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:

One cannot differentiate wholesale and retail by relying on the legal capacity of purchasers (i.e. being an individual or an organization) because an organization could be the customer of either wholesale or retail sellers;
It is ambiguous what could constitute “consumption” as there is no criteria under the law to define “consumption”. Under the Law on Consumer Protection, “consumer” means the purchaser of goods, services for consumption and living purposes of individuals, households, organizations; and
It is almost impossible for the seller to determine whether customers will use the purchased goods for consumption purposes or not.

The MOIT has recently rendered some guidelines that to some extent could help enterprises in identifying wholesale or retail activities. For example, in its Official Correspondence 6219 dated 7 August 2018 (OC 6219), the MOIT opines that “organizations may purchase goods for consumption purposes” and “the sale of goods to organizations for consumption purposes of such organizations (for example, an enterprise purchases food, beverages, stationary, etc. for regular use of its employees) but not for direct use in manufacturing process or supply of service according its investment objectives or registered business lines, is considered retail activity”. However, also under this OC 6219, “the sale of goods to other traders, organizations not being wholesalers or retailers or not for consumption purposes should be wholesale activities (i.e., enterprises or cooperatives purchasing goods for direct use in manufacturing or service supplying activities according to its investment activities, registered business lines. For example, cooperatives having registered the business of manufacturing garments purchases sewing machines, fabric, materials to produce garments for sale)”, according to MOIT’s opinion.

Although the MOIT’s guideline still does not clarify the definitions of wholesale/retail under Decree 9/2018 and technically is not a legal instrument, it could be understood that:

If an enterprise purchases goods as materials for manufacturing then this should be considered as wholesale activity; and
If an enterprise purchases goods to personal use without inputting those goods into any product-making process, then this should be considered as retail activity.

This post is contributed by Nguyen Bich Ngoc, an associate at Venture North Law.

Vietnam Business Law