US embassy cable - 05BANGKOK1345

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, Customs Issues 
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