State by State: Vietnam and Arizona Trade

By Andrew Salzman and Charles Small, Dezan Shira & Associates

Trade relations between Arizona and Vietnam are growing steadily. Imports to Arizona from Vietnam reached US$105 million in 2014, having risen 21.6 percent in value from 2013, ranking the country as the 19th most important origin for imports in 2014.

In return, Arizona exported US$42.9 million to Vietnam in 2014, a 12.7 percent increase from 2013, and a dramatic jump from only US$7.03 million in 2005. Arizona’s top five merchandise exports to Vietnam in 2014 were beverages and tobacco products, computer and electronic products, agricultural products, food manufactures, and non-electrical machinery. 

RELATED: State by State: ASEAN and Arizona Trade 

Tariffs in the TPP

When the Trans-Pacific Partnership negotiations are finalized, Arizona businesses will be able to take advantage of reductions in tariffs in the multilateral trade bloc including the U.S. and Vietnam. Arizona may benefit from the reduction in tariffs on non-alcoholic beverages, which faced a rate of up to 34 percent in 2012. Two of the most important tariffs on imports from Vietnam to Virginia are those on man made fiber sweaters and women’s synthetic fiber pants, which in 2013 faced rates of 32 percent and 28.3 percent respectively.

Opportunities Abound

Arizona’s largest companies may find complimentarities in Vietnam’s economy. Arizona’s largest corporate resident Walmart opened a sourcing office in 2013, and is already benefiting from the ample opportunities in Vietnam’s supply chain. The company may find expanding its global retail business into Vietnam lucrative, as the country is opening up the retail sector under its World Trade Organization obligations. The same could be said for Arizona-based Kroger Co. and Albertsons Inc.

After the establishment of a retail outlet, further outlets may be established based on an Economic Needs Test (ENT), though exemptions are permitted for foreign-invested firms. New business licenses are required for each additional store.

Vietnamese residents

Relations between Arizona and Vietnam are deeper than trade alone. Results from the 2010 U.S. Census showed that the number of Vietnamese residents in the state had shot up 87 percent since 2000. In 2010, the state’s 24,216 Vietnamese residents gave it the 14th largest Vietnamese population in the U.S., rising from 19th position a decade previously. This growing population, coupled with neighboring California‘s 581,946 Vietnamese residents, create a human resource pool from which Arizona businesses can recruit local talents.

The U.S. Census Bureau found in its 2007-2009 ACS that 87.5 percent of Vietnamese residents of the U.S. speak Vietnamese at home, and that 67.8 percent of such residents are foreign born, showing that these residents are often already equipped with the language skills and practical experience abroad which smoothen the process of doing business in Vietnam.

RELATED: Dezan Shira & Associates’ Corporate Establishment Services

High-level dialogue supports closer ties

Perhaps Arizona’s most influential American political figure in Vietnam is Senator John McCain, who has visited the country on numerous occasions. The Senator addressed the Diplomatic Academy of Vietnam during a visit to the country in 2011. In 2015, he led a bipartisan delegation of Senators to Vietnam and Singapore to discuss economic and security issues in the region. The goodwill between Senator McCain and Vietnamese officials is so strong that the Senator hosted Vietnam’s Communist Party Secretary General Nguyen Phu Trong’s at his Washington D.C. office on the official’s maiden visit to the U.S. in July 2015. This high-level support for closer relations on both sides builds confidence in the future of trade relations between the two economies.

Further Support from Dezan Shira & Associates

Dezan Shira & Associates can service Arizona-based companies that are looking to further develop their operations in Vietnam. The firm can help companies establish a direct office in the country and can guide them through the affiliated tax, legal and HR issues that come with doing so. To arrange a free consultation, please contact our U.S. office at: usa@dezshira.com

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