What is a Trade War? Are sales to special economic zones in Vietnam subject to export duty?

What is a trade war?

A trade war is a situation where countries engaged in international trade seek to reduce the competitive imports through tariffs, quotas, or other restrictions on imports and to expand their exports through measures to promote export. These measures typically include increasing tariffs, imposing import quotas, or other trade barriers to protect the domestic economy from external competition.

Such beggar-thy-neighbor measures and the accompanying escalation of trade protectionism often fail and lead to a reduction in the volume of international trade and income of the countries involved.

A trade war might bring short-term benefits to some domestic industries, but in the long run, it can incur several drawbacks, including:

- Higher prices for goods, affecting consumers.

- Reduced exports, weakening the economies of both parties.

- Disruption of global supply chains.

- Causing economic recession if the conflict persists.

Example of a Trade War:

One of the most notable trade wars is the U.S.-China trade war (2018 - present), where the U.S. imposed high tariffs on Chinese goods to reduce trade deficits, and China retaliated with tariffs on U.S. goods. This war disrupted global supply chains and had a significant impact on the world economy.

Note: Information is for reference purposes only!

What is a Trade War? (Image from the Internet)

Are sales to special economic zones in Vietnam subject to export duty?

According to Article 2 of the Law on Export and import duties 2016, which regulates the subjects of export and import duties as follows:

Taxable Subjects

1. Goods exported, imported through Vietnam's borders and customs boundaries.

2. Goods exported from the domestic market to non-tariff zones, goods imported from non-tariff zones into the domestic market.

3. Goods exported, imported on the spot and goods exported, imported by enterprises exercising export, import rights, and distribution rights.

4. Subjects of export, import duties do not apply to the following cases:

a) Goods transiting, transferring, or transshipping;

b) Humanitarian aid goods, non-refundable aid goods;

c) Goods exported from non-tariff zones abroad; goods imported from abroad into non-tariff zones for use only within non-tariff zones; goods transferred from one non-tariff zone to another;

d) The portion of crude oil used to pay resource tax to the Government when exported.

5. The Government of Vietnam prescribes the details of this Article.

In addition, according to paragraph 2 of Article 2 of Decision 100/2009/QD-TTg, it is stipulated as follows:

Definition of Terms

In this Regulation, the following terms are understood as follows:

...

2. Non-tariff zones within an economic zone, border-gate economic zone include: bonded zones, special economic trade zones, industrial trade zones, free trade zones, and other named zones established by Decision of the Prime Minister of the Government of Vietnam, where the trading of goods with outside is considered an export-import relationship.

...

Thus, based on the above regulations, goods sold into special economic trade zones are subject to export tax according to legal provisions.

What types of import tax rates are there in Vietnam?

Pursuant to paragraph 3, Article 5 of the Law on Export and import duties 2016 stipulates as follows:

Basis for Calculating Export and Import duties for Goods Using a Percentage Rate Method

...

3. Import tax rates include preferential tax rates, special preferential tax rates, and standard tax rates and are applied as follows:

a) Preferential tax rates apply to imported goods originating from countries, groups of countries, or territories that apply the most favored nation treatment in trade relations with Vietnam; goods from non-tariff zones imported into the domestic market meeting the origin conditions from countries, groups, or territories that apply the most favored nation treatment in trade relations with Vietnam;

b) Special preferential tax rates apply to imported goods originating from countries, groups of countries, or territories with special preferential import tax agreements with Vietnam in trade relations; goods from non-tariff zones imported into the domestic market meeting the origin conditions from countries, groups, or territories with special preferential import tax agreements in trade relations with Vietnam;

c) Standard tax rates apply to imported goods not covered under point a and point b of this paragraph. The standard tax rate is set at 150% of the preferential tax rate for each corresponding item. In cases where the preferential tax rate is 0%, the Prime Minister of the Government of Vietnam, based on the provisions of Article 10 of this Law, shall decide on the application of the standard tax rate.

Thus, according to regulations, import tax rates include:

(1) Preferential tax rates;

(2) Special preferential tax rates;

(3) Standard tax rates.