(Last updated: 24 Apr 2011)

Business etiquette

Business tips

Lao people should be addressed by their first names, preceded by their title ‘Mr/Madame’ or ‘Than’ (the latter if they occupy a position of respect).

Bargaining is expected in most commercial transactions, although Lao people are generally gentle hagglers.

For men, clothing such as shirt and trousers are appropriate for business meetings. Jackets and ties are generally worn only on formal occasions. Women usually wear long skirts and blouse or sleeveless tops.

Please also note: Bribery of foreign public officials is a crime. Australian individuals and companies can be prosecuted in Australia for bribing foreign officials when overseas. For more information, go to the Attorney General's Department on foreign bribery.

Tariffs and non-tariff barriers

Tariff

Laos follows the Harmonised System of tariffs, classified into eight digits. Duties are calculated on an ad valorem basis. Overall, import tariffs imposed by Laos are relatively low, with the majority of items (except for automotives) subject to a five per cent or 10 per cent flat rate. Imports, which are inputs into productive foreign investments, attract a special rate of one per cent.

Laos is a member of the Association of South East Asian Nations (ASEAN). Preferential rates are applied to imports from other ASEAN members.

Australia and Laos are parties to the ASEAN, Australia, New Zealand Free Trade Agreement (AANZFTA) which entered into force on 1 January 2010. However, some ASEAN countries, including Laos, have still to ratify AANZFTA and are working to ratify the Agreement at the earliest possible opportunity in 2010.

Australian exporters can now access Austrade’s AANZFTA tariff finder. The tool provides an easy reference for Australian exporters who want to know what the applicable tariff rate is for their products under the AANZFTA.

Laos currently imposes an unwieldy system of import and export licensing, as well as quantitative and price controls on certain sensitive imports, including various agricultural items and steel bars. These restrictions are likely to be reviewed and modified in order to allow Laos to accede to the World Trade Organization.

Laos uses the transaction value system for valuing imported goods for taxation purposes. This means that whenever possible, the customs value is based on the price paid by the importer to the exporter for the imported goods. The following costs must be included in the customs value:

• transportation costs
• insurance costs
• packing, packaging and handling costs
• any fees paid to the exporters for royalties, licences etc
• storage charges in the country of export that are paid by the importer
• all escalation costs charged after the goods are ordered
• all selling costs such as commissions that are charged to the importer

Costs which may be deducted from the customs value are:

• discounts for volume purchases, payment for goods in advance etc (where the discount is shown on the invoice and granted before importation)
• duties and taxes where the goods were sold by the exporter on a duty and tax paid basis
• amount paid to the exporter for work that will be performed in Laos related to the imported goods (e.g. installation and maintenance) where such costs are shown on the invoice or in the contract

In cases where the transaction value method cannot be used (eg. where there is a relationship between the importer and exporter that might influence the value), Laos uses the following methods of valuation in the following order:

• transaction value of identical goods
• transaction value of similar goods
• deductive value
• computed value
• flexible value

Other general tariff information:

• Laos's average weighted tariff on an MFN basis is 14.7 per cent.
• An excise tax of between three per cent and 15 per cent is applied to all imports depending on their classification.
• The importer of commercial goods into Laos is currently responsible for the self-assessment of the duty and tax liabilities on all goods imported (although this system is currently subject to review).
• An importer has the right to request the Department of Customs to reconsider any assessment of value and any determination of tariff classification.

Further information on import arrangements in Laos can be obtained from the following:

Department of Customs
Ministry of Finance
Vientiane, Lao PDR
Tel: +856 21 213 810, 223 522
Fax: +856 21 217 451

Non-tariff barriers

Import restrictions

All imports and exports are subject to a strict system of licensing. All importers must have a valid licence and must operate according to certain state directives. Licences are valid for three months.

Goods prohibited for import are listed in regulation No. 462 of 1994 and include:

• war items
• narcotic drugs
• toxic chemicals
• other dangerous industrial products
• obscene items

Most imports enter Laos via Thailand. Freight costs between Thailand and Laos are relatively high due to the small size of the market and restrictions on carriers.

Product certification, labelling and packaging

Labelling

According to Regulation No. 027/CFDC, all food and drink products imported for distribution in Laos must carry labelling which has been approved by the Food and Drug Control Department. The approval of labels is part of the overall process of registration and approval for importation of food products, which takes about a month.

According to the above regulations, food distributed directly to consumers in Laos must carry Lao language wording in a font and size that is clearly visible. Foreign language wording is also permitted. However, in practice this requirement does not appear to be strictly enforced, as almost no imported food sold in Laos carries Lao language labelling.

In principle, food product labels are required to indicate the following:

• name of product
• registration number for food products
• name and location of producers or company that packed products for distribution
• country that produced the product
• quantity of product (expressed in metric system)
• important contents of products in percentage in relation to gross weight, in decreasing order
• production date or expiry date, depending on products
• if available, advice on storage, preparation methods, use of preservatives and colourings

Approval of logos for products marketed in the Lao PDR is the responsibility of the Ministry of Information and Culture.

Packaging

Goods should be carefully packed to protect against adverse weather conditions, particularly heat and humidity. There is no cold storage in Laos.

Methods of quoting and payment

Quotes are usually on a CIF basis in US dollars. Initial transactions should be by confirmed, irrevocable letter of credit.

Documentary requirements

Commercial invoice

A pro-forma invoice is required for the establishment of a letter of credit.

The following documentation is required to enable goods to be cleared through Lao Customs:

• airway bill or bill of lading (three copies)
• commercial invoice indicating the buyer and seller of the goods and price paid (two copies)
• packing list (two copies)
• import permit from Ministry of Commerce (seven copies)
• other permits from relevant ministry or department, if required (two copies)
• certificate of origin (two copies)
• declaration form (three sets)

Public health requirements

Approval and registration of imported food and drug products is the responsibility of the Food and Drug Department, Ministry of Health. Inspection is usually required in the case of food products. Laos does not yet have quarantine regulations in place, although the Ministry of Agriculture and Forestry needs to give prior approval to all agricultural imports.

A handbook and relevant forms relating to the registration of pharmaceutical products are available from this Department for a small fee.

Taxation

Laos applies five main kinds of taxation:

• turnover tax
• excise tax
• profit and income tax
• minimum tax and charges
• service fees

Taxes on profits are set at 20 per cent on net profits for all foreign business enterprises under the Foreign Investment Law (compared to 35 per cent for Lao businesses). Enterprises making a loss pay a minimum tax at a flat rate of one per cent of gross revenues. Administrative fees of five per cent ad valorem are paid on purchases of equipment and materials. Turnover tax rates are five per cent or 10 per cent.