For many SME manufacturers in Thailand, understanding legal compliance with Thai regulations is somewhat of a challenge. These companies know their industries well but may or may not be in full compliance with Thai regulations, leading to potential negative consequences for business. Many too, are finding themselves being audited by their customers on issues like Human Rights and Health & Safety.
Consider these questions on Legal Compliance in Thailand and read on if you are answering NO to any of them:
- Does your company have a Compliance Officer responsible for all legal compliance?
- Does your company have a full understanding of potential gaps in legal compliance?
- Does your company have a process to regularly review legal compliance (annually)?
- Does your company have a practical plan to close gaps in legal compliance?Does your company get audited by client 3rd party supply chain audits? Or will it? Think SMETA, RJC and others
Introduction to Thai Regulatory Compliance
The Thai regulatory picture can often be a confusing myriad of somewhat grey requirements. These regulations are issued by various Ministries and Departments within those Ministries. Moreover, they are issued with little notice to companies operating in Thailand. Some of these legal requirements are well understood (i.e. The Thai Labour Act) but others are less understood, leading to potential gaps in legal compliance for many companies. In 2022 for example, the Ministry of Labour updated the Occupational Safety, Health and Environment Act B.E. 2554 (2011) but many companies we speak with, did not even know this law had been updated significantly.
Key Regulations Impacting the Manufacturing Sector
In Thailand, the manufacturing sector is governed by a comprehensive set of regulations aimed at ensuring safety, environmental protection, and fair labour practices. Key regulations impacting this sector include:
Factory Act B.E. 2535 (1992): This Act governs factory operations in Thailand, setting standards for factory construction, safety, worker health, and environmental issues. It requires factories to obtain operating licenses and comply with specific regulations concerning pollution control and safety measures.
Labour Protection Act B.E. 2541 (1998): This Act provides a broad framework for labour rights and welfare in Thailand. It covers working hours, welfare, minimum wage, overtime pay, holidays, and other employment conditions. It also includes provisions for the fair treatment of workers and the prevention of child and forced labour.
Occupational Safety, Health, and Environment Act B.E. 2554 (2011 & 2022): This legislation (recently updated) focuses on the safety and health of workers in the workplace. It mandates the establishment of Safety, Health and Environment Committees within workplaces and outlines the responsibilities of employers to ensure a safe working environment.
Ministerial Regulation Establishing Standards for Managing and Implementing Occupational Safety, Health, and Environmental Practices Related to Fire Prevention and Suppression BE 2555: This act requires the employer to establish fire prevention and suppression systems in the workplace and ensure that these systems are maintained in a state of readiness, efficiency, and safety.
Industrial Estate Authority of Thailand Act B.E. 2522 (1979): This Act involves the regulation of industrial estates, including the provision of infrastructure, pollution control, and the management of industrial waste within designated areas.
Hazardous Substance Act B.E. 2535 (1992): This Act controls the use, production, import, export, disposal, and treatment of hazardous substances. It is crucial for manufacturers dealing with chemicals or other hazardous materials to comply with this regulation to ensure safety and environmental protection.
Environmental Promotion and Protection Act B.E. 2535 (1992): This Act sets out the framework for environmental protection and management, including pollution control, conservation, and the impact assessment of various projects.
Consumer Protection Act B.E. 2522 (1979): This Act protects consumer rights, regulating product standards and advertising to ensure that manufacturers provide accurate information and safe products.
Customs Act B.E. 2560 (2017): While primarily a tax law, the Customs Act also includes provisions that affect manufacturers importing raw materials or exporting finished goods, including compliance with trade regulations and customs procedures.
Within the above-mentioned regulations, there are a multitude of other requirements and regulations, that could affect your business.
Challenges in Achieving Compliance
For SME companies in particular, there are not always in-house resources or people to keep on top of the regulatory environment in Thailand. A typical company will have a HR Manager who is well acquainted with the Thai Labour Act but may know little about the Health & Safety Act, Fire Safety and others.
For others, they are only finding out about gaps in regulatory compliance, when audited by 3rd party client supply chain audits. These are becoming more frequent now as global companies are making public commitments to sustainable business operations, which include looking down into their supply chains. Third party supply chain audits can be very disruptive to businesses and even lose them business and reputation, if major non-compliances are found.
The Consequences of Non-Compliance
Fines and Criminal Charges
These regulations are enforced by various governmental agencies, and non-compliance can result in significant penalties, including fines, suspension of operations, or criminal charges. Staying compliant not only helps avoid legal repercussions but also enhances business efficiency and reputation.
Failing of Supply Chain Audits:
Since the risk of being fined or criminally indicted in Thailand is relatively low (unless in cases where there was loss of life from an occupational safety incident) there can be other severe consequences.
Companies in the supply chain of large global retailers, for example, will likely find themselves visited by 3rd party auditors at some time. These auditors will focus almost entirely on Legal Compliance with Thai laws. Most of these auditors are ISO Lead Auditors and focus on your management systems and your compliance with the legal and regulatory environment in Thailand. Disney is well known for implementing austere requirements on their supply chain, with particular emphasis on Human Rights and product safety. Walmart is another, which implements audits of the supply chain based on the Sedex Members Ethical Trade Audit, Social Accountability International – SA8000 and others. In the Jewellery industry, membership in the Responsible Jewellery Council (RJC) is almost mandatory these days.
Failure of supply chain audits, usually on the basis of legal compliance, is the most common and can lead to loss of business.
How Ashlar Can Help – Follow the Roadmap
