Conditions for establishing a transportation service company in Vietnam

Today, the demand for travel and freight is increasing, so the transportation service industry also develops rapidly. Transportation services can be understood as intermediary activities that help goods from the place of production to be transported to distributors. Transport services are conducted by various means such as road, sea, rail and air. However, transportation business is a conditional business line on enterprises that need to understand the provisions of law to ensure in the process of operation of enterprises.

Legal bases

• Vietnam’s commitments in the WTO.
• Road Traffic Law 2008.
• Law on Inland Waterway Transport, amended and supplemented in 2014, 2019;
• Law on Civil Aviation of Vietnam 2006, amended and supplemented in 2014, 2023.
• Railway Act 2017.
• Decree 89/2019/ND-CP amending and supplementing a number of articles of Decree 92/2016/ND-CP regulating conditional business lines in the field of civil aviation and Decree No. 30/2013/ND-CP on air transport business and general aviation activities.
• Decree 65/2018/ND-CP, amended and supplemented by Decree 01/2022/ND-CP guiding the Law on Railways.
• Decree 10/2020/ND-CP, amended and supplemented by Decree 47/2022/ND-CP regulating business and conditions for transportation business by car.
• Circular No. 63/2014/TT-BGTVT, amended and supplemented by Circular No. 60/2015/TT-BGTVT regulating the organization and management of passenger and cargo transportation activities by automobiles and road transport support services;

Market access conditions for transportation services in Vietnam

According to Vietnam’s commitments in the WTO, Vietnam is open to foreign investors to access the market for transport services in Vietnam for the following sub-sectors:

• Ocean freight services (including passenger transport services except inland transport; freight services except inland transport)
• Shipping support services (including customs clearance services, container handling services, container warehousing services)
• Inland waterway transport services (including passenger transport services; freight transport services)
• Air transport services (including sales and marketing of aviation products; computer reservation and reservation services, aircraft maintenance and repair services)
• Rail transport services (including passenger transport services; freight services)
• Road transport services (including passenger transport services; freight services)
• Services supporting all modes of transport (including container handling services, except services provided at airports, warehousing services, freight agency services, other transportation services)

For the group of “sea transport services” based on Vietnam’s schedule of service commitments in the WTO, Vietnam, for passenger transport services, except for domestic transport, companies operating fleets flying the flag of Vietnam are established:

• After 2 years from the date of joining, foreign service providers may establish joint ventures with foreign capital contribution not exceeding 49%.
• Foreign seafarers are permitted to work on ships flying the Vietnamese flag (or registered in Vietnam) owned by joint venture enterprises in Vietnam, but the total number does not exceed 1/3 of the ship’s boundary.
• The first captain or deputy must be a Vietnamese citizen.

With regard to cargo transport services, except for domestic transport, foreign investors may have commercial presence in other forms to provide international sea transport services provided that:

• Establish a joint venture with a capital contribution ratio not exceeding 51%. After 5 years from the date of joining, foreign shipping companies can establish 100% foreign-invested enterprises.
• Only the following activities may be carried out: 1. Selling and marketing shipping services through direct transactions with customers, from price listing to documentation; 2. To represent shippers; 3. Provide business information upon request; Prepare documents related to transport documents including customs documents or other documents related to the origin and characteristics of the transported goods; and 4. Provide sea transport services, including inland transport services by Vietnamese-flagged ships in case of provision of integrated transport services; 5. To organize the entry of ships into ports or receive goods on behalf of the company upon request; 6. Negotiating and signing contracts for road, rail and inland waterway transport related to goods transported by the company.
• In the group of “shipping support services”, Vietnam does not restrict market access in the commercial presence of the “container handling services” industry, except that it is possible to establish a joint venture in which the capital contribution ratio of the foreign side does not exceed 50% since joining. The “customs clearance” industry has a rate of 51%. After 5 years, it is permissible to establish a joint venture in which there is no limit to the share of foreign ownership. For the “container warehousing service” industry, the capital ratio is 51% and the restriction is removed after 7 years of joining.
• For the group of “inland waterway transport services”, foreign investors may only establish joint ventures with Vietnamese partners, in which the capital contribution of the foreign side must not exceed 49% of the total legal capital.
• For the “air transport services” industry group, Vietnam does not restrict “air transport product sales and marketing services” as long as it is “through its ticketing offices or agents in Vietnam”. As for “Computer reservation and reservation service”, foreign service providers are required to use public telecommunications networks under the management of Vietnamese telecommunications authorities. For “aircraft maintenance and repair” services, there is a 51% capital ratio restriction and has been abolished 5 years after joining.
• For the “railway transport services” sector, Vietnam has not committed to the mode of commercial presence, except “through the establishment of a joint venture with a Vietnamese partner, in which the capital contribution of the foreign side must not exceed 49% of the total legal capital”.
• For “road transport services”, Vietnam does not restrict its commercial presence, except to ensure that the capital contribution of the foreign side does not exceed 49% in business cooperation contracts or joint ventures. After 3 years since joining, this percentage increased to 51%. Besides, 100% of the drivers of the joint venture must be Vietnamese citizens.
• In the industry group “services supporting all modes of transport”, for “container loading and unloading services, except services provided at airports”, Vietnam does not restrict market access, except for the method of commercial presence that should ensure: “From the date of accession, only foreign service providers are allowed to provide services through joint ventures with partners Vietnam in which the capital contribution ratio of the foreign side is not more than 50%“.
• For warehousing services, it must be through a joint venture with a Vietnamese partner in which the capital contribution ratio of the foreign side does not exceed 50%.
• For “other transportation services” (including bill of lading inspection; freight brokerage services; cargo inspection, sampling and weight determination services; cargo inspection; receiving and accepting services; transportation document preparation services. These services are performed on behalf of shippers), from the date of accession, foreign service providers may only provide services through the establishment of joint ventures with Vietnamese partners in which the capital ratio of the foreign party does not exceed 49%. After 3 years from joining, this restriction will be 51%. 4 years later, this capital restriction will be abolished.

In accordance with the provisions of Vietnamese law

General conditions for establishing a road transport service company

According to the provisions of Article 67 of the Law on Road Traffic and Article 14 of Decree No. 10/2020/ND-CP, conditions for doing business in transporting road goods by car are as follows:

• Register transport business by car in accordance with the provisions of law.
• Means must ensure quantity and quality suitable to the form of business, specifically:

The vehicle must ensure technical safety and environmental protection and be fitted with cruise monitoring equipment that meets at least the following requirements:

• Store and transmit information in accordance with regulations of the Ministry of Transport; Information from the vehicle’s itinerary monitoring device shall be used in the state management of transport activities, the operation management of the transport business unit and provided to the Public Security and Inspection agencies upon request;
• When conducting transport business, there must be a sufficient number of vehicles according to the approved business plan; The vehicle must be under the ownership of the transport business unit or the lawful right of use according to the contract of the transport business unit with a financial leasing organization or an organization or individual having the function of leasing assets in accordance with law. Where a registered vehicle is owned by a cooperative member, there must be a service contract between the member and the cooperative, which stipulates that the cooperative has the rights, responsibilities and obligations to manage, use and operate cars owned by the cooperative member.

Driver and on-board attendant

• The driver is not a person who is prohibited from practicing under the law;
• The driver and staff serving on the vehicle must have a written labor contract with the transport business unit according to the form of the Ministry of Labor, War Invalids and Social Affairs (except for cases where they are simultaneously the head of a business household or a parent, spouse or child of the head of a business household);
• Personnel serving on vehicles must be trained in professional skills and regulations of law for transport activities according to regulations of the Ministry of Transport. Service personnel on tourist transport vehicles must also be trained in tourism operations in accordance with relevant laws on tourism.
• The transport operator must have a transport professional degree of intermediate level or higher or a college degree or higher for other economic and technical majors and have a continuous working time at the transport unit for 03 years or more.

Where to park

The transport business unit must have a parking place suitable to the business plan and ensure the requirements of traffic safety, fire prevention, explosion prevention and environmental sanitation as prescribed by law.

Organization, management

• Transport business units whose vehicles are required to install vehicle journey monitoring devices must be equipped with computers and network connection lines and must monitor and process information received from vehicle journey monitoring devices;
• The transport business unit shall arrange a sufficient number of drivers according to the business plan, be responsible for organizing medical examinations for drivers and employing healthy drivers as prescribed; For passenger transport business cars with a design tonnage of 30 seats or more (including seats, standing seats and sleepers), there must be service personnel on board (except for contract vehicles to transport officials, employees, students to work, etc school attendance and buses with equipment to replace service personnel);
• Enterprises and cooperatives doing business in fixed-route passenger transport, passenger transport by bus, passenger transport by taxi, freight transport by container must have a department to manage and monitor traffic safety conditions;
• Enterprises and cooperatives doing business in transporting passengers by cars on fixed routes, buses and taxis must register and comply with standards of quality of passenger transport services.

Conditions for establishing an air transport service company

Air transport business includes 02 forms: air transport business and general aviation business.

• Air transport business is the transportation of passengers, luggage, cargo, post by air for the purpose of profit.
• General aviation business is a general aviation activity aimed at profiting through advertising, marketing, sale and implementation of general aviation services by aircraft from unmanned aircraft and ultralight flying vehicles.

Air transport business conditions:

• Conform to the air transport development planning;
• Be granted an air transport business license by the Ministry of Transport after being permitted by the Prime Minister;
• Satisfy the conditions on the plan to ensure the operation of aircraft, the organization of the apparatus, capital, business plan and development strategy, specifically: conditions on the plan to ensure the operation of aircraft; conditions on the organization of the apparatus; capital conditions; conditions on business plans and development strategies.

Conditions for establishing a transport service company by inland waterway

Inland waterway transport business is a conditional business line. Pursuant to Clause 2 Article 1 of Decree No. 128/2018-ND-CP amending and supplementing Article 6 of Decree No. 110/2014/ND-CP stipulating conditions for fixed-route passenger transport business, conditions for passenger transport business under trip contracts and conditions for tourist transportation business as follows:  “The transport business unit must establish an enterprise or cooperative in accordance with the provisions of Vietnamese law.”

Conditions for establishing a transport service company by rail

Pursuant to Clause 1, Article 52 of the 2017 Law on Railways: “Railway transport business includes business in transporting passengers, luggage and goods on railways”. A railway transport business enterprise must fully satisfy the following conditions:

• There is a department in charge of rail transport safety;
• Having at least 01 person in charge of safety work with a university degree in railway transport and at least 03 years of direct working experience in railway transport management and operation;
• The person assigned to be primarily responsible for the technical management of transport operation must have a university degree and have at least 03 years of working experience in railway transport operation.

In case of transporting dangerous goods, the following regulations on dangerous goods transport must be fully met:

• Vietnamese and foreign organizations and individuals engaged in activities related to the transport of dangerous goods on railways must comply with the provisions of the Law on Railways and other relevant provisions of law.
• The running of trains, setting up ships and cornering ships in the process of transporting dangerous goods must comply with national technical regulations on railway operation and railway signals.

If you want to establish a transportation service company, please contact Viet An Law Firm for the most effective support!