Circular No. 14/2006/TT-BTC guides the implementation of preferential tariff rates for special preferential import duties of Vietnam to implement the Agreement on the Common Effective Preferential Tariff Erasure (CEPT) among ASEAN countries.

CIRCULAR

Guidelines for Implementing Vietnam's Special Preferential Import Tariff Rates to Fulfill the ASEAN Comprehensive Economic Cooperation Agreement (CEPT)

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Pursuant to the Law on Export Duties and Import Duties No. 45/2005/QH11 dated June 14, 2005; and Decree No. 149/2005/NĐ-CP dated December 8, 2005 of the Government detailing the implementation of the Law on Export Duties and Import Duties;

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

To implement the Protocol on the Accession of the Socialist Republic of Vietnam to the ASEAN Comprehensive Economic Cooperation Agreement (CEPT) for the ASEAN Free Trade Area (AFTA) (hereinafter referred to as the CEPT/AFTA Agreement), signed in Bangkok on December 15, 1995;

The Ministry of Finance hereby provides guidelines for implementing Vietnam's special preferential import tariff rates to fulfill the ASEAN Comprehensive Economic Cooperation Agreement (CEPT) as follows:

I. SCOPE AND CONDITIONS FOR APPLICATION

1. Goods imported to be eligible for Vietnam's special preferential import tariff rates under the CEPT/AFTA Agreement (hereinafter referred to as the CEPT rate) must meet the following conditions:

a) They must be included in the List of Goods and Special Preferential Import Tariff Rates of Vietnam for Implementing the CEPT/AFTA Agreement issued by the Minister of Finance.

b) They must be imported from ASEAN member countries into Vietnam, including the following countries:

- Brunei Darussalam;

- Kingdom of Cambodia;

- Republic of Indonesia;

- Lao People's Democratic Republic;

- Malaysia;

- Union of Myanmar;

- Republic of the Philippines;

- Republic of Singapore; and

- Kingdom of Thailand;

c) They must satisfy the ASEAN origin requirements, confirmed by the ASEAN Certificate of Origin Model D (C/O Model D) as stipulated in Section III of this Circular, except for goods imported with a total value of the consignment (FOB) not exceeding US$200, which are not required to have a C/O Model D. However, goods imported with a C/O Model D bearing the stamp "FOR CUMULATION PURPOSES ONLY" as specified in Decision No. 151/2005/QĐ-BTM dated January 27, 2005 of the Minister of Trade shall not be eligible for the CEPT rate.

d) They must be transported directly from the exporting country, which is a member of ASEAN, to Vietnam as prescribed in Decision No. 1420/2004/QĐ-BTM dated October 4, 2004 of the Minister of Trade.

2. Goods from duty-free zones (including processed goods) when imported into the domestic market and eligible for the CEPT rate must meet the conditions stipulated in Point a and c, Clause 1, Section I of this Circular.

II. IMPORT DUTY RATES APPLIED

1. The import duty rate applied to goods subject to the CEPT rate as prescribed in Section I of this Circular is the CEPT rate for each year, corresponding to the CEPT rate column of that year, as specified in the List of Goods and Special Preferential Import Tariff Rates of Vietnam for Implementing the CEPT/AFTA Agreement issued by the Minister of Finance.

2. Where the preferential import duty rate (MFN rate) of a commodity as stipulated in the Preferential Import Tariff Schedule is adjusted to a lower level than the CEPT rate, the applicable import duty rate for such commodity will be the MFN rate.

If the MFN rate stipulated in the Preferential Import Tariff Schedule of such commodity is adjusted to a higher level than the CEPT rate, the applicable import duty rate will be the CEPT rate.

3. Goods imported by enterprises for manufacturing or assembling mechanical, electrical, and electronic products that simultaneously meet the conditions for applying the CEPT rate and the import duty rate based on the current localization ratio regulations may choose either policy, specifically as follows:

If the enterprise chooses to apply the import duty rate based on the localization ratio, when importing unassembled or partially assembled components, the enterprise must apply a uniform import duty rate based on the localization ratio for all imported components, even if some components meet the conditions for applying the CEPT rate.

If the enterprise chooses to apply the CEPT rate, unassembled or partially assembled components that meet the conditions for applying the CEPT rate will be subject to the CEPT rate; other components will be subject to the MFN rate or the general rate.

4. Application of the CEPT rate to unassembled parts and components imported for assembling mechanical, electrical, and electronic products is carried out as follows:

Unassembled parts (component sets), unassembled components (component sets) with C/O Model D are eligible for the CEPT rate of the complete set if they meet the conditions for applying the CEPT rate as stipulated in Section I of this Circular. Other unassembled parts and components without C/O Model D are subject to the MFN rate or the general rate applicable to the complete set.

The consignor must present separate commercial invoices for unassembled parts (component sets), unassembled components (component sets) with C/O Model D to request application of the CEPT rate.

The application of the CEPT rate is implemented at the time of tax calculation according to the laws on export duties and import duties. Customs clearance procedures for import duties are carried out according to current regulations.

The principle of classifying unassembled and assembled parts and components is implemented according to Circular No. 85/2003/TT-BTC dated August 29, 2003 of the Ministry of Finance guiding the classification of goods according to the Export and Import Goods List and the Preferential Import Tariff Schedule, Export Tariff Schedule, and related regulations and guidance on goods classification.

5. Application of the CEPT rate to automobile kits (CKD):

a) Enterprises must choose to apply the CEPT rate prescribed for automobile kits (CKD) or the CEPT rate prescribed for individual parts and accessories for a specific type of vehicle and register in writing with a local Customs Office deemed convenient by the enterprise, and implement the registered content until December 31, 2006.

In the case where a business chooses to apply the CEPT tariff rate prescribed for automobile kits in CKD form, the parts and components of automobile kits in CKD form imported from multiple sources (countries of origin) and different shipments shall be subject to the CEPT tariff rate specified for automobile kits in CKD form, provided that one or more separate commercial invoices for the parts and components requesting application of the CEPT tariff rate are presented, in addition to the conditions set forth in Section I of this Circular. Parts and components of automobile kits in CKD form imported from multiple sources and different shipments that do not meet the conditions stipulated in Section I of this Circular shall be subject to the MFN tariff rate or the general tariff rate prescribed for automobile kits in CKD form.

The application of the CEPT tariff rate for automobile kits in CKD form imported from multiple sources and different shipments shall be implemented at the time of tax calculation as prescribed by the laws on export tax and import tax. The procedures for settling import tax with the Customs authority shall be carried out according to current regulations.

b) As of January 1, 2007, businesses may only apply the CEPT tariff rate for individual auto parts and components as specified in the List of Goods and Preferential Import Tariff Rates issued by the Minister of Finance to implement the CEPT/AFTA Agreement; the CEPT tariff rate for automobile kits in CKD form as specified in point a, Clause 5, Section II of this Circular shall not be applied.

6. The CEPT tariff rate applicable to processed goods in duty-free zones imported into the domestic market is the CEPT tariff rate of the imported processed goods specified in the List of Goods and Preferential Import Tariff Rates issued by the Minister of Finance to implement the CEPT/AFTA Agreement.

7. In cases where the consignor has not yet presented Certificate of Origin (CO) Form D at the time of registering the customs declaration:

a) For consignors who comply well with the laws on taxes, as stipulated in Part C of Circular No. 113/2005/TT-BTC dated December 15, 2005, issued by the Ministry of Finance guiding the implementation of export tax and import tax, the tax shall be calculated based on the committed CEPT tariff rate and declared by the taxpayer.

If the consignor cannot present CO Form D within the prescribed deadline as stated in point b, Clause 5, Section III of this Circular, the Customs authority shall recalculate the tax for the consignor and impose penalties according to current regulations.

b) For consignors who do not comply well with the laws on taxes, as stipulated in Part C of Circular No. 113/2005/TT-BTC dated December 15, 2005, issued by the Ministry of Finance guiding the implementation of export tax and import tax, provisional tax shall be calculated based on the MFN tariff rate. When the enterprise presents CO Form D in accordance with the prescribed deadline as stated in point b, Clause 5, Section III of this Circular, the Customs authority shall recalculate the import tax for the consignor based on the CEPT tariff rate.

8. In cases where there are changes to the items in the legal documents of ASEAN countries issued to implement the CEPT/AFTA Agreement, affecting Vietnam's right to apply the CEPT tariff rate as specified in Section I of this Circular, the Ministry of Finance will provide appropriate guidance for each specific case.

III. CERTIFICATE OF ORIGIN (CO) AND INSPECTION OF THE CERTIFICATE OF ORIGIN

1. The rules for goods to be recognized as having ASEAN origin are stipulated in the Regulation on Issuing ASEAN Origin Certificates - Form D issued together with Decision No. 1420/2004/QĐ-BTM dated October 4, 2004, Decision No. 151/2005/QĐ-BTM dated January 27, 2005, Decision No. 2281/2005/QĐ-BTM dated August 30, 2005, Decision No. 3188/2005/QĐ-BTM dated December 30, 2005, and other related decisions issued by the Minister of Trade.

2. The Certificate of Origin must bear a signature and stamp consistent with the official model signature and stamp issued by the competent authorities responsible for issuing CO Form D in the following ASEAN member countries:

- In Brunei Darussalam, the Ministry of Foreign Affairs and Trade;

- In the Kingdom of Cambodia, the Ministry of Commerce;

- In the Republic of Indonesia, the Ministry of Trade;

- In the Lao People's Democratic Republic, the Ministry of Trade;

- In Malaysia, the Ministry of International Trade and Industry;

- In Myanmar, the Ministry of Commerce;

- In the Philippines, the Department of Finance;

- In Singapore, the Customs Authority; and

- In Thailand, the Ministry of Commerce.

3. CO Form D for goods from duty-free zones imported into the domestic market must bear a signature and stamp consistent with the official model signature and stamp issued by the Export-Import Management Departments or Boards authorized by the Ministry of Trade to issue CO Form D.

4. CO Form D is valid for six months from the date it is signed by the competent authority of the exporting country which is an ASEAN member.

5. Provisions regarding the presentation of CO Form D:

a) The time for presenting CO Form D to the Customs authority is the time of registering the customs declaration.

b) In cases where CO Form D cannot be presented at the time of registering the customs declaration due to justifiable reasons, the Director of the Customs Office may decide to extend the period for submitting CO Form D up to thirty days from the date of registering the customs declaration.

c) In cases where CO Form D is presented within the prescribed deadline as stated in point a or b, Clause 5, Section III of this Circular but the CO has expired, if there are justifiable reasons such as force majeure or other reasonable grounds beyond the control of the exporter, the Director of the Customs Office may decide to accept the CO.

6. In cases where there is doubt about the authenticity and accuracy of CO Form D, the Customs authority has the right:

a) To request a re-inspection of CO Form D: the Customs authority will send a request to the competent authority issuing the certificate of origin in the exporting country to seek confirmation.

b) Suspend the application of the CEPT tariff rate and temporarily collect taxes at the MFN rate or the ordinary rate. Require the importer to provide additional documentation (if available) to prove that the goods genuinely originate from ASEAN within no more than 365 days from the date the Form D Certificate of Origin is submitted to the Customs authority. When sufficient evidence confirms that the goods are of ASEAN origin, the Customs authority shall be responsible for processing the refund procedures to return to the importer the difference between the amount of tax temporarily collected at the MFN rate or the ordinary rate and the amount of tax calculated at the CEPT tariff rate.

During the waiting period for the re-examination results, continue to process the procedures to release the goods according to the general import regulations.

The procedures and requirements for requesting a re-examination shall be carried out in accordance with the provisions of the Regulation on Issuing Certificates of Origin for ASEAN Goods of Vietnam - Form D issued together with Decision No. 1420/2004/QĐ-BTM dated October 4, 2004, Decision No. 151/2005/QĐ-BTM dated January 27, 2005, and other related decisions of the Minister of Trade.

IV. OTHER PROVISIONS

Provisions regarding the basis for calculating taxes, tax collection and payment systems, tax exemption and reduction systems, tax refund systems, tax recovery, violation handling, and other relevant provisions shall be implemented in accordance with the provisions of the Law on Export Duties and Import Duties and current guiding documents.

V. IMPLEMENTATION

This Circular takes effect 15 days after its publication in the Official Gazette; it abolishes Circular No. 42/2005/TT-BTC dated May 31, 2005 of the Ministry of Finance guiding the implementation of Decree No. 48/2005/NĐ-CP dated April 8, 2005 of the Government, and Circular No. 45/2005/TT-BTC dated June 6, 2005 of the Ministry of Finance guiding the implementation of Decrees No. 78/2003/NĐ-CP dated July 1, 2003, No. 151/2004/NĐ-CP dated August 5, 2004, No. 213/2004/NĐ-CP dated December 24, 2004, and No. 13/2005/NĐ-CP dated February 3, 2005 of the Government.

In the course of implementation, if there are difficulties or obstacles, please promptly reflect them so that the Ministry of Finance can provide supplementary guidance as appropriate./.