Vietnam’s Cosmetics Market and Legal Conditions for Foreign Investors

According to Mintel, a market research firm headquartered in London, Vietnam’s cosmetics market was valued at USD 2.3 billion by the end of 2018. This market holds strong potential, especially among the growing middle class, which was estimated at 33 million people in 2020. Over the past two decades, cosmetic industry revenue has continuously increased, making Vietnam an attractive destination for international brands.

Many major cosmetic companies have already entered the Vietnamese market. L’Oréal Group (France), for instance, introduced its brands — Lancôme, L’Oréal Paris, and Maybelline New York — as part of its expansion into 15 key markets. Other notable players include Watsons (Hong Kong), Beauty Box (Korea), Guardian (under Dairy Farm Group), and Matsumoto Kiyoshi (Japan).

With rising incomes, especially in urban centers such as Ho Chi Minh City and Hanoi, Vietnamese consumers are increasingly drawn to high-quality, branded cosmetics. This article outlines the key legal conditions that foreign investors must meet to trade cosmetics in Vietnam.

1. Establishing a Legal Entity

Foreign investors may:

• Set up a new legal entity,
• Acquire an existing Vietnamese company,
• Or form a partnership with a local distributor.

For market research purposes, it is also possible to open a representative office or branch in Vietnam.

2. Business Scope and Function

Organizations or individuals responsible for introducing cosmetic products to the market must register a business function related to cosmetics in Vietnam.

3. Distribution Options

Once a legal entity is established, investors can engage in either wholesale or retail distribution.

• Retail Distribution: Requires a retail license (trading license) for foreign-invested enterprises.
• Partner Distribution: If cosmetics are sold through local distributors, those partners must be legally authorized to distribute such products.

4. Cosmetic Product Requirements

a. Product Proclamation

Under Vietnamese law, cosmetic products may only be sold once they receive a receipt number for the cosmetic product proclamation. This registration ensures that the manufacturer is fully responsible for the product’s safety, efficacy, and quality.

b. ASEAN Standards

• The product’s usage purpose must align with ASEAN guidelines.
• A Product Information File (PIF) must be maintained according to ASEAN instructions. This file should be stored at the local office of the company or individual responsible for the product.

c. Certificate of Free Sale (CFS)

Imported cosmetics must have a CFS issued by the country of manufacture or export. This certificate confirms that the product is legally sold in its country of origin. If no expiration date is stated, the CFS must be issued within the past 24 months.

Exceptions:

• Products made in or exported from a CPTPP member country (with ratified participation).
• Products that have already received a cosmetic product proclamation number in an ASEAN country.

d. Safety and Ingredient Requirements

• Products must comply with the ASEAN Cosmetic Safety Assessment Guidelines.
• Limits on heavy metals and microorganisms must meet ASEAN standards.
• Formulas must align with the latest ASEAN Cosmetic Treaty appendices.

5. Labeling Requirements for Imports

Imported cosmetic products that lack complete Vietnamese labeling must have an additional label that:

• Shows the required information in Vietnamese,
• Matches the content of the original label.

6. Advertising Regulations

Cosmetic advertisements require pre-approval. Advertisers must submit an advertising registration dossier, particularly for events like product seminars or brand introductions.

The advertising content must:

• Be based on documents proving the product’s safety and effectiveness,
• Align with ASEAN’s guidelines for product feature announcements.

7. Import Tax and VAT

• Cosmetics are subject to a 10% Value Added Tax (VAT).
• The import tax rate ranges from 0% to 30%, depending on the product.
• Products imported from countries with free trade agreements (FTAs) with Vietnam may be eligible for preferential tax rates.

Conclusion

Vietnam offers a growing, dynamic cosmetics market, especially for foreign brands targeting the middle class. However, legal compliance is essential. By understanding and meeting the conditions outlined above, foreign investors can effectively build their cosmetics business in Vietnam.

For further assistance or in-depth legal advice, please contact our legal experts.