THAILAND – CUSTOMS AND FISCAL MEASURES ON CIGARETTES FROM THE PHILIPPINES
Document: Request for Consultations by the Philippines
Date: 12 February 2008
Document codes: WT/DS371/1; G/L/847; G/VAL/D/11
Complainant: Philippines
Respondent: Thailand
Third parties: Australia, China, EU, India, Taiwan, U.S.
Dispute stage: Appellate Body
Agreements cited: Art. 13, 10  Customs valuationArt. X:3, II:1(b), II:3  GATT 1994Art. 2, 3, 4, 5, 6, 7, 1.1, 1.2  Customs valuationArt. VII:1, VII:2, VII:5  GATT 1994Art. 16  Customs valuationArt. X:1, III:2, III:4  GATT 1994

THAILAND – CUSTOMS AND FISCAL MEASURES ON CIGARETTES
FROM THE PHILIPPINES

Request for Consultations by the Philippines

 The following communication, dated 7 February 2008, from the delegation of the Philippines
to the delegation of Thailand 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 request consultations with the Kingdom of 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 Agreement on Tariffs and Trade 1994 (the
"GATT 1994"), and Article 19 of the Agreement on Implementation of Article VII of the General
Agreement on Tariffs and Trade 1994 (the " Customs Valuation Agreement ") with respect to the
measures and claims set out below.

I. CLAIMS UNDER ARTICLE X:3(A) OF THE GATT 1994
1. The Philippines is a major exporter of cigare ttes to Thailand. The Thai Tobacco Monopoly
("TTM") is the only business entity authorized by Th ai law to produce cigarettes in Thailand. TTM
has a market share of approximately 80 per cent. TTM's products are, therefore, the main competitor
of the Philippines cigarettes in the Thai cigarette market.
2. There are numerous personal and institutiona l links between the Thai government and TTM
that create serious conflicts of interests in the administration of Thai fiscal and customs legislation
pertaining to cigarettes, and lead to biased, partial, and unreasonable administration of Thai law. By
way of example, TTM is a business unit of the Thai Mi nistry of Finance, which is responsible for the
administration of the value added, excise, health and "television" or "TV" taxes, as well as of customs
charges. Furthermore, the Minister of Finance has authority to appoint and remove directors on the
TTM Board of Directors, and the TTM Board of Di rectors includes or has included senior Ministry
officials, such as the Director General for Excise and the Director General for Customs, who are
engaged in the administration of duties and charges on cigarettes.
3. These pervasive institutional and personal 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 7;
• the excise tax measures in paragraph 13;

• the health tax measures in paragraph 14;
• the TV tax measures in paragraph 15; and
• the value added tax ("VAT") measures in paragraph 20.
4. In addition, in determining the guarantee or cash amount that importers of cigarettes may be
required to deposit upon entry, Tha iland administers its legal provisions pertaining to guarantees in a
partial and unreasonable manner. In particular, Thailand administers in a partial and unreasonable
manner:
• the provisions of the Customs Act B.E. 2469
1 (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 measures related to the measures listed
in this paragraph.
5. Thailand thereby violates Article X:3(a) of the GATT 1994.
II. CLAIMS PERTAINING TO CUSTOMS VALUATION
6. Between 2003 and August 2006, the Customs Depart ment of the Kingdom of Thailand ("Thai
Customs") routinely accepted as the basis for customs valuation the transaction value declared by
importers on entries of imported cigarettes. Howe ver, since August 2006, Thai Customs has rejected
the transaction value declared by importers on su ch entries as the basis for valuation, both for
purposes of determining the amount of monies that importers are required to deposit as guarantees for
the duties that may be payable on such entries, as well as for purposes of the final assessment of
duties. Instead, on a general and prospective basis, Thai Customs arbitrarily pre-determines values
that are higher than the declared transaction values and applies these values to all entries of imported
cigarettes, in place of the declared transaction valu es. Thai Customs allows the importer to withdraw
the subject goods from customs only if the importer makes a payment on the basis of the declared
transaction value and deposits a guarantee of cust oms duties covering the difference between the
declared transaction value and the applicable pre- determined value. Subsequently, Thai Customs
issues a final assessment of customs value that is hi gher than the declared transaction value and that
reflects the applicable pre-determined value, which is changed from time to time.
7. The measures at issue include:
• the general rule and/or methodology provi ding for the systematic rejection of
transaction value, and the imposition of a hi gher pre-determined value, including any
calculation methodology underpinning the pre- determined value. This measure (or
measures) applies at the time of entry as well as at the time of final assessment;
• individual determinations made by Thai Customs for entries of cigarettes exported
from the Philippines and landed between 4 August 2006 and today, including:

1 The "B.E" year number designates the year in the Buddhist calendar. The year number in parentheses
designates the corresponding year A.D.

(a) the Notices of Assessment for the entr ies listed in Annex I to this request;
and,

(b) the assessments of valu e for purposes of setting the guarantee or cash deposit
at the time of entry for the entries listed in Annex II to this request;

• Customs Act, B.E. 2469 (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 amending 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, 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) Procedure in requesting duty fee
assessment; and
• any amendments, implementing measures, or measures related to the measures listed
in this paragraph.
8. As a result of these measures, Thailand fails to use transaction value as the basis for customs
value, contrary to Articles 1.1, 1.2(a), and 1.2(b) of the Customs Valuation Agreement and the
interpretative Notes to these provisions, as well as paragraphs 1 and 2 of the General Introductory
Commentary. In so doing, Thailand fails to co mmunicate the grounds for considering that the
relationship between the parties influenced the declar ed price, as required by Article 1.2(a). Thailand
also fails to conform to the sequence of valuation methods mandated by the Customs Valuation
Agreement, and uses a valuation method that has no basis in the Customs Valuation Agreement.
These actions are inconsistent with Articles 2, 3, 4, 5, 6, and 7, as well as the relevant interpretative
Notes. These measures are also inconsistent with Article 13 of the Customs Valuation Agreement, as
well as Article II:1(b) and II:3 of the GATT 1994.
9. Thailand has failed to provide an explanation for the determination of the pre-determined
values applied to entries at the time of importation and at the time of final assessment, breaching its
obligations under Article 16 of the Customs Valuation Agreement.
10. The Philippines considers that, for all these reasons, Thailand acts inconsistently with
Articles VII:1, VII:2(a), VII:2(b), and VII:2(c) of the GATT 1994. Moreover, Thailand fails to
publish the bases and methods for determining the va lue of cigarettes imported from the Philippines.
This is in violation of Article VII:5 of the GATT 1994.

11. Further, Thai government officials appear to have publicly disclosed CIF values of imported
cigarettes in the Thai media. The public disclosur e of such business-confidential information is in
violation of Article 10 of the Customs Valuation Agreement.
III. CLAIMS PERTAINING TO THE EXCISE TAX, HEALTH TAX AND TV TAX
REGIMES
12. Thailand imposes an ad valorem excise tax, health tax, and "television" or "TV" tax, on both
imported and domestic cigarettes. For imported ciga rettes, the basis for all these taxes is the CIF
customs value as determined by the Thai customs au thorities, whereas for domestic cigarettes, it is an
ex-factory price determined by the Director-General for Excise.
13. The Philippines understands that Thailand opera tes the excise tax regime through measures
including:
• the Tobacco Act B.E. 2509 (1966), Section 5 ter;
• Notices of Director-General for Excise, setting out the ex-factory prices. The
currently applicable ex-factory prices are set out in the Notice B.E. 2550 (2007) of 29
August 2007; and,
• any amendments, implementing measures, or measures related to the measures listed
in this paragraph.
14. The Philippines further understands that Thaila nd operates the health tax regime through
measures including the Health Promotion and F oundation Act, B.E. 2544 (2001), in particular
Sections 11, 12, and 13 thereof, and any amen dments, implementing meas ures or other related
measures.
15. The Philippines further understands that Tha iland operates the TV tax regime through
measures including the Thai Public Broadcasting Serv ice Act 2551 (2008), in particular Sections 12,
13, and 14 thereof, and any amendments, implementing measures or other related measures.
16. As developed in Section II, Thailand determ ines excessive customs values for Philippine
exports of cigarettes inconsistently with the Customs Valuation Agreement , and because these
customs values serve as the tax basis for imposing th e excise tax, the health tax and the TV tax,
Thailand imposes a higher tax burden on imported products than on like and/or directly competitive or
substitutable domestic products.
17. By so doing, Thailand acts inconsistently with Article III:2, first and second sentence. This
discrimination against imported cigarettes is comp ounded by the fact that Thai law contains no
procedure for cigarette importers to claim a refund of the portion of the excise tax, health tax and TV
tax paid as a result of the excessive customs valuation. The failure of Thailand to provide for such a
refund procedure results in a violation of Article III:2, first and second sentence. It also constitutes
partial and unreasonable administration of the meas ures referred to in paragraphs 13, 14, and 15,
contrary to Article X:3(a) of the GATT 1994.
18. Thailand also has not published the regulations pertaining to the determination of the ex-
factory prices, which constitute the tax basis for Thailand's imposition of the excise, health and TV
taxes on domestic cigarettes. As a result, Thailand is in violation of Article X:1 of the GATT 1994,
which requires governments to publish trade laws and regulations of general application.

IV. CLAIMS PERTAINING TO THAILAND'S VALUE-ADDED TAX ("VAT") REGIME
A. T
HAILAND'S VAT REGIME
19. Under Thailand's fiscal regime, VAT on cigarettes is calculated by reference to brand-specific
maximum retail selling prices ("MRSPs"). These MRSPs are determined by the Thai Government
through executive acts applying solely to domestic cigarettes on one hand, and separate executive acts
applying solely to imported cigarettes on the other hand. The MRSPs are modified from time to time.
In the last two and a half years, the MRSPs for imported cigarettes have been changed more
frequently than those for domestic cigarettes.
20. The Philippines understands that Thailand opera tes the VAT regime for cigarettes through
measures including:
• Sections 79/5 and 81 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. 465), B.E. 2550 (2007);
• 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. 2550 (2007) of 29 August 2007 together with Notice
B.E. 2550 (2007) of 18 December 2007 (for imported products); and
• any amendments, implementing measures or other measures related to the measures
listed in this paragraph.
21. The MRSPs for imported brands of cigarette, including those exported by the Philippines, are
set at significantly higher levels than the MRSPs for like and/or directly competitive or substitutable
domestic brands. Moreover, the MRSPs for importe d 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. Th erefore, the Philippines
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.
22. Thailand also has not published the regulations pertaining to the determination of the MRSPs,
which constitutes the tax base for Thailand's impositi on of VAT on domestic and imported cigarettes.
This failure is a violation of Article X:1 of the GATT 1994.

B. O
THER VAT-RELATED REQUIREMENTS
23. Thailand imposes different VAT-related require ments on wholesale and retail sellers of
cigarettes, depending on whether they sell domestic or imported products. In particular, these sellers
are subject to VAT when they sell imported products but are exempt when they sell like and/or
directly competitive or substitutable domestic products. Moreover, because wholesale and retail
sellers of imported cigarettes are subject to VAT, whereas wholesale and retail sellers of domestic
cigarettes are not, the former are also subject to VAT administrative requirements that are not
imposed on sellers of the like and/or directly competitive or substitutable domestic product. The
Philippines understands that the measure in whic h these discriminatory requirements are contained
include Section 81 of the Revenue Code, Royal Decree issued under the Revenue Code Governing
Exemption from Value Added Tax (No. 239) B.E. 2534 (1991), and Order of Revenue Department
Por 85/2542, and any amendments, implementing measures or other related measures.
24. The Philippines considers that these measures are inconsistent with Articles III:4 and III:2,
first and second sentence, of the GATT 1994.
V. CLAIMS PERTAINING TO RETAIL LICENSING REQUIREMENTS
25. Thailand requires that tobacco and/or cigarette retailers hold separate licenses to sell domestic
and imported cigarettes, respectively. The Philip pines understands that the measure in which these
discriminatory requirements are contained incl ude the Excise Department Announcement by the
Director-General of Excise, dated 12 September 1991, issued pursuant to Article 4, Ministerial
Regulation No. 17 B.E. 2534 (1991) under the T obacco Act B.E. 2509 (1966) , and any amendments,
implementing measures or other related measures.
26. The Philippines considers that this dual license requirement, based purely on the origin of the
products sold, is inconsistent with Article III:4 of the GATT 1994, because it provides less favourable
treatment for imported products than for like domestic products.

 The Philippines reserves its right to raise furt her factual claims and legal matters during the
course of consultations.

 We look forward to receiving your reply to the present request and to fixing a mutually
convenient date for consultations.

ANNEX I

LIST OF ENTRIES FOR WHICH DEFINITIVE ASSESSMENT NOTICES
HAVE ALREADY BEEN ISSUED

NUMBER IMPORTS ENTRY NO DATE OF ENTRY
1 0321-0084902292 5 August 2006
2 0321-0084902229 5 August 2006
3 0321-0084906059 20 August 2006
4 0321-0084907903 28 August 2006
5 0321-0084907964 28 August 2006
6 0321-0084907956 28 August 2006
7 0321-0094900553 4 September 2006
8 0321-0094902458 11 September 2006
9 0321-0094904405 16 September 2006
10 0321-0094906102 25 September 2006
11 0321-0104900059 2 October 2006
12 0321-0104904282 16 October 2006
13 0321-0104904177 16 October 2006
14 0321-0104904464 16 October 2006
15 0321-0104906134 21 October 2006
16 0321-0104906133 23 October 2006
17 0321-0104908031 30 October 2006
18 0321-0104908413 30 October 2006
19 0321-0104907945 30 October 2006
20 0321-0114901060 5 November 2006
21 0505-0015081406 18 November 2006
22 0505-0015081407 18 November 2006
23 0505-0015081443 2 December 2006
24 0505-0025080093 2 December 2006
25 0505-0015081444 11 December 2006
26 0505-0025080094 11 December 2006
27 0505-0025080095 11 December 2006
28 0505-0025080562 11 December 2006
29 0505-0015081442 18 December 2006
30 0505-0015081440 18 December 2006
31 0505-0025080096 18 December 2006

NUMBER IMPORTS ENTRY NO DATE OF ENTRY
32 0505-0025080097 18 December 2006
33 0505-0025080563 18 December 2006
34 0505-0015081441 25 December 2006
35 0505-0025080098 25 December 2006
36 0505-0025080564 25 December 2006
37 0505-0025080101 13 January 2007
38 0505-0025080099 15 January 2007
39 0505-0025080100 15 January 2007
40 0505-0025080565 15 January 2007
41 0505-0025080566 15 January 2007
42 0505-0025080567 22 January 2007
43 0505-0025081290 29 January 2007
44 0505-0025081289 29 January 2007
45 0505-0025081291 5 February 2007
46 0321-0025003881 11 February 2007
47 0505-0025081808 19 February 2007
48 0505-0035080539 26 February 2007
49 0505-0035080540 5 March 2007
50 0505-0035080541 5 March 2007
51 0505-0035081176 12 March 2007
52 0505-0035081177 12 March 2007
53 0505-0035081178 12 March 2007
54 0505-0035081179 12 March 2007
55 0505-0035081651 19 March 2007
56 0505-0035081652 19 March 2007
57 0505-0035081653 19 March 2007
58 0321-0035007837 26 March 2007
59 0321-0045000370 2 April 2007
60 0321-0045000358 2 April 2007
61 0321-0045004200 9 April 2007
62 0321-0045004175 9 April 2007
63 0321-0045005032 16 April 2007
64 0321-0045005880 23 April 2007
65 0321-0045005874 23 April 2007

NUMBER IMPORTS ENTRY NO DATE OF ENTRY
66 0321-0045008416 30 April 2007
67 0321-0045008421 30 April 2007
68 0321-0055000164 30 April 2007
69 0321-0055002134 7 May 2007
70 0321-0055001895 7 May 2007
71 0321-0055004026 14 May 2007
72 0321-0055003067 14 May 2007
73 0321-0055005939 21 May 2007
74 0321-0055005654 21 May 2007
75 0321-0055007319 28 May 2007
76 0321-0055007327 28 May 2007
77 0321-0065000474 4 June 2007
78 0321-0065000518 4 June 2007
79 0321-0065002831 11 June 2007
80 0321-0065002822 11 June 2007
81 0321-0065005236 18 June 2007
82 0321-0065007027 25 June 2007
83 0321-0065007026 25 June 2007
84 0321-0065009038 2 July 2007
85 0321-0065009039 2 July 2007
86 0321-0075002062 9 July 2007
87 0321-0075002036 9 July 2007
88 0321-0075004181 16 July 2007
89 0505-0085080140 16 July 2007
90 0321-0075006402 23 July 2007
91 0321-0075008334 30 July 2007
92 0321-0085000004 30 July 2007
93 0321-0085001654 6 August 2007
94 0321-0085001285 6 August 2007
95 0321-0085003945 13 August 2007
96 0321-0085003944 13 August 2007
97 0321-0085005555 20 August 2007
98 0321-0085005531 20 August 2007
99 0321-0085007597 27 August 2007

NUMBER IMPORTS ENTRY NO DATE OF ENTRY
100 0321-0085007572 27 August 2007
101 0321-0095002684 10 September 2007

ANNEX II

LIST OF ENTRIES FOR WHICH VALUE HAS BEEN ASSESSED
FOR PURPOSES OF SETTING THE GUARANTEE OR CASH DEPOSIT
AT THE TIME OF ENTRY AND FOR WHICH DEFINITIVE ASSESSMENT NOTICES
HAVE NOT YET BEEN ISSUED

NUMBER IMPORTS ENTRY NO DATE OF ENTRY
1 0321-0035007838 26 March 2007
2 0321-0095000434 3 September 2007
3 0321-0095000435 3 September 2007
4 0321-0095002610 10 September 2007
5 0321-0095004054 17 September 2007
6 0321-0095004053 17 September 2007
7 0321-0095005928 24 September 2007
8 0321-0095005927 24 September 2007
9 0321-0095007961 1 October 2007
10 0321-0095007960 1 October 2007
11 0321-0105007052 22 October 2007
12 0321-0105006594 22 October 2007
13 0321-0105006593 22 October 2007
14 0321-0105003749 15 October 2007
15 0321-0105003748 15 October 2007
16 0321-0105008363 29 October 2007
17 0321-0105008395 29 October 2007
18 0321-0105002346 8 October 2007
19 0321-0105002268 8 October 2007
20 0321-0115001266 5 November 2007
21 0321-0115001265 5 November 2007
22 0321-0115002927 12 November 2007
23 0321-0115002926 12 November 2007
24 0321-0115004657 19 November 2007
25 0321-0115007157 26 November 2007
26 0321-0115007163 26 November 2007
27 0321-0115008952 3 December 2007
28 0321-0115008951 3 December 2007
29 0321-0125001676 10 December 2007
30 0321-0125001328 10 December 2007
31 0321-0125004002 17 December 2007
32 0321-0125004001 17 December 2007