Local companies and foreign-invested companies may process lawful goods of all kinds for foreign business entities; and may not process goods on the lists of goods the export or import of which is prohibited or temporarily suspended, except for sales in foreign countries and with a permit from the PM. With respect to goods on the lists of goods the import and export of which is subject to issuance of a permit, business entities may only enter into processing contracts after they have been issued with a permit by the MOIT. The processing contract must be in writing or in another form with equivalent legal validity in accordance with the Commercial Law, and must minimally include certain prescribed terms.
Local processing for foreigners are being governed by the Commercial Law dated 14 June 2005; Law on Foreign Trade Management dated 12 June 2017 (“Foreign Trade Management Law”); Decree No. 69/2018/ND-CP dated 15 May 2018 of the GoV, detailing a number of articles of Law on Foreign Trade Management (“Decree 69/2018/ND-CP”); and Circular No.12/2018/TT-BCT dated 15 June 2018 of the MOIT, detailing a number of articles of the Law on Foreign Trade Management and GoV’s Decree No. 69/2018/ND-CP dated 15 May 2018, detailing a number of articles of the Law on Foreign Trade Management (“Circular 12/2018/TT-BCT”).
Contents of the Contract
Having the similar contents of a formal economic contract, a processing contract must include: Names and addresses of contracting parties and of the party directly conducting the processing; name and quantity of processed products; price for processing; time-limit for and method of payment; list, quantity and value of imported raw materials, sub-materials and supplies and domestically produced raw materials, sub-materials and supplies (if any) for processing; levels of use of raw materials, sub-materials and supplies; level of consumption of supplies and wastage rate of raw materials in processing; list and value of machinery and equipment leased, lent or donated for the purpose of processing (if any); measures to treat scrap and discharged waste and principles for dealing with leased or borrowed machinery and equipment and with left-over raw materials, sub-materials and supplies upon termination of the processing contract; location and time of goods delivery; trade mark of goods and origin appellations of goods; and duration of validity of contract. Trademark and the origin of goods in relation to the processing activities are normally falling within the responsibilities of the foreign principals.
As a matter of fact, a list defining quantities and values of input raw materials, auxiliary materials and supplies for processing activities with a defined rate of consumption and waste, and a list defining values of the machinery and equipment leased, borrowed or donated for processing service, should be present in the contract. Dealings on relevant equipment are also contracted due to the fact that equipment are often leased to local processors from foreign principals in most cases. Both input materials and equipment can be imported into Vietnam on the basis of temporary import and re-export.
Foreign principals are entitled to receive and remit abroad finished products, surplus input materials and leased equipment. To supervise the local processing activities and guide on technical issues, foreign experts can be seconded to Vietnam by foreign principals.
Input materials and equipment serving for the local processing activities are in principle, being exempted from taxes prevailing in Vietnam.