Revised Production Processes for Duty-Free and Free Trade Zones in Thailand

In a recent announcement, effective from December 28, 2023, the Office of Industrial Economics has provided crucial updates to the production processes essential for goods in duty-free zones,as per the law on customs or in free trade zones under the jurisdiction of the Industrial Estate Authority of Thailand. This announcement, dated February 4, 2022, includes amendments aimed at refining the criteria for production processes integral to customs duty-free zones or free trade zones.

Background:

The need for these amendments arises from the continuous evolution of industries and the dynamic landscape of international trade. Recognizing this, the Office of Industrial Economics has deemed it necessary to make additional adjustments to specify the production processes that are considered essential in duty-free zones, as outlined by the customs law or in free trade zones according to the law on industrial estates.

Key Amendments:

1.  Cancellation of Essential Production Process: The announcement cancels the essential production process for goods in duty-free zones under group 16, specifically focusing on the Automotive Industry and Parts, section 30 related to batteries. The new directive replaces the previous section with a revised version, aligning with the current industry standards and regulations.
2.  Addition of Essential Production Process: New production processes deemed essential for goods in duty-free zones have been added to group 16, Automotive and Parts Industry. These additions are detailed in sections 35 and 36, providing comprehensive information to facilitate adherence to the updated regulations.
3.  Specification of Production Process for Battery Electric Cars:The announcement places a special emphasis on the production processes essential for battery electric cars, particularly in response to the Ministry of Finance’s exemption of customs duties for assembled or produced battery electric cars in duty-free zones or free trade zones. The specifications for electric vehicles (Battery Electric Vehicles: BEV) are outlined in Group 16, Automotive Industry and Parts, section 1. This includes passenger cars, pickup trucks, vans, plug-in hybrid electric vehicles (PHEV), and electric cars (BEV).

These amendments and specifications are expected to enhance clarity and compliance within the industries operating in duty-free zones and free trade zones, contributing to the overall efficiency and competitiveness of the businesses involved. The Office of Industrial Economics remains committed to fostering a conducive business environment and adapting regulations to meet the ever-changing demands of the global market.

Insights into Essential Production Processes

Details outlining the essential production process for goods in a duty-free zone, in accordance with customs law, or in a free trade zone, as per the law on the Industrial Estate Authority of Thailand, are provided in the attached announcement from the Office of Industrial Economics (see below). The subject of this announcement pertains to the production process deemed essential for goods in duty-free zones, as specified by the law on customs or in a free operating zone, as outlined by the law on the Industrial Estate Authority of Thailand (No. 3).

Product: 30. Batteries

1.  Before January 2025, the essential production process must include:

1.1   Packing batteries (Pack Assembly) and

1.2   Quality inspection

2.  Starting from January 1, 2025, it must undergo one of the following essential production processes:

2.1   Case 1

1) Module Production

2) Packing batteries (Pack Assembly) and

3) Quality inspection

2.2   Case 2

1) Bringing cells (Cell) to produce Battery Pack and

2) Quality inspection

Notes:
1. Module production involves the assembly of battery cells connected by an electrical bridge and management system.
2. Bringing cells to produce a Battery Pack includes connecting battery cells with an electric bridge and assembling them with other sub-assemblies to form a Battery Pack for a car.
3. Packing the battery (Pack Assembly) is the assembly of battery modules with other sub-assemblies for the final vehicle assembly.
4. Quality inspection involves assessing usability features and safety.
5. For the essential production process of battery electric cars, exemptions from customs duties, as per the Ministry of Finance announcement, will not be applicable if the battery does not undergo either the essential production process specified in article 2.1 or article 2.2.

Product: 35. Passenger Cars

The processing for the production of passenger cars (ICE, HEV, PHEV, BEV) must go through the following essential production processes:

1.  For the production of up to 4,500 vehicles per year:

1.1   Case 1 for ICE/HEV passenger cars

1) Body production

2) Body painting

3) Assembly

4) Quality inspection

1.2   Case 2 for PHEV/BEV passenger cars

1) Battery production

2) Assembly

3) Quality inspection

2.  For the production of more than 4,500 vehicles per year:

2.1   For ICE/HEV/PHEV/BEV passenger cars, at least 4,500 cars per year must go through:

2.1.1 Battery production for PHEV (or at least 2,250 BEV cars per year)

2.1.2 Body production and body painting for all passenger car types

2.1.3 Assembly

2.1.4 Quality inspection

2.2   For the production in excess of 4,500 cars per year, essential production involves at least assembly and quality inspection.

2.3   Within the first year of production, BEV cars must be produced. From the second year onwards, there must be production of not less than 500 BEV passenger cars per year, requiring essential production processes, namely assembly and quality inspection.

Notes:
1. Body production involves the assembly of a body from unpainted parts, such as welding.
2. Body painting is the application of paint to the assembled body for corrosion prevention or aesthetic purposes.
3. Assembly involves fitting car components onto the painted body, including powertrain installation and wiring harness connection.
4. Quality inspection is the final check for safety and proper functioning of vehicle systems.
5. Battery production must undergo a crucial manufacturing process in the Automotive and Parts, Section 30.

Product: 36. Battery Electric Vehicles (BEV) from Vehicle Structure

The production of BEV cars created from the Vehicle Structure designed specifically for BEV cars must undergo the following essential production processes:

1.  For up to 10,000 units within 5 years:

1.1   Vehicle Structure manufacturing

1.2   Body painting

1.3   Assembly

1.4   Battery production, at least at the battery pack assembly level

1.5   Quality inspection

2.  Exceeding 10,000 units within 5 years:

2.1   For at least 10,000 units within 5 years, follow essential manufacturing processes as per point 1. Additionally, BEV cars produced from the Vehicle Structure must undergo crucial manufacturing processes as per point 1 every year from year 1 to year 5.

2.2   For units exceeding 10,000 within 5 years, mandatory crucial manufacturing processes, including assembly and quality inspection.

Notes:
1. Vehicle Structure production involves the assembly of body components in the structural section, excluding additional automotive parts added later.
2. Chassis painting is the process of applying paint to the assembled body chassis for corrosion prevention or aesthetic purposes.
3. Assembly involves fitting car components into the painted body, including powertrain and transmission systems, and connecting the wiring harness.
4. Quality inspection is the final check, including examining equipment for safety and verifying the car’s operational systems.