Circular No. 05/TT-NH7 guiding the implementation of the management regulations for geological survey activities, mining, processing, and trading of precious stones, issued together with Decree No. 67-CP dated January 7, 1993 of the Government.

CIRCULAR

OF THE STATE BANK OF VIETNAM

Guidelines for implementing the management regulations on geological survey activities, mining, processing, and trading of precious stones, issued together with Decree No. 67/CP dated January 7, 1993 of the Government

On October 7, 1993, the Government issued the Management Regulations on Geological Survey Activities, Mining, Processing, and Trading of Precious Stones. Based on Article 3 of the aforementioned Regulations, the Governor of the State Bank guides the implementation of processing, manufacturing, and trading of precious stones as follows:

I. LEGAL RIGHTS TO PRECIOUS STONES AND THE SCOPE OF STATE MANAGEMENT OVER PRECIOUS STONE BUSINESS ACTIVITIES

AND THE SCOPE OF STATE ADMINISTRATIVE MANAGEMENT OVER PRECIOUS STONE BUSINESS ACTIVITIES AND RESPONSIBILITIES

(Article 3, Article 5, Article 14, and Article 20)

1. Organizations and citizens of Vietnam possessing precious stones as stipulated in Article 1 of the Regulations issued together with Decree No. 67-CP, regardless of quantity, are recognized by the State for their legitimate rights, except in cases where organizations and citizens have engaged in illegal activities to obtain such precious stones.

Organizations and citizens with legitimate precious stones have the right to store, transport, transfer, or deposit them with banks under the regulations of the State Bank Governor regarding services for safekeeping of precious metals, precious stones, pearls, etc. All transactions involving the sale of raw precious stones within the territory of Vietnam must be conducted at precious stone trading centers organized by the State Bank of Vietnam or at retail stores licensed by the State Bank.

2. The State manages particularly valuable precious stones, specifically those that meet the gemstone standards with a weight of 50 carats or more for rubies, 1,000 carats or more for sapphires, with a deep red color for rubies, a medium to dark blue color for sapphires, high transparency, fracture less than 15%, and relatively uniform size, which can be processed into various shapes. Organizations and individuals possessing such precious stones must sell them to the State at market prices.

3. The State Bank implements state management over processing, manufacturing, purchasing, selling, exporting, importing, appraising precious stones, and opening retail stores for precious stone business abroad.

II. OBJECTS, CONDITIONS, PROCEDURES, SCOPE, AND RESPONSIBILITIES

FOR PETROLEUM TRADING AND LIABILITY

(Article 17, Article 18, and Article 20)

1. Entities permitted to engage in precious stone business activities include:

Economic organizations (including state-owned enterprises, limited liability companies, joint-stock companies, private businesses, foreign-invested enterprises) established in accordance with the law, and Vietnamese citizens who meet the conditions for processing and trading precious stones as specified in Point 2, Part II of this Circular.

2. Conditions for obtaining a license from the State Bank to conduct precious stone business.

a. Initial investment capital:

a.1. State-owned enterprises must have an initial investment capital of one billion Vietnamese dong.

a.2. Limited liability companies and joint-stock companies must have an initial investment capital of three hundred million Vietnamese dong.

a.3. Private businesses must have an initial investment capital of two hundred million Vietnamese dong.

a.4. Individual households must have an initial investment capital of one hundred million Vietnamese dong.

The initial investment capital mentioned above is the minimum amount of capital that enterprises and individual households must have to engage in the precious stone business.

For state-owned enterprises, the initial investment capital is the state budget allocated to the unit for operation, certified by the Ministry of Finance (for central enterprises) or the Provincial Department of Finance (for local enterprises) regarding the source and amount of capital provided, or certified by a bank if the enterprise is funded through loans.

For limited liability companies and joint-stock companies, the initial investment capital is the registered capital contributed by shareholders and recorded in the company's articles of association.

For private businesses and individual households, the business capital must be in Vietnamese dong, foreign currency, or gold deposited in a bank and confirmed by the bank where the account is opened. If the capital is in physical assets, it must be certified by a notary office.

For enterprises established previously and engaged in other industries wishing to expand into the precious stone business, in addition to their existing capital, they must also meet the minimum capital requirements set forth in this Circular.

b. Professional technical qualifications:

Economic organizations and individuals engaged in the precious stone business must have:

Skilled workers knowledgeable about precious stones (able to distinguish types, quality, and commercial value).

They must have technical equipment for accurately weighing and testing the quality of precious stones, and obtain a permit to use such equipment from the provincial or municipal Quality Standards Measurement Agency where the enterprise or individual is located.

c. Business address:

The address must clearly indicate the house number, street, ward, town, district, county, province, or city, and must be approved by the District People's Committee or equivalent authority for setting up a business premises (store).

When changing the business address, economic organizations and individuals must notify and register at the new location with the State Bank Branch in the province or city.

3. Licensing procedures:

Economic organizations and individuals wishing to engage in the precious stone business must submit an application for a business license to the State Bank (Foreign Exchange Management Department). The application package includes:

- An application form for a precious stone business license (attached model).

- An initial business plan.

- Proof of business address.

- Confirmation of capital according to the provisions in Point (a) of Item 2 above.

Applications for a precious stone business license submitted to the State Bank (Foreign Exchange Management Department) must be endorsed by the head of the relevant ministry or department, the Chairman of the Provincial People's Committee, and the Director of the State Bank branch in the province or city, regarding the conditions for issuing a precious stone business license as stipulated in Part II of this Circular.

4. Scope of business:

Economic organizations and individuals holding a precious stone business license issued by the State Bank, based on the scope specified in the license, may:

- Purchase and sell raw precious stones and processed precious stones at domestic precious stone trading centers organized by the State Bank or at retail stores licensed by the State Bank.

Transactions involving precious stones must be accompanied by invoices in the format prescribed by the Ministry of Finance.

- Export precious stones abroad to earn foreign currency, after obtaining permission from the State Bank (Foreign Exchange Management Department).

- Undertake processing and manufacturing of precious stones for domestic organizations and individuals as well as foreign organizations and individuals. The State encourages the importation of precious stones from abroad for processing and re-export. The State Bank will consider issuing licenses to enterprises according to the provisions in Part III of this Circular.

- Open retail stores for selling precious stones abroad with permission from the Governor of the State Bank.

- Joint venture with foreign entities in the business of precious stones in accordance with the current Investment Law.

5. Responsibilities of economic organizations and individuals engaged in the business of precious stones.

When buying and selling precious stones, economic organizations and individuals must comply with the following regulations:

- Buying and selling of precious stones must be conducted at trading centers organized by the State Bank or at retail stores licensed to sell precious stones by the Governor of the State Bank.

- Use invoices prescribed by the Ministry of Finance. Invoices must clearly state the quantity, weight, quality, and value of the precious stones sold to customers.

- Maintain accounting records and bookkeeping in accordance with the Accounting and Statistics Ordinance.

- Products sold by retail stores must match the quality and weight stated on the invoice. They are subject to inspection and supervision by the State Bank Branches in provinces and cities regarding business conditions, scope, quality, and weight of precious stones sold to customers; they are also subject to management and oversight by People's Committees, Departments of Finance, National Economic Arbitration, Market Management Boards, and Provincial/City Standard Measurement Quality Control Agencies regarding compliance with national regulations.

- Adhere to tax policies of the State. Pay various fees and charges related to the business of precious stones as stipulated by the State Bank and the Ministry of Finance.

6. For scientific organizations, universities, and enterprise research facilities that have the capacity for processing, manufacturing, and appraising precious stones but do not meet the conditions to apply for a business license for precious stones, the State Bank may consider issuing a license for processing, manufacturing, and appraising precious stones.

These enterprises must submit applications to the State Bank. The application package includes:

a. A request for a processing and manufacturing license for precious stones sent to the State Bank (Foreign Exchange Management Department). The request must include the opinion of the head of the main managing agency.

b. Decision on establishment of the enterprise.

c. Plan for organizing processing, manufacturing, and appraisal of precious stones.

d. In cases of processing... manufacturing precious stones for export, each imported consignment must have a quality appraisal certificate issued by the Precious Stones Appraisal and Trading Center (State Bank) or other units authorized by the State Bank to conduct such appraisals, serving as the basis for applying for an export permit.

e. Confirmation letter about technical conditions from the Standard Measurement Quality Control Agency.

g. Approval from the People's Committee of the district or county for setting up headquarters.

III. EXPORT AND IMPORT OF PRECIOUS STONES AND OPENING RETAIL STORES

FOR THE SALE OF PRECIOUS STONES ABROAD.

(Article 19)

1. The State Bank (Foreign Exchange Management Department) issues export and import licenses for processed precious stones and raw materials for economic organizations and individuals engaged in the business of precious stones when they meet the conditions and procedures stipulated below:

a. For exporting precious stones.

- Possess a business license for precious stones issued by the State Bank or a mining license for precious stones issued by the Heavy Industry Ministry.

- Have a sales contract with foreign parties, specifying the type of goods (stone type), quantity, weight, price, payment method, and delivery terms agreed upon by both parties.

- Possess a sales certification from the Precious Stones Appraisal and Trading Center and a sales invoice.

- Possess a quality appraisal certificate for precious stones issued by the Precious Stones Appraisal and Trading Center (State Bank) or other state enterprises authorized by the State Bank to conduct such appraisals.

- Submit an export application for precious stones to the State Bank (Foreign Exchange Management Department) using the prescribed form.

b. For importing precious stones.

- Possess a business license or a processing, manufacturing, and appraisal license for precious stones issued by the State Bank.

- Have a processing contract with foreign parties or a production and business plan based on imported raw materials.

- Have a sales contract with foreign parties.

- Submit an import application for precious stones to the State Bank (Foreign Exchange Management Department) detailing the type of stone, quality, quantity, etc.

After importing, enterprises must bring the precious stones to the State Bank Branches in provinces and cities or other authorized units for quality appraisal.

2. Economic organizations with business licenses wishing to open retail stores abroad must meet the following conditions and procedures:

- Possess a business license for precious stones issued by the State Bank.

- Obtain permission from the foreign country to open a retail store (with a clear address).

- Submit an application to the State Bank requesting permission to open a retail store abroad.

All foreign currency proceeds from sales abroad must be repatriated in accordance with the current foreign exchange management policy.

Each quarter, the unit must report to the State Bank (Foreign Exchange Management Department) on its operational status, sales volume, and actual revenue.

IV. PRECIOUS STONE APPRAISAL, TRADING CENTER AND INTERNATIONAL AUCTION

OF PRECIOUS STONES

(Article 20)

1. The State Bank is the supervisory body, organizer, and operator of the Precious Stone Trading Center. The Trading Center operates under the direction of a management board appointed by the Governor from among the branches of the State Bank in provinces and cities.

Domestic organizations and individuals with business licenses for precious stones and foreign organizations and individuals are permitted to purchase precious stones at the center. Domestic organizations and individuals without business licenses for precious stones but recognized by the State as having legitimate rights over precious stones are also allowed to buy and sell at the center.

The conditions for participating in the purchase and sale of precious stones and all activities of the Precious Stone Trading Center are stipulated in the regulations on the Precious Stone Trading Center.

2. International auctions of precious stones are organized at the Precious Stone Trading Centers of the State Bank.

Organizations and individuals who are Vietnamese citizens with high-quality precious stones may sell through international precious stone auctions. Domestic organizations and individuals with business licenses for precious stones and foreign organizations and individuals may participate in auctions (purchase) of precious stones.

Conditions for participating in international precious stone auctions and all specific provisions are guided in the international precious stone auction regulations.

V. PENALTIES AND REWARDS

(Article 24, 26, 27)

1. Based on current laws, organizations and individuals engaged in the business of precious stones that violate the provisions of Chapter IV of the "Regulations on Managing Activities of Geological Survey, Mining, Processing, and Trade of Precious Stones" issued by the Government and this Circular, depending on the severity of the violation, will be subject to penalties in the form of fines, confiscation of evidence, revocation of business licenses for precious stones, or criminal prosecution (for individuals).

Cases of revoking business licenses shall be announced on local radio and newspapers.

2. Authority to impose penalties and rewards:

Depending on the nature and degree of violation, penalties shall be imposed by state agencies and persons authorized under Article 17, Chapter III of the "Administrative Offense Law" and Chapter XV of the "Criminal Procedure Code."

Organizations and individuals who contribute to detecting, reporting, and preventing smuggling of precious stones shall be rewarded materially and spiritually according to the current system.

VI. IMPLEMENTATION PROVISIONS

(Article 28, 29)

Economic organizations and individuals engaged in the business of precious stones must report their business situation and results every three months, six months, nine months, and annually to the branch of the State Bank in the province or city where they have their headquarters.

The Director of the State Bank Branch in the province or city is responsible for inspecting and urging organizations and individuals engaged in the business of precious stones within their jurisdiction to comply with the provisions of this Circular. Annually (no later than January 15 of the following year), they must report the implementation status to the State Bank (Department of Foreign Exchange Management).

This Circular takes effect from the date of signature. Previous guiding documents (Regulation No. 03-NH accompanying Decision No. 51 dated March 14, 1992 of the Governor of the State Bank regarding the management of the precious stone trade) and other provisions inconsistent with the contents of this Circular are hereby abolished./.