December 24, 2002

JAMA and Three Leading Auto Trade Organizations Jointly Protest Vietnam’s Planned CKD Tariff Hike

The Japan Automobile Manufacturers Association (JAMA) and three other major automotive trade associations have jointly dispatched a letter to Prime Minister Phan Van Khai of the Socialist Republic of Vietnam calling for the Vietnamese government to withdraw its directive to increase tariffs on imported automotive component kits (CKDs), effective January 1, 2003.

In addition to JAMA, signatories of the letter dated December 19, 2002 included the United States' Automotive Trade Policy Council (ATPC), the EU’s Association des Constructeurs Europeens d’Automobiles (ACEA) and the Korea Automobile Manufacturers Association (KAMA) of South Korea. These four groups together represent all major automakers worldwide.

In their letter the four organizations express grave concerns over the planned CKD tariff hike announced by the Vietnamese government on December 4, 2002. They describe the tariff directive as an action taken abruptly, without consulting the local auto industry, which will seriously undermine automobile manufacturing in Vietnam by triggering price increases that will lead to a sharp decline in sales and production and force some automakers to shut down operations there. From a broader perspective, they claim, the policy will severely threaten future foreign direct investment in Vietnam.

All four organizations are therefore urging that the CKD tariff hike be revoked at once.

[Reference materials, including copy of the joint letter, are attached here.]

(Reference Information)

  1. Vietnam's Ministry of Finance in December 4, 2002 issued a policy directive to raise the tariff rate charged on imported CKD (complete knocked down) component kits for passenger cars and commercial vehicles. The measure is scheduled to take effect on January 1, 2003 (Decision 146/2002/QD/BTC).
    • Issue date: December 4, 2002
    • Effective date: January 1, 2003
    • Contents:
      1. Increase in CKD tariff rate
      2. Passenger car CKD categories and tariff rates to be made uniform in 2004 (integrating current three levels)
    Passenger cars CKD-1 40% 60% of complete vehicle tariff 70% of complete vehicle tariff
    CKD-2 20% 40% of complete vehicle tariff
    IKD 5% 10% of complete vehicle tariff
    Commercial vehicles   CKD-1 15% 40% of complete vehicle tariff 50% of complete vehicle tariff
    CKD-2 7% 20% of complete vehicle tariff 30% of complete vehicle tariff
    IKD 3% 5% of complete vehicle tariff 10% of complete vehicle tariff

    (*1): The CKD-1, CKD-2 and IKD classification is unclear, with distinctions based on the level of local assembly (extent of local welding, local parts procurement, etc.). Almost all Japanese-affiliated automakers are currently classified CKD-2.

    (*2): The current tariff rate on complete vehicles is 100%.

  2. Position of the Vietnam Automobile Manufacturers Association (VAMA) The VAMA stance is that the Vietnamese government directive in question will not only cause increases in the sales prices of complete vehicles built in Vietnam, but also seriously impact the local operations of VAMA member companies. The 11 member companies of VAMA have therefore submitted a joint letter to the Vietnamese government demanding that this planned policy measure be revoked