You are using an outdated browser and your browsing experience will not be optimal. Please update to the latest version of Microsoft Edge, Google Chrome or Mozilla Firefox. Install Microsoft Edge

September 1, 2017

New and Improved Penalty Scheme Under the 2017 Thai Customs Act

Subscribe to Updates
Bangkok Post, Corporate Counsellor Column

Businesses involved with the Thai customs clearance process have been anxiously awaiting changes aimed at improving customs laws. These long-awaited changes come with the passage of the Customs Act BE 2560 (2017).

The new act, which will take effect from Nov 13, 2017, repeals the outdated and controversial Customs Act BE 2469 (1926) and its prior amendments and seeks to address many of its shortcomings. This article focuses on the substantial revisions to the Customs Act’s penalty scheme, revisions that will have a direct impact on both businesses and individuals.

Previously, most criminal penalties relevant to business operators were prescribed under Section 27 of the Customs Act. For example, all customs offences, including smuggling and attempting to commit a customs offence, were classified together under Section 27. This offered little flexibility in terms of punishment and frequently failed to account for the considerable differences in the range of wrongdoing by an offender. The new Act seeks to deal with this classification problem by having penalties governed by three distinct sections: 242, 243 and 244.

Another key change is an amendment to the requirements of intent for claims of customs duty evasion. Under the previous act, Section 27 presumed strict liability for all included offences, even where violations may have been due to error rather than intentional or negligent misconduct.

Section 252 of the new Act, while still retaining some strict liability presumptions, now eliminates the highly controversial presumption of intent for customs duty evasion claims under Section 243. This is critical to supporting an accused party’s presumption of innocence by shifting the burden back to the prosecution to show “wilful intent” or “negligence”.

The new Act also revises the penalty scheme to distinguish between degrees of customs offences and prescribes new methods for calculating criminal fines. Previously, under Section 27, penalties were calculated at four times the combined price of goods plus the customs duty, and/or imprisonment for up to 10 years. While some discretion existed for claims settled before reaching court, once at the trial court stage the only penalties the court could impose were the four-times fine and/or imprisonment. Because these stringent penalties did not distinguish between types of offences and offered the courts no discretion in calculating fines, penalties were often out of proportion with the wrongdoing.

Under the new Act, penalties are set forth in Sections 242, 243 and 244. Section 243 applies to duty evasion and calculates criminal penalties using only the actual amount of duty evaded. The penalty multiplier is also limited to a range of one-half to four times the base amount. Penalties can still include imprisonment for up to 10 years, instead of or in addition to the fine.

The new Act also introduces different degrees of penalties for different levels of offences. For example, the penalty for smuggling is more severe than for duty evasion. Section 242 prohibits importing or exporting items that have “not duly passed through customs”. The penalty is four times the price of the article including the duty, and/or imprisonment for up to 10 years. In addition, the item will be forfeited regardless of whether the person is punished.

Section 244 prohibits customs evasion (importing items for the purpose of evading “restrictions or prohibitions with respect to such article”) and imposes a penalty of 500,000 baht, and/or up to 10 years in jail. The court may also order the article forfeited regardless of whether there is anyone to be punished.

It is important to note that, once the new Act becomes effective on Nov 13, it will apply retroactively to the benefit of any pending case, including claims that have not yet been subject to final settlement or judgement. This may provide a welcome opportunity for companies and individuals currently facing criminal customs claims.

The new Act substantially improves the customs clearance process by improving clarity and fairness. A priority for lawmakers was the overhaul of the penalty scheme, including the removal of strict liability, separate penalties for different types of offences, and reduced penalties compared with the previous scheme.

Ultimately, these improvements stand to benefit both the public and the private sectors. With supporting regulations expected to be announced in the near future, further clarity is also expected.

While there are still opportunities to improve the new law further and some existing challenges for companies seeking to ensure customs compliance, it goes a long way towards clarifying and correcting many of the shortcomings of its predecessor.

The authors would also like to thank Mark Hsien for his valuable contribution in preparing this article.

Download Full Article
Related Professionals

Practices

Dispute Resolution and Litigation

Location

RELATED INSIGHTS​ 

May 30, 2024
A bank guarantee or bond is a powerful tool that provides contractual parties with security and assurance. Bank guarantees are commitments made by a bank (as a guarantor) on behalf of a customer (as an obligor) to a beneficiary to ensure that certain contractual obligations will be fulfilled. If the customer fails to comply with these obligations, the bank can compensate the beneficiary up to the amount specified in the bank guarantee. Bank guarantees are widely used in Thailand as a form of security and are common in construction agreements and government procurement contracts, among others. If the beneficiary (e.g., a project owner) concludes that the counterparty in the agreement (e.g., a contractor) has breached the underlying contract in some way, the beneficiary will demand payment from the bank pursuant to the guarantee. Collecting on a Guarantee and Preventing Payment In the context of construction and procurement agreements, there are two types of bank guarantees—conditional and unconditional. A conditional bank guarantee means that the project owner must satisfy certain agreed-upon conditions (e.g., provision of proof of the breach, proof of damages, or even consent from the contractor) to demand payment. An unconditional bank guarantee means that the bank must compensate the project owner for the demanded amount (up to the limit specified in the bank guarantee) without any conditions. When a project owner concludes that a contractor has breached the underlying contract (often for nonperformance or failure to comply with a representation or warranty), the project owner will demand payment from the bank holding the guarantee. Upon receiving such a demand, Thai banks will usually inform the contractor and ask if it has any objections. Even if the bank guarantee is unconditional, in practice, a bank may be reluctant to make payment if the contractor, as the bank’s customer,
Read More
May 28, 2024
Under Thai law, namely the Criminal Procedural Code, an injured person may bring a criminal case to a criminal court without having a public prosecutor file the case for him or her. After the court conducts an inquiry into the case, the court considers whether to accept the case for further trial and determine whether the defendant should be penalized accordingly. Private parties involved in certain types of cases, such as labor disputes or shareholder disputes, may find this a common channel to pursue. Criminal law in Thailand recently underwent a significant change, as new legislation changed numerous criminal offenses to become phinai-fine offenses instead. However, as this is a relatively new development, there are still instances in which plaints involving phinai fines are still being submitted to the court by these private injured persons as criminal cases. But this raises the issue of whether the court can proceed with such cases. For over a year, Thailand has enforced the Act on Phinai Fine Proceedings B.E. 2565 (2022) (ACFP) as a new legal measure to decriminalize certain types of fines for criminal penalties with less-serious offenses to phinai offenses, which results in phinai-related offenders having to pay only fines instead of facing the entire criminal procedures and penalties under the Thai Penal Code and Criminal Procedure Code, including bail submission, travel restrictions, imprisonment, and a criminal record. What happens to ongoing trials in court for phinai offenses? The ACFP automatically changed criminal offenses under 204 pieces of legislation, including certain offenses under the Bankruptcy Act B.E. 2483 (1940), the Determining Offenses Relating to Registered Partnership, Limited Partnership, Limited Company, Association, and Foundation Act B.E. 2499 (1956), the Labor Relations Act B.E. 2518 (1975), the Consumer Protection Act B.E. 2522 (1979), the Public Limited Companies Act B.E. 2535 (1992), and
Read More
May 16, 2024
On May 4, 2024, the Vietnamese government issued Decree No. 46/2024/ND-CP (“Decree 46”) amending and supplementing certain articles of Decree No. 99/2013/ND-CP dated August 29, 2013, on administrative sanctions in industrial property, as amended and supplemented in 2021 (“Decree 99”). Decree 46, which will come into force on July 1, 2024, is designed to bring Decree 99 in line with the amended IP Law of 2022. Some of the notable amendments of Decree 46 are discussed below. New Infringing Acts Decree 46 added the following new infringing acts subject to sanctions, which had not been set out in the former decree: Use of patents, utility solutions, layout designs, or industrial designs without paying compensation according to the provisions on temporary rights specified in Article 131 of the amended IP Law. Accepting a trademark license not in the form of a written contract in the case of using the licensed trademark on goods or packaging. Failure to notify clients of costs, charges, and fees related to procedures for establishing and protecting industrial property rights. Deceiving clients in the course of entering into and performing industrial property representative service contracts, but not to the extent of criminal prosecution, or forcing customers to enter into and perform industrial property representative service contracts. Although these acts are not common occurrences, it is nevertheless important to have clear regulations in order to ensure consistency with the amended IP Law and overcome difficulties and obstacles if such acts are committed in practice. Amendments and Supplements Decree 46 adopted amendments and supplements to main sanctions, additional sanctions, and remedial measures, specifically: The monetary fine imposed for violations against trade secrets is VND 50 million to VND 100 million (approx. USD 2,000 – USD 4,000), a large increase compared to the VND 5 million to VND 15
Read More
May 2, 2024
The Thai Arbitration Institute (TAI) announced on April 19, 2024, that it has jointly set up an in-court arbitration pilot project with five courts in Thailand—namely, the Civil Court, Taling Chan Civil Court, Central Intellectual Property and International Trade Court, Samut Prakan Provincial Court, and Samut Prakan Khwaeng Court. The pilot project launched on May 1, 2024. Pilot Project This project is designed to encourage the parties in cases submitted to these courts to consider having parts of the case, or even the entire case, heard and determined by arbitrators under the Civil Procedural Code (CPC). The objective of the project is to provide faster and more efficient judicial services to the public by reducing the number of cases to be fully tried in the courts through providing an option for parties to engage in in-court arbitration. Still, the court remains largely involved in the process, as the court will consider the award in detail before determining whether to render a judgment in accordance with the award without any edits. Therefore, in-court arbitration favors parties who prefer to have a court judgment instead of an out-of-court arbitral award, which could lead to enforcement challenges under the Arbitration Act. Parties who participate in this pilot project will pay the TAI a fee for its administrative assistance and related services. The TAI will assist in setting up and facilitating meetings, witness hearings, and the necessary logistics pertaining to case files involving the arbitrators, the parties, and the court. After the arbitrators hear the case, the case files, including the witness statements, exhibits, and reports during the arbitration proceedings, are collected and sent back to the respective court along with the award. Under the pilot project, the arbitrators will issue awards within 30 days of the last day of the trial or
Read More