Complete guide to the production-for-export (SXXK) regime

1. What production-for-export (SXXK) is and when to use it

Production for export (SXXK) means the enterprise buys imported raw materials (code E31), manufactures, and sells the products abroad itself (code E62). Unlike processing (gia công), the enterprise owns the materials and products, carries the market risk and keeps the margin.

It suits companies that:

• Run a factory in Vietnam and export most of their output (e.g. imported plates and sections → fabricated steel structures, HS 7308, for export).
• Want no import duty at the time of import (instead of paying under A12 and claiming a refund).
• Have warehouse, production and consumption-norm records good enough to reconcile inputs, outputs and stock every year.

Think twice when most output is sold domestically, when norms are hard to establish, or when stock is not tracked by material code.

2. Legal basis (as of October 2026)

• Customs Law 54/2014/QH13 – customs procedures, inspection and supervision.
• Law on Export and Import Duties 107/2016/QH13 – Art. 16(7): import duty exemption for materials, supplies and components imported to produce exported goods; Art. 19: refunds.
• Decree 134/2016/ND-CP as amended by Decree 18/2021/ND-CP (effective 25 Apr 2021) – conditions and files for the exemption (Art. 12), exemption procedure (Art. 31).
• Decree 08/2015/ND-CP as amended by Decree 59/2018/ND-CP and Decree 167/2025/ND-CP – customs procedures, production-facility notification.
• Circular 38/2015/TT-BTC as amended by Circular 39/2018/TT-BTC and Circular 121/2025/TT-BTC (issued 18 Dec 2025, effective 1 Feb 2026) – production-facility notice (Art. 56), norms, scrap and rejects (Art. 55), settlement report (Art. 60), destruction (Art. 64).
• VAT Law 48/2024/QH15 (effective 1 Jul 2025) – Art. 5(20): materials imported to produce or process exports under contracts with foreign parties are outside VAT.
• Decision 1357/QD-TCHQ (18 May 2021) – procedure codes E31, E62, A42…
• Decree 128/2020/ND-CP – administrative penalties in customs.

Customs was reorganised from March 2025 (Customs Department under the Ministry of Finance; regional customs sub-departments). Always check the latest consolidated texts.

3. Conditions for the import duty exemption

Under Art. 12 of Decree 134/2016 (as amended by Decree 18/2021) the taxpayer must:

1. Have a production facility in Vietnam and own or have the right to use the machinery and equipment there, consistent with the imported materials.
2. Have notified the production facility to customs.
3. If materials are handed to another entity for (sub)processing: that entity must be more than 50% owned by the taxpayer, own or have the right to use the facility, and the subcontract must be notified to customs.

The exempt amount is based on the materials actually used for products that were exported – reconciled in the settlement report.

4. Step-by-step procedure

Step 1 – Notify the production facility

• File the facility details through the customs system (Form 20, Appendix II, Circular 121/2025) with the regional customs office of the facility before the first E31 import.
• Details: factory and warehouse addresses and areas; machinery (owned/leased); capacity; workforce; products.
• Notify any change. Customs may inspect the facility (first-time SXXK, risk signals…); a facility already inspected and confirmed is not re-inspected unless the law requires.

Step 2 – Import materials (E31)

• Declare under E31; keep material codes consistent with the warehouse system (internal code ↔ HS code).
• No import duty; outside import VAT. Product-specific controls (quality inspection, licences…) still apply; anti-dumping/safeguard duties follow their own rules.
• On-site imports (buying from an EPE, processed goods delivered in Vietnam) are also declared under E31.

Step 3 – Production and consumption norms

• The enterprise sets and keeps its own consumption norms (including losses, scrap and rejects) and presents them when customs inspects.
• Track each material from receipt → issue to production → finished goods; production records must trace back to the declarations.
• Circular 121/2025 defines scrap (material removed in production and recovered for other production), rejects (finished/semi-finished goods failing technical standards, discarded, not exportable and no longer fit for their purpose) and waste (per environmental law).

Step 4 – Export the products (E62)

• Declare under E62 (abroad, to non-tariff zones, or on-site export as directed by the foreign buyer).
• Keep product codes consistent with the settlement report; keep payment and transport documents.

Step 5 – Annual settlement report

• Period: fiscal year. Deadline: no later than the 90th day after the fiscal year end (or before a merger, split, dissolution…).
• Submit through the system the indicators of Forms 25, 26, 27 of Appendix II, Circular 121/2025 (materials in–out–stock, finished goods in–out–stock, actual norms). If the system fails: paper Forms 15/BCQT-NVL/GSQL, 15a/BCQTSP-GSQL, 16/DMTT-GSQL (Appendix V).
• Optionally connect the production-management system for continuous data exchange (Form 30, Appendix II) – opening stock must be agreed before the first exchange.
• Where: the regional customs office where the facility was notified (several offices: choose one). Corrections are allowed within 60 days of submission and before an inspection decision.
• Fiscal years ending before 1 Feb 2026 still follow Circular 38/2015 as amended by Circular 39/2018.

Step 6 – Surplus materials, scrap, rejects, products not exported

• Domestic sale / use of surplus materials or products: declare a change of use (A42) and pay the duties due.
• Re-export of materials or products: follow export procedures (no change-of-use declaration).
• Destruction: the enterprise is responsible for the whole process; a licensed collector carries goods to the site; customs directly supervises destruction of materials, semi-finished and finished goods, rejects and machinery, and supervises scrap on a risk basis (Art. 64).
• Sales of scrap/rejects: declare and pay tax with the domestic tax authority as guided by the Customs Department; keep minutes and invoices.

Step 7 – Settlement inspection and post-clearance audit

• Customs reviews the settlement report, material use and stock at the company on a risk basis; unexplained stock differences lead to assessed duty and possible penalties under Decree 128/2020.

5. Records to keep (at least 5 years)

• Purchase contracts, invoices and payment records for materials; E31 declarations.
• Export contracts, commercial invoices, bills of lading, payment records; E62 declarations.
• Consumption norms (and their revision history), drawings / bills of materials.
• Stock records: material receipts and issues, production orders, finished-goods receipts, stock-count minutes.
• Scrap and reject files: classification minutes, sales invoices, destruction minutes.
• Facility notification, factory/machinery lease contracts, submitted settlement reports.

6. SXXK compared with other regimes

7. Notes for steel and fabricated steel structures

• Norms: fabricated structures have nesting, drilling and bevelling losses; build norms per drawing/item and keep nesting results as evidence.
• Steel scrap (offcuts, remnants) is usually sold locally: classify scrap vs rejects correctly, keep minutes, declare and pay tax as guided.
• Consumables (electrodes, wire, paint, bolts) can be imported under E31 when incorporated or consumed directly in exported products and covered by the norms.
• Origin: HS 7308 exports under FTAs must meet each agreement's rules of origin; the United States applies Section 232 duties to steel and steel products – keep melt-and-pour documents of the steel. See Global Markets → United States.
• Trade remedies: check whether imported inputs are subject to anti-dumping duties (e.g. certain coated or cold-rolled steel) – see Trade remedies.

8. Common risks and how to avoid them

• Differences between physical stock, books and the settlement report → reconcile every quarter, not only at year end.
• Material codes on declarations not matching warehouse codes → keep a master code list and lock codes at declaration.
• Norms that do not reflect reality (inflated to leave "surplus") → update norms when designs change and keep the history.
• Selling surplus materials or scrap locally without an A42 declaration / tax filing → assessed duty and penalties.
• Not notifying facility changes (new warehouse, moved workshop, subcontracting) → possible loss of exemption for related shipments.
• Filing the settlement report after the 90-day deadline → administrative penalty.

9. FAQ

• Is there a deadline to export the products? The former 275-day limit no longer exists (since 2016); material use is reconciled through the annual settlement report.
• Imported under A12 and later exported? Yes; an import duty refund can be claimed under the refund conditions (Art. 19 of the 2016 Law, Decree 134/2016 as amended).
• Can one E31 declaration feed several products? Yes – the allocation is shown through norms and the settlement report.
• Can another company do one process step? Yes, if the sub-processing conditions are met and the contract is notified to customs.
• Selling SXXK products locally? Declare a change of use (A42) and pay the import duty and VAT of the incorporated materials as required.