Economy & Trade

Post by: SourceVietnam

Written by Ethan Minh

Reading Time: 7 minutes

May 8, 2025

Insight: Vietnam’s exports hit $369.9B in 2024, boosted by 17 FTAs offering 10–40% tariff cuts—but only if strict rules of origin are met. These rules require HS codes, certifications, and proof of origin, backed by 42 legal documents and WTO recognition.

Vietnam is a top choice for manufacturers. It has many free trade agreements (FTAs). These agreements offer lower tariffs. But they come with strict rules of origin. Businesses must follow these rules to benefit. Breaking them can lead to penalties. This article explains the rules of origin. It helps investors understand Vietnam’s trade system.

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Vietnam is a global trade hub. It has low labor costs. It also has many FTAs. These include the EU-Vietnam Free Trade Agreement (EVFTA). Another is the UK-Vietnam Free Trade Agreement (UKVFTA). These deals boost Vietnam’s exports. Export turnover grew from $114.5 billion in 2012 to $354.7 billion in 2023. In the first 11 months of 2024, it reached $369.9 billion. That’s an average growth of 22 to 23 percent yearly.

FTAs lower import tariffs. They can drop by 10 to 40 percent compared to most-favored-nation (MFN) tariffs. MFN tariffs are set by the World Trade Organization (WTO). But to get these benefits, businesses must follow FTA rules. These rules are long and complex. Some agreements are hundreds of pages. They list specific tariffs and product requirements.

Rules of origin decide if a product qualifies for FTA benefits. They check where a product comes from. This ensures only eligible goods get lower tariffs. Rules also prevent non-FTA countries from gaining unfair advantages. For Vietnam, these rules are key. They ensure exports meet FTA standards.

Rules of origin also apply to international law. They help decide when anti-dumping duties apply. Anti-dumping duties protect against unfairly cheap imports. For Vietnamese exports, rules require parts of production to happen in Vietnam. This varies by FTA and product.

To start, businesses need the Harmonized System (HS) code. HS codes are six-digit numbers. They classify products for customs. They also show which FTA rules apply. These rules cover production methods, labeling, and certifications.

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For a product to get tariff cuts, it must “originate” in an FTA country. There are two types of originating products. These are “wholly obtained” and “not wholly obtained” goods.

Wholly obtained goods come entirely from an FTA country. These include raw materials like livestock or crops. They must be sourced only from the FTA zone. Each FTA lists which goods must be wholly obtained. For example, some agricultural products qualify.

Businesses selling goods from multiple countries must be careful. Goods from non-FTA countries, like China, may not qualify. Companies exporting from both Vietnam and China need to check FTA rules. This ensures their products meet the requirements.

Not wholly obtained goods use materials from outside the FTA zone. Modern FTAs allow this due to global supply chains. But these goods must meet specific rules. There are two main ways they qualify:

The product is sufficiently transformed in the FTA zone.

A certain percentage of the product comes from the FTA zone.

Each FTA sets its own standards. Some require a percentage of inputs from the FTA zone. Others demand a degree of change during production. The way value is calculated varies by agreement and product.

Businesses face challenges here. They must follow complex rules. They also need to design production to meet multiple FTAs. A cost-benefit analysis is key. It helps decide if following FTA rules is worth it.

Vietnam is close to suppliers in China and India. But it’s far from markets in the Americas and Europe. FTAs help with supply chain integration. They also support shipping to final destinations. Two key features are cumulation and transit rules.

Cumulation lets businesses use materials from multiple countries. This keeps the product’s originating status. It suits global supply chains. For example, under the EVFTA, fabric from South Korea can be processed in Vietnam. The final product still qualifies as Vietnamese. This allows tariff cuts.

Businesses with supply chains near Vietnam should check cumulation rules. These are in Vietnam’s FTAs. They help ensure the lowest tariffs possible.

Goods often pass through multiple ports. FTAs ensure these goods keep their preferential status. This lets businesses choose the best shipping routes. But importers may ask for proof. They need to confirm the goods weren’t altered during transit. Altered goods lose tariff benefits.

Rules of origin are detailed and complex. A country may have different rules for each FTA. Businesses with global supply chains must align with these rules. They also need to keep records. These prove the goods’ eligibility. Customs audits can check these records. At minimum, businesses must track material origins.

Vietnam takes rules of origin seriously. Since 2020, preferential certificates of origin (C/O) issuance grew by 20 percent yearly. In 2024, it’s expected to rise by 18 percent from 2023. The Ministry of Industry and Trade (MOIT) issued 42 legal documents. These cover C/O procedures and enforce rules of origin.

Key documents include:

Decree No. 31/2018/ND-CP, dated March 8, 2018.

Circular No. 05/2018/TT-BCT, dated April 3, 2018.

Circular No. 44/2023/TT-BCT, dated December 29, 2023.

Vietnam’s efforts earned praise at a WTO meeting in April 2025. The WTO Committee on Rules of Origin recognized Vietnam’s framework. Vietnam plans to improve further. It aims to launch an electronic data exchange system. This will streamline customs and origin inspections.

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FTAs under negotiation:

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Vietnam’s FTAs offer big opportunities. They lower tariffs and boost exports. But rules of origin are complex. Businesses must understand HS codes, product types, and cumulation. They also need to track origins and keep records. Vietnam’s legal framework supports these rules. It ensures compliance with global standards. By following these rules, businesses can thrive in Vietnam’s trade network.

Ethan Minh

Content Strategist

Before taking on the position of Content Strategist at MediaStep, Ethan Minh graduated with honors from New York University and accumulated more than 8 years of experience working at multinational companies, corporations, and marketing agencies such as Omnicom Group and The Interpublic Group of Companies (IPG). He has developed content across all platforms to implement promotional strategies for businesses.