Circular No. 89/2011/TT-BTC guiding the method for determining the floor price of rice for export

CIRCULAR

Guidelines on the method for determining the minimum export price of rice

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Pursuant to the Price Ordinance No. 40/2002/UBTVQH10 dated April 26, 2002;

Pursuant to the Decree No. 170/2003/NĐ-CP dated December 25, 2003 of the Government detailing the implementation of certain provisions of the Price Ordinance;

Pursuant to the Decree No. 75/2008/NĐ-CP dated June 9, 2008 of the Government amending and supplementing certain provisions of the Decree No. 170/2003/NĐ-CP dated December 25, 2003 of the Government detailing the implementation of certain provisions of the Price Ordinance;

Pursuant to the Decree No. 109/2010/NĐ-CP dated November 4, 2010 of the Government on rice export business;

Pursuant to the Decree No. 118/2008/NĐ-CP dated November 27, 2008 of the Government stipulating the functions, tasks, powers, and organizational structure of the Ministry of Finance;

The Ministry of Finance provides guidelines on the method for determining the minimum export price of rice as follows:

PART I

GENERAL PROVISIONS 

Article 1. Scope of Regulation

These guidelines provide direction on the method for determining the minimum export price of rice as a basis for the Vietnam Food Association to determine and announce the minimum export price of rice during each period; for traders engaged in rice export business to have a basis for concluding contracts and registering export rice contracts.

Article 2. Applicability

These guidelines apply to traders in accordance with the Law on Trade who have the right to engage in rice export business as stipulated in the Decree No. 109/2010/NĐ-CP dated November 4, 2010 of the Government on rice export business; agencies, organizations responsible for managing and directing rice exports and other organizations and individuals related thereto.

Article 3. Principles for Determining the Minimum Export Price of Rice

1. In line with supply and demand relations, the fluctuations in the prices of paddy and rice in the domestic market (the directed paddy purchase price announced, the general purchasing price of paddy and rice in the domestic market) and the export prices of rice according to different quality grades that traders engaged in rice export business transact on the international market.

2. Ensuring reasonable and legitimate actual business costs for exporting rice, ensuring the business efficiency of traders engaged in rice export business.

Article 4. Definitions.

1. Reasonable and legitimate actual business costs for exporting rice are necessary expenses incurred by traders to conduct rice export business meeting certain quality standards at a specific time and location, determined based on economic and technical norms, cost standards issued by competent authorities in accordance with the law and consistent with market prices.

2. Minimum export price of rice is the amount in Vietnamese Dong (VND) and converted into foreign currency (the agreed foreign currency used for international settlement) according to the exchange rate of commercial banks at the time of transaction for announcing the minimum export price of rice per tonne of clean rice at the Vietnamese export port, corresponding to each quality grade of rice calculated according to the principles, bases, and methods prescribed in this Circular.

3. Cost price of exported rice is the total of all reasonable and legitimate actual expenses incurred by traders from purchasing raw materials to completing finished rice ready for export, calculated in VND and converted into foreign currency according to the quoted exchange rate of commercial banks for conducting rice export business.

4. Directed paddy purchase price is the purchase price of paddy set by competent authorities and announced and guided for implementation in accordance with the law.

5. World market rice price as defined in this Circular is the export price of rice from countries with large export volumes determined by the Vietnam Food Association.

6. Cost-based method is the method for determining the minimum export price of rice based on the average cost price of exported rice according to each quality grade and the average expected profit margin of rice exporting traders.

7. Deduction method is the method for determining the minimum export price of rice based on the export price of rice according to each quality grade transacted by Vietnamese traders in major importing countries' markets, as determined by the Vietnam Food Association, deducting all average costs incurred by traders to deliver goods from the export port to sell to buyers at the import port and complete the transfer of ownership of the product from the exporting trader to the importing buyer (including loading and unloading fees, international transportation costs, cargo insurance, customs duties, quality inspection fees, and other costs). 

Chapter II.

METHODS FOR DETERMINING THE MINIMUM EXPORT PRICE OF RICE 

Section I. Cost Method

Article 5. Basis for Pricing

1. Based on the average export cost price of all quality grades of rice of rice exporting traders.

2. The anticipated average profit margin of the rice export business sector.

3. Rice export policy and related policies on rice exports issued by the State during each period.

Article 6. Method for Determining the Average Export Floor Price of Each Quality Grade of Rice

1. The average export floor price of each quality grade of rice is determined according to the following formula:

2. Determination of the average export cost price of each quality grade of rice

a) The average export cost price of each quality grade of rice serving as the basis for calculating the export floor price is determined based on the following cost factors:

- If the export cost price of rice is calculated from the method of purchasing paddy for milling and processing export rice, it is determined according to the table below:

- If the export cost price of rice is calculated from the method of purchasing raw material rice bags for processing export goods, the export cost price is also determined based on the cost factors in the above table but excluding the items under section A; only the costs under sections B and C are included, plus the purchase cost at the warehouse.

- If the export cost price of rice is calculated from the method of purchasing rice meeting export standards from rice supply units, the export cost price is only calculated based on the purchase price of export rice and the costs listed under section C of the above table.

b. Content of some basic cost items is determined as follows:

b1. Raw material costs are the costs of purchasing paddy (or rice) including: the purchase price of paddy (or raw material rice) that meets export standards consistent with domestic rice prices at the time of purchase for export and costs associated with purchasing export goods; specifically:

- The purchase price is set by rice exporting traders in accordance with the directed paddy price announced and guided by competent authorities and consistent with market prices in the region.

- Costs associated with purchasing export goods include: delivery and receiving costs, weighing and settlement costs, other costs associated with purchasing export goods (if any).

These types of costs, if there are state regulations on policies, expense systems, expense levels, economic and technical norms, shall be calculated according to state regulations. For expenses not regulated by the state, they shall be applied according to norms and expense systems established by the Association (if any), Board of Directors, Board of Members, or General Director (Director) of the enterprise and bear legal responsibility for the accuracy of such decisions.

For labor costs incurred in the process of exporting rice, they are calculated based on labor norms and the principle described above multiplied by the wage rate or labor fee. The wage rate is calculated based on the basic wage stipulated by the state; wages, wage allowances, contributions made according to wages (social insurance, health insurance, trade union fees, and unemployment insurance), and other benefits for employees as stipulated by the Labor Code, laws on wages, and laws on corporate income tax. The method of establishing, approval authority, and registration of the wage rate are implemented according to current regulations for production and trading enterprises.

b2. Paddy milling costs into rice:

- If traders organize milling themselves, all costs incurred to serve milling paddy into rice are fully calculated, including transportation costs, loading/unloading costs, direct labor costs, costs for recovering main products and by-products, and other related costs (if any). The calculation principles for these costs are as directed in Subsection b1, Point b, Clause 2, Article 6 of this Circular.

- If traders must hire other milling facilities to mill and process rice for them, the actual rental costs are calculated in line with market prices at the time of rental, as evidenced by economic contracts, settlement records, and invoices in compliance with legal provisions.

b3. Polishing and packaging costs, rice classification costs, transportation and loading/unloading costs:

The calculation principles for these costs are similar to those for calculating paddy milling costs into rice as directed in Subsection b2, Point b, Clause 2, Article 6 of this Circular.

b4. Other costs such as common production costs, financial costs, sales costs, management costs, and allocated costs to be included in product cost, are applied according to the provisions of Clauses 3, 4, 5, 6, 7, Article 10; costs that cannot be included as reasonable and legitimate expenses for determining product cost, are applied according to the provisions of Article 11 of the Regulation on Pricing of Assets, Goods, and Services issued together with Circular No. 154/2010/TT-BTC dated October 1, 2010, by the Ministry of Finance regarding the issuance of the Regulation on Pricing of Assets, Goods, and Services.

b5. The value of recovered by-products is determined by multiplying the total quantity of by-products recovered during the export rice processing process by the selling price of recovered by-products based on market prices.

3. Anticipated Profit:

a) Principle for determining profit: Based on the provisions of Article 3 of this Circular, traders estimate a reasonable profit margin or level consistent with the industry's average profit margin.

The profit level is calculated as a percentage of the export cost price of rice.

b) Method for determining profit:

The maximum expected profit rate is determined by the average actual industry-wide export rice profit margin (audited or settled and approved by the competent authority) over the three consecutive years immediately preceding the pricing period.

Part II: Deduction Method

Article 7. Basis for Pricing

1. Based on the world market price of rice.

2. Based on the average cost incurred by traders to deliver rice from the export port to sell to customers at the import port (CNF/CIF to a specific port) and complete the transfer of ownership of the exported rice to the importing customer.

3. Based on the rice export policy and related export policies of the State during each period.

Article 8. Method for Determining the Average Export Floor Price of Rice by Quality Standards

1. The average export floor price of rice according to each quality standard is determined using the following formula:

2. To determine total costs to deliver the product from the export port to the import port, including reasonable actual costs such as:

- International transportation and loading/unloading fees (if the seller agrees to bear the loading/unloading costs);

- Port fees;

- Customs fees;

- Product inspection fees;

- Other costs (if any).

Part III: Conditions for Applying Methods to Determine the Export Floor Price of Rice

Article 9. Conditions for Applying Methods to Determine the Export Floor Price of Rice

1. Based on the export business costs and the world market price, and based on export conditions under FOB or CNF/CIF prices, rice exporters shall select and apply one of the two methods specified in Part I and Part II of this Circular to determine the specific price level ensuring compliance with the principles for determining the export floor price of rice as stipulated in Article 3 of this Circular.

2. In cases where the world market price decreases, traders must calculate and reduce their business costs, not force the purchase price of paddy and rice from producers to be too low, inconsistent with the directed paddy price according to the guidance of the competent authority and the market price level, and must comply with measures to stabilize the paddy and rice prices in the domestic market as prescribed in Decree No. 109/2010/NĐ-CP dated November 4, 2010 of the Government on rice export business and relevant laws on price stabilization. 

Chapter III

IMPLEMENTATION

Article 10. Implementation Organization

1. Vietnam Food Association:

Based on the provisions of this Circular and the compilation of reports on the calculation of the export floor price of rice by rice exporters, calculate the average export floor price of rice according to each quality standard for the rice export business sector, announce the export floor price at the beginning of the season and adjust it according to different periods to serve as a basis for traders to sign and register export rice contracts. At the same time, report to the Ministry of Finance and the Ministry of Industry and Trade about the announced floor price and provide detailed explanations regarding the calculation, announcement, and changes in the price. Announce the purchase price of paddy and the export price of various types of rice from provinces with commodity paddy on a weekly basis and quarterly, annually compile and report the export rice production cost of enterprises to the Ministry of Finance.

2. Rice Exporters:

Based on the provisions of this Circular, traders are responsible for calculating the export floor price of rice for their own unit, report to the Vietnam Food Association for consolidation. Report the export rice production cost quarterly and annually to the Vietnam Food Association for consolidation and reporting to the Ministry of Finance.

Article 11. Effective Date

This Circular takes effect from August 1, 2011.

During implementation, if any issues arise, please promptly reflect them to the Ministry of Finance for guidance and resolution./.