Seeking Comments on the Draft Circular Replacing Circular No.23/2015/TT-BKHCN providing for the Importation of Used Machinery, Equipment and Production Lines October 20, 2017 Customs & Trade The Ministry of Science and Technology (“MOST”) is currently seeking comments on the new Draft Circular (“Draft Circular”) replacing Circular No.23/2015/TTBKHCN dated November 13, 2015 (“Circular No.23”). The Draft Circular, with a number of amended provisions, facilitates the importation of used machinery, equipment, and production lines for the purpose of deployment in the business operations of enterprises. Accordingly, this Draft Circular is expected to enter into force on June 01, 2018 and contains the following noteworthy provisions: (i) Importation of used equipment: In addition to equipment abandoned by other countries due to their being outdated, poor quality or environmentally undesirable which are listed by the MOST on the Electronic Information Portal, the Draft Circular also disallows the importation of used equipment if such equipment uses technology that is no longer widely utilized in developed countries under Article 11.1.(c), the 2017 Law on Technology Transfer (which will enter into force on July 01, 2018). (ii) The service life of the equipment (i.e. being the time determined from the year of manufacture to the year of importation): Similar to Circular No.23, the Draft Circular provides that the service life of the used equipment must not exceed 10 years. However, there are a number of supplementary suggestions as follows: • Regarding used equipment imported pursuant to an investment project, it shall meet some criteria, in which: Plan 1: The service life of the technology line’s main equipment is not more than 20 years; Plan 2: The remaining service life of the production line’s main equipment is not less than 10 years in comparison with the service life stated by a manufacturer; or Plan 3: The ratio of remaining quality of the main equipment is 75% or above. It is unreasonable to provide a specific service life to be applied to all equipment, since each piece of equipment has different characteristics and depreciation quality which depends on various factors. Therefore, Plan 3 which provides a minimum percentage ratio in the remaining service life of the used equipment can be considered as the most feasible and suitable for practical implementation. However, in order to determine the ratio, the factors which it will be based on, and what necessary documents submitted to ascertain the ratio, etc., must be specifically provided and guided by law. • Regarding the used components, spare parts, and replacement parts: there are to be no limits on the production year. Similar to Circular No.23, the enterprise may submit an application file to the MOST for approval of importation if the service life of the used equipment is under the allowed limit. The Draft Circular additionally provides a principle that no approval of importation shall be granted for used equipment (i) which was produced with complicated technology, affected by time, or has a high risk of affecting the environment; or (ii) which has a remaining life of less than 10 years compared to the service life stated by the manufacturer. However, this provision is very unclear and ambiguous when the Draft Circular does not provide the specific criteria to define that in which cases will the production technology be considered complicated, affected by time and have a high risk of affecting the environment. (iii) Procedures of importation of used equipment in investment projects In investment projects, if the enterprise intends to import used equipment for deployment at its project, the enterprise shall carry out procedures in 02 phases: firstly, the phase of deciding an investment policy and applying for an investment certificate; and secondly, the phase of implementing the investment project. Specifically, in the first phase of deciding an investment policy and applying for an investment certificate, the enterprise requiring used equipment must submit the application file to the MOST for review. Following this, the MOST will provide preliminary comments on the technology and equipment (within 05 working days from the date of fully receiving the valid application file). After obtaining the preliminary comments from the MOST, before being able to import the equipment, the enterprise must once again submit an application file on importation to the MOST. Accordingly, the MOST shall work with other Ministries’ agencies to review and issue a written approval, attached with a List of the used equipment intended for importation (within 15 working days from the date of fully receiving the valid application file). It is only after obtaining this written approval that the enterprise will be allowed to import the equipment. The provision for submitting 02 application files wastes significant time, increases costs and impedes the enterprise from carrying out the investment project. Moreover, in the event that the enterprise was already granted the investment policy decision, the investment certificate but the MOST denies the enterprise permission to import the used equipment, the implementation of the approved investment project shall become much more difficult and will likely result in extra costs in importing and buying new equipment and machinery for deployment in the project. Therefore, it should not be necessary to carry out more procedures after being granted the investment policy decision, the investment certificate. Instead of forcing the enterprise to carry out more procedures, the MOST should review and give an official decision at the time that the enterprise applies for an investment certificate (i.e. the procedures for obtaining the investment certificate and applying for importation of the used equipment should be completed in only one phase). After gathering comments, the Draft Circular shall continue to be completed, reviewed and submitted to the Minister of Science and Technology for consideration on the issuance accordingly. – Written by LE & TRAN | Vietnam’s Premier Business Litigation Firm This insight is quoted from the Vietnam Customs & Trade Law Review (November 2017), you can download and read the full file of Vietnam Customs & Trade Law Review (November 2017) here.