WTO: 2011 NEWS ITEMS

DISPUTE SETTLEMENT

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NOTE:
This summary has been prepared by the WTO Secretariat’s Information and External Relations Division to help public understanding about developments in WTO disputes. It is not a legal interpretation of the issues, and it is not intended as a complete account of the issues. These can be found in the reports themselves and in the minutes of the Dispute Settlement Body’s meetings.

DS371: Thailand — customs and fiscal measures on cigarettes from the Philippines

The DSB adopted the Panel and Appellate Body reports (WT/DS371/R and WT/DS371/AB/R) which examined Thai fiscal and customs measures affecting cigarettes from the Philippines.

The Philippines expressed its deep satisfaction with the outcome of the reports and noted that it prevailed on virtually all the claims it made. The Philippines said that this case was about exports that directly or indirectly benefited many Filipinos from leaf-growing to manufacturing. The Philippines added that its exports continued to suffer arbitrary and discriminatory treatment at a tremendous cost not only in economic terms. The Philippines said that the objective of this dispute was to end such treatment and to put exports back on the secure and predictable ground of the rule of WTO law. The Philippines stated that this was the first dispute to interpret in detail the substantive rules on custom valuation and added that the panel set out in clear and concise terms the obligations imposed on an importing member in a situation where buyers and sellers were related. The Philippines expected Thailand to promptly and fully implement the DSB ruling affording its goods the treatment required under WTO rules.

Thailand said it was puzzled by the Appellate Body's statement which affirmed that it was not appropriate for Thailand to refer to the panel's interim report in its appeal, given that the interim report formed part of the record of the panel proceedings. Thailand was also concerned regarding the Appellate Body's view that a panel could make an objective finding on the basis of evidence which one party had not had the opportunity to comment. Thailand said that the Appellate Body could have addressed its arguments in more detail regarding its VAT system. Thailand added that it was strongly supportive of the binding dispute settlement system in the multilateral trading system, on which it had successfully relied in the past to vindicate its rights under WTO law. Thailand looked forward to working cooperatively with the Philippines.

The EU was very satisfied with the findings of the panel regarding certain obligations enshrined in the Custom Valuation Agreement. The EU added that the panel set in stone that this agreement imposed an obligation on national authorities to determine the customs value of imported goods on the basis of their transaction value and, if this was not possible, to sequentially apply the other customs valuation method. The EU welcomed the clarification from the panel about the respective responsibilities of the customs authorities and the importers.

Australia had reservations about the reasoning applied by the Appellate Body in its application of the necessary test under Article 20 of GATT 1994. According to Australia, the Appellate Body indicated that the analysis of an Article 20(d) exception should focus on whether the differential treatment applied to imported versus domestic cigarettes under the measure was “necessary”, rather that considering whether the measure as a whole was “necessary”. Australia also pointed out that in no case should the Appellate Body proceedings exceed 90 days (Article 17.5 of the Dispute Settlement Understanding (DSU)) except in circumstances where the legal and factual complexity of an appeal required additional time. Australia said that where the facts and legal issues of an appeal were limited in complexity, efforts should be made to respect the time-frame provided under the DSU.

According to the US, in its analysis of Article 20(d) of GATT 1994, the Appellate Body stated that it was the differential treatment that must be “necessary” to secure compliance.  For the US, this seemed to be at odds with prior reports in which it was found that it was the “measure” that must be necessary. The US noted that the Appellate Body report was circulated outside the 90-day period stipulated in Article 17.5 of the DSU. The US noted that the parties accepted the report would be circulated outside the 90-day period. The US regretted that this agreement was not mentioned by the Appellate Body contrary to past practice. The US said that the approach in this dispute resulted in less transparency.

Mexico said that the Appellate Body report was issued 115 days following the notice of appeal and that no reference was made on this issue in the report. Mexico noted that the time-frame was extended from beyond 90 days as required by the DSU.

Japan shared the concerned expressed by the US and Mexico about the lack of transparency of the Appellate Body which deviated from its practice.

  

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The next meeting of the DSB will be held on 20 July 2011.

 

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