2025 US-Vietnam FTA Tariff Changes: How to Claim Duty Exemption for Vietnamese-Processed Chinese Goods
Introduction
For European and North American sellers importing Chinese goods into the U.S., the 2025 U.S.-Vietnam Free Trade Agreement (FTA) offers a strategic opportunity to reduce tariffs by leveraging origin rules. If your products are manufactured using Chinese raw materials but undergo substantial processing in Vietnam, you can claim duty exemptions or reduced tariffs under the FTA.
This article explains how to:
- Split product classifications to meet FTA origin criteria.
- Calculate regional value content (RVC) for Vietnamese-processed goods.
- Apply for FTA certificates of origin to secure duty savings.
By understanding the USTR (U.S. Trade Representative) guidelines and Vietnam’s export compliance rules, you can optimize your supply chain and avoid costly U.S. tariffs.
Understanding the 2025 U.S.-Vietnam FTA Tariff Changes
1. Key Provisions of the U.S.-Vietnam FTA
The U.S.-Vietnam FTA, effective from 2025, reduces tariffs on 94% of Vietnamese exports to the U.S. to 0%, provided they meet origin rules. For goods containing Chinese-sourced components, the FTA allows duty exemption if:
- Substantial transformation occurs in Vietnam (e.g., assembly, manufacturing).
- Regional Value Content (RVC) meets the 45% threshold (calculated as value added in Vietnam / total product value).
2. Impact on Chinese-Processed Goods
If your product uses Chinese raw materials (e.g., textiles, electronics components) but is assembled or finished in Vietnam, it may qualify for 0% U.S. tariffs under the FTA. This is critical for sellers shipping Chinese-made goods to the U.S. via Vietnamese intermediaries.
How to Split Product Classifications for FTA Compliance
1. Step 1: Determine Substantial Transformation
The USTR defines “substantial transformation” as a process that results in a new, distinct article of commerce with a different name, character, or use.
Example:
- Chinese raw materials (e.g., fabric) → Vietnamese sewing and packaging → Finished garment (classified under HS 6209.20.00).
Non-compliant example:
- Chinese pre-made garments → Vietnamese repackaging → No substantial transformation (tariffs apply).
2. Step 2: Calculate Regional Value Content (RVC)
The RVC must be ≥45% of the total product value.
Formula:
RVC=Value Added in VietnamTotal Product Value×100RVC=Total Product ValueValue Added in Vietnam×100
Example:
- Chinese raw material cost: $100 (imported fabric).
- Vietnamese processing cost: $150 (labor, packaging, logistics).
- Total product value: $250.
- RVC: 150/150/250 = 60% (qualifies for FTA exemption).
3. Step 3: Apply for FTA Certificate of Origin
To claim duty exemption, submit a Form A (Vietnamese Certificate of Origin) with your shipment.
Requirements:
- Product classification must align with FTA rules.
- RVC calculation must be documented.
- Vietnamese supplier must issue the certificate.
Case Study: Chinese Electronics Seller Reduces U.S. Tariffs via Vietnam
Background
- Company: Shenzhen TechCo, a Chinese electronics manufacturer exporting smartwatches to the U.S.
- Challenge: U.S. tariffs on Chinese electronics (145% due to Trump’s 2025 policies).
Solution
- Outsource Assembly to Vietnam:
- Ship Chinese-made circuit boards ($50/unit) to a Vietnamese partner.
- Partner assembles smartwatches in Vietnam ($70/unit labor + packaging).
- FTA Compliance Check:
- Total product value: 120(120(50 + $70).
- RVC: 70/70/120 = 58% (meets 45% threshold).
- Result:
- Tariff rate drops from 145% to 0% for U.S. shipments.
- Cost savings: 17.40/unit(e.g.,17.40/unit(e.g.,120 product x 145% = 174tariffvs.174tariffvs.0).
Step-by-Step Guide to FTA Duty Exemption
1. Choose the Right Vietnamese Partner
- Criteria: Partner must perform substantial processing (e.g., assembly, re-packaging).
- Due Diligence: Verify partner’s ability to issue FTA-certified invoices.
2. Document Regional Value Content
- Invoice breakdown: Include Chinese raw material cost and Vietnamese processing cost.
- Example:plaintext深色版本
Product: Smartwatch Chinese Components: $50 (circuit board, sensors) Vietnamese Processing: $70 (assembly, packaging) Total Value: $120 RVC: 58% (FTA compliant)
3. Apply for FTA Certificate of Origin
- Form A: Issued by Vietnamese customs authority.
- Deadline: Submit within 60 days of export.
- Penalties: Non-compliant shipments face retroactive tariffs.
Common Pitfalls to Avoid
1. Incomplete Substantial Transformation
- Error: Shipping pre-assembled goods to Vietnam for minimal repackaging.
- Fix: Ensure Vietnamese partner performs critical manufacturing steps (e.g., soldering, software installation).
2. Miscalculating RVC
- Error: Including non-regional costs (e.g., U.S. shipping, insurance).
- Fix: Use only Chinese and Vietnamese costs in RVC calculation.
3. Missing FTA Documentation
- Error: Failing to submit Form A with customs declaration.
- Fix: Train Vietnamese partners to issue FTA-compliant certificates.
Future Trends: Automation in FTA Compliance
1. Blockchain for Supply Chain Transparency
- GSBN (Global Shipping Business Network) is piloting blockchain-based RVC tracking for U.S.-Vietnam FTA shipments.
- Benefits: Real-time verification of origin and RVC compliance.
2. AI-Powered Customs Declarations
- Platforms like TradeLens now integrate AI to flag FTA eligibility risks before shipment.
Conclusion
The 2025 U.S.-Vietnam FTA presents a cost-effective solution for sellers shipping Chinese goods to the U.S. By splitting product classifications, calculating RVC accurately, and claiming FTA exemptions, you can bypass 145% U.S. tariffs and streamline your supply chain.
Take Action Today:
- Partner with a Vietnamese supplier capable of substantial processing.
- Use our RVC calculator template to verify FTA eligibility.
- Submit Form A with every shipment to ensure duty savings.
