On the 11th of December, 2020, the UK signed The UK Vietnam Free Trade Agreement (UKFTA) in London, effective from the 1st of January 2021. This bilateral trade deal will help the UK replace the existing EU-Vietnam Free Trade Agreement (EVFTA) and it is important to note that the UKVFTA has the same provisions as those found within the EVFTA. Since leaving the EU, the UK has been negotiating new trade deals with a variety of countries in order to replace those to which the trading bloc had negotiated on behalf of its member states.
Tariffs
99% of tariffs between the two countries will be eliminated by the time of full implementation. However, in some cases, non-preferential applied rates may in fact be lower because of changes in the UK’s Most Favoured Nation tariff schedule. From the 1st of January 2021 until the end of February 2021, preferences will be applied retrospectively for goods imported into Vietnam from the UK. This means that goods entering Vietnam from the UK will initially be subject to MFN tariffs for a short period of time. However, businesses will be able to claim back any additional tariffs paid in this temporary period from the Government of Vietnam.
Rules of Origin
In order to claim preferential rates for exports from the UK, starting from the 1st of January 2021, the UK will continue to use the EUR1 format for movement certificates with trade partners that have mutual FTAs with the EU, including Vietnam. These movement certificates will look identical to those currently in use, but the place of origin on the certificate will be marked as the United Kingdom instead of the European Community. However, goods transited through the EU will be subject to the same restrictions as those transited through other third countries. For goods in transit within the period in which the EVFTA ceases to apply to the UK, a retrospective certificate of origin should be issued showing that the goods originated in the UK and are eligible for preferential terms.
There is a unilateral temporary easing of the proof of origin requirements set out in the agreement for goods imported into the UK. If an exporter is unable to raise a proof of origin, UK custom officials will accept EUR1 certificates issued by Vietnam for the purposes of the EVFTA until the 31st of December 2021.
UK & Vietnam Relationship
This FTA is expected to provide a further boost to UK-Vietnam bilateral trade, which has tripled between the years 2010 to 2019, to a sum of £5.7 billion. By the time of full implementation, Vietnam stands to benefit from tariff savings of £114 million on Vietnamese exports. In regards to UK exports, this figure amounts to £36 million. Bilateral trade between the two parties has been quite significant in recent years, to the point that the UK has become the third largest trade partner of Vietnam in Europe after Germany and the Netherlands.
The UK and Vietnam have just celebrated 10 years of their Strategic Partnership Agreement and the FTA with Vietnam is an important step towards the UK’s accession to the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) which should formally apply within the end of 2021. Such accession will strengthen the relationship with the 11 economies within the Indo-Pacific region. Vietnam, a founding member of CPTPP, has fully supported UK’s accession to the group.
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