RIGHTS AND OBLIGATIONS OF PARTIES IN COMMERCIAL PROCESSING

Commercial processing means a commercial activity whereby a processor uses part or whole of raw materials and materials supplied by the supplier to perform one or several stages of the production process at the latter’s request in order to receive remuneration.

Normally, the parties in the commercial processing have suppliers and processors. So what rights and obligations will the parties have in commercial processing?

1. Rights and obligations of suppliers

Pursuant to the provisions of Article 181 of the Commercial Law 2005, the rights and obligations of suppliers are:

(i) To hand over part or whole of raw materials and materials for processing in accordance with processing contracts or transfer money for purchase of materials with agreed quantities, quality and at agreed prices;

(ii) To take back all processed products, leased or lent machinery and equipment, raw materials, auxiliary materials, supplies and discarded materials after the liquidation of processing contracts, unless otherwise agreed;

(iii) To sell, destroy, donate or give as gifts on the spot processed products, leased or lent machinery, equipment, raw materials, auxiliary materials, redundant supplies, faulty products and discarded materials according to agreements and provisions of law;

(iv) To send their representatives to examine and supervise processing activities at processing places, to assign experts to guide production technology and inspect quality of processed products according to agreements in processing contracts; and

(v) To be responsible for the legality of the intellectual property rights over processed goods, raw materials, materials, machinery and equipment for processing handed over to processors.

2. Rights and obligations of processors

Pursuant to the provisions of Article 182 of the Commercial Law 2005, the rights and obligations of processors are:

(i) To supply a part or whole of raw materials and materials for processing as agreed upon with suppliers in terms of quantities, quality, technical standards and prices.

(ii) To receive processing remunerations and other reasonable expenses.

(iii) In case of processing for foreign organizations and individuals, to be entitled to export on spot processed products; leased or borrowed machinery and equipment, raw materials, materials, redundant supplies, faulty products and discarded materials under the authorization of suppliers.

(iv) In case of processing for foreign organizations and individuals, to be exempt from import tax on machinery, equipment, raw materials, auxiliary materials and supplies, that are temporarily imported for the performance of processing contracts according to the provisions of tax law.

(v) To be responsible for the legality of goods processing activities in cases where goods being processed are those banned from business, export or import.

ADK Vietnam Law Firm