Decision 1447/1999/QD-BTM promulgating the Regulation on leasing foreign machinery and equipment issued by the Minister of Trade

DECISION

ISSUING THE REGULATION ON THE LEASE OF FOREIGN MACHINERY AND EQUIPMENT

THE MINISTER OF TRADE

Pursuant to the Commercial Law of May 10, 1997;
Pursuant to the Government's Decree No.95/CP of December 4, 1993 defining the functions, tasks, powers and organizational structure of the Ministry of Trade.

DECIDES

Article 1.- To issue together with this Decision the Regulation on the lease of foreign machinery and equipment.

Article 2.- This Decision takes effect 15 days after its signing.

Article 3.- Organizations and individuals that lease foreign machinery and equipment and the relevant State management agencies shall have to implement this Regulation.

REGULATION

ON THE LEASE OF FOREIGN MACHINERY AND EQUIPMENT
(Issued together with Decision No.1447/1999/QD-BTM of December 10, 1999 of the Minister of Trade)

Chapter I

GENERAL PROVISIONS

Article 1.- Scope of regulation

This Regulation regulates the lease of foreign machinery and equipment in service of production and/or processing of goods for foreign countries, and construction of domestic investment works.

The lease of machinery and equipment by foreign-invested enterprises in the form of temporary import for re-export in service of construction activities shall comply with the Law on Foreign Investment in Vietnam.

Article 2.- Interpretation of terms

- The lease of foreign machinery and equipments an activity whereby a foreign party leases machinery and/or equipment to a Vietnamese party under a machinery and/or equipment leasing contract to be used for given purposes and in a specifie dperiod.

- The lessor of machinery and/or equipment is the foreign party, that may be a foreign organization or individual.

- The lessee of machinery and/or equipment is the Vietnamese party, that may be a Vietnamese organization or individual:

+ Lessees of machinery and/or equipment for production and construction: Enterprises established under the laws of Vietnam.

+ Lessees of machinery and/or equipment for processing: Vietnamese traders according to the Commercial Law.

- Leased machinery and equipment may be single or complete machinery and equipment, production lines, construction machines, special-use vehicles and tools.

Article 3.- Machinery and equipment leasing conditions

1. For leased machinery and equipment

- They must not be on the list of goods banne from import or temporarily ceased from import

- They must comply with the provisions of Vietnamese laws on the import of used machinery and equipment (if they are used machinery and equipment), on labor safety, environmental protection and other relevant provisions.

2. For lessees of machinery and equipment:

- They must have production investment projector plans (economic technical feasibility studyal ready approved by the competent authorities, or have signed processing contracts with foreign traders.

Article 4.- Financial matters

1. The lessees shall pay import tax on the leased machinery and equipment as prescribed in the Finance Ministry's Circular No.172/1998/TT-BTC of December 22, 1998 guiding the implementation of the Government's Decree No.94/1998/ND-CP of November 17, 1998 detailing the implementation of the Law on Import Tax and Export Tax and the laws amending and supplementing a number of articles of the Law on Import Tax and Export Tax.

2. The lessees shall pay for the lessors the enterprise income tax and other financial obligations as prescribed in the Finance Ministry's Circulars No.169/1998/TT-BTC of December 22, 1998 on the tax regime applicable to foreign organizations and individuals conducting business activities in Vietnam other than any investment forms prescribed in the Law on Foreign Investment in Vietnam and No.95/1999/TT-BTC of August 6, 1999 amending and supplementing Circular No.169/1998/TT-BTC of December 22, 1999.

Article 5.- Contracts for lease of machinery and equipment

A contract for lease of machinery and/or equipment must contain the following contents:

- The names and addresses of the machinery and/or or equipment lessor and lessee;

- The names of machinery and/or equipment, their quantity, specifications and quality;

- The purpose of the lease of machinery and/or equipment;

- The leasing price of machinery and/or equipment;

- The leasing term;

- The mode of payment;

- The mode of delivery;

- The time of delivery;

- Rights and obligations of the concerned parties;

- Remedies;

- Dispute settlement.

- Trial agency and applicable laws;

- Contract liquidation.

Chapter II

RIGHTS AND OBLIGATIONS OF THE LESSOR AND LESSEE OF MACHINERY AND EQUIPMENT

Article 6.- Rights and obligations of the lessor

1. To be entitled to request the lessee to pay compensation for damage caused by the latter’s failure to fully comply with the regulations on use of the machinery and/or equipment, fulfill the maintenance and repair duties and pay the rent as provided for in the contract for the lease of machinery and/or equipment.

2. To be entitled to recover the leased machinery and/or equipment if the lessee breaches the contract provisions agreed upon by the parties, which leads to cancellation of the contract.

3. To be entitled to receive the rent in a freely convertible foreign currency.

4. To be obliged to buy insurance for the leased properties.

5. To be obliged to provide guidance for installation and test run of the machinery and/or equipment, supply spare parts and provide warranty for the machinery and/or equipment.

6. To be obliged to pay compensation to the lessee for damage caused by the non-compatibility of the machinery and/or equipment with the technical requirements, failure to achieve the product quality and production capacity agreed upon in the contract or breaches of obligations pledged therein.

Article 7.- Rights and obligations of the lessee

1. To be entitled to purchase the leased machinery and equipment in accordance with the provisions of Vietnamese laws on the import of machinery and equipment.

2. To use the leased machinery and equipment for the right purpose as agreed upon in the contract.

3. To bear all risks of loss and/or damage of the leased machinery and/or equipment, except for risks due to force majeure events.

4. To be responsible for maintaining and repairing the machinery and/or equipment during the leasing term.

5. Not to transfer or sub-lease the machinery and/or equipment without the written consent of the lessor.

6. Not to mortgage or pledge the leased machinery and/or equipment.

7. To be obliged to pay the rent as agreed upon in the contract.

8. To re-export the leased machinery and equipment when the machinery and/or equipment leasing contract ceases to be effective.

Article 8. - Termination of contracts ahead of time

1. The lessor may terminate the contract ahead of time in the following cases where the lessee.

a/ Fails to pay the rent as agreed upon in the contract;

b/ Breaches the commitments made in the contract regarding the preservation and maintenance of the machinery and/or equipment, transfers or sub-leases them without the lessor’s consent.

c/ Is insolvent, bankrupt or dissolved.

d/ Has no substitute guarantor, for cases where the lessee has a guarantor that has become insolvent, bankrupt or dished.

2. The lessee may terminate the contract ahead of time in one of the following cases:

a/ The leased machinery and equipment are not delivered on time as agreed upon in the contract;

b/ The lessor breaches its commitments made in the contract regarding the quality and technical specifications of the machinery and/or equipment, the capacity according to the technical design, warranty, test run and pre-test acceptance.

Article 9. - Handling the termination of contracts ahead of time

1. Where a contract is terminated ahead of time under Article 8, the lessee must immediately pay the rent (calculated up to the time of contract termination) and re-export the machinery and/or equipment back to the lessor. The lessor’s ownership over the machinery and/or equipment is not affected when the lessee is bankrupt, dissolved or insolvent. The leased machinery and/or equipment must not be regarded as property of the lessee when the bankruptcy or dissolution procedures are carried out.

2. Where a contract is terminated ahead of time, the party that breaches the contract must pay compensation for all damage caused to the other party.

Article 10.- Procedures for the import and re-export of leased machinery and equipment

Basing themselves on the provisions in this Regulation and the law provisions on the lease of foreign machinery and equipment, the lessees of machinery and equipment shall fill in the procedures for the import or re-export thereof at border-gate customs offices.

Article 11. - Liquidation of contract

The lessee and lessor of machinery and equipment must liquidate the contract when it ceases to be effective or terminates ahead of time.

The leased machinery and equipment may be re-exported back to the lessor, transferred for performance of another leasing contract, sold or demolished in Vietnam.

The re-export of leased machinery and equipment, the transfer of the leased machinery and equipment for performance of another contract or their demolition in Vietnam shall be dealt with by the customs office.

The sale of the leased machinery and equipment in Vietnam shall be dealt with by the Ministry of Trade according to the current law provisions on import of machinery and equipment.

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