JOINT CIRCULAR No. 04/2004/TTLT-BTM-BCN ON GUIDELINES FOR ALLOCATION AND IMPLEMENTATION OF QUOTAS FOR EXPORTING TEXTILE AND GARMENT PRODUCTS TO THE UNITED STATES MARKET IN 2005

JOINT CIRCULAR

Guidelines for the allocation and implementation of export quotas for textile and garment products to the United States market in 2005

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Pursuant to the Vietnam-United States Textile and Apparel Trade Agreement dated July 17, 2003, and the Memorandum of Understanding dated July 22, 2004;

Pursuant to Decision No. 46/2001/QĐ-TTg dated April 4, 2001 of the Government on managing exports and imports of goods during the period from 2001 to 2005;

Based on the situation of textile and garment exports to the United States in 2004 and the assessment of the export situation in 2005;

After consulting with the Vietnam Textile and Garment Association,

The Ministry of Industry and the Ministry of Commerce jointly issue guidelines for the allocation and implementation of export quotas for textile and garment products to the United States market in 2005 as follows:

I. GENERAL PROVISIONS

1. Scope of application of the quota

The export quota for textile and garment products to the United States includes 38 types of products (Cat.), including 13 double Cats. and 12 single Cats. as specified in Appendix No. 01 attached hereto.

2. Recipients of the quota allocation and implementation

Trading enterprises receiving and implementing the quota must meet the following conditions:

- Having a business registration certificate, registered with a trading code or having an Investment License under the Law on Foreign Investment in Vietnam;

- Possessing production capacity for textile and garment products;

- Not violating current regulations or the provisions of the Agreement in 2004.

- Trading enterprises have the right to receive quotas independently for export or within a supply chain (with the quota level of enterprises in the supply chain recorded). Enterprises can join the supply chain after receiving sufficient quotas.

II. REGULATIONS ON QUOTA ALLOCATION

1. Allocation of quotas

The allocation of quotas for textile and garment products to the United States will be conducted openly, without discrimination, and in accordance with the target group, specifically as follows:

- Allocate 80% of the quota source (including the growth rate of 2% and 7% depending on each type of product) to trading enterprises that have implemented the corresponding product exports (commonly referred to as export achievements) from January 1, 2004 to December 31, 2004.

- Allocate 20% of the quota for supplementary allocation to trading enterprises (commonly referred to as development quotas), including:

+ 3% of the quota for contracts for exporting textile and garment products using domestically produced fabric/materials.

+ 3% of the quota for trading enterprises exporting types of textile and garment products not managed by quotas to the United States from July 2004 to June 2005.

+ 1% of the quota for trading enterprises with factories more than 500 kilometers away from Haiphong Port or Ho Chi Minh City International Port.

+ 4% of the quota for trading enterprises voluntarily joining supply chains and those that have implemented quotas in 2004 and now invest in new large-scale weaving and dyeing projects.

+ 7% of the quota for trading enterprises with contracts signed with major U.S. textile and garment importers, with import volumes of at least 20 million USD in 2003 or 2004, and customers with well-known brands.

+ 2% reserve.

2. Basis for quota allocation

2.1. Achievement quota: Product types are divided into two groups.

- Group I includes 9 types of products (Cat.): 334/335, 338/339, 340/640, 341/641, 342/642, 347/348, 359/659-S, 638/639, and 647/648.

The achievement quota allocated to trading enterprises is the percentage of the quantity of each product type's quota fulfilled in 2004 minus the quantity of the 2005 quota advanced for use in 2004.

- Group II includes 16 types of products (Cat.): 200, 301, 332, 333, 345, 351/651, 352/652, 359/659-C, 434, 435, 440, 447, 448, 620, and 645/646.

The achievement quota allocated to trading enterprises is the quantity of each product type's quota fulfilled in 2004 minus the quantity of the 2005 quota advanced for use in 2004.

- The 2005 quota advanced for use in 2004 shall not be counted towards the export achievements of 2004.

- The quota application form is Model 05 attached hereto.

2.2. Development quota:

2.2.1. Quota for textile and garment products made with domestically produced fabric/materials.

- Export contracts for textile and garment products produced using exactly the type of domestic fabric/material suitable for the exported product;

- Purchase contracts for fabric/materials produced in Vietnam;

- Payment invoices for purchasing fabric/materials issued by the Ministry of Finance.

The documents are in Model No. 01 attached hereto.

2.2.2. Quota for trading enterprises exporting types of products not subject to quotas to the United States from July 2004 to June 2005;

- A statistical table of product types, quantities, and export value of the enterprise;

- Statistical data provided by the Customs Department (provided by the Customs Department to the Ministry of Industry and Trade).

The documents are in Model No. 02 attached hereto.

2.2.3. Quota for trading enterprises voluntarily joining supply chains and those that have implemented quotas in 2004 and now invest in new large-scale weaving and dyeing projects.

- For enterprises voluntarily joining supply chains: The Vietnam Textile and Garment Association will cooperate with enterprises to organize supply chains. Based on the achievement quota quantity of enterprises in the chain, report on the specific operation mechanism of the chain including cooperation in production, import/export of raw materials and finished garments managed by quotas and other non-quota export products to the U.S. market in 2005 through a participation agreement of the chain members (similar to an economic contract between participating parties).

- For enterprises that have implemented quotas in 2004 and now invest in new weaving and dyeing projects: based on investment capital, the number of machines and equipment newly installed or to be installed according to the plan from January 2004 to December 2005.

The documents are in Model No. 03 attached hereto.

2.2.4. Enterprises with factories more than 500 kilometers away from Haiphong Port or Ho Chi Minh City International Port:

- Have processing and manufacturing contracts for textile and garment products for export to the United States.

- Possess production capacity appropriate to the proposed product type.

2.2.5. Enterprises with contracts signed with major U.S. importers and customers with well-known brands:

- Vietnamese enterprises possess production capacity appropriate to the proposed product type and have contracts signed with major U.S. distributors or customers with well-known brands.

The file shall be in the format of Model 04 attached to this Circular.

- Large importers with well-known brands shall submit a written request to the Ministry of Trade (Department of Import-Export) no later than September 30, 2004, detailing the list of suppliers providing goods in Vietnam, types of goods, quantities, values for the years 2003 and 2004, and the planned forecast for 2005.

3. Time limit for allocating quotas

3.1. Achievement quotas shall be allocated in two phases:

- The quota for traders who have export achievements from January 1, 2004 to July 31, 2004 shall be implemented at the beginning of September 2004.

- The quota for traders who have export achievements from August 1, 2004 to December 31, 2004 shall be implemented at the end of January 2005.

3.2. Development quotas:

- The quota for export contracts using fabric/raw materials produced in Vietnam shall be allocated in two phases. Phase I in December 2004, Phase II in April 2005.

- The quota for traders who have export achievements for non-quota categories of goods to the US market in the last six months of 2004 and the first six months of 2005 shall be implemented in February and July 2005.

- The quota for traders whose factories are more than 500 kilometers away from Hai Phong Port and Ho Chi Minh City International Port shall be implemented in October 2004.

- The quota for traders voluntarily participating in chain linkages after the Joint Board of Trade, Industry, and the Vietnam Textile and Garment Association has inspected the actual operation of the chains.

- The quota for traders with contracts signed with major US importers and large, well-known brand customers shall be implemented in October 2004.

III. PROCEDURE FOR REGISTERING QUOTAS

Traders wishing to use textile and garment export quotas to the US market in 2005 shall submit their registration (in the attached form) to the Ministry of Trade (Department of Import-Export, 21 Ngo Quyen Street, Hanoi) and shall bear responsibility for the authenticity of the declared criteria in the quota registration form.

Registration period:

- Achievement quotas: Registration forms according to the model shall be submitted to the Ministry of Trade before September 1, 2004.

- Development quotas: Registration forms shall be submitted to the Ministry of Trade before September 30, 2004. Specifically:

+ For quotas used for exporting textile and garment products made from domestically produced fabrics, the deadline is no later than March 31, 2005.

+ For quotas for traders who have export achievements for non-quota categories of goods to the US market in the last six months of 2004, the registration forms shall be submitted no later than January 30, 2005, and for the first six months of 2005, the registration forms shall be submitted no later than July 20, 2005.

+ For quotas for traders voluntarily participating in chain linkages and traders implementing new large weaving and dyeing projects, the registration forms shall be submitted no later than June 30, 2005.

IV. IMPLEMENTATION REGULATIONS

1. Effective Date

- The 2005 quotas shall be effective from January 1, 2005 to December 31, 2005.

- The submission deadline for applications is calculated from the date stamped on the official letter received by the Ministry of Trade.

2. Issuance of Visa

The issuance of Visa shall be carried out in accordance with Circular No. 03/2003/TT-BTM dated June 5, 2003 of the Ministry of Trade guiding the issuance of Visa for textile and garment exports to the United States under the Vietnam-US Textile Agreement and any amendments (if any).

No Visa shall be issued for shipments of semi-finished products exported to third countries for assembly into finished products or for shipments of semi-finished products imported into Vietnam for assembly into finished products for export to the United States.

3. Return

Traders unable to fulfill the allocated quotas must submit a written return notice to the Ministry of Trade.

- Quotas returned before September 2005 will be counted towards the standard quota of the following year.

- Quotas returned from September 2005 onwards will be counted at 50% towards the standard quota of the following year.

- Quotas allocated but not fulfilled or partially fulfilled without returning them will be deducted from the standard quota of the following year.

- Traders are not permitted to sell quotas to other traders.

- Traders participating in chain linkages who have registered a linkage mechanism (including import/export linkages for quota and non-quota goods, production linkages) and have been confirmed by the Joint Board to operate according to the actual mechanism can transfer quotas within the chain.

4. Conversion of Quotas

In cases where there is a need to convert quotas between different categories of goods (Cat.) for direct export, traders must submit a written request to the Ministry of Trade to resolve it in accordance with the provisions of the Agreement.

5. Entrustment and Acceptance of Entrustment

Entrustment and acceptance of entrustment shall be carried out in accordance with Decree No. 57/1998/NĐ-CP dated July 31, 1998 and Decree No. 44/2001/NĐ-CP dated August 2, 2001 of the Government.

6. Quota Fees

The level of quota fees for each category of goods (Cat.) shall be implemented in accordance with the specific regulations of the Ministry of Finance.

Traders shall pay the quota fee (if applicable) for each quota allocation notification or each shipment of exported goods. When applying for Visa, traders shall present proof of payment of the quota fee to the Regional Export-Import Management Office deposited into the Ministry of Trade's account number 920.01.023 at the State Treasury in Hanoi.

V. IMPLEMENTATION PROVISIONS

1. The Ministry of Trade and the Ministry of Industry shall guide the implementation of the terms of the signed Agreement and the issued regulations, coordinate with relevant domestic and foreign agencies to promptly address any issues arising during implementation. The results of quota allocation and the implementation status of quotas shall be announced through mass media and on the website: www.mot.gov.vn of the Ministry of Trade.

Provincial Departments of Commerce or Departments of Commerce and Tourism shall be responsible for coordinating with the Joint Board's Management Team in: verifying the production and export capacity of traders, preventing commercial fraud to ensure the enforcement of the Vietnam-US Textile Agreement.

2. Traders shall comply with the provisions of the Joint Circular and the regulations of the trade agreement signed with the United States. In case of violation, depending on the severity, they may be subject to penalties ranging from quota revocation to suspension of quota allocation or in accordance with the law. Specifically:

2.1. Traders who illegally transfer goods, produce and use fake Visas, fake Certificates of Origin (C/O), or forge documents shall have all their quotas revoked, not be allocated quotas for the next year, and their files shall be transferred to the law enforcement agency for handling.

2.2. A trader who incorrectly declares the content of the quota application form or visa application form, evades the quota control of the Ministry of Trade and the Ministry of Industry shall have their quota revoked and not be granted additional quotas.

2.3. If a trader misrepresents production capacity or export value to obtain additional quotas, the allocated quota portion based on the false declaration shall be revoked and a fine of 30% of the standard quota shall be imposed.

This Circular takes effect fifteen days from the date of publication in the Official Gazette.