Customs Guarantee - an effective tool for trade facilitation

	Customs guarantee – one more lever for trade facilitation
	Preventing imported goods which do not guarantee food safety
	It is possible to gradually pay tax debt without a bank guarantee

Customs Guarantee will bring many benefits to all parties. Photo: N.Linh.

More and more countries are adopting the Customs Guarantee regime

Many countries recognize Customs Guarantee as an effective measure for trade facilitation, included in international trade agreements with different names such as “surety” or "security instruments" or "guarantee". This is not a global application standard, so it can be applied in many different forms and approaches, depending on the legal system of each country and the decisions of the regulatory agencies.

Developing countries often offer many different types of guarantees for a variety of purposes. While developed countries have gone through this stage and developed the Customs Guarantee in a more streamlined way but to a more extensive level.

Canada has offered a Tax guarantee as a tool to control and prevent smuggling and ensure the compliance of participants; all types of Customs Guarantee were defined by the Government of Canada in customs law. The common types of customs Guarantee in Canada include: guarantee in transportation process, guarantee in bonded warehouses, guarantee for operation of licensed Customs agents, guarantee for goods release and for temporarily imported goods.

Turkey has officially put Customs Guarantee into the Product Safety System since 2012, with the goal of overcoming inadequacies impeding the clearance in licensing in the specialized inspection for imported and exported goods related to health, security and environmental issues.

South Korea also offers a guarantee relating to import and export activities. However, guarantee is only for payment of taxes and fees. The tax guarantee is used to combat tax losses especially in cases of deferring tax payment. For domestic tax, the guarantee period will be the time limit for payment to tax authorities plus 30 days and the guarantee amount must be greater than 110% of the amount required by the tax agency; for customs duty, the guarantee amount will be greater than the amount required by the Customs agency and the guarantee period is 15 days from the date of customs clearance.

Kenya, an underdeveloped African country also has a fairly complete Customs Guarantee system with many different categories: transportation, warehousing, export processing zone, production and temporary imports.

In the United States, after nearly 80 years of development, the Customs guarantee system has undergone various stages of development and is today considered as the most advanced system. The US Customs Guarantee is not only for taxes and fees but also for all other specialized obligations related to the shipment. All imported shipments with a value of US$ 2,500 or more must be ensured by a Customs guarantee or another suitable guarantee.

The US Customs and Border Guard requires guarantees to ensure importers will comply with all Customs and other agencies' regulations. Guarantee serves as a tool to ensure the enforcement by competent authorities and the payment of taxes and fees in compliance with relevant laws.

The Customs Guarantee will ensure all obligations of the importer throughout the process of importing goods, including post-clearance inspection, inspections to determine the accuracy of the HS code and legality of certificate of origin, which are factors that may lead to additional tax rates. Even if the importer disappears or loses the ability to pay, the insurance company will fulfil the obligation under the guarantee. The obligation ends when Customs Guarantee liquidates the import declaration.

Lessons for Vietnam

From the benefits brought by the Customs Guarantee, the Customs Guarantee mechanism will be studied and applied in Vietnam, not only for specialized inspection, but also for many other fields.

In order to avoid disruption to the business and production activities of the enterprise and the customs procedures and management policies of the ministries and sectors, the implementation of the Customs Guarantee will be divided into three phases:

Pilot phase (expected 2021-2022): In the first phase, a guarantee mechanism will be applied to some Customs regimes based on inheriting existing guarantee types and piloting new types: tax payment guarantee (business goods, goods in transit and goods temporarily imported for re-export) guarantee for late submission of Certificate of Origin and guarantee for the transportation of goods for preservation.

The expansion phase (2022-2023): The expansion of the guarantee types can be applied immediately in the pilot phase or after the preliminary review and evaluation of activities in the pilot phase, the Customs Guarantee is expected to expand to other Customs regimes: temporary imports for re-export (fairs, exhibitions, repair and maintenance, warranty; construction of works); the delay in issuance of import permits from ministries and sectors for a number of goods and fields; cases of disputes in the application of management policies and tax policies between state management agencies and enterprises (waiting for price ruling, for identification of codes and tax rates, waiting for inspection results of quality and categories ).

Tax debts can be paid gradually if they are guaranteed by credit institution

Official implementation phase (expected from 2024): Based on reviewing and assessing the pilot implementation in the above two phases, the research team will complete the legal basis (Laws, Decrees, Circulars and procedures) and an information technology system to officially implement the Customs Guarantee system for imports and exports under different Customs regimes.

In order to be able to implement the Customs Guarantee for imports and exports, it needs to review and revise a number of legal documents to create a legal basis for implementation.