PRIORITIZED ENTERPRISE PART 1: CRITERIA AND PRIORITY TREATMENTS

On 14 February 2023, the Customs Authorities of ASEAN countries officially signed the Mutual Recognition Agreement under Authorized Economic Operator (“AEO Agreement“). Under this initiative, customs agencies of member countries within ASEAN will collaborate to implement measures aimed at facilitating advantages in the customs sector for prioritized enterprises. According to the AEO Agreement, when a company is recognized by Vietnam as a prioritized enterprise (“AEO“), it will be eligible for preferential customs policies from other ASEAN nations.

What are the criteria for a business to be acknowledged as an AEO in Vietnam and what are the specific priority treatments applicable to these AEOs? These topics are now analyzed in this article.

  1. What is a prioritized enterprise? 

Pursuant to Article 3 of Circular 72/2015/TT-BTC, the AEO is an enterprise exporting and/or importing cargo recognized as a prioritized enterprise by customs authorities.

  1. What are the conditions to be entitled to priority treatments? 

To be recognized as an AEO, this enterprise must satisfy the following conditions: 

(a) Compliance with customs legislation and tax legislation

Over the last 02 consecutive years before the day on which the enterprise applies for AEO recognition (“Submission Date“), this enterprise has not been involved in any of the violations below:   

(i) Acts of tax evasion, tax fraud; smuggling and illegal transportation of cargo across the border; 

(ii) Administrative customs offenses that result in the form and level of penalties beyond the competence of the Director of Sub-department of Customs or equivalents; and

(iii) No overdue taxes.

(b) Required export and import turnover 

The average turnover of 02 last consecutive years before the Submission Date, excluding turnover from entrusted export and import must be:

(i) at least USD 100 million in annual turnover from import, export; or 

(ii) at least USD 40 million in annual turnover from export of goods manufactured in Vietnam; or

(iii) at least USD 30 million in annual turnover from export of goods being agricultural and aquatic products manufactured or grown in Vietnam.

However, for the enterprise recognized as a high-tech enterprise under the provisions of the Law on High Technology is not required to satisfy the aforementioned export and import turnover.

(c) Electronic customs procedures and electronic tax procedures

The enterprise is required to conduct electronic customs procedures, electronic tax procedures, and implement an information technology program for managing its export and import activities as per the inspection requirements of the customs authority.

(d) Payment for exported and imported cargo

Payment for exported and imported cargo must be made through banks according to the provisions of the State Bank.

Enterprises are responsible for notifying the customs authority of the account number and the list of the banks through which the enterprise implements the payment for exported and imported cargo. 

(e) Internal inspection system

The enterprise must meet the conditions regarding internal inspection systems below:

(i) The enterprise conducts and maintains processes to manage, monitor, and control its entire operation;

(ii) The enterprise has measures and instruments, internal inspection process ensuring the safety and security of the supply chain of exported and imported cargo as follows:

(A) Monitoring the transport process of cargo from enterprises to ports and vice versa;

(B) Inspecting the safety of containers before they are loaded onto the vehicles;

(C) Supervising the essential areas: fences, entrances and exits, warehouses, manufacturing areas, and administrative areas;

(D) Assigning the employees to the working areas that suit their responsibilities;

(E) Ensuring the security of information technology systems;

(F) Ensuring the security of the employees.

(f) Compliance with legislation on accounting, auditing

The enterprise must adhere to the accounting standards as prescribed by the Ministry of Finance.

Besides, the annual financial statements must be audited by a qualified audit service provider under the laws of the independent audit. The auditor’s opinion on the financial statements mentioned in the auditor’s report must be an unqualified opinion according to the audit standards in Vietnam.

  1. What are the priority treatments applied for prioritized enterprises?

Since an enterprise exporting and/or importing cargo is recognized as an AEO, this AEO will be entitled to 07 following priority treatments:

Firstly, exemption from document inspection and cargo physical inspection 

This treatment allows AEO to be exempted from documentary checks and physical cargo inspection, except if there are indications of a violation of law or random inspections for legal compliance assessment.

Secondly, customs clearance by incomplete declarations 

The AEO is permitted to carry out customs clearance with incomplete declarations on the customs electronic data processing system of the customs authority. Within 30 days from the date of registration of the declaration, the declarer shall update data and related documents of the customs dossiers on the customs electronic data processing system of the customs authority.

In the event of an interruption to the electronic data processing system of the customs authority, the AEO is allowed to conduct customs procedures by incomplete declarations paper for customs clearance of import, and export cargo. Within 30 days from the date of registration of the declaration, the declarer is required to submit a complete customs dossier to the Sub-department of Customs where the enterprise carried out the declaration.

Thirdly, priority of customs processing

(i) priority of cargo inspection by scanners for random inspections for legal compliance assessment of the customs declaration.

(ii) responded by the Director of the Sub-department of Customs in writing within 8 working hours from the occurrence of complications in customs clearance.

(iii) priority in procedures for delivery of cargo and customs inspection by customs authorities and warehousing service providers. 

(iv) priority of inspection and sampling cargo when the enterprise files such a request.

Fourthly, specialized inspection

(i) being entitled to transfer imported cargo stored in their warehouses while waiting for the result of specialized inspection unless the laws of specialized inspection stipulate such imported cargo must be inspected at the border checkpoint.

(ii) priority in sampling cargo to serve the specialized inspection.

Fifthly, tax procedures

(i) Tax refund: being entitled to be refunded import and export tax before the inspection

(ii) Term of tax payment: for the tax obligations arising from the customs declarations in which the cargo were cleared or released, the term of tax payment is extended to the 10th day of the next month.

(iii) Tax procedures: priority in tax procedures for exported and imported cargo in accordance with the laws of tax.

Sixthly, indirect export and import procedures

Being entitled to import cargo before customs declaration in case of indirectly exported and imported cargo; raw materials, components and spare parts used for production of AEO bought from bonded warehouses.

Seventhly, post-clearance inspections

Being exempted from post-clearance inspections at the headquarters of the customs authority except for indications of a violation of law.

Besides, as of the date of prioritized enterprise recognition, the customs authority is only entitled to conduct the post-clearance inspection at the declarer’s premises not more than once over 3 consecutive years based on risk management, except for indications of customs violation.

 

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