RESTRICTEDWORLD TRADE
ORGANIZATIONWT/ACC/VNM/19/Rev.1
31 October 2003
(03-5814)
Working Party on the
Accession of Viet NamOriginal:  English
ACCESSION OF VIET NAM
Notification under Article 5.1 of the Agreement on TRIMs
Revision
The Government of the Socialist Republic of Viet Nam has submitted the following revised
Notification under Article 5.1 of the Agreement on Trade-Related Investment Measures (TRIMs),
with the request that it be circulated to the members of the Working Party.
______________WT/ACC/VNM/19/Rev.1
Page 2
Notification under Article 5.1 of the
Agreement on Trade-Related Investment Measures (TRIMs)
Viet Nam
(as of October 2003)
I. DESCRIPTION OF THE MEASURE AND OF ITS MAIN FEATURES
Local content requirement is stipulated as follows:
- Investment projects in manufacturing and assembling of automobile, motorcycle, mechanical
- electric - electronic products must comply with  the localization program.
- Investment projects in processing wood, dairy products, vegetable oil, cane sugar are required
to link with investment on development of  local raw material sources
- Incentives in the form of import duty and/or corporate income tax will be applied to
investment projects implementing localization program and/or using effectively local rawmaterials and natural resources.
(Please see item 6 for more details)
1. The category in the illustrative list under which the measures falls
The above-mentioned measures fall into item 1(a), Illustrative List of the TRIMs Agreement.
2. Is TRIMs applied by the Government under discretionary authority of mandatory
legislation?
 The localization program, the domestic raw material development program and the incentives
for investment projects implementing such programs are stipulated in the Law on ForeignInvestment in Viet Nam, Law on Domestic  Investment Promotion and other legal
.documents issued by the Government and governmental agencies.
3. Where the TRIMs is general in nature, what  are the criteria for determining to which
enterprises it applies?
 The above-mentioned measures are imposed on both FDI and local enterprises in a manner
described in Item 6 on a non-discriminatory basis.
4. Where the TRIMs is applied pursuant to manda tory legislation, does the legislation
require the measure to be applied to new enterprises or new investments of existing
enterprises?
According to current regulations, TRIM is applied to all existing and newly-established
enterprises operating in such industries in Viet Nam, including their new investments.
5. Whether compliance with the measure by the enterprise is (a) mandatory or enforceable
under domestic law or administrative rulings or (b) necessary to obtain an advantage?
 The compliance with the above measures by enterprises is necessary to obtain investment
license and/or to be eligible for certain advantages.WT/ACC/VNM/19/Rev.1
Page 3
6. When the TRIMs relates to specific products , give sufficient detail on these products to
define the scope of the measure.
6.1. Measures which are conditional upon granting investment licence:
- Automobile manufacturing and assembling projects:  Implementation of the automobile
components production program in Viet Nam is a necessary condition for granting investmentlicence. The value of components and spare parts manufactured in Viet Nam must account for
at least 5% of the value of the finished automobile no later than the fifth year from the date of
commencing production and must annually increase to reach at least 30% of the automobile
value at the tenth year of production (Circular No.215/HTDT-LXT).
- Motorcycle manufacturing and assembling projects: Projects assembling motorcycle in
simple CKD form shall not be granted investment licenses. From the second year ofproduction, the value of components and spare parts manufactured in Viet Nam must account
for at least 5-10% of the finished motorcycle value and this percentage must gradually and
steadily increase to reach the target of at least 60% of the motorcycle value after 5-6 years
from the year of commencing production (Circular No.215/HTDT-LXT).
- Mechanical, electric and electronic products assembling and manufacturing projects :
assembling projects may only be approved in IKD form, in which the value of components
and spare parts manufactured in Vietnam in the first 2 years must account for at least 20% of
the value of finished products and must annually increase in subsequent years (Circular
No.215/HTDT-LXT) .
- Wood, dairy products, vegetable oil, cane sugar processing projects: the investors must
commit to develop local raw material sources for the processing of the above products.
6.2. Measures which are conditions to obtain investment incentives:
6.2.1. Import duty incentive
a. Scope of application (Item 1, Inter-ministerial Circular No. 176):Vietnamese and foreign-invested enterprises operating in production, assembly of complete
products and/or parts of these complete products of mechanical-electric-electronic industries,which are subject to MFN import tariff rates of 30% or above, shall be subject to MFN import
tariff rates contingent upon localization ratios.
b. Conditions to enjoy incentives  (Item 3 Inter-ministerial Circular No. 120):
- Meeting the technical conditions and technology capacity to manufacture products in
accordance with guidelines issued by Ministry of Industry;
- Having a registration document for implementing the localization program in
production of complete products and parts, which is certified by Ministry of Industry;
- Having documents certifying the legitimate use of industrial properties issued by the
competent authorities with respect to the product which is registered to be subject to
tariff policy contingent upon localization ratios;
- Directly importing assembling kits, components, spare parts, accessories and
materials for its own production;
- Making payments for the full value of its import consignments via banks;
- Using deductive method in paying VAT;WT/ACC/VNM/19/Rev.1
Page 4
c. Formula of localization ratio:
           Z - I                                       I
N =  ------------- x 100% = (1 -  ---------) x 100%
                         Z                                         Z
Where:N (%): localization ratio of a type of product or spare part;
Z: import price or selling price of product, spare part produced or assembled by the
enterprise;
I: Import value (CIF) of semi-finished products, parts, components directly imported by theenterprise.
d. MFN  import tariff rates contingent upon localization ratios with respect to products
and parts of mechanical - electric - electronic industries:
- Motorcycles and parts of automobiles and motorcycles:
Motorcycles (MFN import tariff rate applied to complete imported motorcycles is 60%):
Achieved localization ratio (%)MFN import tariff rates
contingent upon localization ratios (%)
1.  Above 0 to 202.  Above 20 to 30
3.  Above 30 to 40
4.  Above 40 to 505.  Above 50 to 606.  Above 6060
50
30
1510
5
Parts of automobiles and motorcycles:
MFN import tariff rates
contingent upon localization ratios (%)
Achieved localization
ratio (%)With respect to
parts which are
subject to MFN
import tariff rate
of 30%With respect to
parts which are
subject to MFN
import tariff rate
of 40%With respect to
parts which are
subject to MFN
import tariff rate
of 50%With respect to
parts which are
subject to MFN
import tariff rate
of 50%
1.  Above 0 to 152.  Above 15 to 30
3.  Above 30 to 40
4.  Above 40 to 505.  Above 5020
15
10
5320
15
10
5330
20
10
5340
20
10
53WT/ACC/VNM/19/Rev.1
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- Electronic complete products and parts:
i) Electronic products:
MFN import tariff rates contingent upon
localization ratios (%)
Achieved localization
ratio (%)With respect to
parts which are
subject to MFN
import tariff rate
of 30%With respect to
parts which are
subject to MFN
import tariff rate
of 40%With respect to
parts which are
subject to MFN
import tariff rate
of 50%With respect to
parts which are
subject to MFN
import tariff rate
of 60%
1.  Above 0 to 202.  Above 20 to 353.  Above 35 to 504.  Above 50 to 605.  Above 6020
15105330
20105340
301510340
3015103
ii) Electronic parts:
MFN import tariff rates contingent upon localization ratios (%)
Achieved localization
ratio (%)With respect to
parts which are
subject to MFN
import tariff rate
of 30%With respect to
parts which are
subject to MFN
import tariff rate
of 40%With respect to
parts which are
subject to MFN
import tariff rate
of 50%With respect to
parts which are
subject to MFN
import tariff rate
of 60%
1.  Above 0 to 15
2.  Above 15 to 30
3.  Above 30 to 404.  Above 40 to 505.  Above 5020
15
10
5320
15
10
5330
20
10
5340
20
10
53
- Mechanical-electric products and parts:
i) Mechanical-electric products:
MFN import tariff rates contingent upon
localization ratios (%)
Achieved localization
ratio (%)With respect to
parts which are
subject to MFN
import tariff rate
of 30%With respect to
parts which are
subject to MFN
import tariff rate
of 40%With respect to
parts which are
subject to MFN
import tariff rate
of 50%With respect to
parts which are
subject to MFN
import tariff rate
of 60%
1.  Above 0 to 202.  Above 20 to 35
3.  Above 35 to 504.  Above 50 to 605.  Above 6020
15
10
5330
20
10
5340
30
2010
350
40
2010
3WT/ACC/VNM/19/Rev.1
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ii) Mechanical-electric parts:
MFN import tariff rates contingent upon localization ratios (%)
Achieved localization
ratio (%)With respect to
parts which are
subject to MFN
import tariff rate
of 30%With respect to
parts which are
subject to MFN
import tariff rate
of 40%With respect to
parts which are
subject to MFN
import tariff rate
of 50%With respect to
parts which are
subject to MFN
import tariff rate
of 60%
1.  Above 0 to 15
2.  Above 15 to 30
3.  Above 30 to 404.  Above 40 to 505.  Above 5020
15
10
5320
15
10
5330
20
10
5340
20
10
53
6.2.2. Incentive in corporate income tax
Incentive in the form of preferential corporate income tax (15% in 12 years from the date of
commencing production; tax exemption for 2 years from the date of first profit-making and
reduction of 50% in the 3 subsequent years) is granted to the following projects:
Labour intensive projects and projects using effectively the available natural resources in Viet
Nam;Projects manufacturing and processing goods for export, which account for at least 30% of its
production and using local raw materials valued at no less than 30% of production costs.
7. The date of implementation of the TRIM.
- Mandatory requirement on implementing localization program for projects in the fields of
manufacturing and assembling automobile, motorcycle and mechanical - electric - electronic
products has been applied since 1995.
- Incentive in the form of MFN import tariff rates contingent upon localization ratios for the
above-mentioned products has been applied since January 1999.
- Regulation on incentive in the form of corporate income tax for projects using large quantity
of local raw materials and using effectively the available natural resources in Viet Nam has
been applied since 1996 and amended in 2000.
8. Does the TRIM, as applied under domestic law, include provision for its phasing-out
and/or elimination ?
So far, there is no provision for the phasing-out and/or elimination of the TRIM in Vietnam's
current legal regulations.
9. Please list the domestic law, regulation  or administrative guideline under which the
TRIM is applied; a copy should be submit ted to the Secretariat to be available for
inspection by interested members.
- Law on Foreign investment in Viet Nam;
- Decree No. 24/2000/ND-CP dated 31 July 2000 of the Government  detailing the
implementation of the Law on Foreign Investment in Viet Nam;WT/ACC/VNM/19/Rev.1
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- Decision No.46/2001/QD-TTg dated 4th April 2001 of the Prime Minister on the management
of export-import activities in the 2001-2005 period;
- Inter-Ministerial Circular No.176/1998/TTLT -BTC-BCN-TCHQ dated 25th December  1998
of Ministry of Finance, Ministry of Industry and General Department of Customs guiding the
implementation of tariff policy contingent upon localization ratios with respect to productsand parts of mechanical-electric-electronic industries;
- Inter-Ministerial Circular No.120 /2000/TTLT-BTC-BCN-TCHQ dated 25
th December 2000
of Ministry of Finance, Ministry of I ndustry and General Department of Customs on
amendments of and supplements to the In ter-Ministerial No.176/1998/TTLT-BTC-BCN-
TCHQ dated 25th December, 1998 of Ministry of Finance, Ministry of Industry and General
Department of Customs guiding the implementation of tariff policy contingent upon
localization ratios with respect to products and parts of mechanical-electric-electronicindustries;
- Decision No.1944/1998/QD-BTC dated 25
th December,1998 of Minister of Finance on
promulgating regulations on import tariff rates contingent upon localization ratios with
respect to products and parts of mechanical, electric and electronic industries;
- Decision No.71/1999/QD-BTC dated 6th July,1999 of Minister of Finance on modifying
Article 3 of Decision No.1944/1998/QD/BTC dated 25th December ,1998 of Minister of
Finance;
- Circular No.01/1999/TT-BCN dated 12th March,1999 guiding registration for certification of
the conditions for applying import tariff contingent upon localization ratios with respect to
products of mechanical-electric-electronic industries;
- Decision No.159/2000/QD-BTC dated 26th September, 2000 on removing import tariff rates
applied to CKD, IKD components of certain products and parts of mechanical-electric-
electronic industries;
- Decision No.116/2001/QD-BTC dated 20th October 2001 and  Decision No.66/2002/QD-BTC
dated 22nd May 2002 of the Ministry of Finance on amendment of import tariffs  contingent
upon localization ratios with respect to motorcycle s, machine, and accessories of motorcycle.
- Decision No. 65/2000/QD-BCN dated 13th November,2000 of the Minister of Industry
promulgating regulation on certification of conditions to enjoy import tariff rates contingent
upon localization ratios with respect to motorcycles.
The above legal documents will be translated into English and submitted to Working  Party in
appropriate time for inspection by interested parties.
10. The level of government applying the above-mentioned TRIMs, the name of the
implementing agency and any information on the application procedures
The above-mentioned TRIMs are applied at the levels of Ministry, local People's Committee
and provincial Board of Management of Industrial Zone (BMIZ) according to such authority
and function as stipulated by the Law on fore ign investment in Viet Nam and other related
legal documents as follows:
- Ministry of Planning and Investment, local People's Committees and BMIZ are responsible
for granting investment license and approving incentives according to their authority and
function;
- Ministry of Finance takes responsibility,  in coordination with Ministry of Industry and
General Department of Customs, to guide the implementation of tax treatment contingentupon localization ratios with respect to products and parts of mechanical, electric and
electronic industries;WT/ACC/VNM/19/Rev.1
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- Ministry of Industry is responsible for certifying the registration to implement the
localization ratios with respect to products and parts of mechanical, electric and electronic
industries;
- Customs offices (where enterprises fulfill import procedures) shall receive application and
collect import duty with the rates contingent upon localization ratios of the enterprise in
question as certified by the Ministry of Industry;
- Besides, other Governmental agencies (e.g. Ministries of Science, Technology,
Transportation, etc.) also take part in the issuance of technical standards
II. GENERAL INFORMATION ON THE PROGRAM IN QUESTION
The main purpose of introducing local content requirement and development of local raw material
sources in Viet Nam is to promote the production of parts substituting imported ones, to upgradetechnology, to improve quality and to reduce production costs of automobile, motorcycle and
mechanical - electric - electronic products; to enhance capacity of production from local raw
materials.
So far, There have been 100 enterprises registering implementation of localization program, of which
64% are FDI enterprises and 36% are local enterprises. These enterprises have registered local content
ratios for 700 products, most of which  are motorcycle 's spare parts, electronics products, refrigerators
and air-conditioners, household appliances.
However, the above industries in Viet Nam are still under-developed and their products are not
competitive in the world market. This is due to the fact that Viet Nam has just implemented the
localization program in the last several years, while most regional countries have been implementingthis program since 1960s. Viet Nam, as a result, need to implement this program until the date of
joining WTO.
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