Trade Overview of Vietnam in 2023
According to the General Statistics Office, in 2022 Vietnam’s merchandise exports stood at US$371.3 billion, witnessing a significant increase from the previous year’s US$336 billion. The progression exhibited by the country in terms of exports showcases the robustness of the Vietnamese export market and highlights its growth potential.
Merchandise imports were also accounted for, amounting to US$359 billion in 2022, comparing to the US$332 billion recorded in 2021. The difference between exports and imports resulted in a trade surplus of US$27 billion, a figure that was slightly higher than the surplus seen in 2021, which was US$21.4 billion. The services balance of Vietnam, however, remained in deficit. In 2022, the deficit stood at US$15.7 billion. This is a widening gap as the service export continue to deteriorate.
According to the General Statistics Office of Vietnam, the leading exports for 2022 were telephones, primarily smartphones, and their parts. They were followed by computers, electronic products and parts, other machinery, instruments, accessories, textiles, garments, footwear, wood and wooden products. The US was Vietnam’s primary export market in 2022, with China, Japan, Hong Kong, Mexico, and Australia also being significant destinations for Vietnamese goods.
Vietnam’s key imports for 2022 were electronic goods, computers, their parts, machinery, instruments, accessories, phones of all kinds and their parts, textile and fabrics, and plastic materials. China was the main source of imports for Vietnam, with other significant contributors being Japan, the US, Australia, and Russia.
Vietnam has made notable strides in fulfilling its commitments to the World Trade Organization (WTO) regarding overhauling the country’s trade regulations and policies. Among the significant changes are the abolishment of most quotas, bans, and other quantitative import restrictions in line with its WTO accession in 2007. The country has also reformed its customs laws to be in line with WTO rules, including those dealing with pre-shipment inspection and customs valuation. Vietnam’s export restrictions now conform to WTO requirements, and the country has fully applied the Technical Barriers to Trade and Sanitary and Phytosanitary Measures agreements of the WTO. More specifically, Vietnam has done the following changes in order to fulfill its commitments:
- Addressing Quantitative and Other Restrictions: In line with the conditions set forth in its WTO accession agreement in 2007, Vietnam eradicated most of its quotas, bans, and other quantitative constraints on imports. At present, only a specific list of sensitive products are subject to import prohibitions.
- Conforming to WTO Rule-based Agreements: Vietnam’s Law on Customs (54/2014/QH13) enforces the transaction value as the primary basis for customs valuation, thereby conforming to WTO’s rules of origin and pre-shipment inspection. Furthermore, Decree 08/2015/ND-CP, as amended by Decree 59/2018/ND-CP, elucidates the execution of the Customs Law (54/2014/QH13) to combat the dumping of imported goods into Vietnam.
- Imposing Export Restrictions: The catalogue of goods that Vietnam bans for export is in alignment with WTO’s stipulations. The list can be found in Appendix 1 of Decree 187/2013/ND-CP.
- Implementing Technical Standards: Post its accession, Vietnam has thoroughly integrated the agreements of the WTO on Technical Barriers to Trade and Sanitary and Phytosanitary Measures.
- Eradication of Export Subsidies: Upon its accession, Vietnam eliminated all export subsidies related to agricultural goods, though it continues to support other forms of agricultural activities not linked with export conditions or performance. Additionally, the nation has done away with direct export subsidies on non-agricultural exports, including textiles and garments.
Further improvements have been seen in customs processing. Under the new Customs Law, declarations must be made electronically, with few exceptions, to expedite the process. The law reduces the required documentation for customs clearance and mandates the completion of the physical inspection of goods within eight hours. This is a substantial reduction from the two working days required under the previous regime. Certain transactions, such as goods in transit or return and certain temporary imports/exports, no longer need a manifest for customs declarations.
In terms of regional trade collaborations, Vietnam is an active participant in the Association of South-East Asian Nations (ASEAN), which launched the ASEAN Economic Community in 2015 to enable the free flow of goods, services, and investment across the region. Moreover, Vietnam is part of the Regional Comprehensive Economic Partnership (RCEP) and the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP). On a bilateral basis, the country has free-trade agreements with the EU, Chile, Japan, South Korea, and the Eurasian Economic Union. Post-Brexit, Vietnam has also signed an FTA with the UK and is in ongoing FTA negotiations with Israel and the European Free-Trade Association.
Import
Tariffs and import taxes
Import-duty rates in Vietnam are categorized into three different types: ordinary rates, preferential rates, and special preferential rates. Preferential rates are applied to imported goods from countries that enjoy most-favored-nation (MFN) status with Vietnam. These MFN rates align with Vietnam’s obligations to the World Trade Organization (WTO) and are applicable to goods imported from other WTO member countries. Special preferential rates are designed for imported goods from countries having special preferential trade agreements with Vietnam, such as the Association of South-East Asian Nations (ASEAN), Australia, Chile, China, Hong Kong, India, Japan, New Zealand, South Korea, and the members of the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP).
In order to qualify for preferential or special preferential rates, the imported goods must be accompanied by a valid certificate of origin. If the goods are imported from non-WTO members or countries that lack free-trade agreements with Vietnam, the ordinary rate applies. The ordinary rate is defined as the MFN rate with an additional 50% surcharge.
Vietnam’s accession to the WTO binds the country to a specific and almost comprehensive sets of tariff reductions or eliminations, a process which commenced in 2007, the year of accession. The nation has gradually reduced overall tariffs, besides its specific commitments by sector and product. As of the end of 2020, according to the latest available tariff profile of Vietnam by the WTO, the country’s simple average final bound tariff stood at 11.7% and the simple average applied duty was 9.5%. The most significant reductions since 2007 have been witnessed in electronic products, equipment and machinery, fisheries products, forestry and paper products, and textiles and garments.
Under WTO rules, Vietnam has committed to ceilings (or “bound” rates) on duties of 0-35% for most agricultural and non-agricultural goods. Products with higher ceilings include alcoholic drinks, instant coffee, new and used motor vehicles and components, roof tiles, and tobacco products. Vietnam’s accession agreement with the WTO allows the country to charge applied duties in the form of specific duty amounts (instead of percentages of the price) as long as the result stays below the agreed ceilings.
A number of decrees outline the tariff rates, which include preferential import (and export) tariffs. Annex II of Decree 122/2016/ND-CP sets out the preferential import tariffs applicable to other WTO members. Special preferential tariffs for implementing Vietnam’s free-trade agreement with ASEAN and the bloc’s free-trade agreements with Australia, New Zealand, China, India, and South Korea are delineated in Decrees 149, 150, and Decrees 153-160, all issued in 2017 and applicable from 2018 until the end of 2022.
Import-duty exemptions are provided for projects in encouraged sectors and for goods imported under certain circumstances. There are 20 categories of import-duty exemptions. Decree 87/2010/ND-CP expanded the list of products exempt from import duties. Under Law 107/2016/QH13, the duty exemption for raw materials, supplies and accessories imported for export production is granted unconditionally. This law also exempts a few other categories of goods from import duty, including goods temporarily imported for warranty, repair, and replacement; goods temporarily imported for re-export; materials and supplies imported for digital content and IT production; and fertilizers and pesticides not locally produced.
Since its WTO accession, Vietnam has been a part of the WTO’s Information Technology Agreement. For related products like computers, mobile phones, and modems, the signatory countries agreed to allow imports of these goods to enter duty-free, promoting the technology sector’s growth and competitiveness.
In 2006, Vietnam became a part of the ASEAN Free-Trade Area, subsequently decreasing tariff rates for almost all covered goods to a range of 0-5% by 2008. By the end of 2015, ASEAN members officially established the ASEAN Economic Community, fostering a single market and production base to enable free flow of goods, services, and investment throughout the region. This marked a crucial step in regional economic integration and facilitated a more competitive and robust economic environment.
The year 2016 saw the introduction of Decree 122/2016/ND-CP, which revised import tariffs for several products, including some petrochemicals and unused cars. This decree was promulgated to ensure Vietnam’s compliance with its WTO commitments starting from 2017. This underscores Vietnam’s commitment to conform to international trade standards and shows its responsiveness to changes in the global trade landscape.
Regarding taxation, a value-added tax of 10% is levied on imported goods, although it is reimbursed once the goods are sold. Special consumption tax is also applied to certain products, and imports of such goods are likewise subjected to this tax. However, there have been tax exemptions during extraordinary times. As per Resolution 106/NQ-CP issued in September 2021, goods imported to aid the government in combating the COVID-19 pandemic are treated as humanitarian aid and are exempt from import taxes and value-added tax. This resolution is effective until the government officially announces the end of the pandemic in Vietnam.
In terms of customs valuation, Vietnam largely adheres to the WTO Valuation Agreement with a few variations. The dutiable value of imported goods is typically based on the transaction value, including the price paid or payable for the imported goods, suitably adjusted for certain dutiable or non-dutiable elements. In cases where the transaction value cannot be applied, alternate methods are used to calculate the customs value. Information on Vietnam’s tariff schedules for 2022 under the WTO and various free-trade agreements can be accessed on the website of the Vietnam Chamber of Commerce and Industry.
Import restrictions
Decree 187/2013/ND-CP outlines certain items that are prohibited from being imported into Vietnam. The prohibited imports list includes weapons, ammunition, explosive materials (except industrial explosives), various firecrackers, second-hand consumer goods, culturally banned products such as pornographic publications, certain radio equipment, right-hand-drive motor vehicles, altered automobiles and motorcycles, certain pharmaceuticals, and more. Despite these prohibitions, imports may still be allowed for scientific research or humanitarian aid, subject to government approval.
Circular 34/2013/TT-BCT issued by the Ministry of Industry and Trade adds additional items that are not to be imported into Vietnam, specifically by foreign-invested enterprises. Items on this list include certain aircraft, cigars and processed tobacco leaves, some discs and tapes, specific newspapers and periodicals, and petroleum oils obtained from bituminous minerals other than crude. It is clear that these restrictions aim to protect certain domestic industries or to maintain control over certain sectors.
The same circular also details items that can only be imported with government permission. These items include biological products, certain cosmetics, some chemicals, raw materials for manufacturing, and tobacco products. Businesses must apply for a permit each time they wish to import a shipment of these goods. The process for obtaining a permit is straightforward and requires an application accompanied by supporting documents; authorities must respond within ten days.
Under Decision 18/2019/QD-TTg, used machinery and equipment can be imported if they are less than ten years old (or 15-20 years old when used by certain industries). The used equipment must meet Vietnam’s or any of the G7 countries’ safety, energy-saving, and environmental protection standards. This policy enables businesses to import used equipment that can still provide considerable operational service while promoting environmental sustainability.
In line with its commitments to the World Trade Organization (WTO), Vietnam has liberalized trading rights through several measures. Decree 09/2018/ND-CP, replacing Decree 23/2007/ND-CP, removed the need for foreign companies (those with more than 50% foreign equity) to obtain a business license to be able to engage in trading and/or distribution of certain goods permissible for distribution by foreign firms under Vietnam’s WTO commitments.
Decree 90/2007/ND-CP allows foreign traders without a presence in Vietnam to directly import and export. Foreign traders without a presence in Vietnam can import commodities into Vietnam to sell to traders who have a license to distribute commodities locally. However, Circular 28/2012/TT-BCT ensures that all export and import activities are conducted through Vietnam-based entities by requiring a “certificate of registration of export and import rights” if a company without a permanent establishment in Vietnam directly purchases goods for export or directly sells imported goods to Vietnamese entities.
Decree 85/2021/ND-CP, issued in September 2021 and effective from January 2022, provides details on the import rights of foreign companies engaged in e-commerce activities in Vietnam, including companies without a physical presence in the country. This highlights Vietnam’s push to accommodate and regulate the burgeoning e-commerce sector.
Decree 54/2017/ND-CP allows foreign-invested companies to import pharmaceutical products into Vietnam, but they can sell only to wholesalers, which must be registered with the Ministry of Health. This decision highlights the importance Vietnam places on maintaining control over essential sectors such as healthcare.
In 2020, Vietnam eased restrictions on car imports by amending Decree 116/2017/ND-CP. The amendment, known as Decree 17/2020/ND-CP, removed the need for vehicle-type approval certificates from the authorities in the countries of origin, which confirm that production samples of a design met specified performance standards. It also removed the requirement for quality tests, including emission and safety tests, if the imported cars are identical to previously imported vehicles that had been tested in the last 36 months.
Decree 43/2017/ND-CP, as amended by Decree 111/2021 effective from February 2022, reaffirms strict regulations on labelling goods manufactured in Vietnam for domestic use or export and for goods manufactured overseas and imported into Vietnam. The rules mandate the primary language on the label to be Vietnamese, unless the goods are explicitly made for export.
Since 2013, electronic customs procedures have been in place across Vietnam. Individuals and companies can make customs declarations 24 hours a day and seven days a week, using digital signatures. The Law on Customs (54/2014/QH13) improves these procedures further. It reduces the documentary requirements for customs clearance and requires physical inspection of goods to be completed in eight hours, compared with two working days under the previous regime.
Finally, Decrees 45/2016/ND-CP and 49/2016/ND-CP introduced new fines for customs violations. Various offenses, such as failure to declare or wrongfully declaring a good’s name, quantity, value, description, Harmonization Schedule code, duty rate or origin during customs clearance, can invite fines equivalent to a certain percentage of the duty shortfall arising from the misdeclaration. Additionally, missing a deadline for submission of some required documents and reports may also invite fines.
Export
Export Tax
Export duties in Vietnam are applied to a comparatively small selection of items in contrast to import duties. Goods subjected to these duties primarily include natural resources like chalk, crude oil, forest products, granite, marble, ore and sand. Certain commodities such as coffee, diamonds, fish, metals, nuts, seeds, and wood products are also included. The rates for these duties vary between 0-40%. The base for calculating these export duties is the selling price at the point of departure (as outlined in the contract), excluding freight and insurance costs.
The majority of export taxes were permitted to persist following Vietnam’s accession to the World Trade Organisation (WTO) in 2007. However, the country agreed to reduce export duties on eight different categories of ferrous and non-ferrous scrap metals to 17-22%, down from 34-45%, by 2012. Vietnam adhered to this commitment through the country’s tariff schedule for 2012. Additionally, Decree 122/2016 revised export taxes for several products, including some fertilizer goods, charcoal products, jewelry and other products containing gold, as part of Vietnam’s commitments to the WTO starting from January 1st, 2017.
Goods produced for export entirely from imported materials are exempt from export tax in Vietnam. In situations where export goods are produced from a combination of domestic and imported materials, only the amount of domestic materials used in production or processing is subject to tax. The exporter must specify the amount and value of imported materials used, as well as the amount of exported goods in the application for exemption. This demonstrates Vietnam’s complex but thoughtful approach to balancing trade incentives and obligations.
Export Restriction
The most recent updates to the list of goods subject to export prohibition or restriction were introduced under Annex I of Decree 187/2013/ND-CP. This decree prohibits the export of items such as weapons, ammunition, explosive materials (excluding industrial explosives), certain types of firecrackers, second-hand consumer goods, and culturally banned products like pornographic publications. Also on the list are radio equipment inconsistent with radio frequency and technical regulations, right-hand-drive motor vehicles (with exceptions), automobiles and motorcycles with altered frame and engine numbers, other second-hand motor vehicles, certain pharmaceuticals, scrap, waste and refrigerating equipment using chlorofluorocarbons, and products containing asbestos. Additional prohibited exports include military equipment, antiques, addictive drugs, toxic chemicals, most types of timber sourced from domestic natural forests, and cipher equipment used in the protection of state secrets.
Decree 09/2018/ND-CP allows foreign-invested enterprises to participate in trading activities, such as import/export and distribution. Furthermore, foreign traders without a physical presence in Vietnam can import/export directly. However, these traders are not permitted to establish a network for collecting commodities for export. The term “companies without a presence in Vietnam” refers to those without a representative office, branch, or direct investment in the country.
Moreover, it’s mandatory for all Vietnamese-made export goods to have the label “Made in Vietnam.” This requirement ensures that consumers can easily identify the origin of the product, which is essential for transparency and quality control purposes.
Export Insurance & Credit
The concept of export insurance is still in its early stages in Vietnam, though certain sectors such as tea and rubber have started implementing their own industry-specific programs via business associations. Bao Viet, a state-run insurance company that plays a dominant role in the market, provides export insurance services. Furthermore, in 2006, PV Insurance, a US-based company, became the first insurer in Vietnam to provide international-standard insurance services for foreign oil-and-gas projects.
Several foreign banks are involved in providing export financing in Vietnam. These include ANZ Bank from Australia, UK-based HSBC, and Société Générale from France. Additionally, export credits are made available through agreements with Australia, European Union members, and Japan. These arrangements provide added financial support to exporters and stimulate trade.
For companies from the United States, there are specific institutions providing financial assistance. The US Export-Import Bank (Exim Bank), which opened its full operations in Vietnam in 1999, offers loans, loan guarantees, working-capital guarantees, and export-credit insurance. Another option is the US International Development Finance Corporation, formerly known as the Overseas Private Investment Corporation, which offers project finance and political risk insurance.
In terms of domestic institutions, the state-run Development Assistance Fund, a former provider of credits to Vietnamese exporters, was transformed into the Vietnam Development Bank in 2006. Post Vietnam’s accession to the World Trade Organisation (WTO), the bank has been extending export finance without considering a company’s ownership structure.
In line with Vietnam’s commitments to the WTO, Decree 75/2011/ND-CP abolished state subsidies for interest rates of export credits. The decree allows businesses to receive credit for up to 70% of total project costs for export finance but with an annual interest rate equal to that of five-year government bonds plus 0.5%.
Lastly, deferred letters of credit have emerged as a feasible tool for importers and exporters based in Vietnam. This follows the introduction of new rules in 2001, indicating the evolution of financial tools available to exporters in Vietnam.
Free Port Zone
The Vietnamese government initially established Industrial Zones (IZs) and Export-Processing Zones (EPZs) in 1991. The aim was to create legal bases for investors keen on avoiding the country’s bureaucratic hurdles. However, the main provision of EPZs – duty-free imports of inputs with the condition that finished goods are exported – has lost relevance due to the World Trade Organisation (WTO) ban on export subsidies and the new incentive structure adopted by Vietnam to align with WTO rules.
Vietnam eliminated tax incentives linked to exports, which related to corporate income tax and value-added tax. These incentives were granted to companies inside or outside zones in Vietnam but were in violation of the terms of WTO accession. Subsequently, Decree 24/2007/ND-CP did away with incentives based on local content and export requirements for all companies. Also, incentives based on export ratios for garments and textiles were abolished (Export ratios had already been revoked for other sectors before the implementation of Decree 24).
In addition to IZs and EPZs, Vietnam also has Economic Zones (EZs), which offer tax incentives akin to those given to developers of EPZs. The government initially intended for EZs to serve as primary catalysts for regional economic growth. However, unlike in China and other countries, Vietnam’s EZs have become akin to ordinary EPZs in terms of the tax incentives they provide to investors. An important distinction is that unlike EPZs, EZs are not free ports allowing duty-free import of goods.
The management boards of IZs, EPZs, and EZs handle applications for investment licenses. In many of these zones, obtaining a license can be a swift process, often taking as few as seven days, and in some cases, even within 24 hours. Under the new Investment Law (61/2020/QH14, effective from January 2021), the maximum duration for investment projects remains 50 years. However, projects operating within IZs, EPZs, and EZs may be granted a longer duration of up to 70 years.
