New Customs Act: Opportunities or New Challenges for Business Operators?
The New Customs Act
On 17 May 2017, the Customs Act B.E. 2560 (the Act) was published in the Royal Thai Government Gazette. The Act will become effective on 13 November 2017 (180 days from the date of publication in the Government Gazette).
Key Dates Under the Act
1. The new members of the Appeals Committee must be appointed within 180 days from the date the new law comes into effect. The currently qualified members will remain in their positions until the new members are appointed (section 258).
2. All warehouses, bonded warehouses, godowns, other places of security, and free zones established and operated before this Act comes into effect can still operate, but they must comply with the formalities and pay fees in accordance with the new Act (section 259).
3. The transit and transshipment timeframes in the Act's section 102 paragraph 2 and section 103, respectively, will not apply to transit and transshipments per international agreements which were binding before this Act (section 260).
4. Reward sharing for offenses discovered before the Act will come into effect on 13 November 2017 but will remain subject to the current Customs Act, B.E. 2469 (section 261).
5. All future subordinate regulations under the Act must be announced within 180 days after the Act comes into effect. All subordinate announcements or regulations under the current law, the Customs Act B.E. 2469, will remain in force (to the extent that they do not contradict the new law) until new regulations are announced (sec. 262).
Key Amendments under the Act
1. The offenses of smuggling, evasion of duty and violations of prohibitions or restrictions have been revised. The offenses of smuggling, evasion of duty and violation of prohibitions or restrictions are now categorized into three provisions. The penalty for an evasion of duty has been reduced from four times the import price plus duty to a range of a half to four times the duty shortfall and/or ten years imprisonment. While the penalty for the offense of smuggling remains four times the import price, plus duty and/ or ten years imprisonment, the penalty for a violation of prohibitions or restrictions is now a fine not exceeding THB 500,000 and/or ten years imprisonment.
2. The offense of false declaration has been revised, now dividing such an offense into three separate offenses, namely (i) the offense of providing incorrect, incomplete or mistaken information, (ii) the offense of counterfeiting a seal, signature, initial or other mark, and (iii) the offense of proceeding an incorrect Customs procedures. The offenses of providing incorrect, incomplete or mistaken information and proceeding an incorrect Customs procedures will now only be punished with fines.
3. Now, to be found guilty of an offense of duty evasion, the willful intention or negligence on the part of the importer is required. The offenses of smuggling, violation of prohibitions or restrictions, and false declaration fall under a strict liability presumption.
4. The percentage of rewards shared between customs officers and whistleblowers have been reduced and capped at five million baht. The reward for successfully reporting an offense of smuggling or importation of prohibited items has been decreased to 40% of the proceeds of the sale of the goods in question (the whistleblower receiving 20% and the customs officer receiving the other 20%), while the reward for falsely declared goods has been reduced to 20% of the proceeds of their sale and the reward for reporting a duty shortfall is reduced to 10% of the duty shortfall.
5. The burden of proof for suspected importers/exporters in Customs disputes has been raised in their favor. Now, proof beyond a reasonable doubt per the Criminal Procedure Code is required for the court to punish defendants.
6. Appeal deliberations are now required to follow a proscribed timeframe. The Appeals Committee is now required to complete its deliberation of a case within 180 days from receiving the complete appeal, which can be extended for an additional 90 days. If the committee fails to do so, the appellant has the option to file the case with the Central Tax Court.
7. Duty assessments now have a statute of limitations. Customs officials can assess a duty shortfall within three years from the date the declaration form is filed (can be extended for an additional two years in cases of necessity). However, if there is evidence that there was an intention to evade tax or duty, the statute of limitations can be extended for another five years.
8. The timeframe for a duty refund has been extended from two years from the date of importation or export to three years.
9. The time limit within which goods transits and transshipments must be exported out of Thailand is now 30 days.
10. The import and export requirements for goods consigned into certain free zone areas may receive special exemptions as specified in the relevant future Customs Director-General notification.
11. Duty surcharges are to be limited and reduced. Duty surcharges are now capped at duty shortfall amount, and can be reduced according to criteria proscribed in relevant Ministerial Regulation or Customs Director-General Regulation.
12. The timeframe for overtime goods has been reduced. The period of time imported goods remained in the custody of the customs will be deemed as “overtime goods” has been reduced from 2 months to 30 days. The Act also covers cases where neither a full import duty is paid nor a security is placed in full.
13. Customs officers will now have the power to seize and impound the property of debtors in order to recover duty in arrears without requiring a court order.
14. A five-year statute of limitations for post-clearance audit activities will be introduced.
Our perspective about the new Customs Act:
Even though, on the surface, the amendments to the Customs Act may seem more lenient compared to the legislation currently effective, significant monetary penalties could still be laid against businesses through the civil and administrative provisions. Therefore, it would be prudent for affected businesses to initiate risk and liabilities reduction strategies in a timely manner. As the current Act provides significant incentives for officers to uncover criminal or administrative liabilities and places an unfavorable evidentiary onus upon businesses to prove that they are not guilty of the accusations against them beyond a reasonable doubt, it is probable that charges brought against businesses after the new Act comes into force will be less likely to succeed. Moreover, with the introduction of the THB 5 million limitation on rewards, a strategic allocation of working capital may save businesses from exposure to undue or reward-driven penalties. In addition, with the new statute of limitations for tax and duty reassessment, the amendments also provide a much needed degree of certainty for businesses operating in Thailand. Nevertheless, further clarification regarding the criteria used to determine an intent to evade tax or duty remains a lingering issue.
Furthermore, the revised administrative review process under the new Act may also prove advantageous for businesses undergoing litigation. Under section 112 quindecim of the present Act, the Appeals Committee's decision-making process highly inconveniences the accused party with an unpredictably lengthy process. Given this onerous procedure and duration, often the Committee's decision would in practice be final. To address this shortcoming, the new Act will now allow appellants to apply for a judicial review by a separate court if the Appeals Committee fails to complete its decision-making process within its statutorily allotted timeframe. This change is significant, not only because decision-makers will now be held answerable to the court process and judges who are neutral in the dispute. It would also set precedents to be subsequently relied upon. The implications of this change could be profound, but it would depend on whether the courts of justice will accept such appeal as court cases when the Customs Department has yet to receive a decision from the Appeals Committee. Under the current law, not only is there a lack of certainty and clarity in the post-clearance audit and appeals processes, it could also be argued that the penalties are clearly disproportionate. Therefore, by giving the court discretion under their judicial review authority to calculate criminal fines, businesses would be able to appeal against incentive-driven prosecutions. Thus, the upcoming option for judicial review, as well as other amendments, should be taken into consideration by businesses who are currently anticipating a settlement with Customs authorities to decide if and when they should settle.
Lastly, the amendments to the Act also give rise to other planning issues, such as when shipments should be imported into or exported from Thailand. Not only should businesses be aware of the new limitations and reductions of duty surcharges, but attention should also be given to the introduction of the 30-day limit on transshipments and its severe consequences. Although the impact that the new Customs Act could have on businesses operating in Thailand is yet to be seen, the Act arguably moves Thailand closer to the standards set out in the International Convention on the Simplification and Harmonization of Customs Procedures. The elimination of the reward-sharing regime and the reversed onus or proof, as well as the introduction of the post-clearance audit limitation period, should be applauded as progress towards a fairer, more transparent and more predictable international trade regime.
As of 15 November 2017, 13 Ministerial Regulations have been issued with respect to the application of the new Customs Act, including the customs valuation, criteria for minimizing customs surcharges, customs fees, as well as customs free zone and bonded warehouse.
In addition, the following Ministry of Finance and Customs Department Notifications have been issued that announce customs duty reductions/exemptions and additional privileges:
- section 12 of the Customs Tariff Decree, B.E. 2530 (1987);
- for goods originating from the Lao People's Democratic Republic;
- for goods originating from the Republic of the Union of Myanmar;
- for gemstones and jewelry products imported for gems and jewelry fair in Thailand;
- under the Global System of Trade Preferences Among Developing Countries (GSTP);
- for goods originating from Least Developed Countries (LDCs);
- for goods imported into a Joint-Development Area;
- for goods originating from the Republic of Singapore;
- for goods originating from the People's Republic of China;
- for goods originating from Australia;
- for goods originating from New Zealand;
- for goods originating from the Republic of India;
- for goods originating from Japan;
- for goods originating from the Republic of Chile;
- for goods originating from the Republic of Peru;
- for goods originating from ASEAN;
- for the ASEAN-China Free Trade Agreement;
- for the ASEAN-Japan Free Trade Agreement;
- for the ASEAN-Republic of Korea Free Trade Agreement;
- for the ASEAN-Australia-New Zealand Free Trade Agreement;
- for the ASEAN-India Free Trade Agreement; and
- under the Marrakesh Agreement Establishing the World Trade Organization.
Additional Ministry of Finance and Customs Department Notifications have been issued specifying the following matters:
- goods which are not subject to section 10 of the Customs Decree, B.E. 2530 (1987);
- electronic customs formalities for transit and transshipments;
- customs formalities for transit by land pursuant to the Agreement between Thailand and Laos on Road Transportation; and
- customs formalities for overtime goods.
Besides the above, it is expected that a series of Royal Decrees and Ministerial and Departmental Notifications with respect to the application of the new Customs Act, covering customs criteria, condition, procedures, and formalities will be issued in the coming months.