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

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

 

 

 


TABLE OF CONTENTS

 

1   Introduction.. 23

1.1   Complaint by the Philippines. 23

1.2   Panel establishment and composition. 26

1.3   Panel proceedings. 27

1.3.1   General 27

1.3.2   Preliminary ruling requests related to the scope of this Article 21.5 proceeding. 27

1.3.3   Request for leave to correct typographical errors in a submission. 29

1.3.4   Procedural ruling requests related to lawyer-client privilege. 29

1.3.5   Amicus curiae submissions. 30

1.3.6   Second recourse to Article 21.5 by the Philippines. 31

1.3.7   Request for leave to comment on the comments on the draft descriptive part of the Panel Report 31

2   Factual aspects. 32

2.1   Introduction. 32

2.2   PMTL and the relevant Thai government agencies. 32

2.3   The measures challenged in this proceeding. 33

3   Parties' requests for findings and recommendations. 33

4   Arguments of the parties. 36

5   Arguments of the third parties. 36

6   Interim review... 36

6.1   Introduction. 36

6.2   General parameters guiding our consideration of the parties' requests for additional findings on certain arguments or issues. 37

6.3   Descriptive part 37

6.4   The ACWL/Commerce letters and lawyer-client privilege. 38

6.5   The Board of Appeals Ruling. 38

6.6   The Criminal Charges. 42

6.7   The VAT notification requirement 48

7   Findings. 50

7.1   Initial considerations. 50

7.1.1   Introduction. 50

7.1.2   Jurisdiction of the Panel 50

7.1.2.1   The scope of Article 21.5 compliance proceedings. 50

7.1.2.2   The measures at issue in this proceeding. 53

7.1.3   The ACWL/Commerce letters and lawyer-client privilege. 55

7.1.3.1   Introduction. 55

7.1.3.2   Main arguments of the parties. 56

7.1.3.3   Analysis by the Panel 57

7.1.3.3.1   General considerations. 57

7.1.3.3.2   The circumstances surrounding the ACWL/Commerce letters. 61

7.1.3.4   Conclusion. 65

7.1.4   The relevance of Thailand's developing country status. 65

7.2   The Board of Appeals Ruling. 66

7.2.1   General 66

7.2.1.1   Factual background. 66

7.2.1.2   Claims and order of analysis. 68

7.2.1.3   Claims not pursued. 70

7.2.1.4   Principles of interpretation applicable to the CVA. 70

7.2.1.5   Standard of review.. 72

7.2.2   Claim under Articles 1.1 and 1.2(a), second sentence, of the CVA. 72

7.2.2.1   Introduction. 72

7.2.2.2   Main arguments of the parties. 74

7.2.2.3   Analysis by the Panel 76

7.2.2.3.1   General considerations. 76

7.2.2.3.2   The BoA's examination of the circumstances of sale. 83

7.2.2.4   Conclusion. 116

7.2.3   Claim under Articles 1.1 and 1.2(a), third sentence, of the CVA. 117

7.2.3.1   Introduction. 117

7.2.3.2   Main arguments of the parties. 117

7.2.3.3   Analysis by the Panel 119

7.2.3.3.1   General considerations. 119

7.2.3.3.2   The applicability of Article 1.2(a), third sentence, to the BoA. 120

7.2.3.3.3   The communications between the BoA and PMTL. 124

7.2.3.4   Conclusion. 125

7.2.4   Claim under Article 5.1(a)(i) of the CVA. 125

7.2.4.1   Introduction. 125

7.2.4.2   Main arguments of the parties. 126

7.2.4.3   Analysis by the Panel 126

7.2.4.3.1   General considerations. 126

7.2.4.3.2   The BoA's deduction for P&GE. 127

7.2.4.4   Conclusion. 128

7.2.5   Claim under Article 5.1(a)(ii) of the CVA. 128

7.2.5.1   Introduction. 128

7.2.5.2   Main arguments of the parties. 129

7.2.5.3   Analysis by the Panel 130

7.2.5.3.1   General considerations. 130

7.2.5.3.2   The BoA's deduction for transport costs. 132

7.2.5.4   Conclusion. 134

7.2.6   Claim under Article 5.1(a)(iv) of the CVA. 134

7.2.6.1   Introduction. 134

7.2.6.2   Main arguments of the parties. 135

7.2.6.3   Analysis by the Panel 136

7.2.6.3.1   General considerations. 136

7.2.6.3.2   The BoA's deduction for provincial taxes. 138

7.2.6.4   Conclusion. 147

7.2.7   Claim under Article 11.3 of the CVA. 148

7.2.7.1   Introduction. 148

7.2.7.2   Main arguments of the parties. 148

7.2.7.3   Analysis by the Panel 149

7.2.7.3.1   General considerations. 149

7.2.7.3.2   The reasons provided in the BoA Ruling. 152

7.2.7.4   Conclusion. 156

7.2.8   Claim under Article 16 of the CVA. 156

7.2.8.1   Introduction. 156

7.2.8.2   Main arguments of the parties. 157

7.2.8.3   Analysis by the Panel 158

7.2.8.3.1   General considerations. 158

7.2.8.3.2   The applicability of Article 16 to the BoA. 158

7.2.8.3.3   The explanation provided after the BoA Ruling. 161

7.2.8.4   Conclusion. 162

7.3   The Criminal Charges. 163

7.3.1   General 163

7.3.1.1   Factual description of the Charges. 163

7.3.1.1.1   Events culminating in the Charges. 163

7.3.1.1.2   Section 27 of the Customs Act 166

7.3.1.1.3   The content of the Charges and the Annex. 167

7.3.1.1.4   Events subsequent to the issuance of the Charges. 167

7.3.1.2   Claims and order of analysis. 168

7.3.1.3   Claims not pursued. 169

7.3.2   Preclusion. 170

7.3.2.1   Introduction. 170

7.3.2.2   Main arguments of the parties. 170

7.3.2.3   Analysis by the Panel 172

7.3.2.3.1   General considerations. 172

7.3.2.3.2   Relationship between the Charges and the DSI investigation. 173

7.3.2.4   Conclusion. 177

7.3.3   Close nexus. 177

7.3.3.1   Introduction. 177

7.3.3.2   Main arguments of the parties. 178

7.3.3.3   Analysis by the Panel 180

7.3.3.3.1   General considerations. 180

7.3.3.3.2   Timing, nature and effects of the Charges. 182

7.3.3.4   Conclusion. 193

7.3.4   Ripeness. 194

7.3.4.1   Introduction. 194

7.3.4.2   Main arguments of the parties. 194

7.3.4.3   Analysis by the Panel 197

7.3.4.3.1   General considerations. 197

7.3.4.3.2   Existence of a distinct "measure". 199

7.3.4.3.3   Existence of a "determination" for purposes of the CVA. 202

7.3.4.3.4   Speculation on future measures or events. 205

7.3.4.4   Conclusion. 207

7.3.5   Applicability of the CVA to the Charges. 207

7.3.5.1   Introduction. 207

7.3.5.2   Main arguments of the parties. 207

7.3.5.3   Analysis by the Panel 210

7.3.5.3.1   General considerations. 210

7.3.5.3.2   The agency that filed the Charges. 214

7.3.5.3.3   The meaning of the Charges. 216

7.3.5.3.4   The consequences of the Charges. 221

7.3.5.3.5   The "intention to defraud" aspect of the Charges. 222

7.3.5.4   Conclusion. 225

7.3.6   Consistency of the Charges with CVA disciplines. 225

7.3.6.1   Introduction. 225

7.3.6.2   Analysis by the Panel 226

7.3.6.2.1   General considerations. 226

7.3.6.2.2   Claim under Articles 1.1 and 1.2(a), second sentence, of the CVA. 228

7.3.6.2.3   Claims under Articles 2.1 and/or 3.1 of the CVA. 235

7.3.6.3   Conclusion. 237

7.3.7   Article XX of the GATT 1994. 237

7.3.7.1   Introduction. 237

7.3.7.2   Main arguments of the parties. 238

7.3.7.3   Analysis by the Panel 240

7.3.7.3.1   Applicability of Article XX of the GATT 1994 to the CVA. 240

7.3.7.3.2   Justification under Article XX(a) or XX(d) 245

7.3.7.4   Conclusion. 246

7.3.8   Article 10 of the CVA. 246

7.3.8.1   Introduction. 246

7.3.8.2   Main arguments of the parties. 247

7.3.8.3   Analysis by the Panel 247

7.3.8.3.1   General considerations. 247

7.3.8.3.2   The evidence before the Panel 250

7.3.8.4   Conclusion. 255

7.4   The VAT notification requirement 255

7.4.1   General 255

7.4.1.1   Factual background. 255

7.4.1.2   Claims and order of analysis. 257

7.4.2   The operation of the VAT notification requirement 257

7.4.2.1   Introduction. 257

7.4.2.2   Temporal scope of the Panel's analysis. 258

7.4.2.3   PMTL's ability to ensure that its notification is correct 260

7.4.2.3.1   Section 27 of the Competition Act 260

7.4.2.3.2   The RRSP and the actual average market price. 262

7.4.2.3.3   Market research. 264

7.4.2.3.4   Statements by importers. 265

7.4.2.3.5   Conclusion. 268

7.4.2.4   Consequences of an incorrect notification. 268

7.4.3   Claim under Article X:1 of the GATT 1994. 272

7.4.3.1   Introduction. 272

7.4.3.2   Main arguments of the parties. 273

7.4.3.3   Analysis by the Panel 274

7.4.3.3.1   General considerations. 274

7.4.3.3.2   Existence of an "administrative ruling" subject to Article X:1. 275

7.4.3.4   Conclusion. 281

7.4.4   Claim under Article X:3(a) of the GATT 1994. 281

7.4.4.1   Introduction. 281

7.4.4.2   Main arguments of the parties. 282

7.4.4.3   Analysis by the Panel 283

7.4.4.3.1   General considerations. 283

7.4.4.3.2   "administer". 284

7.4.4.3.3   "in a reasonable manner". 286

7.4.4.4   Conclusion. 289

7.4.5   Claim under Article III:4 of the GATT 1994. 290

7.4.5.1   Introduction. 290

7.4.5.2   Main arguments of the parties. 290

7.4.5.3   Analysis by the Panel 292

7.4.5.3.1   General considerations. 292

7.4.5.3.2   "less favourable treatment". 294

7.4.5.4   Legislative changes in the course of the proceeding. 298

7.4.5.5   Conclusion. 300

8   Conclusions and recommendations. 300