Open a Joint Venture Freight Forwarder and a Courier in VietnamDec 29, 2016 179
Question: We are planning to open a Joint Venture Freight Forwarder and a Courier (express) between a Viet Nam Company and a partner base in Hongkong. We will operate in both export & import. So could you please advise us as following information:
- Documents required
- Time frame
Thank you and hope to get your feedback soon
Answer: This is reference to your email from which, we understand that your company, (hereinafter referred to as “Client”) is now seeking legal advices for establishment of Joint Venture Company with a Taiwanese Investor (hereinafter referred to as “JVC”).
Upon establishment, JVC shall engage with business principal activities of (i) Operations of freight transport agency; (ii) Operations of customs clearance agency; (iii) Warehouse service and (iv) express courier service.
We therefore are grateful to present you our Legal information for your review and consideration.
1.SETTING UP FOREIGN INVESTED COMPANY IN VIETNAM
The establishment of a JVC in Vietnam requires an Investment Certificate and Certificate of Business Registration from the licensing authority. Depending upon the location of the company, the licensing authority may be the Provincial People’s Committee (for companies located outside industrial or export processing zones) or the provincial Industrial and Export Processing Zones Management Authority (for companies located in industrial or export processing zones).
We would like to clarify that the procedure for establishment of a JVC in Vietnam generally takes a rather long time in comparison with other countries in the region.
Our practical experiences show that although the total time for establishment of a foreign invested company as stipulated under Vietnam Investment Law 2014 is only 15 days, the actual process may take a longer time due to that the competent authority must consult other relevant offices to evaluate the investment project. With respect to several cases that involves with relocation of 10,000 people or more in highlands; 20,000 people or more in other areas or requirement for changes of land purposes or project in several special field such as Construction and operation of airports; air transport; Construction and operation of national seaports; Petroleum exploration, extraction, and refinery etc, it shall require for approval from the National Assembly, Prime Minister or
Provincial People Committee before starting the licensing process. In this case, we assume that your case is not subject to such requirement for approval.
However, we reserve our right to requote our professional fee and amend the work schedule if your case is subject to approval of the National Assembly, Prime Minister or the Provincial People Committee. In order to setup a FIC, it shall require you to undergo two following steps:
Step 1: Obtainment of Investment Certificate. The Law requires that within 15 working days from submission of the application dossier the competent authority shall have to issue the Investment Certificate for Foreign Investor. However, having preliminarily discussed with the Licensing Authority, we do not much expect that the licensing authority can comply with this requirement in practice, especially, those relating to conditional investment sectors. For granting the Investment Certificate, the relevant licensing authorities shall evaluate the legitimacy and the feasibility of such Investment Project to determine on granting of the Investment Certificate on the following basis:
- Legal framework including Vietnam’s WTO Commitments, Vietnam Investment Law, Vietnam Enterprise Law, Regulations applicable to specific industries as well as the master economic development plan of the city or province that the JVC shall register its head-office.
- Your financial ability, investment capital to put in the Investment Project, facilities and human resources serving the implementation of such investment project in Vietnam.
Step 2: After obtainment of Investment Certificate, Client shall be required to obtain the Certificate of Business Registration. The Law requires that within 05 working days from submission of application dossier, the competent authority shall have to issue the Certificate of Business Registration for forming the Foreign Invested Company.
2.OUR SPECIFIC COMMENTS
2.1. Operations of freight transport agency is classified to CPC 748: According to
roadmap of opening market under Vietnam’s WTO commitments, from the year of entering into WTO, Foreign Investors shall be required to setup joint venture with Vietnamese Partner in which foreign ownership must not exceed 51%. 7 years after entering into WTO, foreign ownership restriction shall be removed.
Thus, with respect to these services, Investor shall not face with difficulties in obtaining Investment Certificate for establishment of joint venture company;
2.2. Operations of customs clearance agency: According to roadmap of opening market under Vietnam’s WTO commitments, from the year of entering into WTO, Foreign Investors shall be required to setup joint venture with Vietnamese Partner in which foreign ownership must not exceed 51%. 5 years after entering into WTO, foreign ownership restriction in Joint Venture Company shall be removed. Thus, with respect to these services, Client is allowed to setup Joint Venture Company with a Local Investor in which the Ownership of the Client can be up to 99%. We also would like to further note that in this case, experience of the Local Investor in the field of logistic services shall be considered as one of important factors that determine success possibility of the case;
2.3. Warehouse service (except for real-estate business) is classified to Warehousing Service (CPC 742). According to roadmap of opening market under Vietnam’s WTO commitments, from the year of entering into WTO, Foreign Investors shall be required to setup joint venture with Vietnamese Partner in which foreign ownership must not exceed 51%. 7 years after entering into WTO, foreign ownership restriction shall be removed. Thus, Client shall not face with difficulty in obtainment of approval from the competent authority. However, we still would like to note that, for conducting warehouse service, you must lease a land lot having sufficient space that enable the JVC to provide warehouse services to customer.
2.4. Express Courier Service is classified to CPC 751. According to roadmap of opening market under Vietnam’s WTO commitment, Vietnam Government does not limit right of Foreign Investor to carry out Express Courier Service in Vietnam. However, under Vietnam Law, before actually carrying out Express Courier Service, JVC shall need to obtain sub-license from the Ministry of Information and Communication. We shall advise you the procedure for obtaining sub-license for carrying out Express Courier Service in a separate service package upon request.
2.5. Other critical factors
In this case, in order to secure the high success possibility, we highly recommend Client to carefully account following factors:
– Location of the JVC: In Vietnam, location of a foreign invested company is very
important. Location of the Joint Venture Company must strictly comply with master plan of the City. We noted that the Joint Venture Company shall conduct warehousing services. In this case, a land lot having sufficient space for warehousing services shall be strictly required. A plan for leasing existed warehouses from other suppliers for releasing is not recommended. According to our practical experience, locations in Industrial Zones shall be a good option.
The Licensing Authority may refuse to grant the License if Client fails to provide sufficient explanation on such matters.
– Investment Capital of FIC: Under Vietnam Law, your proposed business shall require for minimum rate of investment capital. Particularly, for carrying out domestic express courier service, the minimum capital must be 2,000,000,000VND (Two billion Vietnam Dong) and for carrying out international express courier service, the minimum capital must be 5,000,000,000VND (Five billion Vietnam Dong). However, upon applying for investment certificate, Client still need to provide an estimate of capital required for operating the Foreign Invested Company in a medium or long term. For a number of business activities as mentioned in your email, the competent authority may require Client to consider an amount of investment capital from 500,000USD upward. In case Client finds such amount is not feasible, Client should consider removing un-necessary business lines.
– Experience of Client: Experience of Client and Vietnam Partner in the field is also one of important factor that determining the success possibility of the case. Foreign Investor and Vietnam Partner having no experience in the field are generally not favoured by the Licensing Authority.