28 November, 2015
It is common for Thai Customs Department officials to audit companies that import or export goods into or out of the Kingdom. The audits are generally random, and they almost always include a surprise inspection. Importers are rarely informed in advance of an audit by customs officials.
During a customs audit, importers or exporters (companies) that import or export highly-regulated products, such as chemicals and other raw materials, may be subject to increased scrutiny. The audits are conducted to ensure that the companies are in compliance with Thai law, and they are not necessarily indicative of suspected wrongdoing.
Many companies do not understand the audit procedure and how the audit results can impact a business. For the
"Companies’ directors, officers, and other management-level employees are presumed to be personally liable for any violations of the Customs Act. Punishments range from fines to imprisonment, depending on the nature of the violation".
Companies, knowing the customs procedures is important, because customs violations are a criminal offense and can result in personal criminal liability.
In order to shed light on these issues, this article will explain the customs audit process and how they are resolved under the law.
Preliminary Steps
There are certain steps that are undertaken before an audit is launched. Initially, an official from the Customs Depart- ment will assign customs personnel to conduct the audit of a specific business or in a particular geographic area. Afterward, the Customs Department will ask the court to issue a search warrant.
At this stage, the court will only review the reasons for the request and the supporting documents used by the customs officials to ask the court to issue the warrant. The officials will then conduct the audit in accordance with the warrant.
The Audit
If the officials who are conducting the inspection find any suspicious documents or evidence during the audit, they have the authority to seize them. The officers will put any suspicious documents and evidence into a box with a special Customs Department seal. The companies’ representatives must sign on the seal.
In addition to seizing evidence, the officials have the authority to order the companies to deliver documents to the Customs Department by a specified deadline. Further, the officials can ask the companies’ representatives to provide verbal or written statements on suspect import transactions and documents. Again, the statements must be submitted by a deadline set by the officials.
The Customs Department will review and evaluate all of the evidence, including the witness statements. Based on the evidence, the customs officials will determine whether the companies committed a violation of the Customs Act. If the officials determine that the companies committed a violation, they will issue an order to criminally prosecute the companies.
Violations under the Customs Act
Importantly, companies’ directors, officers, and other management-level employees are presumed to be person- ally liable for any violations of the Customs Act. Punish- ments range from fines to imprisonment, depending on the nature of the violation.
Managers can successfully defend against the charges by proving that the offense was committed without their knowledge or consent.
They can also argue that they acted reasonably in preventing the offense. In addition, the presumption of liability is unconstitutional and should be argued as well in a criminal customs defense.
Not all violations of the Customs Act must be resolved by criminal proceedings in court. Several offenses under the Act can be directly resolved by the Director-General of the Customs Department. For these offenses, the Director-General has authority to waive the prosecution.
To resolve the violation without court action, the alleged violator must admit guilt and pay a fine, or alternatively, sign a settlement agreement or bond or post security as the Director-General deems fit. The waiver also indemnifies the violator against any further prosecution on account of the offense.
If the violator admits guilt and pays a fine to waive prosecution, the alleged violator is prohibited from submitting a civil claim against the Customs Department. This applies even if the alleged violator reserved the right to later object to the Customs Department’s order.
If the offense is not resolved through this method, the case is sent to a police inquiry official and a public prosecu- tor for review. The authorities will then review the case to determine whether to prosecute. Decisions are made on a case-by-case basis.
Prescription Periods
The prescription period for prosecuting a criminal customs case varies from 1 year to 15 years, depending on the charge, as each charge carries different criminal penalties.
For example, the criminal prescription period for a charge of importing any goods with unpaid tax or duty is 15 years from the date that the offender imported the goods, and the civil prescription period for an incorrect tax and duty calculation is 2 years.
In general, the tax and duty liability on imported goods is incurred when the importation is completed. Therefore, the prescription period is also triggered when the importa- tion is completed.
Understanding the audit procedure, how audit results can impact a business, and the customs procedures are centrally important, as violating the Customs Act may lead to severe ramifications. With an astute approach, compa- nies can avoid potentially disastrous results.
For further information, please contact:
Chusert Supasitthumrong, Partner, Tilleke & Gibbins
chusert.s@tilleke.com
