CIRCULAR

GUIDING THE TRADING IN HOME-MADE CIGARETTES

In furtherance of the Government's Decree No.11/1999/ND-CP of March 3, 1999 on commodities banned from circulation, commercial services banned from provision, goods and services subject to business restriction or conditional business' and the Prime Minister's Directive No.13/1999/CT-TTg of May 12, 1999 on "the restructuring of the cigarette production and business branch", after consulting the Ministry of Industry and other concerned ministries and branches, the Ministry of Trade hereby guides the trading in home-made cigarettes on the market as follows:

I. SCOPE OF APPLICATION

1. This Circular applies to all types of cigarettes made in Vietnam (hereinafter referred to as cigarettes for short).

2. According to the provisions in the Government’s Decree No.11/1999/ND-CP and the Prime Minister’s Directive No.13/1999/CT-TTg, the State monopolizes the production of cigarettes, imposes restrictions on cigarette trading on the market and exercises unified management of the cigarette sale, purchase, advertisement and marketing. Therefore, traders who are cigarette wholesalers and/or retailers or wholesale or retail agents shall hale to strictly observe the specific provisions in this Circular.

3. Foreign-invested enterprises in Vietnam in the field of cigarette production and foreign cigarette firms� branches established in Vietnam shall, when selling their cigarettes on the Vietnamese market, have to observe the relevant provisions in this Circular.

4. The cigarette trading at duty-free shops shall comply with separate regulations.

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Only the following types of home-made cigarettes are permitted to be purchased and/or sold on the market:

1. Cigarettes with Vietnamese labels produced by licensed enterprises, with quality meeting the Vietnamese standards, which have been granted a trademark registration certificate and their packs are labeled and stamped according to the provisions of law.

2. Cigarettes with foreign labels produced by licensed enterprises, with quality meeting the Vietnamese standards, which have been granted a trademark registration certificate and their packs are labeled and stamped according to the provisions of law.

III. PROVISIONS ON CIGARETTE TRADING

1. Provisions concerning traders who purchase cigarettes from cigarette business and production enterprises for organizing the cigarette circulation and consumption on the market:

1.1. Only traders who fully meet the following conditions and are considered and approved in writing by the Ministry of Trade or the provincial municipal Trade Services with the Ministry of Trade's authorization may purchase cigarettes from cigarette business and production enterprises under the Vietnam Tobacco Corporation or from local cigarette business and production enterprises (including cigarettes from enterprises entering into joint venture and business cooperation with foreign countries, which are permitted to produce cigarettes in Vietnam) in the forms of direct purchase or acting as distribution agents for these enterprises to organize the cigarette circulation and consumption on the market:

- They must be enterprises established according to the provisions of law and have business registration certificates stating that cigarette is a goods item included in their business line.

- They are financially capable of trading in cigarettes and their financial situation is healthy in 1998 and at present.

- They own stable cigarette distribution and consumption outlets in their business localities.

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- An application for permission to purchase cigarettes from cigarette production and business enterprises.

- A valid copy of the business registration certificate.

- The cigarette trading plan clearly and fully stating: the situation and results of cigarette trading activities in 1998 and 1999; names of the cigarette production and business enterprises which the trader has signed contracts with, and the value, quantities and types of cigarettes already consumed, sale revenues, business localities, budget remittances, profits...; the capability to ensure capital for stable cigarette trading activities, the trader's financial situation in 1998 and at present; the organization of the cigarette circulation and distribution outlet in each locality, including cigarette wholesalers who have regular contracts for cigarette purchase and stable cigarette consumption networks, or traders acting as cigarette of wholesale agents that have regular agency contracts and stable cigarette consumption networks.

1.3. Competence of, order and procedures for consideration:

- Basing themselves on the number of traders who have signed contracts for regular cigarette consumption in the forms of direct purchase or distribution agency and on the conditions prescribed at Point 1.1 above, cigarette production and business enterprises shall make the following lists of traders:

List I including traders who deal in cigarettes in two or more provinces and/or cities,

List II including traders who deal in cigarettes in only one province or city,

and send Lists I and II to the Ministry of Trade (the Domestic Market Policy Department) and List II to the Trade Services of the provinces and cities where the traders have their main offices and, at the same time, notify the traders thereof for drawing up dossiers. This should be completed before November 15, 1999.

- Traders shall compile dossiers as prescribed at Point 1.2 above; traders on List I shall send such dossiers to tile Ministry of Trade (the Domestic Market Policy Department) and traders on List II to the Trade Services of the provinces and cities where the traders have their main offices. The time for receiving dossiers shall be before November 15, 1999.

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- On the basis of the publicized number of traders the Ministry of Trade shall consider the dossiers and give its written approval of qualified traders on List I, authorize the provincial/municipal Trade Services to consider and give written approval of qualified traders oil List II and report such to the Ministry of Trade. This should be completed before December 9, 1999.

- Any supplement or adjustment of the number and list of traders permitted to purchase cigarettes from cigarette production and business enterprises shall comply with the above-said provisions when there are concrete guiding official dispatches of the Ministry of Trade.

1.4. From December 9, 1999 cigarette production and business enterprises shall be allowed to sell cigarettes only to traders that have obtained the written approvals from the Ministry of Trade or provincial/municipal Trade Services; they shall make monthly reports on the situation of their sale of cigarettes to traders then send them to the Ministry of Trade and Trade Services of the provinces and cities where they are located.

1.5. Traders that are permitted by the Ministry of Trade or provincial/municipal Trade Services to purchase cigarettes from cigarette production and business enterprises shall be only allowed to purchase and sell cigarettes within the scope defined in the written approvals of the Ministry of Trade or provincial/municipal Trade Services (these documents have the same validity as cigarette business licenses prescribed in Clauses 2, 3 and 4 - Section III below); they shall have to organize their cigarette distribution and consumption outlets in a stable way on the market and be only allowed to wholesale cigarettes to traders with cigarette business licenses prescribed in this Circular; they shall make monthly reports on the situation of cigarette distribution and consumption then send them to the Ministry of Trade and Trade Services of the provinces and cities where their main offices are located.

1.6. Foreign cigarette firms' branches licensed to operate in Vietnam and trading in cigarettes within the business scope defined in their establishment licenses shall take charge of the consumption of all cigarette products with foreign trademarks made in Vietnam stated in their licenses, organize their cigarette distribution and consumption outlets in a stable may on the market and be only allowed to sell cigarettes to traders with cigarette business licenses prescribed in this Circular: they shall make monthly reports on the situation of cigarette distribution and consumption then send them to the Ministry of Trade and Trade Services of the provinces and cities where their branches are located.

2. Provisions on cigarette wholesale or wholesale agency:

2.1. Traders that are enterprises established under various laws, if they fully meet the following conditions, shall be considered and granted by the provincial/municipal Trade Services business licenses for cigarette wholesale or wholesale agency; they shall be allowed to purchase cigarettes from traders having the written approvals of the Ministry of Trade or provincial/municipal Trade Services as prescribed in Clause 1 above to deal in cigarette circulation and consumption within the provinces and/or cities where the traders have their main offices:

- Having the business registration certificate which states that cigarette is a goods item included in their business line.

- Having a fixed trading place with a clear address.

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- Observing regulations on environmental protection and fire prevention and fighting.

2.2. Traders that are granted business licenses for cigarette wholesale or wholesale agency shall have to organize their cigarette distribution and consumption networks in a stable way in their areas; only be allowed to wholesale cigarettes to those with cigarette business licenses prescribed in this Circular within the provinces and/or cities where the traders are granted cigarette business licenses.

3. Provisions on cigarette retail or retail agency

3.1. Traders mentioned in Clauses 1 and 2 above, including: cigarette production and business enterprises, branches of foreign cigarette companies, traders that get the written approvals of the Ministry of Trade or provincial/municipal Trader Services and traders with business licenses for cigarette wholesale or wholesale agency, shall be allowed to organize shops to retail cigarettes directly to consumers in the traders' business localities without having to apply for cigarette retailing licenses.

3.2. Traders that have business registration certificates for running hotels, inns or restaurants or ordinary food and drink catering shops shall be allowed to retail cigarettes or act as agents to retail cigarettes to consumers within the area of their hotels, inns, restaurants or ordinary food and drink catering shops after they are granted business licenses for cigarette retail or retail agency according to the provisions of this Circular.

3.2. Traders that have business registration certificates which state that cigarette is a goods item included in their business line, have separate and fixed business places or stalls with clear addresses for retailing cigarettes to consumers shall be granted business licenses for cigarette retail or retail agency according to the provisions of this Circular.

4. Competence of, order and procedures for granting cigarette business licenses:

4.1. Cigarette business licenses shall be granted to traders that fully meet the cigarette trading conditions prescribed in this Circular as follows:

- Business licenses to wholesale cigarettes (or act as wholesale agent), granted to traders dealing mainly in cigarette wholesaling mentioned in Clause 2 above.

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- Cigarette business licenses shall have an effective duration compatible to the duration stated in the trader's business registration certificate.

- For traders that are enterprises having more than one cigarette trading place each, each place shall be granted a cigarette trading license.

- For traders that are individuals, cooperative groups and households, each trader shall be allowed to trade in cigarettes at only one place and be granted only one cigarette trading license.

4.2. A dossier of application for cigarette business licenses includes:

- An application for cigarette trading license.

- A valid copy of the business registration certificate.

- For traders wishing to become cigarette wholesalers or wholesale agents, they shall have to also send a cigarette trading plan with the following principal contents: the previous and present situation of cigarette trading (if they have already traded in cigarettes), their financial capability, the organization of their cigarette consumption network, wholesaling area and objects, projected sale and purchase turnovers and economic and financial indicators.

4.3 The provincial/municipal Trade Services shall directly receive dossiers and consider the granting of business licenses to traders that are enterprises fully meeting the conditions prescribed in Clauses 2 and 3, Section III of this Circular.

4.4. Agencies with the function to manage trade activities at district level shall receive dossiers of traders that are individuals, cooperative groups and households in their respective areas, consider and propose the provincial/municipal Trade Services to grant business licenses to retail cigarettes or act as cigarette retail agents to traders that fully meet the conditions prescribed in this Circular.

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4.6. Traders granted cigarette business licenses shall have to pay a fee according to the regulations the Ministry of Finance.

5. Other provisions on business trading:

5.1. All stores, shops and places that retail cigarettes shall have to put up signboards clear indicating: name of the enterprise or household that trades in, retails cigarettes or acts as cigarette retail agent, publicly post its granted cigarette business license and the prices of all types of cigarettes on sale.

5.2. Enterprises engaged in cigarette wholesaling or wholesale agency shall have to:

- Keep daily records on the quantities of cigarettes purchased and sold to each trader and the addresses of traders in their distribution networks.

- Observe the regime on invoices and vouchers and accounting books according to the regulations of the Ministry of Finance.

- Send monthly reports on the situation of cigarette trading to the Trade Services of the provinces or cities where the enterprises have their main offices.

5.3. The use of cigarette wholesale and retail agents and the operations of such agents must strictly comply with the provisions on goods sale and purchase agents in Section 6, Chapter II of the May 10, 1997 Commercial Law.

5.4. It is strictly forbidden to:

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b/ Sell cigarettes (even unpacked cigarettes) without a cigarette trading license as prescribed in this Circular.

c/ Sell cigarettes at the offices of State agencies, armed forces units and social and political organizations; sell cigarettes on streets, sell cigarettes at general education schools, hospitals, cinemas, theatres, sport competition centers and other cultural and art performance houses.

d/ Sell cigarettes by automatic vending machines.

e/ Sell cigarettes to under-16 children and pupils of general education schools.

f/ Use cigarettes for sale promotion or as contest prizes.

g/ Advertise cigarettes in contradiction with the regulations on commercial advertising.

IV. HANDLING OF VIOLATIONS AND IMPLEMENTATION PROVISIONS

1. Traders that violate the provisions of this Circular on cigarettes trading on the market shall be, depending on the seriousness of their violations, administratively sanctioned or examined for penal liability in accordance with the provisions of law.

2. State employees who commit acts of abusing their positions and powers and act against the provisions of this Circular shall, depending on the seriousness of their violations, be administratively, handled or examined for penal liability in accordance with the provisions of law.

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annulled.

4. The provincial/municipal Trade Services shall have to organize the implementation of this Circular, map out implementation plans and guide traders to observe this Circular; organize and complete the granting of cigarette business licenses before December 31, 1999; inspect and handle violations to ensure strict observance of the provisions of Decree No.11/1999/ND-CP and this Circular; regularly report to the Ministry of Trade on the implementation results and promptly report difficulties and obstacles to the Ministry for supplement and adjustment.

FOR THE MINISTRY OF TRADE
VICE MINISTER




Le Danh Vinh