Vietnam proposes 0% import tax on fuel to secure supply amid Middle East tensions

The proposal is included in a draft decree amending most-favored-nation (MFN) import tariff rates on certain petroleum products and fuel production materials, which has been submitted to the Ministry of Justice for appraisal.

Under the proposal, the MFN import tariff on unleaded motor gasoline would be lowered to zero percent from 10 percent under several HS codes, along with gasoline blending components such as naphtha and reformate.

The ministry also proposes cutting the MFN tariff to zero from seven percent for diesel fuel, fuel oil, aviation fuel, and kerosene.

In addition, tariffs on several petrochemical feedstocks, including xylene, condensate, and para-xylene, would be reduced to zero percent from three percent while other cyclic hydrocarbons would fall to zero percent from two percent

Based on 2025 import turnover, the drafting agency estimates that the tax cuts could reduce state budget revenue by about VND1.024 trillion (US$39 million).

The finance ministry said the draft is being developed under streamlined procedures to help authorities respond quickly to developments in the global energy market.

The proposal comes as global conditions remain highly uncertain, particularly amid tensions in the Middle East that have triggered sharp fluctuations in energy prices, especially oil and gas.

The escalating conflict involving the U.S., Israel, and Iran, which erupted on February 28, has had a strong impact on global fuel trade, the ministry said.

Global fuel supply chains are showing signs of disruption, while crude oil prices have been trending upward, developments that have begun affecting Vietnam’s domestic petroleum market.

In particular, the blockade of the Strait of Hormuz has prevented around 20 million barrels of crude oil per day from the Middle East from reaching refineries, particularly in Asia.

As a result, many refineries across the region have been forced to cut production, draw on crude oil reserves, and limit exports of refined fuel products, pushing prices higher.

Similar difficulties could arise in Vietnam, where some domestic refineries could face shortages of imported crude oil, potentially making it difficult to fulfill existing delivery contracts.

Regional suppliers are also considering invoking force majeure if the situation continues and refineries cannot secure enough crude oil to maintain production.

Currently, most of Vietnam’s fuel imports come from ASEAN countries and South Korea, where tariffs are largely set at zero percent under free trade agreements.

However, if global supply continues to tighten, buying finished fuel products from these markets could become more difficult.

In such a scenario, alternative import sources may become scarce and significantly more expensive, or even unavailable, making it harder to ensure domestic fuel supply and stabilize prices.

The decree is expected to take effect upon signing and remain in force until April 30.

If necessary, the Ministry of Industry and Trade will propose an extension for the finance ministry to submit to the government.

The move follows sharp increases in domestic fuel prices in recent days.

According to the Vietnam National Petroleum Group, the current retail price of RON 95V gasoline stands at VND27,640 ($1.05) per liter, while E10 RON 95-III is priced at VND25,850 ($0.98) per liter.