A World Trade Organization (WTO) dispute panel has ruled against Colombia over a tariff it imposed on imports of textiles, apparel and footwear.

In a case brought by Panama two years ago, the compound import tariff was challenged as unjustified and incompatible with Colombia's WTO obligations. Panama claimed the tariffs, which consisted of a fixed 10% and a variable component, breached the maximum allowable 35-40% tariff on those products.

In response, Colombia had argued that it needed to impose the tariff increases because the imports constituted "illicit trade" as they were imported at "artificially low prices" in order to launder money.

In its ruling, the WTO panel noted that Colombia's compound tariff applied to all imports of the products at issue, without distinguishing whether those imports constitute "licit" or "illicit" trade, or are being used for money laundering.

It also found the country failed to demonstrate the tariff was either designed or necessary to fight money laundering – and said such defences cannot be used to justify an increase in tariffs above Colombia's bound rates.