ASEAN FTAs & RCEP: How to Actually Capture Preferential Duty in Thailand

Thailand's strategic position within the ASEAN region and its involvement in numerous Free Trade Agreements (FTAs) present a significant opportunity for businesses looking to optimize their import costs. Through valid certificates of origin, Thailand applies preferential duty rates under ASEAN FTAs and the Regional Comprehensive Economic Partnership (RCEP). Understanding how to navigate these regulations can greatly reduce duty expenses and enhance overall landed costs. Let’s dive into the frameworks, practical implementation, common mistakes, and longer-term strategies for capturing preferential duties in Thailand.

The Opportunity

Thailand enjoys the benefit of applying preferential duty rates for imports that present valid certificates of origin under ASEAN FTAs and RCEP. The correct nuances surrounding origin claims not only minimize duty outlays but also enhance landed costs. It is essential to note that Thailand follows both the World Trade Organization (WTO) valuation rules and the ASEAN Harmonized Tariff Nomenclature (AHTN) 2022 Harmonized System (HS) rules, which are critical in determining duty and origin eligibility.

Bustling marketplace showcasing diverse imported items.

Your Two Workhorse Frameworks

ASEAN FTAs (ATIGA + Dialogue Partners)

Thailand maintains preferential tariffs across ASEAN and enjoys additional bilateral or regional FTAs with partners, including Australia-New Zealand, China, Hong Kong, India, Japan, and Korea. This network of agreements allows businesses to leverage lower tariffs and increased market access. The application of these preferences hinges on the correct claims of Certificate of Origin (CO) and applicable product-specific rules (PSR).

For example, if you import dairy products from Australia under the AANZFTA (Australia-New Zealand FTA), you'd need to demonstrate that the product meets the PSR as outlined in the agreement.

Detailed view of a Certificate of Origin supporting trade activities.

RCEP (Entered into Force)

The RCEP significantly consolidates origin rules across ASEAN nations along with China, Japan, Korea, Australia, and New Zealand, providing a broader platform for trade. Understanding product-specific rules (PSR) and cumulation is paramount when navigating RCEP. For instance, if you manufacture a product using materials sourced from multiple RCEP countries, you can often unlock additional preferences that are not available under bilateral FTAs.

Thus, if your product is predominantly made in Thailand but contains components from Japan and Korea, you can claim price advantages when those components meet the necessary PSR.

Flags of RCEP countries representing strong trade alliances.

How Preference Works in Practice

Tariff Commitments and Documentation

RCEP provides Schedules of Tariff Commitments along with detailed regulations on Rules of Origin. If a product aligns with PSR and the correct origin documentation is presented, the reduced rate can be claimed upon importation. If the necessary documents are not available at that time, businesses may have to seek a refund later, which can complicate cash flow.

Take the case of a manufacturer importing electronics from Vietnam. If those products qualify for preferential duty rates purely based on meeting PSR and can show the necessary documentation, substantial savings can be realized.

ASEAN–China FTA Example

Using the ASEAN Trade Repository to review transposed tariff concessions per member state can be invaluable. Before shipping goods, this resource can help verify eligibility and ensure compliance with regulations. Knowledge of these provisions allows businesses to act proactively rather than reactively, minimizing the risk of unexpected duty charges.

6 Mistakes That Kill Preference (and How to Avoid Them)

1. Wrong HS Code

Submitting an incorrect HS code can lead to the wrong PSR test, ultimately resulting in an unfavorable origin outcome. It's advisable to perform pre-classification of HS codes with input from suppliers, validated by a Thai customs broker for accuracy.

2. Incomplete Origin Evidence

A lack of proper origin evidence will nullify any potential preference. Ensure that you obtain the correct CO types, rigorously linking them with invoices and packing information to establish clear provenance.

3. No Cumulation Modeling

Failure to consider cumulation can be detrimental. Structure your bill of materials (BOM) across RCEP parties in a way that meets the PSR via cumulation. This strategy can unlock preference benefits that would otherwise go untapped.

4. Valuation Mismatches

Valuation mismatches can raise red flags upon arrival in Thailand. Align your transaction value based on the Cost, Insurance, and Freight (CIF) basis. Additionally, declaring royalties and assists accurately under WTO valuation standards can mitigate issues.

5. Late Preference Claim

Delays in claiming preferential rates can significantly affect cash flow. It’s best to claim at import where feasible, while also understanding the refund mechanisms if the Most Favored Nation (MFN) rates were applied initially.

6. Document Inconsistency

Discrepancies in documentation, such as the Bill of Lading (B/L), invoices, and CO can lead to verification failures. Maintain a single data spine across all document sets to ensure consistency and accuracy.

Bonus: Investment Protection for the Longer Game

For companies looking to establish plant setups or regional headquarters, the ASEAN Comprehensive Investment Agreement (ACIA) enhances clarity, protection, and facilitation. This investment framework supports long-term strategies alongside tariff optimization efforts, ensuring that businesses can confidently navigate the regional landscape.

Dynamic industrial park fostering regional manufacturing and investment.

Ready to Maximize Your Preferential Duty Benefits?

Understanding and navigating Thailand's ASEAN FTAs and RCEP can significantly impact your bottom line. By building origin-optimization maps that cater to your BOM and supplier footprint, you can effectively leverage preferential duty rates. We offer simulations for ASEAN and RCEP preferences to help illuminate potential savings before finalizing your pricing.

In this increasingly interconnected global economy, capitalizing on available trade agreements is not just advantageous—it's essential.

Engage with Us

Ready to optimize your access to preferential tariffs? Reach out to us today to request your RCEP/ASEAN preference simulation, and make informed business decisions that can save you money.

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