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Customs & Global Trade Update | June 2024
This update highlights the key customs and global trade on June 2024
This update highlights the following matters:
- Implementation of EU Import Control System 2 (ICS2) Release 3.
- Updates on the Value-Added Tax (VAT) rate reduction for the last six months of 2024.
- Updates on the accession of the United Kingdom (UK) to the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (the CPTPP).
- Decree on an extension of the deadline of VAT, Corporate Income Tax (CIT), Personal Income Tax (PIT) and land rent payments in 2024.
- Official Letters (OLs) providing guidance on the following matters:
- Differences on the consumption rate and loss ratio affecting the origin of goods declared in Certificate of Origin (C/O)
- Tax policy for goods imported by Export Processing Enterprises (EPE) for which the usage purpose changes
- Classification and duty rate application of automotive parts in complete knock-down sets (CKD)
- Customs procedure for scraps returned after exportation
- Difference on HS codes declared in the C/O and customs declaration
- Determining whether an entity is a foreign trader without a presence in Vietnam
Implementation of EU ICS2 Release 3
The mainstream media has recently provided coverage that from 3 June 2024 onwards the EU will implement Release 3 of the ICS2. Accordingly, businesses transporting imported goods into, or transiting through the EU, must declare information prior to the arrival of the goods through the ICS2 of EU Customs Union via Entry Summary Declaration (ENS).
Key information of the ENS includes a 6-digit HS code for each line item listed in the commercial invoice, a detailed description of the goods, the Economic Operators Registration and Identification (EORI) number of the EU-based consignee, seller and buyer information among other things.
Pre-arrival information and risk analysis will enable EU customs authorities to detect security threats and appropriately intervene in the supply chain to protect the commercial security of the EU and its citizens.
EU member states will grant access to ICS2 to relevant stakeholders. Accordingly, businesses included in Release 3 should be aware of the deployment timeline to provide the required information:
- From 3 June 2024 to 4 December 2024: maritime and inland waterway carriers.
- From 4 December 2024 to 1 April 2025: secondary maritime and inland waterway filer.
- From 1 April 2025 to 1 September 2025: road and railway carriers.
Therefore, all logistics enterprises, express couriers, delivery, ocean, railway, aviation and road transportation companies related to goods exported from Vietnam to the EU must declare data on the ICS2 before the goods arrival. If Vietnamese companies are not aware of such regulations, they may face consequences, such as: containers and shipments being halted at the EU border, goods not getting customs clearance by the EU Customs. Incomplete or rejected declarations will be subject to sanctions due to non-compliance with the EU regulations.
Updates on the VAT rate reduction for the last six months of 2024
On 23 May 2024, the Ministry of Finance (MoF) submitted Proposal No. 110/TTr-BTC to the Government on preparing the draft Resolution of the National Assembly on the VAT reduction for the last six months of 2024. The draft Resolution proposes:
- To continue the policy of reducing the VAT rate for certain groups of goods and services currently subject to the 10% VAT rate (now reduced to 8%), except for the following goods and services:
- Tele-communications, information technology; financial, banking, securities and insurance activities, real estate business, metals and products of prefabricated metal production, mining activities (exclusive of coal mining activities), coke production, refined petroleum, Production of chemicals and chemical products, Goods and services subject to special consumption tax.
- Application timeline is from 1 July 2024 to 31 December 2024.
On 28 May 2024, the Government issued Resolution No. 81/NQ-CP approving the proposal of the MoF to develop a National Assembly Resolution on the VAT cut by 2% for the last six months of 2024. The Government will report to the National Assembly and the Standing Committee of the National Assembly for their consideration and approval at the 7th plenary session of the 15th National Assembly.
Updates on the accession of the UK to the CPTPP
On 8 June 2024, at the 7th plenary session of National Assembly, the Ministry of Industry and Trade (MoIT) presented the explanatory report regarding the UK and North Ireland joining the CPTPP (the CPTPP document). According to the explanatory report of the MoIT and the Vietnam President’s proposal to ratify the CPTPP document, the accession of the UK to the CPTPP is expected to bring economic advantages to Vietnam.
Some significant impacts on the accession of the UK to the CPTPP presented at the plenary session including:
- From a bilateral perspective, Vietnam has achieved its goal to request the UK to commit to opening their market at a high level according to the standards of the CPTPP Agreement. This commitment of the UK for Vietnam, in some areas, is at higher level compared to other member countries, and higher than the commitments in the Free Trade Agreement between Vietnam and the United Kingdom and Northern Ireland (the UKVFTA). Specifically, as follows:
- The UK commits to eliminate 94.4 percent of tariff lines for Vietnam as soon as the CPTPP takes effect.
- Some agricultural and seafood products of Vietnam shall be entitled to enjoy quota and import duty removal or subject to higher tariff quotas compared to the tariff quotas applied for other member countries, along with enjoying the preferential tariff rates within tariff quotas, rice is an example.
- Based on Vietnam's confirmation of sectors that are considered as operating in Vietnam under market economy conditions, the UK commits not to apply Article 14.1(b) of its 2019 Trade Remedies Regulations on imported goods from Vietnam.
- From a multilateral perspective, the UK's accession to CPTPP will contribute to connecting the Asia-Pacific and American regions with Europe, attracting more economies to join the free trade agreement in the Asia-Pacific region, indirectly expanding market entries for Vietnamese goods.
According to the MoIT, the UK has completed the formal ratification of its accession to CPTPP on 16 May 2024, and as at the time of our update, four member countries of the CPTPP have announced their completion of the ratification procedures for the UK’s accession to the CPTPP namely, Singapore, Japan, Chile, and New Zealand.
On 26 May 2024, the National Assembly of Vietnam has passed the Resolution on the ratification of the UK’s accession to the CPTPP. The ratification procedure for the UK’s accession to the CPTPP is expected to be completed by 16 October 2024.
Decree on extension of deadlines for VAT, CIT, PIT and land rent payments in 2024
On 17 June 2024, the Government issued Decree No. 64/2024/ND-CP (Decree 64) on extending the deadlines for the payment of VAT, CIT, PIT and land rent in 2024, specifically as follows:
- For VAT (excluding VAT on imported goods): extend the deadline for VAT payments for the VAT payable incurred for the months from May to September (in the case of monthly VAT declarations) and of quarter II and III (in the case of quarterly VAT declarations) in 2024. A VAT return is still required to be submitted in accordance with current regulations.
- For CIT: The deadline is extended by three months, applied for the second quarter provisional payment.
- For VAT and PIT of households and individuals: The deadline for the payment of taxes incurred in 2024 is extended to no later than 30 December 2024.
- For land rent: The deadline for 50% of the land rent due in 2024 (the payment for the second period of 2024) is extended by two months from 31 October 2024.
Decree 64 is effective from the date of signing until 31 December 2024. For details, refer to the Decree.
Some guidance provided in the form of OLs:
No. Subject Content
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2352/TCHQ-PC Dated 28 May 2023 |
Differences on the consumption rate and loss ratio affecting the origin of goods declared in C/O |
Last February, the MoF chaired a Dialogue with Korean enterprises on tax and customs policies in 2024. In the Dialogue, the GDC received some questions from enterprises as well as suggestions on the prevailing customs regulations. One question related to the origin of goods (Question 3 in OL). The question relates to the following circumstances. At the time of applying for a C/O the enterprise used the projected consumption rate and loss ratio to calculate the rule of origin, which had been approved by the MoIT for the C/O issuance. Subsequently, the enterprise used a technical or actual consumption rate and realized the origin of goods changed, as a result, compared to the C/O previously issued by MoIT:
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|---|---|---|
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2340/TCHQ-TXNK Dated 27 May 2024 |
Tax policy for goods imported by an EPE which changes the usage purpose |
If an EPE re-imports goods which are returned for repair or recycling purposes but subsequently does not re-export them, the custom procedure must follow Clause 7, Article 47, Decree No. 08/2015/ND-CP dated 21 January 2015 (Decree 08), accordingly:
Where an EPE is a foreign-invested enterprise and wants to liquidate the imported goods by means of selling, gifting, or donation to Vietnam domestic market, if it satisfies all conditions to liquidate goods as prescribed in Circular No. 04/2007/TT-BTM dated 4 April 2007, the EPE can conduct either of the following customs procedures:
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2236/TCHQ-TXNK Dated 22 May 2024 |
Classification and duty rate application of automotive parts in CKD sets |
If an enterprise imports automotive parts in CKD but does not participate in the tax incentives program under Decree No. 26/2023/ND-CP dated 31 May 2023 of the Government (Decree 26), and it satisfies all conditions in Point b.5.1, Clause 2, Section II, Appendix II in Decree 26, the enterprise can choose either of the following:
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2178/TCHQ-GSQL Dated 15 May 2024 |
Customs procedure for scraps fabric returned after exportation |
If an enterprise exports scrap fabric overseas, which is subsequently returned back to Vietnam, upon carrying out the re-import customs procedure:
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2011/TCHQ-GSQL Dated 9 May 2024 |
Difference on HS codes declared in the C/O and customs declaration |
When the HS code of imported goods indicated in the C/O is different from the HS code declared in customs declarations:
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2643/TCHQ Dated 10 June 2024 |
Determining whether an entity is a foreign trader without a presence in Vietnam |
During the customs procedures for OTS import and export of goods at Clause 1(c), Article 35 of Decree 08, the GDC encountered difficulties related to determining foreign entities having no presence in Vietnam. The documents on trade and foreign trade only define the term foreign trader without a presence in Vietnam, but do not specifically state what are the required documentation, methods, determining procedures, inspection, and which is the administration authority responsible for this matter. This causes difficulties for the GDC in guiding customs procedures. Accordingly, the GDC requests the MoIT and the Ministry of Planning and Investment to provide guidance on the composition of the documents, the methods and procedures for determining and inspecting whether a foreign trader has a presence in Vietnam or not. |