Export Processing Enterprise Questions

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Question: I was reading your website and have a few questions regarding this paragraph:

Goods imported by domestic enterprises for processing for EPE are exempt from import duty (including those allowed to be destroyed in Vietnam under law after liquidation of processing contracts) and processed products exported back to EPE are exempt from export duty.

I have come to Vietnam to start an export processing enterprise to manufacture garments (process fabric) for re-export.

Most of the materials I require will be imported, however, there are materials that I can purchase locally from Vietnam domestic market (such as thread, buttons) so to manufacture garments.  The garments will be exported abroad.

My questions are as follows:

1. If a domestic enterprise can “import for processing for EPE” and are “exempt from import duty”, and those processed products “are exported back to EPE”, then I do not need to start my own factory….correct?  I can simply open an office and then send the materials to a domestic enterprise for the processing of fabric into garments on my company’s behalf.  Correct?

2. If I do start my own processing factory, and also send to a domestic enterprise…..what are the complications if any?  Are there import export declarations to make?  I understand that there should be no import duty or export duty involved.  Correct?

3. Kindly clarify the 90 days time limit you mentioned over the phone earlier.

4. I am currently searching for land or premises for my EPE.  I understand that an EPE can be in an Economic Zone as long as a wall and fence system is in place for customs control.  I currently live in a villa in Sea Links City, Phan Thiet.  I wish to have my processing factory with a villa in Sea Links City.  I can construct a fence around the villa.  How high does the fence need to be?   Will a villa in Sea Links City be permitted for processing of the EPE?  I have seen that many local enterprises have their businesses located within their own homes…… so my feeling is that as long as the company is located within an indiviual building/home/villa, the a company is apparently allowed to be in a residence.  So, I would like some sort of confirmation that I can register my company and processing factory in the villa in Sea Links City.  As you can probably tell, my EPE is a very small scale enterprise.  I will require no more than 200 square meters.  My business plan is to start small and expand over time.

5. I am ready to start the business registration process right away.  What are your charges for business registration?

Answer:

Please see my comments as below:

1. No. It is impossible. You can only start an EPE  in Industrial Zone or Export Processing Zone, from which, you shall be required to lease land lot/factory for starting manufacture activities. Otherwise, your application for starting an EPE shall be rejected.

2. Transaction between EPE and domestic companies must be undergone the custom clearance process. Material sold by EPE to domestic market shall be subject to Import Duty, except for that it shall be re-exported to EPE in due term. Goods sold by domestic companies to EPE may be subject to Export Duty (Export Duty shall be applicable to several specific goods).

3. 90 days that I mentioned in the phone is the time limit for re-exportation. In case a dometic company wishes to have import duty exemption for the reason of temporary import and re-export, it must make sure that, the completed products consuming temporary imported raw material must be re-exported within 60 days (renewable to 90 days as maximum). Otherwise, the import duty shall be imposed.

4. No, villa is for residence only. It is not for manufacturing activities. Then, it is impossible for obtaining approval for carrying out manufacturing actitivities in a villa.

5. Please let us know exactly:

+ What kind of products to be manufactured?

+ What is the manufacturing process?

+ Location of the factory?

+ Scale of the factory.

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