However, importing clothing materials into Vietnam for foreign firms can be tricky. Not only are there a number of technical and legal requirements that need to be met, but a myriad of free trade agreements has made navigating tariffs and trade restrictions complex.

Understanding the nuances of importing clothing materials into Vietnam, including how to find a distributor, establish a trading company, and customs procedures before attempting to access Vietnam’s 100 million-strong consumer market can make the difference between a foreign firm’s success or failure.

Vietnam’s clothing material suppliers

Vietnam’s location in the southeast corner of mainland Southeast Asia puts it in a prime location for accessing raw materials. This section covers the availability and accessibility of said raw materials.

Fabric

Vietnam has a strong textile and garment industry, but its domestic availability of raw materials, particularly fabrics, still poses challenges. While the country is one of the largest exporters of garments, it imports a significant portion of its fabrics, primarily from China, South Korea, and Taiwan, to meet its manufacturing needs. Vietnam produces some fabrics domestically, such as cotton, polyester, and denim, but local production is often insufficient to meet the demand of its fast-growing garment sector.

Leather

Leather is not as common in Southeast Asia with countries like Italy, the US, and Brazil accounting for the bulk of the world’s leather exports. That said, Vietnamese clothing manufacturers have managed to secure relatively stable supply lines of leather in the region.

Locally China, South Korea, Taiwan, and Thailand all supply leather to Vietnam and accounted for about US$4.24 billion of Vietnam leather imports out of a total of about US$5.58 billion in 2023.

That said, Vietnam clothing manufacturers also use imported leather from the US, Italy, and to a lesser extent Brazil among a handful of other nations.

Yarn

With major cotton producers in the US in the east and Australia to the south and the bulk of processing said cotton carried out in China to the north and India just a hop, skip, and a jump to the west, Vietnam is at the centre of the world’s textiles supply. This can be hugely beneficial to Vietnam’s clothing manufacturers when looking to access suppliers of yarn and fabrics.

Establishing a trading company

Trading companies in Vietnam with foreign ownership are generally established as a limited liability company either as a wholly owned foreign enterprise or a joint venture with a Vietnamese partner. This article provides a broad overview of establishment procedures with a more thorough, detailed technical guide available here: How to Form a Company in Vietnam: Technical Guide

Wholly foreign-owned trading companies in Vietnam

A wholly foreign-owned trading company in Vietnam allows a foreign investor complete control over the company’s operations. It is, however, generally more costly and time-consuming.

Specifically, before they can apply to register a business, foreign entrepreneurs who want to set up a wholly foreign-owned company will need to first apply for an Investment Registration Certificate (IRC) which they do not have to do with a local partner.

An IRC is basically required to ensure that foreign firms are not engaging in business in restricted or forbidden business lines. The conditions for approving an IRC are outlined in the Law on Investment which also states that IRCs should be issued in between 5 to 15 days. In reality, however, it is usually around 30 to 45 days.

Joint venture trading companies in Vietnam

With a local partner foreign business persons do not need to file for an Investment Registration Certificate, but rather the Vietnamese partner establishes the company and the foreign investor buys a share. In this sense, working with a local business partner can considerably reduce setup costs and application processing times.

Joint ventures, however, can be risky. A mismatch in work ethics and management styles can cause conflict in the workplace, particularly in cross-cultural settings. For example, whereas in Vietnam it is common to financially penalise staff for arriving late or for using their phone during work hours, in Western countries, this would be unacceptable. Understanding these little nuances of cross-cultural communication, in a joint venture environment, may be crucial to a business’s success.

Import-export licences

Whereas some goods do require an import licence in Vietnam, clothing materials do not.

Shipping to Vietnam

Once you have established your trading company in Vietnam the next step is shipping your goods. If you’re using a local distributor, they will provide you with the delivery details and advise you on the best way to ship your goods. If you have set up your own trading company, however, then there are a number of means by which you can get your goods into Vietnam.

Airports

Airfreight is popular for high-value and perishable goods. High-value clothing materials may be most efficiently delivered via air freight. Most international logistics companies service Vietnam–DHL and FedEx, for example. These companies usually fly to the big cities, Hanoi and Ho Chi Minh City, however, they may also sometimes fly to regional airports if demand warrants it and facilities can accommodate international air freight.

Seaports

For non-perishable items, or bulky low-value items sea freight is likely the most effective option for shipping goods to Vietnam.

Vietnam has approximately 36 ports scattered along its coastline. However, Hai Phong and Ba Ria-Vung Tau are by far the largest and can accommodate the biggest volume of goods. These service key manufacturing hubs in northern Vietnam and southern Vietnam respectively.

Land crossings

Firms that are shipping clothing materials to Vietnam from within Asia could also use land borders. This is common for firms where Vietnam is a part of a longer supply chain. For example, cotton grown in Thailand might be processed in Cambodia and then shipped to Vietnam to be sewn into a sweatshirt. There are a number of land border crossings connecting Vietnam to its neighbours scattered along its northern and western borders.

Customs procedures on arrival in Vietnam

When goods arrive in Vietnam, as they must anywhere else in the world, they are subject to customs inspection. Customs procedures in Vietnam are governed by the Law on Customs.

Paperwork

Firms importing goods into Vietnam need to complete and submit a dossier of documents before the importation can be approved. This can in most cases be submitted online. It will include information on what the goods are, where they are from, their value, and a number of other details. The Vietnam National Trade Repository offers a detailed description of each item that is required.

Tariffs

In recent years, Vietnam has signed on to a number of free trade agreements that have reduced barriers and tariffs almost in their entirety for countries that are party to these agreements.

Import taxes in Vietnam

Though there are no specific import taxes in Vietnam, goods imported into the country may be subject to Vietnam’s Value-added Tax (VAT). That said, if clothing materials imported into Vietnam are made into clothes for export, firms may be able to avoid paying VAT altogether or should be able to claim any VAT paid back.

Post-customs

After clearing customs, importers are free to distribute their goods or store them as they see fit. Logistics firms have built up vast networks of warehouses in recent years that can be an economical means of storing imported goods. Alternatively, depending on the size of the shipment, firms may find it easier to ship directly to their retail outlets.

What’s next?

There are a broad range of tax agents, lawyers, market research firms, human resource professionals, and all-in-one consultancies in Vietnam that can assist entrepreneurs in importing goods into Vietnam.

For up-to-date information on what is happening in Vietnam’s import and export sector at any given time, importers should make sure to subscribe to the-shiv.

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