Foreign firms manufacturing in Vietnam count themselves as part of one of the fastest growing manufacturing industries in the world.
In this light, there is a huge opportunity in buying and exporting Vietnam-made products around the world. This can be very profitable but there are a few nuances to the process that foreign firms looking to open a factory in Vietnam or export good from Vietnam more generally should be mindful of.
This article outlines the key regulations, processes, and means of exporting from Vietnam to other parts of the world.
Using a local trading company
Firms that want a quick and easy solution to export from Vietnam to other parts of the world may find engaging a local trading company the most effective way forward. This is a simple transaction whereby the local trading company takes care of the logistics from the farm gate or the factory floor to one of Vietnam’s many ports. This does, however, give firms little control over their exports while they are in Vietnam.
Finding a local trading company
Professional business matchmaking services in Hanoi and Ho Chi Minh City are a dime a dozen. Most consultancies offer these services and can advise on the right local partner to assist in locating the right products for a particular market as well as negotiate terms.
For firms that would like a little more control over their goods before they leave Vietnam, establishing a local presence is always an option too.
Establishing a trading company in Vietnam
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 2024
Wholly foreign-owned trading companies in Vietnam
Establishing a wholly foreign-owned trading company, to either export from or import into Vietnam, offers foreign investors complete control over their business’s operations. However, this approach typically involves higher costs and can be a more time-consuming process.
Specifically, foreign entrepreneurs interested in setting up a wholly foreign-owned company must apply for an Investment Registration Certificate (IRC), a step not required when partnering with a local entity.
The purpose of the IRC is essentially to ensure that foreign companies do not engage in business activities that fall under restricted or prohibited categories. The criteria for granting an IRC are stipulated in the Law on Investment, which also states that IRCs should ideally be issued within a timeframe ranging from 5 to 15 days. In practice, however, the processing time often extends to around 30 to 45 days.
Joint venture trading companies in Vietnam
When foreign entrepreneurs opt to collaborate with a local partner, they are not required to obtain an Investment Registration Certificate. Instead, the Vietnamese partner establishes the company, and the foreign investor buys a share. This approach can significantly reduce both the initial setup expenses and the time needed to establish a trading company in Vietnam.
However, it’s important to note that joint ventures come with certain inherent risks. Differences in work ethics and management styles can potentially lead to workplace conflicts, especially in cross-cultural contexts. For instance, while it’s customary in Vietnam to impose financial penalties on employees for being late or using their phones during working hours, such practices are usually considered unacceptable in Western countries. Recognizing these subtle nuances in cross-cultural communication within a joint venture environment can be pivotal to the success of a business.
Transporting goods
Once a trading company has been established the next step is arranging logistics in Vietnam. If using a local trading company, they should be able to 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 ship your products out of Vietnam.
Airports
Airfreight is popular for high-value and perishable goods. High-value can be most efficiently exported via air freight. Most international logistics companies service Vietnam–DHL and FedEx, for example. These companies usually fly to the biggest airports in Vietnam in 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 out of Vietnam.
There are approximately 36 seaports in Vietnam 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
Vietnam’s land ports are another option for firms that are exporting to other parts of Asia. This is common for firms where Vietnam is a part of a longer supply chain. For example, rubber harvested in Thailand might be processed in Cambodia and then shipped to Vietnam to form the sole of a new pair of sneakers. There are a number of land border crossings connecting Vietnam to its neighbours scattered along its northern and western borders.
Dealing with customs
Once goods have been shipped to one of Vietnam’s airports, seaports, or land border crossings they will be subject to a customs inspection before they can leave the country.
Procedure
Firms exporting from Vietnam must go through a relatively simple process.
- They must first complete an electronic customs declaration (form HQ/2015/XK).
- Submit the above form to the customs office online.
- This is then either given a green light and the export can proceed. If it receives a yellow light further documentation will be required. If it receives a red light, additional documentation will be required as well as a physical inspection.
For the purposes of exporting , it should be fairly simple. It would be unusual to receive a yellow or red light. If this were the case a thorough review of the customs declaration would be a good first place to start.
Export taxes
Whereas there are a number of taxes in Vietnam that foreign firms should be aware of, Vietnam does not apply export taxes or tariffs to. However, firms should keep in mind that the receiving country may apply import tariffs. In this context, firms should also be mindful that Vietnam has a range of free trade agreements that may limit their exposure to international tariffs.
Post-customs
After clearing customs, goods for export can travel freely to their intended destination.
What’s next?
There are thousands of foreign companies manufacturing in Vietnam but there appears to be room for quite a few more.
Furthermore, 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 exporting goods from Vietnam.
For up-to-date information on what is happening in Vietnam’s import and export sector at any given time, exporters should make sure to subscribe to the-shiv.