Foreign groups, diplomats decry Vietnam import rules

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New Vietnamese rules on imports of cosmetics, alcohol, cell phones and other items amount to non-tariff barriers and may breach the country's international trade obligations, trade groups, lawyers and diplomats said on Friday.

The rules are widely understood to have been introduced in an attempt to narrow the country's trade deficit, which economists say is a potential drain on foreign exchange reserves and a drag on the dong currency.

The government has since February turned its focus to addressing macroeconomic instability marked by high inflation, a wide trade deficit and, until recently, falling reserves and a steadily depreciating currency.

"It seems to be sort of an epidemic of new 'baby permits', and it really does slow things down," said Fred Burke, managing partner at law firm Baker and Mackenzie in Vietnam.

From June 1 a Ministry of Industry and Trade notice requires mobile phone, alcohol and cosmetics importers to obtain a letter of authorization notarised by a Vietnamese diplomatic mission in the country of origin. Then the products can be imported but only via one of three Vietnamese sea ports.

European Chamber of Commerce head Alain Cany told a twice-a-year dialogue between the business community and government that the restrictions "may be in breach of Vietnam's international trade law obligations". He did not elaborate.

Last year the business community in Vietnam raised concerns about the introduction of price controls to clip inflation, and many complain the government has a tendency to resort to administrative measures.

"We have a lot of issues being raised by our importers and distributors now," a diplomat from a country that ships wine to Vietnam said on the sidelines of the Vietnam Business Forum.

"It's another straw on the camel's back in terms of trying to do business in Vietnam."

Price manipulation

The rules restricting mobile phone, cosmetic and alcohol imports to three sea ports were "thinly-disguised measures to restrict trade", Christopher Twomey, chairman of the American Chamber of Commerce, said in remarks prepared for the forum.

"A balance of trade issue is not a valid reason for import controls, and the artificial restriction of imports will not solve the underlying structural causes behind Vietnam's balance of trade issue," he said.

Vice-Minister of Trade and Industry Nguyen Cam Tu denied that the measures were new or aimed at cutting the trade gap, saying imports of mobile phones, cosmetics and alcoholic beverages were to be monitored out of health concerns.

"They are also expensive and often subject to price manipulation so it is necessary to monitor closely the origin and quality," Tu said during the forum.

Vietnam's trade deficit rose 15.4 percent in the January to May period this year from last year, hitting $6.59 billion.

On Thursday, the European Union's Vietnam delegation noted that Vietnam's $14.2 billion trade deficit last year derived predominantly from one country -- namely, China -- but the restrictions were "even targeting the trading partners with whom Vietnam has for years enjoyed a significant trade surplus".

Burke estimated the proliferation of import rules could affect around 5-6 percent of the value of imports.

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