As of 15th August 2008
Draft Amendment of the Customs Act B.E. 2469 (1926)
Summary of Opinions and Comments provided by Joint Foreign Chambers of
Commerce in Thailand
Submitted 14 August 2008 for discussion at the meeting to be held on 19 August 2008
OFFENCES; PENALTIES; BURDEN OF PROOF; REWARDS; APPEALS;
COLLECTION OF DUTY SHORTAGES; GOODS DEEMED TO BE PROHIBITED
IMPORTS
1. Section 161 of the Draft: the Offence of “Duty Evasion”
Current Customs Act:
• Section 27 of the Customs Act prescribes the offence of duty evasion and
provides for a fine four (4) times the amount of the value of the goods plus
duty, and/or imprisonment for a maximum period of ten (10) years. This
section does not provide for a penalty of “up to” the amount specified.
Draft Customs Act:
• The Draft proposes an increase of the total penalty to five times the duty-paid
amount, again without there being any language that such penalty will be
applied “up to” this amount.
Our Comments:
• The Draft language provides no room for the imposition by the Court of a
lower penalty to reflect mitigating circumstances or defenses put forward by
the accused juristic person’s director pursuant to Section 115 quarter of the
Customs Act.
• Raising the penalty level to five times is also not justified, and any such
increase will very likely be used by Customs to increase the 2 times duty
penalty that is applied in the case of agreement to settle a dispute at the
Customs level without recourse to external appeal.
Recommendations:
• That the Draft provides room for the imposition by the Court of a lower
penalty, ie. the wording should provide that the “the maximum penalty shall
not exceed…”
• The penalty regime needs to be reviewed and changed to reflect international
best practice and Thailand’s commitments under the Revised Kyoto
Convention (refer to AMCHAM’s presentation at the Best Practices
Workshop jointly held with Customs in November 2007.
• Importers should be allowed to make a voluntary disclosure of inadvertent
offences under Section 161 and no penalties should be charged.
2. Section 211 of the Draft: “False Declaration”
Current Customs Act:
• The penalty for a “false declaration” offence under Section 99 of the Customs
Act is that “such person shall be liable to a penalty not exceeding five
hundred thousand Baht, or to imprisonment for a period not exceeding six
months”.
Draft Customs Act:
• The penalty for a “false declaration” offence under Section 211 of the Draft
now includes the seizure of goods. In respect of an offence committed in
respect of exports in duty drawback, the prescribed penalty is now four times
the duty paid value of the goods.
Comments:
• As Customs will commonly charge alleged offenders with offences under
Section 27 and 99 of the Customs Act, the duplication of the applicable
penalties (which are substantial in their own right) will place a significant
burden on companies.
Recommendations:
• The language in Section 99 of the current Customs Act should be retained.
Specifically:
o Duty evasion cases should not lead to the seizure of the goods, or fines
in lieu of seizure
o The penalty regime for offences relating to duty drawback are
excessive and should be a maximum of four times the duty evaded, and
less for cases of error.
3. Section 212 of the Draft: Burden of Proof Language in Section 100 of the
Customs Act
Current Customs Act:
• Section 100 of the Customs Act reverses the normal criminal law burden of
proof and generally places it on the accused in respect of criminal matters.
Draft Customs Act:
• Section 212 of the Draft does not propose any changes to this language.
Comments:
• The reversal of the burden of proof creates confusion to all parties involved in
such legal proceedings, as well as potential unfairness to an accused facing the
heavy penalties provided by the Customs Act, which include imprisonment.
• It is our understanding that, in recognition of the heightened potential for
unfair treatment of the accused, precedents indicate that relevant officials have
themselves moved away from this position and would essentially treat a
Customs case in the same manner as any other criminal case, making every
effort to prove the case against the defendant.
Recommendations:
• The burden of proof in criminal cases under the Customs Act should clearly
follow the normal criminal law provisions set out in the Criminal Procedure
Code.
• This aspect also relates to the recommended review of the whole penalty
system
4. Section 215 of the Draft: Reward Language under Section 102ter of the Customs Act
Current Customs Act:
• Section 102ter of the Customs Act provides a mandated reward for officials
and informants in the case of fines collected under Sections 27 and 99 of the
Customs Act.
Draft Customs Act:
• Section 215 of the Draft proposes minor changes to this language; however,
the main concept remains unchanged.
Comments:
• This section and its concept of “sinbon” is an outdated provision which has
long been cited as one which, when coupled with the large amount of penalties
involved, has a potential to impact negatively on the objectivity of officials
involved in investigations.
• While other government departments provide rewards to officials, such
rewards are not set out in the main body of the relevant law and are generally
capped to specified amounts. The reward schemes are also set out in internal
departmental rules and orders, which Customs may wish to consider when
exploring better ways to document the reward scheme.
Recommendations:
• This aspect also relates to the recommended review of the whole penalty system,
including the revocation of this clause from the existing Draft. As a minimum:
o Officers should be rewarded for good performances as part of a transparent
appraisal system that is linked to their overall performance in a year, and
not the revenue collected in individual cases.
o Payments to informants should be capped at a reasonable level rather than
being paid as a percentage of the revenue collected
o Informants that are found to have been complicit in the underpayment of
duty should not be rewarded
o Informants that have falsified documents or otherwise made false claims
should be subject to criminal sanctions.
5. Section 225 of the Draft: New Board of Appeal (BOA)
Current Customs Act:
• If the importer wishes to appeal against Customs’ rejection of (say) the
importer’s CIF Price, the importer is entitled under Section 112 sexies of the
Customs Act to appeal to the BOA established under the Customs Act. The
BOA is a body which is currently chaired by the Director-General of Customs.
Draft Customs Act:
• The Draft proposes the creation of more than one BOA, with the Deputy
Permanent Secretary of the Ministry of Finance now acting as the Chairman.
There is no provision for officials outside the Ministry of Finance to sit on the
BOA.
Comment:
• Whilst having more than one BOA may expedite the hearing of appeals, the
Draft does not address the interaction of the various proposed BOAs or the
power to be given to the Chairman.
Recommendations:
• We propose that the Draft contain wording clarifying:
(a) Chairmanship of all of the BOAs (e.g.. Will the various Deputy
Permanent Secretaries of the Ministry of Finance each chair a
BOA?)
(b) Powers of each Chairman
(c) How cases will be allocated to particular BOAs
• Consideration should be given to the appointment of non-Ministry of Finance
officials to the BOA (e.g. drawn from academia or from amongst retired
government officials) as such appointment could be helpful in providing the
BOA with the necessary expertise and addressing allegations of conflict of
interest.
6. Section 230 of the Draft: Proceedings of the BOA
Current Customs Act:
• The Customs Act provides that companies may appeal to the BOA within
thirty (30) days of receipt of a Notice of Assessment (see Section 112 sexies).
Draft Customs Act:
• The Draft does not address certain key deficiencies which have become
apparent since the establishment of the BOA in 2000
Comment:
• There is no prescribed time period in which appeals must be heard. For
example, appeals that were lodged with the BOA in 2000-2002 are still
pending. This unsatisfactory situation is exacerbated as companies are maybe
required to provide cash payments in order to lodge appeals, sometimes
involving substantial amounts.
Recommendations:
• BOA should be required to hear, finalize and issue rulings on appeals within a
prescribed time period: e.g. within 6 months after the appeal is submitted to
the BOA. If the BOA do not publish a ruling within the prescribed period, the
importer should be deemed to be correct.
• The appellant should be given a right to appear before the BOA and to make
written submissions before and after appearing before the BOA
• A detailed written response explaining the decision of the BOA should be
provided to the importer, including the relevant legislation, the commercial
facts relied on in the decision and the interpretation of the legal provision in
the specific case
• BOA decisions should be publicised within 30 days, provided importer
confidentiality is preserved.
7. Section 16: Collection of Duty Shortage
Current Customs Act:
• There are no specific provisions about the period within which Customs can
recover duty shortages
• Customs relies on the Civil & Commercial Code to recover shortages back 10
years from the date of importation
Draft Customs Act:
• Draft Customs Law specifies the right of the Customs Department to collect
deficient duty shall be ten years from the importation or the exportation of
goods.
Comment:
• Maximum prescription period should be consistent with the Revenue Code
i.e. 5 years; and Section 223 of Customs Law under which importers/exporters
are required to retain documents for 5 years
Recommendations:
• There should be a maximum period of 5 years from the date of importation or
exportation within which Customs can collect duty short payments.
8. Section 19: Goods Deemed to be Prohibited Imports
Draft Customs Act:
• Draft Customs Law provides “The imported or exported goods showing any
qualities or statements or images prohibited by the Director General, on the
goods or their package, or the goods showing their wrong country of origin
with words, description, or other display by weaving, driving, stamping,
attaching with such goods or their packages or their labels, whether or not
such goods have passed through the Customs formalities, the goods are
deemed as prohibited imports or exports”
Comment:
• Harsh penalties are provided for prohibited import offences
• Other jurisdictions:
o Judge whether or not any contravention was considered intentional or
reckless
o Permit corrective re-labelling of goods
• In the current penalty regime, the draft provisions may be open to abuse.
Recommendations:
• Draft provisions be amended to:
o Recognise innocent and innocuous contraventions
o Only apply penalties in cases of deliberate intent or reckless conduct
o Permit goods to be re-labelled to correct infringement
o Explicitly exclude Certificates of Origin for duty preference purposes
from these provisions
o Require Customs to publish guidance on how to determine the origin
of goods (e.g. in cases of manufacturing processes in more than one
country and repackaging operations)
DEFINITION OF “CUSTOMS PRICE”
9. Section 6(12) of the Draft: Amendment of the Definition of “Customs Price”
Current Customs Act:
• Section 2 of the Customs Act lists the methods for determination of “Customs
Value” (Valuation Methods) and states that the bases, procedures and
conditions for the use of the Valuation Methods will be prescribed by
Ministerial Regulations.
Draft Customs Act:
• The Draft proposes omitting the list of Valuation Methods from the body of
the act and instead proposes to leave the Valuation Methods to be prescribed
by Ministerial Regulations.
Comments:
• The current wording in Section 2 of the Customs Act functions well in setting
out the framework for determination of the Customs Value using the
Valuation Methods, with Ministerial Regulations (namely No. 132 as amended
by Nos. 145 and 146) clarifying the bases, procedures and conditions for use
of the Valuation Methods. Further, it is inline with the WTO Customs
Valuation Agreement (“CVA”) language.
• As Ministerial Regulations are not issued through a parliamentary process and
are subject to frequent change, leaving key features of valuation methodology
to be set out in Ministerial Regulations will create a greater risk for
misinterpretation and misapplication, and will not promote transparency and
consistency in decision-making.
• Adopting the approach proposed in the Draft would be contrary to the
prevailing trend in other Asian countries implementing the WTO CVA, which
have adopted the full wording of the WTO CVA provisions into the main
body of their customs acts and not in implementing regulations (e.g in
Indonesia and the Philippines).
Recommendations:
• At a minimum the key Valuation Methods should be enshrined in legislation.
[In fact, setting out the bases, procedures and conditions of use of the
Valuation Methods in the main body of the Customs Act would even better
serve to achieve the goals of promoting consistency in and transparency of
enforcement of the relevant valuation provisions]
• Treatment of the Valuation Methods is best left as is in the current Customs
Act, with the existing regulatory framework further improved with minor
amendment of the language in the relevant Ministerial Regulations in order to
enhance consistency with the provisions of the WTO CVA.
• Alternatively, if any changes are made to the Customs Act itself, that the Draft
should implement a more detailed description of the Valuation Methods in
accordance with the WTO CVA and the prevailing treatment of this issue in
the region.
RIGHT TO REFUND
10. Section 16 of the Draft: Right to Duty Refund
Current Customs Act:
• Section 10 of the Customs Act sets out the right of the importer to claim
overpaid duty within two years from the date of import.
• Claim for refund on the grounds of the type, quality, quantity, weight or value
of any goods or the rates of duty thereof must be made before the payment of
duties and delivery of the goods, except where (a) Intention to claim a refund
is formally provided before delivery; or (b) Where, before delivery, Customs
should have known excess duty was paid.
Draft Customs Act:
• Section 16 para 3 of the Draft sets out the right to claim a refund of the duty
paid in excess of the duty payable. Such right lapses on the expiry of two
years after the date of importation or exportation.
Comments:
• The Draft does not propose either an increase of the refund period, or the
circumstances under which a refund can be claimed.
• Current restrictions effectively prevent refunds been claimed on short
shipments, defective goods, incorrect consignments, overpayments due to
incorrect HS codes/customs values.
• Increasing the refund rights would ensure that the importer/exporter would be
treated in a more equitable and consistent manner. For example, a delayed
ruling of the Customs internal appeal body, the Board of Appeal, may indicate
rights that the importer was hitherto unaware of.
Recommendations:
• The rights of the importer/exporter should be increased:
(a) right of claim should arise as same as the existing clause on Section
16 para 3 of the draft ie. Currently up to ten years from the date of
import/export or the date on which the right of claim should arise
(b) To cover circumstances outlined above where the current provisions
make it is practically impossible for an importer to obtain a refund
(c) The importer should not need to ‘reserve the right to refund’ on each
import entry. Refunds should be made in all cases where the
importer can reasonably prove that duty was overpaid The categories of duty refund should be widened to take account of common commercial
circumstances (e..g. legitimate pricing adjustments).
ADVANCE BINDING RULINGS
11. Section 21 of the Draft: Advance Binding Rulings
Current Customs Act:
• Not available
Draft Customs Act:
• Advance Binding Rulings are measures included as Section 21 of the Dra
Comments:
• The proposed introduction of these rulings is a positive step that we commend.
• The effectiveness of the Advance Binding Rulings system depends on
effective implement. There are deficiencies in the implementation of the
Tariff Classification Rulings i.e.
(a) Importer’s cannot use the ruling system to clarify uncertainties as
Purchase Orders and Sales Contracts must be submitted with rulings
applications
(b) Ruling is only binding for a maximum period of 1 year, after which
time it is a “reference”. This will lead to frequent requests for the
extension of rulings after one year, creating a burden for Customs.
(c) Ruling only applies to those goods imported by the applicant
(d) Customs may consider publishing the Rulings if requested by the
Applicant
Recommendations:
For all Rulings, the Law should specify:
• Timeframes within which Customs will provide rulings eg. within thirty (30)
days of submission of a request by an importer.
• No rulings should be dependent upon goods have been ordered as companies
may need firm rulings to determine whether to import goods
• Rulings should be published and have general application (subject to the
preservation of importer confidentiality)
• Rulings should not have an automatic expiry date, and the revocation process
should be clearly stipulated in the Law
• Rulings should also be available for all ancillary matters related to imports,
customs control and exports (e.g. goods in transit, the use of bonded zones,
conditional tariff concessions, duty drawback procedures, export valuation)
DEFINITION OF RISK MANAGEMENT
12. Section 6: Definition of “Risk Management”
Comment:
• "Risk Management" approach is referred to in many sections of the draft
Customs Act.
• The criteria / scope of this terms should be clearly stated in the Definition
Section, for the common understanding between Customs Officers and
Imports/Exporter.
Recommendations:
• Include a definition of “risk management” in the new Customs Act
CUSTOMS DUTY SURCHARGE (INTEREST)
13. Section 196: Customs Duty Surcharge (Interest)
Comment:
• Interest of 1% per month is payable in the case of short paid customs duty
(where no penalty is imposed), calculated from the date of release of the goods
until the date of payment. In some cases, the interest amount can greatly
exceed the amount of the duty shortage.
• Customs typically takes a long time to calculate the duty shortage when an
importer voluntarily requests to rectify any such shortage. In these cases,
importers are penalized by having to pay additional interest
• In the case of VAT short payments, interest is calculated at 1.5% per month
and is capped at an amount equal to the VAT shortage.
Recommendations:
• Customs duty interest be capped at the amount of the duty shortage
• Collection of duty interest should be calculated from the date of importation to
the date the importer volunteered to repay the duty short paid
EXPRESS INDUSTRY ISSUES
• The requirement for Category 3 (i.e. informal, low-value) shipments must now go
through individual formality process, thus increasing the processing expenses
significantly. Currently EDS companies batch/consolidate these low-value shipments at
40 airway bills per entry. The change will result in the EDS players having to break out
each shipment and getting hit with payments per entry versus just one payment for the
batched group.
• The proposed category changes on Export, going from 2 to 3 categories, with one
specifically for documents, will cause a significant increase in operating expense. No
tangible benefits are seen to justify this increase in expense.
• A full Manifest must now be submitted 2 hours prior to flight departure. As this requires
more processing work, this would impact EDS companies’ service levels as it would
force companies to shorten cut-off times for customers.
ADDITIONAL COMMENT ON CUSTOMS PROCESSES
14. Post-Audit
Issue:
While the Customs Post-Audit Bureau’s process of conducting a post-importation
audit is not set out in the Customs Act, it is a fundamental point of interaction
between Customs and importers/exporters. However, we would recommend that
some thought be given to increasing the certainty and transparency of an
importer’s/exporter’s rights both during and upon the completion of an investigation.
The Draft does not contain any additional treatment of this issue.
Recommendations: The following be added to the Draft:
(a) Specification of a maximum audit period (e.g 6 months)
(b) Return of seized documents within a reasonable and specified period of time
(e.g. 2 months);
(c) Right to seek a detailed written clarification of the alleged offence and scope
of the investigation;
(d) Right to appear before the investigating committee to present facts and
clarification;
(e) Requirement for the Post-Audit Bureau to provide written confirmation of
their findings and the period of investigation covered; and
(f) Once a written ruling is given as per (e) above, that the investigation will be
final in respect of the period covered.
15. Written Communication with Customs
Issue:
A general difficulty faced by importers when dealing with Customs is the lack of
written communication concerning Customs’ audits/investigations and rulings. For
example, many importers experience protracted discussions with Customs concerning
valuation or tariff classification issues, as well as delays in receiving clarification
from Customs on
Recommendations:
• Include procedural requirements in the Customs Act that Customs must respond to
written requests within a specified period of time (e.g. 30 days), so as to encourage a
higher rate of compliance, as well as provide greater certainty and transparency in respect
of a company’s rights when interacting with Customs.
• Customs should set targets for response rates and then publish the actual performance
against those targets.
