The adjustment of laws for foreign investors operating logistics services

Foreign investors operating logistics services in the Vietnamese market present both opportunities for the business sector and international integration, and potential competitive risks for domestic enterprises. To conduct foreign investment in the Vietnamese logistics services market, foreign investors operating logistics services in Vietnam have to carefully research and consider relevant legal regulations. Through this article, NPLaw would like to provide readers with the necessary legal information related to foreign investment in logistics services in Vietnam.

I. Can foreign investors engage in the logistics service business?

Pursuant to Article 4 of Decree 163/2017/ND-CP, traders operating specific logistics services as specified in Article 3 of Decree 163/2017/ND-CP have to meet the investment and business conditions for such services as prescribed by Law. In particular, Clause 3, Article 4 of Decree 163/2017/NĐ-CP stipulates the conditions for foreign investors to operate logistics services.

Therefore, it can be understood that foreign investors can operate logistics services if they meet the conditions prescribed by Vietnamese law.

You are reading information about foreign investors in logistics services business that is currently of interest.

II. Conditions for foreign investors operating the logistics service business

Pursuant to the provisions of Clause 3, Article 4 of Decree 163/2017/ND-CP, the conditions for foreign investors to operate the logistics service business are as follows:

In addition to meeting the conditions and regulations specified in Clauses 1 and 2 of this Article, foreign investors from countries and territories that are members of the World Trade Organization are allowed to provide logistics services under the following conditions:

a) In the cases of operating freight transportation services under maritime transport services (excluding inland transportation):

- Foreign investors are permitted to establish companies operating Vietnamese-flagged ships or contribute capital, purchase shares or purchase capital contributions in enterprises, in which the foreign investor's capital contribution ratio does not exceed 49%. The total number of foreign crew members working on Vietnamese-flagged ships (or registered in Vietnam) owned by these companies in Vietnam does not exceed 1/3 of the ship's crew. The captain or first mate must be a Vietnamese citizen. 

- Foreign shipping companies are permitted to establish enterprises or contribute capital, purchase shares or purchase capital contributions in enterprises. 

b) In the case of operating container handling services under maritime transport support services, foreign investors are permitted to establish enterprises or contribute capital, purchase shares or purchase capital contributions in enterprises, in which the foreign investor's capital contribution ratio does not exceed 50%. Foreign investors are allowed to establish a commercial presence in Vietnam in the form of a business cooperation contract.

c) In the case of operating container handling services under multimodal transport support services, except for airport services, foreign investors are permitted to establish enterprises or contribute capital, purchase shares or purchase capital contributions in enterprises, in which the foreign investor's capital contribution ratio does not exceed 50%.

d) In the case of providing customs clearance services under maritime transport support services, foreign investors are permitted to establish enterprises or contribute capital, purchase shares or purchase capital contributions in enterprises, in which it is mandatory to obtain capital contributions from domestic investors. Foreign investors are allowed to establish a commercial presence in Vietnam in the form of a business cooperation contract.

dd) In the case of operating other services, including the following activities: Bill of lading inspection, freight forwarding services, cargo inspection, and sampling and weight determination services; receipt and acceptance services; and services for preparing transport documents, foreign investors are permitted to establish enterprises or contribute capital, purchase shares or purchase capital contributions in enterprises, in which it is mandatory to obtain capital contributions from domestic investors.

e) In the case of operating freight transportation services under inland waterway transport services or freight transportation services under railway transport services, foreign investors are permitted to establish enterprises or contribute capital, purchase shares or purchase capital contributions in enterprises, in which the foreign investor's capital contribution ratio does not exceed 49%.

g) In the case of operating freight transportation services under road transportation services, foreign investors are carried out through the form of a business cooperation contract or are permitted to establish enterprises or contribute capital, purchase shares or purchase capital contributions in enterprises, in which the foreign investor's capital contribution ratio does not exceed 51%. In addition, 100% of the enterprise's drivers must be Vietnamese citizens.

h) In the case of operating air transport services, foreign investors are permitted to perform these services in accordance with the provisions of the Civil Aviation Law.

i) In the case of operating technical analysis and inspection services:

- For services provided to exercise the Government's authority, they are performed in the form of enterprises in which it is mandatory to have capital contributions from domestic investors after three years, or in the form of enterprises without restrictions on capital contributions from foreign investors after five years, from the time when private providers are allowed to provide such services.

- It is prohibited to provide inspection and certification services for means of transportation.

- The technical analysis and inspection services are restricted to operating in geographical areas determined by the competent authorities due to national security and defense.

In addition, if foreign investors are subject to international treaties that have different provisions on the conditions for operating logistics services, such investors may choose to apply the investment conditions specified in one of those treaties.

Thus, the conditions for foreign investors (foreign traders) to operate logistics services in Vietnam have been clearly and specifically defined by Vietnamese law.

III. Provisions on the limitation of liability for foreign investors (foreign traders) operating logistics services

Article 5 of Decree 163/2017/ND-CP states the limitation of liability in logistics services as follows:

- The limitation of liability is the maximum level at which foreign traders operating logistics services are responsible for compensating their customers for losses arising during the organization and implementation of logistics services in accordance with the provisions of this Decree.

- In cases where relevant laws stipulate the limitation of liability for foreign traders operating logistics services, it shall be applied in accordance with such relevant laws.

- In cases where relevant laws don’t have specific regulations, the limitation of liability for foreign traders operating logistics services shall be agreed upon by the parties. If the parties don’t still have mutual agreements, the limitation of liability shall be applied, as follows:

+ If the customers do not send a prior notice of the value of the goods, the maximum liability shall be 500 million VND for each claim for compensation.

+ If the customers have sent a prior notice of the value of the goods and such notice has been confirmed by foreign traders operating logistics services, the liability shall not exceed the value of the goods.

- The limitation of liability for cases where a trader operating logistics services organizes the performance of multiple stages with different limitations of liability shall be the limitation of liability of the stage with the highest limitation of liability.

Thus, the limitation of liability for foreign traders (foreign investors) is generally recognized under Vietnamese law, with the general principle of protecting the fair interests of the parties involved in logistics relationships with actual losses and agreed-upon values.

IV. Procedures for foreign investors to establish foreign-invested logistics companies in Vietnam

1. A dossier

To establish a foreign-invested logistics company, an investor needs to prepare a dossier to apply for an Investment Registration Certificate, including:

- A written request to implement the investment project;

- Documents on the legal status of the investor: A copy of the citizen identity card or passport (if an individual); a copy of a certificate of establishment or equivalent documents and passport of the capital manager (if an organization);

- Documents proving the investor's financial capacity, including at least one of the following documents:

- Financial statements of the investor for the last 2 years;

- Financial support commitment from the holding company;

- Financial support commitment from a financial institution;

- Guarantee of the investor's financial capacity;

- Other documents proving the investor's financial capacity;

- An investment project proposal includes the following contents: investors, forms of investor selection, investment objectives, investment scale, investment capital and capital mobilization plans, locations, duration, implementation progress, etc. In addition, if the Law on Construction stipulates the preparation of a pre-feasibility study report, the investor may submit the pre-feasibility study report instead of the investment project proposal;

- An investment project does not require the State to allocate land, lease land or allow changing land use purposes. Accordingly, it is necessary to submit a copy of documents on land use rights or other documents identifying the right to use a location to implement the investment project;

- A written explanation of the technology used in the investment project belongs to subjects of technology assessment and consultation according to the provisions of the law on technology transfer;

- Other documents related to the investment project, requirements for conditions and the investor’s capacity according to the provisions of the law (if any);

2. Procedures and processes

Before establishing a foreign-invested enterprise, it must be granted an Investment Registration Certificate. 

Step 1: Preparing an application dossier for an Investment Registration Certificate as specified above. 

Step 2: Submitting such a dossier to the Department of Planning and Investment, where the headquarters is expected to be located. 

Step 3: Within 15 days from the date of receiving a complete and valid dossier, the Department of Planning and Investment will grant an Investment Registration Certificate to the foreign investor. 

If the dossier is refused, the Department of Planning and Investment will reply in writing and clearly state the reasons. 

V. Frequently asked questions for foreign investors operating logistics services

1. What logistics activities are foreign investors allowed to invest 100% of capital in?

Pursuant to the provisions of Article 3 and Clause 3, Article 4 of Decree 163/2017/ND-CP, the logistics activities to which foreign investors can contribute 100% capital include:

+ Customs clearance services under maritime transport support services;

+ Bill of lading inspection, freight forwarding services, cargo inspection, and sampling and weight determination services; receipt and acceptance services; and services for preparing transport documents;

+ Warehousing services;

+ Express delivery services;

2. Is it possible to do logistics business without the Internet?

Pursuant to the provisions of Clauses 1 and 2, Article 4 of Decree 163/2017/ND-CP on business conditions in the logistics sector:

+ Traders operating specific logistics services specified in Article 3 of this Decree have to meet the investment and business conditions as prescribed by law for such services.

+ Traders conducting all or part of their logistics business activities by electronic means with internet connection, mobile telecommunications networks or other open networks, in addition to complying with the legal provisions for the specific services specified in Article 3 of this Decree, have to also comply with the provisions on e-commerce.

Therefore, in order to operate logistics services, traders have to meet the conditions prescribed by law, including the use of electronic means with internet connection, mobile telecommunications networks or other open networks. Therefore, the Internet is required to conduct logistics business activities.

3. Are only Vietnamese entities allowed to operate the specific logistics service of transporting goods by inland waterway?

Pursuant to Clause 3, Article 4 of Decree 163/2017/ND-CP provides for the conditions for operating logistics services as follows:

+ In addition to meeting the conditions and regulations specified in Clauses 1 and 2 of this Article, foreign investors from countries and territories that are members of the World Trade Organization are allowed to provide logistics services under the following conditions:

+ In the cases of operating freight transportation services under inland waterway transportation services or under railway transportation services, be permitted to establish enterprises or contribute capital, purchase shares or purchase capital contributions in enterprises, in which the foreign investor's capital contribution ratio does not exceed 49%.

Therefore, not only Vietnamese enterprises are allowed to operate in the field of inland waterway transport, but enterprises with foreign capital of no more than 49% can also operate the specific logistics service of transporting goods by inland waterway.

VI. Consulting services for foreign investors operating logistics services

Understanding the Client’s need for legal information on foreign investors operating logistics services. With extensive experience in the fields of investment and commerce, NPLaw will support and advise Clients on issues related to the above procedures. Thus, Cleints can directly contact NPLaw to receive enthusiastic and timely advice from NPLaw's experienced lawyers with the following contact information: