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: Addendum
Date: 12 November 2018
Document codes: WT/DS371/RW/Add.1; 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
Addendum
This addendum contains Annexes A to C to the Report of the Panel to be found in document

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

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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

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ANNEX A-1
WORKING PROCEDURES OF THE PANEL
Adopted on 25 January 2017

1. In its proceedings, the Panel shall follow the relevant provisions of the Understanding on Rules
and Procedures Governing the Settlement of Disputes (DSU). In addition, the following Working
Procedures shall apply.
General
2. The Panel will provide the parties to the dispute (hereinafter “parties”) and third parties to the
dispute (hereinafter “third parties”) with a timetable for panel proceedings.
3. The deliberations of the Panel and all documents submitted to it shall be kept confidential.
Nothing in the DSU or in these Working Procedures shall preclude a party from disclosing
statements of its own positions to the public. A party may indicate pa rticular instances of
confidential information contained in its submissions that it wishes to be redacted within square
brackets in the report of the Panel by placing the information between square brackets in its
submissions. The cover letter to any submi ssion containing such information shall give notice of
this request and explain why that party considers the information should be redacted. The Panel
may redact in its Interim/Final Reports all such information submitted to the Panel by a party that
the submitting party has designated for redaction in its submissions. Such information may include
particularly sensitive information submitted to the Panel in the course of these proceedings that is
not otherwise available in the public domain. The designation of specified information by one party
may, in the absence of any objection by the other party, be presumed to constitute confidential
information; however, the Panel retains the authority, as adjudicator, to determine, based on
objective criteria, whether such information is, in fact, confidential and should be redacted, and
the Panel will explain the basis for its decision in its report.
Where a party designates its written submissions to the Panel as confidential , it shall also, upon
request of a Member, provide a non -confidential summary of the information contained in its
submissions that could be disclosed to the public. Non -confidential summaries shall normally be
submitted no later than one week after the written request is presented to the Panel, un less a
different deadline is granted by the Panel where good cause is shown.
4. The Panel shall meet in closed session. The parties and third parties shall be present at the
meetings only when invited by the Panel to appear before it.
5. Each party and third par ty has the right to determine the composition of its own delegation
when meeting with the Panel. Each party and third party shall have the responsibility for all
members of its own delegation and shall ensure that each member of such delegation acts in
accordance with the DSU and these Working Procedures, particularly with regard to the
confidentiality of the proceedings. The parties and the third parties shall provide a list of the
participants of their delegation to the Secretary of the Panel, no later than 5.00 p.m. three working
days before the substantive meeting commences.
6. Each party's written submissions, written answers to questions and comments thereon,
comments on the descriptive part of the report, and written request for review of precise aspect s
of the interim report and comments on the other party's request shall be made available to the
other party and, where appropriate, to the third parties.
Submissions
7. Before the substantive meeting of the Panel with the parties, each party shall submit a w ritten
submission in which it presents the facts of the case and its arguments, in accordance with the

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timetable adopted by the Panel. Each party shall also submit a second written rebuttal submission
before the substantive meeting, in accordance with the timetable adopted by the Panel.
8. A party shall submit any request for a preliminary ruling at the earliest possible opportunity
and in any event on or before the date of the organizational meeting. If either party requests such
a ruling, the other party sha ll submit its response to the request in accordance with the timetable
adopted by the Panel. Exceptions to this procedure shall be granted upon a showing of good cause.
The Panel reserves the right to ask the parties to submit copies of their preliminary s ubmissions to
the third parties, if and when appropriate. The Panel 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. If the Panel decides to rule on any preliminary request at an early stage of the
proceedings, it shall communicate that intention to the parties. In that case, the Panel reserves
the right to hear the parties in the most appropriate manner, be it in writing or electronically or
otherwise. Should a meeting on the preliminary ruling request be held, the Panel will consult the
parties on suitable dates for the meeting.
9. Each party shall endeavour to submit all factual evidence to the Panel with its first written
submission and, in any event, no later than during the substantive meeting, except with respect to
evidence necessary for purposes of answers to questions or comments on answers provided by the
other party. Exceptions to this procedure shall be granted upon a showing of good cause. Where
such exception has been granted, the Panel shall accord the other party a period of time for
comment, as appropriate, on any new factual evidence submitted after the substantive meeting.
10. Where the original language of an exhibit is not a WTO working language, the submitting party
or third party shall submit a translation into the WTO working language of the exhibit at the same
time. Where the exhibit is an excerpt from a larger document, of which only the excerpt is
referred to by either party, the larger original document shall be submitted in the original language
and the relevant excerpt translated and relied on without the need to translate the larger source
document. Exceptionally, the Panel may grant reasonable extensions of time for the translation of
such exhibits upon a showing of good cause.
11. 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 th e 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.
12. Any publically available WTO document that is relied on by either party need not be produced
as an exhibit. Such publically available WTO documents are deemed to be part of the Panel record.
The other party, third parties, the Panel, or the Appellate Body m ay, at any stage, request a copy
of the relevant publicly available WTO documents.
13. Where either party refers to the definition of a word from the New Shorter Oxford English
Dictionary, that party need not produce excerpts from this dictionary as exhibits, unless requested
to do so by the Panel or the other party. However, if a party wishes to provide the relevant excerpt
as an exhibit, it is permitted to do so. If a party relies on any other dictionary, it is required to
provide the relevant excerpts as ex hibits. Such definitions of words from the New Shorter Oxford
English Dictionary are deemed to be part of the Panel record. The other party, third parties, the
Panel, or the Appellate Body may, at any stage, request a copy of the relevant dictionary
definitions.
14. In order to facilitate the work of the Panel, each party and third party is invited to make its
submissions in accordance with the Editorial Guide for English WTO Panel Submissions, as
attached to Appendix 1, to the extent that it is practical to do so.
15. To facilitate the maintenance of the record of the dispute and maximize the clarity of
submissions, each party and third party shall sequentially number its exhibits throughout the
course of the dispute. Exhibits submitted by the Philippines shall be numbered PHL-1, PHL-2, etc.
and exhibits submitted by Thailand shall be numbered THA -1, THA-2, etc. If the last exhibit in

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connection with the first submission was numbered, for example, PHL -5, the first exhibit of the
next submission thus would be numbere d PHL -6. Each party may cross -refer to an exhibit
submitted by another party by using the number attributed to the exhibit by the party who initially
submitted it.
16. Each party shall provide an updated consolidated exhibit list with each submission made.
Questions prior to the substantive meeting
17. Prior to the substantive meeting, the Panel shall pose written questions to the parties and the
parties shall provide written responses, in accordance with the timetable adopted by the Panel.
The Panel reserves the r ight to send questions to the parties at any time, in particular, after
receiving the first written submissions and before the second sets of submissions, as well as after
receiving a request for a preliminary ruling. In the event that the Panel sends ques tions to the
parties that are not expressly provided for in the Panel 's timetable, the Panel shall, to the extent
possible, give favourable consideration to requests by the parties, in particular joint requests, for
modifications to the Panel's timetable in the light of the Panel's additional questions.
Substantive meeting
18. The substantive meeting of the Panel with the parties shall be conducted as follows:
a. The Panel shall invite the Philippines to make an opening statement to present its case
first. Subsequently, the Panel shall invite Thailand to present its point of view. The
maximum length of each opening statement will be fixed subsequently by the Panel, at
least three weeks in advance of the hearing. Before each party takes the floor, it shall
provide the Panel and other participants at the meeting with a provisional written version
of its statement. Each party shall make available to the Panel and the other party the final
version of its opening statement as well as its closing statement, if any, preferably at the
end of the meeting, and in any event no later than 5.00 p.m. on the first working day
following the last day of the meeting.
b. After the conclusion of the statements, the Panel shall give each party the opportunity
to ask each other que stions or make comments, through the Panel. Each party shall then
have an opportunity to answer these questions orally. Each party shall send in writing,
within a timeframe to be determined by the Panel, any questions to the other party to
which it wishes to receive a response in writing. Each party shall be invited to respond in
writing to the other party's written questions within a deadline to be determined by the
Panel.
c. The Panel may subsequently pose questions to the parties. Each party shall then h ave
an opportunity to answer these questions orally. The Panel shall send in writing, within a
timeframe to be determined by it, any questions to the parties to which it wishes to
receive a response in writing. Each party shall be invited to respond in wri ting to such
questions within a deadline to be determined by the Panel.
d. Once the questioning has concluded, the Panel shall afford each party an opportunity
to present a brief closing statement, with the Philippines presenting its statement first.
Third parties
19. The Panel shall invite each third party to transmit to the Panel a written submission prior to
the substantive meeting of the Panel with the parties, but after the written submissions and
rebuttal submissions of the parties, in accordance with the timetable adopted by the Panel.
20. Each third party shall also be invited to present its views orally during a session of the
substantive meeting, set aside for that purpose. Each third party shall provide to the Panel the list
of members of its delegation in advance of this session and no later than 5.00 p.m. the previous
working day.

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21. The third party session shall be conducted as follows:
a. All third parties may be present during the entirety of the session set aside for third
parties.
b. The Panel shall first hear the arguments of the third parties in alphabetical order.
Third parties present at the third party session and intending to present their views orally
at that session, shall provide the Panel, the parties and other third parties with provisional
written versions of their statements before they take the floor. Third parties shall make
available to the Panel, the parties and other third parties the final versions of their
statements, preferably at the end of the session, and in any event no later t han 5.00 p.m.
of the first working day following the session.
c. After the third parties have made their statements, the parties may be given the
opportunity, through the Panel, to ask the third parties questions for clarification on any
matter raised in t he third parties' submissions or statements. Each party shall send in
writing, within a timeframe to be determined by the Panel, any questions to a third party
to which it wishes to receive a response in writing. Each third party shall be invited to
respond in writing to such questions within a deadline to be determined by the Panel.
d. The Panel may subsequently pose questions to the third parties. Each third party shall
then have an opportunity to answer these questions orally. The Panel shall send in wri ting,
within a timeframe to be determined by it, any questions to the third parties to which it
wishes to receive a response in writing. Each third party shall be invited to respond in
writing to such questions within a deadline to be determined by the Panel.
Descriptive part
22. The description of the arguments of the parties and third parties in the descriptive part of the
Panel report shall consist of executive summaries provided by the parties and third parties, subject
to any modifications deemed appropriate by the Panel. The executive summaries shall be annexed
as addenda to the report. These executive summaries shall not in any way serve as a substitute
for the submissions of the parties and third parties in the Panel's examination of the case.
23. Each part y shall submit a consolidated executive summary of the facts and arguments as
presented to the Panel in its written submissions and oral statements, three weeks after the last
submissions have been made, in accordance with the timetable adopted by the Pane l. These
summaries may also include a summary of responses to questions. Each such executive summary
shall not exceed 30 pages. The Panel will not summarize in the descriptive part of its report, or
annex to its report, the parties' responses to questions.
24. Each third party shall submit an executive summary of its arguments as presented in its
written submission and statement in accordance with the timetable adopted by the Panel. This
summary may also include a summary of responses to questions, where releva nt. The executive
summary to be provided by each third party shall not exceed 6 pages.
25. The Panel may revise the page limits upon request of a party. Paragraph 29 below shall apply
to the service of executive summaries.
Interim review
26. Following issuance of the interim report, each party may submit a written request to review
precise aspects of the interim report and request a further meeting with the Panel, in accordance
with the timetable adopted by the Panel. The right to request such a meeting shall be e xercised no
later than at the time the written request for review is submitted.
27. In the event that no further meeting with the Panel is requested, each party may submit
written comments on the other party's written request for review, in accordance with the timetable

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adopted by the Panel. Such comments shall be limited to commenting on the other party's written
request for review.
28. The interim report, as well as the final report prior to its official circulation, shall be kept
strictly confidential and shall not be disclosed.
Service of documents
29. The following procedures regarding service of documents shall apply:
a. Each party and third party shall submit all documents to the Panel by filing them with
the DS Registry.
b. Each party and third party shall file its documents with the DS Registry and serve
copies on the other party (and third parties where appropriate) by 5.00 p.m. (Geneva
time) on the due dates established by the Panel.
c. Each party and third party shall file 1 paper copy of all documents it submits to the
Panel. The DS Registrar shall stamp the documents with the date and time of the filing.
d. Each party and third party shall also provide an electronic copy of all docume nts it
submits to the Panel at the same time as the paper versions, preferably in Microsoft Word
format, either on a CD -ROM, a DVD or as an e -mail attachment. If the electronic copy is
provided by e -mail, it should be addressed to *****@wto.org, *****@wto.org and
*****@wto.org. CD -ROMs or DVDs shall be filed with the DS Registry. The electronic
version shall constitute the official version for the purposes of the record of the dispute.
e. Each party shall serve on the other party electronic copies only of any document
submitted to the Panel. Each party shall, in addition, serve on all third parties electronic
copies only of its written submissions in advance of the substantive meeting with the
Panel, unless a third party requests service of a paper copy.
f. Third parties shall serve on all other parties and third parties electronic copies only of
any document submitted to the Panel, unless another third party requests service of a
paper copy.
g. Each party and third party shall confirm, in writing, that copi es have been served as
required at the time it provides each document to the Panel.
h. The Panel shall provide the parties with an electronic version of the descriptive part,
the interim report and the final report, as well as of other documents as appropriate. When
the Panel transmits to the parties or third parties both paper and electronic versions of a
document, the electronic version shall constitute the official version for the purposes of the
record of the dispute.
30. The Panel reserves the right to modify these procedures as necessary, after consultation with
the parties.

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APPENDIX 1
"EDITORIAL GUIDE FOR ENGLISH WTO PANEL SUBMISSIONS"
 [SEE THE ATTACHMENT TO THE E-MAILS OF 25/01/2017 AND 02/02/2017 SENT BY THE
SECRETARIAT ON BEHALF OF THE PANEL]

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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
Adopted on 24 May 2018
1. Following consultation with the parties, the Panel has adopted these additional procedures
pursuant to its authority under Article 12.1 of the DSU and taking into account the particular
circumstances of these proceedings.

2. Pending the translation and public circulation of the Final Report of the Panel in the
Philippines' first recourse to Article 21.5 of the DSU (the Final Report), the Panel will provide an
electronic copy of the Final Report to any Member participating as a third party in Thailand –
Customs and Fiscal Measures on Cigarettes from the Philippines – Second Recourse to Article 21.5
of the DSU by the Philippines (Philippines' second recourse to Article 21.5) subject to the following
conditions:

(a) the electronic copy of the Report obtained under these procedures may be referenced
by a third party only for the purpose of enabling it to prepare its third -party written
submission, third-party oral statement, or responses to questions in the Philippines'
second recourse to Article 21.5, and for no other purpose; and

(b) no person may have access to the Report except an employee of a third party, and an
outside adviser acting on behalf of the third party for the purposes of this dispute, and
each third party shall ha ve responsibility in this regard for its employees as well as
any outside advisers used for the purposes of this dispute.

3. Any Member participating as a third party in the Philippines' second recourse to Article 21.5
that wishes to receive a copy of the Final Report subject to these conditions shall request a copy of
the Final Report from the Panel. To promote the orderly conduct of the proceeding, any interested
third party is invited to make any such request promptly upon becoming aware of these addi tional
procedures.

4. The parties and third parties are free to refer to the contents of the Final Report in their
submissions to the Panel in the Philippines' second recourse to Article 21.5 of the DSU. Pending
the translation and public circulation of the Final Report, any reference to the contents of the Final
Report included in the parties' and third parties' written submissions, oral statements or responses
to questions in the context of the Philippines' second recourse to Article 21.5 of the DSU sha ll be
treated as confidential information by the parties and third parties and shall not be publicly
disclosed. Accordingly, if a party or third party makes its submissions publicly available, any
reference to the contents of the Final Report shall be reda cted from the public version of its
submission pending the translation and public circulation of the Final Report.

5. In accordance with paragraph 28 of the Working Procedures adopted by the Panel on 25
January 2017 in the context of the Philippines' firs t recourse to Article 21.5 of the DSU, the Final
Report is strictly confidential and shall not be disclosed . For greater clarity, granting third parties
access to the contents of the Final Report in accordance with paragraphs 2 to 4 of these additional
procedures does not constitute "disclosure" within the meaning of paragraph 28.

6. These additional working procedures concerning third-party access to the Final Report of the
Panel will be annexed to the Report of the Panel in the Philippines' first recour se to Article 21.5 of
the DSU, and have been incorporated by reference into the working procedures adopted by the
Panel in the context of the Philippines' second recourse to Article 21.5 of the DSU.

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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
24 May 2018
1 INTRODUCTION
1.1. The Philippines has requested that the Members participating as third parties in its second
recourse to Article 21.5 of the DSU receive a copy of the confidential Final Report that was already
issued to the parties in its first recourse to Article 21.5 of the DSU, and that is not expected to be
translated and publicly circulated before the last quarter of 2018.
1.2. After consulting with the parties, the Panel has decided to grant the Philippines' request. This
procedural ruling relates to the working procedures of both the first and second compliance panels,
and will therefore be annexed to the Reports of the Panel in both the first and second compliance
panel proceedings.
2 FACTUAL BACKGROUND
2.1. In the context of the Philippines' first recourse to Article 21.5 of the DSU, the Panel informed
the Dispute Settlement Body (DSB) that it expected to issue its Final R eport to the parti es in the
first quarter of 2018 .1 The Panel did so. Following the issuance of the Report to the parties, the
Secretariat informed the parties that the translation of the Final Report into Spanish and French
was not expected to be completed before the last quarter of 2018.
2.2. At its meeting on 27 March 2018, the DSB established a second compliance panel to examine
the matter referred to by the Philippines in its second recourse to Article 21.5 of the DSU in this
dispute. As set forth in its request for the establishment of a second compliance panel 2, the two
sets of measures at issue in the Philippines' second recourse to Article 21.5 are related to the
measures at issue in the first compliance proceeding:
a. The Philippines challenges Notices of Assessment that Philip Morr is (Thailand) Limited
(PMTL) received in November 2017 from Thailand's Customs Department, rejecting
PMTL's declared transaction values, and determining revised customs valu es, for 1052
shipments of cigarettes imported over the period 2001 -2003. These 1052 shipments
include 208 shipments whose customs values were previously assessed by a ruling of the
Board of Appeals that was issued on 16 November 2012. The November 2012 Board of
Appeals Ruling is the subject of the Philippines' first recourse to Article 21.5 of the DSU.
b. The Philippines challenges a set of criminal charges filed by the Public Prosecutor against
PMTL and one of its former employees on 26 January 2017, in respect of 779 shipments
of cigarettes imported in 2002-2003. This second set of charges was filed one year after
a first set of criminal charges was filed by the Public Prosecutor against PMTL and seven
of its current and former employees on 18 January 2016, in respect of 272 shipments of
cigarettes imported between 2003-2006. The first set of criminal charges is the subject
of the Philippines' first recourse to Article 21.5 of the DSU.
2.3. With respect to both sets of measures at issue in the second compliance proceeding, the
Philippines' panel request claims that the Thai authorities acted inconsistently with various
obligations under the Customs Valuation Agreement (CVA) and the GATT 1994, including inter
alia:

1 WT/DS371/20, dated 15 May 2017.
2 WT/DS371/22, dated 14 March 2018.

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a. Articles 1.1 and 1.2(a) of the CVA, by rejecting PMTL's transaction values without
conducting a proper examination of the circumstances of sale, by failing to communicate
the grounds for considering that the relationship between the buyer and seller influenced
the price , and by failing to give the importer any opportunity to comment on the
information under consideration;
b. the relevant provisions of Articles 2 through 7 of the CVA, by failing to comply with the
applicable valuation rules when determining the revised customs values of the imported
goods; and
c. Article 16 of the CVA, by failing to provide, upon written request, a written explanation
as to how the customs values of the imported goods were determined.
2.4. The Panel observes that these claims are similar, if not identical, to the legal claims raised in
the first compliance panel proceeding pertaining to both the November 2012 Board of Appeals
Ruling and the first set of criminal charges filed on 18 January 2016. These legal clai ms are the
subject of the Panel's findings in the Final Report that was already issued to the parties in the first
quarter of 2018.
2.5. The DSB was informed on 9 May 2018 that the second compliance panel is composed of the
same individuals serving on the firs t compliance panel. 3 On 24 May 2018, the Panel adopted its
timetable and working procedures, based on a draft timetable and a draft set of working
procedures jointly agreed and proposed by the parties. In accordance with the timetable proposed
by the parties and subsequently adopted by the Panel, the complainant is expected to file its first
written submission before the end of May . The agreed timetable further provides that the parties'
remaining written submissions, the third -party written submissions, an d the written responses to
any pre -hearing questions, will all be received before the last quarter of 2018. The timetable
further provides that the substantive meeting with the parties (including the third -party session),
and any post -hearing written quest ions and responses, will take place within the last quarter of
2018.
3 THE PHILIPPINES' REQUEST AND THAILAND'S RESPONSE
3.1. On 15 May 2018, the Philippines requested that the working procedures governing the
conduct of the first compliance panel proceeding, which were adopted by the Panel on 25 January
2017, be amended so as to make the Final Report available to the third parties participating in this
second compliance proceeding. In its request, the Philippines recalled that under paragraph 28 of
those working procedures, the Final Report of the Panel is to be treated as "strictly confidential"
and thus could not be shared with WTO Members, besides the Philippines and Thailand, until it is
circulated. The Philippines presented this request at the same time that the parties presented the
Panel with their agreed timetable and working procedures.
3.2. In its request, the Philippines confirmed that the interpretations developed by the Panel in its
Final R eport relate to issues that will also arise in the context of this second compliance
proceeding. The Philippines observed that both proceedings concern criminal charges brought by
the Thai authorities against the same importer, and that some of the claims that the Philippines
brings in this case are identical to the claims that it made in the first compliance proceeding. The
Philippines further noted that there is an overlap in the shipments of cigarettes covered by each of
the two sets of measures at issue in the second compliance proceedings, on the one hand, and one
of the measures at issue in the first compliance proceeding (namely, the November 2012 Board of
Appeals Ruling). In its request, the Philippines informed the Panel that it intends to refer to the
Final Report in its submissions in this second compliance proceeding, including in its first written
submission due to be filed before the end of May.
3.3. The Philippines recalled that Article 10 of the DSU provides that the third parties must be
given access to the submissions of the parties in order to participate in the second compliance
proceedings, but observed that if paragraph 28 of the working procedures is left as it is, the
Philippines would be obliged to prepare a redacted and incomplete version of its submissions for
the third parties. In the Philippines' view, this would necessarily deny the third parties full access

3 WT/DS371/23, dated 9 May 2018.

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to the submissions and thereby prejudice their right to participate in the proceedings in a full and
meaningful fashion. The Philippines noted that without access to the Final Report, the third parties
would be denied the ability to make submissions informed by the Final Report because they would
be unaware of, and unable to address, an important part of the jurisprudence relevant t o the
second compliance proceeding and also to the parties' arguments in that respect. In the
Philippines' view, providing the Final Report to a limited number of Members participating in this
proceeding as third parties would not be tantamount to the cir culation of the Report, because
those Members participating as third parties would still be subject to the obligation to preserve the
confidentiality of the Report.
3.4. At the organizational meeting with the Panel held on 19 May 2018, Thailand indicated that it
had serious reservations and concerns regarding the Philippines' request because of the systemic
issues that it raised. Thailand considered that it was for the Panel to decide, but emphasized that if
the Panel chose to grant the request, any such decisi on should be taken on the grounds that there
are sui generis circumstances so as to avoid creating a broader precedent.
3.5. Thailand expressed its doubts whether there were circumstances in this case that would
warrant a decision to sacrifice the important ru le of "strict confidentiality" of the Final Report, and
queried whether the Philippines was in effect proposing to advance the circulation date simply for
its own convenience. Thailand emphasized two points. First, Thailand suggested that the present
case was not so exceptional insofar as it is quite common for Members and legal counsel involved
in multiple WTO dispute settlement proceedings to have access to a Report or ruling in one
proceeding that, regardless of its relevance, cannot be shared or referen ced in the context of
another proceeding. Second, Thailand observed that delays in the translation of panel reports were
not exceptional either. Therefore, Thailand suggested that if the Panel chose to grant the
Philippines' request in this case, the delay in translation should not be treated as sui generis
circumstance or otherwise given undue weight in the reasoning justifying that course of action.
3.6. As to the modalities for how access would be granted to the third parties if the Panel chose to
do so, Th ailand indicated that in its view it was too late to modify the working procedures
governing the conduct of the first compliance panel. Thailand also noted that the Members
participating as third parties in the first and second compliance panel were not id entical. For these
reasons, Thailand suggested that if the Panel were inclined to grant the Philippines' request, the
issue should be addressed in the context of the working procedures of this second compliance
panel.
4 EVALUATION BY THE PANEL
4.1. We would str ess at the outset that this case involves a particular combination of
circumstances, which are as follows:
a. there are two consecutive compliance panel proceedings in Thailand – Customs and
Fiscal Measures on Cigarettes from the Philippines (DS371) between the same disputing
parties and before two compliance panels composed of the same individuals;
b. the Final Report in the first compliance proceeding has already been issued to the
parties, and therefore the Panel's findings and reasoning are no longer subject to any
further modification by the Panel;
c. prior to filing its first written submission, the Philippines informed the Panel that by
virtue of the overlapping subject -matter of the two compliance proceedings, its
submissions will refer to the Final Report to an extent that will necessitate third -party
access to the Final Report if they are to participate in the proceeding in a full and
meaningful fashion;
d. the Secretariat has informed the parties and the Panel that the Final Report will not be
circulated until some point (yet to be determined) in the last quarter of 2018, which is
after the dates for the parties to file all of their written submissions and the date for the

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filing of the third -party written submissions, and possibly also after the substantive
meeting with the parties and the third-party session;
e. the Philippines has specifically requested that the Panel modify its working procedures to
grant third-party access to the Final Report pending its translation; and
f. ten Members have already notified the ir third-party interest in these proceedings, and
these third parties are therefore legally entitled to receive all of the parties' submissions
filed prior to the substantive meeting.
4.2. Clearly, the Panel does not have the authority to unilaterally authoriz e the circulation of a
panel report prior to its translation into all three official languages of the WTO. The General
Council's Decision on Procedures for the Circulation and Derestriction of WTO Documents 4 states
unequivocally that official WTO documents , including reports of panels 5, shall be made available
via the WTO website to facilitate their dissemination to the public at large "[o]nce translated into
all three official WTO languages". 6 It is true that the same decision states that the translation o f
panel reports shall be completed "expeditiously"7, and the Panel notes that Article 15.2 of the DSU
likewise envisages that the translation and circulation of a panel's final report shall be completed
"promptly". However, that requirement does not serve to qualify the rule that panel reports may
only be circulated once translated into the other official languages. Insofar as time periods being
experienced for the translation of panel reports warrants a review of that rule and the existing
procedures governing circulation, the authority to do so is vested with the Members.8
4.3. The issue presented by the Philippines' request is distinct from the question of whether the
Final Report can be circulated prior to its translation. The Philippines has not requested t hat the
Panel circulate the Report prior to its translation, nor has it requested that the Panel waive the
confidentiality of the Final Report prior to its public circulation. Rather, the Philippines has
requested that the Panel allow those Members partici pating as third parties in the Philippines'
second recourse to Article 21.5 of the DSU to have access, on a confidential basis, to the contents
of the Final Report that has already been issued to the parties in the Philippines' first recourse to
Article 21 .5 of the DSU, and to which the parties are undoubtedly going to refer in their
submissions to the second compliance panel.
4.4. Furthermore, the question before the Panel is not whether it should adopt special procedures
to deal with the situation that the parties find themselves in, but rather what special procedures
the Panel should adopt to deal with this situation. If the Panel does not adopt a special procedure
for granting third parties access to the contents of the Final Report on a confidential basis, the
Panel will then have to adopt one of the following alternative sets of special procedures:
a. the Panel could decline to gra nt third parties access to the contents of the Final Report
without modifying the timetable for the proceeding agreed by the parties, in which case
the Panel would then have to adopt special procedures requiring the parties to redact all
reference to the c ontents of the Final Report when they serve their submissions on the
third parties in this second compliance panel proceeding9; or
b. the Panel could decline to grant the third parties access to the contents of Final Report,
and deal with the situation by m odifying the timetable proposed by the parties so as to
postpone the dates for filing their written submissions until such time as the Final Report
has been translated and circulated sometime in the last quarter of 2018.
4.5. With these preliminary considerat ions and the alternative options in mind, t he Panel recalls
that it is well established that "the DSU, and in particular its Appendix 3, leave panels a margin of

4 WT/L/452, dated 16 May 2002.
5 WT/L/452, dated 16 May 2002, paragraph 1 and footnote 1.
6 WT/L/452, dated 16 May 2002, paragraph 3.
7 WT/L/452, dated 16 May 2002, paragraph 3.
8 WT/L/452, dated 16 May 2002, paragraph 5.
9 Such additional procedures would also require the Panel to redact any references to the Final Report
from any preliminary or procedural rulings made by the Panel and served upon the third parties prior the
circulation of the Final Report.

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 discretion to deal, always in accordance with due process, with specific situations that may arise
in a particular case and that are not explicitly regulated". 10 The Panel is required to deal with a
situation that is not explicitly regulated by the DSU or any other applicable rules, and it falls within
the authority of the Panel to adopt appropria te arrangements to deal with this situation in
accordance with due process and following consultation with the parties pursuant to Article 12.1 of
the DSU. The Panel is mindful that "due process requires a balancing of various interests, including
systemic interests as well as those of the parties, and both general and case -specific
considerations".11 The Panel has given careful consideration to the particular circumstances of the
case and the parties' views, while engaging in a balancing exercise taking into account how each of
the alternative options before the Panel would impact on the rights and interests of the third
parties, the Panel, the parties, and the WTO membership at large. In the particular circumstances
of this case, the Panel considers that du e process is best served by granting the third parties
access to the contents of the confidential Final Report of the Panel in the Philippines' first recourse
to Article 21.5 of the DSU, subject to the conditions set forth in the enclosed additional proced ures
adopted by the Panel.
4.6. The Panel recalls that Article 10.1 of the DSU obliges it to ensure that the interests of the
third parties are "fully taken into account during the panel process". Further, it is generally
understood that "the third participants' interests lie mainly in the correct legal interpretation of the
provisions of the WTO agreements ".12 Providing the third parties with versions of the parties'
submissions that have not been redacted so as to remove all references to the contents of the
Final Report, including the relevant legal interpretations contained therein and the parties' legal
arguments based on those interpretations, would therefore ensure that the third parties are able
to exercise their right to participate in these proceedings " in a full and meaningful fashion" 13, as
guaranteed by Article 10 of the DSU. Conversely, requiring the parties to serve third parties with
redacted versions of their submissions, which would remove all references to the Final Report
including all of the par ties' argumentation directly referencing any interpretations by the first
compliance panel, may infringe upon the right of the third parties to receive "the submissions" of
the parties prior to the first meeting with the panel as provided for in Article 10 .3 of the DSU. As
to the alternative option of delaying the proceedings until the Final Report of the Panel is circulated
in both Spanish and French, the submissions of the parties in this proceeding are in English. It is
not clear how any third party woul d be prejudiced by receiving access only to the English version
of the Final Report while its translation is pending, given that the principal reason for granting
third-party access to the Final Report is to enable the Members participating in this proceed ing as
third parties to have access to, understand, and meaningfully comment on the legal arguments
contained in the submissions of the parties.
4.7. The Panel considers that meaningful third -party participation in this proceeding is
instrumental to the Panel' s own function of making an objective assessment of the matter before
it, and in particular to ensuring that the Panel arrives at the correct legal interpretation of the
provisions of the WTO agreements . This again favours granting third parties access to non-
redacted versions of the parties' submissions, as a means of ensuring that the third parties can
provide meaningful views on the parties' legal arguments. Conversely, if the third parties are

10 Appellate Body Report, EC – Hormones, footnote 138. The Appellate Body made that statement in EC
– Hormones, when reviewing the panel's decision to grant the United States access to all information in the
proceedings initiated by Canada (and vice versa), in the context of Canada and the United States having
initiated separate dispute settlement proceedings, and each participating as a third party in the proceeding
initiated by the other. The Appellate Body considered that "[a]lthough Article 12.1 and Appendix 3 of the DSU
do not specifically require the Panel to grant this opportunity to the United States, we believe that this decision
falls within the sound discretion and authority of the Panel, particularly if the Panel considers it necessary for
ensuring to all parties due process of law". The Appellate Body considered that "in the case before us,
circumstances justified the Panel's decision", and recalled that in other cases, panels have considered that
"particular circumstances justified the grant to third parties of rights somewhat broader than those explicitly
envisaged in Article 10 and Appendix 3 of the DSU". (Appellate Body Report, EC – Hormones, paras. 154-155.)
11 Appellate Body Report, Thailand – Cigarettes (Philippines), para. 150.
12 Appellate Body Report, EC and certain member States – Large Civil Aircraft , Annex III, Procedural
Ruling and Additional Procedures to Protect Sensitive Information, para. 23.
13 Appellate Body Report, US – FSC (Article 21.5 – EC), para. 249. See also Appellate Body Report,
Japan – DRAMs (Korea), para. 279, cautioning panels against sweeping redactions that could render a report
unintelligible to third parties.

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 unable to access the parties' argumentation, the Panel may receive a number of third -party
submissions advancing argumentation on the interpretation of CVA obligations that were prepared
without sufficient knowledge of what the parties are actually arguing before this second
compliance panel, and without the know ledge of the jurisprudence that may serve as the basis for
those arguments. The Panel considers that if it is denied the benefit of informed third -party
submissions in this manner, this could compromise the Panel's own ability to make an objective
assessment of the matter as required under Article 11 of the DSU. Alternatively, if the Panel were
to stay the proceeding by at least four to six months against the wishes of the parties and leave all
dates in the air pending the public circulation of the Report, the Panel would not be acting
consistently with its general duty to conduct the proceedings in a fair and orderly manner, or with
its specific obligation to fix the timetable as required by Article 12.3 of the DSU.14
4.8. The Panel does not consider that grantin g access to the contents of the Final Report on a
confidential basis to the third parties would prejudice the interests of either the responding party
or the complaining party in the circumstances of this proceeding. Thailand has indicated that its
concerns and reservations are "systemic" in nature, and has not suggested that sharing the Final
Report with third parties would prejudice its interests in the context of this proceeding. For its
part, the Philippines specifically requested that the Final Report be shared with the third parties,
and argued that its own due process rights may be affected if its request is not granted. In
contrast, the Panel considers that prejudice to the due process rights of one or both parties would
indeed arise if the Panel ado pted special procedures providing for the redaction, or postponement,
of the parties' written submissions. The first scenario would, as already explained, give rise to a
very real possibility of the third parties preparing submissions without adequate know ledge of the
parties' submissions, and in particular without adequate knowledge of the parties' arguments
regarding the correct interpretation of the WTO obligations at issue in this proceeding, or the
jurisprudence that may serve as an important basis for the parties' arguments. Requiring the
parties to dedicate their time and resources to responding to third -party submissions prepared in
such circumstances may entail an "uneconomical use of time and resources" 15 by the parties.
Alternatively, the Panel con siders that the prejudice visited upon the complaining party would be
even greater if the Panel sought to deal with the situation confronting it by postponing the filing of
the parties' submissions until the Final Report has been circulated. While this opt ion for dealing
with the delay in translation would fully safeguard the interests of the third parties and ensure
their meaningful participation, it would do so at the expense of the complaining party's due
process rights16 and the overall object and purpose of the DSU.17
4.9. Finally, the Panel has considered the rights and systemic interests of the WTO membership at
large, particularly from the perspective of contemplating how granting access to the contents of
the Final Report to third parties in this proceedi ng could potentially affect other Members in their
capacity as parties in any other parallel panel proceedings. In general, those Members receiving a
confidential copy of the Final Report for the purpose of enabling them to develop their
argumentation in t his panel proceeding would enjoy no advantage over other Members in the
context of any parallel proceeding, given that those Members who receive a copy of the Final
Report would be prevented from referencing the contents of the Final Report outside of the context
of the present proceeding. 18 Having said that, the Panel recognizes that if there are parallel

14 Article 12.3 of the DSU provides that the timetable for the panel process is to be fixed "as soon as
practicable and whenever possible within one week after the composition and terms of reference of the panel
have been agreed upon".
15 Appellate Body Report, EC – Hormones, para. 152. In this scenario, the potential burden on the
parties could be compounded if the Final Report were circulated prior the conclusion of the briefing phase of
the second proceeding, and at a late stage of this proceeding one or more the third parties requested leave
from the Panel to provide a supplemental third-party submission prepared in the light of the information in the
Final Report to which it finally had access.
16 The Appellate Body has also stated that "due process" requires a panel to take appropriate account of
the complaining party's "right to have recourse to an adjudicative process in which it can seek redress in a
timely manner". (Appellate Body Report, Thailand – Cigarettes (Philippines), para. 150.)
17 Article 3.3 of the DSU provides that the "prompt settlement" of disputes is "essential to the effective
function of the WTO". The Appellate Body has confirmed that this is part of the "overall object and purpose" of
the DSU. (Appellate Body Report, US – Offset Act (Byrd Amendment), para. 311.)
18 Furthermore, we understand that in the event of a breach of its confidentiality, another panel would
be precluded from considering the contents of the Final Report prior to its circulation. See China – Raw
Materials, Communication from the Panel, 18 May 2010, WT/DS394/9, WT/DS395/9, WT/DS398/8, paras. 43-
44.

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proceedings involving similar issues to those examined in the Final Report, and if one of the
parties to those proceedings has access to the contents of t he Final Report and the other disputing
party does not, such knowledge could potentially inform that party's argumentation in a manner
that could give rise to due process issues. However, the Panel considers that insofar as this is a
concern for any Member , that concern is appropriately and fully addressed by circulating this
procedural ruling enclosing the additional working procedures to the DSB, and thereby putting all
WTO Members on an equal footing.
4.10. The Panel agrees with Thailand that preserving the c onfidentiality of the contents of the
Final Report pending its circulation to all Members in the three official languages is an important
principle. However, the Panel does not consider that its decision to grant interested third parties
access to the cont ents of the Final Report on a confidential basis, for the sole purpose of allowing
them to exercise their right to participate in a meaningful and full way in this second compliance
panel proceeding, sacrifices that principle. The Report remains confidenti al. As elaborated in the
enclosed procedures, which establish particularized arrangements for the purpose of this
proceeding, the Panel has decided that the Final Report may be provided upon request to an
interested third party on the basis of several inte rlocking conditions aimed at ensuring that the
confidentiality of the Final Report is preserved.
4.11. The Panel agrees with Thailand that it is common for Members and legal counsel involved in
multiple WTO dispute settlement proceedings to have access to a Rep ort or ruling in one
proceeding that, regardless of its relevance, cannot be shared or referenced in the context of
another proceeding. This procedural ruling is not mean t to suggest otherwise, or to open the door
to panels, parties or third parties receiving advance copies of panel reports in translation whenever
two different proceedings have overlapping subject-matter. In the circumstances of this case, the
disputing parties and the Panel already have the Final Report , and will refer to it in their
submissions to the Panel. The decision to grant third-party access to the Final Report has not been
taken because of the degree of overlappin g subject-matter as an autonomous consideration, but
rather because the Panel expects that by virtue of the overlapping subject-matter between the two
compliance proceedings, the parties' submissions in the second compliance proceeding will refer to
the Final Report from the first compliance proceeding in a manner that will necessitate third-party
access to the contents of the Final Report if they are to participate in the second compliance panel
proceeding in a full and meaningful fashion. In order words, the principal reason for granting third-
party access to the Final Report is simply to enable the third parties to have access to, understand,
and meaningfully comment on the submissions of the parties.
4.12. The parties have provided the Panel with alternative views on the modalities for granting
third parties access to the Final Report. In its request, the Philippi nes requested that the Panel
amend paragraph 28 (regarding the strict confidentiality of both the Interim and Final Reports) of
the working procedures adopted by the panel on 25 January 2017, in its capacity as the first
compliance panel. The Philippines i ndicated that it could then attach the Final Report as an exhibit
to its first written submission in this second compliance proceeding. However, Thailand considers
that the modalities for implementing any decision to grant access to third parties should in stead
relate to the working procedures in this second compliance proceeding, because in its view it is too
late for the Panel to amend the working procedures governing the first compliance proceeding.
Thailand also notes that there is no identity between t he third parties in the first and second
compliance proceedings.
4.13. Having considered the parties' view on the modalities for providing third parties with access
to the contents of the Final Report, the Panel has concluded as follows:
a. If third parties are to be given access to the contents of the Final Report, they should be
given a copy of the Final Report rather than merely being able to receive non -redacted
versions of the parties' submissions and the passages of the Report that are referenced
or extracted therein. The reason is to avoid inducing one or both parties to insert
lengthy, multi -page extracts from the Final Report in their submissions (which would
erase the formal distinction between third parties having a copy of the Final Report
versus not having one, and leave the parties, third parties and Panel having to work with
needlessly long, extract-laden submissions).

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b. The Panel accepts that either party attaching the Final Report to its submission could be
one practical way of making it available to all of the third parties, but the Panel considers
that it would be more appropriate for the Panel itself to provide a copy of the Final
Report to the third parties, and to limit such provision to only those third parties that
specifically request it.
c. The Panel considers that it is not necessary to amend the terms of paragraph 28 of the
working procedures adopted in the first compliance panel proceeding, because the Panel
considers that making the contents of the Final Report available to third parties, in
accordance with the confidentiality and permissible use provisions of paragraphs 2 to 4
of the enclosed additional procedures, does not constitute "disclosure" of the Report
within the meaning of paragraph 28 of the working procedures adopted by the Panel o n
25 January 2017.
d. Only the Panel in the first proceeding has the legal authority to grant third -party access
to the contents of its Final Report. The Panel considers that it still has the authority to
take appropriate action in its capacity as the first compliance panel, notwithstanding that
it has already issued its Final Report.19 At the same time, the Panel agrees with Thailand
that because the third parties are not identical in the first and second compliance
proceedings, any procedures governing acces s to the Final Report cannot be made
effective solely through a change to the working procedures of the first compliance
panel. In the light of the foregoing, the enclosed additional working procedures will be
annexed to the Report of the Panel in the Phil ippines' first recourse to Article 21.5 of the
DSU, and also incorporated by reference into the working procedures adopted by the
Panel for the purposes of the Philippines' second recourse to Article 21.5 of the DSU.

- B-1 -

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

- B-2 -

ANNEX B-1
EXECUTIVE SUMMARY OF THE ARGUMENTS OF THE PHILIPPINES
I. INTRODUCTION
1. The Philippines initiated this dispute in 2008 because Thailand had consistently subjected
PM Thailand – an importer which sources virtually all of its cigarettes from the Philippines – to
prejudicial and protectionist regulatory conduct. The original pane l found, inter alia , that Thai
Customs improperly rejected PM Thailand 's transaction values, on entries between June 2006 and
September 2007, in violation of both the procedural and substantive obligations in the CVA.
Thailand did not appeal these findings , and informed the DSB that it intended to comply with its
recommendations and rulings.
2. The Philippines had hoped that Thailand 's implementation of the DSB 's recommendations
and rulings would bring about security and predictability for importers in Thailan d, without further
recourse to WTO dispute settlement. Regrettably, the situation confronting the Philippines ' export
interests today is considerably worse than it was when the original proceedings were brought.
Indeed, not only has Thailand has failed to comply with the recommendations and rulings of the
DSB, it has taken compliance measures that themselves give rise to WTO violations, as described
below.
3. The Philippines raises claims in relation to three sets of compliance measures:
4. First, the Philippin es challenges the rejection by the Board of Appeals ("BoA") of PM
Thailand's declared transaction values for 210 Marlboro entries from 2002 and the determination
of alternative deductive values (the "BoA Ruling"), as well as certain notices of assessment t hat
result from the BoA Ruling.
5. Second, the Philippines challenges criminal charges, filed on 18 January 2016, against PM
Thailand and seven of its current employees, concerning 272 entries of cigarettes imported from
the Philippines in the period 2003 -2006 ("the Charges"). The Charges reject PM Thailand 's
transaction value, and threaten vast criminal fines, on the basis of a spurious comparison with
purchase prices paid by King Power, a Thai duty -free operator. The Philippines also challenges
Thailand's failure to protect certain confidential information made public by Thai authorities.
6. Third, the Philippines challenges the notification requirement imposed in administering the
amended base for value -added tax ("VAT"), which Thailand adopted to implement the DSB 's
original recommendations and rulings (the "VAT notification requirement"). The Philippines also
challenges Thailand's failure to publish certain measures of general application relating to the VAT
notification requirement.
II. THE BOA RULING IS INCONSISTENT WITH THE CVA
7. The BoA Ruling was the culmination of a process within the Thai customs administration
for establishing the customs value of 210 Marlboro entries from 2002. The declared values were
rejected at the time of entry. The customs value was initially set according to WTO -inconsistent
reference prices. The importer appealed the initial assessment to the BoA, which is an appeal body
within the Thai customs administration. The BoA 's failure to rule on the appeal was the su bject of
findings by the original panel: the panel found that the undue delay in concluding the appeal
violated Article X:3(a) and (b) of the GATT 1994.
8. In the BoA Ruling, the BoA undertook a de novo assessment of the customs value and
decided to reject t he transaction values. It determined an alternative customs value using a
deductive value calculation. Thailand declared the BoA Ruling as a measure taken to comply with
the DSB's recommendations and rulings in this regard.
9. In these Article 21.5 proceedings, the Philippines claims that the BoA Ruling is inconsistent
with Articles 1.1 and 1.2(a) of the CVA because the BoA improperly rejected the transaction value,
and with Article 5 of the CVA because the BoA failed to make appropriate deductions for Provin cial
tax and transport costs when calculating the alternative customs value.

- B-3 -

A. The applicable factual and legal standards of review1
10. Thailand argues that, although Article 11 of the DSU is applicable, Article 17.6(i) of the
Anti-Dumping Agreement ("ADA") provides the standard of review for the Philippines ' substantive
claims under Articles 1.1, 1.2(a), and 5.1 of the CVA. Thailand characterizes this as a deferential
standard of "reasonableness", which it applies to the entirety of the Panel 's evaluation of t he
claims regarding the BoA Ruling, including the assessment of the facts, and the interpretation and
application of the law. Thailand's argument has no merit.
11. First, with respect to the Panel's evaluation of the facts, the standard of review is set forth
in Article 11 of the DSU. The Appellate Body has consistently rejected Thailand 's position that the
standard in Article 17.6(i) of the ADA applies outside of the ADA. Under Article 11, the Panel must
"make … an objective assessment of the facts of the case and the applicability of and conformity
with the relevant covered agreements", "in the light of the specific obligations of the relevant
agreements that are at issue". 2 Thus, the precise contours of the s tandard of review under
Article 11 must be understood in light of the relevant substantive obligations. Under this standard,
the Appellate Body has required panels to conduct a critical review of a national authority 's
findings in light of the explanation given by an authority for its decision. 3 If an authority 's
explanation fails to demonstrate how the facts support its determinations under the obligations
that govern its conduct, the Member violates those obligations.
12. Second, with respect to the Panel 's evaluation of the law , pursuant to Article 3 .2 of the
DSU, a panel must interpret the treaty text using the "customary rules of interpretation of public
international law". Contrary to Thailand 's position, a panel cannot defer to a Member 's
interpretation of treaty language simply because the interp retation is allegedly "reasonable" in
some abstract sense. Under this approach, each Member would decide for itself how to define the
treaty terms, provided it acts "reasonably". The multilateral standard in the covered agreements
would be replaced with diverse unilateral standards, subject only to a reasonableness requirement.
That would not be consistent with the DSU.
B. The rejection of PM Thailand's transaction values on the basis of the BoA's
circumstances of sale test violated Articles 1.1 and 1.2(a) of the CVA
13. The primary basis of valuation under the CVA is the transaction value. Article 1.2(a)
provides that the fact that the buyer and seller are related " shall not in itself be grounds for
regarding the transaction value as unacceptable". 4 Rather, where an authority has doubts about
the transaction value 's acceptability, it must examine the circumstances of sale to determine
whether the relationship influenced the price. Specifically, an administration must undertake a
"critical consideration of, inquiry into, and investigation of, the relevant situation", and "an active,
critical review and consideration of the information before" it; 5 in other words, a rigorous and
critical examination of the circumstances of sale.
14. The CVA does not prescribe a specific process for conducting an examination of the
circumstances of sale. Examples in the Interpretative Note, however, contemplate a comparison
between some aspect of the transaction under consideration, and a benchmark that represents
normal commercial behavior between unrelated parties. When making such a comparison, the CVA
requires the authority to respect two basic principles of comparability: (1) the goods involved must
be comparable ; and (2) full account must be taken of any factors that affect comparabi lity. If
these principles are not observed, a comparison provides neither an objective basis for reaching
conclusions about whether the relationship influenced the price, nor a valid basis for rejecting the
transaction value.

1 The Philippines' second written submission, paras. 38-84; the Philippines' response to Panel Questions
4, 5 and 94; the Philippines' opening statement, paras. 5-14.
2 Appellate Body Report, US – Softwood Lumber VI (Article 21.5 - Canada), para. 92. See also Appellate
Body Report, US – Countervailing Duty Investigation on DRAMS, para. 184. The Original Panel referenced this
standard at paras. 7.68-7.72.
3 See Appellate Body Report, US – Lamb, para. 106; Appellate Body, Argentina – Footwear Safeguards,
para. 121.
4 Emphasis added.
5 Original Panel Report, para. 7.171.

- B-4 -

1. The BoA's examination was based on a flawed industry comparator
group
15. In the BoA Ruling, the BoA purported to examine the circumstances of sale by comparing
P&GE rates of PM Thailand and those of an industry group. There were multiple flaws in the BoA 's
comparison.
a. The BoA selected co mpanies that were not comparable to PM
Thailand in terms of goods sold and commercial level6
16. The first flaw in the BoA 's construction of its industry group relates to the companies that
it included in the group. Specifically, the BoA selected companies tha t were not comparable to PM
Thailand in terms of goods sold, and the commercial level at which the goods were sold. In doing
so, the BoA failed to respect the principles of comparability required by the CVA.
17. The BoA itself accepted that its industry group must comprise companies that sold goods
that were sufficiently comparable to those sold by PM Thailand. In particular, in the BoA Ruling,
the BoA asserted that its industry group consisted of wholesalers of i mported cigarettes with a
brand reputation similar to Marlboro. Instead, however, the BoA selected an industry group
comprised of the following five companies: (1) PM Thailand itself; (2) Chemical Resins (a domestic
manufacturer of cigarette filters); KHS (a wholesaler of cut tobacco); Lee Intertrade (a wholesaler
of cigars, tobacco, rolling paper and cigarette holders); and Piriyapul (a grocery store retailer).
Apart from PM Thailand itself, none of these companies were wholesalers of imported cigarettes.
18. Nonetheless, while conceding that the BoA misrepresented the industry group and went
"beyond the cigarette industry to establish a comparator group", 7 Thailand says that the BoA
respected the first principle of comparability because the comparator compani es all sell "goods of
the same class or kind" as imported cigarettes. Specifically, the companies were selected on the
basis of registrations made by companies under code 51233 of Thailand 's SIC codes, i.e.
"wholesale of tobacco and tobacco products". Howe ver, this rationalization of the BoA 's approach
does not remedy the flaws in the industry group.
19. First, Thailand's explanation is not based on a proper interpretation and application of the
term "goods of the same class or kind". Article 15.3 of the CVA defines this term as "the range of
goods produced by a particular industry or industry sector, and includes identical or similar goods".
This requires an authority to identify the "particular" industry/sector that produces the goods being
valued, and ascert ain the "range" of goods produces by that "particular" industry/sector. In
making this assessment, an authority should take into account a variety of factors, including the
identity of the producers, the nature of the finished goods, the methods of production, the chain(s)
of distribution, and the final consumers. There is no evidence that the BoA ever did so.
20. Second, not only was Thailand 's SIC code system not a reliable way to identify
"wholesale[rs] of tobacco and tobacco products", the BoA did not prope rly apply the SIC codes. In
any event, there is a question whether "tobacco and tobacco products" constitutes the "particular
industry", within the meaning of Article 15.3 of the CVA, producing the goods being valued. The
"industry" selected by the BoA inc luded finished and unfished tobacco products, as well as goods
used to consume tobacco ( e.g. cigarette holders). These goods are made by different producers,
have different inputs, different methods of production, different supply chains, and different
consumers. Thailand has never explained why these goods are all produced by "a particular
industry" for purposes of Article 15.3.
21. Third, even if the BoA correctly identified "tobacco and tobacco products" as the "particular
industry", the BoA included compani es – namely, Piriyapul and Chemical Resins – that did not sell
"tobacco and tobacco products" at the "wholesale" level, as Thailand alleges. Piriyapul is a retailer
of over 3,000 different goods, and KHS is a domestic manufacturer of cigarette filters. The se
companies' P&GE rates were earned in respect of sales of goods other than "tobacco and tobacco
products" at the wholesale level.
22. With respect to the second principle of comparability, the BoA also failed to take account of
differences affecting the comp arison. In particular, the BoA 's industry group included companies

6 The Philippines's first written submission, paras. 239-257; the Philippines' second written submission,
paras. 110-153; the Philippines' response to Panel Questions 6, 7, 78 and 79; the Philippines' opening
statement, paras. 17-22; the Philippines' comments on Thailand's responses to Panel Question 78.
7 Thailand's first written submission, para. 5.31.

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that sell goods at different commercial levels. Because prices differ depending on the commercial
level at which they are sold, P&GE rates earned in sales cannot be used as a benchmark for P&GE
rates earned in sales of goods at a different commercial level, without adjustments. The BoA made
no such adjustments.
23. Thailand's defense of its failure to comply with the principles of comparability required
under the CVA consists largely of repeated assertions regarding an expert witness statement
submitted by the importer, PM Thailand, to Thailand's Public Prosecutor in the context of a criminal
investigation unrelated to the BoA Ruling.8
24. Thailand's reliance on this st atement is misplaced. The statement explicitly states that
comparator companies in a P&GE comparison must be "comparable".9 In the portion of the
statement highlighted by Thailand, the statement explains that, pursuant to Points of
Understanding between PM Thailand and the Customs Department, a company could be considered
comparable where it undertook the same economic activities, at the same commercial level, as PM
Thailand. This statement therefore provides no support for the BoA 's approach, which involve d
inclusion of companies engaged in different economic activities, at different commercial levels.
b. The BoA included PM Thailand itself in the industry group10
25. The second flaw in the BoA's construction of its industry group was that the BoA included
PM Thailand itself in the comparator industry group. To recall, the purpose of the examination is to
establish if the price paid by an importer in a related party transaction reflects normal commercial
behavior between unrelated parties, in order to determine whether the relationship influenced the
price. If 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 wh ether the importer 's pricing is consistent with pricing in unrelated transactions.
Any decision to reject transaction value that is based on an examination that compares the
importer with itself does not meet the requirements of Article 1.2(a).
c. The BoA in appropriately excluded certain companies from the
industry group11
26. The next flaw in the BoA's construction of its industry group was its inappropriate exclusion
of certain companies from the group. First, the BoA excluded BAT and JTI on the sole basis that
they were loss-making. Second, the BoA excluded Classic Cigars and Macrorich, either because the
BoA apparently lacked sufficient information, or because these companies ' P&GE rates were too
high.
27. With regard to BAT and JTI, lack of profitability is not, in itself, a sufficient basis for the
exclusion of a company from the industry group. Rather, an administration must examine whether
there are "valid commercial reasons" for losses. This is consistent with the logic of using a P&GE
comparison in order to examine the circumstances of sale under Article 1.2(a): If there are "valid
commercial reasons" for losses, these companies are part of, and representative of, the
marketplace. Further, since P&GE combines both profits and general expenses, a company could
have a positive P&GE rate, even where it makes losses.
28. Thailand argues that it is valid to exclude loss -making companies simply on the grounds
that they are loss-making. In the case of BAT and JTI, Thailand suggests that it is valid to assume
that they w ere loss -making because the cigarette import prices they paid were influenced by
relationships with suppliers. In assuming this explanation for losses, Thailand implicitly concedes
the Philippines ' point that it is appropriate to consider the reasons for l osses when considering
whether companies with low P&GE rates should be included in a comparison. In any event,
Thailand's explanation does not justify the exclusion of BAT and JTI from the BoA 's comparator
group. To the extent necessary, the Customs Depart ment could easily have adjusted their
respective P&GE rates, as it did for PM Thailand.

8 Expert witness statement, 16 December 2010, (Exhibit PHL-115).
9 Expert witness statement, 16 December 2010, (Exhibit PHL-115), p. 7 (emphasis added).
10 The Philippines' response to Panel Question 7; the Philippines' comments on Thailand's response to
Panel Question 78.
11 The Philippines' first written submission, paras. 258-268; the Philippines' second written submission,
paras. 154-186; the Philippines' response to Panel Questions 8, 9, 10, 80 and 82; the Philippines' opening
statement, paras. 23-26; the Philippines' comments on Thailand's responses to Panel Questions 80, 81 and 82.

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29. With regard to Macrorich and Classic cigars, these companies made very similar sales to
two companies that were included in the industry group, namely Lee Intertrade a nd KHS; all four
companies import and distribute tobacco and cigars (but not cigarettes). If it was appropriate to
include Lee Intertrade and KHS, it was also appropriate to include Macrorich and Classic Cigars.
Thailand initially asserted that it excluded Macrorich and Classic Cigars because their P&GE rates
were "abnormally" or "inexplicably" high. 12 However, if an authority chooses to make a P&GE
comparison under Article 1.2(a), it cannot reject the P&GE rates "usually" made by other sellers
simply because the authority believes – based on its own preconceived prejudices – that the
amount is too low or too high. The P&GE rates "usually" made by other sellers define what is
normal in selling the goods in question.
30. Thailand then changed its position, asserting that the BoA excluded Classic Cigars because
no financial information about its operations (in cluding its SIC code registration) and P&GE ratios
for 2002 was available. Yet, in 2010, the BoA had enough information about Classic Cigars '
operations to consider it as part of the group of 29 companies making up the industry at the time,
and to characte rize its activities as "import, wholesale, and retail of cigarette, cigar and cut
tobacco". The BoA also itself calculated Classic Cigars' P&GE rate to be 34.01 percent.
d. The BoA did not account for important differences in sales volumes
in composing the industry group13
31. A further flaw in the BoA's construction of its industry group was that the BoA calculated a
simple average of the P&GE rates of the five companies included in the industry group, despite the
group including companies with very different sales volumes.
32. PM Thailand 's sales volumes were by far the largest of the five companies in the
comparator group: Piriyapul 's sales were a mere 2.4 percent of PM Thailand 's net sales, and the
remaining three comparator companies had combined sales revenues of just over one percent of
PM Thailand's net sales. The BoA 's failure to account for differences in sales volumes tainted the
comparison, because any insight regarding the effect of the relationship between buyer and seller
on the transaction values was ma sked by differences that flowed purely from the different sales
volumes. The BoA could easily have overcome this problem by weighting the P&GE rates of the
industry group when calculating the average and any measure of dispersion within the data. The
BoA failed to do so.
2. The BoA's examination of the P&GE rates used in the comparison
was flawed
a. The BoA inconsistently used adjusted and unadjusted P&GE rates
for PM Thailand14
33. The BoA 's comparison was also flawed in its decision to attribute three different P&GE
rates to PM Thailand, and then use these different rates inconsistently when undertaking its
comparison. Two of these P&GE rates were for PM Thailand as the subject of the compa rison, one
an adjusted rate of 9.22 percent, and the other an unadjusted rate of 18.47 percent. The third was
for PM Thailand as a Member of the industry group, and was a different adjusted rate of 9.36
percent. There was, therefore, a lack of even -handedness in the treatment of PM Thailand 's P&GE
rate on each side of the comparison.
34. The BoA should have used the adjusted rate of 18.47 percent. Whereas the unadjusted
rate is based on the uplifted customs values determined by the customs administration, the
adjusted rate is based on PM Thailand's declared transaction values. The adjusted rate alone sheds
light on whether the declared transaction values allowed the importer to earn a "normal" P&GE
rate. Basing the P&GE rate on an uplifted alternative customs v alue would, by necessity, lower the
importer's P&GE rate. A comparison based on such a P&GE rate would reveal only whether the
uplifted customs value allowed the importer to earn a "normal" P&GE rate on its sales, which is not
the object of the comparison.

12 Thailand's first written submission, footnote 66.
13 The Philippines' first written submission, paras. 269-279; the Philippines' second written submission,
paras. 187-198; the Philippines' response to Panel Questions 12 and 38.
14 The Philippines' first written submission, paras. 282-288; the Philippines' second written submission,
paras. 199-212; the Philippines response to Panel Question 14.

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b. The BoA failed to use a consistent approach when calculating P&GE
rates for the five companies in the industry group15
35. The BoA's second flaw in comparing the various P&GE rates was to use inconsistent figures
when calculating the P&GE rates attributed to the five companies in the industry group. To recall,
Thailand stated that the BoA determined P&GE rates using the following formula: [N]umerator =
net profit + selling and administrative expenses + corporate income tax (if any). The denominator
was the income of the company.
36. As Thailand describes, in this fraction, a company 's income is relevant in establishing both
the numerator and the denominator. The Philippines accepts Thailand 's clarification that the BoA
calculated the companies' income using figures based on profits before tax, plus general expenses.
There is, however, still an anomaly in the BoA 's calculation. Specifically, the BoA was inconsistent
in the figures it used for corporate income, as between the numerator and the denominator.
37. In the numerator, the BoA used total income, whereas in the denominator, the BoA used
main income. While both total income and main income consist of ordinary operating income, total
income also includes extraordinary income not earned through sales of the relevant goods,
whereas main income does not. Although one company had no extraordinary income, the other
four did. Thus, for one company, the income used in the numerator and the denominator was the
same. However, for the four others, the income in the numerator w as larger than the income used
in the denominator.
38. The use of inconsistent income figures, within a single fraction, to calculate the P&GE rate
for a single company, is not compatible with the requirement of a rigorous and critical
"examination" of the circumstances of sale under Article 1.2(a).
3. The BoA used incorrect use of statistical methods to calculate the
normal or reference P&GE range for the industry group that served
as the comparison benchmark 16
39. The BoA 's examination of the circumstances of sale was also inconsistent with Article
1.2(a) because of its use of statistical tools. To recall, the BoA compared certain P&GE rates
attributed to PM Thailand against a range of P&GE rates established for an industry group. The
logic of the BoA 's comparison w as that any P&GE rate falling outside this supposedly "normal"
industry range reflects transaction values influenced by the relationship between the buyer and
seller.
40. In order to determine the normal range, the BoA: (1) determined the simple average of
the P&GE rates of the five companies included in the industry group; (2) calculated the standard
deviation for this data set; and (3) calculated a standard error of the mean. The supposedly
normal range was then calculated by adding two standard errors to cre ate the upper end of the
range, and deducting two standard errors to create the lower end of the range. The resulting
"normal" range was 9.80 percent to 15.08 percent.
41. First, with a group of only five observations, the BoA should not have used statistical tools
at all to assess the "normal" P&GE range. A customs administration should only have recourse to
statistical tools to assess the "normal" P&GE range when the number of ob servations is sufficiently
large for statistical analysis to yield meaningful results. With a sample of only five observations,
any resulting statistical analysis will have an unacceptably high level of uncertainty. In short,
analysis of a sample of five observations produces results that are arbitrary and inaccurate.
42. Second, the BoA should not have used the standard error, which introduces distortion and
bias into the assessment, both when the group constitutes the whole population, and when it
constitutes a sample. This is because the range generated by the standard error is sensitive to the
number of observations included within the group. The larger a sample, the smaller the range
generated by the standard error. In effect, the use of the standard erro r tends to exclude P&GE
rates that are properly regarded as – and, indeed, define – normal and usual P&GE rates for the

15 The Philippines' first written submission, paras. 289-295; the Philippines' second written submission,
paras. 213-225.
16 The Philippines' first written submission, paras. 296-324; the Philippines' second written submission,
paras. 226-260; the Philippines' response to Panel Question 16; the Philippines' opening statement, paras. 27-
33.

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industry. Comparing PM Thailand 's P&GE rate with a "normal" P&GE range generated in this way
cannot constitute grounds for rejecting transaction value.
43. In contrast to the standard error, the standard deviation is an appropriate statistical tool
for identifying a normal range within a group of observations. In a normal distribution, 68 percent
of the observations will fall within a range ca lculated by adding and subtracting one standard
deviation to/from the average; and 95 percent of the observations will fall within a range
calculated by adding and subtracting two standard deviations to/from the average. These
proportions remain stable, regardless of the number of observations in the data set.
44. Thailand argues that, when using the standard deviation, only five percent of observations
would be excluded from the range, meaning that the relationship between the parties could be
deemed to have a ffected the transfer price in only 5 percent of all possible cases. This argument
reveals a misunderstanding of the statistical tools.
45. The statistical tools seek to establish a "normal" range for one group of companies, for
which the transaction value is not influenced by a relationship between the buyer and seller . This
group's normal range serves as an independent benchmark for assessing the P&GE rates of a
distinct, second group (including one or more companies) where there is a relationship between
buyer and seller. Using standard deviations, all or none of the second group could fall outside the
normal range of the first group. This statistical tool does not predict or dictate the outcomes of
comparing the two distinct groups.
4. The BoA failed to undert ake a proper examination in finding that
PM Thailand 's P&GE rates were "inconsistent with" those of the
comparator group17
46. Finally, the BoA erred in determining whether PM Thailand 's P&GE rates were "inconsistent
with" the P&GE rates calculated for the industry group.
47. In making its comparison, the BoA looked only at quantitative factors and, using a bright
line test, determined that because PM Thailand 's P&GE rates fell outside of the range it had
created, they were not consistent. It did so even though the quantitative gap was small.
48. When a comparison is used as part of an examination of the circumstances of sale, the
value being tested need not match perfectly the comparator value in order to conclude that the
price is acceptable. The legal standard accom modates a degree of difference between the figures
being compared, particularly when the differences are explained by commercial considerations or
are not commercially significant.
49. The purpose of an examination of the circumstances of sale is to ascertai n whether the
relationship influenced the price. In undertaking such an examination, the administration must
"inquire into, investigate and critically consider" all of the information before it. 18 In any given
case, a customs administration must consider all relevant facts, including both quantitative and
qualitative elements.
50. When an administration compares an importer 's P&GE rates with the range of an industry
group, it makes a quantitative assessment only. It cannot then draw rigid, bright lines on the basis
of that quantitative assessment alone, and conclude that the importer 's P&GE rates are
"inconsistent with" those of the industry group.
51. Further, the BoA 's chosen methodology was tainted by numerous flaws that undermined
the comparison. The more imprecise a comparison methodology, the more accommodating an
administration must be of a degree of difference when assessing whether one figure is "not
inconsistent with" another figure or range.
C. The BoA's determination of a new customs value using a deductive value
method violated Article 5 of the CVA
52. Article 5.1 of the CVA sets forth requirements for the deductive valuation method. Article
5.1 bases the customs value on the unit price at which the imported goods are sold in the greatest
aggregate quantity to unrelated parties. It then requires the valuing authority to make deductions

17 The Philippines' first written submission, paras. 325-337; the Philippines' second written submission,
paras. 261-276; the Philippines' response to Panel Question 19.
18 Original Panel Report, 7.188.

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to arrive at an import price. Deductions are based on the categorie s outlined in subparagraphs
(i) -(iv).
1. The BoA fa iled to deduct the correct amount for P&GE in violation
of Article 5.1(a)(i)19
53. The BoA deducted 12.44 percent for P&GE, i.e. the simple weighted average of the
benchmark P&GE rates established for the industry group, which the BoA had previously
constructed as part of its examination of the circumstances of sale.
54. Paragraph 6 of the Interpretative Note to Article 5 explains that the P&GE amount
deducted under Article 5.1(a)(i) should be based on the importer 's own figures. Where that is not
possible, Paragraph 9 provides that the authority must deduct the usual P&GE amount earned in
the sale of the "narrowest group or range of imported goods of the same class or kind".
55. The rejection of an importer 's transaction value under Article 1.1 does not mean that,
under Article 5.1(a)(i), its P&GE figures are inevitably "inconsistent with" the P&GE earned in the
sale of goods of the same class or kind. Rather, because Article 5.1(a)(i), in principle, requires the
use of the importer's own figures, an authority does not have license automatically to depart from
the importer 's own P&GE figures when determining a deductive value, even if it has rejected
transaction value. An authority must undertake a separate analysis of this specific issue under
Article 5.1 of the CVA.
56. The BoA had previously found that PM Thailand 's P&GE rates of 9.36 percent and 18.47
percent were not consistent with the range of P&GE rates established for the industry group. On
this basis alone, the BoA concluded that PM Thailand 's figures were inconsist ent with P&GE rates
obtained in sales of goods of the same class or kind.
57. As summarized above, there are numerous flaws with the BoA 's assessment of P&GE rates
for the industry group. 20 These flaws vitiate the BoA 's conclusion that PM Thailand '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".
2. The BoA failed to deduct the correct amount for Provincial tax in
violation of Article 5.1(a)(iv)21
58. Article 5.1(a)(iv) of the CVA requires deduction of customs duties and other "national
taxes payable in the country of importation by reason of the importation or sale of the goods".
Pursuant to the 1999 Excise Department's Guidelines, PM Thailand pays Provincial tax on behalf of
retailers. An amount for Provincial tax must, therefore, be deducted under Article 5.1(a)(iv).
59. The original panel found that this deduction must be based on Provincial taxes payable
generally, not on Provincial taxes a ctually paid on specific sales. 22 The BoA, however, deducted
only a portion (around 60 percent) of the amount of Provincial taxes that PM Thailand had
demonstrated, with evidence, was payable.
60. Because there is no Provincial tax payable in Bangkok, the BoA calculated an average, per-
unit amount using a fraction in which the BoA divided: (1) the total amount of Provincial tax paid
by PM Thailand in provinces collecting the tax (numerator) by (2) the total volume of all sales
(including in Bangkok) (denominator).
61. PM Thailand provided extensive evidence in support of its claim that it paid THB
162,347,608.85 in total Provincial tax ( i.e., the numerator). Nonetheless, the BoA requested
receipts for all payments of Provincial tax claimed in the period in order to prove the total amount
of Provincial tax that had actually been paid in 2002. In response, PM Thailand provided all the
receipts it had received from the Provincial authorities, which are still in Thailand's possession.

19 The Philippines' first written submission, paras. 380-399; the Philippines' second written submission,
paras. 281-295; the Philippines' response to Panel Question 21.
20 See above, paras. 15-51.
21 The Philippines' first written submission, paras. 400-415; the Philippines' second written submission,
paras. 296-331; the Philippines' response to Panel Questions 20(b), 22, 24, 86, 89 and 90; the Philippines'
opening statement, paras. 34-39; the Philippines' comments on Thailand's responses to Panel Questions 86,
87, 88, 89 and 90.
22 Original Panel Report, para. 7.359.

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62. The BoA, however, accepted only a p ortion of these receipts. The Philippines cannot, at
this stage, know precisely which receipts the BoA accepted, and which it rejected. What is clear,
however, is that, whereas PM Thailand reported payment of Provincial tax of THB 162,347,609, the
BoA deducted only THB 100,497,371.
63. Thailand has asserted that the BoA doubted PM Thailand 's claim that it paid Provincial tax
of THB 162,347,609 because a "test" calculation showed that the per stick amount claimed was
THB 0.147, which exceeded the maximum per sti ck amount payable of THB 0.100. This test
calculation was, however, faulty.
64. In the BoA 's "test" calculation, the BoA sought to divide the claimed Provincial tax
payment of THB 162,347,609 by the total number of sticks sold outside Bangkok, which would
yield an average per stick amount of tax paid on sales subject to the tax. In the denominator of
this "test" calculation, the BoA used a figure of 1.1 billion sticks as the number of sticks sold
outside of Bangkok. In so doing, the BoA rejected, without expla nation, PM Thailand 's reported
figure of 3.57 billion sticks sold outside of Bangkok. Using the reported figure, the per stick
amount of tax paid is well within the maximum per stick amount payable.
65. Thailand asserted that the BoA 's figure of 1.1 billion s tick sales outside of Bangkok came
from sales volumes shown on PM Thailand 's monthly VAT returns. This is false. The Revenue
Department's monthly VAT return form requires vendors to report only a single figure for all sales
revenues earned for sales of all products/brands, in the relevant month, in the whole of Thailand.
The information reported does not enable the BoA to derive the number of sticks sold. The
provenance of the figure of 1.1 billion is, thus, still unknown.
66. In rejecting PM Thailand 's report ed figures, the BoA failed to give the importer any
opportunity to comment, and failed to provide any explanation. The BoA 's insistence on actual
receipts, therefore, flowed directly from its own failure to consult PM Thailand. Irrespective of
which specific receipts the BoA deducted, 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 t he process of
consultation required under the CVA.
3. The BoA failed to deduct any amount for transportation costs in
violation of Article 5.1(a)(ii)23
67. Article 5.1(a)(ii) required the BoA to deduct "the usual costs of transport and insurance
and associated costs incurred within the country of importation". Thailand argues that the BoA was
excused from its obligation to make a deduction, because PM Thailand "waived its right to claim an
adjustment for transportation costs".24 This is incorrect.
68. On 24 August 2011 , PM Thailand offered to waive a deduction for transportation costs on
the proviso that doing so would result in an "immediate conclusion" to appeals that, at that stage,
had been pending for nine years. This condition was not met. On 13 October 2011, PM T hailand
sent the BoA a letter clearly indicating that it considered its offer was no longer valid and that it
sought a deduction of transport costs.
69. PM Thailand provided the BoA with an estimate of domestic transportation costs in its
letter of 9 December 2010. The BoA could have made a deduction on the basis of this evidence. If
the BoA considered the information provided to be deficient, it was required to indicate why and
give the importer the opportunity to provide further information. Moreover, accord ing to the
original panel, even where an importer omits to request a deduction for transportation costs, an
administration should inquire as to whether such a deduction is needed. Instead, the BoA simply
chose not to deduct transportation costs at all.
D. The BoA violated the due process and procedural requirements of the CVA
70. The procedural obligations in Articles 1.2(a) (third sentence), 11.3 and 16 apply to a
Member's "customs administration". As Thailand has previously acknowledged, the BoA is "an

23 The Philippines' first written submission, paras. 416-424; the Philippines' second written submission,
paras. 332-342; the Philippines' response to Panel Questions 25 and 26.
24 Thailand's first written submission, para. 5.96.

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authority within the customs administration", and has insisted that it is "not ‘independent ' of" the
Thai "customs administration".25
1. The BoA violated the procedural requirements of Article 1.2(a)26
71. The third sentence of Article 1.2(a) requires that, "if a customs administration has grounds
for considering that the relationship influenced the price" it must "communicate its grounds to the
importer", and allow the importer "a reasonable opportunity to respond". This process must take
place before a decision to reject transaction value is reached.27
72. Before reaching its decision to reject transaction value, the BoA failed to communicate its
grounds for considering that the relationship influenced the price. As a result, the BoA also denied
PM Thailand its "reasonable op portunity" to address the relevant grounds, before the decision to
reject transaction value was reached. It was especially important that PM Thailand have an
opportunity to address the BoA 's grounds for rejecting transaction value, because the BoA
developed its own novel (" de novo") grounds for considering that the relationship influenced the
price.
73. Thailand does not dispute that the BoA failed to communicate its grounds. Rather, Thailand
argues that the procedural obligations in Article 1.2(a) do not appl y to the BoA, because it is an
appeals body under Article 11.2 of the CVA. As noted above, this is incorrect; Thailand has
previously accepted that the BoA is part of the "customs administration". The procedural
obligations in Article 1.2(a) therefore apply.
2. The BoA violated the procedural requirements of Article 11.328
74. Article 11.3 requires that, when an authority within the customs administration makes a
decision on appeal, it must provide in writing both (i) notice of the decision and (ii) the reasons for
the decision. The BoA failed to provide reasons for its decision.
75. Contrary to Thailand's argument, a statement of "reasons" is not sufficient simply because
it contains some – any – statement of facts relevant to a decision, even if the stated facts do n ot
communicate adequately the substantive basis for the decision. Like Article 16, the duty to provide
"reasons" under Article 11.3 embodies a "due process objective". 29 The "reasons" must set forth
the basis to justify and explain a decision on appeal, inc luding providing sufficient details to make
clear the basis for rejecting transaction value and the basis for an alternative value.
76. In the BoA Ruling, the BoA 's statement of reasons does not meet this threshold. The BoA
provided an inaccurate and misleadi ng explanation of how it constructed the industry group,
stating that it was comprised of "imported cigarette wholesalers … whose brand reputation is close
to the Marlboro cigarettes". 30 Thailand's submissions to the Panel reveal that this is not what the
BoA did.
77. It is also impossible to understand from the Ruling how the BoA undertook its examination
of the circumstances of sale, and why the BoA considered that the transaction value was not
acceptable; it is also impossible to understand the BoA's deductive valuation under Article 5.
3. The BoA violated the procedural requirements in Article 16
78. Article 16 requires a customs authority to provide "an explanation" of its decision. The
original panel explained that this provision serves "due process and transpar ency" objectives. 31
The explanation enables an importer to consider whether to appeal the decision and, if so, on what

25 Thailand's first written submission in the original proceedings, para. 289 (emphasis added).
26 The Philippines' first written submission, paras. 338-346; the Philippines' second written submission,
paras. 348- 368; the Philippines' response to Panel Questions 28 and 91; the Philippines' opening statement,
paras. 41-46
27 Original Panel Report, para. 7.155.
28 The Philippines' first written submission, paras. 441-460; the Philippines' second written submission,
paras. 369-382; the Philippines' response to Panel Questions 29, 92, 93 and 95; the Philippines' opening
statement, paras. 47-55.
29 Original Panel Report, paras. 7.234-7.237.
30 BoA Minutes of Meeting No. 9-2555, 26 September 2012 (English translation), (Exhibit PHL-21), p.
8.
31 Original Panel Report, para. 7.237.

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grounds. It also enables domestic courts and WTO panels to understand an authority 's valuation
determination for purposes of scrutinizing it.
79. To meet these due process and transparency ends, the explanation "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 " how the [alternative] valuation
method [used] was applied to derive the customs value". 32 The BoA never provided PM Thailand
with a sufficient explanation.
80. On 18 December 2012, after the BoA issued its Ruling, PM Thailand requested, in writing,
as required by Article 16, that the BoA provide clarifications on the method used to determine the
customs values. Four years later, the BoA purported to respond, in a letter of 16 June 2016. The
content of this letter does not meet the standard of explanation required under Article 16. It does
not provide, for example, the source of the data that the BoA used in its comparison, the nature of
the data, and calculations based on that data. Nor does it contain sufficient information for PM
Thailand to understand the basis for the BoA's calculation of a deductive value.
81. The timing of the 16 June 2016 letter, and its inadequate content, deprived PM Thailand of
the ability to use the explanation in exercising its rights of appeal. In short, the BoA 's letter of 16
June 2016 was too little, and too late, to discharge its obligation under Article 16.
III. THE CHARGES ARE INCONSISTENT WITH THE CVA
82. On 18 January 2016, the Thai Public Prosecutor filed criminal charges against PM Thailand
and seven of its current employees, concerning 272 entries of cigarettes imported from the
Philippines in the period 2003-2006 ("the Charges"). The Charges embody a determination that PM
Thailand's declared transaction values are lower than the correct customs value. They involve a
rejection of the transaction values that is inconsistent with Article 1.1 and 1.2(a) of the CVA and a
determination of an alternative values that is inconsistent with Articles 2 and 3 of the CVA.
83. Thailand raises four separate hurdles that seek to prevent the Panel from reviewing
whether the Charges are inconsistent with the CVA. If the Panel succeeds in clearing these four
hurdles, Thailand concedes that the Charges are inconsistent with the CVA, but asserts that the
Charges are justified by general exceptions in a different cove red agreement, namely Article XX of
the GATT 1994. Below, the Philippines summarizes why: (1) Thailand 's four hurdles cannot shield
the Charges from scrutiny; (2) the Charges are inconsistent with the CVA; and (3) the Charges are
not justified by Article XX of the GATT 1994.
A. Thailand's four hurdles cannot shield the Charges from the Panel 's
scrutiny
1. The Philippines is not precluded from challenging the Charges33
84. Thailand asserts that the Philippines is precluded from challenging the Charges in these
compliance proceedings. Thailand argues that this obstacle arises because, in the original
proceedings, the Philippines raised, but did not pursue, claims relating to the Department of
Special Investigation's ("the DSI") investigation that preceded the Charges.
85. Thailand's position lacks merit because the Charges did not exist at the time of the original
proceedings. The Charges are a new measure, which Thailand took in January 2016, after the
DSB's original recommendations and rulings. They are distinct from the D SI investigation. Thus, in
the original proceedings, the Philippines did not challenge, and indeed could not have challenged,
the Charges.
86. Thailand itself makes statements that support the Philippines ' position. Thailand remarks,
for example, that the Char ges were adopted "nearly five years after the adoption of the original
panel and Appellate Body Reports" 34, while the DSI investigation "was initiated almost five years
before the adoption of the original panel and Appellate Body Reports".35

32 Original Panel Report, paras. 7.240 and 7.241 (emphasis added).
33 The Philippines' second written submission, paras. 457-464; the Philippines' response to Panel
Question 46; the Philippines' opening statement, paras. 60-63.
34 Thailand's response to Panel Question 41(a), p. 37.
35 Thailand's rebuttal submission to the preliminary ruling request, para. 3.29.

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2. The Charges are "ripe" for adjudication36
87. The second hurdle Thailand presents is that the Panel cannot assess the Charges because
they are not "ripe" for adjudication.
88. Thailand is wrong that there is a doctrine of "ripeness" in WTO law; rather, the issue under
WTO law i s whether there is a measure that is attributable to the respondent. As the European
Union has explained, "rather than introducing a new procedural concept of ‘ripeness ', with unclear
content and vague contours, the question should be framed in a more clas sical manner, namely
whether there is a challengeable ‘measure at issue'."37
89. In principle, under the DSU, a Member may challenge as a "measure" any act or omission
taken by a respondent. In terms of the relevant measures, Article 19.2 of the CVA foresees that
claims may be made under the CVA in respect of any " actions of another Member or of other
Members". Thus, the operative word in Article 19.2 is "actions". The word "action" refers broadly
to "[s]omething done or performed, a deed, an act". This encompa sses but is not limited to
customs valuation "determinations".
90. In any event, while the Charges are an "action" by the Thai Public Prosecutor under Article
19.2, they are, more specifically an "action" in the nature of a customs valuation "determination".
The word "determination" in the CVA includes any "more or less final decision" by any organ of the
state that establishes, for purposes of Article 15.1(a) of the CVA, the value of goods for the
purposes of levying ad valorem customs duties.
91. Despite accepting that the Charges are a measure, Thailand argues that the Panel should
not rule on them because they are merely an "allegation" or "accusation" of wrongdoing, as
opposed to a "determination". This characterization seems designed to convey that the Charges
are casual, informal, and of no consequence. Whilst accusations may be casual, informal, and
inconsequential in some settings – for example, schoolyard banter – that is far from the case with
the Charges brought by the Public Prosecutor.
92. The Charges are a formal act by an authority of the Thai government, exercising criminal
enforcement powers under Thai law, finding that PM Thailand under -declared transaction values
pursuant to provisions of Thai law. The Charges result in real, legal consequences for the accused.
Thailand's own arguments establish that an offence under Section 27 of the Customs Act can be
prosecuted solely on the basis of charges formally issued by the Public Prosecutor, as the
executive officer responsible under Thai law for taki ng this action.38 Accordingly, under Thai law,
the Charges are a necessary, authoritative, and definitive final step – a determination – taken by
the executive branch of the Thai government to enforce Section 27.
93. Thailand also argues that the Charges are not "ripe" because they represent an allegation
upon which the Court has not ruled. Contrary to Thailand's views, the fact that the Court will make
a separate decision whether to convict does not mean that the Charges are not – and cannot be –
a "determina tion". Different organs of the state may make different customs valuation
determinations with respect to a given entry for the purpose of levying ad valorem customs duties.
For example, the customs administration, an independent appeals body, and multiple courts may
make customs valuation determinations with respect to a single entry under the CVA. Each of
these decisions may properly be considered a "determination", and is subject to the CVA.
3. The Charges are a "measure taken to comply"39
94. A third hurdle depl oyed by Thailand is its argument that the Charges are not a measure
taken to comply. However, the Charges share a close nexus – in terms of timing, nature, and
effects – with the DSB 's recommendations and rulings, and the 12 September 2012 BoA ruling,
which is one of Thailand's declared measures taken to comply.

36 The Philippines' second written submission, paras. 399-456; the Philippines' response to Panel
Questions 38; the Philippines' opening statement, paras. 64-72; the Philippines' comments on Thailand's
response to Panel Question 100 and 101.
37 European Union's oral statement, para. 7.
38 Thailand's response to the Philippines' Question 3, p. 2.
39 The Philippines' second written submission, paras. 456-522; the Philippines' response to Panel
Questions 40, 41, 43, 103 and 104; the Philippines' opening statement, paras. 73-76; the Philippines'
comments on Thailand's responses to Panel Questions 103 and 104.

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95. With respect to timing, the Charges post-date the expiry of Thailand's reasonable period of
time to implement the DSB's recommendations and rulings, as well as the adoption by Thailand of
its declared measures taken to comply. Accordingly, the timing of the Charges is such that they
are capable of undermining Thailand's compliance with the DSB's recommendations and rulings.
96. With respect to nature, the Charges have specific, close connections to the m easures
subject to the DSB 's recommendations and rulings, and to one of Thailand 's declared measures
taken to comply ( i.e., the September 2012 BoA ruling). Specifically, the Charges share: the same
importer (PM Thailand); the same exporter (PMPMI); the same importing country (PM Thailand);
the same exporting country (the Philippines); the same product and brands (Marlboro and L&M
cigarettes produced by PMPMI); the same type of legal determination (customs valuation); and the
same grounds for doubting the declared customs values (a comparison with the duty-free prices of
King Power).
97. With respect to effects, the Appellate Body has found a close nexus in terms of "effects" to
exist when the undeclared compliance measure has "the effect of undermining compliance with the
DSB's recommendations and rulings".40
98. Here, the Charges have precisely that effect. The Charges involve a customs valuation
decision to reject the transaction values in exactly the same circumstances as Thailand 's rejection
of the 118 entries and the September 2012 BoA Ruling. The effect of the Charges is to perpetuate
the WTO -inconsistencies it is obliged to correct with respect to a continuous stream of entries,
between the same parties, under the same commercial terms. The relevant transacti ons are also
governed by the same supply contract, with the same business terms.
99. Indeed, Paragraph 2 of the Interpretive Notes to Article 1.2(a) provides that, in a related
party situation, "[i]t is not intended" that the customs administration would examine the
circumstances of sale where it has "previously examined the relationship" between the buyer and
seller. Thus, under the terms of the CVA itself, an unbroken stream of entries are connected across
time where they involve the same commercial relationship.
100. Thailand argues that, notwithstanding these connections, the close nexus is severed
because the Charges do not pertain to the exact same 118 entries as those at issue in the original
proceedings. Thailand has, however, engineered the lack of overlap between the entries at issue.
The DSI investigation initially included 18 of the original "WTO" 118 entries subject to the DSB 's
recommendations and rulings. However, after the significance of these entries under Article 21.5
of the DSU was explained by the importer, the Public Prosecutor decided – at a very late stage in
the investigation process – to remove them. Thailand now seeks to profit from that decision.
101. In any event, Thailand is wrong that the measures at issue in the original and compliance
proceedings must pertain to identical entries. Its position is contradicted by long -standing
jurisprudence in which compliance measures pertained to different entries.41
102. It is also contrary to the findings of the latest panel to examine the "close nexus" test, in
US – Large Civil Aircraft (2nd Complaint) (Article 21.5 – EU). In this case, the compliance panel
found that, "despite the d ifferences" between the original and compliance measures, there was a
close nexus between them because they all related to the production of the same Boeing
product.42 In this case, the undeclared compliance measures concern the customs valuation of the
same products and even the same brands of those products. Just as in US – Large Civil Aircraft
(2nd complaint) (Article 21.5 – EU), the fact that the measures are not identical does not sever
this connection.
4. The CVA applies to the Charges43
103. Thailand's fourth and final hurdle to prevent scrutiny of the Charges is its argument that
the CVA does not apply to the Charges. Thailand is, once more, incorrect.

40 Appellate Body Report, US – Upland Cotton (Article 21.5), para. 205.
41 Appellate Body Report, US – Zeroing (Article 21.5 – Japan), paras.160; Appellate Body Report, US –
Zeroing (Article 21.5 – EC), paras. 222-224, 240; Appellate Body Report, US – Softwood Lumber IV (Article
21.5), para. 83
42 Panel Report, US – Large Civil Aircraft (2nd complaint) (Article 21.5 – EU), para. 7.342.
43 The Philippines' second written submission, paras. 523-618; the Philippines' response to Panel
Questions 48; the Philippines' opening statement, paras. 77-115; the Philippines' comments on Thailand's
responses to Panel Questions 99, 105 and 106.

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104. Article 15.1(a) provides that the CVA applies whenever a Member: (1) determines the
value or monetary wort h of imported goods; and (2) does so for the purposes of levying
ad valorem customs duties.
105. Under Article 15.1(a), the Public Prosecutor made a determination of customs value for the
purposes of levying ad valorem customs duties. Specifically, the Public Prosecutor rejected PM
Thailand's declared transaction values through a comparison with King Power 's prices, and
determined that King Power 's prices constituted alternative customs values, which were used as
the tax base to determine the amount of ad valorem customs duties supposedly due.
106. Thailand makes a number of argument as to why the CVA does not apply. First, Thailand
argues that the Charges do not determine the monetary worth of the imported goods for the
purposes of levying ad valorem customs duties , because King Power 's prices serve only the
purpose of establishing a benchmark to calculate a potential fine. Second, Thailand argues that
because the Charges require a showing of intention to defraud, the CVA does not apply. Third,
Thailand argues that the CVA cannot apply to the Charges, because it would be too onerous for
Members to be subject to the procedural obligations in the CVA in criminal proceedings. Below,
the Philippines explains why these arguments are unavailing.
a. The Charges make a determination of customs value for the
purposes of levying ad valorem customs duties
107. Thailand contests that the Charges establish King Power 's prices as the basis for rejecting
PM Thailand's declared transaction values and as alternative c ustoms values. Instead, it argues
that the references in the Charges to King Power 's prices are solely to establish a benchmark to
calculate the potential fine.
108. However, the Charges themselves demonstrate that King Power 's prices are the
benchmark for reje cting transaction values, and serve as the higher, alternative customs values
used as the tax base to determine the amount of ad valorem customs duties supposedly due.
Every single clause of the Charges concludes that PM Thailand's prices are "false" because they are
"contrary to the actual price", which is identified as King Power's prices. Every clause also refers to
the "amount of tax and duty under the law of customs that the defendant was liable to pay", and
calculates that "amount" using King Power's prices as the tax base.
109. Although Thailand asserts that the Charges do not establish an alternative customs value,
it also recognizes that underpayment of duties is an essential element of Section 27 of the
Customs Act: "Section 27 requires a showing … of an under-statement of the declared value (and
hence underpayment of duties)". 44 As a matter of logic, the Public Prosecutor 's rejection of PM
Thailand's transaction values could not, on its own , be sufficient to conclude that customs duties
were underpaid. Rather, to find that there was "underpayment of duties", the Public Prosecutor
had to establish alternative customs values that were higher than the rejected transaction values.
These alternative values were King Power's prices.
110. Other evidence also shows that King Power 's prices are the benchmark for rejecting
transaction value and the alternative tax base for finding that customs duties were underpaid. In
testimony before the Thai Senate, the DSI, the alleged informant himself (Mr. Somchai) and the
Customs Department all explicitly acknowledged that: King Power 's prices constituted the
benchmark used to reject PM Thailand's transaction values; and, that King Power's prices were the
alternative tax base for calculating the duties supposedly due.
111. Even if Thailand were correct that the King Power prices are used solely as the benchmark
for fixing the fine, the CVA would still apply. The basic building block of the fine under Section 27
is an alternative customs price or value, determined for the expressed pur pose of levying the
correct amount of ad valorem customs duties due, multiplied by four. Therefore, in substance, the
fine incorporates – and collects – the ad valorem customs duties due on an alternative customs
value.
112. Finally, irrespective of the role pl ayed by King Power 's prices in the Charges, and even if
Thailand were correct that the Charges do not determine an alternative customs value, Thailand 's
rejection of the declared transaction values alone suffices to make the CVA applicable. If a
customs administration decides to reject transaction value in deciding the "amount" of ad valorem

44 Thailand's response to Panel Question 32, p. 26.

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customs duties "that the defendant was liable to pay", that rejection is, fundamentally, a
conclusion about the customs value of the goods.
113. The original panel agreed th at "an authority 's rejection of the transaction value under
Article 1 is a necessary and integral element of its determination of the customs value under a
different valuation method". It would be absurd if the CVA did not apply to a determination
merely because it rejects transaction value, given that transaction value is "the primary basis" of
valuation under the CVA. Such an approach would compromise the objectives of the CVA. In the
case of the Charges, Thailan d acknowledges that the transaction values are rejected in the course
of establishing the "amount" of ad valorem customs duties "that the defendant was liable to pay",
which is part of Thailand's process of levying ad valorem customs duties.
b. The "intentio n to defraud" element does not prevent the
application of the CVA
114. Thailand explains that the crime under Section 27 of the Customs Act includes both an
"act" and "intention" element. Yet, it asserts that intent is the "principal" or "main" element of the
crime, with the act flowing as a "natural consequence" of the "intentional under -declaration"
element. Thailand argues that, as a result, the CVA does not apply to the Charges.
115. The Charges do not support Thailand 's assertion that the act of underpayment wa s
established simply by showing an "intention" to underpay. Indeed, an intention to commit an act
does not, in itself, amount to the commission of that act. The "act" of "underpayment" remains –
as Thailand itself has accepted in these proceedings 45 – one of the two fundamental elements of
the crime. Both elements of the crime must be established
116. In emphasizing the "intention" element of the crime, Thailand ignores the Appellate Body 's
findings in US – 1916 Act that the presence of an "intention" element doe s not exclude the
application of relevant WTO rules. In that case, the criminal act under the 1916 Act involved an act
that amounted to "dumping". In addition, the statute imposed an intention requirement. The
United States argued that this intention requi rement excluded the application of Article VI of the
GATT 1994 and the Anti-Dumping Agreement to the 1916 Act.
117. The Appellate Body disagreed. First, it found that because "the constituent elements of
‘dumping' are built into the essential elements of civil and criminal liability under the 1916 Act",
the Anti-Dumping Agreement applied. Second, it held that an additional intention requirement
"does not affect the applicability of Article VI of the GATT 1994".46 Similarly, the additional "intent"
element under Section 27 of the Customs Act does not exclude the application of the CVA. Rather,
the CVA applies because the establishment of the criminal act – the underpayment of ad valorem
customs duties – involves a determination of the allegedly proper customs value for the goods.
118. Finally, Thailand has sought to divert attention from the evidence before the Panel by
relying on a "hypothetical" situation where an importer fails to declare additional invoices relating
to an import transaction.
119. Thailand has failed to show that its hypothetical bears any relation to reality and appears,
instead, to be nothing more than a speculative smoke -screen. Thailand acknowledges that Section
192 of Thailand's Criminal Procedure Code requires the Charges to contain all of the facts that are
considered "essential elements" of the crime. Thailand also concedes that "the Charges contain
[]sufficient information to discern the grounds for the accusation of customs fraud". Nothing in the
Charges establishes anything remotely like the fa ct pattern described by Thailand in its
hypothetical. Rather, they rely on a customs valuation using King Power's prices.
120. Further, even if Thailand's hypothetical had some connection to reality (which it does not),
the CVA would continue to apply. Under the hypothetical, an importer might argue, for example,
that the additional invoices were impermissible additions to the transaction value under Article 8 of
the CVA. Further, even if an importing Member, under the hypothetical, were to decide that
transaction value could be rejected ( e.g., because of doubts about its truth or accuracy, or
because the use of multiple invoices suggests that the relationship influenced the price), an
alleged underpayment of duties could still be established only on the basis of a new alternative
customs value determined consistently with the CVA.

45 See Thailand's response to Panel Question 32, pp. 26-28.
46 Appellate Body Report, US – 1916 Act, para. 132 (emphases added). See also id., para. 122.

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c. The procedural obligations in the CVA do not prevent its application
to the Charges
121. With respect to the Charges, the Philippines has not made claims under the procedural
obligations in the CVA. Thailand argues, however, that the supposedly prejudicial consequences of
applying the CVA's procedural obligations to criminal proceedings demons trate that the CVA
cannot apply to the Charges.
122. The Philippines questions whether applying the CVA's procedural obligations to the Charges
would be overly onerous. The Philippines considers that the Memorandum of Allegations and the
Charges themselves could satisfy the relevant procedural obligations.
123. In any event, there may be a distinction between the CVA's procedural and substantive
obligations. Whereas the third parties agree with the Philippines that the substantive obligations
apply to criminal proce edings, they have raised a question as to the scope of application of the
procedural obligations. Since the procedural obligations apply specifically to a Member 's "customs
administration", the scope of application depends upon the interpretation of this term.
124. The European Union takes a more "institutional" approach to this question, suggesting that
the procedural obligations may apply only to the institution with responsibility for administering
customs procedures, and not to other parts of the government, such as a prosecutor.47 Canada, by
contrast, takes a functional approach to the application of both the substantive and the procedural
obligations, suggesting that they are not restricted to the entity formally described as the customs
administrations, but "apply to the function of determining customs value of imported goods". 48 On
balance, the Philippines inclines to an institutional approach to the application of the CVA's
procedural obligations. This would mean that the procedural obligations would not, for example,
apply to customs valuation made in the context of criminal proceedings.
B. The Charges are inconsistent with the CVA
125. In this section the Philippines summarizes its arguments as to why the charges violate
Articles 1.1, 1.2(a), 2 and 3 of the CVA. The Philippines notes that Thailand has not rebutted the
Philippines' arguments nor sought to explain why the Charges do not violate these provisions of
the CVA. The Philippines also summarizes why Thailand 's disclosure of certain confidential
information violates Article 10 of the CVA.
1. The rejection of PM Thailand 's transaction value is inconsistent
with Articles 1.1 and 1.2(a) of the CVA49
126. Above, the Philippines has summarized the legal standard under Article 1.2(a) of the
CVA.50 To recall, when examining the circumstances of sale, an authority may decide to undertake
comparisons, and in doing so is obliged to respect two basic principles of comparability: (1) the
goods in the transactions subject to the comparison must be sufficiently comparable; and (2) f ull
account must be taken of any factors that affect comparability.
127. In the case of the Charges, the Public Prosecutor undertook an examination of the
circumstances of sale by comparing PM Thailand 's declared transaction values with King Power's
prices. The CVA requires that, when undertaking a price-to-price comparison, the benchmark price
must be a transaction value previously accepted for another imported good under Article 1 of the
CVA, or a customs value previously determined for such a good under Articles 2-7.
128. Below, the Philippines summarizes why, in bringing the Charges, the Public Prosecutor
improperly rejected PM Thailand's transaction value.

47 The European Union's response to Thailand's Question 4, para. 7.
48 Canada's third party submission, para. 33.
49 The Philippines' first written submission, paras. 576-681; the Philippines' second written submission,
paras. 620-624; the Philippines' response to Panel Questions 49 and 53.
50 See above, para. 14.

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a. The comparison with King Power 's prices failed to respect the
requirements in the CVA for a price-to-price comparison
129. Thailand's reliance on a comparison between PM Thailand 's transaction values and King
Power's duty-free prices does not provide a valid basis for rejecting transaction values under the
CVA, because the Public Prosecutor did not re spect the requirements in the CVA for a price-based
comparison.
130. First, King Power 's purchase prices are not transaction values previously accepted, or
customs values previously determined, by the Customs Department for imported goods. This is
because King Power's relevant goods were sold duty-free, so King Power never even declared a
transaction value for customs valuation purposes.
131. Second, the Public Prosecutor's comparison violated both of the principles of comparability
that are embodied in the CVA.
132. In violation of the first principle of comparability, King Power 's goods were not identical or
similar to the goods being valued. For goods to be identical or similar, they must be sufficiently
similar in terms of physical characteristics, and they must be produced in the same country and
sold for export to the same country of importation. PM Thailand 's goods were produced in the
Philippines, whereas King Power's goods were produced in Malaysia.
133. In violation of the second principle of comparability, the Pu blic Prosecutor failed to account
for important differences between the two parties ' transactions in respect of: (i) the impact of the
incidence – if any – of fiscal charges on the prices paid by PM Thailand, a duty -paid operator, and
King Power, a duty -free operator; (ii) the difference in commercial level of the transactions to PM
Thailand and King Power; and, (iii) the quantities sold in the respective transactions.
134. With respect to differences in fiscal charges, whereas PM Thailand's goods were duty-paid,
King Power's goods were duty-free. As a result, pricing at every stage of the two supply chains is
different. With respect to differences in commercial level , the Public Prosecutor compared PM
Thailand's purchase prices in a manufacturer/distributor tr ansaction, with King Power 's purchase
prices in a distributor/retailer transaction. In fact, King Power is two commercial levels removed
from PM Thailand. With respect to differences in quantities sold, whereas PM Thailand imported on
average 8 billion sticks annually at the relevant time, King Power purchased just 170 million sticks,
i.e. just 2 percent of PM Thailand's volume.
135. Finally, the Philippines notes that the World Customs Organization, the Thai Customs
Department and the Public Prosecutor all rejected a comparison between PM Thailand's transaction
values and King Power's prices. Regrettably, the Public Prosecutor made just such a comparison, in
full awareness of the fact that the comparison was inappropriate.
b. The arbitrary exclusion of 18 entries from the Charges shows that
the Public Prosecutor failed to undertake a rigorous and critical
"examination"
136. Although the DSI's investigation had covered more than 290 entries from the period 2003 -
2007, the Public Prosecutor excluded 18 "WTO" entries that w ere initially included in the DSI 's
recommendation to prosecute, thereby accepting the transaction value of these entries.
137. The Public Prosecutor 's decision to accept the transaction values for the 18 excluded
"WTO" entries but to reject the transaction va lues for the 272 entries subject to the Charges was
arbitrary. These entries all had identical or very similar circumstances of sale. To accept
transaction value for one such entry but to reject it for another shows that the Public Prosecutor 's
rejection of transaction value was arbitrary, and thus not based on a a rigorous and critical
"examination" of the circumstances of sale under Article 1.2(a).
2. The Charges ' determination of alternative customs values is
inconsistent with Articles 2 and 3 of the CVA
138. In addition to rejecting the declared customs values, the Charges establish King Power's
prices as alternative customs values. The determination of the alternative customs values is
inconsistent with Articles 2 and 3 of the CVA.

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139. Under Articles 2.1(a) and 3.1(a), the alternative values to be used are the transaction
value of identical or similar goods. The CVA imposes a number of requirements for goods to be
considered identical or similar to the goods being valued. King Power 's goods did not meet these
requirements.
140. First, as noted above, goods are not identical or similar unless they are produced in the
same country as the goods being valued. PM Thailand 's goods were produced in the Philippines,
whereas King Power's goods were produced in Malaysia.
141. Second, Paragraph 4 of the respective Interpretative Notes to Articles 2 and 3 provides
that "the transaction value of identical [or similar] imported goods means a customs value … which
has already been accepted under Article 1 ". King Power ‘s prices were not an already -accepted
customs value.
142. Third, 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. King Power and PM Thailand 's goods were sold at
different levels of trade.
3. Thailand's disclosure of business confidential information
associated with the Charges breached Article 10 of the CVA
143. Thailand acted inconsist ently with Article 10 of the CVA by disclosing, to the media,
business confidential information concerning PM Thailand 's transaction values. Specifically, press
articles disclose PM Thailand's declared transaction values.
144. The only party in a position to d isclose the confidential transaction values, other than PM
Thailand itself, was Thailand. In the circumstances, the only way PM Thailand 's transaction values
could have appeared in press articles is if Thai authorities disclosed those figures to the press. In
both press articles, immediately before reporting PM Thailand 's declared CIF transaction values,
the articles address information obtained from the Office of the Attorney General.
145. The only reasonable inference to draw is that the entity that did the " report[ing]" was the
Office of the Attorney General. Indeed, in the original proceedings of this dispute, the panel found
Thailand violated Article 10 of the CVA based on similar evidence submitted by the Philippines from
press articles.51
146. Thailand argues that the information may have been obtained from the press articles at
issue in the original proceedings. In other words, because the information had been previously
disclosed in violation of Article 10 of the CVA, it would have already bee n public information in
January 2016.
147. On a factual level this cannot be correct because the original press articles and the current
press articles address different entries. On a legal level, it would be absurd, and render the
obligation in Article 10 of the CVA meaningless, if Thailand 's WTO -inconsistent disclosure of
confidential information could effectively change the status of that information to non -confidential,
such that Thailand could then continue to disclose the information freely in the press.
C. The Charges are not justified by Article XX of the GATT 1994
148. Although Thailand offers no substantive defense to the Philippines ' claims in relation to the
Charges under Articles 1.1, 1.2(a), 2 and 3 of the CVA, Thailand argues that violations of these
provisions are nevertheless justified under Article XX(a) or Article XX(d) of the GATT 1994. Below,
the Philippines summarizes why the CVA violations in the Charges cannot be justified by invoking
these provisions of the GATT 1994.
1. Article XX of the GATT 1994 does not apply to justify violations of
the CVA
149. Article XX is not available as a defense to violations of the CVA, because there is no textual
basis in the CVA that would make Article XX applicable to justify inconsistencies with that
Agreement.

51 Original Panel Report, paras. 7.399-7.411.

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150. The text of Article XX establishes that the provision applies, in principle, to " this
Agreement", i.e., the GATT 1994, and not to other covered agreements. Panels and the Appellate
Body have found that the application of Article XX to another covered agreement requ ires
affirmative language, in that other covered agreement, that is sufficient to incorporate Article XX
into the other agreement.52
151. Only twice has the Appellate Body found that such affirmative language existed. Once was
with respect to the TRIMS Agreement, which explicitly provides that "[a]ll exceptions under GATT
1994 shall apply". 53 The other occasion was with respect to a specific provision of China 's
Accession Protocol, which expressly provides that the provision was "[w]ithout prejudice to China 's
right to regulate trade in a manner consistent with the WTO Agreement".54
152. Thailand fails to point to any such affirmative language in the CVA. Thailand argues that
the general reference in the CVA to Article VII of the GATT 1994, and general language in the
preamble are a sufficient textual connection. Thailand is wrong.
153. First, the CVA's reference to Article VII does not reveal any intention to apply all of the
other provisions of the GATT 1994, such as Article XX, to that other agreement. Indeed, as Japan
explained, although the CVA refers generally to Article VII of the GATT 1994, it creates additional
obligations that go beyond the terms of this provision. 55 It cannot thus be assumed that the
general exceptions in Article XX of the GATT 1994 extend to the additional obligations in the CVA.
154. Second, general language in the preamble of the CVA does not suffice to incorporate
specific provisions of the GATT 1994, such as Article XX, into that Agreement. In this respect, the
preamble to the CVA parallels that of the TBT Agreement . However, it is settled that the TBT
Agreement does not incorporate the Article XX defense.56
155. Third, the fact that Article XX(d) of the GATT 1994 permits Members to take WTO -
inconsistent measures necessary to secure com pliance with their laws relating to customs
enforcement does not evidence an intention for Article XX to apply to violations of the CVA.
156. The obligations in the CVA and the provisions of Article XX(d) of the GATT 1994 share a
common objective, namely, ensu ring proper customs enforcement. The CVA pursues this
objective, among others, by establishing substantive disciplines with regard to customs valuation.
Article XX(d) does so by allowing Members to adopt measures necessary to ensure the proper
enforcement of customs laws. It makes no sense for Article XX(d) – which permits measures
necessary to secure compliance with laws relating to customs enforcement – to justify action
inconsistent with the substantive disciplines relating to customs valuation that themselves have
the purpose of securing customs enforcement.
157. As the European Union put it, "the rationale and nature of the obligations set out in the
CVA are not such as to justify the conclusion that Article XX should justify breaches in this context"
and "[t]he fact that Thailand's Article XX defence appears to be obviously unfounded on substance
confirms that Article XX simply does not ‘fit' into the purpose and architecture of the CVA".57
2. The Charges are not provisionally justified under either
Article XX(d) or Article XX(a) of the GATT 1994
158. Even if the Article XX were available to justify a breach of the CVA (quod non ), the
Charges could not be justified under either Article XX(d) or Article XX(a) of the GATT 1994.
159. If the Panel were to reach Thailand 's argument under Article XX, it would have already
determined that the rejection of PM Thailand 's declared transaction values is inconsistent with
Articles 1.1 and 1.2(a) of the CVA, and the determination of alternative values is inconsistent with
Articles 2 or 3 of the CVA.

52 Appellate Body Report, China – Publications and Audiovisual Products, para. 233; Panel Report, China
– Raw Materials, para. 7.153; Appellate Body Report, China – Raw Materials, para. 303; Appellate Body
Report, China – Rare Earths, paras. 96 and 101.
53 Appellate Body Report, China – Rare Earths, para. 5.56.
54 Appellate Body Report, China – Publications and Audiovisual Products, para. 233.
55 Japan's opening statement, paras. 19-20.
56 China – Rare Earths, para. 5.56, citing Appellate Body Report, US – Clove Cigarettes, paras. 96 and
101.
57 The European Union's response to Panel Question 6 to the third parties, para. 16.

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160. It is well established in GATT and WTO case law that the aspect of a measure that must be
"necessary" in order for a measure to be justified under Article XX(d) is the aspect that gives rise
to the finding of WTO inconsistency . Most recently, the Appellate Body confirmed in EC – Seals
that "the aspects of a measure to be justified under the subparagraphs of Article XX are those that
give rise to a finding of inconsistency. 58
161. Accordingly, under Article XX(d), the specific element of a measure that is found to be
WTO-inconsistent, and that is sought to be justified under Article XX, must be "necessary" to
secure compliance with WTO-consistent domestic laws or regulations.
162. Thailand has, however, offered nothing to support it s view that a WTO -inconsistent
customs valuation is "designed" and "necessary" to ensure that PM Thailand pays the correct
amount of customs duties. In fact, the opposite is true: a customs valuation determination that is
inconsistent with the substantive obligations of the CVA cannot be justified as a measure
necessary to secure enforcement of customs laws or protect public morals under Article XX of the
GATT 1994. Rather, the proper enforcement of customs laws requires a WTO-consistent customs
valuation, and not a WTO-inconsistent one.
IV. THAILAND'S MEASURES TAKEN IN CONNECTION WITH THE VAT BASE
APPLICABLE TO IMPORT ERS OF CIGARETTES AR E INCONSISTENT WITH THE
GATT 1994
163. To comply with the DSB's recommendations and rulings, Thailand changed its tax base for
VAT. As part of those changes, Thailand introduced new VAT notification requirements under
Notification 187 and Order Por. 145 -2555 (hereinafter, the "notification requirement"). These
measures were declared as compliance measures.
164. Under the notification requ irement, importers of cigarettes and the domestic monopoly
producer, TTM, are subject to the same notification requirements. In June of each year, both are
obliged to notify the average actual market price prevailing across Thailand on the date of the June
notification.
165. For reasons explained below, importers cannot know the average actual market price on
the date of notification. Instead, importers can notify only the recommended retail selling price
(RRSP). In practice, Thailand has accepted notification of the RRSP.
166. This situation gives rise to the Philippines ' claims that Thailand's VAT notification rules are
inconsistent with Articles X:1, X:3(a) and III:4 of the GATT 1994: (1) in violation of Article X:1,
Thailand has failed to publish the rule that t he Revenue Department applies to accept notification
of the RRSP; (2) in violation of Article III:4, the notification requirement accords imported
products treatment less favorable than domestic products, through the legal jeopardy they face by
being unable to comply with the notification requirement; and, (3) in violation of Article X:3(a),
the notification requirement is unreasonable.
167. In pursuing these claims, the Philippines does not seek to change the Thai Revenue
Department's now long -standing informa l practice of accepting notification of the recommended
retail selling prices ("RRSP") in satisfaction of the notification requirement. Indeed, if Thailand
were to simply publish this practice, in accordance with Article X:1, this would achieve compliance.
To this end, the Philippines seeks, through its claims, to provide importers with appropriate
security and predictability through a formal legal framework, under Thai law, that reflects this
long-standing practice and, therefore, eliminates the risk of le gal jeopardy currently facing
importers.
A. Thailand has violated Article X:1 of the GATT 1994 by failing to publish the
Revenue Department's rule that importers may notify RRSPs
168. The Revenue Department 's rule permitting notification of RRSPs to satisfy the n otification
requirement is a measure that falls within the scope of Article X:1 of the GATT 1994 because it:
(1) is a rule that has general application; (2) is made effective by Thailand; and (3) pertains to
taxes and to requirements affecting sale.
169. First, the phrase "[l]aws, regulations, judicial decisions and administrative rulings of
general application" in Article X:1 of the GATT 1994 covers a "wide range of measures that have

58 Appellate Body Report, EC – Seals, para. 5.185.

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the potential to affect trade and traders", "rang[ing] from imperative rules of conduct to the
exercise of influence or an authoritative pronouncement by certain authoritative bodies". 59 This
phrase must be given broad effect because failure to do so would "undermine the due process
objectives of Article X".60
170. As the authority resp onsible for administering Thailand 's VAT requirements, the Revenue
Department's practice of accepting notification of RRSPs, and then relying on them as the tax
base, is both an exercise of its influence, and an authoritative pronouncement regarding the
acceptable means for importers to comply with the notification requirement. Further, this practice
applies to cigarette importers generally. The practice may properly be described the practice as a
non-binding "administrative ruling[] of general application".
171. Second, the rule permitting the notification of RRSPs in satisfaction of the notification
requirement to has been "made effective" by Thailand. The term "made effective" means "brought
into effect, or made operative, in practice". 61 As Thailand has explai ned, the Thai Revenue
Department has " adopted" a "system" or "practice" "of accepting notifications based on the
RRSPs".62 The rule therefore results in conduct attributable to, and therefore made effective by,
Thailand.
172. Third, the Revenue Department 's rule pertains to taxes, and to requirements affecting
sale, because it relates to the notification of the VAT base, which is connected or related to the
imposition and collection of VAT; and the VAT, in turn, is a condition for lawful sale of cigarettes in
Thailand. This point does not appear to be in dispute between the parties.
173. Thailand disputes that the Revenue Department 's acceptance of RRSPs in satisfaction of
the VAT notification requirement is an "informal practice" of the Revenue Department, and argues
that this is merely an importer 's "chosen means of compliance". However, the measure does not
arise because importers have chosen to notify RRSPs, but because the Revenue Department has,
in full knowledge of the facts, consistently chosen, over an extended period, to accept RRSPs as a
"means of compliance" and has used the notified RRSPs as the tax base. The evidence, of course,
also includes Thailand 's recognition of this as a "practice" and "system" "adopted" to implement
the DSB rulings and recommendations.
174. If this measure were published, importers could rely on it to show they have properly
complied with the notification requirement, thereby resolving the legal jeopardy they currently
face.
B. Thailand has violated Article III:4 of the GATT 1994 by accord ing to
imported products treatment less favorable than that accorded to like
domestic products
175. In the absence of publication of the informal practice of allowing notification of the RRSP in
fulfilment of the VAT notification requirements, importers face a risk of legal jeopardy in light of
the specific requirements set forth in Notification 187 and Order Por. 145 -2555. The notification
requirement set forth in those instruments gives rise to less favorable treatment of imported
cigarettes as compared with the like domestic product.
176. Thailand's notification requirement entails de jure discrimination because it subjects
importers and domestic manufacturers to treatment that is formally the same, while failing to
account for relevant differences in the respecti ve legal situations of importers and the monopoly
producer of domestic cigarettes, TTM. Where a measure discriminates on a de jure basis between
like domestic and imported products, a panel may presume that the discrimination affects "like
products".63
177. As noted above, under the notification requirement, importers of cigarettes are subject to
the same notification requirement as TTM for purposes of the VAT base. In June of each year, both

59 Panel Report, EC – IT Products, paras. 7.1026-7.1027.
60 Panel Report, EC – IT Products, para. 7.1026.
61 EC – IT Products, para. 7.1048 (emphasis added).
62 Thailand's first written submission, paras. 7.33 and 7.48 (emphasis added).
63 See the Philippines' first written submission para. 473, citing Panel Report, Indonesia – Autos, para.
14.113; and Panel Report, Colombia – Ports of Entry, para. 7.355. In any event, as the Original Panel found, a
consideration of the traditional factors used to determine "likeness” demonstrates that TTM's domestically-
produced cigarettes are "like” PM Thailand's imported cigarettes. See Original Panel Report, paras. 7.442,
7.451, 7.541.

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importers and TTM are obliged to notify the average actual market price across Thailand prevailing
on the date of the June notification.
178. However, this formally identical treatment fails to account for the formally different legal
situations of importers. Specifically, with respect to domestic cigarettes, TTM 's exemption from
Thai competition laws means that TTM can, and does, set the downstream retail price. Thus, on
the date of notification, TTM is aware of the average actual market price and is able to comply with
it, in fulfilment of the notification requirement.
179. By contra st, Thai competition law prohibits importers from fixing the retail selling price
charged by independent operators who retail imported cigarettes. Thus, although cigarette
importers are aware of – and able to notify – the recommended retail selling price o n the date of
notification, they do not know – and cannot notify – the average actual market price on that date.
In order to know the average actual market price across Thailand on a particular date, an importer
would have to obtain market research through a market research company. Because collecting and
processing market data in order to calculate the average price necessarily takes time, 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.
180. Thailand contests that this constitutes a difference in treatment that is detrimental to
imports. It contests that (1) cigarette importers do not know the average market price on the date
it must be not ified; (2) it takes several weeks for a market research company to ascertain that
price; and (3) importers face legal jeopardy if they do not comply with the VAT notification
requirement. Each of Thailand's arguments is unavailing.
1. Cigarette importers do not know the average market price on the
date it must be notified
181. Thailand argues that, on the date of notification importers do know the average actual
market price prevailing on that date. Specifically, Thailand asserts that the Revenue Department
defines the "actual price" to reflect only the price charged by sellers – such as 7-11 stores etc. –
that invariably follow the RRSPs ".64 However, this definition does not allow the importer to know
the average market price on the date of notification.
182. First, Thailand bases its contention on Example (b) provided in Clause 2(4) of Order Por.
145-2555. Example (b) provides that, for Marlboro cigarettes, the notified price should be the
retail selling price "that the retailers in general, e.g. convenience stores or super stores use as the
retail selling price to sell to the consumers in general or the majority [of them] ". Contrary to
Thailand's characterization, the Example does not state that importers may notify the price used
either by one specific retailer, i.e., 7-11, or by retailers that "invariably follow the RRSP". Instead,
it refers to "convenience stores" and "super stores" broadly as non-exhaustive examples of the
types of stores that constitute "retailers in general".
183. Second, Thailand also provides no evidence to support its assertion that 7 -11 or any other
retailer "invariably follow the RRSPs". In fact, Thailand concedes that certain retailers " may charge
higher prices for cigarettes " than the RRSPs. 65 Further, Thailand 's New Excise Tax explicitly
envisages situations in which the RRSP "is not consistent with the reality, or is not in accordance
with market mechanisms". In other words, at any given time, the average market price that
"retailers in general" "use" for "consumers in general" could be higher than an importer's RRSP.
184. As a result, an importer cannot possibly know what prices are being charged on the
notification date. As a result, the only way to comply with the VAT notification requirement would
be to engage in vertical price fixing.
2. It takes several weeks for a market research company to ascertain
the average actual price
185. Thailand also argued that the Philippines had not shown the precise amount of time
required to obtain market information. The Philippines demonstrated, based on information
provided by PM Thailand and a market research company, that it takes approximately 4 -6 weeks
to obtain average actual market price information. However, regardless of the precise amount of
time required to obtain accurate data on the average actual retail price prevailing across Thailand

64 Thailand's response to Panel Question 63(a), p. 57. Emphasis added.
65 Thailand's response to Panel Question 63(a), p. 57. Emphasis added.

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on any given day, the decisive point for the Philippines' claims is that it takes some amount of time
after the date of notification for an importer to obtain average actual market price information
from a market research c ompany. It is the necessary gap between the date on which the
notification is made, on the one hand, and the date upon which the average actual retail price
prevailing on that earlier date is known, on the other hand, that gives rise to the risk of legal
jeopardy for importers.
186. Thailand itself has acknowledged that it takes some "amount of time" for a market
research company to conduct market research and ascertain the average actual market price on a
given date. In other words, Thailand recognizes that PM Thailand could not obtain the average
actual market price on the same day the notification is due.
3. Importers face legal jeopardy if they do not comply with the VAT
notification requirement
187. Because importers do not know the average actual market price, the y cannot comply with
the VAT notification requirement without violating Thai competition law. This situation creates legal
jeopardy for cigarette importers, because they risk failing to comply with the notification
requirement in the event of a discrepancy between the average actual market price and the RRSP.
188. Thailand argues that importers ' lack of knowledge of the actual average market price
prevailing on the notification date does not give rise to legal jeopardy because they can
subsequently notify a corr ected price, if the price originally notified was incorrect. Thailand
presents two scenarios, in which corrections can be made either before the incorrect VAT base
enters into effect or before the deadline for submitting the tax return. However, this argum ent
illustrates that less favorable treatment is, indeed, afforded to imported cigarettes.
189. For a start, Thailand 's scenarios do not account for the possibility that a discrepancy
between the average actual market price is not discovered before a tax return is filed.
190. Further, on Thailand 's view, for importers to know whether they must file a correction,
they must first undertake a market survey to monitor their VAT notifications against actual prices
in the market, and then submit a correction. Thailand al so recognizes that a correction could
require the reissuance of VAT invoices. As 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 supply chain, for each pack of imported cigarettes.
191. In seeking to comply with the VAT notification requirement, importers face an endless
spiral of notifications, corrections and reissuance of invoices. Market surveys necessarily provide
information on average market prices with a time lag. Thus, a corrected notification, based on a
market survey, necessarily provides the average market price prevailing on an earlier date,
namely, the date of the original notification. However, the corrected notification may itself be
inaccurate because the average market price prevailing on the date of the corrected notification is
unknown on that date, pending further price surveys that will take more time. Thus, for every
corrected notification, further monitoring is needed, and a fu rther correction may be necessary
several weeks in the future, with invoices reissued by several parties in the supply chain.
192. TTM does not face these additional regulatory burdens and risks. It need never monitor its
VAT notifications against average market prices, submit corrections, or reissue invoices, because it
is able to fix the retail price and therefore can know that its notified selling price is correct on the
original date of notification.
C. Thailand has violated Article X:3(a) of the GATT 1994 by imposing,
through Notification 187 and Order Por. 145 -2555, an unreasonable
notification requirement on importers with which they cannot comply
193. The Philippines ' claim under Article X:3(a) is premised on the same underlying problem
that gives rise to less f avourable treatment under Article III:4, namely, the impossibility for
importers of notifying the average actual market price on the date of notification, without violating
competition law by fixing prices. Since the VAT notification requirements pertain t o administration
of Thailand 's VAT rules, this impossibility gives rise to unreasonable administration contrary to
Article X:3(a). The Philippines summarizes further below.
194. First, the VAT notification requirement is a measure that falls within Article X:3( a) because
it pertains the administration of Thailand 's rules relating to the obligation to pay VAT.

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"Administration" of measures within the meaning of Article X:1 means the manner in which those
measures are "applied", "implemented" or "enforced". 66 Further, "administration" can take the
form of a "legal instrument that regulates the application or implementation of" substantive rules
in another legal instrument.67
195. Whereas the Thai Revenue Code sets forth provisions containing substantive rules relating
to t he calculation of the VAT base, the notification requirement pertains to the application and
implementation of those rules, specifically, the way information used to establish the VAT base is
collected by the administrator of the law. The notification requ irement therefore governs the
administration of the VAT.
196. Second, the notification requirement provides for "unreasonable" administration because it
imposes an impossible administrative requirement on importers.
197. Thailand argues that the notification requirement is not unreasonable because no violation
of Thai competition law arises by notifying the RRSPs. This is not, however, what the Philippines
argues. As discussed above, the Philippines ' argument is that it is "unreasonable" to administer a
tax through a notification requirement imposed on importers that seeks to collect information from
importers that they do not, and cannot, possess. As discussed above, an importer cannot notify
the average market price prevailing on the date of notification beca use it cannot know that price
on that date. As a result, the only way to comply with the VAT notification would be engage in
(illegal) vertical price fixing.
198. Thailand's argument that importers may notify corrections of the VAT base supports the
Philippines' position. As explained earlier, in doing so, importers face an endless spiral of
notifications and corrections because, when a corrected notification is filed, importers still cannot
know the average market price on that date. Thus, further monitoring is required and further
corrections may ensue.
199. This only adds to the inherent unreasonableness of a requirement that forces importers to
choose between complying with the VAT notification requirement and facing legal jeopardy under
Thai competition law, or c omplying with Thai competition law and facing legal jeopardy under the
VAT notification requirement.

66 Appellate Body Report, EC – Bananas III, para. 200. See also Panel Report, Argentina – Hides and
Leather, para. 11.72.
67 Appellate Body Report, EC – Selected Customs Matters, para. 200.

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ANNEX B-2
EXECUTIVE SUMMARY OF THE ARGUMENTS OF THAILAND
1 INTRODUCTION
1.1. This integrated executive summary contains the arguments presented by Thailand in its
written submissions, oral statements, responses to questions and comments thereto.
1.2. In this dispute, the Philippines alleges that Thailand has faile d to bring itself into compliance
with the DSB recommendations and rulings with respect to: (i) the decision of the Thai Customs
Board of Appeals (BoA) in the appeals by Philip Morris (Thailand) Limited (PM Thailand) of the
original customs valuation decisions of Thai Customs concerning 210 entries of cigarettes imported
by PM Thailand; (ii) the Criminal Charges against PM Thailand (Charges); and (iii) Thailand's
establishment of the value-added tax (VAT) tax base for cigarettes.
1.3. In a n initial request for a preliminary ruling , Thailand requests the Panel to find that the
Philippines' claims regarding the Criminal Charges are outside the scope of these proceedings. It
contends that the Philippines is precluded from raising the Charges in these Article 21.5
proceedings because the Philippines raised, but did not pursue, the same issues before the original
panel. Thailand further explained that the Philippines could not claim that the Charges were a
"measure taken to comply" on the ground that there was a "nexus " between the Charges and the
DSB recommendations and rulings in this case. Thailand notes that the Panel has indicated that it
does not intend to issue its preliminary ruling before it issues its report in this case.
1.4. In a subsequent request for a procedur al ruling , Thailand addresses a serious violation of
Thailand's due process rights in these proceedings. During the proceedings, the Philippines
submitted an exhibit containing a confidential, internal Thai government memorandum to which
was attached lawye r-client privileged legal advice from Thailand's legal advisors in this dispute.
Thailand has not waived, and does not waive, either expressly or impliedly, its privilege in these
documents or its right to obtain legal advice to assist it in presenting its case to the Panel in these
proceedings. Thailand requested the Panel to find that Thailand's due process rights have been
violated in a manner that prevents the Panel from fulfilling its obligations under Article 11 of the
DSU. However, the Panel issued i ts preliminary ruling prior to the first substantive meeting,
concluding that Thailand's due process right have not been violated and rejecting Thailand's
request. Thailand therefore expressly requests 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. 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.
1.5. With respect to the Philippines' claims regarding the decision of the BoA , the Philippines has
failed to show that the BoA's decision was in any way biased, partial or arbitrary. In examining
these claims, the Panel should apply a standard of review to these claims similar to that used to
review decisions of domestic trade remedy investigating authorities. Under this standard, the Panel
must examine whether the Bo A reached a reasonable, objectively justifiable, and unbiased, based
on an objective review of the facts and circumstances of the case before it. As explained in more
detail in section 2 below, the Philippines has failed to show that the Bo A acted unreasonably or
that its deci sion lacked objectivity. Instead, the Philippines' arguments in the end amount to a
claim that the Bo A should have used a different methodology that would have resulted in a more
favourable outcome for the importer. This is not the purpose of multilateral review of these kinds
of determinations and the Panel should not follow this approach.
1.6. With respect to the Philippines' claims regarding the Criminal Charges , these claims raise
issues that are not within the scope of the CVA. The CVA governs the determination of the
customs value of goods by the customs administration. It does not, and does not purport to,
govern how WTO Members may exercise their police powe rs in the enforcement of their laws,
including their customs laws. Since the Charges represent an exercise of Thailand's enforcement of
its customs laws, not a determination of customs value by the customs administration, the CVA
does not apply and the Phi lippines' claims under the CVA should be rejected. Moreover, the

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Philippines' claims regarding the Charges are an unprecedented attempt to get a WTO panel to
intervene in pending domestic criminal proceedings in order to pre-empt the court's consideration
of the matter. The Charges are currently pending before the Thai Criminal Court, which will hear
extensive evidence from both sides over the coming year and is unlikely to issue its decision
before summer of 2018. Under the doctrine of "ripeness", however, a WTO panel cannot exercise
its jurisdiction to engage in an exercise of speculation as to what that decision might be or
whether that decision would be consistent with WTO law. A WTO panel cannot possibly render an
objective decision before the Thai Crim inal Court has had an opportunity to hear all the relevant
evidence.
1.7. Finally, with respect to the Philippines' claims regarding the VAT system , Thailand has
implemented the recommendations and rulings of the DSB on this matter in precisely the manner
requested by the Philippines and the importers. Nevertheless, the Philippines has chosen to assert
claims that this method of implementation is WTO -inconsistent because of a perceived difference
in possible outcomes in the event of inaccurate notifications of the tax base by importers and the
domestic producers. The Philippines' claims are based on a misunderstanding of both the relevant
provisions of Thai law and the facts, and should be rejected.
1.8. Thailand will address the Philippines' claims with respect to the BoA Ruling in section 2 below,
the claims regarding the Charges in section 3 below (including the preliminary ruling request and
the procedural request on due process issues), and the claims regarding Thailand's VAT base in
section 4 below. Finally, it presents its conclusions in section 5.
2 THE PHILIPPINES HAS FAILED TO DEMONSTRAT E THAT THE DECISIONS OF THE BOA
ARE INCONSISTENT WITH THE CVA
2.1. This section concerns the BoA decision of November 2012 regarding the customs valuation of
210 entries of cigaret te imported by PM Thailand. The Philippines claims that the BoA improperly
determined that the relationship between PM Thailand and the exporter affected the price such
that the declared transaction value was not an appropriate customs value under Article 1.2 of the
CVA. The Philippines also claims that having made this determination, the BoA improperly
determined the revised customs value, in a manner inconsistent with Article 5 of the CVA. Finally,
the Philippines raises several claims regarding the proce dural aspects of the BoA's decision under
Articles 1.2(a), 11.3 and 16 of the CVA.
2.2. Thailand disagrees that the BoA's decisions were inconsistent with the CVA. Thailand notes
that this is the first case before a WTO panel involving a review of a determinati on of an appellate
tribunal under Article 11.2 of the CVA. In these circumstances, the parties agree that the Panel
should not conduct a de novo review. Instead, Thailand considers that the Panel should use a
standard of review that examines not whether the outcome reached by the Bo A was favourable to
the importer or indeed whether the Panel would have reached exactly the same outcome itself,
were it in the shoes of the Bo A. Instead, the question is whether the Bo A's approach was
reasonable and objective in the light of the circumstances of the case and the evidence before it. 1
This standard is analogous to that used in trade remedy dispute settlement proceedings, which is
mentioned in Article 17.6(i) of the Agreement on Implementation of Article VI of th e General
Agreement on Tariffs and Trade 1994 (Anti-Dumping Agreement).
2.3. There is no express standard of review for decisions such as the BoA decision in the CVA.
Given the analogies between a determination by the BoA and that of a domestic investigating
authority in a trade remedy proceeding under the Anti -Dumping Agreement or the Agreement on
Subsidies and Countervailing Measures (SCM Agreement), the Panel should follow a standard of
review similar to that used by panels in reviews of trade remedy determinations.2
2.4. The Appellate Body has explained that, in a trade remedy -related dispute, where a panel is
reviewing an investigating authority's determination, the "objective assessment" standard in
Article 11 of the DSU requires a panel to review whether the authority h as provided a reasoned
and adequate explanation as to (i) how the evidence on the record supported its factual findings;

1 Thailand's second written submission, paras. 2.2-2.3.
2 Thailand's first written submission, paras. 4.6-4.8; Thailand's second written submission, para. 2.6.

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and (ii) how those factual findings support its overall determination. 3 The Appellate Body has also
clarified that in such cases, a panel should not conduct a de novo review of the evidence, nor
substitute its judgement for that of the investigating authority.4
2.5. There is no dispute between the parties on the fact that the Panel should not choose its own
methodology to conduct the review of PM Thailand's prices or re-assess de novo the facts that
were examined by the BoA in the underlying customs determinations and that some level of
deference to the discretion of the BoA is appropriate.5
2.6. However, the Philippines states that the relevant sta ndard of review should be that provided
in Article 11 of the DSU. The Philippines suggests that by proposing a standard of review similar to
that of Article 17.6(i) of the Anti -dumping Agreement, Thailand is effectively seeking the Panel to
accord total deference to the decisions of the BoA.6
2.7. This is not correct. Thailand made clear that Article 11 of the DSU applies to this dispute. 7 In
Thailand's view, the Panel should apply not only Article 11 of the DSU, but also a standard similar
to that stated in A rticle 17.6(i) of the Anti -Dumping Agreement, because this case involves the
review of a determination based on a complex set of facts, by a domestic entity (the BoA)
comparable to those in charge of investigations for trade remedy purposes.8
2.8. Under this st andard, a panel need not determine whether the approach used by the
investigating authority is the best approach. Equally, a panel is not to focus on whether the
outcome is favourable to one side or another. Instead, it focuses on the reasonableness, the
objectivity and the unbiased nature of the determination, not its results. This approach is
particularly appropriate in a case like this, where the BoA used "objectively" the exact same
methodology to decide three sets of appeals by PM Thailand. In two instances, the outcome was
favourable to PM Thailand. In the third, the instance before the Panel, the outcome was
unfavourable to PM Thailand. The purpos e of the "reasonableness" standard used in trade remedy
cases is precisely to avoid result -driven outcomes, whereby the WTO -consistency of the
determination would depend on the result rather than on the method by which the domestic
authority arrived at the result.9
2.9. Therefore, Thailand considers that the Panel should apply a standard of review to the BoA
decision that is analogous to the "reasonableness" and "objectively justifiable" standards used in
trade remedy and other analogous disputes as discussed ab ove. In any event, the Panel must
avoid becoming the initial trier of facts or examining the issues before BoA on a de novo basis that
results in a substitution of the Panel's assessment for the objective assessment of the BoA.10
2.1 The BoA properly identified the comparison group of companies to establish P&GE
rates
2.10. The BoA addressed PM Thailand's appeal using an approach that compared PM Thailand's
profit and general expense (P&GE) ratio with those of a comparator group to determine whether
PM Thailand's rat io fell within what would be considered a "normal" range. In principle, the
Philippines agrees that it was appropriate for the BoA to use this approach and argues only with
the manner in which it was applied in this case.

3 Appellate Body Report, US – Countervailing Duty Investigation on DRAMS, para. 186; and Appellate
Body Report, US – Lamb, para. 103. See Thailand's second written submission, para. 2.7.
4 Appellate Body Report, US – Countervailing Duty Investigation on DRAMS, paras. 187 – 188. Appellate
Body Report, US – Softwood Lumber VI (Article 21.5 – Canada), para. 93. See Thailand's second written
submission, para. 2.7.
5 Thailand's second written submission, paras. 2.5, 2.8. See Thailand's first written submission, para.
4.10; The Philippines' second written submission, paras. 57 and 66.
6 The Philippines' second written submission, paras. 52 and 62. See Thailand's second written
submission, para. 2.10.
7 Thailand's first written submission, paras. 4.1-4.3.
8 Thailand's second written submission, paras. 2.11-2.14.
9 Thailand's second written submission, paras. 2.21-2.22; Thailand's opening statement at the meeting
of the Panel, paras. 81-82.
10 Thailand's second written submission, para. 2.37.

- B-29 -

2.11. In order to determine whether P M Thailand's P&GE was within the normal range for
importers of cigarettes into Thailand, the BoA had to identify a comparison group of companies.
The Philippines claims that the BoA used a flawed comparison group to determine benchmark
P&GE rates inconsistently with Article 1.2(a) of the CVA.
2.12. First, the Philippines tries to impose an incorrect standard of review of the BoA decision.
Thailand has addressed this above. Second, the Philippines raises several objections regarding how
the BoA implemented its a pproach. The Philippines apparently seeks perfection from the BoA.
However, it fails to acknowledge that the BoA was not faced with a perfect set of choices in its
determination. The nature of the cigarette industry in Thailand, where PM Thailand was the
predominant importer, limited the options available to the BoA. Notwithstanding the Philippines'
arguments, an expert statement filed by the Philippines itself in its first written submission made
essentially this point – that it was not easy to identify a perfect comparison group in the
circumstances of the cigarette industry in Thailand and that it might even have been appropriate
to compare PM Thailand to companies outside the cigarette industry.11
2.13. The Philippines questions the e xclusion of certain comp anies from the comparison group.
However, it is presumptively reasonable to establish a rule that loss -making companies –
especially those that are affiliated with the exporter – do not provide an appropriate basis for a
comparison to determine whether an importer is operating at an arm's length basis.12
2.14. The BoA narrowed down its selection of the comparison group of companies using the
following methodological steps:
• Duty-free operators were excluded (King Power, King Power Duty Free, Bangkok
Airways).
• Companies that did not import cigarettes or sold only domestic products were excluded
(Weh Weh, Kha Sin Thai, HAH, Chitapanya, Dekthaileemax, Ruwamsahairungruang,
Thaiseree Hadyai, Pangna Changwad Trading).
• Loss making companies were excluded (BAT, JTI, PX Imp ort Export, Oriental & Eight
Happiness, Prestige Brand, Universal Consumer Products, Goldimex Intertrade,
Sereewat, Phromrangsi 1999, Boontong Trading, First Trago).
• One company, Macrorich, was excluded because its P&GE ratio was excessively high.
• One company, Sutanatrading, was excluded because the BoA was unable to obtain its
financial statement or confirm its activities.
2.15. Thailand sees nothing in this approach that is not objectively justifiable.13
2.16. The Philippines further questions (i) the BoA's decision t o use a comparison group outside
the industry, (ii) the BoA's alleged failure to take into account the difference in size of the
companies as compared to PM Thailand, and (iii) the BoA' s decision to include PM Thailand in the
comparison group. Regarding the first point, it is objectively justifiable to choose companies selling
the same product instead of companies of the same size. 14 Regarding the second point, this is
precisely the reason why the expert statement provided by the Philippines said it was difficult to
find a perfect comparison group.15 Regarding the third point, had PM Thailand not been included in
the comparison group, its P&GE ratio would still have fallen outside even the absolute range of the
values for the comparison group.16

11 Thailand's first written submission, para. 5.31; Thailand's second written submission, paras. 2.39-
2.40; Thailand's opening statement at the meeting of the Panel, para. 84.
12 Thailand's second written submission, para. 2.42.
13 Thailand's second written submission, para. 2.45; Thailand's first written submission, paras. 5.21-
5.29.
14 Thailand's second written submission, paras. 2.47-2.48.
15 Thailand's second written submission, para. 2.49.
16 Thailand's second written submission, para. 2.50.

- B-30 -

2.17. Thus, the Philippines has failed to make a prima facie case that the BoA's determination was
inherently unreasonable, not objective, or biased against PM Thailand. In these circumstances, the
Panel cannot set the determination aside, simply because the outcome might not have been
favourable to a multinational corporation or be cause the circumstances before the BoA were not
perfect in every respect.17
2.18. For these reasons, the Panel should reject the Philippines' claims regarding the BoA's
selection of the comparison group in this case.
2.2 The BoA calculated the P&GE ratios consistently
2.19. The Philippines argues that the BoA calculated the P&GE ratios for the companies involved
inconsistently. In particular, the Philippines states that for two of the companies in the comparison
group, the BoA used a P&GE ratio based on figures for profi ts before tax. For the three other
companies, however, the Philippines alleges that the BoA used a P&GE ratio based on figures for
profits after tax.
2.20. This is incorrect. The BoA used exactly the same numerator and denominator for all of the
companies within the comparison group, including PM Thailand. The numerator for each company
was profit plus general expenses (before tax). The denominator for each company was the main or
operating income (not including non -operating income such as interest income etc.). There is
nothing inconsistent or unreasonable about this approach.18
2.21. Moreover, contrary to the Philippines' assertion, it was reasonable for the BoA to exclude
companies that made losses because it may indicate that the sales were not at arm's length in th e
case of related -party transactions. 19 In addition, it was appropriate for the BoA to focus on
operating income, profits, and expenses, rather than on whether the companies had a tax liability
under Thai tax law.20
2.22. Finally, the Philippines argues that the BoA erred in "attribut[ing] three different P&GE rates
to PM Thailand and then us[ing] these different rates inconsistently when undertaking its
comparison".21 This is incorrect. PM Thailand changed its position on what P&GE ratio should be
used in this analysis at several stages in the proceeding. However, the BoA approached these rates
consistently.22 Moreover, in order to make an apples to apples comparison, it was appropriate to
use comparable figures for PM Thailand and the other companies, based on the financial results in
the audited financial statements.23
2.23. For these reasons, the Panel should reject the Philippines' arguments that the BoA's
calculations were inconsistent or that the BoA was not unbiased and objective.
2.3 The BoA's establishment of the range of P&GE ratios was proper
2.24. The Philippines questions the methods used by the BoA to establish whether PM Thailand's
P&GE rates were consistent with the representative industry r ate. Based on the assumption that
any P&GE rate falling outside the "normal range" reflects transaction values influenced by the
relationship, it argues that the standard error is not the appropriate statistical method, and that
the appropriate method for that purpose is necessarily the standard deviation.24
2.25. However, the purpose of the test was not to identify "outliers" or abnormal transactions , as
the Philippines seems to suggest .25 The BoA determined that the appropriate standard was

17 Thailand's second written submission, para. 2.54; Thailand's opening statement at the meeting of the
Panel, paras. 81-82.
18 Thailand's first written submission, para. 5.41-5.42; Thailand's second written submission, paras.
2.57-2.58.
19 Thailand's first written submission, para. 5.18-5.22; Thailand's second written submission, para. 2.59.
20 Thailand's second written submission, para. 2.59.
21 The Philippines' second written submission, paras. 199 et seq.
22 Thailand's first written submission, para. 5.45; Thailand's second written submission, para. 2.61.
23 Thailand's second written submission, paras. 2.62-2.64.
24 Thailand's second written submission, paras. 2.68-2.69.
25 Thailand's first written submission, para. 5.54; Thailand's second written submission, para. 2.66.

- B-31 -

whether PM Thailand's P&GE rates were "consistent with those of the industry group" 26, and that
such consistency should be measured by comparing PM Thailand's P&GE rates with a
representative benchmark based on the average or mean of the individual P&GE rates. 27 However,
as it would not be reasonable to compare PM Thailand's P&GE rates with an absolute and precise
figure (i.e. the mean), the BoA decided to introduce a range around the average or mean. For this
purpose, it used the standard error of the mean, which is the statistic al tool that measures how
precisely the population mean is estimated by the sample mean.28
2.26. In layman's terms, the range used by the BoA is the range within which the mean might be
expected to fluctuate. It is perfectly reasonable to use this to establish a benchmark range of what
is "normal" in an industry and to use this based on a sample, not the population as a whole. This
approach has no inherent bias, no inherent subjectivity, and is plainly not outcome -based.29 The
use of the standard error is particula rly apt when using a smaller sample group. As noted, the
standard error is an inferential tool that estimates how close the sample mean is to the population
mean. The smaller the sample group, the larger the standard error. Thus, the two standard error
approach is perfectly reasonable with a small sample group as it results in a broad range within
which the population mean could fall.30
2.27. The CVA does not prescribe a particular means of determining whether a related company's
P&GE ratios are consistent with those of an unrelated importer. There is no textual base in the CVA
requiring the identification of outlier sales or the use of the standard deviation as the appropriate
tool to conduct this assessment. In its arguments, t he Philippines is reading into the CVA
obligations that are not there.31
2.28. In any event, even assuming for the purposes of argument that the task is to establish a
"normal" range of P&GE ratios in the industry or for importers that are not related to the exporter,
it remains the case that the re is no express guidance on how this "normal" range is to be
established.32 In this context, it is clear that the Philippines' argument is simply that its suggested
approach is better or that the BoA should have used an outcome that would have been favoura ble
to the importer.33
2.29. For these reasons, the Panel should reject the Philippines' claims regarding the benchmark
range established by the BoA.
2.4 The BoA's treatment of provincial taxes was reasonable
2.30. The Philippines argue s that the Bo A's decision to limit the deduction for provincial taxes to
the amount that could be documented with receipts by PM Thailand was inconsistent with Article
5.1 of the CVA.
2.31. The Philippines dr aws an analogy to the determination of a fair comparison between the
export price and the normal value under Article 2.4 of the Anti -Dumping Agreement. Under anti-
dumping law, the burden is on the party claiming an adjustment under Article 2.4 to prove that it
is entitled to the adjustment.34
2.32. The Philippines argues that it w as unreasonable from the BoA to request PM Thailand to
support its claimed adjustment for provincial taxes. In effect, the Philippines considers that the
BoA should simply have accepted the adjustment as claimed by PM Thailand. However, when the
BoA performed a reasonableness check on the amount claimed by PM Thailand , the amount

26 Thailand's first written submission, para. 5.56; Thailand's second written submission, para. 2.66.
27 Thailand's first written submission, para. 5.57; Thailand's second written submission, para. 2.66.
28 Thailand's first written submission, para. 5.60; Thailand's second written submission, para. 2.66.
29 Thailand's opening statement at the meeting of the Panel, para. 90.
30 Thailand's opening statement at the meeting of the Panel, para. 92.
31 Thailand's second written submission, para. 2.71.
32 Thailand's second written submission, para. 2.74.
33 Thailand's second written submission, para. 2.75.
34 Thailand's first written submission, paras. 5.86-5.87; Thailand's second written submission, para.
2.81.

- B-32 -

seemed to be too high. However, it was perfectly reasonable for the BoA to require additional
substantiation of the claimed amounts from PM Thailand.35
2.33. The BoA requested PM Thailand to substantiate the amounts claimed by providing receipts.
PM Thailand provided three types of receipts: (i) receipts showing that the tax was paid by PM
Thailand; (ii) receipts showing that the tax was paid by a retailer such as a 7 -11 shop on behalf of
PM Thailand; and (iii) receipts showing that the tax was paid by an individual with nothing to
indicate that this was paid on behalf of PM Thailand. The third category of receipts did not indicate
that the payor was PM Thailand or show that the amounts wer e paid by retailers on behalf of PM
Thailand. It was therefore perfectly reasonable for the BoA to conclude that the claimed
adjustment had not been substantiated in full and to adjust the amount of the deduction
accordingly.36
2.34. Therefore, the Panel should r eject the Philippines' arguments regarding the issue of
provincial taxes and find that the BoA properly limited the adjustment to the amounts that were
actually documented by PM Thailand.
2.5 The BoA's treatment of transportation costs was reasonable
2.35. The Phili ppines argues that the BoA should have made an adjustment for transportation
costs.
2.36. As discussed above with respect to provincial taxes, the burden to prove an adjustment lies
on the party claiming the adjustment. 37 Since the BoA did not have its own acces s to the
necessary records, it was up to PM Thailand to document the claim for an adjustment for
transportation costs.38
2.37. Thailand recalls that t he Bo A did not make this adjustment because PM Thailand had
explicitly stated in a letter dated 24 August 2011 that it was willing to waive this adjustment. 39 In
response, the Philippines argued that PM Thailand had "withdrawn" its offer to "waive" an
adjustment for transportation costs and that the BoA could have made this adjustment on the
basis of an "estimate" provided by PM Thailand.
2.38. Thailand disagrees. In the letter referred to by the Philippines to support its point, PM
Thailand did not seek a deduction for any particular amount for transportation costs, even though,
in the same letter, PM Thailand provided further figures on what it considered to be the correct
P&GE ratio to be used in the calculation. 40 In fact, PM Thailand never made a substantiated claim
of an adjustment for transportation costs. As the Philippines indicates, PM Thailand referred only to
an "estimate" of transportation costs in its submissions to the BoA.41 In these circumstances, the
BoA was not required to take the burden of proof entirely on itself and to be more assiduous than
the importer itself in seeking out information that would have been in the possession of the
importer regarding this minimal amount.42
2.39. Therefore, it was perfectly reasonable of the BoA not to make any adjustment for
transportation costs.

35 Thailand's first written submission, paras. 5.88-5.92; Thailand's second written submission, paras.
2.82-2.85.
36 Thailand's second written submission, paras. 2.86-2.87.
37 Thailand's first written submission, para. 5.97; Thailand's second written submission, para. 2.98.
38 Thailand's second written submission, para. 2.94.
39 Thailand's first written submission, para. 5.98; Thailand's second written submission, para. 2.95. See
40 Thailand's second written submission, para. 2.97.
41 Thailand's second written submission, para. 2.100.
42 Thailand's second written submission, para. 2.103.

- B-33 -

2.6 The BoA did not act inconsistently with the procedures of Article 1.2(a) of the CVA
2.40. The Philippines claims that the BoA acted inconsistently with the procedural requirements of
Article 1.2(a) of the CVA by failing to communicate its grounds for considering that the relationship
influenced the price or allowing the importer a reasonable opportunity to respond.43
2.41. Thailand's view is that the procedural requirements of Article 1.2(a) do not apply mutatis
mutandis to decisions of appellate tribunals under Article 11 of the CVA. Thailand explained that
while Article 1.2(a) clearly envisages a determination of the customs value that may subsequently
be subject to an appeal under Article 11, there is nothing in either Article 1.2(a) or Article 11 to
suggest that the appellate tribun al must follow exactly the same procedures as must be used to
reach the initial valuation decision. Thailand also explained that the logic and purpose of an appeal
would also suggest that the same procedures should not apply mutatis mutandis, in that the issues
and evidence would normally be different at an appellate stage.44
2.42. Moreover, Article 11 does not prescribe the procedures to be followed in appeals of customs
valuation decisions. The drafters did not prescribe any such procedures or state that they in tended
the procedures of Article 1.2(a) to apply mutatis mutandis to appeals under Article 11. These
omissions must be given effect in the interpretation of what procedures apply to appeals under
Article 11 of the CVA.45
2.43. In response, the Philippines argues that since the BoA is part of the customs administration,
the procedural provisions of Article 1.2(a) necessarily apply to its decisions. This does not follow.
Article 1.2(a) applies to determinations of the customs value. In contrast, the BoA's task is t o
resolve a n appeal of a determination of customs value. There is no reason to assume that the
same procedures necessarily apply mutatis mutandis to both.46 Moreover, under the Philippines'
reliance on the reference to "customs administration", the procedures of Article 1.2(a) would apply
to appeals to authorities within the customs administration but not to appeals to the judicial
authorities (who are not part of the customs administration). It would not make sense for the
procedures of Article 1.2(a) to apply to appeals in one case but not the other.47
2.44. The Philippines also states that the procedures of Article 1.2(a) must apply because, in its
view, the Bo A conducted a de novo assessment of PM Thailand's customs values. 48 This term
appears to imply that the BoA went back and conducted exactly the same enquiry as a customs
officer would have done when goods were first imported. However, this is not what the Bo A did.
Instead, the Bo A used a testing methodology based on PM Thailand's P&GE rates, which the
Philippines acknowledges was not as such inappropriate.49
2.45. For these reasons, the Panel should reject the Philippines' claims regarding the procedural
aspects of Article 1.2(a).
2.7 The Philippines failed to establish that the BoA acted inconsistently with Article 11.3
of the CVA
2.46. The Philippines claims that the BoA acted inconsistently with Article 11.3 of the CVA, which
requires that "[n]otice of the decision on appeal shall be given to the appellant and the reasons for
such decision shall be provided in writing".
2.47. In effect, the Philippines' argument is that the BoA ruling did not provide the reasons for its
decision in sufficient detail. However, this is incorrect. T he BoA's decision makes clear both the
legal conclusions and key facts on which the decision is based .50 The BoA explains that its decision

43 The Philippines' first written submission, paras. 338-346.
44 Thailand's first written submission, paras. 5.119-5.124; Thailand's second written submission, paras.
2.109-2.110.
45 Thailand's first written submission, para. 5.121; Thailand's second written submission, para. 2.103.
46 Thailand's second written submission, paras. 2.111-2.112.
47 Thailand's second written submission, para. 2.113.
48 The Philippines' second written submission, para. 355.
49 Thailand's second written submission, para. 2.114.
50 Thailand's first written submission, paras. 5.106-5.107; Thailand's second written submission, para.
2.124.

- B-34 -

to reject the transaction 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, using the test methodology which is also at issue in this case. The Bo A
ruling also explains that it compared PM Thailand's P&GE rates to the "profits and general
expenses rate of the industry group of imported cigarette wholesalers in the year 2002 (9.80 -
15.08 per cent)". In its ruling, the BoA also indicated that PM Thailand's P&GE rates were not
consistent with the industry rates.51
2.48. Moreover, the twelve points the Philippines considers that the BoA should have addressed in
its decision go well beyond the level of d etail that would normally be required as "reasons".
Contrary to other WTO agreements (such as the Anti -Dumping Agreement and the SCM
Agreement), Article 11 of the CVA does not contain such detailed requirements regarding the
reasons for a decision in an appeal.52
2.49. Therefore, the Philippines' claim under Article 11.3 of the CVA should be rejected since it is
premised on an erroneous understanding of the disciplines actually imposed by this provision.
2.8 The Philippines failed to establish that the BoA acted incon sistently with Article 16
of the CVA
2.50. Finally, the Philippines claims that the Bo A ruling is inconsistent with Article 16 of the CVA
because it "fails to provide basic information that is essential to understand the reasons for its
customs valuation decision".53
2.51. However, Article 16 does not apply to decisions by appellate tribunals under Article 11.2 of
the CVA. Instead, decisions of an appellate tribunal under Article 11.2 are subject to the more
specific procedural rules of Article 11.3. More specifically, Article 16 provides that an importer, on
written request, shall have the right to an explanation from the customs administration of how the
customs value was determined. Article 11 applies to an appeal of the "determination of customs
value" referred to i n Article 16, and Article 11.3 provides that notice of the decision and the
"reasons for such decision shall be provided in writing" even without a request from the importer.
Article 11.3 therefore applies specifically to appeals decisions, and provides mo re detailed rules
governing those decisions than Article 16. Therefore, Article 16 does not apply to decisions on
appeal. To conclude otherwise would render Article 11.3 redundant, since it would essentially be a
repetition of the disciplines contained in Article 16, and would go against the principle of effective
treaty interpretation.54
2.52. In response, the Philippines uses the same argument discussed above with respect to the
procedures under Article 1.2(a): since in both provisions (Articles 11 and 16) the text refers to the
"customs administration", both obligations apply. Thailand's response is also the same: This
ignores the difference between the nature of the determinations – a determination of customs
value versus an appeal of a determination of customs value. In addition, under the Philippines'
approach, Article 16 by its terms would apply only to appeals under Article 11 before bodies such
as the BoA but not appeals before judicial authorities. This would make no sense.55
2.53. Therefore, the Philippines has failed to establish that the Bo A acted inconsistently with
Article 16 of the CVA.

51 The Philippines' first written submission, para. 452; Thailand's second written submission, para.
2.124.
52 Thailand's first written submission, paras. 5.109-5.110; Thailand's second written submission, paras.
2.125-2.129.
53 The Philippines' first written submission, para. 462.
54 Thailand's first written submission, paras. 5.114-5.115; Thailand's second written submission, paras.
2.132-2.133.
55 Thailand's second written submission, paras. 2.134.

- B-35 -

3 THE PHILIPPINES HAS FAILED TO DEMONSTRAT E THAT THE CHARGES A RE
INCONSISTENT WITH THE CVA
3.1. This section concerns criminal Charges tha t were issued by the Public Prosecutor in January
2016 and relating to 272 entries of cigarettes imported by PM Thailand. The Philippines claims that
these Charges are inconsistent with Articles 1.2(a), 1.1, 2 and 3 of the CVA.
3.2. The Philippines' claims agai nst the Charges should be dismissed ab initio as they suffer from
fundamental legal flaws: (i) Thailand's due process rights have been violated as a result of the
Philippines' use of confidential internal communications between Thailand and its legal couns el; (ii)
the Philippines is precluded from challenging the Charges in these compliance proceedings because
the Philippines challenged this same measure in the original proceedings; (iii) the Charges fall
outside the scope of these compliance proceedings be cause they are not a "measure taken to
comply" within the meaning of Article 21.5 of the DSU; (iv) the Philippines' claims against the
Charges raise issues that are not covered by the CVA; and (v) the Charges are a measure that is
not "ripe" for adjudication. In any event, the Charges are justified under Articles XX (a) and (d) of
the GATT 1994. The Philippines has also failed to make a prima facie case of inconsistency under
Article 10 of the CVA.
3.1 Thailand's due process rights have been violated
3.3. In its request for a procedural ruling, Thailand addresses a serious violation of Thailand's due
process rights in these proceedings. In its second written submission, the Philippines submitted to
the Panel as Exhibit PHL -150 materials including confidential, intern al Thai government
memorandum to which was attached lawyer -client privileged legal advice from Thailand's legal
advisors in this dispute, the Advisory Centre on WTO Law (ACWL). Thailand has not waived, and
does not waive, either expressly or impliedly, its privilege in these documents or its right to obtain
legal advice to assist it in presenting its case to the Panel in these proceedings. As explained in
more detail below, the Philippines' decision to use these materials violates Thailand's due process
rights under Article 11 of the DSU and, in addition, appears inconsistent with the Philippines'
obligation under Article 3.10 of the DSU to engage in these proceedings in good faith.56
3.4. The due process rights of parties to a dispute settlement proceeding are an extremely serious
matter. Any failure to observe these rights, especially with respect to a matter as important to the
integrity of the process as the right of a Member to defend itself, must be rectified fully wherever
possible. If the failure cannot be fully rectified, such that it continues to cast a shadow over the
fairness and objectivity of the proceedings, the proceedings have been tainted and the Panel must
decline to rule on the claims before it.57
3.5. Article 11 of the DSU requires a panel 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 ... ". Article 11 embodies the due process
inherent in WTO dispute settlement proceedings and the due process rights of the parties.58
3.6. As the Appellate Body made clear in the original proceedings in this dispute, "[d]ue process is
a fundamental principle of WTO dispute settlement". 59 The Appellate Body emphasized that "[i]n
conducting an objective assessment of a matter [under Article 11 of the DSU], 'a panel is bound to
ensure that due process is respected'". 60 The Appellate Body explained the basis for this as
follows:
Due process is intrinsically connected to notions of fairn ess, 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

56 Thailand's request for a procedural ruling regarding the violation of its due process rights, para. 1.1.
57 Thailand's request for a procedural ruling regarding the violation of its due process rights, para. 1.2.
58 Thailand's request for a procedural ruling regarding the violation of its due process rights, para. 1.5.
59 Appellate Body Report, Thailand – Cigarettes (Philippines), para. 147.
60 Appellate Body Report, Thailand – Cigarettes (Philippines), para. 147, quoting Appellate Body Report,

- B-36 -

process is thus a crucial means of guaranteeing the legitimacy of and
efficacy of a rules-based system of adjudication.61
3.7. The Appellate Body emphasized that panels must be "vigilant in the protection of due proce ss
and remain within the bounds of their duties under Article 11 of the DSU".62
3.8. The disclosure of privileged legal advice to a WTO panel, without the consent of the Member,
necessarily disadvantages that Member, violates its due process rights, and undermin es the
objectivity and fairness of the panel's analysis. A panel must be able to address a party's
arguments and defences with a clear and open mind. This cannot happen when the panel has
before it not merely the arguments put forth by a party but also som e of the legal advice received
by the party in the process of preparing for the dispute. Put another way, 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. A party should
not be forced also to have to justify its arguments in the light of the legal advice it may have
received in preparing those arguments. This would be particularly inappropriate where, in order to
explain how the context in which it received legal advice and how that advice relates to the
arguments it has made before a panel, the party would necessarily be forced to reveal further
details of what questions it asked its legal advisors and more details regarding the nature and
context for the advice provided. To force a party into having to explain the legal advice it has
obtained is, therefore, absolutely inconsistent with its due process right to be able to defend itself
meaningfully before a panel.63
3.9. Moreover, a panel's own ability to perform an objective evaluation of the case before it is
necessarily tainted by the panel having before it pri vileged legal advice obtained by a party in the
course of preparing for proceedings. No matter how great the integrity of the members of a panel
(and, indeed, of the officers of the Secretariat assisting them) the objectivity of the panel is
tainted – not of its own doing – when it is made aware of the privileged legal advice obtained by a
party as part of its preparations. In these circumstances, Thailand notes that the Rules of Conduct
for the DSU refer to situations that might "give rise to justifiable d oubts" as to the impartiality of
the covered persons". 64 Such doubts may arise, of course, through no fault of the individuals
themselves. Thailand also recalls that the "protection of due process is thus a crucial means of
guaranteeing the legitimacy of and efficacy of a rules-based system of adjudication".65 This means
that with respect to the protection of due process rights, justice must not only be done, it must be
seen to be done.66
3.10. In the Philippines' words, "PM Thailand exercised its rights under Thai law to request,
through the criminal court, evidence from the Public Prosecutor's files. PM Thailand requested a
copy of the ACWL opinion, together with a letter from the Ministry of Commerce to the Attorney
General concerning this opinion". 67 To the best o f Thailand's knowledge, in exercising its rights
under Thai law, PM Thailand did not indicate to the Thai Criminal Court that these materials would
be considered as privileged and confidential under the DSU and that PM Thailand sought these
documents with a view to providing them to the Philippines for use in WTO dispute settlement
proceedings. On 8 April 2016, the Criminal Court instructed the Public Prosecutor to provide
various documents, including those in Exhibit PHL -150, to PM Thailand for the purpose s of
assisting in its defence. On 19 April, in accordance with Thai law, the Public Prosecutor complied
with the Court's order. Thus, these documents were provided to PM Thailand, not to the
government of the Philippines.68
3.11. The Philippines states that PM T hailand provided the Philippines with these materials on 2
June 2016, on the date of the formal consultations in Bangkok in these proceedings. Thus, even

61 Appellate Body Report, Thailand – Cigarettes (Philippines), para. 147.
62 Appellate Body Report, Thailand – Cigarettes (Philippines), para. 150. See Thailand's request for a
procedural ruling regarding the violation of its due process rights, paras. 1.6-1.7.
63 Thailand's request for a procedural ruling regarding the violation of its due process rights, para. 1.14.
64 Rules of Conduct for the Understanding on Rules and Procedures Governing the Settlement of
Disputes, WT/DSB/RC/1 (11 December 1996), para. III.1.
65 Appellate Body Report, Thailand – Cigarettes (Philippines), para. 147.
66 Thailand's request for a procedural ruling regarding the violation of its due process rights, para. 1.15.
67 The Philippines' second written submission, para. 433.
68 Thailand's request for a procedural ruling regarding the violation of its due process rights, para. 1.30.

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though the documents were clearly marked as "Confidential" and were provided to PM Thailand
ostensibly as evidence for the purpose of PM Thailand's defence in the Thai criminal proceedings, it
appears clear that the documents were actually requested and obtained at the behest of the
government of the Philippines, not for the purpose of the domestic Thai pr oceedings, but to be
provided to the government of the Philippines for use in the WTO dispute settlement
proceedings.69
3.12. Once again, even though the Philippines was undoubtedly aware of the privileged and
confidential nature of these materials, the Philippi nes declined the opportunity during the
consultations in Bangkok to check, in good faith, with the relevant officials of the Thai government
whether privilege had been waived in these materials under WTO law.70
3.13. As noted above, the Philippines provided thes e materials to the Panel in its second written
submission on 12 April 2017, more than 10 months after it says it received them from PM
Thailand. During that 10 -month period, including in the preparation of its second written
submission, the Philippines nev er made any good faith effort to check with Thailand whether
privilege in these materials had been waived.71
3.14. Again, there can be no doubt whatsoever that the Philippines fully understood that these
materials would be considered as subject to lawyer -client privilege and that had they asked at any
time, Thailand would have asserted privilege in the documents.72
3.15. In presenting these materials to the Panel, without clarifying with Thailand whether it could
do so, the Philippines expressly seeks to undermine Thai land's credibility before the Panel and
place it in a disadvantageous position. Thus, the Philippines states that "Thailand and its legal
counsel accept ... ". 73 Further, the Philippines claims that the legal advice obtained by Thailand
"directly contradict s the position that Thailand now takes before the Panel". 74 It is not an
exaggeration to say that the only purpose for the Philippines' actions is to attempt to undermine
Thailand's credibility and to restrict its ability to defend itself in these proceedings.75
3.16. The Philippines was required to accord Thailand the full measure of protection of its due
process rights and not to engage in unfortunate litigation techniques that would frustrate the
objectives of the DSU, which include the due process rights inher ent in Article 11 of the DSU
instead of respecting these rights, the Philippines and/or PM Thailand sought to obtain privileged
material in a circuitous manner, without respect for Thailand's rights. In any event, regardless of
precisely how the Philippine s obtained this material, it is clear that the Philippines made no effort
to respect Thailand's rights by checking in good faith with Thailand whether privilege had been
waived.76
3.17. Thailand made clear that it considered that its due process rights had been v iolated
regardless of whether the Philippines had obtained these materials "legally". As Thailand explained
during the hearing, if materials are obtained illegally, it is beyond dispute that they cannot be
used. Issues of good faith and ethical protection of due process rights scarcely arise. Thus, a
finding that materials were obtained legally is just the beginning of the analysis of good faith and
due process, not the end.77
3.18. It is one of the oldest princi ples of law that what is legal cannot be equated with what is
proper. As long ago as the sixth century CE, the Code of Justinian provided that "non omne quod
licet honestum est" (not everything that is permitted is honourable). Thailand strongly disagrees
with an interpretation of what previous panels and the Appellate Body have said about the duties

69 Thailand's request for a procedural ruling regarding the violation of its due process rights, para. 1.31.
70 Thailand's request for a procedural ruling regarding the violation of its due process rights, para. 1.32.
71 Thailand's request for a procedural ruling regarding the violation of its due process rights, para. 1.33.
72 Thailand's request for a procedural ruling regarding the violation of its due process rights, para. 1.34.
73 The Philippines' second written submission, subheading a on page 132.
74 The Philippines' second written submission, para. 577.
75 Thailand's request for a procedural ruling regarding the violation of its due process rights, para. 1.35.
76 Thailand's request for a procedural ruling regarding the violation of its due process rights, para. 1.39.
77 Thailand's responses to the Panel questions following the meeting with the parties, p. 40.

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of panels and, indeed, parties themselves to protect the due process rights of other parties as
meaning that anything goes as long as it is legal.78
3.19. In light o f the foregoing, Thailand requested the Panel to find that due to the violation of
Thailand's due process rights under WTO law, under Article 11 of the DSU, the Panel can no longer
rule on the claims before it. In addition, the Panel should delete f rom the record the exhibit at
issue and any references to it.79 However, on 2 August 2017, the Panel informed the parties that it
decided to reject Thailand's assertion that its due process rights have been violated. Consequently,
it rejected Thailand's request that the Panel should decline to rule on the charges, and declined to
order the Philippines to withdraw Exhibit PHL -150. It further stated that it would elaborate the
reasons for its decision in its Report.80
3.20. Thailand therefore expressly requests 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. 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.
3.2 The Philippines is precluded from raising the Charges -related claims in these Article
21.5 proceedings
3.21. Thailand submits that the Philippines is precluded from pursuing the Charges -related claims
in these Article 21.5 proceedings because the Philippines already challenged this same measure in
the original dispute, with respect to which the Philippines failed to make a prima facie case.81
3.22. In this case, the Charges were brought in the context of a criminal investigation conducted
by Thailand's Department of Special Investigation (DSI) that was challenged by the Philippines in
the original panel proceedings in this dispute. The Philippines' original panel request (2008 panel
request) contained claims with respect to the DSI criminal investigation.82 The Philippines could
have sought rulings and recommendations from the panel on the consistency of the DSI
investigation with WTO law. However, it ultima tely decided not to do so and, therefore, the Panel
made no findings with respect to the criminal investigation.83
3.23. The jurisprudence confirms that the preclusion doctrine applies when the failure to make a
prima facie case is attributable to the complainant , either because of the complainant's inactivity
or inability to make a prima facie case.
3.24. The panel's decision in US – Countervailing Measures on Certain EC Products (Article 21.5 –
EC) offers a pertinent example of a claim excluded from Article 21.5 proceedings due to the
complainant's inactivity to make a prima face case in the original proceedings. 84 The decisions in
EC – Bed Linen (Article 21.5 – India)85 and US – Shrimp (Article 21.5 – Malaysia)86 offer examples
of claims excluded from Article 21.5 p roceedings due to the complainant's inability to make a
prima facie case in the original proceedings.
3.25. The Philippines finds itself in a similar situation. The failure to make a prima facie case of
violation before the panel is attributable to its own actio ns or, more precisely, to its own inactivity
to substantiate its claims under Articles X:3(a) and X:3(b) of the GATT 1994. As the Appellate
Body did in the cases described above, the Panel in this Article 21.5 dispute should exclude from
its terms of reference the Philippines' challenge against the Charges.

78 Thailand's responses to the Panel questions following the meeting with the parties, p. 40.
79 Thailand's request for a procedural ruling regarding the violation of its due process rights, paras. 1.4,
1.41, 1.44; Thailand's response to Panel question 37(b).
80 Panel's communication to the parties, 2 August 2017.
81 Thailand's preliminary ruling request of 12 January 2017, paras. 3.26 et seq.
82 The Philippines' original request for the establishment of a panel, WT/DS371/3, 6 October 2008, para.
7 (2008 panel request).
83 Thailand's preliminary ruling request of 12 January 2017, para. 1.3.
84 Panel Report, US – Countervailing Measures on Certain EC Products (Article 21.5 – EC), para. 7.74.
85 Appellate Body Report, EC – Bed Linen (Article 21.5 – India), paras. 78 – 99.
86 Appellate Body Report, US – Shrimp (Article 21.5 – Malaysia), paras. 89 – 99.

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3.26. The Philippines submits that, under WTO jurisprudence relating to Article 21.5 of the DSU,
the preclusion doctrine applies when the complainant attempts to challenge in compliance
proceedings a measure that remains unchanged following the original proceedings. 87 According to
the Philippines, this jurisprudence does not apply in the present case because the Charges are a
different measure from the DSI investigation.
3.27. The Philippines' argument that the Char ges are a distinct measure from the DSI
investigation is without merit. The Philippines itself acknowledges that the Charges are the
"culmination" of the DSI investigation.88
3.28. The Philippines' approach not only lacks support in WTO jurisprudence but also co ntradicts
common sense. The term "investigation" is defined as "[t]he action or process of investigating". 89
The term "process", in turn, is defined as "[a] thing that goes on or is carried on; a continuous
series of actions, events, or changes". 90 It follow s that an investigation is, by definition, a
continuous process that is composed of various events. 91 The stages of an investigation – the
beginning, the development, and the end – are inseparable; one cannot exist without the other. A
culmination cannot exist in the abstract; it is necessarily part of the process that preceded it. The
Philippines' efforts to divorce the culmination of the investigation from its earlier stages itself
amount to an artificial separation of the investigation's various components.
3.29. For the reasons stated above, Thailand requests the Panel to exclude from its terms of
reference the Philippines' claims with respect to the Charges. The Philippines should not be given a
second chance to revive a legal challenge that it initiated but a bandoned in the original
proceedings. This is not the function of Article 21.5 of the DSU.
3.3 The Charges are not a measure taken to comply within the meaning of Article 21.5
of the DSU
3.30. Even if the Panel finds that the preclusion principle is not applicable, the Philippines' claims
regarding the Charges would also be outside the scope of Article 21.5 because the Charges do not
have a close nexus with the DSB recommendations and rulings or with Thailand's declared
measure taken to comply (the September 2012 BoA Ruling).92
3.31. To recall, A rticle 21.5 proceedings are limited in scope. They "do not concern just any
measure"93, but only measures taken to comply with the DSB rulings and recommendations. The
Appellate Body has warned that "characterizing an act by a Member as a measure taken to comply
when that Member maintains otherwise is not something that should be done lightly by a panel".94
3.32. To determine whether the measure not declared as a measure taken to comply by the
defendant is nonetheless a " measure taken to comply", the Appellate Body has articulated a
"nexus-based test" which consists of examining whether, in terms o f timing, nature and effects,
the disputed measure is sufficiently connected with the declared measures taken to comply and
with DSB ruling and recommendations.95
3.33. In the present dispute, in terms of timing, the long time gaps between the initiation of the
DSI investigation (August 2006), the adoption by the DSB of the original panel and Appellate Body
reports (July 2011) , and the filing of the Charges (January 2016) indicate that they are too

87 The Philippines' first written submission, para. 700.
88 The Philippines Article 21.5 panel request, WT/DS371/18, 29 June 2016, para. 11. See also the
Philippines' first written submission, paras. 471 – 493.
89 Shorter Oxford English Dictionary, 6th edn (Oxford Univ. Press, 2007), Vol. 1, p. 1425.
90 Shorter Oxford English Dictionary, 6th edn (Oxford Univ. Press, 2007), Vol. 2, p. 2356.
91 The Philippines' description of the "procedural history of the Charges" illustrates perfectly that the DSI
investigation consisted of various stages, which culminated into the Charges (The Philippines' first written
submission, paras. 471 – 493).
92 Thailand's rebuttal submission on the preliminary ruling request, para. 3.9.
93 Appellate Body Report, Canada – Aircraft (Article 21.5 – Brazil), para. 36. (original emphasis) See
Thailand's rebuttal submission on the preliminary ruling request, para. 3.13.
94 Appellate Body Report, US – Softwood Lumber IV (Article 21.5 – Canada), para. 74. (emphasis
added). See Thailand's first written submission, para. 3.13.
95 Appellate Body Report, US – Softwood Lumber IV (Article 21.5 – Canada), para. 77. See Thailand's
rebuttal submission on the preliminary ruling request, paras. 3.14-3.20.

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remote.96 Moreover, the investigation that led to the Charges and the entries covered by the
Charges (July 2003 to June 2006) pre -date the DSB recommendations and rulings. 97 The entries
covered by the Charges also pre -date the entries covered by the DSB recommendations and
rulings (August 2006 to September 2007).98
3.34. In terms of nature, the Charges cover entries different from the specific entries covered by
the panel's findings : the Charges cover 272 entries from July 2003 to June 2006 , whereas the
panel's finding covered another specific set of 118 entries from August 2006 to September 2007.
To recall, in the original proceedings, the Panel rejected the Philippines' assertion that Thailand
maintained a "general rule requiring the rejection of the transaction value and the use of the
deductive method".99 Therefore, the original panel's rulings concerned only the specific set of 118
entries, not any previous or subsequent set of entries. Moreover, the Charges are a mere
accusation of wrong doing. Thus, they are criminal in nature, and they do not involve any customs
valuation de cision. Finally, they were adopted by a different government agency than the ones
responsible for implementing the panel's findings.100
3.35. In terms of the effects of the Charges, the Charges do not have any effects on the customs
valuation of the entries at issue in the original proceedings, because they do not concern the same
entries and do not entail a customs valuation determination .101 To recall, Thailand implemented
the original panel's ruling with respect to the 118 entries in its September ruling. In that ruling,
Thailand's BoA accepted PM Thailand's declared transaction value with respect to these specific
118 entries that were subject to the original panel's findings under the CVA. 102 The Philippines
acknowledges this fact.103
3.36. Thus, the examination of the ti ming, nature and effects of the Charges clearly shows that
the Charges are not sufficiently connected to the DSB recommendations and rulings and the
declared measure taken to comply.
3.37. The Philippines argues that the Charges are nonetheless sufficiently con nected to the DSB
recommendations and rulings, and to Thailand's declared measure taken to comply because they
share certain characteristics, such as the fact that they refer to the same importer and exporter,
same importing and exporting country, same products and brands.104 However, the Appellate Body
has made clear that identity in product and country coverage is insufficient to establish a close
nexus. General similarities are not sufficient to establish a close nexus.105
3.38. Moreover, the Philippines argues that the Charges involve the same type of determination
as that at issue in the original proceedings . However, the Philippines' assertion is based on a
fundamental misunderstanding of the nature of the Charges. The Charges do not form part of a
continuum with any customs valuation decision dealt with in the original proceedings. They are an
accusation of criminal actions, and not a decision or determination for the purpose of levying
customs duties. The purpose of t he Charges is to seek a finding of and punishment for alleged
customs fraud by an importer, not to levy ad valorem customs duties.106
3.39. Therefore, the Charges do not share a sufficiently close nexus with the DSB
recommendations and rulings or with Thailand's declared measure taken to comply such that it can
be considered a measure taken to comply within the meaning of Article 21.5 of the DSU.

96 Thailand's rebuttal submission on the preliminary ruling request, paras. 3.29-3.31.
97 Thailand's opening statement at the meeting of the Panel, para. 46.
98 Thailand's response to Panel questions 41(b) and 104.
100 Thailand's rebuttal submission on the preliminary ruling request, paras. 3.32-3.42.
101 Thailand's rebuttal submission on the preliminary ruling request, paras. 3.43-3.48.
102 Thailand's rebuttal submission on the preliminary ruling request, para. 3.25; Thailand's second
written submission, para. 3.61.
103 The Philippines' first written submission, paras. 61, 553; the Philippines' second written submission,
para. 467.
104 The Philippines' second written submission, para. 482.
105 Appellate Body Report, US – Zeroing (Article 21.5 - EC), para. 239. See Thailand's opening
statement at the meeting of the Panel, para. 47.
106 See Thailand's rebuttal submission on the preliminary ruling request, para.3.42; Thailand's second
written submission, para. 3.50; Thailand's opening statement at the meeting of the Panel, para. 48.

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3.4 The Philippines failed to show how the provisions of the CVA on which it relies
govern criminal proceedings
3.40. The Charge s do not constitute "customs valuation" within the meaning of the CVA and,
therefore, are not subject to the disciplines of this agreement.
3.41. The CVA's scope of application is limited to "customs valuation" conducted by the "customs
administration" of WTO M embers.107 The definition of "customs valuation" is thus fundamental for
understanding the scope of application of the CVA. Article 15.1(a) of the CVA defines the "customs
value of imported goods" to mean "the value of goods for the purposes of levying ad va lorem
duties of customs on imported goods". In Colombia – Ports Entry, the panel found it necessary to
define the term "customs valuation" to decide whether one of Colombia's measures fell within the
purview of the CVA. The panel sought guidance from Article 15.1(a) of the CVA and, on this basis,
found that "customs valuation" refers to "the process of determining the monetary worth or price
of imported goods for the purpose of levying customs duties". 108 The panel further noted that its
definition of "customs valuation" has two central aspects: (i) the value of the goods, which is used
(ii) for the purposes of levying ad valorem customs duties.109
3.42. Thailand also notes that the CVA refers repeatedly and exclusively to the work of the
"customs administration" of a Member. The CVA contains no references whatsoever to the work of
government agencies exercising police powers. While Article 17 of the CVA preserves the right of
customs administrations to satisfy themselves as to the truth or accuracy of customs declara tions,
this should not be interpreted as limiting the police power with respect to the enforcement of
customs laws. Had the drafters intended the CVA to circumscribe the exercise of the police powers
and not merely the work of customs administrations in de termining the customs value of imported
goods, they would have said so.
3.43. Given their criminal nature, the purpose of the Charges, and of the legal proceedings before
the Criminal Court, is to ascertain whether PM Thailand has engaged in any criminal conduct as
provided in Section 27 of Thailand's Customs Act. Their purpose is not to determine the customs
value of the 272 entries at issue in order to levy ad valorem customs duties. Nowhere in the
Charges does the Public Prosecutor indicate that the criminal a ccusations against PM Thailand shall
be the basis for levying ad valorem customs duties.
3.44. Thailand's position is further supported by Article XX(d) of the GATT 1994, which expressly
provides that nothing in the GATT, including Article VII governing valuation, shall prevent Members
from deviating from GATT rules with respect to measures necessary to secure compliance with
laws or regulations "relating to customs enforcement".110
3.45. Furthermore, a report by the WTO's Technical Committee on Customs Valuation express ly
states that "[n]othing in the Valuation Agreement prevents an administration from enacting tough
enforcement provisions in cases of valuation fraud".111
3.46. In response, the Philippines advances various arguments, all of which are without merit.
3.47. The Philippines argues that the Charges constitute "customs valuation" and, therefore, fall
within the scope of the CVA. The Philippines contends that the references in the Charges to King
Power's prices mean that the Public Prosecutor used these prices as alternative customs value for
the levying of customs duties.112
3.48. Thailand explained that the references to King Power's prices in the Charges, which are
contained in an Annex, serve the purpose of providing a possible benchmark to the Criminal court

107 Thailand's first written submission, para. 6.24.
108 Panel Report, Colombia – Ports of Entry, para. 7.83.
109 Panel Report, Colombia – Ports of Entry, para. 7.84.
110 Thailand's first written submission, para. 3.71
111 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/51), G/VAL/54, 16 May 2003, para. 33
112 The Philippines' opening statement at the substantive meeting, paras. 87 – 89.

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to impose a fine in the event of a conviction.113 Under Thai law, the Public Prosecutor is required to
propose the amount of the potential fine to the Criminal Court. 114 Clearly, a criminal fine is not the
same thing as a customs duty. Therefore, the references to King Power in t he Annex of the
Charges is not the basis for the accusation of a criminal offence under Section 27 of the Customs
Act.115
3.49. Thailand recalled that the purpose of the Charges is not to determine the amount of ad
valorem customs duties owed by Philip Morris; rat her, their objective is to prosecute a criminal
offence stipulated in Section 27 of Thailand's Customs Act.
3.50. The Philippines also argues that the Charges constitutes "customs valuation" because a
necessary element of the offence under Section 27 of the Cus toms Act is the under -declaration of
customs value, "which necessarily means that the Public Prosecutor determined the customs value
that it considered to be correct".116 As clarified by Thailand, the Philippines' position is incorrect, as
it ignores that customs fraud, under Section 27 of the Customs Act, requires a showing not merely
of an under -statement of the declared value, but also a showing of an intent to defraud. The
element of intent in Section 27 is known in criminal law as mens rea, which refers to a situation
where the accused individual acts with the express intent to avoid the payment of tax revenue. 117
This is a common feature of many legal systems in the world, including that of the Philippines.
Section 3602 of the Philippines' Tariff and Custo ms Code criminalizes customs fraud, which the
Philippines' Supreme Court has referred to as "technical smuggling". 118 According to the
Philippines' Supreme Court, this fraudulent practice is "[o]ften committed by means of
misclassification of the nature, qua lity or value of goods and articles, undervaluation in terms of
their price, quality or weight, and misdeclaration of their kind".119
3.51. The Philippines argues that, by using the word "price" in the Charges, the Public Prosecutor
conducted an act of customs valuation within the meaning of the CVA.120 The Philippines bases this
assertion on Section 2 of the Customs Act, which defines "price" as the customs value. The
Philippines repeats this argument when alleging that the Public Prosecutor recognized it had
engaged in customs valuation under the CVA in a letter to the DSI. The Philippines says that the
Public Prosecutor again mentioned the word "price" in a letter to the DSI in which he explained
that 18 entries were excluded from the Charges because the BoA had r esolved to "accept the
prices".121
3.52. The Philippines' argument is based on an incorrect understanding of Thailand's Customs Act.
The Philippines incorrectly assumes that the term "price" has the same meaning throughout the
entire Customs Act. This is not the c ase. The preamble of Section 2 of the Customs Act states that
the definitions set out in Section 2 may have different meanings, which can be discerned only by
looking at the specific provision of the Customs Act that is being applied. In this case, Section 103
of Thailand's Customs Act is the relevant provision to determine the meaning of the word "price"
as used in the Charges. The text of Section 103 makes clear that "price" under this provision has a
different meaning from "price" in Section 2. This triggers the application of the preamble of Section
2 mentioned above, because Section 103 stipulates a different rule from that of Section 2, such
that the definitions of Section 2 do not apply.122
3.53. In response to Thailand's arguments that the scope of the CVA is also limited to acts of the
"customs administration", which does not include acts of the Public Prosecutor, the Philippines'
argumentation changed as the proceedings advanced, reaching a point where the Philippines
contradicted its own arguments and actually supported Thailand's position.

113 Thailand's first written submission, para. 6.40.
114 Thailand's response to Panel question 99 (d).
115 Thailand's response to Panel question 32 (a).
116 The Philippines' second written submission, para. 600.
117 Thailand's response to Panel question 32.
118 Thailand's opening statement at the substantive meeting, para. 17 (referring to the Philippines' Tariff
and Customs Code, Section 3602, Exhibit THA-43).
119 Thailand's opening statement at the substantive meeting, para. 17 (referring to Republic of the
Philippines, Supreme Court, Bureau of Customs Vs. The Honorable Agnes Vst Devanadera, G.R. No. 193253, 8
September 2015, page 22, Exhibit THA-44).
120 The Philippines' second written submission, paras. 590 - 602.
121 he Philippines' second written submission, para. 616 and Exhibit PHL-113-B.
122 Thailand's second written submission, paras. 3.115 – 3.121.

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3.54. The Philippines first proposed a "functional" interpretation of the term "customs
administration", whereby the CVA should apply to acts of any governmental entity, regardless of
its classification under municipal law, provided that this entity performs customs valuation
functions.123 This "functional" interpretation cannot apply to the CVA's procedural obligations,
because entities outside the customs administration stricto sensu, such as the Public Prosecutor or
the Supreme Court, do not follow the procedures of the CVA when investigating and prosecuting
acts of customs fraud. 124 Realizing the flaw of its original proposition, the Philippines changed its
position: it maintained the "functional" interpretation of "customs a dministration" but only for the
CVA's substantive obligations, and proposed an "institutional" interpretation of "customs
administration" for the CVA's procedural obligations. 125 Under an "institutional" interpretation, the
term "customs administration would encompass only those government entities whose institutional
and structural features determine whether they are part of the customs administration.
3.55. This bifurcated interpretation of "customs administration" also fails because it lacks support
in the text of the CVA. The term "customs administration" is used throughout the CVA without any
indication that its scope could vary depending on the type of obligation. 126 A close reading of the
CVA shows that, where the drafters wished to distinguish different types of authorities for different
obligations, they did so expressly. Whereas most of the substantive and procedural obligations
refer to "customs administration", certain CVA provi sions, such as Article 10, refer generally to
"authorities". This indicates that the CVA negotiators, aware of the different types of authorities
that could be subject to CVA disciplines, decided that most substantive and procedural obligations
of the CVA would apply only to the "customs administration".
3.56. Thailand submits that the term "customs administration" must have the same meaning
throughout the CVA, regardless of the type of obligation. In Thailand's view, when interpreting the
term "customs administration", the only reasonable approach is an institu tional interpretation that
applies to the CVA as a whole, i.e. the CVA's substantive and procedural obligations.
3.57. The Philippines also cites the Appellate Body findings in US – 1916 Act as support for its
argument that "[t]he separate 'intent' element of t he Charges does not detract from" the
conclusion that the Charges involve customs valuation for purposes of the CVA. 127 The Philippines'
reference to that dispute is inappropriate. In US – 1916 Act, the Appellate Body found that the US
measure violated Article 18.1 of the Anti -Dumping Agreement, a provision that limits the types of
measures Members may take against the act of "dumping" to those expressly stated in the Anti -
Dumping Agreement. In contrast, no similar provision exists in the CVA that would preve nt
Members from applying criminal penalties to situations involving a false declaration of the value of
imported goods. The silence of the CVA in this regard confirms Thailand's position that WTO
Members are free to impose criminal penalties on customs fraud.128
3.58. In summary, the Philippines has failed to demonstrate that the issues addressed in its
claims against the Charges are covered by the CVA as "customs valuation" conducted by
Thailand's "customs administration".
3.5 The Philippines failed to rebut Thailand' s argument that the Charges are a matter
not "ripe" for adjudication
3.59. In addition, Thailand considers that the Panel lacks a basis to rule on the Philippines' claims
regarding the Criminal Charges because the matter is not "ripe" for adjudication in WTO dis pute
settlement proceedings. Put simply, where the Charges are pending before the Thai Criminal Court
and that Court 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 matt er at this point. The Philippines' claims

123 The Philippines' second written submission, paras. 553 and 572.
124 Thailand's second written submission, paras. 3.91-3.92.
125 The Philippines' response to Panel question 92, para 179; See also Philippines' response to Panel
question 102, para 235.
126 Thailand's comments on the Philippines response to Panel question 92 (a) and (b), p. 22.
127 The Philippines' response to Panel question 97, para. 209. See also the Philippines' oral statement at
the substantive meeting, para. 81.
128 Thailand's comments on the Philippines response to Panel question 97 (c), p. 27.

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represent an unprecedented attempt to get a WTO panel to interfere in pending domestic criminal
proceedings.129
3.60. Thailand explained that t he doctrine of ripeness is present in WTO law under different
provisions. First, it finds support in a panel's duty to make an objective assessment of the case
before it under Article 11 of the DSU. A panel cannot make an objective assessment of a matter
within the meaning of that provision if that matter is not ripe for adjudication . This principle is
particularly valid in the context of ongoing court proceedings, where the decision of the court
remains uncertain, and many unknown facts, such as evidence that will be presented, may still
influence that decision. 130 In US – Shrimp (21.5 – Malaysia), the Appellate Body held that the
panel was right not to examine a US Court ruling that was pending before the US Court of Appeals,
because it would have engaged in "speculation" contrary to its duty under Article 11.131 Moreover,
Article 11 of the DSU dictates that panels may not engage in de novo reviews. This implies that a
panel may only examine the matter where a decision has been reached. Otherwise, the panel
would act as an initial trier of the facts and would engage in a de novo review contrary to article
11 of the DSU.132
3.61. Second, the doctrine of ripeness also finds support in Articles 3.4 and 3.7 of the DSU. These
provisions make clear that the objective of the dispute settlement process is to provide a positive
and effective resolution to disputes. In the case of ongoing court proceedings, where the court has
not reached a decision and the outcome is still uncertain, a panel cannot provide a "satisfactory
settlement" or a "positive solution" to the dispute within the mea ning of Articles 3.4 and 3.7 of the
DSU.133
3.62. Third, the doctrine of ripeness finds support in a panel's obligation under Article 19.1 of the
DSU to recommend that the Member concerned bring its measure into conformity with the
agreement with which the measure is inconsistent. In order for a panel to be able to make such
recommendation, there has to be a measure that is capable of being brought into conformity. If a
matter is not "ripe", a panel will be unable to recommend that the Member brings its measure int o
conformity with its WTO obligations.134
3.63. Fourth, professor William Davey situated the doctrine of ripeness in WTO dispute settlement
proceedings in the distinction between mandatory and discretionary measures. Under that
distinction, when a measure, such as a statute, provides discretion in its application to an agency
of the government, a WTO panel can make a finding of WTO -inconsistency only when the statute
has actually been applied in a manner that is WTO-inconsistent.
3.64. Fifth, in the anti -dumping context, Article 17.4 of the Anti -Dumping Agreement provides
that a Member may only challenge a measure when it is ripe for adjudication, i.e. when a
provisional or a definitive measure is imposed. A Member may not challenge a decision to initiate
an anti-dumping investigation until such provisional or definitive measure has been imposed. 135 In
the context of subsidies, a challenge to an actionable subsidy under Article 5 of the SCM
Agreement is not "ripe" until sufficient time has passed – three years under Article 6.3(d) – to
enable a panel to determine whether the measure has had adverse effects. 136 These are examples
of how the doctrine of ripeness is reflected in WTO law.

129 Thailand's first written submission, para. 6.48.
130 Thailand's first written submission, paras. 6.57-6.60; Thailand's second written submission, para.
3.138.
131 Appellate Body Report, US – Shrimp (21.5 – Malaysia), para. 95.
132 Thailand's first written submission, para. 6.61; Thailand's second written submission, para. 3.140.
133 Thailand's first written submission, paras. 6.62-6.65; Thailand's second written submission, para.
3.141.
134 Thailand's first written submission, paras. 6.66-6.67; Thailand's second written submission, para.
3.143.
135 Thailand's first written submission, para. 6.69; Thailand's second written submission, paras. 3.147,
3.164; Thailand's comment on the Philippines' response to the Panel question 102.
136 Thailand's second written submission, paras. 3.145, 3.164; Thailand's comment on the Philippines'
response to the Panel question 102.

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3.65. Sixth, the doctrine of ripeness is also reflected in US law, Swiss law, and in the context of
the International Court of Justice.137
3.66. Finally, as the Panel rightly pointed out, Articles 1 through 7 of the CVA apply only to
measures that constitute a customs valuation "determination". A "determination" is defined as
"[t]he settlement of a suit or contr oversy by the authoritative decision of a judge or arbiter; a
settlement or decision so made, an authoritative opinion". 138 In US – Section 301 Trade Act , the
panel, in assessing a claim under Article 23.2(a) of the DSU, found that the term "determination"
implies "a high degree of firmness or immutability, i.e. a more or less final decision". 139 Article 11
of the CVA further confirms this view. It provides that an importer shall have a right to appeal a
customs valuation determination. Therefore, only measures that constitute "more or less final
decision[s]" may be subject to an appeal.140
3.67. In the present case, it is beyond dispute that the Charges mark the beginning of the
Criminal Court proceedings. They are part of a process which started in 2006 with the DSI
investigation, "culminated" in the Charges being filed by the Public Prosecutor in January 2016,
and led to current examination by the Thai Criminal Court. As part of this process, hearings will
take place and a considerable amount of evidence will be presented before the Court. The Court is
expected to render its decision around mid-2018 at the earliest.141
3.68. It is clear from that description that the Charges do not constitute an evidence of guilt, and
do not reflect all the evidence that the Public Prosecutor will present or the evidence supporting
the defendant. Much less do they amount to a decision by the C ourt whether the accused is guilty,
or whether a fine will be imposed.142
3.69. Moreover, the Charges do not meet the threshold of a "determination" covered by the CVA.
They do not amount to a "more or less final decision" that has "a high degree of firmness and
immutability". They are a mere accusation of wrong -doing. There will only be something akin to a
"more or less final decision" once the Court renders its decision based on all the evidence it still
needs to assess. 143 Article 11 of the CVA also supports this position, because only "more or less
final decision[s]" may be subject to an appeal under that provision. If, as the Philippines asserts,
the Charges amount to a customs valuation "determination", then Thai authorities would also have
to provide a right t o appeal the Charges under Article 11. This makes no sense and would be
impracticable.144
3.70. In light of these features, the Panel cannot make "an objective assessment of the matter …
including an objective assessment of the facts of the case" within the meanin g of Article 11 of the
DSU. It would be engaging in extensive de novo review or making itself the initial trier of facts in a
manner that would exceed its mandate under Article 11. It would also not be providing a positive
and effective solution to this dispute in accordance with Articles 3.4 and 3.7 of the DSU by making
a ruling on ongoing Court proceedings that are far from being over. The Panel can simply not pre -
empt the outcome of the Criminal Court proceedings.145
3.71. Moreover, there is no precedent for a W TO panel to put itself in the place of a domestic
tribunal and make a determination that is within the jurisdiction of that tribunal before the tribunal
itself has a chance to make its ruling. The Philippines has provided no basis in WTO law for a WTO

137 Thailand's first written submission, paras. 6.51-6.54; Thailand's second written submission, para.
3.135.
138 Shorter Oxford English Dictionary, 6th edn (Oxford University Press, 2007), Vol. 1, p.663. See
Thailand's response to Panel question 38(a).
139 Panel Report, US – Section 301 Trade Act, fn 657. This approach was endorsed by the panel in EC –
Commercial Vessels, para. 7.212, and the Appellate Body in Canada/US – Continued Suspension, paras. 396.
See Thailand's response to Panel question 38(b).
140 Thailand's response to Panel question 38(b).
141 Thailand's first written submission, paras. 6.73-6.77; Thailand's second written submission, paras.
3.153-3.156.
142 Thailand's second written submission, para. 3.155.
143 Thailand's response to Panel question 38(b).
144 Thailand's comment on the Philippines' response to the Panel question 102.
145 Thailand's first written submission, para. 6.79; Thailand's second written submission, para. 3.156.

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panel to make such a pre -emptive ruling before a domestic tribunal has had a chance to make its
ruling.146
3.72. In light in these facts, the Panel simply has no basis to assess the WTO -consistency of the
Charges before all the evidence is presented, and before the C ourt makes a decision based on this
evidence.
3.6 The Philippines failed to rebut Thailand's argument that the Charges are justified
under Article XX(d) and (a) of the GATT 1994
3.73. Thailand considers that the Panel should not reach the issue of Thailand's Articl e XX defence
in this case. This is so because: (i) the Charges are not within the scope of these Article 21.5
proceedings, (ii) the claims advanced by the Philippines under the CVA do not govern or apply to
criminal investigations and prosecutions of customs fraud, and (iii) the charges are not "ripe" for
adjudication.147
3.74. If, however, the Panel were to find otherwise, Thailand submits that the violations of
Articles 1.1, 1.2(a), 2, and 3 of the CVA claimed by the Philippines are nonetheless justified under
Articles XX(d) and XX(a) of the GATT 1994.148
3.6.1 The defences under Article XX of the GATT 1994 are available to justify a
departure from the CVA rules
3.75. In China – Rare Earths, the Appellate Body held that "in some instances … exceptions in one
covered agreement, such as Article XX of the GATT 1994, may be invoked to justify a breach of an
obligation set forth elsewhere than in the GATT 1994 ".149 The Appellate Body in China –
Publications and Audiovisual Products held that Article XX is available where there is a clear textual
link between the provisions under which the claims are made and the GATT 1994, in particular
Article XX.150
3.76. Thailand submits that the Article XX defences may be invoked to justify a departure from
the CVA rules for several reasons. First, t he title of the CVA clearly indicates that the CVA
implements the rules contained in Article VII of the GATT 1994. 151 The preamble of the CVA
further recognizes the desire to "elaborate rules for the[] applicat ion of [the provisions of Article
VII of the GATT 1994]". It is undisputed that Article XX of the GATT applies to all the obligations in
the GATT 1994, including Article VII. 152 Since Article XX is available to Article VII, it is also
available to the agreem ent that implements and elaborates Article VII, i.e. the CVA. This flows
from the well-established principle that treaty provisions must be interpreted harmoniously and is
the only logical conclusion to be drawn from the structure of the relevant agreement s.153 In
response to a question by the Panel, the Philippines argues that the CVA is lex specialis as
compared to Article VII of the GATT 1994, because it creates additional specific obligations.
Therefore, it argues that it cannot be assumed that the except ions that apply to Article VII
automatically apply to the CVA as well. 154 However, there is no conflict between Article VII of the
GATT 1994 and the CVA, such that the principle of lex specialis would apply. In fact, since the CVA

146 Thailand's opening statement at the meeting of the Panel, para. 28.
147 Thailand's second written submission, paras. 3.186-3.188.
148 Thailand's first written submission, para. 6.90; Thailand's opening statement at the meeting of the
Panel, para. 51.
149 Appellate Body Report, China – Rare Earths, para. 5.56. See Thailand's second written submission,
para. 3.196.
150 Appellate Body Report, China – Publications and Audiovisual Products, paras. 229-233. See
Thailand's first written submission para. 6.92; Thailand's second written submission, para. 3.195.
151 Thailand's first written submission, para. 6.91; Thailand's second written submission, paras. 3.207-
3.210.
152 Appellate Body Report, US – Gasoline, p. 24. See Thailand's second written submission, para. 3.208;
Thailand's response to Panel question 110(a).
153 Appellate Body Report, Argentina – Footwear, para. 81. See
154 The Philippines' response to Panel question 110(a).

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implements and elaborates A rticle VII, it is clear that the former is a development of the latter,
and that the Article XX defences apply to both.155
3.77. Second, the preamble of the CVA also provides a textual basis for the applicability of Article
XX of the GATT 1994 to the CVA. Recital 2 of the preamble mentions the desire to "further the
objectives of the GATT 1994". Thus, there is another explicit mention in the preamble of the link
between the CVA and the GATT 1994. The objectives of the GATT 1994 include trade liberalization
but also allow some regulatory space for Members. In that respect, the Appellate Body in China –
Raw Materials explained that "[w] e understand the WTO Agreement, as a whole, to reflect the
balance struck by WTO Members between trade and non-trade-related concerns".156
3.78. Third, the text of Article XX itself supports the position that it is available to the CVA,
because Article XX(d) provides explicitly that Members may adopt measures necessary to secure
compliance with their laws "relating to customs enforcement". 157 Therefore, Article XX(d) can be
used to justify measures otherwise WTO -inconsistent that are necessary to enforce a Member's
customs laws.
3.6.2 The Charges are justified under Articles XX(d) and XX(a)
3.79. For a measure to be provisionally justified under Article XX(d) or Article XX(a) of the GATT
1994, a panel must first examine whether the measure is designed and necessary "to secure
compliance with laws or regulations which are not inconsistent with the p rovisions of this
Agreement" or " to protect public morals", respectively. Then , under the chapeau of Article XX, a
panel must address whether the application of the measure does not unjustifiably or arbitrarily
discriminate among countries where the same c onditions prevail or otherwise lead to a disguised
restriction on international trade.158
3.80. With respect to Article XX(d) , Thailand submits that the Charges are "designed" to secure
compliance with Section 27 of the Thai Customs Act, which criminalizes the avo idance of the
payment of taxes or duties with the intention to defraud the Thai government and in turn enforces
the obligation to pay customs duties contained in Section 10bis . The objective of fighting
fraudulent tax and duty evasion through Section 27 is of utmost importance to Thailand. The
relationship between the Charges and Section 27 can be seen by the explicit reference to Section
27 in the legal basis for the Charges, and by the fact that the Charges are the only way to enforce
Section 27, as they lead to an examination of the matter by the Court. 159 Moreover, the Charges
are "necessary" to secure compliance with that provision, because the Charges - and the
calculation of the potential fine by the Public Prosecutor - make an essential contribution to the
enforcement of Section 27. Any departure from the CVA rules was necessary to secure compliance
with a different set of rules that govern the prosecution of customs fraud. Specifically, Section 103
of the Thai Customs Act provides the rule for calculat ing a fine. There is no legal reason why the
police authorities should have to go through exactly the same process outlined in the CVA for
customs administrations in order to enforce laws against customs fraud. This would seriously
undermine the police pow ers of a government to prosecute and punish customs fraud in an
expedited and efficient manner. Lastly, since the Charges do not contain any import restriction or
import prohibition, nothing indicates that they are trade-restrictive.160
3.81. With respect to Arti cle XX(a), Thailand submits that the Charges are "designed" to protect
public morals because by prosecuting alleged customs fraud perpetrators, they are closely related
to the fight against duty and tax evasion, which in turn contributes to the fight against smuggling

155 Thailand's response to Panel question 110(a); Thailand's comment on the Philippines' response to
Panel question 110(a).
156 Appellate Body Report, China – Raw Materials, para. 306; Thailand's response to Panel question
110(a).
157 Thailand's first written submission para. 6.91; Thailand's second written submission, para. 3.212;
Thailand's opening statement at the meeting of the Panel, para. 59; Thailand's response to Panel question
110(a).
158 Thailand's first written submission paras. 6.95-6.102, 6.113-6.119, 6.125-6.128.
159 Thailand's first written submission para. 6.103-6.108; Thailand's second written submission, para.
3.220-3.229.
160 Thailand's first written submission, paras. 6.109-6.110; Thailand's second written submission, paras.
3.214-3.215, 3.225, 3.232-3.233.

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and contraband. This is an important policy objective that represents a real concern in Thailand. 161
Moreover, the Charges are "necessary" to protect public morals. By investigating, prosecuting, and
punishing perpetrators of customs fraud, the Charges significantly contribute to the fight against
duty or tax evasion, which in turn contributes to the fight against smuggling and contraba nd. Any
departure from the rules for customs va luation prescribed in the CVA was necessary in order to
prosecute perpetrators of customs fraud efficiently following a different set of rules.162
3.82. In response, the Philippines argues that Thailand cannot ensure the collection of the correct
amount of the customs duties with a WTO -inconsistent customs valuation. 163 However, this
assertion is based on a wrong understanding of the Charges. The Charges are not meant to collect
the correct amount of the customs duties. Rather, the purpose of the Charges is to impose a
punishment on offenders and to prevent or discourage criminal conduct. The fact that if the Panel
reaches Article XX, it would have found that something in the Charges amounts to a customs
valuation determi nation, does not change the fact that the Charges are criminal in nature. 164
Moreover, the Philippines cannot rely on same finding of inconsistency that the Panel would have
found before reaching Article XX in order to argue that the Charges are not necessar y to secure
compliance with Thai laws or to protect public morals.165
3.83. Notably, the Philippines did not present any less trade -restrictive alternatives to Thailand's
measure.166 This is an important part of the panel's assessment of the necessity of the measure .
In the absence of any less trade -restrictive alternatives presented by the Philippines, Thailand
maintains that no such alternatives to the Charges exist to fulfil the objectives pursued by the
measure, and that the Charges are necessary to secure compli ance with Section 27 and to protect
public morals.167
3.84. With respect to the requirements u nder the chapeau of Article XX, nothing suggests that
Thailand's enforcement of its customs and criminal laws discriminates against imports of the
Philippines compared to imports from other Members in which the same conditions prevail. A
criminal allegation necessarily applies to an individual importer and cannot, as such, be considered
to be discriminatory.168 Similarly, nothing indicates that the Charges are a disguised restriction on
international trade. The Philippines argues that the fact that a fine may be imposed threatens the
very survival of PM Thailand, and the Charges may therefore remove the largest source of import
competition from the Thai market. 169 However, that fine may or may not be imposed, and the
amount of the fine is still to be determined by the Court after hearing and examining all the
evidence. Therefore, it does not make any sense to argue that the Charges, as they stand today,
are applied as a disguised restriction on international trade.170
3.85. Therefore, the Charges are designed and necessary to secure compliance with Thai customs
laws and to protect public morals, within the meaning of Articles XX(d) and XX(a) of the GATT
1994.
3.7 The Philippines failed to demonstrate that the Charges are inconsistent with Article
10 of the CVA
3.86. The Philippines claims that the Office of the Attorney General disclosed PM Thailand's
declared transaction values that appeared in press articles dated 19 January 2016. 171 However,

161 Thailand's first written submission paras. 6.120-6.121; Thailand's second written submission, para.
3.239.
162 Thailand's first written submission para. 6.123; Thailand's second written submission, para.
3.239.Thailand's opening statement at the meeting of the Panel, para. 64.
163 The Philippines' second written submission, paras. 681-682.
164 Thailand's second written submission, paras. 3.234, 3.242; Thailand's response to Panel question
109.
165 Thailand's second written submission, paras. 3.216-3.3.219; Thailand's response to Panel question
109.
166 The Philippines' second written submission, para. 704.
167 Thailand's second written submission, paras. 3.250-3.253.
168 Thailand's first written submission para. 6.129.
169 The Philippines' first written submission, paras. 712-173.
170 Thailand's opening statement at the meeting of the Panel, para. 67; Thailand's second written
submission, paras. 3.258-3.259
171 The Philippines' first written submission, paras. 682-687.

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the Philippines failed to make a prima facie case that the Thai authorities disclosed the confidential
information at issue inconsistently with Article 10 of the CVA.
3.87. By merely drawing inferences that the Office of the Attorney General disclosed the relevan t
information and by not providing any evidence to support this very serious accusation, the
Philippines fails to meet its burden of proof. In the context of its Article 10 claim, the only two
exhibits provided by the Philippines are press articles from Ja nuary 2016 that mention PM
Thailand's declared transaction values. Neither of them identifies the source of this information.172
3.88. In contrast, in the original proceedings, where the Philippines succeeded in presenting a
similar claim, several press articles e xplicitly identified the source of the information as a Thai
governmental agency. No similar circumstances exist in the current proceedings with respect to
the disclosure at issue that took place in 2016.173
3.89. Thailand maintains that the only disclosure of the relevant information that took place is
when the Public Prosecutor filed the Charges with the Criminal Court. In that context, the Public
Prosecutor provided the relevant information to the Court. The Court then provided PM Thailand a
copy of the Charges on the day they were issued.174
3.90. In any event, the Philippines is incorrect that the only inference to draw is that Thai
governmental agencies disclosed the information at issue. While Thailand cannot prove a negative
– that the Office of the Attorney General did not disclose the relevant information – this does not
mean that the complainant has made the necessary prima facie showing.175
3.91. To the contrary, there are many other possible sources of the information. As Thailand has
explained, the values at issue a re the same as those that were found to have been improperly
disclosed in the original proceedings.176 Since the values were in the public domain, any journalist
could have search ed on the internet for the previously disclosed transaction values, and could
have used those values, assuming that they did not change and without paying much attention to
which entries were at issue .177 Moreover, the journalists may have spoken to some of the
individuals outside the Thai government that were familiar either with the current or original
proceedings. Finally, the journalists could have discussed these values with Philip Morris itself on
the basis – or even an assumption – that they were discussing the previously-disclosed values.178
3.92. In these circumstances, the Philippines' failure to provide any evidence that there was a
fresh disclosure by the Thai government means that the Philippines has failed to establish a prima
facie case. For these reasons, the Panel should reject the Philippines' claim under Article 10 of the
CVA.
4 THE PHILIPPINES HAS FAILED TO DEMONSTRAT E THAT THAILAND'S RU LES FOR
DETERMINING THE VAT BASE ARE INCONSISTENT WITH THE GATT 1994
4.1. The Philippines claims that Thailand's rules concerning the notification of the VAT base are
inconsistent with Articles III:4, X:1, and X:3(a) of the GATT 1994. For the reasons detailed below,
the Philippines' claims in this regard should be dismissed by the Panel.

172 Thailand's first written submission, para. 6.85; Thailand's second written submission, paras. 3.177-
3.180; Thailand's opening statement at the meeting of the Panel, para. 71.
173 Thailand's second written submission, paras. 3.181-3.182; Thailand's opening statement at the
174 Thailand's first written submission, para. 6.87; Thailand's second written submission, para. 3.184;
Thailand's opening statement at the meeting of the Panel, para. 73.
175 Thailand's opening statement at the meeting of the Panel, para. 74.
176 Thailand's second written submission, para. 3.183; Thailand's opening statement at the meeting of
the Panel, para. 75; Thailand's comments on the Philippines' response to Panel question 111.
177 Thailand's comments on the Philippines' response to Panel question 111.
178 Thailand's opening statement at the meeting of the Panel, para. 75.

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4.1 The Philippines failed to demonstrate that Thailand's VAT rules are inconsistent
with the national treatment obligation of Article III:4 of the GATT 1994
4.2. The Philippines' claims concern Thailand's requirement, contained in Notification 187 and
Order Por. 145-2555, that cigarette importers notify as their VAT base the average market price of
their cigarettes on the date of the notification. The price notified by cigarette importers then
becomes the VAT base until further notice.
4.3. The Philippines recognizes that Thailand's VAT rules impose "formally identical notification
requirements in respect of imported cigarettes sold by importers and domestic cigarettes sold by
TTM".179 However, according to the Philippines, these formally identical notification requirements
result in less favourable treatment for imported cigarettes because of the different situations of
cigarette importers and TTM.180 Specifically, the Philippines argues that cigarette importers cannot
fix the prices at which their buyers must sell; rather, they can only recommend retail prices, which
means that importers run the risk of being held liable for non -compliance with Thai law if the
actual prices are not the same as the recommended prices. 181 In contrast, the Philippines argues,
TTM can set downstream prices because it is exempted from Thai competition laws and can
therefore accurately notify to the Revenue Depar tment the average actual market price of its
cigarettes.182 The Philippines submits, therefore, that importers face an "additional legal jeopardy"
not faced by TTM.183
4.4. The Philippines claims must fail as they are premised on inaccurate descriptions of the facts
and of Thailand's legal framework. A correct understanding of these points indicates that
Thailand's VAT system does not give rise to less favourable treatment to imported cigarettes.
Thailand addresses these issues in turn.
4.5. First, it is incorrect for the Philippines to assert that Philip Morris does not know the retail
price of its own cigarettes because cigarette importers can only recommend retail prices but
cannot fix them. Thailand submits that, given the arrangements between retailers and cigarette
producers, the recommended prices function, in practice, as the prices followed by retailers. 184 In
one of its questions, the Panel asked the Philippines directly whe ther there have been cases where
the recommended retail price was less than the actual retail price. Unsurprisingly, the Philippines
was unable to identify one single instance in which retailers did not follow the recommended
price.185 This alone is sufficie nt to dismiss the Philippines' claim under Article III:4 of the GATT
1994, as it demonstrates that the alleged "legal jeopardy" does not exist.
4.6. Second, the Philippines incorrectly asserts that the agreements between manufacturers and
retailers concerning the prices charged by retailers are a violation of Thai competition law. This
practice, also known as "vertical price fixing", is not a per se violation of Thai competition law.
Under Thai competition law, the legality of vertical price fixing depends on th e specific
circumstances of each case.186
4.7. Third, Thailand's competition law was recently modified to introduce multiple changes, among
which is the elimination of TTM's automatic exemption from competition legislation. Therefore,
even if vertical price fixi ng were illegal under Thai competition law, the fact that TTM, the Thai
national cigarette producer, can also be subject to penalties under the competition law further
undermines the Philippines' claim that, unlike cigarette importers, TTM can comply easil y with the
VAT notification requirements because it can legally fix retail prices.
4.8. Fourth, the Philippines did not correctly substantiate its factual assertion that the
determination of the average market price to be notified requires a market study that takes 4 -6
weeks to prepare. This means, according to the Philippines, that cigarette importers do not have

179 The Philippines' first written submission, para. 802.
180 The Philippines' first written submission, para. 804.
181 The Philippines' first written submission, para. 813.
182 The Philippines' first written submission, para. 804.
183 The Philippines' first written submission, para. 813.
184 Thailand's second written submission, para. 4.16.
185 The Philippines' response to Panel question 66.
186 Thailand's response to Panel question 113. "Vertical price fixing" is different from "horizontal price
fixing", which is a per se violation of Thai competition law. Vertical price fixing involves requiring downstream
sellers (rather than competitors) to sell at a determined price.

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enough time to know the price that must be notified in June of each year. Although the Philippines
submitted a document that purports to substantiate this point, it did so at the express request of
the Panel as part of its answers to the second set of questions by the Panel. 187 Thailand is of the
view that the Panel should not admit this evidence because, as part of the Philippines' prima facie
case, it should have been submitted much earlier in the proceedings.
4.9. For these reasons, Thailand submits that the Philippines has failed to make a prima facie case
of inconsistency under Article III:4 of the GATT 1994 concerning Thailand's VAT notification
requirements.
4.2 The Philippines failed to demonstrate that Thailand acts inconsistently with A rticle
X:1 of the GATT 1994 by not publishing a measure of general application
4.10. The Philippines claims that Thailand's Revenue Department has an official practice of
permitting cigarette importers to notify their recommended retail prices as a way of comply ing
with the obligation to notify the actual average price. In the Philippines' view, Thailand violates
Article X:1 of the GATT 1994 because this practice is not published.
4.11. The Philippines' claims must be dismissed because they refer to an alleged practice of
Thailand's Revenue Department that does not exist. 188 Given that the publication obligation under
Article X:1 of the GATT 1994 applies only to measures of general application, the Philippines'
claims must fail as there is no measure of general application as described by the Philippines.
4.12. Philip Morris has chosen to comply with the obligation to notify the average retail price by
notifying its recommended retail selling price ("RRSP"). This was Philip Morris' chosen means of
compliance given that, in pract ice, the RRSPs functions as the actual retail selling price. The fact
that Philip Morris has chosen to comply with Thailand's VAT notification requirements in this
manner does not mean that this amounts to a rule of general application maintained by the
government.
4.13. The Philippines, however, believes that, under Article X:1 of the GATT 1994, WTO Members
must notify not only the regulatory outcome required by their trade measures, but also the
different methods that private operators may use to achieve such outcome. In particular, the
Philippines believes that the method chosen by PM Thailand to calculate the average retail selling
price should be enshrined in Thai legislation as a rule of general and prospective application. The
Philippines is incorrect. Tha t importers can choose method "A", method "B", or method "C" to
comply with the requirement of Order Por. 145 -2555 does not mean that any of these methods is,
or should be, an express requirement under Thai law.189
4.14. The purpose of Article X:1 of the GATT 1994 is to ensure that governments publish
measures of general application that exist. Article X:1 cannot be invoked to request governments
to create new substantive rules. In essence, this is what the Philippines requests. Under the guise
of its claim under Article X:1, the Philippines wants Thailand to develop tailor -made regulations so
that Thailand's laws codify exactly PM Thailand's business practices.190
4.3 The Philippines has failed to demonstrate that Thailand acts inconsistently with
Article X:3(a) of the GATT 1994
4.15. The Philippines argues 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" within the meaning of Article X:3(a) of the
GATT 1994.191
4.16. As is the case with its other claims against Thailand's VAT rules, the Philippines' claim under
Article X:3(a) is based on crucial misrepresentations of Thai law.

187 Thailand's comments on the Philippines' response to Panel question 115 (a).
188 Thailand's first written submission, paras. 7.75 – 7.79.
189 Thailand's second written submission, para. 4.27.
190 Thailand's response to Panel question, 61 (b).
191 The Philippines' first written submission, para. 828.

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4.17. First, the notification requirements at issue are substantive elements of Thai VAT rules,
rather than the "administration" of such rules. 192 The scope of Article X:3(a) is limited to the
"administration" of laws and regulations. Article X:3(a) does not govern the substantive content of
laws and regulations. The Appellate Body has rejected claims under Article X after concluding that
the legal challenge concerned the substantive content of the rules themselves rath er than their
administration.193
4.18. Both Notification 187 and Order Por. 145-2555 establish substantive rules relating to the tax
base to be used for purposes of VAT on cigarettes. The introductory paragraph of Notification 187
indicates that the Director -General of the Revenue Department "hereby prescribes the tax base"
for VAT on cigarettes. Clauses 4 and 5 of Notification 187 define the tax base for VAT on
cigarettes, namely that the tax base shall be the value of tobacco derived from deducting the VAT
from the full retail price. Clauses 4 and 5 provide further details on the type of price to be use d as
the tax base. This means that the notification requirements challenged by the Philippines do not
refer to the "administration" of Thailand's VAT rules and, therefore, fall within the category of
measures covered by Article X:3(a).
4.19. Second, even assuming that Notification 187 and Order Por. 145 -2555 refer to the
"administration" of Thailand VAT rules, the claim that this administration is unreasonable is
unfounded. Similar to its argument under Article III:4 of the GATT 1994, the Philippines' argu ment
under Article X:3(a) is premised on the understanding that a cigarette producer must act in
violation of Thailand's competition laws in order to comply with Notification 187 and Order Por.
145-2555.
4.20. Thailand has explained in the context of its argumen ts under Article III:4 that, contrary to
the Philippines' assertions, compliance with Thailand's VAT notification requirements do not require
violating Thailand's competition laws. As noted above, the Philippines failed to demonstrate that
arrangements bet ween retailers and cigarette producers (vertical price fixing) are per se
inconsistent with Thailand's competition laws.194
4.21. In light of the foregoing, Thailand requests the Panel to reject the Philippines' claims under
Article X:3(a) of the GATT 1994.
5 CONCLUSION
5.1. For the reasons stated above, Thailand requests the Panel to reject the Philippines' claims.
5.2. With respect to the BoA Ruling, Thailand requests the Panel to reject the Philippines' claims
under Articles 1.1, 1.2(a), 5.1, 11.3 and 16 of the CVA. Thailand has showed that the methodology
of the BoA for comparing P&GE is reasonable. The Philippines itself agrees with this. With respect
to the application of this methodology, the Philippines has not demonstrated that it was
unreasonable given the circumstanc es. Thailand has emphasized the importance of applying the
correct standard of review when the Panel examines the Philippines' claims against the BoA Ruling.
The Panel should be mindful to not conduct a de novo standard of review or substitute its own
judgement for that of the BoA.
5.3. With respect to the Charges, Thailand requests the Panel to reject the Philippines' claims
under Articles 1.1, 1.2(a), 2, and 3 the CVA. Thailand has explained the different reasons why the
Philippines' claims fail ab initio:
a. Thailand considers that its due process right have been violated. As a result, Thailand
requested the Panel to decline to rule on the Charges and to delete the exhibit at issue
form the record. The Panel declined Thailand's requests. Therefore, Thailand requests
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. If not, Thailand reques ts the Panel to
explain clearly what additional steps were required of the Philippines and where it took
those steps in this case.

192 Thailand's first written submission, paras. 7.60 – 7.65.
193 Appellate Body Report, EC – Poultry, para. 115.
194 Thailand's first written submission, para. 7.67.

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b. The Philippines is precluded from challenging the Charges in these compliance
proceedings because it challenged essentially t he same measure in the original dispute
and failed to make a prima facie case of WTO-inconsistency.
c. The Philippines claims are not "measures taken to comply" within the meaning of Article
21.5 of the DSU and, therefore, are not within the scope of these co mpliance
proceedings.
d. The provisions of the CVA on which the Philippines relies do not apply to the Charges.
The Charges are not an exercise of "customs valuation" under the CVA as they do not
have the purpose of levying ad valorem customs duties. Nothing in the CVA regulates
the manner in which WTO Members can conduct criminal proceedings on customs fraud.
e. The Charges are not a matter "ripe" for adjudication. The Charges constitute merely an
allegation of criminal conduct, not a judgement by the Criminal C ourt. The Philippines'
challenge against the Charges is an attempt to interfere in a pending criminal process
before Thailand's domestic Criminal Court.
5.4. In any event, even if the Panel were to accept the Philippines' position that the Charges are
covered by the CVA and inconsistent with the provisions thereof, Thailand submits that any
possible inconsistency with the CVA is justified under the general exceptions of Articles XX(a) and
XX(d) of the GATT 1994.
5.5. Thailand requests the Panel to reject the Philippines' claim that Thailand violated Article 10 of
the CVA by disclosing PM Thailand's CIF values.
5.6. With respect Thailand's VAT base, Thailand also requests the Panel to reject the Philippines'
claims under Ar ticles III:4, X:1 and X:3(a) of the GATT 1994. The Philippines has failed to
demonstrate that this measure violates the national treatment obligation under Article III:4,
constitutes a measure of general application which Thailand failed to publish as requ ired by Article
X:1, and that these notification requirements give rise to an unreasonable administration under
Article X:3(a). The Philippines' argumentation on all three claims reflects a flawed understanding of
Thai VAT rules. Indeed, it is difficult to understand why the Philippines claims that these are
inconsistent with the cited provisions of the GATT 1994 when Thailand adopted these rules at its
request.

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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

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ANNEX C-1
EXECUTIVE SUMMARY OF THE ARGUMENTS OF AUSTRALIA
I. Introduction

1. Australia thanks the Panel for this opportunity to present its views in this dispute.
2. In its oral statement today Australia will focus on the issue of the scope of Article 21.5
proceedings, and the nature of "measures" and "measures taken to comply" in the context of
compliance proceedings generally and in the specific context of the current case.
3. In providing these views to the Panel, Australia would like to highlight some fundamental
aspects of the WTO dispute settlement system and the role of the compliance Panel in this system.
II. The WTO Dispute settlement system and the role of the compliance Panel

4. Australia recalls the object and purpose of the WTO dispute settlement system is to
promptly resolve disputes between Members. Article 21.5 proceedings are particularly important in
this regard, as they concern the proper implementation by a responding Member of f indings of
inconsistency of its measures with its WTO obligations. It is thus of the utmost importance that
Article 21.5 proceedings avoid a complaining Member having to initiate dispute settlement
proceedings afresh when an original measure found to be in consistent has not been brought into
conformity with the recommendations and rulings of the Dispute Settlement Body ("the DSB").
5. While the scope of Article 21.5 proceedings has clear limitations, in our view the proper
scope of proceedings and, in particul ar, the measures which can be addressed, should not be so
strictly or inflexibly drawn as to allow a responding Member to effectively evade its obligations, or
delay implementation.
6. In considering the appropriate balance, Australia urges the Panel to consider Members' due
process rights, the importance of supporting the legitimacy of the DSB's decisions and the proper
functioning of the multilateral rules based system.
III. The nature of "measures" and "measures taken to comply"

7. Turning then to the specific l egal question at issue, determining in the context of this
dispute what constitutes a measure taken to comply, we provide some views on whether the
criminal charges laid against Philip Morris Thailand and seven of its current or former employees
regarding customs valuation constitute measures taken to comply.
8. It is established 1 that where a complaining Member seeks to have the compliance Panel
consider measures which the implementing Member maintains are not measures taken to comply,
the Panel should seek to determine whether the measures are "particularly closely connected" to
the measures the implementing Member has put forward as measures taken to comply and to the
DSB's recommendations and rulings. As clarified by the Appellate Body, this close nexus te st2
requires an examination of the links in terms of the nature, effects and timing of the measure, the
claimed measure(s) taken to comply and the DSB's recommendations and rulings.
9. Firstly, as a point of general law, we consider that there are instances where domestic
charges could constitute a measure(s) taken to comply, notwithstanding that they by their nature
imply further potential action. The examination in this instance pertains to the charges in relation
to the implementing Member's obligations, n ot the ultimate outcome of the charges. We therefore
do not agree with the application of the "ripeness" argument posited by Thailand in relation to
these charges. Actions such as these which have been initiated by the State have the potential to

 Australia has requested that its Oral Statement serve as its Executive Summary.
1 US – Zeroing (EC) (Article 21.5 – EC), para. 207.
2 US – Softwood Lumber IV (Article 21.5 – Canada), para. 77.

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impact trade and to engage trade obligations hence have the capacity to be considered "measures
taken to comply".
10. Secondly, in applying the "close nexus" test we examine the nature of the charges, their
timing and their effects.
11. With regard to their nature, the charges relate to the same actors, the same type of goods
and the same actions of the authorities. We do not consider the fact that the actions relate to
different arms of the Thai State as of relevance in this case, nor the fact that the charges do not
relate to the same entries, recalling our initial comment that implementing parties must not be
allowed to evade their obligations. We also do not consider the timing issues raised as preventing
the Panel from considering the charges as measures taken to comply.
12. In considering the effects, the key question for the Panel to consider is whether the
charges affect Thailand's obligations under the covered agreements, and in particular whether they
undermine the measures ostensibly taken to comply so as to render these steps ineffective.
IV. Conclusion

13. Australia thanks the Panel for the opportunity to address these issues. We also thank the
Panel for providing questions to the Third Parties in advance and we look forward to providing
responses to those questions in due course.

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ANNEX C-2
EXECUTIVE SUMMARY OF THE ARGUMENTS OF CANADA
I. INTRODUCTION
1. This dispute raises issues of a systemic nature regarding the scope of "measures taken to
comply" under Article 21.5 of the DSU, when government acts such as criminal or civil charges can
be adjudicated by a panel, the standard of review of a determination under the Customs Valuation
Agreement (CVA) as well as issues related to the interpretation of the CVA and its relationship with
the GATT 1994. Canada appreciates the opportunity it has had to provide its views on these
issues. Below, Canada provides a summary of its key arguments in this dispute.
II. CRIMINAL OR CIVIL CH ARGES CAN BE "MEASURES" AND "MEASURES TAKEN TO
COMPLY" UNDER ARTICLE 21.5 OF THE DSU
A. Charges can be a measure
2. Canada notes that "measure" is not defined in the DSU, however, that term has been
interpreted broadly for the purposes of dispute resolution under the GATT and the WTO, such that
"measure" has generally been understood to refer to an action in which there was "sufficient
government involvement"1. A determination of what constitutes a measure is made on a case -by-
case basis2.
3. It must also foc us on the content and substance of a measure rather than form 3, and
ultimately, any act or omission attributable to a Member can be a "measure" for the purposes of
dispute settlement proceedings4.
4. Further, Members are responsible for the acts of all the ir governmental departments and
organs of the state including their judiciary5.
5. Thus, in Canada's view, charges, whether criminal or civil, can be characterized as acts of an
organ of the state and could therefore be considered "measures". While not eve ry charge laid by a
prosecutorial arm of the state will necessarily be considered a "measure", if the content and
substance of a charge falls within the disciplines of the WTO Agreements and merits a finding, on
objective grounds, that the charge is a "mea sure", then the charge can be a considered a
"measure" for the purposes of dispute settlement.
B. Charges can be a measure taken to comply
6. In Canada's view if civil or criminal charges are found to be measures, they may also be
"measures taken to comply ", under Article 21.5 of the DSU, if it can be demonstrated that they
have a sufficient connection with the DSB rulings and recommendations and the declared
measures taken to comply such that they meet the "close nexus" test.
7. Where a Member declares mea sures to be a "measure[] taken to comply", an Article 21.5
panel may review that measure to assess compliance with the WTO Agreement. Measures that are
not declared by an implementing Member may also be reviewed by a panel under Article 21.5 and
be characterized as a measure "taken to comply" 6. Those measures include measures that have

1 Panel Report, Japan – Apples, para. 8.11, referring to Panel Report in Japan - Film, paras. 10.55-
10.56, which refers to GATT panel reports, Japan –Semi-conductors, para. 102; and EEC – Dessert Apples,
para. 126.
3 Appellate Body Report, US – Corrosion-Resistant Steel Sunset Review, para. 87, fn 87.
4 See Appellate Body Report, US – Corrosion-Resistant Steel Sunset Review, para. 81 and fn 79. See
also Appellate Body Report, Australia – Apples, para. 171.
5 Appellate Body Report, US – Shrimp, para. 173.
6 Appellate Body Report, US – Softwood Lumber IV (Article 21.5 – Canada), paras. 66-69, 73 and 77.

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the effect of undermining or nullifying the purported compliance achieved through the measures
declared to be taken to comply7.
8. A full examination of the application or th e effect of the measure, including the legal and
factual settings in which they operate, is required to assess the "existence" of a measure taken to
comply or its "consistency with a covered agreement". Through this examination, a compliance
panel can determine whether there are "sufficiently close links" between the undeclared measure,
any declared measure and the recommendations and rulings of the DSB such that it would be
appropriate to characterize the undeclared measure as a "measure taken to comply"8.
9. The amount of weight to be given to the elements of the factual or legal background of a
measure, including the timing of a measure taken to comply, will depend on the circumstances of
the case at issue9.
III. RIPENESS OF A CUSTOM S VALUATION DETERMIN ATION UNDER THE CUSTOM S
VALUATION AGREEMENT AND THE APPLICABILITY OF THE CVA TO CRIM INAL OR
PENAL PROCEEDINGS
10. The key consideration to determine what constitutes a customs valuation determination that
is ripe for adjudication is whether a decision has actually been taken.
11. In the context of the CVA, the term "determination" is used when referring to a
determination made by the customs administration of the customs value of certain imported
goods10. Once the determination of customs value of imported go ods has been made, it is possible
to assess whether that determination is consistent with the covered agreements, including the
CVA. As a result, Canada is of the view that whether or not a criminal charge has resulted in an
acquittal or conviction is neit her decisive nor relevant as to whether the determination is ripe for
adjudication under the DSU. It is the consistency of the determination of customs value with the
Member's CVA obligations that would be assessed, not the consistency of the charges.
12. The CVA is primarily about function, that is, the methodology to be used in the valuation of
goods for customs purposes. It would undercut the efficacy of the CVA if the same imported goods
could be ascribed a different customs value by different entities within the same government and
only the acts of some of those entities could be considered "measures" for the purposes of the
DSU. If a criminal offence focuses on fraudulent undervaluation of an imported good then the
methodology applied to determine the degree of undervaluation would be that found in the CVA,
regardless of who within the government calculates the valuation.
13. Therefore the relevant question to determine whether the CVA applies to criminal or penal
proceedings is whether or not there is a custom valuation function. To the extent the function of
the valuation of goods for customs purposes is exercised in the context of criminal or penal
proceedings, the CVA would apply to the valuation of imported goods.
IV. A MEMBER CANNOT DEFE ND A MEASUR E INCONSISTENT WITH THE CUSTOMS
VALUATION AGREEMENT BY RELYING ON GATT ARTICLE XX
14. It is Canada's view that GATT Article XX exceptions are not applicable to the provisions of
the CVA because the text does not refer to the provisions of Article XX or to the GATT 1994 in a
manner indicating that the exceptions apply11.
15. There is no jurisprudence that directly addresses the issue of whether GATT Article XX can
be invoked to justify a breach of the CVA provisions. However, the Appellate Body has analyzed
the question and determined that Article XX was available to justify inconsistencies with

7 Panel Reports, Australia – Salmon (Article 21.5 –Canada), para. 7.10(23); Australia – Automotive
Leather II (Article 21.5 –US), para. 6.4; EC – Bed Linen (Article 21.5 –India), para. 6.21.
8 Panel Report, EC and certain member States – Large Civil Aircraft (Article 21.5 – US), para. 6.83.
9 Canada's third-party submission, paras. 15-16.
10 See the General Introductory Commentary "Articles 2 through 7 provide methods of determining the
customs value whenever it cannot be determined under the provisions of Article 1"; articles 1-4, 6-9, 11 and
13.
11 Canada's third-party submission, paras. 42-50.

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obligations set out in WTO agreements other than the GATT 1994 only under limited
circumstances12. Article XX exceptions may be available for breaches of other WTO ag reements
only if the text specifically or by means of a general reference provides a legal basis to resort to
such exceptions13.
16. Canada recognizes that the CVA refers to the GATT 1994 when it states in its preamble the
desire of the Members to further "the objectives of GATT 1994". However, this phrase does not
expressly incorporate the defences or exceptions under the GATT 1994. In fact, this type of
preambular language has been interpreted in the context of the TBT Agreement as merely
indicating that the two agreements have similar objectives14.
17. Thailand submits that the GATT Article XX defence is available because the CVA implements
and elaborates the disciplines of Article VII of the GATT 1994 15. However, an Article XX defence is
not available to a covered agreement on the basis that it implements a provision of the GATT
199416. The mere reference to a GATT provision in a covered agreement does not compel the
conclusion that GATT Article XX is available to justify a breach of that agreement 17. In fact, the
Appellate Body attached significance to the fact that an agreement refers to a provision of the
GATT 1994 but does not refer to GATT Article XX 18. It is also worth noting that other covered
agreements governing the application of a provision of t he GATT 1994, such as the Anti -Dumping
Agreement explicitly includes general exceptions 19. The same approach was not adopted in the
context of the CVA in which no reference is made to the application of general exceptions. It is
Canada's view that the abse nce of references to general exceptions in the CVA reflects the
intention of the Members not to make Article XX available to justify a violation of the CVA.
18. Finally, the Panel raised a question as to whether Article 17 of the CVA is relevant to
determine whether Article XX of the GATT 1994 applies to the CVA. Canada believes that no
inference regarding the application of Article XX to the CVA can be drawn from the existence of
Article 17. The ordinary meaning of Article 17 does not provide for, nor indi cate the application of,
any exceptions to justify measures that could be found to be inconsistent with the obligations in
the Agreement 20. In fact, the purpose of Article 17 is only to reserve the right of customs
administrations "to satisfy themselves as to the truth or accuracy of any statement, document or
declaration presented for customs valuation purposes"21.
V. STANDARD OF REVIEW APPLICABLE TO THE BOA RULING
19. The CVA does not set out a specific standard of review and therefore, the general standa rd
of review under Article 11 of the DSU applies for all covered WTO agreements. The Appellate Body
has been clear in finding that when a WTO agreement is silent as to a standard of review, Article
11 applies, in particular the requirement that a panel sho uld make an objective assessment of the
facts of the case and the applicability of and conformity with the relevant covered agreements22.

12 Appellate Body Reports, China – Raw Materials, para. 272; Panel Reports, China Raw-Materials,
paras. 7.150 and 7.153; and Appellate Body Report, China – Publications and Audiovisual Products, paras.
224-230.
13 Canada's third-party submission, paras. 42-50; Appellate Body Reports, China – Raw Materials, para.
307; see also Panel Reports, China – Raw Materials, para. 7.153; and Appellate Body Reports, China – Rare
Earths, para. 5.56.
14 See Appellate Body Report, US – Clove Cigarettes, paras. 91 and 101; Panel Report, US – Clove
Cigarettes, para. 7.112. In US – Clove Cigarettes, the panel found that this phrase suggests that the TBT
Agreement is a "development" or a "step forward" from the disciplines of the GATT. The phrase also indicates
that the TBT Agreement and the GATT overlap in scope and have similar objectives. The Appellate Body
observed that the TBT Agreement does not contain a general exception clause, such as those in Article XX.
15 Thailand's first written submission, para. 6.91.
16 Canada's responses to the Panel's questions to Third Parties, paras. 36-39.
17 Appellate Body Reports, China – Rare Earths, para. 5.63.
18 Appellate Body Reports, China – Raw Materials, para. 303.
19 See Anti-Dumping Agreement, Article 18.1 and fn 24.
20 Canada's responses to the Panel's questions to Third Parties, paras. 40-43.
21 Panel Reports, China – Auto Parts, fn 401.
22 Appellate Body Report, Argentina – Footwear (EC), para 120.

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20. The Appellate Body has also been clear that the only exception to this rule is found in the
Anti-Dumping Agreement, in which Article 17.6 sets out a special standard of review for disputes
arising under that Agreement23.
21. Therefore, in Canada's view, it would be incorrect for the Panel to apply a standard of review
analogous to or the same as the standard applied under Article 17.6 of the Anti -Dumping
Agreement.
22. In making its assessment under Article 11 of the DSU, the Panel should not engage in a de
novo review with respect to the customs administration's determination under the CVA, nor should
the Panel give total deference to the determination of the custom's administration. The Panel must
make an objective assessment of the facts and the applicability of and conformity with the CVA of
the customs administration's determination. This requires a "reaso ned and adequate" explanation
for the determination in light of the evidence on the record24.
23. Determining what is "adequate" will "depend on the facts and circumstances of the case and
the particular claims made" and the panel's assessment should test whether the reasoning of the
authority is coherent and internally consistent" 25. Further, the panel must examine whether the
explanations provided disclose how the authority treated the facts and evidence in the record and
whether there was positive evide nce before the authority to support the inferences made and
conclusions reached by the authority"26.
24. Finally, an explanation is not reasoned, or is not adequate, if an alternative explanation of
the facts is plausible and if the authority's explanation does not seem adequate in the light of that
alternative explanation"27.

23 Ibid., para. 118.
24 Panel Report, Thailand – Cigarettes (Philippines), paras. 7.104-105.
25 Appellate Body Report, US – Softwood Lumber VI (Article 21.5 – Canada), para. 93.
26 Ibid.
27 Appellate Body Report, US – Lamb, para. 106.

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ANNEX C-3
EXECUTIVE SUMMARY OF THE ARGUMENTS OF THE EUROPEAN UNION
1. This executive summary integrates comments made by the European Union at the Third
Party Hearing on 30 August 2017 and its replies to the Panel's and Thailand's questions to Third
Parties of 15 September 2017. The European Union considers that the present case raises
important systemic questions on the interpr etation and application of the Agreement on the
Implementation of Article VII of the General Agreement on Tariffs and Trade 1994 (Customs
Valuation Agreement, CVA), and the Understanding on Rules and Procedures Governing the
Settlement of Disputes (DSU). Its submissions focussed on those systemic questions, without
taking a definitive position on the facts of the case.
I. The 2012 BoA ruling
2. The comments by the European Union focussed on the standard of review for panel
proceedings under the CVA; the circumstances of sale test under Article 1.2(a) of the CVA; and the
evidentiary standard for deductions for taxes payable pursuant to Article 5.1(a)(iv) of the CVA.
3. Standard of review: Contrary to Thailand's arguments, the European Union considers that
there is no special standard of "reasonableness" under the CVA. The standard of review in disputes
concerning the CVA is the standard of Article 11 of the DSU, namely the obligation of the panel to
make an "objective assessment of the matter". A panel genera lly does not have the full record of
the domestic administrative proceedings and should not step into the shoes of the national
authority and carry out the assessment on substance in the place of the national authority.
However, it may examine whether the national authorities' determinations were supported by the
factual evidence before them and resulted from a correct interpretation and application of the
relevant WTO rules. Methodological choices made by the national authorities should be subject to
the same scrutiny as the other elements of the assessment.
4. Circumstances of sale test : According to Article 1.2(a) of the CVA, the starting point is
that relatedness between exporters and importers does not in itself make transaction values
unacceptable. Transaction values shall be accepted where the circumstances of sale show that the
relationship did not influence the price. This test requires a thorough examination by the
authorities, in a process of consultation with the importers. The Panel in the origi nal dispute
highlighted that customs authorities and importers have respective responsibilities under Article
1.2(a) of the CVA. Customs authorities must ensure that importers be given a reasonable
opportunity to provide relevant information; importers are responsible for providing such
information. While the obligations concerning the decision on substance and those concerning the
process are separate obligations, they are closely interlinked, and violations of procedural
obligations may have a direct impact on the substantive decision.
5. On substance, the deviation of an importer's P&GE from a range of comparables can indeed
constitute a solid argument in favour of the actual influence of the relationship on the price,
provided that the comparables are really reliable. However, all relevant quantitative and qualitative
facts, submitted by the importer or otherwise in the possession of the customs authorities, must
be taken into account in the assessment. Thus, a preliminary conclusion on the (non -)reliability of
transaction prices reached on the basis of a P&GE comparison must be overturned if other
evidence pointing to the contrary prevails.
6. Most importantly, the comparison of P&GE rates can only yield valid results if the situations
being compared ar e truly comparable. This is a general principle which 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 comparabi lity in Article 2 of
the ADA, but also in various provisions of the CVA itself. Comparable means that there must be
sufficient similarities between the things that are compared, so as to make that comparison worthy
or meaningful. Where there are no situations which are fully comparable, authorities may resort to
less like, although still similar, comparators, but will be obliged to make appropriate adjustments.
7. Evidentiary standard for deductions for taxes payable pursuant to Article 5.1(a)(iv) of
the CVA: The Panel in the original proceedings made it very clear that deductions must be made

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for taxes, including provincial taxes, that are payable, in the sense of payments usually made1,
and not actual payments made and evidenced as such for each instance. The European Union 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.
II. The Charges
8. The Philippines' claims relating to the Criminal Charges issued on 18 January 2016 raise
important questions on what type of measures can be challenged in WTO dispute settlement, and
in which procedural circumstances this can be done. The European Union commented on the
concept of preclusion, the close nexus tes t, the question of "ripeness" or what constitutes a
"measure at issue", and the application of the CVA in criminal proceedings. In its reply to a
question by the Panel, the European Union also shared its views on the availability of defences
under Article XX of the GATT 1994 for breaches of the CVA.
9. Alleged preclusion: In any event, the question of preclusion can only be relevant in cases
where the potentially precluded measure is the same as in the original proceedings. This is not the
case in the present dispute; the investigations and the Charges are measures of a different nature.
10. Close nexus test: When carrying out this test, a panel acting under Article 21.5 of the DSU
is called upon to examine if the undeclared measure taken to comply is a “me asure […] with a
particularly close relationship to the declared “measure taken to comply”, and to the
recommendations and rulings of the DSB.” 2 Assessing whether this is the case requires panels to
“scrutinize these relationships”, and examine “the factua l and legal background against which a
declared ‘measure taken to comply ' is adopted”. 3 Depending on the facts, a number of other
specific factors may be examined, in particular the “timing, nature, and effects of the various
measures”.4 These aspects should however not be assessed in a mechanistic, box -ticking fashion;
their relative importance will depend on the concrete circumstances of each case.
11. For the present case, the decisive question should be whether the measure at stake can be
seen as havi ng the effect of undermining compliance for the measures that had been found
incompliant. In the European Union's view, some sort of concrete connector (and not a pure
similarity) between the measures having been found incompliant and the undeclared measur e
taken to comply is required. This connector, however, must not necessarily be state action but
could be a pure factual link such as the commercial relationship between the importer and the
exporter in the current case.
12. Ripeness / Measure at issue: The parties disagree on whether the Criminal Charges can
be challenged in this dispute, as in Thailand's view, they are only a preliminary step in the criminal
proceedings and therefore not "ripe" for adjudication in WTO dispute settlement. The European
Union considers that, rather than introducing a new procedural concept of "ripeness", with unclear
content and vague contours, the question should be framed in a more classical manner, namely
whether there is a challengeable "measure at issue".
13. While the universe of issues that can be challenged in WTO dispute settlement proceedings
is – rightly – broad, it is however not unlimited. According to the Appellate Body, only acts or
omissions attributable to a WTO Member can be challengeable measures. 5 In United States -
Corrosion-Resistant Steel Sunset Review , the Appellate Body indicated that the measures subject
to review "encompass the entire body of generally applicable rules, norms and standards, for
purposes of WTO law, adopted by Members".6 (emphasis added)
14. Internal preparatory conduct cannot, absent any express and specific obligations to the
contrary in the Agreement at stake, be a measure in that sense. Such conduct is incapable of
having tangible, present effects – thus, it cannot affect the operation of any covered agreement or
impair benefits accruing to a Member under the covered agreements (see Articles 3.3 and 4.2 of
the DSU).

1 Panel Report, Thailand - Cigarettes (Philippines), paras. 7.356-7.360.
2 Appellate Body Report, US – Softwood Lumber IV (Article 21.5 – Canada), para. 77 (emphasis added);
see also Appellate Body Report, US – Zeroing (EC) (Article 21.5 – EC), para. 203; Appellate Body Report, US –
3 Appellate Body Report, US – Softwood Lumber IV (Article 21.5 – Canada), para. 77.
4 Appellate Body Report, US – Softwood Lumber IV (Article 21.5 – Canada), para. 77.
5 Appellate Body Report, US - Corrosion-Resistant Steel Sunset Review, para. 81.
6 Appellate Body Report, US - Corrosion-Resistant Steel Sunset Review, para. 87.

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15. In light of these considerations, for the European Union, the key criterion in this case should
be whether the measure at stake has legal effects in itself. The exact contours of what can
constitute a "measure at issue" will be delineated by the substantive WTO law provisions at stake.
Hence, in the present case, the notion of customs valuation "determination" cont ributes to this
delineation. The European Union interprets the notion of "determination" as an act which sets out
a finding of something by a competent authority. As such, the notion confirms the criterion of
"genuine legal effects" suggested by the Europe an Union. A priori, and without taking a definitive
position on the facts of this case, it seems to the European Union that the Charges have such legal
effects of their own.
16. Application of the CVA in criminal proceedings: In accordance with the views expressed
by other Third Parties, the European Union considers that the application of the substantive
obligations under the CVA is not dependent on the authority taking the decision or the formal
characterisation of the measure in question (as "pure custo ms decision" versus
"criminal/enforcement measure"). On the contrary, the scope of application should rather be
determined on a functional basis. Thus, the substantive obligations of the CVA should apply
whenever an organ of the state engages in determinin g the customs value of imported goods,
regardless of which authority takes this decision and in which type of proceedings. Different
considerations might come into play when it comes to the application of the procedural obligations
of the CVA. As the Philippines allege no breach of these obligations with regard to the Charges, the
question does, however, not need to be adjudicated in this case.
17. Availability of defences under Article XX of the GATT 1994 to justify breaches of
the CVA: The European Union notes that arguendo, the substantive conditions of Article XX, in
particular the necessity test, seem not to be fulfilled in the present case. On the question of
principle, the European Union would caution against interpreting the scope of Article XX too
broadly, in view of the absence of any explicit reference to the exceptions of the GATT 1994 in the
CVA, and the special nature of the obligations under the CVA, which c onsists of technical rules
aiming at ensuring orderly customs administration. The Europe an Union fails to see how policy
considerations as those contemplated in and protected by Article XX can be of any relevance in
this context.

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ANNEX C-4
EXECUTIVE SUMMARY OF THE ARGUMENTS OF JAPAN
I. INTRODUCTION
1. Japan participat es in this dispute because o f its systemic interest in the consistent
interpretation and implementation of the Understanding on Rules and Procedures Governing the
Settlement of Disputes ("DSU") and the Agreement on Implementation of Article VII of the General
Agreement on Tariffs and Trade 1994 ( "Customs Valuation Agreement " or "CVA"). Japan made
observations on (i) the scope of Article 21.5 proceedings ; (ii) the examination of "circumstances
surrounding the sale " in related -party transactions under the CVA; (iii) the standard of review
under the CVA; (iv) the so-called doctrine of ripeness; and (v) the applicability of Article XX of the
General Agreement on Tariffs and Trade 1994 ("GATT 1994") to the CVA.
II. THE SCOPE OF ARTICLE 21.5 PROCEEDINGS
2. It is well established that a party having recourse to Article 21.5 of the DSU may request the
compliance panel to review measures that the implementing Member maintains are not measures
"taken to comply".1 The Appellate Body has explained that, in such circumstances, "the compliance
panel should seek to determine whether such distinct measures are particularly closely connected
to the measures the implementing Member[ s] asserts are 'taken to comply ', and to the
recommendations and rulings of the DSB, so as to fa ll within the purview of the compliance
panel".2 This determination involves, in turn, an examination of the links, in terms of the nature,
effects, and timing, between the alleged measure, the declared measure taken to comply, and the
DSB recommendations and rulings.3
3. As regards the nature (or subject matter), 4 the Appellate Body has found that the use of a
common methodology (zeroing) in instruments issued in connected stages of an administrative
proceeding provided the necessary link in terms of the nature of the measures, particularly where
the methodology was the subject of the DSB recommendations and rulings.5
4. By effects, Japan understands the Appellate Body to have in mind legal consequences. The
legal consequence of a challenged measure can b e analyzed from two perspectives: (i) the legal
effect of the challenged measure on the measure found to be WTO -inconsistent in the original
proceedings; and (ii) the legal effect of the challenged measure on the declared measure taken to
comply. With rega rd to the first type of the legal effects, t he Appellate Body in US – Zeroing
(Article 21.5 – EC) has found that, when a measure has legal effects that supersede those of the
measure found to be WTO -inconsistent in the original proceedings, but those effec ts continue to
reflect the same WTO-inconsistent conduct, this would provide a sufficient link in terms of effect. 6
Meanwhile, concerning the second type of the legal effects of the ch allenged measure, the
Appellate Body in US – Softwood Lumber IV (Article 21.5 – Canada) has upheld the analysis by the
panel that a subsequent measure "could have an impact on " or "could possibly undermine" the
implementation of the declared measure taken to comply in the original proceedings. 7 Such an
analysis is necessitated in order to ensure that "limits [on Article 21.5 proceedings] should not
allow circumvention by Members by allowing them to comply through one measure, while, at the
same time, negating compliance through another."8
5. As regards to timing, the Appellate Body has found that the fact that a measure is adopted
simultaneously with, shortly before, or shortly after specific actions taken by a Member to

1 Appellate Body Report, US – Zeroing (EC)(Article 21.5 – EC), para. 207.
2 Appellate Body Report, US – Zeroing (EC)(Article 21.5 – EC), para. 207.
3 Appellate Body Report, US – Zeroing (EC)(Article 21.5 – EC), para. 229.
4 Appellate Body Report, US – Zeroing (EC)(Article 21.5 – EC), para. 230.
5 Appellate Body Report, US – Zeroing (EC)(Article 21.5 – EC), para. 230.
6 Appellate Body Report, US – Zeroing (EC)(Article 21.5 – EC), paras. 231-232.
7 Appellate Body Report, US – Softwood Lumber IV (Article 21.5 – Canada), para. 87.
8 Appellate Body Report, US – Softwood Lumber IV (Article 21.5 – Canada), para. 71.

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implement DSB recommendations and rulings can provide support for a finding that those
measures are c losely connected.9 By contrast, adoption of a measure a considerable time before
the adoption of the DSB recommendations and ruling could be evidence that the measures are not
closely connected. 10 Still, the Appellate Body has cautioned against "formalistic reliance on the
date of issuance" 11 and has found measures adopted prior to the adoption of the DSB
recommendations and ruling to fall within the scope of Article 21.5 proceedings , if those measures
"still bore a sufficiently close nexus, in terms of nature, effects and timing." 12
6. Japan considers that the Panel should follow the approach outlined by the Appellate Body. In
particular, the Panel could examine: whether the Charges address the same subject matter and
actions addressed through the Thai Custom s Board of Appeals ("BoA ") ruling and the DSB 's
recommendations and rulings (nature); whether the Charges result s in the legal effect of
maintaining the WTO -inconsistency found by the DSB or negating the effect of the declared
measure taken to comply (effe ct); and whether the timing of the Charges support the assertion
that they are linked to the BoA ruling and DSB 's recommendations and rulings.
7. Japan considers that the need to interpret the scope of Article 21.5 in a flexible manner
stems from the possibility that an implementing Member may seek to avoid full compliance with
the DSB 's recommendations and rulings by imposing inconsistent measures and yet declaring
them not to be "measures taken to comply ". Japan also recalls that the object of Article 2 1.5
proceedings is to determine whether the implementing Member has complied with the DSB 's
recommendations and rulings. 13 In this light, Japan considers that the Panel should examine the
link between the measure at issue, the declared measure taken to com ply, and the DSB 's
recommendations and rulings , to ensure that the implementing Member does not avoid full
compliance.
III. EXAMINATION OF "CIRCUMSTANCES SURROUNDING THE SALE " IN RELATED -
PARTY TRANSACTIONS
8. Japan agrees that a benchmark comparison may be one method of examining the
"circumstances surrounding the sale ". However, Japan believes that customs authorities should
examine th e ci rcumstances surrounding the sale by taking into consideration all releva nt
qualitative and quantitative factors to determine whether the transaction price was influenced by a
relationship between the buyer and seller.
9. Paragraph 3 of the Interpretive Notes to paragraph 1.2 describes that "circumstances
surrounding the sale" involves "relevant aspects of the transaction, including the way in which the
buyer and seller organize their commercial relations and the way in which the price in question
was arrived at [ ]". These are qualitative analyses that would require an authority to examine that
may not be readily comparable to a quantitative benchmark. The Interpretive Notes then provide
for quantitative analyses, providing as a further example of a situation where a relationship may
not have influenced the sale "where it is shown that the price is adequate to ensure recovery of all
costs plus a profit which is representative of the firm 's overall profit realized over a representative
period of time [ ] in sales of goods of the same class or kind."
IV. THE STANDARD OF REVIEW UNDER THE CVA
10. Japan considers that Article 17.6(i) of the AD Agreement applies exclusively to the review of
anti-dumping measures and the Appellate Body has confirmed that it does not apply to claims
brought under the other covered agreements.14
11. Even when reviewing decisions that are the outcome of an administrative investigation, the
Appellate Body has held that a panel must no t "simply defer to the conclusions of the national
authority".15 Instead, "a panel must examine whether, in the light of the evidence on the record,

9 Appellate Body Report, US – Zeroing (EC)(Article 21.5 – EC), para. 225.
10 Appellate Body Report, US – Zeroing (EC)(Article 21.5 – EC), para. 225.
11 Appellate Body Report, US – Zeroing (EC)(Article 21.5 – EC), para. 226.
12 Appellate Body Report, US – Zeroing (EC)(Article 21.5 – EC), para. 226 (emphasis original).
13 Appellate Body Report, US – Zeroing (Japan) (Article 21.5 – Japan), para. 122.
14 Appellate Body Report, Argentina – Footwear (EC), para. 118.
15 Appellate Body Report, US – Softwood Lumber VI (Article 21.5 – Canada), para. 93.

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the conclusions reached by the investigating authority are reasoned and adequate ", and such a
review must be "critical and searching". 16
V. THE SO-CALLED DOCTRINE OF RIPENESS
12. Considering the systemic importance of the arguments raised in relation to this doctrine,
Japan would like to make the following points.
13. First, as a general rule, the fact that a measure is pending before a national court is not
relevant in the examination of the inconsistency of that measure with international law, such as
the WTO covered agreements. Japan recalls that Article 27 of the Vienna Convention on the Law of
Treaty stipulates that "national law cannot be invoked to justify non -compliance with international
law". Even if the doctrine of ripeness were to apply to WTO dispute settlement, the situation in
domestic judicial proceedings would have no bearing on the so-called ripeness under the DSU or
other WTO covered agreements, unless those agreements so provided.
14. Second, Japan considers that there is no requirement for a distinctive "ripeness" test in the
DSU.17 Japan observes that, in previous disputes , panels and the Appellate Body have rather
focused their analysis on whether an act or omission constitutes a "measure at issue " for the
purposes of WTO dispute settlement, and have then examined whether the measure constitutes a
violation of a Member 's obligation under the WTO covered agreements.18 Questions about whether
a measure is properly subject to dispute settlement are determined within the context of analyzing
whether the act or omission properly constitutes a "measure at issue " under Article 6.2 of DSU,
and not through a separate "ripeness" test to be conducted after this initial determination.
15. Therefore, while Japan does not comment on any factual aspect of this case, it considers
that the Panel should examine those measures as a matter of "fact" in the light of the "legal rules"
in the WTO covered agreements, independently from their situation in national judicial
proceedings.
VI. APPLICABILITY OF ARTICLE XX OF THE GATT 1994
16. In Japan 's view, Article XX of the GATT 1994 is not available to justify measures that are
found to be inconsistent with the CVA.
17. First, the CVA does not provide any textual link to Article XX of the GATT 1994. A common
drafting technique to indicate the intention to make available in one agreement a provision in
another agreement is the inclusion of a cross-reference. For example, cross -references to Article
XX of the GATT 1994 are found in other WTO covered Agreements such as the SPS Agreement and
in the Agreement on Preshipment Inspection. The TRIMs Agreement expressly provides that "[a]ll
exceptions under GATT 1994 shall apply, as appropriate, to the provisions of this Agreement ".
In contrast, the CVA does not contain any reference to Article XX of the GATT 1994.
18. Second, Article XX of the GATT 1994 and the CVA are of different legal construct and nature.
Article XX is a provision of the GATT 1994 that provides general exceptions under the GATT 1994.
In contrast, the CVA is a special agreement on implementation of a specific Article, namely, Article
VII of the GATT 1994. Therefore, by its nature, t he CVA constitutes a special law vis -à-vis GATT
1994, and provides special rules focusing on how Member states should determine the customs
value. Considering this difference, Japan is of the view that Article XX of the GATT 1994 may be
applicable to the C VA only when the latter provides for such application in its text, because
principles that are applicable to general rules are not necessarily applicable to special rules unless
the special rules intend to incorporate these principles. Yet, as mentioned ab ove, the CVA lacks
any provision that indicates an intention to incorporate the general exceptions provided in Article
XX of the GATT 1994.
19. It is well established by the Appellate Body that the a pplicability of Article XX of the
GATT 1994 to other WTO covered agreements depends on whether a textual link exist s in the text

16 Ibid.
17 Japan’s oral statement, paras. 12-15.
18 See e.g., Appellate Body Report, US – Corrosion Resistant Steel Sunset Review, para. 79.

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of th at other agreement . The Appellate Body in China – Publications and Audiovisual Products
stated that China may resort to Article XX of the GATT 1994 to justify an inconsistency with
Paragraph 5.1 of China 's Accession Protocol based on the very text of th at paragraph which
provides that "[w]ithout prejudice to China 's right to regulate trade in a manner with the WTO
Agreement [ ] ". In that case, the Appellate Body recognized the availability of Article XX of the
GATT 1994 to justify a deviation from obligations under Paragraph 5.1 of China 's A ccession
Protocol because, according to the Appellate Body, the said language of Paragraph 5.1
encompasses "China 's Power to take a regulatory action that derogates from WTO obligations that
would otherwise constrain China 's exercise of such power – that is, to relevant exceptions ".19 In
contrast, the Appellate Body in China – Raw Materials denied the availability of Article XX of the
GATT 1994 to justify a meas ure inconsistent with Paragraph 11.3 of the China 's Accession
Protocol, for the reason that Paragraph 11.3 does not contain any language similar to that of
Paragraph 5.3 and that Paragraph 11.3 cannot be interpreted to make Article XX of the GATT 1994
available.20 While denying the applicability of Article XX of the GATT 1994 to the claim under
Paragraph 11.3, the Appellate Body also pointed out the lack of cross-reference to Article XX of the
GATT 1994 in Paragraph 11.3 of China 's Accession Protocol.21
20. Japan considers that the absence of a reference to Article XX of the GATT 1994 in the CVA
weighs heavily against the applicability of Article XX to the CVA. Under the circumstances just
discussed, the absence of any cross -reference to Article XX in the CVA indicates that the CVA is
not intended to apply the Article XX of GATT 1994. This is particularly the case given that the CVA
does include a cross-reference to Article X of the GATT 1994, while it does not refer to Article XX.
21. Japan notes, in addition, that even if Article XX of the GATT 1994 were to apply to certain
claims under other Articles of the CVA, nonetheless, Article XX is not available in the present case,
because there is no textual link to Article XX in Articles 1.1, 1.2(a), 2, 3 or 10 of the CVA

19 Appellate Body Report, China – Publications and Audiovisual Products, para. 221.
20 Appellate Body Report, China – Raw Materials, paras. 304 and 307.
21 Appellate Body Report, China – Raw Materials, para. 303.

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ANNEX C-5
EXECUTIVE SUMMARY OF THE ARGUMENTS OF THE UNITED STATES
I. Scope of "Measures Taken to Comply " Under Article 21.5 of the DSU
1. Panel proceedings under Article 21.5 of the DSU have a more limited scope than original
panel proceedings, as the only measures at issue in an Article 21.5 proceeding are "measures
taken to comply. " The complainant in an Article 21.5 proceeding must show either that such a
measure does not exist, or that it is inconsistent with one of the covered agreements. Measures
that negate or undermine compliance with the DSB 's recommendations and rulings may also
come within the scope of an Article 21.5 proceeding. In addition, panels and the Appellate Body
have found th at a measure that is not itself a measure taken to comply, but which has a
"particularly close relationship " or "sufficiently close nexus " to a declared measure taken to
comply and to the DSB 's recommendations and rulings, may fall within an Article 21.5 panel 's
terms of reference.
2. The Philippines and Thailand dispute whether certain criminal charges are a "measure taken
to comply " for purposes of this proceeding. The United States does not understand Thailand 's
compliance obligations to be necessaril y limited to the valuation of entries at issue in the original
proceeding. However, the United States questions whether valuation determinations with respect
to entries that pre -date entries that were the subject of recommendations and rulings would be a
measure taken to comply with such recommendations and rulings as a general matter. The Panel
should consider the timing of the entries in the charges vis -à-vis the timing of entries at issue in
the original proceeding in evaluating whether the charges share a sufficiently close relationship
with the recommendations and rulings and the declared measure taken to comply.
II. Application of the CVA With Respect to the Criminal Charges
3. In addition to being limited to "measures taken to comply, " a panel 's terms of reference in
a proceeding under Article 21.5 are set forth in Articles 7.1 and 6.2 of the DSU. Under Article 7.1,
the panel 's terms of reference are generally "[t]o examine . . . the matter referred to the DSB "
by the complainant in its panel req uest. Under Article 6.2, the "matter " consists of the "specific
measures at issue " and "a brief summary of the legal basis of the complaint."
4. In turn, the panel 's terms of reference are to examine the "specific measures at issue " set
out in the co mplainant 's panel request, as they exist at the time of panel establishment. Neither
the DSU nor the CVA establishes a "ripeness " doctrine as articulated by Thailand. If a measure is
within a panel's terms of reference, the panel's mandate is to examine the measure as it existed at
the time of panel establishment and to make findings with respect to that measure.
5. In addition, pursuant to Article 19.1 of the DSU, a panel is required to make a
recommendation where it has found a measure within its terms of reference to be inconsistent
with the relevant Member's obligations. Article 19.1 of the DSU states, in part, "Where a panel . . .
concludes that a measure is inconsistent with a covered agreement, it shall recommend that the
Member concerned bring the measure into conformity with that agreement."
6. The Panel's task regarding the Philippines' claims under the CVA with respect to the criminal
charges is, therefore, to examine whether the charges, as they existed at the time of the Panel 's
establishment, are inconsistent with the provisions asserted. If an inconsistency is found, the DSU
requires the Panel to make a recommendation with respect to the measure.
7. The Philippines claims that the criminal charges are inconsistent with Articles 1.1 and 1.2(a )
of the CVA. These articles establish that the primary basis of valuation is the transaction value. An
analysis of whether the criminal charges are inconsistent with Articles 1.1 and 1.2(a) should focus
on whether the charges reflect a failure to accept t he transaction value as the value of goods for
the purposes of levying ad valorem customs duties on imported goods. If the Panel finds that such
a failure occurred, it should assess whether the customs administration had grounds for

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considering that the relationship influenced the price and whether it communicated those grounds
to the importer and provided the importer with a reasonable opportunity to respond.
EXECUTIVE SUMMARY OF U.S. THIRD PARTY ORAL STATEMENT
8. The recommendations and rulings of the DSB are naturally the starting point for assessing
compliance with those recommendations and rulings. With respect to the criminal charges, the
relevant question for purposes of the Panel 's terms of reference in this Article 21.5 proceeding is
whether the cha rges may be subject to a proceeding whose scope is limited under the DSU to
resolving disagreement as to the consistency or existence of measures taken to comply with those
recommendations and rulings. The valuation of entries imported at one point in time does not
necessarily have a relationship – much less a close relationship – with the valuation of any other
entries, or to DSB recommendations and rulings issued later in time that cover subsequent entries.
To find that the charges fall within the scope o f an Article 21.5 proceeding by virtue of a close
relationship with the recommendations and rulings and a declared measure taken to comply, the
Panel must find that a close relationship exists.
9. With respect to the November 2012 Board of Appeals ruling, under Articles 7.1 and 6.2 of
the DSU, the task of the Panel is to conduct an objective assessment as to whether the ruling is
inconsistent with the provisions of the CVA asserted. The CVA does not set forth a "standard of
review, "and Article 11 of the DS U does not call for the Panel to conduct a de novo review of the
Board of Appeals ruling. The United States expects that the Panel 's assessment of whether the
specific steps taken by the authority satisfied the obligations set forth in Articles 1.1 and 1. 2 of the
CVA will depend on the facts surrounding the ruling, including, in light of the Interpretative Notes,
the Board 's efforts to obtain information from the importer, the information regarding the
transaction before the Board, and the reasoning provided for its determination.
EXECUTIVE SUMMARY OF RESPONSES OF THE UNITED STATES TO THE PANEL 'S QUESTIONS TO
THIRD PARTIES

GENERAL

10. There is no provision in the DSU that establishes a requirement that a compliance panel
follow legal interpretations of the original panel or of the Appellate Body in reports adopted by the
DSB. Under the structure of the WTO Agreement (Article IX:2) and the DSU (Article 3.9), it is only
through appropriate action by the Ministerial Conference and the General Council that t his Panel
would be "legally bound " to follow such an authoritative legal interpretation.
11. In Chile – Price Band (Article 21.5 – Argentina) and US – Tuna II (Article 21.5 – Mexico), the
Appellate Body noted that Article 21.5 proceedings "form part of a continuum, " such that "due
cognizance" must be accorded to the DSB 's recommendations and rulings in the original
proceeding. In this regard, it is useful to bear in mind that the DSB recommendations and rulings
in the original proceedings play an import ant role in evaluating compliance. They inform a
Member's understanding of how to bring its measure into compliance with its WTO obligations.
12. Under the DSU, the scope of proceedings under Article 21.5 is more limited than the scope
of original panel proceedings. Given that valuation is conducted for all imports, on a case -by-case
basis, the Panel will need to carefully consider how the criminal charges relate to the original
recommendations and rulings in this context.
13. In addition, the DSU require s the complainant to show that the content of the measure
identified, as it exists at the time of panel establishment, is inconsistent with the obligation
asserted. If the identified measure, as it exists at panel establishment, consists of charges or
allegations, the complainant must show how those charges or allegations are inconsistent with the
provisions at issue in order to prevail on its claims.
CRIMINAL CHARGES
14. The CVA itself does not exclude criminal or penal actions from the scope of its commitments.
The question of whether a challenged measure is inconsistent with a particular CVA obligation
depends on whether that measure, as it exists at panel establishment, is inconsistent with that
obligation, as interpreted under customary rules of interpretation.

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15. Articles 1.1 and 1.2(a) of the CVA obligate a WTO Member to accept the transaction value,
and not to reject the transaction value on the sole ground that the buyer and seller are related.
These obligations are not limited to particular entities within a Member 's government. Moreover,
nothing in the CVA suggests that these obligations do not apply with respect to valuation in cases
where the importer has committed fraud. A Member may seek and apply penalties in such a case,
but it must fo llow the requirements of the CVA in determining the value of the goods. Improper
valuation is not a permissible response to customs fraud.
16. With respect to the applicability of Article XX of the GATT 1994 to claims under the CVA, the
United States is no t aware that this issue has arisen in a previous dispute. Both parties to this
dispute have presented arguments regarding the merits of the Article XX defenses asserted by
Thailand. As such, the Panel may not need to reach this question in order to resolve this dispute,
but could proceed to analyze, on an arguendo basis, the defenses presented by Thailand.
BOA RULING
17. Customs valuation is a transaction -specific process. The specific steps taken by the customs
authority in examining the circumstances of sale will depend on the circumstances of the
transaction at issue.
18. However, the discretion afforded with respect to valuation under the CVA is not unlimited.
The CVA clearly establishes the transaction value as the primary basis for valuation. It furt her
provides that, even when the buyer and seller are related, the customs value shall be accepted,
provided that the transaction value is acceptable under Article 1.2. The Interpretative Notes make
clear that the customs authority need not examine the rel ationship in every case, but rather when
it has "doubts " about the acceptability of the price. In those cases, Article 1.2(a) requires an
examination of the circumstances of sale, and also requires, if the customs administration has
grounds for considerin g the relationship influenced the price, the customs authority to
"communicate its grounds to the importer " and give the importer "a reasonable opportunity to
respond. "