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Revocation of five fuel distributors’ import licenses delayed: Vietnam deputy minister

Revocation of five fuel distributors’ import licenses delayed: Vietnam deputy minister

Wednesday, September 07, 2022, 14:04 GMT+7
Revocation of five fuel distributors’ import licenses delayed: Vietnam deputy minister
The decision to revoke the import licenses of five fuel enterprises in southern Vietnam has raised concerns over market uncertainty. However, the revocation has been delayed. Photo: Q.Dinh / Tuoi Tre

The Ministry of Industry and Trade decided to postpone the revocation of the import licenses of five local fuel trading enterprises as announced earlier on its portal, Deputy Minister Do Thang Hai said on Tuesday. 

Inspectors of the Ministry of Industry and Trade on August 31 issued 18 decisions to fine 11 fuel firms and their subsidiaries over VND13.3 billion (US$564,940) for their administrative violations.

In addition, five of them were subject to a one-month suspension of their import licenses.

The five enterprises are Dong Thap Petroleum Trading Import Export JSC, Tin Nghia Petroleum Import Export JSC, Ho Chi Minh City One-Member Limited Liability Oil & Gas Company (Saigon Petro), Hung Hau Petroleum Co. Ltd., and Orient Oil & Gas JSC.

They currently account for over 10 percent of the country’s fuel market.

The sanctions were issued following an inspection into 33 fuel firms jointly conducted by the Vietnam Directorate of Market Surveillance and the inspectorate of the Ministry of Industry and Trade since February this year.

Seven fuel enterprises had their import licenses revoked previously.

At a regular cabinet meeting on Tuesday, Deputy Minister Hai said these enterprises failed to meet the requirements for fuel distribution systems, news site VnExpress reported.

However, after weighing the difficulties of enterprises in the post-pandemic period as they have to ensure the fuel supply for production and people’s demand, the Party Civil Affairs Committee of the Ministry of Industry and Trade reached a consensus on fining these firms first.

“The additional sanction will be imposed on the five enterprises at an appropriate time,” the deputy minister added.

The Ministry of Industry and Trade also reported its new decision to the government at the meeting on Tuesday. 

“We are striving to come up with the best solutions,” Hai said, emphasizing the viewpoint of strictly handling violations by fuel enterprises.

Arguing over revocation of fuel distributors’ import licenses

After the information about the revocation of the five fuel enterprises’ import licenses was leaked, some of the five opposed the punishment of the Ministry of Industry and Trade’s inspectorate, while the inspectorate said it made the decision in line with the law.

Saigon Petro said that under the government’s Decree 83 on fuel trading, fuel traders must have at least 10 retail outlets under their ownership or co-ownership, and at least 40 general agents and retail agents in their distribution systems.

In 2021, Saigon Petro had no general or retail agents but 73 franchisees. Therefore, the Ministry of Industry and Trade inspectors concluded that the company failed to meet the fuel distribution requirements.

According to Saigon Petro, retail agents and franchisees are equivalent. They are part of the distribution networks and under the management of fuel enterprises.

The decision would severely hit fuel supplies to the market, negatively affecting socio-economic activities in the areas to which it provides fuels, Saigon Petro said.

The company may have to pay compensation for failing to carry out contracts with local oil refineries and foreign partners, and find it hard to ensure the lives of thousands of laborers.

The firm proposed that the ministry not revoke the import licenses to prevent the impact on enterprises’ operations and the fuel supply.

The company also cited Decree 95 amending Decree 83 to say that it meets criteria for distributing fuels.

Pursuant to Decree 95, fuel enterprises must have at least 10 petrol and oil retail stations under their ownership or lease contracts, and a minimum of 40 general agents, retail agents, and franchisees.

In a petition sent to the prime minister and the trade minister, another punished enterprise stated that inspectors accused it of failing to meet distribution requirements.

It has fewer than 40 general and retail agents but hundreds of franchisees. However, these franchisees were not taken into account.

It explained to inspectors of the Ministry of Industry and Trade that retail agents and franchisees are both part of its distribution system and are under its control.

Citing Decree 95, the enterprise affirmed that it meets fuel distribution requirements pursuant to the prevailing regulations.

In addition to a high number of agents, stores, and franchisees, the firm has wharves and warehouses. 

In other words, it is unconvincing if inspectors rely on former regulations to impose sanctions on and revoke the import licenses of enterprises.

“The punitive decision is not persuasive and we do not agree to the use of former regulations," a representative of a punished enterprise said.

“While working with inspectors, we provided them with specific explanations and accepted sanctions for some violations.

“At the time, the inspectors said supplementary sanctions would be imposed but did not reveal what they are.

"If the additional sanction is license revocation, our losses will be immeasurable."

Another firm said it would also report the case to the prime minister and the trade minister.

It has yet to receive a decision on the punishment so it is in the dark about its sanctions.

If it has to halt all activities, the consequences will be severe as enterprises whose import licenses may be taken back account for large market shares in the south. As a result, the market may become unstable.

They will be also fined for breaching contracts with domestic fuel suppliers and foreign customers, not to mention other consequences, such as the impact on their liquidity, debt payment, laborers, and contributions to the state budget.

Meanwhile, a representative of the inspectorate of the Ministry of Industry and Trade affirmed that they made the decision based on the regulations but refused to provide details about the decision.

According to some experts, the regulation on the required number of general agents, agents, stores, and franchisees in Decree 95 seems problematic and unclear. 

Agents in the fuel trading sector include retail, franchise, outright, commission, and wholesale agents.

However, they are not distinguished clearly in the decree. As a result, most enterprises fail to meet the requirement.

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Thanh Ha - Ngoc An / Tuoi Tre News


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