THE NEW CUSTOMS ACT: WHAT TO EXPECT AND HOW TO PREPARE
After several years of discussions, the draft Customs Act was finally approved on March 9 by the National Legislative Assembly (NLA). It will replace and consolidate all current versions of the Customs Act 1926, and it is expected to be proposed for consideration by His Majesty the King within 20 days after NLA approval. Once approved and signed, it will be announced in the Royal Gazette and come into force within 180 days from the announcement date.
Key changes: Among other amendments, one of the key changes involves provisions relating to statutory fines and penalties, customs audit policy, and the bribes-and-rewards regime, as follows:
Statutory fines and penalties for duty evasion offences are reduced to a range of 0.5 to four times the duty shortfall — instead of four times the CIF (cost, insurance and freight) value plus duty under the current Act B — or imprisonment of up to 10 years or both.
For duty evasion offences, “wilful intent” of fraud or “negligence” must be considered and proved by Customs.
The period for Customs to carry out post-clearance audits/investigations is limited to five years after the import/ export date to align with record-retention requirements.
The current regime of bribes (to informants) and rewards (to officers) is revised; for instance, there is a threshold of rewards at 5 million baht per case.
What does the new Act mean? More customs cases could be brought to court as the statutory penalties and fines when losing at court level are significantly reduced. In addition, the period for Customs to carry out post-clearance audits or investigations is reduced from 10 to five years retroactively, so potential initial claims and liabilities are likely to be reduced.
However, the provisions under the draft Act as approved by the NLA have not yet been published. Based on the latest published draft version, there are still certain issues that should be explored further, for example:
Definition and interpretation of “wilful intent” and “negligence” for duty evasion offences.
What will be used as a reference or guideline for Customs interpretation?
How will pending post-clearance audits or investigations that have not been settled at the time the new Act is effective be considered? For example: which penalty scheme will apply? Will there be a transition period? Will the audit period for such cases also be limited to five years?
Will the bribes scheme be completely removed, while the rewards scheme for officers will continue to be applicable for duty-evasion offences?
Will Customs issue new case settlement criteria under the new Act?
How will companies be affected and what should they do? Before the enforcement of the new Act, it is likely that Customs will increase its postclearance activities and try to conclude as many pending cases as possible based on the current bribes-and-rewards scheme.
Companies that have not been audited recently (e.g. in the past three years) could be faced with a customs audit or investigation sooner rather than later. These companies should start preparing themselves for this by conducting internal compliance reviews of their import and export operations to assess the risks and potential issues.
If potential risks and exposures are identified, companies can consider a voluntary disclosure that could “protect” the company from any possible future audit or investigation. Currently, Customs has extended the Voluntary Audit Programme (VAP) until Dec 31, 2017. It could be one option to mitigate risks and liabilities as penalties are normally waived under this programme.
However, before deciding to join the VAP, companies are recommended to carefully consider whether their offences are eligible since offences relating to smuggling of goods, evasion of duty with proof of fraudulent intent, and evasion of import/export restrictions would render companies ineligible to join the programme.
Companies that are currently under a customs audit or investigation may suddenly be faced with more pressure from Customs officers to settle the case as soon as possible and before the new Act comes into force. Therefore, these companies may need to reconsider their strategies when dealing with Customs during this period.
Big changes to the customs and trade environment in Thailand are expected once the new Customs Act is implemented, probably by the end of this year. Doing nothing may no longer be an option and companies need to start proactively preparing themselves for these changes.