
"In the case specified in section 7(1), where taxa tion law provided that an objection or appeal 
against a competent official or committee shall be initially proceeded under the prescribed 
rules, methods and period, the case may be submitted to the tax court unless such proceeding 
has been performed and that objection or appeal has already decides." 
1717 Philippines' first oral statement, para. 28; response to Panel question No. 149. 
1718 Thailand's response to Panel question No. 149.  WT/DS371/R 
 Page 373 
 
 
  2. Appeals against the guarantee decisions 
(a) Introduction 
7.1016  The Philippines claims that Thailand violates Article X:3(b) of the GATT 1994 by failing to 
maintain or institute tribunals or procedur es for the purpose of the prompt review of guarantees  
imposed by Thai Customs on imported cigarettes.1719  Thailand argues that a decision to impose a 
guarantee does not constitute an "administrative action relating to customs matters" within the 
meaning of Article X:3(b) and, even if they fall  within the scope of Article X:3(b), Thailand is 
complying with the obligations under Article X:3(b) because a prompt appeal against guarantees is available before the Thai Tax Court. 
7.1017  Section 112 of the Thai Customs Act authori zes customs officials to  proceed to further 
examination when they have doubts as to the amount of duty applicable to one specific good.
1720  In 
those cases, the customs officers may release the goods pending de termination provided that the 
importer pays "the amount of the duty declared in th e entry by the importer or the exporter [and], as 
the case may be, ... an additional sum of mone y covering the maximum duty payable on the 
goods".1721  In situations where an importer is required to  provide a guarantee, in ternal taxes such as 
VAT, excise, health and television taxes will also  be calculated on the basis of such a guarantee.1722   
7.1018  As explained in the previous section, in orde r to establish a violation of Article X:3(b) a 
complainant must show that the respondent member  has not maintained or instituted tribunals or 
procedures, independent from the agency entrus ted with administrative enforcement of customs 
matters, for the purpose of the prompt review and co rrection of such administrative actions.  In the 
present dispute, the parties' arguments concerning th e Philippines' claim with respect to the imposition 
of a guarantee raises the following two issues:  firs t, whether the imposition of a guarantee falls within 
the scope of "administrative action relating to cu stoms matters" under Article  X:3(b); second, if so, 
whether Thailand maintains or instituted tribunals or  procedures for prompt review and correction of 
the amount of a guarantee imposed by Thai Custom s.  We will address these two issues in turn. 
(b) Whether the imposition of a guarantee falls within  the scope of "administrative action relating 
to customs matters" under Article X:3(b) 
(i) Main arguments of the parties  
7.1019  The Philippines  argues that the imposition of a guarantee is, in itself, an "administrative 
action" within the meaning of Article X:3(b), and that Thailand admits this.1723  The Philippines 
                                                      
1719 Philippines' first written submission, para. 101. 
1720 Exhibit PHL-20. 
1721 Exhibit PHL-20. 
1722 Philippines' first written submission, para. 102; Thailand's first written submission, paras. 39-43. 
The excise, health and television taxes are set out in the Tobacco Act (Exhibit PHL-119), the Health Promotion Foundation Act (Exhibits PHL-121 and THA-33) and the Television and Public Broadcasting Act 
(Exhibit PHL-122). section 5 ter of the Tobacco Act provides that "i n the case of cut tobacco or tobacco 
imported into the Kingdom, c.i. f. prices of the cut tobacco or tobacco pl us duties on imports, differential duty in 
accordance with the law governing inve stment promotion and other taxes an d fees to be specified by royal 
decree, excluding value added tax specified in Chapter 4,  Title 2 of the Revenue Code."  section 11 of the 
Health Promotion Act states that the Health tax shall be 2% of the Excise Tax. section 12 of the Thai 
Broadcasting Act establishes the TV tax at 1.5% of the Excise Tax. 
1723 Philippines' comments on Thailand's response to Panel question No. 167, referring to Thailand's 
first written submission, para. 296, stating that "Article  42 of Thailand's Act on Establishment of Administrative 
Court and Administrative Court Procedures, BE 2542 (1999) provides a right to challenge all Thai government 
administrative actions, that fall under Article 9, including orders requiring guarantees. " Article 9 states in WT/DS371/R 
Page 374  
 
  considers that guarantee decisions are distinct prejudi cial acts, not merely intermediary steps towards 
final customs determinations.  In this regard, the Philippines relies on the Panel's statement in 
Colombia – Ports of Entry  that "'payment of [customs duties]' 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".
1724  
7.1020  The Philippines considers that a guarantee order constitutes a complete and final act having 
adverse effects on traders, and that it is not merely  an intermediary step towards the final customs 
determination.1725  The Philippines emphasizes that guarantee decisions entail immediate and 
independent  financial consequences.1726  The Philippines underlines that the amount of guarantees 
required by Thai Customs for the import of cigarette s is substantial and often excessive compared to 
the value of the imported goods.  Hence, the effectiv e excise tax rate is 400per cent, which means that 
for every baht of uplifted guarantee value, the importer must post a 4-baht guarantee.1727  I n  t h i s  
manner, the guarantee amount initially required fro m PM Thailand was estimated at US$[[xx.xxx.xx]] 
million in 2006.  Therefore, guarantee decisions pot entially bear two prejudicial consequences: (i) 
they immobilize capital or cash which coul d have otherwise been productively employed1728; or (ii) in 
the most severe cases, they dissuade importations altogether, as in August 2006 when PM Thailand 
refused to clear goods until guara ntees were revised downwards.1729  This shows that guarantee 
decisions themselves impose a burden on the importer,  which is independent from the final customs 
determination. They therefore constitute final administrative actions within the meaning of 
Article X:3(b), which commends that a separate app eal against them be available to the importer.1730 
7.1021  Moreover, in any event, in the Philippines' view, the scope of Article X:3(b) is not restricted 
to final administrative acts.  Rather, it covers all administrative action related to customs matters, 
which "on its face, could capture any type of  administrative action" not just final action.1731 
7.1022  Thailand submits that administrative decisions to  require a guarantee do not constitute an 
"administrative action" within the meaning of Article X:3(b) because those decisions are only 
administrative steps of a provisional  nature towards the final determination of customs value.1732  
According to Thailand, Article X:3(b) requires only final determinations to be subjected to appeal.   
7.1023  Thailand argues that Article 11.1 of the Cust oms Valuation Agreement, which serves as lex 
specialis  to Article X:3(b) concerning customs matters, makes it clear that Members must provide 
                                                                                                                                                                     
relevant part: [The] administrative court has competence to try and adjudicate or give orders over the following 
matters: ... (2) the case involving a dispute in relation to an administrative agen cy or official ne glecting official 
duties required by the law to be performed or performing such duties with unreasonable delay; (3) the case 
involving a wrongful act or other liabilities of an administrative agency or State official arising from the exercise of power under the law or from a law, administrative order or other orders, or from the neglect of 
official duties required by the law to be performed or the performance of such duties with unreasonable delay. 
Exhibit THA-34. 
1724 Philippines' second written submission, pa ra. 293, referring to the Panel Report, Colombia – Ports 
of Entry , para. 7.88. 
1725 Philippines' combined response to Panel question Nos. 87 and 89.  The Philippines also uses the 
language "final manifestation of the application of a law to a particular case" as the Panel states in EC – Selected 
Customs Matters , para. 7.105. 
1726 Philippines' combined responses to Panel question Nos. 87 and 89. 
1727 Philippines' first written submission, para. 104. 
1728 Philippines' first written submission, para. 103. 
1729 Philippines' combined responses to Panel question Nos. 87 and 89. 
1730 Philippines response to Panel question Nos. 87 and 89, referring to the Panel Report, EC – Selected 
Customs Matters , para. 7.536. 
1731 Philippines' response to Panel question Nos. 87 and 89. 
1732 Thailand's first written submission, para. 298; response to Panel question No. 89; second written 
submission, para. 239.  WT/DS371/R 
 Page 375 
 
 
  appeal procedures against final customs determinati ons only.  Article 11.1 does not require that an 
appeal be available against intermediary decisi ons taken in the process of determining the final 
customs value.1733  Article 11.1 therefore implicitly restricts the scope of Article X:3(b).  By the same 
token, Thailand notes that Article 13 of the Anti- Dumping Agreement, which applies Article X:3(b) 
in the anti-dumping context, establishes that prompt appeal shall be available against final duty 
determinations only.1734  A contrario , Article 13 of Customs Valuation Agreement, which specifically 
deals with guarantees in the customs contex t, does not mention a right to appeal.1735  Finally, Thailand  
refers to the Appellate Body's finding in US – Shrimp (Thailand)/US – Customs Directive  that 
"generally speaking a security is accessory or anc illary to the principal obligation that it guarantees 
[and is] intrinsically linked to that obligation".1736  Given their provisional and ancillary nature, the 
decisions to impose guarantees on imports of ciga rettes do not constitute "administrative action" 
under Article X:3(b), and there is no obliga tion to provide for their prompt review. 
7.1024  The Philippines  contends that Article 11.1 of the Customs Valuation Agreement cannot serve 
as lex specialis  to Article X:3(b) of the GATT 1994  as both provisions can be applied together in a 
harmonious manner.  There is no conflict between th e right to appeal a determination of customs 
value under Article 11.1 of the Customs Valuation Ag reement and the right to a prompt review of 
administrative actions relating to customs matters under Article X:3(b) of the GATT 1994  and 
therefore Members must provide both rights.1737  Further, the Philippin es considers that Thailand's 
reference to Article 13 of the Anti-Dumping Agreement  is not convincing as this Article expressly 
restricts its scope to  final  determinations, while Article X:3(b) adopts the wider notion of 
"administrative action relating to customs matters". 
(ii) Analysis by the Panel 
7.1025  The Philippines' claim under Article X:3(b) with respect to the alleged absence of a right to 
appeal against the amount of a guarantee in Thailand , presents us with the initial question of whether 
the guarantee decisions fall within the scope of an  "administrative action relating to customs matters" 
under Article X:3(b).  We will begin our analysis  by examining the term "administrative action 
relating to customs matters". 
7.1026  The word "action" can be defined as "the pr ocess or condition of acting or doing ... a thing 
done, a deed, an act".1738  The ordinary meaning of the term "action" indicates that its scope includes 
not only an act or thing done, but also the process or condition of acting or doing.  The term "administrative" means "pertaining to the management of affairs; executive".
1739  We also noted 
earlier in the context of Article X:3(a) that the term  "administer" in Article X:3(a) means "putting into 
practical effect", or "applying", a legal instrument.1740  The scope of the term "administrative action" 
therefore appears to cover a broad range of acts as well as the process of applying legal instruments. 
7.1027  Taken together with the subsequent term in Ar ticle X:3(b) "customs ma tters", "administrative 
action relating to customs matters" would mean an act or the process of applying legal instruments pertaining to customs matters.  Although the Custom s Valuation Agreement does not define the term 
"customs matters", the Black's Law Dictionary de fines "customs" as "duties imposed on imports or 
                                                     
 
1733 Thailand's first written submission, para. 299. 
1734 Thailand's response to Panel question No. 89. 
1735 Thailand's first written submission, para. 299. 
1736 Appellate Body Report, US – Shrimp (Thailand)/US – Customs Bond , para. 231. 
1737 Philippines' second written submission, paras. 305-309. 
1738 The New Shorter Oxford English Dictionary , (Fifth Edition) Oxford Univer sity Press, Vol. I, p. 22 
(2002). 
1739 The New Shorter Oxford English Dictionary , (Fifth Edition) Oxford Univer sity Press, Vol. I, p. 28 
(2002). 
1740 See para. 7.870. WT/DS371/R 
Page 376  
 
  exports.  The agency or procedure for collecting such duties".
1741  The Revised Kyoto Convention on 
the simplification and harmonisation of customs pr ocedures defines "customs matters" as all actions 
by customs authorities "relating to the importati on, exportation, movement or storage of goods".1742  
Furthermore, Article X:1 of the GATT 1994, while not directly mentioning customs matters, sets out various trade regulations that may fall under the scope  of Article X, for example, by referring to the 
classification or the valuation of goods for customs purpose as well as rates of duty. 
7.1028  We also recall that, in the context of an Ar ticle XX of the GATT 1994 analysis, the Appellate 
Body clarified the term "related to" as meaning th at a rational relationship must exist between the 
measure and the objective pursued.  In US – Shrimp , the Appellate Body stated that a measure was 
related to the conservation of natural resources when  it "was not disproportionately wide in its scope 
and reach in relation to [its] policy objective. Th e means and end relationship [between the measure 
and the objective was] observably a close and real one".
1743  This suggests that all administrative 
actions that have a rational relationship to cust oms matters can be considered as "administrative 
actions relating to customs matters". 
7.1029  The above considerations as a whole suggest th at "administrative action relating to customs 
matters" in Article X:3(b) of the GATT 1994 include s a wide range of acts applying legal instruments 
having a rational relationship with cu stoms matters, which clearly includes valuation  of goods being 
imported. 
7.1030  We further note that the underlying objective of Article X:3(b) is the preservation of due 
process rights for affected parties.1744  The panel in EC – Selected Customs Matters stated: 
"[A] due process theme underlies Article X of the GATT 1994.  In the Panel's view, 
this theme suggests that an aim of the revi ew provided for under Article X:3(b) of the 
GATT 1994 is to ensure that  a trader who has been adversely affected  by a decision 
of an administrative agency has the ability to have that adverse  decision 
reviewed."1745  
7.1031  The Appellate Body in the same dispute also stated: 
"We believe this due process objective is not undermined even if first instance review 
decisions do not govern the practice of all the agencies entrusted with customs enforcement throughout the territory of a WTO Member, so long as there is a possibility of an independent review and correction of the administrative action of 
every agency."
1746  
7.1032  These findings by the Panel and the Appellate Body in  EC – Selected Customs Matters help 
to support the view that the  object and purpose of Article X:3(b) is  broad and covers a wide range of 
actions by domestic administrative agencies concerning customs matters. 
7.1033  In this regard, we note the parties' disagreem ent on whether the scope of "administrative 
action" under Article X:3(b) includes only final administrative actions, as opposed to intermediary 
                                                      
1741 Black's Law Dictionary , 7th ed., B.A. Garner (ed.) (West Group, 1999), p. 390. 
1742 Kyoto Convention on the Simplification and Harmonisation of Customs Procedures, Chapters 2 
and 10 of the General Annex. 
1743 Panel Report, US – Shrimp , para. 141. 
1744 Panel Report, EC – Selected Customs Matters , para. 7.536. 
1745 Panel Report, EC – Selected Customs Matters , para. 7.536. See also Appellate Body Report, US – 
Shrimp , para.183: "It is also clear to us that Article  X:3 of the GATT 1994 establishes certain minimum 
standards for transparency and procedural fairness in the administration of trade regulations". 
1746 Appellate Body Report, EC – Selected Customs Matters , para. 302.  WT/DS371/R 
 Page 377 
 
 
  steps leading to a final administrative action.  Th e broad scope of the term "administrative action" 
under Article X:3(b) as discussed above, however, does not appear to confine "administrative action" 
to final administrative actions.  Taking into account in  particular, the due process principle as 
underlined by the Panel in EC – Selected Customs Matters , we are of the view that if a certain 
administrative action can cause a direct and immediat e impact on an individual trader, the trader 
should be able to have the concerned action reviewed  and, as necessary, corrected by an independent 
body as envisaged under Article X:3(b).  If only final administrative actions were to fall within the 
scope of "administrative action" under Article X:3(b), as advocated  by Thailand, Article X:3(b) would 
not be able to fully serve its intended purpose of providing a mechanism through which traders can 
seek review and, if necessary, appropriate correction of administrative actions that are not necessarily 
final, but nonetheless have immediate adverse impact on traders. 
7.1034  Further, the absence of the word "final" precedi ng "administrative action" in Article X:3(b) 
would also tend to manifest the drafters' intention to have the obligations under Article X:3(b) applied 
to a broad range of "administrative action pertaini ng to customs matters" and that this administrative 
action is not necessarily confined to final admini strative actions.  For example, Article 13 of the 
Customs Valuation Agreement  states, "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 them from customs if where so required the importer 
provides sufficient guarantee".  This shows that when the drafters intended to distinguish final actions 
or determinations from provisional actions or determinations, they did specifically add the term 
"final".   
7.1035  At the same time, however, we can think of a situation where the provisional characteristic of 
an administrative action or determination would render  such an action or determination to fall outside 
the scope of Article X:3(b).  For example, this woul d be the case if subjecting the concerned action or 
determination to an independent review would result in unduly interfering with a domestic agency's 
decision-making process mainly due to the provisiona l nature of the action.  In this connection, 
therefore, we must underscore that our mandate for the purpose of resolving this particular dispute is 
not to define the precise types of the measures falling under Article X:3(b).1747  It is sufficient for us to 
clarify that the term "administrative action relatin g to customs matters" in Article X:3(b) is not 
necessarily limited to final administrative determinations where the so-called intermediary actions 
taken prior to final determin ations result in an immediate adverse affect on traders.1748 
7.1036  Certain third parties appear to share the sa me view.  For example, the European Union 
considers that an appeal should be provided agains t all acts by the customs administration which have 
a direct and material effect on the importer su ch as, for instance, the actual collection of a 
guarantee.1749  The United States considers that as Article X:3(b) requires Members to provide for 
review only of, first, "administrative action" and, second, "relating to customs matters", the extent to 
                                                      
1747 We agree with the United States' view in this  relation that the Panel need not identify each 
intermediate step in the customs valuation process as to which an independent right to appeal should exist.  
(Unites States' response to Panel question No. 16). 
1748 We recall the Appellate Body's consideration in US – Shrimp (Thailand)/US – Customs Bond 
Directive that under certain circumstances a security take n for guaranteeing the payment of a lawfully 
established duty may constitute "specific action against dumping.  In relevant part, the Appellate Body states: 
"We do not, however, consider that a security taken for guaranteeing the payment of a 
lawfully established duty liability would n ecessarily constitute a specific action against 
dumping"; rather, whether a particular security constitutes a "specific action against dumping" should be evaluated in the light of the nature and characteristics of the security and the 
particular circumstances in which it is applied.  We wish to emphasize that, in any event, an 
impermissible specific action agai nst dumping cannot be taken in the guise of a security."  
(Appellate Body Report, US – Shrimp (Thailand)/ US – Customs Bond Directive, para. 230). 
1749 European Union's response to Panel question No. 16. WT/DS371/R 
Page 378  
 
  which an intermediate step in the valuation pro cess gives rise to the right to appeal depends on 
whether it is such an action.
1750  The United States also points out that the meaning of "administrative 
action relating to customs matters" should not be equa ted with "a determination of customs value" in 
Article 11 of the Customs Valuation Agreement  that sets out an obligation to provide for an appeal of 
the determination of customs value.1751  
7.1037  We will now turn to the question of whet her the imposition of a guarantee is an 
"administrative action relating to customs matters" under Article X:3(b).  The concept of "guarantee" 
in relation to customs valuation is referred to in Article 13 of the Customs Valuation Agreement: 
"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 wit hdraw them from customs if, where so 
required, the importer provides 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."
1752 (italics added) 
7.1038  The Philippines submits that the imposition of a guarantee is, in itself, an "administrative 
action" within the meaning of Article X:3(b).  The Philippines considers that the imposition of a 
guarantee is a distinct prejudicial act, not merely an intermediary step towards the final customs 
determination as it is the culmination of an admi nistrative process, the final manifestation of the 
application of a law in a particular case.  The Philippines is of the view that although a guarantee 
order is not the final determination of a customs va lue, it is the final determination of a guarantee.  
Thailand takes the position that the decision to impose a guarantee on imported cigarettes does not 
constitute an "administrative action" within the m eaning of Article X:3(b) because that decision is 
only administrative step of a provisional  nature towards the final determination of a customs value.   
7.1039  We will first examine the nature of a guarantee im posed in the context of customs valuation.  
The determination to impose a guarantee under Article  13 of the Customs Valuation Agreement is not 
a mandatory procedural step that needs to be taken to arrive at a final customs value.  Rather, as the 
text of Article 13 stipulates, a guarantee is a tool in the form of a surety or a deposit that enables 
importers to withdraw their goods from customs wh en it becomes necessary for a customs office to 
delay the final determination of the customs value of the imported goods.  A guarantee should also be 
sufficient to cover the ultimate cust oms duties for which the goods may be liable.  In this context, we 
consider that the imposition of a guarantee is a dis tinct decision purported to play a specific role, 
namely to secure the payment of final customs duty.   We find helpful the Appellate Body's statement 
in US – Customs Bond Directive/US – Shrimp (Thailand ) in understanding the specific purpose of a 
guarantee: 
"As in many other cases in customs administration, a Member may require reasonable 
security (bond or cash deposit) for the payment of anti-dumping or countervailing 
duty pending final determination of the facts in any case of suspected dumping or 
subsidization."  In this connection, the Appe llate Body explains the nature of security 
as follows: '[t]he Ad Note also suggests that the reas onable security envisaged by it 
fulfils the same function as the securities taken 'in many other cases in customs administration'.  ...in most other cases in customs administration, security is required 
                                                     
 
1750 United States' response to Panel question No. 16. 
1751 United States' third party oral statement, para. 20. 
1752 The Black's Law Dictionary defines "guarantee" as "something given or existing as security, such 
as to fulfil a future engagement or a condition subsequent." Black's Law Dictionary , 7th ed., B.A. Garner (ed.) 
(West Group, 1999), p. 711.  WT/DS371/R 
 Page 379 
 
 
  upon entry of merchandise when there is some  uncertainty about the actual amount of 
liability that may be lawfully owed by the importer .  Such a security is intended to 
provide a protection against the non-payment ri sk that might arise from the difference 
between the amount collected at the time of  importation and the liability that may be 
finally determined."1753 (emphasis added) 
7.1040  Overall, we consider that the imposition of a gua rantee in the context of the customs valuation 
process is a decision that is intended to serve the distinct purpose of securing  the payment of the 
ultimate actual amount of customs duty pending final determination by customs. 
7.1041  We recall our clarification above that the term  "administrative action pertaining to customs 
matters" in Article X:3(b) includes a wide ra nge of administrative actions having a rational 
relationship with customs matters, including the valuation  of goods being imported.  In our view, 
therefore, a customs administration's guarantee decision under the circumstances as stipulated in Article 13 of the Customs Valuation Agreement  falls within the scope of "administrative action 
pertaining to customs matters" as a guarantee indeed has a rational relationship with the valuation of 
imported goods.
1754  The fact that the imposition of a guarantee is not the final determination of a 
customs value of a good does not affect this unders tanding because, as explained above, a guarantee is 
a distinct decision by customs that is intended to secure the payment of a final customs duty for which 
an importer will ultimately be liable. 
7.1042  Furthermore, we observed above that the purpo se and objective of Article X:3(b) highlights 
the view that "administrative actions" under Ar ticle X:3(b) should cover the acts by domestic 
agencies, which have an immediate adverse imp act on importers and expor ters.  To establish the 
direct adverse effect resulting from the imposition of an excessive guarantee value, the Philippines 
presents situations where the amount of a guarant ee imposed an immediate financial burden on the 
importer because posting guarantees entailed bank fees and collateral instruments.  Cash guarantees 
represent capital that the importer could have used otherwise.  For the years 2006, 2007 and 2008, for 
example, PM Thailand posted US$[[xx.xxx. xx]] million, US$[[xx.xxx.xx]] million and 
US$[[xx.xxx.xx]] million respectively as guarantees.1755  The Philippines also refers to the instance in 
2006 where PM Thailand had been unable to comply with Thai Customs' decision to impose a US$[[xx.xxx.xx]] million as a guarantee.
1756  PM Thailand had to wait until those guarantees were 
revised downwards to clear its goods.1757  
                                                      
1753 Appellate Body Report, US – Shrimp (Thailand ) / US – Customs Bond Directive , para. 221. 
1754 Regarding the relationship between the determination of a final customs value and the 
determination of a guarantee, we note the Appellate Body's following statement in US – Customs Bond 
Directive/US – Shrimp (Thailand ):  
"Generally speaking, a security is accessory or ancillary to the princi pal obligation that it 
guarantees.  A security that is taken to guarantee the obligation to pay anti-dumping or 
countervailing duties is intrinsically linked to that obligation.  Thus, taking security for the full and final payment of duties should be viewed as a component of the imposition and collection 
of anti-dumping or countervailing duties.  Th erefore, a reasonable  security taken in 
accordance with the Ad Note for potential additional anti-dumping duty liability does not 
necessarily, in and of itself, constitutes a fourth autonomous category of response to 
dumping."  
(Appellate Body Report, US – Customs Bond Directive/US – Shrimp (Thailand ), para. 231). 
1755 Philippines first written submission, paras. 103-104. 
1756 Philippines' combined response to Panel ques tion Nos. 87 and 89; second written submission, 
para. 295. This corresponds to guarantees placed at a level which was, respectively, 344 and 265 per cent higher 
than the declared transaction value for Marlboro  and L&M . 
1757 Philippines' combined response to Panel question Nos. 87 and 89. WT/DS371/R 
Page 380  
 
  7.1043  According to the Philippines, therefore, under th e most extreme situation, the imposition of an 
excessive guarantee may dissuade the importer from importing altogether, which would constitute a 
considerable commercial loss.
1758  The Philippines argues that in the absence of an appeal against 
guarantee decisions, this loss cannot be compensated.   We also understand that there is no refund 
mechanism for VAT if it is calculated based on a gua rantee that is subsequently determined to be 
higher than the final customs duty.  The evidence before us as a whole therefore shows that a 
guarantee can cause an immediate commercially a dverse impact on importers by imposing on 
importers a burdensome financial obligation if the level of a guarantee is excessive compared to the 
value of the imported good concerned. 
7.1044  Thailand however takes the position that there are very strong policy reasons why appeals 
should not be provided against inte rmediate determinations such as guarantee decisions.  In Thailand's 
view, this would annul the importer's right to w ithdraw his goods pending the determination of the 
final customs value and would modify the Thai system of administration by giving the prerogative to determine this customs value to the courts rather than to the customs administration.  The Philippines 
argues that the policy reasons put forward by Tha iland are insufficient because providing a right of 
appeal against guarantee decisions would only ensure  that the rights of the importer are protected 
through the customs procedures.
1759   
7.1045  In our view, providing importers with a right of  appeal against guarantee decisions would not 
infringe upon their right to withdraw the goods pend ing final determination of customs values.  As 
pointed out by the Philippines above, on the contrary, the right of appeal provided under Article X:3(b) will ensure that in a situation wher e an importer cannot withdraw the goods due to an 
excessive amount of a guarantee imposed, the importer can have the guarantee at issue reviewed and, 
if necessary, revised downwards so as to be able  to withdraw the goods by providing the required 
guarantee.  In any event, we do not see how a ri ght of appeal against guarantee decisions would 
"annul" the importers' right to withdraw the goo ds unless it somehow deprives the importer of the 
discretion either to choose to pay the guarantee a nd withdraw the goods or to appeal against the 
guarantee even if that would mean a delay in the withdrawal of the goods pending the appeal process. 
7.1046  Thailand further submits that, even if guarant ee decisions constitute an administrative action 
pertaining to customs matters under Article X:3(b), there is no obligation to provide a possibility of 
appeal to the importer because Article 11.1 of the Customs Valuation Agreement, which lays down an 
obligation to provide for a right to appeal against "a determination of customs value", should be read 
as lex specialis  to Article X:3(b) in customs value matte rs.  Accordingly, Article 11.1 specifies the 
requirements in Article X:3(b) such that only final determinations of customs value, not intermediate 
steps towards those decisions, would be subject to  appeal.  Likewise, Article X:3(b) should be 
interpreted in the light of Article 13 of the Anti- Dumping Agreement which restricts the obligation to 
provide prompt review against administrative action to  final  duty determinations.   
7.1047  The lex specialis  principle has been defined by the International Law Commission ("ILC") as 
"a generally accepted technique of interpretation a nd conflict resolution in international law.  It 
suggests that whenever two or more norms deal with the same subject matter, priority should be given 
to the norm that is more specific".
1760  It is our understanding that Thailand's lex specialis argument 
                                                      
1758 Philippines' second written submission, paras. 294-295. 
1759 Philippines' second written submission, paras. 294-295. 
1760 Report of the International Law Commission, Fifty-eighth session (1 May-9 June and 3 July-11 
August 2006) General Assembly Official Records Sixty-first session Supplement No. 10 (A/61/10), p 408. (Italics added)  As an illustration, the ILC refers to two decisions. It first referred to the in  Bankovic v. Belgium 
and others by the European Court of Human Rights, which held that "the Convention [here the specific law] 
should be interpreted as far as possible in harmony with  other principles of international law [here the general 
law] of which it forms part" (ECHR, Bankovic v. Belgium and others , Decision of 12 December 2001, 
Admissibility, ECHR 2001-XII, p. 351, para. 57).
  It also cited to the Panel statement in Korea – Measures  WT/DS371/R 
 Page 381 
 
 
  with respect to the relationship between Article X:3(b) and Article 11.1 is therefore made on the 
premise that the obligations under these two provisi ons concern the same subject matter.  Although 
both provisions address an obligation to provide for the right of appeal concerning customs issues, 
namely "administrative action relating to customs matters" under Article X:3(b)  and "a determination 
of customs value" under Article 11.1, we do not cons ider that these two matt ers can necessarily be 
considered as the same subject matter such that they would trigger the application of the lex specialis 
principle.  For one, as the parties seem to agree, the scope of the subject matter under Article X:3(b) 
("administrative action relating to customs matters ") is broader than that under Article 11.1 ("a 
determination of customs value").   We recall our understanding above in this regard that the 
imposition of a guarantee is an administrative action th at is distinct from the final determination of a 
customs value and considered as falling under the sc ope of "administrative action relating to customs 
matters".   
7.1048  Furthermore, Article 11.2 provides that "an initia l right of appeal without penalty may be to 
an authority within the customs administration or to an independent body, but the legislation of each Member shall provide for the right of appeal without penalty to a judicial authority".  The obligation 
under Article 11.1 to provide for the right of appeal against a determination of customs value, read in 
the light of Article 11.2 as context, t hus focuses on the right to appeal to a judicial authority.  This 
should be contrasted to Article X:3(b) that sets forth the obligation to maintain or institute tribunals or 
procedures independent  of the agencies entrusted with admini strative enforcement, whether judicial, 
arbitral or administrative, for the prompt review  and correction of administrative action relating to 
customs matters.  Therefore, insofar as a determin ation of customs value is concerned, Members are 
obliged under Article 11 of the Customs Valuation Agreement  to provide for the right of appeal to a 
judicial authority although an initial right of a ppeal may be to an authority within the customs 
administration or to an independent body.  We note that to the extent "a determination of customs value" can also fall within the scope of "adminis trative action relating to customs matters", Members 
must maintain or institute indepe ndent tribunals or procedures for th e prompt review and correction of 
the concerned determination, which could simultaneous ly be satisfied if the right to appeal to a 
judicial authority is already provided under Article 11.1.  This, however, does not affect the Members' obligation under Article X:3(b) with respect to "adm inistrative action relating to customs matters".   
7.1049  As discussed above, Article X:3(b) provides importe rs with the right to have a wide range of 
administrative actions relating to customs matters that immediately cause an adverse impact on 
                                                                                                                                                                    
 
Affecting Government Procurement  that "to the extent that there is no co nflict or inconsistency, or an expression 
in a covered WTO agreement [here the specific law] that  applies differently, we are of the view that the 
customary rules of international law [here the general law]  apply to the WTO treaties and to the process of treaty 
formation under the WTO."  (Panel Report, Korea – Measures Affecting Government Procurement , para. 7.96). 
 We note that the Appellate Body has extensively relied on  general principles of international law to interpret 
member's obligations. See for instance,  Appellate Body Report, US – Cotton Yarn , para. 120, applying the 
general principle of proportionality as found in Ar ticle 51 of the International Law Commission Draft 
Articles on State's Responsibility;  
In EC — Hormones , the Appellate Body referred to "the interpretative principle of in dubio mitius " as a 
supplementary means of interpretatio n "widely recognized in  international law" (Appellate Body Report, EC — 
Hormones , footnote 154); in US — Shrimp , the Appellate Body held that  
 
"The chapeau of Article XX is, in fact, but one expression of the principle of good faith. 
This principle, at once a general principle of law and a general principle of international 
law, controls the exercise of rights by states . One application of this general principle, the 
application widely known as the doctrine of abus de droit , prohibits the abusive exercise of 
a state's rights and enjoins that whenever the assertion of a right ‘impinges on the field 
covered by [a] treaty obligation, it must be exercised bona fide, that is to say, 
reasonably." (Appellate Body Report, US — Shrimp , para. 158).  
  WT/DS371/R 
Page 382  
 
  importers, reviewed and corrected.  In this light, the right to appeal a determination of a customs value 
to a judicial authority provided under Article  11.1 would not address the obligations envisaged under 
Article X:3(b), namely to maintain an independent  tribunal or procedure for the prompt review and 
correction of administrative actions that adversely affect importers concerning customs matters.  Considered together, if Thailand' s position were to be accepted, the rights and obligation of the WTO 
Members under Article X:3(b) of the GATT 1994  would lose their raison d'être .
1761 
7.1050  We also find support for our view in the discussions on a similar matter in previous disputes.  
In Canada – Periodicals , for example, regarding the respondents' argument that since a set of rules on 
services exists in the GATS, the provisi ons of Article III:4 of the GATT 1994  on distribution and 
transportation are obsolete, the Appellate Body  found that the scope of Article III:4 was not 
diminished by the entry into force of the GATS.1762  Similarly, in Indonesia – Autos , as regards the 
argument that a subsidy could not be found inconsis tent with the obligations under Article III of the 
GATT 1994  as the SCM Agreement  acted as lex specialis to Article III of the GATT 1994  and 
therefore became the exclusive norm applicable to su bsidies before WTO panels , the Panel considered 
that Article III of the GATT 1994  and the SCM Agreement  had different coverage  and did not impose 
the same type of obligations. The panel considered that the existence of the SCM Agreement, did not 
mean that Article III would never be applicable to subsidies.1763 Accordingly, the Panel found that a 
subsidy could alternatively fall under Article III of  the GATT 1994 or the SCM Agreement  within its 
coverage.1764  
7.1051  Finally, we recall that the general interpre tative note to Annex 1A of the WTO Agreement 
provides that "[i]n the event of conflict between a provision of the General Agreement on Tariffs and 
Trade 1994 and a provision of another agreement in [the WTO Agreement], the provision of the other 
agreement shall prevail to the extent of the conf lict".  In our understanding, however, Thailand is not 
arguing that there is a conflict between Article X:3(b) of the GATT 1994  and Article 11.1 of the 
Customs Valuation Agreement.  In any event, our reading above of both provisions in their specific 
context does not indicate a conflict between these tw o provisions either.  Accordingly, we do not 
consider the principles under the general interp retative note to Annex 1A as applicable to the 
relationship between Article X:3(b) of the GATT 1994  and Article 11.1 of the Customs Valuation 
Agreement. 
                                                      
1761 The Appellate Body in US – Gasoline states, "One of the corollaries of the general rule of 
interpretation in the Vienna Convention is that interpretati on must give meaning and effect to all the terms of the 
treaty. An interpreter is not free to adopt a reading that would result in reducing clauses or paragraphs of a treaty 
to redundancy or inutility" (Appellate Body Report, US – Gasoline , p. 23, DSR 1996:I, 3 at 21. The Appellate 
Body referred to the effet utile doctrine of interpretation in previous disputes such as Japan – Alcoholic 
Beverages II, p. 12, DSR 1996-I, 97, at 110; US – Underwear , p. 16, DSR 1997:I, 11, at 24; EC – Asbestos , 
para. 115.  The Panel in Turkey – Textiles also stated :  "Finally we would also like to recall the principle of 
effective interpretation whereby all provisions of a treaty must be, to the extent possible, given their full 
meaning so that parties to such a tr eaty can enforce their rights and obliga tions effectively. ... We understand 
that this principle of interpretation prevents us from r eaching a conclusion on the clai ms of India or the defence 
of Turkey, or on the related provisions invoked by the parties, that would lead to a denial of either party's rights 
or obligations" (Panel Report, Turkey – Textiles , para. 9.96). 
1762 Appellate Body Report, Canada – Periodicals , p. 19, DSR 1997:I, 449, at 464. The ILC also 
underlined that "the scope of special laws is by defi nition narrower than that of general laws. It will thus 
frequently be the case that a matter not regulated by special law will arise in the institutions charged to 
administer it. In such cases, the relevant general law will apply" (Report of the International Law Commission, 
Fifty-eighth session (1 May-9 June and 3 July-11 August 2006) General Assembly Official Records Sixty-first 
session Supplement No. 10 (A/61/10), p 412). 
1763 Panel Report, Indonesia  –  Autos , para. 14.29-14.36. 
1764 Panel Report, Indonesia – Autos , paras. 14.35-14.36.  WT/DS371/R 
 Page 383 
 
 
  7.1052  Therefore, we are not, persuaded by Thailand' s argument that as Article 11.1 of the Customs 
Valuation Agreement,  as lex specialis to Article X:3(b), specifies the requirements in Article X:3(b), 
no obligation under Article X:3(b) exists for Memb ers to provide a possibility of appeal to the 
importer for guarantee decisions.1765 
7.1053  For the foregoing reasons, we conclude th at the imposition of a guarantee is an 
"administrative action relating to customs matters" within the meaning of Article X:3(b) of the 
GATT 1994. 
(c) Whether Thailand maintains tribunals or pro cedures for prompt review and correction of 
guarantee decisions  
(i) Main arguments of the parties 
7.1054  The Philippines  claims that Thailand does not maintain  independent tribunals or procedures 
for the prompt review of guarantee decisions.1766 In support of its claim, the Philippines relies on the 
decisions of the Thai Administrative Court and the Thai Supreme Administrative Court, and the Thai 
Supreme Court that allegedly show the lack of th e right for importers to appeal guarantee decisions 
directly to the Thai Court.1767   
7.1055  Specifically, the Philippines refers to the Supreme Administrative Court decision in 2007 in 
which upheld the decision of the Administrative Court of First Instance that it did not have jurisdiction to rule on PM Thailand's appeal agai nst guarantee decisions.  The Philippines further 
submits that no right of appeal against guarantee d ecisions exists independently from the notice of 
assessment.  The Philippines refers to various Thai c ourt decisions that allegedly ruled to this effect, 
namely the 1989 and 1991 decisions by the Thai Supreme Court and the 2007 decision by the Thai 
Supreme Administrative Court. 
7.1056  In 1989, the Thai Supreme Court held: 
"[I]n the case of the requirement of the gua rantee by the competen t official according 
to Section 112, if the Court allows the Pl aintiff to file the lawsuit [against the 
guarantee]such as in this case, ... before the Defendant's competent officer assessed 
the duty and notified the Plaintiff, it would cu rtail the power of the competent official 
to assess the duty pursuant to Section 112 bis, paragraph one and would completely 
curtail the right of the Plaintiff to appeal  against such assessment. .... [I]n this case, 
because the Defendant's competent official had not yet assessed the duty and notified the Plaintiff to pay the duty pursuant to Section 112 bis, paragraph one, the Defendant 
has not according to Section 55 of the Civ il Procedure Code infringed upon the  right 
                                                      
1765 We note that this conclusion is in line with relevant international instruments. For instance, 
standard 10.2 of  the Kyoto convention on the harmonization and simplification of customs procedures provides that "any person who is directly affected by a decision or omission
 of the Customs shall have a right of appeal."  
Similarly, Council Regulation (EEC), No 2913/92 of 12 October 1992 establishing the Community Customs 
Code, as amended provides that goods may be released wh en the customs debt is secured (Article 74). The act 
by which a security is imposed qualifies as a decision by customs authorities under Article 4(5). A possibility of 
Appeal is therefore provided against this decision under Article 243. Appeal may be first to a customs authority. 
Appeal to an independent ju dicial authority must be provided (Article 243.2). 
1766 Philippines' first written submission, para. 101. 
1767 Exhibit PHL-132. (Central Administrative Court order No.1740/2549 of 19 October 2006), 
confirmed by Exhibit PHL-133 (Supreme Administrative Court order No 417/2550 of 27 June 2007).  Both are in line with Supreme Court decisions No. 509/2532 (1989) S.K.W steels v. Customs  (Exhibit PHL-136) and 
Saereewattana Industry v. Customs  (Exhibit PHL-288).  WT/DS371/R 
Page 384  
 
  or duty of the Plaintiff
 and, therefore, the Plaintiff has no power to file such lawsuit in 
this case."1768 
7.1057  In 1991, the Supreme Court confirmed that:  
"[I]n order to wait for the results of the cr iminal case to be finalised, the Defendant 
has not issued the notice of assessment to no tify the plaintiff.  As such, the plaintiff 
did not have the right to request the defe ndant to return the cash guarantees or bank 
guarantees to the plaintiff."1769 
7.1058  In the 2007, the Supreme Administration Court also considered that: 
"Although the Plaintiff views that the determin ation of such [guarantee] prices caused 
damage to the Plaintiff and the Plaintiff had no opportunity to provide an explanation, 
it is the process or procedure for assessment  of the prices of products for collection of 
duty and excise tax. Upon payment of import duty as assessed by the 1st Defendant, if 
the Plaintiff thinks that such assessment w as not accurate, the Plaintiff shall then be 
entitled to appeal to the BOA according to Section 112 (f)  of the Customs Act."1770 
7.1059  The Philippines also refers to Professor A sawaroj's commentary on the Supreme Court 
decision No. 509/2532 (1989) S.K.W steels v. Customs  in which he emphasizes that at the time of 
writing (2006), "a lawsuit could no t be brought unless the importer or the exporter has first appealed 
the assessment of the competent official to th e Board of Appeal pursuant to Section 112 sexies ".1771  
The Philippines asserts that these co urt decisions recognize that there is no right of direct appeal 
against guarantee decisions as only notices of assessment, which are distinct acts, may be challenged.
1772   
7.1060  The Philippines further points out that under Thai law, an administrative act must specify the 
nature of any right to appeal against the act.1773  Therefore, if Thai Customs believed that there was a 
right to appeal against the guarantees, for instance to  the Tax Court, the Thai Customs letter of 11 
August 2006 imposing the guarantee order should have informed PM Thailand of that right.  The 
Philippines explains that the letter in fact inform s PM Thailand that, "once the Customs Department 
has issued the assessment letter, the Company can appeal against su ch assessment in accordance with 
                                                      
1768 Exhibit PHL-136.  
1769 Exhibit PHL-288. 
1770 Exhibit PHL-133, p. 6.   
   section 112 (f) of the Customs act states: "the importer or the exporter shall have the right to appeal 
against the duty assessment  of the competent officer" ( italics added) (Exhibit PHL-20). 
1771 Exhibit PHL-135.  
1772 Philippines' first written submission, para. 101. 
1773 Philippines' response to Panel question No. 168, referring to section 40 of the Administrative 
Procedure Act (Exhibit PHL-130).  section 40 provides:  
"[t]he administrative order against which appeal or an objection may further be filed, the circumstances in which the appeal or objection may be filed, the filing of the appeal or 
objection and period of time for the filing of said appeal or objection must be specified.   
  In the event of violation of the provisions under para. 1, the period of time required 
for filing appeal or objection shall re-commence on the date of receipt of the notification of 
the criteria pursuant to para. 1.  But if no new notification is given and such period of time is shorter than one year, such period of time is to be extended to one year of date of receipt of 
the administrative order."  WT/DS371/R 
 Page 385 
 
 
  the law".1774  PM Thailand was not informed of any right to appeal the guarantee itself without 
awaiting final assessment.1775 
7.1061  Thailand argues that it does not violate Article X:3(b) because guarantee decisions can be 
appealed to the Tax Court independently of the notice of assessment.1776 In support of its position, 
Thailand cites to a letter from its Attorney General stating that  direct  appeals to the Tax Court against 
guarantee decisions are also available as "it is consid ered to be a dispute case in respect to rights or 
duties under an obligation made for tax collection's purposes under Section 7(4)  of the Establishment 
of Tax Court and Tax Court procedure Act B.E.2528 [hereinafter "Tax Court Act"]".1777  Thailand in 
addition references a Thai Supreme Court decisi on in which the Court decided that the Thai 
administration could bring a court case against a company which had unduly obtained a corporate tax 
refund in front of the Tax Court.  The Supreme Cour t then held that such cl aim concerned a "case in 
respect to rights and duties incurred under an obl igation made for tax collection purposes" and 
therefore fell within the Tax Court's competence by virtue of Section 7(4) of the Tax Court Act.  
Thailand cites to the court's statement that "a refund  of taxation before an audit is not an absolute 
refund but a  conditional  refund ... [T]he plaintiff has the right to sue for tax".1778   
7.1062  Regarding the right of appeal against guarant ee decisions before the Thai Administrative 
Court, Thailand  initially argued that the Thai Administrativ e Courts are competent to hear appeals 
against guarantees.  However, it agreed at a late r stage of the proceedings, specifically after the 
reference by the Philippines to the Supreme Administ rative Court's decision, that its opinion had not 
been endorsed by the courts.1779 
7.1063  The Philippines  argues that the evidence put forward by  Thailand allegedly showing that the 
Tax Court does have jurisdiction to  review guarantee decisions inde pendently of final customs value 
decisions, is irrelevant.  The letter from the Attorney  General explaining that Section 7(4) of the Tax 
Court Act provides an appeal against guarantee d ecisions contradicts the decisions of the Thai 
Supreme Administrative Court and the Thai Supreme Court.1780  Similarly, the decision of the Thai 
Supreme Court produced by Thailand to this effect  has no link to guarantees in the customs context, 
and rather deals with refunds of company taxes.1781 
7.1064  Thailand submits that even if there was no direct appeal to the Thai Tax Court, importers 
have, at a minimum, the right to challenge the imposition of guarantees to the Thai Tax Court upon 
the exhaustion of alternative remedies.  Thailand po ints out that even the Philippines' own experts 
                                                      
1774 Philippines' response to Panel question No. 168. 
1775 Philippines' response to Panel question No. 168.  Professor C. Asawaroj, Collection of Customs 
and Law relating to Customs Tariff (Duentula Publishing House, Bangkok, 2006). Exhibit PHL-135, stating that an administrative act must specify the nature  of any right to appeal under Thai law.  
1776 Thailand's response to Panel question No. 167. 
1777 Exhibit PHL-281, section 7 of the Act for Establishment and Procedures for Tax Court B.E. (2528) 
provides: 
 
The tax courts have jurisdiction over the following civil matters:  (1) Cases in respect of appeals against any decision of the competent official  or the committee relating 
to any taxation law; 
(2) Cases in respect of disputes over right of claim on tax debts; (3) Cases in respect of taxes refund; 
(4) Cases in respect of debts incurred in connectio n with [an] obligation made for collecting taxes; 
(5) Cases that are prescribed to be und er the jurisdiction of the tax courts. 
 
1778 Exhibit THA-101 (italics added). 
1779 Thailand's second written submission, para. 231, footnote 206. 
1780 Philippines' comments on Thailand's response to Panel question No. 167. 
1781 Philippines' comments on Thailand's response to Panel question No. 167; Exhibit THA-101. WT/DS371/R 
Page 386  
 
  accept that importers have rights to appeal decisi ons imposing guarantees to the Thai Tax Court once 
the notice of assessment is issued .  Specifically, Thailand refers to the statement by Mr Veraphong 
that "the importer cannot appeal against a gua rantee directly, but must wait until a notice of 
assessment is issued under Section 112 bis of the Customs Act and the Board of Appeal renders its 
decision under Section 112 octodecim ".
1782  Further, Thailand also mak es a reference to the statement 
by Mr Aekaputra that "the Customs Act does not di rectly provide a process to challenge guarantees 
but it states that, pursuant to Section 112 sexies , appeals against a final notice of assessment shall be 
made within 30 days of receipt of the notice".1783  In Thailand's view, therefore, appeals against 
guarantee decisions are available before the Thai Tax Court as the issuance of the notice of assessment is only a procedural pre-requisite to bring such appeals to the Tax Court.  As such, unless 
the obligation under Article X:3(b) to maintain independent tribunals for the purpose of prompt 
review requires WTO Members to provide importers  with "independent and immediate" rights to 
appeal, the Philippines' claim must fail.
1784 
7.1065  Thailand argues that Article X:3(b) does not require that WTO Members provide "immediate 
and independent" rights of appeal to affected importers.1785  Rather, the WTO Members are permitted 
to impose requirements to await the completion of  internal proceedings and the exhaustion of 
alternative remedies before rights of appeal can be  exercised.  Thailand counters that an appeal under 
Article X:3(b) needs not be "immediate" as the Philippines argues, but only "prompt".1786  W T O  
Members often require the exhaustion of internal ad ministrative procedures before an appeal can be 
lodged against administrative decisions.  In this re gard, Thailand can lawfully require that a notice of 
assessment be issued and appealed before guara ntee decisions are reviewed by the Tax Court.1787 
7.1066  Furthermore, Thailand submits that there are very strong policy reasons why Article X:3(b) 
should not be considered as requiring Members to pr ovide an immediate right of appeal against the 
imposition of guarantees.  Thailand draws on the curre nt dispute to underline two elements in this 
regard: first, the right of the importer to withdr aw the goods pending customs value determinations 
would be impaired, which would be  contrary to Article 13 of the Customs Valuation Agreement; and, 
second, the judicial authorities would, in effect, pre-empt the authority of the customs administration 
in the area of customs valuation as the judicial  authorities would be required to consider the 
appropriate customs value of the goods at the same  time or even before the customs administration 
had addressed or resolved the issue.1788  
7.1067  The Philippines argues that in many cases, a guarantee will be revoked when goods are 
finally assessed, and domestic courts may not wish to  rule upon such a measure at that stage of the 
process.1789  The Philippines argues that, in any event, Thailand does not provide for prompt appeals 
of guarantee decisions as there is no timeframe governing the issuance of notices of assessment, 
which recently took up to 10 months.1790  Because, as described by Thailand, the issuance of a notice 
                                                      
1782 Exhibit PHL-182, para. 10.3; Exhibit PHL-20, Customs Act section 112 octuordecies  states "the 
Appellant has the right to appeal [in front of the tax court] a decision of the Appeals Committee, [i.e. the BoA]". 
1783 Exhibit PHL-183, Philippines' response to Panel question No. 4.1. 
1784 Thailand's second oral statement, para. 100. 
1785 Thailand's second written submission, paras. 233-236; second oral statement, para. 101. 
1786 Thailand's second written submission, para. 233. 
1787 Thailand's second written submission, para. 234. 
1788 Thailand's response to Panel question No. 89. 
1789 Philippines' second written submission, para. 304. 
1790 Philippines' first written submission, para. 107; Exhibit PHL-27, rows 128-132, for shipments 
entered on 3, 10 and  17 September 2007.  WT/DS371/R 
 Page 387 
 
 
  of assessment is a procedural pre-requisite to th e examination of guarantee decisions by the Tax 
Court, no prompt appeal right is provided to the importer.1791 
7.1068  Moreover, according to the Philippines, the policy reasons put forw ard by Thailand are 
unconvincing: neither the right of the Thai admi nistration to impose guarantees under Article 13 of 
the Customs Valuation Agreement nor the Thai Customs' responsibility in determining customs 
values would be defeated.  Subjecting the guaran tees to review would only ensure that those 
prerogatives and rights are carried out in accordance with WTO law.1792   
(ii) Analysis by the Panel 
7.1069  The Philippines claims that Thailand fails to maintain tribunals or procedures for prompt 
review of guarantee decisions inconsistently with Article X:3(b) of the GATT 1994.  Thailand argues 
that the Philippines' claim must fail as under the Thai System, guaran tee decisions are challengeable 
before the Thai Tax Court.   
7.1070  At the outset, we note that the parties do not dispute that the Thai Administrative Court does 
not have jurisdiction over Thai Customs' guarantee  decisions.  Though Thailand initially argued that 
an appeal can be brought before the Administrativ e Court regarding guarantee decisions. It, however, 
acknowledged later in the proceeding after the Philippines' reference to the Thai Supreme 
Administrative Court's ruling to this effect that its initial view is not endorsed by the Thai 
Administrative Court.  The ruling provides, in relevant part: 
"Once the Plaintiff considered the Notifica tion or order unlawful, it shall be deemed 
to be an appeal against the decision of the official under the law relating to taxation, 
which is under the jurisdiction of the Tax Court pursuant to Section 7 (1) of the Tax 
Court Act and not within the jurisd iction of the Administrative Court  pursuant to third 
paragraph of Section 9 (3) of the Admin Court Act."1793 
7.1071  As such, the question of whether independent  tribunals or procedures are available in 
Thailand for the prompt review and correction of guara ntee decisions is linked to two questions:  first, 
whether Thailand maintains an independent tribunal or procedur e for the prompt review of guarantee 
decisions.  The main contention between the parties w ith respect to this question is whether importers 
can appeal guarantee decisions either directly or i ndirectly to the Thai Tax Court; and, second, if so, 
whether the existing right of appeal ag ainst guarantee decisions provides for a prompt  review and 
correction of guarantee decisions. 
7.1072  In examining the first question, we understand the Philippines' claim to be that no right of 
appeal against a guarantee decision exists independe ntly from a notice of assessment.  In other words, 
the Philippines is not arguing that guarantee decision s can never be challenged before an independent 
tribunal.  Particularly, in the light of the Phili ppines' statements in the course of the proceeding1794, 
                                                      
1791 Philippines' second written submission, para. 304; combined responses to Panel questions Nos. 87 
and 89. 
1792 Philippines' second written submission, paras. 313-314. 
1793 Exhibit PHL-133. Supreme Administrative Court Case No 417/2550 (2007), PM Thailand Ltd- 
Customs and Excise Departments .  
1794 Philippines' second written submission, paras. 302-303. The Philippines considers that providing an 
appeal against a guarantee decision together with the final customs determination is insufficient because: (i) if 
the guarantee is fixed at a sufficiently high level, th ere may never be an assessed customs value because goods 
may not be cleared.  In this situation, no remedy w ould be available against guar antees entirely foreclosing 
market access; (ii) even when some imports occur, a guarantee may undermine co mpetitive opportunities, as 
[t]he delay before an assessed customs value is issued can run to many months – as this dispute shows – with WT/DS371/R 
Page 388  
 
  considered in conjunction with the relevant cour t decisions and expert opinions, the Philippines does 
not appear to be contesting that pursuant to Sec tion 112 of the Customs Act, guarantee decisions can 
be appealed to the Tax Court once a notice of assessment on a final customs value is issued.
1795  
Thailand, however, submits that asi de from this appeal under Section 112 of the Customs Act, a direct 
appeal to the Thai Tax Court is also available to the importers against guarantee decisions by virtue of 
Section 7(4) of the Tax Court Act.1796 
7.1073  Based on the evidence before us, we find that gua rantee decisions can be appealed to the Thai 
Tax Court once the importer has been provided with a notice of assessment regarding a final customs value of the good concerned.  In respect of app eals against notices of assessment, however, we recall 
that under Thai law, an importer must lodge its complaint against a notice of assessment first to the 
BoA for it to be able to bring its appeal to the Tax C ourt.  Therefore, to the extent that an appeal of a 
guarantee decision is also conditioned upon the issuan ce of a notice of assessment, the same process is 
equally applicable to the appeal  process for a guarantee decision.
1797 
7.1074  Thailand, however, takes th e position that direct appeals against guarantee decisions 
independently of final customs value decisions are al so available before the Tax Court by virtue of 
Section 7(4) of the Tax Court Act.1798  In this connection, Thailand relies on two pieces of evidence to 
demonstrate that guarantee decisions can be appeal ed to the Tax Court independently of a notice of 
assessment.  First, Thailand submitted a letter from the Attorney General dated August 2009 stating 
that guarantee decisions can directly be appealed to  the Tax Court as they fall within the scope of 
Article 7(4) of the Tax Court Act.1799  Thailand also relies on the Supreme Court decision 
No 819/2540, which also refers to Section 7(4) of the Tax Court Act1800, to support its position that 
guarantee decisions can be appealed to the Ta x Court independently of final customs value 
determinations.   
7.1075  The Philippines argues that the ev idence put forward by Thailand does not show that the Tax 
Court has jurisdiction to review guarantee decisions  independently of final customs value decisions. 
The Philippines submits that the letter from the Atto rney General explaining that Section 7(4) of the 
Tax Court Act provides for a direct appeal against guarantee decisions before the Tax Court 
contradicts the decisions of the Thai Supreme Administrative Court and the Thai Supreme Court.1801  
                                                                                                                                                                     
market access impaired throug hout that time [and] (iii), in many cases, the guarantee will be revoked when 
goods are finally assessed, and domestic courts may not wish to rule upon such a measure. 
1795 Thailand's second written submission, para. 231. Based on the experts' opinions submitted by the 
Philippines, Thailand also notes that "it appears not to be in dispute that importers may challenge guarantees 
after notices of assessment are issued" (Thailand's response to Panel question No. 88)  The affidavit by Mr. P. 
Veraphong also clarifies this point : "In other words, th e importer subject to a guarantee value must (1) wait for 
a definitive assessment notice and (2) obtain a ruling from the Board of Appeals, before he can submit an 
appeal to the Tax Court ." (Exhibit PHL-150, para. 10.3, emphasis added).  
1796 Thailand's response to question No. 167. 
1797 Thailand's second written submission, para. 231, referring to Aekaputra Affidavit, Response to 
Panel question 4.1, Exhibit PHL-183 and Veraphong Affidavit, Response to Question 10, paragraph 10.3, 
Exhibit PHL-182. 
1798 Thailand's response to Panel question No. 167. 
1799 section 7 of the Tax Court Act provides in relevant part: 
"section 7.  The tax courts have jurisdiction over the following civil matters: (1) Cases in respect of appeals against any deci sion of the competent offi cial or the committee 
relating to any taxation law; 
... (4) Cases in respect of debts incurred in connection with obligation made for collecting 
taxes..." 
1800 Exhibit PHL-281. section 7(4) of the Tax Court Act states that tax courts have jurisdiction over 
cases in respect of debts incurred in connectio n with obligation[s] made for collecting taxes. 
1801 Philippines' comments on Thailand's response to Panel question No. 167.  WT/DS371/R 
 Page 389 
 
 
  Similarly, in the Philippines' view, the Thai Supr eme Court decision produced by Thailand to this 
effect has no link to guarantees in the customs context, and rather deals with refunds of company taxes.
1802 
7.1076  We will examine the evidence provided by Tha iland in turn to determine whether direct 
appeals against guarantee decisions independently of final customs value decisions are also available 
before the Tax Court by virtue of Section 7(4) of th e Tax Court Act.  First, Thailand refers to a letter 
from the Attorney General dated August 2009.  The le tter shows that the Attorney General Office's 
opinion was provided upon request from the Custom s Department regarding the importers' right of 
appeal against a guarantee decision.  In relevant part, the letter states: 
"Office of the Attorney General is of the opinion that an importer has two options to 
appeal regarding a guarantee placement orde r made by the Customs official under the 
law.  First option, appeal such order to the Customs officials, as the appeal to an 
administrative order under Article 44 of th e Administrative Procedure Act B.E. 2539, 
if not satisfied, an importer is entitled to bring the case to the Tax Court, since such 
claim is considered to be a case in resp ect to appeal against any decision of any 
competent officials relating to taxation that is under Article 7(1) of the Establishment 
of Tax Court and Tax Court Procedure Act B.E. 2528.  Second option, an importer 
may bring the case to the Tax Court directly, since this matter is considered to be a 
dispute case in respect to rights or duties under an obligation made for tax collection's purpose under Section 7(4) of the Esta blishment of Tax Court and Tax Court 
Procedure Act B.E. 2528.  Therefore, it can be concluded that Thai law has already 
provided fair channels for an importer to appeal regarding guarantee placement 
order."
1803 
7.1077  Therefore, according to the letter, the Office of  the Attorney General is of the opinion that 
guarantee decisions can be directly appealed to the Tax Court as those decisions fall within the scope 
of Article 7(4) of the Tax Court Act.   
7.1078  The Philippines, however, points to the decision of the Thai Supreme Court, which, in its 
view, contradicts the Attorney General's opinion as provided in the letter.1804  In 1989, the Thai 
Supreme Court held: 
"In the case of the requirement of the guara ntee by the competent official according 
to Section 112, if the Court allows the Pl aintiff to file the lawsuit [against the 
guarantee] such as in this case, ... before the Defendant's competent officer assessed 
the duty and notified the Plaintiff, it would cu rtail the power of the competent official 
to assess the duty pursuant to Section 112 bi s, paragraph one and would completely 
curtail the right of the Plaintiff to appeal  against such assessment. ... [I]n this case, 
because the Defendant's competent official had not yet assessed the duty and notified the Plaintiff to pay the duty pursuant to Section 112 bis, paragraph one, the Defendant 
has not according to Section 55 of the Ci vil Procedure Code infringed upon the right 
                                                     
 
1802 Philippines' comments on Thailand's response to Panel question No. 167; Exhibit THA-101. 
1803 Exhibit THA-91. 
1804 The Philippines' comments on Thailand's response to Panel question No. 167.  As described in 
paras. 7.1054-7.1060, the Philippines also referred to the decisions of the Thai Administrative Court and the 
Thai Supreme Administrative Court in which it was clarified that the Thai Administrative Court did not have 
jurisdiction over guarantee decisions.  We note, however, that the Thai Supreme Administrative Court was of 
the view that guarantee decisions were a subject matter that falls within the scope of jurisdiction of the Thai Tax 
Court. WT/DS371/R 
Page 390  
 
  or duty of the Plaintiff and, therefore, the Plaintiff has no power to file such lawsuit in 
this case."
1805 
7.1079  In this connection, we also note expert opinions submitted by the Philippines.  In his 
commentary to this Thai Supreme Court decision, Professor Asawaroj underlines that at the time of 
writing (2006), "a lawsuit could no t be brought unless the importer or the exporter has first appealed 
the assessment of the comp etent official to the Board of Appeal pursuant to Section 112 sexies".1806  
Further, Mr Piphob Veraphong provides the view that the Customs Act does not directly provide a process for challenging the guarantees.
1807 
7.1080  Moreover, the Philippines refers to the 1991 Thai  Supreme Court decision in which the Court 
addressed a criminal case involving false customs value declaration under the Customs Act.  The 
company concerned initially brought the case before the Tax Court to recover the guarantee pending 
the finalisation of the criminal prosecution.1808  In relevant part of the decision, the Supreme Court 
states: 
"[I]n order to wait for the results of the crim inal case to be finalised, the Defendant  
[DG Customs] has not issued the notice of asse ssment to notify the plaintiff.  As such, 
the plaintiff did not have the right to request the defendant to return the cash 
guarantees or bank guarantees to the plaintiff."1809 
7.1081  We consider that the Thai Supreme Court decisi ons cited above clarify the Court's view that 
importers do not have the right to appeal guarantee decisions to the Thai Tax Court independently of 
the issuance of a notice of assessment.  Both Suprem e Court decisions indicate that the issuance of a 
notice of assessment is a prerequisite for acquiring th e right to appeal an administration's decision.  
Although Thailand put forward the opinion of the Office of the Attorney General in this regard, which 
differs from the rulings in the Supreme Court's deci sions, we are not in a position to blindly accept 
such an opinion in the absence of a specific and convincing explanation by Thailand on how such an 
opinion should supersede or can be reconciled with the Supreme Court decisions. 
7.1082  Thailand also refers to the Thai Supreme Cour t decision in which the Court rules that Thai 
Customs could  bring a case against a company before th e Tax Court for the purpose of obtaining a 
corporate tax refund.  According to Thailand, because both the customs guarantee and the refund of 
company taxes are "conditional" obligations1810, the Supreme Court's ruling on the competence of the 
Tax Court to hear a tax refund case is equally appli cable to appeals against guarantee decisions.  The 
Supreme Court's ruling as relied upon by Thailand, however, does not appear to present the set of 
circumstances that would prove th at the ruling is equally applicab le to Thai Customs' guarantee 
decisions.  As the Philippines points out, we do not see how the Thai Supreme Court decision on a tax 
refund dispute as cited by Thailand can effectivel y be linked to the importers' right to appeal 
guarantees in the customs context despite the Supreme Court's previous ruling to the contrary on the 
latter question. 
7.1083  Therefore, we are not presented with sufficien t evidence to conclude that a guarantee decision 
can be appealed to the Thai Tax Court independently  of the notice of assessment.  This raises the 
                                                      
1805 Philippines' first oral statement, para. 152, re ferring to the Supreme Court Case No. 509/2532 
(1989),  S.K.W. Steels Product Co., Ltd., - Customs Department , p. 2  (Exhibit PHL-136).  
1806 Professor Chuchart Asawaroj, Collection of Customs Law and Law relating to Customs Tariff , p. 4 
(Duentula Publishing House, Bangkok, 2006) (Exhibit PHL-135).  
1807 Exhibit PHL-182, para. 10.3. 
1808 Philippines' comments on Thailand's response to Panel question No. 167. 
1809 Supreme Court Decision 119/2534, (1991) Saereewattana Industry Co., Ltd v. Customs 
Department, (Exhibit PHL-288).  
1810 Thailand's response to Panel question No. 167.  WT/DS371/R 
 Page 391 
 
 
  question of whether the availability of appeals agains t a guarantee before the Thai Tax Court after an 
initial review by the BoA upon the issuance of the no tice of assessment satisfies the requirement to 
provide for the prompt review by an independent body within the meaning of Article X:3(b). 
7.1084  The Philippines claims that Thailand does not provide for prompt appeals of guarantee 
decisions as there is no time-frame governing the issuance of Notices of As sessment, which recently 
took up to 10 months.  Thailand argues that Article X:3(b) does not require that WTO Members 
provide "immediate and independent" rights of appeal to affected importers.   
7.1085  We noted above that the term "prompt" was defined as " adjective. 2 Of action, speech, etc.: 
ready, quick; done, performed, etc., without delay".1811  In the context of Article X:3(b), Members are 
required to maintain the internal review system "for the prompt review and correction of 
administrative action relating to customs matters".  Considered in its context, therefore, the word 
"prompt" concerns the review  as well as the correction of administrative actions.   
7.1086  We have found that a guarantee could, de pending on the situation, bring about a heavy 
financial burden on importers.  This  was shown in the situation where PM Thailand, for example, was 
not able to post guarantee amounts necessary to withdraw the imported cigarettes pending final 
determination of a customs value due to an unusua lly high level of guarantee amount set by Thai 
Customs.1812  Given the possibility that a guarantee immediately and adversely may affect the 
importers' ability to withdraw imported goods , the obligation imposed on Members under 
Article X:3(b) must be interpreted such that an appeal mechanism maintain ed by a Member enables 
the concerned administrative action to be promptly reviewed and corrected.  Whether a Member's 
appeal system maintained pursuant to Article X:3(b)  provides for the prompt review and correction of 
an administrative action as required under Article X: 3(b), in our view, therefore would have to be 
considered, inter alia , in the light of the nature of the specific administrative action concerned.1813   
7.1087  In challenging a guarantee decision, an impor ter seeks to have the amount of a guarantee 
reviewed and, if warranted by the circumstances,  revised downwards, for example, to the level in 
line with the value of the imports and similar im port, so as to enable it withdraw the goods from 
customs.  Considered in the light of this, if a sy stem does not make available the review of a guarantee 
decision until the final determination has made in respect of a customs value, an importer can face a 
situation where it will not be able to withdraw imported goods due to a guarantee value set at an 
excessively high level.  In our view, this is not comp atible with the obligation under Article X:3(b) to 
maintain independent tribunals for the prompt review of the concerned administrative action.   
VIII.  CONCLUSIONS AND RECOMMENDATIONS 
8.1 We first summarize our conclusions on the part ies' claims on the scope of our terms of 
reference in this dispute.  For the reasons set  forth in Section VII.B.1, we conclude that: 
                                                      
1811 The New Shorter Oxford English Dictionary ,  (Fifth Edition) Oxford Univer sity  Press, Vol. I, p.  
2366 (2002). 
1812 Philippines' combined response to Panel question Nos. 87 and 89. 
1813 In this regard, we note the statement by the Ap pellate Body that the word "immediately" in 
Article 12.1 of the Agreement on Safeguards must be given meaning on a case by case basis. (Appellate Body 
Report, US – Wheat Gluten , para. 105, "As regards the meaning of th e word "immediately" in the chapeau to 
Article 12.1, we agree with the Panel that the ordinary meaning of the word "implies a certain urgency". The 
degree of urgency or immediacy requ ired depends on a case-by-case assessment, account being taken of the 
administrative difficulties involved in preparing the notifi cation, and also of the character of the information 
supplied. As previous panels have recognized, relevant factors in this regard may include the complexity of the 
notification and the need for translation into one of the WTO's official languages. Clearly, however, the amount of time taken to prepare the notification must, in all cases, be kept to a minimum, as the underlying obligation is 
to notify "immediately".) WT/DS371/R 
Page 392  
 
  (a) the Philippines' claim under Article X:3(a) w ith respect to the Thai VAT system is 
outside the Panel's terms of reference because the Philippines failed to plainly 
connect the challenged measure with Ar ticle X:3(a) in its panel request;  
(b) the Philippines' claim under Article X:3(a) with respect to the excise, health and 
television taxes are within the Panel's terms of reference; 
(c) Thai Customs' valuation determinations for the imported cigarettes at issue that were 
cleared between 11 August 2006 and 13 September 2007 are within the Panel's terms 
of reference and appropriately presented for the Panel's examination; and 
(d) the December 2005 MRSP Notice, the September 2006 MRSP Notice, the 
March 2007 MRSP Notice, and the August 20 07 MRSP Notice are within the Panel's 
terms of reference. 
8.2 With respect to the Philippines' claims under the Customs Valuation Agreement, we conclude 
that: 
(a) Thailand does not maintain or apply a gene ral rule requiring the rejection of the 
transaction value and the use of the deductive valuation method; 
(b) Thailand's rejection of PM Thailand' s declared transaction values for the 
[[xx.xxx.xx]] entries at issue is inconsistent with Articles 1.1 and 1.2 ; 
(c) Thailand acted inconsistently with Articl e 1.2(a) by failing to communicate within 
the meaning of Article 1.2(a) the Thai Customs "grounds" for considering that the 
relationship between PM Thailand and PM  Philippines influenced the price; 
(d) Thailand acted inconsistently with Article  16 by failing to provide an adequate 
explanation on how Thai Customs determined the customs values for imported 
cigarettes; 
(e) Thailand acted inconsistently with Article  7.1 by improperly assessing the deductive 
value of the imported cigarettes concerned;  
(f) Thailand acted inconsistently with Artic le 7.3 by failing to properly inform 
PM Thailand in writing of the customs value determined under Article 7 and the 
method used to determine such value; and 
(g) Thailand acted inconsistently with Artic le 10 by disclosing confidential customs 
valuation information provided by PM Thailand to Thai Customs in the Thai media. 
8.3 With respect to the Philippines' claims under the GATT 1994, we conclude that:  
(a) regarding the determination of the MRSPs for VAT on imported cigarettes, Thailand 
acted inconsistently with Article III:2,  first sentence by subjecting imported 
cigarettes to a VAT liability in excess of that  applied to like domestic cigarettes with 
respect to the MRSPs for the December 2005 MRSP Notice, the September 2006 MRSP Notice, the March 2007 MRSP Notice, and the August 2007 MRSP Notice; 
(b) regarding the VAT exemption for domestic cigarette resellers, Thailand acted 
inconsistently with Article III:2, first sen tence by subjecting imported cigarettes to a  WT/DS371/R 
 Page 393 
 
 
  VAT liability in excess of that applied to  like domestic cigarettes by granting the 
exemption from the VAT liability only to domestic cigarettes resellers; and 
(c) regarding the VAT exemption for domestic cigarette resellers, Thailand acted 
inconsistently with Article III:4 by subj ecting imported cigarettes to less favourable 
treatment compared to like domestic cigarettes by imposing additional administrative 
requirements, connected to VAT liabilities, on imported cigarette resellers. 
8.4 With respect to the Philippines' claims under Ar ticle X of the GATT 1994, we conclude that: 
(a) Thailand acted inconsistently with Artic le X:1 of the GATT 1994 for failing to 
publish the methodology used to determine the tax base for VAT; 
(b) Thailand did not act inconsistently with  Article X:1 by failing to publish the 
methodology and data necessary to determine ex factory prices for domestic 
cigarettes; 
(c) Thailand acted inconsistently with Artic le X:1 of the GATT 1994 by failing to 
properly publish the gene ral rule pertaining to the release of guarantees; 
(d) Thailand did not act inconsistently with  Article X:3(a) by appointing certain 
government officials to the Board of Directors for TTM; 
(e) Thailand acted inconsistently with Article X:3(a) because of the delays caused in the 
BoA decision-making process; 
(f) Thailand acted inconsistently with Article X:3(b) by failing to maintain or institute 
independent review tribunals or processe s for the prompt review of customs 
valuation determinations; and  
(g) Thailand acted inconsistently with Article X:3(b) by failing to maintain or institute 
independent review tribunals or pro cess for the prompt review of guarantee 
decisions. 
8.5 Regarding the Philippines' claim under Article 4 of the Customs Valuation Agreement, we 
conclude that the Philippines' claim cannot form part of the Philippines' request for findings and 
recommendations because the Philippines' request was not made in a timely manner.  
8.6 We conclude that the Philippines' sequenc ing claim under Article 7.1 of the Customs 
Valuation Agreement cannot form part of the Ph ilippines' request for findings and recommendations 
because it was not presented in a timely manner.  We also consider that Article 7.1 of the Customs 
Valuation Agreement does not constitute the basi s for an independent sequencing claim under the 
Customs Valuation Agreement.  
8.7 Under Article 3.8 of the DSU, in cases where there is an infringement of the obligations 
assumed under a covered agreement, the action is considered prima facie to constitute a case of 
nullification or impairment.  The Panel concludes that , to the extent that the measures listed above are 
inconsistent with the Customs Valuation Agre ement and the GATT 1994, they have nullified or 
impaired benefits accruing to the Philippines under those Agreements. 
8.8 Accordingly, the Panel recommends that the Dispute Settlement Body request Thailand to 
bring these inconsistent measures as  listed above into conformity with its obligations under the 
GATT 1994 and the WTO Agreement.  Regarding our findings in paragraphs 7.509-7.566 above in WT/DS371/R 
Page 394  
 
  respect of the September 2006 MRSP Notice, th e March 2007 MRSP Notice, and the August 2007 
MRSP Notice, as explained in paragraph 6.24 of the In terim Review section, it is not entirely clear to 
us whether and, if so, to what extent, these MR SP Notices will have effects on the subsequent MRSP 
Notices.  Our recommendations with respect to th ese MRSP Notices, therefore, apply only to the 
extent they continue to have effects.  We  do not make a recommendation for the December 2005 
MRSP Notice as it is not disputed that it has expired and does not continue to exist for purpose of 
Article 19.1 of the DSU. 
  WT/DS371/R 
 Page 395 
 
 
 
 ANNEX A-1 
 
 
WORKING PROCEDURES FOR THE PANEL 
  
1. The Panel will provide the parties to the di spute (hereinafter "parties") and third parties 
(hereinafter "third parties") with a timetable fo r panel proceedings and shall follow the relevant 
provisions of the Dispute Settlement Understanding (DSU).  In addition, the following working 
procedures shall apply. 
 
2. The Panel shall meet in closed session.  The pa rties, and the third parties, shall be present at 
the meetings only when invited by the Panel to appear before it.  3. The deliberations of the Panel and the documen ts submitted to it shall be kept confidential.  
Nothing in these procedures shall preclude parties or  third parties from disclosing statements of their 
own positions to the public, provided that such party or third party does not thereby disclose any confidential information from the other party or th ird parties.  Parties shall treat as confidential 
information submitted by the other party or third pa rty to the Panel where such information has been 
so designated.  As provided in Article 18.2 of the DSU, where a party to a dispute submits a 
confidential version of its written submissions to th e Panel, it shall also, upon request of a Member, 
provide a non-confidential summary of the informa tion contained in its subm issions that could be 
disclosed to the public. Non-confidential summaries sh all normally be submitted no later than one (1) 
week  after the written request is presented to the Pa nel, unless a different deadline is granted by the 
Panel where good cause is shown.   
4. The Panel has adopted additional procedures for the protection of certain BCI  as an annex to 
these working procedures, taking into account the procedures proposed by the parties and their 
comments on each other's proposals.   5. Before the first substantive m eeting of the Panel with the parties and third parties, the parties 
shall transmit to the Panel written submissions in which they present the facts of the case and their 
arguments.  The third parties may transmit to the Panel written submissions, but only after the first 
written submissions of the parties have been submitted.  6. At its first substantive meeting with the par ties, the Panel shall ask the Philippines and then 
Thailand to present their cases.   
 
7. All third parties shall be invited to present th eir views during a session of the first substantive 
meeting of the Panel set aside for that purpose.  All such third parties may be present during the 
entirety of this session.  Each party and third party shall serve its written submissions made in advance of the first substantive meeting of th e Panel on the other party and third parties. 
 
8. Formal rebuttals shall be made at the second substantive meeting of the Panel.  Thailand shall 
have the right to take the floor first to be followe d by the Philippines.  The parties shall submit, prior 
to that meeting, written rebuttals to the Panel.  9. The Panel may at any time put questions to the parties and third parties and ask them for 
explanations either during the course of a meeting w ith the parties and third parties or in writing.  
Written replies to questions sha ll be submitted in accordance with the timetable established by the 
Panel.  Third parties shall not be permitted to ask ques tions to the parties or to the other third parties. 
 WT/DS371/R 
Page 396  
 
  10. The parties and any third party invited to pr esent orally their views to the Panel shall make 
available to the Panel and to the other party, an d where appropriate to the third parties, a written 
version of their oral statements by 5:30 pm of the first working day following the last day of the substantive meetings in which the statement was ma de.  The parties and third parties are encouraged 
to provide a provisional written version of their oral statements at the time the oral statement is 
presented.   
 11. The parties and third parties shall make all s ubmissions in an official WTO language. Where  
the original language of exhibits or of text quoted in the submissions or responses to questions is not 
an official WTO language, the party or third party sha ll submit the original language version of that at 
the same time.  In the case of exhi bits, parties may submit them in the original language provided that 
a translated version in an official WTO language is  submitted at the same time.  The Panel may grant 
extensions of time for the translation of such e xhibits into an official WTO language where good 
cause is shown.  
12. Any objection as to the accuracy of a transla tion should be raised in writing and at the earliest 
possible moment, preferably no later than the next re gular filing or meeting (whi chever occurs earlier) 
following the submission which contains the tran slation in question.  Any objection shall be 
accompanied by a detailed explanation of the grounds  of objection and an alternative translation. 
 13. The presentations, rebuttals and statements referr ed to in paragraphs 5, 6, 7 and 8 shall be 
made in the presence of the parties.  Moreover, each party's written submissions, written answers to 
questions and comments thereon, co mments on the descriptive part of  the report, and written request 
for review of precise aspects of the Interim Pane l Report and comments on the other party's request 
shall be made available to the other party a nd, where appropriate, to the third parties. 
 
14. Any request for a preliminary ruling (including  rulings on jurisdictional issues) by the Panel 
shall be submitted at the earliest possible moment, a nd in any event no later than in a party's first 
written submission.  If a party requests such a preliminary ruling, the other party shall submit its response to such request within a time limit specified  by the Panel.  Exceptions to this procedure will 
be granted where good cause is shown.  
15. The parties shall submit all factual evidence to  the Panel no later than the first substantive 
meeting, except with respect to factual evid ence necessary for purposes of rebuttals, answers to 
questions or comments on answers provided by each other.  Exceptions to this procedure will be 
granted where good cause is shown.  In such cases, th e other party shall be accorded a period of time 
for comment, as appropriate. 
 
16. To facilitate the maintenance of the record of the dispute, and for ease of reference to exhibits 
submitted by the parties, the parties are requested to  number their exhibits sequentially throughout the 
stages of the dispute.  For example, exhibits submitted by the Philippines could be numbered PHI-1, 
PHI-2, etc, and exhibits submitted by Thailand co uld be numbered THA-1, THA-2, etc.  If, for 
example, the last exhibit in connection with the fi rst submission was numbered PHI-5, the first exhibit 
of its next submission thus  would be numbered PHI-6. 
 17. The parties and third parties shall submit executive summaries of their written submissions 
(excluding any separate requests for a preliminary ruling and responses thereto) and oral statements within twenty days of the original submission or  statement concerned.  Each executive summary of 
the written submissions to be provided by each pa rty shall not exceed 10 pages in length and each 
executive summary of the oral statements shall not  exceed 5 pages in length.  The summary to be 
provided by each third party shall not exceed 5 pag es.  The Panel may revise these page limits upon 
request of a party.  Paragraph 22 shall apply to the service of  executive summaries. 
  WT/DS371/R 
 Page 397 
 
 
 
 18. The executive summaries shall not in any way ser ve as a substitute for the submissions of the 
parties and third parties in the Panel's examination of the case.  However, the Panel intends to use 
them solely for the purpose of preparing the descriptiv e part of its report, subject to any modifications 
deemed appropriate by the Panel.  The replies of the parties and third parties to questions and the 
parties' comments on each other's replies to quest ions will not be attached to the Panel report as 
annexes.  They will be reflected in the findings sec tion of the Panel report where relevant.  The parties 
may, however, make a request in their comments on th e descriptive part of the report for the inclusion 
in that part of their replies to questions and/or th eir comments on each other's replies to questions.  In 
making such request(s), the parties shall specify th e precise parts of their replies and/or comments on 
each other's replies that they wish to have include d in the specific sections of the descriptive part. 
 
19. The parties and third parties to these proceed ings have the right to determine the composition 
of their own delegations.  The parties and third pa rties shall have responsibility for all members of 
their delegations and shall ensure that all member s of their delegations act in accordance with the 
rules of the DSU and the Working Procedures of this  Panel.  The parties and the third parties shall 
provide a list of the participants of their delegatio n at least one day before each meeting, to the 
Secretary of the Panel, Mrs. Tessa Bri dgman (e-mail: tessa.bridgman@wto.org). 
 20. Following issuance of the Interim Panel Report,  the parties shall have three weeks to submit 
written requests to review precise aspects of the Inte rim Panel Report and to request a further meeting 
with the Panel.  The right to request such a mee ting must be exercised no later than at the time the 
written request for review is submitted.  Following r eceipt of any written requests for review, in cases 
where no further meeting with the Panel is request ed, the parties shall have the opportunity within 
one-and-a-half weeks to submit written comments on the other party's written request for review.  
Such comments shall be strictly limited to responding  to the other party's written request for review.  
The parties are also reminded that the Interim Panel Report shall be kept strictly confidential and shall 
not be disclosed. 
 21. The Panel will do its utmost to provide the par ties with electronic versions of the descriptive 
part of its report, its Interim Panel Report and its final report.  Hard copies will be provided to the 
parties in any event.  In case of inconsistency be tween the electronic and hard copy version of these 
documents, the hard copy version shall prevail. 
 
22. The following procedures regarding service of documents apply:   (a) Each party and third party shall serve its written submissions (including any separate 
requests for preliminary ruling and res ponses thereto), executive summaries and 
written versions of oral statements, dir ectly on the other party, including, where 
appropriate, the third parties, and confirm it has done so at the time it provides its 
submissions to the Panel. 
  (b) The parties and third parties should provide the Panel and the other party with their 
submissions, written answers to questions and comments invited by the Panel by 
5:30 p.m.
 of the date referred to in the dead lines established by the Panel, unless a 
different time is set by the Panel. 
  (c) The parties and third parties shal l provide the Panel with 10 hard copies
 of all their 
submissions.  All these copies shall be file d with the Dispute Settlement Registrar, 
***** ***** (office 2052). 
  (d) At the time they provide a hard copy of  their submissions, the parties and third parties 
shall also provide the Panel with electr onic copies of all their submissions on a WT/DS371/R 
Page 398  
 
  diskette or as an e-mail attachment in a format compatible with the Secretariat's 
software.  E-mail attachments shall be sent to the Dispute Settlement Registry 
(DSRegistry@wto.org) with a copy to ***** ***** (e-mail: *** **.*****@wto.org) 
and ***** ***** (e-mail: *****.*****@wto.org).  If the electronic version is provided by diskette or CD, four c opies should be delivered to ***** ***** 
(office 2052). 
 23. The Panel reserves the right to modify these procedures at any time following consultations 
with the parties.  
_______________  WT/DS371/R 
 Page 399 
 
 
 
 Annex 
  
ADDITIONAL PANEL WORKING PROCEDURES  
CONCERNING BUSINESS CONFIDENTIAL INFORMATION  
 
 
The following procedures apply to all business confid ential information (BCI) submitted in the course 
of the Panel process.  These procedures are inte nded to supplement but not replace the provisions of 
Article 18.2 of the DSU. 
 
1. BCI is defined as financially or commercially  sensitive information submitted to the Panel in 
the course of these proceedings that is (i) not otherw ise available in the public domain, and (ii) clearly 
designated as BCI  by the Philippines or Th ailand in their submissions to the Panel. 
 
2. Access to BCI shall be restricted to Appr oved Persons.  No later than Monday, 16 March 
2009 (close of business, Geneva time) , each Party shall submit to the other Party, and to the Panel a 
list of Approved Persons including the job title of the listed persons.  This list shall also include any 
outside legal advisers in the delegations of the pa rties as well as clerical or support staff who need 
access to BCI submitted by the other Party and/or Th ird Parties.  In no circumstances shall persons 
that serve, on a permanent, part-time or occasional basis, as an employee, officer or agent of an 
enterprise, including a State-owned enterprise, engage d in the production, distribution, export, import 
or sale of the products concerned in this dis pute be included among the Approved Persons.  Each 
Party shall keep the number of Approved Persons as limited as possible.    3. Unless a Party objects to the designation of an individual as an Approved Person by 
Wednesday, 18 March 2009 (close of business, Geneva time)
, the Panel shall designate these 
individuals as Approved Persons.  Where a Party objects, the Panel shall decide on the objection 
promptly.  4. An objection may only be based either on th e failure to exclude from the list of Approved 
Persons an employee, officer or agent of an enterp rise, including a State-owned enterprise, engaged in 
the production, distribution, export, import or sale of  the products concerned in this dispute or on a 
conflict of interest.  5. The Parties may submit amendmen ts to their lists at any time. 
 
6. Nothing in these procedures shall be construed as limiting the right of government officials of 
either party to have access to information submitte d to a government prior to the establishment of the 
Panel and reviewed by those officials in the normal course of their duties.  7. Nothing in these procedures shall be constr ued as limiting the access of Panel members or 
employees of the Secretariat to BCI submitted during these proceedings. 
 
8. Only designated representatives of Third Pa rties may have access to BCI.  Such access shall 
be restricted to Parties' submissions for the first me eting of the Panel, and shall be used solely for the 
purpose of preparing third party submissions and oral  statements in the dispute.  The Third Parties 
will provide the name(s) and title(s) of the designated representative(s) to the Parties and the Panel no 
later than Monday, 16 March 2009 (close of business, Geneva time)
.  The procedures of paragraphs 2, 
3, 4 above shall apply mutatis mutandis with respect to third parties.  WT/DS371/R 
Page 400  
 
  9. A Party or Third Party submitting BCI in any written submission (including in any exhibits) 
shall mark the cover and/or first page of the document containing any such information with the 
words "Contains Business Confidential Information" .  The specific information in question shall be 
enclosed in double brackets, as follows: [[xx.xxx.xx]] and the notation "Contains Business Confidential Information" shall be marked at the top of each page containing the BCI.  A non-
confidential version, clearly marked as such, of any written submission (including any exhibits) 
containing BCI, shall be submitted to the Panel with in three working days after the submission of the 
confidential version containing the BCI.  In the case of  an oral statement containing BCI, the Party or 
Third Party making such a statement shall inform the Panel before commencing that the statement 
will contain BCI, and the Panel will ensure that only persons authorized to have access to BCI 
pursuant to these procedures are in the room to hear that statement.  A written non-confidential 
version of an oral statement containing BCI sha ll be submitted within two working days after the 
statement has been made.  Non-confidential versi ons of both oral and written statements, including 
exhibits, shall be redacted in such a manner as to  convey a reasonable understanding of the substance 
of the BCI deleted therefrom.  
 
10. Any BCI information that is submitted in bina ry-encoded form shall be clearly marked with 
the statement "Business Confidential Information" on a label on the storage medium, and clearly 
marked with the statement "Business Confidentia l Information" in the binary-encoded files. 
 11. As required by Article 18.2 of the DSU, a Party or Third Party having access to BCI 
submitted in this Panel process shall treat it as conf idential and shall not disclose that information 
other than to those persons authorized to receive  it pursuant to these pro cedures.  Any information 
submitted as BCI under these procedures  shall only be used for the purposes of this dispute and for no 
other purpose.  Each Party and Third Party is re sponsible for ensuring that its employees and/or 
outside advisers comply with these procedures to protect BCI.   
 
12. The Panel agrees not to disclose in its Re port any information designated as BCI under these 
procedures.  The Panel may, however, make statem ents of conclusion based on such information. 
 13. After the conclusion of the Panel process, a nd within a period fixed by the Panel, each Party 
shall return all documents in its possession submitte d as BCI in the Panel process to the Party that 
originally submitted the BCI.  Alternatively, a Part y may certify in writing to the other Party that all 
such documents have been destroyed.  The Secr etariat may retain one copy of the documents 
containing the BCI for the archives of the WTO.  14. Submissions containing information d esignated as BCI under these procedures will be 
included in the record forwarded to the Appellate Body in the event of any appeal of the Panel's 
Report.  15. At the request of a Party, the Panel may a pply these procedures or an amended form of these 
procedures, to protect information that does not fall  within the scope of the information set out in 
paragraph 1.  The Panel may, with the consent of  the parties, waive any part of these procedures. 
 
__________