Illustrative image (Photo: Internet) Hanoi (VNS/VNA) -After a local silk importer was recently found to be disguising Chineseproducts as Vietnamese to sell them in India, experts have warned of the risksof losing out on exports and preferential tariffs due to intellectual property(IP) violations.
The Department of Post-CustomsClearance Inspection from the General Department of Customs revealed that ithad recently discovered a company in HCM City using its certificate oforigin (C/O) to pass off Chinese silk products as Vietnamese and export them toIndia.
Customs officials said the firmimported finished silk from China to Cat Lai port in HCM City, then labelledthem as 'Made in Vietnam' in a local warehouse.
Customs officials deemed themove tax evasion as silk exported from Vietnam to India are only taxed at 5 percent,while products shipped from China have a tax rate five times higher.
Each year India imports from2,200 to 2,500 tonnes of silk from China with a value of 750 million USD to 800million USD. According to an India market insider, the Indian Khadi and VillageIndustries Commission (KVIC), the Karnataka State government and the SilkAssociation of India (SAI) recommended banning silk imports from China tosupport domestic producers, which should help Vietnamese silk enterprises gaina stronger foothold in the Indian market.
However, the insider told aVietnamese newspaper: “Such a case has swept the hope further away.”
“It is also a sign that someChinese silk exporters have taken advantage of the lower tax position of Vietnamto export their products,” he added.
An official of the TradeRemedies Authority of Vietnam under the Ministry of Industry and Trade (MoIT)said: “If Vietnam does not take active measures to deal with the problem ofevading trade remedies, especially through origin fraud, those activities willaffect businesses and industries first. In the long run, it will have anegative impact on the competitiveness of the whole economy, especially in thecontext of joining a series of high-demand free trade agreements (FTAs)."
The problem doesn't lie withsilk products alone and from the beginning of the year, customs officials haveuncovered at least 77 cases where they discovered 24 violations of origin inexporting. Customs said bicycles, solar batteries and wooden items accountedfor the majority of cases.
The trade remedies authoritysaid origin frauds have a great impact on trade defence lawsuits. In the firsteight months of 2020, Vietnamese exporters faced 27 investigations for fraud oforigin, greater than the figure for the entire of 2019.
Nguyen Thuy Duong, a lawyerfrom the Hanoi Law University said: “The risk of evading trade remedies andorigin fraud has been increasing, especially in the context of the escalating US-Chinatrade conflict and Vietnam participates in many new FTAs such as thecomprehensive and progressive Trans-Pacific Partnership Trade Agreement (CPTPP)or the Europe-Vietnam Free Trade Agreement (EVFTA).”
To make matters worse,regulations for dealing with origin fraud and illegal transhipment are not verystrong. For example, the firm that evaded tax when exporting the Chinese silkonly faced an administrative sanction of 60 million VND (2,588 USD) and another550 million VND of illegal profit (it is the profit they gained from theChinese exporter) for the trading.
Lawyer Duong said when originfraud helps violators enjoy tax incentives, countries suffer losses in taxrevenues, affecting domestic industries and reducing the benefits of joiningFTAs.
“If there is a suspicion offraud or inaccuracy of the C / O issuance, in the CPTPP for example, if theimporting country discovers a series of similar acts by the exporter or themanufacturer regarding fraud or counterfeiting of goods to enjoy preferentialtax, they may decide to stop granting tax incentives for similar goods until itis proven those goods meet preferential conditions," he added
To deal with the problem,Nguyen Cam Trang, deputy head of the MoIT’s Import-Export Department, said:“Together with more investigations and checking products and export activities,we are educating and providing information to local enterprises, warning themnot to join hand with foreign exporters (to commit fraud).”
Recently, the Trade RemediesAuthority built an early warning system for many industries and products atrisk of being sued for trade remedies.
The customs officials consideredit necessary to add regulations on calculating illegal profits for local firmswhich outsource some of the work to help foreign exporters take advantage oftax incentives.
Customs also said the MoITneeded to have specific guidance documents on all relating C/O activities forproducts with labels 'Made in Viet Nam' so that they could investigate fraud moreeasily./.
The Department of Post-CustomsClearance Inspection from the General Department of Customs revealed that ithad recently discovered a company in HCM City using its certificate oforigin (C/O) to pass off Chinese silk products as Vietnamese and export them toIndia.
Customs officials said the firmimported finished silk from China to Cat Lai port in HCM City, then labelledthem as 'Made in Vietnam' in a local warehouse.
Customs officials deemed themove tax evasion as silk exported from Vietnam to India are only taxed at 5 percent,while products shipped from China have a tax rate five times higher.
Each year India imports from2,200 to 2,500 tonnes of silk from China with a value of 750 million USD to 800million USD. According to an India market insider, the Indian Khadi and VillageIndustries Commission (KVIC), the Karnataka State government and the SilkAssociation of India (SAI) recommended banning silk imports from China tosupport domestic producers, which should help Vietnamese silk enterprises gaina stronger foothold in the Indian market.
However, the insider told aVietnamese newspaper: “Such a case has swept the hope further away.”
“It is also a sign that someChinese silk exporters have taken advantage of the lower tax position of Vietnamto export their products,” he added.
An official of the TradeRemedies Authority of Vietnam under the Ministry of Industry and Trade (MoIT)said: “If Vietnam does not take active measures to deal with the problem ofevading trade remedies, especially through origin fraud, those activities willaffect businesses and industries first. In the long run, it will have anegative impact on the competitiveness of the whole economy, especially in thecontext of joining a series of high-demand free trade agreements (FTAs)."
The problem doesn't lie withsilk products alone and from the beginning of the year, customs officials haveuncovered at least 77 cases where they discovered 24 violations of origin inexporting. Customs said bicycles, solar batteries and wooden items accountedfor the majority of cases.
The trade remedies authoritysaid origin frauds have a great impact on trade defence lawsuits. In the firsteight months of 2020, Vietnamese exporters faced 27 investigations for fraud oforigin, greater than the figure for the entire of 2019.
Nguyen Thuy Duong, a lawyerfrom the Hanoi Law University said: “The risk of evading trade remedies andorigin fraud has been increasing, especially in the context of the escalating US-Chinatrade conflict and Vietnam participates in many new FTAs such as thecomprehensive and progressive Trans-Pacific Partnership Trade Agreement (CPTPP)or the Europe-Vietnam Free Trade Agreement (EVFTA).”
To make matters worse,regulations for dealing with origin fraud and illegal transhipment are not verystrong. For example, the firm that evaded tax when exporting the Chinese silkonly faced an administrative sanction of 60 million VND (2,588 USD) and another550 million VND of illegal profit (it is the profit they gained from theChinese exporter) for the trading.
Lawyer Duong said when originfraud helps violators enjoy tax incentives, countries suffer losses in taxrevenues, affecting domestic industries and reducing the benefits of joiningFTAs.
“If there is a suspicion offraud or inaccuracy of the C / O issuance, in the CPTPP for example, if theimporting country discovers a series of similar acts by the exporter or themanufacturer regarding fraud or counterfeiting of goods to enjoy preferentialtax, they may decide to stop granting tax incentives for similar goods until itis proven those goods meet preferential conditions," he added
To deal with the problem,Nguyen Cam Trang, deputy head of the MoIT’s Import-Export Department, said:“Together with more investigations and checking products and export activities,we are educating and providing information to local enterprises, warning themnot to join hand with foreign exporters (to commit fraud).”
Recently, the Trade RemediesAuthority built an early warning system for many industries and products atrisk of being sued for trade remedies.
The customs officials consideredit necessary to add regulations on calculating illegal profits for local firmswhich outsource some of the work to help foreign exporters take advantage oftax incentives.
Customs also said the MoITneeded to have specific guidance documents on all relating C/O activities forproducts with labels 'Made in Viet Nam' so that they could investigate fraud moreeasily./.
VNA
