Essential Legal Insights for Engaging in International Trade with Vietnamese Manufacturers

LexNovum Lawyers

23/08/2023

When was the most recent occasion on which you engaged in negotiations and signed an international trade contract with a Vietnamese manufacturer?

Given the recent broadening of the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) to encompass the United Kingdom, cross-border commerce between diverse nations and Vietnamese export-oriented manufacturers is primed to experience a swift upsurge. If you are preparing to engage in such transactions, below are some important legal points that you should take note of when participating in international commercial transactions to mitigate future legal risks:

1. Delve into Manufacturer Profiling Before Committing Funds:

The legal expenses associated with Vietnam’s court system can indeed facilitate the retrieval of deposits or the imposition of fines, all with a reasonable price tag. However, the backlog of litigation cases national-wide tends to extend the procedural timeline. Even if victorious, the receiving party may have already disbanded their factory. As such, it’s prudent to thoroughly scrutinize your partner’s legal standing, headquarters, facilities, inventory, and quality benchmarks before taking any decisive step.

2. Articulate Meticulous Standards:

In cases where your products entail precise manufacturing criteria, it’s imperative to ensure that you’ve provided a detailed roster of specifications accompanied by quantifiable metrics or actual sample items. A majority of Vietnamese manufacturers operating on medium and small scales lack the financial reserves needed to rectify orders in instances of deviations from standards or specifications.

3. Consistent Supervision of Production Phases:

Waiting until the goods reach the port before conducting inspections is a practice that warrants reconsideration. Latent defects might emerge due to inadequately supervised segments of the production process. In circumstances where your physical presence in Vietnam isn’t feasible, enlisting the services of local Quality Control experts can provide invaluable assistance. Some U.S. distributors have confided with us that, despite their entitlement to reject defective goods, they’ve found themselves forfeiting credibility with the US retailers due to delayed deliveries.

4. While court proceedings in Vietnam are known for their reasonable fees, they often come with prolonged procedural timelines. On the other hand, arbitration centers provide a faster and more effective option for resolving commercial disputes. Especially for transactions falling below the $1 million USD threshold, local arbitration centers like VIAC are well-prepared to efficiently manage such disputes. Always remember to remind your attorney to include a provision for selecting arbitration as the method of dispute resettlement solution. Forgetting this crucial step would result in waiting endlessly for the wheels of justice to turn.

5. Secure a Commitment to Contract Fulfillment:

Should concerns arise regarding prevailing victorious in a lawsuit, yet encountering resistance from the losing party – even in possession of funds – it’s advisable to stipulate the provision of a Performance Guarantee Letter issued by a Vietnamese bank. This facility is typically extended by banks only when your counterpart boasts a commendable credit history or possesses the financial capacity to honor their responsibilities in the future.

As Vietnamese legal practitioners, we remain steadfast in our readiness to proffer these insights to foreign entrepreneurs seeking to engage in trade with Vietnamese companies. At LexNovum Lawyers, we hold the belief that armed with a comprehensive understanding and experiential acumen, stakeholders can navigate collaborations with ease and confidence. This, in turn, augments the prospects available to judicious and reputable Vietnamese business proprietors. Therefore, should queries of a legal nature arise in the context of your international trade dealings with Vietnamese manufacturers, do not hesitate to reach out to me at hieu.nguyen@lexnovum.com.vn.