Thailand has embarked upon a gradual return to democracy since the May 2014 coup d’état in which the Thai military suspended the constitution and took control of the government. A new constitution was drafted and approved through a referendum in 2016; and general elections occurred in March 2019. Thailand’s economy has remained resilient despite the political upheaval.
Thailand issued an Emergency Decree in March 2020 to control the spread of the COVID-19 virus. The subsequent lockdown, restrictions on international travel, and temporary closures of some businesses classified as health risks had a significant impact on Thailand’s economy. Beginning in early 2022, the Thai government has gradually eased pandemic restrictions on international travel. However, in-bound travelers could still face challenges from changing health codes, mask-wearing requirements, and social distancing measures.
Thai industries face intense competition from both global and domestic suppliers of goods and services. Several key domestic companies are family businesses that span generations and are now headed by third-generation business leaders who possess deep knowledge of their industries.
Thai consumers are price conscious and generally served by local suppliers and low-priced imports. U.S. exporters with products that are competitive for reasons other than price should consider working with a local partner as part of a market-entry strategy.
About half of Thailand’s Most-Favored-Nation (MFN) tariff schedule includes duties of less than five percent, and approximately 30 percent of tariff lines are duty free, including certain chemicals, electronics, industrial machinery, and paper. Thailand’s average MFN applied tariff rate was 10.2 percent in 2020 (latest data available). However, Thailand’s average MFN applied tariff rate was 29.3 percent for agricultural products and 7.1 percent for non-agricultural products in 2020. Thailand has bound 75.2 percent of its tariff lines in the World Trade Organization (WTO), with an average WTO bound tariff rate of 28 percent.
High tariffs in many sectors continue to hinder access to the Thai market for many U.S. products. The highest ad valorem tariff rates apply to imports competing with locally produced goods, including automobiles and automotive parts, motorcycles, beef, pork, poultry, tea, tobacco, flowers, beer and spirits, and textiles and apparel. For example, Thailand applies import tariffs of 80 percent on motor vehicles, 60 percent on motorcycles and certain clothing products, and 54 to 60 percent on distilled spirits. Thailand applies a 10 percent tariff on most pharmaceutical products, including almost all products on the World Health Organization’s list of essential medicines, except for some vaccines, anti-malarial, and anti-retroviral, which are exempt.
Corruption and lack of transparency in government procurement are major concerns for U.S. companies. When corruption is suspected during the bidding process, government agencies and state enterprises reserve the right to accept or reject any or all bids and may also modify the technical requirements. This affords government agencies and state-owned enterprises considerable leeway in making procurements, while denying bidders recourse to challenge procedures. Thailand is not a party to the WTO Agreement on Government Procurement (GPA), but it has been an observer to the WTO Committee on Government Procurement since 2015.
Customs law in Thailand does not meet the standards established by The International Convention on the Simplification and Harmonization of Customs Procedures, otherwise known as “the Kyoto Convention.” Major problem areas include Thailand’s Customs Penalty Regime and Customs Valuation Procedures. The penalty for undervaluing imports into Thailand, even if done through negligence or by mistake, can result in a prison sentence of up to 10 years. The system is incentivized by the distribution of rewards from these penalty payments to customs officials involved in the investigation of each case. Additionally, the procedure for determining “customs value” remains opaque as the valuation methodologies, determined by Ministerial Regulations, are subject to frequent change. Confusion over the guidelines can lead to an increased risk of misinterpretation and misapplication of goods valuation methods.
U.S. businesses operating in Thailand should be aware that in 2018, the Thai government amended its Civil Procedure Code to include class-action lawsuit provisions. This amendment strengthens rule of law and enhances consumer protections, but it may leave some businesses at higher risk, resulting in higher insurance premiums, especially for small businesses.