Banking and Securities: Vietnam currently limits foreign banks to a minority shareholding position of 49 percent, but allows bank branches. Vietnam only allows foreign securities companies to open representative offices. Our WTO bilateral market access agreement with Vietnam includes the following improvements:

• Foreign-invested firms established in Vietnam will be afforded national treatment, across all other financial services sub-sectors.

• Cross-border market access commitments will be comparable, or superior, to those of OECD countries.

Insurance: Foreign insurance companies currently are allowed to operate in Vietnam through joint-ventures with a Vietnamese partner and are subject to a number of limitations on their scope of business. Direct branching is not allowed in the insurance sector. After its accession, Vietnam will permit foreign insurance companies to operate under the following terms:

• Vietnam will allow foreign insurance companies to operate through 100-percent foreign-owned subsidiaries. Vietnam also will allow foreign insurance companies to open direct branches offering non-life insurance after five years from the date of its accession.

• Vietnam will allow foreign insurance companies to operate with minimal limitations on their scope of business. For example, for one year after the date of Vietnam's accession, foreign insurance companies will not be permitted to sell certain lines of statutory insurance; thereafter, there will be no limitations on access to the Vietnamese insurance market.

• Vietnam will provide foreign insurance companies with full national treatment.

• Furthermore, Vietnam will implement its commitment for branching in the non-life insurance sector in a manner consistent with the internationally recognized industry standards of the International Association of Insurance Supervisors (IAIS).

Telecommunications: Vietnam will open its telecommunications market and permit majority owned foreign supply in four areas reflecting key U.S. commercial priorities: basic public telecommunications services offered on a non-facilities basis (fixed and mobile services offered by leasing transmission capacity from a Vietnamese company); private data networks (primarily serving multinational investors, offering Internet-based applications); satellite services; and submarine cable services.

Vietnam also accepted the pro-competitive WTO Basic Telecommunications Reference Paper which establishes an independent regulator and obligations to prevent anti-competitive behavior by the dominant supplier. The Reference Paper establishes transparency obligations and interconnection requirements.

Energy Services: Vietnam has made a broad range of commitments that will result in the phased opening of its energy services market. Vietnam will allow U.S. energy services firms to compete for energy services projects associated with oil and gas exploration and development, management consulting, technical testing and analysis, and repair and maintenance of equipment, among others.

Upon accession, Vietnam will permit foreign energy services companies to operate as joint ventures with a Vietnamese partner for a period of three to five years, depending on the type of service. Thereafter, foreign energy services companies will be able to operate as 100-percent foreign-owned enterprises. Vietnam also has committed to provide foreign energy service companies with full national treatment.

Express Delivery: Vietnam will allow foreign express delivery companies to operate as majority shareholders in joint-ventures with Vietnamese partners upon accession and as 100-percent foreign-owned enterprises after five years. Vietnam's membership in the WTO will ensure the unrestricted delivery of documents, parcels, packages, goods and other items through all relevant modes of supply, and guarantee that foreign express delivery operators will receive treatment no less favorable than that accorded to the Vietnam Post Office.

Transportation Services: Vietnam will open its markets for maintenance and repair of aircraft, allowing foreign companies to form joint-ventures with Vietnamese partners upon accession, and to operate as 100-percent foreign-owned enterprises after five years from Vietnam's accession.

Business Services: Vietnam will provide improved market access for professional and business service providers, including lawyers, accountants, architects, engineers, consultants, advertising and marketing executives and veterinarians. U.S. service providers will be allowed to operate as 100-percent foreign-owned enterprises in most of these sectors, either upon accession or after a brief phase-in period. Vietnam also improved access in the computer and related services sector, including allowing 100-percent foreign equity investment in this rapidly growing sector, in which U.S. companies are globally competitive.

Distribution Services: Vietnam will liberalize the wholesale, retail and franchise sectors. Upon accession, U.S. service providers will be allowed to establish joint-ventures with Vietnamese partners, and on January 1, 2009, U.S. service suppliers will be allowed to operate as 100 percent foreign-owned enterprises. Foreign-invested distributors will also be allowed to distribute both imported and domestically produced goods. In addition, Vietnam’s commitments on retailing services provide for direct sales by individual commission agents.

Environmental Services: Vietnam will liberalize its environmental services market. It will allow U.S. service providers to provide a range of services, from sewage services to noise abatement services, through joint-ventures with Vietnamese partners upon accession, or as 100- percent foreign-owned enterprises after five years. Vietnam also has committed to provide foreign service suppliers with full national treatment.

Hotels and Restaurants: Vietnam will open its market to increased U.S. investment in the Vietnamese lodging industry, and create opportunities for U.S. hotel management companies.

II. Agriculture Goods

U.S. agricultural exports to Vietnam exceeded $192 million in 2005, almost 17 percent of total U.S. exports to Vietnam and over 20 percent more than in 2004. With a fast-growing economy and population, Vietnam represents a market of opportunity for U.S. agricultural exporters. As part of its accession, Vietnam has agreed to significantly reduce tariffs on a number of U.S. exports once it joins the WTO. It also agreed to adopt numerous improvements in its implementation of sanitary and phytosanitary measures, including on shelf-life requirements and other non-tariff measures that have the potential to hinder U.S. agricultural exports. For example, Vietnam now recognizes the U.S. system of approving beef, pork and poultry as ‘equivalent’ to its own. As part of the agreement, it is also eliminating BSE restrictions on all U.S. beef under 30 months of age immediately.

Tariffs: Vietnam’s current average applied tariff on agricultural products is 27 percent.

However, upon accession, tariffs on more than three-fourths of U.S. agricultural exports to

Vietnam will be bound at a rate of 15 percent or less. These products include cotton, beef and pork offals, boneless beef, whey, almonds, grapes, apples, pears, raisins, cherries, and frozen fries.

Sanitary and Phytosanitary Measures: In the multilateral process, Vietnam has agreed to implement the WTO Agreement on Sanitary and Phytosanitary Measures upon accession. As result, Vietnam will apply science-based sanitary and phytosanitary standards to all agricultural goods. Vietnam has already established an SPS inquiry point, ensuring transparency and responsiveness with regard to SPS regulatory affairs. As part of its WTO bilateral agreement with the United States, Vietnam has also taken steps to immediately address key issues of importance to the U.S. farmers and ranchers such as:

• Equivalence: Vietnam will recognize the U.S. food safety inspection systems for beef, pork and poultry as equivalent to its inspection systems.

• Shelf-life and Biotechnology: Vietnam will implement its regulations governing shelf life and biotechnology in a non-trade disruptive manner, and committed to consult with the United States before implementing any changes to its current practices.

• BSE: Vietnam has agreed to allow bone-in beef and beef offal trade to resume upon signing of the bilateral agreement. This means Vietnam now will accept all U.S. beef and beef products from animals under 30 months of age.

Specific Products

Beef: Tariffs on U.S. beef offals will be reduced from the MFN rate of 20 percent to 15 percent immediately and phased down to 8 percent over four years. Boneless beef will be cut from 20 percent to 14 percent over five years. The MFN duty on beef sausages, currently at 50 percent, will drop to 40 percent immediately and will be reduced to 22 percent over five years.

Pork: Tariffs on pork offals will be immediately cut from the MFN level of 20 percent to 15 percent with further reductions to 8 percent over four years. Tariffs on other key pork and pork products will be reduced by 50 percent over five years, including tariffs on hams and carcasses, which will fall from 30 percent to 15 percent in that timeframe. Rates on processed pork products will be reduced from 20 percent to 10 percent over five years.

Dairy: Whey tariffs will be reduced from 20 and 30 percent to 10 percent over five years, and will be harmonized early in the implementation period increasing the competitiveness of U.S. whey. MFN rates on cheese will be reduced from 20 percent to 10 percent immediately, and on ice cream from 50 percent to 20 percent over five years.

Fruits: Apples, grapes, and pear tariffs will be cut immediately from 40 percent to 25 percent and will be reduced further to 10 percent over five years. The rate on cherries will go from 40 percent to 10 percent over five years. The MFN duty on raisins will fall from 40 percent to 25 percent immediately with additional cuts to 13 percent over five years.

Nuts: Tariffs on nuts will be reduced significantly as a result of this agreement. The rate on almonds, walnuts and pistachios is currently 40 percent. The tariffs for shelled almonds and in-shell walnuts will be 10 percent after five years. Pistachios and in-shell almonds will face tariffs of 15 percent after three and five years, respectively.

Processed Products: The majority of U.S. processed product exports will be cut 50 percent or more.

For example, Vietnam will reduce the MFN tariff on frozen fries and potato chips from 50 percent to 40 percent immediately. The rate on fries will be further reduced to 13 percent over six years and the rate for chips will fall to 18 percent over five years. Vietnam also will reduce the MFN rate on peanut butter from 50 percent to 40 percent immediately and then continue reductions to 18 percent over five years. Chocolates will be cut from 40 percent to 20-13 percent. Tariffs on cookies and cereals will fall from 40 percent to 15 percent over five years. The MFN duty on tomato paste will be reduced from 50 percent to 40 percent immediately and will then be cut to 20 percent over five years.

Soybean Products: Tariffs on soybeans will fall from 15 percent to 5 percent over three years.

Tariffs on soybean oil also will be significantly reduced, from the MFN rate of 50 percent to 30 percent, with additional reductions to 20 percent over five years. Tariffs on soybean flour will be reduced from 30 percent to 8 percent over five years.

Cotton and Hides and Skins – Tariffs on cotton and hides and skins, currently two of the United States largest exports to Vietnam, will be bound at zero immediately.

Grains – Vietnam will bind its applied rate of 5 percent for both corn and wheat.

III. Industrial Goods

Exports of U.S. industrial goods to Vietnam have increased by over 50 percent in the four years since implementation of the U.S.-Vietnam Bilateral Trade Agreement (2001) and exceeded $900 million in 2005. As part of our WTO bilateral market access agreement,

Vietnam will further expand market access for U.S. exports by significantly reducing tariffs on many manufactured goods. More than 94 percent of U.S. exports of manufactured goods will face duties of 15

percent or less upon implementation of Vietnam’s WTO accession commitments. Vietnam has committed to bind all tariff lines, creating greater transparency for U.S. exporters, and to lower its average bound tariff rate on industrial and consumer goods by 20 percent after full implementation. Average staging for all consumer and industrial products will be approximately two years with many commitments being implemented immediately upon accession.

Some examples of tariff reductions in areas of commercial significance to the United States include:

• Information Technology Products: Upon accession, Vietnam will join the Information

Technology Agreement (ITA), which eliminates tariffs on information technology products including computers, cell phones and modems. U.S. exports to Vietnam of these products exceeded $40 million in 2005.

• Chemicals, Cosmetics and Pharmaceuticals: Vietnam has committed to reduce tariffs to the harmonization rates required by the Chemical Harmonization Agreement on 80 percent of chemical products, which will cover the vast majority of U.S. chemical exports to Vietnam. Vietnam’s average tariff on cosmetics, a key sub-sector in chemicals, will be reduced from 44 percent to 17.9 percent upon full implementation. Pharmaceutical tariffs will average 2.5 percent within five years after accession.

• Civil Aircraft Equipment: Vietnam’s tariff on airplanes and engines will be eliminated within seven years following accession. Vietnam’s average tariff on all aircraft parts will fall to less than 9 percent in the same timeframe.

• Motor Vehicles and Parts: Tariffs on priority U.S. vehicles such as SUVs will be reduced by 50 percent after full implementation. Tariffs on auto parts will be reduced by 19 percent to an average of 13 percent. Vietnam also will reduce its tariff on large motorcycles by 56 percent and motorcycle parts by 32 percent after full implementation.

• Agriculture and Construction Equipment: Vietnam will bind tariffs at 5 percent or less for close to 90 percent of its tariff lines.

• Medical and Scientific Equipment: Vietnam will bind tariffs at zero on 91 percent of medical equipment products within five years of accession. The average tariff rate for this entire sector will be less than 1 percent. Vietnam will eliminate all duties on 96 percent of scientific equipment within three years after accession.

• Wood Products: Vietnam’s average tariff on wood products will be approximately 4 percent upon accession.

Vietnam also addressed non-tariff issues that significantly impact the scope and quality of market access:

• Motorcycles: Vietnam eliminated its ban on imports of large motorcycles (i.e., those with engines with capacities greater than 175cc’s). Within a year, Vietnam will establish a non-discriminatory and transparent system for the importation, distribution, and use of large motorcycles by individuals and firms that meet agreed criteria

• Products Equipped with Encryption Technology: Vietnam will exempt general, commercially traded goods, including all products covered by the Information Technology Agreement, from restrictions imposed on imports of encryption machines and software.

• Ferrous (Steel) and Other Scrap Metals: Vietnam will reduce export duties on these important, globally traded inputs to steel and other metalworking production by up to 51 percent of current levels over the next five to seven years.

• State-Owned and State-Controlled Enterprises: Vietnam has confirmed that its state-owned and state-controlled enterprises will make purchases (not for governmental use) and sales in international trade based on commercial considerations.

Source: Vneconomy, USTR website 01/06/2006