Recent changes in the Investment Law classify certain automobile businesses as conditional business lines. As a result, the Government has just issued Decree No. 116/2017/ND-CP (the Decree) to specify the regulatory conditions and licenses for automobile manufacturing, assembling, importing, maintenance and warranty businesses. The Decree takes effect immediately, but also provides some grace periods for compliance.

Please find below the key regulations of the Decree:

1. Automobile Manufacturing and Assembling Business

The Decree presents business conditions with respect to automobile manufacturers and assemblers in Vietnam, including the requirements on, among others, facilities, human resources, labor safety and hygiene, fire safety, and environmental protection.

To carry out an automobile manufacturing and assembling business, a company must obtain a certificate from the Ministry of Industry and Trade (the MOIT), which confirms its compliance with the conditions above. The existing automobile manufacturers and assemblers will have a grace period of 18 months from 17 October 2017 to comply with the new business conditions under the Decree.

Automobile manufacturers and assemblers will also need to report to the MOIT regarding production on an annual basis. The MOIT will also conduct inspections on the licensed manufacturers and assemblers, either periodically (at least once per 24 months) or occasionally (e.g., when there is a claim against the company's compliance with the business conditions).

2. Automobile Importation Business

Automobile importers are required to obtain an Automobile Importing Business License from the MOIT. For that purpose, the importers must engage appropriate warranty and maintenance shop(s) and be authorized by the relevant offshore manufacturer/assembler to conduct recalls in Vietnam.

Unlike Circular No. 20/2011/TT-BCT, the Decree does not require importers to prove that they are appointed importers or distributors of the offshore manufacturers. Nevertheless, they can continue importing automobiles in accordance with this Circular until the end of this year.

Notably, the provisions on quality inspection with respect to imported vehicles under this Decree are much stricter than the current regulations. For example, importers are required to provide the type approval certificate by a competent offshore agency for the automobiles; and the quality inspection will be conducted on every batch of newly imported vehicles.

3. Warranty and Maintenance Services for Automobiles

Manufacturers, assemblers, and importers are required to warrant new automobiles for at least three years or 100,000 kilometers (for car), two years or 50,000 kilometers (for coach), or one year or 30,000 kilometers (for other automobiles), whichever comes first.

Under the Decree, the warranty and maintenance shop can be owned by the manufacturer/assembler/importer, be part of an authorized service station network or be leased from a third party. The Decree also presents conditions for enterprises which provide warranty and maintenance services and requires them to obtain a certificate from the Vietnam Register. Notably, these enterprises must comply with the national standard TCVN 11794:2017 and have agreements with the manufacturers or assemblers regarding technical assistance and part supply.

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