Vietnam caught in the middle?
Updated: Aug 7, 2019
As the trade war between the US and China continues, Vietnam has found itself at the centre of the conflict with Chinese products illegally labelled "Made in Vietnam" appearing. This type of mislabelling is likely being driven by US-side importers to avoid tariffs rather than the Chinese factories themselves.
Vietnam's largest trade partner continues to be the US and subsequently this relationship is of crucial importance. Vietnam does not want to be seen by its largest trading partner as an illegal trans-shipping port for Chinese traders avoiding US tariffs. As a result, the Vietnamese government has recently made a statement that it will combat goods that are illegal mislabelled "Made in Vietnam" and the Customs department has reportedly been developing a process to better identify and impose penalties on violating businesses. These statements have not been empty threats, as customs authorities have already made several seizures against mislabelled Chinese products. Customs Authorities are also requiring strict risk management and channel classifications for cargo inspections during clearance process as well as a post clearance audits for suspected mislabelled goods.
A recent case at Hai Phong Port in Vietnam saw Customs intercept a shipment of 'Toppers' branded shoes, which had been temporarily imported from Xiamen, China, to be re-exported to Argentina. Customs conducted a physical inspection of the shipment and found the goods had been falsely labelled as "Made in Vietnam", despite originating in China. As a result of shipments like these, Customs authorities are strengthening inspections and controls. However, they have also stressed the importance of educating organisations and individuals on their rights and responsibilities in the protection of intellectual property rights and country of origin labelling.
It's important to understand how Vietnam determines "Country of origin" and is able to provide a Certificate of Origin (“C/O”) when the subsequent rules below are met. To obtain the C/O in Vietnam, goods must contain a Local Value Content (“LVC”) of 30%. To meet the required LVC, factories in Vietnam must provide the relevant government agency the list and declaration that the exported goods satisfy the LVC criteria. The authority then considers the case. In addition to the LVC, factories in Vietnam may also apply for the C/O by using the criteria of a change in customs tariff classification (that is, significant work has been done to convert the products from one customs class to another).
While the cloud of the trade war is still looming, Vietnam is taking steps to limit its adverse effects. The Ministry of Industry and Trade will be issuing a circular for guidance on the use of the ‘Made in Vietnam’ labelling and will be conducting public consultations for input. In the meantime, if companies are concerned, they should ensure that they check the C/O details to ensure that they don’t become another victim of the trade war, simply by not knowing the way the system works.