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Will customs reform move forwards in Thailand?

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Paying special bonuses to government officials for "fines levied against the private sector" has "actually encouraged distortions and contributed to corruption." 

A previous Bangkok Post article discussed the problems in the customs department as well as other government agencies and ministries (Read article). Today's article gives further details about problems in the customs department.

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Customs Penalties can hit even innocent importers by Thanasak Chanyapoon and Piphob Veraphong

Customs inspectionWhenever an importer brings goods or materials to Thailand, it requires proper customs declaration and clearance. The customs audit can take place at the time of importation or later. The latter is called a post-clearance customs audit, which requires more attention because, if a mistake is found, it could lead to an offence under Section 27 of Customs Act B. E. 2469 (1926) with a jail term of up to 10 years plus a customs penalty of 400% of the import value.

The key reason why customs authorities have been keenly checking post-clearance customs audits is that officers, inspectors and superintendents, as well as the Customs Department's director-general are entitled to so-called "customs reward sharing". An amount equal to 30% of the penalty is granted to people outside the department as a reward for identifying an offence, while 25% is shared among officers participating in an arrest or investigation. Only 45% goes to the government.

This reward programme has discouraged some customs authorities from dealing reasonably with a decent importer who commits a mistake without evasive intention. It also raises the question why the customs should have better privileges than any other officials nationwide.

Anyway, it seems that the voice of many investors who had bad experiences has been heard by the government, although it has taken a long time. On Sept 28, the cabinet resolved to reduce customs penalties from 400% down to a range of 50% to 400% depending on the degree of seriousness of the offence. Power to reduce penalties is given to the courts. It is believed that pressure to reduce penalties came from a few multinational companies, especially in the United States and Japan.

Unfortunately, it is unclear how the new legislation will deal with the reward programme. It is expected that the existing scheme will remain untouched, but the new legislation could empower the Custom Department's director-general to issue a regulation to make the scheme more prudent. In any case, customs officers will continue to enjoy rewards. It will take some time to see how the new regime affects the situation.

Calculation of penalties will not be altered by the new legislation either. While common sense suggests that the sum should be based on the amount of deficient duty, the legislation will continue to adopt the entire import value as the basis for computation. The penalty still applies in case of the import of certain goods without a licence or without carrying out the proper customs formalities - even if there is no deficient duty or if the scope of duty concessions has been mistakenly interpreted under a free trade agreement in good faith.

To give an idea how the penalty works in Thailand, let's assume you are a Board of Investment (BoI)-promoted company and are entitled to duty exemption for imported machinery. In the course of procurement, your staff carry machinery designs by hand while flying to Thailand without properly undertaking the customs declaration. Knowing that the designs should also qualify for BoI privileges, no one wastes time asking the BoI to confirm such duty exemption. Unfortunately, the failure to comply with this formality could lead to the penalty of up to 400% of the value, even if the designs would have been exempt from duty if you had properly complied with the procedures.

Regardless of intention to violate customs laws or even if the mistake is caused through negligence, misinterpretation or human error, penalties under the new regime will remain to be used as a tool by customs officers to threaten the importer to settle the case in exchange for a reduced rate of 200% of deficient duties (rather than up to 400% of the import value) and a waiver of criminal action against the company and its directors. When the board of directors consists of prestigious members, it often leaves the importer with no choice but to give up, even if their case has strong legal grounds.

Do not expect your life to be much improved by the new legislation. If you opt to fight the case, your board members will still have to be fingerprinted at a police station and a criminal action could be taken against them.

The new rates of penalty are still on the high side and there is no certainty as to how customs reward sharing will be lifted to discourage abuse of the post audit. It is highly unlikely that the government will set a ceiling amount for the penalty even if the duty base is substantial. As any reduction of penalty has to be granted by a court, it will continue to give room to customs authorities to attack importers and to apply the maximum rate of 400% while threatening criminal action to pressure importers to settle the case.

Nothing could be worse than what has been happening. If you have the courage to fight against the post audit, you could have a court to stand by you if you are acting in good faith.

By Thanasak Chanyapoon and Piphob Veraphong. They can be reached at admin@lawalliance.co.th
Lawalliance Limited Company

(Source: Bangkok Post, Customs Penalties can hit even innocent importers, 2/11/2010, link)

customs - the government agency that controls goods coming into and going out of the country and collects taxes on them กรมศุลกากร
reform -
improvement, changes to correct a situation that is wrong or unfair การแก้ไข การปฏิรูป

fines levied against Y - when Y pays money to government as a punishment for wrongdoing 
sector - a part of a country's economic or business activity, (public sector = government, private sector = all businesses, household sector = families and consumers, banking sector,...) (See Wikipedia)  ภาค (เศรษฐกิจ)
private sector - all the businesses and companies in an economy
encouraged - having more confidence or hope about something มีกำลังใจ
distortions - when things are not what they should be (example: prices of imported goods too high because customs officials are making money off of them)
contributed to - added to

innocent - not having done anything wrong บริสุทธิ์
import (verb) - bring goods from a foreign country into a country to sell them นำเข้า
importer (noun) - a person who imports goods into a country
importation - the act of bringing goods into the country
proper - done in the proper way, with all required information
customs - the government department that checks goods coming into the country to make sure taxes are paid and that the goods are legal กรมศุลกากร
declaration - an official announcement that something is true or is happening การประกาศ
clearance - official permission to do some activity (official permission to go ahead, to continue, after a check that everything is ok)
audit - the process of checking a company or organisation's accounting system for irregularities (See Wikipedia)
offence - a crime or illegal activity for which there is a punishment การกระทำผิดกฎหมาย
jail term - the period of time that the court makes a criminal stay in jail or prison as punishment
penalty - a punishment, or the usual punishment, for doing something that is against a law โทษ

key - important คนสำคัญ
reason - an explanation of an event, why an event happened เหตุ ; เหตุผล ; สาเหตุ
authorities - the police or people in official organisations who have the legal power to make people obey laws or rules เจ้าหน้าที่ (ตำรวจ หรือผู้มีอำนาจ)
officers - high ranking managers in a company
entitled - having the right to have or do something มีสิทธิโดยชอบ
reward - something given in exchange for good behaviour or good work, etc รางวัล
granted - officially given ให ้ 
identify - to find something, to see it and know what it is 
investigation - the process of trying to find out all the details or facts about something การสอบสวน, การตรวจสอบหาข้อเท็จจริง
discouraged - to prevent by making people want to do something less
decent - has acceptable standard or quality
commit - do something wrong
evade (verb) - to avoid doing something that you should do, runaway from 
evasive (adjective)  
intention - a plan in your mind to do something in the future ความตั้งใจ เจตนา แผนการ 
raises the question Y - the situation is such that you  would naturally ask the question Y
privilege -
ข้อได้เปรียบ, สิทธิพิเศษ
nationwide - throughout a whole country ทั่วทั้งประเทศ

voice - express feelings or opinions ออกความคิด
resolved - promise or state that a problem will be solved
penalty - punishment บทลงโทษ
range - all the numbers between two numbers, everything between two fixed limits ผันแปรภายในขอบเขตหนึ่ง, เปลี่ยนแปลงในช่วงหนึ่ง
pressure - trying to force someone to do something กดดันให้ทำ
multinational companies -  same as "multinational corporations"
multinationals -
same as "multinational corporations"
Multinational Corporation (MNC) - a corporation with factories or operations in many countries, very large multinationals spend more money than many countries, also have a powerful influence in international relations and local economies (See Wikipedia)

legislation - a law or set of laws suggested by a government and made official by a parliament กฎหมาย, การออกกฎหมาย
expected - believe will happen คาดว่า (จะเกิดขึ้น)
scheme - a plan that is developed by a government or large organisation in order to provide a particular service for people แผนการ โครงการ
remain untouched - will not change, will not be affected, no effect or impact
empower - to give someone the legal power to do something ทำให้มีอำนาจ
issue - officially announced ออกประกาศ
regulation - an official government rule that controls the way that things are done in an industry or activity กฎระเบียบ, ระเบียบข้อบังคับ
prudent - careful and using good judgment, making reasonable and sensible decisions  รอบคอบ ถี่ถ้วน (See glossary)
regime - a system of rules that control some activity

altered -
common sense - making good decisions and judgements (that are reasonable, logical and sensible)
sum - an amount of something, especially money จำนวนเงิน
deficient - lacks, does not have enough, has less than the right amount
duty -  tax paid on imported goods, tariffs
adopt - to accept or to start using something new นำมาใช้
the basis for computation - the amount that is used to calculate another amount (applying some formula)
X applies in case of Y - rule X is used when situation Y exists

licence - official permission from government to do a business or some activity, an official document that gives someone permission to do or use something ใบอนุญาต
carry out - do
proper - correct, right (done in the right way without mistakes or errors)
formalities - the many rules and procedures that a person dealing with customs must follow
scope - the size, number or range of things that they apply to
concessions - permission from the government to do some kind business (search for oil in an area, build a phone network, for example)
interpreted - understood in a particular way
mistakenly interpreted - understood in the wrong way
trade - the buying and selling of goods การค้าขาย
Free Trade Agreement (FTA) -  an agreement between a  group of countries to eliminate many tariffs, quotas and preferences on goods passing between them (See Wikipedia)
in good faith -
did things honesty and without trying to cheat 

assume - to accept something to be true (without question or proof)
Board of Investment (BoI) -
the Thai government agency responsible for providing incentives to encourage investment in Thailand (See website)
Board of Investment (BoI)-promoted - the BOI did things to encourage or make companies interested in investing in Thailand
entitled to - should get (because it is their right) มีสิทธิ
exemption (noun) - permission not to do something, such as making a payment, following a rule, etc. ข้อยกเว้น
exempt (adjective) - having permission not to do something
procurement - the process of buying of supplies for a company or other organisation การจัดซื้อ
staff - workers, employees พนักงาน
undertaking - doing some task
properly undertaking- doing some task in the right way
customs declaration - the piece of paper (form) that you fill out and give to customs officials telling them what goods and things you are bringing into the country with you
confirm - state that an arrangement you made earlier that hasn't happened yet, will definitely happen in the future (for example, the financing for construction was confirmed, the hotel reservation was confirmed) ยืนยัน
comply - to obey a rule or a law การปฏิบัติตามกฎ, to obey a rule or law or do what someone asks you to do ปฏิบัติตาม (กฎหมาย, ข้อเสนอ, etc.)
formality - something which has to be done but which has no real importance; something that the law or an official process says must be done ระเบียบ,ระเบียบแบบแผน,พิธีรีตอง,ความเคร่งครัดในระเบียบ

intention -
what you want to do (or the goals you wish to achieve and accomplish in the end)
regardless of intention - it doesn't matter what you want to do (this is irrelevant or unimportant)
violate - to do something that is against a law, rule or agreement ฝ่าฝืนกฎหมาย, ละเมิดกฏหมาย
negligence - when you do not give enough care or attention to someone or something ความประมาท, ความไม่เอาใจใส่
interpret (verb) - to understand something in a certain way (understand a text, action, situation, etc)
misinterpret (verb) - to not understand something in the correct way
misinterpretation (noun)
threaten - to say that you might do something bad or harmful, especially in order to make someone do something ขู่เข็ญ คุกคาม ทำให้กลัว
settle - to reach a decision or an agreement about something and end a disagreement (example: the legal case was ended with an out of court settlement) แก้ปัญหา
X in exchange for Y - giving X to a person and receiving Y from them
waiver - same as "exemption" above, permission to not do something
take criminal action against Y -
start a legal case against a person Y (that may end with finding person Y guilty and then punishing them)
board of directors - the group of elected or appointed people who set the highest level of policy and strategy in a company (See Wikipedia on board of directors and corporate governance)
X consists of Y -
X has Y as its parts
prestigious - famous, respected and admired by many people ที่มีชื่อเสียง ที่ได้รับความนับถือ
grounds - reasons for what you say or do บนมูลเหตุว่า บนพื้นฐานว่า
legal grounds - legal reasons (why a person should win a legal case)

opt - to make a choice or a decision from a range of possibilities เลือก
fingerprint - making a record of the pattern on a person's finger in order to identify that person (See Wikpedia)
station - a place where some activity takes place (for example: power station, police station, fire station, space station, way station)
police station - the local police office (from where the police enforce the law and settle legal disputes in an area or neighborhood)
discourage - cause someone to lose enthusiasm and not do what they are doing
abuse - to use or treat someone or something wrongly or badly, especially in a way that is to your own advantage ใช้ในทางที่ผิด
ceiling - an upper limit เพดาน ขีดจำกัด
duty base - same as "the basis of computation" above
substantial - in a large amount or degree
granted - (formal) given
give room to - give opportunity or chance to do something (that you want to do or are planning to do when you get a chance)
apply - to make use of something นำมาใช้
maximum - the most possible ที่สูงสุด ที่มากที่สุด

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