How a Foreign Company Apply for Certificate of Origin in Vietnam?
Vietnam has growing fast due to the opening policy of the
government, and has been signing a number of free trade agreements with ASEAN,
China, Korea, Japan, India, Australia, New Zealand, Chile, Russia, Belarus…
with effectiveness. The expecting Europe Vietnam Free Trade Agreement has been
signed but not yet effective at this moment. Having said that, Vietnam has
become a destination for foreign investors to set up factory and set up company in Vietnam to
undertake manufacturing for export and enjoy tax preference because of Vietnam
origin.
Certificate of Origin Law Firm
in Vietnam
The applicant wishing to be granted the Certificate of Origin
(“C/O”) needs to register the trader profile under Vietnam regulations before
submitting the dossier applying for C/O. There are steps to be followed
at the State authorities to check the trader profile, its legal registration in
Vietnam, manufacturing facilities that produce the goods which are subject of
C/O. Further, additional information and proof will be required for
verification at Vietnam State Authorities including the declaration of origin
provided by manufacturer or supplier of originating materials or locally
produced originating goods if such material is used in subsequent stage to
produce another good, good manufacturing process. Not only checking the
documents, the authority could undertake an inspection visit to the
manufacturing facility of trader and request the applicant to submit evidence
of customs declaration of materials imported and used in production of exported
goods (if imported materials are used in the production process); a sale
contract or VAT invoice of locally purchased materials (if locally purchased
materials are used in the production process) and other documents as deemed
necessary. If the documents, the process, and the conditions are met, the C/O
will be issued.
In general, an originating good is a good which is originating in
a country, group of countries, or territory where the last processing operation
is performed and substantially transforms such good. To qualify for
non-preferential goods, there will be required of:
1.“Change in tariff classification” (hereinafter
referred to as CTC): means a change in
two-digit, four-digit, or six-digit HS heading of a good as compared with the
HS heading of non-originating materials (including imported materials and
materials of undetermined origin) used for the production of such good.
2.“Local value content” (hereinafter referred to
as LVC)
The applicant for C/O shall choose either direct formula or
indirect formula at their own discretion to calculate LVC and apply the chosen
formula throughout such financial year. The verification and identification of
LVC criteria for exported goods of Vietnam shall be based on the aforesaid
formula.
In order to calculate LVC according to the formula, value of
materials and cost incurred in the production process of goods shall be
determined as follows:
a) “Value of materials originating in a country, group of
countries, or territory of production” is inclusive of CIF value of materials
acquired or locally produced that are originating in a country, group of
countries, or territory; direct labor cost, overhead cost, other costs and
profits.
b) “Value of materials originating in a country, group of
countries, or territory of production” is CIF value of materials imported that
are originating in a country, group of countries, or territory; or the earliest
ascertained price stated in the VAT invoices associated with materials of
unidentifiable origin used for the production, processing of ultimate product.
c) “FOB” is the value stated in the export contract which is
calculated as follows: “FOB = Ex-workshop price + other costs”.
-“Ex-workshop price” = Production cost + profit;
-“Production cost” = material cost + direct labor cost + overhead
cost;
-“Material cost” covers expenses associated with purchase of
materials, their cost of freight and insurance;
-“Direct labor cost” covers wages, bonuses and other welfare
amounts related to the production process;
-“Overhead cost” covers: Overhead cost relates to production
process (insurance for buildings, factory rents and hire-purchase cost,
depreciation of buildings, repairs, taxes, collateral interests); hire-purchase
cost and interests of factories and equipment; factory security; insurance (for
factories and equipments used in the production process); expenses for
essentials for production process (energy, electricity and other essentials to
be used directly in the production process); research, development, design and
workmanship; pressing molds, moulds, devices and amortization, maintenance and
repairs of factories and equipment; patent royalties (in respect of patented machines
or use of patented machines in production process or goods production
licenses); testing of materials and goods; storage in factories; waste
treatment; cost factors in calculating value of materials, such as port-related
cost, good clearance and import duties on taxable components;
-“Other costs” are the costs incurred in placing the good in the
ship or other means of transport for export including, but not limited to,
domestic transport costs, storage and warehousing, port handling, brokerage
fees, service charges and relevant costs incurred when loading goods onboard
ships for export.
If the goods that do not qualify to be issued C/O in Vietnam, it
can not be granted C/O. Any violations of laws will be punished by the
government.
It appears that many manufacturers are in the process to relocate
significant manufacturing process to Vietnam to enjoy “Made-in-Vietnam”.
In the meantime, alarmingly, there are equal number of other
manufactures whom wish to only transfer a small portion of manufacturing process
to Vietnam i.e re-packaging, re-labeling which does not meed to qualifications
above.
It is important that Vietnam authorities to alert and constantly
monitor the C/O application process to ensure all responsible departments,
officers to follow the rule as set by law to evaluate the C/O application
documents, and proof given by trader, manufacturer carefully.
By doing that, Vietnam government will encourage the “real”
transition of manufacturing from China to Vietnam, therefore increasing FDI,
boosting the economy through encouraging manufacturing sectors.
By urging customs authority to investigate and punish violators,
the Vietnam government is sending strong message to US that Vietnam is not
standing to support unfair trade, and in the meantime take advantage of the
situation to attract quality manufacturing projects into Vietnam. Therefore,
more crackdowns are expected.
ANT Lawyers, as a law firm in Vietnam in international trade has been
actively providing legal services through advisory to manufacturers on the C/O
matters and assisting a number of investor to set up manufacturing company,
review leasing contract at industrial zone as part of the process to transition
manufacturing into Vietnam to seriously invest and do business taking advantage
of origin, labour, opening policy of Vietnam government.
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