The Philippines is seeking bilateral talks with Thailand to resolve a dispute on cigarette trade between the two countries.
The Philippines submitted a request on May 4 to the compliance panel of the World Trade Organization for consultation with Thailand to review the latter’s compliance with the international body’s ruling on cigarette imports from the Philippines.
The WTO dispute settlement body issued a ruling nearly five years ago asking Thailand to implement a fair valuation scheme for imported cigarettes brought in by Philip Morris Thailand Ltd. from the company’s manufacturing facility in the Philippines.
The case filed by Thailand against Philip Morris forced the cigarette company to pay $2.2 billion in penalties for previous shipments that were allegedly undervalued by the Philippines as exporter, at a combined valuation estimate of $500 million.
The Philippine legal counsel said the issue should be resolved soon as Philippine tobacco exports to Thailand would be affected. It said PMTL should pursue the case as it was the one registered for paying the taxes.
Manila suggested that the most diplomatic way to resolve the case was to engage Thailand into bilateral talks or pursue another option, which was to file a case under Article 215 of the WTO.
Article 215 provides the adoption of a mutually satisfactory solution by the parties that leads to the termination of dispute settlement procedure.
Philip Morris Philippines Manufacturing Inc. is the biggest cigarette exporter to Thailand accounting for more than 40-percent share of its imports.
Under Thailand’s law, re-sale of domestic cigarettes was exempted entirely from value-added tax, which is not the case for imported cigarettes that are subjected to VAT.
PMTL said the case contradicted Thailand’s non-prosecution order made more than four years ago, as well as prior rulings of the Thai Customs Department, the Customs Board of Appeal, the Customs Post-Clearance Audit Bureau and the WTO.