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UNCLAS SECTION 01 OF 05 BANGKOK 002320 
 
STATE FOR EAP/MLS, EEB/TPP 
STATE PASS TO USTR FOR BWEISEL, DBISBEE, BKLEIN, AND VBROWN 
COMMERCE FOR EAP/MAC/OKSA FOR JKELLY 
DHS FOR CBP, ICE 
GENEVA FOR USTR 
TREASURY FOR OASIA 
SINGAPORE FOR FINATT BLEIWEIS 
 
SENSITIVE 
SIPDIS 
 
E.O. 12958:N/A 
TAGS: ECON ETRD PINR PREL TH
SUBJECT: AMBASSADOR DISCUSSES CUSTOMS CONCERNS WITH DEPUTY FINANCE 
MINISTER 
 
REF: A. BANGKOK 2185 (Reforming Thai Customs) 
¶B. BANGKOK 1684 (Deputy PM Korbsak on Customs) 
¶C. BANGKOK 1574 (Finance Minister Discusses Customs) 
¶D. BANGKOK 1305 (Deputy PM Suthep on Customs) 
 
BANGKOK 00002320  001.2 OF 005 
 
 
¶1. (SBU) SUMMARY: "I will work personally to address these customs 
problems," Deputy Finance Minister Pradit Phataraprasit told the 
Ambassador in a meeting on September 8. Pradit, a coalition member 
of the Abhisit Administration, is the face of the government's new 
reform plan to address at least some of the most egregious and 
longstanding complaints regarding Thai Customs (ref A). While 
applauding Pradit's willingness to tackle Customs inefficiencies, 
the Ambassador stressed the gravity of American business concerns, 
including the ongoing customs disputes of Amway, Philip Morris, and 
FedEx. The Ambassador offered the U.S. government's expertise and 
assistance to Pradit's team as they draft amendments to the Customs 
law (at least in part due to the Mission's commercial advocacy 
efforts) and also invited the newly-appointed Director General of 
the Customs Department, Dr. Somchai Sujjapongse, to present the 
details of the reform plans to American companies at an American 
Chamber of Commerce meeting in the near future. The Ambassador also 
raised business concerns about proposed amendments to the 
government's excise laws, which could result in a significantly 
higher and discriminatory tax burden on affected American companies. 
On a non-customs related note, the Ambassador discussed the 
commercial concerns of the American company G-TECH, which won a 
government contract in 2005 to implement a digital lottery. Pradit, 
who also oversees the Government Lottery Office, expects that the 
digital lottery project will move forward soon, alleviating G-TECH's 
concerns. END SUMMARY. 
 
Pradit's Customs Reforms 
------------------------ 
 
¶2. (SBU) As part of the Mission's continued, broad efforts to press 
the Thai government for fair and transparent treatment of American 
companies operating in Thailand, the Ambassador met with Deputy 
Finance Minister Pradit Phataraprasit on September 8 to learn more 
about Pradit's plans to "transition the Customs Department from a 
duty collector to a trade facilitator" (ref A). The Ambassador 
welcomed Pradit's August 19 announcement of proposed reforms to 
modernize the Customs Department, but he also stressed the 
significant Customs-related concerns of many American companies 
doing business in Thailand. The Ambassador explained that American 
companies continue to rate overall customs issues as the top 
impediment in Thailand, whether due to the lack of transparency 
(i.e., uncertainty about duty rates that are imposed), arbitrary 
valuation methods, or the onerous penalty regime. 
 
¶3. (SBU) Pradit outlined three overall Customs priorities: 1) 
drafting a new Customs law; 2) opening a "Customs Clinic;" and 3) 
accelerating Thailand's implementation of its "National Single 
Window." Regarding the new Customs law, Pradit had promised the 
Prime Minister that a draft would be ready for review by the Cabinet 
within 60 days. Pradit told the Ambassador that unlike previous 
drafts, this new proposal will incorporate suggestions from the Thai 
and foreign business community. He specifically cited his plans to 
give more flexibility to the Customs Department and the judicial 
system when assessing penalties for companies that appealed the 
original decision. Pradit has proposed using a range of no more than 
four times the import value (anywhere from zero to four) rather than 
strictly applying the current fixed penalty of four times the 
duty-paid value of the imported goods. A previous draft of the law 
proposed increasing this penalty to five times the duty-paid value. 
 
 
¶4. (SBU) The Ambassador offered the US Government's assistance and 
expertise to assist with Pradit's reform efforts, noting that 
several USG customs experts are resident in Thailand, in addition to 
numerous experts based in Washington, who can help review particular 
proposals and offer suggestions to the government. The Ambassador 
emphasized that, in order to be more business-friendly, the Customs 
 
BANGKOK 00002320  002.2 OF 005 
 
 
Department should adopt internationally-accepted standards and 
procedures, and the drafting of a new Customs law is the perfect 
opportunity to ensure that Thai Customs procedures are compliant 
with these standards. (NOTE: 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 earlier 
drafts would have worsened the situation by increasing penalties. 
END NOTE.) 
 
¶5. (SBU) Pradit proudly announced to the Ambassador his plans to 
unveil a new Customs website on September 15. He explained that 
Customs modeled the website after that of Singapore's Department and 
expressed hope that the new site will be business friendly, with 
easier access to the correct tariff data and the required forms. He 
also touted the new "Customs Clinic," which officially opened on 
September 7. He explained that the Customs Clinic will be able to 
provide guidance to companies in advance of their shipments to 
improve the transparency and predictability of Customs decisions. 
 
¶6. (SBU) Thailand will also accelerate implementation of its 
"National Single Window," according to Pradit. He explained that 
shippers will be able to deal with a single point of contact at 
Customs to handle all of the required paperwork and formalities 
required by the various ministries. Six government agencies are 
already committed to the project, but he hopes at least nine more 
agencies will join in the Single Window efforts. He recognized that 
in order to fulfill its ASEAN commitments, Thailand should have 
completed its National Single Window process by 2008, but he hopes 
the remaining tasks will be completed by the end of 2009. 
 
Rewards Sharing System: "Too Sensitive" 
--------------------------------------- 
 
¶7. (SBU) The Ambassador inquired about Pradit's plans to address the 
reward sharing procedures at the Customs Department, a systemic 
problem in which the Customs officers who determine whether a 
penalty should be imposed benefit financially from that decision, 
receiving a significant portion of the penalty as a reward. Customs 
officials can share up to 55 percent of the penalty amount, which is 
be divided between the officers in the unit involved in assessment 
of the penalty and the chain of command, up to and including the 
Director General. The Ambassador advised that the reward sharing 
system negatively impacts Thailand's overall business climate and 
discourages new business investments in Thailand. 
 
¶8. (SBU) Pradit acknowledged the litany of complaints from 
businesses regarding the rewards system and the conflicts of 
interest the system may perpetuate, but he indicated that issue is 
simply "too sensitive" to change at this time. He said that the 
Ministry was looking at international standards and studying other 
rewards systems to see if anything can be done. He noted that even 
Finance Minister Korn had complained about the procedures, but 
Pradit still argued, "We probably need to have a rewards system." 
Pradit opined that the rewards system has some positive attributes, 
including enabling the Customs Department to reward informants in 
customs cases. In these cases, a certain portion of the penalty can 
be shared with an informant (30 percent of 55 percent of the penalty 
amount), while the balance (70 percent of the 55 percent) is then 
divided and awarded among the Customs officials. The Ambassador 
responded that although rewarding informants outside the Thai 
government might be an internationally acceptable practice, 
rewarding civil servants under the current system could not be 
justified. 
 
Advocacy on Behalf of American Companies 
---------------------------------------- 
 
¶9. (SBU) The Ambassador also raised several troubling ongoing 
customs cases and expressed our concern about the treatment these 
companies continue to receive from the Customs Department. The 
Ambassador sought Pradit's assistance to resolve these cases in a 
fair and transparent manner. (NOTE: The Ambassador has previously 
 
BANGKOK 00002320  003.4 OF 005 
 
 
raised these cases with the Prime Minister, the Deputy Prime 
Minister, the Finance Minister, the Foreign Minister, and others 
within the government. END NOTE.) 
 
¶10. (SBU) Amway: The Ambassador noted our interest in the Customs 
treatment of Amway, the largest importer of American goods in 
Thailand. Amway has been engaged with Customs on a valuation dispute 
for several years regarding the addition of bonuses and marketing 
expenses to the declared customs values of the company's imports. 
The Ambassador explained to Pradit that if Customs rules against 
Amway in this particular case, the company could be ordered to pay 
an exorbitant amount (approximately $200 million including 
penalties) or face a penalty payment of close to two billion dollars 
and even jail time for the company executives in Thailand. Pradit 
said he was familiar with the case but needed more time to closely 
study how to resolve the matter. The Ambassador emphasized that 
Amway is the largest US exporter to Thailand and the disposition of 
this case, particularly if the outcome is non-transparent, will 
attract significant negative attention. 
 
¶11. (SBU) Philip Morris: The Ambassador outlined his concerns about 
the handling of an ongoing customs dispute with Philip Morris. In 
2006, the Customs Department refused to accept Philip Morris's 
declared prices on its tobacco imports and began applying its own 
reference invoice prices to the company's products. After numerous 
meetings where Philip Morris demonstrated its declared import prices 
were compliant with WTO valuation principles, the Thai Customs 
Valuation Division ruled in a written notification in March 2008 
that the company's original invoice pricing methodology was correct. 
Despite this ruling (which under the current legal regime is 
non-binding), the Customs Suppression Division charged Philip Morris 
with "undervaluation" and "tax evasion" in the amount of $500 
million.  The Philippines, where Philip Morris was producing these 
products, then filed a case against Thailand at the WTO in June 
2009, arguing that the actions taken by Customs Suppression Division 
violated WTO valuation principles. Unfortunately, the Department of 
Special Investigations, under the Ministry of Justice, unexpectedly 
filed criminal charges against Philip Morris and its top executives 
in August 2008, escalating the situation even further. The 
Ambassador added that of even greater concern was that someone in 
the government leaked details of the case to the press, in what 
appeared to be a smear tactic against the company's reputation in 
Thailand. The Ambassador asked that the government at least suspend 
further actions until the WTO has ruled on the case. 
 
¶12. (SBU) FedEx: The Ambassador explained how the Customs Department 
is holding FedEx liable for shipments that were improperly declared 
by three Thai exporters. Because there is no express clearance 
system, FedEx batches 30 airway bills together and is shown as the 
Exporter of Record. In this particular case, in which improperly 
declared diamonds had been sent through FedEx, Customs settled with 
one of the exporters but was unable to settle with the other two, 
whom FedEx helped to identify and locate. While Thai Customs can 
hold the exporter, carrier, and/or the shipping company liable under 
a strict interpretation of customs laws, the Ambassador stressed 
that FedEx should only be liable if the company is suspected of 
intentional fraud. FedEx has been asked to pay a penalty of $345,000 
to settle the case. Pradit assured the Ambassador that he personally 
would look into the matter and report back very soon. 
 
¶13. (SBU) G-TECH: The Ambassador also asked for Pradit's assessment 
of the government's plans to implement the digital lottery. The 
American firm G-TECH was awarded the contract to establish the 
lottery in 2005 during the Thaksin Administration, but the project 
has since been held up with numerous changes in government 
leadership. Earlier this year, Pradit, who also oversees the 
Government Lottery Office, expressed his support for the project to 
move forward, following a decision from the Council of State 
approving the legality of the plan. Pradit told the Ambassador that 
a government-funded poll to determine public opinion on the project 
showed favorable results, with more than 50 percent supporting the 
plans. Pradit said he had briefed the Prime Minister and hopes to 
 
BANGKOK 00002320  004.2 OF 005 
 
 
resolve the issue very soon. The Ambassador asked that Pradit 
continue to keep us informed on any developments or decisions, 
particularly since the American company G-TECH is anxiously waiting 
to complete the project. Since 2005, G-TECH has expended nearly $60 
million on the infrastructure build-out of the digital lottery. 
 
Related Concern: Amendments to Excise Laws 
------------------------------------------ 
 
¶14. (SBU) The Ambasasdor briefed Pradit on new business concerns 
about Thailand's excise tax laws. While customs reforms may be 
underway, many companies are alarmed about potential changes to the 
excise tax regime that could counter the positive efforts made by 
Customs and even negate some of the benefits of Thailand's trade 
agreements with a number of countries. 
 
¶15. (SBU) U.S. business representatives have expressed concerns 
about two provisions in these proposed amendments to the excise 
laws. (NOTE: We will report septel on the details of these 
proposals. END NOTE.) The Ambassador explained that one of the 
amendments would give the Director General of the Excise Department 
the discretionary authority to determine its own import value for a 
product, rather than relying on the Customs-determined value. Since 
both Excise and Customs are under the auspices of the Ministry of 
Finance, introducing two standards for the valuation of the same 
imported product would be both unnecessary and confusing. 
 
¶16. (SBU) Another amendment would change the method used to 
calculate the base value of imported excisable goods from countries 
that have free trade agreements with Thailand. The Excise Department 
could use the higher Most Favored Nation (MFN) duty rate when 
calculating the excise tax base rather than using the preferential 
trade agreement duty rate that an importer actually pays, resulting 
in a significantly higher excise tax burden on the companies. Pradit 
noted he was not familiar with the issue but assured the Ambassador 
someone from his staff would look into the matter in more detail. 
 
New Director General at Customs 
------------------------------- 
 
¶17. (SBU) Immediately prior to the meeting with Pradit, the Cabinet 
approved a new slate of officials to lead the various Finance 
Ministry agencies, including the Customs and Excise Departments. 
Pradit told the Ambassador that current Director General Wisudhi 
Srisuphan, who will reach mandatory retirement at the end of 
September, will be replaced by Ohio State graduate Dr. Somchai 
Sujjapongse, currently the head of the Finance Ministry's brain 
trust, the Fiscal Policy Office. Somchai, who is known as a close 
advisor to Finance Minister Korn, will take the reins at the Customs 
Department on October 1. 
 
¶18. (U) Other appointments include Areepong Bhoocha-Oom, the current 
Director General of the State Enterprise Policy Office, as head of 
the Excise Department; Satit Rungkasiri, a Deputy Permanent 
Secretary, as Areepong's replacement as the Director General of the 
Fiscal Policy Office; and Pongpanu Svetarundra, the current Director 
General of the Public Debt Management Office, as the Comptroller 
General. 
 
Megaports and 100 Percent Cargo Scanning 
---------------------------------------- 
 
¶19. (SBU) The Ambassador thanked Pradit for his continued support 
and cooperation on the Megaports Initiative at the Laem Chabang 
Port. The Ambassador explained that the Customs Department's 
cooperation on Megaports gives us an opportunity to demonstrate our 
shared commitment to port security while enhancing Laem Chabang 
Port's reputation as one of the region's leading seaports. The 
Ambassador clarified that we want the Customs Department to take 
full-ownership of the project in the near future, but assured Pradit 
that the United States would continue to provide long-term support. 
A U.S. Department of Energy official recently arrived in Bangkok to 
 
BANGKOK 00002320  005.2 OF 005 
 
 
provide this assistance. (NOTE: The Megaports Initiative was 
established by the Department of Energy's National Nuclear Security 
Administration, and the implementing partner in Thailand is the 
Customs Department. The project provided $3 million in passive 
radiation scanning equipment to the Laem Chabang Port and a 
guaranteed five years of service and support for the equipment. 
Total USG investment is approximately $20 million, including the 
equipment, repairs, training, and personnel costs. END NOTE.) 
 
¶20. (SBU) Pradit inquired about U.S. plans to implement the 100 
percent cargo scanning requirement on all ships bound for U.S. ports 
and specifically asked whether the Laem Chabang Port would be 
considered a qualified port under these new scanning requirements. 
The Ambassador noted that the specific details regarding the 
implementation of the 100 percent cargo scanning requirements are 
under discussion in Washington, but we would provide more details to 
his office when available. The Ambassador added that many USG 
officials, including those from the Department of Homeland Security 
and the Department of Energy, will attend a Ministry of Foreign 
Affairs seminar on the 100 Percent Cargo Scanning Requirements, to 
be held September 21-23 in Bangkok. 
 
Bio Notes: Pradit Phataraprasit 
------------------------------- 
 
¶21. (SBU) Pradit Phataraprasit, a well-spoken politician from the 
Ruam Jai Thai Chart Pattana Party, became Deputy Finance Minister 
under then Prime Minister Samak in 2007. He stayed on in this same 
position through Prime Minister Somchai's term in office, and then 
Abhisit re-appointed him as part of the sitting coalition government 
in December 2008. There are two Deputy Ministers at the Ministry of 
Finance; these positions have typically gone to coalition partners 
to secure the party's support for the Prime Minister since the 
positions oversee the lucrative revenue collecting agencies of the 
Ministry. Pradit supervises both the Customs and Revenue 
Departments, while Pruektichai Damrongrat from Puea Paendin oversees 
the Excise Department. 
 
¶22. (SBU) Born December 25, 1955, to a wealthy tycoon family in the 
Phichit Province, Pradit became a businessman at a young age and 
managed several of his family's multi-million dollar corporations, 
including the Phataraprasit Group, a large conglomerate with 
interests in the hotel, real estate, and banking sectors. Pradit 
entered politics in 1995 to represent his hometown in Parliament. He 
has been re-elected to office each time since. Pradit was considered 
a rising star within the Democrat Party, as was Abhisit Vejjajiva, 
but Pradit left the party along with current Deputy Prime Minister 
Sanan Kachornprasat, after an internal conflict with Abhisit and the 
party's leadership. Democrat Party insiders allege that Pradit 
walked out the door with party funds, leading to bad blood that 
persists to this day and hampers close cooperation with Finance 
Minister Korn. Pradit then joined the Ruam Jai Thai movement, which 
later merged with Chart Pattana. He became the Secretary General and 
the party's financier. 
 
¶23. (U) Pradit completed his undergraduate studies in business and 
economics in 1979 at Franklin Pierce University in New Hampshire. He 
received a Master's in Political Science from Thammasat University 
in 2004. He is married to Aphamas Phatarapradsit and has four 
children, including one who is currently an undergraduate at his 
father's alma mater, Franklin Pierce. 
 
JOHN