Vietnam CPTPP Tariff Schedule
Hi, my name is Chris and I built this webpage. I have been working in the Vietnam Garment Industry since 2008. My expertise is advising fashion start-ups. I also introduce established brands to factories making shoes, socks, bags, hats etc. Vietnam is small and my network of factories is wide. Let's talk about growing your business by manufacturing in Vietnam.
This page is about determining your tax rate if you qualify for CPTPP tariff reductions.
I offer services like factory introductions, factory visits and quality control. I find the right factories fast for you in Vietnam.
This page is about determining your tax rate if you qualify for CPTPP tariff reductions.
I offer services like factory introductions, factory visits and quality control. I find the right factories fast for you in Vietnam.
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Step 1: Find out if your garment is originating
Your garment is considered originating if it - and all of its components - are produced in a CPTPP member country. Let’s say your garment uses wool yarn from Australia, buttons from New Zealand and embroidery from Mexico before it is sewn together in Vietnam then it qualifies as originating. These three countries are CPTPP countries. But what if the thread is made in China which is not a CPTPP member? There is a legal loop hole to solve this Chinese thread problem and it’s called de minimis.
De minimis stipulates that if your garment has Chinese thread and therefore does not qualify as originating then IT CAN be treated as originating if the value of the non-originating materials used in production is less than 10% of the value of the good. Thread is definitely less than 10% of the total production value of a garment. In fact there are many small components that go into a garment like buttons, labels, hang tag chords etc. They don’t need to be made in CPTPP countries. How to determine the % in case it’s close to 10%?
Start by completing your tech pack. Read here if you don’t know what a tech pack is. In your tech pack you will have a bill of materials (BOM). The BOM lists out every component. Study the list and relative sizes or amounts. At this point you have to make a subjective decision that 90% of the items on the BOM are made in CPTPP countries. If you guess wrong and the CPTPP police catch you then you risk being banned from future preferential taxes.
Step 2: Figure out your HS Code
You will need to use the Harmonized Commodity Description and Coding System generally known as the Harmonized System or simply HS. It is a multipurpose international product nomenclature developed by the World Customs Organization. This system is accepted by and implemented in more than 200 countries worldwide. It categorizes goods into approximately 5,000 commodity groups. The harmonized system classifies your garment with an HS code based on its name, use, and/or the material used in its construction. HS codes are standard across the world but each country has their own tax rates for each code. Let’s look at an example if you are importing a t-shirt into the US.
In the US, HS codes are defined in the Harmonized Tariff Schedule (HTS). Go to the HTS website and download the ‘full document’. Click ctrl+f to search the HTS. Search for “singlets, tank tops.” You will see 6109.10.00 which is the HS code for t-shirts, singlets, tank tops and similar garments, knitted or crocheted made of cotton. You will also see the tax rate of 16.5%. That is the tax rate we hope will be reduced thanks to CPTPP. Let’s say your t-shirt is technically a thermal undershirt. What is the HS code? It’s a little different. It’s 6109.10.11. Or let’s say your t-shirt is made of polyester, a man-made fiber. If you look on the next page you will see that it is 6109.90.10 and the tax rate is 32%.
These two examples are relatively straight forward. In many cases there can be more than one applicable HS Code. You can also request a ruling from the Customs Border Protection via there webpage: https://erulings.cbp.gov/home.
Now that you have your HS code and you know your original tax rate you can check if the tax will decrease thanks to CPTPP.
Step 3: Get the country specific tariff schedule
If you are importing into any of the 11 CPTPP member countries you will have to check the country specific tariff schedule to find out the phase out schedule. Some HS code duty rates will go to 0% immediately and some will be annually decreased.
Here are links to the tariff elimination schedules for each member of CPTPP:
Australia
http://wtocenter.vn/upload/files/fta/174-ftas-concluded/175-cptpp-tpp11/177-full-text/2-D.-Australia-Tariff-Elimination-Schedule.pdf
Brunei
http://wtocenter.vn/upload/files/fta/174-ftas-concluded/175-cptpp-tpp11/177-full-text/2-D.-Brunei-Tariff-Elimination-Schedule.pdf
Canada
http://wtocenter.vn/upload/files/fta/174-ftas-concluded/175-cptpp-tpp11/177-full-text/2-D.-Canada-Tariff-Elimination-Schedule.pdf
Chile
http://wtocenter.vn/upload/files/fta/174-ftas-concluded/175-cptpp-tpp11/177-full-text/2-D.-Chile-Tariff-Elimination-Schedule.pdf
Japan
http://wtocenter.vn/upload/files/fta/174-ftas-concluded/175-cptpp-tpp11/177-full-text/2-D.-Japan-Tariff-Elimination-Schedule.pdf
Malaysia
http://wtocenter.vn/upload/files/fta/174-ftas-concluded/175-cptpp-tpp11/177-full-text/2-D.-Malaysia-Tariff-Elimination-Schedule.pdf
Mexico
http://wtocenter.vn/upload/files/fta/174-ftas-concluded/175-cptpp-tpp11/177-full-text/2-D.-Mexico-Tariff-Elimination-Schedule.pdf
New Zealand
http://wtocenter.vn/upload/files/fta/174-ftas-concluded/175-cptpp-tpp11/177-full-text/2-D.-New-Zealand-Tariff-Elimination-Schedule.pdf
Peru
http://wtocenter.vn/upload/files/fta/174-ftas-concluded/175-cptpp-tpp11/177-full-text/2-D.-Peru-Tariff-Elimination-Schedule.pdf
Singapore
http://wtocenter.vn/upload/files/fta/174-ftas-concluded/175-cptpp-tpp11/177-full-text/2-D.-Singapore-Tariff-Elimination-Schedule.pdf
Vietnam
http://wtocenter.vn/upload/files/fta/174-ftas-concluded/175-cptpp-tpp11/177-full-text/vietnam%20schedule.pdf
Look up your HS code in the tariff elimination schedule to see how much the duty rate decreases.
Step 4: Check the rules of origin details in Annex 4-A
A garment imported to or exported from a CPTPP country is considered to be an originating good if it is wholly obtained or produced in one or more specified CPTPP countries. There are exceptions. The finished product may include materials from another non-CPTPP country provided the non-originating materials meet the product specific requirement (PSR) such as a change in tariff classification (CTC), a Regional Value Content (RVC) or specific process rule as specified in Annex 3-D (Product Specific Rules Schedule)) of the CPTPP, or in the case of textiles products in Annex 4-A (Textiles Products Specific Rules Schedule).
The rules for textile and textile goods are found in Chapter 4 of the Agreement. There are specific provisions relating to the use of elastomeric yarn (Article 4.2.4), sewing thread and narrow elastic bands (Chapter Notes to chapters 61-63 in Annex 4-A (Textiles PSRs)) which require these input materials to be of CPTPP origin. The predominant rule is the yarn-forward rule. To mitigate the restrictiveness of this rule there is a short supply list. Products on this list are deemed to be originating and can be used to meet the origin threshold regardless of their actual origin. The short supply list can be found in Annex 4-A Appendix 1 Short Supply List.
Read Annex 4-A here for details:
https://www.mfat.govt.nz/assets/Trans-Pacific-Partnership/Annexes/Annex-4-A.-Textiles-and-Apparel-Product-Specific-Rules-of-Origin.pdf
Step 5: Prepare shipping and importing declaration paperwork
Ask me and I will introduce you to Cargo Team Vietnam freight forwarding company that will help you process all the documentation.