Import Tariffs
Imports into Vietnam currently attract an average tariff of about 18%, high by global or regional standards. The Government of Vietnam is reducing tariffs in preparation for meeting its goals under AFTA (ASEAN Free Trade Area). It is also making comprehensive changes to its trade regime to meet its obligations under the U.S. Vietnam Bilateral Trade Agreement (BTA) and in preparation for accession to the World Trade Organization. However, there is still a concern that high trade barriers will be maintained in the next few years to protect certain sectors.
Trade Regime Developments
Streamlining the tariff structure is one remaining key trade liberalization issue. However, some of the government’s major obstacles stem from pressures to protect domestic industries and the potential loss of significant tax revenues. Approximately 20 percent of the national budget is provided by tariffs and taxes levied on imports. Nevertheless, Vietnam is committed to reducing or eliminating tariffs and other trade restrictions, since it is a requirement for its membership into AFTA, and if it is to realize its hopes for membership into the WTO. The United States-Vietnam Bilateral Trade Agreement came into force in December 2001. This agreement was a prerequisite to Vietnam gaining Normal Trade Relations (NTR) status. The bilateral trade agreement addresses various market access considerations, including both tariff and non-tariff barriers.
Tariff Code
In late 1998, the National Assembly of Vietnam issued a new Law to Amend the Import and Export Tariffs Law. This law was drawn up in accordance with the Harmonized Tariff System (1996 Version) to facilitate the country’s global integration. The amended law, effective on 1 January 1999, contains more than 6,400 tariff lines.
Within the framework of AFTA, Vietnam has converted its 6-digit Harmonized Tariff System into an 8-digit system which is called ASEAN Harmonized Tariff Nomenclature (AHTN), and is based on the World Customs Organization’s HS2K. The new system, took effect as of September 1, 2003 and contains 10,689 lines.
Tariff Rates
Under the current law, tariff bands are issued by the National Assembly and then detailed by the Ministry of Finance. Import duties are calculated on the basis of (1) the quantity of goods specified in the declaration, (2) dutiable value, and (3) applicable duty rates. Currently, there are three tariff rates for imported goods: ordinary tariffs, preferential tariffs (NTR), and special preferential tariffs. Ordinary tariffs apply to goods originating from countries that have not exchanged Normal Trade Relations (NTR) agreements with Vietnam. The preferential tariffs on the list apply to goods imported from countries or regions, which have NTR status with Vietnam. The special tariffs apply to goods imported from countries that have exchanged special preferential tariffs agreements with Vietnam. For instance, ASEAN members are entitled to special preferential tariff rates of 0-5 percent under the Common Effective Preferential Tariff (CEPT) Agreement (Vietnam is now in the transition period under the CEPT, and will fully implement the CEPT in 2006). Ordinary tariffs are 50 percent higher than preferential tariffs and can be increased or reduced as long as the margin does not exceed 70 percent of the preferential tariffs.
As of January 2, 2004, Vietnam began applying tariff rate quotas on tobacco, salt, cotton, milk, corn and eggs.
In addition to the above-mentioned tariff rates, Vietnam also reserves the right to utilize trade remedies such as antidumping and countervailing duties. Vietnam promulgated an ordinance on safeguards (which took effect in September 2002), an ordinance on anti-dumping (which took effect in October 2004), and an ordinance on countervailing duties (which took effect in January 2005). The Ministry of Trade recently established a new department with specific responsibility for trade remedies and competition policy.
Exemptions are granted if the goods fall into the following categories: (i) special goods for the purpose of national security and defense, science, education and training; (ii) specialized equipment, machinery and facilities for investment projects (both domestic and foreign); (iii) non-refundable aid, goods in transit, temporary imports and re-exports for exhibitions. Goods brought in for foreign-invested projects may qualify for exemption if they fall under five general categories: (1) equipment and machinery imported for the formation of the fixed assets of the project and spare parts and components attached thereto; (2) construction materials imported to build the fixed assets of the project that are not produced locally; (3) materials and supplies imported for the local manufacturer of the equipment and machinery included in the technological process of the projects; (4) specialized means of transport included in the technological process of the project or for transportation of groups of employees (with 24 seats or more); and (5) technology transfer that is considered as capital contribution by the foreign partner.
The U.S.- Vietnam Bilateral Trade Agreement went into effect on December 10, 2001. It provides for MFN tariff rates for U.S. origin goods. Under commitments in Annex E of the Agreement, as of December 10, 2004, tariffs for U.S. goods were reduced from 35% to 26% for approximately 244 bound items, 80% of these tariff items are for agricultural goods while 20% are for industrial goods. These import tariffs will apply to commodities that have certificates of origins (C/O) from the US as well as other countries that have MFN status. Exceptions to MFN treatment include special treatment accorded other countries within a free-trade area, such as AFTA or NAFTA and special procedures for border trade.
Special Consumption Taxes
Other taxes include the special consumption taxes on goods such as cigarettes, alcohol, spirits and beer, automobiles with twenty-four seats or less, and other miscellaneous items such as gasoline, air conditioners with capacity of 90,000 BTU or less and playing cards. Special consumption taxes also apply for services such as dancing, massage, karaoke, casino, jackpot machine games, certain betting activities, and golf. The special consumption tax is applicable to the import and production of the previously mentioned goods and services. Importers pay the special sales tax upon importation, ranging from 10 to 80% percent. The tax is calculated on the basis of applying the applicable tax rate to the CIF value of the good.
In 2003, the Vietnam National Assembly passed a number of amendments and supplements to several of the articles of the Law on Special Consumption Tax. The amendments and supplements focus on taxable objects, taxable prices, tax rates, exemptions, special reductions, and enforcement. The amendment took effect on January 1, 2004.
Value Added Tax (VAT)
VAT replaced the previous turnover tax, which was levied on a sliding scale from zero percent to twenty percent. Most sectors of the economy are likely to pay less under VAT. There are four rates of VAT: (i) zero percent for exported goods; (ii) five percent for the provision of essential goods and services (e.g. clean water, food stuff, medicine); (iii) standard rate of ten percent for activities such as power generation, mineral products, postal, and transportation services; and (iv) twenty percent for activities such as lottery and brokerage.
As of January 1, 2004, the amendments to VAT Law, which was passed by the National Assembly at its May 2003 sessions, took effect. The fundamental change is that the number of rates was reduced from four to three - zero percent, five percent, and ten percent.
Trade Barriers
Vietnam has been phasing out the use of quantitative restrictions on imports. An April 2001 Decision of the Prime Minister phased-out quantitative restrictions on imports with the exception of sugar (to be kept until 2005). A September 2003 Government Decision established conditions for importing and re-exporting petroleum. Trade in petroleum is also subject to annual licensing and price regulation. The annual National Trade Estimates Report published by the United States Trade Representative presents a detailed description of impediments to entering the Vietnamese market. This report can be accessed at the Office of the U.S. Trade Representative (USTR) website.
Import Requirements and Documentation
Authorized Importers
The role of authorized importers in the past few years has declined because of Government's Decree No. 57/1998/ND-CP, partly revised by Decree No. 44/2001/ND-CP, dated August 2, 2001. According to the Decree, Vietnamese traders are entitled to (i) export goods of all kinds, except goods on the list of those banned from export and (ii) import goods according to the business lines stated in their business registration certificates. Foreign-invested enterprises and business cooperation parties, apart from the exportation of their own products, may export goods of other kinds, except those on the list of goods banned from export and a number of goods categories prescribed by the Ministry of Trade. The goods imported by foreign-invested enterprises and business cooperation parties must comply with the provisions of their granted investment licenses, the Law on Foreign Investment in Vietnam and other relevant legal documents.
Import Licensing System
Business entities, including foreign invested enterprises with a legally registered business license, can be engaged in direct import and export activities. However, foreign invested enterprises can import materials, equipment and machinery only for the purpose of establishing production lines and producing goods in accordance with their investment licenses. They are not permitted to import goods for trading purposes and are required to register their import and export codes with the Department of Customs. Foreign invested companies are presently permitted to distribute products made by them and not products of their partners offshore.
Special Import/Export Requirements and Certifications
Previously, importers required approval from the relevant ministry(ies) to import many goods. This system was changed in 2001. Now, seven ministries and agencies are responsible for overseeing a system of minimum quality/performance standards for animal and plant protection, health safety, local network compatibility (in the case of telecommunications), money security, and cultural sensitivity. Goods that meet the minimum standards can be imported upon demand and in unlimited quantity and value.
U.S. Export Controls
Exporters of dual-use and military equipment need to be aware of U.S. Government regulations affecting sales of certain equipment to Vietnam and to certain entities within Vietnam. Before initiating marketing activities in Vietnam involving such items or entities, firms should consult with appropriate U.S. Government agencies.
Further information with regard to export control matters can be obtained from the following organizations:
U.S. Department of State, Directorate of Defense Trade Controls
Temporary Entry
Goods, which are exported or imported as samples or for the purpose of advertising, are subject to export or import duty. Exemption from duty is granted to goods, which are permitted to be temporary exports or imports for exhibitions. At the end of the exhibition, they must be re-imported into Vietnam in the case of temporary exports, or re-exported from Vietnam in the case of temporary imports. Documents required for exemption for exhibitions include a notification of or invitation to the exhibition and an export or import license from the Ministry of Trade for goods under quota by the government. Vietnam does not recognize the International Carnet.
Labeling and Marking Requirements
The Government’s Decision No. 178-1999-QD-TTg dated August 30, 1999, promulgating Regulations on Labeling of Domestically Circulated Goods and Imported and Exported Goods ("Decision 178 and accompanying regulations"), came into effect January 1, 2001. Decision 178 and accompanying regulations provide the requirements for the labeling of goods produced in Vietnam for domestic circulation and for export, and of goods produced in foreign countries that are imported for sale in the Vietnamese market. These regulations do not apply to processed food, fresh food, or unpacked necessities that are sold directly to consumers and pre-packed food and drinks which have a use-by limit of 24 hours.
According to these regulations, subject goods must bear a label containing:
1. A principal display panel in which the following compulsory contents must be shown so that consumers can easily and clearly see them in a normal goods’ display condition:
- name of goods;
- name and address of business entity manufacturing, assembling, or importing goods;
- amount, weight, volume, or size of the goods (in legal measurement units of Vietnam);
- composition or ingredients of goods (including whether goods or components/ingredients thereof have been x-rayed or genetically modified, where a preservative has been added, where a dosage has been stipulated, or where they are included in lists of stimulants or toxicants);
- usage values, human safety standards, and environmental impact on use;
- date of manufacture and expiry;
- instructions on preservation and use;
- origin of goods.
2. An information section on the right-hand side of the principal display panel in which non-compulsory contents of labels of goods may be presented (as well as any compulsory contents which could not fit in the principal display panel) provided that the non-compulsory contents do not conceal or lead to misunderstanding of the compulsory contents of labels.
The basic requirement of Decision 178 and accompanying regulations is that all letters, numbers, drawings, pictures, signs, and codes on labels of goods must be clear and must determine the substance of the goods - any ambiguous labeling that causes confusion with other labels of goods is strictly prohibited.
Labels of domestically circulated goods must be presented in Vietnamese. If necessary, foreign language text may be included provided that it is in smaller print than the Vietnamese text. Labels of exported goods may be written in the language of the country or region into which such goods are imported where so agreed in the contract for sale and purchase of goods. In the case of imported goods, the compulsory contents in Vietnamese may be either printed on the original label or presented in a supplementary label attached to the original foreign language label prior to sale or circulation in the Vietnamese market.
The following acts constitute violation of the law regarding the labeling of goods:
- Circulation of goods without the required labels;
- Labeling goods with pictures, figures, or writing that do not correspond to the nature of the goods;
- Labeling goods unclearly, or with labels so faint that normal eyes cannot read their contents;
- Labeling goods without including all required compulsory contents;
- Failing to meet guidelines for the correct size, position, method of presentation, or languages on labels;
- Erasing or amending the contents of labels of goods;
- Replacing labels of goods for the purpose of deceiving consumers;
- Using trademarks of goods already protected by law without the approval of their owners;
- Labeling goods in the same manner as those of other business entities which have been protected by law.
Prohibited and Restricted Imports
Vietnam currently prohibits the commercial importation of the following products: arms and ammunition, explosive materials (not including industrial explosives), military technical equipment and facilities, narcotics, toxic chemicals, “depraved and reactionary” cultural products, firecrackers, some children’s toys cigarettes, second-hand consumer goods, right-hand drive motor vehicles, used spare parts for vehicles, used internal combustion engines of less than 30 horsepower, asbestos materials under the amphibole group, various encryption devices and encryption software.
Customs Regulations and Contact Information
Certain goods to be exported or imported must be inspected before being cleared at customs stations. The inspection covers quality, specifications, quantity, and volume. The inspection is based on Vietnamese standards, with the exception of pharmaceuticals, and should be carried out by an independent Vietnamese or foreign inspection organization. Imported goods subject to inspection include petroleum products, fertilizers, electronic and electrical products, food and drink, machinery and equipment, steel, and pharmaceuticals. This list may be altered from time to time. Imported pharmaceuticals, for example, must go through random lab tests on sample batches performed by Vietnamese officials. Since January 1998, all imported drugs must have instructions on product use, dosage, and expiration dates printed in Vietnamese and inserted in packages.