Licensing requirements for export, import rights of Foreign Invested Enterprises (FIEs) having distribution rights in Vietnam

In a recent post, we have discussed the concept of “wholesale” and “retail” as two forms of activities under the regulations concerning trading activities by FIEs in Vietnam. From the commercial perspective, “distribution” (phân phối) activities should involve the purchase or import of goods from suppliers for selling to customers. Thus, if an FIE has registered distribution business (i.e., wholesale or retail), it should naturally be able to import goods to sell within its distribution rights without being subject to further licensing requirements. However, this may not be justified from the legal perspective as the purchase of goods to sell in Vietnam or abroad by an FIE is classified as other forms of trading and should be licensed before implemented. Under Vietnamese regulations,

Wholesale/retail concepts under the commercial law of Vietnam

Decree 9/2018 introduces a new approach regarding trading activities of foreign invested enterprises (FIE) in Vietnam. In particular, wholesale of most goods is not subject to the requirement of Trading License (Giấy Phép Kinh Doanh). However, Decree 9/2018 is still uncertain on the category of wholesale versus retail activities. A clearer definition of these concepts is important because an FIE conducting retail activities must apply for a Trading License with the Ministry of Industry and Trade (MOIT).

Under Decree 9/2018,

“wholesale” means the activities of selling goods to (a) wholesalers, (b) retailers, and (c) other traders, organizations; exclusive of retail activities;
“retail” means the activities of selling goods to (a) individuals, (b) households, and (c) other organizations for consumption purposes.

There are some issues arising from the above definitions under Decree 9/2018:

Vietnamese regulator’s imposing prohibition on cryptocurrency activities

Under a recent announcement in Official Letter No. 4486/UBCK-GSDC dated 20 July 2018, the State Securities Commission of Vietnam (SSC) requires public companies, securities companies, asset management companies, and securities investment funds (quỹ đầu tư chứng khoán) (i) not to conduct any illegal offering, transaction or transaction brokerage relating to virtual money (tiền ảo) which should include cryptocurrencies like Bitcoin and to (ii) adhere to the legal regulations on anti-money laundering.

The above official letter was based on Directive 10/CT-TTg of the Prime Minister dated 11 April 2018. Both of them once again confirm the view of Vietnamese government on virtual money that was stated by the State Bank of Vietnam in its press release dated 27 February 2014 about Bitcoin in Vietnam:

(a) virtual money is not currency; and

(b) virtual money is not a legal tender.

New Decree (Decree 81/2018) on trade promotion in Vietnam

On 22 May 2018, the Government issued Decree 81/2018 on trade promotion activities. Decree 81/2018 will take effect from 15 July 2018 and replace Decree 37/2006. Decree 81/2018 introduces new regulations relating to promotion activities. In particular,

Traders must not promote their products by directly comparing with products of other traders for any purpose. Previously, promotion by comparison among products is only prohibited if the promotion is for purpose of unfair competition. However, such purpose is abolished in Decree 81/2018 so the restriction in comparative promotion is stricter;
There is a new maximum rate for promotion activities in mass/concentrated promotion programs (chương trình khuyến mại tập trung). In case of mass promotion programs, the maximum value of goods and services used for promotion and maximum discount rate for promoted goods and services can be 100% of the value of such promoted goods and services. Previously, the maximum rate of the value of goods and services used for promotion and the maximum discount rate in all circumstances can be 50%;
Money can be used as goods, services for promotion except the case of giving the samples free of charges to customers, giving goods as gifts or selling goods or providing services at prices lower than previous price;
Total duration of promotion by discount for a certain goods or services does not exceed 120 days in a year and does not include promotion sale in mass promotion programs and promotion activities approved by the Prime Minister. In Circular 37/2006, duration of promotion by discount cannot exceed 90 days per year and 45 days for one promotion program;
Regarding promotion by games of chance, Decree 81/2018 has provided specific conditions of evidence to determine the prize winners such as this evidence being in material form (ticket, electronic information, etc.) and being different to the lottery exclusively issued by the State. There is no limitation of duration of promotion in the form of games of chance under Decree 81/2018. Time limit and procedure for submitting 50% of prize value to state budget in case of no prize winners is detailed under Decree 81/2018;
Article 15.2 of Decree 81/2018 specifies obligation of traders providing e-commerce trading platform and online promotion website. Particularly, among others, they must request traders in the platform to provide information of promotion, be responsible as the third party in provision of promotion information for consumers;
In case of sale of goods/ service with promotion by contest forms and games of chance, the prize must be announced within 45 days from the end date of promotion duration, instead of 30 days as provided under Decree 37/2006; and
Informing of promotion programs (except promotion by games of chance) to competent authority is not required if total value of prize and gifts is under VND 100 million, or promotion is on e-commerce trading platform and online promotion website. This provision could potentially reduce much paperwork for small businesses with small scale promotion campaigns.

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

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Vietnam Business Law