Proving the origin of a product is crucial when it comes to international trade, particularly for businesses looking to claim preferential tariffs or avoid penalties for false declarations. The challenge arises when goods are partially assembled or processed in Vietnam but contain substantial components from China or other countries. In such cases, companies must meet specific conditions to prove the product's true origin.
To prove a product’s origin is Vietnam and not China, it’s important to meet the strict guidelines set by the Vietnamese government. This process becomes even more crucial given the increasing scrutiny of Vietnam's origin certificates, particularly as some suppliers have previously attempted to circumvent the rules by falsely declaring Chinese products as Vietnamese-made.
This article explores the necessary conditions to obtain a certificate of origin from Vietnam, the import preferential policies of the European Union and the United States for Vietnamese products, and how businesses can navigate this complex process.
What Are the Necessary Conditions to Obtain a Certificate of Origin from Vietnam?
The Vietnamese government has stringent criteria for issuing a Certificate of Origin1 (CO) to ensure that only goods genuinely manufactured or substantially processed in Vietnam can benefit from preferential tariffs. Over the years, the rules surrounding the issuance of these certificates have become more rigorous due to instances of companies trying to pass off Chinese-made products as Vietnamese to gain tariff advantages.
For most products, the added value created within Vietnam must be at least 35% of the total export value. This means that the final product, after assembly or processing in Vietnam, must have undergone significant manufacturing steps in the country. For certain specific goods, not only must the value-added percentage be met, but the essential functions of the product (such as the table’s tabletop) must also be manufactured in Vietnam.
Conditions for Obtaining a CO in Vietnam:
- Substantial Transformation: The product must undergo significant transformation in Vietnam, such as assembly, packaging, or further processing.
- Value-Added Requirement: The added value in Vietnam must exceed 35% of the product's total export value.
- Functional Component: For certain products, like furniture, not only the value added but the primary functionality must be produced in Vietnam (e.g., the tabletop for a desk must be made in Vietnam).
Key Considerations:
| Condition | Description |
|---|---|
| Substantial Transformation | The product must undergo significant processing or assembly in Vietnam |
| Value-Added Threshold | The added value must be at least 35% of the product's total value |
| Functional Component | For specific products, the key functional parts must be produced in Vietnam |
The Vietnamese government is increasingly focused on cracking down on businesses that attempt to falsify their product's origin. Therefore, it’s essential to ensure compliance with these rules to prevent penalties or the rejection of certificates.
What Are the Import Preferential Policies of the European Union for Vietnamese Products?
The European Union (EU) offers preferential tariffs for goods originating from Vietnam under the EU-Vietnam Free Trade Agreement2 (EVFTA). The EVFTA, which came into effect in August 2020, provides tariff reductions for a wide range of Vietnamese products entering the European market, provided they meet the required rules of origin.
To qualify for preferential tariffs under the EVFTA, products must meet the rules of origin established by the agreement. This includes the requirement for the product to be substantially processed or manufactured in Vietnam, and for the added value in Vietnam to exceed 35%. Additionally, the EU provides tariff exemptions for certain products if they meet the specific origin criteria outlined in the agreement.
Key Benefits of EVFTA for Vietnamese Products:
| Product Type | Tariff Reduction |
|---|---|
| Agricultural Products | Duty-free access to EU market |
| Electronics and Machinery | Preferential tariffs based on origin rules |
| Textiles and Garments | Reduced or zero tariffs upon meeting origin criteria |
Vietnamese exporters can take advantage of the EVFTA to reduce or eliminate import tariffs to the EU, provided they can substantiate the origin of their products with the necessary documentation, including the Certificate of Origin.
What Are the Import Preferential Policies of the US for Vietnamese Products?
The United States offers preferential tariffs to Vietnamese products under the Generalized System of Preferences (GSP)3, which grants duty-free entry to eligible products from developing countries. However, to benefit from these preferential tariffs, Vietnamese products must also meet specific origin rules set by U.S. Customs.
Under the GSP, Vietnamese products that meet the rules of origin4—such as substantial transformation or value-added requirements—can enter the U.S. duty-free. However, this exemption is not available for all products, and businesses must ensure that their products meet the detailed criteria, including the 35% added value threshold for the GSP.
GSP Preferences for Vietnamese Products:
| Product Type | GSP Tariff Exemption |
|---|---|
| Electronics | Eligible for duty-free access |
| Leather Goods | Exemption from tariffs if meeting origin conditions |
| Agricultural Products | Duty-free access for certain agricultural exports |
To take advantage of the GSP, businesses must carefully verify that the products meet the origin rules and submit the required documentation to U.S. Customs.
Conclusion
Proving a product’s origin as Vietnam, especially when only partially assembled or processed there, requires careful attention to the country’s strict rules of origin. In Vietnam, businesses must demonstrate that the added value and substantial transformation criteria are met. Both the European Union and the United States offer preferential tariff policies for Vietnamese goods under trade agreements, but these benefits can only be realized if the correct origin certifications and documentation are provided. By understanding these criteria and complying with them, businesses can ensure smooth imports and avoid penalties for incorrect origin declarations.
The government of Vietnam is tightening the rules to ensure the integrity of its origin certifications. As global trade continues to evolve, particularly with the rising scrutiny of international supply chains, it’s crucial for businesses to stay up-to-date with these changes. Ensuring accurate origin documentation not only helps businesses avoid costly fines but also enhances their ability to take advantage of preferential trade policies available in key markets.
Understanding the Certificate of Origin is crucial for businesses to navigate international trade and benefit from tariff advantages. ↩
The EU-Vietnam Free Trade Agreement offers significant benefits for exporters, making it essential to understand its implications. ↩
Learn about GSP and how it provides significant tariff exemptions for Vietnamese goods in the U.S. ↩
Understanding rules of origin is crucial for compliance and maximizing trade benefits for Vietnamese exporters. ↩
