Seafood Firms Bemoan Policy Distresses

The Vietnam Association of Seafood Exporters and Producers (VASEP) and many businesses recently sent a petition to relevant ministries and agencies on export-affected regulations.

Regulatory shortcomings on origin of goods

Seafood companies said it is unreasonable to include exported goods into the scope of regulations on labeling.

Specifically, VASEP sent an official letter to the Ministry of Science and Technology in reference to two draft documents compiled to amend and supplement Decree 43/2017 on labelling and electronic labelling. VASEP stressed that including exported goods to the scope of these drafts is unreasonable, expensive, impossible, contrary to international practices and impractical to state management.

VASEP clearly states that, as exported goods that are not sold in Vietnam, having them subject to both the labelling law of Vietnam and of the importing country will raise costs for producers but bring no benefit to consumers. If all other manufacturing industries are forced to change their labels, the total cost of all economic sectors will reach thousands of billions of Vietnamese dong.

Besides, according to US and EU laws, exported goods are usually only labelled with the name of the manufacturer. VASEP affirmed that the name of the manufacturer required to be written by the draft under Vietnamese law is unreasonable and sure to be rejected by many partners. According to international practices, exporters in Vietnam are only responsible for supplying goods as specified in their contract, while the importer who is the owner of goods is responsible for labelling under the law of importing countries. This should only be treated as a note for businesses to raise their caution in contract signing, rather than require them to act on behalf of foreign businesses.

In Clause 3, Article 12 of the draft decree that amends Clause 4, Article 9 of Decree 43/2017/ND-CP, VASEP pointed out rules inconsistent with the Codex Stand 1-1985, section 8.2.1 and TCVN 7087: 2013 and Article 5.9 of the EVFTA Agreement.

According to the above clause on the name and address of the organization or individual responsible for the goods, “For goods imported for circulation in Vietnam, the name and address of the manufacturer shall be indicated and the name and address of the importer shall be indicated”. VASEP said that goods made by one manufacturer can be exported to many countries and it cannot meet specific requirements for Vietnam unless the purchase quantity is big enough to justify making a private label for the Vietnamese market. In addition, the product can be processed at many different locations and the manufacturer cannot display all the producers address information on the original product label.

“Therefore, it is infeasible, deterrent to request full information of the producer or importer in Vietnam on the original label, as it raises a trade barrier for all imported goods and violates terms of EVFTA and other new generation FTAs as well,​​” VASEP emphasized.

From the above arguments, VASEP proposed removing this requirement and keeping Clause 4, Article 9 of Decree 43/2017/ND-CP: “Goods imported into Vietnam carrying their original label incompatible with this decree, the importer must make an additional label as per Clause 3, Article 7 and Clauses 3 and 4, Article 8 of this decree when it is put into circulation, and the original label must be kept unchanged."

To prevent an importer from using a blank label to affix an additional label on it, authorities may have a regulation on the original label not displayed in Vietnamese language, requiring the name, origin and other contents of the goods displayed in other language specified by the exporting country to make the good origin true, clear, accurate.

Tax imposed on “preliminarily processed” or “processed” goods?

VASEP stressed that the biggest issue today is that a majority of exported processed seafood products are subject to tax on “preliminary processed” goods instead of “processed” goods, and businesses are not entitled to preferential corporate income tax.

Many seafood firms are being subjected to the CIT rate of preliminarily processed seafood at 20%, while their output products are mostly processed, entitled to preferential CIT rate of 10% (applied to producers in localities classified as economically poor regions) or 15%.

Some businesses have been previously granted a preferential CIT rate of 15% by provincial tax departments. However, from 2017 to date, their products have been labelled semi-processed products and the tax rate has been lifted to 20%. This caused great damage to these companies. Previously, when they were entitled to tax incentives, they accepted a discount for foreign customers and raised the purchasing price of input shrimp from local people to sell more outputs and buy more inputs. After being subject to the higher CIT rate, many suffered serious losses.

Therefore, VASEP also petitioned the General Department of Taxation (Ministry of Finance) to reconsider businesses with the registered business operation of processing and preserving seafood and with existing processing factories and seafood products (code 1020) are eligible for CIT incentives as per Decree 12/2015/ND-CP by amending Clause 1, Article 1 of Circular 26/2015/TT-BTC. VASEP believes that it is necessary to consider the operation of frozen seafood factories as new and reasonable processing to ease current pressing distresses of businesses and lift obstacles against them.

By Huong Ly, Vietnam Business Forum