Tariff commitments in VKFTA are negotiated on the basis of tariff commitments in the ASEAN - Korea FTA (AKFTA), with a higher liberalization level. VKFTA will have further cut a number of tariff lines that have not been cut in AKFTA, specifically as follows:

• Korea will have further removement of 506 tariff lines for Vietnam.
• Vietnam will have further removement of 265 tariff lines for Korea.

To sum up the commitments in VKFTA and AKFTA:

• Korea will remove 11,679 tariff lines for Vietnam.
• Vietnam will remove for Korea 8,521 tariff lines.

The Vietnam - Korea Free Trade Agreement (VKFTA) was signed on May 5, 2015 and officially took effect on December 20, 2015. In comparison to the ASEAN-Korea FTA (AKFTA), Vietnam and Korea give more incentives to each other in the fields of goods, services and investment in the VKFTA. However, VKFTA does not replace AKFTA, but both of these FTAs are in effect and businesses can choose to use which FTA is more beneficial.

Progress

• August 6, 2012: started negotiations,
• August 2012 - December 2014: conducted 8 rounds of official negotiations and 8 mid-term meetings, at the level of the leader of the negotiating team,
• December 10, 2014: signed a Memorandum of Understanding on the conclusion of VKFTA negotiations,
• March 29, 2015: initialed signing the VKFTA, towards the official signing of the Agreement within the first 6 months of 2015,
• May 5, 2015: officially signed the VKFTA

Origin criteria: According to the provisions of the Agreement, goods will be considered originating in a party (Vietnam or Korea) if one of the following conditions is met:

• Is wholly obtained or produced in the territory of the exporting party;
• Produced entirely in the exporting Party's territory and from originating materials only; either non-originating or not wholly produced in the territory of the exporting Party, but satisfying the rules of origin requirements specified in the Section-Specific Rules of Origin Annex goods (Annex 3-A) or the Appendix on special goods (Annex 3-B).

In general, the Rules of Origin in VKFTA are stricter than those in AKFTA but still relatively simple. To enjoy tariff preferences under VKFTA, goods need to meet one of the following criteria:

• Regulated Regional Price Content (RVC) ratio (usually above 40%);
• Satisfying the applicable change in tariff classification requirement at 2 digits, 4 digits or 6 digits); or undergone a manufacturing or processing (for textile products).

Goods that do not meet the change of classification requirement are still considered originating if:

• For goods not covered by Chapters 50 to 63, the value of all non-originating materials does not exceed 10% of the FOB value of the goods.
• For goods covered by Chapters 50 to 63, the weight of all non-originating materials does not exceed 10% of the weight of the good, or the value of all non-originating materials may not exceed 10% of the FOB value of the good.
• Provisions for some special goods: The Agreement includes an Annex (3-B) on 100 special goods (The list of these goods can be modified if agreed by both parties). These are goods manufactured or processed in Khai Thanh Industrial Park on the Korean Peninsula. The Agreement has separate rules of origin and safeguard mechanism for this type of goods.

Regulations of origin: Goods are still considered originating whether they are manufactured or processed in Khai Thanh Industrial Park on the Korean Peninsula from materials exported from one party (Korea is the main one) , which is then re-imported back into that party, provided that the total value of the non-originating inputs does not exceed 40% of the FOB value of the good.

Certificate of Origin Procedures: Regarding the procedures for granting preferential certificates of origin (C/O), the FTA still applies the process of certificates of origin issuance through a authorized state agency as in previous signed VKFTAs that Vietnam is implementing.

In particular, the Agreement allows exemption from submission of Certificates of Origin for imported goods with a customs value of not more than USD 600 (FOB value), or a higher level if the importing country allows.

Full text of Agreement

Preamble

Chapter 1: General provision

Chapter 2: National treatment and Market access on goods

Tariff schedule of Vietnam (section A, section B)

Tariff schedule of Korea (section A, section B)

Chapter 3: Rules of Origin and Origin procedure

• • • Annex 3-A: Product Specific Rules
    • Annex 3-B: Treatment for certain goods
    • Annex 3-C: Certificate of Origin

Chapter 4: Customs administration and Trade facilitation

Chapter 5: Sanitary and phytosanitary measure

Chapter 6: Technical barriers to trade

Chapter 7: Trade remedies

Chapter 8: Trade in Service

• • • Annex 8-A: Financial Services
    • Annex 8-B: Telecommunications
    • Annex 8-C: Movement of natural person
    • Annex 8-D: Schedule of specific commitment of Vietnam
    • Annex 8-D: Schedule of specific commitment of Korea

Chapter 9: Investment

Chapter 10: E-commerce

Chapter 11: Competition

Chapter 12: Intellectual property

Chapter 13: Economic cooperation

Chapter 14: Transparency

Chapter 15: Dispute settlement

Chapter 16: Exceptions

Chapter 17: Institutional and Finance provisions

Others related document

Agreement arrangement for economic cooperation pursuant to Chapter 13 of the VKFTA Agreement

Chapter on Services in VKFTA is divided into 02 parts:

1. Commitment in principle:

The two parties commit to common regulations and obligations to ensure the interests of service and service providers of each party when accessing the service market of the other party. Each party shall provide the other party's service providers and service providers with the following basic benefits:

1. • National Treatment (NT): For those sectors covered by the Specific Schedule of Commitments, subject to the conditions and standards set forth therein, each party must accord to services and service suppliers of the other party, in the same circumstances, treatment no less favorable than it received from the other party.
   • Most Favored Nation (MFN) treatment: If, after the VKFTA comes into force, a Party to the Agreement (Vietnam or South Korea) signs agreements with a third party that grants more favorable treatment to such third party services and service suppliers, one party is required to consult with the other to consider the possibility of an increase in preferential treatment under the VKFTA that is no less favorable than that accorded to the other party preferential treatment in agreement with such third party, except where such preferential treatment is under existing agreements or agreements between ASEAN members.
2. Commitment on market opening:

Commitment to market access The Services Chapter in VKFTA applies a choose - give approach similar to that in the WTO, i.e. each party will have a list of areas of commitment which lists open sectors and their level openess of commitment, sectors not listed as uncommitted.

For sectors with commitments, depending on the content of specific commitments, each party will not issue or maintain measures affecting the other party's service providers, including restrictions on the number of service suppliers; restrictions on transaction value; restrictions on the total number of service operations or the number of service outputs; restrictions on the total number of human resources to be recruited; restrictions on the type of business; restrictions on foreign capital contribution.

In comparison with the service market opening commitments of Vietnam and Korea in WTO and AKFTA:

• • Vietnam give more opening to Korea in 02 sub-sectors:
    • Urban planning services and urban landscape architecture.
    • Rental of machinery and other equipment without operator.
  • Korea give more opening to Vietnam in 05 sub-sectors:
    • Legal services.
    • Delivery service.
    • Railway maintenance and repair services.
    • Rail transport support services.
    • Natural science research and development services.

Each party undertakes to protect the interests of investors and the investments of investors of the other party through the obligations specified in the Chapter on Investment, in which, there are 4 basic obligations:

• • National Treatment (NT): Each party shall accord to the investors and protected investments of the other treatment no less favorable than that it accords to investors and its own investment.
  • Most Favored Nation (MFN) treatment: Each party shall accord to the investors and protected investments of the other party treatment no less favorable than that it accords to investors and investments of any third party, except where such treatment is pursuant to agreements already in place with third parties or agreements between ASEAN members.
  • Scope of application: Investment dispute settlement mechanism in VKFTA applies only to disputes between one party and investors of the other party because that state violates a number of investment commitments in the Agreement which prejudice to an investor or an investor's investment of the other party in connection with the management, performance, operation, or sale or other disposition of such investment.
  • Dispute settlers: Investors have the right to bring disputes to settlement at:
    • Administrative Court of the investee country: the process and procedures will be according to the regulations and laws of that country.
    • Arbitration: according to the process and procedures specified in the Agreement.