Freight forwarding business for foreign investors

With the development of the economy and the market demand for logistics, freight transport services are one of the industries and professions attracting a large amount of FDI capital in Vietnam. For this service, there are certain conditions for foreign investors in freight transport services set by Vietnamese Law and commitment within the international treaties.

Foreign investors in freight transport services according to Vietnam’s commitments in WTO and FTAs

Foreign investors in freight transport services according to Vietnam’s commitments in the ASEAN Framework Agreement on Services (AFAS)

Foreign investors in freight transport services according to Vietnam’s commitments in WTO and FTAs

Based on the WTO Commitments, Vietnam currently commits to allowing market access in freight transport services to foreign investors in 04 forms of transport, including: (i) Maritime freight transport; (ii) Inland waterway freight transport; (iii) Railway freight transport and (iv) Road freight transport. For each form of transport, Vietnam has the following specific commitments:

(i) For maritime freight transport:

Regarding the establishment of companies operating Vietnamese-flagged vessels: After 2 years from the joining date, 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 crew members are allowed to work on Vietnamese-flagged vessels (or registered in Vietnam) owned by joint venture enterprises in Vietnam, but the total crew members does not exceed 1/3 of the vessel’s personnel. The captain or first mate must be a Vietnamese citizen.

Regarding commercial presence:

1. Foreign maritime freight transport companies can establish 100% charter capital from foreign investors enterprises.
2. Activities allowed when establishing an enterprise:

• Sell ​​and market ocean freight services through direct customer interaction, from quote to documentation.
• Representing cargo owners.
• Providing business information upon request.
• Preparing dossiers related to shipping documents including customs documents or other documents related to the origin and characteristics of the transported goods;
• Providing maritime transport services including domestic transport services by Vietnamese-flagged vessels in the case of providing integrated transport services.
• Organizing the ship’s entry into the port or receiving goods on behalf of the company when requested.
• Negotiating and signing road, rail, and inland waterway transport contracts related to the goods transported by the company.

(ii) For inland waterway freight transport, Vietnam commits: From the date of joining, foreign service providers are only allowed to provide services through the establishment of joint ventures with Vietnamese partners in which the foreign capital contribution cannot exceed 49% of the total legal capital.

(iii) For rail freight transport, Vietnam has not made any commitments on commercial presence, except: foreign suppliers are allowed to provide freight transport services through the establishment of joint ventures with Vietnamese partners in which the foreign capital contribution cannot exceed 49% of the total legal capital.

(iv) For road freight transport, Vietnam commits to:

No restrictions, except:

• Depending on market demand, joint ventures are allowed to be established to provide freight transport services, in which the foreign capital contribution ratio cannot exceed 51%. Among the criteria for consideration, the following may be used: the ability to generate jobs; the ability to generate foreign currency; the ability to apply advanced technology, including management skills; the ability to reduce industrial pollution; provide vocational training for Vietnamese workers; etc.
• Require 100% of drivers of economic organizations to be Vietnamese citizens.

Foreign investors in freight transport services according to Vietnam’s commitments in the ASEAN Framework Agreement on Services (AFAS)

The AFAS Agreement has broader commitments than the WTO Agreement for foreign investors in freight transport services business. Specifically, in AFAS, Vietnam has made the following commitments:

For maritime freight transport: Regarding the establishment of companies operating Vietnamese-flagged vessels: Foreign service providers are allowed to establish joint ventures in which the capital contribution of foreign investors does not exceed 70% of the total legal capital of the joint venture.

For inland waterway freight transport: 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 transport: Vietnam commits not to impose restrictions on foreign investors.

For road freight transport: Foreign service providers are allowed to conduct freight transport business only through joint ventures with Vietnamese partners in which foreign capital contribution does not exceed 70% of the total legal capital. All of the joint venture drivers must be Vietnamese citizens.

When conducting freight transport services, foreign investors must also comply with the provisions of Decree 163/2017/ND-CP regulating logistics services. However, the Government respects and implements international treaties on investment to which the Socialist Republic of Vietnam is a member.

Thus, for freight transport 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 any questions you may have regarding foreign investors conducting freight transport services. Feel free to contact us for quality legal services.

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