JOINT CIRCULAR No. 18/2005/TTLT/BTM-BCN GUIDING THE ASSIGNMENT AND IMPLEMENTATION OF QUOTA FOR EXPORTING TEXTILE AND GARMENT PRODUCTS TO THE UNITED STATES MARKET IN 2006

JOINT CIRCULAR

Guidelines for the allocation and implementation of export quotas for textile and garment products to the United States market in 2006

textiles and garments entering the United States market in 2006

Based on the Agreement on Textile and Apparel Trade between the Socialist Republic of Vietnam and the United States of America signed on July 17, 2003 (hereinafter referred to as the Vietnam-US Textile Agreement) and the memoranda extending its validity;

Based on current regulations governing export and import management;

Considering the situation of textile and garment exports to the United States;

After consulting with the Vietnam Textile and Garment Association,

The Ministry of Trade and the Ministry of Industry (hereinafter referred to as the Joint Ministries) provide guidelines for the allocation and implementation of export quotas for textile and garment products to the United States market in 2006 as follows:

I. GENERAL PROVISIONS

1. Scope of application of quotas:

Export quotas for textile and garment products to the United States include 38 types of goods (Cat.), including 13 double Cat. and 12 single Cat. as specified in the Appendix attached to this Circular.

2. Subjects eligible for quota allocation and implementation:

Trading entities allocated and implementing quotas must meet the following conditions:

2.1. Possess a Business Registration Certificate, have registered a business code for export and import or hold an Investment License under the Law on Foreign Investment in Vietnam;

2.2. Have production capacity for textile and garment products;

2.3. Must ensure ownership of at least 100 industrial sewing machines (single needle and/or double needle type) in good operating condition. The minimum number of machinery and equipment mentioned above must be supported by legal ownership documents of the trading entity. For types of goods not produced using industrial sewing machines, the trading entity must own sufficient machinery and equipment, and appropriate facilities to meet the production requirements of the registered textile and garment product for export.

Leased machines (not financial lease) shall not be counted as owned by the trading entity.

When there is a need to export goods managed by quotas, new traders (traders without export achievements of quota-managed goods into the US market) must submit a written request to the local Department of Commerce/Commerce and Tourism to organize a joint inspection team, and will be considered for participation in quota implementation after the Textile Quota Management Board (Textile Quota Board) receives the report from the Inspection Team.

2.4. Trading entities must have staff with qualifications and capabilities in export and import procedures and knowledge of trade policies to handle quota procedures and export-import documents.

The Joint Ministries require trading entities to access daily the Ministry of Trade's website at www.mot.gov.vn to promptly grasp and implement the Joint Ministries' guidelines in accordance with the frequent changes in the textile and garment industry.

II. REGULATIONS ON MANAGEMENT AND IMPLEMENTATION OF QUOTAS

1. Basis and time limit for management and implementation of quotas:

From January 1, 2006 to June 30, 2006, the Joint Ministries will automatically issue visas for all types of goods listed in Section I.1.During the period from January 1, 2006 to June 30, 2006, for types of goods that achieve approximately 70% of the total quantity of their respective quotas for 2006, the Joint Ministries will allocate quotas based on the export performance of the first months of 2006 and the export needs of the trading entities for the subsequent period.

By June 30, 2006, types of goods that have not reached 70% of their quota will continue to receive automatic visas. If necessary, the Joint Ministries may announce further management measures for types of goods that have achieved nearly 90% of their respective quotas for 2006.

2Based on the implementation of textile and garment export quotas to the US market during each period, the Joint Ministries may adjust the list of goods subject to quota allocation, goods eligible for automatic visa issuance, amend and supplement automatic issuance guidelines, guidelines for implementing guarantee deposits or other measures as appropriate.

3. Effective Implementation:

In cases where the Joint Ministries allocate part or all of the 2006 quota for certain types of goods, the 2006 quota will be effective for shipments leaving Vietnam from January 1, 2006 to the specific date stipulated in the quota allocation notification but no later than December 31, 2006.

4. Issuance of Visas and Automatic Visas:

The issuance of visas is carried out according to Circular No. 03/2003/TT-BTM dated June 5, 2003 of the Ministry of Trade guiding the issuance of visas for textile and garment exports to the United States under the Vietnam-US Textile Agreement and related implementing circulars.

Regulations on the implementation of automatic visa issuance: trading entities meeting the conditions set forth in Section I.2 above (including new traders who have not been allocated and implemented export quotas to the United States) are entitled to automatic visas for textile and garment exports to the United States. When applying for an automatic visa for the first time, new traders must present a Joint Inspection Team's confirmation document regarding their production capacity to the Import-Export Management Office.

Shipments produced/processed in Vietnam using some imported semi-finished products will be issued export visas to the United States when they obtain a Vietnamese Origin Certificate but must comply with the United States' rules of origin for goods.

5. Entrusting and Accepting Entrustment for Export:

Entrusting and accepting entrustment for textile and garment exports 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.

The achievement of entrusted quota implementation will be counted towards the export performance of the entrusting trader.

6. Transfer of Quotas:

In 2006, if the Joint Ministries allocate quotas and permit their transfer, the transfer of quotas shall be carried out in accordance with Circular No. 06/2005/TTLT/BTM-BCN dated April 1, 2005.

7. Guarantee Deposit/Pledge to Ensure Quota Implementation:

Merchants may voluntarily register for deposit/guarantee for all types of goods to ensure the quota quantity will be utilized in 2006. In cases where the registered deposit/guarantee quantity exceeds the quota source, the Joint Ministries will consider prioritizing the allocation of quotas to merchants with export achievements to the United States market in 2005 and contracts signed with major US customers.

The application of the deposit/guarantee form to ensure the implementation of the textile quota shall be carried out according to Circular Joint Circular No. 15/2005/TTLT/BTM-BCN dated August 9, 2005.

III. IMPLEMENTATION, INSPECTION, SUPERVISION AND VIOLATION HANDLING

1. Joint Ministries guide merchants to implement the terms of the signed Agreement and issued regulations, coordinate with relevant domestic and foreign agencies to promptly resolve issues arising during the implementation process. The results of quota allocation and quota implementation status will be announced through mass media and the website: www.mot.gov.vn of the Ministry of Trade.

Provincial Departments of Commerce or Provincial Departments of Commerce and Tourism are responsible for coordinating with Provincial Industrial Departments and related local departments in organizing inter-departmental inspections and with the Vietnam Textile Garment Quota Board in matters such as verifying production and export capacity of merchants, preventing commercial fraud to ensure the enforcement of the Vietnam-U.S. Textile Agreement.

In cases requiring spot checks, rechecks of production capacity of merchants, checks on suspicious cargo shipments... The Vietnam Textile Garment Quota Board will cooperate with one or more of the following entities: Supervision Team, Customs, Department of Commerce/Commerce and Tourism, Regional Export Control Office, Vietnam Textile Association to conduct inspections and handle violations promptly.

2. All management, distribution, control, and implementation activities of textile export quotas to the U.S. market are supervised by the Joint Ministries' Supervision Team. The Joint Ministries' Supervision Team operates under the current operational regulations.

3. Merchants violating laws and current regulations regarding the implementation of textile export quotas to the United States and the Vietnam-U.S. Textile Trade Agreement will be dealt with according to the level of violation from revoking part or all of the quota quantity to suspending quota allocation, suspending automatic visa issuance or as provided by law. Specifically as follows:

3.1 Merchants illegally transferring goods, making and using fake Visas/C/Os, forging documents will have their entire quota revoked, no further quota allocation, no automatic visa issuance, and their files transferred to law enforcement agencies for handling.

3.2 Merchants who inaccurately declare quota application forms, visa application forms, evading Joint Ministries' quota control will have their entire quota revoked, no supplementary quota allocation, no automatic visa issuance.

3.3 Merchants who inaccurately declare production capacity or export value to obtain supplementary quota allocation will have the allocated quota portion revoked due to inaccurate declaration and fined 30% of the standard quota based on the declared capacity.

3.4 Merchants who inaccurately declare production capacity will be fined corresponding to the inaccurate declared portion relative to the total allocated quota. Specifically, if the inaccurate declaration is less than 10% of the machinery and equipment quantity, they will be warned, no supplementary quota allocation, and development. If the inaccurate declaration is 10% or more, the fine will be proportional to the quota quantity relative to the total allocated quota of the previous year, deducted from the current year's allocation.

In cases where merchants only implement automatic visas without implementing allocated quotas, when penalized, they will not be completely suspended from automatic visa issuance. The Joint Ministries will estimate the penalty deduction quantity if that type of goods stops automatic visa issuance for quota allocation or when merchants register for other types of goods being allocated quotas, the estimated standard allocation quantity will be reduced accordingly.

For violations and penalties not specified above, the Joint Ministries will consider and handle them specifically.

Other provisions governing quota management not mentioned in this Circular but not contrary to the provisions of this Circular will continue to be effective. Previous provisions conflicting with this Circular are abolished.

Based on actual production and import/export conditions, international market situations at different periods, the Joint Ministries will provide detailed guidance and announcements to manage quotas appropriately and effectively.

This Circular Joint Circular takes effect fifteen days after its publication in the Official Gazette.

ANNEX

(attached to Joint Circular No. 18/2005/TTLT/BTM-BCN dated October 21, 2005)