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 in a strong way. Therefore, many domestic and foreign investors aim to invest in the logistics service business. Therefore, Vietnamese law has set strict regulations on conditions for foreign investors to provide logistics services.

CLASSIFICATION OF LOGISTICS SERVICES

 According to Article 233 of the 2005 Commercial Law, logistics services are understood as “commercial activities, whereby traders organize to perform one or more jobs including receiving, transporting, warehousing, warehousing, customs clearance, other paperwork, customer consulting, etc packaging, marking codes, delivering goods or other services related to goods as agreed with customers in order to enjoy remuneration”. 

So logistics services can be understood as managing the supply chain of goods including tasks such as receiving, transferring, warehousing, inspecting and transporting goods to customers according to the agreement. We can see that logistics services will dominate and directly affect from the input to the output of goods and are closely related to the service industry and economic development in general.

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

1. Container handling services, except for services provided at airports.

 

2. Container warehousing services classified as auxiliary services for sea transport.

 

3. Warehousing services classified as all auxiliary services for multimodal transport.

 

4. Delivery services.

 

5. Freight transport agency services.

 

6. Customs brokerage services (including customs clearance services).

 

7. Other services including bill of lading inspection, cargo brokerage services, cargo inspection, sampling and weighing services; goods receipt and acceptance services; and preparation of transport documents.

 

8. Wholesaling auxiliary services and retailing auxiliary services including management of goods in storage, and collection, collation and classification of goods and their delivery.

 

9. Cargo transport services classified as sea transport services.

 

10. Cargo transport services classified as inland waterway transport services.

 

11. Cargo transport services classified as rail transport services.

 

12. Cargo transport services classified as road transport services.

 

13. Air carriage services.

 

14. Multimodal transport services.

 

15. Technical inspection and analysis services.

 

16. Other auxiliary services for transport.

 

17. Other services under the agreement signed between the logistics service provider and customer according to basic rules of the Law on Commerce.

LOGISTICS SERVICES ESTABLISHED BY 100% FOREIGN-OWNED ENTERPRISES 

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

• Storage and warehouse services ( CPC 742)
• Courier Services (CPC 7512)
• Freight transport agency services (CPC 748)

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

Conditions for foreign investors providing logistics services

Currently, the conditions for business in 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 meeting conditions such as domestic investors, foreign investors in 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 the conditions for foreign investors to provide logistics services as follows:

 

Industry	Industry code	Investment form	Conditions for foreign investors to do business in logistics services
✅Cargo transport services classified as sea transport services (except for inland transport)	⭐CPC 7211, 7212	✔️The foreign investor may establish companies operating ships flying Vietnamese flag or contribute capital, purchase shares or stakes in vietnamese enterprise	⭕️The holding of the foreign investor in such company does not exceed 49%
✅Container handling services classified as auxiliary services for sea transport	⭐CPC 7411	✔️Business cooperation agreement or establish an enterprise or contribute capital, purchase shares or stakes in vietnamese enterprise	⭕️The holding of the foreign investor in such company does not exceed 50%
✅Container handling services classified as auxiliary services for multimodal transport,(except for services provided at airports)		✔️Establish an enterprise or contribute capital or purchase shares or stakes in another enterprise	⭕️The holding of the foreign investor in such company does not exceed 50%.
✅Customs clearance services classified as auxiliary services for sea transport		✔️Business cooperation agreement or establish an enterprise or contribute capital, purchase shares or stakes in vietnamese enterprise	⭕️No rate limit
✅Bill of lading inspection services, cargo brokerage services, cargo inspection, sampling and weighing services; goods receipt and acceptance services; and preparation of transport documents		✔️Establish an enterprise or contribute capital or purchase shares or stakes in another enterprise	⭕️No rate limit
✅Cargo transport services classified as  inland waterway transport services	⭐CPC 7222	✔️Establish an enterprise or contribute capital or purchase shares or stakes in another enterprise	⭕️The holding of the foreign investor in such company does not exceed 49%.
✅Cargo transport services classified as rail transport services	⭐CPC 7112	✔️Establish an enterprise or contribute capital or purchase shares or stakes in another enterprise	⭕️The holding of the foreign investor in such company does not exceed 49%
✅Cargo transport services classified as road transport services	⭐CPC 7123	✔️Business cooperation agreement or establish an enterprise or contribute capital, purchase shares or stakes in vietnamese enterprise	⭕️The holding of the foreign investor in such company does not exceed 51%

 

For comprehensive free CONSULTATION ON ESTABLISHMENT SERVICES FOR LOGISTICS SERVICES BUSINESSES FOR FOREIGN INVESTORS IN VIETNAM, please contact:

 

Siglaw Law Firm

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