Decision 22/2022/QD-TTg guide Protocol between Vietnam and Belarus on Supporting the Production of Motor Vehicles

DECISION

Guiding the implementation of the Second Protocol to Amend the Protocol between the Government of the Socialist Republic of Vietnam and the Government of the Republic of Belarus on Supporting the Production of Motor Vehicles in the Territory of Vietnam^[1]

Pursuant to the June 19, 2015 Law on Organization of the Government; and the November 22, 2019 Law Amending and Supplementing a Number of Articles of the Law on Organization of the Government and the Law on Organization of Local Administration;

Pursuant to the April 9, 2016 Law on Treaties;

In furtherance of the Protocol between the Government of the Socialist Republic of Vietnam and the Government of the Republic of Belarus on Supporting the Production of Motor Vehicles in the Territory of Vietnam signed on March 23, 2016; the Protocol Amending the Protocol between the Government of the Socialist Republic of Vietnam and the Government of the Republic of Belarus on Supporting the Production of Motor Vehicles in the Territory of Vietnam signed on June 27, 2017; and the Second Protocol to Amend the Protocol between the Government of the Socialist Republic of Vietnam and the Government of the Republic of Belarus on Supporting the Production of Motor Vehicles in the Territory of Vietnam signed on December 3, 2020;

Pursuant to the Ministry of Industry and Trade’s Official Letters No. 459/BCT-AM of August 12, 2022, and No. 557/BCT-AM of September 20, 2022, and the Ministry of Finance’s Official Letter No. 764/BTC-HTQT of July 8, 2022;

At the proposal of the Minister of Industry and Trade;

The Prime Minister promulgates the Decision guiding the implementation of the Second Protocol to Amend the Protocol between the Government of the Socialist Republic of Vietnam and the Government of the Republic of Belarus on Supporting the Production of Motor Vehicles in the Territory of Vietnam.

Chapter I

GENERAL PROVISIONS

Article 1. Scope of regulation

This Decision provides the process of allocating tariff-rate quotas, order and procedures for granting tariff-rate quota import permits, in-quota and out-of-quota import duty rates, and the mechanism for coordination between state agencies in the management of goods and services to implement the mechanism on tariff-rate quota import of motor vehicles and sets of parts and components within the framework of the Protocol.

Article 2. Subjects of application

1. Competent state management agencies.

2. Eligible joint ventures as specified in Article 4 of this Decision.

Article 3. Interpretation of terms

In this Decision, the terms below shall be construed as follows:

1. Joint venture means a legal entity established by one party being the Joint Stock Company “Minsk Automobile Plant” - the management company of “BELAUTOMAZ” (MAZ) of the Republic of Belarus or MAZ’s replacing or reorganized company at the request of the Belarusian side, and the other party being an interested Vietnamese enterprise in Vietnam’s territory in conformity with Vietnam’s law.

2. Motor vehicles mean a number of categories of trucks (N) and motor vehicles for the carriage of 10 people or more, including the driver (M2, M3), as agreed between MAZ and the interested Vietnamese enterprise.^[2]

3. Set of parts and components of motor vehicles means a set of parts and components imported into Vietnam’s territory by the joint venture and necessary for the industrial assembly of motor vehicles, except parts and components produced in Vietnam’s territory.

4. Localization rate is the domestic value-added content calculated according to the following formula:

a/ Vietnam’s material cost means the value of materials, parts or goods originating in Vietnam and meeting the origin criteria in accordance with the provisions of Chapter 4 (Rules of Origin) of the Vietnam-Eurasian Economic Union Free Trade Agreement (VN-EAEU FTA);

b/ Direct labor cost includes wages, bonuses and other benefits of employees associated with the production process in accordance with Vietnam’s law;

c/ Direct overhead includes, but is not limited to, administrative and commercial expenses; costs of fixed assets associated with the production process (expenses for rent and depreciation of buildings, taxes, mortgage interest); rental costs and interest payable for the factory and equipment; factory protection cost; insurance costs (the factory, equipment and materials used in the production of goods); costs for use of public services (energy, electricity and water and costs for use of other public services associated with the production of goods); research and development, design and engineering costs; dyes, molds, tools, and factory and equipment depreciation, maintenance and repair; royalties or license expenses (in connection with copyrighted machines and technologies used in the production of goods or the right to manufacture goods); costs of inspecting and testing materials and goods; warehousing costs at the factory; recyclable waste disposal costs; and cost of factors used in the calculation of the value of raw materials, i.e., port and release charges and import duties payable on the dutiable portions;

d/ Profit means the net profit of the joint venture after deducting all taxes and fees as required by Vietnam’s law;

dd/ End user price means the price of the goods on the bill of lading.

Article 4. Requirements on the joint venture

Eligible joint ventures include:

1. A legal entity established by one party being the Joint Stock Company “Minsk Automobile Plant” - the management company of “BELAUTOMAZ” (MAZ) of the Republic of Belarus, or MAZ’s replacing or reorganized company at the request of the Belarusian side, and the other party being an interested Vietnamese enterprise in Vietnam’s territory in accordance with Vietnam’s law.

2. MAZ may establish a joint venture producing trucks (N) and a joint venture producing motor vehicles for the carriage of 10 people or more, including the driver (M2, M3), for the purpose of producing motor vehicles in the territory of the Socialist Republic of Vietnam.

3. The capital contributed by Vietnamese enterprises in a joint venture must reach at least 50% of the total charter capital of the joint venture.

4. The joint venture must be established and operate for at least 10 years and at most 30 years.

5. MAZ or its replacing or reorganized company may not transfer capital in joint ventures to any third party of any third country.

6. The localization rate will be gradually increased to 30% by 2022 and 45% by 2025 for trucks, or 35% by 2022 and 50% by 2025 for motor vehicles for the carriage of 10 people or more, including the driver.

7. Motor vehicles manufactured by the joint venture(s) for use in the territory of the Socialist Republic of Vietnam must meet technical requirements, standards and conformity assessment procedures in accordance with Vietnam’s law.

Chapter II

TARIFF-RATE QUOTAS

Article 5. Tariff-rate quota volumes

1. The total volumes of tariff-rate quotas for all joint ventures up to 2024 are as follows:

2. The Ministry of Industry and Trade shall allocate tariff-rate quotas for each year to the joint venture(s) based on the total quota volumes specified in Clause 1, Article 5 of this Decision and the actual situation of implementation of the production plan(s) sent by the joint venture(s) to the Ministry of Industry and Trade.

3. If the quota volume of a year specified in Clause 1, Article 5 of this Decision has not been used up in such year, the unused quota volume may be carried forward to the following year. The tariff-rate quota volume to be allocated for the following year may be reduced, depending on the result of the joint venture’s implementation of the commitment on the localization rate stated in its tentative plan and the situation of fulfillment of the tariff-rate quota in such year, and shall be calculated according to the following formula:

Tariff-rate quota volume to be allocated for the following year = M * (1-A) + B-C (or D)

In which:

a/ M is the tariff-rate quota volume to be allocated to the joint venture under Clause 1, Article 5 of this Decision;

b/ A is the actual non-fulfillment percentage of the localization rate stated in the tentative plan of the year;

c/ B is the tariff-rate quota volume specified in Clause 1, Article 5 of this Decision that has yet to be fulfilled in the year and is allowed to be carried forward to the following year;

d/ C is 30% of M of the following year in case the joint venture has fulfilled only 50-80% of the year’s tariff-rate quota volume (M of the previous year) specified in Clause 1, Article 5 of this Decision;

dd/ D is 50% of M of the following year in case the joint venture has fulfilled less than 50% of the year’s tariff-rate quota volume (M of the previous year) specified in Clause 1, Article 5 of this Decision.

4. In case of adjusting the tariff-rate quota volumes specified in Clause 1, Article 5 of this Decision, the Ministry of Industry and Trade shall notify such adjustment to the Belarusian side before January 31 every year.

Article 6. In-quota and out-of-quota import duty rates

1. The in-quota import duty rate is 0% in case the following conditions are satisfied:

a/ The origin of motor vehicles and the origin of sets of parts and components of motor vehicles imported by the joint venture(s) for industrial assembly in Vietnam’s territory, if assembled into complete motor vehicles in the territory of the Republic of Belarus, is approved by a Certificate of Origin issued with an indication of not less than 55% in value-added content calculated in accordance with Chapter 4 (Rules of Origin) of the VN-EAEU FTA.

b/ All motor vehicles and sets of parts and components imported into Vietnam by the joint venture(s) are brand-new and unused.

c/ Motor vehicles imported by the joint venture(s) are produced/manufactured within 2 years, counted to the year of arrival at a Vietnamese port or border gate.

2. Out-of-quota import duty rates:

a/ In case the goods are accompanied with a Certificate of Origin under the VN-EAEU FTA (Certificate of Origin, form EAV), the out-of-quota import duty rate is the current import duty rate as committed under the VN-EAEU FTA;

b/ In case the goods are not accompanied with a Certificate of Origin, form EAV, the out-of-quota import duty rate shall be determined according to the relevant tax laws of Vietnam.

Chapter III

PROCEDURES FOR GRANT OF TARIFF-RATE QUOTA IMPORT PERMITS AND QUOTA-BASED IMPORT

Article 7. Order and procedures for grant of tariff-rate quota import permits

1. The joint venture shall send its annual production plan to the Ministry of Industry and Trade, clearly stating:

a/ Category and number of vehicles to be produced;

b/ Detailed list of components in sets of parts and components;

c/ Eight-digit tariff lines corresponding to the to-be-imported motor vehicles and sets of parts and components according to Vietnam’s current List of Imports and Exports;

d/ The roadmap to achieve the localization rate as committed in Clause 6, Article 4 of this Decision;

dd/ Expected implementation of agreements on technology transfer and human resource training.

2. Within 30 days after receiving the production plan from the joint venture, the Ministry of Industry and Trade shall notify the approval of this production plan. In case it is necessary to clarify or supplement information about the production plan, the Ministry of Industry and Trade shall notify the joint venture of specific requirements on additional information to be provided.

Within 10 days after receiving additional information on the production plan from the joint venture, the Ministry of Industry and Trade shall notify whether it approves or rejects this plan.

3. Based on the formula for calculation of the tariff-rate quota volume to be allocated for the following year specified in Clause 3, Article 5 of this Decision, the Ministry of Industry and Trade shall grant a tariff-rate quota import permit for each year to the joint venture on the basis of the following documents:

a/ The joint venture’s application for a tariff-rate quota import permit;

b/ The joint venture’s production plan, which has been approved by the Ministry of Industry and Trade, including the 8-digit tariff lines according to Vietnam’s List of Imports and Exports based on a Harmonized Commodity Description and Coding System of the World Customs Organization corresponding to motor vehicles and/or all parts and components of motor vehicles for the production of motor vehicles, except parts and components of motor vehicles produced in Vietnam’s territory.

4. Within 14 days after receiving the documents mentioned in Clause 3 of this Article, the Ministry of Industry and Trade shall grant a tariff-rate quota import permit to the joint venture. Tariff-rate quotas are valid through December 31 of each year.

Article 8. Import procedures

Based on the import tariff-rate quota volume allocated and the validity period of these quotas, when the joint venture(s) complete(s) the submission of the import dossier for each shipment for customs clearance, the Vietnamese customs offices shall reconcile the quantity of imported CBU vehicles and/or sets of parts and components until reaching the maximum annual quota annually allocated.

Article 9. Revocation of import tariff-rate quota import permits

The joint venture shall have its import tariff-rate quota import permit revoked in the following cases:

1. The joint venture fails to operate in accordance with Vietnam’s law.

2. The joint venture fails to meet the localization rate requirements as committed in Clause 6, Article 4 of this Decision within 10 years from the date of entry into force of the Protocol.

3. MAZ or its replacing or reorganized company transfers the capital portion in the joint venture to a third party of a third country.

4. The joint venture fails to perform its obligations in the agreements related to technology transfer.

5. The joint venture fails to carry out specific activities to contribute to developing Vietnam’s automobile part production industry; developing a system of automobile maintenance and repair services; providing technical skill training to local workers and assisting the marketing of motor vehicles and parts and components produced by the joint venture in other countries, including also the Eurasian Economic Union.

Article 10. Change of the authorized enterprise under the Protocol

The Ministry of Industry and Trade shall assume the prime responsibility for reviewing and evaluating the Belarusian side’s proposal regarding the enterprise replacing MAZ or the new enterprise reorganized from MAZ based on the criteria specified in the Protocol and confirm with the Belarusian side the eligibility of the newly authorized enterprise within 28 days after receiving the request and necessary documents.

Chapter IV

MECHANISM ON COOPERATION IN MANAGEMENT BETWEEN STATE AGENCIES

Article 11. Mechanism on coordination in grant of tariff-rate quota import permits

1. The Ministry of Industry and Trade shall assume the prime responsibility for:

a/ Granting tariff-rate quota import permits to the joint venture(s) in accordance with Article 7 of this Decision;

b/ Approving the change of the enterprise of the Belarusian side and notifying thereof to the concerned ministries and sectors in case of agreeing with the proposal of the Belarusian side about this change;

c/ Annually inspecting the production process, evaluating the fulfillment of tariff-rate quotas, and implementation of the commitment on the localization rate of each joint venture so as to obtain a basis for adjusting the tariff-rate quota volume to be allocated to each joint venture for the following year.

2. The Ministry of Industry and Trade shall assume the prime responsibility for, and coordinate with concerned ministries in, considering and approving the production plan of the joint venture(s), in which:

The Ministry of Finance shall review the compatibility between the List of motor vehicles and sets of parts and components proposed for application of duty-free incentives under tariff-rate quotas, detailed to the 8-digit level, which is included in the production plan, and Vietnam’s current List of Imports and Exports.

3. Before January 31 every year, the Ministry of Industry and Trade shall notify the Ministry of Finance of the adjusted tariff-rate quota volume.

4. The Ministry of Industry and Trade shall notify the Ministry of Finance of the List of motor vehicles and sets of parts and components expected to be imported by each joint venture right after approving the joint venture’s production plan.

5. The Ministry of Planning and Investment shall announce the list of domestically available automobile parts according to its functions and tasks and introduce and update the joint venture(s) on information about production facilities in Vietnam which can produce parts with specific types and technical standards. At the same time, the Ministry of Planning and Investment shall inspect the process of negotiation between the joint venture(s) and production facilities for ordering parts for automobiles produced and assembled by the joint venture(s) in Vietnam.

Chapter V

INSPECTION AND REPORTING REGIME

Article 12. Inspection

1. The Ministry of Industry and Trade shall inspect the production process; evaluate the fulfillment of tariff-rate quotas and the implementation of commitments on the localization rate by each joint venture and adjust the duty-free quota volumes for the following year.

2. The Ministry of Finance shall inspect the customs clearance of imported shipments to ensure that motor vehicles and/or sets of parts and components are imported free of duty as specified in the List of motor vehicles and sets of parts and components sent by the Ministry of Industry and Trade and stated in the tariff-rate quota import permits granted by the Ministry of Industry and Trade.

3. The Ministry of Transport shall inspect motor vehicles and components and parts produced by the joint venture(s) for use in Vietnam’s territory to ensure that these vehicles and components and parts meet the standards, technical requirements and conformity assessment procedures specified in relevant legal documents of Vietnam.

Article 13. Reporting obligation

1. The joint venture(s) is(are) obliged to comply with Vietnam’s law.

2. Before January 15 every year, the joint venture(s) shall report to the Ministry of Industry and Trade on the production and business situation in the previous year, the fulfillment of tariff-rate quotas and the implementation of the plan on the localization rate, clearly stating:

a/ The quantity of motor vehicles and sets of parts and components imported free of duty;

b/ Category and quantity of vehicles produced;

c/ Necessary data for calculation of the localization rate (Vietnam’s material cost, direct labor cost, direct overhead, profit, and end user price);

d/ The latest update of the annual financial statement.

Chapter VI

IMPLEMENTATION PROVISIONS

Article 14. Effect

This Decision takes effect on the date of its signing. The Prime Minister’s Decision No. 09/2017/QD-TTg of March 31, 2017, guiding the implementation of the Protocol between the Government of the Socialist Republic of Vietnam and the Government of the Republic of Belarus on Supporting the Production of Motor Vehicles in the Territory of Vietnam (below referred to as Decision No. 09/2017/QD-TTg), and Decision No. 2077/QD-TTg of December 22, 2017, amending and supplementing a number of articles of Decision 09/2017/QD- TTg, cease to be effective on the effective date of this Decision.

If failing to produce motor vehicles that meet the localization rate requirements specified in Clause 6, Article 4 of this Decision within 10 years from October 5, 2016, the joint venture(s) will have its(their) investment registration certificate(s) and enterprise registration certificate(s) revoked.

Article 15. Implementation responsibility

1. The Minister of Industry and Trade shall monitor and inspect the implementation of this Decision.

2. Ministers, heads of ministerial-level agencies, heads of government-attached agencies, and chairpersons of provincial-level People’s Committees shall implement this Decision.-

For the Prime Minister
Deputy Prime Minister
LE VAN THANH