Circular No. 05/2018/TT-BCT on the origin of goods

CIRCULAR

Provisions on the Origin of Goods

Pursuant to Decree No. 98/2017/NĐ-CP dated August 18, 2017, of the Government stipulating the functions, tasks, powers, and organizational structure of the Ministry of Industry and Trade;

Pursuant to Decree No. 31/2018/NĐ-CP dated March 8, 2018, of the Government detailing the Law on Foreign Trade Management regarding the origin of goods;

At the proposal of the Director of the Import-Export Department,

The Minister of Industry and Trade issues the Circular stipulating the origin of goods.

  PART I

GENERAL PROVISIONS

Article 1. Scope of Regulation

This Circular sets forth rules on the origin of goods and declarations of origin for exported goods and imported goods.

Article 2. Applicability

This Circular applies to traders, agencies, organizations issuing Certificates of Origin for goods; other agencies, organizations, and individuals involved in activities related to the origin of goods.

Article 3. Explanation of Terms

In this Circular, the following terms shall be understood as follows:

1. C/O is an abbreviation for "Certificate of Origin for Goods".

2. C/O, is an abbreviation for "Certificate of Goods Not Changed in Origin".

3. Harmonized System is an abbreviation for the term "Harmonized System of Description and Coding of Goods" defined in the International Convention on the Harmonized Commodity Description and Coding System of the World Customs Organization, including all notes that have taken effect and subsequent amendments.

4. Rules of Origin within the framework of the Agreement is a rule requiring raw materials to undergo a process of changing the commodity code or undergoing a specific manufacturing stage, or meeting a percentage value criterion or a combination thereof.

5. Cost, Insurance, and Freight Value (CIF) is the value of imported goods including transportation costs and insurance fees up to the port or customs border of the importing country. The CIF value is calculated according to Article VII of the General Agreement on Tariffs and Trade (GATT) 1994 and the Customs Valuation Agreement.

6. Free On Board Value (FOB) is the value of goods delivered alongside the ship, including shipping costs to the port or final destination before the cargo-carrying vessel departs. The FOB value is calculated according to Article VII of the General Agreement on Tariffs and Trade (GATT) 1994 and the Customs Valuation Agreement.

Chapter II

DETERMINATION OF THE ORIGIN OF GOODS

Article 4. General Principles for Determining the Origin of Goods

Goods determined to have origin under this Circular shall be considered to originate from a country, group of countries, or territory where the final production process substantially transforms the goods.

Article 5. Preferential Rules of Origin

1. For exported goods and imported goods eligible for preferential tariffs and non-tariff benefits, preferential rules of origin shall be implemented in accordance with international treaties to which Vietnam is a party and as provided for by the Ministry of Industry and Trade guiding such treaties.

2. For exported goods eligible for generalized system of preferences (GSP) and other unilateral preferences, preferential rules of origin shall be implemented in accordance with the provisions of the importing country for these preferences and as provided for by the Ministry of Industry and Trade guiding such rules of origin.

Article 6. Non-preferential Rules of Origin

1. Exported goods and imported goods shall be considered to have pure origin or to be wholly produced in a country, group of countries, or territory if they meet the provisions set out in Article 7 of Decree No. 31/2018/ND-CP dated March 8, 2018 of the Government detailing the Law on Foreign Trade Management regarding the origin of goods (hereinafter referred to as Decree No. 31/2018/ND-CP).

2. Exported goods and imported goods shall be considered to have non-pure origin or not wholly produced in a country, group of countries, or territory if they meet the origin criteria specified in the Specific Product Rules List attached as Appendix I to this Circular to guide Article 8 of Decree No. 31/2018/ND-CP. The non-preferential origin criteria in Appendix I are defined as follows:

a) Criterion “Change in Harmonized System Code” (hereinafter referred to as CTC): is the change in the Harmonized System code of the goods at the second, fourth, or sixth digit level compared to the Harmonized System code of the non-originating input material (including imported materials and materials whose origin cannot be determined) used to produce the goods.

b) Criterion “Percentage Value Criterion” (hereinafter referred to as LVC): is calculated according to the formula prescribed in Clause 3 of this Article.

3. LVC is calculated according to one of the following two formulas:

Where "VOM" is the value of originating materials, including the value of originating materials, direct labor costs, direct allocation costs, transportation costs, and profit.

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Where "VNM" is the value of non-originating or undetermined origin input materials, which may be:

The producer or trader requesting the issuance of a Certificate of Origin selects either the direct or indirect formula to calculate LVC and consistently applies the selected formula throughout the fiscal year. Verification of the LVC criterion for Vietnamese exported goods should be based on the LVC calculation formula used by the producer or trader requesting the issuance of a Certificate of Origin.

4. To calculate LVC according to the formula prescribed in Clause 3 of this Article, the value of input materials and costs throughout the entire production process of the goods are determined specifically as follows:

a) “The value of input materials with origin from the producing country, group of countries, or region” includes the CIF value of purchased or domestically produced materials with origin from a country, group of countries, or region; direct labor costs, direct allocation costs, other costs, and profit.

b) “The value of input materials without origin from the producing country, group of countries, or region” is the CIF value of directly imported materials with origin from another country, group of countries, or region; or the first purchase price recorded on the value-added tax invoice for materials whose origin cannot be determined and used to produce, process, or manufacture the final product.

c) “Free On Board Value (FOB)” is the export contract value and is calculated as follows: “FOB value = Factory gate price + other costs”.

 - “Factory gate price” = Factory gate costs + profit;

 - “Factory gate costs” = Material costs + direct labor costs + direct allocation costs;

 - “Material costs” include purchasing costs for raw materials and transportation and insurance costs for those raw materials;

- “Direct labor costs” include wages, bonuses, and other benefits related to the production process;

 - “Direct allocation costs"including: factory costs related to the production process (factory insurance, costs of leasing and purchasing factories, depreciation of factory facilities, repairs, maintenance, taxes, collateral interest); lease payments and interest on factories and equipment; factory security; insurance (factories, equipment, and materials used in the production process); essential items for the production process (energy, electricity, and other essential items directly contributing to the production process); research, development, design, and manufacturing; dies, molds, tooling installation, depreciation, maintenance, and repair of factories and equipment; patent royalty fees (related to machines with patents or processes used in the production of goods or the right to produce goods); raw material and product testing and inspection; factory storage; waste processing; factors in calculating the value of raw materials such as port costs, cargo release costs, and import duties on components subject to taxation;"

- “Other Costs"are costs incurred in loading goods onto ships for export, including but not limited to domestic transportation costs, warehouse costs, port fees, commission fees, service fees, and other related fees during the process of loading goods onto ships for export."

5. The manufacturer or trader requesting issuance of a Certificate of Origin (C/O) may choose the origin criteria specified in Clause 1 or Clause 2 of this Article to declare and commit to the origin of the goods produced, provided that the goods meet the origin criteria and other provisions under Chapter III of Decree No. 31/2018/NĐ-CP.

Article 7. Declaration and Commitment to the Origin of Goods

1. Traders requesting issuance of a C/O shall use the following forms to declare and commit to the export goods meeting preferential origin criteria or non-preferential origin criteria as stipulated in Point e, Clause 1 of Decree No. 31/2018/NĐ-CP:

a) A declaration form for export goods meeting the "Pure Origin" (WO) criterion according to the model prescribed in Appendix II issued together with this Circular, in cases where raw materials are purchased domestically for the production of exported goods without a VAT invoice;

b) A declaration form for export goods meeting the "Pure Origin" (WO) criterion according to the model prescribed in Appendix III issued together with this Circular, in cases where raw materials are purchased domestically for the production of exported goods with a VAT invoice;

c) A declaration form for export goods meeting the "Pure Origin within the ASEAN-Korea Free Trade Area" (WO-AK) criterion according to the model prescribed in Appendix IV issued together with this Circular, in cases where goods meet the "WO-AK" criterion as prescribed by the rules of origin under the ASEAN-Korea Comprehensive Economic Partnership Agreement's Trade in Goods Agreement;

d) A declaration form for export goods meeting the "Change in Tariff Heading" (CTH) criterion according to the model prescribed in Appendix V issued together with this Circular;

đ) A declaration form for export goods meeting the "De Minimis" criterion for "Non-Originating Materials Not Meeting the Change in Tariff Heading Criterion"De Minimis) according to the model prescribed in Appendix VI issued together with this Circular;

e) A declaration form for export goods meeting the "Percentage Value Content" (PVC) criterion according to the model prescribed in Appendix VII issued together with this Circular;

g) A declaration form for export goods meeting the "Regional Value Content" (RVC) criterion according to the model prescribed in Appendix VIII issued together with this Circular;

h) A declaration form for export goods meeting the "Entirely Produced in One Member Country from Materials Originating in One or More Member Countries" (EP) criterion according to the model prescribed in Appendix IX issued together with this Circular, in cases where goods meet the "EP" criterion as prescribed by the rules of origin under certain Free Trade Agreements to which Vietnam is a party.

2. In cases where the trader requesting issuance of a C/O is not the producer, the trader requesting issuance of a C/O shall be responsible for requiring the producer to declare and commit to the origin of the goods using the models specified in Clause 1 of this Article and provide supporting documents proving the origin of the goods to complete the application for issuance of a C/O as stipulated in Point e, Clause 1 of Decree No. 31/2018/NĐ-CP.

3. In cases where raw materials or goods with origin are produced domestically and used in subsequent stages to produce another good, the trader requesting issuance of a C/O shall be responsible for requiring the producer or supplier of those raw materials or goods to declare and commit to the origin of the goods according to the model prescribed in Appendix X issued together with this Circular and provide it to the trader requesting issuance of a C/O to complete the application for issuance of a C/O as stipulated in Point g, Clause 1 of Decree No. 31/2018/NĐ-CP.

4. The declaration and commitment forms for the origin of goods specified in Clauses 1, 2, and 3 of this Article are published electronically on the Ministry of Industry and Trade's Electronic Management and Issuance System for Certificates of Origin at the website www.ecosys.gov.vn or on other electronic pages of agencies and organizations authorized by the Ministry of Industry and Trade to issue C/Os.

Chapter III

GUIDELINES FOR DECLARATION OF C/O, SUPPLEMENTARY DECLARATION FORMS FOR C/O

AND CERTIFICATE OF GOODS NOT ALTERING ORIGIN

Article 8. Declaration of Certificate of Origin (C/O)

1. The Vietnamese C/O model B for exported goods according to the form prescribed in Appendix XI issued together with this Circular shall be declared in English and typed. The specific contents of the declaration of the Vietnamese C/O model B are as follows:

a) Box number 1: exporter's trading name, address, exporting country

b) Box number 2: consignee's name, address, importing country

c) Top right box: reference number of the C/O (for authorized issuing agencies or organizations)

d) Box number 3: date of departure, means of transport (if sent by air, declare "by air", flight number, airport of unloading; if sent by sea, declare ship name and port of unloading)

đ) Box number 4: name of authorized issuing agency or organization, address, country

e) Box number 5: section reserved for customs authorities at the port or place of import

g) Box number 6: description of goods and HS code; marking and number of packages

h) Box number 7: gross weight of goods or other quantity

i) Box number 8: invoice number and issue date

k) Box number 9: place of issuance of C/O, date of issuance of C/O, signature and stamp of the issuing agency or organization

l) Box number 10: place, date of request for issuance of C/O and exporter's signature (for traders requesting issuance of C/O)

2. In cases where preferential rules of origin under international agreements to which Vietnam is a party, preferential rules of origin under the Generalized System of Preferences (GSP) and other unilateral preferences of the importing country for Vietnam have specific provisions on types of preferential C/O forms, the declaration of C/O shall be carried out in accordance with the guidelines of the Ministry of Industry and Trade for such international agreements or in accordance with the regulations of the importing country.

Article 9. Declaration of Supplementary Declaration Form of Certificate of Origin (C/O)

1. In cases where multiple items cannot be declared on the same Vietnamese C/O model B, traders requesting issuance of C/O shall use the Supplementary Declaration Form of C/O model B of Vietnam according to the form prescribed in Appendix XII issued together with this Circular. The Supplementary Declaration Form of C/O model B shall be declared in English and typed. The contents of the declaration of the Supplementary Declaration Form of C/O model B of Vietnam include the same reference number as that of the C/O and follow the guidance from point g to point l of Clause 1 of Article 7 of this Circular.

2. In cases where preferential rules of origin under international agreements to which Vietnam is a party, preferential rules of origin under the GSP and other unilateral preferences of the importing country for Vietnam have specific provisions on types of supplementary declaration forms of C/O or specific guidance on declaring multiple items on the same C/O, the declaration of supplementary declaration forms of C/O shall be carried out in accordance with the guidelines of the Ministry of Industry and Trade for such international agreements or in accordance with the regulations of the importing country.

Article 10. Declaration of Commercial Note (CNM)

The CNM issued by authorized issuing agencies or organizations according to the form prescribed in Appendix XIII issued together with this Circular shall be declared in English and typed. The specific contents of the declaration of CNM are as follows:

1. Box number 1: trader's trading name, address, country

2. Box number 2: consignee's name, address, importing country

3. Box number 3: country of origin of goods

4. Box number 4: final destination country of goods

5. Box number 5: date of arrival of goods in Vietnam, means of transport and voyage number

6. Box number 6: date of departure of goods from Vietnam, means of transport and voyage number

7. Box number 7: description of goods and HS code according to the HS code on the original C/O issued by the first exporting country (if available); marking and number of packages

8. Box number 8: gross weight of goods or other quantity

9. Box number 9: invoice number and issue date

10. Box number 10: place, date of request for issuance of CNM and trader's signature (for traders requesting issuance of CNM)

11. Box number 11: place of issuance of CNM, date of issuance of CNM, signature and stamp of the issuing agency or organization.

Chapter IV

IMPLEMENTING PROVISIONS

Article 11. Implementation Organization

1. This Circular shall be publicly posted or displayed at:

a) The Ministry of Industry and Trade's electronic portal at the website: www.moit.gov.vn;

b) The Ministry of Industry and Trade's electronic management and certification system at the website www.ecosys.gov.vn;

c) The headquarters of authorized issuing agencies or organizations.

2. Authorized issuing agencies or organizations shall be responsible for providing detailed and clear explanations of the provisions in this Circular to traders requesting issuance of C/O.

3. In case of difficulties during implementation, traders requesting issuance of C/O, authorized issuing agencies or organizations and related organizations or individuals shall contact the Import-Export Department (Ministry of Industry and Trade) for consideration and resolution within their authority.

Article 12. Effective Date

This Circular takes effect from April 3, 2018./.