Circular No. 02/2007/TT-BTM on detailed classification of production materials, supplies, and spare parts exempted from import tax as stipulated in Clause 15, Article 16 of Decree No. 149/2005/NĐ-CP dated December 8, 2005 of the Government detailing the implementation of the Law on Export Tax and Import Tax.

CIRCULAR

Detailed classification of production materials, supplies, and components exempt from import tax as provided for in Clause 15, Article 16 of Decree No. 149/2005/NĐ-CP dated December 8, 2005, of the Government detailing the implementation of the Law on Export Tax and Import Tax.

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Pursuant to Decree No. 29/2004/NĐ-CP dated January 16, 2004, of the Government stipulating the functions, tasks, authorities, and organizational structure of the Ministry of Trade.

Pursuant to Decree No. 149/2005/NĐ-CP dated December 8, 2005, of the Government detailing the implementation of the Law on Export Tax and Import Tax.

Pursuant to Decree No. 108/2006/NĐ-CP dated September 22, 2006, of the Government detailing and guiding the implementation of certain provisions of the Investment Law.

After reaching consensus with relevant ministries and agencies, the Ministry of Trade shall guide the detailed classification of production materials, supplies, and components exempt from import tax as provided for in Clause 15, Article 16 of Decree No. 149/2005/NĐ-CP of the Government as follows.

This technical regulation sets out technical requirements, testing methods, sampling procedures; management requirements; responsibilities of organizations and individuals producing, trading, and importing cigarettes.

1. Scope of Application and Scope of Regulation

Investment projects in special preferential investment sectors (Appendix I, Item A of Decree No. 108/2006/NĐ-CP), areas with extremely difficult socio-economic conditions (Appendix II of Decree No. 108/2006/NĐ-CP), and investments in the production of mechanical, electrical, and electronic components are exempt from import tax on production materials, supplies, and components for a period of five years from the date of commencement of production.

2. Explanation of terms

a) "Production materials" refers to raw materials that must undergo processing, manufacturing, or direct transformation to form products specified in the Investment Certificate.

b) "Supplies" refers to necessary materials used in the production process to create products but do not directly constitute the product.

c) "Components" refers to imported electronic parts, semiconductor parts, and mechanical parts used for final assembly of products.

3. General Conditions for Production Materials, Supplies, and Components Exempt from Import Tax

a) Production materials, supplies, and components exempt from import tax must not be included in the "List of Raw Materials, Supplies, Semi-finished Products Produced Domestically" published by the Ministry of Planning and Investment.

b) Production materials, supplies, and components exempt from import tax do not include waste materials or by-products.

c) Supplies do not include packaging materials, industrial cleaning chemicals, spare parts, lubricants, and other maintenance and operation materials for machinery and equipment.

4. Supplementing and Adjusting Classification

The classification of production materials, supplies, and components exempt from import tax as stipulated in this Circular will be reviewed and adjusted as necessary based on proposals from specialized state management agencies.

II. CLASSIFICATION OF PRODUCTION MATERIALS, SUPPLIES, AND COMPONENTS EXEMPT FROM IMPORT TAX

A. INVESTMENT PROJECTS IN SPECIAL PREFERENTIAL SECTORS

1. Production of new materials and energy; high-tech product manufacturing, biotechnology, information technology; machine manufacturing

a) Composite material production, lightweight building materials, rare materials

- Initial raw materials for producing composite materials, lightweight building materials, and rare materials;

- Additives.

b) High-quality steel, alloy, special metal, expanded iron, steel billet production

- Steel billets, colored metal billets used for high-quality steel, alloy, colored metal, special metal, expanded iron production;

- Metal ores, iron ores for steel billet production;

- Surface coatings;

- Rust inhibitors, fire retardants used in metallurgy;

- Metallurgical auxiliary materials.

c) Medical equipment production in analytical and extraction technologies; orthopedic tools, wheelchairs, specialized tools for disabled persons

- Metals in all forms of sheets, bars, coils, pipes;

- Various plating, painting, thermal insulation, electrical insulation, welding materials;

- Polishing agents, mold release agents, fire retardants;

- Electronic parts, semiconductor parts.

d) Advanced technology and biotechnology application for human drug production meeting international GMP standards; antibiotic raw material production

- Organic and inorganic chemicals for antibiotic and human drug raw material production;

- Bacteria for antibiotic cultivation;

- Cultivation environments for bacteria;

- Extracts from bacterial cultivation environments.

e) Computer, information, telecommunications, internet, and key information technology product production

- Metals in all forms of sheets, bars, coils, pipes;

- Various plating, painting, thermal insulation, electrical insulation, welding materials.

f) High-tech semiconductor and electronic component production

- Initial raw materials for semiconductor production;

- Electronic parts, semiconductor parts.

g) Precision machinery production and manufacturing; industrial production safety monitoring equipment; industrial robots

- Metals in all forms of sheets, bars, coils, pipes;

- Various plating, painting, thermal insulation, electrical insulation, welding materials;

- Polishing agents, mold release agents, fire retardants;

- Electronic parts, semiconductors, electronic component clusters for control unit assembly.

2. Agricultural, forestry, aquaculture cultivation; salt production; artificial breeding, new crop and livestock seed production with high economic efficiency

a) Forest planting and care

- Seedlings;

- Veterinary drugs;

- Plant protection chemicals;

- Fertilizers;

- Crop care chemicals.

b) Agricultural, forestry, and aquaculture cultivation on undeveloped land, unexploited waters

- Seedlings, breeding stock, eggs, seeds;

- Breeding stock feed;

- Veterinary drugs;

- Plant protection chemicals;

- Fertilizers;

- Seedling and breeding stock care chemicals;

- Environment creation materials for seedling and breeding stock cultivation.

c) New and economically efficient artificial breeding, crop, and livestock seed production

- Original seeds, breeding stock, eggs, seeds;

- Breeding stock feed;

- Veterinary drugs;

- Plant protection chemicals;

- Fertilizers;

- Seedling and breeding stock care chemicals;

- Environment creation materials for seedling and breeding stock cultivation.

d) Salt production, extraction, and refining

- Unprocessed natural salt;

- Chemicals used in commercial salt production technology.

III. HIGH TECHNOLOGY APPLICATION, ENVIRONMENTAL PROTECTION; RESEARCH, DEVELOPMENT, AND INCUBATION OF HIGH TECHNOLOGY

a) Pollution treatment and environmental protection; production of pollution treatment equipment, environmental monitoring and analysis equipment

- Metals in all forms of sheets, bars, coils, pipes;

- Various plating, painting, thermal insulation, electrical insulation, welding materials;

||| Chemicals of various types for waste treatment, pollution control, and environmental protection;

||| - Microbial materials for waste treatment and pollution control;

- Polishing agents, mold release agents, fire retardants;

- Electronic parts, semiconductors, electronic component clusters for control unit assembly.

||| b) Collection, treatment of wastewater, exhaust gas, solid waste; recycling and reuse of waste;

||| - Chemicals of various types for wastewater, exhaust gas, and solid waste treatment;

||| - Microbial materials for wastewater, exhaust gas, and solid waste treatment.

||| IV. HIGH LABOR USE PROJECTS

||| Projects using regularly five thousand or more workers

||| - Raw materials for production;

||| - Supplies.

||| B. INVESTMENT PROJECTS IN AREAS WITH SPECIAL DIFFICULT ECONOMIC AND SOCIAL CONDITIONS

||| Investment projects in areas with special difficult economic and social conditions are exempt from import duties on raw materials for production and supplies but not exempt from import duties on spare parts.

||| C. INVESTMENT PROJECTS FOR THE PRODUCTION OF MECHANICAL, ELECTRICAL, AND ELECTRONIC COMPONENTS AND PARTS

||| 1. Production of mechanical components and parts

||| - Metal in sheet, bar, coil, pipe forms;

||| - Plating, painting materials of various types, thermal insulation, electrical insulation materials, welding materials, chemicals;

||| - Components for assembling complete products as follows:

||| + Engines, drive units, gearboxes of machinery, equipment, transportation means.

||| + Components and parts of engines, drive units, gearboxes of machinery, equipment, transportation means.

||| + Components and parts of precision mechanical products.

||| 2. Production of electrical components

||| The raw materials for production, supplies, and components listed below that are exempt from import duties apply only to the production of parts for power generation, transmission, and distribution equipment (including power generation units, distribution equipment, power transmission equipment, substations):

- Metals in all forms of sheets, bars, coils, pipes;

||| - Chemicals, plating, painting materials of various types, thermal insulation, electrical insulation materials, welding materials;

||| - Electrical metal wires;

||| - Polishing materials, mold release agents, fire retardants;

||| - Electronic components, component assemblies, display screens used for assembly of control and operation parts of the aforementioned electrical machinery and equipment.

||| 3. Production of electronic components

||| - Semiconductors, printed circuit boards;

||| - Soldering materials, bonding materials, surface coating materials, additives;

||| - Electronic components, mainboards, printed circuit boards, capacitors, central processing units (CPUs), integrated circuits (ICs), resistors, potentiometers, sensors, semiconductors, electrical cables, signal cables, optical fibers.

III. IMPLEMENTATION PROVISIONS

||| 1. This Circular replaces Circular No. 07/2004/TT-BTM dated August 26, 2004 of the Ministry of Trade regarding detailed classification of raw materials for production, supplies, and components exempt from import duties for five years from the start of production for foreign-invested enterprises and joint ventures under business cooperation contracts as stipulated in Clause 10, Article 1 of Decree No. 27/2003/NĐ-CP dated March 19, 2003 of the Government, except for the cases specified in Clause 2 below.

||| 2. For projects that have been granted Investment License or Investment Certificate exempt from import duties on raw materials for production, supplies, and components according to Clause 10, Article 1 of Decree No. 27/2003/NĐ-CP dated March 19, 2003 and Clause 15, Article 16 of Decree No. 149/2005/NĐ-CP dated December 8, 2005, they will continue to be exempt from import duties on raw materials for production, supplies, and components until the end of the five-year period from the date of commencement of production as classified in Section II of Circular No. 07/2004/TT-TM issued by the Ministry of Trade.

||| 3. This Circular takes effect fifteen days after its publication in the Official Gazette./.