Operational activities of Hanoi Customs officers. Photo: N. Linh

Recently, the Hanoi Customs Department has captured and responded to many questions from enterprises regarding customs procedures, financial reporting, and production facilities for processing, export production, and export processing types.

According to Nikon Plast Vietnam Co., Ltd., in the production process, the company uses certain consumable materials. They questioned whether they need to establish norms for these materials and where to include them in the financial report.

In response, Hanoi Customs stated that according to Article 55 of Circular 38/2015/TT-BTC, as amended and supplemented by Circular 39/2018/TT-BTC, and as guided in Form 16 of Circular 39/2018/TT-BTC, the norm for consumable materials is the actual amount consumed to produce one unit of product. The usage norm of raw materials, consumable materials, and the rate of material wastage are kept at the enterprise and presented when the customs authority inspects or requests an explanation of how the norms and wastage rates are calculated. Thus, the company must establish norms for consumable materials and reflect them in the financial report; if norms cannot be established, the company must provide specific annotations.

Regarding customs procedures, Novotech Co., Ltd. reported that in 2023, the warehouse supplied a quantity of raw materials to produce products. However, since the product was newly tested, it did not result in complete products, only defective semi-finished products. The company then ceased production of that product due to order cancellation by the partner. Novotech Co., Ltd. asked if the defective semi-finished products could be considered scrap in production.

Hanoi Customs analyzed that according to Clause 35, Article 1 of Circular 39/2018/TT-BTC, which amends and supplements Article 55 of Circular 38/2015/TT-BTC, “scrap is material discarded during the processing or production of export goods that no longer has its original value and is recovered for use as raw material for another production process; defective products are finished or semi-finished products that do not meet technical standards (specifications, dimensions, quality, etc.) and are discarded during the processing or production of export goods and are not suitable for export.” Therefore, Hanoi Customs stated that enterprises need to refer to the regulations to accurately determine whether the defective products are considered scrap.

Concerning production facilities, X20 Joint Stock Company requested clarification from the customs authority: the company has a production facility that has been inspected and received a production facility conclusion. If the company outsources all work to three different units, with each unit handling a different process such as cutting, sewing, and embroidering, does the company need to request production facility inspections for all three subcontracted units?

Hanoi Customs stated that according to sub-point c, point 1, clause 17, Article 1 of Decree 59/2018/ND-CP, which amends and supplements clauses 1 and 3, Article 39 of Decree 08/2015/ND-CP, the inspection of processing and production facilities, processing, and production capacity includes cases where "organizations or individuals importing goods for processing for foreign traders but subcontracting the entire processing contract to other organizations or individuals.” Therefore, in this case, since the company outsourced all imported goods for processing to other organizations or individuals, all subcontracted processing facilities need to be inspected.

Regarding certificates of origin, TOTO Vietnam Co., Ltd. inquired about using a certificate of origin (C/O) when changing the purpose of use, transitioning from a tax-exempt status to a taxable status upon post-clearance audit. Specifically, at the time of the initial declaration, such as in May 2023, the company did not have a C/O because it did not request the partner to issue one. At the time of changing the purpose of use or during the post-clearance audit, such as in February 2024, the company requested the partner to issue a C/O for the shipment (a C/O issued retrospectively). The company asked whether it could use the C/O issued at the time of changing the purpose of use or at the time of post-clearance audit to enjoy special tax incentives.

Hanoi Customs responded that the company could supplement the certificate of origin at the time of changing the purpose of use, transitioning from a tax-exempt status to a taxable status upon post-clearance audit, provided that the supplementary certificate of origin is still valid at the time of the initial customs procedures, except where otherwise stipulated by a free trade agreement to which Vietnam is a member.