Perfecting the legal corridor to promote the trading of goods through the Commodity Exchange

Speaking at the opening of the workshop, Mr. Tran Huu Linh - Director of the Department of Domestic Market Management and Development ( Ministry of Industry and Trade ) said that although 20 years have passed and the country's economy and trade have developed, the 2005 Commercial Law still has many far-sighted contents, notably the provisions related to the Commodity Exchange (CEX).

In 2006, the Government issued Decree 158/2006/ND-CP detailing the Commercial Law on the purchase and sale of goods through the Department of Goods Exchange (Decree 158). In 2018, to suit the reality, the Government issued Decree 51/2018/ND-CP amending and supplementing a number of articles of Decree 158/2006/ND-CP on the purchase and sale of goods through the Department of Goods Exchange (Decree 51).

After Decree 51 came into effect, many obstacles for the Department of Education and Training model were removed . However, through the practical activities of the Department of Education and Training, Decree 158 and Decree 51 continued to reveal issues that needed to be revised and supplemented.

In the first draft of the revised decree issued by the Ministry of Industry and Trade on August 5, the Ministry of Industry and Trade clarified the content of commodity transactions, regulations, and entities related to commodity trading activities in Vietnam.

According to the Ministry of Industry and Trade, in the context of the commodity trading market becoming increasingly financial in nature and requiring increasingly high levels of in-depth monitoring capacity, the Ministry of Industry and Trade is currently not fully equipped with a specialized organizational structure, a team of personnel with appropriate professional qualifications, as well as a technological infrastructure system that meets the management requirements for derivative financial activities. Therefore, the Ministry of Industry and Trade believes that the Ministry of Industry and Trade manages physical commodity transactions through the Commodity Exchange, and the Ministry of Finance manages commodity derivative transactions. During its operation, the Commodity Exchange is subject to state management by two independent agencies, the Ministry of Industry and Trade and the Ministry of Finance.

"Management of contracts for the purchase and sale of goods through the Department of Trade", so there is only one contact point.

According to experts attending the workshop, the Commercial Law has been in effect for 20 years, Decree 158 issued in 2006 and Decree 51 amending Decree 158 issued in 2018 mainly focus on international interconnected transactions, so it is necessary to develop a new decree to replace Decree 158 and Decree 51 to promptly resolve current shortcomings and difficulties in the market. However, it is still necessary to ensure compliance with the contents of the Commercial Law.

Associate Professor, Dr. Dinh Dung Sy - former Director of the Legal Department, Government Office, Arbitrator of the Vietnam International Arbitration Center (VIAC) said that it is necessary to increase the authority of the Department of Trade and Industry, while improving the capacity of state management agencies; other ministries and branches must properly perform their assigned functions and tasks. The market management function also needs to be clearly defined between the Ministry and the Department.

Regarding the conditions for establishing the Department, raising the charter capital from 150 billion to 1,000 billion VND requires a reasonable roadmap for businesses to adapt and ensure the rights of shareholders and capital contributors.

Mr. Sy emphasized that the new decree has removed the bottleneck between derivatives and physical goods, and at the same time set the goal of listing Vietnamese goods on the international market. However, state management should not be separated as in the draft, instead, it is necessary to centralize management and unified supervision at the Ministry of Industry and Trade, in accordance with current legal regulations.

From a market perspective, Dr. Vo Tri Thanh - Director of the Institute for Brand Strategy and Competition Research, said that it is necessary to build a project or separate strategy to develop the commodity trading market, ensuring a clear and consistent orientation in the long term. He also expressed concerns about the operating model of the Department of Trade and Industry, when the draft assigned too many responsibilities to the Department. According to him, it is necessary to carefully consider whether this exceeds the framework of the Enterprise Law or not, because in terms of legal nature, the Department is also an enterprise.

Dr. Can Van Luc commented that the fact that Vietnamese goods must be traded in connection with foreign exchanges should not be emphasized . More importantly, the traded goods must meet all standards to enhance the reputation and integration ability of Vietnamese goods.

Regarding state management, he said that there should be no separation between the Ministry of Industry and Trade and the Ministry of Finance because currently in the world, only about 5% of transactions through the Exchange have physical delivery. He proposed establishing a joint committee consisting of representatives of the Ministry of Industry and Trade, the State Bank, the Ministry of Finance and related ministries and sectors, to manage the unified and effective operation of this market.

Ms. Vu Thu Thuy - Deputy General Director of MXV also proposed to maintain the mechanism of the Ministry of Industry and Trade as the focal agency for state management of goods trading activities through the Department of Trade. Because according to the Commercial Law 2005, this agency has been assigned the authority to preside over goods management, and is effectively implementing licensing and comprehensive supervision of all activities of the Department. Meanwhile, the Ministry of Finance still plays a coordinating role in financial expertise, and there is no need to become an independent management agency for "derivative" activities.

At this workshop, another issue pointed out by many experts is that after more than 15 years of operation, the commodity trading market in Vietnam is still considered “new” by many organizations, individuals, and even some management agencies outside the Ministry of Industry and Trade. The reason is that there is no systematic, in-depth, and widespread training program to disseminate knowledge to localities and industries.

Notably, the current legal system does not have regulations on training and certification for brokers buying and selling goods through the Department of Trade, although Clause 1, Article 69 of the Commercial Law has assigned the Government to regulate. In other conditional business sectors such as real estate, securities, accounting, auditing, etc., professional certificates are an important tool to monitor and ensure professional ethics and prevent violations. The commodity trading market also needs this mechanism.

In addition, the approval of Business Members and Brokerage Members is currently carried out by the Department of Trade and Industry itself under a civil contract relationship, lacking deterrence and administrative management tools. Therefore, many opinions recommend that the Ministry of Industry and Trade should directly grant operating licenses to members to improve management effectiveness.

Regarding the regulations on the License to establish a Department of Trade and Industry, Ms. Thuy said that some contents in Clause 2, Article 12, Article 13, Clause 2, Article 14 and Article 24 of the Draft are still inadequate. Specifically, limiting the license term to only 5 years is too short, lacks a convincing explanation, is not in accordance with the provisions of the Enterprise Law and is not in accordance with international practice. Therefore, the current regulations on the content of the license should be kept unchanged, without adding requirements on branches or expected locations of operation to the license, in order to avoid unnecessary administrative procedures. Enterprises are still obliged to register and notify the business registration authority when opening a new branch or affiliated unit.

In addition, Ms. Thuy also said that the draft regulation stipulates that the Ministry of Industry and Trade shall perform state management of the Freight Forwarding Center (which may be a unit under the Department of Goods and Services or authorized by the Department of Goods and Services in accordance with the business-to-business relationship). This content interferes too deeply with the business activities of the enterprise establishing the Department and related enterprises, contrary to the policy that ministries and branches only focus on performing state management tasks at the macro level.

Sharing the same opinion with MXV, Mr. Thai Van Hiep - Vice President of Vietnam Coffee - Cocoa Association (VICOFA) considers that buying and selling goods through the Commodity Exchange is a commercial activity associated with goods. Trading physical goods and trading futures and options contracts are two steps of the same trading process for the same type of goods, taking place simultaneously on the same trading platform. This will facilitate the parties involved in the transaction to diversify their delivery or clearing options without generating another transaction.

Along with that, Mr. Hiep also said that businesses are still facing difficulties in accounting, bookkeeping, and tax declaration documents. Meanwhile, tax authorities do not really understand the nature of price insurance through the Department of Goods Exchange. Therefore, VICOFA recommends that the Ministry of Industry and Trade coordinate with the Ministry of Finance to regulate and guide hedging businesses (insurance of goods prices through the Department) on accounting and bookkeeping regimes.

Concluding the workshop, Mr. Tran Huu Linh affirmed that he would absorb the comments of experts, representatives of associations, and the Vietnam Department of Trade and Industry, and consider adjusting some contents of the draft to submit to the Government as planned. In addition, he would continue to research to develop a strategy for developing goods trading activities through the Department of Trade and Industry.

Source: https://baochinhphu.vn/hoan-thien-hanh-lang-phap-ly-de-thuc-day-hoat-dong-mua-ban-hang-hoa-qua-so-giao-dich-hang-hoa-102250813194948468.htm