Last updated: Friday, March 22, 2019


Regulatory Compliance Helps Reduce Risks to Importers/Exporters

Posted: Wednesday, December 19, 2018

Vietnam's economy is increasingly open, the import and export scale has doubled the gross domestic product (GDP), and import and export activities have increased rapidly in both value and diversity of commodities. Vietnam should, therefore, apply risk management methods based on legal compliance of enterprises, said Mr Hoang Quang Phong, Vice President of the Vietnam Chamber of Commerce and Industry (VCCI). This is considered a key stage as it ensures the effectiveness of State management on the one hand and raise the awareness of regulatory compliance for importers and exporters on the other, thus helping the economy gain great benefits.

He said, according to the World Bank, Vietnam's cross-border trade index is still ranked lower than that of other countries, one of three areas seen little change. VCCI's report also showed that only 43 per cent of enterprises interviewed in Vietnam saw positive changes in this field.

Mr Hoang Viet Cuong, Deputy General Director of the General Department of Vietnam Customs, said, effectively assessing regulatory compliance of enterprises in import and export activities will help build a fair business environment and shape a strong business community and a transparent administrative apparatus and will help minimise negative effects.

He added that the draft circular on assessing regulatory compliance of enterprises in import-export activities is being widely consulted, based on risk management methods. This measure has been widely adopted by customs administrations in the world. The risk management approach allows the optimisation of customs manpower and allows efficient management of customs inspection and control.

In the past time, by deploying the Vietnam Automated Cargo and Port Consolidated System (VNACCS) and applying risk management methods to post-audit customs clearance, customs authorities have made sure that customs clearance is rapid for more than US$420 billion of exports and imports a year.

The draft circular has been revised for the third time, addressing many restraints after consulting the business community and relevant agencies. Currently, customs authorities are assessing the regulatory compliance of enterprises in three types but, in this draft circular, based on business classification standards adopted by the World Customs Organisation and international conventions, customs authorities divided regulatory compliance into four categories: high compliance, average compliance, low compliance and no compliance.

By benchmarking regulatory compliance, customs offices will apply corresponding preference policies and apply appropriate management measures to meet two objectives: Facilitating the business community, and fighting against smuggling, promptly detecting and preventing acts of trade fraud and tax evasion.

Besides, the publicity of benchmarking criteria will inspire enterprises to actively review their regulatory compliance by consulting customs authorities to know where they are out of standard and where to find fixing solutions, he added. Then, we will have a fair business environment, a strong business community and a transparent administrative apparatus, and will minimise and prevent negative acts committed by customs agencies at all levels.

Mr Quach Dang Hoa, Director of the Risk Management Department under the General Department of Vietnam Customs, said, to ensure the rationality, feasibility and benefits for enterprises, the General Department is developing and finalising the circular on assessment mechanism for regulatory compliance of enterprises import and export activities and assessment criteria used to classify the level of regulatory compliance.

Currently, the customs sector is assessing businesses based on three flows: Green flow (exempted from record and cargo inspection, accounting for 60 per cent), yellow flow (record inspection only, 35 per cent) and red flow (5 per cent).

The difference of this draft circular is that businesses will assess themselves to a certain extent and have the right to inspect and supervise assessments of customs offices on them.

Ms Dang Thi Binh An, Director of C&A Tax Consultancy Company
Customs authorities should classify and test recommended criteria to make sure that classification is rational to their capacity, to avoid the case when so many enterprises are classified into Category 3 (low compliance) and Category 4 (no compliance), they fail to handle.

Customs authorities also need to publicly and widely inform enterprises of compliance assessment criteria. Enterprises can look at the level of regulatory compliance and reasons to have such classification. Moreover, having so many criteria makes it difficult for them to know what criteria they have violated while the regulatory time for fixing is too long (365 days). Customs authorities should build simple, easy-to-remember criteria for enterprises to apply.

Mr Vu Chu Hien, Arbitrator at the Vietnam International Arbitration Centre (VIAC)
Introducing regulatory compliance assessment criteria and assessing regulatory compliance of enterprises in import, export and transit activities is necessary in foreign economic relations.

However, the draft circular on assessment of regulatory compliance of enterprises in import and export activities “forgets” the responsibility of issuing agencies as well as specific sanctions on wrongdoings of these agencies when they perform their duties. For example, customs authorities may issue a coercive (wrong) decision on import and export activities that cause damage to enterprises but the latter can only request the former to withdraw the coercive decision. The latter must bear all damage because there is no regulation on compensatory actions applied to customs authorities.

Ms Ta Thi Van Ha, Vietnam Association of Seafood Exporters and Producers (VASEP)
Currently, shrimp exporters must wait for specialised inspection results, with some cases lasting up to six months. When we see the results, we continue to be found at fault. To address this reality, specialised inspection agencies must send results to customs offices electronically.

According to criteria specified in the draft circular, no seafood companies meet Categories 1,2 and 3, meaning that all are noncompliant. For example, some contents do not substantively manifest the true nature of faults committed by seafood companies like cancelling customs declaration forms, supplementing customs declaration forms or having specialised inspection results submitted late.

Therefore, it is recommended that customs authorities consider adding the history of regulatory compliance of enterprises. Without taking the history into account, it is not fair for compliant ones. There should be a benchmarking and ranking scale for each specific criterion rather than a generic one. Before the decree is issued, there is a need to have more practical assessments to avoid demoting good performers.

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