Circular No. 19/2006/TT-BTC dated March 15, 2006 of the Ministry of Finance guiding the classification of automotive parts and accessories

CIRCULAR

GUIDING THE CLASSIFICATION OF AUTOMOTIVE PARTS AND ACCESSORIES

Pursuant to Export Duty and Import Duty Law No. 45/2005/QH11 of June 14, 2005,

Pursuant to Customs Law No. 29/2001/QH10 of June 29, 2001, and June 14, 2005 Law No. 42/2005/QH11 Amending and Supplementing a Number of Articles of the Customs Law;

Pursuant to the Government’s Decree No. 77/2003/ND-CP of July 1, 2003, defining the functions, tasks, powers and organizational structure of the Finance Ministry;

The Ministry of Finance guides the classification of imported automotive parts and accessories for application of preferential import duty rates prescribed in Decision No. 57/2005/QD-BTC of August 10, 2005, as follows:

I. GENERAL PROVISIONS:

The list and import duty rates of automotive parts and accessories issued together with Decision No. 57/2005/QD-BTC shall apply to the classification and calculation of payable tax of parts and accessories in knock-down sets in replacement of the calculation of payable tax  of parts in CKD and IKD forms stipulated in the Finance Minister’s Decision No. 110/2005/QD-BTC of July 25, 2003. Accordingly, the import duty rates are prescribed on the following principles:

- Automotive parts and accessories that may be used for different kinds of automobiles are subject to a uniform import duty rate irrespective of kinds of automobile. For example: glass, mirrors, electric wire sets, etc.

- Other automotive parts and accessories are subject to import duty rates varying according to kinds of automobiles (basically four major kinds: automobiles for the transport of under 16 persons; automobiles for the transport of 16 persons or more; cargo trucks with a maximum loaded tonnage not exceeding 5 tons and those of a maximum loaded tonnage exceeding 5 tons).

2. The classification of and application of import duty rates to automotive parts and accessories under the guidance of this Circular uniformly apply to imported accessories and parts irrespective of whether they are used for manufacture, assembly, maintenance, repair, business or other purposes.

II. LIST AND IMPORT DUTY RATES OF AUTOMOTIVE PARTS AND ACCESSORIES

The list and import duty rates of automotive parts and accessories are stipulated in List I and List II issued together with Decision No. 57/2005/QD-BTC of August 10, 2005, of the Minister of Finance (hereinafter collectively referred to as List), specifically as follows:

1. List I has been formulated on the basis of the Preferential Import Tariffs. Each 4-digit commodity heading consists of many sub-headings but only some of 6-digit or 8-digit sub-headings cover automotive parts and accessories. To facilitate the commodity reference and classification by customs declarers and customs offices, the commodity headings still include all of their 6-digit and 8-digit sub-headings.

Example: In heading 7007 (safety glass, of hardened glass or rolled glass), only 8-digit sub-heading 7007.11.10 covers safety glass of a kind used for automobiles. However, in order to facilitate reference and classification, the list still contains all sub-headings of heading 7007.

2. List II covers a number of automotive accessories and parts already classified according to general regulations in List I. However, in order to distinguish the duty rates applicable to accessories and parts of each kind of automobile, the List makes separate classifications (automobiles for the transport of under 16 persons; automobiles for the transport of 16 persons or more; cargo automobiles with a maximum loaded tonnage not exceeding 5 tons and those with a maximum loaded tonnage exceeding 5 tons). Accordingly, some categories of accessories and parts in several sub-headings in List I must be transferred to List II for application of different import duty rates. The sub-headings of commodities transferred to List II are marked with asterisks at the duty rates in List I.

Example 1: In List I, 8-digit sub-heading 8409.99.41 (carburetors and parts thereof) has the preferential import duty rate of 15% marked with an asterisk (*), which means that this sub-heading covers some automotive parts to be specified in List II which are subject to a duty rate other than 15%. Upon classification, it is necessary to refer to List II which stipulates a duty rate other than 15% for carburetors of which kinds of automobiles, specifically:

- List II specifies “carburetors and parts thereof of a kind used for cargo trucks and automobiles for the transport of 16 persons or more” at Item 4.1. with the preferential import duty of 10%. So, if carburetors and parts thereof are of a kind used for cargo trucks and automobiles for the transport of 16 persons or more, the duty rate of 10% specified in List II shall apply instead of the duty rate of 15% in List I. Accordingly, “carburetors and parts thereof” of a kind used for automobiles for the transport of under 16 persons (not specified in List II) are subject to the duty rate of 15% specified in sub-heading 8409.99.41 of List I.

Example 2: In List I, sub-heading 8708.99.99 (others) has the preferential import duty rate of 30% marked with an asterisk (*), which means that this sub-heading covers some kinds of accessories to be specified in List II which are subject to a duty rate other than 30%, specifically:                   

- The commodity “Leaf springs” at Item 20.1 of List II is subject to the preferential import duty rate of 20%; parts and accessories (excluding leaf springs) in sub-heading 8708.99.99 at Item 20.2 of List II are liable to the preferential duty rate of 5%. Meanwhile, chassis not fitted with engines are liable to the preferential import duty rate of 30% specified in sub-heading 8708.99.99 in List I.

Other automotive parts and accessories that are not specified in any headings in Lists I and II above shall be classified and liable to import duty rates specified in the Preferential Import Tariffs issued together with the Finance Minister’s Decision No. 110/2003/QD-BTC of July 25, 2003, decisions amending and supplementing Decision No. 110/2003/QD-BTC, and Circular No.  85/2003/TT-BTC of August 29, 2003, guiding the classification of goods according to the List of Imports and Exports, the Preferential Import Tariffs and the Export Tariffs.

Example: The commodity “Magnetic valves used for small automobiles for the transport of persons and for buses” is not specified in Lists I and II. So, it shall be classified and liable to an import duty rate specified in the Preferential Import Tariffs issued together with Decision No. 110/2003/QD-BTC. Accordingly, this commodity falls into sub-heading 8481.20.11 and is liable to the preferential import duty rate of 5%.

3. A number of headings and sub-headings covering automotive accessories and parts and other commodities are all liable to the import duty rates specified in Decision No. 57/2005/QD-BTC, unless such sub-headings separate automotive accessories and parts for application of different duty rates.

Example 1: Sub-heading 7099.10.00 “Rear-view mirrors of a kind used for motor vehicles” has the preferential import duty rate of 30%, which means that this duty rate is applicable to rear-view mirrors of all kinds of motor vehicles, such as automobiles, motorbikes, etc.   

Example 2: Sub-heading 8544.30.10 “Ignition wiring sets and other wiring sets of a kind used for motor vehicles” has the preferential import duty rate of 20%, which means that this duty rate is applicable to ignition wiring sets and other wiring sets of all kinds of motor vehicles, such as automobiles, motorbikes, etc.      

4. Though a number of headings in the List include headings and sub-headings covering automotive accessories and parts and other commodities, only automotive accessories and parts are separated and liable to different duty rates in List II and other commodities are still liable to duty rates specified in List I.

Example: In sub-heading 8519.99.30 of audio equipment of a kind using compact discs, only those of a kind used for automobiles are separated and specified at Item 11 of List II and are liable to the duty rate of 30%. Other audio equipment of this sub-heading are liable to the duty rate of 50% specified in List I.

III. CLASSIFICATION PRINCIPLES:

The classification of automobile parts and accessories shall comply with Circular No.  85.2003/TT-BTC of August 29, 2003, guiding the classification of goods according to the List of Imports and Exports, the Preferential Import Tariffs and the Export Tariffs. Following are specific regulations for a number of particular cases:

1. Classification of automotive parts in complete or incomplete knock-down sets:

1.1. Imported parts in complete or incomplete knock-down sets for automobile manufacture or assembly are all classified and taxed according to each heading/sub-heading at the duty rate prescribed for each detail and part specified in Decision No. 57/2005/QD-BTC and relevant documents.

1.2. Conditions for classification and calculation of payable tax under the provision of Point 1.1:

- Accessories and parts are imported directly or through entrustment by enterprises that satisfy the standards of automobile manufacture or assembly enterprises stipulated by the Ministry of Industry.

- Details and parts in knock-down forms may be finished products which must, however, have basic characteristics of component products for assembly together at the knock-down degree at least equal to the knock-down degree of automotive part sets stipulated in Decision No. 05/2005/QD-BKHCN of May 11, 2005, of the Minister of Science and Technology.

The condition on the knock-down degree stipulated in Decision No. 05/2005/QD-BKHCN is not applicable to the cases of manufacture and assembly of special-use automobiles on the basis of automotive chassis fitted with engines (chassis automobiles).

1.3. When an automobile manufacture or assembly enterprise imports automotive parts in the incomplete or complete knock-down form for automobile manufacture or assembly with the knock-down degree lower than that stipulated in Decision No. 05/2005/QD-BKHCN, it shall pay an import duty thereon at the duty rate applicable to automobiles in complete units.

1.4. The classification of parts and details in knock-down forms shall be effected according to the knock-down degree upon importation. If each detail is imported in the knock-down form, classification shall be made according to details; if detail assemblies are imported, classification shall be applied according to detail assemblies; it is not allowed to separate details in each assembly for classification and application of different tax rates.

2. Specific classification of a number of automotive accessories and parts:

a/ Chassis fitted with engines and chassis not fitted with engines:

- Chassis fitted with engines are classified in heading 8706; depending on their types (chassis of cargo trucks, automobiles for the transport of persons, special-use automobiles, etc.,), they shall be classified in different sub-headings of heading 8706.

- Chassis not fitted with engines are classified in sub-heading 8708.99.99 of heading 8707.

b/ Chassis fitted with cabins are classified in the same headings 8792, 8703 and 8704 of corresponding automobiles in complete units but not in heading 8706.

c/ Gear boxes and other speed acceleration structures and clutches of a kind used for automobiles are classified into corresponding sub-headings of heading 8708 but not in heading 8483.

d/ Other parts and accessories in Item 20 of List II: Parts and accessories in this item do not cover all other automotive parts and accessories not yet specified or included elsewhere in List I and List II but only cover parts and accessories in sub-heading 8708.99.99, including:

- Leaf springs, which are liable to the preferential import duty rate of 20%.

- Chassis not fitted with engines, which are liable to the preferential import duty rate of 30% specified in List I.

- Other parts in sub-heading 8708.99.99, which are liable to the preferential import duty of 5%.

3. Parts used for cargo trucks with a total loaded tonnage exceeding 20 tons:

1.1. Parts and accessories of headings 4011; 4012;4013; 4016; 6813; 7007; 709; 8415; 8421; 8481; 8482; 8484; 8507; 8511; 8512; 8519; 8539; 8544; 8708.29.13; 8708.29.17; 8708.29.93; 8708.29.17; 9029; 9104 and 9401; automotive bodies in sub-headings 8708.29.93 and 8708.29.87; chassis not fitted with engines in sub-heading 8708.99.99 are liable to the preferential import duty rates specified in Lists I and II.

1.2. Other parts and accessories (not including parts and accessories specified in Item 1.1) which may only be used for cargo transport with a total loaded tonnage exceeding 20 tons are liable to the uniform import duty rate of 3%.

Example 1: Bodies of cargo trucks with a total loaded tonnage exceeding 20 tons are classified in sub-headings 8708.29.93; 8708.29.97 (among parts and accessories specified in Item 1.1.). So they are liable to the import duty rate of 20% prescribed for bodies of trucks in general.

Example 2: Engines of cargo trucks with a loaded tonnage in sub-heading 8407.34.29 (other than accessories and parts specified in Section 1.1) are liable to the preferential import duty rate of 3%.

4. Parts and accessories of automobiles for the transport of both persons and cargo:

4.1. Parts and accessories of automobiles for the transport of both persons and cargo are classified and liable to the preferential import duty rate applicable to parts and accessories of cargo trucks with a total unloaded tonnage not exceeding 5 tons.

Example: Reciprocating internal combustion engines of automobiles for the transport of both persons and cargo with a capacity of over 1,000 cc and completely assembled are classified in Section 2.2 of List II together with cargo trucks and liable to the import duty rate of 20%.

4.2. For parts and accessories fit in compartments for the transport of persons but not used in cargo trucks shall be classified as similar parts and accessories of automobiles for the transport of persons in heading 8703.

5. Parts and accessories of special-use automobiles:

Parts and accessories of special-use automobiles (excluding special-use automotive bodies and special-use equipment and parts) are classified as and liable to rates applicable to parts and accessories of automobiles for the transport of persons and of cargo trucks corresponding to automobiles of base types used for manufacture of special-use automobiles, specifically:

- If special-use automobiles are manufactured from base automobiles being cargo trucks, their parts and accessories shall be classified as and liable to duty rates prescribed for accessories and parts of cargo trucks of corresponding type:

Example 1: For freezing automobiles manufactured and assembled from base automobiles being cargo trucks with a total loaded tonnage not exceeding 5 tons, their accessories and parts shall be classified as and liable to import duty rates applicable to parts and accessories of cargo trucks with a total loaded tonnage not exceeding 5 tons.

Special-use parts of freezing automobiles: freezing equipment, insulation panels, etc., are classified into relevant codes in the Preferential Import Tariffs. For example: freezing equipment is classified in heading 8418.

- If special-use automobiles are manufactured from base automobiles being those for the transport of persons, their parts and accessories shall be classified as and liable to import duty rates prescribed for accessories and parts of automobiles of a corresponding type for the transport of persons:

Example 2: For ambulances manufactured and assembled from base automobiles being automobiles for the transport of under 16 persons (including driver), their accessories and parts shall be classified as and liable to import duty rates applicable to accessories and parts of automobiles for the transport of under 16 persons.

Special-use parts of ambulances: stretches, horns, emergency medical treatment equipment, etc., are classified in relevant codes in the Preferential Import Tariffs. For example: stretches are classified in heading 9402, sub-heading 9402.90.10 with the import duty rate of 0%.             

IV. ORGANIZATION OF IMPLEMENTATION:

1. Issued together with this Circular is a list of automotive parts and accessories of sub-headings based on the commodity database of the World Customs Organization for reference by customs declarers and customs offices.

2. In the course of implementation, if appear parts that may be commonly used for different kinds of cars but are subject to two different import duty rates, local customs offices shall immediately report them to the Ministry of Finance (the Tax Policy Department and the General Department of Customs) for timely handling.

3. This Circular takes effect 15 days after its publication in “CONG BAO”. In the course of implementation, any arising problems should be promptly reported by units, organizations and individuals to the Ministry of Finance for settlement.