Imposed overly high tariffs, car manufacturers entreated help

Car manufacturers import car parts to assemble domestically, but they were told to pay the high tariffs applied to the cars imported under the mode of complete built units (CBU). Specifically, customs agencies and the Ministry of Science and Technology had contradictory conclusions about whether the imports were car parts or CBU cars.

“These are CBU cars” – customs agencies judged

The Vietnam Motors Industry Corporation (Vinamotor), which has been importing sets of car parts and truck components for domestic assembling for the last many years, thought that it had got much experience in the import. Therefore, they could not imagine that one day, the sets of car parts they regularly import, would be considered as CBU cars

In November and December of 2010, Vinamotor imported 90 sets of car parts for assembling 29-seat Hyundai County and 180 sets of car parts for assembling trucks Hyundai Mighty which have the tonnage of 2.5-3.5 tons. When checking the imports, the customs agency concluded that some components of the imports did not fit the regulations stipulated in the Decision No 05 by the Ministry of Science and Technology, in terms of the discreteness level which allows telling the difference between CBU vehicles and sets of car parts.

Reasoning that the sets of car parts that Vinamotor imported did not fit the regulations stipulated in the legal document, the customs agency at the Bac Giang provincial industrial zones’ management board, decided that the importer had to pay 49.499 billion dong in tax for the 90 sets of parts for Hyundai County, instead of 13.111 billion dong as previously defined.

Meanwhile, the 180 sets of parts for Hyundai Mighty were imposed 35.995 billion dong instead of 12.473 billion dong.

In principle, the tax rates are defined depending on the separation level of the imported car parts. Since Vietnam encourages local production, it encourages enterprises to import components to make cars in Vietnam, rather than importing sets of components or nearly completed cars to assemble. Therefore, CBU cars always have higher tariffs than sets of car parts or separated components.

Not only Vinamotor, Ford Vietnam (FVL) also complained that it met the same situation in February 2011. After considering the imported components, the Hai Duong City’s customs agency concluded that the separation level of the imports was lower than that stipulated in the Decision No 05. Therefore, FVL had imposed the tax rates applied to CBU imports, not the tax rates applied to sets of car parts.

These are “sets of car parts” – MST argued

The problem was that similar sets of car parts were imported regularly by the car manufacturers in the past. In all the imported deals before, they only had to pay the tax rates applied to sets of car parts.

In 2010, all the consignments of car parts imported by Vinamotor for the Dong Vang (Golden Field) Automobile Factory were examined by the customs agencies, with the supervision of the General Department of Customs’ Anti-Smuggling Investigation Department. The imports all were considered as “sets of car parts”.

Therefore, the latest decision by the customs agency caused shocks to the enterprises. If they paid tax, the sums of money would be much higher than their estimates, thus badly affecting the production process.

Vinamotor had asked for the intervention by the Ministry of Science and Technology MST, the agency which promulgated the Decision No 05 and relevant ministries. The manufacturer asked the ministries to define the separation level of the imports which would serve as the basis for the taxation.

On January 13, 2011, MST sent a document to the Ministry of Finance, General Department of Customs and Vinamotor, saying that the imports must be considered sets of car parts, not CBU cars.

However, in late April 2011, the Ministry of Finance released a document, agreeing with MST.-DTCK

Tags: Vietnam automotive, Vietnam automotive industry, Vietnam autos market, Vietnam car sales