Customs answer enterprises' questions to make use of the advantages of FTAs

Mr. Dao Duy Tam, Deputy Director of Customs Control and Supervision Department (General Department of Vietnam Customs)

Providing instructions on time

Mr Dao Duy Tam, Deputy Director of Customs Control and Supervision Department (General Department of Vietnam Customs), shared at the talk show "Take advantages of preferential import and export tariffs under FTAs to boost economic growth", held by Customs Magazine on March 7.

At the talk show, Mr Dao Duy Tam said that in the past years, Vietnam had achieved many important achievements in economic development, partly thanks to the promotion of opening up and integration with economies around the world and the signing of a free trade agreement. In particular, from 2018 to 2022, many new-generation free trade agreements such as RCEP, CPTPP, and EVFTA came into effect and officially applied in Vietnam, which has greatly impacted the economy by expanding the import and import-export market. Accordingly, the import-export turnover and the volume of cargo clearance are increasing. As a result, the traditional market is consolidated, and new markets are expanded.

To help businesses take advantage of the free trade agreement effectively, the General Department of Vietnam Customs has developed a plan, organized the implementation, and focused on training and guiding customs officers and enterprises to implement.

For example, in 2022, the General Department of Vietnam Customs (GDVC) coordinated with the Ministry of Industry and Trade to organize three training sessions to implement the RCEP Agreement. For other agreements, GDVC also regularly coordinated with the Ministry of Industry and Trade and relevant ministries, sectors and agencies to guide enterprises.

Notably, from 2018 to 2022, especially in 2020 when the Covid-19 pandemic broke out, to remove obstacles for businesses due to the implementation of social distancing measures, GDVC has submitted to the Ministry of Finance to issue several guidance documents, especially Circular 47/2020/TT-BTC on the extension of the deadline for submitting documents. In addition, GDVC also actively cooperated with the deployment unit to exchange with countries that are members of the agreements to accelerate the application of electronic C/O to facilitate enterprises.

However, Mr Dao Duy Tam said that enterprises and Customs authorities also encountered difficulties implementing preferential export tariffs and special preferential import tariffs under Free Trade Agreements and Economic Partnership Agreements in 2018-2022 and problems.

Problems arise when implementing new-generation agreements. For example, the RCEP Agreement has a new feature which is the tariff rates applied by each participating country to the Agreement, so in the first stage of implementation, enterprises are easily confused when comparing tariff rates.

Or there is an Agreement that stipulates a self-certification mechanism of origin. It assigned exporters to self-certify origin instead of the competent authority of the exporting country as in traditional agreements, leading to problems arising when customs officers look up the form and legality of documents. However, the problems encountered in the initial implementation stage were guided and handled immediately.

Answering a question about what the Customs would do to facilitate enterprises to handle overpaid tax when the effective time of the Decree on special preferential import tariffs schedule for implementation of RCEP is nearly a year behind the Agreement's entry into force, Mr Dao Duy Tam said that, customs authority had received lots of questions regarding this issue.

According to Tam, the Decree stipulates the time limit for applying the tariff schedule. The timing of tax refunds will depend on each country when ratifying the Agreement. For example, in Malaysia, declarations registered before March 8, 2022, will be refunded tax; or for goods imported from Korea that are subject to the Agreement, enterprises will be entitled to a tax refund for declarations registered from February 1, 2022. It is applied to other countries and territories from January 1, 2022.

The mechanism and order of tax refund procedures it is specified in the Law on Import-Export Duty and the Law on Tax Administration. Circular 38/2015/TT-BTC, also guides enterprises on the steps to implement; customs authority will carry out refund procedures based on information on the date the enterprise registers the declaration.

Strengthen investigation and verification in the exporting country

Regarding the issue of how Customs will deploy it to both ensure management and facilitate trade, especially the origin of import and export goods, Mr Tam said that, when participating in the FTAs, tariff rates will be deeply reduced following the commitments and the stages. However, reducing tax rates leads to an increase in the risk of origin fraud and evasion of trade remedies.

Notably, since the trade war between the US and China occurred, Vietnam has carried out origin inspection and control following its commitments as a member of the Agreements. Customs authorities have taken many countermeasures, detecting many cases of origin fraud and handling such as solar panels, plywood, and wooden kitchen cabinets.

For export goods, Customs authorities regularly coordinate with organizations and customs agencies of other countries to provide information and coordinate in inspecting the production activities of enterprises.

In addition, the Customs authority also strengthened the inspection and control of the origin of goods. Currently, the new generation of free trade agreements allows the application of rules of accumulation. When applying this rule, it is easy to lead to avoidance of origin from the countries that are not entitled to FTAs. For example, enterprises have moved their production activities to other ASEAN countries when applying trade remedies for sugar products from Thailand. As a result, however, sugar is imported from Thailand or sugar produced from other ASEAN countries, while the raw materials are imported from non-ASEAN countries.

In such cases, the coming time, Customs will conduct an investigation and verification in the exporting countries. Besides that, the Customs authority is also signing the information exchange of origin with several countries, such as Korea and other countries with a large flow of goods to Vietnam.

Enterprises should note the application of regulations

At the talk show, many businesses asked Mr Dao Duy Tam about specific cases. For example, an enterprise asked: to implement the EVFTA agreement, the enterprise has purchased goods from a Chinese company which is a subsidiary of the group in Europe, goods originating in Europe are exported to a bonded warehouse in China and then exported to Vietnam. Vietnamese enterprises sign contracts with Chinese enterprises, pay for goods to Chinese enterprises and submit self-certification of origin certified by Chinese enterprises and documents proving that the origin has not changed. However, the customs authority refused the self-certification documents issued by the Chinese enterprise.

Responding to enterprises' problems, Mr Dao Duy Tam said that according to the provisions of the EVFTA Agreement, if imported goods originating from Europe are subject to the Agreement's regulations, enterprises will submit self-certification documents. However, self-certification documents must be self-certified by European manufacturers or European enterprises, and Customs will check and compare with the self-certification code system of goods to identify whether goods are eligible or not. In this case, the enterprise submits self-certification documents from China, and the refusal of the customs authority is entirely following regulations.

Regarding the question of the enterprise about importing the shipment from Italy to Vietnam, when opening the declaration, the enterprise did not make an application for late submission of C/O. However, a few days later, the enterprise had a REX code, but the customs branch did not agree, so is it right?

In this regard, Mr Dao Duy Tam said, according to the provisions of Circular 38/2018/TT-BTC, when making a customs declaration, if there is no proof of origin at the time of carrying out customs procedure, enterprises must declare late submission of proof of origin. Therefore, in this case, if the enterprise does not declare the request for late submission at the time of carrying out import procedures, the customs office can completely refuse to follow the law.