BANGKOK, Jan. 7 (Reuters) – The Philippines has offered to buy 370,000 tonnes of rice a year tariff-free from Thailand as compensation for refusing to cut rice duty fully under a regional trade agreement, Thailand's commerce minister said on Thursday.

''We have finished the negotiating process,'' Porntiva Nakasai told Reuters, adding the two countries were working on legal procedures.

She declined to say when the deal would be implemented but a senior commerce ministry official said an agreement could be signed at a meeting of economic ministers of the Association of South East Asian Nations (ASEAN) due to be held by mid-2010.

ASEAN groups Brunei, Cambodia, Indonesia, the Philippines, Laos, Myanmar, Malaysia, Singapore, Thailand and Vietnam.

Under an ASEAN free trade pact, Philippine rice import tariffs should have been cut to 20 percent from 40 percent by Jan. 1, 2010.

But Manila is insisting that rice be classified as a ''highly sensitive'' product, which would allow it to apply a tariff of 35 percent.

Traders said the agreed government-to-government deal would not have a big impact on the rice market or on rice trading between the two countries in term of private deals as Thai prices remained relatively high and unattractive.

Its 25 percent broken grade white rice was quoted at $535 per tonne on Thursday, well above the same grade produced by Vietnam, which was quoted at $460-$470 per tonne.

''However, the deal could help make it easier for the Thai government to sell rice from its stocks to the Philippines due to the tariff-free quota,'' one trader said.

The government is keen to bring down its stockpiles of rice, bought from farmers during intervention schemes to prop up prices. Stocks are currently estimated at 6 million tonnes.

Thailand, the world's biggest rice exporter, shipped 8.57 million tonnes of rice in 2009, but only around 140,000 tonnes of that went to the Philippines, the world's biggest importer.

It has lost out to Vietnam and its cheaper rice in trade with Manila.

Vietnam, the second biggest exporter, was the big winner in December in the Philippines' three tenders for a total of 1.8 million tonnes of rice. Shipments are due in the first quarter of 2010.

Helped by demand from Manila, Vietnamese exports in 2010 were expected to reach 6 million tonnes, surpassing the record high of 5.9 million tonnes set last year.

Meanwhile, Asian rice prices have eased this week in thin New Year trade, with a series of Philippine tenders now completed, traders said.

Thailand's benchmark 100 percent B grade white rice fell to $590 per tonne from the $615 per tonne quoted in the market in late December, exporters said. ''Demand is thin as the speculation that helped support prices during Manila's tender in December has subsided now, and buyers are still in a holiday mood,'' one exporter said.

Prices of both Thai and Vietnamese rice jumped around 10 percent in December when the Philippines, the world's biggest rice importer, held three tenders to buy 600,000 tonnes of rice in each. Vietnam was the big winner in those tenders.

Prices were not expected to fall sharply and could move in a narrow range over the next few weeks as limited supply should provide support, traders said.

Millers and some Thai traders have hoarded rice since late last year, betting that prices could rise further due to demand from the Philippines, and that has restricted supply in the market. Thailand, the world's biggest rice exporter, shipped 8.57 million tonnes of rice in 2009 and aims to sell at least 9 million tonnes in 2010.

In Vietnam, the second biggest exporter, prices of most grades have also fallen in the new year, but mainly due to rising supply, traders said.

Fresh supplies have come in from a minor crop in the Mekong Delta and the market was also looking ahead to arrivals late next month from the the winter-spring crop, the country's largest, traders said.

''Buyers have not returned from the holidays so there has been no trading and the market is quiet,'' a trader in Ho Chi Minh City said. Traders expected the market to be more active next week.

Quotations for Vietnam's 5 percent broken rice eased to $485-$495 a tonne, free on board, from $490-$500 in mid-December.