Learn about barriers to market entry and local requirements, i.e., things to be aware of when entering the market for this country.
In May 2014, the Thai military suspended the constitution and took control of the government in a coup d’état. Since the coup, Thailand has embarked upon a gradual return to democracy. A new constitution was drafted, and a constitutional referendum secured approval in August 2016. The current administration held general elections in March 2019. With a government in transition, Thailand’s economy remained stable despite challenges over the past three years.
With the COVID-19 pandemic in early 2020, Thailand initiated an Emergency Decree on March 25 in an effort to control the spread. This affected the Thai economy significantly given the lockdown, social distancing, and temporary closures of some businesses classified as health risks. Airports were closed for months, and quarantine measures for arriving international passengers remain in place. U.S. businesses interested in doing business in Thailand will face challenges from new health codes and social distancing measures, which will continue until cures and vaccines for COVID-19 are found and widely available.
Thai industries face intense competition from both global and domestic suppliers of goods and services. Many domestic companies are family businesses that span generations and are now led by third-generation businessmen and women who are highly educated and 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 work with a local partner to undertake an appropriate market entry strategy.
About half of Thailand’s MFN tariff schedule includes duties of less than 5 percent, and approximately 30 percent of tariff lines are duty-free, including for certain chemicals, electronics, industrial machinery, and paper. High tariffs in many sectors, however, continue to hinder access to the Thai market for many U.S. products. While Thailand’s MFN-applied tariff rate averaged 12.5 percent ad valorem in 2017 (latest data available), ad valorem tariffs can be as high as 226 percent; the ad valorem equivalent of some specific tariffs (levied mostly on agricultural products) is even higher. Thailand has bound all of its tariffs on agricultural products in its WTO commitments, but only approximately 73.5 percent of its tariff lines on industrial 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, wine, beer, spirits, textiles, and apparel.
Despite the new Thai Public Procurement Act that has been in effect since August 2017, corruption and lack of transparency in government procurements are major concerns for U.S. companies. Where corruption is suspected during the bidding process, government agencies and state enterprises reserve the right to accept or reject any or all bids at any time and may also modify the technical requirements. This allows considerable leeway for government agencies and state-owned enterprises to manage procurements while denying bidders recourse to challenge procedures. There are frequent reports that the Thai government makes changes to technical requirements for this purpose during the course of procurements. Despite the Thai government’s commitment to transparency in government procurement, U.S. companies and the Thai media continue to report allegations of irregularities. Thailand is not a party to the World Trade Organization Agreement on Government Procurement, although it obtained observer status in June 2015.
Customs law in Thailand does not fulfill 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. In 2019, the reform did result in the resolution of a long-standing customs dispute and dismissal of some large penalties under the rewards system.
U.S. businesses operating in Thailand should be aware that the government recently amended its Civil Procedure Code to include class-action lawsuit provisions. This amendment increases rule of law and consumer protections in Thailand, but it may leave some businesses at higher risk. This may result in higher insurance premiums, especially for small businesses.