Circular No. 12551/BTC-TCHQ on the classification of goods according to Circular No. 49/2010/TT-BTC

Respected: Customs Departments of provinces and cities

On April 12, 2010, the Ministry of Finance issued Circular No. 49/2010/TT-BTC on the classification and application of tax rates for exported and imported goods. This circular abolished the special classification regulations for complete sets of equipment, unassembled or disassembled goods, effective from May 27, 2010. To ensure uniformity in the classification of complete sets of equipment, unassembled or disassembled goods, the Ministry of Finance provides guidance as follows:

1. Regarding the classification of machinery and equipment belonging to Chapters 84 and 85 of the Import Tariff Schedule that are integrated systems or chains, meeting Notes 3, 4, and 5 of Part XVI of the List of Goods for Export and Import of Vietnam

1.1. According to Notes 3, 4, and 5 of Part XVI of the List of Goods for Export and Import of Vietnam, "3. Unless otherwise specified, composite machines consisting of two or more machines assembled into a single integrated device and other machines designed to perform two or more different functions or complementary functions shall be classified under the main component or machine performing the primary function" and "4. When a machine (including a composite machine) consists of separate components (whether separate or connected by pipes or transmission parts, by electrical cables or by other parts) intended to perform a specific function detailed in one of the subheadings of Chapter 84 or 85, the entire machine must be classified in the appropriate subheading corresponding to that specific function; 5. For the purposes of these notes, the term 'machine' means any machine, machinery, equipment, tool set, or tool mentioned in the subheadings of Chapter 84 or 85."

According to the second part of Rule 2a, "similarly classified for goods in a complete or finished state or with the essential characteristics of goods in a complete or finished state but not yet assembled or disassembled." This provision is understood as: goods in a complete or finished state but in unassembled or disassembled form are classified in the same group as assembled goods. Unassembled or disassembled goods are usually due to packaging, storage, or transportation requirements.

The above provisions are understood to include machinery and equipment belonging to Chapters 84 and 85 of the Import Tariff Schedule, including the import of machinery and equipment in complete or disassembled form for packaging, storage, or transportation convenience, if they meet the contents specified in Notes 3, 4, and 5 of Part XVI of the List of Goods for Export and Import of Vietnam, then they should be classified according to these notes, regardless of whether such machinery and equipment are imported from one or multiple sources, in the same or multiple shipments, processed at one or multiple customs offices, and imported in complete or disassembled form for packaging, storage, or transportation convenience.

1.2. To have a basis for tracking and classifying machinery and equipment that are integrated systems or chains imported from one or multiple sources, in the same or multiple shipments, processed at one or multiple customs offices, and imported in complete or disassembled form for packaging, storage, or transportation convenience, the procedures are as follows:

1.2.1. Responsibilities of the declarant:

1.2.1.1. In addition to the customs procedures prescribed, the declarant has the responsibility to notify the Customs Sub-Department where the enterprise is headquartered of the list of goods imported under Chapters 84 and 85 that are integrated systems or chains taxed based on the main machine. If there is no Customs Sub-Department at the headquarters location, the notification should be made to the nearest Customs Sub-Department.

1.2.1.2. Documents and materials submitted when notifying the list of goods imported under Chapters 84 and 85 that are integrated systems or chains:

a) A list of machinery and equipment under Chapters 84 and 85 that are integrated systems or chains planned for importation. Clearly stating the name and tariff number of the machinery and equipment, the type of main machinery and equipment (submitting two original copies along with one follow-up adjustment sheet).

b) An explanatory document and/or installation diagram clearly showing the goods as integrated systems or chains.

c) Signing and bearing legal responsibility for accurately and truthfully declaring the two types of documents above, paying taxes for each machine, and being subject to penalties if the declaration is incorrect.

1.2.2. Responsibilities of the customs authority:

a) When notifying the list of goods imported under Chapters 84 and 85 that are integrated systems or chains: The Customs Sub-Department receiving the notification has the responsibility to accept and check if the contents meet Notes 3, 4, and 5 of Part XVI, then establish a tracking record, stamp confirmation on two original copies of the list of imported goods and one original follow-up adjustment sheet (keeping one original copy of the list, handing over one original copy of the list and one original follow-up adjustment sheet to the taxpayer for presentation to the customs office where the actual imported goods are processed for taxation based on the main machine and for follow-up adjustments during customs clearance procedures).

b) When processing import procedures: In addition to the prescribed customs procedures, the customs authority bases on the customs documents, compares with current regulations to track and adjust the machinery and equipment actually imported by the declarant, signs and confirms according to regulations, keeps one copy of the list and follow-up adjustment sheet clearly noting the name of the imported goods already taxed based on the main machine in the customs documents.

Upon completion of the quantity of imported goods listed, the Head of the Customs Sub-Department where the final procedures were processed will confirm on the original follow-up adjustment sheet of the declarant, photocopy one copy to send to the Customs Department where the list was registered as a basis for post-clearance inspection of the use of the integrated machinery and equipment taxed based on the main machine.

c) Machinery and equipment under Chapters 84 and 85 of the Preferential Import Tariff Schedule that form a set or assembly registered with the customs authority from May 27, 2010 (the date Circular No. 49/2010/TT-BTC took effect) to before the enterprise submits the List to the customs authority, if the customs authority has calculated and collected taxes on each machine separately and such sets or assemblies meet the contents specified in Notes 3, 4, and 5 of Part XVI of the List of Goods for Import and Export of Vietnam, then the declarant shall submit the dossier to the Customs Sub-Department where the List was submitted for the Customs Sub-Department to check the dossier, determine the consistency of the imported set or assembly, compare it with the declared List of imported goods, classify according to the guidance provided herein, and retroactively adjust the Deduction Certificate. In case of any issues, the Customs Sub-Department shall report to the Customs Department to report to the General Department of Customs to request the Ministry of Finance to consider and resolve each specific case.

1.2.3. In cases where machinery and equipment under Chapters 84 and 85 that form a set or assembly have been actually imported but do not match the declared List of imported machinery and equipment, the declarant shall be responsible for declaring and paying taxes on each machine individually. If the customs authority or another agency discovers and confirms that the goods are not installed or used as a set or assembly, in addition to paying the full amount of tax owed, they will also be subject to penalties as prescribed.

1.3. In cases where machinery and equipment under Chapters 84 and 85 that form a set or assembly meet Notes 3, 4, and 5 of Part XVI but the declarant does not wish to classify according to the guidance provided in point 1 of this circular, classification and taxation will be done on each machine individually.

1.4. In cases where complete and integrated machinery and equipment were imported before Circular No. 49/2010/TT-BTC took effect and the competent authority had confirmed the main machine and classified the imported goods according to the main machine, the remaining parts imported after Circular No. 49/2010/TT-BTC took effect can continue to be classified according to the main machine.

2. Regarding classification of goods in unassembled or disassembled form according to Rule 2a

2.1. According to Rule 2a and its note in Appendix 2 issued along with Circular No. 49/2010/TT-BTC, goods in unassembled or disassembled form shall be classified based on the following principles:

2.1.1. Classify each component or part separately if all of the following criteria are met:

(i) Regarding the degree of separation: The components or parts must be kept separate, without any being assembled with another. For example, bicycle tires should be kept separate from inner tubes, spokes, rims, etc. Separated components or parts are those that constitute the product, excluding manuals, catalogs, packaging, etc.

(ii) Regarding the total number of separated components or parts: At least one separated component or part produced domestically (self-produced or purchased from domestic enterprises) must be used for assembly into a finished product. Separated components or parts are those that constitute the product, excluding manuals, catalogs, packaging, etc.

2.1.1. Classify the finished product if it fails to meet either or both of the criteria mentioned in point 2.1.1 above. Specifically:

(i) Regarding the degree of separation: The components or parts are kept separate or not kept separate but at least two separated components or parts are assembled together into a subassembly or functional unit.

(ii) Regarding the total number of separated components or parts: The total number of separated components or parts used to assemble a finished product entirely from imported sources.

2.1.3. In cases where imported components or parts do not fully meet the separation criteria specified in point 2.1.1 above, but the enterprise chooses not to classify according to the principle stated in point 2.1.1 and instead chooses to classify according to the code of the finished product, classification will be made according to the declarant's choice.

2.2. To provide a basis for the Customs Sub-Department handling the import procedures to check the use of imported components no later than March 31 of the following year according to the note of Rule 2a, the procedure shall be carried out as follows:

2.2.1. Responsibilities of the declarant:

By no later than January 30 of each year, the declarant must report to the customs authority handling the import procedures (the declarant may choose the most convenient Customs Sub-Department to handle the import procedures) on the importation and use of imported goods of the previous year, including the following contents:

- Name, quantity of imported components; name, quantity of self-produced or domestically purchased components;

- Name of the expected assembled product and the usage rate of components for assembling the product (what components are needed to assemble the product and their quantities);

- Actual quantity of components used for production and assembly;

- Quantity of products produced and assembled;

- Quantity of imported components not used for production and assembly (specify the amount carried over to the next year or used for other purposes; the amount of additional tax payable - if applicable).

2.2.2. Responsibilities of the customs authority:

Within 45 days from the date of receipt of the declaration report submitted by the declarant, the customs authority handling the import procedures shall be responsible for checking the importation and use of goods, settling the use of imported components incorporated into production by the enterprise, and collecting taxes and duties for cases where the declaration and settlement reports are not properly implemented and/or the goods are used for purposes other than those taxed as unassembled components.

The Ministry of Finance provides comments for the Customs Departments of provinces and cities to publicly post this guidance at their headquarters and guide declarants to implement uniformly, ensuring facilitation of export and import activities while effectively managing customs affairs. Any arising issues should be promptly reported to the Ministry of Finance and the General Department of Customs for consideration and guidance on resolution.