I did a transit recently on MU BKK-KMG-XMN, and I presume you will follow the same procedures.

1) Luggage was checked all the way from BKK-XMN,
2) When deboarding the plane in KMG, I was met my MU staff who asked me to fill out a contact form with my cell phone number
so that they could contact me if there was any problems with customs; otherwise they would transfer the bags without my presence.
3) I went through arrival immigration, then proceeded to domestic departures and security check.
4) I was not contacted about my luggage, and picked it up on arrival in XMN.