On 26 June 2019, the Government issued Decree No. 57/2019/ND-CP ("Decree No. 57") effective on 26 June 2019 to implement Vietnam's tariff commitments on exports and imports under the Comprehensive and Progressive Agreement for Trans-Pacific Partnership ("CPTPP").
Decree No. 57 sets forth the tariff rates applicable to countries which already ratified the CPTPP including Australia, Canada, Japan, Mexico, New Zealand, and Singapore for the period from 2019 to 2022.
Decree No. 57 consists of 2 Annexes, of which one is for exports and the other for imports. This demonstrates the more comprehensive approach of the CPTPP as compared to other Free Trade Agreements (FTA), where not only tariff on imports but also tariff on exports are covered under a FTA.
There are two main requirements deciding whether a trader may take advantage of CPTPP import tariff rates available under Decree No. 57: (1) whether goods 'originate' in a CPTPP member country; and (2) goods must be imported into another CPTPP member's territory.
(1) Originating Goods
To be an 'originating good', a good must be grown, raised, caught, hunted, mined or extracted within a CPTPP member country. A product that is made from materials originating in a CPTPP territory would likewise be originating, as would a product that has undergone substantial manufacturing within CPTPP member territories. The actual manufacturing inputs required to qualify a good as CPTPP-originating are product specific. Manufacturers looking to capitalize on this origin category are encouraged to contact Baker McKenzie for a product specific analysis.
(2) Member Countries
Only member countries who have legally adopted the CPTPP and notified other members of their adoption may enjoy preferential tariff rates. This includes the first 6 members to ratify the CPTPP (Australia, Canada, Japan, Mexico, New Zealand and Singapore), and Vietnam, the seventh member to ratify. Annual tariff rate reductions occur on 1 January of each calendar year following ratification.1 The first 6 members and Vietnam have completed two rounds of tariff cuts on CPTPP originating goods, with round three cuts set to occur on 1 January 2020.2
Opportunities for importers to Vietnam
While Decree No. 57 introduces CPTPP tariff reductions from 2019 -2022, Vietnam will continue to eliminate tariffs on CPTPP originating goods over the next 21 years. The largest import tariff reductions are displayed in the chart below:
Exporters/Importers can identify the specific tariff rates applicable to them by consulting the Annexes of Decree No. 57. The structure of the Annexes consists of the following columns:
- HS classification at 8 and 10 digit;
- Commodity Description; and
- Tariff rates: The Tariff rates column consists of 5 sub-columns marked from (I) to (V).3
Hundreds of tariff reductions are occurring across multiple industries for CPTPP originating goods. Businesses importing into Vietnam should confirm whether they are moving CPTPP originating goods in order to claim these preferential rates.
Tariff preference for exporters
The preferential export duty rates for goods exported from Vietnam to CPTPP countries may only be applicable once the exporters can present the copy of the customs declaration form for imported goods issued by the CPTPP countries. As such, at the time of exportation, exporters are still required to pay the applicable MFN export duty rates.
Within 1 year of the date of the customs declaration form for exports, exporters need to present the aforementioned document, along with the Bill of Landing, proving the actual importation into CPTPP countries to claim the export duty back. Beyond this period, the MFN export duty rate shall apply.
This provision is only applicable to commodities subject to export duty. For commodities not subject to export duty, the anonymous export duty rate would be 0%.
See our complimentary alert on CPTPP opportunities available to exporters here.