CONDITIONS FOR FOREIGN INVESTORS TO PROVIDE LOGISTICS SERVICES

CONDITIONS FOR FOREIGN INVESTORS TO PROVIDE LOGISTICS SERVICES

In recent years, with the development of service industries, the supply chain of goods has also developed extremely. Therefore, many domestic and foreign investors aim to invest in the logistics service business. 

Classification of Logistics Services

According to Article 233 of Commercial Law 2005, logistics services are understood as “commercial activities, whereby traders organize to perform one or more tasks including receiving, transporting, warehousing, yard storage of cargoes, marking, delivery of goods, or other services related to goods according to agreements with customers to enjoy service charges“.

So logistics services can be understood as the management of the supply chain of goods including tasks such as receiving, transporting goods, warehousing, checking goods, and transporting goods to customers as agreed. We can see that logistics services will dominate and directly affect from input to output of goods and are closely related to the service industry and economic development in general. Therefore, Vietnamese law has set strict regulations on conditions for foreign investors who want to invest in the logistics service business.

According to Article 3 of Decree 163/2017/ND-CP stipulating the classification of logistics services, foreign investors who want to invest can choose the following services:

1. Container handling services, except those provided at airports;
2. Container warehousing services that belong to undersea transport support services;
3. Warehousing services that support all types of transportation;
4. Delivery services;
5. Stuff delivery agency services;
6. Customs agency services (including customs clearance services);
7. Other services, including the following activities: Bill of lading inspection, freight brokerage services, cargo inspection, sampling, and weight determination services; services for receiving and accepting goods; transportation document preparation services;
8. Wholesale and retail support services including inventory management, collection, aggregation, sorting, and delivery;
9. Transportation services belong to sea transport services;
10.  Transportation services under inland waterway transport services;
11. Transportation services belong to rail transport services;
12.  Transportation services belong to road transport services;
13.  Air transport services;
14. Multimodal transport services;
15. Technical analysis and verification services;
16.  Other transportation support services;
17. Other services shall be agreed upon by logistics traders and customers following the basic principles of the Commercial Law.

Logistics services established by 100% foreign-owned enterprises

In the schedule of specific commitments on services in Vietnam when joining the WTO, each logistics service business line has different limits on the capital contribution ratio of foreign investors. With some specific sub-sectors as mentioned above, investors are required to establish joint ventures (in the form of business cooperation contracts) and the foreign investor’s capital contribution does not exceed the prescribed rate. In Vietnam’s international commitments schedule  to the WTO, only the following logistics service subsectors are allowed to establish 100% foreign-owned enterprises in Vietnam:

1. Warehousing services (CPC 742);
2. Delivery services (CPC7512);
3. Transportation agency services (CPC748).

Logistics service business is listed on the list of conditional business lines under Vietnamese law. Therefore, foreign investors who want to establish 100% foreign-owned enterprises to operate in the logistics sector not only need to satisfy the international commitments Vietnam has joined but also must comply with investment and business conditions as prescribed by Vietnamese law.

Conditions for foreign investors providing logistics services

Currently, conditions for providing logistics services for foreign investors are specified in the WTO Schedule of Commitments on Services and Decree 163/2017/ND-CP. Accordingly, in addition to having to meet conditions such as domestic investors, foreign investors belonging to countries and territories that are members of the World Trade Organization (WTO) are provided with logistics services with quite strict conditions. According to Clause 3 Article 4 of Decree 163/2017/ND-CP stipulating conditions for foreign investors providing logistics services as follows: