Handling Surplus Materials During the Dissolution of Export Processing Enterprises: Practical Considerations

May 19

When dissolving an export processing enterprise, one of the key legal issues that needs careful attention is the handling of imported materials remaining in inventory. For foreign-invested enterprises (FDIs) operating under the export production model, the treatment of surplus materials not only impacts the dissolution process but is also directly tied to tax obligations and customs procedures.

The Challenge: Unused Imported Materials

DEDICA had the opportunity to support an FDI client during the dissolution of its factory in Binh Duong Province, while restructuring operations to another factory within the same group in Binh Phuoc Province. At the time of dissolution, the company still had a quantity of unused imported materials in stock.

These materials had been imported under the export production regime, which qualified them for import duty and VAT exemptions. The client was reluctant to sell the surplus materials on the domestic market, as changing their intended use would trigger additional tax liabilities.

Difficulties with the Traditional Approach

In the past, companies within the same corporate group often opted for the domestic export-import model (xuất khẩu – nhập khẩu tại chỗ) to transfer materials between factories. However, customs authorities have recently tightened regulations on this method, making the procedures more complex and difficult to implement.

Proposed Solution: Bonded Warehouse Export and Re-Import

After thoroughly reviewing applicable laws and evaluating various alternatives, DEDICA advised the client to handle the surplus materials using the following approach:

Export the surplus materials to a bonded warehouse;
Then, the factory in Binh Phuoc would re-import the materials from the bonded warehouse.

Although current legislation does not provide explicit guidance on this approach, DEDICA assisted the client in preparing and submitting an official request for clarification to the customs authority, based on a detailed legal analysis and direct communication with the relevant agency.

In response, the customs authority confirmed that the proposed solution complies with existing regulations and is permissible in practice.

Conclusion: The Need for Flexible, Practical Legal Solutions

The dissolution of an export processing enterprise often raises complex legal issues, especially regarding the handling of remaining imported materials. It is therefore critical for businesses to carefully consider solutions that are not only compliant with the law but also cost-effective and operationally feasible.

📝 DEDICA remains committed to delivering practical, tailored legal solutions to help clients navigate regulatory challenges in manufacturing and investment activities in Vietnam.

👉 Official Customs Response Letter: https://drive.google.com/file/d/16x_cU4-I3ZlP0C3EkirpsDRl1xQNzNOr/view?usp=sharing

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