Circular No. 116/2008/TT-BTC guides customs procedures for processed goods with foreign traders.

CIRCULAR

Guidelines for customs procedures for processed goods

with foreign traders

Pursuant to the Law on Customs No. 29/2001/QH10 dated June 29, 2001 and the Law No. 42/2005/QH11 dated June 14, 2005 amending and supplementing certain articles of the Law on Customs; Pursuant to the Government Decree No. 154/2005/NĐ-CP dated December 15, 2005 detailing certain provisions of the Law on Customs regarding customs procedures, customs inspection, and supervision;

Pursuant to the Law on Export Tax and Import Tax No. 45/2005/QH11 dated June 14, 2005; the Law on Tax Administration No. 78/2006/QH11 dated November 29, 2006;

Pursuant to the 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 the Decree No. 85/2007/NĐ-CP dated May 25, 2007 of the Government detailing the implementation of the Law on Tax Administration;

Pursuant to Decree No. 154/2005/NĐ-CP dated December 15, 2005 of the Government detailing certain provisions of the Customs Law on customs procedures, inspection, and supervision;

Pursuant to the Decree No. 12/2006/NĐ-CP dated January 23, 2006 of the Government detailing the implementation of the Law on Commerce regarding international trade activities and agency buying, selling, processing, and transiting goods with foreign countries;

Pursuant to the Decree No. 77/2003/NĐ-CP dated July 1, 2003 of the Government stipulating the functions, tasks, powers, and organizational structure of the Ministry of Finance.

The Ministry of Finance provides guidelines for customs procedures for processed goods with foreign traders as follows:

Section 1. GENERAL PROVISIONS

I. TERMINOLOGY EXPLANATION

1. "Processing materialsIncludes primary materials and auxiliary materials to produce the processed product.

2. "Primary materialsAre materials forming the main component of the product.

3. "Auxiliary materialsAre materials participating in the production of the processed product but not forming the main component of the product.

4. "Processed suppliesInclude various types of semi-finished products participating in the production process of the processed product but not directly constituting the processed product. Processing materials include packaging or packaging materials containing the processed product.

5. "Processing wasteAre waste materials or parts cut off from raw materials during the processing of raw materials or semi-finished products; machinery and equipment rented or borrowed for processing that are damaged and removed during the production process.

6. “Processing by-productsAre products that do not meet technical standards (specifications, dimensions, quality, utility...) as agreed upon in the processing contract or its annexes, and are removed during the processing.

7. "Processing wasteAre raw materials and auxiliary materials removed during the processing and have no further use value.

8. "Production quota for processed products according to the agreement in the contract"includes:"

8.1. “Raw material usage quotaIs the amount of raw material required to form one unit of the processed product.

8.2. "Consumable materials quotaIs the amount of consumable materials used to produce one unit of the processed product.

8.3. "Raw material and consumable material loss rateIs the quantity of raw material and consumable material lost (including losses resulting in scrap, by-products, and waste from processing), expressed as a percentage relative to the raw material forming the product (for the raw material loss rate) or relative to the amount of consumable materials consumed during processing (for the consumable material loss rate).

9. "Processing machinery, equipment, and toolsAre machines, equipment, and tools within the production technology chain of the processed product. They are rented or borrowed by the party hiring the processing service from the party providing the processing service to fulfill the processing contract.

II. PROCESSING CONTRACT

1. Form of processing contract

A processing contract must be established in writing or in equivalent forms including telegrams, telex, fax, data messages, and other forms as prescribed by law.

2. Content of processing contract

The content of the processing contract must fully comply with the provisions of Article 30 of Decree No. 12/2006/NĐ-CP dated January 23, 2006 of the Government.

3. Annex to the processing contract

The annex to the processing contract is an inseparable part of the processing contract.

3.1. Any changes, additions, or modifications to the terms of the processing contract must be reflected in the annex to the contract and registered with the customs authority before or at the same time as the enterprise processes the first export or import shipment under the annex to the contract. For the value of imported raw materials and consumable materials for processing, the value recorded on the commercial invoice in the import documentation will be accepted, without the need to open a supplementary adjustment annex.

3.2. If a processing contract has a validity period exceeding one year, it may be divided into several annexes for implementation. The duration of each annex shall not exceed one year. In special cases where the processing time for a product exceeds one year, the processing contract or annex to the processing contract shall be implemented on a per-product basis (such as ship repair processing).

III. PLACE OF CUSTOMS PROCEDURES

1. Customs procedures for processing contracts shall be carried out at a Customs Sub-Department at a border gate or a Customs Sub-Department outside a border gate under the Customs Department of the province or city where the production facility of the enterprise implementing the processing contract is located (including subcontracting facilities). In case there are production facilities in multiple locations, the enterprise may choose a suitable Customs Sub-Department to register for customs procedures.

In case there is no customs organization at the location of the production facility, the enterprise may choose a convenient Customs Sub-Department to register for customs procedures.

2. In case imported raw materials for processing require actual inspection by specialized state management agencies at the port of entry, but the processing contract registration and declaration are made at a Customs Sub-Department outside the border gate, the Customs Sub-Department at the port of entry shall carry out the actual inspection at the request of the Customs Sub-Department outside the border gate.

IV. RESPONSIBILITIES OF ENTERPRISES AND CUSTOMS AUTHORITIES

1. For Enterprises:

1.1. Strictly comply with all regulations concerning processing contracts. Upon completion of the processing contract or when the contract expires, the enterprise must settle the contract and complete the liquidation procedures with the customs authority in accordance with Article 35 of Decree No. 12/2006/NĐ-CP dated January 23, 2006 of the Government.

1.2. Use management software for processing types and connect with the customs authority.

1.3. Present payment vouchers for processing fees from the foreign side to the customs authority to facilitate post-clearance verification and inspection when requested.

1.4. When handling surplus raw materials and consumable materials, scrap, by-products, waste, rented or borrowed machinery and equipment, enterprises must proactively declare and handle procedures with the customs authority in accordance with the provisions of Point 6, Clause XII, Section II, of this Circular.

2. For customs authorities:

Apply risk management techniques; assign specialized staff to monitor the implementation process of processing contracts by enterprises; intensify the application of information technology and improve customs supervision work to facilitate and strictly manage the importation of raw materials, export of products, and settlement of processing contracts.

Section 2. CUSTOMS PROCEDURES FOR GOODS RECEIVED FOR PROCESSING IN VIETNAM FOR FOREIGN TRADERS

I. PROCEDURES FOR REGISTERING PROCESSING CONTRACTS

1. Responsibilities of enterprises:

Not later than one day before the first import procedures for goods under the processing contract, the enterprise shall register the processing contract with the Customs authority. The registration dossier includes:

1.1. Processing contract and its annexes (if any): submit two original copies (one for the Customs to keep and one to be returned to the enterprise after contract registration) and one Vietnamese translation copy (if in a foreign language other than English).

1.2. Business registration certificate or investment permit or investment certificate for foreign-invested enterprises (if registering for the first time): submit one copy.

1.3. Export-import business code certificate or tax number (if registering for the first time): submit one copy.

1.4. Permit from the Ministry of Industry and Trade for goods subject to export and import licenses under the processing contract: submit one copy, present the original.

1.5. Certificate confirming eligibility to import waste materials (for cases where waste materials are imported as raw materials for processing) issued by the Department of Natural Resources and Environment at the location of the enterprise's production facility according to Circular Joint No. 02/2007/TT-LT-BCT-BTNMT dated August 30, 2007 of the Inter-Ministerial Joint Circular of the Ministry of Industry and Trade and the Ministry of Natural Resources and Environment.

1.6. Explanation and proof of production capacity for enterprises receiving processing for the first time: clearly state the enterprise's headquarters address, production facility address, management capacity, production capacity, product types, equipment chain, designed capacity... (including cases of subcontracting); bank account number and name: submit one original copy.

For the explanation and proof of production capacity, the enterprise only needs to provide it once and supplement it when there are changes to the previously provided information.

From the date of registering the processing contract until the completion of the contract settlement, if there are changes in legal entity status, office address, production facility address, the enterprise must promptly notify the Customs Sub-Department managing the processing contract in writing.

1.7. Subcontracting contract (for cases of subcontracting the entire processed product): submit one copy, present the original.

1.8. Raw material and supplies registration form for the contract or its annex according to Form 01/ĐKNVL-GC-Appendix I issued together with this Circular (only applicable when handling procedures at the Customs Sub-Department applying information technology for contract management and settlement): submit two original copies.

2. Duties of the Customs Authority:

2.1. Receive and check the dossier.

2.2. Register the processing contract.

2.3. Return one original copy of the processing contract and other original documents presented to the enterprise.

2.4. Inspect the production facility:

a. Cases requiring inspection of the production facility:

When the enterprise registers the processing contract or during the production process, if the Customs authority has doubts about the address, management capacity, production capacity, and related issues concerning the fulfillment of the processing contract, it will conduct an inspection of the enterprise's production facility.

b. Time for inspecting the production facility:

The Customs authority will conduct inspections when necessary at the following times:

b1- After the enterprise submits all the registration dossier for the processing contract to the Customs authority; or

b2- During the production process of the registered products.

c. Authority to decide on inspecting the production facility is the leader of the Customs Sub-Department managing the processing contract.

d. Handling the results of the production facility inspection for cases that do not meet the conditions for implementing the processing contract:

d1- For cases that have not yet registered the contract: The Customs authority will not register the processing contract.

d2- For cases that have already registered the processing contract:

d2.1. If the enterprise has a production facility but does not meet the production conditions according to the production process, the Customs authority will require the enterprise to issue a commitment letter to rectify within a specified period, while temporarily suspending the import procedures for subsequent batches of raw materials and supplies under the processing contract until the enterprise resolves the production facility issues. d2.2. If there is no production facility, the Customs authority will suspend the import procedures for raw materials and supplies for the processing contract. The enterprise will be required to explain, and depending on the nature and severity of the violation, the dossier will be transferred to the customs unit responsible for anti-smuggling control or post-clearance inspection for verification, investigation, and handling according to the law. II. PROCEDURES FOR REGISTRATION, ADJUSTMENT, AND QUOTA INSPECTION

1. Registration of usage quotas, consumption quotas, and loss rates of raw materials and supplies (hereinafter referred to collectively as quotas):

1.1. Based on the quotas agreed upon by both parties in the processing contract according to Article 31 of Decree No. 12/2006/NĐ-CP dated January 23, 2006 of the Government, the enterprise shall register with the Customs authority using Form 03/ĐKĐM-GC-Appendix I issued together with this Circular. These quotas must be consistent with the actual quotas implemented by the enterprise. If the processing contract does not specify the loss rate of raw materials and supplies, it will be considered as zero percent.

1.2. During the implementation of the processing contract, if changes in the nature of raw materials, processing conditions, or export order requirements lead to changes in actual quotas, the enterprise may adjust the registered item quotas with the Customs authority to match the new actual quotas, but must provide a written explanation for each adjustment case. Adjusted quotas do not apply to exported products.

1.1. On the basis of the quota agreed upon by the parties in the processing contract as stipulated in Article 31 of Decree No. 12/2006/NĐ-CP dated January 23, 2006 of the Government, the enterprise shall register with the Customs authority according to Form 03/ĐKĐM-GC-Appendix I issued together with this Circular. This quota must be consistent with the actual quota implemented by the enterprise. If the processing contract does not specify the rate of raw material and material loss, it shall be considered as zero percent.

1.2. During the implementation of the processing contract, if there is a change in the nature of raw materials, processing conditions, or export order requirements leading to a change in the actual quota, the enterprise is permitted to adjust the registered quota for each commodity code with the Customs authority to match the new actual quota, but must provide a written explanation of the specific reasons for each adjustment case. The adjusted quota does not apply to products that have already been exported.

When adjusting the quota of the goods code, the enterprise does not need to change the goods code recorded in the processing contract. The enterprise and the Customs unit will handle the processing contract procedures uniformly by supplementing an additional sub-code for that goods code on the quota adjustment table and on the export declaration for goods with adjusted quotas.

1.3. The unit of measurement in the quota registration form must comply with the provisions of Vietnamese law and must be consistent with the unit of measurement in the registered processing contract.

2. Time for registering and adjusting the quota of the goods code:

2.1. Time for registering the quota:

The quota registration time is carried out together with the registration of the processing contract or at the time of registering the customs declaration for importing the first batch of raw materials and components for the processing contract.

2.2. Time for adjusting the quota: before handling the customs export procedures for products with the goods code requiring quota adjustment.

3. The quota registered and adjusted by the enterprise with the Customs authority is the quota for settling the processing contract.

4. Quota inspection:

4.1. Cases requiring quota inspection:

An enterprise implementing a processing contract with a foreign trader where the Customs authority has doubts about the registered quota or the processing contract has been penalized during implementation for quota fraud.

4.2. Inspection methods:

a) Inspection at the Customs office.

b) Inspection at the production facility of the enterprise.

c) Inspection through specialized appraisal organizations.

4.3. Time for quota inspection:

a) After the enterprise submits the quota registration application to the Customs authority, or

b) During the enterprise's production process of the registered product code; or

c) After exporting the first batch of products of the registered goods code, or

d) When settling the processing contract, or

e) When conducting post-clearance audit (if there is a basis for inspection).

4.4. Responsibilities of the enterprise during quota inspection:

a) Provide detailed explanations regarding the basis and method of establishing the quota of the registered goods code to the Customs authority, accompanied by sample products and technical design documents of the product (for example, cutting diagrams for clothing items).

b) Present accounting books and vouchers when requested by the Customs authority and facilitate the Customs authority to ensure the quota inspection is conducted promptly and accurately.

c) Implement decisions made by the Customs authority related to quota inspection.

4.5. Duties of Customs officers during quota inspection:

a) Conduct inspections according to procedure, quickly and efficiently, without causing undue inconvenience or hindrance to the enterprise's production activities.

b) Prepare a record confirming the inspection results upon completion of the inspection. The record must fully and truthfully reflect the actual inspection situation, signed by the Customs officer conducting the inspection and the representative of the inspected enterprise.

4.6. Authority to decide on quota inspection: The head of the Customs branch managing the processing contract, the post-clearance audit branch.

III. PROCEDURES FOR IMPORTING RAW MATERIALS AND COMPONENTS FOR PROCESSING:

1. For raw materials and components provided by the processing contractor from abroad:

1.1. Follow the guidance on customs procedures for imported commercial goods as stipulated in the Circular guiding customs procedures; customs inspection and supervision; export tax, import tax, and tax management for exported and imported goods issued by the Ministry of Finance (hereinafter referred to as the Circular guiding customs procedures), but do not implement tax assessment procedures.

1.2. For raw materials and components purchased by the processing contractor and designated for a third party to deliver to the processing enterprise, the customs declaration for importing the consignment must include a notification from the processing contractor to the processing enterprise regarding receipt of goods from the third party.

1.3. For finished products provided by the processing contractor to be attached or combined with processed products to form integrated products for export, customs procedures shall be carried out as for processing raw materials if the following conditions are met:

a. The name of the finished product and the purpose of providing the finished product to be attached or combined with processed products to form integrated products for export must be clearly stated in the processing contract or its annex;

b. In the material usage quota table for processed products, there must be a quota for this type of finished product.

1.4. Sampling and retaining samples:

Sampling and retaining samples of raw materials and processed products shall be carried out in accordance with the guidance in the Circular guiding customs procedures and specific instructions from the General Department of Customs.

2. For raw materials and components provided by the processing contractor under the export-import-in-place scheme: customs procedures shall be carried out in accordance with Article 15 of Decree No. 154/2005/NĐ-CP dated December 15, 2005 of the Government and Clause VIII, Section II below.

IV. CUSTOMS PROCEDURES FOR RAW MATERIALS AND COMPONENTS SELF-SUPPLIED BY THE ENTERPRISE FOR THE PROCESSING CONTRACT:

1. For raw materials and components self-produced or purchased from the domestic market:

1.1. Must be agreed upon in the processing contract or its annex regarding the name, quota, loss rate, quantity, unit price, payment method, and payment deadline.

1.2. No need to handle customs procedures (except for export processing zones).

1.3. Must obtain permission from the competent authority before signing the processing contract if self-supplied raw materials and components belong to the list of export goods requiring permits; cannot supply raw materials and components belonging to the list of prohibited or temporarily suspended export goods.

1.4. Declare the name and quantity of self-supplied raw materials and components used in the exported product when handling export procedures for the product according to Form 02/NVLCƯ-GC-Annex I issued along with this Circular.

2. For raw materials and components directly purchased from abroad by the enterprise to supply for the processing contract:

2.1. Must be agreed upon in the processing contract or its annex regarding the name, quota, loss rate, quantity, unit price, payment method, and payment deadline.

2.2. Must obtain permission from the competent authority before signing a processing contract if the raw materials and supplies provided fall within the list of imported goods that require permits; shall not provide raw materials and supplies that belong to the list of prohibited or temporarily suspended import goods.

2.3. Import procedures, tax policies, and refund procedures 2. Import procedures shall be carried out in accordance with relevant laws and regulations. shall be carried out according to the type of importing raw materials for export production.

2.4. When handling export procedures for processed products, the enterprise shall declare according to Form 02/NVLCƯ-GC-Annex I issued together with this Circular: name; quantity of raw materials used to produce the batch of exported processed goods; number, date, month, year of the import declaration for raw materials under the production-for-export category.

V. CUSTOMS PROCEDURES FOR IMPORTING MACHINERY AND EQUIPMENT FOR IMPLEMENTING PROCESSING CONTRACTS

1. The importation of machinery and equipment on lease or loan for implementing processing contracts must comply with regulations on management policies for export and import of goods.

2. The importation of machinery and equipment on lease or loan for implementing processing contracts by foreign-invested enterprises shall be implemented in accordance with the guidance provided in Circular No. 04/2007/TT-BTM dated April 4, 2007, of the Ministry of Trade (now the Ministry of Industry and Trade).

3. Customs procedures:

3.1. For machinery and equipment leased or borrowed directly to serve processing activities that are exempt from import duties, they shall be handled according to the temporary import-reexport procedure and customs formalities shall be conducted at the Customs Sub-Department managing the processing contract.

3.2. For machinery and equipment leased or lent by the party receiving processing services but not directly serving processing activities, customs procedures shall be carried out according to the regulations for export and import trade goods as stipulated in the Circular guiding customs procedures.

VI. CUSTOMS PROCEDURES FOR EXPORTING AND IMPORTING SAMPLES FOR PROCESSING (UNPAID SAMPLES)

1. Customs procedures for exporting and importing samples for processing shall be carried out according to the regulations for goods exported and imported without commercial purposes as guided in the Circular guiding customs procedures.

2. Samples for processing must meet the following conditions:

2.1. They can only be used as samples for processing and have no commercial value (for example: items with holes drilled or marked "sample," one shoe, one sleeve of a shirt);

2.2. The documentation for the consignment must indicate that it is a sample;

2.3. Each sample code may be exported/imported a maximum of five units.

VII. CUSTOMS PROCEDURES FOR EXPORTING PROCESSED PRODUCTS OUTSIDE THE COUNTRY

1. Customs procedures shall be carried out according to the regulations for customs procedures for commercial exports as stipulated in the Circular guiding customs procedures, but the tax assessment process will not be performed. Additionally, the following must also be carried out:

1.1. If the exported processed product uses self-provided raw materials and supplies, when registering the export declaration for the product, the enterprise shall declare in accordance with Clause IV.1.4 and 2.4, Section II above; calculate the export tax (if applicable) into the annex of the export declaration for raw materials and supplies purchased in Vietnam to supply the processing contract.

1.2. In cases where the exported processed product is delivered to a third party but the processing contract does not specifically state the name and address of this third party, when registering the export declaration, the enterprise shall submit to the Customs Authority a copy of the letter from the party leasing the processing service designating delivery to the third party and present the original for verification.

1.3. For consignments subject to actual inspection, the enterprise shall present the retained raw material sample (if sampling was taken) and the registered standard table when requested by the Customs Authority.

In cases where the enterprise loses the retained sample or there is suspicion that the exported product was not produced from imported processing raw materials, the Customs Officer shall take a sample of the exported product for appraisal (except for special products that cannot be sampled, photographs may be taken for review).

1.4. Immediately after the processing contract expires but there are still unexported processed products, the enterprise must commit to the Customs Sub-Department managing the processing contract to export these products within thirty days from the expiration date of the processing contract.

The Customs Authority will only register the export declaration for those product codes that the enterprise has registered standard tables for.

2. Customs procedures for consignments of processed products being exported through border gates shall be carried out according to the customs procedures for goods being transferred through border gates as stipulated in Article 16 and Article 18 of Decree No. 154/2005/NĐ-CP dated December 15, 2005, of the Government and guided in the Circular guiding customs procedures.

VIII. CUSTOMS PROCEDURES FOR EXPORTING AND IMPORTING AT PLACE OF BUSINESS FOR PROCESSED PRODUCTS

Conditions for import and export in place as stipulated in Decree No. 12/2006/NĐ-CP dated January 23, 2006 of the Government. Specific customs procedures are as follows:

1. For processed products imported in place to be used as raw materials for production:

1.1. Import procedures in place:

1.1.1. For exporting enterprises:

a) Fully declare all criteria reserved for exporting enterprises on four customs declarations, sign and stamp them;

b) Hand over four customs declarations, goods, and value-added tax invoices (customer delivery copy, clearly stating the name of the foreign trader, the importing enterprise, and the delivery location in Vietnam) to the importing enterprise.

1.1.2. For importing enterprises:

a) After receiving all four customs declarations, the importing enterprise fully declares all criteria reserved for importing enterprises on four customs declarations;

b) Receive and store the goods delivered by the exporting enterprise until the Customs Sub-Department decides on the form and extent of inspection for import procedures in place;

In cases where goods are exempt from actual inspection, they can be immediately put into production; in cases requiring actual inspection, they can only be put into production after the inspection is completed.

c) Submit the customs declaration file and samples of imported goods in place (for imported goods used as raw materials for processing and producing for export) to the Customs Sub-Department where the importing enterprise handles import procedures in accordance with regulations, suitable for each type of import;

d) After completing the import procedures in place, the importing enterprise retains one customs declaration and transfers two remaining customs declarations to the exporting enterprise.

1.1.3. Customs handling import procedures in place:

a) Accept and register customs declarations, decide on the form and extent of inspection according to current regulations applicable to each type, check taxes (if applicable) according to current regulations for imports. Seal samples (if any) and hand over to the enterprise for self-preservation to present to the Customs authority upon request.

b) Confirm completion of customs procedures, sign and stamp the official seal on four customs declarations;

d) Retain one customs declaration and documents submitted by the enterprise, return three customs declarations and documents presented by the enterprise to the importing enterprise;

đ) Issue a written notice to the direct tax management agency of the importing enterprise in place to monitor or send the notice through the computer network if the Customs Sub-Department handling import procedures and the local tax authority are connected.

1.2. Export procedures in place:

1.2.1. After receiving two export-import customs declarations in place confirmed by the Customs authority handling import procedures, the exporting enterprise submits the customs declaration file to the Customs Sub-Department where the enterprise handles export procedures to process export procedures in place.

1.2.2. Customs handling export procedures in place:

a) Accept the export customs declaration file in place;

b) Proceed with registration of the customs declaration according to regulations, suitable for each type of export and import; check taxes (if applicable). Confirm completion of customs procedures, sign and stamp the official seal on the customs declaration.

c) Retain one customs declaration and documents submitted by the enterprise, return one customs declaration and documents presented by the enterprise.

2. For completed processed products imported in place for domestic trade:

2.1. Customs procedures carried out at the Customs Sub-Department managing processed goods for export in place, specifically:

a) The enterprise accepting processing: handle export procedures in place as for exporting processed products abroad.

b) The enterprise importing processed products in place: handle import procedures in place as for commercial goods. Specifically, the file does not require a transport document. Tax policies and import policies for goods are implemented according to the law.

c) The Customs Sub-Department is responsible for:

- Registering export procedures in place as for exporting processed products abroad (this declaration has value for settlement).

- Registering import procedures in place as for importing commercial goods from abroad.

- In case of actual inspection of goods, it will only be conducted once during the import procedures in place.

2.2. Processed products imported in place for domestic trade must comply with Decree No. 89/2006/NĐ-CP dated August 30, 2006 of the Government regarding product labeling.

2.3. In cases where the enterprise accepting processing for foreign traders is also the enterprise importing processed products in place, this enterprise must handle both export procedures in place and import procedures in place for processed products.

3. For processed products used to settle processing fees:

Customs procedures are carried out under the form of import and export in place. Purchase and sale contracts are replaced by an agreement between the contractor and the processor regarding payment of processing fees with processed products.

The enterprise must fully comply with management policies for imported goods, tax policies as for imports from abroad, and regulations stipulated in Decree No. 89/2006/NĐ-CP dated August 30, 2006 of the Government regarding product labeling. These processed products are used for settling processing contracts.

4. Export-import customs declarations in place have settlement value when:

4.1. For exporting enterprises: the customs declaration is fully declared, confirmed, signed, and stamped by the four parties: the exporting enterprise, the importing enterprise, the Customs authority handling export procedures, and the Customs authority handling import procedures.

4.2. For importing enterprises: the customs declaration is fully declared, confirmed, signed, and stamped by the three parties: the exporting enterprise, the importing enterprise, and the Customs authority handling import procedures.

4.3. In cases where both the exporting enterprise and the importing enterprise handle procedures at the same Customs Sub-Department, this Sub-Department confirms both the Customs authority handling export procedures and the Customs authority handling import procedures.

IX. CUSTOMS PROCEDURES FORSUBCONTRACTING SITUATIONS

In the case where a party receiving processing in Vietnam enters into a processing contract for a foreign trader but does not directly process it themselves but instead subcontracts another trader to process it (subcontracting processing), as stipulated in Point b, Clause 2, Article 33 of Decree No. 12/2006/NĐ-CP dated January 23, 2006 of the Government, the enterprise that signs the processing contract with the foreign trader shall be responsible for exporting, importing procedures, and settling the processing contract with the Customs authority and shall bear legal responsibility for the implementation of this processing contract. The enterprise that subcontracts another trader shall have the responsibility to notify in writing the name, address of headquarters, and production facility address of the subcontracted trader so that the Customs authority can inspect when necessary.

Goods exchanged between enterprises within Vietnam do not require customs procedures.

X. PROCEDURES FOR HANDLING PRODUCTS OR RAW MATERIALS SUBCONTRACTING PROCESSING

1. Responsibilities of enterprises:

1.1. Based on the written designation of the parties subcontracting, the enterprise transferring the product for subcontracting processing (the Transferor) and the enterprise receiving the product for subcontracting processing (the Transferee) shall organize the delivery and receipt of goods according to the provisions below at Point 2.

1.2. The directors of the Transferor and Transferee shall be legally responsible for delivering and receiving products in accordance with the declaration on the subcontracting processing goods declaration form (hereinafter referred to as the transfer declaration form).

1.3. The director of the Transferor shall be legally responsible for ensuring that the subcontracted processing product is produced from imported raw materials under the processing contract. The director of the Transferee shall be legally responsible for using the subcontracted processing product for its intended processing purpose.

1.4. If the processing contract includes a subcontracted processing product (transfer contract) and a processing contract using a subcontracted processing product as raw material (receiving contract) involving the same receiving processing enterprise, then that enterprise shall undertake the responsibilities of both the Transferor and the Transferee.

2. Procedure for customs formalities:

2.1. The Transferor declares the customs declaration and delivers goods to the Transferee:

a) The Transferor fully fills out the criteria for the declarant, signs, and stamps all four copies of the declaration form (model HQ/2008-GCCT-Annex I).

b) Deliver the product along with four copies of the customs declaration and the original VAT invoice (customer copy); for export processing zones, replace the VAT invoice with a warehouse dispatch note for the Transferee; the delivery and receipt take place at the processing facility or the Transferee's warehouse.

2.2. After receiving the product and four copies of the customs declaration signed and stamped by the Transferor, the Transferee must perform the following tasks:

a) Fully fill out the criteria for the recipient, sign, and stamp all four copies of the declaration.

b) Register the customs declaration with the receiving Customs authority, the registration file includes:

- Customs declaration form: submit four original copies;

- Written designation of the receiving party by the subcontracting party: submit one copy, present one original;

- VAT invoice (or warehouse dispatch note if the Transferor is an export processing zone, warehouse receipt note if the Transferee is an export processing zone): submit one copy and present one original;

- Sample of the subcontracted processing product.

- Present the goods or related books and records for inspection by the Customs authority upon request.

2.3. Responsibilities of the receiving Customs authority:

a) Accept the customs file and sample of the subcontracted processing product.

b) Register the declaration form; issue a Sample Collection Form, seal the sample goods according to regulations.

c) Inspect the actual goods: only inspect the actual goods if there is suspicion that the delivery and receipt of goods do not match the declaration on the subcontracted processing declaration form; if the enterprise has already put the goods into production, inspect the books and records related to the receipt of goods by the enterprise.

d) Confirm completion of customs formalities, sign and stamp all four copies of the declaration.

đ) Retain one copy of the declaration and copies of the documents; return three copies of the declaration and original documents to the Transferee; hand over the sealed sample goods to the Transferee for self-preservation to present to the Customs authority when handling export procedures for the processed product or other cases when requested by the Customs authority.

2.4. After receiving three copies of the customs declaration confirmed by the receiving Customs authority, the Transferee retains one copy; immediately transfers two remaining copies to the Transferor.

2.5. Upon receiving two copies of the customs declaration (fully filled out, signed, and stamped by the Transferee and the receiving Customs authority) transferred by the Transferee, the Transferor registers the customs declaration with the sending Customs authority, the registration file includes:

a) Customs declaration received from the Transferee: submit two original copies;

b) Written designation of the delivery party: submit one copy, present one original;

c) Warehouse dispatch note: submit one copy, present one original.

2.6. Responsibilities of the sending Customs authority:

a) Accept the customs file;

b) Register the declaration; confirm completion of customs formalities; sign and stamp both copies of the declaration.

c) Return one copy of the declaration and original documents to the Transferor; retain one copy of the declaration and copies of the documents.

If both the delivery and receiving processing contracts are managed by the same Customs Branch, this branch shall undertake the responsibilities of both the Delivering and Receiving Customs Offices.

The above procedures for handover of intermediate products in processing contracts apply to other subcontracting cases.

3. The transfer declaration form may be used as evidence for settling the processing contract if it meets the following requirements:

3.1. For the transfer processing contract:

a) All criteria on the declaration form must be fully filled out without erasures; must have confirmation, signatures, and stamps of all four parties: the Transferor; the Transferee; the Customs authority managing the transfer processing contract (sending Customs authority); the Customs authority managing the receiving processing contract (receiving Customs authority);

b) The time when the Transferor comes to the sending Customs authority to handle customs formalities must fall within the validity period of the transfer processing contract and not exceed fifteen days from the date the receiving Customs authority signs confirmation of completed customs formalities on the declaration form. Beyond this period, if the declaration form has been confirmed by the receiving Customs authority, a violation record will be made for handling according to regulations, and customs formalities will continue, without canceling the declaration form.

3.2. For the receiving processing contract:

a) All criteria on the declaration form must be fully filled out without erasures; must have confirmation, signatures, and stamps of three parties (excluding the sending Customs authority);

b) The time when the Transferee comes to the receiving Customs authority to handle customs formalities must fall within the validity period of the receiving processing contract and not exceed fifteen days from the date the Transferor signs confirmation on the transfer declaration form.

XI. PROCEDURES FOR EXPORTING AND RETURNING RAW MATERIALS AND COMPONENTS TO OVERSEAS DURING THE PERFORMANCE OF THE CONTRACT

1. Customs Documents:

1.1. Customs declaration: submit two original copies;

1.2. Explanation document of the enterprise (specifying the reasons for re-export; number, date, month, year of the import declaration and of the processing contract with returned goods): submit one original copy along with a copy of the corresponding import declaration;

1.3. Request document for returning goods from the processing contractor: submit one original copy.

2. Customs procedures: shall be carried out according to the customs procedures for exporting and returning excess raw materials for processing as stipulated in Clause XII.6.2.2, Section II below.

3. Customs procedures for processed goods that have been exported and returned for repair or recycling shall be implemented in accordance with the Circular guiding customs procedures.

XII. PROCEDURES FOR SETTLING PROCESSING CONTRACTS

1. Settlement documents:

1.1. Summary table of imported raw materials and components according to Form 01/HSTK-GC-Annex II: submit one original copy.

1.2. Summary table of exported processed products according to Form 02/HSTK-GC-Annex II: submit one original copy.

1.3. Export declaration for processed products (including on-site export declaration; transfer of processed product delivery declaration) ensuring compliance with the regulations on goods already exported as stipulated in the Circular guiding customs procedures: present the original copy (the consignor's retained copy).

Payment voucher for processing fees from the processing contractor (except in cases where the processing contractor pays the processing fee in the form of processed products): present the original copy and submit a copy. In cases where the processing contract stipulates a payment period exceeding 45 days from the date the processing contract ceases to be effective, settlement and the head of the Customs Branch managing the processing contract will consider and resolve to extend the time for submitting payment vouchers according to the agreement in the processing contract but not exceeding 30 days.

If a single payment voucher covers multiple processing contracts or contract appendices, the enterprise must provide an explanation document detailing the amount paid for each contract or appendix, accompanied by a copy of the payment voucher.

1.4. Summary table of raw materials and components exported and transferred to other processing contracts while implementing the current processing contract according to Form 03/HSTK-GC-Annex II: submit one original copy.

1.5. Summary table of raw materials and components supplied by the processor (if any) according to Form 04/HSTK-GC-Annex II: submit one original copy.

1.6. Declaration of self-supplied raw materials (declared when exporting products, Form 02/NVLCU-GC-Annex I): present the original copy. In cases where the Customs authority has doubts about the declaration of domestic raw material sources, the enterprise must present additional purchase invoices and payment vouchers for raw materials supplied by the processing contractor.

1.7. Summary table of raw materials and components used to produce exported products according to Form 05/HSTK-GC-Annex II: submit one original copy.

1.8. Settlement table of processing contracts according to Form 06/HSTK-GC-Annex II: submit two original copies (return one copy to the enterprise after settlement).

1.9. Summary table of temporarily imported machinery and equipment according to Form 07/HSTK-GC-Annex II: submit one original copy.

1.10. Temporary import declaration for leased or borrowed machinery and equipment; receipt declaration for machinery and equipment from other processing contracts (if any); re-export declaration for machinery and equipment: present the original copy (the consignor's retained copy).

The enterprise director must sign and stamp (in case of individual business households, sign and clearly state full name; ID card number, issuing place) on the above tables and bear legal responsibility for the accuracy and truthfulness of the settlement figures.

2. Deadline for submitting settlement files:

Within 45 working days from the date the processing contract (or processing contract appendix) ends or becomes ineffective, the enterprise must submit complete settlement files for the processing contract (including surplus raw material disposal plans, temporarily imported machinery and equipment, waste materials, waste products, waste residues) to the Customs Branch managing the processing contract.

For processing contracts divided into multiple appendices for implementation, the deadline for submitting settlement files for each contract appendix shall be the same as the deadline for submitting settlement files for the processing contract.

3. Deadline for receiving, inspecting, and verifying settlement files by the Customs authority:

3.1. For enterprises within the Customs risk management system currently identified as complying well with customs laws: within 15 working days from the date the enterprise submits complete and valid settlement files, the Customs authority will check the completeness, consistency, and appropriateness of the settlement file set and confirm settlement for the enterprise.

3.2. For enterprises not covered under point 3.1 above: within 30 working days from the date the enterprise submits complete and valid settlement files, the Customs authority will conduct detailed inspections of the settlement files before confirming settlement for the enterprise.

3.3. The inspection of settlement files submitted and presented as specified in points 3.1 and 3.2 above shall be conducted at the Customs authority. In cases where the volume of settlement files is large and the enterprise requests inspection at its premises, the Head of the Customs Branch managing the processing contract will consider and decide specifically.

4. Deadline for customs procedures for surplus raw materials; temporarily imported machinery and equipment; waste materials, waste products, waste residues:

Within 30 working days from the date the Customs authority completes the inspection and verification of settlement files, the enterprise must handle customs procedures to dispose of surplus raw materials; temporarily imported machinery and equipment; waste materials, waste products, waste residues (if any).

5. Handling overdue submission of settlement files and exceeding deadlines for surplus raw materials, components, and temporarily imported machinery and equipment:

5.1. Handling overdue submission of settlement files:

a) Within 20 working days from the expiration date of the settlement file submission deadline, the Customs authority managing the processing contract:

a1. Shall issue a direct invitation letter to the enterprise director to attend the Customs authority to establish a violation record for handling according to regulations; invite only once, if the enterprise does not attend, then unilaterally establish a record and retain it in the file for handling.

a2. Calculate and determine the tax amount and late payment penalties for raw materials, supplies, machinery... under the processing contract that have not been settled, starting from the date of registering the import declaration for raw materials as if they were imported for business purposes.

b) The enterprise is responsible for paying the tax and late payment penalties for imported goods under that contract that have not been settled into the temporary collection account according to the tax determination of the Customs authority and implement the administrative violation decision in accordance with the law.

c) In case more than 90 days have passed since the deadline for submitting the settlement documents and the enterprise has not submitted the settlement documents and/or paid the tax according to the tax determination of the Customs authority, it will not be exempted from taxes on subsequent processing contracts and measures for compulsory enforcement will be applied as prescribed.

d) In case the enterprise submits the documents and completes the settlement after paying the tax and late payment penalties, it can proceed with the procedures to refund the tax and late payment penalties according to the Circular guiding customs procedures.

5.2. Handling overdue deadlines for surplus raw materials, auxiliary materials, and machinery, equipment temporarily imported:

a) The Customs authority managing the processing contract:

a1. Prepare a record of violations for handling according to regulations;

a2. Calculate and determine the tax amount for surplus raw materials, auxiliary materials, machinery, equipment temporarily imported... under the processing contract that have not been settled, starting from the date when the Customs authority completes the settlement verification procedure.

b) The enterprise is responsible for paying the tax into the temporary collection account according to the determination of the Customs authority and implement the administrative violation decision according to the law.

c) If the tax payment deadline is exceeded and the enterprise does not pay the tax, measures for compulsory enforcement will be applied as prescribed.

5.3. Extending the deadline for submitting settlement documents and customs procedures for surplus raw materials; temporarily imported machinery, equipment; waste materials, waste products:

Cases eligible for extending the submission of settlement documents:

- The enterprise simultaneously implements multiple processing contracts, and all these contracts become ineffective at the same time, making it impossible for the enterprise to prepare the documents in time;

- There is a dispute between the party hiring for processing and the party accepting processing related to the processing contract;

- Other cases due to force majeure reasons, the enterprise cannot comply with the settlement deadline.

Based on the explanation document of the enterprise, the Director of the Customs Branch managing the processing contract shall consider and extend the deadline specified in point 2 of this section regarding the deadline for submitting settlement documents. The extension period is only once and not exceeding 30 days.

6. Customs procedures for handling surplus raw materials, auxiliary materials; waste materials, waste products, waste residues, rented, borrowed machinery, equipment

6.1. Forms of handling:

Depending on the agreement in the processing contract and the provisions of Vietnamese law, surplus raw materials, auxiliary materials, waste materials, waste products, waste residues, rented, borrowed machinery, equipment for processing shall be handled as follows:

a) Selling in the Vietnamese market (implemented according to the export, import in place method);

b) Exporting back out of the country;

c) Transferring to another processing contract in Vietnam;

d) Giving away or donating in Vietnam;

đ) Destroy in Vietnam.

6.2. Customs procedures:

6.2.1. Customs procedures for selling surplus raw materials, auxiliary materials, waste materials, rented, borrowed machinery, equipment in the domestic market shall be carried out according to the in-place import and export procedures as guided in Clause VIII, Section II of this Circular.

6.2.2. Customs procedures for exporting back to foreign countries upon the instruction of the party hiring for processing shall be conducted like regular export shipments. When handling customs procedures, the customs officer shall inspect the actual shipment, compare the exported materials with the samples taken during importation (if samples were taken), and verify the type, serial number, and model of the machinery and equipment listed on the temporary import declaration with those being exported.

6.2.3. Customs procedures for transferring surplus raw materials, auxiliary materials, rented, borrowed machinery, equipment to another processing contract upon the instruction of the party hiring for processing shall be conducted like the customs procedures for transferring processed products to another contract as guided in Clause X, Section II of this Circular; additionally, the following actions must also be performed:

a) The customs transfer procedures for surplus raw materials, auxiliary materials, rented, borrowed machinery, equipment to another processing contract shall be carried out after the Head of the Customs Branch managing the processing contract confirms the enterprise's request document when settling the processing contract.

b) In case transferring surplus raw materials, auxiliary materials, rented, borrowed machinery, equipment to another processing contract implemented by another enterprise:

b1. The receiving party: present the raw materials received from another contract and the samples taken during importation for the receiving customs to compare.

b2. The receiving customs: compare the imported material samples with the transferred materials, if consistent, proceed to take new samples for the receiving contract (the comparison and taking of new samples are conducted at the enterprise). During the sample comparison process, if signs of fictitious delivery or delivering less goods than declared on the transfer declaration are detected, the entire shipment shall be inspected and any violations (if any) shall be handled according to the law.

b3. For rented, borrowed machinery, equipment or materials without available samples, the receiving customs shall conduct an on-site inspection of the goods if there are indications of fictitious delivery or delivering less goods than declared on the transfer declaration. The Head of the Receiving Customs Branch decides whether an inspection is necessary.

c) In case transferring surplus raw materials, auxiliary materials, rented, borrowed machinery, equipment from this processing contract to another processing contract implemented by the same enterprise:

c1. When handling customs procedures for transferring surplus raw materials from this processing contract to another processing contract, the enterprise presents the material sample of the processing contract transferring the materials.

c2. The Customs Branch managing the processing contract transfers this material sample to serve as a sample for the new processing contract by issuing a new sampling form, transferring the material sample, and sealing it together with the new sampling form.

c3. The Customs Branch managing the processing contract conducts an on-site inspection at the enterprise if there are signs of non-genuine declarations on the customs declaration.

d) It is not allowed to transfer raw materials, auxiliary materials to another processing contract in the following cases:

d1. An enterprise imports raw materials and components but does not perform the processing contract and requests to transfer all raw materials and components to another enterprise;

d2. An enterprise receives raw materials and components from a processing contract in advance but does not process them and continues to request their transfer to another processing contract.

6.2.4. Customs procedures for gifts, donations of leased or borrowed machinery and equipment; surplus raw materials and components; waste and by-products:

The customs declaration documents include:

a) Customs declaration form (using the non-trade goods declaration form): on the declaration form, clearly state "goods under processing contract number... dated... month... year... Processing enterprise...": submit two original copies.

b) Gift or donation letter from the party placing the processing order: submit one original copy;

c) Approval document from the Ministry of Industry and Trade if the gifted or donated goods fall within the Import License List of the Ministry of Industry and Trade or permission document from the specialized agency if the imported goods require a permit from the specialized management agency: submit one original copy.

Customs procedures and tax policies shall be implemented according to regulations applicable to gifts and donations. After completing customs procedures, the customs authority shall make two copies of the declaration form, one copy to be kept with the processing contract, and one copy to be handed over to the processing enterprise (if the recipient of the gift is not the processing enterprise).

6.2.5. Customs procedures for supervising the destruction of waste and by-products in Vietnam:

a) The destruction of waste and by-products can be carried out during the implementation or after the completion of the processing contract or its annexes, and applies to processed products when the processing service user requests destruction in Vietnam.

b) Customs procedures for supervising destruction:

b1. The enterprise sends a notification letter to the Customs Branch managing the processing contract informing the time and location of destruction, accompanied by an agreement document from the processing service user and an approval document from the competent authority regarding environmental management if the enterprise carries out the destruction directly.

In case the enterprise hires another trader with the function of handling waste, there must be a destruction contract (one original copy) and a permission document from the competent authority for this trader (one copy).

b2. The enterprise takes the initiative to organize the destruction and bears legal responsibility for the impact of the entire destruction process on the environment.

b3. The Customs Branch managing the processing contract assigns two customs officers to supervise the destruction process.

b4. Upon completion of the destruction, all parties must establish a record confirming the destruction in accordance with the prescribed regulations. This record must have the signature of the enterprise's General Director, the seal of the enterprise with the destroyed goods, the name and signature of the customs officer supervising the destruction, and those assigned by the General Director to carry out the destruction.

7. In cases where surplus raw materials and components; leased or borrowed machinery and equipment; processed products cannot be returned due to abandonment by the processing service user

The processing enterprise is responsible for paying domestic consumption tax as prescribed or following the destruction procedures outlined in point 6.2.5, Clause XII of this section.

Chapter 3. CUSTOMS PROCEDURES FOR GOODS PLACED UNDER PROCESSING CONTRACTS
ABROAD

I. PROCEDURES FOR REGISTERING PROCESSING CONTRACTS

1. Responsibilities of enterprises:

Before proceeding with the export procedures for the first consignment of goods under the processing contract, the enterprise must register the contract. The dossier includes:

1.1. Processing contract and annexes (if any): submit two original copies;

1.2. Business registration certificate or Investment License or Investment Certificate: submit one copy;

1.3. Export and import business code certificate or tax code: submit one copy;

1.4. Permit from the competent authority if the exported goods to implement the processing contract and the imported processed products belong to the list of goods requiring permits for export and import: submit one copy, present the original.

2. Duties of the Customs Authority: implemented according to point 2, Clause IV, Section I of this Circular.

II. EXPORT PROCEDURES FOR RAW MATERIALS

1. Customs documents are similar to those for exporting processed product consignments; additionally, if the exported raw materials belong to the list of goods requiring permits from the Ministry of Industry and Trade or specialized management agencies, they must also present the permit from the competent authority for the customs authority to deduct.

2. Customs procedures are carried out like those for exporting commercial goods as guided in the Circular on customs procedures.

III. REGISTRATION, ADJUSTMENT, AND VERIFICATION OF QUOTA

1. Usage quotas, material consumption quotas, and raw material loss rates for processing must be reflected in the processing contract and must be consistent with the actual implementation of the processing contract.

2. Time for registration and adjustment of quotas:

2.1. Before importing processed products, if the processed products are re-imported into Vietnam.

2.2. Before settling the processing contract, if the processed products are sold abroad.

3. Procedures for registering, adjusting, and verifying quotas are carried out like those for foreign traders' processing contracts.

IV. IMPORT PROCEDURES FOR PROCESSED PRODUCTS

1. Customs documents are similar to those for commercial imports; the customs declaration is registered under the processing import category.

2. Customs procedures are carried out like those for importing commercial goods.

IV- PROCEDURES FOR SETTLING THE PROCESSING CONTRACT:

V. SETTLEMENT PROCEDURES FOR PROCESSING CONTRACTS

1. Settlement documents shall include:

1.1. Summary table of exported raw materials: submit one original copy; present the export declaration form;

1.2. Summary table of imported processed products: submit one original copy; present the import declaration form;

1.3. Summary table of processed products sold abroad: submit one original copy;

1.4. Summary table of raw materials used to produce imported processed products: submit one original copy;

1.5. Summary table of raw materials purchased abroad (if any) to produce imported processed products: submit one original copy;

1.6. Settlement table of the processing contract: submit two original copies.

The contents of the above tables are similar to those of the corresponding tables in the settlement dossier for foreign traders' processing contracts as stipulated in Clause XII, Section II of this Circular.

2. Liquidation procedures:

The deadline for enterprises to submit settlement dossiers; handle surplus raw materials and components, temporarily exported machinery and equipment for processing; and the deadline for customs authorities to inspect and confirm settlement dossiers are carried out like those for foreign traders' processing contracts.

Mục 4. ORGANIZATION AND IMPLEMENTATION

1. The Director of the General Department of Customs shall issue the customs procedures and processes based on this Circular to guide the Customs units in uniformly implementing activities related to processing for export and import in accordance with the provisions of the law, ensuring both facilitation and strict customs management.

2. This Circular takes effect fifteen days from the date of publication in the Official Gazette, replacing Decision No. 69/2004/QĐ-BTC dated August 24, 2004 of the Ministry of Finance and other inconsistent documents.

3. The Director of the General Department of Customs, the Heads of units under and directly under the Ministry of Finance, relevant organizations and individuals are responsible for implementing this Circular./.