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Practice after being Investment Promotion

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Raw Materials

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investment incentivePrivileges Utilization


1. The scope of raw and essential materials eligible for import duty exemption
Raw materials refer to items used in the production, mixing, or assembly of products, including those used for packaging the products.
Essential materials refer to items that are necessary for production or mixing or assembling into products or outputs, which are consumed in the process. These materials are crucial for achieving efficiency, quality, and standards, helping to reduce waste and increase productivity for the respective products or outputs.

2. Overview of import duty exemption for raw materials used in export products (Section 36)
1. Approval of raw materials must be obtained prior to exercising the rights.
2. Imports of raw materials must be made within a specified period of duty exemption.
3. Raw materials must be used for production intended for export
4. Production must take place in the factory of the promoted company.
5. Raw materials that cannot be used for export products are subject to duty obligations.



3. Extension of import duty exemption period for raw materials under Section 36
The import duty exemption for raw materials under Section 36 will be counted from the date the right is first exercised. Once the exemption period has ended, the company can apply for an extension. However, the company must use the rights correctly and appropriately, such as by regularly importing, exporting, and accounting for materials. Extensions can be granted for periods of one to two years, based on the following criteria:
1. Extensions can be requested no more than three months before the end of the current exemption period, but not exceeding six months from the end date of the raw material import period.
2. Applications must be submitted through the BOI’s raw material import extension system, with extensions granted for a maximum of two years at a time.
3. Projects seeking an extension must submit export documentation for products that have been exported for over one year (from the date of application for extension) to finalize the adjustment of the raw materials account balance before approval. If the necessary actions are not taken within six months from the date of application, the Office will not approve the extension.

4. Production formula
The production formula formula specifies which raw materials are used to produce each type/model of product, as well as the quantity required for each type. This is to be submitted to the Office for approval of the raw materials, detailing the quantity needed for the production of each product type, in order to deduct the raw materials from the approved stock levels.

5. Maximum stock
Maximum stock (Max Stock) is a record that specifies the list of raw materials and the maximum quantity of each type of raw material that can be imported for production. For example, Chemical A can be imported up to a maximum of 200 tons, and Chemical B can be imported up to a maximum of 500 tons. The approval of raw materials and quantities is based on the production needs outlined in the Investment Promotion Certificate for a period of four months.
The types of maximum stock are divided into a “circulating account” and “the maximum import quantity”.
The “circulating account” means that when the company imports each type of raw material, the Office will record it in this account. When it is exported, it will be deducted from the account, creating space for additional imports. For example, when Chemical A is imported up to the maximum of 200 tons and then used for production and exported (and the account is adjusted) 50 tons, the remaining quantity in the account will be 200 – 50 = 150 tons.
The “maximum import quantity (Max Import)” will be approved by the Office and will be set as the maximum stock level. When the company imports, the import quantity will be recorded, and the company will not be able to import further, even if there are exports. The company must complete a summary of raw material usage before it can request stock quantities for the next period.
Typically, the Office allows the approval of Max Stock sufficiently for four months of production per cycle to encourage exports and facilitate proper account adjustments.

6. Raw material inventory account
The raw material inventory account is the account of raw materials at the maximum stock quantity (Max Stock) approved by the Office for the company. The names for the raw materials used in this inventory include both primary names (commonly used names) as well as the secondary names (for example, trade names which may vary on different invoices used for import). Proper management of this account facilitates the import process for each cycle, as sometimes the received raw materials may have complex names and specifications. Therefore, obtaining approval for the secondary names and coordinating with suppliers is crucial for successful imports.

Example

Primary Name

Secondary Name

Description

Powder detergent

Breeze

Powder detergent is used for washing clothes.

Omo

Powder detergent is used for washing clothes.

Remote control

Remote

Remote control

TV Remote

TV Remote control

Remote TV

Remote control TV
Maximum stock quantity example (Max Stock)

Primary Name

Secondary Name

Description

Max Stock Quantity

Powder Detergent

Breeze

Powder detergent is used for washing clothes.

10,000

Omo

Powder detergent is used for washing clothes.

Remote control

Remote

Remote control

10,000

TV Remote

TV remote control

Remote TV

Remote control TV

7. Release of raw materials
Once the company has received approval for the production formula and the maximum stock, it can start requesting approval to release raw materials. This allows the Office to issue a letter to the Customs Department to release the raw materials without incurring import duties.
For each cycle, the request for release of raw materials must record the items and quantities of raw materials to be imported according to the approved raw material inventory account, and approval will be granted only for the secondary names.
The release of raw materials can be categorized as follows:
1. Normal release: This is the release for importing raw materials.
2. Release for withdrawal of guarantee: This applies when raw materials need to be imported before receiving approval and a bank guarantee has been provided for the import duties. The release is then requested to exempt the duties later and to withdraw the guarantee submitted to the Customs Department.
3. Release for refund of duties: This occurs when duties have already been paid, and a request for release is made to refund the duties as entitled. This process must be completed within two years from the date of the raw material import.

8. Adjustment of raw materials inventory
The adjustment of raw materials inventory is the process of deducting the raw materials amount from the approved stock levels when products are exported for sale abroad. When raw materials that have been used result in wastage or are not utilized, the company can record the use of raw materials based on the following circumstances:


In case the raw materials imported into the project are partially used for production, some may be sold domestically or may not be included in the final product, such as low-quality materials or waste generated from production, the company can take actions to adjust the inventory to relieve duty obligations in the following cases:
1. For losses that are part of the production formula, such as trimmings or remnants from molding, which have a clear proportion specified in the production formula:
a. Request approval for export to a foreign country
b. Request approval for domestic sales, paying duties based on the condition of the waste
2. For losses that are not included in the production formula and raw materials that are not used in production, adjustments can be made by:
a. Exporting them back to a foreign country
b. Destruction the raw materials or waste to render them as scrap and paying duties based on the condition of the waste (with a lower duties rate)
c. Paying duties directly on the imported raw materials and adjusting the raw materials inventory
d. Donating to government agencies or educational institutions

Actions related to waste must be approved before proceeding.
Details of waste auditors


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investment incentiveProcedure for Requesting Rights

1. Request for approval of the production formula, Max Stock, raw material inventory, release of raw materials, and adjustment of raw materials account balance is done in the RMTS Online database (IC Online System).


2. Exporting raw materials to foreign countries is conducted in the RMTS Online database (IC Online System).


3. Request for approval for destruction



4. Payment of duties for remaining raw materials





5. Donation



6. Processing Time

Request

Processing Time
(Business Days)

Required Documents and Evidence for Consideration

1. Approval for the stock quantity inventory

30 business days

Apply for approval to manage the stock quantity inventory through the RMTS Online System as per the details provided in the system

2. Request for approval to release raw materials

3 hours

Submit through the paperless system

3. Request for approval to use the production formula

30 business days

Apply for approval to use the production formula through the RMTS Online System as per the details provided in the system

4. Request for approval to write off the raw materials inventory

3 business days

For export declaration forms from October 1, 2020, any request for write-off the inventory must be submitted through the RMTS2011 system only, by filling in the information according to the file format specified by the system.

5. Request for approval to use an import duty guarantee for raw materials and essential materials

5.1 In case an investment promotion certificate has not been issued yet.

3 hours

Submit through the RMTS2011 system

5.2 In case an investment promotion certificate has already been issued.

3 hours

Submit through the RMTS2011 system

6. Extension of an import duty guarantee period

1 business day

Submit the request via the Investor Club Association

7. Release and withdrawal of raw materials guarantee

7.1 Section 30

3 hours

Submit the request via the Investor Club Association

7.2 Section 36

3 hours

Submit the request via the Investor Club Association

8. Extension of raw materials import period

8.1 Extension of raw materials import period in accordance with Section 30

30 business days

- The applicant submits the request for approval to extend the raw materials import period in accordance with Section 30.

- Request form for the extension of the raw materials import period in accordance with Section 30 (F IN ER 02), to be filled out with company-specific information only

- Report form for imported raw materials or essential materials in the past year (F IN ER 03)

- Summary form for the quantity of used raw materials or essential materials (F IN ER 04)

- List form for raw materials or essential materials expected to be imported in the next year (F IN ER 05)

- A copy of the first investment promotion certificate

- A copy of the last investment promotion certificate in accordance with Section 30

8.2 Extension of raw materials import period in accordance with Section 36

30 business days

Submit a request for an extension of raw materials import period through the electronic system

Source: Utilization of Promotional Privileges (Page 242)

All actions must be approved before proceeding.

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investment incentiveOnline System

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investment incentiveSample Forms

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investment incentiveSupporting Documents for Consideration

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