An import-export sleight of hand

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Glaring loopholes have turned Vietnam into a dumping ground for unwanted materials and an unwitting tax haven

  A machine places a container on a truck at a port in Hai Phong, 100 kilometers east of Hanoi. Temporary imports for re-export increased from US$1.3 billion in 2006 to $6.3 billion in Vietnam last year. Photo: Reuters

The amount of goods temporarily imported into Vietnam for re-export has increased over the years, but officials now say traders of these products might have a hidden agenda they either want to dispose of toxic materials or try to evade import duties.

Vietnam allows temporary imports to stay in the country for up to 180 days as long as the goods go through all customs procedures and are eventually exported out of the country at the end of the period.

Over the past three months, customs officials have found some shipments either overstaying their welcome or disappearing without a trace. Many containers were transported to the northern province of Quang Ninh and Hai Phong City, carrying everything from food and fuel to electronic waste. Although they were bound for a third country on paper, they just never left Vietnam.

Deputy Finance Minister Do Hoang Anh Tuan said inspectors have found more than a thousand shipments that have been declared temporary imports at major gateways but no re-export declarations have ever been filed for them.

"This is a huge risk because these shipments are very large, ranging from a single container to a group of dozens of containers," he said. "We are trying to find out whether they have been exported or they have already messed with the domestic market."

Tuan admitted that lax regulations have allowed traders to engage in dodgy practices. Since traders are not required to provide re-export contracts when bringing in their goods, customs officials have no way of knowing the real motives of dubious traders.

Furthermore, there is no regulation banning toxic waste from passing through the country.

"It's becomes a loophole when other countries ban or restrict some goods and Vietnam doesn't. Toxic lead, used electronic parts and used car tires are all let in as temporary imports," Tuan said.

Officials said the storage time allowed for temporarily-imported goods is also too long, making it difficult to keep track of shipments and paving the way for the goods to break into the domestic market without being subject to taxes.

Temporary shipments cannot stay in Vietnam for more than 90 days, but traders can request an extension, stretching the period to up to 180 days.

"That is just too long. It only takes several days at most to transport goods from a seaport in Hai Phong to the border gate in Mong Cai," Tuan said, adding that such a long period just gives dishonest traders more opportunities to cheat.

Temporary imports for re-export increased from US$1.3 billion in 2006 to $6.3 billion last year, which the Ministry of Finance called an "unusual" increase. In the first half of this year, the figures hit 3.8 billion.

Official statistics show that in 2010, $4 billion out of $5 billion worth of temporary imports left the country.

In some cases, the temporary import is just simply smuggling in broad daylight.

In July, a Cambodian tanker carrying some 2,000 tons of gasoline, supposedly headed for China, was caught selling the fuel to a Vietnamese company. The crew said they were taking advantage of Vietnam's temporary imports policy to evade both import tax and valued added tax, local media reported.

The case prompted the Finance Ministry to propose a ban on temporary imports of fuel into Vietnam.

Nguyen Van Can, deputy director of the General Department of Vietnam Customs, said officials are currently looking for some 600 containers of temporarily imported goods "wandering somewhere around the country." These include 254 tons of sugar that will face an 80 percent import tax if sold in the domestic market.

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