“New barrier” on automobile import

On October 10, 2017, the Government of Vietnam issued Decree No. 116/2017/ND-CP regulating the conditions for manufacturing, assembly and import of automobiles and trade in automobile warranty and maintenance services.

This Decree applies to automobile manufacturers, assemblers and importers and traders of automobile warranty and maintenance services in Vietnam and relevant authorities and entities.

Remarkably, among the conditions for automobile trading in Vietnam, automobile manufacturers, assemblers and importers must have automobile warranty/maintenance center owned/leased by the manufacturer/assembler/importer or belonging to the dealer network authorized by such manufacturer/assembler/importer.

Especially, for automobile importers, the new regulations specified in this Decree are very strict and tight. For example, there is a physical confirmation or document proving that the automobile importer is eligible to represent a foreign automobile manufacturer/assembler to recall defective automobiles imported into Vietnam.

Furthermore, automobile importer must comply with trading requirements and ensure the fulfillment of responsibility for automobile warranty and maintenance, defective and scrap imported automobile recall.

Automobile manufacturers, assemblers and importers shall recall defective automobiles according to regulations of law. All costs related to defective automobile recall shall be covered by automobile manufacturers, assemblers and importers.

However, the things that concern the automobile importers and traders are specified in Article 6 about "Responsibilities for ensuring the technical and environmental safety of domestically manufactured or assembled automobiles and imported automobiles”, especially the two following points.

When conducting inspections or testing of imported brand-new automobiles, the automobile importer shall provide the quality management authority with the following documents: A copy of the certificate of eligible imported automobile class issued by a foreign competent authority; a factory quality control slip prepared by a foreign automobile manufacturer/assembler for each automobile; valid documents on assessment results of quality assurance conditions of the foreign automobile manufacturer/assembler for the factory producing imported automobile classes issued by a foreign competent authority.

Imported brand-new automobiles shall be inspected by the quality management authority for each shipment. The model of each automobile class in each shipment shall have emission and technical safety quality inspected or tested.

Importer faces difficulties to provide the authorities with the number of documents required under new regulations. For example, factory quality control slips are issued by manufacturer for automobiles sold domestically only.

In the past, only the first shipment of each model would have emission and technical safety quality inspected or tested; however, it now is conducted on every batch of automobiles to be imported.

The Japanese Chamber of Commerce and Industry in Vietnam said one emission test could take two months and cost up to US$10,000, adding: "It will cause a huge waste of time and money.”

According to Nikkei Asia, since the Decree was announced in October, the governments of major exporters such as Japan, Thailand and the U.S. have expressed concerns to Vietnam that it would become impossible for them to sell into the country. They have also suggested that the decree could violate World Trade Organization rules.

Other automakers have also been taken by surprise by this move. Honda switched production of the CR-V, its main SUV model, for the Vietnamese market to Thailand in January.

Mitsubishi Motor has also suspended production of its Pajero Sports SUV for the Vietnamese market in Thailand. Ford Thailand, which also ships cars to Vietnam, said in a statement: "We continue to raise our concerns with the Vietnam government in relation to the significant impact of the Decree on the business operations."

Toyota said on January 16 that it has halted all production for export to the Vietnamese market. The Japanese automaker manufactures locally in Vietnam, but imports from Thailand, Indonesia and Japan account for around one-fifth of what it sells in the market, or 1,000 units per month.

Up to now, most of the imported automobiles in showrooms of major automakers such as Toyota, Honda and Ford in Ha Noi have been sold out. It is unknown when new automobile batch will be delivered.

Representatives of automobiles importers explained that the automobile import faces with difficulties due to Decree, causing the insufficient supply of automobile to customers.