Vietnam plans new penalties for illegal transshipments after Trump deal, documents show

New Straits Times

5 days ago

HANOI: Vietnam is preparing stricter penalties to crack down on trade fraud and the illegal transshipment of goods, and has focused its inspections on Chinese products as it tries to comply with commitments made to Washington, documents seen by Reuters show.
Last week, the Communist-ruled country struck a preliminary deal with US President Donald Trump's administration that cuts planned US tariffs on imports from Vietnam to 20 per cent from the 46 per cent level threatened in April.
But goods that Washington deems to be illegally transshipped through Vietnam will be subject to a 40 per cent levy.
The new measures, which expand a crackdown in recent weeks on trade fraud and imported counterfeits, will be key to keeping on Trump's good side.
US officials have repeatedly accused Vietnam of being used as a waypoint for Chinese goods destined for the United States. They allege some goods have "Made in Vietnam" labels despite having received no or little added value in the country – allowing Chinese exporters to take advantage of Vietnam's lower tariffs and avoid high US duties on goods from China.
The Vietnamese government will issue a new decree that will "prescribe additional levels of sanctions for fraud of origin", and introduce stricter measures and checks to prevent fraud, according to a July 3 trade ministry document.
July 3 was the same day that Trump and Vietnam's top leader To Lam reached their agreement, making the Southeast Asian nation the only other country after Britain so far to reach a preliminary deal on tariffs.
Vietnamese authorities have been told to intensify inspections on exports to the United States, according to the document, which said inspections have focused recently on products "at risk of trade fraud… or Chinese items that are subject to trade defence measures by the European Union and the United States".
The document cited wooden furniture, plywood, steel machine parts, bicycles, batteries, wireless headphones and other electronic products as examples.
It listed examples of fraud such as the use of fake papers to obtain certification of origin documents, forged certificates of origin of goods and the import of counterfeit products into Vietnam.
It added that trade fraud had increased in recent times and was focused on avoiding tariffs and trade defence measures.
Vietnam's trade ministry and the Office of the US Trade Representative did not reply to Reuters' requests for comment.
Much unclear
There remains much to be worked out in the US-Vietnam tariff deal.
It is not yet clear how Washington will define an illegal transshipment and how much value Vietnam must add to imported products to avoid the 40 per cent tariff.
Sources have said that the US is pushing Vietnam to reduce its reliance on imported components from China, especially for electronic devices.
It is also not clear when the deal is likely to be finalised.
Vietnam's government decree will introduce stricter procedures to monitor companies that self-certify the origin of the products they trade, increase scrutiny of traded goods with more on-site inspections and increase scrutiny of the issue of certificates of origin, according to an undated draft seen by Reuters.
The draft decree does not currently list penalties, which are expected to be added in revisions or in other legal texts, said a person familiar with the process. The person was not authorised to speak on the matter and declined to be identified.
Vietnam has nearly tripled its exports to the United States since the start of the US-China trade war in 2018, when the first Trump administration imposed wide-ranging tariffs on Beijing, pushing some manufacturers to move production south.
But as exports to the US boomed, Vietnam vastly expanded imports from China, with their inflow almost exactly matching the value and swings of exports to the United States over the years, each totalling around US$140 billion in 2024, data from the US and Vietnam show.