Tax evasion of safeguard through import of steel

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Lang Son Customs officers check steel. Photo: Hong Nu.

The General Department of Vietnam Customs said that the Office of the Government has sent an Official Dispatch to the Ministry of Finance and the General Department of Vietnam Customs about the reflection of the Vietnam Steel Association for massive import of rolled steel from foreign countries into Vietnam and tax evasion of safeguard by changing tax codes as follows: 7213.10.00, 7213.91.20, 7214.20.31, 7214.20.41, 7227.90.00, 7228.30.00 and 9811.00.00 (the codes are imposed safeguard tax) to 7213.91.90, 7213.99.90, 9839.10.00 and 9839.20.00 (the codes are not imposed safeguard tax).

In fact, in the process of Customs procedures for imported shipments declared as the type of iron or non-alloy steel, bars and rods of steel and rolled steel for the use in mechanical manufacturing (such as wiring, manufacturing of bolts and nuts), Customs authorities have conducted an analysis and assessment on the basis of defined criteria to determine whether imported steel is reinforcing steel or high quality steel for use in mechanical manufacturing.

However, in the process of assessment and analysis, the results showed that a large amount of steel with chemical composition and mechanical properties meets the two criteria of reinforcing steel or high quality steel for the use in mechanical manufacturing. Thus, the reflection of the Vietnam Steel Association was reasonable. In fact, although imported high quality steel has a higher cost than reinforcing steel, the import tax of the high quality steel is lower and not imposed safeguard tax. Therefore, enterprises still make a profit in business through changing tax codes and they have taken advantage of "loopholes" in this policy to import steel.

Therefore, for strict management, correct determination of tax codes of reinforcing steel, control of trade fraud and prevention of tax evasion, the General Department of Vietnam Customs has sent an Official Dispatch to the Ministry of Science and Technology and the Ministry of Industry and Trade to determine criteria for this item.

According to Note 5 at the end of Chapter 72 of Preferential Imported Tariffs under Decree 122/2016/ND-CP, in order to identify the reinforcing steel, one of the criteria is ISO 1651-1: 2008. This standard stipulates the technical criteria of the ratio Rm / ReH ≥ 1.46.

However, according to the national regulation on reinforcing steel QCVN 7: 2011/BKHCN issued with Circular 21/2011/TT-BKHCN, reinforcing steel is not applied criteria Rm / ReH ≥ 1.46 specified in TCVN1651- 1: 2008 as mentioned above.

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In fact, in many cases, reinforcing steel meets standards of QCVN 7: 2011/BKHCN but does not meet the TCVN1651-1: 2008 with the criterion Rm / ReH ≥ 1.46. Therefore, there have been many problems arising between Customs authorities and businesses.