Circular No. 30/1999/TT-BTM guiding the business of domestically produced cigarette products

CIRCULAR

Guidelines for the domestic cigarette production business sector

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Implementing the Government Decree No. 11/1999/NĐ-CP dated March 3, 1999 on goodsprohibited from circulation, services prohibited from provision, restricted goodsand services, and conditional business activities, and the Prime Minister'sDirective No. 13/1999/CT-TTg dated May 12, 1999 on rectifying and organizingthe production and business operations in the tobacco industry, after reachingconsensus with the Ministry of Industry and related ministries, the Ministry ofTrade provides guidelines for the domestic cigarette market as follows:

 I. SCOPE OF APPLICATION

These Circular applies to all types of domestically produced cigarettes in Vietnam(hereinafter referred to as cigarettes).

In accordance with the provisions of the Government Decree No. 11/1999/NĐ-CP and thePrime Minister's Directive No. 13/1999/CT-TTg, the State has a monopoly on tobaccoproduction, restricts trade on the market, and uniformly manages all activitiesrelated to buying, selling, advertising, and marketing cigarettes; therefore,business entities engaged in wholesale, retail, or agency wholesale and retailtrade of cigarettes must comply with the specific regulations stipulated herein.

Foreign-invested enterprises operating in the tobacco production sector in Vietnamand branches of foreign tobacco companies established in Vietnam must comply withrelevant regulations stipulated herein when selling cigarettes on the Vietnamese market.

The sale of cigarettes at duty-free shops shall be governed by separate regulations.

II. TYPES OF CIGARETTES PERMITTED FOR TRADE

Only the following types of domestically produced cigarettes may be traded on themarket:

Cigarettes bearing registered trademark brands in Vietnam, produced by permittedenterprises, ensuring product quality according to Vietnamese standards, havingbeen granted a Certificate of Trademark Registration, and labeled and sealed inaccordance with legal provisions.

Cigarettes bearing registered trademark brands from abroad, produced by permittedenterprises in Vietnam, ensuring product quality according to Vietnamese standards,having been granted a Certificate of Trademark Registration, and labeled andsealed in accordance with legal provisions.

III. REGULATIONS ON CIGARETTES TRADING

Regulations concerning traders purchasing cigarettes from cigarette-producing andtrading enterprises to organize circulation and consumption of cigarettes on themarket:

1.1. Only traders meeting the following conditions and being approved in writing by theMinistry of Trade or provincial/municipal Departments of Trade authorized by theMinistry of Trade may purchase cigarettes directly from cigarette-producing andtrading enterprises under the Vietnam Tobacco Corporation or local cigarette-producing and trading enterprises (including joint ventures and cooperativelyoperating enterprises with foreign partners permitted to produce in Vietnam) orserve as agents for distribution for these enterprises to organize circulationand consumption of cigarettes on the market:

Must be an enterprise established in accordance with the law, holding a BusinessRegistration Certificate that includes cigarette products within its scope ofbusiness.

Possess financial capability to trade in cigarettes and have a sound financialsituation in 1998 and currently.

Have a stable distribution and consumption system for cigarettes within theirbusiness territory.

1.2. The application package of the trader shall include:

A letter requesting permission to purchase cigarettes from cigarette-producing andtrading enterprises.

A certified copy of the Business Registration Certificate.

A business plan for cigarette trading, clearly stating and fully detailing: thesituation and results of cigarette trading activities in 1998 and 1999, the namesof cigarette-producing and trading enterprises with which the trader has signedcontracts, the value, quantity, and type of cigarettes sold, sales revenue, tradeterritory, tax payment, profit...; the ability to ensure capital for stablecigarette trading activities, the financial situation of the trader in 1998 andcurrently; the organization of circulation, distribution, and consumption ofcigarettes in each territory, including wholesalers who regularly purchasecigarettes and have a stable sales network, or agents who regularly serve aswholesalers and have a stable sales network.

1.3. Authority and procedures for review:

Based on traders who have regular contracts for cigarette consumption fromcigarette-producing and trading enterprises through direct purchases or servingas distributors, and the conditions stipulated in Point 1.1 above, thecigarette-producing and trading enterprises shall prepare lists of traders asfollows:

List I includes traders with a business territory covering two provinces/citiesor more.

List II includes traders operating only within one province/city, and shall besent to the Ministry of Trade (Domestic Market Policy Department) for List I andto the provincial/municipal Departments of Trade where the traders' main officesare located for List II, while simultaneously notifying the traders to prepareapplication packages. The deadline for completion is before November 15, 1999.

Traders shall prepare application packages in accordance with the provisions ofPoint 1.2 above; those listed in List I shall submit their packages to theMinistry of Trade (Domestic Market Policy Department), and those listed in ListII shall submit their packages to the provincial/municipal Departments of Tradeat their main office locations. The deadline for submission is beforeNovember 15, 1999.

The Ministry of Trade, based on market conditions and state managementrequirements for cigarette products, will determine and announce the number oftraders permitted to purchase cigarettes from each cigarette-producing andtrading enterprise after consulting the Vietnam Tobacco Corporation onenterprises under its jurisdiction and the Vietnam Tobacco Association on otherenterprises.

Pursuant to the published quantity, the Ministry of Commerce examines the applicationand approves in writing for traders meeting the conditions listed in List I. Itauthorizes provincial and municipal commerce bureaus to examine applications andapprove in writing (according to Form 1 attached hereto) for traders meeting theconditions listed in List II and report back to the Ministry of Commerce. Thecompletion time must be before December 9, 1999.

The supplementation, adjustment of quantities and lists of traders permitted topurchase tobacco products from tobacco manufacturing and trading enterprises shallbe carried out according to the above regulations when there is a specific directiveletter from the Ministry of Commerce.

1.4. From December 9, 1999, tobacco manufacturing and trading enterprises are onlypermitted to sell tobacco products to traders with written approval from theMinistry of Commerce or provincial and municipal commerce bureaus; they mustprepare monthly reports on the sale of tobacco products to traders and submit themto the Ministry of Commerce and provincial and municipal commerce bureaus wheretheir tobacco manufacturing and trading enterprises are located.

1.5. Traders permitted by the Ministry of Commerce or provincial and municipalcommerce bureaus to purchase tobacco products from tobacco manufacturing andtrading enterprises are only allowed to buy and sell tobacco products within therange specified in the written approvals from the Ministry of Commerce orprovincial and municipal commerce bureaus (these documents have the effect ofreplacing the Tobacco Trading License stipulated in Clauses 2, 3, and 4 of SectionIII below); they must organize a stable distribution and consumption system for tobaccoproducts on the market and can only wholesale tobacco products to traderswith a Tobacco Trading License as prescribed in this Circular; they must preparemonthly reports on their purchase and sale of tobacco products and submit them tothe Ministry of Commerce and provincial and municipal commerce bureaus wheretheir main offices are located.

1.6. Branches of foreign tobacco companies permitted to operate in Vietnam to trade tobaccoproducts within the scope of the Branch Establishment License issued tothem are responsible for purchasing all branded tobacco products produced inVietnam as recorded in the License, organizing a stable distribution andconsumption system for tobacco products on the market, and can only sell tobaccoproducts to traders with a Tobacco Trading License as prescribed in thisCircular; they must prepare monthly reports on their distribution and consumptionof tobacco products and submit them to the Ministry of Commerce and provincialand municipal commerce bureaus where their branches are located.

2. Regulations on wholesaling or acting as a wholesale agent for tobacco products:

2.1. Traders established under laws, if meeting the following conditions, will beexamined and granted a Wholesale Tobacco Trading License or Wholesale AgentLicense by provincial and municipal commerce bureaus; they may purchase tobaccoproducts from traders with written approval from the Ministry of Commerce orprovincial and municipal commerce bureaus as stipulated in Clause 1 above toengage in the distribution and consumption of tobacco products within the scope ofthe province or city where the trader's main office is located:

Having a Business Registration Certificate indicating that the business scope includes tobaccoproducts.

Having a fixed business location with a clear address.

Having a distribution and consumption system for tobacco products.

Ensuring environmental protection and fire prevention regulations.

2.2. Traders granted a Wholesale Tobacco Trading License or Wholesale Agent Licensemust organize a stable distribution and consumption system for tobacco productson their territory; they can only wholesale tobacco products to entities with atobacco trading license as prescribed in this Circular within the province or citywhere the trader was granted the tobacco trading license.

3. Regulations on retailing or acting as a retail agent for tobacco products:

3.1. The traders mentioned in Clauses 1 and 2 above include: tobacco manufacturing andtrading enterprises, branches of foreign tobacco companies, traders with writtenapproval from the Ministry of Commerce or provincial and municipal commercebureaus, and traders with a Wholesale Tobacco Trading License or WholesaleAgent License, who can organize retail stores directly selling tobacco products toconsumers within their business territory without needing an additional RetailTobacco Trading License.

3.2. Traders with a Business Registration Certificate for hotels, guesthouses, or restaurantsand street food stalls may engage in retailing tobacco products or act asretail agents for tobacco products to consumers within the scope of their hotel,guesthouse, restaurant, or street food stall business premises after being granted aRetail Tobacco Trading License or Retail Agent License as prescribed in thisCircular.

3.3. Traders with a Business Registration Certificate indicating that the business scopeincludes tobaccoproducts, having a separate and fixed sales point or counter witha clear address, are eligible to be granted a Retail Tobacco Trading License orRetail Agent License as prescribed in this Circular.

4. Authority and procedures for granting Tobacco Trading Licenses:

4.1. A Tobacco Trading License is granted to traders meeting the business conditionsfor tobacco products as stipulated in this Circular and is issued as follows:

A Wholesale Tobacco Trading License (or Wholesale Agent License) is granted totraders primarily engaged in wholesale tobacco products as stipulated in Clause 2above.

A Retail Tobacco Trading License (or Retail Agent License) is granted to tradersengaged in retailing tobacco products to consumers as stipulated in Clause 3 above.

A Tobacco Trading License according to Form 3 attached hereto, with an effectiveperiod consistent with the period recorded in the Business Registration Certificatereceived by the trader.

For traders who are enterprises with multiple tobacco sales points, each point willreceive a separate Tobacco Trading License.

For individual traders, cooperative groups, or households, each trader can onlyconduct tobacco business at one location and will only receive one TobaccoTrading License.

4.2. The application dossier for a Tobacco Trading License includes:

An Application for a Tobacco Trading License (according to Form 2 attached hereto).

A certified copy of the Business Registration Certificate.

For traders engaged in wholesaling or acting as wholesale agents for tobacco products,must also submit a Business Plan for tobacco products, including the followingmain contents: previous and current tobacco trading situation (if already engagedin trading), financial capability, the organization of the tobacco consumption systemby the trader, network, territory, wholesale targets, projected purchase and salesfigures, and economic and financial indicators.

4.3. Provincial and municipal commerce bureaus directly receive and examineapplication dossiers for traders meeting the conditions stipulated in Clauses 2 and 3of Section III of this Circular.

4.4. The competent trade management authority at district or county level shall accept the files of individual traders, cooperative organizations, and household businesses within their jurisdiction, examine them, and propose to the Department of Trade to issue a Business Registration Certificate for retail sale or retail agency of tobacco products to traders who meet the conditions stipulated in this Circular.

4.5. Within fifteen days from the date of receiving complete and valid files, the Department of Trade must decide whether to issue or not to issue a Business Registration Certificate for tobacco products to the trader.

4.6. Traders who are issued a Business Registration Certificate for tobacco products must pay the prescribed fee according to the regulations of the Ministry of Finance.

5. Other provisions on the business of tobacco products:

5.1. All retail shops, stores, and outlets selling tobacco products must display a sign indicating the name of the enterprise or business operator, whether they sell retail or act as a retail agency for tobacco products, and must post the issued Business Registration Certificate for tobacco products and the prices of all types of tobacco products currently being sold.

5.2. Enterprises engaged in wholesale trade or wholesale agencies for tobacco products must:

Maintain daily ledgers recording the quantity of tobacco products purchased and sold to each trader and their addresses within the enterprise's distribution system.

Comply with the invoicing and accounting bookkeeping regulations as prescribed by the Ministry of Finance.

Submit monthly reports on the business operations of tobacco products to the Department of Trade of the province or city where the enterprise has its main office.

5.3. The use of agents or acting as a wholesale or retail agent for tobacco products must comply with the provisions on agency purchase and sale of goods under Section 6 - Chapter II - Commercial Law dated May 10, 1997.

5.4. Strictly prohibited:

Selling smuggled tobacco products produced abroad; selling various types of tobacco products without registered trademarks, not meeting quality standards according to Vietnamese Standards, without proper labeling or stickers as required by law; selling counterfeit or substandard tobacco products.

Selling tobacco products (including selling single cigarettes) without a Business Registration Certificate for tobacco products as stipulated in this Circular.

Selling tobacco products at the offices of state agencies, armed forces, and political and social organizations; selling tobacco products on sidewalks, at schools, hospitals, cinemas, theaters, sports venues, and other cultural and artistic performance houses.

Selling tobacco products through automatic vending machines.

Selling tobacco products to children under sixteen years old and secondary school students.

Using tobacco products for promotional purposes or as prizes in contests.

Advertising tobacco products contrary to the provisions on commercial advertising.

IV. VIOLATION HANDLING AND IMPLEMENTATION PROVISIONS

Traders violating the provisions of this Circular regarding the business of tobacco products on the market shall be subject to administrative penalties or criminal prosecution depending on the severity of the violation, as provided by law.

State officials engaging in acts of abuse of power and position to violate the provisions of this Circular shall be subject to administrative penalties or criminal prosecution depending on the severity of the violation, as provided by law.

This Circular shall take effect ninety days from the date of signature. Previous regulations on the domestic production and sale of cigarette tobacco products that conflict with this Circular shall be abolished.

The Department of Trade of the province or city shall be responsible for implementing this Circular, including developing implementation plans and guiding traders in compliance; organizing and completing the issuance of Business Registration Certificates for tobacco products before December 31, 1999; inspecting and handling violations to ensure strict compliance with Decree 11/1999/NĐ-CP and this Circular; regularly reporting to the Ministry of Trade on the results of implementation and promptly reflecting difficulties and issues for the Ministry to supplement and adjust.