Origin certificate fraud still runs rampant

Wednesday, Jul 03, 2013 09:46

Last year, the country registered 80 forged C/O application dossiers, a sharp rise from three years earlier, according to VCCI.—Photo sotrans

(Biz Hub) —Falsifying a Viet Nam C/O (certificate of origin) for goods exported to major market countries having tough tax barriers, such as the US and EU, remains a common fraud committed by foreign-invested enterprises to pay lower tax rates, the Viet Nam Chamber of Commerce and Industry (VCCI) reported.

Last year, the country registered 80 forged C/O application dossiers, a sharp rise from three years earlier, according to VCCI.

Apart from false application dossiers, many Viet Nam C/Os were found to be complete counterfeits with forged seals and signatures of persons granting C/Os, according to Tran Thi Thu Huong, director of the VCCI Center for Trade Paper Attesting.

The most common trick played by foreign investors was to invest in simple production or processing lines and concurrently import products from their own countries. They then mixed these imported products with locally made ones in order to obtain a Viet Nam C/O for export to other countries, Huong said, adding that many items these production lines couldn't possibly manufacture were still exported from Viet Nam.

In many cases, businesses created false origins for their imports simply by replacing the labels or packagings on their imports with Vietnamese ones to enjoy preferential tax treatment when exporting them to other countries.

Last year, SPC Tianhua Viet Nam, a wholly foreign-owned limited liability company in southern Dong Nai Province, was found to be exporting water treatment substances with fake Viet Namese brands to the US. The company imported these substances from China and replaced the Chinese labels with Vietnamese ones.

A VCCI official said violators employed different tricks to obtain a Viet Nam C/O for their imports. For imported raw materials, they would produce dossiers proving the products' satisfaction of origin criteria for obtaining a C/O. For semi-finished imports, they would claim that the products would be exported to countries which did not require C/Os. For finished imports, they would declare that the products were for sale in Viet Nam, placing management agencies in a web of deception.

The C/O frauds were largely committed for goods from Viet Nam's neighbouring countries - which were subject to anti-dumping duties or import restriction measures imposed by large markets such as the EU, the US and Turkey - including garments, footwear, seafood, farm produce and art crafts.

Many import batches which failed to meet goods origin requirements still received preferential C/Os as a result of local customs offices' failure to update legal documents and follow guidance from their superior agencies, according to the General Department of Customs.

This practice has taken its toll on genuine Vietnamese goods which reported unrealistic rising export volumes and were consequently vulnerable to other countries' investigation activities and imposition of anti-dumping, safeguard and countervailing duties.

But fighting C/O-related trade fraud remained a tough job given loopholes in the current legal framework, Huong said, adding that at present, product assessment by the C/O granting agency was mostly based on information declared by businesses in the customs declaration form, which failed to provide details on input materials.

Businesses also took advantage of the right to invest in production while concurrently importing and selling products, Huong said, adding that violators readily imported products for sale, which meant they were not required to prove the origin of their products.

She also said the current punishments were not tough enough for violators in proportion with the illegal profits they could make.

To prevent C/O-related swindles, VCCI had taken early warning measures to crackdown on cheating firms, Huong said.

VCCI had set up a network to exchange information with other countries' customs agencies to promptly detect violations by sending daily C/O grant data to them, she said.

It also signed a co-operation agreement on information exchange with the Smuggling Investigation Department under the General Department of Customs, which enabled VCCI to provide importing countries' customs agencies with full data on goods batches before they arrived, Huong noted.

Experts said regulations on goods origin should be reviewed to change irrelevant provisions to meet practical trade requirements. The Ministry of Finance and the Ministry of Industry and Trade should work together to review unclear provisions of trade agreements which might lead to ambiguous application by contracting states in order to assure uniformity and consistency in these agreements.

Related authorities, including the General Department of Customs, VCCI, the Viet Nam Competition Authority, the Ministry of Industry and Trade's Import-Export Department, the Ministry of Planning and Investment's Foreign Investment Agency and the Ministry of Public Security, should work more closely in inspecting goods origin to detect C/O-related violations earlier, the experts said.

Draft decree clamps down on import of outdated machinery

The import of machinery, equipment and production lines by state-owned enterprises (SOEs) would be strictly controlled to stop obsolete technologies flowing into the country, if a decree drafted by the Ministry of Science and Technology is approved.

Under the draft paper, SOEs would be banned from importing machinery, equipment and technology with technical standards similar to those already made in the country. In addition, they would be required to give priority to the import of modern and advanced technological products that suit the needs of approved projects. In special cases when SOEs need to import used machinery, equipment and technology, they would have to comply with current regulations and guidelines from the Ministry of Science and Technology.

Recent surveys conducted by the Ministry of Science and Technology to examine equipment and machinery imported by state-owned corporations and groups revealed that many firms had imported machines dating back to the 60s or 70s, causing huge losses because they are fuel inefficient and require high maintenance. Worse still, they badly affected the environment with their emissions.

Nguyen Phu Cuong, deputy head of the Ministry of Science and Technology's Department of Science and Technology, said the import of outdated machinery and equipment would turn the country into a landfill for discarded technologies. "This has to be prevented", he said. — Vietnam Law & Legal Forum

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