Inconveniences cause Temu and Shein to enter Vietnam without registration

According to regulations, cross-border online retail platforms with Vietnamese domain names, Vietnamese display language, or with more than 100,000 transactions per year from Vietnam must register their operations with the Ministry of Industry and Trade. However, since the beginning of October, Temu, a subsidiary of PDD Holdings (China) - the group that owns the e-commerce site Pinduoduo - has not registered its operations in Vietnam, but still allows users to download the app, make purchases, and pay on the platform with the Vietnamese version.

Mr. Hoang Van Cuong, member of the National Assembly's Finance and Budget Committee, said that the Temu tornado flooding Vietnam with cheap goods is a big warning for the domestic market. He raised the issue of the responsibility of state management agencies when allowing the phenomenon of cross-border e-commerce platforms selling goods without permission in Vietnam.

"We need to take action, we need to control the quality of goods, we cannot be lax," said Mr. Cuong.

Nearly half a month after Temu quietly entered the Vietnamese market, the Ministry of Industry and Trade has just assigned the Department of E-commerce and Digital Economy to request this platform to comply with the law. Not only Temu, recently, other cross-border e-commerce platforms such as Shein and 1688 have also been operating in Vietnam but have not registered.

Lawyer Nguyen Dinh Hiep (Hoanganh IBC Law Firm) said that the fact that a foreign online platform has not registered but is still operating and selling goods in the domestic market shows that the management agency lacks a strict monitoring mechanism to detect violations of this activity.

In fact, Vietnam has regulations on administrative penalties for unregistered e-commerce websites. However, according to Mr. Hiep, the fine is too low, a maximum of 30 million VND for individuals and 60 million VND for organizations. "With the increasing scale and profits of e-commerce platforms, this fine is not enough to prevent and deter. We lack strong enough sanctions to manage these platforms when they violate the law," he said.

According to Lawyer Nguyen Quoc Toan, Director of IAM Law Firm (Ho Chi Minh City), regulations related to e-commerce are only regulated by sub-law documents (decrees) and have been revised and supplemented from 2013 to 2021, but have not yet covered all cases. For example, the regulations only handle websites with the domain name ".vn", but in reality, there are cases like the case of Temu, a website with the domain name ".com".

According to the Chairman of SB Law Firm, lax management puts consumers at risk when platforms lack policies to protect them. "Unlicensed online platforms often do not commit to product quality or return and warranty policies," said lawyer Nguyen Thanh Ha, Chairman of SB Law Firm.

Therefore, when disputes arise, consumers have no basis to protect their rights. It is also difficult for authorities to control the quality of goods as well as determine legal responsibility and handle cases, because many floors are not registered and do not have a clear head office address in Vietnam.

Not to mention, Mr. Ha is concerned about tax losses from unlicensed online sales platforms, such as Temu and Shein. "This creates an unhealthy competitive environment by putting businesses that comply with regulations at a disadvantage," he commented.

According to data from the Vietnam Posts and Telecommunications Corporation (VNPT) in March 2023, about 4-5 million small-value orders (under 1 million VND) are shipped from China to Vietnam via e-commerce platforms every day. That is, on average, 45-63 million USD worth of small-value goods are not subject to import tax and VAT every day.

Meanwhile, goods worth less than 1 million VND sold through online platforms are exempt from tax, according to the Government's decision since 2010. Assuming that each order of this type is about 200,000 VND on average, then with 4-5 million orders, the total value is up to 800 billion VND. Accordingly, the budget may lose a lot of tax revenue if this type of goods is exempted from tax.

Seeing that platforms like Temu and Shein are evading and taking advantage of tax exemptions for goods under 1 million to sell cheap goods in Vietnam, Deputy Prime Minister Ho Duc Phoc said the Government will abolish this regulation. That is, goods imported into Vietnam must be taxed.

However, to fill the legal gap and loopholes in the management of cross-border e-commerce platforms, lawyer Nguyen Dinh Hiep said that competent authorities need to increase supervision by coordinating with network service units to review e-commerce domain names. From there, the detection and handling of violations will be timely and quick.

In terms of technology, Mr. Tran Minh Tuan, Director of the Department of Digital Economy and Digital Society (Ministry of Information and Communications) said that they can support the Ministry of Industry and Trade and the Ministry of Finance in checking and verifying when online sales floors operate in Vietnam.

According to the Law on Electronic Transactions, enterprises operating in this field, including e-commerce, must be responsible for reporting periodically to the management agency. The Ministry is building a mechanism for receiving and managing e-commerce and transactions. This system will support ministries and sectors to connect and share data.

In addition to increased scrutiny, experts say authorities need to increase sanctions against violating exchanges, including fines and additional measures such as suspension of operations and revocation of business licenses when they intentionally violate. "This is to deter similar acts in the future," said lawyer Nguyen Dinh Hiep.

In addition, international cooperation in managing cross-border e-commerce is essential in the context of globalization. "Coordinating with other countries will help Vietnam monitor and trace transactions on foreign platforms, protecting the interests of consumers and the domestic market," Mr. Nguyen Thanh Ha suggested.

On the management side, a representative of the Department of E-commerce and Digital Economy (Ministry of Industry and Trade) said that the Ministry has reported to the Prime Minister on the proposal to issue a specialized law on e-commerce. This is to increase State management of cross-border transactions. The agency also recommended that the Ministry of Finance study a plan to monitor and manage goods imported through platforms that do not comply with the law.

The Ministry of Finance said it will remove the regulation on VAT exemption for imported goods under 1 million VND sold through e-commerce platforms in the VAT Law being submitted to the National Assembly, to avoid tax losses.