Import duty exemption for raw materials used to manufacture exports

The core message to grasp before reading on: since 25 April 2021 (Decree 18/2021/ND-CP), imported raw materials for manufacturing exports (SXXK) that meet the conditions are EXEMPT from duty upfront at import — the old “pay first, refund later” mechanism no longer applies. This is the point businesses confuse most, and it is the boundary separating this article from the duty refund mechanism (which applies only when duty has already been paid).

Legal basis

• Article 16(7) of the Law on Export and Import Duties (consolidated document 96/VBHN-VPQH): raw materials, supplies and components imported to manufacture exports are exempt from import duty;
• Article 12 of Decree 134/2016/ND-CP (as amended by Decree 18/2021/ND-CP): detailed rules on scope and conditions.

A sharp distinction: Article 16(7) (SXXK) differs from Article 16(6) (processing). Processing means manufacturing under a processing contract for a foreign trader; SXXK means the enterprise imports raw materials itself to manufacture its own exports — two different mechanisms, not to be merged.

Eligible material scope (four groups)

Under Article 12(1) of Decree 134/2016/ND-CP, duty-exempt goods include:

1. Raw materials, supplies (including packaging supplies), components and semi-finished products directly constituting exported products or directly participating in production without being directly transformed into goods;
2. Finished products imported for assembly into exported products, or packed together as complete sets or trial-run combinations;
3. Components and spare parts imported for warranty of exported products;
4. Imported goods not used for trading, used only as samples.

Exemption conditions — three control points businesses often trip on

Under Article 12(2) of Decree 134/2016/ND-CP (after Decree 18/2021), the basis for determining exempt goods:

• Suitable production facility: the organization or individual manufacturing exports has a production facility for exports in Vietnam’s territory; has ownership or the right to use machinery and equipment at the facility suitable for the imported raw materials, supplies and components;
• Production-facility notification to customs (Article 56 of Circular 38/2015/TT-BTC, amended by Article 1(36) of Circular 39/2018/TT-BTC);
• Final settlement report: imported materials must be used to manufacture products actually exported; the exempted value/quantity is determined on the basis of actual use for actually exported products at settlement; proper management and use for the right purpose plus a settlement report on material use under Article 60 of Circular 38/2015/TT-BTC (as amended by Circular 121/2025/TT-BTC, effective 1 February 2026).

Key note: the exempted quantity = actual use for actually exported products (determined at settlement), not the entire imported quantity.

Businesses may also hire other organizations or individuals to re-manufacture or re-process part or all stages, provided they notify customs of the production facility and the manufacturing/re-processing contract and bear responsibility (Article 12(2) of Decree 134/2016/ND-CP after Decree 18/2021).

Exemption procedures

• The taxpayer notifies customs of the list of duty-exempt goods expected to be imported (Article 17 of the Law on Export and Import Duties);
• Dossier and procedures per Article 31 of Decree 134/2016/ND-CP.

Consequences of misuse

Using duty-exempt materials for the wrong purpose (domestic consumption, transfer, etc.) without declaring and paying duty leads to back-tax collection and administrative penalties under customs administrative-penalty law — currently Decree 169/2026/ND-CP (effective 1 July 2026, replacing Decree 128/2020/ND-CP). Proper management and use is not only a condition for exemption but an ongoing obligation after exemption is granted.

Quick checklist for businesses

1. Match materials against the four groups in Article 12(1) of Decree 134/2016;
2. Ensure a suitable production facility + machinery and that the facility notification was filed with customs;
3. Notify the duty-free list before import; track actual use for actually exported products;
4. File the settlement report (Article 60 of Circular 38/2015, post-Circular 121/2025 version);
5. Never use exempt materials for other purposes without declaring and paying duty.

Need help reviewing import/export tax incentives for your investment project? Reach us via the Contact page of FLAT Law Firm.

The information above is for reference only and does not constitute legal advice.

For reference only, not legal advice. Content quality-checked by the AI Legal Council; not yet reviewed by a human lawyer.