The Vietnamese government is seeking public comment on the a decree governing conditions for transport businesses. This feedback will be used to resolve difficulties arising from the current rules governing enterprises that have 49 per cent foreign ownership or higher. Lawyer Oliver Massmann shared his view on this issue.

Requirements to apply for badges

On September 10, 2014, the government issued Decree No. 86/2014/ND-CP setting out conditions for transportation business (Decree 86) which produce automobiles with a designed capacity of 10 tonnes and above, and for 7-10 tonne vehicles that require badges.

On November 7, 2014, the Ministry of Transportation  (MoT) issued Circular No.63/2014/TT-BGTVT guiding Decree 86 (Circular 63), which states that only enterprises with a certificate for conducting a transport business via automotive vehicles can apply for such badges.

Conditions for conducting a transport business and dilemmas when applying for badges

According to Vietnam’s World Trade Organization (WTO) Schedule of Specific Commitments in Services, foreign contributions in a joint venture operating transportation services must not exceed 49 per cent of the total charter capital of the said joint venture.

As such, enterprises with more than 51 per cent foreign ownership do not include transportation business in their investment certificates, thus making it impossible for them to obtain a certificate for conducting a transport business via automotive vehicles.

This means that such enterprises cannot apply for the necessary badges.

Moreover, Decree 86 creates the concept of a “transport business with indirect money collection”, which is defined as a “transport business operated by automotive vehicles, in which the transport business units perform the transport phase and perform another phase in the process from production to consumption of products or services, which collects freight through revenues from such products or services” (Article 3.3).

Circular 63 also requires trucks used by companies that carry out a transport business with indirect money collection to affix the requisite badges when in traffic.

It is ironic that transport enterprises, considering the nature of their business, have to invest in specialised means of transportation to move their own products between their location and their customers’ in Vietnam (for example, industrial gas products).

Some examples would be road tankers, special trailers, and tube trailers, which must be imported because their special designs are not produced in Vietnam.

Given the high technical safety standards at an international level, it is almost impossible for enterprises to rent these special vehicles in Vietnam.

Meanwhile, enterprises must maintain their operation and are contractually obliged to deliver their goods to customers.

However, according to Decree 86, from January 1, 2016, automotive means of goods transported with a designed capacity of 10 tonnes must bear specific badges.

Meanwhile, only enterprises having the certificate for conducting a transport business via automotive vehicles can apply for such badges.

It is also contrary to Vietnam’s WTO Schedule of Specific Commitments in Services, which does not allow 100 per cent foreign-owned enterprises to provide transport services.

It does not make any business or legal sense for a foreign-invested manufacturing enterprise, which is allowed to import means of transport for its operations to serve its production activities, is forced to register for a professional transportation business or outsource this internal job to a professional business transportation company.

In fact, thousands of foreign-invested enterprises had the right to import means of transportation without any requirement on transportation business until the adoption of Decree 86.

For many years, they have maintained their trained driving staff and management personnel in compliance with their own internal policies,  for them it is not easy to switch to a new contractor and hire outside staff.

The draft decree will clarify conditions for transport enterprises Photo: Le Toan

Which way forward for wholly-owned foreign enterprises?

Considering the above mentioned difficulties of enterprises with more than 49 per cent foreign ownership dealing in crude oil products, the Ministry of Transport (MoT) has proposed that the government consider the issuance of badges for these enterprises’ vehicles without requiring the certificate for conducting a transport business via automotive vehicles, while at the same time amending Decree 86.

Consequently, on March 30, 2016, the prime minister issued Resolution No.23/NQ-CP which clearly states that in the short term, the government allows the MoT to issue badges to commodity carrying trucks of foreign-invested enterprises with 49 per cent foreign ownership or more for the core production and business requirements of these companies.

For the next step, the MoT is responsible for incorporating the same regulations in the amendments of Decree 86.

This move by the government has solved the abovementioned difficulties for enterprises with more than 49 per cent foreign ownership so that they can keep operating as normal.

This also ensures the lawful right to conduct business for foreign-invested enterprises operating transport services for self-produced goods.

Amendments to Decree 86 – What is in the current draft?

The government is seeking public comment on the draft decree on conducting business and conditions on conducting a transport business via automotive vehicles.

This draft decree is essentially amending important points in Decree 86, among which is the badge requirement for vehicles belonging to enterprises that conduct transport business with indirect money collection.

In the current draft decree, internal goods transport is the activity of transporting goods with indirect money collection, and includes the following forms:

-Use of transport vehicles to transport dangerous goods according to the government’s list of dangerous goods, transport of dangerous goods, and the authority to license such transport;

-Use of transport vehicles to transport cargo and overweight goods when in traffic on roads;

-Having five vehicles or more;

-Use of vehicles with permitted transported goods of  10 tonnes and above to transport goods.

Enterprises conducting transport business with indirect money collection must also satisfy conditions on means of transport, drivers, parking location, and management of the driving staff as well as their vehicles.

Although the above is not yet effective, we can see that the draft decree has given much more clarity to the business of internal transport and conditions applied thereto.

The draft decree is expected to be finally adopted in the upcoming months.