Thai industry jittery over US tariff rules

Manufacturers apprehensive as they adapt to new international trade landscape, writes Lamonphet Apisitniran

- Lamonphet Apisitniran

Thailand's manufacturing sector is struggling to deal with challenges raised by US tariff rules on Thai imports, even as the rate was cut significantly in early August.

Washington decided to impose a 19% duty on Thai products in August, replacing its draconian rate of 36%. Yet exporters risk facing higher rates on some products if the items are considered by US authorities as being shipped to Thailand and then reexported to America, often called transshipment.

Transshipment and dim prospects for exports are making manufacturers apprehensive as they attempt to overcome challenges this year and in the long term in their adaptation to new international trade rules.

HIGHER RVC

Thailand is expected to raise regional value content (RVC) to around 50% once ongoing US-Thailand negotiations to address transshipment are concluded, according to the Joint Standing Committee on Commerce, Industry and Banking (JSCCIB).

RVC is the percentage of a product's value that comes from a specific region. If the RVC of a product assembled in Thailand for export to the US is 50%, half of its value is calculated from domestically sourced raw materials, while the latter half comes from imported parts.

The proportional calculation is meant to tackle origin fraud and curb the reexport of Chinese goods as Thai products.

"If Thailand fails to meet the RVC requirement, the US will impose a 40% tariff on products regarded as being shipped via Thailand to the US," said Kriengkrai Thiennukul, chairman of the Federation of Thai Industries (FTI), a key member of the JSCCIB.