Circular No. 74/2010/TT-BTC dated May 14, 2010 of the Ministry of Finance amending and supplementing some contents of the Finance Minister's Circular No. 116/2008/TT-BTC of December 4, 2008, guiding customs procedures for goods processed for foreign traders

THE MINISTRY OF FINANCE

Circular No. 74/2010/TT-BTC of May 14, 2010, amending and supplementing some contents of the Finance Minister’s Circular No. 116/2008/TT-BTC of December 4, 2008, guiding customs procedures for goods processed for foreign traders

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

Pursuant to June 14, 2005 Law No. 45/2005/QH11 on Import Duty and Export Duty; and November 29, 2006 Law No. 78/2006/QH11 on Tax Administration;

Pursuant to the Government’s Decree No. 154/2005/ND-CP of December 15, 2005, detailing a number of articles of the Customs Law regarding customs procedures, inspection and supervision;

Pursuant to the Government’s Decree No. 12/2006/ND-CP of January 23, 2006, detailing the implementation of the Commercial Law regarding international goods trading and goods trading agency, processing and transit with foreign parties;

Pursuant to the Government’s Decree No. 118/2008/ND-CP of November 27, 2008, defining the functions, tasks, powers and organizational structure of the Ministry of Finance;

The Ministry of Finance amends and supplements a number of contents of Circular No. 116/2008/TT-BTC of December 4, 2008, guiding customs procedures for goods processed for foreign traders (below referred to as Circular No. 116/2008/TT-BTC), as follows:

Article 1. Processing contracts

1. To amend and supplement Point 1, Clause II, Section I of Circular No. 116/2008/TT-BTC as follows:

“1. Forms of processing contracts

1.1. A processing contract must be made in writing or other forms of equivalent validity, including telegraph, telex, fax, data message and other forms prescribed by law.

Regarding signatures and seals in contracts: Foreign traders shall sign while Vietnamese traders shall sign and seal contracts as required by Vietnam’s law.

1.2. The processors being Vietnamese traders shall sign and seal documents enclosed to contracts which are issued in electronic form by the principals that are foreign traders.”

2. To amend Point 2, Clause II, Section I of Circular No. 116/2008/TT-BTC as follows:

“2. Contents of processing contracts

A processing contract must have all details specified in Article 30 of the Government’s Decree No. 12/2006/ND-CP of January 23, 2006.

In case the principal and processor conduct transactions via a third party, such must be expressed in the contract, contract annex or relevant document as proof.”

3. To amend and supplement Point 3.1, Clause II, Section I of Circular No. 116/2008/TT-BTC as follows:

“3. Processing contract annexes

Annexes of a processing contract constitute an integral part of the processing contract.

3.1. Any modifications, supplements or adjustments to the terms of a processing contract must be expressed in contract annexes which must be notified to the customs office before or when the enterprise carries out import or export procedures for the first goods lot subject to such annexes and before the expiration date of the processing contract. Particularly for the value of raw materials and supplies imported for processing, the value written on the commercial invoice included in the import dossier will be accepted and no adjustment annex is required.”

Article 2. Places of customs clearance

To amend Point 1, Clause III, Section I of Circular No. 116/2008/TT-BTC as follows:

“1. Customs procedures for a specific processing contract (including the receipt of the contract, acceptance of norms, performance of customs procedures for each lot of imports or exports under the contract and liquidation of the contract) shall be carried out at a district-level Customs Department under a provincial-level Customs Department which is selected by the enterprise concerned. Specifically:

a/ The district-level Customs Department of the locality where the production establishment performing the processing contract (including re-processing establishment) is based, or

b/ The district-level Customs Department of the locality where the enterprise’s head office or lawfully established branch is based.

If there is no customs office in the locality where its production establishment, head office or branch is based, the enterprise may select a district-level Customs Department convenient for customs clearance registration.”

Article 3. Responsibilities of enterprises and customs offices

To amend Clause IV, Section I of Circular No. 116/2008/TT-BTC as follows:

“1. Enterprises:

1.1. Enterprises shall take responsibility before law and customs offices when notifying their contracts; making declarations and carrying out import procedures for raw materials, supplies and auxiliary materials; notifying and adjusting norms; undertaking intermediary processing; making declarations and carrying out export procedures for processed products; and liquidating processing contracts. Upon completion or expiration of a processing contract, they shall liquidate the processing contract and carry out liquidation procedures at the customs office under Article 35 of the Government’s Decree No. 12/2006/ND-CP of January 23, 2006.

1.2. Upon disposing of redundant raw materials and supplies, scraps, faulty products, wastes and hired or borrowed machines and equipment under Point 6, Clause XII, Section II of Circular No. 116/2008/TT-BTC, enterprises shall proactively declare them to, and carry out procedures at, customs offices according to regulations.

2. Customs offices:

To apply risk management techniques; arrange officers to monitor enterprises in the performance of processing contracts; apply information technology to customs supervision and management and post-customs clearance inspection so as to facilitate and strictly manage the importation of raw materials and materials, exportation of products and liquidation of processing contracts.”

Article 4. Procedures for notification of processing contracts

To amend Clause I, Section II of Circular No. 116/2008/TT-BTC as follows:

“I. Procedures for notification of processing contracts

1. Responsibilities of enterprises:

At least 1 day before carrying out import procedures for the first goods lot under the processing contract, the enterprise shall notify the processing contract to the customs office. A dossier comprises:

1.1. The processing contract and its annexes (if any): To submit 2 originals (1 to be kept by the customs office and 1 to be returned to the enterprise after the contract is received) and 1 Vietnamese version (if the contract is made in a foreign language other than English).

1.2. The business registration certificate or investment license or investment certificate, for foreign-invested enterprises (if carrying out registration procedures for the first time): To submit 1 copy certified by the enterprise.

1.3. The tax identification number registration certificate (if carrying out registration procedures for the first time): To submit 1 copy certified by the enterprise.

1.4. The permit of the Ministry of Industry and Trade, for processed goods on the list of imports and exports subject to permits: To submit 1 copy certified by the enterprise and produce the original for comparison.

1.5. The certificate of eligibility for scrap import (in case of importing scraps for use as processing raw materials), issued by the provincial-level Natural Resources and Environment Department of the locality where the enterprise’s production establishment is based under Joint Circular No. 02/2007/TTLT-BCT-BTNMT of August 30, 2007, of the Ministry of Industry and Trade and the Ministry of Natural Resources and Environment, guiding Article 43 of the Law on Environmental Protection regarding criteria and conditions for scrap import.

1.6. A document explaining and evidencing its production establishment, for enterprises undertaking the processing for the first time, specifying the address of the enterprise’s head office, the address of the production establishment, equipment line and design capacity (even for cases of outsourcing); the account number and the name of the bank with which the enterprise deposits its money: To submit 1 original.

The enterprise is required to give explanations only once and make additional explanations only when there are any changes in the explained contents. In case of change in the legal person status, address of its working office or production establishment (from the time of submitting the processing contract to the time of completing the liquidation of the contract), the enterprise shall promptly notify in writing these changes to the district-level Customs Department managing the processing contract.

1.7. The processing outsourcing contract (for the case of outsourcing the processing of all products): To submit 1 copy certified by the enterprise and produce the original for comparison.

1.8. The written registration of raw materials and supplies for the processing contract or annex, made according to form No. 01/DKNVL-GC provided in Appendix I to Circular No. 116/2008/TT-BTC: To submit 2 originals.

2. Tasks of customs offices:

2.1. To receive processing contracts:

a/ For cases in which inspection of production establishments is not required: Within 8 working hours after the enterprise submits a complete and valid dossier, the customs office shall complete procedures for receiving the processing contract.

b/ For cases in which inspection of production establishments is required: Within 5 working days after the enterprise submits a complete and valid dossier, the customs office shall inspect production establishments and complete the receipt of the processing contract (or issue a written refusal of the receipt of the processing contract, if prescribed conditions are not fully met).

2.2. To examine the conditions for the receipt of the processing contract.

2.3. To check the completeness and validity of the processing contract.

2.4. To enter in a computer information related to the processing contract; return to the enterprises 1 original of the processing contract and original documents already produced.

2.5. To inspect production establishments:

a/ For cases in which inspection of production establishments is required:

When an enterprise submits its processing contract or during production, if the customs office has any doubt about the address of its production establishment or matters related to the security for the performance of the processing contract, it shall inspect the enterprise’s production establishment.

b/ Time of inspection:

The customs office may conduct inspection at the following points of time:

b1. After the enterprise submits a complete dossier of notification of the processing contract; or

b2. In the production process.

c/ Leaders of the district-level Customs Department managing the processing contract are competent to decide on the inspection of the enterprise’s production establishment.

d/ Handling of results of inspection of a production establishment which show that conditions for the performance of the processing contract are not satisfied:

d1. If the processing contract is not yet received: The customs office shall refuse to receive the processing contract and clearly state the reason.

d2. If the processing contract has been submitted:

d2.1. If the production establishment exists but fails to satisfy all conditions for production according to the prescribed production process, the customs office shall request the enterprise to make a written commitment to redress the problem within a certain period and shall suspend import procedures for subsequent lots of raw materials and supplies under the processing contract until the enterprise satisfies all conditions as prescribed by law.

d2.2. If there is no establishment production, the customs office shall stop clearing import procedures for raw materials and supplies for the performance of the processing contract and request explanation from the enterprise. Depending on the severity of the violation, it shall forward the dossier to an anti-smuggling or post-customs clearance inspection customs unit for verification, investigation and handling in accordance with law.”

Article 5. Procedures for norm notification, adjustment and inspection:

To amend Clause II, Section II of Circular No. 116/2008/TT-BTC as follows:

“II. Procedures for norm notification, adjustment and inspection

1. Notification of norms

1.1. Enterprises shall submit to customs offices a table of use norms, consumption norms and raw material and supplies wastage percentages, made according to form No. 03/TBDM-GC provided in the Appendix to this Circular (not printed herein).

For products (goods items) of different sizes or different categories, enterprises shall declare norms applicable to products of each size or each category or the average norm applicable to each product (goods item). Enterprises shall calculate average norms by the method guided in form No. 03/TBDM-GC provided in the Appendix to this Circular (not printed herein) and submit them, together with the written explanations about the method for calculating average norms, for use as a basis for inspection by customs offices when necessary.

1.2. In the course of performing a processing contract, if its actual norms are changed because of change in raw material characteristics, processing conditions or requirements of each export order, the enterprise shall submit a table of adjusted norms applicable to concerned goods items, enclosed with written explanations for each adjusted norm.

After exporting processed products, if an enterprise detects that the actual norms on the use of raw materials for export processing are different from the notified ones, it may adjust these norms before submitting the liquidation dossier but must satisfy the following conditions:

a/ It still keeps product samples or technical catalogs and design diagrams of the product or there are errors in calculating norms (for example, norms applicable to 3-layer jackets are mistakenly applied to 2-layer ones).

b/ It takes responsibility before law for the accuracy of adjusted norms.

When adjusting norms applicable to a goods item, an enterprise is not required to change the code of the goods item indicated in the processing contract. The enterprise and the customs office carrying out procedures for the processing contract shall reach agreement on the addition of a secondary code for the goods item in the table of adjusted norms and the export declaration for such goods item.

1.3. Units of calculation used in the table of norms comply with the Finance Ministry’s Decision No. 107/2007/QD-BTC of December 25, 2007, promulgating Vietnam’s list of imports and exports and must accord with those used in the notified processing contract or its annex.

For cases in which the units of calculation indicated in the notified processing contract or its annex does not accord with those prescribed in Decision No. 107/2007/QD-TTg, the enterprise shall convert them to accord with the notified table of norms.

2. Time of norm notification and adjustment

2.1. Time of norm notification:

Norms shall be notified before or upon carrying out export procedures for the first lot of goods items under the processing contract or its annex.

2.2. Time of norm adjustment: Norms shall be adjusted before carrying out customs procedures for the export of products for which norms need to be adjusted. Particularly, the adjustment of norms for processed products already exported must comply with the guidance at Point 1.2 above.

3. Norms already notified or adjusted and notified to the customs offices shall be used for liquidation of the processing contract.

4. Inspection of norms

4.1. Norms shall be inspected in the following cases:

Customs offices have detected signs of fraud related to norms notified by enterprises that perform processing contracts for foreign traders or enterprises have been handled for norm-related frauds in the course of performing processing contracts, specifically:

a/ A processing contract or its annex which shows signs of fraud is subject to norm inspection. Inspection shall be carried out on the principles prescribed in Article 3 of the Government’s Decree No. 154/2005/ND-CP of December 15, 2005, and restricted to the inspection of conformity with the results of information analysis and evaluation of law observance by the goods owner and the degree of risks of customs law violation.

b/ For an enterprise which has been handled for a norm-related violation, the time limit for norm inspection is 365 days from the date the enterprise is handled for the norm-related violation; the leader of the district-level Customs Department managing the processing contract shall decide on the norm inspection. Past this time limit, inspection will only be carried out upon detecting signs of norm-related fraud.

4.2. Inspection methods:

a/ Inspection at the customs office.

b/ Inspection at the enterprise’s production establishment.

c/ Inspection by a specialized assessment organization.

4.3. Time of inspection:

The customs office shall only conduct inspection when necessary in the following cases:

a/ Before or upon the exportation of the first lot of the goods item for which the table of norms has been submitted; or,

b/ Upon adjustment of norms applicable to processed products which have been exported under the guidance at Point 1.2 above; or,

c/ Upon liquidation of the processing contract; or,

d/ Upon post-customs clearance inspection.

4.4. Responsibilities of enterprises in the course of norm inspection:

a/ To give detailed explanations about the grounds and methods of elaborating norms of goods items already notified to the customs office, enclosed with product samples and their technical design documents (e.g., cutting diagram for garments).

b/ To produce accounting books and documents to the customs office upon request and create favorable conditions for the customs office to conduct norm inspection in a quick and accurate manner.

c/ To comply with the customs office’s decisions related to norm inspection.

4.5. Tasks of customs officers conducting norm inspection:

a/ To conduct inspection according to the prescribed process without obstructing the enterprise’s production.

b/ Time limits for inspection:

b.1. For cases of documentary examination at the customs office: Norm inspection must be completed within 8 working hours after the inspection begins.

b.2. For cases of documentary examination in combination with physical inspection at the enterprise’s production establishment: Norm inspection must be completed within 3 working days after the inspection begins. For products with a particular production process which requires coordination among specialized agencies, the inspection time limit may be prolonged but must not exceed 5 working days after the inspection begins.

c/ To make a written record of the results of inspection upon completion of inspection, which must fully and truthfully reflect the details of inspection and bear the signature of the customs officer conducting the inspection and a representative of the inspected enterprise.

4.6. Competence to decide on norm inspection: Leaders of the district-level Customs Departments managing processing contracts and customs departments conducting post-customs clearance inspection.”

Article 6. Procedures for the import of raw materials, auxiliary materials and supplies for processing

1. To amend and supplement Point 1.3, Clause III, Section II of Circular No. 116/2008/TT-BTC as follows:

“1.3. For finished products supplied by the principal for attachment to or packaging together with processed products into complete goods for export abroad, customs procedures are the same as those applicable to raw materials for processing, provided the following conditions are met:

a/ The name of the finished product and the purpose of its supply, namely for attachment to or packaging together with processed products into complete goods for export abroad, is specified in the processing contract or its annex;

b/ The quantity of finished products for attachment to or packaging together with processed products for export abroad is clearly indicated in the import customs declaration.”

2. To amend Point 2, Clause III, Section II of Circular No. 116/2008/TT-BTC as follows: 

“2. For raw materials and supplies for processing supplied by the principal in the form of on-spot import and export, customs procedures comply with Article 15 of the Government’s Decree No. 154/2005/ND-CP of December 15, 2005, and the guidance in Article 9 of this Circular.”

3. To add following Point 3 on the import of raw materials, auxiliary materials and supplies for processing via the express delivery service to the end of Clause III, Section II of Circular No. 116/2008/TT-BTC:

“3. For cases in which raw materials, auxiliary materials and supplies for processing are imported via the express delivery service and the express delivery service provider has registered a declaration according to the form of tax payment, the goods owner shall re-register the declaration at the district-level Customs Department managing the processing contract according to the form of importation. The district-level Customs Department managing the processing contract shall re-register the declaration for the goods owner based on the declaration improperly filled in and notify such in writing to the district-level Customs Department managing goods imported via the express delivery service for the latter to refund tax to the enterprise (if any).

If the goods owner knows in advance the arrival of his/her goods in Vietnam, he/she shall register a customs declaration according to the form of importation with the district-level Customs Department managing the processing contract and then transfer the dossier to the express delivery service provider for the latter to carry out customs procedures with the district-level Customs Department managing goods imported via this service. Border-gate transfer procedures are the same as those for goods imported via the express delivery service. If owners of imported goods lots subject to physical inspection make a written request for physical inspection at the place of inspection of goods imported via the express delivery service, the district-level Customs Department managing these goods shall conduct inspection at the request of the enterprise and the district-level Customs Department managing the processing contract.”

Article 7. Customs procedures for raw materials, auxiliary materials and supplies supplied by processors themselves for processing contracts

1. To amend and supplement Point 1, Clause IV, Section II of Circular No. 116/2008/TT-BTC as follows:

“1. For raw materials, auxiliary materials and supplies produced or purchased in the Vietnamese market by the processing enterprise:

1.1. The supply must be agreed upon in the processing contract or its annex. It is prohibited to supply raw materials, auxiliary materials and supplies on the list of goods banned or suspended from export.

1.2. For raw materials, auxiliary materials and supplies on the list of goods subject to export permits: To submit 1 copy and produce the original for comparison.

1.3. Customs procedures:

a/ Export-processing enterprises shall carry out customs procedures and procedures for liquidation of raw materials, auxiliary materials and supplies supplied by themselves according to current regulations (making declarations in the export customs declaration and form No. 02/NVLCU-GC provided in the Appendix to this Circular (not printed herein).

b/ Other enterprises shall carry out customs procedures only for raw materials, auxiliary materials and supplies produced or purchased in the Vietnamese market by themselves which are liable to export duty or require licenses. When carrying out export procedures for processed products, enterprises shall declare and calculate export duty (if any) in an annex to the export goods declaration (form No. PLTK/2002-XK).

Customs office shall not carry out procedures for liquidation for raw materials, auxiliary materials and supplies produced or purchased in the Vietnamese market by enterprises themselves.”

2. To amend Point 2.4, Clause IV, Section II of Circular No. 116/2008/TT-BTC as follows:

“2.4. When carrying out export procedures for processed products, enterprises shall declare in form No. 02/NVLCU-GC provided in the Appendix to this Circular - not printed herein - the names and quantities of raw materials used for the production of the export lot; and the number and date of the declaration for the import of raw materials for export production.”

Article 8. Procedures for the export of processed products abroad

To amend and supplement Clause VII, Section II of Circular No. 116/2008/TT-BTC as follows:

“VII. Procedures for the export of processed products abroad

1. When carrying out customs procedures for the export of processed products, customs declarants shall submit and produce to customs offices the following documents:

a/ The customs declaration: To submit 2 originals;

b/ The detailed list of goods, for goods of different categories or packages: To submit 1 original;

c/ The export permit, for goods subject to export permits as prescribed by law: To submit 1 original, for cases of single exportation, or to submit 1 copy and produce the original for comparison and making of a conciliation slip, for cases of multiple exportation;

d/ Other relevant documents as prescribed by law: To submit 1 original.

Customs procedures are the same as those for commercial exports prescribed in the circular guiding customs procedures but tax inspection will not be carried out. Specifically as follows:

1.1. If the processed products for export contain raw materials and supplies supplied by the processor itself, customs procedures comply with the guidance at Point 2, Clause IV, Section II of Circular No. 116/2008/T-BTC and Article 7 of this Circular.

1.2. It is required to clearly declare the quantity of finished products for attachment to or packaging together with processed products for export in the export customs declaration.

1.3. If the processed products are exported to a third partner whose name and address, however, are not yet indicated in the processing contract, when registering the export declaration, the processing enterprise shall submit to the customs office a copy of the principal’s document designating the delivery of goods to a third party.

1.4. For a goods lot subject to physical inspection, the enterprise shall produce, upon request, to the customs office the stored raw material samples (in case samples were taken) and the table of norms already notified.

If the enterprise has lost the samples or the custom office doubts that to-be-exported products are not produced from imported processing raw materials, customs officers conducting physical inspection shall take samples of exported products for assessment (or photograph the products for examination if sampling is impossible).

1.5. Right after the processing contract expires, if there remain processed products not yet exported, the enterprise shall make a commitment to the district-level Customs Department managing the processing contract that it will export all of these products within 30 days from the date of expiration of the processing contract.

The customs office shall carry out procedures for registration of export declarations only for commodity items for which norms have been notified by enterprises.

2. Customs procedures for processed export goods lots transported from a border gate to another are the same as those applicable to goods transported from a border gate to another provided in Articles 16 and 18 of the Government’s Decree No. 154/2005/ND-CP of December 15, 2005, and the Circular guiding customs procedures.”

Article 9. Customs procedures for on-spot import or export of processed products

1. To amend Point 1.1, Clause VIII, Section II of Circular No. 116/2008/TT-BTC as follows:

“1. For processed products imported on spot for use as production raw materials:

1.1. On-spot import procedures:

1.1.1. Exporting enterprises shall:

a/ Fill in all items reserved for exporting enterprises on 4 on-spot import and export customs declarations, sign and seal them;

b/ Hand 4 on-spot import and export customs declarations, goods and added-value invoices (the customer original showing the name of the foreign trader and the  name of the exporting enterprise) to the importing enterprise.

1.1.2. Importing enterprises shall:

a/ After receiving 4 on-spot import and export customs declarations, fill in all items reserved for importing enterprises on these declarations;

b/ Receive goods delivered by the exporting enterprise;

c/ Submit the customs dossier together with samples of goods imported on spot (for goods imported on spot for use as raw materials for export processing or production) to the district-level Customs Department at which it carries out import procedures for carrying out on-spot import procedures according to regulations applicable to each form of importation;

d/ After completing on-spot import procedures, keep 1 declaration and hand 2 declarations to the exporting enterprise.

1.1.3. Customs offices carrying out on-spot import procedures shall:

a/ Receive and register customs declarations and check duty calculations (for dutiable goods); conduct physical inspection only when detecting signs of violation;

b/ Certify the customs clearance, sign and seal 4 customs declarations;

c/ Keep 1 declaration and documents submitted by the importing enterprise, return to the importing enterprise 3 declarations and documents produced by the enterprise;

d/ To issue a written notice to the tax office managing the importing enterprise for monitoring, either in writing or via the computer network, if available.”

2. To add Item 1.3 to the end of Point 1, Clause VIII, Section II of Circular No. 116/2008/TT-BTC as follows:

“1.3. For cases in which the delivery and receipt of processed products imported on spot for use as raw materials for the production of processed products for export are carried out for several times a day, a week or a month, the enterprise may fill in a single aggregate declaration on-spot import and export customs declaration based in documents of each time of goods delivery and receipt such as invoices, ex-warehousing slips-cum-invoices, provided that the documents used as grounds for making this aggregate declaration are made for such day, week or month only. At the time of goods delivery and receipt, if there is any change in tax policy, a separate on-spot import and export declaration shall be made in addition to declarations subject to no change in tax policy.

The time of registration of a daily aggregate customs declaration is the last working hour of the day. The time of registration of a weekly or monthly aggregate customs declaration is the last working day of the week or month.”

Article 10. Procedures for delivery and receipt of intermediary processed products

To amend the title of Clause X, Section II of Circular No. 116/2008/TT-BTC as follows:

“X. Procedures for delivery and receipt of intermediary processed products:”

Article 11. Procedures for the transfer of raw materials, auxiliary materials, supplies; hired or borrowed machines and equipments to another processing contract in the process of performing the processing contract under the principal’s designation

1. Cases eligible for transfer:

a/ Machines and equipments already used for the performance of a completed processing contract may be transferred for use for the performance of the next processing contract with the same or a different principal;

b/ Raw materials, auxiliary materials and supplies may be transferred within 2 processing contracts (processing-ordering contract and processing-undertaking contract) with the same or a different principal, in case the principal requests a change in designs;

c/ Raw materials, auxiliary materials and supplies may be transferred within 2 processing contracts with the same principal, in case the principal has wrongly delivered them to the processor;

d/ Other cases, if enterprises make written explanations about plausible reasons which are accepted by the director of the district-level Customs Department managing the processing contract, except for cases specified at Point 6.2.3d, Clause XII, Section II of Circular No. 116/2008/TT-BTC.

2. Customs procedures

Customs procedures are the same as those for intermediary processed products guided in Clause X, Section II of Circular No. 116/2008/TT-BTC.

Article 12. Procedures for liquidation of processing contracts

Upon termination or expiration of a processing contract, an enterprise shall liquidate the processing contract and its annex(es) under Article 35 of the Government’s Decree No. 12/2006/ND-CP of January 23, 2006.

1. Liquidation dossiers:

To amend Point 1, Clause XII, Section II of Circular No. 116/2008/TT-BTC as follows:

“1.1. The table of imported raw materials and supplies, made according to form No. 01/HSTK-GC provided in the Appendix to this Circular - not printed herein: To submit 1 original.

1.2. The table of processed products for export, made according to form No. 02/HSTK-GC provided in the Appendix to this Circular - not printed herein: To submit 1 original.

1.3. A list of export declarations of processed products (including the on-spot import and export declaration and declaration of delivery of intermediary processed products) for which customs procedures have been completed under the guidance in the circular guiding customs procedures, customs inspection and supervision, import duty and tax administration for imports and exports (made according to form No. 08/HSTK-GC provided in the Appendix to this Circular - not printed herein).

1.4. The table of raw materials and supplies to be re-exported back to the foreign party and transferred to another processing contract in the course of performing the processing contract, made according to form No. 03/HSTK-GC provided in the Appendix to this Circular - not printed herein: To submit 1 original.

1.5. The table of raw materials and supplies supplied by the processor (if any), made according to form No. 04/HSTK-GC provided in the Appendix to this Circular - not printed herein: To submit 1 original.

1.6. The declaration of raw materials supplied by the processor (declaration made upon exportation of products according to form No. 02/NPLCU-GC provided in the Appendix to this Circular - not printed herein): To produce 1 original. If the customs office has doubts about the local origin of purchased raw materials, it may request the enterprise to additionally produce their purchase invoices and the principal’s documents on payment for these raw materials.

1.7. The table of raw materials and supplies already used to produce export products, made according to form No. 05/HSTK-GC provided in Appendix II to Circular No. 116/2008/TT-BTC: To submit 01 original.

1.8. The processing contract liquidation document, made according to form No. 06/HSTK-GC, provided in Appendix II to Circular No. 116/2008/TT-BTC: To submit 2 originals (one of which will be returned to the enterprise after liquidation).

1.9. The table of machines and equipment temporarily imported for re-export, made according to form No. 07/HSTK-GC provided in Appendix II to Circular No. 116/2008/TT-BTC: To submit 1 original.

1.10. The declaration of temporary import of hired or borrowed machines and equipment; the declaration of receipt of machines and equipment from another processing contract (if any); the declaration of re-export of machines and equipment: To produce the original (kept by the goods owner).

The enterprise director shall sign and seal (for private business households, sign and write the full name and the identity card’s number and place of issue) the above-said tables and take responsibility before law for the accuracy and truthfulness of liquidation data.”

2. Time limits for receipt, examination and comparison of liquidation dossiers by customs offices

To amend and supplement Point 3.1, Clause XII, Section II of Circular No. 116/2008/TT-BTC as follows:

“3.1. For an enterprise, which, according to the risk management system of customs offices, has strictly observed the customs law: Within 7 working days after the enterprise submits a complete and valid liquidation dossier, the customs office shall check the completeness and validity of the liquidation dossier and certify the liquidation for the enterprise.

Priority will be given to enterprises which apply information technology to managing and monitoring processed goods and can be connected to customs offices.”

3. Handling of cases of late submission of liquidation dossiers:

To amend and supplement Point 5.1, Clause XII, Section II of Circular No. 116/2008/TT-BTC:

“5.1. Handling of cases of late submission of liquidation dossiers:

a/ Within 90 days from the deadline for submission of liquidation dossiers, the customs office managing a processing contract shall:

a1. Send a letter inviting the enterprise’s representative to the customs office for making a record of the violation for handling according to regulations; send this letter twice, if the enterprise’s representative fails to appear, make a record of this failure by itself to serve the handling of the violation;

a.2. Apply measures to seek and request the enterprise to liquidate the processing contract.

b/ Past 90 days from the deadline for submission of liquidation dossiers, if the enterprise still fails to submit a liquidation dossier, the customs office shall calculate and assess the payable tax amount and a fine for late payment of tax on raw materials, supplies, machines and equipment under the processing contract not yet liquidated, counting from the date of registration of the import declaration of these raw materials under the Circular guiding customs procedures, customs inspection and supervisions; import duty and export duty and tax administration for imports and exports. Past the prescribed time limit for tax payment, if the enterprise still fails to pay tax according to tax assessment by the customs office, it will be subject to coercive measures under regulations.”

4. Extension of the time limits for submission of liquidation dossiers and carrying out of customs procedures for redundant raw materials; temporarily imported machines and equipment; scraps and faulty products

To supplement Point 5.3, Clause XII, Section II of Circular No. 116/2008/TT-BTC as follows:

“5.3. Extension of the time limits for submission of liquidation dossiers and carrying out of customs procedures for redundant raw materials; temporarily imported machines and equipment; scraps and  faulty products:

Extension of the time limit for submission of liquidation dossiers is permitted in the following cases:

- The enterprise simultaneously performs many processing contracts which all expire at the same point of time so it cannot prepare dossiers on time.

- The principal and processor dispute over the processing contract;

- A force majeure circumstance occurs, making the enterprise unable to observe the liquidation deadline.

On the basis of the enterprise’s written explanations, the director of the district-level Customs Department managing the processing contract shall consider and extend the time limit for submission of liquidation dossiers specified at Point 2, Clause XII, Section II of Circular No. 116/2008/TT-BTC on the time limit for submission of liquidation dossiers. Extension may be given only once and must not exceed 30 days.

Past 90 days from the deadline for submission of liquidation dossiers, if the enterprise still fails to submit a liquidation dossier under the guidance in Clause 3, Article 12 of this Circular but it makes written explanations, the director of the provincial-level Customs Department shall consider and permit the extension on a case-by-case basis. The extended duration must not exceed 30 days. Any troubles must be reported to competent authorities for direction.”

5. Customs procedures for disposal of redundant raw materials and supplies; scraps, faulty products, wastes and hired and borrowed machines and equipment

1. To amend Point 6.2.1, Clause XII, Section II of Circular No. 116/2008/TT-BTC as follows:

“6.2.1. Customs procedures for the sale of redundant raw materials and supplies, scraps, faulty products, hired or borrowed machinery and equipment in the Vietnamese market are the same as those applicable to on-spot import and export guided in Article 9 of this Circular.”

2. To amend and supplement the first paragraph of Point 6.2.3, Clause XII, Section II of Circular No. 116/2008/TT-BTC as follows:

“6.2.3. Customs procedures for the transfer of redundant raw materials and supplies and hired or borrowed machines and equipment to another processing contract under the principal’s designation are the same as those applicable to the delivery and receipt of intermediary processed products guided in Clause X, Section II of this Circular. Enterprises are not required to submit added-value invoices and, in addition, the following shall be performed:”

6. Disposal of redundant raw materials and supplies; hired and borrowed machines and equipment; and processed products which cannot be re-exported because they are abandoned by the principals

To amend Point 7, Clause XII, Section II of Circular No. 116/2008/TT-BTC as follows:

“7. For cases in which redundant raw materials and supplies, hired or borrowed machines and equipment; or processed products cannot be re-exported because they are abandoned by the principals:

The processing enterprise shall pay taxes for domestic sale according to regulations or carry out procedures for destruction under the guidance at Point 6.2.5, Clause XII, Section II of Circular No. 116/2008/TT-BTC. In case of domestic sale, the taxable value shall be calculated at the time of change of use purposes under Article 97 of the Finance Ministry’s Circular No. 97/2009/TT-BTC of April 20, 2009.”

7. Disposal of raw materials and auxiliary materials used for clearing

To add following Point 8 to the end of Clause XII, Section II of Circular No. 116/2008/TT-BTC:

“8. Enterprises may clear raw materials and auxiliary materials of the same categories among processing contracts of the same principal and processor.

Enterprises shall declare and pay taxes for redundant raw materials and auxiliary materials (if any) according to regulations after subtracting the ratios of scraps and faulty products within the norms guided in Articles 100 and 112 of the Finance Ministry’s Circular No. 79/2009/TT-BTC of April 20, 2009. The taxed value shall be calculated at the time of change of use purposes as guided in Article 97 of the Finance Ministry’s Circular No. 79/2009/TT-BTC of April 20, 2009.”

Article 13. Customs procedures for goods ordered for overseas processing

1. To amend Clause I, Section III of Circular No. 116/2008/TT-BTC as follows:

“I. Procedures for notifying processing contracts

1. Responsibilities of enterprises:

The enterprise shall notify the processing contract before carrying out export procedures for the first goods lot under the contract. A dossier comprises:

1.1. The processing contract and annexes (if any): To submit 2 originals;

1.2. The business registration certificate or investment license or investment certificate: To submit 1 copy;

1.3. The tax identification number registration certificate: 1 copy;

1.4.  The permit of a competent agency, if goods exported for the performance of the processing contract and imported processed products are on the list of imports and exports subject to permit: To submit 1 copy and produce the original.

2. Tasks of the customs office: As specified in Article 3 of this Circular.”

2. To amend Point 1.6, Clause V, Section III of Circular No. 116/2008/TT-BTC as follows:

“1.6. The written liquidation of the processing contract: To submit 2 originals.

The contents of the above table are similar to those of corresponding tables included in the dossiers of liquidation of contracts on goods processing for foreign traders guided at Clause 1, Article 12 of this Circular.”

Article 14. Liquidation forms

To use new liquidation forms provided in the Appendix to this Circular as follows:

1. Form No. 02/NVLCU-CG: Declaration of raw materials and supplies supplied by the processors themselves for the production of products for each export declaration (in replacement of form No. 02/NVLCU-GC provided in Appendix I to Circular No. 116/2008/TT-BTC).

2. Form No. 03/TBDM-GC: Table of notification of norms of each commodity item (in replacement of form No. 03/DKDM-GC provided in Appendix I to Circular No. 116/2008/TT-BTC).

3. Form No. 01/HSTK-GC: Table of imported raw materials and supplies (in replacement of form No. 01/HSTK-GC provided in Appendix II to Circular No. 116/2008/TT-BTC).

4. Form No. 02/HSTK-GC: Table of processed products for export ((in replacement of form No. 02/HSTK-GC provided in Appendix II to Circular No. 116/2008/TT-BTC).

5. Form No. 03/HSTK-GC: Table of raw materials and supplies exported back to foreign partners or transferred to other processing contracts (in replacement of form No. 03/HSTK-GC, provided in Appendix II to Circular No. 116/2008/TT-BTC).

6. Form No. 04/HSTK-GC: Table of raw materials and supplies supplied by the processors by themselves (in replacement of form No. 04/HSTK-GC, provided in Appendix II to Circular No. 116/2008/TT-BTC).

7. Form No. 08/HSTK-GC: List of export declarations of processed products.

Article 15. Organization of implementation

This Circular takes effect 45 days from the date of its signing. Any problems arising in the course of implementation should be promptly reported to the Ministry of Finance for timely settlement.

The General Director of Customs, heads of units under and attached to the Ministry of Finance and concerned organizations and individuals shall implement this Circular.-

For the Minister of Finance
Deputy Minister
DO HOANG ANH TUAN