Customs Affairs in Thailand-(2) Violations and Sanctions

Written by Mr. Monchai Varatthan
In this edition, we continue our discussion of customs errors and violations commonly made by importers. The author hopes to encourage awareness, especially of the legal consequences, and help importers improve their compliance framework.

This article continues our customs series. Article 191, the first in the series, was published in April 2021.

Customs Violations-Common Errors

Customs affairs, as discussed in Article 191, typically involve three key areas: tariff, value, and procedure. We discuss the ramifications of each.

1. Tariff classification errors

Tariff classification spurs the most common errors; namely, due to complexity of imported products, incorrect or insufficient product information provided to broker/agent, inexperienced brokers/agents, among others.

Importers are always responsible for their tariff classifications and declarations. Therefore, importers should have sufficient knowledge of classifications by referencing tariff schedules, and the General Rules for Interpretation and Explanatory Notes of the Harmonized System. To further minimize errors, importers may also seek advance rulings for tariff classifications before they import the products.

2. Customs valuation errors

These errors occur when importers do not include elements that form the customs value in the price of the goods. For example:

(1) Royalties, know-how, or technical fees related to the imported goods and paid as a condition of sale. For example, fees for trademarks on imported finished products, or patents or know-how used for manufacturing the imported goods, etc.
(2) Costs of transportation, e.g. internal freight and insurance, often charged by sellers/exporters after importation of the goods.
(3) Value of the goods/service supplied by the importer to the seller/exporter in connection with the production of goods, e.g. molds that importer supplies to the seller abroad, etc.

3. Procedural errors

The two most common procedural errors are incomplete or non-compliant certificates of origin and importation of prohibited goods (narcotics, goods infringing intellectual property rights), or restricted goods, or goods without requisite import licenses (typically food, medicines, animals, and plants, among others.)

Importers are encouraged to continuously perform self-evaluations to identify risks and prevent such errors, particularly tariff classifications of key products imported on a regular basis.

Customs Offenses & Liabilities

Customs errors are treatable as offenses under the Customs Act B.E. 2560 (2017).

1. False declarations resulting in duty shortfalls

Importers are liable for both civil and criminal penalties for false declarations that create duty shortfalls:

Civil liabilities:

(a) Customs duty shortfall.
(b) Customs surcharge of 1% per month base on the duty shortfall, counting from the Customs Departments releases the goods from custody until the importer fully pays the duty shortfall. The surcharge will not exceed the duty shortfall.
(c) Penalty at 20% of the duty shortfall, if not paid within 30 days from the receipt date of the assessment notice.
(d) VAT shortfall, VAT penalty and VAT surcharges, and excise taxes, if any.

Criminal liabilities:

Typically, the Customs Department levies fines from 0.5 - 4 times the duty shortfall or imposes maximum prison terms of 10 years, or both.

Where the importer agrees to settle with the Customs Department, liabilities are usually reduced to 0.5-2 times the duty shortfall and no imprisonment.

The importer would not be subject to criminal liabilities if it can prove, to the satisfaction of the Customs Department or court, that it had no intention to evade duty.

2. Import of prohibited goods, or restricted goods without a permit

Importation of prohibited or restricted goods without required (or valid licenses,) or absent compliance with applicable law, is punishable by a maximum fine of Baht 500,000 or a maximum prison term of 10 years, or both. Settlement with the Customs Department may reduce fine to the rate of one times the CIF value plus duty. The importer will be liable here, regardless of whether or not it intended to violate the law.

Author’s Note:

Customs affairs in Thailand are complex. They are also often overlooked by importers and business operators. Non-compliance issues, though, will surface during Customs Department audits. At that point, liabilities are then inevitable. Companies are urged to perform honest self-evaluations to trace possible violations or discover weaknesses in their compliance framework. Doing so can enable imports to make a voluntarily payment of the duty shortfall of the mistake to be eligible for customs duty exemption and also help minimize error in the future.