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Legal Update

Circular 2 on the Tobacco Industry

23 May 2011
Mayer Brown JSM Legal Update

On 3 January 2011, Vietnam’s Ministry of Industry and Trade (MOIT) issued Circular No. 02/0211/TT-BCT (Circular 02) guiding the implementation of Decree No. 119/2007/ND-CP dated 18 July 2007 (Decree 119) on the manufacturing and trading of tobacco.

Circular 02 took effect as of 14 March 2011 and replaced Circular No. 14/2008/TT-BCT dated 25 November 2008.

Some salient provisions of Circular 02 are discussed below.

Governing scope

Circular 02 provides guidelines on the:

  • conditions for the trading and processing of tobacco raw materials;
  • conditions for the manufacturing of tobacco products;
  • conditions for the import of specialised tobacco industry machinery and equipment, tobacco raw materials and cigarette paper;
  • management of investment in and use of specialised tobacco industry machinery and equipment, and permissible tobacco product manufacturing capacity and manufacturing output;
  • conditions for the trading of tobacco products; and
  • authority, procedures and order for issuance of all types of certificates of satisfaction of business conditions, and tobacco product manufacturing and trading licences pursuant to Decree 119.

Circular 02 does not apply to the import of tobacco products nor to the trading of such products at duty free shops.

Applicable entities

Circular 02 applies to domestic and foreign organisations and individuals engaged in the manufacture and trading of tobacco products and related activities in the territory of Vietnam.

Manufacture of tobacco products

Among other things, to be issued with a tobacco product manufacturing licence, a business entity must

  • be an enterprise incorporated in accordance with the law and have been manufacturing tobacco products prior to 14 August 2000, which is the issuing date of Resolution No. 12/2000/NQ-CP of the Government on the national policy on prevention and combat of cigarette harms for the 2000-2010 period;
  • meet conditions on quality, hygiene and safety of tobacco products;
  • own or have the lawful right to use trademarks that are registered and protected in Vietnam; and
  • have adequate means and equipment for fire prevention and fire fighting and ensure environmental safety and hygiene as set out by law.

The business entity may not manufacture tobacco products in excess of the manufacturing capacity stated in its tobacco product manufacturing licence.

Conditions for the issuance of a tobacco product wholesale licence (or tobacco product wholesale agent licence)

A business entity shall be issued with a tobacco product wholesale licence (or tobacco product wholesale agent licence) if it:

  • has a registered tobacco product trading business;
  • has a fixed place of business (including places for retail sale, if any) with a clear address, in line with the plan for the tobacco product trading network as approved by a relevant authority;
  • meets requirements on physical facilities and financial conditions;
  • is selected by enterprises supplying tobacco products or other wholesale dealers as their wholesale dealer (or wholesale agent); and
  • has organised or is in the process of organising a stable tobacco product distribution network in the locality. To this effect, in its written request for the issuance of a wholesale licence, the business entity must set out the provinces and/or cities where it intends to set up the distribution system for the wholesale of tobacco products and also the addresses and telephone numbers of the places proposed to serve as retail outlets.

Conditions for the issuance of a tobacco product retail licence (or tobacco product retail agent licence)

A business entity shall be issued with a tobacco product retail licence if it:

  • has registered to conduct tobacco product purchase and sale activities;
  • has a fixed business place with a clear address in compliance with the plan for the tobacco product trading network approved by the competent authority;
  • has a separate area for the sale of tobacco products; and
  • belongs to the distribution network of a tobacco product wholesale deale

Foreign investment in the manufacturing of tobacco products

Foreign investment in the manufacture of tobacco products is only licensed in the form of either:

  • a joint venture with a domestic enterprise which possesses a licence for the manufacturing of tobacco products (in this case, the State must hold a dominant stake in the charter capital of the enterprise); or
  • an intellectual property licensing contract.

Import of specialised tobacco machinery and equipment, tobacco raw materials and cigarette paper

The import of specialised tobacco industry machinery and equipment, tobacco raw materials and cigarette paper is subject to a number of conditions set out by the MOIT.

Reporting regime

Enterprises manufacturing tobacco products must send quarterly reports to the MOIT on the import and use of specialised tobacco machinery and equipment, tobacco raw materials and cigarette paper imported during the relevant quarter.

They must send annual and bi-annual reports to the MOIT on their business performance no later than 10 days after the end of the relevant reporting period.

For inquiries related to this Legal Update, please contact:

Dao Nguyen ( )

Jim Dao ( )

Thinh Dan ( )

Learn more about our Vietnam offices and Health Care practice.

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