Regulations for applying for distribution operation project for Chinese investors who have established a business in Vietnam

This article analyzes the procedures for applying for a distribution operation project for Chinese investors in cases where the project implementation organization is also the investor implementing the distribution operation project in Vietnam. The context is set where the Chinese investor has contributed capital to acquire shares in a domestic economic organization and intends to use this very organization to carry out an investment project for distribution activities in Vietnam. 

1. Procedure for applying for a distribution operation project for Chinese investors in Vietnam

• Applying for an Investment Registration Certificate for the distribution operation project 

The implementation of an investment project is one of the forms of investment stipulated in clause 3 of Article 21 of the current Law on Investment. Accordingly, an economic organization with foreign investors holding more than 50% of the charter capital will apply the regulations for foreign investors when implementing investment projects as specified in point a clause 1 Article 23 of the Law on Investment 2020.   

Therefore, when implementing an investment project, a business organization with foreign investors holding more than 50% of the charter capital must carry out the procedures for applying for an Investment Registration Certificate as specified in point b clause 1 Article 37 of the Investment Law 2020.  

Depending on the scale of the project, investors must obtain investment policy approval from different competent authorities such as the National Assembly, the Prime Minister, or the provincial People’s Committee, as stipulated in Section 2 of the 2020 Investment Law. After receiving the written investment policy approval, the investment registration authority will issue the Investment Registration Certificate to the investor within 5 working days from the date of receiving the written approval, simultaneously with the approval of the investor for projects requiring the issuance of the Investment Registration Certificate, as stipulated in point a, clause 1, Article 38 of the Investment Law 2020. 

For projects not requiring investment policy approval, investors shall proceed with the procedures for obtaining the Investment Registration Certificate in accordance with clause 1, Article 33 of the Investment Law 2020 and Article 36 of Decree 31/2020/ND-CP. 

•  Adding Distribution Business to the Enterprise Registration Certificate 

In cases where the company’s business activities have not yet been registered for distribution, the business organization needs to carry out additional procedures to include the distribution business in the Enterprise Registration Certificate. 

Depending on the products that the business organization intends to distribute in the market, the registered business lines will vary. For example, distributing pharmaceuticals will require different types of licenses and registrations compared to distributing cosmetics. Each type of product has its own legal requirements and industry standards that must be adhered to. 

Therefore, carefully considering and appropriately registering each intended product distribution line is crucial. This not only ensures compliance with legal requirements but also facilitates smooth business operations. Hence, the business organization implementing the project should consult legal experts or advisory units to determine the appropriate business lines. 

2. Regulations on market access conditions for Chinese investors in Vietnam 

•  Nationality Conditions 

According to Vietnam’s WTO accession commitments, regarding the right to wholesale and retail distribution, Vietnam has officially opened up to foreign investors without any restrictions on the capital contribution ratio. 

In cases where the business organization implementing the project is also the investor carrying out the project, and the company is established and operates under Vietnamese law but has Chinese investors holding 50% or more of the charter capital, the regulations applicable to foreign investors will be applied. 

Since China joined and became a member of the World Trade Organization (“WTO”), specifically joining on November 11st, 2001, the nationality condition for foreign owners/contributors/shareholders in the investor has been met.  

• Business Line Conditions and Project Activity Objectives 

For the business line of wholesale and retail distribution of certain permitted goods within the territory of Vietnam, the right to wholesale and retail distribution falls under activities related to the purchase and sale of goods as stated in clauses 1 and 4 of Article 3 of Decree 09/2018/ND-CP. This decree details the Law on Commercial and the Law on Foreign Trade Management concerning the purchase and sale of goods and activities directly related to the purchase and sale of goods by foreign investors and foreign-invested economic organizations in Vietnam. This is also an activity that Vietnam has committed to opening up to all WTO member countries, including China, in its Schedule of Specific Commitments in Services (“WTO Schedule of Commitments”). According to the WTO Schedule of Commitments, there are no restrictions on the capital contribution ratio and market access for foreign investors in the distribution services sector (wholesale and retail distribution rights). 

Therefore, Chinese investors can meet the nationality conditions to register for the right to wholesale and retail distribution under current legal regulations through investment activities to implement distribution projects in Vietnam. 

• Conditions Regarding the Goods to Be Distributed 

The goods to be distributed must meet the following conditions: 

• • They must not be on the list of goods prohibited from import as specified in Appendix I of Decree 69/2018/ND-CP, detailing several provisions of the Law on Foreign Trade Management. 

1. • They must not be on the list of goods prohibited from import and distribution as specified in Appendix 01 of Circular 01/2018/TT-BCT, detailing goods and trade exchanges across sub-border gates and border openings by traders. 

In case the goods that the economic organization intends to distribute fall under the list of goods subject to export and import licensing conditions as stated in Appendix III attached to Decree 69/2018/ND-CP, the business organization must also meet additional licensing conditions such as Export License, Import License, Inspection License, and Standard Announcement following the legal regulations before conducting distribution activities in Vietnam. 

Thus, it is feasible to apply for a distribution operation project for Chinese investors in Vietnam. However, during the implementation process, foreign-invested economic organizations must strictly comply with legal regulations related to investment activities and the import, export, wholesale, and retail distribution of goods in the Vietnamese market. 

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