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EU-Vietnam Trade Agreement: How to trade freely!

Updated: Oct 15, 2023

Trading with the EU and Vietnam without duty offer great growth opportunities for many businesses but read the fine print, argues Arne Mielken of Customs Manager Ltd


On August 1st 2020, after many years of intense negotiations, the comprehensive and modern free trade agreements European Union (EU) and Vietnam has finally entered into force. We look at the key provisions and what exporters and importers need to do to trade freely with the EU or Vietnam. If you have any questions, contact your dedicated Customs Manager using the chat function on www.customsmanager.org


EVFTA: Comprehensive

Known as "EVFTA", was dubbed to be the most comprehensive agreement the EU has ever concluded with a developing country and the second between the bloc and a Southeast Asian nation. It is dubbed “comprehensive” as it promises to gradually eliminate almost all tariffs between the two parties over the course of the next decade between the two regions. It is “modern” as it includes binding rules on climate, labour and human rights.


Three headlines to note

1. Full duty-free by 2030

The EU-Vietnam free trade agreement aims to gradually eliminate almost all tariffs between the two parties in ten years.


2. European and Vietnamese delicacies protected

It will protect emblematic Vietnamese and European products and allows Europe to access the Vietnamese public procurement market and vice versa. The EU-Vietnam FTA extends protection to 169 European foods and drinks. Thus, for example, the rules require that the use of geographical indications such as Champagne, Prosciutto di Parma, Rioja wine and Irish whiskey be reserved for imports from the EU regions from which they originate. As will 39 Vietnamese products are protected in the EU. This is known as Geographical Indications.


3. Modern provisions: Climate, labour and human rights

The deal includes binding rules on climate, labour and human rights


A “Win-Win” deal

Both sides are benefiting from the deal:

  • Vietnam, one of the fastest-growing countries of the Association of Southeast Asian Nations (ASEAN), is the EU’s second-largest trading partner after Singapore and ahead of Malaysia, with trade in goods between the EU and Vietnam worth € 48 billion a year.

  • For Vietnam’s business, the deal is equally important. The EU is the country’s second most important trading partner among all ASEAN members – surpassing regional rivals Indonesia and Thailand, in recent years.


Tariff elimination: What products are concerned?

The tariff elimination will benefit a wide range of exporting, importing, and manufacturing industries in both countries.


On the Vietnamese side, businesses making or exporting smartphones and electronic products, textiles, footwear, textiles and clothing, coffee, rice, seafood, and furniture are expected to be able to increase their sales into the EU. EU businesses producing and selling high tech products, including electrical machinery and equipment, aircraft, vehicles, and pharmaceutical products, should be able to find it easier to gain market share in Vietnam.


Examples of the benefits from Tariff Elimination

  • 71% of Vietnamese exports have been duty-free since 2020, with the rest catching up in seven years.

  • 65% of EU exports to Vietnam are duty-free, the rest - including motorcycles, cars, pharmaceuticals, chemicals, wines, chicken and pork - gradually liberalized over ten years.

  • Almost all EU exports of machinery and appliances are now fully liberalized.

  • Around half of EU pharmaceutical exports can now enter Vietnam duty-free

  • All EU textile exports are now liberalized

  • Car parts will enter Vietnam duty-free by 2027

  • Close to 70% of EU chemicals exports to Vietnam are now duty-free

  • Machine and equipment: About 60% of import tariffs into the EU are now eliminated

  • Cars, car parts and motorcycles will be free from tariff barriers after July 2027.

  • Alcohol beverages: Wine will be free from import tariffs July 2027, Beer from 2030.

  • Free tariff rate quotas for Vietnamese rice exports, sweetcorn, garlic, mushrooms

Specific sectors

  • Textiles: The EU agreed to phase out duties within a seven-year timeline for Vietnam’s textile and footwear products. Exports of the sector reached around US$9 billion in 2018. As a large proportion of Vietnam’s exports to the EU are consumer goods such as clothing, textile, and footwear, the FTA could significantly increase their trade volume. 

  • Electronics: The EVFTA provides Vietnam with a chance to take a lead in electronic products.

  • Pharmaceutical: EU pharmaceutical imports are duty-free immediately, the rest exempted from duty after seven years. EU pharmaceutical companies will be allowed to establish a company to import pharmaceuticals that have been authorized to be sold in the Vietnamese market. Such entities can sell pharmaceuticals imported by them to Vietnamese distributors or wholesalers. The entities can also build their own warehouses.

  • Investment: The new FTA will bring a fair and equal access to the market enabling EU investors to further expand their business.

  • Duty-free Vietnamese exports of sensitive agricultural products, such as rice, garlic or eggs, will be limited


Qualifying for tariff reductions

Business looking to taking advantage of the recently ratified EVFTA must understand and comply with the rules of origin. Rules of origin can be complex. While sourcing materials from third party states may decrease the overall cost of production, they can compromise competitiveness if entering EU or Vietnamese markets.


EVFTA rules of origin

Products will benefit from the tariff preferences under the EVFTA rules of origin provided that they can prove that they are “originating”. Products are considered originating under the agreement if they meet one of the following requirements:

  • Wholly obtained in Vietnam or the EU; and

  • Products produced in EU or Vietnam incorporating materials that have not been wholly obtained there, provided that such materials have undergone sufficient working or processing within the EU or Vietnam.

While raw materials from EU or Vietnam and goods produced in EU or Vietnam using European or Vietnamese inputs easily fall into the wholly obtained category, many goods contain materials or components imported from countries not a party to a trade agreement. These goods must prove that the inputs that have been inputted have and have undergone specific levels of alteration within Vietnamese borders to tap into the benefits of the EVFTA.


Many goods have set procedures – outlined in Protocol 1 of the EVFTA text – that must be completed within the EU Vietnam for the good in question to be considered originating.


Watch out for minimal processing requirements

In addition to these procedures, certain areas of working are specifically noted for their inability to qualify as goods for originating status. These exemptions include the following:  

  • preserving operations to ensure that the products remain in good condition during transport and storage;

  • breaking-up and assembly of packages;

  • washing, cleaning; removal of dust, oxide, oil, paint or other coverings;

  • ironing or pressing of textiles and textile articles;

  • simple painting and polishing operations;

  • husking and partial or total milling of rice;

  • operations to color or flavor sugar or form sugar lumps;

  • peeling, stoning, and shelling of fruits, nuts, and vegetables;

  • sharpening, simple grinding or simple cutting;

  • sifting, screening, sorting, classifying, grading, matching (including the making-up of sets of articles);

  • simple placing in bottles, cans, flasks, bags, cases, boxes, fixing on cards or boards, and all other simple packaging operations;

  • affixing or printing marks, labels, logos, and others like distinguishing signs on products or their packaging;

  • simple mixing of products, whether or not of different kinds; mixing of sugar with any material;

  • simple addition of water or dilution or dehydration or denaturation of products;

  • simple assembly of parts of articles to constitute a complete article or disassembly of products into parts; and

  • slaughter of animals

Compliance with EVFTA

Under the EVFTA, all firms exporting goods from the EU to Vietnam or Vietnam to the EU have to comply with the rules of the agreement. A Certificate of origin or a statement of origin must be provided.


In addition to the application forms listed above, it may be necessary to produce any of the following supporting information:

  • direct evidence of the manufacturing or other processes carried out by the exporter or supplier to obtain the goods concerned, contained for example, in his accounts or internal book-keeping

  • documents proving the originating status of materials used, issued or made out in a party, where these documents are used in accordance with domestic law

  • documents proving the working or processing of materials in a party, issued or made out in a party, where these documents are used in accordance with domestic law

  • proof of origin proving the originating status of materials used, issued or made out in a party in accordance with this protocol

  • Note: Certificates of origin may be issued retroactively for goods that have already been exported under limited circumstances such as technical errors or limited information on the ultimate destination of a product.

Statement on origin

Made out by any exporter for consignments the total value of which is to be determined in the national legislation of Vietnam and will not exceed US$6,600 (EUR 6000).


Or


Origin declaration

Exporters that have been approved by the Vietnamese government may forgo the issuance of a certificate of origin once their approval status has been relayed to relevant EU authorities. Instead, an Origin Declaration will be required upon export.

Note: Producers in the EU exporting to Vietnam may forgo all requirements above if they file electronic origin documentation with a database in the EU after their participation in this database has been notified to Vietnamese authorities.


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Proofing Compliance with Rules of Origin REX

The REX system will apply as of the entry into force of the agreement. The Registered Exporter system (the REX system) is a system of certification of the origin of goods based on a principle of self-certification. The origin of goods is declared by economic operators themselves by means of so-called statements of origin.


To be entitled to make out a statement on origin, an economic operator has to be registered in a database by his competent authorities. The economic operator becomes a "registered exporter".


More information


Guidance by EU Commission (June 2021 - Version 5)


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