Thai Customs DG Tells Ambassador Reforms on Track

1. (SBU) Summary: The Thai Director General for Customs told the
Ambassador that the first two phases of the Customs reform effort
mandated by the Abhisit government have been approved by the Cabinet
and that the crucial third phase, which will revamp the rewards
system, has been drafted and will be presented to the Cabinet in
March. The Director General said that his Department is ready to
take possession of the Megaports system, as soon as the start date
for the five-year U.S. maintenance commitment can be worked out.
The Ambassador also raised concerns about major Customs disputes
involving U.S. firms, and was assured they would receive fair
treatment. End Summary.



2. (SBU) Comment: While the Director General's presentation of the
progress of the reform program is in line with what he told us in
November (see reftel), it nevertheless came as very good news. All
three phases of the reform still have to be approved by Parliament,
and the Director General could provide no timeline for that. We
have heard that the reform of the rewards system, from which Customs
officers have benefitted handsomely for years, is being fiercely
resisted in the Department. If the Abhisit government can pull off
all three phases of this reform program, it will have made a giant
leap forward in bringing transparency and good governance to what
has historically been one of the Thai government entities least
known for such. End Comment.

Customs Reform on Track


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3. (SBU) During a visit February 24 to Royal Thai Customs, Director
General Somchai Sujjapongse told the Ambassador that the first two
phases of Thai Customs reform have already been approved by the
Cabinet. The first phase, he said, involved an explanation to the
Cabinet of Thailand's need to be in compliance with international
obligations stemming from the Kyoto Convention and agreements
related to the Greater Mekong Sub-region.



4. (SBU) The second phase was approved by the cabinet two weeks ago
and, according to DG Somchai, included the following:

--an adjustment of the penalty structure giving judges the
flexibility to assess penalties from zero to four times the value of
the tariffs due. Current law requires an automatic charge of four
times the value.

--the establishment of a recognition between "evasion" and
"avoidance" in the intentions of a company found to be liable for
unpaid tariffs, allowing the judge to recognize that a company may
have failed to pay the proper tariff because of simple
mis-estimation with no attempt to defraud.

--a change in the charge for late payment "to be more fair than
existing law." Currently, companies can be charged a late fee of 1
percent per month for up to ten years for tariffs judged to be in
arrears, which can add up to more than the entire value of the
tariffs owed. With this change, late fees will be capped at a value
equal to the tariffs owed.

--discretion given to the Director General to waive duty charges of
less than 1000 baht (30 dollars) to enable Customs to clear its
books of nuisance accounts. The previous limit was 20 baht.



5. (SBU) DG Somchai told the Ambassador that when he presented this
second phase reform to the cabinet, he received stiff questioning
from Prime Minister Abhisit and Justice Minister Pirapan
Salirathavibhaga about the status of the initiative to reform the
reward scheme. He explained that this third phase reform seeks "to
revamp the whole system." This amendment, said DG Somchai while
turning to his senior staff also in the meeting, needs to be
acceptable to the Royal Customs Department, the private sector, and
the whole country.



6. (SBU) The Customs Department has been hard at work on this
reform. A committee headed by Deputy Director General Wisan, the DG
told the Ambassador, has now completed its work and the draft is now
in the process of "fine tuning." It will be ready for submission
to the Cabinet in March, and will make the Customs Department
"transparent."

Megaports


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7. (SBU) DG Somchai thanked the Ambassador for the U.S. provision
of the high-tech equipment involved in the Megaports project at Laem
Chabang port. He said that the 2007 Thai Constitution's Section
190, which normally requires Parliamentary approval of any agreement
with a foreign country, is "not a problem at all" with regard to
Megaports. The only remaining issue is one of timing. The Thai

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side would like the five-year U.S. commitment to fund maintenance on
the equipment to begin when the formal turnover is signed
(presumably in the next month or two). We noted that the U.S.
Department of Energy rep in Thailand believes that five-year period
should begin when the equipment first went into full operation last
April. The Embassy will work with the U.S. Department of Energy and
Thai Customs to resolve this impasse.

U.S. Company Concerns


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8. (SBU) The Ambassador raised the case of Amway (which was
notified last year of an exorbitant penalty charge), noting that
this is a respectable U.S. firm and the leading importer of
U.S.-manufactured goods into Thailand. DG Somchai promised the
Ambassador that Amway would receive "fair treatment" and noted that
he was meeting in two days with Thai Trade Representative Kiat to
discuss the Amway case. Later, during the tour of Customs'
high-tech monitoring center, we raised the FEDEX case, noting that
while the company has tentatively agreed to seek a settlement, we
hope that Customs will take action against the actual exporter of
illegal goods (whose identification FEDEX has made known to Customs)
and not just against FEDEX as the exporter of record.

Other Issues


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9. (SBU) The Ambassador congratulated DG Somchai on Customs'
successful interdiction of goods involved in the illegal animal
parts trade as part of the ASEAN WEN initiative, which the U.S.
supports. DG Somchai appreciated that support.



10. (SBU) DG Somchai asked about the USG position on the current
law requiring 100 percent scanning of containers entering the U.S.
by 2012. We responded that although the Department of Homeland
Security has not officially backed away from that date, Secretary
Napolitano has said publicly that the Department will seek an
extension, thereby pushing it back two years. In previous
statements the Secretary had also suggested that implementation may
be "tiered" or risk-based, rather than 100 percent from the
beginning. We also raised the issue of the return of cash
guarantees to the spirits industry, to which Customs agreed
following resolution of a valuation dispute, but has not yet
fulfilled.

JOHN