Thailand may face WTO penalties on PHL cigarettes

The Philippines will seek compensation and suspension of concessions penalties from Thailand if the Department of Trade and Industry discovers that Thailand failed to comply with a World Trade Organization ruling that it correct its taxation scheme for Philippine-made cigarettes before May 15 this year.

 

Trade Undersecretary Adrian Cristobal said a team will be sent to Thailand to verify if the Southeast Asian country failed to meet the set deadline for compliance.

 

According to the WTO, the Philippines sought consultation with Thailand on February 7, 2008 regarding the latter’s tax measures on cigarettes. The Philippines claimed that Thailand administers its customs valuation practices, excise tax, health tax, TV tax, VAT regime, retail licensing requirements, and import guarantees imposed upon cigarette importers “in a partial and unreasonable manner”.

 

Cristobal elaborated that on July 15, 2011, the WTO ruled that Thailand was in breach of its obligations with respect to the customs and tax treatment of cigarettes produced in the Philippines.

 

A month later, Thailand said it intended to implement the WTO rulings and sought a reasonable period to do it, which ended May 15, 2012.

 

Article 22 of the WTO said compensation and the suspension of concessions or other obligations are temporary measures available in the event that the recommendations and rulings are not implemented within a reasonable period of time.

 

Article 22 goes on to say that if a member country fails to enact WTO rulings it will “enter into negotiations with any party having invoked the dispute settlement procedures, with a view to developing mutually acceptable compensation."

 

The WTO article also said that in considering what concessions or other obligations to suspend, the complaining party (in this case the Philippines) "should first seek to suspend concessions or other obligations with respect to the same sector(s) as that in which the panel or Appellate Body has found a violation or other nullification or impairment."

 

If the complaining party considers that it is not practicable or effective to suspend concessions or other obligations with respect to the same sector(s), "it may seek to suspend concessions or other obligations in other sectors under the same agreement."

 

It was reported that the dispute significantly contributed to the 20 percent decline in exports of the Philippine tobacco industry in 2009 alone.

 

"We are vigilant on our tobacco case against Thailand," concluded Cristobal. — DVM, GMA News