The EU-Vietnam free trade agreement entered into force on 1 August 2020

Tax & Legal Alert | PwC Hungary | August 13, 2020

As published in the Official Journal of the European Union, the free trade agreement between the European Union and the Socialist Republic of Vietnam took effect on 1 August 2020.

As a result of the Agreement, 99% of the duties applied between the two sides have been abolished. The Agreement scrapped 65% of the duties applicable earlier to goods exported from the EU to Vietnam as of its effective date, and the remaining duties will be phased out within ten years. For goods transported from Vietnam to the EU, 71% of the duties were eliminated as of the above effective date, with the remaining duties to be phased out in the next seven years. 

Economic operators wishing to take advantage of the favourable conditions provided by the Agreement will be required to certify preferential origin of the goods concerned. Considering the related administrative burden, we recommend that preparations for certification of preferential origin should start as soon as possible.

By eliminating or reducing customs duties, the free trade agreement may place companies doing trade with Vietnam at an advantage. Under the regulations applicable previously, goods imported from Vietnam were subject to preferential duty rates on the basis of the Generalised System of Preferences (GSP), which will remain available for two years after the free trade agreement becomes effective. However, in most cases the free trade agreement grants more favourable conditions than the GSP benefits. Therefore, all economic operators trading with Vietnam should examine whether they would enjoy more advantages by continuing to apply the GSP – for a maximum period of two years – or by fulfilling the conditions set out in the free trade agreement. 

If you have any questions regarding the above, please contact Attila Környei (e-mail: attila.kornyei@pwc.com)