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MoIT drops ball on draft car recall decree

Illustrative photo (Source: VNA)
Hanoi (VNA) – A draft decree on auto manufacturing, assembling,
importing, and maintenance and warranty business recently publicised by the
Ministry of Industry and Trade (MoIT) is concerning industry insiders.

The
decree, developed by the MoIT and the Ministry of Transport with other agencies
and offices says that “enterprises engaged in automotive manufacturing,
assembling and importing must be responsible for recalling and disposing of
defective vehicles.” However, no specific sanctions for violations are
mentioned.

The
statement was made by lawyer Nguyen Van Hau, Chairman of the Vietnam Lawyers’
Commercial Arbitration Center (VLCAC) and also Vice Chairman of the HCM City
Lawyers’ Association, at a meeting to discuss the draft decree in HCM City on
June 13.

“The
question is how exactly will businesses compensate consumers and how do we
ensure that they will recall defective vehicles?” Hau said, adding that
the draft decree should include sanctions for violations and serve as a legal
basis for state agencies to manage automotive manufacturing, assembling, and
importing enterprises.

Regarding
recalls of defective vehicles, the Vietnam Chamber of Commerce and Industry
(VCCI) suggested the drafting agency reconsider the responsibility of vehicle
recalls.

The
decree’s article 21 stops importers from demanding accountability from
manufacturers over the recall of defective units, the draft dictates that car
importers are responsible for providing warranty and maintenance services and
recalling the products.

But
according to the VCCI, recalls should be executed by manufacturers, both
domestic and foreign, through authorised agencies. No commercial importers
should be allowed to initiate recalls.

Technical
failures arise during the design, manufacture and assembly processes, all of
which are conducted by manufacturers, not distributors, the VCCI said,
therefore, in all cases, only the manufacturer possesses precise knowledge of
systematic errors in the design and production process.

Diagnosing
defects related to details, parts, and components and how to fix them can only
be carried out by the manufacturer, with their equipment and technical
knowledge, it added.

In
fact, in some cases, the two sides could negotiate with each other so that the
distributors can help manufacturers initiate product recalls. However, such
companies often merely acted as an intermediary in recalls, VCCI said.

Concerning
imported completely-built units (CBUs), if foreign manufactures fail to fulfil
their obligation to recall vehicles, Vietnam can issue an import ban on
products provided by that supplier, the VCCI said.

At
the meeting, Tran Dinh Thu, a lawyer from the Legal Consulting Center under the
HCM City Lawyers’ Association, warned about auto redundancy as the draft
loosened restrictions on the import of CBUs. 

Article
21 of the Draft stipulates that importers file a “written commitment with the
MoIT in fulfilling their responsibilities in the warranty, maintenance, recall,
and recalls of imported cars,” which was ,not tough enough, Thu said.

With
importing cars are easy, people will flock to buy cheap cars to run businesses,
pressuring the market, Thu said.

In
addition, there is a risk that defective vehicles with poor quality will flood
easy markets, with manufacturers not required to recall defective vehicles, Thu
said.

Although
the decree stipulates that importers must “commit to the Ministry of
Industry and Trade to recall defective vehicles” this makes recalls
impossible, Thu said, adding that the importers, who just trade the vehicles,
are not capable of dealing with technical problems.

Since
there are no specific sanctions for those who can’t fulfil their warranty and
maintenance commitments, they will likely to ignore problems of consumers and
open another company to continuing importing cars, Thu said.

According
to the General Department of Customs, in May, imports of automobiles of all
types hit 9,900 units valued at 216 million USD, up 42.7 percent in volume and
27.3 percent in value compared with the previous month.

In
the first five months of the year, Vietnam imported 43,300 automobiles of all
types, up 5.3 percent in volume and down 10.1 percent in value over the same
period last year.

Thailand
supplied the most CBUs to Vietnam up to June with 15,900 units worth 288
million USD, up 27.2 percent in volume and 27.4 percent in value. Vehicles from
Indonesia reached 8,700 units, up sharply against 2016.

Regarding
cars under nine seats, Indonesia became the largest supplier for Vietnam with
7,200 units in the first five months, soaring from last year’s figure of 100
units in the same period, surpassing Thailand, India and the Republic of
Korea.-VNA

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