- Vietnam recently issued rules of origin and preferential tariff regulations for the implementation of the UK-Vietnam free trade agreement
- The UK and Vietnam have signed the UK-Vietnam Free Trade Agreement, which will see virtually all tariffs eliminated when fully implemented.
- The deal represents significant opportunities in education, renewable energy, healthcare and infrastructure for UK and Vietnamese businesses and will strengthen and build on the two countries’ trade relations.
- The UK is also reportedly keen to join the CPTPP, which Vietnam has supported but is dependent on remaining signatories.
While the United Kingdom-Vietnam Free Trade Agreement (UKVFTA) entered into force on May 1, Vietnam issued several regulations to implement the free trade agreement. Investors should know the implementing decrees to profit and reduce costs if they exchange goods between the two countries.
Rules of origin: Circular 2
More recently, the Vietnamese government issued Circular 02/2021 / TT-BCT (Circular 2) guiding the implementation of rules of origin in the UKVFTA. In accordance with Circular 2, the exporter is authorized to self-certify the origin of export and import shipments valued at less than 6,000 euros (7,133 USD) between the United Kingdom and Vietnam . Circular 2 takes effect on July 26, 2021.
For an export value above 600 euros, exporters must have a certificate of origin (C / O) of 1 EUR authorized by the Vietnamese Ministry of Industry and Trade (MoIT). For imports worth more than 6000 euros into Vietnam, exporters registered in an electronic database authorized by the UK customs authorities are allowed to self-certify.
Circular 2 also stipulates that proof of origin must be submitted within two years of importation to Vietnamese customs. Customs authorities may require a translation if it is not in English. Certificates of origin are valid for 12 months and must be submitted to the customs authorities of either country during the period of validity.
Preferential tariffs for the implementation of the UKVFTA: Decree 53
On May 21, the Vietnamese government released Decree 53/2021 / ND-CP (Decree 53) on Vietnam’s preferential export and import tariffs for the implementation of the United Kingdom-Vietnam Free Trade Agreement (UKFTA) for the period 2021-2022. Decree 53 comes into force on May 21, 2021.
The decree lists two annexes which detail the products which benefit from preferential tariffs. Specifically, goods exported from Vietnam to the UK will be eligible for preferential tariffs if:
- Include commodity codes (such as HS codes);
- Product descriptions;
- Transport documents with destination included;
- Preferential rates for each product; and
- Customs declarations declaring that the goods originate in Vietnam.
Likewise, products imported into Vietnam must comply with the rules of origin and come from the UK or non-tariff areas.
The UK and Vietnam signed the UKVFTA on December 29, 2020, as the UK exits the EU.
The free trade agreement was signed by the ambassadors of the two countries in London, paving the way for continued and growing trade between the two countries. The UKVFTA entered into force on May 1, 2021.
The agreement will see the elimination of virtually all tariffs between the two countries when fully implemented.
The British Embassy in Vietnam has forecast Vietnam to save $ 151 million in tariffs through the deal, while the UK is expected to save around $ 36 million.
The bilateral FTA will strengthen the Vietnam-UK relationship through trade liberalization, legal regulation and alignment with global standards.
Following the ratification of the EU-Vietnam Free Trade Agreement (EVFTA), the UK and Vietnam wanted to further strengthen their ties and develop their bilateral relations. More recently, British Foreign Minister Dominic Raab visited Hanoi on September 29-30 and discussed Vietnam-UK relations with Vietnamese Foreign Minister Pham Binh Minh.
Looking for a trade deal
The FTA is important because the UK left the EU after December 31, 2020. The UK was busy negotiating renewal trade deals to replace those the EU had negotiated so it could continue to benefit from preferential trade agreements from January 1, 2021.
In addition, Vietnam has pledged to support the UK’s accession to the Comprehensive and Trans-Pacific Partnership (CPTPP). The CPTPP is made up of 11 countries and would require the approval of all member states for the UK to join the Trade Pact. Yet this is an important victory for the UK; its allies such as Australia, Canada and New Zealand are also signatories, increasing its chances of joining the FTA.
For Vietnam, the UK’s accession to the CPTPP, as well as its bilateral FTA with the country, would be a win-win situation, as finalizing the two trade pacts would help the export-oriented country catch up with its growth targets. , which come up against an obstacle. due to the COVID-19 pandemic.
Vietnam is Southeast Asia’s second-largest exporter to the UK after Thailand, with bilateral trade between the two countries amounting to US $ 6.7 billion in 2019. The main exports to the UK United included cellphones, clothing and textiles, and seafood. The UK is also looking to Vietnam for goods and services such as education, renewable energy, technology, infrastructure and Healthcare. In fact, it is the largest foreign investor in the education sector in Vietnam.
To further explore the UK-Vietnam relationship, we take a look at some of the industries that present opportunities for UK businesses in Vietnam.
As mentioned earlier, the UK is one of the biggest foreign investors in the education sector in Vietnam. In addition, education remains a national priority for the Vietnamese government. Vietnam’s nascent middle class prefers private education to public school systems because of the higher quality of services and has thus resulted in a market for private institutions and schools and professional services. There is still a demand for quality English training centers as well as higher education and teacher training. In addition, technical and vocational training is at the center of the government’s development plans, all the more so as jobs evolve in the light of digital developments such as Industry 4.0.
The recent boom in solar energy development in Vietnam presents new opportunities for UK businesses. Vietnam’s energy use is expected to increase further as it recovers from the pandemic-induced slowdown. Vietnam continues to depend on coal because it is cheap, but technological advancements and environmental concerns make renewables more attractive. More recently, the government reiterated its position that renewable energy contributes 20% of its total energy supply by 2030. There is a demand for technology, equipment and training in the renewable energy sector, a field in which which the United Kingdom has expertise.
As a fast growing economy, Vietnam’s list of infrastructure projects continues to grow. With 50 percent of Vietnam’s population expected to live in cities by 2030, authorities in Hanoi and Ho Chi Minh City are scrambling to build metro systems topping US $ 22 billion in hopes reduce congestion and improve air quality. The government also continues to work on several highways and has engaged several private investors for development and financing.
Long Thanh Airport, which will replace the currently overcrowded Tan Son Nhat International Airport in Ho Chi Minh City, is expected to be completed by 2025. Vietnam spends a significant portion of its GDP on infrastructure, which is one highest in Southeast Asia. The railways and aviation sectors in particular are important opportunities for UK companies which have products and services that can meet the needs of the Vietnamese market.
An increased demand for health services combined with strained public resources from the government offers opportunities for growth in the health sector in Vietnam. Vietnam is currently undergoing economic and demographic transformations that will offer great potential to the industry. Healthcare spending is expected to reach US $ 23 billion in 2022, with compound annual growth of 10.7% according to Fitch Solutions. Vietnam has a rapidly growing middle class and aging population, and rapid economic development has spurred demand for specialized and better health services.
The Vietnamese Ministry of Health (MoH) has forecast that the country’s medical equipment market will grow at a rate of 18-20% from 2016 to 2020. However, most medical equipment must be imported. Public hospitals also lack sufficient equipment for surgical and intensive care units. As local production cannot meet demand, the Vietnamese government is encouraging the import of medical equipment and this is another area ripe for UK investors.
Following an economic partnership agreement with Japan and a trade deal with Singapore, Vietnam was the UK’s third trade deal in Asia. For the UK, the deal offers significant potential for expanding exports to Vietnam, which is one of the fastest growing emerging markets in the world.
While the UKVFTA is expected to go into effect on January 1, 2021, it is unclear when the FTA will be signed. Vietnam has also said it will apply the EVFTA deal to the UK until a bilateral pact is ready. Nevertheless, the trade deal is expected to be similar to the EVFTA.
The UK and Vietnam improved their links to a strategic partnership in 2010 with exchanges on an upward trajectory since then.
While a trade deal will benefit both countries, UK investors should familiarize themselves with Vietnam’s current legal and tax environment. Investors who target sectors that align with Vietnam’s development goals are likely to be successful in long-term investment projects.
Note: This article was first published in October 2020 and has been updated to include the latest developments.
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