Vietnam is one of the countries with the largest alcohol consumption in the world. According to research conducted by the Lancet Medical Journal in the United Kingdom, the rate of alcohol consumption in Vietnam grew by up to 90% in the period 2010 – 2017. Currently, Vietnam is ranked 3rd in ASEAN for alcohol consumption and in 2020, the number of alcoholic beverages consumed in the Vietnam market reached 15.3 million liters. For these reasons, Vietnam has become a potential market for alcohol importers including wine importers.
According to data from the General Statistics Office of Vietnam, the proportion of Vietnam’s wine imports since 2010 has steadily increased with an average increase of 10% per year. Wine consumption is gradually becoming a habit for the Vietnamese people.
In this article, we will focus on wine consumption in Vietnam as well as some important points wine traders should know about this potential market.
EU – Vietnam Free Trade Agreement (EVFTA)
Vietnam is in the process of deep and wide integration, as over the past few years the country has signed many free trade agreements (FTAs) making the Vietnamese market more competitive and attractive to foreign investors. The FTAs that Vietnam have signed have significantly reduced or completely exempted tariffs, including the free trade agreement between the European Union and Vietnam.
The free trade agreement between the European Union and Vietnam – EVFTA was officially approved by the European Parliament on the 12th of February 2020, ratified by the National Assembly of Vietnam and took effect from the 1st of August 2020. Items of interest to the EU include Vietnam’s specific commitment that the wine import tax will be gradually reduced to 0% after 7 years. This is an extremely positive sign for wine traders and wine consumers in Vietnam.
Procedure to set up a local wine trading company
With the positive development prospects of wine in the Vietnamese market, we will clarify the necessary factors for foreign investors to establish a wine distribution company in Vietnam.
First of all, foreign investors need to meet certain conditions including establishing legal status in Vietnam, having a wine distribution system in the provinces and centrally run cities with the quantity of 2 or more and having written introduction letters or principal contracts with overseas wine productors, distributors or suppliers to name but a few. Specifically, investors will have to take the following steps:
Step 1: Investment Registration
An investor needs to apply for the issuance of an Investment Registration Certificate (IRC) at the Department of Planning and Investment where the investor’s head office is located.
Step 2: Enterprise Registration
After obtaining the IRC, an investor needs to prepare an application for the issuance of enterprise registration certificates (ERC) at the Department of Planning and Investment where the enterprise is located. The investor will also have to register business lines related to its business activities.
Step 3: Preparing the Company Seal
After being granted the ERC, it is necessary to make a company seal. The company shall take responsibility for the seal which must include certain information specified by laws.
Step 4: Apply for a Liquor Distribution License
In addition to the IRC and the ERC, an investor will have to obtain a Liquor Distribution License (sublicense). Any business activities related to alcoholic drinks will require related sublicenses to be considered legally compliant. A dossier of application materials necessary for a Liquor Distribution License includes:
- An application form for a Liquor Distribution License;
- ERC (notarized copy);
- Lease contract or related documents towards the business locations, warehouses (notarized copy);
- Certificates on food safety compliance for each product (notarized copy);
- Principle contracts, letters of confirmation or commitments to participate in the distribution system signed between the company and its wine wholesalers, related licenses of the wholesalers;
- Principle contracts, confirmation letters and commitments signed between the company and its wine producers, distributors or suppliers that include all wine to be traded; related licenses of the wine producers, distributors or suppliers;
- Written commitments ensuring full compliance on fire prevention and environmental protection towards the business locations, warehouses.
If the company has its own trademarks, it is important to register the trademarks with the National Office of Intellectual Property of Vietnam to have the highest level of protection in Vietnam.
The EU – Vietnam Free Trade Agreement (EVFTA) with the commitment on reducing import tax of wine provides an opportunity not only for wine traders to develop in the market but also for wine consumers to enjoy wine at cheaper prices.
We at D’Andrea & Partners Legal Counsel constantly monitor the latest developments in the Vietnamese market. Please feel free to contact us at firstname.lastname@example.org for more information.