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Vietnam opens logistics sector to foreign investment

As of 11 January 2014, wholly foreign-invested enterprises ("FIE") are permitted to provide almost all types of logistic services in Vietnam subject to proper licensing. The problem is that important aspects of logistics are not open to wholly-owned foreign companies: container handling services and road transport services still require joint ventures with Vietnamese partners.

Market access should be granted under Vietnam's WTO service sector commitments, which use the United Nations' Central Product Classification ("CPC") codes. Although the term "logistic services" is not defined in Vietnam's WTO commitments, the following "services auxiliary to all modes of transport" (sector H) are now technically open to FIE:

  1. Storage and warehouse services(CPC 742);
  2. Freight transport agency services (CPC 748), including "freight forwarding services", i.e., "activities consisting of organizing and monitoring shipment operations on behalf of shippers, through the acquisition of transport and related services, preparation of documentation and provision of business information."
  3. Foreign capital restrictions on "bill auditing; freight brokerage services; freight inspection, weighing and sampling services; freight receiving and acceptance services; transportation document preparation services" (part of CPC 749) have all been lifted for several years.

Yet, container handling services (CPC 7411) require joint ventures with Vietnamese partners with foreign capital contribution "not exceeding 50 percent" (except at airports). There is no definition of container handling in Vietnam's WTO commitments and it remains to be seen how this restriction will be handled in practice. Likewise, freight transportation services by road (CPC 7123) are still restricted to joint ventures with Vietnamese partners with foreign capital contribution "not exceeding 51 percent", and all of the joint-venture's drivers must be Vietnamese citizens.

Although, a number of logistics sectors have been opened, there are still considerable barriers to market access in the logistics sector. How can a foreign company, for example, organize and monitor shipments (CPC 748) and handle bill auditing, freight inspections, etc. (CPC 749) without any "container handling" at all? Foreign logistics companies may not transport freight by road? Unfortunately, interpreting the WTO commitments strictly, foreign companies may only be permitted to provide full logistics services at airports at the moment, because joint ventures are still required for the most important transport sectors.

Based in Ho Chi Minh City for the law firm DuaneMorris, Manfred Otto advises individuals and corporations on a wide range of corporate and commercial matters related to doing business in Vietnam and Southeast Asia, including business formation, contract negotiation, M&A, intellectual property and employment law.

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