PH trumps Thailand in cigarette dispute

The Appellate Body of the World Trade Organization sided with the Philippines in a dispute over cigarette taxes and duties with Thailand, ruling with finality that Thailand was unfairly treating cigarette imports from the Philippines.

In a report released last June 17, the Appellate Body upheld an earlier-issued Panel Report by the WTO Dispute Settlement Body, saying Thailand acted inconsistently with its WTO obligations and acted counter to provisions of the General Agreement on Tariffs and Trade.

The Philippines in 2008 asked the WTO panel to scrutinize the customs, fiscal and health measures that the Thai government imposed on imported cigarettes. In a report issued last year, the panel declared that Thailand indeed acted inconsistently with its WTO obligations.

The report stated that Thailand failed to treat imported cigarettes the same way it did local brands. Thailand sought a reversal in the WTO panel’s ruling.

The Philippine complaint to the WTO was filed on behalf of Philip Morris Philippines Manufacturing Inc., which cited the Thai government’s bias against imported cigarette brands, particularly in terms of the customs valuation practices, excise tax, health tax, TV tax, value-added tax regime, retail licensing requirements, and import guarantees imposed upon cigarette importers.

The Philippines claimed that these measures were administered in violation of GATT 1994 Article X 3a, or in a “partial and unreasonable manner.”

Philip Morris cannot go straight to the WTO to file a complaint. Only governments are allowed to do that on behalf of businesses that are operating in their countries.

“Philip Morris welcomes the final decision of the WTO favoring the Philippines over Thailand on a trade dispute involving Philippine-made cigarettes exported to Thailand. We hope that with the finality of the decision, Thailand will revise its relevant customs and tax rules found to be non-compliant with WTO requirements. Further, we are hopeful that all issues relating to Philip Morris exports to Thailand will now be settled favorably by Thai authorities,” Philip Morris Philippines managing director Chris Nelson said in a statement issued Saturday.

Before seeking the assistance of the Philippine government to elevate its concern to the WTO, there were bilateral discussions with Thailand starting in October 2006. Philip Morris also filed a complaint with the Association of Southeast Asian Nations Consultation to Solve Trade and Investment Issues in September 2007.

When Thailand failed to reply to this complaint, the case was raised to the Asean Compliance Board in December 2007, and then to the WTO Dispute Settlement Board in 2008.