EXPORT IN THAILAND & FREE TRADE

EXPORT FROM THAILAND: FREE TRADE HUB FOR THE WHOLE OF ASIA

ONCE A COMPANY HAS DECIDED TO PRODUCE IN THAILAND, IT WILL GENERALLY NEVER REGRET THIS

Alongside a good infrastructure, tax incentives, a skilled and affordable workforce and a modern, industrial environment, it is particularly the export from Thailand without customs barriers to large parts of Asia that makes the country so popular as a production location. Thailand is part of an economic union or Free Trade Agreement with over 17 countries, including Japan, China, South Korea, India and the 10 “Little Tigers” of the Asean states.

This means nothing less than that products from these countries can be traded among each other duty-free. However, the condition is that the true origin from the exporting country is confirmed in a Certificate of Origin.

The calculation of the therefore required Local Content or Regional Content requires quite some expertise. The same applies to the procedure, the exporter’s self-certification and the avoidance of violations of the agreements.

However, one must also understand how to utilize these advantages. First and foremost, it is important that the goods exported from Thailand are actually manufactured in Thailand. Anyone who may think that importing nearly complete products and then screwing a few parts together will earn them the duty-free “Made in Thailand” label is mistaken.

Any customer wishing to import goods duty-free will first require a formal “Certificate of Origin” from the manufacturer confirming production within a Free Trade Agreement. There are very specific conditions for such a Certificate of Origin, the fulfillment of which requires some expertise.

The Sanet Group in Bangkok offers investors and exporters multilingual seminars in which they provide detailed information on the requirements for such a Certificate of Origin, as well as the procedures and their validity.

The Winterhalter Group, a global market leader for commercial dishwashers, is one of the “Hidden Champions” that shape and represent the good reputation of the German mechanical engineering industry worldwide. Winterhalter Asia Co Ltd, based in Thailand, serves from here the Asian markets. Together with Harald Kössel, Head of Technical Controlling, and Melina Scherz, Senior Office Manager from German HQ, Managing Director Tobias Wimmer and Head of Operations Kamonchanok Wimmer took part in a refresher seminar on Rules of Origin and Local Content at the Sanet Group in July 2024. Sanet also found it enriching to be able to reconcile the seminar content with day-to-day practice in an export company on the scale of the Winterhalter Group in a friendly and open discussion.

Here are the main features of the procedure and the “Local Content” as a prerequisite for a Certificate of Origin.

The first requirement for a certificate of origin (COO) is that the product in question has completed the final stage of production processing in the country of issuance. This is usually the case for agricultural goods. Such a product, which comprises “all stages of production” in a country, is referred to as “wholly obtained”. Agricultural products are a good example of this type of goods. A Certificate of Origin is certain in this case. However, other goods with components from countries other than the country of origin can also receive a certificate of origin if they were only partially produced in the country of final manufacturing.

In this case, the granting of a Certificate of Origin depends on the regulations of each individual free trade agreement, the so-called “Rules of Origin”.

According to these rules, a product receives a Certificate of Origin from Thailand, for example, if the local value added, or “local content”, reaches a minimum percentage of the export FOB-price. In most of Thailand’s and ASEAN’s free trade agreements, this percentage is 40%. This means that 40 % of the export price (not the “production costs”!) must consist of local services such as materials and labor costs. As mentioned, this includes direct labor costs and material costs, but also direct overhead and transportation costs to a port.

Of particular importance is the fact that the profit that the company generates also counts as “Local Content”.

Besides the “Local Content”, which can be calculated very transparently in various ways, a “change in customs tariff” can also allow a Certificate of Origin to be issued for quite a number of free trade agreements. However, the calculation is somewhat more complicated under that method. Anyone who receives such a Certificate of Origin from the Ministry of Trade can, for example in the case of the Asean states, upload it to a joint database and thus provide the importer or customer in the recipient country with all the necessary documents for a duty-free import.

It is also important to know that, in addition to “Local Content”, there is also “Regional Value Content”, which, for example under ASEAN China Free Trade Area (ACFTA), entitles the manufacturer to import parts from all other partner countries duty-free and then export the end product duty-free to one of these eleven countries.

This is a fantastic option that the RCEP agreement, for another example, grants to 16 Asian countries.

As part of their seminars, the experts from Sanet not only present all the free trade agreements and their rules, but also explain exactly how the local content is calculated, the equally important “Change of Tariff Classification”, the application procedure, the validity of a Certificate of Origin and, above all, the differences in the use of the exported goods. Here, too, there are six different certificates of origin, for example for further processing or invoicing of the goods by the parent company, which lose their validity the first time they cross the border.

When exporting from Thailand, every company should have attended one of these seminars. You can find contact details for Sanet here.