TOPIC HS CODE DETERMINATION FOR LONGANS AND GASOLINE OF RON 90 AND ABOVE, BUT BELOW RON 97

Review the six GIR applications...10 CHAP 2: ANALYSIS OF LONGANS AND GASOLINE “OF RON 90 AND ABOVE, BUT BELOW RON 97” AND THE PROCESS OF HS CODE DETERMINATION...12 2.1.. Additionally, Lo

VIET NAM GENERAL CONFEDERATION OF LABOR

TON DUC THANG UNIVERSITY FACULTY OF BUSINESS ADMINITRATION

CUSTOMS PROCEDURES

TOPIC

HS CODE DETERMINATION FOR LONGANS AND GASOLINE “OF

RON 90 AND ABOVE, BUT BELOW RON 97”

Group 7

Nguyễn Thẩm Phương - 720K0560Nguyễn Phú Khang - 720K0438Nguyễn Thục Khanh - 720I0517Đinh Nguyễn Gia Định - 720I0490Trương Thùy Duyên - 720D0189

Class code: 706023 Class: 20K70601 Instructor: PhD TRAN NGUYEN CHAT

Ho Chi Minh, November 2022

Our report is made based on the efforts of our team members as well as the referencesand lessons learned from study materials, research works, and information from newssites Although we have tried our best, because of limited knowledge and lack of practicalexperience, it is challenging to avoid shortcomings in the implementation process.Therefore, we are looking forward to receiving your comments on improving this report.

Finally, we wish you all good health and good work

We sincerely thank you

COMMENTS FROM LECTURERS

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LIST OF MEMBERS

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Content implementation

Reviews

Table of Contents

THANK YOU 2

COMMENTS FROM LECTURERS 3

LIST OF MEMBERS 4

TABLE OF FIGURES 6

INTRODUCTION 7

CHAP 1: BRIEF INTRODUCTION TO THE HARMONIZED SYSTEM AND VIETNAM’S PARTICIPATION 8

1.1 Introduction and definition of HS code 8

1.2 Harmonized System in Vietnam 9

1.3 HS convention that VN participates in 10

1.4 Review the six GIR applications 10

CHAP 2: ANALYSIS OF LONGANS AND GASOLINE “OF RON 90 AND ABOVE, BUT BELOW RON 97” AND THE PROCESS OF HS CODE DETERMINATION 12

2.1 How to apply GIRs 12

2.2 Export Longans 14

2.2.1 Overview of Longans 14

2.2.2 Analysis of how to determine HS code 16

2.3 Goods under HS 2710 20

2.3.1 Overview of Gasoline “Of RON 90 and above, but below RON 97” 20

2.3.2 Analysis how to determine HS code 22

2.4 Evaluate 30

CHAP 3: FINDINGS 31

3.1 Advantages 31

3.2 Disadvantages and common misunderstandings in researching 32

3.3 Experience gathering and lesson learned 33

CONCLUSION 35

BIBLIOGRAPHY 36

TABLE OF FIGUR

Figure 1: Structure of an eight digits HS code 10

Figure 2: Diagram of applying GIRs to determine HS code 13

Figure 3: The situation of Vietnam's longanss export, in the first 6 months of 2022 compared to the same period in 2021 (USD) (hvnclc.vn, 2022) 17

Figure 4: Import and Export Tariff 2022 19

Figure 5: Import and Export Tariff 2022 20

Figure 6: General Department of Customs 21

Figure 7: Import and Export Tariff 2022 24

Figure 8: Import and Export Tariff 2022 27

Figure 9: Import and Export Tariff 2022 28

Figure 10: Import and Export Tariff 2022 30

Figure 11: General Department of Customs 31

Y Picture 1: Hung Yen longans 14

Picture 2: RON 95 and RON 92 21

Table 1: HS code of longans 20

Table 2: HS code of RON 90 30

Along with the development of the economy and human civilization, international tradehas become more popular than ever Every day, millions of kinds of goods and servicesare being traded around the world Trading is not just about the movement of one’sproducts but it also illustrates the demand of people for a diversity of goods.Consequently, a vast majority of products move from this country to another country hascreated the demand for customs This is to ensure the goods will be classified, declaredand levied tax correctly A quality classification system like Harmonized System will beunified and beneficial to a country tremendously Therefore in this report, our team willbriefly introduce this kind of system and take Longans and Gasoline “Of RON 90 andabove, but below RON 97”as two examples of import and export products for furtherexplanation

To begin with, this report will have a glance on 6 General Interpretative Rules (GIR),Harmonized Commodity Description and Coding System and the procedure ofdetermining these codes for Longans and product under HS code 2710 (which is Gasoline

“Of RON 90 and above, but below RON 97”) In each section, the authors will showcaseone-by-one steps and explain how the authors will apply and eliminate the rules to theproducts Additionally, Longans is a local agricultural product of Vietnam and Gasoline

“Of RON 90 and above, but below RON 97” is the critical natural resource that is used

by most Vietnamese people Both 2 products are prominently known and used so thathaving these as an example will somehow give the authors a better understanding in theCustoms industry The structure of this report will be demonstrated further below:

 Chapter 1: The brief introduction to harmonized systems and Vietnam’sparticipation

 Chapter 2: Analysis of longans and Gasoline “Of RON 90 and above, but belowRON 97” products and the process of HS code determination

 Chapter 3: Findings and experience gaining

CHAP 1: BRIEF INTRODUCTION TO THE HARMONIZED

SYSTEM AND VIETNAM’S PARTICIPATION

1.1 Introduction and definition of HS code

A universal standard for identifying the kinds of goods transported is the HarmonizedCommodity Description and Coding System (HS Code) This code must be used whendeclaring any goods exported or imported across international borders to customs As aresult, the code aids in standardizing and identifying goods in a uniform manner so thatthey can be described accurately everywhere Basically, it is a common number systemfor categorizing commercial goods Customs officials use it all around the world toidentify products when determining tariffs and taxes and to compile statistics.Additionally, with HS, enterprises can use trade data, conduct market research, lower theprice of international trade and complete a successful export transaction The HarmonizedSystem, in particular, not only creates favorable conditions for trade negotiations,promotes administrative reform, accelerates the rate of integration with the region and theworld, makes significant contributions to the process of improving the quality of goodsand services, automates and modernizes customs procedures, but also contributes to thestruggle against smuggling and trade fraud

The Harmonized System is developed and maintained by the World CustomsOrganization (WCO) and is revised every five years It is considered the basis for theimport and export operation and is used by several trading partners, especially the UnitedStates From 1976 to 1983, 60 founding member countries' customs associations and 20additional international organizations summarized and judiciously inherited the previousresults in order to develop the Harmonized System

The Harmonized System, mandates that the HS code be recognized by a 6-digit code andhave a distinct structure In addition, 99 chapters with 21 sections contain 5000commodity categories The 6 digits that can be broken down into three parts The first

two digits identify the chapter in which the goods are classified The next two digitsidentify headings within that chapter The last two digits identify the subheadings and areeven more specific The first 6 digits of HS codes are usually the same worldwide.Theoretically, countries utilize HS codes to classify specific products under the samesection, chapter, heading, and subheading, but in fact, discrepancies in the range ofproducts and the customs regulations of each national customs authorities can causedisputes Countries can add additional numbers for their own purposes, those longercodes differ among nations Vietnam and India, for instance, use 8-digit HS codes, whileJapan uses a 9-digit one China uses a 10-digit HS code, as does the EU, Canada, the US,and Korea A 12-digit HS code is used by Turkey.

1.2 Harmonized System in Vietnam

On 6 March 1998, Vietnam became a member of the Harmonized System by presidentth

No 49 / QD - CTN in the year of 1998 And on 1 January 2000, Vietnam approved thestConvention

The ASEAN Harmonized Tariff Nomenclature is the sole source of Vietnam's eight-digit

HS nomenclature, which is used to classify tariffs (AHTN) Both Vietnamese and Englishare used for tariff nomenclature in Vietnam

Vietnam's nomenclature is divided into 97 chapters and 21 sections (in which chapter 77

is used in the possible future)

As was previously mentioned, the HS code used in customs declarations in Vietnam is theone that is listed in the most recent version of Vietnam's Nomenclature of Exports andImports

The HS code in Vietnam includes eight digits The first two digits identify the chapter inwhich the goods are classified The next two digits identify headings within that chapter.The fifth and sixth digits identify the subheadings Finally, the last two digits indicate theprecise categorization in Vietnam’s export and import nomenclature

Figure 1: Structure of an eight digits HS code

1.3 HS convention that VN participates in

The International Convention on the Harmonized Commodity Description and CodingSystem controlled The Harmonized System It was approved in June 1983 and began totake effect on January 1st,1988

The target of the HS Convention is that harmonizing the description, classification, andcoding of items in international trade will promote trade and information exchange.Customs duties and statistics on international trade are gathered using the HS.Governments, international organizations, and the private sector all use it extensively for

a variety of other things, including taxes, trade policies, controlling restricted goods,checking rules of origin, freight tariffs, monitoring prices, controlling quotas, andresearching the economic situation

In 1993, Vietnam took part in the HS Convention on July 1 , however, until 6 Marchst th

1998 that decision No 49/QD-CTN issued by the President of Vietnam acknowledged it.Therefore, the HS Convention began to take effect in Vietnam on January 1 , 2000 ThisstConvention currently applies to the substances that have occurred in 1992, 1996, 2007,

2012, and 2017

1.4 Review the six GIR applications

General Interpretative Rules (GIR) are a set of six classification rules These regulations ensure that the legality of the Harmonized Commodity Description and Coding System

(HS) for the right classification of goods is interpreted consistently Rules must be

reviewed in order, if rule 1 is not applicable, the next rule will be applied Order of review of rules: Rules 1, 2(a), 2(b), 3(a), 3(b), 3(c), 4 In particular, rules 5 and 6 apply separately

Rule 1:

Most commodities are categorized under Rule 1 It indicates that the terms of theheadings and the relevant section or chapter notes serve as the primary determinants ofclassification

Rule 2:

(a) refers to the classification of products that are unfinished or incomplete but yet

possess the basic qualities of a finished or full product

(b) stipulates that any headings pertaining to a specific material or substance must also beapplied to mixtures and combinations made up of that substance Rule 3 is applicablewhen commodities made up of many materials can be classified under two or moreheadings

Rule 3:

Rule 3 is accepted when the goods are categorized under two or more headings Rule 3'spoints (a), (b), and (c) must be applied in that order

(a) indicates that the heading with the most detailed description should be used

(b) refers to the categorization of mixtures or sets in light of the substance or element thatgives them their fundamental characteristics

(c) is utilized when the commodities cannot be categorized using 3(a) or (b) The headingthat follows last in numerical order among those that equally merit consideration will beused to classify such items

Rule 4:

Rarely used, usually in relation to new technologies According to Rule 4, the items must

be categorized under the heading that corresponds to the goods that they are most similarto

CHAP 2: ANALYSIS OF LONGANS AND GASOLINE “OF RON

90 AND ABOVE, BUT BELOW RON 97” AND THE PROCESS OF

HS CODE DETERMINATION

2.1 How to apply GIRs

In this chapter, our group adopted textbook knowledge and the instructor's class lectures

to determine the HS code of exported fruits, namely longans, and goods under HS code

2710 To classify goods, we methodically applied theories based on the GeneralInterpretative Rules (GIR) The diagram below depicts the specific process ofdetermining the HS code using the six rules that we followed Rules that are not used areignored by default

Figure 2: Diagram of applying GIRs to determine HS code

Understanding the nature of the goods is a prerequisite according to these rules, and therules will be applied in order from rule 1 to 5 to determine the first 4 digits of the 8-digit

HS code If any of the rules are not satisfied, the next rule in the sequence will be useduntil the first four digits are determined; the following rules will obviously be ignored.Rule 6 is compulsory and must be followed when determining the HS code for anycommodity The last 4 digits will be determined based on rule 6 After completing alleight digits, our group must decide whether to choose the HS code

Furthermore, the HS code search tool on the official website of Vietnam Customs(https://www.customs.gov.vn/) and the Vietnam Import and Export Tariff of 2022(shorturl.at/bpUV6) are two simple, effective, and efficient methods that our team hasused in the process of searching for HS codes, as well as recheck whether the selected HScodes are correct according to customs regulations

2.2 Export Longans

2.2.1 Overview of Longans

Longans's scientific name is Dimocarpus Longans (Vietnamese name is Dragon Eye).This is a typical fruit of the tropics and subtropics, widely grown in Vietnam, SouthChina, and Indonesia, etc Longans is a close relative of lychee, but smaller (about 3centimeters)

The longans shell has a light yellow color and is thin, so that it can be easily peeled byhand Inside is a layer of translucent longans rice that wraps the jet-black seeds Longansseeds have no nutritional value and have an intense bitter taste, making them inedible

Picture 1: Hung Yen longans

This is the most popular type of longans in Vietnam, originating from Hung Yen Thename "longans cage" comes from the fact that farmers use bamboo cages to cover thebunch of longans to avoid birds and bats Hung Yen longans has large fruit, and thickyellow skin, quite different from other varieties of longans The taste is very sweet, thelongans rice is thick and the seeds are small

Longans is a fruit that brings many health benefits to humans For example, preventinganemia and increasing awareness, boosting immunity, and good for the nervous system.According to some reports, eating longans will help the body absorb iron—a majorsubstance of red blood cells in the blood Thereby reducing the risk of anemia andincreasing memory ability and alertness The high content of vitamin C in the longanshelps to strengthen the resistance against common colds And the vitamin B in longanshelps the nerves relax, reducing stress and fatigue It also helps to treat neurasthenia,insomnia, and depression In addition, consuming longans with a suitable quality canbring good benefits to the heart Longans contains a lot of potassium to help stabilizeblood pressure, reduce cholesterol in the blood, and reduce cardiovascular diseases tohelp us have a healthy heart.

Currently, Vietnamese longans are exported to many countries around the world, but most

of them are in China and the US market In the first half of 2022, Vietnam's longansexport value dropped sharply compared to the same period last year, reaching only550,000 USD Vietnam's main export market is China, estimated at only 138,000 USDcompared to 4,300000 USD in 2021 (hvnclc.vn, 2022) In addition, China is applyingstrict measures on imported fresh fruit, so Vietnam faces many difficulties whenexporting

Besides, the data of longans exports from Vietnam to international markets such asAustralia, UAE, and the US, all decreased sharply compared to the same period lastyear In the first two quarters of 2022, the export value of longans to the US reached70,000 USD, down 70% As for Australia and the UAE, the export value decreased by60%, at 150,000 USD and 68,000 USD respectively (hvnclc.vn, 2022)

It can be seen that the export value of longans has been on a downward trend in recentyears There are many reasons for this, but it is mainly due to the high cost, whichreduces the competitiveness of the product Vietnamese longans exports are mostly thin-skinned varieties Leading to export by sea will make the fruit easily perishable.Therefore, transportation by air is the best solution, however, the product's

competitiveness is also significantly reduced compared to competitors, as well asbecoming less attractive than substitutes

Figure 3: The situation of Vietnam's longans export, in the first 6 months of 2022 compared to the same

period in 2021 (USD) (hvnclc.vn, 2022)

2.2.2 Analysis of how to determine HS code

The following are the steps required to determine and draw conclusions about the HScode of fresh longans:

Step 1 : Type “longans” in the search box

Currently, the HS code of this product is still unknown, so we have downloaded the 2022Import and Export Tariff for reference and will take note to determine its digits type.Then use the keyword "Longans" to locate this item in the tariff nomenclature Here issome basic information about this product:

 The product's full name: longans (fresh)

 Produced: Hung Yen province, Viet Nam

 Rich nutrition: In 100g longans include 0.03mg of vitamin B1, 0.14mg of vitaminB2, 58mg of vitamin C, 0.9g of protein, 10.9g of carbohydrates, 0.1g of lipids,1.0g of fiber, 21mg of can xi, 0.4mg of iron,

After learning some background information, my team moved on to the important secondstep, which is to use the six GIRs learned to determine its HS code.

Step 2: Determine the HS code for “longans" products by following GIRs

Chapter: Apply rule 1: "Notes and Chapter Identifiers"

Firstly, it is necessary to determine the first two digits of the HS code We use the importand export nomenclature 2022 to identify the chapter and title of the product Sectionsinclude Chapters within the Nomenclature, which were designed to gather together avariety of commodities with the same type, function, composition, effect, purpose, orusage Chapters are collections of commodities that are more closely related and includemore thorough information A two-digit code (from 01 to 99) is used to identify theChapter to which specific commodities are categorized

After a bit of searching, we found a suitable result for the keyword “longans” Our teamdiscovered longans fulfill statements in "Chapter 8 - Edible fruits and nuts, peel of citrusfruit or melons." As a result, we can deduce that the first two digits are 08

- Section 2: Vegetable products:

In this section, the term “pellets” means products that are bound by directcompression or by the addition of a binder in a content not exceeding 3% byweight

- Chapter 8: Edible fruits and nuts, peel of citrus fruit or melons:

1 This Chapter does not cover nuts or inedible fruit

2 Chilled fruit and nuts must be classified in the same heading as fresh fruit andnuts

3 The dried fruits or seeds of this Chapter may be partially rehydrated or treatedfor the following purposes:

(a) Advanced storage or stabilization (e.g., moderate heat treatment, with sulfur, bythe addition of sorbic acid or potassium sorbate),

(b) Improve or maintain their appearance (for example, by adding vegetable oil orsmall amounts of glucose syrup), provided they retain the character of dried fruitand nuts

Figure 4: Import and Export Tariff 2022

Heading: Apply rule 1: "Notes and Chapter Identifiers"

Next, to find the heading for the product (which are the third and fourth digits), wecontinuously use the Import and Export Tariff 2022 and rule 1 Similarly, chaptersinclude headings, which are a group of more closely related commodities that areredefined by double digits These Group digits range from 01 to 100, with 100represented as 00

There are 14 headings (from 01 to 14) for the vegetarian products category Wediscovered that heading 10 (which is "other fruit, fresh") is the most appropriate based onthe product's "fresh" attribute after reading the captions of each heading in sequence Thedescription of the heading 08.10 is fresh fruit, so the exported longans is consistent withthis title

As we already identified the chapter and heading (the first 4 digits) of the product, ourgroup will ignore rules 3, 4, 5, and go straight to rule 6

Sub-heading and tariff line: Apply rule 6: “Explanatory notes"