In the era of globalisation and international trade, businesses face numerous challenges while setting up operations in different countries. One of the major challenges is importing goods into a new host country, like Vietnam. The traditional strategy of incorporating a company, getting an import license and registering your products in the country can take anywhere from 2-4 months.  Hence, Importers of Record in Vietnam play a crucial role as a faster alternative. They provide timely and error-free delivery of imported goods to the assigned destination.  This article will summarize the importer of record services, the benefits and provide a guide to free trade agreements and relevant tariff reductions you should know of.

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Understanding the concept of Importer of Record in Vietnam

An Importer of Record (IOR) is an individual or entity who owns or purchases products imported into the host country and oversees the legal obligations for the same. For instance, importers must ensure that there is a record of all goods and that they are valued. They are also legally accountable for paying taxes, assessing duties, and assigning values on clients’ imports into the country. 

IORs perform a significant role in supervising the implementation of customs compliance on goods imported from a foreign country.

Following are a few more services that IORs in Vietnam provide:

• Procuring appropriate entry documents to facilitate clearance through ports 

• Obtaining import permits for transit via entry ports

• Classification and certification of products

• Power of Attorney (POA): It entrusts an authorized person with legal responsibilities when the importer of record is not present on the premises.

• International Freight Forwarding: Authorised freight forwarders can also be Importers of Record. The import process of goods must be handled by a legal representative in the country of origin if the shipper has hired a freight forwarder that does not offer Importers of Record services.

Benefits of Using an Importer of Record Services in Vietnam

Thanks to the services offered by IORs, businesses are able to import products into their host country in an efficient and seamless manner. Generally, a business will use the IOR during a trial phase to test the market. Once the market is proven to be viable, a full entry into the market is carried out, with entity establishment and full operations of a branch office in Vietnam.

Hiring an Importer of Record is highly recommended for businesses that cannot afford to make changes in their core processes to import goods and give up control over their supply chain. Moreover, a business gets access to expert information related to international trade issues, compliance, and licensing.

Guide to Import Tariffs/Taxes for Vietnam

Vietnam has emerged as a global trade leader through its active involvement in regional and international trade owing to its association with the Asia-Pacific Economic Cooperation (APEC) forum, the World Trade Organization (WTO), and the Association of Southeast Asian Nations (ASEAN), the United Nations (UN).

Apart from being a part of several trading blocs,

As part of your research into the viability of importing or exporting to and from Vietnam, the first step is to identify the tariffs that exist between you (the country of origin) and Vietnam. 

Vietnam has signed the following trade agreements with over 50 countries, via 14 global trade agreements with average tariff reductions included:

1. EU-Vietnam Free Trade Agreement

Vietnam and the EU signed a free trade agreement in July 2018 to boost trade relations and deepen international integration.

By bolstering trade volumes, boosting employment, and fostering economic growth on both sides, the EU-Vietnam Free Trade Agreement (EVFTA) aims to fulfil the following objectives:

• Elimination of 99% of taxes on imports
• Protecting the interest of investors
• Streamlining the bureaucracy and eliminating red-tapism
• Getting rid of restrictions on trade

2. Vietnam & the Trans-Pacific Partnership (CPTPP) – Trans-Pacific Trade

The 11 signatories to the Comprehensive & Progressive Agreement for Trans-Pacific Partnership (CPTPP), representing 13.4% of the global GDP (approximately USD 13.5 trillion) are as follows:

• Singapore
• Brunei
• Canada
• Malaysia
• Japan
• Mexico
• Peru
• Chile
• Australia
• New Zealand, and
• Vietnam

With the implementation of this agreement in 2019, Vietnam immediately eliminated taxes by 43% on its garment exports to Canada, and by 2023, these taxes might be entirely eliminated.

3. Vietnam-UK Free Trade Agreement

Between 2011 and 2020, UK-Vietnam trade doubled, demonstrating the importance of an impeccable bilateral economic alliance.

Tariff Elimination under UKFTA

For products imported by Vietnam:

• The removal of 48.5% of tariff lines took place on January 1, 2021;
• It is expected that 91.8% of tariff lines will be removed by January 1, 2027;
• By January 2029, 98.3% of tariff lines will be eliminated;

For products imported by UK:

• The number of tariff lines has been cut down by 85.6% since 1st January 2021;
• By the end of January 2027, 99.2% of tariff lines will be eliminated;

4. The U.S.-Vietnam Bilateral Trade Agreement (BTA)

The US exported products worth USD 12.1 billion to Vietnam in 2020, while US imports to Vietnam totaled USD 80.1 billion (estimated).

The Bilateral trade agreement (BTA) is a comprehensive pact between the United States and Vietnam that promotes the freedom to conduct business and encourages economic development.
This resulted in most of Vietnam’s exports to the US only being subject to 15% tariffs or lower.

5. ASEAN – Regional Free trade agreement

Incepted to boost local trade and manufacturing in all ASEAN countries, the ASEAN Free Trade Area (AFTA) is recognized as one of the world’s most significant free trade areas.

AFTA currently consists of the following ten countries:

• Brunei
• Indonesia
• Malaysia
• Philippines
• Singapore
• Thailand
• Vietnam
• Laos
• Myanmar
• Cambodia 

By removing tariffs and non-tariff barriers, AFTA plans on turning ASEAN into a global production hub.

For specific tariffs within the ASEAN bloc click here

6. Vietnam and China Free Trade under ASEAN

Vietnam exported USD 49.4 billion worth of products to China in 2020, including telephones, integrated circuits, and pure cotton yarn. On the other hand, China exported USD 104 billion to Vietnam in the same year.

An initiative to establish the ASEAN-China Free Trade Area was endorsed in 2000 after leaders from ASEAN and China met to explore possible ways to enhance economic integration between the two regions.

7. Trade between Vietnam and Australia/New Zealand under AAFTA-ASEAN

Before the outbreak of Covid-19, Vietnamese exports to Australia reached USD 3.62 billion, which created new investment opportunities within ASEAN, Australia, and New Zealand. Moreover, Australia’s exports to Vietnam clocked USD 9.8 billion.

AANZFTA is expected to realize the following:

• Approximately 90% of all tariff lines will be gradually reduced and eliminated;
• Enable seamless movement of goods 
• Service trade barriers will gradually be lifted
• Assuring the protection of investors’ interests

8. Vietnam – South Korea Free Trade Agreement (VKFTA)

Upon signing the Vietnam-Korea free trade agreement (VKFTA) in 2015 making Korea one of the biggest investors in the country., Korea has quickly gained traction among foreign investors in Vietnam, as it promotes bilateral trade, expands investment options, and promotes economic growth.

With the agreement, Vietnam will remove 90% of its tariffs on South Korean imports, while South Korea will remove 95% of its tariffs on Vietnamese imports. 

9. Vietnam- Japan Economic Partnership Agreement (VJEPA)

Before the Covid-19 pandemic, Japan exported USD 19.11 billion worth of products to Vietnam, while Vietnam exported USD 21.2 billion to Japan. Most exports to Vietnam were insulated wire, broadcasting equipment, and fuelwood.

According to the agreement, Vietnam strives to eliminate 90.64% of tariff lines as part of the Vietnam-Japan Economic Partnership Agreement (VJEPA), which went into effect in 2009. 

10. Vietnam and India under ASEAN (AIFTA)

In 2009, ASEAN and India signed the ASEAN-India Trade in Goods (TIG) Agreement, paving the way for one of the world’s largest free trade agreements. In effect, the agreement covers approximately 1.8 billion people and USD 2.8 trillion in combined GDP.

• Trade tariffs are liberalized between Asian nations on over 90% of their products
  
• Over 4,000 product lines are now tariff-free

11. Vietnam – Eurasian Free Trade Agreement

In order to open up 90% of Vietnam’s total tariff lines the VN-EAEU Free Trade Agreement was signed. Both trading blocs agree to the following conditions:

• In the EAEU’s Entry into Force Directive (EIF), commodities prioritized at the time of their entry into force (EIF) were exempted from tariffs
• Within 3 to 5 years of the EIF, tariffs on processed meat and fish, electrical equipment, and agricultural machinery were completely abolished.
• A five-year period after the EIF, chicken and pork tariffs have been eliminated.
• A decade after the EIF, automobiles and alcoholic beverages will be free of tariffs

12. RCEP, the largest trade deal initiated by China

Regional Comprehensive Economic Partnership (RCEP) is a new free trade pact between Australia, Brunei, Cambodia, China, Indonesia, Japan, South Korea, Laos, Malaysia, Myanmar, New Zealand, the Philippines, Singapore, Thailand, and Vietnam.

Due to its inclusion of approximately 30% of the global population, this deal is considered to be the largest FTA in the world. It went into force on January 1st, 2022.

Weighted tariffs imposed by Vietnam reduced from 0.8% to 0.2%, while tariffs imposed on Vietnam reduced from 0.6% to 0.1%

13. Vietnam – Cuba Trade Agreement

The Vietnam-Cuba Trade Agreement, signed in 2018, focuses heavily on regulations related to rules of origin, goods trade, trade defense, technical regulations, and economic security between the two countries.

Each side has agreed to remove or reduce taxes on all imports from each other’s respective markets as part of the agreement.

For exact tariffs:

• Vietnam Import Tariffs
• Cuba Import Tariffs 

14. Vietnam-Chile Free Trade Agreement

The Asia-Pacific Economic Cooperation (APEC) conference recognized Vietnam and Chile with a Free Trade Agreement (FTA).

The agreement will benefit the two nations in the following ways:

• While most of Chile’s exports will benefit from the FTA, 73% of its exports will enjoy tariff-free access to Vietnam. However, only 4% of its products will be exempt from tariffs.
  
• Further, 75% of Vietnam’s exports would be duty-free in Chile, and the remaining 25% would receive tax breaks for 6 to 11 years.