Vietnam's small car importers driven to desperate measures in policy war

In a move rarely seen in Vietnam, a group of local private car importers earlier this week put up banner in front of the Vietnamese Ministry of Industry and Trade in Hanoi to call for an adjustment to a circular which they say is unfair to them.

The ministry issued Circular 20 in 2011 to set rules for imports of new passenger automobiles with nine seats or less. Under the circular, importers must present local authorities with two different papers: an authorization certificate or authorized agent contract provided by a foreign car manufacturer, and an automobile warranty and maintenance certificate granted by Vietnam’s Ministry of Transport.

Small firms said the requirements are too strict for them to implement and have demanded the ministry adjust the circular. A number of powerful local and foreign automobile makers/importers in Vietnam, who are believed to have benefited from the circular, are naturally in favor of keeping the current regulations.

The circular expired on July 1, so the ministry has asked the central government to pass a new regulation to supersede it. On July 21 the ministry held a meeting to seek comments from relevant stakeholders on the new proposed policy.

“Many local automobile importers who were negatively affected by Circular 20 tried to attend the meeting, but the Ministry of Industry and Trade refused us entry,"  a company director said on condition of anonymity, adding that they would continue to lobby for policy change by any means necessary. "We have not had the chance to have our say, so we put up a banner in front of the ministry demanding the circular be scrapped.”

The banner in front of the Ministry of Industry and Trade. Photo by VnExpress

Representatives of the small importers have also sent a request to Prime Minister Nguyen Xuan Phuc asking the government to abolish the strict requirements imposed on small private firms.

“This policy lobby is an unbalanced game between big local and foreign manufacturers/importers who are professional and well organized and a group of small local importers who do not even have a representative association of their own,” a source attending the July 21 meeting said. While the former had tens of representatives at the meeting, only three representatives from small importers were allowed to attend, according to the source.

At the meeting, the Vietnam Automobile Manufacturers Association (VAMA) and the Vietnam Car Importers Association (VIVA), who benefit from current import rules, all agreed to keep the regulations outlined in Circular 20 in the new draft policy.

They said the regulations would help the government fight tax evasion and monitor the quality of imported vehicles. VIVA said small importers often declare low prices for their imported vehicles to avoid tax. Moreover, the rules also benefit locals because they will receive formal warranties and maintenance services from manufacturers.

But opponents of the current regulations say they are not buying into them.

Dau Anh Tuan, director of the Vietnam Chamber of Industry and Commerce’s Legal Department, said at the meeting that since Circular 20 took effect in 2011, it has elbowed out hundreds of local small car importers, and those that have survived are finding life difficult.

He said that the regulations set out by the ministry in Circular 20 are no longer legitimate. He pointed out that under two government directives on administrative procedures for imported goods, one issued in 2006 and the other in 2013, importers no longer have to present authorization certificates from manufacturers.

Imports of new passenger automobiles with nine seats or less are also not regarded as a "conditional business" under the current Law on Investment. “We can conclude that regulations under Circular 20 are no longer suitable or legitimate,” Tuan said.

According to Tuan, the tax evasion, if any, will be dealt with by law enforcement forces, and has nothing to do with a regulation issued by the Ministry of Industry and Trade.

With regard to vehicle quality, Tuan said the customers will have the final say. The government, for example, cannot force people to buy goods at the supermarkets just because it believes the quality of goods there is higher than other private stores or shops near their homes.

“Circular 20 has had a great impact on the development of the local private business community. We should provide them opportunities rather than take them away,” Tuan said. Vietnam’s automobile market is dominated by foreign companies with very few local manufacturers, he added.

Key members of VAMA include global makers such as Toyota, Ford and Mercedes-Benz. Truong Hai (Thaco) is the leading local automobile manufacturer and importer in the association.

Data released by VAMA on July 8 showed that Vietnam’s automobile sales in June jumped 31 percent on-year to 24,400 units. Thaco, which assembles trucks, buses and sedans, retained its leading position in the monthly sales tally with 9,246 units, surging 39 percent from June 2015, followed by Toyota, Ford, Honda, GM and Mercedes-Benz.