International Import and Export
On the 12th of July 2007, Panama asked for consultations with Colombia concerning Indicative prices applied to particular goods and the restrictions importation of certain products. Panama’s request that concerned the indicative prices is related to a number of resolutions that were promulgated in June 2007 that led to the establishment of a system of indicative prices. In particular, Colombia was suspected by Panama to necessitate that importers of certain goods, pay custom duties together with other duties or are charged and taxed according to the indicative prices instead of on the valuation methods included in Article VII of the GATT 1994 as well as the agreement on customs valuation. Furthermore, Panama claimed that the tax base for Colombia’s sales tax on products that are imported, is based on the indicative price while the tax base for sales tax on the goods that are considered domestic is based on the value of a business deal.
According to Panama this disparity in tax bases leads to the imposition of sales tax burden on the goods that are imported. This imposition leads to probable inconsistencies with Article 1 to 7 and 13 of the Agreement on Customs Valuation and Article VII, II:1(a) and (b), as well as Article III:2 (OR III:4) of the GATT 1994. Panama also claimed that Colombia had not made available the technique for the creation of the indicative prices. According to Panama, this was not in agreement with the Colombia’s obligations as indicated in Article X:1 (a) of the GATT 1994. Lastly, Colombia management of its customary laws and the indicative prices was supposed to have been carried out in a way that was considered inconsistent with Colombia’s obligations as indicated in Article X:3 (a) of the GATT 1994.
The outcome of the WTO dispute Resolution Panel’s decision
The panel noted that the customs valuation Agreement did not define custom valuation; however the definitions of customs value were included in the Article 15 of the customs Valuation Agreement as the value of products for the purpose of levying. Based on this definition, and the understanding of the meaning of customs valuation, and after assessing how the indicative price regime operated in Columbia, the panel concluded that Colombia utilization of the indicative prices constituted customs valuation within the Custom valuation Agreement since the payments that were made by the importers were considered as payments strictu sentu and not as guarantees in the form of cash deposits. According to the panel, the measures applied in establishing the indicative prices, through the authorization of their use of custom valuation process, were not consistent with the obligation included in the Articles 1,2,3,5 as well as 6 of the Agreement. The Colombia v Panama case concerned numerous dealings that were associated with local anti-smuggling guiding principles including other limitations on ports of entry and their impacts on Panama which is the neighboring state. Thus the panel found that those limitations were prejudiced and therefore were breaching the WTO laws, moreover, the panel had doubts over the efficiency of those restrictions in general. It is significant to demonstrate efficiency in order to ensure that one complies with the WTO laws. According to the panel, the prohibition of importation certain goods from Panama, by Colombia was an outlawed restriction on importation as indicated in Article XI: 1.