Prevent violations from bonded warehouse business

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Deputy Director of Customs Control and Supervision Department Tran Duc Hung

Could you please tell us about operation of bonded warehouses?

As of December 2019, the General Department of Vietnam Customs issued a recognition decision for 180 bonded warehouses managed by 22 provincial and municipal customs departments and carried out customs procedures for goods in bonded warehouses nationwide.

In general, bonded warehouses have effectively operated in places and routes witha high flow of goods, such as seaports (in Hai Phong, Ba Ria-Vung Tau and Ho Chi Minh City), border gates (in Quang Ninh, Lang Son, Cao Bang, Tay Ninh andBinh Phuoc) and have a volume of trade with bordering countries; some inland bonded warehouses for goods storage of export processing enterprises and industrial parks (in Bac Ninh, Ninh Binh, Binh Duong and Dong Nai).

To meet conditions for operation of bonded warehouses, the General Department of Vietnam Customs has regularly inspected and reviewed the maintenance and compliance with the provisions of Government Decree No. 68/2016/ND-CP of July 1, 2016, including conditions of location (industrial parks, export processing zones, logistics planning areas), area (minimum 5,000m2 or 1,000m2 for specializedbonded warehouses), management software for goods in bonded warehouses, camera systems, lighting systems, fire protection systems, connection with centralized electronic customs systems of the General Department of Customs; regime of declaration, reporting and carrying out customs procedures.

Through monitoring and management, how have customs authorities detected and handle violations related to this regime, Sir?

Through the actual monitoring, the most common violations are enterprises that do not declare and falsely declarenames, categories, quantities, volumes, values, origins of goods subject to being used or destroyed in the non-tariff area; goods which are not permitted to be stored in bonded warehouses. In addition, enterprises take advantage of tax incentive policies for bonded warehouses to intentionally falsely declare names, categories of goods or correctly declare names of goods but falsely declare quantity and intentionally bring goods which are not permitted to the bonded warehouse to evade taxes and avoid customs inspections.

When detected by Customs authorities, these enterprises comply with sanctioning decisions of the customs authority and implement additional declarations and amendments to contents of declarations or re-export goods. For management of import and export activities by mechanisms of risk management, goods channel classification and part physical inspection of goods will create loopholes for enterprises to take advantage of preferential policies for smuggling, trade fraud, tax evasion and trading goods subject to the list of goods banned from import and export.

For enterprises (goods owners, transport means owner, bonded warehouse owners, customs brokers; enterprises may be bonded warehouse owners or goods owners, transport means owner and customs brokers) have researched and adoptednew and sophisticated methods to deal with customs inspections, leading to smuggling, trade fraud under regime, fields and in routes with more serious scale, nature and level.

Bonded warehouses that do not meet conditions and violate customs procedures will be subject to punishment or will be suspended or have operations terminated as per regulations. The General Department of Vietnam Customs has suspendedand terminated operations of 11 bonded warehouses that do not meet regulations, such as no software meets the criteria; no camera system; warehouses and yards do not meet conditions; or beyond the time limit but enterprisesdo not put bonded warehouses into operation.

What are the problems and shortcomings related to management of bonded warehouses?

According to current law, the bonded warehouse is one of the places where export and import goods are stored. Basically, the main problem arises from customs regime of goods imported from abroad and sent to the bonded warehouse for re-export to a third country. Specifically,regarding goods, commodities stored in bonded warehouses are very diverse, have a large total taxable value, are imported and sent to bonded warehouse for export, there is not regime of import inland, but there are many consumer goods such as electronics, 100% new cosmetics, supplementary foods, and children's toys originating from developed countries, consumed in the Vietnamese market.

Regarding export trends, in addition to commodity groups depositedin other bonded warehouse: goods from the non-tariff area (not including the bonded warehouse) or inland to the bonded warehouse; goods from bonded warehouse to inland; goods from the bonded warehouse into the non-tariff area (not including the bonded warehouse and export processing enterprises); for goods from the bonded warehouse into the bonded warehouse, the common problem is that goods from abroad send into the bonded warehouse to export to foreign countries, especially through countries sharing borders. The characteristics of the regular transport routes from the bonded warehouse to the border gate of the export border are long distances, the control range of the customs unit is too wide, the transportation, goods delivery are implemented at border crossings or the delivery and receipt of goods are implemented at night. Therefore, the role of inspection and supervision of customs officers at the management areas of bonded warehouses and border gates is particularly important.

What does the Customs sector do to effectively manage this regime?

Currently, the General Department of Vietnam Customs has regularly reviewed provisions of the law related to the operation of bonded warehouse, operational conditions and customs procedures. Specifically, the General Department of Vietnam Customs is developing a draft Decree amending and supplementing some articles of Government Decree 68/2016/ND-CP dated July 1, 2016; a Circular amending and supplementing Circular No. 38/2015/TT-BTC dated March 25, 2015 and Circular No. 39/2018/TT-BTC dated April 20, 2018 of the Ministry of Finance.

For imports and exports of goods via bonded warehouses, the General Department of Vietnam Customs regularly directs municipal and provincial customs departments to inspect and supervise bonded warehouse operators and compliance with regulations and customs procedures of import and export enterprises.

For goods, the General Department of Vietnam Customs is reviewing and developing to submit to competent agencies to consider and approve the promulgation of the list of goods subject to suspension from storing in the bonded warehouse according to the Prime Minister's decision. Accordingly, some commodities will not be permitted to be stored in the bonded warehouse.

Regarding the application of IT systemsin managing the operation of warehouses, yards and sites in 2020, the General Department of Vietnam Customs expects to install modern equipment to improve the efficiency of supervision of goods stored in the bonded warehouse such as GPS and cameras.

In addition, the General Department of Vietnam Customs develops an overall IT system to manage import-export activities in general, and the VASSCM system to manage operation of bonded warehouses in particular. Accordingly, goods in and out of bonded warehouses are managed by the automated system, meeting regulations on connecting with software of warehouses, yards and sites.