Legal auto import advantages to remain

The requirement was mentioned in the ministry’s Circular 20, which came into effect in June 2011 but was scheduled to become invalid on July 1 this year.

The regulation’s initial purpose was to tighten the import of CBU cars and compel businesses to ensure that after-sale services, such as warranty and maintenance, matched the manufacturers’ standards. 

It is said that meeting these standards is very difficult for businesses because foreign automakers always choose only one official supplier in a foreign country.

Insiders expect that the regulation will once again come into force because it has been included in a draft decree on trade and investment conditions. The draft has been sent to relevant ministries and sectors for suggestions.

Many auto importers in Vietnam are eagerly waiting for the new decree.

If the regulation on auto imports is retained, importers who are authorised dealers for foreign automakers, can set their mind at ease and continue doing business as normal. But if the regulation is removed, all businesses, including those that are not authorised dealers for foreign automakers, can import CBUs to Vietnam.

Speaking to baodientu.chinhphu.vn, deputy head of the ministry’s Import-Export Department, Tran Thanh Hai, defended the regulation, saying that if the regulation on auto imports in Circular 20 was not put into the decree, it would lead to a series of negative impacts on the domestic automobile market.

Hải said that the lifting of the regulation would also put a halt to the national automobile industry’s development planning already approved by the Prime Minister, which includes the plan to boost the development of domestic auto assembling and manufacturing businesses.

There are two additional factors that will push up auto imports in Vietnam: the auto import tariff for ASEAN members becomes zero per cent as of 2018, and the country’s reduction of the special consumption tax on vehicles with small engine displacement has come into effect since July 1 this year.

"If the regulation is removed, it will accelerate auto imports, leading to social problems such as traffic jams and urban environmental pollution," Hai said.

“It’s not that the ministry does not want to remove difficulties for businesses, but the lifting of the regulation will likely cause unhealthy competition in the market, like it was before 2011 when Circular 20 had not yet been issued," he added.

In response to the draft decree, the Vietnam Chamber of Commerce and Industry (VCCI) has recently asked to abrogate the circular’s regulation and not put it into the decree.

The VCCI said the requirement of having an authorised paper to become an official supplier of a foreign automaker had created advantages for some businesses that were authorised dealers.

Meanwhile, other businesses that did not have such a paper but wanted to import vehicles had to buy cars from authorised dealers to sell them in the market.

This not only led to unfair competition between the two groups, but also meant consumers had to pay a higher price for the imported vehicles.

The Ministry of Justice has also opposed this regulation in an official letter recently sent to the Government.

Earlier, many auto importers, official suppliers, the Vietnam Automobile Manufacturers’ Association and the European Chamber of Commerce in Vietnam, as well as the German Business Association in Vietnam and the Vietnam Business Forum, sent documents to Prime Minister Nguyen Xuan Phuc proposing to keep the regulations on auto imports in Circular 20.

They also expressed their concerns that if the regulation was removed, it would affect the domestic automobile industry and the auto market, lead to commercial fraud in auto imports, losses in tax and influence the interests and rights of domestic consumers.

According to a report from the General Statistic Office, Vietnam imported an estimated 49,000 cars, worth US$1.18 billion in the first half of this year, decreasing by 11.2% in quantity and 21.2% in value compared with the same period last year.

May and June were a ‘boisterous’ period for high-value auto imports. This is because businesses and consumers had tried to import vehicles with 10 seats and below and with an engine displacement of more than 2,500cc before July 1 when the increase of special consumption tax comes into effect.