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    Limiting Legal Violations in Importing Goods

    Vietnam is a potential business market, attracting many foreign enterprises to invest in manufacturing and business. During the operation, enterprises have a great need to import machinery, equipment, raw materials, components, accessories, etc. into Vietnam to serve the process of operation, manufacturing, and business. However, enterprises often do not have expertise in customs and import of goods. When it comes to importing goods, enterprises often assign their employees to carry out necessary procedures by themselves according to their knowledge or hire a customs agent service to make the customs declarations without a mechanism to manage and control risks for enterprises. Therefore, the import procedures of enterprises often have errors leading to violations of the law and certain legal risks that enterprises must bear.

    Common Violations in Importing Goods of Enterprises

    There are many violations in importing goods, in which customs declaration are the most common, specifically:

    • Declaring incorrectly of the name, HS code, origin, or tax rate of imported goods. This violation can often lead to over or lack of tax payable amount due to different declarations of tax rates for different types of goods. However, there are also cases where the incorrect declaration of names of goods, HS codes or origin does not affect the payable tax amount because the goods declared incorrectly have the same tax rate. Regardless of a difference in the amount of payable tax, the act of declaring incorrectly the name of goods, HS code, origin or tax rate is also a violation of the law on import and export of goods.
    • Declaring incorrectly the quantity, type and value of the goods compared to reality. This violation will lead to an over or lack of tax payable amount, due to the quantity and value of the goods are the grounds for calculating import tax.
    • Importing goods that require an import license/regulation conformity announcement or registration for quality inspection of imported goods, etc. but enterprises do not apply for an import license/regulation conformity announcement or registration for quality inspection of imported goods. These goods is on the list of goods subject to conditional import promulgated by the State, the importation requires satisfying all conditions as prescribed.
    • Importing goods on the list of goods banned from import. The State promulgates the list of goods banned from import, in case goods are on this list, enterprises are not allowed to import, any act of importing goods on this list is illegal.

    Legal Risks

    Violations in the import and export of goods may arise from enterprises or individual that performing the declaration processes intentionally making fraudulent declaration, or as a result of negligence or ignorance. Regardless of the rationale, enterprises, its legal representative, and the individual making the customs declaration are all subject to the following legal consequences:

    • Being sanctioned for administrative violations on import and export of goods or examined for criminal liability for ‘Smuggling’. The crime of Smuggling can result in a sentence of up to 15 years in jail.
    • During the investigation expansion, the Investigating Authority may request the documents, books and vouchers related to the export and import or accounting, finance, and tax within 01 year to the date of the minutes of administrative violation or during the entire operation process of the enterprise.
    • Subject to investigation, inspection, and examination for all or some of the previously imported consignments that related and/or unrelated to this shipment.
    • Subject to investigation, inspection, and examination on tax during the entire operation process or for a period of time at the request of the competent authorities.
    • Bear the expenses of handling and dealing with consequences such as violation sanction or compensation for damage caused by breach of contracts with customers, delay in business and production processes, loss of competitive opportunities, costs of returning goods, ….
    • Leaving a record for having been sanctioned for administrative violations and degrade the reputation of the enterprise in the customs field, leading to later imported goods being regularly classified as yellow (check documents and documents) or red channel (physical inspection of goods).

    Solutions for Limiting the Legal Risk in Importing Goods of Enterprises

    In this section, we would provide enterprises and its legal representatives with solutions to limit the legal risk regarding importing goods:

    Firstly, before importing goods, enterprises/legal representative of the enterprise shall clarify the following issues:

    • What is the type of imported goods? Are they on the list of goods that banned from import?
    • Do the imported goods need to have quota, import permits, declaration of conformity, and specialized inspection before being imported? If the answer is yes, by which agency?
    • Double-checking with the foreign partner to ensure that the imported goods are compliance with the signed agreement.

    Secondly, in case of assigning to an employee or looking for a customs agent, the enterprise/legal representative of the enterprise should clarify the professional capacity of those entities. We should choose the reputable customs agent or employee professional knowledge in customs declaration.

    Thirdly, the hiring of customs agents’ services must be performed in writing and clearly specify the declaration monitoring process of the enterprise; rights of enterprises and responsibilities of customs agents.

    Fourthly, enterprise must request the customs agent, the declaration officer to send the enterprise/legal representative of the enterprise a draft of the customs declaration for inspection before transmitting the declaration. Enterprises must check all information of goods, including name, HS code, tax rate, quantity, type, value, origin, etc. on the declaration against the importing documents. In case of arising any issue that is not regulated by law and the customs agent does not know well, enterprise should request the customs agent to consult in writing the General Department of customs or Department of Customs before opening the declaration.

    Fifthly, in case goods declaration are classify as red lane, before physical examinate the goods, enterprises should actively work with business partner to determine whether the goods are sent in accordance with the import documents or not? If there is a mistake in sending goods, enterprise should immediately notify the customs authority. Enterprises should notify the customs authority in writing before conducting physical examination of goods. When performing physical examination of goods, enterprises should appoint staff who have professional knowledge about import, export of goods, and especially goods belonging to the inspected consignment to represent the goods owner to participate in physical inspection with the customs authority in order to work and explain clearly about mistakes, errors (if any).

    This article contains legal knowledge and technical terminology, if readers have any question or need to discuss related to importing goods or constituting the crime of Smuggling in the import and export of goods or codes, HS number, tax rate in import and export of goods, please contact our Criminal Lawyer at info@letranlaw.com.