Chinese Investors

Contract Manufacturing for Chinese Brands in Vietnam: Contract Terms to Protect the Brand

Industrial sewing machines in operation — illustration for the article on contract manufacturing for Chinese brands in Vietnam

Taking on contract manufacturing for a Chinese brand in Vietnam is not just a production contract — it is a contract under which the brand entrusts you with its trademarks, designs, and technical know-how. This article is a contract checklist from the angle of protecting the Chinese brand owner’s brand, under the newest legal framework.

Applicable legal framework

  • Commercial Law 2005 — Articles 178–196 on processing contracts; Article 301 on contractual penalties (capped at 8%).
  • Decree 292/2026/ND-CP — effective 5 September 2026, replacing Decree 69/2018/ND-CP. New points: clear rules on processing of components/semi-finished goods, handling of surplus goods, and material-consumption-norm appendices.
  • Intellectual Property Law — Article 148.3 after Law 131/2025/QH15 (effective 1 April 2026): trademark licence contracts are not required to be registered to take effect.

1. Processing scope and technical standards per the brand’s specs

  • Describe the processed products precisely per the Chinese brand’s technical specs (drawings, quality standards, technological processes) — attached as an inseparable appendix.
  • Any spec change requires the brand owner’s prior written approval — no unilateral changes to materials or processes.

2. Materials, consumption norms, and scrap handling

  • State which party supplies materials (brand owner or processor).
  • Material consumption norms — a norms appendix per the new points of Decree 292/2026.
  • Scrap, defective goods, and surplus handling: who owns them, whether they may be destroyed/sold or must be returned — Decree 292/2026 tightens surplus-goods handling, especially for components/semi-finished goods bearing the brand’s marks.
  • Bar the processor from using leftover materials to make goods for the open market.

3. Intellectual property — the crux of the contract

  • Scope of mark/design use: the processor may use the Chinese brand’s trademarks and designs only on the contract-manufactured finished goods — no off-scope use, no affixing the marks to other products.
  • Ban on similar-mark registration: the processor undertakes not to register, or assist third parties in registering, identical or confusingly similar marks in Vietnam (or anywhere).
  • Trademark licence: under IP Law Article 148.3 after Law 131/2025, a trademark licence contract is effective without registration with the IP office — but registration is still recommended to protect the brand against third parties.
  • Know-how and design confidentiality: confidentiality surviving termination (typically 3–5 years), with specific penalties.

4. The brand owner’s inspection and supervision rights at the factory

  • The Chinese brand owner has the right to inspect and supervise processing at the processor’s factory (Article 181, Commercial Law).
  • Specify inspection frequency, advance notice, and access scope (production lines, material and finished-goods warehouses) — to avoid disputes when inspection teams arrive.

5. Exclusivity and non-competition

  • No processing for the brand’s competitors during the contract term (and a post-termination period if agreed).
  • Territory- or product-line exclusivity may be agreed — the processor works only for this brand within the defined scope.
  • Set specific penalties for non-compete breaches (beyond the general 8% cap, via damages).

6. Remuneration, schedule, acceptance, and claims

  • Processing fees: unit price per conforming product, clear payment method and terms.
  • Delivery schedule: batch timetable, delivery place, handover conditions.
  • Acceptance: acceptance criteria per the brand’s specs, acceptance period, handling of non-conforming goods (repair, rework, fee deduction).
  • Claims: deadlines and procedures for finished-product quality claims.

7. Tax incentives for the processor

  • The processor is exempt from import duty on temporarily imported materials for processing within registered norms — the single most important tax incentive of the processing model.
  • Note: the exemption is tied to norms and customs declarations; surplus materials or misuse can trigger duty recovery and penalties.

8. Penalties, liquidation, governing law, and arbitration

  • Penalties: capped at 8% of the breached obligation’s value (Article 301, Commercial Law); damages beyond the penalty may be agreed.
  • Contract liquidation: final settlement, handling of leftover materials/finished goods, and surviving confidentiality and non-compete duties.
  • Governing law and arbitration: agree expressly on governing law and dispute resolution (VIAC/SIAC/HKIAC arbitration recommended for Vietnam–China deals).

FAQ

Q: Must a contract licensing the Chinese brand’s trademark be registered in Vietnam?
A: No — under IP Law Article 148.3 after Law 131/2025 (effective 1 April 2026), a trademark licence is effective without registration. Registration is still recommended to protect the brand against third parties.

Q: May the processor use the brand’s moulds and designs for its own goods?
A: No — unless the contract allows it. The IP clause must expressly bar off-scope use of marks and designs and bar “same-mould, different-label” production.

Q: What did Decree 292/2026 change versus Decree 69/2018?
A: Notably, clear rules on processing components/semi-finished goods, surplus-goods handling, and material-norm appendices — old templates citing Decree 69/2018 should be updated.

Legal sources

  • Commercial Law 2005, Articles 178–196 (processing in commerce), Article 181, Article 301 — thuvienphapluat.vn
  • Decree 292/2026/ND-CP (effective 5 September 2026, replacing Decree 69/2018/ND-CP) — thuvienphapluat.vn
  • Intellectual Property Law, Article 148.3 (after Law 131/2025/QH15, effective 1 April 2026) — thuvienphapluat.vn

This article provides general legal information and is not legal advice for any specific case. Content has been reviewed by the AI Legal Council before publication, not by a human lawyer.

Contact FLAT Law Firm

If your company manufactures for a Chinese brand (or places processing orders in Vietnam) and needs a processing contract drafted or reviewed with brand, trademark, and design protection clauses, contact our lawyers at contact us.

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