Vietnam: Cane sugar shows signs of changes in product origin for tax evasion

According to data from the Vietnam General Department of Customs, in the period from January to October 2021, the amount of cane sugar imported from 5 ASEAN countries to Vietnam has increased by 5 times.

With the situation that the amount of cane sugar originating from 5 ASEAN countries into Vietnam increased by 5 times compared to the same period in 2020, the Vietnam Trade Remedies Department (Ministry of Industry and Trade) is investigating signs of changes in product origin for the purpose of tax evasion.

The General Department of Customs has received a document from the Trade Remedies Department with the content requesting to provide a copy of the certificate of origin (C/O) for cane sugar shipments imported from 5 countries: Cambodia, Indonesia, Laos, Malaysia, Myanmar between October 1, 2020 and September 30, 2021.

The Ministry of Industry and Trade has also issued a decision to investigate the application of anti-circumvention measures against a number of cane sugar products imported from these five countries.

Suspicion of sugar products to evade taxes

According to data from the General Department of Customs, in the period from January to October 2021, the amount of cane sugar imported from the 5 countries mentioned above to Vietnam increased by 5 times, specifically, an increase of more than 757,000 tons. compared with the same period in 2020. In particular, all of these cane sugars are entitled to a preferential tax rate of 5% (lower for sugar products originating from Laos under the Vietnam-Laos border agreement), with the basis of C/O form D of the ASEAN Trade in Goods Agreement (ATIGA).

On January 5, 2022, the Vietnam Sugar and Sugarcane Association (VSSA) sent an official dispatch to the Trade Remedies Department as well as the General Department of Customs mentioning signs of violations with C/O for refined sugar products imported from the five ASEAN countries mentioned above.

Accordingly, in terms of origin, most of the above-mentioned imported refined sugar products are produced at Indonesian and Malaysian sugar factories with most of the raw materials being imported raw sugar products, because Malaysia does not grow sugar product, besides, Indonesia’s sugarcane output is not enough for domestic white sugar production needs, so it has to import more sugar.

“According to a report of the World Sugar Organization (ISO), Indonesia and Malaysia are two countries that import raw sugar in large quantities every year to serve sugar refining. These two countries import raw sugar from many different sources, including Thailand and non-ASEAN countries such as Australia, Brazil, South Africa, etc. (In 2020, Indonesia only imported 36% raw sugar from Thailand, and Malaysia imported only 2.8% raw sugar from Thailand). Thus, in fact, the majority of refined sugar imported into Vietnam from these two countries originates from non-ASEAN countries.

According to VSSA, in the first 10 months of 2021 alone, according to data from the General Department of Customs, the amount of sugar imported into Vietnam from Indonesia and Malaysia is about 267,000 tons and 154,000 tons, respectively. All of these refined sugars have C/O form D (enjoying the preferential tax rate of 5%). According to the regulations of ATIGA, cane sugar products are only granted C/O form D if there is not less than 40% of the products originating from any ASEAN member country in the composition of the goods.

With unusual signs on C/O form D of refined sugar shipments imported from Indonesia and Malaysia in 2021, VSSA has made recommendations for the investigation agency to review, inspect and handle the above case as prescribed.

Currently, ASL LAW is supporting sugarcane exporting companies to Vietnam to answer investigation questions related to the Investigation into the application of anti-circumvention measures to trade remedies for cane sugar products originated from Thailand.

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