Collecting billions in tax through the work of duty room

Making incorrect declarations on HS code of electric wire code causes a reduction of nearly VND900 million in tax

In the last months of 2020, the duty room of the General Department directed Saigon port area 1 Customs Branch to inspect the import shipment of ELITE Trading and Service Co., Ltd.

The enterprise declared goods as "Conducting cable without connectors used in solar energy systems, insulated with EPDM rubber, Item L-313741, brand LEONI, core size: 1x4mm2, rated voltage 1500V".

According to the declaration, the HS code of this item was 8544.6012 with a tax rate of 5%. However, through the results of physical inspection and classification, goods were identified as "Unconnected electrical wires for solar power systems with the voltage of 1500 VDC", the appropriate HS code was 8544.6011 with a tax rate of 20%.

The Customs Branch issued a decision to sanction the violation of ELITE Trading and Service Co., Ltd. with more than VND171 million, and collect nearly VND900 million of tax arrears into the state budget.

Thus, with the incorrect declaration of detailed specifications of insulating materials for electrical wires from plastic to rubber EPDM, it changed the import code (from code 8544.6011 with a tax rate of 20% to code 8544.6012 with a tax rate of 5%). If the customs authority did not inspect and detect the violation, the enterprise could have evaded nearly VND900 million of tax.

Nearly 200 tons of steel declared unclearly between non-alloys and alloys

On September 13, 2021, the duty room of the General Department of Vietnam Customs directed the Dung Quat Port Customs Branch (Quang Ngai Customs Department) to inspect a shipment of 214,544kg of imported steel of Hoa Phat Dung Quat Steel Joint Stock Company which was transported from Shanghai port, China to Hao Hung port, Quang Ngai.

The shipment weighed 199,990kg and was declared by the enterprise as "Galvanized steel, coil, width of 1500mm, thickness of 0.5mm, brand new 100%", HS code 7225.9290, with preferential import tax of 0%, anti-dumping tax 0%, and VAT 10%.

Through analysis, the General Department's duty room identified that goods declared with HS code 72259290 belonging to heading 7225 "flat-rolled other alloy steel with a width of 600 mm or more". It also showed signs that the enterprise did not made a clear declaration on the properties of alloy or non-alloy steel. It suspected that the enterprise failed to declare the properties of goods to evade anti-dumping tax.

To clarify suspicious signs, the General Department's duty room directed the Dung Quat Port Customs Branch to conduct a physical inspection for the entire shipment and take samples to send for analysis and classification in order to determine the correct HS code of the goods.

As a result, the Customs authority identified the name of the goods as "Galvanized steel, non-alloy, 0.5mm thick, 1500mm wide, 0.15% carbon content, manganese of 0.80%, flat rolled without corrugation, hot-dip galvanizing method, brand new 100%". It was appropriate with HS code 7210.4912, import tax rate of 20%, anti-dumping tax of 38.34%, and VAT of 10%.

Determining the act of declaring the wrong name of goods, goods codes, and tax rates, leading to a lack of payable tax amount when the enterprise carried out customs procedures, the Customs Branch sanctioned the enterprise nearly VND50 million, and collected more than VND246 million of tax arrears.

Collecting VND2.6 billion from DC/AC electric motors

On May 24, 2021, the General Department's duty room directed Thu Dau Mot Customs Branch (Binh Duong Customs Department) to inspect a shipment of 24,144 kg of imported motor components and engines worth nearly $50,000 from the Honest Motor Vietnam Co., Ltd which was imported from Pingxiang border gate, China, through Huu Nghi border gate, Vietnam.

2,040 units of "Motor subassembly semi-finished products", declared by the enterprise with HS code 8501.2029, with a preferential import tax rate of 0% and VAT of 10%.

However, through analysis, the General Department’s duty room found that HS code 8501.2029 was suitable for DC/AC motors which was a high-tech item, rarely used in Vietnam, and not suitable for production activities and assembly of the enterprise. It was suspected that the enterprise misrepresented the nature of the goods to reduce the amount of payable tax.

The duty room of the General Department directed Thu Dau Mot Customs Branch to conduct a physical inspection and take samples to send to Technical Center for Standards, Metrology and Quality 3 for assessment. The result of goods inspection showed that electric motor was in incomplete form, with type of alternating-current (AC).

Based on the assessment results, Thu Dau Mot Customs Branch determined the correct HS code of the goods was 8501.40.29, with a preferential import tax rate of 20%, and rejected the C/O form E of the enterprise.

Pursuant to Point a, Clause 3, Article 9 of Decree No. 128/2020/ND-CP dated October 19, 2020 of the Government, the Customs Branch has sanctioned violations of enterprises with a monetary penalty of more than VND98.6 million.

Notably, expanding the review of import data of similar products of Honest Motor Vietnam Co., Ltd. in 2021 (in 2020 the enterprise did not import products with HS code 8501), after receiving the direction of General Department’s duty room, the Customs Branch reviewed and applied code 850140 to 15 declarations, increasing the amount of tax collection up to more than VND2.6 billion.

Violations related to a shipment of industrial fans worth $40,000

Through analyzing and evaluating the information on the industry's professional information systems, the General Department’s duty room identified suspicions of incorrect declaration on HS code for a shipment worth nearly $40,000 of Manh Phuong electric service - trading company limited. The shipment was transported from Jiangmen port, China and imported through Cat Lai port, Ho Chi Minh City.

Manh Phuong Company declared 5,400 units of "industrial ventilation fans with code AFC-130 brand MPE" to apply HS code 8414.5999 with a preferential import tax rate of 0% and VAT of 10%.

Through research, the ventilation fans product code AFC-130 MPE and size 20x20cm was a ceiling exhaust fan that was suitable for use in kitchens, living rooms, bathrooms, toilets, apartments, office buildings, factories, restaurants, bars, hotels, hospitals, schools, public toilets. The fact that the enterprise declared it as an industrial fan raised suspicions of tax evasion.

On May 26, 2021, the General Department’s duty room directed the Saigon port area 1 Customs Branch (HCM City Customs Department) to conduct a physical inspection to determine the correct code. The Customs Branch checked and re-determined the value which increased by 25%, requested the business to correctly declare HS code 8414.5191 with the preferential import tax rate of form E was 15%. The Customs Branch had sanctioned the enterprise VND42.5 million, collected VND212 million of tax as per regulations.

After that the General Department’s duty room continued to monitor and review the customs information systems about the law compliance of Manh Phuong Electric Service Trading Co., Ltd and found that the declarations arising after May 26, 2021 had been declared correctly with HS code 8414.5191 and paid the full amount of tax with the import tax rate of 15%.

In order to ensure the tax amount of declarations that were already cleared, the leaders of the General Department assigned the duty room to continue directing and urging the Saigon port area 1 Customs Branch to review and trace to collect and handle violations for eight declarations worth $92,499 arising before May 26, 2021 of Manh Phuong Electric Service Trading Co., Ltd.

Moreover, the General Department’s duty room advised and submitted to the leaders of the General Department of Vietnam Customs to assign the Import-Export Duty Department to study, promptly issue a warning and guide the Customs Departments of provinces and cities to strengthen inspections of declarations and examinations of dossiers for items declared as steel with HS code of 7225 but did not specifically declare as alloy steel; motor items declared code of 8501.20; ventilation fan declared code 8414.59. At the same time, it is required to review similar declarations of enterprises importing goods declared with HS codes as 7225, 8501.20, 8414.59.

In the future, the General Department’s duty room will continue to analyze and evaluate professional information to direct the inspection, clarify suspicious signs, and request to strictly handle violations.