Trade Units and Terms

Non-Tariff Barriers

Import Prohibitions: Vietnam currently prohibits the commercial importation of the following products: arms and ammunition, explosive materials, military technical equipment and facilities narcotics, toxic chemicals, “depraved and reactionary” cultural products, firecrackers, some children’s toys, cigarettes, second-hand consumer goods, right-hand drive motor vehicles, used spare parts for vehicles, used internal combustion engines of less than 30 horsepower asbestos materials under the amphibole group, various encryption devices, encryption software.

Quantitative restrictions and non-automatic licensing: Vietnam has been phasing out the use of quantitative restrictions on imports. The following products remain subject to quantitative restrictions: sugar, petroleum products, cement and clinker, some common chemicals, chemical fertilizer, paint, tubes and tires, paper, silk, ceramic (constructive), construction glass, construction steel, some engines, some types of automobiles, motorcycles, bicycles and parts, and ships and vessels. Quantitative limitations on sensitive items. N May of 2003, the Prime Minister a decision to implement tariff-rate quotas on certain agricultural products that were not previously under quotas. Cotton, tobacco materials, and salt are the three items on “trial” implementations as of July 01, 2003. During the “trial” period, import licenses for those items granted in line with the demand level to set up volume of quotas for the following years. Milk materials , corn, and poultry eggs are the remaining targeted items to be implemented sometime in 2004.

Special Authority Regulation: Previously, importers required approval from the relevant ministries to import many goods. This system was changed in 2001. Now, seven ministries and agencies are for overseeing a system of minimum quality/performance standards for animal and plant protection, health safety, and cultural sensitivity. Goods that meet the minimum standard can be imported upon demand and in unlimited quantity and value.

Foreign Exchange System: In 1998, the State Bank of Vietnam (SBV) issued a foreign exchange surrender requirement for all exporters, including foreign trade enterprises. A Series of reductions decreased this requirement from 80 percent of percent of foreign exchange balances to 30 percent as of May 2002. In April 2003, Government Decision 46 reduced the foreign exchange surrender requirement to zero percent.

Customs: Vietnam is phasing out minimum import prices in its customs valuation system. The number of commodity groups subject to a minimum value was reduced from 34 in 1997 to seven in 2000. The include: beverages of all kinds; tires, rubber inner tubes and mud-resistant fronts for used cars, motorcycles and bicycles; floor tiles and sanitary wares; construction glass and vacuum flasks; engines; electric fans; motorcycles; and, unprocessed tobacco.

Trading Rights: Under the terms of the BTA, three years aftet the entry-into-the-force of the agreement, enterprises with capital directly invested by U.S. Nationals and companies in production and manufacturing will be able to emerge in trading activities in most products and will be able to enter into joint ventures with Vietnamese partners to engage in trading activities in all products, as long as the U.S. partner holds no more than 49 percent share in the venture. Seven year after entry-into-force of the BTA, U.S. companies will be able to establish wholly owned trading companies in Vietnam. The rights to trade certain goods is subject to a phase in period.



Service Barriers

Under the terms of the BTA, Vietnam agreed for the first time to liberalize a broad array of services sectors, including telecommunications, accounting, banking, and distribution services, and to apply MFN treatment to U.S. services in all sectors and for all modes of supply (with itemized exceptions). The BTA also incorporated the WTO agreements on Trade in Services (GATS), Annex on Movement of Natural Persons, Annex on Telecommunications and Telecommunications Reference Paper. Vietnam’s commitments to liberalize market access on services are phased in over specified time periods depending on the sector. The commitments by sector are as follows:

Accounting, Auditing, and Bookkeeping Services: For the first three years under the BTA, licenses will be granted on a case-by-case basis. The company must employ at least persons with licenses to be a CPA in Vietnam who have practiced in Vietnam for more than one year. For then first two years under the BTA, firms with U.S. equity will only be allowed to supply services to foreign-invested enterprises and foreign funded projects in Vietnam. Branching is not permitted.

Taxation Services: For the first five years under the BTA, licenses will be granted on a case-by-case basis, and firms with U.S. equity will only be allowed to supply services to foreign-invested enterprises and foreign funded projects in Vietnam. Branching is not permitted.

Architectural, Engineering, and Computer Services: For a period of two years from the date of establishment and operation, U.S. owned companies may only provide services with foreign-invested enterprises in Vietnam. U.S. companies have to be legally registered in the United States. Branching is not permitted.

Legal Services: Under the terms of the BTA, 100 percent equity ownership in companies, joint ventures, and branches is permitted. U.S. lawyers may not appear before Vietnamese courts. However, U.S. firms may advise on Vietnamese law if they hire persons with Vietnamese law degrees who satisfy requirements
Applied to like Vietnamese practitioners. Branches of law firms receive a five year renewable license. In July 2003, the government promulgated Decree 87 significantly reforming the regulatory framework for the operations of foreign law practice of foreign law firms in Vietnam. Foreign law practices are permitted to provide advice on foreign and international law in the areas of business, investment and commerce, which had been previously prohibited. By virtue of these reforms, foreign law firms may now offer a full range of legal services and employ Vietnamese lawyers.

Advertising Services on Market Research: Vietnam has not agreed to provide market access for advertising services for wines and cigarettes or for the cross-border supply of market research services. U.S. companies in these sectors may initially only establish a commercial presence through joint ventures or business cooperation contracts with Vietnamese partners. U.S. investment is limited to 49 percent of the legal capital for the first five years under the Bilateral Trade Agreement, 51 percent for years six and seven, and is unlimited after that. Vietnam has not agreed to ensure national treatment for the cross-border supply of market research services.

Management Consulting: U.S companies may only establish a commercial presence through joint ventures or business cooperation contracts. After the BTA has been in effect for 5 years, enterprises with 100 percent U.S. ownership will be permitted.

Telecommunications services: Initially, the provision of basic telecommunications services, value-added telecommunications services, and voice telephone services are only permitted through business contracts with Vietnamese gateway operators. According to the terms of the BTA, by December 2003, U.S. value added telecommunications service providers may establish joint ventures with Vietnamese partners with up to 50 percent equity ownership. These joint ventures may not, however, construct their own long-distance and international circuits. Four years after entry-into-force of the BTA, U.S. basic telecommunications service suppliers can establish joint ventures with Vietnamese partners with up to 49 percent U.S. equity ownership. These joint ventures may not, however, construct their own long-distance and international circuits. Six years after entry-into-force of the Agreement, U.S. voice telephone service providers may establish joint ventures with Vietnamese partners with up to 49 percent U.S. equity ownership.

Audiovisual Services: Vietnam has not agreed to provide market access or national treatment for cross-border supply or consumption abroad of audiovisual services. U.S. service suppliers may establish a commercial presence only through a business cooperation contract or joint venture with a Vietnamese partner. For the first five years after their establishment and operation, 100 percent U.s. owned enterprises may only provide services to foreign-invested enterprises in Vietnam. U.S. companies must be legally registered for operations in the United States.

Construction and Related Engineering Services: Vietnam has not agreed to provide market access or national treatment for cross-border supply or consumption abroad of construction and related engineering services. Branches are not permitted. For the first three years after their establishment and operation, 100 percent U.S. owned enterprises may only provide services to foreign-invested enterprises in Vietnam. U.S. companies must be legally registered for operation in the United States.

Distribution Services: Vietnam has not agreed to provide market access or national treatment for cross-border supply of distribution services. Three years after entry-into-force of the BTA, U.S. service providers may establish joint ventures with Vietnamese partners with up to 49 per4cent of U.S. equity. After six years, U.S. ownership in joint ventures will be unlimited. After seven years, companies with 100 percent equity will be allowed. One retail outlet will be considered on a case-by-case basis. For some agricultural and industrial products, market access in this sector is subject to additional limitations, which will be phased out over a period of three to five years. There are a limited number of products for which Vietnam did not commit to allow distribution services.

Educational Services: Vietnam will not provide market access or national treatment for cross-border supply of educational services. For the first seven year after entry-into-force of the BTA, U.S. companies may only establish a commercial presence through joint venture. After that, schools with 100 percent U.S. invested capital may be established. Foreign teachers employed by educational units with U.S. invested capital must have five years teaching experience and be recognized by the Ministry of Education.

Insurance Services: Vietnam has agreed to allow market access form the cross-border supply of insurance services to enterprises with foreign invested capital or foreigners working in Vietnam; reinvestment services; insurance services in international transportation; insurance brokering services; and advisory, claim settlement, and risk assessment services. Three years after entry-into-force of the BTA, U.S. companies can establish joint ventures with Vietnamese partners with up to 50 percent U.S. equity participation. After five years, 100 percent U.S.-invested companies may be established.

Banking: Vietnam will not provide market access or national treatment for cross-border supply provision of banking services, except for financial information services and advisory, intermediation, and other auxiliary services. U.S. banks may establish branches, joint ventures with Vietnamese banks, wholly owned U.S. financial leasing companies or joint venture financial leasing companies with Vietnamese partners.

For the first three years after entry-into-force of the BTA, the only legal form apart from banks and leasing companies in which U.S. companies may provide financial services is through joint ventures with Vietnamese banks. During the first nine years, U.S> equity in joint adventure banks must be between 30 percent and 49 percent. After nine years, 100 percent equity participation in subsidiary banks will be allowed.

Non-Banking Financial Services: The BTA allows 100 percent U.S> equity in financial leasing and in other leasing after 3 years.