In recent years, there have been various cases where manufacturers of goods using imported components in Vietnam are held to have violated the rules of origin when using the phrase “Made in Vietnam” (e.g., Asanzo, KhaiSilk, and Seven.am). Therefore, it is important to understand the rules of origin applicable for goods sold in Vietnam market. In this post, we will discuss the rules of origin under Vietnam domestic law and the rules of origin under the ASEAN Trade in Goods Agreement (ATIGA).

The rules of origin applicable to imported and exported goods between ASEAN countries (including Vietnam) (ASEAN Goods) are provided under ATIGA. Whereas, under Vietnamese laws, there is no legal framework for determining the origin of goods manufactured and sold within Vietnam territory (Vietnam Domestic Goods). In particular, it is not clear which conditions or standards Vietnam Domestic Goods must satisfy so that they can be labelled “products of Vietnam”, “made in Vietnam” or the like.

According to Article 2(d) and Article 3(c) of WTO’s Agreement on Rules of Origin, WTO members must ensure that the rules of origin that they apply to imports and exports are no more stringent than the rules of origin they apply to determine whether or not a good is domestic. This means that Vietnam Domestic Goods are always subject to equal or more stringent rules of origin than those applicable to imports and exports (currently provided in Decree 31 of the Government dated 8 March 2018 detailing the Law on Foreign Trade Management on product origin (Decree 31/2018)).

Both ATIGA and Decree 31/2018 provide that a good is deemed originating in the exporting country if it:

(1)        is wholly obtained or produced in such country; or

(2)        is not wholly obtained or produced in such country, but (i) the final product has a specific local/ regional value content, or (ii) all non-originating materials used in the production of such good have undergone a change in tariff classification of the Harmonized System (the HS Code of those materials are different from that of the final product).

However, under ATIGA, a good originating in the territory of a Member State will retain its initial originating status, when exported from another Member State, where operations undertaken have not gone beyond minimal operations and processes (Minimal Operations). Operations which are considered as Minimal Operations include:

(3)        ensuring preservation of goods in good condition for the    purposes of transport or storage;

(4)        facilitating shipment or transportation; and

(5)        packaging or presenting goods for sale.

A similar regulation is also provided under Decree 31/2018. Nevertheless, under Decree 31/2018, the operations of simply mixing goods and simply assembling parts of product into a complete product are also considered Minimal Operations.

It can be seen that the rules of origin under Decree 31/2018 are more stringent than those under ATIGA. This means that comparing with manufacturers of ASEAN Goods, manufacturers of Vietnam Domestic Goods are subject to more stringent origin labelling regulations.

For example: A television is produced in Vietnam by simply assembling components imported from China (the HS Codes of these components are different from the television’s HS Code).

(1)        If such television is exported to another ASEAN country, then its origin will be determined in accordance with the rules of origin under ATIGA. Accordingly, the origin of such television will be Vietnam. Accordingly, the phrase “Made in Vietnam” could be affixed to such television.

(2)        If such television is sold within Vietnam, then its origin will be determined in accordance with the rules of origin that are at least equivalent to those under Decree 31/2018. Accordingly, due to the simple assembling process, the origin of such television will be determined as the origin of its components, which is China. Accordingly, the phrase “Made in Vietnam” could not be affixed to such television.

This post is written by Nguyen Thuc Anh and Nguyen Quang Vu.