Beyond WTO Compliance: Why Vietnam Should Introduce a Deemed Approval Mechanism for Advance Customs Rulings
Learning from International Best Practices to Build the Next Generation of Trade Facilitation
By Dr. Oliver Massmann – Partner & General Director, Duane Morris Vietnam LLC
Introduction
Vietnam has repeatedly demonstrated that it is prepared to look beyond minimum international standards when modernising its legal system.
From Doi Moi to accession to the World Trade Organization, from the implementation of the EU-Vietnam Free Trade Agreement (EVFTA) to the country’s anticipated FTSE Russell Emerging Market upgrade, Vietnam has consistently adopted reforms that improve transparency, strengthen investor confidence and enhance international competitiveness.
Today, another opportunity presents itself.
Vietnam has fully implemented the WTO Trade Facilitation Agreement (“TFA”) by establishing a legal framework for advance customs rulings. This represents an important achievement.
However, Vietnam now has the opportunity to move beyond WTO compliance and establish itself as one of the world’s leading jurisdictions for predictable and investor-friendly customs administration.
What is an Advance Customs Ruling?
An advance customs ruling is one of the most important trade facilitation instruments available to international traders.
Before goods are imported, an importer may submit an application to Customs describing the planned transaction in detail.
For example:
A German steel manufacturer intends to export 1,000 tonnes of specialised steel products to Vietnam.
Before shipment, the importer submits all relevant information to Vietnam Customs, including:
- detailed product specifications;
- tariff classification proposal;
- certificates of origin;
- customs valuation methodology;
- technical documentation;
- commercial contracts;
- intended customs procedures.
Vietnam Customs then examines the application and issues an official advance ruling.
Once issued, both Customs and the importer know in advance how the shipment will be treated.
This creates legal certainty before the goods even leave Germany.
Why Advance Rulings Matter
International supply chains depend upon predictability.
Large investments often require decisions months before production begins.
Importers need certainty regarding:
- customs classification;
- applicable duty rates;
- preferential tariff treatment;
- rules of origin;
- customs valuation;
- import compliance.
Without legal certainty, investors face unnecessary commercial risks.
Vietnam’s Current Legal Framework
Vietnam deserves considerable recognition for implementing the WTO Trade Facilitation Agreement.
The Law on Customs and its implementing regulations establish an advance ruling system covering matters such as:
- tariff classification;
- origin of goods; and
- customs valuation.
This framework significantly improves transparency.
However, under current Vietnamese law, Customs must issue a written decision before the advance ruling becomes effective.
If Customs remains silent, no legal consequence follows.
The importer must simply continue waiting.
The WTO Does Not Require More — But It Allows More
Article 3 of the WTO Trade Facilitation Agreement requires Members to establish advance ruling systems.
It requires rulings to be issued within a reasonable published period.
Importantly, however, the WTO does not require Members to introduce a deemed approval mechanism.
The WTO establishes minimum obligations.
Nothing prevents Members from adopting more business-friendly procedures.
Learning from German Administrative Law
German administrative law contains an interesting concept known as the Genehmigungsfiktion, or “deemed approval.”
Under this principle, where legislation specifically provides for it, an administrative application is automatically deemed approved if the competent authority fails to decide within a prescribed statutory period.
The legal effect arises by operation of law.
The applicant does not receive a discretionary favour.
Instead, legal certainty is created because the administration failed to act within the legally prescribed timeframe.
Although this concept does not generally apply to customs procedures in Germany, it demonstrates an important legislative principle:
Administrative efficiency can be encouraged by attaching legal consequences to administrative silence.
Several jurisdictions around the world have adopted comparable mechanisms in selected regulatory areas.
Vietnam could develop its own model based upon this internationally recognised legislative technique.
A New Reform Opportunity for Vietnam
Vietnam could introduce a carefully balanced provision stating:
Where an applicant has submitted a complete, accurate and truthful application for an advance customs ruling, and Vietnam Customs fails to issue a decision within the prescribed statutory period, the requested advance ruling shall be deemed approved, unless the matter concerns fraud, prohibited goods, national security, trade remedies or other specifically excluded circumstances.
This proposal would not weaken Customs.
Instead, it would encourage administrative discipline while rewarding transparent and compliant businesses.
Benefits for Vietnam
- Greater Legal Certainty
Investors can make commercial decisions with confidence.
- Faster Investment Decisions
Projects proceed without unnecessary administrative delay.
- Stronger International Competitiveness
Vietnam would distinguish itself as one of Asia’s most predictable customs jurisdictions.
- Increased Foreign Direct Investment
International investors consistently rank legal certainty among the most important investment factors.
- Better Administrative Performance
Statutory deadlines improve efficiency, accountability and internal management.
Suggested Legislative Safeguards
A deemed approval mechanism should include appropriate safeguards.
For example:
- complete disclosure by the applicant;
- suspension of the statutory period where additional information is requested;
- exclusion for fraud, intentional misrepresentation and false declarations;
- exclusion for prohibited goods and national security matters;
- preservation of Customs’ post-clearance audit powers;
- judicial review where appropriate.
Such safeguards protect both legitimate trade and the public interest.
Proposed Action Plan
Step 1 – Establish an Inter-Ministerial Working Group
Including:
- Ministry of Finance;
- Vietnam Customs;
- Ministry of Industry and Trade;
- Ministry of Justice;
- Vietnam Chamber of Commerce and Industry.
Step 2 – Conduct an International Comparative Study
Review legislative models from:
- Germany;
- Singapore;
- Australia;
- New Zealand;
- Canada;
- South Korea;
- the European Union.
The objective should not be to copy foreign law but to identify best practices suitable for Vietnam.
Step 3 – Amend the Customs Law
Introduce:
- statutory decision deadlines;
- deemed approval provisions;
- procedural safeguards;
- electronic notification systems.
Step 4 – Digitalisation
Integrate advance rulings into Vietnam’s National Single Window and digital customs platform.
Applications, tracking, deadline monitoring and rulings should be fully electronic.
Step 5 – Pilot Programme
Implement the new mechanism initially for low-risk categories such as tariff classification and origin determinations before extending it to additional customs matters.
Conclusion
Vietnam has never become one of Asia’s most successful economies by merely complying with international minimum standards.
Its greatest achievements have resulted from adopting reforms that anticipate future economic needs.
Introducing a carefully designed deemed approval mechanism for advance customs rulings would represent another such reform.
It would not only strengthen legal certainty.
It would enhance Vietnam’s reputation as a transparent, efficient and investment-friendly economy.
The WTO Trade Facilitation Agreement provides the foundation.
Vietnam now has the opportunity to build the next level.
Rather than asking what the WTO requires, Vietnam can once again ask a more ambitious question:
What reform will make Vietnam the preferred destination for global investment over the next twenty years?
A modern, predictable and efficient advance customs ruling system—supported by a carefully designed deemed approval mechanism—could be one of the answers
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For more information on the above, please do not hesitate to contact the author Dr. Oliver Massmann under [email protected]. Dr. Oliver Massmann is the General Director of Duane Morris Vietnam LLC.