Zero-Tariff Export from Thailand

A Practical Guide for Foreign Investors

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EP 5: Rules of Origin Explained: How Products Qualify for 0% Import Duty

Many foreign investors assume that manufacturing in Thailand automatically qualifies their products for zero-tariff treatment under Free Trade Agreements (FTAs).

This assumption is one of the most common — and costly — misunderstandings.

In reality, zero-tariff eligibility is determined by Rules of Origin, not by factory location alone.

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What Are Rules of Origin?

Rules of Origin (ROO) are the technical criteria used by customs authorities to determine where a product legally “originates.”

They answer one critical question:

Is this product genuinely originating from Thailand under the applicable FTA?

Only products that meet the applicable Rules of Origin can:

• Claim preferential tariff treatment
• Enter destination markets at 0% import duty
• Defend that claim during customs audits

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Why Rules of Origin Matter More Than Any Incentive

Investors often focus on:

• BOI incentives
• Corporate tax benefits
• Factory location

But customs authorities focus on origin.

A project can be:

• Fully licensed
• BOI-promoted
• Operationally sound

…and still lose zero-tariff benefits if origin rules are not met.

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The Three Main Types of Rules of Origin

While details vary by FTA, most Rules of Origin fall into three core categories.

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1. Wholly Obtained (WO)

This rule applies to products that are entirely produced in one country.

Typical examples:

• Agricultural products harvested in Thailand
• Minerals extracted in Thailand

Limitation:
WO rules are simple, but apply to a narrow range of products.

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2. Regional Value Content (RVC)

RVC requires that a minimum percentage of the product’s value be added within Thailand (or FTA partner countries).

Common thresholds:

• 35%
• 40%
• 45%

Depending on the FTA and product.

Key risk:
Imported materials, transfer pricing, and incorrect cost allocation can easily push the product below the required threshold.

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3. Change in Tariff Classification (CTC)

CTC requires that non-originating materials undergo a change in HS code during production.

Examples:

• Change at chapter level (CC)
• Change at heading level (CTH)
• Change at subheading level (CTSH)

This rule focuses on manufacturing transformation, not cost.

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Why Many Products Fail Origin Tests

In practice, origin failures usually occur because:

• Key components are imported without sufficient transformation
• Assembly activities are too minimal
• Value-added calculations are incorrect or unsupported
• HS codes are misclassified
• Documentation does not reflect real operations

These issues are often discovered after exports begin, during customs post-clearance audits.

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Rules of Origin Are FTA-Specific

A critical but overlooked fact:

A product may qualify under one FTA — and fail under another.

Each FTA has:

• Its own ROO rules
• Its own calculation methods
• Its own documentation requirements

This means:

• A structure optimized for ASEAN may not work for Japan
• A product qualifying under RCEP may fail under a bilateral FTA

FTA selection must therefore be designed together with origin planning.

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Origin Is About Substance, Not Paperwork

Customs authorities do not rely solely on certificates.

They assess:

• Actual manufacturing processes
• Sourcing of raw materials
• Cost structures
• Transfer pricing consistency
• Operational substance in Thailand

A Certificate of Origin is evidence — not proof by itself.

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A Common Investor Scenario: “Approved, But Rejected”

It is common to see companies that:

• Receive Certificates of Origin
• Export successfully for months
• Later face customs audits

When origin cannot be substantiated:

• Zero-tariff treatment is revoked
• Back-duties are imposed
• Penalties and interest apply

The risk is retrospective — and often underestimated.

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Strategic Takeaway for Investors

Rules of Origin are not a compliance formality.
They are a structural design issue.

Zero-tariff success requires:

• Origin planning at the investment stage
• Alignment between sourcing, manufacturing, and FTA selection
• Documentation that reflects operational reality

Designing origin after the factory is built is usually too late.

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How BRW Helps Investors Get Origin Right

At BRW, we support foreign investors by:

• Analyzing origin eligibility before investment
• Designing sourcing and manufacturing structures to meet ROO
• Stress-testing RVC and CTC scenarios
• Aligning BOI, FBL, tax, and customs considerations
• Preparing defensible documentation for audits

Rules of Origin do not reward assumptions — they reward preparation.

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At BRW – Boonrawee Co., Ltd., we offer comprehensive legal, business, and property consulting services to support foreign investors and business owners looking to establish and grow in Thailand.

Our services include:

• Helping you understand and comply with Thai property and land ownership laws.
• Company registration and structuring for business and property purposes.
• Applying for BOI or IEAT promotions if land ownership or special privileges are needed.
• Drafting and reviewing land lease agreements to ensure legal protection.
• Finding suitable land or property locations that match your business needs (factory, office, or commercial spaces).
• Advising on site selection for business operations, including industrial estates, office buildings, and commercial zones.
• Providing architectural design and construction services for buildings, offices, and factories, including customized designs to meet specific business requirements.
• Coordinating with professional architects, engineers, and contractors to ensure your building project complies with Thai laws and standards.

📞 Contact BRW today for expert advice and a one-stop solution to establish your business and property in Thailand!