Buying Illegally-Mined Minerals Unknowingly: Penalty?

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Company A had a written acceptance from the Provincial People’s Committee allowing it to contact and supply mineral ores to establishments, including Company B. However, Company A was later penalized for illegal mineral extraction, and the provincial police investigation authority issued a notice investigating and clarifying, and recovering the illegal profits of Company B from purchasing ores from Company A. Is this correct? On what basis?

If an enterprise buys mineral ores without knowing they were illegally extracted, is it subject to administrative penalties?

Article 1 of Decree 77/2016/ND-CP as amended by Clause 1, Article 14 of Decree 17/2020/ND-CP provides as follows:

Adding Clause 11 to Article 9 of Decree No. 187/2013/ND-CP dated 20 November 2013 of the Government detailing the implementation of the Commercial Law regarding international goods trading and agency activities for purchase, sale, processing, and transit of goods with foreign countries
11. Conditions for mineral trading:
a) Being a trader as prescribed by the Commercial Law;
b) Traders may only trade minerals of lawful origin.
Minerals of lawful origin are minerals whose origin falls into one of the following cases:
– Extracted or salvage-extracted from mines, mining points, or waste dumps within the validity period of the extraction license or salvage extraction license issued by the competent state authority;
– Minerals imported under an import goods declaration certified by the border-gate Customs;
– Confiscated and auctioned by the competent state authority.
…

In addition, Article 11 of the 2012 Law on Handling of Administrative Violations provides as follows:

Cases exempt from administrative penalties
No administrative penalties shall be imposed in the following cases:
1. Committing an administrative violation in a situation of urgency;
2. Committing an administrative violation in legitimate self-defense;
3. Committing an administrative violation due to an unexpected event;
4. Committing an administrative violation due to force majeure;
5. The person committing the administrative violation lacks administrative responsibility capacity; the person committing the administrative violation is not yet of the age subject to administrative penalties as prescribed in Point a, Clause 1, Article 5 of this Law.”

Under the above regulations, when trading minerals, both the buyer and the seller must ensure that the minerals are of lawful origin.

According to the information provided, the minerals that Company A extracted and sold to Company B were illegally extracted, so this quantity of minerals is determined to be of unlawful origin.

The argument that Company B was unaware that these minerals were of unlawful origin is not a basis for exempting Company B from administrative handling.

Therefore, the competent authority’s requirement that Company B disgorge the illegal profits from purchasing minerals from Company A is well-founded.

In this case, Company B may pursue liability against Company A by requesting Company A to compensate for the damage caused by selling unlawful minerals to Company B, resulting in damage to Company B.

How is an enterprise administratively penalized for buying illegally extracted mineral ores without checking their origin?

The administrative penalty levels for trading goods of unknown origin are prescribed in Article 17 of Decree 98/2020/ND-CP as follows:

Violations regarding the shelf life of goods, goods of unknown origin, and other violations
1. A warning or a fine of VND 300,000 to VND 500,000 for one of the following violations where the infringing goods are valued at under VND 1,000,000:
…
d) Buying, selling, transporting, storing, or consuming minerals of unlawful origin.
…
11. A fine of VND 40,000,000 to VND 50,000,000 for violations prescribed in Clause 1 of this Article where the infringing goods are valued at VND 100,000,000 or more.

Thus, where an enterprise buys illegally extracted mineral ores without checking their origin, the administrative penalty level depends on the value of the minerals the enterprise purchased.

The lowest administrative penalty for trading goods of unknown origin is VND 300,000 to VND 500,000 (infringing goods valued at under VND 1,000,000) and the highest is VND 40,000,000 to VND 50,000,000 (infringing goods valued at VND 100,000,000 or more).

Must an enterprise disgorge profits arising from purchased illegally extracted mineral ores?

Pursuant to Clause 14, Article 17 of Decree 98/2020/ND-CP as follows:

Violations regarding the shelf life of goods, goods of unknown origin, and other violations
…
14. Remedial measures:
…
b) Forced disgorgement of illegal profits obtained from committing the violations prescribed in this Article.

Thus, in addition to the administrative penalty, the enterprise must also disgorge the illegal profits obtained from the illegally extracted mineral ores purchased.

Notes on Applying Current Legal Regulations

This article belongs to the General Legal Knowledge series and is presented for reference purposes, helping readers understand the legal issue at an overview level before preparing dossiers or carrying out transactions.

Legal regulations may change over time, by locality, dossier type, and specific circumstances. If you need to determine the exact legal basis applicable to your dossier, please contact an ANT Legal lawyer at 0966.475.966 for verification and advice before proceeding.

Common Risks to Watch Out For

Applying legal instruments that have been amended, supplemented, or replaced.
Preparing incomplete dossiers, documents, or evidence.
Misunderstanding the conditions, procedures, time limits, or competent authority.
Signing, filing, or carrying out transactions without fully assessing legal risks.

How Can ANT Legal Help?

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For quick advice, please contact our lawyers at 0966.475.966.