On 12/11/2021, the General department of Customs (“GDC”) published the new guidance (Official letter no. 5371/TCHQ-TXNK dated 12/11/2021) about the procedure and required document of price consultation session.
Price consultation is a Customs procedure where Customs authority coordinates with the Customs declarant to check the trustfulness and appropriateness of price declared on Customs import / export declaration form (“declared price”), and consider adjustment(s) where necessary. The final-determined price is the basis to calculate payable duties (import/export duty and VAT etc.) and proceed relevant State management tasks.
Compared to the prevailing regulations and old guidance, there are several new points in this official letter:
- Online consultation allowed
In case the declarant is unable to attend face-to-face consultation meeting due to the impact of pandemic, online consultation can be held instead. Required dossiers and documents accordingly can be sent via email (scanned copy with e-signature), via e-Customs system, or by post.
In this guidance, the GDC also reminds that in case the Customs officer rejects declared price and imposes tax based on another re-determined price, even if the declarant does not agree with this decision, they still have to pay the imposed tax amount before proceeding with appealing process or further legal process.
- Regarding document and dossier used for price consultation
Compared with the provision of Circular no. 39/2019/TT-BTC (providing guidance on mandatory dossiers and documents which Customs declarants must present to Customs officer during the process of price consultation), this new guidance lists out many other documents / information which Customs authority can use – if the declarant agrees to provide – to analyze and assess the declared price:
- Frame contract of the sales / purchase containing detailed terms of the transaction.
- Invoice of the subsequent transaction after importation (e.g. resale, sending to processing vendor, etc.)
- Accounting vouchers and documents relating to the assessed transactions or relating to identical / similar goods which were imported / exported before.
- Accounting vouchers / documents evidence for account receivables/payables of the import.
- Company’s Charter showing shareholding structure – in case of doubt on the relationship between the importer and overseas seller.
- Others: please see the full content of Official letter 5371 for more details.
As such, if these documents / dossiers are available, the declarant may consider providing them to Customs authority for better clarification about the transaction and better defense for the declared price. It is noteworthy that providing the documents / dossiers to Customs authority is an option, not a requirement – on top of the mandatory documents / dossiers that the declarant must provide to Customs authority as provided by Circular no. 39/2018/TT-BTC. Whether and what to provide is therefore advised to be handled with care to avoid unnecessary challenge.
- Regarding the process of price check
The official letter provides guidance for both exported and imported goods, in which the important notes are in the checking procedure for declared price of import goods, briefly as follows:
- Regarding the methodology: The GDC requests that Customs officers must first assess whether the declarant satisfies conditions to apply transaction-price method (the price by which Customs dutiable value is determined based on the price of actual transaction) before proceeding with detailed price check. Customs officers shall only accept the application of transaction-price method if the declarant has sufficient documents and dossiers to prove they satisfied all required conditions to apply this method as provided by prevailing regulation.
It is noteworthy that per the prevailing regulation about determining Customs dutiable value for imported goods:
- Relationship between buyer – importer – and the seller is one of the conditions to assess whether the declarant can apply transaction-price method. Accordingly, this method can only be used if the two parties have no special relationship, or if they can prove that this special relationship does not have any impact on the transaction price.
- If the importer does not meet conditions to apply transaction-price method, Customs dutiable value will be determined based on another method.
- Regarding the detailed check of declared price: The GDC instructs Customs officers to estimate the deductive value of imported goods (by deducting relevant expenses and profit from domestic resale price) and compare this with the declared price. The Customs officers shall only accept declared price if it is approximate to the deductive value calculated by this instruction.
According to this guidance, the declarant may have to provide the Customs officers with relevant dossiers / documents about expenses incurred in relation to the goods after import stage and / or profit rate / expense rate of their business as shown on latest financial statements submitted to the Tax authority. As there is no other detailed Customs guidance on how to determine / calculate these factors (profit rate, expense rate, etc.), this guidance may lead to many different understandings among Customs officers and business community; companies therefore should pay more attention to this issue and consider proper actions where appropriate.
The GDC also reminds that in case of rejecting the declared price, the Customs officers must re-determine Customs dutiable value following the exact process of Customs valuation as set out under prevailing regulation (i.e., apply the 6 methods of customs valuation one-by-one and pick the first method by which the Customs dutiable value can be appropriately determined).
We do trust the above points are notable and sufficient, but should you have any questions or need a deeper discussion on this issue, please do not hesitate to contact us.
- Assist to review the whole transaction process (sale/purchase) for transactions between related parties (parties whose relationships are considers “affiliated” in term of Customs valuation) in regards to Customs compliance requirements.
- Assist to review dossiers and documents relating to pricing and price consultation.
- Assist to review and advise on change (where appropriate) the declaration of Customs dutiable value.
- Assist in liaising and working with Customs authority regarding price doubts or price-related issues.
- Advice on other relevant topics regarding Customs declaration and model-planning in aiming to enhancing the Company’s business model and ensuring compliance with Customs regulations.