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The spatial extent of conflicts over forest land is larger than that indicated by Viet Nam government statistics. The main reasons for conflicts include: (1) Unfair land distribution and utilization, (2) People lack productive land, (3) Increasing role of the commercial agriculture market, and (4) Local authorities lack an effective mechanism to address conflict. In addition, unclear demarcation of forestland boundaries in the field and lack of local participation has caused conflicts over forest use and management.
Regarding rubber wood from plantations managed by Viet Nam Rubber Group (state-own enterprise), the plantations were established a long time ago (30-40 years ago), with clear boundaries and stable legal rights to the land allocated by the State at the time of establishment. The lands have been well-managed for rubber plantations. There has been no reported disputes or violations related to land-use and management right of those rubber plantations in Viet Nam. Consultation with legality experts in Viet Nam supports the view that risk related to land tenure is considered low for rubber plantations owned by the Viet Nam Rubber Group.
The forest owner shall physically possess the Land-use right certificate or equivalent documents to demonstrate their land-use right to the land.
According to the Constitution of Viet Nam, regarding "land ownership," land (including forests, rivers and lakes, water sources, and underground natural resources) belongs to the entire people, with the State acting as the owner's representative and uniformly managing land.
The State shall hand over "land use rights" to land users following the Land Law. The State can allocate land use rights to land users in one of the following forms:
In Viet Nam, the land is collectively owned by people and administered by the government on their behalf. Therefore, under such a system, tenure rights in Viet Nam are essentially usufruct rights, meaning that right holders may use land, but cannot own it. The state grants use rights through a "land-use right certificate" (LURC), which entitles holders to sell, rent, exchange, mortgage, and bequeath their use rights and to exclude others from the land. Users may also legally acquire use rights through lease, inheritance, or grant from a family member and purchase. Land use right certificates (LURCs) are necessary for formal state recognition of a user's rights and for secured tenure, formal land transactions, access to formal credit, and legal protection of land-use rights.
Viet Nam has complex land institutions regarding land tenure rights and management rights, which date back to the 1950s. The land was not formally nationalized until the 1980 Constitution, and the first so-called "Land Law" in Viet Nam was not passed until 1988. The second Land Law was passed in 1993—a fuller version that expanded upon the 1988 law. Since then, the 1993 Land Law has been amended four times: in 1998, 2001, 2003, and 2013. With the evolution of the land policy of Viet Nam in different periods, there are several types of legally required documents that can be used as evidence for legal land use rights and forest use rights. Some of them introduced under previous regulations may still be valid according to the current Land Law of 2013.
Land-use right certificate (usually known as the "Red book") was introduced through the Land Law of 1993. Since 1993, the issuance of land use rights certificates has been progressively extended to all land users and all categories of land throughout the country. That process is still underway, and there are some circumstances in which legal forest land users have not yet been granted land use rights certificates. In this situation, several alternative evidence may apply and can be used to demonstrate legal land use rights and legal forest use rights. Such alternatives include decisions on land allocation; decisions on forest allocation; decisions on forest land allocation; decisions on forest allocation combined with land allocation; decisions on land leasing; decisions on contracting forest land; forest registration books; and written confirmation from the Commune People's Committee that the land is currently used and is not subject to any dispute.
According to the Land Law 2013 (Article 105), the Provincial People's Committees are responsible for granting certificates of land use rights to organizations, religious establishments, overseas Viet Nam, foreign-invested enterprises which implement investment projects, and foreign organizations with diplomatic functions. Provincial People's Committees may authorize the Department in charge of Natural resources and Environment of the same level to grant the certificates of land use rights and ownership of houses and other land-attached assets. On the other hand, district-level People's Committees are responsible for granting the certificates of land use rights (or the Red book) to individuals and communities and to overseas Viet Nam that are eligible to own houses associated with land use rights in Viet Nam.
Forest land is classified as a sub-category of agricultural land (Article 10, Land Law 2013). As with other land in Viet Nam, forest land is not subject to private ownership but rather belongs to the whole people and is managed by the State. However, entities, including households and organizations, can be allocated or lease forestland to use for up to 50 years. Such use rights can be inherited, transferred, and exchanged. The Land Law 2013 and Law on Forestry 2017 categorize all forestland as belonging to one of three functional categories (special-use, protection, and production) and establish principles and rules for each category's management, protection, development, and use.
With regards to forest ownership, the Law on Forestry 2017 has institutionalized the concept of "forest ownership" (Article 7) following the provisions in the 2013 Constitution; accordingly, two categories of forest ownership are defined (i) forests under the ownership of the entire people for which the State is the owner's representative, which includes: natural forest; planted forest wholly invested by the State; and planted forests revoked by the State, donated or granted forest, or other cases of other planted forest ownership transferred following legal provisions; and (ii) forests under the ownership of organizations, households, individuals, local communities including planted forest invested by organizations, individuals and local communities; and forest donated, granted by or inherited from other forest owners in compliance with legal provisions.
In summary, in Viet Nam, there are four types of ownership and use rights to the forest land and forest:
With the new Law on Forestry 2017, "forest owner" is defined as either an organization or a household, an individual or a local community to whom the State allocates or leases forest; land for afforestation, restoration, development of forest by his/her own; who is transferred, donated, inherits a forest following legal provisions. There are 7 types of forest owners: (1) Special-use forest management boards, protection forest management boards, (2) Economic organizations including enterprises, cooperatives, and cooperatives unions, and other economic organizations established and operating following legal provisions, except those referred to in Clause 7 of this Article, (3) People's armed forces units that are allocated forests (below referred to as armed units), (4) Forestry related science and technology, training and vocational education organizations, (5) Domestic households and individuals, (6) Residential communities, and (7) Foreign-invested enterprises that are leased land by State for planting production forests.
Forest owners have the right to use forests and own planted production forests recognized by competent state agencies following the law. And they are responsible for managing, protecting, developing, and using forests in a sustainable manner and fulfilling their financial and other obligations following the law. According to Article 54, 135, 136, and 137 of Land Law 2013, and Article 14, 15, 16 of Law on Forestry 2017, for production purposes, planted production forest land can be allocated without forest use levy or leased with a one-off payment or annual rental payment by the State to economic organizations, households, and individuals. According to Enterprise Law and Investment Law, forest owners who conduct business activities in the forest for profit are considered enterprises that are subject to requirements relating to investment registration and business registration.
Up to 2019, the land-use right certificate issuance rate reached 97,36%. This result helps to ensure the legal conditions for land users to exercise their legitimate rights and obligations following the land law. However, it has been reported that there were long delays and corrupt practices by officials of the local land registration agencies while issuing land-use certificates. This leads to lobbying and bribery by applicants. This risk is common throughout the country.
With rubber wood from plantations managed by Viet Nam Rubber Group (state-own enterprise), the plantations were established a long time ago (30-40 years ago), with clear boundaries and stable legal rights to the land allocated by the State at the time of establishment. The lands have been well-managed for rubber plantations. There has been no reported disputes or violations related to land-use and management right of those rubber plantations in Viet Nam. Consultation with legality experts in Viet Nam supports the view that risk related to land tenure is considered low for rubber plantations owned by the Viet Nam Rubber Group.
Regarding business registration and tax registration, Preferred by Natures' Legality Consultant in Viet Nam has not experienced issues with forestry companies operating without a business license when conducting supply chain assessment. In addition, there is no further information via internet research that indicates issues of companies' lacking business registration certificates. Without a valid business license and a valid tax registration number, a company cannot issue a VAT invoice for customers. Business licenses can be verified online, via the website: https://dangkykinhdoanh.gov.vn/en/Pages/default.aspx VIEW LESS
According to Enterprise Law and Investment Law, forest owners who conduct business activities in the forest for profit are considered enterprises that are subject to requirements relating to investment registration and business registration.
Check for information of the contractor and contractee, as well as information on the rights and responsibilities of each party.
Forest land shall not be used for other purposes than forestry.
According to the 2017 Law on Forestry (Article 17), a forest lease by the State means the State decides to assign forest use rights through a forest lease contract to an organization, a household, or an individual that wishes to use the forest. The State may lease to organizations, households, and individuals’ natural production forests and planted production forests with a one-off or annual rental payment for forestry production; agro-forestry and fishery practice; or eco-tourism, leisure, and recreation business. The entities that have the forests leased by the State have rights and obligations for "forest owners" as stipulated in Articles 73, 74, 79, 83 in the Law. They also have the right to share benefits from the forests under forest lease contracts; to own trees, animals, and other assets associated with the forests they have invested.
Organizations shall make sustainable forest management plans and submit them to a competent State agency for approval and implement the approved plans.
Under the 2017 Law on Forestry, as the requirements in Decree 156/2018/NĐ-CP, the process of obtaining the lease contract is as follows: Every year, the district-level People's Committee (PC) must conduct an annual plan of forest allocation and forest lease, which shall be submitted to and approved by the Provincial PC. Based on that plan, the entities will submit a Form of request for land allocation, forest lease, land lease, or forest lease with required documentation to district-level PC (if they are individuals/households) or Provincial PC (if they are organizations). Once the request is approved, the PC (provincial or district-level) will issue a Decision on land allocation, forest allocation, or Decision on land lease forest lease to the applicant.
In the case of land lease, forest lease, both sides (applicant and President of PC) will have to sign Forest Lease Contract after having the Decision. Because the forest allocation or lease must be accompanied by land allocation or lease, the forest allocation and the lease procedures will all be consistent and synchronized with the land allocation and land lease. For any mismatch between land allocation/lease and forest allocation/lease (for example, the household has been allocated forest land but has not been allocated forests on the land, or vice versa), the organizations, households, or individuals are responsible for working with relevant government agencies to complete the required dossiers for the land and the forest.
According to Article 99 of the Land Law, The State shall grant a certificate of land use rights and ownership of houses and other land-attached assets for the people allocated land or leased land by the State. Therefore, the ones who have leased land by the State also have the red book. So, in this case, since forest allocation and lease must be consistent and synchronized with the land allocation and land lease,
With the evolution of the land policy of Viet Nam in different periods, there are several types of legally required documents that can be used as evidence for legal land use rights and forest use rights, because some of them which were introduced under previous regulations may still be valid now. Therefore, there are several types of documents being listed as valid legally required records as above. On the other hand, there is a situation in Viet Nam that forests, gardens, and water surface areas managed by Special-use Forest and Protection Forest Management Boards and State-owned Agriculture and Forestry One-Member Limited Liability Company can be contracted to individuals/households or local communities, which Decree 168/2016/ND-CP stipulates.
The special-use forest and protection forest management authority can sign contracts with households, individuals, and local communities living in their managed forest area for protection and development of the forest (protection forest can be contracted to organizations). For planted protection forests that the contractor establishes under the contract terms and tenure, the contractor can enjoy the yields and profits from the concessions due to their investments after fulfilling all financial obligations to the State.
The procedure for contracting starts with the forest owner (Special-use Forest and Protection Forest Management Boards and State-owned Agriculture and Forestry One-Member Limited Liability Company) announcing the plan of contracting areas and eligible possible contractors at the head office of the forest owner and the commune-level PC.
The households, individuals, and local communities who are interested can submit a request for contracting and a copy of residential documentation to the forest owner, who then decides on a list of chosen contractors. After that, both sides will negotiate and sign the contract, and the contracted area will be handover to the contractor.
The households, individuals, and local communities who are interested can submit a request for contracting and a copy of residential documentation to the forest owner, who then decides on a list of chosen contractors. After that, both sides will negotiate and sign the contract, and the contracted area will be handover to the contractor. VIEW LESS
This requirement on a sustainable forest management plan (SFM) is specifically for forest owners being organizations. Since this is a new requirement under the new Law on Forestry, there has been no evidence of violation occurring. The research was based on interviews and reviewing several written sources. According to expert's feedback received during expert consultation in May 2021, many Protection Management Boards could not make SFM plan (as Circular 28 stipulated) due to various reasons such as unclear red books, lack of budget to re-inventory their forest, or incapable technical skills.
Since this is a new legal requirement (generally when there is a new legal requirement, a violation is more likely to occur at the initial stage after coming into force) and there's little evidence that identified laws are upheld, this indicator has been evaluated as Specified risk for State-owned and private company owned.
Verify that Sustainable Forest Management Plan and the required approval are as followed: Private company-owned plantations who invest their own money to establish plantations: no approval required. For other organizational forest owners (State-owned or private company-owned plantations which were invested in by State’s funds): Provincial People's Committee shall approve
A Sustainable Forest Management shall be in place and approved by the legal authority. The Sustainable Forest Management Plan shall implemented as legally required.
According to Article 27 of the Law on Forestry 2017, the responsibility to make and implement a sustainable forest management plan (SFM plan) is stipulated as follows: a. Forest owners being organizations (both State and privately owned) shall make and implement sustainable forest management plans. b. Forest owners being households, individuals, residential communities, or groups of households or individuals, are encouraged to make and implement sustainable forest management plans For the protection of forests, the key contents in the sustainable forest management plan include a) Assessment of natural, socio-economic, national defence and security conditions; status quo of forest resources; b) Objectives and scope of sustainable forest management; c) The protection function of the forest; d) Forest management, protection, development, and use activities; e) Solutions and plan for implementation. For production forests, key contents of sustainable forest management plan include a) Assessment of natural and socio-economic conditions; status quo of forest resources, production, and trading results; market impacts on the forest owner's activities; b) Objectives and scope of sustainable forest management; c) Forest management, protection, development, use, and forest products trade; d) Solutions and plan of implementation The form of a sustainable forest management plan for forest owners being organized is provided in Appendix II to Circular 28/2018/TT-BNNPTNT. According to Articles 10-13 of Circular 28/2018/TT-BNNPTNT, the approval on sustainable forest management plans shall be as follows: For forest owners, organizations that manage special-use forests under the Ministry of Agriculture and Rural Development: MARD shall be approved. For forest owners being private economic organizations or households, individuals, and communities (who invest their own money to establish plantations): no approval required. For other organizational forest owners: Provincial People's Committee shall approve. As required in Circular 28/2018/TT-BNNPTNT, forest owners must prepare and submit a report on the results of implementing their SFM plan to the District Department of Agriculture and Rural Development before 10 th December annually. Regarding rubber wood which can be grown on forest land and other agricultural land , the requirements for a sustainable forest management plan are only applicable to plantations established on forest land.
Illegal logging or illegal harvesting cases reported are mainly from natural forests, especially in the Central Highlands area. The media typically reports small-scale illegal logging perpetrated by poor villagers who invade government property containing natural forest with valuable timber. They can sell timber for money, need timber to build houses or clear forest land for cultivation. Corrupt forest protection officers are described as turning a blind eye on the villagers’ illegal practices. They collude with traders to perpetuate this trade in illegal timber for personal gain.
Since loggings in natural forests are prohibited, the main source of timber is from plantations. The Law on Forestry 2017 has provided forest owners of plantations with great freedom to manage and use their forests. There have been very little information/few reports on illegal harvesting of planted forests. However, for plantations that were established with the State’s funds, there is little evidence that identified laws are upheld, and using the precautionary approach, there is a risk that the harvest of these plantations may not follow the required procedures and that the harvest dossier is not in place.
The risk is not applicable for the planted forest, which is privately owned and invested by the private companies and individuals/ households, as there is no requirement on harvest permit/approval.
For main harvesting of wood, as well as salvage collection of wood from planted forests whose ownership is represented by the State:
The information on forest owner, location, species, quantities, and quality between the harvest plan and the packing list of forest products should be tallied.
For harvesting of wood from planted forests whose ownership is represented by the State:
Harvesting Plan prepared by forest owner or harvesting entities (Form No. 08, Circular 27/2018/TT-BNNPTNT) to be submitted to the authority that has approved the budget funds for forest planting for its decision and local forest protection authority for information and monitoring.
For Harvesting of rubber wood in VRG or state-own enterprises:
Approved harvest plan called "Decision on Rubber plantation liquidation."
For salvage collection of wood from planted forests whose ownership is represented by the State:
The report shall be prepared by the forest owner to be submitted to the authority that has approved the budget funds for forest planting for its decision; and local forest protection authority for information and monitoring.
For the planted forest, either if it is state-owned or privately owned, if the plantation was state funded, the harvest shall be approved by the government agency, which was the approver for the budget funds. Harvest dossier shall be in place.
Note that there is a logging ban in force for the natural forest. The Law on Royalties provides for the payment of royalties on the exploitation of Viet Nam natural and mineral resources. The Law describes the natural resource output used for royalty calculation, royalty-liable prices, and royalty rates. Royalty payers must register, declare, calculate, and pay royalties under the Law on Tax Administration.
Note: Processed wood products such as planks, wood panels, wood chips are subject to the VAT rate of 10% (Law 13/2008/QH12, Article 8). This risk related to processed wood has not been assessed.
Round wood, unprocessed logs directly planted and sold by organizations or individuals, are not subject to VAT. (Law 13/2008/QH12, Article 5)
For round wood, unprocessed logs that enterprises and cooperatives, which pay VAT by the credit method, sell to enterprises or cooperatives at the commercial stage, the seller is not required to declare and pay VAT.
On the VAT invoice, the seller will write the sales price without VAT and cross out the tax rate and VAT line.
Processed wood products such as planks, wood panels, wood chips are subject to the VAT rate of 10% (Law 13/2008/QH12, Article 8)
For export of timber products
Export of timber products are subject to Export tax. The detailed export tax rates for timber products, according to HS Code, are provided in Decree No. 125/2017/ND-CP.
The regulations (Circular 68/2019/TT-BTC) define “high tax risk enterprises”. High-risk enterprises are defined as those which have equity of less than VND 15 billion and have certain features, for example: Sales of goods or provision of services to related parties (a definition thereof is included); or Non-compliance with certain tax declaration requirements; or Change of business location more than 2 times within 12 months without any notification or any tax declaration at the new location; or Enterprises have been penalized for breaches of the invoice regulations in the last year. Etc… “High tax risk enterprises” are required to use e-invoices with verification codes, instead of normal paper VAT invoices, continuously for 12 months. The “high tax risk enterprise” status will then be re-assessed after 12 months for possible approval for using e-invoices without verification code.
If an enterprise is in the list of “High tax risk enterprises”, it can be found on the website of the General Department of Taxation http://tracuuhoadon.gdt.gov.vn/dnrrvp.html
Viet Nam is going to make e-invoice compulsory for all entities. It is currently in the transition period, and the due date to completely change to e-invoice is 1 st July 2022. From 1 st July 2022, e-invoice should be possible be checked online for their validity on the website of the General Department of Taxation http://tracuuhoadon.gdt.gov.vn/main.html
Since Viet Nam has a high level of corruption and a low score on governance, risks relating to forest owners being organized include:
In addition, many businesses are evading tax by minimizing taxable income compared to actual income through reducing revenue or increasing costs, or both when making tax declarations. Many companies declare insufficient revenue and incorrect expenses, thereby underestimating value-added tax, corporate income tax, and profit tax to be paid to the Government. The logging, transport, and wood processing sectors are still high-risk and need further oversight and guidance from the authorities.
Forest owners being households/individuals are exempted from personal income tax, so this indicator is not applicable for households/individuals
Check that the organization does not have any export tax debt, late payments to due dates at Viet Nam Custom website: https://www.customs.gov.vn/Lists/CongKhaiThongTin/ViewDetails.aspx?ID=38 (only in Vietnamese). This link lets you access the list of businesses that have export tax debt or late payments by provinces. It is necessary to know the border gate through which the company exported the goods to consult the list of that correspondent province.
Accurate income and profit taxes shall be paid according to legal requirements.
According to the Law on Personal Income Tax and the detailed instruction Circular 111/2013/TT-BTC, income of households and individuals directly engaged in agricultural production, forestry, salt making, aquaculture, and fisheries activities, of which products have not yet been processed, are exempted from personal income tax.
The eligible household/individual must have the legal right to use land, rent land, use water surface, rent water surface for production, and directly participate in agricultural, forestry, salt making, and aquaculture production process.
According to Law on Corporate Income Tax, any organization conducting production activities [and/or] business in goods and services that earn taxable income must pay corporate income tax.
Taxable income comprises income earned from activities of production and/or business in goods and services AND other incomes, including income from the transfer of capital or transfer of the capital-contributing rights; income from the transfer of the real estate, transfer of investment projects, transfer of the right to participate in investment projects or transfer of the right to explore, exploit and process minerals; income from asset use rights or asset ownership rights, etc.…. (Law 71/2014/QH13).
In Viet Nam, incomes from planting, tending, and protecting forests in forestry enterprises or cooperatives operating in areas with difficult or extremely difficult socio-economic conditions are entitled to enterprises' income tax preferences. The income tax rate of 10% shall be applied in this case (the normal corporate income tax rate is 20%). The eligible areas are in the most updated list in Decree 31/2021/NĐ-CP dated 26 March 2021.
Enterprises must pay corporate income tax provisionally every quarter based on estimates. The payment deadline is no later than the 30th day of the following quarter. Essentially, a final tax declaration and return must be filed and submitted annually. This must be done within 90 days after the end of the calendar year or fiscal year. The total sum of provisional quarterly payments will then be reconciled with the finalization amount.
The regulations (Circular 68/2019/TT-BTC) contain a definition of “high tax risk enterprises.” In particular, high-risk enterprises are defined as those which have equity of less than VND 15 billion and have certain features, for example: Sales of goods or provision of services to related parties (a definition thereof is included); or Non-compliance with certain tax declaration requirements; or Change of business location more than 2 times within 12 months without any notification or any tax declaration at the new location; or Enterprises that have been penalized for breaches of the invoice regulations in the last year, etc.… “High tax risk enterprises” are required to use e-invoices with verification codes continuously for 12 months. The “high tax risk enterprise” status will then be re-assessed after 12 months for possible approval for using e-invoices without verification code.
Viet Nam law stipulates the separation of forest conservation (special-used forest) from production forests and protection forests.
There are high levels of Government oversight of the special-use forests, and the Government has invested significant resources in this. There are specific legal sanctions that apply to illegal harvesting in special-used forests. However, there are several cases of illegal harvesting in the special-use forests, with these offenders usually arrested by the forest rangers. Instances of illegal harvesting in the special-use forests are published in the newspaper and on the website of the FPD.
Viet Nam’s 5th National CBD report identifies that illegal logging and road construction are linked to habitat degradation and fragmentation. It also cites that population growth may lead to uncontrolled deforestation linked to the need of many people to clear land for farming and livestock. The most difficult task related to the conservation and management of Viet Nam's national parks and nature reserves now results from the pressure placed by the human population growth and resource use within and around protected areas, the lack of funding, limited human and institutional capacity and land use conflict. Illegal hunting, trapping, poaching, and fishing, the illegal wildlife trade, illegal logging, and firewood collecting appeared to be the most serious threats to the conservation and management of natural resources. Furthermore, the Global Forest Watch Intact Forest Landscape loss map layer from 2000 to 2013 indicates IFL loss in all existing IFL areas in Viet Nam and loss of one whole IFL area during this period. Although the loss of intact forest landscape seems to have been reduced in 2013-2016, and there has been no available data on the IFL areas in Viet Nam since 2016, the risk of loss on these landscapes is relatively high due to the pressure of human population growth and resource use pressure within and around protected areas.
As legal timber sources are from plantations, consultation with stakeholders conducted in late 2021, and experiences from FSC audits of Preferred by Nature staff confirm plantations are not established in protected areas. However, since illegal logging in the protected area is still a rampant issue in Viet Nam, there is a risk that timber in the protected area is illegally harvested and enters the commercial supply chain.
In the case of risk related to protected species within plantations, little information is found on the harvesting of protected species within plantations in Viet Nam. Species most used in forest plantations are Acacia (Acacia spp.) and Eucalyptus (Eucalyptus spp.). The risk for this sub-category is considered low. However, with the continued demand for rare and high-value species for hand-carved wood furniture for the domestic market and export to China, there is a risk that the protected species are planted and harvested illegally, not following the legally required procedure.
Timber test samples of purchased material to identify the species or origin of timber and verify that timber purchased corresponds to the harvesting permit or authorisation required.
VAT invoices (for e-invoice) can be validated using the following database: http://tracuuhoadon.gdt.gov.vn/tc1hd.html
Business Registration Certificates can be validated using the fNational Business Registration Portal: https://dichvuthongtin.dkkd.gov.vn/inf/default.aspx
Conduct verification audits of upstream suppliers, which may include forest level audits - check critical control points in the supply chain, CoC system or due diligence system.
The Law on Forestry and other legal documents specifying conservation of nature (including biodiversity) apply only to special-use forests (national parks, nature reserves, species conservation areas, historic parks, cultural sites). On the other hand, protection forests are used predominantly for protecting water resources, land, to prevent erosion and desertification in key areas, to restrict natural calamities, and to regulate climate. So special-use forests are the main protected areas and support protected species, established in areas with significant ecological and/or cultural importance.
The management of protected areas is coordinated by the Forest Protection Department (FPD) within the MARD. Forest management boards of protected areas (FMBs) belonging to the state currently manage more than 4.7 million ha, primarily special-use and protected forests for protection and conservation purposes. As of 2020, out of 4.7 million ha, about 88% are natural forests, and the remaining 12% are plantation forests (Decision 1558/QĐ-BNN-TCLN). FMBs receive central government budget allocations and, in many cases, contract local people to implement protection and conservation activities (EFI 2011, FPD 2013).
Viet Nam has regulations to ensure conservation in special-use forests. Around the special-use forests, there is a buffer zone to further ensure that the special use forests are not infringed upon. Furthermore, there is currently a logging ban in Viet Nam for natural forests, in both protection forests and special-use forests. The production forests are not subject to requirements for protection activities.
In the Law on Forestry, there is mention of protecting species and sites in production forests; however, no circular or decree elaborate how this should be carried out. Harvesting companies must identify endangered animal and plant (including timber) species within the forest management unit (FMU) as per the Decree 06/2019/ND-CP list and comply with relevant provisions for their protection or exploitation as appropriate.
For forest owner who would like to plant, and harvest protected species for commercial purpose, Article 12 and 15 of Decree 06/2019/ND-CP stipulates the conditions for this, as below:
According to Decree 06/2019/ND-CP, some common protected timber species are as below:
In recent years, an improvement in policies has helped to improve the regulation of forest management. Policies are now more comprehensive, state management by law has progressed, and social awareness of the forest sector has increased. However, implementation is also limited because law enforcement in the sector is perceived as weak; laws and regulations are not strictly followed, and sanctions are not strong enough to act as a deterrent.
Viet Nam has established and implemented a range of legal requirements related to the identification and/or protection of environmental values. However, with a significant body of reports and news on limited implementation and weak monitoring, which has led to environmental degradation, including land degradation and water pollution, there is a high risk related to systematic and/or large-scale non-compliance with legally required environmental protection measures that threaten the forest resources or other environmental values.
For forest owners being organizations, the SFM plan is the tool to make sure their forest activities comply with environmental protection regulations. Since this is a new legal requirement, there is a specified risk that the organizations do not have an SFM plan and approved by appropriate authority (if applicable). Even if the plan is in place, it may not be implemented by the forest owner. The same risk applies to the requirement on the Fire fighting and prevention plan.
For individual/household forest owners, the requirement on the SFM plan is not applicable. However, there are still requirements for the individual/household to prepare and implement a Fire prevention and fighting plan, as well as comply with other environmental protection requirements (use of permissible pesticides, minimizing and treating waste before discharging it into any water bodies, no wastes/toxic chemicals/explosives/inflammable in the forests, minimizing soil erosion for steep slopes of over 25° such as creating contour lines, etc.…). Although there has been no clear evidence, nor the significant body of reports on the incompliance, the risk is considered specified because law enforcement in the sector is perceived as weak; laws and regulations are not strictly followed, and sanctions are not strong enough to act as a deterrent.
Verify that the SFM plan of the forest owner has been implemented in the field (if possible)
Check if the State-owned and private company-owned plantation has SFM plan as legally required and approved by the appropriate authority
Regarding the risk that the forest owner does not implement the plans:
- Request for their record of the report on the results of implementing their SFM plan submitted to the District Department of Agriculture and Rural Development before 10th December annually.
According to the National Centre for Occupational and Health (2020) report, of the labours that have the labour contract, there were 7,473 occupational accidents cases nationwide involving 7,649 people in 2020. By sectors, mining and mineral exploitation accounted for 16.51%; the construction sector accounted for 15.6%, the field of mechanics, metallurgy accounted for 6.42%, the service sector accounted for 5.51% and the textile, garment and footwear sector accounted for 5.5% of the total number of cases. However, with the labours that do not have labour contracts, the accident cases have been recorded in construction, production of construction materials, agriculture, mechanics, and business services. The forestry sector is categorized under the agricultural sector in the report.
Also, according to the report mentioned above, the reasons for occupational accidents are listed: the employers did not provide the labour the safety training or inadequate training for the employees (43%), equipment does not ensure occupational safety (11.93%) the organization of labour and working conditions (8.27%), employers who did not develop safe working procedures and measures accounted (4.59%), employers without personal protective equipment or unqualified personal protective equipment (2.75%) of the total number of cases.
By type of production: Joint-stock company (37.61%), limited liability company (30.28%), state-owned enterprises, administrative and non-business units (22.93%), private enterprise, individual business household accounts for 5.51% of accidents and 5.22% of deaths.
Though Viet Nam has made progress through the years, occupational safety remains a problem in Viet Nam.
The plans shall be available and it shall be ensured that procedures are implemented and followed.
The plan shall be prepared by the employer (SFMP for State-owned and private company owned plantation) and are relevant for workers employed with a labour contract.
Consult the Department to gather information on the results of annual inspections for the company
On-site verification of operational activities to:
Verify that H&S training has been completed.
Verify that H&S training has been completed. Relevant for workers without labour contract (in case of freelance work/work less than one month)
Observe if child labour is used at the forest sites
Viet Nam does not constitute formal recognition of customary rights in Viet Nam law. The following overview of requirements provide the legal system that ensures all ethnic groups have the same rights to the forest land and forest resources and their right are respected and protected. The Constitution of The Socialist Republic of Viet Nam (2013) regulates all ethnicities are equal and unite with, respect, and assist one another for mutual development; all acts of discrimination against and division of the ethnicities are prohibited. This resulted in ethnic minorities and Kinh people (which is the majority) in Viet Nam being treated equally under the laws. Land Law 2013 indicates that Land belongs to the entire people, with the State acting as the owner’s representative and uniformly managing land. The State shall grant land use rights to land users following this Law (Article 4). have the rights to utilize the forest and enjoy benefits arising from that place. There is no specific requirement for customary rights to the harvesting of the forest. In practice, Viet Nam government encourages the benefits sharing from the forest through the new forest management mechanisms such as Payment of Forest Environment Services (PFES), REDD+, and FLEGT. These offer the potential for greater recognition of customary tenure, as they require that benefits accrue to local people.
Not applicable. In 2009 Viet Nam became the first country to trial the implementation of FPIC under the UN-REDD program. Three pilot projects were initiated in Lam Dong, Thai Nguyen, and Nghe An. However, FPIC has not been implemented into the legal framework. VIEW LESS
Not applicable. In 2019, The total population of Viet Nam was 96,208,984 people. The Kinh population was 82.1 million persons, accounting for 85.3% of the total population. The rest of the population are 53 ethnic minorities. Viet Nam ratified the International Covenant on Civil and Political Rights in 1982 and thereby recognized the rights of its ethnic minorities. In 2007, Viet Nam ratified the United Nations Declaration on the Rights of Indigenous Peoples (UNDRIP). The Constitution of The Socialist Republic of Viet Nam (2013) regulates all ethnicities are equal and unite with, respect, and assist one another for mutual development; all acts of discrimination against and division of the ethnicities are prohibited (Article 5). This resulted in ethnic minorities, and Kinh people (which is the majority) in Viet Nam being treated equally under the law. VIEW LESS
Both the sale invoice and packing list could be the documents that define the information on species, quantities, qualities. However, the sale invoice does not clearly state the species but the names of goods instead. Due to this, in some cases, the sale invoices may not be sufficient to identify the species. The sales invoice is also not required to be attached with the vehicle during transport, but the packing list are. Therefore, the packing list is used to demonstrate compliance with this requirement.
The risk of this sub-category is related to three steps of 1) how to complete the packing list and 2) the ability to make a false classification on the packing list to avoid the taxes and 3) trade bans on product types or species.
1) Circular 27/2018/TT-BNNPTN, the packing list is no longer required to be verified by the Local Forest Protection Department (for planation forest), which creates a simplified process for the forest owners as they can complete it themselves. Forest Protection Department inspects tracing of forest products by annual inspection or unannounced inspection, including inspecting the quantity, volume, type and number of woods, packing list; harvesting documents. The combination of the simplified process to complete the packing list and the inspection by the Forest Protection Department creates encouragement for the forest/log owners to comply with the relevant law requirements.
2) Wood sourced from Viet Nam forests mostly originates from plantations. According to MARD (2019) the Viet Nam “mass” plantation forests (i.e., not including scattered trees) produced about 16 million m3 of logs in 2019, which is mainly used for processing by the domestic industry. Species most commonly used in forest plantations are Acacia (Acacia spp.) and Eucalyptus (Eucalyptus spp.) (non-government source 1).
Two commercially traded timber species are listed on CITES Appendix II from Viet Nam: Aquilaria spp. and Dalbergia cochinchinensis (Thailand Rosewood). These Appendix-II listings are not a ban on trade. To conduct international commercial trade in these listed species, it is necessary to ensure all the proper CITES documentation from the exporting or re-exporting country is compiled and accurate. (Forest Legality Alliance, 2014). There is no trade ban on the species from the plantation.
3) Regarding to the incorrect classification (quantities/volume) of harvested material to reduce/avoid payment of legality prescribed taxes and fees, value-added taxes and income and profit taxes, the household are not applicable for all these taxes and fees. As mentioned in indicator 1.7 on Income Tax, many businesses avoid tax by claiming the lowest possible profit or not complying with tax declaration requirements. They may declare insufficient revenue and incorrect expenses, thereby underestimating value-added tax, corporate income tax, and profit tax to be paid to the Government. Therefore, the risk for the private and state-owned plantation is specified. VIEW LESS
Circular No. 39/2014/TT-BTC requires the sales invoice to be made by the sellers who are organizations, households, and individuals that sell goods and/or provide services in Viet Nam or abroad.
Circular 119/2014/TT-BTC requires that information in the sale invoice include: Names of goods and services, units, quantity, unit prices of goods and services; amount must be written in numbers and words.
Circular 27/2018/TT-BNNPTNT defines that the forest product owner shall make a packing list after harvesting; when trading, transporting and dispatching forest products. The packing list reflects the information related to forest products on the vehicle used for transport.
Circular 27/2018/TT-BNNPTNT stipulates the information which must be contained in the Packing list of forest products by forest owners/log owners, including:
The Forest Protection Department will conduct two types of inspection: annual inspection or unannounced inspection. Unannounced inspection will be conducted when complaints, violations, denunciations, or reports are made.
The contents of the inspection will include:
The circular 27/2018/TT-BNNPTNT only requires dossiers to accompany the transported timber, timber products and NTFPs. Though the dossiers required are slightly different depending on the timber origins, what is generally required to be included during transport are: the packing list and a copy of the forest product origin dossier of the seller.
The packing list is made by the owners of forest products and the forest product origin dossier is collected from the sellers without pre-verification/stamping by local forest protection department.
The owners of forest products must be solely responsible for the legality of the forest products. This simplified process of obtaining these dossiers on one side lowers the risk of non-compliance with lawful requirements. On the other hand, the simplified process also risks making fraudulent documents (packing list, forest origin dossier).
In addition, the Local Forest Protection Department annually conducts inspections or unannounced inspections of the trade and transport of timber, timber products and NTFPs. Regarding the transport activities, the Local Forest Protection Department checks relevant dossiers and applications and forest products available on the transport vehicle.
According to VNFOREST, in 2020, there are 10,931 cases of forestry violation for the whole country, a decrease of 2% compared to 2019. Compared to Forest Legality Alliance (2014), there were an estimated 30,000 to 50,000 reported forest violations per year, the number of forest violations in Viet Nam has decreased significantly from 2014 to 2020. These numbers are relevant for the whole forest sector, and not only to transport. However, the trend in decreased violations is also expected to be relevant to violations related to transport. The incorrect packing list to avoid/reduce income and profit taxes likely happen to the forest owned by state and private organizations and the supply chain.
Before the government released applicable laws to enterprises having controlled transactions (in April 2017), transfer pricing rules in Viet Nam were lax.
Investors could enter the market without worrying about their transfer pricing policies. Now, companies considering an investment into Viet Nam and those companies already operating in the country need to comply with the stricter regulatory requirements, which are based on OECD guidelines and Base Erosion and Profit Shifting BEPS actions.
In July 2015, a Transfer Pricing Audit Department was established within the General Department of Taxation (“GDT”). Soon afterward, in November 2015, local Transfer Pricing Audit departments were also established in the Hanoi, Binh Duong, Dong Nai, and Ho Chi Minh City tax authorities.
During 2016, tax audits were conducted on 84,472 companies, with the additional tax amount of VND17.164 trillion. Specifically, 329 transfer pricing audit cases were conducted, with the recollected tax amount and penalties of VND607.52 billion (loss reduction of VND5,612.21 billion). According to the Foreign Investment Agency report, FDI inflows into Viet Nam continuously increased in the period 2010–2018. It is worth noting that about 28% of this capital flow came from countries and territories with very low or zero corporate income tax (CIT) rates such as Singapore, Hong Kong, UK Virgin Islands, Cayman Islands, etc. Therefore, multinational enterprises from the above countries and territories may transfer profits from Viet Nam to those places to reduce the tax rate that should be paid in Viet Nam.
According to the Foreign Investment Department, by the end of 2019, the total number of FDI enterprises operating in the timber industry was 966, an increase of 11.4% compared to the number of FDI enterprises in 2018. Total registered investment capital reached $ 6.3 billion by the end of 2019, an increase of 13.2% compared to the total registered capital at the end of 2018. The annual report of Viet Nam enterprises in 2015 published by the Viet Nam Chamber of Commerce and Industry (VCCI) has a very remarkable result, among the three types of enterprises, the Foreign Direct Investment (FDI) sector has the highest rate of loss-making enterprises, with nearly 48 enterprises in 3 years (2012 - 2014).
Investment sectors with the highest rate of transfer pricing enterprises include 90% of businesses in the financial and insurance sectors, 70% of textile and garment manufacturing enterprises, 51% of auto parts manufacturing enterprises, etc.
A study by Nguyen Huu Anh from National Economics University on analysing and assessing the current situation of transfer pricing, controlling transfer pricing, and assessing its impact Viet Nam enterprises in many aspects and pointed out several limitations and shortcomings, specifically: the database for the arm length price has not been available, lack of capacity of government staffs on transfer pricing audit, etc.
APA application is to improve the efficiency in tax administration, reduce the cost of compliance with tax laws, determine prices of taxpayers’ related-party transactions in conformity with arm’s-length and substance-over-form principles to determine the nature of related-party transactions and corporate income tax liability of taxpayers in the same manner as that of transactions between independent parties, and prevent double taxation and tax evasion and minimize disputes over the determination of prices of related transactions. The enterprises that join APA are considered as low risk for transfer pricing. Nevertheless, there is only 11 enterprises that joined in the negotiation of APA.
As the above information, the number of transfer pricing activities was a significant and high rate across the country with FDI enterprises. The risk for the privately-owned plantation is therefore considered as Specified.
In 2020, the State Audit Office audited the financial statements and activities related to the management and use of state capital in 2019 of 160 enterprises belonging to 17 groups and corporations and pointed out many management issues of the use of state capital and assets in corporations, leading to inefficiencies, losses, and negative capital. (Non-Government source 7). There is no information on the Offshore transfer pricing found linked with the state company. Given the above situation and based on the precautionary approach, the risk for the State-owned planation is therefore considered Specified.
According to article 5 of Decree 132/2020/NĐ-CP, households are not recognized as transfer pricing-related parties. The risk for household-owned plantations is Not Applicable. However, if the timber from the household-owned plantation goes into the supply chain through trading, processing, and exporting, the risk is Specified.
Decree 132/2020/NĐ-CP dated November 5, 2020, on prescribing tax administration for enterprises having related-party transactions that regulate transfer pricing doctrines, methods, and processes for the determination of transfer pricing factors; taxpayer’s transfer pricing rights and obligations, declaration procedures; responsibilities of state regulatory authorities for the tax administration over taxpayers having related party transactions. Article 5 defines the enterprises that are related parties: 1) A party is directly or indirectly involved in the management, control of, the contribution of capital to, or investment in, the other party; 2) Parties are directly or indirectly affected by the management, control of, the contribution of capital, or investment, from the other party and meet one of the following conditions from points a to me of the Article 5.
Article 18 indicates that the taxpayers (enterprises) engaged in related party transactions shall be held responsible for declaring information about their interrelationships or intra-group relationships and related party transactions using Form No. 01 given in Appendix I, II and III to this Decree, and submitting their completed forms together with Finalization of corporate tax and retaining and providing the transfer pricing files comprising information, documents, data and records.
Taxpayers already entering into the Advance Pricing Agreement (APA) have submitted the annual report following the legislation on Advance Pricing Agreements. For those related party transactions not covered by the APA, taxpayers shall be responsible for making transfer pricing declarations as referred to in Article 18 herein. Taxpayers perform business activities by exercising simple functions, neither generating any revenue nor incurring any cost from an operation or use of intangible assets, generating the sales of less than VND 200 billion, as well as applying the ratio of net operating profit before deducting loan interest and corporate income tax (exclusive of the difference between sales and costs of financial activities) to net sales, in detail: Distribution (5% or over), Manufacturing (10% or over), Processing (15% or over.). Law No. 38/2019/QH14, Article 42 provide the rules for declaring and calculating taxable prices in related-party transactions:
Circular No. 45/2021/TT-BTC and Decree No. 126/2020/ND-CP guide the enterprises' application Advance Pricing Agreement (APA). An APA will be applied on the principle that the tax authority and the taxpayer or a Viet Nam tax authority and a party tax authority and a taxpayer cooperate, discuss and negotiate the application of regulations of law on payment of corporate income tax on the related transactions covered by APA in conformity with arm’s length principle and substance-over-form principle.
The importing tax for timber and sawn timber is 0%, so tax evasion is low.
Viet Nam has been operating a online platform customs declaration that is relevant for classification of products, and relevant documents are recorded. The online system will check whether the importers are eligible for exporting and classify the shipment into low, medium and high risk with the appropriate inspection for each level of risk. This reduces the risk of violation of custom requirements.
However, numerous sources suggest that the illegal trade across the borders with Laos, Cambodia takes place as follows: In 2020, Viet Nam imported 2.54 million m3 of sawn timber and 2.17 million m3 of logs. The low-risk source accounts for 65.7% of imported wood materials; the remaining 34.3% is high-risk sources from 45 countries. Though Laos and Cambodia used to be a significant source of tropical timber, timber imports from these two countries are officially decreasing and negligible in 2020, which is approximately 5,000- 6,000 m3 of log and 50,000 - 60,000 m3 of sawn wood from Laos and even less from Combodia. However, up to 2017, various sources suggest that the illegal timber trade still occurs in some parts of Quang Binh, Ha Tinh and Nghe An provinces, which are on the Viet Nam–Lao PDR border and that most of that trade is in precious species that are listed under the Convention on International Trade in Endangered Species of Wild Fauna and Flora (CITES).
Viet Nam is a leading timber transit market, with timber exports valued at more than USD11 billion in 2019. However, the source of the timber being imported into the country is not always clear, leading to concerns that the industry supports the illegal timber trade. In addition, the customs force is not well trained in forestry or timber identification; this is one of the major difficulties for this force. B
ased on the above information, the risk for import is Specified.
Relevant to collect FLEGT license if timber is imported from a country that has entered a Timber Legality Agreement with EU and has an operative FLEGT licensing system
Shall be collected if there is no CITES or FLEGT license available for the imported product
Shall be collected if timber is listed in a CITES Appendix for the country of origin. Collect:
The importers must submit the customs declaration online. Timber importer shall be legally responsible for: 1) the legal origins of the timber according to relevant laws of the country of harvest, 2) comply with the request for information according to the criteria for evaluation of exporting countries and species and 3) take responsibility for the accuracy of the documents provided and information declared.
Note: If logs are not legally imported there is a risk of timber being illegally harvested in the country of origin.
According to article 3 of Decree No. 69/2018/ND-CP, there is no specific license/permits required for import/export of timber and timber products into and out of Viet Nam, except for licenses for timber and timber products (CITES License) or import from the countries that have entered a Voluntary Partnership Agreement (VPA) with EU and has an operative FLEGT licensing system (FLEGT License).
The enterprise interested in importing/exporting goods must hold a business registration certificate.
There is a suspension of temporary import for re-export of round timber and sawn timber from natural forests of Laos and Cambodia from January 01, 2019, to December 31, 2023 (No. 44/2018/TT-BCT).
The importers/exporters must submit the customs declaration online. The customs declaration requires a wide range of information that includes the product classification (HS codes, quantities, qualities and species). The system will automatically check whether the importer/exporters are eligible for importing/exporting. The Viet Nam customs system classifies the imported/exported products into 3 lines with different levels of risk management. Accordingly, 1) Green line (low risk): Exemption from detailed inspection of records and physical inspection of goods by the custom sub-department, 2) Yellow line (medium risk): Records are required to be checked, exemption from physical inspection of goods; 3) Red line (high risk):
Records and physical inspection are needed ( Decision No. 1966/QĐ-TCHQ).
The products that are customs cleared are considered legally imported/exported.
In addition, inspection can be made at the border gate after the customs clearance depending on the risk level of the shipment.
Article 4 of Decree No. 102/2020/ND-CP, the timber importer shall be legally responsible for: 1) the legal origins of the timber according to relevant laws of the country of harvest, 2) comply with the request for information according to the criteria for evaluation of exporting countries and species and 3) take responsibility for the accuracy of the documents provided and information declared. The import of timber shall be based on a risk assessment identifying whether the countries/regions and the species are low/high risk.
All the importers shall implement the due diligence system regulated under this decree. Decision No. 4832/QĐ-BNN-TCLN provides the list of 51 low-risk countries/regions considered low-risk for importing. The high-risk species criterion is listed in article 6 of Decree No. 102/2020/ND-CP.
The importing dossiers are regulated in Article 7 of Decree No. 102/2020/ND-CP.
Dalbergia cochinchinensis - commercially traded timber species listed in CITES Appendix II. These Appendix-II listings are not a ban on trade. To conduct international commercial trade in these listed species, it is necessary to ensure all the proper CITES documentation from the exporting or re-exporting country is compiled and accurate.
Dalbergia cochinchinensis in the wild: The Thailand rosewood population trend is decreasing in both Viet Nam and in the rest of the world. The number of mature individuals has significantly declined. Moreover, deforestation has seriously compromised the distribution of the species. In the past distribution locations such as Ben Cat of Binh Duong province, Trang Bom district of Dong Nai province, and Thu Duc district of Ho Chi Minh city, where six of 30 specimens of Dalbergia cochinchinensis were collected in the period 1880 – 1890 and are being kept at the French National Museum of Natural History, wild populations of Dalbergia cochinchinensis maybe now exterminated due to the urbanization.
Results of field visits on Thailand rosewood in the provinces of Kon Tum, Gia Lai and Dak Lak from 9 – 14 September 2019 and Binh Thuan, Dong Nai and Binh Phuoc from 7 – 12 October 2019 indicated that Dalbergia cochinchinensis is still naturally distributed in all sites above. However, the occupancy area, populations, and the number of mature individuals has been drastically reduced due to over-exploitation and destructed habitats.
Dalbergia cochinchinensis plantation: In recent years, under the instruction of the provincial FPDs of Kon Tum, Gia Lai, Dak Lak and Binh Phuoc provinces, citizens and local governmental officers planted Dalbergia cochinchinensis in the small, isolated lands (also called sparse land) on the streets, cultivated land of households and office on the international environmental day. Field visits indicated that few nurseries are having Dalbergia cochinchinensis in the region. Some seedling provision facilities such as the Tropical Forest Research Center in Pleiku city of Gia Lai province Yok Don national park and families in Trang Bom district of Dong Nai province produce Dalbergia cochinchinensis seedlings for local government programs of scattered afforestation, and planting trees in offices, streets, local households and surrounding areas. However, with the remaining demand for rare and high-value species for hand-carved wood furniture for the domestic market and export to China, there is a risk that the protected species are planted and harvested illegally, not following the legally required procedure. Most of Dalbergia cochinchinensis harvested from the natural forest are illegal.
Verify the existence of the CITES export permit and validate the information on the document. Check date of issue and validity. The effective period of the export or re-export permit is 6 months and 12 months for the import permit.
All cross-border trade of CITES-listed species shall be documented and accompanied by required export, import, and re-export certificates issued by competent authorities (CITES Management Authorities). Note that there is a risk that permits have been obtained fraudulently.
CITES species shall be planted only following legal requirements.
The legislation requirements on due diligence have only recently been issued and came into force in 2020. The EU has commented on the need to revise further and develop the current requirements to be in line with the VPA, “and Viet Nam then puts these controls into practice, including the specification of adequate, proportionate and dissuasive administrative or criminal sanctions to address violations”.
It is reported that the supply of tropical timber from Africa, Laos, Cambodia, and PNG falls into the category of risky geographic regions. In terms of imported species, the proportion of risk species imported into Viet Nam out of the total of different imported species depends on the supplying sources. However, risk species generally still account for a relatively large proportion of imported species.
In 2020, The U.S. Trade Representative initiated an investigation of Viet Nam’s acts, policies, and practices related to importing and using illegally harvested or traded timber.
Reports indicate that a significant amount of the timber exported from Cambodia to Viet Nam was harvested on protected lands, such as wildlife sanctuaries, or outside of and therefore in violation of legal timber concessions. Cambodia nevertheless remains a significant source of Viet Nam’s timber imports. Similarly, timber sourced from other countries, such as Cameroon and the Democratic Republic of the Congo (DRC), may have been harvested against those countries’ laws.
There is a warning from the experts about the illegal supply of logs and sawn timber from Russia and Ukraine imported into Viet Nam through China. Though the number of timber products from Russia and Ukraine account for a very small proportion, these sources are considered risky due to the illegal logging in these countries.
Following the survey findings, VCCI and Forest Trends has developed the advising legal framework for bidding related to the public procurement policy on timber products, developed the guidelines and training material to support the central and provincial government buyers with the new bidding procedures, including, for example, how to evaluate bids. This handbook was released in April 2021, and due to its early release, there has been no evaluation of its impact.
The risk is considered Specified.
Collect FLEGT license if timber is imported from a country that has entered a Timber Legality Agreement with EU and has an operative FLEGT licensing system
The Viet Nam government and the European Union (EU) announced the start of formal negotiations for a Forest Law Enforcement, Governance and Trade (FLEGT) Voluntary Partnership Agreement (VPA) on 18 August 2010. This Agreement aims to ensure the legality of timber products entering the EU market. At the same time, it could help maintain and expand the export of timber and timber products from Viet Nam enterprises, subject to the changing EU market requirement as of March 2013.
The EU and Viet Nam signed the VPA in October 2018. The VPA entered into force in June 2019, after both the EU and Viet Nam had ratified it following their respective procedures. The VPA is yet fully implemented after the VPA has entered into force.
During the early stage of the implementation phase of the VPA, Viet Nam is revising and developing new legislation requirements to realize the commitments of the VPA. Following that, legislation will have to be implemented by developing new elements and building capacity to operate the system. In 2020, Viet Nam issued Decree 102/2020/ND-CP on Viet Nam Timber Legality Assurance System, which is to ensure that timber products are verified as legal according to specified requirements for all stages of the supply chain, from the forest or the point of import to the point of final sale or export. The Decree went into force on 31st October 2020.
There have been requirements for Viet Nam operators to exercise due diligence to assess the legality of timber and timber products they import from that effective date. When importing timber, Viet Nam importers shall complete a self-declaration that documents their due diligence exercise, including collecting information, risk assessment, and mitigation of any risk related to the legal origin. Customs Department will verify compliance with due diligence requirements in cooperation with other relevant agencies.
Decision No. 4832/QĐ-BNN-TCLN provides the list of 51 countries/regions considered low risk for importing. The high-risk species criterion is listed in article 6 of Decree No. 102/2020/ND-CP. Article 10 on Timber dossier for export and the FLEGT License has not been put in force yet. Therefore, the Timber dossier for export shall still be regulated by Article 26 of Circular 27/2018/TT-BNNPTNT. The Timber dossier for export and issuing the FLEGT License will be valid when the Prime Minister issues a decision on effective dates of regulations on management of timber for export prescribed in Section 2 Chapter II and FLEGT licensing prescribed in Section 1 Chapter IV of this Decree.
Supply chain mapping is particularly difficult in Viet Nam, due to the often-high number of sub-suppliers, the complexity of supply chains, and challenges concerning supply-chain transparency and frequently occurring traceability information gaps within supply chains.
Also, Based on the Preferred by Nature local expert, the Forest Product Entry and Exit Book are not usually completed comprehensively by the organization to provide supply chain transparency.
The timber industry is important in Viet Nam. Viet Nam's wood processing industry produces and exports high-end wood products, particularly furniture. Viet Nam is an important timber processing hub and one of the world's largest exporting countries.
The forestry sector in Viet Nam contributed USS$12.5 billion to the economy in 2020. Viet Nam’s export markets are US, Japan, China, South Korea, EU.
Since Viet Nam banned logging in its natural forests, Viet Nam’s rapidly expanding wood processing industry has become dependent on imported timber and domestic production from the plantation.
Domestic production: The domestic supply of industrial wood is expanding to keep up with spectacular growth in demand in Viet Nam’s domestic and export markets:
Domestic production in 2016 reached approximately 24 million m3, composed of:
The supply and demand volumes reveal how most of Viet Nam’s smallholder and plantation forests supply mainly species, such as acacia and rubberwood, that feed the low-value-added wood chip export industry.
Import of round timber and sawn timber: In 2020, Viet Nam imported 2.54 million m3 of sawn timber and 2.17 million m3 of logs. The low-risk source accounts for 65.7% of imported wood materials; the remaining 34.3% are high-risk sources from 45 countries. Most of the imported wood goes into furniture products.
The EU-Viet Nam VPA implementing legislation is being developed. The decree setting the requirements for Viet Nam Timber Legality Assurance System (VNTLAS) has been developed (Decree No. 102/2020/ND-CP). This decree also provides for regulations on the law on management, tracing of origins of forestry products and relevant legislative documents shall apply to VNTLAS for harvest, transport, trade, and processing of timber. However, the VPA has not yet been implemented, and currently, it is impossible to state a high level of transparency and traceability in supply chains from Viet Nam.
According to Article 30 of Circular No. 27/2018/TT-BNNPTNT: The organization shall prepare the forest product entry and exit book using the Form No. 11 of the circular that includes the information of: