THAILAND – CUSTOMS AND FISCAL MEASURES ON CIGARETTES FROM THE PHILIPPINES RECOURSE TO ARTICLE 21.5 OF THE DSU BY THE PHILIPPINES REPORT OF THE PANEL
Document: REPORT OF THE PANEL
Date: 12 November 2018
Document codes: WT/DS371/RW
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
RECOURSE TO ARTICLE 21.5 OF THE DSU BY THE PHILIPPINES
REPORT OF THE PANEL

LIST OF ANNEXES
ANNEX A
WORKING PROCEDURES OF THE PANEL
Contents Page
Annex A-1 Working Procedures of the Panel A-2
Annex A-2 Additional Working Procedures Concerning Third-Party Access to the Final
Report of the Panel in the Philippines' First Recourse to Article 21.5 of the
DSU
A-8
Annex A-3 Procedural Ruling Concerning Third-Party Access to the Final Report of the
Panel in the Philippines' First Recourse to Article 21.5 of the DSU
A-9
ANNEX B
ARGUMENTS OF THE PARTIES
Contents Page
Annex B-1 Executive summary of the arguments of the Philippines B-2
Annex B-2 Executive summary of the arguments of Thailand B-26
ANNEX C
ARGUMENTS OF THE THIRD PARTIES
Contents Page
Annex C-1 Executive summary of the arguments of Australia C-2
Annex C-2 Executive summary of the arguments of Canada C-4
Annex C-3 Executive summary of the arguments of the European Union C-8
Annex C-4 Executive summary of the arguments of Japan C-11
Annex C-5 Executive summary of the arguments of the United States C-15

WTO CASES CITED IN THIS REPORT
Short title Full case title and citation
Argentina – Financial
Services
Appellate Body Report, Argentina – Measures Relating to Trade in Goods and
Services, and Add.1, adopted 9 May 2016
Argentina – Footwear (EC) Appellate Body Report, Argentina – Safeguard Measures on Imports of
Footwear, , adopted 12 January 2000, DSR 2000:I, p. 515
Argentina – Hides and
Leather
Panel Report, Argentina – Measures Affecting the Export of Bovine Hides and
the Import of Finished Leather, and Corr.1, adopted 16
February 2001, DSR 2001:V, p. 1779
Argentina – Textiles and
Apparel
Panel Report, Argentina – Measures Affecting Imports of Footwear, Textiles,
Apparel and Other Items, WT/DS56/R, adopted 22 April 1998, as modified by
Appellate Body Report WT/DS56/AB/R, DSR 1998:III, p. 1033
Australia – Apples Appellate Body Report, Australia – Measures Affecting the Importation of
Apples from New Zealand, WT/DS367/AB/R, adopted 17 December 2010,
DSR 2010:V, p. 2175
Australia – Automotive
Leather II (Article 21.5 –
US)
Panel Report, Australia – Subsidies Provided to Producers and Exporters of
Automotive Leather – Recourse to Article 21.5 of the DSU by the United
States, WT/DS126/RW and Corr.1, adopted 11 February 2000, DSR 2000:III,
p. 1189
Australia – Salmon Panel Report, Australia – Measures Affecting Importation of Salmon,
WT/DS18/R and Corr.1, adopted 6 November 1998, as modified by Appellate
Body Report WT/DS18/AB/R, DSR 1998:VIII, p. 3407
Australia – Salmon (Article
21.5 – Canada)
Panel Report, Australia – Measures Affecting Importation of Salmon –
Recourse to Article 21.5 of the DSU by Canada, WT/DS18/RW, adopted 20
March 2000, DSR 2000:IV, p. 2031
Brazil – Desiccated Coconut Appellate Body Report, Brazil – Measures Affecting Desiccated Coconut,
WT/DS22/AB/R, adopted 20 March 1997, DSR 1997:I, p. 167
Brazil – Retreaded Tyres Appellate Body Report, Brazil – Measures Affecting Imports of Retreaded
Tyres, WT/DS332/AB/R, adopted 17 December 2007, DSR 2007:IV, p. 1527
Brazil – Taxation Panel Reports, Brazil – Certain Measures Concerning Taxation and Charges,
WT/DS472/R, Add.1 and Corr.1/ WT/DS497/R, Add.1 and Corr.1, circulated
to WTO Members 30 August 2017 [appealed by Brazil on 28 September 2017]
Canada – Aircraft Appellate Body Report, Canada – Measures Affecting the Export of Civilian
Aircraft, WT/DS70/AB/R, adopted 20 August 1999, DSR 1999:III, p. 1377
Canada – Aircraft (Article
21.5 – Brazil)
Appellate Body Report, Canada – Measures Affecting the Export of Civilian
Aircraft – Recourse by Brazil to Article 21.5 of the DSU, WT/DS70/AB/RW,
adopted 4 August 2000, DSR 2000:IX, p. 4299
Canada – Autos Appellate Body Report, Canada – Certain Measures Affecting the Automotive
Industry, WT/DS139/AB/R, WT/DS142/AB/R, adopted 19 June 2000, DSR
2000:VI, p. 2985
Canada – Continued
Suspension
Appellate Body Report, Canada – Continued Suspension of Obligations in the
EC – Hormones Dispute, WT/DS321/AB/R, adopted 14 November 2008, DSR
2008:XIV, p. 5373
Canada – Continued
Suspension
Panel Report, Canada – Continued Suspension of Obligations in the EC –
Hormones Dispute, WT/DS321/R and Add.1 to Add.7, adopted 14 November
2008, as modified by Appellate Body Report WT/DS321/AB/R, DSR 2008:XV,
p. 5757
Canada – Dairy (Article
21.5 – New Zealand and US
II)
Panel Report, Canada – Measures Affecting the Importation of Milk and the
Exportation of Dairy Products – Second Recourse to Article 21.5 of the DSU
by New Zealand and the United States, WT/DS103/RW2, WT/DS113/RW2,
adopted 17 January 2003, as modified by Appellate Body Report
WT/DS103/AB/RW2, WT/DS113/AB/RW2, DSR 2003:I, p. 255
Canada – Patent Term Appellate Body Report, Canada – Term of Patent Protection, WT/DS170/AB/R,
adopted 12 October 2000, DSR 2000:X, p. 5093
Canada – Periodicals Appellate Body Report, Canada – Certain Measures Concerning Periodicals,
WT/DS31/AB/R, adopted 30 July 1997, DSR 1997:I, p. 449

Short title Full case title and citation
Canada – Wheat Exports
and Grain Imports
Appellate Body Report, Canada – Measures Relating to Exports of Wheat and
Treatment of Imported Grain, WT/DS276/AB/R, adopted 27 September 2004,
DSR 2004:VI, p. 2739
Canada – Wheat Exports
and Grain Imports
Panel Report, Canada – Measures Relating to Exports of Wheat and
Treatment of Imported Grain, WT/DS276/R, adopted 27 September 2004,
upheld by Appellate Body Report WT/DS276/AB/R, DSR 2004:VI, p. 2817
Chile – Alcoholic Beverages Appellate Body Report, Chile – Taxes on Alcoholic Beverages, WT/DS87/AB/R,
WT/DS110/AB/R, adopted 12 January 2000, DSR 2000:I, p. 281
Chile – Price Band System Appellate Body Report, Chile – Price Band System and Safeguard Measures
Relating to Certain Agricultural Products, WT/DS207/AB/R, adopted 23
October 2002, DSR 2002:VIII, p. 3045 (Corr.1, DSR 2006:XII, p. 5473)
Chile – Price Band System
(Article 21.5 – Argentina)
Appellate Body Report, Chile – Price Band System and Safeguard Measures
Relating to Certain Agricultural Products – Recourse to Article 21.5 of the DSU
by Argentina, WT/DS207/AB/RW, adopted 22 May 2007, DSR 2007:II, p. 513
Chile – Price Band System
(Article 21.5 – Argentina)
Panel Report, Chile – Price Band System and Safeguard Measures Relating to
Certain Agricultural Products – Recourse to Article 21.5 of the DSU by
Argentina, WT/DS207/RW and Corr.1, adopted 22 May 2007, upheld by
Appellate Body Report WT/DS207/AB/RW, DSR 2007:II, p. 613
China – Auto Parts Appellate Body Reports, China – Measures Affecting Imports of Automobile
Parts, WT/DS339/AB/R / WT/DS340/AB/R / WT/DS342/AB/R, adopted 12
January 2009, DSR 2009:I, p. 3
China – Autos (US) Panel Report, China – Anti-Dumping and Countervailing Duties on Certain
Automobiles from the United States, WT/DS440/R and Add.1, adopted 18
June 2014, DSR 2014:VII, p. 2655
China – GOES (Article 21.5
– US)
Panel Report, China – Countervailing and Anti-Dumping Duties on Grain
Oriented Flat-Rolled Electrical Steel from the United States – Recourse to
Article 21.5 of the DSU by the United States, WT/DS414/RW and Add.1,
adopted 31 August 2015
China – HP-SSST (Japan) /
China – HP-SSST (EU)
Panel Reports, China – Measures Imposing Anti-Dumping Duties on High-
Performance Stainless Steel Seamless Tubes ("HP-SSST") from Japan / China
– Measures Imposing Anti-Dumping Duties on High-Performance Stainless
Steel Seamless Tubes ("HP-SSST") from the European Union, WT/DS454/R
and Add.1 / WT/DS460/R, Add.1 and Corr.1, adopted 28 October 2015, as
modified by Appellate Body Reports WT/DS454/AB/R / WT/DS460/AB/R
China – Intellectual
Property Rights
Panel Report, China – Measures Affecting the Protection and Enforcement of
Intellectual Property Rights, WT/DS362/R, adopted 20 March 2009, DSR
2009:V, p. 2097
China – Publications and
Audiovisual Products
Appellate Body Report, China – Measures Affecting Trading Rights and
Distribution Services for Certain Publications and Audiovisual Entertainment
Products, WT/DS363/AB/R, adopted 19 January 2010, DSR 2010:I, p. 3
China – Rare Earths Appellate Body Reports, China – Measures Related to the Exportation of Rare
Earths, Tungsten, and Molybdenum, WT/DS431/AB/R / WT/DS432/AB/R /
WT/DS433/AB/R, adopted 29 August 2014, DSR 2014:III, p. 805
China – Rare Earths Panel Reports, China – Measures Related to the Exportation of Rare Earths,
Tungsten, and Molybdenum, WT/DS431/R and Add.1 / WT/DS432/R and
Add.1 / WT/DS433/R and Add.1, adopted 29 August 2014, upheld by
Appellate Body Reports WT/DS431/AB/R / WT/DS432/AB/R /
WT/DS433/AB/R, DSR 2014:IV, p. 1127
China – Raw Materials Appellate Body Reports, China – Measures Related to the Exportation of
Various Raw Materials, WT/DS394/AB/R / WT/DS395/AB/R /
WT/DS398/AB/R, adopted 22 February 2012, DSR 2012:VII, p. 3295
China – Raw Materials Panel Reports, China – Measures Related to the Exportation of Various Raw
Materials, WT/DS394/R, Add.1 and Corr.1 / WT/DS395/R, Add.1 and Corr.1 /
WT/DS398/R, Add.1 and Corr.1, adopted 22 February 2012, as modified by
Appellate Body Reports WT/DS394/AB/R / WT/DS395/AB/R /
WT/DS398/AB/R, DSR 2012:VII, p. 3501
China – X-Ray Equipment Panel Report, China – Definitive Anti-Dumping Duties on X-Ray Security
Inspection Equipment from the European Union, WT/DS425/R and Add.1,
adopted 24 April 2013, DSR 2013:III, p. 659

Short title Full case title and citation
Colombia – Ports of Entry Panel Report, Colombia – Indicative Prices and Restrictions on Ports of Entry,
WT/DS366/R and Corr.1, adopted 20 May 2009, DSR 2009:VI, p. 2535
Colombia – Textiles Panel Report, Colombia – Measures Relating to the Importation of Textiles,
Apparel and Footwear, WT/DS461/R and Add.1, adopted 22 June 2016, as
modified by Appellate Body Report WT/DS461/AB/R
Dominican Republic –
Import and Sale of
Cigarettes
Panel Report, Dominican Republic – Measures Affecting the Importation and
Internal Sale of Cigarettes, WT/DS302/R, adopted 19 May 2005, as modified
by Appellate Body Report WT/DS302/AB/R, DSR 2005:XV, p. 7425
EC – Approval and
Marketing of Biotech
Products
Panel Reports, European Communities – Measures Affecting the Approval and
Marketing of Biotech Products, WT/DS291/R, Add.1 to Add.9 and Corr.1 /
WT/DS292/R, Add.1 to Add.9 and Corr.1 / WT/DS293/R, Add.1 to Add.9 and
Corr.1, adopted 21 November 2006, DSR 2006:III, p. 847
EC – Asbestos Appellate Body Report, European Communities – Measures Affecting Asbestos
and Asbestos-Containing Products, WT/DS135/AB/R, adopted 5 April 2001,
DSR 2001:VII, p. 3243
EC – Bananas III Appellate Body Report, European Communities – Regime for the Importation,
Sale and Distribution of Bananas, WT/DS27/AB/R, adopted 25 September
1997, DSR 1997:II, p. 591
EC – Bananas III
(Article 21.5 – Ecuador)
Panel Report, European Communities – Regime for the Importation, Sale and
Distribution of Bananas – Recourse to Article 21.5 of the DSU by Ecuador,
WT/DS27/RW/ECU, adopted 6 May 1999, DSR 1999:II, p. 803
EC – Bananas III
(Article 21.5 – Ecuador II) /
EC – Bananas III
(Article 21.5 – US)
Appellate Body Reports, European Communities – Regime for the
Importation, Sale and Distribution of Bananas – Second Recourse to
Article 21.5 of the DSU by Ecuador, WT/DS27/AB/RW2/ECU, adopted 11
December 2008, and Corr.1 / European Communities – Regime for the
Importation, Sale and Distribution of Bananas – Recourse to Article 21.5 of
the DSU by the United States, WT/DS27/AB/RW/USA and Corr.1, adopted 22
December 2008, DSR 2008:XVIII, p. 7165
EC – Bed Linen
(Article 21.5 – India)
Appellate Body Report, European Communities – Anti-Dumping Duties on
Imports of Cotton-Type Bed Linen from India – Recourse to Article 21.5 of the
DSU by India, WT/DS141/AB/RW, adopted 24 April 2003, DSR 2003:III,
p. 965
EC – Bed Linen
(Article 21.5 – India)
Panel Report, European Communities – Anti-Dumping Duties on Imports of
Cotton-Type Bed Linen from India – Recourse to Article 21.5 of the DSU by
India, WT/DS141/RW, adopted 24 April 2003, as modified by Appellate Body
Report WT/DS141/AB/RW, DSR 2003:IV, p. 1269
EC – Chicken Cuts Appellate Body Report, European Communities – Customs Classification of
Frozen Boneless Chicken Cuts, WT/DS269/AB/R, WT/DS286/AB/R, adopted
27 September 2005, and Corr.1, DSR 2005:XIX, p. 9157
EC – Fasteners (China) Appellate Body Report, European Communities – Definitive Anti-Dumping
Measures on Certain Iron or Steel Fasteners from China, WT/DS397/AB/R,
adopted 28 July 2011, DSR 2011:VII, p. 3995
EC – Fasteners (China) Panel Report, European Communities – Definitive Anti-Dumping Measures on
Certain Iron or Steel Fasteners from China, WT/DS397/R and Corr.1, adopted
28 July 2011, as modified by Appellate Body Report WT/DS397/AB/R, DSR
2011:VIII, p. 4289
EC – Fasteners (China)
(Article 21.5 – China)
Appellate Body Report, European Communities – Definitive Anti-Dumping
Measures on Certain Iron or Steel Fasteners from China – Recourse to Article
21.5 of the DSU by China, WT/DS397/AB/RW and Add.1, adopted 12
February 2016
EC – Hormones Appellate Body Report, EC Measures Concerning Meat and Meat Products
(Hormones), WT/DS26/AB/R, WT/DS48/AB/R, adopted 13 February 1998,
DSR 1998:I, p. 135
EC – Hormones (US)
(Article 22.6 – EC)
Decision by the Arbitrators, European Communities – Measures Concerning
Meat and Meat Products (Hormones), Original Complaint by the United States
– Recourse to Arbitration by the European Communities under Article 22.6 of
the DSU, WT/DS26/ARB, 12 July 1999, DSR 1999:III, p. 1105

Short title Full case title and citation
EC – IT Products Panel Reports, European Communities and its member States – Tariff
Treatment of Certain Information Technology Products, WT/DS375/R /
WT/DS376/R / WT/DS377/R, adopted 21 September 2010, DSR 2010:III, p.
933
EC – Salmon (Norway) Panel Report, European Communities – Anti-Dumping Measure on Farmed
Salmon from Norway, WT/DS337/R, adopted 15 January 2008, and Corr.1,
DSR 2008:I, p. 3
EC – Sardines Appellate Body Report, European Communities – Trade Description of
Sardines, WT/DS231/AB/R, adopted 23 October 2002, DSR 2002:VIII, p.
3359
EC – Seal Products Appellate Body Reports, European Communities – Measures Prohibiting the
Importation and Marketing of Seal Products, WT/DS400/AB/R /
WT/DS401/AB/R, adopted 18 June 2014, DSR 2014:I, p. 7
EC – Seal Products Panel Reports, European Communities – Measures Prohibiting the Importation
and Marketing of Seal Products, WT/DS400/R and Add.1 / WT/DS401/R and
Add.1, adopted 18 June 2014, as modified by Appellate Body Reports
WT/DS400/AB/R / WT/DS401/AB/R, DSR 2014:II, p. 365
EC – Selected Customs
Matters
Appellate Body Report, European Communities – Selected Customs Matters,
WT/DS315/AB/R, adopted 11 December 2006, DSR 2006:IX, p. 3791
EC – Tariff Preferences Panel Report, European Communities – Conditions for the Granting of Tariff
Preferences to Developing Countries, WT/DS246/R, adopted 20 April 2004, as
modified by Appellate Body Report WT/DS246/AB/R, DSR 2004:III, p. 1009
EC – Trademarks and
Geographical Indications
(Australia)
Panel Report, European Communities – Protection of Trademarks and
Geographical Indications for Agricultural Products and Foodstuffs, Complaint
by Australia, WT/DS290/R, adopted 20 April 2005, DSR 2005:X, p. 4603
EC – Trademarks and
Geographical Indications
(US)
Panel Report, European Communities – Protection of Trademarks and
Geographical Indications for Agricultural Products and Foodstuffs, Complaint
by the United States, WT/DS174/R, adopted 20 April 2005, DSR 2005:VIII, p.
3499
EC – Tube or Pipe Fittings Panel Report, European Communities – Anti-Dumping Duties on Malleable
Cast Iron Tube or Pipe Fittings from Brazil, WT/DS219/R, adopted 18 August
2003, as modified by Appellate Body Report WT/DS219/AB/R, DSR 2003:VII,
p. 2701
EC and certain member
States – Large Civil Aircraft
Appellate Body Report, European Communities and Certain Member States –
Measures Affecting Trade in Large Civil Aircraft, WT/DS316/AB/R, adopted 1
June 2011, DSR 2011:I, p. 7
EC and certain member
States – Large Civil Aircraft
(Article 21.5 – US)
Panel Report, European Communities and Certain Member States – Measures
Affecting Trade in Large Civil Aircraft – Recourse to Article 21.5 of the DSU by
the United States, WT/DS316/RW and Add.1, circulated to WTO Members 22
September 2016 [appealed by European Union on 13 October 2016]
EU – Biodiesel (Argentina) Appellate Body Report, European Union – Anti-Dumping Measures on
Biodiesel from Argentina, WT/DS473/AB/R and Add.1, adopted 26 October
2016
EU – Fatty Alcohols
(Indonesia)
Panel Report, European Union – Anti-Dumping Measures on Imports of
Certain Fatty Alcohols from Indonesia, WT/DS442/R and Add.1, adopted 29
September 2017, as modified by Appellate Body Report WT/DS442/AB/R
EU – Footwear (China) Panel Report, European Union – Anti-Dumping Measures on Certain Footwear
from China, WT/DS405/R, adopted 22 February 2012, DSR 2012:IX, p. 4585
Guatemala – Cement I Appellate Body Report, Guatemala – Anti-Dumping Investigation Regarding
Portland Cement from Mexico, WT/DS60/AB/R, adopted 25 November 1998,
DSR 1998:IX, p. 3767
India – Additional Import
Duties
Panel Report, India – Additional and Extra-Additional Duties on Imports from
the United States, WT/DS360/R, adopted 17 November 2008, as reversed by
Appellate Body Report WT/DS360/AB/R, DSR 2008:XX, p. 8317
India – Autos Panel Report, India – Measures Affecting the Automotive Sector,
WT/DS146/R, WT/DS175/R, and Corr.1, adopted 5 April 2002, DSR 2002:V,
p. 1827
India – Patents (US) Appellate Body Report, India – Patent Protection for Pharmaceutical and
Agricultural Chemical Products, WT/DS50/AB/R, adopted 16 January 1998,
DSR 1998:I, p. 9

Short title Full case title and citation
India – Patents (US) Panel Report, India – Patent Protection for Pharmaceutical and Agricultural
Chemical Products, Complaint by the United States, WT/DS50/R, adopted 16
January 1998, as modified by Appellate Body Report WT/DS50/AB/R, DSR
1998:I, p. 41
India – Quantitative
Restrictions
Appellate Body Report, India – Quantitative Restrictions on Imports of
Agricultural, Textile and Industrial Products, WT/DS90/AB/R, adopted 22
September 1999, DSR 1999:IV, p. 1763
India – Solar Cells Appellate Body Report, India – Certain Measures Relating to Solar Cells and
Solar Modules, WT/DS456/AB/R and Add.1, adopted 14 October 2016
Indonesia – Autos Panel Report, Indonesia – Certain Measures Affecting the Automobile
Industry, WT/DS54/R, WT/DS55/R, WT/DS59/R, WT/DS64/R, Corr.1 and
Corr.2, adopted 23 July 1998, and Corr.3 and Corr.4, DSR 1998:VI, p. 2201
Japan – Alcoholic
Beverages II
Appellate Body Report, Japan – Taxes on Alcoholic Beverages, WT/DS8/AB/R,
WT/DS10/AB/R, WT/DS11/AB/R, adopted 1 November 1996, DSR 1996:I, p.
97
Japan – DRAMs (Korea) Appellate Body Report, Japan – Countervailing Duties on Dynamic Random
Access Memories from Korea, WT/DS336/AB/R and Corr.1, adopted 17
December 2007, DSR 2007:VII, p. 2703
Japan – Film Panel Report, Japan – Measures Affecting Consumer Photographic Film and
Paper, WT/DS44/R, adopted 22 April 1998, DSR 1998:IV, p. 1179
Korea – Alcoholic
Beverages
Appellate Body Report, Korea – Taxes on Alcoholic Beverages,
WT/DS75/AB/R, WT/DS84/AB/R, adopted 17 February 1999, DSR 1999:I, p.
3
Korea – Various Measures
on Beef
Appellate Body Report, Korea – Measures Affecting Imports of Fresh, Chilled
and Frozen Beef, WT/DS161/AB/R, WT/DS169/AB/R, adopted 10 January
2001, DSR 2001:I, p. 5
Mexico – Corn Syrup
(Article 21.5 – US)
Appellate Body Report, Mexico – Anti-Dumping Investigation of High Fructose
Corn Syrup (HFCS) from the United States – Recourse to Article 21.5 of the
DSU by the United States, WT/DS132/AB/RW, adopted 21 November 2001,
DSR 2001:XIII, p. 6675
Mexico – Taxes on Soft
Drinks
Appellate Body Report, Mexico – Tax Measures on Soft Drinks and Other
Beverages, WT/DS308/AB/R, adopted 24 March 2006, DSR 2006:I, p. 3
Russia – Commercial
Vehicles
Panel Report, Russia – Anti-Dumping Duties on Light Commercial Vehicles
from Germany and Italy, WT/DS479/R and Add.1, circulated to WTO Members
27 January 2017 [appealed by Russia on 20 February 2017]
Russia – Tariff Treatment Panel Report, Russia – Tariff Treatment of Certain Agricultural and
Manufacturing Products, WT/DS485/R, Corr.1, Corr.2, and Add.1, adopted 26
September 2016
Thailand – Cigarettes
(Philippines)
Appellate Body Report, Thailand – Customs and Fiscal Measures on Cigarettes
from the Philippines, WT/DS371/AB/R, adopted 15 July 2011, DSR 2011:IV,
p. 2203
Thailand – Cigarettes
(Philippines)

Panel Report, Thailand – Customs and Fiscal Measures on Cigarettes from the
Philippines, WT/DS371/R, adopted 15 July 2011, as modified by Appellate
Body Report WT/DS371/AB/R, DSR 2011:IV, p. 2299
Thailand – H-Beams Appellate Body Report, Thailand – Anti-Dumping Duties on Angles, Shapes
and Sections of Iron or Non-Alloy Steel and H-Beams from Poland,
WT/DS122/AB/R, adopted 5 April 2001, DSR 2001:VII, p. 2701
Turkey – Textiles Appellate Body Report, Turkey – Restrictions on Imports of Textile and
Clothing Products, WT/DS34/AB/R, adopted 19 November 1999, DSR
1999:VI, p. 2345
US – 1916 Act Appellate Body Report, United States – Anti-Dumping Act of 1916,
WT/DS136/AB/R, WT/DS162/AB/R, adopted 26 September 2000, DSR
2000:X, p. 4793
US – 1916 Act (Japan) Panel Report, United States – Anti-Dumping Act of 1916, Complaint by Japan,
WT/DS162/R and Add.1, adopted 26 September 2000, upheld by Appellate
Body Report WT/DS136/AB/R, WT/DS162/AB/R, DSR 2000:X, p. 4831

Short title Full case title and citation
US – Anti-Dumping and
Countervailing Duties
(China)
Panel Report, United States – Definitive Anti-Dumping and Countervailing
Duties on Certain Products from China, WT/DS379/R, adopted 25 March
2011, as modified by Appellate Body Report WT/DS379/AB/R, DSR 2011:VI,
p. 3143
US – Anti-Dumping
Methodologies (China)
Appellate Body Report, United States – Certain Methodologies and Their
Application to Anti-Dumping Proceedings Involving China, WT/DS471/AB/R
and Add.1, adopted 22 May 2017
US – Carbon Steel Appellate Body Report, United States – Countervailing Duties on Certain
Corrosion-Resistant Carbon Steel Flat Products from Germany,
WT/DS213/AB/R and Corr.1, adopted 19 December 2002, DSR 2002:IX, p.
3779
US – Carbon Steel (India) Appellate Body Report, United States – Countervailing Measures on Certain
Hot-Rolled Carbon Steel Flat Products from India, WT/DS436/AB/R, adopted
19 December 2014, DSR 2014:V, p. 1727
US – Carbon Steel (India) Panel Report, United States – Countervailing Measures on Certain Hot-Rolled
Carbon Steel Flat Products from India, WT/DS436/R and Add.1, adopted 19
December 2014, as modified by Appellate Body Report WT/DS436/AB/R, DSR
2014:VI, p. 2189
US – Certain EC Products Appellate Body Report, United States – Import Measures on Certain Products
from the European Communities, WT/DS165/AB/R, adopted 10 January 2001,
DSR 2001:I, p. 373
US – Clove Cigarettes Appellate Body Report, United States – Measures Affecting the Production and
Sale of Clove Cigarettes, WT/DS406/AB/R, adopted 24 April 2012, DSR 2012:
XI, p. 5751
US – Continued Suspension Panel Report, United States – Continued Suspension of Obligations in the EC
– Hormones Dispute, WT/DS320/R and Add.1 to Add.7, adopted 14
November 2008, as modified by Appellate Body Report WT/DS320/AB/R, DSR
2008:XI, p. 3891
US – Continued Zeroing Appellate Body Report, United States – Continued Existence and Application
of Zeroing Methodology, WT/DS350/AB/R, adopted 19 February 2009, DSR
2009:III, p. 1291
US – COOL Appellate Body Reports, United States – Certain Country of Origin Labelling
(COOL) Requirements, WT/DS384/AB/R / WT/DS386/AB/R, adopted 23 July
2012, DSR 2012:V, p. 2449
US – COOL Panel Reports, United States – Certain Country of Origin Labelling (COOL)
Requirements, WT/DS384/R / WT/DS386/R, adopted 23 July 2012, as
modified by Appellate Body Reports WT/DS384/AB/R / WT/DS386/AB/R, DSR
2012:VI, p. 2745
US – Corrosion-Resistant
Steel Sunset Review
Appellate Body Report, United States – Sunset Review of Anti-Dumping
Duties on Corrosion-Resistant Carbon Steel Flat Products from Japan,
WT/DS244/AB/R, adopted 9 January 2004, DSR 2004:I, p. 3
US – Countervailing and
Anti-Dumping Measures
(China)
Appellate Body Report, United States – Countervailing and Anti-Dumping
Measures on Certain Products from China, WT/DS449/AB/R and Corr.1,
adopted 22 July 2014, DSR 2014:VIII, p. 3027
US – Countervailing and
Anti-Dumping Measures
(China)
Panel Report, United States – Countervailing and Anti-Dumping Measures on
Certain Products from China, WT/DS449/R and Add.1, adopted 22 July 2014,
as modified by Appellate Body Report WT/DS449/AB/R, DSR 2014:VIII, p.
3175
US – Countervailing Duty
Investigation on DRAMS
Appellate Body Report, United States – Countervailing Duty Investigation on
Dynamic Random Access Memory Semiconductors (DRAMS) from Korea,
WT/DS296/AB/R, adopted 20 July 2005, DSR 2005:XVI, p. 8131
US – Countervailing
Measures on Certain EC
Products (Article 21.5 – EC)
Panel Report, United States – Countervailing Measures Concerning Certain
Products from the European Communities – Recourse to Article 21.5 of the
DSU by the European Communities, WT/DS212/RW, adopted 27 September
2005, DSR 2005:XVIII, p. 8950
US – Customs Bond
Directive
Panel Report, United States – Customs Bond Directive for Merchandise
Subject to Anti-Dumping/Countervailing Duties, WT/DS345/R, adopted 1
August 2008, as modified by Appellate Body Report WT/DS343/AB/R /
WT/DS345/AB/R, DSR 2008:VIII, p. 2925
US – Export Restraints Panel Report, United States – Measures Treating Exports Restraints as
Subsidies, WT/DS194/R and Corr.2, adopted 23 August 2001, DSR 2001:XI,
p. 5767

Short title Full case title and citation
US – FSC Appellate Body Report, United States – Tax Treatment for "Foreign Sales
Corporations", WT/DS108/AB/R, adopted 20 March 2000, DSR 2000:III, p.
1619
US – FSC (Article 21.5 –
EC)
Appellate Body Report, United States – Tax Treatment for "Foreign Sales
Corporations" – Recourse to Article 21.5 of the DSU by the European
Communities, WT/DS108/AB/RW, adopted 29 January 2002, DSR 2002:I, p.
55
US – FSC (Article 21.5 –
EC)
Panel Report, United States – Tax Treatment for "Foreign Sales Corporations"
– Recourse to Article 21.5 of the DSU by the European Communities,
WT/DS108/RW, adopted 29 January 2002, as modified by Appellate Body
Report WT/DS108/AB/RW, DSR 2002:I, p. 119
US – Gambling Panel Report, United States – Measures Affecting the Cross-Border Supply of
Gambling and Betting Services, WT/DS285/R, adopted 20 April 2005, as
modified by Appellate Body Report WT/DS285/AB/R, DSR 2005:XII, p. 5797
US – Gasoline Appellate Body Report, United States – Standards for Reformulated and
Conventional Gasoline, WT/DS2/AB/R, adopted 20 May 1996, DSR 1996:I, p.
3
US – Hot-Rolled Steel Appellate Body Report, United States – Anti-Dumping Measures on Certain
Hot-Rolled Steel Products from Japan, WT/DS184/AB/R, adopted 23 August
2001, DSR 2001:X, p. 4697
US – Lamb Appellate Body Report, United States – Safeguard Measures on Imports of
Fresh, Chilled or Frozen Lamb Meat from New Zealand and Australia,
WT/DS177/AB/R, WT/DS178/AB/R, adopted 16 May 2001, DSR 2001:IX, p.
4051
US – Large Civil Aircraft
(2nd complaint) (Article
21.5 – EU)
Panel Report, United States – Measures Affecting Trade in Large Civil Aircraft
(Second Complaint) – Recourse to Article 21.5 of the DSU by the European
Union, WT/DS353/RW and Add.1, circulated to WTO Members 9 June 2017
[appealed by the European Union on 29 June 2017]
US – Line Pipe Appellate Body Report, United States – Definitive Safeguard Measures on
Imports of Circular Welded Carbon Quality Line Pipe from Korea,
WT/DS202/AB/R, adopted 8 March 2002, DSR 2002:IV, p. 1403
US – Offset Act (Byrd
Amendment)
Appellate Body Report, United States – Continued Dumping and Subsidy
Offset Act of 2000, WT/DS217/AB/R, WT/DS234/AB/R, adopted 27 January
2003, DSR 2003:I, p. 375
US – Oil Country Tubular
Goods Sunset Reviews
(Article 21.5 – Argentina)
Appellate Body Report, United States – Sunset Reviews of Anti-Dumping
Measures on Oil Country Tubular Goods from Argentina – Recourse to Article
21.5 of the DSU by Argentina, WT/DS268/AB/RW, adopted 11 May 2007, DSR
2007:IX, p. 3523
US – Orange Juice (Brazil) Panel Report, United States – Anti-Dumping Administrative Reviews and
Other Measures Related to Imports of Certain Orange Juice from Brazil,
WT/DS382/R, adopted 17 June 2011, DSR 2011:VII, p. 3753
US – Poultry (China) Panel Report, United States – Certain Measures Affecting Imports of Poultry
from China, WT/DS392/R, adopted 25 October 2010, DSR 2010:V, p. 1909
US – Section 211
Appropriations Act
Appellate Body Report, United States – Section 211 Omnibus Appropriations
Act of 1998, WT/DS176/AB/R, adopted 1 February 2002, DSR 2002:II, p. 589
US – Section 301 Trade Act Panel Report, United States – Sections 301-310 of the Trade Act of 1974,
WT/DS152/R, adopted 27 January 2000, DSR 2000:II, p. 815
US – Shrimp Appellate Body Report, United States – Import Prohibition of Certain Shrimp
and Shrimp Products, WT/DS58/AB/R, adopted 6 November 1998, DSR
1998:VII, p. 2755
US – Shrimp (Article 21.5 –
Malaysia)
Appellate Body Report, United States – Import Prohibition of Certain Shrimp
and Shrimp Products – Recourse to Article 21.5 of the DSU by Malaysia,
WT/DS58/AB/RW, adopted 21 November 2001, DSR 2001:XIII, p. 6481
US – Shrimp (Article 21.5 –
Malaysia)
Panel Report, United States – Import Prohibition of Certain Shrimp and
Shrimp Products – Recourse to Article 21.5 of the DSU by Malaysia,
WT/DS58/RW, adopted 21 November 2001, upheld by Appellate Body Report
WT/DS58/AB/RW, DSR 2001:XIII, p. 6529
US – Shrimp (Ecuador) Panel Report, United States – Anti-Dumping Measure on Shrimp from
Ecuador, WT/DS335/R, adopted on 20 February 2007, DSR 2007:II, p. 425

Short title Full case title and citation
US – Shrimp (Thailand) /
US – Customs Bond
Directive
Appellate Body Report, United States – Measures Relating to Shrimp from
Thailand / United States – Customs Bond Directive for Merchandise Subject to
Anti-Dumping/Countervailing Duties, WT/DS343/AB/R / WT/DS345/AB/R,
adopted 1 August 2008, DSR 2008:VII, p. 2385 / DSR 2008:VIII, p. 2773
US – Shrimp (Thailand) Panel Report, United States – Measures Relating to Shrimp from Thailand,
WT/DS343/R, adopted 1 August 2008, as modified by Appellate Body Report
WT/DS343/AB/R / WT/DS345/AB/R, DSR 2008:VII, p. 2539
US – Softwood Lumber IV Appellate Body Report, United States – Final Countervailing Duty
Determination with Respect to Certain Softwood Lumber from Canada,
WT/DS257/AB/R, adopted 17 February 2004, DSR 2004:II, p. 571
US – Softwood Lumber IV
(Article 21.5 – Canada)
Appellate Body Report, United States – Final Countervailing Duty
Determination with Respect to Certain Softwood Lumber from Canada –
Recourse by Canada to Article 21.5 of the DSU, WT/DS257/AB/RW, adopted
20 December 2005, DSR 2005:XXIII, p. 11357
US – Softwood Lumber VI
(Article 21.5 – Canada)
Appellate Body Report, United States – Investigation of the International
Trade Commission in Softwood Lumber from Canada – Recourse to Article
21.5 of the DSU by Canada, WT/DS277/AB/RW, adopted 9 May 2006, and
Corr.1, DSR 2006:XI, p. 4865
US – Steel Plate Panel Report, United States – Anti-Dumping and Countervailing Measures on
Steel Plate from India, WT/DS206/R and Corr.1, adopted 29 July 2002, DSR
2002:VI, p. 2073
US – Steel Safeguards Appellate Body Report, United States – Definitive Safeguard Measures on
Imports of Certain Steel Products, WT/DS248/AB/R, WT/DS249/AB/R,
WT/DS251/AB/R, WT/DS252/AB/R, WT/DS253/AB/R, WT/DS254/AB/R,
WT/DS258/AB/R, WT/DS259/AB/R, adopted 10 December 2003, DSR
2003:VII, p. 3117
US – Steel Safeguards Panel Reports, United States – Definitive Safeguard Measures on Imports of
Certain Steel Products, WT/DS248/R and Corr.1 / WT/DS249/R and Corr.1 /
WT/DS251/R and Corr.1 / WT/DS252/R and Corr.1 / WT/DS253/R and Corr.1
/ WT/DS254/R and Corr.1 / WT/DS258/R and Corr.1 / WT/DS259/R and
Corr.1, adopted 10 December 2003, as modified by Appellate Body Report
WT/DS248/AB/R, WT/DS249/AB/R, WT/DS251/AB/R, WT/DS252/AB/R,
WT/DS253/AB/R, WT/DS254/AB/R, WT/DS258/AB/R, WT/DS259/AB/R, DSR
2003:VIII, p. 3273
US – Tax Incentives Panel Report, United States – Conditional Tax Incentives for Large Civil
Aircraft, WT/DS487/R and Add.1, adopted 22 September 2017, as modified
by Appellate Body Report WT/DS487/AB/R
US – Tuna II (Mexico) Appellate Body Report, United States – Measures Concerning the Importation,
Marketing and Sale of Tuna and Tuna Products, WT/DS381/AB/R, adopted 13
June 2012, DSR 2012:IV, p. 1837
US – Tuna II (Mexico)
(Article 21.5 – Mexico)
Appellate Body Report, United States – Measures Concerning the Importation,
Marketing and Sale of Tuna and Tuna Products – Recourse to Article 21.5 of
the DSU by Mexico, WT/DS381/AB/RW and Add.1, adopted 3 December 2015
US – Tuna II (Mexico)
(Article 21.5 – Mexico)
Panel Report, United States – Measures Concerning the Importation,
Marketing and Sale of Tuna and Tuna Products – Recourse to Article 21.5 of
the DSU by Mexico, WT/DS381/RW, Add.1 and Corr.1, adopted 3 December
2015, as modified by Appellate Body Report WT/DS381/AB/RW
US – Tuna II (Mexico)
(Article 21.5 – US) /
US – Tuna II (Mexico)
(Article 21.5 – Mexico II)
Reports of the Panels, United States – Measures Concerning the Importation,
Marketing and Sale of Tuna and Tuna Products – Recourse to Article 21.5 of
the DSU by the United States, WT/DS381/RW/USA and Add.1 / United States
– Measures Concerning the Importation, Marketing and Sale of Tuna and
Tuna Products – Second Recourse to Article 21.5 of the DSU by Mexico,
WT/DS381/RW/2 and Add.1, circulated to WTO Members 26 October 2017
[appealed by Mexico on 1 December 2017]
US – Tyres (China) Appellate Body Report, United States – Measures Affecting Imports of Certain
Passenger Vehicle and Light Truck Tyres from China, WT/DS399/AB/R,
adopted 5 October 2011, DSR 2011:IX, p. 4811
US – Underwear Appellate Body Report, United States – Restrictions on Imports of Cotton and
Man-made Fibre Underwear, WT/DS24/AB/R, adopted 25 February 1997, DSR
1997:I, p. 11

Short title Full case title and citation
US – Underwear Panel Report, United States – Restrictions on Imports of Cotton and Man-
made Fibre Underwear, WT/DS24/R, adopted 25 February 1997, as modified
by Appellate Body Report WT/DS24/AB/R, DSR 1997:I, p. 31
US – Upland Cotton Panel Report, United States – Subsidies on Upland Cotton, WT/DS267/R,
Add.1 to Add.3 and Corr.1, adopted 21 March 2005, as modified by Appellate
Body Report WT/DS267/AB/R, DSR 2005:II, p. 299
US – Upland Cotton (Article
21.5 – Brazil)
Appellate Body Report, United States – Subsidies on Upland Cotton –
Recourse to Article 21.5 of the DSU by Brazil, WT/DS267/AB/RW, adopted 20
June 2008, DSR 2008:III, p. 809
US – Wool Shirts and
Blouses
Appellate Body Report, United States – Measure Affecting Imports of Woven
Wool Shirts and Blouses from India, WT/DS33/AB/R, adopted 23 May 1997,
and Corr.1, DSR 1997:I, p. 323
US – Zeroing (EC) (Article
21.5 – EC)
Appellate Body Report, United States – Laws, Regulations and Methodology
for Calculating Dumping Margins ("Zeroing") – Recourse to Article 21.5 of the
DSU by the European Communities, WT/DS294/AB/RW and Corr.1, adopted
11 June 2009, DSR 2009:VII, p. 2911
US – Zeroing (EC) (Article
21.5 – EC)
Panel Report, United States – Laws, Regulations and Methodology for
Calculating Dumping Margins ("Zeroing") – Recourse to Article 21.5 of the
DSU by the European Communities, WT/DS294/RW, adopted 11 June 2009,
as modified by Appellate Body Report WT/DS294/AB/RW, DSR 2009:VII, p.
3117
US – Zeroing (Japan)
(Article 21.5 – Japan)
Appellate Body Report, United States – Measures Relating to Zeroing and
Sunset Reviews – Recourse to Article 21.5 of the DSU by Japan,
WT/DS322/AB/RW, adopted 31 August 2009, DSR 2009:VIII, p. 3441
US – Zeroing (Japan)
(Article 21.5 – Japan)
Panel Report, United States – Measures Relating to Zeroing and Sunset
Reviews – Recourse to Article 21.5 of the DSU by Japan, WT/DS322/RW,
adopted 31 August 2009, upheld by Appellate Body Report
WT/DS322/AB/RW, DSR 2009:VIII, p. 3553

ABBREVIATIONS USED IN THIS REPORT
Abbreviation Description
ACWL/Commerce Letters Advisory Centre on WTO Law opinion of 21 May 2012 and related letter of 22
January 2014 from the Thai Ministry of Commerce to Thailand's Attorney
General
Anti-Dumping Agreement Agreement on Implementation of Article VI of the General Agreement on
Tariffs and Trade 1994
BAT British American Tobacco
BoA Board of Appeals
BoA Ruling Board of Appeals Ruling No. GorOr 112/2555/Por9/2555(3.1) of 16 November
2012
Charges The Charges, Case Black No. Or. 185/2559, 18 January 2016
2002-2003 Charges The Charges, Case Black No. Or. 232/2560, 26 January 2017
Competition Act Competition Act B.E. 2542 (1999)
Customs Act Customs Act B.E. 2469 (1926), as amended
CVA Agreement on Implementation of Article VII of the General Agreement on
Tariffs and Trade 1994
DSB Dispute Settlement Body
DSI Department of Special Investigations
DSU Understanding on Rules and Procedures Governing the Settlement of Disputes
GATS General Agreement on Trade in Services
GATT 1994 General Agreement on Tariffs and Trade 1994
IBA Rules on Evidence International Bar Association, Rules on the Taking of Evidence in International
Arbitration, adopted by a resolution of the IBA Council on 29 May 2010
ILC Articles on State
Responsibility
International Law Commission, Articles on Responsibility of States for
Internationally Wrongful Acts, adopted by the ILC at its fifty-third session, in
2001, published in Yearbook of the International Law Commission, 2001, Vol.
II, Part Two
JTI Japan Tobacco International
King Power King Power International Co. Ltd.
Ministerial Decision Ministerial Decision Regarding Cases Where Customs Administrations Have
Reasons to Doubt the Truth or Accuracy of the Declared Value
MRSP Maximum Retail Selling Price
Nairobi Convention International Convention on Mutual Administrative Assistance for the
Prevention, Investigation and Repression of Customs Offences (signed in
Nairobi, 9 June 1977, entered into force 21 May 1980)
OECD Transfer Pricing
Guidelines
OECD Transfer Pricing Guidelines for Multinational Enterprises and Tax
Administrations (OECD Guidelines)
P&GE Profits and general expenses
PM Indonesia Philip Morris Indonesia
PM Philip Morris
PMPMI Philip Morris Philippines Manufacturing Inc.
PMTL / PM Thailand Philip Morris Thailand Limited
RRSP Recommended retail selling price
RSP Retail selling price
SCM Agreement Agreement on Subsidies and Countervailing Measures
September 2012 BoA Ruling Board of Appeals Ruling No. GorOr 81/2555/Por7/2555(4.1) and cover letter
No. GorKor 0519(8) (GotOr), 12 September 2012
SPS Agreement Agreement on the Application of Sanitary and Phytosanitary Measures
TBT Agreement Agreement on Technical Barriers to Trade
TFA Trade Facilitation Agreement
THB Thai baht
TRIMs Agreement Agreement on Trade-Related Investment Measures
TRIPS Agreement Agreement on Trade-Related Aspects of Intellectual Property Rights

TSIC Thailand's Standard Industrial Classification
TTM Thailand Tobacco Monopoly
USD United States dollar
VAT Value-added tax
Vienna Convention Vienna Convention on the Law of Treaties, Done at Vienna, 23 May 1969,
WTO World Trade Organization
WTO Agreement Marrakesh Agreement Establishing the World Trade Organization

EXHIBITS CITED IN THIS REPORT

Exhibit
Number
Full Title
PHL-1-B The Criminal Court, Charges, Case Black No. Or. 185/2559, 18 January 2016 (English translation)
PHL-3 TTM, Annual Report, 2015 (English and Thai)
PHL-7 PMTL, Comparison calculation: King Power's duty free prices vs. PMTL's duty-paid prices
PHL-8-B Customs Act (No. 17), B.E. 2543 (2000) (English translation)
PHL-14-B The Criminal Court, Charges, Case Black No. Or. 232/2560, 26 January 2017 (English translation)
PHL-16-B The Reward Giving to Offender Suppression Act. B.E. 2498 (1946) (English translation)
PHL-17-B DSI, Memorandum of Allegation, 9 April 2009 (English translation)
PHL-18-B Letter from the Customs Department to the Managing Director of PMTL No. Gor Kor 0514(Sor)/656,
19 June 2008 (English translation)
PHL-20-B Letter from the Customs Privilege Bureau to PMTL No. Gor Kor 0516(5)/Fhor Bor Kor 1/285, 11
August 2006 (English translation)
PHL-21-B BoA Ruling, No. GorOr 112/2555/Por9/2555(3.1) and cover letter No. GorKor 0519(8)/(GorOr)/118,
16 November 2012 (English translation)
PHL-25-B Letter from PMTL to the Sub-Committee for Appeal Consideration, 5 October 2012 (English
translation)
PHL-27-B Letter from PMTL to the BoA, 18 December 2012 (English translation)
PHL-28-B 180 Notices of Assessment (English translation of one notice)
PHL-29-B Letter from Bangkok Customs Bureau to PMTL, No. GorKor 0504(Sor)/35, 17 January 2013 (English
translation)
PHL-30-B Motion requesting the Court to summon documentary evidence or material evidence, 27 September
2013 (English translation)
PHL-31-B Statement Explaining the event that the Defendant failed to submit the documents pursuant to the
summons, 24 June 2014 (English translation)
PHL-32-B Central Tax Court Ruling, 29 October 2014 (English translation)
PHL-33-B Appeal by the Customs Department to the Supreme Court of the Decision by the Tax Court of 29
October 2014 on PMTL's appeal against the BoA Ruling of 16 November 2012, 28 January 2015
(English translation)
PHL-34-B Customs Act B.E. 2469 (1926) (as amended to (No. 22) B.E. 2557 (2014)) (English translation)
PHL-37 Letter from the Permanent Mission of Thailand to the WTO to the Permanent Mission of the
Philippines to the WTO, 4 September 2013
PHL-38-B Letter from the Director of Customs Standard Procedures and Valuation Bureau of Customs to PMTL,
No. GorKor0519(Sor)/732, 16 June 2016 (English translation)
PHL-39-B Minutes of the BoA Meeting of 26 September 2012 (English translation)
PHL-41 OECD Transfer Pricing Guidelines for Multinational Enterprises and Tax Administrations, 22 July
2010
PHL-42-B Minutes of the BoA Meeting of 14 January 2010 (English translation)
PHL-43-B Letter from PMTL to the Sub-Committee for Appeal Consideration, 12 October 2012 (English
translation)
PHL-46-B Chemical Resins Thailand Limited, Audited Financial Statement, 2002 (English translation)
PHL-47-B K H S Company Limited, Audited Financial Statement, 2002 (English translation)
PHL-48 Leeintertrade Website, available at: http://www.leeintertrade.com/en (last accessed 10 October
2016)
PHL-49-B Piriyapul International co., Ltd, Audited Financial Statement, 2002 (English translation)
PHL-50 Piriyapul International Limited, 40 Anniversary Special Publication, 2013
PHL-53-B BoA Ruling No. GorOr 81/2555/Por7/2555(4.1) and cover letter No. GorKor 0519(8) (GotOr), 12
September 2012 (English translation)
PHL-54 BoA Presentation, 1 August 2013
PHL-58 Letter from the Permanent Mission of Philippines to the WTO to the Permanent Mission of Thailand
to the WTO, 27 September 2013
PHL-59 Letter from the Permanent Mission of Thailand to the WTO to the Permanent Mission of the
Philippines to the WTO, 27 March 2014
PHL-60-B Macrorich Co. Ltd., Audited Financial Statement, 2002 (English translation)

Exhibit
Number
Full Title
PHL-61-A Classic Cigars Co., Ltd. Audited Financial Statement, 2002
PHL-61-B Classic Cigars Co., Ltd. Audited Financial Statement, 2002 (English translation)
PHL-63-B Lee Intertrade Co. Ltd., Audited Financial Statement, 2002 (English translation)
PHL-70 Jack Levine, James Alan Fox, David R. Forde, Elementary Statistics in Social Research, 2nd edn
(Pearson Education, 2014), pp. 172-217
PHL-72 R. Mark Sirkin, Statistics for the Social Sciences, 3rd edn (SAGE Publications, 2006), pp. 127-141
PHL-75-B Letter from PMTL to the Director of Customs Valuation Appeal Division, 9 December 2010 (English
translation)
PHL-76-B Letter from PMTL to the Director of Customs Valuation Appeal Division, 24 August 2011 (English
translation)
PHL-82 PMTL's submission of its expense and cost statement FY 2002 (English translation)
PHL-83-B Letter from the Sub-Committee for Appeal Consideration to PMTL No. GorKor 0519(GorOr)/91, 27
September 2012 (English translation)
PHL-85 World Customs Organization, Customs Valuation Compendium, Commentary 15.1 "Application of
Deductive Value Method", 2nd Edition, November 2008
PHL-87-B Senate Committee on Justice and Police Affairs, Report on Review and Study of Investigation into
and Consideration of Case Concerning Actual or Attempted Tax Evasion by PMTL et al., 10 October
2013 (English translation)
PHL-90-B DSI, Press Release, 2 September 2009 (English translation)
PHL-91-B Manager Online, "'Public Prosecutor' indicated not to prosecute Philip [Morris], reiterated 2
government agencies confirmed no offence found", 22 March 2011 (English translation), available
at: http://manager.co.th/Crime/ViewNews.aspx?NewsID=9540000036517 (last accessed 19
January 2017)
PHL-93-B DSI, Press Release, 17 August 2011 (English translation)
PHL-94-B Criminal Procedure Code, Section 145 (English translation and Thai original)
PHL-95-B Post Today Online, "Attorney General ordered a prosecution against Philip Morris for evasion of
cigarette tax", 2 October 2013 (English translation), available at:
http://www.posttoday.com/economy/finance/250676 (last accessed 19 January 2017)
PHL-96-B Annex to the Charges, Case Black No. Or. 185/2559, 18 January 2016 (English translation)
PHL-98-B Customs Act (No. 11), B.E. 2490 (1947) (English translation)
PHL-99-B Criminal Code, Section 4 of the Amendment Act of the Criminal Code (No. 6) B.E. 2526 (1983)
(English translation)
PHL-103 Tilleke & Gibbins International Ltd., Hearing Report, 28 June 2016
PHL-106-B Customs Notification No. 20-2549, 27 March 2006 (English translation)
PHL-107-B PMTL's PowerPoint presentation at meeting with the Customs Department of 7 August 2006 (English
translation)
PHL-108 Statement by Georges Farah, PM World Trade, 9 November 2010
PHL-109 PMTL Products arrival 2003-2006
PHL-110 Letter from the World Customs Organization to the Government of Thailand, 27 July 2006
PHL-112-B Letter from PMTL to the Director of Customs Bonded Warehouse, 30 August 2004, with attachments
dated 23 and 27 August 2004 (English translation)
PHL-115 Expert witness statement of Paulette Vander Schueren, 16 September 2010
PHL-119 King-Oua Laohong, "Philip Morris tax evasion case reaches court", Bangkok Post, 19 January 2016,
available at http://www.bangkokpost.com/news/general/831708/philip-morris-tax-evasion-case-
reaches-court (last accessed 6 December 2016)
PHL-120 The Phuket News, "Philip Morris tax evasion case reaches court", 19 January 2016, available at
http://www.thephuketnews.com/philip-morris-tax-evasion-case-reaches-court-55840.php (last
accessed 6 December 2016)
PHL-121-B Notification No. 187 on VAT, "Determination of tax base, categories and types of tobacco for sale for
which the value of the tax base is required to be calculated according to the rules under Section
79/5(2) of the Revenue Code", 31 August 2012 (English translation)
PHL-122-B Order Por. 145-2555, Calculation of Tax Base for Importation and Sale of Tobacco According to the
Category and Type Prescribed by the Director-General and Approved by the Minister Under Section
79/5 of the Revenue Code, and Preparation of Tax Invoice In Case of Sale of Tobacco Under Section
86/5(2) of the Revenue Code (English translation)

Exhibit
Number
Full Title
PHL-123-B Letter from PMTL to the Director of the Revenue Department, 21 September 2012 (English
translation)
PHL-124-B Competition Act, B.E. 2542 (1999) (English translation)
PHL-129-B Letter from PMTL to the Director of the Revenue Department, 28 September 2012 (English
translation)
PHL-130 Email communication between officials of the Permanent Mission of the Philippines to the WTO and
the Permanent Mission of Thailand to the WTO, 10 October 2012
PHL-132-B Letter from PMTL to the Director of the Revenue Department, 28 June 2013 (English translation)
PHL-133-B Letter from PMTL to the Director of the Revenue Department, 25 June 2015 (English translation)
PHL-134-B Letter from PMTL to the Director of the Revenue Department, 29 June 2016 (English translation)
PHL-140 P&GE rates based on consistent and inconsistent use of income
PHL-145-B Letter from PMTL to the Sub-Committee for Appeal Consideration, 13 October 2011 (English
translation)
PHL-146-B Letter from PMTL to the Customs Department, 31 March 2010 (English translation)
PHL-150-B Commerce Ministry Letter annexing ACWL Letter, 22 January 2014 (English translation)
PHL-188 Amicus Curiae Submissions - EABC, US-ABC, USCIB, NAM, NFTC and APCAC
PHL-189 Amicus Curiae Submissions - EU-ABC and ECCP
PHL-191-B Letter from PMTL to Chief of Analysis and Appeal Section, 15 December 2005 (English translation)
PHL-192 Anne Hawkins, Flavia Jolliffe and Leslie Glickman, Teaching Statistical Concepts, (Longman, 1992)
(extract)
PHL-193 Robin Hill, "What Sample Size is 'Enough' in Internet Survey Research?", in Interpersonal
Computing and Technology: An Electronic Journal for the 21st Century, Vol. 6, No. 3-4 (1998)
PHL-194 Timothy Bock and John Sergeant, "Small sample market research", in International Journal of
Market Research, Vol. 44, Quarter 2 (2002)
PHL-196-B Provincial tax receipts from 2003 with cover letter, 23 April 2003 (English translation)
PHL-198-B Memorandum of Court Proceedings dated 3 July 2017, Case Black No. Or.185/2559, 3 July 2017
(English translation)
PHL-203-B New Excise Tax Act (English translation)
PHL-204-B Letter from PMTL to the Secretary of the Sub-Committee for Appeal Consideration, 21 August 2012
PHL-207-B Trade Competition Act, B.E. 2560 (2017) (English translation)
PHL-212 TSIC code registrations of Goldimex Intertrade Co. Ltd., under Form SorSorChor1
PHL-214 Thailand's Standard Industrial Classification Codes (Thai and English translation)
PHL-215 SIC code registration of Piriyapul International Co., Ltd. under form SorBorChor3
PHL-216 SIC code registration of Chemical Resins (Thailand) Ltd. under form SorBorChor3
PHL-217 SIC code registration of Lee Intertrade Co., Ltd. under form SorBorChor3
PHL-218 SIC code registration of KHS Company Ltd. under form SorBorChor3
PHL-222 TTM, Annual Report, 2004, pp. 100-102 (English and Thai)
PHL-223 TTM, Annual Report, 2013, pp. 102-103 (English and Thai)
PHL-224 Letter from PMTL confirming adherence to Excise Department Guidelines, 25 September 2017
PHL-228-B Notification of the Board of Special Case (No. 4) B.E. 2554 (2011) (English translation)
PHL-231-B Revenue Code, Sections 37, 88, 89 and 90 (English translation)
THA-1-B Letter from PMTL to the Director General of DSI, 1 September 2006 (English translation)
THA-3-B Customs Act, B.E. 2469 (1926) (English translation)
THA-11 Chronology of the BoA appeals
THA-12 Betty R. Kirkwood and Jonathan A.C. Sterne, Essential Medical Statistics, 2nd ed (Blackwell
Publishing, 2003) (excerpts only)
THA-13 BoA's calculation of the revised customs value
THA-16 Criminal Procedure Code (excerpts only)
THA-24 William J. Davey, "Has the WTO Dispute Settlement System Exceeded Its Authority? : A
Consideration of Deference Shown by the System to Member Government Decisions and its Use of
Issue-Avoidance Techniques", in Journal of International Economic Law No. 4 Vol. 1 (2001), pp. 79-
110

Exhibit
Number
Full Title
THA-30-B Minutes of the meeting of 11 June 2013 between the Revenue Department's representatives and
representatives of cigarette importers and the domestic cigarette manufacturer (English translation)
THA-31-B Minutes of the meeting of 20 June 2014 between the Revenue Department's representatives and
representatives of cigarette importers and the domestic cigarette manufacturer (English translation)
THA-32 Provincial tax receipts provided by PMTL in 2002 (English translation)
THA-37 Criminal Procedure Code, Sections 8 and 177
THA-39 Documents relating to Thailand Standard Industrial Classification (TSIC)
THA-40 Calculations of P&GE ratios/ranges
THA-42 Thailand's official gazette of 7 July 2017 publishing the amended competition law (excerpts only)

1 INTRODUCTION
1.1 Complaint by the Philippines
1.1. The Philippines' complaint in this proceeding, initiated under Article 21.5 of the Understanding
on Rules and Procedures Governing the Settlement of Disputes (DSU), concerns the alleged failur e
by Thailand to comply with the Dispute Settlement Body's (DSB) recommendations and rulings in
the original proceeding in Thailand – Customs and Fiscal Measures on Cigarettes from the Philippines.
1.2. In the original proceeding, the Philippines challenged various measures relating to cigarettes
imported into Thailand by Philip Morris Thailand Limited (PMTL) . These included: (i) delays by the
Board of Appeals (BoA) in resolving appeals against the rejection of transaction value for 210 entries
of cigarettes over the period 2002-2003; (ii) the Thai Customs Department's determination of
customs value for 118 entries over the period 2006 -2007; and (iii) several measures relating to
Thailand's Value-Added Tax (VAT) regime as applied to domestic and imported cigarettes.
1.3. With respect to the customs valuation issues, the original panel made the following findings
under the Agreement on Implementation of Article VII of the General Agreement on Tariffs and
Trade 1994 (CVA) and the General Agreement on Tariffs and Trade 1994 (GATT 1994):
a. Thailand did not maintain or apply a general rule requiring the rejection of the transaction
value and the use of the deductive valuation method1;
b. Thailand's rejection of PMTL's declared transaction values for 118 entries of cigarettes
imported by PMTL between August 2006 and September 2007 2 was inconsistent with
Articles 1.1 and 1.2 of the CVA3;
c. Thailand acted inconsistently with Article 1.2(a) of the CVA by failing to communicate the
Thai Custom Department's "grounds" for considering that the relationship between PMTL
and Philip Morris Philippines Manufacturing Inc. (PMPMI) influenced the price with respect
to those 118 entries4;
d. Thailand acted inconsistently with Article 16 of the CVA by failing to provide an adequate
explanation on how Thai Customs determined the customs values for those 118 entries5;
e. Thailand acted inconsistently with Article 7.1 of the CVA by improperly asse ssing the
deductive value of the entries concerned6;
f. Thailand acted inconsistently with Article 7.3 of the CVA by failing to properly inform PMTL
in writing of the customs value determined under Article 7, and the method used to
determine such value, for these entries7;
g. Thailand acted inconsistently with Article 10 of the CVA by disclosing confidential customs
valuation information, provided by PMTL to Thai Customs, to the Thai media8;

1 Panel Report, Thailand – Cigarettes (Philippines), para. 8.2(a).
2 The original panel report and the parties in the current proceeding generally refer to the clearing
dates, rather than the landing dates, for the purposes of indicating when the relevant entries were imported.
Whenever the dates of importation are mentioned in this Report, they refer to the dates of customs clearance,
rather than the landing dates. (See parties' responses to Panel question No. 76)
3 Panel Report, Thailand – Cigarettes (Philippines), para. 8.2(b). We note that in the original panel
report, information regarding the entries at issue was redacted. (See, e.g. Panel Report, Thailand – Cigarettes
(Philippines), para. 8.2(b)) In the current Article 21.5 proceeding, neither party has designated this
information as confidential.
4 Panel Report, Thailand – Cigarettes (Philippines), para. 8.2(c).
5 Panel Report, Thailand – Cigarettes (Philippines), para. 8.2(d).
6 Panel Report, Thailand – Cigarettes (Philippines), para. 8.2(e).
7 Panel Report, Thailand – Cigarettes (Philippines), para. 8.2(f).
8 Panel Report, Thailand – Cigarettes (Philippines), para. 8.2(g).

h. Thailand acted inconsistently with Article X:1 of the GATT 1994 by failing to properly
publish a general rule pertaining to the release of guarantees in the context of cus toms
valuation9;
i. Thailand acted inconsistently with Article X:3(a) of the GATT 1994 because of the delays
caused in the BoA's decision-making process on customs valuation determinations for 210
entries of cigarettes imported by PMTL between January 2002 and January 200310;
j. Thailand acted inconsistently with Article X:3(b) of the GATT 1994 by failing to maintain
or institute independent review tribunals or processes for the prompt review of customs
valuation determinations for these 210 entries11; and
k. Thailand acted inconsistently with Article X:3(b) of the GATT 1994 by failing to maintain
or institute independent review tribunals or process for the prompt review of guarantee
decisions imposed by Thai Customs in the context of customs valuation.12
1.4. With respect to the VAT-related issues, the original panel made the following findings under
the GATT 1994:
a. regarding the determination of the Maximum Retail S elling Prices (MRSPs) for VAT on
imported cigarettes, Thailand acted inconsistently with Article III:2, first sentence by
subjecting imported cigarettes to a VAT liability in excess of that applied to like domestic
cigarettes with respect to the MRSPs for the December 2005 MRSP Notice, the September
2006 MRSP Notice, the March 2007 MRSP Notice, and the August 2007 MRSP Notice13;
b. regarding the VAT exemption for 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 gran ting the exemption
from the VAT liability only to domestic cigarette resellers14;
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 imposing additional administrative
requirements, connected to VAT liabilities, on imported cigarette resellers15;
d. Thailand acted inconsistently with Article X:1 for failing to publish the methodology used
to determine the tax base for VAT16; and
e. Thailand did not act inconsistently with Article X:1 by failing to publish the methodology
and data necessary to determine ex factory prices, one of the components of the MRSP
for domestic cigarettes.17
1.5. The original pane l report was circulated to the Members on 15 November 2010. Thailand
appealed certain panel findings regarding the VAT exemption for domestic resellers, and the failure
to maintain independent review procedures for guarantee decisions. In its report circul ated to the
Members on 17 June 2011, the Appellate Body:

9 Panel Report, Thailand – Cigarettes (Philippines), para. 8.4(c).
10 Panel Report, Thailand – Cigarettes (Philippines), para. 8.4(e). We note that in the original panel
report, information regarding the entries at issue was redacted. (See, e.g. Panel Report, Thailand – Cigarettes
(Philippines), para. 7.937) In the current Article 21.5 proceeding, neither party has designated this information
as confidential.
11 Panel Report, Thailand – Cigarettes (Philippines), para. 8.4(f). Our observation in footnote 10 above
applies here equally.
12 Panel Report, Thailand – Cigarettes (Philippines), para. 8.4(g).
13 Panel Report, Thailand – Cigarettes (Philippines), para. 8.3(a).
14 Panel Report, Thailand – Cigarettes (Philippines), para. 8.3(b).
15 Panel Report, Thailand – Cigarettes (Philippines), para. 8.3(c).
16 Panel Report, Thailand – Cigarettes (Philippines), para. 8.4(a).
17 Panel Report, Thailand – Cigarettes (Philippines), para. 8.4(b).

a. upheld the original panel's finding that Thailand's treatment of resellers of imported
cigarettes, as compared to its treatment of resellers of like domestic cigarettes, was
inconsistent with Articles III:2 and III:4 of the GATT 199418; and
b. upheld the original panel's finding that Thailand acted inconsistently with Article X:3(b) of
the GATT 1994 by failing to maintain or institute independent tribunals or procedures for
the prompt review of guarantee decisions.19
1.6. In light of its findings, the Appellate Body recommended that the DSB request Thailand to bring
its measures found to be inconsistent with the CVA and the GATT 1994 into conformity with its
obligations under those agreements.20
1.7. The DSB adopte d the panel and Appellate Body reports in the original proceeding on
15 July 2011.21 On 11 August 2011, Thailand informed the DSB that it intended to comply with the
DSB's recommendations and rulings, but that it would require a reasonable period of time to do so.22
On 23 September 2011, the Philippines and Thailand informed the DSB of their mutual agreement,
pursuant to Article 21.3(b) of the DSU, that there would be two reasonable periods of time: (i) a
period of 15 months, expiring on 15 October 2012, with respect to certain findings regarding
exemptions from VAT liability set forth in paragraphs 8.3(b) and (c) of the original panel report; and
(ii) a period of 10 months, expiring on 15 May 2012, with respect to the DSB 's recommendations
and rulings on all other measures.23
1.8. At the DSB meeting held on 24 May 2012, Thailand indicated that it had taken the following
steps to bring its measures into conformity with the DSB's recommendations and rulings:
a. with respect to the original panel's findings concerning the establishment of MRSPs, on 15
May 2012, the Excise Department issued two regulations eliminating the use of MRSPs as
the tax base for VAT payable on resales of both the domestically produced and imported
cigarettes24;
b. with respect to the original panel's findings under the CVA, on 8 May 2012, the Customs
Department issued Regulation No. 71/B.E. 2555, revising and expanding the rules and
procedures governing how the Customs Department determined customs value using the
transaction value and the deductive value methods pursuant to the CVA25;
c. with respect to the original panel's findings that Thailand had failed to properly publish the
rules regarding the release of guarantees, on 8 May 2012, the Customs Department issued
Regulation No. 72/B.E. 2555, which published the procedures and requirements pertaining
to requests for a refund of guarantees on the final assessment of duties and the processing
of refunds26; and
d. with respect to the original panel's findings regarding delays in the appeal process for
customs va luation determinations: the Customs De partment adopted Regulation
No. 73/B.E. 2555, effective as of 14 May 2012, which provided for procedures pertaining
to appeals of customs valuation determinations, including the procedures for submissions
of appeals and related documents.27
1.9. Thailand subsequently informed the DSB of the following additional steps that it had taken to
bring its measures into conformity with the DSB's recommendations and rulings:
a. in its status report of 15 June 2012, Thailand indicated that it issued the Customs
Regulation on Administration Regarding the Customs Guarantees, which established an

18 Appellate Body Report, Thailand – Cigarettes (Philippines), para. 223(a).
19 Appellate Body Report, Thailand – Cigarettes (Philippines), para. 223(b).
20 Appellate Body Report, Thailand – Cigarettes (Philippines), para. 224.
21 WT/DSB/M/299.
22 WT/DS371/12.
23 WT/DS371/14.
24 WT/DSB/M/316, para. 58.
25 WT/DSB/M/316, para. 58.
26 WT/DSB/M/316, para. 59.
27 WT/DSB/M/316, para. 59.

independent review process for the review of decisions to require customs guarantees on
clearance of goods pending final determination of the customs value, effective as of
13 June 201228;
b. in its status report of 18 September 2012, Thailand reported that the BoA had issued its
determination in the appeal of the customs valuation of the specific entries of merchandise
listed in the original 2008 panel request29;
c. in its status report of 12 October 2012, Thailand indicated that the Royal Decree
implementing the findings of the original p anel under Article III:4 of the GATT 1994
regarding the administrative requirements of Thailand's VAT system would come into
effect on 15 October 201230; and
d. in its status report of 7 December 2012, Thailand reported that the BoA had issued its
decision in the appeal of the entries involved in the Philippines' claim under Article X:3 of
the GATT 1 994, which Thailand considered was the last outstanding step of the
implementation process.31
1.10. On 4 May 2016, the Philippines requested consultations32 with Thailand pursuant to Articles 4
and 21.5 of the DSU, Article XXII:1 of the GATT 1994, Article 19 of the CVA, and paragraph 1 of the
Understanding between the Philippines and Thailand of 1 June 2012 regarding Procedures under
Articles 21 and 22 of the DSU (Sequencing Agreement) 33, with respect to three disti nct sets of
measures, including:
a. measures related to the BoA's ruling issued on 16 November 2012 regarding 210 entries
of Marlboro cigarettes imported by PMTL between January 2002 and January 2003 (the
"BoA Ruling");
b. measures related to the criminal charges filed on 18 January 2016 by the Public Prosecutor
against PMTL and seven of its current and former employees regarding 272 entries of
Marlboro and L&M cigarettes imported by PMTL between July 2003 and June 2006 (the
"Charges"); and
c. measures related to the notification requirement concerning the VAT base applicable to
cigarette importers.
1.11. The BoA Ruling was included among Thailand's declared measures taken to comply in its
status reports. The Charges were not, and in this proceeding Thailand maintains that they are not a
measure taken to comply with the DSB's recommendations and rulings. Thailand's status reports
indicated that changes to its VAT administrative rules were among the measures taken to comply,
and in this proceeding it has confirmed that the modification of the rules related to the VAT base
was introduced in order to implement the DSB's recommendations and rulings in the original
dispute.34 These measures are described further below.
1.12. Consultations were held on 2 June 2016, but the consultations failed to resolve the dispute.
1.2 Panel establishment and composition
1.13. On 29 June 2016, the Philippines requested the establishment of a compliance panel with
standard terms of reference , pursuant to Article s 6 and 21.5 of the DSU , Article XXIII of the
GATT 1994, Article 19 of the CVA, and paragraph 1 of the Sequencing Agreement.35 At its meeting

28 WT/DS371/15/Add.2.
29 WT/DS371/15/Add.5.
30 WT/DS371/15/Add.6.
31 WT/DS371/15/Add.8.
32 WT/DS371/17.
33 WT/DS371/16.
34 Thailand's first written submission, paras. 7.3-7.5.
35 WT/DS371/18.

on 21 July 2016, the DSB decided, in accordance with Article 21.5 of the DSU, to refer to the original
panel, if possible, the matter raised by the Philippines in document WT/DS371/18.36
1.14. The Panel's terms of reference are the following:
To examine, in the light of the relevant provisions of the covered agreements cited by
the parties to the dispute, the matter referred to the DSB by the Philippines in document
WT/DS371/18 and to make such findings as will assist the DSB in making the
recommendations or in giving the rulings provided for in those agreements.37
1.15. On 7 December 2016, the Philippines requested the Director-General of the WTO to determine
the composition of the panel, pursuant to paragraph 7 of Article 8 of the DSU. On 16 December
2016, the Director-General accordingly composed the Panel as follows38:
Chairperson: Mr Thomas Cottier

Members: Mr Alvaro Espinoza
 Mr Alvaro Hansen

1.16. Australia, Canada, China, the European Union, Japan, the Russian Federation, Singapore, and
the United States notified their interest in participating in the Panel proceeding as third parties.
1.3 Panel proceedings
1.3.1 General
1.17. In this proceeding, the parties prepared and jointly proposed a set of working procedures and
partial timetable for the Panel's consideration . After consulting with the parties, the Panel adopted
its Working Procedures 39 and a partial timetable on 25 January 2017, based on the working
procedures and partial timetable proposed by the parties. Following a request to extend one of the
deadlines in the timetable, the Panel revised its timetable on 19 June 2017. On 31 August 2017, the
Panel issued a revised timetable extending certain remaining deadlines at the request of the parties,
and containing the dates related to the issuance of the descriptive part, the Interim Report, and the
Final Report.
1.18. The Panel held its substantive meeting with the parties on 29 and 30 August 2017, including
a session with the third parties that took place on 30 August 2017. On 2 November 2017, the Panel
issued the descriptive part of its Report to the parties. The Panel issued its Interim Report to the
parties on 8 January 2018. The Panel issued its Final Report to the parties on 12 March 2018.
1.3.2 Preliminary ruling requests related to the scope of this Article 21.5 proceeding
1.19. On 12 January 2017, Thailand submitted a request for a preliminary ruling that the Philippines'
claims relating to the Charges are outside of the scope of this compliance proceeding. On 1 February
2017, as part of its first written submission, the Philippines provided its response to the substance
of Thailand's preliminary ruling request, in which it argued that the jurisdictional issues rais ed by
Thailand's request should be addressed in the Panel's report at the same time as the merits of the
dispute; the Philippines requested in the alternative that, if the Panel were inclined to make an early
ruling, there should be an additional hearing f or that purpose. On 16 February 2017, Thailand filed
its rebuttal submission on the preliminary ruling request, in which it reiterated its initial request, and
proceeded to elaborate40 on an additional ground for finding that the criminal charges are outside of
the scope of this proceeding.

36 See WT/DSB/M/383.
37 WT/DS371/19.
38 As Mr Roberto Carvalho de Azevêdo and Mr Richard Gottlieb, both original panelists, were no longer
available, they were replaced by Mr Thomas Cottier and Mr Alvaro Espinoza, respectively.
39 See the Panel's Working Procedures in Annex A-1.
40 In its 12 January 2017 request for a preliminary ruling, Thailand argued that the Philippines was
precluded from availing itself of a "second chance", under Article 21.5, to pursue claims that it initially raised
but did not pursue before the original panel, and that for "this reason", Thailand requested the Panel to issue a

1.20. The timetable adopted by the Panel provided for the Philippines to file its rebuttal submission
to the preliminary ruling request on 2 March 2017. However, given that the timetable provided that
any request for a preliminary ruling was to have been filed no later than 12 January 2017, and was
to be the subject to two rounds of submissions by the parties 41, the Philippines requested, on 22
February 2017, that the Panel rule that: (i) Thailand's rebuttal submission raised a new ground of
request that was not part of Thailand's preliminary ruling request of 12 January 2017; and that (ii)
the Philippines need not address this new ground for a preliminary ruling request in its own rebuttal
submission. The Philippines requested i n the alternative that, if the Panel were to consider that
Thailand's new ground should be addressed on a preliminary basis, then the Panel should establish
a separate preliminary procedure for consideration of that question. The Philippines also requested
that, pending the Panel's decision on this matter, the Panel should immediately suspend the deadline
of 2 March 2017 for the submission of the Philippines' response to Thailand's new ground for a
preliminary ruling request.
1.21. On 23 February 2017, Thailand responded that the Panel should reject the aforementioned
requests by the Philippines. Thailand further observed that the Philippines' letter of
22 February 2017 contained not only a procedural objection to Thailand's "new ground" but also a
substantive response thereto, and thus the Philippines had given itself an additional opportunity to
present substantive comments. Thailand requested that the Panel strike from the Panel record the
substantive comments that the Philippines made in its letter of 22 Febru ary, because they were
made outside the procedural stages contemplated in the Panel's timetable.
1.22. In a communication dated 24 February 2017, the Panel informed the parties as follows:
The Panel recalls that paragraph 8 of the Working Procedures provides that it "may
decide to rule on any preliminary request at an early stage of the proceedings, or may
instead defer its ruling to a later stage of the proceedings". Having carefully considered
the submissions already received from the parties, the Panel is not persuaded that it
would be appropriate to rule on the issues raised by Thailand's preliminary ruling
request at an early stage of the proceedings. The Panel hereby informs the parties of
its decision to address those issues together with the merits so as to ensure that the
parties (and third parties) have an appropriately extensive opportunity to exchange
views on the issues raised as part of the main proceedings, and will defer its ru ling on
those issues until the issuance of the Report.
The Panel considers that its decision to defer ruling on the issues raised by the
preliminary ruling request until the issuance of the Report renders moot the Philippines'
various requests relating to the preliminary r uling procedure, including: (i) the
Philippines' conditional request, in its first written submission, for a separate hearing on
the issues raised by the preliminary ruling request; (ii) the Philippines' request, in its
letter of 22 February 2017, that the Panel rule on which issues fall within the scope of
the preliminary ruling procedure; (iii) the Philippines' additional request that the Panel
immediately suspend the deadline for its rebuttal submission on the preliminary ruling
request, pending the aforementioned ruling; and (iv) the Philippines' conditional and
alternative request that the Panel establish a separate preliminary procedure for

preliminary ruling excluding the Charges-related claims. Thailand presented 12 pages of supporting
argumentation on why the Philippines is precluded from pursuing claims that it initially raised in the original
proceeding but did not pursue. In its first written submission, the Philippines addressed Thailand's preliminary
ruling request and set forth its understanding that Thailand did not argue that the Charges do not constitute a
"measure taken to comply". In its 16 February 2017 rebuttal submission on the preliminary ruling request,
Thailand maintained that the Philippines' understanding was incorrect, and asserted that, in its preliminary
ruling request, Thailand "contended not only that the Philippines is precluded from challenging the Charges,
but also that the Charges are not measures taken to comply under Article 21.5". Thailand referred to two
statements, found at paragraphs 1.3 and 3.37 of its preliminary ruling request, in support of this reading of its
request. Without taking a position on the disputed question of whether Thailand's preliminary ruling request
can be construed as embodying an argument that the Charges do not constitute a "measure taken to comply",
any such argument, even if already contained or implied in the original preliminary ruling request, was only
elaborated for the first time in Thailand's rebuttal submission.
41 At the request of the parties, the timetable and Working Procedures adopted by the Panel in this
proceeding provided that any request for a preliminary ruling would be subject to two rounds of submissions by
the parties. Specifically, the timetable provided: that any request for a preliminary ruling would be made on
12 January 2017; that the Philippines' response would be filed on 2 February 2017; that Thailand's rebuttal
submission would be filed on 16 February 2017; and that the Philippines' rebuttal submission would be filed on
2 March 2017.

consideration of the "new ground " introduced by Thailand in its 16 February 2017
submission.
The Panel notes that the Philippines provided, at paragraphs 26 -36 of its "procedural
objection" dated 22 February 2017, substantive argumentation on whether the
measures in question constitute a "measure taken to comply". Insofar as the Philippines
wishes for the Panel to consider the substantive argumentation set forth in paragraphs
27-36 of its letter, the Panel invites the Philippines to reiterate those arguments in the
rebuttal submission that it is expected to file on 2 March 2017.
1.3.3 Request for leave to correct typographical errors in a submission
1.23. On 6 February 2017, the Philippines informed the Panel that it had identified a number of
typographical errors in its first written submission filed on 1 February 2017 , and requested the
Panel's approval to submit a revised version of its first written submission that would correct these
typographical errors. The Panel invited Thailand to indicate whether it had any objection to the
Philippines' request. Thailand indicated that it did not. The Panel invited the Philippines to file the
revised version of its first written submission, and the Philippines did so on 9 February 2017.
1.3.4 Procedural ruling requests related to lawyer-client privilege
1.24. On 9 May 2017, Thailand requested that the Panel decline to rule on the Philippines' claims
relating to the Charges. Thailand requested that the Panel make this ruling as a consequence of the
Philippines' decision to include, as part of its second written submission filed on 12 April 2017, certain
materials including "confidential, internal Thai government memorandum to which was attached
lawyer-client privileged legal advice from Thailand's legal advisors in this dispute "42 pertaining to
the Charges. Thailand further req uested: (i) that the Panel instruct the Philippines to take
appropriate action to rectify an inconsistency between the content of a related exhibit and the
associated description in the Philippines' second written submission ; (ii) that pending the Panel's
decision on this matter, the Panel should postpone the deadline of 12 May 2017 for the submission
of Thailand's second written submission ; and (iii) that, once the Philippines had provided its
response, Thailand be given the right to file a rebuttal submission on this issue.
1.25. On 10 May 2017, the Panel informed the parties as follows:
Thailand has not explained why there is a need to postpone the upcoming deadlines
while its procedural ruling request is pending before the Panel. Taking account of the
impact that such postponement would have on subsequent steps in the timetable, the
Panel declines Thailand's request to postpone the upcoming deadlines.
The Panel wishes to clarify and assure Thailand that as a Party to the dispute it is under
no obligation to d isclose, justify, or explain any confidential legal advice that it has
received, either in its second written submission or at any other subsequent phase of
these proceedings.
1.26. In light of Thailand's request that it be given the right to file a rebuttal submission, the Panel
allowed for two rounds of submissions by the parties on the issues raised by Thailand's request for
a procedural ruling concerning the submission of lawyer -client privileged legal advice .43 In the set
of written questions sent to the parties on 14 June 2017 in advance of the substantive meeting, the
Panel included several questions to Thailand aimed at clarifying the scope and legal bas es for its
requests, and soliciting both parties' views on the need to rule on this matter prior to the h earing.
Thailand subsequently clarified that it was requesting not only that the Panel abstain from making
legal findings on the Philippines' claims concerning the Charges, but also that the Panel exclude
Exhibit PHL-150 from the record.44 The parties expressed opposing views on the need to rule on this
issue prior to the meeting.45

42 Thailand's request for a procedural ruling, para. 1.1.
43 Specifically, the Panel invited the Philippines to file its response on 17 May 2017, Thailand to file its
rebuttal submission on 24 May 2017, and the Philippines to file its rebuttal submission on 2 June 2017.
44 Thailand's response to Panel question No. 37(b).
45 Parties' responses to Panel question No. 36.

1.27. Following a thorough exchange of arguments on this matter between the parties, on 2 August
2017 the Panel sent a communication which informed the parties and third parties as follows:
The Panel has carefully considered Thailand's requests relating to the ACWL/Commerce
Letters and the related arguments of the parties. The Panel considers that it is in the
interest of due process and the efficient conduct of the proceedings to rule on Thailand's
requests prior to the substantive meeting with the parties. The Panel hereby informs
the parties that, for reasons to be elaborated in its Report:
1. The Panel considers that Thailand has failed to demonstrate that its due
process rights have been violated, that the Philippines has not acted in good faith,
or that the Panel is prevented from making an objective assessment of the
matter, as a consequence of the Philippines submitting the ACWL/Commerce
Letters to the Panel;
2. The Panel therefore declines Thailand's request that, as a consequence of
the Philippines submitting the ACWL/Commerce Letters to the Panel, the Panel
should decline to rule on the Philippines' claims relating to the Charges; and
3. For the same reasons, the Panel declines Thailand's request that the Panel
order the Philippines to withdraw Exhibit PHL -150 and the related references in
the Philippines' second written submission.
1.28. At the meeting of the Panel with the parties on 29 and 30 August 2017, Thailand reacted to
the Philippines' opening statement by reiterating its objection to the Philippines' reference to the
ACWL/Commerce Letters. This triggered a further exchange of arguments on this matter between
the parties at the meeting , and in their subsequent responses to questions and comments
thereupon.46
1.3.5 Amicus curiae submissions
1.29. On 15 May 2017, the Panel received an unsolicited amicus curiae submission47 from a group
of US business associations.48 On 17 May 2017, the Panel forwarded this submission to the parties
and third parties. The Panel invited the parties to provide any comments that they wished to make
on this amicus curiae submission by 6 June 2017. The Panel also noted that the submission referred
to prior statements made by several Members participating as third parties in this proceeding. The
Panel indicated that if any third parties wished to make comments, they could do so in the context
of their written submissions scheduled for 24 May 2017.
1.30. On 30 May 2017, the Panel forwarded to the parties and third parties two more amicus curiae
submissions that it had subsequently received, on 29 May 2017 and 30 May 2017.49 The Panel invited
the parties to provide any comments that they wished to make on these submissions by 6 June
2017. The Panel informed the parties and third parties that, moving forward, any further amicus
curiae submissions that it received in this proceeding would be immediately forwarded to the parties
and third parties. The Panel indicated that the parties and third parties would be free, if they so
wished, to integrate any comments that they wished to make on any such briefs in their oral
statements at the meeting or in their responses to questions.

46 See paragraphs 7.24. and 7.25.
47 The Panel uses the term "amicus curiae submission" to refer to the various documents that it received
from business associations in the course of this proceeding.
48 This submission, dated 12 May 2017, was made jointly by four associations: the US-ASEAN Business
Council (US-ABC); the United States Council for International Business (USCIB); the National Association of
Manufacturers of the United States of America (NAM); and the National Foreign Trade Council (NFTC).
49 On 29 May 2017, the Panel received an amicus curiae submission, dated 9 May 2017, from the
European Association for Business and Commerce (EABC). On 30 May 2017, the Panel received an amicus
curiae submission, dated 16 May 2017, from the Asia Pacific Council of American Chambers of Commerce
(APCAC).

1.31. The Panel subsequently received two more amicus curiae submissions, which were forwarded
to the parties and third parties. 50 The Philippines incorporated all the amicus curiae submissions
received as exhibits to ensure that they are on the record of this proceeding.51
1.3.6 Second recourse to Article 21.5 by the Philippines
1.32. On 4 July 2017, the Philippines requested additional consultations with Thailand. This "Second
Recourse to Article 21.5 of the DSU by the Philippines" 52 concerns another set of criminal charges
filed by the Public Prosecutor, on 26 January 2017, against PMTL and one of its former employees
(the 2002-2003 Charges).53 According to the Philippines' request for consultations, these charges
relate to 780 entries of cigarettes imported by PMTL between January 2002 and August 2003.54 The
entries of cigarettes covered by the Charges filed on 26 January 2017 are different from the entries
of cigarettes covered by the Charges that were filed on 18 January 2016, and which are at issue in
this first recourse to Article 21.5 of the DSU.
1.33. On 21 February 2018, the Philippines submitted a revised request for consultations that
"replaces and supersedes" the consultations request dated 4 July 2017. 55 According to this revised
request for consultations, the measures subject to the "Second recourse to Article 21 .5 of the DSU
by the Philippines" include both the 2002 -2003 Charges and also certain revised Notices of
Assessment for underpayment of taxes and duties covering 1052 entries of cigarettes imported
between 2001-2003.56
1.34. The 2002-2003 Charges were filed on 26 January 2017, approximately six months after this
compliance Panel was established. According to the Philippines' revised request for consultations,
the 1052 Notices of Assessment in question were received by PMTL on 29 November 2017. At no
point in the present proceeding has the Philippines requested that this compliance Panel rule on the
2002-2003 Charges or the 1052 Notices of Assessment. As of the date of the issuance of the Final
Report to the parties, the Philippines' "Second recourse to Article 21.5 of the DSU" had not
progressed beyond the consultations phase. Accordingly, neither the 2002 -2003 Charges nor the
1052 Notices of Assessment are a measure at issue in this first recourse to Article 21.5 of the DSU.
1.3.7 Request for leave to comment on the comments on the draft descriptive part of the
Panel Report
1.35. On 15 November 2017, the parties provided their comments on the draft descriptive part of
the Panel Report in accordance with the timetable adopted by the Panel. On 17 November 2017, the
Philippines requested leave to comment on Thailand's comments on the draft descriptive part of the
Panel Report. The Panel invited Thailand to provide its views on the Philippines' request, and
following that, on 20 November 2017, Thailand communicated its objection to the Philippines'
request.
1.36. On 22 November 2017, the Panel informed the parties as follows:
[T]he Interim Report, which is scheduled to be issued to the parties on 8 January 2018,
will incorporate the descriptive part of the Report and any changes made thereto in the
light of the parties' comments on the draft descriptive part of the Panel Report. The
Panel notes that when the parties submit their requests to review precise aspects of the

50 On 8 June 2017, the Panel received a submission, dated 12 May 2017, from the EU-ASEAN Business
Council (EU-ABC). On 12 June 2017, the Panel received a submission, dated 24 May 2017, from the European
Chamber of Commerce of the Philippines (ECCP).
51 Amicus Curiae Submissions - EABC, US-ABC, USCIB, NAM, NFTC and APCAC, (Exhibit PHL-188); and
Amicus Curiae Submissions - EU-ABC and ECCP, (Exhibit PHL-189).
52 WT/DS371/21.
53 As with the initial request for consultations, the Philippines' request for consultations in the context of
this second recourse to Article 21.5 was made pursuant to Articles 4 and 21.5 of the DSU, Article XXII:1 of the
GATT 1994, Article 19 of the CVA, and paragraph 1 of the Sequencing Agreement.
54 According to the Philippines' first written submission, 205 of the 210 entries subject to the BoA Ruling
at issue in this proceeding are also covered by the charges filed in January 2017. (Philippines' first written
submission, para. 51 (referring to The Criminal Court, Charges, Case Black No. Or. 232/2560, 26 January 2017
(English translation), (Exhibit PHL-14-B))
55 WT/DS371/21/Rev.1, p. 1.
56 According to the Philippines' revised request for consultations, 208 of the 210 entries subject to the
BoA Ruling at issue in this proceeding are also covered by these Notices of Assessment. (WT/DS371/21/Rev.1,
para. 9)

Interim Report on 29 January 2018, they are free to request the Pane l to review any
changes that have been made to the descriptive part of the Report. Accordingly, the
Panel considers it unnecessary for the parties to provide comments on one another's
comments on the draft descriptive part before the issuance of the Interi m Report, or
separately from their requests to review precise aspects of the Interim Report.
Therefore, the Panel declines the Philippines' request.
2 FACTUAL ASPECTS
2.1 Introduction
2.1. This section briefly describes the activities of relevant entities, includin g the foreign and
domestic companies involved in the Thai cigarette market, and relevant Thai government agencies.
It then briefly sets out the measures at issue, by reference to facts that are not in dispute. Detailed
facts, including the background and c ontent of the challenged measures, are further elaborated in
the context of the Findings in Section 7 of this Report.
2.2 PMTL and the relevant Thai government agencies
2.2. PMTL operates in Thailand as a branch office of a US corporation.57 PMTL imports and distributes
Philip Morris brands of cigarettes in Thailand, including the Marlboro and L&M brands. PMTL is the
exclusive importer of Philip Morris cigarettes in Thailand, which it distributes to wholesalers and
retailers.58 PMTL currently imports virtually all of its cigarettes from a related suppl ier based in the
Philippines, PMPMI. 59 PMTL previously imported cigarettes from a related supplier based in
Indonesia, Philip Morris Indonesia (PM Indonesia), and some of the measures at issue in this dispute,
including in particular the measures related to the BoA Ruling of November 2012, concern imports
that took place when PMTL imported cigarettes from PM Indonesia. As of November 2016, the market
share of PMTL's brands in Thailand stood at 19%.60
2.3. The Thailand Tobacco Monopoly (TTM) is owned and operated by Thailand's Ministry of Finance,
and is the sole domestic cigarette producer. TTM enjoys a dominant market share of 76.14%.61
2.4. The Thai Customs Department, which is part of Thailand's Ministry of Finance, is the agency
authorized under Thai law to determin e the value of goods for customs purposes. 62 The BoA, an
authority within the Customs Department, hears appeals from importers or exporters in relation to
initial customs valuation decisions by the Customs Department.63
2.5. The Thai Department of Special Investi gations (DSI) and the Public Prosecuto r are different
agencies within the central government with responsibilities relating to the investigation an d
prosecution of criminal offenc es. Their respective mandates extend to the investigation and
prosecution of criminal offences under Section 27 of the Thai Customs Act, which criminalizes acts
"to avoid or attempt to avoid the payment … of any duties … with the intention to defraud the
government tax of His Majesty the King which must be paid for such goods ".64 The DSI is a unit

57 Panel Report, Thailand – Cigarettes (Philippines), fn 293; Philippines' first written submission, fn 1.
60 Philippines' first written submission, para. 36 (referring to A C Nielsen, Retail Index (Thailand), data
as at November 2016).
61 Philippines' first written submission, para. 36 (referring to TTM, Annual Report, 2015 (English and
Thai), (Exhibit PHL-3), p. 7.)
62 Thailand's response to Panel question No. 48(b).
63 Philippines' first written submission, paras. 84 and 441; and second written submission, paras.
351-353 (referring to Thailand's first written submission in the original proceeding, para. 289; and Thailand's
opening statement at the second meeting of the panel in the original proceeding, paras. 95 and 96); response
to Panel question No. 28.
64 Section 27 of the Customs Act B.E. 2469 (1926) (as amended to (No. 22) B.E. 2557 (2014)) (English
translation), (Exhibit PHL-34-B). Thailand also submitted the Customs Act B.E. 2469 (1926) and its English
translation as Exhibits THA-3-A and THA-3-B. In response to a question from the Panel, Thailand subsequently
confirmed that the Panel was correct in its understanding that Thailand did not object to the English translation
of Section 27 submitted by the Philippines as Exhibit PHL 34-B. See footnote 980 below.

within the Ministry of Justice with an investigative function. 65 The Public Prosecutor is responsible
for the prosecution of criminal offences.
2.6. The Thai Revenue Department , which also operates within the Ministry of Finance, is
responsible for the administration and collection of various forms of taxes, including VAT.66
2.3 The measures challenged in this proceeding
2.7. The measures at issue in this compliance proceeding include the following:
a. the BoA Ruling, including:
i. various substantive aspects of the customs valuation determination in the BoA Ruling
issued on 16 November 2012;
ii. various procedural aspec ts relating to the BoA Ruling, including the BoA's alleged
failure, prior to the issuance of the BoA Ruling, to communicate to PMTL its grounds
for considering that the relationship between the buyer and seller influenced the price
and provide an opportunity to PMTL to respond to those grounds, and the BoA's alleged
failure, after issuance of the BoA Ruling, to provide reasons or an explanation to PMTL,
in writing, as to how the customs value was determined; and
iii. the 180 Revised Notices of Assessment issued in January 2013 pursuant to the BoA
Ruling issued on 16 November 2012.
b. the Charges, including:
i. various substantive aspects of the customs valuation determination allegedly
contained in the Charges; and
ii. Thailand's alleged disclosure to the Thai media of the declared transaction values for
entries covered by the Charges.
c. measures related to the notification requirement concerning the VAT base applicable to
cigarette importers, including:
i. the notification requirement, arising under Notification 187 and Order Por. 145-2555,
for importers of cigarettes to notify in June of each year the average actual market
price valid as of the date of notification; and
ii. Thailand's failure to publish the rule that it has allegedly adopted permitting the
recommended retail selling price to be notified as a proxy for the average actual
market price.
3 PARTIES' REQUESTS FOR FINDINGS AND RECOMMENDATIONS
3.1. Regarding the first set of measures challenged by the Philippines, related to the BoA Ruling,
the Philippines requests the Panel to find that:
a. the BoA acted inconsistently with Articles 1.1 and 1.2(a) of the CVA by rejecting PMTL's
declared transaction values without a valid basis, and in particular that:
i. the BoA acted inconsistently with Article 1.2(a), second sentence, by failing to properly
examine the circumstances surrounding the sale of the cigarettes to PMTL because the
BoA compared PMTL's profit and general expenses (P&GE) rates to a benchmark range
of P&GE rates using a flawed industry comparator group, used flawed methods to
establish the P&GE benchmark range, and followed a flawed approach to conducting
the comparison between PMTL's rates and the benchmark range of P&GE rates; and

66 Panel Report, Thailand – Cigarettes (Philippines), fn 942.

ii. the BoA acted inconsistently with Article 1.2(a), third sentence, by failing to
communicate to PMTL its grounds for considering that the relationship influenced the
price, and by failing to give PMTL an opportunity to respond.
b. the BoA acted inconsistently with Article 5.1 of the CVA in applying the deductive method
to determine an alternative customs value, and in particular that:
i. the BoA acted inconsistently with Article 5.1(a)(i) by failing to deduct an appropr iate
amount in respect of P&GE;
ii. the BoA acted inconsistently with Article 5.1(a)(ii) by failing to deduct an appropriate
amount in respect of transport costs; and
iii. the BoA acted inconsistently with Article 5.1(a)(iv) by failing to deduct an appropriate
amount in respect of provincial taxes payable.
c. the BoA acted inconsistently with Article 11.3 of the CVA by failing to provide sufficient
reasons for the decision; and
d. the BoA acted inconsistently with Article 16 of the CVA by failing to provide an explanation
of how the customs value was determined.
3.2. Thailand requests that the Panel reject the Philippines' claims, and find that:
a. the BoA established a reasonable methodology for comparing P&GE rates in determining
whether the relationship between PMTL and the exporter influenced the price, and the
Philippines has failed to demonstrate that the BoA's application of the methodology in the
facts and circumstances of the case was unreasonable and therefore its claims under
Articles 1.1 and 1.2(a) of the CVA should be rejected;
b. the BoA reasonably determined the amounts to deduct for P&GE, provincial taxes and
transport costs when determining the revised customs value, and the Philippines has failed
to demonstrate that the BoA's approach in the facts and circumstance s of the case was
unreasonable and therefore its claims under Article 5 of the CVA should be rejected; and
c. the BoA Ruling satisfied the requirements of Article 11.3 of the CVA, was not subject to
the additional procedural requirements of the third sentence of Article 1.2(a) or Article 16
of the CVA, and in the event the BoA was subject to Article 1.2(a), third sentence, and
Article 16, it satisfied those requirements.
3.3. Regarding the second set of measures challenged by the Philippines, related to the Charges,
the Philippines requests that the Panel find that:
a. the Charges are inconsistent with Articles 1.1 and 1.2(a) of the CVA because they reject
PMTL's declared transaction values without a valid basis, and in particular that the Public
Prosecutor acted inconsistently with Article 1.2(a), second sentence, by failing to properly
examine the circumstances surrounding the sale of the cigarettes to PMTL because the
Public Prosecutor relied on an invalid comparison between PMTL's import prices and King
Power's duty-free purchase prices, insofar as the Public Prosecutor relied on the other
grounds mentioned in the DSI's April 2009 Memorandum of Allegation they were equally
invalid, and the Public Prosecutor drew arbitrary distinctions between those entries which
were included in the Charges and those which were excluded;
b. the Charges violate Article 2.1(a) and (b) and/or Article 3.1(a) and (b) of the CVA by
improperly treating King Power's purchase prices as transaction values for "identical" or
"similar" goods, taking into account how these terms are defined in Article 15.2(a) and (b)
of the CVA; and
c. Thailand violated Article 10 of the CVA by improperly disclosing business confidential
information asso ciated with the Charges that PMTL had provided for the purpose of
customs valuation.

3.4. Thailand requests that the Panel reject the Philippines' claims, and find that:
a. the Panel should decline to rule on the Philippines' claims relating to the Charges as a
consequence of the Philippines' decision to put before the Panel confidential documents,
including confidential, lawyer-client privileged legal advice received by Thai land from its
legal advisers in this dispute;
b. the Philippines is precluded from challenging the Charges in th is compliance proceeding
because it challenged essentially the same measure in the original dispute and failed to
make a prima facie case of WTO-inconsistency;
c. the Charges do not have a sufficiently "close nexus" with the matters covered by the DSB's
recommendations and rulings or the BoA Ruling of 12 September 2012, and therefore they
are not a "measure taken to comply" with the DSB's recommendations and rulings within
the meaning of Article 21.5 of the DSU;
d. the Charges are not a matter "ripe" for adjudication, as they constitute merely an
allegation of criminal conduct, and not a judgment by the Criminal Court;
e. contrary to the Philippines' misreading of the Charges, they actually allege customs fraud
by PMTL and the references to King Power's prices in the accompanying Annex only serve
to establish a possible benchmark for a fine in the event of a conviction , and therefore
Articles 1, 2 and 3 of the CVA do not apply because the Charges do not determine "the
value of goods for the purpose of levying ad valorem customs duties" within the meaning
of Article 15.1(a) of the CVA , are not a measure taken by the "customs administration",
and nothing in the CVA regulates the manner in which WTO Members can conduct criminal
proceedings to address customs fraud;
f. even if the Panel were to accept the Philippines' position that the Charges are covered by
the CVA and inconsistent with the provis ions thereof, Thailand submits that such
inconsistency with the CVA is justified under th e general exceptions in Article XX(a) and
Article XX(d) of the GATT 1994; and
g. the Philippines has failed to demonstrate that Thailand violated Article 10 of the CVA b y
disclosing PMTL's transaction values to the media.
3.5. Regarding the third set of measures challenged by the Philippines, related to the requirement
on importers to notify the average actual market price of cigarettes on the date of notification for
the purpose of determining the VAT base, the Philippines requests the Panel to find that:
a. Thailand's failure to publish the general rule that cigarette importers may notify
recommended retail selling prices under Notification 187 and Order Por. 145 -2555, as
opposed to the average actual market prices, violates Article X:1 of the GATT 1994;
b. the requirement under Notification 187 and Order Por. 145 -2555 for cigarette importers
to notify the average actual market prices of cigarettes on the date of notification violates
Article III:4 of the GATT 1994 by according less favourable treatment to imported
cigarettes than like domestic cigarettes; and
c. the requirement under Notification 187 and Order Por. 145 -2555 for cigarette importers
to notify the average actual market p rices violates Article X:3(a) of the GATT 1994 by
imposing an unreasonable notification requirement on such importers.
3.6. Regarding the third set of measures challenged by the Philippines, Thailand requests that the
Panel reject the Philippines' claims under Article X:1, Article III:4 and Article X:3(a) of the GATT 1994
because they are all premised on an inaccurate description of the operation of Thailand's VAT rules,
and in particular that:
a. the Philippines has failed to demonstrate that the Thai Revenue Department's acceptance
of recommended retail selling prices to satisfy the requirement under Notification 187 and
Order Por. 145-2555 to notify the VAT base is a rule of general application that falls within
the scope of Article X:1 of the GATT 1994;

b. the Phil ippines has failed to demonstrate that the notification requirement under
Notification 187 and Order Por. 145 -2555 accords imported cigarettes "less favourable
treatment" within the meaning of Article III:4 of the GATT 1994; and
c. the Philippines has failed to demonstrate that Notification 187 and Order Por. 145 -2555
provide for the "administration" of laws, regulations, decisions and rulings of the kind
described in Article X:1 of the GATT 1994, and the Philippines' claim of "unreasonable"
administration is premised on the misconception that compliance with Notification 187 and
Order Por. 145-2555 cannot be achieved without contravening Thai competition law.
3.7. The Philippines requests that, pursuant to Article 19.1 of the DSU, the Panel "reiterate the
recommendation that the DSB request Thailand to bring its measures into conformity with its
obligations under the covered agreements".67
3.8. Thailand requests that the Panel reject the Philippines' claims in this dispute in their entirety.
4 ARGUMENTS OF THE PARTIES
4.1. The parties' arguments are reflected in their executive summaries, provided to the Panel in
accordance with paragraph 23 of the Working Procedures adopted by the Panel (see Annex B).
5 ARGUMENTS OF THE THIRD PARTIES
5.1. The arguments of Australia, Canada, the European Union, Japan, and the United States are
reflected in their executive summaries, provided in accordance with paragraph 24 of the Working
Procedures adopted by the Panel (see Annex C). China, the Russian Federation, and Singapore did
not submit written or oral arguments to the Panel.
6 INTERIM REVIEW
6.1 Introduction
6.1. On 8 January 2018, the Panel issued its Interim Report to the parties. On 29 January 2018,
the Philippines and Thailand each submitted written requests for the Panel to review aspects of the
Interim Report. On 19 February 2018, each party submitted comments on the other's requests for
review. Neither party requested an interim review meeting.
6.2. In accordance with Article 15.3 of the DSU, this section of the Report sets out our response to
the parties' requests for review of precise aspects of the Report made at the interim review stage.
We discuss the parties' requests for substantiv e modifications below, in sequence according to the
sections and paragraphs to which the requests pertain.
6.3. In addition to the substantive requests that are discussed below, various corrections or
improvements of a typographical or editorial nature were ma de to the Report, including but not
limited to those suggested by the parties in their interim review comments. Both parties identified
a number of instances in which drafting improvements could be made to enhance clarity or precision,
in respect of which no objection was made by the other party. In those instances we made the
requested drafting improvements, and in the interest of brevity refrain from listing such changes
below.
6.4. As a consequence of adding several new paragraphs and footnotes in response t o the parties'
comments on the Interim Report, the numbering of the paragraphs and footnotes in the Final Report
has changed from the numbering in the Interim Report. The discussion below refers to the numbering
in the Final Report.

6.2 General parameters guiding our consideration of the parties' requests for additional
findings on certain arguments or issues
6.5. Both parties have made requests that we address certain arguments or issues that are not
strictly necessary to resolving the dispute in the light of the findings that we have made. We consider
it useful to briefly set out the general parameters that guide our consideration of such requests.
6.6. On the one hand, we find guidance in the Appellate Body's statement that "there is no obligation
upon a panel to con sider each and every argument put forward by the parties in support of their
respective cases, so long as it completes an objective assessment of the matter before it, in
accordance with Article 11 of the DSU".68 We consider that the case for exercising judicial economy
in respect of particular arguments may be particularly strong in situations where those arguments
only amount to additional reasons that would, if accepted, lead to the same conclusion that a panel
has already reached on a claim, defence, or element thereof. For example, the panel in the original
proceeding explained that:
[T]he Philippines has made one claim under Article 7.1 based on two sets of arguments.
Having so considered and to the extent that we examine and make a finding in the
following sections with respect to the Philippines' claim under Article 7.1 based on Thai
Customs' decision not to deduct the three items at issue, we do not find it necessary to
examine the same claim based on another set of arguments.69
6.7. On the other hand, we understand that the exercise of judicial economy may have the potential,
whether exercised at the level of claims or individual arguments, to detract from a clear enunciation
by a panel of the relevant WTO law.70 Furthermore, deciding not to rule on arguments or issues that
are not strictly necessary in the light of other findings that a panel makes could undermine the
objective of securing the prompt settlement of the dispute insofar as this restricts the Appella te
Body's ability to complete the analysis in the event that it subsequently reverses the Panel's other
findings71, or insofar as it creates uncertainty with respect to the respondent's implementation
obligations.72 For these reasons, panels are not preclude d from ruling on arguments or issues that
are not strictly necessary to resolve the dispute in the light of its other findings, and may see
compelling reasons to do so in respect of particular issues. For example, the original panel decided
to address certain ex post facto explanations provided by the respondent on an arguendo basis, in
order to help "resolve the parties' dispute".73
6.8. In exercising our judgement on whether to address certain arguments or disputed issues that
are not strictly necessary to res olve in the light of our other findings, we have sought to balance
considerations of judicial economy against the equally important interests of contributing to the
clarification of WTO law and assisting the parties in arriving at a prompt settlement of the dispute.
6.3 Descriptive part
6.9. We note that Section 1.3.6 of the Report provides a brief factual description of the "Second
recourse to Article 21.5 of the DSU by the Philippines", with a view to distinguishing the measures
at issue in this proceeding. This Section of the Report was included in the Interim Report issued to
the parties on 8 January 2018, and the description that it contained was based on the Philippines'
request for consultations filed on 4 July 2017. On 21 February 2018, two days after the parties' final
opportunity to provide comments on the Interim Report, the Philippines filed a revised request for
consultations in connection with the "Second recourse to Article 21.5 of the DSU by the Philippines",
which "replaces and supersedes" the Philip pines' request made on 4 July 2017. 74 We have revised
the brief factual description in Section 1.3.6 to reflect the revised consultations request filed on
21 February 2018.

68 Appellate Body Report, Dominican Republic – Import and Sale of Cigarettes, paras. 124-125 (referring
to Appellate Body Report, EC – Poultry, para. 135).
69 Panel Report, Thailand – Cigarettes (Philippines), para. 7.304.
70 Appellate Body Report, China – Publications and Audiovisual Products, para. 213.
71 Appellate Body Reports, US – Tuna II (Mexico), para. 405; EC – Seal Products, para. 5.67.
72 Appellate Body Report, China – Publications and Audiovisual Products, para. 215.
73 Panel Report, Thailand – Cigarettes (Philippines), para. 7.365.
74 WT/DS371/21/Rev.1, p. 1.

6.4 The ACWL/Commerce letters and lawyer-client privilege
6.10. Thailand submits that paragraph 7.47 responds to an argument that it did not make, insofar
as it suggests that Thailand argued that a defending Member may be entitled to refuse to provide
material that was labelled "confidential". In this regard, Thailand recalls that its argument concerns
documents that are labelled "confidential" and include lawyer -client privileged material. In these
circumstances, Thailand requests the Panel to either delete paragraph 7.47, or to at a minimum
clarify that the Panel does not intend to suggest that a Member could be compelled to provide lawyer-
client privileged material that was not otherwise disclosed. The Philippines does not object to
amending the third sentence of paragraph 7.47 to reflect Thailand's position that its argument was
that a Member must consent to the use of information that it designates as confidential and lawyer-
client privileged, but it considers that paragraph 7.47 should be retained, as the Panel's point in the
paragraph still stands. We have revised paragraph 7.47 to reflect the parties' comments.
6.5 The Board of Appeals Ruling
6.11. The Philippines notes that the Panel uses the terms "customs administration" and "customs
authority" interchangeably throughout the Report, and queries whether the Panel would prefer to
adopt the term "custo ms administration" consistently throughout the Report. Thailand does not
comment on the Philippines' request. In considering this request, we note the following: the original
panel appears to have used the terms "customs administration" and "customs author ity"
interchangeably to describe entities performing customs valuation within the meaning of the CVA75;
the Appellate Body in the original proceeding used the term "customs authority" to refer to such
entities76; the Philippines itself in the course of this proceeding has used the terms
interchangeably77; and certain of the issues raised by the parties touch on the scope of the term
"customs administration" as it appears explicitly in certain provisions of the CVA.78 We therefore do
not consider our use of the term "customs authority" to be inappropriate or unwarranted, and decline
the Philippines' request.
6.12. The Philippines highlights that, during the course of the proceeding, Thailand asserted that
"the Panel should apply the same standard of review that govern s panels in disputes arising under
the Anti-Dumping Agreement, namely, Article 17.6 of that Agreement".79 The Philippines notes that,
in addressing the standard of review under the CVA in paragraphs 7.85 to 7.87, the Panel did not
expressly address Thailand 's argument. In the Philippines' view, addressing this argument would
clarify the relevant standard of review for fact -finding under the CVA. Thailand does not comment
on the Philippines' request. In accordance with the Philippines' request, we have added paragraph
7.110. to address this issue.
6.13. The Philippines notes that the final sentence of paragraph 7.141. concerning the Panel's
discussion of whether the P&GE rates of companies included in the industry group were obtained in
respect of sales of goods of the same class or kind as those sold by PMTL, refers to a comparison
between products, and a comparison between companies, and uses the term "apt comparison". The
Philippines suggests, first, clarifying that the relevant methodology entails a comparison with P&GE
rates obtained (by a company) in sales of certain products, and not a comparison of P&GE rates
obtained by companies selling those products. The Philippines also suggests that the Panel should
clarify its use of the term "apt comparison". Thailand does not comment on the Philippines' request.
In the interest of clarity, we have revised the final sentence of paragraph 7.141. .
6.14. Thailand requests that the Panel revise certain aspects of paragraph 7.154. , as well as
paragraph 7.155. , concerning other methods that the BoA could have used to examine the
circumstances of sale. Thailand submits that these paragraphs mischaracterize the parties'
arguments, since the Philippin es has not argued that the BoA was required to demonstrate that it
could not use other methodologies, and, in Thailand's view, it is not clear that Thailand would bear
the burden of demonstrating whether the BoA had indeed done so. Thailand requests the Pa nel to
remove or revise these paragraphs. The Philippines objects to Thailand's request, on the grounds
that the Panel did not say that the BoA "should" have used a different methodology, but rather

75 See generally Panel Report, Thailand – Cigarettes (Philippines).
76 See Appellate Body Report, Thailand – Cigarettes (Philippines), paras. 208-209.
77 See generally the Philippines' first and second written submissions.
78 See, e.g. paragraphs 7.258. , 7.269. to 7.271. , and 7.419. and 7.420. below.
79 Philippines' request to review the Interim Report, para. 19 (quoting Thailand's first written
submission, para. 5.12).

stated that it "could" have used alternative methodologies, and this statement was made in response
to Thailand's own argument that the BoA's approach was reasonable given the difficulties of applying
the chosen methodology. The Philippines also points out that these paragraphs properly take account
of the Philippines' own argument that "if the BoA felt it faced difficulties with the approach it had
decided to take, other options were available."80 In considering Thailand's request, we note that the
paragraphs in question address Thailand's argument that the BoA's examination of the
circumstances of sale was reasonable in light of the difficulties of conducting a comparison of P&GE
rates to examine the circumstances of sale. The relevant paragraphs identify that a relevant
consideration to be taken into account is the "extent to which the problems that the BoA encountered
could have been avoided by following a different method". In this context, we do not consider it
relevant that a particular methodology or approach is, in principle , an appropriate means of
conducting an examination of the circumstances of sale. To the extent that it bears repeating, we
emphasize that the fact that a particular methodology is a valid methodology in principle does not
grant a customs authority the discretion to apply such methodology without regard to whether its
application in the particular circumstances of a specific decision would be apt to reveal whether the
relationship between the buyer and seller influenced the price. We further note that we do not make
any finding of inconsis tency exclusively on the basis of the difficulties facing the BoA, nor do we
"require" that the BoA examine all possible methodologies. Rather our analysis of the BoA's
examination of the circumstances of sale is on the basis of an overall assessment that takes into
account both the difficulties facing the BoA and the steps taken by the BoA to address those
difficulties. We therefore decline Thailand's request.
6.15. The Philippines, for its part, notes that in paragraph 7.154. , the Panel only identifies a
single alternative methodology that the BoA could have used. The Philippines requests that the Panel
broaden or revise its description of alternative possible methodologies, in light of certain limitations
on the application of the computed -value methodology in Thailand. The Philippines suggests other
alternative methodologies that, in its view, are more appurtenant. Thailand objects to the Philippines'
request, reiterating its argument that these references to alternative methodologies should be
deleted, given the parties ' lack of argumentation on this issue. Thailand also argues that the
Philippines introduces new arguments and evidence in the context of this request, and that the
Philippines is requesting additional factual findings regarding TTM. In respect of Thailand's argument
that the Panel's analysis goes beyond the scope of the parties' arguments, we consider that the
Panel's analysis fairly reflects the Philippines' argument that the BoA's "difficulties were entirely of
[its] own making" and that, if the comparison was incapable of satisfying the requirements of Article
1.2(a) of the CVA, then "the BoA should have explored a different testing me thod".81 Regarding
Thailand's other arguments, we emphasize that, as explained above, the Panel makes no finding of
inconsistency in respect of the BoA's choice to use a comparison of P&GE rates to examine the
circumstances of sale, but rather the Panel add resses whether the BoA's application of its chosen
methodology satisfies the requirements of Article 1.2(a). With that in mind, we consider the
Philippines' suggestion to be helpful, and have revised paragraph 7.154. accordingly. We
emphasize in this regard that our minor revisions do not alter or extend the substance of our findings,
as contained in the interim report, in any way.
6.16. The Philippines agrees with the Panel's conclusion in paragraph 7.171. that an authority
should communicate to the importer its exclusion of a company from the co mparator group on the
basis that it is a loss -making company. The Philippines considers, however, that a customs
administration or administrative tribunal within the administration may have access to information
about private companies that importers do no t have, and consequently suggests that the panel's
findings reflect the nature of the consultative process, and that the burden placed on an importer
will depend on the particular circumstances of the case (including whether relevant information is in
the hands of the importer or the authority). Thailand objects to the Philippines' request on the
grounds that the panel's discussion is comprehensive, and the revision is both unnecessary and goes
beyond the scope of the Panel's reasoning. In the interests of resolving any unintended ambiguities,
we have made minor revisions to paragraph 7.171. , and added a footnote to that paragraph.
6.17. Thailand requests that paragraph 7.195. , concerning the parties' arguments with respect
to the BoA's calculations of the P&GE figures for the com panies in the industry group, be revised,
because it incorrectly implies: (i) that the explanation provided by Thailand was insufficient to
respond to the arguments that had been made by the Philippines at that point; and (ii) that Thailand
offered no furt her explanation of these calculations once the Philippines raised further alleged

80 Philippines' comments on Thailand's request to review the Interim Report, para. 14 (referring to
Philippines' second written submission, paras. 142 and 150-153; response to Panel question No. 9).
81 Philippines' second written submission, paras. 142 and 153.

anomalies. The Philippines objects to Thailand's request, on the basis that the paragraph in question
accurately captures the fact that Thailand did not provide a full and tr ansparent explanation of the
BoA's figures in its first written submission. Without prejudice to the accuracy of the statement itself,
in the interest of avoiding unintentional ambiguity, we have removed the relevant sentence of this
paragraph, as requested by Thailand. We do not consider that the removal of this sentence alters in
any way our factual description of the parties' exchange of views on this issue, nor our substantive
findings regarding this process, as captured in paragraph 7.201. .
6.18. Thailand requests the Panel to revise paragraphs 7.200. and 7.219. , concerning the
BoA's determination of the numerator and denominator used to calculate the P&GE rates for
companies included in the industry group. Thailand requests that these paragraphs be revised to
reflect that the explanation provided by Thailand was not contested by the Philippines, and
consequently there is no dispute, or lack of clarity, as to how the BoA performed its calculation. The
Philippines objects to Thailand's request, on the grounds that the Panel's description is accurate,
given the explanation, as contained in paragraph 7.200. , that the BoA relied on two different ways
of defining income when calculating the numerator as opposed to the denominator. The Philippines
highlights that Thailand has not objected to this characterization of the facts. As an initial matter,
we note that Thailand's explanation for why the BoA used different definitions is set forth in full in
paragraph 7.198. . We do not consider that the accuracy of the statement that "the BoA used
different definitions of income in determining the numerator and denominator" is in any way refuted
or called into question by the alleged reasons for adopting such different definitions. In this respect,
we note that Thailand has not objected to the description of the facts in paragraph 7.200. , namely
that the BoA included extraordinary income in its "definition" of income for inclusion in the
numerator, but excluded such extraordinary income in its "definition" of income when determining
the denominator. We therefore decline Thailand's request.
6.19. Thailand requests that paragraph 7.206. , concerning the P&GE rates used by the BoA in
respect of PMTL, be revised to reflect the fact that PMTL requested the BoA to use several different
rates (as explained in paragraph 7.226. ). The Philippines objects to Thailand's request, noting the
different contexts of the two paragraphs, highlighting that PMTL's request to use the first P&GE rate
was on the understanding that the BoA was conducting a different methodology to examine the
circumstances of sale, and emphasizing that the relevant BoA Minutes state repeatedly that the rate
requested by PMTL was the rate of 18.47%. In the light of the parties' comments, we have added a
sentence to the relevant footnote to paragraph 7.206. .
6.20. Thailand requests that the Panel revise paragraph 7.215. , concerning the explanation "on
the record" of the BoA's determination as to how the BoA determined a benchmark range of 9.8%
to 15.08%. Thailand requests that the Panel reflect in this paragraph that the determination of the
range by calculating two standard errors of the mean, and the confidence level of 95%, appears in
evidence "on the record", as reflected in Exhibit PHL -54. The Phi lippines objects to Thailand's
request, in light of the Panel's finding that Exhibit PHL -54 is not part "of the record" of the
determination. We agree with the Philippines, and refer Thailand to footnote 429 in which we explain
why we do not consider that Exhibit PHL -54 can be considered "on the record" of the BoA's
determination. We therefore decline Thailand's request.
6.21. Thailand requests that the Panel remove the phrase "using a Ouija board" in the penultimate
sentence of paragraph 7.218. , and argues that doing so would not change the point the Panel is
trying to make in that paragraph. The Philippines disagrees, and submits that this reference to a
comparison of the BoA's methodology to an arbitrary "methodology", such as a Ouija board, helps
to illustrate the flaws in Thailand's logic. The Philippines requests that, if the Panel were to modify
the reference to a "Ouija board", it should replace it with the "spinning wheel" analogy used by the
original panel, to preserve the Panel's point. We have revised the wordi ng of paragraph 7.218. in
the light of the parties' comments.
6.22. Thailand requests that the Panel replace its reference to the "adjusted" P&GE rate of 18.47%
in paragraph 7.219. with the term "hypothetical". The Philippines disagrees, and submits that the
word "adjusted" is appropriate, given that the term "unadjusted" has been consistently used by the
original panel, the parties, and the compliance Panel, to refer to a P&GE rate calculated using PMTL's
audited financial statements, adjusted to reflect PMTL's declared transaction value. The Phil ippines
further submits that the use of the word "hypothetical" in either paragraph 7.219. or paragraph
7.206. does not seem to be appropriate, as the relevant P&GE rate is calculated based on real
figures, namely PMTL's audited accounts and declared transaction values. On the basis of the parties'
observations regarding the references to "adjusted" and "unadjusted" P&GE rates, we have revised

all references by the Panel to P&GE rates in order to unambiguously identify the figures on which
they were based (i.e. the transaction values as declared by PMTL, or the revised customs values as
determined by the Thai Custom s Department). Such changes appear in paragraphs 7.206. ,
7.219. , 7.226. and 7.230. , as well as footnote 573. In the course of making this change, we
also aligned the wording of the third and fourth sentences of paragraph 7.230. ("should have") to
harmonize these statements with the wording used in the last sentence of paragraph 7.206. ("could
have"). We have not altered our description, in paragraph 7.185. , of the Philippines'
characterization of these P&GE rates as adjusted/unadjusted.
6.23. The Philippines recalls that the parties exchanged arguments regarding the proper
interpretation of the term "inconsistent with", for the purposes of determining whether an importer's
P&GE rates are "inconsistent with" those of the industry group. The Philippines notes that the panel
does not address this aspect of the parties' argumentation, and considers that clarification of the
relevant legal standard that the BoA should have applied would add weight to the Panel' s findings.
The Philippines submits that such findings could follow paragraph 7.226. . Thailand does not
comment on the Philippines' request. We have revised paragraph 7.228. to reflect our approach to
this issue.
6.24. Thailand considers that paragraphs 7.262. to 7.266. misrepresent Thailand's arguments
that the procedural obligations of Article 1.2(a), third sentence, of the CVA do not apply to appeals
tribunals such as the BoA. Specifically, Thailand considers that these paragraphs incorrectly suggest
that Thailand considers that the procedural obligations of Article 1.2(a) "do not apply at all to
appellate tribunals such as the BoA", and requests that the Panel correctly reflect its argument "that
these obligations do not apply mutatis mutandis to appeals".82 The Philippines has no comments on
the Thailand's request. We consider that Thailand's request to revise paragraph 7.262. is helpful,
in that it identifies an issue as to terminology that has the potential to create confusion. First, while
Thailand submits that the discussion incorrectly suggests that Thailand argued that the procedural
obligations of Article 1.2(a) "do not apply at all to appellate tribunals such as the BoA", in our view
that is indeed an accurate characterization of Thailand's arguments in its submissions.83 We do not
understand Thailand to have argued that the obligations in the third sentence of Article 1.2(a) are
partially applicable to appeals tribunals such as the BoA, in the sense that some aspects of the
procedural obligations in Article 1.2(a) may apply to the BoA but that other aspects may not be
applicable in the same manner to the BoA . Nor do we understand Thailand to have argued that in
some circumstances the procedural obligations in Article 1.2(a), third sentence, may apply to the
BoA but that in other circumstances those obligations may not be applicable to the BoA . It has not
framed its argument in such terms, nor has it specified precisely what aspects of the obligations in
Article 1.2(a), third sentence, would or would not apply to the BoA, or in what circumstances the
obligations in Article 1.2(a), third sentence, would not apply to the BoA. Thailand's argument is that
Article 1.2(a), third sentence, of the CVA is inapplicable to appeals tribunals such as the BoA, inter
alia because it would not make sense to subject such tribunals to the exact same procedures that
apply in the context of an initial customs valuation determination. We further understa nd Thailand
to argue that even if this is incorrect, and the procedural obligations in Article 1.2(a), third sentence,
do apply to such tribunals, then in the circumstances of this case, this obligation was satisfied since
PMTL was aware that the BoA was c onducting a comparison of P&GE rates, and because PMTL had
an "open-ended opportunity" to communicate with the BoA. We address that second issue, including
Thailand's arguments in relation to that second issue, below in S ection 7.2.3.3.3. Second, we
consider that confusion is likely to arise from the manner in which Thailand employs the term
"mutatis mutandis" to qualify its view of the applicability of Article 1.2(a), third sentence, to the
BoA.84 We have therefore made adjustments to paragraphs 7.246. , 7.255. , 7.262. , and

82 Thailand's request to review the Interim Report, para. 2.15. (emphasis original)
83 See, e.g. Thailand's first written submission, Section 5.6.4 ("The procedures of Article 1.2(a) of the
CVA do not apply to the BoA decision"); second written submission, paras. 2.109-2.118 ("the Philippines has
failed to make a prima facie case that the procedures of Article 1.2(a) must be applied mutatis mutandis to the
work of an appellate authority such as the Board of Appeals"); and comments on the Philippines' response to
Panel question No. 73(b), p. 11 ("the procedural requirements of Article 1.2(a) cannot be applied mutatis
mutandis to appeals under Article 11.2 of the CVA in the same manner as they would be applied to the original
valuation determination").
84 Specifically, Thailand equates the notion of subjecting the BoA to an obligation to "follow exactly the
same procedures as must be used to reach the initial valuation decision" (Thailand's first written submission,
para. 5.120) with the notion that those procedures apply "mutatis mutandis" to the BoA. Thus, when Thailand
argues that it would not make sense to apply exactly the same procedural obligations in Article 1.2(a), third
sentence, "mutatis mutandis" to the BoA, we understand its argument to be that it would not make sense to
apply exactly the same procedural obligations to an appeals tribunal like the BoA. However, this formulation

7.268. that aim to fairly and accurately characterize Thailand's argument while avoiding any
potential confusion.
6.25. The Philippines requests that the Panel include, in its summary of the Philippines' arguments
in paragraph 7.324. , the Philippines' argument that had PMTL been given the opportunity to
provide further evidence of its payment of provincial taxes, it could have provided evidence from its
SAP accounting system and statements from its customers confirming that PMTL paid the provincial
tax on their behalf. The Philippines also considers that it would add weight to the panel's findings to
address this point in its summary of the Philippines' arguments. Thailand does not comment on the
Philippines' request. To comprehensively reflect the Philippines' arguments on this issue, we have
added a reference to these aspects of its argumentation in paragraph 7.324. of Section 7.2.6.2,
entitled "Main arguments of the parties", and have also reflected the citations to the Philippines'
arguments during the proceeding in the footnote to paragraph 7.368. , where we address this
argument. However, we consider that paragraph 7.368. , and the footnote thereto, sufficiently
captures our consideration of this argument, and we therefore decline the Philippines' request to
further revise our findings.
6.26. Thailand considers that the final sentence of paragraph 7.349. , which concerns the BoA's
determination of the total amount of provincial tax payable by PMTL in 2002, does not explain
Thailand's argument with sufficient clarity. Thailand suggests the following revision to the final
sentence of this paragraph: "For its part, Thailand agrees with the distinction made by the original
panel, but argues that in this case, be cause the provincial tax is not applied in all provinces, the
amount of provincial taxes payable cannot be determined without additional evidence of provincial
taxes paid." The Philippines objects to Thailand's request, arguing that the Panel's description is
accurate, and Thailand's revision inaccurate, because through the course of the proceeding Thailand
gave a number of reasons why, in its view, the BoA required additional evidence of provincial taxes
paid. In light of the parties' concerns, we have revised the relevant sentence of paragraph 7.349. to
quote Thailand's own explanation, as provided in its first written submission.
6.6 The Criminal Charges
6.27. Regarding paragraph 7.479. , which lists the legal consequences of the Charges that do not
result from the DSI investigation, the Philippines requests adding the following: (i) an offence under
Section 27 of the Customs Act can be prosecuted only after the Public Prosecutor has issued charges,
which the Panel mentions as a consequence of the Charges in paragraph 7.595 of its Report; and
(ii) the Charges result in the accused's potential liability for fines over USD 2.35 billion. With respect
to the first consequence mentioned by the Philippines, Thailand notes that it is redundant because
the legal consequences cited by the Panel in paragraph 7.479. already reflect the fact that the
Charges trigger Thailand's ability to prosecute. With respect to the second part of the proposed
addition, Thailand considers that it is not relevant to the Panel's analysis because the list of
consequences contains direct and actual legal consequences for the accused, whereas the fine that
may be imposed is, in contrast, a potential consequence. We agree with the points made by Thailand
in its comments on the Philippines' request, and therefore we have not revised paragraph 7.479. in
the manner requested by the Philippines.
6.28. Thailand requests revising the first sentences of paragraphs 7.497. and 7.538. to clarify
that the quoted passage is not Thailand's argument, but the Philippines' mischaracterization of what
Thailand argued. In this regard, Thailand states that it has not argued that "the lack of overlap is
decisive" for purposes of determining whether there is a substantive connection between the 272

may be apt to cause confusion, since Black's Law Dictionary defines the term "mutatis mutandis" as "all
necessary changes having been made; with the necessary changes". (Black's Law Dictionary, 7th edn, Bryan A.
Garner (ed.) (West Group, 1999), p. 1039) Fn1250.) Likewise, the Appellate Body has explained that when
Article 22.7 of the SCM Agreement indicates that the provisions of Article 22 are to apply "mutatis mutandis" to
the initiation and completion of Article 21 reviews, what that means is that "certain requirements set out in
Articles 22.1 through 22.6 of the SCM Agreement, which are fully applicable to the initiation or completion of
an Article 11 original investigation, may not be applicable in the same manner, or to the same extent, to Article
21 reviews". (Appellate Body Report, US – Carbon Steel (India), para. 4.535 (referring to Panel Reports, US -
Corrosion-Resistant Steel Sunset Review, para. 7.33, and US - Oil Country Tubular Goods Sunset Reviews,
para. 7.248) Therefore, insofar as Thailand were arguing that some aspects of the procedural obligations in
Article 1.2(a), third sentence, may apply to the BoA, or that in some circumstances the procedural obligations
in Article 1.2(a), third sentence, may apply to the BoA, then we would characterize either of those arguments
as an argument that the procedural requirements in Article 1.2(a) third sentence are applicable mutatis
mutandis to the BoA. As explained above, however, we do not understand Thailand to have advanced that
argument.

entries subject to the Charges and the 118 entries subject to the DSB's recommendations and
rulings. The Philippines submits that its characterization of Thailand's argument is correct. We
consider that these sentences are drafted in a manner that makes clear that the quoted passage is
the Philippines' characterization, not the Panel's characterization, of Thailand's argument.
Furthermore, we note that the Philippines' comments on Thailand's request make clear that the
Philippines stands by that characterization of Thailand's arguments. Therefore, we have not adjusted
the text of paragraphs 7.497. and 7.538. . However, we have supplemented paragraph 7.537. ,
which presents Thailand's arguments on this point, to reflect Thailand's clarification that the lack of
overlap is not "decisive" and is "only one of the several factors presented by Thailand demonstrating
the lack of close nexus".
6.29. With reference to the Panel's conclusion at paragraph 7.549. regarding the effects of the
Charges for the purpose of the "close nexus" test, the Philippines requests that the Panel explicitly
address its argument that the Charges "aggravate the WTO-inconsistencies that Thailand has been
instructed by the DSB to reso lve", and in this way "undermine compliance" and "circumvent" the
DSB's recommendations and rulings because they "perpetuate the problem" addressed in those
recommendations and rulings. Thailand does not comment on the Philippines' request. Although we
are not required to address each and every argument advanced by the parties, we consider that the
change requested by the Philippines would serve to make explicit that which is already implicit in
our reasoning. Therefore, we have added language to paragraph 7.549. connecting the existing
reasoning in that paragraph to the Philippines' argumentation.
6.30. In paragraph 7.578. the Panel quotes a particular portion of Thailand's response to Panel
question No. 39, and Thailand requests that the Panel instead quote a different portion of Thailand's
response "in order better to reflect Thailand's response to the Panel's question". The Philippines
submits that the Panel should reject Thailand's request because it does not explain why its preferred
quote better reflects its response, and because the Panel is entitled to quote the elements of
Thailand's argument that the Panel considers to be most relevant to the particular aspect of the
Panel's reasoning at stake. We have supplemented the existing text of paragraph 7.578. by
including the quotation requested by Thailand.
6.31. The Philippines proposes that a new paragraph, summarizing its argument that the Charges
should not be understood as alleging customs fraud in the sense that the Panel describes in the first
sentence of paragraph 7.631. , be included following paragraph 7.631. . In its view, this would
be helpful to clarify this aspect of the parties' disagreement over the nature of the Charges. Thailand
considers that the fairly lengthy summary of arguments propose d by the Philippines breaks the
structure of the Panel's narrative in this section. In this regard, Thailand observes that in paragraph
7.631. the Panel clarifies only that the disagreement between the parties does not relate to the
concept of customs fraud, but to whether the Charges constitute an allegation of customs fraud, and
is not meant to be an exhaustive summary of the parties' arguments on this aspect. Thailand also
points out that a summary of the Philippines' arguments is unnecessary because these arguments
are explained and addressed by the Panel in the subsequent sub -sections of the Panel's report (as
well as in the parties' executive s ummaries). We agree with the points made by Thailand in its
comments on the Philippines' request, and therefore we have not added the new paragraph proposed
by the Philippines.
6.32. The Philippines also proposes the following amendment to paragraph 7.631. , fourth
sentence: "Thailand does not specifically contest the Philippines' understanding on this point the
nature of customs fraud in relation to the declared value, […]". The Philippines asserts that this
amendment would add clarity to the Panel's reasoning. Thailand objects to this request, being of the
view that the current wording of paragraph 7.631. is sufficiently clear; in its view, by indicating
that Thailand does not specifically contest the Philippines' understanding "on this point", the Panel's
narrative makes clear that it is referr ing to the issue described immediately above in that same
paragraph and there is no need, therefore, to rephrase something that the Panel already described.
We agree with the point made by Thailand in its comments on the Philippines' request, and therefore
we have not introduced this amendment.
6.33. The Philippines suggests a revision to the statement, in paragraph 7.642. , that insofar as
the "plain meaning" of the term "customs administration" is "inconclusive ", the object and purpose
of the covered agreements should guide the Panel to avoid interpretations t hat would enable
Members to circumvent or evade their obligations. In the Philippines' view, this could be read to
suggest a degree of uncertainty regarding the interpretation of the term "customs administration",
and in any event recalls that a panel is e ntitled to take into account the object and purpose of a

covered agreement regardless of whether or not the plain meaning is "inconclusive". Thailand does
not comment on the Philippines' request. We have adjusted the wording of this sentence in
paragraph 7.642. in the light of the Philippines' comment, and made a similar change to the
wording of a similar sentence found at paragraph 7.671. .
6.34. The Philippines requests that the Panel reconsider the statement in paragraph 7.649. , that
the Panel "would be inclined to agree with Thailand that the Charges fall outside of the scope of
application of the CVA" if Thailand were able to substantiate its assertions about the meaning of the
Charges. In its view, the Panel's statement addresses a hypothetical circumstance that does not
need to be addressed to resolve the dispute. The Philippines also notes that earlier in its findings
the Panel correctly confirms that the Decision Regarding Cases Where Customs Administrations Have
Reasons to Doubt the Truth or Accuracy of the Declared Value elaborates on certain procedures that
would apply in such situations. Thailand observes that this paragraph serves to outline the Panel's
approach and the possib le outcomes that may result from its assessment of the facts, which is
particularly important when there is a threshold question raised by Thailand regarding the
applicability of a particular WTO agreement. Furthermore, Thailand considers that the Panel's view
that the CVA would not apply in certain circumstances serves to clarify the scope of application of
the CVA, an issue that is at the heart of this dispute. Thailand also argues that the Philippines'
characterization of paragraph 7.649. gives the impression that the Panel addressed these
circumstances as obiter dicta for no apparent reason, but as the Philippines is aware, the
circumstances addressed by the Panel were those put forth by Thailand as part of its argumentation.
Finally, Thailand disputes the Philippines' understanding that the procedures referred to in th e
Ministerial Decision would necessarily and always apply in cases of customs fraud. We note that
contrary to what the Philippines' comment and another comment by Thailand in relation to
paragraphs 7.681. and 7.682. might be taken to suggest, paragraph 7.649. does not make a
blanket statement that the CVA does not apply to any circumstance when the declared transaction
value is not the price actually paid or payable. Rather, the text states that we would "be inclined to
agree" with Thailand that the Charges fall outside of the scope of application of the CVA if Thailand
were to substantiate its "interrelated assertions" that (i) "the Charges allege customs fraud based
on a determination that the price that PMTL declared to have paid to PMPMI was not the actual price
that was paid to PMPMI", and that (ii) "the references to King Power's prices in the Annex merely
serve as a possible benchmark for the purposes of a fine" and (iii) not "as a basis for determining
the actual customs value of PMTL's imported goods". We also agree with the points made by Thailand
in its comments on the Philippines' request as to why paragraph 7.649. is not gratuitous. For these
reasons, we have not deleted or modified the first sentence of paragraph 7.649. . However, we
have added a footnote clarifying that in the circumstances of this case, the Panel need not decide,
and therefore does not decide, whether in such circumstances the domestic authorities may still be
subject to the procedures ela borated in the Decision Regarding Cases Where Customs
Administrations Have Reasons to Doubt the Truth or Accuracy of the Declared Value.
6.35. The Philippines notes that paragraph 7.652. , which refers to a statement by the Appellate
Body regarding the allocation of the burden of proof in the context of the examination of the
respondent's municipal law, could be read to sugges t that the Philippines is making an " as such"
challenge against a Thai "municipal law". The Philippines suggests an alternative quote to describe
the Philippines' burden to introduce evidence as to the scope and meaning of the legal instruments
that it challenges. Thailand considers that the Philippines misses the point. In its view, the Philippines
is challenging the Charges on their face , and not as they may be applied once the Thai Criminal
Court has heard all of the evidence, and in this context the Pan el's reference to "as such" (or de
jure) is correct and should be maintained. We have retained the reference to the Appellate Body's
statement, because we consider that it reflects a general principle that is applicable not only to the
manner in which a panel should approach claims relating to the WTO-consistency of a municipal law
in the form of a statute or a regulation, but also to the manner in which a panel should approach
claims relating to the WTO-consistency of municipal legal instruments such as the Charges. We have
adjusted the wording of paragraph 7.652. to that effect, and with a view to avoiding any suggestion
that the Philippines is making an "as such" challenge against any provision of Thai legislation in the
context of the Charges.
6.36. The Philippines requests a revision to paragraph 7.659. , which states that "an allegation
of customs fraud could be made without ever seekin g to determine the customs value of the
importer's goods" and then refers to a hypothetical example given by Thailand involving the
discovery of a second invoice suggesting that declared value is less than the amount actually paid .
The Philippines expresses its concern that the Panel's reasoning here could suggest that the CVA
would "never apply" in this situation, and then recalls that the Decision Regarding Ca ses Where

Customs Administrations Have Reasons to Doubt the Truth or Accuracy of the Declared Value
elaborates on certain procedures that apply in such situations and submits that in making these
obiter remarks, the Panel is addressing the legal consequenc es of a hypothetical example that the
Panel has found does not correspond to the facts in this dispute. Thailand objects to the Philippines'
request to revise this paragraph for the same reasons expressed above with respect to the
Philippines' comment on p aragraph 7.649. . We note that paragraph 7.659. refers to Thailand's
example only as a simple hypothetical meant to illustrate how there could be situations in which the
customs administration may never have conclusive evidence of the pric e actually paid by the
importer, but could nonetheless come into possession of proof that the declared value was less than
the price actually paid by the importer. Paragraph 7.659. does not say or imply that the CVA would
be "necessarily inapplicable" in the case of Thailand's hypothetical example nor more generally in
cases where an importing Member doubts whether the declared value is the "transac tion value".
Accordingly, we are not persuaded that there is any need to revise this paragraph.
6.37. The Philippines requests a revision to paragraph 7.660. , which concludes that the terms
of Section 27 of the Customs Act do not always require that the authorities engage in custom
valuation determinations, such that any and all Charges brought pursuant to Section 27 do not
necessarily fall within the purview of the CVA. The Philippines recalls that Section 27 provides that
"[f]or each offence that there shall be a fine of four times the amount of price of the goods including
duty or to imprisonment for a term of not exceeding ten years, or to both". The Philippines requests
that the Panel: (i) clarify that the terms of Section 27 do not always require that the authorities
engage in customs valuation determinations "in order to establish the constituent elements of an
offence"; and (ii) include a clarification that, even in the situation where the constituent elements of
the offense in a particular case under Section 27 do not involve customs valuation, if Thailand were
to establish a fine that is calculated on the basis of the value of the goods, the CVA applies to that
valuation exercise. Thailand requests that the substance and text of paragraph 7.660. remain as
they are. Thailand submits that the Philippines' comment goes beyond the scope of interim review,
as it "addresses the WTO consistency of Section 27 of the Customs Act 'as such', that is, its WTO
consistency in general terms beyond the specific manner in which it was applied in the Charges".
Thailand also suggests that it is internally contradictory to suggest that where something "do[es]
not involve a customs valuation", the CVA would nevertheless "appl[y] to that valuation exercise".
In addition, it reiterates its position that the CVA does not apply when calculating a benchmark for
a possible criminal fine. W e consider that the Philippines' requests are aimed at stating explicitly
that which is already implicit in the text of paragraph 7.660. when read in conjunction with our
observations in paragraph 7.662. . Therefore, we have made the clarifications requested by the
Philippines.
6.38. With reference to paragraph 7.662. , bo th the Philippines and Thailand recall that the
parties disputed the use of the term "price" in the Charges and advanced arguments addressing
Section 2 and Section 103 of the Customs Act, and request that the Panel address those arguments
in this regard. We note that paragraph 7.662. implicitly rejects Thailand's argument that Section
103 of the Customs Act is the relevant provision for the calculation of a criminal fine, and that Section
103, and not Section 2, is therefore the correct context for understanding the term "price" as use d
in the Charges. We agree with the parties that the basis for rejecting Thailand's argument should be
set out explicitly. We have added a footnote to paragraph 7.662. explaining that we agree with the
Philippines that it is clear from the terms of the Charges that they refer to the "price" for the purpose
of establishing the constituent elements of the crime under Section 27 of the Customs Act, and not
for "for the purpose of fixing the amount of any fine or penalty".
6.39. Thailand suggests that the Panel modify paragraphs 7.681. and 7.682. , which contain
part of the Panel's analysis regarding the applicability of the Appellate Body's findings in US – 1916
Act to the instant dispute, to ensure that there are no internal inconsistencies in its findings. In this
regard, Thailand sees a contradiction between (i) the Panel's statements that the CVA would not
apply when the declared transaction value is not the price actually paid or payabl e ( paragraph
7.649. ) and that the absence of any CVA provision analogous to Article 18.1 of the Anti -Dumping
Agreement could mean that the silence of the CVA in this regard indicates that WTO Members are
free to impose criminal penalties on customs fraud (paragraph 7.681. ); and (ii) the Panel's
statement that the Appellate Body's findings in US – 1916 Act nonetheless support the conclusion
that the CVA applies to the aspect of the Charges that is regulated by the CVA (paragraph 7.682. ).
The Philippines submits that there is no contradiction between these statements. Furthermore, with
reference to paragraph 7.649. , the Philippines considers that "Thailand 's interpretation of the
Panel's obiter statement, and its reliance upon this statement at the first opportunity, illustrates the
dangers of the Panel 's approach" in making this obiter statement. We have reviewed these

paragraphs in the light of Thailand's comments, and we see no internal inconsistencies between any
of these findings and therefore we have not revised these paragraphs. We note that, contrary to
what Thailand's comment might be taken to imply, paragraph 7.649. does not make a blanket
statement that the CVA does not apply when the declared transaction value is not the price actually
paid or payable.
6.40. The Philippines requests an amendment to paragraph 7.703. , which addresses the legal
standard under the CVA for regarding goods as "identical or similar" to the goods being valued, in
order to state more explicitly that the close physical similarity of goods is not sufficient to make the
goods identical or similar for valuation purposes under Articles 1, 2, or 3 of the CVA. The Philippines
observes that, as reflected in the record, this point continues to be an issue of contention, and even
a source of confusion, in the ongoing criminal proceedings in Thailand. Thailand considers that the
Philippines' request is unwarranted given that the Panel already made a finding of violation under
Articles 1, 2, and 3 of the CVA, as requested by the Philippines. In its view, the Philippines is
essentially asking the Panel not only to find a violation, but to do so by addressing every argument
the Philippines made. However, Thailand recalls that nothing in the DSU obliges WTO panels to
address all arguments advanced by the parties. We agree with Thailand that we are not required to
address all arguments advanced by the parties, at least insofar as it would not alter the overall
conclusion reached in respect of the claim at issue. Having said that , we consider that the change
requested by the Philippines merely makes more explicit what is already implicit in our reasoning.
Accordingly, we have revised paragraph 7.703. as requested by the Philippines.
6.41. The Philippines observes that the footnote to paragraph 7.703. refers to Article 2.4 of the
Anti-Dumping Agreement as contextual support for the need to take into account the differential
impact of fiscal charges or duties under the CVA, and suggests that the Panel could anchor this
aspect of its interpretation in context drawn from the CVA. To this end, the Philippines recalls that
it has referenced a number of provisions of the CVA as context supporting the requirement to adjust
for factors that affect price -comparability, including Articles 1.2(b), 2 and 3 of the CVA. Thailand
does not comment on the Philippines' request. We have adjusted this footnote in the light of the
Philippines' request.
6.42. The Philippines observes that paragraph 7.712. refers to the Public Prosecutor's "decision
to examine the circumstances of sale " in respect of 272 entries subject to the Charges, and its
decision to exclude from that examination the 18 WTO entries, but recalls that the 18 WTO entries
were included in the DSI's examination and in its two recommendations to prosecute, and they were
also included in the Public Prosecutor's examination until just before the Charges were issued. The
Philippines requests an amendment to reflect that the Public Prosecutor's decision -making is
arbitrary because, after the examination, the Public Prosecutor decided to accept the transaction
values for the 18 WTO entries (deferring to the customs administration's decision sitting as the BoA)
but decided to reject it for the 272 entries subject to the Charges, even though the circumstances
of sale were identical for 111 of the entries, and highly similar for the remaining entries. Thailand
submits that the Panel's conclusion is sufficiently clear as it stands in paragraph 7.712. , and that
if accepted by the Panel, the Philippines' formulation would go beyond the Panel's conclusion, and
would in fact change the nature of the Panel's finding as to what conduct by the Public Prosecutor
was "arbitrary". We have reviewed paragraph 7.712. in the light of the parties' comments, and
consider that the amendment suggested by the Philippines entails a more precise articulation of the
premise of our reasoning. We have therefore made this change.
6.43. Regarding paragraphs 7.720. and 7.721. , the Philippines notes that the Panel's findings
with respect to the other grounds set out in the Memorandum of Allegation are limited. The
Philippines considers that it would be helpful for the Panel to provide further reasoning as to why
these grounds do not constitute a valid basis to reject transaction value, and proceeds to reiterate
its arguments to that effect. Thailand requests that the Panel clarify the meaning of its finding that
the rejection of the transaction value "cannot be justified on the basis of the grounds contained in
the Memorandum of Allegations", and in particular whether the Panel is finding that (i) the Charges
are inconsistent with the CVA in relation to the grounds mentioned in the Memorandum of Allegation
(in addition to its other findings of inconsistency under the CVA); or (ii) it is not ruling on the CVA-
inconsistency of the Charges in relation to the grounds mentioned in the Memorandum of Allegation.
In this regard, Thailand seeks clarification that the Panel is not ruling on the WTO consistency of the
content of the Memorandum of Allegation. Thailand considers that the Philippines' request for
additional substantive findings are without merit, because it considers that the Panel correctly
characterized the Philippines' comments regarding the Memorandum of Allegation as "conditional",
as they were made in anticipation that Thailand could seek to defend the Public Prosecutor's rejection

of PMTL's declared transaction values on the grounds indicated therein; and as the Panel found, this
condition precedent did not occur and, hence, the Panel concluded that the rejection of the
transaction value cannot be justified on the basis of the grounds mentioned in the Memorandum of
Allegation. We recall that the Philippines has advanced a single claim under Articles 1.1 and 1.2(a),
which is that the Public Prosecutor's rejection of the declared transaction value in the Charges was
inconsistent with Article s 1.1 and 1.2(a) of the CVA because the Public Prosecutor lacked a valid
basis to reject the declared transaction value. In support of that claim, the Philippines has presented
arguments relating to: (i) the comparison with King Power; ( ii) the arbitrary inclusion/exclusion of
entries; and (iii) the additional grounds for rejecting PMTL's transaction values contained in the 2009
Memorandum of Allegation. We understand both parties to agree that these aspects and factual
circumstances of t he Charges do not necessarily require that the Panel make three separate and
distinct findings in relation to the obligation in Article 1.2(a), second sentence, as these are simply
arguments in support of a single claim, namely that the Charges allegedly violated the obligation in
Article 1.2(a) to engage in a proper examination of the circumstances of sale. 85 In response to the
parties' comments, we have revised paragraph 7.721. to reflect our views on the parties'
arguments concerning the grounds set out in the Memorandum of Allegation. However, we
emphasize that our finding therein does not constitute a separate finding of inconsistency, but rather
a finding in respect of one aspect of the parties' arguments that is nonetheless relevant to our
ultimate finding of inconsistency as set out in paragraph 7.722. .
6.44. The Philippines notes that in paragraph 7.731. , the Panel provides a single conclusion in
which it makes findings with respect t o the Philippines' claims under Articles 1.1, 1.2(a) second
sentence, 2.1 and 3.1 of the CVA. The Philippines requests that the Panel provide separate
conclusions in each of the sections dealing with the Philippines' separate claims under the CVA.
Thailand does not comment on the Philippines' request. We note that the Philippines has advanced
one claim under Articles 1.1 and 1.2(a) , second sentence , regarding the rejecting of PMTL's
transaction values, which we address together in Section 7.3.6.2.2 under the heading "Claim under
Articles 1.1 and 1.2(a), second sentence, of the CVA", and another set of two alternative claims
under Articles 2.1 and 3.1 regarding the determination of an alternative customs value, which we
address together as alternative claims in Section 7.3.6.2.3 under heading "Claims under Articles 2.1
and/or 3.1 of the CVA". We understand the Philippines to request that instead of presenting our
conclusions on the claims considered in these two subsections together at the end of the analysis in
paragraph 7.731. under the heading "Conclusion", we should separate the conclusions contained
therein and instead present them as conclusions within, and at the end of, Sections 7.3.6.2.2 and
7.3.6.2.3. We note that these conclusions are already separated in paragraph 8.2(a) and (b) of the
Conclusions and Recommendations section of the Report, and it is not apparent to us that the change
requested by the Philippines is necessary. However, insofar as the Philippines' request is motivated
by the concern that grouping these conclusions together in a single paragraph could be read as
suggesting that they are not independent claims or findings, we agree that it may be useful to first
present these conclusions as separate conclusions within Sections 7.3.6.2.2 and 7.3.6.2.3. We have
done so, and we have also adjusted the language in paragraph 7.731. to state explicitly that these
are two distinct sets of claims.
6.45. Regarding paragraph 7.759. , Thailand disagrees with the Panel's characterization that
Thailand's defences under Article XX(a) and XX(d) "essentially reiterate" the argument that "the
Charges do not involve any customs valuation determination in the first place, and that the reference
to the King Power prices merely serves the purpose of providing a possible benchmark to the Criminal
Court to impose fines in the event of a conviction". Thailand requests the Panel to also address the
specific facts and arguments put forward by Thailan d, including in its first written submission
(paragraphs 6.103-6.112 and 6.120-6.131) and second written submission (sections 3.6.3 to 3.6.6).
Also regarding paragraph 7.759. , the Philippines requests that the Panel supplement its
observations by explicitly stating the necessary consequence of its findings in paragraph 7.759. ,
which is that the "aspect of the Charges that needs to be justified under Article XX" is not the use
of King Power's prices as a possible benchmark for the imposition of a fine, but, rather the Charges'
WTO-inconsistent customs valuation. The Philippines further requests the Panel to confirm that a
WTO-inconsistent customs valuation could never be necessary for the proper enforcement of
Thailand's customs laws. Having carefully considered the parties' req uests, we are not convinced
that there is any reason to modify or add to the existing text of paragraph 7.759. . First, while we
note that Thailand disagrees with our characterization of how its defences under Article XX(a) and
(d) relate to its arguments regarding the applicability of the CVA, and while we recognize and
appreciate that it has made very detailed submissions elaborating its defences u nder Article XX(a)

85 See Philippines' and Thailand's responses to Panel question No. 70(a).

and (d), we are not persuaded that we have incorrectly or unfairly characterized its essential
argument. Second, we understand the Philippines' requests to be motivated by the concern that, if
Thailand were to successfully appeal the Panel's findings on the applicability of Article XX to the CVA,
there may be insufficient findings on the record to complete the analysis as to whether the Charges
are justified under Article XX. As already indicated in paragraphs 7.758. to 7.760. , we are not
convinced that we need to make any additional factual findings, beyond those already made in earlier
sections of its Report, to assist the Appellate Body in completing the analysis under Article XX.
Likewise, we do not see how the Appellate Body's ability to complete the analysis would turn on the
presence or absence, in our Report, of the particular statements requested by the Philippines.
Accordingly, we have not revised paragraph 7.759. .
6.46. Thailand asks the Panel to modify paragraph 7.784. , which sets forth the Panel's
understanding that the article from the Bangkok Post must have been based on the information
contained in the Annex to the Charges because the comparison between PMTL's import prices with
those of King Power in the article mirrors the comparison in the Annex to the Charges, to reflect the
fact that it is not clear that the information in the Bangkok Post was necessarily based on the Annex
to the Charges. Thailand observes that, while the Panel is saying that this is the first time that King
Power's import prices were disclosed and compared to PMTL's import prices, this is incorrect because
King Power's import prices and the comparison with those of PMTL also appear in several past press
articles, including the DSI press release from September 2009 (Exhibit PHL-90-B), and press articles
from 2006 and 2009. For that reason, Thailand requests the Panel to modify the paragraph at issue
and reflect this. The Philippines submits that the Panel is correct that the information in the Bangkok
Post necessarily demonstrates knowledge of some of the information contained in the Annex to the
Charges, and there is no basis to modify paragraph 7.784. as Thailand suggests. We consider that
Thailand's request for modification proceeds on an incorrect premise. The Panel does not proceed
on the premise that this is the first time that King Power's import prices were disclosed and compared
to PMTL's import prices. Rather, as explained in paragraph 7.784. , the Panel reasons that the article
from the Bangkok Post must have been based on t he information contained in the Annex to the
Charges because the comparison between PMTL's import prices with those of King Power in the
article mirrors the comparison in the Annex to the Charges. Thailand has not sufficiently explained
why, absent knowledge of the fact that the Charges are based on a comparison between the prices
of King Power and the PMTL as set forth in the confidential Annex, that information would be included
in a press article reporting on the Charges.
6.47. Thailand requests that the Pane l delete the third sentence of paragraph 7.789. , which
reads: "We agree with the Philippines that this evidences a consistent pattern by Thailand of
disclosing PMTL's confidential information, contrary to Article 10 of the CVA." Thailand considers that
this statement amounts to a legal finding of inconsistency with Article 10 of the CVA of an alleged
measure that was not before the Panel, and notes that the Panel itself stated, in paragraph 7.787. ,
that "it would be outside of our terms of reference to make any findings of inconsistency unde r
Article 10 with respect to the DSI press releases from September 2009 and August 2011, and we
make no such findings". The Philippines submits that there is no basis to construe the Panel's
statement in paragraph 7.789. as amounting to a "legal finding of inconsistency with Article 10".
The Philippines notes that the Panel expressly notes that Thailand's prior disclosures were not
identified as m easures, and are therefore outside its terms of reference. In this regard, the
Philippines observes that, instead of finding that Thailand's "'consistent pattern' of behavior"
constitutes a "measure", the Panel explains that Thailand's previous conduct con stitutes relevant
factual circumstances, which have "probative value" to the question before it, namely whether, in
January 2016, Thai officials disclosed PMTL's transaction values to the press. In order to avoid any
ambiguity, we have revised paragraph 7.789. .
6.7 The VAT notification requirement
6.48. Thailand requests the Panel to specify in paragraph 7.798. of the section on the factual
background that "the Revenue Department reserves the right to verify whether the notified price is,
in fact, the average actual purchase price". The Philippines do es not object to Thailand's request.
We note that in the course of this proceeding the parties disagreed on the precise content of the
Revenue Department's practice. As discussed in paragraph 7.881. , "according to the Philippines,
in the course of audit, the Revenue Department would be comparing the notified RRSP against the
RRSP in force on the date of notification; according to Thailand, the Revenue Department would be
comparing the notified RRSP against the average actual market price on the date of notification." To
resolve this disagreement, we have found in paragraphs 7.881. to 7.884. that the Revenue
Department reserves the right to verify whether the notified price reflects the average actual market

price. Since the factual issue that Thailand would like us to reflect in paragraph 7.798. is contested
by the parties, we consider that it is more appropriate to address it in the context of the Philippines'
claim under Article X:1 of the GATT 1994 rather than in the section on the factual background, which
reflects uncontested facts. We therefore decline Thailand's request to modify paragraph 7.798. .
Instead, to accommodate Thailand's concern we have modified the wording of paragraph 7.883. .
We have also added a reference to Thailand's response to Panel question No. 117 in the footnote to
paragraph 7.883. .
6.49. The Philippines requests us to delete paragraph 7.800 of the Interim Report, included in
Section 7.4.1.3 ("Claims not pursued") of the Interim Report. This paragraph stated that the
Philippines has not pursued a claim under Article III:4 of the GATT 1994 against TTM's exemp tion
from the competition law. The Philippines submits that, in its panel request, it did not identify TTM's
exemption from Thai competition law as a "measure" taken to comply; r ather, according to the
Philippines, it identified TTM's exemption from competition law as a factual circumstance relevant to
the Philippines' claims regarding discrimination under the VAT notification requirement. The
Philippines requests the Panel to delete paragraph 7.800 and Section 7.4.1.3 of the Interim Report
or, alternatively, to specify that the Philippines mentioned TTM's exemption from Thai competition
law both in its panel request and its submissions as a relevant factual circumstance, but did not
identify the exemption as a measure taken to comply. Thailand disagrees with the changes requested
by the Philippines and reiterates its request for additional findings under Article III:4 of the GATT
taking into account the amended competition law. We do not consider Section 7.4.1.3 of the Interim
Report to be essential to our analysis and therefore have deleted it from the Final Report. To reflect
this deletion, we have modified the language of paragraphs 7.800. and 7.801. .
6.50. Regarding the Panel's decision to examine Thai competition law as it existed on the da te of
the establishment of the Panel, as set out in Section 7.4.2.2, Thailand requests the Panel to make
an additional finding taking into account the amendment to Thailand's competition law that entered
into force on 5 October 2017. Specifically, Thailand submits that Thailand's VAT measures and
Thailand's amended competition law are not inconsistent with Article III:4 of the GATT 1994 because
cigarette importers and the producer of domestic cigarettes face the same requirements for purposes
of notifying the VAT base as neither of them benefits from an exemption from Thai competition law.
Thailand argues that the Panel's terms of reference extend to the amendment of the competition
law and that knowing whether Thailand's VAT notification requirement is WTO-consistent in light of
the current regulatory framework would help to secure a positive solution to the dispute. According
to Thailand, in the absence of such findings, the parties would be compelled to start new compliance
proceedings to resolve their disagreement as to whether the VAT measures have been brought into
compliance. The Philippines suggests that, instead of making additional findings, the Panel exercise
judicial economy over the Philippines' claim under Article III:4 of the GATT. For the reasons set forth
at paragraphs 7.808. to 7.811. , including in particular the potential utility of the Panel presenting
the parties' arguments and making factual findings that could assist the Appellate Body on appeal,
we have accepted Thailand's request and have accordingly modified paragraphs 7.807. to 7.811. ,
and 7.950. . We have added the summaries of the parties' arguments regarding the amendment in
Section 7.4.5.2, and have made additional findings in Section 7.4.5.4 ("Legisla tive changes in the
course of the proceeding"), at paragraphs 7.969. to 7.977. .
6.51. With regard to Section 7.4.2.3.2, Thailand requests that the Panel reflect the fact that the
Philippines has not produced any evidence of instances where the RRSP differed from the actual
retail prices used by retailers. In response, the Philippines points to paragraph 7.829. of the Interim
Panel Report, which states, "[w]e recognize that the Philippines has not identified any instances in
which PMTL's recommended price differed from the actual retail selling price". The Philippines
submits that there is no basis to revise Sec tion 7.4.2.3.2. We consider that
paragraph 7.829. indeed adequately reflects the issue raised by Thailand and thus no additional
language is necessary.
6.52. The Philippines recalls the Panel's finding that the Revenue Department has adopted an
unpublished administrative ruling that cigarette importers can notify RRSPs under Notification 187
and Order Por. 145 -2555 to the extent that they reflect the av erage actual market prices. The
Philippines then refers to the Panel's statement in paragraph 7.926. made in the context of the
analysis under Article X:3(a) that the unpublished administrative ruling "gives no guarantee that the
Revenue Department … will not impose penalties in the event of a divergence between the RRSP
and the average actual market price" and suggests an amendment to reflect that even if published,
the unpublished administrative ruling creates no legal certainty for importers that they are complying
with the VAT notification requirement correctly. Thailand submits that paragraph 7.926. adequately

reflects the consequences of the unpublished administrative ruling and that it is unnecessary to
insert additional language regarding the unpublished administrative ruling, an aspect relevant to the
claim under Article X:1, not Article X:3(a). As we explained in paragraph 7.926. , the administrative
ruling constitutes part o f Thailand's administration of the VAT rules and thus has to be taken into
account in the analysis under Article X:3(a). We therefore agree with the Philippines and consider it
appropriate to explain fully the consequences of the administrative ruling in t he contex t of our
analysis under Article X:3(a). Accordingly, we have modified paragraph 7.926. and added
paragraph 7.931. .
6.53. With regard to the Panel's analysis under Article II I:4 of the GATT 1994, the Philippines
suggests an amendment to paragraph 7.959. to reflect that, even if the Revenue Department's
administrative ruling is published, an importer cannot rely on this informal rule to establish its formal
compliance with the VAT notification requirement and to eliminate the uncertainty and legal jeopardy
facing importers. The Philippines explains that the Revenue Department accepts RRSPs only to the
extent that they reflect the average actual market prices and therefore the informal rule would not
protect importers in the event of a divergence between the RRSP and the average actual market
price. Thailand considers that the additional language regarding the administrative ruling suggested
by the Philippines is unnecessary for the Panel's findings under Article III:4 since this part of the
Panel Report does not deal with Article X:1 of the GATT 1994. We recall that under Article III:4
Thailand argued that the practice of notifying RRSPs "applies equally to both TTM and the
importers".86 We therefore consider that the discussion of the Revenue Department's practice, which
we found to be an administrative ruling within the m eaning of Article X:1, is appropriate for our
examination of the claim under Article III:4. We have modified paragraph 7.959. accordingly.
7 FINDINGS
7.1 Initial considerations
7.1.1 Introduction
7.1. The Philippines' complaint in this proceeding, initiated under Article 21.5 of the DSU, concerns
the alleged failure by Thailand to comply with the DSB's recommendations and rulings in the original
proceeding in Thailand – Customs and Fiscal Measures on Cigarettes from the Philippines (DS371).87
7.2. In S ection 1 above, we recalled the panel and Appellate Body findings in the original
proceeding, listed Thailand's declared measures taken to comply, recapitulated the procedural
rulings that we made in the course of the proceeding, and specified the three sets of measures
challenged by the Phil ippines in this proceeding. In S ection 2 above we identified the relevant
governmental and corporate entities implicated by the measures, and in Section 3 we set forth the
parties' requests for findings in relation to those measures.
7.3. Before turning to our analysis of the measures at issue in this Article 21.5 compliance
proceeding, we address several preliminary issues at the out set, including the jurisdiction of the
Panel, Thailand's request for a preliminary ruling in respect of certain evidence submitted by the
Philippines, and the relevance of Thailand's developing country status to our objective assessment
of the matter.
7.1.2 Jurisdiction of the Panel
7.1.2.1 The scope of Article 21.5 compliance proceedings
7.4. Article 21.5 of the DSU provides, in relevant part:
Where there is disagreement as to the existence or consistency with a covered
agreement of measures taken to comply with the recommendations and rulings [of the

86 Thailand's first written submission, para. 7.32.
87 See Panel Report, Thailand –Cigarettes (Philippines), WT/DS371/R, adopted 15 July 2011, as modified
by Appellate Body Report WT/DS371/AB/R; and Appellate Body Report, Thailand – Cigarettes (Philippines),
WT/DS371/AB/R, adopted 15 July 2011.

DSB] such dispute shall be decided through recourse to these dispute settlement
procedures, including wherever possible resort to the original panel.
7.5. Panels and the Appellate Body have explained that the object and purpose of Article 21.5 is to
provide for expedited procedures to determine whether a Member has properly implemented the
recommendations and rulings of the DSB in the dispute.88 The Appellate Body has made clear that,
compared to the original panel pr oceedings, Article 21.5 proceedings "do not concern just any
measure".89 The mandate of a panel established under Article 21.5 is limited to an examination of
"measures taken to comply with the recommendations and rulings " of the DSB. 90 These are
"measures which have been, or which should be, adopted by a Member to bring about compliance
with the recommendations and rulings of the DSB ".91 Thus, the scope of Article 21.5 proceedings
depends on (i) the existence of relevant recommendations and rulings of the DSB , and (ii) the
existence (or otherwise) of measures taken to comply with those recommendations and rulings.
7.6. It is well established that a panel is entitled to consider the issue of its jurisdiction on its own
initiative, and must satisfy itself of its juri sdiction in any dispute that comes before it. 92 Therefore,
even where the respondent declares that a measure is one taken to comply, we do not a priori
exclude the possibility that there might be circumstances where a compliance panel would consider
it necessary to conduct its own assessment of whether that "declared" measure taken to comply
falls within its jurisdiction. Having said this, we are not aware of any case to date in which a
compliance panel has conducted its own assessment of whether a "declared" measure taken to
comply by the respondent falls within the scope of a compliance panel proceeding. 93 Accordingly,
where a respondent declares that a challenged measure is one "taken to comply", and that measure
is subsequently challenged by the complainan t in an Article 21.5 compl iance proceeding, a
compliance p anel may be expected to proceed on that shared understanding, unless there are
extraordinary circumstances compelling a panel to conduct its own independent assessment.
7.7. Where there is a disagreemen t between the parties about whether a measure that is not a
"declared" measure taken to comply nevertheless falls within the scope of a compliance proceeding,
the panel must make an objective and independent assessment of that issue. The starting point is
that inherent in proceedings under Article 21.5 of the DSU is "the need to balance important systemic
interests"94 and ensure due process for both the complainant and respondent. Expanding the scope
of a compliance proceeding to cover older measures not challenged by the complainant in the context
of the original proceeding, and to include measures other than those declared by the respondent to
be a measure "taken to comply", may be necessary to ensure prompt and thorough verification of
compliance, and to e nsure due process to the complainant. H owever, expanding the scope of a
compliance proceeding in this way can also compromise due process for the respondent insofar as
it circumvents the ordinary dispute settlement process by enabling a complainant to obtain a finding
of non-compliance and potentially seek retaliation without the respondent having had a reasonable
period of time in which to bring any inconsistent measures into compliance.95
7.8. The scope of a panel's jurisdiction with resp ect to what measures and claims it may consider
in an Article 21.5 compliance proceeding has been addressed by a number of panels and the
Appellate Body, and several fundamental principles have emerged from these decisions. On the one
hand, in the interest of ensuring prompt and thorough verification of compliance and due process

88 Appellate Body Report, EC – Bed Linen (Article 21.5 – India), para. 98; and Panel Reports, US –
Countervailing Measures on Certain EC Products (Article 21.5 – EC), para. 7.74; Chile – Price Band System
(Article 21.5 – Argentina), para. 7.135.
89 Appellate Body Report, Canada – Aircraft (Article 21.5 – Brazil), para. 36. (emphasis original)
90 Appellate Body Report, US – Zeroing (EC) (Article 21.5 – EC), para. 199.
91 Appellate Body Report, Canada – Aircraft (Article 21.5 – Brazil), para. 36.
92 Appellate Body Reports, US – 1916 Act, fn 30; Mexico – Corn Syrup (Article 21.5 – US), para. 36; EC
and certain member States – Large Civil Aircraft, para. 791.
93 The Appellate Body has stated that, "if the measure at issue is found to constitute in itself a measure
taken to comply, it will not be necessary to establish a 'particularly close relationship' of the measure at issue
to the declared measure taken to comply in order to subject the measure at issue to the scope of Article 21.5."
(Appellate Body Report, EC – Bananas III (Article 21.5 – US/Article 21.5 – Ecuador II), paras. 244-245
(emphasis added)) The Appellate Body's finding is consistent with our understanding that, where a measure is
declared to be a measure taken to comply by the respondent, it is generally not necessary for a compliance
panel to independently establish that it has a close nexus to any other "measure taken to comply", or to the
DSB's recommendations and rulings.
94 Panel Report, China – GOES (Article 21.5 – US), para. 7.11.
95 Panel Report, China – GOES (Article 21.5 – US), para. 7.11.

for the complainant, it is now accepted that nothing in Article 21.5 limits the scope of a compliance
panel's mandate to considering only certain claims in relation to , or certain aspects of, a measure
taken to comply. In other words, a measure taken to comply with the DSB's recommendations and
rulings is "a new and different measure " that must be examined in its totality, and an Article 21.5
panel must, in principle, examine all cl aims of inconsistency regarding the new measure, including
those claims that are new and different from those raised in the original proceeding. 96 Thus, a
complainant can challenge all aspects of a new measure taken to comply, not only those aspects
related to issues covered by the original proceeding. 97 Furthermore, a panel is not limited, in
conducting its review under Article 21.5, to examining the measures taken to comply from the
perspective of the claims, arguments and factual circumstances related to the measure that was the
subject of the original proceeding.98
7.9. On the other hand, with a view to avoiding the circumvention of the ordinary dispute settlement
process and protecting the due process rights of the respondent, it is well established that an Article
21.5 proceeding must be narrower in scope than an original proceeding, in particular with respect
to the types of measures at issue.99 Two fundamental limitations warrant emphasis at the outset of
our findings.
7.10. First, a compliance panel proceeding is not an opportunity to "re-litigate" issues that were
addressed, or that could have been addressed, in the original proceeding.100 The Appellate Body has
concluded that, in the context of a compliance proceeding, a complainant may be precluded from
bringing the same claim with respect to an aspect of the respondent's measure that is unchanged
from the original dispute.101 An unchanged aspect of the original measure that the respondent does
not have to change, and does not change, in complying with the recommendations and rulings of
the DSB thus should not be susceptible to challenge in a compliance proceeding. 102 This limitation
applies where a complainant: (i) could have challenged the unchanged measure (or unchanged
aspect thereof) in the original proceeding but chose not to; or (ii) did challenge the unchanged
measure (or aspect thereof) in the original proceeding, but failed to establish a prima facie case.103
7.11. Second, even if a new measure is not one that was challenged or that could have been
challenged in context of the original proceeding, it will still not necessarily fall within the jurisdiction
of a compliance panel. To determine whether a new measure that is not one of the "declared"
measures taken to comply is nonetheless a "measure taken to comply " for the purpose of Article
21.5 of the DSU , the Appellate Body has articulated a "nexus-based test "104, or "close nexus
analysis".105 This test requires an examination of how the measure at issue relates to the
respondent's declared measure(s) taken to comply, and to the DSB's recommendations and rulings
in the original proceeding. The Appellate Body has noted that:
Some measures with a particularly close relationship to the declared "measure taken to
comply", and to the recommendations and rulings of the DSB, may also be susceptible
to review by a panel acting under Article 21.5. Determining whether this is the case
requires a panel to scrutinize these relationships, which may, depending on the
particular facts, call for an examination of the timing, nature, and effects of the various
measures. This also requires an Article 21.5 panel to examine the factual and legal
background against which a declared "measure taken to comply " is adopted. 106
(emphasis added)

96 Appellate Body Reports, US – Shrimp (Article 21.5 – Malaysia), paras. 86-87; Canada – Aircraft
(Article 21.5 – Brazil), paras. 40-42; US – FSC (Article 21.5 – EC), para. 222; and EC – Bed Linen (Article 21.5
– India), para. 79.
97 See, e.g. Panel Report, EC – Bananas III (Article 21.5 – Ecuador), paras. 6.3-6.12.
98 See, e.g. Appellate Body Report, Canada – Aircraft (Article 21.5 – Brazil), paras. 37-41.
99 Appellate Body Report, US – Softwood Lumber IV (Article 21.5 – Canada), para. 72.
100 Appellate Body Reports, EC – Bed Linen (Article 21.5 – India), para. 96; US – Upland Cotton
(Article 21.5 – Brazil), para. 210; and Panel Report, US – Large Civil Aircraft (2nd complaint) (Article 21.5 –
EU), para. 7.35.
101 Appellate Body Report, EC – Bed Linen (Article 21.5 – India), paras. 88-89.
102 Appellate Body Report, EC – Bed Linen (Article 21.5 – India), paras. 88-89.
103 See Section 7.3.2 of this Report.
104 Panel Report, US – Zeroing (EC) (Article 21.5 – EC), para. 8.98.
105 Appellate Body Report, US – Zeroing (EC) (Article 21.5 – EC), section VI.B.
106 Appellate Body Report, US – Softwood Lumber IV (Article 21.5 – Canada), para. 77.

7.12. The "close nexus " analysis, therefore, consists of examining whether, in terms of timing,
nature and effects, the disputed measure is sufficiently connected with the declared measures taken
to comply and with the DSB's recommendations and rulings.
7.13. Based on the foregoing, if we wer e to find that any of the challenged measures (or aspects
thereof) could have been challenged in the original proceeding, or were already challenged in the
original proceeding, then we would find that the Philippines is precluded from challenging those same
measures (or aspects thereof) in this proceeding. Furthermore, if we were to find that any of the
challenged measures that are not a declared measure taken to comply only have general links,
associations, similarities or connections to general matters ad dressed in the original proceeding107,
then we would find that the Philippines is precluded from challenging those measures in this
proceeding.
7.1.2.2 The measures at issue in this proceeding
7.14. As explained in Section 2.3 above, the Philippines has challenged three sets of measures in
this Article 21. 5 compliance proceeding, namely (i) measures related to the BoA Rulin g of
16 November 2012 (the BoA Ruling); (ii) measures related to t he criminal charges filed on
18 January 2016 by the Public Prosecutor against PMTL and seven of its current and former
employees (the Charges); and (iii) measures related to the notification requirement concerning the
VAT base applicable to cigarette importers. It is uncontested that each of the challenged measures
is specifically identified in the Philippines' request for establishment of a panel, in accordance with
the requirements of Article 6.2 of the DSU. As elaborated below, it is also uncontested that most of
these measures fall within the scope of this Article 21.5 compliance proceeding.
7.15. As regards the first set of measures, it is uncontested that all of the challenged measures
related to the BoA Ruling fall within the scope of this compliance panel proceeding. The BoA Ruling
itself is one of Thailand's declared measures taken to comply with the DSB's recommendations and
rulings in the original proceeding. 108 More specifically, the original panel found that Thailand acted
inconsistently with Articles X:3(a) and (b) of the GATT 1994 by virtue of delays in the administrative
review proceedings before the BoA in relation to outstanding appeals relating to customs
valuation109, and the parties agree that the BoA Ruling issued on 16 November 2012 is a "measure
taken to comply" with the DSB's recommendations and rulings under Articles X:3(a) and (b) of the
GATT 1994. 110 Taking into account the absence of any disagreement between the parties, we
conclude that the BoA Ruling is a "measure t aken to comply" falling within the scope of this
proceeding.
7.16. Additionally, the Philippines has challenged 180 Revised Notices of Assessment that were
issued in January 2013, pursuant to the BoA Ruling issued on 16 November 2012. The Philippines
explains that they "derive mechanically from the BoA Ruling and are, therefore also measures taken
to comply", because they are "a means of assessing and collecting outstanding customs duties due
on the customs values determined in the Ruling ".111 Thailand does not contest that understanding.
Taking into account the absence of any disagreement between the parties, we conclude that the 180
Revised Notices of Assessment constitute "measures taken to comply" falling within the scope of this
proceeding.
7.17. Regarding the second set of measures, Thailand maintains that the Philippines is precluded
from challenging the Charges in this compliance proceeding because it challenged essentially the
same measure in the original dispute and failed to make a prima facie case of WTO-inconsistency.
Thailand also argues that the Charges do not have a sufficiently close nexus with the matters covered
by the DSB's recommendations and rulings or the BoA Ruling of 12 September 2012, and therefore
they are not a "measure taken to comply" with the DSB's recommendations and rulings within the

107 Thailand's rebuttal submission on the preliminary ruling request, paras. 3.21 and 3.40; first written
submission, para. 3.13.
108 WT/DS371/15/Add.8, and see paragraph 1.9. d above.
109 Panel Report, Thailand – Cigarettes (Philippines), paras. 8.4(e) and (f).
110 Parties' responses to Panel question No. 1(a).
111 Philippines' first written submission, paras. 237-238 (referring to Appellate Body Reports, US –
Zeroing (EC) (Article 21.5 – EC), para. 311; and US – Zeroing (Japan) (Article 21.5 – Japan), para 181).

meaning of Article 21.5 of the DSU. We will address the parties' arguments on these issues in the
context of our assessment of the Charges further below.112
7.18. We recall that , in addition to the Charges themselves, the challenged measures include
Thailand's alleged disclosure to the Thai media of the declared transaction values for entries covered
by the Charges. Thailand argues that the Philippines has failed to demonstrate that Thai officials
disclosed PMTL's transaction values to the media, but Thailand does not contest the premise that
the alleged disclosure of PMTL's import prices to the press in January 2016 is a measure that falls
within the scope of this compliance proceeding. We recall that the original panel found that Thailand
acted inconsistently with Article 10 of the CVA by disclosing PMTL's import prices to the Thai
media.113 In this proceeding, the Philippines claims that Thai officials did so again in connection with
the issuance of the Charges in January 2016, and that this subsequent disclosure represents another
violation of Article 10.114 Taking into account the absence of any disagreement on Thailand's part,
we consider that there is a sufficiently close nexus between the challenged measure (i.e. the alleged
disclosure of PMTL's import prices to the press) and the DSB's recommendations and rulings in the
original proceeding, such that the Philippines' claim against this measure is within our jurisdiction.
This is without prejudice to our assessment of the merits of the Philippines' claim, and in particular
whether or not the Philippines has proven its allegation that Thai officials disclosed PMTL's import
prices to the press in January 2016, and thereby substantiated this element of its claim under Article
10 of the CVA. That is an issue that goes to our assessment of the merits of the Philippines' claim,
and we do not consider it in the context of determining whether we have jurisdiction in respect of
the claim under Article 10 of the CVA.
7.19. Regarding the third set of measures, it is uncontested that all of the challenged measures
related to the VAT notification requirement fall within the scope of this compliance proceeding. In
the original proceeding, the panel found that Thailand had acted inconsistentl y with Article III:2 of
the GATT 1994 by subjecting imported cigarettes to a VAT liability in excess of that applied to like
domestic cigarettes, by means of the calculation of the government -mandated MRSPs that were
used as the VAT base.115 In response to the DSB's recommendations and rulings, Thailand modified
its VAT regime, and declared these modifications to be a measure taken to comply. 116 Thailand
promulgated the challenged measures – Notification 187 and Order Por. 145 -2555 – on
31 August 2012 and 30 No vember 2012, respectively. The Philippines argues that since
Notification187 and Order Por. 145-2555 directly replace Thailand's earlier framework for calculating
the VAT base through MRSPs, they have "the necessary connections – to both Thailand's declare d
measures taken to comply and to the subject -matter of the dispute", to be "measures taken to
comply".117 Thailand has not contested this understanding. R ather, Thailand confirms that it
"implemented the recommendations and rulings of the DSB regarding its VAT tax base by changing
the tax base for VAT on cigarettes from the old 'maximum retail selling price' to the average actual
retail selling price for each brand, as notified by the producer/importer to the Revenue
Department".118 In the absence of any disag reement on Thailand's part, we agree with the
Philippines that the VAT notification requirement arising from Notification 187 and Order Por. 145-
2555 are "measures taken to comply" falling within the scope of this proceeding.
7.20. Additionally, we observe that the Philippines' claim under Article X:1 of the GATT 1994
regarding Thailand's failure to publish the rule that it has allegedly adopted, of permitting the
recommended retail selling price to be notified as a proxy for the ave rage actual market price, is
intrinsically linked to Notification 187 and Order Por. 145-2555. Thus it is closely connected to these
measures taken to comply, and to the DSB's recommendations and rulings, in the sense that it only
exists in the context of those measures. Thailand argues that the Philippines has failed to
demonstrate that the Revenue Department has adopted such a rule, but Thailand does not contest
the premise that its failure to publish the rule that it has allegedly adopted is a measure falling within
the scope of this compliance proceeding. In the absence of any disagreement on Thailand's part, we
consider that the measure challenged by the Philippines, i.e. the failure to publish the alleged
practice of permitting the recommended retail selling price to be notified as a proxy for the average
actual market price, is a "measure taken to comply" falling within the scope of this proceeding. Of

112 See Sections 7.3.2 and 7.3.3 below.
113 Panel Report, Thailand – Cigarettes (Philippines), para. 8.2(g).
114 See Section 7.3 8.
115 Panel Report, Thailand – Cigarettes (Philippines), paras. 7.567 and 8.3(a); Philippines' first written
116 See Statement by Thailand to the DSB, 24 May 2012, WT/DSB/M/316.
118 Thailand's second written submission, para. 4.3.

course, this is without prejudice to our assessment of the merits of the Philippines' claim, and in
particular whether or not the Philippines has proven its allegation that the Revenue Department has
adopted a rule permitting the recommended retail selling price to be notified as a proxy for the
average actual market price. That is an issue that goes to o ur assessment of the merits of the
Philippines' claim under Article X:1.
7.1.3 The ACWL/Commerce letters and lawyer-client privilege
7.1.3.1 Introduction
7.21. In its second written submission, the Philippines referred to a May 2013 legal opinion prepared
for Thailand by th e Advisory Centre on WTO Law (ACWL), Thailand's legal counsel in this
proceeding.119 The Philippines stated that the legal opinion "directly contradicts the position that
Thailand now takes before the Panel that the CVA does not, a priori, apply to customs enforcement
actions taken by municipal law enforcement agencies ".120 The Philippines submitted the ACWL
opinion, as well as a related letter by the Ministry of Commerce, as Exhibit PHL -150 (the
ACWL/Commerce Letters).
7.22. On 9 May 2017, Thailand filed a "request for a procedural ruling regarding the violation of its
due process rights ", in which it requested that the Panel decline to rule on the Charges as a
consequence of the Philippines submitting "lawyer-client privileged legal advice from Thailand's legal
advisors".121 While Thailand's request is framed as a request for a procedural ruling regarding its
"due process rights", Thailand has stated that "it has, primarily, asked the Panel to make a ruling
under Article 11 of the DSU that its ability to make an objective assessment of the matter has been
compromised".122 In response to a question from the Panel, Thailand has clarified that the three
distinct grounds for its request are that: (i) Thailand's "due process" rights have been violated; (ii)
the Philippines ha s not acted "in good faith "; and (iii) the Panel is prevented from making an
"objective assessment of the matter" because the "objectivity of the panel is tainted".123
7.23. As already indicated in the descriptive part of the Report124, we considered that it was in the
interests of due process and the efficient conduct of the proceedings to rule on Thailand's request
prior to the substantive meeting with the parties. On 2 August 2017, we informed the parties and
third parties that, for reasons to be elaborated in our Report, we had concluded that Thailand had
failed to demonstrate : that its due p rocess rights had been violated; that the Philippi nes had not
acted in good faith; or that the Panel was prevented from making an objective assessment of the
matter as a conse quence of the Philippines submitting the ACWL/Commerce Letters to the Panel.
The Panel therefore rejected Thailand's request that, as a consequence of the Philippines submitting
the ACWL/Commerce Letters to the Panel, the Panel should decline to rule on the Philippines' claims
relating to the Charges. For the same reasons, the Panel declined Thailand's request that the Panel
exclude Exhibit PHL-150 from the record and strike t he related references from the Philippines'
second written submission.
7.24. Thailand reacted to the Philippines' opening statement at the substantive meeting with the
Panel by reiterating its objection to the Philippines' reference to the ACWL/Comm erce Letters. This
triggered a further exchange of arguments on this matter between the partie s at the meeting and
in their subsequent responses to questions and comments thereupon. As part of this further
exchange of arguments, Thailand requested the Panel "to explain clearly in its ruling whether it
considers that the Philippines' good faith/due process obligations and the Panel's due process
obligations extended merely to inquiring whether the Philippines acted legally", and if not, Thailand
"requests the Panel to explain clearly what additional steps were required of the Philippines and
where it took those steps in this case ".125 The Philippines responded that Thailand's "unsolicited

119 Philippines' second written submission, paras. 435-436, 558-561 and 576-577 (referring to
Commerce Ministry Letter annexing ACWL Letter, 22 January 2014 (English translation), (Exhibit PHL-150-B)).
121 Thailand's request for a procedural ruling, para. 1.1.
122 Thailand's reply to the Philippines' comments on the procedural ruling request, para. 4.6.
123 Thailand's response to Panel question No. 35.
124 See paragraphs 1.24. to 1.27. above.
125 Thailand's responses to the Panel's second set of questions, p. 40. Thailand presented this request
under the heading "Thailand's request for a procedural ruling", not in response to any particular question from
the Panel. In the context of providing its comments on the draft descriptive part of the Report issued to the

comment" on an issue "closed by the Panel's ruling of 2 August 2017 " seems "to demand findings
from the Panel that Thailand may use to support some theory for an appeal", and "amounts to little
more than an invitation to the Panel to provide an advisory opinion on a topic not properly briefed
by the parties".126
7.25. We note that Thailand has made this request for additional clarification prior to seeing our
reasoning for our ruling on its request , as elaborated in the Report. Our ruling on the
ACWL/Commerce Letters, and the reasons that we elaborate below in support of that ruling, form
an integral part of this Report. In accordance with Article 15.2 of the DSU, both parties have the
right to request the Panel to review "precise aspects" of the Report in the context of the interim
review phase of the proceeding. Those requests may extend to precise aspects of the reasoning that
we have elaborated below in support of ou r ruling on the ACWL/Commerce Letters. While nothing
requires that a disputing party wait until it has seen a panel's interim report before asking a panel
to address or clarify certain points in its reasoning, we consider that it would be more efficient an d
fruitful to address any requests that either party wishes to make in connection with precise aspects
of our reasoning on the ACWL/Commerce Letters in the context of the interim review phase of the
proceeding.
7.1.3.2 Main arguments of the parties
7.26. Thailand submits that "the privileged nature of communications between a Member and its
legal advisors is an essential component of the Member's right to access and use legal advice to
defend itself in dispute settlement proceedings ", and that "the importance of the law yer-client
privilege is recognized in most legal systems around the world ".127 Thailand accepts that the
privileged/confidential nature of legal advice "may of course be waived by the party receiving the
advice", but maintains that "tribunals are naturally generally very reluctant to deem or imply waivers
where there has been no express waiver" and that "waivers of essential due process rights must be
express and clear".128 Thailand considers that the Philippines failed to act in good faith under Article
3.10 of the DSU by submitting the documents to the Panel129, that "Thailand's essential due process
right to defend itself fully before the Panel has been violated", and that the Philippines' actions "have
compromised the Panel's ability to undertake an objective assessment of the matter as stipulated in
Article 11 of the DSU and the Panel can no longer make an objective assessment".130
7.27. Thailand submits that notwithstanding the Public Prosecutor's disclosure of the
ACWL/Commerce Letters to PMTL in May 2016, these documents continued to be subject to lawyer-
client privilege for purposes of WTO dispute settlement proceedings because "it is clear that Thailand
never consented, expressly or even impliedly, to the use of these documents by the Philippines in
WTO proceedin gs".131 Thailand asserts that, under Thai law, the right to access documents, as
exercised by PMTL in the context of Thai criminal proceedings, is "normally for the purpose only of
enabling a party to defend itself in the instant Thai court proceedings [and] …. is normally understood
to mean that the documents would not be shared publicly or used for another purpose, such as
separate proceedings between different entities in an international forum".132 Thailand suggests that
this understanding also explains why the Public Prosecutor chose to disclose the documents at issue
even though he had a choice to refuse to do so. 133 Thailand further recalls that the Thai Criminal
Court issued an interim order on 27 June 2016 requiring that any documents in the case be kept
confidential, and submits that it is not relevant that the Public Prosecutor did not designate the
Commerce/ACWL Letters as meriting special protection.134 Furthermore, Thailand stresses that the
documents were clearly labelled "confidential" and clearly include material that would normally be
considered to be lawyer -client privileged.135 Based on the foregoing, Thailand considers that the

parties in accordance with Article 15.1 of the DSU, Thailand subsequently asked the Panel to record these
requests.
126 Philippines' comments on Thailand's responses to the set of questions, paras. 128 and 133.
127 Thailand's request for a procedural ruling, paras. 1.13 and 1.16.
128 Thailand's request for a procedural ruling, para. 1.19.
129 Thailand's reply to the Philippines' comments on Thailand's request for a procedural ruling, para. 4.5.
130 Thailand's reply to the Philippines' comments on Thailand's request for a procedural ruling, para. 5.1.
131 Thailand's reply to the Philippines' comments on Thailand's request for a procedural ruling, para. 1.4.
(emphasis added)
132 Thailand's reply to the Philippines' comments the procedural ruling request, para. 3.24 (referring to
Criminal Procedure Code, Section 8, (Exhibit THA-37)).
133 Thailand's reply to the Philippines' comments the procedural ruling request, para. 3.35.
134 Thailand's reply to the Philippines' comments the procedural ruling request, paras. 3.27-3.29.
135 Thailand's reply to the Philippines' comments the procedural ruling request, para. 3.31.

Philippines' assertion that "there was no reason for the Philippines to consider that Thailand regarded
the ACWL/Commerce Letters as secret, confidential, or protected by law" is "simply inaccurate".136
7.28. The Philippines submits that it would be outside of the Panel's terms of reference to find that
it did not act in good faith137, and that, in any event, it is "evident that the Philippines has acted in
good faith".138 The Philippines submits that, if lawyer-client privilege amounts to a WTO due process
right, the nature of that right must be understood in light of the general principles applicable to
privilege.139 The Philippines submits that it is well established that privilege is waived by the party's
disclosure of a lawyer -client communication to a third party that is outside the lawyer -client
relationship, and thus the Public Prosecutor's choice to disclose the ACWL/Commerce Letters waived
any lawyer-client privilege attached to those documents.140 In addition, the Philippines submits that
the Panel "is perfectly capable of making an objective assessment of the claims regarding the
Charges irrespective of the arguments and evidence pr ovided by the two parties ", and the
ACWL/Commerce Letters do "not taint the Panel's own understanding and evaluation of the law".141
The Philippines states that it "is surprised to find itself having to defend its use of two documents …
that the Thai Public Prosecutor, an agent of the Thai government, chose to disclose to a third party,
and did so without asserting that the documents are confidential or privileged, and without imposing
any restrictions on the use of those documents".142 The Philippines submits that nothing in Thai law
prohibited PMTL from sharing the ACWL/Commerce Letters with the Philippines 143, and that the
consequences of disclosing the ACWL/Commerce Letters to third parties outside the lawyer -client
relationship are not cured by the fact that the Commerce Letter was stamped confidential.144
7.1.3.3 Analysis by the Panel
7.1.3.3.1 General considerations
7.29. Thailand's "request for a procedural ruling regarding the violation of its due process rights" is
said to be warranted as a consequence of the Philippines submit ting "lawyer-client privileged legal
advice from Thailand's legal advisors ".145 The concept of lawyer -client privilege, and the extent to
which it can be waived, are thus central to our consideration of Thailand's request. 146 As an initial
matter, the Panel notes that issues of due process, including questions regarding lawyer -client
privilege and the good faith conduct of WTO Members, are fundamental to the substantive
obligations of the Members as well as the dispute settlement system as a whole. The questi ons
raised as a result of Thailand's request, in our view, implicate significant due process considerations
concerning both parties to this dispute, and merit serious consideration. In light of this, we
emphasize that the decision by the Panel to reject Th ailand's procedural ruling request was made
following careful consideration of the parties' extensive arguments on the questions raised by
Thailand's request, and focusing on the particular factual circumstances surrounding the disclosure
of the ACWL/Commerce Letters.
7.30. The WTO has not elaborated any rules governing lawyer -client privilege, and thus there are
no directly applicable legal provisions or guidelines expressly addressing lawyer-client privilege that
we can refer to in order to resolve the issues raised by Thailand. Furthermore, there is very limited
prior WTO jurisprudence to guide our analysis. In EC – Seal Products, the only previous WTO dispute
settlement proceeding in which a similar issue arose, the complainants agreed to a request from the
respondent to withdraw the material at issue.147 In that case, all parties appeared to accept that the
legal opinions at issue were "classified documents under the applicable regulations of the European

136 Thailand's reply to the Philippines' comments the procedural ruling request, para. 3.39.
137 Philippines' comments on Thailand's request for a procedural ruling, paras. 20-21.
138 Philippines' comments on Thailand's request for a procedural ruling, para. 22.
139 Philippines' comments on Thailand's request for a procedural ruling, paras. 71-73 and 82.
140 Philippines' comments on Thailand's request for a procedural ruling, para. 64.
141 Philippines' comments on Thailand's request for a procedural ruling, paras. 60 and 98.
142 Philippines' comments on Thailand's request for a procedural ruling, para. 1.
143 Philippines' reply to Thailand's comments on the Philippines' comments on Thailand's request for a
procedural ruling, paras. 96-101.
144 Philippines' reply to Thailand's comments on the Philippines' comments on Thailand's request for a
procedural ruling, paras. 61-67.
145 Thailand's request for a procedural ruling, para. 1.1.
146 We use the expression "lawyer-client privilege" as a generic term to mean the same thing as
"attorney-client privilege" and "solicitor-client privilege", which are the expressions more commonly
encountered in the context of domestic legal systems.
147 Preliminary Ruling of the Panel, EC – Seal Products, WT/DS400/6; WT/DS401/7, para. 2.2.

Union and [which had] not been authorized by the EU Council for public disclosure".148 The panel in
that case considered that it was not necessary for it "to pronounce on the legal status of the
documents or the relevance thereof ", and that, given the complainants' willingness to remove the
documents, it was not necessary "to determine whether the European Union would [have suffered]
any impairment in its ability to defend itself in [those] proceedings were the documents to remain
in the record ".149 The panel further considered that, in light of the complainants' ag reement to
withdraw the documents from the record and their undertaking to refrain from making any reference
thereto in those proceedings, "the complainants' due process rights would not [have been] affected
by the removal of the two exhibits from the record".150
7.31. We note that the panel in EC – Tariff Preferences found itself in somewhat analogous
circumstances when confronted with a procedural issue on which the DSU is silent, and we find its
approach instructive. In that case, the responding party requested that the panel clarify whether,
as a matter of principle, the same legal counsel could represent simultaneously a complaining party
and a third party and, if so, under what conditions. 151 The panel first noted that the WTO has not
elaborated any rules governing the ethical conduct of legal counsel representing WTO Members in
particular disputes, and that therefore there were no directly applicable legal provisions or guidelines
to which it could refer to resolve the issue. The panel also observed that it was not aware of any
previous GATT or WTO dispute in which a panel or the Appellate Body had addressed the type of
"conflict of interest" issue raised by the European Communities.152 The panel observed that, whereas
issues of confidentiality and of measures necessary to maintain such confidentiality were addressed
in certain prior proceedings, "the factual settings and the rulings in those earlier cases [were] not
apposite to the issues raised by the European Communities".153 In such circumstances, the panel in
EC – Tariff Preferences considered that:
[F]lowing from its terms of reference and from the requirement, in Article 11 of the
DSU, to "make an objective assessment of the matter before it … ", as well as the
requirement, pursuant to Article 12 of the DSU, to determine and administer its Working
Procedures, the Panel has the inherent authority – and, indeed, the duty – to manage
the proceeding in a manner guaranteeing due process to all part ies involved in the
proceeding and to maintain the integrity of the dispute settlement system. With specific
reference to issues raised in the instant case, it is incumbent on the Panel to clarify
whether the ACWL's joint representation of India and Paragu ay poses any ethical
concerns of the kind raised by the European Communities. At the same time, and
although the European Communities asks the Panel for a ruling whether, as a matter of
principle, the same legal counsel can represent simultaneously a party and a third party
and, if so, under what conditions, the Panel considers that it cannot rule on such issues
in the abstract, but only as they relate to the specific case before it.154
7.32. Thus, i n the absence of directly applicable WTO rules expressly governing "conflicts of
interest" in respect of legal representation, the panel in EC – Tariff Preferences proceeded to identify
and apply general principles contained in the DSU relating to confidentiality, as well as "common
elements to ethical rules of conduct i n many jurisdictions [that] are equally appropriate to dealing
with issues of representational conflict of interest in the WTO dispute settlement context ".155 We
consider that a similar approach is warranted in the circumstances of this case. As elaborated further
below, the parties appear to agree that the Panel's analysis should apply or at least be informed
both by general principles of WTO dispute settlement – including a panel's duty to make an objective
assessment of the matter, the principle of due pro cess, and the principle of good faith – as well as
general principles applicable to the concept of lawyer-client privilege reflected in the practice of other

148 Preliminary Ruling of the Panel, EC – Seal Products, WT/DS400/6; WT/DS401/7, para. 2.2.
149 Preliminary Ruling of the Panel, EC – Seal Products, WT/DS400/6; WT/DS401/7, para. 3.1.
150 Preliminary Ruling of the Panel, EC – Seal Products, WT/DS400/6; WT/DS401/7, para. 3.3.
151 Panel Report, EC – Tariff Preferences, para. 7.3.
152 Panel Report, EC – Tariff Preferences, paras. 7.5-7.6.
153 Panel Report, EC – Tariff Preferences, para. 7.7.
154 Panel Report, EC – Tariff Preferences, para. 7.8.
155 Panel Report, EC – Tariff Preferences, paras. 7.9-7.11. The panel referred to American Bar
Association, Model Rules of Professional Conduct; State Bar of California, Rules of Conduct; New York State Bar
Association, Lawyer's Code of Professional Responsibility; Canadian Bar Association, Code of Professional
Conduct; Law Society of Upper Canada, Rules of Professional Conduct; Council of the Bars and Law Societies of
the European Union, Code of Conduct for Lawyers in the European Union; Barreau de Paris, Règles
professionnelles; and the Bar of England and Wales, Code of Conduct.

international courts and tribunals.156 We do not consider that either applies to the exclusion of th e
other, or that it would be correct to establish any hierarchy between these sets of principles.
7.33. The Appellate Body has linked principles of due process to Article 11 of the DSU. The Appellate
Body has stated, for example, that in conducting an "objective assessment" of a matter under Article
11 of the DSU, a panel "is bound to ensure that due process is respected ".157 We recall that in the
original proceeding, the Appellate Body explained the basis for this as follows:
Due process is intrinsically connected to notions of fairness, impartiality, and the rights
of parties 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 balanced and orderly manner, according to established rules. The protection of due
process is thus a crucial means of guaranteeing the legitimacy of and efficacy of a rules-
based system of adjudication.158
7.34. With regard to "good faith", Article 3.10 of the DSU establishes that "all Members will engage
in these procedures in good faith in an effort to resolve the dispute ". The Appellate Body has said
that by complying with the requirements of the DSU in good faith, complaining Members "accord to
the responding Members the full measure of protection and opportunity to defend, contemplated by
the letter and spirit of the procedural rules".159
7.35. Given that the relevant WTO dispute settlement rules and procedures are silent on the issue
of lawyer-client privilege, we consider that it is appropriate to review wider international practice in
this regard.160 We do so with a view to identifying common principles that may be equally appropriate
to dealing with issues of lawyer -client privilege in the WTO dispute settlement context. In th is
respect, we note that lawyer-client privilege is specifically regulated in the procedural rules of certain
international courts and tribunals.
7.36. The International Bar Association Rules on the Taking of Evidence in International
Arbitration161 provide that an international arbitral tribunal shall exclude any document from
evidence or production if there exists a "legal impediment or privilege under the legal or ethical rules
determined by the Arbitral Tribunal to be applicable ".162 However, those rules also in dicate that
tribunals must also take into account "any possible waiver of any applicable legal impediment or
privilege by virtue of consent, earlier disclosure, affirmative use of the Document, statement, oral
communication or advice contained therein, or otherwise".163
7.37. The Rules of Procedure and Evidence of the International Criminal Court provides that
"communications made in the context of the professional relationship between a person and his or
her legal counsel shall be regarded as privileged, and conse quently not subject to disclosure ".164
However, the same provision states that this general rule applies unless "the person consents in
writing to such disclosure", or "the person voluntarily disclosed the content of the communication to
a third party, and that third party gives evidence of that disclosure ".165 The same rule is replicated
in the Rules of Procedure and Evidence of the International Criminal Tri bunal for the former

156 Thailand's legal arguments on the issue of lawyer-client privilege place more emphasis on general
principles of WTO dispute settlement, including a panel's duty to make an objective assessment of the matter,
the principle of due process, and the principle of good faith, whereas the Philippines' arguments appear to
place more emphasis on general principles applicable to privilege.
157 Appellate Body Report, Thailand – Cigarettes (Philippines), para. 147 (quoting Appellate Body
Report, Chile – Price Band System, para. 176).
158 Appellate Body Report, Thailand – Cigarettes (Philippines), para. 147.
159 Appellate Body Report, US – FSC, para. 166.
160 As one panel observed, "it may be appropriate for panels to look to the practice of international
tribunals for inspiration, particularly in situations where the WTO agreements, GATT/WTO jurisprudence or
practice provide no useful guidance." (Panel Report, EC – Approval and Marketing of Biotech Products, para.
7.1663)
161 International Bar Association, Rules on the Taking of Evidence in International Arbitration, adopted
by a resolution of the IBA Council on 29 May 2010 (IBA Rules on Evidence).
162 IBA Rules on Evidence, Article 9.2(b).
163 IBA Rules on Evidence, Article 9.3(d).
164 Rules of Procedure and Evidence of the International Criminal Court, Rule 73(1).
165 Rules of Procedure and Evidence of the International Criminal Court, Rule 73(1)(a).

Yugoslavia166, the Internation al Criminal Tribunal for Rwanda 167, the Special Court f or Sierra
Leone168, and the Special Tribunal for Lebanon. 169 In applying this rule, international criminal
tribunals have confirmed that disclosure of a communication to a third party may waive lawyer-client
privilege. The International Criminal Court has conf irmed that privilege would be waived where
communications are disclosed, because "the content of communications made in the context of the
professional relationship … would be revealed ".170 Similarly, the International Criminal Tribunal for
Rwanda has found that "[a]ttorney/client privilege … was waived by the accused when he
communicated to persons other than his counsel, the content and nature of the documents".171
7.38. The Permanent Court of Arbitration (PCA) has recognized that "[t]he attorney-client privilege,
which is widely applied in domestic legal systems, has been recognized in public international and
international commercial arbitration rules and arbitral awards ".172 The PCA has also confirmed that
disclosure of a communication to a third party may waive lawyer-client privilege:
[L]egal communications which would qualify for privilege … may lose their privilege if
the party entitled to it waives the privilege by word or deed or voluntarily publicizes the
substance of the legal communications beyond the circ le of those who are authorized
to make or to participate in the making of the decision.173
7.39. The practice of investor -State dispute settlement tribunals is also a source of guidance on
common elements regarding the scope of lawyer -client privilege, and the pos sibility of waiver
through disclosure. The Tribunal in VG Gallo v Canada , citing to prior case law, confirmed that
"domestic legal concepts of solicitor -client privilege are recognised and protected by international
law".174 In several cases, investor-State tribunals have made rulings on whether a party's disclosure
of legal communications to one or more third parties had the consequence of waiving lawyer-client
privilege. For instance it has been established that in the government context, when the client is by
nature a group, lawyer-client privilege "is not defeated by circulation beyond the attorney and the
person within the group requesting or providing the information ", such that privileged
communications between different government departments remain privileged if "there is a
'substantial identity of legal interests ' within the different [departments] in the particular subject
matter of the communication".175
7.40. In a series of cases, it has also been established that privilege is not automatically waived by
inadvertent disclosure to the opposing party. In Glamis Gold v USA , the Tribunal found that there
was no waiver when the respondent inadvertently disclosed several privileged documents to the
opposing party; in reaching its decision, the Tribunal considered several different circumstances,
including the reasonableness of the precautions taken to prevent inadvertent disclosure in view of
the extent of the document production, an d any delay and measures taken to rectify the
disclosure.176 In VG Gallo, the Tribunal stated that "according to … international law on the subject,
where information covered by solicitor -client privilege is disclosed inadvertently, as a general rule

166 Rules of Procedure and Evidence of the International Criminal Tribunal for the Former Yugoslavia,
Rule 97.
167 Rules of Procedure and Evidence of the International Criminal Tribunal for Rwanda, Rule 97.
168 Rules of Procedure and Evidence of the Special Court for Sierra Leone, Rule 97.
169 Rules of Procedure and Evidence of the Special Tribunal for Lebanon, Rule 163.
170 Mbarushimana case, Pre-Trial Chamber, Second Decision on the Review of Potentially Privileged
Material, 12 July 2011, p. 7.
171 Prosecutor v Nahimana et al., ICTR-99-52-I, Decision on the Defence Motion for Declaratory Relief,
9 May 2002, p. 4.
172 Dr Horst Reineccius et al v Bank for International Settlements, Procedural Order No. 6, 11 June
2001, p. 180.
173 Dr Horst Reineccius et al v Bank for International Settlements, Procedural Order No. 6, 11 June
2001, p. 180.
174 VG Gallo v Government of Canada, Arbitration under NAFTA Chapter Eleven and the UNCITRAL
Arbitration Rules, Procedural Order No. 3, dated 8 April 2009, para. 41.
175 Glamis Gold Ltd v United States of America, Arbitration under NAFTA Chapter Eleven and the
UNCITRAL Arbitration Rules, Decision on the Parties' Requests for Production of Documents Withheld on
Grounds of Privilege, 17 November 2005, para. 24 (followed in Bilcon et al vs Government of Canada,
Arbitration under NAFTA Chapter Eleven and the UNCITRAL Arbitration Rules, Procedural Order No. 12, dated
2 May 2012, paras. 25-26).
176 Glamis Gold Ltd v United States of America, Arbitration under NAFTA Chapter Eleven and the
UNCITRAL Arbitration Rules, Decision on the Parties' Requests for Production of Documents Withheld on
Grounds of Privilege, 17 November 2005, paras. 50-52.

there is no waiver of privilege ".177 In that case, the Tribunal found that the respondent had "not
implicitly waived its right to claim solicitor-client privilege with respect to the Draft and Final Cabinet
Decisions, due to its inadvertent disclosure to the counte rparty".178 In relation to another issue in
the same proceeding, the Tribunal found that by specifically referring to and relying on the
otherwise-privileged legal advice in its written submission to the Tribunal, there was an "implicit
waiver of privilege" in respect of such legal advice.179 In Bilcon et al, the Tribunal, having considered
several circumstances, found that the respondent had not waived privilege over 45 documents
inadvertently disclosed to the opposing party.180
7.41. In our view, several common princ iples emerge from the foregoing. First, lawyer -client
privilege is recognised and has been protected in the context of international dispute settlement
proceedings. Second, lawyer -client privilege over a communication may be waived if the party
voluntarily discloses the document or the content thereof to a third party. Finally, the extent to
which the disclosure to a third party waives privilege depends on the specific circumstances. For
example, privilege is not automatically waived by inadvertent disclosu re to the opposing party. We
consider that these common principles are fully consonant with the general principles of due process
and good faith applicable in the WTO dispute settlement context. We therefore consider that applying
these principles is appro priate when dealing with issues of lawyer -client privilege arising in WTO
dispute settlement.
7.42. In light of the parties' arguments and the principles identified above, we consider that the
main issue raised by Thailand's request is whether it would be a violation of due process for the
Panel to rule on the WTO -consistency of the Charges. We consider that to address this issue, we
must resolve whether Thailand waived lawyer-client privilege over the ACWL/Commerce Letters by
disclosing them to PMTL in May 2016, and whether their submission by the Philippines precludes the
Panel from making an objective assessment of the matter.
7.1.3.3.2 The circumstances surrounding the ACWL/Commerce letters
7.43. We recall that it is not in dispute that, in May 2016, the Public Prosecutor, an agent of the
Thai government, provided a copy of the ACWL/Commerce Letters to PMTL in the context of the
ongoing criminal proceedings against PMTL that are the subject matter of this dispute. It is also not
in dispute that the Public Prosecutor provided the ACWL/Commerce Letters to PMTL without invoking
the Public Prosecutor's right to object under Section 231 of the Thai Crimina l Procedure Code. This
provision establishes a right to object to disclosure of requested documents on the grounds that
they are, inter alia, "secret", "confidential", or "protected from publicity by law ".181 At no time has
Thailand asserted that the Public Prosecutor disclosed these materials to PMTL inadvertently. To the
contrary, it is common ground that the Public Prosecutor knowingly and voluntarily disclosed the
ACWL/Commerce Letters to PMTL. We consider that, absent a clear and compelling explanation b y
Thailand as to why the ACWL/Commerce Letters continue to be protected by lawyer-client privilege
despite the Public Prosecutor knowingly and voluntarily disclosing them to PMTL, the foregoing would
suffice to compel the conclusion that Thailand waived an y lawyer -client privilege over the
documents.
7.44. In our view, Thailand has provided no such explanation. Regarding Thailand's argument that
"it is clear that Thailand never consented, expressly or even impliedly, to the use of these documents
by the Philippines in WTO proceedings", we accept that Thailand never specifically consented to the
use of these documents by the Philippines in this proceeding. 182 However, we are unable to agree
with Thailand that such consent was required following the Public Prosecutor's decision to knowingly
and voluntarily disclose the ACWL/Commerce Letters to PMTL. That action by the Public Prosecutor
had the consequence of waiving any lawyer-client privilege that previously existed in relation to the

177 VG Gallo v Government of Canada, Arbitration under NAFTA Chapter Eleven and the UNCITRAL
Arbitration Rules, Procedural Order No. 4, dated 21 December 2009, para. 27.
178 VG Gallo v Government of Canada, Arbitration under NAFTA Chapter Eleven and the UNCITRAL
Arbitration Rules, Procedural Order No. 4, dated 21 December 2009, para. 29.
179 VG Gallo v Government of Canada, Arbitration under NAFTA Chapter Eleven and the UNCITRAL
Arbitration Rules, Procedural Order No. 3, dated 8 April 2009, para. 61.
180 Bilcon et al vs Government of Canada, Arbitration under NAFTA Chapter Eleven and the UNCITRAL
Arbitration Rules, Procedural Order No. 12, dated 2 May 2012, paras. 47-49.
181 Philippines' comments on Thailand's request for a procedural ruling, paras. 39-40.
182 Thailand's reply to the Philippines' comments on Thailand's request for a procedural ruling, para. 1.4.
(emphasis added)

ACWL/Commerce Letters. With this in mind , we are aware of no dispute in which a panel or the
Appellate Body found that evidence in the possession of one party could not be submitted to the
panel in the absence of express consent, by the opposing party, for the use of those docume nts in
WTO proceedings.
7.45. Regarding Thailand's assertion that under Thai law the right to documents exercised by PMTL
"is normally understood to mean that the documents would not be shared publicly or used for
another purpose, such as separate proceedings between different entities in an international forum",
we agree with the Philippines that Thailand has failed to substantiate this assertion.183 Furthermore,
in the course of the proceeding, Thailand's assertion has also been contradicted by the Thai Criminal
Court itself. In its 14 July 2017 response to the Panel's questions relating to the ACWL/Commerce
Letters, the Philippines drew the Panel's attention to an order of the Thai Criminal Court, dated 3 July
2017, issued in response to a petition by the Public Prosecutor for the Court to examine whether
PMTL acted inconsistently with Thai law by sharing the ACWL/Commerce Letters with the
Philippines.184 The order holds that PMTL enjoyed a right under Thai law to share the Commerce and
ACWL Letters with the Philippines, and did not act in violation of the earlier court order prohibiting
dissemination of information when it did so.185
7.46. We now turn to Thailand's argument that t he documents were clearly labelled "confidential"
and included material that would normally be considered to be lawyer-client privileged. Thailand has
not provided us with any domestic or international legal authority to support the premise that when
a party voluntarily and knowingly discloses a communication to a third party, without imposing any
restrictions on how that document may be used, lawyer-client privilege is not waived as long as that
document is still marked "confidential".186 We agree with the Philippines that the consequences of
disclosing the ACWL/Commerce Letters to third parties outside the lawyer -client relationship "are
not cured by the fact that the Commerce Letter was stamped confidential ".187 As the Philippines
observes, it is often the case that, when a client discloses a privileged com munication to a third
party, and thereby waives privilege, the communication will have been marked or stamped
"confidential" and/or "privileged" by the lawyer.188
7.47. Furthermore, we need to take into account the consequences that would follow from accepting
Thailand's argument. The Appellate Body has found that a party cannot refuse to provide information
requested by a panel that is exclusively in the party's possession on the grounds that it is
confidential, as that would enable the party to "thwart the panel 's fact-finding powers and take
control itself of the information-gathering process".189 Insofar as Thailand's argument suggests that
a Member must consent to the use of any information contained in a document stamped
"confidential", and which it chooses to designate as lawyer-client privileged notwithstanding its prior
disclosure, this would have the same effect. Naturally, a Member that is defending a challenged
measure in the context of a WTO dispute settlement proceeding would not have an incentive to
consent to the use of information that a complainant seeks to rely on to establish the WTO -
inconsistency of that measure.
7.48. Thailand argues that the question of whether documents are obtained "legally" or "illegally"
under domestic law does not resolve all of the relevant issues, as there "could be cases in which
documents were obtained legally, in the very strict sense of the word, but the circumstances make
clear that they were not intended for other use ", and that in such circumstances, the question of
whether the use of the documents was consistent with WTO due process rights and obligations

183 Thailand's reply to the Philippines' comments on Thailand's request for a procedural ruling, para.
3.24; Philippines' reply to Thailand's comments on the Philippines' comments on Thailand's request for a
procedural ruling, paras. 94, 99, 100, 121 and 124.
184 Philippines' response to Panel question No. 36, paras. 292-301 (referring to Memorandum of Court
Proceedings dated 3 July 2017, Case Black No. Or.185/2559, 3 July 2017 (English translation), (Court Order of
3 July 2017), (Exhibit PHL-198-B)).
185 Court Order of 3 July 2017, (Exhibit PHL-198-B). Pursuant to a separate order issued by the court,
PMTL was also permitted to share this 3 July 2017 order with the Philippines, notwithstanding the order of
27 June 2016 that otherwise bars the defendants from sharing any information on the court record.
186 Thailand's reply to the Philippines' comments on Thailand's request for a procedural ruling, para.
3.31.
187 Philippines' reply to Thailand's comments on the Philippines' comments on Thailand's request for a
procedural ruling, paras. 61-67.
188 Philippines' reply to Thailand's comments on the Philippines' comments on Thailand's request for a
procedural ruling, para. 66.
189 Appellate Body Report, Canada – Aircraft, para. 188.

"would not turn on the strict legality under domestic law ".190 As an example, Thailand refers to a
hypothetical in which "the Philippines or PM Thailand found the Commerce cover letter and the ACWL
Letter lying on the street in Bangkok, having been dropped accidentally ".191 Thailand submits that
there would "presumably be nothing illegal in picking them up ", but it could not be "assume[d] in
the same manner that it would be appropriate to submit them to a panel without any further effort
to see whether it was appropriate to do so ".192 As noted above, f ollowing the meeting, Thailand
requested that the Panel "explain clearly in its ruling whether it considers that the Philippines' good
faith/due process obligations and the Panel's due process obligations extended merely to inquiring
whether the Philippines acted legally ", and "[i]f not, Thailand requests the Panel to explain clearly
what additional steps were required of the Philippines and where it took those steps in this case".193
7.49. It appears that Thailand's argument about PMTL and the Philippines acting "legally" is
concerned with the situation in which a party obtains a communication th at was inadvertently
disclosed by the opposing party. As we have already found above, in such a situation, privilege is
not automatically waived by the inadvertent disclosure to the opposing party. In such a situation,
we agree with the premise that it may well be contrary to principles of good faith to then exploit the
accidental disclosure by the other party. However, we do not consider it necessary to opine on what
steps may be required of a party in such a case, because we agree with the Philippines' observation
that "the relevant facts do not remotely resemble Thailand's hypothetical scenario ".194 Specifically,
in this case the facts are that "the Public Prosecutor elected to disclose the Letters to specific third
parties, in a formal process, following a formal request naming one of the Letters; and, the Public
Prosecutor agreed to disclosure without exercising its right to object to disclosure, and without
imposing restrictions on the use of the Letters".195
7.50. It seems to us that the basic thrust of Thailan d's argument is that even though the Public
Prosecutor knowingly and voluntarily provided the ACWL/Commerce Letters to PMTL for the purpose
of enabling PMTL to defend itself against the Charges, and even though the Thai Court has confirmed
that under Thai law PMTL was free to share these letters with the Philippines for the purpose of this
proceeding (in which the Philippines challenges the WTO -consistency of the same Charges ), the
Panel should nonetheless decline to rule on the Philippines' claims on the grounds that the Philippines
should have proceeded on the premise that widely recognized principles relating to the waiver of
lawyer-client privilege do not apply in the context of WTO dispute settlement. In our view, to uphold
Thailand's request in these circumstances would violate the due process rights of the Philippines. In
this connection, we recall that, in the original proceeding, the Appellate Body explained that ensuring
due process requires a balancing of the interests of both parties, and not merely the interests of the
responding party. The Appellate Body explained that other interests may include "an aggrieved
party's right to have recourse to an adjudicative process in which it can seek redress in a timely
manner".196 In line with this understandi ng, the panel in EC – Seal Products highlighted that "the
complainants' due process rights would not be affected by the removal of the two exhibits from the
record in the present proceedings".197
7.51. Thailand submits that the Philippines' actions "have compromi sed the Panel's ability to
undertake an objective assessment of the matter as stipulated in Article 11 of the DSU and the Panel
can no longer make an objective assessment ".198 In this regard, Thailand emphasizes that "[e]ven
with the best will in the world, however, it cannot be guaranteed that the Philippines' deliberate
attempt to plant a seed of doubt as to Thailand's credibility will have no effect on how the Panel
perceives and addresses the arguments of the parties for the remainder of these proceedings ."199
Thailand explains that while a panel must be able to address a party's arguments and defences with
a clear and open mind, that "cannot happen when the panel has before it not merely the arguments
put forth by a party but also some of the legal advice received by the party in the process of preparing

190 Thailand's reply to the Philippines' comments on Thailand's request for a procedural ruling, para. 4.4.
191 Thailand's reply to the Philippines' comments on Thailand's request for a procedural ruling, para. 4.4.
192 Thailand's reply to the Philippines' comments on Thailand's request for a procedural ruling, para. 4.4.
193 Thailand's responses to the Panel's second set of questions, p. 40.
194 Philippines' reply to Thailand's comments on the Philippines' comments on Thailand's request for a
procedural ruling, para. 47.
195 Philippines' reply to Thailand's comments on the Philippines' comments on Thailand's request for a
procedural ruling, para. 47.
196 Appellate Body Report, Thailand – Cigarettes (Philippines), para. 150.
197 Preliminary Ruling of the Panel, EC – Seal Products, WT/DS400/6; WT/DS401/7, para. 3.3.
198 Thailand's reply to the Philippines' comments on Thailand's request for a procedural ruling, para. 5.1.
199 Thailand's request for a procedural ruling, para. 1.41.

for the dispute"200, and that "the consequences of the Philippines' actions cannot be wiped out simply
by the post hoc exclusion of the evidence".201 Thailand submits that "it is inevitable that any rulings
by the Panel adverse to Thailand, especially with respect to the claims to which this material relates,
will be perceived as having been tainted by the materials submitted by the Philippines".202
7.52. We consider that it is perfectly normal for different individuals or agencies within a
government, or advising a government, to hold different views on certain legal issues . In addition,
we consider that it is to be expected that a Member's view on certain issues may change or evolve
over time. Furthermore, a number of Thailand's arguments before the Panel regarding the non -
applicability of the CVA to the Charges raise novel legal issues that are not touched upon at all in
the ACWL/Commerce Letters. We note that the ACWL/Commerce Letters, which were apparently
prepared years prior to the Charges being issued, do not establish any relevant fact relating to the
Charges such that their existence or content would assist the Panel in making its objective
assessment of the facts. More generally, if a complaining party considers that certain arguments or
analysis contained in an agency's opinions are compelling, then it may present those arguments or
analysis to the Panel – authorship by an organ or agency of the responding party does not itself
contribute to the force of the arg uments or analysis. In this regard, w e agree with Thailand that
"a party has a right to have its arguments before a panel judged only according to the standard in
Article 3.2 of the DSU of whether they are based on a correct clarification of the provisions of the
covered agreements in accordance with the customary rules of interpretation of public international
law".203 We recall that, in our 10 May 2017 communication to the parties, we assured Thailand that
"as a Party to the dispute [Thailand] is under no o bligation to disclose, justify, or explain any
confidential legal advice that it has received".204
7.53. In the light of the foregoing, we consider that the ACWL/Commerce Letters are not relevant
to our assessment of the matter before us, and we have given no weight to them in our analysis of
the disputed issues in this proceeding. The ACWL/Commerce Letters have had no effect on how the
Panel perceives and addresses the arguments advanced by the parties in relation to the applicability
of the CVA to the Charges, and we consider that this is reflected in our extensive analysis of the
issues raised in that regard.205
7.54. We further note that in WTO dispute settlement proceedings it is not unusual for parties to
develop arguments that attempt to rely on statements made by the opposing party outside the
context of WTO dispute settlement proceedings, or in the context of prior or parallel WTO dispute
settlement proceedings, or in its submissions in the same proceeding, and present these statements
as being inconsistent with the arguments that the opposing party is advancing before the panel .206
This does not compromise a pan el's ability to discharge its function of making an objective
assessment of the matter . We further observe that there is no precedent for a GATT/WTO panel
declining to rule on a claim on the basis that its ability to make an "objective assessment" of a
matter has been compromised. In this regard, we find it relevant that the panel in EC – Seal Products
evidently did not consider that the submission of an internal legal opinion in any way compromised
its ability to make an objective assessment of the matter before it. We recall that in that case, unlike
this case, it appear s to have been common ground between the parties that the legal opinions at
issue were classified documents under the applicable EU regulations, and the EU Council had not
authorized their public disclosure.207 Given that the submission of an internal legal opinion in those
circumstances did not preclude the panel from making an objective assessment of the matter before
it, Thailand's argument is to some extent contradicted by the only prior panel to find itself in an
analogous situation.208

200 Thailand's request for a procedural ruling, para. 1.14.
201 Thailand's request for a procedural ruling, para. 1.41.
202 Thailand's request for a procedural ruling, para. 1.41.
203 Thailand's request for a procedural ruling, para. 1.14.
204 See paragraph 1.25. above.
205 See Section 7.3.5 below.
206 For example, in its comments on the Philippines' response to Panel question number 92, Thailand
states that the Philippines' approach to interpreting and applying the CVA's should be rejected because it is
legally incorrect, but additionally Thailand "notes that the Philippines' new approach is a glaring volte-face of
its original position in these proceedings".
207 Preliminary Ruling of the Panel, EC – Seal Products, WT/DS400/6, WT/DS401/7, paras. 2.2 and 2.4.
208 We further note that the European Union, in its third-party submission, rejects Thailand's premise
that the ACWL/Commerce Letters were obtained illegally, or that their disclosure prevents the Panel from
making an objective and independent assessment of the matter. (European Union's third-party submission,
paras. 66-67)

7.55. In addition to requesting that the Panel decline to rule on the Charges, Thailand requested
that the Panel order the Philippines to withdraw Exhibit PHL -150 from the record, as well as the
related references in the Philippines' second written submission. In our view, if there is no basis to
find that the ACWL/Commerce Letters are protected by lawyer -client privilege, or that their
submission taints the Panel's objectivity, then it follows that we have no basis to order the Philippines
to withdraw Exhibit PHL -150 from the record, or the related references in the Philippines' second
written submission.
7.1.3.4 Conclusion
7.56. For the foregoing reasons, the Panel concluded that Thailand had failed to demonstrate that
its due process rights were violated, that the Philippines did not act in good faith, or that the Panel
was prevented from making an objective assessment of the matter as a consequence of the
Philippines submitting the ACWL/Commerce Letters to the Panel. The Pan el therefore rejected
Thailand's requests that the Panel decline to rule on the Philippines' claims relating to the Charges
as a consequence of the Philippines submitting the ACWL/Commerce Letters to the Panel , and
declined Thailand's request that the Pane l exclude Exhibit PHL -150 from the record and strike the
related references from the Philippines' second written submission. However, although the
ACWL/Commerce Letters are admissible and are not protected by lawyer-client privilege, the Panel
considers that they are not relevant to its assessment of the matter before it, and therefore gave
no weight to them in its analysis of the issues in dispute in this proceeding.
7.1.4 The relevance of Thailand's developing country status
7.57. Article 20.1 of the CVA provides that, upon notification, developing countries were entitled to
delay the application of the CVA for a period "not exceeding five years". Thailand made a notification
under this provision and implemented the CVA in 2000, following the expiry of the transition period
allowed for under Article 20.1.209 Therefore, the special and differential treatment provisions of the
CVA no longer apply to Thailand for the purposes of this dispute. 210 The Panel notes that, in the
course of these Panel proceedings, Thailand did not raise any specific provisions on differential and
more-favourable treatment for developing country Members that require particular consideration.211
7.58. Although the parties in this dispute generally agree that a "single legal standard applies to all
WTO Members"212, Thailand nonetheless argues that its "developing country status may be relevant
when the Panel attempts to determine compliance with that single legal standard".213 In this regard,
Thailand states that its developing country status is a "relevant fact that the Panel may take into
account in assessing the reasonableness of the actions of the Thai authorities at issue in this
proceeding".214 Regarding the BoA Ruling, Thailand submits that "even if the BoA's decisions are not
perfect, in the sense in which th e Philippines' legal team, experts in the western legal tradition,
wants, such perfection is not required".215 With respect to the criminal Charges, Thailand states that
"developing countries such as Thailand face particular difficulties when dealing with customs fraud",
and therefore "need to be able to adopt tough enforcement measures, such as criminal prosecution,
in order to fight customs fraud efficiently".216
7.59. We are aware that the diversity of existing national legal systems and traditions influences
the way in which Members implement their WTO obligations. Regarding the BoA Ruling, which
concerns issues of customs valuation and the CVA, we elaborate further below that, where the terms
of the CVA are generally -worded and do not prescribe any particular mea ns or methodology that

209 See Entry into Force and Notification of Acceptances, WT/Let/1, 27 January 1995; parties' responses
to Panel question No. 75.
210 Thailand's response to Panel question No. 75, p. 9.
211 We note that Article 12.11 of the DSU provides that, where one or more of the parties is a
developing country Member, "the panel's report shall explicitly indicate the form in which account has been
taken of relevant provisions on differential and more-favourable treatment for developing country Members
that form part of the covered agreements which have been raised by the developing country Member in the
course of the dispute settlement procedures".
212 Philippines' response to Panel question No. 75, para. 53; Thailand's comments on the Philippines'
response to Panel question No. 75.
213 Thailand's comments on the Philippines' response to Panel question No. 75, p. 12.
214 Thailand's comments on the Philippines' response to Panel question No. 75, p. 12.
215 Thailand's response to Panel question No. 75, p. 9.
216 Thailand's response to Panel question No. 75, p. 10.

must be followed in discharging a substantive and procedural obligation contained therein, the
domestic customs authorities involved in customs valuation enjoy a margin of discretion regarding
the means or methodology that they may follow, within the parameters laid down in the applicable
treaty provisions, read in their context and in the light of the object and purpose of the CVA. 217 It
follows that, insofar as the terms of the CVA leave such a margin of discretion, "perfection is not the
standard" that applies in WTO dispute settlement proceedings. 218 In addition, in the context of our
findings on the Charges we point out that it is common ground between the parties that there is
nothing in the text of the CVA that prevents Members – developing or developed – from taking tough
enforcement measures against customs fraud.219 Thus, we also agree with Thailand that developing
country Members "need to be able to adopt tough enforcement measures, such as criminal
prosecution, in order to fight customs fraud efficiently".220 However, the basis for our agreement is
not that developing countries face special difficulties in this regard, but rather our interpretation of
the rights and obligations under the CVA and the GATT 1994 that we develop in the c ontext of our
findings on the Charges.
7.60. We note that Article 12.10 of the DSU provides that "[i]n examining a complaint against a
developing country Member, the panel shall accord sufficient time for the developing country
Member to prepare and present its argumentation". During this proceeding, the Panel took into
account the respondent's status as a developing country Member when preparing and revising the
timetable for the process. The Panel accommodated both Thailand's and the Philippines' requests for
ample time to prepare the written submissions, and written question and answer procedure prior to
the meeting; the extension of the initially agreed deadlines to submit responses to (and subsequent
comments on) the questions posed by the Panel after the substantive meetings; as well as the timing
of the issuance of the draft descriptive part of the Panel's report, and the issuance of the Panel's
interim report to the parties.
7.2 The Board of Appeals Ruling
7.2.1 General
7.2.1.1 Factual background
7.61. This section provides a gen eral factual description of the BoA Ruling, including the events
leading up to, and post-dating, the issuance of the BoA Ruling. The parties do not disagree on these
facts. We note that the parties do disagree on several factual issues regarding the amount of
provincial taxes actually paid by PMTL in the year 2002. We address these disputed factual issues in
Section 7.2.6 below.
7.62. Between January 2002 and January 2003, PMTL imported into Thailand 210 entries of
Marlboro cigarettes from Indonesia.221 PMTL's transaction value for each of these entries was USD
8.50 per 1,000 sticks.222 The Thai Customs Department rejected the transaction values for the 210
entries of cigarettes imported by PMTL, and assigned a higher customs value.223 PMTL filed an appeal
with the BoA, an authority within the Thai Customs Department that hears appeals from importers
or exporters in relation to initial customs valuation decisions by the Customs Department.224 PMTL's
appeal against the duty assessment for these 210 entries was part of a series of appeals made by
PMTL, covering a total of 867 entries that took place between June 2000 and March 2003.225

217 See paragraph 7.82. below.
218 Panel Report, US – Steel Plate, para. 7.71. See also Panel Report, EU – Footwear (China), para.
7.656.
219 We note the Philippines' agreement on this point. (See Philippines' comments on Thailand's response
to Panel question No. 75)
220 Thailand's response to Panel question No. 75, p. 10.
221 Minutes of the BoA Meeting of 26 September 2012 (English translation), (Exhibit PHL-39-B), p. 1.
222 BoA Ruling, No. GorOr 112/2555/Por9/2555(3.1) and cover letter No. GorKor 0519(8)/(GorOr)/118,
16 November 2012, (BoA Ruling), (Exhibit PHL-21-B), p. 2.
223 BoA Ruling, (Exhibit PHL-21-B), p. 2. The assessed values for the 210 entries were USD 9.88 per
1,000 sticks for Marlboro Light; USD 10.21 per 1,000 sticks for Marlboro; USD 10.71 per 1,000 sticks for
Marlboro Light Menthol; and USD 10.71 per 1,000 sticks for Marlboro Menthol.

7.63. When the original panel issued its report in 2010, PMTL's appeals regarding the 210 entries
were still outstanding before the BoA.226 Before the original panel, the Philippines claimed, inter alia,
that Thailand acted inconsistently with Articles X:3(a) and (b) of the GA TT 1994 as a consequence
of the undue delay in the administrative review proceedings before the BoA in relation to the
outstanding appeals for the 210 Marlboro entries. The original panel found that Thailand had acted
inconsistently with both Articles X:3( a) and (b), and recommended that Thailand take action to
address the delays.227
7.64. On 16 November 2012, the BoA issued its Ruling on PMTL's appeal of the customs duties
assessed by the Customs Department for the 210 entries imported by PMTL between January 2002
and January 2003. 228 The BoA Ruling rejected PMTL's transaction values on the basis that the
relationship between the buyer, PMTL, and the seller, PM Indonesia, had influenced the transaction
values as declared by PMTL.229 The BoA based this rejection on an examination of the circumstances
of the sale, conducted "by comparing the [P&GE] rate according to the 2002 financial statements of
PMTL, certified by the auditor, and the [P&GE] rate as requested by PMTL with the profits and general
expenses rate of [an] i ndustry group of imported cigarette wholesalers in the year 2002 ".230 The
BoA Ruling concluded that two separate P&GE rates ascribed to PMTL were "not consistent with those
of the industry group of imported cigarette wholesalers, which is the information for the sale of the
goods of the same class or kind in the Kingdom [of Thailand]".231
7.65. The BoA Ruling explains that, having rejected the transaction value, the BoA determined the
customs value by using the "deductive value", i.e. "applying the selling price per unit of the imported
goods sold in the Kingdom to the unrelated purchaser in the same condition as when imported at
the first level of sale and in the greatest aggregate quantity ", while making deductions for P&GE,
taxes and duties.232 In calculating the cu stoms value, the BoA made deductions for PMTL's P&GE,
using the average P&GE rate for the industry group in place of PMTL's requested P&GE value.233 The
BoA Ruling also stated that PMTL "voluntarily accepted " that transportation costs would not be
considered for the calculation of the customs value by the BoA, and that "[a]s such, there was no
information for considering the deduction ".234 The BoA also made deductions for "taxes and duty",
which included "provincial tax (calculated by using the total amount of payment of the provincial tax
pursuant to the receipts specifying that money is received from PMTL and the name of the retailers
… in the year 2002 according to the information provided by PMTL … and comparing in proportion to
the sales amount throughout the year)".235 The resulting customs value determined by the BoA was
equivalent to THB 9.3001 per pack (or THB 465.01 per 1,000 sticks).236
7.66. By letter of 18 December 2012 to the Director General of the Customs Department, PMTL
"request[ed] an explanation as to how the customs value was determined for the 210 entries at
issue in the BoA Ruling ".237 In particular, PMTL requested an explanation regarding questions that
"are essential to the Company's understanding of how the BoA has determined the customs value
for the Company's products set out in the BoA ruling".238 With respect to the industry group used in
the comparison of P&GE rates, PMTL requested an explanation of the following: (i) the identity of
the companies included in the "industry group of imported cigare tte wholesalers in the year 2002 "
from which the benchmark P&GE rates were derived; (ii) how and why these companies were chosen,
including the "selection criteria" for including or excluding a company from the industry group; and
(iii) how the average P&G E rate for the industry group was calculated, including "the mean; the
standard deviation; and the variances of the volumes / sales values for the members of the industry
group".239 PMTL also requested an explanation regarding the deduction for provincial taxes.240

227 Panel Report, Thailand – Cigarettes (Philippines), paras. 8.4(e) and (f).
228 BoA Ruling, (Exhibit PHL-21-B).
229 BoA Ruling, (Exhibit PHL-21-B), p. 2.
230 BoA Ruling, (Exhibit PHL-21-B), p. 3.
231 BoA Ruling, (Exhibit PHL-21-B), p. 3.
232 BoA Ruling, (Exhibit PHL-21-B, pp. 3-4.
233 BoA Ruling, (Exhibit PHL-21-B), p. 4.
234 BoA Ruling, (Exhibit PHL-21-B), p. 4.
235 BoA Ruling, (Exhibit PHL-21-B), p. 4.
236 BoA Ruling, (Exhibit PHL-21-B), p. 3.
237 Letter from PMTL to the BoA, 18 December 2012 (English translation), (Exhibit PHL-27-B), p. 1.
238 Letter from PMTL to the BoA, 18 December 2012 (English translation), (Exhibit PHL-27-B), p. 3.
239 Letter from PMTL to the BoA, 18 December 2012 (English translation), (Exhibit PHL-27-B), p. 2.
240 Letter from PMTL to the BoA, 18 December 2012 (English translation), (Exhibit PHL-27-B), p. 3.

7.67. On 16 June 2016 (i.e. three and a half years later), the Customs Department sent a letter to
PMTL providing certain information in response to PMTL's requ est for an explanation dated
18 December 2012.241 The letter stated that information regarding P& GE rates was collected by
assessing the 2002 P&GE rates for "wholesalers of imported cigarettes which are … in the same class
or kind … in the level of brand [reputation] close to Marlboro cigarettes".242 The letter indicates that
the average P&GE rate was d etermined with reference to "5 companies, with a 95% confidential
[sic] interval at a range of 9.80 – 15.08 per cent with an average of 12.44 per cent".243 Additionally,
the letter states that the deduction for provincial tax was determined by "applying the total amount
of payment of provincial tax according to the receipts specifying that money is received from Philip
Morris (Thailand) Limited and the name of retailers … and comparing in proportion to the cigarette
sales amount in 2002".244
7.68. Following the issuance of the BoA Ruling in November 2012, Thailand reassessed the customs
duties and internal taxes due on the 210 entries.245 On the basis of the revised customs values, and
taking into account currency fluctuations, refunds were due on some entries, and addi tional duties
and taxes were due on others. With respect to 30 entries, Thailand has paid PMTL a refund; for 180
entries, additional sums were due.246 On 9 January 2013, PMTL received 180 Notices of Assessment
in respect of these latter entries. 247 The revised Notices of Assessment resulted in the payment by
PMTL of an additional THB 152,581,835.35 (around USD 5.2 million) in duties and taxes.248
7.69. On 18 January 2013, PMTL appealed the BoA Ruling to the Central Tax Court of Thailand. In
a judgment of 29 October 2014, the Court upheld PMTL's appeal, on the grounds that the Customs
Department had improperly used minimum values as the basis for the original valuation.249 On this
basis, the Court ordered revocation of: the original 210 assessments; the BoA Ruling; and the 180
Notices of Assessment that resulted from the BoA Ruling.250
7.70. On 28 January 2015, the Customs Department, together with the members of the BoA,
appealed the Central Tax Court decision to the Thai Supreme Court, requesting the Supreme Court
to reverse the decision of the Central Tax Court.251
7.2.1.2 Claims and order of analysis
7.71. The parties' requests for findings in relation to the BoA Ruling are set out in greater detail in
Section 3 of our Report. As reflected there, the Philippines' claims and Thailand's defences raise a
number of issues in relation to the BoA Ruling.
7.72. Article 1 of the CVA requires that, in situations where the importer is related to the seller, the
transaction value must nonetheless be accepted, unless the customs authority demonstrates, after
examining the circumstances of sale in accordance with the requirements of Article 1.2(a), that the
price was influenced by the relationship between the bu yer and seller. The Philippines claims that
the BoA Ruling is inconsistent with Article 1 of the CVA because the BoA rejected the transaction
value without properly examining the circumstances of sale, and because the BoA failed to
communicate its grounds to PMTL for rejecting the transaction value, thereby also precluding PMTL
from responding to those grounds. We note that the Philippines has made distinct claims in respect
of: (i) the "substantive" obligation under Article 1.2(a), second sentence, that a customs authority
must conduct an examination of the circumstances of sale in order to determine whether the
relationship influenced the price; and (ii) the "procedural" obligation under Article 1.2(a), third

241 Letter from the Director of Customs Standard Procedures and Valuation Bureau of Customs to PMTL,
No. GorKor0519(Sor)/732, 16 June 2016 (English translation), (Letter from Customs Department to PMTL of 16
June 2016), (Exhibit PHL-38-B).
242 Letter from Customs Department to PMTL of 16 June 2016, (Exhibit PHL-38-B).
243 Letter from Customs Department to PMTL of 16 June 2016, (Exhibit PHL-38-B).
244 Letter from Customs Department to PMTL of 16 June 2016, (Exhibit PHL-38-B).
247 180 Notices of Assessment (English translation of one notice), (Exhibit PHL-28-B).
248 Philippines' first written submission, paras. 113-114 (referring to Letter from Bangkok Customs
Bureau to PMTL, No. GorKor 0504(Sor)/35, 17 January 2013, (Exhibit PHL-29-B)).
249 Central Tax Court Ruling, 29 October 2014 (English translation), (Exhibit PHL-32-B).
250 Central Tax Court Ruling, 29 October 2014 (English translation), (Exhibit PHL-32-B), p. 18.
251 Appeal by the Customs Department to the Supreme Court of the Decision by the Tax Court of
29 October 2014 on PMTL's appeal against the BoA Ruling of 16 November 2012, 28 January 2015 (English
translation), (Exhibit PHL-33-B), p. 18.

sentence, that a customs authority must communicate to the importer its grounds for doubting the
transaction value, and give the importer a reasonable opportunity to respond. The parties and third
parties have indicated that these obligations are distinct, although they may be related. 252
Notwithstanding that these provisions may be related, we agree with the parties and third parties
that the obligations are distinct. We therefore proceed with our analysis by addressing the
Philippines' distinct claims under these provisions separately, and in accordance with the structure
of Article 1.2(a), by first addressing the Philippines' claim concerning the substantive obligation in
the second sentence of Article 1.2(a), before addressing the Philippines' claim in respect of the
procedural obligation in the third sentence.
7.73. Article 5 of the CVA concerns the deductive method of customs valuation. Under Article 4,
where a customs authority has rejected the transaction value under Article 1, and the customs value
cannot be determined under the provisions of Articles 2 and 3, the customs value shall, in principle,
be determined under Article 5. When using the deductive method under Article 5, a customs
authority determines the customs value of the imported goods based on the unit price at which the
imported goods or identical or similar imported goods are sold in the greatest aggregate quantity,
at or about the time of the importation of the goods being valued, when they are sold in an unrelated
transaction and deduct s certain amounts from that figure to arrive at a revi sed customs value.
Article 5 lists the specific types of deductions that must be made. After the BoA rejected the
transaction value on the basis of the comparison of P&GE rates, the BoA proceeded to determine a
revised customs value, by deducting various amounts from the value of the first sale to an unrelated
purchaser (specifically, sales to retailers).
7.74. The Philippines claims that, in determining the customs value to use in place of the transaction
values, the BoA acted inconsistently with several aspect s of Article 5 of the CVA.253 The Philippines
contends that the BoA failed to deduct the correct amount of P&GE, inconsistently with Article
5.1(a)(i). The Philippines submits that the BoA acted inconsistently with Article 5.1(a)(ii) by failing
to deduct any amount for transportation expenses. The Philippines also considers that the BoA failed
to deduct the proper amount for provincial taxes payable by PMTL, and subjected PMTL to an
excessively high burden of proof, inconsistently with Article 5.1(a)(iv).
7.75. We note that the Philippines does not raise any issue or claim with respect to the fact that,
having rejected the transaction value under Article 1.2(a) of the CVA, the BoA proceeded to
determine the customs value on the basis of the methodology set forth in Article 5, as opposed to
determining an alternative customs value on the basis of Article 2 or Article 3.254
7.76. Where a customs authority improperly rejects the transaction value, inconsistently with the
requirements of Article 1 of the CVA, it becomes a moot point whether the customs authority's
determination of a revised customs value was conducted in accordance with the requirements of
Articles 2 to 7. Thus, if we were to uphold the Philippines' claim that the BoA failed to satisfy the
legal requirements of Article 1, it may be a moot point whether the BoA determi ned a revised
customs value in accordance with the legal requirements of Article 5. In this respect, the Philippines
acknowledges that "[i]f the Panel were to find that the BoA Ruling violates Articles 1.1 and 1.2(a),
it would be within the Panel's discretion to exercise judicial economy with respect to the Philippines'
claim under Article 5".255 Having said that, the Philippines "urges the Panel not to exercise judicial
economy" in respect of the claims under Article 5, as it considers that "findings on a range of issues
are an important means of contributing to the full and prompt resolution of the dispute."256 We note
that the original panel, having found that the Thai customs authority acted inconsistently with
Article 1 of the CVA, made additional findings in respect of Articles 5 and 7 of the CVA.257 We adopt
the same approach in this proceeding, in the interest of assisting the parties in resolving their

252 See parties' responses to questioning at the meeting of the Panel; parties' responses to Panel
question No. 73; third parties' responses to questioning at the meeting of the Panel; third parties' responses to
Panel question No. 7(b).
253 Philippines' first written submission, paras. 350-427; second written submission, paras. 278-343;
response to Panel question Nos. 20-22, 24-26, 85-86 and 89-90; opening statement at the meeting of the
Panel, paras. 34-39; and closing statement at the meeting of the Panel, paras. 7-8.
254 Philippines' response to Panel question No. 85. Under Article 4 of the CVA, customs value may only
be determined under the provisions of Article 5 if the customs value cannot be determined under the provisions
of Articles 1, 2 or 3.
255 Philippines' response to Panel question No. 20(a).
256 Philippines' response to Panel question No. 20(a).
257 Panel Report, Thailand – Cigarettes (Philippines), paras. 7.291-7.398.

dispute.258 We will therefore proceed by addressing the Philippines' claims under Article 5 in the
event that we uphold the Philippines' claims under Article 1. Since each of the Philippines' three
claims under Article 5 pertains to a distinct provision of Article 5.1(a), we address each claim
separately.
7.77. We then turn to the Philippines' claim that the BoA acte d inconsistently with Article 11.3 of
the CVA by failing to provide sufficient reasons for its decision to PMTL, before finally addressing the
Philippines' claim that the BoA acted inconsistently with Article 16 of the CVA by failing to provide
an adequate explanation to PMTL upon request. Both of these claims involve an alleged failure by
the BoA to provide reasons/an explanation to PMTL. However, since these claims are based on
distinct provisions of the CVA, we address them separately.
7.2.1.3 Claims not pursued
7.78. The Philippines' panel request contains a number of claims in relation to the BoA Ruling,
almost all of which it has pursued in this proceeding. We note however that in addition to the
measures specified in paragraph 2.7. above, the panel request also indicates that:
On 29 October 2014, the Thai Tax Court upheld an appeal by PM Thailand against the
BoA Ruling. However, on 28 January 2015, Thai Cust oms appealed the Tax Court's
decision to the Thai Supreme Court. The appeal is currently outstanding. On appeal,
Thai Customs has argued that the DSB's recommendations and rulings under points
(xii) and (xiii) above bind only the Philippines, and not Thailand. All actions by Thailand
to uphold the BoA Ruling are measures taken to comply that are inconsistent with the
provisions cited in paragraph 10.259
7.79. The Philippines has referred to the appeal to the Thai Supreme Court in its submissions, and
we have taken note of this factual circumstance in the context of setting forth the factual background
and context to the measures at issue. 260 However, the Philippines has not pursued any claims in
respect of the "actions by Thailand to uphold the BoA Ruling " in the cou rse of this proceeding.
Accordingly, it is not necessary for us to make findings on what types of actions taken by a Member
in the context of domestic appeal proceedings could constitute measures taken to comply.
7.2.1.4 Principles of interpretation applicable to the CVA
7.80. Being e ver mindful of the function and institutional role of a compliance panel under
Article 21.5 of the DSU, we consider that the starting point for our interpretation of the terms of the
CVA are the findings of the panel and the Appellate Body that were made in the original proceeding,
and which were adopted by the DSB in the context of the ordinary dispute settlement process . We
agree with the parties and third parties that we are not, strictly speaking, "bound" to follow the legal
interpretations of the original panel. 261 However, we also share the view that, in the interests of
ensuring security and predictability in dispute settlement and the finality of the DSB's
recommendations and rulings, there is an expectation that, absent compelling reasons, compliance
panels will make findings consistent with those made by the original panel in the same dispute. The
Appellate Body has stated that "doubts could arise about the objective nature of an Article 21.5
panel's assessment if, on a specific issue, that panel were to deviate from the reasoning in the
original panel report in the absence of any change in the underlying evidence in the record and
explanations given".262
7.81. In this compliance proceeding, the Panel is presented with a number of interpretati ve issues
that the original panel was not required to resolve. Article 3.2 of the DSU states that the WTO dispute
settlement system serves to "clarify the existing provisions of those agreements in accordance with
customary rules of interpretation of public international law". The "customary rules of interpretation
of public international law " referred to by the DSU include Articles 31, 32 and 33 of the Vienna
Convention on the Law of Treaties (the Vienna Convention). Article 31(1) of the Vienna Convention

258 We note that Thailand has also not requested the Panel, in the event it were to find that the BoA
acted inconsistently with Article 1 of the CVA, to limit its analysis to those claims.
259 Panel request, fn 22. (emphasis added)
260 See paragraphs 7.69. and 7.70. above.
261 Parties' responses to Panel question No. 74; third parties' responses to Panel question No. 1.
262 Appellate Body Report, US – Softwood Lumber VI (Article 21.5 – Canada), para. 103.

provides that "[a] treaty shall be interpreted in good faith in accordance with the ordinary meaning
to be given to the terms of the treaty in their context and in the light of its object and purpose".
7.82. Where the terms of the CVA are generally-worded and do not prescribe any particular means
or methodology that must be followed in discharging a substantive and procedural obligation
contained therein, we proceed on the understanding that the domestic customs authorities involved
in customs valuation enjoy a margin of discretion regarding the means or methodology that they
choose to follow, within the parameters laid down in the applicable treaty provisions, read in their
context and in the light of the object and purpose of the CVA. This understanding derives from the
manner in which the Appellate Body and previous panels have approached generally -worded
obligations that do not prescribe a particular means or methodology for conducting the analysis, or
making the determinations provided for in the WTO agreement in question.263 We note that the
Philippines accepts that the CVA "does not prescribe a specific process for customs authorities to
follow" when conducting an examination of the circumstances of sale264 and that, as a consequence,
the customs authority "has a degree of discretion in deciding how to conduct its examination".265
7.83. We also note that Article 14 of the CVA provides that the interpretative notes in Annex I to
the CVA "form an integral part" of the CVA, and that the provisions of the CVA are "to be read and
applied in conjunction with " those notes. We recall the original panel's view that although
commentaries by the Technical Committee on Customs Valuation are "not legally binding upon the
parties", they may be "instructive and can provide guid ance on the interpretation of the Customs
Valuation Agreement, especially since it is the WTO Members that make up the Technical
Committee".266 In this proceeding, both parties have referred to the World Customs Organization's
(WCO) Commentary 15.1, regarding the application of the deductive value method. The Philippines
has observed, without any disagreement from Thailand, that this commentary is not legally binding
on customs administrations, and does not amount to international law, but is a well -respected
authority and aims to facilitate a uniform interpretation and application of the CVA.267
7.84. Also relevant to the interpretation of the provisions of the CVA is the Decision of the
Committee on Customs Valuation Regarding Cases Where Customs Administ rations Have Reasons
to Doubt the Truth or Accuracy of the Declared Value (the Decision). 268 We recall that the original
panel found guidance in the Decision to confirm its understanding of certain CVA obligations. 269
Furthermore, we observe that the parties a re of the view that the Decision is, or could potentially
qualify as, a "subsequent agreement between the parties regarding the interpretation of the treaty

263 See, e.g. Appellate Body Reports, US – Anti-Dumping Methodologies, para. 5.22; EC – Fasteners,
(China), para. 7.357; US – Steel Safeguards, paras. 10.49-10.197; EC – Salmon, para. 7.716; EC – Tube or
266 Panel Report, Thailand – Cigarettes (Philippines), fn 650. We note that Article 18 of the CVA
mandates the creation of two committees for the administration of the CVA. Article 18.1 establishes the
Committee on Customs Valuation ("the Committee"), which comprises representatives of all WTO Members,
and which is established under the auspices of the WTO. Article 18.2 establishes the Technical Committee on
Customs Valuation ("Technical Committee"), which also comprises representatives of WTO Members, but which
is established under the auspices of the Customs Cooperation Council (CCC), which subsequently became the
World Customs Organization (WCO). The Technical Committee on Customs Valuation was established "with a
view to ensuring, at a technical level, uniformity in interpretation and application of this Agreement". (Annex
II, paragraph 1, of the CVA)
267 Philippines' first written submission, fn 212.
268 See Committee on Customs Valuation, Decision Regarding Cases Where Customs Administrations
Have Reasons to Doubt the Truth or Accuracy of the Declared Value, G/VAL/1, 27 April 1995, (the Decision),
and Minutes of the Committee Meeting of 12 May 1995, G/VAL/M/1, 11 August 1995. The Decision was
adopted pursuant to the invitation in the Ministerial Decision Regarding Cases Where Customs Administrations
Have Reasons to Doubt the Truth or Accuracy of the Declared Value (the Ministerial Decision). The Philippines
also considers that the Ministerial Decision, which invited the Committee on Customs Valuation to take its own
decision, may be considered an "agreement relating to the treaty which was made between all the parties in
connexion with the conclusion of the treaty" under Article 31.2(a) of the Vienna Convention because the
invitation was made concurrently with the conclusion of the CVA. (Philippines' response to Panel question
No. 97(c), para. 212)
269 Panel Report, Thailand – Cigarettes (Philippines), para. 7.172, fns 564 and 582.

or the application of its provisions " within the meaning of Article 31(3)(a) of the Vienna
Convention.270
7.2.1.5 Standard of review
7.85. The parties do not contest that Article 11 of the DSU sets forth the standard of review in
respect of both the GATT 1994 and the CVA (the two agreements invoked by the Philippines in this
proceeding).271 Under Article 11, a panel's mandate is to "make an objective assessment of the
matter before it, including an objective assessment of the facts of the case and the applicability of
and conformity with the relevant covered agreements, and make such other f indings as will assist
the DSB in making the recommendations or in giving the rulings provided for in the covered
agreements".
7.86. Regarding the CVA specifically, the original panel explained that Article 11 of the DSU sets
forth the standard of review, pursuant to which the Panel must "make an objective assessment of
the facts of the case and the applicability of and conformity with the relevant covered
agreements".272 The original panel relied on the Appellate Body's statement that "this means 'neither
de novo review as such, nor 'total deference''".273 The original panel also explained that the standard
of review under the CVA requires a panel to "critically examine a domestic authority's explanation
'in depth, and in the light of the facts before the panel' ".274 The original panel further recalled the
Appellate Body's statement that an "objective assessment under Article 11 of the DSU mus t be
understood in the light of the obligations of the particular covered agreement at issue in order to
derive the more specific contours of the appropriate standard of review."275 The original panel stated
that it would therefore make an objective assessme nt of the matter "in the light of the relevant
obligations" invoked.276
7.87. In the course of this proceeding the parties have exchanged views on the standard of review
in the context of the BoA Ruling. 277 The parties agree, however, that the standard of review und er
Article 11 of the DSU also applies to the CVA.278 Furthermore, the parties agree that the Panel can
neither defer to the findings of the customs authority, nor can it conduct a de novo review.279 We
address below in the context of our substantive analysis a dditional issues concerning the standard
of review as they arise.280
7.2.2 Claim under Articles 1.1 and 1.2(a), second sentence, of the CVA
7.2.2.1 Introduction
7.88. Article 1 of the CVA requires that, in principle, the customs value of imported goods shall be
the transaction value. In situations in which the buyer and seller are related, the transaction value
must be accepted as the customs value so long as the transaction value is acceptable under the

270 Parties' responses to Panel question No. 97(c).
271 Philippines' second written submission, paras. 39-84; Thailand's first written submission, paras. 4.1-
4.3.
272 Panel Report, Thailand – Cigarettes (Philippines), para. 7.70.
273 Panel Report, Thailand – Cigarettes (Philippines), para. 7.70 (referring to Appellate Body Reports,
274 Panel Report, Thailand – Cigarettes (Philippines), para. 7.104 (quoting Appellate Body Report,
US - Lamb, para. 106).
275 Panel Report, Thailand – Cigarettes (Philippines), para. 7.71 (quoting Appellate Body Report,
US - Countervailing Duty Investigation on DRAMS, para. 184).
276 Panel Report, Thailand – Cigarettes (Philippines), para. 7.72.
277 According to the Philippines, the parties have "fundamentally different views as to how the panel
should undertake its task of examining the Philippines' claims … [t]hese differences pertain to the factual and
legal standards that apply to the Panel's review of the BoA's rejection of the transaction value and the
determination of an alternative customs value." (Philippines' second written submission, para. 38. See also
Philippines' second written submission, paras. 39-84; response to Panel question Nos. 4 and 74; opening
statement at the meeting of the Panel, paras. 5-14; responses to questioning at the meeting of the Panel;
Thailand's first written submission, paras. 4.1-4.12 and 5.9-5.12; second written submission, paras. 2.5-2.37;
and response to Panel question No. 4.
278 Philippines' second written submission, para. 40; Thailand's second written submission, paras. 2.11.
279 Philippines' second written submission, para. 66; Thailand's second written submission, para. 2.13-
2.14.
280 See, for example, paragraphs 7.107. to 7.121 below.

requirements of Article 1.2. In this respect, Article 1.2(a), second sente nce, requires that , in a
situation where the buyer and seller are related, if the customs authority has doubts as to whether
the relationship influenced the price, it must examine "the circumstances surrounding the sale" and
accept the transaction value, unless the customs authority demonstrates that the relationship did
indeed affect the price.
7.89. It is uncontested that the buyer (PMTL) and the seller (PM Indonesia) in the relevant
transactions at issue here were indeed "related" within the meaning of the CVA.281 Since the buyer
and seller were related, the BoA conducted an examination of "the circumstances of sale", specifically
by comparing, on the one hand, two "profit and general expenses" (P&GE) rates attributed to PMTL
and, on the other hand, a "benchmark range" constructed around an "industry average" P&GE rate
that was calculated using the P&GE rates of five companies allegedly representative of the industry
(these five companies comprised an alleged "industry group").282
7.90. The Philippines asserts that the BoA's examination of "the circumstances of sale " was
inconsistent with the substantive requirements contained in the second sentence of Article 1.2(a),
and consequently the BoA's rejection of the transaction value was in consistent with Article 1.1. 283
The Philippines asserts that the BoA, in comparing PMTL's P&GE rates to a benchmark range of P&GE
rates representative of the industry: (i) composed an improper industry benchmark group of
companies; (ii) improperly determined the benchmark range of P&GE rates; and (iii) conducted an
improper comparison between PMTL's P&GE rates and the benchmark range.
7.91. In Thailand's view, the BoA reasonably determined that the relationship between PMTL and
PM Indonesia affected the transactio n value. 284 Thailand considers that the BoA's choice of
companies to include in the benchmark comparison group was reasonable; that the BoA acted
reasonably in determining the benchmark range for the industry group; and that the comparison
between PMTL's P&GE rates and the benchmark range was reasonable.
7.92. The parties agree that an examination of the circumstances of sale between related parties
under Article 1.2(a) may, in principle, be conducted by using a comparison aimed at determining
whether the transaction value reflects normal commercial behaviour between unrelated parties. 285
More specifically, the parties agree that comparing the P&GE rate that the importer obtained in sales
of the imported goods with the P&GE rates obtained by other importers of similar or identical goods,
could give an indication as to whether the relationship influenced the price.286 The Philippines argues
that "the BoA's application of the method as part of its examination of the circumstances of sale was

281 We recall the original panel's finding that "[t]he Philippines agrees that PM Thailand and PM
Philippines are related within the meaning of Article 15.4(f) of the Customs Valuation Agreement, because they
are both directly or indirectly controlled by a third person, PM International." (Panel Report, Thailand –
Cigarettes (Philippines), fn 460)
282 Philippines' first written submission, paras. 126-127.
283 Philippines' first written submission, paras. 227-346; second written submission, paras. 32-277 and
348-368; response to Panel question Nos. 2-6(a), 7(b), 8(a), 8(c), 9-12, 14, 16,19, 78-80, 82(a) and 83-84;
comments on Thailand's response to Panel question Nos. 78(b), 80-81 and 82(b); opening statement at the
meeting of the Panel, paras. 3-33 and 41-46.
284 Thailand's first written submission, paras. 5.13-5.75; second written submission, paras. 2.1-2.105;
response to Panel question Nos. 4-7(a), 8(b)-8(c), 11, 13, 15, 17-18, 77, 78(b), 80, 81 and 82(b); comments
on the Philippines' response to Panel question Nos. 78(b)-79, 82(a), 83; opening statement at the meeting of
the Panel, paras. 78-95.
285 Philippines' first written submission, para. 175; Thailand's first written submission, para. 5.2.
286 Philippines' first written submission, paras. 175 and 229-231; Thailand's first written submission,
para. 5.2. We note the Philippines' explanation that:
A comparison of P&GE rates … might shed light on whether the parties' relationship influenced
the price. The logic is that, in a related-party context, the price paid or payable for imported
goods might be lower than would prevail were the parties unrelated. By lowering the import
price, the importer would reduce its cost of goods sold, as well as its liability for customs duties
and internal taxes assessed on the transaction value. However, the importer would still resell its
goods in the country of importation at the prevailing market price. As a result, there would be a
larger net difference between the importer's sales revenues and its cost of goods sold plus fiscal
charges. Thus, relative to an importer purchasing the same goods from an unrelated party, sales
of the imported goods would generate a higher P&GE rate, which is the difference between sales
revenue and cost of goods sold plus fiscal charges, expressed as a percentage of sales revenue.
(Philippines' first written submission, para. 230 (emphasis original))

flawed in ways that render the examination inconsistent with Article 1.2(a) of the CVA."287 We
proceed with our analysis on the understanding that a comparison of P&GE rates between PMTL and
an industry benchmark is, in principle, a valid methodology for determining whether the relationship
between PMTL and PM Indonesia influenced the price.
7.2.2.2 Main arguments of the parties
7.93. The Philippines argues that an examination of the circumstances of sale, under Article 1.2(a),
must consist of a rigorous and critical examination that observes due process, and covers "all
relevant aspects of the transaction".288 According to the Philippines, the transaction value must be
used unless the customs authority has grounds rooted in objective, positive evidence for regarding
the transaction value as unacceptable.289
7.94. Regarding the BoA's examination of the circumstances of sale, the Philippines first argues that
the BoA constructed an improper industry group to compare against PMTL's P&GE rates. Specifically,
the Philippines argues that the selection of the companies included in the industry group was
inconsistent with the requirements of Article 1.2(a), second sentence, because the inclusion of PMTL
itself sheds no light on whether PMTL's sale was consistent with the industry standard, and the P&GE
rates of the other companies included in the industry group were not comparable to PMTL's P&GE
rate since those companies did not make sales of imported cigarettes at the wholesale level.290 The
Philippines also argues that, if the companies selected in the group were appropriate, then the BoA
should have also included two other companies that it chose to exclude. 291 Additionally, in the
Philippines' view, regardless of whether the companies included in the group were appropriate, the
BoA improperly excluded two companies that were appropriate comparators, and which therefore
should have been included in the industry group.292
7.95. Second, the Philippines argues that the way in which the BoA determined the benchmark
range, on the basis of the industry group, was flawed. The Philippines considers that the BoA
inappropriately determined the P&GE rates for the companies in the group, by using different
definitions of "profit" in the numerator, compared to the denominator, when applying the calculation
to determine P&GE.293 Additionally, the Philippines argues that the BoA used an inappropriate figure
in respect of PMTL's P&GE rate when determining the benchmark range. 294 Furthermore, the
Philippines argues that the BoA inappropriately relied on a simple average instead of a weighted
average when calculating an average P&GE rate for the industry group, thereby failing to take into
account the differences in sales volumes of the companies in the industry group.295 The Philippines
also submits that the BoA inappropriately determined the benchmark range using the statistical tool
of "standard error".296
7.96. Third, the Philippines argues that the BoA conducted an improper comparison between PMTL's
P&GE rates and the benchmark range, because the BoA incorrectly relied on a strict quantitative test
to assess whether the BoA's rates were consistent with the benchmark range, without taking into
account qualitative factors that may have explained apparent discrep ancies in the comparison of

287 Philippines' first written submission, para. 232. (emphasis original) See also Philippines' comments
on Thailand's response to Panel question No. 73.
288 Philippines' first written submission, paras. 162 and 168 (referring to Panel Report, Thailand –
Cigarettes (Philippines), para. 7.191). See also Philippines' second written submission, paras. 93-95.
289 Philippines' first written submission, paras. 155, 160 and 169.
290 Philippines' first written submission, paras. 241-257; second written submission, paras. 111-153;
response to Panel question Nos. 6, 7(b) and 78-79; comments on Thailand's response to Panel question
No. 78(b); opening statement at the meeting of the Panel, paras. 16-22.
291 Philippines' first written submission 258-261 and 265-268; second written submission, paras. 177-
186; response to Panel question Nos. 10-11, 80, 82(a); comments on Thailand's response to Panel question
No. 82(b); opening statement at the meeting of the Panel, paras. 25-26.
292 Philippines' first written submission, paras. 258-264; second written submission, paras. 157-177;
response to Panel question Nos. 8(a), 8(c), 9, 80; comments on Thailand's response to Panel question No. 81;
opening statement at the meeting of the Panel, para. 24.
293 Philippines' first written submission, paras. 289-295; second written submission, paras. 213-225.
294 Philippines' first written submission, paras. 282-288; second written submission, paras. 199-212;
response to Panel question No. 14.
295 Philippines' first written submission, paras. 269-279; second written submission, paras. 187-198;
response to Panel question Nos. 23 and 83.
296 Philippines' first written submission, paras. 296-324; second written submission, paras. 226-260;
response to Panel question Nos. 16 and 84; opening statement at the meeting of the Panel, paras. 27-33.

P&GE rates.297 Additionally, the Philippines notes that the BoA apparently used two rates for PMTL
when comparing PMTL to the benchmark range, and that both of these rates were different to the
P&GE rate used in respect of PMTL wh en calculating the industry average rate. 298 The Philippines
argues that the BoA should have been consistent, and used a single P&GE rate for PMTL both when
determining the benchmark range, and when comparing PMTL to that range.
7.97. In Thailand's view, the BoA r easonably determined that the relationship between PMTL and
PM Indonesia affected the transaction value. Thailand considers that the BoA's choice of a benchmark
comparison group was reasonable, because the BoA acted impartially and objectively by selecting
the companies based on information received from the Thai Business Development Department, and
which information was based on a Thai industrial classification identifying companies in the business
of "wholesale of tobacco and tobacco products".299 Thailand considers that the inclusion of PMTL in
the industry group was reasonable and appropriate. 300 Thailand explains that the BoA excluded
certain companies from the list on the basis of objectively justifiable reasons, including companies
whose P&GE rates were d isproportionately high, and companies for whom the BoA could not find
relevant financial information. 301 Thailand explains that the BoA excluded loss -making companies
from the group, and that a company's loss-making status is a sufficient reason to exclude it from an
industry group, on the basis that loss-making companies do not reflect P&GE in the ordinary course
of trade.302 Thailand argues that the BoA's approach was reasonable in light of the difficulties of
constructing a relevant group of comparator companies with which to compare PMTL's P&GE rates,
and highlights that such realities, and the consequential necessity of relying on companies outside
the cigarette sector, are acknowledged by a representative of PMTL itself.303
7.98. Regarding the determination of th e benchmark range, Thailand argues that the BoA's
calculation of P&GE rates "was used consistently for all companies in the group " and that, even if
the denominator had been based on total income, there "would have been no effect on the overall
calculation."304 Regarding the determination of PMTL's P&GE rate, Thailand explains that the BoA
used the rate of 9.22% in order to be consistent with how the rates were established for the other
companies included in the benchmark group.305 Regarding the use of a simple average, instead of a
weighted average, Thailand explains that, had the BoA weighted the calculation of the industry
average, the volume of PMTL's sales would have "led to the BoA comparing PM Thailand with itself",
meaning that PMTL "would not be subject to scrutiny simply because it was the largest importer."306
Thailand also argues that the BoA's reliance on "standard error" to establish a benchmark range of
P&GE rates to compare against PMTL's P&GE rate was reasonable.307
7.99. Regarding the comparison of PMTL to the benchmark range, Thailand considers that the BoA's
determination of whether PMTL's rates were consistent with those of the industry group was
objective and reasonable.308 Additionally, Thailand considers that the BoA did not act inconsistently
with Article 1.2(a) by comparing two distinct rates for PMTL to the benchmark range.309

297 Philippines' first written submission, paras. 325-337; second written submission, paras. 261-276;
response to Panel question Nos. 19 and 83.
298 Philippines' first written submission, paras. 282-288; second written submission, 199-212; response
to Panel question No. 14.
299 Thailand's response to Panel question No. 6. See also Thailand's response to Panel question Nos. 13
and 80; comments on the Philippines' response to Panel question No. 79.
300 Thailand's second written submission, para. 2.50; response to Panel question Nos. 7(a) and 78(b);
comments on the Philippines' response to Panel question No. 78(b).
301 Thailand's first written submission, fn 66; second written submission, paras. 2.43-2.46; response to
Panel question Nos. 11 and 82; comments on the Philippines' response to Panel question No. 82.
302 Thailand's first written submission, paras. 5.18-5.27; second written submission, para. 2.42;
response to Panel question Nos. 8(b)-8(c) and 81; opening statement at the meeting of the Panel, para. 83.
303 Thailand's first written submission, paras. 5.21, 5.31-5.32 and 5.36-5.37; second written
submission, paras. 2.40-2.41 and 2.47; response to Panel question Nos. 6 and 13; comments on the
Philippines' response to Panel question No. 79; opening statement at the meeting of the Panel, para. 84.
304 Thailand's response to Panel question No. 15, p. 17 (referring to Calculations of P&GE ratios/ranges,
(Exhibit THA-40)). See also Thailand's second written submission, para. 2.59.
305 Thailand's second written submission, paras. 2.61-2.66.
306 Thailand's first written submission, para. 5.35. See also Thailand's second written submission,
para. 2.49; comments on the Philippines' response to Panel question No. 83.
307 Thailand's first written submission, paras. 5.48-5.75; second written submission, paras. 2.69-2.78;
response to Panel question No. 17.
308 Thailand's first written submission, paras. 5.49-5.75; second written submission, para. 2.76-2.78;
response to Panel question No. 18; opening statement at the meeting of the Panel, paras. 87-92.
309 Thailand's first written submission, paras. 5.45-5.46; second written submission, para. 2.66.

7.2.2.3 Analysis by the Panel
7.2.2.3.1 General considerations
7.100. Article 1.1 (d) of the CVA states that:
The customs value of imported goods shall be the transaction value, that is the p rice
actually paid or payable for the goods when sold for export to the country of importation
adjusted in accordance with the provisions of Article 8, provided:
…
(d) that the buyer and seller are not related, or where the buyer and seller
are related, that the transaction value is acceptable for customs purposes
under the provisions of paragraph 2.
7.101. Article 1.2(a) of the CVA elaborates two distinct but related obligations, in its second and
third sentences. It states that:
In determining whether the transa ction value is acceptable for the purposes of
paragraph 1, the fact that the buyer and the seller are related within the meaning of
Article 15 shall not in itself be grounds for regarding the transaction value as
unacceptable. In such case the circumstance s surrounding the sale shall be examined
and the transaction value shall be accepted provided that the relationship did not
influence the price. If, in the light of information provided by the importer or otherwise,
the customs administration has grounds for considering that the relationship influenced
the price, it shall communicate its grounds to the importer and the importer shall be
given a reasonable opportunity to respond . If the importer so requests, the
communication of the grounds shall be in writing.310
7.102. Thus, Article 1.1 provides that, in principle, a customs authority must use the transaction
value of the imported goods as the customs value. Article 1.1(d) r ead in conjunction with
Article 1.2(a) clarifies that this applies also in situations in which the buyer and the seller are related,
unless it is established that the relationship influenced the price. If a customs authority has doubts
as to whether the relationship between the buyer and seller affected the price, then under Article
1.2(a), second sentence, the customs authority must examine the circumstances surrounding the
sale, and the customs authority may reject the transaction value if the customs authority establishes
that the relationship influenced the price. Article 1.2(a), third sentenc e, also requires that if the
customs administration has grounds for considering that the relationship influenced the price, it
must communicate those grounds to the importer and the importer must be given a reasonable
opportunity to respond, before the customs authority makes its final determination.
7.103. There is no disagreement between the parties that if the BoA's examination of the
circumstances of sale was not in accordance with the substantive requirements contained in the
second sentence of Article 1.2(a), then it would automatically entail a consequential violation of
Article 1.1. In accordance with the findings of the original panel, we proceed on that basis. 311
Accordingly, our analysis of the Philippines' claims under Articles 1.1 and 1.2(a) focuses on the legal
standards under Article 1.2(a). In this section of our Report we address the Philippines' claim under
the second sentence of Article 1.2(a), and in Section 7.2.3 below we address the Philippines' claim
under the third sentence of Article 1.2(a).
7.104. The parties agree that Article 1.2(a) "does not prescribe a specific process for customs
authorities to follow", and that the customs authority "has a degree of discretion in deciding how to
conduct its examination".312 We agree. In this respect, we recall the original panel's findings that
the term "examine" means to "inquire into, investigate or consider critic ally", similarly to the word
"investigate", which means "[s]earch or inquire into; examine (a matter) systematically or in detail;

310 Emphasis added.
311 See, e.g. Panel Report, Thailand – Cigarettes (Philippines), paras. 7.195 and 8.2(b).
312 Philippines' first written submission, paras. 171 and 559. See also Thailand's first written submission,
paras. 4.8-4.10; second written submission, paras. 2.8-2.17.

make an (official) inquiry into ".313 We note that the interpretative notes concerning Article 1.2(a),
as well as Article 1.2(b), all indicate methods that may be used to determine whether the relationship
between the buyer and seller influenced the price. We also note that the object and purpose of an
examination of the circumstances of sale under Article 1.2(a) is to reveal wheth er the price was
influenced by the relationship between the buyer and seller. Given the foregoing, we consider that,
although Article 1.2(a) does not prescribe any particular means or methodology that must be
followed by a customs authority in examining th e circumstances of sale, the chosen means or
methodology must be capable of, and suitable for, revealing whether the relationship between the
buyer and seller influenced the price. We therefore agree with the Philippines that an examination
of the circumst ances of sale under Article 1.2(a) must be apt to reveal whether the relationship
between the buyer and seller influenced the price.
7.105. We note that the CVA and its accompanying interpretative notes provide guidance and
instruction on a number of aspects of customs valuation that may be relevant to determining whether
a particular examination of the circumstances of sale is apt to reveal whether the relationship
influenced the price. Given the discretion that the CVA accords to the customs authority in
determining its approach to examining the circumstances of sale, we do not consider it appropriate
to indicate in the abstract any specific principles, beyond those articulated above, that would bind a
customs authority in any and all situations. Rather, we consider that a determination of whether the
customs authority has acted consistently with the legal standard above may be informed by the
context provided by the other provisions of the CVA, on a case-by-case basis. To that end we address
below, in the context of the specific arguments of the parties, the extent to which other provisions
of the CVA inform our determination of whether the BoA's examination of the circumstances of sale
was apt to reveal whether the relationship between the buyer and seller influenced the price.
7.106. Regarding the legal standard under Article 1.2(a), second sentence, we recall the findings
of the original panel that the customs authority's examination must consist of a process of
consultations as between the importer and the customs authority:
[I]n order to properly examine the circumstances of a given transaction, the customs
authority must clearly indicate to the importer how it evaluates the information
submitted by the importer, including the insufficiency of the information submitted and,
if necessary and feasible, any further particular type of information that may help them
assess the validity of the transaction value.
…
[C]ustoms authorities and importers have respective responsibilities under
Article 1.2(a). The customs authori ties must ensure that importers be given a
reasonable opportunity to provide information that would indicate that the relationship
did not influence the price. Importers are responsible for providing information that
would enable the customs authority to e xamine and assess the circumstances of sale
so as to determine the acceptability of the transaction value. Provided with such
information, the customs authorities must conduct an "examination" of the
circumstance of sale, which would require an active, critical review and consideration of
the information before them.
… The process of examining the circumstances of the sale under Article 1.2(a) therefore
resembles that of consultation as both the importer and the customs administration
respectively need to make a good faith effort on the one hand to provide relevant
information and on the other hand to provide a reasonable opportunity to the importer
to submit information and review the information provided in reaching a final
determination.314

313 Panel Report, Thailand – Cigarettes (Philippines), para. 7.158 (referring to The New Shorter Oxford
English Dictionary, (Fifth Edition) Oxford University Press, 2002, Vol. I, p. 1417 (2002)).
314 Panel Report, Thailand – Cigarettes (Philippines), paras. 7.164 and 7.171-7.172. The original panel
also stated, regarding the burden of proof, that:
[T]he nature of the obligations under Article 1.2(a) can be clarified on the basis of the text of
Article 1.2(a) considered in its context and in the light of the objective and purpose of the
Customs Valuation Agreement. Therefore, to that extent, we do not consider it necessary to
address the applicability of the notion of burden of proof in the context of the Customs Valuation

7.107. The parties dis agree on whether the legal standard under Article 1.2(a) requires that the
customs authority conduct a "rigorous and critical" examination of the circumstances of sale, as the
Philippines puts it315, or alternatively whether, in order to prevail on a claim under Article 1.2(a), a
complainant must demonstrate that the customs authority's determination was "inherently
unreasonable", "not objective ", or "biased", as Thailand argues. 316 In our view, the essential
requirement under Article 1.2(a), second sentence, is that an examination of the circumstances of
sale must be apt to reveal whether the relationship between the buyer and seller influenced the
price. To that end, it appears inevitable that a biased, arbitrary, or unreasonable examination would
indeed be inapt to reveal whether the relationship influenced the price. We also consider it probable
that an examination that is neither rigorous nor critical would fail to satisfy this requirement.
Fundamentally, however, the assessment of whether a customs authority satisfied the requirements
of Article 1.2(a) must be based on whether the examination was apt to reveal whether the
relationship between the buyer and seller influenced the price.
7.108. We note that Thailand has argued that, in considering the issues pertaining to the BoA Ruling
in this dispute, the Panel's mandate is limited to determining whether the BoA acted "reasonably",
and that the issues should be framed in terms of the reasonableness of the BoA's approach. 317 The
Philippines, for its part, considers th at Thailand seeks to substitute "a general standard of
reasonableness" for the specific legal standards that are set forth in the CVA. 318 We take it both as
a given, and as a requirement under Article 3.2 of the DSU, that an interpreter cannot simply
substitute an abstract standard of "reasonableness" for the specific legal standards set forth in a
treaty. Rather, we consider that the extent to which considerations of reasonableness may be taken
into account in assessing a Member's consistency with any provision of the covered agreements is a
function of the particular provisions. 319 In this respect, we have set forth both our standard of
review320, and the legal standard under Article 1.2(a) , second sentence, 321 above. In accordance
with our standard of review, and the relevant legal standard under Article 1.2(a), second sentence,
we proceed with our analysis by making an objective assessment of whether the BoA properly
rejected the transaction value by examining the circumstances of sale within the meaning of Article
1.2(a).322
7.109. Having said that, we do not understand Thailand to suggest that the Panel should substitute
a general standard of "reasonableness" in place of specific legal standards in the CVA. Rather, we

Agreement for the purpose of resolving the present dispute. (Panel Report, Thailand – Cigarettes
(Philippines), para. 7.173)
315 See, e.g. Philippines' first written submission, paras. 168 and 224; second written submission,
para. 94.
316 See, e.g. Thailand's first written submission, paras. 5.39 and 5.75; second written submission,
paras. 2.53-2.54, 2.67, and 2.78; response to Panel question Nos. 6(c)(ii), 8(b), 11(a), 13, and 18; and
comments on the Philippines' response to Panel question Nos. 73, 78 and 79.
317 Thailand's first written submission, paras.4.1-4.12 and 5.9-5.12; second written submission,
paras. 2.1-2.37; response to Panel question No. 4.
318 Philippines' second written submission, paras. 11, 72, 76, 78, and 231. In the Philippines' view,
"Thailand's position that the Panel should apply a deferential 'reasonableness' standard … seems to infect its
arguments regarding the legal standards to be applied by the Panel." (Philippines' second written submission,
para. 67) The Philippines elaborates that "Thailand conspicuously fails to engage in any such examination of
the relevant treaty text … Thailand repeatedly argues that the issue is whether the BoA's 'decision', 'approach',
'methodology', or 'determination' was 'reasonable' … A reader of Thailand's submission would be forgiven for
thinking that Articles 1.1, 1.2(a), and 5.1 of the CVA were drafted to include a 'reasonableness' obligation."
(Philippines' second written submission, paras. 74 and 76) The Philippines considers that "[i]n proposing that
the BoA's determination must be assessed under a standard of reasonableness, Thailand simply ignores the
relevant treaty language". (Philippines' second written submission, para. 83)
319 For example, in EU – Biodiesel, the Appellate Body rejected the respondent's argument that the
obligation in Article 2.2.1.1 of the Anti-Dumping Agreement is qualified by, or informed by, a "general standard
of reasonableness". (Appellate Body Report, EU – Biodiesel, paras. 6.35-6.39) We also note that, as Thailand
rightly points out, "[t]here are other provisions in the covered agreements that do not refer to 'reasonableness'
and nonetheless have been construed as requiring that aspect in the adoption of the measures at issue. For
instance, in the evaluation of a justification under Articles XX(a), (b) or (d) of the GATT 1994, a panel must
look at whether the national authorities had considered reasonable alternative means to the challenged
measure, even though there is no express reference to that requirement in those provisions." (Thailand's
second written submission, para. 2.23). In our view, whether a particular provision involves an element of
reasonableness must be assessed in accordance with the interpretative principles set forth under Article 3.2 of
the DSU.
320 See Section 7.2.1.5.
321 See paragraphs 7.100. to 7.107. above.
322 See Panel Report, Thailand – Cigarettes (Philippines), paras. 7.99-7.101.

construe Thailand's arguments relating to "reasonableness" in the context of discussing the
applicable legal standards in the CVA to be another way of saying that, insofar as the CVA does not
prescribe a specific process for customs authorities to follow , they have a degree of discretion in
deciding how to conduct the examination, and it is not for a treaty interpreter to read terms into the
text that are not there.323 As already indicated, we agree that, as a matter of treaty interpretation,
authorities enjoy a degree of discretion with respect to matters not prescribed by the text of the
provision. Furthermore, we construe Thailand's arguments relating to "reasonableness" in the
context of discussing our standard of review, which should not be conflated with the question of the
applicable legal standards in the CVA, to be another way of saying that the Panel should not engage
in a de novo review. We have already indicated our agreement with this understanding as well.
7.110. We note that during this proceeding the parties exchanged views on the applicability and
relevance of Article 17.6(i) of the Anti-Dumping Agreement to the Panel's standard of review under
the CVA.324 In this respect, we agree with the Philippines that, by its express terms, Article 17.6(i)
applies to matters within the scope of the Anti -Dumping Agreement, and is not directly applicable
to matters arising under the CVA. Having said that, certain aspects of the standard of review
articulated in relation to the Anti -Dumping Agreement may nonetheless be analogous to, and in
some respects inform and provide guidance on, the standard of review to be followed under one or
more other covered agreements.325 Indeed, certain aspects of the standard of review under the Anti-
Dumping Agreement have informed our approach to certain issues arising in relation to the standard
of review under the CVA.326
7.111. Additionally, we note that the parties and third parties have expresse d different views on
the extent to which a panel's assessment of a customs authority's examination of the circumstances
of sale must take into account the "effect or impact" on the final determination.327 In our view, our
reliance on the legal standard artic ulated above largely resolves this issue. Insofar as we find that
there is a flaw or shortcoming in the examination that renders the examination inapt to reveal
whether the relationship between the buyer and seller influenced the price, then there is a violation
of the obligation in Article 1.2(a), second sentence. However, insofar as we find a flaw or shortcoming
in the examination, but consider that the nature of the flaw or shortcoming does not render the
examination inapt to reveal whether the relations hip between the buyer and seller influenced the
price – because the flaw or shortcoming is not sufficiently "serious" or "consequential", or for some
other reason – then we would conclude that there is no violation of Article 1.2(a), second sentence.
An assessment of whether a flaw or shortcoming in the examination of the circumstances of sale is

323 See, e.g. Thailand's second written submission, paras. 2.24-2.28.
324 See Thailand's first written submission, paras. 5.9-5.12; Thailand's second written submission,
paras. 2.2-2.14 and 2.31-2.32; Philippines' second written submission, paras. 38-84; Philippines' response to
Panel question Nos. 4, 5 and 94; and Philippines' opening statement, paras. 5-14.
325 Generally speaking, the standard of review articulated in relation to the Anti-Dumping Agreement is
similar to the standard of review under the SCM Agreement and the Agreement on Safeguards, insofar as
factual issues are concerned. One of the main reasons for this is that Article 11 of the DSU, which applies to all
of the covered agreements other than the Anti-Dumping Agreement, has been understood as establishing a
standard of review that is, at its core, very similar to the standard of review expressed in Article 17.6(i) of the
Anti-Dumping Agreement. (See, e.g. Panel Report, US – Softwood Lumber VI, paras. 7.15-7.18)
326 See, e.g. paragraphs 7.112. and 7.117. below. Having set forth our understanding of the
applicable standard of review under the CVA that is relevant to our assessment of the issues raised in this
proceeding (see paragraphs 7.85. to 7.87. above, read together with our further observations in paragraphs
7.108. to 7.109. above and paragraphs 7.111. to 7.121. below), we do not consider it necessary to
embark on the exercise of further elaborating on the extent to which the standard of review under Article
17.6(i) of the Anti-Dumping Agreement is similar to, or different from, the standard of review under the CVA.
327 In its third-party submission, the European Union stated that the Panel must be certain that the
authority's error is "sufficiently serious and consequential to justify a finding of error". (European Union's third
party submission, para. 14. See also European Union's third-party statement at the meeting of the Panel, para.
2) Thailand agrees, and also submits that "a panel should consider whether a particular flaw is sufficiently
serious to justify finding of inconsistency". (Thailand's response to Panel question no. 71, p. 6) The Philippines
disagrees with Thailand and the European Union, and argues that "[i]t is not necessary for the Panel to
determine the relative impact that each of the alleged flaws had on the BoA's P&GE calculation in order to
determine whether the alleged flaw gives rise to an inconsistency with Articles 1.1 and 1.2(a)", and that "[a]ny
shortcoming in an administration's determination in these respects amounts to a violation of these treaty
provisions, with no additional requirement to demonstrate that a particular shortcoming had a particular factual
effect or impact on the administration's determination". (Philippines' response to Panel question No. 2(b),
paras. 19 and 22. See also Philippines' comment on Thailand's response to Panel question No. 71) We note
that Canada also comments on this issue, stating that "some flaws may be minor enough on their own to not
warrant a finding of a violation under Article 1.2(a). However, when combined with other flaws, the cumulative
effect may amount to a clear violation." (Canada's third-party response to Panel question No. 3(a), para. 45)

"sufficiently serious and consequential" is, to that extent, inherent in the legal standard that we have
articulated above.
7.112. In our view, consideration of whether a flaw or shortcoming is sufficiently serious or
consequential as to render the examination inapt to reveal whether the relationship between the
buyer and seller influenced the price is distinct , however, from any atte mpt to embark on an
assessment of how a particular flaw or shortcoming may have affected the calculations performed
by the authority, or would have altered the overall outcome reached by the authority. To the extent
that the parties' disagreement extends to whether a particular examination of the circumstances of
sale (or aspect of that examination) must have gone against the interests of the importer in order
to be found to be inconsistent with Article 1.2(a), second sentence, we wish to clarify that a
determination may be found to be inconsistent with the obligation in Article 1.2(a), second sentence,
regardless of the impact (if any) of the flaw or shortcoming on the final outcome of the
determination.328
7.113. As a final observation in respect of the legal standard under Article 1.2(a), second sentence,
we recall that the original panel considered that the notion of the "burden of proof " may not be
central to the assessment of whether or not a Member has complied with its obligations under the
CVA, including, in particular, with respect to the examination of the circumstances of sale in a
related-party transaction under Article 1.2(a) of the CVA.329 To the extent that issues regarding the
burden of proof on an importer or customs authority do arise in this proceedin g, we address them
in the context of our substantive analysis below.
7.114. Before proceeding to assess the parties' arguments under Article 1.2(a), second sentence,
we note that another general issue concerns the relevant evidence upon which we base our
assessment of those arguments. In setting forth the standard of review in respect of Article 1.2(a)
of the CVA, the original panel explained that its assessment would be based on the customs
authority's "grounds" for considering that the relationship influenced t he price, as required to be
communicated by the customs authority to the importer under the third sentence of Article 1.2(a),
as well as the "explanation" that was provided by the customs authority to the importer, as required
under Article 16, upon request from the importer.330 The original panel also based its analysis under
Article 1.2(a), second sentence, on letters sent between the customs authority and the importer, as

328 We note that in US – Orange Juice (Brazil), the panel found a violation of Article 2.4 of the Anti-
Dumping Agreement through the use of zeroing, even though the zeroing had no impact on the amount of
anti-dumping duties actually collected. (Panel Report, US – Orange Juice (Brazil), paras. 7.156-7.157) In
US - Zeroing (Japan – Article 21.5), the panel found that a sunset review failed to comply with the
requirements of Article 11.3 due to the United States' reliance on dumping margins determined through
zeroing, and rejected the United States' argument that the reliance on margins calculated through zeroing was
not material because its investigating authority would have made the same determination anyway. (Panel
Report, US – Zeroing (Japan – Article 21.5), paras. 7.222-7.229) Article 3.8 of the DSU indicates that "where
there is an infringement of the obligations assumed under a covered agreement, the action is considered prima
facie to constitute a case of nullification or impairment", and that "there is normally a presumption that a
breach of the rules has an adverse impact on other Members parties to that covered agreement, and in such
cases, it shall be up to the Member against whom the complaint has been brought to rebut the charge." The
Appellate Body has also found that "the disciplines of the GATT and the WTO, as well as the dispute settlement
system, are intended to protect not only existing trade but also the security and predictability needed to
conduct future trade". (Appellate Body Report, US – Corrosion-Resistant Steel Sunset Review, para. 82) We
further note that the Appellate Body and a number of panels have previously found, in the context of specific
provisions of the covered agreements, that the "impact" or "trade effects" of a Member's act need not be
demonstrated when assessing the WTO-consistency of that act. (See Appellate Body Report, Japan – Alcoholic
Beverages II, p. 23, DSR 1996:I, 97, at p. 115; and Panel Reports, Russia – Tariff Treatment, paras. 7.18-
7.20; EC – IT Products, para. 7.757; Argentina – Hides and Leather, para. 11.20; US – Orange Juice (Brazil),
para. 7.156)
329 Panel Report, Thailand – Cigarettes (Philippines), para. 7.173. The original panel stated:
As a final observation, we note that in the course of this dispute, the parties have contested the
applicability of the principle of the burden of proof to the Customs Valuation Agreement, in
particular with respect to the examination of the circumstances of sale in a related-party
transaction. As our analysis above illustrates, the nature of the obligations under Article 1.2(a)
can be clarified on the basis of the text of Article 1.2(a) considered in its context and in the light
of the objective and purpose of the Customs Valuation Agreement. Therefore, to that extent, we
do not consider it necessary to address the applicability of the notion of burden of proof in the
context of the Customs Valuation Agreement for the purpose of resolving the present dispute.
330 Panel Report, Thailand – Cigarettes (Philippines), paras. 7.106 and 7.182.

well as the minutes of a meeting held between the customs authority and representativ es of the
importer.331
7.115. In this proceeding, the Philippines argues that "in assessing whether a Member has complied
with its substantive obligation to examine the circumstances of sale, a panel must review all available
contemporaneous evidence relating to t he examination, such as meeting minutes … [S]uch other
evidence sheds light on the substance of the examination conducted, whether or not the evidence
forms part of the grounds and explanation. "332 Specifically, the Philippines submits that such
contemporaneous evidence includes the BoA Ruling itself, the minutes of internal BoA meetings held
on 14 January 2010 and 26 September 2012 that allegedly constitute part of the "decision-making
process", certain "BoA memoranda and presentations", a letter sent by the Customs Department to
PMTL on 16 June 2016 in response to PMTL's December 2012 request for an explanation, and
explanations that were provided by Thailand to the Philippines (but that were not provided to PMTL),
attached to a letter dated 27 March 2014.333 In support of its view, the Philippines argues that "[i]t
is well established that a panel should examine evidence on the record of a domestic administration,
in addition to the administration's explanation of its decision " and that the additional evidence
"reveal[s] important elements of the BoA's examination of the facts that were critical to its ultimate
decision."334
7.116. For its part, Thailand considers that "the BoA decision should be read in conjunction with the
minutes of the meeting of 26 September [2012 ]", but that documents "prepared after the BoA's
decision by officials that [w]ere not directly involved in the BoA's process … do not form part of the
decision".335 Thailand agrees that "in certain situations, it is appropriate to examine
contemporaneous evidence when examining the consistency with the CVA of a customs value
determination".336 Thailand explains, however, that documents that do not "constitute[] exchanges
or interactions between the customs administration and the importer… cannot be considere d
'contemporaneous evidence'".337
7.117. As the original panel noted, the Appellate Body has indicated in the context of the Safeguards
Agreement that, "where a competent authority has not provided a reasoned and adequate
explanation to support its determination, the panel is not in a position to conclude that the relevant
requirement for applying a safeguard measure has been fulfilled … [and] the panel has no option
but to find that the competent authority has not performed the analysis correctly."338 However, the
Appellate Body has also explained that the standard of review under the Anti -Dumping Agreement
does not "prevent a panel from examining facts that were not disclosed to, or discernible by, the
interested parties at the time of the final determination."339 Furthermore, in the context of reviewing
a countervailing duty determination, the Appellate Body has stated that, "in principle, a panel must
review the conduct of an investigating authority in the light of information contained on the record
and the explanations given … in [the] published report".340 In the latter dispute, the Appellate Body
upheld the panel's examination of the investigating authority's preliminary and final determinations,
as well as "other contemporaneous … document[s]".341 Most pertinently, in a dispute concerning an
anti-dumping investigation, the Appellate Body upheld the panel's assessment of the complainant's

331 See Panel Report, Thailand – Cigarettes (Philippines), paras. 7.182-7.194 and fn 591. See also
Thailand's comments on the Philippines' response to Panel question No. 72(a).
332 Philippines' response to Panel question No.72, para. 24.
334 Philippines' response to Panel question No. 5, paras. 67-68.
335 Thailand's response to Panel question No. 5, pp. 9-10.
336 Thailand's comments on the Philippines' response to Panel question No. 72(a), p. 8.
337 Thailand's comments on the Philippines' response to Panel question No. 72(a), p. 8.
338 Appellate Body Report, US – Steel Safeguards, para. 303. See also Panel Report, Thailand –
Cigarettes (Philippines), fn 499.
339 Appellate Body Report, Thailand – H-Beams, para. 118. (emphasis added)
340 Appellate Body Report, US – Carbon Steel (India), para. 4.273. (emphasis added)
341 Appellate Body Report, US – Carbon Steel (India), para. 4.273 (quoting Panel Report, US – Carbon
Steel (India), para. 7.154). Applying that standard in US – Tyres (China), the Appellate Body considered that
"[t]he fact that the Panel may have examined evidence or data on the record that the [investigating authority]
did not refer to specifically in its determination does not establish that the Panel conducted an improper review
of the USITC determination." (Appellate Body Report, US – Tyres (China), para. 330) This approach was also
followed by the panel in EC – Salmon, which stated that "in order for … information to be put before a [p]anel
to support an argument in dispute settlement, such information must be reflected in the published
determinations, or at a minimum in other documents in the files of the investigating authority and brought
before us in a form that demonstrates that it was available to and considered by the investigating authority in
establishing the facts." (Panel Report, EC – Salmon, para. 7.843 (emphasis added))

substantive claim under Article 3.4 of the Anti-Dumping Agreement on the basis of an "internal 'note
for the file'" that was not disclosed to the interested parties during the investigation.342 The Appellate
Body emphasized in its reasoning that the panel had taken "steps to assure [itself] of the validity "
of the relevant exhibit, and to establish that the document formed "part of the co ntemporaneous
written record of the … investigation".343
7.118. We note that the Philippines in this proceeding has argued that the "grounds", "reasons",
and "explanations" provided by the BoA to PMTL during and after the process of conducting the
customs determination, are, respectively, inconsistent with Article 1.2(a), third sentence,
Article 11.3, and Article 16 of the CVA.344 Without prejudice to our findings on those claims, we note
in particular that the Philippines has argued that the explanation provided in the BoA Ruling itself is
not only incomplete, but is factually inaccurate regarding the BoA's method of examining the
circumstances of sale. 345 Furthermore, we emphas ize that the Philippines as the complainant has
not requested us to make findings solely on the basis of information contained in the BoA Ruling
itself, but has insisted that our assessment of the BoA's examination of the circumstances of sale
should take into account all relevant contemporaneous evidence – which the Philippines has provided
as exhibits to substantiate its claims.
7.119. In the context of reviewing a customs valuation determination, a WTO dispute settlement
panel should be wary of assigning undue weight to documentary evidence that was not
communicated to the importer at the time of the determination. At the same time, we do not consider
that any potential failings by a customs authority to properly explain its customs valuation
determination to the importer should serve to shield its actual determination from being assessed
for its substantive consistency with the CVA. Insofar as another Member brings claims before a WTO
panel that necessitate an assessment of how the authority actually conducted its examination, the
complainant bears the burden of establishing the facts as to how the authority actually conducted
its examination. Indeed, the circumstances surrounding the determination may be such that the
complainant has no means of establishing how the authority actually conducted its examination
other than on the basis of documentary evidence that was not provided to the importer at the time
of the customs valuation determination. In such circumstances, it could be inconsistent with the
panel's function under Article 11 of the DSU if it were to disregard documentary evidence that sheds
light on how the authority actually conducted its examination, and instead mad e only a truncated
assessment of the matter based solely on information provided to the importer at the time of the
determination. This is particularly relevant in circumstances where the complainant claims that
relevant information was not co mmunicated to the importer, or the information that was
communicated to the importer was insufficient to understand how the authority conducted its
examination (for instance, on the basis that the information provided was factually inaccurate).
7.120. Therefore, we consider that, in the circumstances of this case, it is appropriate to assess the
Philippines' claim under Article 1.2(a), second sentence, on the basis of evidence comprising part of
the written record of the determination, regardless of whether it was communicated to the importer
at the time of the determination. We recognize that there may be no of ficial "record" of a customs
authority's determination, in contrast to the record that exists in an anti -dumping, countervailing
duty, or safeguards investigation. However, in our view, documents that pertain to the customs
authority's decision-making process, and that were demonstrably a part of the customs valuation
process, may be construed to be part of the "record" for our purposes. Such evidence necessarily
includes communications between the importer (PMTL) and the customs authority (the BoA)346 both
during and after the customs determination, as well as evidence in the form of documents that were
not communicated by the BoA to the importer, but nonetheless constitute a part of the BoA's
decision-making process and shed light on how the BoA actually conducted its examination. We do
not consider it necessary at this stage to identify all relevant documents that satisfy this standard.
Rather we proceed with our analysis, and identify therein the evidence upon which we rely in respect
of different aspects of the parties' arguments, by applying the legal standard articulated here.347

342 See Appellate Body Report, EC – Pipe Fittings, paras. 119-128.
343 Appellate Body Report, EC – Pipe Fittings, para. 127 (quoting Panel Report, EC – Pipe Fittings, para.
7.307).
344 See Sections 7.2.3 , 7.2.7 and 7.2.8 below.
345 See, e.g. Philippines' first written submission, para. 379; second written submission, para. 115.
346 And vice-versa.
347 See footnotes 349, 356, 392, 429, 445 and 517 below.

7.121. Having said that, w e are not suggesting that a respondent can justify the actions of a
customs authority on the basis of re asons or rationalizations that were not relied upon by the
customs authority itself at the time it conducted the customs valuation determination. The Appellate
Body has cautioned that a Member may not rely on ex post rationalizations of an authority's conduct
in WTO dispute settlement.348 We therefore consider that Thailand cannot seek to justify the BoA's
actions on the basis of any ex post rationalizations that are not substantiated by any of the
documents on the record of the customs valuation determination.
7.2.2.3.2 The BoA's examination of the circumstances of sale
7.122. It is uncontested by the parties, and borne out by the evidence, that the BoA conducted the
following process for examining the circumstances of sale for the purpose of determining whether
the relationship between PMTL and PM Indonesia influenced the transaction value:
a. The BoA constructed an "industry group" of five companies;
b. The BoA determined P&GE rates for each of the five companies in the industry group;
c. The BoA calculated an "industry average" P&GE rate of 12.44% for the five companies,
using a simple average calculation;
d. From that industry average, the BoA constructed a "benchmark range " of P&GE rates
falling between 9.8% and 15.08%, by adding and subtracting 2.64% from the industry
average of 12.44%; and
e. The BoA compared two different P&GE rates for PMTL, namely 9.36% and 18.47%, against
the benchmark range, and concluded that, because PMTL's rates fell outside the
benchmark range, the transaction value was "influenced by the relationship between the
purchaser and seller".349
7.123. The Philippines has raised a number of different arguments concerning alleged flaws in the
BoA's examination of the circumstances of sale, each of which, in the Philippines' view, individually
"constitutes a sufficient basis for a finding of violation".350 However, the Philippines has also clarified
that is making a single claim under Article 1.2(a), second sentence, and is only requesting a single
finding of inconsistency.351 The Philippines has also indicated that in analys ing the various grounds
raised by the Philippines, "the Panel enjoys a degree of discretion in organizing its analysis … [and]
could evaluate each ground separately or it could group inter -connected grounds together – for
example, when dealing with the var ious arguments raised in respect of the comparator group
constructed by the BoA as part of its circumstances of sale test. "352 We note that two of the third

348 See, e.g. Appellate Body Reports, Japan – DRAMs (Korea), para. 159; US – Tyres (China), para. 329.
349 See BoA Ruling, (Exhibit PHL-21-B), pp. 2-4; Minutes of the BoA Meeting of 26 September 2012
(English translation), (Exhibit PHL-39-B), pp. 7-9. We consider that the BoA Ruling and the Minutes of the BoA
Meeting of 26 September 2012 both constitute documents "on the record" of the determination. We note that
the BoA Ruling contains the reasons for the BoA's decision, as communicated to the importer. We recognize
that the Minutes of the BoA Meeting were not communicated to the importer in the context of the customs
valuation determination itself, but were only provided to PMTL in the course of the domestic court proceeding
initiated by PMTL after the BoA Ruling was issued. (See Philippines' first written submission, para. 138; Minutes
of the BoA Meeting of 26 September 2012 (English translation), (Exhibit PHL-39-B)) Nevertheless, we consider
that these Minutes officially document the BoA's decision-making process. We also note that both the
Philippines and Thailand argue that the Panel should take these Minutes into account in assessing the WTO-
consistency of the BoA's determination. (See parties' responses to Panel question No. 5)
350 Philippines' response to Panel question No. 70, para. 5. See also the Philippines' response to Panel
question No. 2, paras. 11-12.
351 Philippines' response to Panel question No. 70, para. 3.
352 Philippines' response to Panel question No. 70, para. 8. The Philippines also indicates that, if "the
Panel considers that these various flaws should be examined together, the Philippines' position is that,
collectively, these flaws a fortiori constitute grounds for a violation of Articles 1.1 and 1.2(a)." (Philippines'
response to Panel question No. 2, para. 12) The Philippines also identifies a number of aspects related to the
BoA's determination of the benchmark range, which the Philippines indicates "the Panel may wish to consider …
under a single heading in its report." (Philippines' response to Panel question No. 84, para. 146)

parties also suggest that we should conduct a "holistic assessment", or assess the BoA's examination
of the circumstances of sale "as a whole".353
7.124. Panels have a degree of discretion as to how they structure their analysis, provided that they
do not do so in such a way as to lead them to truncate their analysis prematurely, or foreclose
consideration of crucial aspects of a party's arguments.354 We find it useful to address certain of the
Philippines' arguments together, insofar as they correspond to three different aspects of the BoA's
examination. We therefore proceed by addressing, in turn, the Philippines' arguments concerning:
(i) the BoA's composition of the industry group; (ii) the BoA's determination of the benchmark range
(including the way in which the BoA determined the P&GE rates for the companies in the industry
group); and (iii) the BoA's comparison between PMTL and the benchmark range.
7.125. While we group the issues raised into these three distinct aspects of the BoA Ruling, we
stress at the outset that these issues involve interrelated aspects of the methodology and approach
followed by the BoA. As integrally related aspects of a single methodology employed by the BoA, we
do not consider that these aspects can be assessed in isolation from one another. In this regard,
both parties share the understanding that the various aspects alleged by the Philippi nes are to be
assessed by the Panel as constituting a single claim, rather than as a series of distinct claims.355 We
will therefore conduct a holistic examination of the totality of the facts to arrive at an overall
conclusion, taking into account our intermediate findings in respect of these various aspects.
7.2.2.3.2.1 The composition of the industry group
7.126. As indicated above, to determine whether the price of the cigarettes was influenced by the
relationship between PMTL and PM Indonesia, the BoA compared PMTL's P&GE rates with a range of
P&GE rates. That range was based on an industry group that the BoA composed. The industry group
consisted of five companies : PMTL itself, Lee Intertrade, Chemical Resin s, Piriyapul International,
and KHS.356 In the BoA Ruling, and other documents on the record, this industry group was described
as consisting of "wholesalers" of "imported cigarettes", and comprising information for the "sale of
… goods of the same class or kind" as PMTL.357
7.127. The Philippines argues that the BoA's composition of the industry group was flawed, because:
(i) the companies included in the industry group were not apt to reveal whether the relationship
between PMTL and PM Indonesia influenced the price; (ii) the BoA excluded two companies from the
industry group th at should have been included i n the industry group; and (iii) the BoA arbitrarily
excluded two other companies that were, for the purposes of the comparison, as similar to PMTL as
those companies that were included in the industry group.
7.128. We first set out the parties' arguments on these aspects of the BoA's approach, before
proceeding with our analysis of the issues raised.
7.129. First, regarding the companies that were included in the industry group, the Philippines
asserts that, as a general matter, under Article 1.2(a), an examination of the circumstances of sale
in the form of a comparison must satisfy two "principles of comparability ", namely that the

353 See Canada's third-party response to Panel question No. 7(a), para. 44; United States' third-party
response to Panel question No. 7(a), para. 40. The European Union also commented on this issue, stating that
"[t]he question of whether individual flaws should be considered as undermining the comparability by
themselves, or only by their combined effect, should depend on the Panel's assessment on substance of the
gravity of the flaw in question." (European Union's third-party response to Panel question No. 7(a), para. 19)
354 Appellate Body Report, Argentina – Financial Services, para. 6.203.
355 Parties' responses to Panel question No. 70(b).
356 See Letter from Customs Department to PTML of 16 June 2016, (Exhibit PHL-38-B). We consider that
this letter, constituting a communication from the Customs Department to PMTL referring specifically to the
BoA Ruling, and provided explicitly in response to a request from PMTL for information concerning the Customs
Department's decision, constitutes evidence "on the record" of the determination. We further note that the
identity of the five companies was confirmed by Thailand in consultations with the Philippines, and it is
uncontested by the parties that the industry group was composed of these five companies. (See Letter from
Thailand to the Philippines of 4 September 2013, (Exhibit PHL-37))
357 See, e.g. BoA Ruling, (Exhibit PHL-21-B), p. 3; Minutes of the BoA Meeting of 26 September 2012
(English translation), (Exhibit PHL-39-B), p. 8; Letter from Customs Department to PTML of 16 June 2016,
(Exhibit PHL-38-B), p. 1.

comparison (i) be made between comparable goods358; and (ii) takes full account of any differences
that affect comparability.359 The Philippines further asserts that, in conducting its comparison of
P&GE rates, the BoA acknowledged "that the sales of the companies chosen had to be comparable
in terms of both the imported goods sold and the commercial level at which the sales were made."360
The Philippines argues, however, that of the five companies that the BoA included in the benchmark
industry group, the only company that satisfied this standard was PMTL itself. 361 The Philippines
asserts that the other companies were invalid comparators, because three of the four remaining
companies in the benchmark group (namely Chemical Resins, KHS and Lee Intertrade) did not sell
imported cigarettes at a wholesale level 362, and the remaining company (namely Piriyapul
International) did not import or distribute cigarettes, and its cigarette retail sales comprised only a
"tiny fraction" of its overall sales.363 As regards the inclusion of PMTL itself in the industry comparator
group, the Philippines argues that "[i]f the examination includes a comparison of the importer with
the importer itself in respect of transactions involving the same seller, that element of the
examination cannot, by definition, shed light on whether the importer's pricing in those related party
transactions is consistent with pricing in unrelated [party] transactions."364
7.130. Second, the Philippines argues that the industry group was flawed because it excluded British
American Tobacco (BAT) and Japan Tobacco International (JTI).365 The Philippines points out that in
the course of bilateral communications between Thailand and the Philippines, Thailand indicated that
BAT and JTI were excluded on the basis that they had been "loss-making" during the relevant
period.366 In the Philippines' view, a "lack of profitability is not, in itself, a sufficient basis for
excluding these companies".367 The Philippines concedes that "it may sometimes be appropriate to
exclude unprofitable companies when drawing comparisons under the CVA", but maintains that the
customs authority "must take account of commercial factors before doing so".368
7.131. Third, the Philippines considers that Macrorich and Classic Cigars, two companies excluded
from the benchmark group, were sufficiently similar to Lee Intertrade and KHS that their exclusi on
was not justifiable in terms of their business operations.369 The Philippines considers that a customs
authority cannot exclude a company from a comparison group solely for the reason that its P&GE
rate is "too low or too high", and rather it is the comparison itself that determines whether a P&GE

358 Philippines' first written submission, paras. 183-196; response to Panel question No. 79. The
Philippines supports this view with reference to Articles 1.2(b) and Article 15.2 of the CVA, which refer to
comparisons between identical or similar goods, as well as Articles 2 and 3 of the CVA, which contemplate the
use of prices of identical or similar goods as alternative customs values to the transaction values. The
Philippines also emphasizes that Articles 5 and 6 of the CVA, which refer to deductive and computed value
methods for customs valuation, require a high level of comparability in terms of benchmark goods used for
determining the customs value.
359 Philippines' first written submission, paras. 197-206.
360 Philippines' first written submission, paras. 241-242.
362 Philippines' first written submission, paras. 247-249 (referring to Chemical Resins Thailand Limited,
Audited Financial Statement, 2002 (English translation), (Exhibit PHL-46-B); K H S Company Limited, Audited
Financial Statement, 2002 (English translation), (Exhibit PHL-47-B); Leeintertrade Website, available at
http://www.leeintertrade.com/en (last accessed 10 October 2016), (Exhibit PHL-48)). See also Philippines'
second written submission, para. 117. Specifically, the Philippines contends that: Chemical Resins is a
manufacturer of cigarette filters, that does not deal at all in finished cigarettes; KHS is a wholesaler of cut
tobacco, that does not import cigarettes for resale; and Lee Intertrade is a wholesaler of cigars, tobacco, rolling
paper, and cigarette holders, but not imported cigarettes.
364 Philippines' response to Panel question No. 7(b), para. 72. The Philippines concedes that in
"exceptional circumstances", it may permissible to include an importer in an industry group. For instance, "if
the industry group is large and an authority cannot disaggregate data relating to the importer from data
relating to the industry group, an authority might not be required to reject the data in its entirety." However,
the Philippines explains that this is not the case in the present dispute. (Philippines' response to Panel question
365 Philippines' first written submission, paras. 258-264; second written submission, paras. 157-177.
366 Philippines' first written submission, para. 262 (referring to Letter from the Permanent Mission of the
Philippines to the WTO to the Permanent Mission of Thailand to the WTO, 27 September 2013, (Exhibit PHL-
58), p. 2; Letter from the Permanent Mission of Thailand to the WTO to the Permanent Mission of the
Philippines to the WTO, 27 March 2014, (Exhibit PHL-59), p. 2).
367 Philippines' first written submission, paras. 263.
368 Philippines' first written submission, paras. 263.
369 Philippines' first written submission, para. 265 (referring to Macrorich Co. Ltd., Audited Financial
Statement, 2002 (English translation), (Exhibit PHL-60-B); and Classic Cigars Co. Ltd., Audited Financial
Statement, 2002 (English translation), (Exhibit PHL-61-B)).

rate is too low or too high. 370 Additionally, the Philippines considers that the BoA had sufficient
financial information for these companies to determine their P&GE rates.371 In the Philippines' view,
the arbitrary exclusion of these companies was inconsistent with Article 1.2(a), second sentence.
7.132. For its part, Thailand "generally agrees that an 'apples -to-apples' comparison should be
used"372, but disagrees that Article 1.2(a) requires that comparisons must be condu cted in
accordance with the principles of comparability suggested by the Philippines.373 Thailand argues that
the particular circumstances of the Thai cigarette market make it difficult to conduct an examination
of the circumstances of sale to the level of p erfection demanded by the Philippines. 374 Thailand
further explains that the BoA's approach was reasonable, because it sought to establish a list of
"companies in the cigarette industry" by seeking information from the Ministry of Commerce and the
Thai Custo ms Department regarding "companies that were in the business of import and/or
wholesale of cigarettes and related products".375 Thailand also argues that the BoA's approach was
in accordance with OECD guidelines.376
7.133. Regarding the exclusion of BAT and JTI, Thailand argues that the BoA excluded all loss -
making companies from the benchmark comparison, and that the exclusion of these loss -making
companies was reasonable, on several grounds.377 Thailand argues that: loss-making sales are not
in the ordinary course of trade378; loss-making firms "could not be reasonably used to determine
whether PM Thailand's P&GE [rate] was within the range that might be expected based on
transactions between unaffiliated parties"379; it would be excessively burdensome to require the BoA
to examine whether commercial factors could explain why such firms are loss -making380; the
Philippines did not explain what commercial reasons could account for BAT and JTI's lack of
profitability, or what valid commercial reasons would be sufficient to include loss-making companies
in a benchmark group381; and given that BAT and JTI import cigarettes from related exporters, their
lack of profitability confirms that their transaction values "may have been influenced by the
relationship".382
7.134. Finally, regarding the exclusion of Macrorich and Classic Cigars, Thailand explains that
Macrorich was "excluded because its P&GE rate of 54% was disproportionately high and did not
appear to be, in effect, 'within the ordinary course of trade'".383 Thailand argues that "in arriving at
a reasonable and objective benchmark, it is perfectly reasonable to exclude a data point that appears
aberrational."384 With respect to Classic Cigars, Thailand argues that Classic Cigars was excluded
from the group of 29 companies because "no financial information about its operations and P&GE
ratios for 2002 was available."385

370 Philippines' second written submission, paras. 183-186
371 Philippines' response to Panel question No. 82(a); comments on Thailand's response to Panel
question No. 82(b).
372 Thailand's comments on the Philippines' response to Panel question no. 79, p. 15.
373 Thailand's second written submission, para. 2.28.
374 Thailand's opening statement at the meeting of the Panel, para. 84; responses to questioning at the
meeting of the Panel; response to Panel question No. 71; comments on the Philippines' response to Panel
question No. 79.
375 Thailand's response to Panel question No. 6(a).
376 Thailand's response to Panel question No. 78; comments on the Philippines' response to Panel
question Nos. 75 and 78.
377 Thailand's first written submission, paras. 5.21-5.29; response to Panel question No. 81. Thailand
indicates that in addition to BAT and JTI, the BoA also excluded nine other companies for being loss-making,
namely PX Import Export, Oriental & Eight Happiness, Prestige Brand, Universal Consumer Products, Goldimex
Intertrade, Sereewat, Phromrangsi 1999, Boontong Trading, and First Trago. (See Thailand's second written
submission, para. 2.45)
378 Thailand's first written submission, paras. 5.22-5.24.
379 Thailand's first written submission, para. 5.25.
380 Thailand's response to Panel question No. 8(b), pp. 13-14.
381 Thailand's first written submission, paras. 5.26-5.27; opening statement at the meeting of the Panel,
para. 83.
382 Thailand's first written submission, para. 5.26. (emphasis original)
383 Thailand's second written submission, para. 2.43.
384 Thailand's response to Panel question No. 11(a), p. 15.
385 Thailand's response to Panel question No. 11(b), p. 15. See also Thailand's response to Panel
question No. 82; and comments on the Philippines' response to Panel question No. 82. We note that Thailand
initially argued that "[t]he reason for excluding Classic Cigars was … that research indicate that the company
did not import cigarettes during 2002." (Thailand's second written submission, para. 2.43) Thailand

7.135. We recall that authorities enjoy a margin of discretion regarding the means or methodology
that they choose to follow when engaging in comparisons. However, in the context of conducting an
examination of the circumstances of sale, they enjoy that discretion within the parameters laid down
under Article 1.2(a), read in its context and in light of the object and purpose of the CVA. We agree
with Thailand that the text of Article 1.2(a) does not prescribe specific requirements regarding
comparisons made in the context of examining the circumstances of sale. 386 However, we consider
that certain principles of comparability are inherent in the essential legal standard to be applied
under that provision, or arise by necessary implication from the context and purpose of
Article 1.2(a).
7.136. As a starting point, we consider it axiomatic that, for a comparison to be apt to reveal
whether the relationship between the buyer and seller influenced t he price, that comparison must
be between comparable things. Not only is this inherent to the legal standard under Article 1.2(a),
but it is reflected in a general principle of comparability that appears both within the CVA itself, as
well as throughout the covered agreements.387 We also consider that both the CVA and other covered
agreements indicate that , where there are relevant differences between things being compared,
those differences must be accounted for in some way.388 Thus, in our view, for a comparison between
two things to reveal whether the relationship between a buyer and seller influenced the price, such
a comparison should be between comparable things, and any relevant and identifiable differences
that would affect the comparison must be taken into account.
7.137. Furthermore, we consider that, where a comparison is between the importer and a group of
companies intended to represent the industry, a company that would otherwise satisfy the
requirement of comparability de scribed above may only be excluded from that industry group on
the basis of an objectively justifiable reason.389 In the absence of an objectively justifiable reason to
exclude an otherwise appropriate comparator company, the industry group is arbitrary and does not
accurately represent the industry. A comparison using such an arbitrary industry group would not
be apt to reveal anything about the business operations of the importer relative to the industry.
7.138. Applying these basic principles to the BoA's examin ation of the circumstances of sale, we
consider first the companies that the BoA included in the industry comparator group (PMTL itself,
and four other companies). We then consider the companies excluded from the industry comparator
group. We note that the parties' arguments regarding the composition of the industry comparator
group raise a number of issues that are interrelated, and it is for that reason that we address them
together.
7.139. It is axiomatic that the inclusion of PMTL within the industry group is not apt to reveal
whether the relationship between PMTL and PM Indonesia influenced the price paid by PMTL.
Specifically, we agree with the Philippines that, if an examination of the circumstances of sale
"includes a comparison of the importer with the im porter itself in respect of transactions involving
the same seller, that element of the examination cannot, by definition, shed light on whether the
importer's pricing in those related party transactions is consistent with pricing in unrelated

subsequently indicated that it "would like to correct an error in its explanation of the exclusion of Classic
Cigars. On re-checking with the officials responsible in the BoA at the time, Classic Cigars was in fact excluded
… because no financial information … was available." (Thailand's response to Panel question No. 11(b), p. 15)
386 See, e.g. Thailand's second written submission, paras. 2.24-2.28.
387 See, e.g. Articles 1.2(b), 2, 3, 5, 6 and 15.2 of the CVA, Articles I and III of the GATT 1994, and
Article 2 of the Anti-Dumping Agreement. We also note the European Union's statement that a general
principle of comparability "can be found throughout the covered agreements, such as in Articles I:1, III:2 and
III:4 of the GATT 1994, in Article 14(b) of the SCM Agreement, in the extensive rules on price comparison and
comparability in Article 2 of the ADA … [and] also in various provisions of the CVA itself." (European Union's
third party submission, para. 21)
388 We find support for this conclusion in an examination of Articles 1.2(b), 2 and 3 of the CVA, Article VI
of the GATT 1994, Article 14(b) of the SCM Agreement, and Article 2 of the Anti-Dumping Agreement. Article
1.2(b) of the CVA requires that account be taken of differences in commercial levels and quantity levels when
doing a comparison of test prices. Articles 2 and 3 of the CVA require that benchmark transaction values be at
the same commercial level and substantially the same quantity as the goods being valued, or if not possible,
adjustments must be made for transactions at different levels or quantities. Article VI:1 of the GATT 1994 and
Article 2.4 of the Anti-Dumping Agreement require adjustments for differences in price comparability, including
taxes, commercial levels, and quantities. Article 14(b) of the SCM Agreement requires adjustments to ensure
comparability in a comparison of government and commercial loans.
389 Such objectively justifiable reasons include, for instance, that a particular company is not a valid
comparator on the basis of the goods it sells, the commercial level at which it sells those goods, or the volume
of its sales relative to the importer. (See, e.g. Article 1.2(b) of the CVA)

transactions."390 We further note that the BoA did not include PMTL in the industry group as a
consequence of being unable to disaggregate data relating to the importer from data relating to the
industry group. To the contrary, the BoA sought actively to include data for the importer. Insofar as
the other four companies included in the industry comparator group engaged in business activities
that were sufficiently comparable to those of PMTL, and insofar as the BoA used the appropriate
P&GE rate for PMTL on both sides of the comparison, then the inclusion of PMTL itself in the industry
comparator group would not necessarily render the entire industry group inapt to reveal whether
the relationship influenced the price, or give rise, by itself, to a violation of Article 1.2(a) of the CVA.
We do, however, consider that the BoA's decision to undertake a comparison of PMTL to itself raises
questions about the BoA's composition of the industry group.391
7.140. Turning to the other four companies included in the group, it is uncontested that they differ
from PMTL in significant ways and that, despite the representation made in the BoA Ruling itself,
none of them were "imported cigarette wholesalers in the year 2002". We emphasize in this regard
that it is uncontested by Thailand that:
a. Chemical Resins is a manufacturer of cigarette filters and does not sell cigarettes;
b. KHS is a wholesaler of cut tobacco that does not import cigarettes for resale;
c. Lee Intertrade is a wholesaler of cigars, tobacco, rolling paper, and cigarette holders, but
not imported cigarettes; and
d. Piriyapul sells cigarettes at the retail level (instead of the wholesale level), and cigarettes
comprise only a small fraction of Piriyapul's overall sales.392
7.141. We note that several CVA provisions contemplate a comparison of P&GE rates in connection
with "imported goods of the same class or kind ", including in the specific context of examining the
circumstances of sale under Article 1.2(a).393 We further note that Article 15.3 defines "goods of the
same class or kind" as goods which fall "within a group or range of goods produced by a particular
industry or industry sector, and [which] includes identical or similar goods. " Furthermore, both
paragraph 9 of the Interpr etative Note to Article 5 and paragraph 8 of the Interpretative Note to
Article 6 refer explicitly to the question of "whether certain goods are 'of the same class or kind' as
other goods". Both interpretative notes indicate that such a determination must be on a case -by-
case basis, and that "the narrowest group or range of … goods … for which the necessary information
can be provided, should be examined. " In short, while an authority is not confined to comparing

390 Philippines' response to Panel question No. 7, para. 72.
391 We recall that the BoA Ruling indicated that it had compared PMTL's P&GE rates with the benchmark
P&GE rates of an "industry group of imported cigarette wholesalers in the year 2002". PMTL was the only
company in the industry group that was an "imported cigarette wholesaler in the year 2002". (See paragraph
7.140. below) Given that there was no evident methodological reason for including PMTL itself in the industry
comparator group, a question that arises is whether the BoA did so as a basis for representing, in its Ruling,
that the industry group comprised "imported cigarette wholesalers in the year 2002".
392 See Philippines' first written submission, paras. 248-250 (referring to Chemical Resins Thailand
Limited, Audited Financial Statement, 2002 (English translation), (Exhibit PHL-46-B); Lee Intertrade Co. Ltd.,
Audited Financial Statement, 2002 (English translation), (Exhibit PHL-63-B); and K H S Company Limited,
Audited Financial Statement, 2002 (English translation), (Exhibit PHL-47-B)); Thailand's response to Panel
question No. 6(a). Regarding Piriyapul, the Philippines explains (and Thailand does not contest) that Piriyapul
"imports and distributes a wide range of consumer goods for distribution to grocery stores, convenience stores
and food service providers [and w]ith respect to its own retail activities, Piriyapul sells some 3,000 different
goods in Piriyapul grocery stores, covering the product categories of beverages, canned food, personal care,
confectionary, and tobacco." (Philippines' first written submission, para. 250 (referring to Piriyapul
International co., Ltd, Audited Financial Statement, 2002 (English translation), (Exhibit PHL-49-B); Piriyapul
International Limited, 40 Anniversary Special Publication, 2013, (Exhibit PHL-50)). We note that in the course
of considering PMTL's appeal, the BoA itself considered at one point that Piriyapul was not an appropriate
comparator because it imported and sold other goods in addition to cigarettes. (Minutes of the BoA Meeting of
14 January 2010 (English translation), (Exhibit PHL-42-B), at pp. 14-15) We note in this connection that the
Minutes of the BoA Meeting of 26 September 2012, a document which both parties agree should be taken into
account in our consideration of the BoA Ruling, state explicitly that the BoA's determination as represented in
the 2010 Minutes was a resolution that constituted "preparation for the arrangement of the making of the
ruling". (See Minutes of the BoA Meeting of 26 September 2012 (English translation), (Exhibit PHL-39-B), p. 3)
393 See, e.g. Article 5.1(a)(i); Article 6.1(b); paragraph 3 of the Interpretative Note to Article 1.2;
paragraphs 6 and 9 of the Interpretative Note to Article 5; and paragraphs 4, 5 and 8 of the Interpretative
Note to Article 6.

identical or similar products for the purpose of conducting a comparison of P&GE rates, a customs
authority also does not have licence to pick any products that are related in some way to the product
being valued , without regard to whether th ose comparator products have sufficiently common
characteristics for such a comparison to be apt to reveal whether the price of imported goods was
influenced by the relationship between the buyer and seller.
7.142. We recall that the BoA Ruling concluded that two separate P&GE rates ascribed to PMTL were
"not consistent with those of the industry group of imported cigarette wholesalers, which is the
information for the sale of the goods of the same class or kind in the Kingdom [of Thailand] ".394
Recalling the definition in Article 15.3 of the CVA, Thailand submits, only in the context of providing
its comments on the Philippines' responses to the Panel's second set of questions, that this definition
"is much broader, of course, than the definition of 'identical' and 'similar' goods contained in Articles
15.2(a) and (b) of the CVA".395 However, while Thailand disagrees with the Philippines' interpretation
of these terms, Thailand has not advanced any arguments to demonstrate that the four companies
in the comparator group actually produced products "of the same class or kind ", except for its
reliance on the TSIC classification.396 We address this further below.
7.143. We recall that the legal standard under Article 1.2(a) requires tha t, at a minimum, the
examination of the circumstances of sale should be apt to reveal whether the relationship influenced
the price. In our view, given the significant differences in business operations between Chemical
Resins, KHS, Lee Intertrade and Piri yapul, it is not clear how the P&GE rates of these companies
can, in principle, reveal anything about the P&GE rate of PMTL, a company that exclusively sells
cigarettes at the wholesale level. Having said that, we do not consider that the inclusion of thes e
four companies in the industry comparator group, by itself, necessarily renders the entire industry
group inapt to reveal whether the relationship influenced the price, or gives rise, by itself, to a
violation of Article 1.2(a) of the CVA. In this regard , we consider it necessary to further consider
whether the inclusion of these four companies in the industry comparator group was defensible on
one or more grounds raised by the respondent.
7.144. We will therefore proceed to consider the principal reasons identified by Thailand, which are
that these companies were identified as being part of the "wholesale of tobacco and tobacco
products" industry, that the BoA referred to the OECD guidelines, and that the BoA encountered
difficulties identifying comparable comp anies because, inter alia, the companies that were more
comparable to PMTL were loss-making during the relevant period.
7.145. In its second written submission, Thailand stated that it is "incorrect" to argue that the BoA
"went beyond the industry in selecting the comparison group", but did not elaborate further. 397 In
response to a question from the Panel, however, Thailand elaborated that the BoA relied on
information provided by the Business Development Department of the Thai Ministry of Commerce.398
According to Thailand, the Business Development Department relied on Thailand's Standard
Industrial Classification (TSIC), heading 51.233 of which referred to "wholesale of tobacco and
tobacco products ", to provide the BoA with a list of possible comparator companies within that
sector.399
7.146. We consider that such references may constitute an ex post rationalization of the BoA's
conduct. As the Philippines points out, "Thailand did not provide this justification for its industry
group in the BoA Ruling, its first written s ubmission, or its second written submission. This
explanation was, instead, offered for the first time in Thailand's responses of July 2017 to the Panel's
first set of questions."400 Furthermore, in reviewing all of the evidence presented by the parties, we
cannot see any evidence on the record of the BoA's determination indicating that the BoA relied on
the TSIC to determine whether certain companies were comparable to PMTL. Insofar as this is an ex
post rationalization, we do not consider that Thailand can defend the BoA's actions on this basis.

394 BoA Ruling, (Exhibit PHL-21-B), p. 3.
395 Thailand's comments on the Philippines' response to Panel question No. 79, p. 15.
396 Thailand's comments on the Philippines' response to Panel question No. 79, p. 16.
397 Thailand's second written submission, para. 2.41.
398 Thailand's response to Panel question No. 6(a); Documents relating to Thailand Standard Industrial
Classification (TSIC), (Exhibit THA-39).
399 Thailand's response to Panel question No. 6(a); Documents relating to Thailand Standard Industrial
Classification (TSIC), (Exhibit THA-39).
400 Philippines' response to Panel question No. 79, para. 99.

7.147. Having said that, we acknowledge that in the context of customs valuation determinations,
where there may be no official "record" of a customs authority's determination in contrast to the
record that exists in the context of an anti-dumping, countervailing duty, or safeguards investigation,
there may be circumstances in which it is difficult to sharply distinguish between an ex post
rationalization and permissible reliance on documentary evidence showing how the auth orities
actually conducted their examination. We also note that the Appellate Body has explained that a
panel is not precluded from making alternative findings on ex post rationales made by the
respondent.401 We are mindful that the original panel followed the same approach, in order to help
"resolve the parties' dispute ".402 Although the absence of any evidence in support of Thailand's
assertion suggests that, in this particular instance, the BoA's reliance on the TSIC may constitute an
ex post rationalization, we nevertheless consider it appropriate to follow the same approach as the
original panel. We therefore proceed to address this explanation by Thailand on an arguendo basis.
7.148. We concluded above that the fundamental business operations of Chemical Resins, KHS, Lee
Intertrade and Piriyapul were so different from those of PMTL that a comparison of their P&GE rates
was not, in principle, apt to reveal anything about the price paid by PMTL to PM Indonesia for
cigarettes. In our view, this is no t called into question by the alleged fact that the BoA relied on a
domestic industry classification, pursuant to which the relevant companies all appeared under the
heading of "wholesale of tobacco and tobacco products". In our view, although a domestic industry
classification may be a useful starting point for a customs authority to seek comparable companies,
the customs authority remains under a fundamental obligation to ensure that the comparator
companies are, in actual fact, comparable to the importer.
7.149. Our reasoning in this regard is only reinforced by the fact that Thailand has not contested
that, under the TSIC, "companies self-register under a particular code", "companies are not obliged
to account for all their activities ", "they are free to register under three separate codes at any one
time", and "there is … little to no verification of whether companies correctly identify their business
activities".403 Additionally, the Ministry of Commerce apparently re -categorized the TSIC codes in
2009, and although none of the companies has significantly changed its business activities, under
the new classification none of the four companies appears under "wholesale of tobacco products "
(new TSIC code 46323). Rather, Chemical Resins appears under "manufacture and distribution of
cigarette filter[s]" (new TSIC code 12002), KHS and Lee Intertrade appear under "wholesale of non-
finished tobacco products" (new TSIC code 46203), and Piriyapul appears under "retail of other
goods in general stores " (new TSIC code 47190).404 We therefore agree with the Philippines that
"the SIC code under which a particular company is registered is not a reliable indicator of the
business activities undertaken by that company."405
7.150. As a general matter , regarding Thailand's emphasis that the BoA acted "impartially" and
"objectively" in how it composed the industry group, we do not question that this was the case.
Furthermore, we agree with Thailand insofar as it argues that the selection of companies who se
business operations were significantly different from those of PMTL was not inherently biased against

401 See Appellate Body Report, US – Carbon Steel (India), para. 4.274.
402 Panel Report, Thailand – Cigarettes (Philippines), para. 7.365.
403 Philippines' response to Panel question No. 79, para. 104. In order to exemplify this, the Philippines
also explains that one of the companies included in the original list of 29 companies, Goldimex, has changed its
classification under the TSIC multiple times since 2006, from "transportation and goods loading" to "trading in
engine oil, lubricant" to "accounts and balance sheet preparations and advisory services", and ultimately
registering itself under three, separate codes, namely "trading in vegetable, fruit, bamboo shoot, pepper,
garden plant, cigarettes, cut tobacco, beverage, water, mineral water, fruit juice, liquor, fresh food, dried food,
finished foods", "trading in engine oil, lubricant for all type of engine", and "guarantee services for one or more
persons, whether individuals or juristic persons for performance of obligations, including to guarantee the
person related to the business or operation of the company according to the law on immigration". (Philippines'
response to Panel question No. 79, paras. 107-108 (referring to TSIC code registrations of Goldimex Intertrade
Co. Ltd., under Form SorSorChor1, (Exhibit PHL-212), pp. 1-4))
404 Philippines' response to Panel question No. 79, paras. 114-116 (referring to the Minutes of the BoA
Meeting of 26 September 2012 (English translation), (Exhibit PHL-39-B), p. 8; Thailand's Standard Industrial
Classification Codes (Thai and English translation), (Exhibit PHL-214), p. 4; SIC code registration of Piriyapul
International Co., Ltd. under form SorBorChor3, (Exhibit PHL-215); SIC code registration of Chemical Resins
(Thailand) Ltd. under form SorBorChor3, (Exhibit PHL-216); SIC code registration of Lee Intertrade Co., Ltd.
under form SorBorChor3, (Exhibit PHL-217); and SIC code registration of KHS Company Ltd. under form
SorBorChor3, (Exhibit PHL-218)).
405 Philippines' response to Panel question No. 79, para. 103.

PMTL.406 However, we consider that the absence of bias or partiality is not directly relevant to
assessing whether a particular examination of the circum stances of sale was apt to reveal whether
the relationship between the buyer and the seller influenced the price. 407 Thus, the BoA's decision
to compose an industry group on the basis of the TSIC code s is not problematic by virtue of any
partiality or bias on the part of t he BoA in using the TSIC codes. Rather, an apples -to-oranges
comparison is problematic regardless of whether or not, in a particular case, it yields an outcome
that is favourable to the importer.
7.151. Thailand also argues that the BoA's approach followed OECD guidelines.408 We understand
Thailand to refer to the OECD Transfer Pricing Guidelines for Multinational Enterprises and Tax
Administrations.409 We note that the Minutes of the BoA Meeting of 26 September 2012 indicate that
the BoA did indeed purport to follow an approach that "is pursuant to the OECD rules".410
7.152. We note that Thailand has not sought to demonstrate the relevance of the OECD Transfer
Pricing Guidelines to the assessment of whether the BoA's examination of the circumstances of sale
was consistent with Article 1.2(a) of the CVA. Thailand has not emphasized this aspect of its
argumentation, and, in our view, has not elaborated on how the OECD guidelines indicate whether
the BoA acted consistently with Article 1.2(a), second sentence. In the absence of such elaboration,
we are wary of undertaking our own assessment of whether the BoA followed the OECD guidelines411,
and, in any event, we do not consider it necessary to do so . In accordance with the reasoning set
forth above regarding the BoA's reliance on the TSIC, we consider that regardless of the source from
which a customs authority derives its approach to examining the circumstances of sale, th e actual
examination must, fundamentally, be apt to reveal whether the relationship influenced t he price.
Thailand has not demonstrated how the references in the BoA Minutes to OECD "rules" or
"guidelines" demonstrate that the companies selected were apt to reveal whether the relationship
between PMTL and PM Indonesia influenced the price paid by PMTL.
7.153. Thailand also argues that the BoA encountered significant difficulties in identifying an
appropriate comparison group within the Thai cigarette market. 412 We note that, in its first and
second written submissions, Thailand offered no argumentation as to why a comparison of PMTL to
Chemical Resins, KHS, Lee Intertrade, or Piriyapul (or PMTL itself) would be apt t o reveal anything
about PMTL, or why the BoA Ruling indicated that the industry comparator group comprised
"imported cigarette wholesalers " when it did not. Rather, the principal focus of Thailand's
argumentation in its submission regarding the composition of the industry group was on the
difficulties that the BoA encountered in finding comparable companies. Thus, we consider that
Thailand's argumentation might be read as conceding that the industry group comprising these
companies may not have been a very apt comparator, and that the justification for relying on them
for purposes of the industry comparator group was that the BoA was not "faced with a perfect set
of choices".413 In the light of the foregoing, our assessment of the industry comparator group cannot
be confined to merely focusing on the differences between PMTL and the four other companies,
without considering any difficulties that the BoA may have faced in selecting companies that were
more comparable.

406 Thailand's second written submission, para. 2.54; comments on the Philippines' response to Panel
question No. 79, p. 15.
407 See paragraph 7.107. above.
408 Thailand's response to Panel question No. 78; comments on the Philippines' response to Panel
question Nos. 75 and 78.
409 We note that the Philippines has provided the relevant OECD guidelines. (See OECD Transfer Pricing
Guidelines for Multinational Enterprises and Tax Administrations, 22 July 2010, (OECD Guidelines), (Exhibit
PHL-41))
410 Minutes of the BoA Meeting of 26 September 2012 (English translation), (Exhibit PHL-39-B), p. 7.
411 The subject matter of transfer pricing rules (namely, the value of goods for taxation) is closely
related to, but not the same as, customs valuation (namely, the value of goods for levying of ad valorem
duties), and it is entirely possible that a value may be acceptable for customs purposes but adjusted later
under transfer pricing rules. We note, in this regard, that the Transfer Pricing Guidelines explicitly contemplate
that, "[v]aluation methods for Customs purposes … may not be aligned with the OECD's recognised transfer
pricing methods", without suggesting that such a deviation would fail to be in accordance with the CVA. (See
OECD Guidelines, (Exhibit PHL-41), para. 1.78) In any event, we also note that the guidelines consistently
insist that comparisons are to be conducted between "comparable" things. (See, e.g. OECD Guidelines, (Exhibit
PHL-41), pp. 41-45 and 119-125) We note in particular that the OECD Guidelines state that "the economically
relevant characteristics of the situations being compared must be sufficiently comparable". (OECD Guidelines,
(Exhibit PHL-41), p. 41)
412 See footnote 303 above.
413 Thailand's second written submission, para. 2.40.

7.154. In our view, the difficult circumstances of the BoA's examination were self-imposed, because
it followed from the BoA's decision to conduct its examination of the circumstances of sale by
comparing PMTL's P&GE rates with those of an industry comparator group. Thailand has not
demonstrated that these difficulties would have been present in any and every possible examination
of "the circumstances of sale " involving PMTL. Rather, these difficulties were specific to an
examination that relied on a comparison of PMTL's P&GE rates with an industry benchma rk group.
We note that the CVA itself contemplates a number of different methods for examining the
circumstances of sale that possibly are less likely to suffer from the failings of the BoA's chosen
method. For instance, paragraph 3 of the Interpretative N ote to Article 1.2 describes a number of
methodologies that are available to customs authorities for the purpose of examining the
circumstances of sale, including an examination of the buyer and seller's commercial relations and
method of setting the price , comparisons with pricing practices in the industry, comparisons with
the seller's prices in sales to unrelated buyers, or an assessment of whether the price is adequate
to ensure recovery of all costs plus a profit.
7.155. Thus, there is at least one alternati ve methodology that the BoA could have employed.
Thailand has not argued, much less demonstrated, that the BoA could not have used other methods,
or that these methods would also have been inapt to demonstrate whether the relationship
influenced the price. In response to a question regarding whether the BoA was obliged to examine
the circumstances of sale through a comparison of P&GE rates and whether the BoA should have
explored a different testing method, Thailand indicated that it would not "be consistent with the
Panel's standard of review for the Panel to say that the BoA should have exhausted every possibility
in terms of finding a 'better' approach – instead, the Panel's task is simply to determine, objectively,
whether the BoA's approach was reasonab le."414 We agree with Thailand that an authority is not
required to "exhaust every possibility" to find the best possible approach for conducting a customs
valuation determination. However, insofar as Thailand is seeking to defend the BoA's decision to use
an industry group comprising companies that are not comparable to PMTL on the grounds that it had
no better options, then it becomes highly germane to consider the extent to which the problems that
the BoA encountered were self-imposed and could have been avoided by following a different method
to conduct the examination of the circumstances of sale.
7.156. In this respect, we do not wish to suggest that a customs authority is precluded from ever
conducting an examination of the circumstances of sale on the basis of a comparison of P&GE rates
in situations where the market circumstances do not allow for a perfect apples-to-apples comparison
between companies being compared.415 It is conceivable that a particular market situation could be
such that any examination of the circumstances of sale will suffer from certain limitations. In such
a situation, certain shortcomings in the methodology may be permissible to the extent that they are
controlled for in a reasonable and appropriate manner, in order to ensure that the c hosen
methodology is as apt as possible under the circumstances. As indicated above, shortcomings in the
comparison may not give rise to an inconsistency with Article 1.2(a) insofar as relevant and
identifiable differences that would affect the comparison are taken into account. We return to this
issue in the context of addressing the manner in which the BoA determined the industry benchmark
P&GE range, and also the manner in which the BoA compared PMTL's P&GE rates with th at
benchmark P&GE range.
7.157. Thailand points to what it terms an "expert witness statement" made on behalf of PMTL, and
submitted as evidence in this proceeding by the Philippines, that indicates that "[i]n order to
determine whether the Gross Margin [(GM)] was in line with industry s tandards, PM Thailand then
compared this GM to that of other comparable operators that transact with unrelated parties,
including distributors in the tobacco industry, but, since there are so few of the latter, also others in
other sectors of industry for better comparability purposes."416 Thailand considers that "[i]f it would
be appropriate to consider companies from other sectors, it cannot be a priori unreasonable to
consider companies within the tobacco sector that are not as identical to PM Thailand as the
Philippines might like".417 Thailand also points out that the expert witness "referred to 'fast-moving
consumer goods companies'", which, in Thailand's view, "undermines" the Philippines' objections to

414 Thailand's response to Panel question No. 6(c)(ii).
415 We note in this regard that Article 2.2.2(iii) of the Anti-Dumping Agreement envisages that there will
be situations in which an authority may compare an importer's P&GE rate with the P&GE rates of other
exporters or producers on sales of products "in the same general category of products".
416 Thailand's first written submission, para. 5.31 (quoting Expert witness statement of Paulette Vander
Schueren, 16 September 2010, (Exhibit PHL-115), p. 7).
417 Thailand's first written submission, para. 5.32. (emphasis original)

relying on other companies "within the group of 'tob acco products'", and in particular the reliance
on Piriyapul which also sells products that "all appear to be, like cigarettes, 'fast moving consumer
products'".418
7.158. We are wary of according undue reliance to this expert witness statement, given that it was
not made on behalf of the Philippines in the context of this proceeding, but rather was submitted by
PMTL in the context of a domestic criminal proceeding that addressed a different customs valuation
determination to that at issue in the BoA Ruling. 419 In any event, and in accordance with the legal
standard under Article 1.2(a), second sentence, the essential question is whether Piriyapul is an
appropriate comparator company. Indeed, in this respect the expert witness statement explicitly
indicates that, in c omparing PMTL's gross margin with the industry standard, PMTL compared its
gross margin to "that of other comparable operators", both within and outside the tobacco
industry.420 In our view, Thailand has failed to demonstrate, through either the expert witne ss
statement, or through any other arguments or evidence, that a comparison of PMTL to Piriyapul was
apt to reveal whether the relationship between PMTL and PM Indonesia influenced the price paid by
PMTL. We do note, however, that the expert witness statem ent is indeed indicative of the fact that
there were difficulties in establishing a comparison group in the Thai cigarette market. In this
respect, as discussed above, although the particular circumstances of the market situation may be
a relevant consideration in the BoA's determination of a particular method to use, it does not change
the fact that the ultimate methodology chosen by the BoA to examine the circumstances of sale
must have been apt to reveal whether the relationship between PMTL and PM Indon esia influenced
the price.
7.159. In connection with its arguments concerning the difficulties of establishing the industry
group, Thailand asserts that when "faced with a choice between a comparison with companies selling
the same product and companies of the s ame size, it is objectively justifiable to proceed with the
former".421 We observe that, with the exception of Piriyapul, the other companies included in the
industry comparator group were not "selling the same product". In addition, Piriyapul is a "grocery
store retailer" that sold several thousand other products, such that it cannot be said that its P&GE
rate was derived from "selling the same product ".422 Furthermore, we consider that Thailand's
argument concerning a choice between companies selling the same product versus companies of the
same size represents a false dichotomy. As indicated above, we consider that there were other
possible methodologies that the BoA could have employed, and Thailand has not demonstrated that
the BoA was forced to choose "between a comparison with companies selling the same product and
[a comparison with] companies of the same size".423
7.160. In its argumentation regarding the com panies included in the industry comparator group
and the difficulties that the BoA faced in finding comparable companies, Thailand has highlighted
the difficulties that the BoA encountered in constructing an industry group given that a number of
the other companies initially considered (e.g. other cigarette importers) were excluded from the final
industry group, for various reasons.424 For its part, the Philippines claims that the BoA, in fact, acted
inconsistently with Article 1.2(a) through its exclusion of certain companies. Specifically, the
Philippines argues that the exclusion of BAT, JTI, Macrorich and Classic Cigars from the industry

418 Thailand's comments on the Philippines' response to Panel question No. 79, p. 15 (referring to Expert
witness statement of Paulette Vander Schueren, 16 September 2010, (Exhibit PHL-115), pp. 7-8).
419 Philippines' second written submission, paras. 128-138.
420 Expert witness statement of Paulette Vander Schueren, 16 September 2010, (Exhibit PHL-115), p. 7.
421 Thailand's first written submission, para. 2.47. See also Thailand's response to Panel question Nos.
6(b) and 13, pp. 10 and 16.
422 Philippines' first written submission, paras. 144 and 250 (referring to Piriyapul International co., Ltd,
Audited Financial Statement, 2002 (English translation), (Exhibit PHL-49-B); Piriyapul International Limited,
40 Anniversary Special Publication, 2013, (Exhibit PHL-50); second written submission, para. 117).
423 We note that the Panel directly asked Thailand whether it considered that this choice "would also be
present in all other possible methodologies that could be used to examine the circumstances of sale". Thailand
stated that the:
Panel is called upon not to do a de novo review to determine what would be the best possible
option, because that would require the Panel to identify every possible option and to make itself
the sort of choices inherent in a situation in which there is no perfect solution. Instead, the Panel
is called upon simply to determine objectively whether the approach taken by the BoA was
reasonable in the circumstances. (Thailand's response to Panel question No. 13, p. 16)
424 In its first written submission, Thailand states that all but five of the companies initially considered
had losses (i.e. no profits) during the relevant period (2002). (Thailand's first written submission, para. 5.21.
See also Thailand's second written submission, paras. 2.42-2.48)

group was not justified. We now address whether the exclusion of these companies was indeed
justified.
7.161. Turning first to the exclusion of BAT and JTI from the industry group, Thailand argues that
these companies were excluded because they were loss -making and had no profits during the
relevant period. 425 The Philippines argues that a "lack of profitability is not, in itself, a sufficient
basis for excluding these companies".426
7.162. It is uncontested that BAT and JTI's business operations in Thailand are comparable to PMTL,
and, in particular, that the goods they sell are sufficiently similar to the goods at issue (namely
Marlboro cigarettes) such that a comparison of P&GE rates could, in principle, shed light on whether
the price paid by PMTL was influenced by its relationship with PM Indonesia. We recall that certain
companies that are potentially relevant comparators may nonetheless be excluded from an industry
comparator group on the basis of objectively justifiable reasons. 427 The parties disagree as to
whether the BoA should have excluded these companies exclusively on the basis that they were
"loss-making", or whether the BoA sh ould have taken into account valid commercial reasons for
their loss-making status before excluding them.
7.163. We note that the explanation that these companies were excluded on the basis of their loss-
making status was first presented not by the BoA, but by Th ailand, in the course of bilateral
consultations between the Philippines and Thailand. 428 In our review of the evidence on the record
of the BoA determination, we can see no indication that the BoA opted to exclude BAT and JTI on
the basis that they were loss-making.429 We therefore consider that Thailand's explanation that the
BoA excluded BAT and JTI on the basis of their loss -making status may constitute an ex post
rationalization, in which case the exclusion of these companies could not be justified on that basis.
Nevertheless, in accordance with our approach above, we consider it appropriate to proceed on an
arguendo basis and address the parties' arguments in relation to the exclusion of JTI and BAT.430
7.164. We consider that paragraph 5 of the Interpretative Note to Article 6 of the CVA is
instructive.431 Paragraph 5 explains that:

425 Thailand's first written submission, paras. 5.18-5.27; second written submission, para. 2.42;
response to Panel question Nos. 8(b)-8(c) and 81; opening statement at the meeting of the Panel, para. 83.
426 Philippines' first written submission, paras. 263.
427 See paragraph 7.137. above.
428 See Philippines' first written submission, para. 262; Letter from the Permanent Mission of Philippines
to the WTO to the Permanent Mission of Thailand to the WTO, 27 September 2013, (Exhibit PHL-58), p. 2;
Letter from the Permanent Mission of Thailand to the WTO to the Permanent Mission of the Philippines to the
WTO, 27 March 2014, (Exhibit PHL-59), p. 2.
429 We note that there is indeed evidence before the Panel suggesting that the BoA may have excluded
BAT and JTI on the basis that they were loss-making. Specifically, the Philippines has submitted: (i) a letter
sent from the Permanent Mission of Thailand to the WTO to the Philippine Mission to the WTO on 27 March
2014, almost a year and a half after the BoA Ruling was issued, stating that "BAT and JTI were not included
because … these companies made a loss on their operations in 2002 and therefore including them … would
have been adverse to PMTL"; and (ii) a BoA "presentation" of 1 August 2013 that indicates that no P&GE rates
were calculated for certain companies that were loss-making. (See BoA Presentation, 1 August 2013 (Exhibit
PHL-54) and Letter from the Permanent Mission of Thailand to the WTO to the Permanent Mission of the
Philippines to the WTO, 27 March 2014, (Exhibit PHL-59)) However, Thailand itself argues that both of these
documents "were prepared after the BoA's decision by officials that [w]ere not directly involved in the BoA's
process. These documents do not form part of the decision." (Thailand's comment on Panel question No. 5, p.
10) We agree with Thailand's characterization of these documents and consider that these documents do not
form part of the record of the BoA's determination. We also note that our caution in this respect is further
reinforced by the fact that: (i) the BoA presentation appears to predominantly relate to "test calculations"
conducted between 2002 and 2007, and the context of the presentation has not been explained; and (ii) the
letter from Thailand to the Philippines asserts that the four companies other than PMTL included in the industry
group not only imported factory manufactured cigarettes in 2002, but distributed those imported cigarettes in
the Thai cigarette market to "wholesalers, retailers and consumers" – yet, as we have found above, three of
those companies did not sell imported cigarettes in Thailand, and the fourth company only sold imported
cigarettes at the retail level. (See Letter from the Permanent Mission of Thailand to the WTO to the Permanent
Mission of the Philippines to the WTO, 27 March 2014, (Exhibit PHL-59), p. 2. See also paragraph
7.140. above)
430 See paragraph 7.147. above.
431 Article 6 governs customs valuations conducted using a "computed value", which consists of the sum
of certain costs, as well as an amount for P&GE that is "equal to that usually reflected in sales of goods of the

It should be noted in this context that the "amount for profit and general expenses" has
to be taken as a whole. It follows that if, in any particular case, the producer's profit
figure is low and the producer's general expenses are high, the producer's profit and
general expenses taken together may nevertheless be consistent with that usually
reflected in sales of goods of the same class or kind. Such a situation might occur, for
example, if a product were being launched in the country of importation and the
producer accepted a nil or low profit to offset high general expenses associated with the
launch. Where the producer can demonstrate a low profit on sales of the imported goods
because of particular commercial circumstances, the producer's actual profit figures
should be taken into account provided that the producer has valid commercial reasons
to justify them and the producer's pricing policy reflects usual pricing policies in the
branch of industry concerned. Such a situation might occur, for example, where
producers have been forced to lower prices temporarily because of an unforeseeable
drop in demand, or where they sell goods to complement a range of goods being
produced in the country of importation and accept a low profit to maintain competitivity.
7.165. Thus, in the context of conducting a computed value calculation of the customs value, the
determination of the P&GE rate "usually reflected" in sales of comparable goods must include P&GE
rates for producers who have "accepted a low or nil profit ", on two conditions: (i) there are valid
commercial reasons to justify the low profits; and (ii) the pricing policy reflects usual pricing policies
in the relevant sector. We recognize that the methodology for conducting a computed value
calculation pursuant to Article 6 differs from an examination of the circumstances of sale pursuant
to Article 1.2(a), second sentence. Nevertheless, this guidance in the context of a computed value
calculation strongly suggests that similar considerations should be taken into account in conducting
an examination of the circumstances of sale under Article 1.2(a), where such an examination
involves a comparison of P&GE rates , given that the interpretative note dir ectly governs a
determination of a proxy P&GE rate to be used in determining customs value.
7.166. We note that Thailand argues that Article 2.2.1 of the Anti -Dumping Agreement indicates
that sales below the cost of production may be treated as not being in the "ordinary course of
trade".432 As a general matter, we note that the subject matter of Article 2.2.1 of the Anti-Dumping
Agreement (rules governing the determination of normal value for purposes of determining the
existence of dumping) is different from the subject matter of Articles 1 through 7 of the CVA (rules
governing the determination of the value of goods for the purpose of levying ad valorem duties).
Therefore, we are wary of according undue weight to the se provisions of the Anti -Dumping
Agreement in interpreting the CVA. However, even if we were to rely on Article 2.2.1 of the Anti -
Dumping Agreement as relevant context for the question of assessing whether customs authorities
may exclude loss-making companies from an industry comparator group used for customs valuation
purposes, we note that Article 2.2.1 does not support Thailand's argument. Rather, Article 2.2.1
states explicitly that sales below the cost of production may be treated as not being in the ordinary
course of trade "only if the authorities determine that such sales are made within an extended period
of time in substantial quantities and are at prices which do not provide for the recovery of all costs
within a reasonable period of time. " Thus, Article 2.2.1 provides strict conditi ons that must be
satisfied in order for sales below cost to be treated as not being made in the ordinary course of
trade.
7.167. We are also unconvinced by Thailand's suggestion that the reference in Article 5 of the CVA
to "additions usually made for profit and general expenses " implies that there are "usually" profits
in an importing country, and that when "determining whether those profits are within the 'usual'
range … it is reasonable to exclude companies that sell at a loss".433 We consider that the expression
"profit and general expenses" is an accounting term of art, and the adverb "usually" merely implies
the "typical" P&GE. Furthermore, the interpretative note to Article 6 clearly indicates that the usual,
or typical, P&GE can include "nil" profits.
7.168. We further disagree with Thailand's argument that, "presumably, companies in the same
industry are affected by the same commercial factors ", and consequently, "there is no basis to
distinguish between companies in a particular sector on the basis of the commercial factors affecting

same class or kind as the goods being valued which are made by producers in the country of exportation for
export to the country of importation".
432 Thailand's first written submission, paras. 5.18-5.27; second written submission, para. 2.42;
response to Panel question Nos. 8(b)-(c) and 81; opening statement at the meeting of the Panel, para. 83.
433 Thailand's first written submission, para. 5.23.

them".434 We consider that firstly, this is a presumption that may not be true in every case, and
secondly, there may indeed be commercial factors affecting all (or many) companies in a particular
industry, with the result that all (or many) companies are operating at a loss. Far from suggesting
that these companies should not be taken into account, we consider that in such a situation where
the entire (or almost the entire) industry is loss -making, the importer must be compared with the
entire industry, including those companies that are loss -making, in order for the comparison to
meaningfully reveal how the importer's situation compares to that of the relevant industry, in the
particular circumstances of that market.
7.169. Additionally, we disagree with Thailand that a requirement to investigate valid commercial
reasons for a company's lack of profitability would "increase, rather than decrease, the level of
subjectivity in a tribunal's decision ", and that "it is more objective and reasonable to exclude loss-
making companies" per se.435 The CVA clearly requires that when conducting a computed -value
calculation under Article 6, a customs authority is obliged to examine valid commercial reasons for
a "low" or "nil" profit, regardless of the subjectivity of such an examination. Furthermore, where
valid commercial reasons436 could explain a particular company's "low" or "nil" profits, and a customs
authority failed to take those considerations into account, that would be a less objective analysis of
the circumstances of sale than if it did take those considerations into account.
7.170. With respect to Thailand's argument that "it would be excessively burdensome and indeed
impossible for a tribunal such as the BoA to investigate why a co mpany such as BAT might have
made a loss in a given period"437, we first note that when conducting a computed value calculation
under Article 6 of the CVA a customs authority is obliged to examine valid commercial reasons
despite the burden such an examinati on imposes. However, we also recall in this connection that,
under Article 1.2(a), the process of examining the circumstances of sale is one that is supposed to
involve consultation between the customs authority and the importer. In this respect, the Philippines
itself indicates that "if PM Thailand had been given the opportunity to address whether loss-making
(or other) companies should have been included in an industry group, it should have provided any
relevant information."438 Taking account of the balance under the CVA between the respective rights
and responsibilities of the importer and the customs authority, we agree with the Philippines that
the burden of indicating "valid commercial reasons " for a company being loss -making should be
placed on the importer.439
7.171. We consider that it would indeed be an excessive burden to impose on a customs authority
a requirement to independently identify and examine any and all "valid commercial reasons " that
might explain why a particular company is loss-making. In our view, a private importer may well be
more aware of "valid commercial reasons" that might explain a company's loss-making status, than
an administrative tribunal that does not operate in the private market. Furthermore, and recalling
that the Philippines itself considers that a company's loss -making status is a valid consideration in

434 Thailand's response to Panel question No. 8(b), p. 13.
435 Thailand's response to Panel question No. 8(b), pp. 13-14.
436 For instance, paragraph 5 of the Interpretative Note to Article 6 provides as examples of such valid
commercial reasons, "a situation … where producers have been forced to lower prices temporarily because of
an unforeseeable drop in demand, or where they sell goods to complement a range of goods being produced in
the country of importation and accept a low profit to maintain competitivity."
437 Thailand's response to Panel question No. 8(b), p. 13.
438 Philippines' response to Panel question No. 8(c), para. 94.
439 We recall the original panel's statements that the CVA "aims at striking the balance between
respecting the customs authorities' need to address cases where it has reason to doubt the truth or accuracy of
the particulars or of documents produced by traders in support of a declared value and protecting the
legitimate commercial interests of traders" and that "[t]he process of examining the circumstances of the sale
under Article 1.2(a) … resembles that of consultation as both the importer and the customs administration
respectively need to make a good faith effort on the one hand to provide relevant information and on the other
hand to provide a reasonable opportunity to the importer to submit information and review the information
provided in reaching a final determination". (Panel Report, Thailand – Cigarettes (Philippines), paras. 7.171-
7.172) Additionally:
[C]ustoms authorities and importers have respective responsibilities under Article 1.2(a). The
customs authorities must ensure that importers be given a reasonable opportunity to provide
information that would indicate that the relationship did not influence the price. Importers are
responsible for providing information that would enable the customs authority to examine and
assess the circumstances of sale so as to determine the acceptability of the transaction value.
(Panel Report, Thailand – Cigarettes (Philippines), para. 7.171)

selecting companies for inclusion440, we consider that it is fully consistent with the requirements of
Article 1.2(a), as set forth above, that a customs authority may consider that a company should be
excluded from the comparator group on the basis that it is loss -making, and communicate this
position to the importer, thereby allowing the importer to explain why, in its view, certain companies
should nonetheless be included in the comparator group despite their loss-making status.441
7.172. Applying this legal standard, we note the Philippines' explanation that PMTL was not informed
of the BoA's selection of the industry group, and therefore was not given the opportunity to provide
any information regarding valid commercial reasons to justify the inclusion of BAT or JTI in the
group.442 On the basis of the evidence before us, we agree with the Philippines that the BoA did not
indicate to PMTL that BAT and JTI were excluded from the group, nor did the BoA indicate its reasons
for excluding those companies from the group. 443 Consequently, PMTL was precluded from being
able to provide potentially valid commercial reasons that could explain BAT and JTI's loss -making
status.
7.173. For these reasons, we ar e not persuaded that JTI and BAT, two companies that were
comparable to PMTL, were excluded from the industry group on the basis of objectively justifiable
reasons. Consequently, we consider that the decision to compare PMTL with an industry group that
did not actually comprise "imported cigarette wholesalers in the year 2002", other than PMTL itself,
cannot be defended on the grounds that JTI and BAT were loss -making. We do not consider it
necessary to address whether the exclusion of JTI and BAT from the industry group, by itself,
necessarily renders the entire industry group inapt to reveal whether the relationship influenced the
price, or gives rise, by itself, to a violation of Article 1.2(a) of the CVA.
7.174. Regarding the exclusion of Macrorich and Classic Cigars, we note that the Philippines'
arguments in this respect are based on the fact that "like Lee Intertrade and KHS, which were
included in the final group, Macrorich and Classic Cigars import and distribute tobacco and cigars
(but not cigarettes). "444 As a factual matter the similarities between the operations of these
companies are uncontested. We have already concluded that, given the significant differences
between PMTL's business operations and those of KHS and Lee Intertrade (as well as Chemical
Resins and Piriyapul), we do not see how the P&GE rates of these companies can, in principle, reveal
anything about the P&GE rate of PMTL. Recalling our conclusion above that Lee Intertrade and KHS
were themselves not apt to reveal whether the relationship between PMTL and PM Indonesia
influenced the price, we consider that, for the same reason, Classic Cigars and Macrorich also should
not have been included in the industry group.
7.175. Having said that, we do not consider that Thailand has demonstrated that ther e was any
objectively justifiable reason for excluding Macrorich and Classic Cigars from the group, given the
BoA's decision to include Lee Intertrade and KHS in the industry comparator group . First, we can
find no indication in the record of the determina tion as to why the BoA excluded Macrorich and
Classic Cigars from the industry group.445 Therefore, as with Thailand's references to the TSIC, and

440 The Philippines indicates that "it may sometimes be appropriate to exclude unprofitable companies
when drawing comparisons under the CVA". (Philippines' first written submission, para. 263)
441 We note, in this respect, that it is conceivable that a customs authority may, prior to consulting with
the importer, already be in possession of information that is directly pertinent to the question of whether "valid
commercial reasons" explain a particular company's loss-making status. In such a scenario, and without
prejudice to the question of whether the customs authority is obliged to communicate that information to the
importer, we consider it unlikely that an examination of the circumstances of sale that excludes a comparator
company on the basis of its loss-making status without taking into account such information could be apt to
reveal whether the relationship influenced the price.
442 Philippines' response to Panel question No. 8(c), paras. 95-97.
443 We note that the names of the companies included in the group were only released to PMTL on
16 June 2016. (See Letter from Customs Department to PMTL of 16 June 2016, (Exhibit PHL-38-B))
444 Philippines' first written submission, para. 265 (referring to Macrorich Co. Ltd., Audited Financial
Statement, 2002 (English translation), (Exhibit PHL-60-B); and Classic Cigars Co., Ltd. Audited Financial
Statement, 2002 (English translation), (Exhibit PHL-61-B)).
445 We cannot find in any of the documents on the record of the BoA's determination, or indeed any of
the evidence submitted by the parties whether on or off the record of the determination, any indication that
the BoA excluded Macrorich on the basis that its P&GE rate was too high. Similarly, we can find no indication
that the BoA excluded Classic Cigars on the basis that no financial information could be found for that firm. To
the contrary, at least one document on the record, namely the Minutes of the BoA Meeting of 14 January 2010,
indicates that the BoA did, in fact, have financial information for Classic Cigars in 2010, two years prior to the
2012 determination. (See Minutes of the BoA Meeting of 14 January 2010 (English translation), (Exhibit PHL-
42-B), p. 10)

the exclusion of JTI and BAT, we consider that Thailand's explanation for the exclusion of these
companies may constitute an ex post rationalization.446 Nevertheless, in accordance with our
approach above, we consider it appropriate to proceed on an arguendo basis and address the parties'
arguments in relation to the exclusion of Macrorich and Classic Cigars.447
7.176. Regarding Thailand's explanation that the BoA excluded Macrorich because its P&GE rate
was disproportionately high, we do not consider that an examination of the circumstances of sale
would be apt to reveal whether the re lationship influenced the price if a company were excluded
from a comparator group solely on the basis that its incl usion would affect the comparis on. In our
view, the mere characterization of a company's P&GE rate as "too high" or "too low", absent any
further explanation, is not an objectively justifiable reason for excluding that company from a
comparator group. Indeed, absent some other kind of explanation, there is no basis for regarding a
company with a high P&GE rate as anything other than representative of the industry.448
7.177. As for Thailand's explanation that Classic Cigars was excluded because the BoA did not have
access to relevant financial information, we note that the record of the BoA's determination
demonstrates that the BoA did, in fact, have financial data for Classic Cigars in 2010, sufficient to
calculate a P&GE rate for Classic Cigars for 2002.449 Furthermore, we note that in the course of this
proceeding, the Philippines has submitted Classic Cigars' Audited Financial Statement for 2002 with
the date of receipt by the Thai Commercial Registration Department of 28 March 2003. 450 Had the
BoA indicated in the course of the required consultations 451 with PMTL that it was conducting an
examination of the circumstances of sale based on a comparison of P&GE rates, and that it excluded
Classic Cigars from the industry group on the basis that no financial information was available, there
appears to be no reason that PMTL could not have provided that same audited financial statement
to the BoA, much as the Philippines has provided it to us. Regarding Thailand's argument that "the
newly-composed BoA in 2011-2012 conducted its own analysis using different sources of information
(TSIC data, Revenue Department data, and Customs data) than the 2010 BoA "452, we do not
consider that Thailand has adequately explained how either the BoA's reliance over time on different
sources of information, or changes in the composition of the BoA itself, has a bearing on the question
of whether the BoA had access to relevant financial information. In short, we do not consider that
Thailand has adequately explained the exclusion of Classic Cigars from the group.
7.178. Given the BoA's decision to include Lee Intertrade and KHS in the industry comparator group,
we consider that there was a degree of arbitrariness in the BoA's decision to exclude Macrorich and
Classic Cigars from the group. As our earlier findings regarding the inclusion of L ee Intertrade and
KHS make clear, we consider that the BoA's inclusion of these companies in the industry group was
problematic. The reason is that from the significant differences in business operations between Lee
Intertrade and KHS (and Chemical Resins and Piriyapul) and PMTL, it is not clear how the P&GE rates
of these companies can, in principle, reveal anything about the P&GE rate of PMTL, a company that
exclusively sells cigarettes at the wholesale level. For the same reason, we consider that it woul d
have been problematic for the BoA to include Macrorich and Classic Cigars in the industry comparator
group. However, given the BoA's decision to include Lee Intertrade and KHS in the industry
comparator group, there was a degree of arbitrariness in the B oA's decision to exclude Macrorich
and Classic Cigars from the industry comparator group. We do not consider it necessary to address
whether the exclusion of Macrorich and Classic Cigars from the industry group renders the entire

446 See paragraphs 7.121. , 7.146. , 7.147. and 7.163. above.
447 See paragraph 7.147. above.
448 We do not preclude the possibility that it may be appropriate, using specific statistical methodologies,
to exclude so-called "outliers" from a particular analysis. In such circumstances, it may be the case that the
exclusion of certain companies from a comparator group is indeed objectively justified, on the basis of reasons
based on valid statistical methodologies. In the present dispute, no such arguments or reasons have been
presented, neither in an ex post sense, nor on the record of the determination itself. We further note in this
regard that the extremely small size of the comparator group at issue here (namely consisting of only five
observations, or seven observations if one were to include BAT and JTI) reinforces our view that Thailand has
not demonstrated that there was any objectively justifiable reason for excluding Macrorich from the industry
group, given the BoA's decision to include Lee Intertrade and KHS in the group.
449 See Minutes of the BoA Meeting of 14 January 2010 (English translation), (Exhibit PHL-42-B), p. 10.
450 Classic Cigars Co., Ltd. Audited Financial Statement, 2002, (Exhibit PHL-61-A) and Classic Cigars
Co., Ltd. Audited Financial Statement, 2002 (English translation), (Exhibit PHL-61-B).
451 See paragraph 7.106. above.
452 Thailand's comments on the Philippines' response to Panel question No. 82, p. 17.

industry group inapt to reveal whether the relationship influenced the price or gives rise to a violation
of Article 1.2(a) of the CVA.
7.179. At this point, we consider it useful to recapitulate the intermediate conclusions that we have
reached above with regard to the composition of the industry group. As elaborated above, we
consider that the authorities enjoy a margin of discretion regarding the means or methodology that
they choose to follow when engaging in comparisons, but that certain principles of comparability are
inherent in the essential legal standard to be applied under that provision, as read in its context and
in light of its object and purpose. We consider that it is axiomatic that the inclusion of PMTL within
the industry group is not apt to reveal whether the relationship between PMTL and PM Indonesia
influenced the price paid by PMTL. We note that, despite the representation made in the BoA Ruling
that PMTL's P&GE rates were compared to a benchmark range derived from the P&GE rates of
"imported cigarette wholesalers in the year 2002", Thailand does not contest that none of the other
companies included in the group were actually "imported cigarette wholesalers in the year 2002".453
We further consider that, given the significant differences in business operations between PMTL and
Chemical Resins, KHS, Lee Intertrade and Piriyapul, it is not clear how the P&GE rates of these
companies can, in principle, reveal anything about the P&GE rate of PMTL, a company that
exclusively sells cigarettes at the wholesale level. We are not persuaded that the BoA's composition
of the industry group can be defended on the grounds that these companies were included in the
TSIC, or by the BoA's reference to the OECD guidelines, or because the BoA encountered difficulties
identifying comparable com panies as a consequence of its decision to engage in a comparison of
PMTL's P&GE rates with those of an industry comparator group for the purpose of examining the
circumstances of sale. Furthermore, we are not persuaded that JTI and BAT, two companies that
were comparable to PMTL, were excluded from the industry group on the basis of objectively
justifiable reasons. Finally, we consider that there was a degree of arbitrariness in excluding
Macrorich and Classic Cigars from the group, given the BoA's decision to include Lee Intertrade and
KHS in the industry comparator group.
7.180. Based on all of the foregoing, we consider that the Philippines has established that the BoA
constructed an industry comparator group composed of companies that were not comparable to
PMTL, and consequently were not, in principle, apt to reveal whether the relationship between PMTL
and PM Indonesia influenced the price paid by PMTL. However, we consider that it may be premature
to arrive at a conclusion as to whether this intermediate finding gives rise, by itself, to a violation of
Article 1.2(a) of the CVA. As we have already indicated, a customs authority is not precluded from
conducting an examination of the circumstances of sale on the basis of a comparison of P&GE rates
in situations where the market circumstances do not allow for a perfect apples-to-apples comparison.
We agree with Thailand that a particular market situation could be such that any examination of the
circumstances of sale will suffer from certain limitations. Such shortcomings in the comparison may
not give rise to any inconsistency with Article 1.2(a) insofar as relevant and identifiable differences
that would affect the comparison are taken into account. We therefore proceed to examine the
remaining aspects of the B oA's comparison, addressing , in turn, the BoA's determination of the
industry benchmark P&GE range, and the manner in which the BoA compared PMTL's P&GE rates
with that industry benchmark P&GE range. Finally, we will conduct an overall assessment of the
BoA's examination of the circumstances of sale.
7.2.2.3.2.2 The determination of the benchmark range
7.181. Having constructed an industry group, the BoA proceeded to determine a P&GE rate for each
of the five companies in the industry group and calculated an "industry averag e" P&GE rate of
12.44% for the five companies, using a simple average calculation. 454 From that industry average,
the BoA created a "benchmark range" of P&GE rates, by adding and subtracting 2.64% from the
industry average – the resulting benchmark range fel l between 9.8% and 15.08%. 455 It is

453 See paragraph 7.140. above.
454 Minutes of the BoA Meeting of 26 September 2012 (English translation), (Exhibit PHL-39-B), p. 8;
Letter from Customs Department to PMTL of 16 June 2016, (Exhibit PHL-38-B). We note that this factual
aspect of the BoA's approach is uncontested by the parties.
455 BoA Ruling, (Exhibit PHL-21-B), p. 3; Minutes of the BoA Meeting of 26 September 2012 (English
translation), (Exhibit PHL-39-B), p. 8.

uncontested that the BoA used the statistical measurement of "standard error" to determine the
benchmark range, by adding and subtracting two "standard errors" from the industry average.456
7.182. As elaborated below, the Philippines argues that the BoA's determination of the benchmark
range was flawed because: (i) the BoA used different definitions of corporate income in determining
the numerator and denominator for its calculation of P&GE; (ii) the BoA used an incorrect P&GE rate
for PMTL when determining the industry average; (iii) the BoA calculated the industry average on
the basis of a simple average, instead of a weighted average, thereby failing to account for
differences in sales volumes between PMTL and the other companies 457; and (iv) the BoA used an
inappropriate statistical measurement of "standard error" to calculate the benchmark range.
7.183. We first set out the parties' arguments on these issues in greater detail, before providing
our analysis of the BoA's determination of the industry P&GE range in the light of the issues raised.
7.184. Regarding the BoA's determination of a P&GE rate for each of the companies in the industry
group, the Philippines explained that the BoA's calculation was based on a formula, by which the
P&GE rate was calculated by dividing the sum of "net profit", "selling and administrative expenses",
and "corporate income tax " (if any), by a denominator comprising simply the income of the
company.458 The Philippines notes that , in determining the net profit for the purpose of giving a
value to the numerator in the P&GE calculation, the BoA deducted operating expenses from "total
income" (which includes ordinary operating income as well as extraordinary income). 459 However,
when determining the denominator for the P&GE calculation, the BoA used "main income" (which
excludes extraordinary income). 460 The Philippines notes that although on e of the five companies
did not have any extraordinary income, the other four companies did, resulting in different income
figures being used in the numerator and denominator for those four companies.461 In the Philippines'
view, the "use of inconsistent income figures for four companies in the industry group had an impact
on the calculation of: the P&GE rates for the four companies concerned; the average P&GE rate for
the industry group; the standard deviation used to calculate the standard error of the mean ; and,
hence, the normal range for the industry group."462
7.185. Regarding the BoA's determination of a P&GE rate for PMTL as part of the industry
comparator group, the Philippines argues that the BoA incorrectly used a rate of 9.22%. 463 The
Philippines explains that the 9.22% rate was calculated from data in PMTL's financial statements,
which reflect the customs duties and taxes paid by PMTL on the revised customs value determined
by the Customs Department, and not the actual transaction value.464 The Philippines argues that the

456 We note in this respect that we can see no evidence submitted to the Panel conclusively
demonstrating that the BoA relied on the "standard error of the mean" to calculate the benchmark range.
However, the Philippines has demonstrated mathematically that a range of 9.79% - 15.09% could have been
calculated by adding and subtracting two standard errors of the mean from the industry average of 12.44%.
(See P&GE rates based on consistent and inconsistent use of income, (Exhibit PHL-140)) We note that this
calculated range is slightly different to the range actually used by the BoA. Nevertheless, given the extremely
close approximation, and in particular given that Thailand itself in the context of this proceeding has
acknowledged that "the BoA used the standard error of the industry-average P&GE ratio as the statistical tool
to establish the range", we proceed on the presumption that, factually speaking, the BoA did indeed rely on
standard error when calculating the benchmark range. (See Thailand's first written submission, para. 5.60) We
emphasize in this respect that, since this concerns a factual matter regarding the BoA's actions, and not an
explanation for those actions, we do not consider that this constitutes an ex post rationalization, within the
meaning set forth in paragraph 7.121. above.
457 Regarding this aspect of the BoA's approach, we note that the Philippines argues that the failure to
account for the vast differences in sales volumes between PMTL and the other companies included in the
comparator group pertains not only to the manner in which the BoA determined the industry benchmark range,
but also to the BoA's comparison of PMTL's P&GE rate to that range. (See Philippines' response to Panel
question No. 83)
458 Philippines' second written submission, para. 214 (referring to Letter from the Permanent Mission of
Thailand to the WTO to the Permanent Mission of the Philippines to the WTO, 27 March 2014, (Exhibit PHL-59),
response to Question 8). The Philippines describes the formula as "[N]umerator = net profit + selling and
administrative expenses + corporate income tax (if any). The denominator was the income of the company."
462 Philippines' second written submission, para. 224 (referring to P&GE rates based on consistent and
inconsistent use of income, (Exhibit PHL-140)).
464 Philippines' first written submission, paras. 283-284; second written submission, paras. 205-207.

BoA should have therefore used a P&GE rate of 18.47% rate, adjusted to reflect the customs duties
and taxes that would have been paid on the transaction value.465 The Philippines argues that, "[a]s
a result, the benchmark P&GE rates used in the c omparison were necessarily lower, through the
inclusion of an unadjusted PM Thailand rate of 9.22 percent, than they would have been had the
BoA used an adjusted PM Thailand rate of 18.47 percent on both sides of the comparison. This lack
of even-handedness … inevitably skewed the comparison".466 In the Philippines' view, a comparison
based on the rate of 9.22% could reveal "only whether the Customs Department's assessment of
higher customs values led to P&GE rates that were consistent with those of the indus try group."467
The Philippines also points out that if the BoA had used the adjusted rate of 18.47% for both inclusion
in the benchmark group as well as the comparison with PMTL itself, that rate "would have fallen very
close to the upper limit of the range" established by the BoA.468
7.186. The Philippines argues that, once the BoA had determined P&GE rates for each company,
the BoA failed to account for significant differences in the sales volumes of the companies in the
benchmark group when determining the industry average, by using a simple average calculation
instead of a weighted average calculation. 469 The Philippines considers that the purpose of a
comparison of P&GE rates is to shed light on the circumstances of sale, and if one of the companies
included in the benchmark group is substantially larger than the others, this should be accounted
for, or else "the benchmark will not be apt to represent normal commercial behavior in the industry;
rather, the range will be skewed by the disproportionate sizes of the companies included. "470 The
Philippines highlights that , in 2002, PMTL had sales amounting to THB 8.5 billion, whereas by
comparison, Piriyapul, the largest of the other four companies in the benchmark group, had net
sales of THB 200 million (or 2.4% of PMTL's net sales), while the three other benchmark companies
had combined net sales of less than TH B 110 million (just over 1% of PMTL's net sales). 471 The
Philippines notes that if the BoA had weighted the calculation to account for different sales volumes,
PMTL's figures would have dominated the calculation, such that the BoA's "basis for rejecting PM
Thailand's transaction values would have disappeared."472 Thus, in the Philippines' view, "any insight
regarding the effect of the relationship between buyer and seller on the transaction values was
masked by differences that flowed purely from the different sales volumes of companies included in
the comparator group ".473 The Philippines also states that the differences in size between PM
Thailand and the companies included in the comparator group are also relevant "in assessing
whether PM Thailand's P&GE rate was 'inconsistent' with those of the industry group in the sense of
Paragraph 6 of the Interpretative Note to Article 5 of the CVA".474
7.187. Regarding the BoA's determination of the benchmark range from 9.8% to 15.08%, the
Philippines argues that the BoA inapprop riately applied the statistical measurement of "standard
error of the mean" to construct this range. The Philippines argues, first, that statistical methods in
general were inappropriate, because the industry group of only five P&GE rates "was far too small
to yield any statistically valid result " and was a "deficient population due to the small number of
companies used".475 In any event, the Philippines explains that the BoA's reliance on standard error
was particularly inappropriate, since standard error ef fectively measures the precision of a sample
mean, and does not "identify whether a particular value in a distribution is abnormally high or low
relative to the sample mean ".476 The Philippines elaborates that , because the standard error is
calculated by div iding standard deviation by the square root of the number of observations,
mathematically speaking the standard error necessarily becomes smaller as the number of

465 Philippines' first written submission, paras. 283-284; second written submission, paras. 202 and
205-207.
466 Philippines' first written submission, para. 286. (emphasis original)
469 Philippines' first written submission, paras. 269-279; second written submission, paras. 187-198.
470 Philippines' response to Panel question No. 12, para. 114. (emphasis original)
471 Philippines' first written submission, paras. 271-273 (referring to Chemical Resins Thailand Limited,
Audited Financial Statement, 2002 (English translation), (Exhibit PHL-46-B); Lee Intertrade Co. Ltd., Audited
Financial Statement, 2002 (English translation), (Exhibit PHL-63-B); and K H S Company Limited, Audited
Financial Statement, 2002 (English translation), (Exhibit PHL-47-B)). The Philippines explains that Chemical
Resin's net sales represented 0.98% of PMTL's net sales, Lee Intertrade's net sales represented 0.28% of
PMTL's net sales; and KHS's net sales represented 0.02% of PMTL's net sales.
474 Philippines' response to Panel question No. 83, para. 143.
475 Philippines' first written submission, paras. 302 and 397.

observations becomes larger, with the consequence that, with a sufficient number of observati ons,
the standard error would be close to zero, resulting in a "range" based on standard error that would
exclude all (or almost all) observations.477 The Philippines further asserts that the correct statistical
method for determining whether PMTL's rates fell within the normal range of industry rates was to
establish a range of values based on standard deviation.478
7.188. Thailand explains, regarding the alleg edly inconsistent definition of income in determining
the numerator and denominator of its calculation of P&GE rates for the companies in the industry
comparator group, that the calculation of profit was based on total income (including extraordinary
income) because "the total expenses used in the calculation of the numerator for each of the five
companies was reported on a corporate-wide or total basis", and that "it was necessary to use total
income and total expenses, because that was the basis on which the expenses were reported or
available".479 According to Thailand, the "resulting figure was then divided by the operating or main
income in order to allocate the total profit over operating income only, to reflect as accurately as
possible the P&GE ratios that would be achieved on operations. "480 Thailand also notes that this
calculation "was used consistently for all companies in the group" and that even if the denominator
had been based on total income, there "would have been no effect on the overall calculation."481
7.189. With respect to the BoA's choice of a P&GE rate of 9.22% for PMTL when treating it as part
of the industry benchmark group, Thailand notes that the BoA used the rate of 9.22% in order to be
consistent with how the rates were established for the ot her companies included in the benchmark
group.482 Thailand considers that the BoA could not have gone "behind" the financial statements of
other companies to see whether their P&GE rates could have been higher or lower than expected,
and therefore "the only reasonable approach was for the Board of Appeals to rely on the available
audited information."483 As to the Philippines' argument that this rate was incorrect because it would
have been lower if Thai Customs had accepted the transaction values, Thailand not es that for
purposes of the comparison, "it was appropriate" for the BoA to use figures for PMTL and the other
companies based on the "financial results" in the audited financial statements because it was "the
only basis on which to make a fair apples to apples comparison".484
7.190. Regarding the differences in sales volumes between PMTL and the other companies included
in the industry group, Thailand defends the BoA's reliance on a simple average instead of a weighted
average, in determining the average P&GE rate for the industry comparator group. Thailand asserts
that the fact of PMTL having significantly larger sales volumes than the other companies "does not
mean that … the BoA cannot compare PM Thailand to other companies ", which would put PMTL
"beyond review by Thai customs law, simply because it is the largest importer ".485 Thailand further
notes that expert evidence provided by the Philippines itself in this dispute indicates that there is a
problem with making comparisons with PMTL in Thailand, since there ar e so few "comparable
operators that transact with unrelated parties ".486 Thailand considers that it is "objectively
justifiable" for the BoA to conduct a comparison with "companies selling the same product " rather
than "companies of the same size ".487 In Thailand's view, the BoA's approach "in the absence of
perfect solutions or mandated approaches in the CVA " was not inherently unreasonable, and was
objective and unbiased.488 Thailand also argues that "a comparison with companies of the same size
as PMTL would have required the BoA to look at companies in entirely different sectors".489 Thailand
further asserts that "the Philippines itself acknowledges that the asymmetry in the relative sizes of
sales was a matter considered by the BoA ", however the BoA did not ascribe as much "weight and

477 Philippines' second written submission, paras. 246-249 and 254-259.
478 Philippines' first written submission, paras. 322-323; second written submission, paras. 251-252
479 Thailand's response to Panel question No. 15, p. 17.
480 Thailand's response to Panel question No. 15, p. 17.
481 Thailand's response to Panel question No. 15, p. 17 (referring to calculations of P&GE ratios/ranges
(Exhibit THA-40)).
482 Thailand's second written submission, para. 2.62. In Thailand's view, in order to determine whether
PMTL's P&GE rates "were within a benchmark range, the PM Thailand rate used had to be calculated on the
same basis as the other rates in the benchmark range".
483 Thailand's second written submission, fn 36.
484 Thailand's second written submission, para. 2.64.
485 Thailand's first written submission, para. 5.30.
486 Thailand's first written submission, para. 5.31 (quoting Expert witness statement of Paulette Vander
Schueren, 16 September 2010, (Exhibit PHL-115), p. 7).
487 Thailand's second written submission, para. 2.47.
488 Thailand's second written submission, para. 2.53.
489 Thailand's response to Panel question No. 14, p. 16.

significance" to this consideration "as the Philippines would have liked ".490 Furthermore, Thailand
recalls that the Philippines itself explains that if the BoA had weighted the calculation to account for
differences in sales volumes, PMTL's figures would have "dominated any weighting of the figures".491
Thailand considers that this would have "led to the BoA comparing PM Thailand with itself … [which
would] have prejudged the outcome " of the comparison. 492 Thus, according to Tha iland, it was
reasonable for the BoA to rely on a simple average P&GE rate, instead of a weighted average. 493
Thailand also considers that, even if PMTL had been excluded from the benchmark group, its P&GE
rates would still have been outside the benchmark range.494
7.191. Turning to the BoA's determination of the benchmark range around the industry average,
Thailand argues that the Philippines does not indicate what sample size would be sufficient for "the
use of the sample and statistical tools", and that under the Philippines' suggested approach of simply
comparing PMTL's P&GE rates with the range of P&GE rates in the benchmark group, from lowest to
highest, PMTL's rates still fall outside that range when excluding PMTL's own rates from the
benchmark range. 495 As for the BoA's reliance on "standard error" to create the benchmark range,
Thailand argues that Article 1.2(a) does not prescribe a statistical tool for determining ranges for
comparison.496 In Thailand's view, the BoA's reliance on the mean "makes sense as, in statistics, the
'mean' is the expected value of a given variable, and … is the measure of 'central tendency' of the
values in the distribution".497 Thailand explains that the standard error of the mean "'measures how
precisely the population mean is estimate d by the sample mean' … [and thus] predicts the range
around the sample mean within which the actual mean of the entire population would be expected
to fall".498 Thailand considers that the BoA's approach is supported by the WCO Commentary on the
application of the deductive value method 499, that other possible approaches to the comparison of
P&GE rates demonstrate the reasonableness of the BoA's approach 500, and that the Philippines'
reliance on standard deviation is misplaced.501
7.192. We first address the Philippines' argument that the BoA's use of different definitions of
corporate income in determining the numerator and denominator for the calculation of P&GE was
inconsistent with Article 1.2(a). Before turning to the parties' specific arguments, we note at the
outset that the CVA does not impose any specific obligations on customs authorities with respect to
how corporate income is treated in the context of calculating a company's P&GE rate. This means
that customs authorities have a degree of discretion in how they treat corporate income in the
context of calculating a company's P&GE rate. However, a customs authority does not have licence
to define corporate income in any manner that it wishes. In light of the legal standard that we have
articulated above, we consid er that the relevant question is whether the BoA's calculation of the
P&GE rates of the companies in the industry comparator group using different figures for corporate
income in the numerator and the d enominator was apt for the purpose of determining whether
PMTL's P&GE rate was consistent with the industry, in order to assess whether the relationship
between the buyer and seller influenced the price.
7.193. The parties' arguments in this proceeding reveal that there was a lack of clarity surrounding
the manner in which the BoA actually conducted its calculation, which has only been clarified in the
course of this proceeding. We consider it useful to recount how the parties' understanding of the
BoA's calculation of P&GE rates has evolved through the course of this proceeding.

490 Thailand's first written submission, para. 5.34 (referring to the Philippines' first written submission,
paras. 276-278).
491 Thailand's first written submission, para. 5.35 (referring to the Philippines' first written submission,
para. 275).
492 Thailand's first written submission, para. 5.35.
493 Thailand's first written submission, para. 5.35.
494 Thailand's first written submission, para. 5.35.
495 Thailand's first written submission, paras. 5.51-5.52.
496 Thailand's first written submission, para. 5.54.
497 Thailand's first written submission, para. 5.57. See also Thailand's second written submission,
para. 2.70.
498 Thailand's first written submission, para. 5.60 (quoting Betty R. Kirkwood and Jonathan A.C. Sterne,
Essential Medical Statistics, 2nd ed (Blackwell Publishing, 2003) (excerpts only), (Exhibit THA-12), p. 39).
499 Thailand's first written submission, para. 5.62 (referring to World Customs Organization, Customs
Valuation Compendium, Commentary 15.1 "Application of Deductive Value Method", 2nd ed., November 2008
(Exhibit PHL-85), para. 11).
500 Thailand's first written submission, paras. 5.65-5.69.
501 Thailand's first written submission, paras. 5.70-5.73.

7.194. In its first written submission, the Philippines claimed that the BoA Ruling is inconsistent
with Article 1.2(a) of the CVA because the BoA used different approaches to calculating the P&GE
rates for the five benchmark companies. 502 Specifically, the Philippines understood that, in
determining the profit for two of the five companies in the benchmark group (namely KHS and Lee
Intertrade), the BoA used a "profit before income tax " method, but for the other three companies
(namely PMTL, Chemical Resins and Piriyapul), the BoA used a "profit after income tax" method.503
7.195. In its first written submission, Thailand responded that the Philippines' arguments
concerning the figures for the benchmark companies were factually incorrect, and that f or all
comparator companies, the BoA used profits before tax plus general expenses. 504 Thailand noted
that certain companies did not pay taxes, meaning that profit before tax and profit after tax were
the same figure.505
7.196. In its second written submission, the Philippines stated that it accepted Thailand's
clarification of the facts, but maintained that , in the light of Thailand's explanations regarding
corporate income tax, the Philippines had been able to identify the "real source of the anomalies".506
The Philippines explained that the anomalies that it identified arose from the fact that the BoA's
calculation for the rate of P&GE was determined by dividing the sum of net profit, selling and
administrative expenses, and corporate income tax (if any), by a denomi nator consisting of the
income of the company. 507 The Philippines explained that , in determining the net profit for the
purpose of determining the numerator in the P&GE calculation, it appeared that the BoA had
deducted operating expenses from total income (which includes ordinary operating income as well
as extraordinary income)508; however, when determining the denominator for the P&GE calculation,
the BoA had used "main income " consisting of ordinary operating income only, and excluding
extraordinary income.509 Proceeding on that understanding, the Philippines noted that although one
of the five companies did not have any extraordinary income, the other four companies did, resulting
in different income figures being used in the numerator and denominator for tho se four
companies.510 In the Philippines' view, the "use of inconsistent income figures for four companies in
the industry group had an impact on the calculation of: the P&GE rates for the four companies
concerned; the average P&GE rate for the industry group; the standard deviation used to calculate
the standard error of the mean; and, hence, the normal range for the industry group."511
7.197. In its second written submission, Thailand did not specifically respond to this point, or explain
whether the Philippines' un derstanding was correct, and if so why the BoA's approach was
reasonable. Rather, Thailand simply asserted that the Philippines "is incorrect" in arguing that the
BoA calculated the P&GE ratios for the relevant companies inconsistently, and noted that there was
nothing inconsistent or unreasonable about the BoA's approach.512 However, Thailand acknowledged
that "the Philippines also suggest[ed] that there is a minor computational error in some of the
calculations underlying the above table ", and that as of th at time, "Thailand is still reviewing this
issue and will provide any necessar[y] clarification as appropriate".513
7.198. In response to a question from the Panel asking Thailand to clarify, Thailand then explained
that "there does not appear to be any computational error as such".514 Thailand then explained what
the BoA had done, and why:

502 Philippines' first written submission, paras. 289-295.
504 Thailand's first written submission, paras. 5.42-5.44; second written submission, paras. 2.57-2.58.
505 Thailand's first written submission, para. 5.43.
506 Philippines' second written submission, paras. 218.
507 Philippines' second written submission, paras. 214 (referring to Letter from the Permanent Mission of
Thailand to the WTO to the Permanent Mission of the Philippines to the WTO, 27 March 2014, (Exhibit PHL-59),
response to Question 8).
511 Philippines' second written submission, para. 224 (referring to P&GE rates based on consistent and
inconsistent use of income, (Exhibit PHL-140)).
512 Thailand's second written submission, paras. 2.57-2.58. Thailand noted that, for each company, the
numerator was profit plus general expenses (before tax), and the denominator was operating income (not
including non-operating income, such as interest income). (Thailand's second written submission, para. 2.58)
513 Thailand's second written submission, para. 2.57 and fn 31.
514 Thailand's response to Panel question No. 15, p. 17.

The total income was used in the calculation of profit because the total expenses used
in the calculation of the numerator for each of the five companies was reported o n a
corporate-wide or total basis also. In other words, to arrive at a profit figure, it was
necessary to use total income and total expenses, because that was the basis on which
the expenses were reported or available. Thus, the calculation of profit was done on an
"apples minus apples" basis.
The resulting figure was then divided by the operating or main income in order to
allocate the total profit over operating income only, to reflect as accurately as possible
the P&GE ratios that would be achieved on operations. This is, in effect, the final
calculation used by the BoA.515
7.199. In the light of the foregoing, we are able to draw two sets of conclusions regarding the
alleged inconsistencies in the BoA's P&GE calculations, and in particular its treatment of corp orate
income. First, we are now able to arrive at a factual conclusion as to what the BoA actually did. We
understand that the BoA's determination of P&GE rates for the companies in the benchmark group
consisted of a calculation as follows:

7.200. We further understand that it is uncontested that , in determining the numerator ("net
profit"), the BoA relied on a figure representing ordinary operating income (earned in sales of goods)
as well as extraordinary income (not earned through sales of goods). It is also undisputed that ,
when determining the denominator (i.e. "total income") for the P&GE calculation, the BoA used a
figure consisting of ordinary operating income only and excluding extraordinary income.516 Thus, the
BoA used different definitions of income in determining the numerator and denominator for its
calculation of P&GE. We understand that it is also undisputed that the BoA followed the same
approach in determining the numerator and the denominator for all companies in the industry
comparator group. It is uncontested that, of the five companies for which the BoA calculated a P&GE
rate, one of the companies did not have any "extraordinary income", meaning that, for this one
company, their profit figures used to derive the numerator and denominator were in fact identical,
whereas for the other companies, the profit figures used to derive the numerator and the
denominator were different.
7.201. Second, we cons ider that the manner in which the above explanation has unfolded
demonstrates shortcomings in the BoA's approach to examining the circumstances of sale under
Article 1.2(a), second sentence. We recall that the process of examining the circumstances of sale
is one of consultation between the customs authority and the importer. As explained above, the
manner in which the BoA addressed corporate income had still not been clarified as of the time of
the Philippines' first written submission, and it was only in the light of Thailand's first written
submission that the Philippines was able to discern how the BoA had actually conducted its
calculation. Furthermore, it was only in response to a question from the Panel that Thailand
elaborated on why the BoA had appa rently conducted its calculation in this manner. None of this
was discussed by the BoA and PMTL in the context of the customs valuation determination itself, nor
in any subsequent explanations provided to PMTL or the Philippines by the BoA (or any other Th ai
entity). We further note that the Philippines' argument is based on its understanding of the
calculation conducted by the BoA, as explained in two documents that, in our view, are not on the
record of the BoA's determination.517
7.202. To the extent that we wer e to address the parties' arguments, we consider that certain
questions may remain despite Thailand's explanation for why the BoA calculated the P&GE rates in
this way. Having said that, we also note that the Philippines has not specifically responded to the
explanation and justification that Thailand provided in response to a question from the Panel. In any
event, we do not consider it necessary to resolve that issue, given the BoA's failure to communicate
this aspect of its methodology to PMTL. In particular, we consider that PMTL was precluded from

515 Thailand's response to Panel question No. 15, p. 17. (emphasis original)
517 Specifically, the Philippines refers to a letter sent from the Permanent Mission of Thailand to the WTO
to the Philippine Mission to the WTO, 27 March 2014 (Exhibit PHL-59), and BoA Presentation, 1 August 2013
(Exhibit PHL-54). As explained in footnote 429 above, we consider that these documents do not form part of
the record of the BoA's determination.
P&GE = (net profit + selling and administrative expenses + corporate income tax)
(total income)

ever raising its concerns regarding this aspect of the methodology to the BoA at the time of the
customs valuation determination.
7.203. Turning to the second flaw alleged by the Philippines, which concerns the manner in which
the BoA calculated the P&GE rate for PMTL when treating it as part of the industry comparator group,
we note that this argument relates to the inclusion of PMTL itself in the industry group. We have
already found above that the BoA's inclusion of PMTL itself within the group was not apt to reveal
whether the relationship influenced the price. However, we d o not consider that this necessarily
renders the Philippines' argument moot. Rather, we consider that it relates more generally to a
methodological issue of how the BoA should have determined the P&GE rate of the companies
included in the industry group, taking into account that the group included PMTL itself. In light of
the legal standard that we have articulated above, we consider that the relevant question is whether
the BoA's determination of the P&GE rates of the companies in the industry comparator g roup,
derived from their financial statements and in the case of PMTL, reflecting the P&GE rates derived
from the customs values as determined by Thai Customs as opposed to a P&GE rate derived from
the declared transaction values, was apt for the purpose o f determining whether PMTL's P&GE was
consistent with the industry, in order to assess whether the relationship between the buyer and
seller influenced the price.
7.204. Regarding the P&GE rate that the BoA used for PMTL, we recall that, according to the
Philippines, the BoA incorrectly ascribed a P&GE rate of 9.22% to PMTL, when it should have used a
rate of 18.47%.518 We agree with the Philippines that, for the purpose of determining PMTL's P&GE
rate, the BoA should not have used the rate of 9.22% derived from PMTL's financial statements. As
the Philippines explains, and Thailand does not dispute, the 9.22% rate used by Thailand was based
on PMTL's financial statement, prepared on the basis of the revised customs values as determined
by the Thai Customs Department. 519 Thus, these figures do not correspond to PMTL's transaction
values. We agree with the Philippines that the 9.22% figure is only useful for assessing whether the
revised customs value assessed by the Thai Customs Department is consistent with that of an
industry benchmark group. In our view, that reveals nothing about whether the P&GE rates
calculated on the basis of PMTL's transaction values were consistent with the P&GE rates of the
industry group, and therefore whether those transaction values were influenced by the relationship
between the buyer and seller.520
7.205. We are not convinced by Thailand's argument that, because the P&GE rates of the other
companies were determined based on the financial statements, the BoA was forced to also use
PMTL's financial statements to determine its P&GE rate. We recall that the BoA's comparison of P&GE
rates was in the context of an examination of the circumstances of sale, conducted in order to
determine whether PMTL's transaction values should have been accepted by the Cust oms
Department. We further recall that, under the CVA, any revised customs value determined pursuant
to Articles 2 through 7 can only be assessed after the transaction value has been validly rejected.521
It is a fact that, in the context of an appeal of an initial customs valuation determination, an importer
may challenge not only the initial rejection of the transaction value, but also the manner in which
the revised customs duties were calculated by the Customs Department. An importer may also
refrain from challenging the determination of revised customs value, notwithstanding any concerns
it may have regarding that determination, if the importer is confident that the transaction values
should have been accepted. It is therefore inappropriate, in our view, for an appellate tribunal such
as the BoA to conduct its examination of the circumstances of sale in assessing whether the
transaction value should have been rejected, by accepting at face value that the revised customs
duties calculated by the Customs Department accurately reflect the value of the importer's goods.
7.206. Having found that 9.22% was not an appropriate rate to use in respect of PMTL, we further
note that, in total, the BoA ascribed three different rates to PMTL in the process of conducting its
comparison: 9.22% when including PMTL within the industry group, and two different rates of 9.36%

518 Philippines' first written submission, paras. 283-287; second written submission, paras. 205-207.
519 Thailand explains that the "PM Thailand's audited financial statement P&GE for 2002 was 9.36%,
which, corrected to account for interest income/expenses, was adjusted to 9.22%." (Thailand's first written
submission, para. 5.45 (referring to Philippines' first written submission, paras. 282-286))
521 See the interpretative note regarding the Sequential Application of Valuation Methods in Annex I to
the CVA

and 18.47% when comparing PMTL to the benchmark range. 522 We note that the rates of 9.22%
(not taking into account interest) and 9.36% ( taking into account interest) were both based on
PMTL's financial statements for 2002, which were themselves based on the taxes and duties paid on
the revised customs values as determined by the Customs Department.523 By contrast, the 18.47%
rate was a rate calculated by PMTL as to wh at its P&GE rate would have been had the transaction
value, as declared by PMTL, been accepted by the Customs Department.524 As explained above, we
consider that the BoA should have based its determination on the transaction value, and therefore
the BoA should have used a rate that appropriately reflected this. We understand that the 18.47%
rate is indeed a rate that the BoA could have used as it does not suffer from the same shortcomings
as the 9.22% and 9.36% rates.525
7.207. Turning to the third flaw alleged by the Philippines, namely the BoA's use of a simple average
instead of a weighted average to calculate the industry average P&GE rate, we recall the Philippines'
contention that the BoA failed to account for significant differences in the sales volumes of the
companies in the benchmark group when determining the industry average, by using a simple
average calculation instead of a weighted average calculation. 526 We recall that, in response to a
Panel question, the Philippines states that the differences in size between PM TL and the companies
included in the comparator group are also relevant "in assessing whether PM Thailand's P&GE rate
was 'inconsistent' with those of the industry group in the sense of Paragraph 6 of the Interpretative
Note to Article 5 of the CVA".527
7.208. We recall that the purpose of constructing a benchmark group was to ascertain a benchmark
figure for P&GE rates, to determine whether PMTL's rate was consistent with that benchmark group.
We consider that differences in sales volumes can have a direct impact on different companies' P&GE
rates, and therefore, in principle, a comparison of P&GE rates should account for me aningful
differences in sales volumes. We note that the principle of economies of scale implies that companies
with significantly different sales volumes may have different levels of profits and general expenses.
Consistent with this understanding, Article 1.2(b) of the CVA, which prescribes a number of methods
by which an importer can demonstrate that the transaction value was not influenced by a relationship
with the seller, explicitly indicates that "due account shall be taken of demonstrated differences in
… quantity levels". Furthermore, Articles 2 and 3 of the CVA indicate that, in determining the customs
value for a particular good, the transaction value of an "identical" or "similar" good can be used if
the transaction value was for a sale "at the sa me commercial level and in substantially the same
quantity as the goods being valued ". Both Articles 2 and 3 indicate that the transaction value of
goods sold "in different quantities " may be used if "adjusted to take account of differences
attributable to … quantity … provided that such adjustments can be made on the basis of
demonstrated evidence which clearly establishes the reasonableness and accuracy of the
adjustment". These provisions confirm that differences in sales volumes, generally, are a relevant
consideration that should be taken into account when making comparisons. Furthermore, where an
industry group comprises only four other companies, large differences in sales volumes could have
particularly significant implications for the determination of what is "usual" for the industry. Since
any comparison must be apt to shed light on whether the relationship between the buyer and seller
influenced the price, we do not consider that a customs authority can simply disregard significant
differences in sales volumes.
7.209. Having said this, we disagree with the Philippines that the BoA was necessarily required to
take into account the differences in sales volumes between PMTL and the other companies in the
context of determining an industry P&GE average, whether in the form of using a weighted average

522 See BoA Ruling, (Exhibit PHL-21-B), p. 3; Minutes of the BoA Meeting of 26 September 2012 (English
translation), (Exhibit PHL-39-B), p. 8. We note that, according to Thailand, PMTL also proposed rates of
15.05%, and 18.36%. (Thailand's first written submission, para. 5.45; second written submission, para. 2.65)
523 Thailand's first written submission, para. 5.45; second written submission, fn 39.
524 Philippines' first written submission, para. 283 and fn 180. See also Letter from PMTL to Chief of
Analysis and Appeal Section, 15 December 2005, (Exhibit PHL-191-B).
525 We note that, in addition to its argument concerning the nature of the rate, the Philippines also
argues that the BoA used two different rates (namely 9.36% and 18.47%) when comparing PMTL to the
benchmark range, and that the BoA should have used the same rate for P&GE when including it within the
benchmark group, and when comparing it to that group. (Philippines' first written submission, paras. 282-288;
second written submission, paras. 199-212; and response to Panel question No. 14) In our view, this latter
argument relates to the comparison conducted by the BoA as between PMTL and the benchmark range. We
therefore address this argument in that context. (See paragraphs 7.227. to 7.230. below)
526 Philippines' first written submission, paras. 269-279; second written submission, paras. 187-198.
527 Philippines' response to Panel question No. 83, para. 143.

or otherwise. It is uncontested that the combined sales volumes of the four other companies included
in the industry comparator group represent a tiny fraction of PMTL's sales, and that the next-largest
of the other four companies included in the industry group, Piriyapul, had net sales amounting to
just 2.4% of PMTL's net sales, of which only a fraction is attributable to imported cigarettes.528 It is
further uncontested that if the BoA had weighted the calculation to account for differences in sales
volumes, while including PMTL itself in the industry comparator group, then PMTL's figur es would
have "dominated any weighting of the figures"529 in a way that would have "led to the BoA comparing
PM Thailand with itself ".530 In this respect, the Philippines accepts that there would have been no
need to use a weighted average if PMTL itself had not been included in the comparator group, as the
other four companies were of comparable size to one another. 531 We do not consider that, having
decided to include PMTL in the industry comparator group, the BoA was then required to perfect the
inaptness of the industry comparator group, and its comparison of PMTL with that group, by using
a weighted average that would have led to a comparison of PMTL with itself. We also note that the
Philippines itself has indicated that the difference in sales volumes is so mething that the BoA could
have taken into account when comparing PMTL to the benchmark range. 532 Based on our review of
the CVA533, and in accordance with our findings above concerning the BoA's composition of the
industry group, we consider that relevant differences can be taken into account in different ways.
Therefore, not only do we consider that it would have been inappropriate for the BoA to use a
weighted average when determining the industry P&GE average, given that this would have
fundamentally distorted the outcome of the comparison for the reasons explained above , but we
also consider that it would be inappropriate for us to assess this aspect of the BoA's examination in
isolation from how the BoA conducted its overall comparison. For these reasons, we do not consider
that the BoA's failure to account for differences in sales volumes when calculating the industry P&GE
average was flawed or inappropriate in the circumstances of this case . We do, however, return to
this issue in the context of assessing the BoA's comparison of PMTL to the benchmark range.534
7.210. Turning to the Philippines' fourth set of arguments, concerning the BoA's determination of
the benchmark range based on the standard error of the mean, we note that the Philippines has
made two distinc t arguments. The Philippines argues that: (i) the size of industry group was too
small to apply statistical methods to determine a benchmark range; and (ii) in any event, the BoA's
reliance on "standard error" was misplaced.
7.211. Before turning to these specif ic arguments, we note at the outset that the CVA does not
impose any specific obligations on customs authorities with respect to the use of samples or
statistical tools.535 This means that a customs authority's degree of discretion in deciding how to
conduct the examination extends to the use of statistical tools in determining an industry benchmark
P&GE range.536 However, a customs authority does not have licence to use statistical tools in any
manner it wishes. In light of the legal standard that we have articulated above, we consider that the
relevant question is whether the BoA's determination of an industry benchmark P&GE range by
adding and subtracting two "standard errors" from the mean was apt for the purpose of determining
whether PMTL's P&GE rate was c onsistent with the industry, in order to assess whether the
relationship between the buyer and seller influenced the price.537

528 The Philippines' first written submission, para. 272.
529 Thailand's first written submission, para. 5.35 (referring to the Philippines' first written submission,
para. 275).
530 Thailand's first written submission, para. 5.35.
531 In its response to Panel question No. 12, asking whether the BoA would have been free to determine
the benchmark P&GE range based on a simple average of the other four companies if PMTL had not been
included in the industry group, the Philippines responds that it "does not object, in principle, to the use of a
simple average when assessing P&GE rates, provided the companies in question are of a sufficiently similar
size". (Philippines' response to Panel question No. 12, para. 113. See also Philippines' response to Panel
question No. 83)
532 See Philippines' response to Panel question No. 83.
533 For instance, Article 1.2(b) of the CVA, concerning methods that an importer can use to demonstrate
that the relationship did not influence the price, indicates only that "due account shall be taken of
demonstrated differences in … quantity levels", and the interpretative note to that provision indicates that such
differences might be taken into account "in determining whether one value 'closely approximates' to another
value".
534 See paragraph 7.231. below.
535 Thailand's first written submission, para. 5.49.
536 See, e.g. Thailand's second written submission, paras. 2.24-2.28.
537 Our understanding is consistent with how panels and the Appellate Body have reviewed the use of
statistical tools in the trade remedies context. In US – Anti-Dumping Methodologies (China), the complainant

7.212. On the basis of our review of the evidence that it has provided 538, we agree with the
Philippines that sample size is an important a nd relevant consideration in assessing whether an
examination of the circumstances of sale, where it relies on statistical methodologies, is apt to reveal
whether the relationship influenced the price. We further consider that the evidence provided by the
Philippines raises doubts about whether the size of the industry group was sufficiently large to justify
the BoA's resort to any statistical methods for the purpose of determining a P&GE benchmark range.
We agree with the Philippines that "[i]t is axiomatic in statistical analysis that the statistical validity
of the results depends upon the number of observations "539 and that "a customs administration
should only have recourse to statistical tools … when the number of observations … is sufficiently
large for statistical analysis to yield meaningful results".540 Recalling the relevant legal standard, we
are convinced that a statistical analysis that is not capable of yielding "meaningful results" would
not be apt to reveal whether the relationship between a buye r and seller influenced a transaction
value. We further note that the Technical Committee on Customs Valuation's Commentary 15.1,
regarding the "Application of Deductive Value Method", states that:
The usual amount for commission or profit and general exp enses could constitute a
range of amounts which probably would vary according to the class or kind of the goods
being valued. In order for a range to be acceptable it should be neither too wide nor too
deficient in population. The range should be obvious and easily discernible in order for
it to be the 'usual' amount. Other approaches might also be possible, e.g. the use of a
preponderant amount (where such an amount exists) or an amount derived by simple
– or weighted averaging.541
Having noted that sample size is an important consideration, we proceed to assess the BoA's use of
"standard error" to define the benchmark range.
7.213. Turning to the Philippines' arguments concerning the BoA's use of "standard error of the
mean" in particular, we understand from the parties' arguments that standard error is calculated by
dividing the standard deviation of the sample by the square root of the number of observations in
the sample.542 The Philippines has demonstrated that the necessary and inevitable consequence of
dividing the standard deviation by the square root of the number of observations in the sample is
that the size of the standard error necessarily and inevitably decreases in size as the number of
observations increases.543 This means that the larger the industry group, the more companies would
fall outside a P&GE "range" that was calculated using the standard error.544 If there were a sufficient

argued that the investigating authority was free to use statistical tools to identify a "pattern" of pricing for
purposes of the second sentence of Article 2.4.2 of the Anti-Dumping Agreement, but claimed that the
respondent's use of a "one standard deviation threshold" led to "arbitrary conclusions" as to the existence of a
pattern. The Appellate Body agreed with the panel that investigating authorities "enjoy a margin of discretion
regarding the methods or tools they wish to use in establishing the existence of a pattern", but that
irrespective of the method used, investigating authorities are required to identify a "pattern" of export prices
within the meaning of Article 2.4.2 and consistently with their obligations under the Anti-Dumping Agreement.
(Appellate Body Report, US – Anti-Dumping Methodologies (China), para. 5.22.) The Appellate Body, like the
panel, conducted a detailed analysis of whether the investigating authority's use of the "one standard deviation
threshold" was improper in the context of the obligation in Article 2.4.2 of the Anti-Dumping Agreement.
(Appellate Body Report, US – Anti-Dumping Methodologies (China), paras. 5.13-5.31)
538 Timothy Bock and John Sergeant, "Small sample market research", in International Journal of Market
Research, Vol. 44, Quarter 2 (2002), (Exhibit PHL-194), pp. 240-242; Anne Hawkins, Flavia Jolliffe and Leslie
Glickman, Teaching Statistical Concepts, (Longman, 1992) (extract), (Exhibit PHL-192); Robin Hill, "What
Sample Size is 'Enough' in Internet Survey Research?", in Interpersonal Computing and Technology: An
Electronic Journal for the 21st Century, Vol. 6, No. 3-4 (1998), (Exhibit PHL-193), p. 3.
539 Philippines' response to Panel question No. 16(a), para. 133.
540 Philippines' response to Panel question No. 16(a), para. 132.
541 World Customs Organization, Customs Valuation Compendium, Commentary 15.1, "Application of
Deductive Value Method", 2nd edition, November 2008, (Exhibit PHL-85), para. 11.
542 Philippines' second written submission, para. 246 and statistical appendix, para. 11 (referring to Jack
Levine, James Alan Fox, David R. Forde, Elementary Statistics in Social Research, 2nd edn (Pearson Education,
2014), (Exhibit PHL-70), pp. 172-217).
543 Philippines' second written submission, para. 246 and statistical appendix, para. 11 (referring to Jack
Levine, James Alan Fox, David R. Forde, Elementary Statistics in Social Research, 2nd edn (Pearson Education,
2014), (Exhibit PHL-70), pp. 172-217).
544 See, e.g. Philippines' second written submission, paras. 245-260 and statistical appendix, paras. 4-
32.

number of companies in the group, every single company would fall outside a range established on
the basis of standard error.
7.214. Recalling the legal standard under Article 1.2(a), second sentence, we consider that a P&GE
industry range that necessarily shrinks as the number of observations increases is simply not
adequately representative of the industry. Notwithstanding any other concerns related to the use of
standard error to establish the range 545, the fact that a benchmark range based on standard error
narrows the range in a way that necessarily excludes P&GE rates that properly reflect the industry
demonstrates that a comparison between an importer's P&GE rate and such a benchmark range is
not apt to reveal whether an importer's relationship influenced the price.
7.215. We note that there is little explanation in any of the evidence on the record of the BoA's
determination as to why the BoA constructed a range from 9.8% to 15.08%. In fact, it appears that
the only explanation for this approach is provided in the Minutes of the BoA Meeting of 26 September
2012, which state that the range was determined on the basis of a "Confidential Interval at 95%".
The relevance of this reference to a "confidential interval of 95% " is not clarified. However, we
understand that in the field of statistics, a 95% confidence interval in a normal distribution "is an
approximation of the proportion of observations that falls outside a range based on plus and minus
two standard deviations from the average."546 It therefore appears to us, on the basis of the BoA
Minutes, that the BoA may have intended to calculate a range based on standard deviation.
Mathematically speaking, a range based on two standard deviations would not have stretched from
9.8% to 15.08%, but rather from 6.51% to 18.37%. 547 Thus, the explanation on the record of the
BoA's determination for why the BoA constructed its range may contradict the r ange it actually
established.
7.216. We are unconvinced by Thailand's argument that standard error is appropriate since
standard error measures the precision within which a population mean is estimated by a sample
mean, and therefore predicts that range within which the actual mean would be expected to fall.548
We agree with this characterization of standard error, but fail to see how that demonstrates the
validity of using such a range – which necessarily gets smaller as the size of the sample increases –
for assessing whether a particular observation is representative of the whole.
7.217. We find similarly unconvincing Thailand's argument that the BoA's approach is supported by
the WCO Commentary on the application of the deductive value method, which states that for
purposes of comparison with an importer's own P&GE figures, a "usual" amount of P&GE "could
constitute a range of amounts … [that] should be neither too wide nor too deficient in population ",
and "[o]ther approaches might also be possible, e.g. the use of a preponderant amount … or an
amount derived by simple - or weighted averaging."549 Again, we fail to see how this reference to a
preponderant amount is any way related to a determination of a range which decreases as the size
of the companies in the group increases.

545 We note, for instance, that standard error is only relevant when it is applied to a sample that is
intended to represent a portion of a larger population. Specifically, standard error measures the likelihood of
the sample mean correctly predicting the population mean. (See Philippines' second written submission,
statistical appendix, para. 11 (referring to R. Mark Sirkin, Statistics for the Social Sciences, 3rd edn (SAGE
Publications, 2006), (Exhibit PHL-72), pp. 127-141). Given the BoA's methods of determining the industry
group we have doubts as to whether the industry group can be considered a "sample" and not the entire
"population". Although Thailand considers that the total population would be "a broader category such as, for
example, the 29 companies in the industry group", it seems obvious that, to the extent that those companies
properly represent the total population, those additional companies should have been included in the
comparison. (See Thailand's response to Panel question No. 17(b), p. 19) If the BoA had legitimate reasons for
excluding those companies from the sample, then it seems to us that those same reasons would also mitigate
against including those companies in the total population.
546 Philippines' second written submission, fn 141 (referring to Jack Levine, James Alan Fox, David R.
Forde, Elementary Statistics in Social Research, 2nd edn (Pearson Education, 2014), (Exhibit PHL-70))
(emphasis added). See also Philippines' second written submission, statistical appendix, paras. 6-7.
547 See P&GE rates based on consistent and inconsistent use of income, (Exhibit PHL-140).
548 Thailand's first written submission, para. 5.60 (quoting Betty R. Kirkwood and Jonathan A.C. Sterne,
Essential Medical Statistics, 2nd ed (Blackwell Publishing, 2003) (excerpts only), (Exhibit THA-12), p. 39).
549 Thailand's first written submission, para. 5.62 (referring to World Customs Organization, Customs
Valuation Compendium, Commentary 15.1 "Application of Deductive Value Method", 2nd ed., November 2008,
(Exhibit PHL-85), para. 11).

7.218. We note that Thailand argues that various other possible approaches to the comparison of
P&GE rates would have led to the same result, i.e. that PMTL's P&GE rates were outside the
benchmark range, and that this demonstrates the reasonableness of the BoA's approach. According
to Thailand, these other possible approaches include using the full range of the sample group P&GE
rates from highest to lowest, or relying on the interquartile range of the average -industry P&GE
ratio, or relying on one standa rd deviation. 550 In our view, the fact that a different approach may
have resulted in the same outcome does not obviate any flaws in the approach actually used. If a
customs authority were to arbitrarily reject a transaction value on the basis of a coin-toss, but
subsequently it was demonstrated that there is an alternative WTO -consistent approach to
conducting the examination of the circumstances of sale that, if applied, would also result in the
transaction value being rejected, the fact of the latter could not be used to justify the former.
7.219. In sum, we find that the BoA's determination of the benchmark range was problematic in
several respects. First, we consider that there was a lack of clarity in the BoA's use of different
definitions of profit i n determining the numerator and denominator for its calculation of P&GE.
Second, we consider that , having included PMTL in the industry group, the BoA then used an
inappropriate P&GE rate for PMTL in the context of determining the industry average, because it
used a P&GE rate that reflected the Thai Customs Department's revised customs values for PMTL,
rather than the price actually paid. Third, we consider that the determination of the benchmark
range using statistical tools, in particular the standard error of the mean, was also flawed.
7.220. We consider that it may be premature to arrive at a conclusion as to whether these
intermediate findings give rise to a violation of Article 1.2(a) of the CVA. Rather, we consider that
we must continue with our analysis to address the manner in which the BoA compared PMTL's P&GE
rates with that industry benchmark P&GE range. Thus, we now turn to review the basis upon which
the BoA established that PMTL's P&GE rate was "inconsistent" with the industry benchmark range.
7.2.2.3.2.3 The comparison between PMTL and the benchmark range
7.221. Once the BoA had constructed its benchmark range (including by relying on a P&GE rate for
PMTL of 9.22%), it proceeded to compare two different P&GE rates for PMTL, specifically 9.36%
(based on PMTL's financial statements) and 18.47% (the rate requested by PMTL), with the
benchmark range of 9.8% to 15.08%. 551 Having determined that both of PMTL's rates fell outside
the benchmark range, the BoA concluded that the relationship between PMTL and PM Indonesia
affected the price paid by PMTL, and on that basis rejected PMTL's transaction value.552
7.222. The Philippines argues that the BoA's comparison of PMTL to the industry group was flawed
in multiple respects, including its reliance on a mechanical, bright -line test. We first set out the
parties' arguments on these aspects of the BoA's approach, before proceeding with our analysis of
the issues raised.
7.223. The Philippines argues that the legal standard under Article 1.2(a) "accommodates
differences between the things being compa red, particularly when these differences are explained
by commercial considerations or are not commercially significant."553 The Philippines indicates that,
under Articles 5 and 6 of the CVA, when determining whether an importer's P&GE rates are
"inconsistent with " those of an industry group, a customs authority must take into account the
degree to which the P&GE amounts are different, and "differences between an importer's figures and
those of a comparator group do not suggest that the relationship influenced the price, provided the
differences do not render the two amounts incompatible or incongruous."554 In the Philippines' view,
"[i]n assessing whether the importer's P&GE amounts are inconsistent with those of an appropriate
industry group, an authority must consider explanations for any quantitative differences between
them."555 The Philippines asserts that even if the BoA's selection of the benchmark group was
sufficient, the imperfections present in the choice of benchmark group mean that , although a
comparison of P&GE rates could suggest the influence of a relationship on the transaction values,

550 Thailand's first written submission, paras. 5.65-5.69.
551 Minutes of the BoA Meeting of 26 September (English translation), (Exhibit PHL-39-B), p. 8.
552 BoA Ruling, (Exhibit PHL-21-B), Clause 2, para. 1; Minutes of the BoA Meeting of 26 September
(English translation), (Exhibit PHL-39-B), p. 9.

qualitative factors should also be taken into account.556 The Philippines argues more specifically that
the BoA should have taken into account the differences in sales volumes between the companies
that were included in the benchmark group and PMTL when conducting the comparison. 557
Additionally, the Philippines argues that even where a quantitative assessment is not flawed, a
customs authority "cannot … draw rigid bright lines on the basis of that quantitative assessment
alone … [T]he administration must accompany the quantitative assessment with a qualitative
assessment of relevant factors. "558 The Philippines suggests that such a qualitative assessment
"could, for example , reveal that any differences between the P&GE rates are explained by
commercial considerations, or are not commercially significant."559
7.224. The Philippines argues that the BoA acted inconsistently with Article 1.2(a), second sentence,
by failing to use the sa me P&GE rates for PMTL when including PMTL in the industry group when
determining the benchmark range and when comparing PMTL's P&GE rates to the benchmark
range.560 The Philippines argues that the only rate the BoA should have used for PMTL was 18.47%,
given that the P&GE rates of 9.22% and 9.36% were not based on the transaction value, but rather
the revised customs value as determined by the Thai Customs Department. 561 The Philippines also
clarifies that, regardless of which rate the BoA used, it should have used the same rate when
including PMTL in the industry group and when comparing PMTL to that group. 562 Additionally, the
Philippines argues that the differences in size between PM Thailand and the companies included in
the comparator group are also relevant "in assessing whether PM Thailand's P&GE rate was
'inconsistent' with those of the industry group in the sense of Paragraph 6 of the Interpretative Note
to Article 5 of the CVA".563
7.225. Regarding the legal standard under Article 1.2(a), Thailand explains that the BoA's standard
for assessing the extent to which the relatedness of the buyer and seller influenced the price was
whether PMTL's P&GE rates were "'consistent' with those of the industry group ".564 Thailand
considers that this approach is supported by the expert witness testimony submitted by the
Philippines as evidence in this dispute. 565 Thailand further argues that "paragraph 6 of the
Interpretive Note to Article 5 and paragraph 5 of the Interpretive Note to Article 6 do not define the
term 'inconsistent' or 'inconsistency' as the Philippines suggests", and consequently it is up to WTO
Members to define what they consider to be "inconsistent".566 In Thailand's view, the BoA conducted
its comparison by establishing "reasonable parameters within which, with an almost absolute level
of confidence, the representative P&GE ratio of the industry would be expected to be found ".567
Thailand considers that "this kind of objective approach achieves reasonable, reasoned and adequate
outcomes".568 Thailand notes that it was on this basis that the BoA considered that there were
reasonable grounds to conclude that PMTL's transaction value was inconsistent with the industry
benchmark.569 Thailand emphasizes that "the BoA's approach need not be the only reasonable
approach" and, in Thailand's view, the Panel "cannot set aside the BoA's approach simply because

556 Philippines' second written submission, paras. 271-276. The Philippines highlights the inherent
imprecision of the test adopted by the BoA, which, in the Philippines' view, further suggests that the BoA
"should not have adopted a rigid, brightline approach in which the mere existence of some quantitative
difference … led, for that reason alone, to rejection of the transaction values, without consideration of other
factors." (Philippines' first written submission, para. 337)
557 Philippines' response to Panel question No. 83.
558 Philippines' response to Panel question No. 19, para. 156.
559 Philippines' response to Panel question No. 19, para. 156.
560 Philippines' first written submission, paras. 282-288; second written submission, paras. 199-212;
and response to Panel question No. 14
561 Philippines' second written submission, paras. 204-212.
562 Philippines' response to Panel question No. 14(a). The Philippines explains that "[s]uch
inconsistencies distort the comparison. An appearance of a discrepancy between the importer's P&GE rate and
the industry group's P&GE rates may, in that event, be due to the administration's inconsistent use of P&GE
rates." (Philippines' response to Panel question No. 14(a), para. 121)
563 Philippines' response to Panel question No. 83, para. 143.
564 Thailand's first written submission, para. 5.56. See also Thailand's second written submission,
para. 2.70.
565 Thailand's first written submission, para. 5.59 (referring to Expert witness statement of Paulette
Vander Schueren, 16 September 2010, (Exhibit PHL-115), p. 8). Thailand refers to the statement by Ms Vander
Schueren that the purpose of the tests is to determine whether the importer's figures are "commensurate" with
the figures of other distributors in the industry.
566 Thailand's response to Panel question No. 18, p. 20.
567 Thailand's first written submission, para. 5.50.
568 Thailand's response to Panel question No. 18, p. 20.
569 Thailand's first written submission, para. 5.50 and 5.56-5.57.

there may be other reasonable approaches".570 Thailand also considers that the Philippines "appears
to consider that the BoA was obliged to engage in an endless search for a subj ective ('qualitative')
method, based on a potentially endless consideration of unknown or unspecified facts that might
somehow be relevant, and ending only when there was an outcome favourable to the importer."571
7.226. Thailand explains that the P&GE rate in PMT L's audited financial statement for 2002 was
9.36%, which was modified to 9.22% to account for interest income and expenses.572 Thailand notes
that on 15 September 2004, PMTL requested that a rate of 15.05% be used, and , on 15 December
2005, PMTL requested that a rate of 18.47% (calculated based on the transaction values as initially
declared by PMTL) be used.573 The BoA subsequently "considered both the 9.22/9.36% figure and
the 18.47% figure and found that both were outside the benchmark range".574 Furthermore, Thailand
contends that, because PMTL had argued that a rate of 18.47% should be used, the BoA "without
prejudice to whether this rate was correct, also compared this rate with the benchmark range " to
ensure "completeness in the analysis".575 Thus, in Thailand's view, the BoA did not act inconsistently
by using both of these figures to compare against the benchmark range. 576 Thailand does not
specifically address the Philippines' argument that the differences in size between PMTL and the
companies included in the comparator group were relevant to the assessment of whether PMTL's
P&GE rate was inconsistent with the industry P&GE range that the BoA determined.577
7.227. We recall that the BoA constructed an industry benchmark P&GE range of 9.8% to 15.08%.
The final step in the BoA's methodology for determining whether the relationship influenced the price
was to determine whether PMTL's P&GE rates were inconsistent with the P&GE rates calculated for
the industry group. The BoA concluded that PMTL's transa ction values were influenced by the
relationship between the buyer and seller solely on the basis that PMTL's rates of 9.36% and 18.47%
fell outside of that industry benchmark P&GE range. The BoA conducted no further analysis, of either
quantitative or qualitative factors, as part of its examination of the circumstances of sale.
7.228. Leaving aside the parties' disagreement over the precise meaning of the terms "inconsistent
with" in the context of certain CVA provisions 578, we consider that the BoA's decision to a dopt a
mechanical, bright-line test to compare PMTL's P&GE rate with the industry benchmark range was
inappropriate, taking into account the totality of the circumstances before it. First, the quantitative
differences between the P&GE rates attributed to PMTL and the industry benchmark range are small.
PMTL's P&GE rates of 9.36% and 18.47% fell outside the benchmark range of 9.80% to 15.08%, by
margins of only 0.44% and 3.39% respectively. These differences are also relatively small as
compared with the P&GE ratios for many of the other 15 companies under the TSIC heading 51.233
(wholesale of "tobacco and tobacco products") for which the BoA calculated P&GE ratios for 2002.579

570 Thailand's first written submission, para. 5.65. See also Thailand's second written submission,
para. 2.76.
571 Thailand's response to Panel question No. 18, p. 20.
572 Thailand's first written submission, para. 5.45.
573 Thailand's first written submission, para. 5.45. Thailand further notes that, in addition to the three
rates described by PMTL (namely 9.22%, 9.36% and 18.47%), PMTL also proposed an alternative rate of
18.36%. (Thailand's second written submission, para. 2.65) Thailand highlights that all four rates proposed by
PMTL fall outside the benchmark range. Thailand considers that this "is not a question of being generous to PM
Thailand" but merely reflects "that none of the rates proposed by PM Thailand or derived from its financial
statements would fall within the range". (Thailand's second written submission, para. 2.66)
574 Thailand's first written submission, para. 5.45.
575 Thailand's first written submission, para. 5.46.
576 Thailand's first written submission, para. 5.46. See also Thailand's second written submission, para.
2.66.
577 Thailand's comments on the Philippines' response to Panel question No. 83.
578 We note that Paragraph 3 of the Interpretative Note to Article 1.2(a) envisages an examination of
whether the parties' pricing methods were "consistent" with those of the industry, or with the seller’s usual
pricing practices; Article 1.2(b) calls for an authority to assess whether the declared transaction value "closely
approximates" the transaction or customs values used as test values; and Paragraph 6 of the Interpretative
Note to Article 5 provides that an importer’s P&GE amounts are acceptable, unless the importer’s figures are
"inconsistent with" the P&GE amounts obtained in sales in the country of importation of imported goods of the
same class or kind.
579 BoA Presentation, 1 August 2013, (Exhibit PHL-54), pp. 24-25. We note that there were a total of 29
companies that Thailand initially identified as possible comparators, but it appears that, for those companies
that were loss-making it did not indicate a P&GE ratio. For reasons indicated earlier, we do not consider that
this document forms part of the contemporaneous record of the BoA's determination. (See footnote 429 above)
However, we do not see any reason why we should not look at this document for information on the P&GE

7.229. Second, most of the other companies in the "tobacco and tobacco products " industry fell
outside of the benchmark range of 9.80% to 15.08% which the BoA constructed. This included one
of the four companies (other than PMTL) included in the industry comparator group, Chemical Resins,
which had a P&GE rate of 17.75%.580
7.230. Third, the BoA applied a bright -line test in circumstances where it was confronted with
different methods of calculating P&GE rates for the same companies, which yielded different P&GE
rates for PMTL. We have already addressed above the Philippines' concerns regarding the P&GE rate
used by the BoA in respect of PMTL when including PMTL within the industry group, and found that
the BoA's reliance on a P&GE rate of 9.22% for PMTL was flawed , since it was calculated based on
the revised customs values determined by the Customs Department.581 We further found above that
a relevant P&GE rate that could have been used for PMTL when calculating the benchmark range
was the rate of 18.47%, calculated based on PMTL's declared transaction values.582 For the same
reasons set forth abo ve in respect of the benchmark group, we consider that the BoA could have
used this rate of 18.47% for PMTL when comparing PMTL to the benchmark range.583 Furthermore,
and of relevance to the manner in which the BoA conducted its comparison, we agree with th e
Philippines that, regardless of the actual rates used, by assigning different P&GE rates to PMTL when
constructing the benchmark group versus when comparing PMTL against that benchmark group, the
BoA's comparison was flawed.584 We note that, in effect, the BoA compared three different things:
a benchmark range, calculated using a figure based on revised customs values determined by the
Customs Department to be the appropriate customs values for PMTL's purchases of the cigarettes,
taking into account interest (i.e. 9.22%) ; an individual rate determined based on the revised
customs value determined by the Customs Department, not taking into account interest (i.e.
9.36%); and an individual rate determined based on the declared transaction value actually paid by
PMTL to PM Indonesia (i.e. 18.47%).585 We do not see how a comparison based on such different
things can reveal anything about any one of those three things.
7.231. Fourth, the BoA's comparison of PMTL's P&GE rate with the industry benchmark range did
not take into account the vast differences in sales volumes between PMTL and the companies in the
comparator group. We have already found above that significant differences in sales volumes must
be taken into account when conducting a comparison of P&GE rates for the purpose of assessing the
circumstances of sale.586 The BoA did not take into account such differences when comparing PMTL's
P&GE rate to the benchmark range.
7.232. Fifth, the BoA's reliance on a bright -line test for conducting its comparison is particularly
problematic given the shortcomings in its composition of the industry comparator group, and its
determination of the benchmark range. Specifically, we have found that the BoA compared PMTL's
P&GE rates to a benchmark range of P&GE rates using an industry comp arator group that was not
apt to reveal whether the relationship between PMTL and PM Indonesia influenced the price paid by
PMTL. We have further found that the BoA's determination of that benchmark range was flawed in
several respects. Taken together, we agree with the Philippines that "the serial flaws in the BoA's
comparison mean that there was no basis for the BoA to apply rigid quantitative bright lines, without
consideration of qualitative factors, in assessing [whether] PM Thailand's P&GE rates that fell slightly
outside the calculated range".587
7.233. In other words, even assuming that the BoA was entitled to compare PMTL's P&GE rate with
P&GE rates derived from a handful of companies selling different products at different commercial

rates of the companies that BoA initially identified as potential candidates for the industry comparator group,
and neither party has suggested otherwise.
580 Furthermore, we note that there is information before us which indicates that of the 15 companies
under the TSIC heading 51.233 for which the BoA calculated P&GE ratios for 2002, every single company other
than Lee Intertrade, Piriyapul, and KHS fell outside of this range. We are not suggesting that these companies
should have been included in the industry comparator group, or that the BoA's reasons for excluding them
from the industry group were invalid. Rather, we consider it a relevant circumstance, in the context of
appraising the BoA's application of a bright-line test, that four-fifths of the companies that it initially identified
fell outside of the industry P&GE benchmark range that it constructed.
581 See paragraphs 7.204. to 7.205. above.
582 See paragraph 7.206. above.
583 See paragraphs 7.204. to 7.206. above.
584 Philippines' response to Panel question No. 14, para. 121.
585 See paragraph 7.206. above.
586 See paragraph 7.208. above.

levels when defining a range for the industry comparator group, such differences would still be
relevant for assessing whether PM Thailand's rate is "inconsistent" with the P&GE rates for this
industry. Taking into account the apparent difficulties that the BoA f aced, we agree with the
Philippines' argument that the fact that such companies are a far less -than-perfect proxy for the
industry itself needs to be taken into account when drawing conclusions from the comparison of
P&GE rates. 588 In addition to the problem s with the comparator group, we recall that the BoA
calculated the P&GE rate for PMTL based on the customs values as determined by Thai Customs as
opposed to PMTL's declared transaction values, and that the benchmark range of 9.80% to 15.08%
was derived by adding/subtracting two "standard errors" from the mean P&GE rate of only five
companies (as indicated above, the BoA's statistical analysis resulted in two of those same five
companies falling outside of the industry benchmark P&GE range ).589 Furthermore, the application
of a bright-line test was inappropriate given the vast differences in sales volumes between PMTL and
the companies in the comparator group.
7.234. Finally, we consider that, although there could be circumstances in which a comparison of
P&GE rates could be sufficient in and of itself to constitute grounds for finding that the relationship
influenced the price, the legal standard under Article 1.2(a), second sentence, requires a process of
consultation between the customs authority and the importer. Most pertinently, we recall that:
[C]ustoms authorities and importers have respective responsibilities under
Article 1.2(a). The customs authorities must ensure that importers be given a
reasonable opportunity to provide information that would indicate that the relationship
did not influence the price. Importers are responsible for providing information that
would enable the customs authority to examine and assess the circumstances of sale
so as to determine the acceptability of the transaction value.590
Furthermore, we recall that a customs authority is under an obligation to "review the information
provided [by the importer] in reaching a final determination".591 In our view, given that the parties
do not dispute that a comparison of P&GE rates is, in princi ple, a valid indicator of whether the
relationship influenced the price, we consider that any obligation on a customs authority to take into
account additional information will depend on the information provided by the importer to the
customs authority in the context of the consultations. Specifically, where an importer provides
certain evidence or information that is relevant to the examination of the circumstances of sale, be
it quantitative or qualitative, a customs authority is under an obligation to address such evidence or
information.592 We therefore disagree with the Philippines that a customs authority "always has to
take into account both quantitative and qualitative factors in order to have an objective basis for
rejecting an importer's declared tra nsaction value."593 Rather, we consider that the nature of the
factors to be taken into account depends on the specific information that is provided to the customs
authority by the importer. Where an importer provides relevant qualitative information, a cust oms
authority is indeed obliged to take that information into account.
7.235. We note, however, that in the particular circumstances of this dispute, the Philippines has
argued that the BoA failed to communicate to PMTL its grounds for considering that the relationship
influenced the price, and therefore PMTL was precluded from being able to respond, inconsistently

588 Philippines' second written submission, paras. 270-271.
589 The BoA's analysis also resulted in the P&GE rate for the other 12 companies initially considered by
the BoA falling outside of the benchmark range. See footnote 580 above.
590 Panel Report, Thailand – Cigarettes (Philippines), para. 7.171.
591 Panel Report, Thailand – Cigarettes (Philippines), para. 7.172.
592 For instance, it may be the case that, in examining the circumstances of sale, a customs authority
considers that the relationship influenced the price on the basis of a purely quantitative assessment which is in
itself a valid indicator, or is suggestive, of whether the relationship influenced the price. Once the customs
authority has communicated its grounds to the importer, as required under Article 1.2(a), third sentence, the
importer may respond by providing qualitative evidence that is relevant to the examination of the
circumstances of sale (either directly related to the customs authority's quantitative methodology, or unrelated
to that methodology but still relevant to a determination of whether the relationship between the buyer and
seller influenced the price). In such a situation, if the customs authority failed to take into account such
information the customs authority would essentially be failing to conduct an examination of the circumstances
of sale that is apt to reveal whether the relationship influenced the price. However, in a situation where the
importer does not provide any relevant qualitative information, it would be fully consistent with the
requirements of Article 1.2(a) for the customs authority to reject the declared transaction value on the basis of
its initial grounds.
593 Philippines' response to Panel question No. 19, para. 154. (emphasis original)

with Article 1.2(a), third sentence.594 Without prejudice to the Philippines' claim under Article 1.2(a),
third sentence, we consider that in reviewing the evidence before us, there is no indication that,
prior to its final determination, the BoA indicated to PMTL that it considered that PMTL's P&GE rate
was inconsistent with a benchmark range established around an industry average , or indeed any
other information that would have put PMTL in a position to provide relevant qualitative information
to the BoA. Consequently, the BoA deprived PMTL of an opportunity to provide relevant qualitative
information that could have been taken into account. We therefore consider that, by precluding PMTL
of an opportunity to provide potentially relevant information, the BoA's examination of the
circumstances of sale was not apt to reveal whether the relationship between PMTL and PM Indonesia
influenced the price paid by PMTL.
7.236. In sum, we consider that the BoA's decision to adopt a mechanical, bright -line test to
compare PMTL's P&GE rate with the industry benchmark range was inappropriate , taking into
account the totality of the circumstances before it. These circumstance s included the small
quantitative differences between the P&GE rates attributed to PMTL and the industry benchmark
range; the number of other companies in the "tobacco and tobacco products " industry that fell
outside of the range constructed; the vast diff erences in sales volumes between PMTL and the
industry group; the different methods of calculating P&GE rates for the same companies resulting in
different sets of figures; the shortcomings in the composition of the industry group; the additional
shortcomings in the determination of the benchmark range; and PMTL having had no opportunity to
provide the BoA with potentially relevant qualitative information for purposes of the comparison.
7.237. Based on the foregoing, we conclude that the manner of the comparison undertaken by the
BoA, i.e. its application of a simple bright -line test in these circumstances, did not establish that
PMTL's P&GE rate was "inconsistent" with the industry benchmark range that it had constructed.
7.2.2.3.2.4 Overall assessment
7.238. We have concluded tha t the BoA compared PMTL's P&GE rates to a benchmark range of
P&GE rates using an industry comparator group that was not apt to reveal whether the relationship
between PMTL and PM Indonesia influenced the price pa id by PMTL. We have considered the
composition of the industry group in conjunction with the manner in which the BoA determine d the
industry benchmark P&GE range, and also in conjunction with the manner in which the BoA
compared PMTL's P&GE rates with that industry benchmark P&GE range. In this rega rd, we have
concluded that the manner of the comparison undertaken by the BoA did not establish that PMTL's
P&GE rate was "inconsistent" with the industry benchmark range, taking into account the flaws in
how that benchmark range was determined, as well as the flaws in the composition of the industry
group itself.
7.239. In light of these findings in respect of these different aspects of the BoA's examination of
the circumstances of sale, we consider that the BoA's examination, taken as a whole, was not apt
to reveal whether the relationship between PMTL and PM Indonesia influenced the price paid by PMTL
for the relevant cigarettes. The BoA's examination was therefore inconsistent with Article 1.2(a),
second sentence, of the CVA. Consequently, the BoA lacked a prop er basis for rejecting the
transaction value under Article 1.1 of the CVA.
7.2.2.4 Conclusion
7.240. In the original proceeding, the panel found that Thailand had acted inconsistently with
Articles X:3(a) and (b) of the GATT 1994 by virtue of delays in the administrative review proceedings
before the BoA.595 For the reasons set forth above , the Panel concludes that, in implementing the
DSB's recommendations and rulings in the original proceeding, the BoA acted inconsistently with
Articles 1.1 and 1.2(a) of the CVA by rejecting PMTL's transaction values without a valid basis, and
in particular that the BoA acted inconsistently with Article 1.2(a), second sentence, by failing to
properly examine the circumstances surrounding the sale of the cigarettes to PMTL because its
examination of the circumstances of sale was not apt to reveal whether the relationship between
PMTL and PM Indonesia influenced the price paid by PMTL for the relevant cigarettes.

594 See paragraphs 7.242. and 7.245. , and footnote 596 below.
595 See Panel Report, Thailand – Cigarettes (Philippines), paras. 8.4(e) and (f). See also paragraph
7.15. above.

7.2.3 Claim under Articles 1.1 and 1.2(a), third sentence, of the CVA
7.2.3.1 Introduction
7.241. As stated above, Article 1.1(d) of the CVA requires that the customs value of imported goods
shall be the transaction value, including in situations where the buyer and seller are related if the
transaction value is acceptable under Article 1.2. As discussed in detail above, Article 1.2(a), second
sentence, requires that, in a situation where the buyer and seller are related, the customs authority
must examine the circumstances surrounding the sale and accept the transaction value, unless the
customs authority demonstrates that the relationship did indeed affect the price. Article 1.2(a), third
sentence, further requires that when a customs authority has grounds for considering that the
relationship influenced the price, it must communicate those grounds to th e importer and give the
importer a reasonable opportunity to respond.
7.242. The Philippines claims that the BoA acted inconsistently with Article 1.2(a), third sentence,
because it failed to communicate its grounds for considering that the relationship influenc ed the
price, and failed to allow a reasonable opportunity for the importer to respond. 596 The Philippines
also asserts that, as a consequence, the BoA's rejection of the transaction valu e was inconsistent
with Article 1.1.597
7.243. Thailand submits that the procedural requirements of Article 1.2(a), third sentence, are not
applicable to decisions of appellate tribunals covered by Article 11 of the CVA, and that even if such
requirements were applicable such requirements were satisfied since PMTL was aware that the BoA
was conducting a comparison of P&GE rates, and had the opportunity to present its case to the
BoA.598
7.2.3.2 Main arguments of the parties
7.244. The Philippines contends that the procedural requirements of Article 1.2(a) do apply to
decisions of appellate tribunals, since such obligations apply to the "customs administration", and,
as Thailand itself states, the BoA is an authority within the customs administration that is not
independent of the customs administration. 599 The Philippines notes that in this case the BoA
undertook a de novo assessment of PMTL's customs values, and developed "an entirely new ground
for considering that the transaction value was not acceptable ".600 The Philippines highlights that
"[w]here there are new grounds, the BoA's duty to communicate th em … is especially important,
because the importer has never before had a chance to address the particular grounds."601
7.245. The Philippines argues that Article 1.2(a) requires a customs authority to provide an importer
with a "meaningful opportunity" to understand the basis for the authority's doubts and the nature
of the information that would be required to dispel those doubts.602 The Philippines asserts that the
BoA failed to satisfy this requirement, because it did not inform PMTL that it was examining the
circumstances of sale, nor did it inform PMTL of: how it had selected the benchmark companies;
which benchmark companies it had selected; its methodology for calculating the P&GE rates for each
company; or why it considered PMTL's P&GE rates to be inconsistent with the benchmark group.603
The Philippines explains that PMTL was not made aware of the BoA's intention to use the comparison
of P&GE rates for considering the acceptability of the transaction value. 604 Additionally, the
Philippines notes that, even if PMTL was made aware of the general nature of the testing that the

596 Philippines' first written submission, paras. 218-222 and 338-346; second written submission,
paras. 348-366; response to Panel question Nos. 28, 73 and 92; opening statement at the meeting of the
Panel, paras. 41-46; comments on Thailand's response to Panel question No. 77.
598 Thailand's first written submission, para. 5.123-5.124; Thailand's second written submission,
paras. 2.119-2.121; response to Panel question Nos. 27, 48 and 77; comments on the Philippines' response to
Panel question Nos. 73, 92 and 95.
599 Philippines' second written submission, para. 353 (quoting Thailand's first written submission in the
original proceeding, para. 289); response to Panel question Nos. 28(a) and 92; opening statement at the
600 Philippines' second written submission, para. 355; opening statement at the meeting of the Panel,
para. 44.
601 Philippines' response to Panel question No. 28(a), para. 236.
603 Philippines' first written submission, paras. 341-342.
604 Philippines' second written submission, paras. 358-368.

BoA intended to use, this would not satisfy the requirements under Article 1.2(a), since PMTL would
still not have known the BoA's grounds for doubting the transaction value.605 Thus, in the Philippines'
view, the BoA "failed to communicate its grounds for rejecting the transaction values and, as a
necessary and inevitable consequence, it failed to provide a reasonable opportunity for [PMTL] to
respond."606
7.246. Thailand submits that the procedural requir ements of Article 1.2(a) are not applicable,
"mutatis mutandis"607, to decisions of appellate tribunals under Article 11 of the CVA. 608 Thailand
agrees with the Philippines that the BoA is part of the customs administration, but disagrees that
the procedural provisions of Article 1.2(a) consequently apply to the BoA.609 According to Thailand,
"there is nothing in either Article 1.2(a) or Article 11 to suggest that the appellate tribunal must
follow exactly the same procedures as must be used to reach the initial valuation decision".610 In
Thailand's view, the "logic and purpose" of an appeal imply that different procedures could apply,
given that "the issues and evidence would normally be different at an appellate stage ".611 Thailand
states that the procedures of Article 1.2(a) "might not be adaptable or appropriate " to all possible
approaches taken by an appellate tribunal.612 Additionally, Thailand submits that the requirement in
Article 1.2(a) to provide the importer with no tice of the grounds may be redundant in an appellate
proceeding, since by virtue of the appeal the customs administration would have necessarily
determined that the relationship affected the price.613 In Thailand's view, "[i]f the appellate tribunal
is not replicating the method of the original determination … there is no reason why the appellate
tribunal should be compelled to follow the procedures of the original determination."614 Additionally,
Thailand points out that the right of appeal under Article 11 ma y be to an authority within the
customs administration or to a judicial authority.615 Thailand argues that, under the Philippines' logic,
the procedures of Article 1.2(a) would apply to appellate authorities in the customs administration
but not to judicial authorities, even though they perform the same function under Article 11. 616
Thailand also disagrees with the Philippines that the BoA conducted a de novo determination of the
customs valuation.617 Thailand notes that, in this dispute, the BoA did not conduct the "same enquiry
as a customs officer would have done when goods were first imported".618
7.247. Thailand also argues that, even if the requirements of Article 1.2(a), third sentence, were
applicable to the BoA, such requirements were satisfied since PMTL was mad e aware that the BoA
was conducting a comparison of P&GE rates, and PMTL had ample opportunity to present its case to
the BoA.619 Thailand asserts "that there was an extensive process of oral and written interaction
between PMTL and the BoA and that this pro cess satisfied the due process requirements of Article

605 Philippines' second written submission, paras. 363-367; opening statement at the meeting of the
Panel, paras. 45-46.
606 Philippines' response to Panel question No. 28(b), paras. 237-239.
607 In the context of our discussion of the parties' comments on the Interim Report, we observe that
Thailand's use of the term "mutatis mutandis" in this context has the potential to cause confusion. See
paragraph 6.24. above.
608 Thailand's first written submission, para. 5.120-5.122; second written submission, paras. 2.109-
2.118; comments on the Philippines' response to Panel question Nos. 73 and 92.
609 Thailand's second written submission, paras. 2.111-2.113.
610 Thailand's first written submission, para. 5.120.
611 Thailand's first written submission, para. 5.120.
612 Thailand's second written submission, para. 2.115. Thailand notes that Article 1.2(a) applies to
determinations of customs value, whereas the BoA's task is to resolve an "appeal of a determination of
customs value". (Thailand's second written submission, para. 2.112)
613 Thailand's second written submission, para. 2.116. Thailand elaborates that:
In many cases, the manner in which the appeal under Article 11.2 proceeds will depend on the
nature of the appeal. Depending on the nature or scope of the appeal, the requirement to
provide grounds under Article 1.2(a) third sentence may be more or less redundant. This is not
to say that an importer does not have due process rights in an appeal. To the contrary, Thailand
agrees that importers have due process rights in an appeal. Thailand has provided a detailed list
of the communications between the BoA and Philip Morris over the course of this appeal, in which
Philip Morris was given repeated full opportunities to provide information. (Thailand's comments
on the Philippines' response to Panel question No. 73, p. 11)
614 Thailand's second written submission, para. 2.117.
615 Thailand's second written submission, para. 2.113.
616 Thailand's second written submission, para. 2.113.
617 Thailand's second written submission, para. 2.114.
618 Thailand's second written submission, para. 2.114.
619 Thailand's first written submission, para. 5.123-5.124; second written submission, paras. 2.119-
2.121.

1.2(a)".620 Thailand points to a number of letters sent between the BoA and PMTL concerning the
P&GE rate to be used and the timing of a meeting to discuss the matter. 621 Thailand considers that
PMTL "had, in effect, an open-ended opportunity to interact with the Board of Appeals, in both writing
and in person".622 Thailand notes that Article 11 does not prescribe specific procedures for instances
of appeals, and if the drafters had intended specific procedures to apply, they "could and would have
done so".623 Thailand considers that the Philippines is effectively complaining that PMTL was "not
given an advance opportunity to comment on the Board of Appeals' final decision ", which is a
requirement similar to tha t under Article 6.9 of the Anti -Dumping Agreement, but which does not
exist in the CVA.624 Thailand notes that Section I of the Trade Facilitation Agreement (TFA) addresses
the procedures for appeals of customs decisions, but does not impose the kind of detailed procedural
requirements which the Philippines reads into Article 11.3 of the CVA.625
7.2.3.3 Analysis by the Panel
7.2.3.3.1 General considerations
7.248. As explained above, Article 1.1 of the CVA provides that, in principle, a customs authority
must use the transaction value of the imported goods as the customs value. Article 1.1(d) read in
conjunction with Article 1.2(a) clarifies that this applies also in situations in which the buyer and the
seller are related, unless it is established that the relationship influenced the price.626 The third and
fourth sentences of Article 1.2(a) of the CVA state that:
If, in the light of information provided by the importer or otherwise, the customs
administration has grounds for considering that the relationship influenced the price, it
shall communicate its grounds to the importer and the importer shall be given a
reasonable opportunity to respond. If the importer so requests, the communication of
the grounds shall be in writing.
7.249. As indicated above in the context of Article 1.2(a), second s entence, the original panel
explained that customs authorities and importers have respective responsibilities under
Article 1.2(a):
The customs authorities must ensure that importers be given a reasonable opportunity
to provide information that would indic ate that the relationship did not influence the
price. Importers are responsible for providing information that would enable the
customs authority to examine and assess the circumstances of sale so as to determine
the acceptability of the transaction value. Provided with such information, the customs
authorities must conduct an "examination" of the circumstance of sale, which would
require an active, critical review and consideration of the information before them.627
7.250. The original panel stressed that the process of examining the circumstances of sale under
Article 1.2(a) resembles that of consultation "as both the importer and the customs administration
respectively need to make a good faith effort on the one hand to pr ovide relevant information and
on the other hand to provide a reasonable opportunity to the importer to submit information and
review the information provided in reaching a final determination".628
7.251. Regarding the requirement to communicate "grounds" to the i mporter, the original panel
considered that the term "grounds" means the "reasons for considering".629 The original panel also

620 Thailand's response to Panel question No. 27, p. 24.
621 Thailand's first written submission, para. 5.123 (referring to Chronology of the BoA appeals,
(Exhibit THA-11)).
622 Thailand's second written submission, para. 2.199.
624 Thailand's second written submission, para. 2.120.
625 Thailand's second written submission, para. 2.121.
626 See paragraphs 7.100. to 7.102. .
627 Panel Report, Thailand – Cigarettes (Philippines), para. 7.171.
628 Panel Report, Thailand – Cigarettes (Philippines), paras. 7.171-7.172.
629 Panel Report, Thailand – Cigarettes (Philippines), para. 7.218. This interpretation is consistent with
the Spanish and French versions of the CVA, which refer to "razones" and "motifs" respectively. In the Spanish

noted that, where an importer has provided information and evidence to the customs authority, "the
grounds for [the customs authority's] consideration that the relationship between the buyer and the
seller influenced the price must be linked to that concerned evidence so as to assist the importer in
understanding the authority's consideration ".630 Additionally, the original panel stated that it was
neither "necessary [n]or useful … to define the exact extent and scope of 'grounds' to be provided
under Article 1.2(a) as they may vary depending on the factual circumstances presented in each
case."631
7.252. However, the original panel explained that:
[I]n order for the importer to have a reasonable opportunity to respond to the customs
authorities' consideration … the importer must not be left to guess the reasons for the
customs authorities' consideration. The right of the importer to have "a reas onable
opportunity to respond" under Article 1.2(a) would lose its meaning unless the importer
is informed of at least the reason(s) why the customs authority continues to question
the acceptability of the transaction value despite the evidence and informa tion
presented or otherwise in the possession of the customs authority until that point.632
7.253. The original panel highlighted the importance of giving the importer the opportunity to
respond, because "while customs authorities are responsible for providing a 'reasonable opportunity'
to the importer to provide information, once given this opportunity, importers are in principle liable
for supplying the customs authorities with information that would indicate that the relationship did
not influence the price."633 In this respect, the original panel emphasized that, "[t]o the extent that
Thai Customs was presented with certain evidence, the grounds for its consideration that the
relationship between the buyer and the seller influenced the price must be linked to that concerned
evidence so as to assist the importer in understanding the authority's consideration."634
7.254. In short, to comply with the third sentence of Article 1.2(a), a customs authority must give
the importer sufficient information regarding the authority's gro unds for doubting the transaction
value, such that the importer is able to meaningfully respond to those grounds. Additionally, the
customs authority must give the importer an opportunity to respond.
7.255. The parties do not contest the legal standard described above. The parties disagree on two
main issues. First, whether the obligations contained in Article 1.2(a), third sentence, apply to an
appellate tribunal such as the BoA. Second, in the event such obligations do apply to the BoA,
whether the BoA satisfied those obligations.
7.2.3.3.2 The applicability of Article 1.2(a), third sentence, to the BoA
7.256. In the original proceeding, Thailand explained that the BoA is an authority within the Thai
Customs Department that hears appeals from importers or exporters in relation to initial valuation
decisions by the Customs Department. Thailand elaborated that:
The Board of Appeals is headed by the Director -General of Customs (who serves as
Chairman). 'A civil servant attached to the Customs Department' serves as secretary to
the Board. The Director -General and the Secretary both may vote on appeals. The
Director-General exercises the deciding vote in the event of a tie. In addition, the Board
of Appeals is supported by a 'team of officers of the Customs Standards Procedure and
Valuation Bureau [of the Customs Department] that acts as secretariat of the Board of
Appeal.' This secretariat presents an initial report to the Sub -Committee for Customs
Valuation of the Board of Appeal. This Sub -Committee is charged with the 'power and

esas razones al importador y le dará oportunidad razonable para contestar." In the French versión, Article
1.2(a) states that "Si, compte tenu des renseignements fournis par l'importateur ou obtenus d'autres sources,
ses motifs à l'importateur et lui donnera une possibilité raisonnable de répondre."
630 Panel Report, Thailand – Cigarettes (Philippines), para. 7.220.
631 Panel Report, Thailand – Cigarettes (Philippines), para. 7.214.
632 Panel Report, Thailand – Cigarettes (Philippines), para. 7.214.
633 Panel Report, Thailand – Cigarettes (Philippines), para. 7.170 (referring to Case Study 10.1 on the
application of Article 1.2 of the Customs Valuation Agreement by the WTO Technical Committee on Customs
Valuation).
634 Panel Report, Thailand – Cigarettes (Philippines), para. 7.220.

responsibility to ... consider the appeal' and to reach initial conclusions for the purposes
of presenting a 'Report of the Conclusion of the Appeal Sub-Committee' to the Board of
Appeals. It is composed entirely of Customs Department officials.635
7.257. In response to a question from the Panel, Thailand confirms that, at the time of the BoA
Ruling at issue, the structure and composition of the BoA had not changed since the original
proceeding.636
7.258. Beginning with the text of Article 1.2(a), we note that Article 1.2(a) explicitly indicates that
the obligations therein apply to the "customs administration" conducting the process of determining
whether the transaction value is acceptable. It is uncontested that the BoA is formally part of the
Thai Customs Department, and is therefore part of the "customs administration" in the narrowest
understanding of these terms.637 There is no textual limitation in Article 1.2(a) confining the scope
of the obligations therein to certain types of entities, in a way that would exclude parts of a customs
administration from the scope of the term. Thus, there is no textual basis in Arti cle 1.2(a), third
sentence, to justify the exclusion of appellate tribunals like the BoA from the scope of the obligations
contained therein.
7.259. Turning to the nature of the obligations in Article 1.2(a), third sentence , and the function
that they serve, we see nothing therein that would justify excluding appellate tribunals such as the
BoA from the scope of those obligations. Rather, we consider that the obligation s in Article 1.2(a),
third sentence, to communicate the grounds to an importer and provide a reasonable opportunity to
respond are consistent with due process. Indeed, it could be contrary to the CVA's object and
purpose of providing for a "fair, uniform and neutral " system of valuation if a customs authority's
examination of the circumstances of sal e, whether initially or at the point of appeal, provided no
opportunity for the importer to provide relevant information to the customs authorit y in order to
inform its determination. 638 We understand that Thailand may even agree on this point, given its
insistence that PMTL was given "repeated full opportunities to provide information" to the BoA.639 In
our view, as a consequence of the consultative nature of an examination of the circumstances of
sale under Article 1.2(a), second sentence, the obligations under the second and third sentences of
Article 1.2(a) are necessarily related. 640 Indeed, certain of our findings above emphasize the
importance of the customs authority adequately consulting with the importer, in assessing whether
the customs authority acted inconsistently with Article 1.2(a), second sentence.641

635 Philippines' first written submission, para. 84 (referring to Thailand's opening statement at the
second meeting of the original panel, para. 96).
636 Thailand's response to Panel question No. 77(a). Thailand notes that while it is not directly relevant
to this proceeding, under the changes to the Thai Customs Act that will be effective on November 13, 2017,
the composition of the BoA will be reduced from ten to five individuals: the Director General of the Customs
Department, and representatives of the Excise and Revenue Departments, and of the Council of State and the
Office of the Attorney General.
637 Philippines' first written submission, paras. 84 and 441; second written submission, paras. 351-353;
response to Panel question No. 28; Thailand's second written submission, para. 2.111.
638 See the fourth recital to the preamble of the CVA.
639 Thailand's comments on the Philippines' response to Panel question No. 73, p. 11.
640 The Philippines explains that, "if a Member failed to communicate its grounds under the third
sentence, it is unlikely that the Member could conduct a proper examination of the circumstances of sale under
the second sentence." (Philippines' response to Panel question No. 73(b)) Canada states that "the obligations
in the second and third sentences of Article 1.2(a) are part of the same process … [and] they may need to be
analyzed together. For example, if the customs authorities do not provide a reasonable opportunity for the
importer to provide information that the relationship did not influence [the] price and the importer had
information that it could have provided in order to establish this fact, the customs authority's determination not
to accept the transaction value would be inconsistent with the second sentence of Article 1.2(a)." (Canada's
third-party response to Panel question No. 7(b), paras. 46-47) The European Union explains that ,"in practice
the obligations contained in Article 1.2(a) arise in a single process and are logically interlinked, as customs
authorities must examine all circumstances surrounding the sale, of course having due regard to evidence
submitted by importers." (European Union's third-party response to Panel question No. 7(b), para. 21) The
United States also points to paragraph 3 of the Interpretative Note to Article 1.2 of the CVA, which explains
that "[w]here the customs administration is unable to accept the transaction without further inquiry, it should
give the importer an opportunity to supply such further detailed information as may be necessary to enable it
to examine the circumstances surrounding the sale." (See United States' third-party response to Panel question
No. 7(b), para. 43)
641 See paragraphs 7.170. to 7.171. , 7.177. and 7.234. , and footnote 592 above.

7.260. Furthermore, we consider that the nature of the obligations in Article 1.2(a) third sentence
serves the same objective as Article 16 of the CVA, which, as the original panel stated, is to "enable[]
importers and foreign governments to effectively exercise their respective rights under Articles 11
and 19 of the Customs Valuation Agreement when requesting domestic reviewing tribunals, courts
and WTO panels to determine whether the manner or means of valua tion by a customs authority
was consistent with the importing Member's WTO obligations".642 It is consistent with this objective
that an appeals tribunal within the customs administration be subject to the requirements set forth
in Article 1.2(a), third sent ence. In sum, we see nothing in the nature of the legal obligations
contained in Article 1.2(a), third sentence, that would justify excluding appellate tribunals such as
the BoA from the scope of those obligations.
7.261. Furthermore, it is not clear how any practical difficulties would arise by subjecting an appeal
tribunal within a customs administration, like the BoA, to the procedural obligations contained in the
third sentence of Article 1.2(a). Assuming for the sake of argument that the procedures of Article
1.2(a) might not be adaptable or appropriate in the context of some appellate tribunals, Thailand
has not presented any basis to show that this is actually the case with the BoA. We note that the
BoA communicated with PMTL over a long period leading up to its Ruling, on a variety of substantive
issues, and Thailand itself emphasizes that PMTL had an "open-ended opportunity" to communicate
with the BoA.643 In short, we see no practical challenges to the imposition of the obligations under
Article 1.2(a), third sentence, on an appellate tribunal within a "customs administration", such as
the BoA.
7.262. We note, however, that Thailand raises a number of arguments that, in its view, demonstrate
why it "would not make sense" for the exact same procedural obligations of Article 1.2(a) to apply
to an appellate tribunal such as the BoA. 644 In this regard, we understand Thailand's argument to
be that if Article 1.2(a), third sentence, were to apply to appeals tribunals such as the BoA this would
mean that the exact same procedural obligations would apply, and that, because it would not make
sense for the exact same procedures to apply, it follows that the procedural obligations in Article
1.2(a), third sentence, are not legally applicable to the BoA.
7.263. First, Thailand argues th at, "[d]epending on the nature or scope of the appeal, the
requirement to provide grounds under Article 1.2(a) third sentence may be more or less
redundant."645 Thailand argues that the procedures at the appellate level can be different because
"the issues a nd evidence would normally be different at an appellate stage "646 and that "[i]f the
appellate tribunal is not replicating the method of the original determination … there is no reason
why the appellate tribunal should be compelled to follow the procedures o f the original
determination."647
7.264. In our view, however, if the issues and evidence are different at the appellate stage than
during the initial determination, then the procedural requirements of Article 1.2(a) may take on
particular importance. We recall th at the purpose of the procedural obligations in Article 1.2(a) is,
in general terms, to "ensure that importers be given a reasonable opportunity to provide information

642 Panel Report, Thailand – Cigarettes (Philippines), para. 7.234.
643 Thailand's first written submission, para. 5.123-5.124; second written submission, paras. 2.119-
2.121. Thailand argues that:
PM Thailand was clearly aware that the BoA was using a test method based on a comparison of
P&GE ratios and submitted various P&GE ratios for this purpose. For example, PM Thailand
submitted a letter on 31 March 2010 regarding the P&GE ratio to be used. When, on 15 October
2010, the BoA sent a letter to PM Thailand inviting the company to meet to discuss the matter,
on 4 November 2010, PM Thailand sent a letter requesting a postponement of the meeting.
When, on 14 September 2011, the BoA sent a letter requesting further information regarding the
relationship between the seller and buyer and whether the relationship affected the prices, PM
Thailand sent a letter on 13 October in which it continued to maintain that the transaction value
should be used but also addressing how the BoA should apply the deductive method if it chose to
take that approach. It cannot, therefore, be asserted that PM Thailand was not aware of the type
of methodology under consideration, that it had not an opportunity to participate or even, as the
Philippines suggests, that the BoA did not engage in good faith. (Thailand's first written
submission, para. 5.123 (referring to Chronology of the BoA appeals, (Exhibit THA-11)))
644 Thailand's second written submission, paras. 2.112-2.113.
645 Thailand's comments on the Philippines' response to Panel question No. 73, p. 11. See also
Thailand's second written submission, para. 2.116.
646 Thailand's first written submission, para. 5.120.
647 Thailand's second written submission, para. 2.117.

that would indicate that the relationship did not influence the price ".648 In this dispute , it is
uncontested that the BoA developed its P&GE comparison methodology during the appeal, as an
entirely new ground for considering that the transaction value was not acceptable.
7.265. Furthermore, it would be a straightforward task for customs authorities to circumvent the
obligations under Article 1.2(a), third sentence, if appellate tribunals within the administration were
not subject to those obligations. For example, a customs authority could make an initial rejection of
the customs value on WTO -inconsistent grounds, while respecting the requirements of the third
sentence, and on appeal the appellate tribunal could reject the transaction value on entirely distinct
grounds from the original determination, without consulting the importer (i.e. without noti fying the
importer of its grounds for considering rejection of the transaction value, and without giving the
importer an opportunity to respond to those grounds). In that scenario, the grounds for the customs
authority's final rejection of the transaction value would be grounds of which the importer was
completely ignorant. This would not serve the purpose of "ensur[ing] that importers be given a
reasonable opportunity to provide information that would indicate that the relationship did not
influence the price".649
7.266. Second, Thailand argues that "Article 1.2(a) by its express terms, applies to a determination
of customs value ", whereas by contrast, the "task" of the BoA is "to resolve an appeal of a
determination of customs value", and because these "are not the same thing" there is "no reason to
assume that the same procedures necessarily apply mutatis mutandis to both".650
7.267. In our view, Thailand's argument rests on a tenuous distinction between an initial
"determination of customs value" and an "appeal of a determination of customs value". We consider
that to the extent that an appellate tribunal such as the BoA is "resolving an appeal of a
determination of customs value ", to use Thailand's terminology, it may also be making a customs
value determination. Ind eed, in the appeal in question the BoA developed its P&GE comparison
methodology during the appeal as an entirely new ground for considering that the transaction value
was not acceptable, and on that basis the BoA proceeded to revise the customs values tha t were
initially determined by the Customs Department. In such circumstances, we do not see how a
decision by an appellate tribunal as to the correct customs value is not a customs value
determination within the meaning of Article 1.2(a), and the CVA more generally.651
7.268. We agree with Thailand that there is "no reason to assume "652 that the exact same
procedures necessarily apply to any tribunal, regardless of relevant institutional differences. As a
general matter, we agree with Thailand that it would be inappr opriate for any panel to make
assumptions about the obligations in the covered agreements. Rather, any conclusion as to the
applicability of any substantive or procedural obligations, including those in the CVA, must be
anchored in the text of the relevant provision, read in the light of their context, and the object and
purpose of the relevant agreement. We therefore do not assume that the procedural obligations in
Article 1.2(a), third sentence apply to the BoA, but rather proceed by conducting a proper t extual
analysis of the relevant provision.
7.269. Third, Thailand argues that it would lead to absurd consequences if the procedures of Article
1.2(a) would apply to appellate authorities within the customs administration, but not to other
judicial authorities outside of the customs administration, even though both types of entities perform
the very same function under Article 11 of the CVA.653
7.270. Assuming for the sake of argument that appeals tribunals outside of the "customs
administration" are not subject to the specific obligations in Article 1.2(a), third sentence, there are

648 Panel Report, Thailand – Cigarettes (Philippines), para. 7.171.
649 Panel Report, Thailand – Cigarettes (Philippines), para. 7.171.
650 Thailand's second written submission, para. 2.112.
651 For this same reason we have difficulty with Thailand's argument that "the procedures of Article
1.2(a) may simply be redundant at the appellate stage … [because b]y the time the case gets to appeal, the
customs administration has already determined that the relationship affected the price". (Thailand's second
written submission, para. 2.116) For the reasons explained above, it is our view that, at the stage of an appeal
to a body within the "customs administration" in the narrowest sense, by definition the "customs
administration" has not yet made a final determination that the relationship affected the price. Consequently,
the procedures of Article 1.2(a) are not redundant.
652 Thailand's second written submission, para. 2.112.
653 Thailand's second written submission, para. 2.113; comments on the Philippines' response to Panel
question No. 92.

several plausible explanations as to why that may be. For example, there may have been an
assumption, by the drafters of the CVA, that such tribunals would not be expected to go as far as
appeals tribunals within the "customs administration" in terms of developing and applying their own
customs valuation methodology (as the BoA did in this case). Insofar as appeals tribunals outside of
the customs authority are typically confined to reviewing the correctness of the initial customs
valuation determination, without embarking on a customs valuation determination afresh, then it
may well be that the procedural obligations in Article 1.2(a), third sentence, would have less scope
for application. Re gardless, given that the entity at issue here is an appeals tribunal within the
customs administration, and taking into account not only that it conducted its own customs valuation
determination but that no practical difficulties have been shown to arise as a consequence of
subjecting it to the obligations in the third sentence of Article 1.2(a), we do not consider it necessary
to address the extent to which these obligations may apply to other appeals tribunals.
7.271. In conclusion, we consider that if the customs administration – whether in the form of an
appellate tribunal within the customs administration, or the customs officer(s) conducting the initial
valuation – considers that the relationship between the importer and exporter influenced the price,
then Article 1.2(a), third sentence, requires that the importer b e informed of the grounds for that
consideration, and be given a reasonable opportunity to respond , before the customs authority
makes its final determination.
7.2.3.3.3 The communications between the BoA and PMTL
7.272. Recalling the legal standard above, to satisfy Article 1.2(a), third sentence, the BoA was
required to provide to PMTL sufficient information regarding its grounds for considering rejection of
the transaction values, to enable PMTL to understand the BoA's reasons and meaningfully respond
to those reasons.
7.273. The Philippines asserts that the BoA did not inform PMTL that it was examining the
circumstances of sale, and "failed to communicate its grounds for rejecting the transaction values
and, as a necessary and inevitable consequence, it failed to provide a re asonable opportunity for
[PMTL] to respond."654
7.274. Thailand does not directly assert that the BoA ever "communicate[d] its grounds " for
doubting the transaction values to PMTL prior to the BoA Ruling. However, Thailand argues that this
obligation was satisfied since PMTL was aware that the BoA was conducting a comparison of P&GE
rates, and because PMTL had an "open-ended opportunity" to communicate with the BoA.655 Thailand
points to letters sent from PMTL to the BoA that refer to P&GE rates, which in Thailand's v iew,
constitute evidence that PMTL "was clearly aware " that the BoA was conducting a comparison of
P&GE rates.656 Thailand elaborates that it:
[C]onsiders that there was an extensive process of oral and written interaction between
PMTL and the BoA and that this process satisfied the due process requirements of Article
1.2(a) of the CVA to the extent that they might apply mutatis mutandis to proceedings
of a review tribunal such as the BoA.657
7.275. We do not find this argument to be convincing. At no time in this p roceeding has Thailand
indicated when or how the BoA actually communicated the grounds to PMTL. Besides providing a
"chronology" of the events in the BoA proceeding, Thailand has not submitted any evidence or
exhibits to demonstrate that the grounds for th e BoA's consideration were communicated to PMTL
(for instance, Thailand has not submitted as exhibits the letters which, in its view, evidence PMTL's
awareness that the BoA was conducting a comparison of P&GE rates). Presumably, had the BoA
actually communicated any grounds to PMTL, there would be evidence of that communication which
Thailand could have submitted.658

654 Philippines' response to Panel question No. 28(b), paras. 237-239.
655 See footnote 643 above.
656 Thailand's first written submission, para. 5.123 (referring to Chronology of the BoA appeals,
(Exhibit THA-11)).
657 Thailand's response to Panel question No. 27.
658 Without prejudice to the burden of proof, if the BoA had communicated any grounds to PMTL,
Thailand could submit that evidence to the Panel. Thailand has not done so.

7.276. Furthermore, the Philippines directly contradicts Thailand's characterization of these letters
as evidence of PMTL's awareness that the BoA was conducting a comparison of P&GE rates. The
Philippines explains that, in previous appeals from that period, the BoA had tested the transaction
values by performing a "deductive value calculation", which included in the methodology a deduction
for P&GE.659 Thus, through the exchange of letters discussed by Thailand, the Philippines understood
that the BoA intended to use this same method, and not that a different test would be conducted
based on a comparison of PMTL's P&GE rate with the P&GE rates of comparable companies.660
7.277. Having reviewed these letters 661, we consider that PMTL's references to P&GE rates were
indeed in relation to the application of the deductive method (whether in the context of using the
deductive method to test the transaction values, or in the context of applying the deductive method
to determine a revised customs value). Specifically, a letter from PMTL to the Director -General of
the Thai Customs Department states that "[a]s discussed during our meeting, we are concerned that
the Board of A ppeal (BOA) plans to rule on 210 appeals relating to Marlboro cigarette imports in
2002 using a deductive value calculation with a profit and general expense (gross margin) of
9.36%".662 Moreover, Thailand's own summary of the letters from PMTL indicates that PMTL
"maintain[ed] that the transaction value should be used but also address[ed] how the BoA should
apply the deductive method if it chose to take that approach ".663 For these reasons , we consider
that PMTL's references to P&GE rates in its communications with the BoA were not in the context of
a comparison of P&GE rates. Furthermore, we note that as late as 12 October 2012 (approximately
one month prior to the issuance of the BoA Ruling on 16 November 2012), PMTL was still indicating
to the BoA that it was "unaware of any evidence that provides grounds for doubting the transaction
values, much less evidence that would warrant the rejection of the transaction values ", and
requested that "if … any grounds exist for doubting the transaction values, the BOA … communicate
such grounds to the importer in writing."664
7.278. Based on the evidence and arguments of the parties, we do not consider that the BoA
communicated to PMTL its grounds for consider ing that the relationship between PMTL and PM
Indonesia influenced the price, sufficiently for PMTL to meaningfully respond. We note that the
Philippines describes in its submissions the precise information that it considers should have been
provided to PMTL in order to satisfy th is requirement under Article 1.2(a). 665 In light of the BoA's
failure to communicate any grounds, we do not consider it necessary to delineate the precise
information that should have been provided.
7.2.3.4 Conclusion
7.279. For the reasons set fo rth above , the Panel concludes that, in implementing the DSB's
recommendations and rulings in the original proceeding, the BoA acted inconsistently with
Articles 1.1 and 1.2(a) of the CVA by rejecting PMTL's transaction values without a valid basis, and
in particular that the BoA acted inconsistently with Article 1.2(a), third sentence, by failing to
communicate to PMTL its grounds for considering that the relationship influenced the price, and by
failing to give PMTL an opportunity to respond.
7.2.4 Claim under Article 5.1(a)(i) of the CVA
7.2.4.1 Introduction
7.280. Article 5.1(a)(i) of the CVA requires that, when applying the deductive method, a deduction
should be made for commissions usually paid or agreed to be paid, or for additions that are usually
made for P&GE. In the course of applying the deductive method, instead of using PMTL's P&GE
figures, the BoA made a deduction for P&GE based on the 12.44% industry average of the industry

659 Philippines' second written submission, paras. 359-360.
661 We note that the Philippines itself submitted such letters to the Panel as evidence.
662 See Letter from PMTL to the Customs Department, 31 March 2010 (English translation), (Exhibit
PHL-146-B). (emphasis added) See also Letter from PMTL to the Director of Customs Valuation Appeal Division,
9 December 2010 (English translation), (Exhibit PHL-75-B).
663 Thailand's first written submission, para. 5.123. (emphasis added)
664 Letter from PMTL to the Sub-Committee for Appeal Consideration, 12 October 2012 (English
translation), (Exhibit PHL-43-B), p. 2. See also Letter from PMTL to the Sub-Committee for Appeal
Consideration, 5 October 2012 (English translation), (Exhibit PHL-25-B), p. 1
665 Philippines' first written submission, paras. 338-346.

group determined in the process of conducting the examination of the circumstances of sal e under
Article 1.2(a).666
7.281. The Philippines claims that the BoA acted inconsistently with Article 5.1(a)(i) of the CVA by
failing to deduct the correct amount of P&GE.667 The Philippines asserts that, under Article 5.1(a)(i),
the BoA was not entitled to rely on figures other than PMTL's figures, and that even if the BoA was
entitled to use figures other than PMTL's, the BoA's reasons for not using PMTL's own P&GE figures
were flawed and the BoA used a rate that was determined through a flawed process.
7.282. Thailand argues that the BoA acted consistently with Article 5.1(a)(i) of the CVA.668 Thailand
argues that, once the BoA had determined that the relatedness of the buyer and seller affected the
transaction value it could no longer continue to use PMTL's own P&GE rate since this would simply
have recreated PMTL's own calculation of the transfer price. Consequently, Thailand argues, it was
reasonable and logical for the BoA to use the average P&GE rate that it determined for the
benchmark group instead of PMTL's claimed P&GE rate, reiterating that the BoA properly determined
the average P&GE rate.
7.2.4.2 Main arguments of the parties
7.283. The Philippines explains that "if an administration does validly reject an importer's own
figures as an integral part of its assessment under Arti cle 1 on the grounds that they are not
consistent with the figures of a properly constituted industry group, the administration is entitled to
reject the importer's figures under Article 5. "669 The Philippines maintains, however, that the BoA
did not have valid grounds to reject PMTL's figures under Article 1.670 The Philippines contends that
the "numerous flaws" that it identifies with respect to the BoA's assessment of P&GE rates for the
industry group "vitiate the BoA's conclusion that PMTL's figures for P&GE were not consistent with
those obtained from sales in Thailand of imported goods of the 'narrowest group or range of imported
goods of the same class or kind'".671 Additionally, the Philippines considers that even if the BoA had
properly rejected PMTL's own figures, it incorrectly relied on the average P&GE rate of 12.44% that
the BoA determined to be the industry average.672
7.284. Thailand notes that the Philippines does not object to the use of the average P&GE rate
determined by the BoA, per se, but rather makes the same objections that it raises in the context
of its claims under Articles 1.1 and 1.2(a) of the CVA. 673 Thailand asserts that, once the BoA had
determined that the relatedness of the buyer and seller affected the transaction value, it could no
longer continue to use PMTL's own P&GE rate, since this would simply have "re-created PM Thailand's
own calculation of its transfer price".674 It was therefore "obvious and reasonable" to use the average
P&GE rate.675 Regarding the Philippines' arguments that the comparison group and average P&GE
rate were improperly determined, Thailand refers back to its arguments regarding how the BoA
identified the comparison group and determined the P&GE rates.676
7.2.4.3 Analysis by the Panel
7.2.4.3.1 General considerations
7.285. Article 5.1(a)(i) of the CVA provides that:
1. (a) If the imported goods or identical or similar imported goods are sold in the country
of importation in the condition as imported, the customs value of the imported goods

666 See BoA Ruling, (Exhibit PHL-21-B), p. 4; Minutes of the BoA Meeting of 26 September 2012 (English
translation), (Exhibit PHL-39-B), p. 11.
667 Philippines' first written submission, paras. 380-399; second written submission, paras. 281-295;
response to Panel question No. 21.
668 Thailand's first written submission, paras. 5.81-5.83.
669 Philippines' response to Panel question No. 21, para. 184.
670 Philippines' response to Panel question No. 21, para. 184.
673 Thailand's first written submission, paras. 5.81-5.82.
674 Thailand's first written submission, para. 5.82.
675 Thailand's first written submission, para. 5.82.
676 Thailand's first written submission, para. 5.83.

under the provisions of this Article shall be based on the unit price at which the imported
goods or identical or similar imported goods are so sold in the greatest aggregate
quantity, at or about the time of the importation of the goods being valued, to persons
who are not related to the persons from whom th ey buy such goods, subject to
deductions for the following:
(i) either the commissions usually paid or agreed to be paid or the additions
usually made for profit and general expenses in connection with sales in
such country of imported goods of the same class or kind;677
7.286. Paragraph 6 of the Interpretative Note to Article 5 states that:
It should be noted that "profit and general expenses " referred to in paragraph 1 of
Article 5 should be taken as a whole. The figure for the purposes of this deduction should
be determined on the basis of information supplied by or on behalf of the importer
unless the importer's figures are inconsistent with those obtained in sales in the country
of importation of imported goods of the same class or kind. Where the importer's figures
are inconsistent with such figures, the amount for profit and general expenses may be
based upon relevant information other than that supplied by or on behalf of the
importer.
7.287. In sum, under Article 5.1(a)(i), in applying the deductive method to cal culate a revised
customs value, a customs authority must make a deduction for "additions usually made for profit
and general expenses". Furthermore, paragraph 6 of the Interpretative Note sets forth a hierarchy
in the usage of figures for a P&GE deduction, pursuant to which a customs authority must necessarily
use the figures provided by the importer unless the customs authority establishes that the importer's
figures are inconsistent with P&GE rates "obtained in sales in the country of importation of imported
goods of the same class or kind".
7.288. We recall that Article 15.3 of the CVA defines "goods of the same class or kind" as goods
which fall "within a group or range of goods produced by a particular industry or industry sector,
and includes identical or similar goods."
7.289. We note that our assessment of the Philippines' claims under Article 5 is conducted in
accordance with the evidentiary principles set forth above in respect of our assessment of the
Philippines' claim under Article 1.2(a), second sentence.678
7.290. The issue before us is whether the BoA acted inconsistently with Article 5.1(a)(i) by making
a deduction for P&GE based on the 12.44% rate that the BoA determined to be the average P&GE
rate of the industry benchmark group it composed in the process of examining the circumstances of
sale under Article 1.2(a), instead of using PMTL's own P&GE figures.
7.2.4.3.2 The BoA's deduction for P&GE
7.291. We recall that paragraph 6 of the Interpretative Note to Article 5 of the CVA indicates that a
customs authority is required, in principle, to use the figures supplied by the importer. However,
this obligation is not absolute. Paragraph 6 also indicates that a customs authority may reject the
importer's figures if it concludes that those figures are inconsistent with the figures obtained in sales
of imported goods "of the same class or kind" in the country of importation.
7.292. In our view, if a customs authority, in the course of an examination of the circumstances of
sale under Article 1.2(a) (for the purpose of determining whether to reject the transaction value),
finds that an importer's P&GE figures are inconsistent with P&GE figures obtained in sales in the
country of importation of imported goods "of the same class or kind", then the customs authority is
under no obligation to rely on the importer's P&GE figures when making deductions under Article 5.
Essentially, in such a scenario, the customs authority would have satisfied the requirements of Article
5.1(a)(i) relating to the rejection of the importer's own figures for the P&GE deduction. Applying this
to the present dispute, if the BoA's examination of the circumstances of sale under Article 1.2(a)
properly established that PMTL's P&GE rate was inconsistent with the P&GE rates for sales in Thailand
of imported goods "of the same class or kind" as PMTL's imported cigarettes, then the BoA would

677 Emphasis added.
678 See paragraphs 7.119. to 7.121. above.

have satisfied the requirement under Article 5.1(a)(i) relating to the rejection of PMTL's figures for
the P&GE deduction, and consequently would be no longer obliged to use the importer's own figures.
7.293. We recall our finding above that the BoA's examination of the circumstances of sale was
inconsistent with Article 1.2(a), second sentence. Specifically, we found that, taken together, the
composition of the industry group, the way the BoA deter mined the benchmark range, and the
manner in which the BoA compared PMTL's P&GE figures with the benchmark range, rendered the
BoA's comparison of P&GE rates inapt to reveal whether the relationship between the buyer and
seller influenced the price.679
7.294. We note that the legal standard in respect of Article 5 concerning comparisons of P&GE rates
is not, in principle, identical to that under Article 1, concerning the examination of the circumstances
of sale. However, in the specific circumstances of this disput e, we consider that our findings above
regarding the BoA's comparison of P&GE rates are directly relevant to a determination of whether
the BoA satisfactorily determined whether PMTL's P&GE figures are inconsistent with P&GE figures
obtained in sales in Thailand of imported goods "of the same class or kind ". Indeed, we recall that
the entirety of the BoA's examination of the circumstances of sale consisted of a comparison of the
importer's P&GE figures with an industry benchmark, and that it was exclusively on this basis that
the BoA rejected the transaction value. Furthermore, we consider that , for the reasons set forth in
Section 7.2.2.3.2 above, the BoA did not adequately determine that PMTL's P&GE rates were
inconsistent with those obtained in sales in Thailand of imported goods "of the same class or kind"
as PMTL. We recall that Thailand has advanced almost no argumentation in this proceeding to
establish that the companies (other than PMTL itself) included in the industry comparator group
produce goods "of the same class or kind " within the meaning of the CVA. 680 Simply put, for the
same reasons set forth above, we do not consider that the BoA's comparison reveals anything about
the P&GE rate of PMTL itself. We therefore do not consider that the BoA appropriately determined
that PMTL's P&GE figures were "inconsistent" with P&GE figures obtained in sales in Thailand of
imported "goods of the same class or kind".
7.295. Consequently, we consider that, since the BoA failed to properly establish that PMTL's figures
were inconsistent with the P&GE figures for such sales, the BoA failed to act in accordance with the
requirements of Article 5.1(a)(i).
7.2.4.4 Conclusion
7.296. For the reasons set forth above , the Panel concludes that, in implementing the DSB's
recommendations and rulings in the original proceeding, the BoA acted inconsistently with
Article 5.1(a)(i) of the CVA by failing to deduct an appropriate amount in respect of P&GE.
7.2.5 Claim under Article 5.1(a)(ii) of the CVA
7.2.5.1 Introduction
7.297. Article 5.1(a)(ii) of the CVA requires that, when applying the deductive method, a deduction
should be made for the usual costs of transport and insurance, as well as associated costs, that are
incurred in the country of importation. In applying the deductive method, the BoA did not make any
deduction for transportation costs.681
7.298. The Philippines claims that the BoA acted inconsistently with Article 5.1(a)(ii) of the CVA by
failing to make a d eduction for transportation costs when applying the deductive method. 682 The
Philippines asserts that any waiver of such a deduction by PMTL was on a conditional basis, that the
BoA failed to satisfy such conditions, and that the BoA should have consulted wi th PMTL regarding
the transportation costs.

679 See paragraphs 7.122. to 7.240. above.
680 See paragraph 7.142. above.
681 See BoA Ruling, (Exhibit PHL-21-B), p. 4; Minutes of the BoA Meeting of 26 September 2012 (English
translation), (Exhibit PHL-39-B), p. 18.
682 Philippines' first written submission, paras. 416-424; second written submission, paras. 332-342;
response to Panel question Nos. 20(b) and 25-26.

7.299. Thailand submits that the BoA acted consistently with Article 5.1(a)(ii). 683 Thailand argues
that PMTL waived its right to any adjustment for transportation costs. Additionally, Thailand argues
that the burden of requesting such an adjustment (and proving that the adjustment is required) falls
on the party claiming the adjustment, and that in this case PMTL did not claim or substantiate such
an adjustment.
7.2.5.2 Main arguments of the parties
7.300. The Philippines notes that Article 5.1(a)(ii) requires that, in determining the customs value,
deductions are to be made for "the usual costs of transport ".684 The Philippines further notes that
the BoA made no adjustment for transport costs, on the basis that PMTL had "voluntarily accepted
that … transportation cost may not be considered for the calculation by way of deductive value
method."685 The Philippines contends that PMTL did not waive its right to such a deduction, but
rather offered to waive its right on the condition that the Bo A would "act expeditiously in resolving
the appeal".686 At the time of making the offer, the appeal process had been ongoing for nine years
– a delay that was found to be WTO -inconsistent in the original proceeding. 687 The Philippines
explains that, two months after PMTL made the initial offer, PMTL sent the BoA a letter indicating
that its offer was no longer valid, and requesting deductions for transportation costs.688
7.301. Since the BoA Ruling was only issued 15 months after PMTL made the offer, the Philippines
argues that the BoA should have consulted with PMTL as to whether PMTL wished to provide
additional information in respect of a deduction for transportation costs. 689 The Philippines submits
that PMTL had, in any case, provided an estimate of domestic transportation costs to the BoA in its
letter of 9 December 2010.690 The Philippines refers to the original panel report for the proposition
that "an importer's request for expeditious assessment cannot justify an authority's failure to respect
the due process requi rements inherent in the process of consultations between customs and the
importer, as foreseen by the CVA".691 The Philippines contends that the BoA was "required to conduct
the deductive valuation as a process involving 'consultation between an importer and a customs
administration'", and if the BoA had questions concerning the amount of transportation costs to be
deducted, it was obliged to consult with PMTL, but chose not to do so.692
7.302. Thailand argues that if PMTL had "wished to claim an adjustment for transportation costs, it
could, at any time after it sent its letter saying that it did not intend to claim an adjustment, [have]
changed its mind, notified the BoA that it intended to claim the adjustment, and submitted the
necessary information for review by the BoA. "693 Thailand submits that PMTL did not do so. 694
Thailand refutes the Philippines' assertion that PMTL sought any reduction for transportation costs
in its letter, or on any other occasion.695 Thailand considers that in the letter to which the Philippines
refers, "[c]ertainly PM Thailand pointed out that in a deductive method calculation, transportation
costs are to be deducted. "696 However, Thailand asserts that PMTL did not request a deduction for
any specific amount in that letter, whereas, by compariso n, PMTL did provide figures through that
letter on what it considered to be the correct P&GE rate.697

683 Thailand's first written submission, paras. 5.96-5.100; second written submission,
paras. 2.97-2.104; response to Panel question No. 25; opening statement at the meeting of the Panel, para.
93.
688 Philippines' second written submission, para. 338 (referring to Letter from PMTL to the Sub-
Committee for Appeal Consideration, 13 October 2011 (English translation), (Exhibit PHL-145-B), p. 3).
690 Philippines' second written submission, para. 340 (referring to Letter from PMTL to the Director of
Customs Valuation Appeal Division, 9 December 2010 (English translation) (Exhibit PHL-75-B), pp. 8-9).
691 Philippines' first written submission, para. 423 (referring to Panel Report, Thailand – Cigarettes
(Philippines), para. 7.331).
692 Philippines' second written submission, para. 341 (quoting Panel Report, Thailand – Cigarettes
(Philippines), para. 7.384).
693 Thailand's first written submission, para. 5.99.
694 Thailand's first written submission, para. 5.99.
695 Thailand's second written submission, paras. 2.93-2.104.
696 Thailand's second written submission, para. 2.97.
697 Thailand's second written submission, para. 2.97.

7.303. Thailand also states that the BoA did not have access to information about "how PM Thailand
incurred transportation costs or how to quantify any transporta tion costs".698 Thailand asserts that
PMTL's submission to the BoA only made an "unsubstantiated 'estimate'" of the transportation costs,
and made no further effort to identify the amount to be deducted for transport costs, whereas again,
by contrast, PMTL "actively pursued … what it considered to be the correct P&GE ratio and amounts
for provincial taxes".699 Thailand submits that PMTL similarly did not "claim the adjustment or provide
anything more than the unsubstantiated 'estimate' it had originally provided" when it sent its letter
in which it allegedly "withdrew" its offer to waive the adjustment. 700 Thailand highlights that a
company like PMTL would most likely have sufficient accounting records to identify transportation
costs relatively easily, in which case it did not pursue the deduction because the estimated amount
was so insignificant (approximately €0.001 per pack) that it was not worth the effort. 701
Alternatively, Thailand submits that PMTL simply did not have the records.702
7.2.5.3 Analysis by the Panel
7.2.5.3.1 General considerations
7.304. Article 5.1(a)(ii) of the CVA provides that:
1. (a) If the imported goods or identical or similar imported goods are sold in the country
of importation in the condition as imported, the customs value of the imported goods
under the provisions of this Article shall be based on the unit price at which the imported
goods or identical or similar imported goods are so sold in the greatest aggregate
quantity, at or about the time of the importation of the goods being valued, to persons
who are not related to the persons from whom they buy such goods, subject to
deductions for the following:
…
(ii) the usual costs of transport and insurance and associated costs incurred
within the country of importation;
7.305. According to the original panel , the process of customs valuation, including the application
of the deductive method under Article 5, requires consultation between the importer and the customs
authority.703 The original panel referred to the General Introductory Commentary of the CVA, which
explains that the customs valuation process consists of cooperation and collaboration between the
customs valuation authority and the importer.704 The original panel observed that the CVA "aims at
striking the balance between respecting the customs authorities' need to address cases where it has
reason to doubt the truth or accuracy of the particulars or of documents produced by traders in
support of a declared value and protecting the legitimate commercial interests of traders. "705
Specifically concerning the Thai Customs Department's failure to deduct transportation costs in the
process of applying the deductive method, the original panel stated:
Regarding the deduction of transportation costs, we note that although PM Thailand
(mistakenly) omitted to request deduction of these costs, Thailand should have inquired
as to whether such a deduction was needed. First, deduction of "the usual costs of
transport" is specifically mentioned in Article 5.1(a)(ii), and therefore a common item
to be deducted. Second, th e minutes of the 6 March meeting show that Thailand was
aware of the fact that in the calculation of the deductive value, transportation costs
must be deducted. Third, Thai Customs was aware of the fact that PM Thailand had
included a deduction for internal transportation costs in annual filings covering the three
year period from 2003 to 2005 for either "inland freight" or "domestic transportation".
We believe, therefore, that although PM Thailand did not specifically request deduction
of the transportatio n costs, Thailand should have deducted these costs based on the

698 Thailand's first written submission, para. 5.98.
699 Thailand's second written submission, para. 2.100.
700 Thailand's second written submission, para. 2.102.
701 Thailand's second written submission, paras. 2.100-2.102 and fn 55.
702 Thailand's second written submission, para. 2.102.
703 Panel Report, Thailand – Cigarettes (Philippines), paras. 7.172 and 7.326-7.327.
704 Panel Report, Thailand – Cigarettes (Philippines), paras. 7.326-7.327.
705 Panel Report, Thailand – Cigarettes (Philippines), para.7.172.

information put forward by PM Thailand, or if it considered this information to be
insufficient, it again could and should have communicated such views to the importer
during the valuation process.706
7.306. The original panel also stated the following regarding the Thai Customs Department's
decision not to deduct transportation costs:
The next issue raised by the parties in relation to transportation costs is whether Thai
Customs' decision not to dedu ct this item was not inconsistent with the principles of
Article 5 because PM Thailand failed to make a specific request for its deduction.
In respect of the transportation costs at issue in this case, as the Philippines
acknowledges, PM Thailand mistakenly omitted them in its letter of 21 February 2007.
Thailand argues that due to PM Thailand's failure to claim a deduction for transportation
costs, it did not have to deduct these costs, but even if the deduction had been claimed,
the documents submitted by PM Thailand do not establish that PM Thailand incurred
transportation costs with respect to the sales on which the GAQ price was based.
Nonetheless, we note the following Thai Customs' statement relating to the deductive
valuation method in the original minutes of the 6 March 2007 meeting:
"To prescribe customs prices by using deductive value, the deductive value
must comprise the following: selling price of the imported thing per unit
sold at the first sale in the country, and sold in the biggest volume t o the
person with no relationship less commission or normal profit and general
expenses less insurance cost , transportation cost in the country and less
import tariff, other taxes for the import and the sale of such things."
This shows that Thai Customs understood and discussed at the 6 March 2007 meeting
that transportation costs in the country of importation, as one of the items that are
subject to deductions under Article 5, had to be deducted in calculating the customs
value of the cigarettes at issue. As we explained above, a valuation process must be
that of consultation between an importer and a customs administration. To the extent
that transportation costs usually are incurred in the resale of goods in the country of
importation, Thai Customs had t o rely on the available evidence or, if not, consult
PM Thailand as regard this item if it had queries on the available evidence.707
7.307. Importantly, we note that the parties do not contest that an importer can "waive" its right
to a deduction under Article 5, in a practical sense. Specifically, the parties agree that, if an importer
fails to provide relevant information to substantiate a requested deduction under Article 5.1, the
customs authority cannot be found to have acted inconsistently with Article 5.1 fo r not making the
deduction.708 While we consider that the legal obligations that Members assume under the covered
agreements cannot strictly speaking be waived by importers or other private parties, we agree with
the parties that, in the circumstances of a c ustoms valuation determination, it is possible that an
importer may, practically speaking, "waive" its rights in a particular set of circumstances. This does
not amount to a waiver of the treaty obligation assumed by a Member.
7.308. The original panel indicated that Article 5 imposes an obligation on the customs authority to
engage in a process of consultation with the importer during the course of the customs valuation
determination. Furthermore, we consider that the customs authority must make its deduction on the
basis of the information provided by the importer. Furthermore, in a situation where the customs
authority has doubts about the information provided by the importer, then , in accordance with the
consultative nature of the process, the customs authorit y should communicate its doubts to the

706 Panel Report, Thailand – Cigarettes (Philippines), para. 7.330. (footnote omitted)
707 Panel Report, Thailand – Cigarettes (Philippines), paras. 7.383-7.384. (footnote omitted) (emphasis
added by original panel)
708 The Philippines acknowledges that due to the nature of the customs valuation process, the customs
authority is required to specify the information it requires to make a deduction and the importer must provide
the same in order for the deduction to be made. As a result, it is possible that the importer fails to provide the
required information that would allow the authority to make the deduction, thereby preventing the deduction
from being made. (Philippines' response to Panel question No. 25) Thailand states that "[w]hen the importer
decides not to provide substantiated amounts … it is perfectly reasonable for the [customs authority] to
proceed on the basis that any right to adjustment for transportation expenses has not been exercised and,
rather than delaying the matter further, to proceed to make a decision." (Thailand's response to Panel question
No. 25, p. 23-24)

importer and invite the importer to submit additional information. We note that it may so happen
that an importer declines to submit the necessary evidence, despite a good faith effort by the
customs authority to cons ult with the importer. It is entirely plausible that an importer may elect
not to supply such information. Furthermore, in such a situation the importer may explicitly inform
the customs valuation authority that it does not intend to supply such informatio n. We do not
consider that a customs authority can be found to have acted inconsistently with its obligations
under Article 5 in such a situation. In short, a practical consequence of the nature of the consultative
process under Article 5.1 is that an impo rter is entitled to submit the necessary information, but is
not required to do so, and may prefer not to do so. In this "practical" sense, an importer can indeed
"waive" its right to a deduction for transportation costs.
7.309. The parties also do not disagree t hat, if an importer initially indicates its intention not to
substantiate a particular deduction, the importer is not necessarily precluded from changing its mind
and subsequently requesting (and substantiating) that deduction. 709 We note that the purpose of
the deduction itself, as contemplated in Article 5, is to enable the customs authority to determine a
customs value that is as accurate as possible. We therefore agree with the parties that a declaration
by an importer that it does not intend to claim or substantiate a particular deduction does not
necessarily preclude an importer from changing its mind and subsequently requesting the relevant
deduction. Having said that, we also consider that the importer itself must approach the customs
valuation process in good faith. If an importer intends to request (and substantiate) a particular
deduction, it must do so within a reasonable period of time, sufficient to enable the customs authority
to operate efficiently and effectively. A customs authority could not be found to have acted
inconsistently with Article 5 for failing to make a deduction in a situation where an importer utilizes
the flexibilities of the consultative customs valuation process to delay or frustrate the customs
authority's own rights under the CVA.
7.2.5.3.2 The BoA's deduction for transport costs
7.310. The issue before the Panel is whether PMTL "waived" its right to have transportation costs
deducted from the resale value in the process of customs valuation. In this connection, we briefly
recount key aspects of PMTL's communications with the BoA.
7.311. On 9 December 2010, PMTL sent a position paper to the BoA in connection with the appeal,
detailing its views on various matters. 710 With regard to transportation costs, PMTL expressed its
concerns that the BoA appear ed to believe that it was not required to deduct transportation costs,
and expressed the view that failing to do so would violate Thailand's obligations under the CVA.
PMTL further provided an estimate of the transportation costs, and indicated that if fur ther
information was required, it was ready to provide whatever information was needed. The letter
stated in relevant part that:
PMTL is concerned that the BOA appears to believe that it is not required to deduct
domestic transportation costs paid by PMTL as part of the deductive value calculation.
… [F]ailing to make a deduction for domestic transportation costs in a deductive value
calculation would be contrary to Thai law and Thailand's obligations under the CVA …
Thailand's obligation to deduct domestic transportation costs in a deductive value
calculation was confirmed in the WTO Panel Ruling … The WTO Panel further held that
a customs authority must consult with the importer to secure the information it needs
to calculate the amount of deductions to be made, and it must request additional
information as necessary … Therefore, in order to assist the BOA, PMTL is providing the
amount to be deducted as the domestic transportation costs of THB 2.57/1,000 sticks
in respect of the 210 Marlboro entries at issu e. … Should the BOA require additional
information in order to determine the amount of domestic transportation costs to be
deducted, PMTL is ready to provide whatever information is needed.711

709 Thailand states that "[h]ad PM Thailand wished to claim an adjustment for transportation costs, it
could, at any time after it sent its letter saying that it did not intend to claim an adjustment, changed its mind,
notified the BoA that it intended to claim the adjustment, and submitted the necessary information for review
by the BoA." (Thailand's first written submission, para. 5.99) The Philippines does not contest that an importer
can change its mind, and claim an adjustment if it wishes to do so.
710 Letter from PMTL to the Director of Customs Valuation Appeal Division, 9 December 2010, (English
translation), (Exhibit PHL-75-B), pp. 8-9.
711 Letter from PMTL to the Director of Customs Valuation Appeal Division, 9 December 2010, (English
translation), (Exhibit PHL-75-B), p. 8.

7.312. In a subsequent letter to the BoA dated 24 August 2011, PMTL rem inded the BoA of its
obligation to deduct transport costs, and the original panel's finding that further information had to
be requested from the importer if necessary. However, in the same letter, PMTL indicated that to
facilitate the "immediate conclusion" of the longstanding appeals, it was prepared, for the purposes
of these appeals only, to not include transportation costs in the deductive calculation. The letter
stated in relevant part that:
PMTL would like to remind the BOA that the WTO Panel Report, as adopted by the WTO's
Dispute Settlement Body on 15 July 2011, states that sales allowance and transport
costs, among other elements, must be deducted in a deductive calculation, and if
necessary, further information should be requested from the importe r (please see
paragraph 7.332 at attachment 2). PMTL expects that Thailand, including the BOA, will
adhere to this and other elements of the WTO's Panel and Appellate Body Reports.
Nonetheless, to facilitate the immediate conclusion of these long outstandi ng appeals
(with respect to entries made in 2002), PMTL is willing, for these appeals only, to accept
that sales allowance and transport costs are not taken into consideration in a deductive
calculation. However, such acceptance shall not be deemed as any waiver of PMTL's
rights under Thai law and international agreements.712
7.313. Based on the foregoing we understand that PMTL offered to accept that transportation costs
not be taken into consideration. However, as the paragraph above indicates, the purpose of PMT L
foregoing this deduction was to facilitate the immediate conclusion of the appeals. We note that the
appeal process continued for approximately 15 months after this initial offer.
7.314. On 13 October 2011, two months after PMTL made the relevant offer, PMTL s ent the BoA
another letter covering various points relating to the ongoing appeal, and noting the need to deduct
transportation costs. The letter stated:
[I]n light of the WTO Report, in respect of the Provincial Tax and the use of adjusted
gross margin fo r the calculation according to the deductive value, the Company is of
the view that the following points should be considered by the BOA, which follows the
guidelines and the WTO Report for the consideration of the pending appeals totalling
210 entries: … In addition, the deduction of Sales Allowance and Transport Costs were
all confirmed in the WTO Report as the proper steps to be taken when applying a
deductive calculation. If the proper amounts for these items are NOT deducted, the
resulting deductive value is inflated and inconsistent with the Ministerial Regulation and
the [CVA].713
7.315. Thus, this subsequent letter reminded the BoA of its obligation to deduct transportation costs
from the resale value. Even if this letter did not specifically claim a deducti on in relation to
transportation costs, and only generally remind ed the BoA of its duty to make deductions, we
consider that the letter, at a minimum, created ambiguity as regards the initial offer that PMTL had
made in the letter dated 24 August 2011. In light of the ambiguity created as a result of this letter,
we consider that the BoA was required to consult with PMTL to confirm PMTL's intention to forego
its right to a deduction for transportation costs. If PMTL did in fact intend to forego this deducti on,
it would have confirmed the same in the course of the consultation.714
7.316. Regarding Thailand's argument that PMTL waived its right to a deduction because it only
provided an "estimate" of transport costs in its December 2010 letter, we consider that the absence
of substantiation by itself cannot demonstrate a company's intention to forego its right to a
deduction, unless this absence of substantiation is preceded by the customs authority's attempt to
engage with the company in a process of consultations. Th e original panel found that even where
an importer omits to request a deduction for transportation costs, an administration should inquire
as to whether such a deduction is needed. 715 Additionally, the original panel found that "[t]o the

712 Letter from PMTL to the Director of Customs Valuation Appeal Division, 24 August 2011 (English
translation), (Exhibit PHL-76-B), p. 1.
713 Letter from PMTL to the Sub-Committee for Appeal Consideration, 13 October 2011 (English
translation), (Exhibit PHL-145-B), p. 3. (footnotes omitted)
714 We note that this finding accords with the original panel's findings in respect of the Thai Customs
Department's failure to make deductions for sales allowances, provincial taxes and transportation costs. (See
Panel Report, Thailand – Cigarettes (Philippines), paras. 7.332)
715 Panel Report, Thailand – Cigarettes (Philippines), para. 7.330.

extent that transportation costs usually are incurred in the resale of goods in the country of
importation, Thai Customs had to rely on the available evidence or, if not, consult PM Thailand as
regard this item if it had queries on the available evidence. "716 In this re spect, we highlight that
PMTL's initial letter conveying its estimate for transportation costs states unambiguously that,
"[s]hould the BOA require additional information in order to determine the amount of domestic
transportation costs to be deducted, PMT L is ready to provide whatever information is needed. "717
We therefore consider that the BoA was indeed required to rely on PMTL's "rough estimate" unless
it communicated its concerns to PMTL and gave PMTL an opportunity to provide further
substantiation.
7.317. Regarding Thailand's argument that "in anti -dumping disputes … the burden of proving
entitlement to an adjustment lies with the party claiming the adjustment", we agree that a customs
authority may request an importer to substantiate any claimed deduction.718 However, as explained
above, where an importer does provide certain estimations to the customs authority, a customs
authority cannot simply reject the importer's figures without attempting to consult with the importer,
including by explaining its concern s to the importer and giving the importer an opportunity to
respond to those concerns.
7.318. In sum, we consider that PMTL did not forego its right to a deduction for transport costs,
and that PMTL's submission of its estimate of transport costs was, in the circ umstances, sufficient
to require the BoA to consult with PMTL if it had any misgivings regarding PMTL's estimations. As a
consequence of the BoA's failure to do so, it was not justified in failing to make any deduction for
transportation costs, as it is in principle required to do when applying the deductive method under
Article 5.1(a)(ii).
7.2.5.4 Conclusion
7.319. For the reasons set forth above, the Panel concludes that, in implementing the DSB's
recommendations and rulings in the original proceeding, the BoA acted in consistently with
Article 5.1(a)(ii) of the CVA by failing to make a deduction in respect of transport costs.
7.2.6 Claim under Article 5.1(a)(iv) of the CVA
7.2.6.1 Introduction
7.320. Article 5.1(a)(iv) of the CVA requires that, when applying the deductive method, a deduction
should be made for customs duties and other national taxes payable in the country of importation
as a consequence of the importation or sale of the goods to be valued. PMTL claimed a deduction of
THB 0.033/stick in respect of provincial taxes payable.719 In applying the deductive method, the BoA
made a deduction of only THB 0.021/stick in respect of provincial taxes payable by PMTL.720
7.321. The Philippines claims that the BoA acted inconsistently with Article 5.1(a)(iv) of the CVA,
by improperly determining the amount to be deducted in respect of provincial tax, by disregarding
the evidence provided by PMTL and relying exclusively on certain tax receipts to determine the total
amount of provincial tax that PMTL had paid, and by improperly determining the total amo unt of
cigarettes sold by PMTL in Thailand in 2002. 721 The Philippines argues that the BoA did not have a
valid basis for deducting a lower amount than that claimed by PMTL, because the BoA failed to
properly consult with PMTL regarding its calculation of the amount to be deducted.

716 Panel Report, Thailand – Cigarettes (Philippines), para. 7.384.
717 Letter from PMTL to the Director of Customs Valuation Appeal Division, 9 December 2010, (English
translation), (Exhibit PHL-75-B), p. 8.
718 See Thailand's second written submission, para. 2.98.
719 Minutes of the BoA Meeting of 26 September 2012 (English translation), (Exhibit PHL-39-B), p. 16.
720 BoA Ruling, (Exhibit PHL-21-B), p. 4; Minutes of the BoA Meeting of 26 September 2012 (English
translation), (Exhibit PHL-39-B), p. 17.
721 Philippines' first written submission, paras. 400-415; second written submission, paras. 296-331;
response to Panel question Nos. 20, 22, 24, 86, 89 and 90; comments on Thailand's response to Panel
question Nos. 86-90; opening statement at the meeting of the Panel, paras. 35-39.

7.322. Thailand considers that the BoA acted consistently with Article 5.1(a)(iv).722 Thailand argues
that it was reasonable for the BoA to request proof in support of the adjustment claimed by PMTL,
due to the particular circumstances of the requested deduction. Thailand argues that the burden of
producing the relevant tax receipts was on PMTL, not the BoA, and in light of the circumstances
described above, it was reasonable for the BoA to determine the total amount of tax pa yable
exclusively on the basis of those tax receipts indicating that PMTL had paid the provincial tax.
7.2.6.2 Main arguments of the parties
7.323. The Philippines argues that PMTL provided the BoA with extensive evidence to demonstrate
that PMTL paid THB 162,347,608.85 of total provi ncial tax for the relevant period, including all
receipts for payment of provincial tax that it had received from the provincial authorities for the
period.723 Other evidence provided by PMTL included data on the total amount of provincial tax paid
during the relevant period, the total volume of sales during that period, and the average provincial
tax rate, which in three previous appeals had sufficed for the BoA to make a deduction in respect of
provincial tax. 724 PMTL also provided: receipts for provincial ta xes actually paid during a
representative period of the year; monthly data from January 2002 to December 2002 showing for
each province the sales volume of Marlboro and L&M cigarettes, the value of the sales, and the
average provincial tax rate in Thailand , from which PMTL calculated the amount of provincial tax
paid in 2002 (THB 162,347,608.85); and an Expense and Cost Statement from 2002 indicating the
amount of tax paid (THB 162,347,608.85).725 The Philippines explains that the Secretary of the BoA
had also initially concluded that the total amount of provincial tax paid by PMTL for the relevant
period was THB 162,347,609.00.726
7.324. The Philippines emphasizes that the BoA failed to act in accordance with the requirements
of Article 5, by failing to consult with PMTL regarding the BoA's perceived deficiencies in the evidence
provided by PMTL.727 Additionally, the Philippines has argued that the BoA essentially "imposed an
evidentiary burden that the importer could not meet ", since certain provincial tax authorities failed
to provide the relevant receipts to PMTL and certain receipts provided by PMTL were not in the
precise format requested by the BoA. 728 The Philippines considers that PMTL could have provided
additional evidence to the BoA in the form of evidence from its SAP accounting system, or statements
from its customers, had the BoA adequately consulted with PMTL. 729 The Philippines has also
contested Thailand's characterization of the receipts provided by PMTL to the BoA, the nature of the
obligation to pay provincial tax on cigarettes in Thailand, and the format of the receipts that PMTL
provided to the BoA.730 The Philippines has also suggested that the BoA's calculation of the amount
of provincial tax to be deducted was flawed.731 The Philippines explains that "there is a lack of clarity
as to which categories of receipts the BoA accepted, and which it rejected ".732 The Philippines has
elaborated that PMTL is not legally obliged under Thai law to pay provincial tax on behalf of retailers
but that it does so, in accorda nce with Thai Excise Department guidelines and in accordance with
industry practice.733 The Philippines has also explained that its claim under Article 5.1(a)(iv) is that
"irrespective of which specific receipts the BoA included in the deduction, it violated Article 5 by
rejecting PM Thailand's claimed amount of Provincial tax, without giving PM Thailand the opportunity
to address the perceived deficiencies in the supporting evidence, and without properly engaging in
the process of consultation envisaged under the CVA."734

722 Thailand's first written submission, paras. 5.84-5.95; second written submission, paras. 2.81-2.82;
response to Panel question Nos. 23-24 and 86-90; comments on the Philippines' response to Panel question
Nos. 86(b) and 90; opening statement at the meeting of the Panel, paras. 93-94.
723 Philippines' second written submission, paras. 311-312.
725 Philippines' second written submission, paras. 306-308.
727 Philippines' second written submission, paras. 319 and 324-325; and response to Panel question No.
22(c), paras. 210-211 and 218-220, and Panel question No. 89, paras. 161-162.
728 Philippines' first written submission, paras. 413-414.
729 Philippines' response to Panel question No. 22, para. 219; comments on Thailand's response to Panel
question No. 90(b), para. 122.
730 Philippines' first written submission, paras. 360-361 and 372-375; and second written submission,
paras. 311-316 and 320.
731 Philippines' response to Panel question No. 22(b), paras. 201-210.
732 Philippines' response to Panel question No. 89, para. 158.
733 Philippines' response to Panel question No. 86(b), paras. 154-157.
734 Philippines' response to Panel question No. 89, para. 162.

7.325. Thailand argues that, for a number of reasons, the BoA acted reasonably by requesting PMTL
to provide evidence in the form of all relevant tax receipts demonstrating that it paid the amount of
provincial tax claimed. Thailand emphasizes that in assessing PMTL's claimed amount for provincial
taxes, the BoA calculated that PMTL would have paid provincial taxes on cigarettes at a rate higher
than the rate applicable under the provincial tax law, which constituted "reasonable grounds to
consider that the amount claimed by PM Thailand … was too high."735 Since the receipts provided by
PMTL to the BoA included receipts that did not indicate that PMTL was the payer, or that the amounts
were paid by retailers on behalf of PMTL, Thailand asserts that it w as reasonable for the BoA to
conclude that "the claimed adjustment had not been substantiated in full".736 Additionally, Thailand
asserts that provincial tax liability in Thailand falls on the retailer, not the importer.737 Consequently,
according to Thailand, "the amount of provincial taxes paid on PM Thailand's sales cannot be
determined with accuracy simply with reference to the amounts paid by PM Thailand itself … [and]
it was reasonable to verify the claims of the importer regarding the provincial tax actu ally paid on
its sales".738 Thailand explains that it was on the basis of these circumstances that the BoA requested
evidence in the form of tax receipts explicitly identifying that the tax was paid by PMTL on behalf of
the retailers.739
7.326. Regarding the requirem ent imposed by the BoA on PMTL, Thailand explains that , in
"determining the adjustment for provincial taxes, the BoA included all receipts that showed any
indication that the taxes were paid by or on behalf of PMTL or related to Philip Morris' cigarettes."740
Additionally, in response to the Philippines' argument that in some provinces no receipts were issued
by the tax authorities, Thailand argues that Section 16(i) of the Regulations governing the collection
of provincial tax requires that the official coll ecting the tax shall provide a receipt in the required
form.741 Thailand further adds that it is the responsibility of the tax payer to "obtain a receipt and
to furnish the relevant information to enable the receipt to be filled out in the manner required by
the payor. "742 Furthermore, Thailand explains that any failure by an official to comply with the
requirements of these Regulations would be enforceable under Section 157 of the Thai Criminal
Code.743 Thailand also argues that, because it is PMTL and the retailers that have access to records
of proof of payment, and not the Thai central government, it was reasonable for the BoA to request
PMTL to provide evidence that the claimed provincial taxes "had in fact been paid".744 Thailand notes
that certain of the receipts submitted by PMTL did not indicate the importer or brand of cigarettes,
and consequently there was nothing in these receipts to demonstrate "that they actually related to
PM Thailand['s] sales of Philip Morris-brand cigarettes".745
7.2.6.3 Analysis by the Panel
7.2.6.3.1 General considerations
7.327. Article 5.1(a)(iv) of the CVA states that:
1. (a) If the imported goods or identical or similar imported goods are sold in the country
of importation in the condition as imported, the customs value of the imported goods
under the provisions of this Article shall be based on the unit price at which the imported
goods or identical or similar imported goods are so sold in the greatest aggregate
quantity, at or about the time of the importation of the goods being valued, to persons
who are not related to the persons from whom they buy such goods, subject to
deductions for the following:
…

735 Thailand's second written submission, para. 2.84.
736 Thailand's second written submission, para. 2.87.
737 Thailand's first written submission, paras. 5.89-5.91; and response to Panel question Nos. 23(a) and
24.
738 Thailand's first written submission, para. 5.91.
739 Thailand's response to Panel question No. 24, p. 223.
740 Thailand's response to Panel question No. 88, p. 18.
741 Thailand's response to Panel question No. 23(b).
742 Thailand's response to Panel question No. 23(b), p. 22.
743 Thailand's response to Panel question No. 23(c).
744 Thailand's first written submission, para. 5.92.
745 Thailand's first written submission, para. 5.93.

(iv) the customs duties and other national taxes payable in the country of
importation by reason of the importation or sale of the goods.
7.328. Paragraph 8 of the Interpretative Note to Article 5 states that "[l]ocal taxes payable by
reason of the sale of the goods for which a deduction is not made under the provisions of paragraph
1(a)(iv) of Article 5 shall be deducted under the provisions of paragraph 1(a)(i) of Article 5," implying
that a deduction for local taxes such as provincial taxes shall be made either under Article 5.1(a)(i)
or Article 5.1(a)(iv).
7.329. In the course of the original panel proceeding, the original panel was confronted with a
question regarding the type of evidence required from an importer for the deduction of the items
listed in Article 5.1(a). More specifically, the original panel was required to analyse whether the
importer needed to show that the expenses for which deductions were sought were, in fact, tied to
the sales made in the greatest aggregate quantity (GAQ) based on which the unit price of the good
was decided.746 In relation to the issue of provincial taxes, the Philippines claimed that deductions
were required to be made for taxes "payable", whereas Thailand had argued that deductions could
only be made for those taxes which were "actually paid" on the GAQ sales. 747 The original panel
found that the ordinary meaning of the word "payable", understood in its context, did not req uire
that the importer provide evidence for every payment made in relation to GAQ sales, but rather that
taxes payable be deducted if the information showed that usual payments had been made for local
taxes.748 The original panel stated that:
The term "payable" can be defined as "adj. (Of a sum of money or a negotiable
instrument) that is to be paid. An amount may be payable without being due. Debts are
commonly payable long before they fall due". It can also be defined as "adjective. 1 Of
a sum of money, a bill, etc: that is to be paid; falling due (usu. At or on a specified date
or to a specified person). 2 Able to be paid ". Therefore, the ordinary meaning of the
term "payable" refers to both "a sum of money that is to be paid without being due "
and "that is due to be paid ". This suggests that national taxes and provincial taxes
subject to the deduction under Article 5 need not be related to the GAQ sale. The phrase
"by reason of the importation or sale of the goods " also supports the view that these
taxes refer to those usually to be paid upon importation and upon sale in the market.
Furthermore, paragraph 8 of the Interpretative Note to Article 5 states that "local taxes
payable ... for which a deduction is not made under the provisions of paragraph 1(a)(iv)
of Article 5 shall be deducted under the provisions of paragraph 1(a)(i) of Article 5".
Article 5.1(a)(i) refers to "either the commission usually paid or agreed to be paid or
the additional usually made for profit and general expenses ...". Therefore, we consider
that provincial taxes payable must be deducted if the information shows usual payments
made for local taxes even if they are not included in the sales price based on which the
deductive valuation method will be applied under Article 5.749
7.330. In interpreting the term "payable", and distinguishing it from the term "paid", the original
panel indicated that the evidence to be submitted by the importer need not be related to every single
instance of tax paid in relation to a GAQ sale. Thus, the original panel understood the term "payable"
to be distinct from the term "paid" in that corroboration of the former does not burden the importer
with the need to prove each and every instance of tax payment.
7.331. The original panel also highlighted:
[T]he Technical Committee's commentary on Article 5.1 that "in general, the application
of the deductive valuation method under Article 5 of the Customs Valuation Agreement
may differ on a set of circumstances from another and thus the practical application of
Article 5 requires a flexible approach, having regard to the circumstances in each
case".750

746 Panel Report, Thailand – Cigarettes (Philippines), para. 7.333.
747 Panel Report, Thailand – Cigarettes (Philippines), paras. 7.341-7.342.
748 Panel Report, Thailand – Cigarettes (Philippines), paras. 7.358-7.359.
749 Panel Report, Thailand – Cigarettes (Philippines), paras. 7.358-7.359. (footnote omitted) (emphasis
original)
750 Panel Report, Thailand – Cigarettes (Philippines), para. 7.348.

7.332. As elaborated in paragraph 7.305. above, the original panel also found that, when applying
the deductive method as part of the customs valuation process, the customs authority and the
importer must engage with each other in good faith. A deduction claimed by the importer, and
supported by sufficient evidence, must be accepted by the customs authority unless it has sufficient
reason to believe that the figures provided by the importer are incorrect. If the customs authority
comes to such a conclusion, it remains under an obligation to consult wit h the importer and arrive
at the correct figure for a deduction.
7.333. We note that the deductive method, under Article 5, is a process of valuation that takes as
a starting point the transaction value of the first unrelated-party transaction. In this dispute, that
first sale to an unrelated party was the first sale from PMTL to customers in Thailand. Importantly,
the provincial tax at issue under this claim is not a tax that is clearly required, in law, to be paid on
the sale of cigarettes by PMTL to retailers; rather the provincial taxes are, in principle, on the "retail
sale of cigarettes".751 However, the Philippines claims deductions for these taxes because it argues
that, under Thai law, the importer-distributor (i.e. PMTL) is "expected" to pay the provincial tax on
behalf of the retailer, and as a consequence, PMTL incorporates the amount of that tax into its sales
price when it sells the cigarettes to the retailers. 752 Additionally, the Philippines asserts that, as a
practical matter, PMTL has treated this exp ectation as a "requirement", and PMTL does indeed pay
the relevant provincial taxes on behalf of all retailers to whom it sells cigarettes. 753 We understand
that Thailand does not dispute that provincial taxes payable should be deducted if those taxes are
payable by PMTL and included in the price of the cigarettes when sold by PMTL to the retailers.754
7.334. The parties also agree that an importer must substantiate a claimed deduction, and provide
evidence in support of a requested amount.755 In accordance with our findings above concerning the
requirement to make a deduction for transportation costs, we consider that the customs authority
must make its deduction on the basis of the information provided by the importer, and that in a
situation where the customs authority has doubts about the information provided by the importer,
then in accordance with the consultative nature of the process, the customs authority should
communicate its doubts to the importer and invite the importer to submit additional information.
7.335. Finally, regarding the specific facts of this dispute, it is uncontested that no provincial tax is
paid in Bangkok, and that any determination of the amount of provincial tax to be deducted from
the sales price must take this into account.756 It is also uncontested that one possible way of doing
so is to calculate an average provincial tax rate payable per cigarette stick, by dividing the total
amount of provincial tax paid in a particular year by the total number of cigarette sales made in all
provinces in Thail and in that year. 757 The result of this calculation yields an average tax rate per
cigarette stick, which can be deducted from the sales price of a single cigarette stick in applying the
deductive method. This is indeed the same approach that the BoA followe d in making the relevant
deduction at issue here. 758 The Philippines does not contest the BoA's use of that calculation, but
argues that the BoA's approach to determining the figures for the purpose of applying the calculation
was inconsistent with Article 5.1(a)(iv).
7.2.6.3.2 The BoA's deduction for provincial taxes
7.336. As explained, the evidence provided by the parties indicates that, in determining the amount
to be deducted in respect of provincial taxes, the BoA calculated an average amount of provincial
tax paid per cigarette stick, by dividing a figure representing the total amount of provincial tax paid
by PMTL in 2002 by another figure representing the total volume of cigarettes sold by PMTL in
2002.759 It is uncontested that the BoA did not communicate the content or result of this calculation

752 Philippines' response to Panel question No. 86(b), para. 154.
753 Philippines' response to Panel question No. 86(b), para. 156.
754 However, the parties disagree over whether, in fact, PMTL does pay such provincial taxes on behalf
of retailers.
755 Philippines' first written submission, para. 323; Thailand's first written submission, paras. 5.87-5.88.
756 Philippines' second written submission, paras. 299-304; Thailand's first written submission, paras.
5.89-5.90; Thailand's response to Panel question No. 24, p. 23.
757 Philippines' second written submission, paras. 299-304; BoA's calculation of the revised customs
value, (Exhibit THA-13), p. 2.
758 See paragraph 7.336. below.
759 See Minutes of the BoA Meeting of 26 September 2012 (English translation), (Exhibit PHL-39-B), p.
17.

to PMTL prior to issuing its Ruling, at which time it only indicated the outcome of the calculation,
without explaining the figures used in the calculation.
7.337. We note that, unlike Article 1.2(a), which imposes distinct (albeit related) substantive and
procedural obligations under its second and third sentences respectively, Article 5 does not impose
a distinct obligation in respect of consultations as between the importer and the customs authority.
Rather, the obligation to cond uct consultations is integral to the manner in which the customs
authority applies the deductive value method. We proceed by addressing, in turn, the parties'
arguments concerning the BoA's determination of the total volume of PMTL's cigarette sales in 2002,
before turning to address the BoA's determination of the total amount of provincial tax paid in 2002.
As we address these distinct aspects of the BoA's determination we also assess whether the BoA
adequately consulted with PMTL. Finally, we conduct an overall assessment of whether the BoA acted
inconsistently with Article 5.1(a)(iv).
7.2.6.3.2.1 The determination of the total volume of cigarettes sold in 2002
7.338. The BoA's determination of the final amount to be deducted in respect of provincial taxes
was calculated by dividing a figure representing the total amount of provincial taxes paid in 2002,
by another figure representing the "[s]ale amount of cigarettes pursuant to 12 months sale invoices
in 2002".760 In making this calculation, the BoA used a figure of 4,754,577,380 cigarettes in respect
of the total volume of sales in 2002.761
7.339. The Philippines argues that the BoA used the wrong figure since, in its letter of 15 December
2005, PMTL had provided to the BoA the figure of 4,895,968,580 cigarettes sold in Thailand in
2002.762 In highlighting this discrepancy in the BoA's calculations, the Philippines emphasizes that it
"is not asking the Panel to decide which particular figures for stick sales are correct."763 Rather, the
Philippines argues that the BoA acted inconsistentl y with Article 5.1(a)(iv) by failing to properly
engage in consultations with PMTL, with the consequence that PMTL was never given the opportunity
to address this discrepancy.764
7.340. Thailand has not directly responded to this argument by the Philippines. Howev er we note
that the Minutes of the BoA Meeting indicate that the sales amount was calculated "pursuant to
12 months sale invoices in 2002 ".765 Furthermore, we note that in the context of its arguments
concerning other aspects of the BoA's determination of th e deduction for provincial tax, Thailand
argues that a similar figure that also allegedly was calculated "pursuant to 12 months sale invoices
in 2002 " was determined by reference to "the sales volumes shown on PMTL's monthly VAT
returns".766
7.341. We note that the total sales amount on which the BoA ultimately made its deduction was
lower than the total sales amount that PMTL requested. Further, by making its calculation using a
denominator of approximately 4.8 billion instead of approximately 4.9 billion, the fina l average
provincial tax rate calculated by the BoA was (marginally) higher than it would have been had the
BoA used the larger figure, and was therefore closer to the deduction that PMTL initially claimed.767
7.342. We recall from the legal standard described in p aragraphs 7.305. and 7.332. above that
Article 5 contemplates a process of consultation between the customs authority and the importer.
In this respect, the original panel found, regarding the Thai Customs Department's failure to make
a deduction for sales allowances and provincial taxes, that "if upon receiving the specific request for

760 Minutes of the BoA Meeting of 26 September 2012 (English translation), (Exhibit PHL-39-B), p. 17.
761 Minutes of the BoA Meeting of 26 September 2012 (English translation), (Exhibit PHL-39-B), p. 17.
762 Philippines' response to Panel question No. 22(c), paras. 201-206 (referring to Letter from PMTL to
Chief of Analysis and Appeal Section, 15 December 2005 (English translation), (Exhibit PHL-191-B)).
763 Philippines' response to Panel question No. 22(c), para. 207.
764 Philippines' response to Panel question No. 22(c), paras. 207-208.
765 Minutes of the BoA Meeting of 26 September 2012 (English translation), (Exhibit PHL-39-B), p. 17.
766 Thailand's response to Panel question No. 87, p. 17. See paragraph 7.354. below.
767 We note that, had the BoA used the higher figure, but continued to rely on the same figure for
provincial taxes payable, the higher denominator would have resulted in an amount approximately 0.0005
THB/stick less, which rounded up would have come to the same amount of average provincial tax paid that the
BoA ultimately determined. However, had the BoA used the total amount of provincial tax payable as initially
claimed by PMTL (and discussed further below), the difference would have been approximately 0.001, which
would indeed have changed the average amount of provincial tax per stick.

the deduction of sales allowances and provincial taxes, Thai Customs had doubts about the
deductibility of those items, as it explained to the Panel in this proceeding, it could and should have
communicated such views to the importer during the valuation process. "768 Thus, in the event that
a customs authority determines that the figures provided by the importer are incorrect or unreliable,
it must consult with the importer in order to allow the importer an opportunity to explain its figures.
In this process, the customs authority might come to the conclusion that additional evidence from
the importer is required to make a proper assessment of the deductions claimed. In such event, the
customs authority must inform the importer why its figures are considered insufficient or unreliable,
and what new evidence is required.
7.343. We consider that the BoA's failure to inform PMTL of the figures on which it intended to rely
for purposes of the calculation is inconsistent with the consultative process required to be undertaken
under Article 5.1(a)(iv). In our view, the apparent discrepancy between the figures apparently based
on PMTL's monthly VAT returns and the figures provided by PMTL in its letter of 5 December 2005769
should have been resolved by giving PMTL the opportunity to explain its figures. We can see no
evidence that the details of the BoA's determination of the total amount of cigarettes sold by PMTL
in Thailand in 2002 were provided to PMTL prior to the BoA's determ ination of the amount to be
deducted, nor was any summary or allusion to this aspect of the BoA's reasoning communicated to
PMTL. Furthermore, assuming that PMTL's monthly sales figures were correctly accounted for when
determining the total amount of cigarettes sold, we note that there is no rationale or reason indicated
in any of the evidence on the record of the BoA's determination as to why the BoA opted to use the
lower figure instead of the higher figure. We note in this respect that the Minutes of the BoA Meeting
of 26 September 2012 explicitly identify the total sale amount claimed by PMTL as 4,895,968,580
sticks, without explaining why this amount was not used when calculating the final deduction.770 For
these reasons, we agree with the Philippines that the BoA's determination of the total volume of
cigarettes sold in 2002 was not in accordance with the requirements of Article 5.1(a)(iv).
7.2.6.3.2.2 The determination of the total amount of provincial tax paid in 2002
7.344. The BoA conducted the following process for determining the total amount of provincial tax
payable by PMTL in 2002.771 Between 12 March 2007 and 9 December 2010, PMTL provided the BoA
with "relevant information showing that the usual provincial taxes to be deducted are THB
33.16/1,000 sticks".772 Such information consisted of PMTL's "[l]edger account, revenue, costs and
expenses account showing the total amount of provincial taxes paid … in the amount of THB
162,347,609 … Monthly VAT returns Form PorPor. 30 in 2002, together with the attachments,
i.e. Sale Invoice (output VAT report) showing the total amount of monthly sale in each area … [a]
Provincial tax filing form … [and r]eceipts supporting payments of provincial tax in each area ".773
Regarding the latter tax receipts, such documents indicated three different types of language in the
relevant space indicating from whom the money was received: (i) language indicating that PMTL
itself was the taxpayer; (ii) language indicating only the name of the retailer as the taxpayer; and
(iii) and language indicating the name of the retailer, followed by the words "by Philip Morris
(Thailand) Limited", as the taxpayer.774
7.345. The BoA then conducted a "test calculation" allegedly using the figures provided by PMTL.775
In that calculation, the BoA divided the total amount of provincial taxes allegedly paid in 2002 by

768 Panel Report, Thailand – Cigarettes (Philippines), para. 7.329.
769 Compare Minutes of the BoA Meeting of 26 September 2012 (English translation), (Exhibit PHL-39-
B), p. 17, and Letter from PMTL to Chief of Analysis and Appeal Section, 15 December 2005 (English
translation), (Exhibit PHL-191-B).
770 See Minutes of the BoA Meeting of 26 September 2012 (English translation), (Exhibit PHL-39-B), p.
16.
771 For the purposes of considering the process undertaken by the BoA, we do not distinguish between
the Secretary of the BoA and the BoA itself, to the extent that the BoA relied on the actions of the Secretary of
the BoA in determining the revised customs value.
772 See Position Paper for the BoA, attached to Letter from PMTL to the Director of Customs Valuation
Appeal Division, 9 December 2010 (English translation), (Exhibit PHL-75-B), p. 7. We note that PMTL provided
this information on the basis that, "[w]hile PMTL does not agree that the use of the deductive value method is
correct as there is no legal basis for the rejection of its transaction value, PMTL is nevertheless prepared to
accept this approach in this specific case only in order to bring this matter to a prompt conclusion." (Ibid, p. 1)
773 Minutes of the BoA Meeting of 26 September 2012 (English translation), (Exhibit PHL-39-B), p. 13;
PMTL's submission of its expense and cost statement FY 2002) (English translation), (Exhibit PHL-82).
774 Minutes of the BoA Meeting of 26 September 2012 (English translation), (Exhibit PHL-39-B), p. 13.
775 Minutes of the BoA Meeting of 26 September 2012 (English translation), (Exhibit PHL-39-B), p. 13.

PMTL (namely THB 162,347,609) by 1,102,317,440 cigarette sticks, representing the "[s]ale amount
of cigarettes pursuant to 12 months sale invoices in 2002 " in provinces other than Bangkok. This
yielded an average amount of THB 0.147/stick. 776 The BoA noted that such average amount was
higher than the average amount claimed by PMTL itself (namely THB 0.033/stick), and was also in
excess of the maximum amount of prov incial tax permitted under Thai law, namely THB 0.10 per
stick.777 It is uncontested that the BoA did not communicate the content or result of this calculation
to PMTL.
7.346. On 17 August 2012, the BoA sent a letter to PMTL "to clarify and provide information ".778
Specifically, the BoA asked PMTL about: the provinces in which PMTL sold the relevant cigarettes;
the rate of provincial tax per stick paid by PMTL; and "evidence of receipt of payment of the provincial
tax" paid by PMTL.779 On 21 August 2012, PMTL responded to the letter of 17 August 2012, providing
monthly sales data for 2002 showing the sales volume of Marlboro and L&M cigarettes for each of
the 75 Thai provinces, the value of those sales, and the average provincial tax rate in Thailand. 780
In that letter, PMTL indicated that if the BoA wished to receive additional evidence, over and above
that which had already been given to the BoA, PMTL would require "a reasonable time -frame in
which [it could] complete this immense task ".781 PMTL also referred the BoA to it s financial
statements for 2002, "which were audited and verified by the independent auditor, to the Revenue
Department and the Ministry of Commerce", as well as the provincial tax "submitted" to the Excise
Department, which "was accepted by the Excise Department without further query or
investigation".782 PMTL also indicated that its previous determination of the average provincial tax
rate was lower than the actual provincial tax rate, but that PMTL would have "no objection" if the
BoA chose to apply the lower rate.783
7.347. On 27 September 2012, the BoA requested that PMTL provide receipts for all payments of
provincial tax claimed by PMTL for 2002. 784 On 5 October 2012, PMTL sent a letter to the BoA,
indicating that the additional information requested by the BoA was "unnecessary, for several
reasons".785 That letter indicated that PMTL was still, at that time, under the impression that the
BoA was requesting such information for the purpose of assessing "PMTL's declared transaction
values".786 However, the letter als o elaborates on PMTL's view that, in the event the information
were being requested for the purpose of applying the deductive method, the relevant evidence
already provided by PMTL was sufficient for that purpose. 787 The letter invites the BoA to "advise"
PMTL if the BoA "disagrees" with PMTL's position in this respect. 788 Subsequently, on 12 October
2012, PMTL again wrote to the BoA indicating that PMTL had "in good faith made an effort to collect

776 Minutes of the BoA Meeting of 26 September 2012 (English translation), (Exhibit PHL-39-B), p. 13.
777 Minutes of the BoA Meeting of 26 September 2012 (English translation), (Exhibit PHL-39-B), p. 14.
778 Minutes of the BoA Meeting of 26 September 2012 (English translation), (Exhibit PHL-39-B), p. 14.
See also Letter from PMTL to the Secretary of the Sub-Committee for the Appeal, 21 August 2012, (Exhibit
PHL-204-B), p. 1
779 Minutes of the BoA Meeting of 26 September 2012 (English translation), (Exhibit PHL-39-B), p. 14.
See also Letter from PMTL to the Secretary of the Sub-Committee for the Appeal, 21 August 2012, (Exhibit
PHL-204-B), pp. 1-2.
780 Philippines' first written submission, para. 364; Letter from PMTL to Secretary of the Sub-Committee
for the Appeal, 21 August 2012, (Exhibit PHL-204-B); Minutes of the BoA Meeting of 26 September 2012
(English translation), (Exhibit PHL-39-B), p. 14.
781 Letter from PMTL to Secretary of the Sub-Committee for the Appeal, 21 August 2012, (Exhibit PHL-
204-B), p. 1.
782 Letter from PMTL to Secretary of the Sub-Committee for the Appeal, 21 August 2012, (Exhibit PHL-
204-B), p. 2.
783 Letter from PMTL to Secretary of the Sub-Committee for the Appeal, 21 August 2012, (Exhibit PHL-
204-B), pp. 1-2.
784 Philippines' first written submission, para. 369 (referring to Letter from the Sub-Committee for
Appeal Consideration to PMTL No. GorKor 0519(GorOr)/91, 27 September 2012 (English translation), (Exhibit
PHL-83-B)). We note that in its initial request for such information, the BoA imposed a 15-day time-frame.
Subsequently, however, the BoA granted a 6-week extension on that time-frame. (See parties' responses to
Panel question No. 90(b))
785 Letter from PMTL to the Sub-Committee for Appeal Consideration, 5 October 2012 (English
translation), (Exhibit PHL-25-B), p. 1.
786 Letter from PMTL to the Sub-Committee for Appeal Consideration, 5 October 2012 (English
translation), (Exhibit PHL-25-B), p. 1.
787 Letter from PMTL to the Sub-Committee for Appeal Consideration, 5 October 2012 (English
translation), (Exhibit PHL-25-B), p. 1.
788 Letter from PMTL to the Sub-Committee for Appeal Consideration, 5 October 2012 (English
translation), (Exhibit PHL-25-B), p. 3.

the requested documentation" and submitting such evidence to the BoA.789 PMTL's letter states that
"in those instances where a receipt is not provided, the failure to provide such receipt is solely
because the relevant provincial authority did not issue such receipt, which factors are beyond PMTL's
control".790
7.348. On 16 November 2012, the BoA issued its Ruling, in which it indicated that the deduction for
provincial tax had been calculated "by using the total amount of payment of the provincial tax
pursuant to the receipts specifying that money is received from PMTL and the n ame of retailers by
PMTL

of the year 2002 according to the information provided by PMTL".791
7.349. We note that the BoA determined the total amount of provincial tax payable by PMTL in 2002
exclusively on the basis of receipts indicating that PMTL had actually pai d the provincial tax. We
recall that the legal standard articulated by the original panel in respect of Article 5.1(a)(iv)
highlights a distinction between "taxes actually paid" and "taxes payable". Specifically, the original
panel understood the term "payable" to be distinct from the term "paid", in the context of Article
5.1(a)(iv) of the CVA, and that , under Article 5.1(a)(iv), in order for the customs authority to be
obliged to make a deduction for taxes payable, an importer is not obliged to prove each and every
instance of tax actually paid.792 The Philippines, supported by the European Union as a third party,
has argued that the BoA's deduction on the basis of evidence of taxes "actually paid" is inconsistent
with the legal standard under Article 5.793 For its part, Thailand agrees with the distinction made by
the original panel, but argues that , "in the circumstances of this case, it was not an unreasonable
burden to require proof of the amounts claimed by PM Thailand as provincial taxes paid".794
7.350. We do not consider that the distinction between "tax paid" and "tax payable", as elaborated
upon by the original panel, indicates that a customs authority is strictly precluded, under Article 5,
from requiring any evidence of taxes actually paid. Some evidence of such taxes actually paid could
be useful or even necessary, in certain circumstances, to ascertain the precise amount of tax
"payable". Indeed, we note that the Philippines accepts "that determining what taxes are payable
requires an evidentiary basis"795 and "[a]s a general matter … an importer must furnish proof of the
amounts of tax that an importer claims should be deducted ".796 The European Union also indicates
that its view "does not mean that the national authority is not allowed to request evidence to
determine the precise amount of payments usually made".797

789 Letter from PMTL to the Sub-Committee for Appeal Consideration, 12 October 2012 (English
translation), (Exhibit PHL-43-B), p. 1. See also Philippines' first written submission, paras. 371-372; and
response to Panel question No. 22.
790 Letter from PMTL to the Sub-Committee for Appeal Consideration (English translation), (Exhibit PHL-
43-B), p. 2.
791 BoA Ruling, (Exhibit PHL-21-B), p. 4. The translation of the BoA Ruling submitted by the Philippines
to the Panel includes a "Translation Note", in a footnote, which explains that the wording of the Ruling
"includes receipts which either show PMTL as the payee or the name of the retailer and then 'by PMTL' in the
same receipt." (BoA Ruling, (Exhibit PHL-21-B), fns 1 and 2) The Translation Note elaborates that in the view
of the translators, the "intention is not to include those receipts without any mention of PMTL."
792 We note that this is a logical approach to the deductive method, since a good that is yet to be valued
is most likely a good that is sitting at the border, i.e. a good that has yet to have any taxes paid on its sale
within the country of importation. Thus, when using the deductive method to determine the value of a good, in
a typical customs valuation determination, the deduction for tax must be for "tax payable", and not "tax paid".
793 The European Union highlights in its third party submission that the original panel considered that
deductions must be made for taxes "payable, in the sense of payments usually made, and not actual payments
made and evidenced as such for each instance". (European Union's third party submission, para. 26 (referring
to Panel Report, Thailand – Cigarettes (Philippines), paras. 7.356-7.360)) The European Union states that it
"fails to see how this finding can be reconciled with a system where only such taxes are deducted for which
receipts of actual payments are being provided." (European Union's third party submission, para. 26) The
Philippines agrees with the position of the European Union and states that "in order to calculate the amount of
[p]rovincial tax payable, the BoA demanded receipts in a specific format for each and every actual payment of
[p]rovincial tax that [PMTL] made. In effect, the BoA required evidence of [p]rovincial taxes actually paid. This,
as the European Union notes, is not the legal standard under Article 5." (Philippines' response to Panel question
No. 24, para. 223)
794 Thailand's first written submission, para. 5.89. See also Thailand's response to Panel question No.
24.
795 Philippines' response to Panel question No. 24, para. 222.
797 European Union's third party submission, para. 27. The European Union emphasizes that national
authorities may request evidence in order to determine the amount of payments usually made, but that such
"evidentiary requirements must take account of the fact that what needs to be proven are not actual payments

7.351. Furthermore, we understand that , in the specific circumstances of this dispute, since no
provincial tax is paid in Bangkok, a valid method of calculating the amount to be deducted is by
determining an average provincial tax rate payable per cigarette stick, by dividing the total amount
of provincial tax paid in a particular year by the total number of cigarette sales made in all provinces
in Thailand in that year. Indeed, to substantiate its claim f or a deduction and inform the BoA's
calculation, PMTL did, in fact, submit evidence of provincial taxes actually paid prior to being
requested to submit further such evidence. 798 We therefore do not consider that the mere fact of
the BoA basing its ultimate determination of the amount to be deducted on evidence of taxes
"actually paid" was, in and of itself, inconsistent with the requirements of Article 5.
7.352. We therefore turn to address whether the other aspects of the BoA's determination of the
amount of provincial tax paid in 2002 were consistent with the requirements of Article 5.1(a)(iv). In
this respect, we recall that the Philippines submitted evidence indicating PMTL had paid
THB 162,347,609 of total provincial tax in 2002, whereas the BoA used a fig ure of
THB 100,497,347.41 when performing the final calculation.
7.353. Thailand argues that the BoA's determination of the total amount of provincial tax paid,
exclusively on the basis of tax receipts indicating that PMTL had paid the tax, was justified because
of the result of the test calculation, which indicated that the amount claimed by PMTL was higher
than what could be payable or usually paid, and the fact that Thai law requires retailers, and not
importers, to pay the provincial tax. 799 In respect of this latter point, Thailand emphasizes that,
although an importer such as PMTL may pay on behalf of the retailer, it may also be the case that a
retailer pays on its own behalf.800
7.354. First, and importantly, we note that the BoA did not communicate either the conten t or the
outcome of its "test calculation" to PMTL, on which basis the BoA proceeded to request additional
evidence from PMTL. It is uncontested that this test calculation constituted a fundamental aspect of
the BoA's process of determining the total amoun t of provincial tax payable by PMTL, since it was
on this basis that the BoA doubted the evidence provided by PMTL, and requested the additional
evidence on which the BoA ultimately relied.801 The Philippines argues that in making the calculation
for a per stick rate of provincial tax, the BoA did not use the figure provided by PMTL for the total
volume of sticks sold outside Bangkok.802 Specifically, PMTL had reported to the BoA that it had sold
approximately 3.57 billion sticks outside Bangkok in 2002 wherea s the BoA, in its test calculation,
used a figure of approximately 1.1 billion for the total volume of cigarette sales outside Bangkok in
2002.803 Thailand responds that the BoA's calculation was based on monthly sales data that was
specifically provided by PMTL.804 The Philippines counters that Thailand's allegation is unsupported
by the evidence on the record of the BoA's determination, and that Thailand "has offered no evidence
whatsoever in support of its … assertion".805
7.355. Regardless of whether Thailand has su bstantiated its view, or even whether Thailand's
argument or explanation constitutes an ex post rationalization, we consider that the BoA's failure to
inform PMTL of this calculation (including the figures on which it relied) is inconsistent with the
consultative process that Article 5.1(a)(iv) requires. It is uncontested that, first in its letter of
4 June 2004, and second in its letter of 21 August 2012, PMTL indicated a different figure for total

but usual payments, i.e. averages". For example, the European Union suggests that "[s]ample evidence for tax
levels and sales statistics per province" could suffice.
798 See paragraph 7.344. above.
799 Thailand's first written submission, para. 5.91; Thailand's response to Panel question No. 24.
800 Thailand's response to Panel question No. 24.
801 Thailand argues that the test calculation created a "perfectly reasonable" circumstance for the BoA to
require additional substantiation of the claimed deduction. (Thailand's second written submission, paras. 2.84-
2.85)
802 Philippines' response to Panel question No. 22.
803 Philippines' response to Panel question No. 22 (referring to Minutes of the BoA Meeting of 26
September 2012 (English translation), (Exhibit PHL-39-B)). According to the Philippines, if the BoA had used
the correct figures, as supplied by PMTL, the resulting per-stick tax rate would have been THB 0.045, which is
well below the maximum applicable rate of 0.10 baht per stick. (Philippines' response to Panel question No. 22)
The Philippines explains, however, that it "is not asking the Panel to decide which particular figures for stick
sales are correct", but rather that "the BoA's failure to engage in a process of consultation in this respect is
contrary to Article 5 of the CVA." (Philippines' response to Panel question No. 22, paras. 207-208).
804 Thailand's response to Panel question 87(b) (referring to Minutes of the BoA Meeting of 26
September 2012 (English translation), (Exhibit PHL-39-B), p. 13).
805 Philippines' comments on Thailand's response to Panel question No. 87.

sales volume outside Bangkok than that on which the BoA relied in conducting its test calculation.
In our view, any possible discrepancy between the figures allegedly based on PMTL's monthly VAT
returns and the figures provided by PMTL in its letter s of 4 June 2004 and of 21 August 2012 806
should have been resolved by giving PMTL the opportunity to explain its figures. 807 We can see no
evidence that the details of the BoA's test calculation were provided to PMTL prior to the BoA's
determination of the amount to be deducted.
7.356. Furthermore, even assuming that PMTL's monthly sales figures were correctly accounted for
when determining the total amount of cigarettes sold in provinces other than Bangkok, we note that
there is no rationale or reason indicated in any of the evidence on the record of the BoA's
determination as t o why the BoA opted to use the lower figure instead of the higher figure. In
response to a question from the Panel, Thailand asserted that the BoA's reliance on the lower figure
was reasonable, in light of PMTL's concession in its letter to the BoA of 21 A ugust 2012 that "the
adjustment of THB 0.033 was acceptable ".808 We do not find this argument or rationalization
reflected in any of the contemporaneous evidence regarding the BoA's application of the deductive
method, and this argument may consequently cons titute an ex post rationalization. In any event,
we do not consider that Thailand has demonstrated how the concession by PMTL to use the lower
average rate is in any way related to the BoA's decision to use the lower figures in respect of total
volume of sales when conducting its test calculation.
7.357. Turning to Thailand's argument that the BoA was justified in relying exclusively on the tax
receipts identifying that PMTL paid the tax, on the basis that certain retailers may pay on their own
behalf, we recall Thailand's assertion that, under Thai law, retailers (and not importers) are generally
liable for provincial tax, although in certain circumstances "retailers may authorize the importers to
pay the provincial taxes on their behalf ".809 Consequently, according to Thailand, "the amount of
provincial taxes paid on PM Thailand's sales cannot be determined with accuracy simply with
reference to the amounts paid by PM Thailand itself … [and] it was reasonable to verify the claims
of the importer regarding the provincial tax actually paid on its sales".810 The Philippines, for its part,
acknowledges that the relevant legal instruments imposing this requirement, namely the 1999
Excise Department guidelines, "are not, as a formal matter, legally binding."811 However, the
Philippines insists that the Thai Excise Department "expects compliance with its desired method of
duty collection" as set forth in those guidelines, and that PMTL "has always complied fully with the
Excise Department guidelines and treated them as if they impose a requirement".812
7.358. We note that Thailand has also argued in the course of this proceeding that the BoA's doubts
regarding whether PMTL actually pays on behalf of all retailers were borne out by the fact that certain
of the receipts submitted by PMTL to the BoA indicated that the tax was paid by the retailer, without
any mention of PMTL.813 The Philippines has argued that although certain provincial authorities did
issue receipts that indicated the taxpayer to be the retailer, all such receipts were accompanied by
a cover letter from the relevant provincial tax authority indicating that such tax was paid by PMTL

806 Compare Minutes of the BoA Meeting of 26 September 2012 (English translation), (Exhibit PHL-39-
B), p. 13, Letter from PMTL to the Secretary of the Sub-Committee for Appeal Consideration, (Exhibit PHL-204-
B), attachment no. 2, and Letter of 4 June 2004 to the Sub-committee for Appeal Consideration (Exhibit PHL-
205-B).
807 We further recall that the Minutes of the BoA Meeting of 26 September 2012 explicitly indicate that
PMTL claimed that the total sales amount in 2002 was 4,895,968,580 sticks. (See Minutes of the BoA Meeting
of 26 September 2012 (English translation), (Exhibit PHL-39-B), p. 16)
808 Thailand's response to Panel question No. 87, p. 26.
809 Thailand's first written submission, para. 5.91.
810 Thailand's first written submission, para. 5.91. Thailand submits that, in practice, PMTL may have
entered into agreements with retailers to do so, but was not required under Thai law to do so. (Thailand's
second written submission, para. 2.89)
811 Philippines' response to Panel question No. 86(b), para. 154. We note that the Philippines' position
on this issue changed during the proceeding. (See Philippines' first written submission, para. 361; second
written submission, paras. 316 and 328-329)
812 Philippines' response to Panel question No. 86(b), paras. 154 and 156.
813 See Thailand's second written submission, para. 2.90. Thailand contends that if the importer was
indeed required to pay the provincial tax, then the relevant tax "receipts would show PMTL (or another
importer) as the payor in every case", however this is not the case. Additionally, Thailand states that "there
are receipts that show retailers as the payor", and points to Exhibit THA-32, which Thailand asserts is a sample
of the receipts actually provided by PMTL. (Thailand's second written submission, para. 2.90 (referring to
Provincial tax receipts provided by PMTL in 2002 (English translation), (Exhibit THA-32)))

on behalf of a retailer 814, to which Thailand responds that, if such receipts were accompanied by
cover letters then they would have been taken into account by the BoA.815
7.359. Regardless of the factual question of whether PMTL actually pays tax on behalf of all retailers,
we consider that the BoA did not adequately convey this aspect of its reasoning to PMTL at any point
during the customs valuation process, thereby precluding PMTL from responding to the BoA's
rationale for relying exclusively on evidence of taxes "actually paid". In this respect, we note that ,
in its letter of 9 December 2010 to the BoA, PMTL explained that "[b]y way of background, the
provincial tax is payable to the provincial administration by PMTL and the tax is passed on in PMTL's
selling prices to its customers. "816 It is uncontested that at no time did the BoA contradict this
assertion by PMTL.
7.360. Furthermore, similarly to our findings above in respect of the test calculation conducted by
the BoA, we consider that the BoA's failure to adequately consult with PMTL on this issue had
important substantive consequences for its determination of the total amount of provi ncial tax
payable by PMTL. We note that, in the course of this proceeding, Thailand and the Philippines have
exchanged extensive argumentation over the issue of whether, in fact, PMTL pays provincial tax on
behalf of all retailers. 817 Indeed, Thailand has ar gued that it is specifically because PMTL is not
obliged to do so that the BoA determined the amount to be deducted by relying exclusively on those
tax receipts indicating that PMTL had paid. 818 For its part, the Philippines accepts that PMTL is not
legally obliged to pay provincial taxes on behalf of retailers, but has argued strenuously that PMTL
does, in fact, pay provincial tax on behalf of all retailers.819
7.361. None of this was discussed by the BoA and PMTL in the context of the customs valuation
determination itself. In effect, the parties would have us make a finding of fact regarding an issue
that the BoA did not adequately address at the time of the determination. We are wary of making a
factual finding on an issue that should have been raised during the customs valuation process itself.
However, we do wish to make the following observations regarding the arguments of the parties.
7.362. First, we note that neither Thailand (in the course of this proceeding), nor the BoA (in any
of the documents on the record of the determination), has explained how the receipts bearing the
names of the retailers paying the provincial tax would have been in possession of PMTL in the first
place, if the retailers had been paying the provincial tax on their own behalf rather than PMTL paying
the provincial tax indicated in the receipt. Second, Thailand's argument seems to carry with it the
implication that PMTL overstated the amount of provincial taxes paid by PMTL when completing its
2002 audited financial statements. 820 Third, to effectively rebut the Philippines' arguments and
evidence, Thailand would need to only submit convincing evidence of a single instance where it was
incontrovertible that a retailer had paid tax on its behalf. Thailand has failed to do so. By contrast,
we note that the Philippines has provided evidence indicating that PMTL itself pays all provincial tax

814 Philippines' response to Panel question No. 22, para. 215. The Philippines provides ten examples of
such cover letters from 2003, and notes that it is unable to provide such evidence from 2002 since all such
evidence was provided to the BoA following the request for such evidence on 27 August 2012, and PMTL did
not have sufficient time to make photocopies of this evidence. (Philippines' response to Panel question No. 22,
paras. 215-216 (referring to Provincial tax receipts from 2003 with cover letter, 23 April 2003 (English
translation), (Exhibit PHL-196-B))
815 Thailand's response to Panel question No. 88.
816 Letter from PMTL to the Director of Customs Valuation Appeal Division, 9 December 2010 (English
translation), (Exhibit PHL-75-B), p. 7.
817 Philippines' first written submission, para. 361; Philippines' second written submission, paras. 316
and 328-329; Philippines' response to Panel question Nos. 22 and 86(b); Philippines' response to questioning
at the meeting of the Panel; Thailand's first written submission, para. 5.91; Thailand's second written
submission, paras. 2.89-2.90.
818 Thailand's first written submission, para. 5.91; second written submission, paras. 2.89-2.90.
819 Philippines' response to Panel question No. 86(b), paras. 154-156. At the meeting of the Panel, the
Philippines stated that it could "confirm … that Philip Morris Thailand pays the provincial tax in 100% of cases
for all of its sales". (Philippines' response to questioning at the meeting of the Panel)
820 We note that Thailand itself acknowledges this implication, stating that "when the [BoA] performed a
reasonableness check on the amount claimed by PM Thailand as its provincial taxes paid from its 2002 financial
statements, the amount seemed to be too high". (Thailand's second written submission, para. 2.83)

on behalf of retailers, as well as evidence indicating that PMTL's main competitor in Thailand, TTM,
also pays provincial tax on behalf of all retailers.821
7.363. In a ny event, n otwithstanding the BoA's failure to engage with PMTL regarding PMTL's
assertion of 9 December 2010 that all provincial taxes were paid by PMTL itself, we further note that
on 5 October 2012, PMTL sent a letter to the BoA explaining in detail why, in its view, the evidence
submitted up to that date was sufficient for the BoA to make its determination of the amount, and
inviting the BoA to "advise" PMTL if it disagreed with PMTL's position. 822 It is uncontested that the
BoA did not indicate to PMTL any reason for doubting the total amount of provincial tax paid by
PMTL, as claimed by PMTL and supported by the other evidence provided by PMTL.
7.364. Furthermore, on 12 October 2012, when PMTL did submit all of the tax receipts in its
possession, PMTL explicitly indicated to the BoA that "in those instances where a receipt is not
provided, the failure to provide such receipt is solely because the relevant provincial authority did
not issue such receipt, which factors are beyond PMTL's control ".823 Thus, PMTL explicitly
acknowledged to the BoA, and explained, that it was not providing all receipts for all tax payments.
The BoA proceeded to rely on the limited number of receipts provided by PMTL, without
acknowledging or responding to PMTL's explanation.
7.365. We note that Thailand has argued in the context of this proceeding that it was up to PMTL
to provide all relevant receipts to the BoA, and that it was within PMTL's power to utilize the Thai
legal system to get the provincial tax authorities to provide all relevant tax receipts. 824 The
Philippines argues, however, that the requirement imposed by the BoA on PMTL, namely to provide
all tax receipts for all tax payments claimed by PMTL in a format that identified PMTL as the taxpayer,
was "an impossible evidentiary burden ", because certain provincial authorities did not provide
receipts to PMTL in the format required by the BoA, and in some transactions the provincial authority
did not provide any receipts at all.825
7.366. In our view, Thailand has indeed indicated a means by which PMTL could at least have
attempted to obtain the relevant tax receipts in a fo rmat that would have satisfied the BoA.
Furthermore, we agree with Thailand that the Philippines has not indicated why PMTL could not have
utilized such legal recourses. However, we note that the BoA was essentially requesting tax receipts
for a 12 -month period, in respect of each individual retailer outside Bangkok to whom PMTL sells
cigarettes in Thailand, and for tax payments that had occurred ten years previously . As Thailand
itself concedes, the task was "onerous".826 Furthermore, the BoA did not indicat e to PMTL, at any

821 See Philippines' response to Panel question No. 86(b), para. 155; Letter from PMTL confirming
adherence to Excise Department Guidelines, 25 September 2017, (Exhibit PHL-224); TTM, Annual Report,
2004, pp. 100-102 (English and Thai), (Exhibit PHL-222), p. 101; TTM, Annual Report, 2013, pp. 102-103,
(English and Thai), (Exhibit PHL-223), p. 103). The Philippines argues that "[g]iven that the dominant player in
the market, TTM, pays Provincial tax on behalf of retailers, PM Thailand is not in a position to impose additional
burdens on retailers by disregarding the Excise Department guidelines." (Philippines' response to Panel
question No. 86(b), para. 156)
822 Letter from PMTL to the Sub-Committee for Appeal Consideration, 5 October 2012 (English
translation), (Exhibit PHL-25-B), p. 2.
823 Letter from PMTL to the Sub-Committee for Appeal Consideration, 12 October 2012, (Exhibit PHL-43-
B), p. 2.
824 Thailand argues that Section 16(i) of the Regulations governing the collection of provincial tax
requires that the official collecting the tax shall provide a receipt in the required form. (Thailand's response to
Panel question No. 23(b)) Thailand further adds that it is the responsibility of the tax payer to "obtain a receipt
and to furnish the relevant information to enable the receipt to be filled out in the manner required by the
payor." (Thailand's response to Panel question No. 23(b), p. 22) Thailand explains that any failure by an official
to comply with the requirements of these Regulations would be enforceable under Section 157 of the Thai
Criminal Code. (Thailand's response to Panel question No. 23(c)) Thailand points out that PMTL did not ask for
an extension of the six-week deadline for submitting the receipts, nor has the Philippines in the course of this
proceeding presented any evidence that any provincial tax authorities refused to provide such receipts or that
PMTL was otherwise precluded from requesting the receipts in the required format. (Thailand's response to
Panel question No. 23(c); comments on the Philippines' response to Panel question No. 90(b))
825 Philippines' first written submission, paras. 411 and 414; second written submission, para. 312. In
the Philippines' view, the BoA thus required "that the importer provide Thailand with receipts that Thailand
itself had failed to issue to the importer", which is "an evidentiary burden that the importer could not meet".
(Philippines' first written submission, paras. 412-413) The Philippines asserts that Thailand thus required PMTL
to provide the BoA "with evidence that it did not possess and could never have possessed". (Philippines' second
written submission, para. 320)
826 Thailand's second written submission, para. 2.91.

time, that its determination of the amount of provincial tax to be deducted would be based on only
those receipts that indicated that PMTL had paid the tax, nor did the BoA indicate to PMTL that PMTL
should pursue legal recourse to get all relevant receipts in an acceptable format. As a consequence,
when PMTL submitted the receipts in its possession, it did so without knowing that no deduction
would be made in respect of payments for which no receipt was provided, and therefore without
knowing that it could (and should) go through the onerous and lengthy process of invoking Thai law
to get all relevant receipts.
7.367. On the basis of the foregoing, we consider that the BoA failed to determine the amount of
provincial tax paid by PMTL in accordan ce with the requirement in Article 5.1(a)(iv) to determine
the customs value through a process of consultations with the importer. We highlight in this regard
that the BoA declined to inform PMTL of both the test calculation conducted by the BoA and its
doubts concerning whether PMTL pays provincial tax on behalf of all retailers. In addition to failing
to inform PMTL of the reasons for doubting the claimed deduction, the BoA also neglected to inform
PMTL that the determination of the amount to be deducted would be based on only those tax receipts
provided by PMTL that identified PMTL as the taxpayer.
7.368. Furthermore, we consider that these procedural failings by the BoA had important
substantive consequences for its determination of the total amount of provincial tax paid by PMTL in
2002. Having considered Thailand's arguments as to why the BoA relied exclusively on evidence in
the form of tax receipts indicating that PMTL paid the tax, we consider that the BoA's failure to
adequately consult with PMTL regardin g the test calculation and its doubts over whether PMTL
actually paid provincial tax on behalf of all retailers, effectively precluded PMTL from addressing the
BoA's concerns or providing the BoA with additional and relevant information that could and should
have informed its determination.827 As a consequence, we do not consider that the test calculation,
or the BoA's doubts about whether PMTL actually paid provincial tax on behalf of all retailers,
constituted valid grounds to reject the evidence submitted by PMTL and to rely exclusively on
evidence in the form of tax receipts indicating that PMTL had "actually paid" the provincial tax, to
determine the total amount of provincial tax payable by PMTL in 2002.
7.2.6.3.2.3 Overall assessment
7.369. As explained, the BoA determined the amount of provincial tax to be deducted by dividing a
figure representing the total amount of provincial taxes paid in 2002, by another figure representing
the "[s]ale amount of cigarettes pursuant to 12 months sale invoices in 2002".828 We have addressed
above the BoA's determination of the total volume of cigarette sales in Thailand in 2002, and similarly
found that the BoA failed to make this determination in accordance with the requirements of Article
5.1(a)(iv). We have also addressed above the BoA's determination of the total amount of provincial
taxes paid in 2002, and found that the BoA failed to make this determination in accordance with the
requirements of Article 5.1(a)(iv). Taken together, we consider that the BoA's determination of the
amount of provincial tax to be deducted, and in particular its determination of the total amount of
provincial tax paid in 2002, was inconsistent with Article 5.1(a)(iv).
7.2.6.4 Conclusion
7.370. For the reasons set forth above , the Panel concludes that, in implementing the DSB's
recommendations and rulings in the original proceeding, the BoA acted inconsistently with Article
5.1(a)(iv) of the CVA by failing to deduct an appropriate amount in respect of provincial taxes
payable.

827 Specifically, we note the Philippines' argument that, had PMTL been given the opportunity to properly
consult with the BoA, PMTL could have provided additional evidence from PMTL'S "SAP accounting system" or
"statements from customers that PM Thailand had paid Provincial tax on their behalf". (Philippines' opening
statement at the meeting of the Panel, para. 38; response to Panel question No. 22, para. 219; comments on
Thailand's response to Panel question No. 90(b), para. 122)
828 Minutes of the BoA Meeting of 26 September 2012 (English translation), (Exhibit PHL-39-B), p. 17.

7.2.7 Claim under Article 11.3 of the CVA
7.2.7.1 Introduction
7.371. Article 11.1 of the CVA requires that Members provide for a right of appeal for importers
with respect to customs value determinations. Article 11.3 requires that notice of the decision on
appeal must be given to the appellant, and the reasons for the decision must be provided in writing.
The BoA Ruling, which constituted the BoA's notice of its decision with respect to PMTL's appeal
concerning the 210 entries imported from January to December 2002, was issued on
16 November 2012.829
7.372. The Philippines claims that the BoA acted inconsistently with Article 11.3 of the CVA by failing
to provide adequate reasons for its decision in the BoA Ruling.830 The Philippines does not deny that
the BoA Ruling contains reasons. However, it con siders that such reasons "must be sufficient to
make clear and give details of how the customs value … was determined, including the basis for
rejecting the transaction value ".831 In its view, the reasons contained in the BoA Ruling are
insufficient.
7.373. Thailand does not contest that Article 11.3 is applicable to the BoA Ruling. 832 However,
Thailand argues that the BoA satisfied the obligation in Article 11.3 because the BoA Ruling
adequately conveyed to PMTL the reasons for the BoA's decision. 833 In its view, the legal standard
proposed by the Philippines is stricter than that required under Article 11.3.834
7.2.7.2 Main arguments of the parties
7.374. The Philippines considers that the BoA failed to provide sufficient reasons with respect to the
rejection of the transaction values, because the BoA failed to explain: the basis for selecting the
benchmark companies; the number of companies in the benchmark group, and the names of those
companies; the commercial activities of the benchmark companies, and how any differences in
commercial activities as compared to PMTL were accounted for; the P&GE rates of the benchmark
groups and how they were determined; the method of calculating the industry average P&GE rate
as well as the benchmark range; and the standard for determining whether PMTL's P&GE rates were
inconsistent with the benchmark group. 835 Further, the Philippines asserts that the inadequacy of
the BoA's statement of reasons is demonstrated by its incorrect assertion that "it conducted a
comparison involving the P&GE rates of wholesalers of imported cigarettes".836 The Philippines also
considers that the BoA did not provide sufficient reasons with respect to the deductive valuation, for
the same reasons indicated above in respect of the deduction for P&GE rates, as well as the B oA's
failure to explain certain aspects related to the deduction for provincial taxes, specifically: the criteria
used to include or exclude an amount on a tax receipt; which receipts were included or excluded;
whether the BoA made a deduction in instances where the provincial authority did not provide a
receipt; and how the BoA determined the total amount to deduct.837 The Philippines also asserts that
the inadequacy of the BoA's statement of reasons is demonstrated by its incorrect assertion that "it
conducted a comparison involving the P&GE rates of wholesalers of imported cigarettes".838
7.375. Thailand notes that nothing in Article 11.3 "remotely suggests that the 'reasons for such
decision' must be provided in the exhaustive level of detail alleged by the Philippines".839 Thailand

829 See BoA Ruling, (Exhibit PHL-21-B).
830 Philippines' first written submission, paras. 428-457; second written submission, paras. 369-382;
response to Panel question Nos. 29(a), 91, 93 and 95; opening statement at the meeting of the Panel, paras.
47-55.
831 Philippines' first written submission, para. 449 (quoting Panel Report, Thailand – Cigarettes
(Philippines), para. 7.240).
832 Thailand's first written submission, para. 5.116.
833 Thailand's first written submission, paras. 5.104-5.112; second written submission,
paras. 2.123-2.130; response to Panel question Nos. 29(b), 31 and 94; comments on the Philippines' response
to Panel question Nos. 90(b) and 92.
834 Thailand's first written submission, para. 5.109-5.110.
835 Philippines' first written submission, paras. 452-453.
836 Philippines' first written submission, para. 379. (emphasis original)
837 Philippines' first written submission, paras. 454-455.
838 Philippines' first written submission, para. 379. (emphasis original) See also Philippines' second
written submission, para. 115.
839 Thailand's first written submission, para. 5.109.

notes that certain other procedural obligations in the covered agreements "provide detailed
specifications of the type of information that must be provided in the 'public notice and explanation'
of certain decisions in anti-dumping and countervailing duty investigations", and that the "failure of
the drafters to spell out such detailed requirements in Article 11.3 … must be given meaning ".840
Thailand also notes that Members are considering a proposal to amend Article 6.9 of the Anti -
Dumping Agreement to impose a number of requirements on investigating authorities in respect of
specific information that must be provided to exporters or producers, and that "if Members have not
yet agreed to add these requirements to Articles 6.9 and/or 1 2.2 of the Anti-Dumping Agreement,
which already have more detailed requirements than Article 11.3, it cannot be appropriate for the
Panel to read these or similar requirements into Article 11.3. "841 Thailand also recalls from its
arguments in respect of Article 1.2(a) of the CVA, that the TFA addresses procedures for appeal or
review of customs decisions, and "had the drafters wished to include the level of detail sought by
the Philippines … they could have done so", but did not.842
7.376. Thailand considers that th e information provided in the BoA Ruling "was sufficient under
Article 11.3, in that PMTL was able to exercise, and in fact, exercised, its right to appeal in Thai
courts."843 Thailand notes that the BoA Ruling "explains that its decision to reject the trans action
value is based on its conclusion that the relationship between purchaser and seller affected the
purchase price, a conclusion reached after having examined the circumstances of sale", and further
explains that it compared PMTL's P&GE rates to a range established for a benchmark industry group
in the year 2002, and determined that PMTL's P&GE rates were not consistent with the benchmark
rates.844 Thailand highlights that the BoA Ruling indicates that, when applying the deductive method,
the BoA used a rate of 12.44% for deducting P&GE, based on the industry average.845
7.2.7.3 Analysis by the Panel
7.2.7.3.1 General considerations
7.377. Article 11.3 of the CVA requires that:
Notice of the decision on appeal shall be given to the appellant and the reasons for such
decision shall be provided in writing. The appellant shall also be informed of any rights
of further appeal.
7.378. Article 11.3 of the CVA was not subject to any claims before the original panel, and this
provision has not been addressed in WTO dispute settlement prior to this proceeding.846 As
elaborated below, however, we consider that the legal standards under Article 1.2(a), third sentence,
and Article 16 of the CVA provide useful guidance for interpreting Article 11.3.
7.379. In terms of textual meaning, t he dictionary definition of "reasons" refers to "[a] statement
used as an argument to justify or condemn some act, or to prove or disprove some assertion or

840 Thailand's first written submission, para. 5.110 (referring to Article 12 of the Anti-Dumping
Agreement and Article 22 of the SCM Agreement). See also Thailand's second written submission, para. 2.126
(referring to Article 6.9 of the Anti-Dumping Agreement).
841 Thailand's second written submission, para. 2.128.
842 Thailand's second written submission, para. 2.129.
843 Thailand's response to Panel question No. 94, p. 21. See also Thailand's first written submission,
para. 5.108.
844 Thailand's first written submission, para. 5.106.
845 Thailand's first written submission, para. 5.107.
846 We note that the original panel referred to Article 11.1 (and briefly Article 11.2) in the context of an
argument made by Thailand that Article X:3(b) of the GATT 1994 did not apply to guarantee decisions in the
customs valuation context, but the panel did not consider the legal standard in Article 11.3. (Panel Report,
Thailand – Cigarettes (Philippines), paras. 7.1046-7.1052) In this respect, we note that the original panel
considered that, although Article X:3(b) and Article 11.1 both "address an obligation to provide for the right of
appeal concerning customs issues … the scope of the subject matter under Article X:3(b) ('administrative
action relating to customs matters') is broader than that under Article 11.1 ('a determination of customs
value')". (Panel Report, Thailand – Cigarettes (Philippines), para. 7.1047) The original panel also considered
that "the right to appeal a determination of a customs value to a judicial authority provided under Article 11.1
would not address the obligations envisaged under Article X:3(b), namely to maintain an independent tribunal
or procedure for the prompt review and correction of administrative actions that adversely affect importers
concerning customs matters." (Panel Report, Thailand – Cigarettes (Philippines), para. 7.1049)

belief".847 We recall that "dictionary definitions have their limitations in revealing the ordinary
meaning of a term"848, and may "leave many interpretive questions open ".849 Moreover, they may
vary among the different official languages of the WTO. Indeed, the definition of the word "reasons"
referred to above does not take us very far in ascertaining the scope of the duty to provide reasons,
because it explains what a "reason" is but does not speak to the issue of how detailed those reasons
must be. Accordingly, we consider that it is necessary to look to the c ontext of the obligation in
Article 11.3, notably other provisions of the CVA and the covered agreements containing similar
obligations, and consider the general purpose of those provision s as reflected in prior panel and
Appellate Body reports.
7.380. In this re spect, we consider that the requirement to provide "reasons" in Article 11.3 is
directly comparable to the requirement in Article 1.2(a) of the CVA to communicate to the importer
the "grounds for considering that the relationship influenced the price ", as described above. 850
Therefore, the relevant legal standard for determining whether the "grounds" were communicated
to the importer under Article 1.2(a) is also relevant for determining whether the "reasons" for the
decision on appeal were provided to the importer in writing. We recall that the relevant legal standard
under Article 1.2(a), third sentence, is that the "grounds" for considering that the relationship
influenced the price provided to the importer must be sufficient to enable the importer to
meaningfully respond to those grounds. 851 In other words, the standard is inherently functional in
nature.
7.381. Article 11.3 also bears similarities to the requirement in Article 16 of the CVA that "[u]pon
written request, the importer shall have the right to an explanation in writing from the customs
administration … as to how the customs value … was determined. "852 Indeed, the Philippines
contends that "the substantive content of the explanation due under Articles 11.3 and 16 is the
same"853, and, for its part, Thailand is also of the view that the standard of reasons required under
Article 11.3 is not "lesser" than the standard that applies under Article 16. 854 In our view, there is
little to distinguish between the plain meaning of a requirement to provide an "explanation"855 and
a requirement to provide "reasons".856
7.382. When defining the legal standard under Article 16 of the CVA, the original panel explained
that, similarly to the legal standard under Article 1.2(a), third sentence, an explanation under Article
16 "must be sufficient to make clear and give details of how the customs value of the importer's
goods was determined, including the basis for rejecting the transaction value and other valuation
methods that sequentially precede the method actually used by the customs aut horities."857 In
setting forth this legal standard, the original panel highlighted that Article 16 serves an important
"transparency and due process objective", by enabling importers and WTO Members to "effectively

847 Shorter Oxford English Dictionary (2007), p. 2481. Amongst other definitions, the Shorter Oxford
English Dictionary also refers to a "fact or circumstance forming a motive sufficient to lead a person to adopt or
reject some course of action, belief, etc.; a fact etc. adduced or serving as this (Foll. by why, that; of, for; to
do.) … A cause of a fact, situation, event, or thing, esp. one adduced as an explanation; cause, ground".
848 Appellate Body Report, US – Softwood Lumber IV, para. 59.
849 Appellate Body Report, Canada – Aircraft, para. 153. See also Appellate Body Reports, US –
850 (emphasis added) Indeed, the original panel found that the reference to "grounds" in Article 1.2(a)
meant the "reasons for considering". Panel Report, Thailand – Cigarettes (Philippines), para. 7.218.
Furthermore, the Spanish version of the CVA uses the word "reasons" in both Article 1.2(a) and Article 11.3,
referring to "razones" that must be communicated to the importer.
851 See paragraph 7.254. above.
852 Emphasis added.
853 Philippines' response to Panel question No. 29, para. 245.
854 Thailand's response to Panel question No. 29(b).
855 The original panel stated that "[t]he term 'explanation' can be defined as 'noun. 1 The action or act
of explaining. 2 A statement, circumstance, etc., which makes clear or accounts for something.'" (Panel Report,
Thailand – Cigarettes (Philippines), para. 7.232 (quoting The New Shorter Oxford English Dictionary, (Fifth
Edition) Oxford University Press, Vol. I, p. 895 (2002)))
856 As explained above, the dictionary definition of "reasons" refers to "[a] statement used as an
argument to justify or condemn some act, or to prove or disprove some assertion or belief". (Shorter Oxford
English Dictionary (2007), p. 2481)
857 Panel Report, Thailand – Cigarettes (Philippines), para. 7.240. The original panel explained that a
customs authority's explanation under Article 16 must include, "at the minimum, the basis for rejecting the
transaction value in the light of the information provided by the importer, the identification of the method used
and the illustration of how the method was applied in reaching the final customs value." (Panel Report,
Thailand – Cigarettes (Philippines), para. 7.238)

exercise their respective rights under Articles 11 and 19 of the Customs Valuation Agreement when
requesting domestic reviewing tribunals, courts and WTO panels to determine whether the manner
or means of valuation by a customs authority was consistent with the importing Member's WTO
obligations".858 The original panel elaborated that the explanation under Article 16 "provides a
window through which domestic tribunals and WTO panels review and understand a customs
authority's valuation determination."859 Thus, here again, the applicable legal standard is inherently
functional in nature.
7.383. We note that similar interpretations have also been developed in the context of other
provisions in the covered agreements that, consistent with principles of due process, require
domestic tribunals to provide reasons for their decisions.860 As one panel has observed, the purpose
of Article 12.2.2 of the Anti -Dumping Agreement, concerning "explanations" for anti -dumping
determinations, is to "ensure that the investigating authority's reasons for concluding as it did can
be discerned and understood by the public ".861 Another panel has indicated that Article 12.2.2
"seek[s] to guarantee that interested parties are able to pursue judicial review of a final
determination".862 Article 12.7 of the DSU , a provision which "reflects and conforms with the
principles of fundamental fairness and due process that underlie and inform the provisions of the
DSU", provides that a panel report must contain the "basic rationale" for a panel's findings.863 One
of the main reasons behind the requirement to set out a "basic rationale" in the panel report is that
it assists a Member to understand "whether and what to appeal".864 Thus, here again, the applicable
legal standard has been understood as being inherently functional in nature.
7.384. We further observe that Article 4.1 of the TFA requires that "[e]ach Member shall provide
that any person to whom customs issues an administrative decision has the right, within its territory,
to: (a) an administrative appeal to or review by an administrative a uthority higher than or
independent of the official or office that issued the decision; and/or (b) a judicial appeal or review
of the decision. " Article 4 further articulates a number of specific obligations concerning the
"procedures" for such appeal or r eview. In this respect, Article 4.5 of the TFA states that "[e]ach
Member shall ensure that [any person to whom customs issues an administrative decision] is
provided with the reasons for the administrative decision so as to enable such a person to have
recourse to procedures for appeal or review where necessary ". We consider that this further
reinforces our interpretation of Article 11.3 as articulated above.
7.385. The fourth recital to the CVA expressly recognizes, as an object and purpose of the CVA, the
"need for a fair, uniform and neutral system for the valuation of goods for customs purposes ". In
light of this express recognition by WTO Members of the importance of fairness in customs valuation,
we consider that Article 11.3 serves the purpose of preventing arbitrary decisions by imposing an
obligation on the domestic appellate tribunal to provide written reasons sufficient to enable the
decisions to be properly reviewed by the importer, as well as superior courts, and WTO dispute
settlement panels.865
7.386. We note that Article 11.3 does not contain any specific requirements regarding the type of
information that must be provided. This is entirely consistent with the functional nature of the legal
standard that should be applied to assess the sufficiency of the reasons, which by definition requires
a case-by-case analysis and which cannot be specified a priori and in the abstract.866 In this respect,

858 Panel Report, Thailand – Cigarettes (Philippines), para. 7.234.
859 Panel Report, Thailand – Cigarettes (Philippines), para. 7.234.
860 See, e.g. Appellate Body Report, EC – Fasteners (China), paras. 542-544; and Panel Report, China –
Autos (US), paras. 7.26-7.27.
861 Panel Report, China – HP-SSST (Japan/EU), para. 7.275.
862 Panel Report, China – X-ray Equipment, para. 7.459. See also Article 22 of the SCM Agreement, and
Article 3 of the Safeguards Agreement.
863 Appellate Body Report, Mexico – Corn Syrup (Article 21.5 – US), para. 107.
864 Appellate Body Report, Mexico – Corn Syrup (Article 21.5 – US), para. 107.
865 We note that Article 11.2 provides that the importer must have a right of appeal to a judicial
authority. Thus, where the importer initially appeals to an appellate tribunal other than a judicial authority, the
reasons for that initial decision on appeal will be critical to the importer's choice as to whether to pursue
recourse to judicial proceedings following the initial appeal. In any event, whether in domestic proceedings or
in WTO dispute settlement, the "reasons" provided by the appellate tribunal pursuant to Article 11.3 would in
principle form the basis for the panel's consideration of the determination.
866 In the context of applying Article 12.7 of the DSU, the Appellate Body has concluded that it is
"neither necessary, or desirable, to attempt to define the scope of the obligation provided for" in the abstract,
and that compliance with Article 12.7 must necessarily be determined "on a case-by-case basis, taking into

we agree with Thailand that it would be inappropriate to read into Article 11.3 any specific
requirements that are universally applicable to any and all situations where an appellate tribunal is
required to provide reasons.867 Rather, in the absence of specific guidance in Article 11.3 governing
the relevant information that must be provided, and in accordance with the legal standard under
Article 16, we consider that it is to be assessed on a case-by-case basis whether the reasons provided
under Article 11.3 sufficiently make clear and give details of how the customs value was
determined.868
7.387. Finally, we note the origina l's panel's explanation that Article 16 imposes a "formal"
requirement, and not a "substantive" requirement.869 In other words, the assessment of whether
the requirement to provide an explanation has been satisfied does not require examining the
consistency of the provided "explanation" with the substantive requirements of the CVA. We consider
that the original panel's reasoning on this issue is equally applicable in respect of Article 11.3, and
thus the requirement to provide "reasons" under Article 11.3 is a procedural requirement that does
not require a reviewing Panel to assess, at the level of a claim made under Article 11.3, whether the
alleged "reasons" are consistent with the substantive obligations in the CVA.
7.388. On the basis of the foregoing, we consid er that the obligation on appellate tribunals under
Article 11.3 to give "reasons" requires that they must make clear and give details of the reasons for
their decisions. Such reasons may be expected to include the basis for rejecting the transaction
value, the identification of the method used to determine the final customs value, and a description
of how that method was applied. Fundamentally, such reasons must be sufficient to meet the
purpose of enabling importers, WTO Members and superior courts within the domestic legal system
of the Member concerned, to determine whether the manner or means of valuation by a customs
authority was consistent with the importing Member's WTO obligations.
7.2.7.3.2 The reasons provided in the BoA Ruling
7.389. The issue presented is whe ther the BoA Ruling sufficiently explains the BoA's basis for
rejecting the transaction value, the BoA's method for determining the customs value, and how the
BoA applied that method, for an observer to adequately assess whether the decision was consistent
with the requirements of the CVA.
7.390. The BoA Ruling is a document consisting of seven pages, including a cover letter, three pages
constituting the substance of the Ruling, and a three-page attachment concerning the details of the
specific shipments under appeal. The substance of the Ruling contains the BoA's conclusion, namely
that the transaction value was rejected because, following an examination of the circumstances
surrounding the sale, it was determined that the buyer and seller were related and that t he
relationship affected the sale and purchase price, as well as the conclusion that the customs value
shall be determined through the "deductive value" method and the outcome of that determination.
The BoA Ruling contains a sub -heading entitled "Reasons for the Ruling ", which states that "the
customs valuation for the imports … shall be in accordance with … the principles of customs valuation
of the World Trade Organization".
7.391. For the purposes of our analysis, we distinguish between the BoA's rejection of the
transaction value, and the BoA's determination of the revised customs value. We proceed by
addressing these two aspects separately.
7.2.7.3.2.1 The BoA's rejection of the transaction value
7.392. The BoA Ruling provides, in respect of the rejection of the transaction value, that:
When examining the circumstances surrounding the sale by comparing the [P&GE] rate
according to the 2002 financial statements of PMTL, certified by the auditor, and the

account the facts of the case, the specific legal provisions at issue, and the particular findings and
recommendations made by a panel". (Appellate Body Reports, Korea – Alcoholic Beverages, para. 168, and
Mexico – Corn Syrup (Article 21.5 – US), para. 108)
867 See Thailand's first written submission, para. 5.110; and Thailand's second written submission,
paras. 2.126-2.129 (referring to Article 12 of the Anti-Dumping Agreement, Article 22 of the SCM Agreement,
Article 6.9 of the Anti-Dumping Agreement, and Article 4.5 of the TFA).
868 Panel Report, Thailand – Cigarettes (Philippines), para. 7.240.
869 Panel Report, Thailand – Cigarettes (Philippines), para. 7.241.

profits and general expenses rate as requested by PMTL with the [P&GE] rate of the
industry group of imported cigarette wholesalers in the year 2002 (9.80 – 15.08 per
cent), [the BoA] found that both [P&GE] rates of PMTL are not consistent with those of
the industry group of imported cigarette wholesalers, which is the informatio n for the
sale of the goods of the same class or kind in the Kingdom. The test with the deductive
value proposed by PMTL is not in accordance with Clause 16 of the Ministerial Regulation
No. 132 (B.E. 2543 (2000)). It can be concluded that the relationship between the
purchaser and the seller affects the sale and purchase price. The customs value, thus,
cannot be determined by way of Method 1 transaction value of imported goods.870
7.393. We recall from our examination of the Philippines' substantive claim under Article 1.2(a),
second sentence, that the following information, inter alia, was essential to our assessment:
a. Regarding the composition of the industry group – the identities of the companies included
in the industry group, and the BoA's reasons for including certain companies within the
group and excluding others from that group;
b. Regarding the determination of the benchmark range – the BoA's manner of calculating
the P&GE rates of the companies included in the industry group, as well as the actual P&GE
rates themselves (including the P&GE rate used for PMTL when including it in the group),
its use of a simple average to determine the industry average notwithstanding the
differences in sales volumes, and its use of standard error to determine the benchmark
range around the industry average; and
c. Regarding the comparison of PMTL to the benchmark group – the legal standard by which
it determined that PMTL's P&GE rates are "not consistent" with those of the industry group,
its reasons for using different P&GE rates for PMTL within and without the group, the extent
to which it took into account the differences between PMTL and the companies in the
industry comparator group when making its determination, as well as all relevant details
pertaining to how it determined the composition of the industry group and the benchmark
range (as described above).
7.394. We observe that none of this information can be found within the BoA Ruling itself. Taking
into account these omissions in the BoA Ruling, and recalling the legal standard articulated above,
we do not consider that we would be able to properly assess whether the BoA's examination of the
circumstances of sale was in accordance with the substantive requirements of Article 1.2(a), second
sentence, if we were to limit ourselves to the reasons contained in the BoA Ruling itself.
7.395. Furthermore, we emphasize that the BoA Ruling is misleading, to the extent that it indicates
that the industry group was composed of "imported cigarette wholesalers". We have found above
that none of the companies in the industry group was an "imported cigarette wholesaler". 871 We
understand that, according to Thailand, the BoA based its determination of the industry grou p on
the TSIC, used by the Thai Business Development Department, Heading 51.233 of which allegedly
refers to "wholesale of tobacco and tobacco products ".872 However, this does not appear to be
reflected in the contemporaneous evidence, and most importantly f or our purposes here, is not
reflected in the BoA Ruling itself. Furthermore, where the TSIC allegedly refers to wholesalers of
"tobacco and tobacco products ", the BoA Ruling refers to "cigarette" wholesalers. Thus, the BoA
Ruling not only fails to accurat ely reflect the nature of the benchmark group, but it fails to even
represent the benchmark group in accordance with the information on which it relied to actually
determine the benchmark group. Clearly, a misleading representation of the BoA's methodology
cannot satisfy the requirements of Article 11.3 to provide "reasons".873
7.396. Shifting perspective to the level of domestic appeal proceedings, we recall that under the
legal standard described above, the reasons given by the BoA for rejecting the transaction v alues

870 BoA Ruling, (Exhibit PHL-21-B), p. 3.
871 See paragraph 7.140. above.
872 See Thailand's response to Panel question No. 6(a).
873 We recall that the requirement under Article 11.3 is a "procedural" and not "substantive"
requirement, in accordance with the legal standard under Article 16. (See paragraph 7.387. above) In our
view, providing inaccurate reasons is inconsistent with the formal requirement to provide reasons, without
prejudice to the substantive obligations of the CVA, which are still applicable to the actual reasons and basis for
the customs determination.

should have been sufficient for PMTL to determine whether there were grounds to appeal the BoA's
conclusion that the relationship between the purchaser and the seller affected the sale and purchase
price. In our view, the unrebutted evidence of the Philippines is that PMTL was in fact hindered in its
appeal, based on the information that is missing from the BoA Ruling. 874 Specifically, we note the
Philippines' explanation that, when PMTL challenged the BoA Ruling before the Central Tax Court, it
"was hampered … because critical aspects of the reasons for the BoA's decision were not disclosed
by the BoA, such as the number and identity of the comparator companies in the industry group.
PM Thailand could not, for example, argue that the industry group was not comparable to PM
Thailand, because the identity of the companies making up the industry group was not disclosed to
PM Thailand."875
7.397. We further note that in that domestic court proceeding, the Central Tax Court ordered the
Thai Customs Department to provide the names of the companies in the industry benchmark group,
and the Customs Department refused to do so. 876 Indeed, it was only on 16 June 2016, "following
formal consultations in these proceedings", that Thailand provided the names of the five companies
to PMTL.877 Additionally, we note that the Minutes of the BoA Meeting of 26 September 2012, on
which the parties and the Panel have relied heavily in assessing the consistency of the BoA's decision,
were only "released to the importer during the proceedings before the Thai courts ".878 Given the
extent to which we have ourselves relied on the information contained in the BoA Minutes in our
assessment of the BoA's determination, we consider that, without this information, PMTL was indeed
hindered in assessing the BoA's decision.
7.398. We note that, in response to a question from the Panel, Thailand stated that "[t]he BoA did
not disclose the names of the companies [in the benchmark industry group] due to confidentiality
concerns as to whether it would be permissible t o disclose the information. This issue was raised
several times in discussions between the parties before clearance was finally obtained to provide the
information."879 Responding to this assertion, the Philippines explained that "there was no basis for
the BoA to withhold the names of the companies on grounds of confidentiality. The business activities
and financial information of the relevant companies, on which the BoA relied, was publicly
available."880 In response, Thailand asserts that "the names of these companies, in the sense that
they had been identified by the BoA for comparison purposes, was not a matter of public record and
the BoA was trying to be careful to avoid any commercial harm to these companies by publicising
their names and/or information."881
7.399. While we have considered Thailand's argument that "the BoA was trying to be careful to
avoid any commercial harm to these companies by publicising their names and/or information "882,
we do not consider that Thailand has demonstrated how commercial harm ma y have arisen from
revealing the names of the companies to PMTL when the business activities and financial information
of the relevant companies was publicly available. Additionally, Thailand has not presented any legal
arguments regarding the extent to which Article 11.3 takes into account confidentiality concerns.883
We note, in particular, that Thailand has not referred to, or relied on, Article 10 of the CVA,
concerning non-disclosure of confidential information. We therefore do not consider that Thailand
has demonstrated that confidentiality concerns precluded the BoA from revealing the names of the
companies, or any of the other relevant information discussed above, to PMTL.
7.400. We therefore consider that the reasons provided in the BoA Ruling do not satisf y the
requirement in Article 11.3 to make clear and give details about the BoA's rejection of the transaction
value, sufficient to enable importers, domestic tribunals, WTO Members, and this Panel to assess

874 As we discuss in the context of the Philippines' claim under Article 16, the BoA also refused to
provide this information in response to a request from PMTL made in December 2012.
876 Philippines' first written submission, para. 116 (referring to Motion requesting the Court to summon
documentary evidence or material evidence, 27 September 2013 (English translation), (Exhibit PHL-30-B), and
Statement Explaining the event that the Defendant failed to submit the documents pursuant to the summons,
24 June 2014 (English translation), (Exhibit PHL-31-B)).
879 Thailand's response to Panel question No. 30, p. 26.
880 Philippines' response to Panel question No. 91, para. 165.
881 Thailand's comments on the Philippines' response to Panel question No. 91, p. 21.
882 Thailand's comments on the Philippines' response to Panel question No. 91, p. 21.
883 See Thailand's comment on the Philippines' response to Panel question No. 91, p. 21.

whether the manner or means of valuation by the B oA was consistent with Thailand's WTO
obligations.
7.2.7.3.2.2 The BoA's determination of the customs value using the deductive method
7.401. Turning to the BoA's determination of a revised customs value using the deductive method,
the BoA Ruling indicates that, having rejec ted the transaction value, the BoA used a "deductive"
method for determining the customs value for the 210 entries, by "applying the selling price per unit
of the imported goods sold in the Kingdom [of Thailand] to the unrelated purchaser in the same
condition as when imported at the first level of sale and in the greatest aggregate quantity according
to the information provided by the importer ".884 In calculating the customs value, the BoA Ruling
states that the BoA made deductions for PMTL's P&GE, using the industry average P&GE rate in place
of PMTL's stated P&GE value.885 The BoA Ruling also states that, in determining the customs value,
PMTL "voluntarily accepted " that such costs would not be considered for the calculation of the
customs value by the BoA, a nd that "[a]s such, there was no information for considering the
deduction".886 Regarding the deductions for "taxes and duty ", the BoA Ruling states that the
deduction shall be made by:
[D]educting value added tax, tobacco tax, health promotion foundation l evy, customs
duty at the rates prevailing at the time of importation and provincial tax, calculated by
using the total amount of payment of the provincial tax pursuant to the receipts
specifying that money is received from PMTL and the name of retailers by PMTL

of the
year 2002 according to the information provided by PMTL and comparing in proportion
to the cigarette sales amount in 2002 at the rate of 0.021 Baht/stick or 21.14
Baht/1,000 sticks.887
7.402. We recall that the Philippines' concerns with respect to this aspect of the BoA's decision focus
on the deduction for P&GE, and the deduction for provincial taxes payable by PMTL. Concerning
P&GE, the Philippines argues that the same information which was omitted from the BoA Ruling's
description of the comparison of P&GE rates (in respect of the rejection of the declared transaction
value) is also relevant to the BoA's determination of the amount of P&GE to be deducted (in respect
of the determination of a revised customs value) , and therefore this information should have been
included. In respect of provincial taxes, the Philippines argues that the BoA Ruling failed to indicate:
the criteria used to include or exclude an amount on a tax receipt; which receipts were included or
excluded; whether the BoA made a d eduction in instances where the provincial authority did not
provide a receipt; how the BoA determined the total amount to be deducted; the deficiencies in the
evidence already provided by PMTL; the BoA's reasons for requiring actual receipts substantiatin g
the claimed amount; its reasons for requiring a particular format for those receipts; and the
deficiencies in the receipts that the BoA rejected.888
7.403. Regarding the alleged lack of information in the BoA Ruling concerning the deduction in
respect of P&GE, we consider that our findings above on the rejection of the transaction value are
equally applicable in respect of the determination of the customs value. 889 Given that the BoA
decided to use the industry average P&GE rate as a proxy for PMTL's own P&GE rate, the BoA should
have indicated all of the relevant information concerning its determination of that proxy rate.
7.404. Regarding the alleged lack of information in the BoA Ruling concerning the deduction in
respect of provincial taxes, we are not convinced that all of the information alleged by the Philippines
to be missing is, in fact, missing. Importantly, we consider that the BoA Ruling does identify that
the BoA based its determination on those receipts which identified PMTL as the taxpayer. However,
we also consider that the BoA Ruling omits a significant amount of information which was material
to the Panel's assessment of whether the BoA acted in accordance with Article 5.1(a)(iv) of the CVA.

884 BoA Ruling, (Exhibit PHL-21-B), pp. 3-4. The BoA Ruling also indicates that the customs value could
not be determined using the transaction value of identical or similar goods, because "no such goods had
already been accepted as the customs value by the Customs Department". (BoA Ruling, (Exhibit PHL-21-B),
p. 3).
885 BoA Ruling, (Exhibit PHL-21-B), p. 4.
886 BoA Ruling, (Exhibit PHL-21-B), p. 4.
887 BoA Ruling, (Exhibit PHL-21-B), p. 4. (emphasis added) Regarding the translation note concerning
the determination of the deduction for provincial taxes, see footnote 791 above.
888 Philippines' first written submission, paras. 454-455; response to Panel question No. 95.
889 See paragraphs 7.392. to 7.399. above.

Specifically, we emphasize that the BoA Ruling indicates only tha t the "total amount" of provincial
tax paid was "compar[ed] in proportion to the cigarette sales amount in 2002". The BoA Ruling fails
to indicate the formulae or figures used, and fails to explain why the BoA was using these particular
formulae or figures . Furthermore, the BoA Ruling does not explain why the determination of the
provincial tax was limited to only the amounts on tax receipts that indicated "that money [was]
received from PMTL" and identified "the name of the retailers ". In particular, the BoA Ruling omits
any mention of the "test calculation" conducted by the BoA allegedly on the basis of PMTL's figures.
In our view, aspects of the BoA's determination that are fundamental to our assessment of the BoA's
actions, and which are reflected in the Minutes of the BoA Meeting of 26 September 2016, are not
reflected in the BoA Ruling.890
7.405. We therefore consider that the reasons provided in the BoA Ruling do not fully satisfy the
requirement in Article 11.3 to make clear and give details about the BoA's d etermination of the
revised customs value, using the deductive method, sufficient to enable importers, domestic
tribunals, WTO Members, and this Panel to determine whether the manner or means of valuation by
the BoA was consistent with Thailand's WTO obligations.
7.2.7.4 Conclusion
7.406. For the reasons set forth above , the Panel concludes that, in implementing the DSB's
recommendations and rulings in the original proceeding, the BoA ac ted inconsistently with
Article 11.3 of the CVA by failing to provide sufficient reasons for its decision.
7.2.8 Claim under Article 16 of the CVA
7.2.8.1 Introduction
7.407. Article 16 of the CVA requires that, upon written request, a customs authority must provide
to the importer, in writing, an explanation of how the customs value was determined. The BoA Ruling
was issued on 16 November 2012. On 18 December 2012, PMTL requested an explanation from the
BoA concerning certain aspects of the BoA's decision. 891 On 16 June 2016, the Thai Customs
Department sent a letter to PMTL, referring to PMTL's letter of 18 December 2012, and providing
certain information.892
7.408. The Philippines claims that Article 16 applies to the BoA since the BoA forms part of the Thai
customs administration, and that the BoA acted inconsistently with Article 16 of the CVA by failing
to provide a written explanation of how it determined the customs value, following PMTL's written
request of 18 December 2012.893
7.409. Thailand argues that Article 16 does not apply to decisions by appellate tribunals under
Article 11.2 of the CVA, which are subject exclusively to the more specific procedural rules of Article
11.3.894 Thailand also submits that, even if Article 16 does apply, then in any event the BoA Ruling
itself "provides sufficient explanation that enables PM Thailand to understand the bases for its
decision on customs valuation", for the reasons elaborated by Thailand in respect of Article 11.3.895

890 We emphasize, in particular, that the BoA Ruling omits to mention any details of the BoA's "test
calculation", the fact that such test calculation was conducted, the assertion that PMTL does not pay tax on
behalf of all retailers, the evidence provided by PMTL, the BoA's reasons for ignoring PMTL's explanation for not
providing all relevant receipts, and the details of the BoA's final calculation. We do not wish to suggest that
these omissions are the sum total of the information that should have been included in the BoA Ruling. We do,
however, consider that these omissions are particularly glaring in light of our analysis above. (See paragraphs
7.344. to 7.369. above)
891 Letter from PMTL to the BoA, 18 December 2012 (English translation), (Exhibit PHL-27-B), p. 1.
892 Letter from Customs Department to PMTL of 16 June 2016, (Exhibit PHL-38-B).
893 Philippines' first written submission, paras. 428-440 and 458-462 (referring to Letter from PMTL to
the BoA, 18 December 2012 (English translation), (Exhibit PHL-27-B)); second written submission, paras. 383-
390; response to Panel question No. 29(a), 30, 92, and 94; comments on Thailand's response to Panel
question No. 94; opening statement at the meeting of the Panel, paras. 47-55.
894 Thailand's first written submission, paras. 5.114-5.116; second written submission, paras. 2.131-
2.136; and response to Panel question No. 29(b).
895 Thailand's first written submission, para. 5.117; response to Panel question No. 94. See also para.
7.376. above.

7.2.8.2 Main arguments of the parties
7.410. The Philippines argues that Article 16, by its explicit terms, applies to the "customs
administration", and, as Thailand concedes, the BoA is an "authority within the customs
administration".896 The Philippines contends that cumulative application of Articles 11.3 and 16 does
not render Article 16 redundant, since the "application of one WTO obligation is not rendered
redundant or inutile merely because it overlaps with another obligation on the facts of a particular
case".897 The Philippines explains that the obligations in Articles 11.3 and 16 do not conflict, and the
"concurrent application of the obligati ons in Articles 11.3 and 16 … is fully consistent with the
principle that obligations under the covered agreements apply cumulatively, unless there is a
conflict".898 The Philippines notes that, because "the substantive content of the explanation due
under Articles 11.3 and 16 is the same … in practice, an importer is unlikely to seek an explanation
under Article 16 ".899 Nevertheless, in the Philippines' view, the right to seek an explanation is
important in those cases "where the initial statement of reasons from the appeal body does not meet
the requisite standard."900 The Philippines also considers that an overlap in coverage does not render
Article 16 redundant, since Article 16 provides an "additional opportunity" to request a "further
explanation", in addition to the reasons for the decision that must be provided under Article 11.3.901
7.411. Regarding the alleged failure by the BoA to satisfy the requirements of Article 16, the
Philippines asserts that the BoA never responded to PMTL's 18 December 2012 request, made to the
Director General of the Customs Department, asking for an explanation of certain aspects of the
decision.902 The Philippines acknowledges that a letter sent from the Customs Department to PMTL
on 16 June 2016 provided a "partial explanation"903 of the BoA's decision, however the Philippines
emphasizes that, although the letter asserts itself to be an explanation, "the content of the letter
does not meet the standard of explanation required under" Article 16.904 Additionally, the Philippines
argues that the letter of 16 June 2016 was "provided too late to satisfy the obligation in Article
16".905 In the Philippines' view, "an explanation under Article 16 must be sufficiently timely to enable
an importer to exercise effectively its right to appeal under domestic law in light of the explanation
given for the determination. "906 The Philippines also explains that, in its view, the fact that an
importer exercises its right to appeal does not imply that the customs authority satisfied its
obligations under Article 16.907
7.412. Thailand argues that the obligation in Article 16 is inapplicable to appeal tribunals like the
BoA. Thailand points out that Article 16 only indicates that an importer "shall have the right to an
explanation … of how the customs value was determined" whereas Article 11.3, governing decisions
on appeals, indicates that "notice of the decision and the 'reasons for such decision shall be provided
in writing' even without a request from the importer ".908 In Thailand's view, Article 11.3 therefore
provides "more detailed rules … than Article 16 " and applies specifically to appeals. 909 Thailand
submits that Article 16 therefore does not apply to appeals, since "it would essentially be a repetition
of the disciplines contained in Article 16 ", which would "render Artic le 11.3 redundant ".910 In
Thailand's view, it would make no sense to apply Article 16 to appellate tribunals such as the BoA,
since Article 11 explicitly "requires a disclosure of the reasons for a decision without a request in
writing", and Article 16 "would require an importer to make a request in writing ".911 Thailand
responds to the Philippines' argument that Article 16 applies to decisions by appellate tribunals

898 Philippines' response to Panel question No. 29, para. 243 (referring to Appellate Body Reports,
899 Philippines' response to Panel question No. 29, para. 245.
900 Philippines' response to Panel question No. 29, para. 245.
901 Philippines' response to Panel question No. 29, para. 244. (emphasis original)
903 Philippines' response to Panel question No. 30(a), para. 246 (referring to Letter from Customs
Department to PMTL of 16 June 2016, (Exhibit PHL-38-B)) (emphasis omitted).
904 Philippines' response to Panel question No. 30(a), para. 249. See also Philippines' response to Panel
question No. 94, para. 193.
905 Philippines' response to Panel question No. 94, para. 193.
906 Philippines' response to Panel question No. 94, para. 195.
907 Philippines' comment on Thailand's response to Panel question No. 94.
908 Thailand's first written submission, para. 5.115.
909 Thailand's first written submission, para. 5.115.
910 Thailand's first written submission, para. 5.115.
911 Thailand's second written submission, para. 2.135.

because of the reference to "customs administration " in the text, arguing that the Philippines
essentially "ignores the difference between the nature of the determinations – a determination of
customs value versus an appeal of a determination of customs value … [U]nder the Philippines'
approach, Article 16 by its terms would apply only to appeals … before bodies such as the Board of
Appeals but not appeals before judicial authorities … [which] would make no sense".912
7.413. Thailand also submits that, even if the BoA is subject to the obligation in Article 16, then
"[i]n any event … the BoA Ruling provides sufficient explanation that enables PM Thailand to
understand the bases for its decision on customs valuation ".913 Thailand also states that the
information provided in the BoA Ruling "was sufficient under Article 11.3, in that PMTL was able to
exercise, and in fact, exercised, its right to appeal in Thai courts".914
7.2.8.3 Analysis by the Panel
7.2.8.3.1 General considerations
7.414. Article 16 of the CVA states that:
Upon written request, the importer shall have the right to an explanation in writing from
the customs administration of the country of importation as to how the customs value
of the importer's goods was determined.
7.415. In the original proceeding, the panel found that the Thai Customs Department failed to
provide an explanation of how the customs value of the importer's good s was determined,
inconsistently with Thailand's obligations under Article 16.915
7.416. In our analysis of the Philippines' claim under Article 11.3 of the CVA, we set forth the
fundamental aspects of the legal standard under Article 16. 916 We briefly recall in thi s respect that
an explanation under Article 16 must "make clear and give details of how the customs value of the
importer's goods was determined, including the basis for rejecting the transaction value and other
valuation methods that sequentially precede the method actually used by the customs
authorities."917 Such an explanation must indicate , "at the minimum, the basis for rejecting the
transaction value in the light of the information provided by the importer, the identification of the
method used and the illustration of how the method was applied in reaching the final customs
value."918 Furthermore, the relevant explanation must be sufficient for "domestic reviewing tribunals,
courts and WTO panels to determine whether the manner or means of valuation by a customs
authority was consistent with the importing Member's WTO obligations ".919 We reiterate that the
principle of due process is fundamental to the CVA, as expressed in various provisions including the
fourth recital of the preamble which recognizes the need for a "fair, uniform and neutral" system of
customs valuation. In our view, the original panel's formulation of the legal standard under Article
16 espouses this principle of due process.920
7.417. In proceeding with our analysis, we note that the parties' arguments raise the threshold
issue of whether the obligation in Article 16 applies to the BoA. We therefore address this issue first,
before turning to address the issue of whether the BoA failed to provide to PMTL an adequate
explanation as to how the customs value was determined.
7.2.8.3.2 The applicability of Article 16 to the BoA
7.418. The parties disagree on whether Article 16 applies to appellate tribunals. We note that their
arguments resemble in part their arguments regarding the applicability of the procedural obligation
in Article 1.2(a), third sentence, to the BoA.921 In this respect, we consider that certain interpretative

912 Thailand's second written submission, para. 2.134.
913 Thailand's first written submission, para. 5.117.
914 Thailand's response to Panel question No. 94, p. 21.
915 Panel Report, Thailand – Cigarettes (Philippines), paras. 7.249-7.266.
916 See paragraph 7.382. above.
917 Panel Report, Thailand – Cigarettes (Philippines), para. 7.240.
918 Panel Report, Thailand – Cigarettes (Philippines), para. 7.238
919 Panel Report, Thailand – Cigarettes (Philippines), para. 7.234.
920 See paragraph 7.382. above.
921 See paragraph 7.246. above.

elements that we identified in the context of our analysis of the applicability of Article 1.2(a), third
sentence, are similarly relevant here.
7.419. Beginning with the text of Article 16, we note that Article 16 explicitly imposes an obligation
on the "customs administration" to provide an explanation in writing "as to how the customs value
… was determined". We recall that it is uncontested that the BoA is formally part of the Thai Customs
Department, and is therefore part of the "customs administration" in the narrowest understanding
of this term.922 There is no textual limitation in Article 16 confining the scope of the obligation therein
only to certain types of entities that operate within the "customs administration". Nor does Article
16 distinguish between different types of customs value determinations (i.e. initial determinations
versus determinations on appeal), in any way that would exclude tribunals like the BoA from its
scope. Thus, there is no textual basis in Article 16 to justify the exclusion of appellate tribunals like
the BoA from the scope of the obligation contained therein.
7.420. Turning to the nature of the obligation in Article 16 and the function that it serves, we have
already found above that there are some core commonalities between the legal standards in Article
1.2(a), third sentence, Article 11.3, and Article 16. Most importantly, as elaborated above 923, all of
these provisions es tablish obligations that are inherently functional in nature. The fundamental
purpose of Article 16 is to "enable[] importers and foreign governments to effectively exercise their
respective rights under Articles 11 and 19 of the Customs Valuation Agreemen t when requesting
domestic reviewing tribunals, courts and WTO panels to determine whether the manner or means
of valuation by a customs authority was consistent with the importing Member's WTO obligations".924
As indicated in the context of Article 1.2(a), third sentence, it is consistent with this objective that
an appeals tribunal within the customs administration is subject to that requirement. 925 Thus, we
see nothing in the nature of the legal obligation contained therein that would justify excluding
appellate tribunals such as the BoA from the scope of that obligation.
7.421. Furthermore, as indicated above in the context of our analysis of Article 1.2(a), third
sentence, Thailand has not demonstrated that any practical difficulties would arise as a consequence
of the BoA being subject to the procedural obligation contained in that provision.926 In our view, the
same conclusion holds in respect of Article 16. Importantly, we note that the Customs Department
did, in fact, eventually respond to PMTL's request for an explanation on behalf of the BoA.927 Similarly
to our analysis in respect of Article 1.2(a), third sentence, we do not consider that Thailand has
demonstrated how subjecting the BoA to the requirement in Article 16 would be impractical or
inappropriate. Thus, we see nothing in how the BoA conducts its work to justify a finding that it is
excluded from the scope of that obligation.
7.422. This brings us to Thailand's principal argument, which is that Article 16 cannot be applicable
to appellate tribunals because if i t were applicable, it would render Article 11.3 redundant (or vice
versa). We recall the well -established rule of "effective" treaty interpretation, which precludes
interpreting one provision in a way that renders another provision redundant, and that "[a]n
interpreter is not free to adopt a reading that would result in reducing whole clauses or paragraphs
of a treaty to redundancy or inutility."928
7.423. It is uncontested that Article 11.3 applies to the BoA, and to appellate tribunals generally.
We further recall the overlapping requirement that both Article 11.3 and Article 16 impose, namely
to provide sufficient "reasons" (under Article 11.3) or "explanation" (under Article 16) to clarify how
and why the transaction value was rejected and the customs value determined. In addition, we note
that it is further uncontested that the legal standards under Articles 11.3 and 16 are sufficiently
similar to one another, such that if Article 16 does apply to the appellate tribunal, it could be the
case that the information provided by a customs authority in the context of giving its "reasons"
would also be sufficient, if provided in response to a request from the importer , to discharge the
obligation under Article 16. In this regard, the Philippines contends that "the substantive content of

922 See paragraphs 7.256. to 7.258. above.
923 See paragraphs 7.380. , 7.382. and 7.383. above.
924 Panel Report, Thailand – Cigarettes (Philippines), para. 7.234.
925 See paragraph 7.259. above.
926 See paragraph 7.261. above.
927 See Letter from Customs Department to PMTL of 16 June 2016, (Exhibit PHL-38-B).
928 Appellate Body Report, US – Gasoline, p. 23, DSR 1996:I, 3, at p. 21. See also Appellate Body
Report, Japan – Alcoholic Beverages II, p. 12, DSR 1997:I, 97, at p. 106.

the explanation due under Articles 11.3 and 16 is the same"929, and, for its part, Thailand is also of
the view that the standard of rea sons required under Article 11.3 is not "lesser" than the standard
that applies under Article 16.930 In our view, there is little to distinguish between the plain meaning
of a requirement to provide an "explanation"931 and a requirement to provide "reasons"932, and we
recall that the nature of the obligations in these provisions is similar.933
7.424. None of these points is contested, and we consider that they establish that there is a
substantial degree of overlap between the obligation in Article 11.3 to provide "reaso ns" and the
obligation in Article 16 to provide an "explanation" upon request , at least insofar as they apply to
domestic appellate tribunals within the "customs administration". However, we do not consider that
the foregoing renders Article 16 redundant or inutile, such that as a matter of treaty interpretation
we must find that appellate tribunals fall outside of the scope of the obligation contained therein.
Our reasons are as follows.
7.425. First, we accept that the obligation in Article 11.3 that is specific to appellate tribunals means
that the obligation in Article 16 will typically be more relevant and useful in the context of initial
determinations because, under the CVA, a customs authority is normally not required to provide
reasons for its final decis ion on rejection of declared customs values or a choice of a particular
valuation method. However, this does not by itself establish that the concurrent application of the
obligations in Article 11.3 and Article 16 to appellate tribunals would render one of those provisions
redundant. The Appellate Body has found that, in the absence of conflict, different WTO provisions
can apply cumulatively 934, and that "[t]he fact that an interpretation of " one WTO provision in
accordance with customary rules of interpret ation "implies a less frequent recourse to " another
provision "does not deprive" the second provision "of effet utile".935
7.426. Second, we consider that even if the legal standards under Articles 11.3 and 16 are identical,
such that the information provided in ac cordance with Article 11.3 may obviate the need to ever
request an explanation under Article 16, the fact that they are temporally distinguishable is
significant.936 In this regard, we agree with the Philippines that the right to seek an explanation
would be important in those cases "where the initial statement of reasons from the appeal body does
not meet the requisite standard."937 The additional obligation under Article 16 can make a significant
practical difference to an importer faced with a situation where insufficient reasons were provided
with the initial decision on appeal. In such a circumstance, the customs authority would not prevent
a finding of WTO inconsistency in respect of Article 11.3 by subsequently providing an explanation
that is consistent with Article 16 . However, a subsequent explanation provided pursuant to Article
16 may enable an importer to exercise its right of appeal in domestic proceedings, or preclude
additional litigation by an importer in domestic proceedings, or even preclude resort by a Member
to WTO dispute settlement. Thus, the imposition of the obligation under Article 16 can serve a critical
practical role in those situations where the initial reasons provided under Article 11.3 are insufficient.
7.427. Finally, it appears to us that the lex specialis argument that Thailand is advancing in relation
to Articles 11.3 and 16 of the CVA in this proceeding resembles the lex specialis argument that
Thailand advanced in relation to Article 11.2 of the CVA and Article X:3(b) of the GATT 1994, and

929 Philippines' response to Panel question No. 29, para. 245.
930 Thailand's response to Panel question No. 29(b).
931 The original panel stated that "[t]he term "explanation" can be defined as "noun. 1 The action or act
of explaining. 2 A statement, circumstance, etc., which makes clear or accounts for something." (Panel Report,
Thailand – Cigarettes (Philippines), para. 7.232, referring to The New Shorter Oxford English Dictionary, (Fifth
Edition) Oxford University Press, Vol. I, p. 895 (2002)).
932 As explained above, the dictionary definition of "reasons" refers to "[a] statement used as an
argument to justify or condemn some act, or to prove or disprove some assertion or belief". (Shorter Oxford
English Dictionary (2007), p. 2481)
933 We note the Philippines' explanation that, "in practice, an importer is unlikely to seek an explanation
under Article 16, if the statement of reasons under Article 11.3 meets the requisite standard. However, nothing
prevents an importer from seeking an explanation under Article 16." (Philippines' response to Panel question
No. 29(a), para. 245)
934 See, e.g. Appellate Body Reports, Guatemala – Cement I, para. 65; and Argentina – Footwear (EC),
para. 89.
935 Appellate Body Report, EC – Asbestos, para. 115.
936 We recall that the original panel attached significance to the temporal scope of application of the
obligations in Article 16 and Article 1.2(a), third sentence, for the purpose of distinguishing between these
obligations. (Panel Report, Thailand – Cigarettes (Philippines), para. 7.213)
937 Philippines' response to Panel question No. 29, para. 245.

which the original panel rejected. 938 In the original proceeding, the Philippines claimed that the
conduct of the BoA vis-à-vis PMTL was inconsistent with the Article X:3(b), and Thailand responded
that the BoA was not subject to the obligation in Article X:3(b). The panel concluded that these
provisions, i.e. Article 11 of the CVA and Article X:3(b) of the GATT 1994, applied concurrently
according to the plain meaning of the terms of each provision. The Appellate Body upheld the panel's
finding.939
7.428. Taking these interpretative elements into account, we consider that the ordinary meaning of
Article 16 indicates that the BoA, as part of the Thai customs authority, is indeed subject to the
requirement in Article 16. We consider that this is further reinforced by both the nature of the
obligation in Article 16, and our consideration that there are no apparent practical constraints on the
BoA to provide an explanation in accordance with Article 16. We do not consider that the concurrent
application of the obligations in Articles 11.3 and 16 to appellate tribunals such as the BoA renders
either of those provisions redundant, and consider that the obligation under Articl e 16 could be
particularly useful to importers in a situation where the reasons initially provided do not meet the
requirements of Article 11.3. For these reasons, we consider that the obligation in Article 16 applies
to the BoA.
7.429. Having said that, we wish to stress that the applicability of Article 16 does not, in any way,
relieve an appellate tribunal within the customs administration of its obligation under Article 11.3 to
provide to the importer sufficient reasons for the decision on appeal, at the time that it gives notice
of its decision to the importer. Although Article 16 may serve a useful role in and of itself, for the
reasons given above, under Article 11.3 an appellate tribunal is obliged to communicate the reasons
for the decision on appeal, reg ardless of whether any specific request for an explanation in writing
has been made by the importer.
7.2.8.3.3 The explanation provided after the BoA Ruling
7.430. In assessing whether the BoA failed to provide a sufficient explanation in response to PMTL's
request, we consider that two issues are raised. First, Thailand argues that even if the BoA is subject
to the obligation in Article 16, the information provided in the BoA Ruling itself was sufficient to
discharge any obligation that the BoA may have been under, by vir tue of Article 16, to provide a
sufficient explanation. In respect of this argument, we recall our findings above that the BoA Ruling
does not provide sufficient reasons to satisfy the requirements of Article 11.3. 940 Consequently we
consider, on the basis of our findings above in respect of Article 11.3, that the BoA Ruling itself did
not provide reasons that were sufficient to discharge the BoA's obligation under Article 16 to provide
the explanation, subsequently requested by PMTL, on how the customs value of the importer's goods
was determined.
7.431. Second, we note that on 16 June 2016 the Thai Customs Department did respond to PMTL's
request of 18 December 2012. At no time during this proceeding has Thailand argued that this
response satisfies the requirement of Article 16.941 Nevertheless, given that this letter purports to
respond to PMTL's request for an explanation, and since this letter was submitted as evidence to the
Panel, we consider it necessary to examine whether this letter satisfies the requirements of Article
16.942

938 Panel Report, Thailand – Cigarettes (Philippines), paras. 7.1046-7.1052.
939 Appellate Body Report, Thailand – Cigarettes (Philippines), paras. 182-222.
940 See paragraphs 7.389. to 7.405. above.
941 Indeed, when questioned directly regarding the timeliness of the Thai Customs Department's letter of
16 June 2016, in the context of the requirements of Article 16, Thailand stated only that "information
[provided] by the BoA was sufficient under Article 11.3, in that PMTL was able to exercise, and in fact
exercised, its right to appeal in Thai courts." (Thailand's response to Panel question No. 94, p. 21) Additionally,
we note that, in response to a question from the Panel, the Philippines noted that it had "overlooked" that the
June 2016 letter from the Thai Customs Department was "styled" as a response to PMTL's request for
information. (Philippines' response to Panel question No. 30, para. 248)
942 We acknowledge the statement of the Appellate Body that "[w]here there is an absence of
argumentation … a panel cannot intervene to raise arguments on a party's behalf and make the case for the
complainant." (Appellate Body Report, EC – Fasteners (China), para. 566) Although the Appellate Body made
this statement with reference to the complainant, we consider that it would be equally inappropriate for a panel
to construct arguments on behalf of a respondent. We therefore refrain from constructing arguments on behalf
of Thailand. However, given that the burden lies on the Philippines to demonstrate that the BoA acted
inconsistently with Article 16, and given that the letter at issue was submitted by the Philippines itself in

7.432. We recognize that the text of Article 16 does not explicitly impose a time-period during which
an explanation must be provided. However, it is clear that certain provisions of the covered
agreements that establish procedural obligations may, depending on the nature of the procedural
obligation contained therein, necessarily carry an implied limitation on when the required action
must be performed.943 In this respect, we recall the original panel's statement that Article 16 serves
an importa nt transparency and due process objective, by enabling "importers and foreign
governments to effectively exercise their respective rights under Articles 11 and 19 of the Customs
Valuation Agreement when requesting domestic reviewing tribunals, courts and WTO panels to
determine whether the manner or means of valuation by a customs authority was consistent with
the importing Member's WTO obligations. "944 The original panel elaborated that the explanation
provided under Article 16 "provides a window through wh ich domestic tribunals and WTO panels
review and understand a customs authority's valuation determination".945
7.433. We therefore consider that an explanation provided three and a half years after it was
requested, and, in the specific context of this dispute, se veral years after the conclusion of the
appeal of the customs valuation determination before the Thai Tax Court, does not satisfy the
requirements of Article 16. A delay of three and a half years is an excessively long period of time to
provide an explanat ion irrespective of the circumstances. Furthermore, in the circumstances of
PMTL's appeal, it is clear that an explanation provided well after the conclusion of the domestic court
proceeding initiated by the importer, in response to a request that preceded the initiation of that
domestic proceeding, cannot be sufficient to satisfy Article 16.946 In light of the lack of timeliness in
the Customs Department's response, we do not consider it necessary to examine the actual content
of the June 2016 letter to determine whether it would have satisfied the requirements of Article 16
had it been delivered in a timely manner.
7.2.8.4 Conclusion
7.434. For the reasons set forth above , the Panel concludes that, in implementing the DSB's
recommendations and rulings in the original proceeding, the BoA acted inconsistently with Article 16
of the CVA by failing to provide a timely explanation of how the customs value was determined.

support of its claims, we are compelled to at least address this evidence in determining whether the Philippines
has met its burden of proof. In this respect, we recall the Appellate Body's statements that "[a] panel must
examine and consider all of the evidence placed before it" (Appellate Body Report, Chile – Price Band System
(Article 21.5 – Argentina), para. 240) and "the Panel's … role as the trier of facts requires it to review and
consider all the evidence that it receives from the parties". (Appellate Body Report, Australia – Apples, paras.
275-276)
943 For example, in US – Offset Act (Byrd Amendment), the Appellate Body acknowledged that the text
of Article 9.2 of the DSU "contains no requirement for the request for a separate panel report to be made by a
certain time". (Appellate Body Report, US – Offset Act (Byrd Amendment), para. 310 (emphasis original))
However, the Appellate Body considered that the provision had to be read in the light of the object and
purpose of the DSU, and upheld the panel's decision to deny the US request for separate reports on the
grounds that the request came too late. (Appellate Body Report, US – Offset Act (Byrd Amendment), paras.
311-316) We further recall the un-appealed findings of the original panel that the Thai Customs Department
had acted inconsistently with Articles X:3(a) and (b) of the GATT 1994 due to the "overall delays shown
throughout the course of the review process" and the "excessive delays that have been caused in the …
appeals before the BoA", respectively. (See Panel Report, Thailand – Cigarettes (Philippines), paras. 7.969 and
7.1015)
944 Panel Report, Thailand – Cigarettes (Philippines), para. 7.234.
945 Panel Report, Thailand – Cigarettes (Philippines), para. 7.234.
946 We recall our finding in footnote 356 above that the letter provided by the Customs Department on
16 June 2016 is part of the "record" of the determination. We do not consider that this alters our conclusion
that the letter was sent too late to satisfy the obligation in Article 16. In accordance with the original panel's
findings in respect of Article X:3(a) and (b) of the GATT 1994, a ruling by an appellate tribunal would certainly
constitute part of the "record" of the determination, but if that ruling were issued ten years after the request
for an appeal was filed, it would seem to be inconsistent with Article X:3(a) and (b). Similar reasoning is
applicable, in our view, in respect of the letter sent by the Customs Department on 16 June 2016 vis-à-vis
Thailand's obligations under Article 16 of the CVA.

7.3 The Criminal Charges
7.3.1 General
7.3.1.1 Factual description of the Charges
7.435. This section provides a general factual de scription of the criminal charges (the Charges),
beginning with a review of the events that culminated in the Public Prosecutor issuing them on
18 January 2016. The parties disagree on several related fundamental factual issues. We address
these disputed f actual issues in S ection 7.3.5 below, in the context of assessing whether the
Charges reflect a "customs valuation" determination for purposes of the CVA.
7.3.1.1.1 Events culminating in the Charges
7.436. Between July 2003 and June 2006, PMTL imported into Thailand 272 entries of Marlboro and
L&M cigarettes from the Philippines. PMTL's declared transaction values for each of these e ntries
was in the range of THB 7.60-8.14 per pack for Marlboro cigarettes, and THB 5.75-6.16 per pack for
L&M cigarettes.947 The Thai Customs Department accepted PMTL's declared transaction values for
these 272 entries of cigarettes.948
7.437. The Customs Department conducted a post -clearance audit of an unspecified number of
entries from 2006, and, in June 2008, the Customs Department concluded this audit by issuing a
letter confirming that PMTL had engaged in "no wrongdoing".949 In subsequent testimony to the Thai
Senate, a senior official with the Customs Department stated that "none of the information available
to [the Customs Department] indicates that the prices/values declared by [PMTL] were not the
correct transaction values of the imported goods".950
7.438. In August 2 006, the Thai Department of Special Investigations (DSI), a unit within the
Ministry of Justice, initiated a criminal investigation into the transaction values declared by PMTL.
The investigation covered 292 entries of cigarettes imported from the Philippi nes over the period
2003-2007.951 These 292 entries included the 272 entries imported between July 2003 and June
2006, and an additional 20 entries: 18 entries that took place between June 2006 and February
2007 and 2 entries that were wrongly included, as determined later.952 When the original panel was
established in 2008, the DSI investigation was still ongoing and had not yet arrived at any conclusion
on whether to recommend prosecution.
7.439. In April 2009, while the original panel proceeding w as ongoing, the D SI issued a
Memorandum of Allegation against PMTL and 13 of its current and former employees. 953 In the
Memorandum of Allegation, the DSI alleged that PMTL committed offences under several provisions
of the Customs Act of Thailand (B.E. 2469 (1926)) (the "Customs Act"), including Section 27 thereof.
More specifically, the DSI alleged that, over the period July 2003 through February 2007, PMTL
imported 292 entries of Marlboro and L&M cigarettes, and that "the declared values of cigarettes
imported into Thailan d from the Philippines by Philip Morris pursuant to such import entries were
undervalued and did not reflect the actual value of the cigarettes".954 The Memorandum of Allegation

947 Philippines' first written submission, para. 517, figure 6. The Philippines explains that for the first 111
of the 272 entries subject to the Charges, the prices expressed in THB fluctuate because the relevant entries
were priced in USD. (Philippines' first written submission, fn 323)
948 Philippines' first written submission, para. 638; Thailand's first written submission, para. 6.35.
949 Philippines' first written submission, para. 65 (referring to Letter from the Customs Department to
the Managing Director of PMTL No. Gor Kor 0514(Sor)/656, 19 June 2008 (English translation), (Exhibit PHL-
18-B)).
950 Senate Committee on Justice and Police Affairs, Report on Review and Study of Investigation into
and Consideration of Case Concerning Actual or Attempted Tax Evasion by PMTL et al., 10 October 2013
(English translation), (Exhibit PHL-87-B), p. 7.
951 The DSI simultaneously opened an investigation covering other entries imported over the period
between 2000 and 2003. This separate investigation culminated in the Charges filed in January 2017. See
paragraphs 1.32. to 1.34. above.
952 The Public Prosecutor identified one entry that had been double-counted by the DSI, and one entry
that did not pertain to Marlboro or L&M cigarettes. Those two entries were excluded from the scope of the
Charges brought in January 2016. (Philippines' first written submission, para. 500)
953 DSI, Memorandum of Allegation, 9 April 2009 (English translation), (Exhibit PHL-17-B).
954 DSI, Memorandum of Allegation, 9 April 2009 (English translation), (Exhibit PHL-17-B), p. 2.
(emphasis added)

set out multiple grounds for arriving at this conclusion955, beginning with "the comparison of the cost
price of cigarettes imported by Philip Morris with the cost price of cigarettes in other ASEAN
countries", and "the comparison of the price of cigarettes imported by Philip Morris with the price of
cigarettes imported by other importers, namely, Alis Inter Co., Ltd. and Bangkok Airways Co., Ltd."
(both of which are duty-free operators).
7.440. The DSI's Memorandum of Allegation also included the following comparison with the
declared import price of King Power, another duty-free operator, for the same brands:
[W]hen compared with the declared import price set forth by King Power International
Co., Ltd. of Marlboro brand cigarettes of 27.46/pack and of L&M brand cigarettes at
16.81/pack, the special investigation team found that, based upon the declared import
prices of Philip Morris, taxes and duties were lost in the approximate amount of
68,881,394,278 Baht 69 Satang (as detailed in the list accompanying the Memorandum
of Allegation) … Moreover, by sending sample cigarettes for testing, it w as found that
imported cigarettes from the Philippines by Philip Morris and imported cigarettes from
Malaysia by King Power International Co., Ltd. have the same overall quality,
proportions and ingredients. Additionally, the overall forms of evaporating s ubstances
in the cigarettes is not different as King Power used the certificate for importation (Form
YorSor. 3) issued by the Department of Disease Control to Philip Morris to support its
importation.
7.441. Thus, the DSI's Memorandum of Allegation suggested that the cigarettes imported by PMTL
are identical to those imported by King Power ( "the same overall quality, proportions and
ingredients", and the same certificate for importation), and calculated the taxes and customs duties
"lost" based on a comparison between the declared transaction values of PMTL and King Power's
prices. The Memorandum of Allegation was accompanied by a list of the entries in question, and a
table that calculates the "shortage of duty " at THB 68.8 billion. The calculation states that "the
difference in price is derived from the comparison with the import price declared by King Power at
THB27.47/pack for Marlboro and at THB16.81/pack for L&M".956
7.442. The Memorandum of Allegation additionally stated that "customs officials previously
inspected the price structure of Philip Morris on 3 March 1999 and the import price of its cigarettes
has been used for several years despite the fact that the price of ingredients used for manufacturing
cigarettes have risen every year ".957 The Memorandum of Allegatio n also stated that "from the
investigation, it was found that Philip Morris, the importer, and Philip Morris Philippines
Manufacturing Inc., the seller, have a relationship that resulted in the undervaluation of cigarettes
declared for importation into Tha iland".958 The Memorandum of Allegation added that "[f]rom the
investigation of Philip Morris financial documents, evidence of transfer of inaccurate expenses to
related persons or juristic persons was found".959
7.443. In September 2009, the DSI recommended that the Public Prosecutor bring charges against
PMTL and its employees.960 While the recommendation itself was not made public, the DSI issued a
press release reporting its recommendation. The press release explained that PMTL's under-declaring
of the transaction values resulted in under -taxation, in the sense that "fictitious values have been
fixed … to evade taxes and duties ", and that these arrangements "have cost the country's tax
revenues approximately THB [68.8 billion] ".961 The September 2009 press release further noted
"problems in collecting excise taxes on imported liquor and tobacco products ", and stated that
"[f]alse and underdeclarations of import values as part of tax-evasive planning are widespread and
have cost enormous tax revenues each year".962 As with the April 2009 Memorandum of Allegation,
the September 2009 DSI press release included a comparison of the transaction values declared by
"the foreign entity " for Marlboro and L&M cigarettes with several benchmarks, including "C.I.F.

955 DSI, Memorandum of Allegation, 9 April 2009 (English translation), (Exhibit PHL-17-B), pp. 1-2.
956 DSI, Memorandum of Allegation, 9 April 2009 (English translation), (Exhibit PHL-17-B), note
accompanying the table appearing at p. 4/44.
957 DSI, Memorandum of Allegation, 9 April 2009 (English translation), (Exhibit PHL-17-B), p. 1.
958 DSI, Memorandum of Allegation, 9 April 2009 (English translation), (Exhibit PHL-17-B), pp. 1-2
959 DSI, Memorandum of Allegation, 9 April 2009 (English translation), (Exhibit PHL-17-B), p. 2.
960 DSI, Press Release, 2 September 2009 (English translation), (Exhibit PHL-90-B).
961 DSI, Press Release, 2 September 2009 (English translation), (Exhibit PHL-90-B), p. 2.
962 DSI, Press Release, 2 September 2009 (English translation), (Exhibit PHL-90-B), p. 2.

Values of King Power"963, and notes that they are "vastly different".964 In subsequent testimony to
the Thai Senate, a senior official with the Customs Department confirmed that in "the DSI case
forwarded to the public prosecutors, the Department of Special Investigation used the import
prices/values of King Power, a duty free operator, as the basis of its allegations".965
7.444. However, this was not the sole ground specified in the September 2009 press release, as it
also referred to the transaction value of Alis Inter Co., Ltd. and Bangkok Airways Co., Ltd. (other
duty-free operators); retail prices in other ASEAN countries; and the ex factory values of
domestically produced Thai cigarettes. 966 As with the April 2009 Memorandum of Allegation, the
September 2009 press release also noted that the distributor/buyer and the manufacturer/seller are
both affiliates of the world's largest multinational tobacco group, and that it could be said that their
selling transactions "were not at arm's length"; it referred to "overseas money transfers which are
claimed to be expenses [but] are actually not expenses" in the sense of the Revenue Code, and this
"indicates tax-evasive schemes in Thailand, in terms of customs duties, [excise] taxes, and other
taxes"; and it stated that the C.I.F. value declared had remained unchanged over a period of years,
notwithstanding variations in freight costs and exchange rates.967
7.445. In January 2011, the Public Prosecutor determined that the evidence did not warrant
bringing charges against PMTL and its employees for the under-declaration of the customs values.968
The reasons that led the Public Prosecutor not to prosecute were not made public at that time.
However, they were publicly revealed in October 2013, in a report by the Thai Senate Committe e
on Justice and Police Affairs, which conducted a parliamentary inquiry into the investigation of PMTL.
That report included evidence given by DSI officials, who cited the following reasons for the Public
Prosecutor's decision not to prosecute PMTL: (i) t he Public Prosecutor concluded that the cigarette
prices/values declared by King Power and the prices/values deemed by the DSI to be likely actual
prices/values could not be held to be the actual prices/values for PMTL (on the grounds that the
imported cigarettes were of different places of origin, their distribution methods differed from each
other, and the purchase prices/values as declared by King Power did not include taxes and duties);
(ii) the Public Prosecutor concluded that to commence criminal proceedings, there would need to be
evidence showing a difference between the amount of the actual price/value paid by PMTL and the
price/value declared by PMTL; and (iii) the Public Prosecutor took into account that the Customs
Department, in a post -clearance audit, had found that PMTL had engaged in no wrongdoing in
declaring its transaction values.969
7.446. In January 2011, the Attorney -General returned the file to the DSI, for its reconsideration
and to decide whether to issue a "dissenting opinion", as provided for under the applicable criminal
procedure. In August 2011, the DSI issued such a dissenting opinion, objecting to the Public
Prosecutor's decision not to bring charges, and re -asserting its own recommendation that charges
be brought.970 The document itself was not made public at the time. However, a related press release
from the DSI, dated 17 August 2011, provided a summary of the DSI's dissenting opinion. The DSI's
August 2011 press release recalled its earlier opinion that the accused "declared the import value
which caused the shortage of the customs duty in the approx. amount of THB [68.8 billion]".971 As
with the DSI's Memorandum of Allegation from April 2009, and also the DSI's subsequent September
2009 recommendation, this dissenting opinion referred to several grounds for rejecting PMTL's
declared transaction value, including that the declared transaction value had remained unchanged
over a period of years, notwithstanding increases in the cost of goods, insurance, transportation
cost, and changes in currency exchange rates; the distributor/buyer and the manufacturer/seller are
both affiliates of Philip Morris, and their selling transactions were not at arm's length; and that

963 DSI, Press Release, 2 September 2009 (English translation), (Exhibit PHL-90-B), p. 1.
964 DSI, Press Release, 2 September 2009 (English translation), (Exhibit PHL-90-B), p. 2.
965 Senate Committee on Justice and Police Affairs, Report on Review and Study of Investigation into
and Consideration of Case Concerning Actual or Attempted Tax Evasion by PMTL et al., 10 October 2013
(English translation), (Exhibit PHL-87-B), p. 7.
966 DSI, Press Release, 2 September 2009 (English translation), (Exhibit PHL-90-B), p. 1.
967 DSI, Press Release, 2 September 2009 (English translation), (Exhibit PHL-90-B), p. 2.
968 Senate Committee on Justice and Police Affairs, Report on Review and Study of Investigation into
and Consideration of Case Concerning Actual or Attempted Tax Evasion by PMTL et al., 10 October 2013
(English translation), (Exhibit PHL-87-B), p. 4.
969 Senate Committee on Justice and Police Affairs, Report on Review and Study of Investigation into
and Consideration of Case Concerning Actual or Attempted Tax Evasion by PMTL et al., 10 October 2013
(English translation), (Exhibit PHL-87-B), pp. 4-5.
970 DSI, Press Release, 17 August 2011 (English translation), (Exhibit PHL-93-B).
971 DSI, Press Release, 17 August 2011 (English translation), (Exhibit PHL-93-B), p. 2.

PMTL's declared transaction value, of THB 7.76 per pack, was THB 0.1 lower than the price of Thai
cigarettes, and was THB 16 per pack lower than the price of Philip Morris cigarettes in Indonesia.972
It further stated that:
In addition, the case was important in terms of international trade. The Philippines had
filed a claim against Thailand and a panel of the World Trade Organisation (WTO) had
ruled that Thailand had acted in violation of the General Agreement on Tariffs and Trade
(GATT). If no objection was made to the prosecutor's decision to drop charges,
Thailand's national security or interests might be seriously affected.973
7.447. Given that the Public Prosecutor and the DSI disagreed on whether to file charges against
PMTL, the ultimate decision on whether to prosecute was left to Thailand's Attorney -General.974 In
September 2013, it was reported in the Thai press that the Attorney-General at the time had decided
to follow the DSI's recommendation, and had issued a Prosecution Order. This order was not made
public, but the Post Today Online reported at the time that:
Mr. Chulasingh Vasantasingh, the former Attorney General, had considered and decided
to order a prosecution against Philip Morris (Thailand) Limited and 12 other persons for
offences under the Customs Act B.E. 2469 (1926) and Tobacco Act B.E. 2509 (1966)
for jointly declaring the import prices of Marlboro and L&M from the Philippines below
the normal [price], to pay excise tax for cigarettes less than actual [tax], causing the
State to suffer damages of more than THB 68 billion.975
7.448. On 18 January 2016, the se events culminated in a de cision taken by the Thai Public
Prosecutor to file criminal charges against PMTL and seven of its current and former employees. The
competent Thai Criminal Court accepted and issued the Charges on the same day. 976 The Charges
cover 272 entries of Marlboro and L&M cigarettes imported from the Philippines between July 2003
and June 2006. While the DSI had recommended that PMTL be prosecuted with respect to 292
entries977, the Public Prosecutor decided to exclude 20 of the 292 entries from the Charges, to arrive
at a total of 272 entries subject to the Charges. As a result, the Charges cover a continuous sequence
of 272 entries, running from July 2003 to June 2006. The 20 entries excluded from the Charges
included 18 entries that were among the 118 entries covered by the DSB's recommendations and
rulings in the original proceeding, one entry that had been double-counted by the DSI, and one entry
that did not pertain to Marlboro or L&M cigarettes.978
7.449. In respect of these 272 entries of Marlboro and L&M cigarettes by PMTL, the Charges allege
that offences have been committed under Section 27 of the Customs Act, as well as other offences
that are consequential to a violation of Section 27.979
7.3.1.1.2 Section 27 of the Customs Act
7.450. Section 27 of the Customs Act makes it a crime to avoid or attempt to avoid the payment of
any customs duties with the intention to defraud the government of the customs duties and taxes

972 DSI, Press Release, 17 August 2011 (English translation), (Exhibit PHL-93-B), pp. 2-3.
973 DSI, Press Release, 17 August 2011 (English translation), (Exhibit PHL-93-B), p. 1.
974 According to Criminal Procedure Code, Section 145 (English translation and Thai original), (Exhibit
PHL-94-B).
975 Post Today Online, "Attorney General ordered a prosecution against Philip Morris for evasion of
cigarette tax", 2 October 2013 (English translation), available at:
http://www.posttoday.com/economy/finance/250676 (last accessed 19 January 2017), (Exhibit PHL-95-B). The
Philippines states that the Prosecution Order was widely reported in the Thai press, but was neither published
nor shared with the accused. (Philippines' first written submission, para. 492)
976 The Criminal Court, Charges, Case Black No. Or. 185/2559, 18 January 2016 (English translation),
(Exhibit PHL-1-B).
977 See DSI, Memorandum of Allegation, 9 April 2009 (English translation), (Exhibit PHL-17-B), p. 1.
978 Philippines' first written submission, paras. 496-497 and 500.
979 The other alleged violations are: Section 115 quarter of Custom Act B.E. 2469 (1926) (as amended
to (No. 22) B.E. 2557 (2014)) (English translation), (Exhibit PHL-34-B); Section 3 of the Customs Act (No. 11),
B.E. 2490 (1947) (English translation), (Exhibit PHL-98-B); Section 10 of the Customs Act (No. 17), B.E. 2543
(2000) (English translation), (Exhibit PHL-8-B); Sections 83 and 91 of the Criminal Code, Section 4 of the
Amendment Act of the Criminal Code (No. 6) B.E. 2526 (1983) (English translation), (Exhibit PHL-99-B);
Sections 4, 5, 6, 7, 8 and 9 of The Reward Giving to Offender Suppression Act. B.E. 2498 (1946) (English
translation), (Exhibit PHL-16-B).

which must be paid for such goods. The English translation of Section 27 submitted by the Philippines
reads as follows, with relevant terms highlighted:
Any person who shall import or bring into the Kingdom any uncustomed, restricted, or
prohibited goods, or any goods which have not been duly passed through the Customs;
or shall export or take out of the Kingdom any such goods; or shall assist in any way in
importing or exporting such goods; or shall, without official authority, remove or assist
in removing any such goods from any ship, wharf, godown, warehouse, place of
security, or store; or shall harb our, keep, or conceal, or permit or cause to be
harboured, kept, or concealed, any such goods; or shall be in any way concerned in
carrying, removing, or dealing with such goods; or shall be in any way concerned in any
evasion or attempted evasion of any d uties of Customs , or of any of the laws and
restrictions relating to the importation, exportation, landing, warehousing, and delivery
of goods with intent to defraud His Majesty's Government of any duties due on such
goods or to evade any prohibition or restriction of or applicable to such goods; shall for
each offence be liable to a fine equal to quadruple the duty-paid value of the goods, or
imprisonment for a period not exceeding ten years, or both fine and imprisonment.980
7.451. Thus, Section 27 of the Customs Act makes it a criminal offense to evade the payment of
"duties on Customs", with the "intention to "defraud the government" of the "duties" that is "due on
such goods". It further provides that the "fine" for such offense shall be four times the "duty-paid
value of the goods".
7.3.1.1.3 The content of the Charges and the Annex
7.452. The Charges set forth the allegation that PMTL violated Section 27 of the Customs Act by
declaring a "false price" for Marlboro and L&M cigarettes contrary to the "actual price", with the
intention to defraud the government of taxes and customs duties. The Charges repeat this allegation
in the context of providing particulars on each of the 272 entries of Marlboro and L&M cigarettes set
forth therein. For each of those 272 entries, the Charges repeat that "the Exhibit attached to the
Complaint" shows the details with respect to price per pack of cigarettes "falsely" declared, and the
"actual price" of cigarettes of each brand. The content of the Charges and the Annex is addressed
in greater detail below in Section 7.3.5 , in the context of our assessment of whether the Charges
reflect a "customs valuation" determination for purposes of the CVA.
7.453. Under Section 27 of the Customs Act, the penalties upon conviction include the imprisonment
of seven of PMTL's current and former employees, and the payment of fines by PMTL in an amount
that shall equal four times the duty -paid value, which is approximately THB 80,800,000,000
(approximately USD 2.3 billion). The Charge s also request the Court to order "the payment of a
bounty to the informant according to the law".
7.3.1.1.4 Events subsequent to the issuance of the Charges
7.454. On 19 January 2016, the day after the Charges were filed by the Public Prosecutor and issued
by the competent Thai Criminal Court, at least two articles in the Thai press reported on the filing of
the Charges. 981 These press reports contained various information, including PMTL's declared

980 Customs Act B.E. 2469 (1926) (as amended to (No. 22) B.E. 2557 (2014)) (English translation),
(Exhibit PHL-34-B). After the Philippines submitted an English translation of Section 27 of the Customs Act as
Exhibit PHL 34-B, Thailand subsequently submitted its own English translation of Section 27, as Exhibit THA 3-
B. In response to a question from the Panel, Thailand subsequently confirmed that the Panel was correct in its
understanding that Thailand did not object to the English translation of Section 27 submitted by the Philippines
as Exhibit PHL 34-B. (Thailand's response to Panel question No. 96) We note that paragraph 11 of the Working
Procedures provides that:
Any objection as to the accuracy of a translation should be raised promptly in writing, preferably
no later than the next filing or meeting (whichever occurs earlier) following the submission which
contains the translation in question. Any objection shall be accompanied by a detailed
explanation of the grounds of objection and an alternative translation. The Panel shall rule on
any objection to the accuracy of a translation as promptly as possible thereafter.
981 King-Oua Laohong, "Philip Morris tax evasion case reaches court", Bangkok Post, 19 January 2016,
available at http://www.bangkokpost.com/news/general/831708/philip-morris-tax-evasion-case-reaches-court
(last accessed 6 December 2016 ), (Exhibit PHL-119); and The Phuket News, "Philip Morris tax evasion case
reaches court", 19 January 2016, available at http://www.thephuketnews.com/philip-morris-tax-evasion-case-
reaches-court-55840.php (last accessed 6 December 2016), (Exhibit PHL-120).

transaction values for Marlboro (THB 7.76/pack) and L&M cigarettes (THB 5.88/pack), and the price
reported by other companies (THB 27.46/pack and THB 16.81/pack, respectively).
7.455. The proceedings before the Thai Criminal Court are ongoing. The court's initial hearing on
the evidence took place on 27 June 2016, and various other procedural hearings took place between
that date and 23 January 2017. At the hearing on 23 January 2017, the court decided that hearings
on the evidence would be conducted between 7 November 2017 and 4 April 2018. Assuming there
are no delays or postponements, the decision of the court would be announced by about June
2018.982
7.456. On 27 June 2016, at the hearing on the exchange of evidence, the Public Prosecutor filed an
application for an order to prevent information regarding the criminal proceedings from being shared
with third parties, including the Philippines, and to have the criminal proceedings heard behind closed
doors. The Public Prosecutor stated that the application was to counter the "possibility that the
Philippines may use such publicly disclosed evidence against Thailand in the WTO settlement of the
compliance dispute".983
7.3.1.2 Claims and order of analysis
7.457. The parties' requests for findings in relation to the Charges are set out in greater detail in
Section 3 of our Report. As reflected there, the Philippines ' claims and Thailand's defence s raise a
number of issues, including several distinct preliminary objections to the Panel making findings on
the WTO-consistency of the Charges.
7.458. We will begin by considering the two grounds underlying Thailand's request for a preliminary
ruling that the Charges fall outside the scope of this Article 21.5 compliance proceeding. In this
regard, Thailand asks the Panel to find that the Philippines is precluded from challenging the Charges
in this compliance proceeding because it challenged essentially the same measure in the original
dispute and failed to make a prima facie case of WTO-inconsistency. Thailand also submits that the
Philippines has not demonstrated that the Charges have a sufficiently "close nexus" with the matters
covered by the DSB's recommendations and rulings or the BoA's Ruling of 12 September 2012, and
therefore they are not a measure "taken to comply" with the DSB's recommendations and rulings.
7.459. If we find that the Ph ilippines' claims relating to the Charges fall within the scope of this
compliance proceeding, we will address Thailand's argument that the Charges are not a matter "ripe"
for adjudication as they constitute merely an allegation of criminal conduct and not a judgment by
the Criminal Court. Thailand characterizes the "ripeness" issue as one going to the Panel's
competence, and its submissions present this issue as a threshold issue to be resolved prior to
addressing the applicability of the CVA to the Charges.984
7.460. If we find that there is no legal impediment to making findings on the Charges in the present
Article 21.5 compliance proceeding, we will address the merits of the Philippines' claims relating to
the Charges. We will begin with the principal point of contention between the parties, which is the
applicability of the obligations in the CVA to the Charges. If we find that the Charges involve a
"customs valuation" determination subject to the obligations of the CVA invoked by the Philippines,
we will then determine whether the Philippines has demonstrated that the Charges are inconsistent
with those obligations. If we find that they are, we will then address the questions of whether the
general exceptions in Article XX of the GATT 1994 apply to the CVA, and if so, whether Thailand has
demonstrated that the inconsistency with the CVA is justified under those provisions.
7.461. After addressing these issues relating to the Charges, we turn to the Philippines' separate
and additional claim under Article 10 of the CV A concerning the alleged disclosure of PMTL's
transaction values to the media.

982 Philippines' first written submission, para. 524; Thailand's first written submission, paras. 6.8-6.10.
983 Philippines' first written submission, para. 528 (referring to Tilleke & Gibbins International Ltd.,
Hearing Report, 28 June 2016, (Exhibit PHL-103), p. 3).
984 In its first written submission, Thailand considers that even if the Philippines' claims relating to the
Charges "fall within the Panel's terms of reference" (para. 6.1), they are not "justiciable" (para. 6.49) by the
Panel, and states that the Panel does not have the "competence" (paras. 6.81, 6.82, 6.89) to address claims
relating to the Charges when the Charges have yet to be addressed by the Thai Criminal Court.

7.3.1.3 Claims not pursued
7.462. The Philippines' panel request contains a number of claims, some of which it has elected not
to pursue in this proceeding. In its panel request, the Philippines claimed that different aspects of
the Charges are inconsistent with several distinct obligations in the CVA and the GATT 1994. In the
course of the proceeding, the Philippine s pursued its claim that the Charges are inc onsistent with
the substantive obligations in Articles 1.1/1.2(a) of the CVA, because Thailand failed to use the
transaction value as the basis for customs value and failed properly to examine the circumstances
of sale. The Philippines also pursued its cla ims that the Charges are inconsistent with Article s 2.1
and/or 3.1 of the CVA to the extent that Thailand determined an alternative customs value based
on King Power's purchase prices. 985 However, the Philippines did not pursue additional claims that
were included in the panel request under Articles 7.1 and 7.2 of the CVA, or certain additional claims
under Articles III:2 and X:3(a) of the GATT 1994.986
7.463. We further note that the panel request claimed that the Charges are also inconsistent with
Article 1.2(a), third sentence, because Thailand "failed to communicate to the importer its grounds
for considering the transaction values to be unacceptable; and it further failed to give the importer
a reasonable opportunity to respond".987 However, the Philippines has not pursued any claim under
Article 1.2(a), third sentence, in relation to the Charges. In response to a question from the Panel,
the Philippines confirms that , "[w]ith respect to the Charges, the Philippines limits its claims to
violations of Thailand's substantive obligations under the CVA"988 and that "it makes no procedural
claims regarding the Charges"989. This means that the Panel need not, and indeed may not, examine
the consistency of the Charges with the procedural obligation in Article 1.2(a), third sentence, of the
CVA.990 As a consequence, it is not necessary for us to rule on whether, and if so how, the obligation
in Article 1.2(a), third sentence, would apply in the context of criminal charges relating to customs
valuation, or on how that procedural obligation would be informed by the terms of the "Decision
Regarding Cases where Customs Administrations Have Reasons to Doubt the Truth or Accuracy of
the Declared Value".991 Nor is it necessary for us to resolve the question of whether the DSI's April
2009 Memorandum of Allegation could be characterized as a document that "communicates" the
"grounds" to the importer.992
7.464. The panel request notes that "Thai law explicitly provides for the payment of 'bribes' and
'rewards' to informants and government officials assisting in bringing the Charges, in the amount of
55 percent of fines, which in this case amounts to approximately THB 44,440,000,000
(approximately USD 1,250,000,000)."993 Although the panel request contains this information, the
panel request does not appear to set out any claims under the CVA relating to the reward -sharing
provisions of Thai law, either "as such", or "as applied" in the context of the investigation of PMTL
and the Charges brought against it. In its submissions, the Philippines has not requested that the
Panel make any finding that the alleged "bribes" or "rewards" are inconsistent with the CVA. The
parties' submissions reveal that they hold different views on the proper characterization of the
"bounty", the eligibility of government officials to receive such bounty, and the amount of any money
that would be paid. 994 However, we agree with Thailand that "the Philippines has not challenged
Thailand's system as being WTO -inconsistent", and therefore "the question of rewards is simply
legally and factually irrelevant to the claims actually before the Panel ". Based on the foregoing, we
conclude that we are not called upon to make findings as to the WTO-consistency of Thailand's
"bribes" and "rewards" scheme, and it is not necessary to make any finding on the identity of the
"informant".

985 Panel request, para. 14, third and fourth bullets.
986 Panel request, para. 14, fifth bullet, and paras. 15-16.
988 Philippines' response to Panel question No. 92, para. 168.
989 Philippines' response to Panel question No. 92, para. 189.
990 See Thailand's comments on the Philippines' response to Panel question No. 92, p. 26.
991 See parties' responses to Panel question No. 97; third parties' responses to Panel question No. 4(a).
992 See Thailand's response to Panel question No. 107(b); Philippines' comment on Thailand's response
to Panel question No. 107(b).
993 Panel request, para. 13.
994 Philippines' first written submission, paras. 520-521; Philippines' second written submission, paras.
397-398; Thailand's first written submission, paras. 6.14-6.17; Thailand's second written submission, paras.
3.24-3.32.

7.3.2 Preclusion
7.3.2.1 Introduction
7.465. In August 2006, the DSI, a unit within the Thai Ministry of Justice, initiated a criminal
investigation into the import prices declared by PMTL. 995 The investigation covered 292 entries of
cigarettes, imported from the Philippines, over the period 2003 -2007.996 When the original panel
was established in 2008, the DSI investigation was stil l ongoing. The Philippines' request for the
establishment of a panel included claims relating to the DSI investigation under Articles X:3(a) and
(b) of the GATT 1994.997
7.466. In a preliminary ruling request, Thailand asked the Panel to find that the Philippines i s
precluded from challenging the Charges in th is compliance proceeding because it included claims
with regard to the underlying DSI investigation in the original proceeding, but did not pursue those
claims.998 According to Thailand, the Charges issued in January 2016 are the "same measure", or "a
measure which remains essentially the same", as the DSI investigation that was initiated in 2006.999
Thailand asks the Panel to find that the Charges issued in January 2016 are outside the scope of this
Article 21.5 compliance proceeding because the Philippines initially challenged the DSI investigation
before the original panel but failed to pursue its claim and therefore the Philippines is "precluded"
from challenging the Charges in this compliance proceeding.1000
7.467. The Philippines agrees with Thailand that "if a complainant opted not to pursue a challenge
to a measure in original proceedings, when it could have done so", or "did challenge the unchanged
measure in the original proceedings and failed to establish a prima facie case", then due process
precludes the complainant from challenging that measure in compliance proceedings. 1001 However,
the Philippines argues that the preclusion doctrine is not triggered in this case because the Charges
issued in January 2016 are n ot a measure that it could have challenged in 2008, nor the same
measure as the DSI investigation that was ongoing at the time of the original proceeding.1002
7.3.2.2 Main arguments of the parties
7.468. Thailand emphasizes that the Philippines' 2008 panel request in the or iginal proceeding
contained claims with respect to the DSI investigation. 1003 Thailand argues that the Charges "are
the same measure " as the DSI investigation initiated in 2006 because the Charges are the
"culmination" of the investigation by the DSI that was the subject of one of the Philippines' claims
in the original proceeding. 1004 Thailand emphasizes that the Philippines itself accepts that the

995 Philippines' first written submission, para. 465. In August 2006, the DSI also commenced a second
criminal investigation into 1094 entries imported by PMTL in the 2000-2003 period. That second investigation
resulted in the Public Prosecutor filing a second set of criminal charges, on 26 January 2017, against PMTL and
one of its former employees in respect of 780 entries of cigarettes imported by PMTL between January 2002
and August 2003. The competent Thai criminal court accepted and issued the Charges. It is these 2002-2003
Charges that are at issue in the second recourse to Article 21.5 referred to at paragraph 1.32. above.
996 These 292 entries included the 272 entries imported between July 2003 and June 2006, and an
additional 20 entries: 18 entries that took place between June 2006 and February 2007 and 2 entries that were
wrongly included, as determined later. The Public Prosecutor identified one entry that had been double-counted
by the DSI, and one entry that did not pertain to Marlboro or L&M cigarettes. Those two entries were excluded
from the scope of the Charges brought in January 2016. (Philippines' first written submission, para. 500)
997 Request for the establishment of a panel, 29 September 2008, WT/DS371/3, (Panel request), paras.
7 and 11.
998 Request for a preliminary ruling by Thailand, para. 1.3.
999 Thailand's response to Panel question No. 45, p. 42.
1000 See generally Thailand's request for a preliminary ruling; rebuttal submission on the preliminary
ruling request, paras. 2.1-2.21; first written submission, paras. 4.19-4.20; second written submission, paras.
3.33-3.38; response to Panel question Nos. 44-45; opening statement at the meeting of the Panel, paras. 31-
42.
1002 Philippines' first written submission, paras. 691-725; rebuttal submission on the preliminary ruling
request, paras. 3-30; second written submission, paras. 46-464; response to Panel question No. 46; opening
statement at the meeting of the Panel, paras. 60-63.
1003 Thailand's request for a preliminary ruling, para. 2.2 (referring to the panel request in the original
proceeding, para. 7). In response to question from the Panel, Thailand states that "the Philippines' decision to
include in its original panel request a challenge against the DSI investigation is a key reason why the
preclusion principle applies in this case". (Thailand's response to Panel question No. 44, p. 41)
1004 Thailand's second written submission, para. 3.34.

Charges are a "culmination" of the DSI investigation1005, and argues that the Philippines' claims rest
on a "formalistic"1006 and "artificial" distinction between the DSI investigation and its culmination –
the Charges. 1007 In Thailand's view, the DSI investigation and the Charges are "the same
measure"1008, or "essentially"1009 or "effectively"1010 the same measure, and the Philippines' position
that the Charges and the DSI investigation "are two different measures is simply hair-splitting".1011
In response to a question from the Panel, Thailand clarifies that this is a situation in which the
measure challenged in this compliance proceeding "is the same measure that was challenged in the
original proceedings", as opposed to a measure that the Philippines could have challenged in the
original proceeding but chose not to.1012
7.469. In Thailand's view, the fact that the Philippines raised clai ms with respect to the DSI
investigation under WTO legal provisions different from those in the original proceeding does not
render the preclusion doctrine inapplicable to those claims. 1013 Thailand argues that differences in
the WTO legal provisions under which the claims were brought against the DSI investigation (Article
X:3 of the GATT 1994) and the Charges (CVA Art icles 1 to 3) do not show that the two measures
are distinct. 1014 Thailand points out that the "legal concerns " of the Philippines have stayed
essentially the same, since the Philippines' first written submission and the record of the original
dispute show that the Philippines is now, and was then, concerned with "the rejection of PM
Thailand's customs valuation on the basis of comparison with the products of King Power, a duty-free
operator".1015 Thailand also submits that the Philippines mentioned the DSI investigation as part of
the factual background for the CVA -related claims in its first written submission in the original
dispute.1016 This, in Thailand's view, supports the argument that "the DSI investigation was relevant
at least to some extent" to the Philippines' claims under the CVA."1017
7.470. The Philippines submits that the "factual premise on which the request is based is simply
wrong", for "the simple reason that the Charges did not yet exist " at the time of the original
proceeding.1018 Regarding Thailand's argument that the Charges are a "continuation" of the DSI
investigation, the Philippines responds that the Charges are a "distinct legal act " by the Public
Prosecutor that ended the investigation that had been ongoing since August 2006, and constitute a
new measure that could not have been challenged, and was not challenged, in 2008. 1019 The
Philippines submits that the DSI investigation and the Charges cannot be seen as a single "measure"
because of the differences in substance: in the original proceeding the measure consisted of the
DSI's administration of an ongoing investigation while in the compliance proceeding the measure
consists of a custo ms valuation decision taken by the Public Prosecutor 1020; in th is compliance
proceeding, the Charges have been challenged under the CVA1021, whereas in the original proceeding
the Philippines challenged the investigation under Article X:3(a) of the GATT 1994; and finally, the
measures were taken by different executive agencies of Thailand, since the investigation was
conducted by the DSI while the Charges were brought by the Public Prosecutor. 1022 The Philippines
further argues that even if the Charges are viewed as an "inseparable part" of the DSI investigation,
which they are not, the relevant aspect of the measure being challenged has changed since 2008,
for the simple reason that the Charges did not exist in 2008.1023

1005 Thailand's rebuttal submission on the preliminary ruling request, para. 2.7.
1006 Thailand's rebuttal submission on the preliminary ruling request, paras. 2.8 and 2.9 (referring to
Panel Report, Chile – Price Band System (Article 21.5 – Argentina), paras. 7.154-7.155).
1007 Thailand's rebuttal submission on the preliminary ruling request, para. 2.6.
1008 Thailand's rebuttal submission on the preliminary ruling request, section 2 (entitled "The Charges
Are The Same Measure As The Criminal Investigation Challenged In The Original Proceedings").
1009 Thailand's response to Panel question No. 45, p. 42.
1010 Thailand's opening statement at the meeting of the Panel, para. 36.
1011 Thailand's opening statement at the meeting of the Panel, para. 36
1012 Thailand's response to Panel question No. 45.
1013 Thailand's request for a preliminary ruling, para. 3.36.
1014 Thailand's rebuttal submission on the preliminary ruling request, para. 2.18.
1015 Thailand's rebuttal submission on the preliminary ruling request, para. 2.20.
1016 Thailand's first written submission, para. 3.10 (referring to the Philippines' first written submission
in the original proceeding, paras. 196-201).
1017 Thailand's first written submission, para. 3.10.
1023 Philippines' rebuttal submission on the preliminary ruling request, para. 16.

7.471. The Philippines contests Thailand's argument th at the Philippines had the same "legal
concerns" with regard to both the DSI investigation and the Charges and thus could have challenged
the DSI investigation on the same basis in the original proceeding. The Philippines submits that it is
clear from its panel request in the original proceeding that the aspect of the measure challenged by
the Philippines in that proceeding was the DSI's "conduct [of] an investigation of the importer in
relation to the declared customs value of imports from the Philippines [that] has been conducted in
an unreasonable manner and is taking undue time to conclude"; and, the only claims raised by the
Philippines with regard to such measure were under Articles X:3(a) and (b) of the GATT 1994. 1024
The Philippines further observes that the 2006 letter from PMTL to the DSI (on which Thailand relies
to demonstrate the Philippines' customs valuation concerns with regard to the DSI investigation in
the original proceeding) referred only to media reports, and as a WTO Member distinct from P MTL
(the author of the letter) the Philippines never made the arguments contained in the letter. 1025 In
addition, the Philippines states that "no customs valuation decision had been made " when the
original dispute began, as the Charges had not been issued at that time, and that "[v]iolations of
Articles 1.1, 1.2(a), 2.1(a), 2.1(b), 3.1(a), 3.1(b) and 10 of the CVA could not, therefore, have been
brought then, because the violations had not yet been committed".1026 The Philippines considers that
the point in time at which there was a customs valuation "determination" was when the Public
Prosecutor issued the Charges on 18 January 2016.1027
7.3.2.3 Analysis by the Panel
7.3.2.3.1 General considerations
7.472. We note that Thailand relies on the so-called "preclusion doctrine", a limitation on the scope
of Article 21.5 proceedings that is well established in WTO case law.1028 The Philippines largely agrees
with Thailand's articulation of the legal standard relating to the preclusion doctrine, and accepts that
"if a complainant opted not to pursue a challenge to a measure in original proceedings, when it could
have done so, due process precludes the complainant from challenging that measure in compliance
proceedings."1029
7.473. As we have previously emphasized, a compliance panel proceeding is not an opportunity to
"re-litigate" issues that were addressed, or could have been addressed, in the original
proceeding.1030 It is well established that "[a] complainant that, in an original proceeding, fails to
establish a prima facie case should not be given a 'second chance' in an Article 21.5 proceeding, and
thus be treated more favourably than a complainant that did establish a prima facie case but,
ultimately, failed to prevail before the original panel ".1031 Thus, no distinction is drawn between a
measure that could h ave been challenged at the time of the original proceeding but was not, a
measure that was initially raised but not pursued by the complainant, and a measure that was
challenged but rejected on the merits. In US – Upland Cotton (Article 21.5 – Brazil), the Appellate
Body stated that "a complaining Member ordinarily would not be allowed to raise claims in an Article
21.5 proceeding that it could have pursued in the original proceedings, but did not ".1032 Additional

1025 Philippines' rebuttal submission on the preliminary ruling request, paras. 26-28.
1026 Philippines rebuttal submission on the preliminary ruling request, para. 29.
1027 Philippines' response to Panel question No. 38(d), para. 34.
1028 The preclusion doctrine has been considered in a number of Article 21.5 proceedings to date,
including US – Shrimp (Article 21.5 – Malaysia), EC – Bed Linen (Article 21.5 – India), US – Countervailing
Measures on Certain EC Products (Article 21.5 – EC), US – Oil Country Tubular Goods Sunset Reviews, (Article
21.5 – Argentina), Chile – Price Band System (Article 21.5 – Argentina), US – Upland Cotton (Article 21.5 –
Brazil), US – Zeroing (EC) (Article 21.5 – EC), US – Tuna II (Mexico) (Article 21.5 – Mexico), EC – Fasteners
(Article 21.5 – China), EC and certain member States – Large Civil Aircraft (Article 21.5 – US), and US – Large
Civil Aircraft (2nd complaint) (Article 21.5 – EU).
1029 Philippines' first written submission, paras. 700 and 705.
1030 See paragraph above 7.10. (referring to Appellate Body Reports, EC – Bed Linen (Article 21.5 –
India), para. 96; US – Upland Cotton (Article 21.5 – Brazil), para. 210; and Panel Report, US – Large Civil
1031 Appellate Body Report, EC – Bed Linen (Article 21.5 – India), para. 96.
1032 Request for a preliminary ruling by Thailand, para. 3.15 (referring to Appellate Body Report, US –

guidance on the scope and contours of the prec lusion doctrine, and on how it applies in different
sets of circumstances, has been developed through subsequent cases.1033
7.474. The "preclusion doctrine", as the parties refer to it, essentially stands for the proposition
that the complainant cannot challenge, i n an Article 21.5 proceeding, the same measure that the
complaining party: (i) could have challenged in the original proceeding, but chose not to; or (ii) did
already challenge, but did not successfully pursue, in the original proceeding. The preclusion doctrine
applies at the level of unchanged aspects of a measure , insofar as they are separable from the
measure taken to comply.1034
7.475. The parties, in addition to agreeing on the articulation of the legal standard that is to be
applied, also agree on several key factual circumstances that are relevant to its application. Notably,
it is not in dispute that the DSI investigation had been initiated as of August 2006, and that the
Philippines raised claims of WTO -inconsistency in respect of that investigation in its 2008 panel
request. It is also not in dispute that the Philippines elected not to pursue those claims, and that, as
a result, the original panel made no findings in relation to those claims. Nor is it in dispute that the
Charges filed on 18 January 2016 are the culmination of the DSI investigation initiated in 2006.
7.476. We understand the Philippines to accept the premise that if the complaining party raises a
claim in the original panel request but chooses not to pursue that claim before the original panel,
the complaining party may, as a consequence, be precluded from raising the same claim in relation
to the same measure before a compliance panel. In other words, the Philippines has not argued that
there is any significant distinction, for purposes of applying the preclusion doctrine, between claims
that were pursued and ultimately rejected on the merits by the panel, on the one hand, and claims
that were included in the panel request and abandoned by the complainant in the course of the
proceeding. We see no significant distinction between these situations, and consider abandoned
claims as akin to claims that were pursued and rejected for purposes of the preclusion doctrine.
Indeed, it appears that in EC – Bed Linen (Article 21.5 – India), India was precluded from making a
claim that it had raised in the panel request but abandoned in the course of the proceeding.1035
7.477. Based on the parties' arguments, we consider that there are two main issues in dispute.
First, whether the Charges issued in January 2016 and the DSI investigation initiated in 2006 are
properly characterized as essentially the same "measure" for purposes of applying the preclusion
doctrine, such that the Philippines is now challenging the same measure that it already challenged ,
but did not successfully pursue, in the original proceeding. Second, if the Charges and the DSI
investigation are not the same measure, whether the Philippines' claim in this proceeding
nonetheless relates to an "unchanged aspect " of the measure ( a comparison with King Power's
prices) that was challenged, but not successfully pursued, in the original proceeding.
7.3.2.3.2 Relationship between the Charges and the DSI investigation
7.3.2.3.2.1 "the same measure"
7.478. As explained above, Thailand argues that the Charges "are the same measure ", or
"essentially" or "effectively" the same measure, as the DSI investigation initiated in 2006. In this
regard, Thailand considers that the Charges ar e "inseparable" from the investigation, and

1033 We note that the preclusion doctrine is not unique to WTO dispute settlement proceedings, and
iterations of the same doctrine, albeit with varying nomenclature, can be found in various jurisdictions. For
instance, the doctrine of res judicata, which prevents parties from re-litigating certain matters previously
raised before a court or a tribunal, is conceptually similar to the preclusion doctrine. As one panel has
explained:
In international jurisdictions where it is applicable, the doctrine is generally understood to mean
that an issue that has been decided on in a final adjudication, that is, after exhaustion of any
available appeal rights, must be considered as a settled matter between the parties to the
dispute. Consequently the issue previously resolved cannot be re-opened in subsequent
proceedings. This doctrine has found application in the jurisprudence of the International Court of
Justice, whose Statute contains express provisions concerning the binding and final character of
its judgments. (Panel Report, India – Autos, para. 7.62)
1034 Appellate Body Report, EC – Bed Linen (Article 21.5 – India), para. 86; Appellate Body Report, US –
Zeroing (Article 21.5 – EC), paras. 432-435; Panel Report, EC and certain member States – Large Civil Aircraft
(Article 21.5 – US), para. 7.426.
1035 Panel Report, EC – Bed Linen (Article 21.5 – India), paras. 6.41-6.42.

"necessarily part of " the investigation. 1036 Thailand considers that it would be "artificial" and
"formalistic" to characterize the Charges as a "distinct measure" from the investigation.1037
7.479. Having carefully considered Thailand's arguments and taking into account the introductory
considerations addressing the relationship of original panel proceedings in the context of the ordinary
dispute settlement process and compliance proceedings under Article 21.5 of the DSU, we are unable
to agree that the DSI investigation initiated in 2006, and the Charges filed by the Public Prosecutor
in 18 January 2016, are "the same measure". We observe that the Charges are a legal instrument
issued in 2016, approximately ten years after the DSI investigation was initiated in 2006, and
approximately eight years after the panel request was filed in the original proceeding. The events
between the DSI's initiation of its investigation in August 2006 and the Public Prosecutor's filing o f
the Charges on 18 January 2016 involved a series of steps, over a period of years, including: the
information-gathering steps by the DSI over the period 2006-2009; a Memorandum of Allegation by
the DSI in April 2009; a recommendation to prosecute by the DSI in September 2009; a rejection
of that recommendation by the Public Prosecutor in 2011; a second recommendation by the DSI in
August 2011; a subsequent Prosecution Order by the Attorney-General two years later, in September
2013; and then the issuance of the Charges by the Public Prosecutor two years after that, in January
2016. We further observe that the investigation was conducted by the DSI, whereas the Charges
were issued by the Public Prosecutor, a separate authority. Finally, the Charges have dir ect legal
consequences that the DSI investigation did not, including: (i) the accused becoming subject to the
mandatory jurisdiction of the criminal court; (ii) the accused being required to appear before the
court to answer the Charges and attend the hearings relating to the Charges; (iii) the accused having
to apply for and pay bail to secure temporary release during the proceedings; (iv) the accused having
an officially recorded indictment and accusations; and (v) the accused having to pay the costs of a
defence for criminal proceedings.
7.480. It is not in dispute that the Charges were the culmination of the DSI investigation. However,
in our view this does not serve as a basis for finding that they comprise a single measure for purposes
of WTO dispute settleme nt or the application of the preclusion doctrine. By way of analogy, we
observe that, in the context of countervailing and anti-dumping duty proceedings, there is a process
that begins with the initiation of an investigation, and then continues through sub sequent phases
and steps that may include a preliminary determination, a final determination, the imposition of
duties, and subsequent administrative and sunset review determinations. The Appellate Body has
observed, in the countervailing duty context, tha t it sees "a decision to impose a definitive
countervailing duty as the culminating act of a domestic legal process which starts with the filing of an
application by the domestic industry, includes the initiation and conduct of an investigation by an
investigating authority, and normally leads to a preliminary determination and a final
determination".1038 In the anti -dumping context, the same understanding is reflected in the
observation that "successive determinations of different types are made in the context of a single
trade remedy proceeding" and since they all concern the imposition and collection of duties under a
particular dumping order, they "form part of a continuum of events and measures that are all
inextricably linked".1039
7.481. If the DSI investigation and the 2016 Charges must be treated as the same "measure" on
account of the fact that the former "culminated" in the latter, then applying that same logic to the
trade remedies context would lead to the conclusion that all of the sequential phases and steps in a
single trade remedy investigation must also constitute inseparable components of a single
"measure", given that a determination (and imposition of duties) is always the "culminating act" of
the investigation. Taken to i ts logical conclusion, this would mean that, in the trade remed ies
context, a complainant would, in principle, be precluded from initiating any compliance proceeding
against subsequent steps in the process, because any such steps (including, for instance, a re-
determination on the basis of an administrative or sunset review) would always be part of the same
"measure" that the complainant had already challenged in the original proceeding. It would evidently
be at odds with WTO law and practice, including prior Article 21.5 proceedings in the trade remedies
context, to conclude that all of the various phases and steps in a trade remedy investigation,
spanning the initiation of the investigation to the imposition of duties, constitute a single "measure"
in this manner.

1036 Thailand's rebuttal submission on the preliminary ruling request, para. 2.7.
1037 Thailand's rebuttal submission on the preliminary ruling request, paras. 1.2, 2.6, 2.7 and 2.8.
1038 Appellate Body Report, Brazil – Desiccated Coconut, p. 11, DSR 1997:I, 167, at p. 176. (emphasis
added)
1039 Panel Report, US – Zeroing (Article 21.5 – EC), para. 8.103. (emphasis added)

7.482. A somewhat similar issue was addressed by the panel in US – Large Civil Aircraft (2 nd
complaint) (Article 21.5 – EU) and we find that panel's analysis to be instructive. In that dispute,
the complainant challenged payments made to Boeing pursuant to US Department of Defence
research contracts. These individual research contracts were funded under broader research
programs (or "program elements"). The respondent argued that the complainant was precluded from
challenging certain research contracts that were funded through research programs (or "program
elements") that were in existence at the time of the panel request, even though the specific research
contracts were not yet in existence at the time of the original panel request. The panel stated that
it was:
[U]nable to endorse this argument, insofar as it concerns procurement contracts and
assistance instruments entered i nto after the date of the European Communities'
original panel request … albeit funded through program elements that already existed
at that time. In this situation, the issue of "preclusion" does not arise because, even if
the RDT&E program elements (or their antecedent program elements) were in existence
at the time of the European Communities' original panel request, the legal instruments
were not. It would not have been possible for the European Communities to have
challenged the program elements indepe ndently of the legal instruments because the
only way that Boeing receives payments or access to DOD facilities, equipment, and
employees under the RDT&E program elements is through specific legal instruments,
whether procurement contracts or assistance instruments.1040
7.483. Accordingly, the p anel explained that it would examine the United States' "preclusion"
arguments concerning particular R&D contracts on a contract-by-contract basis, by first "determining
whether the procurement contract or assistance instrume nt existed at the time of the European
Communities' original panel request".1041 Thus, the challenged measure existing at the time of the
original panel request was treated as a necessary pre-condition for triggering the application of the
preclusion doctrine , and the fact that challenged instruments were the consequence of other
measures that did exist at the time of the original panel request did not mean that the two measures
could be agglomerated into the same "measure" for purposes of applying the preclusion doctrine.
7.484. We recognize that, in its argumentation on the preclusion issue, Thailand repeatedly
emphasizes that the Philippines included, and then abandoned, a claim relating to the DSI
investigation in the panel request in the original proceeding. 1042 Thailand indicated that it is "a key
reason why the preclusion principle applies in this case".1043 In our view, the fact that a claim relating
to the DSI investigation was included in the 2008 panel request is contemporaneous evidence that
the Philippines was aware of the existence of the DSI investigation at the time of the original
proceeding. We do not consider, however, that this fact speaks to the issue of whether the DSI
investigation and the Charges issued in January 2016 are the "same measure".
7.485. Based on the foregoing, we are unable to sustain the basic premise of Thailand's argument,
which is that the Charges and the underlying DSI investigation are the same measure. Accordingly,
we are unable to agree with Thailand that the Philippines is precluded from challenging the Charges
on the grounds that they are the same measure that the Philippines already challenged in the original
proceeding.
7.3.2.3.2.2 "unchanged aspect" of the measure
7.486. Turning to the second issue, namely whether the Philippines' claims relate to an "unchanged
aspect" of the Charges that it had already challenged in the original proceeding, we recall that the
preclusion doctrine applies at the level of unchanged aspects of a measure that are separable from
the measure taken to comply .1044 Thus, in principle, a complainant cannot challenge, in an Article
21.5 proceeding, an unchanged aspect of a measure that it could have challenged in the original
proceeding, but chose not to, or which the complainant did already challenge , but did not
successfully pursue, in the original proceeding. With this in mind, we recall Thailand's argument
that, at the time of the original proceeding, the Philippines had the same "legal concern" with regard

1040 Panel Report, US – Large Civil Aircraft (2nd complaint) (Article 21.5 – EU), para. 7.158.
1041 Panel Report, US – Large Civil Aircraft (2nd complaint) (Article 21.5 – EU), para. 7.159.
1042 See, e.g. Thailand's rebuttal submission on the preliminary ruling request, para. 2.4.
1043 Thailand's response to Panel question No. 44, p. 41.
1044 See cases cited in footnote 1034 above.

to the DSI investigation as it now has with regard to the Charges – namely, a customs valuation
determination on the basis of a comparison with the products of King Power, the Thai duty -free
operator.1045 In this regard, Thailand refers to a letter, dated 1 September 2006 from PMTL to the
DSI Director-General, in which PMTL objects to a comparison between its import prices and a duty-
free import price.1046
7.487. Recalling our findings in the previous section as to the fundamental differences between the
Charges and the DSI investigation, and our resulting conclusion that they are two distinct measures
taken approximately eight years apart from one another , it is by no means clear that one or more
commonalities between those measures could suffice to trigger the applicability of the preclusion
doctrine. Insofar as it is necessary to proceed further and assess whether the preclusion doctrine
applies on the grounds that the relevant aspect of the Charges being challenged by the Philippines
was already brought into existence through the DSI investigation that preceded it by approximately
eight years, we observe that Thailand has not demonstrated that the Philippines is actually
challenging the same "aspect" of the DSI investigation that it challenged in the original proceeding.
We recall that the Philippines' claims in the or iginal panel request relating to the DSI investigation
were made under Article X:3 of the GATT 1994, and not under Articles 1, 2 or 3 of the CVA.
Specifically, the panel request included the following claim relating to the DSI investigation under
Articles X:3(a) and (b) of the GATT 1994:
II. CLAIMS UNDER ARTICLES X:3(A) AND X:3(B) OF THE GATT 1994
…
7. Moreover, Thailand's Department of Special Investigations (DSI) is
conducting an investigation of the importer in relation to the declared
customs value of imports from the Philippines. This investigation has been
conducted in an unreasonable manner and is taking undue time to
conclude. The unreasonable nature of this investigation is highlighted by
the fact that Thai Customs has conducted a parallel investigation to that of
the DSI and, on 19 June 2008, concluded with a finding that the importer
had engaged in no wrong-doing.
…
For all these reasons, Thailand violates Articles X:3(a) and X:3(b) of the
GATT 1994.1047
7.488. It follows from the panel request that the Phil ippines raised two concerns in respect of its
claims under Article X:3(a) and (b). First, the Philippines highlighted the protracted period of time
the DSI investigation was taking, stating that: "[t]his investigation has been conducted in an
unreasonable manner and is taking undue time to conclude". Second, the Philippines indicated that
the DSI and Thai Customs were conducting parallel investigations which, in the Philippines' view,
further demonstrated the "unreasonable nature " of the DSI investigation. Neither of these two
aspects of the DSI investigation challenged by the Philippines in the original panel request related
to doubts by the DSI - let alone the Public Prosecutor - as to PMTL's declared transaction values on
the basis of a comparison with King Power's purchase prices. In our view, this is sufficient to conclude
that the Philippines did not challenge this "aspect" of the DSI investigation in the original proceeding.
7.489. We emphasize that Thailand's argument is that this case presents a situation i n which the
measure challenged in this compliance proceeding "is the same measure that was challenged in the
original proceedings", as opposed to a measure that the Philippines could have challenged in the
original proceeding but chose not to.1048 Based on the scope of Thailand's request, and the grounds
that it is based on, the question before the Panel is limited to whether the Philippines is challenging
essentially the same measure, or essentially the same aspect of a measure, as that which it already
raised, but did not pursue, in the original proceeding. We do not consider that Thailand has further

1045 Thailand's rebuttal submission on the preliminary ruling request, para. 2.20.
1046 Letter from PMTL to the Director General of DSI, 1 September 2006 (English translation), (Exhibit
THA-1-B).
1047 Philippines' panel request in the original proceeding, paras. 7 and 11.
1048 Thailand's response to Panel question No. 45. (emphasis added)

argued, even in the alternative, that the Philippines is precluded from challenging this aspect of the
measure on the ground that it could have been challenged, even though it was not challenged in the
original proceeding. However, Thailand's argumentation on this point is not entirely devoid of
ambiguity1049, and we therefore address this issue in the interest of completeness.
7.490. We are not persuaded that the Philippi nes could have challenged the same "aspect" of the
Charges that it now challenges, i.e. the rejection of PMTL's transaction values and the determination
of a revised customs value based on King Power's prices, in the context of its challenge of the DSI
investigation. In our view, the Philippines has adequately demonstrated that, at the time of the
original proceeding, there was no information available for the Philippines to bring claims other than
"administrative" claims under Article X:3(a) and (b) of the GATT 1994 with regard to the DSI
investigation.1050 We recall that the DSI did not issue its Memorandum of Allegation until April 2009,
and did not issue its recommendation to prosecute until September 2009. The DSI investigation was
still ongoing at the time of the original proceeding, and it is not clear that it could have reached the
threshold of being a customs valuation "determination" that could have been challenged under the
CVA at that time. Indeed, Thailand has not suggested otherwise, and maintains that the Charges
issued in January 2016 do not have the requisite degree of finality to be characterized as a
"determination" under the CVA. 1051 Thus, even assuming for the sake of argument that the
Philippines was aware, in 2008, that the DSI investigation involved doubts as to PMTL's declared
transaction values, on the basis of a comparison with King Power, we still do not see how the
Philippines could have been in a position to challenge this aspect of the DSI investigation in the
original proceeding.
7.3.2.4 Conclusion
7.491. Based upon the considerations above, t he Panel concludes that the Philippines is not
precluded from challenging the Charges in this compliance proceeding under Article 21.5 of the DSU.
7.3.3 Close nexus
7.3.3.1 Introduction
7.492. In the original proceeding, the challenged measures included the rejection by the Thai
Customs Department of PMTL's declared transaction values for 118 entries, imported over the period
June 2006 to September 2007. 1052 On 12 September 2012, the BoA reversed the Customs
Department's rejection of the transaction values for the 118 entries subject to the DSB's
recommendations and rulings, and decided to accept the transaction values. 1053 This
September 2012 BoA Ruling is one of Thailand's declared "measures taken to comply" with the DSB's
recommendations and rulings.1054
7.493. The Philippines submits that the Charges are a "measure taken to comply " because they
have a sufficiently close nexus to the September 2012 BoA Ruling and the related recommendations
and rulings of the DSB.1055 Thailand argues that the Charges do not have a sufficiently close nexus
to the matters covered by the DSB's recommendations and rulings, or to the September 2012 BoA
Ruling, to be considered a measure taken to comply with DSB's recommendations and rulings, and
consequently the Charges fall outside of the scope of this proceeding.1056

1049 At paragraph 41 of its opening statement at the meeting of the Panel, Thailand stated that "[t]hese
are effectively the same arguments that the Philippines is now making before this compliance panel. Thus, the
Philippines is simply incorrect that it did not or could not have raised exactly the same factual and legal
concerns before the original panel." (emphasis added)
1050 Philippines' rebuttal submission on the preliminary ruling request, para. 27.
1051 See paragraph 7.586. below.
1052 Panel Report, Thailand – Cigarettes (Philippines), para. 7.79.
1053 See BoA Ruling No. GorOr 81/2555/Por7/2555(4.1) and cover letter No. GorKor 0519(8) (GotOr),
12 September 2012 (English translation), (Exhibit PHL-53-B).
1054 See paragraph 1.9. b above.
1055 Philippines' first written submission, paras. 541-555; Philippines' rebuttal submission on the
preliminary ruling request, paras. 31-54; second written submission, paras. 465-522; opening statement at
the meeting of the Panel, paras. 73-76; responses/comments to Panel question Nos. 40-41, 43, 103-104.
1056 Thailand's rebuttal submission on the preliminary ruling request, paras. 3.1-3.48; first written
submission, paras. 4.6-4.18; second written submission, paras. 3.39-3.62; opening statement at the meeting
of the Panel, paras. 43-50; responses/comments to Panel question Nos. 40-41, 43 and 103-104.

7.494. On the basis of the relevant jurisprudence, the parties have focused their arguments relating
to the existence of a "close nexus" on an examination of whether, in terms of timing, nature and
effects, the Charges are sufficiently connected with the declared measures taken to comply, in
particular the September 2012 BoA Ruling, and with the DSB's recommendations and rulings in the
original proceeding.
7.3.3.2 Main arguments of the parties
7.495. The Philippines advances arguments relating to the timing, nature and effects of the
measures in question. Beginning with the timing of the Charges, the Philippines submi ts that the
Charges were brought on 18 January 2016, which post -dates the expiry of Thailand's reasonable
period of time to implement the DSB's recommendations and rulings, in 2012, as well as the adoption
of Thailand's declared measures taken to comply, a nd thus the timing of the Charges is such that
they are capable of undermining compliance. 1057 The Philippines agrees with Japan that the Panel
should consider "the course of events leading up to the Charges (including the institution of the
investigation and the filing of the criminal charges) in relation to the DSB's recommendations and
rulings as well as the BoA's decision".1058 In this regard, the Philippines highlights that, although the
DSI's investigation began in August 2006, before the DSB issued its rec ommendations and rulings
in the original proceeding on 15 July 2011, it proceeded subsequent to that date, and resulted in the
second recommendation to prosecute in August 2011 (which, as discussed above, specifically
connected the recommendation to the or iginal WTO ruling), and ultimately the Charges issued on
18 January 2016. 1059 The Philippines submits that "[t]his course of events shows that there is a
substantive connection between the Charges and the DSB's recommendations and rulings. The
relevant events continued after the DSB's recommendations and rulings, and the Charges
themselves were adopted long thereafter".1060 The Philippines further notes that, "in considering 'the
course of events leading up to the Charges ', the Panel must also take into account t hat the
investigation included 18 of the 118 entries that were subject to the DSB's recommendations and
rulings", and that "[i]t was not until shortly before the Charges were issued in January 2016 that
the Public Prosecutor decided to exclude these 18 entries from the Charges."1061
7.496. In terms of the nature of the measures, the Philippines argues that the Charges, the BoA
ruling issued on 12 September 2012, and the DSB's recommendations and rulings in the original
dispute, share "specific close connections in terms of nature", specifically: the same importer (PMTL),
the same exporter (PM Philippines Manufacturing Inc.), the same importing country (Thailand), the
same exporting country (the Philippines), the same product and brands (Marlboro and L&M cigarettes
produced by PMPMI), the same transaction values, under the same supply contract, the same type
of legal determination (a customs valuation determination), and the same grounds for doubting the
declared customs values (a comparison with the duty free price s of King Power International Co.
Ltd.).1062
7.497. The Philippines disagrees with Thailand that "the lack of overlap in entries is decisive for
purposes of determining whether there is a substantive connection "1063, and argues that, "[t]aken
to its logical conclusion , Thailand could continue to engage in the same WTO -inconsistency with
respect to every new entry" and "the Philippines would be required to bring new disputes regarding
each new entry ".1064 The Philippines argues that when the measures involve a certain type of
"recurring decision " – decisions to calculate dumping margins, or assess customs value (in this
dispute) – the decisions need not be identical to enjoy sufficient connections to be within the scope
of a compliance proceeding.1065 The Philippines submits that, contrary to Thailand's arguments, the
fact that the Charges were issued by the Public Prosecutor while the DSB's recommendations and
rulings were implemented by different agencies does not sever the close nexus as "municipal law

1058 Philippines' response to Panel question No. 41(a), para. 342 (referring to Japan's third-party
submission, para. 19).
1059 Philippines' response to Panel question No. 41(a), paras. 342-343.
1060 Philippines' response to Panel question No. 41(a), para. 344.
1061 Philippines' response to Panel question No. 41(a), para. 345. (emphasis original)
1063 Philippines' second written submission, para. 496. (emphasis original)
1064 Philippines' rebuttal submission on the preliminary ruling request, para. 52.

classifications are no t determinative of issues raised in WTO dispute settlement proceedings. "1066
Similarly, the Philippines submits that a municipal classification of the Charges as criminal is not
dispositive of the existence of close nexus, and that the Charges involve the sam e type of legal
determination that was at issue in the original proceeding – customs valuation.1067 The Philippines
maintains that the Charges involve a customs valuation determination for all of the same reasons
set forth in its submission regarding the applicability of the CVA to the Charges.1068
7.498. With regard to the effects of the Charges, the Philippines reiterates that "as compared with
the original measure concerning Thailand's rejection of customs value for 118 entries in 2006-2007,
and the September 2012 BoA Ruling, the Charges involve a customs valuation decision to reject the
transaction values for the same product and the same brands, imported by the same importer to
the same importing country, from the same exporter in the same exporting country, under the same
supply contract, and at the same prices."1069 In the Philippines' view, "[t]he effect of the Charges is
to aggravate the WTO inconsistencies that Thailand has been instructed by the DSB to resolve,
because Thailand is making new WTO -inconsistent valua tion decisions that perpetuate the WTO
inconsistencies it is obliged to correct."1070
7.499. Thailand argues that, although the timing of a measure offers only limited guidance, long
gaps between the adoption of the DSB's recommendations and rulings, the issuance of the BoA
Ruling and the issuance of the Charges suggest that the connection between those elements is "too
remote".1071 In addition, the DSI investigation, which resulted in the Charges, started in August
2006, almost five years before the DSB adopted the original panel and the Appellate Body reports;
this time gap, in Thailand's opinion, also shows that the Charges are not connected with the
occurrence of the DSB's recommendations and rulings.1072
7.500. With regard to the nature of the Charges, Thailand does not cont est the majority of the
commonalities identified by the Philippines between the Charges and the BoA Ruling of
September 2012 and the DSB's recommendations and rulings that it implemented, but submits that
"these are simply not sufficient to meet the close nexus test".1073 In fact, Thailand considers that
"[t]he Charges have no conn ection with the DSB recommendations and rulings given that their
subject matter is different. "1074 In its initial argumentation, Thailand focuses primarily on the fact
that the 272 customs entries covered by the Charges are entirely different from those 118 entries
covered by the DSB's recommendations and rulings under the CVA.1075 In this connection, Thailand
attaches significance to the finding of the original panel that the Philippines f ailed to demonstrate
that Thailand maintains or applies a general rule requiring the rejection of the transaction value and
the use of the deductive valuation method. 1076 In response to the Philippines' arguments, Thailand
submits that there is no "recurring decision" because "[t]here is nothing 'recurring' between, on the
one hand, a customs valuation by the customs authorities of certain entries, and, on the other hand,
the decision to bring Charges by the Public Prosecutor with respect to different entries."1077
7.501. Thailand submits that although the lack of overlap between the 272 entries subject to the
Charges and the 118 entries subject to the DSB's recommendations and rulings "is one of the main
arguments" put forward by Thailand because it clearly shows that t here is no nexus in terms of
nature, it is "only one of the several factors presented by Thailand demonstrating the lack of close
nexus".1078 Thailand further argues that the agencies responsible for the implementation of the DSB
rulings (the Thai Excise Department, the Thai Revenue Department, the Thai Customs Department

1066 Philippines' second written submission, para. 487 (referring to Appellate Body Reports, China –
Measures Affecting Automobile Parts, fn 244; US – Softwood Lumber IV (Article 21.5 – Canada), para. 82; and
1067 Philippines' second written submission, paras. 491-494.
1068 Philippines' second written submission, paras. 486 and 493.
1071 Thailand's rebuttal submission on the preliminary ruling request, paras. 3.29 and 3.31.
1072 Thailand's rebuttal submission on the preliminary ruling request, para. 3.30.
1073 Thailand's second written submission, para. 3.45.
1074 Thailand's rebuttal submission on the preliminary ruling request, para. 3.33.
1075 Thailand's rebuttal submission on the preliminary ruling request, para. 3.33.
1076 Thailand's rebuttal submission on the preliminary ruling request, para. 3.35 (referring to Panel
1077 Thailand's second written submission, para. 3.59.
1078 Thailand's response to Panel question No. 42(a), p. 39.

and the BoA) have "clearly different mandates"1079 from the actors involved in the issuance of the
Charges (the DSI and the Public Prosecutor). Thailand emphasizes that the Charges are criminal in
nature, and in particular that they lead to an examination of the matter by a Thai criminal court and
may lead to sanctions, involving a fine and/or imprisonment upon conviction, whereas the measures
taken to comply with the DSB's recommendations and ru lings related to customs valuation. 1080
Thailand also argues that the "grounds for doubting the declared transaction values " were not the
same for the 118 entries at issue in the original dispute and the 272 entries covered by the Charges,
because a comparison with King Power prices is not the "sole ground" for doubting the accuracy of
the customs value in the Charges; Thailand points in this regard to the Philippines' own recognition
that the DSI identified in the 2009 Memorandum of Allegation several other g rounds.1081 Thailand
also disagrees with the Philippines that the Charges involve "the same type of legal determination
(customs valuation)" as in the original proceeding, reiterating its argument that the calculation of
the "actual price" of cigarettes in the Charges does not amount to a customs valuation decision, but
merely serves the purpose of establishing a possible benchmark on which the Criminal Court could
impose a fine. 1082 In this regard, Thailand maintains that the Charges do not involve a "customs
valuation" determination for all of the same reasons set forth in its submission regarding the
applicability of the CVA to the Charges.1083
7.502. With regard to the effects of the Charges, Thailand argues that the Charges could not have
had any impact on the customs valuation of the specific entries at issue in the original proceeding ,
because the BoA Ruling implemented the original panel's findings with regard to those entr ies, and
the Charges concern a different set of entries. 1084 Thailand argues that, similarly, the Charges
produce no effects on the DSB's recommendations and rulings, because any possible penalty would
not consist of the levying of ad valorem customs duties, which was the subject of the DSB's
recommendations and rulings.1085
7.3.3.3 Analysis by the Panel
7.3.3.3.1 General considerations
7.503. We recall that Article 21.5 of the DSU states in relevant part:
Where there is disagreement as to the existence or consistency with a covered
agreement of measures taken to comply with the recommendations and rulings such
dispute shall be decided through recourse to these dispute settlement procedures,
including wherever possible resort to the original panel.
7.504. As we have previously observed, the scope of Article 21.5 is not limited to "measures taken
to comply" that the responding Member identifies as such : the scope of Article 21.5 proceedings
extends beyond such "declared" measures taken to comply to include other measures that share a
sufficiently "close nexus" with one or more declared measures taken to comply, or with the DSB's
recommendations and rulings. 1086
7.505. The issue is whether the Charges have a sufficiently close nexus with the BoA Ruling of
12 September 2012 and the DSB's recommendations and rulings that the BoA sought to
implement.1087 The BoA Ruling of 16 November 2012, which is one of the measures at issue in this
compliance proceeding, rejected PMTL's transaction values for 210 entries of cigarettes over the
period 2002-2003; the BoA Ruling of 12 September 2012 , which is not a measure at issue in this
compliance proceeding, accepted PMTL's transaction values for 118 import entries made i n 2006-

1079 Thailand's second written submission, paras. 3.53-3.54 (referring to Panel Report, Australia –
1080 Thailand's second written submission, para. 3.55.
1081 Thailand's second written submission, para. 3.51.
1082 Thailand's second written submission, para. 3.50.
1083 Thailand's second written submission, paras. 3.50, 3.55 and 3.60.
1084 Thailand's second written submission, paras. 3.60-3.61.
1085 Thailand's rebuttal submission on the preliminary ruling request, para. 3.47.
1086 See paragraph 7.11. above.
1087 The BoA Ruling of 12 September 2012 was declared as taken to comply in Thailand's status report
of September 2012, WT/DS371/15/Add.5, as noted by the Philippines at paragraph 500 of its first written
submission. The BoA Ruling of 12 September 2012 has been submitted as Exhibit PHL-53-B and THA-2-B.

2007.1088 Both of these BoA rulings are declared "measures taken to comply". 1089 The link between
the September 2012 BoA Ruling and the DSB's recommendations and rulings arises from the fact
that the original panel found that Thailand had no basis to reject PMTL's declared transaction values
for those 118 entries and thus violated Articles 1.2(a) and 1.1 of the CVA. 1090 Thailand has not
questioned that it is open to the Panel to find that the Charges fall within the scope of this compliance
proceeding on the basis of a "close nexus" with either of these BoA Rulings. For the purposes of the
Panel's assessment of the existence of a "close nexus" with Thailand's measures taken to comply, it
is the BoA Ruling of 12 September 2012 that is pertinent.
7.506. A "nexus" means "a connection, bond or link ", or "a connected group or series; a
network".1091 Similar notions are conveyed by other terms used interchangeably by the Appellate
Body in this context, including its references to a "close relationship " or "closely connected "
measures.1092 Thus, the notion of a "close nexus" is inherently an examination of the degree of
connection between two (or more) things, as opposed to a bright line or binary test in which decisive
importance or formalistic reliance could be placed on any one similarity or difference. Indeed, by
framing the analysis as an enquiry into the existence of a "sufficiently close nexus"1093, involving the
existence of "sufficiently close links"1094, panels and the Appellate Body have reinforced that there
is no bright-line or binary test.
7.507. In accordance with the case law developed on the "close nexus" standard, a compliance
panel typically reaches a conclusion on the basis of "an examination of the timing, nature, and effects
of the various measures".1095 In this case, the parties have both proceeded on that basis, and have
accordingly focused their arguments on the timing, nature and effects of the Charges. However, we
note that in articulating the analytical framework to be applied in a close nexus analysis, the
Appellate Body has made clear that the analysis "may, depending on the particular facts, call for an
examination of the timing, nature, and effects of the various measures ".1096 In our view, this
language clearly and expressly envisages that there may be situations in which the factual
circumstances and legal provisions at issue in a particular compliance proceeding call for a different
approach to be taken1097, and that it is not always mandatory to consider each of these elements.
Having said that, our own analysis in this case is naturally guided by the manner in which the parties
have framed their arguments.
7.508. Both parties base their arguments on prior jurisprudence that provides guidance on the
applicable analytical framework. Both parties recognize that the timing of the measure cannot of
itself be determinative of whether it bears a sufficiently close nexus to a Member's implementation
of the DSB's recommendations and rulings.1098 In this proceeding, the parties further agree that the
examination of whether there is a sufficient linkage in terms of timing may look not only at the dates
that the Charges, the BoA Ruling of 12 September 2012, and the DSB's recommendations and
rulings were adopted, but more broadly and holistically at the course of events leading up to the
Charges.1099
7.509. The nexus in terms of nature involves an analysis of the subject matter of the measure, of
the declared measures "taken to comply", and of the DSB's recommendations and rulings. 1100 We

1089 See paragraphs 1.9. b and 1.9. d above.
1090 Philippines' first written submission, para. 63; Panel Report, Thailand – Cigarettes (Philippines),
para. 8.2(b).
1091 Shorter Oxford English Dictionary.
1092 Initially panels referred to measures as "clearly connected" or "inextricably linked". (See, e.g. Panel
Reports, Australia – Salmon (Article 21.5 – Canada), para. 7.10, sub-para. 22; and Australia – Automotive
Leather II (Article 21.5 – US), para. 6.5) The term "close nexus" was first used by the panel in US – Upland
Cotton (Article 21.5 – Brazil), para. 9.26.
1093 Appellate Body Report, US – Zeroing (EC) (Article 21.5 – EC), para. 230.
1094 Panel Report, EC and certain member States – Large Civil Aircraft (Article 21.5 – US), para. 6.83.
1095 Appellate Body Report, US - Softwood Lumber IV (Article 21.5 – Canada), para. 77.
1096 Appellate Body Report, US – Softwood Lumber IV (Article 21.5 – Canada), para. 77. (emphasis
added)
1097 Panel Report, EC and certain member States – Large Civil Aircraft (Article 21.5 – US), fn 190.
1098 See Thailand's rebuttal submission on the preliminary ruling request, para. 3.16; Philippines' second
written submission, para. 473 (quoting Appellate Body Report, US – Zeroing (EC) (Article 21.5 – EC), para.
224).
1099 Parties' responses to Panel question No. 41(a).
1100 Appellate Body Report, US – Zeroing (EC) (Article 21.5 – EC), para. 230.

note that the terms "nature" and "subject matter " have been used by the Appellate Body
interchangeably in this context.1101 In this case, the parties hold opposing views on whether there
is a sufficiently close nexus in terms of the nature of the relevant measures. We note, however, that
their disagreement arises predominantly as a consequence of the varying significance that they
attach to certain facts, as opposed to any dispute regarding the facts. For its part, Thailand does not
contest that the Charges and the September BoA Ruling involve the same importer (PMTL), the same
exporter (PM Philippines Manufacturing Inc.), the same importing country (Thailand), the same
exporting country (the Philippines), the same product and brands ( Marlboro and L&M cigarettes
produced by PMPMI), and the same transaction va lues, imported under the same supply contract.
At the same time, the Philippines does not contest that there is no overlap between the 272 entries
covered by the Charges and the 118 entries covered by the September 2012 BoA Ruling, or that the
Charges were issued by the Public Prosecutor whereas the DSB's recommendations and rulings were
implemented by different agencies. Rather, the parties disagree as to whether the Charges involve
a "customs valuation " determination for all of the same reasons set forth in their submissions
regarding the applicability of the CVA to the Charges, including their opposing views on the meaning
of the Charges and the references to King Power's prices contained therein.
7.510. With regard to the consideration of the effects of the Charges for purposes of the close nexus
analysis, the examination may focus on whether "closely connected" measures could "undermine
compliance".1102 Considerations relating to the effects of a measure are informed by concerns of
possible "circumvention", such as a Member complying through a declared measure "while, at the
same time, negating compliance through another measure".1103 In this case the parties' arguments
on the effects of the Charges are largely derived from the same facts that they highlight in the
context of addressing the nature of the Charges. The Philippines considers that the effect of the
Charges "is to aggravate the WTO-inconsistencies that Thailand has been instructed by the DSB to
resolve", and refers to the fact that "as compared with the original measure concerning Thailand's
rejection of customs value for 118 entries in 2006 -2007, and the September 2012 BoA ruling, the
Charges involve a customs valuation decision to reject the transaction values for the same product
and the same brands, imported by the same importer to the same importing country, from the same
exporter in the same exporting country, under the same supply contract, and at the same prices".1104
Thailand submits that the Charges could not have had any impact on the customs valuation of the
118 entries at issue in the original proceeding, based on the fact that, among other things, the
implementation efforts concerned 118 entries distinct from the 272 entries covered by the
Charges.1105
7.511. As indicated above, the is sue before us is w hether the Charges have a sufficiently close
nexus to the September 2012 BoA Ruling and the DSB's recommendations and rulings which it
sought to implement. In accordance with our understanding of the holistic nature of the examination
that we are required to undertake to answer that question, and taking into account the manner in
which the parties have presented their arguments in this case, we will proceed with a holistic
assessment that focuses on the timing, nature and effects of the Charges.
7.3.3.3.2 Timing, nature and effects of the Charges
7.3.3.3.2.1 Introduction
7.512. For the purposes of assessing whether the Charges have a sufficiently close nexus to the
September 2012 BoA Ruling and the DSB's recommendations and rulings that it implements, we
proceed by considering various circumstances identified by the parties relating to the timing, nature
and effects of these measures, and we then provide an overall assessment based on the totality of
the circumstances.

1101 Appellate Body Reports, US – Zeroing (EC) (Article 21.5 – EC), para. 230; US - Softwood Lumber IV
(Article 21.5 – Canada), paras. 77 and 83. See also Thailand's rebuttal submission on the preliminary ruling
request, paras. 3.17 and 3.32-3.33; Philippines' rebuttal submission on the preliminary ruling request, fn 35.
1102 Appellate Body Report, US – Zeroing (EC) (Article 21.5 – EC), para. 256.
1103 Appellate Body Report, US – Softwood Lumber IV (Article 21.5 – Canada), para. 71. This statement
has been repeated by panels and the Appellate Body in several subsequent cases. (See, e.g. Appellate Body
Report, US – Zeroing (EC) (Article 21.5 – EC), para. 250)
1105 Thailand's rebuttal submission on the preliminary ruling request, para. 3.46.

7.3.3.3.2.2 Timing
7.513. The Philippines highlights that t he Charges were brought on 18 January 2016, which post -
dates not only the expiry of Thailand's reasonable period of time to implement the DSB's
recommendations and rulings, but also the September 2012 BoA Ruling, and therefore "the timing
of the Charges is such that they are capable of undermining Thailand's compliance with the DSB's
recommendations and rulings".1106 Thailand considers that the fact that the DSI investigation started
five years before the DSB's recommendations and rulings were adopted, as well as t he long time
gaps between the adoption of the DSB's recommendations and rulings (15 July 2011) and the BoA
Ruling (12 September 2012) on the one hand , and the Charges (18 January 2016) on the other
hand, are indicative of the lack of any nexus in terms of timing.1107
7.514. As a starting point, we note the observation by the panel in US – Large Civil Aircraft (2nd
complaint) (Article 21.5 – EU) that:
Ordinarily, timing would be expected to become an issue if the "undeclared" measure
precedes the adoption of DSB recommendations and rulings (or even the panel request
in the original proceeding), raising the potential that the complaining party is in reality
using compliance proceedings to retroactively enlarge the scope of its original panel
request.1108
7.515. In this dispute, the undeclared measure does not precede the adoption of the DSB's
recommendations and rulings. Rather, the Charges were issued on 18 January 2016, which post -
dates the expiry of Thailand's reasonable period of time to implement the DSB's recommendations
and rulings (15 May 2012), as well as the adoption by Thailand of the relevant declared measure
taken to comply (12 September 2012). Accordingly, the circumstance in which timing would
ordinarily become an issue, in the sense of an obstacle to a compliance p anel finding a sufficiently
close nexus, is not present in this case.
7.516. Moreover, the parties agree that the examination of whether there is a sufficient linkage in
terms of timing may includ e an assessment of the course of events leading up to the Charges in
relation to the DSB's recommendations and rulings as well as the BoA's decision.1109 In this respect,
we note that the Charges are the culmination of the DSI investigation. The DSI investigation began
in August 2006, five years before the DSB issued its re commendations and rulings in the original
dispute on 15 July 2011. However, when the DSI recommended for a second time that Charges be
filed, in August 2011, this took place only one month after the DSB's recommendations and rulings
were adopted. Furthermore, when the DSI did so, it specifically connected its recommendation to
the DSB's recommendations and rulings. In its press release, the DSI stated:
The Philippines had filed a claim against Thailand and a panel of the World Trade
Organization (WTO) had r uled that Thailand had acted in violation of the General
Agreement on Tariffs and Trade (GATT). If no objection was made to the prosecutor's
decision to drop charges, Thailand's national security or interests might be seriously
affected. After due consider ation, therefore, the DSI's suggestion that all alleged
offenders be prosecuted was confirmed.1110
7.517. We further observe that while the Charges were not issued until January 2016, the Attorney-
General ordered prosecution in September 2013, only one year after th e September 2012 BoA
Ruling. Additionally, i n considering the course of events leading up to the Charges, we find it
significant that the entries covered by the DSI investigation included 18 of the 118 entries that were
subject to the DSB's recommendations and rulings, and that were also the subject of the
12 September 2012 BoA Ruling.1111 In our view, the foregoing considerations relating to the timing
of the Charges establish a nexus in terms of timing between the September 2012 BoA Ruling and
the DSB's recommendations and rulings it implements, and the events culminating in the Charges.

1107 Thailand's rebuttal submission on the preliminary ruling request, paras. 3.29-3.31.
1108 Panel Report, US – Large Civil Aircraft (2nd complaint) (Article 21.5 – EU), fn 492.
1109 Parties' responses to Panel question No. 41(a).
1110 See Philippines' first written submission, para. 493 (quoting from Thailand's DSI, Press Release,
17 August 2011 (English translation), (Exhibit PHL-93-B)).
1111 Philippines' response to Panel question No. 41(a), para. 345.

7.518. We note that Thailand points to the gap of several years between the date of the issuance
of the Charges (18 January 2016), and the dates on which the DSB made its recommendations (four
and a half years earlier, on 15 July 2011) and the BoA Ruling in question was issued (three and a
half years earlier, on 12 September 2012). We note the Appellate Body's explanation that if a
measure is adopted "simultaneously with, shortly before, or shortly after" specific actions introduced
by Members with a view to implementing the recommendations and rulings of the DSB, this may be
a relevant factor to take into consideration.1112 Recalling the time gap of three and a half to four and
a half years, we agree with Thailand that the Charges themselves were not issued "simultaneously
with, shortly before, or shortly after " either the September 2012 BoA Ruling, or the DSB's
recommendations and rulings that it implements. We are also mindful of the difficulties that could
arise if Article 21.5 proceedings were used to challenge measures that were only taken many years
after the original dispute, bearing in mind the limited scope and purpose of compliance
proceedings.1113
7.519. However, even if we were t o focus narrowly on the date that the Charges were issued,
without regard to the fact that they are the culmination of the DSI investigation that had a nexus in
terms of timing to the September 2012 BoA and the DSB's recommendations and rulings that it
implements, we do not consider that these periods of three and a half to four and a half years are
per se such long time gaps as to render any connections "too remote", and sever any nexus.1114 In
this regard, we consider it pertinent that a complainant (or resp ondent) may initiat e multiple,
successive compliance proceedings in the context of the same dispute. In disputes involving multiple
recourses to Article 21.5 of the DSU, it may be expected that, depending on the dispute, there would
be a time gap of severa l years between the original recommendations and rulings of the DSB and
the measures taken to comply that are challenged in successive Article 21.5 compliance
proceedings.1115
7.520. In its third -party submission, the United States highlights the fact that the 272 entries of
cigarettes covered by the Charges were imported into Thailand between July 2003 and June 2006,
which was not only years prior to the DSB's recommendations and rulings made in July 2011, but
also prior to the entries of cigarettes covered by the September 2012 BoA Ruling (i.e. 118 entries,
imported over the period June 2006 to September 2007). The United States submits that the timing
of the entries should not be ignored.1116 In response to a question from the Panel, Canada and Japan
indicated that they agree.1117 However, in response to a question from the Panel, Thailand considers
that fact to be "of limited guidance " in the Panel's assessment of the close nexus 1118, and, for its
part, the Philippines argues on the basis of Appellate Body jurisprudence that "the 'close nexus'
analysis requires an evaluation that takes into account the course of events in relation to the
respondent's actions in adopting the measure at issue ", and that the date of importation of the
underlying entries is irrelevant for that purpose.1119
7.521. The issue raised by the United States which we are considering at this juncture of our
analysis concerns the fact that the entries subject to the Charges were imported into Thailand prior
to the entries subject to the September 2012 BoA Ruling and the DSB's recommendations and rulings

1112 Appellate Body Report, US – Zeroing (EC) (Article 21.5 – EC), para. 225.
1113 See Section 7.1.2 above.
1114 Thailand's rebuttal submission on the preliminary ruling request, para. 3.29.
1115 For example, in US – Tuna II (Mexico), the DSB made its recommendations and rulings on
13 June 2012. The compliance measure examined by the panel in US – Tuna II (Mexico), Second Recourse to
Article 21.5 of the DSU by Mexico, was adopted on 23 March 2016, i.e. over three and a half years later. See

1116 United States third-party written submission, para. 37; United States third-party statement, paras.
8-10.
1117 Canada and Japan's third-party responses to Panel question No. 2(b). In its response to the same
question, the European Union suggests that denying the existence of a close nexus simply because of the
timing of the respective imports would seem to be "inappropriately formalistic", insofar as there is otherwise a
close nexus in the form of the commercial relationship on the basis of which the goods were imported.
1118 Thailand's response to Panel question No. 41(b), p. 38.
1119 Philippines' response Panel question No. 41(b), para. 347. The Philippines submits that "the United
States effectively seeks to resurrect an argument it made unsuccessfully in the Zeroing disputes", which was
that it had no implementation obligations in respect of entries that had occurred prior to the expiry of the
reasonable period of time. The Philippines recalls that the Appellate Body rejected that argument, finding
instead that "actions taken by the implementing Member after the end of the reasonable period of time must
be WTO-consistent, even if those actions are in respect of imports that entered the Member's territory before
the end of the reasonable period of time". (Appellate Body Report, US – Zeroing (Japan) (Article 21.5 – Japan),
para. 160)

that it implements.1120 While we do not necessarily exclude that the timing of the entries covered by
a measure could be relevant to the close nexus analysis, the relevance of that fact in the
circumstances of this dispute is not apparent. While the 272 entries of cigarettes covered by the
Charges were imported into Thailand years prior to the DSB's recommendations and rulings being
adopted in July 2011, that is equally true of the entries of cigarettes covered by the September 2012
BoA Ruling, which is one of Thailand's declared "measures taken to comply " (i.e. 118 entries,
imported over the period June 2006 to September 2007). The same is also true of the November
2012 BoA Ruling which is another of Thailand's declared "measures taken to comply" (i.e. 210 entries
of Marlboro cigarettes imported by PMTL between January 2002 and January 2003). 1121 Just as we
are mindful of the difficulties that could arise if Article 21.5 proceedings are used to challenge
measures that were only taken many years after the original dispute, we recognize that it may be
somewhat unusual for an Article 21.5 compliance panel to review customs valuation determinations
concerning entries of cigarettes that were imported up to 13 years earlier. However, we note that
this is simply the consequence of the Public Prosecutor issuing Charges in January 2016 with regard
to entries of cigarettes that were imported into Thailand a decade earlier.
7.3.3.3.2.3 Nature
7.522. The Philippines argues that the Charges, the September 2012 BoA Ru ling, and the initial
valuation by Thai Customs that was found to be inconsistent in the original proceeding 1122 share a
number of commonalities, which serve to establish a "close nexus" in terms of the nature of the
Charges and these other measures. The Phil ippines submits that these factors "establish highly
specific, and very close, links in nature" between the Charges and the DSB's recommendations and
rulings, and the September 2012 BoA ruling.1123
7.523. The Philippines asserts that these measures all involve:
a. the same importer (PMTL),
b. the same exporter (PMPMI),
c. the same importing country (Thailand),
d. the same exporting country (the Philippines),
e. the same product, brands and producer ( Marlboro and L&M cigarettes produced by
PMPMI),
f. the same transaction values, imported under the same supply contract,
g. the same type of legal determination, i.e. a customs valuation determination, and
h. the same grounds for doubting the declared customs values (a comparison with the duty
free prices of King Power).1124
7.524. With respect to the first six points set forth above, Thailand does not contest the Philippines'
assertions and the resulting links they establish. Thus, in our view there is no dispute that there is
a "nexus" between the measures insofar as they involve (i) the same importer (PMTL), (ii) the same
exporter (PM Philippines Manufacturing Inc.), (iii) the same importing country (Thailand), (iv) the
same exporting country (the Philippines), (v) the same product and brands ( Marlboro and L&M

1120 In the context of examining the nature of the Charges further below, we address Thailand's
argument regarding the absence of overlap between the entries subject to the September 2012 BoA Ruling and
the Charges.
1121 Furthermore, while the entries subject to the Charges were imported into Thailand before the 118
entries subject to the September 2012 BoA Ruling, they were imported into Thailand after the 210 entries
subject to the November 2012 BoA Ruling.
1122 In respect of which the November 2012 BoA Ruling is the declared "measure taken to comply".

cigarettes produced by PMPMI), an d (vi) the same transaction values, imported under the same
supply contract.
7.525. Thailand disputes the Philippines' contention that the Charges involve "the same type of
legal determination" as the September 2012 BoA Ruling, because , in Thailand's view, they do not
involve a "customs valuation " determination. In this connection, Thailand emphasizes that the
Charges are "criminal in nature" and "do not have any customs valuation effects".1125 In support of
their opposing views on this issue in the context of the "close nexus" analysis, both parties rely on,
and indeed expressly cross-reference and incorporate, their later arguments on whether the Charges
can be characterized as a "customs valuation" determination.1126
7.526. In response to a question from the Panel, both parties agree that there are legal impediments
to how far the Panel should go in assessing whether the Charges involve "the same type of
determination" without deciding, in the jurisdictional scope of this proceeding, the merits of the
substantive claims. 1127 However, the parties have expressed different views on the question of
whether the Panel should, for the purposes of the jurisdictional analysis, go no further than making
a finding on whether the measure could be found to constitute a "customs valuation" determination;
or, alternatively, confine the scope of the jurisdictional examination to the fact that the complaining
party alleges, and will seek to demonstrate, that the Charges involve a "customs valuation "
determination.1128 Thailand considers that the Panel "cannot rely on a mere allegation by the
complainant in deciding the jurisdictional scope of this dispute ", and states that "it should not rely
merely on what the Philippines alleges and should not pre -judge the merits of the case ".1129 The
Philippines also indicates that "a panel should proceed with a measure of caution in relying solely on
an allegation made by one party".1130
7.527. There is no question that a panel may be required to resolve disputed questions of fact and
law in the context of determining whether it has jurisdiction over a measure or claim. This is reflected
in the sheer length and complexity of the analyses of jurisdictional issues that panels have
undertaken on such issues ranging from the adequacy of a panel request in identifying the legal
basis of the complaint pursuant to Article 6.2 of the DSU 1131, to the adequacy of a panel request in
setting forth claims under Article I:1 of the GATT 1994 in cases where the complainant may have
been on notice that the measures at issue were taken pursuant to the Enabling Clause1132, to the
existence of a sufficiently close nexus between a challenged measure in an Article 21.5 proceeding
and the DSB's recommendations and rulings arising from the original proceeding. 1133 Furthermore,
in each of these situations, a panel may be called upon to examine the legal provisions that serve
as the basis for the complainant's claims.
7.528. However, we consider that a panel must take care to ensure that it does not make findings
on disputed questions of fact or law encroaching on th e merits of a claim for the purpose of

1125 Thailand's response to Panel question Nos. 42(a) and 43, pp. 39-40.
1126 See, e.g. Philippines' second written submission, paras. 486 and 493; Thailand's second written
submission, paras. 3.50, 3.55 and 3.60.
1127 Thailand states that it "would see considerable problems in the Panel taking an approach that would
effectively collapse the procedural issue of the scope of the proceedings with the substantive issues to be
addressed subsequently", and suggests that "there may well be approaches under which the Panel could find
that the Charges were within the scope of these proceedings without deciding the merits of the substantive
claims". (Thailand's response to Panel question No. 43, p. 40) For its part, the Philippines states that "[f]or
purposes of the jurisdictional question of whether the Charges are an undeclared measure taken to comply, the
Panel need not decide definitively the merits of the Philippines' substantive claims". According to the
Philippines, the Panel could conduct an examination in the same manner as a recent compliance panel that
conducted its examination of "whether the measure in question could undermine compliance with the DSB's
recommendations and rulings, not whether the Charges are actually a determination subject to the obligations
of the relevant covered agreement (here, the CVA) and are actually inconsistent with the obligations in that
agreement". (Philippines' response to Panel question No. 43, paras. 350 and 353.)
1128 Parties' responses/comments to Panel question No. 103.
1129 Thailand's response to Panel question No. 103, p. 27.
1130 Philippines' comments on Thailand's response to Panel question No. 103, para. 180.
1131 See, e.g. Preliminary Ruling, US – Countervailing and Anti-Dumping Measures (China),
WT/DS449/4, paras. 3.17-3.60; Appellate Body Report, US – Countervailing and Anti-Dumping Measures
(China), paras. 4.1-4.52.
1132 See, e.g. Panel Report, Brazil – Taxes, paras. 7.1049-7.1131.
1133 See, e.g. Panel Report, EC and certain member States – Large Civil Aircraft (Article 21.5 – US),
paras. 6.80-6.155.

determining whether it has jurisdiction over that same claim.1134 Otherwise, a panel runs the risk of
turning a jurisdictional analysis on its head, insofar as it would result in a panel making findings on
the merits of a claim to determine the threshold question of whether an assessment of that claim
falls within the scope of its jurisdiction. For these and other reasons, the necessity of maintaining a
"firewall" between questions of jurisdiction and questions of merits has been recognized.1135
7.529. In principle, disputed questions of fact or law raised at the jurisdictional phase will encroach
upon the merits of a claim insofar as they would require a panel to make findings relating to one or
more legal elements that must be est ablished to uphold the claim at issue. What those issues are
will therefore depend on the particular claims at issue. For example, in a case involving claims of
either prohibited or actionable subsidies under the SCM Agreement, one of the legal elements th at
must be established is that the challenged measure involves a "subsidy" within the meaning of Article
1 of the SCM Agreement. Thus, a dispute as to whether a challenged measure constitutes a subsidy
in a case involving prohibited or actionable subsidy claims under the SCM Agreement is an issue that
goes to the merits of the claims, and therefore would not be resolved by a panel for the purpose of
determining whether or not there is a sufficiently "close nexus" between the nature of the challenged
measure and the DSB's recommendations and rulings arising from subsidies previously granted by
the respondent. Likewise, in a case involving a claim under Article 10 of the CVA, one of the elements
that must be established to uphold the claim is that the responde nt disclosed information which is
by nature confidential. Thus, where there is a dispute as to whether officials have disclosed
information which is by nature confidential, that is an issue that goes to the merits of the claims and
would not be resolved by a panel for the purpose of determining whether or not there is a sufficiently
close nexus between the alleged disclosure and the DSB's recommendations and rulings arising from
prior disclosures of confidential information by the respondent.
7.530. The question of whether a challenged measure involves a "customs valuation" determination
within the meaning of Article 15.1(a) of the CVA is a legal element of the Philippines' claims under
the CVA in this dispute. Accordingly, to rule on this issue in the context of our analysis of whether
there is a sufficiently close nexus between the Charges and the DSB's recommendations and rulings
arising from the customs valuation determination previously made by Thailand would require us to
make findings that would encroach on the merits, as they relate to one or more legal elements that
must be established to uphold the claims at issue. Based on the foregoing, we do not consider it
necessary or appropriate to rule on whether the Charges involve a "customs valuation" determination
within the meaning of the CVA to determine whether there is a close nexus between the Charges
and the September 2012 BoA Ruling (and the DSB's recommendations and rulings that it
implements). Leaving aside for purposes of the present jurisdictional enquiry whether the Charges
involve a "customs valuation" determination to which the CVA is applicable, at this juncture of our
analysis we note that the Charges were issued on the grounds that PMTL's declared transaction
values for the 272 entries at issue should not be accepted, and that PMTL should have paid a greater
amount in ad valorem duties in respect of those entries than it actually paid. It is clear that the
Charges and the September 2012 BoA Ruling both relate to the valuation of goods for purposes of
levying ad valorem duties on PMTL's imports of Marlboro and L&M cigarettes. We do not proceed
further to assess, at this stage of our analysis, whether the Charges and the September 2012 BoA
Ruling involve "the same type of legal determination (customs valuation)".
7.531. Thailand further argu es that there is no nexus in terms of agencies responsible for the
implementation of the DSB's recommendations and rulings (the Thai Excise Department, the Thai
Revenue Department, the Thai Customs Department and the BoA) and the actors involved in issuing
the Charges (the DSI and the Public Prosecutor).1136 Thailand stresses that the Public Prosecutor has
a different mandate from the Customs Department, and emphasises that "[t]he Public Prosecutor is
not entitled under Thai law to engage in any form of custom s valuation for the purposes of levying
customs duties."1137
7.532. We agree with Thailand that the involvement of different agencies is a fact that is relevant
to the close nexus analysis, and it attenuates the nexus between the Charges and the
September 2012 BoA Ruling. However, our review of the jurisprudence suggests that this fact has

1134 Appellate Body Report, Australia – Apples, paras. 423-425; Panel Reports, EC – Fasteners (China),
para. 7.45; EC and certain member States – Large Civil Aircraft (Article 21.5 – US), paras. 6.134-6.135.
1135 Hugh Thirlway, The Law and Procedure of the International Court of Justice: Fifty Years of
Jurisprudence Volume II, (Oxford University Press, 2013), p. 1632.
1136 Thailand's rebuttal submission on the preliminary ruling request, para. 3.41.
1137 Thailand's second written submission, para. 3.87.

not been decisive in other cases, especially where different agencies had overlapping objectives or
similar mandates.
7.533. In US - Softwood Lumber IV (Article 21.5 – Canada), the Appellate Body noted, as part of
its analysis of the subject-matter for the purpose of finding a close relationship between measures,
the fact that all three measures (the original measure found to be WTO-inconsistent, the measure
taken to comply and the undecl ared measure) were countervailing duty proceedings conducted by
the same agency.1138 We note that, as the Philippines points out, in Australia – Salmon the measure
in the original proceeding was based on the Australian Quarantine Proclamation issued by the
Governor-General of Australia, which banned the importation of salmon to Australia1139, whereas in
the compliance proceeding, the panel found a measure issued by the Government of Tasmania, also
a ban on importation of salmon, to be "clearly connected to the pa nel and Appellate Body reports
concerned".1140 However, we also note that, as Thailand observes1141, those different agencies had
a similar mandate – to implement quarantine measures. In US – Zeroing (Article 21.5 – EC) and US
– Zeroing (Article 21.5 – Japan), the same agency adopted the original and subsequent measures.
However, neither the panels nor the Appellate Body specifically emphasized that point as important
to the "close nexus" analysis. More recently, the compliance panel in US – Large Civil Aircraft (2nd
complaint) (Article 21.5 – EU) considered the relevance of differences in the governmental agencies
involved, and concluded that:
In any case, the differences in the structure of the various measures do not detract
from the closeness of the links tha t they share in other respects. Nor do we consider
fatal to the existence of sufficiently close links between the measures the differences in
the governmental agencies funding the respective measures. While FAA and NASA are
different government agencies, t hey share overlapping objectives with respect to civil
aviation. These commonalities are expressly recognized with respect to environmental
and energy efficiency goals. In any case, we note that a close nexus has been found in
instances where the respective measures have involved different levels of government,
so we see no reason why the fact that FAA funds the Boeing CLEEN Agreement and
NASA funds the NASA aeronautics R&D measures should be fatal to the existence of a
sufficiently close link in terms of nature between those two sets of measures.1142
7.534. We consider that it suffices, for the limited purpose of the jurisdictional question with which
we are confronted at this juncture of our analysis, to note that the BoA and the Public Prosecutor
have potentially overlapping functions in the area of customs valuation. Leaving aside for purposes
of the present jurisdictional enquiry whether the Charges involve a "customs valuation "
determination to which the CVA is applicable, we note that the Public Prosecutor dete rmined that
PMTL's declared transaction values for the 272 entries at issue should be rejected, and determined
PMTL should have paid a greater amount in ad valorem duties in respect of those entries. To that
extent, the Charges and the September 2012 BoA R uling both relate to the valuation of goods for
purposes of levying ad valorem duties on PMTL's imports of Marlboro and L&M cigarettes. And to
that extent at least, the Public Prosecutor and the BoA have potentially overlapping functions in the
area of customs valuation.
7.535. Turning to Thailand's assertion that the Philippines is incorrect in stating that the Charges
and the Thai customs valuation determination at issue in the original proceeding (which was
subsequently reversed in the September 2012 BoA Rulin g) had "[t]he same grounds for doubting
the declared customs values (a comparison with King Power's duty-free prices)"1143, Thailand asserts
that "although the comparison with the prices of King Power may have played a role in the suspicion
of customs fraud a gainst PM Thailand, it is not the sole ground for doubting the accuracy of the
customs value declared by PM Thailand".1144 Indeed, Thailand states, the "DSI identified in the 2009
Memorandum of Allegation several other grounds for doubting the declared custom s value", and
"[t]herefore, the grounds for doubting the declared customs value are not the same".1145

1138 Appellate Body Report, US – Softwood Lumber IV (Article 21.5 – Canada), para. 83.
1140 Panel Report, Australia – Salmon (Article 21.5 – Canada), para. 7.10, subparas. 16 and 22.
1141 Thailand's second written submission, paras. 3.53-3.54.
1142 Panel Report, US – Large Civil Aircraft (2nd complaint) (Article 21.5 – EU), para. 7.287.
1143 Philippines' second written submission, para. 482. (emphasis original)
1144 Thailand's second written submission, para. 3.51.
1145 Thailand's second written submission, para. 3.51.

7.536. We note that Thailand does not contest that a comparison with King Power prices was one
of the grounds for doubting PMTL's transaction values in the original Thai customs valuation
determination that was subsequently reversed in the September 2012 BoA Ruling, or that it is one
of the grounds for the Charges. 1146 Rather, Thailand stresses that a comparison between PMTL's
import prices and those of King Power was not the sole ground underlying either determination.
However, we note that the Philippines has not suggested otherwise, and we do not see the relevance
of this fact to the assessment of whether or not there is a "sufficiently close nexus" between these
various measures. Indeed, there does not need to be perfect and exact identit y between all of the
grounds underlying the two measures in order for there to be a "close nexus".
7.537. Thailand also argues, regarding the absen ce of any overlap between the entries subject to
the Charges and the September 2012 BoA Ruling, that "[t]he Charges have no connection with the
DSB recommendations and rulings given that their subject matter is different."1147 In response to a
question from the Panel, Thailand clarified that its position is that the lack of overlap is not "decisive"
as to the existence of a close nexus, and is "only one of the several factors presented by Thailand
demonstrating the lack of close nexus". 1148 Thailand emphasizes th at the 272 customs entries
covered by the Charges are entirely different from the 118 entries covered by the DSB's
recommendations and rulings under the CVA.1149 Thailand emphasizes that the two "sets of entries
refer to different import transactions that wer e registered under different entry numbers. "1150
Thailand recalls the finding of the original panel that the Philippines has failed to demonstrate that
Thailand maintains or applies a general rule requiring the rejection of the transaction value and the
use of the deductive valuation method.1151
7.538. The Philippines disagrees with Thailand that "the lack of overlap in entries is decisive for
purposes of determining whether there is a substantive connection"1152, and argues that "[t]aken to
its logical conclusion, Thailand could continue to engage in the same WTO-inconsistency with respect
to every new entry " and "the Philippines would be required to bring new disputes regarding each
new entry".1153 The Philippines considers that findings of close nexus in US - Zeroing (Article 21.5 –
EC) and US – Zeroing (Article 21.5 – Japan) show that it is not necessary that the measure taken
to comply and the undeclared measure concern identical entries. In those disputes, administrative
reviews were considered to be measures taken to comply, even though they concerned different

1146 Based on the explanations reflected in the original panel report, we understand that a comparison
with King Power's duty free prices did not provide the final basis for Thai Customs' decision to reject the
transaction values in respect of the 118 entries in the original proceeding. The original panel report notes the
following explanation from Thailand at the time: "Thai Customs did not rely on a comparison between
PM Thailand's c.i.f. prices and the c.i.f. prices for duty-free imports as a ground for rejecting the transaction
value. The c.i.f. prices for duty-free imports constituted the reason why Thai Customs had doubts about the
acceptability of the price, but were not the ultimate grounds for not using the transaction value as the customs
value." (Panel Report, Thailand – Cigarettes (Philippines), para. 4.50) In the original proceeding, Thailand
explained that "the grounds for Thai Customs not using the transaction value as the customs value were that
PM Thailand failed to establish that the relationship did not influence the transfer price." (Panel Report,
Thailand – Cigarettes (Philippines), para. 7.177 (emphasis original)) Thus, it appears that in connection with
the original customs valuation measure found to be inconsistent, Thai Customs did undertake a comparison of
PMTL's price with the price of the duty-free operator King Power, and it was the result of that comparison that
was "the reason" why Thai Customs "had doubts" about the acceptability of the price; but it was then PMTL's
failure to establish that the relationship did not influence the price that was the ultimate "ground" for rejecting
the declared transaction value. Thai Customs thus shifted the burden onto PMTL to establish that the
relationship did not influence the price. The Panel found that Thai Customs failed to examine the circumstances
of the sale with respect to the entries at issue, within the meaning of Article 1.2(a), in large part because it
failed to explain why the information provided by PMTL was insufficient. Consequently, Thailand acted
inconsistently with Articles 1.1 and 1.2(a) in rejecting the transaction value of the concerned entries. In sum,
strictly speaking this comparison with King Power was used by Thai Customs only as the basis for doubting the
declared transaction, and Thai Customs ultimately rejected PMTL's transaction values based on PMTL's failure
to overcome those doubts. In the light of the foregoing, there may not be perfect identity in this regard, but
there is evidently a "connection" between the Charges and the previous measure insofar as the comparison
between PMTL and King Power is concerned.
1147 Thailand's rebuttal submission on the preliminary ruling request, para. 3.33.
1148 Thailand's response to Panel question No. 42(a), p. 39.
1149 Thailand's rebuttal submission on the preliminary ruling request, para. 3.33.
1150 Thailand's rebuttal submission on the preliminary ruling request, para. 3.33.
1151 Thailand's rebuttal submission on the preliminary ruling request, para. 3.35 (referring to Panel
1152 Philippines' second written submission, para. 497. (emphasis original)
1153 Philippines' rebuttal submission on the preliminary ruling request, para. 52.

entries than those covered by the original investigations or administrative reviews that were subject
to the DSB's recommendations and rulings.
7.539. We observe that Thailand has not identified any case in which a measure was found not to
have a "sufficiently close nexus" with a declared measure taken to comply on the grounds that the
measures concerned different shipments. Instead, Thailand has sought to demonstrate that the
trade remedy cases referred to by the Philippines, in which a "close nexus" was found between
certain anti -dumping measures notwithstanding that they covered different entries, are
distinguishable from the present case. Thailand argues that they are distinguishable because in the
trade remedies context, the different measures covering different entries were part of the same
investigation or based on the same anti -dumping order. That may be true, but in our view it does
not logically follow that one can extrapolate from these other cases the pri nciple that measures
relating to different shipments cannot be found to have a "close nexus " unless they are taken
pursuant to the same underlying legal basis (e.g. an anti-dumping order).
7.540. Thailand recalls that the original panel found that the Philippines failed to prove that Thailand
maintained or applied a "general rule" requiring Thai Customs to reject the transaction value and
use the deductive method for valuing cigarette imports . Although we agree with Thailand's
characterization of the original panel's findings, we do not consider that this demonstrates that the
scope of this Article 21.5 compliance proceeding can only cover the same set of entries that were at
issue in the original proceeding. A similar issue was addressed by the panel in the compl iance
proceeding in EC and certain member States – Large Civil Aircraft (Ar ticle 21.5 – US), and we
consider that panel's analysis to be instructive. In that dispute, the original panel found that the
complainant failed to demonstrate the existence of an u nwritten LCA assistance/financing program
(and, on appeal, the Appellate Body further found that no such program was identified in the panel
request, and that it therefore fell outside of the panel's terms of reference). In the course of the
subsequent Article 21.5 compliance proceeding in that dispute, the panel considered whether the
implication was that the scope of the "measures taken to comply" were confined to the same aircraft
models at issue in the original proceeding – or instead, whether measures related to the A350XWB,
an aircraft model that was not covered by the original panel's findings, could also fall within the
scope of the compliance proceeding by virtue of the "close nexus" test.1154 The panel concluded that
the existence of an "overarching measure" (for instance, an unwritten assistance/financing program
linking together different measures rel ating to different models of large civil aircraft ) may be one
fact that could be used, but was not a requirement, to support the existence of a "close nexus" in
these circumstances.1155 The panel ultimately found th at the challenged A350XWB measures had
the same nature as the measures found to cause adverse effects in the original proceeding because
of four commonalities: (i) they were all loan agreements; (ii) they all contained the same four "core"
repayment terms; (iii) they were all entered into by essentially the same parties; and (iv) they were
all entered into for the purpose of financing the development costs of Airbus large civil aircraft .1156
Based on the foregoing, we do not see that a "general rule" or other "overarching measure" by
relevant Thai agencies is a necessary precondition for finding a close nexus between measures
covering different entries of cigarettes imported by PMTL into Thailand.
7.541. Continuing with our consideration of the significance of the fact that there is no o verlap
between the entries covered by the Charges and those covered by the September 2012 BoA Ruling,
we agree with the compliance panel in US – Large Civil Aircraft (2nd complaint) (Article 21.5 – EU)
that "[i]t is difficult to say in the abstract which a spects of a measure may be relevant to
demonstrating a sufficiently close link in terms of 'nature' to the measures subject to the DSB
recommendations and rulings ", because "[t]he relevance or otherwise of certain aspects of the
measures depends very much on the circumstances of the case".1157 In that dispute, the panel found

1154 Panel Report, EC and certain member States – Large Civil Aircraft (Article 21.5 – US), paras. 6.80
and 6.84.
1155 Panel Report, EC and certain member States – Large Civil Aircraft (Article 21.5 – US), para. 6.108.
1156 Panel Report, EC and certain member States – Large Civil Aircraft (Article 21.5 – US), para. 6.130.
1157 Panel Report, US – Large Civil Aircraft (2nd complaint) (Article 21.5 – EU), paras. 7.322-7.323. The
panel observed, by way of example, that in a dispute involving a quarantine measure found to be WTO-
inconsistent, the fact that an "undeclared" measure "is also a quarantine measure covering the same products
(or subset of products), or otherwise operating in the same manner as the quarantine measure the subject of
the DSB recommendations and rulings, will clearly be an important and relevant element of a panel's
assessment of the closeness of the links, in terms of nature, between the "undeclared" measure and the
original measure". However, the panel observed that "[o]n the other hand, it is not obvious that, in a dispute
involving subsidies to a particular recipient in respect of a number of that recipient's products, the "type" of
subsidy should be determinative in demonstrating whether any "undeclared" measures are within the scope of

that there was a sufficiently "close nexus " between measures adopted in different US states,
notwithstanding certain differences such as the absence of any geographical overlap. The panel
considered that the "key commonality in terms of nature " between the different sets of measures
was "that they are packages of incentives which, despite the differences in the individual measures
comprising each package, have been granted by a state of th e United States conditional upon the
location in that state of manufacturing facilities related to the same Boeing product, namely
the 787", and that "the relevance to the close nexus analysis of any overlapping geographical scope
of the measures depends very much on the context."1158
7.542. We find that panel's analysis instructive insofar as it illustrates how the relevance of a given
similarity or difference between two measures to the "close nexus" analysis may depend on the
circumstances of the case. In this case, Thailand has not explained why it is significant, in the
circumstances of the issues raised in this dispute, that the Charges relate to a different set of entries
from those covered by the September 2012 BoA Ruling. From the point of view of WTO jurisprudence
relating to "close nexus " issues, there is no inherent relevance or significance that necessarily
attaches to the fact that the Charges and the September 2012 BoA Ruling concern different
shipments. We can certainly appreciate that, in some cases, the fact that different customs valuation
decisions relate to different entries might be highly significant. Indeed, we note that customs
valuation decisions can be said to be "transaction-specific", in the sense that they determine the
customs value for particular entries, at a particular point in time. 1159 In the circumstances of this
case, however, the different entries all involved t he same product, the same brands and producer
(Marlboro and L&M cigarettes produced by PMPMI), and, critically, the same transaction values,
imported under the same supply contract.
7.543. Finally, it appears to us that consideration of the entries covered by the Charges and those
covered by the September 2012 BoA Ruling seems to reinforce, rather than sever, the "nexus"
arising from the connections identified by the Philippines. This is because the 272 entries covered
by the Charges cover a continuous sequence of entries over the three -year period (running from
July 2003 to June 2006) immediately preceding the 118 entries (running from June 2006 through to
September 2007) that were the subject of the DSB's recommendations and rulings in the original
proceeding, and that were the subject of the September 2012 BoA Ruling that implements it. Taken
together, the entries covered by the Charges and the September 2012 BoA Ruling therefore comprise
a continuous sequence of all entries over the period July 2003 to September 2007. Thus, there is
actually a perfect chronological "connection" and "link" between the "group or series " of entries
covered by the Charges, and the "group or series" of entries covered by the September 2012 BoA
Ruling. While there is no nexus in terms of any overlap between the entries at issue, we recall that
a "nexus" means "a connection, bond or link ", or "a connected group or series; a network ".1160 In
our view, the fact that the entries covered by the Charges and the September 2012 BoA Ruling
comprise a continuous sequence of all entries over the period July 2003 to September 2007
establishes a nexus in terms of the timing, the nature and the effects of the measures.
7.544. In conclusion, the foregoing considerations relating to the nature of the Charges establish a
nexus between the Charges, the September 2012 BoA Ruling and the DSB's recommendations and
rulings it implements.
7.3.3.3.2.4 Effects
7.545. Thailand argues that the Charges could not have had any impact on the customs valuation
of the specific entries at issue in the initial proceeding, because the BoA Ruling implemented the
original panel's findings with regard to thos e entries, and the Charges concern a different set of
entries. Thailand argues that, similarly, the Charges produce no effects on the DSB's

the compliance proceeding", because the panel considered "the fact that the 'undeclared' measure is a similar
type of subsidy (e.g. a tax concession) may not be especially informative".
1158 Panel Report, US – Large Civil Aircraft (2nd complaint) (Article 21.5 – EU), paras. 7.342 and fn 588.
The panel stated, "f]or example, when the measures involve import bans, their respective geographical scope
of application may be highly relevant to an assessment of whether they are sufficiently closely connected.
However, where the measures under consideration are location incentive packages offered by different states
in competition with one another, it is much less relevant to whether they are sufficiently closely connected that
they apply in different geographical areas."
1159 United States' third party statement, paras. 9, 10 and 15.
1160 Shorter Oxford English Dictionary.

recommendations and rulings because any possible penalty would not consist of the levying of
ad valorem customs duties, which was the subject of the DSB's recommendations and rulings.
7.546. We note that, in some cases, panels and the Appellate Body have examined effects relatively
narrowly, focusing on the extent to which the measure in question legally replaced or supersede d
the declared measure taken to comply.1161 For example, the Appellate Body in US – Zeroing (Article
21.5 – EC) found that, when a measure has legal effects that supersede those of the measure found
to be WTO -inconsistent in the original proceeding, but those effects continue to reflect the same
WTO-inconsistent conduct, this would provide a sufficient link in terms of effect.1162
7.547. However, some panels have taken a broader view of what may be considered in relation to
the examination of effects, presumably relying on a broader notion of what is meant by "undermining
compliance". For example, the compliance panel in US – Large Civil Aircraft (2nd complaint) (Article
21.5 – EU) found a sufficiently close connection in terms of effects of certain measures taken by the
State of South Carolina, on the one hand, and, on the other hand, the effects of certain Washington
State tax measures at issue in the original proceeding. The former had no legal effect (in terms of
replacing, superseding or otherwise) on the latter, but the panel found a sufficiently close connection
in terms of effects because both sets of measures "in very general terms induce Boeing to locate
manufacturing operations in a particular place by offering tax and other concessions that represent
the functional equivalent of additional cash to Boeing."1163 In light of the foregoing, we do not agree
with the view that the jurisprudence narrows or equates an examination of effects to "legal
consequences" in relation to other measures 1164, nor do we agree with Tha iland's arguments
regarding effects insofar as its arguments proceed from that premise. While that is certainly one
type of "effect" that would be relevant to the examination, it does not exhaust what may be captured
by an examination of effects.
7.548. Indeed, this is already apparent from the Appellate Body's broader formulation, cast in
general terms, that an examination into effects takes into account whether the measure in question
could "undermine compliance"1165, and that this examination is informed by conce rns of possible
"circumvention", such as a Member complying through a declared measure, "while, at the same
time, negating compliance through another".1166 Insofar as the examination of effects is concerned
with "circumvention", it would be antithetical to th en narrowly confine that examination to
consideration of "legal effects" on other measures.
7.549. We recall that, in this case, the Thai Customs Department initially rejected PMTL's declared
transaction values for 118 entries over the period 2006 -2007, and instead determined alternative
customs values that required PMTL to pay a greater amount in ad va lorem duties. After this
alternative customs valuation was found to be WTO-inconsistent in the original proceeding, the BoA,
in its September 2012 Ruling, accepted PMTL's declared transaction values for those transactions.
Following the September 2012 BoA Ruling, Thailand, through the Public Prosecutor, filed criminal
charges against PMTL. Leaving aside for purposes of the present jurisdictional enquiry whether the
Charges involve a "customs valuation" determination to which the CVA is applicable, as alread y
noted, the Charges were issued on the grounds that PMTL's declared transaction values for the 272
entries over the three -year period immediately preceding those 118 entries should have been
rejected, and that PMTL should have paid a greater amount in ad valorem duties. The resulting
criminal fine that is being sought, which under Section 27 is four times the duty-paid value, is far
greater than the amount of money at issue in respect of the initial customs valuation of the 118
entries. We note that the two measures in question, i.e. the Charges and the September 2012 BoA
Ruling, are both PMTL -specific determinations. Furthermore, and again leaving aside whether the
Charges involve a "customs valuation " determination, both relate to the valuation of goods f or
purposes of levying ad valorem duties on PMTL's imports of Marlboro and L&M cigarettes. From that
perspective, it appears overly formalistic to us to confine the analysis of the effects of the Charges
solely to the perspective of assessing their "legal effect" (or lack thereof) on the 118 entries at issue
in the September 2012 BoA Ruling. For the reasons set f orth above, we agree with the Philippines
that the Charges appear to aggravate the WTO-inconsistencies that Thailand has been instructed by

1161 Japan's third-party submission, paras. 8-10.
1162 Appellate Body Report, US – Zeroing (EC) (Article 21.5 – EC), paras. 231-232.
1163 Panel Report, US – Large Civil Aircraft (2nd complaint) (Article 21.5 – EU), para 7.343.
1164 Japan's third-party written submission, paras. 8-10.
1165 Appellate Body Report, US – Zeroing (EC) (Article 21.5 – EC), para. 256.
1166 Appellate Body Report, US – Softwood Lumber IV (Article 21.5 – Canada), para. 71. This statement
has been repeated by panels and the Appellate Body in several subsequent cases. (See, e.g. Appellate Body
Report, US – Zeroing (EC) (Article 21.5 – EC), para. 250)

the DSB to resolve, and in this way potentially undermine compliance and circumvent the DSB's
recommendations and rulings because they perpetuate the problem addressed in those
recommendations and rulings.
7.550. Based on the foregoing, we consider that the Charges have the potential to circumvent the
compliance with the CVA achieved through the September 2012 BoA Ruling, and the fact that they
have no legal effect on the BoA Ruling or the entries subject to that ruling does not mean that the
Charges have no effects on compliance for purposes of the close nexus analysis.
7.3.3.3.2.5 Overall assessment
7.551. We have concluded that several considerations relating to the timing of the Charges establish
a nexus in terms of timing between the September 2012 BoA Ruling and the DSB's recommendations
and rulings it implements, and the events culminating in the Charges.
7.552. We have further found that the nature of the Charges establishes a nexus between the
Charges and the September 2012 BoA Ruling and the DSB's recommendations and rulings that it
seeks to implement, in that the relevant measures involve the same importer (PMTL), the same
exporter (PMPMI), the same importing country (Thailand), the same exporting country (the
Philippines), the same product, brands and producer ( Marlboro and L&M cigarettes produced by
PMPMI), and the same transaction values, imported under the same supply contract.
7.553. Leaving aside for purposes of the present jurisdictional enquiry whether the Charges involve
a "customs valuation" determination to which the CVA is applicable, at this juncture of our analysis
we note that the Charges were issued on the grounds that PMTL's declared transaction values for
the 272 entries at issue should be rejected, and that PMTL should have paid a greater amount in ad
valorem duties in respect of those entries, and to that extent the Charges and the September 2012
BoA Ruling both relate to the valuation of goods for purposes of levying ad valorem duties on PMTL's
imports of Marlboro and L&M cigarettes. We have found that the nexus that exists between the
Charges and the September 2012 BoA Ruling is more attenuated than it would otherwise be if both
measures were taken by the same Thai government agencies . We have also found that the Public
Prosecutor and the BoA have potentially overlapping functions in the area of customs valuation , at
least to the extent that , in discharging their respective mandates, both agencies have made
assessments as to whether PMTL's declared transaction values should be accepted or not, with
corresponding assessments as to the amount in ad valorem duties that PMTL should have paid to
the Thai government. We have further found that the Charges, like the original recommendations
and rulings of the DSB implemented by the BoA in its September 2012 Ruling, both entailed
reference to, and comparison of some kind with, the duty free prices of King Power.
7.554. We have also concluded that, although there is no overlap between the entries covered by
the Charges and the September BoA Ruling, this does not sever the nexus; and that because the
two sets of entries comprise a continuous sequence of all entries over the period July 2003 to
September 2007, this establishes an additional nexus in the sense of establishing "a connected group
or series" – in chronological terms – that spans the period July 2003 to September 2007.
7.555. Finally, we consider that the Charges have the potential to circumvent compliance with the
CVA achieved through the September 2012 BoA Ruling, and we consider the fact that they have no
legal effect on the BoA Ruling or the entries subject to that ruling does not mean that the Charges
have no effects on compliance for purposes of the close nexus analysis.
7.3.3.4 Conclusion
7.556. On the basis of the foregoing conside rations, taken together, the Panel concludes that the
Charges fall within the scope of this compliance proceeding as a measure "taken to comply" because
they have a sufficiently close nexus with the matters covered by the DSB's recommendations and
rulings and the BoA's Ruling of 12 September 2012, which is a declared measure taken to comply.

7.3.4 Ripeness
7.3.4.1 Introduction
7.557. On 18 January 2016, an investigation by the DSI, a unit within the Ministry of Justice,
culminated in the Thai Public Prosecutor filing criminal charges against PMTL and seven of its current
and former employees.1167 The competent Thai Criminal Court accepted and issued the Charges on
the same day.1168 The proceedings before the Criminal Court were ongoing at the time the Philippines
made its request for the establishment of a panel, and are still ongoing as of the time of the issuance
of the Report to the parties.1169
7.558. Thailand submits that a "doctrine of ripeness" applies in WTO dispute settlement, and that
the Charges are not a matter "ripe" for adjudication in WTO dispute settlement proceedings. 1170
Thailand considers that the Panel is not competent to address claims relating to the Charges because
they constitute "merely an allegation of criminal conduct, not a judgment by the Criminal Court".1171
Given the na ture of the Charges as constituting a mere "allegation" or "accusation", Thailand
suggests that they are inseparable from the criminal proceedings that they triggered 1172, and
submits that they do not represent a customs valuation "determination" for the purposes of the
CVA1173, and that the Philippines' claims directed at the Charges are effectively seeking "an abstract
ruling on hypothetical future measures "1174, namely on the outcome of the ongoing criminal court
proceedings.
7.559. The Philippines requests that the Panel dismiss Thailand's "ripeness" arguments, arguing
that the Charges are a "measure" subject to WTO dispute settlement. 1175 In its view, "the alleged
'ripeness' doctrine is an invention of Thailand that has no foundation in the covered agreements ",
and the only relevant legal issue is whether the Charges are a "measure" that can be challenged in
WTO dispute settlement. 1176 The Philippines emphasizes the finality of the Public Prosecutor's
decision, asserting that the Charges are "a defined and formal act, taken by an organ of the Thai
state, on a date certain in the past, and that they have very real legal consequences for the
accused".1177 Based on the nature of the Public Prosecutor's decision, the Philippines also considers
that the Charges constitute a "determination" covered by the CVA. 1178 The Philippines emphasizes
that the "measure" challenged by the Philippines is the Charges, whereas "throughout its arguments
on this issue, Thailand argues as if the Philippines were challenging 'the outcome of ' the criminal
court proceedings".1179
7.3.4.2 Main arguments of the parties
7.560. Thailand submits that "the doctrine of ripeness" is reflected in US law, Swiss law, and in the
context of the International Court of Justice, and has been recognized in various contexts of WTO
law and used by the Appellate Body and previous panels to resolve questions about the justiciability
of matters before them.1180 Thailand provides various examples to show that the doctrine of ripeness

1167 Philippines' first written submission, paras. 465-466; the Criminal Court, Charges, Case Black No.
Or. 185/2559, 18 January 2016 (English translation), (Exhibit PHL-1-B).
1168 The Criminal Court, Charges, Case Black No. Or. 185/2559, 18 January 2016 (English translation),
(Exhibit PHL-1-B).
1169 According to Thailand, the decision of the Criminal Court is not expected before June 2018. (See
Philippines' first written submission, para. 524; Thailand's first written submission, paras. 6.8-6.10)
1170 Thailand's first written submission, paras. 6.48-6.82; second written submission, paras. 3.128-
3.173; response to Panel question Nos. 38-39; opening statement at the meeting of the Panel, paras. 26-30;
responses/comments to Panel question Nos. 100-102.
1171 Thailand's second written submission, para. 5.2(c); first written submission, para. 6.7.
1172 Thailand's second written submission, paras. 3.167-3.169; response to Panel question No. 39.
1173 Thailand's response to Panel question No. 38; opening statement at the meeting of the Panel, para.
29.
1174 Thailand's first written submission, para. 6.81.
1175 Philippines' second written submission, paras. 448-449; response to Panel question No. 39; opening
statement at the meeting of the Panel, paras. 64-72; responses/comments to Panel question Nos. 100-102.
1178 Philippines' response to Panel question No. 38; comments on Thailand's response to Panel question
Nos. 100(b) and 101.
1180 Thailand's first written submission, paras. 6.50-6.71.

is reflected in various forms and contexts in WTO law, including: the general distinction between
mandatory/discretionary measures1181; the approach taken by panels and th e Appellate Body in
several other cases that involved domestic court proceedings 1182; implications drawn from various
provisions of the DSU, including Articles 3.4, 3.7, 11, and 19.1 1183; and Article 17.4 of the Anti -
Dumping Agreement, which establishes that decisions to initiate anti -dumping investigations may
not be challenged as such in WTO dispute settlement proceedings.1184 Thailand submits that whether
a challenged action is a "measure"1185 that forms part of a panel's terms of reference is a separate
issue from whether that measure is "ripe" for adjudication.1186
7.561. Thailand stresses that the Charges constitute merely an "allegation" of criminal conduct, not
a finding of guilt or a judg ment by the Criminal Court. Thailand submits that because the Charges
are still pending before the Thai Criminal Court, which has yet to hear or evaluate the evidence let
alone reach a decision, a WTO panel "has no basis on which to evaluate the outcome of the matter
at this point".1187 Thailand reiterates that the Charges "marked only the beginning of the Criminal
Court proceedings"1188, whereby the Public Prosecutor "requests the competent Criminal Court to
conduct a trial and determine the guilt or innocence of the defendants".1189 In Thailand's view, "[o]n
its face, the allegation or accusa tion that someone is acting inconsistently with domestic customs
laws cannot be considered a violation of WTO law".1190 Thailand adds that, "while the Charges contain
a description of the facts surrounding the alleged offences, the Charges do not contain or refer to all
of the evidence supporting the Public Prosecutor's allegations ".1191 Thailand explains that the court
proceedings are "far from being completed", and that the court will conduct hearings "until at least
April 2018".1192
7.562. Although Thailand states that it accepts that the Charges may be a "measure"1193 that forms
part of the Panel's terms of reference 1194, Thailand submits that the Charges are inseparable from
the rest of the proceedings, including the outcome of the criminal proceedings1195, in the sense that
they "cannot be examined in isolation"1196, and "cannot be segregated from the rest of the criminal
proceedings".1197 Thailand submits that, because the Charges are a mere accusation , they do not
represent a customs valuation "determination" for the purposes of the CVA. 1198 Finally, building
again on the premise that the Charges constitute merely an "allegation" and that the Court has yet
to hear and evaluate the arguments and evidence, Thailand argues that the Philippines' claims
directed at the Charges are effectively seeking "an abstract ruling on hypothetical future
measures"1199, namely on the outcome of the ongoing criminal court proceedings. In Thailand's view,
this would "represent an unprecedented attempt to get a WTO panel to interfere in pending domestic
criminal proceedings".1200 In its view, "[t]here is no precedent whatsoever in WTO jurisprudence for
such an ex ante ruling", and "no precedent for a WTO panel to put itself in the place of a domestic

1181 Thailand's first written submission, paras. 6.55-6.66 (referring to William J. Davey, "Has the WTO
Dispute Settlement System Exceeded Its Authority? : A Consideration of Deference Shown by the System to
Member Government Decisions and its Use of Issue-Avoidance Techniques", in Journal of International
Economic Law No. 4 Vol. 1 (2001), (Exhibit THA-24), pp. 101-103).
1182 Thailand's first written submission, paras. 6.57-6.60 and 6.68 (referring to Appellate Body Report,
1183 Thailand's first written submission, paras. 6.61-6.67.
1184 Thailand's first written submission, para. 6.69.
1185 Thailand's second written submission, para. 3.131.
1186 Thailand's first written submission, para. 6.1.
1187 Thailand's first written submission, para. 6.48.
1188 Thailand's first written submission, para. 6.73.
1189 Thailand's first written submission, para. 6.74.
1190 Thailand's first written submission, para. 6.74.
1191 Thailand's first written submission, para. 6.75.
1192 Thailand's first written submission, para. 6.76.
1193 Thailand's second written submission, para. 3.131.
1194 Thailand's first written submission, para. 6.1.
1195 Thailand's second written submission, paras. 3.167-3.169; Thailand's response to Panel question
No. 39.
1196 Thailand's second written submission, para. 3.168.
1197 Thailand's second written submission, para. 3.168.
1198 Thailand's response to Panel question No. 38; Thailand's opening statement at the meeting of the
Panel, para. 29.
1199 Thailand's first written submission, para. 6.81.
1200 Thailand's first written submission, para. 6.48.

tribunal and make a determination that is within the jurisdiction of that tribunal before the tribunal
itself has a chance to make its ruling".1201
7.563. The Philippines submits that the "the alleged 'ripeness' doctrine is an invention of Thailand
that has no foundation in the covered agreements "1202, and the relevant legal standard is whether
the Charges are a "measure". The Philippines recalls the Appellate Body's finding that a panel is "not
in a position to choose freely whether or not to exercise its jurisdiction ".1203 The Philippines recalls
that the Appel late Body has taken a broad view of the term "measure", stating that "any act or
omission attributable to a WTO Member can be a measure of that Member for purposes of dispute
settlement proceedings".1204 The Philippines submits that an "act" is simply "[s]omething done"1205,
and that the Appellate Body has further explained that "[t]he acts or omissions that are so
attributable are … the acts or omissions of the organs of the state".1206 The Philippines submits that,
under this definition, a "measure" may be any administrative, legislative, and judicial act taken by
any state organs, including an act taken by a Member's law enforcement authorities or courts.1207
7.564. The Philippines submits that Thailand's characterization of the Charges as merely an
"accusation" or "allegation" seems designed to convey that they are "casual, informal, and of no
consequence".1208 The Philippines emphasizes the finality of the Public Prosecutor's decision,
asserting that the Charges are "a defined and formal act, taken by an organ of the Thai state, on a
date certain in the past, and they have very real legal consequences for the accused ".1209 The
Philippines also notes that Thailand itself acknowledges that the Charges are the "culmination" of a
decade-long investigation conducted by the DSI and the Public Prosecutor into PMTL's transaction
values", and that by Thailand's own admission, therefore, the Charges constitute "the final act ending
that investigation".1210 In the Philippines' view, the "finality" of the decision is confirmed by the fact
that the Charges have real legal consequences for the accused. 1211 The Philippines submits that,
"under the CVA, the fact that the Customs Department previously made customs valuation decisions,
and that the criminal court will also do so, in respec t of the entries at issue does not detract from
the finality of the Thai Public Prosecutor's customs valuation decision as set out in the Charges".1212
7.565. The Philippines emphasizes that the "measure" challenged by the Philippines is the Charges,
whereas "throughout its arguments on this issue, Thailand argues as if the Philippines were
challenging 'the outcome of' the criminal court proceedings".1213 The Philippines agrees that "panels
cannot speculate about future events", but that there is no need to do so in order to rule upon the
WTO-consistency of the Charges. 1214 Accordingly, the Philippines considers that Thailand's
arguments as to the impermissibility of ruling on the outcome of ongoing court proceedings is "beside
the point".1215 The Philippines reiterates that it "has not challenged any ruling of a Thai court ".1216
Given the nature of the Charges, including their finality and legal consequences, the Philippines
considers that the Charges are a "determination" for purposes of the CVA.1217

1201 Thailand's opening statement at the meeting of the Panel, paras. 27-28.
1203 Philippines' second written submission, para. 410 (referring to Appellate Body Report, Mexico –
1204 Philippines' second written submission, para. 413 (referring to Appellate Body Report, US –
Corrosion-Resistant Steel Sunset Review, para. 81).
1205 Philippines' second written submission, para. 413 (referring to Oxford English Dictionary, OED
Online).
1206 Philippines' second written submission, para. 413 (referring to Appellate Body Report, US –
Corrosion-Resistant Steel Sunset Review para. 81).
1208 Philippines' opening statement at the meeting of the Panel, para. 66.
1211 Philippines' response to Panel question No. 38(b), para. 330.
1212 Philippines' response to Panel question No. 38(b), para. 332.
1217 Philippines' response to Panel question No. 38(b). In response to a question from the Panel, the
Philippines states that the events between the DSI's initiation of its investigation in August 2006 and the Public
Prosecutor's filing of the Charges on 18 January 2016 involved a series of information-gathering steps, a
memorandum of allegation, and recommendations, and submits that the point in time at which there was a

7.3.4.3 Analysis by the Panel
7.3.4.3.1 General considerations
7.566. Thailand essentially argues that it would be premature for this Panel to make a finding on
the WTO -consistency of the Charges, because they constitute "merely an allegation of criminal
conduct, not a judgment by the Criminal Court ".1218 Thailand premises its arguments on the basis
of what it terms "the doctrine of ripeness"1219, and proceeds to define the issue before the Panel in
terms of whether or not the Charges are "ripe" for adjudication.
7.567. Before turning to these issues, we note that n one of the questions as formulated above
presuppose that the doctrine of the "exhaustion of local remedies " is applicable in WTO dispute
settlement proceedings. To the contrary, it is well established that the doctrine of the exhaustion of
local remedies and the rationale behind it are not applicable in the context of WTO dispute settlement
proceedings. This is evidenced by the fact that, in hundreds of GATT/WTO dispute settlement
proceedings spanning many decades, there appears to be no instance in which a disputing party, a
panel, or the Appellate Body has attached any significance to whether the complainants had initiated,
pursued or exhausted domestic appeal mechanisms. 1220 In this dispute, both parties agree that
exhaustion of local remedies is not applica ble in the context of WTO dispute settlement
proceedings1221, and none of the third parties has expressed a different view on this issue.1222
7.568. We also note that Thailand has not sought to argue that the mandatory/discretionary
distinction is relevant to the analysis of whether the Charges are "ripe" such that they may be subject
to WTO dispute settlement proceedings. In the context of providing various examples of WTO law
recognizing a "doctrine of ripeness", Thailand explains that the mandatory/discretionary distinction
is one such instance.1223 However, Thailand makes clear that the "present situation does not raise
the issue of the distinction between a mandatory and discretionary measure".1224
7.569. We note at the outset that the concept of "ripeness" does not appear explicitly in the covered
agreements. Furthermore, the "doctrine of ripeness " is not an expression that has any defined
meaning in the context of general international law or international dispute settlement. 1225 We are
unaware of any panel o r Appellate Body report that has conducted an analysis of the admissibility
or merits of a claim in terms of a "ripeness" doctrine.
7.570. However, we do consider that the findings of the Appellate Body in the original proceeding
are instructive. In the original proceeding, the panel found that "guarantee decisions", which are
taken prior to final duty assessment, fall within the scope of "administrative action relating to
customs matters" within the meaning of Article X:3(b) of the GATT 1994, and are therefore subject
to the right of appeal contained therein. Thailand appealed this finding, arguing that the scope of
Article X:3(b) does not extend to "provisional" measures such as customs guarantee decisions, which

customs valuation "determination" was when the Public Prosecutor issued the Charges on 18 January 2016.
(Philippines' response to Panel question No. 38(c))
1218 Thailand's second written submission, para. 5.2(c); Thailand's first written submission, para. 6.7.
1219 Thailand's first written submission, paras. 6.50, 6.55, 6.57, 6.61, 6.62, 6.65, 6.69, 6.70, and 6.71.
1220 See Ernst-Ulrich Petersmann, The GATT/WTO Dispute Settlement System: International Law,
International Organizations and Dispute Settlement (Kluwer Law International, 1997), pp. 241–244. See also
Appellate Body Report, Thailand – H-Beams, para. 94; Panel Report, Argentina – Textiles and Apparel, para.
6.68.
1222 Canada, the European Union, Japan, and the United States' third-party responses to Panel question
No. 3.
1223 At paragraph 6.55 of its first written submission, Thailand states that "under this doctrine, a
complaining Member may challenge as such a measure that is mandatory in the sense that its application will
necessarily result in certain clearly definable consequences. Members may not, however, challenge as such a
measure that is discretionary in the sense that its application in different cases might have different
consequences. In the latter case, a reviewing panel could not adjudicate the WTO consistency of the measure
because it does not know whether it would be applied in a WTO-consistent or WTO-inconsistent manner. It
would be premature for the reviewing panel [to] attempt to categorize the consequences of the measure."
1224 Thailand's first written submission, para. 6.56.
1225 In support of its contention that there is a "doctrine of ripeness", Thailand refers to the International
Court of Justice's case law relating to the requirement for an "actual controversy" in connection with "concrete
cases". Thailand suggests that this means, "in effect", that the ICJ will only entertain cases that are "ripe".
(Thailand's first written submission, paras. 6.53-6.54)

in its view were merely a "component" of the final determination of customs duties, and should not
be regarded as "distinct decisions " for the purpose of Article X:3(b). 1226 Thailand argue d that
acceptance of the panel's view would "result in unduly interfering with" the customs administration's
domestic decision-making process.1227 In addition, Thailand argued that the Appellate Body should
take into account "the doctrine of ripeness ", as reflected in US Supreme Court jurisprudence. 1228
The Appellate Body proceeded to conduct its analysis of the issue raised by T hailand in the usual
manner, on the basis of a careful analysis of the ordinary meaning of the terms of Article X:3(b)
(i.e. "administrative action relating to customs matters "), in their context, and in the light of the
object and purpose of the GATT 1994. The Appellate Body did not refer to the concept of "ripeness"
in its analysis, let alone frame its analysis of the issues raised by Thailand in terms of a "doctrine of
ripeness".
7.571. We highlight that the Appellate Body's analysis in the original proceeding concerned a
different issue in the context of a different provision, and we are not suggesting that it is dispositive
of the substantive issue raised by Thailand in this proceeding in relation to "ripeness". However, we
consider that it is instructive as to how we should analyse the substance of the issue raised by
Thailand. As the European Union has observed, "the doctrine of ripeness " is "a rather abstract
concept … which is difficult to clearly circumscribe and delineate "1229, and therefore "the question
should be framed in a more classical manner ".1230 We agree. Rather than framing the analysis in
terms of an abstract, undefined, and novel "ripeness doctrine", we will analyse Thailand's "ripeness"
arguments on the basis of the more precise standards reflected in the covered agreements and WTO
jurisprudence.
7.572. We consider that chief among the various considerations that weigh against proceeding with
an analysis framed in terms of "ripeness" is the fact that the WTO agreements establish no one -
size-fits-all legal standard with respect to what may be called "ripeness". Therefore, conducting an
analysis in terms of so -called "ripeness" has the potential to obscure the more precise and
individualized legal standards established in the text of the covered agreements . By way of
illustration, Article 17.4 of the Anti -Dumping Agreement establishes a rule, unique to dispute
settlement proceedings concerning that agreement, that decisions to initiate anti -dumping
investigations may not be challenged in WTO dispute settlement until such time as a provisional or
definitive measure has been imposed.1231 In cases where particular WTO provisions establish effects-
based legal standards, such as those found in Articles 5(c) and 6 of the SCM Agreement concerning
subsidies that cause "serious prejudice", it is evident that, from a practical perspective, a Member
may be unable to discharge its burden of proof if it brings its case immediately upon the granting of
the specific subsidy in question1232; in contrast, it would generally be the case that no such limitations
present themselves in the context of a claim brou ght under, for example, Article III:2 of the GATT
1994. Certain provisions in the covered agreements provide for rights of domestic appeal only in
respect of "final" determinations or actions, whereas others are not so qualified. 1233 Certain

1226 Appellate Body Report, Thailand – Cigarettes (Philippines), paras. 32-34.
1227 Appellate Body Report, Thailand – Cigarettes (Philippines), para. 35.
1228 Appellate Body Report, Thailand – Cigarettes (Philippines), paras. 39 and 214. At fn 51, the
Appellate Body notes that, with reference to the "doctrine of ripeness", Thailand referred to United States
Supreme Court, Abbott Laboratories v. Gardner, 387 U.S. 136 (1967).
1229 European Union's third-party statement, para. 53.
1230 European Union's third-party response to Panel question No. 3.
1231 Article 17.4 provides that "[i]f the Member that requested consultations considers that the
consultations pursuant to paragraph 3 have failed to achieve a mutually agreed solution, and if final action has
been taken by the administering authorities of the importing Member to levy definitive anti-dumping duties or
to accept price undertakings, it may refer the matter to the Dispute Settlement Body ('DSB'). When a
provisional measure has a significant impact and the Member that requested consultations considers that the
measure was taken contrary to the provisions of paragraph 1 of Article 7, that Member may also refer such
matter to the DSB." The Appellate Body has observed that "the language of Article 17.4 of the Anti-Dumping
Agreement is unique to that Agreement". (Appellate Body Report, Guatemala – Cement I, para. 79)
1232 As Thailand points out, to prevail in a claim of serious prejudice under Article 6.3(d), it must be
demonstrated that "the effect of the subsidy is an increase in the world market share of the subsidizing
Member … and this increase follows a consistent trend over a period when subsidies have been granted".
1233 The original panel stated that "the absence of the word 'final' preceding 'administrative action' in
Article X:3(b) would also tend to manifest the drafters' intention to have the obligations under Article X:3(b)
applied to a broad range of 'administrative action pertaining to customs matters' and that this administrative
action is not necessarily confined to final administrative actions". (Panel Report, Thailand – Cigarettes
(Philippines), para. 7.1034) In contrast, we note that Article 13 of the CVA limits independent review to a "final
determination of customs value", and that Article 13 of the Anti-Dumping Agreement limits independent review
to "final" anti-dumping determinations.

notification and publication obligations in the covered agreements are applicable to draft laws and
regulations, whereas other publication obligations apply only to measures once they have been
"made effective".1234
7.573. In this dispute, we note that all third parties disagree with Thailand's position that the
Charges are not ripe for adjudication. 1235 In fact, the Philippines and several third parties have
suggested that the only relevant question is whether the Charges constitute a "measure" as defined
in WTO dispute settlement proceedings.1236
7.574. In our view, Thailand's argumentation in connection with the "ripeness doctrine" is more
complex than, and may raise issues that go beyond the question of, whether there is a "measure"
within the meaning of Article 6.2 of the DSU. In addition, we consider that our resolution of this
issue must take due account of the precise legal standards arising from the text of the CVA provisions
at issue, which may not be possible insofar as the analysis is framed more broadly and generically
in terms of what constitutes a "measure".1237
7.575. We understand Thailand's arguments related to "ripeness" to raise three distinct issues.
First, Thailand's arguments raise the question of whether the Charges are a distinct measure for
purposes of WTO dispute settlement. Second, Thailand's arguments raise the separate question of
whether the Charges consti tute a "determination" for the purposes of the CVA. Third, Thailand's
arguments raise the question of whether the Panel can make findings on the WTO -consistency of
the Charges without engaging in speculation as to when or how the ongoing criminal proceedin gs
before the Criminal Court may be concluded, and without issuing abstract rulings on hypothetical
future measures. In making our findings on these issues, we proceed on the understanding that the
legal standard for what constitutes a "measure", or for wh at constitutes a "determination", or for
what constitutes speculative findings on "future" measures, does not vary according to whether or
not the subject matter of the case involves criminal law enforcement measures.1238
7.3.4.3.2 Existence of a distinct "measure"
7.576. It is well established that "[i]n principle, any act or omission attributable to a WTO Member
can be a measure of that Member for purposes of dispute settlement proceedings".1239 As to the first

1234 For example, Article 2.9 of the TBT Agreement establishes procedural and consultative obligations in
respect of certain categories of "proposed technical regulation[s]" that "may have an effect on international
trade". Similar obligations are contained in Annex B:5 of the SPS Agreement. Article 2.1 of the TFA establishes
a similar obligation requiring that, to the extent practicable and subject to its domestic law, a Member must
provide opportunities to comment on "the proposed introduction or amendment" of laws and regulations. On
the other hand, the publication obligation in Article X:1 of the GATT 1994 is only triggered once a law,
regulation, judicial decision, or administrative ruling of general application has been "made effective". This
could occur either before or after it is formally adopted under a Member's domestic legal system. (See, e.g.
Panel Report, EC – IT Products, para. 7.1048)
1235 See the European Union's third-party submission, para. 54; the European Union's third-party
statement, paras. 7-8; the European Union's response to panel question No. 3; Japan's third-party statement,
paras. 13-14; Japan's response to panel question No. 3; the United States' third-party submission, paras. 17-
19; the United States' response to panel question No. 3; Australia's third-party statement, para. 9. Canada is
the only third party that submits that the doctrine of ripeness does apply in WTO dispute settlement, but
disagrees with Thailand that the Charges are not ripe for adjudication. (See Canada's third-party submission,
paras. 22-30; Canada's third-party response to Panel question No. 3)
1236 Philippines' second written submission, para. 455; European Union's third-party statement, para.
54; Japan's third-party statement, para. 14.
1237 In this regard, while the Philippines' arguments imply that the only relevant issue is whether the
Charges are "measure", it also appears to argue that any such measure must also qualify as "actions of
another Member" and that it may be relevant to assess whether or not that measure constitutes a
"determination" for the purposes of the CVA. In its response to Panel question number 3 to the third parties,
the European Union submits that only relevant question is whether there is a "measure", but then submits that
"the exact contours" of what can constitute a "measure at issue" will be "delineated by the substantive WTO
law provisions at stake", and that "in the present case the notion of customs valuation 'determination'
contributes to this delineation". The United States appears to hold a similar view, suggesting that "the 'unripe'
nature of a measure might inform the examination of the consistency of the measure at issue with the
obligations asserted – for example, by indicating that the precise content of the measure at the time of the
panel request does not (yet) reflect conduct inconsistent with the covered agreement". (United States third-
party submission, para. 17)
1238 We discuss the treatment of criminal law measures in greater detail in the context of Section 7.3.5
of our Report.
1239 Appellate Body Report, US – Corrosion-Resistant Steel Sunset Review, para. 81.

element of this legal standard, in WTO law there are no a priori limitations on the kinds of "acts" or
"omissions" that may qualify as a measure, and Thailand does not contest the Philippines'
characterization of the Charges as a "formal legal act" by the Public Prosecutor. As the Philippines
observes, the ordinary meaning of the word "act" is simply "[s]omething done".1240 We note that in
the context of interpreting the word "act" in Article 70.1 of the TRIPS Agreement, the Appellate Body
viewed it "in its normal or ordinary sense of 'things done', 'deeds', 'actions' or ' operations'".1241 As
to the second element of the legal standard, it is common ground between the parties that the Public
Prosecutor is an organ of the state, and that acts taken by the Public Prosecutor are attributable to
Thailand.1242
7.577. Based on the foregoing, we consider that the Charges are a "measure" within the meaning
of Article 6.2 of the DSU. We note that Thailand has not disputed that the Charges are a "measure",
defined broadly under WTO law as "any act or omission attributable to a WTO Member " taken by
different organs of the state. 1243 However, Thailand's arguments do raise the question of whether
the Charges are a distinct measure that can be analysed separately from the subsequent criminal
proceedings.
7.578. In this respect, Thailand submits that the Charge s are inseparable from the rest of the
proceedings, including the outcome of the criminal proceedings 1244, in the sense that they "cannot
be examined in isolation "1245, and "cannot be segregated from the rest of the criminal
proceedings".1246 In response to a question from the Panel asking Thailand to elaborate on why it
would be artificial to focus on the Charges as a measure that is distinct from the outcome of the
criminal court proceedings, Thailand states that it "understands that the Philippines challenged the
Charges", but emphasizes that the Charges "are the mere starting point of the ongoing court
proceedings that are not, at present, ripe for adjudication ".1247 In Thailand's view, "since there is
still no outcome in the court proceedings, the Charges are not ripe for examination by this Panel".1248
7.579. We recall that in US – Export Restraints, the panel articulated an approach for the purpose
of determining when a measure can individually give rise to a violation of WTO obligations:
In considering whether any or all of the measures individually can give rise to a violation
of WTO obligations, the central question that must be answered is whether each
measure operates in some concrete way in its own right. By this we mean that each
measure would have to constitute an instrument with a functional life of its own, i.e.,
that it would have to do something concrete, independently of any other instruments,
for it to be able to give rise independently to a violation of WTO obligations.1249
7.580. In our view, upon being filed by the Public Prosecutor and issued by the competent Thai
Criminal Court on the same day, the Charges "do" something concrete, independently of any other
instruments or subsequent actions taken by the executive, administrative or judicial orga ns of
Thailand. Specifically, the Charges have the direct legal consequences of: (i) the accused becoming
subject to the mandatory jurisdiction of the criminal court; (ii) the accused being required to appear
before the court to answer the Charges and atte nd the hearings relating to the Charges; (iii) the
accused having to apply for and pay bail to secure temporary release during the proceedings; (iv) the
accused having an officially recorded indictment and accusations; and (v) the accused having to pay
the costs of a defence for criminal proceedings . Finally, the Charges deploy negative reputational
effects to which the accused is being exposed. Accordingly, the Charges "operate" in "some concrete

1240 Philippines' second written submission, para. 413 (referring to Oxford English Dictionary, OED
Online).
1241 Appellate Body Report, Canada – Patent Term, para. 54.
1242 Thailand's second written submission, para. 3.131.
1243 Thailand's second written submission, para. 3.131.
1244 Thailand's second written submission, paras. 3.167-3.169; Thailand's response to Panel question
No. 39.
1245 Thailand's second written submission, para. 3.168.
1246 Thailand's second written submission, para. 3.168.
1247 Thailand's response to Panel question No. 39, p. 36.
1248 Thailand's response to Panel question No. 39, p. 36.
1249 Panel Report, US – Export Restraints, para. 8.85.

way in its own right" as "an instrument with a functional life of its own".1250 In other words, it is an
instrument that has "autonomous status".1251
7.581. Clearly, it could be said that the DSI investigation, the Charges, the subsequent criminal
proceedings, and the eventual outcome of those proceedings all "form part of a continuum of events
and measures that are all inextricably linked ".1252 However, to the extent that Thailand is arguing
on this basis that the Charges are not a distinct measure for the purposes of WTO dispute settlement,
we disagree for essentially the same reasons for which we earlier disagreed with Thailand's argument
that the Charges are the same measure as the DSI investigation initiated in 2006. 1253 Just as the
Charges had legal consequences that the earlier DSI investigation did not, those legal consequences
are independent from the subsequent criminal proceedings that they triggered. As we indicated in
the context of addressing Thailand's argument relating to the preclusion doctrine, the fact that
certain events form part of a continuum of events and are all inextricably linked does not mean that
they constitute a single "measure" for purposes of WTO dispute settlement.
7.582. The legal effect of the Charges includes the initiation of the criminal proceedings. The
existence of Article 17.4 of the Anti-Dumping Agreement, and specifically the absence of any similar
rule in the SCM Agreement or other covered agreements, reinforces our conclusion that the
instrument initiating an investigation can , in principle, be analysed as a measure distinct from the
subsequent investigation and the outcome thereof, and that, in principle, such a measure can be
challenged prior to any subsequent investigation or resulting determination even taking place. Were
it otherwise, the procedural restriction in Article 17.4 of the Anti -Dumping Agreement would be
superfluous. We note that, in the absence of any comparable special rule and additional rule of
procedure in the SCM Agreement, there is nothing in the text of the SCM Agreement that would pose
any legal impediment to a Member initiating a WTO dispute settlement proceeding in respect of the
initiation of a countervailing duty investigation prior to the imposition of any provisional or final
countervailing duties.1254
7.583. We note that the issuance of criminal charges and arrest warrants have been treated as
challengeable measures before other international courts and tribunals. For instance, the
International Court of Justice has observed (in a case that involved, inter alia, the arrest of a ship
and its master) that "in its ordinary sense th e word ["measure"] is wide enough to cover any act,
step or proceeding, and imposes no particular limit on their material content or on the aim pursued
thereby".1255 In Arrest Warrant of 11 April 2000 (Democratic Republic of the Congo v. Belgium), the
Court found that the mere issuance of an arrest warrant against the Minister for Foreign Affairs for
the Democratic Republic of the Congo was, although never enforced, an act giving rise to a violation
of the customary international law of immunities.1256 It is also well established that unlawful arrests
can be challenged under Article 5 of the European Convention on Human Rights, which, by its terms,
provides that no one shall be "deprived of his liberty " save in the cases specified therein and in
accordance with a procedure prescribed by law. 1257 The context is admittedly different, but it
supports the conclusion that the issuance of criminal charges can be a "measure" that is distinct
from any subsequent proceedings, including the outcome of any subsequent criminal proceedings.

1250 Panel Report, US – Export Restraints, para. 8.85.
1251 Panel Reports, US – COOL, para. 7.50 (referring to Appellate Body Report, EC – Asbestos, para. 64;
US – Export Restraints, para. 8.85).
1252 Panel Report, US – Zeroing (Article 21.5 – EC), para. 8.103.
1253 See paragraphs 7.479. to 7.485. above.
1254 There are several examples of Members requesting consultations regarding the initiation of a
countervailing duty investigation. See WT/DS97/1 (United States – Countervailing Duty Investigation of
Imports of Salmon from Chile); WT/DS112/1 (Peru – Countervailing Duty Investigation against Imports of
Buses from Brazil); WT/DS167/1 (United States – Countervailing Duty Investigation with respect to Live Cattle
from Canada), WT/DS470/1 (Pakistan – Anti-Dumping and Countervailing Duty Investigations on Certain Paper
Products from Indonesia).
1255 Fisheries Jurisdiction (Spain v. Canada), Jurisdiction of the Court, Judgment of 4 December 1998,
I.C.J. Reports 1998, p. 432, para. 66.
1256 Arrest Warrant of 11 April 2000 (Democratic Republic of the Congo v. Belgium), Judgment of 14
February 2002, I.C.J. Reports 2002, p. 3, paras. 52-54, 71 and 78.
1257 See, e.g. European Court of Human Rights, Guide on Article 5 of the Convention – Right to Liberty
and Security, 2014, available at http://www.echr.coe.int/Documents/Guide_Art_5_ENG.pdf), para. 3
(explaining that "a deprivation of liberty is not confined to the classic case of detention following arrest or
conviction, but may take numerous other forms").

7.584. Based on the foregoing, we conclude that the Charges constitute a distinct "measure" for
purposes of WTO dispute settlement. We next turn to the question of whether the Charges constitute
a "determination" under the CVA.
7.3.4.3.3 Existence of a "determination" for purposes of the CVA
7.585. The CVA does not contain any general "scope and coverage" provision that expressly defines
the kinds of customs valuation actions to which it applies. However, the text of the CVA contains 43
references to how customs valu e is to be "determined", and Article 11 of the CVA provides for a
right of appeal with regard to a "determination" of customs value. The General Introductory
Commentary to the CVA provides that Articles 1 through 7 provide the methods of "determining"
the customs value.
7.586. In response to a question from the Panel, Thailand confirms that its argument is tantamount
to saying that an "allegation" or "accusation" does not meet the threshold of constituting a
"determination" covered by the CVA. 1258 Thailand submits that, because the Charges are a mere
accusation of wrong -doing, they do not represent a customs valuation "determination" for the
purposes of the CVA.1259 Thailand submits that a "determination" is defined as "[t]he settlement of
a suit or controversy by the authoritative decision of a judge or arbiter; a settlement or decision so
made, an authoritative opinion", and that in the present case, the Charges are a mere accusation of
wrong-doing and do not represent an "authoritative decision of a judge", nor do they represent a
"settlement".1260 Thailand is of the view that the distinction developed in the context of Article 23 of
the DSU, between "a more or less final decision" that meets the threshold of a "determination", and
a "preliminary opinion or view" that does not meet that threshold, "also applies in the context of the
CVA".1261 According to Thailand, the Charges do not meet the threshold of a "determination" covered
by the CVA and are not ripe for examination by the Panel.1262
7.587. The Philippines takes a somewhat broader view of the types of measures that may be subject
to the obligations in Article 1 through 7 of the CVA, based on its view that the scope of the CVA
extends to any "actions of another Member " pursuant to Article 19.2 of the CVA, regar dless of
whether those actions can be characterized as a "determination".1263 However, the Philippines
accepts that, insofar as the applicable standard is that of a "determination", it may follow that a
preliminary opinion or view, as distinguished from a more or less final decision, would not meet the
threshold of a "determination" for purposes of the CVA. 1264 The Philippines notes that a
"determination" is defined as "[t]he decision arrived at or promulgated; a determinate sentence,
conclusion, or opinion".1265 In the Philippines' view, the Charges "entail a final decision by the Public
Prosecutor to establish the tax base used to determine the correct amount of ad valorem customs
duties to be imposed on PM Thailand, for the purposes of levying ad valorem customs duties".1266
7.588. Beginning with the ordinary meaning of what constitutes a "determination", we note that
Thailand refers the Panel to dictionary definitions of "determination" that include "[t]he settlement
of a suit or controversy by the authoritative decision of a judge or arbiter; a settlement or decision
so made, an authoritative opinion", and highlights the fact that in the present case, the Charges are
a mere accusation of wrongdoing and do not represent an "authoritative decision of a judge ", nor
do they represent a "settlement".1267 The Philippines notes that other definitions of the word

1258 Thailand's first written submission, para. 6.74; response to Panel question No. 38(c).
1259 Thailand's response to Panel question No. 38; opening statement at the meeting of the Panel, para.
29.
1260 Thailand's response to Panel question No. 38(a), p. 34 (quoting Shorter Oxford English Dictionary,
6th edn (Oxford University Press, 2007), Vol. 1, p. 663).
1261 Thailand's response to Panel question No. 38(b), p. 35.
1262 Thailand's response to Panel question No. 38(b), p. 35.
1263 Philippines' response to Panel question No. 38(a).
1264 Philippines' response to Panel question No. 38(b).
1265 Philippines' response to Panel question No. 38(b), para. 328 (referring to Oxford English Dictionary,
OED Online).
1266 Philippines' response to Panel question No. 38(b), para. 330.
1267 Thailand's response to Panel question No. 38(a), p. 34 (Shorter Oxford English Dictionary, 6th edn
(Oxford University Press, 2007), Vol. 1, p. 663).

"determination" include "[t]he decision arrived at or promulgated; a determinate sentence,
conclusion, or opinion".1268
7.589. We recall that the Appellate Body has previously inter preted the word "determine" in the
context of Article 11.3 of the Anti-Dumping Agreement. It observed that dictionary definitions of the
verb "determine" include "[c]onclude from reasoning or investigation, deduce " as well as "[s]ettle
or decide (a dispute , controversy, etc., or a sentence, conclusion, issue, etc.) as a judge or
arbiter".1269 We further note that in the context of Article 2.2.1 of the Anti-Dumping Agreement, the
panel in EC – Salmon (Norway) recalled the above dictionary definitions relied upon by the Appellate
Body, and further stated that:
Turning again to the dictionary definitions of the verb "determine", we note that in
addition to those identified by the Appellate Body, other definitions include "[c]ome to
a judicial decision; make or give a decision about something ", "[l]ay down
authoritatively; pronounce, declare" as well as "[s]ettle or fix beforehand (now esp. a
date); ordain, decree". This range of slightly varying definitions indicates that the verb
"determine" may have a slightly different meaning depending on the context in which
it is found.1270
7.590. The above dictionary definitions suggest that the ordinary meaning of the word
"determination" is quite broad. We agree with Thailand that the Charges themselves do not qualify
as "[t]he settlement of a suit or controversy by the authoritative decision of a judge or arbiter ", at
least insofar as the "judge or arbiter" is to be equated with the Criminal Court. However, we recall
that the Public Prosecutor is a state organ whose actions are attributable to Thailand, and from that
perspective t he Charges can naturally be described as "the decision arrived at " by the Public
Prosecutor, "the determinate conclusion" of the Public Prosecutor, and "the determinate opinion" of
the Public Prosecutor. Furthermore, the Charges can naturally be described as an act that, insofar
as the Public Prosecutor is concerned, "conclude[s] from reasoning or investigation" that PMTL has
acted in violation of Section 27 of the Customs Act. The Charges can also be said to "give a decision"
by the Public Prosecutor that criminal charges should be issued against PMTL and a criminal
proceeding conducted.
7.591. We find additional guidance on the ordinary meaning of the term "determination" in the
context of Article 23.2(a) of the DSU.1271 In US/Canada – Continued Suspension, the Appellate Body
reversed the panel's finding that statements made by Canad a and the United States at two DSB
meetings constituted a "determination" under Article 23.2(a) of the DSU. The Appellate Body stated
that it "share[d] the view of the panel in US – Section 301 Trade Act that a 'determination' within
the meaning of Article 23.2(a) 'implies a high degree of firmness or immutability, i.e. a more or less
final decision by a Member in respect of the WTO consistency of a measure taken by another
Member'", and that "preliminary opinions or views expressed without a clear intention to seek
redress" are not covered by Article 23.2(a).1272 It then found that the statements in question "seem
no more than initial reactions" to the European Communities' self-proclaimed compliance, and stated
that, given the complexity of the issues that arise with respect to an assessment of the WTO -
consistency of that measure, "it is reasonable to assume" that Canada and the United States "needed
some time before formulating a definitive view" on whether the European Communities had brought
itself into compliance.1273 The Appellate Body noted that in their statements to the DSB, the United
States and Canada indicat ed that they "would be willing to engage in further bilateral discussions
regarding the alleged scientific justification" for Directive 2003/74/EC, and the Appellate Body found
that "[t]his readiness to discuss Directive 2003/74/EC is difficult to reconcile with a finding that the
DSB statements constituted a 'determination' with the type of firmness and immutability required

1268 Philippines' response to Panel question No. 38(b), para. 328 (referring to Oxford English Dictionary,
OED Online).
1269 Appellate Body Report, US – Corrosion-Resistant Steel Sunset Review, para. 110.
1270 Panel Report, EC – Salmon (Norway), para. 7.237.
1271 Article 23.1 of the DSU provides that, when Members seek the redress of a violation of WTO
obligations, they shall have recourse to, and abide by, the rules and procedures of the DSU. Article 23.2 then
elaborates on this principle, with paragraph (a) stating that, in such cases, Members shall "not make a
determination to the effect that a violation has occurred", except through recourse to dispute settlement in
accordance with the rules and procedures of this Understanding, "and shall make any such determination
consistent with the findings contained in" panel or Appellate Body reports. (emphasis added)
1272 Appellate Body Reports, US/Canada – Continued Suspension, para. 396.
1273 Appellate Body Reports, US/Canada – Continued Suspension, para. 396.

by its ordinary meaning".1274 Furthermore, the Appellate Body stated that such statements "are not
intended to have legal effects and do not have the legal status " of a definitive determination in
themselves; rather than being "intended to have legal effects" or "legal status", the Appellate Body
considered that "they are views expressed by Members and should not be considered to prejudice
Members' position in the context of a dispute ".1275 In the context of elaborating on the point that
DSB statements "are not intended to have legal effects ", the Appellate Body stated that they are
"generally diplomatic or political in nature " and "generally have no legal effect or status in and of
themselves".1276
7.592. In response to a question from the Panel, the parties agree that Appellate Body jurisprudence
analysing what constitutes a "determination" in the context of Article 23 of the DSU provides relevant
guidance for determining what constitutes a "determination" under the CVA. 1277 Following this
guidance, we find it difficult to escape the conclusion that the Charges fall within the meaning of
what constitutes a "determination". In our view, the Charges constitute "a more or less final decision"
by the Public Prosecutor that PMTL acted in violation of Section 27, in the sense that the issuance of
the Charges triggered criminal court proceedings against PMTL. The Charges cannot naturally be
characterized as a kind of "initial reaction" or "preliminary opinion" of the Public Prosecutor, in the
sense that the Public Prosecutor might subsequently reassess its own conclusion. Similarly, it could
not be said that the Charges "should not be considered to prejudice " the position of the Public
Prosecutor in the conduct of the criminal court proceedings. 1278 We acknowledge that the Charges
are not required to, and do not, lay out the evidence that the Public Prosecutor will provide to
substantiate the Charges.1279 However, it is not in dispute that under Section 158 of the Criminal
Procedure, a charge must contain "all the acts alleged to have been committed by the accused, all
the facts and particulars regarding the time and place of such acts, and the persons or articles
concerned which are reasonably sufficient to give the accused a clear understanding of the
charge".1280 Most importantly, the Charges are "intended to have legal effects" and "legal status in
and of themselves", and we have identified above some of those consequences.
7.593. We consider that the Appellate Body's findings in the original proceeding are also instructive,
and provide valuable contextual guidance on what it means for an action to be "final" as opposed to
a merely "provisional" or "intermediate" step. As explained above, in the original proceedi ng the
panel found that "guarantee decisions", which are taken prior to final duty assessments, fall within
the scope of "administrative action relating to customs matters" within the meaning of Article X:3(b),
and are therefore subject to the right of app eal contained therein. Thailand appealed this finding,
arguing that the scope of Article X:3(b) does not extend to "provisional" measures such as customs
guarantee decisions. Thailand advanced a line of reasoning that appears to have some similarities
to its argument in the present proceeding, submitting that "guarantee decisions are not final
administrative acts but constitute merely intermediate steps on the way towards a final customs
valuation decision".1281
7.594. In the context of its analysis of that issue, the Appellate Body found that "[w]ith respect to
the purpose of securing payment of customs duties, the guarantee is the final measure, not merely
an intermediate step."1282 The Appellate Body elaborated on this point as follows:
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 for 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,
and, on the other hand, securing the payment of the ultimate customs duty. 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

1274 Appellate Body Reports, US/Canada – Continued Suspension, para. 397.
1275 Appellate Body Reports, US/Canada – Continued Suspension, para. 398.
1276 Appellate Body Reports, US/Canada – Continued Suspension, para. 398.
1277 Thailand's response to Panel question No. 38(b).
1278 Appellate Body Reports, US/Canada – Continued Suspension, para. 398.
1279 Thailand's response to Panel question No. 32(d).
1280 Thailand's first written submission, para. 6.87 (referring to Criminal Procedure Code, (Exhibit THA-
16), Section 158).
1281 Appellate Body Report, Thailand – Cigarettes (Philippines), para. 213. (emphasis original)
1282 Appellate Body Report, Thailand – Cigarettes (Philippines), para. 212.

administrative action does not change the fact that the imposition of a guarantee is an
administrative action in its own right.1283
7.595. In the same way, we consider that the Charges involve a "final" decision, and not a
"provisional" or "intermediate" step, for the purpose of initiating criminal proceedings. An offence
under Section 27 of the Customs Act can be prosecuted only after the Public Prosecutor has issued
charges1284, and the issuance of the Charges therefore constitutes a "determination" for that
purpose.
7.596. We consider that the definition of an "administrative decision" contained in footnote 4 to
Article 4.1 of the TFA is also relevant context. It provides that an administrative decision, within the
meaning of Article 4.1, is a decision "with a legal effect that affects the rights and obligations of a
specific person in an individual case". We consider that this squares with the Appellate Body's view
that a relevant consideration in assessing the finality of a measure is the question of whether an
action is an administrative action in its own right, and that an action would be an administrative
action in its own right if distinct legal effects flow from the action in question.
7.597. Based on the foregoing, we consider that the Charges constitute a "determination" for
purposes of the CVA. Having found that the Charges constitute a "determination" for purposes of
the CVA, then in the circumstances of this case we find it unnecessary to resolv e the disputed
questions of whether the notion of a "determination" is narrower than the notion of "actions taken
by a Member" within the meaning of Article 19.2 of the CVA, and the related question of whether a
measure relating to customs valuation that i s not a "determination" for purposes of the CVA may
nonetheless be subject to the obligations in Articles 1 to 7 of the CVA insofar as it qualifies as an
"action" taken by a Member. We next address the question of whether the Panel can make findings
on the WTO-consistency of the Charges without engaging in speculation on future measures or
events.
7.3.4.3.4 Speculation on future measures or events
7.598. We understand Thailand to equate "the doctrine of ripeness" with the view that panels should
not make speculative finding s on "hypothetical future measures ", such as the outcome of the
pending criminal proceedings. In its first written submission, Thailand states that, "[p]ut simply, the
doctrine [of ripeness] means that panels should not engage in exercises in speculation t o predict
either when or how a matter before it may be concluded and should not issue abstract rulings on
hypothetical future measures. "1285 Thailand also refers to the statement by the panel in EC –
Commercial Vessels that "an abstract ruling on hypothetical future measures is [not] necessary nor
helpful to the resolution of this dispute "1286, and states that this is "the essence of the doctrine of
ripeness".1287
7.599. We agree that, as a general rule, a measure must be in existence at the time of a panel's
establishment in order to be within that panel's terms of reference. 1288 This general rule has been
applied in various contexts in a number of disputes, including US – Upland Cotton, in which the panel
found that a particular legislative measure "did not exist, had never existed and might not
subsequently have ever come into existence".1289 The panel considered that Brazil's claim in relation
to the legislation was therefore "entirely speculative".1290 To the same effect, the panel in India –
Autos agreed with the respondent that "hypothetical future measures which it could, but might not
take … would not fall within the scope of this Panel's terms of reference".1291
7.600. The Appellate Body's analysis in US – Shrimp (Article 21.5 – Malaysia) confirms that panels
should refrain not only from making speculative findings on future measures, but also from making
speculative findings on future events that may have a bearing on the specific measure being
challenged. In that dispute, the original panel found that an import ban imposed by the United States

1283 Appellate Body Report, Thailand – Cigarettes (Philippines), para. 214.
1284 Thailand's response to the Philippines' question No. 3.
1285 Thailand's first written submission, para. 6.70.
1286 Panel Report, EC – Commercial Vessels, para. 7.30; Thailand's first written submission, para. 6.64.
1287 Thailand's second written submission, para. 3.142.
1288 Appellate Body Report, EC – Chicken Cuts, para. 156.
1289 Panel Report, US – Upland Cotton, para. 7.158.
1290 Panel Report, US – Upland Cotton, para. 7.158.

on certain shrimp products was inconsistent with its WTO obligations. As part of its implementation
efforts, the United States issued Revised Guidelines that permitted the importation of shrimp under
certain conditions. The Revised Guidelines constituted the "measure taken to comply ". However,
following adoption of the Revised Guidelines the US Court of International Trade (CIT) ruled that
these Revised Guidelines were incompatible with the original US law that impo sed the import ban.
The CIT ruling was then appealed to the Court of Appeals. That appeal was still pending at the time
of the WTO compliance proceeding. The panel noted that "until a decision is reached by the Court of
Appeals, the Revised Guidelines remain applicable" and "the United States does not, for now, have
to modify its Revised Guidelines".1292 Thus, the compliance panel confined the scope of its findings
to the relevant measure, i.e. the Revised Guidelines.
7.601. The Appellate Body affirmed the panel's approach, stating that the panel was correct not to
indulge in speculation regarding the outcome of the US court proceedings. The Appellate Body stated
that:
There is no way of knowing or predicting when or how that particular legal proceeding
will conclude in the United States. The Turtle Island case has been appealed and could
conceivably go as far as the Supreme Court of the United States. It would have been
an exercise in speculation on the part of the Panel to predict either when or how that
case may be concluded, or to assume that injunctive relief ultimately would be granted
and that the United States Court of Appeals or the Supreme Court of the United States
eventually would compel the Department of State to modify the Revised Guidelines. The
Panel was correct not to indulge in such speculation, which would have been contrary
to the duty of the Panel, under Article 11 of the DSU, to make "an objective assessment
of the matter … including an objective assessment of the facts of the case".1293
7.602. In light of the foregoing, we fully agree with Thailand that, in the words of the Appellate
Body in US – Shrimp (Article 21.5 – Malaysia), it would be "an exercise in speculation on the part of
the Panel to predict either when or how " the ongoing criminal proceedings against PMTL "may be
concluded", and that the Panel should "not to indulge in such speculation ". The Philippines agrees
with Thailand that "panels cannot speculate about future events".1294
7.603. However, in the specific circumstances of this dispute, we do not consider that we would
need to engage in speculation on future measures or events in order to make findings on the WTO-
consistency of the Charges. As the Philippines has observed, the Charges are "a defined and formal
act, taken by an organ of the Thai state, on a date certain in the past".1295 Specifically, the issuance
of the Charges constitutes an act completed on 18 January 2 016. We consider that an assessment
of the content and meaning of t he Charges does not necessitate that we make predictions about
events or measures taken subsequent to the issuance of the Charges on 18 January 2016.
7.604. We note that the Philippines has not relied on any events or measures subsequent to the
Charges for the purpose of determining the meaning of the Charges. In response to a question from
the Panel, the Philippines confirms that because the measure being challenged by the Philippines is
the Charges, as distinct from the subsequent criminal court proceedings or their outcome, the court
order preventing information regarding the criminal proceedings from being shared with third parties
in question should not hinder either the Philippines' ability to challenge the Charges in th is
compliance proceeding, or the Panel's ability to conduct an "objective assessment of the facts of the
case".1296 Furthermore, we note that in a response to a question from the Panel, Thailand submits
that it is not arguing that the Charges "contain insufficient information to discern the grou nds for
the accusation of customs fraud".1297
7.605. On the basis of the foregoing, we consider that the Panel can make findings on the WTO -
consistency of the Charges without engaging in speculation on future measures or events.

1292 Panel Report, US – Shrimp (Article 21.5 – Malaysia), para. 5.109.
1293 Appellate Body Report, US – Shrimp (Article 21.5 – Malaysia), para. 95.
1296 Philippines' response to Panel question No. 34(a).
1297 Thailand's response to Panel question No. 100(a), p. 26.

7.3.4.4 Conclusion
7.606. For the reasons set forth above, the Panel concludes that it is not precluded from considering
the WTO-consistency of the Charges on the basis of a "ripeness doctrine", because the Charges
constitute a distinct "measure" for purposes of WTO dispute settlement, the Charges constitute a
"determination" for purposes of the CVA, and an assessment of the WTO-consistency of the Charges
does not require the Panel to engage in speculation on future measures or events, notwithstanding
that no judgment has been rendered by the Criminal Court.
7.3.5 Applicability of the CVA to the Charges
7.3.5.1 Introduction
7.607. Articles 1 through 7 of the CVA provide methods of determining the customs value of
imported goods. Article 15.1(a) of the CVA defines the "customs value of imported goods " as "the
value of goods for the purposes of levying ad valorem customs duties on imported goods".
7.608. The Charges filed by the Public Prosecutor set forth the allegation that PMTL violated
Section 27 of the Customs Act by declaring a "false price" for Marlboro and L&M cigarettes contrary
to the "actual price", with the intention to defraud the government of taxes and customs duties.
Pursuant to Section 27 of the Customs Act, the penalties upon conviction may include the
imprisonment of seven of PMTL's current and former employees, and the payment of fines by PMTL
in an amount that shall equal four times the duty -paid value, which is approximately
THB 80,800,000,000 (approximately USD 2.3 billion).
7.609. Thailand submits that the CVA does not apply to Charges. 1298 Thailand submits that the
Charges do not seek to determine "the value of goods" imported by PMTL, because the references
to King Power's prices in the accompanying Annex only serve to establish a possible benchmark for
a fine in the event of a conviction for customs fraud. Thailand further argues that, given the
possibility of criminal penalties upon conviction, the Charges do not have the consequence of "levying
ad valorem customs duties". Thailand argues that because the Public Prosecutor is not a part of
Thailand's "customs administration " the substantive obligations of the CVA do not apply to the
Charges. In addition, Thailand maintains that allegations under Section 27 have at their core the
element of an "intention to defraud" the government that is neither found nor regulated in Articles
1 through 7 of the CVA.
7.610. The Philippines submits that the CVA applies to the Charges.1299 The Philippines agrees with
Thailand that the substantive obligations of the CVA apply to a measure insofar as it determines "the
value of goods for the purpose of levying ad valorem customs duties" within the meaning of Article
15.1(a), and argues that the aspect of the Charges being challenged in this proceeding meets both
elements of this definition. The Philippines considers that there may well be a question as to whether
the Public Prosecutor is subject to certain procedural obligations in the CVA that apply to the
"customs administration" in a narrow sense, but that the substantive obligations in the CVA apply
to any organ of the State that makes a customs valuation determination, regardless of whether that
entity is designated under domestic law as part of the country's customs administration. The
Philippines submits that the "intention to defraud" element of Section 27 and the Charges does not
prevent the application of the CVA, and that the Appellate Body rejected such an argument in US –
1916 Act.
7.3.5.2 Main arguments of the parties
7.611. Thailand submits that the CVA lays down rules and procedures to be fol lowed by "the
customs administration" in determining customs value for that purpose.1300 Thailand notes that the
CVA "refers repeatedly and exclusively to the work of the 'customs administration' of a Member ",
and "contains no references whatsoever to the wor k of government agencies exercising police

1298 Thailand's first written submission, paras. 6.19-6.47; second written submission, paras. 3.64-3.127;
opening statement at the meeting of the Panel, paras. 13-25; responses/comments to Panel question Nos. 32,
47, 48, 98-99 and 105-106.
1299 Philippines' second written submission, paras. 523-618; opening statement at the meeting of the
Panel, paras. 77-115; responses/comments to Panel question Nos. 33, 48, 98-99 and 105-106.
1300 Thailand's first written submission, para. 6.19.

powers".1301 Thailand reasons that, had the drafters intended the CVA to circumscribe the exercise
of police powers and not merely the work of "customs administrations" in determining the customs
value of imported goods, they would have said so.1302 Thailand states that the Customs Department
is the only Thai agency authorized under Thai law "to determine the value of goods for customs
purposes".1303 Thailand initially agreed in principle that the term "customs administrati on" may
generally apply "to any entity conducting customs valuation, regardless of whether that entity is
designated under domestic law as part of the country's customs administration"1304, but nonetheless
emphasized that "which agency is responsible for the administration of certain laws or takes a
measure may be very relevant to the determination of the nature, in WTO terms, of the measure
and whether that measure falls within the scope of a particular provision of the covered
agreements".1305 However, Thailand subsequently argued that the substantive obligations in the CVA
at issue in this dispute only apply to government agencies that are responsible for the administration
of the customs formalities and procedures that arise from the flow of goods into and out of a
Member's territory, and those do not include the Public Prosecutor.1306
7.612. Thailand recalls that on the basis of the definition in Article 15.1(a) of the CVA, the panel in
Colombia – Ports of Entry found that "customs valuation" has two elements: (i) the valuation of the
goods (ii) for the purposes of levying ad valorem customs duties.1307 Regarding the first element,
Thailand submits that the Charges do not actually seek to "fix or determine the monetary value of
PMTL's imported cigarettes".1308 In this regard, Thailand asserts that the reference to the King Power
prices "is not contained in the Charges themselves, but in an Annex for the purpose of providing a
possible benchmark to the Criminal Court to impose fines in the event of a conviction".1309 Thailand
asserts that "the Charges do not determine or even attempt to determine what should be the 'true'
or 'correct' or 'actual' customs value " for PMTL's goods. 1310 Thailand submits that the Philippines'
entire argumentation concerning the Charges rests on the "defective foundation" that "the Charges
represent a determination that the customs value of the goods at issue is the price charged by Philip
Morris to King Power, a duty-free operator in Thailand".1311
7.613. Regarding the second element of th e definition above, Thailand refers to the ordinary
meaning of the term "levy", and submits that "the second element is satisfied only if the valuation
of the goods has the purpose of collecting charges imposed at the border on goods entering the
country".1312 Thailand states that "[n]owhere in the Charges does the Public Prosecutor indicate that
the criminal accusations against PM Thailand shall be the basis for levying ad valorem customs
duties".1313 Thailand further submits that the customs duties on the 272 e ntries have already been
levied and paid; hence, all matters relating to the customs valuation and levying of ad valorem
customs duties for these 272 entries have concluded.1314 Furthermore, Thailand points out that, as
a matter of Thai law, neither the Publi c Prosecutor nor the Criminal Court has the legal power to
value imported goods for the purposes of levying ad valorem customs duties. 1315 According to
Thailand, if a fine were imposed, it would "have no effect on the customs duties that [were] already
paid b y PM Thailand with respect to these 272 entries ".1316 Thailand explains that the potential
criminal fine at issue "would not be a charge levied at the border on goods entering Thailand".1317
7.614. Finally, Thailand maintains that allegations under Section 27 "have at their core the element
of an intention to defraud the government that is not found nor regulated in Articles 1 through 7" of

1301 Thailand's first written submission, para. 6.29.
1302 Thailand's first written submission, paras. 6.29-6.30.
1303 Thailand's response to Panel question No. 48(b), p. 46.
1304 Thailand's response to Panel question No. 48, p. 45.
1305 Thailand's response to Panel question No. 48, p. 45.
1306 Thailand's comments on the Philippines' response to Panel question No. 92.
1307 Thailand's first written submission, para. 6.25.
1308 Thailand's response to Panel question No. 47(a), p. 44.
1309 Thailand's first written submission, para. 6.40.
1310 Thailand's response to Panel question No. 32(b), p. 28.
1311 Thailand's opening statement at the meeting of the Panel, para. 21.
1312 Thailand's first written submission, para. 6.26.
1313 Thailand's first written submission, para. 6.34.
1314 Thailand's first written submission, para. 6.35.
1315 Thailand's first written submission, para. 6.36.
1316 Thailand's first written submission, para. 6.41.
1317 Thailand's first written submission, para. 6.41.

the CVA.1318 According to Thailand, "even if the Charges were to qualify as 'customs valuation', the
Charges would still fall outside the scope of the CVA because, as Thailand has argued, the Charges
relate to a criminal accusation that focuses on whether PM Thailand had the intention to defraud the
government".1319 Thailand emphasizes specifically this additional element of the offence with which
PMTL is charged, namely the "intention to defraud" (i.e. mens rea).1320 Thailand disagrees with the
Philippines that, "for purposes of its claims against the Charges, the Panel need only consider the
aspect of the Charges dealing with goods valuation and can disregard the element of intent".1321 In
Thailand's view, to accept that the actus reus can be separated from the mens rea "would mean that
a criminal judge would see no difference between acts of murder (intentional homicide) and
manslaughter (unintentional homicide)", and it further points out that for "some crimes, such as
theft, the element of intent determines whether the act is unlawful in the first place ".1322 Thailand
distinguishes the Appellate Body's findings in US – 1916 Act, regarding the irr elevance of an
additional "intent" requirement in the context of Article 18.1 of the Anti-Dumping Agreement, on the
grounds that CVA contains no provision similar to Article 18.1 and because , unlike the US measure
at issue in that case, the element of "intent" is inseparable from the actus reus in the context of
Section 27 of the Customs Act.1323
7.615. The Philippines considers that there may well be a question as to whether the Public
Prosecutor is subject to the procedural obligations in the CVA that apply to the "customs
administration"1324, in respect of which it makes no claims of violation in this proceeding 1325;
however, the Philippines considers that the substantive obligations apply to any organs of the Thai
state that conduct a customs valuation exercise, regardless of whether that entity is designated
under domestic law as part of the country's customs administration.1326 The Philippines submits that
"[i]t is well -established that a Member's WTO rights and obligations apply to all government
agencies, including the courts and law enforcement authorities ", and "[i]t is also well established
that WTO law applies to measures characterized in municipal law as criminal ".1327 The Philippines
recalls that municipal law classifications are not determinative of issues rai sed in WTO dispute
settlement proceedings, and argues that if a Member could limit "customs administration" only to
those entities designated under domestic law, this would permit Members to evade their CVA
obligations.1328
7.616. The Philippines agrees with Thaila nd that, on the basis of Article 15.1(a) of the CVA as
interpreted by the panel in Colombia – Ports of Entry, the substantive obligations in the CVA only
apply to measures that determine (i) the valuation of the goods (ii) for the purposes of levying
ad valorem customs duties. However, the Philippines argues that the aspect of the Charges being
challenged in this proceeding meet s both elements of this definition. Regarding the first element,
the Philippines argues, based on its reading of Section 27 togethe r with Section 2 of the Customs
Act, that "[o]ne of the constituent elements of the offence under Section 27 is the determination,
by the administering authority, of the 'price of the goods' (i.e., customs value), both to calculate the
amount of ad valorem customs duties allegedly due and to determine any fine payable".1329 Among
other things, the Philippines emphasizes that the Charges by their own terms entail a rejection by
the Public Prosecutor of the "falsely declared price", and a determination of the "actual price" which,
when read together with the definition of "price" in Section 2 of the Customs Act, "by definition …
entails a customs valuation decision".1330
7.617. Regarding the second element of Article 15.1(a), the Philippines agrees with Thailand that
the CVA only applies to valuation undertaken for the specified purpose in Article 15.1(a) of the CVA,

1318 Thailand's response to Panel question No. 38(a), p. 34. More generally, see Thailand's response to
Panel question number 32.
1319 Thailand's response to Panel question No. 47(b), p. 45.
1320 Thailand's response to Panel question No. 32(a), p. 27; Thailand's comments on the Philippines'
response to Panel question No. 97(c), p. 30.
1321 Thailand's comments on the Philippines' response to Panel question No. 97(c), p. 30.
1322 Thailand's comments on the Philippines' response to Panel question No. 97(c), p. 30.
1323 Thailand's comments on the Philippines' response to Panel question No. 97(c), pp. 29-30.
1324 Philippines' response to Panel question No. 92.
1325 See paragraph 7.463. above.
1327 Philippines' second written submission, paras. 553-554.
1328 See the Philippines' second written submission, paras. 562-570.
1329 Philippines' second written submission, paras. 578-589.

namely "for the purposes of levying ad valorem customs duties on imported goods ".1331 However,
the Philippines considers that the second element of Article 15.1(a) is satisfied whenever a valuation
of goods is undertaken for the purposes of establishing the base used by an importing Member to
levy the correct amount of ad valorem customs duties due. 1332 The Philippines observes that the
verb "levy" means "to raise (a sum of money) by legal execution or process ".1333 Contrary to
Thailand's view, the Philippines submits "customs duties are not necessarily 'levied on the border',
either in physical or temporal terms "1334, and that "[l]iability for the payment of customs duties
arises by reason of importation, although the duties are often not 'levied on the border'."1335 In the
Philippines' view, the "levying of ad valorem customs duties necessarily includes action taken to
enforce the payment of the correct amount [of] those duties, based on the customs value, whether
that action is taken at the time of initial payment or subsequently".1336 In other words, the Philippines
submits that "enforcing the full payment of customs duties is part and parcel of levying those duties,
within the meaning of Article 15.1(a) of the CVA".1337
7.618. Finally, the Philippines submits that the "intention to defraud" element of Section 27 and the
Charges does not prevent the application of the CVA, and that the Appellate Body squarely rejected
the same argument i n US – 1916 Act.1338 The Philippines does not dispute that the "intention to
defraud" is an additional element of the offence with which PMTL is charged. However, the Philippines
recalls that in US – 1916 Act , t he Appellate Body held that a separate and additional "intent"
requirement did not remove the 1916 Act from the scope of application of the Anti-Dumping
Agreement, and was not even relevant to this question.1339
7.3.5.3 Analysis by the Panel
7.3.5.3.1 General considerations
7.619. We observe that certain treaty provisions may contain language expressly indicating that
the obligations therein apply exclusively to measures taken in the context of criminal law
procedures1340, others may contain language expressly indicating that the obligations therein apply
exclusively to measures taken in the context of civil procedures1341, and others may contain language
expressly indicating that the obligations therein apply in the context of both criminal and civil
procedures.1342 However, the vast majority of treaty obligations, including most of those found in
the WTO covered agreements, contain no language expressly delineating their applicability to
criminal or civil procedures. As a matter of treaty interpretation, the absence of treaty language
qualifying the scope of application of an obliga tion to a particular sphere of municipal law suggests
that the obligation may, in principle, apply to any measure taken in the context of any sphere of
municipal law.
7.620. Thailand does not argue that the CVA is inapplicable to the Charges on the grounds that
criminal law issues fall outside of the scope and coverage of WTO law and dispute settlement. The
parties agree that criminal law matters are not a priori carved out from the scope of the WTO law,
and that such matters are not a priori excluded from the sc ope of WTO dispute settlement
proceedings. We note that we are not the first WTO dispute settlement panel to be called upon to

1331 Philippines' second written submission, paras. 535-537 and 546.
1333 Philippines' second written submission, para. 539 (referring to the Oxford English Dictionary, OED
Online).
1335 Philippines' second written submission, para. 605. (emphasis original)
1337 Philippines' response to Panel question No. 38(b), para. 330.
1338 Philippines' opening statement at the meeting of the Panel, para. 81.
1339 Philippines' opening statement at the meeting of the Panel, para. 81.
1340 See, e.g. Section 5 of Part III of the TRIPS Agreement, entitled "Criminal Procedures".
1341 See, e.g. Article 34.1 of the TRIPS Agreement (providing that "[f]or the purposes of civil
proceedings in respect of the infringement of the rights of the owner referred to in paragraph 1(b) of Article
28, if the subject matter of a patent is a process for obtaining a product, the judicial authorities shall have the
authority to order the defendant to prove that the process to obtain an identical product is different from the
patented process").
1342 See, e.g. Article 6.1 of the European Convention on Human Rights (providing that "[i]n the
determination of his civil rights and obligations or of any criminal charge against him, everyone is entitled to a
fair and public hearing within a reasonable time by an independent and impartial tribunal established by law").

review domestic measures in the sphere of a Member's criminal law, and we consider it useful to
recall several general considerations that emerge from WTO jurisprudence.
7.621. In US – 1916 Act, the panel made findings on the WTO -consistency of a provision of a US
law by the same name which criminalized dumping insofar as it was done with the requisite intent
of destroying or injuring a domestic industry.1343 In US – Gambling, the panel made findings on the
WTO-consistency of domestic laws relating to money laundering, organized crime, fraud, and
underage gambling.1344 In China – Intellectual Property Rights, the panel made findings on the WTO-
consistency of provisions in China's Criminal Law which established thresholds for criminal
procedures and penalties for infringements of intellectual property rights.1345 In Argentina – Financial
Services and Colombia – Textiles, the panels made findings on the WTO -consistency of measures
that were, according to the responding Member, justified on the grounds that they were aimed at
addressing criminal money laundering and terrorist financing.1346
7.622. These cases established that the legal framework to be applied by a panel does not change
when the measure at issue is adopted in the sphere of a Member's criminal law. As the Appellate
Body has repeatedly observed, "municipal law classifications are not determinative of issues raised
in WTO dispute settlement proceedings".1347 In US – 1916 Act, the Appellate Body found that both
Article VI of the GATT 1994 and Article 18.1 of the Anti-Dumping Agreement applied to a US measure
that criminalized certain conduct, based on a straightforward application of the terms of those
provisions. In US – Gambling, the panel noted that it was "well aware of the sensitivities associated
with the subject -matter of this dispute ", and emphasized that , although Members have a right to
regulate, including a right to prohibit gambling and betting activities, if they do so they must do so
in a manner consistent with their WTO obligations. 1348 In China — Intellectual Property Rights, the
Panel stated that it "acknowledge[d] the sensitive nature of criminal matters and attendant concerns
regarding sovereignty", but considered that "[t]hese concerns may be expected to find reflection in
the text and scope of treaty obligations regarding such matters as negotiated by States and other
Members".1349 The panel stated that it would apply the usual rules of treaty interpretation to resolve
the issues before it, taking into account such "limitations and flexibilities" that were reflected in the
text.1350
7.623. We note at the outset that it is common ground between the parties that there is nothing in
the text of the CVA that prevents Members – developing or developed – from taking tough
enforcement measures against customs fraud.1351 We also agree that developing country Members
"need to be able to adopt tough enforcement measures, such as criminal prosecution, in order to
fight customs fraud efficiently".1352 However, we consider it important to clarify at the outset what
is meant by "customs fraud", since the term "customs fraud" does not itself appear in the CVA.
7.624. The starting point of our analysis is Article 17 of the CVA, which provides that "[n]othing in
this Agreement shall be construed as restricting or calling into question the rights of customs
administrations to satisfy themselves as to the truth or accuracy of any statement, document or
declaration presented for customs valuation purposes". The text of Article 17 does not elaborate on
what is meant by the "truth or accuracy" of any statement, document or declaration presented for
customs purposes. Paragraph 6 of Annex III to the CVA states tha t Article 17 acknowledges that
enquiries may be made "which are, for example, aimed at verifying that the elements of value
declared or presented to customs in connection with a determination of customs value are complete
and correct". When read alone, these provisions leave open the precise benchmark for determining
"the truth or accuracy" of the value "declared or presented" to customs.

1343 See Panel Report, US – 1916 Act, paras. 6.178-6.181.
1344 See Panel Report, US – Gambling, paras. 6.499-6.509 and 6.515-6.533.
1345 See Panel Report, China – Intellectual Property Rights, paras. 2.2 and 7.669.
1346 See Panel Reports, Argentina – Financial Services, para. 7.923; and Colombia – Textiles, para.
7.199.
1347 Appellate Body Reports, China – Measures Affecting Automobile Parts, fn 244; US – Softwood
1348 Panel Report, US – Gambling, paras. 7.3-7.4.
1349 Panel Report, China –Intellectual Property Rights, para. 7.501.
1350 Panel Report, China –Intellectual Property Rights, paras. 7.500-7.501.
1351 We note the Philippines' agreement on this point. (See Philippines' comments on Thailand's
response to Panel question No. 75).
1352 Thailand's response to Panel question No. 75, p. 10.

7.625. The "Decision of the Committee on Customs Valuation adopted pursuant to the Ministerial
Decision Regarding Cases Where Customs Administrations Have Reasons to Doubt the Truth or
Accuracy of the Declared Value"1353 elaborates on certain procedures that apply when an authority
doubts the "truth or accuracy" of a declared transaction value, and sheds light on what is meant by
the "truth or accuracy" of statements, documents or declarations. The Decision refers to cases where
the customs administration has reason "to doubt the truth or accuracy of the particulars or of
documents produced by traders in support of a declared value", and it states that when a declaration
has been presented and where the customs administration has reason to doubt "the truth or accuracy
of the particulars or of documents produced in support of this declaration", the customs
administration may ask the im porter to provide further explanation, including documents or other
evidence demonstrating "that the declared value represents the total amount actually paid or
payable for the imported goods ".1354 Along the same lines, it continues by explaining what the
customs administration may do if it still has reasonable doubts about "the truth or accuracy of the
declared value".
7.626. Thus, the Decision reflects an understanding that when reference is made to the "truth or
accuracy" of documents and particulars provided in the context of customs valuation, the concern is
whether the transaction value declared to customs is the "amount actually paid or payable for the
imported goods". The nature of this enquiry is clearly distinct from, and in our view must be sharply
contrasted with, the enquiry into whether the price "actually paid or payable for the imported goods"
by the importer (i.e. "the transaction value") is an acceptable price for purposes of customs valuation
in accordance with Article 1 of the CVA.
7.627. This understanding finds further reflection in the Doha Ministerial Decision on
Implementation-Related Issues and Concerns of 14 November 2001. In paragraph 8.3 of that
Decision, the Ministerial Conference "[u]nderlines the importance of strengthening cooperation
between the customs administrations of Members in the prevention of customs fraud".1355 It further
states that, pursuant to the Decision Regarding Cases Where Customs Administrations Have Reasons
to Doubt the Truth or Accuracy of the Declared Value, when the customs administration of an
importing Member has reasonable grounds to doubt "the truth or accuracy of the declared value", it
may seek assistance from the customs administration of an exporting Member , which may include
"furnishing information on the export value " of the good concerned.1356 Recognizing the legitimate
concerns expressed by the customs administrations of several importing Members "on the accuracy
of the declared value ", the Committee on Cus toms Valuation is directed to identify and assess
practical means to address such concerns, "including the exchange of information on export values"
and to report to the General Council by the end of 2002 at the latest.1357
7.628. Thus, the wording of paragraph 8.3 , including its reference to the "accuracy" of the
"declared" value and emphasis on the exchange of information on "the export value", is in line with
the understanding that when reference is made to the "truth or accuracy " of documents and
particulars provided in the context of customs valuation, the concern is whether the transaction
value declared to customs is the "amount actually paid or payable for the imported goods ". This
understanding is also consistent with the statement of the Technical Committee on Customs
Valuation that "[n]othing in the Valuation Agreement prevents an administration from enacting
tough enforcement provisions in cases of valuation fraud".1358
7.629. Article 1(c) of the WCO's International Convention on Mutual Administrative Assistance for
the Prevention, Investigation and Repression of Customs Offences (the Nairobi Convention) defines
"customs fraud" as "a Customs offence by which a person deceives the Customs [Department] and
thus evades, wholly or partly, the payment of import or export duties and taxes or the application

1353 Committee on Customs Valuation, Decision Regarding Cases Where Customs Administrations Have
Reasons to Doubt the Truth or Accuracy of the Declared Value, G/VAL/1, 27 April 1995, and Minutes of the
Meeting of 12 May 1995, G/VAL/M/1, 11 August 1995, adopted pursuant to the invitation in the Ministerial
Decision Regarding Cases Where Customs Administrations Have Reasons to Doubt the Truth or Accuracy of the
Declared Value.
1354 Emphasis added.
1355 WT/MIN(01)/17, para. 8.3.
1358 See Committee on Customs Valuation, Technical Committee on Customs Valuation Response to the
Terms of Reference for the Work of the Technical Committee on Customs Valuation in connection with
Concerns on the Accuracy of the Declared Value, G/VAL/54, 16 May 2003, para. 33. We note that this
understanding is further reflected in the title of the document itself.

of prohibitions or restrictions laid down by Customs law or obtains any advantage contrary to
Customs law ".1359 The general definition of "customs fraud " contained in Article 1(c) does not
elaborate on the kinds of "deception" that are embraced by this concept, but the examples of
"customs fraud" reiterated in the Nairobi Convention are "forgery, falsification or counterfeiting".1360
This too is consistent with th e understanding that, in the particular context of customs valuation,
customs fraud concerns whether the transaction value declared to customs is the "amount actually
paid or payable for the imported goods".
7.630. Finally, we note that in Argentina – Textiles and Apparel, the panel confirmed that Members
may of course take actions, including through criminal law, to counteract a "false declaration ".
Consistent with our understanding above, the panel understood a "false declaration" to refer to a
situation in which "the customs value declared by the importer does not represent the price actually
paid". The panel stated:
[C]ustoms duties are normally to be imposed on the transaction value of imported goods
as defined in the [CVA]. The transaction value is defined as "the price actually paid or
payable for the goods when sold for export to the country of importation". Obviously, if
the customs value declared by the importer does not represent the price actually paid,
the Argentine authorities may take action to counteract a false declaration through, for
example, revisions of the customs value declared in specific cases and even criminal
prosecutions.1361
7.631. We understand both parties to agree that, in the context of customs valuation, the concept
of customs fraud concerns the situation in which "the customs value declared by the importer does
not represent the price actually paid". The Philippines submits that the conduct of an importer is not
"fraudulent or otherwise criminal" simply by declaring a transaction value that a customs authority
subsequently decides was influenced by the importer's relationship with the supplier, as this situation
merely reflects the anticipated operation of Articles 1 to 7 of the CVA. In its view, "where the declared
transaction value is not, in fact, the price paid or payable by the importer in the transaction in
question", then "the importer may be liable under domestic law for criminal fraud for declaring a
transaction value that was not truthful or accurat e".1362 Thailand does not specifically contest the
Philippines' understanding on this point, and has asserted that the Charges should be understood as
alleging customs fraud in precisely this sense. In its second written submission, Thailand makes
reference t o the grounds "for doubting the accuracy of the customs value declared by PM
Thailand".1363 In response to a question from the Panel, Thailand states that the Charges are to be
understood as alleging that the transaction value declared by PMTL was not the actual price that
PMTL paid to PMPMI.1364 In response to the same question, Thailand states that "the Charges do not
determine or even attempt to determine what should be the 'true' or 'correct' or 'actual' customs
value".1365 According to Thailand, "PMTL employees are accused of declaring a customs value that
they knew was not the actual transaction price paid by the buyer."1366
7.632. We understand Thailand to argue that the CVA is inapplicable to the Charges on four different
grounds, which relate to : (i) the agency that filed the Charges ; (ii) the meaning of the Charges ;
(iii) the consequences of the Charges; and (iv) the "intention to defraud" aspect of the Charges.

1359 International Convention on Mutual Administrative Assistance for the Prevention, Investigation and
Repression of Customs Offences (Nairobi Convention), concluded in Nairobi on 9 June 1977, entered into force
on 21 May 1980. As one panel has observed, other treaties "may in some cases aid a treaty interpreter in
establishing, or confirming, the ordinary meaning of treaty terms in the specific context in which they are used.
Such rules would not be considered because they are legal rules, but rather because they may provide
evidence of the ordinary meaning of terms in the same way that dictionaries do. They would be considered for
their informative character." (Panel Report, EC – Approval and Marketing of Biotech Products, paras. 7.92)
Notwithstanding that the term "customs fraud" does not appear in the CVA, we refer to the Nairobi Convention
because it has an informative character with respect to the general concept of "customs fraud".
1360 Nairobi Convention, Annex IX, part II.
1361 Panel Report, Argentina – Textiles and Apparel, para. 6.44.
1362 Philippines' first written submission, paras. 511 and 513. (emphasis original)
1363 Thailand's second written submission, para. 3.51. (emphasis added)
1364 Thailand's response to Panel question No. 32(b).
1365 Thailand's response to Panel question No. 32(b), p. 28. (emphasis added)
1366 Thailand's response to Panel question No. 32(d), p. 29.

7.3.5.3.2 The agency that filed the Charges
7.633. We begin by considering whether the Charges fall outside of the scope of the CVA by virtue
of the agency that issued them. More specifically, the question we are called upon to resolve is
whether the CVA is inapplicable to the Charges because they were issued by an organ of the State
that is not part of the "customs administration".
7.634. Thailand argues that even if the Charges contain a "customs valuation" determination, the
CVA still does not apply to the Public Prosecutor because it is not a part of the "customs
administration" for purposes of the CVA. Thailand initially agreed in principle that the term "customs
administration" may generally apply "to any entity conducting customs valuation, regardless of
whether that entity is designated under domestic law as part of the country's customs
administration"1367, but nonetheless emph asized that "which agency is responsible for the
administration of certain laws or takes a measure may be very relevant to the determination of the
nature, in WTO terms, of the measure and whether that measure falls within the scope of a particular
provision of the covered agreements ".1368 Thailand subsequently argued that the substantive
obligations in the CVA at issue in this dispute only apply to government agencies that are responsible
for the administration of the customs formalities and procedures that a rise from the flow of goods
into and out of a Member's territory, thereby excluding the Public Prosecutor.1369
7.635. It is common ground between the parties that the Public Prosecutor is an organ of the state,
and that acts taken by the Public Prosecutor are attrib utable to Thailand.1370 Article 3.3 of the DSU
refers to "measures taken by another Member ", without limitation as to the government agencies
involved, and it is well established that "[i]n principle, any act or omission attributable to a WTO
Member can be a measure of that Member for purposes of dispute settlement proceedings".1371
7.636. We note that the original panel stated, with reference to Article 4 of the ILC Articles on
Responsibility of States for Internationally Wrongful Acts 1372, that "WTO Members are responsi ble
for the actions of their government officials".1373 We consider that Article 4(1) of these Articles is an
expression of customary international law. Article 4(1) provides that:
The conduct of any State organ shall be considered an act of that State under
international law, whether the organ exercises legislative, executive, judicial or any
other functions, whatever position it holds in the organization of the State, and whatever
its character as an organ of the central Government or of a territorial unit of the State.
7.637. We further note that, while certain covered agreements may include one or more provisions
that specifically apply to certain types of entities, such as state trading enterprises, none of the
covered agreements in Annex 1A, nor the GATS , nor the TRIPS Agreement, contains any general
scope and coverage provision limiting its applicability to particular government agencies within a
Member. The Agreement on Government Procurement is unique in containing a scope and coverage
provision stating that it applies to the "entities covered by this Agreement, as specified in Appendix
I"1374, and this reflects the subject matter and content and structure of the agreement as a whole.
7.638. Against this background, we consider that there would have to be a clear and ex plicit
indication in the text of the CVA limiting its applicability to a narrow subset of government officials
to sustain Thailand's interpretation. However, the CVA has no scope and coverage provision at all.
The absence of any scope and coverage provision in the CVA weighs heavily against an interpretation
that would restrict the scope and coverage of the provisions therein to a narrow subset of
government officials. So does Article 19 of the CVA, which deals with dispute settlement, and which
refers without limitation to "the actions of another Member" that may be challenged in WTO dispute
settlement proceedings.

1367 Thailand's response to Panel question No. 48, p. 45.
1368 Thailand's response to Panel question No. 48, p. 45.
1369 Thailand's comments on the Philippines' response to Panel question No. 92.
1370 Thailand's second written submission, para. 3.131.
1371 Appellate Body Report, US – Corrosion-Resistant Steel Sunset Review, para. 81.
1372 International Law Commission, Articles on Responsibility of States for Internationally Wrongful Acts,
adopted by the ILC at its fifty-third session, in 2001, published in Yearbook of the International Law
Commission, 2001, Vol. II, Part Two (the ILC Articles on State Responsibility).
1373 Panel Report, Thailand – Cigarettes (Philippines), para. 7.120.
1374 Article I:1 of the Agreement on Government Procurement.

7.639. Turning to the CVA provisions at issue, Article 1.1 uses the passive voice in stating that
"[t]he customs value of imported goods shall be the transaction value, that is the price actually paid
or payable for the goods when sold for export to the country of importation ", provided that "the
buyer and seller are not related, or where the buyer and seller are related, that the transaction value
is acceptable for customs purposes under the provisions of paragraph 2 ". Likewise, the first and
second sentences of Article 1.2(a) are also formulated in the passive voice, and state that:
In determining whether the transaction value is acceptable for the pur poses of
paragraph 1, the fact that the buyer and the seller are related within the meaning of
Article 15 shall not in itself be grounds for regarding the transaction value as
unacceptable. In such case the circumstances surrounding the sale shall be exami ned
and the transaction value shall be accepted provided that the relationship did not
influence the price.
7.640. We note that the text of Articles 2.1 and 3.1, quoted in full and discussed below, also set
forth obligations that are silent on who is applying the methodology.
7.641. We recognize that the CVA contains a number of references to the "customs administration"
of a Member. These provisions include, inter alia, Article 1.2(a) third sentence. They also include
references to the "customs administration" in the Interpretative Notes to paragraph 2 of Article 1,
and Articles 2 and 3. However, these references in the tex t of the CVA to the "customs
administration" do not amount to a clear and explicit indication in the text of the CVA limiting its
applicability to a narrow subset of government officials. These are relatively generic terms, and are
not defined in the CVA. Furthermore, many of the references to "the customs administration" in the
CVA serve essentially the same function as the repeated references to "the authorities" in the context
of the Anti-Dumping Agreement and SCM Agreement. Indeed, the Interpretative Note to Article 6 of
the CVA refers to "the authorities" in the importing country.
7.642. If Thailand were correct that the CVA only applies to customs valuation determinations made
by the "customs administration", Members could easily evade their CVA obligations. A Member's
customs administration and law enforcement agency could each undertake a valuation decision for
exactly the same purposes, namely, to establish the value of goods that should have been used for
the purposes of levying customs duties due on good s at or following the time of their importation.
However, while the CVA would apply to the Member's customs administration's actions in initially
valuing the goods, it would not apply when the value is re -assessed by a law enforcement agency.
We agree with the Philippines that such an interpretation would render the CVA meaningless because
Members could evade their CVA obligations simply by having a different agency re-assess the values
initially determined by the customs administration. 1375 We consider that the object and purpose of
the covered agreements should guide us to avoid interpretations that would enable Members to
"circumvent" or "evade" their obligations.1376
7.643. All of the third parties that expressed a view on this point disagree with Thailand's
interpretation of the CVA. Canada considers that "the text appears to provide flexibility as to the
government actors captured by its obligations"1377, and submits that "[t]he question is whether the
entity conducts customs valuation functions or not. Otherwise, the obligations borne by a WTO
Member under the CVA could be dictated by the organization of its domestic government. "1378 The
European Union states that "a line must be drawn between (i) applying the substantive obligations
on customs valuation in the context o f criminal proceedings and (ii) applying the procedural
obligations of the CVA to criminal proceedings involving customs valuation determinations", and that
"[o]n the former, the European Union has made it very clear that a functional approach is warranted,
whereby the substantive rules of the CVA apply regardless of the nature of the procedures in which
the determination is made. "1379 The United States notes that "certain interim procedural

1375 Philippines' response to Panel question No. 48(a), para. 359.
1376 Appellate Body Report, US – Shrimp, para. 114; Panel Report, US – Anti-Dumping and
Countervailing Duties (China), paras. 8-75-8.76; Appellate Body Report, US –Softwood Lumber IV, para. 64;
Panel Report, US – FSC (Article 21.5 – EC), para. 8.39 ("it is evident that the interpretation [of 'revenue
foregone'] advanced by the United States would be irreconcilable with th[e] object and purpose …given that it
would offer governments 'carte-blanche' to evade any effective disciplines, thereby creating fundamental
uncertainty and unpredictability").
1377 Canada's third-party submission, para. 35.
1378 Canada's third-party submission, para. 40.
1379 European Union's third-party response to Thailand's question No. 4, paras. 6-7.

requirements might not apply to the prosecutor directly"1380, but that the obligations in Article 1 "are
not limited to particular entities within a Member's government ".1381 Australia states that it does
"not consider the fact that the actions relate to different arms of the Thai State as of relevance in
this case".1382
7.644. Based on the foregoing, we find that the obligations in Articles 1, 2 and 3 of the CVA invoked
by the Philippines in this case apply to any organ of the state that makes a "customs valuation"
determination. Accordingly, we are unable to agree with Thailand that the CVA is inapplicable to the
Charges on the grounds that they were issued by the Public Prosecutor, which is not a part of the
"customs administration". Having reached that conclusion, we consider it unnecessary to reach any
definitive conclusion on the scope of the term "customs administration".
7.3.5.3.3 The meaning of the Charges
7.645. We now consider whether the Charges seek to determine the monetary value of PMTL's
imported cigarettes. This point of disagreement between the parties requires us to resolve certain
issues relating to the meaning of the Charges filed by the Public Prosecutor.
7.646. Article 15.1(a) of the CVA defines the "customs value of imported goods " as "the value of
goods for the purposes of levying ad valorem customs duties on imported goods ". The panel in
Colombia – Ports of Entry relied on Article 15.1(a) to define the constituent elements that must be
presented for an action to constitute a "customs valuation" determination subject to the obligations
in the CVA.1383 The panel stated that:
In light of the dic tionary definitions of valuation and value, as well as the definition of
customs value provided in Article 15 of the Customs Valuation Agreement , the Panel
considers that the ordinary meaning of the concept of customs valuation is
straightforward. Essentially, customs valuation involves the process of determining the
monetary worth or price of imported goods for the purpose of levying customs duties.
With this understanding of the meaning of customs valuation, the Panel will consider
whether Colombia determ ines the customs value of imports through the use of its
indicative prices regime.1384
7.647. Thus, the panel found, based on the definition of "customs value of imported goods" in Article
15.1(a), that "customs valuation" involves "the process of determining the monetary worth or price
of imported goods for the purpose of levying customs duties".1385 In this case, the parties both agree
that this is the applicable legal standard, and that for the Charges to be subject to the CVA, both of
the following elements of the d efinition of "customs valuation" reflected in Article 15.1(a) must be
present: (i) determining the monetary worth or price of imported goods (ii) for the purposes of
levying ad valorem customs duties.
7.648. Thailand submits that in this case there is no "valuation of goods", because the Charges do
not actually seek to "fix or determine the monetary value of PMTL's imported cigarettes".1386 Thailand
essentially argues that the Charges are to be understood as alleging that the transaction value
declared by PMTL was not the actual price that PMTL paid to PMPMI 1387, and that the reference to
the King Power prices, which is not contained in the Charges themselves but in an Annex, merely
serves the purpose of providing a possible benchmark to the Criminal Court to impose fin es in the
event of a conviction.
7.649. We would be inclined to agree with Thailand that the Charges fall outside of the scope of
application of the CVA i f Thailand were to substantiate its interrelated assertions that the Charges
allege customs fraud based on a determination that the price that PMTL declared to have paid to
PMPMI was not the actual price that was paid to PMPMI, and that the references to King Power's
prices in the Annex merely serve as a possible benchmark for the purposes of a fine and not as a

1380 United States' response to Panel question No. 4(b), para. 29.
1381 United States' response to Panel question No. 4(a), para. 25.
1382 Australia's third-party statement, para. 11.
1383 Panel Report, Colombia – Ports of Entry, para. 7.81.
1384 Panel Report, Colombia – Ports of Entry, para. 7.83.
1385 Panel Report, Colombia – Ports of Entry, paras. 7.83-7.84.
1386 Thailand's response to Panel question No. 47(a), p. 44.
1387 Thailand's response to Panel question No. 32(b).

basis for determining the actual customs value of PMTL's imported goods.1388 However, as elaborated
further below, we consider that Thailand's reading of the Charges is not supported by the actual text
of the instrument, when it is read in conjunction with i ts accompanying Annex, the domestic legal
framework in which the Charges are situated, and the events culminating in the Charges.
7.650. The Appellate Body has explained that, "[a]lthough it is not the role of panels or the Appellate
Body to interpret a Member's domestic legislation as such, it is permissible, indeed essential, to
conduct a detailed examination of that legislation in assessing its consistency with WTO law ".1389 A
panel's obligation to conduct an "objective assessment of the facts " under Article 11 o f the DSU
"means that panels must conduct their own objective and independent assessment of the meaning
of municipal law, instead of deferring to a party's characterization of such law ".1390 As the original
panel observed, "to the extent that the parties disagree on the interpretation of relevant provisions,
we are required to objectively examine the question at issue based on the text of the concerned
provision[s] as well as on the evidence before us".1391
7.651. It is well established that questions relating to the me aning of domestic law arising before
WTO panels and the Appellate Body are to be approached as questions of fact. In respect of the
types of factual evidence that may be relied upon to resolve the meaning and content of municipal
law, the Appellate Body has explained that "[i]f the meaning and content of the measure are clear
on its face, then the consistency of the measure as such can be assessed on that basis alone. If,
however, the meaning … is not evident on its face, further examination is required. "1392 The nature
and the extent of the evidence required to satisfy the burden of proof varies from case to case. 1393
In some cases, the text of the relevant legislation may be sufficient to clarify the content and the
meaning of the relevant legal instruments. In other cases, the parties will also need to support their
understanding of the content and meaning of such legal instruments with evidence beyond the text
of the instrument, such as evidence of consistent application of such laws, pronouncements of
domestic courts on the meaning of such laws, the opinions of legal experts, and the writings of
recognized scholars. 1394 The Appellate Body has added that, "in ascertaining the meaning of
municipal law, a panel should undertake a holistic assessment of all relevant elements, starting with
the text of the law".1395
7.652. In respect of the burden of proof, the party asserting that another party's municipal law is
inconsistent with relevant treaty obligations "bears the burden of introducing evidence as to the
scope and meaning of such law to substantiate that assertion ".1396 This general principle regarding
the allocation of the burden of proof applies not only to assertions relating to the WTO-consistency
of a municipal law in the form of a statute or a regulation, but also to mun icipal legal instruments
such as the Charges. However, in applying general principles of law to the WTO dispute settlement
system, we recall that the burden of proof lies with the party asserting a fact, whether that party is
the complainant or the respond ent.1397 Thus, while the Philippines bears the burden of introducing
evidence as to the scope and meaning of the legal instrument that it challenges, Thailand must also
substantiate assertions that it makes with respect to the meaning and content of its domes tic laws
and legal instruments.
7.653. With these principles in mind, we observe that t he text of the Charges allege s that PMTL
violated Section 27 of the Customs Act by declaring a "false price" for Marlboro and L&M cigarettes

1388 The Panel need not decide, and therefore does not decide, whether in such circumstances the
domestic authorities may still be subject to the procedures elaborated in the Decision Regarding Cases Where
Customs Administrations Have Reasons to Doubt the Truth or Accuracy of the Declared Value.
1389 Appellate Body Report, US – Hot-Rolled Steel, para. 200. See also Appellate Body Report, US –
Carbon Steel (India), para. 4.445.
1390 Appellate Body Report, US – Carbon Steel (India), para. 4.445 (referring to Appellate Body Report,
India – Patents (US), para. 66).
1391 Panel Report, Thailand – Cigarettes (Philippines), paras. 6.157 and 7.684.
1392 Appellate Body Report, US – Corrosion-Resistant Steel Sunset Review, para. 168.
1393 Appellate Body Report, US – Carbon Steel, para. 157. See also Appellate Body Report, US – Carbon
Steel (India), para. 4.446.
1394 Appellate Body Reports, US – Countervailing and Anti-Dumping Measures (China), para. 4.100; US
1395 Appellate Body Report, US – Countervailing and Anti-Dumping Measures (China), para. 4.101. See
also Appellate Body Report, US – Carbon Steel (India), para. 4.446.
1396 Appellate Body Report, US – Carbon Steel, para. 157 (referring to Appellate Body Report, US – Wool
Shirts and Blouses, p. 14, DSR 1997:I, p. 335).
1397 Appellate Body Report, US – Wool Shirts and Blouses, pp. 12-16, DSR 1997:I, 323, at pp. 333-338.

contrary to the "actual price". The Charges do not elaborate on whether PMTL declared a "false"
price in the sense that it was contrary to the "actual price" that PMTL paid to PMPMI, or rather a
"false" price that was contrary to the "actual price" using another benchmark to determine the price
to be used for customs valuation. However, the terms of the Charges make clear that PMTL's
declaring of a "false price" contrary to the "actual price" is the act giving rise to the offense. There
is no specific reference to any "fine" in the Charges. On the other hand, for each of the 272 entries
at issue, there is a clause which: (i) states that for the particular entry at issue, the defendants
declared a "false price of such [cigarettes] contrary to the actual price and against the law of
customs"; (ii) refers to "the Exhibit attached to the Complaint" for, inter alia, the "price per pack of
cigarette falsely and jointly declared by the Defendants", and the "actual price of cigarettes of each
brand"; (iii) then concludes that "[t]he Defendant and others committed such for the importation of
the goods into the Kingdom in order to avoid the full payment of tax and duty, which constituted
the acts of being involved in any manner to avoid or attempt to avoid the payment of customs tax
or duties … with the intention to defraud the government tax of His Majesty the King, which was the
violation of law".1398 Thus, the Charges refer to these elements as the "acts" that "constituted" the
crime.
7.654. For each of the 272 entries, the Charges repeat that "the Exhibit attached to the Complaint"
shows the details with respect to price per pack of cigarettes "falsely" declared, and the "actual
price" of cigarettes of each brand. The attachment to the Charges, referred to by the parties as the
"Annex"1399 to the Charges, provides information on the 272 entries at issue in the form of a table.
For each of the 272 entries, Columns 2 through 6 of the table provide information on the date and
time of importation; the import entry number; the imported goods ( Marlboro or L&M); and the
number of boxes/packs of cigarettes included in that entry. Columns 7 and 8 provide information
and exact figures on the "false" and the "actual" prices, as follows:
a. Column 7 specifies the alleged "false" price declared by PMTL. The figures contained in
Column 7 correspond to the transaction value declared by PMTL, and range from THB 7.60
to THB 8.14 per pack for Marlboro and THB 5.75 to THB 6.16 per pack for L&M. This column
is entitled the "Price of Goods (cigarettes) with false declaration / pack (Baht)".
b. Column 8 of the Annex specifies the alleged "actual price". The "actual price" indicated in
Column 8 is the transaction value paid by King Power for Marlboro and L&M cigarettes.
This Column is entitled, "Price of Goods (cigarettes ) or Actual Customs Price price/pack
(THB) (*** price of goods imported by King Power)".
c. Column 9 then calculates the "Price of Goods (cigarettes) underdeclared / pack (THB)".
Based on the difference between the prices in Columns 7 and 8, i.e. between the prices
paid by PMTL and those paid by King Power, it provides this information on an entry -by-
entry basis. Thus, the Annex provides a comparison between PMTL's transaction values
and King Power's prices, with the stated amount of the "underdeclared" amount of duties
based on the precise difference between the two.
d. Column 10 calculates the resulting "Price of Goods (cigarettes) / import entry (THB) " by
taking the number of packs imported by PMTL in the entry at issue, and multiplying by the
price paid by Ki ng Power. On the basis of that price, Column 11 calculates the resulting
"Duty / Import Entry (THB) ", by applying the ad valorem rate of 5% to the price of the
goods arrived at based on King Power's prices.
e. Column 12 sets forth the total of the "Price of Goods (cigarettes) plus declared duty /
import entry". It arrives at a total of THB 20.2 billion (approximately USD 580 million).
7.655. We agree with the Philippines more generally that "[b]efore the Public Prosecutor can
establish any penalty (such as a fine), the Public Prosecutor must first establish that the elements
of the alleged crime are present, because these provide the necessary justification for establishing
the penalty"1400 and that "[l]ogically, a penalty for the commission of a crime can be considered only

1398 The Criminal Court, Charges, Case Black No. Or. 185/2559, 18 January 2016 (English translation),
(Exhibit PHL-1-B). (emphasis added)
1399 Annex to the Charges, Case Black No. Or. 185/2559, 18 January 2016 (English translation), (Exhibit
PHL-96-B).
1400 Philippines' response to Panel question No. 33, para. 263.

after the substantive elements of the crime itself have been established ".1401 The domestic legal
framework in which the Charges and the Annex are situated, and in the context of which they must
be read, also includes Section 158(5) of the Criminal Procedure Code. Section 158(5), to which both
parties have made reference1402, provides that "a charge must contain 'all the acts alleged to have
been committed by the accused, all the facts and particulars regarding the time and place of such
acts, and the pers ons or articles concerned which are reasonably sufficient to give the accused a
clear understanding of the charge'."1403
7.656. We acknowledge Thailand's assertion that the information mentioned in the Annex does not
serve "to explain the specific acts that constitute the fraud of which PMTL is accused", however we
do not consider that Thailand has adequately explained how this can be reconciled with what the
Annex to the Charges actually says.1404 By their own terms, the Charges and the Annex "show[] the
details" with respect to the "false" and "actual" price, "fix or determine the monetary value of PMTL's
imported cigarettes" for the purpose of customs valuation, and do so on the basis of King Power's
prices.
7.657. We note that the English translation of Section 27 of the Customs Act, as submitted by the
Philippines1405, reads as follows:
Any person who … shall be in any way concerned in any evasion or attempted evasion
of any duties of Customs … with intent to defraud His Majesty's Government of any
duties due on such goods o r to evade any prohibition or restriction of or applicable to
such goods; shall for each offence be liable to a fine equal to quadruple the duty -paid
value of the goods, or imprisonment for a period not exceeding ten years, or both fine
and imprisonment.
7.658. Thus, Section 27 of the Customs Act makes it a criminal offense to evade the payment of
customs duties, with the "intent[ion]" to "defraud the government" of the "duties" that are "due on
such goods".
7.659. We agree with Thailand that in cases of customs fraud, the authorities may not know the
price actually paid.1406 We further agree with Thailand that an allegation of customs fraud could be
made without ever seeking to determine the customs value of the importer's goods, and the making
of such an accusation does n ot necessarily presuppose that the authorities would have engaged in
a customs valuation determination in order to reach the conclusion that the declared transaction
value was not "truthful or accurate". Using Thailand's example1407, if an importer presents an invoice
indicating a purchase price of 100 for the imported merchandise, but the customs authorities find in
the importer's luggage a second invoice of 50 for that same merchandise, the necessary conclusion
is that the declared value of 100 is not the price actually paid by the importer, but the authority may
never discover the totality of the invoices related to this purchase and, hence, may never have
conclusive evidence of the price actually paid by the importer.
7.660. It appears to us that these general considerations apply equally in the context of Section 27
of the Customs Act. In circumstances where the authorities find evidence of false invoicing, for

1401 Philippines' response to Panel question No. 33, para. 264.
1402 Thailand's first written submission, para. 6.87; Philippines' second written submission, fn. 406.
1403 Criminal Procedure Code, (Exhibit THA-16), Section 158.
1404 Thailand's response to Panel question No. 99(a).
1405 Customs Act B.E. 2469 (1926) (as amended to (No. 22) B.E. 2557 (2014)) (English translation),
(Exhibit PHL-34-B). After the Philippines submitted an English translation of Section 27 of the Customs Act as
Exhibit PHL 34-B, Thailand subsequently submitted its own English translation of Section 27, as Exhibit THA 3-
B. In response to a question from the Panel, Thailand subsequently confirmed that the Panel was correct in its
understanding that, in the absence of any objection in accordance with paragraph 11 of the Working
Procedures, Thailand did not object to the English translation of Section 27 submitted by the Philippines as
Exhibit PHL 34-B. (Thailand's response to Panel question No. 96). We note that paragraph 11 of the Working
Procedures provides that:
Any objection as to the accuracy of a translation should be raised promptly in writing, preferably
no later than the next filing or meeting (whichever occurs earlier) following the submission which
contains the translation in question. Any objection shall be accompanied by a detailed
explanation of the grounds of objection and an alternative translation. The Panel shall rule on
any objection to the accuracy of a translation as promptly as possible thereafter.
1406 Thailand's response to Panel question Nos. 99(b) and 106.
1407 Thailand's response to Panel question No. 99(b).

example, it would be possible to reach a conclusion that the importer evaded the "duties due on
such goods" without ever establishing, as a constituent element of the offense, what was the price
actually paid or payable, and/or an alternative customs value determined according to Articles 1 to
7 of the CVA. We see nothing in the terms of Section 27 that com pels the conclusion that the
authorities must, in every case of customs fraud, have determined the actual customs value. To that
extent, we disagree with the Philippines insofar as it is arguing that , for any offense alleged under
Section 27, the Public Pr osecutor must always determine "the customs value that it considered to
be correct".1408 We therefore do not consider that, in order to establish the constituent elements of
an offence, the terms of Section 27 always require that the authorities engage in customs valuation
determinations, such that any and all Charges brought pursuant to Section 27 necessarily fall within
the purview of the CVA. 1409 In light of the foregoing, we also accept Thailand's explanation that
Section 158(5) of the Criminal Procedure does not have the effect of requiring that, for any charges
alleging an offense under Section 27, they must "lay out what the correct value would have been
had the alleged offence not occurred".1410
7.661. Having said that, in the circumstances of this case, the Charges brought against PMTL allege
that PMTL failed to comply with Section 27 by declaring a "false price " for Marlboro and L&M
cigarettes contrary to the "actual price". The Charges also specify in exact detail both the "actual
price", and the basis for determining that "actual price". As already detailed above, the Charges do
so in a manner that clearly seeks to "fix or determine the monetary value of PMTL's imported
cigarettes" for purposes of customs valuation, and they do so on the basis of King Power's prices.
7.662. Furthermore, a reading of the terms of the Charges and their accompanying Annex in the
context of Section 2 of the Act reinforces the conclusion that the "actual price" referred to in the
Charges involves a customs valuation determination. Section 2 of the Customs Act sets out
definitions of terms that appear throughout the Act, and confirms that the terms "customs price"
and "price" carry the same meaning as one another, which "in the case of importation, means price
of goods for the purpose to collect duty ".1411 It further provides that the "price of goods for the
purpose to collect duty" should be in accordance with one of six different benchmarks corresponding
to Articles 1-7 of the CVA. 1412 We recall that Section 27 provides a benchmark for the purpose of
calculating a fine, which is that, in the event of a conviction, PMTL shall for each offence be liable
for a fine equal to quadruple "the duty-paid value of the goods".1413 In response to a question from
the Panel, Thailand confirms that, under its position that the Annex merely sets forth a benchmark
for a fine, the Annex still reflects "the Public Prosecutor's view that King Power's purchase prices are
equivalent to the duty-paid value of the goods within the meaning of Section 27".1414
7.663. Furthermore, we do not see how Thailand's assertions regarding the meaning of the Charges
can be reconciled with the content of the April 2009 Memorandum of Allegation. This document
states that "the declared values of cigarettes imported into Thailand from the Philippines by Philip
Morris pursuant to such import entries were undervalued and did not reflect the actual value of the
cigarettes". The Memorandum of Allegation then calculates that THB 68.8 billion in taxes and duties
were lost, based on a comparison of PMTL's prices with King Power's declared import prices.1415 The
Memorandum of Allegation cannot be understood as referring to King Power's declared import prices
for the purposes of calculating a fine. Furt hermore, if the actual allegation had been that PMTL's

1409 Having said this, we note that even in the situation where the constituent elements of the offense in
a particular case under Section 27 do not involve customs valuation, if Thailand were to establish a fine that is
calculated on the basis of the value of the goods, the CVA applies to that valuation exercise. See paragraph
7.662. below.
1410 Thailand's response to Panel question No. 32(d).
1411 Emphasis added. Thailand argues that Section 103 of the Customs Act is the relevant provision for
the calculation of a criminal fine, and that therefore Section 103, and not Section 2, is the correct context for
understanding the term "price" as used in the Charges. (Thailand's second written submission, para. 3.118-
3.120) We agree with the Philippines that it is clear from the terms of the Charges that they refer to the "price"
for the purpose of establishing the constituent elements of the crime under Section 27 of the Customs Act, not
"for the purpose of fixing the amount of any fine or penalty". (Philippines' response to Panel question No. 33,
paras. 261-274) Accordingly, we agree with the Philippines that Section 2, and not Section 103, is the relevant
provision of the Customs Act for the purpose of understanding the term "price" as used in the Charges.
1412 Emphasis added.
1413 Customs Act B.E. 2469 (1926) (as amended to (No. 22) B.E. 2557 (2014)) (English translation),
(Exhibit PHL-34-B), Section 27.
1414 Thailand's response to Panel question No. 99(c), p. 25.
1415 See paragraph 7.441. above.

declared transaction values were not truthful or accurate by reference to the actual price paid to
PMPMI, then one would expect to see the "lost" duties/taxes derived from a comparison of PMTL's
declared transaction values with the prices PMTL actually paid to PMPMI . While we agree with
Thailand that in cases of false invoicing the authorities may not know the price actually paid, Thailand
has not explained why the April 2009 Memorandum of Allegation re lies on King Power's prices. 1416
The inescapable conclusion is that the Memorandum of Allegation sought to "fix or determine the
monetary value of PMTL's imported cigarettes" for the purpose of customs valuation, and did do so
on the basis of King Power's prices.1417
7.664. Based on the foregoing, and in particular the plain meaning of the Charges and their Annex,
we find that the Charges "fix or determine the monetary value of PMTL's imported cigarettes " for
the purpose of customs valuation, and that they do so on the basis of King Power's prices.
Accordingly, we are unable to agree with Thailand that the CVA is inapplicable to the Charges on the
grounds that they do not actually seek to fix or determine the monetary value of PMTL's imported
cigarettes.
7.3.5.3.4 The consequences of the Charges
7.665. We now turn to Thailand's argument that the CVA is inapplicable to the Charges because
they will not result in the levying of ad valorem customs duties on imported goods. Thailand's
argument essentially relates to the consequences that may follow from the Charges.
7.666. The parties agree that for the Charges to be subject to the CVA, both of the following
elements of the definition of "customs valuation " reflected in Artic le 15.1(a) must be present:
(i) determining the monetary worth or price of imported goods (ii) for the purposes of levying
ad valorem customs duties on imported goods. Having already considered the first element above,
we now turn to the second element.
7.667. Section 27 of the Customs Act makes it a criminal offense to ev ade the payment of "duties
on Customs", with the "intention to "defraud the government" of the "duties" that are "due on such
goods". By their plain terms, the Charges read in conjunction with their Annex determine the
monetary worth or price of imported goods of PMTL for the purpose of determining the amount of
the ad valorem customs duties that should have been paid by PMTL. This rea ding is based on the
explicit terms of the Annex to the Charges, and confirmed by the domestic legal framework in which
they are situated. We refer generally to our detailed review in the previous section of our findings.
7.668. However, we understand Thailand t o argue that , even if this is so, the Charges still fall
outside of the scope and coverage of the CVA because they could only result in criminal fines and
penalties, and will not result in border measures levying ad valorem customs duties on imported
goods. In this regard, Thailand advances arguments relating to the ordinary meaning of the term
"levy", and submits that "the second element is satisfied only if the valuation of the goods has the
purpose of collecting charges imposed at the border on goods entering the country".1418
7.669. In the circumstances of this case, we do not consider that the applicability of the CVA to the
Charges turns on the meaning of the term "levying".1419 In our view, even if Article 15.1(a) provided
that a "customs valuation" determination falling within the scope of the CVA must determine "the
value of goods for the purposes of collecting ad valorem customs duties on imported goods ", the
Charges would meet that definition. The Public Prosecutor's determination that the amount of the
ad valorem customs duties that PMTL paid was less than the amount of ad valorem customs duties
that should have been collected from PMTL, in the context of an allegation that PMTL declared a

1416 Thailand's response to Panel question No. 99(b).
1417 We further note that in 2013, it was reported in the Thai press that the then-Attorney-General had
decided to follow the DSI's recommendation, and had issued a Prosecution Order against PMTL for declaring
the import prices of Marlboro and L&M from the Philippines below the normal price, causing the State to suffer
damages of THB 68 billion. (See paragraph 7.447. above) Here again, there is an unexplained contradiction
between what Thailand submits the Charges mean, and the basis for the recurring THB 68.8 billion figure.
1418 Thailand's first written submission, para. 6.26.
1419 Thailand argues that the verb "levy" refers to "the collection"of customs duties, and equates the
"levying" of ad valorem customs duties with the "collection" of duties. (Thailand's first written submission,
para. 6.26) The Philippines counters that the drafters did not use the words "collection" or "collecting", as they
did elsewhere in the covered agreements, and that the verb "levy" has a broader meaning of "to raise (a sum
of money) by legal execution or process". (Philippines' second written submission, para. 539)

false price in order to evade the customs duties owed, suffices to esta blish that the Charges value
goods for the purposes of collecting ad valorem customs duties on imported goods. We read the
terms "for the purposes of levying ad valorem duties" in the context of Article 15.1(a) as embracing
any determination of the value of imported goods for the purpose of determining the amount of ad
valorem duties due on those imported goods.1420
7.670. We consider that Thailand's interpretation of Article 15.1(a) is contradicted by various
provisions of the CVA which establish that customs duties are not necessarily "levied on the border",
either in physical or temporal terms. As the Philippines observes1421, Article 13 of the CVA expressly
foresees that the determination of customs value may be delayed, and permits the goods to be
withdrawn from customs upon provision of a security. The charges subsequently levied remain ad
valorem customs duties, even though they are not "levied on the border".
7.671. If Thailand were correct in its argument that the CVA only applies to customs valuation
determinations that result in the actual levying of ad valorem customs duties, Members could very
easily evade their CVA obligations. A Member's customs administration and law enforcement agency
could each undertake a valuation decision for exactly the same purposes, namely, to establish the
value of goods that should have been used for the purposes of levying customs duties due on goods
at or following the time of their importation. However, while the CVA would apply to the Member's
valuation actions in initially valuing the goods, it would not apply when the value is re -assessed a
second time, after the goods have passed the border. We agree with the Philippines that su ch an
interpretation would render the CVA worthless, because Members could evade their CVA obligations
simply by having a law enforcement agency re-assess the values initially determined by the customs
administration.1422 We consider that the object and purpose of the covered agreements should guide
us to avoid interpretations that would enable Members to "circumvent" or "evade" their
obligations.1423 It appears to us that Thailand distances itself from the restrictive interpretation of
Article 15.1(a) that would lead to this consequence. In response to a question from the Panel,
Thailand accepted the proposition that if an agency values imported goods for the purpose of
determining the amount of the ad valorem customs duties (and excise tax) that should have been
paid at the time of importation, this would not cease to constitute the valuation of goods "for the
purposes of levying ad valorem customs duties" if it results in a fine.1424
7.672. Based on the foregoing, we conclude that the Public Prosecutor's determination of the
monetary worth or price of imported goods of PMTL for the purpose of determining the amount of
the ad valorem customs duties that should have been levied on goods imported by PMTL, in the
context of an allegation that PMTL declared false prices in order to evade customs duties, suffices to
establish that this valuation was made "for the purposes of levying ad valorem customs duties on
imported goods". Accordingly, we do not agree with Thailand that the Charges fall outside of the
scope and coverage of the CVA because they could only result in criminal fines and penalties and do
not result in the levying of ad valorem customs duties on imported goods.
7.3.5.3.5 The "intention to defraud" aspect of the Charges
7.673. We now turn to Thailand's argument that the CVA is inapplicable to the "customs valuation"
aspect of the Charges as a consequence of the non -applicability of the CVA to the "intention to
defraud" aspect of the Charges.
7.674. Section 27 of the Customs Act makes it a criminal offense to evade the payment of "duties
on Customs", with the intention to "defraud the government" of the "duties" that are "due on such
goods". Thus, there are two constituent elements to the offence under Section 27 of the Customs
Act, and to the allegations made against PMTL in the Charges: (i) the first element of the allegation
is that PMTL did not pay the customs duties due on the imported goods ( actus reus); and (ii) the

1420 The same would be true if Article 15.1(a) included language similar to that found in the Ad Note to
Article III of the GATT 1994, and referred to ad valorem customs duties imposed on imported goods "at the
time or point of importation". In our view, the Public Prosecutor's determination that the amount of the ad
valorem customs duties that were collected from PMTL at the point or time of importation was less than the
amount of ad valorem customs duties that should have been collected from PMTL at the point of importation
would suffice to establish that the Charges value goods for the purposes of levying/collecting ad valorem
customs duties on imported goods.
1423 See footnote 1376 above.
1424 Thailand's response to Panel question No. 105.

second element of the allegation is that PMTL did so with the intention to defraud ( mens rea). We
understand Thailand to argue that even if the Charges contain a "customs valuation" determination,
and even if the CVA applies to the Public Prosecutor notwithstanding that it is not a part of the
"customs administration ", the CVA should be found to be inapplicable to the cust oms valuation
aspect of the Charges as a consequence of the non -applicability of the CVA to the "intention to
defraud" aspect of the Charges.
7.675. In this proceeding, the Philippines does not dispute that the offence under Section 27, and
the allegations conta ined in the Charges, contain these two constituent elements. However, the
Philippines' claims focus only on the first constituent element of the allegation, and in particular the
basis upon which the Public Prosecutor determined that PMTL did not pay the customs duties due on
the imported goods. The Philippines has made no claim or argumentation with regard to the second
element of the offense, i.e. the "intention to defraud".
7.676. Thailand asserts that "the key element" of a violation under Section 27 of the C ustoms Act
is the second constituent element of the offence, i.e. the "intention to defraud " (mens rea).1425
Thailand disagrees with the Philippines that , "for purposes of its claims against the Charges, the
Panel need only consider the aspect of the Charges dealing with goods valuation and can disregard
the element of intent".1426 In this regard, Thailand explains that allegations under Section 27 "have
at their core the element of an intention to defraud the government that is not found nor regulated
in Articles 1 through 7".1427 According to Thailand, "even if the Charges were to qualify as 'customs
valuation', the Charges would still fall outside the scope of the CVA because, as Thailand has argued,
the Charges relate to a criminal accusation that focuses on whet her PM Thailand had the intention
to defraud the government".1428 In Thailand's view, to accept that the actus reus can be separated
from the mens rea "would mean that a criminal judge would see no difference between acts of
murder (intentional homicide) and manslaughter (unintentional homicide)", and it further points out
that for "some crimes, such as theft, the element of intent determines whether the act is unlawful
in the first place".1429
7.677. In our view, it is a general principle that, insofar as a WTO obligation is by its terms applicable
to the particular aspect of a domestic measure being challenged, it does not become inapplicable to
that aspect as a consequence of the same measure containing other aspects that are not regulated
by that WTO obligation. The Appellate Body has confirmed this general principle in the context of
clarifying the applicability of different covered agreements to different aspects of a single measure,
in which it has explained that "the specific aspects" of the measure examined under each agreement
could be different.1430 In that context, the Appellate Body has stated that, i n such situations, "the
focus of the inquiry, and the specific aspects of the measure to be scrutinized, under each
agreement, will be diffe rent because the subjects of the two agreements are different ".1431 In our
view, the Appellate Body's findings in US – 1916 Act further confirm that the same principle applies
in respect of the issue that Thailand raises in this case regarding the element of criminal "intent". In
US – 1916 Act, the measure at issue made it a criminal offense to engage in "dumping" with "the
intent of destroying or injuring" a US industry.1432 The complainants claimed that the 1916 Act was
inconsistent with a series of obligations , including Article VI of the GATT 1994 and Article 18.1 of
the Anti-Dumping Agreement. The United States argued that Article VI of the GATT 1994 does not
"state that its disciplines govern any law based upon the concept of international price
discrimination regardless of any other elements required to be proven under the law".1433 Likewise,
the United States argued that, because Article 18.1 concerned actions against "dumping" while the
1916 Act imposed criminal penalties against "dumping with the intent of destroying or injuring" a
US industry, Article 18.1 did not apply to the US 1916 Act.

1425 Thailand's response to Panel question No. 32(c), p. 28.
1426 Thailand's comments on the Philippines' response to Panel question No. 97(c), p. 30.
1427 Thailand's response to Panel question No. 38(a), p. 34. More generally, see Thailand's response to
Panel question No. 32.
1428 Thailand's response to Panel question No. 47(b), p. 45.
1429 Thailand's comments on the Philippines' response to Panel question No. 97(c), p. 30.
1430 Appellate Body Report, EC – Bananas III, para. 221 (referring to Appellate Body Report, Canada –
Periodicals, p. 19, DSR 1997:I, 449, at p. 465).
1431 Appellate Body Report, Canada – Autos, para. 160.
1432 Panel Report, US – 1916 Act (Japan), paras. 2.1-2.3.
1433 Panel Report, US – 1916 Act (Japan), para. 6.110.

7.678. The panel in US – 1916 Act found that "the existence in the 1916 Act of the additional
requirements referred to by the United States, which are not found in Article VI, does not per se
suffice to make the 1916 Act fall outside the scope of Article VI".1434 The panel found that since
Article 18.1 of the Anti-Dumping Agreement specifies that actions must be taken "in accordance with
the provisions of GATT 1994 as interpreted b y this Agreement ", such a violation automatically
entailed a violation of Article 18.1.1435 The Appellate Body upheld the panel's finding, concluding that
Article 18.1 applied to the 1916 Act because, regardless of the "additional requirement" of intent of
destroying or injuring a US industry, the 1916 Act imposed penalties against conduct that satisfied
the constituent elements of "dumping", as defined by Article VI of the GATT 1994 and the Anti -
Dumping Agreement.1436
7.679. The Appellate Body recalled that "dumping" is defined in Article VI:1 of the GATT 1994 as
conduct "by which products of one country are introduced into the commerce of another country at
less than the normal value of the products ", and that the elements of this definition are further
elaborated in Articles VI:2 and VI:3 of the GATT 1994, and in Article 2 of the Anti -Dumping
Agreement.1437 The Appellate Body referred to the elements of the definition of "dumping" contained
in the relevant WTO provisions as the "constituent elements" of "dumping".1438 In the course of its
analysis, the Appellate Body stated:
We note that the United States places much emphasis on the "intent" requirement of
the 1916 Act, i.e., the stipulation that dumping is "unlawful" when it is:
... done with the intent of destroying or inj uring an industry in the United
States, or of preventing the establishment of an industry in the United
States, or of restraining or monopolizing any part of trade and commerce
in such Articles in the United States.
This requirement of intent to destroy, i njure, or prevent the establishment of an
American industry, or to restrain or monopolize any part of trade, does not affect the
applicability of Article VI of the GATT 1994 to the 1916 Act. As already noted, action
may be taken under the 1916 Act only whe n the constituent elements of dumping are
present. The fact that an importer can only be found to have violated the 1916 Act when
the sales of dumped products in the United States were carried out with a certain intent
does not mean that the actions under the 1916 Act are not "specific action against
dumping". Proof of a requisite intent under the 1916 Act only constitutes an additional
requirement for the imposition of the civil and criminal penalties set out in that Act.
Even if the 1916 Act allowed the i mposition of penalties only if the intent proven were
an intent to monopolize or an intent to restrain trade (i.e., an "antitrust"-type intent),
this would not transform the 1916 Act into a statute which does not provide for "specific
action against dumping", and, thus, would not remove the 1916 Act from the scope of
application of Article VI.1439
7.680. Thailand seeks to distinguish the Appellate Body's findings in US – 1916 Act, regarding the
irrelevance of an additional "intent" requirement in the context of Article 18.1 of the Anti-Dumping
Agreement from the situation in this dispute. First, Thailand submits that the CVA contains no
provision similar to Article 18.1 of the Anti-Dumping Agreement and therefore the Appellate Body's
analysis sheds no light on the scope of application of the CVA. 1440 Second, Thailand submits that,
unlike the US measure at issue in that case, the element of "intent" is inseparable from the actus
reus in the context of Section 27 of the Customs Act.1441
7.681. We agree with Thailand that no provision exists in the CVA that is analogous to Article 18.1
of the Anti -Dumping Agreement, and it may well be that the "silence of the CVA in this regard
confirms Thailand's position that WTO Members are free to impose criminal penalties on customs
fraud".1442 However, that does not mean that the Appellate Body's interpretation of Article 18.1 in

1434 Panel Report, US – 1916 Act (Japan), para. 6.130.
1435 Panel Report, US – 1916 Act (Japan), fn 573.
1436 Appellate Body Report, US – 1916 Act, para. 132.
1437 Appellate Body Report, US – 1916 Act, para. 106.
1438 Appellate Body Report, US – 1916 Act, para. 122.
1439 Appellate Body Report, US – 1916 Act, paras. 131-132. (footnote omitted)
1440 Thailand's comments on the Philippines' response to Panel question No. 97(c), p. 29.
1441 Thailand's comments on the Philippines' response to Panel question No. 97(c), pp. 29-30.
1442 Thailand's comments on the Philippines' response to Panel question No. 97(c), p. 29.

US – 1916 Act does not shed any light on the question of the scope of the CVA, as put before this
Panel.
7.682. In essence, the Appellate Body's finding in US – 1916 Act appears to constitute an application
of the more general principle that , insofar as WTO obligations by their terms apply to a particular
aspect of a measure being challenged, the fact that the same measure being challenged contains
other aspects that are not regulated by those WTO obligations does not remove the whole measure
from the scope of application of those WTO obligations. The Appellate Body's analysis in US – 1916
Act is instructive because, in that dispute, as in this dispute, the measure at issue was a criminal
law measure, and the aspect of the measure that was not regulated by the WTO obligations was the
constituent element of the criminal offense regarding "intent". The Appellate Body's analysis in US
– 1916 Act also necessarily implies that , from the point of view of WTO law, the criminal "intent"
(mens rea) element of the offense is separable from the element and aspect of the Charges being
challenged by the Philippines, i.e. the basis upon which the Public Prosecutor determined that PMTL
did not pay the customs duties due on the imported goods (the actus reus).
7.683. For these reasons, we find that the obligations in Articles 1 to 7 of the CVA apply to the
customs valuation aspect of the Charges, despite the fact that the measure at issue includes a n
additional aspect, i.e. the "intention to defraud ". Accordingly, we do not agree with Thailand that
the CVA is inapplicable to the customs valuation aspect of the Charges as a consequence of the non-
applicability of the CVA to the "intention to defraud" aspect of the Charges.
7.3.5.4 Conclusion
7.684. Based upon the findings above, the Panel concludes that the obligations in Articles 1 to 7 of
the CVA apply to the Charges.
7.3.6 Consistency of the Charges with CVA disciplines
7.3.6.1 Introduction
7.685. In its first written submission, the Philippines claims that the Charges do not provide a valid
basis for the rejection of PMTL's transaction values and therefore violate Article s 1.1 and 1.2(a) ,
second sentence, of the CVA. In support of this claim, the Philippines advances three argumen ts.
First, the Philippines argues that the sole ground specified in the Charges – a comparison of PMTL's
transaction values with King Power's duty -free purchase prices – is not a valid basis to reject
transaction values.1443 Second, the Philippines argues that the arbitrary exclusion of 18 entries from
the Charges with circumstances of sale that were identical or very similar to the circumstances of
sale of the 272 entries included in the Charges shows that the Public Prosecutor failed to undertake
a rigorous and critical examination of the circumstances of sale. 1444 In addition, the Philippines
argues that three additional grounds mentioned in the April 2009 Memorandum of Allegation provide
no basis under WTO law to reject PMTL's transaction values. 1445 The Philippines submits that , for
these reasons, the Public Prosecutor's rejection of PMTL's transaction values in the Charges is
inconsistent with Article 1.2(a) and, consequently, Article 1.1 of the CVA. Additionally, the Philippines
claims that the Public Prosecutor's determination of a revised customs value, by concluding that the
customs values of PMTL's imported cigarettes are equal to King Power's prices, was inconsistent with
Articles 2.1 and/or 3.1 of the CVA.1446
7.686. In its written submissions, Thailand has advanced extensive arguments that the Charges are
outside the scope of this proceeding by virtue of the preclusion doctrine and the absence of a close
nexus with the declared measures taken to comply, that they are not "ripe" for adjudication, and
that Articles 1 to 3 of the CVA are not applicable to the Charges. Furthermore, in the context of
arguing that Articles 1 to 3 of the CVA are not applicable to the Charges, Thailand has vigorously
argued that "the Charges do not determine or even attempt to determine what should be the 'true'
or 'correct' or 'actual' customs value " for PMTL's goods ",1447 and that the Philippines' entire
argumentation concerning the Charges rests on the "defective foundation " that "the Charges

1443 Philippines' first written submission, paras. 580-628.
1444 Philippines' first written submission, paras. 629-640.
1445 Philippines' first written submission, paras. 641-667.
1446 Philippines' first written submission, paras. 670-681.
1447 Thailand's response to Panel question No. 32(b), p. 28.

represent a determination that the customs value of the goods at issue is the price charged by Philip
Morris to King Power, a duty-free operator in Thailand".1448 Thailand also argues that, if the Charges
are inconsistent with the CVA, any such inconsistency is justified under Article XX of the GATT 1994.
7.687. In the light of the foregoing, and in particular Thailand's arguments regarding the
applicability of the CVA to the Charges, it would be incorrect to state that Thailand concedes that
the Charges are inconsistent with Articles 1 to 3 of the CVA. 1449 However, Thailand's arguments in
this proceeding move from the applicability of Articles 1 to 3 of the CVA directly to its defence under
Article XX of the GATT 1994. While Thailand does deny that the Charges determine the customs
value of PMTL's imported goods on the basis of King Power's prices, Thailand does not advance any
argument to the effect that the rejection of PMTL's transaction values on that basis, and/or the
determination of an alternative customs value on the basis of King Power's prices, are consisten t
with Articles 1 to 3 of the CVA. Additionally, Thailand's first and second written submissions contain
no response to either the Philippines' argument concerning the arbitrary exclusion of 18 entries from
the Charges with circumstances of sale that were identical or very similar to the circumstances of
sale of the 272 entries included in the Charges, or to the Philippines' arguments regarding the
grounds contained in the April 2009 Memorandum of Allegation.
7.688. In accordance with Article 11 of the DSU, it is well established that panels presented with
so-called "uncontested claims" must undertake their own "objective assessment" of the matter. In
US – Shrimp (Ecuador), the panel stated that "the fact that the United States does not contest
Ecuador's claims is not a sufficient basis for us to summarily conclude that Ecuador's claims are well-
founded. Rather, we can only rule in favour of Ecuador if we are satisfied that Ecuador has made a
prima facie case."1450 In US – Shrimp (Thailand) / US – Customs Bond Directive, the panel stated
that "notwithstanding the fact that the United States is not seeking to refute Thailand's claims, we
must satisfy ourselves that Thailand has established a prima facie case of violation".1451 To ensure
that we are in a position to make an objective assessment of the aspects that are not contested by
Thailand, we have put several questions to both the Philippines and Thailand in relation to several
different issues.1452 We proceed to consider whether the Philippines has made a prima facie case
that the Charges are inconsistent with Articles 1.1, 1.2(a), 2.1 or 3.1 of the CVA.
7.3.6.2 Analysis by the Panel
7.3.6.2.1 General considerations
7.689. We recall that the nature of the obligations under Articles 1.1 and 1.2(a), second sentence,
regarding the obligation to undertake a proper examination of the circumstances of sale, is discussed
in detail in the context of our analysis of the Philippines' claims in respect of the November 2012
BoA Ruling. We do not repeat that analysis here.1453
7.690. In cases where the authority concludes that the importer's transaction values are not
acceptable, it must then proceed to the second step of determining an alternative customs value in
accordance with the detailed disciplin es in Articles 2 to 7 of the CVA. Articles 2 and 3 of the CVA
provide as follows:
Article 2
1. (a) If the customs value of the imported goods cannot be determined under
the provisions of Article 1, the customs value shall be the transaction value of
identical goods sold for export to the same country of importation and exported
at or about the same time as the goods being valued.
(b) In applying this Article, the transaction value of identical goods in a sale at
the same commercial level and in subst antially the same quantity as the goods
being valued shall be used to determine the customs value. Where no such sale
is found, the transaction value of identical goods sold at a different commercial

1448 Thailand's opening statement at the meeting of the Panel, para. 21.
1449 Thailand's second written submission, paras. 319-323.
1450 Panel Report, US – Shrimp (Ecuador), para. 7.9.
1451 Panel Report, US – Shrimp (Thailand) / US – Customs Bond Directive, para. 7.21.
1452 See Panel question Nos. 49-53, 70(a) and 107-108.
1453 See Section 7.2.2.3.1 above.

level and/or in different quantities, adjusted to take a ccount of differences
attributable to commercial level and/or to quantity , shall be used, provided that
such adjustments can be made on the basis of demonstrated evidence which
clearly establishes the reasonableness and accuracy of the adjustment , whether
the adjustment leads to an increase or a decrease in the value.
 …
Article 3
1. (a) If the customs value of the imported goods cannot be determined under
the provisions of Articles 1 and 2, the customs value shall be the transaction value
of similar goods sold for export to the same country of importation and exported
at or about the same time as the goods being valued.
(b) In applying this Article, the transaction value of similar goods in a sale at
the same commercial level and in substantially the same quantity as the goods
being valued shall be used to determine the customs value. Where no such sale
is found, the transaction value of similar goods sold at a different commercial
level and/or in different quantities, adjusted to take account of differenc es
attributable to commercial level and/or to quantity , shall be used, provided that
such adjustments can be made on the basis of demonstrated evidence which
clearly establishes the reasonableness and accuracy of the adjustment , whether
the adjustment leads to an increase or a decrease in the value.1454
7.691. By its terms, Article 2.1(a) of the CVA provides an alternative basis for customs valuation in
the event that the transaction value is rejected in accordance with Article s 1.1 and 1.2(a). Under
Article 2.1(a), the alternative value to be used is "the transaction value of identical goods sold for
export to the same country of importation and exported at or about the same time as the goods
being valued". Article 3.1(a) provides that if the alternative value cannot be determined based on a
comparison under Article 2 (i.e. if there are no "identical goods"), then the alternative value to be
used is "the transaction value of similar goods".1455 These two provisions are very similar, except
that Article 2 applies to valuation using the transaction value of identical goods, and Article 3 applies
to valuation using the transaction value of similar goods.
7.692. Article 15.2 of the CVA defines "identical goods" and "similar goods" for customs valuation
purposes, and these definitions apply to Articles 2 and 3 of the CVA. Article 15.2 reads in relevant
part:
(a) "identical goods" means goods which are the same in all respects, including physical
characteristics, quality and reputation. …

(b) "similar goods " means goods which, although not alike in all respects, have like
characteristics and like component materials which enable them to perform the same
functions and to be commercially interchangeable.

…

(d) goods shall not be regarded as "identical goods" or "similar goods" unless they were
produced in the same country as the goods being valued.

7.693. Paragraph 4 of the respective Interpretative Notes to Articles 2 and 3 further provides that
"the transaction value of identical [or similar] imported goods means a customs value … which has
already been accepted under Article 1". Additionally, Articles 2.1(b) and 3.1(b) each require that the
transaction value of identical or similar imported goods be taken from a sale "at the same commercial
level and in substantially the same quantities " as the goods being valued. When there is no such
sale, the transaction value of the identical or si milar goods must be adjusted "on the basis of
demonstrated evidence which clearly establishes the reasonableness and accuracy of the
adjustment". Paragraph 5 of the Interpretative Notes to each of these provisions explains that, if

1454 Emphasis added.
1455 Emphasis added.

there is no "objective" basis to make an adjustment, the proposed comparison cannot be
undertaken, and the goods must be valued in a different way.
7.3.6.2.2 Claim under Articles 1.1 and 1.2(a), second sentence, of the CVA
7.3.6.2.2.1 Introduction
7.694. We proceed to consider whether the Philippines has m ade a prima facie case in support of
its claim that the Charges violate Article s 1.1 and 1.2(a) by rejecting PMTL's transaction values
without any valid basis. The Philippines argues that the rejection of PMTL's transaction values is
invalid and inconsiste nt with Article 1 because it is based on: (i) an invalid comparison with King
Power's prices; (ii) the arbitrary inclusion/exclusion of entries with identical circumstances of sale;
and (iii) the other invalid grounds referred to in the April 2009 Memorand um of Allegation, and
reiterated in DSI press releases and in Senate testimony. 1456 The Philippines also argues that
Thailand "repeatedly concedes that the Charges reject the declared transaction [] values", and that
Thailand admits that the Public Prosecutor's determination "necessarily implies that the declared
value is incorrect and not the correct value".1457
7.3.6.2.2.2 The comparison with King Power's prices
7.695. The Philippines considers that the sole basis in the Charge s for the rejection of the
transaction values is a comparison of King Power's prices with PMTL's transaction values. 1458 The
Philippines explains that the Charges allege that PMTL's transaction values are a "false price …
contrary to the actual price", and that the Annex to the Charges indicates that the "actual customs
price" consists of King Power's prices.1459 The Philippines further points out that the "Annex provides
a precise numerical comparison between PM Thailand's transaction values and King Power's dut y-
free prices, with the stated amount of the underpayment of duties and taxes based on the precise
difference between the two."1460 The Philippines also points to statements of Thai customs officials
alleging that PMTL had made false declarations because its transaction values were different to the
prices of King Power.1461
7.696. The Philippines recalls its characterization of the legal standard under Article 1.2(a) of the
CVA, as described in respect of its claims regarding the BoA Ruling.1462 The Philippines adds to that
characterization its understanding that Article 1.2(a) imposes specific requirements on the use of a
benchmark price to be used for purposes of a comparison.1463 Specifically, the Philippines contends
that, under Article 1.2(a), second sentence, when conduc ting an examination of the circumstances
of sale through a comparison of the declared transaction value with a benchmark price, the
benchmark price must be a customs value that the customs authority has previously approved,
either in the form of a transaction value that has been accepted by the customs authority, or in the
form of a customs value determined by the customs authority in accordance with Articles 2 to 7 of
the CVA.1464
7.697. The Philippines alleges that a comparison between King Power's prices and PMTL's declared
transaction values is not a valid basis to reject transaction values, under the requirements of Article
1.2(a) of the CVA.1465 The Philippines argues that the King Power comparison is invalid because: (i)
King Power's prices do not comprise customs values accepted by the Customs Department; and (ii)
the comparison fails to respect the "principles of comparability", because King Power's cigarettes are
not sufficiently comparable to PMTL's cigarettes, and the comparison fails to account for important
differences between PMTL and King Power. The Philippines also highlights that a comparison of King

1456 Philippines' first written submission, paras. 576-669.
1457 Philippines' opening statement at the meeting of the Panel, para. 114.
1461 Philippines' first written submission, para. 584 (referring to The Criminal Court, Charges, Case Black
No. Or. 185/2559, 18 January 2016 (English translation), (Exhibit PHL-1-B); and Senate Committee on Justice
and Police Affairs, Report on Review and Study of Investigation into and Consideration of Case Concerning
Actual or Attempted Tax Evasion by PMTL et al., 10 October 2013 (English translation), (Exhibit PHL-87-B)).
1462 Philippines' first written submission, paras. 556-575.
1463 Philippines' first written submission, paras. 561-565.
1464 Philippines' first written submission, paras. 561-565.
1465 Philippines' first written submission, paras. 585-627.

Power's prices to PMTL's prices, for the purpose of rejecting the declared transaction value, had
previously been considered and rejected by the WCO, the Thai Customs Department, and the Public
Prosecutor itself.1466
7.698. On its first point, the Philippines notes that no customs value has been determined for King
Power's cigarettes, because King Power sells its cigarettes in duty -free shops in which the goods
have not "formally cleared Thai customs or entered Thailand".1467 The Philippines explains that these
cigarettes would only have been valued by the Thai Customs Department upon entry into Thailand,
and that since King Power's cigarettes were sold to "duty-free consumers", they may never have
entered Thailand. Furthermore, any cigarettes that did enter Thailand would have been valued on
the basis of the price paid by the end consumer to King Power, and not the price paid by King Power
for the cigarettes.1468 Since King Power's purchase prices were not accepted by Thailand for customs
valuation purposes, the Philippines argues that Article 1.2(a) precludes their use as a benchmark
price.1469
7.699. On its second point, the Philippines highlights that King Power's cigare ttes are produced in
Malaysia, whereas PMTL's cigarettes are produced in the Philippines, and thus the cigarettes of the
two companies are not identical or similar goods, within the meaning of the CVA. 1470 Based on its
characterization of the legal standard u nder Article 1.2(a) of the CVA, the Philippines asserts that
such goods are not sufficiently comparable for the purposes of establishing a benchmark to compare
declared transaction values under Article 1.2(a), because they were not produced in the same
country.1471
7.700. The Philippines further elaborates that Thailand also failed to account for significant
differences between King Power and PMTL, including the incidence of fiscal charges on PMTL's
cigarettes.1472 The Philippines notes that PMTL's cigarettes are subject to fiscal charges at "each step
in the supply chain ", whereas King Power's cigarettes, being in the "duty-free distribution chain ",
are not subject to customs duties or internal taxes at any point in the supply chain. 1473 In the
Philippines' view, "[m]oving backwards through the supply chain, the net sales revenue at each step
in the duty -free chain is higher, because there is more revenue to allocate among the different
actors"1474, with the consequence that net revenue at each step of the duty -free supply ch ain is
higher than in the duty -paid supply chain.1475 The Philippines explains that if the customs value of
PMTL's cigarettes was equivalent to King Power's prices, the final retail price would be prohibitively
expensive, and retailers would have been legally prohibited from selling at that price, resulting in
retailers failing to recover the excise tax on the cigarettes. 1476 Additionally, the Philippines asserts
that, had the customs value been King Power's purchase price, as alleged in the Charges, the retail
price would have been "more than 2.5 times the retail selling price at the time ", to recoup the cost
of goods sold plus applicable duties and taxes on the uplifted customs value. 1477 The Philippines
indicates that t he retail price would also have been 40% higher than the "the highest maximum
retail selling price for any brand in the Thai market."1478
7.701. Additionally, the Philippines asserts that Thailand failed to account for differences in
commercial levels and sales volumes between King Power and PMTL. 1479 Regarding different
commercial levels, the Philippines asserts that the King Power comparison erroneously compares the
sales price in a manufacturer-distributor transaction (in the case of PMTL) with the sales price in a
distributor-retailer transaction (in the case of King Power).1480 The Philippines notes that "[a]t each

1466 Philippines' first written submission, paras. 587 and 621-627 (referring to Exhibits PHL110; and
PHL 87-B).
1469 Philippines' first written submission, paras. 592-593.
1470 Philippines' first written submission, paras. 596-603.
1471 Philippines' first written submission, paras. 597-603.
1472 Philippines' first written submission, paras. 604-616.
1474 Philippines' response to Panel question No. 49, para. 362.
1475 Philippines' first written submission, paras. 609-610. The Philippines' elaborates in its response to
Panel question number 49.
1476 Philippines' first written submission, paras. 612-614.
1479 Philippines' first written submission, paras. 617-620.

stage of the supply chain, the selling price increases to account for the costs and profits of the party
at that stage of the supply chain".1481 Regarding different sales volumes, the Philippines asserts that
in the relevant time -period, PMTL purchased approximately 8 billion cigarettes annually, whereas
King Power purchased 170 million cigarettes (or roughly 2% of PMTL's volume).1482
7.702. As reviewed in detail in the previous section of our Report regarding the applicability of the
CVA to the Charges, Thailand denies that the Charges determine the customs value of PMTL's
imported goods on the basis of King Power's prices. However, as indicated above, Thailand does not
advance any argument to the effect that the rejection of PMTL's transaction values on that basis
would be consistent with Articles 1 to 3 of the CVA.
7.703. Turning to assess whether the Philippines has made a prima facie case, we con sider that
there is ample context in the CVA indicating that comparisons should, in principle, be conducted with
comparable goods that have been sold for export to the same country of importation1483 and which
have been previously valued by the customs administration.1484 As a first point, we note that, under
Article 15.2(a) of the CVA, identical or similar goods are physically similar to the goods being valued.
However, the mere fact that goods have a close physical similarity is not sufficient to establish that
they are identical or similar under the CVA. Rather, other considerations are relevant in finding that
goods are identical or similar, such as whether the goods were sold at the same level of trade. We
also note that under Article 15.2(d) of the CVA, "goods shall not be regarded as 'identical goods' or
'similar goods' unless they were produced in the same country as the goods being valued ". To the
extent, therefore, that the Memorandum of Allegation suggests that King Power 's cigarettes are
identical or similar goods solely on the basis that they have "the same overall quality, proportions
and ingredients" and the same import certification (Form YorSor. 3), this conclusion is not sufficient
to establish that they are identical or similar under the CVA. Finally, we recall our findings above
that, when conducting an examination of the circumstances of sale, differences between things being
compared should be taken into account.1485 We also highlighted above that such differences include
differences in commercial levels and sales volumes.1486 We further consider that a relevant difference
to be taken into account would be the impact of fiscal duties or charges imposed on the production
of a particular good, particularly where the production of the comparator good is not subject to any
such duties or charges.1487
7.704. In our view, the Philippines has demonstrated that the cigarettes sold by King Power were
not sold for export to Thailand, and were not previously valued by the customs administration, since:
King Power's duty-free shops are a form of 'bonded warehouse' – a storage area for
goods that have not formally cleared Thai customs or entered Thailand. Goods inside a
bonded warehouse remain in the custody of the Customs Department … With respect
to the transactions used for benchmark purposes, King Power never withdrew the
cigarettes in question from the bonded warehouse for entry into free circulation in
Thailand. Instead, it sold the goods to duty-free consumers, many of whom were leaving
Thailand for a third country.1488

1483 We refer to the text of, and interpretative notes to, Articles 1.1, 1.2(b), 2.1(a), 3.1(a), 5.1(a), 5.2,
6.1(b) and 7.2(a) of the CVA.
1484 We refer to the text of, and interpretative notes to, Articles 1.2(b), 2.1 and 3.1 of the CVA.
1485 See paragraph 7.136. above.
1486 See footnotes 388 and 389 above.
1487 We consider that the differential impact of fiscal charges or duties, in particular in a situation where
the production of a comparator good is not subject to any such charges or duties, is directly relevant to a
comparison of prices for the purpose of determining whether the prices paid by an importer are consistent with
the prices of comparable goods. We note in this regard that a number of provisions of the CVA itself, including
Articles 1.2(b), 2 and 3 of the CVA, suggest a requirement to adjust for factors that affect price-comparability.
See footnote 388 above. In addition, to the extent that the Anti-Dumping Agreement may provide relevant
context for interpreting the CVA, we note that Article 2.4 of the Anti-Dumping Agreement requires that
allowances must be made for differences affecting comparability, including differences in "taxation".
1488 Philippines' first written submission, paras. 590-591 (referring to Customs Notification No. 20-2549,
27 March 2006 (English translation), (Exhibit PHL-106-B), Sections 6 and 8a, regarding Process and Practice in
relation to Duty-Free Shop; Customs Act B.E. 2469 (1926) (as amended to (No. 22) B.E. 2557 (2014))
(English translation), (Exhibit PHL-34-B), Section 40.

7.705. The Philippines has also explained that the cigarettes sold by King Power were not produced
in the Philippines, but rather Malaysia,1489 and that King Power's cigarettes are produced in a "duty-
free supply chain ", in which the normal fiscal duties applicable in a normal production chain of
cigarettes (for instance, the fiscal charges applicable in the production of PMTL's cigarettes) are not
applicable.1490 We further consider that the Philippines has demonstrated that King Power's prices
are for transactions taking place between a distributor and a retailer, whereas , by contrast, PMTL's
transaction values are for transactions between a manufacturer and distributor.1491 Additionally, the
Philippines has demonstrated that the volume of imports by PMTL was substantially larger than King
Power's cigarette purchases.1492 It is uncontested that in conducting its comparison of PMTL's prices
with those of King Power, the Public Prosecutor failed to account for any such differences.
7.706. We therefore consider that the Philippines has adequately demonstrated that the prices paid
by King Power for its cigarettes purchases were not per se comparable to the prices paid by PMTL,
and that the Public Prosecutor failed to account for important and relevant differences between PMTL
and King Power. On this basis, we consider that the Philippines has made a prima facie case that the
King Power comparison is not apt to reveal whether the relationship between PMTL and PMPMI
influenced the price paid by PMTL. Furthermore, we note that, a s Thailand also observes, in the
context of the BoA Ruling of 16 November 2012, the BoA specifically excluded King Power from the
industry comparator group on the grounds that it was a duty-free operator.1493
7.3.6.2.2.3 The arbitrary inclusion/exclusion of entries
7.707. The Charges cover 272 entries of Marlboro and L&M cigarettes imported from the Philippines
between July 2003 and June 2006. While the DSI had recommended that PMTL be prosecuted with
respect to 292 entries1494, the Public Prosecutor decided to exclude 20 of the 2 92 entries from the
Charges, to arrive at a total of 272 entries subject to the Charges. As a result, the Charges cover a
continuous sequence of 272 entries, running from July 2003 to June 2006. The 20 entries excluded
from the Charges included 18 entries that were among the 118 entries covered by the DSB's
recommendations and rulings in the original proceeding.1495 The Philippines argues that the exclusion
of the 18 "WTO" entries from the Charges was arbitrary, and therefore inconsistent with the
obligation u nder Article 1.2(a) of the CVA to conduct a rigorous and critical examination of the
circumstances of sale.1496
7.708. The Philippines insists that the Public Prosecutor is required, under Article 1.2(a), to "reach
the same decision with respect to exactly the same transaction values, for the same brands of
cigarettes, imported by the same importer, from the same supplier, under the same supply
contract."1497 The Philippines notes that the Charges "cover a continuous sequence of 272 entries
[of cigarettes], running from July 2003 to June 2006."1498 The Philippines points out that the Public
Prosecutor removed from the Charges 18 entries that continue the "same temporal sequence without

1489 See Philippines' first written submission, para. 601 (referring to Manager Online, "'Public Prosecutor'
indicated not to prosecute Philip [Morris], reiterated 2 government agencies confirmed no offence found", 22
March 2011 (English translation), available at:
http://manager.co.th/Crime/ViewNews.aspx?NewsID=9540000036517 (last accessed 19 January 2017),
(Exhibit PHL-91-B)).
1490 Philippines' first written submission, paras. 606-616 (referring to PMTL, Comparison calculation:
King Power's duty free prices vs. PMTL's duty-paid prices, (Exhibit PHL-7); PMTL's PowerPoint presentation at
meeting with the Customs Department of 7 August 2006 (English translation), (Exhibit PHL-107-B); Statement
by Georges Farah, PM World Trade, 9 November 2010, (Exhibit PHL-108). See also Philippines' response to
Panel question No. 49.
1491 Philippines' first written submission, paras. 617-619.
1492 Philippines' first written submission, para. 620 (referring to PMTL Products arrival 2003-2006,
(Exhibit PHL-109); PMTL's PowerPoint presentation at meeting with the Customs Department of 7 August 2006
(English translation), (Exhibit PHL-107-B)).
1493 Thailand's second written submission, para. 2.45. Thailand explains that the duty-free operators
that were excluded from the industry comparator group included King Power, King Power Duty Free, and
Bangkok Airways.
1494 See DSI, Memorandum of Allegation, 9 April 2009 (English translation), (Exhibit PHL-17-B), p. 1.
1495 Philippines' first written submission, paras. 496-497. The Public Prosecutor identified one entry that
had been double-counted by the DSI, and one entry that did not pertain to Marlboro or L&M cigarettes.
1496 Philippines' first written submission, paras. 629-642.

interruption", starting in September 2006 and ending in February 2007. 1499 Specifically, the
Philippines notes that the circumstances of sale for the last 161 of the 272 entries in the Charges
are identical to the circumstances of sale for the 18 excluded entries, and the circumstances of sale
for the other 111 entries in the Charges were "very similar" to the 18 entries.1500 The Philippines
contends that, by including the 2 72 entries and rejecting the 18 entries, the Public Prosecutor has
essentially considered that PMTL acted criminally in some transactions, and did not act criminally in
other transactions that involved the same circumstances of sale.1501
7.709. The Philippines explains that the Public Prosecutor justified its decision on the grounds that
the BoA had accepted the transaction values for the 18 entries. 1502 However, given that these
transactions had the same circumstances of sale as the other transactions, the Philippines notes that
the Public Prosecutor has not explained why it deferred to the BoA on the 18, but not also the 272.1503
Furthermore, the Philippines emphasizes that there is arbitrariness in the Public Prosecutor's alleged
deference to the BoA but not to the Customs Department, which had itself accepted the declared
transaction values for the 272 entries in the Charges.1504
7.710. In the context of its arguments that the Charges are outside the scope of a compliance
proceeding pursuant to Article 21.5, Thailand stated that "it is within the prerogative of the Public
Prosecutor to rectify the number of entries it presents to the Court ".1505 In response to a question
from the Panel inviting Thailand to respond to the Philippines' argument, Thailand recalls that "[a]s
the declared value for these entries had been accepted by the BoA " in its September 2012 Ruling,
"Thailand was seeking to achieve closure with respect to the entries subject to the origin al panel's
ruling".1506 In addition, Thailand recalls its position that "the requirements under Article 1.2(a) of
the CVA – as well as the other provisions of the CVA invoked by the Philippines - do not govern the
conduct of the domestic court proceedings at issue, including the Public Prosecutor's alleged arbitrary
distinction between the 18 'WTO' and the 272 entries in the Charges ", and its position that "the
Public Prosecutor's actions at issue in the present dispute do not constitute a customs valuation
decision subject to the provisions of the CVA invoked by the Philippines".1507
7.711. It is essentially uncontested that the Public Prosecutor accepted the declared transaction
value for one set of imports, and rejected the declared transaction for another set of good s, when
the actual circumstances of sale were identical for bo th sets of goods. T he preamble to the CVA
recognizes the "need for a fair, uniform and neutral system for the valuation of goods for customs
purposes that precludes the use of arbitrary or fictitious customs values".1508 In our view, the stated
objective of the CVA to achieve a fair, uniform and neutral system that precludes the use of arbitrary
customs values informs the substantive requirements of the CVA. Indeed, the explicit objectives of
the CVA would be frustrated if a customs authority's margin of discretion entitled it to simultaneously
both accept and reject the declared transaction value, when examining imports that have the same
transaction values, for the same brands of cigarettes, imported by the same importer , from the
same supplier, under the same supply contract. 1509 We do not consider that the imposition of such
a consistency requirement precludes a customs authority from altering its methodologies for either
examining the circumstances of sale or determining a revised customs value, over time, as a
consequence of changed circumstances or for any other justifiable reason.
7.712. Applying this to the present dispute, we note that Thailand has offered no principled basis
for the Public Prosecutor's differential treatment of entries in identical circumstances (i.e. its decision

1500 Philippines' first written submission, para. 634. For the 161 entries, the Philippines notes that the
"same importer imported the same brands of cigarettes, from the same supplier, under the same supply
contract, with exactly the same values." For the 111 entries, the Philippines explains that the only difference is
that the transaction values were "agreed in US dollars and converted to Thai baht on importation" resulting in
the prices being different to the other entries. (See Philippines' first written submission, fn 397 (referring to
Letter from PMTL to the Director of Customs Bonded Warehouse, 30 August 2004, with attachments dated
23 and 27 August 2004 (English translation), (Exhibit PHL-112-B)))
1503 Philippines' first written submission, paras. 636-637.
1505 Thailand's first written submission, para. 3.16.
1506 Thailand's response to Panel question No. 52, p. 47.
1507 Thailand's response to Panel question No. 52, p. 47.
1508 Fourth recital of the preamble to the CVA.
1509 Philippines' first written submission, para. 637. (emphasis omitted)

to reject the transaction values in respect of the 272 entries subject to the Charges, and its decision
to defer to the BoA's acceptance of the declared transaction values in respect of the 18 ent ries
subject to the BoA's decision) from the point of view of customs valuation, and the obligation to
conduct a proper examination of the circumstances of sale. We therefore consider that this reflects
a degree of arbitrariness that casts further doubt on the extent to which the Public Prosecutor
engaged in a proper examination of the circumstances of sale.
7.3.6.2.2.4 The additional grounds for rejecting PMTL's transaction values
7.713. The Philippines notes that there are three grounds for rejecting PMTL's declared transaction
value that do not appear in the Charges, but that did appear in the Memorandum of Allegation of
9 April 2009.1510 The additional grounds are: (i) a comparison with cigarette prices in third country
markets; (ii) the assertion that PMTL's cigarette price s in Thailand have remained constant for
several years, despite rising costs; and (iii) an allegation that PMTL made unspecified payments of
"inaccurate expenses" to unspecified related parties.1511
7.714. The Philippines submits that the three additional grounds c ontained in the Memorandum of
Allegation of 9 April 2009 are invalid for the following reasons. First, the Philippines argues that a
comparison with third country prices is not a valid basis to reject the declared transaction values.1512
The Philippines recal ls that a rejection of transaction value must be supported by "substantive
reasons that are linked to the evidence submitted".1513 In the Philippines' view, no details have been
provided on any third country price comparisons and the "piecemeal and inconsistent descriptions
given of pricing comparisons, given in different documents (some official and others not), do not
provide valid 'grounds' for rejecting the transaction values under Article 1.2(a)".1514 Additionally, the
Philippines recalls that , in a comparis on with benchmark prices, Article 1.2(a) requires that the
benchmark prices must be for goods sold for export to Thailand, and that Article 7.2(c) of the CVA
expressly prohibits the use of domestic prices in the country of exportation, which implies that other
third country prices also may not be used. 1515 The Philippines notes that issues such as different
commercial levels of the transactions, and the constituent elements of the prices, are not accounted
for in a third-country price comparison.1516
7.715. Second, the Philippines argues that the assertion that PMTL's cigarette prices in Thailand
remained constant despite rising costs is not a valid basis to reject the declared transaction
values.1517 The Philippines notes that no details have been provided. 1518 The Philippine s further
considers that the assertion that costs of production have increased is "particularly flimsy", since it
is based on an inspection that took place in 1999, when PMTL imported its cigarettes from Indonesia
and not the Philippines, and thus is not a valid basis for making conclusions on sales made between
2003 and 2006.1519 Additionally, the Philippines points out that PMTL has testified that cost increases
resulting from increased wages have been "compensated by other factors that have reduced costs,
such as improvements in productivity and economies of scale" as well as falling "transport costs".1520
The Philippines also declares that PMTL uses a "resale minus" pricing method that is consistent with
traditional pricing practices in the industry, and that the prices of TTM, PMTL's main competitor in
the Thai market, were also stable for a long period of time.1521 Finally, with respect to the allegation
that PMTL's transaction values should have fluctuated in accordance with changes in the USD -THB
exchange rate, the Philippines notes that until 1 September 2004 the transaction values did
fluctuate, since PMTL purch ased cigarettes in USD. 1522 Furthermore, the Philippines explains that,

1512 Philippines' first written submission, paras. 643-651.
1513 Philippines' first written submission, para. 646 (quoting Panel Report, Thailand – Cigarettes
(Philippines), para. 7.200).
1514 Philippines' first written submission, para. 646 (referring to DSI, Press Release, 17 August 2011
(English translation), (Exhibit PHL-93-B); and Senate Committee on Justice and Police Affairs, Report on
Review and Study of Investigation into and Consideration of Case Concerning Actual or Attempted Tax Evasion
by PMTL et al., 10 October 2013 (English translation), (Exhibit PHL-87-B)).
1515 Philippines' first written submission, paras. 647-649.
1516 Philippines' first written submission, paras. 650-651.
1517 Philippines' first written submission, paras. 652-664.
1519 Philippines' first written submission, paras. 655-656.
1521 Philippines' first written submission, paras. 658-659.

after 1 September 2004, PMTL purchased cigarettes in THB, and the price in THB therefore no longer
fluctuated, and from that point on the supplier (PMPMI) bore any risk of fluctuations in the USD-THB
exchange rate.1523
7.716. Third, the Philippines argues that the allegation that PMTL made inaccurate financial
transfers to related parties is not supported by any explanation or evidence, amounts to nothing
more than speculation, and is therefore an invalid basis for rejecting the declared transaction value,
under the requirements of Article 1.2(a) of the CVA.1524 The Philippines notes that the MoA devotes
a single sentence to this point, asserting that there is "evidence of transfer of inaccurate expenses
to related persons". It further notes that no details are given of these transfers and, again, the Public
Prosecutor did not include this allegation in the Charges; thus, the Philippines submits that it is again
unclear if the Public Prosecutor will use these unstated grounds in support of the Charges. 1525 The
Philippines submits that, in the absence of any further details, the single sentence included in the
MoA does not provide valid "grounds" for rejecting the transaction values under Article 1.2(a). The
Philippines recalls the original panel's view that a rejection of the transaction value "needs to be
supported with substantive reasons that are linked to the evidence submitted ".1526 The Philippines
observes that, although the DSI's single sentence refers v aguely to "evidence", it fails to identify
any relevant evidence before the authority, and argues that a vague reference to unspecified and
unsubstantiated "evidence" is substantively no different than no reference at all to evidence. The
Philippines submits that the existence of such alleged "evidence" cannot be confirmed objectively,
let alone contested, and it amounts to nothing more than a speculative assertion that does not
warrant the rejection of the transaction values in the Charges.1527
7.717. In the context of its arguments that the Charges are outside the scope of a compliance
proceeding pursuant to Article 21.5, Thailand stated that "[a]lthough the comparison with the prices
of King Power may have played a role in the suspicion of customs fraud against PM Thailand, it is
not the sole ground for doubting the accuracy of the customs value declared by PM Thailand ", and
that the "DSI identified in the 2009 Memorandum of Allegation several other grounds for doubting
the declared customs value."1528 Otherwise, Thailand's first and second written submissions contain
no response to the Philippines' arguments regarding the grounds contained in the April 2009
Memorandum of Allegation. In response to a question from the Panel, Thailand states that it "can
confirm that the grounds mentioned in the 2009 Memorandum of Allegations are among the grounds
that the Public Prosecutor considered in order to substantiate the element of 'intention to defraud'
for purposes of demonstrating to the Criminal Court an offence under Section 27 of the Customs
Act".1529 In response to a follow-up question, Thailand clarifies that although "the Memorandum of
Allegation contains several grounds for doubting the declared customs value ", this "should not be
interpreted as Thailand accepting that the Memorandum of Allegation contains grounds for rejecting
the transaction value in the context of a customs value determination".1530
7.718. We recall that the Philippines' essential claim is that the Public Prosecutor's rejection of the
declared transaction value in the Charges was inconsistent with Article 1.1 of the CVA, because the
Public Prosecutor lacked a valid basis to reject the declared transaction value. The Philippines points
out that the "sole ground specified in the Charges" – a comparison of PMTL's transaction values with
King Power's duty-free purchase prices – is not a valid basis to reject transaction values.1531
7.719. It appears to us that the Philippines' argument relating to the Memorandum of Allegation is
a conditional argument, made in anticipation that T hailand might seek to defend the Public
Prosecutor's rejection of PMTL's declared transaction values on the grounds set forth therein. The
Philippines notes that it is unclear "whether the Public Prosecutor is entitled under Thai law to rely
on these alleged grounds of rejection even though they are not specified in the Charges and, if so,
whether the Public Prosecutor will do so ".1532 The Philippines states that it addresses these

1523 Philippines' first written submission, paras. 662-663.
1524 Philippines' first written submission, paras. 665-667.
1526 Philippines' first written submission, para. 666 (referring to Panel Report, Thailand – Cigarettes
(Philippines), para. 7.200).
1528 Thailand's second written submission, para. 3.51.
1529 Thailand's response to Panel question No. 50, pp. 46-47.
1530 Thailand's response to Panel question No. 108, p. 33.
1531 Philippines' first written submission, paras. 580-628.

allegations for "the sake of completeness", and argues that they do not meet the requirements under
Article 1.2(a) to reject PMTL's declared transaction values. Additionally, the Philippines has clarified
that it is asking the Panel to make a finding in respect of the grounds contained in the Memorandum
of Allegation "insofar as [the Charges] reject PM Thailand's declared transaction values on the basis
of these … grounds".1533
7.720. However, Thailand has not sought to defend the Public Prosecutor's rejection of PMTL's
declared transaction values on the grounds set forth in the Memorandum of A llegation. Thailand
states that it "can confirm that the grounds mentioned in the 2009 Memorandum of Allegations are
among the grounds that the Public Prosecutor considered in order to substantiate the element of
'intention to defraud' for purposes of demo nstrating to the Criminal Court an offence under
Section 27 of the Customs Act"1534, but it also states that this "should not be interpreted as Thailand
accepting that the Memorandum of Allegation contains grounds for rejecting the transaction value
in the co ntext of a customs value determination ".1535 Furthermore, Thailand has not directly
responded to the substance of the Philippines' arguments relating to these grounds, and has not
advanced any arguments aimed at demonstrating that the Memorandum of Allegation establishes
any valid grounds for rejecting PMTL's declared transaction values.
7.721. We note that the grounds contained in the Memorandum of Allegation were not explicitly
indicated in the Charges as being bases for the rejection of the declared transaction v alue. Given
the absence of these grounds in the Charges themselves, and the fact that Thailand has not sought
to defend the Public Prosecutor's rejection of PMTL's declared transaction values on the grounds set
forth in the Memorandum of Allegation, we con sider that the rejection of the declared transaction
value cannot be justified on the basis of the grounds contained in the Memorandum of Allegation.
In other words, neither the text of the Charges, nor the arguments of the parties, demonstrate that
the Public Prosecutor's rejection of the declared transaction value was on the basis of the reasons
contained in the Memorandum of Allegation. Thus, such reasons cannot be considered to be part of
the "examination of the circumstances of sale" within the meaning of Article 1.2(a), second sentence,
which was conducted by the Public Prosecutor. As a consequence, we find that the grounds contained
therein cannot be used to defend the decision to reject the declared transaction value, nor is it
necessary for us to assess whether, if the Public Prosecutor had based its decision to reject the
declared transaction value on those grounds, such a rejection would satisfy the requirement of Article
1.2(a), second sentence, to "examine the circumstances of sale".1536
7.3.6.2.2.5 Conclusion
7.722. The Panel concludes that the Philippines has made a prima facie case that the Charges are
inconsistent with Articles 1.1 and 1.2(a) of the CVA because they reject PMTL's declared transaction
values without a valid basis, and in particular that the Public Prosecutor acted inconsistently with
Article 1.2(a), second sentence, by failing to properly examine the circumstances surrounding the
sale of the cigarettes to PMTL.
7.3.6.2.3 Claims under Articles 2.1 and/or 3.1 of the CVA
7.723. The Philippines further claims that, in its determination of a revised customs value, Thailand
acted inconsistently with Articles 2.1 and/or 3.1 of the CVA by concluding that the customs values
of PMTL's imported cigarettes are equal to King Power's prices. 1537 The Philippines contends t hat,
based on various statements by Thai criminal enforcement officials, the Charges use King Power's
prices as the customs value for PMTL's cigarettes on the basis that they are "identical". Specifically,

1533 Philippines' response to Panel question No. 51.
1534 Thailand's response to Panel question No. 50, pp. 46-47.
1535 Thailand's response to Panel question No. 108, p. 33.
1536 We are mindful of the Philippines' concern that "the grounds mentioned in the Memorandum of
Allegation continue to be an issue in the ongoing criminal proceedings in Thailand". (Philippines' request to
review the Interim Report, para. 71) However, we recall that it is the Charges issued on 18 January 2016
which are the relevant measure at issue in this proceeding, and that we must refrain from making speculative
findings on future measures, or from making speculative findings on future events (see generally Section
7.3.3, regarding the "ripeness" issue). Of course, if any future measure is taken on the basis of one or more or
the grounds mentioned in the Memorandum of Allegation, the manner in which we have analysed the
Philippines' claims and arguments in this proceeding mean that the Philippines would not be precluded from
seeking review of any such future measure in the context of WTO dispute settlement proceedings.
1537 Philippines' first written submission, paras. 670-681.

the Philippines notes that Thailand's criminal enf orcement officials also seem to believe that "PM
Thailand's and King Power's cigarettes are identical because of their close physical similarity".1538 In
this regard, Mr. Somchai Aphiwatthanaphon, the then -Deputy Director General of the Excise
Department, referred to the respective cigarettes as "identical", and the DSI's MoA also states that
the respective cigarettes "have the same overall quality, proportions and ingredients".1539
7.724. The Philippines asserts that, by using King Power's prices for determining the proper customs
value of PMTL's cigarettes, the Public Prosecutor acted inconsistently with Articles 2.1 and/or 3.1 of
the CVA, for three reasons. First, the Philippines submits that King Power's purchase prices were not
previously accepted by the customs authority under Article 1 of the CVA.1540 The Philippines submits
that Thailand neither accepts a transaction value for these cigarettes, nor assesses an alternative
customs value for them. The Philippines submits that King Power's prices are not, therefore,
transaction values for imported goods that could be used under Article 2 or 3 of the CVA for assessing
the customs value of PMTL's imported cigarettes.1541
7.725. Second, the Philippines submits that King Power's cigarettes were produced in Malaysia,
whereas PMTL's cigarettes were produced in the Philippines. 1542 The Philippines recalls that, under
the applicable legal standard, to be "identical" or "similar", Articles 2 and 3 require that goods be
produced in the same country.1543 Specifically, Article 15.2 of the CVA indicates that goods can only
be regarded as identical or similar goods within the meaning of the CVA if they were "produced in
the same country as the goods being valued".1544
7.726. Third, recalling its arguments that King Power's sales differ from PMTL's own sales in respect
of the fiscal charges paid by PMTL, the different commercial levels of PMTL and King Power's
transactions, and the quantities sold by King Power and PMTL respectively, the Philippines asserts
that the Public Prosecutor failed to make necessary adjustments for these "considerable differences"
in using King Power's transaction values for determining PMTL's customs values.1545 The Philippines
points out that Articles 2.1(b) and 3.1(b) require that, for the trans action value of an identical or
similar good to be used as the customs value, the transaction value must be from sales "at the same
commercial level and in substantially the same quantities" as the goods being valued, or alternatively
adjustments must be m ade for any such differences. 1546 The Philippines also points out that,
pursuant to paragraph 5 in each of the Interpretative Notes to Articles 2 and 3, in the absence of an
"objective" basis to make adjustments, the goods must be valued in a different way. 1547 In its first
written submission, the Philippines identified at least three such adjustments that must be made to
King Power's purchase prices. These adjustments account for: (i) the impact of the incidence of fiscal
charges on the prices paid by PMTL, a duty-paid operator, and the absence of fiscal charges on the
prices paid by King Power, a duty -free operator; (ii) the different commercial levels of PMTL's and
King Power's transactions; and, (iii) the quantities sold in the respective transactions.1548
7.727. As indicated above, Thailand denies that the Charges determine the customs value of PMTL's
imported goods on the basis of King Power's prices. However, it does not advance any argument to
the effect that the rejection of PMTL's transaction values on that basis, and/or the determination of
an alternative customs value on the basis of King Power's prices would be consistent with Articles 1
to 3 of the CVA. We recall that in the original proceeding, Thailand provided a copy of a letter from
the WCO Secretariat.1549 In that letter, dated 28 June 2006, the WCO explicitly informed Thailand
that it was inappropriate for the Customs Department to compare the respective prices of PMTL and
duty-free operator, King Power, for the purpose of assessing the acceptability of PMTL's transaction
values. Specifically, the WCO explained that such a comparison was inappropriate without
accounting for differences between the transactions (fiscal charges, commercial levels, and

1539 DSI, Memorandum of Allegation, 9 April 2009 (English translation), (Exhibit PHL-17-B), p. 1.
1548 Philippines' first written submission, para. 680. See also the Philippines' response to Panel question
No. 53.
1549 Letter from the World Customs Organization to the Government of Thailand, 27 July 2006 (Exhibit
PHL-110).

quantities). Consistent with the advice of the WCO, Thailand a dvised the original panel that the
Customs Department did not rely on a comparison with King Power's duty -free prices as the final
grounds for considering that PMTL's transaction values were influenced by its relationship with its
supplier.1550
7.728. We note that, having found that the Charges are inconsistent with Article 1 of the CVA by
rejecting the declared transaction value without a proper basis, it is a moot point whether the
determination of a revised customs value is inconsistent with Articles 2 or 3 of the CVA. However,
in accordance with our approach in respect of the BoA Ruling, we consider it appropriate to proceed
to make findings in respect of the Philippines' claims in this respect, in the alternative.1551
7.729. Having reviewed the Philippines' arguments, and bearing in mind our findings in respect of
the Philippines' claim under Article 1.2(a), second sentence, above, we consider that the Philippines
has satisfactorily demonstrated that King Power's purchase prices do not constitute transaction
values for either "identical" goods (within the meaning of Article 2 of the CVA) or "similar" goods
(within the meaning of Article 3 of the CVA). Recalling the applicable legal standard under Article
2.1, Article 3.1, and Article 15.2(a), (b) and (d), which we have set forth above, we consider that
the Philippines has made a prima facie case that the Charges are indeed inconsistent with Article
2.1(a) and (b), or in the event that the goods could be considered "similar goods" within the meaning
of Article 3, Article 3.1(a) and (b) of the CVA.
7.730. For these reasons, the Panel concludes that the Philippines has made a prima facie case that
the Charges are inconsistent with Article 2.1(a) and (b), or in the alternative, Article 3.1(a) and (b)
of the CVA, because they improperly treat King Power's purchase prices as transaction values for
identical or similar goods.
7.3.6.3 Conclusion
7.731. In sum, w e have found above that the Charges are a measure with a close nexus to
Thailand's declared "measures taken to comply" with the DSB's recommendations and rulings in the
original proceeding. With respect to the first distinct claim made by the Philippines, w e have
concluded that the Philippines has made a prima facie case that the Charges are inconsistent with
Articles 1.1 and 1.2(a) of the CVA because they reject PMTL's declared transaction values without a
valid basis, and in particular that the Public Prosecutor acted inconsistently with Article 1.2(a),
second sentence, by failing to properly examine th e circumstances surrounding the sale of the
cigarettes to PMTL. With respect to the second distinct claim made by the Philippines, we have
concluded that the Philippines has made a prima facie case that the Charges are inconsistent with
Article 2.1(a) and (b), or in the alternative, Article 3.1(a) and (b) of the CVA, because they
improperly treat King Power's purchase prices as transaction values for identical or similar goods.
7.3.7 Article XX of the GATT 1994
7.3.7.1 Introduction
7.732. Thailand argues that, insofar as the Charges are inconsistent with the provisions of the CVA,
such inconsistency is justified under Article XX(d) because the Charges are measures "necessary to
secure compliance with laws or regulations" and that such inconsistency is also justified under Article
XX(a) because the Charges are measures "necessary to protect public morals ".1552 As a threshold
issue, Thailand submits that Article XX is available to justify inconsistencies with the CVA. 1553
Thailand argues that the Charges are provisionally justified under Article XX(d), because the Charges
are "necessary to secure compliance" with Section 27 of the Customs Act. 1554 Thailand argues that
the Charges are also justified under Article XX(a) because they are necessary to protect "public

1550 See Thailand's first written submission in the original proceeding, para. 57. See also fn 1146 above.
1551 See paragraph 7.76. above.
1552 Thailand's first written submission, paras. 6.89-6.131; second written submission,
paras. 3.186-3.263; opening statement at the meeting of the Panel, paras. 51-69; responses/comments to
Panel question Nos. 55-56 and 109-110.
1553 Thailand's first written submission, paras. 6.91-6.93.
1554 Thailand's first written submission, paras. 6.95-6.112.

morals".1555 Finally, Thailand argues that the Charges satisfy the requirements of the chapeau of
Article XX of the GATT 1994.1556
7.733. The Philippines submits that the Charges are not justified under Article XX of the
GATT 1994.1557 As an initial matter, it submits that Article XX of the GATT 1994 is not applicable to
the CVA.1558 Regarding Article XX(d), the Philippines submits that the Charges are not "designed" or
"necessary" to secure compliance with Section 27, as "there can […] be no relationship between …
a WTO-inconsistent customs valuation and … the objective of securing compliance with laws designed
to enforce payment of the correct amount of customs duties owed."1559 The Philippines submits that
the Charges are not justified un der Article XX(a) for essentially the same reason. 1560 Finally, the
Philippines additionally submits that the Charges constitute a "disguised restriction" on trade, and
therefore fail to meet the requirements of the chapeau of Article XX.1561
7.734. In its second writt en submission, the Philippines sets forth its understanding that Thailand
"does not assert justification under Article XX with respect to the Philippines' Article 10 claims, where
the relevant conduct is not the Charges themselves, but the disclosure of PM Thailand's business
confidential information".1562 Thailand subsequently confirmed that this understanding is correct.1563
7.3.7.2 Main arguments of the parties
7.735. Thailand understands that the Appellate Body has indicated that Article XX is available to
justify findings of inconsistency in respect of agreements other than the GATT 1994 where there is
"a clear textual link between the provisions under which claims ar e made and the text of the
GATT 1994, in particular Article XX".1564 Thailand argues that there is a sufficient textual basis in the
title of the CVA 1565, the language in the preamble of the CVA 1566, and also the language in Article
XX(d) of the GATT 1994. In Thailand's view, it would be absurd if Article XX was available to justify
an inconsistency with Article VII, bu t not the CVA, which explicitly "implements and elaborates on
the rules contained in Article VII."1567
7.736. Thailand considers that the Charges are designed to secure compliance with Section 27 of
the Customs Act, since the Charges "lead to the examination of the matter by the Criminal Court "
and thus "are the only way of enforcing Section 27".1568 Thailand considers that "Thailand could not
properly enforce section 27, and the other requirements of the Customs Act, were it not able to
pursue criminal cases. "1569 Thailand further asserts that the Charges make an "essential"
contribution to the enforcement of Section 27, and that, in the absence of the Charges, "Section 27
would not have been enforced properly ".1570 In response to the Philippines' argument that a WTO -
inconsistent customs valuation determination can , by definition , not be capable of securing
compliance with laws designed to enforce payment of the correct amount of customs duties owed,
Thailand submits that this "makes no sense" because the "need to justify a measure, or aspects of
a measure, arises solely because those aspects have been found to be WTO -inconsistent", and,
under the Philippines' approach, it would be "impossible" to ever justify a measure under Article

1555 Thailand's first written submission, paras. 6.113-6.6.124.
1556 Thailand's first written submission, paras. 6.125-6.131.
1557 Philippines' second written submission, paras. 636-715; opening statement at the meeting of the
Panel, paras. 116-120; responses/comments to Panel question Nos. 54, 56, 57 and 110.
1558 Philippines' second written submission, paras. 652-660.
1559 Philippines' second written submission, paras. 677-692.
1560 Philippines' second written submission, paras. 697-705.
1561 Philippines' second written submission, paras. 706-714.
1562 Philippines' second written submission, fn 423.
1563 Thailand's response to Panel question No. 55.
1564 Thailand's first written submission, para. 6.92 (referring to Appellate Body Reports, China –
Publications and Audiovisual Products, paras. 229-233; US – Shrimp (Thailand) / US – Customs Bond Directive,
paras. 310-319).
1565 Thailand's second written submission, para. 3.207.
1567 Thailand's second written submission, para. 3.208.
1568 Thailand's first written submission, para. 6.106. See also Thailand's second written submission,
para. 3.224.
1569 Thailand's first written submission, para. 6.106.
1570 Thailand's first written submission, para. 6.109. See also Thailand's second written submission,
para. 3.232.

XX(d).1571 Thailand further submits that the Philippines mischaracterizes the purpose of Section 27
of the Customs Act as being the re-evaluation of imported goods for collection of "correct" customs
duties1572, when the "purpose of Section 27 is, in a case of customs fraud, to impose a punishment,
in the form of a fine on and/or imprisonment of the offender."1573 Thailand submits that the Charges
are necessary to protect "public morals " within the meaning of Article XX(a) because they are
"closely related to the fight against fraudulent duty and tax evasion, and contribute to the fight
against smuggling and contraband of cigarettes in Thailand ", the criminalization of which under
Section 27 "is a necessary component of the fight against smuggling and contraband".1574
7.737. Thailand argues that the Charges sa tisfy the requirements of the chapeau of Article XX of
the GATT 1994. 1575 Thailand submits that "there is no indication that the Charges are applied
arbitrarily or in a discriminatory manner against cigarette imports from the Philippines, or that they
are a d isguised restriction on international trade. "1576 Thailand notes that a criminal allegation
"necessarily applies to an individual importer and cannot, as such, be considered to be
discriminatory".1577 In response to the Philippines' argument that the Charges are a "disguised
restriction" on international trade because the fines could lead to the demise of PMTL and thereby
leave TTM without import competition, Thailand submits that no fine has been imposed as yet, there
is no certainty that a fine will be imposed, and the amount of any potential fine has yet to be
determined.1578 Additionally, Thailand notes that in 2015 the gross profit for Philip Morris
International was USD 17.429 billion, and ranged between USD 17.429 billion and USD 21.004 billion
between 2011 and 2015. 1579 Consequently, in Thailand's view, "it is not clear " that a fine of USD
2.35 billion would threaten the very survival of PMTL.1580 Thailand also submits that the purpose of
a fine is to punish offenders, and "the fact that there may be a fine at the end of the ongoing court
proceedings cannot suffice to show that Thailand abuses or makes an illegitimate use of the
exceptions under Article XX of the GATT 1994".1581
7.738. The Philippines reviews panel and Appellate Body reports that have addressed the availability
of Article XX of the GATT 1994 to justify inconsistencies in respect of agreements other than the
GATT 19941582, and submits that "[p]anels and the Appellate Body have not … readily applied Article
XX to other covered agreements and have required sufficiently clear affirmative language to justify
its application outside of the GATT 1994. "1583 The Philippines submits that "the mere fact that one
particular provision of the GATT 1994 (other than Articl e XX) is mentioned in a different covered
agreement – either in the title or the preamble – does not reveal any intention to apply all of the
other provisions of the GATT 1994, such as Article XX, to that other agreement."1584
7.739. Regarding Article XX(d), the Ph ilippines submits that the Charges are not "designed" or
"necessary" to secure compliance with Section 27.1585 The Philippines emphasizes that, in seeking
justification under Article XX, Thailand must demonstrate that the WTO -inconsistent aspect of the
Charges is necessary to secure compliance, and not that the Charges "as a whole" are necessary.1586
The Philippines notes that Section 27 seeks to enforce Section 10bis of the Customs Act, which
requires, according to the Philippines, that "the correct amount of the duties owed is calculated on

1571 Thailand's second written submission, para. 3.218.
1572 Thailand's second written submission, para. 3.218.
1573 Thailand's second written submission, para. 3.223.
1574 Thailand's response to Panel question No. 56, p. 49.
1575 Thailand's first written submission, paras. 6.125-6.131; second written submission,
paras. 3.254-3.261.
1576 Thailand's first written submission, para. 6.129.
1577 Thailand's first written submission, para. 6.129.
1578 Thailand's second written submission, para. 3.258.
1579 Thailand's second written submission, para. 3.259.
1580 Thailand's second written submission, para. 3.259.
1581 Thailand's second written submission, para. 3.260 (referring to Appellate Body Report, US –
Gasoline, p. 25, DSR 1996:I, 3, at p. 23).
1582 Philippines' second written submission, paras. 642-651 (referring to Appellate Body Reports, Turkey
– Textiles, para. 58; Argentina – Footwear (EC), para. 110; US – Shrimp (Thailand) / US – Customs Bond
Directive, para. 319; China – Publications and Audiovisual Products, para. 233; China – Raw Materials, paras.
303 and 307; China – Rare Earths, paras. 5.55-5.56; and US – Clove Cigarettes, para. 101).
1584 Philippines' second written submission, para. 656 (referring to Appellate Body Reports, China – Raw
Materials, para. 303).
1585 Philippines' second written submission, paras. 677-692.

the basis of an assessment of the 'price' or customs value of the goods ".1587 The Philippines insists
that "[e]nforcement of the 'correct' amount of custom duties owed depends on establishing the
correct … customs value" and that "[l]ogically, there can never be a circumstance where an incorrect
customs valuation decision is 'necessary' to ensure the collection of the correct amount of customs
duties."1588 In the view of the Philippines, "there can therefore be no relationship between … a WTO-
inconsistent customs valuation and … the objective of securing compliance with laws designed to
enforce payment of the correct amount of customs duties owed. "1589 The Philippines thus asserts
that the WTO-inconsistent aspect of the Charges, the cus toms valuation, is "incapable of securing
compliance with Section 27", and consequently the Charges are not designed to secure compliance
with Section 27.1590 The Philippines emphasizes that, in the event that a justification under Article
XX is relevant to t he Panel's analysis, the Panel would already have concluded that the Charges
determined the customs value of the goods in a WTO -inconsistent manner. 1591 The Philippines
submits that the Charges are not "designed" or "necessary" to protect public morals under Article
XX(a), for the same reasons that they are not justified under Article XX(d).1592
7.740. Finally, the Philippines submits that the Charges constitute a "disguised restriction" on trade,
and therefore fail to meet the requirements of the chapeau of Article XX.1593 The Philippines argues
that PMTL is the largest importer of cigarettes into Thailand, and that the potential fines of USD 2.35
billion threaten "the very survival of PM Thailand", and could potentially result in the removal of "the
largest source of import competition from the Thai market".1594 The Philippines notes that Thailand's
Ministry of Finance owns TTM, which "enjoys a monopoly over the production of cigarettes in
Thailand, and is the dominant force in the Thai cigare tte market, controlling more than three -
quarters of the market".1595 The Philippines suggests that "[t]he demise of PM Thailand would leave
TTM, the sole domestic producer, without import competition in the market".1596
7.3.7.3 Analysis by the Panel
7.741. Thailand's defence under Article XX of the GATT 1994 raises two main issues. First, whether
Article XX is available to justify a violation of the CVA. If so, the second issue is whether Thailand
has demonstrated that the aspects of the Charges giving rise to the inconsistency with the CVA are
justified under either Article XX(d) or Article XX(a). We address these issues in turn.1597
7.3.7.3.1 Applicability of Article XX of the GATT 1994 to the CVA
7.742. Article XX of the GATT 1994 reads in relevant part:
General Exceptions
Subject to the requirement that such measures are not applied in a manner which would
constitute a means of arbitrary or unjustifiable discrimination between countries where
the same conditions prevail, or a disguised restriction on international trade, nothing in
this Agreement shall be construed to prevent the adoption or enforcement by any
contracting party of measures:

1588 Philippines' second written submission, paras. 688-689.
1592 Philippines' second written submission, paras. 697-705.
1593 Philippines' second written submission, paras. 706-714.
1597 We are also mindful of the fact that, where the responding party claims that the obligations in
another covered agreement are subject to the general exceptions in Article XX of the GATT 1994, a panel
should, in principle, rule on that issue regardless of whether the panel considers that the respondent has
demonstrated that the challenged aspects of the measure at issue are justified under Article XX in the
particular circumstances of the case. Specifically, the Appellate Body has explained that in circumstances
where a panel concludes that the respondent has failed to demonstrate that the WTO-inconsistent aspects of
the measure at issue are "necessary" under Article XX, the absence of a ruling may leave the parties uncertain
as to the regulatory scope that the respondent enjoys in implementing the recommendations and rulings of the
DSB. (Appellate Body Report, China – Publications and Audiovisual Products, para. 214)

(a) necessary to protect public morals;
…
(d) necessary to secure compliance with laws or regulations which are not inconsistent
with 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
7.743. The text of Article XX establishes that the provision applies to "this Agreement", i.e. to the
GATT 1994. Insofar as another covered agreement specifically cross -references Article XX and
incorporates these general exceptions by reference, the Article XX exceptions will apply to that other
agreement. For example, Article 3 of the TRIMs Agreement explicitly provides that "[a]ll exceptions
under GATT 1994 shall apply", which plainly includes Article XX of the GATT 1994. Similarly, Article
24.7 of the TFA, which entered into force on 22 February 2017, states that "[a]ll exceptions and
exemptions under the GATT 1994 shall apply to the provisions of this Agreement ". These are clear
examples of incorporation by reference.
7.744. The provisions of the CVA, however, do not make any reference to Article XX of the
GATT 1994. The question before us, therefore, is whether the Article XX exceptions are available to
Members to justify me asures found to be inconsistent with the provisions of the CVA. There have
been several disputes in which panels and the Appellate Body have considered the extent to which
Article XX of the GATT 1994 is incorporated into other covered agreements, including accession
protocols which are an integral part of the WTO Agreement, in the absence of such a clear reference
to exceptions under the GATT. 1598 This dispute is the first to raise the interpretive question of
whether Article XX of the GATT 1994 is available to justify violations of the CVA, which is a different
covered agreement from the GATT 1994. The Appellate Body has articulated and applied a standard
"analytical approach" that entails an agreement-by-agreement analysis that starts with the text of
the cov ered agreement in question , and which entails a "thorough analysis of the relevant
provisions", on the understanding that the lack of an express textual reference is not dispositive in
and of itself.1599 This standard analytical approach is captured in the Appellate Body's statement that
the specific relationship between provisions of different covered agreements must be "ascertained
through scrutiny of the provisions concerned, read in the light of their context and object and

1598 In US – Shrimp (Thailand) / US – Customs Bond Directive, both the panel and the Appellate Body
considered it unnecessary to rule on whether Article XX(d) was available to justify a violation of the Anti-
Dumping Agreement, because they considered that the respondent had in any event not demonstrated that the
measure could be justified as "necessary". (See Panel Reports, paras. 6.11-6.13; Appellate Body Reports,
paras. 306-310) In EC – Salmon (Norway), the EU argued on similar grounds that one of the challenged
measures was justified under Article XX(d), but the panel in that dispute did not rule on the issue after finding
that the measure was not inconsistent with the Anti-Dumping Agreement in the first place. (See Panel Report,
paras. 7.755-7.761) In China – Publications and Audiovisual Products, the Appellate Body found that the
"Trading Rights" obligation under Paragraph 5.1 of China's Accession Protocol, and the corresponding "Trading
Rights" paragraphs of the Working Party Report, which expressly provided that the provision was "[w]ithout
prejudice to China's right to regulate trade in a manner consistent with the WTO Agreement", is subject to
Article XX of the GATT 1994. (See Panel Report, paras. 7.742-7.745; Appellate Body Report, paras. 205-233)
In China – Raw Materials, both the panel and the Appellate Body found that the general exceptions in Article
XX are not available in respect of Paragraph 11.3 of the China's Accession Protocol, which establishes a general
prohibition of export duties. (See Panel Reports, paras. 7.116-7.159; Appellate Body Reports, paras. 270-307)
In China – Rare Earths, the parties re-argued the question of whether Article XX is applicable to Paragraph
11.3 on the basis of new arguments raised by China, and the panel found, again, that Article XX is not
available in respect of Paragraph 11.3 of the China's Accession Protocol. China appealed the Panel's
assessment of the systemic relationship between, on the one hand, the specific provisions of its Accession
Protocol and, on the other hand, the Marrakesh Agreement and the Multilateral Trade Agreements annexed
thereto. In doing so, however, China did not specifically appeal the Panel's ultimate conclusion that Article XX
of the GATT 1994 is not available as a defence to justify its export duties. Furthermore, in a finding that was
also not appealed, the panel found that China's commitments in Paragraphs 83 and 84 of its Working Party
Report are subject to the general exceptions in Article XX. (See Panel Reports, paras. 7.53-7.115 and 7.1016-
7.1033; Appellate Body Reports, paras. 5.1-5.74) In US – Clove Cigarettes the Appellate Body found that
Article XX is not available to justify a breach of the TBT Agreement. (See Appellate Body Report, paras. 96 and
101; see also Appellate Body Report, China – Rare Earths, para. 5.56, fn 479) In US – Poultry (China), the
panel found that an SPS measure which has been found to be inconsistent with Articles 2 and 5 of the SPS
Agreement cannot be justified under Article XX(b) of the GATT 1994. (See Panel Report, paras. 7.465-7.482)
1599 Appellate Body Reports, China – Rare Earths, paras. 5.61-5.63.

purpose, with due account being taken of the overall architecture of the WTO system as a single
package of rights and obligations, and any specific provisions that govern or shed light on the
relationship between the provisions of different instruments".1600
7.745. We understand the parties to agree that the applicability of Article XX of the GATT 1994 to
the CVA must be determined on the basis of a textual analysis of the CVA and the GATT 1994.
Specifically, we understand Thailand to accept that Article XX does not automatically apply to
obligations in the covered agreements other than the GATT 1994, as reflected in its view that Article
XX applies to other covered agreements where there is "a clear textual link between the provisions
under which claims are made and the text of the GATT 1994, in p articular Article XX."1601 We
understand the Philippines to accept that the absence of a specific textual reference to Article XX is
not in and of itself dispositive, as reflected in its view that panels and the Appellate Body "have
required sufficiently clea r affirmative language to justify its application outside of the
GATT 1994".1602
7.746. Therefore, we star t our analysis with an examination of the textual bas es identified by
Thailand. Following that, we address Thailand's argument that the inapplicability of Article XX to the
CVA would lead to an absurd result since Article XX would be available to justify a violation of Article
VII of the GATT 1994, but not the Agreement that implements that provision. We then address
Thailand's argument that Article XX applies t o the CVA since this is the only way to establish a
balance between Members' obligations and Members' right to regulate. In our assessment of that
issue, we consider the consequences of the inapplicability of Article XX to the CVA on Members' right
to enact measures to combat customs fraud.
7.747. Thailand identifies three textual bases to support its assertion that Article XX of the
GATT 1994 is available to ju stify violations of the CVA. First, Thailand refers to the full title of the
CVA, namely the "Agreement on Implementation of Article VII of the GATT 1994 ", which refers to
Article VII of the GATT 1994.1603 Second, Thailand refers to the language in the preamble to the CVA
indicating the desire to "further the objectives of the GATT 1994", and recognizing "the importance
of the provisions of Article VII of GATT 1994 and desir[e] to elaborate rules for their application in
order to provide greater uniformity and certainty in their implementation".1604 Third, Thailand notes
that Article XX(d) of the GATT 1994 explicitly indicates that Members may adopt measures necessary
to secure compliance with their laws "relating to customs enforcement", which indicates that Article
XX(d) "can be used to justify measures … that are necessary to enforce a Member's customs
laws".1605 While we recognize that treaty interpretation calls for a holistic analysis, for analytical
clarity we will assess these three textual bases in turn.
7.748. Regarding the reference to Article VII in the title of the CVA, we observe that each of the
covered agreements in Annex 1A ( "Multilateral Agreements on Trade in Goods ") to the WTO
Agreement is in some way an elaboration, or otherwise linked to, one or more specific provisions in
the GATT 1994. We agree with Thailand that the reference to the GATT 1994 in the title of the CVA
is a textual reference to the GATT 1994. However, we do not consider that this alone is sufficient to
indicate that Article XX is applicab le to the CVA. Indeed, we consider that it would be overly
formalistic to give undue weight to an explicit reference to a GATT Article in the title of an agreement
for the purpose of ascertaining whether Article XX applies to the obligations contained ther ein. We
note, for example, that the full title of the Tokyo Round Subsidies Code was the Agreement on
Interpretation and Application of Articles VI, XVI and XXIII of the General Agreement on Tariffs and
Trade. The preamble to the Code clarified that the pa rties to the Code had agreed to its terms
desiring, inter alia, "to apply fully and to interpret the provisions of Articles VI, XVI and XXIII" of the
GATT, and to "elaborate rules for their application in order to provide greater uniformity and certainty
in their implementation". In the context of the Uruguay Round, the title of the successor agreement
was shortened to the Agreement on Subsidies and Countervailing Measures. We do not see how this
mere shortening of the title could have legal implications in respect of the applicability of Article XX
to countervailing duty investigations conducted under the Tokyo Round Subsidies Code, as opposed
to those conducted under the SCM Agreement. In sum, we consider that , although the title to the

1600 Appellate Body Reports, China – Rare Earths, para. 5.55.
1601 Thailand's first written submission, para. 6.92.
1603 Thailand's second written submission, para. 3.207.
1605 Thailand's second written submission, para. 3.212.

CVA reflects a general link between the CVA and the GATT 1994, it does not establish any textual
link to Article XX of the GATT 1994.
7.749. As regards Thailand's second identified textual link, we note that a preamble to an
agreement is useful for providing interpretative contex t for the operative provisions being
interpreted.1606 However, we consider that in the absence of clear and specific language to the
contrary, a treaty interpreter may presume that the language of a preamble is not a source of legally
operative rights or obligations.1607 Regarding the language in the preamble to the CVA indicating the
Members' desire to "further the objectives of the GATT 1994 ", and recognizing "the importance of
the provisions of Article VII of GATT 1994 and desir[e] to elaborate rules for their application in
order to provide greater uniformity and certainty in their implementation ", this language does not
establish a textual basis for concluding that Article XX is applicable to the CVA. We note that the
ordinary meaning of these terms reflects a general link between the CVA and the GATT 1994, but
as with the title to the CVA, does not establish any textual link to Article XX of the GATT 1994. We
note that the preambles to both the TBT Agreement and the SPS Agreement include language
indicating, respectively, that such agreements "further the objectives of GATT 1994 " (TBT
Agreement) and "elaborate rules for the application of the provisions of the GATT 1994 " (SPS
Agreement). However, the TBT Agreement and SPS Agreement are two covered agreements i n
respect of which Article XX of the GATT 1994 has been found to not be available.1608 In our view,
the language in the preamble to the CVA does not establish any affirmative textual basis for
concluding that Article XX applies to the CVA.
7.750. Regarding the text of Article XX(d) it does not follow from the fact that Article XX(d) of the
GATT 1994 explicitly indicates that Members may adopt measures necessary to secure compliance
with their laws "relating to customs enforcement" that Article XX must apply in respec t of the
obligations contained in the CVA. We consider that the question relating to the applicability of
Article XX cannot be decided on the premise that the measure sought to be justified is characterized
as one which aims to fulfil one of the policy goals that are protected in Article XX. Such an approach
would conflate two distinct steps of the analysis: the question regarding the applicability of Article XX
to an agreement in the first place , and the question regarding the fulfilment of the substantive
requirements of Article XX, in case Article XX is found to be applicable. Specifically in relation to
Thailand's identified link, we do not consider that a reference to "customs enforcement" in Article
XX would be sufficient to demonstrate the applicabili ty of Article XX to an agreement relating to
customs valuation simply because the measure sought to be justified in violating that agreement is
one that relates to customs enforcement. In other words, the applicability of Article XX of the GATT
1994 must be decided on the basis of a clear and sufficient textual link between provisions of the
GATT 1994, especially Article XX, and the agreement to which Article XX allegedly applies. This
demonstration cannot be short -circuited by proceeding on the basis of ho w to characterize the
measure that the Member seeks to justify under Article XX. Thus, Article XX cannot be found
applicable to obligations in other covered agreements based on the fact that those obligations may
regulate measures with objectives similar to those reflected in Article XX of the GATT 1994. Indeed,
to find that Article XX is applicable to the CVA on that basis would be contrary to the approach taken
in previous cases. In China – Raw Materials, for example, the respondent claimed that the expor t
duties in question were necessary to protect public health and conserve natural resources, and were
thus justifiable under Articles XX(b) and (g); however, both the panel and the Appellate Body found
that Article XX of the GATT 1994 was not applicable to paragraph 11.3 of China's Accession
Protocol.1609

1606 Article 31(2) of the Vienna Convention.
1607 We note that in US – Norwegian Salmon AD, the GATT panel referred with approval to the
proposition that "[p]reambular provisions, cast in general wording are generally not intended to constitute
substantive stipulations", and to the proposition that "[s]ince they are mere statements, preambles do not
create any legal commitment above and beyond the actual text of the treaty". (GATT Panel Report, US –
Norwegian Salmon AD, para. 369 and fn 463 (referring to Treviranus, Encyclopaedia of Public International
Law, Vol. 7, p. 394 (1984))).
1608 In China – Rare Earths, the Appellate Body stated that "Article XX of the GATT 1994 has been found
by the Appellate Body not to be available to justify a breach of the Agreement on Technical Barriers to Trade
(TBT Agreement)". (Appellate Body Reports, China – Rare Earths, para. 5.56) (referring to Appellate Body
Report, US – Clove Cigarettes, paras. 96 and 101) In US – Poultry (China), the panel found that an SPS
measure which has been found to be inconsistent with Articles 2 and 5 of the SPS Agreement cannot be
justified under Article XX(b) of the GATT 1994. (Panel Report, US - Poultry (China), para. 7.481)
1609 Panel Reports, China – Raw Materials, paras. 7.116-7.7.159; Appellate Body Reports, China – Raw
Materials, paras. 270-307.

7.751. Thailand submits that, if Article XX is not available to justify violations of the CVA, this would
"result in an absurd situation, contrary to the principle that 'a treaty interpreter must read all
applicable provisions of a treaty in a way that gives meaning to all of them, harmoniously'".1610 This
result would be absurd , according to Thailand, as this would allow a violation of Article VII of the
GATT 1994 to be justified, in principle, under the general exceptions in Article XX of the GATT 1994,
but would not allow for the justification of a violation of the CVA, notwithstanding that the CVA is an
agreement that expressly implements Article VII of the GATT 1994.1611
7.752. We observe that the core concept of the "trans action value" established in the CVA is not
necessarily identical to the concept of "actual value" as articulated in Art icle VII:2(b) of the
GATT 1994, and that the CVA elaborates on the rudimentary provisions of Article VII by establishing
a comprehensive system for customs valuation, comprising a series of multiple different steps and
methods subject to detailed rules governing their sequential application. We do not consider that it
follows from the fact that Article XX is applicable to the obligations c ontained in Article VII of the
GATT 1994 that there would be a legal conflict or absurd result if Article XX were not applicable to
the obligations in the CVA . In our view, it does not follow that the applicability of Article XX
exceptions to the general o bligations regarding customs valuation contained in Article VII of the
GATT 1994 mandates that those same exceptions must also be applicable to the system of customs
valuation comprising detailed methodologies found in the CVA. Indeed, the CVA contains spe cific
and technical rules that elaborate how the customs value of imports may be determined, which are
additional to, and different from, those found in Article VII of the GATT 1994.
7.753. We also note that, with the exception of China1612, all of the other third parties in this dispute
that expressed a view on the matter, including Canada, the European Union, Japan, and the United
States, agree with the Philippines that Article XX is not available to justify inconsistencies with the
CVA and that the applicability of Article XX to violations of Article VII, but not to violations of the
CVA, would not lead to an absurdity.1613 We note Japan's view that "the CVA is a special agreement
on the implementation for a specific article, namely, Article VII of the GATT 1994. Therefore, by its
nature, the CVA constitutes special law vis-à-vis GATT 1994, and provides special rules focusing on
how Member states should determine the customs value. "1614 We also note the European Union's
view that "the rationale and nature of obligations set out in the CVA are not such as to justify the
conclusion that Article XX should justify breaches in this context".1615
7.754. Thailand submits that in the context of the TBT Agreement, the Appellate Body found that
there exists a "balance" between a Member's ob ligations and a Member's right to regulate that is
"inherent" in the TBT Agreement1616, and that it was for this reason that Article XX of the GATT 1994
was found to be inapplicable to the TBT Agreement. 1617 Thailand considers that "in the case of the
CVA, there is no such balance that can be found between obligations it contains and the right of
Members to regulate", that there is "no reason why the CVA should be deprived of such a balance",
and that therefore "the only way to ensure this balance is respected is for Article XX of the GATT
1994 to be available to justify a measure that is found to be inconsistent with certain provisions of
the CVA."1618
7.755. We observe that the Appellate Body has repeatedly characterized the object and purpose of
various WTO agreements in terms of "balance". As Thailand notes, the Appellate Body has articulated
the object and purpose of the TBT Agreement in terms of striking a "balance …. between, on the one
hand, the desire to avoid creating unnecessary obstacles to international trade an d, on the other
hand, the recognition of Members' right to regulate", and has said that this "is not, in principle,

1610 Thailand's second written submission, para. 3.208.
1611 Thailand's second written submission, para. 3.209.
1612 In the course of the third-party meeting with the Panel, China expressed the view that although
there is no reproduction of Article XX in the CVA, there may be a bridge between the GATT 1994 and the CVA.
In support of this position, China asserted that, on the basis of the text and title of the CVA, there appears to
be a natural and close connection between the GATT 1994 and the CVA, and China further suggested that the
general exceptions in Article XX reflect the "inherent power" of WTO Members to regulate international trade.
1613 See Canada, the European Union, Japan and United States' third-party responses to Panel question
No. 6.
1614 Japan's third-party statement, para. 19.
1615 European Union's third-party response to Panel question No. 6.
1616 Thailand's second written submission, para. 3.204.
1617 Thailand's second written submission, para. 3.205.
1618 Thailand's second written submission, para. 3.205.

different from the balance set out in the GATT 1994".1619 The Appellate Body has confirmed that the
GATS likewise "seeks to strike a balance be tween a Member's obligations assumed under
the Agreement and that Member's right to pursue national policy objectives".1620 The Appellate Body
has also defined the object and purpose of the SCM Agreement as reflecting a "delicate balance
between the Members that sought to impose more disciplines on the use of subsidies and those that
sought to impose more disciplines on the application of countervailing measures".1621 The Appellate
Body has also described accession protocols as containing a "delicate balance of rights and
obligations".1622
7.756. We consider that there is also an inherent balance in the CVA. This inherent balance finds
reflection primarily through the relatively limited scope of the substantive and procedural obligations
contained in the CVA , including a degree of discretion accorded to the customs authority in
implementing those obligations. These obligations elaborate a methodology and a set of procedural
obligations that must be followed by domestic authorities when making cu stoms valuation
determinations, but these obligations apply only where the customs authority engages in a
determination of the monetary worth or price of imported goods for the purposes of levying ad
valorem customs duties. Thus, measures taken by a Member to combat customs fraud wil l not run
afoul of the obligations contained in the CVA unless such measures are premised on a false customs
value that was determined inconsistently with the provisions of the CVA. This is confirmed by
Article 17 of the CVA, which establishes that nothing in the CVA restricts or calls into question the
rights of customs authorities to satisfy themselves as to the truth or accuracy of statements made
by importers. Given the limited scope and reach of the obligations in the CVA, we see no reason why
authorities pursuing the legitimate regulatory purpose of identifying or combatting customs fraud
would need to deviate from the system of customs valuation established in the CVA, so as to require
recourse to Article XX of the GATT 1994. For these reasons, we do not agree with the premise that
there is no "inherent balance" in the CVA, such that "the only way to ensure this balance is respected
is for Article XX of the GATT 1994 to be available".1623
7.757. Based on the foregoing, the Panel finds that the general exceptions in Article XX of the GATT
1994 are not applicable to the obligations in the CVA.
7.3.7.3.2 Justification under Article XX(a) or XX(d)
7.758. Having found that the general exceptions in Article XX of the GATT 1994 are not applicable
to the obligations in the CVA, it is unnecessary for us to examine whether the Charges are justified
under Article XX(d) or (a) of the GATT 1994. We are aware that panels have the discretion to address
arguments and make additional findings beyond those strictly necessary to resolve a particular claim
or defence, and that, in several disputes in which panels found that Article XX of the GATT 1994 was
not available to justify a violation of an obligation arising under another covered agreement, they
nonetheless proceeded to address the merits of those defences on an arguendo basis. In other
disputes, panels have rejected Article XX defences based on their findings on certain threshold
issues, but nonetheless proceeded to make additional limited findings on one or more of the
remaining elements. In all of these cases, however, it appears that the main reason for doing so
was to make additional factual findings to assist the Appellate Body in the event that its
interpretation of Article XX, or the applicability thereof, was reversed on appeal.1624
7.759. In this dispute, Thailand's defences under Article XX(a) and (d) of the GATT 1994 essentially
reiterate its earlier argument that the Charges do not involve any customs valuation determination
in the first place, and that the reference to the King Power pr ices merely serves the purpose of
providing a possible benchmark to the Criminal Court to impose fines in the event of a conviction.
Thus, in the context of its Article XX defence, Thailand states that the Charges are not meant to
determine the "correct" a mount of customs duties 1625, and that "[t]here is no requirement that a
penalty must be limited to or depend on the 'correct' customs value".1626 Thus, Thailand's argument
under Article XX assumes that the references to "false price" and "actual price" in the Charges, and

1619 Appellate Body Report, US – Clove Cigarettes, para. 96.
1620 Appellate Body Report, Argentina – Financial Services, para. 6.114.
1621 Appellate Body Report, US – Countervailing Duty Investigation on DRAMS, para. 115.
1622 Panel Reports, China – Raw Materials, para. 7.112.
1623 Thailand's second written submission, para. 3.205.
1624 See e.g. Panel Reports, China – Raw Materials, paras. 7.229-7.230; China – Rare Earths, para.
7.140; India – Solar Cells, paras. 7.335-7.336.
1625 Thailand's second written submission, paras. 3.223 and 3.242.
1626 Thailand's second written submission, para. 3.242.

the references to King Power's prices in the Annex to the Charges, merely serve the purpose of
providing a possible benchmark to the Criminal Court to impose fines in the event of a conviction for
customs fraud established on separate grounds, and that this is the aspect of the Charges that needs
to be justified under Article XX. However, we have already addressed this argument in the context
of addressing the applicability of the CVA to the Charges, where we found that Thailand's reading of
the Charges is not supported by the actual text of the instrument, when it is read in conjunction with
its accompanying Annex, the domestic legal framework in which the Charges are situated, and the
events culminating in the Charges.
7.760. Accordingly, in the circumstances of this case, we do not see any reason to proceed with an
assessment of Thailand's defence under Article XX of the GATT 1994.
7.3.7.4 Conclusion
7.761. The Panel finds that the general exceptions in Article XX of the GATT 1994 are not applicable
to the obligati ons in the CVA , and therefore the aspects of the Charges giving rise to the
inconsistency with Thailand's obligations under the CVA cannot be justified under Article XX(a) or
(d) of the GATT 1994.
7.3.8 Article 10 of the CVA
7.3.8.1 Introduction
7.762. The Public Prosecutor filed the Charges with the Court on 18 January 2016. The Annex to
the Charges provided figures on PMTL's import prices for Marlboro and L&M cigarettes, along with
figures on King Power's import prices for those same brands. On 19 January 2016, newspaper articles
published in the Bangkok Post and The Phuket News reported on the filing of the Charges. These
articles also provided figures on PMTL's import prices for Marlboro and L&M cigarettes, and compared
these with the import prices of "other cigarette importers". The figures contained in these articles
correspond to the information contained in the Annex to the Charges.1627
7.763. Article 10 of the CVA provides that, subject to certain limited exceptions, information that is
by nature confidential or which is provided by an importer on a confidential basis for the purpose of
customs valuation shall be treated as strictly confidential by the authorities concerned who shall not
disclose it. The Philippines submits that the information regarding the price for Marlboro and L&M
cigarettes imported over the period 2003 -2006 is confidential, and claims that Thailand acted
inconsistently with Article 10 of the CVA by disclosing PMTL's import prices to the press.1628 According
to the Philippines, while the press articles do n ot specifically identify the source for the information
in question, the only reasonable inference to draw is that Thai officials were responsible.
7.764. Thailand accepts that PMTL's import prices qualify as confidential information within the
meaning of Article 10.1629 Thailand also accepts that any disclosure of PMTL's import prices to the
press by Thai government officials would not fall within the scope of the limited exceptions to the
non-disclosure obligation provided for in the text of Article 10. However, Th ailand submits that the
Philippines' claim must fail because it has not been proven that Thai officials disclosed the
information on PMTL's import prices to the press.1630

1627 Philippines' first written submission, paras. 686-687 (referring to King-Oua Laohong, "Philip Morris
tax evasion case reaches court", Bangkok Post, 19 January 2016, available at
http://www.bangkokpost.com/news/general/831708/philip-morris-tax-evasion-case-reaches-court (last
accessed 6 December 2016), (Exhibit PHL-119); and The Phuket News, "Philip Morris tax evasion case reaches
court", 19 January 2016, available at http://www.thephuketnews.com/philip-morris-tax-evasion-case-reaches-
court-55840.php (last accessed 6 December 2016), (Exhibit PHL-120)).
1628 See generally Philippines' first written submission, paras. 682-690; second written submission,
paras. 625-635; responses/comments in relation to Panel question Nos. 111 and 112.
1629 See paragraph 7.770. below.
1630 See generally Thailand's first written submission, paras. 6.83-6.88; second written submission,
paras. 3.174-3.185; opening statement at the meeting of the Panel, paras. 70-77; responses/comments in
relation to Panel question Nos. 58, 111 and 112.

7.3.8.2 Main arguments of the parties
7.765. The Philippines argues that PMTL declared its transactio n values to the Thai authorities for
the purpose of customs valuation, and the "only way" that they "could have appeared in press
articles is if Thai authorities disclosed those figures to the press ".1631 Additionally, the Philippines
notes that both press articles, "immediately before reporting PM Thailand's declared CIF transaction
values … address information obtained from the Office of the Attorney General ", and both articles
use the phrase "[t]he company reportedly declared ".1632 In the Philippines' view, "[t]he only
reasonable inference to draw is that the entity that did the 'report[ing]' to the Thai media was the
Office of the Attorney General".1633 The Philippines argues that the information in the press articles
at issue could not have been obtained from th e press articles at issue in the original proceeding,
because the original press articles and the current press articles address different entries. 1634 The
Philippines considers that the evidence submitted by the Philippines is similar to that submitted by
the Philippines in the original dispute, and on which basis the original panel found that Thailand had
acted inconsistently with Article 10.1635 The Philippines further argues that additional disclosures of
PMTL's import prices by the DSI subsequent to the original proceeding evidence a consistent pattern
by Thailand of disclosing PMTL's confidential information, contrary to Article 10 of the CVA.1636
7.766. Thailand argues that neither of the press articles referred to by the Philippines indicates the
source of the relevant information, and the Philippines has provided no other evidence to prove that
PMTL's transaction values were disclosed by Thai government officials.1637 Thailand reiterates that a
"mere 'inference'" does not constitute sufficient evidence to make a "prima facie " case.1638
Furthermore, Thailand rejects the Philippines' assertion that the press articles imply that the
information on PMTL's transaction values was obtained from the Office of the Attorney General. 1639
Thailand points out that the prices that were at issue in the original proceeding are identical to the
prices at issue in this proceeding, and therefore it is possible that the authors of the relevant press
articles of concern in this proceeding could have obtained the information from sources other tha n
the Thai government, including from the press articles at issue in the original proceeding. 1640
Thailand submits that journalists may have spoken to some of the individuals outside the Thai
government that were familiar either with the current or original p roceeding, and could have
discussed these prices with PMTL itself on the basis that they were discussing the previously -
disclosed prices.1641 Regarding the Philippines' contention that the evidence in this dispute is similar
to that it provided in the original dispute, Thailand notes that, unlike this dispute, in the original
dispute the Philippines provided multiple exhibits as evidence, some of which explicitly identified the
source of the information as the Thai government.1642 Additionally, unlike this dispute, in the original
dispute the parties agreed that the information had been disclosed by Thai government officials.1643
Thailand further argues that additional disclosures of PMTL's import prices by the DSI in 2009 and
2011 do not form part of the Philippines' prima facie case to support its claim under Article 10, and
have no probative value as to the conduct of the Thai authorities in 2016.1644
7.3.8.3 Analysis by the Panel
7.3.8.3.1 General considerations
7.767. Article 10 of the CVA reads as follows:
All information which is by nature confidential or which is provided on a confidential
basis for the purposes of customs valuation shall be treated as strictly confident ial by
the authorities concerned who shall not disclose it without the specific permission of the

1634 Philippines' response to Panel question No. 111, para. 269.
1636 Philippines' response to Panel question No. 112.
1638 Thailand's second written submission, paras. 3.177 and 3.180.
1639 Thailand's second written submission, paras. 3.178.
1640 Thailand's second written submission, paras. 3.183.
1642 Thailand's second written submission, paras. 3.182.
1643 Thailand's second written submission, paras. 3.182.
1644 Thailand's response to Panel question No. 112.

person or government providing such information, except to the extent that it may be
required to be disclosed in the context of judicial proceedings.
7.768. The text of Article 10 can be parsed into several elements. The first element is that the
information in question qualifies as "information which is by nature confidential or which is provided
on a confidential basis for the purposes of customs valuation ". The sec ond element is that the
authorities concerned failed to treat this information "as strictly confidential [and] not disclose it". If
both of those elements are established, there would be a violation of Article 10 unless it was
established that the entity p roviding such information gave "specific permission" to disclose it, or
that such disclosure was "required to be disclosed" in the context of judicial proceedings.
7.769. It is not in dispute that information an importer provides to a customs authority on its
transaction values would normally constitute "confidential" information within the meaning of Article
10. In the context of this compliance proceeding, the Philippines notes that "[f]ew matters are more
commercially sensitive for an importer than pricing inf ormation relating to its imports "1645, and
Thailand does not contest this point. I n the original proceeding, Thailand accepted that
"PM Thailand's customs value is confidential information ", and that "[w]ith respect to imported
cigarettes, the customs value i s confidential and cannot be published ".1646 Although the point was
not in dispute, the original panel set forth its own analysis as to why PMTL's transaction values was
confidential for purposes of Article 10 of the CVA:
The Customs Valuation Agreement neither defines confidential information nor provides
a specific list of information that qualifies as confidential information. We find useful
guidance in the discussions of the Ad Hoc Group on Implementation in the Committee
on Anti-Dumping Practices. The record of the discussions indicates that information can
be considered as confidential if it is not in the public domain and if its disclosure would
be likely inter alia: "to be of significant competitive advantage to a competitor ... , to
have a significant adverse effect upon the party who submitted the information ... , to
prejudice the commercial position of a person who supplied or who is the subject of the
information, ...".1647
… we agree that the very disclosure of PM Thailand's c.i.f. price, transaction values and
imports volume information could cause commercial damages to PM Thailand by giving
its competitors access to its sensitive business information. For example, the nature of
such information could give competitors useful indications on PM Thailand's business
strategy, including profit margins. Thailand did not specifically respond to this
argument. Rather, it acknowledged that "the disclosure of [the c.i.f. price] information
would prejudice the legitimate commercial interests of importers of cigarettes".1648
7.770. As indicated above, the original panel considered that information can be regarded as
confidential for the purposes of Article 10 if it is not "in the public domain". We recall that the original
panel found that Thailand acted inconsistently with Article 10 of the CVA by disclosing PMTL's import
prices to the Thai media in August and September 2006, and in June 2009.1649 As discussed further
below, the evidence before the Panel in th is proceeding indicates that the DSI publicly disclosed
PMTL's import prices subsequently on at least two occasions, in September 2009 and
August 2011.1650 Notwithstanding these prior disclosures, both parties agree that the information on
PMTL's import prices that appeared in the press reports on 19 January 2016 still qualifi es as
"confidential" information for the purposes of Article 10 .1651 We see no reason to disagree. In our
view, the prior unauthorized disclosure of PMTL's confidential business information by Thai officials
does not change the status of that information to n on-confidential, precisely because that prior

1646 Panel Report, Thailand – Cigarettes (Philippines), para. 7.410, and fn 715.
1647 (footnote original) G/ADP/AHG/W/65.
1648 Panel Report, Thailand – Cigarettes (Philippines), paras. 7.408 and 7.410.
1649 Panel Report, Thailand – Cigarettes (Philippines), para. 8.2(g); Philippines' first written submission,
para. 685.
1650 See paragraph 7.786. below.
1651 Philippines' response to Panel question No. 111, para. 271; Thailand's comments on the Philippines'
response to Panel question No. 111, p. 38 (confirming that "Thailand is not seeking to rely on a prior WTO-
inconsistent conduct to justify the alleged subsequent disclosure").

disclosure was made without PMTL's permission.1652 To find otherwise would entail giving an unduly
broad meaning to what is meant by information "in the public domain ", and could lead to the
consequence that a Member's prior WTO-inconsistent disclosure of business confidential information
gives it licence to do so again. This would be antithetical to a Member's obligation under Article 19.1
of the DSU to "bring its measure into conformity" with its WTO obligations.
7.771. In this case, the parties do not disagree on the interpretation of the terms "shall be treated
as strictly confidential by the authorities concerned who shall not disclose it "; rather, the issue in
dispute is the factual issue of whether the confidential information on PMTL's import prices that
appeared in the January 2016 newspaper articles was disclosed by Thai officials. As to the meaning
of these terms in Article 10, we note that the term "shall" establishes a legal obligation, and the
word "strictly" suggests that Members enjoy no latitude or flexibility beyond the limited exceptions
set forth in the text of Article 10. This provision applies broadly and without any textual limitation
to "the authorities concerned ".1653 As the original panel observed in a different context, "WTO
Members are responsible for the actions of their government officials".1654
7.772. Turning to the limited exceptions provided for in the text of Article 10, Thailand explains that
the Public Prosecutor was required to disclose PMTL's impor t prices in the Charges, and that such
disclosure – i.e. the disclosure of this information in the Charges – falls squarely into the exception
provided under Article 10 of the CVA that business confidential information may be disclosed "to the
extent that it may be required to be disclosed in the context of judicial proceedings ".1655 However,
we do not understand the Philippines to suggest otherwise, or to argue that the Public Prosecutor
acted inconsistently with Article 10 by including information on PMTL's import prices in the Charges
themselves. Rather, the Philippines' claim rests on the allegation that Thai officials violated Article 10
insofar as they separately disclosed the information contained in the confidential Charges to the
press.1656
7.773. For its part, Thailand has not argued that PMTL gave specific permission to Thai authorities
to disclose this information to the press, or that any such disclosure to the press by Thai officials
was "required in the context of judicial proceedings". Thailand accepts that the limited exception in
Article 10 for information "required to be disclosed in the context of judicial proceedings" would "not
directly justify the conduct that the Philippines is alleging, as it would not make sense to argue that
an alleged disclosure to the press is justified by the disclosure by the Public Prosecutor to the criminal

1652 The panel in EU – Fatty Alcohols considered certain information relating to the investigated
producers/exporters to be confidential, and such information was therefore bracketed in the panel report.
Following the issuance of the interim report to the parties, the European Union requested the panel to treat
this information as non-confidential as it was already in the public domain. The panel, in its final report,
reduced the bracketing to a limited extent, deleted some of the information the European Union considered
non-confidential, and maintained the bracketing in the other paragraphs. On appeal, the European Union
argued that the information in question was erroneously redacted since it was already in the public domain.
Indonesia, in response, stated that the European Union bore the burden of demonstrating that this information
had been "properly released" into the public domain, questioning whether or not the matter had been
discussed or agreed with the investigated producers/exporters. While the Appellate Body considered that it was
not necessary to rule on this matter in order to arrive at a satisfactory settlement of the dispute, we note the
panel's reluctance to disclose this information in the panel report despite its uncontested existence in the public
domain. (Appellate Body Report, EU – Fatty Alcohols, paras. 5.242-5.252, discussing information redacted in
Panel Report, EU – Fatty Alcohols, paras. 7.64, 7.74, 7.80, 7.82, 7.83)
1653 In Thailand's view, the unqualified reference to "authorities" in Article 10, as distinguished from
other CVA provisions that use the term "customs administration", suggests that its scope extends to any
authority "that could come across this information". (Thailand's comments on the Philippines' response to Panel
question No. 92, p. 24)
1654 Panel Report, Thailand – Cigarettes (Philippines), para. 7.120 (referring to Article 4(1) of the ILC
Articles on State Responsibility; Appellate Body Report, US – Gasoline, p. 28, DSR 1996:I, 3, at pp. 26-27).
1655 Thailand's first written submission, para. 6.87.
1656 We note in this connection that the relevant item of the Philippines' panel request states that
Thailand violated Article 10 of the CVA "because Thailand has disclosed to the Thai media the declared
transaction values for entries covered by the Charges, which is business confidential information" (paragraph
14, final bullet point). (emphasis added) We note that in its first written submission, the Philippines formulated
its request for findings in a manner that could lead to the understanding that the Charges themselves violate
Article 10 (paragraph 856, second bullet point), and this may have led Thailand to argue, in response, that the
inclusion of the information in the Charges themselves does not violate Article 10, on the grounds that this
limited disclosure was "required in the context of judicial proceedings". We note that in its second written
submission, the Philippines formulates its requests for findings in a way that is more consonant with its panel
request, and with the substance of its argumentation in support of this claim (paragraph 800, third bullet
point).

court".1657 Accordingly, we consider that the limited exception in Article 10 regarding the
"[requirement] to be disclosed in the context of judicial proceedings " is not relevant to the claims
made in this case.
7.774. The disputed issue between the parties in relation to the Philippines' claim under Article 10
is whether the Philippines has provided sufficient evidence to demonstrate that PMTL's import prices
were disclosed to the press by Thai officials.
7.3.8.3.2 The evidence before the Panel
7.775. In the light of the parties' arguments and the issue raised by the Philippines' claim under
Article 10, we begin our analysis by clarifying the applicable evidentiary standard. We will then
proceed to provide our assessment of the facts in the light of that standard.
7.776. Thailand submits that the Philippines has not presented evidence to show "with certainty"
that the confidential information was disclosed to the press by Thai government officials, and that
its claim under Article 10 is inste ad based on "inference[s]".1658 Thailand submits that, for this
reason, the Philippines "fails to meet the standard of making a prima facie case" that it was indeed
Thai government officials that disclosed the information to the press.1659 In Thailand's view, "a mere
'inference' is not sufficient to support the Philippines' assertion that the confidential information was
disclosed by Thai government officials ".1660 In response to a question from the Panel1661, Thailand
argues that the Philippines cannot make its case o n the basis of "inferences", and recalls the
Appellate Body's statement that a "prima facie " case "is one which, in the absence of effective
refutation by the defending party, requires a panel, as a matter of law , to rule in favour of the
complaining party presenting the prima facie case".1662
7.777. We agree with Thailand that the evidence before the Panel does not show "with certainty"
that PMTL's import prices were disclosed to the press by Thai government officials. However,
Appellate Body and panel reports support the conclusion that while WTO-inconsistent conduct may
not be lightly presumed, and must always be supported by sufficient evidence, the applicable
evidentiary standard of proof in WTO dispute settlement proceedings is closer to that of the balance
of probabilities, and is not a standard of certainty or proof beyond a reasonable doubt. It is well
established that a complainant is only required to make a prima facie case, and that a prima facie
case is made when a complainant provides evidence "sufficient to raise a presumption that what is
claimed is true ".1663 Where the evidence submitted to a panel "support two plausible conclusions
that one could draw", the relevant question is whether the evidence makes one of the two probable
outcomes "more likely than not".1664 Indeed, a panel would commit a legal error insofar as it required
the complainant to provide evidence "necessarily showing"1665 a particular fact, in the sense of
requiring that the evidence "in no circumstance permit of a conclusion other than the existence of
that fact".1666

1657 Thailand's response to Panel question No. 58(a), p. 50.
1658 Thailand's second written submission, paras. 3.177 and 3.181.
1659 Thailand's second written submission, paras. 3.177.
1660 Thailand's second written submission, paras. 3.180.
1661 Thailand's response to Panel question No. 58(c).
1662 Appellate Body Report, EC – Hormones, para. 104 (referring to Appellate Body Report, US - Wool
Shirts and Blouses, p. 14, DSR 1997:I, 323, at p. 335). (emphasis added)
1663 Appellate Body Report, US – Wool Shirts and Blouses, p. 14, DSR 1997:I, 323, at p. 335. (emphasis
added)
1664 The Appellate Body found that "it is more likely than not that the revised GSM 102 programme
operates at a loss", and found, on that basis, that "[t]herefore, we consider that Brazil has succeeded in
establishing" its claim of violation under item (j) of the Illustrative List of Export Subsidies annexed to the SCM
Agreement. (Appellate Body Report, US – Upland Cotton (Article 21.5 – Brazil), paras. 301 and 321) (emphasis
added)
1665 Emphasis added.
1666 Appellate Body Report, US – Continued Zeroing, para. 335. (emphasis original) Several panels have
made findings to the same effect. For example, in Canada – Dairy (Article 21.5 – New Zealand and US II), the
panel rejected a legal benchmark proposed by the respondent on the grounds that it would entail "a standard
of proof akin to the 'beyond a reasonable doubt' standard under criminal law". (Panel Report, Canada – Dairy
(Article 21.5 – New Zealand and US II), para. 5.67) In US – Countervailing and Anti-Dumping Measures
(China), the panel found that a series of challenged determinations were inconsistent with applicable WTO
obligations arising from an inference drawn from certain facts. That panel acknowledged that those facts "do

7.778. We also agree with Thailand that there is no direct evidence before the Panel establishing
that PTML's import prices were disclosed to the press by Thai government officials, and that the
Philippines' claim under Article 10 is indeed based on inference and circumstantial evidence. We do
not consider this to be decisive. As a consequence of the applicable evidentiary standard being closer
to that of a balance of probabilities, and not that of certainty or proof beyond a reasonable doubt, it
is well established that panels may make findings of fact based on inferences and circumstantial
evidence. The Appellate Body has stated that "a panel may have a sufficient basis to reach an
affirmative finding regarding a particular fact or clai m on the basis of inferences that can be
reasonably drawn from circumstantial rather than direct evidence. "1667 The Appellate Body has
elaborated as follows:
[P]anels routinely draw inferences from the facts placed on the record. The inferences
drawn may be inferences of fact: that is, from fact A and fact B, it is reasonable to infer
the existence of fact C. … The facts must, of course, rationally support the inferences
made, but inferences may be drawn whether or not the facts already on the record
deserve the qualification of a prima facie case. The drawing of inferences is, in other
words, an inherent and unavoidable aspect of a panel's basic task of finding and
characterizing the facts making up a dispute.1668
7.779. The Appellate Body has explained that, as a gener al principle, "precisely how much and
precisely what kind of evidence will be required to establish [a prima facie case] will necessarily vary
from measure to measure, and provision to provision, and case to case".1669 Based on the foregoing,
we consider the relevant question to be whether the circumstantial evidence before the panel
rationally supports the inference that, on or about 18 January 2016, Thai officials likely disclosed
PMTL's confidential import prices to the media. We must make an objective asse ssment of that
question based on a close scrutiny of the evidence provided to the Panel by the parties, and on the
basis of the inferences rationally supported by that evidence.
7.780. On 19 January 2016, newspaper articles published in the Bangkok Post and The Phuket News
reported on the filing of the Charges. Copies of these articles have been provided to the Panel. The
article published in the Bangkok Post1670 provided information related to the filing of the Charges,
and then disclosed the following information on import prices of PMTL and other, unnamed cigarette
importers:
In 2013 the attorney -general indicted PMTL for allegedly under -reporting the value of
cigarettes it imported from the Philippines between 2003 and 2006 to avoid paying the
full amount of tax.

not necessarily lead to this (and only this) conclusion", and that while recognizing that an alternative
explanation could be drawn from those facts, the panel stated that "to reject China's claim on the basis of a
remote possibility … would not be in keeping with the standard of proof that applies in WTO panel
proceedings". (Panel Report, US – Countervailing and Anti-Dumping Measures (China), para. 7.378 (referring
to Appellate Body Report, US – Continued Zeroing, para. 335)) In US – Large Civil Aircraft (2nd complaint)
(Article 21.5 – EU), the compliance panel stated that it was "satisfied on the balance of probabilities" that an
amendment to a South Carolina law was intended to provide a property tax exemption in respect of Boeing's
aircraft. (Panel Report, US – Large Civil Aircraft (2nd complaint) (Article 21.5 – EU), para. 8.996)
1667 Appellate Body Report, US – Continued Zeroing, para. 357.
1668 Appellate Body Report, Canada – Aircraft, para. 198. Panels have made statements to the same
effect. In US – Large Civil Aircraft (2nd complaint) (Article 21.5 – EU), the compliance panel stated that it was a
"reasonable inference" that an amendment to a South Carolina law was intended to provide a property tax
exemption in respect of Boeing's aircraft. (Panel Report, US – Large Civil Aircraft (2nd complaint) (Article 21.5 –
EU), para. 8.996) As one panel has observed, "[i]n situations where direct evidence is not available, relying on
inferences drawn from relevant facts of each case facilitates the duty of international tribunals in determining
whether or not the burden of proof has been met". (Panel Report, Argentina – Textiles and Apparel, para. 6.39
(referring to Keith Highet, "Evidence and Proof of Facts" in The International Court of Justice at a Crossroads,
Transnational Publishers, Inc. (1987), p. 355 and Mojtaba Kazazi, Burden of Proof and Related Issues, Kluwer
(1996)))
1669 Appellate Body Report, US – Wool Shirts and Blouses, p. 14, DSR 1997:1, 323, at p. 335.
1670 King-Oua Laohong, "Philip Morris tax evasion case reaches court", Bangkok Post, 19 January 2016,
available at http://www.bangkokpost.com/news/general/831708/philip-morris-tax-evasion-case-reaches-court
(last accessed 6 December 2016), (Exhibit PHL-119).

The value of the imported products and avoided tax was estimated at 20 billion baht.
The offence is liable to a fine worth four times the amount, or about 80 billion baht,
and/or a jail term of up to 10 years.
The company reportedly declared 5.88 baht as its CIF (cost, insurance and freight) rate
for a packet of L&M cigarettes from the Philippines, while other cigarette importers
declared it at 16.81 baht per packet.
PMTL also declared the CIF rate on Marlboro cigarettes from the Philippines at 7.76 baht
a packet, lower than the 27.46 baht reported by other importers.
7.781. The content of the article in The Phuket News1671 is virtually identical to that which appeared
in the Bangkok Post, and the above passage appears in identical terms in both articles. The article
in The Phuket News states, in several places, that it is based on other "Thai media reports ";
furthermore, it contains a hyperlink to what is identified as the "original story", which directs to the
article from the Bangkok Post. Thus, it appears that the information in the article published in The
Phuket News was directly based on the information already published in the Bangkok Post - as
opposed to being based on any information disclosed by Thai officials.
7.782. This leads us to conclude that Thailand is partially correct when it suggests that information
contained in the two media reports in question may have been based on other, earlier media reports:
in this case, one is based on information contained in the other. This also leads us to reiterate that
while a panel may find that a Member has acted in a WTO-inconsistent manner based on inferences
drawn from circumstantial evidence, such inferences are not to be drawn lightly, or without close
scrutiny of the available evidence before the Panel. In the light of the foregoing, the remainder of
our analysis focuses on the source of the information in the "original story", i.e. the article in the
Bangkok Post.
7.783. The article published in the Bangkok Post does not specifically or directly identify the source
of the information on the import prices of PMTL or of other cigarette importers. Furthermore, we find
nothing in the text of the article that sheds any light on the source of the information. It is true, as
the Philippines notes, that the article refers to other information provided by the Attorney -General
in connection with the filing of the Charges, "immediately before reporting PM Thailand's declared
CIF transaction values".1672 However, we do not consider that certain information in the article being
specifically attributed to the Attorney-General rationally supports the inference that the unattributed
information appearing in the same article, regarding the import prices of PMTL and other cigarette
importers, should also be attributed to the same source. 1673 In this regard, we observe that the
article also refers to statements made by representatives of PMTL in connection with the issuance
of the Charges. Having found nothing intrinsic to the text of the article that sheds light on the source
of the confidential info rmation disclosed therein, we proceed with our assessment of the issue in
light of the surrounding factual circumstances and the context of this article.
7.784. The Bangkok Post includes the import prices of both PMTL and King Power, without
referencing the latt er by name, in a way that corresponds to the information contained in the
confidential Annex to the Charges. Since the Annex to the Charges remains confidential, and is
therefore not available in the public domain in any prior news articles or otherwise, this information
comparing PMTL's import prices with those of King Power that appeared in the Bangkok Post article
necessarily demonstrates knowledge of some of the information contained in the Annex to the
Charges issued on 18 January 2016. If the article referred solely to PMTL's import prices in the
context of reporting on the Charges, then it is possible that the information on PMTL's import prices
might have been obtained from prior press articles published in Thailand, insofar as one proceeded
on the assumption that PMTL's import prices remain static over time.1674 However, the fact that the

1671 The Phuket News, "Philip Morris tax evasion case reaches court", 19 January 2016, available at
http://www.thephuketnews.com/philip-morris-tax-evasion-case-reaches-court-55840.php (last accessed 6
December 2016), (Exhibit PHL-120).
1673 In this regard, we have noted Thailand's arguments at paragraphs 3.178-3.179 of its second written
submission.
1674 Philippines' response to Panel question No. 111, para. 269. At paragraph 270 of its response to
Panel question number 112, the Philippines states that "[n]o respectable journalist writing an article in January
2016 concerning entries from 2003 to 2006 would simply copy previously reported transaction values from
earlier press articles pertaining to entries from 2006 to 2008." In response, Thailand maintains that "[t]he

news article mirrors the comparison between PMTL's import prices with those of King Power as
contained in the confidential Annex to the Charges, makes it difficult to conceive of why or how the
Bangkok Post article would contain this information unless the Annex to the Charges (or at least the
confidential information on the import prices therein) was disclosed to the press on or about 18
January 2016.
7.785. There are several past examples of Thai government officials (including officials from the
DSI) disclosing PMTL's import prices for L&M and Marlboro cigarettes to Thai newspapers. In the
original proceeding, the panel found that Thai government officials did so on three separate
occasions, in the months of August 2006, September 2006, and again in June 2009. 1675 In the
original dispute the Philippines provided multiple exhibits as evidence, some of which explicitly
identified the source of the information as the Thai government, and the parties agreed that the
information had been disclosed to the media by Thai government officials.1676 In this proceeding,
Thailand seeks to contrast the Bangkok Post article with these other reports, in that it does not
explicitly identify the source of the information as the Thai government.
7.786. Furthermore, based on our review of the exhibits provided by the parties in this proceeding,
it appears that, on at least two more subsequent occasions, the DSI disclosed PMTL's import prices
for Marlboro and L&M cigarettes to the public. The first occasion occurred in September 2009, when
the DSI issued a press release recommending prosecution: without naming PMTL by name, this
press release provides the transaction values for Marlboro and L&M of the "foreign entity" that is an
"affiliate of the world's largest tobacco manufacturing group", and which imports Marlboro and L&M
from the "affiliate" in the Philippines.1677 The second occasion occurred in August 2011, when the
DSI issued a press release reiterating its recommendation for prosecution: this time the DSI,
identifying PMTL by name, included its import price for Marlboro cigarettes, as well as the customs
values determined by Customs Department. 1678 It is notable that the second disclosure that took
place in August 2011 occurred well after the original panel found a violation of Article 10 of the CVA
by virtue of the disclosure of PMTL's transaction values by different Thai government officials,
including officials from the DSI.
7.787. As Thailand correctly points out, however, these press releases were not identified as part
of the Philippines' claims as presented in its panel request.1679 Accordingly, we agree with Thailand
that it would be outside of our terms of reference to make any findings of inconsistency under Article
10 with respect to the DSI press releases from September 2009 and August 2011, and we make no
such findings. Thailand also stresses that the Philippines did not refer to the DSI press releases in
the context of making a "prima facie" case under Article 10. 1680 It is well established that a panel
must not make a prima facie case for a party that bears the burden of proof in relation to a claim or
a defence. However, insofar as Thailand is suggesting that the Panel's assessment of the Philippines'
claim under Article 10 must be confined to the evidence which the Philippines itself referred to in the
course of trying to make i ts prima facie case, we disagree: there is no strict temporal sequence of
proof in WTO dispute settlement proceedings requiring a panel to make a specific finding on whether
the complainant has, at a particular point in time in the course of the proceeding , made a prima
facie case.1681 Nor would such an approach sit easily with the Appellate Body's repeated insistence
that panels have a significant degree of discretion in weighing and analysing evidence, which includes
the prerogative both to "decide which evidence it chooses to utilize in making its findings "1682 and
"how much weight to attach to the various items of evidence placed before it by the parties".1683

journalist could have assumed that the values were the same because the entries at issue were consecutive. It
could also have assumed that transaction values usually do not change over the years. These are perfectly
plausible scenarios, taking into account that the journalist concerned might not have been a specialist in
customs matters, might not have had other information available, might have had a deadline, or might have
assumed that the previously-disclosed information was public knowledge." (Thailand's comments on the
Philippines' response to Panel question No. 111, p. 38)
1675 Panel Report, Thailand – Cigarettes (Philippines), para. 7.409.
1676 Thailand's second written submission, para. 3.182.
1677 DSI, Press release, 2 September 2009 (English translation), (Exhibit PHL 90-B), pp. 1-2.
1678 DSI, Press release, 17 August 2011 (English translation), (Exhibit PHL 93-B), p. 3.
1679 Thailand's response/comments in relation to Panel question No. 112.
1680 Thailand's response/comments in relation to Panel question No. 112.
1681 Panel Report, EC and certain member States – Large Civil Aircraft (Article 21.5 – US), paras 6.50-
6.51.
1682 Appellate Body Report, EC – Hormones, para. 135.
1683 Appellate Body Report, Chile – Price Band System (Article 21.5 – Argentina), para. 229.

7.788. Having said this, the fact that certain Thai government officials disclosed PMTL's confidential
import prices in the past is not a sufficient or decisive basis for concluding that Thai government
officials acted inconsistently with the same WTO obligation several years later. In Chile – Alcoholic
Beverages, the Appellate Body explained that:
[T]he Panel has relied on the fact that previous Chilean measures, which are no longer
applicable, involved some protection of domestic alcoholic beverages to show that the
new tax system will also be applied "so as to afford protection". The Panel's reliance on
this factor is wrong. Members of the WTO should not be assumed, in any way, to have
continued previous protection or discrimination through the adoption of a new measure.
This would come close to a presumption of bad faith. Accordingly, we hold that the Panel
committed legal error in taking this factor into account in examining the issue of "so as
to afford protection".1684
7.789. This does not mean that these facts are not relevant, and have no probative value, to the
question before us. The information before the Panel establishes that Thai government officials
disclosed PMTL's confidential import prices for Marlboro and/or L&M to the press on at least five
separate occasions, over a period of several years, prior to the issuance of the Charges; that such
disclosure occurred by different Thai government officials before, during, and after the original panel
proceedings; and that these prior disclosures concerned exactly the same kind of information that
was disclosed in the Bangkok Post article, namely PMTL's import price s for Marlboro and L&M
cigarettes. We agree with the Philippines that this evidences a consistent pattern by Thailand of
disclosing PMTL's confidential information. 1685 However, we consider that it would constitute legal
error for us to presume that Thai offi cials disclosed the information to the media on the basis of
these prior actions.
7.790. The evidence before the Panel establishes that the information comparing PMTL's import
prices with those of King Power that appeared in the Bangkok Post article published on 19 January
2016 necessarily demonstrates knowledge of some of the information contained in the Annex to the
Charges issued on 18 January 2016 . Thai government officials have previously disclosed PMTL's
confidential import prices for Marlboro and/or L&M to the press on at least five separate occasions,
over a period of several years, prior to the issuance of the Charges. In the light of the foregoing, we
certainly cannot exclude that PMTL's import prices for L&M and Marlboro that were referenced in the
19 January 2016 article in the Bangkok Post were disclosed by Thai government officials.
7.791. However, the press reports do not identify who disclosed this information. Even if it appears
unlikely that PMTL would have disclosed information prejudicial to its own i nterests to the media,
this does not sufficiently answer the question of which individual disclosed it. The universe of
individuals who may have had access to the confidential information in the Charges is unknown.
Following our close review of the articles submitted by the Philippines, it is clear that the information
in one of the two articles came from the other article, and not from Thai officials. Furthermore, while
Thai government officials disclosed PMTL's confidential import prices in the past, this is not a
sufficient or decisive basis for concluding that Thai government officials acted inconsistently with the
same WTO obligation several years later.
7.792. The Philippines was not required to provide evidence meeting a standard of proof beyond a
reasonable doubt, and as a panel we are free to make factual findings based on inference and
circumstantial evidence. However, we cannot engage in speculation, or make factual findings giving
rise to a finding of violation based on an educated guess. Having carefully considered the evidence
before us, we conclude that there is insufficient evidence to sustain the conclusion that Thai officials
disclosed PMTL's transaction values to the media in connection with the Charges filed on 18 January
2016.

1684 Appellate Body Report, Chile – Alcoholic Beverages, para. 74. We note that panels and the Appellate
Body have consistently reiterated that there is no presumption of inconsistency in WTO dispute settlement, and
that a Member is presumed to have fulfilled its WTO obligations unless proven otherwise. (See Appellate Body
Report, EC – Sardines, para. 278; Appellate Body Report, US – Section 211 Appropriations Act, para. 259;
Panel Report, US – Certain EC Products, para. 6.110; Panel Report, US – Continued Suspension, para. 7.338;
Panel Report, Canada – Continued Suspension, para. 7.339; Panel Reports, China – Rare Earths, para. 7.390,
7.709; and Decision by the Arbitrator, EC – Hormones (Article 22.6 – EC), para. 9).
1685 Philippines' response to Panel question No. 112.

7.3.8.4 Conclusion
7.793. For the reasons set forth above, the Panel finds that the evidence before it is insufficient to
find that the Philippines has discharged its burden of demonstrating that Thai officials were
responsible for disclosing PMTL's import prices to the media, contrary to Thailand's obligation under
Article 10 of the CVA. The Panel wishes to emphasize, however, that it is highly regrettable that the
purpose of Article 10 of the CVA has been frustrated. We recall the original panel's finding that
Thailand acted inconsistently with Article 10 of the CVA by disclosing confidential customs valuation
information, provided by PMTL to Thai Customs, to the Thai media. 1686 The relevant Thai agencies
should take all necessary precautionary measures to ensure that PMTL's transaction values are kept
strictly confidential in accordance with Article 10 of the CVA. In this regard, the Panel observes that
the obligation in Article 10 of the CVA is of a continuing nature, as are the DSB's recommendations
and rulings in connection with Article 10 arising from the original proceeding.
7.4 The VAT notification requirement
7.4.1 General
7.4.1.1 Factual background
7.794. This section briefly describes the uncontested facts relevant to the VAT notification
requirement. We note that the parties disagree on several fundamental factual issues regarding the
operation of the VAT notification requirement. We address these issues in Section 7.4.2 below, and
in the course of our analysis of the Philippines' claims under Articles X:1, X:3(a) and III:4 of the
GATT 1994.
7.795. Thailand charges VAT, at an ad valorem rate, on imported and domestic goods and services
sold in Thailand.1687 The tax liability under an ad valorem tax is a function of the tax rate and the
tax base used.1688 Under Thailand's VAT scheme, cigarette importers are responsible for paying the
VAT on cigarettes they distribute for retail sale in Thailand.1689 Previously, Thailand based its VAT on
maximum retail selling prices (MRSPs) established by the Excise Department on a brand -specific
basis.1690 In response to the DSB's recommendations and rulings in the original proceeding, Thailand
modified its VAT regime and abandoned the use of MRSPs as the VAT base. 1691 Under the modified
regime, VAT for cigarettes is now based on a retail selling price (RSP) notified for each brand by
importers, including but not limited to PMTL. The VAT is determined on the same basis for TTM (the
sole domestic cigarette producer).1692
7.796. On 31 August 2012, the Revenue Department adopted Notification 187, which provides a
replacement VAT base.1693 Clauses 4(2) and 5(2) of Notification 187 read together with Clause 6(1)
provide that, in June of each year, TTM and each importer (including PMTL) are required to notify to
the Revenue Department the retail selling price, which is defined as the "average price of the market
price" for each brand that they sell. 1694 The RSP is used for the calculation of the VAT base from

1686 Panel Report, Thailand – Cigarettes (Philippines), para. 8.2(g).
1689 Philippines' first written submission, para. 732; Thailand's response to Panel question No. 62(a).
1690 For discussion, see Panel Report, Thailand – Cigarettes (Philippines), paras. 7.458-7.473.
1691 On 24 May 2012, Thailand reported to the DSB that the Excise Department had issued two
regulations, on 15 May 2012, that eliminated MRSPs entirely. (See WT/DSB/M/316, 20 July 2012, para. 58)
1692 According to Thailand, the RSP is "notified by cigarette producers to the Revenue Department."
(Thailand's first written submission, para. 7.3)
1693 Notification No. 187 on VAT, "Determination of tax base, categories and types of tobacco for sale for
which the value of the tax base is required to be calculated according to the rules under Section 79/5(2) of the
Revenue Code", 31 August 2012 (English translation), (Notification 187), (Exhibit PHL-121-B).
1694 Notification 187, (Exhibit PHL-121-B). The Philippines observes that the VAT base is based on the
higher of a constructed retail price (option 1) and an average actual market price (option 2), and that, since
the adoption of Notification 187 and Order Por. 145-2555, the VAT base for all domestic and imported
cigarettes has been set pursuant to option 2. The Philippines' claims in this proceeding concern the
requirement to notify "the average price of the market price actually purchased and sold in general on the date
on which the value added tax liability occurs", pursuant to option 2. (Philippines' first written submission,
paras. 736-737)

1 July to 30 June of the next year.1695 If the price changes during the course of the year, a revised
RSP must be notified.1696
7.797. Following the adoption of Notification 187 in August 2012, the Philippines raised concerns
with Thailand that importers could not meet the notification requirement s pecified in Notification
187.1697 On 21 September 2012, PMTL raised similar concerns in a letter sent to the Revenue
Department, and indicated that it would notify the recommended retail selling price (RRSP), because
it was unable to comply with the requirement to notify the average actual market price, and invited
the Revenue Department to advise PMTL should it have concerns with PMTL's compliance. 1698 The
company noted its understanding that "the use of RRSPs is consistent with the VAT tax base ".1699
On 28 Septemb er 2012, in its first notification after Notification 187 entered into force, PMTL
informed the Revenue Department that it was notifying the RRSP. 1700 On 10 October 2012, in
response to the Philippines' requests for memorialization of the importers' right to notify the
recommended retail selling price, Thailand sent the Philippines a note, by email, stating that "where
manufacturers set the market price by means of recommended retail selling prices, the
recommended retail selling prices may be notified".1701
7.798. On 30 November 2012, the Revenue Department adopted Order Por. 145-2555.1702 Clauses
4(1), 5(1) and 6(2) of Order Por. 145-2555 reiterate the requirement that in June of each year, TTM
and each cigarette importer are to notify to the Revenue Department the retail selling price.
Additionally, Clause 2(4) of Order Por. 145 -2555 clarifies that the retail price to be notified under
Notification 187 is the average of the actual purchase prices paid for cigarettes by the majority of
consumers, to retailers, on the notification date in June of each year.1703 After the adoption of Order
Por. 145-2555, PMTL continued to notify the RRSP in every subsequent June notification.1704 In the
notifications of June 2013, June 2015, and June 2016, PMTL again expressed its understanding that
it is acceptable to notify the RRSP as the VAT base. 1705 In those notifications, the company
consistently referred to the letter of September 2012 inviting objections to this understanding from
the Revenue Department, and noted that it had never received any letter of disagreement.1706

1695 Notification 187, (Exhibit PHL-121-B), Clause 6(1).
1696 Notification 187, (Exhibit PHL-121-B), Clause 6(2).
1697 Philippines' first written submission, paras. 748-751. Thailand has not contested that the Philippines
had concerns with regard to the operation of Notification 187. (See Thailand's first written submission, paras.
7.1-7.81; and second written submission, paras. 4.1-4.47)
1698 Letter from PMTL to the Director of the Revenue Department, 21 September 2012 (English
translation), (Exhibit PHL-123-B).
1699 Letter from PMTL to the Director of the Revenue Department, 21 September 2012 (English
translation), (Exhibit PHL-123-B), p. 2.
1700 See, e.g. Letter from PMTL to the Director of the Revenue Department, 28 September 2012 (English
translation), (Exhibit PHL-129-B).
1701 Email communication between officials of the Permanent Mission of the Philippines to the WTO and
the Permanent Mission of Thailand to the WTO, 10 October 2012, (Exhibit PHL-130).
1702 Order Por. 145-2555, Calculation of Tax Base for Importation and Sale of Tobacco According to the
Category and Type Prescribed by the Director-General and Approved by the Minister Under Section 79/5 of the
Revenue Code, and Preparation of Tax Invoice In Case of Sale of Tobacco Under Section 86/5(2) of the
Revenue Code (English translation), (Order Por. 145-2555), (Exhibit PHL-122-B).
1703 Specifically, Clause 2(4) of Order Por. 145-2555 defines the term "the average price of the market
price actually purchased and sold in general on the date on which the value added tax liability arises", which is
set forth in Notification 187. Clause 2(4) of Order Por. 145-2555 defines this term with respect to both
domestic and imported cigarettes. The clause states that the term "average price of the market price actually
purchased and sold in general on the date on which the Value Added Tax liability occurs" means "the market
price of tobacco for each type of cigarette category at which the consumers in general or the majority [of
them] purchase" cigarettes "on the date on which the registered operator … notifies the retail selling price
which is used for the calculation of the value of the tax base". (Order Por. 145-2555, (Exhibit PHL-122-B))
1704 Philippines' first written submission, para. 750; Thailand's first written submission, paras. 7.12 and
7.21.
1705 Letter from PMTL to the Director of the Revenue Department, 28 June 2013 (English translation),
(Exhibit PHL-132-B); Letter from PMTL to the Director of the Revenue Department, 25 June 2015 (English
translation), (Exhibit PHL-133-B); Letter from PMTL to the Director of the Revenue Department, 29 June 2016
(English translation), (Exhibit PHL-134-B). The Philippines has not submitted the notification for 2014. (See
Philippines' first written submission, para. 753, fn 462)
1706 Letter from PMTL to the Director of the Revenue Department, 28 June 2013 (English translation),
(Exhibit PHL-132-B); Letter from PMTL to the Director of the Revenue Department, 25 June 2015 (English
translation), (Exhibit PHL-133-B); Letter from PMTL to the Director of the Revenue Department, 29 June 2016
(English translation), (Exhibit PHL-134-B).

7.4.1.2 Claims and order of analysis
7.799. The parties' requests for findings in relation to the VAT notification requirement are set out
in greater detail in Section 3 of our Report. As reflected there, the Philippines advances several
claims under the GATT 1994 relating to the notification requirement arising under Notification 187
and Order Por. 145-2555.1707 The Philippines claims that the requirement for cigarette importers to
notify in June of each year the "average actual market price "1708 for cigarettes on the date of
notification is inconsistent with Articles III:4 and X:3(a) of the GATT 1994, and that Thailand's failure
to publish a rule allowing cigarette importers to notify the RRSP in fulfilment of the VAT notification
requirement is inconsistent with Article X:1 of the GATT 1994. Thailand argues that the Philippines
has failed to demonstrate that Thailand acted inconsistently with Articles X:1, X:3(a) and III:4 of
the GATT 1994.1709
7.800. The Philippines' claims under Articles X:1, X:3(a) and III :4 rest on a number of factual
premises that reflect, in Thailand's view, an inaccurate description of the operation of Thailand's VAT
notification requirement. We begin our analysis by addressing certain disputed factual issues that
relate to several of the Philippines' claims regarding the operation of the VAT notification requirement
under Articles X:1, X:3(a) and III:4. After addressing these factual aspects of the operation of the
VAT notification requirement, we will proceed to examine the Philippines' claims under Articles X:1,
X:3(a) and III:4. Since our findings under Article X:1 inform our analysis of the Philippines' claims
under Articles X:3(a) and III:4, we address the claim under Article X:1 first.
7.4.2 The operation of the VAT notification requirement
7.4.2.1 Introduction
7.801. The Philippines' claims relating to the VAT notification requirement rely on the different legal
situations of TTM and PMTL under Thai competiti on law as a relevant factual circumstance. In this
respect, the parties disagree whether legislative changes that Thailand has introduced into its
competition legislation in the course of this proceeding should be taken into account by the Panel.
We address this question first in our analysis below.
7.802. Additionally, the Philippines' claims under Article X:1, X:3(a) and III:4 rest on a number of
factual premises that reflect, in Thailand's view, an inaccurate description of the operation of
Thailand's VAT notif ication requirement. Among other things, Thailand denies the Philippines'
assertion that PMTL is not in a position to know the average actual market price on the date of
notification and thus cannot notify it. It also denies the Philippines' assertion that , in the event the
notified RRSP turns out to be less than the average actual market price, the importer will face legal
consequences. These issues relate to several of the Philippines' claims in relation to the VAT
notification requirement under Articles X:1, X:3(a) and III:4, and we therefore address them before
turning to those specific claims.
7.803. With regard to the Philippines' assertion that PMTL is not in a position to know the average
actual market price on the date of notification and thus cannot noti fy it1710, Thailand submits that
the Philippines' claims are based on "incorrect" and "unsupported" assumptions.1711 Thailand
considers that: (i) like TTM, PMTL "equally can, and does, set the downstream retail price", despite
the operation of Thai competition law1712; (ii) importers can satisfy the VAT notification requirement
through the use of RRSPs, which in effect amount to actual selling prices1713; (iii) the Philippines has
not proved that it is impossible for the importers to know the average actual market pric e through

1707 Philippines' first written submission, paras. 728-854; and second written submission, paras. 717-
796.
1708 In their submissions, the parties use the expression the "average actual market price" to refer to
"average price of the market price", the term used in Notification 187. Accordingly, we use the same
terminology as the parties.
1709 Thailand's first written submission, paras. 7.1-7.81; and second written submission, paras. 4.1-
4.47.
1710 Philippines' first written submission, paras. 745-746, 804-807 and 827; and second written
submission, paras. 758 and 790.
1711 Thailand's first written submission, paras. 7.38-7.39.
1712 Thailand's first written submission, paras. 7.39.
1713 Thailand's first written submission, paras. 7.12, 7.21 and 7.38; second written submission, paras.
4.16-4.17.

collection of market research data 1714; and (iv) the importers have not encountered problems in
complying with the notification requirement in recent years.1715
7.804. Thailand also contests the Philippines' assertions that in the event the notified RRSP tur ns
out to be less than the average actual market price the importer will face legal consequences. 1716
Thailand submits that even if a cigarette importer could not ensure that it complies with the
requirement, and there is a discrepancy, it would not be in "legal jeopardy" because it can simply
notify the correct price without legal consequences.1717
7.4.2.2 Temporal scope of the Panel's analysis
7.805. On the date of the establishment of the Panel, Section 4(2) of the Competition Act of Thailand
(1999) contained an exemption from competition law for state enterprises.1718 It is an uncontested
fact that TTM, the domestic producer of cigarettes, enjoyed the exemption at the time and was thus
free to enter into pricing arrangements with wholesalers and retailers. 1719 The parties also agree
that, as of the date of the establishment of the Panel, cigarette importers enjoyed no such exemption
and thus were subject to the general requirements of competition legislation, and in particular
Section 27(1) of the Thai Competition Act, 1999.1720
7.806. In the course of th is proceeding, Thailand modified its competition law . In its first written
submission, Thailand explained that it was in the process of revising the relevant competition laws
for other purposes, and that one of the proposed changes "would eliminate TTM's exemption from
the competition laws ".1721 At that time, Thailand stated that due to unforeseen developments in
Thailand, this legislative process had taken longer than expected to complete, and, while it remained
on the legislative agenda, "it [was] difficult to predict with certainty when it [would] be
completed".1722 In its second written submission, Thailand informed the Panel that the proposed
amendments, including the "elimination of TTM's exemption " from the competition laws, had
received legislative approval and were awaiting Royal Assent, and that it was anticipated that the
amendments would come into effect in the third quarter of 2017.1723 In its responses to the Panel's
questions, Thailand states that its "competition law was recently modif ied to introduce multiple
changes, among which is the elimination of TTM's automatic exemption from competition legislation.
The amended competition law was published on 7 July 2017 in Thailand's official gazette, and
entered into force on 5 October 2017."1724
7.807. The parties disagree as to whether the Panel should take into account the amendment of
Thailand's competition law in the course of this proceeding. In response to a question from the Panel,
Thailand clarified that it was requesting that the Panel take t he "amendment" into account and
submitted that this would be consistent with the meaning of the Philippines' panel request, which
indicates that "[t]his request for the establishment of a panel also concerns any amendments to the

1714 Thailand's response to Panel question Nos. 65 and 115(b); comments on the Philippines' response
to Panel question No. 115(a).
1715 Thailand's first written submission, para. 7.21; response to Panel question No. 115(b), p. 43; and
comments on the Philippines' response to Panel question No. 116.
1716 Thailand's second written submission, para. 4.18; and response to Panel question No. 62(a).
1717 Thailand's second written submission, para. 4.18.
1718 Section 4 of the Competition Act, 1999 reads: "This Act shall not apply to the act of: … (2) State
enterprises under the law on budgetary procedure". (Competition Act, B.E. 2542 (1999) (English translation),
(Exhibit PHL-124-B))
1719 Philippines' first written submission, para. 747 and fn 452; Thailand's first written submission,
paras. 7.47-7.48; and second written submission, para. 4.7.
1720 Section 27(1) of the Competition Act, 1999 reads: "[a]ny business operator shall not enter into an
agreement with another business operator to do any act amounting to a monopoly, or reduction of competition
or restriction of competition in the market of any particular goods or any particular service in any of the
following manners:(1) fixing selling prices of goods or service as a single price or as agreed, or restricting the
purchase volume of goods or services." (Competition Act, B.E. 2542 (1999) (English translation), (Exhibit PHL-
124-B))
1721 Thailand's first written submission, para. 7.48.
1722 Thailand's first written submission, para. 7.48.
1723 Thailand's second written submission, para. 4.47.
1724 Thailand's response to Panel question No. 62(a), p. 56. Thailand submits as Exhibit THA-42 a copy
of Thailand's official gazette of 7 July 2017 in which Thailand's amended competition law was published.
Thailand stated that it did not yet have an English translation of the relevant provisions of the amended
competition law, and for the moment therefore Thailand's exhibit contained only the cover page of the official
gazette in Thai and a general English translation of this cover page.

measures identified above".1725 Thailand further submits that the absence of a finding on the current
regulatory framework "leaves the parties in a state of uncertainty regarding whether Thailand has
come into compliance" and that "[t]he Panel's failure to address the amendments to the competition
law could result in the parties being forced to initiate unnecessary additional compliance proceedings
under Article 21.5 of the DSU." 1726 The Philippines, for its part, considers that its claim under
Article III:4 is an "as such" claim, and tha t "[i]f the legal regime in Thailand were reformed in a
manner that would, on its face, impose the same risk of legal jeopardy on the producer of domestic
cigarettes as is currently faced by importers of foreign cigarettes, then this would remove the basis
for an 'as such' challenge under Article III:4 ".1727 However, the Philippines submits that it is well -
established that a panel should rule on measures as they stand at the time of the panel's
establishment.1728 The Philippines argues that therefore it is "neither necessary as a matter of law,
nor appropriate in the circumstances of this case, for the Panel to take account of changes to Thai
competition law".1729
7.808. We address the question of whether or not we should take into account the amendment of
Thailand's competition law bearing in mind that Thai competition law has not been challenged as a
measure at issue in this proceeding. Rather, the Philippines has framed its claim under Article III:4
in a manner that focuses on the VAT notification requirement in Notification 187 and Order Por. 145-
2555 as the specific measure at issue, and that presents TTM's exclusion from Thai competition law
as a relevant factual circumstance that creates "different situations" for TTM and PMTL, as a
consequence of which the VAT notific ation requirement gives rise to less favourable treatment.1730
We recall that a panel may examine a legal instrument enacted after the date of the panel's
establishment, which amends one of the challenged measures at issue, provided that the panel
request is broad enough to encompass such an amendment and the amendment does not change
the "essence" of the measure.1731 However, in this proceeding, the provisions of Thai competition
legislation are neither part of the challenged measure itself, nor a distinct measure being challenged.
Since the specific measures challenged by the Philippines relating to the VAT notification requirement
are not altered by the change in the competition legislation, this principle does not resolve the issue
before us.
7.809. It is well established that a panel's terms of reference require it to assess the WTO -
consistency of a challenged measure as it existed on the date of the Panel's establishment. 1732
Several panels have rejected requests from a respondent to make findings on the changed situation,
on the basis that the complainant had not requested such findings. 1733 This approach has been

1725 Thailand's response to Panel question No. 124(a).
1726 Thailand's request to review the Interim Report, paras. 2.57 and 2.59.
1727 Philippines' response to Panel question No. 64, para. 465.
1728 Philippines' opening statement at the meeting of the Panel, para. 128; and response to Panel
question No. 124(a).
1729 Philippines' response to Panel question No. 124(a), para. 338.
1730 We note that the requests for findings in the Philippines' first and second written submissions do not
identify any provision of Thailand's competition law. (See Philippines' first written submission, para. 856, third
bullet; Philippines' second written submission, para. 801) The Philippines has also not tried to argue that TTM's
exclusion from Thailand's competition legislation is itself a "measure taken to comply". (See, e.g. Philippines'
first written submission, para. 762) We further note that while the panel request may not be entirely free of
ambiguity, the Philippines has clarified that it "did not identify TTM's exemption from Thai competition law as a
measure taken to comply, subject to claims. Rather, the Philippines identified TTM's exemption from Thai
competition law as a factual circumstance relevant to the Philippines' claims regarding discrimination under the
VAT notification requirement." (Philippines' request to review the Interim Report, paras. 132-133)
1731 Appellate Body Reports, Chile – Price Band System, paras. 136-144; and EC – Selected Customs
Matters, para. 184.
1732 Appellate Body Report, US – Clove Cigarettes, para. 205. See also Appellate Body Reports, China –
1733 In Russia – Tariff Treatment, the panel highlighted the findings of the Appellate Body in Chile – Price
Band System to the effect that its decision to make findings on the amended measure in that dispute should
not "condone a practice of amending measures during dispute settlement proceedings if such changes are
made with a view to shielding a measure from scrutiny" and additionally "the demands of due process are such
that a complaining party should not have to adjust its pleadings throughout dispute settlement proceedings in
order to deal with a disputed measure as a 'moving target'". (Panel Report, Russia – Tariff Treatment, paras.
7.83 (referring to Appellate Body Report, Chile – Price Band System, para. 144)) The panel then stated that
"for the reasons explained by the Appellate Body in Chile – Price Band System (relating to the possibility of
shielding a measure from scrutiny and the demands of due process, and referred to above), it would not be
appropriate to [make findings on the amended measure] in the absence of a specific request from the
[complainant]". (Panel Report, Russia – Tariff Treatment, para. 7.84) The panel in China – Raw Materials noted
that, by requesting the panel not to make findings on subsequent replacement measures, the complainants

followed in disputes where changes were introduced to the challenged measures, or where
subsequent events in the course of this proceeding had an impact on the operation of the measures
at issue. In our view , the same approach may apply equally in situations where the challenged
measure remains unchanged, but the surrounding factual circumstances relevant to the assessment
of the WTO-consistency of the meas ure evolve in the course of a proceeding. In the absence of a
request from the Philippines to consider the VAT notification requirement in light of the changed
circumstances, we do not consider that additional findings on the changed situation are strictly
necessary to resolve the dispute between the parties.
7.810. Nonetheless, we note that Thailand has provided a detailed justification in support of its
request that the Panel make additional findings on this issue.1734 While we do not necessarily agree
with every reason presented by Thailand, we appreciate Thailand's concern regarding possible
uncertainty in the implementation of the Panel's findings under Article III:4 of the GATT 1994 in
light of the amendment of the competition law.1735 The Philippines has not clearly objected to that
request.1736 Furthermore, the issue presented by the parties' arguments raises a narrow and well -
defined factual issue, such that there could be utility in the Panel presenting the parties' arguments
and making factual findings that could assist the Appellate Body on appeal.
7.811. Accordingly, we proceed to make additional findings relating to the amendment in our
analysis of the Philippines' claim under Article III:4 of the GATT 1994. With regard to the Philippines'
claims under Article s X:1 and X:3(a) , we will limit our examination of the VAT notification
requirement to the facts as they existed at the date of the establishment of the Panel, prior to the
changes to the competition legislation.
7.4.2.3 PMTL's ability to ensure that its notification is correct
7.4.2.3.1 Section 27 of the Competition Act
7.812. The parties disagree as to whether, under the Competition Act of Thailand, importers were,
at the time of the panel's establishment , allowed to set the retail selling price in the same way as
TTM. We recall the Philippines' argument that while TTM enjoyed an exemption from the Competition
Act and could set retail prices, importers could not similarly set prices because the Competition Act
prohibits price fixing agreements between different economic operators. 1737 According to the
Philippines, this restriction "applies not only to horizontal arrangements between competitors, but
also to vertical arrangements between suppliers and downstream resellers of products".1738
7.813. Thailand contests this point. According to Thailand, "[PMTL] equally can, and does, set the
downstream retail price, by means of its RRSPs".1739 In addition, Thailand submits that "the practice
of imposing prices on wholesalers and retailers, also known as "vertical price fixing", is not "a per
se violation of Thai competition law " and that "the legality of vertical price fixing depends on the
specific circumstance of each case".1740

"are in fact narrowing the panel's terms of reference." The panel stated that "there is nothing unfair in a
complainant reducing, as opposed to enlarging, the case the defendant has to meet." (See Panel Report, China
– Raw Materials, paras. 7.22-7.24) In India – Additional Import Duties, the panel considered whether its terms
of reference could include a subsequent amendment of the measure. In interpreting the scope of the terms of
reference, the panel accepted the complainant's position that it never intended to bring within the scope of the
dispute measures which were not in existence on the date of the establishment of the panel. (See Panel
Report, India – Additional Import Duties, paras. 7.58-7.60) We also note that in India – Autos, the panel
considered it relevant that "[t]he complainants, while they had not specifically requested the Panel to consider
these issues at this stage of its analysis, did make requests for findings which called for these subsequent
events to be taken into account, in requesting the Panel to find that the measures had 'remained' in violation
subsequent to 1 April." (Panel Report, India – Autos, para. 8.27)
1734 Thailand's request to review the Interim Report, paras. 2.39-2.72.
1735 Thailand's request to review the Interim Report, para. 2.58.
1736 Philippines' comments on Thailand's request to review the Interim Report, paras. 96-112.
1737 Philippines' first written submission, paras. 744 and 747; Competition Act, B.E. 2542 (1999)
(English translation), (Exhibit PHL-124-B), Sections 4(2) and 27(1).
1738 Philippines' first written submission, fn 451.
1739 Thailand's first written submission, para. 7.39.
1740 Thailand's response to Panel question No. 62(a), p. 55.

7.814. Before proceeding to an examination of the provisions of the Competition Act, we recall the
mandate of a panel when faced with parties' disagreement on the meaning of municipal law.1741 The
obligation to conduct an "objective assessment of the facts" under Article 11 of the DSU "means that
panels must conduct their own objective and independent assessment of the meaning of municipal
law, instead of deferring to a party's characterization of such law".1742 As the original panel observed,
"to the extent that the parties disagree on the interpretation of relevant provisions, we are required
to objectively examine the question at issue based on the text of the concerned provision[s] as well
as on the evidence before us ".1743 In respect of the types of evidence that may be relied upon to
resolve the meaning and content of municipal law, the Appellate Body has explained that "[i]f the
meaning and content of the measure are clear on its face, then the consistency of the measure as
such can be assessed on that basis alone. If, however, the meaning … is not evident on its fa ce,
further examination is required."1744 In line with this approach, to the extent the parties disagree on
the content of the provisions of Thai law, we will examine the question at issue based on the text of
the concerned provisions and other evidence before the Panel.
7.815. Beginning with the text, Section 27(1) of the Competition Act, which applies to importers of
cigarettes, contains a chapeau and a list of ten specific practices.1745 The provision reads in relevant
part:
Any business operator shall not enter into an agreement with another business operator
to do any act amounting to a monopoly, or reduction of competition or restriction of
competition in the market of any particular goods or any particular service in any of the
following manners:
(1) fixing selling prices of goods or service as a single price or as agreed, or restricting
the purchase volume of goods or services;1746
7.816. Thailand explains that "conduct would violate Section 27 only if it falls within one of the ten
practices listed and if the practice also gives rise to a situation described in the chapeau, i.e. it
amounts to a monopoly, reduction of competition or restriction of competition in the market of any
particular goods or any particular service".1747 Thailand further submits that while vertical price fixing
could fall within sub-paragraph (1) of Section 27, "[t]here may be specific instances of vertical price
fixing that do not reduce or restrict competition in the market and, hence, would not violate Section
27 of Thailand's Competition Act ".1748 The Philippines has a different reading of Section 27. In its
view, the words "in any of the following manners " in the chapeau of Section 27 means that any of
the ten listed practices constitutes an "act amounting to a monopoly, or reduction of competition or
restriction of competition in the market of any particular goods or any particular service".1749
7.817. Recalling that the meaning of domestic law is a question of fact, subject to the normal rules
governing the burden of proof, certainty is not required. 1750 In this case, neither party has pointed
to any relevant "evidence of the consistent application of such laws, the pronouncements of domestic
courts on the meaning of such laws, [or] the opinions of legal experts and the writings of recognized
scholars"1751 to support its reading of Section 27. Accordingly, we must base our understanding of
the meaning of Section 27 on the text of the provision, and that is what we have done.
7.818. The ordinary meaning of the words "in any of the following manners" in the chapeau appears
to deem the listed practices that follow in sub -paragraphs 1 to 10 to be an "act amounting to
monopoly, reduction of competition or restriction of competition in the market " for relevant goods
or services, and, therefore, prohibited. The chapeau of Section 27 is not drafted in terms that would

1741 See paragraphs 7.650. to 7.652. .
1742 Appellate Body Report, US – Carbon Steel (India), p. 4.445 (referring to Appellate Body Report,
India – Patents (US), para. 66).
1743 Panel Report, Thailand – Cigarettes (Philippines), paras. 6.157 and 7.684.
1744 Appellate Body Report, US – Corrosion-Resistant Steel Sunset Review, para. 168.
1745 Competition Act, B.E. 2542 (1999) (English translation), (Exhibit PHL-124-B), Section 27.
1746 Competition Act, B.E. 2542 (1999) (English translation), (Exhibit PHL-124-B), Section 27(1).
1747 Thailand's response to Panel question No. 113, p. 41. (emphasis original)
1748 Thailand's response to Panel question No. 113, p. 41.
1749 Philippines' comments on Thailand's response to Panel question No. 113, paras. 233-236.
1750 Appellate Body Report, US – Anti-Dumping Methodologies (China), para. 5.132.
1751 Appellate Body Report, US – Countervailing and Anti-Dumping Measures (China), para. 4.100
(quoting Appellate Body Report, US – Carbon Steel, para. 157).

suggest that they contain an autonomous set of criteria. 1752 Moreover, some of the actions
enumerated in sub -paragraphs 1 to 10 would amount at least to a "reduction of competition or
restriction of competition" in the ordinary sense of those words. For example, sub-paragraph 4 refers
to different business operators "fixing an agreement or condition in a collusive manner in order to
enable one party to win a bid or a tender for the goods or services or in order t o prevent one party
from participating in a bid or a tender for the goods or services". It stands to reason that if some of
the conduct that is described in sub -paragraphs 1 to 10 would by definition amount at least to a
"reduction of competition or restriction of competition" in the market with respect to the "particular
goods" subject to the agreement, if not a "monopoly", then it is difficult to sustain the conclusion
that the chapeau establishes an additional, autonomous legal standard that must be established for
the specified conduct to be a violation of Section 27. In conclusion, the terms of Section 27 of the
Competition Act therefore support the interpretation submitted by the Philippines.
7.819. We also find force in the Philippines' argument that even if Thailand were correct that vertical
price fixing is not per se a violation of Section 27 of the Competition Act, Thailand concedes that
vertical price fixing "could fall within sub-paragraph (1) of Section 27" and, in certain circumstances,
meet the elements of the chapeau.1753 Indeed, given that the nature of the conduct specified in sub-
paragraph (1) is that of entering into an agreement "fixing selling prices of goods or service as a
single price or as agreed, or restricting the purchase volume of goods or services", we consider that
it is highly likely that such conduct would, in many cases, constitute an act amounting to a "reduction
of competition or restriction of competition " in the market with respect to the "particular goods"
subject to the agreement . Thus, even under Thailand's reading, an importer that fixes the retail
sales prices certainly faces the risk that it violates Section 27 of the Competition Act. Therefore,
even under Thailand's interpretation, cigarette importers continue to face "legal jeopardy" if they fix
retail sales prices in order to comply with the VAT notification requirement.1754
7.820. We further recall that both parties accept that TTM enjoyed an exemption from the
Competition Act, and was free to enter into pricing arrangements with wholesalers and retailers. Our
analysis thus reveals that TTM and importers were situated differently vis-à-vis Thai competition law
at the time of the Panel's establishment. For these reasons, we find that while TTM was exempted
from the competition law and able to enter into pricing arrangements, importers were subject to
Section 27 of the Competition Act and thus unable to lawfully set retail prices in the same way as
TTM.
7.4.2.3.2 The RRSP and the actual average market price
7.821. The parties disagree on whether RRSPs always correspond to average actual market prices,
such that an importer's notifications using RRSPs will necessarily fulfil the VAT notification
requirement.
7.822. The Philippines acknowledges that "the average actual market price is usually close to the
recommended price ", but submits that "it often differs from the recommended price to some
extent".1755 Thailand maintains that "the RRSP is for all practical purposes the same as the actual
average selling price".1756 In support of its point, Thailand quotes the original panel's statement that:
We understand that for imported cigarettes, the RRSP figures are virtually the same as
the RSP figures as the retailers will normally accept the retail selling price proposed by
PM Thailand (i.e. the RRSP (Recommended Retail Sel ling Price)) as their actual retail
selling price (i.e. the RSP (Retail Selling Price)).1757
Thailand thus submits that , "as noted by the original panel, PM Thailand … can, and does, set the
downstream retail price, by means of its RRSPs".1758

1752 We note that Article XX of the GATT 1994 provides an example of the kind of language that
establishes autonomous legal standards in a chapeau that must be examined separately from those contained
in the sub-paragraphs that follow.
1753 Thailand's response to Panel Question 113, p. 41.
1754 Philippines' comments on Thailand's response to Panel question No. 113, para. 238.
1756 Thailand's first written submission, para. 7.8.
1757 Thailand's first written submission, para. 7.8 (quoting Panel Report, Thailand – Cigarettes
(Philippines), para. 7.491).
1758 Thailand's first written submission, para. 7.39.

7.823. We note at the outset that the Philippines' claims rest on the premise that the RRSP and
average actual retail price on the date of notification may not be the same, and not on a
demonstration that they are not the same. 1759 In other words, the Philippines' c laims rest on the
possibility that the RRSP notified may not correspond to the actual average market price. Therefore,
the relevant question that needs to be resolved is whether an importer's notifications using RRSPs
will always correspond to the actual average market price, and thereby will necessarily fulfil the VAT
notification requirement.
7.824. In addressing this question, we first note that the very concept of a "recommended" retail
sales price implies that it may not be the same as the "actual" retail sales price. That is because a
"recommended" retail selling price represents a mere benchmark for retailers of what an appropriate
price of cigarettes may be and that recommendation does not in any way constrain retailers' freedom
to deviate from the benchmark and set a specific retail price they prefer.
7.825. Furthermore, the Philippines has brought to our attention Thailand's New Excise Tax Act ,
which became effective on 16 September 2017. 1760 Sections 16 and 17 of the New Excise Tax Act
set the tax base for goods b y reference to the RRSP; the list of goods subject to the excise tax
includes, but is not limited to, tobacco products. Section 17 states that "[i]n case that the
Recommended Retail Selling Price is not consistent with the reality , or is not in accordance with
market mechanisms , or the [Recommended Retail Selling] Price cannot be determined under
paragraph two, the Director -General shall have the power to announce a Recommended Retail
Selling Price as a base for Tax calculation ".1761 Thus, the possibility of a divergence between the
RRSP and the actual price is sufficiently real as to be addressed by Thailand itself in its legislation.
In response to a question from the Panel, Thailand recognized that this reflects at least the
"theoretical possibility" of deviation.1762 According to Thailand, however, "the scenario contemplated
by Section 17 is a theoretical one" and this "does not amount to an admission by Thailand that this
scenario will occur or is likely to occur".1763 We agree with Thailand that the theoretical possibility of
the RRSPs diverging from the actual retail selling price does not mean that such divergence is likely
to occur, or has occurred. However, it does mean, or at least suggests, that the RRSP is no t
necessarily the actual price.
7.826. We acknowledge that Thailand has asserted in the course of this proceeding that "PMTL
follows the standard business practice of many sectors whereby, as part of their marketing
agreements with the suppliers, wholesalers and retailers are required to respect the recommend ed
retail price in return for marketing assistance. "1764 We observe, however, that Thailand has not
substantiated this assertion and we have no evidence supporting this proposition before us. The
Philippines, to the contrary, argues that PMTL does not control the distribution chain for its imported
cigarettes, but rather sells the cigarettes either to an independent wholesaler for onward sale to a
retailer, or directly to large independent retailers.1765 As discussed above, we understand that should
an importer a ttempt to fix retail prices, it would face the risk that it violates Section 27 of the
Competition Act. In the absence of any evidence that PMTL is acting in contravention of Thai
competition law, we cannot assume that PMTL engages in unlawful behaviour. Therefore, Thailand's
assertion does not call into question the fact that wholesalers and retailers have a choice whether
to follow the importer's recommended price or not, meaning that the actual price may not be the
same as the recommended price.
7.827. Indeed, the original panel observed that "the RRSP figures are virtually the same as the RSP
figures as the retailers will normally accept the retail selling price proposed by PM Thailand".1766 The
original panel did not find that PMTL "can, and does, set the downstream retail price, by means of
its RRSPs," as argued by Thailand.1767 In fact, the panel's use of the words "virtually" and "normally"

1759 Philippines' response to Panel question No. 66(a), para. 481.
1760 Philippines' response to Panel question No. 59(a), para. 430 and fn 396.
1761 New Excise Tax Act (English translation), (Exhibit PHL-203-B). (emphasis added)
1762 Thailand's response to Panel question No. 114, p. 41; Philippines' comments on Thailand's response
1763 Thailand's response to Panel question No. 114, p. 41.
1764 Thailand's response to Panel question No. 62(a), p. 56.
1766 Emphasis added.
1767 Thailand's first written submission, para. 7.39.

explicitly contemplates the possibility that the RRSPs and actual retail selling prices may not always
be identical.
7.828. Additionally, we consider that the statement of the original panel above needs to be read in
its context. The original panel was not presented with the issue that is now before this compliance
Panel, i.e. whether the RRSPs and average actual market prices of PMTL's cigarettes are always the
same. Rather, the original panel was called upon to determine whether imported cigarettes were
subjected to taxes in excess of those applied to domestic cigarettes by virtue of a difference between
maximum retail sellin g prices (MRSPs) of imported cigarettes and actual retail selling prices (and
RRSPs) of imported cigarettes, on the one hand, and the lack of any such difference between the
MRSPs and actual retail selling prices of domestic cigarettes, on the other. 1768 We understand the
original panel to have referred to the RRSPs and actual retail selling prices of imported cigarettes
interchangeably in the context of addressing that issue because the parties had done so, and since
the figures for both would normally be the same.1769 In sum, in dealing with the Philippines' claim in
the original dispute, the original panel focused its analysis on the differences between MRSPs and
RRSPs/RSPs, and not on the differences between RRSPs and RSPs. Read in this context, therefore,
the statement quoted by Thailand does not amount to a finding by the original panel that the RRSP
is the same as the actual average market price of cigarettes. In any event, we note that, insofar as
the extent to which the RRSP determines the retail selling p rice is a factual issue that has the
potential to evolve over time, a statement made by the original panel based on the evidence before
it in 2009 would not necessarily hold true today.
7.829. We note that Thailand itself does not assert that RRSPs and average ac tual market prices
are necessarily and always identical, but rather that they are "generally", "virtually", "normally", "for
all practical purposes ", and "in effect " the same. 1770 We recognize that the Philippines has not
identified any instances in which PMT L's recommended price differed from the actual retail selling
price.1771 As we have already indicated, the Philippines' claims rest on the premise that the RRSP
and average actual retail price on the date of notification may not be the same, and not on a
demonstration that they are not the same. As we discussed in the previous section, the evidence
before the Panel supports the Philippines' assertion that importers cannot impose recommended
prices on retailers without violati ng, or at least running the risk of violating, Thai competition law.
Thus, even if, in practice, the RRSPs for imported cigarettes have always been followed by retailers
in Thailand, there remains the possibility that retailers will deviate from the RRSP.
7.830. For the reasons stated above, we conclude that the RRSP for imported cigarettes is not
necessarily the same as the average actual market price and therefore the importer cannot ensure
that it complies with the VAT notification requirement by notifying its RRSP on the date of
notification.
7.4.2.3.3 Market research
7.831. The Philippines argues that it could be possible, by relying on market research data, for an
importer to notify the average actual market price in Thailand, but since gathering and processing
such data necessarily involves a delay it is impossible to notify the average actual market price on
the date of notification itself. 1772 The Philippines argues that market research may take 4 -6 weeks
to be completed and that this assertion is based on PMTL's explanation and experience in obtaining
such data.1773
7.832. With regard to the means of compliance with the notification requirement, Thailand submits
that "if importers wish to obtain this price from 'a market research company, such as A.C. Nielsen',
that is their choice ".1774 According to Thailand, "[i]mporters can obtain the average retail selling

1768 Panel Report, Thailand – Cigarettes (Philippines), paras. 7.489-7.490.
1769 Panel Report, Thailand – Cigarettes (Philippines), para. 7.491.
1770 See Thailand's first written submission, paras. 7.8-7.9, 7.36 and 7.38.
1771 In response to a question from the Panel, the Philippines explains that it does not consider it
appropriate for it to request the importer to provide evidence showing instances where the RRSP was below the
retail selling price. The Philippines states that it "is concerned that such evidence, if it were to exist, could be
used by Thai authorities as a basis for action (perhaps criminal) against the importer for failing to notify the
correct retail selling price". (Philippines' response to Panel question No. 66(a), para. 482)
1772 Philippines' response to Panel question No. 115 (a).
1773 Philippines' first written submission, para. 806; and response to Panel question No. 115 (a).
1774 Thailand's second written submission, para. 4.26.

price through any method they prefer ".1775 Additionally, Thailand considers that the Philippines'
assertion that the collection of market research data takes 4 -6 weeks has not been pro perly
substantiated.1776
7.833. It is our understanding that the Philippines' claims under Articles X:3(a) and III:4 are based
on the factual proposition that the importer is not in a position to know the average actual market
price on the date of notification . Thus, regardless of the precise time period that market research
takes, it is sufficient for the Philippines to establish that a necessary delay in gathering pricing data
makes it impossible for the importer to obtain the average actual market price through ma rket
research on the date of notification. In our view, the Philippines has succeeded in establishing this
presumption. As the Philippines explains in its first written submission, "[b]ecause such information
must be collected and compiled by the research company, there is necessarily a delay between the
date of the notification and the subsequent date on which the average actual market price on the
notification date becomes known ".1777 We recall that, according to Clause 2(4) of Order Por. 145 -
2555, the avera ge market price to be notified is "the market price of tobacco for each type of
cigarette category" at which the consumers in general or the majority [of them] purchase cigarettes
"on the date on which the registered operator … notifies the retail selling price".1778 Thailand has not
asserted that market research data on the average actual market price of imported cigarettes on
the date of notification can be obtained on that same date.1779
7.834. We note that Thailand objected to the submission by the Philippines of E xhibit PHL-226,
which contains a letter from A.C. Nielsen and a covering letter from PMTL. 1780 The Philippines uses
this letter in support of its assertion that the collection of market research data takes 4-6 weeks.1781
Since we have already established, withou t relying on or addressing this evidence, that it is not
possible for the importer to obtain market research data , on the date of notification, regarding the
average actual market price of imported cigarettes on that same date, we see no need to address
this additional piece of evidence.
7.835. For the above reasons, we conclude that collecting market research data necessarily involves
some delay and the purchasing of such market data does not enable the importer to comply with
the requirement of Notification 187 and Order Por. 145 -2555 to notify the average actual market
price on the same date as when the notification is made. We further note that Thailand has not
suggested any alternative means of compliance that would fulfil the requirement to notify the
average actual market price on the date of notification. 1782 Accordingly, the Panel finds that an
importer cannot rely on market research studies to know and notify the average actual market price
on the date of notification.
7.4.2.3.4 Statements by importers
7.836. Thailand points to evidence which suggests that, to date, PMTL and other importers have
consistently submitted notifications on the basis of RRSPs and have not been found in violation of
the notification requirement. Thailand argues that "[i]n recent years … PM T hailand, and other
importers have complied with Order Por. 145-2555 by notifying their RRSP as a proxy/best evidence
for the actual average selling price (at their own request)."1783 According to Thailand, "[t]here have
been no problems on either side with the operation of Order Por. 145-2555 or the system of notifying
and announcing the VAT base on June of each year, or with the notification of any changes
thereto."1784 Thailand has also provided the minutes of meetings that took place between the
Revenue Depart ment, the domestic cigarette manufacturer (TTM), and cigarette importers on
11 June 2013 and 20 June 2014, which report statements of the cigarette importers and

1775 Thailand's second written submission, para. 4.26.
1776 Thailand's response to Panel question No. 65; and comments on the Philippines' response to Panel
question No. 115(a).
1779 Thailand's response to Panel question Nos. 63(a) and 115(b).
1780 Thailand's comments on the Philippines' response to Panel question No. 115(a).
1781 Philippines' response to Panel question No. 115(a).
1782 Thailand's response to Panel question No. 63(b).
1783 Thailand's first written submission, para. 7.11.
1784 Thailand's first written submission, para. 7.21.

manufacturer to the effect that they encountered no problems in complying with the notificatio n
requirement.1785
7.837. The Philippines argues that the statements of importers in the minutes submitted by Thailand
do not contradict its claims. 1786 The Philippines further submits that the "acknowledgement by
importers that the existing practice of notifying RRSP s in fulfilment of the VAT notification
requirement is not in itself 'problematic' does not resolve the risk of legal jeopardy that importers
face."1787
7.838. From the perspective of how the Philippines frames its claims, the relevant question is
whether this evidence demonstrates that PMTL and other importers are able to know the average
actual market price on the date of notification so as to be able to ensure that they are in compliance
with the VAT notification requirement. In examining this issue, we consider t hat the evidence
presented by the parties falls into two categories. First, the parties presented reported statements
of importers on their ability to comply with the VAT notification requirement, and correspondence
between PMTL and the Revenue Department relating to the same issue. Second, both parties agree
that, since the adoption of Notification 187, the Revenue Department has accepted notifications from
importers on the basis of RRSPs without any issue.
7.839. We start our analysis by looking at the statemen ts of importers and the relevant
correspondence. The minutes of the meetings between the Revenue Department and importers
which took place on 11 June 2013 and 20 June 2014 demonstrate that the Revenue Department
gave importers and manufacturers the opportu nity to express their views on the operation of
Notification 187 and Order Por. 145-2555. The minutes of the meeting of 11 June 2013 state in the
section "Meeting resolution" that the "[c]igarette importers and manufacturer concluded that they
had no problems in understanding and complying with" the requirements of Notification 187.1788 The
minutes of the meeting of 20 June 2014 contain a somewhat different wording in the same section:
"[c]igarette importers and manufacturers acknowledge the practice of inform ing retail prices and
report that there is no problematic issue ".1789 Read in isolation, these statements seem to confirm
Thailand's view that the importers had not experienced problems "complying with " the VAT
notification requirement.
7.840. However, as indicated above, we consider that the relevant question is whether this evidence
demonstrates that PMTL and other importers are able to know the average actual market price on
the date of notification so as to be able to ensure that they are in compliance with the VAT notification
requirement. These statements do not necessarily answer that question, as they might be
understood to mean that PMTL and other importers had not, to date, experienced any problems in
complying with the VAT notification requirement insofar as the Revenue Department has been
accepting notifications based on RRSPs. It is common ground between the parties that the RRSP is
frequently the same as the actual average selling price, and we recall that the Revenue Department
has consistently accepted notifications from PMTL on the basis of RRSPs without any issue.
Specifically, the Philippines has submitted notifications sent by PMTL to the Revenue Department in
2012, 2013, 2015, and 2016.1790 All such notifications refer to the letter of 21 September 20121791,

1785 Thailand's first written submission, para. 7.11 (referring to the Minutes of the meeting of
11 June 2013 between the Revenue Department's representatives and representatives of cigarette importers
and the domestic cigarette manufacturer (English translation), (Exhibit THA-30-B)); See also Minutes of the
meeting of 20 June 2014 between the Revenue Department's representatives and representatives of cigarette
importers and the domestic cigarette manufacturer (English translation), (Exhibit THA-31-B).
1786 Philippines' response to Panel question No. 116, para. 284.
1787 Philippines' response to Panel question No. 116, para. 286.
1788 Minutes of the meeting of 11 June 2013 between the Revenue Department's representatives and
representatives of cigarette importers and the domestic cigarette manufacturer (English translation), (Exhibit
THA-30-B), p. 3.
1789 Minutes of the meeting of 20 June 2014 between the Revenue Department's representatives and
representatives of cigarette importers and the domestic cigarette manufacturer (English translation), (Exhibit
THA-31-B), p. 3.
1790 Letter from PMTL to the Director of the Revenue Department, 28 September 2012 (English
translation), (Exhibit PHL-129-B); Letter from PMTL to the Director of the Revenue Department, 28 June 2013
(English translation), (Exhibit PHL-132-B); Letter from PMTL to the Director of the Revenue Department,
25 June 2015 (English translation), (Exhibit PHL-133-B); Letter from PMTL to the Director of the Revenue
Department, 29 June 2016 (English translation), (Exhibit PHL-134-B).
1791 Letter from PMTL to the Director of the Revenue Department, 21 September 2012 (English
translation), (Exhibit PHL-123-B).

which states that PMTL invited the Revenue Department to object to the use of RRSPs for the purpose
of notifications, and notes that the company received no such objection or notice of disagreement
from the Revenue Department.1792
7.841. Insofar as it is appropriate to rely on contemporaneous statements by PMTL or other
importers for the purpose of assessing whether they are able to ensure that they are in compliance
with the VAT notification requirement, we consider that greater weight must be given to PM TL's
statements contained in its letter of 21 September 2012 to the Revenue Department. This letter
speaks to the difficulties PMTL had in finding a way to satisfy the notification requirement. This letter
reads in relevant part:
The Company is concerned that it is not possible to collect all data necessary to assess
the "average price of the market actually purchased and sold in general on the date on
which the value added tax l[i]ability arises". Any efforts made by the Company to meet
this requirement could not, practically speaking, result in the capture of all data on all
sales in all parts of Thailand on any given date. For the sake of certainty therefore, the
Company will apply the recommended retail selling price ( RRSP) which it recommends
that its t rade partners follow pursuant to a written notification. While we understand
that our trade partners make every effort to sell our product in accordance with the
RRSP, please note that the Company is subject to the Provisions of the Trade
Competition Act B .E. 2542 (1999) and cannot therefore make any further efforts to
control pricing in the market.1793
7.842. We note that Thailand objects to the relevance of this letter, given that it was sent after the
introduction of Notification 187, but prior to the adoption of Order Por. 145 -2555, and makes no
reference to any "alleged difficulty related to the calculation of the price of PMTL's cigarettes
prevailing on the date of the notification".1794 We further note that, when Notification 187 was initially
introduced, its word ing suggested that "importers were expected to notify, in June, a retail price
that will be charged in the future" and this letter was expressing the concern that it was impossible
to comply with this requirement.1795 We recall that, on 30 November 2012, the Revenue Department
adopted Order Por. 145 -2555 to clarify that, inter alia, the price to be notified is the price on the
date of notification. 1796 In our view, PMTL's concerns expressed in the letter remain relevant
regardless of whether the price to be notif ied is the price on a future date or on the date of
notification. We observe that the letter expresses PMTL's concern with the impossibility of collecting
market pricing data "on any given date ", the plain meaning of which includes the date of
notification.1797 Additionally, we do not see how PMTL's concern that it cannot ensure that RRSPs are
followed by its retailers, due to the constraints of competition law, would have changed by virtue of
7.843. Overall, we consider that the statements of the importers in the meetings with the Revenue
Department and PMTL's letter of 21 September 2012 are to be taken into account and given some
weight. However, we consider that this evidence is inconclusive with regard to whether the importers
have experienced difficulties or not, because they do not specify in what sense there have been "no
problems in … complying with the notification requirement."1798 We consider that PMTL's statements
contained in its letter of 21 September 2012 to the Revenue Department speak to this question with
greater specificity, and therefore carry greater weight. We therefore conclude that statements of
importers reported in the minutes of the meetings with the Revenue Department do not demonstrate

1792 Letter from PMTL to the Director of the Revenue Department, 28 September 2012 (English
translation), (Exhibit PHL-129-B); Letter from PMTL to the Director of the Revenue Department, 28 June 2013
(English translation), (Exhibit PHL-132-B); Letter from PMTL to the Director of the Revenue Department,
25 June 2015 (English translation), (Exhibit PHL-133-B); Letter from PMTL to the Director of the Revenue
Department, 29 June 2016 (English translation), (Exhibit PHL-134-B).
1793 Letter from PMTL to the Director of the Revenue Department, 21 September 2012 (English
translation), (Exhibit PHL-123-B), p. 2. (emphasis original)
1794 Thailand's comments on the Philippines' response to Panel question No. 115(a), p. 40.
1796 Philippines' first written submission, para. 740; Thailand's comments on the Philippines' response to
Panel question No. 115(a), p. 40.
1797 Emphasis added.
1798 Minutes of the meeting of 11 June 2013 between the Revenue Department's representatives and
representatives of cigarette importers and the domestic cigarette manufacturer (English translation), (Exhibit
THA-30-B), p. 3.

that importers have not experienced difficulties in complying with the VAT notification requirement
as written.
7.4.2.3.5 Conclusion
7.844. For the reasons stated above, the Panel concludes that: (i) while TTM was exempted from
Thai competition law and able to enter into price fixing arrangeme nts, importers were subject to
Section 27 of the Competition Act and thus unable to lawfully set retail prices in the same way as
TTM; (ii) the RRSP for imported cigarettes is not necessarily the same as the average actual market
price and therefore importers cannot ensure that they comply with the VAT notification requirement
by notifying their RRSPs; (iii) since collecting market research data necessarily involves some delay,
importers cannot rely on market research studies to know and notify the average actual market
price on the date of notification; and (iv) the minutes of the meetings with the Revenue Department
relied on by Thailand do not demonstrate that importers have not experi enced difficulties in
complying with the VAT notification requirement as written.
7.845. In sum, the Panel concludes that the importer is not in a position to know the average actual
market price on the date of notification and thus is unable to ensure that it co mplies with the VAT
notification requirement, as written, in Notification 187 and Order Por. 145-2555.
7.4.2.4 Consequences of an incorrect notification
7.846. We recall that the Philippines' claims under Articles X:3(a) and III:4 of the GATT 1994 are
framed in terms of "legal jeopardy ", in the sense of PMTL being exposed to the risk of legal
consequences, in the form of penalties or otherwise, in the event that the notified RRSP turns out
to be less than the average actual market price. Therefore, they necessarily rest on the premise that
PMTL could actually face such consequences in the event that the notified RRSP turns out to be less
than the average actual market price.1799 However, Thailand submits that even if a cigarette importer
could not ensure that it complies with the VAT notification requirement, and there turns out to be a
discrepancy between the RRSP notified and the actual average market price, PMTL would not be in
any "legal jeopardy" because it can simply submit a correction of an originally incorrect notification,
without suffering any legal consequences. 1800 The Philippines contests this understanding, and
argues that, in any event, there is still a significant administrative burden imposed on the importer
in the event that it attempts to submit a correction.1801
7.847. Turning first to the existence of "legal jeopardy", we recall that, according to the Philippines,
"under Sections 88 and 89 of the Revenue Code, the Revenue Department may impose 'penalties'
and 'surcharges' on an importer for conduct leading to the underpayment of VAT."1802 Section 89(3)
of the Revenue Code states:
A person liable to tax or a person under Section 86/13 shall pay penalties in the cases
and at the rates as follows:
…
(3) If he files a tax return or a tax remittance return incorrectly or contains errors
affecting the amount of tax payable or remittable to be inaccurate, the penalty shall be
equal to the amount of tax additionally payable or remittable.1803
7.848. We recall that the VAT on cigarettes that the importer is required to pay is a function of the
tax rate and tax base. In our analysis above we have reached the conclusion that the importer is
unable to ensure that it notifies correctly the "average actual market price" used for the purpose of
establishing the VAT base. For this reason, the importer is exposed to the risk of understatement of
the VAT base. In light of these findings and Section 89(3) of the Revenue Code, which by its terms

1799 Philippines' first written submission, para. 810; second written submission, paras. 770-771; and
response to Panel question Nos. 118 and 121.
1800 Thailand's second written submission, para. 4.18.
1801 Philippines' response to Panel question No. 118; comments on Thailand's response to Panel question
No. 119(b).
1802 Philippines' response to Panel question No. 121, para. 302.
1803 Revenue Code (English translation), (Exhibit PHL-231-B), Section 89(3).

refers to the "penalties" that shall be paid, we agree with the Philippines that if an importer pays its
VAT in accordance with a VAT base that is lower than the one that should have been notified, and
thereby incurs a lower tax liability than is actually due, the Revenue Department may impose
penalties on the importer. 1804 This, in our view, constitutes a tangi ble legal consequence of
unintentional non-compliance.
7.849. Additionally, we recall the Philippines' argument that Sections 37 and 90/4 of the Revenue
Code provide for criminal offenc es relating to the underpayment of the VAT. 1805 The Philippines
submits that as a consequence of an incorrect notification and resulting VAT underpayment, the
importer can be subject to action by the DS I and Public Prosecutor. 1806 We understand that the
Philippines' claims are framed in terms of a risk of "legal jeopardy" in the event of the importer's
unintentional failure to comply with the VAT notification requirement. Thus, to the extent that the
penalties under Sections 37 and 90/4 depend on the existence of an importer's intent to furnish
false information or evade VAT, we are not convinced that those provision s will necessarily lead to
penalties in the event of an unintentional failure to comply. We are mindful, however, that the DSI
is authorized to investigate these criminal offences.1807 In our view, in the event that the DSI were
to investigate the importer's failure to comply, regardless of the specific outcome of the
investigation, this would represent a significant consequence of unintentional non-compliance for an
importer.1808
7.850. We note that Thailand has not contested that, in case of a failure to comply with the VAT
notification requirement, an importer may face the penalties described above, or the prospect of a
criminal investigation.1809 We take into account Thailand's clarification that any criminal investigation
can be initiated by the DSI only at the reques t of the Revenue Department.1810 However, this does
not alter our analysis.
7.851. With regard to the existence of "legal jeopardy ", Thailand submits that "[i]f a cigarette
importer notifies in good faith the actual average market price on the basis of its RRSP, an d
subsequently notices a discrepancy between the notified price and the actual price that prevailed on
the date of the notification, the importer could simply notify this correction as a change of the notified
price."1811 Furthermore, according to Thailand, "[t]he Revenue Department would not retroactively
calculate VAT liability for the period between the original notification and the notification of the
change."1812 In response to a question from the Panel, Thailand describes two scenarios in which an

1804 Philippines' response to Panel question No. 121, para. 306.
1805 Section 37 of the Revenue Code provides for the punishment with imprisonment of three months to
seven years and a fine of two thousand to two hundred thousand Baht for "knowingly or wilfully" furnishing
false information "with a view to evading payment of the tax and duty" and for evading or attempting to evade
payment of the tax "by falsehood, fraud, artifice." We further note that Section 90/4 of the Revenue Code
imposes identical penalties for various action related to evasion of tax or duties committed with "intent to
evade or attempt to evade value added tax." (Revenue Code (English translation), (Exhibit PHL-231-B),
Sections 37 and 90/4)
1806 Philippines' response to Panel question No. 121, paras. 302-303.
1807 Philippines' response to Panel question No. 121, para. 302; Thailand's comments on the Philippines'
response to Panel question Nos. 120 and 121. We observe that the Notification of the Board of Special Case
(No. 4) B.E. 2554 identifies Sections 37, 90/4 of the Revenue Code as falling within the authority of the DSI.
See Notification of the Board of Special Case (No. 4) B.E. 2554 (2011) (English translation), (Exhibit PHL-228-
B), Clause 4.
1808 In response to Panel question No. 121, the Philippines submits that, where the importer pays
insufficient VAT, the importer may face "surcharges" under Section 89/1 of the Revenue Code. We note that
Thailand explained in the course of the proceedings that this provision relates to the situation where "the
importer submitted to the Revenue Department an amount of VAT that is not the actual amount of VAT
collected from consumers". (See Thailand's response to Panel question No. 62(c)) As we understand Thailand's
argument, Section 89/1 of the Revenue Code would then be not relevant to the situation where the notified
VAT base is lower than it should have been because even using this lower VAT base the importer would submit
all the amount of VAT collected from consumers. We do not find it necessary to decide on this issue, in light of
our overall findings that the importer may indeed face consequences in the form of potential imposition of
penalties and the possibility of DSI investigation.
1809 Thailand's comments on the Philippines' response to Panel question Nos. 120 and 121.
1810 Thailand's comments on the Philippines' response to Panel question Nos. 120 and 121.
1811 Thailand's second written submission, para. 4.18.
1812 Thailand's second written submission, para. 4.18.

importer may make a correction of the notified VAT base without incurring any penalty.1813 Thailand
provides the following table to explain Scenario 1 and Scenario 2:
Scenario 1
JUNE1814 JULY AUGUST
[-------------------20----28---] [-1---------------------------] [--------------15--------------]
Notification by the
importer of the new
VAT base according
to the information
available (importer
later realizes this is
VAT base is
incorrect)
Notification of
the correct
VAT base after
noticing a
mistake in the
20 June
notification
Correct VAT base enters into
effect.
Tax return is submitted reflecting
the correct VAT base
Scenario 2
[----------------------20-------] [-1-----------------------29-] [-1-------------15-------------]
Notification by the importer of the
new VAT base according to the
information available (importer later
realizes this is VAT base is incorrect)
Incorrect
VAT base
enters into
effect
Notification of
the correct VAT
base after
noticing a
mistake in the
20 June
notification
Correct VAT
base enters
into effect
Deadline for filing
tax return on VAT
collected during
July.

 Period of 1 July – 31 July

7.852. Under Notification 187, the VAT base notified by a cigarette importer enters into force on
the first day of the following month.1815 Under the first scenario as explained by Thailand, an importer
notifies an incorrect VAT base during the month of June and then, after discovering a discrepancy
between the notified RRSP and the average actual market price, notifies the correction of the VAT
base during the same month, before the entry into force of the incorrect VAT base (which would be
1 July), and consequently the revised, correct VAT base enters into force on 1 July. In this situation,
the importer then uses the correct VAT base to collect VAT during the next month, and incurs no
penalty.1816
7.853. Under the second scenario, as explained by Thailand, the importer makes a notification using
available information during the month of June and the incorrect tax base enters into force on 1 July.
Shortly thereafter, the importer discovers a discrepancy between the notified RRSP and the average
actual market price, and notifies a correction during the month of July. The revised, corrected tax
base enters into force on 1 August. According to Section 83 of Thailand's Revenue Code, the VAT
collected by the taxpayer during the month in w hich the VAT base was in effect must be reported
and paid by submitting a tax return within the first 15 days of the following month. In this example,
the VAT for the month of July would have to be paid on 15 August and the importer would have
already collected the VAT using an incorrect VAT base. In this situation, the importer would have to

1813 Thailand's response to Panel question No. 62(a).
1814 We note that initially the explanation provided by Thailand referred to the months of February,
March and April. However, Thailand later clarified that those months can be replaced with the months of June,
July and August, thus the table reflects those changes. (See Thailand's response to Panel question No. 119)
1815 Notification 187, (Exhibit PHL-121-B), Clauses 6(1), 6(2) and 7. See also Thailand's response to
Panel question No. 62(a).
1816 Thailand's response to Panel question No. 62(a).

re-issue new invoices of its sales to retailers to collect VAT using the correct VAT base. On the basis
of these new invoices, the importer would then submit its tax return on 15 August.1817
7.854. First, we observe that both of the scenarios presented by Thailand envisage corrections being
made either before the incorrect VAT base enters into effect or before the deadline for submitting
the tax return, and do not account for the possibility that a discrepancy between the RRSP notified
and the average actual market price may not be discovered before the return is filed. We agree with
the Philippines that , in this third scenario, "importers face a risk of legal jeopardy that not ev en
Thailand suggests can be mitigated through monitoring and corrected notifications".1818
7.855. Second, we have reviewed the terms of Notification 187 and Order Por. 145 -2555 relating
to changes in the average actual market price, and it is not clear to us that t hey establish any
correction mechanism. We note that Thailand has not directed us to any specific provisions in the
applicable instruments to substantiate its assurances that an importer can subsequently correct the
original incorrect notification without facing any penalties or consequences. We recall that an
importer is required to notify the "average actual market price" in June of each year, and that if the
price changes during the course of the year, a revised price must be notified. Specifically, Clau se
6(2) of Notification 187 and Clause 6(3) of Order Por. 145-2555 impose on an importer the obligation
to notify "a change" in the "average actual market price". However, these terms address the situation
in which there is "a change" in the "average actual market price ", not the situation in which the
RRSP notified on a particular date turns out to be different from the average actual market price on
that date.
7.856. Furthermore, according to Clauses 5(1)(b) and 2(4) of Order Por. 145 -2555, what must be
notified is the average actual market price "on the date on which … the importer … notifies " the
average actual market price. Thus, based on the wording of these provisions, insofar as the
provisions dealing with the situation in which there was a "change" to the average actual market
price may serve as a basis for submitting revised notifications, it appears that the new notification
(i.e. the correction) would be expected to also reflect the average market price on the date of the
new notification. This suggests that the importer will continue to be subject to the same problem as
before, namely being unable to identify the correct price to notify on the date on which it is required
to make a notification. Therefore, we do not consider that the correction mechanis m presented by
Thailand mitigates the "legal jeopardy" to which the importer is exposed.
7.857. In any event, even if Thailand's understanding were correct and the importer was allowed
to make a correction to the original notification reflecting the price on the date of the original
notification, we consider that the importer would still face significant administrative and financial
burdens in the process of making those corrections. We consider that under any of Thailand's
scenarios, in order to ensure its compliance with the notification requirement through any correction
mechanism, an importer would have to commission market research studies to verify whether the
RRSP which it notified continues to match the average actual market price. 1819 In this respect, we
note the Philippines' position that gathering market research data would "impose a substantial cost
on the importer, amounting to more than THB 4 million in 2016. "1820 While we do not consider it
necessary to quantify the cost, we agree with the Philippines that undertaking market research would
impose a financial burden on the importer. Additionally, we note that, as Thailand itself explains,
under the second scenario described above, a correction may require the re -issuance of VAT
invoices.1821 We further note that "[a]s the usual supply chain includes PM Thailand, a distributor, a
wholesaler and a retailer, three invoices may have to be reissued, by three different parties in the

1817 Thailand's response to Panel question No. 62(a).
1818 Philippines' response to Panel question No. 118, para. 296.
1819 See Thailand's response to Panel question No. 62(a) and question No. 9 from the Philippines to
Thailand.
1821 Thailand's response to Panel question No. 62(a), p. 55. Thailand states that:
As long as the importer notifies the correct VAT base before the submission of the tax return (in
this example, 15 April), the importer has the opportunity to submit his tax return paying VAT on
the basis of the correct VAT base. In this case, as the importer would have already collected VAT
from retailers based on the incorrect VAT base, the importer would need to re-issue new invoices
of his sales to retailers to collect VAT using the correct VAT base.

supply chain, for each pack of imported cigarettes. "1822 In our view, the issuing of such additional
invoices would indeed impose a significant administrative burden on an importer.
7.858. Furthermore, we recall the Philippines' argument that even if the mechanism of correction
exists, the importer still faces "an en dless spiral of notifications, corrections and reissuance of
invoices".1823 Thailand, for its part, argues that the importer does not face an "endless spiral of
notifications, corrections and reissuance of invoices", because an importer may subsequently submit
a corrected notification that indicates the average actual market price on the date of the original
notification.1824 In our view, even assuming that the importer can submit a correction reflecting the
average actual market price on the date of the original notification, we do not see how this would
significantly reduce the administrative and financial burdens imposed on importers.
7.859. We recall that an importer is required to notify the average actual market price in June of
each year, and that if the price ch anges during the course of the year, a revised price must be
notified. Insofar as an importer were required to only make one notification per year based on the
average actual market price in June, it would follow that the possibility of submitting a subseq uent
correction of the average actual market price prevailing on the date of the initial notification would
obviate the need to make any further notifications, including any further notifications correcting the
average actual market price prevailing on the date of the second notification. Furthermore, insofar
as Thailand's assertion is correct, it means that there would never be a need to submit more than
one subsequent correction in respect of the same earlier month, e.g. June. However, since an
importer is required to notify changes to the actual average market price on an ongoing basis, there
is inherently the prospect of submitting multiple notifications, corrections, and reissuing of invoices
to reflect changes throughout the course of the year, with an attendant administrative burden.
7.860. For the reasons above, we conclude that, in the event the notified RRSP turns out to be less
than the actual average market price prevailing on the initial date of notification, or prevailing at
subsequent points in the year, the importer, in the absence of any appropriate administrative ruling
or formal bilateral arrangement with the Revenue Department, may face significant consequences,
including legal consequences such as penalties and possible criminal investigation. F urthermore,
even if the importer were able to correct the original incorrect notification, it would still have to bear
additional administrative and financial burdens.
7.4.3 Claim under Article X:1 of the GATT 1994
7.4.3.1 Introduction
7.861. Article X:1 of the GATT 1994 esta blishes an obligation on Member s to publish promptly
certain trade regulations of general application insofar as they have been made effective. As
described above, Notification 187 and Order Por. 145 -2555 require importers and the domestic
producer of cigarettes to notify in June of each year the "average actual market price" on the date
of notification. Since the introduction of Notification 187 in 2012, PMTL has consistently submitted
yearly notifications on the basis of its RRSPs, and the Thai Revenue Department has accepted those
notifications without objection.1825 However, the possibility of submitting notifications on the basis
of RRSPs has not been specified in written Thai regulations.1826
7.862. The Philippines argues that the Thai Revenue Department's consistent practice of permitting
importers to notify the RRSP prevailing on the date of notification, instead of the average actual

1822 Philippines' response to Panel question No. 118, para. 293. Thailand has not contested this
assertion.
1823 Philippines' opening statement at the meeting of the Panel, para. 149.
1824 Thailand's response to the Philippines' question No. 9.
1825 Philippines' first written submission, paras. 753 and 845 (referring to Letter from PMTL to the
Director of the Revenue Department, 28 September 2012 (English translation), (Exhibit PHL-129-B); Letter
from PMTL to the Director of the Revenue Department, 28 June 2013 (English translation), (Exhibit PHL-132-
B); Letter from PMTL to the Director of the Revenue Department, 25 June 2015 (English translation), (Exhibit
PHL-133-B); Letter from PMTL to the Director of the Revenue Department, 29 June 2016 (English translation),
(Exhibit PHL-134-B); and Thailand's first written submission, paras. 7.12, 7.70 and 7.76.
1826 Philippines' first written submission, paras. 753 and 851; and Thailand's second written submission,
para. 4.23.

market price, amounts to a general rule for purposes of Article X:1, and that the failure to publish
this rule therefore constitutes a violation of Article X:1.1827
7.863. Thailand disputes that the Revenue Department's confirmation that importers can notify
RRSPs to fulfil the notification requirement amounts to a rule of general application within the
meaning of Article X:1. 1828 In this regard , Thailand considers that the Philippines has not
demonstrated the existence of any "practice" adopted by the Revenue Department; rather, it
considers that PMTL's notification of the average actual market price on the basis of RRSPs
constitutes merely a specific means of compliance chosen by PMTL.
7.4.3.2 Main arguments of the parties
7.864. The Philippines argues that the Revenue Department "has adopted a long-standing general
rule, reflected in its consistent practice, of permitting importers to notify, on a brand-specific basis,
the recommended retail selling price prevailing on the date of notification ".1829 As evidence of this,
the Philippines points to the Revenue Department's lack of objection to PMTL's practice of notifying
the RRSP, as well as representati ons made to the Philippines by Thailand, in writing, to the effect
that "it is permissible for importers to notify the recommended retail selling price prevailing on the
date of notification, in order to satisfy the notification requirements … with respect to the average
actual market price".1830 The Philippines considers that the Revenue Department's "conduct amounts
to a consistent practice " that has the "required degree of authoritativeness to amount to 'laws,
regulations, [or] administrative rulings' for p urposes of Article X:1 ".1831 The Philippines considers
that Thailand's suggestion that notification of the RRSPs is simply an importer's "chosen means" of
compliance demonstrates why Thailand's rule should be published, as required under Article X:1.1832
The Philippines also considers that this "rule" applies to all importers of cigarettes in Thailand, and
therefore the rule is "generally applicable " within the meaning of Article X:1. 1833 The Philippines
considers that this "rule" is "connected or related to the imposition and collection of VAT, which … is
a condition for lawful sale of cigarettes in Thailand ".1834 The Philippines argues that the "rule" was
made effective by Thailand. 1835 Finally, the Philippines argues that Thailand has not published this
"rule", in contravention of Article X:1.1836
7.865. Thailand submits that the Revenue Department's confirmation that "importers can use
RRSPs as a proxy for the average actual selling price " is not included in the category of measures
that are subject to Article X:1. 1837 Thailand considers that there is no "formal right" to notify the
RRSPs under Notification 187 and Order Por. 145 -2555, but rather the notification of the RRSPs
constitutes the "method" chosen by PMTL to notify the average actual market price to the Revenue
Department.1838 In Thailand's view, the Philippines is advancing an interpretation of Article X:1 that,
if accepted, would require that Members publish the specific methods by which private entities
choose to comply with their obligations.1839 According to Thailand, this interpretation would lead to
absurd outcomes, such that Thailand would also be required to publish, for example, "the possibility
of notifying the price obtained from 'a market research company, such as A.C. Nielsen'".1840 Thailand
explains that it has published "the relevant administrative rules establishing the VAT tax base for
cigarettes", namely those contained in Notification 187 and Order Por. 145-2555.1841

1827 Philippines' first written submission, paras. 832-854; second written submission, paras. 723-746;
opening statement at the meeting of the Panel, paras. 123-126; and response to Panel question Nos. 69 and
117.
1828 Thailand's first written submission, paras. 7.69-7.81; second written submission, paras. 4.22-4.36;
opening statement at the meeting of the Panel, paras. 105-111; and response to Panel question No. 61.
1831 Philippines' first written submission, para. 846. (emphasis omitted)
1832 Philippines' second written submission, paras. 731-733.
1833 Philippines' first written submission, para. 847; and second written submission, paras. 725-727.
1834 Philippines' first written submission, para. 849. (emphasis omitted)
1835 Philippines' second written submission, paras. 735-737.
1836 Philippines' first written submission, paras. 851-853; and second written submission, paras. 740-
743.
1837 Thailand's second written submission, para. 4.23.
1838 Thailand's second written submission, para. 4.29.
1839 Thailand's second written submission, para. 4.27.
1840 Thailand's second written submission, para. 4.28.
1841 Thailand's first written submission, para. 7.77.

7.4.3.3 Analysis by the Panel
7.4.3.3.1 General considerations
7.866. Article X:1 of the GATT 1994 states in relevant part:
Laws, regulations, judicial decisions and administrative rulings of general application,
made effective by any contracting party, pertaining to the classification or the valuation
of products for customs purposes, or to rates of duty, taxes or other charges, or to
requirements, restrictions or prohibitions on imports or exports or on the transfer of
payments therefor, or affecting their sale, distribution, transportation, insurance,
warehousing, inspection, exhibition, processing, mixing or other use, shall be published
promptly in such a manner as to enable governments and traders to become acquainted
with them.
7.867. The Appellate Body has explained that the rationale behind Article X:1 is "to ensure that
traders are made aware of measures that may have a n impact on them, so that they have time to
become acquainted with, and to adapt to, the new measures ".1842 We recall that the original panel
noted that:
The obligations under Article X:1 to publish trade regulations largely consist of the
following elements : (i) the existence of laws, regulations, judicial decisions and
administrative rulings of general application made effective by a WTO Member that
pertain to, inter alia , the classification or the valuation of products for customs
purposes; and (ii) the obligation to publish such laws and regulations promptly in such
a manner as to enable governments and traders to become acquainted with them.1843
7.868. It is not in dispute that Thailand has not published any rule or guidance indicating that
notifications on the b asis of RRSPs are acceptable for the purpose of fulfilling the VAT notification
requirement. This means that if we were to find that the Revenue Department's conduct at issue
falls within the scope of "laws, regulations, judicial decisions and administrati ve rulings of general
application" within the meaning of Article X:1, there would be no need for us to inquire further into
the second element identified above.
7.869. Thus, the single issue on which the parties disagree in relation to Article X:1 is whether the
Revenue Department's acceptance of importers' notifications based on RRSPs in fulfilment of
Notification 187 and Order Por. 145 -2555 amounts to a "[l]aw", "regulation", "judicial decision" or
"administrative ruling" within the meaning of Article X:1. In particular, the Philippines submits that
the Revenue Department "has adopted a long -standing general rule, reflected in its consistent
practice, of permitting importers to notify, on a brand-specific basis, the recommended retail selling
price prevailing on the date of notification ".1844 More specifically, the Philippines argues that "the
practice at issue is an exercise of non -binding administrative authority by the Thai Revenue
Department in deciding what is [an] acceptable notification under Notification 187 and Order Por.
145-2555, as part of the Department's administration of VAT ", which falls within the concept of an
"administrative ruling" within the meaning of Article X:1.1845 In Thailand's view, however, the option
of submitting notifications on the basis o f RRSPs "is not a measure of general and prospective
application"1846, rather it is "the specific means chosen by PM Thailand to comply with Thailand's
VAT rules".1847 Thailand further argues that "nothing in Article X:1 requires WTO Members to publish
the speci fic means, process or methods chosen by private operators to comply with legal
requirements".1848
7.870. Our analysis therefore will focus on whether the Revenue Department's conduct qualifies as
an "administrative ruling" within the meaning of Article X:1. The mea ning of "[l]aws, regulations,
judicial decisions and administrative rulings" as used in Article X:1, has been considered by panels
before. In this respect, the panel in EC – IT Products found that "the coverage of Article X:1 extends

1842 Appellate Body Report, US – Countervailing and Anti-Dumping Measures (China), para. 4.65.
1843 Panel Report, Thailand – Cigarettes (Philippines), para. 7.761.
1845 Philippines' response to Panel question No. 68, para. 495.
1846 Thailand's second written submission, para. 4.25.
1847 Thailand's second written submission, para. 4.23.
1848 Thailand's second written submission, para. 4.23.

to instruments with a degree of authoritativeness issued by certain legislative, administrative or
judicial bodies".1849 The panel also noted that whether a particular measure has a necessary "degree
of authoritativeness" requires a "case-by-case assessment of the particular factu al features of the
measure".1850 On the issue of what constitutes an "administrative ruling", the panel observed that
"a 'ruling' is 'the action of governing or exercising authority, the exercise of government, authority,
control, influence' or 'an authoritative pronouncement'".1851 We observe that this is similar to the
term "regulation", which is defined as "[a] rule or principle governing behaviour or
practice; esp. such a directive established and maintained by an authority".1852
7.871. Regarding the Philippi nes' contention that the Revenue Department has adopted an
unwritten administrative ruling, we further find relevant the original panel's discussion of whether,
in the absence of written rules, the Thai Customs Department had established, through practice, a
general rule regarding the release of guarantees for internal taxes.1853 The original panel explained
that, if the Philippines were to allege the existence of an unwritten rule, "it should have … drawn
[the Panel's] attention to the 'practice' relied on by Thai Customs in previous instances ".1854 In
explaining its finding that the Philippines had not established the existence of specific procedural
rules regarding the release of guarantees, the panel noted "the absence of evidence showing a
practice or repeate d actions".1855 We approach the issue of the alleged existence of an unwritten
administrative ruling with these considerations in mind.
7.872. The parties' disagreement does not centre on the meaning of "[l]aws, regulations, judicial
decisions and administrative rul ings of general application " as used in Article X:1. Rather, it rests
primarily on the application of the legal standard to the facts. Having said this, certain key facts are
not in dispute. In the course of this proceeding, Thailand has not contested that , since 2012, the
Revenue Department has accepted PMTL's notifications on the basis of RRSPs without objection.1856
It is also an undisputed fact that Thailand has confirmed to the Philippines that PMTL can notify its
RRSP.1857 We note that both parties agree that the Revenue Department's acceptance of notifications
on the basis of RRSPs is premised on its right to verify the information submitted by the taxpayer.1858
7.873. We therefore proceed to consider the key issue disputed by the parties, namely, whether
the Revenue Department's conduct of accepting the importer's notifications on the basis of RRSPs
in fulfilment of Notification 187 and Order Por. 145-2555 constitutes an "administrative ruling" within
the meaning of Article X:1 of the GATT 1994. In our analysis, we will, following the approach of the
panels in EC - IT Products and in the original proceeding, consider whether the Philippines has
demonstrated that there was "an authoritative pronouncement"1859 on behalf of Thailand confirming
that notifications on the bas is of RRSPs are acceptable and whether the evidence confirms the
existence of the Revenue Department's "practice or repeated actions "1860 of accepting such
notifications.
7.4.3.3.2 Existence of an "administrative ruling" subject to Article X:1
7.874. We begin our analysis with an examination of whether Thailand or Thai agencies have made
any "authoritative pronouncement " to the effect that cigarette importers can notify RRSPs in
fulfilment of the VAT notification requirement. In this respect, we examin e whether, as argued by
the Philippines, Thailand has represented to the Philippines that it is permissible for importers to
notify the recommended retail selling price prevailing on the date of notification, in order to satisfy

1849 Panel Report, EC – IT Products, para. 7.1027.
1850 Panel Report, EC – IT Products, para. 7.1027.
1851 Panel Report, EC – IT Products, para. 7.1025.
1852 Appellate Body Report, India – Solar Cells, para. 5.106 (referring to Oxford English Dictionary
online).
1853 Panel Report, Thailand – Cigarettes (Philippines), paras. 7.845-7.849.
1854 Panel Report, Thailand – Cigarettes (Philippines), para. 7.846.
1855 Panel Report, Thailand – Cigarettes (Philippines), para. 7.847.
1856 Thailand's first written submission, paras. 7.12, 7.70 and 7.76.
1857 Philippines' first written submission, para. 751 (referring to Email communication between officials
of the Permanent Mission of the Philippines to the WTO and the Permanent Mission of Thailand to the WTO, 10
October 2012, (Exhibit PHL-130)); Thailand's first written submission, paras. 7.10 and 7.78-7.79 (referring to
the same Email communication ); and second written submission, para. 4.36.
1858 Thailand's response to Panel question No. 117; Philippines' response to Panel question No. 117 and
comments on Thailand's response to Panel question No. 117.
1859 Panel Report, EC – IT Products, para. 7.1025.
1860 Panel Report, Thailand – Cigarettes (Philippines), para. 7.847.

the notification requiremen ts of Notification 187 and Order Por. 145 -2555 with respect to the
average actual market price.1861
7.875. On the issue of evidence relating to discussions between the Philippines and Thailand
regarding implementation of the DSB's recommendations and rulings in the original dispute, we take
note of Thailand's concern that the documents submitted by the Philippines as Exhibits PHL-126,
PHL-127 and PHL-160 constitute notes of bilateral meetings and that those notes were prepared by
the Philippines without Thailand's approval or agreement on the content.1862 Indeed, we are cautious
in attaching weight to statements reportedly made by Thai officials, as contained in unilaterally
prepared notes and, therefore, we refrain from relying on the content of those notes in our findings.
7.876. Despite this, Thailand has not denied that it explicitly confirmed to the Philippines that PMTL
could use the RRSPs in its notifications.1863 Thailand explains that "the Philippines and [PMTL] asked
whether the companies could use their RRSPs as a proxy/best evidence for their notifications of the
average actual selling price under Order Por. 145 -2555."1864 Thailand further clarifies that in an
email sent from Thailand to the Philippines "on 10 October 2012, Thailand confirmed to the
Philippines that this practice was acceptable."1865
7.877. We consider significant the context in which this confirmation was made. As Thailand itself
explains, PMTL "expressed concerns to the Revenue Department that it was difficult to comply with
Order Por. 145-2555 because while the companies announce RRSPs, they do not control the re-sale
price and cannot be certain of the actual price on the date of the notification" and "[h]ence, [PMTL]
and the Philippines requested the Revenue Department to allow the companies to use their
RRSPs".1866 This, for us, shows that Thailand and the Thai Revenue Department were aware that
importers experience difficulties in finding a way to notify the average actual market price in the
situation where they are not able to know it on the date of notification.1867
7.878. Giving guidance on how to comply with the notification requirement, particularly in those
circumstances, in our view, appears to constitute an "authoritative pronouncement" on behalf of
Thailand. However, we consider that it is necessary to review the existence of the practice and
actions followed by the Revenue Department before reaching any conclusion on whether Thailand
has adopted an "administrative ruling", within the meaning of Article X:1, that cigarette importers
can submit notifications on the basis of RRSPs in fulfilment of their obligations under Notification
187 and Order Por. 145-2555.
7.879. As explained above, in establishing the existence of an unwritten rule the original panel
attached importance to the evidence of a "practice or repeated actions". In the circumstances of this
case, we consider that such evidence is highly relevant to the question of whether an unwritten
"administrative ruling " exists. According to the Philippines, the existence of the Revenue
Department's practice is establishe d, in particular, by the fact that, since 2012, the Revenue
Department has consistently and without objection accepted notifications on the basis of RRSPs from
PMTL.1868 As already discussed, the evidence adduced by the Philippines indeed demonstrates that
the Revenue Department has consistently and without any objection accepted notifications from
PMTL that used RRSPs for the calculation of the VAT base. 1869 We recall that the Philippines has
submitted to the Panel such notifications made by PMTL in 2012, 2013, 2015, and 2016.1870 All such

1862 Thailand's first written submission, fn 23; and second written submission, paras. 4.34-4.36.
1863 Thailand's first written submission, para. 7.10; and second written submission, para. 4.36.
1864 Thailand's first written submission, para. 7.10.
1865 Thailand's first written submission, para. 7.10 (referring to Email communication between officials of
the Permanent Mission of the Philippines to the WTO and the Permanent Mission of Thailand to the WTO , 10
October 2012, (Exhibit PHL-130)).
1866 Thailand's first written submission, para. 7.7.
1867 We recall in this respect our finding above that importers are not in a position to know the average
actual market price on the date of notification and thus are not able to ensure that they comply with the
notification requirement as written. (See Section 7.4.2.3.5 above)
1868 Philippines' first written submission, paras. 845-846.
1869 See Section 7.4.2.3.4 above.
1870 Letter from PMTL to the Director of the Revenue Department, 28 September 2012 (English
translation), (Exhibit PHL-129-B); Letter from PMTL to the Director of the Revenue Department, 28 June 2013
(English translation), (Exhibit PHL-132-B); Letter from PMTL to the Director of the Revenue Department,
25 June 2015 (English translation), (Exhibit PHL-133-B); Letter from PMTL to the Director of the Revenue
Department, 29 June 2016 (English translation), (Exhibit PHL-134-B).

notifications refer to PMTL's earlier letter of 21 September 20121871, which states that PMTL invited
the Revenue Department to object to the use of RRSPs for the purpose of notifications, and notes
that the company received no such objection or notice of disagreement from the Revenue
Department.1872
7.880. We note that Thailand does not contest the Revenue Department's acceptance of
notifications on the basis of RRSPs in recent years but offers a different interpretation of this fact.
For Thailand, "[t]he fact that [PMTL] has been able to comply with Thai VAT law for several years
demonstrates that importers are able to determine for themselves how to comply with the law in
the preferred manner of their own choosing".1873 In light of our finding that importers are not in a
position to know the average actual market price on the date of notification and thus cannot ensure
that they comply with the notification requirement as written 1874, we cannot agree with the
proposition that PMTL has chosen this method to comply with the requirement. Rather, in our view,
the evidence shows that PMTL has had recourse to the notification of RRSPs as the only method of
compliance, which was explicitly authorized by Thailand and habitually accepted by the Revenue
Department. Overall, the Revenue Department's consistent acceptance of notifications from PMTL,
which used RRSPs, together with the absence of any objection to this method of calculation of the
VAT base (although expressly invited), suggest to us the existence of a "practice or repeated actions"
by the Revenue Department. We consider that this practice also appears to confirm the existence of
an "administrative ruling" to the effect that cigarette importers can submit notifications on the basis
of RRSPs in fulfilment of their obligations under Notification 187 and Order Por. 145-2555. However,
we consider that it is necessary to review the precise content of the practice followed by the Revenue
Department before reaching any conclusion on whether Thailand has ado pted an "administrative
ruling" within the meaning of Article X:1.
7.881. We note that there is a disagreement between the parties on the precise content of the
practice that has been followed. The Philippines contends that the Revenue Department has
"unconditionally accept[ed] the RRSPs as the VAT base as a proxy for the actual average market
price"1875, while preserving the right to verify the notified RRSP "to ensure its validity".1876 Thailand,
on the other hand, argues that RRSPs are acceptable only insofar as they reflect the average actual
market price. In particular, Thailand states that "despite the self -assessment system which tax
payers must carry out in good faith, the Revenue Department retains the right to audit these
notifications to verify whether … these prices reflect the average market price of imported cigarettes
at the time of the notification. "1877 In sum, according to the Philippines, in the course of audit, the
Revenue Department would be comparing the notified RRSP against the RRSP in force on the date
of notification; according to Thailand, the Revenue Department would be comparing the notified
RRSP against the average actual market price on the date of notification.
7.882. The evidence before us is somewhat ambiguous, but we consider that it tends to support
Thailand's view on the content of the Revenue Department's practice. Specifically, paragraph 4 of
the email providing an explanation of the Revenue Department's practices, sent from Thailand to
the Philippines on 10 October 2012, states that the Revenue Department "confirmed that where
manufacturers set the market price by means of recommended retail selling prices, the
recommended retail selling prices may be notified. "1878 Paragraph 5 further provides that the
Revenue Department "is no lo nger setting the tax base. Revenue explained that in practice, the

1871 Letter from PMTL to the Director of the Revenue Department, 21 September 2012 (English
translation).
1872 Letter from PMTL to the Director of the Revenue Department, 28 September 2012 (English
translation), (Exhibit PHL-129-B); Letter from PMTL to the Director of the Revenue Department, 28 June 2013
(English translation), (Exhibit PHL-132-B); Letter from PMTL to the Director of the Revenue Department,
25 June 2015 (English translation), (Exhibit PHL-133-B); Letter from PMTL to the Director of the Revenue
Department, 29 June 2016 (English translation), (Exhibit PHL-134-B).
1873 Thailand's second written submission, para. 4.29. (emphasis original)
1874 See Section 7.4.2.3.5 above.
1875 Philippines' response to Panel question No. 117, para. 288.
1876 Philippines' comments on Thailand's response to Panel question No. 117, para. 254.
1877 Thailand's response to Panel question No. 61(a), p. 53.
1878 Email communication between officials of the Permanent Mission of the Philippines to the WTO and
the Permanent Mission of Thailand to the WTO, 10 October 2012, (Exhibit PHL-130). (emphasis added)

importers/manufacturers set the price and the retail market follows. It has never seen situations in
which the retail price does not follow the price set by the importer/manufacturer."1879
7.883. We read the foregoing as suggesting that the RRSP is accepted by the Revenue Department
"where manufacturers set the market price ", from which it could be understood that the Revenue
Department only accepts the RRSPs to the extent that they reflect the "actual average market price"
of cigarettes. Additionally, insofar as the Philippines' arguments relating to the content of the practice
rely mostly on the reported statements of Thai officials, we cannot ignore, and must accord at least
some weight to, the clear statements made by Thailand to the Panel in the course of this proceeding
on the exact same issue, to the effect that the RRSP is accepted only to the extent that it reflects
the average actual market price and that the Revenue Department reserves the right to verify
whether the notified RRSP corresponds to the average actual market price.1880
7.884. Notwithstanding that the evidence before us tends to support Thailand's view that the
notifications on the basis of the RRSP are accepted only to the extent that it reflects the average
actual market price, we consider that it still demonstrates the existence of an "administrative ruling"
within the meaning of Article X:1. We consider this to be the case because even accepting Thailand's
characterization of the conte nt of the Revenue Department's practice, this practice appears to
contradict, or at least stand in tension with, the terms of published VAT notification requirement set
forth in Notification 187 and Order Por. 145-2555, as we explain further below.
7.885. In this regard, we consider that the notion of an "administrative ruling" in Article X:1 cannot
be interpreted so broadly as to entail the consequence that any and all pronouncements made or
practices followed by government agencies, regardless of their nature a nd normative status, must
be published.1881 We agree with Thailand that there must be, and indeed are, important limitations
on the kinds of practices that become subject to the publication requirement in the context of Article
X:1.1882 One important limitation that we discuss further below is the express qualification, set forth
in the text of Article X:1, that only judicial decisions and administrative rulings "of general
application" fall within the scope of Article X:1. Another important limitation is that Ar ticle X:1 only
covers specified matters listed in Article X:1, including measures of general application "pertaining
to the classification or the valuation of products for customs purposes, or to rates of duty, taxes or
other charges".
7.886. We consider that other important limitations are inherent in the concept of an "administrative
ruling". Of particular relevance in this case, we consider that for a pronouncement or unwritten
practice to meet the threshold of qualifying as an "administrative ruling" subject to the publication
requirement in Article X:1, it must differ from, or add to, or significantly elaborate on published laws,
regulations, and rulings. Were it otherwise, Members would have to publish, inter alia , every
permissible form and modality for complying with laws and regulations falling within the scope of
Article X:1. In our view, an unduly broad interpretation of the kinds of measures covered by Article

1879 Email communication between officials of the Permanent Mission of the Philippines to the WTO and
the Permanent Mission of Thailand to the WTO, 10 October 2012, (Exhibit PHL-130). (emphasis added)
1880 For example, in paragraph 7.15 of its first written submission, Thailand states that "[i]f an importer
considers that its RRSP corresponds to the average market price under Order Por. 145-2555, as indeed it does
in practice, importers are free to notify this price to the Revenue Department". Furthermore, in paragraph
7.78, Thailand argues that "[a]t PM Thailand's request, Thailand clarified that PM Thailand could notify the
RRSP as its VAT base if it considers that this reflects the actual retail price mentioned in Order Por. 145-2555".
In paragraph 4.11 of its second written submission, Thailand clarifies that "importers may notify their RRSPs as
their VAT base only to the extent that they consider their RRSPs as reliable indicators or proxy of the value to
be notified, that is, the actual retail selling price prevailing in Thailand on the date of the notification".
(emphasis original) Additionally, in response to Panel question No. 117, Thailand states that "the Revenue
Department reserves the right to verify whether the notified price is, in fact, the average market price."
1881 We observe that Article X:1 does not prescribe any specific means of publication. As the Panel in EC
– IT Products explained, Article X:1 requires "publication that is prompt and that ensures those who need to be
aware of certain laws, regulations, judicial decisions and administrative rulings of general application can
become acquainted with them." (See Panel Report, EC – IT Products, para. 7.1015) Thus, as long as that
requirement is complied with, a WTO Member enjoys flexibility in the choice of a particular means of
publication.
1882 Thailand submits that, "while Article X:1 requires WTO Members to publish the legal rules that
private operators must be satisfy, nothing in Article X:1 requires WTO Members to publish the specific means,
process or methods chosen by private operators to comply with legal requirements." (See Thailand's second
written submission, para. 4.23) Thailand further states that "[t]here is no requirement under Article X:1 … that
a regulator is required to publish rules laying down the universe of methods by which an entity may comply
with regulatory requirements." (See Thailand's second written submission, para. 4.28)

X:1 would entail unduly burdensome and unrealistic consequences for Members , and would extend
beyond the "wide range of measures that have the potential to affect trade and traders".1883
7.887. This distinction finds reflection in several cases in which panels have faced the question of
whether certain practices, followed in the context o f other published rules, fall within the scope of
the publication requirement in Article X:1. In several disputes, panels have examined the relationship
between the practice and the published rules, particularly in terms of tension or contradiction. For
example, the panel in Japan – Film noted in its analysis of the claims under Article X:1, on the issue
of whether there was any evidence of an "administrative ruling" within the meaning of Article X:1,
that the "record is devoid of any specific allegation by the United States as to any action taken by
any of the councils that is at odds with the basic principles set forth in the codes ."1884 Along the
same lines, the panel considered that even "administrative rulings in individual cases [fall within the
scope of Article X:1] where such rulings establish or revise principles or criteria applicable in future
cases".1885 A similar approach was also followed by the panel in India – Patents in its analysis of the
claim under Article 63.1 of the TRIPS Agreement (a provision equivalent to Article X:1 of the GATT
1994). The panel stated:
[W]e find unpersuasive the Indian claim that only the Patents Act 1970, on which the
administrative practices are based, is subject to the publication requirement. In view of
the fact that the Patents Act contains mandatory provisions which are contrary to the
administrative practice, the text of the Patents Act alone would at best mislead the
public regarding the existence of the mailbox system, and would not satisfy the
requirement under Article 63.1.1886 (emphasis added)
7.888. Applying this standard to the facts of this case, we examine the relationship between the
Revenue Department's practice and written Thai rules establishing the VAT notification requirement.
To begin with, we recall that the term "the average price of the market price actually purchased and
sold in general on the date on which the value added tax liability arises", as set forth in Notification
187, is defined in Clause 2(4) of Order Por. 145-2555 as "the market price of tobacco for each type
of cigarette category at which the consumers in general or the majority [of the consumers] purchase
from the trader of tobacco actually distributed in general on the date on which the registered
operator … notifies the retail selling p rice which is used for the calculation of the value of the tax
base".1887 This provision makes it clear that the data underlying "the average price of the market
price" should be data on the actual sales and purchases of imported cigarettes by the majority of
consumers. Notably, it makes no reference to the recommended price. We further note that the
recommended price is plainly not based on the data of the actual sales and purchases of imported
cigarettes on the date of notification.
7.889. Thus, by looking at the text of the requirement, we consider that an importer would not
know that the RRSP can potentially fulfil the notification requirement to the extent it matches the
average actual market price. Hypothetically speaking, we consider that , for a new importer o f
cigarettes who launches a new business in Thailand and is unaware of whether the RRSPs are
followed by the Thai market, nothing in the wording of the notification requirement would indicate
that an RRSP can be notified to the Revenue Department. In light of this, we consider that Thailand
through its Revenue Department has authorized a method of fulfilling the notification requirement,
which is not already set forth in the text of Notification 187 and Order Por. 145 -2555, and is,
inconsistent with the written provisions of those regulations.
7.890. On the basis of all of the foregoing, we conclude that the Revenue Department's practice of
accepting notifications which use the RRSP to notify the average actual market price, together with
Thailand's authoritative pronouncement that the use of RRSPs as a proxy/best evidence for the
average actual selling price is acceptable, amount to an "administrative ruling" within the meaning
of Article X:1.

1883 Pane Report, EC – IT Products, para. 7.1026.
1884 Panel Report, Japan – Film, para. 10.396. (emphasis added)
1885 Panel Report, Japan – Film, para. 10.388. (emphasis added) We note that the panel made this
statement in the context of interpreting and applying the terms "of general application".
1886 Panel Report, India – Patents, para. 7.48. The panel's reasoning under Article 63.1 of the TRIPS
Agreement was reversed on appeal on the grounds that the complainant's claim under that provision was
outside of the panel's terms of reference. Nonetheless, we draw useful guidance from the panel's approach.

7.891. While our conclusion is based on the particular circumstances of this case, we note that it is
broadly consistent with the finding reached by the panel in Dominican Republic — Import and Sale
of Cigarettes. In that dispute, the panel found that the average-price surveys of cigarettes conducted
by the Dominican Republic Centr al Bank "were part of the administrative determination of the tax
base for cigarettes", and as such were covered by the scope of "administrative rulings … of general
application" described in Article X:1 of the GATT.1888 In that case, the panel concluded that while the
surveys may have not been, in themselves, administrative rulings of general application, "they would
constitute an essential element of an administrative ruling: the determination of the tax base for
cigarettes".1889 The panel found it significant that once authorities had determined the tax base for
cigarettes at a specific amount, "that ruling would be applicable for the importation of all cigarettes
within the description, until a new tax base had been set ". The panel thus considered that because
the average-price surveys were used to determine the applicable tax base for cigarettes, they were
"part of the administrative determination of the tax base for cigarettes".1890 Therefore, "governments
and traders would be entitled to obtain information on t he results of the survey, as well as on the
methodology used in order to conduct the survey ".1891 As already indicated, the principal issue in
dispute is whether the Philippines has established the existence of an "administrative ruling" within
the meaning of Article X:1. Having found that Thailand has indeed adopted an "administrative
ruling", we now consider whether this ruling pertains to one or more of the matters specified in
Article X:1, whether it is of "general application ", and whether it has been "made effective " by
Thailand so that it is subject to the publication requirement under Article X:1 of the GATT 1994.
7.892. Article X:1 applies to measures "pertaining to … rates of duty, taxes or other charges ". We
have found that the Revenue Department has adopte d a practice of permitting cigarette importers
to notify RRSPs in fulfilment of the VAT notification requirement. We agree with the Philippines that
this administrative ruling pertains to taxes or other charges (specifically, VAT), in the sense that it
"defines in what way an importer can successfully comply with the obligation to notify the average
actual market price for purposes of establishing the VAT base ".1892 We therefore consider that,
because it forms part of the administrative determination of the ta x base for cigarettes, this
administrative ruling pertains to "rates of … taxes ". We note that Thailand does not specifically
contest this point.
7.893. Furthermore, we note that Thailand does not contest that the Revenue Department's conduct
of accepting notifications on the basis of RRSPs is "of general application" in the sense that other
cigarette importers and manufacturers may equally notify their RRSPs in the same manner as PMTL
has done. As explained by the panel in US - Underwear, in a finding that was upheld by the Appellate
Body, where a measure "affects an unidentified number of economic operators ", it constitutes a
measure of general application.1893 Thailand has not argued that notification on the basis of RRSP is
a method available only to PMTL but not to other importers of cigarettes. We note in particular
Thailand's statement that "[i]n recent years ... TTM, PM Thailand, and other importers have complied
with Order Por. 145-2555 by notifying their RRSP as a proxy/best evidence for the actual average
selling price".1894 Additionally, we observe that the email sent from Thailand to the Philippines on
10 October 2012, which we have referred to in the previous paragraph, confirms that notification of
the RRSP is acceptable "where manufacturers set the market price by means of recommended retail
selling prices" and contains an additional explanation that, "in practice, the importers/manufacturers
set the price and the retail market follows. It has never seen situations in which the retail price does
not follow the price set by the importer/manufacturer".1895 We agree with the Philippines that this
confirmation was phrased in general terms and relates to all importers, not being in any way specific
to PMTL. 1896 We therefore consider that the Revenue Department's practice constitutes an
"administrative ruling" of "general application" within the meaning of Article X:1.

1888 Panel Report, Dominican Republic - Import and Sale of Cigarettes, para. 7.408.
1889 Panel Report, Dominican Republic - Import and Sale of Cigarettes, para. 7.405.
1890 Panel Report, Dominican Republic - Import and Sale of Cigarettes, para. 7.406.
1891 Panel Report, Dominican Republic - Import and Sale of Cigarettes, para. 7.407.
1893 Panel Report, US - Underwear, para. 7.65. See also Appellate Body Report, US - Underwear, p. 21,
DSR 1997:I, 11, p. 29.
1894 Thailand's first written submission, para. 7.12.
1895 Email communication between officials of the Permanent Mission of the Philippines to the WTO and
the Permanent Mission of Thailand to the WTO, 10 October 2012, (Exhibit PHL-130). (emphasis added)

7.894. Finally, on the issue of whether the administ rative ruling has been "made effective" for the
purposes of Article X:1, we consider that the evidence before the Panel establishing the existence of
the Revenue Department's "administrative ruling" permitting the notification of RRSPs in fulfilment
of the VAT notification requirement equally establishes that this is a measure that Thailand has,
through the Revenue Department, "made effective". The panel in EC – IT Products considered that
"the term 'made effective' under Article X:1 of the GATT 1994 … covers measures that were brought
into effect, or made operative, in practice".1897 We have already found above that the Revenue
Department has, in practice, consistently accepted the notification of RRSPs in fulfilment of the VAT
notification requirement, which means that the administrative ruling of general application has been
made effective by Thailand.
7.895. On the basis of the foregoing, we consider that the Revenue Department's unpublished
practice of acc epting the importers' RRSPs in fulfilment of the VAT notification requirement
constitutes an administrative ruling of general application, and is related to the imposition and
collection of VAT, which is a condition for the lawful sale of cigarettes in Thailand.1898 Therefore, the
practice at issue falls within the meaning of Article X:1 of the GATT 1994 and is subject to the
publication requirement.
7.4.3.4 Conclusion
7.896. The Panel recalls that in the original proceeding, the panel found that Thailand had acted
inconsistently with Article III:2 of the GATT 1994 by subjecting imported cigarettes to a VAT liability
in excess of that applied to like domestic cigarettes, by means of the calculation of the government-
mandated MRSPs that were used as the VAT base. 1899 For the rea sons set forth above, t he Panel
finds that, in implementing the DSB's recommendations and rulings in the original proceeding,
Thailand failed to publish the administrative ruling of general application that cigarette importers
can notify RRSPs to the extent they reflect the average actual market prices under Notification 187
and Order Por. 145-2555, inconsistently with Article X:1 of the GATT 1994.
7.4.4 Claim under Article X:3(a) of the GATT 1994
7.4.4.1 Introduction
7.897. Article X:3(a) of the GATT 1994 sets out the obligat ion to administer laws, regulations,
decisions and rulings , within the meaning of Article X:1 , in a uniform, impartial and reasonable
manner. As indicated above, Notification 187 and Order Por. 145 -2555 impose on importers the
requirement to notify the ave rage actual market price on the date of notification as the VAT base.
Under Clauses 5 and 6 of Notification 187 and Clauses 2(4), 5 and 6 of Order Por. 145 -2555, the
importer is required to notify the average actual market price on the date of notification in June of
each year. As we found in the previous section, the Revenue Department has adopted an
administrative ruling of general application that cigarette importers can notify RRSPs to the extent
that they reflect the average actual market prices in fulfilment of their obligations under Notification
187 and Order Por. 145-2555.
7.898. The Philippines claims that the VAT notification requirement under Notification 187 and Order
Por. 145-2555 is not "reasonable", and therefore inconsistent with Article X:3(a) of the GATT 1994,
because importers cannot ensure that they comply with this requirement without violating Thai
competition law.1900
7.899. Thailand argues that the Philippines has failed to demonstrate any inconsistency with
Article X:3(a) of the GATT 1994, because: (i) the Philippines' claims concern substantive rules and
not "administration" of those rules; and (ii) the Philippines' claim that the VAT notification

1897 Panel Report, EC – IT Products, para. 7.1048.
1899 Panel Report, Thailand – Cigarettes (Philippines), paras. 7.791 and 8.4(a). See also paragraphs
7.19. and 7.20. above.
1900 Philippines' first written submission, paras. 816-831; second written submission, paras. 785-796;
opening statement at the meeting of the Panel, paras. 155-162; and response to Panel question Nos. 60, 64,
67, 115, 116, 118, 120, 121 and 122.

requirement is not "reasonable" rests on an incorrect factual understanding of the operation of
Thailand's VAT regime.1901
7.4.4.2 Main arguments of the parties
7.900. The Philippines argues that Notification 187 and Order Por. 145 -2555 are within the scope
of Article X:3(a) of the GATT 1994 because they "administer" Thailand's VAT regime as established
under the Thai Revenue Code.1902 The Philippines considers that "the measures govern the manner
in which Thailand administers the tax with respect to individual entities subject to the tax, by
requiring that certain information be obtained from those entities in order to establish the tax base
for their cigarettes."1903 In the Philippines' view, "[t]he notification requirement does not, in itself,
prescribe any substantive aspect of the tax ", but rather provides for a manner of applying the
substantive rules on the VAT tax base, which are specified in the Revenue Code.1904 The Philippines
clarifies that although Notification 187 and Order Por. 145-2555 may also contain substantive rules
relating to the VAT base, the Philippines is challenging only the notification requirement.1905
7.901. The Philippines considers that Notification 187 and Order Por. 145 -2555 provide for
"unreasonable" administration of Thailand's VAT regime, because importers are not in a position to
know the average actual market prices on the date of notification, and therefore cannot ensure that
they comply with the notification requirement without violating Thai competition law. 1906 The
Philippines recalls that, under the notification requirement, an importer of cigarettes must notify "in
June of each year … the average actual market price on the date of notification".1907 The Philippines
further argues that importers cannot be in possession of average actual market price information at
the time of the notification obligation. 1908 The Philippines considers that it is unreasonable "in the
sense of rational or appropriate – for a Member to impose binding administrative requirements on
an importer in the knowledge that the importer cannot comply with those requirements".1909 In the
Philippines' view, this prospect of non -compliance places t he importer "in one form or another of
legal jeopardy".1910 Regarding Thailand's contention that a faulty notification can be corrected, the
Philippines submits that "[e]ven if the endless spiral of notifications, corrections and reissuance of
invoices … coul d, in theory, mitigate the legal jeopardy faced by an importer, the imposition of a
requirement constantly to monitor, re -notify, correct and re -document transactions is itself an
inherently unreasonable requirement".1911
7.902. Thailand argues that the scope of Ar ticle X:3(a) is limited to administration of laws and
regulations, and that "any claim under Article X:3(a) relating to an instrument's substantive content
must be dismissed ".1912 In Thailand's view, Notification 187 and Order Por. 145 -2555 "establish
substantive rules relating to the tax base to be used for purposes of VAT on cigarettes".1913 Thailand
highlights that the text of Notification 187 explicitly indicates that it "prescribes the tax base " for
VAT on cigarettes.1914

1901 Thailand's first written submission, paras. 7.50-7.68; second written submission, paras. 4.37-4.46;
opening statement at the meeting of the Panel, paras. 112-117; response to Panel question Nos. 67, 122 and
123.
1902 Philippines' first written submission, paras. 824-825; and second written submission, paras. 786-
789.
1906 Philippines' first written submission, paras. 826-830; second written submission, paras. 790-796.
1908 Philippines' first written submission, paras. 826-830; second written submission, para. 790.
1911 Philippines' response to Panel question No. 118, para. 298.
1912 Thailand's first written submission, para. 7.60.
1913 Thailand's first written submission, para. 7.61.
1914 Thailand's second written submission, para. 4.42.

7.903. Thailand also argues that, even if the challenged measures were within the scope of Article
X:3(a), the Philippines' "entire argumentation … is premised on its understanding that compliance …
can only be achieved by violating Thailand's competition law ".1915 Thailand argues that "cigarette
importers can comply, and have complied, with Notification 187 and Order Por. 145 -2555 without
infringing Thailand's competition law".1916 This, in Thailand's view, serves as evidence that there is
no need to violate either the notification requirement or Thai competition law.1917
7.4.4.3 Analysis by the Panel
7.4.4.3.1 General considerations
7.904. Article X:3(a) of the GATT 1994 states:
Each contracting party shall administer in a uniform, impartial and reasonable manner
all its laws, regulations, decisions and rulings of the kind described in paragraph 1 of
this Article.
7.905. We recall that the original panel discussed the nature of Article X:3(a) and its requirements.
The original panel observed that:
To establish a violation of Article X:3(a), a compl aining party must … show that the
responding Member administers the legal instruments of the kind described in Article
X:1 in a manner that is non-uniform, partial and/or unreasonable.
The obligations of uniformity, impartiality and reasonableness are lega lly independent
and the WTO Members are obliged to comply with all three requirements. This means
that … a violation of any of the three obligations will lead to a violation of the obligations
under Article X:3(a).1918
7.906. In the present proceeding, the Philippines' claim concerns the requirement to administer the
legal instruments of the kind described in Article X:1 in a "reasonable" manner. In the context of
such a claim, it is incumbent on the complainant to demonstrate three elements: first, the existence
of a legal instrument of the kind described in Article X:1 ; second, that this instrument is being
administered by the respondent; third, the administration of the legal instrument in question is
unreasonable. We note that the parties largely agree on the inte rpretation of the legal standard
under Article X:3(a).1919
7.907. We recall that the "laws, regulations, decisions and rulings " described in Article X:1 are as
follows:
Laws, regulations, judicial decisions and administrative rulings of general application,
made effective by any [Member], pertaining to the classification or the valuation of
products for customs purposes, or to rates of duty, taxes or other charges, or to
requirements, restrictions or prohibitions on imports or exports or on the transfer of
payments therefor, or affecting their sale, distribution, transportation, insurance,
warehousing, inspection, exhibition, processing, mixing or other use.
7.908. The Philippines submits that Notification 187 and Order Por. 145 -2555 provide for the
"administration" of the VAT regime established under the Thai Revenue Code, which "pertain[s]" to
the imposition of "taxes or other charges" and "requirements … affecting … sale".1920 Thailand does
not contest that the Thai Revenue Code qualifies as a "law[] … of general application " within the
meaning of Article X:1. We agree with this characterization of the Thai Revenue Code.
7.909. From previous jurisprudence, it is established that one legal instrument can "administer"
another legal instrument. In EC – Selected Customs Matters, the Appellate Body reversed the panel's

1915 Thailand's first written submission, para. 7.67.
1916 Thailand's second written submission, para. 4.45.
1917 Thailand's second written submission, para. 4.45.
1918 Panel Report, Thailand – Cigarettes (Philippines), paras. 7.866-7.867. (emphasis original)
1919 Thailand's first written submission, para. 7.57.

finding that Article X:3(a) does not apply to legal instruments which are themselves laws and
regulations, insofar as they "administer" other laws or regulations.1921 In the context of interpreting
whether legal instruments can qualify as acts of administration under Article X:3(a), t he Appellate
Body stated:
While the substantive content of the legal instrument being administered is not
challengeable under Article X:3(a), we see no reason why a legal instrument that
regulates the application or implementation of that instrument cannot be examined
under Article X:3(a) if it is alleged to lead to a lack of uniform, impartial, or reasonable
administration of that legal instrument.1922
7.910. Thailand does not contest that, in principle, one legal instrument may administer another
legal instrument. 1923 Rather, Thailand disagrees with the proposition that the two challenged
measures at issue in this dispute are of an administrative character.
7.911. We note that the parties disagree on the description of the VAT regime in several respects.
We have considered the disputed factual aspects of Thailand's VAT regime in Section 7.4.2 above.
As we have found, an importer is not in a position to know the average actual market price on the
date of notification, which makes it impossible for an importer to ensure that it complies with the
VAT notification requirement.1924 In case of non -compliance with the VAT notification requirement
and understatement of the VAT base, an importer faces consequences such as penalties, the
prospect of a criminal investigation, and an additional administrative and financial burden in the
event the importer tries to correct an original incorrect notification.1925 In practice, the Thai Revenue
Department permits the notification of RRSPs in fulfilment of the VAT notification requirement.
However, it has not published this administrative ruling of general application.1926
7.912. On the basis of these findings we proceed to consider whether the VAT notification
requirement in Notification 187 and Order Por. 145-2555 "administers" the Thai Revenue Code and,
if so, whether it is "reasonable".
7.4.4.3.2 "administer"
7.913. The Philippines submits that "[t]he measures at issue lay down rules for applying or
implementing – that is, administering – Thailand's VAT regime through, among others, requiring the
notification of information that is used to establish the tax base."1927 Although the Philippines accepts
that these two instruments may contain substantive rules relating to the VAT base, the Philippines
maintains that it does not challenge those substantive rules, and that its challenge is limited to "the
requirement for importers to notify the average actual mar ket prices prevailing on the date of
notification".1928
7.914. Thailand emphasizes that Notification 187 and Order Por. 145 -2555 "establish substantive
rules relating to the tax base " for the VAT on cigarettes. 1929 In particular, Thailand points to the
introductory paragraph of Notification 187, which states that the Director -General of the Revenue
Department "hereby prescribes the tax base " for VAT on cigarettes. 1930 In addition, according to
Thailand, "Clauses 4 and 5 of Notification 187 define the tax base for VAT on cigarettes, namely that

1921 Appellate Body Report, EC – Selected Customs Matters, para. 309. Additionally, we recall the
observation of the panel in Argentina – Hides and Leather that "[i]f the substance of a rule could not be
challenged, even if the rule was administrative in nature, it is unclear what could ever be challenged under
Article X". The panel in that dispute found that Resolution 2235, which provided for a means to involve private
persons in assisting Customs officials in the application and enforcement of the substantive rules, clearly was
administrative in nature. (See Panel Report, Argentina – Hides and Leather, paras. 11.70-11.72)
1922 Appellate Body Report, EC – Selected Customs Matters, para. 200.
1923 Thailand's first written submission, para. 7.58.
1924 See Section 7.4.2.3.5 above.
1925 See Section 7.4.2.4 above.
1926 See Section 7.4.3.4 above.
1929 Thailand's first written submission, para. 7.61.
1930 Thailand's first written submission, para. 7.61.

the tax base shall be the value of tobacco derived from deducting the VAT from the full retail
price."1931
7.915. Previous panels have interpreted the term "administer" as "putting into practical effect or
applying" another legal instrument of the kind described in Article X:1 1932, or "a certain manner of
applying"1933 substantive rules. In our view, a legal instrument can contain both administrative and
substantive requirements, and this alone does not exclude an instrument from the scope of
Article X:3(a). Indeed, an interpretation to the contrary would exclude from the scope of
Article X:3(a) a wide range of legal instruments, including various kinds of instruments that have
previously been found to fall within the scope of Article X:3(a).1934 What matters, in our view, is
whether the individual provisions or aspects of the instrument being challenged – i.e., the "specific
measure at issue" – essentially are of an implementing, as opposed to substantive, character. Insofar
as they are, then it is irrelevant whether those provisions or aspects are embodied in an instrument
that contains other provisions of a substantive nature. Hence, the issue before us is whether the
VAT notification requirement contained in the relevant provisions of Notification 187 and Order Por.
145-2555 essentially implements the provisions of the Thai Revenue Code.
7.916. While Notification 187 and Order Por. 145-2555 may establish rules relating to the VAT base,
we understand the Philippines to be particularly concerned with bot h the type of information that
must be submitted in order to calculate the VAT, as well as the timing element of the notification
requirement. Specifically, the Philippines asserts that the required information on the average actual
market price as of the date of notification cannot be submitted on the date of notification because it
is not yet available to an importer. In our view, the requirement that a specific type of information
has to be submitted on a particular date, is indeed a requirement that relates to "a certain manner
of applying" the rules pertaining to the VAT tax base, or, in other words, their "administration".
7.917. By way of illustration, while the VAT base is the retail selling price, and more specifically,
the average actual market price, one can contemplate various options or modalities of implementing
this base that would not alter the nature of the base itself. For example, one option could be to
require importers to notify the average actual market price prevailing on a date preceding the date
of notification, rather than the average actual market price on the date of notification. Alternatively,
since Thailand considers that recommended prices are virtually the same as average actual market
prices1935, another option could be to require impo rters to notify their RRSPs as a proxy of the
average actual market price. These modalities would not change the essence of the substantive
requirement of the regulations at issue. Rather, such changes would affect the "manner of applying"
that VAT base. We therefore consider that requiring a cigarette importer to notify the average actual
market price based on actual purchases of cigarettes by the majority of consumers from retailers on
the date of notification represents "a certain manner of applying " or administering the prescribed
VAT base.
7.918. Furthermore, by their terms, Notification 187 and Order Por. 145-2555 appear to administer
another provision, i.e. Section 79/5 of the Revenue Code. While we do not suggest that the
nomenclature is decisive, we do note that the full titles of the challenged measures are:
Notification No. 187 on VAT, "Determination of tax base, categories and types of tobacco
for sale for which the value of the tax base is required to be calculated according to the
rules under Section 79/5(2) of the Revenue Code".
Order Por. 145 -2555, "Calculation of Tax Base for Importation and Sale of Tobacco
According to the Category and Type Prescribed by the Director -General and Approved

1931 Thailand's first written submission, para. 7.61.
1933 Panel Report, Argentina – Hides and Leather, para. 11.72.
1934 In EC – Selected Customs Matters, the Appellate Body found that the EU's penalty laws and
instruments of implementation of customs law could be examined under Article X:3(a). (Appellate Body Report,
EC – Selected Customs Matters, para. 210) The panel in Argentina – Leather and Hides found Resolution 2235,
which provided for a means to involve private persons in assisting Customs officials in the application and
enforcement of the rules on classification and export duties, to be administrative in nature and thus fall within
the scope of Article X:3(a). (See Panel Report, Argentina – Leather and Hides, para. 11.72)
1935 Thailand's first written submission, paras. 7.8-7.9, 7.36 and 7.38.

by the Minister Under Section 79/5 of the Revenue Code, and Preparation of Tax Invoice
In Case of Sale of Tobacco Under Section 86/5(2) of the Revenue Code".
The mention of Section 79/5 of the Revenue Code in the titles of both instruments supports our
conclusion above.1936

7.919. For these reasons we agree with the Philippines that the VAT notification requirement
embodied in Notification 187 and Order Por. 145 -2555, and in particular the requirement that a
specific type of information has to be submitted on a particular date, falls within the scope of Article
X:3(a).
7.4.4.3.3 "in a reasonable manner"
7.920. Turning to the substantive issue, the Philippines submits that "[b]y imposing a notification
requirement on importers with which they cannot comply, unless they violate Thai competition law,
Notification 187 and Order Por. 145-2555 provide for unreasonable administration."1937 This, in the
Philippines' view, "creates a permanent state of legal uncertainty for the importer."1938
7.921. The jurisprudence indicates that what is "unreasonable" has to be determined on a case-by-
case basis.1939 In our view, imposing a requirement with which compliance cannot be ensured unless
a subject of the law elects to violate another legal requirement would fall within the scope of
"unreasonable". We further consider that a requ irement placing the burden of potential
consequences of internally incoherent national legislation on a private party would not satisfy the
standard of "reasonable" administration.
7.922. We proceed by applying this standard of "reasonableness" against the conclusions regarding
the operation of the Thai VAT regime that we reached in S ections 7.4.2 and 7.4.3 above, which
are the following: (i) the importer s of cigarettes are not in a position to know the average actual
market price on the date of notification for tax purposes and thus cannot ensure that they comply
with the VAT notification requirement; (ii) importers of cigarettes may well face real consequences
if the notified value turns out to be less than the average actual market price; and (iii) the Revenue
Department permits, in practice, the notification of RRSPs to the extent that they reflect the average
actual market prices on the day of notification, but it has not published this administrative ruling of
general application.
7.923. We consider that the VAT notification requirement creates uncertainty for cigarette importers
regarding how to comply. As we have established in Section 7.4.2.3 , importers are not in a position
to know the average actual market price on the date of notification and thus cannot ensure that they
comply with the VAT notification requirement. Through the notification of the RRSP, importers may,
as a practical matter, consistently match the average actual market price when they notify their
RRSPs. However, such importers simply have no way of knowing whether the RRSP does, in fact,
correspond to the average actual market price on the date of notification, when they submit their
notification. The importers in this situation are left to wonder whether the notification of the RRSP,
accepted by the Revenue Department in practice, would fulfil the VAT notification requirement or
not. This uncertainty, in our view, suffices to establish that the provisions of Notificatio n 187 and
Order Por. 145 -2555, which contain the VAT notification requirement, lead to unreasonable
administration of Section 79/5 of the Thai Revenue Code establishing the VAT tax base.
7.924. However, we also agree with the Philippines that the situation before us raises an even more
serious concern because, aside from creating uncertainty and confusion, it is impossible to ensure
compliance with the published VAT notification requirement, and thus exposes the importer to

1936 We observe that in our reasoning we do not draw any inferences from Thailand's statement in
paragraph 7.75 of its first written submission that "the relevant administrative rules establishing the VAT tax
base for cigarettes are those contained in Notification 187 and Order Por. 145-2555". We took into account
Thailand's explanation that it did not use "the term 'administrative' in the sense or context of Article X:3(a),
which refers to the administration of substantive rules". (See Thailand's response to Panel question No. 67)
1939 Panel Reports, US – COOL, para. 7.851. Furthermore, the original panel observed that the ordinary
meaning of the term "reasonable" is "in accordance with reason", "not irrational or absurd", "proportionate",
"sensible", and "within the limits of reason, not greatly less or more than might be thought likely or
appropriate". See Panel Report, Thailand – Cigarettes (Philippines), para. 7.919.

potential consequences of non -compliance.1940 The imposition of a notification requirement with
which it is impossible to ensure compliance at the time of notification, particularly where its violation
may expose an importer to penalties, the prospect of a criminal investigation or, at a minimum, an
additional administrative and financial burden, is not reasonable.
7.925. We recall that Thailand's principal argument in relation to the claim under Article X:3(a) is
that cigarette importers can comply with Notification 187 and Order Por. 145-2555 without violating
Thailand's competition law, and have done so through the use of RRSPs. 1941 We have already
addressed this argument in our analysis above.1942 We have found that RRSPs are not the same as
average actual market prices, and the importer has no control over market players to ensure that
RRSPs are, in fact, followed. Therefore, cigarette importers cannot ensure their compliance with the
notification requirement, simply by notifying RRSPs.1943 Additionally, we do not find it relevant that
the use of RRSPs is not a violation of Thai competition law; rather, we recall our observations that
importers would be acting in contravention of Thai competition law should they try to impose retail
selling prices on wholesalers and retailers.1944
7.926. These considerations notwithstandi ng, we recall our finding under Article X:1 that the
Revenue Department has adopted an unpublished administrative ruling that cigarette importers can
notify RRSPs to the extent that they reflect the average actual market prices under Notification 187
and Order Por. 145 -2555.1945 This administrative ruling is part of Thailand's administration of the
VAT rules, in our view, and has to be taken into account in our assessment of its reasonableness.
We observe that, even though the Revenue Department has allowed importers to notify RRSPs for
several years already, Thailand denies that there is any "formal right" of the importers to submit the
RRSP in order to comply with Notification 187 and Order Por. 145 -2555.1946 The unpublished
administrative ruling therefore creates no legal certainty for importers that they are complying with
the VAT notification requirement correctly, or that the Revenue Department will continue to accept
RRSPs. For these reasons, the Revenue Depa rtment's unpublished administrative ruling does not
eliminate the uncertainty existing for the industry as to the means of compliance with the VAT
notification requirement, and does not render the administration of the requirement reasonable.
7.927. We find suppo rt for our reasoning in two previous disputes involving claims under
Article X:3(a) where panels made their findings of "unreasonable administration" on the basis of
uncertainty generated by legal requirements. In China – Raw Materials, the panel was faced with
the issue of whether the criterion of operation capacity of an applicant (used as one of the eligibility
criteria for the export quota of raw materials) was reasonably administered by China. 1947 While the
operation capacity criterion could trump all other criteria and result in an applicant's failure to obtain
a quota, there was no official definition of this criterion and no standard against which the authorities
could assess it.1948 In the course of its analysis, the panel noted that "a system of quota allocation
where an undefined and vaguely worded criterion can trump all other criteria, yet is to be applied
by 32 different regional offices[,] constitutes the type of evidence " that establishes unreasonable
administration.1949 The reason for the panel to con clude that the administration of the operation
capacity criterion was unreasonable included the "lack of any definition, guidelines or standards in
how the 32 Local Departments in charge of Foreign Trade should apply the potentially critical
operation capa city criterion ".1950 We thus understand the panel's finding to be based on the
uncertainty surrounding the application of the operation capacity criterion.
7.928. Similarly, in US – COOL, the panel found that a letter sent by the Secretary of Agriculture to
industry representatives ( "the Vilsack letter ") in connection with a new rule governing labelling
requirements led to "unreasonable" administration because of an apparent tension between the
letter and the rule.1951 In the course of its analysis, the panel stated that the Vilsack letter "created

1940 Philippines' response to Panel question No. 122(a), paras. 316 and 327; Philippines' comments on
Thailand's response to Panel question No. 122(a), para. 269.
1941 Thailand's first written submission, para. 7.67; and second written submission, para. 4.45.
1942 See Section 7.4.2.3 above.
1943 See Section 7.4.2.3 above.
1944 See Section 7.4.2.3.1 above.
1945 See Section 7.4.3.4 above.
1946 Thailand's second written submission, para. 4.29; and response to Panel question No. 63(c).
1947 Panel Reports, China – Raw Materials, paras. 7.737-7.738 and 7.741-7.746.
1948 Panel Reports, China – Raw Materials, para. 7.738.
1949 Panel Reports, China – Raw Materials, para. 7.744. (emphasis added)
1950 Panel Reports, China – Raw Materials, para. 7.745. (emphasis added)
1951 Panel Reports, US – COOL, paras. 7.850-7.870.

uncertainties for industry regarding how to comply with the specific labelling requirements contained
in" the 2009 Final Rule, and on that basis found a violation of the "reasonable" administration
requirement.1952 We note that Thailand does not agree with the proposition that the panel in US –
COOL based its finding of "unreasonable" administration on the fact that the Vilsack letter created
uncertainty or confusion.1953 However, we observe that paragraph 7.866 of the panel report indeed
makes the connection between "uncertainties for industry regarding how to comply " and
"unreasonableness" of administration:
In our view, however, Mexico has adduced sufficient evidence to demonstrate that the
Vilsack letter created uncertainties for industry regarding how to comply with the
specific labelling requirements contained in the 2009 Final Rule (AMS). In particular,
Mexico highlights that the Vilsack letter suggested practices additional to the ones
foreseen under the 2009 Final Rule (AM S), and threatened to modify the 2009 Final
Rule (AMS) if such practices were not followed. It is essentially for these same reasons
that we found that Canada has demonstrated that the Vilsack letter is inconsistent with
the requirement of reasonable admin istration under Article X:3(a) of the GATT 1994.
Accordingly, we find that Mexico has demonstrated that the Vilsack letter does not meet
the standard of reasonable administration of the COOL measure within the meaning of
Article X:3(a).1954
7.929. We find further support for our position in the reasoning of the panel and the Appellate Body
in India – Patents. The panel in India – Patents examined whether India had established a legal
mechanism for the filing of mailbox applications that provided "a sound legal basis" for preserving
both the novelty of the inventions and the priority of the applications, as required by Article 70.8 of
the TRIPS Agreement. India was relying on the unpublished administrative practice of receiving
mailbox applications as a means of estab lishing such a legal mechanism. 1955 The panel, however,
found that the administrative practice "creat[ed] a certain degree of legal insecurity in that it
requir[ed] Indian officials to ignore certain mandatory provisions of the Patents Act ".1956 The panel
further observed that "economic operators - in this case potential patent applicants - are influenced
by the legal insecurity created by the continued existence of mandatory legislation" that established
conflicting rules.1957 On the basis of the lack of legal security, the panel found that India's system of
receiving mailbox applications did not satisfy the requirements of Article 70.8 of the TRIPS
Agreement.1958
7.930. As Thailand rightly observes 1959, the panel in India – Patents was dealing with a different
provision, and not Article X:3(a) of the GATT 1994. However, we consider that the panel's analysis
is relevant to a more general question of whether an informal, unpublished administrative ruling can
create legal uncertainty for private operators. 1960 We see a certain paralle l between the
circumstances of the present dispute and India – Patents. As we found above 1961, the Revenue
Department's administrative ruling, through which it has been accepting RRSPs, is not set forth in
the written provisions of Notification 187 and Order Por. 145-2555 and is not consistent with them.
Thus, similarly to the situation in India – Patents, the Revenue Department's informal administrative
ruling under which it allows importers to notify RRSPs, creates a degree of legal insecurity as to its
status in light of the written provisions of the regulations. Further, despite the Revenue Department's
informal administrative ruling, cigarette importers are influenced by the legal insecurity created by
the continued existence of the text of the VAT notification requirement. These considerations further
reinforce our view that, even in the presence of the unpublished Revenue Department's

1952 Panel Reports, US – COOL, para. 7.866. (emphasis added)
1953 Thailand's response to Panel question No. 122(a), p. 46.
1954 Panel Reports, US – COOL, para. 7.866. (emphasis added)
1955 Panel Report, India – Patents, paras. 7.31-7.33. See also Appellate Body Report, India – Patents,
para. 61.
1958 Panel Report, India – Patents, para. 7.35. The panel's finding was upheld on appeal. (See Appellate
1959 Thailand's response to Panel question No. 122(b), p. 46.
1960 In its analysis of how India's administrative practice relates to the mandatory provisions of the law,
the panel in India – Patents relied on the findings of the GATT panel in Malt Beverages, which dealt with a
completely different provision – Article III:4 of the GATT. Thus, we do not consider that the analysis of the
panel was entirely provision-specific and we will rely on the more general observations of the panel. (See Panel
Report, India – Patents, para. 7.35)
1961 See paras. 7.888. and 7.889. above.

administrative ruling, the VAT notification requirement leads to unreasonable administration of the
Thai Revenue Code.
7.931. Moreover, we recall that the Revenue Department only accepts RRSPs under Notification 187
and Order Por. 145 -2555 to the extent that they reflect the average actual market prices. Thus,
even if the administrative ruling were published, it would not give cigarette importers any guarantee
that the Revenue Department will not impose penalties in the event of a divergence between the
RRSP and the average actual market price. Therefore, even the publication of the administrative
ruling would not render the administration of the VAT rules reasonable.
7.932. In examining the reasonableness of the requirement at issue, we are mindful of the need to
consider any rationale that may explain the existence of such a rule. In the original proceeding, the
panel noted that in applying the standard of reasonableness in Article X:3(a), it "also found guidance
in WTO jurisprudence that the requirement of reasonableness should be examined based on the
features of the administrative act at issue in the light of its objective, cause or the rationale behind
it".1962 In response to our request to explain the rationale behind the requirement to notify the
average actual market price prevailing on the same day that the notification is due, Thailand
submitted that "[t]he rationale for using the actual price … is that the taxpayers do not determine
unilaterally their own tax base".1963
7.933. We certainly agree that WTO members have a legitimate right not to allow a taxpayer to
determine the amount of tax unilaterally in order to ensure correct tax collec tion. However, we do
not see the connection between this objective and the aspect of the VAT notification requirement
that is at issue. As we understand it, both the Philippines and Thailand concur that tax authorities
have the right to review a taxpayer's declaration.1964
7.934. We further observe that Thailand, in its response, has not addressed the timing element
highlighted in the question from the Panel, i.e. that the importer is required to submit the data on
the average actual market price on the date of noti fication. We fail to see how the requirement to
notify the average actual market price prevailing on the same day that the notification is due helps
to address the objective that the notification requirement seeks to achieve according to Thailand,
i.e. ensuring there is no unilateral determination of the tax base by a taxpayer. As we have found
above, importers do not and are not in a position to know the average actual market price on the
date of notification. Thus, if anything, the notification requirement forces the taxpayer to arbitrarily
determine the value to be notified, which, in our view, undermines the alleged objective of avoiding
unilateral tax base determination. We can therefore identify no rational connection between the
objectives pursed by the VAT notification requirement and the difficulties imposed on the importers
in attempting to comply with it.
7.4.4.4 Conclusion
7.935. For the reasons set forth above , the Panel finds that , in implementing the DSB's
recommendations and rulings in the original proceedin g, Thailand has administered the provisions
of its Revenue Code in an unreasonable manner, inconsistently with Article X:3(a) of the GATT 1994,
by imposing on cigarette importers a VAT notification requirement with which it is impossible to

1962 Panel Report, Thailand – Cigarettes (Philippines), para. 7.951 (referring to Panel Report, Argentina –
Hides and Leather, para. 11.86; and Appellate Body Report, Brazil – Retreaded Tyres, para. 227). Examination
of the measure's reasonableness in light of its objective echoes clear parallels between the nature of the
obligation in Article X:3(a) and the requirement, under the chapeau of Article XX, to ensure that any measures
covered by the general exceptions are "applied" in a manner that does not give rise to discrimination that is
"arbitrary" or "unjustifiable". Panels applying Article X:3(a) have relied upon findings under the chapeau, and
vice versa. The original panel in its analysis under Article X:3(a) cited the Appellate Body's finding in Brazil –
Retreaded Tyres that "the analysis of whether the application of a measure results in arbitrary or unjustifiable
discrimination should focus on the cause of the discrimination, or the rationale put forward to explain its
existence". (See Panel Report, Thailand – Cigarettes (Philippines), para. 7.921 and fn 180) In US – Shrimp, the
Appellate Body found, in the context of addressing the consistency of the measure with the chapeau of Article
XX, that the "due process requirements" found in Article X:3(a) and (b) "bear upon this matter". (Appellate
1963 Thailand's response to Panel question No. 123.
1964 Thailand's response to Panel question No. 117; Philippines' response to Panel question No. 117,
para. 289; and Philippines' comments on Thailand's response to Panel question No. 117, para. 254.

ensure compliance, and which exposes cigarette importers to the potential consequences of non -
compliance.
7.4.5 Claim under Article III:4 of the GATT 1994
7.4.5.1 Introduction
7.936. Article III:4 of the GATT 1994 sets out the obligation to accord to imported products
treatment no less favourable than that accorded to like products of national origin.
7.937. We recall that Notification 187 and Order Por. 145-2555 impose an identical requirement on
importers and TTM, the domestic producer of cigarettes, to notify, in June of each year the average
actual market price on the date of notification as the VAT base. We have found above that under
Thai competition law, as it stood on the date of the establishment of the Panel, cigarette importers
attempting to set retail selling prices would have acted in violation of Thai competition law or, at a
minimum, were exposed to the risk of such violation, whereas TTM benefited from an exemption
from Thai competition law and could enter into vertical price fixing arrangements.1965 We found that,
because of the constraints of Thai competition law, cigarette importers could not know the average
actual market price prevailing on the date of notification and thus could not ensure that they
complied with the notification requirement.1966
7.938. The Philippines claims that the requirement to notify the average actual market price
prevailing on the date of notification is "as such" inconsistent with Article III:4 of the GATT 1994
because of the different situations of importers and TTM vis-à-vis Thai competition law, by virtue of
which it is possible for TTM, but not cigarette importers, to comply with the notification
requirement.1967
7.939. Thailand does not contest that the cigarettes imported by PMTL and domestically produced
cigarettes are "like products"1968, or that the notification requirement falls within the meaning of
"law, regulation, or requirement affecting their internal sale".1969 However, Thailand argues that the
VAT notification requirement does not accord "less favourable treatment" to imported cigarettes.1970
7.4.5.2 Main arguments of the parties
7.940. The Philippines claims that the notification requirement under Thailand's VAT regime,
whereby importers and local producers are required to notify the "average actual market price" is,
taken together with the other provisions of Thai law exempting TTM from competition law, "as such"
inconsistent with Article III:4 of the GATT 1994. 1971 The Philippines argues that domestic and
imported cigarettes are "like" products within the meaning of Article III:4 of the GATT 1994, because
the notification requirement taken together with the exclusion of TTM from competition law
discriminates on a de jure basis between domestic and imported cigarettes; therefore "likeness"
may be presumed.1972 The Philippines additionally argues that domestic and imported cigarettes are
"like" based on an examination of the physical characteristics and end -uses of the domestic and
imported cigarettes, as well as consumer preferences in Thailand, and the classification of domestic
and imported cigarettes under Thai regulations (including customs, internal taxes, and other
regulations).1973 The Philippines argues that the notification requirement obliges importers and TTM
to notify the average actual market price to the authorities to enable the VAT base to be determined,

1965 See Section 7.4.2.3.1 above.
1966 See Section 7.4.2.3 above.
1967 Philippines' first written submission, paras. 759-815; second written submission, paras. 747-784;
opening statement at the meeting of the Panel, paras. 129-154; and response to Panel question Nos. 60, 64-
66, 115(a), 116, 118, 120, 121 and 124.
1968 Thailand's response to Panel question No. 65.
1969 Thailand's first written submission, paras. 7.1-7.49; and second written submission, paras. 4.1-
4.21.
1970 Thailand's first written submission, paras. 7.26-7.49; second written submission, paras. 4.7-4.21;
opening statement at the meeting of the Panel, paras. 99-104; and response to Panel question Nos. 62, 65 and
124.
1971 Philippines' first written submission, paras. 759-815; second written submission, paras. 747-784;
and response to Panel question No. 64, para. 464.
1972 Philippines' first written submission, paras. 731 and 778-779.
1973 Philippines' first written submission, paras. 784-794.

and thus these measures impose "requirements" within the meaning of Article III:4. 1974 These
requirements, according to the Philippines, "affect" the internal sale of cigarettes because they have
the potential to "adversely modify the conditions of competition between domestic and imported
products".1975
7.941. Regarding the issue of "less favourable treatment", the Philippines argues that Notification
187 and Order Por. 145 -2555 accord to imported cigarettes treatment less favourable than that
accorded to domestic cigarettes, because of the formally different legal situations of importers and
TTM, which result in importers being subject to additional legal jeopardy to which TTM is not. 1976
Specifically, the Philippines notes that, under the relevant measures, "[i]n June of each year, both
importers and TTM are obliged to notify the average actual market price prevailing on the date of
the June notification ".1977 The Philippines notes, however, that Thai competition law "prohibits
importers from imposing a retail selling price on the independent wholesalers and retailers to whom
they sell imported cigarettes", and therefore importers are not in a position to know (or notify) the
average actual market price on the date in question. 1978 The Philippines highlights that it could be
possible, through relying on market research data, for an importer to notify the average actual
market price in Thailand for a date 4 -6 weeks prior to the notification date of 30 June, but it is
impossible to notify the average actual market pric e as it stands on 30 June on that date itself,
because that price could not be known. 1979 The Philippines submits that, in contrast to importers,
TTM is exempted from Thai competition law, meaning that "TTM has a choice … whether or not to
dictate its retaile rs' retail sales prices and, thereby, know the actual price on the date of
notification".1980 The Philippines maintains that, unlike TTM, importers have no such choice and
cannot comply with the notification requirement unless they simultaneously violate Thai competition
law, and therefore importers are exposed to legal jeopardy through the consequences of a failure to
comply with the notification requirement. 1981 According to the Philippines, even if the possibility of
correcting an original faulty notification could somehow mitigate the legal jeopardy, the importers
face additional financial burdens of monitoring actual prices, filing corrections and reissuing VAT
invoices to retailers – a burden that the domestic producer of cigarettes does not have to face.1982
7.942. The Philippines has not requested findings on the VAT notification requirement as affected
by the amended competition law. 1983 Nonetheless, the Philippines contests Thailand's
characterization of the amended competition law. In particular, the Philippines argues that the text
of the provision does not support Thailand's assertion that the exemption for state enterprises has
become non-automatic (i.e. has to be granted by the authorities).1984 Furthermore, the Philippines
submits that "even if TTM does not automati cally enjoy an exemption under the new Section 4(2),
an exemption may be reintroduced at any time upon a finding that TTM 's activities fall within the
scope of the new Section 4(2)." 1985 Finally, according to the Philippines, "Thailand has not
demonstrated that TTM does not satisfy " the requirements of the exemption as amended. 1986 The
Philippines considers that even taking into account the amended competition law , the Panel should
conclude that Thailand's VAT notification requirement is inconsistent with its obligations under Article
III:4 of the GATT 1994.1987
7.943. Thailand argues that because the text of the notification requirement does not distinguish
between imported and domestic cigarettes, an y less favourable treatment could only arise on a de

1974 Philippines' first written submission, paras. 796-797.
1976 Philippines' first written submission, paras. 801-814; and second written submission, paras. 753-
759.
1978 Philippines' first written submission, para. 804. See also Philippines' second written submission,
para. 757 (referring to Competition Act, B.E. 2542 (1999) (English translation), (Exhibit PHL-124-B), Sections
4(2) and 27(1)).
1979 Philippines' first written submission, paras. 806-807.
1980 Philippines' comments on Thailand's response to Panel question No. 114, para. 246.
1981 Philippines' comments on Thailand's response to Panel question No. 114, para. 247.
1982 Philippines' opening statement at the meeting of the Panel, paras. 148-151 and 160; and response
to Panel question No. 119, paras. 293-298.
1983 Philippines' response to Panel question No. 124(a).
1984 Philippines' comments on Thailand's response to Panel question No. 124(b), paras. 287-288.
1985 Philippines' comments on Thailand's response to Panel question No. 124(b), para. 286.
1986 Philippines' comments on Thailand's response to Panel question No. 124(b), para. 289.
1987 Philippines' comments on Thailand's response to Panel question No. 124(b), para. 290.

facto basis.1988 Thailand argues that, although it does not contest "likeness", the de jure / de facto
distinction "is not a moot point "1989 because "unlike de jure discrimination which can be
demonstrated on the basis of the words of the legislation, de facto discrimination entails a heavier
evidentiary burden as the complainant needs to explain and substantiate the reasons why, in
practice, the formally identical treatment results nonetheless in less favourable treatment."1990
7.944. Regarding the allegation of "less favourable treatment", Thailand underlines that the practice
of notifying RRSPs "applies equally to both TTM and the importers" and that "TTM and the importers
both set and notify their RRSPs in precisely the same manner ".1991 Regarding the Philippines'
assertion that TTM "can, and does, set the downstream retail price ", Thailand argues, that the
Philippines has provided no evidence that TTM sets the downstream retail price differently to the
manner in which PMTL's own RRSPs set the downstream market price.1992 Regarding the Philippines'
argument that the importers are not permitted under Thai competition law to set retail prices,
Thailand argues that "there may be specific instances of vertical price fixing that … would not violate"
Thai competition law.1993 Thailand also considers that the Philippines' argument is premised on the
idea that a cigarette importer is "more likely" to make an incorrect notification in comparison to TTM,
yet, in Thailand's view, the Phili ppines has not provided any evidence in support of this
contention.1994 Thailand considers that the Philippines' Article III:4 claim is premised on certain
factual assertions that it has failed to prove, "i.e. it cannot know the average market price on the
day of the notification because: (i) although cigarette importers determine recommended retail
selling prices, they do not know the actual market price on that date; (ii) that it takes 4-6 weeks for
a market research company to obtain the av erage market pric e; and (iii) that a failure to comply
with Thailand's VAT notification requirements results in a 'legal jeopardy' affecting cigarette
importers".1995 Thailand submits that if a cigarette importer notifies the actual average market price
on the basis of its RRSP, and subsequently notices a discrepancy between the notified price and the
actual price, that importer could simply notify this correction as a change of the notified price, which
means that no legal jeopardy exists for the importer.1996
7.945. Thailand requests that the Panel take into account the amended competition law in its
analysis of the VAT notification requirement under Article III:4 of the GATT 1994.1997 Thailand
explains that the amended Section 4(2), which provides that the Act shall not apply to the acts of
certain State enterprises, public organizations, or other State agencies, "does not afford TTM, or any
other Thai state enterprise, an automatic exemption from the Competition Act".1998 In its responses
to the Panel's questions following the meeting with the parties, Thailand indicated that to date there
had been no finding or resolution indicating whether TTM's activities fall within the scope of the
exemption in Section 4(2).1999
7.4.5.3 Analysis by the Panel
7.4.5.3.1 General considerations
7.946. Article III:4 of the GATT 1994 requires that:
The products of the territory of any Member imported into the territory of any other
contracting party 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, purchase, transportation, distribution or
use.

1988 Thailand's first written submission, paras. 7.28-7.32.
1989 Thailand's response to Panel question No. 65, p. 59.
1990 Thailand's response to Panel question No. 65, p. 59.
1991 Thailand's first written submission, para. 7.32.
1992 Thailand's first written submission, paras. 7.39-7.40.
1993 Thailand's response to Panel question No. 113(b), p. 41.
1994 Thailand's second written submission, para. 4.6.
1995 Thailand's response to Panel question No. 65, p. 59.
1996 Thailand's second written submission, para. 4.18; and response to Panel question No. 62(a).
1997 Thailand's response to Panel question No. 124(a).
1998 Thailand's response to Panel question No. 124(b), p. 49.
1999 Thailand's response to Panel question No. 124(b), p. 49.

7.947. We recall that three requirements must be satisfied to establish a violation of Article III:4:
(i) the imported and domestic products at issue are "like products"; (ii) the measure at issue is a
"law, regulation, or requirement affecting their internal sale, offering for sale, purchase,
transportation, distribution, or use"; and (iii) the imported products are accorded "less favourable"
treatment than that accorded to like domestic products.2000
7.948. With regard to the first requirement, it is not in dispute that the cigarettes imported by PMTL
and domestically produced cigarettes are "like products".2001 Furthermore, we note that the original
panel already found that the Marlboro and L&M cigarettes imported by PMTL were "like" TTM's
cigarettes in the same price range for the purposes of Article III:2 and III:4 of the GATT. 2002 We
appreciate that the original panel's "likeness" findings rested on factual elements with the potential
to evolve over time, but the Philippines observes that none of the facts supporting these findings
have changed2003, and Thailand does not contest this assertion. We recall that a determination of
"likeness" must be carried out on a case-by-case basis taking into account the four traditional factors
as well as any other criteria that may also be relevant.2004 Apart from the fact that the original panel
found that the products at issue are "like products" and recalling that this issue is not in dispute in
this proceeding, we note that the Philippines has nonetheless elaborated how domestically produced
cigarettes and PMTL's imported cigarettes: (i) share the same physical characteristics2005; (ii) have
identical end-uses2006; (iii) are interchangeable from the consumers' point of view2007; and (iv) have
the same tariff classification in Thailand. 2008 We consider that all of the foregoing constitutes a
sufficient basis for us to find that PMTL's imported cigarettes and domestic cigarettes are "like
products" within the meaning of Article III:4 of the GATT 1994.
7.949. We note that Thailand equally does not contest that the notification requirement falls within
the meaning of a "law, regulation, or requirement affecting their internal sale".2009 In our view, the
VAT notification requirement is evidently a "requirement", and it is set forth in instruments adopted
by the Revenue Department that constitu te "regulations" within the meaning of Article III:4. We
recall that the Appellate Body in EC – Bananas III confirmed that the term "affecting" is understood
to mean "to have an effect on, which indicates a broad scope of application".2010 Furthermore, in the
original proceeding, the panel found that "the Thai regulations at issue, which concern the VAT -
related administrative requirements, can be considered as affecting the internal sale of imported
cigarettes within the meaning of Article III:4 ".2011 In light of this jurisprudence and in the absence
of any objection from Thailand, we consider that the VAT notification requirement, pursuant to which
importers and TTM are required to notify the average actual market price to the authorities for the
purpose of calculating the VAT base, is a "requirement" that "affects the internal sale" of imported
cigarettes within the meaning of Article III:4.
7.950. Furthermore, the parties do not dispute that, as of the date of this Panel's establishment,
TTM enjoyed an exemption from the Competition Act and was thus in the position to lawfully enter
into price fixing arrangements with retailers. 2012 Our analysis of the Philippines' claim under
Article III:4 is based on the relevant factual circumstances, including the state of Thai competition
law, as they existed on the date of the establishment of the Panel. As explained in Section
7.4.2.2 above we will , following our anal ysis of the Philippines' claim under Article III:4 , make
additional findings relating to the amendment to Thai competition law that took place in the course
of this proceeding.
7.951. We note that the parties also agree that the VAT notification requirement sets an identical
requirement for both TTM and importers, i.e. to notify the average actual market price on the date

2000 Appellate Body Reports, Korea – Various Measures on Beef, para. 133; and EC – Seals, para. 5.99.
2001 Thailand's response to Panel question No. 65.
2002 Panel Report, Thailand – Cigarettes (Philippines), paras. 7.541 and 7.662.
2004 Appellate Body Report, Japan – Alcoholic Beverages II, pp. 19-21, DSR 1996:I, 3, at pp. 113-114.
2005 Philippines' first written submission, paras. 784-788.
2007 Philippines' first written submission, paras. 790-792.
2009 Thailand's first written submission, paras. 7.1-7.49; Thailand's second written submission, paras.
4.1-4.21.
2010 Appellate Body Report, EC – Bananas III, para. 220 (referring to GATT Panel Report, Italian
Agricultural Machinery, adopted 23 October 1958, BISD 7S/60, para. 12).
2011 Panel Report, Thailand – Cigarettes (Philippines), para. 7.665.
2012 See para. 7.805. above.

of notification in June. 2013 We recall that "the concept of discrimination may encompass both the
making of distinctions between similar situations , as well as treating dissimilar situations in a
formally identical manner ".2014 We further recall in this respect that a measure accords less
favourable treatment to imported products over domestic products if it "modifies the conditions of
competition in the relevant market to the detriment of imported products ".2015 The Appellate Body
noted in the original proceeding that the element of less favourable treatment requires "a careful
examination 'grounded in close scrutiny of the 'fundamental thrust and effect of the measure itself''
… [but t]his analysis need not be based on empirical evidence as to the actual effects of the measure
at issue in the internal market of the Member concerned."2016 Additionally, the Appellate Body stated
that "[t]he implications of the contested measure for the equality of competitive conditions are, first
and foremost, those that are discernible from the design, structure, and expected operation of the
measure."2017
7.952. We have already made findings on a number of factual elements which are disputed by the
parties in the context of the Philippines' claim under Article III:4. In particular, we found that: (i) an
importer that fixes the retail sales price acts in violation of Thai competition law or, at a minimum,
faces the risk of such violat ion; (ii) the Philippines has established that an importer cannot obtain
the average actual market price on the date of notification through a market survey because
collecting and processing such data necessarily involves a delay; and (iii) the importers' RRSPs are
not necessarily identical to the average actual market prices, and that notifying its RRSP does not
allow the importer to ensure that it complies with the VAT notification requirement.2018 On the basis
of those findings, we came to the conclusion th at the importer is not in a position to know the
average actual market price on the date of notification and thus cannot ensure that it complies with
the VAT notification requirement as written. 2019 We also found that, in the event the notified
importer's RRSP turns out to be less than the average actual market price, the importer may face
consequences, such as penalties, the prospect of a criminal investigation, or, at a minimum, an
additional financial and administrative burden in attempting to correct an in correct notification.2020
Finally, we recall that in our analysis of the Philippines' claim under Article X:1 we found that the
Revenue Department adopted an administrative ruling that cigarette importers can notify RRSPs to
the extent that they reflect the average actual market prices under Notification 187 and Order Por.
145-2555, however this ruling remains unpublished.
7.953. The only remaining disputed issue is thus whether, despite the absence of any formal
difference in treatment arising from the terms of Notification 187 and Order Por. 145-2555, the VAT
notification requirement accords "less favourable treatment" to imported cigarettes.2021 In the course
of our analysis of that issue, we also address the parties' disagreement on whether any alleged
discrimination arises on a de jure or de facto basis.2022
7.4.5.3.2 "less favourable treatment"
7.954. According to the Philippines, the "[c]onditions of competition between imports and domestic
cigarettes [in Thailand] are adversely modified by the risk that importers, but not TTM, may be held
liable for non-compliance with Thai law".2023 The Philippines argues that "TTM's exemption from Thai
competition laws means that TTM can … set the downstream retail price" and "is able to comply with
the requirement to notify the average actual market price" whereas "Thai competition law prohibits
importers from imposing a retail selling price on the independent wholesalers and retailers to whom
they sell imported cigarettes" and thus cigarette importers "on the date of notification… do not know

2013 Philippines' first written submission, paras. 802-803; and Thailand's first written submission, para.
7.30.
2014 Appellate Body Report, Canada – Wheat Exports and Grain Imports, para. 87 (referring to Appellate
Body Report, Korea – Various Measures on Beef, para. 136; and GATT Panel Report, US – Section 337).
2015 Appellate Body Report, Korea – Various Measures on Beef, para. 137.
2016 Appellate Body Report, Thailand – Cigarettes (Philippines), para. 129 (quoting Appellate Body
Report, US – FSC (Article 21.5 – EC), para. 215).
2017 Appellate Body Report, Thailand – Cigarettes (Philippines), para. 130.
2018 See Section 7.4.2.3 above.
2019 See Section 7.4.2.3.5 above.
2020 See Section 7.4.2.4 above.
2021 Thailand's first written submission, paras. 7.26-7.49; and second written submission, paras. 4.7-
4.21.
2022 Parties' responses to Panel question No. 65.

– and cannot notify – the average actual market price on that date ".2024 The Philippines explains
that "cigarette importers face the legal risk of violating either the notification requirement … or the
prohibition against dictating retail sales prices to retailers under Thai competition law, while the
domestic cigarette manufacturer TTM faces no such legal risk".2025
7.955. The Appellate Body has previously found that an "additional obstacle" or "extra hurdle" can
modify the conditions of competition for an imported product.2026 In a number of previous disputes,
measures leading to additional administrative burden and paperwork were found to negatively affect
competitive opportunities of the imported products. We recall that in the original proceeding, the
Appellate Body upheld the panel's finding that the imposition on resellers of imported cigarettes of
additional VAT -related administrative requirements – which included filing forms, maintaining
reports and potentially facing penalties and surcharges – resulted in less favourab le treatment of
imported cigarettes. 2027 Furthermore, in Canada – Wheat Exports and Grain Imports, elevator
operators were subjected to a prior authorization scheme to process imported grain, while no such
requirement existed for domestic grain. The panel fou nd that this modified the conditions of
competition to the detriment of imported grain, even though the authorization had never been
refused by the competent Canadian agencies and advance authorization schemes were available.2028
Similarly, in US – COOL, a measure challenged under Article 2.1 of the TBT Agreement was found
to entail a detrimental impact on imported products by virtue of a higher burden in terms of
recordkeeping and verification requirements, the consequent need for segregation, and higher
associated compliance costs.2029
7.956. In light of this jurisprudence, we now examine whether our findings above, in the context of
our assessment of the disputed issues relating to the operation of the Thai VAT regime and
competition law, demonstrate that the notific ation requirement modifies the conditions of
competition to the detriment of imported products, by exposing cigarette importers to legal risks, or
at a minimum, an additional administrative burden and financial burden.
7.957. First, in the absence of an appropriate administrative ruling or formal bilateral arrangement
with the Revenue Department, an importer that fixes the retail sales prices acts in violation of Thai
competition law or, at a minimum, faces the risk of such violation, whereas TTM is exempted from
competition legislation and can fix retail prices. TTM thus can ensure that the RRSPs are followed in
retail transactions and that the RRSP matches the actual average market price. In light of these
facts, we disagree with Thailand's contention that "TTM's exemption from Thai competition law is
simply irrelevant to the structure and operation of Thailand's VAT regime " and that even if it were
relevant "it would amount at most to a difference in treatment ".2030 The exemption from Thai
competition law enables TTM, unlike importers, to know the average actual market prices on the
date of notification. In our view, this goes well beyond a mere "formal" difference in treatment.
7.958. We note that Thailand contests that "TTM can, and does, set the price charged by retailers
for TTM's cigarettes ".2031 However, the jurisprudence supports the conclusion that it is not legally
relevant whether TTM actually takes advantage of its exemption from competition law and actually
sets retail prices. For example, the panel in US – FSC (Article 21.5 – EC) confirmed that Article III:4
of the GATT 1994 is an obligation requiring that Members ensure equality of competitive
opportunities to like domestic and imported products, and demonstrating a violation thereof did not
require proof t hat the sourcing decisions of private firms had "actually been impacted by the
requirement in question".2032 The fact of the matter is that TTM has the ability under Thai competition

2026 Appellate Body Report, US – Section 211 Appropriations Act, para. 268.
2027 Panel Report, Thailand – Cigarettes (Philippines), paras. 7.722, 7.734 and 7.738; Appellate Body
Report, Thailand – Cigarettes (Philippines), paras. 138 and 140.
2028 Panel Report, Canada – Wheat Exports and Grain Imports, paras. 6.184-6.213.
2029 See Panel Reports, US – COOL, paras. 7.346-7.347 and 7.372; Appellate Body Reports, US – COOL,
para. 348. The Appellate Body has also found that in assessing whether a measure affects competitive
conditions under Article III:4 of the GATT 1994, it may be reasonable for a panel to rely on any relevant
findings it made in examining that measure's detrimental impact under Article 2.1 of the TBT Agreement.
(Appellate Body Report, US – Tuna II (Mexico), para. 7.278) We therefore consider that the jurisprudence
developed under Article 2.1 of the TBT Agreement may inform our analysis of the meaning of "less favourable
treatment" under Article III:4 of the GATT 1994.
2030 Thailand's first written submission, para. 7.47.
2031 Thailand's response to Panel question No. 114.
2032 Panel Report, US – FSC (Article 21.5 – EC), para. 8.159.

law to lawfully set retail prices and ensure that its notified recommended price matches "the average
price of the market price " on the date of notification, whereas importers do not have the same
ability, which is not consistent with the standard of equality of competitive opportunities protected
by Article III:4 of the GATT.
7.959. Second, importers currently have no alternative way of ensuring that they are complying
with the VAT notification requirement. As we have established above, market research studies do
not enable an importer to know the average actual market price on the date of notification.2033
Equally, while the Revenue Department has adopted an administrative ruling that the notifications
on the basis of RRSPs are acceptable, this ruling has not been published, and thus an importer
cannot rely on it to ensure its formal compliance with the VAT notification requirement. Furthermore,
since the Revenue Department only accepts RRSPs to the extent that they reflect the average actual
market prices, even if the administrative ruling were published, it would not give cigarette importers
any guarantee that the Revenue Department will not find the importer in breach of the notification
requirement in the event of a divergence between the RRSP and the average actual market price.
As indicated above, we consider that this is tantamount to imposing a formal VAT notification
requirement with which an importer cannot ensure its compliance. The implication of these two
factual considerations is that the "unreasonable" requirement that is imposed on importers, as
described above in respect of Article X:3(a), is not also imposed on TTM (due to the exemption from
competition law).
7.960. Third, as follows from our earlier analysis, the consequences of the failure to notify the
correct average actual market price includes the risk of penalties and a crimi nal investigation.2034
Thailand observes that "if TTM fails to comply with the VAT requirements, it will be subject to the
same audit consequences as the importers would be ".2035 This argument, in our view, does not
address the fact that the formally identical treatment accorded to TTM and PMTL in respect of their
VAT notification obligations fails to account for their formally different legal situations under Thai
competition law. While the same legal consequences may apply to both TTM and the importer in
case of a failure to comply with the notification requirement, TTM, by virtue of its exemption from
competition law, has the ability to avoid a situation of non -compliance whereas the importer does
not. We recall the Appellate Body's view that "the concept of di scrimination may encompass both
the making of distinctions between similar situations, as well as treating dissimilar situations in a
formally identical manner ".2036 Thus, under the VAT notification requirement as written, the
importer, unlike TTM, permanently faces the risk of legal consequences of non-compliance (i.e. so-
called "legal jeopardy").
7.961. Finally, we recall Thailand's argument that, to make a correction to an originally incorrect
notification, the importer could simply notify a correction as a change of the notified price, and thus
the importer faces no legal jeopardy. 2037 As we have explained above, we do not consider that the
correction mechanism presented by Thailand mitigates the "legal jeopardy" to which the importer is
exposed.2038 It appears that th e new notification (i.e. the correction) would be expected to also
reflect the average actual market price on the date of the new notification meaning that the importer
will continue being unable to identify the average actual market price to notify on the date on which
it is required to make a notification. Nonetheless, even if a correction could indeed be made and, as
argued by Thailand, could reflect the average actual market price on the date of the original
notification2039, insofar as an importer is requ ired to notify changes to the actual average market
price on an ongoing basis, there exists inherently the prospect of submitting multiple notifications,
corrections, and reissuing of invoices to reflect changes throughout the course of the year. 2040
Therefore, even under this scenario, the importer faces the additional administrative and financial
burden of monitoring prices, submitting corrections, and possible reissuance of VAT invoices. 2041
Since TTM can ensure that its notification of the average actual mark et price is correct in the first

2033 See Section 7.4.2.3.3 above.
2034 See Section 7.4.2.4 above.
2035 Thailand's first written submission, para. 7.46.
2036 Appellate Body Report, Canada – Wheat Exports and Grain Imports, para. 87 (referring to Appellate
Body Report, Korea – Various Measures on Beef, para. 136; and GATT Panel Report, US – Section 337).
2037 Thailand's second written submission, para. 4.18; and response to Panel question No. 62(a).
2038 See paragraph 7.856. above.
2039 Thailand's response to the Philippines' question No. 9.
2040 See paragraph 7.859. above.
2041 See paragraphs 7.859. and 7.860. above.

place, unlike importers, it is not compelled to submit corrections and does not have to bear this
additional administrative and financial burden.
7.962. In response to the Philippines' assertion of less favourable treatment, Thailand stresses that
"the current practice of notifying RRSPs applies equally to both TTM and the importers " and that
"TTM and the importers both set and notify their RRSPs in precisely the same manner".2042 We have
already established above that TTM and importers do not set RRSPs in the same manner. Thus, the
same practice affects TTM and cigarette importers differently: TTM can ensure that it notifies the
correct price on the date of notification through controlling retail prices, whereas importers cannot.
Therefore, as stated above, such a practice does not eliminate less favourable treatment accorded
to imported cigarettes by the VAT notification requirement.
7.963. Additionally, we do not consider that our finding under Article X:1 that the Revenue
Department's unwritten practice of accepting RRSPs amounts to an administrative ruling of general
application2043 alters the analysis under Article III:4. As we have expl ained in the context of
Article X:3(a), Thailand denies that there is any "formal right" to submit the RRSPs in fulfilment of
the VAT notification requirement, and thus the unpublished administrative ruling does not eliminate
the legal risks associated with potential non -compliance with the VAT notification requirement as
written nor the administrative and financial burden that the importer has to bear in order to correct
faulty notifications.2044
7.964. In conclusion, we consider that the inability of importers to ensure their compliance with the
VAT notification requirement puts importers in a state of legal uncertainty regarding the correctness
of the notified VAT base, and creates the possibility of punitive or burdensome legal consequences
for any mistake. In other words, the VAT notification requirement creates a legal risk for the importer
that the domestic manufacturer of cigarettes does not face. Furthermore, even if an importer tries
to address the risk through the submission of corrections to the original notification, the importer
bears an additional administrative burden. Put simply, under the Thai VAT reg ime, the sale of
imported cigarettes is associated with legal risks and additional administrative burdens and costs
whereas sale of domestic cigarettes is not. In light of these considerations, we find that the VAT
notification requirement, as written, mod ifies the conditions of competition to the detriment of
imported cigarettes.
7.965. The parties provided extensive arguments on whether the discrimination at issue arises on
a de facto or de jure basis. The Philippines argues that , insofar as the discrimination necessarily
arises from "the interaction of different elements of Thai law", i.e. from the "necessary implication"
arising from the texts of Notification 187 and Order Por. 145-2555 and the "simultaneous operation
of Thai competition law", the discrimination is de jure in nature.2045 Thailand disagrees and denies
that there is any de jure discrimination. It argues that whatever less favourable treatment is alleged
by the Philippines could arise only on a de facto basis.2046 Thailand notes that "the Philippines'
Article III:4 claim is premised on certain factual assertions", and for that reason it "is necessarily a
de facto claim".2047
7.966. We recall Thailand's argument that the Philippines' claim is based on certain factual
premises, which in its view the Philippines has not proved, and that this establishes that its
argumentation rests on a de facto basis.2048 Thailand refers to the Philippines' assertions "that it
cannot know the average market price on the day of the notification because: (i) although cigarette
importers determine recommended retail selling prices, they do not know the actual market price
on that date; (ii) that it takes 4 -6 weeks for a market research company to obtain the average
market price; and (iii) that a failure to comply with Thailand's VAT notification requirements results
in a 'legal jeopardy' affecting cigarette importers".2049 In Section 7.4.2 above, we have addressed
these assertions by the Philippines and found that: (i) an importer that attempts to fix retail prices
acts in violation of Thai competition law or, at a minimum, faces a risk of such violation; (ii)
consequently the RRSP for imported cigarettes is not necessarily the same as the average actual

2042 Thailand's first written submission, para. 7.33.
2043 See Section 7.4.3.4 above.
2044 See paragraph 7.926. above.
2045 Philippines' first written submission, para. 779; second written submission, para 764; and response
2046 Thailand's first written submission, para. 7.32.
2047 Thailand's response to Panel question No. 65, p. 59.
2048 Thailand's response to Panel question No. 65, p. 59.
2049 Thailand's response to Panel question No. 65, p. 59. (footnotes omitted)

market price, meaning that by notifying its RRSP the importer cannot ensure that it complies with
the notification requirement; (iii) a market survey of cigarette prices necessarily involves a delay,
which makes it impossible for the ci garette importer to obtain average actual market price on the
date of notification through this method; and (iv) in the event the notified RRSP turns out to be less
than the actual average market price, the importer may face significant consequences ("lega l
jeopardy") and, where the importer tries to correct an inaccurate notification it has to bear an
additional administrative and financial burden. We find that, with regard to these factual elements,
the Philippines has discharged its burden of proof.
7.967. It is well established that less favourable treatment can arise where a measure does not
draw formal distinctions in the treatment of domestic and imported products but in practice modifies
the conditions of competition to the detriment of the latter. 2050 Since the obligation provided by
Article III:4 extends to situations of de facto discrimination, it operates as a safeguard against the
circumvention of the non -discrimination disciplines through the provision of formally identical
treatment in law. We recall in this respect the Appellate Body's statement, reflecting the fundamental
nature of the principle of equal treatment, and equality, that "the concept of discrimination may
encompass both the making of distinctions between similar situations, as well as treating dissimilar
situations in a formally identical manner".2051 In the circumstances of the present case, we are faced
with the issue of whether the discrimination established is in its nature de jure or de facto.
7.968. We note that the measure challenged is the VA T notification requirement, while its
application is affected by the rules of the Competition Act. These rules are essentially the cause of
the discriminatory treatment. We appreciate that less favourable treatment can arise on a de jure
basis by virtue of the interaction of different laws and regulations of a Member . However, a s we
explained in paragraph 7.808. above, the Thai Competition Act is not a challenged measure in this
dispute. We therefore consider and qualify the impact of the Competition Act under these
circumstances as an indirect impact which causes discrimination in the application of VAT notification
requirement which stands alone as the measure challenged before this panel. We thus consider Thai
competition law as a relevant factual circumstance that creates different situations for TTM and
PMTL, as a consequence of which the VAT notification requirement in practice gives rise to les s
favourable treatment.
7.4.5.4 Legislative changes in the course of the proceeding
7.969. Thailand requests the Panel to find that "Thailand's VAT measures and Thailand's amended
competition law are not inconsistent with Article III:4 of the GATT 1994 because cigarette importers
and the producer of domestic cigarettes face the same requirements for purposes of notifying the
VAT base as neither of them benefits from an exemption from Thai competition law that would allow
them to legally fix retail prices."2052 The basis for that request is Thailand's assertion that following

2050 See Appellate Body Reports, Canada - Wheat Exports and Grain Imports, para. 87; Korea - Various
Measures on Beef, paras. 135-137. In Dominican Republic - Import and Sale of Cigarettes, the panel
considered that the requirement that a tax stamp must be affixed on cigarette packets in the territory of the
Dominican Republic and under the supervision of Dominican Republic tax authorities applied equally to both
domestic and imported cigarettes. However, the panel found that this formal equality itself led to less
favourable treatment of imported cigarettes, since tax stamps could be affixed on packs of domestic cigarettes
as part of the production process, while in the case of imported cigarettes an additional process had to be
undertaken, with resulting additional costs. (See Panel Report, Dominican Republic - Import and Sale of
Cigarettes, paras. 7.189-7.198) Additionally, we recall that the panel in EC - Trademarks and Geographical
Indications examined the WTO-consistency of the Regulation which contained formally identical provisions vis-
à-vis nationals of different Members, with respect to the protection of geographical indications. The panel found
that the distinction made by the Regulation on the basis of the location of a geographical indication operated in
practice to discriminate between the group of nationals of other WTO Members who wished to obtain protection
of a geographical indication, and the group of the European Communities' nationals in the same situation,
inconsistently with the national treatment obligation provided in the TRIPS Agreement, Article 3.1. (See Panel
Reports, EC – Trademarks and Geographical Indications (Australia), paras. 7.181-7.240; EC – Trademarks and
Geographical Indications (US), paras. 7.131-7.213)
2051 Appellate Body Report, Canada – Wheat Exports and Grain Imports, para. 87 (referring to Appellate
Body Report, Korea – Various Measures on Beef, para. 136; and GATT Panel Report, US – Section 337).
2052 Thailand's request to review the Interim Report, para. 2.71. See also Thailand's response to Panel
question No. 124(a).

an amendment of the competition law in October 2017, " TTM does not at present enjoy any
exemption from competition law".2053 The Philippines' contests that assertion.2054
7.970. We recall that questions relating to the meaning of domestic law arising before WTO panels
are to be approached as questions of fact. In respect of the types of factual evidence that may be
relied upon to resolve the meaning and content of municipal law, the Appellate Body has explained
that "[i]f the meaning and content of the measure are clear on its face, then the consistency of the
measure as such can be assessed on that basis alone. If, however, the meaning … is not evident on
its face, further examination is required."2055
7.971. We recall that the Philippines has not requested any findings with regard to the VAT
notification requirement as affected by the amended competition law. Rather, the Philippines
requested that the Panel should rule on the consistency of the measure as it stood at the date of the
panel's establishment.2056 We have found that the Philippines fulfilled its burden of proof with regard
to its challenge of the VAT notification requirement, based on the circumstances as they existed on
the date of the panel's establishment. The Appellate Body has clarified that while the complaining
party bears the burden of making its prima facie case, "the responding party must prove the case it
seeks to make in response, and each party bears the burden of substantiating the assertions that it
makes".2057 We consider that it is Thailand, as the party asserting the WTO -consistency of the VAT
notification requirement by virtue of the amendment of the competition law, that must demonstrate
with evidence that circumstances have changed such that the VAT notifi cation requirement is no
longer inconsistent with Article III:4 of the GATT 1994.
7.972. Thailand refers us to the amended Section 4(2) of the Trade Competition Act (2017) . It
reads:
This Act shall not apply to the acts of:
[…]
(2) State enterprises, public org anizations, or other State agencies, however,
specifically in the part carried out under the laws or resolutions of the Council of
Ministers with necessity for the purpose of maintaining State's stability, public interests,
common interests, or arrangement of public utilities.2058
7.973. In other words, the text of Section 4(2) contains an exemption from the prohibitions in the
Thai competition law that extends to those state enterprises having the purpose of "maintaining
[the] State's stability, public interests, common interests, or arrangement of public utilities". Thus,
it is not clear from the face of Section 4(2) whether TTM falls within the scope of the exemption.
7.974. Indeed, Thailand itself has not expressed any definite view on whether TTM is, or could be
found to be, within the scope of the exemption in Section 4(2). Rather, Thailand confines its assertion
to the point that "the amended language of Section 4(2) of the Competition Act indicates that state
enterprises may be exempted from the application of this law, but only in specific circumstances."2059
According to Thailand, in that sense, this provision "does not afford TTM, or any other Thai state
enterprise, an automatic exemption from the Competition Act".2060
7.975. We note that Thailand has not submitted any evidence on the application of the law,
pronouncements of domestic courts on the meaning of the law, opinions of legal experts, or writings
of recognized scholars, to clarify whether TTM falls within the scope of the exemption in Section 4(2).
In its responses to the Panel's questions following the meeting with the parties, Thailand indicated

2053 Thailand's response to Panel question No. 124(b).
2054 See paragraph 7.942. above.
2055 Appellate Body Report, US – Corrosion-Resistant Steel Sunset Review, para. 168.
2056 Philippines' opening statement at the meeting of the Panel, para. 128; and response to Panel
question No. 124(a).
2057 Appellate Body Report, US – Tuna II (Mexico) (Article 21.5 – Mexico), para. 7.33 (referring to
Appellate Body Reports, Japan – Apples, paras. 154, 157; US – Tuna II (Mexico), para. 283; US – Wool Shirts
and Blouses, p. 14, DSR 1997:1, p. 335; EC – Hormones, para. 98)
2058 Trade Competition Act B.E. 2560 (2017) (English translation), (Exhibit PHL-207-B).
2059 Thailand's response to Panel question No. 124(b).
2060 Thailand's response to Panel question No. 124(b). (emphasis added)

that to date there had been no finding or resolution indicating whether TTM's activities fall within
the scope of the exemption in Section 4(2). 2061 Indeed, Thailand states that it is "pure speculation
as to whether TTM would be granted, or even claim, an exemption".2062
7.976. We note that TTM's Annual Report for the year 2015 reads in relevant part that "TTM's core
functions are to provide the state with remittance in a form of revenues a nd taxes and to support
tobacco farmers in improving the tobacco leaf quality in compliance with Good Agricultural Practices
(GAP)".2063 The 2015 Annual Report adds that:
Although TTM has adhered to the policy that does not support people's smoking, there
are still consumers' demand and an increasing amount of imported cigarettes.
Therefore, TTM, as a state enterprise having a function to redistribute the revenues to
the Government, has to protect the nation's interests and develop business operation
with more effectiveness.2064
In our view, this raises the question of whether TTM's self-description of its functions and objectives
suggests that it may indeed satisfy the requirements of Section 4(2).
7.977. We make no finding on whether TTM does or does not fall within the exemption in
Section 4(2). Rather, we find that Thailand bears the burden of substantiating its assertion that TTM
does not enjoy any exemption from the relevant Thai competition law , and that Thailand has not
provided sufficient evidence in the course of this proceeding to discharge its burden.
7.4.5.5 Conclusion
7.978. For the reasons set forth above , the Panel concludes that, in implementing the DSB's
recommendations and rulings in the original proceeding, Thailand's VAT notification requirement
accords less favourable treatment to imported cigarettes as compared to like domestic cigarettes by
exposing cigarette importers to legal risks and additional administrative burdens and costs, which
the domestic producer of cigarettes does not have to face. The VAT notification requirement is thus
inconsistent with Article III:4 of the GATT 1994.
8 CONCLUSIONS AND RECOMMENDATIONS
8.1. Regarding the BoA Ruling of 16 November 2012, concerning 210 entries of Marlboro cigarettes
imported into Thailand by PMTL between January 2002 and January 2003, we conclude that:
a. the BoA acted inconsistently with Articles 1.1 and 1.2(a) of the CVA by rejecting PMTL's
declared transaction values without a valid basis, and in particular that:
i. the BoA acted inconsistently with Article 1.2(a), second sentence, by failing to properly
examine the circumstances surrounding the sale of the cigarettes to PMTL because its
examination of the circumstances of sale was not apt to reveal whether the relationship
between PMTL and PM Indonesia influenced the price paid by PMTL for the relevant
cigarettes; and
ii. the BoA acted inconsistently with Article 1.2(a), third sentence, by failing to
communicate to PMTL its grounds for considering that the relationship inf luenced the
price and failing to give PMTL an opportunity to respond.
b. the BoA acted inconsistently with Article 5.1 of the CVA in applying the deductive method
to determine an alternative customs value, and in particular that:
i. the BoA acted inconsistently with Article 5.1(a)(i) by failing to deduct an appropriate
amount in respect of P&GE;

2061 Thailand's response to Panel question No. 124(b), p. 49.
2062 Thailand's request to review the Interim Report, para. 2.61.
2063 TTM, Annual Report, 2015 (English and Thai), (Exhibit PHL-3), p. 5.
2064 TTM, Annual Report, 2015 (English and Thai), (Exhibit PHL-3), p. 5.

ii. the BoA acted inconsistently with Article 5.1(a)(ii) by failing to deduct an appropriate
amount in respect of transport costs; and
iii. the BoA acted inconsistently with Article 5.1(a)(iv) by failing to deduct an appropriate
amount in respect of provincial taxes payable.
c. the BoA acted inconsistently with Article 11.3 of the CVA by failing to provide sufficient
reasons for its decision in the BoA Ruling itself; and
d. the BoA acte d inconsistently with Article 16 of the CVA by failing to provide a timely
explanation of how the customs value was determined, following PMTL's request for an
explanation.
8.2. Regarding the Charges filed by the Public Prosecutor on 18 January 2016 concerning 272
entries of Marlboro and L&M cigarettes imported by PMTL between July 2003 and June 2006, we find
that the Philippines' claims are admissible and fall within the scope of this compliance proceeding2065,
and we conclude that:
a. the Charges are inconsistent with Articles 1.1 and 1.2(a) of the CVA because they reject
PMTL's declared transaction values without a valid basis, and in particular that the Public
Prosecutor acted inconsistently with Article 1.2(a), second sentence, by not engaging in
an examination of the circumstances of sale that was apt to reveal whether the relationship
between PMTL and PMPMI influenced the price paid by PMTL;
b. the Charges are inconsistent with Article 2.1(a) and (b), or in the alternative, Article 3.1(a)
and (b) of the CVA, becau se they improperly treat King Power's purchase prices as
transaction values for identical or similar goods; and
c. the Philippines has not demonstrated that Thai officials were responsible for disclosing
PMTL's import prices to the media contrary to Thailand's obligation under Article 10 of the
CVA.
8.3. Regarding the requirement under Notification 187 and Order Por. 145 -2555 to notify the
average actual market price of cigarettes on the date of notification for the purpose of determining
the VAT base, we conclude that:
a. Thailand's failure to publish the administrative ruling of general application that cigarette
importers can notify RRSPs to the extent they re flect the average actual market prices
under Notification 187 and Order Por. 145 -2555, is inconsistent with Article X:1 of the
GATT 1994;
b. Thailand has administered its Revenue Code provisions in an unreasonable manner,
inconsistently with Article X:3(a) of the GATT 1994, by imposing on cigarette importers
the VAT notification requirement with which it is impossible to ensure compliance and
which exposes importers to potential consequences of non-compliance; and
c. Thailand has acted inconsistently with Article III:4 of the GATT 1994 by imposing the VAT
notification requirement, which accords less favourable treatment to imported cigarettes
than like domestic cigarettes.
8.4. Under Article 3.8 of the DSU, in cases where there is an infringement of the obligations
assumed under a covered agreement, the action is considered prima facie to constitute a case of
nullification or impairment. We conclude that, to the extent that the measures at issue are
inconsistent with the Customs Valuation Agreement and the GATT 1994, th ey have nullified or
impaired benefits accruing to the Philippines under those agreements.
8.5. We therefore conclude that Thailand has failed to implement the recommendations and rulings
of the DSB to bring its measures into conformity with its obligations under the CVA and the GATT

2065 See Sections 7.1.3 (The ACWL/Commerce letters and lawyer-client privilege), 7.3.2 (Preclusion),
7.3.3 (Close nexus), 7.3.4 (Ripeness) above.

1994. To the extent that Thailand has failed to comply with the recommendations and rulings of the
DSB in the original dispute, those recommendations and rulings remain operative.