Philippines and Thailand have signed an “understanding” agreement to resolve the decade-long cigarette customs value dispute, the World Trade Organization (WTO) announced.
In a post on its website, WTO said both ASEAN countries signed a bilateral “Understanding on Agreed Procedures Towards a Comprehensive Settlement of the Dispute in Thailand — Customs and Fiscal Measures on Cigarettes from the Philippines (DS371)” on June 7.
Reacting to the deal, Trade and Industry DTI Secretary Ramon Lopez said, "This bilateral understanding shows the good faith and
strong commitment among ASEAN partners to resolve their differences and support the WTO's rules -based dispute settlement system. Thailand and its agencies of government including its judicial branch, have shown positive progress towards upholding WTO rules and the Customs Valuation Agreement.”
In a recent related development, Lopez said the Thai Appellate Court affirmed with finality the acquittal of Philip Morris Thailand employees in a case related to imports of cigarettes from the Philippines, while also reducing civil penalties and other fines that could have discouraged greater trade between the Philippines and Thailand.
Under theUnderstanding on Agreed Procedures, the two countries have agreed to establish a bilateral consultative mechanism (BCM), which will serve as a channel for their respective relevant authorities to cooperate and dialogue on a regular basis, with the objective of building further confidence that will support them to reach a comprehensive settlement of their dispute in DS371, consistent with their rights and obligations under the WTO Agreement, as well as the recommendations and rulings of the DSB.
The Understanding may be terminated by either party on 60-days written notice. Taking into account the progress made in the implementation of their cooperation, it should ideally lead to the notification by the parties of a mutually agreed solution under Article 3.6 of the DSU.
WTO said that the “Understanding on Agreed Procedures” underlines the commitment of Thailand and the Philippines to continue their close cooperation, particularly through the frank and open dialogue process that will be facilitated under the BCM, consistent with the strong spirit of ASEAN solidarity and friendship which unites them and their commitment to the WTO’s rules-based dispute settlement system.
The Understanding on Agreed Procedures was negotiated between the two members of the Association of Southeast Asian Nations (ASEAN) to be consistent with relevant bilateral treaties, ASEAN treaties and values, WTO law and agreements, including the Customs Valuation Agreement, WTO Dispute Settlement Body (DSB) rulings and recommendations as well as their domestic laws and regulations.
Reflecting the shared determination and effort of the two countries to resolve their longstanding differences, the formal signature of the Understanding on Agreed Procedures on 7 June represents a successful outcome of the facilitator-assisted process commenced in 2021 following the "Understanding between the Philippines and Thailand to pursue Facilitator-Assisted discussions aimed at progressing and resolving outstanding issues in regard to DS371” on December 2020
Throughout the process and assisted by the leadership of Ambassador George Mina, Permanent Representative of Australia to the WTO, acting as Facilitator, the Philippines and Thailand have actively and constructively engaged in discussions, both in Geneva and through their respective capitals, with a view to considering possible ways forward for the two countries to reach a mutually agreeable resolution to their customs valuation related dispute, without prejudice to their respective rights and obligations under the Dispute Settlement Understanding (DSU).
The Philippines and Thailand, represented by their Permanent Representatives to the
WTO in Geneva, Amb. Manuel A.J. Teehankee and Amb. Pimchanok Pitfield signed the Understanding on Agreed Procedures Towards a Comprehensive Settlement of the Dispute in Thailand - Customs and Fiscal Measures on Cigarettes from the Philippines (DS 371).
The cigarette tax dispute started in 2008 when the Philippines, on behalf of Philip Morris Philippines Manufacturing Inc., asked the WTO panel to look into the discriminatory tax treatment the Thai government imposed on imported cigarettes, particularly on customs valuation.
The case has dragged on for a total of 14 years on Thailand’s delaying tactics, affecting the Philippines’ cigarette exports and local tobacco industry.