THAILAND – CUSTOMS AND FISCAL MEASURES ON CIGARETTES FROM THE PHILIPPINES REPORT OF THE FACILITATOR PURSUANT TO PARAGRAPH 5 OF THE "UNDERSTANDING BETWEEN THE PHILIPPINES AND THAILAND TO PURSUE FACILITATOR-ASSISTED DISCUSSIONS AIMED AT PROGRESSING AND RESOLVING OUTSTANDING ISSUES IN REGARD TO DS371"
Document: UNDERSTANDING BETWEEN
Date: 5 July 2022
Document codes: WT/DS371/46; WT/DS371/44
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
REPORT OF THE FACILITATOR PURSUANT TO PARAGRAPH 5 OF THE
"UNDERSTANDING BETWEEN THE PHILIPPINES AND THAILAND TO PURSUE
FACILITATOR-ASSISTED DISCUSSIONS AIMED AT PROGRESSING AND
RESOLVING OUTSTANDING ISSUES IN REGARD TO DS371"
The following communication, dated 30 June 2022 , from the Facilitator to the Chairper son of the
Dispute Settlement Body (DSB), is circulated at the request of the Facilitator.

Further to para 5 of the 18 December 2020 Understanding between the Philippines and Thailand on
the DS 371 Facilitator-Assisted discussions () as well as to the written report I provided
to the DSB on 31 March 2021 () and my oral reports to the DSB meetings held on 26
July and 20 December 2021 as well as at the DSB meeting held earlier today, I am now writing to
provide a further update to the DSB, through you, in this communication:

I am pleased to report that following on from my earlier reports to the DSB, I have continued to
meet on a regular basis with the Philippines and Thailand (the DS 371 parties) in my capacity as
Facilitator. While it is not my intention to report on the detail of the consultations, which remain
confidential, I can confirm that these further consultations have proven extremely valuable in
identifying a practical path forward that should, hopefully, eventually lead the parties to arrive at a
mutually agreed solution to their dispute in accordance with Article 3.6 of the DSU.

The productive consultations between the DS 371 parties have recently culminated with the
signature on 7 June 2022 of a bilatera l "Understanding on Agreed Procedures Towards a
Comprehensive Settlement of the Dispute in Thailand -Customs and Fiscal Measures on Cigarettes
from the Philippines" ("the Understanding").

Pursuant to this Understanding, the DS 371 Parties have agreed to establish a bilateral consultative
mechanism (BCM) which will serve as a channel for their respective relevant authorities to cooperate
and dialogue on a regular basis, with the objective to build further confidence that will support efforts
to reach a comp rehensive settlement of their dispute in DS 371, consistent with their rights and
obligations under the WTO Agreement, as well as the recommendations and rulings of the Dispute
Settlement Body (DSB). The joint statement of the DS 371 parties further backgrounding the 7 June
2022 Understanding is attached.

In my capacity as Facilitator, I am delighted to have been able to assist the parties over the last
eighteen months in their negotiations on the Understanding. In this context, I also wish to express,
on behalf of both myself and the DS 371 parties, our shared appreciation for the strong support
offered by the WTO Secretariat, in particular Mr John Adank and Ms Bozena Mueller-Holyst. We also
wish to record our appreciation for the technical assistance that Dr Leonardo Macedo, of Brazil, was
able to offer the parties to assist them in achieving a better understanding of their respective
positions.

I believe the active and constructive engagement by the DS 371 parties both in Geneva and through
their respective capitals to arrive at the Agreed Procedures Understanding signed earlier this month
serves to further highlight their commitment to the WTO dispute settlement system.

In concluding this report, I also wan ted to take the opportunity, as I did in my oral report to the
DSB earlier today, to make some observations about this DS 371 Facilitation process in the broader
context of the unresolved functioning issues that continue to stand in the way of our goal of restoring
a fully and well-functioning WTO Dispute Settlement System. In my view, it is very clear that there
is a huge appetite across the membership to restore a greater sense of normality to the WTO Dispute
Settlement System, including its appeal architecture. My country, Australia, shares that desire.

In my capacity as Facilitator of the DS 371 Facilitation process, I have of course been made very
aware as a result of the commitment the DS 371 parties have brought to this process that there are
creative alternative means of dispute settlement available to the Membership. At the same time, we
need to recognize that the DS 371 Facilitation process represents something of a rare or even
unprecedented example in the WTO's dispute settlement lexicon of expe rience. These forms of
alternative means of dispute settlement are available to all of us but they do require a substantial
investment of energy, of political commitment, and of time. Such processes require an engineering
of process that in most cases will be unnecessary if we are able to return to a fully and well -
functioning dispute settlement system in line with the commitment Ministers have recently made at
MC12. Therein lies the challenge for all of us in the period ahead.

Joint Statement issued by
the Philippines and Thailand following signature of Understanding
Aimed at Resolving Customs Valuation Dispute

On Tuesday 7 June 2022 the Philippines and Thailand, meeting at the World Trade Organization in
Geneva, signed a b ilateral Understanding on Agreed Procedures Towards a Comprehensive
Settlement of the Dispute in Thailand -Customs and Fiscal Measures on Cigarettes from the
Philippines (DS 371).

The Understanding on Agreed Procedures was negotiated between the two ASEAN members to be
consistent with relevant bilateral treaties, ASEAN treaties and values, WTO law and agreements
including the Customs Valuation Agreement, WTO Dispute Settlement Body Rulings and
Recommendations, as well as their domestic laws and regulations.

Reflecting the shared determination and effort of the two countries to resolve their longstanding
differences, the formal signature of the Understanding on Agreed Procedures on 7 June represents
a successful outcome of the facilitator -assisted process co mmenced in 2021 following the
"Understanding between the Philippines and Thailand to pursue Facilitator -Assisted discussions
aimed at progressing and resolving outstanding issues in regard to DS 371" (WT/DS371/44, 21
December 2020).

Throughout the process and assisted by the leadership of H.E. Ambassador George Mina, Permanent
Representative of Australia to the WTO, acting as Facilitator, the Philippines and Thailand have
actively and constructively engaged in discussions, both in Geneva and through their respective
capitals, with a view to considering possible ways forward for the two countries to reach a mutually
agreeable resolution to their customs valuation related dispute, without prejudice to their respective
rights and obligations under the DSU.

In accordance with the Understanding on Agreed Procedures , the two countries have agreed to
establish a bilateral consultative mechanism (BCM) which will serve as a channel for their respective
relevant authorities to cooperate and dialogue on a regular basis, with the objective to build further
confidence that will support them to reach a comprehensive settlement of their dispute in DS 371,
consistent with their rights and obligations under the WTO Agreement, as well as the
recommendations and rulings of the DSB.

The Understanding entered into force on signature by the two parties and may be terminated by
either party on 60 -days written notice, and, taking into account the progress made in the
implementation of their cooperation, it should ideally lead to the notification by the parties of a
mutually agreed solution under Article 3.6 of the DSU.

The signature of the Understanding on Agreed Procedures underlines the commitment of Thailand
and the Philippines to continue their close cooperation, particularly through the frank and open
dialogue process that will be facilitated under the BCM, consistent with the strong spirit of ASEAN
solidarity and friendship which unites them and their commitment to the WTO’s rules-based dispute
settlement system.