Cross-Border Transactions in Vietnam and the Vietnam-us bilateral Trade Agreement

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Cross-Border Transactions in Vietnam and the Vietnam-US Bilateral Trade Agreement

Quan Hien Nguyen1


After decades as a closed, command economy, Vietnam has committed itself to market reform. On its way to full integration with the global market, Vietnam has signed a bilateral trade agreement with the United States of America. Under this agreement, Vietnam agrees to open its domestic markets for trade with, and investment from, the United States and other countries which have a Most Favoured Nation2 relationship with Vietnam.

Although Vietnam is accelerating the process of liberalisation, it does not yet have in place the legal principles necessary to support a market economy. Some areas of commercial law in Vietnam still operate according to doctrines and principles native to the command economy. Moreover, many commercial rights, which are well established in traditional market economies, are alien to, or only partially recognised under, Vietnamese law. Nonetheless, after the implementation of the Vietnam-US Bilateral Trade Agreement (hereafter the Vietnam-US Trade Agreement or the Agreement), the volume of cross-border transactions involving Vietnam is expected to increase exponentially. Thus, there is even greater potential for conflict over the recognition of commercial rights in the Vietnamese legal system.

Opening the market

The process of liberalisation

On 3 October 2001, US Congress ratified the Vietnam-US Trade Agreement with an overwhelming majority and a ‘surprising lack of controversy’.3 After four years of negotiation, this agreement not only completed ‘the process of normalisation, reconciliation and healing between [the] two nations’4 but also created optimism that the volume of bilateral trade between the two countries would sharply increase. The historic significance of this agreement does not diminish its economic significance: the Agreement will open the Vietnamese domestic market, the fourth largest market in the Asia-pacific region, to American products, as well as the US domestic market—the largest market in the world—to Vietnamese exports.

Historically, cross-border transactions were a rare occurrence in Vietnam. Before the 1992 Constitution was put in place, the state monopolised foreign trade and could therefore limit international transactions to barter arrangements with other socialist countries.5 Even after the National Assembly promulgated the first law on foreign direct investment in Vietnam in 1987,6 cross-border trading was still limited to a number of state-owned import-export companies,7 which collected commissions from local enterprises in return for representation in international contracts. As a consequence of many years of economic isolationism, Vietnamese legislators paid little or no attention to the law of cross-border transactions in Vietnam.

The implementation of the ‘Doi-Moi’ (Reformation) policy as part of the 1992 Constitution provided the legal foundation for comprehensive economic reform in Vietnam.8 Stimulated by Vietnam’s commitment to an ASEAN Free Trade Area (AFTA),9 ‘Doi Moi’ also began the process of legal reformation in Vietnam. It generated the Civil Code,10 which provides the framework for private international law in Vietnam,11 as well as the Commercial Law12 and Decree 57/1998/ND-CP, which entitle all business organisations, including foreign invested enterprises, to import and export goods subject only to registration requirements.

One of the most significant changes to result from the ‘Doi Moi’ was the revocation of the import-export licences, which had been a primary mechanism for protectionism in the Vietnamese economy.13 After the promulgation of the Commercial Law in 1997, the Vietnamese state abandoned licensing of import-export activities, choosing instead to control trade volume by tariffs and quotas for certain categories of goods.14 Since 1998, the Government has finalised regulations to cancel import-export licensing requirements for virtually all Vietnamese and foreign firms.15 Most recently, the General Department of Customs issued Circular 07,16 which further simplifies the registration of import/ export activities. This document implements the recent policy that allows all merchants who have acquired a Customs Duty Code to conduct regular import/ export activities. The provincial customs agency where the merchant’s headquarters are located is authorised to issue a permanent Customs Duty Code to the merchant after receiving from him:

a certified copy of the Certificate of Registration of Tax Code issued by the tax agencies of the Ministry of Finance;

a certified copy of the Certificate of Registration of Business (if local merchants) or Investment License (if foreign-invested enterprises) issued by the Ministry of Planning and Investment; and

a Declaration for the Customs Duty Code.
The Customs Duty Code then allows merchants to conduct import/export activities at any port throughout Vietnam.

Despite the significant changes wrought on the Vietnamese legal system in response to ‘Doi Moi’, even more radical adaptations will be required under the US-Vietnamese Trade Agreement. To this end, the Vietnamese government has begun a large-scale investigation into current laws and regulations promulgated by the central authorities. The six categories established by the investigation correspond with the six chapters of the Trade Agreement: (1) trade in goods; (2) intellectual property rights; (3) trade in services; (4) investment; (5) transparency; (6) dispute settlement.17 The investigation has revealed that, amongst the 135 legal documents reviewed, 24 required revision, 29 replacement and six revocation. In addition, the investigation recommended that Vietnam ratify six international conventions.

In keeping with the previous changes, it would seem that further refinement of the rules of private international law in Vietnam will fall to the executive and not to the courts. The Ordinance on Promulgation of Legal Documents18 provides both that precedent is not a source of law in Vietnam, and that Vietnamese courts are prohibited from engaging in interpretation of laws.19 Accordingly, the Vietnamese courts depend almost entirely on administrative by­laws and statements of government policy to guide their decisions. For example, government decrees provide regulations on implementation of laws or ordinances,20 whilst circulars issued by individual ministries, or jointly by ministries, guide courts as to how a particular ministry will administer laws, ordinances, or decrees.21 Guidelines of the Prime Minister, although not legal instruments, are nonetheless policy outlines indicating that state agencies and provincial people’s committees should be set up to deal with issues.22 Without interpretive powers, courts are heavily reliant on these bylaws, especially in regards to areas where there is little or no jurisprudence, such as private international law.
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