MANILA, Philippines - A preliminary World Trade Organization (WTO) ruling on the Philippines’ trade dispute with Thailand over cigarette taxes is expected to be issued this month.

A draft decision will be released by end-March to both Manila and Bangkok regarding the latter’s allegedly unfair tax policies on imported cigarettes, a Trade official said.

"Then the final report will be issued by mid-May," said Jose Antonio S. Buencamino, the Department of Trade and Industry’s lead official for WTO matters, in a text message last week.

The government in 2008 complained on behalf of the local unit of Philip Morris International, saying that Thailand was discriminating against Philippine-made cigarettes. The cigarette company operates a factory in Tanauan, Batangas, and exports 30% of its output, or around eight billion sticks annually, to Thailand.

Manila has claimed that Bangkok, since 2006, was ignoring the declared customs values of Philip Morris’ shipments, preferring instead to set higher "predetermined values."

This meant higher duties had to be paid and value-added taxes on imported cigarettes were also allegedly higher on imports than those slapped on Thai counterparts.

These policies were said to unfairly favor the state-owned Thai Tobacco Monopoly which corners 80% of the domestic market.

Final ruling

Under the dispute process rules, the WTO final report due in May will become an official ruling within 60 days unless the parties involved file an appeal or the entire WTO membership rejects it.

"If there is an appeal, the final report will not yet be adopted by the dispute settlement body and will go to the appellate body [which will mean] another 90-day process at the least," Mr. Buencamino said.

Philip Morris Philippines Manufacturing, Inc. (PMPMI) officials could not be immediately reached to comment.
Its president, Chris J. Nelson, has earlier said the firm was looking forward to a final WTO ruling as policy stability was needed for more effective business planning.

PMPMI formed a new company last month to separate domestic operations from its export business.

It will share an equal stake in the new entity -- which will be called PMFTC, Inc. -- with rival Fortune Tobacco Corp.

PMPMI reported P32.8 billion in revenues and P2.1 billion in profits for 2008, higher by 8% and 15%, respectively.