Hanoi Customs: thoroughly addressing concerns of processing, export production, and export processing enterprises

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Customs Officers of Hanoi Customs Department at work. Photo: N. Linh

Recently, the Hanoi Customs Department has addressed and answered many questions from enterprises regarding customs procedures, finalization reports, production facilities, etc., for processing, export production, and export processing types.

According to Nikon Plast Vietnam Co., Ltd., during production, the company uses some consumable materials. In this case, does the company need to set up norms for these materials and include them in any part of the finalization report?

Addressing this issue, the Hanoi Customs Department stated that according to Article 55 of Circular 38/2015/TT-BTC, amended and supplemented by Circular 39/2018/TT-BTC and guided in Form 16 of Circular 39/2018/TT-BTC, the norm for consumable materials is the actual consumption of materials to produce one unit of product; the norms for raw material use, consumable materials, and the wastage rate of raw materials and consumable materials are kept at the enterprise and presented when the Customs authority checks or requests an explanation of the calculation of norms and wastage rates of raw materials and consumable materials. Therefore, the company must establish norms for consumable materials and reflect them in the finalization report. If it cannot establish the norms, the company must make specific notes.

Regarding customs procedures, Novotech Co., Ltd. reported: in 2023, the warehouse provided a quantity of raw materials to make products. However, as the product was newly produced on a trial basis, it did not create finished products but only defective semi-finished products. Later, the company stopped producing that product due to the partner canceling the order. Novotech Co., Ltd. asked: in this case, when handling scrap, are the defective semi-finished products considered scrap in production?

Regarding this issue, the Hanoi Customs Department analyzed: Based on Clause 35, Article 1 of Circular 39/2018/TT-BTC, amending and supplementing Article 55 of Circular 38/2015/TT-BTC, “scrap is material discarded during the processing and production of export goods that no longer has initial use value and is recovered as raw material for other production processes; defective products are finished or semi-finished products that do not meet technical standards (specifications, dimensions, quality, etc.) and are discarded during the processing and production of export goods and do not meet export quality.” Therefore, according to the Hanoi Customs Department, the enterprise needs to base its decision on regulations to determine precisely whether the defective products are considered scrap.

Regarding production facilities, X20 Joint Stock Company requested the Customs authority to resolve the problem: the enterprise has a production facility inspected and concluded to be a production facility. If the enterprise outsources all processing to three different units, with each unit performing one stage, such as cutting, sewing, and embroidery, does the enterprise need to request inspection for all three subcontracted processing facilities?

Regarding this issue, according to Hanoi Customs, at point c, clause 1, Article 17, Decree 59/2018/ND-CP amending and supplementing clause 1, clause 3, Article 39, Decree 08/2015/ND-CP stipulates the inspection of processing facilities, production capacity, and processing capability, the inspection cases include: “Organizations and individuals importing goods for processing for foreign traders but hiring other organizations and individuals to reprocess the entire processing contract.” Therefore, in this case, since the enterprise has outsourced all imported goods and hired other organizations and individuals to reprocess the entire contract, all subcontracted processing facilities need to be inspected.

Regarding the certificate of origin, TOTO Vietnam Co., Ltd. asked about using the C/O in the case of declaring a change in the purpose of use, shifting from tax-exempt to tax-liable objects through post-clearance inspection. Specifically, at the time of the initial declaration, such as May 2023, the enterprise did not have a C/O because it did not require the partner to issue it. At the time of changing the purpose of use or post-clearance inspection, such as February 2024, the enterprise requested the partner to issue a C/O for the shipment (C/O issued later). So, can the enterprise use the C/O issued at the time of changing the purpose of use or the time of post-clearance inspection to enjoy special tax incentives?

Regarding this issue, the Hanoi Customs Department stated that the enterprise can still supplement the certificate of origin documents at the time of declaring a change in the purpose of use, shifting from tax-exempt to tax-liable objects through post-clearance inspection, provided that the supplementary certificate of origin documents are still valid at the time of the initial customs procedure, except as provided otherwise in the free trade agreements with Vietnam as a member.