By SPECIAL TO THE NATION
The reward structure created incentives toward high assessments and the massive additional penalties if the importer refused to pay deterred any appeal to the courts.
That changed when the new Customs Act came into force on November 13, 2017. The penalties at the court level for duty evasion cases were reduced from four times the duty-paid value of the goods to a maximum of four times the actual duty.
For a lot more importers, this opened up the possibility of going to court. The rewards paid to Customs officials and informants were capped at Bt5 million and Bt10 million respectively, so large assessments no longer bring incremental benefit. These changes were very welcome among the business community.
We are now seeing further changes in the approach taken by Thai Customs.
The Investigation and Suppression Bureau – ISB (currently known as the Enforcement Division) used to conduct a lot of investigations on importers by securing a court warrant and seizing large volumes of documents, often acting on information from an informant.
These were particularly intimidating to deal with because of a perception that the company was involved in serious criminal activities, whereas in reality most underpayments resulted from a misapplication of complex rules or honest mistakes. The ISB is now focused away from revenue collection and more towards the protection of the quality of life – enforcing licensing standards and acting against counterfeit goods.
Audits are still undertaken by the Post-Clearance Audit Bureau (currently known as the Post-Clearance Audit Division). However, the length of audits has dramatically declined as there are new limits to the period of assessment, and the importer has more options to challenge the assessment.
This means Customs are less concerned about agreeing to the number before issuing the assessment, as it is likely to be appealed. Customs is establishing several boards of appeal to handle the already increasing workload.
Customs at the ports are increasingly getting involved in technical matters. Companies are being more frequently challenged on issues such as tariff classification that don’t require a full audit. Instead of the case being transferred to headquarters, arrears are being collected at a port level. Customs officials still get a 10 per cent reward from notices of assessment. Unlike the audit cases, where the reward is capped per an audit case, the issuing of notices of assessment is done on a per shipment basis, so the cap of Bt5 million applies per shipment.
This change in approach by Thai Customs will require a change in approach by importers under audit. Previously, a common strategy was to let Customs make the running. They would audit (or investigate) and then disappear for several months.
A wildly inflated claim would lead to several more months of negotiations before a reluctant settlement in many cases.
The risk of fighting a case in criminal court was just too high, and so a lot of companies settled despite their belief that they had done nothing wrong, or that inadvertent errors should not be so heavily penalised.
Now the previously long period of negotiation appears to be much shorter. Cases will be written up and assessed regardless of any agreement, or lack thereof.
Importers under audit need to make technical arguments more quickly and more robustly than before, otherwise it is likely that a large assessment will be made and the Board of Appeals will have to decide, often months or years after the initial challenge.
The traditional “wait and see” strategy is almost certainly over. Importers under audit should proactively assess potential weak points and be prepared to rebut the Thai Customs view of matters before they are crystallised into a formal assessment.
The previously available breathing space is probably no more, and inaction will lead to an assessment.
Proactively managing the technical issues and reviewing compliance against the sometimes complex import rules could realistically make the difference between a court case, with the associated sleepless nights, or the sleep of the just.
Contributed by PAUL SUMNER,
partner of customs & international trade, PwC Thailand.