Current Issues with Customs in Vietnam KPMG Vietnam Webinar 27 September 2017 10:00 am (GMT+7) 11:00 am HKT 1:00 pm AEST
Current Issues with Customs: Agenda 10:00-10:20 10:20-10:30 Customs Environment in Vietnam Customs valuation Classification mismatch/controversy Import-export compliance Post-clearance audits Updates in the law Way forward with WCO/OECD guidelines Year-end TP adjustments and customs valuation Free trade agreements (FTAs) and challenges; Cost-saving and compliance programs (FSFE and TFAs) 10:30-11:00 Question & Answer Session 11:00 End of Webinar, Questionnaire
Question and Answer Session Please submit questions in the chat window (bottom right corner of the screen) at any time during the presentation. Don t forget to hit SEND. I will compile the questions and submit them to the speaker in the last 30 minutes of the webinar, as time permits 3
Key Presenter Rohit has been providing indirect tax and international trade services for over nine years. He has worked in New Delhi, India and was in Hong Kong for over five years, providing Indirect Tax advisory to clients in Asia-Pacific region. Rohit Sinha Senior Manager, Trade & Customs Integrated International Tax KPMG Vietnam Rohit has extensive experience in advising multinational companies with regards to customs and trade matters throughout Asia and assisting Asian businesses exporting to North American and European markets. This has encompassed the development of regional and global trade strategies, customs valuation, HS classification, application and implementation of trade regimes, first sale for export, excise taxes and a range of value added taxes. 4
Customs environment in Vietnam
1 Customs environment in Vietnam Customs valuation Approximately 25% of transactions questioned Relationship, HS code interpretation, valuation method noted as major reasons Related vs unrelated party imports Special relationship special attention from customs Unfamiliarity among importers, customs brokers Experience sharing (luxury goods importer) Commercial vs non-commercial imports Use of pricing database as reference by customs 6
2 Customs environment in Vietnam Classification mismatch/controversy Strict interpretation of GIRs and guidelines Compliance with AHTN (latest in 2017) Importers may not have updated the HS codes per AHTN Experience sharing (disallowance of duty relief under ATIGA) 7
3 Customs environment in Vietnam Import-Export compliance Comprehensive, time consuming Room for digitizing the process Inconsistent interpretation of law by different customs offices Experience sharing (different HS codes applied by two offices) Management of imported material for production of goods for export EPE vs non-epe (separate records, BOM accuracy, imported vs domestic material usage) Management of duty-exempt fixed assets (usage, transfer, liquidation, reporting) EPE executing import right for trading activity: Separate physical storage area, accounting records, VAT implication etc. 8
4 Customs environment in Vietnam Post-Clearance Audits (PCA) Multiple scenarios under which a PCA can be initiated Suspicion of non-compliance, PCA campaign, periodic every 5 years Importer s track record, industry, volume etc. can play an important role Assertive approach from customs Controversy and litigation 9
5 Customs environment in Vietnam Updates in laws to address evolving business Expected as the economy grows Experience sharing (mismatch in material quantity records, liquidation and subsequent claim for refund of taxes) New laws/provisions introduced recently Law on foreign trade management Updated decree and circular on customs procedure, duty and tax management Decision for list of goods to be declared and customs clearance performed at the port of entry 10
6 Customs environment in Vietnam Way forward with WCO/OECD guidelines Growing link between transfer pricing and customs valuation, both impacting each other WCO guideline issued in 2015: To assist customs authorities understand the relationship between the two Improve consistency and accuracy in valuation and duty computation Methodology based on the OECD transfer pricing guidelines Both WCO and OECD guidelines are soft laws. However: Countries working on updating domestic laws to implement the guidelines Recent changes in Japan customs procedures 11
7 Customs environment in Vietnam Year-end TP adjustments and customs valuation Upward adjustment results in lower customs value Japan Customs recently introduced measures to accept year-end adjustments (upwards and downwards) Retrospective revision of value in Vietnam? 12
Free Trade Agreements and challenges
Vietnam export is growing and continue to grow with new FTAs Merchandise export growth in 2016 0% Indonesia Malaysia Philippines Singapore Thailand Vietnam 9% Vietnam Signed / Developing FTAs ASEAN - China Vietnam - Chile ASEAN Vietnam - Korea ASEAN - India Vietnam - Eurasian Economic Union ASEAN Australia / NZ Vietnam - EU ASEAN - Korea Vietnam - Japan Source: World Bank ; WTO Center 14
FTAs and challenges Effective utilization Untapped leveraging due to complex procedures and compliance Growth in exports Ineffective utilization, slower growth Domestic market competition Labor productivity Market entry strategy, local players Skilled vs semi-skilled vs unskilled labor Halfway reforms Barriers to trade (TBT such as labeling. NTBT such as valuation, duty rate) National treatment 15
Cost Savings and Compliance Programs
First Sale For Export Program (for US imports) - A long-established customs valuation method that can reduce customs duty costs on US imports - First Sale is the use of Invoice 1 rather than Invoice 2 as the US customs value US Importer - Depending on supplier profile, it may reduce duty costs by 5% to 15% Invoice 2 Vendor (outside US) Invoice 1 Goods Manufacturer Vietnam 17
Trade Facilitation Agreement - Introduced by WTO in 2013; concluded in February 2017 by WTO member countries - Standard procedures and information for cross-border movement of goods - Speedy movement, release and clearance of goods - Improved cooperation between customs and other regulators - Technical assistance and training - Phased implementation for developed vs developing countries - Developing and LDC member countries can group measures into the following categories: A. At the time Agreement enters into force (one year later for LDCs) B. Entry into force + (X) time (only local action needed) C. After TACB 18
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