By Kevin Hawkins and Nguyen Thi Phuong Nga
Ho Chi Minh City, March 2017

logistics

Upon accession to the World Trade Organization (WTO), Vietnam opened market access to various services including logistics services. In this regard, the Government issued Decree 140/2007/ND-CP (Decree 140) as an effort to incorporate WTO commitments into domestic law. However, Decree 140 revealed certain problems in practice during its decade of implementation. One of those problems is that classification of the logistic services under Decree 140 does not match with classifications in the WTO commitments. In addition, Decree 140’s wording is unclear, which has in turn created room for different interpretations by various implementing authorities.

In an effort to resolve the issues under Decree 140, the Ministry of Industry and Trade is seeking public opinion on a draft decree replacing Decree 140 (Draft Decree). According to the Prime Minister’s logistics action plan under Decision No. 200/QD-TTg dated 14 February 2017, this Draft Decree is expected to be issued within the next few months.

The Draft Decree addresses significant problems that remain unresolved under Decree 140. In particular, the Draft Decree provides classification of logistics services which is consistent with the WTO commitments, for example, maritime freight transport services (CPC 7212), container handling services (CPC 7411) and freight brokerage services (CPC 749).

In addition, the Draft Decree also resolves the issue of different interpretations because it clearly provides the form of commercial presence of foreign investors consistent with Vietnam’s WTO commitments. This will enable foreign investors to increase their percentage ownership in many sectors or even obtain 100% foreign ownership in some logistic services previously restricted or otherwise vague under Decree 140.

To achieve that end, in some logistic services, a foreign investor will be able to (i) set up a 100% foreign owned company with business lines like international maritime freight transport services or container station and depot services; and/or (ii) acquire more shares from domestic investors in an existing joint venture. This procedure will require issuance by a licensing authority of a new or amended enterprise registration certificate and/or investment registration. Please contact us if you are interested in finding out more how these changes in law can benefit your investment in the logistics sector.

Vilaf