Grey importers plead for tariff cut to revive business

Independent car importers and distributors, known as grey-market operators, are calling for a cut in import tariffs to help shore up sales.

Adul Sawasdee, a director of the Independent Car Importer and Distributor Association, said the industry is hit hard by customs duties as high as 80%.

Apart from customs duty, all imported vehicles are subject to a 30-50% excise tax based on CO2 emissions, a 10% interior tax and a 7% value-added tax.

Grey-market dealers are legal but unauthorised and can undercut authorised dealers because of lower customs tax and operating expenses.

The grey market during 2010-12 recorded sales of 10,000-12,000 vehicles before encountering several restrictions, including a higher import tax and a refusal by European carmakers such as MercedesBenz to provide after-sales service.

In 2012, the Customs Department raised the import tax and tightened customs surveillance of grey market cars after complaints by authorised dealers that their market share was being eroded by grey-market importers, many of whom were suspected of illegally understating the value of their imports to minimise tax burden.

The new measures raised the reference prices of imported luxury cars by 10-20%.

If the price declared by an importer is assessed as too low, customs officials calculate tax based on the reference price, which includes cost, insurance and freight (CIF).

In 2013, the Department of Special Investigation began rigorously inspecting disassembled luxury cars. The Industry Ministry also launched tighter controls to test imported cars before delivery to customers.

The Customs Department raised CIF rates by 10-20% for imported vehicles, effective from last October.

Mr Adul said the grey market is required to declare the entire value, while authorised importers or carmakers are eligible to declare local content of 40%, thus avoiding import tariffs.

Somsak Sriratanaprapas, the association’s newly appointed chairman, expects grey-market sales to stay flat at 5,000 units this year.

“Most importers have been working hard to stay afloat in such a difficult environment, and some of them were forced out of business,” he said.

There are roughly 100 importers now, 54 of which are association members. All are Thai companies.