23.10.2020, 11:44

EVFTA: Vietnam's Decree 111 - Details on the preferential export and import tariff structure

On September 18 Vietnam issued decree 111/2020 /ND-CP, in which the preferential export and import tariffs of Vietnam for the implementation of the EVFTA are specified.

The decree contains details on the timetables for preferential import and export duties, the eligible countries and guidelines on the rules of origin.

Exporters and importers should ensure that they comply with the decree to ensure that their eligibility is not rejected by customs, thereby undoing the benefits of the EVFTA.

On September 18 Vietnam issued Decree 111/2020 /ND-CP (Decree 111), in which Vietnam’s preferential export and import tariffs for the implementation of the Free Trade Agreement between the EU and Vietnam (EVFTA) are set. The EVFTA came into force on August 1st and paves the way for increased trade between the EU and Vietnam. The free trade agreement is seen as a modern, landmark agreement between Vietnam and the EU, which contains provisions on intellectual property rights (IP), investment liberalization and sustainable development.

Decree 111 came into force on September 18. However, from August 1st, when the EVFTA came into force, goods that are exported or imported from August 1st can also benefit from preferential tariffs. Companies will therefore be able to request a refund if they have exported or imported after August 1st. The decree is therefore retroactive.

The regulation also lists which countries it applies to, as well as the conditions for applying the EVFTA, including the directives on rules of origin. We take a look.

Exports to the EU

Decree 111 applies to all member states of the EU. It also applies to the UK and Northern Ireland until December 312020. To benefit from the preferential rates, companies should enclose documents clearly stating that they are for EU member states or the UK and Northern Ireland. The customs declaration must clearly state that the goods originate in Vietnam.

In the case of exports, Vietnam has the right to withhold export duties on 526 tariff lines for important goods such as crude oil and coal. For goods that are not included in the preferential export tariffs of Decree 111 but are included in the list of taxable goods of Decree 57/2020 /ND-CP, an export duty rate of zero percent should apply.

Imports to Vietnam

For goods that are imported into Vietnam, they must be on the list of the customs tariff according to this decree 111. They must also be imported from the EU or the UK, Northern Ireland, Andorra or San Marino and comply with the EVFTA rules of origin. We have discussed this topic earlier here, whereby the EU proof of origin also includes the country of origin, which was created, for example, by registered users in the REX system.

Vietnam has committed itself to abolishing around 45.8 percent of import tariffs from August 1 which corresponds to 64.5 percent of EU exports.

Compliance will be crucial

The new decree comes at the right time and lists the details of the preferential tariff that will make it easier for traders to know exactly which product is eligible for tax breaks. The decree also explains the criteria, the countries in question and the guidelines for the rules of origin. The decree also allows for refunds for exporters and importers who have followed the guidelines and been trading goods since August 1 when the EVFTA came into effect.

However, the crux of the EVFTA and those eligible for preferential tariffs will be included in the Rules of Origin guidelines. These can be complex and manufacturers should harmonize them according to FTA rules. Exporters and importers should ensure compliance as customs will likely inspect the goods if companies want to take advantage of the EVFTA.