Businesses are frustrated with the problem of counterfeit goods and commercial fraud

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Customs combats smuggling in e-commerceCustoms combats smuggling in e-commerce
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Businesses are frustrated with the problem of counterfeit goods and commercial fraud
Chinese goods with fake brand names were discovered and seized by Customs forces in June 2021. Photo: T.Binh

Accepting breaking even is still difficult to compete

Sharing specifically about the business’s losses in the face of smuggled goods and commercial fraud, Mr Hoang Huu Loc, Deputy Sales Department of Southern Battery Joint Stock Company (Pinaco), said that Battery import tax in ASEAN is currently 0%, the import tax on batteries from Korea in 2022 is 5%, according to the roadmap to reduce each year by 2.5%, so by 2024, the import tax on batteries from Korea will be 0%. However, all imports are subject to a value-added tax (VAT) of 8%.

With sophisticated tricks, smuggled batteries have a VAT invoice equal to only 66% of the price list announced to customers. Therefore, Mr Hoang Huu Loc calculated 1 120Ah battery has a published price of VND 2.84 million, the VAT invoice price is VND 1,868 million, and the price difference is VND 971,600, if multiplied 8% tax VAT, the State lost VND 77,728/product unit. According to statistics, battery companies spend about 6 million USD each year, equivalent to 144 billion VND to import about 140,000 batteries from Korea. Therefore, if the subjects use the above tricks, the State will lose nearly 11 billion VND in VAT, not including import tax. In addition, many types of batteries are smuggled from many other countries in ASEAN, although not subject to import tax, but with this trick, they can also “evade” the VAT payable.

That’s the damage to the State, but for businesses, Pinaco’s representative shared, each smuggled jar with tax fraud will have a price reduction of 25-36%. With such a large difference, the price of smuggled batteries is very low, making it difficult to compete because the average profit of the battery industry is only about 3-4%, so if there is a price reduction to compete, Even if it is reduced to the production cost, the selling price is 10-15% higher than that of smuggled batteries.

Regarding the problem of counterfeit goods, Mr Duong Duc Duy, Project Manager of Rang Dong Lamp Joint Stock Company, said that the company’s LED bulb products are currently being counterfeited and counterfeited widely on the market and are offered in distribution systems with low prices and attractive discount regimes. This affects businesses’ revenue, and consumers have to spend a lot of money but cannot use products of equivalent value and quality.

“With the rapid development of technology, online violations are happening very strongly. The subjects even built their own website, using the company’s image, but when delivering the goods to the distribution agent, it was a different, poor-quality product. In addition, some subjects recruited sales agents through social networks, offering products through e-commerce platforms,” Mr Duong Duc Duy added.

Moreover, despite the involvement of the National Office of Intellectual Property and law firms, according to the representative of Rang Dong Lamp Joint Stock Company, many cases are still deliberately violated with sophisticated countermeasures such as: seasonal work and continuous model changes.

Adding punishments to be enough deterrence

Mr Adrian Clarke, External Relations Manager of JTI Vietnam, called those who smuggled, produced, traded in counterfeit goods, and cheated on trade “stealing” market share from legitimate businesses. However, he said that the struggle with this problem faces great challenges; the challenge in Vietnam is much greater than that of other countries in the world when Vietnam has a long border, and high crimes with sophisticated acts.

According to experts and businesses, the cause of this situation is that a part of the cadres and civil servants lacks a sense of responsibility, are weak in expertise and professionalism, has a low sense of law compliance, and have signs of respect, cover and even have cases of “protection” for violations of the law… Some legal provisions related to preventing and combatting smuggling and commercial fraud are still inadequate. This is because loopholes, and coordination between law enforcement agencies, between law enforcement agencies and businesses is not really synchronized and effective. Sanctions are not strict, and lack deterrence.

Commenting on solutions to prevent trade fraud, Mr Hoang Huu Loc said that it is necessary to control by the minimum tariff for import tax. Enterprises are willing to cooperate in providing norms and product prices for the State to refer to for tax calculation.

As for the problem of counterfeit goods, Mr Duong Duc Duy suggested adding serious penalties to deter violators because the administrative sanctioning mechanism based on product value is still light and insufficient. In addition, it is necessary to have clear sanctions, form a management and supervision mechanism to ensure the interests of enterprises in the e-commerce environment. Additionally, businesses suggested that the authorities need to be more drastic and stronger, and at the same time strengthen the dissemination and propaganda to raise consumers’ awareness about the consequences of counterfeit goods.

Mr Nguyen Duc Le, Deputy Director of the Operations Department, General Department of Market Management, affirmed that if businesses, consumers, and domestic and international organizations, the authorities do not agree to coordinate so, fighting smuggling, counterfeiting, imitation goods and commercial fraud is still difficult.

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