OTTAWA – Vietnam’s free-trade deal with the European Union includes a commitment that cars sold in the country should follow international vehicle regulations.
The agreement should make it easier for European automakers to sell vehicles in Vietnam because they already follow these technical rules, but it may make it more difficult for American exporters.
The commitment also covers parts for these vehicles and also car parts also used in minibuses (of up to 5 tons) and in commercial trucks.
These technical rules have been set by the UN Economic Commission for Europe’s World Forum for Harmonization of Vehicle Regulations and generally are written into EU type-approval legislation.
An annex to the free-trade deal, whose text was released Feb. 1, declares “the parties shall at any time refrain from introducing any new domestic technical regulation, markings and conformity assessment procedures diverging from technical requirements of UNECE regulations in areas covered.”
Commenting on the text, which was initialed in August, EU Trade Commissioner Cecilia Malmström says that once ratified, “the agreement will unlock a market with huge potential for EU firms. Vietnam is a fast-growing economy of more than 90 million consumers with a growing middle class and a young and dynamic workforce.”
Of critical importance is the agreed removal of tariffs, especially in Vietnam’s growing market, helping European manufacturers sell the higher-end models not manufactured in this emerging market.
According to the agreement, duties of 78% on most EU-made motor vehicles imported into Vietnam will be phased out over 11 years following the deal coming into force, with 70% tariffs on imports of stretch limousines also to disappear over 11 years. It is the same schedule for phasing out Vietnamese duties on trucks, for instance: 65% on models under five tons; 50% on trucks 5-10 tons; 30% on trucks 10-20 tons; 20% for 20-24 tons; and 10% for 24-45 tons.
Bigger European trucks already enter Vietnam duty-free.
Also to be phased out over 11 years are 70% duties on imports of minibuses between six and 18 tons.
Dropping Duties on Grommets
Duties on parts also will be phased out. Key here is a general catch-all 10% duty for motor vehicle engine parts imported into Vietnam which will be phased out over eight years following the deal coming into force. Other, more Vietnamese-specific duties also will go – for instance, 5% duties on rubber grommets and rubber covers for automotive wiring harnesses will be phased out over four years; and 5% duties on automotive air-conditioning pumps, over eight years.
EU duties on Vietnamese vehicle exports already are significantly lower but these, too, will be scrapped under the deal.
Most cars attract 10% tariffs and these will be phased out over eight years once the agreement takes effect. Vietnamese-made trucks can attract higher duties but these also will be phased out over eight years: 22% on trucks with cylinder capacity exceeding 2.5L, and 10% on those with smaller engines.
A similar 8-year phaseout will apply for larger passenger vehicles: 16% on buses with cylinder capacity exceeding 2.5L, and 10% on minibuses with smaller engines.
The EU also has released details on more general agreements on reducing trade and investment restrictions. Commenting on an investment-protection chapter within the deal, Malmström says, “The agreement will also help trigger a new wave of high-quality investment in both directions, supported by our new investment dispute-resolution system with an appeal mechanism.”