Preliminary U.S.-Vietnam Trade Agreement

Preliminary U.S.-Vietnam Trade Agreement and Implications for Tariff Assessment and Rules of Origin

By Len Fleisig

On the eve of the July 9, 2025 deadline for a proposed 46% tariff increase on Vietnamese imports, the United States has reached a preliminary trade agreement with the Government of Vietnam. While the agreement has not yet been signed or finalized, several core provisions have been disclosed that will significantly affect trade practices and tariff exposure for importers and exporters operating between the two nations.

Below summarizes the key terms of the provisional deal and outlines the anticipated regulatory challenges, with particular focus on issues surrounding transshipped goods and the U.S. Customs and Border Protection’s (CBP) rules of origin.

Key Provisions of the Preliminary Agreement

1. Reduction in Tariff Threat Level
   The United States will impose a 20% tariff on Vietnamese-origin goods, replacing the previously threatened 46% rate. It remains undetermined whether this tariff will be applied as a flat 20% rate or as 20% in addition to existing Harmonized Tariff Schedule (HTS) duty rates on affected products.

2. Preferential Access for U.S. Exports to Vietnam
   Vietnam will adopt a zero-tariff regime for U.S. exports, effectively establishing a one-way preferential trade arrangement. No reciprocal duty reductions are currently anticipated for Vietnamese exports beyond the revised 20% U.S. tariff.

3. High Tariff Penalty for “Transshipped” Goods
   A 40% duty will be imposed by the United States on goods deemed to be “transshipped” from China through Vietnam—i.e., cargo that allegedly originates in China but is routed through Vietnam and re-labeled to bypass punitive tariffs on Chinese products.

Legal Concerns: Transshipment vs. Substantial Transformation

The most contentious provision involves the definition and enforcement of the term “transshipped” goods. This designation may conflict with the established CBP doctrine of substantial transformation, which allows a product to assume the origin of the country where it undergoes a significant manufacturing process resulting in a new article of commerce with a different HTS classification.

Under existing CBP guidance:

• A substantial transformation may occur where Chinese components are integrated into a finished good in Vietnam, resulting in a product of Vietnamese origin.

• A shift in tariff classification is often used as a test to validate substantial transformation.

The newly proposed 40% tariff on “transshipped” goods may disregard this rule-of-origin framework and instead apply a blanket presumption of Chinese origin, particularly in cases where Chinese inputs are heavily embedded in Vietnamese manufacturing processes.

Given Vietnam’s extensive reliance on Chinese-sourced components, many legitimate Vietnamese exports may be subject to heightened scrutiny and potential reclassification by CBP.

Recommendations and Risk Mitigation

Pending formal implementing regulations, we recommend the following precautionary measures:

1. Enhanced Documentation
   All parties in the Vietnamese supply chain should compile and retain detailed records of the manufacturing process, including sourcing of components, production steps, and tariff classification changes that demonstrate substantial transformation.

2. Advance Ruling Requests
   Importers should consider filing Requests for Ruling Letters with CBP to confirm origin determinations in advance of shipment. These rulings provide legal certainty and reduce the risk of post-entry reclassification and penalty assessments.

3. Internal Compliance Audits
   Companies should undertake internal reviews of their Vietnam-sourced products, especially where Chinese materials are involved, to assess whether those goods are likely to be subject to the 40% “transshipped” tariff.

4. Trade Counsel Consultation
   Due to the evolving nature of this agreement, ongoing consultation with trade counsel is strongly advised to ensure continued compliance as implementing guidance is issued.

Conclusion

The provisional U.S.-Vietnam trade agreement provides temporary relief from the severe 46% tariff hike, but introduces significant ambiguity around transshipment enforcement and country-of-origin rules. Until further guidance is released, importers and exporters must take proactive steps to protect their supply chains and legal exposure under U.S. customs law.

Please contact our office with any questions or for assistance in preparing ruling requests or compliance documentation.

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