Investment in Production of Chemicals in Vietnam under Decree 113

After nearly ten years of implementation in the guidance of Decree 108/2008 and then as amended, supplemented in Decree 26/2011 [specifying some Articles of Chemicals Law in 2007], so far, because practically manufacturing activities of Vietnamese enterprises have undergone a lot of changes to be in line with the movements of many laws, these Decrees have revealed no less limitation and not met the Government’s administration requirement in the chemical activities. In this regard, on 9th October 2017, the Vietnamese Government has issued Decree 113/2017 (“Decree 113”) to replace along with its expectation of helping Vietnamese enterprises defuse the existing difficulties and create a more favorable business environment in line with Government’s policy at the same time. This Decree 113 shall take its effect since 25th November 2017.

This article, LuatViet is expected to generalize and synthesize Vietnamese legal regulations associated with chemicals manufacturing activity but mainly focus on some of the developments in Decree 113 which are conceived to have direct impact on business investment activity of Vietnamese enterprises and foreign investors who have intentions to participate in the field of manufacturing chemicals in Vietnam.

Services incidental to manufacturing (CPC 884, 885), including chemicals production

Since the date of 11th January 2015, under Schedule of Specific Commitments in Services to join the WTO of Vietnam (“Commitment“), foreign investor has its entitlement to establish a 100-percent foreign owned enterprise in Vietnam to produce chemicals. In line with this Commitment, Vietnamese laws and regulations also have no limitation of investment conditions [ratio of the foreign investor’s charter capital in an entity, forms of investment, scope of investment, Vietnamese partners participating in the investment and other investment conditions provided] for foreign investor in fields related to manufacturing, including chemicals production in Vietnam.

Required licenses for manufacturing chemicals subject to conditional production or trading (“Conditional Chemicals“)

For purpose of carrying out manufacturing activity of Conditional Chemicals in Vietnam, such foreign investor shall need to conduct the administrative procedures to register its project in question aiming to obtain a certificate of investment registration under Investment Law in 2014 and then to establish an enterprise (“Project Enterprise“) to receive a certificate of enterprise registration according to Enterprise Law in 2014. Subsequently, dealing with the initial intention to invest and develop Conditional Chemicals production as prescribed in Annex I, Decree 113 [as defined more below], Project Enterprise shall conduct necessary administrative procedure to collect a certificate of eligibility for production and trading of Conditional Chemicals (“Certificate“) in consonance with conditions of production and sequences and procedures as prescribed in Article 9 and Article 10 of Decree 113.

Conditional Chemicals

Conditional Chemicals are hazardous chemicals with strict requirements on technical safety in production and trading. So, in order to closely manage the production of this category of Chemicals, Decree 113 has listed Conditional Chemicals in details including:

(a) substances listed in Annex I,

(b) mixture of which ingredient is the substance in Annex I, and

(c) mixture of substances which fully satisfies all factors: (1) containing the substance in Annex II [Category of chemicals restricted from production and trading], (2) not being the chemicals limited to production and trading [in Article 14, Decree 113], (3) being in the table of classification of chemicals [into material hazard, hazard affecting human health and environment], and (4) belong to at least one of the categorized groups below:

(i) material hazard levels 1, 2, 3 or types A, B, C and D;

(ii) acutely toxic (following different exposure) levels 2, 3;

(iii) serious injuries, eye irritation level 1, 2/2A;

(iv) skin corrosion, irritation level 1, level 2;

(v) agents causing cancer, mutation of germ cell, reproductive toxicity level 2;

(vi) environment hazard level 1.

Conditions of production and sequences and procedures

For the purpose of collecting the Certificate, the Project Enterprise shall ensure and satisfy full conditions below:

(a) Requirements on material-technical foundations shall be assured as provided in Article 12 of Chemicals Law in 2007; Article 4 [General requirements on workshops and warehouses], Clauses 1, 2 of Article 5 [General requirements on technology, equipment, tool, package]; Clauses 1, 2 of Article 6 [General requirements on preservation and transportation] of Decree 113;

(b) Workshop and warehouse areas must satisfy National standard and technical requirements. The foundations must have appropriate area to install production lines in line with designed capacity, assure production stages, satisfy technological requirements;

(c) Director or Deputy Director in charge of engineering or technical staff in charge of producing chemicals must have a college degree or more specialized in chemicals;

(d) Staff, employees participating in production must be trained chemical safety [Article 32, Decree 113].

After the foregoing conditions are satisfied, the Project Enterprise shall prepare and submit documentation for grant of the Certificate to the Service of Industry and Trading [where the foundation is located] for approval. Within 12 business days upon receipt of the acceptable documentation, this authority shall examine, consider and grant the Certificate for the Project Enterprise and deliver one copy to the Service of Industry and Trading where the headquarter of the Project Enterprise is registered.

Plan of prevention from and response to chemical incidents (“Plan“)

Following Decree 113, the investor owning the project manufactures the Conditional Chemicals containing at least a hazardous chemical provided in Annex IV with biggest volume reserved at a time which is bigger than or equal to the threshold prescribed in this Annex IV shall make the Plan for such hazardous chemical in line with the contents provided and get approval from the competent authority before taking the project into official operation.

During the operation, the Project Enterprise shall ensure and maintain full satisfaction of the requirements exhibited in the approved Plan and organize chemical incident prevention and response drills in front of representatives of central or local specialized administrations. In case of an adjustment for content of the Plan, the Project Enterprise shall report the authority for review and decision.

Measures to prevent and response chemical incident (“Measures“)

If the Conditional Chemicals do not belong to the object to make the Plan, the investor shall build and issue the Measures with the basic contents as prescribed before the project is taken into official operation. Such Measures need to be assured to comply with, store, edit, supplement if any change and to show at the requests.

Chemical safety cards

The Project Enterprise should be aware of, if the Conditional Chemicals manufactured contain hazardous substance of which volume is bigger or equal to the volume provided in Article 24 of Decree 113 shall make chemical safety cards in Vietnamese and provide the same to organizations, individuals engaging in Conditional Chemical production.

Safety distance for facilities producing hazardous chemicals

For the project investing in producing, trading, storing and utilizing hazardous chemicals provided in Annex IV, the investor shall establish safety distance residential areas, public works, historical or cultural relics, scenic places, beauty spots, natural reserves, national parks, biosphere reserves, species-habitat conservation areas, marine conservation areas and daily-life water sources in the feasibility study report of which front ending engineering design is examined and approved by the competent authority after the technical regulations on the safety distance is valid. Inside the approved safety distance, the investor [or organizations, personals] is not allowed to construct any work except for permission and shall make sure to maintain safety distance when conducting land use planning, selecting locations to build the industrial zones, processing zones, projects involved.

Responsibilities of the Project Enterprise

During the Conditional Chemicals production in Vietnam, the Project Enterprise shall make sure maintain the conditions satisfied for the granted Certificate and be responsible for keeping, showing at the competent authority’s request. When such conditions are not satisfied fully, the Project Entity shall be withdrawn the granted Certificate prescribed in Article 18.2 of Chemicals Law in 2007.

In addition, the Project Enterprise shall also establish and submit annually synthetic report on implementation of Conditional Chemicals production of previous year according to the contents as provided [including declaration for the Conditional Chemicals manufactured belong to the chemicals required to declare [in Annex V] and the mixture containing the chemicals in this Annex V]. This report shall also be delivered by the Project Enterprise to the central and local administrations of industry by 15th January of the immediate year after or on sudden demand when there is an incident in chemical production happened, chemical production is terminated and at the competent authority’s request.

Some remarkable when Decree 113 taken in to effect

For the project which has been manufacturing the Conditional Chemicals in Vietnam under the Certificate before Decree 113 validates, it is continuing to implement until the Certificate expires. In case, it was required to make the Plan but before Decree 113 validates, the Plan has not been made and ratified to apply, within two years upon the effective date of Decree 113 the investor shall finish the procedure to ratify the Plan and apply. Meanwhile, for the Measures, within one year upon the effective date of Decree 113, the investor shall build and approve the Measures to apply.