The European Council first gave the green light for a new trade agreement with Vietnam in March 2020. At the beginning of June, Vietnam also ratified the EU-Vietnam free trade agreement. The agreement will come into effect on 1 August 2020.
The EU-Vietnam agreement and accompanying removal of customs barriers will ease trade relations between the two parties. Vietnamese labour law is also being reformed and adapted to international standards.
The aim of the agreement is to reduce 99% of all tariffs within 7 years and to increase exports from the EU to Vietnam by 8.3 billion euros.
Above all, the tariff reductions in the chemical, pharmaceutical and machinery sectors are intended to make European goods more attractive and competitive. This will further increase the importance of the EU as a sales market for Vietnamese goods.
German companies in particular are likely to benefit from the agreement – as around 33% of all EU exports to Vietnam come from Germany.
But what is the concrete impact on favourable tariff treatment?
99% of customs duties abolished by the EU/Vietnam FTA
The EU-Vietnam Free Trade Agreement abolishes almost all customs duties (roughly 99 %) on origin goods between the EU and Vietnam.
As far as EU exports to Vietnam are concerned, 65 % of customs duties will be abolished when the agreement takes effect on August 1, 2020. Almost all remaining tariffs will be eliminated within the next 10 years.
EU exports to Vietnam
65% of all export duties will be abolished on 1 August 2020.
Almost all mechanical engineering equipment can be imported duty-free into Vietnam from August as well as a large portion of pharmaceuticals. The tariff reduction in the motor vehicle sector will be gradual, ultimately reaching duty-free free import in 10 years time.
By the time the agreement comes into force, 71% of customs duties will already have been eliminated on imports from Vietnam into the European Union. The remaining tariffs will continue to be eliminated over the coming seven years.
Vietnam imports into EU
71% of all import duties will be abolished on 1 August 2020.
A restriction does apply however to sensitive agricultural products, for which import values are still limited by import quotas. Tariff quotas remain in place for goods such as sugar and high sugar products, as well as rice, corn, garlic, mushrooms, eggs and tuna.
| Products category | Former rate of duty | New rate of duty |
| Animals, agricultural products (Ch. 1-24) | 0-55 % | Duty-free depending on the product at the time of entry into force, or after 5, 7, 10 or 15 years , or quotas |
| Chemistry, Pharmaceuticals (Ch. 25-38) | 0-25 % | Duty-free from the time of entry into force for some goods ; for others: after 3, 5, 7 or 10 years |
| Plastics, leather and wood products (Ch. 39-49) | 0-35 % | Duty-free after 3, 5, 7 or 10 years |
| Textile, Clothing (Ch. 50-67) | 0-30 % | 70% of goods duty-free from time of entry into force ; for other goods: after 3, 5 or 7 years |
| Stones, ceramics, porcelain etc. (Ch. 68-83) | 0-45 % | Duty-free depending on the product at the time of entry into force, or after 5, 7, or 10 years |
| Machines, Electronics (Ch. 84-85) | 0-30 % | Duty-free at the time of entry into force for a large majority of products; for other goods : after 5 or 7 years |
| Means of Transport (Ch. 86-89) | 0-78 % | Duty-free 10 years after entry into force |
| Instruments , Measuring Instruments (Ch. 90-93) | 0-25 % | Duty-free from entry into force for a majority of goods |
| Furniture, Miscellaneous (Ch. 94-97) | 0-25 % | Duty-free after 3 years |
Proof of origin for Vietnam
The EU-Vietnam Free Trade Agreement grants companies duty-free imports. For this, the goods must originate from the EU or Vietnam. Companies must keep the correct proof of origin.
For EU companies exporting goods to Vietnam, the declaration of origin on the invoice is considered proof of origin. For goods with a value of 6,000 euros or more, proof must be provided by a registered exporter (REX). The revelant customs authority is responsible for the registration. In Germany, this would be the respective main customs office.
Proof of origin for EU exports
EU companies should apply to become registered exporters (REX) to benefit from the Free Trade Agreement with Vietnam.
Exporters in Vietnam can also use the declaration of origin as evidence of entitlement to preferential treatment. However, a EUR.1 movement certificate must be issued for goods worth EUR 6,000 or more.
Nevertheless, even after the EU-Vietnam Free Trade Agreement, there is still the possibility of using the Generalised Scheme of Preferences (GSP) during a transitional phase: the GSP applies for a period of two years from the entry into force of the parallel agreement.
Supplier declarations
Since the agreement was published by the EU on 12 June 2020, companies can already indicate Vietnam on the supplier declarations.
Labour law reform through EU-Vietnam Free Trade Agreement
Part of the EU-Vietnam Free Trade Agreement is also a comprehensive Reform of Vietnamese labour law: in the future, Vietnam will also be obliged to comply with key provisions of the International Labour Organization (ILO).
This includes the requirement to allow free trade unions and the prohibition of forced labour and child labour.
Vietnam has already taken the first steps by adopting a new version of the labour code
in 2019, as well as ratifying the ILO Convention No. 98 (Right to Organise and Collective Bargaining). The country will also sign conventions on freedom of association and forced labor in the near future.
International Social and Environmental Standards
With the EU-Vietnam Free Trade Agreement’s entry into force, many existing non-tariff barriers in the trade relationship with Vietnam will also be lifted. In addition to the field of trade policy, Vietnam has also made many commitments to environmental protection and social development.
Services and public contracts from the European Union are likely to increase in Vietnam. Through greater access to public tender, European companies will likewise be able to participate on equal footing in the future. The procurement of pharmaceuticals in particular will be extended to European suppliers in Vietnam.
The EU Free Trade Agreement also enables Vietnam to take more effective action against cases of serious human rights violations.
Additionally, the agreement contains provisions for intellectual property law and important measures that promote sustainable economic development.
Furthermore, Vietnam intends to comply with essential provisions of the United Nations conventions, for example in the field of climate and species protection.
Investment protection agreement
In addition to the EU-Vietnam Free Trade Agreement, the EU and Vietnam have also agreed on an investment protection agreement – but this has yet to be approved in all EU member states. The agreement will replace the existing bilateral treaties between Vietnam and the member states.
