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FY 1999: Thailand |
CHAPTER VI. TRADE REGULATIONS AND STANDARDS TRADE BARRIERS Tariffs on Non-Agricultural Products In the Thai fiscal year (TFY) 1997 (October 1996 to September 1997), the average Thai tariff was 5.5 percent, calculated as a ratio of import duties collected to total imports arriving in Thailand (including imports of goods on which tariffs were waived as part of the Royal Thai Government's (RTG) program of investment incentives. This compares with a figure of 6.7 percent in TFY 1996. The difference between these figures reflects the continuation of Thailand's tariff reduction policies, designed to bring them into line with their ASEAN Free Trade Area (AFTA) and World Trade Organization (WTO) obligations. The average trade weighted tariff for dutiable items was 15.2 percent in 1997, down from 17.01 percent in 1996-97. Tariffs accounted for 11.9 percent of government revenues during TFY 1997, compared to 14.9 percent in 1996. Thailand is continuing with tariff reform begun at the end of 1994, although progress was impeded during 1997, due to the shortfall in government revenue. The total number of tariff rate bands has been reduced from 39 to six, with the following rates: zero percent for certain goods such as medical equipment and fertilizer; one percent for raw materials, electronic components, and vehicles for international transport; five percent for primary and capital goods, such as machinery, tools and computers; ten percent for intermediate goods; twenty percent for instant print film and certain finished products; and thirty percent for goods "needing special protection," including items such as fabrics, clothing, refrigerators and air conditioners. Since 1997, tariff rates on almost 4,000 items were reduced. Overall, duties that had ranged between thirty to sixty percent were cut to between one and 45 percent During 1997, Thailand increased tariffs, surcharges and excise taxes on a number of items. Tariffs on automobiles were increased to eighty percent, and tariffs for perfume and cosmetics, some leather products, crystal, jewelry, cameras, watches and clocks, pens, lighters, and spectacles, are currently applied at thirty percent. In addition, a new surcharge equivalent to ten percent of the applicable tariff is levied on imports, except those items on which the customs duty is less than five percent. Some items, including automobiles, auto parts, alcoholic beverages, certain agricultural products and other sensitive products are not included in the current tariff reform program. Tariffs on petrochemical products are gradually being reduced. In January 1998, the petrochemical tariff was reviewed, and reductions were affected as follows: petrochemicals from 27 to 23.5 percent, plastic pellets from 40.5 to thirty percent, and other plastic products from 40.5 to 35.25 percent. Further reductions to twenty percent and thirty percent for petrochemicals and plastic products, respectively, are scheduled for mid-1998. There are anomalies in the Thai tariff schedules. In some cases, import duties on unfinished materials have been higher than on finished products. Most of these problems are to be addressed through Thailand's adoption of the tariff codes and nomenclature of the Harmonized System, a move being undertaken by the Thai Government. Tariffs on Agriculture and Food Products The Thai Government is complying with its WTO tariff reduction commitments and has significantly eased other barriers for a small, select group of agricultural and food products in the past two years. The United States has benefited from these measures through increased sales and/or additional market share. Nevertheless, Thailand's high tariff structure remains a major market access impediment. Duties on many high-value fresh and processed food products are especially high. Even though the rates will decline by 33 to fifty percent under the WTO, most items will remain in the thirty to forty percent range by the year 2004 -- high compared with Malaysia, Singapore and Indonesia. Thus, producers of meats, certain fresh and dried fruits, juices, and other packaged items may still find it difficult to penetrate the Thai market. In particular, duties on many high-value fresh and processed food products will remain high even after the reductions of current rates by fifty percent or more under Thailand's Uruguay Round schedule. U.S. agriculture exporters are concerned that Thai tariffs on agriculture, upon full implementation of Uruguay Round commitments, will still remain relatively high, with bound rates on many products, such as imported frozen processed potatoes/french fries, in the thirty to forty percent range by the year 2004. Thailand's tariff rate quotas for a selected number of agricultural products were adjusted in 1996. In some cases, Thailand has lowered applied tariffs on agricultural and food products below its WTO commitments. For example, in October 1996, Thailand eliminated the quota for soybeans and reduced tariffs on soybean meal when specific domestic purchase requirements were met. For corn, however, Thailand continues to require that imports arrive between February and June. Corn is also subject to a tariff-rate quota based on domestic wholesale corn prices. Rice is subject to a "safeguard" on importation and price levels, pursuant to WTO rules. Non-Tariff Barriers In addition to high duties, other Thai policies continue to impose tough barriers on imports of products. For example, Thailand's food registration and labeling requirements are time-consuming and costly for suppliers of processed food products. Phytosanitary standards continue to be a source of concern for the United States. After years of effort, the United States in 1995, was able to obtain Thai approval for the importation of fresh citrus fruit from Florida and California. Since then, however, efforts to obtain approval for citrus from Texas and Arizona have been underway, but have stalled for unsubstantiated technical reasons. Import Taxes In addition to tariffs, some import goods, many of which are considered luxury items, are subject excise tax. These include petroleum products, soft drinks and fruit juice, lamp shades, perfumes, air-conditioners, crystalware, passenger cars and vehicles seating not more than 10 persons (e.g., motorcycles and golf carts) and, yachts. Both specific and ad valorem rates are prescribed. The tax is calculated on the CIF price plus import duty, special fees pursuant to the Investment Promotion Act and any other taxes or fees as prescribed by royal decree (but not including VAT). Some exemptions are possible; other tax liabilities may be levied under various other provisions. In addition to high tariffs, Thailand maintains substantial taxes on imported wines. These include excise, value-added and municipal taxes, which are assessed through a complex equation. The excise tax for wine was doubled from twenty to forty percent in 1996, raised to fifty percent in 1997, and increased to 55 percent in early 1998. A case of wine with a CIF invoice value of $100 invoiced now costs more than $400 at retail. U.S. wine sales to Thailand, which as recently as 1996, was the twelfth largest U.S. wine market, are off by nearly ninety percent. Finally, Thailand's restriction of corn imports to a certain time of the year puts U.S. corn at a competitive disadvantage. CUSTOMS VALUATION Arbitrary and inconsistent valuation serves as a barrier to the efficient flow of goods. Customs reform has been a top priority of the business community for a number of years. Businesses complain about the great losses in time and effort they incur dealing with Customs procedures. The Royal Thai Government has recently taken steps, following the appointment of a new Customs Chief, to undertake a systematic analysis of the customs processes and to take measures that will regularize assessments and limit occasions for arbitrary and capricious treatment. While these reforms are lauded, the business community is waiting to see if a new institutional philosophy of fairness and efficiency can be instilled in what has been described as an almost feudal institutional environment. The Thai Customs Department keeps records of the highest declared price of products imported into Thailand from invoices of previous shipments. Those prices can be used as "check prices" to assess tariffs on subsequent shipments of similar products from the same country. Customs will disregard actual invoiced values in favor of the checked price for assessment purposes, a practice that can result in very high effective duties for agricultural products and large lot shipments. For products shipped from other than the country of origin, the Customs Department reserves the option of using the check price of either the country of origin or the country of shipment, which ever is higher Four groups, the Formalities and Assessment Division, the Tariff Division, the Valuation Division, and the Laboratory Division of the Customs Department, are all involved in the price assessment of goods. Pricing outcomes can differ from one office to another and conflicting outcomes can result. Although Thailand subscribes to the "Harmonized Classification System," companies report that each port of entry and customs inspector applies his or her own interpretation of the categories and assessment. Customs regulations are not printed in full for importers to consult. This lack of transparency allows for the use of "in-house" guidelines, which are inconsistent with international agreements and standards. Because there is no open and central database, it is often necessary to find the specific officer in charge of an issue to get information. Although the Customs Department claims to now be using a concept of "True Market Value" according to the Brussels Definition of Values (BDV) for valuation, it contends legislation is needed to bring Thai practice on customs valuation in line with the WTO principles. Such changes were proposed by the Customs Department to the Council of State Committee in April 1998. IMPORT LICENSES The Thai Ministry of Commerce requires import licenses on certain raw materials, petroleum, textiles, and industrial and agricultural products. While licensing requirements have been dropped on a number of items in recent years, licenses are still required for 42 categories of items, of which 23 are All items of food for human consumption require licenses. In the food products area, licensing requirements remain for powdered skim milk and fresh milk, potatoes, soy beans and soy bean oil, and refined sugar, among others. In 1995, Thailand began the process of converting these restrictions (excluding industrial products) to tariff rate quotas and tariffs in accordance with WTO obligations. Food and pharmaceutical product importers are also required to apply for import licenses from the Thai Food and Drug Administration. The licensing process is time consuming and costly, and sometimes requires the disclosure of proprietary information. Food licenses cost about $300 and must be renewed every three years. Pharmaceutical import licenses are expensive and must be renewed yearly. Licenses for sample food products imported in bulk, and sealed package foods are also be costly. Pharmaceuticals must be registered, and must be inspected and analyzed, with additional fees assessed at each step. The process can take up to three months to complete. Effective November 1997, the registration and inspection process for pharmaceuticals may be expedited upon application and payment of a fee which is determined by the type of product under consideration. A new brand-name pharmaceutical costs 40,000 baht for each application. A request to expedite a generic drug costs 2,500 baht, while traditional medicine costs 1,500 baht. Some procedures have been streamlined, but delays of up to a year have occurred. All processed foods must be accompanied by a detailed list of ingredients and a manufacturing process description. U.S. manufacturers are reluctant to disclose trade secrets and, as a result, some U.S. products are not marketed in Thailand for this reason. EXPORT CONTROLS Thailand maintains few restrictions on exports, except when related to national security, environmental protection and cultural concerns, or pursuant to trade agreements (such as international commodity agreements, agreements governing the textile and apparel trade, agreements on subsidies and dumping, etc.). The Department of Foreign Trade under the Ministry of Commerce, administers Thailand's quota program for the export of textiles and apparel. IMPORT/EXPORT DOCUMENTATION REQUIREMENTS Customs procedures require the submission of an export entry form or import entry form, along with several other documents (invoice, packing list, bill of lading, letter of credit, etc.) to the Customs Officer. An advance entry system has been implemented to assist importers. All documents may be submitted and processed prior to the arrival of goods. Upon arrival, only assessed duty and port charges remain to be paid. Imported food items must be registered with the Thai Food and Drug Administration, which at times can be a difficult and time consuming task. Cosmetics: Under the Cosmetic Act, B.E. 2517, of 1974, a method of analysis for the substance in final product form, as well as efficacy data showing consumer benefit for all substances included as a part of a cosmetic product's labeling, must be submitted to the Thai FDA for approval. Controlled cosmetics are subject to product registration in addition to normal licensing requirements. To secure an import permit, product samples, quantitative formula, a notarized/legalized letter guaranteeing compliance with the Thai cosmetics regulations, and an identification of preservatives must be submitted to the Thai FDA. The following are needed in order to register controlled products (in addition to those requirements needed to secure a permanent import permit): method of analysis for the controlled (active) substance; and compendia references for all non-active ingredients. Medical Equipment: To import a medical device into Thailand, the importer needs to apply for an import authorization/registration permit from the Thai Food and Drug Administration (FDA) office prior to the actual shipment. The U.S. manufacturer of the medical device needs to present a notarized "Certificate to Foreign Government" (formally Certificate of Free Sales) issued by the U.S. Food and Drug Administration, duly signed and legalized by the Royal Thai Government Consulate in the U.S. or the American Embassy in Thailand. Pricing information for the device is not required. There is no import quota applied the medical devices, but the government of Thailand does not allow the importation of used or refurbished devices into the country. Importation of Saliva HIV Test Kits is also not allowed. TEMPORARY ENTRY Thailand has joined the ATA Carnet System. Therefore, products for exhibitions or demonstrations can be imported for up to six months without payment of custom duties and value-added tax. Businesses must obtain a bank guarantee for the value of the imports. If the product is not re- exported within six months, the duties and tax then will be levied. LABELING AND MARKING REQUIREMENTS Labels must be approved by the Thai Food and Drug Administration and affixed to imported food products. Labels must bear the product name, description, net weight or volume and manufacturing/expiration dates. The label must identify the manufacturer or distributor's name and address, and the product/label registration number. The label must be printed in Thai (not required for alcoholic beverages). To apply for label approval from the Thai Food and Drug Administration Office, one needs to present a certificate of Food Analysis Report issued by the government of the country of origin or any accredited private laboratory. This certificate should be issued not more than one year from the date of the label approval application. The result of the analysis must comply with the quality or standards specified in the Ministry of Public Health's ministerial notification. Five copies of the original label, together with the Thai labels attached in the way that the food product will be presented for marketing, must be attached to the application. PROHIBITED IMPORTS Thailand bans only a few imported products, including aerosol mixtures of vinyl chloride monomers (for health reasons) and products constituting trademark infringement. However, imports of many items, such as pharmaceutical products, cosmetics, health foods, food supplement, medical equipment and machines, hazardous chemicals, edible food products both for human and animal consumption, and defense products, require licenses from various government agencies. STANDARDS Interest in adopting international standards is growing in Thailand. By mid-1998, over 640 companies had been certified to be in compliance with ISO 9000 international standards for quality in design, production, installation and servicing. One hundred and seventy-one of these companies were certified by the Thai Industrial Standards Institute (TISI), and 475 by other certification bodies. Some of these companies are: Esso Standard Thailand Limited; Shell Thailand Manufacturing Limited; Alphatec Electronics Co., Ltd.; Union Plastics Limited; Sony Magnetic Products (Thailand) Co., Ltd.; Thai Micro Systems Technology Corporation Limited; and the Siam Cement Public Co., Ltd. Specifications for ISO 14000 standards on environmental management are now available from the International Organization for Standardization. Fifty-five companies have already received this environmental certification. The Thai Industrial Standards Institute (TISI) is the national standards organization under the Royal Thai Government's Ministry of Industry. TISI has formulated standards for 24 product categories including, textiles, furniture, machinery, metal, food, agricultural products, plastics and rubber. In addition to developing standards, TISI can provide certification and testing services, and other technical assistance. Private sector organizations, such as the Federation of Thai Industries (FTI), also provide some standards-related services. FREE TRADE ZONES/WAREHOUSES Thailand has several Export Processing Zones (EPZs). Firms located in EPZs are exempt from import duties and other taxes on factory construction materials, machinery and equipment and export manufacturing inputs. Within EPZs, foreign investors are permitted to own land and employ foreign technicians and experts. EPZs are generally co- located within industrial estates developed either by the Thai Industrial Estate Authority or by the private sector. Therefore, they have full infrastructure facilities and generally good access to transportation. On May 27, 1997, the Thai Cabinet passed a proposal to establish free trade zones (FTZs) to boost key export- oriented industries such as electronics, automobiles and parts, and gems and jewelry. Industries located in these zones would enjoy tax holidays on machinery imports and corporate tax exemption for a set period. The raw materials imported for export-oriented production also would be exempt from duties. In addition, industries in these zones would not have to apply to the Industrial Works Department for factory operating licenses. A FTZ must be set up on a 200 acre site of land and should be located near an airport. The Thai Government set up the Eastern Seaboard Development Program in 1981 to establish the country's new industrial development complexes. Laem Chabang Industrial Estate and Export Processing Zone was established in Chon Buri Province and Map Ta Phut Industrial Estate in Rayong Province. With the support of a deep-sea port, Laem Chabang Industrial Estate serves agriculture-based and other light industries such as electronics, auto parts, toys and sports goods shipped in container ships. With another deep-sea port, Map Ta Phut Industrial Estate serves heavy industries such as oil refineries, petrochemical plants, chemical plants, and fertilizer plants with bulk cargo service. Private investors have subsequently developed seven more industrial estates in the Eastern Seaboard areas. Now, the National Economic and Social Development Board (NESDB), the national economic policy office, is planning the Phase II of the Eastern Seaboard Development Program to be implemented in the next twenty years. Eight additional provinces (for a total of eleven provinces) will be included in the Phase II plan. Five industry sectors will be targeted: - Chemical and petrochemical industry - Automobile and spare parts industry - Metal processing industry - Air transport export industry which will serve agricultural products, seafood, textile and garments, electrical and electronics appliances, surgical and medical devices, watches and clocks. - Other support and service industries such as restaurants, medical services, industrial research and educational institutes, financial and banking services, department stores, security services, machinery maintenance services, and construction services. The Government plans to establish a special economic zone with duty-free zone status to facilitate export-based industries in the Southern Seaboard Area. The National Economic and Social Development Board (NESDB) is conducting a study of this project and the Japanese International Cooperation Agency (JICA) has been asked to provide funding for the study. In addition, on June 2, 1997, the NESDB signed an agreement with a U.S.-led consortium under the sponsorship of the U.S. Trade and Development Agency (TDA) to undertake feasibility study on the development of a Southern Seaboard Ports and Industrial Complex development project. However, because of the current economic crisis, the project is likely to be put on hold. The Customs Department allows larger firms, engaged exclusively in manufacturing for export, to set up bonded warehouses and to import (duty-free) inputs for their export production. Producers who receive approval to establish bonded warehouses pay an annual fee and avoid paying duties if they submit guarantees for duties. SPECIAL IMPORT PROVISIONS Thai Ministry of Commerce licenses must be obtained for 42 import items, 23 of which are agricultural. In general, items under import licensing may be divided into three categories. These are: 1) goods whose import is restricted to protect local industries; 2) goods whose purchase is subject to a requirement for a concurrent purchase of similar domestically produced goods; and 3) goods whose import is controlled for health, security and other reasons. As an anti-dumping measure, the Thai Ministry of Commerce has levied special fees on some imported goods from certain countries. No U.S. goods have been affected. MEMBERSHIP IN FREE TRADE ARRANGEMENTS Thailand is a member of the Association of Southeast Asian Nations (ASEAN). In 1992, leaders of ASEAN governments approved a Thai proposal to establish the ASEAN Free Trade Area (AFTA), which aims to reduce tariffs on most processed agricultural and industrial products traded among ASEAN countries, to zero to five percent by the year 2007. The agreed date for completing the implementation of AFTA has been moved up to the year 2003. Other ASEAN members are Brunei, Indonesia, Malaysia, the Philippines, Singapore and Vietnam. Burma, and Laos were admitted in July 1997. Cambodia's membership was deferred until more political stability could be demonstrated. Altogether, the ASEAN countries absorbed over $300 billion in imports in 1996. While Thailand has begun a program of phased reductions to meet the tariff reduction target, the extent of AFTA's coverage and the extent of participation of each member country remains to be finalized. Thai officials have said that they favor expanding AFTA to include other countries in the region, and a possible linkage between AFTA and the Australia-New Zealand free trade arrangement is being discussed.[end of document]
Note* International Copyright, United States Government, 1998 (or other year of first publication). All rights under foreign copyright laws are reserved. All portions of this publication are protected against any type or form of reproduction, communications to the public and the preparation of adaptations, arrangement and alterations outside the United States. U. S. copyright is not asserted under the U. S. Copyright Law, Title17, United States Code.
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