CBU car firms on a collision course

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At least 50 commercial firms trading in completely built unit (CBU) car import have signed a claim forwarded to the prime minister and relevant state agencies in respect to the ministry’s (MoIT) recent enactment of Circular 20/2011/TT-BTC dated May 12, 2011 which will come into force from June 26, 2011.

“Seeking amended papers to stay on par with Circular 20’s requirements are a big challenge to car import commercial firms, meaning that nearly 2,000 current CBU car importers face going bankrupt or being dismantled,” said the claim.

These firms assume that Vietnam is now home to around 2,000 CBU car import commercial firms according to Vietnam Register figures. Many of them have inked long-term contracts on space lease, invested in human resources, fixed asset and equipment and signed long-term deals on product purchases with foreign partners.

To diversify product ranges which suit the budget and tastes of diverse consumers these commercial firms imported a variety of car brands from different manufacturers such as Kia, Hyundai, Daewoo, Toyota, Nissan and Mazda from overseas commercial firms. Therefore, procuring certificates proving the firm being a distributor or authorised dealer a foreign car manufacturer, let alone several car manufacturers was almost impossible, said these firms.

They also argued that to get a Ministry of Transport (MoT) certificate to have standard car maintenance facilities as required in the Circular 20, businesses only have 45 days to source relevant papers, hire space, buy relevant equipment from overseas and ship to Vietnam, recruit and train manpower.

Besides, they also argue they do not know how to deal with contracts signed before May 12, 2011 (the date Circular 20 was signed), which envisaged product delivery after June 26, 2011 (the date Circular 20 will come into force) and who will protect businesses if they in fact have paid foreign partners for these contracts.

In MoIT’s recent five-month import-export review meeting, MoIT deputy minister Nguyen Thanh Bien said the ministry was yet to receive any feedback from the business community in respect to the Circular 20.

The Circular 20 did not go against World Trade Organization (WTO) regulations and only introduced measures to ensure a healthy market performance and better tend to consumers, according to Bien.

“Tracing imported cars’ origins is a vital requirement which was not properly handled in Vietnam until present,” Bien said.

The MoIT pointed out to Toyota’s recent recall of dozens of thousands of cars due to brake fault issue, which confused many local consumers who bought these cars from local car salons. In fact most car salons did not operate repair and maintenance facilities, while Toyota Vietnam initially refused providing maintenance to these cars.

According to Bien, each year Vietnam imports around 30,000 under nine-seater CBU cars. Resuming that there are 1,700 CBU import commercial car firms, each business will import an average 20 cars per year or two cars per month, quite a low level to say that the new circular would affect on labour employment as these firms claim.

Upon the assumption that the MoIT has favoured foreign joint ventures  in CBU car import, Bien said foreign joint ventures have engaged in importing CBU cars alongside their conventional assembling activities for several years since Vietnam opened doors to foreign retailers under WTO commitments. Therefore, it is groundless to say the Circular 20 stimulates CBU import by these joint ventures.