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05BANGKOK1345 Thai Customs Notifies Ports: Zero Percent Duty on Diebold’s ATM Machines

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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

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Written by thaicables

August 26, 2011 at 5:35 am

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