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Setting up shipping agency company in Vietnam

Question: We are a shipping company with our head quarter in Singapore. We operate our vessels between Singapore, Japan, Taiwan and Southeast Asia countries.
Setting up shipping agency company in Vietnam

Now, we are planning setting up our own shipping agency company in Vietnam. Please let us know if you can help us to do so. We prefer to set up a 100% owned company but we are not sure if it is workable in the current Vietnam legal structure. Or, does it have to be a joint venture? And, does shipping agency and freight forwarding have to be two separated companies?
 
Please let us know if you can provide the service to us.
 
Answer: I am Lawyer of SB Law. I was entrusted to provide you legal advice regarding to incorporation of foreign invested company in Vietnam.
From your email, we understand that you intend to setup a wholly foreign owned company for conducting business line of shipping agency and custom clearance.
 
Under Vietnam-WTO Commitments, from 2015, there is no restriction regarding to foreign ownership in shipping agency. However, regarding to the custom clearance, you must set up a joint venture with a Local Investor. Your ownership in such joint venture company can be up to 99% of total capital.
 
In this case, if you wish to conduct both of shipping agency service and custom clearance service, you shall be required to setup a Joint Venture Company.
 
Could you let us know which city will you intend to setup the company? Then, we shall send you our legal service proposal for your consideration.
 
 
Etsablishment of Joint Venture Company with business principal activities of Operations of shipping agency and customs clearance agency.

This is reference to your email from which, we understand that your Singapore company, (hereinafter referred to as “Client”) is now seeking legal advices for establishment of Joint Venture Company with business principal activities of (i) Operations of shipping agency and customs clearance agency (hereinafter referred to as “FIC”).
 
Location of the Company can be in Ho Chi Minh City or Hai Phong City.
 
We therefore are grateful to present you our Legal Services Proposal for your review and consideration.
 
1. SETTING UP FOREIGN INVESTED COMPANY IN VIETNAM
 
The establishment of a FIC in Vietnam requires an Investment Certificate and a Certificate of Business Registration from the licensing authority.
 
Depending upon the location of the company, the licensing authority may be the Provincial People’s Committee (for companies located outside industrial or export processing zones) or the provincial Industrial and Export Processing Zones Management Authority (for companies located in industrial or export processing zones).
 
We would like to clarify that the procedure for establishment of a FIC in Vietnam generally takes a rather long time in comparison with other countries in the region.
 
Our practical experiences show that although the total time for establishment of a foreign invested company as stipulated under Vietnam Investment Law 2014 is only 15 days, the actual process may take a longer time due to that the competent authority must consult other relevant offices to evaluate the investment project.
 
With respect to several cases that involves with relocation of 10,000 people or more in highlands; 20,000 people or more in other areas or requirement for changes of land purposes or project in several special field such as Construction and operation of airports; air transport; Construction and operation of national
seaports; Petroleum exploration, extraction, and refinery etc, it shall require for approval from the National Assembly, Prime Minister or Provincial People Committee before starting the licensing process. In this case, we assume that your case is not subject to such requirement for approval. However, we reserve our right to re-quote our professional fee and amend the work schedule if your case is subject to approval of the National Assembly, Prime Minister or the Provincial People Committee. In order to setup a FIC, it shall require you to undergo two following steps:
 
Step 1: Obtainment of Investment Certificate. The Law requires that within 15 working days from submission of the application dossier the competent authority shall have to issue the Investment Certificate for Foreign Investor. However, having preliminarily discussed with the Licensing Authority, we do not much expect that the licensing authority can comply with this requirement in practice, especially, those relating to conditional investment sectors. For granting the Investment Certificate, the relevant licensing authorities shall evaluate the legitimacy and the feasibility of such Investment Project to determine on granting of the
Investment Certificate on the following basis:
 
 Legal framework including Vietnam’s WTO Commitments, Vietnam Investment Law, Vietnam Enterprise Law, Regulations applicable to specific industries as well as the master economic development plan of the city or province that the FIC shall
register its head-office.
 
 Your financial ability, investment capital to put in the Investment Project, facilities and human resources serving the implementation of such investment project in Vietnam.
 
Step 2: After obtainment of Investment Certificate, Client shall be required to obtain the Certificate of Business Registration. The Law requires that within 05 working days from submission of application dossier, the competent authority shall have to issue the Certificate of Business Registration for forming the Foreign Invested Company.
 
2. OUR SPECIFIC COMMENTS
 
2.1. Operations of shipping agency is classified to CPC 748 (freight transport agency):
 
According to roadmap of opening market under Vietnam’s WTO commitments, from the year of entering into WTO, Foreign Investors shall be required to setup joint venture with Vietnamese Partner in which foreign ownership must not exceed 51%. 7 years after entering into WTO, foreign ownership restriction shall be removed.
 
Thus, with respect to these services, Investor shall not face with difficulties in obtaining Investment Certificate for establishment of joint venture company;
 
2.2. Operations of customs clearance agency: According to roadmap of opening market under Vietnam’s WTO commitments, from the year of entering into WTO, Foreign Investors shall be required to setup joint venture with Vietnamese Partner in which foreign ownership must not exceed 51%. 5 years after entering into WTO, foreign ownership restriction in Joint Venture Company shall be removed. Thus, with respect to these services, Client is allowed to setup Joint Venture Company with a Local Investor in which the Ownership of the Client can be up to 99%. We also would like to further note that in this case, experience of the Local Investor in the field of logistic services shall be considered as one of important factors that determine success possibility of the case;
 
2.3. Other critical factors In this case, in order to secure the high success possibility, we highly recommend Client to carefully account following factors:
 
- Location of the Joint Venture: In Vietnam, location of a foreign invested company is very important. Location of the Joint Venture Company must strictly comply with master plan of the City.
 
- Investment Capital of FIC: Under Vietnam Law, your proposed business does not require for minimum rate of investment capital.
 
However, upon applying for investment certificate, Client shall need to provide an estimate of capital required for operating the
Foreign Invested Company in a medium or long term. For a number of business activities as mentioned in your email, the competent authority may require Client to consider an amount of investment capital from 200,000USD upward.
 
- Experience of Client: Experience of Client and Vietnam Partner in the field is also one of important factor that determining the success possibility of the case. Foreign Investor and Vietnam Partner having no experience in the field is generally not favoured by the Licensing Authority.

» Setting Up Company in Vietnam
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