Law on Foreign Trade Management: Still having difficulties while implementing

Professional activities at Hanoi Investment and Processing Customs Branch. Photo: N.Linh

Many ways for understanding

According to the provisions of Clause 3, Article 56 and Clause 3, Article 57 of the Law on Foreign Trade Management, it only applied once measures for managing export and import goods are in separate customs areas.

According to the General Department of Vietnam Customs, in the course of carrying out customs procedures for import and export goods from inland into separate bonded warehouse areas and vice versa, problems have occurred.

The first case: export processing enterprises (EPE) importing-exporting computers from foreign countries for serving production activities of an EPE, at the time of importing, a computer is 100% brand new. However, after the retention period, the EPE has a demand for liquidation of computers in the domestic market (selling, donating, gifting), at the time of carrying out the customs procedures for liquidation of computers they are used goods and belonging to the list of prohibited imported goods under Circular 31/2015/TT-BTTTT of the Ministry of Information and Communications.

When implementing customs procedures, customs authority would base on the above provisions of the Law on Foreign Trade Management, Clause 5, Article 30 of Decree No. 82/2018/ND-CP stipulating that export processing enterprises shall allow selling asset liquidation and goods under the provisions of law on investment and trade. At the time of selling or liquidating to the domestic market, the export and import management policies would not be applied, except for goods subject to management under conditions, standards or specialized inspection which have not been performed yet when importing; Goods that are subject to manage by license must have an approval document issued by the competent authorities granting an import license.

Moreover, in Clause 5, Article 25 of Decree No. 08/2015/ND-CP, which is amended and supplemented in Clause 12, Article 1 of Decree No. 59/2018/ND-CP of the Government stipulating that: … “for changing the using purpose and transferring to the domestic consumption, policies for managing import-export goods; tax policies for import-export goods would be implemented at the time of registering new customs declaration, except the case which has already implemented all management policies of import-export goods at the time of registering new customs”.

Thus, when the customs authorities apply the above provisions it could generate a number of views. The first point of view: At the time of importing, a computer is brand new and has met the requirements for importing. When implementing procedure for changing using purpose and applying the provision as stipulated in the Article 56 of Law on Foreign Trade Management, the used computer is not included in the list of prohibited goods although it has been used. As a result, EPEs were allowed to fulfill procedures for exporting computers to the domestic market and domestic enterprises imported computer would not be adjusted by the list of prohibited goods for import – export.

The second point of view: Based on the provisions in the Article 56 and Article 57 of the Law on Foreign Trade Management, foreign trade management measures should be applied once to separate customs areas. Hence, in this case when domestic enterprises imported used computers under the list of prohibited imported goods, they were not allowed to import.

The third point of view: At the time of importing computers from foreign countries, export processing enterprises did not generate an issue related to policies of managing export and import goods. When they implement liquidation and sell to domestic market, it generated an issue related to policy of import-export management. Thus, in this case, enterprises must be approved by competent authorities.

The second case: domestic enterprises imported chemicals which are precursor substances from foreign countries, at the time of import, they have been licensed by the Ministry of Industry and Trade. Then, this company sold chemicals as precursor substance for EPE. According to Clause 3, Article 9 of the Circular No. 42/2013/TT-BTC, "Organizations and individuals in export processing zones, when importing precursor substance from domestic enterprises, they must obtain permits from the Ministry of Industry and Trade. Organizations and individuals, when exporting precursor substance from domestic market into export processing zones, they did not need to apply for permits from the Ministry of Industry and Trade." Thus, the problem for export processing enterprises (in export processing zones or outside export processing zones) when importing precursor substance originating from domestic importers, is whether they must apply for import licenses from the Ministry of Industry and Trade in accordance with the above regulations, or applying the Clause 3, Article 57 of the Law on Foreign Trade Management which does not require a permit. In order to have a unified basis for the application of legal documents, the General Department of Vietnam Customs sent a document for requesting the Ministry of Industry and Trade to provide guidance for understanding and applying the provisions of Article 56 and Article 57 of the Law on Foreign Trade Management.

Obstacles when conducting the destruction of scrap and processed defective products

When implementing the Decree 69/2018/ND-CP, the customs authorities also has problems related to the destruction of scrap and processed defective products of the processing contract.

According to the provisions of Clause 4, Article 44 of Decree No. 69/2018/ND-CP, the destruction of scrap and defective products (if any) should be permitted only after obtaining written permission from the provincial Natural Resources and Environment Department and must be implemented under the supervision of the Customs authorities. If it is not allowed to be destroyed in Vietnam, it must be re-exported by appointment of the processing-ordering party.

When implementing, the customs authorities encountered problems regarding the regulation that the customs authorities must supervise all cases of destruction of scrap and processed defective products of the processing contract. The reason was that, scrap and processed defective products are often eliminated in the production process. For large enterprises, the frequency of destruction of these scrap and processed defective products is usual. Hence, customs authorities did not have enough human resources for monitoring the destruction at all enterprises, the organization of supervision would cause costs for enterprises.

In addition, according to the provisions of Article 17 of the Customs Law, customs authorities shall apply risk management in order to decide on customs inspection and supervision of goods and means of transport. Accordingly, at present, the management activities of Customs authorities (including the supervision of cargo destruction) are applying risk management methods that is stipulated specifically in the Decree 08/2015/NĐ-CP and guidance Circulars.

Meanwhile, regarding to this matter, the General Department of Vietnam Customs said that, when commenting on the draft Decree detailing the Law on Foreign Trade Management, the Ministry of Finance has issued a document for proposing: For the regulation on notification, liquidation and settlement of processing contracts, it is suggested to hand over to the Ministry of Finance for guiding the procedures of notification on processing contracts and final settlement of processing activities with the customs authorities. At the same time proposing the removal of a number of some articles (Articles 2, 3, 4, 5) because customs law has regulated these procedures and it has been operating stably, without any problems.

Regarding to the destruction of scraps and defective products, it would be implemented after having a document of permission from the Ministry of Natural Resources and Environment. General Department of Vietnam Customs said that, when implementing the regulation about goods destruction of enterprises, the Ministry of Natural Resources and Environment said that the regulation on environment stipulated that: Only permits for treatment of hazardous wastes for enterprises that collect and transport hazardous wastes; The hazardous waste source owner is responsible for registering with the Department of Natural Resources and Environment (not required to have a permit).

In case of destruction of machinery, equipment, scraps and defective products which are not hazardous wastes, it would be complied to the regulations on management of ordinary industrial solid waste. Accordingly, it is not stipulated that the owner of solid waste must have written permission of the Department of Natural Resources and Environment, it is only regulated about the report on the arising situation and management of ordinary solid waste in the periodical report of monitoring environment.

According to the General Department of Customs, the implementation of the above regulations is causing difficulties for customs authorities in applying legal documents, and to enterprises for arising administrative procedures and expenses when applying for permission to be destroyed.

Facing those problems, the General Department of Customs requested the Ministry of Industry and Trade to report to the Prime Minister on the destruction of raw materials, supplies, machinery, scrap and defective products under processing contracts in accordance with customs law and environmental law. During the time of waiting for guidance from competent authorities, the General Department of Vietnam Customs would guide the implementation of procedures for supervising the destruction of scraps and defective products under processing contracts in accordance with the provisions of Point d, Clause 3, Article 64 of Circular No. 38/2015/TT-BTC, which is amended in Clause 42, Article 1 of Circular No. 39/2018/TT-BTC.