27 Aug 2019
VIETNAM: Import Duty Exemptions Planned for Alternative Fuel Vehicle Components
Automotive parts imported into the country for the domestic assembly/manufacture of green/alternative fuel vehicles are to be exempt from import duties under the terms of a proposed move championed by the Finance Ministry. This exemption will apply to all such components imported before the end of 2023, with the change initiated through an amendment to Decree No. 125/2017/ND-CP.
The move is intended to boost the country’s vehicle manufacturing sector, where development has been hampered by a shortage of local component manufacturers. Although existing regulations permit the duty-free import of certain components for use in green vehicles, manufacturers are obliged to meet certain production output levels in order to qualify for such benefits. To date, no manufacturer is known to have benefited from this arrangement as the manufacture/assembly of alternative fuel vehicles is almost non-existent in Vietnam. VinFast, a local company, however, has announced plans to assemble 500 electric buses a year from 2020 onwards. This, though, still falls below the required threshold for claiming duty benefits.
The government is, however, hoping that this new move will spur local and overseas investors into establishing alternative fuel vehicle assembly and manufacturing plants in Vietnam. It is believed that this may boost the overall development of the domestic vehicle manufacturing sector, which is a priority given that a number of Vietnam’s recently signed free trade agreements are likely to see a surge in the duty-free import levels of completely built units (CBUs) for vehicles over the next seven to 10 years. The two agreements seen as likely to have the greatest impact in this regard are the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) and the EU-Vietnam Free Trade Agreement (EVFTA).