Keep on track of trading controls on dual-use items

Economy May 09, 2017 01:00


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PREPARE EARLY to avoid embarrassing disruptions to your supply chain (or worse).

As terrorism becomes an unfortunate reality of modern day life, concerns over global safety and security have significantly increased. In preventing terrorism attacks, governments worldwide are making considerable efforts to observe and control weapons including proliferation of weapons, especially weapons of mass destruction (WMD); nuclear, radiological, chemical, biological weapons.

Apart from control over WMD, many countries attempt to exert control over the first process of WMD supply chain by controlling raw materials and tools which may be used in supporting WMD or manufacturing of such weapons. A common element of this control is on export of dual-use items. These are products or technologies which are normally used for civilian or commercial purposes, but can also be used as WMD or as a material for developing, producing, or supporting WMD.

The Thai government, to be in line with the United Nations Security Council Resolution No 1540, is drafting laws on export control of WMD and dual-use items which are expected to be effective in January 2018. 

In late 2015, the Ministry of Commerce (MOC) announced the dual-use Items list (List one) and HS Code list (List two) to stipulate the export products which are controlled. Goods in List one require an export licence before they can be exported whilst an exporter of goods in list two must first self-certify that the product is not a dual-use item before exportation.

Although export controls may seem to be complicated and provide an additional compliance burden to many types of export business, the MOC has introduced a new system to support exporters called e-Trade Management of dual-use Items (e-TMD). Through e-TMD, exporters are able to determine whether goods are dual-use items or not. If subject to the rules, then the system provides for the exporter to obtain the DUI Export License for list one goods or self-certify for the list two goods. Exporters can now try out the trial version of e-TMD online.

This system is expected to be fully launched before Thailand’s regulation on export control of WMD and dual-use items come into effect in January 2018.

Even though, controlled lists have already been announced and the trial version of e-TMD has been launched, Trade Controls of Weapons of Mass Destruction Act (TCWMD Act), Thailand’s regulation on export control of WMD and dual-use items, is still in the legislative process. After the Thai government provided approval in principal for the draft regulations in late 2016, the draft is now under review and amendment by the Office of Council of State. The draft is expected to pass all legislative process later this year.

Failing to comply with these regulations once they become effective in 2018, for example, attempting to export goods under List two without self-certifying through e-TMD, may result in the exporter facing obstacles in exporting goods (ie cannot export such goods until performing self-certification).

Where an exporter exports DUI without proper DUI export license, such exporter may be subject to significant fine or imprisonment or both. Moreover, if the illegally exported DUI goods are used in terrorism activity whether used as a raw material, supporting tools, or other activities for developing WMD, the exporter may be subjected to imprisonment up to 22 years or a fine up to Bt22 million, or both. Also, if this WMD is a cause of death, the exporter may be subjected to life imprisonment, or 30 years imprisonment including a fine up to Bt50 million.

Whilst the regulations are still being drafted, exporters should still start preparations for their potential impact on the business. The list of controlled goods is already available and exporters should assess to what extent goods they export will be impacted. This would include starting to familiarize themselves with the e-TMD. 

An export control regime may be an added compliance burden for exporters, but ultimately it will make society safer and more secure. 

Co-written by STUART SIMONS, tax partner and SUJITRA SUKPANICH, director, tax and legal services, Deloitte.