The Thai government joined this trend when it announced in 2015 that it would implement new legislation that controls the export of good related to WMD including dual-use items (DUIs); goods that have a civilian purpose but which can also be used for military ends. This legislation, in the form of the Trade Controls on WMD Act (TCWMD Act), is nearly completed and is expected to come into force beginning of 2019.

What to watch out for in the new legislation?

Goods which the Thai government considers to be DUIs will be subject to strict controls and are required to go through an approval procedure prior to being exported. Specifically, goods classified under the DUI list (List I) would require an export license, while goods which fall under the designated HS code list (List II) would need to be self-certified that they are not a dual-use item.

The exporter will be required to request for a licence or self-certify every shipment. Nonetheless, this Act also provide an opportunity for the exporter who operate the Internal Compliance Programme (ICP), a programme for self-screening and monitoring trade transactions, to apply for an annual export license. During the annual license period, an annual license holder will not be required to request for a licence for every shipment. The annual licence’s application period is expected to begin in September 2018.

For the purpose of DUI classification, an exporter will need to provide details of goods by responding to questionnaires on the e-TCWMD system operated by the Ministry of Commerce. This system will classify whether the goods require an export license, self-certification or such goods are non-DUI items which are not on any of the aforementioned lists. Thus, the details of goods, including the HS code and CAS No. (for chemical products), will play a significant part in classification of dual-use items process. Inputting wrong information may lead to incorrect classification and the consequent risk of non-compliance with the regulations.

The Department of Foreign Trade (DFT) recently announced that they will issue another controlled list that will cover all weapons controlled under the TCWMD Act, the Military list (ML List).

In addition to the mentioned three lists and similar to the European and US regimes, Thailand will also impose catch-all controls. Even though goods destined for export are not mentioned on any of the three lists, they can still be subject to control, if authorities suspect that they will be used in making WMD or for terrorism purposes. The catch-all control obliges exporters to always perform sufficient due diligence on its exports concerning the final use of the goods, the destination, and the recipient. As an exporter, you are required to prove that the goods will not be used for any of the suspected reasons.

The Act will apply to exports, re-exports of goods, as well as transit, transshipments, and transfer of technology. Offshore brokers will also be subject to the obligations if the goods are classified under ML List.

What are the consequences of non-compliance?

In case of non-compliance with the Act, authorities can impose both criminal charges and civil penalties on the exporter. Exporting goods without the proper DUI licence may lead to imprisonment of up to 30 years and fines to a total of Bt30 million or both in case where the goods end up in WMD which cause death. In a worst case scenario for companies, the Thai government has the authority to decide to suspend all export activities of a company.

Contributed by STUART SIMONS, Tax Partner and SUJITRA SUKPANICH, Director, Tax & Legal Services, Deloitte Thailand.

email: ssimons@deloitte.com and ssukpanich@deloitte.com.