Bac Ninh Customs: Research on management of processing and export production enterprises following a centralized model

Customs officers of Yen Phong Industrial Park Customs Branch carried out procedures. Photo: Quang Hùng

Difficulties in management and supervision

As recorded by the Bac Ninh Customs Department, the number of import-export enterprises increased rapidly, especially the groups of processing, export production, and export processing enterprises. Among the 6,500 import-export enterprises in the areas managed by the unit, there are more than 1,000 processing enterprises, export production enterprises, and export processing enterprises. However, in customs management and supervision for this type, Bac Ninh Customs Department found that there were inadequacies arising from legal regulations.

Regarding tax policy in Vietnam, for processed and exported goods, export processing enterprises are enjoying great incentives such as being tax exempt and not subject to tax when meeting conditions such as having a production facility, having machinery and equipment and satisfying conditions of customs inspection and supervision. However, there is no limit on the time to put raw materials and supplies into production from the time of import or the time of processing and producing goods; source of capital or conditions on import and export value of the enterprise; conditions for the destruction of machinery, equipment, raw materials, supplies... lead to difficulties in carrying out management, monitoring and supervision, Customs authority must monitor and manage goods in a long period, depending on the needs of the business.

Regarding foreign trade policy, there still exist difficult-to-distinguish regulations in the operations of foreign-invested enterprises such as business activities under import rights and export rights that require licensing in Investment Registration Certificate (according to Decree No. 09/2018/ND-CP); the liquidation of surplus raw materials, supplies, machinery and equipment from production activities does not require licensing (according to Article 26 of Decree No. 35/2022/ND-CP, Circular No. 04/2007/TT-BTM has not announced its expiration date yet...) leading to difficulties in the management of customs authorities in determining the types because there are no specific standards.

Regarding customs procedures and management measures, inspection and supervision are specified in the Decree and Circular, but it does not ensure strict management to prevent and promptly detect fraudulent acts of businesses or prevent businesses from running away or going missing. Specifically, there is a lack of management regulations for customs authorities to capture information about businesses selling scrap and waste products created from the production process into the domestic market (currently businesses sell invoices to the Domestic Tax Agency). At the same time, there is a lack of regulations allowing businesses to self-submission of settlement reports as needed or businesses must submit norms to the Customs authority before exporting.

Through researching the laws of some countries, Bac Ninh Customs Department found that each country, depending on its economic conditions and specific characteristics, has its internal laws to manage this type of processing and export production enterprise. However, the common point is that businesses must operate in a separate area with strict control and supervision by the Customs agency. The measure to manage production activities is the norm and must be approved by the Customs authority for use within a certain period; implement reporting measures with high frequency (1 month, 3 months, 6 months); apply tax guarantee if the enterprise is not located in a separate area (non-tariff area) subject to the control and supervision of the Customs authority.

Centralized management solution

To strengthen management, and supervision and overcome the difficulties and inadequacies in the context of certain limitations in human resources and systems, Bac Ninh Customs Department planned to restructure and reorganize the management or processing, export production, and export processing following the centralized customs model.

That is, focusing resources on performing management tasks including receiving, processing, and checking production facilities, places where raw materials, supplies, products, machinery, and equipment are stored; checking conditions of customs inspection and supervision for export processing enterprises; collecting and analyzing business information; supervising goods entering and exiting the export processing enterprises and goods storage locations outside the export processing enterprises; receiving and checking final settlement reports, checking the status of the use of import-export-inventory and imported raw materials, supplies, machinery and equipment at the online supervision department at the Bac Ninh Customs Department headquarters.

At the same time, investing and building an online office equipped with appropriate machinery and equipment to meet customs management requirements for processing, export production, and export processing enterprises. On the other hand, researching and developing information technology systems focus on serving the management of processing enterprises, export production, and export processing enterprises; providing timely support for issuing risk warnings about businesses for civil servants to evaluate, analyze, and handle immediately, and support civil servants to carry out various types of periodic and extraordinary reports to serve executive direction and management of Bac Ninh Customs Department. Along with that, training and building a team of officials and civil servants with specialized professional qualifications, professional working style, and mastery of modern equipment and technology.

Currently, Bac Ninh Customs Department is developing a tool to collect centralized business information of more than 1,000 processing enterprises, export production and export processing enterprises (it is expected that by the end of the second quarter of 2024, the enterprise data set will be completed). The business information collection tool has completed the early warning function for businesses at risk of ceasing business operations when the factory lease contract or project implementation period is about to end three months before. Furthermore, warning function of abnormal business activities through electricity consumption and water consumption; warning function of abnormal increase or decrease in import and export activities of processing and export production enterprises...