How a Foreign Company Apply for Certificate of Origin in Vietnam?

Benefits to Apply for Certificate of Origin in Vietnam with Vietnam Origin

Vietnam has growing fast due to the opening policy of the government, and been signing a number of free trade agreements with EU, ASEAN, China, Korea, Japan, India, Australia, New Zealand, Chile, Russia, Belarus… with effectiveness. Having said that, Vietnam has become a destination for foreign investors to set up factory and set up company in Vietnam to undertake manufacturing for export, meet the conditions, follow the follow to apply for Certificate of Origin in Vietnam and enjoy tax preference because of Vietnam origin.

Requirements to apply for Certificate of Origin in Vietnam

The applicant wishing to be apply for Certificate of Origin in Vietnam (“C/O”) needs to register the trader profile under Vietnam regulations before submitting the dossier to apply for Certificate of Origin in Vietnam (“C/O”).

There are steps to be followed at the State authorities to check the trader profile, its legal registration in Vietnam, manufacturing facilities that produce the goods which are subject of C/O to apply for Certificate of Origin in Vietnam.

Further, additional information and proof will be required for verification at Vietnam State Authorities including the declaration of origin provided by manufacturer or supplier of originating materials or locally produced originating goods if such material is used in subsequent stage to produce another good, good manufacturing process.

Not only checking the documents, the authority could undertake an inspection visit to the manufacturing facility of trader and request the applicant to submit evidence of customs declaration of materials imported and used in production of exported goods (if imported materials are used in the production process); a sale contract or VAT invoice of locally purchased materials (if locally purchased materials are used in the production process) and other documents as deemed necessary to apply for Certificate of Origin in Vietnam.

If the documents, the process, and the conditions are met, the Vietnam Certificate of Origin (“C/O”) will be issued.

Requirements to qualify for non-preferential goods

In general, an originating good is a good which is originating in a country, group of countries, or territory where the last processing operation is performed and substantially transforms such good. To qualify for non-preferential goods, there will be requirement of:

1.“Change in tariff classification” (hereinafter referred to as CTC):

CTC means a change in two-digit, four-digit, or six-digit HS heading of a good as compared with the HS heading of non-originating materials (including imported materials and materials of undetermined origin) used for the production of such good.

2.“Local value content” (hereinafter referred to as LVC)

The applicant for C/O shall choose either direct formula or indirect formula at their own discretion to calculate LVC and apply the chosen formula throughout such financial year. The verification and identification of LVC criteria for exported goods of Vietnam shall be based on the aforesaid formula.

In order to calculate LVC according to the formula, value of materials and cost incurred in the production process of goods shall be determined as follows:

a) “Value of materials originating in a country, group of countries, or territory of production” is inclusive of CIF value of materials acquired or locally produced that are originating in a country, group of countries, or territory; direct labor cost, overhead cost, other costs and profits.

b) “Value of materials originating in a country, group of countries, or territory of production” is CIF value of materials imported that are originating in a country, group of countries, or territory; or the earliest ascertained price stated in the VAT invoices associated with materials of unidentifiable origin used for the production, processing of ultimate product.

c) “FOB” is the value stated in the export contract which is calculated as follows: “FOB = Ex-workshop price + other costs”.

-“Ex-workshop price” = Production cost + profit;

-“Production cost” = material cost + direct labor cost + overhead cost;

-“Material cost” covers expenses associated with purchase of materials, their cost of freight and insurance;

-“Direct labor cost” covers wages, bonuses and other welfare amounts related to the production process;

-“Overhead cost” covers:

Overhead cost relates to production process (insurance for buildings, factory rents and hire-purchase cost, depreciation of buildings, repairs, taxes, collateral interests);

hire-purchase cost and interests of factories and equipment;

factory security;

insurance (for factories and equipments used in the production process);

expenses for essentials for production process (energy, electricity and other essentials to be used directly in the production process);

research, development, design and workmanship; pressing molds, moulds, devices and amortization, maintenance and repairs of factories and equipment;

patent royalties (in respect of patented machines or use of patented machines in production process or goods production licenses);

testing of materials and goods; storage in factories; waste treatment;

cost factors in calculating value of materials, such as port-related cost, good clearance and import duties on taxable components;

-“Other costs” are the costs incurred in placing the good in the ship or other means of transport for export including, but not limited to, domestic transport costs, storage and warehousing, port handling, brokerage fees, service charges and relevant costs incurred when loading goods onboard ships for export.

The applicant shall follow the procedures and provide the proof of meeting conditions to apply for Certificate of Origin in Vietnam.  If the goods that do not qualify to be issued Certificate of Origin in Vietnam, it can not be granted Vietnam C/O. Any violations of laws will be punished by the government.

It appears that many manufacturers are in the process to relocate significant manufacturing process to Vietnam to enjoy “Made-in-Vietnam” and apply for Certificate of Origin in Vietnam.

In the meantime, alarmingly, there are equal number of other manufactures whom wish to only transfer a small portion of manufacturing process to Vietnam i.e re-packaging, re-labeling which does not meed to qualifications above to apply for Certificate of Origin in Vietnam.

It is important that Vietnam authorities to alert and constantly monitor the process to apply for Certificate of Origin in Vietnam to ensure all responsible departments, officers to follow the rule as set by law to evaluate the C/O application documents, and proof given by trader, manufacturer carefully.

By doing that, Vietnam government will encourage the “real” transition of manufacturing from China to Vietnam, therefore increasing FDI, boosting the economy through encouraging manufacturing sectors.  

By urging customs authority to investigate and punish violators, the Vietnam government is sending strong message to US that Vietnam is not standing to support unfair trade, and in the meantime take advantage of the situation to attract quality manufacturing projects to set up factory in Vietnam and such quality exporters could apply for Certificate of Origin in Vietnam with Vietnam origin and enjoy tax preference. 

How can we help clients to apply for Certificate of Origin in Vietnam?

As a law firm in Vietnam in international trade, we have been actively providing legal services through advisory to manufacturers on the C/O matters in particular the process to apply for Certificate of Origin in Vietnam, and assisting a number of investor to set up manufacturing company, review leasing contract at industrial zone as part of the process to transition manufacturing into Vietnam to seriously invest and do business taking advantage of origin, labour, opening policy of Vietnam government.

About ANT Lawyers

We help clients overcome cultural barriers and achieve their strategic and financial outcomes, while ensuring the best interest rate protection, risk mitigation and regulatory compliance. ANT lawyers has lawyers in Ho Chi Minh city, Hanoi,  and Danang, and will help customers in doing business in Vietnam.