Automobile importers and dealers have their backs to the wall amid moves to make them pay duty very soon after port delivery.
The newly released Decision 10 by the Ministry of Industry and Trade stipulates that automobile importers and dealers are no longer allowed to pay duty after 30 days of automobile port deliveries.
Enterprises said the move would hurt as new car duties had recently increased by 23% to 83%.
Under the existing mechanism on import automobiles, local enterprises must borrow at least 70% of the value of imported automobile.
Normally, importers must transfer the amount estimated at 10% of an imported consignment’s value to foreign sellers when opening letters of credit for the imported consignment. Then when the consignment arrives, importers have to pay full amount to sellers.
The managing director of an import and export company said that if the consignment covered 100 imported cars priced at US$25,000 each, his company had to pay around US$2.5 million to the sellers.
“Now, as a result of the above-mentioned decision, we would have to pay an additional amount of at least US$1.5 million for the duty at the ports shortly for the consignment,” he said.
He added that with the currently very high lending interest rate, if the importer could not sell the car in a short time, it would face a high financial pressure.
Tradoco, an automobile import and export company just had to nullify a contract to import 60 luxury cars, accepting to lose the 10% deposit for breaching the contract because it could not afford tax payments.
“Never before has the market for imported cars faced such difficulties,” Tradoco’s director Pham Huu Tam.
Since early May, Tradoco has temporarily stopped signing new contracts with its clients, while several automobile dealers have been forced to reduce car selling price to recoup the capital.
According to customs offices’ estimates, in the first five months of this year around US$625 million was paid for 30,000 new imported cars.