EU Vietnam trade agreement explained for exporters

The EU Vietnam trade agreement was signed on 30 June 2019. Right now it does not apply. Exporters should read what it promises now, so they are ready when it starts.

This note is for Vietnamese firms that sell to Europe, and for European firms that sell to Vietnam. Here are the main points, kept simple. This summary is a general overview. Before you ship goods under the deal, a customs broker or trade lawyer can check the tariff lines and origin rules that apply to your products.

What was signed on 30 June

Two documents were signed on the same day. One is the trade agreement. The other is a separate investment protection agreement. The first deals with trade in goods and services. The second deals with how investors from each side are treated.

The European Commission says the agreements are meant to eliminate 99 percent of all tariffs. A tariff is a tax charged when goods cross a border. If the tax goes to zero, a product can reach the buyer at a lower price, or the seller can keep a larger margin.

Signing matters because it shows both sides have agreed on the final text. It does not mean the lower tariffs have started.

Sources: European Commission, EU-Vietnam Agreements page (ec.europa.eu/trade/policy/in-focus/eu-vietnam-agreement); European Commission, Vietnam country page (ec.europa.eu/trade/policy/countries-and-regions/countries/vietnam).

What it covers for goods

Tariffs are the headline. The Commission describes the goal as removing almost all of them, on both sides. Exporters in sectors that pay duties today, such as food, clothing and footwear, will want to look at the tariff schedules in the text. Importers of machinery and other goods should do the same.

The agreement also aims to cut regulatory barriers and overlapping red tape. In practice, this means less paperwork and fewer repeated checks at the border. The exact rules for each product are in the legal text, so do not rely on a summary for a real shipment.

Free trade agreements normally include rules of origin. These rules say how much of a product must be made in the partner country to earn the lower tariff. Check this early. A product that is mostly built from third-country parts may not qualify.

Sources: European Commission, EU-Vietnam Agreements page; European Commission, Vietnam country page.

Services, procurement and protected names

The agreement is not only about goods. The Commission says it opens up services markets and public procurement markets on both sides. Public procurement means contracts that governments award for works, supplies and services. Firms from the partner side may get a fairer chance to bid.

It also protects geographical indications. These are product names tied to a place, such as a regional food or drink. Protection means other producers cannot use the name for products that do not come from that place. For Vietnamese farmers and food makers, this can help guard the value of a local name in Europe.

Source: European Commission, EU-Vietnam Agreements page.

Why it does not apply yet

Signing is one step, not the last one. Before a trade agreement of this kind takes effect, each side must finish its own approval process. On the EU side, that includes the formal approval steps in its institutions. On the Vietnamese side, the agreement must also go through the country's own approval process.

No firm start date has been set. Until the agreements are in force, current tariffs and rules stay in place. An order shipped today pays today's duties.

The agreements also build on the EU-Vietnam Partnership and Cooperation Agreement, which entered into force in October 2016. That earlier deal set the wider political and economic relationship between the two sides.

Sources: European Commission, Vietnam country page; European Commission, EU-Vietnam Agreements page.

What exporters can do now

Start with your product code. Every traded good has a customs code, and the tariff schedule is organised by code. Find the code for each of your products and write down today's duty rate in the market you sell to.

Next, map your supply chain. Note where each input is made. This tells you whether a product is likely to meet origin rules later. If a key part comes from a country outside the agreement, ask whether a supplier closer to home could replace it.

Then talk to your buyers. Many European buyers will ask for lower prices once duties fall, and some will offer larger orders. Decide in advance how much of the saving you can share and how much you must keep to cover costs.

Finally, watch for the official texts and the start date. Use the Commission pages and Vietnamese government notices, not rumours. Plan around the date they publish, not around a guess. Smaller firms can also ask a trade association or a chamber of commerce to explain the schedule for their sector.

Treat the next months as preparation time. Firms that know their codes, their origin and their costs will be ready to use the lower tariffs on the first day they apply.

Sources: European Commission, EU-Vietnam Agreements page; European Commission, Vietnam country page.

Sources

• European Commission, EU-Vietnam Agreements: https://ec.europa.eu/trade/policy/in-focus/eu-vietnam-agreement/index_en.htm
• European Commission, Vietnam: https://ec.europa.eu/trade/policy/countries-and-regions/countries/vietnam/