Ministry drops ball on draft car recall decree

Jun 15, 2017 | 12:47 PM GMT+7

A draft decree on auto manufacturing, assembling, importing, and maintenance and warranty business recently publicised by the Ministry of Industry and Trade (MoIT) is concerning industry insiders.

Ministry drops ball on draft car recall decree
A draft decree is concerning auto industry insiders. Photo: Saigon Entrepreneurs

The decree, developed by the MoIT and the Ministry of Transport with other agencies and offices says that “enterprises engaged in automotive manufacturing, assembling and importing must be responsible for recalling and disposing of defective vehicles.” However, no specific sanctions for violations are mentioned.

The statement was made by lawyer Nguyen Van Hau, Chairman of the Vietnam Lawyers’ Commercial Arbitration Center (VLCAC) and also Vice Chairman of the HCM City Lawyers’ Association, at a meeting to discuss the draft decree in HCM City on June 13.

“The question is how exactly will businesses compensate consumers and how do we ensure that they will recall defective vehicles?" Hau said, adding that the draft decree should include sanctions for violations and serve as a legal basis for state agencies to manage automotive manufacturing, assembling, and importing enterprises.

Regarding recalls of defective vehicles, the Vietnam Chamber of Commerce and Industry (VCCI) suggested the drafting agency reconsider the responsibility of vehicle recalls.

The decree’s article 21 stops importers from demanding accountability from manufacturers over the recall of defective units, the draft dictates that car importers are responsible for providing warranty and maintenance services and recalling the products.

But according to the VCCI, recalls should be executed by manufacturers, both domestic and foreign, through authorised agencies. No commercial importers should be allowed to initiate recalls.

Technical failures arise during the design, manufacture and assembly processes, all of which are conducted by manufacturers, not distributors, the VCCI said, therefore, in all cases, only the manufacturer possesses precise knowledge of systematic errors in the design and production process.

Diagnosing defects related to details, parts, and components and how to fix them can only be carried out by the manufacturer, with their equipment and technical knowledge, it added.

In fact, in some cases, the two sides could negotiate with each other so that the distributors can help manufacturers initiate product recalls. However, such companies often merely acted as an intermediary in recalls, VCCI said.

Concerning imported completely-built units (CBUs), if foreign manufactures fail to fulfil their obligation to recall vehicles, Vietnam can issue an import ban on products provided by that supplier, the VCCI said.

At the meeting, Tran Dinh Thu, a lawyer from the Legal Consulting Center under the HCM City Lawyers’ Association, warned about auto redundancy as the draft loosened restrictions on the import of CBUs.

Article 21 of the Draft stipulates that importers file a “written commitment with the MoIT in fulfilling their responsibilities in the warranty, maintenance, recall, and recalls of imported cars,” which was, not tough enough, Thu said.

With importing cars are easy, people will flock to buy cheap cars to run businesses, pressuring the market, Thu said.

In addition, there is a risk that defective vehicles with poor quality will flood easy markets, with manufacturers not required to recall defective vehicles, Thu said.

Although the decree stipulates that importers must "commit to the Ministry of Industry and Trade to recall defective vehicles" this makes recalls impossible, Thu said, adding that the importers, who just trade the vehicles, are not capable of dealing with technical problems.

Since there are no specific sanctions for those who can’t fulfil their warranty and maintenance commitments, they will likely to ignore problems of consumers and open another company to continuing importing cars, Thu said.

According to the General Department of Customs, in May, imports of automobiles of all types hit 9,900 units valued at 216 million USD, up 42.7 percent in volume and 27.3 percent in value compared with the previous month.

In the first five months of the year, Vietnam imported 43,300 automobiles of all types, up 5.3 percent in volume and down 10.1 percent in value over the same period last year.

Thailand supplied the most CBUs to Vietnam up to June with 15,900 units worth 288 million USD, up 27.2 percent in volume and 27.4 percent in value. Vehicles from Indonesia reached 8,700 units, up sharply against 2016.

Regarding cars under nine seats, Indonesia became the largest supplier for Vietnam with 7,200 units in the first five months, soaring from last year’s figure of 100 units in the same period, surpassing Thailand, India and the Republic of Korea.