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Vietnam: Foreign investment in services

Transport services, including logistics services, have been opened by Vietnam under its 2007 Specific Commitments in Services to the World Trade Organisations (WTO commitments)

Huong Thi Thanh Nguyen

Transport services, including logistics services, have been opened by Vietnam under its 2007 Specific Commitments in Services to the World Trade Organisations (WTO commitments). Following its accession to the WTO commitments, the government of Vietnam introduced Decree 140/2007/ND-CP (Decree 140). This sets out specific conditions and guidance on logistics services. Unfortunately, the provisions of this decree are inconsistent with Vietnam's WTO commitments.

In particular, under the WTO commitments, freight transport agency services (CPC 748), which include freight forwarding services, were fully opened to foreign investors seven years after the country's accession to the WTO. As such, a wholly foreign-invested company was permissible from January 11 2014. Nevertheless, under Decree 140, a joint venture must be entered into with a Vietnamese partner to conduct the same business, even after the seven-year period. Similarly, while the WTO commitments require foreign investors to conduct other services auxiliary to all modes of transport (part of CPC 749) in the form of a joint venture with a Vietnamese partner, Decree 140 allows wholly foreign-invested companies to conduct services auxiliary to transport. Further, the classification of transport services and auxiliary services under Decree 140 is incompatible with those under the CPC system. These inconsistencies have confused both investors and licensing authorities.

Last year, Vietnam's government and its ministries started to address the issue. The Ministry of Industry and Trade issued an internal guidance to licensing authorities on September 24 2015. It confirmed that the WTO commitments prevail over the decree and can be applied directly. Therefore, it would be prudent for foreign investors to use the WTO commitments as the basis when considering transport auxiliary services in Vietnam, rather than looking at the current domestic sectorial regulations. CPC 748 includes: freight brokerage services; freight forwarding services (primarily transport organisation or arrangement services on behalf of the shipper or consignee); ship and aircraft space brokerage services; and freight consolidation and break-bulk services.

Foreign investors should be aware that certain services under CPC 749 have not been committed by Vietnam, including packing and crating and unpacking and de-crating services. Therefore, licensing for those services will be at the sole discretion of Vietnam's competent authorities. CPC 749 includes: freight brokerage services; bill auditing and freight rate information services; transportation document preparation services; packing and crating and unpacking and de-crating services; freight inspection, weighing and sampling services; and freight receiving and acceptance services (including local pick-up and delivery).

Huong Thi Thanh Nguyen

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