With the advancement and proliferation of the internet and electronic devices, Electronic Commerce (better known as ‘e-commerce’) has become a foundation of how modern society consumes and interacts. Given the impact e-commerce has on our lives, let’s look at what is e-commerce in Vietnam and what you need to know in order to start an e-commerce business in Vietnam.
Requirements for e-commerce businesses in Vietnam.
1. What is E-Commerce?
The World Trade Organization’s definition, in accordance with The Declaration on Global Electronic Commerce adopted by the WTO’s Second Ministerial Conference in May 1998, states that e-commerce is “the production, distribution, marketing, sale or delivery of goods and services by electronic means”.
From a Vietnamese perspective, Clause 1, Article 3 Decree 52/2013/ND-CP on E-commerce of the Government (“Decree 52”), states that “E-commerce activities are the conduct of a part or the whole process of commercial activities by means of electronics connected to the Internet, mobile telecommunications networks or other open networks”.
Although there may be differing definitions of e-commerce, they all generally operate to create commercial transactions via electronic means.
2. Forms of e-commerce activities in Vietnam
E-commerce activities are represented in different forms and by a lot of electronic means. According to Vietnam law, there are 3 kinds of e-commerce operation:
- E-commerce activities conducted via a website;
- E-commerce activities conducted via an application installed on an electronic device
- E-commerce activities conducted via mobile telecommunication networks
It should be noted that e-commerce activities conducted via mobile telecommunication networks have no specific regulations, and as “websites” and “mobile apps’ have many points of similarity, discussions and general information regarding e-commerce websites can be interpreted interchangeably with “mobile apps”.
There are 4 common types of e-commerce websites:
- E-commerce sales website;
- E-commerce trading floor;
- Online promotion website;
- Online auction website.
a. An e-commerce sales website
Following Clause 1 Article 25 Decree 52, an e-commerce sales website is an e-commerce website developed by traders, organizations, or individuals to serve their own commercial promotion, sales, or service provision. This is commonly the standard website of a retailer or service provider selling their own product using their own domain. Examples include:
b. An e-commerce trading floor
E-commerce Trading Floors have become popular in recent times, with significant investment being put into promoting these websites as part of everyday life for consumers.
An E-commerce Trading Floor is defined as an e-commerce service provision website established and owned by an organization which allows other traders, organizations and individuals that are not the website owner to conduct part or the whole of process of sale and purchase of goods or services on that website (exclusive online securities trading websites) (Clause 8, Article 3, Decree 52).
Forms of operation of E-Commerce Trading Floors include:
- Websites allowing participants to open “booths” for the display and introduction of goods or services
- Websites allowing participants to set up “branch” websites for displaying and introducing goods or services;
- Websites having a sales and purchases section permitting participants to post news of sales and purchases of goods or services
Some familiar E-Commerce Trading Floors in Vietnam include:
c. Online promotion website
Pursuant to Clause 10, Article 3, Decree 52, an Online Promotion Website is an e-commerce service provision website set up by traders and organisations to promote goods and services of other traders, organisations or individuals under the terms of promotion service contracts.
An e-commerce website is considered as an Online Promotion Website if it performs one of the following services:
- Selling goods vouchers and service vouchers so that customers can buy goods or use services of the partners at preferential prices or with other benefits;
- Selling frequent customer cards to enable customers to use goods or services from a network of partners at preferential prices or with other benefits compared with those upon purchase of goods and services of each individual partner;
- Conducting promotion of goods from other traders, organisations and individuals under terms and conditions of the promotion service contracts by offering freebies or samples for customers to try;
- Conducting promotion of goods from other traders, organisations and individuals under terms and conditions of the promotion service contracts by selling goods at lower prices for a certain period of time or to specific number of customers.
Below are examples of Online Promotion Websites:
d. Online auction website
Following Clause 11, Article 3, Decree 51, an Online Auction Website is an e-commerce service provision website providing solutions to allow traders, organizations and individual that are not the website owner to organize an auction for their goods on that website.
Examples of Online Auction Websites include:
A single e-commerce website can integrate different types of e-commerce into the single site . For example:
https://www.lazada.vn/ is a website that combines 3 e-commerce types: Sales E-Commerce Website, E-Commerce Trading Floor, Online Promotion Website
https://www.foody.vn/ is a website that combines 2 e-commerce types: E-Commerce Trading Floor, Online Promotion Website
3. Registration of Websites with the Ministry
Traders, organizations, or individuals which own the website are responsible for registration of the website with the Ministry.
For the website to integrate multiple functions of multiple types of website, this web must be registered in accordance with its function.
Below is an illustration of the procedure for the registration of an e-commerce website.
|Registration of Sales E-Commerce Website||Registration of E-commerce Trading Floor, Online Promotion Website, Online Auction Website|
|Authority||Ministry of Industry and Trade (“MOIT”)
Receipt and handling of the registration for websites is done online by the Ministry of Industry and Trade on the e-commerce management portal at www.online.gov.vn
|Creating an account to access the system of MOIT||Step 1
Providing required information and documentation of the owner
(3 working days)
Receive the account activation (username and password) via email
|Registering the e-commerce website||Step 3
Using the registered account for logging in, choose a feature “Notification of the sales e-commerce website” and fill in all required information
(3 working days)
Receiving code segment for insertion into the sales online website and displayed onscreen as a “notified” sign
Using the registered account for logging in, choose a feature “Registration of e-commerce service provision website” and fill in all required information and upload documents
(7 working days)
Receiving the notice confirming adequacy and eligibility of the application and submitting physical documents to MOIT
(5 working days)
Receiving code segment for insertion into the sales online website and displayed onscreen as a “registered” sign
4. Restrictions / Issues for Foreign Invested Companies
Companies in Vietnam can only undertake activities for which they are licensed, which generally involves specific business line registration, along with sub-license registration for certain business lines.
For foreign investors and e-commerce activities, this can be somewhat complicated. Specific matters to consider and plan for include:
- Where a company seeks to retail its own products online via its website, in addition to registering the appropriate e-commerce trading business lines for Online Retail, the company needs to register the website to the Ministry of Industry and Trade as well and obtain a Trading License for retail services (registration is via the relevant Department of Industry and Trade – “DoIT”)
- Where a company seeks to provide e-commerce services via an E-Commerce Trading Floor, an Online Promotion Website (or App) or an Online Auction Website (or App), it also needs to register the e-commerce business lines (issued by the relevant DPI) and hold a Trading License for e-commerce services (issued by the relevant DoIT)
- E-commerce services business lines are not mentioned in Vietnam’s WTO commitments, therefore foreign invested companies must first seek approval from relevant Ministerial level authority (generally, the Ministry of Industry and Trade and the Ministry of Planning and Investment) for approval to register e-commerce services business lines in order to operate e-commerce services, which can take some considerable time in practice. For clarity, online retail through a company’s own website is not restricted by WTO commitments, but e-commerce services business lines are
Given the complications that these restrictions and requirements can introduce, appropriate strategies to register and apply each step is critical to reduce the timelines for foreign investors to undertake e-commerce activities.