USAID Trade Facilitation Program
SCOPE OF WORK
Rapid assessment of the issues related to customs procedures
faced by export processing enterprises in Vietnam
Proposed Personnel: Local/National STTA International Trade Expert
Period of Performance: o/a 15 April – 30 May 2021
Level of Effort: 20 days
Origin/Destination: Hanoi/HCMC, Vietnam
Travel Dates: n/a
Activity No. FY 2021 Activity 4.3.1 _ Customs Business Consultation
MEL indicator(s): IR4.1-1, IR4.1-2, CBLD-9
Project Background:
The USAID Trade Facilitation Program is a five-year project that aims to support the adoption and implementation of a more risk–based approach to customs and specialized inspection institutions in Vietnam. The Program will work with the General Department of Vietnam Customs (GDVC) to strengthen the National Trade Facilitation Committee (NTFC) of Vietnam and its Working Groups; streamline border clearance procedures (including specialized inspection implemented by other line ministries and agencies); harmonize the implementation of risk-based approaches between national and provincial levels; train national and provincial customs officers and staff from other ministries on risk management; and facilitate dialogue between customs and business and between stakeholders in Hanoi and in the provinces.
Activity Background:
Background:
Trade facilitation and customs modernization efforts hinge on the principles of voluntary compliance and effective private sector engagement. Started back in 2013 there have been several regulatory initiatives introduced by the Ministry of Finance and GDVC to establish a more regular and managed C2B consultation mechanism for the private sector to propose policy revisions and the latest in this series of milestones is the Decision 29/QD-TCHQ issued in January 2021. Besides focusing on ongoing and regular activities which have been initiated for years, the Decision 29/QD-TCHQ also shows the determination of GDVC on strengthening and expanding the cooperation with FDIs, the key industrial sectors’ companies and SMEs.
Aligning with the strategy of GDVC in cooperating with the private sector, the USAID Trade Facilitation Program (the Program) has been conducting periodic meetings with private sector experts (Private Sector Trade Facilitation Meetings) who are representatives from FDIs, customs brokers, traders, and manufacturers to solicit their input and feedback on dominant issues and solutions related to the National Single Window; specialized management and inspection of imports and exports; self-certification and verification of origin; illegal transshipments; customs-to-business partnership; etc. Discussions from the meetings suggested there are imminent issues related to customs management of procedures with respect to export processing enterprises (hereinafter EPEs) in Vietnam. Specifically:
1. Investment Registration Certificates of EPEs
For years, the issuance of Investment Registration Certificates (hereinafter IRCs) of EPEs has been a controversial issue. Pursuant to Decree 82/2018/ND-CP dated May 22, 2018 of the Government on regulating the management of industrial parks and economic zones, the licensing authorities are required to get opinions of customs authorities on the investors’ capabilities of satisfying conditions of the customs inspection and supervision (e.g. fence, camera, etc.) prior to issuing IRCs. However, EPEs cannot fulfill those conditions until they complete their construction stage. In addition, there was no official criteria to assess the investors’ capability in any legal documents.
With the purpose of solving this problem, the Government has just issued Decree 18/2021/ND-CP amending some articles in Decree 134/2016/ND-CP on customs duties. Pursuant to the new Decree, the criteria and procedure for assessing the investors’ capability to satisfy conditions of the customs inspection and supervision are detailed and simplified. Nevertheless, until the new regulations take into effect on April 25, 2021, its effectiveness in reality is uncertain.
2. Tax preferences and tax refunds
EPEs receive unique treatment when it comes to tax on imports and exports. Generally, they are exempt from paying any duties or VAT on any materials or goods imported or exported. However, as investors could not be granted IRCs of EPEs in the first stage because of the abovementioned conditions, they have to pay tax as other normal investment projects during the construction stage and face numerous difficulties when trying to get tax refund after fulfilling the conditions to be EPEs. In case of VAT refund, there are more complaints as investors do not know which authority between customs and local tax department would be in charge of the refund. In addition, local tax departments have an apparent opinion that they could not see the logics of VAT refund in this case. According to them, EPEs do not have to pay VAT so they never fall in the case of getting VAT refund.
3. The establishment of EPEs’ subsidiaries
Decree 82/2018/ND-CP also provides that EPEs’ subsidiaries receive the same treatment as EPEs if and only if they (i) fulfill conditions of the customs inspection and supervision (e.g. fence, camera, etc.); (ii) are established in export processing zones, industrial parks or economic zones; and (iii) are dependent accounting units of EPEs. While these conditions are management subjects by different authorities which are Customs, Planning and Investment and Tax, there is no single authority assigned to take responsibility (for certifying that an EPE’s subsidiary satisfy the abovementioned conditions) as well as no specific regulation for the certification procedures. As such for investors to fulfill these conditions in practice is a big challenge.
4. Doing business with domestic enterprises
In original definition, EPE is defined as a company doing manufacturing/processing business for export only. All incentive scheme applied to EPEs (e.g. CIT incentive, VAT/duty exemption, etc.) are set out based on this concept. However, there are cases EPEs also run other kinds of business, e.g. processing services, trading goods, etc. – and in general they are required to apply VAT invoices and declare normal taxes. In particular for processing service (receiving materials from domestic customers and returning finished goods), some tax authorities request EPEs to charge VAT on the service fee while that added value would also be declared when the customers import goods back, that leads to double taxation.
5. Common issues
The specific issues for EPEs which are similar to export manufacturing enterprises, or export processing business model are subject to many customs issues especially inventory control rules. EPEs are subject to customs supervision so as to ensure that all duty-free materials imported are used legitimately for goods which are manufactured for export. If there are any discrepancies, either surplus or minus, between accounting books and customs declarations, taxes and duties will be applied. Therefore, the customs supervision on inventory control in EPEs is rigorous. In practice, the obligation of reporting, managing, and recording all the use of duty-free materials might be an administrative burden for EPEs.
In order to prepare for a well-informed discussion for the upcoming Private Sector Trade Facilitation Meeting and to develop feasible and practical policy-related solutions, the Program seeks consultant(s) to conduct a rapid assessment examining into the above mentioned problems and issues faced by export processing enterprises in Vietnam.
Methodology: The Program will mobilize a local/national STTA International Trade Expert to undertake study and to prepare a rapid assessment report with in-depth analysis on the specific topics above. This work should include research and consultations with relevant stakeholders (through small invited-discussion groups if needed). The local/national STTA International Trade Expert will also be expected to
participate with and contribute to subject-matter seminars as deemed necessary and at the Program’s request to present the findings and conclusions from the study and to discuss specified topics.
In consultation with the Program’s Senior Trade Facilitation Expert (STFE) and Private Sector Engagement Specialist, the local/national STTA International Trade Expert may also be required to work in collaboration with other members of the Program team in order to undertake this activity.
Tasks & Responsibilities:
The local/national STTA International Trade Expert will be responsible for the following:
- Desk study and preparation of the rapid assessment of the specific topics assigned;
- Research and consultations with stakeholders (EPEs, business associations and authorities) to gather their views and feedbacks on the current situation;
- Participate in small scale discussion groups (as deemed necessary) and thereafter present findings and conclusions contained in the assessment to subject matter seminars at the Program’s request; and
- Produce a Final Rapid Assessment Report containing proposals and recommendations for solutions to reform customs administrative procedures, enhance customs administration and improve trade facilitation efforts.
Deliverables:
- Draft study on the specific topic assigned;
- Participate with survey and consultations with export processing enterprises or other relevant stakeholders (as necessary) in order to gather information and collect feedback on the current situation;
- Active participation at subject matter seminars for stakeholders giving a presentation on findings and conclusions on specific topics assigned; and
- Final Report containing details of all work carried out and including proposals and recommendations for possible solutions to reform administrative procedures, enhance customs administration, and improve trade facilitation efforts on the specific topics assigned.
Qualifications:
The local/national STTA International Trade Expert will be required to meet the following essential qualifications:
- Master's degree or higher in trade policy, international trade, international economics, customs administration, business administration, or similar field;
- Minimum 7 years of experience coordinating with host government counterparts on programs of a similar focus, on topics such as export processing zones, international trade policy, customs management and procedures, trade facilitation, international trade agreements, etc.;
- Proven knowledge and understanding of customs and non-customs procedures including Investment licensing, Tax procedure, Inventory control, Tax preferences, etc.;
- Awareness of the WCO and WTO instruments such as the Revised Kyoto Convention (RKC) and the Trade Facilitation Agreement (TFA);
- Capable in word processing, spreadsheets and office software such as Microsoft Word, Excel, PowerPoint, and Google Applications;
- Fluency in Vietnamese and good written, oral, and presentation skills; and
- English language skills preferred.
Reporting:
The local/national STTA International Trade Expert may be required to report periodically to the Program STFE ([email protected] [1]) and on a regular (weekly) basis to the Private Sector Engagement Specialist ([email protected] [2]).
Application
Interested candidates should send a cover letter outlining their interest in the position along with a CV to Mr. Filip Graovac at [email protected] [3].
Deadline for submission: Apr 14, 2021