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Foreign investors providing freight transportation services
With the development of the economy and the market demand for logistics, freight service business is also one of the industries and trades attracting a large amount of FDI capital in Vietnam. With this service, Vietnam’s commitments in international treaties as well as Vietnamese law also set certain conditions for foreign investors providing freight services.
Foreign investors providing freight transportation services according to Vietnam’s commitments in WTO, FTAs
According to the WTO commitments, Vietnam currently commits to freight transport services for foreign investors in 04 forms of transport, including: (i) Transporting goods by sea; (ii) Transportation of goods by inland waterways; (iii) Freight by rail and (iv) Freight by road. Specifically, for each form of transport, Vietnam has the following commitments:
For the transport of goods transported by sea, Vietnam commits to:
Regarding the establishment of companies operating the Vietnamese flag fleet: After 2 years from the date of joining, foreign service providers are allowed to establish joint ventures in which the capital contribution of foreign investors does not exceed 49% of the legal capital of the joint venture. Foreign seafarers are permitted to work on ships flying the Vietnamese flag (or registered in Vietnam) owned by joint venture enterprises in Vietnam but the total number does not exceed 1/3 of the ship’s boundary. The first captain or deputy must be a Vietnamese citizen.
About commercial presence:
- Foreign shipping companies can establish 100% foreign-invested enterprises.
- Activities allowed when establishing a business:
- Sell and market ocean freight services through direct transactions with customers, from listing prices to making documents.
- Represent shippers.
- Provide the requested business information.
- Prepare documents related to transport documents including customs documents or other documents related to the origin and characteristics of the transported goods; and
- Provide sea transport services including inland transport services by ships flying the flag of Vietnam in case of provision of integrated transport services.
- On behalf of the company, organize for ships to enter the port or receive goods upon request.
- Negotiating and signing contracts for road, railway, and inland waterway transport related to goods transported by the company.
For the transport of goods transported by inland waterways, Vietnam commits:
From the date of accession, foreign service providers are only allowed to provide services through the establishment of a joint venture with a Vietnamese partner in which the capital contribution of the foreign side must not exceed 49% of the total legal capital.
With regard to freight transport by railway, Vietnam has not committed to commercial presence, except:
foreign suppliers may provide freight transport services through the establishment of joint ventures with Vietnamese partners in which the capital contribution of the foreign side must not exceed 49% of the total legal capital.
With regard to the transport of goods transported by road, Vietnam commits to:
No restrictions, except:
- Depending on market demand, it is permissible to establish joint ventures to provide freight transport services, in which the capital contribution ratio of the foreign side must not exceed 51%. Among the criteria for consideration, it is possible to use: the ability to create jobs; the ability to create foreign currency; the ability to apply advanced technology, including management skills; the ability to reduce industrial pollution; vocational training for Vietnamese workers; etc…
- It is required that 100% of drivers of economic organizations must be Vietnamese citizens.
Foreign investors providing freight transport services as committed by Vietnam in the ASEAN Framework Agreement on Services (AFAS)
The AFAS Agreement has broader commitments than the WTO Agreement for foreign investors in the business of freight services, specifically in AFAS Vietnam has made the following commitments:
For cargo transport by sea: Regarding the establishment of companies operating the fleet flying the Vietnamese flag: Foreign service providers are allowed to establish joint ventures in which the capital contribution of foreign investors does not exceed 70% of the legal capital of the joint venture.
For cargo transport by inland waterways: Foreign service providers are only allowed to provide services through the establishment of joint ventures with Vietnamese partners in which the foreign capital contribution does not exceed 51% of the total legal capital.
For rail freight: Vietnam commits not to place restrictions on foreign investors.
For road freight: Foreign service providers are allowed to do business in transporting goods and services only through the establishment of joint ventures with Vietnamese partners whose capital contribution does not exceed 70% of the total legal capital. 100% of the drivers of the joint venture must be Vietnamese citizens.
When doing business in freight services, foreign investors must also comply with the provisions of Decree 163/2017/ND-CP regulating logistics service business. However, the State respects and implements international treaties on investment to which the Socialist Republic of Vietnam is a contracting party.
Thus, for freight services, entering the market will require foreign investors to meet stricter conditions than Vietnamese investors. With a team of experienced lawyers and legal experts, Siglaw Law Firm is ready to advise and answer for you the remaining problems for foreign investors providing freight services. Please contact us for advice.
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