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27 September, 2016
Foreign investors can now proceed with more certainty when setting up logistic companies or acquiring stakes from Vietnamese partners. Logistics is an area where discrepancies between international treaties and domestic law implementation have caused many headaches. However, Vietnam’s Ministry of Industry and Trade (MOIT) has recently provided more clarity through a guiding regulation (Circular No. 9911/BCT-KH) and a number of official letters, including responses to the Ho Chi Minh City People’s Committee and the Vietnam Business Forum. At the same time, a few Japanese logistics companies have established 100% foreign-invested subsidiaries in Vietnam.
International treaties should supersede national law, and official comments from MOIT have restated that view. So, we initially refer to Vietnam’s WTO service sector commitments (WTOSSC) in most cases. Accordingly, some sectors are open to 100% foreign investment (e.g., warehousing and freight forwarding), while some still require Vietnamese equity participation (e.g., container handling).
| Foreign Ownership Limitations in the Logistics Sector (WTOSSC) | ||
| CPC | Service Description | Max. Foreign Ownership |
| 742 | Storage and Warehouse | 100% |
| 748 | Freight transport agency (incl. freight forwarding services) | 100% |
| 749 (partially) | Bill auditing; freight brokerage; freight inspection, weighing and sampling; freight receiving and acceptance; transportation document preparation on behalf of cargo owners | 99% |
| 7211 | Maritime transport (Passengers; less cabotage) | 49% |
| 7212 | Maritime transport (Freight; less cabotage) | 51% |
| 7221 | Internal waterways transport (Passengers) | 49% |
| 7222 | Internal waterways transport (Freight) | 49% |
| 7111 | Rail transport (Passengers) | Unbound |
| 7112 | Rail transport (Freight) | 49% |
| 7121 + 7122 | Road transport (Passengers) | 49% |
| 7123 | Road transport (Freight) | 51% |
| No CPC | Custom clearance | 99% |
| No CPC | Container station and depot | 100% |
| 7411 | Container handling (except at airports) | 50% |
| 7512 | Courier (express delivery) | 100% |
| 621, 61111, 6113, 6121, 622, 631 + 632 | Distribution (import/export, commission agents, wholesale, retail) | 100% |
As a foreign buyer in an M&A case, besides the purchases price and other conditions, we recommend to consider and differentiate between absolutely essential and optional business lines as well as the best case and acceptable levels of ownership in the target.
Yamato Logistics and the Sagawa Express have established 100% foreign-invested subsidiaries in Vietnam. This is possible through strategically limiting business lines to those that are open to 100% foreign investment.
For further information, please contact:
Manfred Otto, Duane Morris
motto@duanemorris.com
