Rights and obligations of the party processing goods for foreign traders

Rights and obligations of the party processing goods for foreign traders clearly stipulated in legal documents, to ensure that the production and export process takes place transparently and in accordance with regulations. The processing party has the right to enjoy tax exemption, outsourcing and contract product processing, but must also strictly comply with tax, export and processing contract requirements.

General regulations on processing goods for foreign traders

Processing goods for foreign traders is a common activity in the field of international trade. According to the provisions of Decree 69/2018/ND-CP, Vietnamese traders have the right to process goods for foreign traders, except for goods on the list of banned exports, banned imports, or temporarily suspended import and export. This is a production activity in which the processing party performs one or more stages of the goods production process at the request of the ordering party. After completion, the goods will be returned to the ordering party or exported abroad.

Conditions for processing goods for foreign traders:

• Vietnamese traders must meet all conditions for producing and trading goods according to the provisions of law.
• If processing items subject to conditional business investment, traders must ensure compliance with the corresponding regulations.
• For imported and exported goods under license, traders must have a license from the Ministry of Industry and Trade to carry out processing activities.
• For imported goods in the form of designated traders under the management authority of the State Bank of Vietnam, the processing of goods shall comply with the regulations of the State Bank of Vietnam.

To process goods, the processing party must be able to organize the production process and meet the technical requirements set forth by the processing party. Processing activities help foreign traders take advantage of Vietnam’s cheap labor, available raw materials and large production capacity, while the processing party can increase revenue from this activity.

Rights and obligations of the party processing goods for foreign traders

Rights of the processing party

According to Clause 2, Article 42 of Decree 69/2018/ND-CP, the processing party is entitled to certain benefits to carry out processing activities effectively:

• Exemption from export tax and import tax for goods temporarily imported to perform processing contracts and exported processed products, provided that the goods must comply with loss norms and raw material consumption rates.
• The right to hire another trader to reprocess part or all of the production process, if agreed upon in the processing contract. This allows the outsourcing party to optimize the production process and reduce the load on its system.
• The right to supply raw materials, auxiliary materials, or supplies for processing according to the agreement. The processing party can provide materials themselves or receive materials from the ordering party. For raw materials purchased from Vietnam, they must pay export tax according to the provisions of law.
• Receive payment in processed products: The processing party can agree to receive partial or full payment in processed products, except for products banned from import or subject to strict control.
• On-site export of processed products: The processing party can carry out on-site export procedures for processed products, waste products, scrap, or machinery and equipment as authorized by the ordering party.

Obligations of the processing party

Also according to Clause 2, Article 42 of Decree 69/2018/ND-CP, the processing party must comply with the following legal obligations:

• Comply with tax regulations and Vietnamese law on processing activities: The processing party must comply with Vietnamese law regulations on import and export taxes, processing activities and terms of the contract. . This ensures transparency and legality in business activities.
• Protection of intellectual property rights: The processing party must ensure that it does not infringe the intellectual property rights of the outsourcing party. They need to comply with requirements on using labels and names of origin of processed products.
• Ensuring the quality of processed products: The processing party is responsible for properly implementing the production process and meeting the quality standards required by the ordering party. The processing party must also ensure that the product is completed on schedule and delivered according to the committed time.
• Handling of scrap and defective products: After completing the processing process, the processing party is obliged to handle scrap, defective products and excess materials according to regulations and agreements in the contract.

Regulations on procedures for applying for a license to process goods

To process goods for foreign traders, Vietnamese traders need to apply for a license from the Ministry of Industry and Trade. The licensing application process is specified in Article 38 of Decree 69/2018/ND-CP.

Prepare documents

Dossier to apply for a goods processing license includes:

• Written request for a Goods Processing License, which specifically states the contents specified in Article 39 of Decree 69/2018/ND-CP: 1 original copy.
• Investment certificate or business registration certificate, enterprise registration certificate: 1 copy with the trader’s seal.
• Certificate of eligibility for production and business (if any): 1 copy with the trader’s stamp.

Licensing procedures

The licensing process includes the following steps:

• Prepare documents: Traders need to prepare complete documents according to regulations.
• Submitting applications: Traders can submit applications directly at the Ministry of Industry and Trade or by post, and in some cases can submit online.
• Processing of documents: Within 3 working days, if the documents are incomplete, the Ministry of Industry and Trade will request the trader to supplement. If the dossier is valid, the Ministry of Industry and Trade will have a written exchange of opinions with the relevant ministries and ministerial-level agencies for appraisal within 5 working days.
• Within 5 working days from the date of receiving the document from the Ministry of Industry and Trade, the relevant ministries and ministerial-level agencies shall respond in writing to the Ministry of Industry and Trade.
• Licensing: After receiving a written response from the relevant ministry or ministerial-level agency, the Ministry of Industry and Trade will issue a license within 5 working days. If refused, the agency will send a written notice of reason.

Consulting services on processing activities for foreign traders in Long Phan

With experience in the field of international trade and goods processing, Long Phan provides comprehensive consulting services for businesses. We will support customers:

• Carrying out legal procedures: Long Phan will help you fully prepare licensing documents and carry out steps related to the goods processing process.
• Processing contract consulting: We support drafting and negotiating processing contract terms in accordance with Vietnamese law and customer interests.
• Consulting on taxes and import-export regulations: Make sure you clearly understand tax regulations and customs procedures when performing processing activities.
• Representing customers in working with competent authorities.
• Advise on how to handle when risks arise.

With a team of experienced experts, Long Phan is committed to providing optimal support to customers in all legal procedures and processes related to goods processing in Vietnam. If you still have questions or need in-depth advice on issues and procedures related to goods processing activities, please contact Long Phan via hotline 0906735386 for detailed support.