PH Cutting Thailand Some Slack Despite Delayed Compliance with WTO Tobacco Ruling

Source from:  InterAksyon 01/21/2014

The Philippines is cutting Thailand some slack amid its delayed compliance with a World Trade Organization (WTO) ruling that found Bangkok's taxes on cigarette imports to be discriminatory.

Trade Secretary Gregory L. Domingo on Monday told reporters that the Philippines is not about to bring Thailand back to arbitration despite its failure to comply with the WTO ruling.

"That is an option on the table but that is not something that you do at the start. Marami pa tayong interests sa kanila," he said.

Domingo's statement comes after Bangkok decided to prosecute Philip Morris International Thailand for allegedly under-declaring the customs value of imports between 2003 to 2007 in violation of the WTO ruling.

To recall, the WTO in 2011 ruled that Bangkok's taxes on tobacco exports of Philip Morris' Philippine unit were discriminatory and so violated global trading rules.

Since the WTO ruled against it, Thailand has adopted a royal decree abolishing the value-added tax (VAT) exemption enjoyed by resellers of locally made cigarettes, making them at par with imports, which were not VAT-exempt.

The Philippine WTO mission however said the Thai Customs' Board of Appeals ruling on certain customs valuation entries of imported tobacco from 2002 to 2003 were "inconsistent" with WTO rules.

Despite informal consultations between Philippine and Thai trade officials held in Bangkok in May of last year, DTI two months later insisted that Thailand was dragging its feet on compliance.

Late last year, Trade Undersecretary Adrian Cristobal Jr. said the Philippines had asked Thailand to respond to a number of questions pertaining to its non-compliance with the WTO ruling.

If the Philippines deems Thailand's response as noncompliant, Manila would drag Bangkok into compliance proceedings leading to compensation, Cristobal had said.

Compensation may be obtained when an "implementing member does not achieve full compliance by the end of the reasonable period of time" to comply, according to the WTO.

In the case of Thailand, the reasonable period of time to comply with the WTO ruling lapsed in October of 2012.

Compensation "does not mean monetary payment; rather, the respondent is supposed to offer a benefit, for example a tariff reduction, which is equivalent to the benefit which the respondent has nullified or impaired by applying its measure," the WTO said. Enditem