Authorities have acted to quickly allay concerns over the “single licenced distributor” issue. The Ministry of Industry and Trade announced last week that it would soon amend Circular 09’s regulations on the import rights of foreign direct investment (FDI) enterprises, to meet Vietnam’s World Trade Organization commitments.
Importers do not want to be saddled with extra baggage
Circular09/2007/TT/ BTM (Circular 09), issued last July by the then Ministry of Trade, providing guidance for the implementation of Decree 23 regarding trading and distribution activities by FDI companies in Vietnam, has caused much frustration and concern for foreign-invested enterprises.
In the Vietnam Business Forum on December 4, 2007, many foreign law firms and foreign commerce chamber representatives said Circular 09 imposed new market access obstacles and, particularly in Article 3.1, restricted FDI companies to using only one single licenced distributor for each group of imported products in one chapter of the import tariff list.
The representatives said this restriction was inconsistent with the rights of foreign-invested enterprises to exercise their trading rights by selling imported products to “one or more licenced Vietnamese distributors”, as stated in Article 147 of the Working Party Report.
Vo Van Quyen, deputy director of the Ministry of Industry and Trade’s (MoIT) Domestic Market Department, last week said Article 3.1 of the Circular would be revised in the spirit of removing the limitations towards FDI enterprises’ import rights. “It means that foreign invested enterprises will be allowed to sell their imported products to several Vietnamese distributors,” Quyen told VIR. He also said that foreign enterprises could select Vietnamese distributors themselves and complete registration with the responsible authorities.
However, Quyen said the revised circular may include supplementary regulations and criteria, such as importers not being allowed to impose selling prices, partners or conditions on Vietnamese distributors or traders. He said these additional regulations would prevent importers from establishing or participating in camouflaged distribution systems. “Vietnam’s WTO commitments say that foreign investors cannot establish 100 per cent, foreign-owned distribution enterprises until January 1, 2009,” said Quyen.
He also noted that according to Vietnam’s current regulations, foreign investors’ import rights do not include the right to organise or participate in distribution systems. Foreign-invested enterprises lauded the MoIT’s move to remove limitations on their import rights. However, they said MoIT should give careful consideration to the making of supplementary regulations and criteria.
Trinh Kim Ngoc, P&G Vietnam’s director of external relations, said that if foreign importers were not allowed to impose selling prices, partners or conditions on their distributors, when they had supply problems, distributors would speculate on the increased prices, badly affecting consumers.
Some Vietnamese lawyers and local distributors said that there was little time before the Vietnamese distribution market opened up in nine months. As a result, in order to help domestic distributors in the upcoming fight against foreign competitors, when MoIT revises Circular 09, it should not pay too much attention to the prevention of camouflaged distribution systems, but rather spend more time and effort to specify criteria on the stablishment of a second retail outlet beyond the first. This would be a legal but effective way to screen qualified foreign distributors and prevent them from manipulating the domestic market.