Long Awaited Changes to the Thai Cus­toms Act Signed Into Law

Thai-American Business (T-AB) Magazine - - Contents - Writ­ten by: Michael Ramirez

On Wed­nes­day, May 17, 2017, Thai­land pub­lished its new Cus­toms Act B. E. 2560 ( 2017) in the Royal Gazette, the of­fi­cial jour­nal in which new laws are an­nounced. The Act, ef­fec­tive 180 days from pub­li­ca­tion, re­peals the out­dated and con­tro­ver­sial Cus­toms Act B. E. 2469 ( 1926) and its prior amend­ments.

The his­toric new Act rep­re­sents the cul­mi­na­tion of many years of drafts, con­sul­ta­tions, and some­times con­tentious de­bate. Through­out the process, the govern­ment col­lab­o­rated closely with pri­vate sec­tor part­ners to en­sure an im­proved cus­toms process. The new Cus­toms Act joins twenty- four tax laws that the govern­ment has rewrit­ten or amended to meet in­ter­na­tional stan­dards in or­der to bet­ter sup­port trade and in­vest­ment and to im­prove Thai­land’s trans­parency and com­pet­i­tive ad­van­tages. Ul­ti­mately, the new law is a sig­nif­i­cant step for­ward adding clar­ity and im­prov­ing fair­ness for all par­ties in­volved in the cus­toms clear­ance process.

The pre­vi­ous Cus­toms Act of 1926 in­cluded a num­ber of am­bi­gu­i­ties, cre­at­ing dif­fi­cul­ties for cor­po­ra­tions to en­sure com­pli­ance. For ex­am­ple, the Cus­toms De­part­ment de­fined “cus­toms eva­sion” and “cus­toms avoid­ance” as dif­fer­ent of­fenses un­der Sec­tion 27 of the Act; how­ever, the Of­fice of the Coun­cil of State ( OCS) and the Anti- Money Laun­der­ing Of­fice ( AMLO) con­sid­ered “cus­toms avoid­ance” a sub- of­fense of “cus­toms eva­sion.” Sim­i­larly, the pre­vi­ous Act was am­bigu­ous on of­fi­cer and di­rec­tor li­a­bil­ity, es­pe­cially as the Act failed to de­fine “man­ag­ing di­rec­tor,” “man­ag­ing part­ner,” and “per­son re­spon­si­ble for the op­er­a­tion of a ju­ris­tic per­son.”

The pre­vi­ous Act also al­lowed a cus­toms re­ward- shar­ing regime that dis­torted in­cen­tives dur­ing en­force­ment. The Di­rec­tor- Gen­eral of the Cus­toms Depart- ment pos­sesses the author­ity to “re­ward” cus­toms of­fi­cials and third- party whistle­blow­ers for re­port­ing or oth­er­wise suc­cess­fully pur­su­ing in­stances of cus­toms eva­sion ( smug­gling) and cus­toms avoid­ance ( false dec­la­ra­tions).

The re­ward sys­tem is in stark con­trast to those prac­ticed in many other coun­tries such as Britain, In­dia, and Pak­istan, where re­wards have strict lim­i­ta­tions. Al­though a re­ward sys­tem can help iden­tify cus­toms avoid­ance and eva­sion, overly gen­er­ous re­wards can cre­ate in­cen­tives to pur­sue or fa­cil­i­tate wrong­do­ing, or in­tro­duce bias dur­ing au­dits and in­ves­ti­ga­tions.

Other trou­bling as­pects of the pre­vi­ous Act in­cluded shifted bur­dens of proof, penal­ties sig­nif­i­cantly out of pro­por­tion to the al­leged wrong­do­ing, strict li­a­bil­ity even in cases where un­der- dec­la­ra­tion of cus­toms duty was a mis­take, and an opaque post- clear­ance au­dit and ap­peal process.

The new Act ad­dresses sev­eral of these sub­stan­tive is­sues and of­fers re­lief to im­porters sub­ject to the his­tor­i­cally dif­fi­cult cus­toms en­vi­ron­ment. In en­act­ing the new law, the Thai Na­tional Leg­isla­tive Assem­bly ac­knowl­edged these well- known chal­lenges and in­di­cated the de­sire to re­solve out­dated or in­con­sis­tent pro­vi­sions. The govern­ment noted that the am­bi­gu­ity cre­ated dif­fi­cul­ties not only for the pri­vate sec­tor, but ham­pered law en­force­ment. In ad­di­tion, the govern­ment noted the growth of in­ter­na­tional trade re­quir­ing im­proved “cus­toms for­mal­ity and other rel­e­vant pro­ce­dures in or­der to be ef­fi­cient and con­sis­tent with in­ter­na­tional stan­dards, which will in­crease [ Thai­land’s] com­pet­i­tive­ness.”

A num­ber of the changes are ex­pected to vastly im­prove the cus­toms clear­ance process. The new Act elim­i­nates strict li­a­bil­ity pre­sump­tions for cus­toms duty eva­sion and now re­quires “will­ful in­tent” or “neg­li­gence.” Pre­sumed li­a­bil­ity for of­fi­cers, direc­tors, and other au­tho­rized per­sons is also elim­i­nated.

The re­wards regime will be re­vised dra­mat­i­cally, par­tic­u­larly with caps on the amounts for re­wards. For ex­am­ple, whistle­blow­ers will now only re­ceive a max­i­mum of Baht 5 mil­lion.

The new Act also stan­dard­izes and sets clear time­lines for post- clear­ance au­dits and Board of Ap­peal re­views. Un­der the cur­rent regime, ap­peals can take years to re­solve. Sim­i­larly, the new Act im­poses clear dead­lines for the re­turn of duty guar­an­tees.

An­other crit­i­cal change in­cludes re­vi­sions to the method for cal­cu­lat­ing crim­i­nal fines. Pre­vi­ously, penal­ties were de­ter­mined us­ing four times the com­bined price of goods plus the cus­toms duty. The new cal­cu­la­tion will be based solely on the amount of duty evaded and will be lim­ited to a mul­ti­plier be­tween 0.5 and four times the base amount. Courts will now have dis­cre­tion in cal­cu­lat­ing crim­i­nal fines.

The new Act also in­tro­duces dif­fer­ent de­grees of penal­ties for dif­fer­ent of­fense lev­els. For ex­am­ple, the penalty for smug­gling is more se­vere than for duty eva­sion. The Act also re­lin­quishes ju­ris­dic­tion of of­fenses re­lat­ing to re­stricted goods.

The new Cus­toms Act of 2017 rep­re­sents a sig­nif­i­cant im­prove­ment in fair­ness and clar­ity that will ben­e­fit not only the pri­vate sec­tor, but the Thai govern­ment it­self. Around 80 sub- reg­u­la­tions are ex­pected to be an­nounced be­fore the new Act be­comes ef­fec­tive in mid- Novem­ber 2017.

Michael Ramirez is Se­nior Con­sul­tant at Tilleke & Gib­bins. He can be con­tacted at michael.r@tilleke.com

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