New Crossborder Regulation in Thailand to Impact Cosmetic and Dietary Supplement Shipments
Background – Can a Small Lovely Puppet Made in China Change the Regulatory Landscape in Thailand?
By “vox populi,” the answer is yes. The commercial boom of the famous “Labubu,” sold in tens of thousands via cross-border trade from China, has caught the attention of the Thai Customs Department. Starting June 19, 2024, all products entering Thailand, regardless of value, will be subject to VAT. This will necessitate the inspection of ALL packages entering the kingdom.
During these inspections, customs officials may discover the lack of necessary health authorizations for cosmetics and dietary supplements, which are currently imported in large quantities without proper licensing. This oversight has undermined the efforts and investments of compliant manufacturers by allowing irregular competition.
In a significant regulatory shift, the Thai government has announced new measures that will affect crossborder regulation in Thailand, particularly concerning cosmetic and dietary supplement shipments. Effective immediately and lasting until December 31, 2024, all imported goods, regardless of value, will be subject to value-added tax (VAT). This change primarily targets shipments lacking prior FDA approval, which constitutes the majority (99%) of cases in these categories.
Key Changes in Crossborder Regulation in Thailand
The Thai Cabinet has approved a new policy mandating that all imported goods, including those valued as low as 1 Baht, will incur VAT. This update replaces the previous exemption for items valued below 1,500 Baht, established in 2018. The new measure aims to address unfair competition between foreign sellers, who previously benefited from tax exemptions, and domestic sellers, who did not.
Implications for Cosmetic and Dietary Supplement Shipments
One of the most affected sectors by this crossborder regulation in Thailand will be the import of cosmetics and dietary supplements. These products frequently enter the country without FDA approval or proper licensing, leading to significant regulatory scrutiny under the new guidelines. As a result, all shipments in these categories will now be thoroughly checked for compliance and tax obligations.
The increased regulatory oversight is expected to lead to the seizure of many shipments that do not meet the new standards. Importers will need to ensure that their products have the necessary FDA notifications and licenses to avoid these penalties. The implementation of this regulation underscores the government’s commitment to enforcing stricter compliance and protecting local businesses.
Crossborder Regulation in Thailand: Enforcement and Compliance
The Thai Ministry of Finance has been tasked with issuing the necessary decrees to enforce this new VAT policy. Once published in the Royal Gazette, the regulations will take effect 15 days later and remain in place until the end of 2024. This temporary measure will be evaluated to determine its effectiveness and potential long-term application.
The new crossborder regulation in Thailand is part of a broader government initiative to create a fairer market environment. By eliminating tax exemptions for low-value imports, the government aims to level the playing field for domestic producers and sellers.
Impact on Businesses and Consumers
For businesses involved in the import of cosmetics and dietary supplements, this new regulation will necessitate changes in their operational and compliance strategies. Companies will need to navigate the complexities of obtaining FDA approvals and ensuring that all products meet Thai regulatory standards before shipment.
Consumers, on the other hand, may see a reduction in the availability of certain imported products, particularly those that previously entered the market without proper oversight. This could lead to a shift in consumer behavior, with a potential increase in demand for locally produced alternatives that comply with Thai regulations.
Preparing for the New Regulatory Environment
To adapt to the new crossborder regulation in Thailand, importers should:
- Secure FDA Approvals: Ensure all cosmetic and dietary supplement products have the necessary FDA notifications and licenses before shipment.
- Stay Informed: Keep up-to-date with regulatory changes and compliance requirements to avoid penalties and seizures.
- Adjust Pricing Strategies: Factor in the additional VAT costs when pricing products for the Thai market.
The introduction of this stringent crossborder regulation in Thailand marks a significant shift in the import landscape. Businesses must promptly adjust to these changes to maintain compliance and avoid disruptions in their supply chains. As the government continues to refine its approach, staying informed and proactive will be key to navigating this evolving regulatory environment.
