Processing contract for foreign traders in Vietnam

Processing contract for foreign traders in Vietnam (Internet image)

1. Rights and obligations of the ordering party and processor in Vietnam

Rights and obligations of the ordering party and processor in Vietnam according to Article 42 of Decree 69/2018/ND-CP are as follows:

* The ordering party shall have rights and obligations to:

- Give the whole or a part of materials for processing purpose as specified in the processing contract.

- Receive the finished products; machinery and equipment leased or lent to the ordering party; and materials, ancillary materials, waste and scrap after the contract finalization, unless they are eligible for in-country export, destruction, donation or giving as prescribed in this Decree.

- Have experts come to Vietnam to provide guidance on production engineering and quality inspection of processed products as agreed upon in the processing contract.

- Take responsibility for right to use trademarks and geographical indications.

- Comply with laws and regulations of Vietnam on processing activities and terms and conditions mentioned in the signed processing contract.

- Carry out in-country export of processed products; leased or borrowed machinery and equipment; oversupplied materials ; and scrap and waste according to agreements between involved parties, in accordance with regulations of law in force on management of export and import and fulfill tax liabilities and other financial obligations as per the law.

* The processor shall have rights and obligations to:

- Be eligible for export duty or import duty exemption in accordance with regulations of law on taxation associated with temporarily imported goods according to the given amount of required material for each finished unit and wastage rate to perform the processing contract and associated with processed exports.

- Have other traders to perform the processing.

- Receive partly or wholly materials  for processing as mentioned in the processing contract; pay export duty on locally-acquired materials  as prescribed in the Law on export and import duty.

- Receive payment in kind as processed products from the ordering party, other than goods under the lists of prohibited or suspended imports. In case of goods under list of imported goods requiring license or under given conditions, the regulations on such license and conditions shall apply.

- Comply with laws and regulations of Vietnam on export or import processing, local good production and terms and conditions of the signed processing contract.

- Carry out procedures for in-country export of processed products, leased or borrowed machinery and equipment, oversupplied materials, waste and scrap as authorized by the ordering party.

* Conditions for in-country export or import of processed products, leased or borrowed machinery and equipment, oversupplied materials, waste and scrap prescribed in Point e Clause 1 and Point e Clause 2 of Article 42 of Decree 69/2018/ND-CP:

- Compliance with regulations on management of export and import, taxation and other financial obligations as per the law.

- A contract concluded between the foreign trader or duly authorized person of foreign trader and the importer.

2. Processing contract in Vietnam 

According to Article 39 of Decree 69/2018/ND-CP, the processing must be made in writing or another equivalent form as prescribed in the Law on Commerce and contain at least:

- Name and address of the contracting parties and processor.

- Name and quantity of processed products.

- Price.

- Payment period and methods of payment.

- A list of materials to be imported and locally produced materials  (if any) for processing, quantity and value thereof; amount of required material for each finished unit, quota for consumables and material wastage rate in processing.

- A list of machinery and equipment to be leased, borrowed or given for processing (if any) and value thereof.

- Actions against scrap, wreckage and rules for actions against leased or borrowed machinery and equipment, and oversupplied materials  after the processing contract finishes.

- Delivery place and time.

- Trademarks and geographical indications.

- The contract term.

Quoc Dat

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