Effective from 05 June 2018, Circular 39/2018/TT-BTC (“Circular 39”) provides amendments to Circular 38/2015/TT-BTC dated 25 March 2015 (“Circular 38”) on customs procedures, customs supervision, and inspection export duty, import duty, and tax administration applied to exports and imports. The regulations require export manufacturing and processing enterprises to submit the customs finalization reports annually.
Decree 128/2020/ND-CP (“Decree 128”) which took effect from 10 December 2020 also provides for new administrative penalties for customs violations related to annual customs finalization reports and the inventory management of raw materials/supplies imported to serve the purpose of manufacturing for export.
Customs finalization reports (“CFRs”)
CFRs or statement of use of imported raw materials, supplies, and exported finished goods are only required for enterprises conducting production for exports, in which the raw materials and supplies were exempted from import customs duties.
According to Vietnamese regulations on customs, processors and manufacturers of exports shall submit annual CFRs no later than 90 days from the end of the fiscal year or before the acquisition, merger, division, or relocation of the place where procedures for import of raw materials and supplies are followed. After submission to customs authorities, the CFRs could be revised (if needed) within 60 days from the date of the first submission. The CFRs include three (03) separate forms:
- Form No. 15/BCQT-NVL/GSQL (paper-based) (or Form no. 25 via the e-customs system): is a statement of movement and inventory of raw materials and supplies imported for manufacturing/ processing contracts;
- Form No. 15a/BCQTSP-GSQL (paper-based) (or Form no. 26 via the e-customs system): is a statement of movement and inventory of finished products produced from raw materials and supplies imported for manufacturing/processing contracts; and
- Form No. 16/DMTT-GSQL (paper-based) (or Form no. 27 via the e-customs system): is a calculation of norms of manufacturing/ processing of exports.
Administrative penalties related to CFRs.
Under Decree 128, customs authorities are taking an aggressive stance on challenging the violations.
Related to CFRs and inventory management, especially:
- Late submission of CFRs according to requirements on the timeline.
- Preparation of CFRs in which the quantity of imported materials/supplies and parts used for production does not match the actual usage.
- Preparation of CFRs in which inconsistent with the accounting books, accounting documents or customs declaration; and
- Failure to manage materials, supplies, machinery, and equipment, finished products from manufacturing/processing for export activities, thereby resulting in a discrepancy between actual stock and accounting documents, accounting books or customs dossier on exports/imports.
Common issues
Based on our observations, typical areas of scrutiny faced by enterprises about CFRs and inventory management include:
- The discrepancy in the record for codes of materials/finished goods on accounting books and customs dossiers.
- Failure to notify the destruction of materials and finished goods to competent customs authorities.
- Abnormal loss rate leading to the inaccurate actual norm; and
– Unexplained differences in actual usage of imported raw materials/ exported finished goods, in accounting books, customs dossiers and CFRs.
THT CARGO LOGISTICS can assist you in addressing the customs authorities’ challenges related to CFRs and inventory management with:
- Review of CFRs to provide suggestions for the improvement of the current internal management, the recommendation for enterprises future preparation of CFRs;
- Support in preparation of CFRs;
- Provide customs health check service which will be useful to diagnose all key customs issues and suggest enterprises to have timely remedial solutions, especially in the context of fast- changing customs legislation; and
- Support enterprises in post customs audit support.
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