A decision to change the HS code can lead to a series of consequences: increasing import taxes, changing origin incentives, incurring value-added tax and an arrears of up to billions of VND. At that time, what businesses need to do is not to rush to affirm that "customs applied the wrong code", but to clearly determine: what the goods really are, how the law requires classification and whether the amount of tax has been calculated correctly or not.
A dispute expressed in the first-instance administrative judgment No. 914/2020/HC-ST[1] dated 3-7-2020 of the People's Court of H City shows quite clearly the complexity of the problem.
When the HS code changed, the story continued to spread to import taxes, origin incentives, C/O and value-added tax.
Enterprises import items such as Magnesium Sulphate, Ferrous Sulphate, Sodium Sulphate and Humic Acid. The debate is not only in the numbers in the tariff, but in the chemical nature, content, uses of goods and whether they belong to the chemical group of Chapter 28 or fertilizers of Chapter 31.
When the HS code changed, the story continued to spread to import taxes, origin incentives, C/O and value-added tax. The amount of arrears mentioned in the dossier is up to billions of VND.
The first thing businesses should do
When receiving a decision to impose tax, businesses often look for evidence proving that the HS code they previously declared is correct. But businesses should wonder why customs changed the HS code?
Does the customs authority rely on the chemical composition, content or purity of the product? Based on the results of sample analysis? Based on the use? Or based on the chapter and group footnotes in the List of exports and imports?
Determining the right "basis" for a tax assessment decision will determine how the business responds appropriately to this decision.
If the customs department relies on the results of chemical analysis, the enterprise must check the results of the analysis. If the dispute is in the footnotes of Chapter 28 and Chapter 31, the focus must be on the classification rules. If the disagreement is on the tax rate after changing the code, it must turn to the tax and origin law.
Uses don't decide everything
A common mistake is that businesses focus on proving that goods are imported to produce fertilizers, thereby assuming that goods must be classified as fertilizers. This way of reasoning is not enough.
In the classification of goods, the trade name or the purpose for which the business uses the product can be important data, but it does not always determine the HS code. The classification also depends on the objective characteristics of the goods and the corresponding rules and legal annotations.
This is especially important for chemicals. A substance purchased by enterprises as raw materials for fertilizer production does not naturally become a "fertilizer" in terms of customs classification. On the contrary, it is also impossible to just look at the chemical formula and ignore other legal criteria of the group of goods.
Therefore, what businesses need to build is a dossier proving the origin and origin of goods. That dossier should answer very specific questions: what is the chemical name and trade name; what is the composition and content; what is the purity; what impurities are there; the production process; the form of existence of the product; packaging specifications; technical standards; uses; what the manufacturer's catalogue, COA and SDS/MSDS say. Then compare each characteristic with the classification rules, chapter annotations, groups and subgroups.
In other words, businesses need to go in the direction of actual goods → technical characteristics → classification rules → HS codes, instead of doing the opposite by pre-selecting a beneficial code and then finding data to protect that code.
A sample of goods can decide billions of dollars in taxes
In student disputes, the results of analysis and classification are often very important evidence. But businesses should not consider an analysis result sheet as an indisputable conclusion.
It is necessary to check from the beginning: which shipment the sample was taken from, which declaration it belonged to, who took it, how it was sealed and stored, whether the sample represented other shipments or not.
If the results of one sample are used as a basis for processing multiple declarations for a long time, the question of representation is even more noteworthy.
The test method must also be considered. What indicators were analyzed? Are the results sufficient to determine the legal characteristics necessary for the classification?
More importantly, it is necessary to distinguish two issues that are often entered into one: the results of scientific analysis and the conclusion of legal classification.
The testing laboratory can determine what substances the product contains and how much content. But from that data to the conclusion of which HS code the goods belong to, there is still a step to apply the law.
Businesses may therefore have to criticize on both levels: whether the scientific results are reliable, and even if the results are correct, whether the HS rules are applied correctly.
Businesses should go into the details of the declarations
An arrears of a few billion VND can easily make both businesses and consultants focus on the final number. In fact, the more effective way to do this is often to go back to each declaration.
The records of the aforementioned case also show that the numbers 157 and 129 declarations appear in different contexts; similarly, the records mention the amounts of VND 4,610,772,023 and VND 4,294,079,339. Such numbers should not be taken for granted as the same scope or the same meaning if the records do not clarify.
Enterprises should make a separate checklist for each declaration, at least including the date of registration, item, declared HS code, re-determined HS code, dutiable value, old and new tax rates, origin, C/O, import tax difference, VAT difference and basis for assessment. Then add it back to the total amount in the decision.
This approach can detect discrepancies that are not visible to the pure debate on HS codes: imposing the wrong tax rate, duplicating the declaration, wrong legal period, omitting C/O or applying the VAT policy at the wrong time.
The safety principle is that each declaration must be placed in accordance with the law in force at the time of registration of that declaration.
Proving the HS code is not the only path
Another important point is that businesses should separate the classification dispute from the dispute over the amount of tax to be paid. Assuming that the HS code determined by customs is ultimately correct, that does not automatically mean that the entire amount is also correct.
After re-determining the code, it is still necessary to answer other questions: what is the import tax rate applied at the time of registration of each declaration; whether the goods are eligible for special preferential tax rates; whether the C/O is still valid for the re-determined code; What is the VAT policy at that time?
In the above case, C/O Form E and ACFTA incentives are among the issues that need to be considered. This is an example that shows that HS code changes should not be mechanically interpreted as saying that all origin preferences automatically disappear.
VAT is also a very confusing issue.
Legally, "0% tax rate" and "not subject to VAT" are two different concepts. For items whose policies change over many stages, this difference can directly affect the arrears calculation.
The safety principle is that each declaration must be placed in accordance with the law in force at the time of registration of that declaration.
Is "Customs still allowed customs clearance in the past" enough?
This is probably one of the most common arguments when a business is subject to arrears after a post-clearance inspection or inspection.
This argument is valid, but it should not be considered an absolute shield. Enterprises need to collect the entire transaction history: previous declarations, results of classification analysis, classification notices, guidance documents of the customs office, specialized inspection records and especially documents showing that the customs authority used to know all the characteristics of the goods but still accepted the declaration method.
These documents can help demonstrate the consistency of transactions, the level of transparency, and the basis for the business to form its understanding.
However, the fact that the goods have been cleared does not mean that the customs office permanently loses the right to re-inspect or impose taxes if allowed by law.
Appropriate customs complaint procedures
Right from the first complaint, the enterprise should prepare a dossier with the quality of a litigation file. Arguments should be divided into four classes: the actual nature of the goods; the basis for classification of HS; tax policy and origin; and finally, the legality of the process of inspection, sampling, analysis, tax assessment and complaint settlement. Each argument should be associated with a specific evidence.
This approach also helps businesses realize early on what are their real strengths. There are cases where businesses are difficult to win in the story of classification but have significant problems in the tax calculation method. There is a case where HS codes are not a weakness of customs, but the procedure or scope is debatable.
In particular, it is necessary to determine exactly which administrative decisions or acts are being complained about or sued and what the enterprise wants the court to cancel. A very good technical record may still be at a disadvantage if the procedural request is not properly defined.
Businesses should also be aware that disputes with customs can be prolonged. Meanwhile, tax decisions can put pressure on cash flow and import activities before a final ruling is made. Therefore, the legal strategy must go hand in hand with the operational strategy.
Enterprises need to calculate in advance the possibility of having to pay, the risk of applying coercive measures, affecting the next shipments and the need to apply temporary emergency measures if they meet legal conditions.
A lawsuit won after a few years is not necessarily a good business outcome if the supply chain is disrupted during that time.
Businesses need to prepare early before importing goods
For items that are difficult to classify, have a large import value or are imported frequently, the cost of determining the HS code first is often much lower than the cost of a dispute later.
Enterprises should not only take the HS code written by the foreign supplier on the invoice and then use it for import dossiers in Vietnam. The HS system is international, but the classification must still be placed in the List of goods and regulations in force in Vietnam. For high-risk cases, the mechanism of pre-determining the code according to customs law is also a tool worth considering.
HS code disputes often start from a few numbers on the declaration, but the consequences can be billions of VND in taxes and years of complaints and litigation. Therefore, when being imposed on tax, businesses should not only focus on proving that "the code they declare is correct", but need to check the entire chain based on the actual characteristics of the goods, classification rules, HS codes, origin, tax rates to how to calculate the amount of tax arrears. The lessons from the case also show that in customs disputes, good technical documents are not enough and good legal arguments are not enough if the two parts do not meet. Enterprises have the most advantage when they can turn the characteristics of goods into evidence, turn evidence into a basis for classification and thereby verify each tax imposed by the customs office.
And perhaps this is the principle that businesses should remember: don't wait until you receive an arrears decision to start building an HS code protection profile. For goods with a high risk of classification, preventing a dispute from import is always less expensive than resolving it after customs clearance.
[1] https://congbobanan.toaan.gov.vn/3ta779414t1cvn/, accessed on 20/09/2026.
