New Decree on Trading Rights/Distribution Rights, and Trade-related Activities
Issued and effective on 15 January 2018, Decree No. 09/2018/ND-CP (Decree No. 09) superseded Decree No. 23/2007/ND-CP detailing the Commercial Law on international goods sale and purchase and related activities of foreign invested enterprises (Decree No. 23).
Decree No. 09 continues to maintain administrative burdens on foreign-invested enterprises when operating in the international trade in goods and trade-related activities, but does provide clarity on business license requirements, regulatory time frame and relevant authorities. There are a number of salient amendments as follows:
1. Expand the scope of Business License:
Decree No. 23 theoretically governs all activities set forth in Chapter IV, V, VI of the Commercial Law such as goods leasing, trade promotion, trade intermediation, etc. However, Decree No. 23 does not provide any details or administrative procedure to implement this regulation.
This has led to the rejection of investment applications for such services due to ambiguity of applicable laws and regulations. Decree No. 09 now clearly requires the application for Business License for the following business activities:
- Retail Distribution;
- Import and Wholesale Distribution with respect to lubricants;
- Logistics services, except those as committed in applicable international treaties;
- Goods leasing (financial leasing not included), except leasing of construction equipment with operators;
- Trade promotion services, except advertising services;
- Trade intermediation services;
- E-commerce services; and
- Bidding organizing services for goods/services.
The above regulations introduce administrative burdens for investors engaging in trade promotion services, trade intermediation services and ecommerce services, when such services are now subject to a Business License. For example, e-commerce platforms previously were not required to obtain sub-permits, other than the Investment Registration Certificate (IRC) and Enterprise Registration Certificate (ERC) and were not required to register their website with the MOIT. However, under Decree No. 09 enterprises hosting an e-commerce platform must obtain a Business License.
2. Import, Export, and Wholesale Distribution Activities no longer subject to a Business License
In comparison with Decree No. 23, Decree 09 introduces a significant improvement as traders are now allowed to import and wholesale distribute the goods and products without obtaining the separate Business License, provided that these goods and products are not in the list of products/goods prohibited from being imported and distributed in Vietnam. The exception of this regulation is importation and wholesale distribution of lubricant products, which will be granted with right to import/wholesale on a case by case basis and will be subject to a Business License.
Additionally, for the right to export, foreign invested enterprises are not required to apply for a Business License. Instead, foreign invested enterprises only need to amend their IRC and ERC.
3. Officially transfer the authority to Department of Industry and Trade (DOIT)
It is clear now that the provincial DOITs are now the authorities in charge of issuing, amending and revoking Business Licenses and Store Establishment Licenses, instead of the Department of Planning and Investment. The DOITs will also be responsible for obtaining the opinions of the Ministry of Industry and Trade ("MOIT") and relevant authorities for each application dossier.
4. Expand the list of goods to be distributed in Vietnam by foreign invested enterprises
Under its WTO commitments, Vietnam does not need to grant distribution rights to certain commodities to foreign invested enterprises. Under Decree No. 09, the Vietnamese government allows the granting of distribution rights of such commodities to certain foreign invested enterprises. Particularly, for lubricants, import rights and wholesale distribution rights, subject to appraisal, may be granted to foreign-invested enterprises who conduct manufacturing of lubricants in Vietnam, or manufacture/distribute machines/equipment which require the use of specialized lubricants.
Rice, sugar, media recordings, books, newspapers/magazines, foreign supermarkets, and convenience stores may receive retail distribution right, subject to appraisal.
5. Economic Need Test (ENT) is still highly regulated, albeit with clearer timeframe
Although the first retail store is not subject to ENT, under the Decree No. 09, the first retail store must be granted a separate Store Establishment License.
ENT still applies to the second retail outlet onwards. Further, Decree No. 09 expands the scope of retail outlets subject to ENT by stating that ENT is only exempted if a proposed retail outlet is less than 500 m² and located in a trading center, and is not mini-supermarket or convenience store. While the first 2 conditions are the similar to those in Decree No. 23 and its implementation guidance, the last condition is newly introduced in Decree No. 09, and will increase targeted regulation on many retail supply chains.
Furthermore, the provincial people's committees are empowered to administer the ENT via an ENT Committee.
Decree No. 09 also provides a detailed timeline for conducting ENT, specifically, within 07 working days from the dated of receipt of request for establishment the of ENT, the provincial people's committees must set up the ENT Council. The ENT Council must issue the ENT outcome within 30 days from the date of establishment of ENT Council. Within 03 working days from the date of receipt of the ENT outcome, the DOIT will submit the application together with the ENT outcome to the MOIT.
Within 10 working days from the date of receipt of the application dossier, MOIT will have to issue their opinion (approval/refusal) on the application. The Store Establishment License will be granted within 03 working days from the date of receipt of the opinion of the MOIT.