Business challenges – Logistics and customs duties for Thailand

As an integral component of the Thai taxation system, classification of good and the duties collected are based on the Harmonized Commodity Description and Coding System (commonly referred to as the “Harmonized System” or “HS Code”). This practice is consistent with classifications used by the majority of Thailand’s trading partners whereby custom duties are levied according to a product's value or a specific rate basis, whichever is higher. On 1 January, 2000, Thailand adopted the GATT Valuation Agreement (General Agreement on Tariffs and Trade), under which imported articles are subject both to duties and to VAT, which is administered by the Customs Department.

All goods imported are subject to two different taxes: Tariff Duty and VAT. Tariff duties are calculated by multiplying the cost, insurance, and freight value (CIF value) of the goods by the duty rate. After determining the duty, it is added to the CIF value of the goods. After which, VAT is levied on the total sum of the CIF value, duty, and excise tax (if any).

Businesses must pay tariffs ranging from 5% to 60% of the value of the vast majority of goods imported into Thailand. Exemptions from import duties are available only on items of goods listed in the Customs Tariff Decree. However, there are reduced tariff rates available on imported goods from the 18 countries with which the kingdom has preferential free trade agreements (FTA), including 10 ASEAN members, plus Australia, Chile, China, Hong Kong, India, Japan, Korean, New Zealand, and Peru.

Like many other countries with free trade agreements and economic partnerships, the necessary documents required to clear customs include an entry form together with a bill of lading, invoice, and packing list. Once the goods have arrived in Thailand either by air freight, sea or land, customs duties are due on the imports. Goods can be stored in a customs bonded warehouse for up to 45 days with no submission of an import entry and 60 days in the case of submission of an import entry. However, both landing and storage charges must be paid before the goods are released.

To assist in clearing of customs, warehousing, and supply chain management, a fourth party logistics (4PL) provider can assist. Areas of expertise include assistance with shipping, customs clearance, logistics, packaging, warehousing, and delivery of the products. In comparison, a third party logistics (3PL) provider is only involved in the outsourcing of logistics such as inventory storage, inventory management, and customs clearance. Under the latter arrangement, the company / retailer maintains oversight of their supply chain.

The choice of using either 3PL or 4PL is up to the company / retailer and will depend on the requirement to outsource part of the workflow or the entire workflow.