Vietnam expands import ban on used IT products

The Ministry of Information & Communication (“MIC”) recently issued Circular No. 43/2008/TT-BTTTT, prohibiting the import of certain second-hand information technology products (“Circular No. 43”). This Circular took effect 15 February 2010, replacing Decision No. 20/2006/QD-BBCVT and Decision No. 11/2007/QD-BBCVT on the same issue.

1. Additional Products Subject to Prohibitions

The main difference between Circular No. 43 and the legal rules it replaces is that, in addition to certain products already banned, the new Circular adds second-hand printing machinery, copying machines, and facsimile machines to the list of products prohibited for import.

An official from the MIC announced that the Circular is intended to (a) prevent industrial waste from entering Vietnam, (b) protect consumers’ rights, and (c) stimulate sales of domestic technological products.

Circular No. 43 applies to traders licensed to operate in Vietnam, and other individuals and organizations with trade related operations who participate in importing second-hand information technology (“IT”) products.

The Circular exempts second-hand IT products from the prohibition if they are:

i. imported for warranty, maintenance, repair, renovation or reproduction and then re-export;

ii. imported in order to form direct manufacturing tools or use as samples to support designing work or R&D in the form of purchasing, leasing, financial leasing, and borrowing;

iii. re-imported after overseas warranty, maintenance, or repair and renovation; or

iv. imported in the form of transfer of materials within the same corporation.

The Circular also exempts the following types of second-hand IT products from the prohibition:

i. specialized IT products (i.e., IT products which are used to form means for manufacturing, controlling, operating, exploiting, or inspecting the operation of manufacturing systems, or for assembly in specific industries); and

ii. IT products which have been renovated or reproduced in order to support specific manufacturing projects, or the implementation of which has promoted socioeconomic development or national defense.

We summarize in Annex 1 below a brief list of prohibited products at 4 digit Harmonized System (HS) classification level. The list of products under Circular No. 43 contains classification codes at the 4, 6, 8, and 10 digit level. However, please note that the prohibition only applies to those specific goods classified at the detailed 10 digit level.

2. Possible World Trade Organization (“WTO”) and U.S.– Vietnam Bilateral Trade Agreement (“BTA”) Concerns

Circular No. 43 has raised concerns regarding Vietnam’s World Trade Organization “(“WTO”) and U.S. – Vietnam Bilateral Trade Agreement (“BTA”) commitments. Under these commitments, Vietnam agreed to limit its use of import bans, subject to agreed exceptions, one of which is an allowed prohibition on the importation of second-hand consumer goods. Circular No. 43 would prohibit companies from importing second-hand IT products (such as certain office equipment) for day-to-day use in their business operations.

If local authorities were to interpret the exemption for transfer of materials within the same corporation strictly to exclude affiliated entities or to exclude resale to other business entities, this may run afoul of the corresponding WTO and BTA commitments under which Vietnam may only ban the importation of second-hand electronic goods that are intended for personal consumption (as opposed to business usage or resale to other businesses). Applied in such a manner, the Circular could be considered as non-compliant with these commitments.

Annex 1 – General Categories of Prohibited Goods

(for reference only at the 4 digit HS codes; specific products banned are detailed only at the HS 10 digit level, so not all products in the 4 digit categories below are prohibited)

(i) 8443: Printing machinery, copying machines, and facsimile machines;

(ii) 8469: Typewriters other than printers of heading 84.43; wordprocessing machines;

(iii) 8470: Calculating machines, recoding devices, ticket issuing machines, cash registers, etc;

(iv) 8471: Automatic data processing machines, magnetic or optical readers, etc;

(v) 8517: Telephone sets, other apparatus for the transmission or reception of voice, images or other data other than transmission or reception apparatus of heading 84.43, 85.25, 85.27 or 85.28;

(vi) 8525: Transmission apparatus for radio –broadcasting or television, television cameras, digital cameras and video camera recorders;

(vii) 8528: Monitors and projectors, etc.; and

(viii) 8544: Wires, cables, etc.