U.S.Vietnam Bilateral Trade Agreement Summary of Key Provisions

Sectors Legal Services 100% US equity allowed, including branches; branches receive 5 year, renewable license, and; May consult on Vietnamese laws... Architectural 100% US equity allowed

U.S.-Vietnam Bilateral Trade Agreement

Summary of Key Provisions

by Joseph Damond Board Member, U.S.-Vietnam Trade Council U.S Chief Negotiator, U.S.-Vietnam Bilateral Trade Agreement

Chapter 1:

Trade In Goods

(Industrial and Agricultural)

invested companies the right to trade any products (subject to

some exceptions) in 3 years; 4) U.S persons to form joint ventures for the purpose of trading, in three years, with a maximum 49% share; in six years, the maximum U.S share is 51% There are

limited product exceptions to these rights, where the phase-in

period for trading rights is longer

Tariff Cuts

Vietnam has agreed to cut tariffs (typical cut is by third to half) on a broad range of products of interest to U.S exporters,

one-including toiletries, film, air conditioners and refrigerators,

electrical motors, valves, mobile phones, pagers, video games,

lamb, cheese, potatoes, tomatoes, onions, garlic, other vegetables,

grapes, apples and pears, other fresh fruits, certain flours, soybeans, vegetable oils, prepared meats and fish, pasta, fruit juices Phase-in period is 3 years

Import Licensing

Vietnam will eliminate all discretionary import licensing, in

accordance with the WTO agreement

Customs Valuation and

Customs Fees

Vietnam shall comply with WTO rules – using transactions

value for customs valuation, and limiting customs fees to cost of services rendered – in 2 years

Technical Standards and Sanitary

and Phytosanitary Measures

In accordance with the WTO standard, technical regulations and

sanitary and phytosanitary measures must be applied on a national treatment basis, and be applied only to the extent necessary to

fulfill legitimate objectives (e.g., to protect human, animal or

plant life)

State Trading

Must be carried out in accordance with WTO rules (e.g., state

trading enterprises make any sales and purchases only in

accordance with commercial considerations)

Chapter 2:

Intellectual Property Rights

Vietnam agrees to full TRIPs compliance in all areas in short time frame, including:

 TRIPs-level Patent and Trademark protection – comply in 12 months

 TRIPs-level Copyright and Trade Secrets Protection – comply in 18

months

Vietnam agrees to “TRIPs plus” treatment in several areas, including

encrypted satellite signals, patent protection for plants and animals,

protection of confidential test data submitted to governments In the case

of satellite signal protection, phase in period is 30 months.

Chapter 3:

Trade In Services

General (“Horizontal”) Commitments

GATS framework of rules (including disciplines

on domestic regulation)

Existing licenses protected by a Grandfather provision

Foreign companies may lease land

Top managers and sales people allowed to enter and

work

Sectors

Legal Services

100% US equity allowed, including branches; branches receive

5 year, renewable license, and;

May consult on Vietnamese laws

Architectural

100% US equity allowed;

May provide services to foreign invested companies for first 2

years, no limits thereafter

100% US equity allowed;

May provide services to foreign invested companies for first 2

years, no limits thereafter

Computer and related

100% US equity allowed;

May provide services to foreign invested companies for first 2

years, no limits thereafter

Advertising

Joint ventures allowed, with initial limit on US equity share at

49% In 5 years, limit on US equity increases to 51%; in 7 years,

no limit on US equity in JV

Market Research

Joint ventures allowed, with initial limit on US

equity share at 49% In 5 years, limit on US equity increases to 51%; in 7 years, 100% US equity

WTO Basic Telecom Reference paper (requiring

pro-competitive regulatory regime) agreed to

Value-added Telecom:

Joint ventures allowed after 2 years (3 years for Internet

services), with 50% limit on US equity;

Basic Telecom (including mobile cellular and satellite)

Joint ventures allowed after 4 years, with 49% US equity limit;

Voice Telephone services Joint ventures allowed after 6 years, with 49% US equity limit;

May provide services to foreign invested companies for first 3

years, no limits thereafter

Distribution

Wholesale distribution: Joint ventures allowed after 3 years, with 49% US equity limit After 6 years, no limit on US equity in JV’s Longer phase-ins for limited list of sensitive items

Retail: One outlet automatically allowed for each retailer; beyond that, on a case by case basis

Educational

Joint ventures allowed, no limits on US equity; in 7 years, schools with 100% US capital allowed

Financial Services

GATS financial services annex (includes prudential

carve-out) agreed to:

Insurance

Life and other “non-mandatory” sectors: Joint ventures, with

50% US equity limit, allowed after 3 years; after 5 years 100%

US equity allowed

“Mandatory” sectors (motor vehicle, construction related): Joint

ventures allowed after 3 years (no limit on US equity share),

100% US equity allowed after 6 years

Banking and related financial services

Non-bank and leasing company providers: Joint ventures allowed

(no US equity limit); in 3 years, 100% US equity allowed

Banks: US branches allowed Joint ventures allowed with US

equity between 30% and 49%; after 9 years, 100% US subsidiary

banks allowed US equity in privatized Vietnamese banks allowed

at same level as participation allowed to Vietnamese investors

Minimum capital requirements: $15 million for branch of US bank;

$10 million for joint ventures or 100% subsidiary banks

Mortgage holding rights: After 3 years, financial institutions

with 100% US equity may take mortgage interest in land use

rights of foreign invested firms; in case of default of such, may

acquire and use mortgages for purposes of liquidation

100% US equity financial leasing companies, or joint ventures

allowed Investors must have three consecutive profit making

years and legal capital of at least $5 million

In three years, will provide national treatment with respect to

central bank discounting, swap, and forward facilities by US

financial service providers

Ability to take local currency (“dong”) deposits by US bank

branches:

For legal entities with whom bank does not has a credit relationship:

may accept deposits, up to 50% of bank’s legal capital in first year,

increasing according to agreed schedule to full national treatment in 8

years (for legal entities with a credit relationship, no limits on dong

deposits)

For natural persons with whom the bank does not have credit

relationship, may accept deposits up to 50% of banks legal capital in first year, increasing according to agreed schedule, to full national treatment in

10 years For other natural persons, no limits on dong deposits.

In 8 years, US financial institutions may issue credit cards on a national

treatment basis

US banks may place ATM machines at locations other than branches

when Vietnamese banks are allowed to do so

Securities-related services

Representative offices allowed.

Health and related social services

100% US equity allowed; Minimum investment for hospital: $20

million; minimum for clinic: $2 million; minimum for specialty unit:

$1 million

Tourism and travel related

Hotel and restaurants: 100% equity allowed, in parallel with

investment to build a hotel

Travel agencies & tour operators: Joint ventures allowed, with 49% U.S equity limit; in 3 years, equity limit is 51%; in 5 years, no limit

on US equity in joint ventures.

Chapter 4 : Investment

Provisions allowing for free transfer of currency on a national

treatment basis (N.B.: Vietnamese currency not fully

convertible)

Trade-Related Investment Measures

(TRIMs)

Vietnam will phase out all WTO inconsistent

TRIMs (e.g., local content requirements) in 5

years, and other TRIMs like practices (export

performance requirements) over a similar

timeframe.

National Treatment

Vietnam makes a general national

treatment commitment, with some

exceptions.

Investment screening

Will be totally phased out for most sectors over

a 2, 6 or 9 year period (depending on the type of

sector, e.g, investment in industrial zones or in

the manufacturing sector), but Vietnam reserves

the right to apply screening in certain excepted

sectors.

requirement to sell US share in the JV to the

Vietnamese partner and replaces it with right of first

refusal.

Functioning of Joint-Ventures

Eliminates requirement that certain board

members be Vietnamese in three years, and

sharply limits the types of issues on which board

“consensus” must be reached (i.e., on which

Vietnamese members have veto power)

Discriminatory Pricing

Phases out all discriminatory pricing to U.S

investors or persons (utilities, transportation fees,

rents, etc.), immediately or over 2-4 year period

depending on type of fee

Chapter V:

Business Facilitation

Ensures that U.S persons can conduct routine

business practices, such as setting up offices, import products for office use, advertise, and conduct

market studies

Chapter VI:

Transparency and Right

to Appeal

Extensive transparency provisions, requiring Vietnam

provide advance notice of all laws, regulations and other

administrative procedures relating to any matter covered in

the agreement, and requiring their publication, and an

indication therein of effective dates and government contact points.

Requires all laws governing issues covered in the agreement which have not been published to be made public and readily available

Requires designation of an official journal where all such measures will be published

Requires uniform, impartial and reasonable application of all laws, regulations and administrative procedures

Requires formation of administrative or judicial tribunals for

review and correction (at the request of an affected person) of all

matters covered in the agreement, and affords the right to appeal

the relevant decisions Notice of decisions upon appeal and reasons for decisions appealed shall be provided in writing