THAILAND – CUSTOMS AND FISCAL MEASURES ON CIGARETTES FROM THE PHILIPPINES
Document: Report of the Appellate Body
Date: 17 June 2011
Document codes: WT/DS371/AB/R
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

AB-2011-1

Report of the Appellate Body

APPELLATE BODY

Thailand, Appellant
Philippines, Appellee

Australia, Third Participant
China, Third Participant
European Union
1, Third Participant
India, Third Participant
Separate Customs Territory of Taiwan, Penghu,
 Kinmen and Matsu, Third Participant
United States, Third Participant

 AB-2011-1

 Present:

 Van den Bossche, Presiding Member
 Ramírez-Hernández, Member
 Zhang, Member

I. Introduction
1. Thailand appeals certain issues of law and legal interpretations developed in the Panel Report,
 (the "Panel Report"). 2
The Panel was established on 17 November 2008 to consider a complaint by the Philippines with
respect to certain customs and fiscal measures im posed by Thailand on cigarettes imported from the
Philippines.3

1This dispute began before the entry into force of the Treaty of Lisbon amending the Treaty on
European Union and the Treaty establishing the European Community (done at Lisbon, 13 December 2007) on
1 December 2009. On 29 November 2009, the received a Verbal Note (WT/L/779)
from the Council of the European Union and the Commission of the European Communities stating that, by
virtue of the Treaty of Lisbon , as of 1 December 2009, the "Europe an Union" replaces and succeeds the
"European Community". On 13 July 2010, the World Trade Organizati on received a second Verbal Note
(WT/Let/679) from the Council of the European Union confirming that, with effect from 1 December 2009, the
European Union replaced the European Community and assumed all the rights and obligations of the European
Community in respect of all Agreements for which the Di rector-General of the World Trade Organization is the
depositary and to which the European Community is a si gnatory or a contracting party. We understand the
reference in the Verbal Notes to the "European Communi ty" to be a reference to the "European Communities".
In the proceedings before the Panel, the third party submission dated 18 May 2009 and the 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 the Panel to refer to "European Union" and "EU", rather than "European
Communities" and "EC", in the Panel Report. (Panel Report, footnote 3 to para. 1.6) We refer to the European
Union in this Report.
2WT/DS371/R, 15 November 2010.
3Panel Report, para. 1.3.

2. Before the Panel, the Philippines made a number of claims in respect of several Thai customs
and fiscal measures affecting cigarettes imported from the Philippines. 4 The Philippines raised three
sets of claims: (i) with respect to measures pertaining to customs valuation, under Articles 1, 4, 5, 7,
10, and 16 of the Agreement on Implementation of Article VII of the General Agreement on Tariffs
and Trade 1994 (the "Agreement on Customs Valuation")5; (ii) with respect to measures forming part
of Thailand's value added tax ("VAT") regime under Article III:2 and Article III:4 of the General
Agreement on Tariffs and Trade 1994 (the "GATT 1994") 6; and (iii) with respect to Thailand's
administration of certain customs and fiscal measur es, including with respect to guarantees, under
Article X of the GATT 1994.7
3. The Panel Report was circulated to Members of the World Trade Organization (the "WTO")
on 15 November 2010.

4Panel Report, para. 7.1.
5With respect to Thai Customs' valuation of cigarettes imported from the Philippines and cleared
between 11 August 2006 and 13 September 2007, the Philippines claimed that: (i) Thailand acted inconsistently
with Article 1.1 and Article 1.2(a) of the Agreement on Customs Valuation because Thai Customs improperly
rejected the transaction values of those entries; (ii) Thai Customs applied the deductive valuation method
inconsistently with Thailand's obligations under Articles 5 and 7 in determining the customs value of those
cigarette entries; (iii) Thailand acted inconsistently with its obligation under Article 10 not to disclose
confidential information; and (iv) Thailand acted inconsistently with its obligation under Article 16 to provide
an explanation for the determination of the final customs value. The Philippines also claimed that Thailand
acted inconsistently with Article 1.1 and Article 1.2(a) of the Agreement on Customs Valuation by maintaining
an unpublished general rule requiring the rejection of tr ansaction value and the use of the deductive valuation
method. (Panel Report, paras. 7.2 and 7.79-7.81)
6The Philippines claimed that Thailand acted inconsiste ntly with Article III:2, first sentence, of the
GATT 1994 by subjecting imported cigarettes to tax in excess of that applied to like domestic cigarettes
through: (i) a discriminatory tax base for VAT imposed on imported cigarettes; and (ii) the exemption of
domestic cigarettes from VAT obligations. The Philippines also claimed that Thailand acted inconsistently with
Article III:4 of the GATT 1994 by imposing more onerous administrative requirements on resellers of imported
cigarettes than on resellers of domestic cigarettes. (Panel Report, paras. 7.412, 7.568, and 7.645)
7The Philippines claimed that Thailand acted inconsistently with Article X:1 of the GATT 1994 by
failing to publish: (i) the methodology for determini ng the maximum retail selling price ("MRSP"), a reference
price fixed by the Thai Government for each brand of cigarettes; (ii) the me thodology for determining
ex factory prices for Thailand Tobacco Monopoly ("TTM") cigarettes; and (iii) laws and regulations governing
the release of guarantees for potential liability arising from health, excise, and television taxes. The Philippines
also raised the following claims under Article X:3(a) of the GATT 1994: (i) Thailand did not administer its
customs and internal tax rules in a "reasonable" and "impartial" manner by appointing certain senior Thai
Government officials to serve on the Board of Directors of TTM; (ii) u ndue delays in th e decision-making
process of the Board of Appeals (the "BoA") constitute an "unreasonable" administration of customs laws;
(iii) the determination of the tax base for VAT for im ported cigarettes is administered in a "non-uniform",
"unreasonable", and "partial" manner; and (iv) the estab lishment of the health, excise, and television taxes in
relation to imported cigarettes is administered in a "non-uniform", "unreasonable", and "partial" manner. The
Philippines further claimed that Thailand acted inconsis tently with Article X:3(b) of the GATT 1994: by
(i) failing to maintain tribunals or procedures for the prompt review of appeals against certain customs valuation
decisions; and (ii) failing to maintain or institute tribunals or proced ures for the purpose of prompt review of
guarantees imposed by Thai Customs on imported cigarettes. (Panel Report, paras. 7.759, 7.862, 7.989,
and 7.1016)

4. In its Report, the Panel made a number of findi ngs with respect to the scope of the matters
before it8, and a number of findings that Thailand had act ed inconsistently with its obligations under
the Agreement on Customs Valuation.9 None of these findings is at issue in this appeal.
5. The Panel further made several findings that Thailand had acted inconsistently with its
obligations under Article III of the GATT 1994, including that:
(b) regarding the VAT exemption for domestic cigarette
resellers, Thailand acted inconsiste ntly with Article III:2, first
sentence by subjecting imported cigarettes to a VAT liability in
excess of that applied to like dome stic 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
subjecting imported cigarettes to less favourable treatment compared
to like domestic cigarettes by impos ing additional administrative
requirements, connected to VAT liabilities, on imported cigarette
resellers.
10

8With respect to the claims advanced by the Philippines, the Panel found that: (i) the Philippines' claim
under Article X:3(a) of the GATT 1994 with respect to the Thai VAT system was outside its terms of reference
because the Philippines failed to plainly connect the challenged measure with Article X:3(a) in its panel request;
and (ii) the Philippines' claim under Article X:3(a) with respect to the health, excise, and television taxes was
within the Panel's terms of reference. (Panel Report, para. 8.1(a) and (b); see also paras. 7.26 and 7.31) The
Panel also found that, although the two provisions were listed in the panel request, the Philippines' claims under
Article 4 and Article 7.1 of the Agreement on Customs Valuation were not supported by specific arguments and
evidence presented in a timely manner, and further that Article 7.1 of the Agreement on Customs Valuation does
not constitute a basis for an independent sequencing claim under that Agreement. (Ibid., paras. 8.5 and 8.6; see
also para. 7.280) With respect to the measures at issue, the Panel found the following to be within its terms of
reference: (i) Thai Customs' valuation determinations for the imported cigarettes at issue that were cleared
between 11 August 2006 and 13 September 2007; and (ii) the December 2005 MR SP Notice, the September
2006 MRSP Notice, the March 2007 MRSP Noti ce, and the August 2007 MRSP Notice. ( Ibid., para. 8.1(c)
and (d); see also paras. 7.51 and 7.67)
9Panel Report, para. 8.2; see also paras. 7.195, 7. 223, 7.266, 7.332, 7.398, and 7.411. With respect to
the Philippines' claims under the Agreement on Customs Valuation , the Panel found that the rejection by Thai
Customs of the declared transaction values for certain ci garette entries in 2006 and 2007 was inconsistent with
Article 1.1 and Article 1.2, and that Thailand acted inc onsistently with Article 1.2(a) by failing to communicate
Thai Customs' grounds for such rejection. The Panel also found that the application by Thai Customs of its
valuation methodology was inconsistent with Thailand's obligations under Article 7.1 and Article 7.3, and that
Thailand acted inconsistently with Article 10 and Article 16, respectively, by disclosing confidential
information, and by failing to provide an adequate explanation as to how Thai Customs determined customs
values for imported cigarettes. The Panel found, however, that Thailand does not, as the Philippines claimed,
maintain or apply a general rule requiring the rejection of the transaction value and the use of the deductive
valuation method.
10Panel Report, para. 8.3(b) and (c); see also paras. 7.644 and 7.738. The Panel also found that
Thailand acted inconsistently with Article III:2, first sentence, by subjecting imported cigarettes to VAT liability
in excess of that applied to like domestic cigarette s with respect to the MRSPs for the December 2005 MRSP
Notice, the September 2006 MRSP Notice, the Marc h 2007 MRSP Notice, and the August 2007 MRSP Notice.
(Ibid., para. 8.3(a); see also para. 7.567) This finding has not been appealed.

6. The Panel also made certain findings that Thailand had acted inconsistently with its
obligations under Article X of the GATT 1994, including that:
(g) Thailand acted inconsistently with Article X:3(b) by failing
to maintain or institute independent review tribunals or process for
the prompt review of guarantee decisions.11
7. The Panel recommended that the Dispute Settleme nt Body (the "DSB") request Thailand to
bring those measures found to be inconsistent in to conformity with its obligations under the
GATT 1994 and the Marrakesh Agreement Establishi ng the World Trade Organization (the " WTO
Agreement"). The Panel made no recomme ndation with respect to one m easure that had expired.
With respect to certain other measures found to be inconsistent with Thailand's obligations under the
Agreement on Customs Valuation, the Panel indicated that it was "not entirely clear … whether and, if
so, to what extent" 12 those measures have effects on subsequent measures. Accordingly, for those
measures, the Panel stated that its recommendations "apply only to the extent [that those measures]
continue to have effects".13
8. On 22 February 2011, Thailand notified the DSB of its intention to appeal certain issues of
law covered in the Panel Report and certain legal interpretations deve loped by the Panel, pursuant to
Article 16.4 and Article 17 of the Understanding on Rules and Procedures Governing the Settlement
of Disputes (the "DSU"), and filed a Notice of Appeal 14 and an appellant's submission pursuant to
Rule 20 and Rule 21, respectively, of the Working Procedures for Appellate Review (the " Working
Procedures").15 On 14 March 2011, the Philippines filed an appellee's submission. 16 On 15 March
2011, Australia, the European Union, and the Un ited States each filed a third participant's
submission17, and the Separate Customs Territory of Ta iwan, Penghu, Kinmen and Matsu notified its

11Panel Report, para. 8.4(g); see also para. 7.1087. The Panel also found that: (i) Thailand acted
inconsistently with Article X:1 of th e GATT 1994 by failing to publish the methodology used to determine the
MRSP (the tax base for VAT); (ii) 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; (iii) Thailand acted
inconsistently with Article X:1 of the GATT 1994 by fa iling to properly publish the general rule pertaining to
the release of guarantees; (iv) Thailand did not act in consistently with Article X:3(a) by appointing certain
government officials to the Board of Directors for TTM; (v) Thailand acted inconsistently with Article X:3(a)
because of the delays caused in the BoA decision-making process; (vi) the Philippines' claim relating to the
administration of Thai health, excise, and television ta xes was improperly brought under Article X:3(a); and
(vii) Thailand acted inconsistently with Article X:3(b) by failing to maintain or institute independent review
tribunals or processes for the prompt review of customs valuation determinations. ( Ibid., para. 8.4(a)-(f); see
also paras. 7.791, 7.829, 7.861, 7.929, 7.969, 7.988, and 7.1015) With the exception of the Panel's finding in
paragraph 8.4(g)—reproduced above—none of these findings are at issue in this appeal.
12Panel Report, para. 8.8.
13Panel Report, para. 8.8.
14WT/DS371/8 (attached as Annex I to this Report).
15WT/AB/WP/6, 16 August 2010.
16Pursuant to Rule 22 of the Working Procedures.
17Pursuant to Rule 24(1) of the Working Procedures.

intention to appear at the oral hearing as a third participant. 18 On 16 March 2011, China and India
each notified its intention to appear at the oral hearing and requested to make an oral statement at the
hearing. In accordance with Rule 24(4) of the Working Procedures, the Division authorized China,
India, and the Separate Customs Territory of Taiwan, Penghu, Kinmen and Matsu, each to make an oral
statement at the hearing.
9. By letter dated 15 March 2011, the Philippines requested, pursuant to Rule 18(5) of the
Working Procedures, authorization
 from the Appellate Body Division hearing this appeal to correct a
clerical error in its appellee's submission. On 16 March 2011, the Division invited Thailand and the
third participants to comment on this request. No comments were received. On 18 March 2011, the
Division authorized the Philippines to correct the clerical error in its appellee's submission.
10. The Panel adopted additional working proce dures for the protection of business confidential
information ("BCI")19, but we have not done so in this appeal . Neither participant requested that we
adopt additional procedures for the protection of BCI in these appellate proceedings, although the
Philippines made a conditional request that we consult the participants in the event that we considered
it necessary to refer to information that was considered to be BCI in the proceedings before the Panel.
We have not found it necessary to refer to any such information in this Report.
11. The oral hearing in this appeal was held on 18 and 19 April 2011. The participants and
three of the third participants (Australia, the Eu ropean Union, and the United States) made oral
statements. The participants and third participan ts responded to questions posed by the Members of
the Division hearing the appeal.
II. Arguments of the Participants and the Third Participants
A. Claims of Error by Thailand – Appellant
1. Article III:2 of the GATT 1994
12. Thailand requests the Appellate Body to reve rse the Panel's finding that Thailand acted
inconsistently with Article III:2, first sentence, of the GATT 1994. Thailand contends that the
measures at issue consist of administrative requirements that are not subject to the scope of
Article III:2, and that, even if these admini strative requirements could be examined under

18Although the Separate Customs Territory of Taiwan, Penghu, Kinmen and Matsu indicated that its
notification was made pursuant to Rule 24(2) of the Working Procedures, the notification was not received
before the 17:00 deadline specified in Rule 18(1) of the Working Procedures. Accordingly, the Division treated
it as a notification and request to make an oral statement at the hearing made pursuant to Rule 24(4) of the
Working Procedures.
19See Panel Report, paras. 2.3 and 2.4, and Annex A-1 at pp. 399 and 400.

Article III:2, the Panel erred in finding an incons istency arising in situa tions where resellers of
imported cigarettes do not satisfy those requirements.
13. Thailand argues that the Panel improperly fo und a violation of Article III:2 because the
Panel's analysis was not based on any differen ce in the tax burdens imposed on imported and
domestic cigarettes, but rather on the regulatory requirements affecting the resale of imported
cigarettes and the consequences of non-compliance with those requirements. In Thailand's view, such
a difference in regulatory requirements cannot give rise to a violation of Article III:2 and should
therefore have been addressed solely under Article III:4.
14. According to Thailand, Article III:2 "imposes a strict standard"
20 that internal taxes or internal
charges on imported products may not be in excess of those applied to like domestic products. Thus,
Article III:2 concerns the actual tax burden, and is essentially a mathematical exercise in which the
tax burden on imported and domestic products under the measure at issue is first identified and then
compared. In contrast, Article III:4 addresses the non-ch arge elements of internal legislation, which,
in this dispute, consist of administrative requirements.
15. Thailand submits that the difference in how measures are analyzed under Article III:2 and
under Article III:4 explains why it is important to maintain the distinction between their scopes.
Article III:2 is intended to discipline the tax bur dens imposed on imported and domestic products by
Members, not how Members regulate their internal markets. Subjecting administrative requirements,
or the financial consequences of failing to comp ly with those requirements, to the scope of
Article III:2 will deprive Members of their right under Article III:4 to regulate sales of imported and
domestic products differently, so long as the differences do not amount to less favourable treatment of
imported products. Thailand further argues that it is well established that a measu re that consists of
administrative requirements should be analyzed under Ar ticle III:4, even if the failure to comply with
those administrative requirements may have fi nancial consequences for an imported product.
Accordingly, the financial conse quences of non-compliance with the administrative requirements of
Thailand's VAT regime cannot be treated as separ ate measures to be analyzed under Article III:2
independently of those administrative requirements.
16. Thailand contends that, in the circumstances of this case, there is "no question of any
difference between the actual tax burden"
21 on imported cigarettes and th at on domestic cigarettes.
The Panel found that Thailand's VAT rate is seven per cent for both imported and domestic cigarettes,
and that the full amount of VAT is collected from both the domestic producer and the importer at the

time of the initial sale by the domestic producer or importer to the wholesaler. Thus, the Panel's
finding was not based on the tax burden under Thai VAT law, but instead solely on the difference in
the regulatory requirements for resales of importe d and domestic cigarettes and the consequences of
failure to comply with those requirements. Such requirements, Thailand contends, "are fundamentally
administrative rather than fiscal in nature".22
17. Thailand objects to the Panel's re liance on the GATT panel report in US – Tobacco and to its
application of the proposition that a challenged measu re is inconsistent with Article III:2 where it
carries with it "the risk of discriminatory treatment of imports in respect of internal taxes".23 Thailand
states that it does not disagree that a risk of excess taxation may give rise to a violation of
Article III:2, and that a measure that contains an inherent risk of applying a higher tax rate for
imported products will be in consistent with Article III:2. Such risk, however, must relate to the
calculation of the tax burden imposed under the meas ures at issue. The scope of Article III:2 cannot
be expanded to include consequences arising out of non-compliance with administrative requirements.
In this dispute, the measures at issue do not pr escribe a mandatory formula that "mathematically,
invariably leads to a specific result concerning the tax rate". 24 Moreover, any risk associated with a
failure to comply with reporting requirements cannot be equated with an inherent risk of being subject
to higher taxation. Thailand maintains that the measures in this dispute a priori provide for equal
taxation for imported and domestic products.
18. Even if the Panel were correct in examining the consequences of failure to comply with
administrative requirements under Article III:2, first sentence, Thailand argues that the Panel's finding
of inconsistency was incorrect for two reasons. First, a system of offsetting tax paid against tax
collected cannot be said to be inconsistent with Article III:2 simply because private parties are
required to comply with certain administrative re quirements in order to obtain offsetting credits.
Entitlement to a right is not any less "automatic" where parties do not avail themselves of that right.
Moreover, the Panel improperly relied on the Appellate Body report in Korea – Various Measures on
Beef in concluding that "what is relevant in asses sing 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".25 In Thailand's view, the Appellate Body di d not, in that dispute, suggest that WTO
law does not permit Members to require private parties to comply with administrative procedures in
order to protect their rights and fulfil their obligations under domestic law.

23Thailand's appellant's submission, para. 80 (quoting Panel Report, para. 7.625, in turn quoting GATT
Panel Report, US – Tobacco, para. 97 (emphasis added by the Panel)).
25Thailand's appellant's submission, para. 93 (quoting Panel Report, para. 7.637, in turn quoting
Appellate Body Report, Korea – Various Measures on Beef, para. 146).

19. Second, Thailand considers that the situations in which a tax credit may be denied involve
either instances in which resellers cannot establish that the claimed credit relates to an actual and
legitimate purchase of cigarettes, or where the ru les do not relate to th e purchase and resale of
imported products. It cannot be in consistent with WTO law not to give tax credits on purchases that
may not have taken place, to require proof of purch ase in order to obtain an input tax credit, or to
deny claims based on inaccurate invoices. An anal ysis of excess taxation for purposes of Article III:2
must involve a comparison of the taxes applied on actual, legitimate, docum ented sales of imported
and domestic products, and WTO Members must be entitled to establish reporting and record-keeping
requirements to satisfy themselves that taxes are imposed and collected only with respect to legitimate
sales. Yet, Thailand claims, the Panel's finding u nder Article III:2 implies that it would be required
under WTO law to grant input tax credits claimed by resellers even if the resellers cannot prove that
the purchases for which the credit was claimed actually took place.
2. Article III:4 of the GATT 1994
20. Thailand requests the Appellate Body to reve rse the Panel's finding that Thailand acted
inconsistently with Article III:4 of the GATT 1994 by subjecting imported cigarettes to less
favourable treatment than that accorded to lik e domestic cigarettes, through the imposition of
additional VAT-related administrative requirements only on resellers of imported cigarettes. Thailand
advances three independent grounds for reversal of this finding: (i) that the Panel erred in its
application of Article III:4 to the facts of this di spute and in finding that the Thai measures at issue
accord less favourable treatment to imported cigarett es; (ii) that the Panel violated Thailand's due
process rights, and acted inconsistently with Artic le 11 of the DSU and paragraph 15 of its Working
Procedures, in accepting and relying upon a piece of evidence submitted late in the proceedings by the
Philippines; and (iii) that the Panel erred in re jecting Thailand's defence under Article XX(d) of the
GATT 1994.
(a) Article III:4: "treatment no less favourable"
21. Thailand submits that the Panel's analysis and findings do not support a finding of less
favourable treatment under Article III:4. Under Article III:4, the fact that different regulatory regimes
apply to imported and to like domestic products is not determinative of whether imported products are
treated less favourably. Members have the right to treat imported products differently and, therefore,
to impose additional or more complicated require ments so long as they do not amount to less
favourable treatment. The Panel reached its finding without making any factual findings other than to
establish the existence of the different requirements themselves. According to Thailand, in this case
the Panel simply referred to price elasticity and sw itching patterns as an indication that the additional

administrative requirements can potentially have a negative impact, and asserted that "an additional
administrative burden can be linked to the operating co sts of [] businesses", which " could in turn
result in modifying the competitive conditions". 26 The Panel's finding was thus based entirely on the
theoretical possibility that the differences " could potentially affect the competitive position of
imported cigarettes in a negative manner". 27 Thailand argues that the Panel, therefore, simply
identified differences in the regulatory treatment of resales of imported cigarettes and assumed that
those differences had the potential to affect nega tively the competitive position of such imported
products.
22. Thailand points out that the Appellate Body h as found that a measure that accords imported
products treatment different from that accorded to domestic products "is not necessarily inconsistent
with Article III:4, as long as the treatment provi ded by the measure is 'no less favourable'." 28 The
Panel's reliance on a "could potentially affect" standard appears to be founded on the Appellate Body's
statement in US – FSC (Article 21.5 – EC) that an examination of less favourable treatment "need not
be based on the actual effects of the contested measure in the marketplace". 29 The Appellate Body
also stated in that case, however, that a determination of less favourable treatment " cannot rest on
simple assertion , but must be found on a careful analysis of the contested measure and of its
implications in the marketplace". 30 The Panel appears to have consid ered it sufficient to identify any
conceivable potential negative effect on the competiti ve position of imports and to find a violation of
Article III:4 on that basis. As a result, the Panel made no attempt to identify how or to what extent the
minor differences in treatment might in practice in crease costs, or how any increase in costs would
affect negatively the competitive position of impor ted cigarettes. Moreover, the Panel failed to
account for the gains that resellers of imported cigarettes obtain by virtue of the administrative
requirements, such as the possibilit y to claim additional input tax credits from VAT paid on utilities,
administrative expenses, and other services. Thus, in Thailand's view, the Panel "failed to conduct
any meaningful analysis of how these differences affect the competitive position of imports".
31
23. Thailand also rejects the Panel's reliance on sev eral other WTO cases. For instance, Thailand
does not understand the Appellate Body to have suggested, in US – Section 211 Appropriations Act ,

26Thailand's appellant's submission, para. 119 (quoting Panel Report, para. 7.736). (emphasis added by
Thailand)
27Thailand's appellant's submission, para. 120. (original emphasis)
28Thailand's appellant's submission, para. 122 (quoting Appellate Body Report, Korea – Various
Measures on Beef, para. 135; and referring to Appellate Body Report, EC – Asbestos, para. 100, and Appellate
Body Report, US – Section 211 Appropriations Act, para. 261).
29Thailand's appellant's submission, para. 124 (quoting Appellate Body Report, US – FSC
30Thailand's appellant's submission, para. 125 (quoting Appellate Body Report, US – FSC
(Article 21.5 – EC), para. 215). (emphasis added by Thailand)
31Thailand's appellant's submission, para. 135. (original emphasis)

that all "additional" requirements are "inherently" less favourable. To the contrary, the Appellate
Body emphasized that it is permissible to subject imported products to diffe rent legal provisions. 32
Moreover, the differential treatment in that case involved two entirely separate administrative
proceedings, a comparison qualitatively different from the "benign" 33 or "very minor"34 differences in
reporting requirements under Thailand's VAT regi me. In addition, a lthough the panel in Canada –
Wheat Exports and Grain Imports stated that practices not very onerous in commercial terms may still
be banned when they are likely to put imported products at a competitive disadvantage, Thailand
argues that the Panel in this dispute never examin ed whether such a likelihood in fact exists for
imported cigarettes.
(b) Article 11 of the DSU: the Panel's Treatment of Exhibit PHL-289
24. Thailand also contends that the Panel viol ated Thailand's due process rights and acted
inconsistently with Article 11 of the DSU and pa ragraph 15 of its Working Procedures by accepting
and relying on Exhibit PHL-289, which was submitted by the Philippines at the last stage of the
proceedings, without affording Thailand the right to comment on such eviden ce. Because the Panel
relied on Exhibit PHL-289 in reaching its findings under Article III:4, Thailand also requests the
Appellate Body to reverse the Panel's finding that Thailand acted inconsistently with that provision.
25. Thailand submits that Article 11 of the DSU requires panels to protect the due process rights
of each party to a dispute, including the provision of an adequate opportunity to respond to evidence
adduced by the other party. However, Thailand was not afforded the opportunity to comment on
Exhibit PHL-289, which was submitted by the Phili ppines in its comments on Thailand's responses to
the Panel's questions after the second substantive meeting. The Panel's due process violation is
particularly serious because the Panel stated in its Interim Report that it was basing its finding that
sales of domestic cigarettes need not be reported in form Por.Por.30 solely on the expert opinion
contained in Exhibit PHL-289. Although the Panel deleted this reference from its Report, "Exhibit
PHL-289 was still the only evidence referred to in the final report". 35 As the panel found in Korea –
Alcoholic Beverages, the rights of the parties under the DSU may be affected by the importance of the
evidence at issue. 36 Therefore, since Exhibit PHL-2 89 was the only evidence upon which the
Philippines based its prima facie case, Thailand considers that its due process rights with respect to

32Thailand's appellant's submission, paras. 122 and 137 (referring to Appellate Body Report, US –
Section 211 Appropriations Act, para. 261).
36Thailand's appellant's submission, para. 170 (quoting Panel Report, Korea – Alcoholic Beverages ,
para. 10.25).

Exhibit PHL-289 should have been "accorded the highest importance" 37, and that Thailand could not
have been required to request speci al leave to respond to Exhibit PHL-289 in order to have its due
process rights respected.
26. Thailand also alleges that the Panel' s due process violation was "exacerbated" 38 by the fact
that the Panel did not accord considerable deference to Thailand's interpretation of its own law. This
is because, in Thailand's view, where the only ev idence suggesting that sales of domestic cigarettes
need not be reported in form Por.Por.30 was expe rt testimony, and Thailand had informed the Panel
that these sales had to be reported in that form, the Panel "could have and should have" 39 given
deference to Thailand's interpretation of its own law.
27. Thailand contends that the Panel's relian ce on the Appellate Body's statement in Argentina –
Textiles and Apparel , that working procedures do not constrain panels with "hard and fast rules on
deadlines for submitting evidence", is misplaced for three reasons. 40 First, a panel's working
procedures cannot supersede a panel's due process obligations. Second, the Appellate Body made this
finding in respect of the working procedures of the panel in that dispute, which contained deadlines
for submitting evidence that were less detailed a nd clear than those specified in the Working
Procedures adopted by the Panel in this dispute. Third, the Panel failed to take into account the
Appellate Body's observation that prima facie evidence must be submitted during the first procedural
stage of the panel proceedings.
28. Thailand also argues that the Panel failed to comply with paragraph 15 of its Working
Procedures by accepting and relying upon Exhibi t PHL-289. According to Thailand, under
Article 12.1 of the DSU, panels are required to co mply with working procedures that are adopted in
agreement with the parties. Paragraph 15 of the Panel's Working Procedures es tablishes, as a general
rule, that evidence cannot be submitted after the firs t substantive meeting, and that evidence may be
submitted after this deadline onl y in exceptional circumstances, provided that good cause is shown
and the other party is afforded an opportunity to comment. 41 However, the Panel neither rejected

38Thailand's appellant's submission, para. 173 (referring to Panel Report, US – Section 301 Trade Act ,
para. 7.19).
40Thailand's appellant's submission, para. 176 (quoting Panel Report, para. 6.125, in turn quoting
Appellate Body Report, Argentina – Textiles and Apparel, paras. 79 and 80).
41Paragraph 15 of the Panel's Working Procedures provides:
The parties shall submit all factual evidence to the Panel no later than the
first substantive meeting, except with respect to factual evidence 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, the other party shall be accorded a
period of time for comment, as appropriate.

Exhibit PHL-289 as untimely, nor accepted it subject to a showing of good cause and the provision to
Thailand of an opportunity to comment. Moreover, Exhibit PHL-289 cannot be classified as rebuttal
evidence because it was crucial to the Philippines' prima facie case, and a piece of evidence cannot be
rebuttal evidence and prima facie evidence at the same time. Nor could Exhibit PHL-289 be deemed
to have been necessary for the Philippines' comments on Thailand's responses to the Panel's questions,
since the opportunity to comment on answers provided by the other party is not intended to provide a
fresh opportunity to rectify or expand prima facie evidence. Thailand adds that there is no reason
why the Philippines could not have submitted the expert testimony contained in Exhibit PHL-289
earlier in the proceedings so as to permit Thailand to respond to it.
(c) Thailand's Defence Under Article XX(d) of the GATT 1994
29. Thailand requests the Appellate Body to rever se the Panel's finding that Thailand did not
discharge its burden of establishing its defe nce under Article XX(d) of the GATT 1994 on the
grounds that the Panel committed legal error in so finding. Furthermore, because the Panel's failure to
conduct the correct legal analysis "effectively deprived Thailand of its right to assert its Article XX(d)
defence"
42, Thailand requests the Appellate Body to reverse the Panel's finding of inconsistency under
Article III:4 on the grounds that it is also legally flawed.
30. Thailand contends that the Panel's reasoning in respect of Thailand's defence under
Article XX(d) was circular. Before the Panel, Thailand had argued that, even if the additional
administrative requirements were found to be incons istent with Article III:4, those requirements are
justified under Article XX(d) because they are necessary to secure compliance with "the obligation to
pay VAT" and to "combat smuggling, including tax avoidance by cont raband and counterfeit
cigarettes".
43 Although an essential step in the analysis of an Article XX(d) defence is to identify the
laws or regulations with which the measure at issue is asserted to secure compliance, the Panel in this
case failed to identify the Thai laws or regula tions with which the additional administrative
requirements secure compliance. Instead, in para graph 7.758, the Panel simply referred back to
Section VII.F.6(b)(ii) of its Report, where it had found the additional administrative requirements to
be inconsistent with Article III:4. Therefore, the Panel erroneously conc luded that the additional
administrative requirements cannot be justified under Article XX(d) because the same additional
administrative requirements had been found to be in consistent with Article III:4 of the GATT 1994.
This circular reasoning led the Panel to commit a fundamental error of legal analysis in its rejection of
Thailand's defence under Article XX(d). Thailand adds that, even if the Panel's cross-reference could
be rewritten as having intended to be a reference to the Panel's findi ng under Article III:2, the Panel's

analysis under Article XX(d) would remain circular, because that finding was based on the same
additional administrative requirements with resp ect to which Thailand asserted its Article XX(d)
defence.
3. Article X:3(b) of the GATT 1994
31. Thailand requests the Appellate Body to reve rse the Panel's finding that Thailand acted
inconsistently with Article X:3(b) of the GATT 1994 by failing to maintain or institute independent
review tribunals or procedures for the prompt review of guarantee decisions. Thailand contends that
the Panel erred in concluding that requiring a guarantee in order to obtain the release of goods
pending a final determination of cu stoms value is "administrative ac tion relating to customs matters"
within the meaning of Article X:3(b). In the even t that the Appellate Body rejects this allegation of
error, Thailand asserts that providing for a right of appeal of guarantee decisions upon the final
assessment of customs duties satisfies Thailand's obligations under Article X:3(b).
32. With respect to the allegation that the Panel erred in finding that guarantee decisions are
covered by Article X:3(b), Thailand argues th at: (i) the ordinary meaning of the phrase
"administrative action relating to customs matters" in Article X:3(b) does not include provisional
measures such as customs guarantees; (ii) the contex t of Article X:3(b) supports the conclusion that
the acceptance of guarantees in the sense of Article 13 of the Agreement on Customs Valuation does
not fall within the scope of "administrative action re lating to customs matters"; and (iii) the "object
and purpose of the treaty" supports the conclusion th at the acceptance of guarantees is not within the
scope of Article X:3(b).
33. Thailand submits that the ordinary meaning of the phrase "administrative action relating to
customs matters" in Article X:3(b) does not incl ude provisional measures such as customs guarantees
for three reasons. First, dictionary definitions of the words making up the phrase "administrative
action relating to customs matters" are not dispositive in this case. Because it is inconceivable that all
government acts relating to customs matters fall within the scope of Article X:3(b), Thailand
maintains that it is necessary to assess the "surrounding circumstances" 44 in order properly to assess
the common intention of the parties.
34. Second, referring to the Panel's statement th at "the provisional characteristic of an
administrative action or determination [may] render su ch an action or determination to fall outside the

44Thailand's appellant's submission, para. 238 (quoting Appellate Body Report, EC – Chicken Cuts ,
para. 175).

scope of Article X:3(b)"45, Thailand alleges that the Panel failed properly to analyze whether requiring
a guarantee was of such a provisional character. Tha iland also refers to the Appellate Body report in
US – Shrimp (Thailand) / US – Customs Bond Directive in support of the proposition that a security
required under the Ad Note to paragraphs 2 and 3 of Article VI of the GATT 1994 is an accessory or
ancillary obligation. Because the guarantees in th e present case are also "provisional" and "accessory
or ancillary" to the final duty liability 46, Thailand submits that they should be regarded as a
component of the final determination of customs duties, rather than as distinct decisions.
35. Third, Thailand argues that acceptance of the Panel's view that guarantees fall within the
ambit of Article X:3(b) would "result in unduly interfering with" 47 the customs administration's
decision-making process. Because a guarantee is intrin sically linked to the determination of the final
customs value, decisions relating to a guarantee are within both the technical expertise and
prerogative of the customs administration. Ther efore, contends Thailand, allowing a guarantee
decision to be challenged before the final duty asse ssment would curtail the power of the competent
official to assess such duty.
36. Thailand further submits that the context of Article X:3(b) supports the conclusion that
guarantee decisions do not fall within the scope of Article X:3(b). Specifically, Thailand refers to
Article X:1 and Article X:3(a) of the GATT 1994, Articles 11, 12, and 13 of the Agreement on
Customs Valuation , as well as to Articles 7, 13, and 9.5 of the Agreement on Implementation of
Article VI of the General Agreement on Tariffs and Trade 1994 (the "Anti-Dumping Agreement") and
Articles 2(j) and 3(h) of the Agreement on Rules of Origin. For Thailand, these provisions support the
conclusion that the guarantee decisions at issu e do not fall within the scope of the phrase
"administrative action relating to customs matters" in Article X:3(b) of the GATT 1994.
37. With respect to Article X:1 of the GATT 1994, Thailand argues that, while this provision lists
several different types of measures, namely, "[l]aws, regulations, judicial decisions and administrative
rulings of general application", it contains no reference to guara ntees or other securities. This
suggests that the drafters did not intend Article X:3( b) to apply to provisional steps such as guarantee
decisions. Thailand also refers to Article 13 of the Agreement on Customs Valuation, which relates to
the possibility for customs to rele ase goods in exchange for a guar antee. Because Article 13 itself
does not contain a reference to a right of appeal ag ainst the imposition of a guarantee, there is no such
right. If the drafters had intended to provide for a right to appeal, "they could and would have said

47Thailand's appellant's submission, paras. 245 and 248 (quoting Panel Report, para. 7.1035).

so".48 Thailand also refers to Article 11 of the Agreement on Customs Valuation , arguing that this
Article provides for a right to appeal only with r espect to a determination of customs value and that
the lack of express provision for an appeal agai nst the taking of a guarantee indicates that the
negotiators did not intend to provide for the possibility of such appeal.
38. Thailand also refers to Articles 7, 9.5, and 13 of the Anti-Dumping Agreement. For Thailand,
the absence of a right to appeal against either provisional measures or "new shipper" guarantees under
the Anti-Dumping Agreement suggests that guarantees taken to secure payment of customs duties do
not fall within the scope of "administrative action rela ting to customs matters" in Article X:3(b) of the
GATT 1994. Thailand also refers to Articles 2(j) and 3(h) of the Agreement on Rules of Origin .
These provisions stipulate that WTO Members must ensure that "any administrative action which they
take in relation to the determination of origin is reviewable promptly by judicial, arbitral, or
administrative tribunals or procedures". 49 Thailand argues that, because the word "any" is used in
these provisions of the Agreement on Rules of Origin but not in Article X:3(b) of the GATT 1994,
certain "administrative action[s]", such as the taki ng of a guarantee, are not within the scope of
Article X:3(b).
39. In addition, Thailand argues that considera tions of object and purpose also support the
conclusion that the acceptance of guarantees is not with in the scope of Article X:3(b). For Thailand,
the principle of due process, which the Panel cons idered to be expressed in Article X:3, does not
compel the conclusion that there must be a right of appeal against provisional steps. Procedural due
process is not a technical concept with fixed content unrelated to time, place, and circumstance, but
must be defined in the light of th e particular circumstances of the case. 50 The doctrine of "ripeness"
and deference to the expertise of an administra tive agency must also be taken into account. 51
Thailand argues that "it does not make practical sen se to require courts to intervene in a decision-
making process within the technical expertise of an administrative agency before that agency has had
an opportunity to consider the issue fully and issue a final decision."52
40. In the event that the Appellate Body upholds the Panel's finding that requiring a guarantee in
order to obtain the release of goods pending a fi nal determination of cu stoms value constitutes
"administrative action relating to customs matters", Thailand argues that providing for a right of
appeal upon final assessment of duties none theless satisfies Thailand's obligations under

49Thailand's appellant's submission, para. 272. (emphasis added by Thailand)
50Thailand's appellant's submission, para. 277 (quoting United States Supreme Court, Cafeteria
Workers v. McElroy, 367 U.S. 886, 895 (1961)).
51Thailand's appellant's submission, para. 278 (referring to United St ates Supreme Court, Abbott
Laboratories v. Gardner, 387 U.S. 136 (1967)).

Article X:3(b). Allowing the challenge of a gua rantee before the issuance of the final notice of
customs value would unduly interfere with the cu stoms administration's decision-making process in
an area within its technical expertise. Thailand s ubmits that this concern ca n be reconciled with the
right of appeal under Article X:3(b) if it were cons idered to be consistent with that provision to
require importers to await the final determination of customs value before exercising their right of
appeal in respect of the guarantee. Thailand ass erts that this point wa s acknowledged by the Panel
when it stated that it does "not … consider that the existence of interposing steps prior to an
independent review in itself constitutes a systemic flaw that prevents Thailand from maintaining
procedures for prompt review of administrative actions under Article X:3(b)". 53 Thailand however
alleges that the Panel did not explain "why other interposing steps might not result in a violation of
Article X:3(b) but an interposing step in the fo rm of a requirement to await the final assessment
before appealing a guarantee would always do so".54
B. Arguments of the Philippines – Appellee
1. Article III:2 of the GATT 1994
41. The Philippines requests the Appellate Body to uphold the Panel's finding that Thailand acted
inconsistently with Article III:2, first sentence, of the GATT 1994. The Philippines contends that the
Panel properly based its finding on di fferences in the levels of ta xation that apply to resales of
domestic and imported cigare ttes resulting from Thailand's de jure exemption from VAT liability for
resellers of domestic cigarettes. The Philippines al so maintains that discriminatory taxation cannot be
cured by a right to claim an offsetting tax credit, an d that, even if it could, the Panel properly found
that resellers of imported cigarettes may be de nied a tax credit in defined circumstances under
Thai law.
42. The Philippines argues that de jure discriminatory taxation be tween imported and domestic
cigarettes constitutes a sufficient basis for a finding of inconsistency under Article III:2. Article III:2
requires that goods shall not be subject to internal taxes in excess of those applied to domestic goods
and, as Thailand acknowledges, the first sentence of Article III:2 is violated if imported goods are
subject to "even the slightest difference" 55 in taxation. Moreover, the Philippines argues, de jure
discrimination arises if it can be demonstrated on the basis of the words of the relevant legislation,
regulation, or other legal instrument constituting the measure.

54Thailand's appellant's submission, para. 297. (original emphasis)
55Philippines' appellee's submission, para. 58 (referring to Thailand's appellant's submission,
footnote 30 to para. 62).

43. The Philippines considers that the Panel correctly found that resales of imported cigarettes are
subject to internal taxes in excess of those applicab le to resales of domestic cigarettes. Resellers of
imported cigarettes are obliged to account fully to Thai fiscal authorities for the VAT liability on
taxable resales. The process of securing a tax credit does not mean that resales of imported cigarettes
are not subject to tax, but is rather a mechanism for accounting for that tax liability. The Panel also
correctly found that, in contrast, resellers of dom estic cigarettes are exempt from VAT on resales of
cigarettes, and therefore are not subject to any VAT liability. Because resales of imported cigarettes
are subject to a tax rate of seven per cent, whereas resales of domestic cigarettes are subject to zero
tax, a comparison of the relative tax burdens sh ows excess taxation based on the origin of the
cigarettes. For these reasons, the Philippines maintain s that Thailand errs in arguing that the Panel's
finding under Article III:2 was based on different ad ministrative requirements, and not on different
tax burdens.
44. With respect to Thailand's argument that VAT liability is offset by an input tax credit, the
Philippines maintains that, having established that imported cigarettes are subject to VAT in excess of
that applicable to like domestic cigarettes, the Pa nel was not required to examine the legal conditions
under which Thailand grants offsetting tax credits. In Canada – Patent Term , the Appellate Body
rejected the argument that Canada had met its oblig ation to provide patent protection for 20 years,
under Article 33 of the Agreement on Trade-Related Aspects of Intellectual Property Rights (the
"TRIPS Agreement"). In that case, Canada granted a 17-year patent term, which patent holders could
extend to 20 years by taking specific procedural action.
56 Similarly, Article III:2 of the GATT 1994
prevents a Member from making its compliance wi th the national treatment obligations depend on
private party action. De jure discrimination cannot be cured by the fact that a private party may take
action in an attempt to counteract that discrimination. In the Philippines' view, if a private party fails
to take all possible action available to it under a Member's law, the adverse consequences of the
private party's lack of action are the responsibility of the Member.
45. The Philippines further submits that the Panel correctly found that resellers of imported
cigarettes are not automatically entitled to a tax cred it to offset the discriminatory obligation to pay
VAT. Thailand admitted before the Panel, and accepts on appeal, that a tax credit is available only if
a reseller of imported cigarettes complies with the relevant administrative requirements. In particular,
Thailand accepts that a tax credit is not granted if th e reseller of imported cigarettes: (i) fails to file
form Por.Por.30; (ii) fails to claim a tax credit in form Por.Por.30; (iii) fails to produce an invoice as
proof of purchase; and (iv) fails to produce a complete and accurate invoice. Section 82/5 of the Thai

56Philippines' appellee's submission, para. 73 (referring to Appellate Body Report, Canada – Patent
Term, paras. 91 and 92).

Revenue Code 57 sets forth other circumstances in which a reseller of imported cigarettes can be
denied an input tax credit. Accordingly, the Ph ilippines considers that the Panel properly rejected
Thailand's argument that a reseller of imported cigare ttes can never incur a net liability on the resale
of cigarettes, and correctly found that there are ci rcumstances, defined under Thai law, in which a
reseller of imported cigarettes would not receive a tax credit.
46. The Philippines also maintains that the Panel properly dismissed Thailand's argument that an
inconsistency does not arise under Article III:2 if a reseller of imported cigarettes does not obtain a
tax credit due to the reseller's own failure to exercise its right to claim a tax credit. It is the Thai
Government, and not a private reseller, that establis hes the legal conditions that determine whether a
reseller of imported cigarettes is entitled to offset the discriminatory obligation to pay VAT. In
contrast, resellers of domestic cigarettes are never required to comply with the tax credit requirements
in connection with resales of dom estic cigarettes, because they are automatically exempt from VAT
on these sales. The Philippines argues that, under Article III of the GATT 1994, it is Thailand, and
not a private reseller, that is obliged to ensure th at imported cigarettes benefit, in all circumstances,
from equality of competitive conditions.
47. The Philippines takes note of Thailand's argument that it should not be obliged to grant a tax
credit to resellers of imported cigarettes if they cannot demonstrate that the claimed credit results from
actual and legitimate purchases of cigarettes. This, the Philippines asserts, "is the same argument in
another guise".
58 It is Thailand, and not a private reseller, that is responsible under Article III:2 for
establishing a regulatory framework in which importe d goods are not subject to taxation in excess of
that applied to like domestic cigarettes. This does not imply that Members cannot, as a general
matter, insist that taxpayers comply with legal conditions to obtain a tax credit. The reason Thailand's
VAT system discriminates, the Philippines submits, is because resales of domestic cigarettes are
de jure exempt from VAT liability, and are therefore exempt from all requirements relating to tax
credits.
2. Article III:4 of the GATT 1994
48. The Philippines requests the Appellate Body to uphold the Panel's finding that Thailand acted
inconsistently with Article III:4 of the GATT 1994. The Philippines further requests the Appellate
Body to reject Thailand's arguments that the Pane l acted inconsistently with Article 11 of the DSU
and paragraph 15 of its Working Procedures in ac cepting the expert opinion contained in Exhibit

57Government of the Kingdom of Thailand, The Council of Regency, The Act Promulgating the
Revenue Code, B.E. 2481 (Panel Exhibit PHL-94).
58Philippines' appellee's submission, para. 86.

PHL-289, as well as Thailand's appeal of the Panel's finding on Thailand's defence under
Article XX(d) of the GATT 1994.
(a) Article III:4: "treatment no less favourable"
49. The Philippines contends that the Panel co rrectly found that Thailand subjects imported
cigarettes to less favourable treatment than dom estic cigarettes by imposing additional VAT-related
administrative requirements only on resellers of im ported cigarettes. "Less favourable treatment"
within the meaning of Article III:4 is accorded wher e treatment does not ensure effective equality of
opportunities, and does not protect expectations on the competitive relationship between imported and
domestic products. Article III:4 requires that gove rnment regulation on imported and like domestic
products be "perfectly neutral". 59 The Philippines adds that, when government regulation subjects
imported goods to administrative burdens that ar e not imposed on like domestic goods, this is not
neutral, and upsets the equality of competitive conditions.
50. The Philippines considers that the Panel correc tly relied on WTO jurisprudence in support of
its finding. For instance, the Appellate Body stated in US – Section 211 Appropriations Act that
"even the possibility that [foreign nationals] face two hurdles is inherently less favourable than the
undisputed fact that United States [nationals] face only one". 60 Moreover, the panel in Canada –
Wheat Exports and Grain Imports found that "less favourable treatment in this case results from the
imposition of an additional requirement on imported grain t hat does not apply to domestic grain ".61
Accordingly, to the extent that a Member subject s imported products to administrative requirements
to which domestic products are not subject, this gi ves rise to unequal treatment, which is inherently
less favourable for imported products. This is because the additional requirements prevent traders
from making a "free choice between like domestic and imported [products] on the basis of purely
commercial considerations".62 This situation is to be distinguished from one in which different sets of
requirements are imposed on imported and domestic pr oducts. In such circumstances, the Philippines
maintains, a panel may be required to conduct a cl oser examination of the measures to determine
whether the different administrative requirement s disturb the effective equality of competitive
conditions to the detriment of imported goods and thus constitute less favourable treatment.

59Philippines' appellee's submission, para. 123.
60Philippines' appellee's submission, para. 125 (quoting Appellate Body Report, US – Section 211
61Philippines' appellee's submission, para. 126 (quoting Panel Report, Canada – Wheat Exports and
Grain Imports, para. 6.190). (emphasis added by the Philippines)
62Philippines' appellee's submission, para. 130 (quoting Appellate Body Report, US – FSC
(Article 21.5 – EC), para. 219).

51. The Philippines recalls that the Panel found that Thailand subjects resales of imported
cigarettes to a number of VAT administrative requirements and that such requirements do not apply in
connection with resales of domestic cigarettes. It follows from this alone that the treatment accorded
to imported cigarettes is less favourable, and there is no need to inquire into the "impact of the
discriminatory treatment" or the "trade effects" of such treatment. 63 Thus, Thailand's appeal, which
focuses on, and finds fault with, the Panel's asse ssment of "the degree of likelihood that any
differences in treatment will have any negativ e impact on the competitive position of imports" 64, is
misplaced. In addition, although it was not requi red to do so, the Panel sought further confirmation
for its finding by examining the ways in which Thailand's discriminatory administrative requirements
upset the equality of competitive conditions in the Th ai market. The Panel correctly concluded, on
the basis of evidence of price elasticity and switchi ng patterns, that the close competitive relationship
between imported and domestic cigarettes means that any unequal fiscal treatment is sufficient to
disturb the equality of competitive conditions. Moreove r, the Panel correctly linked the effects of the
additional administrative requirements with the operati ng costs of businesses, and stated that the costs
of compliance with such administrative require ments could affect business decisions and limit
opportunities for imported cigarettes. The Philippi nes considers it noteworthy that more than
20 per cent of cigarette retailers have opted not to sell imported cigarettes. Although there is no
evidence as to why they do not resell imported ciga rettes, these retailers avoid the administrative
requirements by reselling only domestic cigarettes. Regarding Thailand's assertion that, by complying
with the additional requirements, resellers of impor ted cigarettes may obtain certain gains in the form
of additional tax credits, the Philippines argues that the fact that the obligation to pay VAT may be
offset in some instances "does not cure the de jure discrimination".65 The Philippines emphasizes that
WTO jurisprudence clearly establishes that more fa vourable treatment of imported products in some
instances does not justify less favourable treatment in other instances.
(b) Article 11 of the DSU: the Panel's Treatment of Exhibit PHL-289
52. With respect to the Panel's acceptance of and reliance on Exhibit PHL-289, the Philippines
argues that Thailand's due process rights were prope rly respected by the Panel because Thailand had
opportunities to comment on Exhibit PHL-289 and took advantage of one of them. The exercise of
due process rights involves responsibilities for the party invoking such rights, and parties should bring

63Philippines' appellee's submission, para. 138.
64Philippines' appellee's submission, para. 136 (quoting Thailand's appellant's submission, footnote 115
to para. 124).

alleged procedural deficiencies to a panel's attention at the "earliest possible opportunity".66 Although
the Philippines submitted the 2000 DG Revenue ruling 67 at the second substantive meeting, Thailand
chose to submit the 1995 DG Revenue ruling 68 only in its responses to Panel questions after the
second substantive meeting. Conversely, the Ph ilippines submitted Exhibit PHL-289 in its comments
on those responses, which was the first opportunity after Thailand filed the 1995 DG Revenue ruling.
In any event, the Philippines ma intains, Thailand was responsible for seeking an opportunity to
comment on Exhibit PHL-289, but instead opted to object to this evidence only in its comments on
the Panel's Interim Report, where Thailand made largely the same arguments it now raises on appeal.
53. The Philippines also contends that Exhibit PH L-289 was properly submitted before the Panel,
in accordance with paragraph 15 of its Working Pr ocedures, because it is rebuttal evidence provided
in comments on Thailand's answers to Panel questio ns. The Philippines asserts that Exhibit PHL-289
was submitted to support the Philippines' comments on the 1995 DG Revenue ruling that had been
attached to Thailand's responses to Panel questions. The first sentence of paragraph 15 of the Panel's
Working Procedures expressly allows the submissi on of evidence with comments on the other party's
responses to questions. The expert testimony subm itted in Exhibit PHL-289 stated that its purpose
was to "provide an opinion on [the 1995 DG Revenue ruling]". 69 Had Thailand not submitted the
1995 DG Revenue ruling, the Philippines would have had no cause to submit this expert testimony.
Thus, Exhibit PHL-289 falls within the category of evidence set out in the first sentence of
paragraph 15 of the Panel's Working Procedures, as opposed to that set out in the second sentence, for
which a showing of good cause and an opportunity to respond is required. At any rate, the Philippines
asserts, if Thailand considered that the evidence was not submitted consistently with paragraph 15, the
proper course of action for Thaila nd would have been to object immediately to Exhibit PHL-289,
rather than to wait until its comments on the Interim Report.
54. The Philippines argues that the Panel did not gi ve decisive weight to Exhibit PHL-289 and
did not act inconsistently with Article 11 of the DS U. Rather, the Panel reached its finding that sales
of domestic cigarettes need not be reported in form Por.Por.30 based on the totality of the evidence.
Article 11 of the DSU affords panels a "certain ma rgin of discretion" in assessing the credibility and

66Philippines' appellee's submission, para. 186 (quoting Appellate Body Report, Canada – Wheat
Exports and Grain Imports, para. 205, in turn quoting Appellate Body Report, US – Carbon Steel, para. 123).
67Ruling by the Director-General of the Thai Revenue Department, Gor.Kor. 0811/Por.633, 27 January
2000 (Panel Exhibit PHL-253).
68Ruling by the Director-General of the Thai Revenue Department, Gor.Kor. 0802/Por.22836,
10 October 1995 (Panel Exhibit THA-96).

weight to be ascribed to a given piece of evidence.70 Even in its Interim Report, the Panel did not give
decisive weight to Exhibit PHL-289, but simply explained that the expert testimony in Exhibit
PHL-289 confirmed the change in the requirement to report sales of domestic cigarettes in form
Por.Por.30. The Panel's use of the word "only" to describe the evidence re lating to the change in
reporting practice was incorrect, and, following a su ggestion by the Philippines, the Panel corrected
this mistake in the Panel Report. In any case, the Philippines consid ers that, under Article 17 of the
DSU, the Interim Report is not subject to appellate review, and that it is improper for Thailand to base
its appeal on the Panel's findings in the Interim Report.
(c) Thailand's Defence Under Article XX(d) of the GATT 1994
55. The Philippines requests the Appellate Body to re ject Thailand's appeal of the Panel's finding
on Thailand's defence under Article XX(d) of the GATT 1994. The Panel properly concluded that
Article XX(d) does not justify one WTO-inconsis tent measure (discriminatory administrative
requirements on imported cigarettes) on the grounds that it secures compliance with another
WTO-inconsistent measure (discriminatory taxati on on imported cigarettes). The Philippines also
points out that Thailand's arguments with respec t to its Article XX(d) defence were not well
developed, consisting of a total of six paragraphs in all of its submissions to the Panel.
56. In the view of the Philippines, the cross-refere nce made by the Panel, in paragraph 7.758 of
its Report, is a clerical error rather than, as Thailand claims, a "fundamental" 71 error. There is no
basis in the Panel's reasoning to suggest that its substantive examinati on of Thailand's defence
consisted of a circular analysis of whether th e administrative requirements are necessary to secure
compliance with those same administrative require ments. To the contrary, the Panel properly
articulated the legal standard under Article XX(d) as involving two different measures, one to be
justified and the other that must be WTO-consistent. The Panel also identified Thailand's argument as
being that the "administrative requirements" are necessary to secure compliance "with the Thai VAT
laws". The Panel therefore correctly assessed whet her the inconsistent measures were necessary to
secure compliance with different measures. Thus, the Philippines believes that the Panel's reasoning
reveals that the cross-reference in paragraph 7.758 was simply a mistake: the Panel referred to
Section VII.F.6(b)(ii) of its Report, which deal s with discriminatory administrative requirements,
instead of to Section VII.E.5(b)(ii), which deals with discriminatory taxation. Accordingly, the
Philippines requests the Appellate Body to modify this clerical error, replacing the reference to

70Philippines' appellee's submission, para. 212 (quoting Appellate Body Report, US – Continued
Zeroing, para. 331, in turn referring to Appellate Body Report, EC – Hormones, para. 132, and Appellate Body
Report, EC – Sardines, para. 299).
71Philippines' appellee's submission, para. 238 (referring to Thailand's appellant's submission,
para. 153).

"Section VII.F.6(b)(ii)" with a reference to "Sectio n VII.E.5(b)(ii)". The Philippines further rejects
Thailand's contention that the Panel's analysis under Article XX(d) would remain circular even if the
cross-reference were rewritten in this way, b ecause the Panel's finding under Article III:2 of the
GATT 1994 was based on the discriminatory obligati on to pay VAT, rather than, as Thailand asserts,
on the discriminatory administrative requirements with respect to which Thailand advanced its
Article XX(d) defence.
57. The Philippines also disagrees with Thailand's contention that, should the Appellate Body
reverse the Panel's finding under Article XX(d), it should also reverse the Panel's finding under
Article III:4. The interpretation and/or applicati on of a substantive obligation is distinct from an
analysis of an exception set out in a separate legal provision, and reversal of a finding under the latter
does not entail reversal of a finding under the former. The Philippines also observes that Thailand has
not requested the Appellate Body to complete the analysis of its Article XX(d) defence.
3. Article X:3(b) of the GATT 1994
58. The Philippines requests the Appellate Body to uphold the Panel's finding that Thailand acted
inconsistently with Article X:3(b) of the GATT 1994 by failing to maintain or institute independent
review tribunals or procedures for the prompt revi ew of guarantee decisions. The Philippines argues
that the Panel correctly found that requiring a guarantee in order to obtain the release of goods
pending a final determination of cu stoms value is "administrative ac tion relating to customs matters"
within the meaning of Article X:3(b). The Philippi nes further submits that the Panel correctly found
that providing for independent review of guarantees only following the final determination of customs
value does not satisfy Article X:3(b) of the GATT 1994.
59. The Philippines contends that the legal char acter and purpose of a customs guarantee, the
context of Article X:3(b), as well as the object and purpose of Article X:3(b), confirm that guarantee
decisions constitute "administrative action relatin g to customs matters" within the meaning of
Article X:3(b). Guarantees involve a process that is related to, but separate from, the customs
valuation process. A guarantee decision establishes the legal conditions under which an importer may
withdraw its goods from customs, pending the final asse ssment of the customs value. Thus, the Panel
correctly found that a guarantee 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". 72
For the Philippines, a guarantee is not an integral pa rt of the determination of customs value and does
not, as Thailand asserts, constitute a provisional decisi on regarding customs value. Instead, it is a

underlining added by the Philippines)).

final administrative action establishing the defin ite legal conditions under which the importer may
withdraw its goods from customs, and has immediate consequences for importers and market access.
As the panel in Colombia – Ports of Entry recognized, a guarantee is legally distinct from the
payment obligation that it secures. 73 While acknowledging the Appella te Body's statement in
US – Shrimp (Thailand) / US – Customs Bond Directive that a guarantee obligation is "ancillary" and
"intrinsically linked to" the obligation it secures 74, the Philippines argues that this does not mean that
the two obligations become an "indistinguishable whole".75
60. With respect to the context of Article X:3( b), the Philippines notes that Article 11 of the
Agreement on Customs Valuation limits independent review to fi nal "determination[s] of customs
value", and that Article 13 of the Anti-Dumping Agreement limits independent review to "final"
anti-dumping determinations. The Panel was correct to conclude that the absen ce of the word "final"
in Article X:3(b) suggests that independent review under Article X:3(b) "is not necessarily confined to
final administrative actions".76 The Philippines also endorses the Pa nel's reasoning that the use of the
term "customs matters" in Article X:3(b), as opposed to "customs value" in Article 11.1 of the
Agreement on Customs Valuation , suggests that the scope of Article X:3(b) is broader than that of
Article 11.1.
61. The Philippines characterizes as misplaced Thailand's contextual arguments based on
Article X:1 of the GATT 1994 and Article 12 of the Agreement on Customs Valuation. In response to
Thailand's contention that the absence of a referenc e to guarantee decisions in Article X:1 suggests
that Article X:3(b) of the GATT 1994 does not apply to guarantee decisions, the Philippines notes that
Thailand has not appealed the Panel's finding th at rules relating to guarantees are covered by
Article X:1 as rules pertaining to customs valua tion. Moreover, the Philippines argues that the
absence of a reference to Article X of the GATT 1994 in Article 12 of the Agreement on Customs
Valuation cannot be read to restrict the obligation to provide for independent review pursuant to
Article X:3(b).
62. The Philippines also disagrees with Thailand's c ontextual arguments based on Article 7.2 and
Article 9.5 of the Anti-Dumping Agreement . For the Philippines, there is a significant difference
between provisional anti-dumping measures and gua rantees provided pending completion of "new

73Philippines' appellee's submission, para. 290 (quoting Panel Report, Colombia – Ports of Entry ,
para. 7.88).
74Philippines' appellee's submission, para. 294 (referring to Thailand's appellant's submission,
paras. 240-243, in turn quoting Appellate Body Report, US – Shrimp (Thailand) / US – Customs Bond Directive,
para. 231).
75Philippines' appellee's submission, para. 295.
by the Philippines)

shipper" reviews under the Anti-Dumping Agreement, on the one hand, and a customs guarantee, on
the other hand. Both a provisional anti-dumping measure and a "new shipper" guarantee can be
imposed for only a short period. Once the aut hority completes the relevant proceeding, the
provisional measure or security is automatically removed and replaced by a definitive anti-dumping
measure. In contrast, the Philippines maintain s, a customs guarantee may be imposed for an
indefinite period of time, and thus has the potential of imposing long-term costs on the importer.
63. The Philippines submits that the object and purpos e of Article X:3(b) confirms the Panel's
conclusion that a customs guarantee is administrativ e action relating to customs matters falling within
the scope of Article X:3(b). The Panel was corr ect in stating that the underlying objective of
Article X:3(b) is the preservation of due process right s for affected parties, and in finding that a
guarantee decision can cause an immediate commercially adverse impact on importers if the level of a
guarantee is excessive. The Philippines disagrees with Thailand that, because customs guarantee
decisions are only provisional measures, they are not "ripe" for independent review, and that courts
should therefore not intervene in a decision-making pr ocess that falls within the technical expertise of
an administrative agency. Thailand itself has illust rated, in another dispute, the importance of
permitting a challenge to a guarantee decision for due process reasons, when it successfully
challenged in WTO dispute settlement a guarantee imposed by the United States to cover potential
liability for definitive anti-dumping duties. 77 There was no suggestion in that case that such review
prejudiced or unduly interfered with the ability of the United States Department of Commerce to
assess final anti-dumping duties. The Philippines adds that, irrespective of the level of a guarantee or
the basis for its determination, customs author ities are required to determine the customs value
consistently with the relevant provisions of the Agreement on Customs Valuation , and that customs
law is not so complex and difficult that governme ntal actions must be immune from scrutiny by
independent tribunals. By interpreting Article X: 3(b) to encompass custom s guarantees, the Panel
ensured that importers are entitled to seek independe nt review to contest the amount of a guarantee,
thereby preserving the competitive opportunities that Article X of the GATT 1994 protects.
64. Finally, the Philippines takes issue with Tha iland's conditional appeal requesting that, if a
guarantee decision is considered to be an "admin istrative action relating to customs matters", the
Appellate Body find that the provision of a ri ght of appeal upon final assessment of customs duties
nonetheless satisfies Thailand's obligations under Artic le X:3(b). Under Thai law, no independent
tribunal enjoys jurisdiction to hear a challenge to a guarantee decision separately from the appeal of a
final assessment of customs value. The Panel was correct to find that permitting review of guarantee

77Philippines' appellee's submission, para. 319 (referring to Appellate Body Report, US – Shrimp
(Thailand) / US – Customs Bond Directive, paras. 258-260).

decisions only after the final determination of cust oms value has been issued does not comply with
Article X:3(b). Such a system is not a system for the prompt review and correction of guarantee
decisions, but only a system of review of customs valuation determinations. If an importer decides
not to import goods because a guarantee imposes too gr eat a financial burden, there would never be a
final determination of customs value, and it woul d thus be impossible for an importer to obtain
independent review of a guarantee decision. Even in situations in which importation occurs and a
final customs valuation determina tion is made, the requirement to await that determination before
pursuing independent review of a guarantee results in unnecessary delays.
65. The Philippines disagrees with Thailand's argumen t that, since the Panel found that it is, in
principle, acceptable under Article X:3(b) to requir e that importers pursue internal review before
seeking independent review of a customs valuation determination, it must also be permissible to
compel importers to await a final customs value determination before seeking independent review of a
guarantee decision. A requirement first to seek inte rnal review of a customs valuation determination
does not create a lacuna in the review system, thereby making independent review of a final
determination impossible in certain situations. In contrast, requiring importers to await a final
customs value determination before seeking independent review of a guarantee decision does give rise
to such a lacuna. In addition, the Philippines c ontends that, while internal review of a customs
valuation determination may contri bute to the resolution of the valuation issue, waiting for the
issuance of the final customs value determinati on does not contribute to the prompt review and
correction of a guarantee decision.
C. Arguments of the Third Participants
1. Australia
66. Australia submits that, in examining Thaila nd's appeal under Article III:2 of the GATT 1994,
the Appellate Body must first examine the threshold issue of whether the Panel correctly identified the
measure at issue. Australia considers that the Panel was unclear as to whether this was the VAT
scheme per se, or whether the measure comprises the mechan isms used to collect the VAT. Australia
considers it difficult to separate each component of Thailand's VAT regime, and observes that
whether a sale of a product is exempt from VAT, or whether a reseller may apply for input tax credits
to relieve itself of the tax burden, is relevant and indistinguishable from the tax regime itself.
67. Referring to the reasoning of the panel in Argentina – Hides and Leather , and the GATT
panel in US – Malt Beverages , Australia submits that the administrative nature of Thailand's tax
collection mechanism does not mean a priori that it falls outside the scope of the first sentence of

Article III:2 of the GATT 1994. In the circumstances of this case, the administrative requirements are
a collection mechanism that affects the calc ulation of the cumulative VAT burden. The
non-fulfilment of the administrative requirements for resellers of imported cigarettes directly results
in a higher tax burden, whereas resellers of dom estic cigarettes are fully exempt from paying VAT.
Accordingly, the collection mechanism itself cons titutes a "tax" for the purposes of Article III:2 as it
potentially results in a higher cumulative tax burde n on the reseller of imported cigarettes. As for
whether the tax burden on imported cigarettes is "in excess" of that on domestic cigarettes, Australia
submits that the additional administrative requirement s applicable to resellers of imported cigarettes,
and the inherent risk of a higher tax burden if these requirements are not met, should be taken into
account. Noting Thailand's acknowledgment that "a risk of excess taxation may give rise to a
violation of Article III:2"
78, Australia points out that, when a clai m for input tax credit by a reseller is
rejected, the actual tax burden is higher, whereas th is risk is not faced by resellers of domestic
cigarettes, which are automatically exempt from VAT.
68. With respect to Thailand's arguments that th e Panel erred in finding that the additional
administrative requirements accord "less favourable treatment" within the meaning of Article III:4 of
the GATT 1994, Australia disagrees with Thailand's contention that "the right to treat imported
products differently may include the right to impo se additional or more complicated requirements so
long as they do not amount to 'less favourable' treatment". 79 Rather, panels and the Appellate Body
have found merely that different treatment is not sufficient for a finding of inconsistency with
Article III:4. While emphasizing that any determination of less favourable treatment must be made on
a case-by-case basis, Australia requests the Appellate Body to take account of the broader systemic
implications of the threshold for a finding of inco nsistency under Article II I:4. For Australia, the
Panel's finding of less favourable treatment base d on its view that the measures "could potentially
affect", or "may potentially modify", the conditions of competition seems to imply a lower threshold
than that used by the panels in China – Publications and Audiovisual Products ("may reasonably be
expected")80 and India – Autos ("is more than likely").81
69. Regarding Thailand's appeal under Article XX( d) of the GATT 1994, Australia expresses
concern that the Panel failed to identify clearly bot h the GATT-inconsistent measure and the "laws or
regulations" with which the GATT-inconsistent measu re secures compliance. This apparent failure

78Australia's third participant's submission, para. 19 (quoting Thailand's appellant's submission,
para. 81).
79Australia's third participant's submission, para. 24 (quoting Thailand's appellant's submission,
80Australia's third participant's submission, para. 26 (quoting Panel Report, China – Publications and
Audiovisual Products, para. 7.1471).
81Australia's third participant's submission, para. 27 (quoting Panel Report, India – Autos, para. 7.201).

"compromised [the Panel's] ability to consider the [Article] XX(d) defence".82 The Panel should have
considered whether the administrative mechanism for the implementation of VAT was designed to
secure compliance with Thailand's VAT regime. In Australia's view, the design of that measure
appears, at least in part, to secure such compliance. Moreover, in determining whether the measure is
"necessary", consideration should have been given to the range of possible alternative measures that
could secure compliance with Thailand's VAT regime. Australia notes, in this regard, the Philippines'
argument before the Panel that Article XX(d) ca nnot justify "both the VAT-related administrative
requirements imposed on resellers of imported cigare ttes and the exemption accorded to resellers of
domestic cigarettes".83
70. Australia supports Thailand's view that the acceptance of a guarantee is a provisional decision
that does not fall within the scope of Article X:3( b) of the GATT 1994. Guarantees are interlocutory
decisions made pending a final customs valuation de termination, and are difficult to distinguish from
that final determination. In the absence of an express reference to a right to appeal at an interlocutory
stage, no such right should be read into Article X:3(b). Noting the Panel's statement that it could
"think of a situation where the provisional characteri stics of an administrative action or determination
would render such an action or determination to fa ll outside the scope of Article X:3(b)", Australia
argues that the Panel then failed to consider wh ether the acceptance of guarantees for the payment of
customs duties may be such a situation. 84 Requiring external review of a provisional decision to
accept a guarantee could effectively pre-empt and interfere with the final customs valuation
determination to be taken by the relevant domestic agency. Australia submits that, so long as the right
to appeal the final determination is capable of ove rturning any stage of the process, then there should
be no right of appeal of individua l, interlocutory stages in that process unless such a right is expressly
provided for, which is not the case under Article X:3(b).
2. European Union
71. With respect to Thailand's appeal under Artic le III:2 of the GATT 1994, the European Union
understands the measure at issue to consist of the VAT exemption on the resale of domestic cigarettes,
as compared to the additional administrative require ments that are imposed on imported cigarettes in
order to obtain the same level of tax burden. The European Union considers that there is a de jure
violation of Article III:2 of the GATT 1994 wh en, for domestic products only, an automatic
exemption from VAT is embedded in the design and structure of the measure, but the same automatic
result is not granted with respect to imported produc ts. The European Union disagrees with Thailand

82Australia's third participant's submission, para. 32.
83Australia's third participant's submission, para. 35. (original underlining)

that, in order to be found inconsistent with Article III:2, first sentence, a measure needs to lead to a
higher tax rate for imported products. Rather, as the panel stated in Argentina – Hides and Leather ,
the "tax burden" need not be th e tax itself, but can also be derived from "aspects of broader tax
systems" that are covered by the disciplines of Article III:2. 85 The European Union adds that the use
of the term "indirectly" in Article III:2 supports th e view that the scope of this provision includes
situations, like the present case, where the measure at issue contains elements that adversely affect
only imported products, by increasing their overall tax burden, as compared to domestic products.
72. The European Union also disagrees with Thaila nd's contention that the analysis of a measure
under the first sentence of Article III:2 must consis t of a mathematical exercise. Such a narrow
interpretation would give WTO Members the possibility to circumvent the norm of Article III:2.
Moreover, it is not appropriate to draw a distinc tion between "substantive" tax measures, such as the
tax rate, and "measures of tax administration", such as the measures at issue in the present case. The
European Union insists that a tax burden can also be of a non-mathematical nature.
73. The European Union observes that Thailand's appeal under Article III:4 of the GATT 1994
appears to raise the issue of whet her, in an analysis under that provision, panels must engage in a
detailed analysis in order to establish that the measure at issue will affect the competitive position of
imported cigarettes in a negative manner, or whethe r an analysis based on the possibility that the
measure at issue could affect the competitive position of imported cigarettes can suffice to find an
inconsistency. The Appellate Body has stated that, in establishing inconsistency with Article III:4, the
actual effects of a measure in the marketplace need not be shown. Instead, it is sufficient to show that
"such a measure is likely to lead to that result".
86 Previous measures have also been found to be
inconsistent with Article III:4 wh en they create a mere "incentive" 87 to favour domestic products, or
"may be reasonably expected"88 to modify the conditions of competition. Accordingly, it seems to be
sufficient for a panel to determine on the basis of th e available elements of fact that the measure will
probably negatively affect the conditions of competition. Without expressing a view on the Panel's
finding under Article III:4, the European Union enc ourages the Appellate Body to review that finding
in accordance with this case law, and to consider the extent to which the facts before the Panel (that is,
the accumulation of all the requirements imposed on the resellers of imported cigarettes) allow a

85European Union's third participant's submission, para. 18 (quoting Panel Report, Argentina – Hides
86European Union's third participant's submission, para. 27 (referring to Appellate Body Report,
87European Union's third participant's submission, para. 28 (referring to Appellate Body Report,
US – FSC (Article 21.5 – EC), para. 212; and Panel Report, India – Autos, paras. 7.195-7.198 and 7.201).
88European Union's third participant's submission, para. 29 (referring to Panel Report, China –

reasonable expectation, or, in other words, lend credence to the conclusion, that the imported products
will be treated less favourably.
74. Concerning Thailand's appeal in respect of th e Panel's acceptance of Exhibit PHL-289, the
European Union submits that the first issue that the Appellate Body needs to resolve is whether
Exhibit PHL-289 is rebuttal evidence or not. If it is not, then the Panel infringed its Working
Procedures by admitting this item of untimely ev idence without requiring good cause and without
affording Thailand the right to comment thereon. Article 11 of the DSU requires panels actively to
respect parties' due process rights. Thus, if the Panel accepted and relied upon Exhibit PHL-289
contrary to its Working Procedures, it should, at a minimum, have afforded Thailand an opportunity
to comment. If the Panel failed to do so, then this defect cannot be cured by arguing that such an
opportunity was provided during interim review. The Appellate Body need not address the content of
the Interim Report since the issue on appeal is wh ether the Panel's finding in its Report that VAT
registrants need not report resales of domestic ciga rettes in form Por.Por.30 was based exclusively on
Exhibit PHL-289. Finally, the European Union obser ves that, even if the Appellate Body agrees with
Thailand regarding the Panel's treatment of Exhibit PHL-289, Thailand bears the burden of explaining
why and how the ultimate finding made by the Pa nel under Article III:4 was fully dependent on the
Panel's factual finding regarding the reporting of resales of domestic cigarettes in form Por.Por.30.
75. Regarding Thailand's appeal under Article XX (d) of the GATT 1994, the European Union
considers the relevant question to be whether the me asure at issue secures compliance with other laws
or regulations which are not WTO-inconsistent. The measure at issue in this dispute is the different
treatment applied to imported cigarettes versus domestic cigarettes, that is, the additional
administrative requirements imposed on imported cigare ttes. The laws or regulations with which the
measure at issue aims to secure compliance are Thailand's VAT laws. Since the GATT-inconsistent
measure at issue is part of the VAT regime, the European Union considers that the Panel properly
concluded that the laws or regulations with whic h the measure at issue secures compliance, namely,
the laws comprising the Thai VAT regime, are also WTO-inconsistent.
76. The European Union submits that the Panel correctly found that decisions on the imposition
of guarantees pursuant to Article 13 of the Agreement on Customs Valuation fall within the scope of
"administrative action relating to customs matter s" in Article X:3(b) of the GATT 1994. The
characterization of an action as "provisional" or "fin al" is not crucial to bring that action within the
scope of Article X:3(b). Rather, the key issue is whether the administrative action at issue has a direct
and individual material effect on the importer. The European Union contends that neither the text of
Article X:3(b), nor that of the other paragraphs of Article X, make a distinction between "provisional"

and "final" administrative actions. This contrasts with other provisions in the GATT 1994, such as
Article XV:2, which explicitly refer to "final" measu res. The European Unio n also agrees with the
Panel's reasoning that the due process objective underly ing Article X:3(b) supports an interpretation
of the term "administrative action" that is not limited to final administrative determinations.
77. Furthermore, the European Union views the imposition of a guarantee as being separate and
distinct from a customs value determination. Like a determination of the value of imported goods, the
imposition of a guarantee is one component of the imposition and co llection of customs duties.
However, imposing a guarantee is not a component of determining the customs value. Instead, it is a
separate and distinct action, constituting "administr ative action" in the sense of Article X:3(b). The
European Union also disputes Thailand's asserti on that the imposition of a guarantee cannot be
reviewed effectively without knowing the final dut y liability, as well as Thailand's reliance upon the
Appellate Body report in US – Shrimp (Thailand) / US – Customs Bond Directive . The Appellate
Body did not, in that dispute, rule out that, un der certain circumstances, a guarantee could constitute
"specific action against dumping" pursuant to Article 17.4 of the Anti-Dumping Agreement.89 In the
view of the European Union, the same reasoning supports the view that a guarantee pursuant to
Article 13 of the Agreement on Customs Valuation may constitute "administrative action relating to
customs matters" within the meaning of Article X:3(b) of the GATT 1994.
78. Finally, in the event that the Appellate Body upholds the Panel's finding that the acceptance
of a guarantee under Article 13 of the Agreement on Customs Valuation constitutes an "administrative
action relating to customs matters" within the me aning of Article X:3(b) of the GATT 1994, the
European Union considers that a system which requi res a final customs value determination in order
to appeal the imposition of a guarantee is contrary to Article X:3(b). Thailand's concerns about an
appeal of a guarantee interfering with the custom s administration's decision-making process are
unfounded. Courts are in a position fully to revi ew customs authorities' decisions. Furthermore,
courts may not need to review the final customs va lue determination, but could limit their analysis to
reviewing the basis for establishing the amount of the guarantee, thus not interfering with the customs
administration's decision-making process. The Eur opean Union adds that, once the final customs
value is established, an appeal against the impos ition of a guarantee becomes irrelevant because the
guarantee effectively ceases to exist.

89European Union's third participant's submission, para. 64 (referring to Appellate Body Report,
US – Shrimp (Thailand) / US – Customs Bond Directive, paras. 230 and 231).

3. United States
79. With respect to Thailand's appeal of the Pane l's finding of less favourable treatment under
Article III:4 of the GATT 1994, the United States argues that, while a complainant need not
demonstrate the actual trade impact of a measure , it must establish that the measure modifies the
conditions of competition for importe d products. The United States questions whether mere risk that
a change to the conditions of competition might oc cur would fulfil that requirement, given that a
finding of less favourable treatment cannot be based on mere assertion or speculation.90
80. As regards Thailand's appeal concerning the Panel's treatment of Exhibit PHL-289, the United
States observes that the Panel's Working Procedur es expressly allowed for the submission of factual
evidence, even after the first substantive meeting, for the purposes of rebuttals, answers to questions,
or comments on answers to questions. The United States takes no view on whether the evidence at
issue can properly be considered to have been submitted for these pur poses. In any event, while it
could have done so, the Panel was not required as a matter of due process to offer Thailand an
opportunity to comment on Exhibit PHL-289. Furt hermore, Thailand did in fact respond to the
evidence as part of the interim review, and the Panel took Thailand's response into account in its
evaluation of the evidence. Accordingly, it is not clear to the United States what due process right of
Thailand was not respected. The United States also recalls that Article 11 of the DSU affords panels a
degree of discretion regarding the treatment of evidence, and that working procedures "do not
constrain panels with hard and fast rules on deadlines for submitting evidence".
91
81. The United States takes no position on whether Th ailand has acted inconsistently with the
obligations of Article X:3(b) of the GATT 1994. The United States observes, however, that the Panel
did not accept Thailand's categorizati on of "provisional" ve rsus "non-provisional" customs measures,
and thus did not make a broad finding about such classes of measures, nor seek to define the precise
types of measures falling within the scope of Article X:3(b). Instead, the United States maintains, the
Panel properly examined whether the guarantees at i ssue constitute "administrative action relating to
customs matters", and, if so, whether Thailand faile d to provide for the prompt review and correction
of such action. This is the same question that is presented on appeal. The United States further
considers that, contrary to Thailand's arguments on appeal, neither the Appellate Body report in
US – Shrimp (Thailand) / US – Customs Bond Directive , nor the provisions of the Agreement on
Customs Valuation or the Anti-Dumping Agreement , are relevant in answering this question. With
respect to the issue of whether a measure satisfies the obligation to provide for "prompt review and

90United States' closing statement at the oral hearing.
91United States' opening statement at the oral hearing (quoting Appellate Body Report, Argentina –
Textiles and Apparel, para. 80).

correction", the United States agrees with both Thailand and the Panel that such an evaluation requires
a case-by-case analysis, and with the Panel that what it means for action to be taken "promptly" will
depend on the factual context of the specific measure at issue in a dispute.
III. Issues Raised in This Appeal
82. The following issues are raised in this appeal:
(a) With respect to the Panel's findings un der Article III of the GATT 1994 concerning
Thailand's treatment of resellers of imported cigarettes, as compared to its treatment
of resellers of like domestic cigarettes:
(i) whether the Panel erred in finding th at Thailand acts inconsistently with
Article III:2, first sentence, of the GATT 1994 by subjecting imported
cigarettes to value added tax ("VAT") liability in excess of that applied to
like domestic cigarettes;
(ii) whether the Panel erred in finding th at Thailand acts inconsistently with
Article III:4 of the GATT 1994, and, in particular:
- whether the Panel erred in finding that Thailand accords less
favourable treatment to imported ci garettes than to like domestic
cigarettes;
- whether the Panel failed to ensure due process and, thus, to comply
with its duty under Article 11 of the DSU to make an objective
assessment of the matter, by accepting and relying on Exhibit
PHL-289 without affording Thailand an opportunity to comment on
that evidence; and
- whether the Panel erred in re jecting Thailand's defence under
Article XX(d) of the GATT 1994 to the Panel's finding of
inconsistency under Article III:4; and
(b) Whether the Panel erred in its interpretation and application of Article X:3(b) of the
GATT 1994 in finding that Thailand acts incons istently with its obligation, under that
provision, to maintain or institute independe nt tribunals or procedures for the prompt
review of guarantee decisions.

IV. Article III of the GATT 1994
A. Introduction
83. The Philippines alleged before the Panel that Thai law discriminates between resellers of
imported cigarettes and resellers of domestic cigarettes in a manner inconsistent with Article III:2 and
Article III:4 of the GATT 1994. According to th e Philippines, Thailand acts inconsistently with
Article III:2, first sentence, because Thailand impos es VAT liability on imported cigarettes in excess
of that applied to like domestic cigarettes thr ough an exemption from VAT for resales of domestic
cigarettes.92 The Philippines also claimed that Thailand acts inconsistently with Article III:4 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 like domestic
cigarettes.
84. In respect of both claims, the Panel found in favour of the Philippines
93, and Thailand appeals
those findings. Before examining Thailand's appeal , we describe relevant aspects of Thailand's VAT
regime, and identify the measures that the Panel found to be inconsistent with Article III:2 and
Article III:4, respectively, of the GATT 1994.
B. Overview of the Measures at Issue
1. The Measure Challenged Under Article III:2 of the GATT 1994
85. For purposes of the Philippines' claim under Article III:2 of the GATT 1994, the Panel
considered various provisions of Thailand's VAT regime.94
86. Thailand administers VAT pursuant to Chapte r IV of the Act Promulgating the Revenue
Code95 (the "Thai Revenue Code"). 96 The Thai Revenue Code provides that, as a general rule, every

92The Philippines also claimed that, in the determination of the tax base for imported cigarettes,
Thailand acts inconsistently with Article III:2, fi rst sentence, of the GATT 1994 by subjecting imported
cigarettes to VAT liability in excess of that applied to like domestic cigarettes. The Panel found in favour of the
Philippines in respect of this claim, and Thailand has not appealed this finding. (Panel Report, para. 8.3(a))
94The Panel stated that the Thai measures specifica lly identified in the Philippines' panel request are
"Sections 81 and 82/7 of the Thai Revenue Code, Section 3(1) of Royal Decree No. 239, and Order of Revenue
Department No. Por. 85/2542". The Panel explained that in the course of the dispute the parties also referred to
other provisions pertaining to the imposition of, and exemption from, VAT liability. (Panel Report, para. 7.572)
95Government of the Kingdom of Thailand, The Council of Regency, The Act Promulgating the
Revenue Code, B.E. 2481 (Panel Exhibit PHL-94).
96Panel Report, para. 7.573 (referring to Chapter IV, "Value Added Tax", consisting of Sections 77-90
of the Thai Revenue Code).

VAT registrant97 in the distribution chain for a product incurs liability in respect of VAT. 98 The VAT
rate generally applicable to sales of products in Thailand is seven per cent ad valorem.99 F o r m o s t
products, VAT is determined by applying this rate to the actual selling price of the product at each
stage of the supply chain. 100 VAT must be reported on a monthly basis in tax form Por.Por.30. 101
Pursuant to Section 82/3 of the Thai Revenue C ode, in each tax month sellers are entitled to deduct
the "input tax", paid upon purchase of the goods from the previous seller, from the "output tax"
collected from the next purchaser of the goods. 102 VAT liability under Thai law in respect of a sales
transaction thus consists of the amount to be pa id after subtracting input tax from output tax.103 When
output tax exceeds input tax, the tax payable is equa l to the difference between the two. When input
tax exceeds output tax, the difference is treated as a tax credit, and the seller is entitled to receive a tax
refund or to apply that credit in future VAT assessments.104
87. With respect to sales of cigarettes, however, Thailand's VAT system operates differently in
two main respects. First, instead of applying the tax rate against the actual sales price, VAT is
determined for each stage of the supply chain for ciga rettes, starting with the first sale of cigarettes in
Thailand by Thailand Tobacco Monopoly ("TTM") or an importer, by applying the seven per cent rate
to the maximum retail selling price ("MRSP"), a refe rence price fixed by the Thai Government for
each brand of cigarettes. 105 This means that, because VAT is based on the same fixed price at each
stage of the supply chain, the amount of VAT assess ed is the same for each sales transaction along
that chain. Moreover, because the VAT paid by a rese ller of cigarettes to a prior seller in the form of
input tax is the same as the amount that the reselle r collects from a subsequent purchaser in the form
of output tax, these amounts will, subject to complia nce with certain administrative requirements, be
offset, resulting in a VAT liability of zero.
88. Second, Thai law provides for an exemption from VAT for all sales of domestic cigarettes by
resellers in the distribution chain for domestic cigare ttes. Thus, resellers of domestic cigarettes incur

97VAT obligations under the Thai Revenue Code apply to VAT registrants. Section 85 of the Thai
Revenue Code requires that all sellers file an applica tion for VAT registration before commencing a business of
selling goods or providing services. Section 81 of the Thai Revenue Code exempts from VAT registration
businesses engaged in sales only of VAT-exempt good s, and businesses with annual sales of less than
1.8 million baht. (Panel Report, paras. 7.687-7.689 and footnote 1243 thereto)
98Panel Report, paras. 7.574 and 7.580 (referring to, inter alia , Thai Revenue Code, Section 82 and
Section 82/3).
99Panel Report, para. 7.457.
100Panel Report, footnote 947 to para. 7.460.
101Panel Report, paras. 7.634 and 7.652.
102Panel Report, para. 7.579.
103Panel Report, paras. 7.580 and 7.628.
104Panel Report, para. 7.581.
105Panel Report, para. 7.460 and footnote 947 thereto, and paras. 7.577 and 7.578 (referring to Thai
Revenue Code, Section 79/5 and Section 82/7). Altho ugh cigarettes cannot be sold at prices exceeding the
MRSP, they may be sold at prices below the MRSP. (Ibid., para. 7.463)

no VAT liability because of an exemption provided pu rsuant to Section 81(1)(v) of the Thai Revenue
Code, Section 3(1) of Thailand's Royal Decree issued under the Thai Revenue Code 106 ("Royal
Decree No. 239"), and Thailand's Order of Revenue Department No. Por. 85/2542 107 ("Order
No. Por. 85/2542").108
89. Section 81(1)(v) of the Thai Revenue Code provides:
Section 81. There shall be exempt from value added tax the
following transactions:
(1) Sale of goods not for export or provision of services as
follows:
…
(v) Sale of goods or provision of services designated by
a Royal Decree.109 (footnote omitted)
90. Section 3(1) of Royal Decree No. 239 provides:
Section 3. There shall be exem pt from value added tax for the
following businesses:
(1) Sale of cigarettes produced by a manufacturer which is an
organization of a government where the seller is not such
manufacturer who produces such cigarettes ...
110
91. As the Panel explained, because TTM is the onl y manufacturer of cigarettes in Thailand, and
an organization of the Thai Government, these provi sions exempt resellers of TTM brand cigarettes
from VAT. 111 The Panel thus concluded that, in respect of sales of domestic cigarettes, TTM is
subject to VAT, whereas resellers of domestic cigarettes are not.112

106Government of the Kingdom of Thailand, Royal Decree Issued Under the Revenue Code Governing
Exemption from Value Added Tax (No. 239) B.E. 2534 (Panel Exhibit PHL-217).
107Government of the Kingdom of Thailand, Order of Revenue Department No. Por. 85/2542,
Re Computation of Tax Base for Impor tation 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 (Panel Exhibit PHL-95).
108Panel Report, para. 7.591.
109See Panel Report, para. 7.584.
110Panel Report, para. 7.585.
111Panel Report, para. 7.585. Order No. Por. 85/2542 also confirms that, with respect to the first
purchaser of cigarettes from TTM, there is an exemption from VAT in accordance with Section 81(1)(v) of the
112Panel Report, paras. 7.590 and 7.591.

92. In respect of imported cigarettes, the Panel stated:
No such exemption is available for imported cigarettes. As such,
when the wholesaler subsequently resells imported cigarettes to the
retailer, for example, the wholesaler incurs a VAT liability of
7 per cent of the MRSP. This VAT liability arises at each subsequent
transactional stage until consumers purchase imported cigarettes.
Each agent subject to VAT in th e 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.
113 (footnote omitted)
93. Finally, the Panel referred to certain "[o]ther relevant provisions" that it examined, including
Section 82/5 of the Thai Revenue Code, which sets out instances in which VAT registrants are not
allowed to deduct input tax in computing tax liability under Section 82/3.114 Section 82/5 provides for
the denial of a tax credit in the following six instances:
(i) a tax invoice is absent or cannot be produced to prove that input
tax has been collected, except wh ere there is a reasonable excuse
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 subs tance according to the rules and
conditions prescribed by the Director-General;
(iii) the input tax is not directly connected with the business carried
on by a supplier according to the rules and conditions prescribed by
the Director-General;
(iv) the input tax originated from entertainment expenses or expenses
of a similar nature according 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.
115
94. In sum, in evaluating the Philippines' Article III: 2 claim in respect of resellers of cigarettes,
the Panel considered several provisions under Thai la w collectively. The Panel first identified that
resellers of imported cigarettes are liable for VAT under Section 82/7 of the Thai Revenue Code, and
that resellers of domestic cigarettes are exempt fro m VAT liability pursuant to Section 81(1)(v) of the

113Panel Report, para. 7.591.
114Panel Report, subheading VII.E.3(d) and para. 7.593.
115Panel Report, para. 7.593.

Thai Revenue Code, Section 3(1) of Roya l Decree No. 239, and Order No. Por. 85/2542. 116
Recognizing that VAT liability consists of output tax minus input tax 117, the Panel then proceeded to
evaluate whether an input tax credit is "automati cally" available to resellers of imported cigarettes. 118
The Panel found that such resellers would not obtain an input tax credit if they fail to satisfy certain
conditions, namely: (i) to complete and file form Po r.Por.30; (ii) to produce a complete and accurate
tax invoice in respect of a transaction (or to satis fy other conditions under Section 82/5 of the Thai
Revenue Code); or (iii) to meet other record-keeping requirements. 119 On this basis, the Panel
concluded that "resellers of domestic cigarettes are de jure exempt from the VAT liability, whereas
the same exemption is not granted to resellers of imported cigarettes as tax credits do not
automatically and irrevocably offset tax liabilities incurred by [resellers] of imported cigarettes in
every case."120
95. Accordingly, the measure that the Panel analyzed under Article III:2 of the GATT 1994
consists of an exemption from VAT liability for rese llers of domestic cigarettes, together with the
imposition of VAT on resellers of im ported cigarettes when they do not satisfy prescribed conditions
for obtaining input tax credits necessary to achieve zero VAT liability.
2. The Measure Challenged Under Article III:4 of the GATT 1994
96. For purposes of the Philippines' claim under Article III:4 of the GATT 1994, the Panel also
considered a series of provisions of Thailand's VAT regime.121
97. Pursuant to Section 81/2 of the Thai Revenue Code, businesses exempt from VAT are also
exempt from compliance with the provisions of Chapter IV of the Thai Revenue Code. Consequently,
because resellers of domestic cigarettes are exempt from VAT, they are also relieved of the obligation
to comply with VAT-related administrativ e requirements contained in Chapter IV. 122 The Panel
addressed various requirements that, according to th e Philippines, apply only to resellers of imported
cigarettes, and not to resellers of domestic ciga rettes. The Panel concluded that three sets of

116Panel Report, paras. 7.621 and 7.622.
117Panel Report, para. 7.628.
118Panel Report, para. 7.632.
119Panel Report, para. 7.634.
120Panel Report, para. 7.644.
121The Philippines identified the following relevant provisions in connection with Thailand's
VAT-related administrative requirements: Sections 81 and 82/7 of the Thai Revenue Code; Royal Decree
122Panel Report, paras. 7.688-7.690.

VAT-related administrative requirements impose an additional administrative burden only on resellers
of imported cigarettes.123
98. First, Section 83/1 of the Thai Revenue Code imposes on every VAT registrant the obligation
to file a tax return, namely, form Por.Por.30, on a monthly basis regardless of the type of goods sold
and/or services provided. 124 Resellers of goods subject to VAT, such as imported cigarettes, are
therefore required to file form Por.Por.30. Resellers of exclusively VAT-exempt goods, such as
domestic cigarettes, are not required to be VAT registrants and are therefore exempt from this
requirement.125 When a reseller sells both domestic ciga rettes and other goods subject to VAT, that
reseller is, by virtue of its sales of the latter, under an obligation to file form Por.Por.30. The Panel
found, however, that such a reseller is not requi red to report its sales of VAT-exempt domestic
cigarettes in that form. 126 The Panel therefore concluded that resellers of imported cigarettes are
subject to a heavier administrative burden in respec t of the obligation to complete and submit form
Por.Por.30 because: (i) a reseller of domestic cigarettes who carries exclusively VAT-exempt goods,
and therefore is not required to register for VAT, is exempted from the obligation to file form
Por.Por.30, whereas the same exemption is not provide d to resellers of imported cigarettes; and (ii) a
cigarette reseller who is a VAT registrant need not report sales of domestic cigarettes when
completing form Por.Por.30.127 In this Report, we refer collectivel y to this first set of requirements as
99. Second, Section 87 of the Thai Revenue Code requires resellers of imported cigarettes to
prepare and maintain input tax and output tax records, and goods and raw materials records. 128
Resellers of imported cigarettes are also subject to an obligation to file re venue and expense reports,
from which resellers of exclusively domestic cigarettes are exempt. 129 Thus, the Panel concluded that
resellers of imported cigarettes, but not resellers of domestic cigarettes, are subject to an obligation to
fill out and file reports. 130 The Panel further found that Section 87/3 of the Thai Revenue Code

123The Philippines also alleged before the Panel that resellers of imported cigarettes are subject to tax
invoice-related requirements and auditing procedures to which resellers of domestic cigarettes are not subject.
Regarding the requirement to prepare and keep tax invoices, the Panel found that the Philippines did not respond
to Thailand's argument that sales receipts, which both VAT registrants and non-VAT registrants must maintain,
may serve as tax invoices, and that the Philippines did not fully explain its argument that the use of the MRSP as
the tax base would make the requirement to prepare a tax invoice more burdensome for resellers of imported
cigarettes. (Panel Report, paras. 7.706 and 7.707) With respect to the auditing procedures, the Panel found that
resellers of both imported and domestic cigarettes are subject to similar procedures. (Ibid., para. 7.718)
124Panel Report, para. 7.686.
125Panel Report, para. 7.694.
126Panel Report, para. 7.703.
127Panel Report, para. 7.704.
128Panel Report, para. 7.654.
129Panel Report, para. 7.710.
130Panel Report, para. 7.715.

requires resellers of imported cigarettes to main tain more information for accounting and auditing
purposes than that required of resellers of domestic cigarettes. 131 In this Report, we refer collectively
to this second set of requirements as the "reporting and record-keeping requirements".
100. Third, Sections 89 and 90 of the Thai Reve nue Code subject VAT registrants to various
penalties and other sanctions associated with the fa ilure to comply with VAT-related administrative
requirements set out in Chapter IV of the Thai Revenue Code.132 Resellers of goods that are subject to
VAT, such as imported cigarettes, are therefore subject to these penalties and other sanctions, whereas
resellers of exclusively domestic cigarettes are not. In this Report, we refer collectively to this third
set of requirements as the "penalties and other sanctions".
101. In sum, the Panel found that Thailand imposes these three sets of requirements only on
resellers of imported cigarettes. 133 With the exception of the issue of whether sales of domestic
cigarettes must be reported in form Por.Por.30, di scussed below in section IV.D.2 of our Report, the
participants do not contest on appeal the Panel's findings that the requirements relating to form
Por.Por.30, the reporting and record-keeping require ments, and the penalties and other sanctions are
imposed only on resellers of imported cigarettes, and not on resellers of domestic cigarettes.134
102. Accordingly, the measure that the Panel analyzed under Article III:4 of the GATT 1994
consists of an exemption from three sets of VAT-r elated administrative requirements for resellers of
domestic cigarettes, together with the imposition of these administrative requirements on resellers of
imported cigarettes.
103. Based on the foregoing, we now turn to assess Thailand's claims of error on appeal under
Article III:2 and Article III:4 of the GATT 1994.

131Panel Report, para. 7.717.
132Panel Report, paras. 7.719, 7.720, and 7.722. The Panel analyzed these penalties and other sanctions
as part of the additional administrative requirements at issue, and neither participant has challenged this
approach. We observe that they ar e not administrative requirements as su ch, but rather the consequence of
failing to comply with VAT-related administrative requirem ents. Nonetheless, like the Panel, we address the
penalties and other sanctions as among th e relevant additional administrative requirements for purposes of our
Report.
133Panel Report, para. 7.722.
134The Panel did not make any finding regarding the extent to which cigarette resellers sell exclusively
domestic, exclusively imported, or both domestic and imported cigarettes, nor regarding the extent to which the
distribution channels for domestic and imported cigarettes in Thailand overlap. Although the Panel
acknowledged evidence adduced by the Philippines that more than 20 per cent of cigarette resellers in Thailand
do not sell imported cigarettes, the Panel considered that the Philippines had not demonstrated why
the 68,000 businesses concerned decided not to sell imported cigarettes, and also took note of Thailand's
argument that many of those businesses are exempt from VAT liability by virtue of their low annual turnover.
(Panel Report, paras. 7.725 and 7.727, and footnote 1300 to para. 7.736) Pursuant to Section 81/1 and
Section 81/2 of the Thai Revenue Code, small businesse s (that is, businesses with annual sales of less than
1.8 million baht) are exempt from all obligations under Chapter IV of the Thai Revenue Code. ( Ibid.,
para. 7.689 and footnote 1243 thereto)

C. Article III:2 of the GATT 1994
104. Thailand appeals the Panel's finding that:
… regarding the VAT exemption fo r domestic cigarette resellers,
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 by granting the exemption from
the VAT liability only to domestic cigarette[] resellers.
135
105. Thailand raises two principal issues on appeal. First, Thailand claims that the Panel erred
because the measures that it found to be inconsiste nt with Article III:2, first sentence, of the
GATT 1994 are not fiscal measures subject to the scope of that provision. Rather, according to
Thailand, the measures entail only administrative requirements that fall within the scope of
Article III:4, rather than Article III:2. Second, Th ailand claims that, even if the measures fall within
the scope of Article III:2, they do not subject importe d cigarettes to taxes in excess of those applied to
domestic cigarettes. In Thailand's view, inconsis tency with Article III:2 cannot arise due to an
obligation to comply with the administrative forma lity of filing a tax form, or a limitation on the
availability of tax credits only for transactions that are documented and legitimate.
106. The Philippines argues that the Panel correctly established under Article III:2 that imported
cigarettes are subject to taxation in excess of that applied to like domestic cigarettes. The Philippines
considers that the Panel could have limited its analysis and simply found that resellers of imported
cigarettes are subject to VAT liability, whereas rese llers of domestic cigarettes, through a complete
exemption from VAT, are not. The Philippines adds that, although the Panel did not need to do so,
the Panel undertook further analysis and correctly fo und the existence of a discriminatory tax because
resellers of imported cigarettes, in defined ci rcumstances under Thai law, may not satisfy the
conditions necessary to offset VAT liability. The Philippines reject s Thailand's argument that the
administrative formalities associated with VAT liability cannot give rise to excess taxation under
Article III:2.
107. Before we turn to evaluate the substance of Thailand's claim of error on appeal, we consider it
necessary to recall the measure that the Panel found to be inconsistent with Article III:2, first
sentence, of the GATT 1994. Thailand asserts that it is beyond dispute that Thailand's VAT rate is
seven per cent for both imported and domestic cigarettes, and that the Panel found that the full amount

135Panel Report, para. 8.3(b); see also para. 7. 644. In assessing the Philippines' claim under
Article III:2, the Panel undertook a two-step analysis to determine: (i) whether the imported and domestic
products at issue are "like"; and (ii) whether the challenged measure subjects the imported products to an
internal tax or charge in excess of that applied to like domestic products. ( Ibid., para. 7.569) In respect of
likeness, the Panel found that the imported cigarettes at issue are "like" domestic cigarettes within the same
price segments. (Ibid., paras. 7.451 and 7.597) Thailand has not appealed this finding.

of VAT is collected from both the domestic producer and importers at the time of the first sale. 136
Thus, Thailand argues, the Panel's finding was not based on the tax burden under Thai VAT law, but
instead was based solely on the difference in the "administrative requirements" for resales of imported
and domestic cigarettes, and the consequences of failure to comply with those requirements.137
108. We consider that Thailand's description of the measure analyzed by the Panel under
Article III:2 as "administrative requirements" in respect of VAT is both under-inclusive and
over-inclusive. The description is under-inclu sive because it does not account for the complete
exemption from VAT for resales of domestic cigarettes, and therefore disregards that VAT liability
will, when certain conditions prescribed under Thai law are not met, be incurred by resellers of
imported cigarettes, but never by resellers of dom estic cigarettes. For this reason, Thailand's
observation that the domestic producer and importer pay the same VAT amount is incomplete because
it disregards that, under Thai law, subsequent r esellers of imported cigare ttes, but not subsequent
resellers of domestic cigarettes, may also incu r VAT liability. At the same time, Thailand's
description is over-inclusive because the relevant m easure for purposes of the Panel's consideration of
the Philippines' Article III:2 claim does not include all of the administrative requirements evaluated
by the Panel in respect of the Philippines' Article III:4 claim.
138 As we have explained, the relevant
measure analyzed by the Panel under Article III:2 consists of an exemption from VAT liability for
resellers of domestic cigarettes, together with the imposition of VAT on resellers of imported
cigarettes when they do not satisfy prescribed cond itions for obtaining input tax credits necessary to
achieve zero VAT liability.139
109. On the basis of this understanding of Thailand's measure, we now turn to Thailand's appeal of
the Panel's finding under Article III:2, first sentence, of the GATT 1994.
110. Article III of the GATT 1994, entitled "National Treatment on Internal Taxation and
Regulation", sets out obligations that prohibit th e application by Members of internal tax and
regulatory measures in a manner affording protecti on to domestic production. The various provisions

137Thailand's appellant's submission, paras. 74 and 75.
138In its Article III:2 analysis, the Panel identified provisions under Thai law that specify conditions for
obtaining an input tax credit. The Panel considered that a reseller of imported cigarettes would be subject to
VAT if it did not properly fill out and f ile form Por.Por.30, or did not, as specified in Section 82/5(1) and (2) of
the Thai Revenue Code, produce a complete and accurate ta x invoice in respect of a transaction. The Panel also
stated that an input tax credit would not be available if certain reporting and record-keeping requirements were
not satisfied, or if the conditions specified in Section 82/5 of the Thai Revenue Code were not met. (Panel
Report, para. 7.634) In contrast, we note that, in its consideration of the Philippine s' claim under Article III:4,
the Panel evaluated various administrative requirement s in addition to the requirements relating to form
Por.Por.30, but did not examine the conditions specified in Section 82/5 of the Thai Revenue Code.
139See supra, para. 95.

of Article III thus operate to ensure that Me mbers provide equality of competitive conditions for
imported products in relation to domestic products in their internal markets.140
111. The first sentence of Article III:2 provides:
The products of the territory of any Member imported into the
territory of any other Member 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.
112. Article III:2, first sentence, thus serves to pr ohibit the imposition of discriminatory internal
taxes or other internal charges on imported versus like domestic products. Thailand's appeal calls for
us to address two issues: whether Thailand's measure falls within the scope of the first sentence of
Article III:2; and, if so, whether the taxes or charges applied to imported products pursuant to
Thailand's measure are "in excess of" those applied to like domestic products. Article III:2, first
sentence, concerns circumstances where imported a nd like domestic products are subject "directly or
indirectly" to internal taxes or other internal char ges "of any kind". This language suggests that the
provision applies to a broad range of measures.
141 Regarding the requirement of "not … in excess of",
the Appellate Body has clarified that a finding of in consistency under Article III:2, first sentence, is
not conditional on a "trade effects test", and that even the smallest amount of "excess" is too much. 142
For purposes of our consideration of Thailand's app eal, a measure that subjects products to internal
taxes or other internal charges may be examined under Article III:2, first sentence, of the GATT 1994.
When such a measure subjects imported products to tax es or charges in excess of those applied to like
domestic products, it will be inconsistent with the first sentence of Article III:2.
113. Thailand argues that, because the relevant measure relates only to administrative
requirements, and the financial consequences of non-compliance with those requirements, it should
have been evaluated by the Panel under Article III:4, not Article III:2, of the GATT 1994. According
to Thailand, administrative requirements related to the collection of taxes, or consequences arising out
of failure to comply with those requirements, are not subject to the disciplines of Article III:2, "even if
the failure to comply with those administrative re quirements may have financial consequences for an

140Appellate Body Report, Japan – Alcoholic Beverages II, pp. 16-18, DSR 1996:I, 97, at 109-111. See
also Appellate Body Report, Korea – Alcoholic Beverages , paras. 119 and 127; and Appellate Body Reports,
China – Auto Parts, para. 161.
141Appellate Body Report, Canada – Periodicals, p. 19, DSR 1997:I, 449, at 464-465.
142Appellate Body Report, Japan – Alcoholic Beverages II, p. 23, DSR 1996:I, 97, at 115.

imported product".143 The Philippines argues that the Panel properly found that Thailand's measure
falls within the scope of Article III:2.
114. We have already explained that we do not accep t Thailand's characterization of the measure
that was challenged by the Philippines, and found by th e Panel to be inconsistent with Article III:2, as
administrative requirements. For the reasons set out above, we also do not accept Thailand's position
that the measure at issue does not relate to the respective tax burdens imposed on imported and
domestic cigarettes. Thailand's measure subjects resellers of imported cigarettes to VAT when they
do not satisfy prescribed conditions for obtaining i nput tax credits necessary to achieve zero VAT
liability. Whether such conditions are satisfied t hus has a direct consequence for the amount of tax
liability imposed on imported cigarettes. Conversel y, a complete exemption from VAT ensures that
there can never be any VAT liability for resellers in respect of their sales of domestic cigarettes. We
therefore agree with the Panel that Thailand's m easure affects the respective tax liability imposed on
imported and like domestic cigarettes, and accordi ngly reject Thailand's claim that the measure
consists solely of administrative requirements that are not subject to the disciplines of Article III:2,
first sentence, of the GATT 1994.144
115. Thailand also argues that, even if the Panel were correct to examine Thailand's measure under
Article III:2, the Panel erred in finding that Tha iland acted inconsistently with that provision.
Thailand contends that it cannot be WTO-inconsistent to require resellers to complete "administrative
formalities"145 in order to obtain input tax credits neces sary to achieve zero VAT liability. Thailand
adds that none of the six situations set out in Section 82/5 of the Thai Revenue Code 146 involves a
situation in which a reseller could be denied an in put tax credit on the basis of an actual, legitimate
purchase of cigarettes for resale. In contrast, th e Philippines argues that, if resellers of imported
cigarettes cannot obtain an input tax credit, this is the legal consequence of the regulatory framework
established by Thailand. The Philip pines maintains that resellers of domestic cigarettes are never
subject to that consequence because they are automatically exempt from VAT liability on such sales.

144We note that even if a measure at issue consiste d solely of administrative requirements, we do not
exclude the possibility that such requirements may have a bearing on the respective tax burdens on imported and
like domestic products, and may theref ore be subject to Article III:2. Although Thailand may be correct in
stating that prior WTO reports have examined measures consisting of "administrative requirements relating to
the sale of imported products" under Article III:4 (Thailand 's appellant's submission, para. 69), this does not in
our view demonstrate that, if such requirements subject imported and like domestic products to internal taxes or
other internal charges, the same measures, or certain aspects of the same measures, could not also be scrutinized
under Article III:2. (See Panel Report, Argentina – Hides and Leather, para. 11.143 (finding that administrative
measures concerning the pre-payment of tax "qualify as tax measures [that] fall to be assessed under
Article III:2"))
146See supra, para. 93.

116. Thailand does not dispute that resellers of imported cigarettes incur VAT liability when they
do not satisfy conditions to obtain an input tax credit 147, or that a measure that creates a risk of excess
taxation may give rise to a violation of Article III:2, first sentence. 148 Rather, Thailand argues that
requiring resellers to satisfy administrative require ments in respect of VAT does not present a risk
related to the calculation of the tax burden, and therefore cannot give rise to a violation under
Article III:2. We consider, however, that a proper c onception of Thailand's measure clarifies that it is
not the mere imposition of administrative requireme nts that creates a differential tax burden, but
rather that only resellers of imported cigarettes will incur VAT liability as a consequence of failing to
offset output tax. Resellers of imported ciga rettes are subject to VAT liability in defined
circumstances under Thai law, whereas resellers of domestic cigarettes, due to a complete exemption
from VAT, are not. Based on this understanding of the measure, we therefore agree with the Panel
that Thailand subjects imported cigarettes to internal taxes in excess of those applied to like domestic
cigarettes, within the meaning of Article III:2, first sentence, of the GATT 1994.
117. Thailand also argues that the conduct of private parties in relation to the challenged measure
cannot form the basis for establishing a violation of Article III:2. As Thailand puts it, a system of
offsetting input tax against output tax cannot be said to be WTO-inconsistent "simply because private
parties are required to comply with certain admi nistrative requirements", or because it compels
resellers "to limit claims for input tax credits to actual, legitimate purchases" of cigarettes. 149
Thailand argued at the oral hearing that resellers of imported cigarettes will owe VAT only when they
have not legitimately purchased cigarettes, or wh en they make mistakes in their filing for VAT. 150 It
is not clear to us, based on the Panel's findings rega rding the operation of Thailand's measure, that the
situations in which resellers of imported ciga rettes will incur VAT liability are limited to those
identified by Thailand. In any event, we do not consider that Thailand's measure precludes a finding
of inconsistency with Article III:2 due to the fact that resellers of imported cigarettes may take action
to avoid the imposition of VAT liability. In our view , the availability of such a course of action does
not alter the legal assessment of whether, under Thai law, imported cigarettes are subject to internal
taxes or other internal charges in excess of those applied to domestic cigarettes. As we have
explained, Thailand's measure provides for circum stances in which resellers of imported cigarettes
will be subject to VAT liability, to which resellers of domestic cigarettes will never be subject. In this
respect, we agree with the Panel's reliance on Korea – Various Measures on Beef, where the Appellate

147Thailand's appellant's submission, para. 97. See also Thailand's responses to Panel Questions 137
and 138.
148Thailand's appellant's submission, paras. 80-82 (referring to GATT Panel Report, US – Tobacco ,
para. 97).
150Thailand's responses to questioning at the oral hearing.

Body stated, in the context of its Article III:4 anal ysis, that "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".151
118. We also disagree with Thailand's suggestion that the Panel's finding would limit the ability of
WTO Members to ensure the proper administration of their tax regimes. 152 Again, the Panel
considered that Thailand's measure was inconsistent with Article III:2, first sentence, not because it
prescribed conditions for obtaining tax credits, but rather because those conditions applied only in
respect of resellers of imported cigarettes, and di d not "automatically and irrevocably offset tax
liabilities incurred by [those resellers] in every case". 153 WTO Members remain free "to administer
and collect internal taxes as they see fit", so long as they do so "in conformity with Article III:2". 154
Imposing legal requirements that result in tax lia bility on imported products when resellers do not
satisfy prescribed conditions necessary to avoid that liability, but which never result in tax liability on
like domestic products, is inconsistent with the requirements of Article III:2, first sentence.
119. For the foregoing reasons, we uphold the Panel's finding, in para graph 8.3(b) of the Panel
Report, that Thailand acts inconsistently with Ar ticle III:2, first sentence, of the GATT 1994 by
subjecting imported cigarettes to VAT liability in excess of that applied to like domestic cigarettes.155
D. Article III:4 of the GATT 1994
120. Thailand appeals the Panel's finding that:
… regarding the VAT exemption fo r domestic cigarette resellers,
Thailand acted inconsistently w ith Article III:4 by subjecting
imported cigarettes to less favourab le treatment compared to like
domestic cigarettes by imposing additional administrative
requirements, connected to VAT liabilities, on imported cigarette
resellers.156
121. The Panel's finding under Article III:4 of the GATT 1994 concerned an exemption from three
sets of VAT-related administrative requirements for resellers of domestic cigarettes, together with the

151Panel Report, para. 7.637 (quoting Appellate Body Report, Korea – Various Measures on Beef ,
para. 146).
152Thailand's appellant's submission, paras. 96, 97, and 104.
153Panel Report, para. 7.644.
154Panel Report, Argentina – Hides and Leather , para. 11.144. The Panel stated that Thailand did not
assert a defence under Article XX to the alleged violation of Article III:2 of the GATT 1994. (Panel Report,
para. 7.642)
155See also Panel Report, para. 7.644.

imposition of these administrative requirements on resellers of imported cigarettes. These three sets
of administrative requirements consist of: (i) require ments relating to form Por.Por.30; (ii) reporting
and record-keeping requirements; a nd (iii) penalties and other sanctions. 157 We refer to these
requirements collectively as the "additional administrative requirements".
122. Thailand advances three indepe ndent grounds for reversal of the Panel's finding under
Article III:4. First, Thailand argues that the Pane l's analysis of "treatment no less favourable" was
insufficient as a matter of law to support a findi ng that Thailand acted inconsistently with
Article III:4. Second, Thailand claims that the Pa nel erred in accepting a nd relying upon an exhibit
submitted late in the proceedings by the Philippi nes—Exhibit PHL-289—and thus violated Article 11
of the DSU, Thailand's due process rights, and pa ragraph 15 of the Panel' s Working Procedures.
Third, Thailand alleges that, because the Panel failed to conduct a correct legal analysis in respect of
Thailand's defence under Article XX(d) of the GATT 1994, the Panel "effectively deprived" Thailand
of the opportunity to justify the additional admi nistrative requirements as necessary to secure
compliance with the Thai VAT laws. We address these issues in turn.
1. Article III:4: "treatment no less favourable"
123. In its appeal of the Panel's finding that impor ted cigarettes are treated less favourably than
like domestic cigarettes, Thailand argues that differences in treatment are "not necessarily inconsistent
with Article III:4, as long as the treatment provided by the measure is 'no less favourable'" 158, and that
a determination of less favourable treatment " cannot rest on simple assertion, but must be founded on
a careful analysis of the contested measure and of its implications in the marketplace". 159 According
to Thailand, however, the Panel b ased its finding on a "mere assertion" 160 or a "theoretical
possibility"161 that the differences in treatment found by the Panel " could affect costs and could
potentially affect the competitive position" of imported cigarettes. 162 Thailand adds that the Panel
failed to conduct " any meaningful analysis"163 of how the differences in treatment might, in practice,
increase costs, or how the measures at issue "constr ained" or "restricted" the choices available to
traders in such a manner as to affect the competitive conditions for imported cigarette resellers.164

157See supra, Section IV.B.2.
158Thailand's appellant's submission, para. 122 (quoting Appellate Body Report, Korea – Various
Measures on Beef, para. 135).
159Thailand's appellant's submission, para. 125 (quoting Appellate Body Report, US – FSC
(Article 21.5 – EC), para. 215). (emphasis added by Thailand)
162Thailand's appellant's submission, para. 120. (original emphasis)
163Thailand's appellant's submission, para. 135. (original emphasis)

124. In response, the Philippines submits that treat ment is less favourable if it does not "ensure
effective equality of opportunities"165 between imported products and dom estic products, and that this
equality of opportunities is upset when govern ment regulation is not "perfectly neutral". 166 The
Philippines contends that, when government regulati on subjects imported products to burdens that are
not imposed on like domestic products, the treatment of imported and like domestic products is
unequal and, accordingly, "'inherently less favorable' for imported goods". 167 On this basis, the Panel
correctly found that, because resellers of importe d cigarettes must comply with three additional
administrative requirements that are not imposed on resellers of domestic cigarettes, the treatment
accorded to imported cigarettes was "inherently less favourable".
168 The Philippines adds that, even
though it was not necessary for it to do so, the Panel sought further confirmation for its finding of less
favourable treatment by examining the ways in which Thailand's additional administrative
requirements upset the equality of competitive conditi ons in the Thai market. The Panel considered
evidence of price elasticity and switching patterns and found that domestic and imported cigarettes
operate in a close competitive relationship in the Th ai market, such that the additional administrative
requirements can potentially have a negative impact on the competitive position of imported
cigarettes. The Philippines points out that the add itional administrative requirements can be linked to
the operating costs of businesses, thereby disturbing the equality of competitive conditions.
125. We begin our analysis with the text of Ar ticle III:4 of the GATT 1994, which provides in
relevant part:
The products of the territory of any Member imported into the
territory of any other Member shall be accorded 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, pur chase, transportation, distribution
or use.
126. Article III:4 forms part of the broader framework set out in Article III, which ensures that
Members provide equality of competitive conditions for imported products in relation to domestic
products.
169 Like the other paragraphs of Article III, the obligation prescribed under Article III:4 is
informed by the general principle set out in Article III:1 that internal measures should not be applied

165Philippines' appellee's submission, para. 121 (quoting, inter alia , Panel Report, Canada – Autos ,
paras. 10.78 and 10.84).
166Philippines' appellee's submission, para. 123.
167Philippines' appellee's submission, para. 129 (referring to Appellate Body Report, US – Section 211
Appropriations Act, para. 265).
168Philippines' appellee's submission, para. 137 (referring to Appellate Body Report, US – Section 211
Appropriations Act, para. 265).
169See Appellate Body Report, Japan – Alcoholic Beverages II, p. 16, DSR 1996:I, 97, at 109.

so as to afford protection to domestic production. 170 In the context of Article III:4, this means that,
where there is less favourable treatment of imported products, th ere is protection to domestic
production.171
127. Article III:4 consists of three elements that must be demonstrated in order to establish
inconsistency with this provision, namely: (i) that the imported and domestic products are "like
products"; (ii) that the measure at issue constitut es a law, regulation, or requirement affecting the
internal sale, offering for sale, purchase, transportation, distribution, or use of the products at issue;
and (iii) that the treatment accorded to imported produc ts is less favourable than that accorded to like
domestic products. 172 Thailand's appeal concerns only the Pa nel's finding in respect of the third
element, namely, the no less favourable treatment standard in Article III:4.173
128. The phrase "treatment no less favourable" in Article III:4 has been interpreted by the
Appellate Body in prior disputes. In Korea – Various Measures on Beef , the Appellate Body
explained that the analysis of whether imported products are treated less favourably must ascertain
whether the measure at issue "modifies the conditions of competition in the relevant market to the
detriment of imported products".
174 The Appellate Body also stated that "[a] formal difference in
treatment between imported and like domestic products is … neither necessary, nor sufficient, to
show a violation of Article III:4". 175 Accordingly, the mere fact that a Member draws regulatory
distinctions between imported and like domestic products is, in itsel f, not determinative of whether
imported products are treated less favourab ly within the meaning of Article III:4. 176 Rather, what is
relevant is whether such regulatory differences di stort the conditions of competition to the detriment
of imported products. If so, then the differential tr eatment will amount to treatment that is "less
favourable" within the meaning of Article III:4.
129. The analysis of whether imported products are a ccorded less favourable treatment requires a
careful examination "grounded in close scrutiny of the 'fundamental thrust and effect of the measure
itself'"177, including of the implications of the meas ure for the conditions of competition between

170See Appellate Body Report, Japan – Alcoholic Beverages II, p. 18, DSR 1996:I, 97, at 111.
171See Appellate Body Report, EC – Asbestos, para. 100.
172Appellate Body Report, Korea – Various Measures on Beef, para. 133.
173The Panel found that the imported cigarette brands Marlboro and L&M are "like" Thai domestic
cigarettes within the meaning of Article III:4 of the GATT 1994. (Panel Report, para. 7.662) Likewise, the
Panel found that the Thai regulations at issue, containing the additional administrative requirements, can be
considered as affecting the internal sale of imported cigarettes within the meaning of Article III:4 of the
GATT 1994. (Ibid., para. 7.665) Neither of these findings is appealed.
174Appellate Body Report, Korea – Various Measures on Beef, para. 137. (original emphasis)
175Appellate Body Report, Korea – Various Measures on Beef, para. 137.
177Appellate Body Report, US – FSC (Article 21.5 – EC) , para. 215 (quoting Appellate Body Report,
Korea – Various Measures on Beef, footnote 44 to para. 142).

imported and like domestic products. This analysis need not be based on empirical evidence as to the
actual effects of the measure at issue in the intern al market of the Member concerned. Of course,
nothing precludes a panel from taking such evidence of actual effects into account.
130. The implications of the contest ed measure for the equality of competitive conditions are, first
and foremost, those that are discernible from the d esign, structure, and expected operation of the
measure. For instance, where a Member's legal system applies a single regulatory regime to both
imported and like domestic products, with the sole di fference being that an additional requirement is
imposed only on imported products, the existence of this additional requirement may provide a
significant indication that imported products are treated less favourably. Because, however, the
examination of whether imported products are tr eated less favourably "cannot rest on simple
assertion"
178, close scrutiny of the measure at issue w ill normally require further identification or
elaboration of its implications for the conditions of competition in order properly to support a finding
of less favourable treatment under Article III:4 of the GATT 1994.
131. The Panel found that the additional administrativ e requirements imposed only on resellers of
imported cigarettes "could potentially affect" the c onditions of competition for imported cigarettes
in a negative manner. 179 In its analysis, the Panel began by observing that, in previous disputes,
a simple administrative authorization scheme 180, a differentiated distribution scheme 181, or the mere
possibility that non-nationals have to defend their pate nt claims in two jurisdictions rather than only
one182, were all situations found to constitute "add itional administrative burdens" that accord less
favourable treatment.183 The Panel then observed that the relative market shares held by imported and
domestic cigarettes in the Thai market and an ec onometric study submitted by the Philippines show a
certain degree of price elasticity and switching patter ns. The Panel considered that this would also
indicate that the additional administrative require ments "can potentially have" a negative impact on
the competitive position of imported cigarettes in the Thai market.184 Furthermore, the Panel reasoned
that, because the burden associated with the additi onal administrative requirements can be linked to
the operating costs of suppliers of imported ci garettes, this could limit business opportunities for

178Appellate Body Report, US – FSC (Article 21.5 – EC), para. 215.
179Panel Report, para. 7.734.
180Panel Report, para. 7.732 (referring to Panel Report, Canada – Wheat Exports and Grain Imports ,
paras. 6.184 and 6.213).
181Panel Report, para. 7.732 (referring to Appellate Body Report, Korea – Various Measures on Beef ,
paras. 143-151; and GATT Panel Report, US – Malt Beverages, paras. 5.32 and 5.35).
182Panel Report, paras. 7.730 and 7.732 (referring to Appellate Body Report, US – Section 211
Appropriations Act, para. 265).
183Panel Report, para. 7.732.
184Panel Report, para. 7.735.

imported cigarettes to the extent that cigarette s uppliers seek to reduce costs by avoiding resales of
imported cigarettes.185
132. On appeal, Thailand contends that the Panel e rred and applied an incorrect standard of less
favourable treatment because its finding was based on the "theoretical possibility" that the
"differences could affect costs and could potentially affect the competitive position of imported
cigarettes in a negative manner"
186, and that the Panel failed to engage in any meaningful analysis as
to the implications of the measure in the market place, or how the differe nces affect the competitive
position of imported cigarettes. Although Thailand does not contest the Panel's finding that the
additional administrative requirements are impos ed only on resellers of imported cigarettes 187,
Thailand characterizes these requirements as "benign" 188 or "very minor" 189 differences in treatment,
and argues that "the right to treat imported products differently may include the right to impose
additional or more complicated requirements so long as they do not amount to 'less favourable'
treatment".190
133. We observe that the regulatory "differences" at issue stem from the fact that resellers of
imported cigarettes must comply with the additional administrative requirements, whereas resellers of
domestic cigarettes are exempt from such requirements. Thus, in this dispute, the sole difference in
regulatory treatment consists of requirements applied only to imported cigarettes. The uncontested
fact that resellers of imported cigarettes are subj ect to certain administrative requirements, whereas
resellers of like domestic cigarettes are not, itself provides a significant indication that imported
cigarettes are accorded less favourable treatment.
134. With respect to the standard of less favourable treatment under Article III:4, we observe that,
in its third participant's submission, Australia expresses concern with the Panel's apparent use of a test
of whether the measure at issue "may potentially modify" the conditions of competition to the
detriment of imported products. Australia argues that previous panels have used a more rigorous legal
standard of less favourable treatment, namely, wh ether a measure "may reasonably be expected"
191 or
"is more than likely" 192 to modify adversely the conditions of competition. In our view, however, an

185Panel Report, para. 7.736.
186Thailand's appellant's submission, para. 120. (original emphasis)
187Thailand confirmed at the oral h earing that, on appeal, it contests on ly the evidentiary basis for the
Panel's finding that resellers of imported cigarettes are not required to report resales of domestic cigarettes in
form Por.Por.30. That issue is addressed below in the context of Thailand's claim under Article 11 of the DSU.
191Australia's third participant's submi ssion, para. 26 (quoting Panel Report, China – Publications and
Audiovisual Products, para. 7.1471).
192Australia's third participant's submission, para. 27 (quoting Panel Report, India – Autos, para. 7.201).

analysis of less favourable treatment should not be anchored in an assess ment of the degree of
likelihood that an adverse impact on competitive conditions will materi alize. Rather, an analysis
under Article III:4 must begin with careful scrutiny of the measure, including consideration of the
design, structure, and expected operation of the me asure at issue. Such scrutiny may well involve
—but does not require—an assessment of the contested measure in the light of evidence regarding the
actual effects of that measure in the market. In any event, there must be in every case a genuine
relationship between the measure at issue and its adverse impact on competitive opportunities for
imported versus like domes tic products to support a finding that imported products are treated less
favourably.
135. Furthermore, we do not agree with Thailand that the Panel's use of the word "potentially"
reveals that the Panel found less favourable treatme nt based only on a remo te, unsubstantiated, or
"theoretical possibility" that differences in regul atory treatment could affect the conditions of
competition for imported cigarettes. The Pane l referred to the Appellate Body Report in US – FSC
(Article 21.5 – EC) to note that an examination of whether a measure involves less favourable
treatment "need not be based on the actual effects of the contested measure in the marketplace". 193
The Panel understood this statement to mean that "the contested measure in the marketplace can be
assessed on its potential effects on the competitive conditions of the imported product concerned". 194
We consider that, when read in the context of this reasoning, it is clear that the terms "potentially" and
"potential effects" were intended to reflect the Pa nel's recognition that it was not required to inquire
into the "actual effects" of the additional administrative requirements.
136. In addition, we observe that the Panel did identify further implications of the additional
administrative requirements in the Thai market affecting the competitive position of imported and
domestic cigarettes. In particular, the Panel ob served that an econometric study submitted by the
Philippines suggested a "certain degree of price elasticity and switching patterns" between imported
and domestic cigarettes, and that this was an indication that the additional administrative requirements
"can potentially have a negative impact on the comp etitive position of [imported] cigarettes in the
market".195 On appeal, Thailand alleges that the Pane l itself acknowledged that this evidence was

193Panel Report, para. 7.730 (quoting Appellate Body Report, US – FSC (Article 21.5 – EC) , para. 215
(original emphasis)).
194Panel Report, para. 7.730. (original emphasis)
195Panel Report, para. 7.735. This evidence was provided by the Philippines, and consists of a study
conducted by an economics professor regarding cross-price elasticity between imported and domestic cigarettes
in Thailand between 2007 and 2009. In particular, this study noted that "the estimated increase of market share
of domestic cigarettes pursuant to an increase in the re lative [retail selling price] of imported cigarettes strongly
suggests that the two products are close substitutes in the eyes of Thai consumers". ( Ibid., para. 7.446 (quoting
Panel Exhibit PHL-149, p. 9))

"uneven".196 Furthermore, adds Thailand, the no less favourable treatment analysis under Article III:4
presupposes that imported and domestic products have been considered "like", and that, consequently,
imported and domestic products subject to an Article III:4 analysis will always have "'some' degree of
competitive relationship with each other".197
137. As we see it, the Panel did not acknowledge that the econometric evidence before it was
"uneven". Instead, the Panel merely took note of Thailand's contention that "switching patterns are
uneven across various pairs of domestic and foreign brands". 198 Furthermore, the Panel did not err in
relying upon this econometric evidence for its finding of less favourable treatment under Article III:4.
The Panel used this evidence merely to confirm that the additional administrative requirements may
have a negative impact on imported cigarettes rela tive to domestic cigarettes, as these products are in
close competition with each other in the Thai market. 199 Taking a specific example, the Panel
considered that the additional administrative re quirements imposed only on resellers of imported
cigarettes may affect business decisions of cigare tte suppliers because "an additional administrative
burden can be linked to the operating costs of th eir businesses", which would, in turn, modify the
conditions of competition to the detriment of imported cigarettes. 200 Although Thailand criticizes the
Panel for this "cursory" statement 201, we consider that the Panel sought merely to identify that the
"potential operating costs associated with the add itional administrative requirements" may influence
business decisions in a market where products compete closely with each other.202 In our view, it was
reasonable for the Panel to conclude that complia nce with the additional administrative requirements
will involve some costs that resellers of importe d cigarettes, and not resellers of like domestic
cigarettes, must bear, taking account of, inter alia, economic evidence relating to the market.
138. Accordingly, we are not persuaded by Thaila nd's arguments that the Panel made its finding
"without making any factual findings other than to establish the existence of the different
requirements themselves".
203 The Panel assessed certain implica tions of these measures in the Thai
market by referring to econometric evidence indicati ng a close competitive relationship, and also by

196Thailand's appellant's submission, para. 114 (quoting Panel Report, footnote 1299 to para. 7.735).
198Panel Report, footnote 1299 to para. 7.735.
199At paragraph 7.735 of its Report, the Panel stated: (i) that TTM holds a 78 per cent market share,
whereas imported cigarettes account for the remaining 22 pe r cent; (ii) that the eco nometric evidence adduced
by the Philippines suggests a certain degree of elasticity and switching patterns between imported and domestic
cigarettes; and (iii) that, "[i]n 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".
200Panel Report, para. 7.736.
202Panel Report, para. 7.736.

noting that the additional administrative requirements carry certain operating costs. 204 We note that,
although the Panel could have inquire d further into the implications of Thailand's measure for the
conditions of competition, the mere fact that the additional administrative requirements are imposed
on imported cigarettes, and not on like domestic cigare ttes, provides, in itself, a significant indication
that the conditions of competition are adversely modified to the detriment of imported cigarettes. We
therefore consider that the Panel's analysis was su fficient to support its finding that the additional
administrative requirements modify the conditions of competition to the detriment of imported
cigarettes.
139. Finally, Thailand claims that the Panel failed to address Thailand's argument that resellers of
imported cigarettes gain certain "financial advant ages" by virtue of the additional administrative
requirements.
205 In particular, Thailand argues that r esellers of imported cigarettes may claim
"additional input tax credits for VAT paid on u tilities, administrative expenses and other services
consumed on the basis of the ratio of th eir VAT sales to their VAT-exempt sales". 206 However, we
observe that Thailand submitted this argument only in response to Panel questions following the first
substantive meeting, and in a few other instances ther eafter, and that Thailand produced no evidence
to substantiate its assertion. Therefore, we do not see any basis for Thaila nd's contention on appeal
that the Panel should have given greater considerati on to this argument in conducting its substantive
analysis.207
140. Accordingly, we reject Thailand's contention on appeal that the Panel's findings and "analysis
of less favourable treatment are not sufficient as a matter of law to support a finding of a violation of

204In addition, we note that other Panel findings shed further light on the implications of the additional
administrative requirements in the Thai market. The Panel found that failure to comply with the requirements
relating to form Por.Por.30 and the reporting and record-keeping requirements may lead to denial of tax credits.
(Panel Report, para. 7.634) Moreover, the Panel found that resellers of imported cigarettes may be subject to
certain penalties and other sanctions if they fail to co mply with the VAT-related administrative requirements.
(Ibid., paras. 7.719 and 7.722) By contrast, these economic risks are not borne by resellers of domestic
cigarettes.
207We also note that the GATT Panel in US – Section 337 Tariff Act held that:
[T]he "no less favourable" treatment requirement of Article III:4 has to be
understood as applicable to each individual case of imported products. The
Panel rejected any notion of balancing more favourable treatment of some
imported products against less favourable treatment of other imported
products. If this notion were accepted, it would entitle a contracting party to
derogate from the no less favourable treatment obligation in one case, or
indeed in respect of one contractin g party, on the ground that it accords
more favourable treatment in some other case, or to another contracting
party. Such an interpretation would lead to great unce rtainty about the
conditions of competition between imported and domestic products and thus
defeat the purposes of Article III.
(GATT Panel Report, US – Section 337 Tariff Act, para. 5.14)

Article III:4".208 We therefore find that the Panel did not err in conc luding, in paragraph 7.738 of the
Panel Report, that Thailand accords less favourable treatment to imported cigarettes than to like
domestic cigarettes.
2. Article 11 of the DSU: the Panel's Treatment of Exhibit PHL-289
141. We now turn to Thailand's request to revers e the Panel's finding of inconsistency with
Article III:4 of the GATT 1994 on the grounds that th e Panel failed to comply with Article 11 of the
DSU. According to Thailand, the Panel failed to ensure due process and to make an objective
assessment of the matter by accepting and relying on Exhibit PHL-289 without affording Thailand
any opportunity to respond to that evidence.
142. Before considering the merits of Thailand's claim of error, we consider it useful to set out the
circumstances that have given rise to this issu e on appeal. Exhibit PHL-289 was submitted by the
Philippines at the last stage of the proceedings before the Panel and consists of an expert opinion from
a Thai tax lawyer. The opinion concerns the issu e of whether, as a matter of Thai law, VAT
registrants reselling domestic cigarettes are require d to report their sales of domestic cigarettes in
form Por.Por.30. This issue was contested thr oughout the Panel proceedings, with the Philippines
arguing that VAT registrants are obliged to report only resales of imported, not domestic, cigarettes,
and Thailand arguing that resales of both importe d and domestic cigarettes must be reported.
As explained above209, the Panel ultimately agreed with the Philippines. 210 The requirement to report
resales of imported cigarettes, but not resales of like domestic cigarettes, in form Por.Por.30 was thus
one of the additional administrative requirements examined by the Panel in its Article III:4 analysis.
211
143. Prior to the submission of Exhibit PHL-289, each party had adduced several exhibits in
support of its position on whether or not resales of domestic cigarettes must be reported in form
how to complete that form 212, as well as certain examples of form Por.Por.30 actually filed by VAT

209Supra, para. 98.
210Panel Report, para. 7.703.
211Thailand's Article 11 claim with respect to Exhi bit PHL-289 relates only to the Panel's finding in
paragraph 7.704 that VAT registrants need not include information on resales of domestic cigarettes in form
Por.Por.30, and does not concern the Panel's finding in the same paragraph, that resellers of exclusively
domestic cigarettes are exempt from the requirement to file form Por.Por.30. Nor does Thailand's objection to
Exhibit PHL-289 concern the other additional administrative requirements that the Panel found to be imposed
only on resellers of imported cigarettes.
212Form Por.Por. 30 (Thai monthly VAT form) (Panel Exhibit THA-42), submitted by Thailand with its
answers to the Panel's questions following the first substantive meeting.

registrants.213 With its second written submission, the Philippines submitted an expert opinion 214 and
a ruling by the Director-General of the Thai Re venue Department issued in 2000 (the "2000 DG
Revenue ruling").215 The Philippines further attached a second expert opinion to its opening statement
at the second substantive meeting of the Panel with the parties. 216 In its questions following the
second substantive meeting, the Panel specifically requested Thailand to comment on the 2000 DG
Revenue ruling provided by the Philippines. 217 In responding to that question, Thailand submitted an
excerpt from a 2006 textbook on the Thai Revenue Code 218 (the "2006 textbook"), and a ruling by the
Director-General of the Thai Revenue Departme nt issued in 1995 (the "1995 DG Revenue ruling"). 219
On 8 December 2009, each party submitted its co mments on the other party's answers to Panel
questions following the second substantive meeting. Th is was the last stage of the proceedings before
the Panel. In its comments, the Philippines responded to Thailand's evidence, and in particular to the
1995 DG Revenue ruling, and in doing so submitted a third expert opinion (Exhibit PHL-289), which
is the evidence at the centre of this issue on appeal.220
144. The Panel's Interim Report was issued to the parties on 30 June 2010. In its comments on the
Interim Report, Thailand requested the Panel to revise its analysis under Article III:4 of the
GATT 1994 and to find that resales of domestic cigarettes are required to be reported in form
Por.Por.30.221 Among the arguments put forth by Thailand in support of this request was that the
Panel should not have relied upon Ex hibit PHL-289. Thailand stressed that this exhibit had been
provided only "at the last opportunity afforded to the parties to submit their views" 222, and that
paragraph 15 of the Panel's Worki ng Procedures required evidence, including Exhibit PHL-289, to be
submitted no later than the first substantiv e meeting of the Panel with the parties. 223 In dismissing
Thailand's request, the Panel observed that nothing in the DSU or its Working Procedures precluded
the Panel "from accepting evidence submitted by a party at the latest stage of the proceedings". 224
The Panel also read the first sentence of the opinion in Exhibit PHL-289 as "suggesting that the

213TTM and Re-seller Forms Por.Por.30 (Panel Exhibit THA-89 (BCI)), submitted by Thailand with its
opening statement at the second substantive meeting.
214Expert statement by Mr. Piphob Veraphong, 17 July 2009 (Panel Exhibit PHL-207).
215Revenue Ruling Gor.Kor. 0811/Por.633, 27 January 2000 (Panel Exhibit PHL-253).
216Expert Statement by Mr. Piphob Veraphong, 1 September 2009 (Panel Exhibit PHL-254).
217In Panel Question 142(2), the Panel requested Thailand to comment on the "DG Excise's ruling,
provided by the Philippines at the second substantive meeting (Exhibit PHL-253)".
218Excerpt of page 4-266 of Textbook on the Revenue Code by Professor Paichit Rojanavanich,
Chumporn Sensai, and Saroch Thongpracum, B.E. 2549 (2006) (Panel Exhibit THA-95).
219Revenue Department Ruling Gor.Kor. 0802/Por.22836, 10 October 1995 (Panel Exhibit THA-96).
220Expert Statement by Mr. Piphob Veraphong, 8 December 2009 (Panel Exhibit PHL-289).
221Thailand's comments on the Interim Report, para. 63. Thailand's comments were submitted to the
Panel on 14 July 2010.
222Panel Report, para. 6.122 (quoting Thailand's comments on the Interim Report, para. 48).
223Panel Report, para. 6.122.
224Panel Report, para. 6.125.

intended purpose of this evidence was to rebut Th ailand's arguments in relation to [the 1995 DG
Revenue ruling]". 225 Accordingly, since Exhibit PHL- 289 was evidence necessary for purposes of
rebuttal or comments provided by parties, the Pa nel concluded that accepting this evidence was in
accordance with paragraph 15 of its Working Procedures.
145. On appeal, Thailand argues that the Panel vi olated Thailand's due process rights and acted
inconsistently with Article 11 of the DSU by accepting and relying on Exhibit PHL-289 without
affording Thailand the right to comment on that evid ence. Thailand points to several considerations
as establishing such a violation, which may be gro uped into two main lines of argument. First,
Thailand emphasizes that due process requires that par ties be provided with an adequate opportunity
to respond to evidence adduced by the other party. Given the significance of Exhibit PHL-289 to the
Panel's finding regarding the requirement to report sal es of domestic cigarettes in form Por.Por.30,
Thailand considers that its due process rights with r espect to that piece of evidence should have been
"accorded the highest importance".226 Thailand adds that the Panel's failure to ensure due process was
"exacerbated" by the fact that the Panel did not ac cord deference to Thailand's interpretation of its
own law. 227 Second, Thailand contends that the Pa nel's acceptance of Exhibit PHL-289 was not
consistent with paragraph 15 of its Working Procedures. In Thailand's view, because Exhibit
PHL-289 was not rebuttal evidence, it should have b een submitted no later than the first substantive
meeting, or accepted only after having require d the Philippines to show good cause and having
afforded Thailand a right of response.
146. The Philippines, for its part, argues that the Pa nel complied with its duties under Article 11 of
the DSU. According to the Ph ilippines, the Panel respected both Thailand's due process rights and
paragraph 15 of the Panel's Wo rking Procedures. Thailand did have opportunities to comment on
Exhibit PHL-289, and took advantage of one of them during interim review. The Philippines stresses
that Thailand did not seek an opportunity to comment on Exhibit PHL-289 at the time that it was
submitted, and that Thailand did not submit its own evidence, the 1995 DG Revenue ruling, at the
earliest opportunity, but only in its responses to Pane l questions after the second substantive meeting.
The Philippines further maintains that the Panel did not give decisive weight to Exhibit PHL-289, in
either the Interim Report or the Panel Report. For the Philippines, moreover, the expert opinion
contained in Exhibit PHL-289 constitutes evidence that is covered by the first, rather than the second,
sentence of paragraph 15 of the Panel's Working Procedures. Accordingly, the Panel was not
required, pursuant to paragraph 15, to determin e that the Philippines had shown good cause for the
admission of Exhibit PHL-289, nor to afford Thailand an opportunity to respond to that evidence.

225Panel Report, para. 6.127.

147. We note that Thailand couches its claim under Article 11 of the DSU as a "due process
claim".228 Due process is a fundamental principle of WTO dispute settlement. 229 It informs and finds
reflection in the provisions of the DSU. 230 In conducting an objective as sessment of a matter, a panel
is "bound to ensure that due process is respected".231 Due process is intrinsically connected to notions
of fairness, impartiality, and the rights of partie s to be heard and to be afforded an adequate
opportunity to pursue their claims, make out their defences, and establish the facts in the context of
proceedings conducted in a balan ced and orderly manner, according to established rules. The
protection of due process is thus a crucial means of guaranteeing the legitimacy and efficacy of a
rules-based system of adjudication.
148. Panel working procedures should both embody and reinforce due process. Article 12.1 of the
DSU states that panels "shall" follow the worki ng procedures set out in Appendix 3 to the DSU
"unless the panel decides otherwise after consulti ng the parties to the dispute". The working
procedures adopted by a panel must conform to the DSU. 232 As the Appellate Body has previously
observed, the use by panels of detailed, standa rdized working procedures promotes fairness and the
protection of due process. 233 The inclusion by a panel in its working procedures of a rule that is
inconsistent with due process would be a clear sign th at such panel has failed to ensure the protection
of due process. At the same time, even when th e working procedures are themselves sound, a panel's
failure to adhere to those procedures may be per tinent to, albeit not necessarily determinative of, the
issue of whether such panel has failed to ensure the protection of due process in a given instance.
149. We also recall that panel proceedings consist of two main stages, the first of which involves
each party setting out its "case in chief, including a full presentation of the facts on the basis of
submission of supporting evidence", and the second d esigned to permit the rebuttal by each party of

228Thailand's response to questioning at the oral hearing.
229The Appellate Body has held that "the protection of due process is an essential feature of a
rules-based system of adjudication, such as that es tablished under the DSU", and that "due process is
fundamental to ensuring a fair and orderly conduct of dispute settlement proceedings". (Appellate Body Reports,
Canada – Continued Suspension / US – Continued Suspension , para. 433; and Appellate Body Report,
Thailand – H-Beams , para. 88, respectively. See also Appellate Body Report, Chile – Price Band System ,
para. 176)
230See Appellate Body Report, Mexico – Corn Syrup (Article 21.5 – US), para. 107. See also Appellate
Body Report, India – Patents (US), para. 94; and Appellate Body Report, Chile – Price Band System, para. 176.
231Appellate Body Report, Chile – Price Band System, para. 176.
232We observe that, in India – Patents (US) , the Appellate Body held that, while "panels enjoy some
discretion in establishing their own working procedures, this discretion does not extend to modifying the
substantive provisions of the DSU". (Appellate Body Report, India – Patents (US), para. 92. See also Appellate
Body Report, US – FSC (Article 21.5 – EC), para. 241)
233See Appellate Body Reports, Canada – Continued Suspension / US – Continued Suspension ,
para. 434; Appellate Body Report, Argentina – Textiles and Apparel , footnote 68 to para. 79; Appellate Body
Report, EC – Bananas III, para. 144; and Appellate Body Report, India – Patents (US), para. 95.

the arguments and evidence submitted by the other parties. 234 Nonetheless, the submission of
evidence may not always fall neatly into one or the other of these categories, in particular when panels
themselves, in the exercise of their fact finding au thority, seek to pursue specific lines of inquiry in
their questioning of the parties. In this respect, we wish to reiterate that due process will best be
served by working procedures that provide "for appr opriate factual discovery at an early stage in
panel proceedings" 235, and that "[d]ue process may be of pa rticular concern in cases where a party
raises new facts at a late stage of the panel proceedings." 236 Furthermore, when the particular
circumstances of specific disputes present situations that are not explicitly regulated by their working
procedures, panels, in the exercise of their contro l over the proceedings, and subject to the constraints
of due process and the DSU, enjoy a margin of discretion to deal with such situations.237
150. As a general rule, due process requires that each party be afforded a meaningful opportunity
to comment on the arguments and evidence adduced by the other party. This was expressly
acknowledged by the Appellate Body in Australia – Salmon when it stated that "[a] fundamental tenet
of due process is that a party be provided with an opportunity to respond to claims made against it".238
At the same time, due process may also require a pa nel to take appropriate account of the need to
safeguard other interests, such as an aggrieved party's right to have recourse to an adjudicative process
in which it can seek redress in a timely manner, and the need for proceedings to be brought to a close.
These interests find reflection in the provisions of the DSU, including Article 3.3, which calls for
"[t]he prompt settlement" of WTO disputes, as this is "essential to the effective functioning of the
WTO and the maintenance of a proper balance betw een the rights and obligations of Members".
Likewise, Article 12.2 of the DSU provides that "[p]anel procedures should provide sufficient
flexibility so as to ensure high-quality panel re ports, while not unduly delaying the panel process".
Furthermore, "in the interests of due process, part ies should bring alleged procedural deficiencies to
the attention of a panel at the earliest possible opportunity".
239 Accordingly, ensuring due process
requires a balancing of various interests, including systemic interests as well as those of the parties,
and both general and case-specific considerations. In our view, panels are best situated to determine
how this balance should be struck in any given pr oceeding, provided that they are vigilant in the
protection of due process and remain within the bounds of their duties under Article 11 of the DSU.

234Appellate Body Report, Argentina – Textiles and Apparel , para. 79. See also Appellate Body
Report, US – FSC (Article 21.5 – EC), para. 240.
235Appellate Body Report, India – Patents (US), para. 95.
236Appellate Body Report, US – Gambling, para. 271. (original emphasis)
237Appellate Body Report, EC – Hormones, footnote 138 to para. 152.
238Appellate Body Report, Australia – Salmon , para. 278. See also ibid., para. 272; and Appellate
239Appellate Body Report, US – Carbon Steel , para. 123. See also Appellate Body Report,
US – Gambling , para. 269; Appellate Body Report, US – FSC , para. 166; and Appellate Body Report,
Mexico – Corn Syrup (Article 21.5 – US), para. 50.

151. We begin our analysis of the Panel's treatmen t of Exhibit PHL-289 by examining Thailand's
arguments concerning paragraph 15 of the Panel's Working Procedures, which provides:
The parties shall submit all factual evidence to the Panel no later than
the first substantive meeting, excep t with respect to factual evidence
necessary for purposes of rebuttals, an swers to questions or comments
on answers provided by each other. Ex ceptions to this procedure will
be granted where good cause is shown. In such cases, the other party
shall be accorded a period of time for comment, as appropriate.
240
152. We note at the outset that, although it alleges that the Panel failed to comply with this
paragraph, Thailand is not seeking from us an independent finding that the Panel violated
paragraph 15 of its Working Procedures. Rather , Thailand invokes this pr ovision to support its
contention that the Panel violated Thailand's due process rights and failed to comply with its duties
under Article 11 of the DSU.241
153. We read paragraph 15 as addressing two categories of evidence. The first encompasses
evidence that is submitted no later than the first s ubstantive meeting, as well as evidence that, albeit
submitted at a later stage, is necessary for purposes of rebuttal, answers to questions, or comments on
answers to questions. The second category of eviden ce is residual. It comprises evidence that does
not fall within the scope of the first sentence. For the second category of evidence, the submitting
party must show good cause and the other party must be accorded an opportunity to comment.
154. Thailand contends that Exhib it PHL-289 cannot be characterized as evidence necessary for
purposes of rebuttal, or comments on Thailand's answ ers to Panel questions, because it was evidence
adduced in support of the Philippines' prima facie case and, in particular, to establish that resales of
domestic cigarettes need not be reported in form Po r.Por.30. Yet, as explained above, the Philippines
had previously submitted the 2000 DG Revenue ruling and two expert opinions in support of this
assertion. Then, in response to a specific request by the Panel to comment on the 2000 DG Revenue
ruling, Thailand submitted the 1995 DG Revenue ruling to show that resales of domestic cigarettes
must be reported in form Por.Por.30. The Philippines, in turn, responded in its comments on
Thailand's answers by submitting Exhibit PHL-2 89 to show that the 2000 DG Revenue ruling
reflected the current state of Thai law. As we see it, Exhibit PHL-289 was submitted to explain the
discrepancies between the 1995 DG Revenue ruling a nd the 2000 DG Revenue ruling. As such, this
exhibit was "factual evidence necessary for purpo ses of rebuttals … or comments on [Thailand's]
answers" within the meaning of the first sentence of paragraph 15. Thus, the Panel's acceptance of

240Panel Report, Annex A-1. The Panel, pursuant to Article 12.1 of the DSU, adopted its own Working
Procedures following consultation with the parties.
241Thailand's response to questioning at the oral hearing.

Exhibit PHL-289 without requiring the Philippines to show good cause or affording Thailand an
opportunity to comment thereon was not inconsiste nt with paragraph 15 of the Panel's Working
Procedures.242
155. However, the fact that the Panel's treatment of Exhibit PHL-289 was not inconsistent with
paragraph 15 of its Working Pro cedures is, in our view, not disp ositive of whether Thailand's due
process rights were respected and, accordingly, of whether the Panel complied with its duties under
Article 11 of the DSU. As set out above, due pro cess generally demands that each party be afforded a
meaningful opportunity to comment on evidence adduced by the other party. At the same time, a
number of different considerations will need to be f actored into a panel's effort to protect due process
in a particular dispute, and these may include the n eed for a panel, in pursui ng prompt resolution of
the dispute, to exercise control over the proceedings in order to bring an end to the back and forth
exchange of competing evidence by the parties. In the context of this dispute, there are several
considerations that are germane to our assessment of Thailand's claim under Article 11 of the DSU.
These include: the conduct of the parties; the le gal issue to which the evidence related and the
circumstances surrounding the submi ssion of the evidence relating to th at issue; and the discretion
afforded under the DSU to panels in their handl ing of the proceedings and appreciation of the
evidence.
156. With respect to the conduct of the parties, we observe that Thailand adduced two items of
evidence, including the 1995 DG Revenue ruling, in response to a specific question posed by the
Panel following the second substantive meeting. Exhibit PHL-289 was then submitted by the
Philippines at the earliest subsequent opportunity, that is, in its comments on Thailand's answers to
Panel questions.
243 Although this was the last stage in the Panel proceedings, the Philippines would
have had no reason to produce the expert testimony c ontained in Exhibit PHL-289 at an earlier stage,
given that this evidence was introduced to rebut the 1995 DG Revenue ruling. Moreover, Thailand
did not object to Exhibit PHL-289 when it was subm itted, but rather seven months later, in its
comments on the Panel's Interim Report. Although we are mindful that the parties' submission of
comments on each other's responses to the Panel's questions marked the last step in the Panel
proceedings, we do not consider that this precl uded Thailand from objecting to Exhibit PHL-289 in a

242We note that the first sentence of paragraph 15 appears to allow for the submission of factual
evidence at the very last stage of th e proceedings, that is, in a party's co mments on the other party's answers to
questions by the Panel following the second substantive meeting. A party's submission of factual evidence so
late in the proceedings should be unusual.
243Philippines' appellee's submission, paras. 189-192.

timely fashion, and requesting that the Panel eith er reject that evidence or give Thailand an
opportunity to respond to that evidence.244
157. Thailand alleges that the due process violati on is "more serious" because "Exhibit PHL-289
was the 'only evidence' supporting" 245 the Panel's finding that resales of domestic cigarettes need not
be reported in form Por.Por.30, and that "the parties' rights under the DSU may be affected by the
importance of the evidence at issue".
246 In response, the Philippines argues that the Panel did not
attach "decisive weight" 247 to Exhibit PHL-289, but instead reached its finding based "on several
pieces of evidence constituting the totality of the evidence before it".248
158. We recall that the issue of whether a VAT registrant is required to report resales of
VAT-exempt goods, such as domestic cigarettes, in form Por.Por.30 was contested between the
parties throughout the proceedings, and each adduced several pieces of evidence in support of its
position. Thus, at the time that Exhibit PHL-289 was submitted by the Philippines, both Thailand and
the Panel would have been aware that it related to a key and highly disputed issue. In determining
that resales of domestic cigarettes need not be repor ted in form Por.Por.30, the Panel explained that
this finding was "based on [its] careful examin ation of all the evidence in its totality". 249 I n i t s
analysis, the Panel referred to the 2006 textbook, as well as the 1995 DG Revenue ruling, which had
been adduced to show that resales of VAT-exempt products must be reported in form Por.Por.30. 250
The Panel also observed that the 2000 DG Revenue ruling, together with the second expert opinion
submitted by the Philippines, indicated that businesses selling VAT-exempt domestic cigarettes do not
have to report those sales in form Por.Por.30. 251 The Panel further noted that the third expert opinion
submitted by the Philippines—Exhibit PHL-289—explaine d that the differences in the rulings issued
in 1995 and 2000 reflect "a change in DG Revenue's approach to the requirements for completing
Form Por.Por.30".252

244Although the Philippines asserts that Thailand had, and took advantage of, the opportunity to
respond to Exhibit PHL-289 in its comments on the Interim Report, we do not consider that this constituted an
appropriate opportunity to respond.
246Thailand's appellant's submission, para. 170 (referring to Panel Report, Korea – Alcoholic
Beverages, para. 10.25).
247Philippines' appellee's submission, para. 209.
248Philippines' appellee's submission, para. 221.
249Panel Report, para. 7.703. Thailand's assertion that Exhibit PHL-289 was the only evidence upon
which the Panel based its finding that sales of domestic cigarettes need not be reported in form Por.Por.30 is
also based on a statement made by the Panel in its Inte rim Report that was not included in the Panel's final
Report. We do not consider that it is appropriate, in these appellate pro ceedings, for Thailand to rely upon a
statement made by the Panel in its Interim Report but which was redacted from the Panel Report.
250Panel Report, para. 7.698.
251Panel Report, para. 7.699.

159. The above overview of the evidence considered by the Panel indicates that Exhibit PHL-289
was not the only evidence supporting the Panel's finding that resales of domestic cigarettes need not
be reported in form Por.Por.30. 253 If anything, the main support for the Panel's finding seems to have
been found in the 2000 DG Revenue ruling, whic h the Panel apparently found compelling because it
confirmed that "income exempted under Section 81 n eed not be reported in Form Por.Por.30 for the
calculation of VAT".254
160. In the light of the above, we do not consider that the Panel's treatment of Exhibit PHL-289
amounted to a violation of due process. Thailand could have requested an opportunity to respond
when the Philippines submitted the exhibit in question, but it did not. 255 Although Exhibit PHL-289
was submitted very late in the proceedings, this ev idence did not raise or relate to a new issue,
previously unknown to Thailand or unexplored by the Panel, and it was not the only evidence
supporting the Panel's conclusion that resales of domestic cigarettes need not be reported in form
Por.Por.30. The Panel could have chosen to refu se to accept Exhibit PHL-289 or to afford Thailand
an opportunity to respond to it. It did not do so. However, taking into account all of the
circumstances, we consider that the Panel did not fail to protect due process in this case.256

253We take note of Thailand's additional argument that the Panel's failure to respect Thailand's due
process rights was "exacerbated" by the fact that the Panel failed to give "due deference" to Thailand's
interpretation of its own law. (Thailand's appellant's submission, para. 173) In our view, the panel in China –
Intellectual Property Rights correctly recognized that, "objectively, a Member is normally well-placed to
explain the meaning of its own law", but that this does not relieve a party of its burden to adduce arguments and
evidence necessary to sustain its pro posed interpretation. (Panel Report, China – Intellectual Property Rights ,
para. 7.28) Further, a panel's duties under Article 11 of the DSU require it to cond uct an objective assessment
of all such arguments and evidence. In this dispute, the Panel observed, in the context of its Article III:4
analysis, that "Thailand should normally be in a position to explain the nature" of obligations under Thai law but
that, to the extent that the parties disagree on the content of such obligations, the Panel was "required to
objectively examine the question at issue based on the text of the concerned provision[s] as well as on the
evidence before [the Panel]". (Panel Report, para. 7.684 (footnote omitted)) We see no error in the Panel's
approach.
254Panel Report, para. 7.701.
255We are not suggesting that the fact that Thailand did not expressly request an opportunity to respond
to Exhibit PHL-289 automatically imp lies that it cannot succeed in its claim that the Panel failed to ensure due
process. At the same time, Thailand's failure to request an opportunity to respond is a consideration relevant to
our overall assessment of whether, in the circumstances of this case, the Panel's condu ct denied due process to
Thailand. We observe, in this regard, that when confronted with an issue similar to the one raised here, the
panel in China – Auto Parts rejected "China's argument that the Panel should, sua sponte, have accorded a
period of time for other parties to comment on Exhibit CDA-48", and stated that "it is China, not the Panel, that
should have initiated an opportunity to submit comments on Exhibit CDA-48." (Panel Reports, China – Auto
Parts, para. 6.22 (emphasis added)) We disagree with these statements to the extent that they imply that only
the conduct of the party receiving evid ence submitted by the other party late in the proceedings is relevant in
determining whether due process was protected. In our view, both that party and the panel to which the
evidence is submitted have a responsibility to consider whether an opportunity to respond to that evidence
would be useful or necessary, and to conduct themselves accordingly.
256We wish to emphasize, however, that we do not co nsider that the mere char acterization of evidence
as rebuttal evidence means that no due process concerns can arise in s ituations where a panel does not afford a
party an opportunity to respond to such rebuttal evidence.

161. For all of these reasons, we find that Thailand has not established that the Panel failed to
ensure due process and, thus, to comply with it s duty under Article 11 of the DSU to make an
objective assessment of the matter by accepting a nd relying on Exhibit PHL-289 without having
afforded Thailand an opportunity to comment on that evidence.
3. Thailand's Defence Under Article XX(d) of the GATT 1994
162. Thailand also appeals the Panel's finding that:
… Thailand has not discharged its burden of showing that the
administrative requirements and the imposition of penalties for
failure to complete VAT filing requirements are necessary to secure
compliance with the Thai VAT laws within the meaning of
Article XX(d) of the GATT 1994.
257
163. The Panel made this finding in response to Tha iland's efforts to invoke Article XX(d) of the
GATT 1994 to defend the additional administrative requirements found to be inconsistent with
Article III:4. Article XX(d) enables Members to jus tify measures found to be inconsistent with the
provisions of the GATT 1994 if they can estab lish that such measur es are "necessary to secure
compliance with laws or regulations which are not inconsistent with the provisions of this
Agreement", and provided that the application of such measures is also consistent with the
requirements of the chapeau of Article XX. Thus, in order to make out an Article XX(d) defence,
a respondent must, inter alia , identify "laws or regulations whic h are not inconsistent" with the
GATT 1994, and establish that the measure found to be GATT-inconsistent is "necessary" to secure
compliance with such "laws or regulations".
164. Thailand requests us to reverse the Panel's finding under Article XX(d). Thailand does not
challenge the substance of the Panel's reasoning on Thailand's defence, as such. Rather, Thailand
contends that a reference contained in the sente nce of the Panel Report immediately preceding the
Panel's finding reveals that the Panel "committed a funda mental error of legal analysis in its rejection
of Thailand's defence under Article XX(d)".258 That sentence reads:
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[s] at issue, were not WTO
consistent.259 (original italics; underlining added)

257Panel Report, para. 7.758.
259Panel Report, para. 7.758.

165. Thus, by means of a cross-reference to Sec tion VII.F.6(b)(ii) of its Report, the Panel
expressed the view that Thailand had not identified "laws or regulations which are not inconsistent"
with the GATT 1994, but only VAT laws that the Pa nel had already found to be GATT-inconsistent.
As Thailand's asserted Article XX(d) defence could not succeed if the laws or regulations with which
the measures at issue purportedly secure compliance are themselves GATT-inconsistent, the Panel, in
the very next sentence of its Report, reached the finding set out above.
166. Section VII.F.6(b)(ii) of the Panel Report comprises paragraphs 7.729 through 7.738. It
contains the Panel's analysis of "[w]hether imported cigarettes are subject to less favourable treatment
than domestic cigarettes within the meaning of Article III:4" 260, and culminates with the Panel's
conclusion that "Thailand acted inc onsistently with Article III:4 by subjecting imported cigarettes to
less favourable treatment compared to like domestic cigarettes through the VAT-related
administrative requirements imposed only on resellers of imported cigarettes."261
167. Thailand argues that the Panel's reference to Section VII.F.6(b)(ii) shows that the Panel
identified as the "laws or regulations" with wh ich the inconsistent measure purportedly secures
compliance the very same measure that the Panel had f ound to be inconsistent with Article III:4 of the
GATT 1994. Thus, the Panel's cros s-reference signifies, according to Thailand, that the Panel
rejected Thailand's Article XX(d) defence to the violation of Article III:4 on the grounds that it had
already found that the additional administrative re quirements violate Article III:4. Such circular
reasoning constitutes, in Thailand's view, a "fundame ntal error" by the Panel that "effectively
deprived Thailand of its right to assert its Article XX (d) defence" to the finding of inconsistency with
Article III:4. For this reason, Thailand submits th at the Panel's Article III:4 finding "is also legally
flawed"262, and should also be reversed.
168. The Philippines, on the other hand, considers the cross-reference made by the Panel to be a
mere clerical error. The Ph ilippines sees no basis in the Panel' s reasoning to suggest that its
examination of Thailand's defen ce consisted of a circular analysis of whether the additional
administrative requirements are necessary to secu re compliance with those same administrative
requirements. The Philippines high lights that the Panel properly articulated the legal standard under
Article XX(d) and identified Thailand's argument as be ing that the "administrative requirements" are
necessary to secure compliance "with the Thai VAT laws". Thus, the Philippines believes that other
elements of the Panel's reasoning disclose that the cross-reference in paragraph 7.758 was simply a
mistake, and that the Panel really intended to refer to Section VII.E.5(b)(ii) of its Report, which deals

260Panel Report, heading to Section VII.F.6(b).
261Panel Report, para. 7.738. (emphasis added)

with discriminatory taxation, rather than to Section VII.F.6(b)(ii) of its Report, which deals with the
discriminatory administrative requirements. A ccordingly, the Philippines requests the Appellate
Body to modify this clerical error, replacing the reference to "Section VII.F.6(b)(ii)" with a reference
to "Section VII.E.5(b)(ii)".
169. Like the participants, we, too, consider the Pane l's reference to Section VII.F.6(b)(ii) to be
erroneous. Read literally, this cross-reference mean s that the Panel considered that the additional
administrative requirements could not be justified as necessary to secure compliance with those same
additional administrative requirements because the additional administrative requirements had already
been found to be inconsistent with Article III:4. This would be a ma nifestly incorrect approach to the
analysis of Thailand's Article XX(d) defence.
170. The Panel's analysis and disposition of Th ailand's defence under Ar ticle XX(d) of the
GATT 1994 was extremely brief. In just over a page, the Panel set out the text of the provision,
identified the order of analysis, the burden of proo f, and the requisite elemen ts of an Article XX(d)
defence. In a single paragraph, including the cross -reference to Section VII.F.6(b)(ii) quoted above,
the Panel applied this analysis to the facts before it. The brevity of this analysis has not itself been
challenged on appeal. Yet it does mean that the Panel' s reasoning offers few clues as to the details of
the analytical steps taken by the Panel. Thus, ev en accepting the Philippines' assertions that the Panel
properly identified the legal standard to be app lied under Article XX(d) a nd the elements of the
defence advanced by Thailand, we do not see suffi cient reasoning to enable us to conclude with
confidence that, although the Panel in fact referred to its finding in Section VII.F.6(b)(ii), it intended
to refer to its finding in Section VII.E.5(b)(ii) of its Report, or indeed to any other Section of its
Report. The reference to Section VII.F.6(b)(ii) was an obvious error, but it is not clear, on the basis of
the Panel Report, what would have been the correct reference.
171. Accordingly, due to the obvious error in the penultimate sentence of paragraph 7.758 of the
Panel Report, we are compelled to reverse the Panel's finding, in that paragraph, that Thailand did not
discharge its burden of demonstrating that the a dditional administrative requirements are necessary to
secure compliance with the Thai VAT laws within the meaning of Article XX(d) of the GATT 1994.
172. Thailand contends that, in the event that we re verse this finding by the Panel, we should also
reverse the Panel's finding that the additional ad ministrative requirements are inconsistent with
Article III:4 because the Panel "effectively deprived Thailand of its right to assert its Article XX(d)

defence" to that finding. 263 Thailand does not refer to any prov ision of the DSU or other covered
agreement, nor to any jurisprudence, in support of this position.
173. We have difficulties understanding why the Panel's disposition of the Philippines' claim under
Article III:4 should depend on the Panel's disposition of Thailand's defence under Article XX(d). It is
true that, in examining a specific measure, a panel may be called upon to analyze a substantive
obligation and an affirmative defence, and to apply both to that measure. It is also true that such an
exercise will require a panel to find and apply a "line of equilibrium" 264 between a substantive
obligation and an exception. Yet this does not rende r that panel's analyses of the obligation and the
exception a single and integrated one. On the contrary , an analysis of whether a measure infringes an
obligation necessarily precedes, and is distinct from, the "further and separate" assessment of whether
such measure is otherwise justified. 265 Thus, we reject Thailand's request to reverse the Panel's
Article III:4 finding on the grounds that the Panel erre d in its analysis of Thailand's Article XX(d)
defence.
174. In circumstances where it has reversed panel fi ndings and legal interpre tations, the Appellate
Body has, within the limits of its jurisdiction, consistently sought to "facilitate the prompt settlement
of the dispute" 266 by completing the legal analysis of relevant issues. 267 The same considerations
impel us to seek to do the same in this appeal. A ccordingly, we consider whether we are able to rule,
ourselves, on Thailand's defence under Article XX(d) of the GATT 1994.
175. Article XX(d) of the GATT 1994 provides:
General Exceptions
Subject to the requirement that such measures are not applied in a
manner which would constitute a mean s of arbitrary or unjustifiable
discrimination between countries wher e the same conditions prevail,
or a disguised restriction on international trade, nothing in this
Agreement shall be construed to pr event the adoption or enforcement
by any Member of measures:

265In US – Gasoline, the Appellate Body cautioned against confusing "the question of whether
inconsistency with a substantive rule existed, with the further and separate question … as to whether that
inconsistency was nevertheless justified". (Appellate Body Report, US – Gasoline , p. 23, DSR 1996:I, 1, at 21
(emphasis added). See also GATT Panel Report, US – Section 337 Tariff Act, para. 5.9)
266Appellate Body Report, US – Hot-Rolled Steel, para. 235.
267To the extent that completion of the legal analysis requires the Appellate Body to rely upon facts, the
Appellate Body can complete the analysis only if "factual findings of the panel" and/or "undisputed facts in the
panel record" provide a sufficient factual basis to perform the requisite legal analysis. (See Appellate Body
Report, EC – Asbestos, para. 78)

(d) necessary to secure compliance with laws or regulations
which are not inconsistent w ith the provisions of this
Agreement, including those relating to customs enforcement,
the enforcement of monopolies operated under paragraph 4 of
Article II and Article XVII, the protection of patents, trade
marks and copyrights, and the prevention of deceptive
practices[.]
176. Article XX(d) is one of the limited and conditi onal "General Exceptions" that allow Members
pursuing certain public policy objectives to deroga te from the substantive obligations in the
GATT 1994, including the national treatment obligations set out in Article III.
268 In order to justify an
otherwise GATT-inconsistent measure, a Member invoking Article XX(d) as a defence bears the
burden of establishing that the conditions prescribed therein are met.269
177. A Member will successfully discharge that burden and establish its Article XX(d) defence
upon demonstration of three key elements, namely: (i) that the measure at issue secures compliance
with "laws or regulations" that are themselves cons istent with the GATT 1994; (ii) that the measure
at issue is "necessary" to secure such compliance; and (iii) that the measure at issue meets the
requirements set out in the chapeau of Article XX. Furthermore, when Article XX(d) is invoked to
justify an inconsistency with Article III:4, what must be shown to be "necessary" is the treatment
giving rise to the finding of less favourable treatment. 270 Thus, when less favourable treatment is
found based on differences in the regulation of impor ts and of like domestic products, the analysis of
an Article XX(d) defence should focus on whethe r those regulatory differences are "necessary" to
secure compliance with "laws or regulations" that are not GATT-inconsistent.
178. In all of its submissions before the Panel, Tha iland devoted just six paragraphs to justifying
the additional administrative requirements, and provided little or no elaboration of the necessary
elements of its asserted defence under Article XX(d). We see at least four critical flaws in Thailand's
presentation of its Article XX(d) defence to the Panel.
179. First, in putting forth its defence, Thaila nd sought to justify administrative requirements
relating to VAT liability generally, rather than to justify the differential treatment afforded to
imported versus domestic cigarettes under its measure . Second, Thailand failed to identify precisely
the "laws or regulations" with which the measu re at issue purportedly secures compliance, and
engaged in no effort to establish that such laws and regulations are consistent with the GATT 1994.

268See Appellate Body Report, US – Gasoline , p. 24, DSR 1996:I, 1, at 22; and Appellate Body
Report, US – Shrimp, para. 156.
269See Appellate Body Report, Korea – Various Measures on Beef, para. 157.
270See GATT Panel Report, US – Section 337 Tariff Act, para. 5.27.

Even assuming that the vague references made by Thailand in its submissions to the Panel 271 could be
construed as identifying relevant laws or regulations with wh ich the additional administrative
requirements seek to ensure compliance, Thailand's arguments with respect to, third, "necessity" and,
fourth, the chapeau of Article XX, were patently underdeveloped. 272 With respect to the necessity
test, Thailand asserted that the "reporting requi rements are necessary ... to the enforcement of
Thailand's VAT system"273, and that the additional administrative requirements are necessary "in that
it is difficult to see how Thailand could administer its VAT system without requiring VAT payers to
maintain and submit input and output reports , the VAT Form Por.Por. 30 and the other
requirements".274 Thailand provided no further elabor ation of these assertions and adduced no
evidence in support of them. 275 As for the chapeau of Article XX, Thailand referred to it only once.
In its entirety, this reference consisted of Tha iland's argument that, "[g]iven that these measures are
applied to all products, im ported or domestic, subject to VAT, th ey are not applied in a manner that
constitutes an arbitrary or unjustifiable discrimination or a disguised restriction on international

271Thailand made loose references to: "Thailand's VAT law" (Thailand's first written submission to the
Panel, para. 260); "Thailand's VAT system, as established under Chapter 4 of Thailand's Revenue Code" (ibid.);
and the "normal reporting requirements of its VAT a nd other tax laws" (Thailand's response to Panel
Question 139, para. 147). These references encompass a myriad of provisions of Thai law addressing various
matters. In one instance, Thailand also argued that the "penalties [] ensure compliance with the normal
reporting requirements of its VAT and other tax laws especially where … thos e reporting requirements
contribute to the fight against smuggling of cigarettes". (Thailand's response to Panel Question 139, para. 147)
This argument seems to have been advanced in order to justify the penalties under Article XX(d) in the event
that the Panel considered such penalties to constitute "exc ess tax" under Article III:2 of the GATT 1994. It is
unclear to us whether Thailand sought to assert the same defence in the event that, as the Panel ultimately found,
the penalties were inconsistent with Article III:4.
272That the defence by Thailand was largely unelaborated with respect to "necessity" is likely due to the
fact that it is difficult to make detailed arguments to demonstrate the "necessity" of a measure under
Article XX(d) in the absence of a clea r identification of the laws or regu lations with which that measure is
purportedly necessary to secure compliance.
273Thailand's second written submission to the Panel, para. 177.
274Thailand's first written submission to the Panel, para. 260. (original emphasis) Thailand added that
the additional administrative requiremen ts "are necessary, as that term has been interpreted by the Appellate
Body in Brazil – Retreaded Tyres " (Thailand's second written submission to the Panel, para. 177), and, in a
footnote, quoted a statement by the Appellate Body in that report, that a measure is necessary if it is "apt to
make a material contribution to the achievement of its objective" (Thailand's second written submission to the
Panel, footnote 139 to para. 177 (quoting Appellate Body Report, Brazil – Retreaded Tyres, para. 150)).
275We recall that the issue of "whether a measure is 'necessary' should be determined through 'a process
of weighing and balancing a series of factors'" (Appellate Body Report, Korea – Various Measures on Beef ,
para. 164) and that "two factors that, in most cases, will be relevant to a panel's determination of the 'necessity'
of a measure [are] the contribution of the measure to the realization of the ends pursued by it [and] the
restrictive impact of the measure on intern ational commerce" (Appellate Body Report, US – Gambling ,
para. 306). Moreover, a panel's analysis of "neces sity" must include consideration of "whether a
WTO-consistent alternative measure which the Member c oncerned could 'reasonably be expected to employ' is
available". (Appellate Body Report, Korea – Various Measures on Beef , para. 166) See also Appellate Body
Report, Brazil – Retreaded Tyres, paras. 142 and 143.

trade".276 This cannot suffice to establish that the ad ditional administrative requirements fulfil the
requirements of the chapeau of Article XX.277
180. In our view, therefore, the arguments and evidence put forward by Thailand fail, on their face,
to establish the requisite elements of an Article XX(d) defence. Accordingly, we find that Thailand
failed to make out a prima facie defence and, therefore, failed to establish that the additional
administrative requirements are justified under Article XX(d) of the GATT 1994.
4. Conclusion
181. In the light of the above, we uphold the Panel's finding, in paragraph 8.3(c) of the Panel
Report, that Thailand acts inconsistently with it s obligations under Article III:4 of the GATT 1994 by
subjecting imported cigarettes to treatment less favourable than that accorded to like domestic
cigarettes.278
V. Article X:3(b) of the GATT 1994
A. Introduction
182. Thailand appeals the Panel's findi ng that Thailand acts inconsistently with Article X:3(b) of
the GATT 1994 by failing to maintain or institute in dependent review tribunals or procedures for the
prompt review of guarantee decisions.279
183. The Panel considered, first, the meaning of the phrase "administrative action relating to
customs matters" in Arti cle X:3(b). The Panel found that the imposition of a guarantee by the Thai
Customs Department ("Thai Customs") is "adminis trative action relating to customs matters" within
the meaning of Article X:3(b). 280 Second, the Panel considered whether Thailand maintains or
instituted tribunals or procedures for the prompt review and correction of guarantee decisions
in accordance with Article X:3(b) and found that the Thai system does not comply with that
obligation.
281

276Thailand's first written submission to the Panel, para. 260.
277Furthermore, we are uncertain what Thailand meant to refer to when it stated that "these measures
are applied to all products, imported or domestic, subject to VAT", since the measures that had to be justified
under Article XX(d) and the chapeau of Article XX were the additional administrative requirements, which are
not applied to resellers of domestic cigarettes.
278See also Panel Report, para. 7.738.
279Panel Report, paras. 7.1087 and 8.4(g).
280Panel Report, para. 7.1053.
281Panel Report, para. 7.1087.

184. On appeal, Thailand requests us to rever se the Panel's finding that Thailand acts
inconsistently with Article X:3(b). Thailand contends that the Panel erred in concluding that requiring
a guarantee in order to obtain the release of goods pending a final determination of customs value is
"administrative action relating to customs matters" w ithin the meaning of Article X:3(b). In the event
that we reject this allegation of error and uphol d the Panel's finding that requiring a guarantee falls
within the scope of Article X:3(b), then Thailand fu rther submits that providing for a right of appeal
of a guarantee decision upon final assessment of duties satisfies Thailand's obligations under
Article X:3(b).
185. The Philippines contends that the Panel correctly found that the guarantee decisions at issue
constitute "administrative action re lating to customs matters" within the meaning of Article X:3(b).
The Philippines requests us to uphold this finding by the Panel and to reject Thailand's contention that
providing for a right of appeal upon final assessment of duties satisfies Thailand's obligations under
Article X:3(b).
B. Article X:3(b) of the GATT 1994
186. Article X:3(b) stipulates that WTO Members shall maintain judicial, arbitral or administrative
tribunals or procedures for the "prompt review a nd correction of administrative action relating to
customs matters." On appeal, Thailand's claims of error relate to the Panel's interpretation and
application, in the context of guarantee decisions , of the phrases "administrative action relating to
customs matters" and "prompt review" in Article X:3(b).
187. Before turning to our analysis we briefly set out our understanding of the operation of the
measure at issue based on the findings of the Panel and on the Panel record. Section 112 of Thailand's
Customs Act (the "Thai Customs Act") 282 provides that in the event of doubt as to the amount of duty
applicable to a specific good, customs officials may undertake a detailed examination. In such
circumstances, the goods in question may be re leased from customs pending the final assessment of
duty liability, provided that the importer pays "the amount of the duty declared in the entry by the
importer or the exporter" and pr ovided that "an additional sum of money covering the maximum duty
payable on the goods" is deposited as a guarantee.
283 If, for example, Thai Customs questions
whether the importer's declared price is an appropriate basis for customs valuation, then Thai Customs
may examine the matter further. During the examin ation process, the importer is entitled to withdraw

282Government of the Kingdom of Thailand, The Customs Act, B.E. 2469 (Panel Exhibit PHL-20).
283Panel Report, para. 7.1017 (quoting Thai Customs Act, Section 112).

the goods against payment of a guarantee. 284 Section 112 further stipulates that the guarantee may be
given in the form of a cash deposit or, provided that the Director-General of Thai Customs so
approves, it may be given in the form of a "guarantee … of the Ministry of Finance or a bank".
188. Once final duty liability has been established, Thai Customs issues a notice of assessment. If
the final duty liability exceeds the duty paid on the d eclared value at the time of entry of the goods,
and the guarantee has been given in the form of a cash deposit, then the amount by which it exceeds
the declared duty shall be paid immediately from the cash deposit. 285 In the event that a guarantee
from a bank or the Ministry of Finance has been gi ven, the importer or exporter shall pay the amount
that exceeds the declared duty with in 30 days after the date of receiving the notice of assessment. If
the declared duty paid or the cash deposit exceeds the amount specified in the notice of final
assessment, the excess amount, together with interest, is to be refunded to the importer.286
189. Both the importer and the exporter have the right to challenge the final duty assessment
before a Board of Appeals (the "BoA") within 30 da ys from the date of the receipt of the notice of
assessment, pursuant to Section 112sexies of the Thai Customs Act.287
190. The Panel found that guarantee decisions can be appealed to the Thai Tax Court only when:
(i) the importer has been provided with a notice of assessment regarding the final customs value of the
goods concerned; and (ii) the importer has challenged that notice before the BoA. 288 We understand
that the Philippines' claim under Article X:3(b) w ith respect to appeals of guarantee decisions as well
as the Panel's finding with respect thereto, focused on the first of these two mandatory steps, that is,
on the requirement under Thai law to await the issuan ce of the notice of assessment before being able

284Panel Report, para. 7.971. The guarantee must be in an amount equal to the difference between the
declared c.i.f. price and a (higher) c.i.f. price provisionally fixed by Thai Customs, plus taxes calculated on the
basis of the higher, provisional, c.i.f. price.
285Panel Report, para. 7.856 (quoting Thai Customs Act, Section 112bis).
286Panel Report, para. 7.857 (quoting Thai Customs Act, Section 112quater).
287In findings that are not subject to appeal, the Pane l concluded that the BoA cannot be considered to
be free of control or influence from Thai Customs, principa lly because it is staffed, at least partially, with Thai
Customs agents, thus creating the possi bility that individuals involved in taking customs decisions might also
participate in the review of those same decisions. (Panel Report, paras. 7.1003-7.1005) Accordingly, the Panel
considered that the BoA cannot be considered to be a tribunal independent of the agencies entrusted with
administrative enforcement within the meaning of Article X:3(b). (Ibid., para. 7.1006)
288Although Thailand contended that guarantee decisions could be appealed directly to the Thai Tax
Court without a prior appeal to the BoA, the Panel, based on evidence submitted by the Philippines, found
otherwise. (Panel Report, paras. 7.1072-7.1083; see also para. 7.91)

to appeal a guarantee decision. 289 Furthermore, we understand the Philippines' claim to relate to
guarantee decisions regardless of whether security is provided by means of a cash deposit or by means
of a guarantee from a bank or the Ministry of Finance. Finally, with respect to the obligation under
Article X:3(b), we note that the Philippines' clai m and the Panel's findings focused on whether the
Thai system ensures "prompt" review rather th an on what constitutes "review and correction" of
guarantee decisions.
1. The Meaning of "administrative action relating to customs matters" and
"prompt review and correction" in Article X:3(b)
191. Article X:3(b) of the GATT 1994 provides as follows:
Each Member 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
administrative action relating to customs matters. Such tribunals or
procedures shall be independent of the agencies entrusted with
administrative enforcement and their decisions shall be implemented
by, and shall govern the practice 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; Provided that the
central administration of such agen cy may take steps to obtain a
review of the matter in another proceeding if there is good cause to
believe that the decision is inconsis tent with established principles of
law or the actual facts. (original italics)
192. We begin our analysis of the ordinary meaning of the phrase "administrative action relating to
customs matters" by considering dictionary defin itions of the individual words making up this phrase.
The word "action" is defined, inter alia, as "[a] thing done, a deed, an act", and as "an act or decision
by an executive or legislative body (as of a government or a political party) or by a supranational
agency".
290 The word "administrative" is defined as "of or relating to the executive branch of a
government" and "of or relating to a government agency". 291 Thus, "administrative action" refers to
acts or decisions of the executive branch of a government, or of a government agency.

289We note the Panel's finding that delays in the Bo A appeal proceedings at issue 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 administrative actions". (Panel Report, para. 7.1015 (original emphasis))
Based on evidence of excessive delays in multiple cas es, the Panel concluded that there was a "capacity for
delays in the system", and therefore concluded that Thailand acts inconsistently with its obligation under
Article X:3(b) of the GATT 1994. (Ibid.)
290Webster's Third New International Dictiona ry of the English Language, Unabridged, P. Babcock
Gove (ed.) (Merriam-Webster Inc., 1976), p. 21.
291Merriam Webster's Dictionary of Law, L.P. Wood (ed.) (Merriam-Webster Inc., 1996), p. 13.

193. Furthermore, the word "customs " is defined as "duties levied upon imports as a branch of the
public revenue; the department of the Civ il Service employed in levying these duties". 292 We also
note that the International Convention on the Simplification and Harmonization of Customs
Procedures, as amended 293 (the " Revised Kyoto Convention ") defines the word "customs" in the
context of Chapter 2 of the General Annex to that Convention. 294 It refers to the government service
responsible for the administration of customs law and the collection of duties and taxes and which
also has responsibility for the application of other laws and regulations "rel ating to the importation,
exportation, movement or storage of goods". 295 Moreover, we observe that the term "matter", when
used with a qualification is defined as "[a] thing, affair, subject, etc., of the kind denoted by, or
pertaining to the thing denoted by the qualification."296
194. Turning to the term "relating to", we note that "relate to" is defined, inter alia , as "[h]ave
some connection with, be connected to". 297 The Panel also referred to the Appellate Body's
interpretation of the term "related to" in the context of Article XX of the GATT 1994, where the
Appellate Body found that for a measure to be "rel ated to" a particular objective, there must be a
rational relationship between the measure and the objective pursued. 298 For such a rational
relationship to exist, the measure must not be di sproportionately wide in its scope and reach in
relation to its objective. Similarly, in the context of Article X:3(b), we consider that measures must
have a rational connection with customs matters to fall within the scope of that provision.
195. Next, we consider the phrase "administrative action relating to customs matters" in its
context. We note that the second sentence of Artic le X:3(b) refers to "agencies entrusted with
administrative enforcement". This suggests that "adm inistrative action" in the sense of Article X:3(b)
is action by agencies that "enforce", that is, "apply" relevant rules. The reference to "appeals to be
lodged by importers" suggests that the relevant administrative action is action that affects "importers".

292The Oxford English Dictionary , 2nd edn, J.A. Simpson and E.S.C. Weiner (eds) (Clarendon Press,
Oxford, 1989), Vol. IV, p. 167.
293International Convention on the Simplification and Harmonization of Customs Procedures , done at
Kyoto, 18 May 1973, 950 UNTS 269, as amended by the Protocol of Amendment to the International
Convention on the Simplification and Harmonization of Customs Procedures , done at Brussels, 26 June 1999,
2370 UNTS 27.
294The "General Annex" is the set of provisions app licable to all the customs procedures and practices
referred to in the Convention (see Article 1 of the Revised Kyoto Convention).
295See also Panel Report, para. 7.1027 (quoting the Revised Kyoto Convention, Chapters 2 and 10 of the
General Annex).
296The Oxford English Dictionary , 2nd edn, J.A. Simpson and E.S.C. Weiner (eds) (Clarendon Press,
Oxford, 1989), Vol. IX, p. 481.
297Shorter Oxford English Dictionary , 6th edn, A. Stevenson (ed.) (Oxford University Press, 2007),
Vol. 2, p. 2519.

196. We also consider relevant the cont ext provided by Article 11.1 of the Agreement on Customs
Valuation. It stipulates:
The legislation of each Member shall provide in regard to a
determination of customs value for the right of appeal, without
penalty, by the importer or any other person liable for the payment of
the duty.
197. This provision imposes an obligation with respect to a specific kind of administrative action,
namely, with respect to the determination of cu stoms value. As we see it, the more specific
description of one type of administra tive action in Article 11.1 of the Agreement on Customs
Valuation, and the absence of any similar qualification in Article X:3(b) of the GATT 1994, suggest
that the obligation contained in Article X:3(b) is not limited to particular types of customs-related
"administrative action".
198. We note Thailand's assertion that Articles 7, 9.5, and 13 of the Anti-Dumping Agreement
"provide[] important context in considering whet her the imposition of a guarantee under Article 13 of
the [ Agreement on Customs Valuation ] is an 'administrative action relating to customs matters'". 299
Thailand argues that the lack of any right to app eal against either provisional anti-dumping measures
or "new shipper" guarantees under the Anti-Dumping Agreement suggests that guarantees within the
meaning of Article 13 of the Agreement on Customs Valuation do not fall within the scope of
"administrative action relating to customs matters" in Article X:3(b) of the GATT 1994.300
199. Thailand has not explained why these provisions of the Anti-Dumping Agreement constitute
context relevant to the interpretation of the phrase "administrative action relating to customs matters",
and we are not convinced that they do. We see significant conceptual differences between ordinary
customs duties and anti-dumping duties. These di fferences speak against considering the above
provisions of the Anti-Dumping Agreement as relevant context for the interpretation of Article X:3(b)
of the GATT 1994. The Anti-Dumping Agreement specifically regulates questions relating to
situations of what is widely understood as " unfair trade". These rules authorize a response by
importing Members to offset the effects of dumpi ng and re-establish a "level playing field".
Article X:3(b), in contrast, is not a specific rule targ eting "unfair" trade practices. Rather, it relates to
customs matters in general. The conceptual differences between anti-dumping duties and ordinary
customs duties are reflected in the different disciplin es that apply in respect of the imposition of each
type of duty. For example, the imposition of anti-dumping duties requires as a prerequisite, inter alia,

a determination of injury by the importing Member. In contrast, ordinary customs duties may, within
tariff bindings, be applied without any such determination.
200. Even if we were to consider the above provisions of the Anti-Dumping Agreement as relevant
context for the interpretation of the phrase "admin istrative action relating to customs matters" in
Article X:3(b) of the GATT 1994, we do not see th at these provisions support Thailand's position.
We do not consider it evident that the customs gua rantees at issue should be equated with provisional
anti-dumping measures and "new shipper" guarantees provided in the context of an anti-dumping
determination. Furthermore, Article 13 of the Anti-Dumping Agreement uses language that differs
from the language of Article X:3(b) of the GATT 1994, and which makes clear that the review is
limited to "final" determinations and determinati ons of review proceedings under Article 11 of the
Anti-Dumping Agreement. The absence of any such express limitation in Article X:3(b) suggests, if
anything, that the phrase "administrative action rela ted to customs matters" is not limited in the way
Thailand contends.
201. Consequently, we consider that these provisions do not shed light on the ordinary meaning of
the phrase "administrative action relating to customs matters" in Article X:3(b). Instead, reading the
phrase "administrative action relating to customs matters" in the light of Article X:3(b) as a whole and
in the context of Article 11.1 of the Agreement on Customs Valuation points to a common intention of
WTO Members not to limit the obligation contained in Article X:3(b) to particular types of
customs-related "administrative action".
202. Finally, we turn to consider the phrase "admin istrative action relating to customs matters" in
the light of the object and purpose of the treaty. A basic object and purpose of the GATT 1994, as
reflected in Article X:3(b), is to ensure due pro cess in relation to customs matters. The Appellate
Body referred to this due process objective in EC – Selected Customs Matters .
301 In t hat v ein, the
panel in EC – Selected Customs Matters stated that Article X:3(b) seeks 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." 302 In addition, relating more broadl y to Article X:3 of the GATT 1994,
the Appellate Body has found that this provision establishes certain minimum standards for
transparency and procedural fairness in Members' administration of their trade regulations.
303 While
recognizing WTO Members' discretion to design a nd administer their own laws and regulations,
Article X:3 also serves to ensure that Members afford the protection of due process to individual
traders. As we see it, the obligation under Article X:3(b) to maintain tribunals or procedures for the

301Appellate Body Report, EC – Selected Customs Matters, para. 302.
302Panel Report, EC – Selected Customs Matters, para. 7.536.
303See Appellate Body Report, US – Shrimp, para. 183.

prompt review and correction of administrative action relating to customs matters is an expression of
this due process objective of Article X:3. In the li ght of the above considerat ions, we see no error in
the Panel's intermediate finding that "administra tive action relating to customs matters" encompasses
"a wide range of acts applying legal instrument s that have a rational relationship with customs
matters".304
203. Next, we address the meaning of the phrase "prompt review and correction" in Article X:3(b).
The word "prompt" is defined as "ready, quick; done, performed, etc., without delay". 305 In addition,
the due process objective reflected in Article X:3 of the GATT 1994 suggests that "prompt review and
correction" is to be understood as review and correction of administrative action that is performed in a
quick and effective manner and without delay. What is quick or performed without delay depends on
the context and particular circumstances, including the nature of the specific type of action to be
reviewed and corrected. Whether a system does or does not ensure prompt review thus cannot be
determined in the abstract. We therefore agree with the Panel that the nature of the specific
administrative action at issue informs the meani ng of the word "prompt" in the particular
circumstances of a Member's domestic system.306
204. We further note that Article X:3(b) refers to "review and correction" of administrative action.
The word "review" is defined as "[a]n inspection, an examinati on", or in the legal context as
"[c]onsideration of a judgment, sentence, et c., by some higher court or authority". 307 T h e w o r d
"correction" is defined as "[t]he actio n of putting right or indicating errors". 308 The reference to
"correction" indicates that Article X:3(b) requires more than mere declaratory action or ex post review
of whether administrative action conforms to domest ic law or not. Compliance with the obligation to
maintain tribunals or procedures for the "correc tion" of administrative action relating to customs
matters requires that Members ensure that thei r system of review provides for the relevant
administrative action to be set right.
205. Finally, we note that Article X:3(b) does not prescribe one particular type of review or
correction of administrative action relating to customs matters. Instead it refers to "judicial, arbitral or

304Panel Report, para. 7.1029.
305Shorter Oxford English Dictionary , 6th edn, A. Stevenson (ed.) (Oxford University Press, 2007),
Vol. 2, p. 2367. See also Panel Report, para. 7.1085.
306Panel Report, para. 7.1086. We also note the Pa nel's statement, elsewhere in its Report, 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
systemic flaw in the tribunal or procedure maintained by a Member." (Ibid., para. 7.997)
307Shorter Oxford English Dictionary , 6th edn, A. Stevenson (ed.) (Oxford University Press, 2007),
Vol. 2, p. 2566.
308Shorter Oxford English Dictionary , 6th edn, A. Stevenson (ed.) (Oxford University Press, 2007),
Vol. 1, p. 527.

administrative tribunals or procedures". This sugge sts that there are a variety of ways in which a
Member may comply with the obligation of mainta ining tribunals or procedures for prompt review
and correction of administrative action re lating to customs matters, provided that, inter alia, such
tribunals and procedures are independent of the agencies entrusted with administrative enforcement as
required by the second sentence of Article X:3(b).
2. Application of Article X:3(b) to the Facts of the Dispute
(a) Administrative Action Relating to Customs Matters
206. We now turn to consider whether the Panel correctly found that decisions by Thai Customs on
the guarantees required in order to have goods re leased pending a final duty assessment constitute
"administrative action relating to customs matters". The Panel noted the participants' agreement that
customs valuation determinations fall within the sc ope of "administrative act ion relating to customs
matters" in Article X:3(b).309 On appeal, as before the Panel, th e participants' disagreement concerns
whether the imposition of a guarantee as a security to cover ultimate duty lia bility in exchange for
release of the goods also falls within the scope of Article X:3(b).
207. We recall that, pursuant to Section 112 of the Thai Customs Act, customs officials may, in
case of doubt as to the amount of duty applicable to a specific good, undertake a detailed examination.
In that event, the goods in question may be re leased from customs pending the final assessment of
duty liability, provided that the importer pays the d eclared duty and that a cash deposit or guarantee
covering the maximum duty payable on the goods is given.310
208. We note that the Panel took into account th e following definition of "guarantee" from Black's
Law Dictionary: "[s]omething given or existing as security, such as to fulfill a future engagement or a
condition subsequent." 311 Read in the light of the present case, the "future engagement" is the
payment of ultimate customs duties. We further note, as did the Panel, that Article 13 of the
Agreement on Customs Valuation refers to the concept of "guarantee" in relation to customs valuation.
The first sentence of Article 13 refers to different forms in which a guarantee may be provided. The
second sentence, while stipulating an obligation for Members to provide for the possibility to obtain
the release of goods pending a final determination of customs value, leaves considerable discretion to
Members in determining the form of the guarantee to be provided. Thus, we understand that, in
customs matters, guarantees include legal instruments of different forms, provided in order to secure

309Panel Report, para. 7.992.
310Panel Report, para. 7.1017 (quoting Thai Customs Act, Section 112). See supra, paras. 187 and 188.
311Panel Report, footnote 1752 to para. 7.1037 (quoting Black's Law Dictionary , 7th edn,
B.A. Garner (ed.) (West Group, 1999), p. 711).

the payment of ultimate customs duties. We also observe that the decisions of customs authorities
imposing or accepting guarantees may relate, inter alia, to the amount or to the form of the security
being provided.
209. The customs guarantee decisions at issue in th is dispute are actions taken by Thailand's
customs authorities. 312 As such, they are acts of the ex ecutive branch of government and thus
constitute administrative action in the sense of Arti cle X:3(b). Furthermore, because they serve to
secure the payment of ultimate customs duties, th ese guarantee decisions are connected to "customs
matters" and thus fall within the scope of Article X:3(b).
210. On appeal, Thailand submits that the imposition of a guarantee does not constitute
"administrative action" within the meaning of Article X:3(b) because it constitutes only an
administrative step of a provisional nature. Thailand asserts that the Appellate Body's statement in
US – Shrimp (Thailand) / US – Customs Bond Directive that "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" suggests that the Appellate Body characterized a security as a "provisional
measure".313 Thailand submits that the A ppellate Body's rationale in US – Shrimp (Thailand) / US –
Customs Bond Directive applies equally to the guarantees at issue in this dispute.
211. We disagree with Thailand. In our vi ew, the Appellate Body's statement in US – Shrimp
(Thailand) / US – Customs Bond Directive , that securities under the Ad Note to paragraphs 2 and 3 of
Article VI of the GATT 1994 are accessory to final duty liability, does not stand for the proposition
that such securities are "provisional" measures. The fact that two le gal instruments, in that case, the
security and the imposition of anti-dumping duties, are interlinked, does not, without more, suggest
that one of the two instruments is necessarily prov isional in nature. There, the Appellate Body
explained that the "security [was] intended to pr ovide a protection against the non-payment risk that
might arise from the differences between the amount collected at the time of importation and the
liability that may be finally determined."
314 This statement is consistent with the view that a security
is a final and not a provisional measure with respect to that intention to avoid the risk of non-payment.
212. The Panel referred to this part of the Appellate Body report in US – Shrimp (Thailand) / US –
Customs Bond Directive, and concluded that, in the particular circumstances of customs valuation, the
imposition of a guarantee is intende d to serve the distinct purpose of securing the payment of the

312In the following paragraphs, when referring to the Thai system, and unless otherwise indicated, we
use the word "guarantees" to cover both cash deposits and guarantees from a bank or the Ministry of Finance,
within the meaning of Section 112 of the Thai Customs Act.
313Thailand's appellant's submission, para. 240 (quoting Appellate Body Report, US – Shrimp
(Thailand) / US – Customs Bond Directive, para. 231).
314Appellate Body Report, US – Shrimp (Thailand) / US – Customs Bond Directive, para. 221.

ultimate amount of customs duty pending a fina l determination of duty liability by customs. 315 We
agree with that characterization of the guarantee. With respect to the purpose of securing payment of
customs duties, the guarantee is the final measure, not merely an intermediate step.
213. Thailand also argues that Article X:1 of th e GATT 1994 lists several different types of
measures, such as "[l]aws, regulations, judicial decisions and administrative rulings of general
application", but contains no refe rence to guarantees and other securiti es. For Thailand, this suggests
that the drafters did not intend Article X:3(b) to apply to guarantee decisions. 316 We are not
persuaded by this argument. It is built on the prem ise that Article X:1 and Article X:3(b) relate to the
same types of measures. However, this is not n ecessarily so. Article X:1 and Article X:3(b) of the
GATT 1994 stipulate distinct obligations. Both u se general, albeit differe nt language. Neither
provision uses the word "guarantee". Therefore, we see no basis for an assumption that the obligation
of Article X:3(b) extends only to measures falling within the scope of Article X:1 of the GATT 1994.
214. Finally, Thailand argues that the concept of due process does not compel the conclusion that
there must be a right of appeal against guarantee decisions. Thailand submits that guarantee decisions
are not final administrative acts but constitute merely in termediate steps on the way towards a final
customs valuation decision and that, as such, they do not constitute "adminis trative action relating to
customs matters" in the sense of Article X:3(b). Thailand refers to the doctrine of "ripeness",
reflecting the concept of deference to the expertise of an administrative agency. Thailand argues that
it does not make practical sense to require courts to intervene in a decision-making process within the
technical expertise of an administrative agency, be fore that agency has had an opportunity fully to
consider the issue and render a final decision.317
215. As already noted above, we do not consider that a guarantee is merely an intermediate step
within the administrative procedure leading up to the final assessment of customs duty. Rather, a
requirement to provide a guarantee in exchange fo r release of the goods has an administrative content
of its own. As the Panel correctly found, the guarantee is a device allowing, on the one hand, the
importer to withdraw their goods from customs, a nd, on the other hand, securing the payment of the
ultimate customs duty.318 It is a final, and not an intermediate, administrative act with respect to these
particular objectives. The fact that a guarantee provides security for a claim stemming from another

315Panel Report, para. 7.1039 (referring to Appellate Body Report, US – Shrimp (Thailand) / US –
Customs Bond Directive, para. 221).
317Thailand's appellant's submission, para. 278 (referring to United States Supreme Court, Abbott
Laboratories v. Gardner, 387 U.S. 136 (1967)).
318Panel Report, paras. 7.1039 and 7.1040.

administrative action does not change the fact that the imposition of a guarantee is an administrative
action in its own right.
216. For these reasons, we agree with the Panel th at the "imposition of a guarantee is an
'administrative action relating to customs matters' within the meaning of Article X:3(b)".319
(b) Prompt Review and Correction
217. In the event that we uphold the Panel's finding th at guarantee decisions fall within the scope
of "administrative action relating to customs matters ", then Thailand appeals the Panel's finding that
Thailand's provision of a right of appeal against guarantee decisions at the time when the notice of
final assessment is issued does not satisfy the obligation in Article X:3(b).320 Because we have agreed
with the Panel that guarantee decisions fall within the scope of "administrative action relating to
customs matters" within the meaning of Article X: 3(b), the condition on which this part of Thailand's
appeal is predicated is fulfilled. Consequently, we now turn to consider whether the Panel erred in
finding that Thailand's provision of a right of appeal against the imposition of a guarantee only at the
time when the notice of final assessment is issu ed does not satisfy the obligation prescribed in
Article X:3(b).
218. In its assessment of whether the availability of an appeal of a guarantee decision to the Thai
Tax Court following the issuance of the notice of assessment satisfies Article X:3(b), the Panel
considered that the question of whether a Member provides for prompt review and correction of
administrative action has to be considered in the light of the nature of the specific administrative
action concerned.321 The Panel also took into account that guarantee decisions could, depending on
the situation, entail a heavy fina ncial burden on importers. With respect to the present dispute, the
Panel observed that there is no time-frame for the issu ance of a notice of assessment, and that in some
cases this has taken "up to 10 months". 322 The Panel also noted that fo llowing the issuance of a final
assessment, an importer must first exhaust an appeal to the BoA before it can appeal to the Thai Tax
Court.323 In the context of the Philippines' claim pur suant to Article X:3(b) relating to guarantee
decisions, neither the Philippines nor the Pane l addressed the length of time taken for BoA
proceedings.324 The Panel then found that if a system does not make available the review of a

319Panel Report, para. 7.1053.
321Panel Report, para. 7.1086.
322Panel Report, para. 7.1084.
324Elsewhere in its Report, in the context of a claim by the Philippines under Article X:3(a), the Panel
observed that specific appeals of customs valuation decisions lodged by PM Thailand between 2000 and 2002
took, on average, two years and six months for the BoA to complete. (Panel Report, para. 7.953)

guarantee decision until the final assessment has b een made in respect of the customs duty, an
importer may face a situation where it will not be able to withdraw imported goods due to a guarantee
value set at an excessively high level. 325 The Panel concluded that this is not compatible with the
obligation under Article X:3(b) to maintain independent tribunals or procedures for the prompt review
of the concerned administrative action.326
219. Above, we have set out the reasons why we agree with the Panel that the nature of the specific
administrative action at issue informs the meani ng of the word "prompt" in the particular
circumstances of any given case. Turning to the s ituation in this dispute, we consider that the
character of a guarantee is relevant in determining wh at can be regarded as "prompt" with respect to
the review of guarantee decisions. As set out above, a "guarantee" is defined as "[s]omething given or
existing as security, such as to fulfill a futu re engagement or a condition subsequent". 327 T h i s
definition clarifies a key element of a guarantee, name ly, its relation to a future event. A guarantee is
tied to, but distinct from, the fulfilment of an enga gement or condition in the future. Accordingly, a
guarantee is effective as a security from the time it is given up to the time when the engagement or
condition is fulfilled. Once the future condition is fulfilled, the guarantee no longer serves as a
security.
220. We also recall our above consideration that th e due process objective reflected in Article X:3
of the GATT 1994 suggests that "prompt review a nd correction" is to be understood as review and
correction of administrative action that is perfo rmed in a quick and effective manner and without
delay. It follows that the mechanism for the re view of administrative action relating to customs
matters must permit review to be ti mely and effective. In the particular circumstances of a guarantee,
which is effective as a security from the time it is given until the time when the engagement or
condition is fulfilled, we consider that, for a review to be considered timely and effective, it must at
least be possible to challenge the guarantee during the time it serves as a security. This is so because
it is during the period of time that a guarantee is required that importers are most affected by the
guarantee decision.
221. In the present case, the Panel understood Thailand's measure to operate in a way that allows a
challenge of the guarantee decision only once the no tice of assessment is issued and the BoA has
reviewed that final assessment. As set out above, Thai law provides that once the ultimate duty has
been established, and if the ultimate duty liability exceeds the duty paid on the declared value at the
time of entry of the goods, the amount by which it exceeds the declared duty shall be paid

325Panel Report, para. 7.1087.
326Panel Report, para. 7.1087.
327Black's Law Dictionary, 7th edn, B.A. Garner (ed.) (West Group, 1999), p. 711.

immediately from the cash deposit if cash was deposited as security. 328 In the event that a guarantee
by a bank or the Ministry of Finance has been given, the importer or exporter shall pay the amount
that exceeds the declared dut y within 30 days after the date of receiving the notice of assessment. If
the duty initially paid or the cash deposit exceed s the amount specified in the notice of final
assessment, the excess amount, together with in terest, is to be refunded to the importer. 329 Thus, with
the fulfilment of the condition—in this case paymen t of the ultimate duty—the security function of
the guarantee ceases. 330 In providing that a guarantee can only be challenged once the notice of
assessment has been issued, Section 112 of the Th ai Customs Act invariably delays review of
guarantee decisions and thereby shields guarantee d ecisions from challenge throughout the period in
which they serve as a security and in which traders are most affected by these decisions. 331 W e
recognize that, where security has been given in the form of a guarantee by a bank or the Ministry of
Finance, such a guarantee could be challenged with in the short time period between the issuance of a
notice of assessment and payment of the ultimate du ty. Even in such ca ses, however, the review
system maintained by Thailand imposes delays that are essentially coextensive with the lifetime of a
guarantee's security function. Thus, this system does not ensure prompt review of the relevant
administrative action.
222. For the above reasons, we find no error in the Panel's conclusion that Thailand's system for
the review of guarantee decisions is not compatib le with the obligation un der Article X:3(b) to
provide for the prompt review of administrative action relating to customs matters because such
review is not available until after the final assessme nt of customs duty has been made. Consequently,
we uphold the Panel's finding, in paragraph 8.4(g) of the Panel Report, that Thailand acts
inconsistently with Article X:3(b) of the GATT 1994 by failing to maintain or institute independent
review tribunals or procedures for the prompt review of guarantee decisions.332

328Panel Report, para. 7.856 (quoting Thai Customs Act, Section 112bis).
329Panel Report, para. 7.857 (quoting Thai Customs Act, Section 112quater).
330This occurs either immediately up on issuance of the notice of asse ssment when security has been
given in the form of a cash deposit, or upon full payment of the assessed duty within 30 days when security has
been given in the form of a guarantee by a bank or the Ministry of Finance.
331We also note that the fact that a guarantee decisi on cannot be challenged before the issuance of the
notice of assessment may in certain cases prevent an importer from obtaining release of goods from customs
pending determination of final customs duties or may even lead an importer to cancel a transaction, for instance,
where the amount of a guarantee is so high that the im porter is unable to provide it. (See Panel Report,
332See also Panel Report, para. 7.1087.

VI. Findings and Conclusions
223. For the reasons set out in this Report, the Appellate Body:
(a) with respect to the Panel's findings under Article III of the GATT 1994 concerning
Thailand's treatment of resellers of imported cigarettes, as compared to its treatment
of resellers of like domestic cigarettes:
(i) upholds the Panel's finding, in paragraph 8.3(b) of the Panel Report 333,
that Thailand acts inconsistently with Article III:2, first sentence, of the
GATT 1994 by subjecting imported cigarettes to VAT liability in excess of
that applied to like domestic cigarettes;
(ii) with respect to the Panel's findings under Article III:4 of the GATT 1994:
- finds that the Panel did not err in concluding, in paragraph 7.738 of
the Panel Report, that Thailand accords less favourable treatment to
imported cigarettes than to like domestic cigarettes;
- finds that Thailand has not establishe d that the Panel failed to ensure
due process and, thus, to comply with its duty under Article 11 of the
DSU to make an objective assessment of the matter, by accepting and
relying on Exhibit PHL-289 without affording Thailand an
opportunity to comment on that evidence;
- reverses the Panel's finding, in pa ragraph 7.758 of the Panel Report,
regarding Article XX(d) of the GATT 1994; but finds that Thailand
failed to establish that its measure is justified under Article XX(d) of
the GATT 1994; and
- upholds the Panel's finding, in pa ragraph 8.3(c) of the Panel
Report334, that Thailand acts inconsistently with Article III:4 of the
GATT 1994 by subjecting imported cigarettes to less favourable
treatment than that accorded to like domestic cigarettes; and

333See also Panel Report, para. 7.644.
334See also Panel Report, para. 7.738.

ANNEX I

23 February 2011
 (11-0961)
 Original: English

Notification of an Appeal by Thailand
under Article 16.4 and Article 17 of the Understanding on Rules
and Procedures Governing the Settlement of Disputes (DSU),
and under Rule 20(1) of the Working Procedures for Appellate Review

 The following notification, dated 22 February 2011, from the Delegation of Thailand, is being
circulated to Members.

 Pursuant to Articles 16.4 and 17 of the Understanding on Rules and Procedures Governing
the Settlement of Disputes ("DSU") and Rule 20 of the Working Procedures for Appellate Review ,
Thailand hereby notifies the Dispute Settlement Body of its decision to appeal to the Appellate Body
certain issues of law and legal interpre tation covered in the Panel Report entitled (WT/DS371/R), which was circulated on
15 November 2010 (the "Panel Report"). Pursuant to Rules 20(1) and 21(1) of the Working
Procedures for Appellate Review , Thailand is simultaneously filing this Notice of Appeal and its
Appellant's Submission with the Appellate Body Secretariat.

 As described below, Thailand appeals certain of the Panel's findings on measures related to
Thailand's Value Added Tax ("VAT") regime for ci garettes, as well as Thailand's regime for the
acceptance of guarantees to secure the importer’s ul timate liability for customs duties pending final
determination of the customs value of imported goods.

 Thailand seeks review by the Appellate Body of the following errors of law and legal
interpretation by the Panel in the Panel Report:

I. The Panel's finding under Article III:2 of the GATT 1994

1. The Panel erred in law in finding a violatio n of Article III:2, first sentence, of the
GATT 1994, not on the basis of the fiscal burdens imposed on imported and domestic products under
Thai VAT law, but solely on the basis of the administrative requirements of Thailand's VAT system

and the consequences of non-compliance with those requirements.
1 The administrative requirements
of Thailand’s VAT system and the consequences of non-compliance are measures that fall within the
scope of Article III:4, not Article III:2, first sentence, of the GATT 1994.

2. Even if the Panel were correct to address the administrative requirements of Thai VAT law
under Article III:2, first sentence, of the GATT 1994, th e Panel erred in law in finding a violation of
Article III:2 solely on the basis of administrativ e requirements whereby resellers must file a VAT
form declaring and offsetting their VAT credits a nd liabilities on re-sales of imported cigarettes for
each month and whereby VAT credits are granted onl y with respect to actual, documented purchases
of goods such as imported cigarettes. 2 These requirements cannot, as a matter of law, lead to taxation
of imported products in excess of that imposed on domestic products within the meaning of
Article III:2, first sentence.

II. The Panel's finding under Articles III:4 and XX(d) of the GATT 1994

3. The Panel erred in law in finding that certain additional administrative requirements for re-
sales of imported cigarettes amounted to less favourab le treatment of imported products within the
meaning of Article III:4 of the GATT 1994 on the basi s of a finding solely that these administrative
requirements could potentially affect the compe titive position of imported cigarettes that is not
supported by its factual analysis and findings.3

4. The Panel erred in law in rejecting Thailand's defence under Article XX(d) of the GATT 1994
to the Philippines' claim under Article III:4 on the ground that it had already found the measures with
respect to which Thailand asserted the defence (the additional administrative requirements for re-sales
of imported cigarettes) to be inconsis tent with Article III:4 of the GATT 1994. 4 Instead, the Panel
should have looked first at whether the laws with respect to which Thailand sought to achieve
compliance were otherwise consistent with the GATT 1994.5

5. The Panel erred in law by accepting and relying on evidence that was submitted at the last
opportunity for the parties to submit their views to the Panel and that was the only evidence to support
one aspect of the Panel's finding under Article III:4 and upon which Thaila nd had no opportunity to
comment.6 The Panel acted inconsistently with Artic le 11 of the DSU and paragraph 15 of its
Working Procedures and also failed to protect Thailand's due process rights by accepting and relying
on this evidence.7

III. The Panel's finding under Article X:3(b) of the GATT 1994

6. The Panel erred in law in finding that the pr ovisional step of accepting a guarantee in the
circumstances provided for in Article 13 of the Agreement on Implementation of Article VII of the
General Agreement on Tariffs and Trade 1994 ("CVA" ) constitutes an "administrative action relating
to customs matters" within the meaning of and subjec t to a right of review under Article X:3(b) of the
GATT 1994.8

1See Panel Report, paras. 6.98-6.120, paras. 7.568-7.644, and para. 8.3(b). This appeal does not
include the Panel's separate finding under Article III:2, first sentence, in paragraphs 7.567 and 8.3(a) of the
Panel Report.
2See Panel Report, paras. 6.98-6.120; paras. 7.613-7.637; and 8.3(b).
3See Panel Report, paras. 7.724-7.738 and para. 8.3(c).
4See Panel Report, paras. 7.749-7.758.
5See Panel Report, paras. 7.738 and para. 8.3(c).
6See Panel Report, paras. 6.122-6.128, paras. 7.684-7.704, and para. 8.3(c).
7See Panel Report, paras. 6.122-6.128, paras. 7.684-7.704, and para. 8.3(c).
8See Panel Report, paras. 7.1016-7.1053 and para. 8.4(g).

7. Even if the Panel were correct that the acceptance of a guarantee under Article 13 of the CVA
constitutes an "administrative action relating to customs matters" within the meaning of
Article X:3(b), the Panel erred in law in finding th at providing a right of review of the taking of a
guarantee at the time of the final determination of duty liability cannot satisfy the obligation in
Article X:3(b).9

Thailand respectfully requests the Appellate Body to reverse the findings of the Panel
identified in this Notice of Appeal.

9See Panel Report, paras. 7.1054-7.1087, and para. 8.4(g).