This is an update of the draft regulations in Vietnam affecting e-commerce platforms (the scope of which now covers foreign traders and organizations conducting e-commerce activities in Vietnam). Obligations include qualifying platforms being required to set up a representative office or appoint a legal representative, consumer protection/product quality safeguards, customs requirements and compliance by foreign investors with the new Law on Investment.
- Scope of application of Decree No. 52 adjusted
- E-commerce service defined and scope of E-commerce Service Providers narrowed down
- The characteristics of e-commerce platforms
- New requirements on the sale of goods on Vietnamese e-commerce platforms
- New requirements regarding offshore e-commerce activities
- New market access conditions for foreign investors in the field of e-commerce
- More responsibilities for sales e-commerce website owners
- More responsibilities for other governed subjects
In line with the government’s instructions to address the underlying issues arising out of the implementation of Decree No. 52/2013/ND-CP dated 16 May 2013 of the government on e-commerce (“Decree No. 52”), the Ministry of Industry and Trade (MOIT), on 4 January 2021, released the draft decree (“Draft Decree”) amending and supplementing certain articles of Decree No. 52.
Below are some notable proposed amendments and supplements to Decree No. 52.
Scope of application of Decree No. 52 adjusted
The amended Article 1 under the Draft Decree clarifies that e-commerce activities in the sectors of financial, banking, credit, insurance and lottery services; the purchase, sale and exchange of currencies, gold, foreign exchange and other means of payment; online game services, betting or reward game services, radio and television services that are already covered by sectoral laws, will not be subject to Decree No. 52.
Under Article 2 of Decree No. 52, the following types of traders, organizations or individuals are considered to be engaging in e-commerce activities in Vietnam and will be subject to Vietnamese e-commerce regulations:
- Vietnamese traders, organizations or individuals
- Foreign individuals residing in Vietnam
- Foreign (offshore) traders and organizations having a presence in Vietnam through: (a) investment activities (establishment of local entities or buying shares/capital contributions in Vietnamese companies); (b) establishment of branches or representative offices; or (c) website set-up under a Vietnamese domain name (.vn)
The Draft Decree expands the subjects covered under point (iii) above to include foreign traders and organizations conducting e-commerce activities in Vietnam.
E-commerce service defined and scope of E-commerce Service Providers narrowed down
In this Draft Decree, e-commerce service is defined as an e-commerce activity where the trader, an organization providing e-commerce service (“E-commerce Service Provider”) sets up an e-commerce website that offers an environment for other traders, organizations and individuals to carry out trade promotion, sale of goods or supply of services activities.
In line with the MOIT’s proposal dated 18 May 2020, the Draft Decree narrows down the range of E-commerce Service Providers by clarifying that E-commerce Service Providers do not include traders and organizations that only design websites and applications, and do not directly participate in the business, operation or coordination activities on such websites and applications.
The characteristics of e-commerce platforms
According to the Draft Decree, a website is considered a form of e-commerce service provision if it meets one of the following conditions:
- It allows members to open sales booths for displaying/promoting goods and services.
- It allows members to open accounts to effect the contracting process with customers.
- It has specific trading categories/tabs that allow members to post their listings of goods/services.
Social networks would be regulated as e-commerce platforms if they meet one of the abovementioned conditions and additionally, make their members directly or indirectly pay a fee to carry out such activities.
New requirements on the sale of goods on Vietnamese e-commerce platforms
Under the proposed Article 67b of the Draft Decree, foreign traders and organizations selling goods on Vietnamese e-commerce platforms must comply with the regulations on operation of the relevant e-commerce platforms.
As for Vietnamese E-commerce Service Providers, they are required to authenticate the identities of foreign traders and organizations selling goods on such e-commerce platforms, and concurrently undertake any of the following:
- Request foreign traders and organizations to exercise the export and import rights applicable to foreign traders who have no presence in Vietnam in accordance with laws.
- Organize the implementation of import activities as entrusted by purchasers in respect of the goods traded by foreign traders and organizations on the e-commerce platforms.
- Request foreign traders and organizations to designate their commercial agents in Vietnam.
Moreover, these providers would have to make available support tools to state agencies to enable the search and identification of sellers and seller-related transactions for the purposes of inspection, examination, violation-handling, and claim and denouncement resolution. They would also bear joint responsibility for the goods and services sold on their e-commerce platforms if they fail to carry out the following:
- Take timely remedial actions when detecting or receiving reports about any business acts in violation of laws on their e-commerce platforms.
- Provide assistance to state agencies in tackling business acts in violation of laws and resolving disputes and claims.
New requirements regarding offshore e-commerce activities
The Draft Decree provides two options for the definition of foreign traders and organizations engaging in e-commerce activities in Vietnam through setting up their own sales e-commerce websites or e-commerce platforms. Despite different approaches to defining the foreign traders and organizations to be regulated, both options require the governed traders and organizations to notify and register their e-commerce activities as prescribed by Decree No. 52, and concurrently, ensure the performance of their obligations aimed at protecting consumers’ interests, as well as the quality of products and goods, either through their representative office or legal representative in Vietnam.
Option 1: A foreign trader or organization setting up websites for e-commerce activities in Vietnam has any of the following operation forms:
- setting up e-commerce websites under Vietnam domain names
- setting up e-commerce websites that have Vietnamese language displayed
- setting up e-commerce platforms that have more than 100,000 transactions originated from Vietnam within a year
The foreign trader will be required to set up a representative office in Vietnam.
Option 2: A foreign trader or organization carrying out e-commerce activities by way of any of the following:
- setting up websites under Vietnam domain names
- setting up websites that have Vietnamese language displayed
- setting up e-commerce platforms on which the number of transactions/visits/purchase orders by Vietnamese organizations and/or individuals exceeds a particular threshold
The foreign trader will be required to appoint/authorize a legal representative/representative office in Vietnam.
Under Option 2, the MOIT is assigned (in coordination with the Ministry of Information and Communications, the Ministry of Finance and other relevant authorities) to regulate from time to time the threshold for the number of transactions/visits/purchase orders mentioned above. This threshold must be consistent with the e-commerce activities in practice.
The traffic of transactions/access to the websites under both options will be determined based on the following sources:
- voluntary reports by traders and organizations as prescribed by this Decree
- official statistics by competent state regulatory authorities in Vietnam, including customs authorities; authorities performing state management over internet-related issues; and authorities performing state management over banking- and tax-related issues
- referring to available and publicly disclosed reports and information, the authenticity of which can be verified by relevant competent state regulatory authorities or internationally accredited institutions
Furthermore, imported/exported goods on these websites are subject to the customs procedures prescribed by laws. Foreign E-commerce Service Providers in Vietnam must cooperate with Vietnam authorities to prevent/stop transactions of illegal goods and services and report to the MOIT annually before 15 January the statistics on their operations in the preceding year.
New market access conditions for foreign investors in the field of e-commerce
Foreign investors must carry out business investment in e-commerce activities in Vietnam in compliance with the new Law on Investment. They must also be listed under the list of internationally reputable technology companies operating in e-commerce as periodically announced by the MOIT. An exception to the latter requirement is given to foreign investors investing in small and medium-sized start-ups.
A foreign investor that controls one or more companies in a group of five companies holding a dominant position in the e-commerce service market (as listed by the MOIT) will be subject to the appraisal of the Ministry of National Defense and the Ministry of Public Security, in addition to the above market access conditions. Companies having less than 10% share of the relevant market are not considered as holding a dominant market position.
By control over a company providing e-commerce services, the Draft Decree means one of the following cases:
- Its foreign investor owns more than 50% of the enterprise’s (a) charter capital or (b) voting shares.
- Its foreign investor controls and governs the technology system of the website providing e-commerce services.
- Its investor has the right to directly or indirectly decide to appoint, relieve from duty or discharge the majority of or all the members of the board of directors, chairman of the board of members, the director or general director of the enterprise.
- Its investor has the right to decide important matters during the enterprise’s business operation, which include choosing its business establishment form; business lines, business areas, forms of doing business; adjusting the business scope and/or lines; as well as selecting the form and method to mobilize, distribute and use the enterprise’s capital.
More responsibilities for sales e-commerce website owners
In addition to the existing requirements, sales e-commerce website owners must also accomplish the following:
- Show information that allows customers to correctly identify the characteristics of goods and services displayed on their websites. Such information must satisfy the requirements on goods labeling.
- Publish the policy on goods inspection in addition to the required policies under Article 32.1 of Decree No. 52.
- Announce the scope of liability of logistics service providers.
More responsibilities for other governed subjects
An e-commerce service provider will be considered a third party, subject to the laws on protecting consumers’ rights if it provides information about a seller’s goods and/or services on its e-commerce website to consumers.
The Draft Decree now adds companies providing logistics services and other supportive services to the list of governed subjects. Notably, logistics service providers shall have joint liability as to the provision of documentation proving the origin of goods during delivery.
Under Article 74 of the Draft Decree, e-commerce website owners with online payment features must, among other responsibilities, allow their customers to choose the guaranteed payment method. “Guaranteed payment method” is defined as the service available on e-commerce websites that allows monies prepaid online by consumers when making goods and services purchase transactions on these websites to be temporarily kept in a third party’s account, in order to support the resolution of disputes between the customers and the sellers. The duration of such temporary retention is not specified.
The requirement to store sufficient information on purchasers and the history of transactions conducted via e-commerce websites does not specify the applicable retention period.