Now may be time for new Customs Act

So what are the key potential changes in the new act?

First of all, the proposed new Customs Act would consolidate all previous amendments (the current act has more than 20 revisions that are not consolidated). It would also be renumbered to be more readable than the existing Customs Act, which still uses Roman numerals.

Second, the long-awaited and sensitive revisions of the systems for penalties and rewards to counter bribery may have finally made the cut. 

Under the revised anti-bribery reward scheme, caps will be introduced for informants (at Bt10 million per case) and customs officers (at Bt5 million per case). Under the current scheme there are no caps, which has received a lot of pushback from the private sector alleging bias among enforcement officers during post-clearance audits and investigations. However, for offences that were discovered before the new act entering force, the existing reward scheme would still apply. Depending on when the new act comes into force, this may lead to an increase in audits and scrutiny from the Customs Department.

The current draft introduces different degrees of penalties for different offence levels. For example, the penalty for smuggling is more severe than that for duty evasion, and there is a new penalty schedule for the duty drawback scheme (the current Section 19bis scheme). It will also add a “wilful intent or negligence” requirement to decide guilt for certain offences, which currently is not required. 

The new act relinquishes jurisdiction of offences related to restricted goods. For example, importing hazardous substances without the required import licence would be penalised under the Hazardous Substances Act and not the Customs Act. 

The duty surcharge in this new version would be capped at the amount of duty paid, similar to VAT (value-added tax) surcharge conditions. This would give importers more flexibility to reserve their budget while waiting for Customs’ consideration procedures after submitting self-disclosure information. 

Third, the new act provides more flexibility for extending the deadline for claiming refunds on excess duties paid from two years to three, as well as enacting the possibility of obtaining binding advance rulings from Customs, and introduces timelines under which the Board of Appeals must consider cases. Currently, there are no timelines and appeals can take years to complete. 

This new act also seems to expand the responsibility of import/export agents who act on behalf of the owner of the goods to be penalised for customs offences if they cannot prove they were not involved with such wrongdoing. This new provision provides Customs more flexibility to go after other companies than the owner of the goods. This could have a significant impact on certain companies (such as customs brokers) that are currently carrying out customs clearance on behalf of other owners of goods. 

These day lots of companies are utilising Customs Free Zone privileges, especially automotive companies. In some cases there may be a question on what should be the declared value of the goods withdrawn from the free zone. The new act also provides a clearer guideline on the application of the GATT (General Agreement on Tariffs and Trade) valuation in determining the customs value for goods removed from a free zone. 

Despite the many positive changes in the new act, there are areas that may need further clarification or guidelines. For example, how will Customs interpret “wilful intent or negligence”? How will the new transit and trans-shipment procedures work in practice, and how will Customs enforce them? Will the caps in the new reward system simply mean that Customs will increase its audits to maintain the existing reward amounts?

Some alignment issues remain as well. For example, the statutes of limitation on civil and criminal offences in the new act would remain at 10 and 15 years, while the statute for maintaining records is five years. It would be better to align these timelines to make sure company records are maintained for as long as may be needed.

Nevertheless, the proposed act is a huge step forward from what we have now. And it is very encouraging that Customs has considered and acted on feedback from the private sector. With the Asean Economic Community on the horizon, and with Thailand’s commitment to align with the International Convention on the Simplification and Harmonisation of Customs Procedures, the time is now for the government to put this draft into effect.

 

Nu To Van is a director and Wiphawee Lertdhamtawee a manager at PricewaterhouseCoopers.