(Last updated: 2 Nov 2011)

Business etiquette

Business tips

You should prepare for your visit by undertaking some reading on business practices and styles of negotiations. This will help to set you up for success. While books of this kind may not be easily found in Australia they are readily available in the major bookshops in Thailand or from online services.

Relationship building is an essential factor if you are to succeed in doing business in Thailand.

Relating to business contacts is considered more important than doing business in Thailand and maintaining a good profile or image is of paramount importance to Thais. Social engagements play an important role in developing trust. For this reason sending the same person to the market and undertaking busines each time is essential. But it is important that others are briefed in detail in case that person leaves the position or company.

Business cards are always presented, preferably with a Thai language version printed on one side of the card.

In general, Thai business people tend to follow a formal dress code. In business meetings a business shirt, tie and proper footwear (not sandals) are essential for men. Casual wear should not be worn to business meetings. For men we recommend 100% cotton white shirts as these generally show less perspiration! Singlets or T-shirts under the shirt while appearing to be hot do absorb moisture which in itself helps cool the body. For women, stockings are not common but acceptable if you prefer to wear them.

In order to avoid offending you Thais often will not admit that they do not understand what has been said. This can be both frustrating and deleterious for business. There is also the vexing problem where politeness also means a Thai person is unable to say, ‘No’. Foreign business people may leave a meeting thinking they have achieved an agreement only to become perplexed when nothing further happens. Therefore it is advisable to have an interpreter to ensure that as far as possible effective communication takes place. Translating language is one thing – the meaning is another thing altogether!

Hierarchy and seniority are important and senior officials and business people will most likely expect to meet Australian representatives in similar positions, not their juniors. All correspondence should be addressed to the most senior person.

Thais respond well to bargaining and negotiating. This shows flexibility and a willingness to accommodate business partners. Business acumen may be judged by the ability to bargain and reach what they consider a fair deal. Sometimes the agreement may change between the negotiation and the final signing of the agreement.

The exchange of gifts is widely practised in business in Thailand and should be reciprocated. Gifts are given to those visited for the first time and signify friendship and an appreciation of hospitality. Gifts are opened in privacy, not when received. Gifts do not need to be expensive but a generosity of spirit will help build a strong relationship with your partners.

Khun (pronounced koon, as in look) is Thai for Mr, Mrs, Ms or Miss. Thais use a person's first (given) name so you preface the given name (not the family name) with Khun. For example: Khun Somporn, Khun Mallee, or in a Western context Khun Jim, not Khun Smith. Most Thais also have a nickname which they use in place of the given name. When corresponding it is important to use the correct given name but this is not so important in casual conversation if you have been introduced by the nickname.

The correct form of greeting is the wai, which is performed by placing the palms of the hands together, raising them to the face with the fingertips at eye level and inclining the head slightly.

There is great formality in the wai and the level at which the hands are placed have a great significance. Foreign business people are not expected to initiate a wai or even return it – a simple smile and a nod of acknowledgement is acceptable, but it may be appropriate to return a wai when you are a little more familiar with the tradition.

Please also note: Bribery of foreign public officials is a crime. Australian individuals and companies can be prosecuted in Australia for bribing foreign officials when overseas. For more information, go to the Attorney General's Department on foreign bribery.

Tariffs and non-tariff barriers

Tariff

Thailand has a two-column tariff based on the Harmonised System. Preferential rates are accorded selective imports from other ASEAN countries. Australian exporters enjoy preferential tariff rates on many goods. You can download the tariff schedule from the Australian Government Free Trade Agreement website. Tariff duties on goods are levied on numerous import items and on an ad valorem or a specific rate basis, whichever is higher. Suppliers or manufacturers invoices generally determine cost values and quantities. The customs authority, however, have the right to reassess the value of goods found to be valued manifestly lower than the market.

The majority of imported articles are subject to two different taxes: tariff duty and Value Added Tax (VAT). Tariff duty is computed by multiplying the CIF value of the goods by the duty rate. This is added to the value of the goods to determine a final tax. VAT is then levied on the total sum of the CIF value, duty and excise tax, if any. Goods imported for re-export are generally exempt from import duty and VAT.

Australian exporters should contact the Royal Thai Customs Department for information on quotas on goods imported to Thailand. Tradewatch, prepared by the Department of Foreign Affairs and Trade, tracks new developments in trade with Thailand, particularly tariff reduction on goods.

Customs authority contact details:

Director General - Department of Customs
Ministry of Finance
Sunthornkosa Road
Klong-Toey
Bangkok 10110
Tel: +66 2 249 0431
Fax: +66 2 249 2874

Non-tariff barriers

Import restrictions

Although most products are freely transportable within Thailand provided import duties are paid there are import restrictions on some products and Australian exporters are required to check these with the Thai Ministry of Commerce prior to exporting.

The control of the import, marketing, distribution and sale of products is shared between a number of government bodies including the Food and Drug Administration (FDA), the Customs Department, the Ministry of Agriculture and the Ministry of Commerce.

The Ministry of Commerce designates classes of goods that are subject to import controls which usually takes the form of permission and licensing.

Please ensure you investigate thoroughly the regulations governing your business.

Product certification, labelling and packaging

Labelling

Strict requirements governing the labelling of dairy foods, baby foods, canned foods, vinegar, beverages, edible oil and fats, and gourmet powder (defined as an article containing monosodium glutamate (MSG) and used for food seasoning) must be met.

Food products must be approved and registered with the Food and Drug Administration (FDA). When seeking registration importers must supply two samples of each product, details of the exact composition by percentage of each ingredient, and six labels. Foodstuffs in sealed containers are subject to specific regulations.

Food products imported into Thailand must be labelled in Thai displaying specific information. General requirements for labelling food products must display the following information for consumers:

• Name and brand of the product (both generic and trade)
• Registration number
• Name and address of the manufacturer
• Name and address of the importer
• Date of manufacturing and expiry
• Net weight and volume
• Any additives used
• Health and nutritional claims (if any)

For other processed food standards, contact the Thai National Food Institute.

Labels for alcoholic beverages must advise the percentage of alcohol content. There must also be a health warning, printed in Thai, on the label or on a sticker, with specific wording.

Specific regulations govern the labelling on cosmetic products.

Labelling must indicate in the Thai language:

• The name and type of the product
• The name of manufacturer and address
• Directions for use
• Net contents
• A statement of caution if irregular use may cause injury

Generally a local agent / importer can help get a product registered and ensure labelling requirements are met.

Packaging

Packing should be secure and able to stand extreme heat and humidity. Consideration should also be for possible storage in the open. As merchandise may be landed in Thai ports from open lighters waterproof packing should be used where necessary. The use of hay and straw should be avoided.

Special certificates

Certain types of seeds, plants and animals require phytosanitary certificates issued by the approved authority in the country of origin. In Australia this is usually the Australian Quarantine and Inspection Service, Commonwealth Department of Agriculture, Fisheries and Forestry - Australia or the relevant state department of agriculture.

Meat imports must be accompanied by a veterinary health certificate signed by the official authority in the country of origin certifying:

• That the country of origin has been free from endemic diseases for the specified period
• The animal has been processed in an approved establishment in sanitary conditions under constant veterinary supervision
• The products are fit for human consumption and do not contain preservatives, additives or other substances in quantities harmful to human health
• They have not been stored for more than three months (the date of processing or packing must be stated)

Exporters of pharmaceutical and medicinal products may be requested to provide a Certificate of Free Sale before shipment will be allowed. One copy of the supplier's certificate is required. This certificate may be obtained upon application to:

The Director
Export Controls Section
Therapeutic Goods Administration
Department of Human Services and Health
PO Box 9848
Canberra City ACT 2601

Methods of quoting and payment

Quotes are usually on CIF (Incoterms 1990) basis in Thai baht, Australian dollars, US dollars, Pound Sterling or any other currency. Thai baht and US dollars are preferred. Initial transactions should be by confirmed irrevocable letter of credit only. The validity period is usually nine months.

Documentary requirements

Pro-forma invoice

This is required for establishment of letter of credit, and should include similar details to the commercial invoice.

Commercial invoice

There is no prescribed form but very precise details are obligatory. A minimum of five copies is needed.

Required details include:

• Country of origin
• Country or countries from which purchased and consigned
• Date of purchase and sale - whether goods are sold, contracted to be sold, sent on consignment or supplied to branch firm
• Kinds of packages (crates, drums, bundles etc.)
• Marks, numbers, gross and net weight of each package and total gross weight of consignment
• Total number of packages and number containing identical goods
• Complete description of goods, i.e. name, kind, quality and weight, size and/or grade of each item (for composite articles, show ratio of constituents), trademarks and other symbols
• Selling price or value per unit (in currency of transaction)
• Any other charges, including export bonus or subsidy, discounts, packing, insurance, freight, commission, etc

Bill of lading/Airway bill

Two copies are required and must include:

• Number of shipper
• Ultimate and any intermediate consignees
• Markings and numbers of packages
• Any other details specified by importer
• Certificate of insurance
• A minimum of five copies is required

Packing list

A minimum of five copies is required, and must accompany each invoice if goods are packed in more than one case.

Certificate of origin

If requested, a Certificate of Origin must be issued by an approved authority. A Certificate of Origin is required for Australian goods seeking preferential tariffs under the Thai Australian Free Trade Agreement. See the Australian Government’s Free Trade Agreement website for full details, and when to secure a certificate of origin for your goods to access the special tariff rates.

Public health requirements

Preserved foodstuffs must be registered prior to importation with the Food and Drug Administration, Ministry of Public Health. When seeking registration, importers must supply two samples of each product, details of exact composition by percentage of each ingredient, and six labels.

Gourmet powder (see 'Packing, marking and labelling') is subject to strict quality and standard controls. Dulcin (p-Phenetolcarbamide), cyclamic acid and its salts and foods containing dulcin or cyclamic acid and its salts are prohibited imports.

Medicinal and similar products are strictly controlled by the same division (see also 'Special certificates' below).

Imports of meat must be accompanied by a sanitary certificate and subject to approval from the Department of Livestock Development, Ministry of Agriculture and Cooperatives.

Dairy foods are subject to specific regulations regarding quality or standard, labelling and existing quota. Documentation required includes:

• Pro-forma invoice
• Commercial invoice
• Certificate of origin
• Bill of lading
• Certificate of insurance
• Packing list
• Special certificates

Original copies must be manually signed.

Insurance

Normal commercial practice.

Weights and measures

The metric system.

Taxation

Many firms with Australian connections offer excellent and detailed guides for establishing a business in Thailand.

Most forms of business organisations existing under Thai law, including foreign organisations conducting business in Thailand or deriving income from Thailand, whether they do business in Thailand or not, are subject to corporate income tax on their book profits adjusted for tax purposes. Capital gains are treated as ordinary income and are therefore subject to corporate income tax.

A Value Added Tax (VAT) of seven per cent is applied to all stages of production of goods.

There are two exceptions to the obligation to pay customs duties on importation of machinery, equipment and materials. These are oil and gas concessionaries and their contractors, and certain companies promoted by Board of Investment of Thailand.

A uniform tax rate of 30 per cent is levied on all companies.