The Vietnamese government is considering reinstating Circular 20, which regulates car imports into Vietnam. Critics argue this would limit competition by only allowing authorized dealers to import cars. Supporters argue it protects consumers and tax revenue. The debate over reinstating the regulations has grown contentious, with arguments on both sides. Lawyers state the regulations contradict Vietnam's competition laws and free enterprise provisions. The future of car import regulations in Vietnam remains unclear as the government considers feedback from all perspectives.

1. Investing8August 1-7, 2016
By Thanh Xuan
and Van Hanh
Critics are opposing a possible
extension of car import regu-
lations under expired Circular
20, saying it contradicts exist-
ing laws on fair trade and
competition.
Adraft 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 no-
tarised by Vietnamese diplo-
matic 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 Viet-
namese government asking for
the renewal of Circular 20.
Lawyers and Vietnamese
importers, however, blamed
the requirements for creating a
‘monopoly’ for foreign auto-
mobile firms in Vietnam.
“According to the Law on
Competition, state administra-
tive bodies are not permitted to
discriminate between enter-
prises or force an enterprise,
organisation or individual to
purchase or sell goods or serv-
ices with an enterprise ap-
pointed by such body [Article
6, Clause 1 and 2],” said Dau
Anh Tuan, head of the Viet-
nam Chamber of Commerce
and Industry’s (VCCI) Legal
Department.
Tuan told VIR that the im-
port condition discriminated
between authorised and unau-
thorised dealers of automakers,
indirectly forcing buyers to
only purchase cars from a small
number of sellers. “This vio-
lated the Law on Competition.”
Reportedly, after the ratifi-
cation 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 compe-
tition. Some shifted their busi-
ness model to used car
importation instead.
“The MoIT is also the state
authority supervising market
competition, so it needs to ful-
fil its responsibility to ensure
fairness amongst enterprises,”
Tuan stressed.
Another argument against
the regulations is the contra-
diction between them and the
Law on Intellectual Property.
Under the Law on Intellec-
tual Property, even owners of
an industrial property object
do not have the right to pre-
vent 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 re-
quirements 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 free-
dom of enterprise in the sec-
tors and trades that are not
prohibited by law. This means
only laws can regulate condi-
tional 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 prohib-
ited 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 ven-
tures or subsidiaries in Viet-
nam had not given such
authorisation to local im-
porters,” 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 pre-
vent false declaration of tax-
able 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 su-
pervising import-export activ-
ities. It has had to ask the
MoIT for guidance on car im-
ports since July 2015.
“That’s ridiculous,” said
Basico law firm’s chairman
Duc. “Circular 20 became in-
valid on July 1, but customs
authorities still have to seek
guidance from the MoIT on
the issue.”n
Contentious auto bill
up for reinstatement
Limiting the participation of
new car dealers in the auto
market will eliminate the
competition in the market.
It is the consumers’deci-
sion to choose the products
and accompanied services,
and the government’s busi-
ness is not governing what
they can buy. Besides, cars are already examined by the Viet-
nam Register under the Ministry of Transport before circu-
lation in terms of quality and safety
Registration agencies have the responsibility of offering
registration certificates to cars which qualify. Circular 20
does not have the function of managing cars’ quality.
Also, foreign car producers have the right of selecting
agencies for their products. The state should not interfere
with this issue because it is the market’s decision.n
DANG HUY DONG
Deputy Minister of Planning and Investment
Circular 20 gives unfair reg-
ulations, facilitating big en-
terprises and hurting small
ones, creating an unfair com-
petitive environment, nega-
tively affecting businesses
and consumer rights. It is un-
necessary to reinstate Circu-
lar 20, as it has run its
course. The elimination of the circular is necessary for busi-
ness environment reform, facilitating fair competition and
small and medium-sized enterprises’ development.n
Economist LE DANG DOANH
Former director of the Central Institute for Economic
Management (CIEM)
Spending on auto import has
risen, passing the $1.5-2.5
billion threshold each year
since 2014 – compared to
some $1 billion in 2010 and
2011. The circular started
taking effect in 2011. Have
the circular’s goals of pro-
tecting domestic car produc-
tion and minimising foreign currency flow abroad from
Vietnam been reached? Who has benefited from the car im-
port increase? Car prices have increased because Circular
20 has facilitated some car traders in holding a monopoly.
The circular has failed in protecting consumers’ rights,
and failed to improve macroeconomic stability, in accor-
dance with the goals set for it. In fact, it has favoured a mo-
nopoly of authorised importers, putting consumers at a
disadvantage because of limited choice.n
NGUYEN TUAN
Director of car trader Thien An Phuc
Controversy over Circular 20 on car import conditions reaches boiling point
The government’s
business is not
governing what
[consumers] can
buy.
– Dang Huy Dong
Deputy Minister of
Planning and Investment
“
INDUSTRIAL CIRCLE

2. This column
is sponsored by
Before Circular 20 came into
effect in 2011, all car traders
were allowed to import new
cars with less than nine seats.
Thus, many traders imported
cars from foreign dealerships
without transparent origins
and standards.
At that time, Vietnam
was inundated with car dealerships. Nearly 100,000 cars
were imported between 2008 and 2010, resulting in a big
trade deficit, and an unstable foreign exchange market.
Many car enterprises did not invest in warranty and re-
pair services, and did not ensure supply of spare parts for
warranty.
If Circular 20 is invalidated, and is not replaced by other
technical barriers or regulations, the car production and trade
environment might regress to levels not seen since 2011.
The government should ask the Ministry of Industry and
Trade to co-operate with other relevant agencies, and take
measures to ensure the smooth development of the automo-
bile market.n
TRAN BA DUONG
Chairman of auto car maker Truong Hai
Automobiles are compli-
cated, high-technology prod-
ucts – and especially in
Vietnam, cars are related to
traffic safety for many peo-
ple. Selling cars requires a
professional, long-term rela-
tionship with consumers. In
order to provide that, a car
dealer needs authorisation from its original manufacturer for
technical support, human resource training, and genuine
parts supply. There is also periodical maintenance, warranty,
and recall to ensure the vehicle runs at a high standard during
its long service life. Vehicle quality, professional service,
and maintenance have a big influence on traffic safety and
environmental protection.
Without the requirements stated in Circular 20, we worry
about who will take care of vehicle quality and customer
service, and who will take care of recall and recycling issues
if unauthorised importers close their businesses.
There are also other issues at stake, which will affect the
government. We are afraid that without the requirements of
Circular 20, unauthorised importers will under-invoice to
avoid taxes or make illegal, ‘off the books’ payments – the
same as happened before the original passing of Circular 20.
That will cause serious impact to the government tax revenue.
For the above mentioned reasons, VAMA would like to
propose that the prime minister urgently issue a decree ef-
fective from July 1, 2016, in order to extend the require-
ments of Circular 20 and protect the consumer’s rights,
traffic safety, and environment.n
YOSHIHISA MARUTA
Chairman of the Vietnam Automobile Manufacturers’
Association (VAMA)
For automobile products,
safety and environment pro-
tection are at top priority.
Vehicles affect customer’s
safety and health.Any single
malfunction of the vehicle
can lead to unsafe operation.
The official importers there-
fore represent the manufac-
turer to maintain the vehicles according to established
processes, execute possible recalls and retrofit flawed prod-
ucts (if any) to assure the highest safety and ensure a kind
of “peace in mind” for the customers.
We propose to the government to maintain the original
“spirit” of Circular 20. Therefore, we support the draft revi-
sion of Decree 187 which includes those requirements for
protection of consumer’s rights, traffic safety and environ-
ment protection. Our proposal is also in line with the expec-
tation of other business associations like the Vietnamese
Automotive Manufacturing Association (VAMA), the Euro-
pean Chamber of Commerce (Eurocham) and the German
Chamber of Commerce (GBA).
We believe that, in a free market, protection of customers
and road safety has to be top priority of any responsible auto
manufacturer. Given the fact that regulations of Circular 20
made significant contribution to the stability of Vietnam auto
market as well as the protection of consumers during the past
five years, we recommend that the government maintains
these regulations of Circular 20 in the legal documents on
the subject matter which will be issued by the government
in the coming time.n
MICHAEL BEHRENS
CEO of Mercedes-Benz Vietnam
InvestingAugust 1-7, 2016