VZCZCXRO3338
OO RUEHCHI RUEHCN RUEHDT RUEHHM
DE RUEHBK #2185/01 2401029
ZNR UUUUU ZZH
O 281029Z AUG 09
FM AMEMBASSY BANGKOK
TO RUEHC/SECSTATE WASHDC IMMEDIATE 8110
INFO RUCPDOC/DEPT OF COMMERCE WASHINGTON DC IMMEDIATE
RUEHRC/DEPT OF AGRICULTURE WASHINGTON DC IMMEDIATE
RUEATRS/DEPT OF TREASURY WASHINGTON DC IMMEDIATE
RUEAWJL/DEPT OF JUSTICE WASHINGTON DC IMMEDIATE
RHMFIUU/DEPT OF HOMELAND SECURITY WASHINGTON DC IMMEDIATE
RUEHZS/ASSOCIATION OF SOUTHEAST ASIAN NATIONS IMMEDIATE
RUEHCHI/AMCONSUL CHIANG MAI IMMEDIATE 6927
RUEHGV/USMISSION GENEVA IMMEDIATE 2153

UNCLAS SECTION 01 OF 03 BANGKOK 002185 
 
STATE FOR EAP/MLS, EEB/TPP 
STATE PASS TO USTR FOR BWEISEL, DBISBEE, BKLEIN, AND VBROWN 
COMMERCE FOR EAP/MAC/OKSA 
DHS FOR CBP, ICE 
GENEVA FOR USTR 
 
SENSITIVE 
SIPDIS 
 
E.O. 12958:N/A 
TAGS: ECON ETRD PINR PREL TH
SUBJECT: Reforming Thai Customs: First Steps Taken 
 
REF: A. BANGKOK 1684 (Deputy PM Korbsak on Customs) 
¶B. BANGKOK 1574 (Finance Minister Discusses Customs) 
¶C. BANGKOK 1305 (Deputy PM Suthep on Customs) 
¶D. BANGKOK 1223 (Ambassador Discusses with Foreign Minister) 
 
BANGKOK 00002185  001.2 OF 003 
 
 
¶1. (SBU) SUMMARY: Over the past year, threats of ludicrously high 
customs penalties against very prominent American, European, and 
Japanese companies appear to have back-fired against the Customs 
officials who stood to profit handsomely. After strong advocacy by 
this Embassy and others, including the American Chamber of Commerce, 
other foreign chambers, and the Thai business community, the Abhisit 
government has decided to address head-on at least some of the most 
egregious and longstanding complaints. On August 19, Deputy Finance 
Minister Pradit Phataraprasit, who oversees the Customs and Revenue 
Departments, proposed a set of reforms that would "transition the 
Customs Department from a duty collector to a trade facilitator." 
His announcement is viewed widely as a potential major step forward. 
Ambassador John will meet with Deputy Minister Pradit and Customs 
Director-General Wisudhi on September 8 to discuss these new plans 
and will continue to push for transparent and fair decisions in 
several outstanding U.S. company cases. We will report septel on 
these various customs disputes. END SUMMARY. 
 
--------------------------------------------- ---------- 
Transforming from "Duty Collector to Trade Facilitator" 
--------------------------------------------- ---------- 
 
¶2. (SBU) In a press conference on August 19, Deputy Finance Minister 
Pradit Phataraprasit, who oversees the Thai Customs Department as 
well as the Thai Revenue Department, proposed several significant 
reforms to "make dealing with the Customs Department easier, more 
transparent, and more predictable for importers and exporters." 
Pradit argued that these reforms should be "the biggest overhaul of 
the way Customs works since its establishment over 135 years ago." 
This announcement came after the Ambassador had raised the need for 
Customs reform with the Minister of Finance and two Deputy Prime 
Ministers in previous weeks. The issues had also been raised by 
other governments, and Pradit had heard from various trade 
associations and chambers of commerce, both local and foreign, that 
Thai Customs is the top business concern in Thailand. 
 
¶3. (SBU) A new Customs law has been in the works for several years; 
however, to the dismay of most business groups, many of the 
amendments proposed by the Customs Department in that draft would 
have purportedly worsened the situation. Prior to the August 19 
announcement, Deputy Finance Minister Pradit pulled that draft law 
and decided to rework the existing law to address the business 
concerns. Pradit stated his office would have a new draft ready 
within 60 days to submit to the Cabinet for approval, after which 
the bill will move into a probably lengthy parliamentary process. 
 
-------------------------------- 
More Business Friendly Practices 
-------------------------------- 
 
¶4. (SBU) Website Improvements: In one of the few proposals that will 
not require legal amendments, Pradit promised to overhaul the 
Customs Department's website, making it more business-friendly, with 
easier access to the correct tariff data and the required forms. 
Pradit noted that the most common complaint received from businesses 
is the difficulty in determining how a product will be classified 
and valued in advance. The Office of the U.S. Trade Representative, 
in the annual National Trade Estimate Report, has complained for 
several years about discrepancies in published tariff rates on Thai 
Customs' website. Following the August 19 announcement, Pradit 
invited two members of the Joint Foreign Chambers of Commerce to 
work with the Customs web designers to ensure that the site is more 
business-friendly. 
 
¶5. (U) Single Window: Pradit also stated that Thailand will 
accelerate implementation of its "Single Window," to streamline the 
application and process requirements from various agencies and 
ministries. Ideally, shippers will be able to deal with a single 
point of contact at Customs to handle all of the required forms from 
the various ministries. 
 
¶6. (U) Bond-Based Payments: Companies currently pay duties on a 
per-shipment basis, a very costly and cumbersome process. Pradit 
 
BANGKOK 00002185  002.2 OF 003 
 
 
proposed changes to the law that would allow companies to post a 
bond with Customs, as it is done in the United States, and then make 
payments on a monthly basis. 
 
---------------------------------- 
Predictability: Publishing Rulings 
---------------------------------- 
 
¶7. (SBU) Companies have complained about the constant variations in 
how a product is classified and valued by individual Customs 
officers; unlike most other customs services, the Thai Customs 
Department does not publish its rulings, even among its own 
officers. Because there are no publicly available rulings, 
individual Customs officers currently have discretion to arbitrarily 
increase the value of an import or reclassify it as another product 
with a higher tariff rate. In a significant shift from previous 
policies, Pradit proposed publishing all classification, valuation, 
and other Customs decisions and providing this information to 
importers. Pradit coined his idea the "Customs Clinic," a one-stop 
service provider to answer any questions about classification, 
valuation, or any other issues in order to facilitate trade. The 
details have not been hammered out, and exactly how the information 
will be provided and disseminated remains unclear. 
 
----------------------------- 
Improving the Appeals Process 
----------------------------- 
 
¶8. (SBU) Customs decisions are currently appealed within Customs' 
own institutional structures to an appeals committee, chaired by the 
Customs Director-General himself. While other representatives from 
the Ministry of Finance sit on this "Board of Appeals," the lack of 
independence or any separation from the Customs officials who made 
the original ruling, and the ensuing conflict of interest, has long 
been a complaint of the business community. There is also no 
prescribed time period in which an appeal should be heard by this 
committee; some businesses report that there are appeals lodged as 
far back as 2000 that are still pending before the Customs Board of 
Appeals. While not addressing all of these concerns, Pradit promised 
to closely review the appeals process. He argued that businesses 
should be able to more easily appeal Customs decisions to an 
independent judicial body, rather than to a Customs committee that 
nearly always rules in favor of Customs. As in the other proposals, 
the details on how exactly this will be done are to be clarified 
over the next 60 days. 
 
------------------------------------- 
Limited Changes to the Penalty Regime 
------------------------------------- 
 
¶9. (SBU) The current penalty provisions imposed on importers make no 
distinction between duty evasion and unintentional errors; penalties 
imposed are the same even if the errors made are inadvertent and 
without fraudulent intent or gross negligence. Companies are often 
faced with a decision to either settle or appeal the decision. If a 
company chooses to settle a case directly with Customs, penalties of 
two-times the required duty payment are typically paid. However, if 
a company chooses to appeal a decision, the importer risks a fixed 
fine of four times the duty-paid value of the imported goods (as 
described in the law) and/or ten years of imprisonment. The harsh 
penalties associated with an appeal sway most companies to simply 
settle their cases with Customs. (Note: The previous draft of the 
proposed customs law would have increased this fixed appeal penalty 
to five-times the duty paid value of the imported goods.) 
 
¶10. (SBU) In his August 19 announcement, Pradit proposed giving 
flexibility to the Customs and the judicial system when assessing an 
appeal penalty, creating a range of no more than four-times the 
original (anywhere from zero to four) rather than fixing the penalty 
at the four-times amount. This simple, but significant, change in 
the law would also bring the Customs Department more into line with 
the practices of the other two Thai revenue-collecting authorities, 
whose officials can reduce or even waive penalties according to 
their respective laws. 
 
--------------------------------------- 
No Mention of the Reward-Sharing System 
--------------------------------------- 
 
BANGKOK 00002185  003.2 OF 003 
 
 
 
¶11. (SBU) A significant item absent from Pradit's list of reforms 
was the reward sharing procedures, a systemic problem in which the 
Customs officers and managers who determine whether a penalty should 
be imposed benefit financially from that decision. Thai Customs 
officials can share up to 55 percent of the penalty amount, which 
would be divided between the officers in the unit involved in 
assessment of the penalty along with the rest of the chain of 
command, up to and including the Director General. The immediate 
unit involved (usually either the Investigations or Legal Division) 
will receive 30 percent of the 55 percent amount and the balance (70 
percent of the 55 percent) will then be divided and awarded up the 
chain of command. If a company appeals the decision, the penalty 
amount would increase to four times the duty-paid value of the 
import - resulting in a mega-reward to the Customs officials on that 
particular case. 
 
¶12. (SBU) Comment: The rewards system, while transparent to an 
extent, has long been a source of revenue not only for the officers 
involved personally, but for the political parties controlling 
Customs. That system is not being tackled with these new changes, 
but Minister of Finance Korn has agreed to establish an independent 
working group to review the rewards procedures at all three 
revenue-collecting agencies at the Ministry of Finance (Customs, 
Excise, and Revenue). (Note: The Thai Revenue Department has no 
program to distribute a share of the penalties to its involved 
employees; the Excise Department does have a penalty-sharing system 
in place, but it is considered more restrictive than the Customs 
version.) The ability at least to get penalty decisions reviewed 
independently by the Thai court system, as Pradit has now proposed, 
would be a meaningful improvement.  In concert with the American 
Chamber and other trade associations, we will continue to work 
closely with Pradit's office to track the reform efforts and to 
provide any assistance needed. 
 
JOHN