VietNamNet Bridge – Ministry of Industry and Trade’s Planning Department head Nguyen Sy Chung argues that foreign-invested enterprises (FIEs) will be in a better position thanks to the ministry’s new Circular 08/2013/TT-BCT detailing the trading of goods and directly related FIEs activities in Vietnam.

Could you elaborate on FIEs’ fresh right to export under Circular 08?

In light of Circular 08 which came into force from June 7, FIEs licenced to operate exportation in Vietnam can buy goods in Vietnam for exports. The goods cover the items they have imported or the items other companies have imported and fulfilled their financial obligations.

Does this mean FIEs will enjoy extended right towards items they have imported into Vietnam when altering business plans?

Yes. After more than five years of Circular 09/2007/TT-BTM coming into force, it shows that FIEs’ right to export, import and distribute has failed to cover actual business practice of foreign investors engaged in the purchase and sale of goods in Vietnam.

For instance, relevant to the right to export pursuant to regulations in Circular 09, FIEs could not export items of import origin. Thereby, to export these items FIEs needed to export via domestic companies. The regulation restricted FIEs’ export right and drove up firms’ costs, particularly those pursuing global value chain model as it gave birth to multiple complex procedures they must follow and squander them time and money.

Now FIEs will have the initiative in their business plans with Circular 08. Of course, these export items will face regulated financial obligations and businesses may incur export duty when exporting these items.

What about the right to business transactions of FIEs located in export processing zones (EPZs), since current trading regulations between FIEs located inside and outside EPZs are opaque?

Circular 08 has underscored that all legitimate FIEs based in EPZs have the right to perform goods trading and directly related activities as other FIEs operating in Vietnam.

However, the circular also confirmed the purchase and sales of goods and directly related activities performed by FIEs in EPZs shall not enjoy investment and tax incentives and other financial incentives as applied to operations of EPZs-based FIEs.

Are there new points in Circular 08 relevant to procedures on setup of retail outlets of FIEs?

There have been clearer regulations relevant to the setup of retail outlets outside the first one by FIEs to come on par with state management requirements in this field.

However, to match market development needs and international practice, Circular 08’s regulations are more open compared to Circular 09. Accordingly, the retail outlets less than 500 square metres belonging to areas planned for shopping activities by centrally governed provinces and cities and featuring well-built infrastructure do not need to conduct Economic Needs Test requirements.

Circular 08 is meaningful since it not only contributes to perfecting the legal system regulating goods trading of FIEs, but it also will help ameliorate the investment climate in services and trading sectors particularly and foreign investment environment generally in Vietnam.

Source: VIR