THE GOVERNMENT

DECREES:

Chapter I

GENERAL PROVISIONS

Article 1.- Application scope and objects

1. This Decree prescribes the cigarette production and business activities in the Socialist Republic of Vietnam.

2. Domestic and foreign organizations and individuals engaged in cigarette production and business activities on the Vietnamese territory must all abide by the provisions of this Decree and other relevant law provisions, except otherwise provided for by the international agreements which the Socialist Republic of Vietnam has signed or acceded to.

Article 2.- Principles on management of cigarette production and business activities

1. Cigarette products are goods items of which the domestic consumption is not encouraged. The State shall exercise the unified management of the cigarette industry and monopolize the cigarette production; Vietnam Cigarette Corporation shall play the core role in implementing this policy. Only State enterprises and licensed joint ventures with foreign countries meeting the conditions prescribed in this Decree can turn out cigarette products.

2. The State shall control the cigarette consumption on the market, including the wholesale and retail of cigarette products.

3. The business activities of buying and selling cigarette raw materials, producing cigarette products, cigarette wholesale or wholesale agency can be carried out only when all the prescribed business conditions are met.

Article 3.- Term interpretation

In this Decree, the following terms and phrases shall be construed as follows:

1. Cigarette production and business activities mean activities of producing and selling cigarette products to consumers, including activities on planning, production development investment, raw material growing and processing, cigarette product production and consumption, export and import of machinery, equipment, raw materials and materials as well as cigarette products.

2. Tobacco means the leaves of tobacco plants with the scientific name of Nicotiana tabacum L, including heat-dried tobacco leaves and sun-dried tobacco leaves.

3. Cigarette raw materials mean tobacco in form of leaves, preliminarily processed leaves without stems or shredded tobacco and other substitute preparations used for the production of cigarette products.

4. Cigarette products are products turned out from the whole or part of the cigarette raw materials and processed in form of cigarettes, cigars, pipe tobacco and other forms of products used for smoking, chewing or sniffing.

5. Cigarette subsidiary materials mean all sorts of materials other than cigarette raw materials, used for the production of cigarette products.

Chapter II

GROWING, PROCESSING AND TRADING IN CIGARETTE RAW MATERIALS

Article 4.- Investment in the growing and processing of cigarette raw materials

1. The investment in the development of cigarette raw material-growing areas in each locality must comply with the planning already approved by competent State bodies and suit the conditions on climates, soil and resources of each locality.

2. The State encourages and creates favorable conditions for domestic and foreign organizations and individuals to invest in the development of areas of high-quality cigarette raw materials up to the international standards, invest in raising the raw material processing capacity in order to raise the quality of cigarette products, substitute the imports and meet the export demands.

Article 5.- Annual plans on cigarette growing

1. Vietnam Cigarette Corporation shall assume the prime responsibility and coordinate with the concerned agencies and localities in submitting to the Prime Minister for approval the scheme for development of cigarette raw materials areas and organizing the implementation thereof.

2. Annually, basing itself on the production and export demands of the entire cigarette industry, Vietnam Cigarette Corporation shall consult with the People�s Committees of the provinces and centrally-run cities having cigarette-growing areas in the elaboration and announcement of cigarette-growing plans, which shall serve as basis for investment in growing and purchasing tobacco leaves from merchants and tobacco growers.

3. Enterprises engaged in the processing, trading or export of cigarette raw materials must sign contracts directly with and support farmers or cooperatives for growing tobacco according to the planning and plans.

Article 6.- Using tobacco varieties

1. Tobacco saplings put to cultivation must suit the climate and soil of each locality, and be of high yield and good quality.

2. The State shall adopt the support policy in order to create sources of tobacco saplings with high quality, lower nicotine and tar content. The use of tobacco saplings must comply with the State�s current regulations on breed management.

Article 7.- Criteria for tobacco leaf grading and purchasing prices

The trading of tobacco leaves between tobacco growers and merchants dealing in cigarette raw materials must comply with the following regulations on grading criteria and purchasing prices:

1. The tobacco leaf- grading criteria are those set by the Ministry of Industry in cooperation with the Ministry of Science, Technology and Environment.

2. Vietnam Cigarette Corporation shall reach agreement with the Government�s Pricing Committee on notification of the minimum (floor) prices of tobacco leaves to tobacco growers right at the beginning of the tobacco crop in order to ensure the interests of the tobacco growers.

Article 8.- Conditions for trading in cigarette raw materials

1. Trading in cigarette raw materials is a conditional business line. Traders can conduct business only when satisfying all the conditions prescribed below and committing to strictly observe such conditions throughout the process of their business activities:

a) Traders being enterprises with business registration of goods item being cigarette raw materials;

b) Having material and technical foundations as well as equipment and facilities which meet the standards prescribed for business lines of selling and purchasing cigarette raw materials;

c) Meeting the requirements on environmental hygiene as well as fire prevention and fighting.

2. The Industry Ministry shall guide in detail conditions for dealing in cigarette raw materials under the provisions of law.

Article 9.- Rights and obligations of cigarette raw materials dealers

Apart from the law-prescribed rights and obligations, the cigarette raw materials dealers shall also have the following rights and obligations:

1. To select investment regions and tobacco growers according to plans.

2. To sign contracts for investment in cigarette raw materials growing and purchase with tobacco growers; to inspect and supervise the observance of committed terms regarding the tobacco growers� liability inscribed in the contracts.

3. Not to purchase cigarette raw materials on areas of other traders who have invested in the growing thereof and signed purchase contracts, if without their agreements.

Article 10.- Cigarette raw materials growing and processing investment fund

1. Enterprises investing in tobacco growing may make deductions from the cigarette raw materials purchasing prices for the establishment of cigarette raw material growing and processing investment fund with a view to developing cigarette raw materials regions.

2. The Finance Ministry shall reach agreement with the Industry Ministry to promulgate the Regulation on deduction for setting up and use of this fund.

Chapter III

PRODUCTION OF CIGARETTE PRODUCTS AND CIGARETTE SUBSIDIARY MATERIALS

Article 11.- Conditions for the production of cigarette products

1. Producing cigarette products is a production line requiring the permit issued by the Industry Ministry. Enterprises can only carry out their business as from the date they are granted the permit to produce cigarette products.

2. Conditions for being granted the cigarette product- producing permit:

a) Being State enterprises set up under the provisions of law prior to the promulgation of the Government�s Resolution No. 12/2000/NQ-CP of August 14, 2000 on the "national policy to prevent and combat cigarette harms in the 2000-2010 period;"

b) Having invested in developing the raw material areas and used the domestically-produced cigarette raw materials according to percentages prescribed by the Industry Ministry;

c) The output of cigarette products turned out by the enterprises equivalent in cigarette (type of 20 cigarettes/pack) must reach 20 million packs/year or more;

d) Having synchronous equipment, ensuring the conditions on labor safety and hygiene, fire and explosion prevention and fighting as well as environmental sanitation;

e) Meeting the requirements on cigarette products hygiene as prescribed by the Health Ministry, satisfying the cigarette product quality under the Vietnamese standards and having the right to lawfully own or use the trademarks being protected for the cigarette products in Vietnam.

3. The Industry Ministry shall guide in detail the conditions, order and procedures for the granting of cigarette product- producing permits and organize the restructure of enterprises being engaged in cigarette production according to the principles prescribed in Articles 2 and 11 of this Decree.

4. Cigarette product-producing enterprises with foreign investment capital, which have already been licensed, may continue to produce cigarettes within the scope of their investment licenses, but must abide by the provisions of the Law on Foreign Investment in Vietnam and the provisions of this Decree.

Article 12.- Rights and obligations of cigarette product-producing enterprises

Apart from the law-prescribed rights and obligations, the enterprises engaged in the production of cigarette products shall also have the following rights and obligations:

1. To wholesale cigarette products to traders licensed to deal in cigarette products according to the provisions of this Decree and to organize stores to introduce and retail cigarette products to users.

2. To announce and ensure that their cigarette products meet the Vietnamese quality standards and the cigarette product hygiene standards prescribed by the Health Ministry.

3. To be entitled to introduce the enterprises in the following forms:

a) Publishing, introducing their cigarette products, finished tobacco shreds on foreign-language press;

b) Annually, on festive and new year occasions and their tradition days, the enterprises are allowed to publish once on the mass media their greetings, introducing their names, addresses and logos.

Article 13.- Labeling packages of cigarette products

1. The labeling of packages of cigarette products must comply with the current regulations of the State.

2. The content of the warning against the harms caused by cigarette to human health must be printed in Vietnamese language on cigarette packages according to the regulations of the Health Ministry, except for case of export which must comply with the requirements of the importing countries.

Article 14.- Stamping cigarette products

1. Cigarette products turned out for domestic sale must be stamped on their packages according to the current regulations of the State.

2. Cigarette products turned out for export, sale offer or exhibitions in foreign countries must not be stamped under Vietnam�s regulations, except for cases where the importing countries so request.

Article 15.- Investment in the production of cigarette products

Investment in the production of cigarette products must be based on the planning for the development of the cigarette industry in each period, which is approved by the Prime Minister, and ensure the following principles:

1. Not investing in building new cigarette product- producing establishments or expanding existing ones in excess of the total production capacity at the time of promulgating the Government�s Resolution No. 12/2000/ NQ-CP of August 14, 2000 on the "national policy to prevent and combat cigarette harms in the 2000-2010 period", except for cases where cigarette products are turned out for export.

2. Intensive investment can be made in renovation of equipment and technology for production of cigarette products or relocation of production establishments according to the planning in order to raise the product quality, reduce content of toxic substances affecting human health and protect the environment.

3. Organizations and individuals having no licenses for the production of cigarette products are not allowed to use cigarette product-producing machinery and equipment in any form. The State adopts policies to support Vietnam Cigarette Corporation in re-purchasing the cigarette-producing machinery and equipment with lawful origins from organizations and individuals that have the function of producing cigarette products as well as from localities and joint ventures in the process of restructuring the cigarette industry.

4. The formulation of new projects for cooperation or joint venture with foreign countries on cigarette product manufacturing shall be stopped, except for case of production for export as requested by the Industry Ministry and permitted by the Prime Minister, provided that the capital amount contributed by Vietnamese enterprises accounts for 51% or higher of the capital of cigarette product-producing joint ventures.

Article 16.- Management of package printing and production of cigarette subsidiary materials

1. Only enterprises directly engaged in the production of cigarette products are allowed to conduct package-printing and production of cigarette subsidiary materials or sign contracts with establishments engaged in package printing and cigarette subsidiary material production for package-printing and cigarette subsidiary materials production.

2. The package-printing and/or cigarette subsidiary materials-producing establishments must abide by the regulations on standards and quality, promulgated by competent State bodies, and be subject to the inspection and supervision by State management bodies as provided for by law.

Chapter IV

DEALING IN CIGARETTE PRODUCTS

Article 17.- Conditions for cigarette product-wholesale or wholesale agency

1. Cigarette product-wholesale business or wholesale agency are conditional business lines requiring permits granted by competent State bodies.

2. Conditions for the granting of permits for cigarette product-wholesale business or wholesale agency:

a) Traders must be enterprises having business registration of cigarette products;

b) Having fixed business locations with clear addresses;

c) Meeting all requirements on environmental sanitation, fire prevention and fighting.

3. The Trade Ministry shall guide in detail the conditions, procedures, order and competence for granting of permits for cigarette product-wholesale business or wholesale agency.

Article 18.- Rights and obligations of cigarette product wholesalers or wholesale agents

Apart from the law-prescribed rights and obligations, the cigarette wholesalers or wholesale agents shall also have the following rights and obligations:

1. To buy cigarette products of lawful origins to organize the circulation and consumption on the market strictly according to the contents of the granted permits for cigarette product wholesale or wholesaling agency.

2. To organize stores for retail to users in their respective areas of business.

3. To wholesale cigarette products only to subjects licensed for cigarette product dealing.

4. To have networks for stable distribution and consumption of cigarette products on the market.

5. To constantly satisfy conditions on dealing in cigarette products in the course of operation.

Article 19.- Retail of cigarette products

Cigarette product retailers or retail agents must satisfy all business conditions for cigarette product retail or retail agency according to current law provisions.

Article 20.- Prohibited cigarette product business activities

The State strictly forbids the following cigarette product-dealing activities:

1. Importing and consuming foreign-made cigarette products on Vietnamese market.

2. Selling illegally imported cigarette products, fake cigarette products, cigarette products of inferior quality or with use duration having already expired, cigarette products bearing trademarks not protected in Vietnam, failing to meet the Vietnamese standards, having no labels on packages, not affixed with stamps as provided for by law.

3. Selling cigarettes to persons aged under 18.

4. Selling cigarette products at general education schools, hospitals, cinemas, theatres, cultural and art performance houses.

5. Organizing marketing activities, including the employment of marketing personnel for sale offer, the printing of labels and symbols of cigarette products on newspapers and transport means in contravention of the regulations on commercial advertisement.

6. Providing financial support for organizing cultural, art and/or sport activities in association with cigarette advertisement.

Article 21.- Foreign enterprises� branches dealing in cigarette products in Vietnam

Foreign cigarette enterprises� branches licensed to operate in Vietnam may deal in cigarette products only within the scope prescribed in the permits for setting up the branches, have the responsibility to consume all cigarette products bearing foreign labels and produced in Vietnam, as inscribed in the permits; organize networks for stable distribution and consumption on the market and can sell cigarettes only to traders licensed to deal in cigarette products as provided for in this Decree.

Article 22.- Import of specialized machinery and equipment of the cigarette industry, cigarette raw materials, cigarette-rolling paper

1. Machinery and equipment for cigarette production, cigarette raw materials and cigarette-rolling paper are import goods subject to the specialized management by the Industry Ministry. Only enterprises manufacturing cigarette products can conduct or entrust the import thereof in service of their production.

2. Conditions for the import of specialized machinery and equipment of the cigarette industry as well as cigarette raw materials and cigarette-rolling paper include:

a) Being enterprises which satisfy all conditions prescribed in Article 11 of this Decree;

b) Imported cigarette raw materials, rolling paper, machinery and equipment must be compatible with the enterprises� production capacity as well as annual plans on cigarette production and consumption.

c) Being consented by the Industry Ministry.

3. The Industry Ministry shall guide the conditions for import of specialized machinery and equipment of the cigarette industry, cigarette raw materials as well as rolling paper.

4. The Finance Ministry shall stipulate the import tax rates as well as the minimum prices for calculation of import tax on cigarette raw materials.

Article 23.- Import of cigarette products for personal use

1. Individuals entering Vietnam may carry along cigarette within the permitted luggage quotas prescribed by the Vietnamese State.

2. Vietnam-based diplomatic missions, consulates and international organizations may import cigarette products for use if they have such demand but must strictly comply with the provisions of Vietnamese law.

Article 24.- Export of cigarette raw materials, subsidiary materials and products

1. The State encourages and creates conditions for enterprises to export cigarette raw materials, subsidiary materials and products turned out in Vietnam.

2. Cigarette raw materials which are exported or used for the production of export cigarette products are entitled to tax preferences under the current regulations.

Chapter V

STATE MANAGEMENT OVER CIGARETTE PRODUCTION AND BUSINESS

Article 25.- Contents of the State management over cigarette production and business activities

The State management over cigarette production and business activities shall cover the following contents:

1. Elaborating strategies, planning, plans and policies for the development of the cigarette industry in line with the country�s socio-economic objectives and orientations in each period.

2. Elaborating, promulgating and organizing the implementation of legal documents on cigarette production and business activities.

3. Appraising and approving investment projects for technological renovation and development of raw material areas according to the assignment of management responsibility.

4. Granting, readjusting and withdrawing assorted permits for cigarette production and business.

5. Organizing the implementation and management of professional training and fostering for organizations and individuals involved in cigarette production and business activities.

6. Examining, inspecting and supervising cigarette production and business activities; settling complaints and denunciations according to the provisions of law.

7. Undertaking international cooperation and managing export and import in the field of cigarette production and business.

Article 26.- Agencies exercising the State management over cigarette production and business activities

1. The Government shall exercise the unified management of cigarette production and business activities throughout the country.

2. The Industry Ministry is the body assisting the Government in performing its function of State management over cigarette production and business activities according to the following contents:

a) Submitting to the Government or the Prime Minister for promulgation or promulgating according to its competent the legal documents on cigarette production and business activities;

b) Working out strategies, planning and plans for development of Vietnam�s cigarette industry and submitting them to the Prime Minister for approval;

c) Assuming the prime responsibility and coordinating with the concerned ministries and localities in drawing up schemes for restructuring of the cigarette industry nationwide along the direction of consolidating coordinating bodies in order to implement the policy of State monopoly; and at the same time proposing the Prime Minister to handle enterprises which fail to ensure the conditions for operation under the provisions of this Decree;

d) Granting, readjusting, extending and withdrawing permits for production of cigarette products; setting technical standards for specialized machinery and equipment of the cigarette industry as well as cigarette raw materials and subsidiary materials to be imported;

e) Performing the responsibility of State management over the cigarette industry in construction investment according to the law provisions on management of investment and capital construction;

f) Promulgating and supervising the cigarette industry�s standards;

g) Inspecting, examining and settling complaints and denunciations and handling acts of violation in cigarette production and business activities;

h) Managing the establishment, division, separation, merger and dissolution of enterprises engaged in the production of cigarette products and/or the processing of cigarette raw materials and subsidiary materials strictly according to the provisions of law;

i) Organizing the management of capacity of cigarette machinery and equipment, the quality of cigarette products and industrial safety and hygiene;

j) Coordinating with the concerned ministries, branches and localities in working out planning and plans for development of cigarette raw materials regions as well as rational cigarette purchasing mechanism, aiming to develop cigarette raw materials areas.

3. The Trade Ministry is the body assisting the Government in performing the function of State management over the trading, export and import of cigarette products according to the following contents:

a) Drafting and submitting to the Government and the Prime Minister for promulgation or promulgating according to its own competence legal documents on dealing in cigarette products;

b) Granting, readjusting, extending and with-drawing permits for cigarette product wholesale or wholesale agency;

c) Coordinating with the functional State bodies in organizing the confiscation, destruction, recycle or sale for public fund of illegally imported cigarette products, fake cigarettes, cigarettes of inferior quality or expired use duration or cigarette products bearing trademarks not protected in Vietnam, bearing no labels on their packages or no stamps as stipulated;

d) Coordinating with the Industry Ministry in managing the import of specialized machinery and equipment of the cigarette industry as well as cigarette raw materials and subsidiary materials.

4. The ministries, the ministerial-level agencies and the agencies attached to the Government shall, within the scope of their powers and the Government�s assignment, have to coordinate with the Industry Ministry and the Trade Ministry in exercising the State management over cigarette production and business activities.

5. The People�s Committees of the provinces and centrally-run cities:

a) Performing the function of State management of the cigarette industry in their respective localities; managing and settling matters which fall under their respective competence.

b) Participating in the elaboration of overall planning of the cigarette industry; coordinating with the Industry Ministry in implementing the policy of restructuring cigarette enterprises in areas managed by the provinces or centrally-run cities;

c) Inspecting the consumption of cigarette raw materials in their localities; not letting the situation of pressing the supply, pressing the prices, which cause losses to tobacco growers;

d) Inspecting the circulation and consumption of cigarette products in their respective localities;

e) Supervising and inspecting the implementation of planning, regulations on labor, human ecology and environment at cigarette producing enterprises.

Chapter VI

COMMENDATION, REWARD AND HANDLING OF VIOLATIONS

Article 27.- Commendation and reward

Organization and individuals recording achievements in cigarette production and business shall be commended and/or rewarded according to law provisions.

1. Organizations and individuals that commit acts of violating the provisions of this Decree shall, depending on the nature and seriousness of their violations, be administratively handled or examined for penal liability; if causing damage, they shall have to compensate therefor according to the provisions of law.

2. Those who abuse their positions and powers, acting against the provisions of this Decree shall, depending on the nature and seriousness of their violations, be disciplined, administratively handled or examined for penal liability according to the provisions of law.

Chapter VII

IMPLEMENTATION PROVISIONS

Article 29.- Implementation effect

1. This Decree takes effect 15 days after its signing; to annul all previous regulations contrary to this Decree.

2. Traders engaged in cigarette raw materials trading, cigarette products wholesale or wholesale agency, which have registered their business operation before the promulgation of this Decree shall continue with their business activities, but have to add all conditions prescribed by this Decree within 6 months as from the effective date of this Decree.

Article 30.- Implementation organization and responsibility

1. The Industry Ministry shall coordinate with the concerned ministries and branches in guiding the implementation of this Decree.

2. The ministers, the heads of the ministerial-level agencies, the heads of the agencies attached to the Government and the presidents of the People�s Committees of the provinces and centrally-run cites shall have to implement this Decree.

On behalf of the Government
Prime Minister
PHAN VAN KHAI