State by State: Vietnam and California Trade

By Andrew Salzman and Charles Small, Dezan Shira & Associates

In 2014, California exported US$1.21 billion in merchandise to Vietnam, up 9 percent from 2013. This figure has more than doubled from US$538 million in 2005, reflecting the fast growth of the Vietnamese market.

In terms of value, the majority of this trade relationship is made up of Vietnamese exports to California, which reached US$8.08 billion in 2014, up 20.3 percent from 2013. This put Vietnam in 11th place as a source of imports to the state. To put this into perspective, imports to California from Vietnam were close to four times the value of imports from Latin American economic giant Brazil.

The top five merchandise exports from California to Vietnam are computer and electronic products, agricultural products, food manufactures, chemicals, and waste and scrap. 90,057 Californian jobs are supported by exports to ASEAN, in which Vietnam is a significant player. 44,850 of those jobs are supported directly by the exports.

Californian agricultural exports

Vietnam was the 10th largest market for California agricultural exports in 2012-13. In 2013, the total value of these exports reached US$332.9 million in 2013, 69% growth from the previous year. Vietnam is developing a taste for Californian wine, and is now the world’s ninth most important destination by export value of Californian wine, reaching US$20 million in 2014. This represents 55 percent growth from 2014. Vietnam’s demand for California’s agricultural exports has also seen it overtake China as a destination for California’s walnut exports. As the state is responsible for 99 percent of walnut production in the U.S. and two thirds of worldwide production, this is a significant feat.

RELATED: State by State: China and California Trade

Software outsourcing

Tech companies in California’s Silicon Valley can find plenty of opportunities to outsource to low-cost software engineers in Vietnam. With close to 300 universities offering communications and information technology courses, Vietnam’s workforce has the skills to support your business. When outsourcing software development to Vietnam, an important factor to consider is the impact of Vietnam’s intellectual property law, affecting retention of rights to use of the software.

Tariffs in the TPP

When the Trans-Pacific Partnership negotiations are finalized, California may benefit from the reduction in California’s export tariffs on sweetened dairy products, which was up to 20% in 2011. Important tariffs on imports which could be reduced are those involving textiles. As Vietnam’s largest market for textiles exports, California importers should keep an eye out for possible reductions in tariffs on men’s man made fiber shirts, which faced a 32% rate in 2013. man made fiber t-shirts, which saw a 31.8% rate in 2013, and baby clothes, which had an 18.7% rate imposed in 2013.

Following its World Trade Organization obligations, the U.S. has granted Vietnam Most Favored Nation status, extending the country preferential tariffs.

California-Vietnam relations beyond economic

Relations between California and Vietnam are deeper than trade alone. Results from the 2010 U.S. Census showed that California had by far the highest number of Vietnamese residents by state, at 581,946, almost triple that of second place Texas. Between 2000 and 2010, California gained the most Vietnamese residents of any state, with 134,914 more people recorded.

Seven of the top 10 U.S. cities by Vietnamese population in the census were in California. In first place was San Jose City with 100,486, followed by Garden Grove City with 47,331 and Westminster City with 36,058. Orange County had the highest number of Vietnamese residents at 183,766.

RELATED: Dezan Shira & Associates’ Pre-Investment, Market Entry Strategy Advisory

The United States Census Bureau has found that Vietnamese residents of the U.S. are close to being on par with other Southeast Asians when it comes to English proficiency – only 33.1 percent reported not speaking English either well or at all, compared to 27 percent of Laotians and  21.7 percent of Thais. In 2010, 1,381,488 Vietnamese residents reported speaking a language other than English at home.

These are not just numbers, these are individuals who put California at an advantage over any other U.S. state by Vietnamese human resources capacity. Many of these residents have a strong understanding of the Vietnamese language and cultural nuances essential to doing business here.

Further Support from Dezan Shira & Associates

Dezan Shira & Associates can service California-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.

Import and Export: A Guide to Trade in Vietnam
In this issue of Vietnam Briefing Magazine, we provide you with a clear understanding of the current business trends related to trade in Vietnam, as well as explaining how to set up your trading business in the country. We also attempt to give perspective on what will be Vietnam’s place in the Association of Southeast Asian Nations (ASEAN) in 2015, and look at some of the country’s key import and export regulations.

Using Vietnam’s Free Trade & Double Tax Agreements
In this issue of Vietnam Briefing we explore how Vietnam’s Free Trade Agreements – and especially those via its membership in ASEAN – will affect foreign investment into Vietnam. We also go a step further and examine the specific, bilateral Double Tax Agreements that Vietnam has enacted, and how these can be further used to minimize profits and withholding taxes that would otherwise be levied upon foreign investors.

Developing Your Sourcing Strategy for Vietnam In this issue of Vietnam Briefing Magazine, we outline the various sourcing models available for foreign investors – representative offices, service companies and trading companies – and discuss how to decide which structure best suits the sourcing needs of your business.

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