Selling to Vietnam – Overview
Selling to Vietnam – The Socialist Republic of Vietnam has transcended its struggles from the wars of independence with France and the United States. Today, it stands at the forefront of development, riding the surge sweeping through Asia. As China’s competitive edge in manufacturing begins to wane, Vietnam emerges as a primary beneficiary, attracting production shifts away from its northern neighbour.
Vietnam is ranked 36th in the 2022 World GDP Economy rankings (source Knoema.com). Its population is just over 100 million, with over 68% between the ages of 15 and 64 (source cia.gov).
Strengths of the Vietnamese market include:
- Vietnam’s average GDP growth has been 6 per cent over the last 20 years, and it will grow 8 per cent in 2022 (Statista).
- Establishing itself as the destination for labour-intensive manufacturing.
- Emerging as a manufacturing hub in Asia, especially for electronics (Samsung, LG, and Intel now have operations in Vietnam).
- Vietnam is expected to have a middle class in excess of 35 million people (McKinsey)
- Currently, the median age in Vietnam is 33.1 years of age.
- Vietnam has a well-educated, young, digital-savvy generation with high mobile commerce penetration.
Challenges of doing business in Vietnam include:
- High level of corruption. Vietnam is ranked 81/180 in the 2023 Transparency Index.
- Strict restrictions on foreign exchange transactions.
- Slow and cumbersome customs procedures.
- Lack of transparency, uniformity, and consistency in government policies and decisions can make it difficult to do business.
Vietnam Business culture
A handshake and a slight head bow is the general custom for saying hello and goodbye.
When giving or receiving business cards, do so with both hands. Time should be spent reading the name on the card – hastily stuffing a business card or barely glancing at it is deemed offensive. When possible, seek to create a business card with English and Vietnamese translations.
Vietnamese names are written and introduced in the following order: last name, middle name, first name.
You should use the correct form of address for people. For example, ‘Ms. An Nam To’ would be ‘Ms. To.’
Vietnamese people often address foreigners by their title and first name, e.g., Mr. Paul. This is not intended as a sign of intimacy or disrespect.
Moments of silence are regular during meetings. Interrupting this time of reflection can be considered rude. Further, silence may be used when someone disagrees so as not to cause attendees to lose face.
Meetings
Business attire will depend on the location of the meeting. For instance, Hanoi is known for its professional environment, while Ho Chi Minh City is more business casual
The “win-win” business scenario concept is not widely ingrained in local business culture. However, it is vital to remember when negotiating with a Vietnamese organization. Once a deal is struck in principle, Vietnamese companies may want to take more time to improve their terms and, in addition, try to re-negotiate—again, adding time to business deals.
Like most Asian countries, Vietnamese people will spend time getting to know you and develop a connection with you. The Vietnamese make most of their business decisions based on how they see you as a person outside of the business.
Wait to be seated at a restaurant. In most cases, the oldest in the group will be seated first.
The concept of “face” is fundamental in Vietnam; an essential rule of thumb for Vietnam is that in public, treat everyone in Vietnam with respect.
Setting up in Vietnam
There are many ways you can do business in Vietnam. The most common are:
- Appoint a local partner, distributor or agent –
According to current Vietnamese regulations, unless a foreign company has an investment license permitting it to distribute goods in Vietnam directly, which includes invoicing in the local currency, it must appoint an authorized agent or distributor.
- Set up a representative office or branch office in Vietnam –
A representative office (RO) is generally easy to establish but is also the most restrictive form of official presence in Vietnam. Under the laws of Vietnam, the term “branch” office refers to an entirely foreign-owned business that operates in specifically designated service sectors. Branch status authorizes a foreign company to operate officially in Vietnam, including invoicing/billing onshore in local currency and executing local contracts. Many foreign branch offices first entered Vietnam as representative offices and later applied for a branch license.
- Form a joint-stock or Limited Liability Company –
Foreign direct investment (FDI) in Vietnam is regulated by the Department of Planning and Investment (DPI) at the local level and the Ministry of Planning and Investment (MPI) at the central level through related implementing regulations, decrees, and circulars.
Banking and Finance
The unit of legal tender in Vietnam is the Vietnam Dong ₫ (VND).
The central bank, the State Bank of Vietnam (SBV), is the financial regulatory agency.
Foreign exchange transactions are strictly controlled. Four state-owned banks, Vietcombank, BIDV, Vietinbank, and Agribank, operate in Vietnam. Some foreign banks have branches and representative offices in Vietnam. Therefore, it is important to contact your bank to determine if it has a presence there.
Selling to Vietnam – Tariffs and Non-Tariff Barriers
Tariff
Taxes and duty rates are revised continuously in Vietnam and can change without notice.
Further information on excise taxes can be obtained from the website of Vietnam Customs.
Non-tariff barriers
Import
Exporters of food and foodstuff products to Vietnam must register their products (one-time for one product only) with an authorized agency under the Ministry of Agriculture and Rural Development and the Ministry of Health.
Product labelling, certification, and packaging
The Ministry of Science and Technology is primarily responsible for coordinating with specialized management ministries in amending and supplementing the compulsory contents of goods labels. Product labels must include the following contents (In Vietnamese):
- The name of the Product;
- The name and address of the organization or individual responsible for the products;
- The Origin of the Products;
- Any other content according to the nature of each kind of product;
Food labels, in Vietnamese, must be quantitative and contain the following:
- The production date.
- The expiry date.
- Warning information (if any).
- The name of the food.
- The name and address of the organization or individual responsible for the food.
- The origin of the food.
Alcohol labels, in Vietnamese, must be quantitative and contain the following
- Shelf life (if any),
- Preservation instructions (for wines),
- Warning information (if any),
- Batch identification (if any).
- The name of the alcohol
- The name and address of the organization or individual responsible for the alcohol.
- The origin of the alcohol.
For goods imported into Vietnam but not yet labelled, these auxiliary labels must show the compulsory contents in Vietnamese while keeping the original labels of goods
Vietnam uses the metric system.
Packing
Exporters selling to Vietnam must ensure that any packaging used can protect the products from extreme weather and climate changes as well as the rigors of transport and handling. The packing must meet Vietnam packing requirements
Methods of quoting and payment
Quotes can usually be on a FOB, C&F, or CIF (Incoterms 2020) basis.
Businesses commonly use an irrevocable letter of credit (L/C) payable at sight to settle international transactions. It offers protection to both the exporter and the importer. The currency can be in US$ or Euro. However, Vietnamese companies often resist using confirmed L/C’s because of the additional cost and collateral requirements from banks.
Parties must agree to payment terms in advance. It’s crucial for all parties to understand and sign a document detailing these terms.
Payment terms of 60, 90, or 120 days are standard in Vietnam.
When dealing with a new customer, It is best practice to use secure payment terms such as 100% payment before shipping, letters of credit, sight drafts, or bills of exchange.
Selling to Vietnam – Documentary & Clearance Requirements
Documentation required:
Vietnamese customs procedures are complex and often subject to change. For up-to-date information on clearance regulations, processing times, or applying for the priority program, it is best to consult with government officials or professional service firms.
Below are the documents which Vietnam Customs may require:
- Bill of lading;
- Import goods declaration form;
- Import permit (for restricted products);
- Certificate of origin
- Cargo release order;
- Commercial invoice;
- Customs import declaration form;
- Inspection report;
- Packing list;
- Delivery Order (for goods imported through seaports)
- Technical standard/health certificate; and
- Terminal handling receipts.
Customs process:
Therefore, companies that import or export goods must submit a dossier of documents to the customs authorities. The file must include at least the company’s business registration certificate and import/export business code registration certificate.
Vietnam currently prohibits the importation of weaponry, ammunition, explosive materials, military-technical equipment, firecrackers, second-hand consumer goods, types of publications,, right-hand-drive motor vehicles, materials and transport facilities, chemicals, plant protection agents prohibited from use in Vietnam, scrap and waste, refrigerating equipment using CFC, products, raw material containing asbestos of the group of amphibole, chemicals on the list of prohibited chemicals.
Selling to Vietnam – Business Risks
Companies who operate in Vietnam should commit to the highest level of corporate behaviour and continuously familiarise themselves with the laws of the country and the penalties for bribery of foreign officials.
Intellectual Property Protection
Vietnam has IP protection laws, but enforcement is not reliable. You’ll need to take measures to protect your IP before exporting. For further help and information, contact the National Office of Intellectual Property of Vietnam (NoIP).
Trademark counterfeiting, copyright piracy, and patent infringements are issues in Vietnam. It is mainly because of ignorance among the general public as to what is and what is not a crime.
Enforcement is gradually improving from a very low level but remains precarious to date. Enforcement through civil court action is nearly impossible in practice due to a lack of capacity.
Dispute resolution
Contracts are difficult to enforce in Vietnam, particularly for foreign parties. Contracts should include dispute resolution procedures. Negotiations between the concerned parties are a common means of dispute resolution.
The Economic Court in Vietnam oversees business disputes, while the Administrative Court oversees issues concerning infractions of administrative procedures. The legal process in Vietnam is notoriously intransparent, tedious, and lengthy. Economic Arbitration Centres also offer dispute resolution services. The Vietnam International Arbitration Centre (VIAC) operates closely with the Vietnam Chamber of Commerce and Industry.
Hiring a local legal representative is the best advice.
Selling to Vietnam – Web Resources
Vietnam Customs https://www.customs.gov.vn/default.aspx
Vietnam Trade Promotion Agency http://en.vietrade.gov.vn/
National Business Registration Portal https://dangkykinhdoanh.gov.vn
Intellasia http://www.dau-thau.com/
Ministry of Planning and Investment http://muasamcong.mpi.gov.vn/
Ministry of Foreign Affairs http://www.mofa.gov.vn/en
The Vietnam Standards Agency https://tcvn.gov.vn/
Vietnam Chamber of Commerce and Industry http://vccinews.com/
The Vietnam E-Commerce and Digital Economy Agency http://en.idea.gov.vn/
Vietnam E-Commerce Association http://www.vecom.vn/
The Vietnam Economic Times http://vneconomy.vn/
Vietnam Investment Review http://www.vir.com.vn/
Viet Nam News http://vietnamnews.vnagency.com.vn/
WorldVest Base Financial Intelligence Services Co. Ltd. http://www.vietcr.com/
Credit Information Centre https://cic.org.vn
Selling to Vietnam – About the Author
Aidan Conaty is the founder of TCI China and Goodada.com. Goodada provides third-party Vietnam Quality Control Inspections.
You can contact Aidan by email at aidan@goodada.com or by phone at
- (Europe/ Rest of the World) +353 1 885 3919
- (UK) +44.020.3287.2990
- (North America) +1.518.290.6604