In today’s global business landscape, companies frequently encounter challenges when entering foreign markets. A major hurdle is importing goods into a market like Vietnam, where the conventional approach—establishing a company, securing import permissions, and registering products—can take anywhere from two to four months.
As a result, the role of Importer of Record (IOR) in Vietnam has become crucial, providing a faster alternative for businesses. These entities facilitate the efficient and accurate delivery of imported goods. This article will provide a comprehensive overview of the services offered by Importers of Record, underscoring their benefits. Additionally, it will share insights into leveraging free trade agreements and relevant tariff reductions critical for thriving in international trade.
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Understanding Importer of Record (IOR) in Vietnam
An Importer of Record (IOR) is an individual or entity responsible for ensuring that imported products comply with the legal requirements of the host country. This includes managing proper documentation, accurate valuation, and adherence to import regulations.
The Importer of Record (IOR) can be the owner, purchaser, or a customs broker granted appropriate authorization, typically through a power of attorney (POA). The IOR is responsible for ensuring that all goods are correctly documented and valued for customs clearance.
Additionally, this IOR (also known as non-resident importer – NRI) is a responsible entity for:
- Creating a list of imported products that abide by local law and regulation;
- Paying the import duties and other taxation;
- Clearing the goods smoothly through customs;
- Delivering the products to the final destination.
Responsibilities of the Importer of Record (IOR)
Exporting goods to countries outside a free trade zone typically requires a local presence to efficiently manage the import process. Without this, shipping challenges and restrictions can arise, hindering successful delivery. Therefore, establishing a local presence is crucial for navigating import procedures effectively and ensuring goods reach their intended destination outside the free trade zone.
In this context, the Importer of Record (IOR) is critical in ensuring compliance with all legal requirements for customs clearance. This includes accurate product classification and correct valuation of imported goods.
Furthermore, the IOR is financially responsible for paying all duties, tariffs, and taxes, and diligently handles all required compliance documentation. Additionally, the IOR assumes ultimate liability for the shipment, taking on associated risks, especially with the import of dual-use goods, underscoring the vital importance of their role in the importation process.
Below is a list of some key functions of the IOR:
Duties and Tax Payment
As the Importer of Record (IOR), one undertakes financial responsibility for settling any duties, taxes, and fees imposed on imported goods upon their entry into the destination country. This encompasses several charges:
- Import duties: These are the taxes imposed on imported goods determined by tariff classification and trade agreements. It is often calculated as a percentage of the shipment value.
- Excise taxes: These are the additional levies applied to specific imported items like alcohol, tobacco, fuels, and luxury goods, with rates varying by product type.
- Merchandise processing fees: Minor administrative charges imposed by customs on formal entries to cover administrative expenses.
- Harbor maintenance fees: These are the fees collected on vessel arrivals at U.S. ports to finance harbor upkeep and expansion.
- Bonded warehouse fees: Charges for storing goods in a bonded customs warehouse before formal customs clearance.
- Additional inspection fees: Possible charges if Customs mandates supplementary shipment inspections.
Trade Compliance
The Importer of Record (IOR) is responsible for adhering to regulatory requirements during import. This entails the below:
- Correct classification of goods according to the destination country’s tariff schedule to avoid penalties originating from inaccurate classification.
- Compliance with eligibility criteria for applicable trade programs, including free trade agreements and special trade programs.
- Accurate declaration of the country of origin based on substantial transformation rules.
- Proper assignment of value to imported items for customs purposes.
- Fulfillment of all licensing, permitting, and other import prerequisites, as certain products require licenses or permits before formal entry.
- Absence of prohibited or restricted items within the shipment.
Failure to comply with trade regulations may lead to delays in shipment, penalties, or seizure of goods by customs authorities.
Documentation and Custom Entry
The Importer of Record (IOR) is tasked with officially clearing shipments through customs upon their arrival. This process entails the precise submission of essential paperwork, including commercial invoices, packing lists, and certificates of origin. The specific entry procedures depend on the regulations of the destination country and the details of the shipment. In the U.S., the types of entry include:
- Consumption Entry: This is the most common entry type, which declares goods for retention in the U.S. market for sale or use.
- Temporary Import Bond (TIB): Temporarily importing goods for re-export within a specified timeframe.
- Foreign Trade Zone (FTZ) Entry: Importing goods into an FTZ for storage, manufacturing, or re-export, allowing for duty/tax deferral.
- In-bond Entry: Transporting goods “in-bond” to a U.S. inland port of entry under customs control.
Selecting the appropriate entry type is crucial to prevent delays and additional expenses. The IOR is tasked with determining the optimal entry process based on the intended use of the imported goods.
What an Importer of Record (IOR) Must Consider
The Importer of Record maintains documentation for all initial import assessments, as listed below:
- Classification of Product: IOR must check these details to understand the type and value of the product
- Export and Import Licenses: These documents prove that you have permission to import and export goods beyond the country’s international border.
- Import Permits: It is necessary documents that deal with different import activities
- Power of Attorney (POA): It is a documentation that specifies the entity to take charge of legal responsibilities, acting on behalf of the Importer of Record when they are not on site.
- Country-specific: Every country maintains distinct customs, regulations, and requirements tailored to its unique needs. The IOR must comprehend these regulations to facilitate smooth initial customs clearance processes.
Some Common Definitions in Importer of Record (IOR)
You should understand some common and important roles in the IOR supply chain process. This includes the following:
Consignee
The consignee is typically the owner of the goods. It receives the shipment and takes ownership after customs clearance. In standard import/export operations, the consignee pays import duties and taxes. It can be an individual consumer ordering goods internationally or another business entity. When a business imports goods for internal use, storage, or future distribution, it acts as both the importer and the consignee.
Exporter
Customs recognizes this entity as the official exporter of goods across international borders. Whether a business, individual, or company serves as the exporter of record (EOR) on behalf of the exporter, they hold the authority granted by customs and government agencies. It helps them to facilitate the shipment of goods from one country to another. Regardless of whether the exporter is the seller, they are authorized to send goods across borders, representing either themselves or an organization acting on their behalf.
Custom Broker
An external agent or broker handles customs clearance and documentation submission on behalf of the business. They facilitate clearing goods through customs and ensure compliance with regulations and requirements.
Owner or Purchaser
It is the entity that imports the consignment and has a monetary stake in importing the goods to the international borders.
Guide to Import Tariffs/Taxes for Vietnam
The country’s prominence in global trade stems from its active regional and international trade engagement. It is mainly facilitated by its membership in organizations such as:
- The Asia-Pacific Economic Cooperation (APEC) forum
- The World Trade Organization (WTO)
- The Association of Southeast Asian Nations (ASEAN)
- The United Nations (UN)
Read More: The Definitive Guide to Vietnam’s 16 Active Free Trade Agreements
The first step in assessing the feasibility of importing or exporting goods to and from Vietnam is to determine the applicable tariffs between the country of origin and Vietnam. As a member of over 50 international trade agreements, including 14 global trade pacts, this Southeast Asian nation benefits from significant tariff reductions.
| Abbreviation | Full Form |
| AANZFTA | ASEAN – Australia – New Zealand Free Trade Area |
| ACFTA | ASEAN – China Free Trade Area |
| AFTA | ASEAN Free Trade Area |
| AHKFTA | ASEAN – Hong Kong, China Free Trade Agreement |
| AIFTA | Vietnam and India under the ASEAN Free Trade Agreement |
| BTA | U.S. – Vietnam Bilateral Trade Agreement |
| CPTPP | Comprehensive and Progressive Agreement for Trans-Pacific Partnership |
| EVFTA | EU – Vietnam Free Trade Agreement |
| RCEP | Regional Comprehensive Economic Partnership |
| UKVFTA | UK – Vietnam Free Trade Agreement |
| VCFTA | Vietnam – Chile Free Trade Agreement |
| VIFTA | Vietnam – Israel Free Trade Agreement |
| VKFTA | Vietnam – South Korea Free Trade Agreement |
| VJEPA | Vietnam – Japan Economic Partnership Agreement |
| VN-EAEU FTA | Vietnam – Eurasian Economic Union Free Trade Agreement |
| VN-CUBA FTA | Vietnam – Cuba Free Trade Agreement |
Benefits of an Importer of Record (IOR) Services in Vietnam
Utilizing the services of IORs is instrumental for businesses that aim to import products seamlessly into their host country. Typically, companies engage an IOR during a trial phase to assess market viability. Upon confirming market potential, they proceed with full market entry, establishing entities, and conducting operations through branch offices in Vietnam.
IORs are particularly beneficial for companies unwilling to alter their core processes for importing goods or forfeit control over their supply chain. They grant access to expert insights on international trade issues, compliance, and licensing.
The decision to employ an Importer of Record in Vietnam is crucial, especially for international import operations in countries where a company lacks representation. Its global presence facilitates efficient clearance of goods for delivery, balancing the need to set up a fiscal entity.
Furthermore, it streamlines the import process without altering core business procedures. With specialized knowledge in compliance, licensing, and global trade matters, an IOR provides peace of mind by ensuring smooth shipment clearance and minimizing the risk of fines, penalties, or delays.
Check out InCorp Vietnam’s Legal Advisory for your Importer of Record (IOR) right now!
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