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The status of frauds is more and more complicated...36 CHAPTER 3 SOLUTIONS TO IMPROVE RISK MANAGEMENT FOR THE VALUE OF THE IMPORTED GOODS IN THE DEPARTMENT OF RISK MANAGEMENT – GENERAL D

HANOI - 2017

I swear that this is my own research All data and results conducted inthe graduation thesis are true, coming from the actual situation of internshiplocation The figures in the tables for analysis, comment, and evaluation arecollected by the author from various sources indicated in the referencesection

In addition, the thesis also uses some comments, reviews as well as data

of other authors, other organizations cited and annotated the source

1 ACKNOWLEDGMENTS

First of all, I truly appreciate the internship opportunity at theDepartment of Risk Management, General Department of Vietnam Customs.They gave me a chance to corporate at work and to gain more not onlyknowledge but also experience Many thanks to the Department of RiskManagement for creating favorable conditions and supporting me incollecting data as well as the necessary study materials related to my thesis Achieving this thesis, I would like to express sincere and profoundgratitude to General Department of Vietnam Customs, the Department of RiskManagement, Academy of Finance, Tax and Customs Department – Academy

of Finance, especially Mrs Nguyen Thi An Giang and PhD Vu Duy Nguyenwho gave me direct instructions with valuable knowledge during the process

of deployment, research and completing this graduation thesis

I would like to express my profound gratitude to my supervisor Mr VuDuy Nguyen – Deputy of Tax and Customs Department – Who hascontinuously helped and encouraged me to develop the understanding of thesubject Otherwise, I could not complete my graduation thesis without hisenthusiastic instructions, advice and correction

Finally, once again sincerely thank the teachers, the units andindividuals who have helped me during the practice of this thesis

REASSURANCE i

ACKNOWLEDGMENTS ii

INDEX iii

LIST OF TABLES vii

PREFACE viii

CHAPTER 1 OVERVIEW OF RISK MANAGEMENT FOR THE VALUE OF THE IMPORTED GOODS 1

1.1 Overview of the value of the imported goods 1

1.1.1 Principles of determining the value of the imported goods under Article VII, GATT/WTO 1

1.1.2 The methods of customs valuation of the imported goods under Article VII of the General Agreement on Tariffs and Trade (GATT) 1994 2

1.2 Content of Risk management for the value of the trade imported goods 6

1.2.1 Definitions 6

1.2.2 Risk management principles and criteria 7

1.2.2.1 Risk management principles 7

1.2.2.2 Risk management criteria 8

1.2.3 The process of risk management for the value of the imported goods 8 1.2.3.1 Step 1 8

1.2.3.2 Step 2 9

1.2.3.3 Step 3 10

1.2.3.4 Step 4 10

1.2.3.5 Step 5 11

1.3 The factors affect risk management for the value of the imported goods 11

1.3.1 Outside factors: 11

1.3.1.1 Globalization 11

1.3.1.2 The demand of a balance between control and facilitation of World Trade Organization 13

1.3.2 Inside factors 14

1.3.2.1 Human resources 14

1.3.2.2 Information technology 15

1.3.2.3 Regulations 16

1.4 Practical experience of risk management for the value of the imported goods

17 1.4.1 Some countries 17

1.4.1.1 New Zealand 17

1.4.1.2 Japan 18

1.4.2 Lessons for Vietnam 20

CHAPTER 2 ACTUAL SITUATION OF RISK MANAGEMENT FOR THE VALUE OF THE IMPORTED GOODS IN THE DEPARTMENT OF RISK MANAGEMENT – GENERAL DEPARTMENT OF VIETNAM CUSTOMS 21 2.1 Introduce about the Department of Risk Management 21

2.1.1 The organizational structure 21

2.1.2 The functions and powers 21

2.2 The situation of the legal framework of risk management for the value of the trade imported goods in Vietnam 23

2.2.1 Customs Law No 54/2014/QH13 June 23, 2014 23

2.2.2 Decree No 08/2015/ND-CP May 21, 2015 23

2.2.3 Circulars No 38/2015/TT-BTC March 25, 2015 24

2.2.4 Circular No 39/2015/TT-BTC, March 25, 2015 24

2.2.5 Decision No 464/QĐ-BTC, June 29, 2015 25

2.2.6 Decision No 465/QĐ-BTC June 29, 2015 25

2.2.7 Decision No 200/QĐ-TCHQ August 24, 2015 26

2.3 Evaluation of risk management application for the value of the imported goods through SWOT matrix analysis 26

2.3.1 Strengths (S) 26

2.3.1.1 Allocate human resources efficiently, focus on the subjects of the greatest level to less the others 26

2.3.1.2 Reduce transaction costs 27

2.3.1.3 Improve the compliance of enterprises in the declaration of dutiable value of imported goods 27

2.3.1.4 Detect and prevent the actions of commercial fraudulence through price 28

2.3.1.5 Ensure the accurate and sufficient collection of revenue 29

2.3.2 Weaknesses (W) 31

2.3.2.1 Legal documents 31

2.3.2.2 Limited qualification of Customs officials 31

2.3.2.3 Short of the specific guidelines of applying risk management for the value of imported goods 32

2.3.2.4 Some limitations in collecting information to support risk management for the value of imported goods 32

2.3.2.5 Some limitations in the list of imported/exported goods facing risk in value 33

2.3.3 Opportunities (O) 33

2.3.3.1 Customs Modernization 33

2.3.3.2 Build an fairly competitive environment between Businesses via reducing the time of clearance 34

2.3.3.3 Increase autonomy and self-responsibility of enterprises 35

2.3.3.4 Enhance the cooperating relationship between Vietnam

Customs with international Customs 35

2.3.4 Threatens (T) 36

2.3.4.1 Globalization and economic integration 36

2.3.4.2 The status of frauds is more and more complicated 36

CHAPTER 3 SOLUTIONS TO IMPROVE RISK MANAGEMENT FOR THE VALUE OF THE IMPORTED GOODS IN THE DEPARTMENT OF RISK MANAGEMENT – GENERAL DEPARTMENT OF VIETNAM CUSTOMS 38

3.1 Orientation and purpose 38

3.1.1 Orientation accelerating the application of risk management for the value of the imported goods 38

3.1.2 Overall purpose 40

3.2 Some proposed Solutions 41

3.2.1 Long-term solutions 43

3.2.1.1 Complete internal Guidelines for applying risk management for the value of imported goods 43

3.2.1.2 Train professional human resource 43

3.2.1.3 Extend the scope of the information collection for Customs officials in the Department of risk management 45

3.2.1.4 Use the results of applying risk management 46

3.2.1.5 Build a strong punishment to punish the wrong declaring action of the value of imported goods 47

3.2.2 Timely solutions 47

3.2.2.1 Develop and modify the Lists of imported goods facing risk in value 47

3.2.2.2 Enhance qualification of Customs officials 49

CONCLUTION 50

REFERENCE 52

LIST OF TABLES

Table 1 The proportion of revenue from import and export activities to

the State Budget from 2010 to 2016

Table 2 Adjusted tax increases after consultation in customs clearance

LIST OF FIGURES Figure 1: Some proposed Solutions

LIST OF CHARTS Chart 1 Trade balance of Vietnam from 2006 - 2016

1 The necessity of thesis

In recent years, the trend of integration and internationalization of theworld economy has become more and more popular, and trade liberalizationhas taken place at an accelerated pace Like many other countries in theworld, Vietnam is taking positive steps to integrate into the regional andworld economy by becoming an official member of the World TradeOrganization, the World Customs Organization as well as joining largeeconomic organizations such as ASEAN, APEC, ASEM, etc

International economic integration has brought Vietnam in general andCustoms in particular new opportunities and challenges After joining theWorld Trade Organization, Vietnamese economy has experiencedconsiderable growth, attracted more and more foreign investors We havesigned many bilateral and multilateral treaties and agreements in many fields,including Customs As a result, exchange trade with other countries in theworld are increasingly expanding, the flow of import and export goods issignificantly increasing Thereby, Customs activities increasingly play a moreand more important role for any national economy, as well as globaleconomy

The recent situation of fraud through price is more and morecomplicated, mainly focusing on some forms of fraud, such as customsvaluation is lower than the actual price Enterprises do not calculate or declarethe costs or value of assistance, royalties, license fees In the first 3 months of

2017, through customs supervision, the customs authorities have discoveredmany cases customs declarants have declared customs value lower than theactual price They can declare that defective goods, inventories or lowerquality goods Some customs declarants incorrectly declare the goods name or

the general name of goods to lower the customs value declared There are alsocases of non-declaration of royalties and freight surcharges (such as CIC –Container Imbalance Charge, EBS - Emergency Bunker Surcharge) intocustoms value.

In that context, customs operations must meet the rapidly growingdemand for diversified modern trade Customs management measures need to

be changed promptly and deeply in the direction of trade facilitation andcustoms control In addition to the reform and renewal of traditionalmanagement practices, a very important part of the mission is to promote theapplication of risk management for the value of the imported goods, that willbenefit both Customs and Enterprises It is also necessary to have a specialistteam implementing risk management for the value of the imported goods.Risk management for the value of the imported goods allows CustomsAuthority to focus its resources on high-risk subjects, thereby facilitatingrapid clearance of goods and assisting the state in enforcing effective controls.This is an important step towards the application of modern managementskills of countries in the world to suit the new situation However, riskmanagement is still a relatively new field in Vietnam In practice, theapplication of risk management for the value of the imported goods still facesmany difficulties, lack of preparation and many shortcomings Therefore, inorder to apply the risk management for the value of the imported goods isdone scientifically and effectively, we need comprehensive and in-depthresearch in this field

From the knowledge gained during the study and internship, I chose the

topic “Risk management for the value of the imported goods in the

Department of Risk Management – General Department of Vietnam Customs” as my thesis topic.

2 The objectives of the thesis

The thesis focuses on clarifying the following issues:

- The theoretical basis of applying risk management for the value of theimported goods

- Analysing the actual situation of applying risk management for thevalue of importation for home use in the Department of Risk Management –General Department of Vietnam Customs

- Some solutions to improve risk management for the value of thetrade imported goods in the Department of risk management – GeneralDepartment of Vietnam Customs

3 The subject and scope of the study

- The subject: The process of risk management for the value of theimported goods in the Department of Risk Management – GeneralDepartment of Vietnam Customs

- The scope: The theoretical basis and the actual situation of applyingrisk management for the value of importation for home use in the Department

of Risk Management – General Department of Vietnam Customs

4 The methods of research

When conducting the specific problems in the thesis, I have been usingparticular approaches of economic science like summarizing, analyzingbasing on the statistics and summarized practical work that have beenpublished

5 The structure of the thesis

The content of thesis consists of 3 chapters:

Chapter 1: Overview of Risk management for the value of the imported

goods

Chapter 2: Actual situation of Risk management for the value of theimported goods in the Department of Risk Management – GeneralDepartment of Vietnam Customs

Chapter 3: Solutions to improve risk management for the value of theimported goods in the Department of risk management – General Department

of Vietnam Customs

CHAPTER 1 OVERVIEW OF RISK MANAGEMENT FOR THE VALUE OF THE

IMPORTED GOODS

1.1 Overview of the value of the imported goods

1.1.1 Principles of determining the value of the imported goods under Article VII, GATT/WTO

Customs valuation is a customs procedure applied to determine thecustoms value of imported goods The customs value is essential to determinethe duty to be paid on an imported good

Basic principle to determine the value of the imported goods:

“Customs valuation shall, except in specified circumstances, be based on theactual price of the goods to be valued, which is generally shown on theinvoice This price, plus adjustments for certain elements, equals thetransaction value, which constitutes the first and most important method ofvaluation referred to in the Agreement”

The main principles of determining the value of imported goodsunder Article VII, GATT/WTO:

- The value for customs purposes of imported merchandise should bebased on the actual value of the imported merchandise on which duty isassessed, or of like merchandise, and should not be based on the value ofmerchandise of national origin or on arbitrary or fictitious values

- “Actual value” should be the price at which, at a time and placedetermined by the legislation of the country of importation, such or likemerchandise is sold or offered for sale in the ordinary course of trade underfully competitive conditions To the extent to which the price of such or likemerchandise is governed by the quantity in a particular transaction, the price

to be considered should uniformly be related to either (i) comparable

quantities, or (ii) quantities not less favorable to importers than those in whichthe greater volume of the merchandise is sold in the trade between thecountries of exportation and importation.

- When the actual value is not ascertainable, the value for customspurposes should be based on the nearest ascertainable equivalent of suchvalue

- The value for customs purposes of any imported product should notinclude the amount of any internal tax, applicable within the country of origin

or export, from which the imported product has been exempted or has been orwill be relieved by means of refund

- The bases and methods for determining the value of products subject toduties or other charges or restrictions based upon or regulated in any manner

by value should be stable and should be given sufficient publicity to enabletraders to estimate, with a reasonable degree of certainty, the value forcustoms purposes

1.1.2 The methods of customs valuation of the imported goods under Article VII of the General Agreement on Tariffs and Trade (GATT) 1994

For cases in which there is no transaction value, or where the transactionvalue is not acceptable as the customs value because the price has beendistorted as a result of certain conditions, the Agreement lays down five othermethods of customs valuation, to be applied in the prescribed hierarchicalorder Overall the following six methods are considered in the Agreement:

Method 1: Transaction value

Definition of transaction value

The price actually paid or payable is the total payment made or to bemade by the buyer to or for the benefit of the seller for the imported goods,and includes all payments made as a condition of sale of the imported goods

by the buyer to the seller, or by the buyer to a third party to satisfy anobligation of the seller.

Conditions to be fulfilled

The customs value is the transaction value if all of the following

conditions have been fulfilled:

- Evidence of sale: There must be evidence of a sale for export to the

country of importation (i.e commercial invoices, contracts, purchase orders,etc.)

- No restriction on the disposition or use: There must be no restriction

on the disposition or use of the goods by the buyer

- Not subject to additional conditions: The sale or price must not be

subject to conditions or considerations for which a value cannot bedetermined with respect to the goods being valued

- Full prices: No part of the proceeds of any subsequent resale, disposal

or use of the goods by the buyer will accrue directly or indirectly to the seller,unless adjustment can be made

- Sufficient information for adjustments: Sufficient information is

available to enable the specific adjustments to be made the price paid orpayable

- Buyer and seller not related: The buyer and seller are not related, but

even if so, the use of the transaction value is acceptable if the importerdemonstrates that:

+ The relationship did not influence the price, or

+ The transaction value closely approximates a test value

Method 2: Transaction value of identical goods

The transaction value is calculated in the same manner on identicalgoods if the goods are:

- The same in all respects including physical characteristics, quality, andreputation;

- Produced in the same country as the goods being valued;

- And produced by the producer of the goods being valued.

For this method to be used, the goods must be sold for export to thesame country of importation as the goods being valued The goods must also

be exported at or about the same time as the goods being valued

Method 3: Transaction value of similar goods

The transaction value is calculated in the same manner on similargoods if:

- Goods closely resembling the goods being valued in terms ofcomponent materials and characteristics

- Goods which are capable of performing the same functions and arecommercially interchangeable with the goods being valued

- Goods which are produced in the same country as and by the producer

of the goods being valued

For this method to be used, the goods must be sold to the samecountry of importation as the goods being valued The goods must beexported at or about the same time as the goods being valued

Method 4: Deductive method

When customs value cannot be determined on the basis of thetransaction value of the imported goods or identical or similar goods, it will

be determined on the basis of the unit price at which the imported goods oridentical or similar goods are sold to an unrelated buyer in the greatestaggregate quantity in the country of importation The buyer and the seller inthe importing country must not be related and the sale must take place at orabout the time of importation of the goods being valued If no sale took place

at or about the time of importation, it is permitted to use sales up to 90 daysafter importation of the goods being valued.

Method 5: Computed method

Determining the customs value on the basis of the cost of production

of the goods being valued, plus an amount for profit and general expensesusually reflected in sales from the country of exportation to the country ofimportation of goods of the same class or kind Computed value is the sum ofthe following elements:

- Production cost = value of materials and fabrication: The cost or value

of materials and fabrication or other processing employed in producing theimported goods

- Profit and general expenses: Profit and general expenses usuallyreflected in export sales to the country of importation, by producers in thecountry of importation on the basis of information supplied by the producer,

of goods of the same class or kind

- Other expenses to be added: other expenses should be added to theprice such as the cost of transport of the imported goods to the port or place ofimportation, loading, unloading and handling charges associated with thetransport of the imported goods to the port or place of importation, and thecost of insurance

Method 6: Fall-back method

When the customs value cannot be determined under any of theprevious methods, it may be determined using reasonable means consistentwith the principles and general provisions of the Agreement and of ArticleVII of GATT, and on the basis of data available in the country of importation

To the greatest extent possible, this method should be based on previouslydetermined values and methods with a reasonable degree of flexibility in theirapplication

1.1 Content of Risk management for the value of the trade imported goods

1.1.1 Definitions

Customs administrations around the world are responsible forimplementing a broad range of government policies in areas as diverse asrevenue collection, trade and traveller compliance, protection of society,cultural heritage, intellectual property, collection of statistics and environmentprotection Some of these responsibilities are often carried out on behalf ofother government ministries and agencies, through the implementation of adiverse range of agreed control regimes, with Customs having responsibilityfor the administration and enforcement of relevant regulatory requirements atthe point of importation and exportation

Customs administrations operating in the modern global economyare faced with a complex range of challenges and risks According to Chapter

6 – Customs control, Kyoto Convention, General annex Guidelines: “Risk inCustoms operation is the potential for non-compliance with Customs laws” According to article 4 in Vietnam Customs Law stated that

“Risk means a possible failure to comply with the law on customs on import,export and transit of goods; and the exit, entry and transit of vehicle”

Thereby, to manage these risks, Customs organizations need to use arisk management strategy in Customs operations Risk management meansthe application by customs authorities of a system of professional measuresand processes to identify, evaluate and classify risks to serve as a basis forreasonable arrangement of resources to effectively inspect, supervise andsupport other customs operations

The introduction of risk management techniques within Customsoften comes as a result of the acknowledgement that due to increasing crossborder flows and changing government priorities, the administration is unable

to continue to deliver its business operations in the same manner aspreviously The realization and acknowledgement that business as usual is nolonger sustainable generally means the administration will need to make afundamental reassessment of its mission, roles and methods of operation Thisoften leads administrations to recognize that they can no longer interact in aphysical manner with 100% of cross-border flows and need to move fromtraditional gate-keeper style controls towards a risk based operating model Customs inspection and supervision shall be conducted on the basis

of applying the risk management in order to ensure effectiveness andefficiency of state management of customs and facilitate import, export, exit,and entry and transit operation

1.1.2 Risk management principles and criteria

1.1.2.1 Risk management principles

1.1.2.1.1 Definition

According article 3, Decision No 464/QD-BTC stated that “ Riskmanagement principles is the basic rules to carry out the measures andtechniques of risk management, as well as the application of risk management

in Customs operations

1.1.2.1.2 Principles

Customs authorities apply the risk management measures and

techniques to forecast the risks of customs law and tax law violations, thenapply appropriate control measures prior to customs inspection, while carryout customs procedures, customs supervision, post clearance audit, inspectionand other necessary professional measures under regulations for import andexport activities, entry and exit activities

Compliance assessment, risk assessment, decision on customsinspection and supervision , post clearance audit are based on the application

of criteria and risk management information available on the customs

information system, risk signs provided at the time of assessment anddecision.

Decisions on customs inspection, supervision and post clearanceaudit of import and export activities, exit and entry activities must be based

on the application of selective criteria issued by the Ministry of Finance onthe basis of compliance with regulations, the provisions of the specializedmanagement law and the level of law observance by customs declarants,together with the consideration of the level of risk of import-export goods,luggage of people on entry or exit, means of transport of immigration andother factors

1.1.2.2 Risk management criteria

In managing risk a balance must be struck between costs andbenefits, as clearly it will not be cost effective to address all risks equally.Criteria are needed to decide what constitutes an acceptable or unacceptablelevel of risk

Risk indicators is specific criteria which, when taken together, serve

as a practical tool to identify, classify the compliance levels and the risklevels , select for customs inspection and supervision, post clearance audit inmanaging the import-export activity

Risk management criteria includes: Criteria of complianceassessment, Criteria of risk assessment, Criteria of selection

1.1.3 The process of risk management for the value of the imported goods

b Evaluate the status, results, limitations, weakness in implementingcustoms procedures, the professional measures of the customs authority andother relevant authorities.

c Predict criteria and criteria indicators which will be applied to meetthe objectives, requirements of customs and tax management

d Identify the demands and information products of risk management

1.1.3.2 Step 2

Evaluate risk

a Collect and analysis information:

Firstly, Collect information related to customs value from 2 sources:

- The automatically integrated system updates information aboutcustoms value from customs declarations of import / export goods

- Risk management units at customs offices at all levels: Coordinate tocollect and receive information on acts, modes, tricks, subjects that violate thelaws related to customs valuation

Secondly, Process information about the value of imported goods:

- Research, propose the application of risk management measures inaccordance with the imported goods in the list of imported goods facing risk

in value

- Analysis, build the list of imported goods facing risk in value

- Make a summary table to monitor, evaluate, adjust, supplement theapplication of risk management for each item

b Analysis risk

c Assess the compliance level of importer.

d Evaluate and rank the risk level of importer.

e Manage risk profiles

f Identify a key business profile

1.1.3.3 Step 3

Synthesize information about risk management to select, decide the application of risk management measures

a Synthesize, collate results from step 2 with criteria to determine:

- Necessity and the importance of risk control

- Predict the risk control measures which are applied in accordance witheach level of standard

b Consider the effectiveness, effectiveness and impact of the application

of risk control measures

c Select and decide on the application of risk control measures suitablewith each type of risk and the law compliance level of the customs declarant

d Plan the implementation of risk control measures

e Establish, update selection criteria on the risk managementinformation system to decide on inspection and supervision and post-clearance inspection

f Synthesize, classify, provide information and warn risks in support ofcustoms operations

1.1.3.4 Step 4

Implement the risk control measures

a Implement customs inspection, supervision, post-clearance inspection

and other professional measures on the basis of results of classification, riskwarnings, risk management information and risk control plans

b Change the form, mode and level of customs inspection, supervision

and post clearance audit when detecting the signals of violation of thecustoms law

c Update and feedback the information to the risk management unitthrough the results system of implementing professional measures

Chart 1 Trade balance of Vietnam from 2006 - 2016

(Sourse: General Department of Vietnam Customs)

Chart 1 shows that in recent years, The volume of international trade

is rapidly increasing Thus, Customs administration operating in the modernglobal economy is faced with complex range of challenges The primeresponsibilities remain the collection of revenues and protection of society,but these demanding tasks must be performed effectively and efficiently, with

at the same time facilitating the flow of legitimate goods

Risk management is a logical and systematic method of identifying,analyzing and managing risks Risk management can be associated with anyactivity, function or process within the organization and will enable theorganization to take advantage of opportunities and minimize potential losses Risk management is successfully applied in the private sector, whereinsurance, banking, trade and industry find that it creates opportunities toimprove business results The use of risk management can also help the public

sector to determine where the greatest areas of exposure to risk exist, and cansupport management in deciding how to allocate limited resources effectively.

In managing risk a balance must be struck between costs andbenefits, as clearly it will not be cost effective to address all risk equally.Criteria are needed to decide what constitutes an acceptable or unacceptablelevel of risk

The broad legal basis for application of risk management by Customs

is provided for in the Standards of Chapter 6 of the General Annex of therevised Kyoto Convention The application of risk management for the value

of imported goods enhances the effectiveness and efficiency of customsbusiness in collecting revenue Risk management for the value of importedgoods will have a beneficial impact on all Customs activities, including thecollection of revenue, implementing trade policy, ensuring public safety andproviding trade facilitation to legitimate trader, travelers and carriers

1.2.1.2 The demand of a balance between control and facilitation of World Trade Organization

To become a member of World Trade Organization, Vietnam has toimplement a lot of commitments that strongly affect all aspect of Customsoperations

Firstly, Vietnam Customs has to facilitate international trade activityand create the convenient environment to attract foreign investment In order

to meet the requirements of trade facilitation, but not loosen the managerialrole and ensure security, Customs must enhance the application of moderncustoms professional measures so as to both ensure the capability of control,but not impede trade

Secondly, The customs authorities will have to carry out a series ofrelevant WTO commitments Such as: Determination of the customs valueunder General Agreement on Tariffs and Trade (GATT), Implement the

regulations on fees and charges that regulated by WTO, Transparency ofpolicies and procedures; Implement the Agreement on Rules of Origin;Enforcement of intellectual property rights at the border under the TRIPSAgreement on Trade-Related Aspects of Intellectual Property Rights At thesame time, implement other regulations related to the import and exportlicense, import and export rights and the name on customs declarations offoreign business operators….

When applying GATT to determine the value of the importedgoods, there were some positive and negative effects such as:

- As a condition of international economic integration, increasingrevenue from import tax and protection of the domestic market

- Create an equal business environment, remove imposing and rigidwhen applying the minimum price list

- Transparency, clarity, detail, publicity in customs valuation

- Businesses have to declare goods more clearly and in detail, therefore

in support of the Customs management operations

But at first stage, the implementation is lack of uniformity In otherhands, efficient and effective management system has not yet beenestablished, most countries face trade fraud Some forms of value fraud:declaring customs value is lower than actual value to evade tax; Declaringcustoms value is higher than actual value that often occurs in foreign investedenterprises, raise the import value in order to increase the cost and reduce thetaxable income

1.2.2 Inside factors

1.2.2.1 Human resources

Recently, the increasing complexity, speed, and volume ofinternational trade, fueled by the technological advances that haverevolutionized global trading practices, have significantly affected the way

customs authorities carry out their responsibilities To ensure both offacilitation and control for increasing volume of international trade, whilevolume of customs officials does not change, Customs administrations need

to apply risk management for the value of imported goods Hence, Customsauthority focuses on the greatest risk area and facilitates declarants whocomply to Customs law and other regulations

Risk management for the value of imported goods requires customs

officials who is responsible for collecting, analysing and evaluatinginformation about the value of imported goods have to have knowledge andskills in customs valuation Therefore, qualification of customs officialdecides the success of risk management for the value of imported goods

To accurately identify the risk, customs officials consider in further

detail what could happen that may result in incorrect valuation, and how such

an event could occur One such risk is undervaluation due to certain tradersdeliberately failing to declare the cost of assists (includes materials, tooling,

or other costs provided by an importer to a foreign producer)

Thus, if customs officials lack of knowledge and skills in customs

valuation, they can not accurately identify the risk in declaring the value ofimported goods, then the risks will not be prevented and controlled

1.2.2.2 Information technology

Information technology has a great influence on the application ofrisk management by the customs authorities in such a way as: the coverage ofthe electronic information network, the ability to quickly access and processinformation, coordinate with other agencies in the collection and use ofinformation, establish a international information system to exchangeinformation in needed with abroad customs administration and otherauthorities

A excel information technology system helps the customs authoritycollect enough information, analyze and identify the risk area Then, Customsauthority will select the professional measures to prevent and control risks Aoutdated information system will lead to an increase in the likelihood ofwrong forecast.

For example, inaccurate and incomplete statistical information, lack

of exchange with other management agencies will make it difficult forcustoms officials to find the right decision In particular, inaccurate statisticalinformation is not the only cause of wrong decisions but also cause moretrouble later

An appropriate information system will help Customs authorityautomatically collect necessary information in support of risk management,thereby providing risk warnings

1.2.2.3 Regulations

Now, the legal framework for the application of risk management isbasically constituted The legal basis provides flexibility and solutions thatallow customs authority implement appropriate risk management strategiesand administrative management strategies The legal basis helps the customsauthorities to perform their functions, duties and rights in controllingimplementation of customs procedures of declarants and the application ofrisk management for import and export activities

The legal basis recognizes the rights and responsibilities of both thegovernment and the business community for achieving compliance with theregulatory framework Thanks to legal framework, both the customs authorityand customs declarants perform properly their rights and duties

1.3 Practical experience of risk management for the value of the imported goods

1.3.1 Some countries

1.3.1.1 New Zealand

New Zealand’s Risk Management Methodology includes 7 steps:establish the context, identify risks, analyze risks, evaluate risks, treat risks,

monitor and review, communicate and consult This methodology is applied

by the New Zealand Customs Service’s Intelligence group, which isresponsible for assessing, prioritizing, and recommending treatment foridentified risks The group’s activities enable the proper functioning of theentire customs administration

The Intelligence group is responsible for producing impartial risk

assessments about border transactions and associated entities that informpotential intervention strategies The Intelligence function helps facilitatetrade by ensuring:

- Profiles and alerts are developed and implemented that effectivelytarget cases of non-compliance;

- There is a standardised set of trade targeting rules that are used tosystematically assess transactions for non-compliance;

- Interventions can occur prior to arrival of the goods based on astandardised entry, which can be assessed against known risk indicators; and

- Feedback from interventions and audits are systematically captured andassessed to ensure that lessons are learned, and alerts, profiles and rules aresystematically updated

Customs’ risk assessments are linked to operations through NewZealand’s Integrated Targeting Operations Centre (ITOC) The ITOC appliesthe intelligence assessments at a tactical level to identify specific border

transactions, and ensures there is a strong connection between the customsadministration’s strategy and operations.

The ITOC has improved customs risk management becauseintelligence drives interventions at the border In addition, the ITOC addsvalue because it is staffed by customs officers as well as officers from otherborder agencies, such as Immigration New Zealand and the Ministry ofAgriculture and Forestry

The ITOC is responsible for:

- Identifying risky border transactions

- Directing activities related to passenger, trade, and shipping risks, andproviding response briefings 24 hours a day, 7 days a week

- Improving operational capacity to respond rapidly and efficiently to arange of border risks

- Managing the advance information received, such as advancepassenger information, import and export entries, freight manifests, and craftmovements

- Working with other agencies domestically and internationally

New Zealand is developing the ITOC’s functions so that it supportsall government activities to co-ordinate border management, target borderrisks and link more closely with other international intelligence centers so thatthey can work together to identify international border risks

1.3.1.2 Japan

Japanese Customs is one of the most modern customsadministrations in the world The experience of the Japanese Customs inimplementing risk management can be useful to countries in the process ofreform and modernization

Thanks to the application of risk management techniques to exportand import activities, customs clearance procedures of Japan moved from a

system of imposing tariffs to self-declare importers and tax Japanese customsauthority have used these criteria to evaluate and analyze risks In Japan, theapplication of risk management and the selection of customs inspection based

on the classification of risk that allows Customs to allocate scarce resources

to areas of high risk while increasing efficiency of goods clearance processfor low-risk areas

To effectively apply risk management for the value of the importedgoods, Japanese Customs built a list of imported goods facing risk in valuewith the reference price With this list, Customs officials can refer theminimum price and the maximum price of a certain goods in a short time(normally one month) If the value of imported goods declared by importers islower than the minimum price or higher than the maximum price in the list, itmeans there is risk in value declared by declarant and Customs officials has tofocus on inspecting the value of that shipment Japanese Customs frequentlyupdates the list of imported goods facing in value once a month in accordancewith price fluctuations in the international market

By analyzing and measuring the level of compliance in relation toindividual trade, commodities or international exchanges between countriesand regions, Customs can identify those cases in which further scrutiny in theform of physical examination and documentary review is necessary Byacknowledging the compliance level of a trader, in personal authorized tradersand AEOs (Authorized Economic Operator), leading to a lower examinationrate than that of other less-compliant traders, Customs offers incentives fortraders to encourage compliance In combination with the pre - arrivalprocessing of cargo and goods declarations, Customs gains the necessary time

to accomplish risk assessment and enabling immediate release of the goodswhen its arrival

1.3.2 Lessons for Vietnam

Risk management in Customs, including intelligence and operations,must rest on an effective regulatory framework Legislation should enableinformation collection and sharing, including internationally whereappropriate It also should provide a legal basis for operations If needed,legislation should be updated to reflect changing risk management processes.The regulatory framework should be aimed at encouraging voluntarycompliance

Risk management should be viewed as a continually evolvingprocess Though the basic thinking underpinning risk management mayremain the same, its cyclical nature allows constant improvement This maymean tweaking estimated risk levels, introducing new technologies, or sharingmore risk with other supply chain participants

A comprehensive approach to managing customs risks must marryrisk management with intelligence and operations Effective processes requirewell-trained staff, suitable systems, knowledge transfer between domesticagencies, and international collaboration Risk management processes mustalso be subject to checks and balances

The list of imported / exported goods facing with risk in value should

be built regularly and has to have the minimum price and the maximum price

of a certain goods for a specific period The reference price of this list mustclose to the actual price in the market and also in accordance with pricefluctuations in the international market

Trade facilitation is enhanced when customs administrations workwith other domestic agencies involved in border protection to jointly managerisks Working together can reduce the cost of implementing risk managementprocesses and increases the amount of available information, improvingunderstanding of the border environment