LEGAL UPDATE
The European Union Vietnam Free Trade Agreement (EVFTA) entered into force on 1 August 2020, almost 8 years after the negotiations had started and 5 years after the final draft of the agreement had been signed.
The agreement creates new opportunities to further boost commercial ties between the 27 member states of the European Union (EU), and one of Southeast Asia's biggest manufacturing economies. For the United Kingdom and Northern Ireland the agreement will only be applicable until the end of the year.
It is beneficial to EU exporters and investors as it brings them into the same category as other regions or countries that have already signed FTAs with Vietnam. At the same time, Vietnam benefits as it joins the select ranks of South Korea, Japan and Singapore, the only Asian nations that have signed free trade agreements with the EU.
For more detailed information on the impact of the EVFTA, read our earlier update.
1. Elimination of Import Duties
The EVFTA will eliminate 99.7% of the import duties over a period of up to 8 years. Some duties will be eliminated on the day the EVFTA enters into force, while others will be gradually elimiated over a period from 3 to 8 years. For other products, those classified as sensitive products, a quota with no or reduced import duties will apply, but once the quota has been reached the full import duty will apply. Vietnam will liberalise 65% of its import duties over a period of up to 15 years, remove almost all export duties, and will not increase those which remain in force as per the agreeement's standstill-clause.
Decree 111/2020/ND-CP, which provides a preferential tariffs schedule for the implementation of the EVFTA for the period 2020-2022 in its annexes was issued on 18 September 2020 and entered into force on the same date.
In case any export or import of qualifying products after 1 August but before 18 September 2020 and all conditions are met to enjoy preferential tariffs of Vietnam, it is possible to qualify for reimbursements if higher taxes have been paid. For the tariffs schedule beyond 2022, the EVFTA text and Annexes will provide more information on the remaining progressive reductions based on product name, HS code, base rate, and category.
2. Rules of Origin
Products will benefit from the tariff preferences provided that they are originated in Vietnam. This is the case if the materials of the product are wholly obtained in Vietnam, or products produced in Vietnam that incorporate materials not wholly obtained there, provided that these materials have undergone sufficient work or processing within Vietnam. This may be based on the percentage of the final product originating outside Vietnam, or the change of tariff classification or weight. Important to note is that material sourced from countries that already have a free-trade agreement with the EU, such as South Korea, will not impact the origin.
Circular 11/2020/TT-BCT (Circular 11) was published on 15 June 2020 and entered into force on 1 August 2020. Circular 11 provides detailed information as to when a product would qualify as having Vietnamese origin and when not. This is particularly relevant in case a product contains parts that are not produced in Vietnam.
Contact Information
Should you have any questions, please feel free to contact our lawyers at the below email addresses.
Mark Oakley / Managing Partner
mark.oakley@acsvlegal.com
Katie O'Connell / Associate
katie@acsvlegal.com
© 2020 ACS Legal Vietnam Company Limited – All rights reserved
This legal update is not an advice and should not be treated as such.
Download pdf: EVFTA: Implementing Documents Issued
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