VIETNAM – TOBACCO PRODUCTION AND DISTRIBUTION UNDER LOCAL AND INTERNATIONAL REGULATIONS

In Vietnam, the Government holds a monopoly on the importation of cigarettes and cigars, except import for sales as duty-free goods. The market size remains stable with over 100 billions cigarettes per year since 2015, in which around 60% is Vietnamese products, around 22% is foreign products made in Vietnam and 18% is illegally imported products. As of 2018, the cigarettes and cigars industry has contributed USD 450 millions to the State budget

There are currently 16 Vietnamese cigarette manufacturers with Vietnam National Tobacco Corporation (Vinataba) being a prominent unit in the production, distribution and trading scene. Additionally, there are two foreign-invested joint ventures between Phillip Morris and Vinataba, and British American Tobacco and Vinataba that engaged in the production of tobacco and shredded tobacco products respectively.

Requirements for cigarette production

Under Law on Investment 2020, cigarette production is a conditional business line, meaning investors have to fulfil requirements imposed by the Government regarding licensing procedures before commencement of operation. Entities manufacturing, buying and selling tobacco products, processing tobacco materials, buying and selling tobacco materials and investing in growing tobacco plants must obtain specific licenses for such activities according to regulations.

In case of merger or joint venture with a local company, investors need to acquire Decision on Investment Policy approved by the Prime Minister to produce cigarettes.

International regulations on Vietnamese tobacco products

EU-Vietnam Free Trade Agreement: After 15 years from 1 August 2020, EU will remove import taxes on Vietnamese tobacco products and vice versa.

Vietnam-US Bilateral Trade Agreement and Vietnam-Japan Agreement on Investment Encouragement and Protection: Vietnam eliminated export requirements applicable to tobacco products for investors coming from USA and Japan.

WTO schedule: there’s currently no commitments made by Vietnam to WTO members regarding the distribution of tobacco products.

Tariff quotas from the Eurasian Economic Union in 2020, 2021 and 2022 for tobacco is 500 tons per year.

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For more information on the above, please do not hesitate to contact the author Dr. Oliver Massmann under omassmann@duanemorris.com. Dr. Oliver Massmann is the General Director of Duane Morris Vietnam LLC, Member to the Supervisory Board of PetroVietnam Insurance JSC and the only foreign lawyer presenting in Vietnamese language to members of the NATIONAL ASSEMBLY OF VIETNAM.