Articles
Doors to automobile import to be restricted

30 - 07 - 2011
By Cao Tran Nghia*

On 12 May 2011, the Ministry of Industry and Trade, MOIT, issued Circular No. 20/2011/TT-BCT in relation to additional conditions for import procedures applicable to passenger automobiles of up to nine seats (the "Circular"). The Circular adds two conditions to the current regulations, presenting formidable obstacles to many automobile distributors in Vietnam.

First, an importer must now submit (i) evidence from the manufacturers of the automobiles demonstrating that the importer/distributor is authorized to do so, and (ii) an authorized reseller agreement signed with said manufacturers. These documents must be legalized per existing regulations.

Second, if the importer wishes to provide mechanical maintenance for any vehicles, the importer must be a licensed provider of qualified automobile maintenance. This newly-invented license is issued by the Ministry of Transportation in accordance with yet to be issued guidelines.

Most importers generally agree with the new Circular, given that it is purportedly a temporary counter-measure against the trade deficit and also provides a standard regime for quality control to protect consumer rights. However, the fact that the Ministry did not consider the opinion of concerned importers when drafting the Circular, and that importers are required to comply on such a short notice caught the industry by surprise.

The first requirement of the new Circular generally eliminates importers who are acting without any binding relationship with the relevant manufacturers. Unaffected importers are the authorized distributors in Vietnam, some of which are joint ventures with the manufacturers. It is understood by importers in the industry that manufacturers will rarely appoint another authorized distributor if one already exists.

The second requirement of the new Circular, on the other hand, has not been properly explicated at the time of issuance of the Circular. It is still uncertain whether clarification will be issued by the time the Circular enters effect. Pending such further instructions, concerned importers have only 45 days to comply without knowing what the requirements for a license are.

With such uncertainty remaining, the Circular becomes a filter to reduce the number of concerned importers in the industry. This means that several smaller and medium sized importers will most likely be cut from the herd and several thousands of jobs lost. The other question is one of ultimate benefit for the consumer, will this culling of the importer herd actually inure to the benefit of the end user or will the lack of choice actually drive prices up and quality down?

The Circular enters effect on 26 June 2011.

(*) Please contact the authors at nghia.cao@indochinecounsel.com or our partners if you wish to have more information or specific advice for the topic of this article.

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