What must businesses do to prove their goods qualify as “Made in Vietnam”?

The United States applies a 20% tariff on exports from Vietnam, and this can rise to 40% if there are signs of “transshipping.” In other words, goods suspected of simply passing through Vietnam to avoid duties from another country may face a 40% tariff. As a result, businesses must prove that their products are genuinely assembled in Vietnam, that production processes occur locally, and that imported components only serve a supporting role.

Specific Legal Regulations

Under Decree 31/2018/ND-CP and Circular 05/2018/TT-BCT, regarding the determination of rules of origin for exported goods, a product can be considered of Vietnamese origin if it meets one of two criteria: a local value content (LVC) of 30% or more, or a change in HS code at the 2-, 4-, or 6-digit level compared to non-originating materials. Therefore, it is necessary to base this assessment on the specific production, processing, or manufacturing activities carried out within the business..

For instance, a business importing chicken feet from Brazil, Japan, or South Korea and only cleaning, marinating, and packaging them; or importing whole salmon from Norway or Chile, then slicing and packaging for export; or importing pre-cut garment components and sewing them into finished products. According to the General Department of Customs, these cases are considered simple processing (Clause 6, Article 9 of Decree 31) and do not qualify for claiming Vietnamese origin.

Under Decree 31/2018/ND-CP, goods can only be considered of Vietnamese origin if they undergo a substantial transformation—meaning the production process must create a new commercial product that differs in shape, function, essential characteristics, or intended use from the original goods (Clause 12, Article 3). Clause 1, Article 3 of the same decree also stipulates that the country of origin is either where the goods are entirely produced or where the last basic processing stage takes place if multiple countries are involved in production.

At the international level, U.S. law (19 CFR Part 134) has similar provisions, requiring that any additional processing or added materials must result in a significant transformation for the country to be recognized as the origin.

Challenges in Reducing the Share of Imported Materials and Components from China

One of the biggest barriers to exporting to the U.S. today is not only proving the origin of goods but also meeting the requirement to reduce the proportion of materials and components sourced from China in the product composition. The U.S. is concerned that if most of the product’s value still comes from China, labeling it “Made in Vietnam” would be merely symbolic and would not satisfy the substantial transformation principle. In other words, the goods must genuinely reflect the production value in Vietnam, rather than merely serving as the final assembly point.

This requirement places Vietnamese businesses in a difficult position. In many industries, Chinese materials are not only inexpensive but also a primary supply source, making short-term alternatives almost impossible.

In the textile and footwear sector, imports of raw materials and components reached over USD 22.8 billion in 2024, with 51% sourced from China. For raw fabrics alone, up to 70% of imports originate from China. The footwear sector achieves around 55% domestic content, but many raw materials still need to be imported (General Department of Customs, 2024).

Meanwhile, the electronics sector—which exports over USD 100 billion—relies almost entirely on imported components from South Korea, China, and Taiwan. In the wood industry, more than 70% of raw materials must still be imported. These figures highlight that meeting origin requirements is far from straightforward.

Notes on Origin Labeling and Customs Declarations

In the wood manufacturing and processing sector, preventing origin fraud is a key issue. With the implementation of the EVFTA, businesses that are transparent about origin will benefit the most. However, in practice, many small and medium enterprises still lack full awareness, leading to difficulties in compliance.

According to Ms. Nguyen Thi Hang, Deputy Head of the Customs Team at Tan Thuan Export Processing Zone, if suspicions of fraud arise during customs procedures, shipments can be held for documentation checks, or even for physical inspections of goods or production facilities. In reality, many businesses are not fully familiar with regulations and cannot provide sufficient origin documentation, resulting in extended clearance times and additional costs.

To mitigate risks, businesses must ensure that goods and materials comply with preferential or non-preferential rules of origin under Decree 31/2018/ND-CP. Export documentation must be complete and accurate, including contracts, certificates of origin (C/O), and clear, consistent processing records. Ms. Phung Thi Ngoc Anh also recommends tightening supply chain management and reviewing all documents to ensure transparency.

Additionally, businesses should pay attention to labeling. If goods meet origin criteria, they may be labeled as “Origin: Vietnam,” “Made in Vietnam,” “Produced in Vietnam,” or “Product of Vietnam.” If they do not meet the criteria, these terms must not be used. Labels should reflect the actual status, such as “Assembled in Vietnam,” “Completed in Vietnam,” “Assembled by [Company/Group Name],” “Processed by [Company/Group Name],” or “Product of [Company/Group Name].” This is crucial for avoiding penalties, protecting the company’s reputation, and facilitating smooth exports.

We hope this article provides you with a useful perspective. If you find it helpful, we invite you to subscribe to our newsletter to stay updated with the latest information, or contact Phoenix Logistics for more specific advice.

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