COLOMBIA – INDICATIVE PRICES AND RESTRICTIONS ON PORTS OF ENTRY
Document: Request for Consultations by Panama
Date: 17 July 2007
Document codes: WT/DS366/1; G/L/824; G/VAL/D/9
Complainant: Panama
Respondent: Colombia
Third parties: China, Ecuador, EU, Guatemala, Honduras, India, Taiwan, Turkey, U.S.
Dispute stage: Panel
Agreements cited: Art. 1, 2, 3, 4, 5, 6, 7, 13  Customs valuationArt. VII, VII:1, III:2, X:3(a), XIII:1, V:6  GATT 1994

COLOMBIA – INDICATIVE PRICES AND RESTRICTIONS
ON PORTS OF ENTRY

Request for Consultations by Panama

 The following communication, dated 12 July 2007, from the delegation of Panama to the
delegation of Colombia and to the Chairman of the Dispute Settlement Body, is circulated in
accordance with Article 4.4 of the DSU.

 My authorities have instructed me to requ est consultations with Colombia, pursuant to
Article 4 of the Understanding on Rules and Procedures Governing the Settlement of Disputes
("DSU"), Article XXII:1 of the General Agreement on Tariffs and Trade 1994 ("GATT 1994") and
Article 19.1 and 19.2 of the Agreement on Implementation of Article VII of the GATT 1994
("Agreement on Customs Valuation") with respect to newly enacted Colombian customs regulations
on the importation of certain goods from Panama.

 By way of background, on 20 July 2006, Pana ma requested consultations with Colombia on
the indicative prices for customs valuation purposes for certain goods that originate in and/or are
imported from Panama that resulted in the determ ination and payment of customs duties and other
duties or charges and taxes based on those prices, and not on the valuation methods set out in the
Agreement on Customs Valuation. Panama consid ered that the import regime based on indicative
prices was inconsistent with Colombia's obligations under Articles 1 to 7 and 13 of the Agreement on
Customs Valuation and the General Notes in its Annex I, as well as under Articles XI:1, XIII:1,
II:1(a), II:1(b), X:1, X:3(a) and I:1 of the GATT 1994.

 Furthermore, Panama also requested consultati ons with Colombia on the requirement that all
goods coming from Panama falling under Chapters 50 to 64 of Colombia's Customs Tariff (textile and
footwear products) had to enter Colombia onl y through two designated ports: the Special
Administration for Customs Service at El Dorado Ai rport and the Special Customs Administration at
Barranquilla (the "restrictions on the ports of entry"). Panama considered that this restriction on the
ports of entry was inconsistent with Colombia's obligations under Articles XI:1, XIII:1, V:6 and I:1 of
the GATT 1994. This request was circulat ed to Members on 25 July 2006 as document
WT/DS348/1, G/L/782, G/VAL/D/8.

 Following fruitful consultations on this matter, Panama and Colombia reached an agreement
that involved Colombia's repeal on 1 November 2 006 of the resolutions cited in the request for
consultations. Accordingly, pursuant to Article 3.6 of the DSU, on 1 December 2006, Panama notified
the Dispute Settlement Body that Panama and Colo mbia had reached a mutually agreed solution on
the issues raised by Panama in its request for consultations.

 To Panama's consternation and surprise, howev er, 8 months after Colombia repealed these
resolutions in accordance with the terms of th e mutually agreed solution, Colombia has now
reintroduced similar requirements with respect to i ndicative prices and restrictions on the ports of
entry.

I. INDICATIVE PRICES
 Indicative prices apply to specific goods from all countries except those with which Colombia
has signed free trade agreements. The National Directorate of Taxes and National Customs ("DIAN")
resolutions establishing the mechanism of indica tive prices are Resolutions No. 07509, No. 07510,
No. 07511, No. 07512, No. 07513, as well as No. 07530 of 26 June 2007, and any other related acts,
amendments, or extensions – including related le gislative acts such as Colombia's Customs Code
(Decree No. 2685 of 1999) in particular Titles V and VI, its Regulations (Resolution No. 4240 of
2000) and Colombia's Tax Code (Decreto 624 de 1999) – or any related practices.

 Colombia requires that importers of specific goods pay customs duties and other duties or
charges and taxes based on the indicative prices, ra ther than on the valuation methods set out in
Article VII of the GATT 1994 and the Agreement on Cu stoms Valuation. Panama is challenging the
indicative price measures on an "as such" and "as applied" basis.

 Under Article 128.5(e) of Colombia's Customs Code and Article 172.7 of its Regulations, an
importer declaring a FOB value that is below the indicative price can only obtain the release of its
merchandise if it corrects its import declaration to reflect indicative prices and pays customs duties
and other duties or charges on the basis of the indi cative prices. Article 115 of Colombia's Customs
Code further provides that if an importer refuses to co rrect its declaration in this manner and thus fails
to obtain the release of the merchandise within the custody period, the merchandise shall be
considered as legally abandoned.

 The effect of these provisions is that an importer cannot declare the transaction value but must
instead declare the indicative pri ce as the customs value. As a c onsequence, duties and charges are
assessed on the basis of indicative prices rather than the transaction value. Panama considers that this
is inconsistent with Articles 1 to 7 and 13 of the Agreement on Customs Valuation and the General
Notes in its Annex 1, as well as Article VII of the GATT 1994.

 Colombia's imposition of indicative prices as th e basis for the calculation of customs duties is
likely to result in various instances in the imposition of customs duties in excess of the bound rates of
duty specified in Colombia's schedule. Panama c onsiders that this imposition of duties in excess
of bound rates would be inconsistent with Colombia 's obligations under Article II:1(a) and (b) of the
GATT 1994.

 Moreover, the tax base for the sales tax on impor ted products is based on the indicative price.
1
In contrast, the tax base for the sales tax on the like domestic products is based on the transaction
value.2 The difference in tax bases results in the imposition of a sales tax burden on imported
products higher than that borne by the domestic lik e products, which is inconsistent with Article III:2
of the GATT 1994. In the alternative, this differenc e results in treatment less favourable to imports
than that accorded to domestic like products, within the meaning of Article III:4 of the GATT 1994.

1 Article 459 of Colombia's Tax Code.
2 Article 447 of Colombia's Tax Code.

 Colombia has not published the methodology for the establishment of the indicative prices.
Panama considers that this is inconsistent with Colombia's obligations under Article X:1 of the GATT
1994. Moreover, Colombia's administration of its customs laws and the indicative prices is conducted
in a manner that is inconsistent with its obligations under Article X:3(a) of the GATT 1994.

II. RESTRICTIONS ON THE PORTS OF ENTRY INTO COLOMBIA
 Resolution No. 07373 of 22 June 2007 provides th at all goods classifiable in Chapters 50 to
64 of the Customs Tariff coming from the Free Zone of Colon in Panama shall be entered and
imported exclusively through the jurisdictions of the Special Customs Administration of Bogota and
the Barranquilla Customs Office. This requirement does not apply to goods arriving directly from
third countries. The regulation provides that w ith respect to these goods, the authorization of the
customs transit procedure will not be appropriate. Furthermore, the import declaration applicable to
these imports shall be presented prior to their arri val in the national customs territory but not more
than 15 days in advance. If an importer does not comply with these requirements, it is subject to
special procedures under Colombia's Customs Code, including the detention of goods pursuant to
Article 502 of that Code. In addition, while an importer is normally allowed to correct any
discrepancy between the declaration and the me rchandise actually imported (through a legalization
declaration without the payment of a rescue fee) , the regulation limits this possibility only to
situations where there are differences in the weight per square metre or the width of the cloth and
these do not exceed 7% and 10%, respectively.

 Panama considers that these restrictions, imposed pursuant to the Resolution No. 07373 as
well as any other related acts, amendments, exte nsions, including the relevant provisions of
Colombia's Customs Code and its Regulations, or any related practices, are inconsistent with
Colombia's obligations pursuant to Articles XI:1, XIII:1, V:2, V:6 and I:1 of the GATT 1994.

 Given that the measures at issue are adversel y affecting the entry of Panamanian goods into
Colombia during the busiest period of end-of-year sales, Panama requests to hold consultations within
the time-frame set out in Article 4.8 of the DSU for cases of urgency, that is, within 10 days of receipt
of this request for consultations.

 My authorities look forward to receiving your repl y to this request. I propose that the date and
venue of the consultations be agreed between our missions.