Contentious auto bill up for reinstatement
Critics are opposing a possible extension of car import regulations under expired Circular 20, saying it contradicts existing laws on fair trade and competition.
A draft decree compiled by the Ministry of Industry and Trade (MoIT) on car imports is seeking relevant authorities’ opinions. Accordingly, firms must show proof that they are authorised dealers for foreign automakers in order to import complete-build-up (CBU) cars with less than nine seats. The documents have also to be notarised by Vietnamese diplomatic representatives in the country of origin.
Those regulations were originally prescribed in the MoIT’s Circular 20/2011/TT-BCT, effective in 2011.
Automobile joint ventures which are authorised dealers certainly support an extension of the bill. Toyota and General Motors, for instance, quickly sent proposals to the Vietnamese government asking for the renewal of Circular 20.
Lawyers and Vietnamese importers, however, blamed the requirements for creating a ‘monopoly’ for foreign automobile firms in Vietnam.
“According to the Law on Competition, state administrative bodies are not permitted to discriminate between enterprises or force an enterprise, organisation or individual to purchase or sell goods or services with an enterprise appointed by such body [Article 6, Clause 1 and 2],” said Dau Anh Tuan, head of the Vietnam Chamber of Commerce and Industry’s (VCCI) Legal Department.
Tuan told VIR that the import condition discriminated between authorised and unauthorised dealers of automakers, indirectly forcing buyers to only purchase cars from a small number of sellers. “This violated the Law on Competition.”
Reportedly, after the ratification of Circular 20 five years ago, the total number of local importers fell dramatically from nearly 200 to fewer than 20, due to this lack of competition. Some shifted their business model to used car importation instead.
“The MoIT is also the state authority supervising market competition, so it needs to fulfil its responsibility to ensure fairness amongst enterprises,” Tuan stressed.
Another argument against the regulations is the contradiction between them and the Law on Intellectual Property.
Under the Law on Intellectual Property, even owners of an industrial property object do not have the right to prevent others from circulating, importing, or exploiting uses of a product legally put into the marketplace [Article 125].
In this case, the VCCI’s Tuan interpreted the law to mean “foreign carmakers have no right to prohibit independent importers from selling their products in the Vietnamese market”. But the MoIT’s requirements do the opposite.
Lawyer Truong Thanh Duc, chairman of Basico law firm, told VIR that the MoIT’s regulations feature a business condition for importation of cars less than nine seats, which “goes against the country’s Constitution and the Law on Enterprises 2014.”
“Under the Constitution, everyone has the right to freedom of enterprise in the sectors and trades that are not prohibited by law. This means only laws can regulate conditional businesses – decrees or circulars are not allowed to,” he noted.
At present, imports of cars with less than nine seats are not listed amongst the prohibited or restricted goods and services specified in the Law on Enterprises 2014.
In addition, legal experts pointed out that this measure stands in violation of the MoIT’s requirements against specialised regulation.
Many local importers found it impossible to achieve the required documents under Circular 20, because “foreign automakers having joint ventures or subsidiaries in Vietnam had not given such authorisation to local importers,” said Vu Hai Lam, head of the sales division of the local importer Nam Son Auto Company.
The Vietnam Automotive Manufacturer Association (VAMA), representing joint ventures and subsidiaries of foreign carmakers, defended the regulations, saying that they have protected consumers from low-quality products and services.
VAMA also argued that the requirements helped prevent false declaration of taxable price by unauthorised importers, which otherwise would cause serious impact to the state tax revenue.
Not everyone agrees with this assessment. “Dealing with tax-avoidance behaviours is the mission of specialised tax laws and tax authorities,” the VCCI’s Tuan said.
The MoIT has praised the requirements as “they reduced the huge trade deficit situation in 2011 which was led by car imports”, despite the fact that statistics suggest otherwise.
According to the General Statistics Office, the number of CBU imported to Vietnam rose from 55,000 units in 2011 to 125,000 units in 2015. Moreover, pre-tax import value also increased from $1.02 billion to $2.98 billion during the period, implying a hike in foreign currency spent.
The fierce debate confused the General Department of Customs, the state agency supervising import-export activities. It has had to ask the MoIT for guidance on car imports since July 2015.
“That’s ridiculous,” said Basico law firm’s chairman Duc. “Circular 20 became invalid on July 1, but customs authorities still have to seek guidance from the MoIT on the issue.”