Customs guarantee insurance for import-export goods: New breakthrough to boost trade

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Enterprises with certificates of insurance will be cleared immediately

To achieve the goal of the scheme, measures to pilot the Customs guarantee insurance system for import-export in Vietnam are built based on views and orientations for performing synchronously solutions such as perfecting the legal basis, promoting application of information technology to ensure interconnection between performers on the same system and solutions must be consistent with international practices, as well as the Convention and Trade Agreement signed by Vietnam.

The implementation of the scheme will be divided into three phases (pilot, expansion and official phases), prioritise the selection of regimes that have already applied the guarantee mechanism to expand performers, and at the same time pilot mechanisms while performing, ensuring not to affect import and export activities of enterprises.

In addition, the pilot selection of import-export regime and the insurance business must be consistent with practical work and customs management capacity, insurance business and import and export activities of enterprises.

To perfect the scheme, from the beginning of 2019 to now, the General Department of Vietnam Customs (GDVC) has held meetings, seminars and researched international experience to build it in accordance with reality in Vietnam.

Accordingly, the basic contents of the scheme will specify the overview of customs guarantee for import and export goods.

The "Customs guarantee" is a form of financial commitment to ensure that when guaranteed objects have not fulfilled tax obligations or violated provisions of the customs law, the insurance company shall be on behalf of guaranteed objects to fully implement the tax and other payable obligations for exported and imported goods with the Customs authority. The Customs authority shall work based on the certificate of Customs guarantee insurance to decide customs clearance or release.

The certificate of Customs guarantee insurance is issued by an insurance company, which has a commitment to the customs authority that it will perform the financial obligations and other obligations as prescribed by law for guaranteed objects if the objects fail to fulfill or insufficiently fufill their obligations under provisions of law with customs authority for customs clearance or release of imported, exported and transited goods.

According to the GDVC, the certificate of Customs guarantee insurance is issued by an insurance company according to requests of importers and exporters, including commitments to fulfill compulsory obligations for customs clearance, release or storage to wait for results of specialised inspection in accordance with the law with the Customs authority (the beneficiary).

The customs guarantee aims to help Customs authorities ensure revenue for the budget and ensure compliance of import and export businesses.

Multi-party interests

The customs guarantee mechanism will provide a control mechanism to reduce customs clearance time and enhance compliance. The execution of the customs guarantee mechanism will improve tax collection; prevent trade fraud and customs violation. It will facilitate customs clearance and release imported goods subject to specialised inspection and ensure conditions on customs supervision and management for goods.

The mechanism will also bring benefits to parties directly involved. For businesses, it will contribute to cost savings and increase capital for businesses and quickly implement customs clearance. For customs, it will ensure compliance with customs laws and it will expand the insurance service business market.

According to experts from the Global Alliance for Trade Facilitation, the mechanism will cut administrative costs for businesses, the State management agencies, and reduce costs by 0.1-0.5% of the value of the shipment. Reducing customs clearance time and cost for businesses (the reduction of 0.5-0.8% of the value of the shipment). Increasing competition and promoting export growth (up 1% of total exports). Meanwhile, application of the customs guarantee system still maintains the requirements of implementing specialised management and inspection regulations for import and export goods.

In fact, from the experience of deploying the customs guarantee mechanism in many countries and achieving benefits. According to the GDVC, the customs guarantee system has been developed for many decades. Initially, the system is used to ensure the fulfillment tax and fee obligations of importers. Currently, this function has remained.

In some countries such as the US and the European region, customs guarantees have been expanded and developed rapidly to become an effective instrument in facilitating trade, promoting related trade services , as well as specialised trade activities such as bonded warehouses, foreign trade or free trade zones and production and processing facilities.

The customs guarantee mechanism has been also applied to international shipping lines engaged in import, export and transit of goods. An increasing number of countries recognise customs guarantee as an effective trade facilitation measure and this measure has been included in international trade agreements for a long time with different names such as "surety" or "security instruments" or "a guarantee”. This is not a globally applicable standard, so it can be applied in many different forms and approaches, depending on the legal system of each country and decisions of the management agencies.

Developing countries often use various types of guarantees for various detailed purposes, while developed countries have gone through this phase and developed customs guarantees at a more streamlined level and are more comprehensive in many areas.

According to the GDVC, from experience of implementing the customs guarantee system for import-export goods in some countries, the execution of this system in Vietnam also aims to meet requirements on trade facilitation, speed up customs clearance and release of goods, improve legal compliance requirements for enterprises, minimise risks related to the performance of tax policies and specialised management policies for Customs.

Experience from the US and some countries shows that the customs guarantee mechanism with the participation of insurance businesses ensures that export and import shipments are required to buy insurance. Therefore, risks to exporters and importers that do not comply with regulations on taxes, customs and specialised management policies will be handled by insurance businesses as per commitments with the customs according to Vietnam's Insurance Business Law.

To help import-export enterprises, insurance companies, management units and Vietnamese stakeholders know the customs guarantee mechanism, perfect the legal basis and the information technology system for the application of this mechanism, the Ministry of Finance proposed Vietnam should pilot this mechanism in some regimes and stages that still have shortcomings and have not facilitated import-export enterprises. During the pilot period, it is necessary to continue studying and expanding regimes and stages that have shortcomings before being widely deployed in Vietnam.