OEM Product Manufacturing for Export – Opportunity or Hidden Legal Risks?

Jun 30

The global market increasingly favors smart, cost-efficient cooperation models. Among them, OEM (Original Equipment Manufacturer) product manufacturing has become a popular choice between Vietnamese manufacturers and foreign partners. However, behind seemingly simple contracts lie a series of legal issues and complex customs procedures—if not handled carefully, businesses can fall into passive positions or even face international disputes.

What is an OEM contract and why does it matter in exports?

Essentially, an OEM contract is an agreement in which a Vietnamese company manufactures goods according to the design, technical specifications, and branding provided by a foreign partner. In return, the manufacturer receives a processing fee or production cost as agreed. Unlike standard sales contracts, OEM agreements raise complex legal requirements regarding intellectual property, technical standards, product quality responsibility, and ownership rights over the goods.

A common misunderstanding among companies is to assume that OEM goods are “owned by the customer,” since they ordered and provided the raw materials. In reality, if not clearly stated in the contract, legal risks fall on the manufacturer—in this case, the Vietnamese company.

Legal framework governing OEM contracts in Vietnam

OEM contracts often fall at the intersection of service agreements and international goods sale contracts, making the determination of governing law, dispute resolution jurisdiction, and tax/customs obligations complex. The Vietnamese Commercial Law and the Vienna Convention (CISG) may apply depending on the contract’s specifics.

Moreover, if the OEM contract involves importing raw materials, using partner-supplied machinery, or re-exporting finished products, the company must comply with export-manufacturing regulations under:

Decree 08/2015/ND‑CP
Decree 59/2018/ND‑CP
Circular 39/2018/TT‑BTC of the Ministry of Finance

How can companies handle legal and customs procedures properly in an OEM contract?

To prevent an OEM contract from becoming a “time bomb” in your business operations, a company must ensure product quality and standardized production processes—and also thoroughly prepare legally and for customs procedures. From drafting the contract and defining each party’s responsibilities, to customs declaration and management of production norms—each step must be conducted professionally and accurately. In this section, we share practical experience from cases DEDICA has advised on to help you gain a comprehensive perspective and suitable solutions.

1. Drafting a legally tight OEM contract

Real Situation: We assisted Client A, an electrical appliance manufacturer in Binh Duong, in signing an OEM contract with a German partner. Initially, the contract only contained vague clauses on product standards and payment. After a technical defect appeared in the first shipment, the partner refused to pay and demanded compensation. Legal risks were inevitable without a well-drafted contract.

We supported Client A in reviewing and rebuilding the OEM contract with thorough clauses covering:

Rights and obligations of both parties regarding materials, trademarks, and technical standards;
Inspection, acceptance, and product approval mechanisms;
Warranty responsibilities, defect handling, and dispute resolution methods;
Clear applicable law and dispute resolution jurisdiction.

Drafting a legally sound contract not only prevents disputes but also builds a strong foundation for long-term cooperation.

2. Customs procedures for export-oriented processing

When participating in an OEM contract with foreign factors—especially when a Vietnamese company imports raw materials and re-exports finished products—compliance with customs procedures is mandatory.

We advised Client A to carry out the following steps:

Register the processing contract with customs authorities: This is mandatory for all export manufacturing contracts.
Open customs declarations for importing raw materials and exporting finished goods in accordance with the defined production norms.
Manage production norms and submit periodic customs reports: These procedures are often audited and carry heavy penalties if done incorrectly.
Ensure full documentation for inputs and outputs: Including contract, invoice, packing list, warehouse exit slips, and certificates of origin.

DEDICA’s recommendations for Vietnamese businesses signing OEM contracts

Don’t treat OEM contracts as simple templates: These are international contracts with complex legal nature, requiring specialist legal counsel.
Always verify technical specifications and quality obligations: This helps avoid claims, non-payment, or rejected shipments.
Work in tandem with your customs department from the start: Don’t wait until the product is ready—mistakes in norms, HS codes, or documentation can cause significant losses.
Register trademark and patent protection (if applicable): Especially for exclusive OEM products, IP protection helps prevent copying or reverse litigation.

If you are preparing to sign an OEM contract for export production, let DEDICA accompany you from the very first steps: from contract advice, risk assessment, to supporting all customs procedures and protecting your interests throughout international cooperation.

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