Lawyer in Vietnam Oliver Massmann Transportation and Logistics businesses Requirements to apply for the badges: Which way for wholly owned foreign enterprises?

1. Lawyer in Vietnam Oliver Massmann
Transportation and Logistics businesses Requirements to apply for the badges: Which
way for wholly owned foreign enterprises?
On 10 September 2014, the Government issued Decree No. 86/2014/ND-CP setting out conditions on
transportation business (Decree 86) that automotive vehicles with designed capacity of 10 tones and
above and from 7-10 tones must bear badges (the Badges). On 7 November 2014, the Ministry of
Transportation and Communications (MT) issued Circular No. 63/2014/TT-BGTVT guiding Decree
86 (Circular 63), which requires that only enterprises having the Certificate of doing transport
business by automotive vehicles can apply for the Badges.
However, according to Vietnam’s WTO Schedule of Specific Commitments in Services, foreign
contribution in a joint venture doing transportation services must not exceed 49% of the total charter
capital of that joint venture. Accordingly, enterprises with more than 51% foreign ownership do not
have transportation business in their investment certificates, resulting in the impossibility to obtain the
Certificate of doing transport business by automotive vehicles. This further leads to the fact that these
enterprises will neither be able to apply for the Badges.
Moreover, Decree 86 creates the concept of ‘transport business with indirect money collection’ which
is defined as ‘the transport business by automotive vehicles, in which the transport business units
perform the transport phase and perform at least another phase in the process from production to
consumption of products or services and collect freight through revenues from such products or
services’ (Article 3.3). Circular 63 further requires trucks used by companies that carry out the
transport business with indirect money collection to affix the Badges thereon when in traffic.
It is noted that some enterprises, considering their business nature, have to invest in specialized means
of transportation to transport their own products between their locations and to their customers in
Vietnam (for example, industrial gas products). Examples would be road tankers, special trailers and
tube trailer, etc. that must be imported because their special designs make them impossible to be
produced in Vietnam. Given high technical safety standards of international level, it is nearly
impossible/very difficult for enterprises to rent these special vehicles in Vietnam while relying on the
same standards.
It does also not make any business and legal sense if a manufacturing foreign invested enterprise
which is allowed to import means of transport for its operations to serve its production activities is
forced to register for professional transportation business or outsource this internal job to a
professional business transportation company. In fact, thousands of other foreign invested enterprises

2. have been long granted with the right to import means of transportation without any requirement on
transportation business until the adoption of Decree 86.
Considering the abovementioned difficulties of enterprises with more than 49% foreign ownership
doing business in crude oil products with special characteristics, the Ministry of Transport has
proposed to the Government to consider the issuance of the Badges for vehicles of these enterprises
without requiring the Certificate of doing transport business by automotive vehicles, and at the same
time consider the amendment of Decree 86.
Consequently on 30 March 2016, the Prime Minister issued Resolution No. 23/NQ-CP which clearly
states that in the short term, the Government allows the Ministry of Transport to issue the Badges to
commodity carrying trucks of foreign invested enterprises with 49% foreign ownership or more for
the purpose of the main production and business of these companies. For the next step, the Ministry of
Transportation is responsible for incorporating the same regulations in the amendments of Decree 86.
This has basically solved difficulties resulting from Decree 86 for enterprises with 49% foreign
ownership or more.
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Please do not hesitate to contact Oliver Massmann under omassmann@duanemorris.com if you have
any questions or want to know more details on the above. Oliver Massmann is the General Director of
Duane Morris Vietnam LLC.