Third Participant Oral Statement of Australia

Geneva, 18 April 2011

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Thailand - Customs and fiscal measures on cigarettes from the Philippines. AB-2011-1/DS371 - Third Participant Oral Statement of Australia [PDF 26 KB]

A. Introduction

Members of the Division.

1. Thank you for the opportunity to present Australia's views on this appeal.
   Australia has provided a written submission identifying some key issues of
   systemic and legal interest raised by Thailand's appeal on the Panel's findings
   in this dispute. Australia would like to briefly address some of those key
   issues.

B. The Issues under Appeal

(a) "internal taxes or other charges" (Article III:2 of GATT 1994,
first sentence)

2. Australia notes a fundamental difference between how the principal parties
   have identified the measure at issue in relation to Article III:2 of GATT
   1994. The Philippines contends that the measure at issue is the obligation
   to pay, or the exemption from the obligation to pay, VAT. In contrast, Thailand
   argues that the measure comprises only the administrative mechanisms used
   to collect the VAT. In Australia's view, the correct identification of the
   measure at issue is a critical threshold matter. Only when that matter is
   decided can it be determined whether the Panel was correct in finding that
   the measure falls within both the first sentence of Article III:2 and Article
   III:4 of GATT 1994.
3. Australia considers that if the measure is the obligation to pay VAT then
   it is well understood that such a measure would fall within the scope of "internal
   taxes or other internal charges" for the purposes of Article III:2. On
   other hand, while an administrative mechanism for the collection of taxes
   does not a priori fall outside the scope of Article III:2, such a
   measure requires further examination to determine whether it should be appropriately
   characterised as "internal taxes or other internal charges" within
   the scope of the first sentence of Article III:2.¹
4. As noted in our written submission, Argentina - Hides and Leather and
   US-Malt Beverages provide examples of matters which have been taken
   into account by previous panels in undertaking such an examination.²
   Based on the findings of the panels in those disputes, Australia considers
   that it was a matter for the Panel to determine, on the basis of the available
   information, whether the characteristics of Thailand's administrative requirement
   for collection of VAT are such that the requirement amounts to an "internal
   tax or other charge" and therefore falls within the scope of the first
   sentence of Article III:2.

(b) "in excess of' (Article III:2 of GATT 1994, first sentence)

5. In relation to the Panel's finding that Thailand's VAT measure applied internal
   taxes or other charges to imported cigarettes "in excess" of those
   applied to domestic cigarettes, Australia notes Thailand's claim that in practice
   the cumulative total VAT payable is the same for both domestic and imported
   cigarettes. Thailand argues that the different treatment merely relates to
   the regulatory arrangement by which the VAT scheme is applied and collected.
6. In considering the application of Article III:2 to Thailand's VAT scheme,
   Australia supports the Panel's finding that Thailand's VAT scheme imposes
   VAT liability on resellers of imported cigarettes which is not automatically
   offset without the need for the fulfilment of administrative requirements.
   Therefore if a reseller does not exercise his or her right to make a claim
   for input tax credits, or if such a claim is made and subsequently rejected,
   it would result in the application of a higher tax burden. In Australia's
   view, it is significant that such a risk is not faced by resellers of domestic
   cigarettes as they are automatically exempt from payment of VAT.³

(c) "less favourable treatment" (Article III:4 of GATT 1994)

7. Thailand's appeal asks the Appellate Body to consider how likely it needs
   to be that a measure will result in "less favorable treatment" for
   imported like products in order to find that there has been a violation of
   Article III:4. Australia submits that this question should be determined case-by-case
   on the basis of supporting evidence provided to the Panel by the parties.
   Australia notes that previous panel decisions, including China-Audiovisual
   Services'⁴ and India-Autos,⁵
   illustrate the different factors and evidential requirements that may
   affect the determination of this issue in each case.

(d) application of Article XX(d) of GATT 1994

8. I now turn to the Panel's findings that Thailand could not rely on the defence
   under Article XX(d) of GATT 1994 in respect of any claims under Article III:4.
   Australia submits that the panel's reasoning in applying this Article raises
   some inconsistencies in the identification of the "laws or regulations"
   under consideration, and the measure alleged to be designed so as to "secure
   compliance" with such laws or regulations. Australia notes that these
   inconsistencies may be the result of a clerical error in the Panel's report
   as identified by the Philippines in its submission. The Philippines asserts
   that the Panel's report incorrectly refers to the "administrative requirements"
   as the "laws or regulations", when in fact it should have referred
   to the obligation to pay VAT.⁶ Australia submits
   that this matter should be resolved to assist the consideration of Thailand's
   appeal on the Panel's findings in relation to the applicability of Article
   XX(d).

(e) "administrative action" (Article X:3(b) of GATT 1994)

9. Turning to Article X:3(b), Australia notes that the Panel found that in
   some situations, "the provisional characteristics of an administrative
   action or determination would render such an action or determination to fall
   outside the scope of Article X:3(b)".⁷ Based
   on such reasoning, Australia considers that the provisional nature of a decision
   is relevant, if not determinative, of whether a particular decision falls
   outside of the scope of Article X:3(b).
10. Further, Australia suggests that the application of the Panel's reasoning
    would require that the obligation to provide review of a decision under Article
    X:3(b) should be assessed on a case-by-case basis, taking into account the
    nature and characteristics of the security and the particular circumstances
    in which it is applied. In Australia's view such an assessment should consider
    the broader systemic implications of requiring review procedures to be available
    in respect of such ancillary matters, including whether the nature of the
    decision is such that it would be an inefficient and inappropriate use of
    resources to conduct external review. For example, it may be inappropriate
    to review a provisional decision where liability only arises at the time of
    the final decision. Additionally, it may be inefficient and unnecessary to
    provide for a review of a provisional decision where that decision becomes
    redundant by the making of a final decision, which itself is subject to review
    on request.

C. Conclusion

11. Members of the Division, Australia would be pleased to provide answers to
    any questions on these or any other matters related to the appeal.

• ¹ Panel Report, Argentina – Hides and Leather, paras. 11.143 - 11.144.
• ² Australia, Third Party Written Submission of Australia, 15 March 2011, paras. 9-10 ciiting: Panel Report, Argentina – Hides and Leather, paras. 11.143 - 11.144; and GATT Panel Report, US–Malt Beverages, para 5.21- 5.22.
• ³ Panel Report, paras. 7.635 - 7.637.
• ⁴ Panel Report, China – Audiovisual Services, para 7.1471.
• ⁵ Panel Report, India – Autos, para. 7.201.
• ⁶ Philippines, Appellee Submission, 14 March 2011, paras. 231-232, citing Panel Report, para 7.758.
• ⁷ Panel Report, para. 7.1035.