Joint Circular No. 103/2008/TTLT/BTC-BGTVT dated November 12, 2008 of the Ministry of Finance and the Ministry of Transport guiding the management of domestic air fare and freight rates and air service charge rates at Vietnamese airports and airfields

JOINT CIRCULAR

GUIDING THE MANAGEMENT OF DOMESTIC AIR FARE AND FREIGHT RATES AND AIR SERVICE CHARGE RATES AT VIETNAMESEAIRPORTS AND AIRFIELDS

Pursuant to June 29, 2006 Law No. 66/2006/QH11 on Vietnam Civil Aviation;

Pursuant to April 26, 2002 Ordinance No. 40/2002/UBTVQH10 on Prices;

Pursuant to the Government s Decree No. 170/2003/ND-CP of December 25, 2003, detailing the implementation of a number of articles of the Ordinance on Prices, and Decree No. 75/2008/ND-CP of June 9, 2008, amending and supplementing a number of articles of Decree No. 170/2003/ND-CP of December 25, 2003, detailing the implementation of a number of articles of the Ordinance on Prices;

Pursuant to the Governments Decree No. 77/2003/ND-CP of July 1, 2003, defining the functions, tasks, powers and organizational structure of the Ministry of Finance;

Pursuant to the Governments Decree No. 51/2008/ND-CP of April 22, 2008. defining the functions, tasks, powers and organizational structure of the Ministry of Transport;

Pursuant to the Governments Decree No. 83/2007/ND-CP of May 25, 2007. on management of operation of airports and oilfields;

The Finance Ministry and the Transport Ministry jointly guide the management of domestic airfares and freight rates arid air service charge rates at Vietnamese airports and oilfields as follows:

I. GENERAL PROVISIONS

1. Scope of regulation

This Circular guides the principles for determining domestic air fare and freight rates (for cargoes and passengers) and air service charge rates (below collectively referred to as charge rates) at Vietnamese airports and airfields beyond the scope of regulation of the Ordinance on Charges and Fees; the competence and responsibility of agencies and units for elaborating, submitting and evaluating charge rate plans and deciding on, registering and declaring charge rates.

2. Subjects of application

This Circular applies to Vietnamese and foreign organizations and individuals (below collectively referred to as entities) licensed to provide or allowed to use domestic air transport services and air services at Vietnamese airports and airfields (below referred to as air services).

3. Currencies for payment

3.1. Rates of domestic air fares and freight sold in the Vietnamese territory and charge rates of air services provided for domestic flights are prescribed in Vietnam dong (VND).

3.2. Rates of domestic air fares and freight sold outside the Vietnamese territory and charge rates of air services provided for international flights are prescribed in US dollar (USD). In case payments are made in Vietnam dong or currencies of host countries, these payments must be converted into USD at average exchange rates on the inter-bank foreign currency market announced by the State Bank of Vietnam at the time of payment.

II. SPECIFIC PROVISIONS

1. Modes of price management

Domestic air fare and freight rates (for cargoes and passengers); air service charges rates at Vietnamese airports and airfields shall be managed by the following modes:

1.1. The State decides on charge rates and charge rate brackets of services on the list of services with charge rates prescribed by the State.

1.2. Entities register and declare charge rates for services falling under their competence with competent state management agencies.

1.3. Charge rates for services other than those specified above can be negotiated.

2. Principles for determining domestic air fare and freight rates and air service charges rates

Apart horn complying with the Regulation on calculation of asset and goods prices and service charge rates and relevant guiding documents of the Finance Ministry, entities shall comply with the following principles and regulations:

2.1. Domestic air fare and freight rates: These rates shall be determined on the basis of reasonable expenses, service quality, demand-supply balance and socio-economic development policies in each period, and suitable to the average charge, rate for the same type of service applied within the ASEAN.

2.2. Air service charge rates:

2.2.1. Air service charge rates for international flights, regardless of whether these flights are made by aircraft of Vietnamese or foreign airlines, shall be determined on the basis of reasonable expenses to ensure investment capital recovery and capital accumulation of service providers and service quality, and suitable to the average charge rate for the same type of service applied within the ASEAN.

2.2.2. Air service charge rates for domestic flights shall be determined on the basis of reasonable expenses, service quality and domestic market prices, taking into account the relationship between domestic and international charge rates for the same type of service, and socio-economic development policies in each period, and suitable to the average charge rate for the same type of service applied within the ASEAN.

3. Competence and responsibility of agencies and service providers for elaborating, submitting and evaluating charge rate plans and deciding on service charge rates

3.1. The Finance Ministry shall decide on charge rates and charge rate brackets of the following services at the request of the Transport Ministry (the Civil Aviation Administration of Vietnam):

3.1.1. The bracket of domestic air fare rates applicable to economic-class passengers on air routes on which a sole service provider operates.

When fuel prices rise by more than 20% over those used for the calculation of the fare rate bracket and the bracket is not adjusted, the Finance Ministry shall consider and set the maximum domestic fuel surcharge level to be applied for a definite time.

3.1.2. Rates of takeoff and landing; air traffic management; flight operation assurance assistance; security screening; and passenger services.

3.1.3. The bracket of charge rates of a number of air services which are still provided by a sole provider at airports and airfields, including:

a/ Apron hire service;

b/ Passenger check-in counter hire service;

c/ Baggage conveyor belt lease service;

d/ Mobile passenger stairs hire service;

dd/ Service of lease of spaces for representative offices of airlines within terminals;

e/ Ground package service at airports and airfields other than Noi Bai, Tan Son Nhat, Da Nang, Cam Ranh and Phu Bai;

g/ Service of supply and pumping of aviation fuel for domestic flights;

h/ Service of automated classification of check-in baggage.

3.1.4. Special-purpose aircraft charter rates shall be determined according to state-placed orders or state-assigned tasks funded with the state budget.

3.2. The Transport Ministry:

The Civil Aviation Administration of Vietnam, an agency under the Transport Ministry, shall perform on the latters behalf the following tasks:

3.2.1. Directing and guiding service providers in working out charge rates plans and brackets and setting fuel surcharges; organizing the evaluation of charge rates plans and brackets and fuel surcharges elaborated and set by service providers; and making written official proposals on service charge rates and charge rate brackets and the maximum fuel charge level specified at Item 3.1, Point 3, Section II of this Circular to the Finance Ministry for decision.

3.2.2. Assuming the prime responsibility for reviewing dossiers and details of charge rates registered and declared by service providers.

3.3.3. Guiding service providers in executing the States decisions on charge rates, charge rate brackets and the maximum fuel surcharges and complying with the provisions on management of charge rates in this Circular and relevant legal documents.

3.2.4. Publicly notifying in the first quarter every year or extraordinarily upon request, the list of domestic air routes on which a sole service provider operates and charge rate brackets are prescribed by the State and air routes on which charge rates are registered by service providers.

3.2.5. Specifically guiding air services at airports and airfields specified in Article 21 of the Governments Decree No. 83/2007/ND-CP of May 25, 2007, on management of operation of airports and airfields.

3.3. Service providers shall:

3.3.1. Elaborate charge rate plans and brackets for air services, brackets of domestic passenger fare rates and the maximum fuel surcharge specified at Item 3.1, Point 3, Section II of this Circular, then report them to the Finance Ministry and the Transport Ministry (the Civil Aviation Administration of Vietnam).

Charge rate plans shall be based on the principles specified at Point 2, Section II of this Circular and the regulations on calculation of assets and goods prices and service charge rates promulgated by the Finance Ministry. Charge rate plan dossiers shall be made according to Appendix 1 to this Circular (not printed herein).

3.3.2. Decide on specific air ticket prices and fuel surcharge rates applicable to domestic air routes; specific charge rates for services specified at Items 3.1.1 and 3.1.3, Point 3.1, Section II of this Circular within the service charge rate bracket and the maximum fuel surcharge prescribed by the Finance Ministry.

3.3.3. Decide on air fare and freight rates and charge rates of other air services not on the list specified at Item 3.1, Point 3. Section II of this Circular.

3.4. Adjustment of charge rates prescribed by the State and the procedures and time limit for deciding on charge rates: To comply with Articles 9 and 10 of the Governments Decree No. 170/2003/ND-CP of December 25, 2003, detailing the implementation of a number of articles of the Ordinance on Prices.

4. Registration of service charge rates

4.1. Charge rate registration means that service providers register charges rates of services specified at Item 4.2, Point 4, Section II of this Circular with state management agencies.

4.2. Services subject to charge rate registration:

Air transport services on domestic air routes for which the charge rate bracket is not prescribed by the State.

In addition to the above services, the Civil Aviation Administration of Vietnam may base itself on the practical situation to permit the modification and supplementation of the list of services subject to charge rate registration after obtaining the Finance Ministrys agreement.

4.3. Mode and details of and procedures for charge rate registration:

4.3.1. Charge rate registration shall be made by service providers by sending their written registrations to the charge rate registration dossier-receiving agencies being the Transport Ministry (the Civil Aviation Administration of Vietnam) and the Finance Ministry (the Price Management Department) at least 15 days before the planned date of application. Past the 15-day time limit, if the charge rate registration dossier-receiving agencies make no request for explanation, service providers may start providing services at registered charge rates and publicly post up charge rates under law.

4.3.2. A dossier of charge rate registration comprises:

- A written registration of charge rates, stating the time when these charge rates become effective, enclosed with relevant documents;

- A table of specific charge rates for registration;

- An explanation of the calculation of charge rates for services subject to charge rate registration.

Forms of charge rate registration dossier documents are provided in Appendix 2 to this Circular.

4.3.3. Procedures for charge rate registration:

- First-time charge rate registration shall be made when service providers register for the first time charge rates with the charge rate registration dossier-receiving agencies specified in this Circular;

- Charge rate re-registration shall be made when service providers increase or reduce charge rates compared to the last registration.

4.4. Powers and responsibilities of agencies and service providers:

4.4.1. Service providers registering charge rates shall:

- Register charge rates of their services under this Circular and relevant legal documents;

- Be held responsible before law for registered charge rates.

4.4.2. The charge rate registration dossier-receiving agencies shall receive charge rate registration dossiers sent by service providers; examine details of to-be-registered charge rates; when detecting that registered charge rates involve unreasonable factors, request service providers to stop providing services at these charge rates, and to make re-registration.

5. Declaration of service charge rates

5.1. Service providers shall declare service charge rates specified at Item 5.2, Point 5, Section II of this Circular, to the charge rate declaration dossier-receiving agencies being the Transport Ministry (the Civil Aviation Administration of Vietnam) and the Finance Ministry (the Price Management Department) at least 15 days before the planned date of application. Past the 15-day time limit, if the charge rate declaration dossier-receiving agencies make no request for explanation, service providers may start providing services at declared charge rates and publicly post up charge rates under law.

5.2. Service charge rates subject to declaration include:

- Specific charge rates of services specified at Items 3.1.1 and 3.1.3, Point 3.1, Section II of this Circular;

- Charge rates of services for which service providers are competent to set charge rates (except for services subject to charge rate registration).

5.3. Mode and details of and procedures for charge rate declaration:

5.3.1. Charge rate declaration shall be made by service providers by sending their written declarations enclosed with the decisions on charge rates of their services to the charge rate declaration dossier-receiving agencies.

5.3.2. A dossier of charge rate declaration comprises:

- A written declaration of charge rates, stating the time when declared charge rates become effective, enclosed with relevant documents;

- A table of declared specific charge rates;

- Analysis of reasons for charge rate increase/reduction compared to the last charge rate declaration.

Forms of charge rate declaration dossier documents are provided in Appendix 3 to this Circular.

5.3.3. Procedures for charge rate declaration:

- First-time charge rate declaration shall be made when service providers declare for the first time charge rates to the charge rate declaration dossier-receiving agencies specified in this Circular;

- Charge rate re-declaration shall be made when service providers increase or reduce charge rates compared to the last declaration.

5.4. Powers and responsibilities of concerned organizations and individuals:

5.4.1. Charge rate declaration dossier-receiving agencies:

Upon receiving charge rate declaration dossiers, these agencies shall, instead of approving charge rates declared by service providers, only write, the date of receipt of dossiers and append an arrival stamp on declaration dossiers according to administrative procedures. If detecting that charge rates declared by service providers involve unreasonable factors, they shall request service providers to make re-declaration.

5.4.2. Service providers declaring charge rates shall:

- Declare charge rates of their services under this Circular and relevant legal documents;

- Be held responsible before law for declared charge rates.

6. Negotiations on air service charge rates

6.1. Conditions on organization of negotiations on charge rates:

Negotiations on charge rates may be organized for the following services:

- Services not on the list of services with their charge rates prescribed by the State;

- Important services produced or provided in particular conditions or by sole providers or purchasers, and service providers and purchasers are interdependent and irreplaceable and competition on the market is limited;

- At the request of either of service providers or purchasers when these parties cannot reach agreement on service sale and purchase prices for signing contracts.

6.2. Competence to organize negotiations on charge rates:

The Finance Ministry (the Price Management Department) shall assume the prime responsibility for, and coordinate with the Transport Ministry (the Civil Aviation Administration of Vietnam) in, organizing negotiations on charge rates for services satisfying the conditions specified at Item 6.1, Section II of this Circular or at the request of the Prime Minister, heads of ministerial-level agencies or government-attached agencies.

6.3. A dossier for charge rate negotiation comprises:

6.3.1. A written request for a charge rate negotiation made by either of the service provider or purchaser or a competent state management agency.

6.3.2. A charge rate plan for negotiation:

a/ In case the charge rate negotiation is conducted by the service provider at its own will or the request of a competent agency, its charge rate plan for negotiation must clearly state:

- The situation of production or provision and consumption or use, supply and demand of goods or services;

- Analysis of the charge rate proposed for negotiation;

- The charge rate calculation structure with charge constituents, and analysis and explanation of this structure;

- Analysis of effects of the new charge rate on production or business efficiency; financial operation; living conditions of the service providers employees; and the service providers obligation toward the state budget;

- Matters on which the service provider and purchaser cannot reach agreement yet; the service providers arguments on these matters;

- Proposals (if any).

b/ In case the charge rate negotiation is conducted by service purchaser at its own will or the request of a competent agency, a plan on charge rate subject to negotiation must clearly state:

- The charge rate calculation structure with elements constituting prices or charge rates of goods or services it produces or provides according to new input service charge rates offered by the service provider. Explanation of this structure;

- Analysis of effects of the new charge rate on production or business efficiency; financial operation; living conditions of the purchasers employees; sale price of its products, possibility of customer acceptance and comparison with prices of products of the same type on the market; and its obligation toward the state budget;

- Matters on which the service provider and purchaser cannot reach agreement yet; the purchasers arguments on these matters;

- Other proposals (if any).

6.3.3. In case the service provider and purchaser are requested by a competent agency to conduct a compulsory negotiation or only either of them requests a charge rate negotiation, both parties shall make charge rate negotiation dossiers under the above guidance.

6.3.4. A charge rate negotiation dossier shall be made according to a set form (not printed herein) by the service provider or purchaser and sent (at least in three sets) in advance to the agency competent to organize charge rate negotiations and concurrently to the other party.

6.4. Results of charge rate negotiation

6.4.1. Results of a charge rate negotiation are obtained under Article 12 of the Ordinance on Prices. In case a charge rate negotiation has been organized but the service provider and purchaser cannot reach agreement on a charge rate, the Finance Ministry shall decide on a temporary charge rate for application by these parties.

6.4.2. A decision on a temporary charge rate issued by the Finance Ministry is valid for no more than six months. While executing the temporary charge rate decision, the parties may still negotiate on sale or purchase prices.

If the parties can agree on a charge rate, they may apply this charge rate and shall report the agreed charge rate and duration of application to the agency competent to organize charge rate negotiations.

Past the six-month time limit, if the parties cannot reach agreement on a charge rate, the

Finance Ministry shall organize a charge rate re-negotiation under Clause 6.1, Section II of this Circular and shall continue executing the temporary charge rate decision in the course of re-negotiation.

III. ORGANIZATION OF IMPLEMENTATION

1. Service providers shall:

1.1. Comply with the provisions on management on charge rates guided in this Circular and relevant legal documents.

1.2. Post up charge rates at places where transactions on service provision and purchase are conducted. For services with charge rates prescribed by the State, their state-prescribed charge rates shall be posted up. For services with specific charge rates set by service providers according to charge rate brackets set by the State or services falling under service providers competence to set charge rates, charge rates set by service providers shall be posted up.

1.3. When necessary, at the request of the Finance Ministry and the Transport Ministry (the Civil Aviation Administration of Vietnam), make and send reports on the application of air service charge rates at their units. For service providers being members of Vietnam Airlines, the reporting on the application of charge rates under this Circular shall be made through Vietnam Airlines.

2. Control and inspection of application of service charge rates

The Finance Ministry, the Transport Ministry and the Civil Aviation Administration of Vietnam shall organize independent or coordinated control and inspection of the observance of service charge rates and the States regulations on management of charge rates at service providers; and promptly handle violations under current regulations.

IV. IMPLEMENTATION PROVISIONS

1. This Circular takes effect 15 days after its publication in CONG BAO and replaces Joint Circular No. 22/2007/TTLT/BTC-BGTVT of March 21, 2007, of the Finance Ministry and the Transport Ministry, guiding the management of domestic air fare and freight charge rates and air service charge rates at Vietnamese airports and airfields.

2. Any problems arising in the course of implementation should be promptly reported to the Finance Ministry and the Transport Ministry (the Civil Aviation Administration of Vietnam) for study and settlement.