Pure toll manufacturing pays a fee per unit; a manufacturing BCC shares the outcome of the whole line. The boundary sounds simple, but the consequences are not: the ordering party inside a BCC becomes an investor in a project that must be registered, shares inventory and price risk, and in exchange gains deep control over the plant and a far larger slice of margin than tolling savings. This is a model-selection problem, not a price negotiation.
How profit-sharing tolling differs from ordinary toll manufacturing
Under a processing contract governed by Civil Code 91/2015/QH13 and Commercial Law 36/2005/QH11, the processor earns a fixed fee per unit and does not care whether the product sells at a profit; market risk sits entirely with the ordering party. Under a BCC pursuant to Investment Law 143/2025/QH15, the Vietnamese partner contributes the plant, workforce and operating capability, the foreign party contributes orders, technology and sometimes machinery and working capital, and the parties split the manufacturing profit by ratio. Consequences follow: a BCC with a foreign investor requires investment registration; the cooperation’s books must be separable so each party’s profit share and tax can be determined; and when the operation loses money the foreign party is no longer a customer standing outside but a co-bearer of risk. Choose a BCC only to lock long-term capacity and intervene in quality at system level; seasonal, fluctuating demand is served far better by ordinary tolling.
Moulds and machinery: whose assets when cooperation ends
Practice shows the flashpoint is not the large line but the moulds, jigs and dedicated fixtures funded by the foreign party: if the contract is silent on ownership, at termination the plant holder keeps the tooling and can keep producing for other customers. A sound BCC carries an asset register by funding source, ownership labelling, an allocation of depreciation and maintenance, and the foreign party’s right to retrieve or have moulds destroyed at the end. Imported machinery also ties into customs regimes: temporary admission, investment imports or export-processing enterprise preferences under the Customs Law and Export and Import Duties Law 107/2016/QH13 — choosing the wrong regime at the start produces reassessment when the project structure later changes.
Blocking the partner from making for competitors: writing an exclusivity clause with teeth
A non-compete promise is worth only what its three definitions are worth: who the competitors are (named, or defined by industry criteria and directly competing products), what is prohibited (making similar products with the same moulds and technology — not banning the plant’s entire business), and what the sanction is (contractual penalty within the 8% cap of Commercial Law 36/2005/QH11 on the breached obligation’s value, plus proven damages and an immediate termination right). Stronger protection is structural rather than verbal: keep critical steps such as programming, final testing or core components outside the partner’s plant, route sensitive orders to a segregated line, and audit mould output periodically. Overly broad exclusivity can also collide with Competition Law 23/2018/QH14 where a party holds a dominant market position; narrow drafting by product and duration is the safe route.
Frequently asked questions
1. How does profit-sharing component manufacturing differ from ordinary tolling?
Tolling: the plant earns a fixed fee and market risk belongs to the ordering party. Profit-sharing BCC: both sides co-invest and share losses, the foreign party becomes an investor that must register the BCC project under Investment Law 143/2025/QH15, and gains deeper operating control.
2. Who invests in moulds and machinery?
As agreed — but a funding-source asset register must be written into the BCC from the start: moulds funded by the foreign party must be recorded as its property, with retrieval or destruction rights at the end. Contractual silence on this point is the most common cause of end-of-cooperation disputes.
3. How can the partner be stopped from producing for competitors?
With a narrow, measurable exclusivity clause: named competitors and prohibited products, limited to similar products using the shared technology, backed by a penalty and a termination right. Add structural measures such as keeping final testing and core components outside the partner plant.
4. How is manufacturing BCC profit taxed?
The cooperation must keep separable accounts; each party declares corporate income tax on its shared result, and the foreign party remits profit abroad through its investment capital account under Circular 38/2026/TT-NHNN on foreign exchange management for investment. The exact numbers depend on each project’s structure.
5. When should a BCC not be used for manufacturing?
When order demand fluctuates sharply, when trust is not yet sufficient for open books, or when a replacement supplier can be found within months. A BCC locks the parties together for years and carries investment registration compliance cost; ordinary tolling wins on flexibility.
This article has been quality-reviewed by the FLAW AI Legal Council