International Cooperation Agreement of Vietnam.
Vietnam Free Trade Agreements: How Businesses Use FTAs to Reduce Tariffs and Boost Exports
When people talk about Vietnam’s manufacturing boom, they usually mention low labor costs, taxes, and a fast-growing economy.
But from a business perspective, one of the key reasons is Vietnam’s extensive network of Free Trade Agreements (FTAs). In many industries, these agreements are what actually make manufacturing in Vietnam financially viable. Sometimes the difference between a 12% import duty and a 0% tariff is not just a “nice advantage” — it is the entire project margin.
Why Foreign Businesses Choose Vietnam
Many companies use Vietnam not as a sales market, but as an export platform.
In practice, the model often looks like this:
- importing components;
- manufacturing or assembly in Vietnam;
- exporting finished products under preferential tariff schemes.
This is exactly why manufacturing companies from China, South Korea, Japan, and Europe continue moving production into Vietnam.
Over the last few years, supply chains have become far more diversified. Instead of producing everything in China, companies now structure operations differently:
- some components come from China;
- others from Korea or Japan;
- assembly takes place in Vietnam;
- finished products are exported to the EU or CPTPP countries.
Key Free Trade Agreements in Vietnam
Vietnam has more than 15 active trade agreements, but in practice businesses usually focus on several major ones. Some agreements are more important for exports to Europe, others for Asian supply chains, and some mainly affect imports of raw materials and industrial components.
EVFTA - EU–Vietnam Free Trade Agreement
The EVFTA is considered one of Vietnam’s most important trade agreements for export-oriented businesses. For the European market, it effectively positioned Vietnam as a preferred manufacturing destination in Asia.
The agreement provides for the gradual elimination of almost 99% of customs duties between Vietnam and the European Union. Some tariffs were removed immediately after the agreement entered into force, while others are being phased out over several years.
The industries benefiting the most include:
- furniture manufacturing;
- textiles and garments;
- footwear;
- electronics;
- processed food products;
- seafood;
- industrial goods.
The furniture industry, in particular, saw a major shift after EVFTA came into force. Many manufacturers relocated production to Vietnam specifically to gain access to lower EU tariffs. At the same time, European customs authorities pay very close attention to rules of origin. Simply routing products through Vietnam or performing minimal assembly is usually not enough to qualify for preferential tariffs.
Certificate of Origin Requirements
To obtain a certificate of origin, products generally need to undergo substantial transformation in Vietnam rather than simple repackaging or basic assembly.
Depending on the agreement, customs authorities may evaluate:
- changes in HS codes after processing;
- local value-added content;
- manufacturing operations performed in Vietnam.
In many agreements, products must contain at least 40% local value to qualify for preferential tariff treatment. If the product does not meet the rules of origin requirements, reduced tariffs under the FTA will not apply.
CPTPP - One of the Most Valuable Agreements for Export Manufacturers
The CPTPP includes:
- Japan;
- Canada;
- Australia;
- New Zealand;
- Mexico;
- Singapore;
- Malaysia;
- Vietnam;
- Chile;
- Peru;
- Brunei.
In practice, CPTPP creates a large preferential trade zone across the Pacific region. For manufacturers, the biggest advantage is the ability to use one production base in Vietnam to access multiple markets under a single agreement.
For example: manufacturing in Vietnam and exporting to Canada, Japan, and Australia within the same FTA framework.
This is often far more efficient than building separate structures for each market.
CPTPP is especially important for:
- textile manufacturers;
- industrial assembly operations;
- wood processing;
- food manufacturing;
- component suppliers.
Another advantage of CPTPP is that its rules are considered more modern than many older ASEAN agreements, particularly in areas such as e-commerce, intellectual property, and international supply chain standards.
RCEP - The Largest Trade Agreement in the World
RCEP is often less discussed than EVFTA, but for Asian manufacturing its impact is enormous.
The agreement includes:
- ASEAN countries;
- China;
- Japan;
- South Korea;
- Australia;
- New Zealand.
Together, these economies form the world’s largest trade bloc by population and combined GDP. The main value of RCEP is not only tariff reduction, but also the simplification of regional supply chains and harmonization of origin rules across Asia.
Before RCEP, companies had to navigate different origin rules and separate compliance requirements for each country, making supply chains more complicated and expensive. RCEP significantly simplified this process and made regional trade within Asia much more efficient.
ACFTA - ASEAN–China Free Trade Agreement
ACFTA is one of the core agreements supporting Vietnam’s industrial sector.
Almost every manufacturing business in Vietnam depends on Chinese imports in some form:
- industrial equipment;
- raw materials;
- components;
- packaging;
- chemicals;
- manufacturing supplies.
Over the years, ACFTA gradually reduced tariffs between China and ASEAN countries, including Vietnam. Many product categories now benefit from near-zero tariff rates. This allows Vietnamese manufacturers to import Chinese components at lower cost, process or assemble products in Vietnam, and then export finished goods under other FTAs.
The model: Chinese components → manufacturing in Vietnam → export to the EU or CPTPP countries has become extremely common.
VKFTA - Vietnam–Korea Free Trade Agreement
South Korea is one of the largest foreign investors in Vietnam. Companies such as Samsung, LG, and numerous Korean industrial groups have effectively created entire manufacturing ecosystems inside the country.
VKFTA expanded tariff benefits beyond the standard ASEAN–Korea agreement, particularly for:
- electronics;
- industrial equipment;
- chemicals;
- automotive components;
- industrial raw materials;
- manufacturing supplies.
For businesses involved in electronics and industrial manufacturing, Korean supply chains play a major role in Vietnam today.
Why FTAs Have Become Even More Important
Global trade patterns continue changing rapidly. Many manufacturers are reducing dependence on China and diversifying production into other Asian countries. In this environment, Vietnam has positioned itself extremely well thanks to several advantages:
- a large network of FTAs;
- stable export regulations;
- rapidly growing industrial capacity;
- strategic geographic location;
- access to major global markets.
As a result, Vietnam continues attracting manufacturing companies and international trading groups. And in most large-scale projects, Free Trade Agreements eventually become one of the key economic factors.
Because this is often where the real difference lies between:
- competitive production costs;
- sustainable profit margins;
- and a project that only looks good on paper.
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