GENERAL DEPARTMENT OF CUSTOMS	SOCIALIST REPUBLIC OF VIETNAM Independence - Freedom - Happiness ****
No. 111-GSQL-TT	Hanoi, 28 May 1997

CIRCULAR

Providing guidelines for implementation of Decree No. 12/CP dated 18 February 1997 providing detailed Regulations on the implementation of the Law on Foreign Investment in Vietnam *****

Pursuant to the Ordinance on Customs dated 20 February 1990;

In order to implement article 104 of Decree 12-CP dated 18 February 1997 of the Government providing detailed regulations on the implementation of the Law on Foreign Investment in Vietnam;

The General Department of Customs provides specific guidelines for the implementation of articles 40, 47, 48, 63, 76, 98 and 103 of Decree 12-CP as follows:

I. General Provisions

1. All goods exported or imported by joint venture enterprises, enterprises with one hundred (100) per cent foreign owned capital and parties to business co-operation contracts (hereinafter referred to as enterprises with foreign owned capital) shall be subject to customs inspection and control in accordance with provisions of the law of Vietnam.

2. In accordance with the provisions of clause 4 of article 2 of Decree 89-CP dated 15 December 1995 and articles 47 and 76 of Decree 12-CP, any goods (including equipment, machinery, materials and means of transportation imported for the purpose of formation of fixed assets; raw materials and other materials imported for production purposes, and all exported goods) exported or imported by an enterprise with foreign owned capital shall be subject to the written approval of the Ministry of Trade. The customs office shall, on the basis of the written approval of the Ministry of Trade, process export-import formalities by reference to the quantities and value of goods specified in the export or import licence.

3. Customs formalities applicable to goods exported or imported by enterprises with foreign owned capital shall be the same formalities applicable to ordinary exported or imported goods, except in the following particular cases:

3.1 Customs formalities in respect of goods exported or imported by enterprises operating in export processing zones or concentrated industrial zones shall be processed in the export processing zones or concentrated industrial zones (in accordance with separately stipulated provisions).

3.2 Goods which are entitled to exemption from import duties as stipulated in clause 1 of article 63 of Decree 12-CP shall not be subject to taxation upon completion of import formalities (in accordance with the guidelines provided in Official Letter 663-TCHQ-KTTT dated 28 February 1997 of the General Department of Customs).

4. Customs offices shall be responsible for processing customs formalities in a timely manner in respect of goods exported or imported by enterprises with foreign owned capital upon arrival of such goods at the bordergate in accordance with the request of the enterprises and subject to provisions of the laws on customs in order to ensure that the production and construction activities of the enterprises may be carried out in a timely manner. Where there are difficulties arising beyond the authority of the local customs department, the department shall forward reports thereon to the higher authority of the General Department of Customs for instructions and shall not, under any circumstances, retain imported or exported materials and goods at the bordergate.

5. All goods exported or imported by enterprises with foreign owned capital shall be subject to export-import duties and other related taxes in accordance with provisions of the law, except those entitled to exemption from or refund of import duties as stipulated in article 63 of Decree 12-CP.

II. A Number of Detailed Guidelines

1. With respect to article 40 of Decree 12-CP in relation to quality and evaluation of quality and prices of imported equipment, machinery, materials and means of transportation, the General Department of Customs provides guidelines for implementation as follows:

1.1. Imported equipment, machinery and materials referred to in this article shall be equipment, machinery and materials (hereinafter referred to as goods) imported for the purpose of formation of fixed assets (including equipment, machinery and materials required for expansion of scale of projects or replacement and renovation of technology). Raw materials and other materials imported for production purposes shall not be subject to the provisions of article 40 of Decree 12-CP.

1.2. Customs offices shall, on the basis of the provisions on quality standards of equipment, machinery and materials applicable at the time of registration of import declaration forms as stipulated in clause 4 of Interministerial Circular 01-LB dated 31 October 1995 of the Ministry of Trade, the Ministry of Finance, the State Committee for Co-operation and Investment and the General Department of Customs and the provisions stipulated in investment licences (if any), process import formalities. Where any discrepancies arise between the above documents, import procedures shall be carried out pursuant to the provisions of investment licences.

1.3. A quality evaluation certificate shall be required in respect of any equipment, machinery or materials imported for the purposes of formation of fixed assets under investment projects. In particular:

(i) Where the investment licence or the written approval of the import plans issued by the Ministry of Trade requires pre-shipment evaluation, the evaluation certificate shall be included in the application file for processing of import formalities.

(ii) Where the investment licence or the written approval of the import plans issued by the Ministry of Trade does not require pre-shipment evaluation, the customs office shall process import formalities in respect of the imported goods in a timely manner and the evaluation certificate shall be forwarded to the customs office upon completion of evaluation no later than thirty (30) days after the date of processing of import formalities in respect of the goods. Owners of imported goods shall be responsible for the value and quality of the goods; the customs office shall be responsible for processing formalities in respect of the imported goods without awaiting submission of an evaluation certificate in respect of such goods.

1.4. An evaluation certificate shall be considered a legal certificate if it is issued by one of the evaluation organizations specified in clause 4 of article 40 of Decree 12-CP. Where the evaluation is conducted in accordance with clause 1.3(ii) above, the evaluation certificate shall clearly specify that the evaluation is pre-installation evaluation.

1.5. An evaluation organization shall be responsible for the results of evaluations conducted by it. In cases where the customs office has evidence proving that the conclusions stated in an evaluation certificate are incorrect with respect to the value or quality of goods, the provincial or municipal customs office in charge of processing customs formalities in respect of such goods shall forward a written proposal to the investment licence-issuing body to conduct re-evaluation. Where the results of re-evaluation prove that the conclusions of the customs office are correct, the package of imported goods and the organization conducting the previous evaluation thereof shall, in addition to implementing the decision of the investment licence-issuing body, be penalized in accordance with provisions of the law.

2. With respect to article 48 of Decree 12-CP in relation to processing operations and bonded warehouses, the General Department of Customs provides guidelines as follows:

2.1. Customs formalities in respect of packages of goods processed or re-processed by enterprises with foreign owned capital shall be carried out in accordance with the provisions of clause 1 of article 48 of Decree 12-CP, Interministerial Circular 14-KHDT-TM dated 25 September 1996 of the Ministry of Planning and Investment and the Ministry of Trade (providing guidelines for processing of exports by enterprises with foreign owned capital in accordance with the Law on Foreign Investment in Vietnam), Decision 126-TCHQ-GSQL dated 8 April 1995, and other implementing instruments issued by the General Department of Customs.

2.2. Any enterprise with foreign owned capital satisfying relevant conditions for establishment of a bonded warehouse shall be issued with a licence to establish such warehouse within the enterprise in accordance with the guidelines provided in Section III below.

3. With respect to article 63 of Decree 12-CP in relation to exemption from and refund of import duties and transfer of goods imported by enterprises with foreign owned capital, the General Department provides guidelines as follows:

3.1 Pursuant to the provisions of article 63 of Decree 12-CP and Interministerial Circular 01-LB dated 31 October 1995 of the Ministry of Trade, the Ministry of Finance, the State Committee for Co-operation and Investment and the General Department of Customs, details in relation to the lists and values of imported goods which are entitled to exemption from import duties and imported goods which are subject to import duties and other relevant taxes shall be specified in the written approval of the Ministry of Trade of the importation of such goods. Customs offices shall, on the basis of the written approval of the Ministry of Trade, process import formalities.

In respect of imported goods which are entitled to exemption from import duties as approved by the Ministry of Trade but which are subject to special sales tax or other taxes (if any), import formalities shall be processed by customs offices in accordance with applicable provisions.

3.2. With respect to imported goods which are entitled to exemption from import duties as stipulated in clause 1 of article 63 of the above: where the quantities of goods correspond to the details specified in the written approval of the Ministry of Trade, but the value of such goods exceeds the approved value, customs offices shall, on the basis of the value stipulated in the evaluation certificate duly issued in accordance with the guidelines provided in clause 1.3 above, deal with the goods as follows:

(i) Where the results of evaluation prove that the declared value is correct, the customs office shall process import formalities without requesting the issued written approval to be amended.

(ii) Where the results of evaluation prove that the declared value is incorrect, the offender shall be penalized and the written approval of the Ministry of Trade shall be amended or supplemented with respect to the excessive value of the imported goods.

(iii) Where pre-shipment evaluation is not required, if an evaluation certificate is not available at the time of processing of import formalities but the declared value of imported goods exceeds the approved value stated in the written approval of the Ministry of Trade, the imported goods shall only be released upon a conclusion or decision on dealing with the excessive value being made in accordance with the guidelines provided in clauses (i) and (ii) above. In the event that the imported goods are required for production and construction purposes, the goods may be released provided that the enterprise importing such goods shall undertake to comply with the decision on dealing with the excessive value of the goods by the customs office.

3.3 With respect to imported goods which are subject to import duties and other relevant taxes, where the quantities of goods correspond to the details specified in the written approval of the Ministry of Trade, but the value of such goods exceeds the approved value, the offender shall be subject to administrative penalty and full payment of relevant taxes levied on the actual value of the imported goods, however, import formalities shall be processed without the written approval being amended.

3.4 Procedures for exemption from and refund of taxes shall be in accordance with prevailing provisions.

III. Bonded Warehouses at Enterprises

1. Definition

A bonded warehouse of an enterprise with foreign owned capital (hereinafter referred to as bonded warehouse) means a warehouse established by an enterprise with foreign owned capital for the purpose of production of exports to which special regulations on customs control shall be applied whereby raw materials and other materials imported by the enterprise for production purposes may be temporarily stored in the bonded warehouse without being subject to the calculation and payment of import duties and other relevant taxes.

The bonded warehouse of an enterprise shall store only the raw materials and materials required for production and the products produced by the enterprise.

2. Conditions for an enterprise to establish a bonded warehouse

(a) The enterprise must be established under the Law on Foreign Investment in Vietnam for the principal purpose of production of exports (at least fifty (50) per cent of its products shall be for export);

(b) The enterprise has not committed any breach of the law; and has maintained a sound business, financial and credit status;

(c) The enterprise has established and maintained a full system of accounting books and vouchers in relation to its export, import, delivery and storage activities in accordance with provisions of the laws of Vietnam;

(d) The enterprise is located in a place convenient for customs management and control.

3. Procedures for application for establishment of a bonded warehouse

3.1 An enterprise wishing to establish a bonded warehouse shall submit to the provincial or municipal customs office two application files, each of which shall include:

(i) Application for establishment of a bonded warehouse (in the form stipulated by the General Department of Customs);

(ii) Investment licence (notarized copy);

(iii) Charter of enterprise (notarized copy);

(iv) Layouts of enterprise and bonded warehouse;

(v) Operating rules of bonded warehouse.

3.2 The provincial or municipal customs office shall, no later than ten (10) days after receipt of proper application files, conduct a survey and, where relevant conditions are fully satisfied, forward a written proposal (enclosing the application file) to the General Department of Customs for establishment of the bonded warehouse.

The General Department of Customs shall, no later than twenty (20) days after receipt of the application file and proposal forwarded by the provincial or municipal customs office, issue a licence for establishment of the bonded warehouse or reply in writing to the enterprise.

The licence for establishment of a bonded warehouse shall be valid for one year. Upon expiry of the licence, where an enterprise which continue to satisfy all relevant conditions submits an application certified by the provincial or municipal customs office for extension of the duration of the licence, the General Department of Customs shall consider to extend the duration of such licence on a yearly basis.

3.3 For the purposes of establishment of, or extension of the duration of operation of, a bonded warehouse, the enterprise shall pay a fee as stipulated in Interministerial Circular 80-TTLB dated 4 October 1994 of the Ministry of Finance and the General Department of Customs.

4. Customs formalities applicable to goods stored in or delivered from bonded warehouses

Customs formalities applicable to imported raw materials and other materials delivered into a bonded warehouse and products for export shall be similar to the customs formalities applicable to ordinary exported or imported goods. In particular, the calculation and payment of taxes levied on imported raw materials and other materials shall be carried out as follows:

4.1 On the basis of the proportion of products permitted to be sold in the domestic market as stated in the investment licence or the annual written approval of the Ministry of Trade in accordance with the provisions of article 47 of Decree 12-CP, the customs office shall carry out calculation and collection of import duties for materials required for the production of products to be sold in the domestic market of Vietnam in the same manner as for ordinary imported goods (for which the customs declaration form no. HQ96-KD shall be used). In the event that the proportion stipulated in the investment licence differs from the proportion stated in the annual written approval of the Ministry of Trade, the proportion stated in the written approval of the Ministry of Trade shall prevail.

- With respect to imported raw materials and other materials delivered into a bonded warehouse for production of exports, the customs office shall defer calculation of payable taxes provided that the specific quantities of such materials shall be clearly specified in the declarations (that is, declaration form no. HQ96-GC for products for export) and shall be recorded in accounting books (that is, accounting books for raw materials imported for production of exports).

- In cases where goods stored in a bonded warehouse are damaged or the quality thereof is reduced and therefore are unable to satisfy the requirements of production, the customs office shall carry out procedures for re-exportation or destruction of goods. The destruction of such goods shall be carried out in accordance with the provisions issued by the General Department of Customs and shall be subject to supervision by the customs office, the taxation body and the body in charge of environmental protection.

4.2 An enterprise shall, on a six-monthly basis, prepare and forward to the customs office a general statement, enclosing declarations, of the total volume of imported raw materials and other materials stored in its bonded warehouse and the total volume of products exported by it. The customs office shall, upon verification of the accuracy of the forwarded statement in comparison with the records filed by the customs office and by reference to the proportion of products permitted to be exported as stipulated in the investment licence or the written approval of the Ministry of Trade of the export plans, resolve as follows:

(i) Where the proportion of exported products corresponds to the approved proportion, customs formalities in respect of the exported products shall be carried out in accordance with applicable provisions.

(ii) Where the proportion of exported products is lower than the approved proportion and the enterprise fails to submit an explanatory statement and a request approved by the investment licence-issuing body or the Ministry of Trade for adjustment of the previously approved proportion, the enterprise shall pay taxes with respect to the volume of finished products, being the difference between the approved volume of exported products and the volume of actually exported products as if the enterprise had imported finished products from a foreign country. The time of calculation of tax shall be the time at which a decision on tax collection is made by the customs office.

(iii) By the end of the planning year (on 31 December of the year), the enterprise shall prepare and forward to the customs office a general statement, enclosing declarations, of the total volume of imported raw materials and other materials stored in its bonded warehouse and the total volume of products exported by it. The customs office shall, upon verification of the accuracy of the forwarded statement in comparison with the records filed by the customs office and by reference to the proportion of products permitted to be exported as stipulated in the investment licence or the written approval of the Ministry of Trade of the export plans, resolve as follows:

(iii-a) Where the proportion of exported products is lower than the approved proportion and the enterprise fails to submit an explanatory statement and a request approved by the investment licence-issuing body or the Ministry of Trade for adjustment of the previously approved proportion, the enterprise shall pay taxes with respect to the volume of finished products, being the difference between the approved volume of products for export and the volume of products actually exported, and shall be subject to a penalty in accordance with applicable provisions. Where the proportion of exported products is lower than fifty (50) per cent, the provincial or municipal customs office shall, in addition to imposition of the above penalty, report to the General Department of Customs for issuance of a decision on withdrawal of the operating licence of the bonded warehouse.

The taxes referred to in clauses (ii) and (iii-a) shall be the taxes applicable to finished products for export in accordance with the regimes on taxation prevailing at the time of issuance of the decision on tax collection by the customs office.

(iii-b) Where the proportion of exported products is higher than the approved proportion, the enterprise shall be entitled to refund of taxes with respect to the volume of products, being the difference between the volume of products actually exported and the volume of products for export for which taxes have been paid.

(iv) Any enterprise having a bonded warehouse shall be responsible before the law for the accuracy and completeness of details stated in the general statements referred to in this clause 4.2.

4.3 Imported goods which are stored in a bonded warehouse shall not be sold in the Vietnamese market. In special cases where such goods are permitted by the Ministry of Trade to be sold in the Vietnamese market, the enterprise shall pay import duties and other taxes in accordance with currently applicable provisions.

5. Customs control of bonded warehouses

In principle, bonded warehouses established by enterprises shall be subject to regular customs inspection and control. The customs office may, however, depending on particular conditions, either directly control or affirm its rights to inspect and control without carrying out direct inspection and control of warehouses. Customs inspection and control shall be carried out principally by way of processing formalities in respect of goods imported or exported by enterprises; completing formalities in respect of specific packages of goods; verifying reports prepared and submitted by enterprises; and inspecting enterprises without notice (in terms of accounting books, vouchers, computerized data, and stored goods of such enterprises). The enterprises shall be responsible for organizing management of their warehouses and creating favourable conditions for and co-ordinating with customs offices for inspection and control as referred to above.

IV. Organization of Implementation

This Circular shall replace Circular 10-TCHQ-PC dated 15 October 1993 of the General Department of Customs providing guidelines for the implementation of Decree 18-CP dated 16 April 1993. This Circular shall be of full force and effect as of the date of its signing. All previous provisions which are inconsistent with this Circular are hereby repealed.

Any problems arising in the course of implementation of this Circular shall be reported in a timely manner to the General Department of Customs for guidelines.

 Appendix 1

 

APPLICATION FOR ESTABLISHMENT OF BONDED WAREHOUSE

To: General Department of Customs

Pursuant to the Law on Foreign Investment in Vietnam passed by the National Assembly on 12 November 1996;

Pursuant to Decree 12-CP dated 18 February 1997 making detailed provisions for the implementation of the Law on Foreign Investment in Vietnam.

Pursuant to Circular 111-TCHQ-TT dated 28 May 1997 of the Director General of Customs providing guidelines for the implementation of Decree 12-CP of the Government;

Name of applicant: ........................... Position:

Being legal representative of company:

Investment licence no. .................. Date of issue:

Place of issue:

Mailing address:

Telephone number: ................Facsimile number:

Business and production lines:

Proportion of products sold in: Domestic market: ...... %

Foreign markets: %

Hereby applies for establishment of a bonded warehouse to be located in:

With: ..... m² of warehouse; ...... m² of grounds

I hereby undertake that:

1. The details stated in this application and attached documents are true and correct to the best of my knowledge.

2. I shall strictly comply with the provisions of the laws of Vietnam and relevant provisions in relation to bonded warehouses.

...Date...

Applicant

(Signed & sealed)

Encl.

- Investment licence (notarized copy)

- Charter of enterprise (notarized copy)

- Operating rules of proposed bonded warehouse

- Layout of enterprise and bonded warehouse