An Export processing zone (EPZ) is an industrial zone where enterprises specialising in manufacturing exports, providing services for the production or manufacture of exports, and export activities come together.
This article will cover the legislation under which the importing and distribution rights of export processing enterprises in the domestic market are regulated.
In domestic trading, export processing enterprises are allowed to import a certain number of goods to serve internal purposes; only when a separate branch is established outside of the EPZ will they have the right to distribute products.
Import rights of export processing enterprises
It is legal for export processing enterprises to import from local markets several items to serve internal purposes (but not for sale in the EPZ). Some examples of products that can be imported are construction materials used to build structures in enterprises as well as stationery, food, and consumer goods to serve the administration of their office apparatus and the daily activities of their staff and workers.
Export processing enterprises and their suppliers may choose whether or not to carry out the import and customs procedures for the aforementioned goods.
Distribution rights of export processing enterprises
According to a provision of Clause 6 of Article 21 of the Decree No. 29/2008/ND-CP amended and supplemented by Clause 9 of Article 1 of the Decree No 164/2013/ND-CP, export processing enterprises that are granted Business License to carry out goods purchase and sale and other activities directly related to goods purchase and sale in Vietnam, must establish separate branches outside of the export processing enterprises and EPZ in order to conduct those activities.
Such a regulation can currently cause numerous complications for export processing enterprises, as the inception of additional branches outside of the EPZ will undoubtedly result in extra costs of management, warehousing, personnel, etc. In addition, due to the fact that an EPZ is an industrial zone with defined geographical boundaries, entering and leaving an EPZ will also make it difficult for the management of external branches.
Existing laws have yet to provide detailed regulations on the establishment of the branches of export processing enterprises. Therefore, the existing law on setting up the branches of enterprises in general shall apply to the export processing enterprises that wish to form branches outside of the EPZ. Furthermore, the relationship between export processing enterprises and their inland branches is prescribed to be an export and import relationship. Export processing enterprises and branches engaging in the purchase and sale of goods must comply with provisions on procedures and financial obligations applying to exports and imports.