BANGKOK — Thailand secured a 19% reciprocal tariff rate with the US but faces strict Rules of Origin requirements to prevent Chinese goods from being re-exported through Thailand and ensure compliance with tariff regulations.
Although the “Team Thailand” delegation, led by Deputy Prime Minister and Finance Minister Pichai Chunhavajira, concluded negotiations with the United States Trade Representative (USTR) with relief for Thai exporters, securing a reciprocal tariff rate of 19% that will allow Thailand to remain competitive, one of the most worrisome and difficult conditions remains: Rules of Origin, specifically.
Thailand has agreed to introduce a less flexible origin verification system to prevent “Chinese goods from being exported through Thailand” and to ensure that Thai goods are not used to circumvent tariffs.
Concerns Over Seven Industries with Low RVC
At last week’s meeting of the Joint Standing Committee on Commerce, Industry and Banking (JSCCIB), the issue of the Regional Value Content (RVC) rule was discussed in detail. Thailand still lacks important, sector-specific data on production structures, such as the use of domestic raw materials and intermediate products, and current RVC shares. A start has now been made on surveying and collating basic data to ensure compliance with US export requirements.
The aim is to contribute to decision-making and negotiations under the new trade paradigm, strengthen Thailand’s role within ASEAN, and create opportunities for Thai companies in the global market by improving production processes throughout the supply chain and upstream industries to increase the share of local production.
Kriangkrai Thiennukul, chairman of the Federation of Thai Industries (FTI), said the government’s relief measures to mitigate the impact of reciprocal US tariffs, whether soft loans or measures under the BOI’s Competitiveness Enhancement Act, are all practical, straightforward, and implementable for the private sector.
He believes that these measures will play a key role in supporting the industry. However, for any sector that needs to raise its RVC, the US is using this condition to exert pressure and speed up negotiations so that Thailand avoids a 40% tariff in cases where it is considered a transshipment hub.
Discussions with all sectors are ongoing, but so far, 17 sectors have a local share (RVC) of over 40%, including:
- Over 80%: Plywood, roofing and accessories, glass and glass products
- 70%: Medical devices, petrochemicals
- 58%: Rubber, automotive, plant products, pulp and paper, automotive parts and components, gemstones and jewelry
- 45%: Food supplements, furniture, leather and leather goods, chemicals, shipbuilding, textiles
- 40%: Clothing
However, worrying industries with a local share of less than 40% are:
- Pharmaceutical products: 35%
- Food and beverages: 38%
- Cosmetics: 15%
- Electrical engineering and electronics: 22.5%
- Steel: 20%
- Oil refining: 7.5%
Gem and Jewellery Sector Urges Government to Negotiate
Wiboon Hongsrichinda, consultant to the FTI Group Gem and Jewelry Industry, said that almost all raw materials for this sector are imported, as Thailand does not have enough natural minerals.
Most imports come from China, Australia, and South Korea. If the US sets the RVC requirement at 60%, this would be impossible to achieve even in several decades due to raw material constraints. It would be best for the government to negotiate with each industry and clearly explain who can and cannot meet the requirements and why.
RVC Target Seen as Hard to Reach with No Time to Adjust
Wiboon Raksasanjaroenphon, secretary general of the FTI Electrical and Electronics Industry Group, said raising the RVC was difficult, but there was no time to wait. If the US makes a requirement, Thailand must fulfill it immediately as it cannot take five years to adjust. The question is where the raw materials should be sourced from, whether domestically or abroad. Solutions are still being discussed.
The current figure of 60% is only an estimate; the official requirement is expected to be confirmed in August 2025.
Prawit Horungreung, advisor to the Association of Long Product Steel Producers using Electric Arc Furnaces, said that the local content of steel varies depending on the production stage. In smelting, the local content is already over 60%, so this is not a problem. However, for rolling mills, the local share is low, and increasing it would require sourcing more domestic billets.
The problem is that the domestic billet supply is not sufficient, so imports are required. Solutions are still being discussed.
Theeraphan Pimthong, honorary chairman of the FTI’s Aluminum Industry Group, said the share of local production varies depending on whether it is an upstream product (focusing on aluminum scrap) or a midstream product, but the average is 30–40%. Increasing this proportion to 60% would have a significant impact because:
- Thailand has no upstream production such as bauxite mining, alumina refining, and smelting and relies on imports of virgin aluminum.
- US import tariffs on aluminum are 50%, which undermines Thailand’s competitiveness with countries closer to the US that have shorter transport distances, greater production capacity, and lower production costs. Even with the same tariffs, Thailand would not be able to increase sales prices accordingly.
The way forward is to maximize the use of aluminum scrap, which requires advanced technology. The government should also prevent aluminum scrap from flowing out of the country. In comparison, neighboring countries such as Vietnam and Malaysia impose export duties of 22% and 10%, respectively.
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