Transcript of the above video: 

As the title of this video suggests, we are discussing Thai Customs, specifically looking at "tax privileges" in the context of basically it looks to me like International and domestic trade. I thought of making this video after reading a recent article from the Bangkok Post, bangkokpost.com, the article is titled: Customs Addresses Local Content Loophole. Quoting directly: "The Customs Department looks set to amend regulations on local content to prevent imported goods from exploiting tax privileges to compete with domestic producers. The effort also seeks to tighten controls against the false use of the "Made in Thailand" label for exports, especially to the US. 

Yeah, so-called, I think it's sort of akin to transfer pricing, but basically like bringing something through a third-party country in order to circumvent certain tariffs and things, the US, that gets their hackles up. So I expect that there is some communication between their counterparts in US Customs and Thai Customs to maybe deal with that issue. That said, quoting further: "According to Phantong Loykulnanta, director-general of the Department, imported goods, whether stored in a free zone or not, are eligible for an import duty exemption if their local content can be increased to 40% and the products are sold in Thailand. If the same goods are re-exported, they can be claimed as "Made in Thailand." 

So what we are seeing here is it hits a free-zone, it may be from abroad, but then a certain value add occurs, it can be sold in the domestic market much akin to domestic goods. As well it could be shipped under the label again "Made in Thailand" which may cause issues especially in supply chains that may be culminating in the US. That said, quoting further: "The local content criteria were last revised during the administration of the National Council for Peace and Order" - so for those that are unaware, that was the name of the Military Government that began in 2014 under Prayut Chan-O-Cha and basically, really depending on how you view it, I would say it really, all of that kind of ended in August of 2023. That was the real watershed moment when Prayut went into caretaker mode and then handed it off and it went to Srettha Taveesin after the elections and the Parliament was formed in 2023. So it was about a 9-year period - that said, quoting further: "stipulating the local content designation requires a specific manufacturing process carried out in Thailand -- not merely the addition of domestic profit and labour costs. However, some importers circumvented the rule by conducting very simple processes. For instance, imported animal offal is very cheap because it is not commonly consumed in Western countries. When it enters a free zone, it is repackaged and frozen, which allows it to be classified as having 40% local content. Another example is imported garlic, which normally carries an import duty of 57%. However, when it is brought into a free-zone and undergoes a small additional production process such as peeling and a profit margin is added, it registers 40% domestic value added, allowing it to qualify for a preferential tax rate of 0% when sold in the domestic market."

So as you can see, there are means and methods through the supply chains to legally sort of change the designation of a given product and essentially in a very real sense make it no longer an export in any meaningful way or excuse me an imported item, and make it a domestically sourced item in a legal sense, and then it changes the tax assessability and ultimate liability associated with the underlying product. Meanwhile, from a trade perspective, there's the issue that, again depending on how you look at this, the idea of a “simple process” - I'm sure folks that are in this business would say, "well bringing in a large amount of this stuff and then putting it through this process, it's not just an “easy thing”, it's not the correct word" - that said they are re-examining the legal framework because there seem to be concerns regarding the label "Made in Thailand" and then onward movement of goods and services into supply chains, again especially those that end up in the United States, due to the current tariff regime or perhaps we should say the Executive in the United States' position that all of this tariffs, it's not so much disrupting trade, it's that the supply chains are sort of being reorganized if you will and this is just one aspect of the overall reorganization. 

That said, it remains to be seen exactly how all this plays out, so we will certainly try to be keeping you updated on this channel as this situation evolves.