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I. General back to top
A. Concept of Customs Valuation
1. In Colombia
— Ports of Entry, the parties focused their
arguments relating to Colombia’s use of indicative prices on a series
of factual determinations concerning the actual nature and functioning
of indicative prices within Colombia’s customs procedures. Panama
considered that the use of indicative prices for the payment of customs
duties and taxes constituted customs valuation, whereas Colombia was of
the view that the indicative prices regime did not constitute
customs valuation but was used as a customs control mechanism. To
address the question whether indicative prices are used for the purpose
of customs valuation within the meaning of the Customs Valuation
Agreement, the Panel in Colombia — Ports of Entry first
examined the concept of customs valuation pursuant to the Customs
Valuation Agreement:
“The Panel notes that the Customs Valuation Agreement does
not provide a definition for customs valuation. Article 15 of the Customs
Valuation Agreement does however include a definition of ‘customs
value’. The term ‘customs value of imported goods’ is defined in
Article 15.1(a) of the Customs Valuation Agreement as ‘the
value of the goods for the purposes of levying ad valorem duties of
customs on imported goods’. The Panel believes that this definition of
customs value is useful in understanding what customs valuation means
within the Customs Valuation Agreement. …
…
In light of the dictionary definitions of valuation and value, as
well as the definition of customs value provided in Article 15 of the Customs
Valuation Agreement, the Panel considers that the ordinary meaning
of the concept of customs valuation is straightforward. Essentially,
customs valuation involves the process of determining the monetary worth
or price of imported goods for the purpose of levying customs duties.
With this understanding of the meaning of customs valuation, the Panel
will consider whether Colombia determines the customs value of imports
through the use of its indicative prices regime.”(1)
2. The Panel in that dispute further elaborated on the meaning of
customs valuation in the context of its analysis of indicative prices
used by Colombia:
“In the Panel’s view, the two central aspects within the concept
of customs valuation are (i) the value of the goods, which is
used (ii) for the purposes of levying ad valorem customs duties.
The first question is whether the indicative prices set by Colombia
represent the ‘value of the goods’. In light of the ordinary
meaning of customs valuation, indicative prices whenever higher than the
declared value reflect the ‘value of the goods’ imported into
Colombia. Accordingly, the question arises whether the value assigned to
goods entering Colombia is used for the purposes of levying customs
duties. The Panel notes that the term ‘levy’ is defined in the Oxford
English Dictionary as ‘the collection of an assessment, duty or
tax’, while the Black’s Law Dictionary defines ‘levy’ as
‘the imposition of a fine or tax’. The key issue is thus whether
Colombia’s customs authorities collect customs duties on the
basis of indicative prices.
…
The parties disagree on whether Colombia collects duties based on
indicative prices. This raises the larger issue of whether the ‘payment’
of duties is in fact a payment strictu sensu or instead a
guarantee in the form of a cash deposit, as claimed by Colombia.
In the Panel’s view, ‘payment’ and ‘guarantee’ are two
different legal concepts that may not be equated lightly. This is true
irrespective of the form that the guarantee may take, whether a bank
guarantee, guarantee provided by an insurance company, cash deposit, or
any other kind of guarantee. …the future obligation of payment that is
secured by a guarantee cannot be confused with the obligation to provide
that guarantee.”(2)
3. In light of the meaning of customs valuation as clarified above
and having assessed how the indicative prices regime operates in
Colombia, the Panel in Columbia — Ports of Entry concluded that
Colombia’s use of indicative prices constitutes customs valuation
within the meaning of the Customs Valuation Agreement because payments
made by importers are payments strictu sensu and not guarantees
in the form of a cash deposit.(3)
B. Standard of Review
4. In Thailand
— Cigarettes
(Philippines), the Panel set out
that an objective assessment under Article 11 of the DSU was the proper
standard for its review of the complainants’ claims under the Customs
Valuation Agreement. The Panel further elaborated that the objective
assessment must be understood in the light of the relevant obligations
of the substantive agreement at issue.(4) As for the claims under the
Customs Valuation Agreement, the Panel therefore observed that its
objective assessment must be understood in the light of the relevant
obligations under the Customs Valuation Agreement, particularly the
grounds and explanations to be provided by the customs authority at the
time of determination pursuant to Articles 1.2(a),
7.3 and 16 of the
Customs Valuation Agreement.
1. Claims under Articles 1.1 and 1.2(a)
5. With respect to the complainant’s claims under
Articles 1.1 and
1.2(a) that Thai Customs improperly rejected the transaction value of
the imported cigarettes at issue, the Panel in Thailand — Cigarettes
(Philippines) considered that the appropriate standard of review for it
was to assess the consistency of Thai Customs’ decision based on the
grounds as well as the explanation provided by Thai Customs pursuant to
Articles 1.2(a) and 16. The Panel explained that:
“[T]he precise standard applicable to a panel’s review of a
claim, and in particular to the factual aspects of a claim, depends on
whether the panel must conduct an analysis of the facts as the first
trier of facts or as a reviewer of factual determinations made by
domestic authorities. We understand this distinction to be based on the
nature of the specific obligations under the particular provision of a
given WTO-covered agreement. …
The Philippines’ claim under Articles 1.1 and
1.2(a) of the Customs
Valuation Agreement that Thai Customs improperly rejected the declared
transaction values of the subject entries of cigarettes, requires us to
make an objective assessment of whether Thai Customs examined the
circumstances of the sale between PM Thailand and PM Philippines within
the meaning of Article 1.2(a). … the parties’ arguments in this
regard are focused on whether Thai Customs examined the evidence
submitted by PM Thailand at the time of determination and whether the
Thai Customs’ determination not to accept the transaction value of the
cigarettes at issue can be justified by such evidence. Our mandate in
examining the claims under Articles 1.1 and 1.2(a) is therefore to
assess whether the Thai Customs’ determination under Article 1.2(a) is
supported by the factual evidence before it, but not to determine
as the first trier of facts whether the relationship between PM Thailand
and PM Philippines influenced the price based on the information
submitted by PM Thailand at the time of the valuation determination.
The substantive obligation under the Customs Valuation Agreement that
is relevant to the formulation of the applicable standard of review of
the Philippines’ claims under Articles 1.1 and
1.2(a), is the
obligation imposed on a customs administration under Article 1.2(a) to
communicate its grounds for considering that, in the light of the
information provided by the importer, the relationship influenced the
price. Further, under Article 16, upon request from the importer, the
customs administration must provide a written explanation as to how the
customs value was determined …
Consequently, an objective assessment of whether Thai Customs
properly rejected the transaction value by examining the circumstances
of sale within the meaning of Article 1.2(a) must be based on the
grounds as well as on the explanation provided by Thai Customs under
Articles 1.2(a) and 16 respectively.(5) We find support for our view in
the Appellate Body’s statement in US — Lamb …
…
The Appellate Body also emphasized that a panel must critically
examine a domestic authority’s explanation ‘in depth, and in the
light of the facts before the panel’… .
In this connection, we further recall the Appellate Body’s
reasoning that panels need not necessarily confine their review of a
domestic authority’s determination to an examination of that
determination in terms of the factual and legal arguments put forward by
the interested parties during the domestic investigation. The Appellate
Body in US — Countervailing Duty Investigation on DRAMS also
stated, ‘this is not to say that a panel is prohibited from examining
whether the agency has given a reasoned and adequate explanation for its
determination, in particular, by considering other inferences that could
reasonably be drawn from — and explanations that could reasonably be
given to — the evidence on record. Indeed, a panel must undertake such
an inquiry’.(6)
2. Claims under Article 7.1
6. The Panel in Thailand
— Cigarettes (Philippines)
prescribed the standard appropriate for its review of the Philippines’
claim under Article 7.1. The Panel explained that the basis for its
assessment of whether Thai Customs’ application of the deductive
valuation method was consistent with Article 7.1
was Thai Customs’
explanations provided pursuant to Article 16 as well as information
given to the importer under Article 7.3.(7) The Panel stated that:
“Our mandate in examining the Philippines’ claim under
Article
7.1 is to make an objective assessment of whether Thai Customs properly
applied the deductive valuation method in determining the customs values
of the cigarettes at issue in accordance with the disciplines under Article
7.1 and the principles of the deductive valuation method as
prescribed in Article 5. We considered above that in objectively
assessing the factual aspects of the customs administration’s
determinations, we may neither conduct a de novo review nor
completely defer to the administration’s determination.
In examining the Philippines’ claim Articles 1.1 and
1.2(a)
…, we
clarified that our objective assessment of the claims must be based on
the grounds and explanations provided by Thai Customs at the time of
determination pursuant to Articles 1.2(a) and
16. Under Article
16, in
particular, a customs authority is required to make clear and give
details of not only the basis for rejecting the transaction value, but
also how the chosen deductive valuation method was applied for the
calculation of the final customs value.
In applying a valuation method falling under Article
7, customs
authorities are required under Article 7.3 to inform the importer
in writing of the customs value determined under Article 7 and the
method used to determine such value if the importer so requests. …the
Philippines made a claim under Article 7.3 in this dispute. In order to
set the standard for our review of the Philippines’ claim under
Article 7.1, we consider the obligation imposed on the customs authority
under Article 7.3 also relevant. This is because our objective
assessment of Thailand’s compliance with its obligations under
Article 7.1 requires us to base our review of the factual determinations made by
Thai Customs when it applied the valuation method under
Article 7.1 on
Thai Customs’ explanations and information at the time of
determination.”(8)
7. In examining the parties’ substantive arguments on the
Philippines’ claim under Article 7.1, the Panel observed that Thai
Customs never explained at the time of the determination why it decided
not to deduct certain items under the deductive valuation method used.
The Philippines argued that Thai Customs’ failure to explain the basis
for its decision pursuant to Articles 7.3 and
16 prevents the Panel from
basing its decision on ex post explanations provided by Thailand
in the Panel proceeding.(9) The Panel considered that in light of the
standard of review formulated for its examination of the Philippines’
claim under Article 7.1, it could conclude based on the absence of such
explanation that Thai Customs failed to apply the deductive valuation
method consistently with Article 7.1.(10) Nonetheless, the Panel proceeded
to examine the parties’ substantive arguments under Article
7.1:
“[D]uring the course of the proceeding, both parties heavily
substantiated their arguments related to the deductibility of the three
items at issue. Particularly, Thailand explained in detail the reason
why Thai Customs, at the time of the domestic proceeding, decided not to
deduct the three items at issue. In these circumstances, we consider
that making an assessment of Thai Customs’ decision not to deduct
these three items, as explained in this proceeding based on the evidence
before Thai Customs at the time of the determination, helps to resolve
the parties’ dispute relating to the deductibility of the concerned
items.(11)”(12)
C. Sequential Nature of the Valuation Methods
in Articles 1 Through 7
8. In Colombia
— Ports of Entry, the Panel explained the
sequential nature of the valuation methods in Articles 1 through
7.1 of
the Customs Valuation Agreement:
“[T]he Customs Valuation Agreement provides for sequential
valuation methods in Articles 1 through 7.1.
Article 1 establishes the
primacy of the transaction value as the valuation method. Whenever
customs authorities consider that the transaction value of the imported
good, as defined in Article 1, cannot be used, authorities must follow,
in a sequential manner, the valuation methods provided for in Article 2
(transactional value of identical goods), Article 3 (transaction value
of similar goods), Article 5 (deductive method) and
Article 6 (computed
value) of the Customs Valuation Agreement. Where none of the
methods in Articles 1 to 6 are available, Article 7 allows customs
authorities to resort to any other reasonable means to determine the
customs value, provided such methods are consistent with the principles
and general provisions of the Customs Valuation Agreement and of GATT
1994. In doing so, customs authorities must not use any of the
methods prohibited in paragraph 2 of Article 7.
…
The Panel considers that national customs authorities are required to
apply the various customs valuation methods laid down in Articles
1, 2, 3, 5 and
6 of the Customs Valuation Agreement on a case-by-case
basis, so as to reflect the particular conditions of the sale of the
product in question. The Panel considers that, inasmuch as the customs
values for subject goods are established on a fixed basis for broad
categories of products without any examination of the specific
circumstances surrounding the transaction at issue, indicative prices do
not reflect any of the methodologies set out in the referred provisions.
…
The Panel acknowledges that the sequential nature of the various
valuation methods permits national customs authorities to proceed from
one method to the next without violating the previous method, provided
the former cannot be used. However, the structure and design of the
indicative prices system … prevents Colombian customs authorities from
sequentially applying the customs valuation methods provided in Articles
1 through 6. Indeed, when determining the value of subject goods
imports, Colombian customs authorities are required to systematically
apply a methodology that does not reflect any of the methods provided
for in these provisions, i.e. the use of indicative prices, unless the
transactional value is higher than the indicative price.
The Panel therefore finds that … as well as the various resolutions
establishing indicative prices, which together mandate the use of
indicative prices for customs valuation purposes, are inconsistent with
the obligation to conduct customs valuation of subject goods based on
the sequential application of the methods established by Articles
1, 2, 3, 5 and
6 of the Customs Valuation Agreement.”(13)
9. In Thailand
— Cigarettes (Philippines), regarding the
Philippines’ claim under Article 7.1 in respect of Thailand’s
alleged violation of the sequencing obligation, the Panel did not
consider that Article 7.1 could form the basis for an independent
sequencing claim under the Customs Valuation Agreement:
“As we noted above, the primary basis for customs value under the
Customs Valuation Agreement is the transaction value. Whenever the
customs value cannot be determined based on the transaction value under
Article 1 for the reasons authorized under the same provision, the
methods under Articles 2 through 7 are to be used in the sequential
order. …
…
Next, we address the Philippines’ claim under Article 7.1 in
respect of Thailand’s alleged violation of the sequencing obligation.
The text of Article 7.1 stipulates that resort to
Article 7.1 for
customs valuation is conditioned on the situation where ‘the customs
value of the imported goods cannot be determined under the provisions of
Articles 1 through 6’. As such, Article 7 may only be applied if the
customs value of the imported goods cannot be determined under the
provisions of Articles 1 through 6. We understand that the Philippines’
sequencing claim under Article 7.1 stems from this part of
Article 7.1.
In our view, this phrase in Article 7.1 lays down a condition or
requirement that needs to be met before a customs authority can use the
valuation principles under Article 7.1. As such, we do not consider that
Article 7.1 can form the basis for an independent sequencing claim under
the Customs Valuation Agreement. We consider that the Philippines’
claim pertaining to this part of Article 7.1 rather falls within the
Philippines’ claim that Thailand improperly applied the deductive
valuation method under Article 7.1 …”(14)
II. General Introductory
Commentary back to top
A. Text of General Introductory Commentary
1. The primary basis for customs value under this Agreement is “transaction
value” as defined in Article 1. Article 1 is to be read together with
Article 8 which provides, inter alia, for adjustments to the
price actually paid or payable in cases where certain specific elements
which are considered to form a part of the value for customs purposes
are incurred by the buyer but are not included in the price actually
paid or payable for the imported goods. Article 8 also provides for the
inclusion in the transaction value of certain considerations which may
pass from the buyer to the seller in the form of specified goods or
services rather than in the form of money. Articles 2 through
7 provide
methods of determining the customs value whenever it cannot be
determined under the provisions of Article 1.
2. Where the customs value cannot be determined under the provisions
of Article 1 there should normally be a process of consultation between
the customs administration and importer with a view to arriving at a
basis of value under the provisions of Article 2 or
3. It may occur, for
example, that the importer has information about the customs value of
identical or similar imported goods which is not immediately available
to the customs administration in the port of importation. On the other
hand, the customs administration may have information about the customs
value of identical or similar imported goods which is not readily
available to the importer. A process of consultation between the two
parties will enable information to be exchanged, subject to the
requirements of commercial confidentiality, with a view to determining a
proper basis of value for customs purposes.
3. Articles 5 and
6 provide two bases for determining the customs
value where it cannot be determined on the basis of the transaction
value of the imported goods or of identical or similar imported goods.
Under paragraph 1 of Article 5 the customs value is determined on the
basis of the price at which the goods are sold in the condition as
imported to an unrelated buyer in the country of importation. The
importer also has the right to have goods which are further processed
after importation valued under the provisions of Article 5 if the
importer so requests. Under Article 6 the customs value is determined on
the basis of the computed value. Both these methods present certain
difficulties and because of this the importer is given the right, under
the provisions of Article 4, to choose the order of application of the
two methods.
4. Article 7 sets out how to determine the customs value in cases
where it cannot be determined under the provisions of any of the
preceding Articles.
Members,
Having
regard to the Multilateral Trade Negotiations;
Desiring to further the objectives of GATT 1994 and to secure
additional benefits for the international trade of developing countries;
Recognizing the importance of the provisions of
Article VII of
GATT 1994 and desiring to elaborate rules for their application in order
to provide greater uniformity and certainty in their implementation;
Recognizing the need for a fair, uniform and neutral system for
the valuation of goods for customs purposes that precludes the use of
arbitrary or fictitious customs values;
Recognizing that the basis for valuation of goods for customs
purposes should, to the greatest extent possible, be the transaction
value of the goods being valued;
Recognizing that customs value should be based on simple and
equitable criteria consistent with commercial practices and that
valuation procedures should be of general application without
distinction between sources of supply;
Recognizing that valuation procedures should not be used to
combat dumping;
Hereby agree as follows:
B. Interpretation and Application of the General Introductory
Commentary
1. General
(a) Adoption of the decisions of the Tokyo Round Committee
10. At its meeting of 12 May 1995, the Committee on Customs Valuation
agreed, inter alia, to adopt the decisions adopted by the Tokyo
Round Committee on Customs Valuation relating to the interpretation and
administration of the Customs Valuation Agreement.(15)
(b) Implementation of the Customs Valuation Agreement
11. At its meeting of 18–19 October 2000, the General Council
requested the Committee on Customs Valuation to consider three proposals
relating to the implementation of the Customs Valuation Agreement.(16) The
Committee reported to the General Council on its consideration of these
matters.(17) Following adoption of the Ministerial
Declaration(18) and the
Decision on Implementation-Related Issues and Concerns(19) at Doha, the
Committee on Customs Valuation was requested to carry out the mandate
contained in paragraph 12(b) of the Ministerial Declaration and
paragraph 13 of the Decision on Implementation-Related Issues and
Concerns, as well as paragraph 8.3 of the Decision on
Implementation-Related Issues and Concerns. The Committee reported to
the Trade Negotiations Committee on its consideration of the former(20),
and to the General Council on its consideration of the latter.(21)
2. Transaction value as the primary basis for customs value
12. In Colombia
— Ports of Entry, the Panel confirmed that
the Customs Valuation Agreement prescribes the transaction value as the
primary customs valuation method:
“The primacy of the transaction value as a customs valuation method
and the sequential nature of the valuation methods derives from the ‘General
Introductory Comment’ to this Agreement. This Comment explains that
the ‘primary basis for customs value under this Agreement is “transaction
value” as defined in Article 1’, while also indicating that ‘Articles
2 through 7 provide methods of determining the customs value whenever it
cannot be determined under the provisions of Article 1’. In addition,
the Preamble to the Agreement makes explicit reference to the crucial
role of the transaction value in customs valuation.
The Panel therefore understands that the Customs Valuation
Agreement imposes an obligation on national authorities to determine
the customs value of imported goods based on the ‘transaction value’
and, whenever that is not possible, to sequentially apply the customs
valuation methods provided for in Articles 1, 2,
3, 5, 6 and
7.1 of the Agreement.”(22)
Part I: Rules on Customs Valuation
III. Article 1
back to top
A. Text of Article 1
Article 1
1.
The customs value of imported goods shall be the transaction
value, that is the price actually paid or payable for the goods when
sold for export to the country of importation adjusted in accordance
with the provisions of Article 8, provided:
(a) that there are no restrictions as to the disposition or use of
the goods by the buyer other than restrictions which:
(i) are imposed or required by law or by the public authorities in
the country of importation;
(ii) limit the geographical area in which the goods may be resold; or
(iii) do not substantially affect the value of the goods;
(b) that the sale or price is not subject to some condition or
consideration for which a value cannot be determined with respect to the
goods being valued;
(c) that no part of the proceeds of any subsequent resale, disposal
or use of the goods by the buyer will accrue directly or indirectly to
the seller, unless an appropriate adjustment can be made in accordance
with the provisions of Article 8; and
(d) that the buyer and seller are not related, or where the buyer and
seller are related, that the transaction value is acceptable for customs
purposes under the provisions of paragraph 2.
2.
(a) In determining whether the transaction value is acceptable for
the purposes of paragraph 1, the fact that the buyer and the seller are
related within the meaning of Article 15 shall not in itself be grounds
for regarding the transaction value as unacceptable. In such case the
circumstances surrounding the sale shall be examined and the transaction
value shall be accepted provided that the relationship did not influence
the price. If, in the light of information provided by the importer or
otherwise, the customs administration has grounds for considering that
the relationship influenced the price, it shall communicate its grounds
to the importer and the importer shall be given a reasonable opportunity
to respond. If the importer so requests, the communication of the
grounds shall be in writing.
b) In a sale between related persons, the transaction value shall be
accepted and the goods valued in accordance with the provisions of
paragraph 1 whenever the importer demonstrates that such value closely
approximates to one of the following occurring at or about the same
time:
(i) the transaction value in sales to unrelated buyers of identical
or similar goods for export to the same country of importation;
(ii) the customs value of identical or similar goods as determined
under the provisions of Article 5;
(iii) the customs value of identical or similar goods as determined
under the provisions of Article 6;
In applying the foregoing tests, due account shall be taken of
demonstrated differences in commercial levels, quantity levels, the
elements enumerated in Article 8 and costs incurred by the seller in
sales in which the seller and the buyer are not related that are not
incurred by the seller in sales in which the seller and the buyer are
related.
(c) The tests set forth in
paragraph 2(b) are to be used at the
initiative of the importer and only for comparison purposes. Substitute
values may not be established under the provisions of paragraph 2(b).
B. Text of Interpretative Note to Article 1
Note to Article 1: Price Actually Paid or Payable
1. The price actually paid or payable is the total payment made or to
be made by the buyer to or for the benefit of the seller for the
imported goods. The payment need not necessarily take the form of a
transfer of money. Payment may be made by way of letters of credit or
negotiable instruments. Payment may be made directly or indirectly. An
example of an indirect payment would be the settlement by the buyer,
whether in whole or in part, of a debt owed by the seller.
2. Activities undertaken by the buyer on the buyer’s own account,
other than those for which an adjustment is provided in Article
8, are
not considered to be an indirect payment to the seller, even though they
might be regarded as of benefit to the seller. The costs of such
activities shall not, therefore, be added to the price actually paid or
payable in determining the customs value.
3. The customs value shall not include the following charges or
costs(23), provided that they are distinguished from the price actually
paid or payable for the imported goods:
(a) charges for construction, erection, assembly, maintenance or
technical assistance, undertaken after importation on imported goods
such as industrial plant, machinery or equipment;
(b) the cost of transport after importation;
(c) duties and taxes of the country of importation.
4. The price
actually paid or payable refers to the price for the imported goods.
Thus the flow of dividends or other payments from the buyer to the
seller that do not relate to the imported goods are not part of the
customs value.
Paragraph 1(a)(iii)
Among restrictions which would not render a price actually paid or
payable unacceptable are restrictions which do not substantially affect
the value of the goods. An example of such restrictions would be the
case where a seller requires a buyer of automobiles not to sell or
exhibit them prior to a fixed date which represents the beginning of a
model year.
Paragraph 1(b)
1. If the sale or price is subject to some condition or consideration
for which a value cannot be determined with respect to the goods being
valued, the transaction value shall not be acceptable for customs
purposes. Some examples of this include:
(a) the seller establishes the price of the imported goods on
condition that the buyer will also buy other goods in specified
quantities;
(b) the price of the imported goods is dependent upon the price or
prices at which the buyer of the imported goods sells other goods to the
seller of the imported goods;
(c) the price is established on the basis of a form of payment
extraneous to the imported goods, such as where the imported goods are
semi-finished goods which have been provided by the seller on condition
that the seller will receive a specified quantity of the finished goods.
2. However, conditions or considerations relating to the production
or marketing of the imported goods shall not result in rejection of the
transaction value. For example, the fact that the buyer furnishes the
seller with engineering and plans undertaken in the country of
importation shall not result in rejection of the transaction value for
the purposes of Article 1. Likewise, if the buyer undertakes on the
buyer’s own account, even though by agreement with the seller,
activities relating to the marketing of the imported goods, the value of
these activities is not part of the customs value nor shall such
activities result in rejection of the transaction value.
Paragraph 2
1. Paragraphs 2(a) and
2(b) provide different means of establishing
the acceptability of a transaction value.
2. Paragraph 2(a) provides that where the buyer and the seller are
related, the circumstances surrounding the sale shall be examined and
the transaction value shall be accepted as the customs value provided
that the relationship did not influence the price. It is not intended
that there should be an examination of the circumstances in all cases
where the buyer and the seller are related. Such examination will only
be required where there are doubts about the acceptability of the price.
Where the customs administration have no doubts about the acceptability
of the price, it should be accepted without requesting further
information from the importer. For example, the customs administration
may have previously examined the relationship, or it may already have
detailed information concerning the buyer and the seller, and may
already be satisfied from such examination or information that the
relationship did not influence the price.
3. Where the customs administration is unable to accept the
transaction value without further inquiry, it should give the importer
an opportunity to supply such further detailed information as may be
necessary to enable it to examine the circumstances surrounding the
sale. In this context, the customs administration should be prepared to
examine 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, in order to determine
whether the relationship influenced the price. Where it can be shown
that the buyer and seller, although related under the provisions of
Article 15, buy from and sell to each other as if they were not related,
this would demonstrate that the price had not been influenced by the
relationship. As an example of this, if the price had been settled in a
manner consistent with the normal pricing practices of the industry in
question or with the way the seller settles prices for sales to buyers
who are not related to the seller, this would demonstrate that the price
had not been influenced by the relationship. As a further example, 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 (e.g. on an annual basis)
in sales of goods of the same class or kind, this would demonstrate that
the price had not been influenced.
4. Paragraph 2(b) provides an opportunity for the importer to
demonstrate that the transaction value closely approximates to a “test”
value previously accepted by the customs administration and is therefore
acceptable under the provisions of Article 1. Where a test under
Paragraph 2(b) is met, it is not necessary to examine the question of
influence under paragraph 2(a). If the customs administration has
already sufficient information to be satisfied, without further detailed
inquiries, that one of the tests provided in Paragraph 2(b)
has been
met, there is no reason for it to require the importer to demonstrate
that the test can be met. In Paragraph 2(b) the term “unrelated buyers”
means buyers who are not related to the seller in any particular case.
Paragraph 2(b)
A number of factors must be taken into consideration in determining
whether one value “closely approximates” to another value. These
factors include the nature of the imported goods, the nature of the
industry itself, the season in which the goods are imported, and,
whether the difference in values is commercially significant. Since
these factors may vary from case to case, it would be impossible to
apply a uniform standard such as a fixed percentage, in each case. For
example, a small difference in value in a case involving one type of
goods could be unacceptable while a large difference in a case involving
another type of goods might be acceptable in determining whether the
transaction value closely approximates to the “test” values set
forth in paragraph 2(b) of Article 1.
C. Interpretation and Application of Article 1
1.
Valuation
of carrier media bearing software for data-processing
equipment
13. At its meeting of 12 May 1995, the Committee on Customs Valuation
adopted the decision of the Tokyo Round Committee on the valuation of
carrier media bearing software for data-processing equipment.(24)
2. Article 1.1
14. In Thailand
— Cigarettes (Philippines), the Panel
explained that Article 1.1 sets out the principle that the transaction
value is the customs value of imported goods provided certain conditions
are met. The Panel further elaborated that, in a related-party
transaction, this principle is linked to the conditions prescribed in
Article 1.2(a):
“Article 1 sets out the principle under the Customs Valuation
Agreement that the customs value of imported goods must be the
transaction value provided that the conditions set out in paragraphs (a)–(d)
are met.
Sub-paragraph (d) of Article 1 stipulates, as one of the conditions
for accepting the transaction value, that the buyer and the seller
should not be related. In a situation where they are related
within the meaning of Article 15, the customs value of the concerned
imported goods will be the transaction value if that transaction value
is acceptable for customs purposes under Article
1.2. Therefore, the
obligation under Article 1.1 of the Customs Valuation Agreement to use
the transaction value as the customs value of imported goods is linked
to Article 1.2(a) in a situation where the buyer and the seller are
related.”(25)
3. Article 1.2(a)
(a) Obligation to “examine” the circumstances of sale in a
related-party transaction to determine the acceptability of the
transaction value as the customs value of imported goods
15. Based on the text of the first two sentences of
Article 1.2(a),
the Panel in Thailand — Cigarettes (Philippines) considered
that, in a related party situation, Article 1.2(a)
imposes an obligation
on customs authorities to “examine” the circumstances of the sale
before deciding the acceptability of the importer’s declared
transaction value. The Panel observed that the fact that the importer
and the exporter were related was not a sufficient basis for the customs
authorities to reject the transaction value.(26) The Panel further
explained that, based on the results of such examination, the customs
authorities must then accept the transaction value provided that the
relationship did not influence the price. Regarding the examination to
be conducted by the customs authorities under Article 1.2(a), the Panel
clarified that Article 1.2(a), read in conjunction with the
Interpretative Note to Article 1.3, entails certain procedural as well
as substantive obligations.
16. As for the procedural steps that the customs authorities’
examination entails under Article 1.2(a), the Panel clarified that:
“Article 1.2(a), taken together with paragraph 2 of the
Interpretative Notes to Article
1.2, indicates that only when customs
authorities have doubts about the transaction value in a related-party
transaction, they will need to inquire into the acceptability of the
transaction value.
… In examining the circumstances of the sale, therefore, the
customs administration may, if and to the extent necessary, choose to
ask the importer to provide information relevant to the customs
authorities’ examination. Paragraph 3 of the Interpretative Notes to
Article 1.2(a) illustrates specific examples of the aspects of the
transactions that the customs administration should be prepared to
examine.
Article 1.2(a) further requires that if the customs administration
has grounds for considering that the relationship influenced the price
‘in light of the information provided by the importer or otherwise’,
the customs administration shall communicate such grounds to the
importer so as to ‘give the importer a reasonable opportunity to
respond’. The phrase ‘in light of the information provided by the
importer or otherwise’ indicates that
Article 1.2(a) does not
impose an obligation on the customs administration to seek information
or clarification from the importer when it decides to look further into
the circumstances of sale. Particularly, the term ‘or otherwise’
in the subject sentence and the absence of the requirement to seek
information from the importer in
Article 1.2(a) confirms that a customs
administration may reach the decision on whether it has grounds for
preliminarily considering that the relationship influenced the price
without informing the concerned importer of its need for further inquiry
or seeking information from the importer. In other words, while a
customs administration may choose to inform the importer of its decision
to examine the circumstances of sale, it is not required to do so
in the light of the absence of language to that effect in
Article 1.2(a). This is in contrast to the phrase in
Article 1.2(a) — ‘[the
customs administration] shall communicate its grounds to the
importer’ — that imposes an explicit obligation on the customs
administration to communicate its grounds regarding its consideration to
the importer.
Despite the absence of the explicit obligation to inform the importer
of its decision to examine the circumstances of the sale, however, we
wish to emphasize that it may still be highly desirable for the customs
administration to do so in order to facilitate the valuation process by
respecting the transparency principle underlying the process. …
Although
Article 1.2(a) does not further elaborate on specific
procedures subsequent to customs authorities’ communication of
grounds, it is logical to understand that the scope of
Article 1.2(a) extends to the submission by the importer of further information in
response to the customs authorities’ communication of grounds for its
consideration and the customs authorities’ subsequent determination to
accept or reject the declared transaction value. If a customs authority
decides to reject the transaction value, another valuation method must
be used by observing the sequential order of the methods stipulated in
Articles 2, 3, 5, 6 and
7.
Overall, therefore, the determination of whether to accept the
transaction value as the customs value in a related-party situation
under
Article 1.2(a) entails the following procedural steps:
- The importer declares a transaction value for the goods imported;
- The customs authority is required to examine the circumstances of the sale only if it has doubts about the validity of the transaction value of the imported goods, because the fact that the buyer and seller are related should not in itself be grounds for regarding the transaction value as unacceptable;
- The customs authority shall examine the circumstances of the sale in the light of the information provided by the importer or otherwise and communicate to the importer the grounds for preliminarily
considering that the relationship influenced the price;
- The customs authority gives the importer a reasonable opportunity to respond. Given the opportunity, the importer submits further information; and
- The customs authority makes a .final decision on whether to accept the transaction value.
Based on the procedural steps required in the customs authorities’
examination of the circumstances of the sale
as above, we can infer that the temporal scope of an examination under
Article 1.2(a) begins when a customs authority’s doubts on the
validity of the transaction value trigger the need for an examination of
the acceptability of the transaction value, and ends when the customs
authority makes a final decision on the acceptability of that transaction
value. Once that determination is made, either the transaction value
will be accepted as declared by the importer Articles 1.1 or another
method will be used according to the sequential order of the valuation
methods to determine the value of the goods imported. …”(27)
17. Having clarified the procedural aspect of the examination under
Article 1.2(a), the Panel in Thailand — Cigarettes (Philippines)
proceeded to analyse the substantive nature of the examination of the
circumstances of sale that the customs administration must conduct. The
Panel first observed the different positions put forward by the parties
on this issue. The Philippines argued that a customs authority is
obliged to undertake an active investigative role by requesting and
gathering information from the importer as well as other WTO Members and
by analysing information pertaining to the circumstances of the
concerned transaction. On the other hand, Thailand was of the view that
the obligation on the customs authority will be met as long as it
notifies the importer of its preliminary determination and reviews the
information provided by the importer before reaching a final conclusion
on the acceptability of the transaction value. The Panel turned to the
ordinary meaning of as well as the context for the term “examine” in
Article 1.2(a) to reach the conclusion that both the customs authorities
and importers have respective responsibilities under
Article 1.2(a):
“The ordinary meaning of the term ‘examine’ signifies that the
customs authorities must carefully consider, investigate and inquire
into the information provided by importers concerning the
circumstances of the transaction. We also consider that the principle
under the Customs Valuation Agreement that the primary basis of
valuation is the transaction value sheds light on the nature of
examination to be conducted concerning the circumstances of sale in a
related-party situation. Given that the transaction value should
normally form the basis of a valuation, any situation giving rise to a
reason(s) for questioning the transaction value would naturally demand
the customs authorities’ critical consideration of, inquiry into, and
investigation of, the relevant situation.
At the same time, we understand that the principal responsibility of
providing relevant information that may show the acceptability of the
transaction value, in accordance with the method under either
Article 1.2(a) or 1.2(b), rests upon the importer. This is related to the fact
that the importer and, in certain situations, its related seller in an
exporting country are in possession of the facts relevant to the
question before the customs authorities and therefore responsible for
providing customs authorities with sufficient information to enable them
to assess the acceptability of the transaction value. Specifically, for
example,
Article 1.2(a) refers to ‘in the light of information
provided by the importer’. The Interpretative Note to
Article 1.2(a) also stipulates in paragraph 3 that the customs administration should
‘give the importer an opportunity to supply such further detailed
information as may be necessary to enable it to examine the
circumstances surrounding the sale’. The text of paragraph 3 of the
Interpretative Note to
Article 1.2(a) therefore makes it clear that the
responsibility imposed on importers for providing sufficient information
is directly linked to the objective of enabling the customs
authorities to examine the circumstances of the sale.
…
In sum, we consider that the customs authorities and importers have
respective responsibilities under Article 1.2(a). The customs
authorities must ensure that importers be given a reasonable opportunity
to provide information that would indicate that the relationship did not
influence the price. Importers are responsible for providing information
that would enable the customs authority to examine and assess the
circumstances of sale so as to determine the acceptability of the
transaction value. Provided with such information, the customs
authorities must conduct an ‘examination’ of the circumstance of
sale, which would require an active, critical review and consideration
of the information before them.”(28)
18. In reaching this conclusion, the Panel in Thailand
— Cigarettes (Philippines) also referred to the Appellate Body’s
analysis in US — Wheat Gluten of the nature of the
investigation to be conducted by the competent authorities in the
context of the Agreement on Safeguards. The Panel recalled the Appellate
Body’s statement that the Agreement on Safeguards envisages that the
interested parties play a central role in the investigation and that
they will be a primary source of information for the competent
authorities.(29) The Panel stated, “both the obligation to examine
the validity of the transaction value under Article 1.2(a) of the
Customs Valuation Agreement and the obligation to carry out a full investigation
to conduct a proper evaluation of all of the relevant factors under
Article 3.1 of the Agreement on Safeguards are imposed on ‘domestic
authorities’.”(30) The Panel further elaborated that:
“As the
Appellate Body inferred from the term ‘investigate’, we consider
therefore the word ‘examine’ also suggests ‘a proper degree of
activity on the part of the [customs authorities] because authorities
charged with conducting an inquiry or a study … must actively seek out
pertinent information’. To that extent, in order to properly examine
the circumstances of a given transaction, the customs authority must
clearly indicate to the importer how it evaluates the information
submitted by the importer, including the insufficiency of the
information submitted and, if necessary and feasible, any further
particular type of information that may help them assess the validity of
the transaction value. This must, in our view, be carried out at the communication
of grounds stage (the required step under
Article 1.2(a) identified …
above) whereby the customs authority will explain the grounds for
considering preliminarily that the relationship influenced the price so
as to give a reasonable opportunity for the importer to respond.
…
We underline in this regard that the obligations imposed on the
customs authorities to examine the circumstances of sale under the
Customs Valuation Agreement at the same time need to be understood
against the succinct language of Article 1.2(a) of the Customs Valuation
Agreement. Particularly, for this reason, we are mindful that the extent
and scope of the obligations imposed on customs authorities to ‘examine’
under Article 1.2(a) of the Customs Valuation
Agreement cannot be the
same as that imposed on domestic investigative authorities under the WTO
agreements concerning trade remedy measures.”(31)
19. The Panel in Thailand — Cigarettes (Philippines) found
that Thailand acted inconsistently with Articles 1.1 and
1.2(a) in
rejecting the transaction value of the concerned imported cigarettes
because Thai Customs failed to properly examine the circumstances of the
transaction between PM Thailand (the importer) and PM Philippines (the
seller). In this connection, the Panel highlighted the following
factors: (i) the importer did provide evidence to Thai Customs to
establish that the relationship between the importer and the seller did
not influence the price and thus fulfilled its procedural responsibility
under Article 1.2(a) to provide information to the customs
administration; and (ii) upon receiving the evidence submitted by the
importer, Thai Customs failed to explain to the importer why it
considered the information provided by the importer was insufficient and
consequently decided to reject the transaction value.(32) The Panel
emphasized, “upon receiving information and data from [the importer],
Thai Customs was required to inquire into, investigate and critically
consider such information and data and communicate its grounds and
explain the final determination.”(33) The Panel further explained that:
“In the light of the nature of the obligation to ‘examine’
under Article 1.2(a), as clarified … above, upon receiving information
and data from PM Thailand, Thai Customs was required to inquire into,
investigate and critically consider such information and data and
communicate its grounds and explain the final determination. In this
regard, we wish to emphasize that this question should be distinguished
from the question of whether the content of the information provided by
PM Thailand did not establish the validity of the transaction value as
explained by Thailand [before the Panel]. Addressing the latter would
amount to acting outside our mandate to make an objective assessment of
the matter at issue.
Turning back to the question before us, we recognize that it may well
be that Thai Customs critically considered the information and data
submitted based on the reasons it has provided to the Panel in this
proceeding. However, we would not be in the position to find that Thai
Customs did in fact examine such information unless such reasoning is
provided in its communication of grounds and its explanations to the
importer in accordance with the obligations under the Customs Valuation
Agreement. In its explanation given in the 12 April 2007 letter, Thai
Customs does not elucidate the reason why it reached the conclusion that
the relationship influenced the price with respect to the entries at
issue. We therefore do not have the evidence confirming that Thai
Customs did in fact examine the circumstances of the sale by critically
considering all information and data before it at the time of determination, as it claims in this proceeding.(34) We do not find any
other explanation in the subject letter than that the importer and the
exporter are related and that the importer failed to meet the burden of
proof. As explicitly stipulated in Article 1.2(a), however, the mere
fact that an importer is related to an exporter is not sufficient in
itself for a customs administration to reject the transaction value. Article 1.2(a)
requires the customs administration to examine the
circumstances of the sale in a related-party transaction. Consequently,
it follows that Thai Customs was under an obligation to explain why it
decided to reject the transaction value, including the basis for
considering that the relationship influenced the price, after it had
examined the circumstances of the sale.
Thailand further submits that the grounds for Thai Customs not using
the transaction value as the customs value were communicated in its
letter of 19 December 2006, namely that PM Thailand failed to establish
that the relationship did not influence the transfer price. Other than
this statement, the concerned letter does not include any of the other
explanations that Thailand provided in this proceeding, as noted in the
previous paragraph.
Without informing the importer of the basis for its
consideration that the information provided up until that stage of the
process did not establish the validity of the transaction value, the
importer would not have been able to effectively, if at all, respond to
the authority’s consideration. This would further hinder the ability
of the customs authorities to properly examine the circumstances of sale
under Article 1.2(a).
Furthermore, Thai Customs’ explanation for the final determination
of the final customs value for the entries at issue is contained in its
letter dated 12 April 2007 and the minutes of the 6 March 2007 meeting. …
Thai Customs indicates in the letter as the reason for its decision
to reject the transaction value the following statement: ‘[t]he
company and the overseas seller are related parties, and it cannot be
proven whether the relationship has an influence on the determination of
customs values or not’. However, none of the explanations provided by
Thailand in this Panel proceeding were set out in the Thai Customs’
letter of 12 April 2007. In response to the Panel question of whether
Thai Customs ever communicated the same explanations that were given in
this Panel proceeding to PM Thailand during the domestic proceedings,
Thailand submits that although its explanations before the Panel are
much more detailed, they are fully consistent with the grounds on which
Thai Customs acted and the explanations provided to PM Thailand at the
time. As already addressed above, however, in the light of the nature of
the obligation to ‘examine’ the circumstances of the sale,
considered in the due process objective of Article 1.2(a)
as well as the
Customs Valuation Agreement in its entirety, the absence of any
explanations on why the information provided was considered insufficient
and consequently led Thai Customs to reject the transaction value
renders Thai Customs’ examination inconsistent with Article 1.2(a).
We address next the minutes of the 6 March 2007 meeting. The minutes
include the description of Thai Customs’ examination of the
circumstances of the sale; its determination to reject the transaction
value; and the alternative valuation methods considered to be used for
valuation of the cigarettes at issue. … we will assess whether the
minutes explain the basis for Thai Customs’ determination to reject
the transaction value in the light of the information and evidence
provided by PM Thailand… . This therefore shows that Thai Customs
considered it unnecessary to examine the circumstances of the sale in
respect of the cigarettes at issue imported in August 2006 based on its
examination and consequent determination in 2003 that the relationship
between PM Thailand and PM Philippines influenced the price of the
cigarettes imported at that time. As the Philippines points out, we do
not consider that the requirement to examine the circumstances of the
sale under Article 1.2(a) can be satisfied by simply referring back to
the examination conducted and determination reached in respect of the
transaction that took place three years before the current transaction
at issue. There may indeed be a situation where despite the gap in time,
the circumstances of both transactions between the same parties turn out
to be the same. Even in such a case, however, in our view, the customs
authorities are obliged under Article 1.2(a)
to explain the basis for
finding the current transaction to be the same as the previous
transaction which it had already examined.”(35)
(b) Obligation to communicate grounds for rejecting declared
transaction values
20. Regarding the nature of the obligations to communicate grounds
for rejecting declared transaction values under Article 1.2(a), the
Panel in Thailand — Cigarettes (Philippines) explained that:
“The term ‘ground[s]’ can be defined as ‘noun.
… 6
The basis of an opinion or argument, the reason or motive for an action,
(now freq. in pl.). In pl. also, sufficient reason or
reasons for, that. ME’.(36) When used in plural, as in
Article 1.2(a), ‘grounds’ thus means ‘sufficient reason or reasons’ for
an opinion or an action. Under Article 1.2(a), the grounds to be
provided to the importer are the customs authorities’ reasons for
considering, in the light of the information provided by the importer or
otherwise, that the relationship influenced the price. In this regard,
we recall our discussion above regarding the procedural steps to be
taken by customs authorities as well as importers under Article 1.2(a).
The importer is responsible for providing information relevant to the
acceptability of the transaction value once it has been notified by the
customs authority of the need to examine the circumstances of the sale
in related-party situations. Subsequently, the customs authority must
assess the information initially provided by the importer and
communicate its grounds for considering that the relationship influenced
the price based on the evidence provided if that is the preliminary
conclusion reached at that point in the process.
In this context, the obligation to communicate the grounds under
Article 1.2(a) can be temporarily distinguished from the obligation to
provide an explanation under Article 16 for how the final customs value
of the importer’s goods was determined. As the parties have also
clarified, the obligation to provide ‘grounds’ under Article 1.2(a)
arises during the valuation process. The obligation to ‘explain’
the determination of the customs value, on the other hand, does not
arise until after the customs authority has made a final assessment of
the customs value of the concerned goods. This temporal difference in
the process, in our view, thus affects the substantive nature of the
content of ‘grounds’ under Article 1.2(a)
and an ‘explanation’
under Article 16. Given that under
Article 1.2(a), the importer shall be
given a reasonable opportunity to further respond to the customs
authority’s ‘grounds’ for considering that the relationship
influenced the price, the ‘explanation’ to be provided after the
valuation process is completed must therefore include the assessment of
all relevant information, including that provided by the importer as a
response to the customs authority’s communication of its grounds
regarding its consideration.
Moreover, we consider that the right of the importer to have a
reasonable opportunity to respond to the customs authority’s grounds
for its consideration under Article 1.2(a) provides contextual basis
for the term ‘grounds’. As the Philippines suggests, in order for
the importer to have a reasonable opportunity to respond to the customs
authorities’ consideration, particularly if the customs authority
considers that there is insufficient information, the importer must not
be left to guess the reasons for the customs authorities’
consideration. The right of the importer to have ‘a reasonable
opportunity to respond’ under Article 1.2(a)
would lose its meaning
unless the importer is informed of at least the reason(s) why the
customs authority continues to question the acceptability of the
transaction value despite the evidence and information presented or
otherwise in the possession of the customs authority until that point.
In this regard, we do not find it necessary or useful for us to define
the exact extent and scope of ‘grounds’ to be provided under Article 1.2(a)
as they may vary depending on the factual circumstances presented
in each case. We do agree, however, with the Philippines that without
knowing the reasons for the authority’s consideration in relation to
the specific evidence before it, the importer would not be in the
position to effectively ‘respond’, for example, by further
elaborating on the relevance of the evidence it has already submitted
and presenting additional information. It would be desirable if a
customs authority could, to the extent possible, inform the importer of
the kind(s) of additional factual information that it considers may
prove useful in further assessing the acceptability of the transaction
value. It is difficult to conceive any other way in which the importer
can have a reasonable opportunity to respond to the customs authorities’
consideration that the relationship did influence the price.”(37)
21. In Thailand — Cigarettes (Philippines), the importer
provided Thai Customs with certain information and data to establish the
acceptability of the transaction value. Given these factual
circumstances, the Panel in Thailand — Cigarettes (Philippines)
found that Thai Customs’ grounds as provided to the importer (that the
importer and the seller are related parties … and the importer has yet
to prove if the said relationship influences the customs value
determination or not) did not satisfy the obligation under Article 1.2(a)
to communicate the grounds for its consideration.(38) The Panel
considered that “to the extent that Thai Customs was presented with
certain evidence, the grounds for its consideration that the
relationship between the buyer and the seller influenced the price must
be linked to that concerned evidence so as to assist the importer in
understanding the authority’s consideration.”(39)
IV. Article 2
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A. Text of Article 2
Article 2
1. (a)
If the customs value of the imported goods cannot be
determined under the provisions of Article 1, the customs value shall be
the transaction value of identical goods sold for export to the same
country of importation and exported at or about the same time as the
goods being valued.
(b) In applying this Article, the transaction value of identical
goods in a sale at the same commercial level and in substantially the
same quantity as the goods being valued shall be used to determine the
customs value. Where no such sale is found, the transaction value of
identical goods sold at a different commercial level and/or in different
quantities, adjusted to take account of differences attributable to
commercial level and/or to quantity, shall be used, provided that such
adjustments can be made on the basis of demonstrated evidence which
clearly establishes the reasonableness and accuracy of the adjustment,
whether the adjustment leads to an increase or a decrease in the value.
2. Where the costs and charges referred to in
paragraph 2 of Article
8 are included in the transaction value, an adjustment shall be made to
take account of significant differences in such costs and charges
between the imported goods and the identical goods in question arising
from differences in distances and modes of transport.
3. If, in applying
this Article, more than one transaction value of identical goods is
found, the lowest such value shall be used to determine the customs
value of the imported goods.
B. Text of Interpretative Note to Article 2
Note to Article 2
1. In applying Article
2, the customs administration shall, wherever
possible, use a sale of identical goods at the same commercial level and
in substantially the same quantities as the goods being valued. Where no
such sale is found, a sale of identical goods that takes place under any
one of the following three conditions may be used:
(a) a sale at the same commercial level but in different quantities;
(b) a sale at a different commercial level but in substantially the
same quantities; or
(c) a sale at a different commercial level and in different
quantities.
2. Having found a sale under any one of these three conditions
adjustments will then be made, as the case may be, for:
(a) quantity factors only;
(b) commercial level factors only; or
(c) both commercial level and quantity factors.
3. The expression “and/or” allows the flexibility to use the
sales and make the necessary adjustments in any one of the three
conditions described above.
4. For the purposes of Article
2, the transaction value of identical
imported goods means a customs value, adjusted as provided for in
paragraphs 1(b) and 2, which has already been accepted under Article
1.
5. A condition for adjustment because of different commercial levels
or different quantities is that such adjustment, whether it leads to an
increase or a decrease in the value, be made only on the basis of
demonstrated evidence that clearly establishes the reasonableness and
accuracy of the adjustments, e.g. valid price lists containing prices
referring to different levels or different quantities. As an example of
this, if the imported goods being valued consist of a shipment of 10
units and the only identical imported goods for which a transaction
value exists involved a sale of 500 units, and it is recognized that the
seller grants quantity discounts, the required adjustment may be
accomplished by resorting to the seller’s price list and using that
price applicable to a sale of 10 units. This does not require that a
sale had to have been made in quantities of 10 as long as the price list
has been established as being bona .de through sales at other
quantities. In the absence of such an objective measure, however, the
determination of a customs value under the provisions of Article 2 is
not appropriate.
C. Interpretation and Application of Article 2
22. At its meeting of 12 May 1995, the Committee on Customs Valuation
adopted the decision of the Tokyo Round Committee on Customs Valuation
relating to the rectification of the French text of paragraph 1 of the
Note to Articles 2 and 3.(40)
V. Article 3
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A. Text of Article 3
Article 3
1. (a)
If the customs value of the imported goods cannot be
determined under the provisions of Articles 1 and
2, the customs value
shall be the transaction value of similar goods sold for export to the
same country of importation and exported at or about the same time as
the goods being valued.
(b) In applying this Article, the transaction value of similar goods
in a sale at the same commercial level and in substantially the same
quantity as the goods being valued shall be used to determine the
customs value. Where no such sale is found, the transaction value of
similar goods sold at a different commercial level and/or in different
quantities, adjusted to take account of differences attributable to
commercial level and/or to quantity, shall be used, provided that such
adjustments can be made on the basis of demonstrated evidence which
clearly establishes the reasonableness and accuracy of the adjustment,
whether the adjustment leads to an increase or a decrease in the value.
2. Where the costs and charges referred to in
paragraph 2 of Article
8 are included in the transaction value, an adjustment shall be made to
take account of significant differences in such costs and charges
between the imported goods and the similar goods in question arising
from differences in distances and modes of transport.
3. If, in applying this Article, more than one transaction value of
similar goods is found, the lowest such value shall be used to determine
the customs value of the imported goods.
B. Text of Interpretative Note to Article 3
Note to Article 3
1. In applying
Article 3, the customs administration shall, wherever
possible, use a sale of similar goods at the same commercial level and
in substantially the same quantities as the goods being valued. Where no
such sale is found, a sale of similar goods that takes place under any
one of the following three conditions may be used:
(a) a sale at the same commercial level but in different quantities;
(b) a sale at a different commercial level but in substantially the
same quantities; or
(c) a sale at a different commercial level and in different
quantities.
2. Having found a sale under any one of these three conditions
adjustments will then be made, as the case may be, for:
(a) quantity factors only;
(b) commercial level factors only; or
(c) both commercial level and quantity factors.
3. The expression “and/or” allows the flexibility to use the
sales and make the necessary adjustments in any one of the three
conditions described above.
4. For the purpose of Article
3, the transaction value of similar
imported goods means a customs value, adjusted as provided for in
paragraphs 1(b) and 2, which has already been accepted under
Article 1.
5. A condition for adjustment because of different commercial levels
or different quantities is that such adjustment, whether it leads to an
increase or a decrease in the value, be made only on the basis of
demonstrated evidence that clearly establishes the reasonableness and
accuracy of the adjustment, e.g. valid price lists containing prices
referring to different levels or different quantities. As an example of
this, if the imported goods being valued consist of a shipment of 10
units and the only similar imported goods for which a transaction value
exists involved a sale of 500 units, and it is recognized that the
seller grants quantity discounts, the required adjustment may be
accomplished by resorting to the seller’s price list and using that
price applicable to a sale of 10 units. This does not require that a
sale had to have been made in quantities of 10 as long as the price list
has been established as being bona .de through sales at other
quantities. In the absence of such an objective measure, however, the
determination of a customs value under the provisions of Article 3 is
not appropriate.
C. Interpretation and Application of Article 3
23. With respect to the rectification of the French text of
paragraph
1 of the Note to Article 3, see paragraph 22
above.
VI. Article 4
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A. Text of Article 4
Article 4
If the customs value of the imported goods cannot be determined under
the provisions of Articles 1, 2 and
3, the customs value shall be
determined under the provisions of Article 5 or, when the customs value
cannot be determined under that Article, under the provisions of Article
6 except that, at the request of the importer, the order of application
of Articles 5 and 6 shall be reversed.
B. Interpretation and Application of Article 4
24. Paragraph 3 of Annex III allows developing countries to make a
reservation that would allow customs administrations the right to deny
an importer’s request to reverse the sequential order of the Articles
5 and 6. See interpretation and application of
paragraph 3 of Annex III
paragraph 83 below.
VII. Article 5
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A. Text of Article 5
Article 5
1. (a)
If the imported goods or identical or similar imported goods
are sold in the country of importation in the condition as imported, the
customs value of the imported goods under the provisions of this Article
shall be based on the unit price at which the imported goods or
identical or similar imported goods are so sold in the greatest
aggregate quantity, at or about the time of the importation of the goods
being valued, to persons who are not related to the persons from whom
they buy such goods, subject to deductions for the following:
(i) either the commissions usually paid or agreed to be paid or the
additions usually made for profit and general expenses in connection
with sales in such country of imported goods of the same class or kind;
(ii) the usual costs of transport and insurance and associated costs
incurred within the country of importation;
(iii) where appropriate, the costs and charges referred to in
paragraph 2 of Article
8; and
(iv) the customs duties and other national taxes payable in the
country of importation by reason of the importation or sale of the
goods.
(b) If neither the imported goods nor identical nor similar imported
goods are sold at or about the time of importation of the goods being
valued, the customs value shall, subject otherwise to the provisions of
paragraph 1(a), be based on the unit price at which the imported goods
or identical or similar imported goods are sold in the country of
importation in the condition as imported at the earliest date after the
importation of the goods being valued but before the expiration of 90
days after such importation.
2. If neither the imported goods nor identical nor similar imported
goods are sold in the country of importation in the condition as
imported, then, if the importer so requests, the customs value shall be
based on the unit price at which the imported goods, after further
processing, are sold in the greatest aggregate quantity to persons in
the country of importation who are not related to the persons from whom
they buy such goods, due allowance being made for the value added by
such processing and the deductions provided for in
paragraph 1(a).
B. Text of Interpretative Note to Article 5
Note to Article 5
1. The term “unit price at which
… goods are sold in the greatest
aggregate quantity” means the price at which the greatest number of
units is sold in sales to persons who are not related to the persons
from whom they buy such goods at the first commercial level after
importation at which such sales take place.
2. As an example of this, goods are sold from a price list which
grants favourable unit prices for purchases made in larger quantities.
|
Sale quantity |
Unit price |
Number of sales |
Total quantity Sold at
each price |
|
1–10 units |
100 |
10 sales of 5 units
5 sales of 3 units |
65 |
|
11–25 units |
95 |
5 sales of 11 units |
55 |
|
over 25 units |
90 |
1 sale of 30 units
1 sale of 50 units |
80 |
The greatest number of units sold at a price is 80; therefore, the
unit price in the greatest aggregate quantity is 90.
3. As another example of this, two sales occur. In the first sale 500
units are sold at a price of 95 currency units each. In the second sale
400 units are sold at a price of 90 currency units each. In this
example, the greatest number of units sold at a particular price is 500;
therefore, the unit price in the greatest aggregate quantity is 95.
4. A third example would be the following situation where various
quantities are sold at various prices.
|
(a) Sales |
|
|
Sale quantity |
Unit price |
|
40 units |
100 |
|
30 units |
90 |
|
15 units |
100 |
|
50 units |
95 |
|
25 units |
105 |
|
35 units |
90 |
|
5 units |
100 |
|
(b) Totals |
|
|
Total quantity sold |
Unit price |
|
65 |
90 |
|
50 |
95 |
|
60 |
100 |
|
25 |
105 |
In this example, the greatest number of units sold at a particular
price is 65; therefore, the unit price in the greatest aggregate
quantity is 90.
5. Any sale in the importing country, as described in
paragraph 1 above, to a person who supplies directly or indirectly free of charge or
at reduced cost for use in connection with the production and sale for
export of the imported goods any of the elements specified in paragraph
1(b) of Article 8, should not be taken into account in establishing the
unit price for the purposes of Article 5.
6. It should be noted that “profit and general expenses” referred
to in paragraph 1 of Article 5 should be taken as a whole. The figure
for the purposes of this deduction should be determined on the basis of
information supplied by or on behalf of the importer unless the importer’s
figures are inconsistent with those obtained in sales in the country of
importation of imported goods of the same class or kind. Where the
importer’s figures are inconsistent with such figures, the amount for
profit and general expenses may be based upon relevant information other
than that supplied by or on behalf of the importer.
7. The “general expenses” include the direct and indirect costs
of marketing the goods in question.
8. Local taxes payable by reason of the sale of the
goods for which a deduction is not made under the provisions of
paragraph 1(a)(iv) of Article 5 shall be deducted under the provisions
of paragraph 1(a)(i) of Article
5.
9. In determining either the commissions or the usual
profits and general expenses under the provisions of paragraph 1 of
Article 5, the question whether certain goods are “of the same class
or kind” as other goods must be determined on a case-by-case basis by
reference to the circumstances involved. Sales in the country of
importation of the narrowest group or range of imported goods of the
same class or kind, which includes the goods being valued, for which the
necessary information can be provided, should be examined. For the
purposes of Article 5, “goods of the same class or kind” includes
goods imported from the same country as the goods being valued as well
as goods imported from other countries.
10. For the purposes of paragraph 1(b) of Article 5,
the “earliest date” shall be the date by which sales of the imported
goods or of identical or similar imported goods are made in sufficient
quantity to establish the unit price.
11. Where the method in paragraph 2 of Article 5 is
used, deductions made for the value added by further processing shall be
based on objective and quantifiable data relating to the cost of such
work. Accepted industry formulas, recipes, methods of construction, and
other industry practices would form the basis of the calculations.
12. It is recognized that the method of valuation
provided for in paragraph 2 of Article 5 would normally not be
applicable when, as a result of the further processing, the imported
goods lose their identity. However, there can be instances where,
although the identity of the imported goods is lost, the value added by
the processing can be determined accurately without unreasonable
difficulty. On the other hand, there can also be instances where the
imported goods maintain their identity but form such a minor element in
the goods sold in the country of importation that the use of this
valuation method would be unjustified. In view of the above, each
situation of this type must be considered on a case-by-case basis.
C. Interpretation and Application of Article 5
1. Article 5.1
25. In Thailand — Cigarettes (Philippines),
the Philippines claimed that Thailand violated Article 5 by declining to
use that provision for impermissible reasons such as a lack of
contemporaneous financial information. The Panel stated that:
“We do not find in the text of Article 5 any
specific obligation according to which Members must use the method under
that provision rather than the subsequent valuation methods. In other
words, the provisions of Article 5 do not provide for the criteria to be
used in deciding whether the decision not to use the valuation method
under Article 5 is consistent or not with the obligations under
Article 5. Rather, Article 5 prescribes the principles to be applied in using
the deductive valuation method once the customs authority has decided to
use the deductive valuation method under Article 5. In our view,
declining to use Article 5 for impermissible reasons, namely, a lack of
contemporaneous financial information, would, for example, lead to a
finding that the condition for resorting to a method under Article 7.1
is not satisfied in the light of the text of the provisions under
Article 7.1. … We therefore find that the Philippines failed to
establish a prima facie case for its claim under Article
5.”
26. For the application of the deductive valuation
method using the principles under Article 5.1, see the section on
Article 7.1.
2. Article 5.2
27. Paragraph 4 of Annex III allows developing
countries to make a reservation with respect to the application of
paragraph 2. See interpretation and application of paragraph 4 of Annex III,
paragraph 84 below.
VIII. Article 6
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A. Text of Article 6
Article 6
1. The customs value of imported goods under the
provisions of this Article shall be based on a computed value. Computed
value shall consist of the sum of:
(a) the cost or value of materials and fabrication or
other processing employed in producing the imported goods;
(b) an amount for profit and general expenses equal
to that usually reflected in sales of goods of the same class or kind as
the goods being valued which are made by producers in the country of
exportation for export to the country of importation;
(c) the cost or value of all other expenses necessary
to reflect the valuation option chosen by the Member under paragraph 2 of Article
8.
2. No Member may require or compel any person not
resident in its own territory to produce for examination, or to allow
access to, any account or other record for the purposes of determining a
computed value. However, information supplied by the producer of the
goods for the purposes of determining the customs value under the
provisions of this Article may be verified in another country by the
authorities of the country of importation with the agreement of the
producer and provided they give sufficient advance notice to the
government of the country in question and the latter does not object to
the investigation.
B. Text of Interpretative Note to Article 6
Note to Article 6
1. As a general rule, customs value is determined
under this Agreement on the basis of information readily available in
the country of importation. In order to determine a computed value,
however, it may be necessary to examine the costs of producing the goods
being valued and other information which has to be obtained from outside
the country of importation. Furthermore, in most cases the producer of
the goods will be outside the jurisdiction of the authorities of the
country of importation. The use of the computed value method will
generally be limited to those cases where the buyer and seller are
related, and the producer is prepared to supply to the authorities of
the country of importation the necessary costings and to provide
facilities for any subsequent verification which may be necessary.
2. The “cost or value” referred to in
paragraph
1(a) of Article 6 is to be determined on the basis of information
relating to the production of the goods being valued supplied by or on
behalf of the producer. It is to be based upon the commercial accounts
of the producer, provided that such accounts are consistent with the
generally accepted accounting principles applied in the country where
the goods are produced.
3. The “cost or value” shall include the cost of
elements specified in paragraphs 1(a)(ii) and
(iii) of Article 8. It
shall also include the value, apportioned as appropriate under the
provisions of the relevant note to Article 8, of any element specified
in paragraph 1(b) of Article 8 which has been supplied directly or
indirectly by the buyer for use in connection with the production of the
imported goods. The value of the elements specified in paragraph
1(b)(iv) of Article 8 which are undertaken in the country of importation
shall be included only to the extent that such elements are charged to
the producer. It is to be understood that no cost or value of the
elements referred to in this paragraph shall be counted twice in
determining the computed value.
4. The “amount for profit and general expenses”
referred to in paragraph 1(b) of Article 6 is to be determined on the
basis of information supplied by or on behalf of the producer unless the
producer’s figures are inconsistent with those usually reflected in
sales of goods of the same class or kind as the goods being valued which
are made by producers in the country of exportation for export to the
country of importation.
5. It should be noted in this context that the “amount
for profit and general expenses” has to be taken as a whole. It
follows that if, in any particular case, the producer’s profit figure
is low and the producer’s general expenses are high, the producer’s
profit and general expenses taken together may nevertheless be
consistent with that usually reflected in sales of goods of the same
class or kind. Such a situation might occur, for example, if a product
were being launched in the country of importation and the producer
accepted a nil or low profit to offset high general expenses associated
with the launch. Where the producer can demonstrate a low profit on
sales of the imported goods because of particular commercial
circumstances, the producer’s actual profit figures should be taken
into account provided that the producer has valid commercial reasons to
justify them and the producer’s pricing policy reflects usual pricing
policies in the branch of industry concerned. Such a situation might
occur, for example, where producers have been forced to lower prices
temporarily because of an unforeseeable drop in demand, or where they
sell goods to complement a range of goods being produced in the country
of importation and accept a low profit to maintain competitivity. Where
the producer’s own figures for profit and general expenses are not
consistent with those usually reflected in sales of goods of the same
class or kind as the goods being valued which are made by producers in
the country of exportation for export to the country of importation, the
amount for profit and general expenses may be based upon relevant
information other than that supplied by or on behalf of the producer of
the goods.
6. Where information other than that supplied by or
on behalf of the producer is used for the purposes of determining a
computed value, the authorities of the importing country shall inform
the importer, if the latter so requests, of the source of such
information, the data used and the calculations based upon such data,
subject to the provisions of Article
10.
7. The “general expenses” referred to in
paragraph 1(b) of Article 6 covers the direct and indirect costs of
producing and selling the goods for export which are not included under paragraph
1(a) of Article 6.
8. Whether certain goods are “of the same class or
kind” as other goods must be determined on a case-by-case basis with
reference to the circumstances involved. In determining the usual
profits and general expenses under the provisions of Article
6, sales
for export to the country of importation of the narrowest group or range
of goods, which includes the goods being valued, for which the necessary
information can be provided, should be examined. For the purposes of
Article 6, “goods of the same class or kind” must be from the same
country as the goods being valued.
C. Interpretation and Application of Article 6
No jurisprudence or decision of a competent WTO body.
IX. Article 7
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A. Text of Article 7
Article 7
1. If the customs value of the imported goods cannot
be determined under the provisions of Articles 1 through
6, inclusive,
the customs value shall be determined using reasonable means consistent
with the principles and general provisions of this Agreement and of
Article VII of GATT 1994 and on the basis of data available in the
country of importation.
2. No customs value shall be determined under the provisions of this
Article on the basis of:
(a) the selling price in the country of importation of goods produced
in such country;
(b) a system which provides for the acceptance for
customs purposes of the higher of two alternative values;
(c) the price of goods on the domestic market of the country of
exportation;
(d) the cost of production other than computed values
which have been determined for identical or similar goods in accordance
with the provisions of Article 6;
(e) the price of the goods for export to a country other than the
country of importation;
(f) minimum customs values; or
(g) arbitrary or fictitious values.
3. If the importer so requests, the importer shall be
informed in writing of the customs value determined under the provisions
of this Article and the method used to determine such value.
B. Text of Interpretative Note to Article 7
Note to Article 7
1. Customs values determined under the provisions of
Article 7 should, to the greatest extent possible, be based on
previously determined customs values.
2. The methods of valuation to be employed under
Article 7 should be those laid down in Articles 1 through
6 but a
reasonable flexibility in the application of such methods would be in
conformity with the aims and provisions of Article
7.
3. Some examples of reasonable flexibility are as follows:
(a) Identical goods — the requirement that
the identical goods should be exported at or about the same time as the
goods being valued could be flexibly interpreted; identical imported
goods produced in a country other than the country of exportation of the
goods being valued could be the basis for customs valuation; customs
values of identical imported goods already determined under the
provisions of Articles 5 and 6 could be used.
(b) Similar goods — the requirement that the similar goods
should be exported at or about the same time as the goods being valued
could be flexibly interpreted; similar imported goods produced in a
country other than the country of exportation of the goods being valued
could be the basis for customs valuation; customs values of similar
imported goods already determined under the provisions of Articles 5 and
6 could be used.
(c) Deductive method — the requirement that the goods shall
have been sold in the “condition as imported” in paragraph 1(a) of
Article 5 could be flexibly interpreted; the “90 days” requirement
could be administered flexibly.
C. Interpretation and Application of Article 7
1. Article 7.1
(a) Condition for using a valuation method under Article 7
28. In Thailand — Cigarettes (Philippines), the Philippines
argued that Thailand violated the sequencing obligation contained in
Article 7.1. The Panel did not consider that
Article 7.1 can form the
basis for an independent sequencing claim under the Customs Valuation
Agreement.
“Next, we address the Philippines’ claim under
Article 7.1 in
respect of Thailand’s alleged violation of the sequencing obligation.
The text of
Article 7.1 stipulates that resort to
Article 7.1 for
customs valuation is conditioned on the situation where ‘the customs
value of the imported goods cannot be determined under the provisions of
Articles 1 through 6’. As such, Article 7 may only be applied if the
customs value of the imported goods cannot be determined under the
provisions of Articles 1 through 6. We understand that the Philippines’
sequencing claim under
Article 7.1 stems from this part of
Article 7.1.
In our view, this phrase in
Article 7.1 lays down a condition or
requirement that needs to be met before a customs authority can use the
valuation principles under
Article 7.1. As such, we do not consider that
Article 7.1 can form the basis for an independent sequencing claim under
the Customs Valuation Agreement. We consider that the Philippines’
claim pertaining to this part of
Article 7.1 rather falls within the
Philippines’ claim that Thailand improperly applied the deductive
valuation method under
Article 7.1 …”(41)
29. The Panel in Thailand — Cigarettes (Philippines)
found that the condition for using a valuation method under Article 7 was not met in the factual circumstances
of that case because Thai Customs had necessary financial data (i.e. financial data from prior years) to use the
valuation method under Article 5.(42) The Panel noted in this connection that financial data from prior years,
even if not the most current data, could be used for valuation under Article
5.(43)
(b) Application of the deductive valuation method under Article 7.1
30. In Thailand — Cigarettes (Philippines), the Philippines
claimed that Thai Customs valued the entries at issue inconsistently
with
Article 7.1 because it failed to make deductions for sales
allowances, provincial taxes and internal transportation costs. Thailand
argued that the importer did not provide sufficient evidence before Thai
Customs at the time of determination to justify the requested
deductions. In evaluating the proper application of the deductive
valuation method within the meaning of
Article 7.1, the Panel in Thailand
— Cigarettes (Philippines) made the following observation:
“The text of
Article 7.1, read together with paragraph 2 of the
Interpretative Note to Article 7, provides that when using a deductive
valuation method under
Article 7.1, a customs authority is required to
apply the same principles that would be applied under Article
5, with
allowance for a reasonable flexibility where Article 5 cannot be applied
strictly. The parties’ arguments concerning Thai Customs’ valuation
of the entries at issue are therefore based on the specific principles
to be applied in using the deductive valuation method as prescribed in
Article 5.”(44)
31. In light of the relationship between
Article 5 and
Article 7.1,
the Panel in Thailand — Cigarettes (Philippines) analysed the
deductibility of sales allowances, provincial taxes and internal
transportation costs under the principles of Article
5, particularly
Article 5.1(a) in order to assess the consistency of Thai Customs’
decision not to deduct these items with
Article 7.1. Furthermore, the
Panel addressed the procedural aspect of Thai Customs’ decision not to
deduct the items at issue under
Article 7.1.
(i) Procedural aspects
32. The parties in Thailand — Cigarettes (Philippines)
disputed the obligations imposed on both the importer and the customs
authority in the process of applying the deductive valuation method.
Referring to, inter alia, the general principle contained in
paragraph 2 of the General Introductory Commentary to the Customs
Valuation Agreement, the Panel emphasized that the process of
determining a customs value under the principles of Article 5 should be
a “process of consultation”. The Panel explained that:
“Although the first sentence of
paragraph 2 refers to ‘value
under the provisions of Article 2 or 3’, we consider that the spirit
of the Customs Valuation Agreement envisaged under this paragraph,
namely the determination of customs value through a process of
consultation between the customs administration and importer,
equally applies to other valuation methods. The phrase ‘using
reasonable means consistent with the principles and general provisions
of this Agreement’ in Article 7.1 also supports this view. As the
Philippines submits, while the importer is the party that typically
possesses relevant information for a deductive calculation, it is the
customs authority that knows the specific information necessary to
accept the requested deductions. Viewed in this light, it is difficult
to conceive that the drafters of the Agreement would have intended a
process of consultation between the customs administration and importer
to be limited solely to the valuation process under Article 2 or
3. …”
(45)
33. In light of the above and under the factual circumstances
of the dispute, the Panel in Thailand — Cigarettes (Philippines)
concluded that Thai Customs’ failure to properly consult the importer
on the information necessary for the requested deductions renders its
decision not to deduct the concerned items inconsistent with Article 7.1
of the Customs Valuation Agreement.
(ii) Substantive aspects — deductions in general and deductibility
of sales allowances, provincial taxes and transportation costs under the
principles of Article 5.1
34. Regarding the deductions for sales allowances, provincial taxes
and transportation costs, the parties in Thailand — Cigarettes
(Philippines) did not dispute that these items were, in principle,
deductible under
Article 5.1(a). The disagreement between the parties
was on the type of evidence required from the importer for the deduction
of these items. Specifically, the question at issue was whether, as a
general matter, the importer is required to prove that these expenses
are actually tied to the GAQ(46) sales based on which the unit price was
decided.(47)
35. First, the Panel addressed whether there was a general
requirement under Article 5.1 that deductions must be made only to the
extent that they reflect documented expenses that are actually tied to
the GAQ sale. The Panel did not find such a requirement:
“The Interpretative Note to Article 5 in paragraph 1 defines the
term ‘unit price at which … goods are sold in the greatest aggregate
quantity’ as ‘the price at which the greatest number of units is
sold in sales to persons who are not related to the persons from whom
they buy such goods at the first commercial level after importation at
which such sales take place’.
In this regard, we note that the terms ‘usually’ and ‘usual’
can be found in Article 5.1(a)(i) and (ii), which states, for example,
‘the commissions usually paid or agreed to be paid’, ‘the
additions usually made for profit and general expenses’ and ‘the usual
costs of transport and insurance and associated costs’. A plain
reading of these phrases therefore suggests that the deductions of the
commissions or the additions or the costs of transport as set out in Article 5.1(a)(i)
and (ii) need not necessarily be tied to a particular
unit price for the GAQ sale that is being used in the deductive value
calculation.
A treatise cited to by the parties also supports this view: ‘It
should be pointed out initially that the deductions will in general not
relate to the same resale(s) from which the price has just been derived’.
At the same time, we note the phrase ‘in general’ in this statement,
which appears to imply that there may be exceptional situations. We also
observe the Technical Committee’s commentary on Article 5.1 that ‘in
general, the application of the deductive valuation method under Article
5 of the Customs Valuation Agreement may differ on a set of
circumstances from another and thus the practical application of Article
5 requires a flexible approach, having regard to the circumstances in
each case’.
Considered overall, therefore, we do not find a general
requirement under Article 5.1, which can be applied to every situation,
that deductions must be made only to the extent that they reflect
documented expenses that are actually tied to the GAQ sale.
Particularly, items that fall within the categories of (i),
(ii) and
(iv) of Article 5.1(a) do not appear to require such a requirement in
the light of the terms used in the text of the provisions such as ‘usual’
and ‘payable’ and the statements in reference sources. Further, as
the Philippines submits, we do not see a logical reason to require that
deductions be tied to the particular GAQ sale, because the customs value
to be determined using the deductive valuation method under Article 5 is
not the customs value for that specific GAQ sale. It is rather the
customs value for a particular import subject to the customs’
valuation.”(48)
36. Regarding sales allowances, the parties debated on whether
the deductions of sales allowances can be made only if there is
information and data showing that such allowances are tied to a
particular unit price for the GAQ sale that is being used in the
deductive value calculation. Thailand argued that, as items such as
sales allowances, rebates and sales allowances are not expenses, but
instead form part of the unit price itself, it is reasonable for the
customs authority to accept deductions of these items only for discounts
that are tied to the particular unit price for the GAQ sale used in the
deductive value calculation. The Philippines submitted that where the
importer offers an allowance or discount on the GAQ price, that
allowance reduces the unit price at which the goods are sold, and must
therefore be deducted under Article 5 to provide a proper starting point
for a deductive calculation. The Panel agreed with Thailand’s view:
“We note that sales allowances, discounts and rebates are not one
of the items listed in Article 5.1(a)(i)–(iv). Nor do the
interpretative notes to Article 5 provide any guidance on the
deductibility of these expenses under Article
5.1(a). We also observe a
statement in the above-mentioned treatise cited to by the parties that
‘[price] means all direct and indirect net payments … excluding all
rebates, discounts and similar reductions in the price payable’. We
can infer from this statement that sales allowances are an item that
must be deducted from the sales price in order to arrive at the unit
price (GAQ price) within the meaning of Article 5. Therefore, to the
extent that sales allowances are included in the sales price, they must
be excluded from that sales price before deducting the items falling
within the categories under Article 5. We do not consider that the
Philippines is necessarily putting forward a different view on this
either… . the Philippines submits that, as sales allowances reduce the
unit price at which the goods are sold, they must be deducted under Article
5.1(a), without specifying a specific category under Article
5.1(a), to provide a proper starting point for a deductive calculation.
We therefore agree with Thailand that it is reasonable for the
customs administration to accept deductions only for sales allowances
that are tied to the particular unit price for the GAQ sale that is
being used in the deductive value calculation. Although the Philippines
asserts that the grant of sales allowances, and their amount, is a
function of factors including events in the marketplace; the evolution
of the business and marketing strategy; and, considerations relating to
particular customers (e.g. sales volumes), we do not see how this
assertion can disprove of Thailand’s position that deductions of sales
allowances (e.g. discounts, rebates and sales allowances) must be tied
to a particular unit price for the GAQ sale that is being used in the
deductive value calculation.(49)
…
In assessing the parties’ arguments in respect of the deduction of
sales allowances, we are not presented with any evidence that clarifies
whether the amount of sales allowances that a company declares for
deduction to the customs authorities must exactly match the amount of
sales allowances actually provided by the company in the period under
evaluation… . What is contested by Thailand is that the amounts of
sales allowances shown on the spreadsheet provided by PM Thailand are
less than the amounts requested for the deduction for Marlboro and
L&M. In the light of these circumstances, we do not see how the Thai
Customs’ decision not to deduct sales allowances at all, as opposed to
adjusting the deductible amount for the sales allowances of the imported
cigarettes at issue, can be justified. Even if Thailand’s position
concerning the determination of the deductible amount for sales
allowances were correct, this does not render the Thai Customs’
decision not to deduct sales allowances consistent with Article 5.1
of
the Customs Valuation Agreement.”(50)
37. As for provincial taxes, Thailand argued that unlike
national taxes, which are deductible if they are payable under
Article 5.1(a)(iv), provincial taxes are deductible if included in the
unit price on which the deductive value is based. The Philippines
asserted that Article 5.1(iv) requires the deduction of the national
taxes payable, not the taxes paid on the GAQ sales. The
Panel concluded that provincial taxes payable must be deducted if
the information shows usual payments made for local taxes even if
they are not included in the sales price based on which the deductive
valuation method will be applied under Article 5:
“Article 5.1(a)(iv) refers to ‘the customs duties and other
national taxes payable in the country of importation by reason of the
importation or sale of the goods’, but not to provincial taxes. ‘Local
taxes’ are however mentioned in the interpretative note to Article
5,
in paragraph 8, where it states, ‘local taxes payable by reason of the
sale of the goods for which a deduction is not made under the provisions
of paragraph 1(a)(iv) of Article 5 shall be deducted under the
provisions of paragraph 1(a)(i) of Article 5’. The phrase in the
Interpretative Note to Article 5 ‘local taxes payable by reason of the
sale of the goods’ mirrors the phrase in Article 1(a)(iv).
The term ‘payable’ can be defined as ‘adj. (Of a sum of
money or a negotiable instrument) that is to be paid. An amount may be
payable without being due. Debts are commonly payable long before they
fall due’. It can also be defined as ‘adjective. 1 Of a sum
of money, a bill, etc: that is to be paid; falling due (usu. at or on a
specified date or to a specified person). 2 Able to be paid’.
Therefore, the ordinary meaning of the term ‘payable’ refers to both
‘a sum of money that is to be paid without being due’ and ‘that is
due to be paid’. This suggests that national taxes and provincial
taxes subject to the deduction under Article 5 need not be related to
the GAQ sale. The phrase ‘by reason of the importation or sale of the
goods’ also supports the view that these taxes refer to those usually
to be paid upon importation and upon sale in the market.
Furthermore, paragraph 8 of the Interpretative Note to Article 5
states that ‘local taxes payable … for which a deduction is not made
under the provisions of paragraph 1(a)(iv) of Article 5 shall be
deducted under the provisions of paragraph 1(a)(i) of Article 5’.
Article 5.1(a)(i) refers to ‘either the commission usually paid
or agreed to be paid or the addition usually made for profit and
general expenses …’. Therefore, we consider that provincial taxes
payable must be deducted if the information shows usual payments
made for local taxes even if they are not included in the sales price
based on which the deductive valuation method will be applied under
Article 5.
Further, we note the statement in the above-mentioned treatise, as
Thailand points out, that ‘state and local taxes … are deductible if
included in the resale price upon which the [deductive value] is based’.
This statement, in our view, supports our view as it stipulates that
while state and local taxes are deductible if they are included
in the resale price, it does not necessarily imply that that is the only
situation in which state and local taxes can be deducted.”(51)
38. Regarding transportation costs, the Panel considered
that transportation costs need not be specifically linked to the GAQ sale for a deduction to be made
under Article 5:
“Article 5.1(a)(ii) refers to ‘the usual costs of
transport and insurance and associated costs occurred within the country
of importation’. As noted in paragraph 0 above, we consider that the
term usual in the provision indicates that the costs to be
deducted may not be specifically linked to the GAQ sale at issue.
Thailand refers to a statement in the treatise that the usual cost of
transportation should be, as far as possible in practice, the actual
average inland cost incurred in the resale of the imported goods. The
statement cannot however be understood as requiring transportation costs
to be specifically linked to the GAQ sale at issue. Furthermore, it is
not clear whether using the actual average inland cost incurred in the
resale of the imported goods was ‘possible’ in practice in the
situation at issue in this dispute. This is particularly so given that
Thai Customs did not seek any further information from PMT hailand in
this regard. We therefore do not agree with Thailand’s argument that
transportation costs need to be specifically linked to the GAQ sale for
a deduction to be made under Article 5.(52)
…
…Thai Customs understood and discussed at the 6 March 2007 meeting
that transportation costs in the country of importation, as one of the
items that are subject to deductions under Article
5, had to be deducted
in calculating the customs value of the cigarettes at issue. As we
explained above, a valuation process must be that of consultation
between an importer and a customs administration. To the extent that
transportation costs usually are incurred in the resale of goods in the
country of importation, Thai Customs had to rely on the available
evidence or, if not, consult PM Thailand as regards this item if it had
queries on the available evidence.”(53)
2. Article 7.2
(a) General
39. In Colombia — Ports of Entry, the Panel explained that
Article 7.2 provides that reasonable means of valuation, permitted under
Article 7.1, cannot be determined using a series of prohibited customs
valuation methods.
(b) Paragraph (b)
40. In Colombia — Ports of Entry, with respect to
Article 7.2(b), Panama contended that because the Colombian measure requires the
use of an indicative price for customs valuation purposes whenever the
transaction value is lower than the indicative price, it is tantamount
to the acceptance of the higher of two alternative values.(54)
The Panel found that:
“[ ] … as well as the various resolutions establishing indicative
prices, impose ‘the acceptance for customs purposes of the higher of
two alternative values’… . for products subject to indicative
prices, customs duties and sales taxes are levied at the time of
inspection on the basis of the higher of two values: the declared value
or the indicative price. The Panel therefore finds that … [ ] as well
as the various resolutions establishing indicative prices, which mandate
the use of indicative prices for customs valuation purposes are
inconsistent with Article 7.2(b) of the Customs Valuation Agreement.”(55)
(c) Paragraph (f)
41. Developing countries can suspend the application of this
paragraph making a reservation to established minimum values, in
accordance with paragraph 2 of Annex
III. See interpretation and
application of paragraph 2 of Annex
III, paragraphs 81–82
below.
42. In Colombia — Ports of Entry, Panama argued in relation
to Article 7.2(f) that the indicative prices are minimum customs values
because importation of products subject to indicative prices will not be
permitted unless this minimum value is declared by the importer.(56)
The Panel found that:
“[I]n cases in which the declared value is lower than the
indicative price, an importer has to ‘correct’ the import
declaration and pay custom duties and sales tax based on the indicative
price. If the importer refuses to do so, the importer has no choice but
to re-ship the goods or abandon them. As a result, only two possible
scenarios exist when subject goods are submitted for customs clearance:
either customs duties and sales tax are collected on the basis of a
value equal to or higher than the indicative price; or the goods are not
imported into Colombian customs territory at all. In practice, this
results in a system in which customs duties and sales tax are never
levied on the basis of a value lower than the one provided by the
indicative price. For this reason, the Panel concludes that indicative
prices amount to ‘minimum prices’ and, therefore, finds that [ ] …
as well as the various resolutions establishing indicative prices which
mandate the use of indicative prices for customs valuation purposes are
also inconsistent with Article 7.2(f) of the Customs Valuation
Agreement.”(57)
3. Article 7.3
43. Based on the text of
Article 7.3, the Panel in Thailand — Cigarettes (Philippines) observed that the customs authority must
inform the importer of the customs value determined and the method used
under Article 7 to determine such value when there is a request from an
importer. The Panel further clarified that the content of the
information to be provided under Article 7.3 needs to be specific and
elaborative on the method chosen as well as the application of that
method to derive at the final customs value. The Panel stated that:
“We observe that the obligation to inform the customs value
determined under the provisions of Article 7.3
and the method used to
determine such value can be compared to the obligation under Article 16
to provide an explanation as to how the customs value was determined. We
clarified above that the explanation to be provided under Article 16
must be sufficient to make clear and give details of how the customs
value of the importer’s goods was determined, including the basis for
rejecting the transaction value, the identification of the method used
and the illustration of how the method was applied in reaching the final
customs value. The information to be provided under Article 7.3
on the
other hand may be different from the explanation to be given under
Article 16, inter alia, in its scope, as the Philippines submits.
In other words, as Article 7 is a provision addressing how to determine
the customs value when it cannot be determined under the provisions of
Articles 1 through 6, the information to be delivered to an importer
under Article 7.3 may be confined to the specific valuation method used
within the meaning of Article 7 and may not include, for example, the
basis for rejecting the transaction value.
We also consider that the request for information under
Article 7.3 would become possible only if the importer was already aware at the time
of requesting that the customs authority had relied on a valuation
method under Article 7. Given the particular nature of
Article 7, i.e.
allowing the customs authority to use any of the valuation methods under
Articles 2 through 6 with a reasonable flexibility, we can envisage a
situation where the importer wishes to clarify the exact method used
under Article 7 once it is known that the customs authority used one of
the methods falling within the scope of Article 7.
To the extent that the information to be provided under
Article 7.3 is linked to a particular method used under Article
7, the content of
the information, in our view, needs to be specific and elaborative on
the method chosen as well as the application of that method to derive at
the final customs value. The term ‘method’ in Article 7.3
is defined
as ‘noun. I. Procedure for attaining an object. 2. A mode of
procedure; a (defined or systematic) way of doing a thing, esp. (with
specifying word or words) in accordance with a particular theory or as
associated with a particular person’. The ordinary meaning of the word
‘method’ therefore indicates that more than a mere identification of
the type of valuation method used must be provided, including how a
given method was applied to calculate the customs value of the imported
goods concerned.”(58)
X. Article 8
back to top
A. Text of Article 8
Article 8
1. In determining the customs value under the provisions of
Article 1, there shall be added to the price actually paid or payable for the
imported goods:
(a) the following, to the extent that they are incurred by the buyer
but are not included in the price actually paid or payable for the
goods:
(i) commissions and brokerage, except buying commissions;
(ii) the cost of containers which are treated as being one for
customs purposes with the goods in question;
(iii) the cost of packing whether for labour or materials;
(b) the value, apportioned as appropriate, of the following goods and
services where supplied directly or indirectly by the buyer free of
charge or at reduced cost for use in connection with the production and
sale for export of the imported goods, to the extent that such value has
not been included in the price actually paid or payable(59):
(i) materials, components, parts and similar items incorporated in
the imported goods;
(ii) tools, dies, moulds and similar items used in the production of
the imported goods;
(iii) materials consumed in the production of the imported goods;
(iv) engineering, development, artwork, design work, and plans and
sketches undertaken elsewhere than in the country of importation and
necessary for the production of the imported goods;
(c) royalties and licence fees related to the goods being valued that
the buyer must pay, either directly or indirectly, as a condition of
sale of the goods being valued, to the extent that such royalties and
fees are not included in the price actually paid or payable;
(d) the value of any part of the proceeds of any subsequent resale,
disposal or use of the imported goods that accrues directly or
indirectly to the seller.
2. In framing its legislation, each Member shall provide for the
inclusion in or the exclusion from the customs value, in whole or in
part, of the following:
(a) the cost of transport of the imported goods to the port or place
of importation;
(b) loading, unloading and handling charges associated with the
transport of the imported goods to the port or place of importation; and
(c) the cost of insurance.
3. Additions to the price actually paid or payable shall be made
under this Article only on the basis of objective and quantifiable data.
4. No additions shall be made to the price actually paid or payable
in determining the customs value except as provided in this Article.
B. Text of Interpretative Note to Article 8
Note to Article 8: Paragraph 1(a)(i)
The term “buying commissions” means fees paid by an importer to
the importer’s agent for the service of representing the importer
abroad in the purchase of the goods being valued.
Paragraph 1(b)(ii)
1. There are two factors involved in the apportionment of the
elements specified in paragraph 1(b)(ii) of Article 8 to the imported
goods — the value of the element itself and the way in which that
value is to be apportioned to the imported goods. The apportionment of
these elements should be made in a reasonable manner appropriate to the
circumstances and in accordance with generally accepted accounting
principles.
2. Concerning the value of the element, if the importer acquires the
element from a seller not related to the importer at a given cost, the
value of the element is that cost. If the element was produced by the
importer or by a person related to the importer, its value would be the
cost of producing it. If the element had been previously used by the
importer, regardless of whether it had been acquired or produced by such
importer, the original cost of acquisition or production would have to
be adjusted downward to reflect its use in order to arrive at the value
of the element.
3. Once a value has been determined for the element, it is necessary
to apportion that value to the imported goods. Various possibilities
exist. For example, the value might be apportioned to the first shipment
if the importer wishes to pay duty on the entire value at one time. As
another example, the importer may request that the value be apportioned
over the number of units produced up to the time of the first shipment.
As a further example, the importer may request that the value be
apportioned over the entire anticipated production where contracts or
firm commitments exist for that production. The method of apportionment
used will depend upon the documentation provided by the importer.
4. As an illustration of the above, an importer provides the producer
with a mould to be used in the production of the imported goods and
contracts with the producer to buy 10,000 units. By the time of arrival
of the first shipment of 1,000 units, the producer has already produced
4,000 units. The importer may request the customs administration to
apportion the value of the mould over 1,000 units, 4,000 units or 10,000
units.
Paragraph 1(b)(iv)
1. Additions for the elements specified in
paragraph 1 (b)(iv) of
Article 8 should be based on objective and quantifiable data. In order
to minimize the burden for both the importer and customs administration
in determining the values to be added, data readily available in the
buyer’s commercial record system should be used in so far as possible.
2. For those elements supplied by the buyer which were purchased or
leased by the buyer, the addition would be the cost of the purchase or
the lease. No addition shall be made for those elements available in the
public domain, other than the cost of obtaining copies of them.
3. The ease with which it may be possible to calculate the values to
be added will depend on a particular firm’s structure and management
practice, as well as its accounting methods.
4. For example, it is possible that a firm which imports a variety of
products from several countries maintains the records of its design
centre outside the country of importation in such a way as to show
accurately the costs attributable to a given product. In such cases, a
direct adjustment may appropriately be made under the provisions of
Article 8.
5. In another case, a firm may carry the cost of the design centre
outside the country of importation as a general overhead expense without
allocation to specific products. In this instance, an appropriate
adjustment could be made under the provisions of Article 8 with respect
to the imported goods by apportioning total design centre costs over
total production benefiting from the design centre and adding such
apportioned cost on a unit basis to imports.
6. Variations in the above circumstances will, of course, require
different factors to be considered in determining the proper method of
allocation.
7. In cases where the production of the element in question involves
a number of countries and over a period of time, the adjustment should
be limited to the value actually added to that element outside the
country of importation.
Paragraph 1(c)
1. The royalties and licence fees referred to in
paragraph 1(c) of
Article 8 may include, among other things, payments in respect to
patents, trade marks and copyrights. However, the charges for the right
to reproduce the imported goods in the country of importation shall not
be added to the price actually paid or payable for the imported goods in
determining the customs value.
2. Payments made by the buyer for the right to distribute or resell
the imported goods shall not be added to the price actually paid or
payable for the imported goods if such payments are not a condition of
the sale for export to the country of importation of the imported goods.
Paragraph 3
Where objective and quantifiable data do not exist with regard to the
additions required to be made under the provisions of Article
8, the
transaction value cannot be determined under the provisions of Article
1. As an illustration of this, a royalty is paid on the basis of the
price in a sale in the importing country of a litre of a particular
product that was imported by the kilogram and made up into a solution
after importation. If the royalty is based partially on the imported
goods and partially on other factors which have nothing to do with the
imported goods (such as when the imported goods are mixed with domestic
ingredients and are no longer separately identifiable, or when the
royalty cannot be distinguished from special financial arrangements
between the buyer and the seller), it would be inappropriate to attempt
to make an addition for the royalty. However, if the amount of this
royalty is based only on the imported goods and can be readily
quantified, an addition to the price actually paid or payable can be
made.
C. Interpretation and Application of Article 8
1.
Treatment
of interest charges in the customs value of imported
goods
44. At its meeting of 12 May 1995, the Committee on Customs Valuation
adopted the decision of the Tokyo Round Committee on Customs Valuation
relating to the treatment of interest charges in the customs value of
imported goods.(60)
2.
Article 8.1(b)(iv)
45. At its meeting of 12 May 1995, the Committee on Customs Valuation
adopted the decision of the Tokyo Round Committee on Customs Valuation
relating to the interpretation of the term “undertaken” used in
Article 8.1(b)(iv).(61)
46. At the same meeting, the Committee on Customs Valuation adopted
the decision of the Tokyo Round Committee on Customs Valuation relating
to the linguistic consistency of the item “development” in
Article 8.1(b)(iv).(62)
Footnotes:
1. Panel Report,
Colombia — Ports of Entry, paras. 7.81, 7.83.
back to text
2. Panel Report,
Colombia — Ports of Entry, paras. 7.84–7.88. back to text
3. Panel Report,
Colombia — Ports of Entry, paras. 7.99–7.130. back to text
4. Panel Report,
Thailand — Cigarettes (Philippines), para. 7.99. back to text
5. (footnote original) We recognize that there may be a situation where
the importer does not request a written explanation under Article
16. We do not consider it necessary for the purpose of resolving this
dispute to determine the proper standard of review in such a situation. back to text
6. Panel Report,
Thailand — Cigarettes (Philippines), paras. 7.100–7.105. back to text
7. Panel Report,
Thailand — Cigarettes (Philippines), para. 7.314. back to text
8. Panel Report,
Thailand — Cigarettes (Philippines),
paras. 7.311–7.313. back to text
9. Panel Report,
Thailand — Cigarettes (Philippines), para. 7.300. back to text
10. Panel Report,
Thailand — Cigarettes (Philippines), para. 7.365. back to text
11. (footnote original) Panels in
previous disputes addressed a similar issue. In Argentina — Ceramic Tiles and Argentina — Poultry Anti-Dumping Duties, for
instance, the panels considered that ex post facto explanations
provided by Argentina in the Panel proceedings should not be taken into
account in the panels’ analysis. (Panel Report,
Argentina — Ceramic Tiles, para. 6.27; Panel Report, Argentina
— Poultry Anti-Dumping Duties, para. 7.178). The panel in Argentina
— Ceramic Tiles also refers to the panel’s analysis in Guatemala
— Cement (II), para. 8.245. We further note that the panels in
Argentina — Ceramic Tiles and Guatemala
— Cement (II) nonetheless continued to examine the parties’ claims based on the ex
post facto explanations. The panel in
Argentina — Poultry Anti-Dumping Duties, however, did not
proceed to examine ex post explanations. back to text
12. Panel Report,
Thailand — Cigarettes (Philippines), para. 7.365. back to text
13. Panel Report,
Colombia — Ports of Entry, paras. 7.136, 7.142–7.144. back to text
14. Panel Report,
Thailand — Cigarettes (Philippines), paras. 7.237, 7.279. back to text
15. G/VAL/M/1, Section J. Those decisions are
referred to in paragraphs 13, 22, 44,
45, 46, 63,
68, 75 and
76 of this Chapter. back to text
16.
WT/GC/M/59, paras. 22–26. back to text
17.
G/VAL/36. back to text
18.
WT/MIN(01)/DEC/1. back to text
19. (WT/MIN(01)/17). back to text
20.
G/VAL/49. back to text
21.
G/VAL/50. back to text
22. Panel Report,
Colombia — Ports of Entry, paras. 7.137–7.138. back to text
23. For jurisprudence, see the report of the
Panel under the Independent Entity established pursuant to Article 4 of
the Agreement on Preshipment Inspection in
G/PSI/IE/R/2. back to text
24. G/VAL/M/1, paras. 66–67; see also
G/VAL/W/1, Section A.4. The text of the decision can be found in
G/VAL/5, Section A.4. back to text
25. Panel Report,
Thailand — Cigarettes (Philippines), paras. 7.145–7.146. back to text
26. Panel Report,
Thailand — Cigarettes (Philippines), para. 7.148. back to text
27. Panel Report,
Thailand — Cigarettes (Philippines), paras. 7.150–7.156. back to text
28. Panel Report,
Thailand — Cigarettes (Philippines), paras. 7.159–7.160, 7.171. back to text
29. Panel Report,
Thailand — Cigarettes (Philippines), paras. 7.150–7.156; Appellate Body Report, US
— Wheat Gluten, para. 54. back to text
30. Panel Report,
Thailand — Cigarettes (Philippines), para. 7.163. back to text
31. Panel Report,
Thailand — Cigarettes (Philippines), paras. 7.164, 7.166. back to text
32. Panel Report,
Thailand — Cigarettes (Philippines), paras. 7.181–7.195. back to text
33. Panel Report,
Thailand — Cigarettes (Philippines), para. 7.188. back to text
34. (footnote
original) We recall the Appellate Body’s statement in
US — Steel Safeguards:
“[A]s stated above, because a panel may not
conduct a de novo review of the evidence before the competent authority, it is
the explanation given by the competent authority for its determination that
alone enables panels to determine whether there has been compliance with the
requirements of Article XIX of the GATT 1994 and of
Articles 2 and 4 of the
Agreement on Safeguards. It may well be that, as the United States argues, the
competent authorities have performed the appropriate analysis correctly.
However, where a competent authority has not provided a reasoned and adequate
explanation to support its determination, the panel is not in a position to
conclude that the relevant requirement for applying a safeguard measure has been
fulfilled by that competent authority….” (para. 303) back to text
35. Panel Report,
Thailand — Cigarettes (Philippines), paras. 7.181–7.195. back to text
36. (footnote original) The New Shorter Oxford English Dictionary (Fifth Edition),
Oxford University Press, Volume 1, p. 1158 (2002). back to text
37. Panel Report,
Thailand — Cigarettes (Philippines), paras. 7.212–7.214. back to text
38. Panel Report,
Thailand — Cigarettes (Philippines), para. 7.220. back to text
39. Panel Report,
Thailand — Cigarettes (Philippines), para. 7.220. back to text
40. G/VAL/M/1, paras.
66–67; see also
G/VAL/W/1, Section A.5. The decision can be found in
G/VAL/5, Section A.5. back to text
41. Panel Report,
Thailand — Cigarettes (Philippines), para. 7.279. back to text
42. Panel Report,
Thailand — Cigarettes (Philippines), para. 7.297. back to text
43. Panel Report,
Thailand — Cigarettes (Philippines), para. 7.297. back to text
44. Panel Report,
Thailand — Cigarettes (Philippines), para. 7.298. back to text
45. Panel Report,
Thailand — Cigarettes (Philippines), para. 7.327. back to text
46. The term “GAQ”
stands for greatest aggregate quantity. back to text
47. Panel Report,
Thailand — Cigarettes (Philippines), para. 7.333. back to text
48. Panel Report,
Thailand — Cigarettes (Philippines), paras.
7.346–7.349. back to text
49. Panel Report,
Thailand — Cigarettes (Philippines), paras.
7.354–7.355. back to text
50. Panel Report,
Thailand — Cigarettes (Philippines), para. 7.381. back to text
51. Panel Report,
Thailand — Cigarettes (Philippines), paras.
7.356–7.360. back to text
52. Panel Report,
Thailand — Cigarettes (Philippines), paras. 7.361–7.362. back to text
53. Panel Report,
Thailand — Cigarettes (Philippines), para. 7.384. back to text
54. Panel Report,
Colombia — Ports of Entry, para. 7.147. back to text
55. Panel Report,
Colombia — Ports of Entry, para. 7.149. back to text
56. Panel Report,
Colombia — Ports of Entry, para. 7.147. back to text
57. Panel Report,
Colombia — Ports of Entry, para. 7.150. back to text
58. Panel Report,
Thailand — Cigarettes (Philippines), paras. 7.393–7.395. back to text
59. See
G/PSI/IE/R/2. back to text
60. G/VAL/M/1, paras. 66–67; see also
G/VAL/W/1, Section A.3. The
text of the decision can be found in
G/VAL/5, Section A.3. back to text
61. G/VAL/M/1, paras. 66–67; see also
G/VAL/W/1, Section A.1. The
text of the decision can be found in
G/VAL/5, Section A.1. back to text
62. G/VAL/M/1, paras. 66–67; see also
G/VAL/W/1, Section A.2. The
text of the decision can be found in
G/VAL/5, Section A.2. back to text
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