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Viewing cable 05BANGKOK1345, Thai Customs Notifies Ports: Zero Percent Duty on
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| Reference ID | Created | Released | Classification | Origin |
|---|---|---|---|---|
| 05BANGKOK1345 | 2005-02-23 10:07 | 2011-08-25 00:00 | UNCLASSIFIED//FOR OFFICIAL USE ONLY | Embassy Bangkok |
This record is a partial extract of the original cable. The full text of the original cable is not available.
UNCLAS SECTION 01 OF 03 BANGKOK 001345
SIPDIS
SENSITIVE
COMMERCE FOR ITA: KBOYD, JBENDER AND JKELLY
STATE PLEASE PASS TO USTR FOR BWEISEL;EBRYAN;DKATZ
DEPT FOR EB AND EAP/BCLTV
E.O. 12958: N/A
TAGS: ETRD ECON TH
SUBJECT: Thai Customs Notifies Ports: Zero Percent Duty on
Diebold's ATM Machines
REF: (A) 04 SECSTATE 162348 (B) 04 BANGKOK 5885 C) 04 BANGKOK
6447
-- SENSITIVE BUT UNCLASSIFIED PLEASE PROTECT ACCORDINGLY --
¶1. (SBU) Summary: Thailand's Customs Department informed
Econoff on February 18 that its November 1 ruling, that ATMs
that dispense cash as a core function are entitled to a zero
percent import tariff under the Information Technology
Agreement (ITA), had been distributed to Thailand's ports in
January. The ruling benefits Diebold, which can expect a
refund within 2-3 months, but is a blow to IBM (which had
d
appealed the earlier Customs ruling) as its cash deposit
machines will be subject to a fifteen percent tariff. This
case highlights Thailand's often protracted and opaque legal
mechanisms, and the need for effective dispute resolution
procedures in our prospective Free Trade Agreement. End
Summary.
¶2. (U) On February 18, Embassy representatives met with the
Customs Department's Mr. Watana U-Thasoonthorn, Director,
Customs Procedures and Valuation Directorate. Econoff
thanked Mr. Watana for his work in resolving the Diebold
automatic teller machine (ATM) case and asked for an update.
(NOTE: In October 2003, Customs had assessed a fifteen
percent duty on Diebold's imported ATMs rather than the zero
percent duty they had previously enjoyed as products under
the WTO's Information Technology Agreement (ITA), deciding
that the machines were not ATMs if they did not carry out all
four functions of an ATM as outlined in the ITA's Harmonized
System Explanatory Notes. Diebold was then required to post
a 15 percent deposit or bond to allow importation, preceding
formally contesting the finding. Diebold sought advocacy
through the USG, while IBM, whose ATM imports were also
affected, appealed the Customs ruling through Royal Thai
Government (RTG) channels. After learning of the case in
July and delivering points in Ref A to Customs in August,
Customs Deputy Director General Manat made emboffs a firm
commitment that Customs would reverse its earlier decision
and "fix this problem." (Ref B). In September DDG Manat
provided emboffs with the Ministry of Finance's (MOF) Fiscal
Policy Office opinion that ATMs without all four functions
are entitled to a tariff exemption under the ITA (Ref C),
saying it paved the way for a swift and favorable ruling by
the Customs Committee on IBM's appeal. However, those
expectations were revealed to be premature, as wrangling
continued within Customs with the influential official who
had made the original determination. Customs then solicited
opinions from Customs officials of other countries, including
the US, on their practices regarding ATMs.)
¶3. (SBU) Director Watana noted that on November 1, 2004 the
Customs Committee ruled that a machine need not carry out all
four functions to be considered an ATM under the ITA, but
that it must dispense money as a core function to benefit
from tariff exemption under the ITA. (NOTE: This ruling
mirrors rulings of U.S. Customs and tariff treatment of ATMs
imported into the U.S.) The ruling benefits Diebold (which
Watana said should receive a refund of the duties paid within
2-3 months) but not IBM, which imports deposit only machines
that are now subject to a 15 percent tariff. Watana further
explained that the Customs Committee ruling had been
circulated in January to both the MOF's Revenue Department
and Customs officials at the ports, removing the appellant's
name (IBM) from those copies in view of privacy issues. At
Econoff's request, Watana provided a Thai language copy of
the November 1 ruling circulated to the ports. Post's
informal translation of the ruling, and the cover letters to
the Revenue Department and Port Customs Bureaus, appears at
the end of this message.
¶4. (SBU) Comment: This outcome is great news for Diebold and
its American workforce. In reviewing the long and winding
road that we have traveled to reach this resolution, we draw
several lessons: first, for U.S. firms encountering customs
problems, there is great efficacy in getting the Embassy
involved early in the process. Second, a thorough
understanding of U.S. tariff treatment is highly desirable,
since Thai authorities pay close attention to -- and not
infrequently emulate -- U.S. practices. Finally, the lack of
transparent procedures reminds us anew of the need for
effective dispute resolution mechanisms in our prospective
FTA. End Comment.
¶7. (SBU) [Begin Text.] Memorandum
From:Standard Procedure and Customs Valuation
Directorate (SPCVD)
Ref:Gor Kor 0519 (Kor)/0056
Date:Jan 14, 2005
Subject:Notification of the Appeal Ruling
To:Deputy Director-General Responsible for Tariff
Collection
1)Background:
In accordance with the Valuation Appeal Committee's ruling
during the 4th/2004 meeting dated November 1, 2004 regarding
the Automatic Depositor Machine (ADM) and Automatic Teller
Machine Cash Dispenser (CD) products, the appeal ruling no.
Gor Or 5/2004/Por 4 (3.2) has been issued.
2)Facts
Currently, importations of said products through various
Customs ports still face many difficulties in Customs
assessment procedures. In order to facilitate this process,
Customs deems it necessary to notify Customs officials of the
appeal ruling on ADM and CD products for appropriate action.
3)SPCVD's Opinion
The SPCVD has agreed that the appeal ruling should be
circulated to the followings Customs agencies dealing with
the importations:
Bangkok Customs Bureau,
Bangkok International Airport Customs Bureau,
reau,
Bangkok Port Customs Bureau,
and Laem Chabang Port Customs Bureau.
For your approval,
Mr. Watana U-Thasoontorn
(signed)
Senior Expert
SPCVD
Copy
From:SPCVD
Ref:Gor Kor 0519 (Gor) 0057-0060
Date:January 14, 2005
Subject:Notification of the Appeal Ruling
To:-Bangkok Customs Bureau
-Bangkok International Airport Customs Bureau
-Bangkok Port Customs Bureau
-Laem Chabang Port Customs Bureau
Please be notified of the appeal ruling of ADM and CD
products, as per the attached ruling. The Deputy Director-
General responsible for tariff collection approved on January
18, 2005 to circulate this appeal ruling to Customs officials
for action.
Please be informed accordingly.
Mr. Watana U-Thasoontorn
(signed)
Senor Expert
SPCVD
The Appeal Ruling
1) The Company [name excised] had appealed to the
Committee on Valuation Appeal as per the attached documents
about 16 imported shipments.
Products: Automatic Depositor Machine (ADM) and
s: Automatic Depositor Machine (ADM) and
Automatic Teller Machine Cash Dispenser (CD)
Meeting date:4th /2004, dated November 1, 2004
Issue:Shall the products be qualified for duty-free
treatment under the WTO-ITA?
Fact
The Company [name excised] as the Appellant has declared its
16 shipments of imported Cash Deposit Machines and Cash
Dispenser Machines to be classified in sub-heading 8472.90
for tariff exemption, as stated in the Finance Ministerial
Notification for tariff exemption and reduction (Tor Sor 3)
dated December 28, 2001.
Customs officials had decided that ATMs with tariff exemption
under the Ministerial Notification (Tor Sor 3) dated December
28, 2001 must have all 4 functions, namely: deposit,
withdrawal, transfer, and checking balances; a machine
missing any one of these functions would not be entitled to
tariff exemption.
2)The Appeal Committee rules as follows,
ATMs classified under sub-heading 8472.90 of Finance
Ministerial Notification dated December 28, 2004 regarding
ing
tariff exemption and reduction (Tor Sor 3), which is in
compliance with the Information Technology Agreement (ITA),
explains that the ATM machine must have Cash Dispensing as
the main function, and such machine may or may not include
the other functions.
Rationale
Originally, the imported ATMs with 4 functions, namely
deposit, withdrawal, transfer, and checking balances, which
was classified in sub-heading 8472.90 and listed under the
Information Technology Agreement (ITA) products with tariff
exemption under the Finance Ministerial Notification No. Sor
Gor 21/1999 (Tor Sor 1) dated December 29, 1999, enforced on
January 1, 2000, and the Finance Ministerial Notification
(Tor Sor 3) dated December 28, 2001, enforced on January 1,
2002, has been classified in:
Sub-heading 8472.90 only the Automatic Teller Machines
(ATMs) are treated as tariff exempt.
Later on, the similar imported machines classified in sub-
heading 8472.90 did not have all 4 functions, as the
separation of the withdrawal and deposit functions provides
faster service to users. Therefore, the tariff assessments
were questioned as to whether a machine without all 4
functions should be classified as an ATM under the Finance
Ministerial Notification dated December 28, 2001 regarding
tariff exemption and reduction (Tor Sor 3), or not.
In reviewing the explanatory notes of the Harmonization
System 2002 or EN/HS 2002, which defines Automatic teller
machines as "machines with which customers deposit, draw and
transfer money and see the balances of their accounts without
direct contact with bank personnel," the problem has emerged
as to whether the ATMs must have all 4 functions or not.
In the Appeal Committee's review, considering information
gathered from such sources as its own technical research, the
explanation of ITA members namely: USA, Canada, Japan,
Malaysia and Indonesia, and also from the explanation of the
WCO (World Customs Organization), has found that ATMs do not
need to have all 4 functions. But, the machine must have the
withdrawal function (cash dispensing) as a core function,
while the other functions, such as deposit, transfer and
checking balances need not be included in that machine.
Therefore, the Appeal Committee has determined accordingly.
3)The Appeal Committee and the Appellant will each receive
a copy of the appeal ruling. The Appellant has the right to
appeal the ruling to the court within 30 days from the date
of receiving the appeal ruling.
[End Text.]
Boyce