WTO asked: Is Thailand snubbing cigarette ruling?

The Philippines has asked the World Trade Organization (WTO) to review Thailand’s compliance with a ruling issued five years ago ordering it to impose a fair valuation of tariffs on imported cigarettes.

Ruling in favor of the Philippines, which filed the case in favor of Philip Morris Philippines Manufacturing Inc. (now Philip Morris Fortune Tobacco Corp.), the WTO had determined Thailand gave imported cigarette brands less favorable treatment between August 2006 and September 2007 in terms of customs valuation practices, excise taxes, health taxes, TV taxes, value-added tax regimes, retail licensing requirements and import guarantees. It also said Thailand exempted domestic cigarettes from administrative requirements like the filing of tax returns, filing of revenue and expense reports and other related reports.

According to the WTO, the Philippines submitted last May 4 “a request for consultations with Thailand under Article 21.5 of the Dispute Settlement Understanding (DSU) to review measures adopted by Thailand following the adoption by the Dispute Settlement Body (DSB) on July 15, 2011 of the Appellate Body and panel report in the case, ‘Thailand—Customs and fiscal measures on cigarettes from the Philippines.’”

Under Article 21.5 of the WTO DSU, a panel can be established to rule whether the implementation of the recommendations and rulings has been carried out.

“Where there is disagreement as to the existence or consistency with a covered agreement of measures taken to comply with the recommendations and rulings, such dispute shall be decided through recourse to these dispute settlement procedures, including wherever possible a resort to the original panel,” the article stated.

“The panel shall circulate its report within 90 days after the date of referral of the matter to it. When the panel considers that it cannot provide its report within this time frame, it shall inform the DSB in writing of the reasons for the delay together with an estimate of the period within which it will submit its report,” it added.

In November last year, the Philippines submitted a report to the WTO that stated it remained “deeply concerned” of Thailand’s customs treatment of imported cigarettes.

The Philippines again raised the alarm early this year after receiving news that Thai prosecutors charged Philip Morris Thailand Ltd. with tax evasion for allegedly under-declaring the value of 272 batches of cigarettes imported from the Philippines. The total cost of the imported goods and duties was estimated to be more than 20 billion baht ($557 million).

If found guilty, Philip Morris Thailand would have to face a fine four times the estimated cost of the imported goods, including taxes.

Trade officials had expressed fear the results of this tax evasion case would have a bearing on some two million Filipino tobacco farmers currently dependent on the operations of Philip Morris, which is the country’s biggest manufacturer of cigarettes.

Thailand is the biggest export destination of this product.