Method of management for on-spot import and export goods to be changed

	Using invoice for on-spot imports and exports
	Handling administrative fines if failing to declare and pay VAT at the time of on-spot import
	General Department of Vietnam Customs instruct Decree 18 for over 200 enterprises

Dong Nai Customs officers supervise import and export goods. Photo: N.H

Many shortcomings

According to Article 35 of Decree 08/2015 of the Government, on-sport import and export activities include goods under processing contract in Vietnam by a foreign individual or organization to sell to individuals or organizations in Vietnam; goods traded between domestic enterprises and export processing enterprises, enterprises in non-tariff areas and goods traded between Vietnamese enterprises with individuals or organizations without an entity in Vietnam and designated to deliver to another enterprise in Vietnam.

Still, the Law on trade 2005, Law on foreign trade management 2018 and related guiding documents on trade activities do not have regulations on on-spot import and export, except for processed goods; hired/borrowed machinery and equipment; disposal of excess raw materials/supplies, waste, rejects subject to on-spot import and export.

According to internal experience, the on-spot import and export regime is considered as domestic trade and is not managed under the import-export activities.

This regime also imposes the potential risk of transfer pricing, foreign currency flight abroad and unfair competition in goods circulation in Vietnam between foreign-involved firms and domestic firms.

Therefore, the representative of the Customs Supervision and Management Department said that goods designated to be delivered to another enterprise in Vietnam by a foreign traded and goods traded between Vietnamese enterprises and foreign traders who are not present in Vietnam (described in points a and c of Article 35 Decree 08/2015) are considered domestic trade.

Accordingly, the tax agency will cover this trade. The tax payment via an agent shall be done by the foreign trader under an agent contract or VAT must state the tax code, name of foreign trade and enterprise authorized to receive goods in Vietnam.

Mr. Au Anh Tuan, Director of the Customs Supervision and Management Department - General Department of Customs, said that the permission to open on-spot import and export declarations for two cases under point a and point c Article 35 of Decree 08 has created a great burden for the Customs sector when each year there are millions of declarations with a turnover of tens of billions of USD.

“In the supply chain, which includes many different stages, the output of one factory is the input of another factory, so it is very difficult for Customs to track down,” said Mr. Au Anh Tuan.

In fact, many Customs units have struggled to handle the on-spot import and export declarations because there are no reciprocal declarations.

Mr. Do Thanh Phong, Head of Customs Supervision and Management - Binh Duong Customs Department, said that it is difficult to determine that foreign traders who are not present in Vietnam are actually not present in Vietnam. "If it is determined that the trader is not present in Vietnam, then the on-spot import-export declaration can be opened, otherwise, the on-spot import and export declaration is invalid and cannot be completed," Mr. Phong said,

Meanwhile, according to the provisions of the Law on Foreign Trade Management, foreign traders who are not present in Vietnam are foreign traders who do not have business investment activities in Vietnam, and have no representative offices and agent, branches in Vietnam.

However, it is difficult for Customs officers to determine this, because that trader can invest, open an office in another locality, or even have a different name when entering the Vietnamese market.

Avoid disruption to businesses

Despite inadequacies in management, it is also said that on-spot import-export activities have greatly encouraged and supported production chain activities in Vietnam. A representative of Bac Ninh Customs Department said that businesses in Bac Ninh mainly operate in the field of electronic assembly with a very large supply chain, especially corporations such as Samsung, Canon, Hong Hai.

Suppliers for these chains involve a lot of on-spot import and export rights. Regulations on on-spot import and export are an advantage for Vietnam to attract investment. Therefore, the representative of Bac Ninh Customs Department is concerned that the change of management method for this type will affect the operation of enterprises, thereby affecting the investment attraction in Vietnam.

It is thought this change of management will incur costs for businesses. Mr. Tran Tu Buu, Deputy Head of Customs Supervision and Management Division under Dong Nai Customs Department, said that it is advisable to use neutral measures to reduce the management burden for Customs while creating consensus among enterprises. Accordingly, the problem lies in tax policy. He suggested that goods under points a and c should not have to go through customs procedures but still be subject to Value Added Tax (VAT).

Mr. Au Anh Tuan also said that it is necessary to carefully consider tax issues to avoid disturbing businesses. Accordingly, in terms of VAT, if the enterprise does not open the declaration for buying raw materials for export production, such goods will not be subject to VAT as when registering the import declaration according to the type of export production or processing. Regarding the tax treatment mechanism, Mr. Au Anh Tuan said that if the enterprise has paid input tax, it will be refunded upon export, even if there is no declaration.

"This problem must be solved before considering changing the method of management from opening declarations to domestic trading to be true to the nature of the trade activity," Mr. Au Anh Tuan said.