Vietnam - Distribution and Sales Channels Vietnam - Distribution and Sales
Import Trading Rights
Vietnam, under both its WTO commitments and its domestic laws, extends import and export activities to “all foreign individuals and enterprises (including foreign-invested enterprises).” In effect, with import rights, a foreign-invested company: (i) can be the importer of record; and (ii) can sell its imported products to distributors (licensed wholesalers or retailers) in Vietnam; but (iii) with just import rights alone, it cannot sell its imported products to final consumers. Vietnam reserves the import rights for several product categories for state-owned companies.
Companies that do not have their own import license must work through licensed traders, who typically charge a commission of between one and two percent of the value of the invoice. Under Vietnamese law, the importer is the consignee. Therefore, it is important to identify a reliable importer with the ability to clear merchandise through customs quickly and efficiently. If a licensed third-party importer is used, the importer will handle customs clearance. If a foreign-invested firm imports products directly, it must make arrangements to handle customs clearance at the port.
Many foreign firms have complained that the administration of customs can be opaque and inefficient. Importers have claimed that duty classifications for the same product differ from office to office, and that even the same inspector may charge different rates for the same item at different times. Should the importer disagree with the classification, it can be appealed before the local Customs office, Customs HQ in Hanoi, or an administrative court. Companies also complain about arbitrary fees, the expectation of undocumented facilitation payments and other problems with the clearance process. Article No. 24 of the Decree No. 08/2015/ND-CP dated Jan. 21, 2015, regulated the details of HS advanced customs ruling.
Customs issues will continue to play an important role particularly with recent import licensing hurdles including automatic import licensing rules (see the section on Trade Barriers), new country of origin rules, and more aggressive enforcement of customs duty collections. The right to import does not include the right to organize or participate in a goods distribution system in Vietnam.
Distribution Services
Per Vietnam’s WTO Commitments, 100 percent foreign-owned companies may engage in distribution services (including wholesale or retail sales) of most legally imported or domestically produced products. Distribution services include commission agent sales, wholesaling, retailing, and franchising.
Some products are excluded from Vietnam’s commitment to open distribution services. Foreign Invested Enterprises (FIEs) are currently prohibited from distributing cigarettes and cigars, books, newspapers and magazines, video recordings, precious metals and stones, pharmaceutical products and drugs, explosives, processed oil and crude oil, rice, cane, and beet sugar (per Circular No. 34/2013/TT-BCT dated Mar 28, 2013.
Wholesaling
Per Vietnamese law, “wholesaling” means the activity of selling goods to other business entities and organizations. This activity does not include the activity of selling goods directly to the final consumer or end user. Foreign companies engaging wholesalers in Vietnam should examine the investment certificate or business registration certificate of each reseller or distributor to make sure that the reseller is properly licensed to engage in wholesaling or retailing of the products sold to them.
Retailing
Fully foreign businesses without equity limitation have been able to engage in retailing activities since 2009. Per Vietnamese law, “retailing” means the activity of selling goods directly to the end-user (Decree No. 23, Article 3.8). Being licensed to engage in retail services would enable the foreign-invested company to sell directly to end users, without having to go through a licensed local distributor.
A company licensed to engage in retailing has the right to establish a single retail sales outlet. Subsequent outlets are subject to approval from the relevant local Department of Planning and Investment (DPI). Local authorities will take into consideration the "master plan" of the province, including the "economic needs" of the proposed establishment that takes into consideration such factors as available parking and access roads, the number of retail sales outlets already in the locality, and population density. Thus, the so-called "Economic Needs Test" (ENT) remains a significant consideration and potential hurdle for foreign multi-outlet retail chains.
Vietnam’s retail landscape has been going through a rapid transformation, providing more venues for proper display and marketing of products. Many new shopping malls are under development in the major cities, and Western-style grocery stores, mini-markets, and convenience stores (e.g., Lotte, MaxiMart, Aeon CitiMart, E-Mart and Saigon Coop) are now common in major urban areas.
Showrooms and service centers for specialized products such as electronics, appliances, automobiles, and industrial goods are also expanding. Still, family-run market stalls or small street-front shops continue to play a major role in retailing. Wet markets are also prevalent throughout the country.
Warehousing
Manufacturing companies can warehouse their processed products. The situation tends to be more complicated for trading companies, which, even though importing their own brand products, are considered rendering a service to their parent companies. Previously foreign investors were limited to a 51 percent joint venture or could outsource their warehousing activity. As of 2014, warehousing service (as part of the logistics industry) is now fully opened to foreign investment, allowing 100 percent foreign ownership.
While a small number of foreign-invested warehousing operations offering modern and efficient facilities have been established in recent years, warehouses and other storage infrastructure in Vietnam are for the most part quite basic. Climate control is rare and security may be a problem.
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