The World Trade Organzation (WTO) has upheld an earlier decision that Colombia has broken world trade rules over a tariff it imposed on imports of textiles, apparel and footwear from Panama.

Colombia had claimed the measure was necessary to combat money laundering, but the WTO's Appellate Body earlier this week said the tariff violated WTO rules, and did not appear necessary to tackle money laundering.

The case was brought by Panama three years ago, challenging the compound import tariff 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 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.

However, ruling on the case in December, the WTO disputes 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.