Processing activities by an foreign invested enterprises (FIE) in Vietnam

It is not clear under Vietnamese law if an FIE needs to obtain a Trading Licence (Giấy phép kinh doanh) to provide commercial processing services (gia công thương mại) to other companies. Under Decree 23/2007 on goods purchase and sale activities and other related activities of FIEs, commercial processing is regarded as an activity relating to sale and purchase of goods. Accordingly, technically, if an FIE wishes to involve in commercial processing, such FIE should obtain a Trading Licence.

On the other hand, after Decree 23/2007, Ministry of Trade issued Circular 4/2007 under which, an FIE can process goods if (i) the processing activity is consistent with the objectives set out in the Investment Certificate of this FIE; (ii) the processed goods are not banned or suspended from import and export or if the processed goods are subject to import and export licence, the FIE can enter into the processing contract only when the import and export licence is obtained; and (iii) FIE has completed its capital construction investment and has commenced production and business activities. It appears that a Trading Licence is not required under Circular 4/2007.

Two regulations regarding processing activities of an FIE may cause certain confusion. Although Decree 23/2007 is a higher legislation, in practice, it appears that Circular 4/2007 still applies and FIEs do not obtain Trading Licence for their processing activities.

This post is contributed by Le Minh Thuy, a trainee lawyer at Venture North Law.

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Draft Decree on logistics services replacing Decree 140/2007 in Vietnam

A draft Decree on logistics services in Vietnam (Draft Logistics Decree) has been circulated by the Ministry of Industry and Trade (MOIT) recently. The Draft Logistics Decree, which appears to be a near final draft, will replace Decree 140/2007 on the same topic. The salient points of the Draft Logistics Decree include:

The Draft Logistics Decree classifies logistics services in accordance with Vietnam’s commitment to the WTO. On the other hand, Decree 140/2007 has its own classification of logistics services which are not consistent with the description of logistics services under the WTO Commitments. So it is not easier to compare the Draft Logistics Decree with the WTO Commitments;
The Draft Logistics Decree does not include certain logistics services which were provided in Decree 140/2007 (see the table below). Accordingly, it is not clear of these services are permitted or not permitted under the Draft Logistics Decree;

List of State monopoly goods and services in Vietnam

Decree 94/2017 of the Government provides a list of goods and services, which are subject to State monopoly. In other words, enterprises from private sectors including foreign-invested enterprises are not allowed to provide these goods and services in Vietnam unless they are appointed by the State authority to do so.

Under Decree 94/2017, the State will contemplate a goods or service to be State monopoly services only when there are no other investors who are interested in and capable to provide such goods and services. The list of State monopoly goods and services includes, among other things:

Investment Registration Certificates for Establishing a Branch of a Foreign Entity in Vietnam

Technically, except for branches in the banking, insurance, securities and oil and gas sectors, the Investment Law 2014 will apply to the establishment of a branch in Vietnam by a foreign entity. This is because:

under the Commercial Law 2005, a foreign business entity’s branch, a part of a foreign business entity in Vietnam, is established in Vietnam and conducts commercial activities in accordance with Vietnamese laws;
a Vietnamese branch of a foreign business is a form of economic entity as defined in Investment Law 2014; and
the investment procedures under Investment Law 2014 will apply to the establishment of economic entities in all sectors, excluding securities, credit institution, insurance business, and petroleum laws.

Vietnam Business Law