Preparing for changes to the customs ... · Preparing for changes to the customs, excise and...

Preparing for changes to the customs, excise and international trade environment – what you need to do.

www.pwccustoms.com

27 October 2015

Strictly Private and Confidential

Agenda

The New Customs Act - what to expect?

Other Updates

New Excise Act - the compilation from seven into one legislation

Wrap up

Q&A

PwC

27 October 2015Maximise Shareholder Value 2016

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27 October 2015

The New Customs Act - what to expect?

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Maximise Shareholder Value 2016

PwC


Current status

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Section 1 – The New Customs Act - what to expect?

• Some changes already incorporated in current Customs Act and Customs Tariff Decree as part of approaching ASEAN Economic Community, including

Advanced binding rulings

Transit and Transhipment provisions

Outward Processing Relief (OPR)

• First draft to revise complete Customs Act – released in October 2014

• Second draft released March 2015 after revisions by Customs

• Approved by Cabinet on 21 July 2015

• Currently being reviewed by Council of State

• Latest update…..enter into force by this year or next year?

PwC


The New Customs Act – what to expect?

Bonded Warehouse

Advance Rulings

Duty Surcharge

AgentsStatute of Limitation

Overtime goods

Import License

Statutory Penalties and Fines

Bribes and Rewards Regime

Post-Audit/ Investigation

Appeal Timeline

Customs Free Zone

Origin Power Enforcement officers

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Bribes and Rewards

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Officer (‘reward’)

o 25% of duty fine or selling amount of seized goods or 30% in case no informant involved

o No threshold

o 10% of shortfall amount in case of duty deficit collection discovered by officer

Informant (‘bribe’)

o 30% of duty fine or selling amount of seized goods

o No threshold

Officer (‘reward’)

o 15% of duty fine or selling amount of seized goods or 20% in case no informant involved

o Limited to 5 million baht per case

o 10% in case of duty deficit collection discovered by officer (same) - no threshold?

Informant (‘bribe’)

o 30% of duty fine or selling amount of seized goods

o Limited to 10 million baht per case

Current

New Proposal

PwC


Statutory Fines and Penalties

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Offense

• Smuggling

• Duty Evasion

• Evasion in relation to

import of restricted goods

without import license

Current

4 times of CIF value +duty

or

Imprisonment not more

than 10 years

or both

(current Section 27)

No prove of willful intent

or negligence required

New proposal

• 4 times of CIF value + duty or imprisonment

from 3 months - 10 years or both

• Forfeiture of goods

• Customs does not need to prove wilful intent

or negligence

• 0.5 to 4 times of duty shortfall or

imprisonment for not more than 10 years or both

• Customs has to prove wilful intent

or negligence

• Penalise according to the main Act or

imprisonment from 3 months – 10 years or both

• Forfeiture of goods

• Customs does not need to prove wilful intent

or negligence

PwC


Statutory Fines and Penalties (cont’d)

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Offense

• Knowingly assisting in

concealing, disposing,

purchasing duty unpaid

goods, smuggled,

restricted or prohibited

goods

Current

4 times of CIF value +duty

or

Imprisonment not more

than 5 years

or both

(current Section 27bis)

New proposal

• Duty evasion - 0.5 to 4 times of duty shortfall

or imprisonment not exceeding 5 years or both

• Import restricted goods –Penalise according

to the main Act or imprisonment from 3 months

– 5 years or both

• Smuggling – 4 times of CIF value + duty or

Imprisonment from 3 months to 5 years or both

PwC


Current New Proposal

Import License • Required at the time of importation

• Under current Act– when vessels enters Port

• Possible non-compliance at early stage of importation

• Time of importation changed for restricted goods

• Prior to taking the goods out of Customs’ custody

• Possibility to obtain import license with relevant agency while goods remain under Customs’ custody

Post Clearance Audits /Investigations

• No timeline specified for audit period

• Typically every 2-3 years after last audit or investigation

• Within 5 years after the import/export date

• Aligned with record retention requirements

Overtime goods • 2 months 15 days • 1 month 15 days

• Reduction of time period will lead to more space in Customs warehouse

• Faster duty collection for overtime goods

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Statute of Limitation

• 10 years

• Duty refund within 2 years after import/export date

• Remains 10 years

• Duty refund within 3 years after import/export date

• Still reservation required

Agents • No provision • Definition of Agent (authorized by owner and approved by Customs)

• Deemed to be the owner of goods

• Shall be liable to customs offences except where they can proof that they are not involved in such wrong doing.

• Owner remain liable to same penalties

• Civilly liable towards agent in case judgment by Court

Appeal Timeline • No provision • The Board of Appeal (BOA) shall consider the application within 180 days from receipt date of completed information and application

• The BOA shall include at least one member from the private sector

Duty Surcharge • Unlimited – no cap • Limited to the duty shortfall amount

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Advanced Rulings • No provision • Binding Advance rulings possible for customs valuation, origin and classification

• Separate Notifications already issued

• How does it work in practice?

Bonded Warehouse • Consignment into Bonded Warehouse not considered as ‘export’

• Consignment into Bonded Warehouse considered as ‘export’

• Subject to regulations by DG

• BOI compliance?

Customs Free Zone • No waiver of importrestrictions, standards, testing requirements etc.

• Waiver of import restrictions, standards, testing requirements, unless….

• Subject to further Ministerial Regulations to not exempt or waive

Origin • Prohibition to import goods with wrong or incorrect origin marking

• Based on old Act B.E. 2481

• Incorporated into new Act

• Goods considered as ‘prohibited goods’

• Smuggling offence for importing / exporting goods with ‘wrong’ or ‘incorrect’ origin statement or marking

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Power Enforcement officers

• Different from Revenue Department

• Aligned with Revenue Department officers

• Power to seize and sell property by auction to obtain duty deficiency

• No need for Court approval

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27 October 2015

New Excise Act - the compilation from seven into one legislation

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Current status

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Section 2 – New Excise Act - the compilation from seven into one legislation

• 9 March 2015, Ministry of Finance proposed the excise tax bill to the cabinet.

• The new bill is made under the concept of principal of sound tax theory that based on 6 main pillars which are;

1) Simplicity

2) Equity

3) Fairness

4) Transparency

5) Anti-Tax Avoidance and

6) Internationalization.

• Expected to enter into force 180 days after published in the government gazette.

• As Tax rates in the initial proposal were deemed to be too high, Ministry of Finance will reconsider the appropriate tax rates

PwC


Excise tax base

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Section 2 – New Excise Act - the compilation from seven into one legislation

CIF value / Ex-factory price

CIF value / Ex-factory price or Last Wholesale price

Suggested retail price

PwC

27 October 2015

Other Updates

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Outward Processing Relief (OPR)

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Section 3 – Other Updates

Thailand

Singapore

Export = $100

Re-imported = $120

Duty exemption = ...... Duty payable = ……

PwC


Outward Processing Relief

• Possible duty saving opportunities (e.g. using RDC outside Thailand and goods re-imported into Thailand)

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Local/Duty paid

Re-import within 1 year from the date of approval

Same importer and exporter

Evidence for verifying that the re-imported goodshas passed further processing

Request for principle approval must be done prior to exportation

Conditions

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Free Zone

• Current discussion to change requirement conditions for local sales transactions

• More stringent requirements on manufacturing process within the Free Zone and subject to verification by Customs

• Possibly based on Finished Products and/or Industry Sectors

• Currently being discussed and input requested from the Federation of Thai Industries (FTI)

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PwC


FTA updates

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Topic Key change Condition Effective date

Third party invoicing interpretation under the ACFTA

• “Third Party” can now be interpreted as one or more country under ACFTA

• Currently, only the preferential ACFTA and ATIGA are allowed when using duty benefits

27 February 2015

Harmonised System version 2012 applied for Form D

• The change of HS 2012 version under ATIGA, instead of 2007

• Use of HS 2012 required for Form Ds (except for Cambodia)

30 March 2015

Self-Certification under the Second Pilot Project under ATIGA

• Certified exporters in Philippine, Indonesia, Laos and Cambodia are enable to make out invoice declarations on the origin of goods.

• Certified exporters are limited to only manufacturers

1 May 2015 / 1 August 2015

PwC


FTA updates

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Harmonised System version 2012 applied for Form E

• The change of HS 2012 version under ACFTA, instead of 2007

• Use of new HS version for imports

• DFT pending update system

31 May 2015

Transition period from 31 May till 31 July 2015

Harmonised System (“HS”) version 2012 applied for Form AANZ

New Certificate of Origin (“CO”) Form AANZ

• The use of HS 2012 version under AANZ FTA, instead of HS 2007

• For Third Party Invoice, the name of third party must be indicated in Box 7

• In case of the RVC rule, the FOB value must still be indicated in Box 9.

• Implement the use of new HS version for imports

• Allow to use old Form AANZ during the transition period (valid for 12 months) but FOB value will apply in all cases.

1 October 2015

Transition period from 1 October 2015 till 31 March 2016 (Cambodia, Myanmar and Indonesia will have extra conditions on FOB value and the use of old CO Form AANZ)

PwC


FTA updates

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Thai-Chile FTA • Expected to be implement at the end of this year

TBD • Expected November 2015

Thai – Pakistan FTA

(Under negotiation)

• 1st round already started in September 2015

• Target to conclude the negotiation in 2017

TBD TBD

Regional Comprehensive Economic Partnership (RCEP)

(Under negotiation)

• Extended timeline to 2016• At least 80% goods are

liberalized• 33% of global GDP

TBD TBD

Trans-Pacific Partnership (TPP)

(Thailand is interested to join TPP?)

• Finally reached the agreement on 5th October 2015

• 40% of global GDP

TBD TBD

PwC


FTA updates

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FOB Value in case of 3rd party invoicing

• No change yet but under discussion

• Currently only waived when using CTC

• Which FOB value to use?

• TBD TBD

Combination B-2-B and 3rd party invoicing

• Not allowed by Thai Customs

• No change yet but under discussion

• TBD TBD

PwC


3rd party invoicing vs. back to back

3rd party invoicing Back to back

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Malaysia Thailand

Ireland

Malaysia Thailand

Singapore

Goods + Form D

2nd invoice1st invoice Goods + Form D

Partial goods+ Form D

PwC


Combination B-2-B and 3rd party invoicing

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Malaysia Thailand

Singapore

Goods + Form DPartial goods+ Form D

Ireland

1st invoice

2nd invoice

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Export Control for Dual-USE Products

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• Dual-use goods are goods, software and technology normally used for both civil purposes but which may have military applications or may contribute to the proliferation to the of Weapon of Mass Destruction (WMD).

• Examples

Goods Commercial Military

Multi-Walled Piping Use in petrochemicals and chemicals industries

production of chemicals weapons

Fermenters Beverage industry Medical industry

Microbiological Culture

Switching devices Medical equipmentSurge protector

Bomb detonators

Carbon Fiber Motor sport production, especially racing car, sport equipment such as tennis rackets and golf club

Gas centrifugesand material of missiles

PwC


Export Control Of Dual-use items in Thailand:

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Short Term

• Ministry of Commerce propose Ministerial Notification for export control of Dual Use items (list of approximately 1,000 items are expected to be covered)

• Develop e-Trade Management of Dual-Use Items (e-TMD) for Dual Use items licensing

• Standardized laws and regulations regarding export control of dual use items of relevant Ministries

• Establish the relevant laws and regulations regarding dual use items such as the control of End Use and End Users.

Long Term

Enact Trade Management Of Dual-use Item Act (possibly after 2018?)

PwC


Which Thai business sectors could be impacted?

1. Electronics and Electricity

2. Computer

3. Chemical and Medicine

4. Automotive components and parts

5. Steel

6. Telecommunication and Communication Business

7. Glass

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Facilitation Act: Facilitating business or simply adding more work?

Trade facilitation Act entered into force in July 2015. The Act applies to all permissions and licensing including registrations and notifications. Under this Act, government agencies have the following obligations:

- The Authority who authorizes a permission shall present to the public a manual of such permission

- The officer who receives the request of permission shall examine the completeness of the application and the relevant documents. In the case where the requirements are not complete, the competent officer shall suggest the applicant promptly and all the documents to be fulfilled should be suggested at once

- The officer shall finish his consideration within the period as specified by the licensing manual

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PwC


Facilitation Act: Facilitating business or simply adding more work? (contd.)

Based on our experience with Customs: Request for Advance Ruling

- Difficulties in request submission

- The officer denied to accept the request / supporting documents

- Scrutiny on document checking

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27 October 2015

Wrap Up

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Section 4 – Wrap Up Positive developments in proposed Act but still various issues up for interpretation and ‘discretion DG’

Already some items incorporated and enacted

As goods as it gets…?

Revised Customs Act unlikely to enter into force this year

Explore new opportunities under revised Act

Stay on top of developments and be proactive rather reactive

Customs regulatory environment changes rapidlyo FTAso AECo Export Control

Wrap Up

PwC

27 October 2015

Discussion - Q&A

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PwC


WMS Thailand

Paul Sumner (Partner)Tel: +66 (0) 2 344 1305Email: [email protected]

Santi Krongsithidej (Director) Tel: +66 (0) 2 344 1341Email: [email protected]

Nu To Van (Director) Tel: +66 (0) 2 344 1353Email: [email protected]

Wiphawee Lertdhamtawee (Senior Manager)Tel: +66 (0) 2 344 1248Email: [email protected]

Yossatorn Wattanapituksakul (Manager)Tel: +66 (0) 2 344 1233Email: [email protected]

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Thank you

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