VCI Legal – May 12, 2026

Bilateral trade relations between Vietnam and the United States entered a turbulent and challenging period following the Office of the United States Trade Representative (USTR) official release of the 2026 Special 301 Report on April 30, 2026. This event sent shockwaves through the business community and policy-making circles as Vietnam was placed on the “Priority Foreign Country” (PFC) list – the highest warning level under the U.S. legal framework for intellectual property rights (IPR) protection. This marks a significant setback in trade diplomacy, as the U.S. has not designated any trading partner as a PFC for 13 years, since the case of Ukraine in 2013. Vietnam being elevated directly from the Watch List to the PFC level without passing through the intermediate Priority Watch List underscores the deep concern of U.S. officials regarding the actual enforcement progress in Vietnam. 

This USTR action is not merely a symbolic warning but a mechanism triggering strong coercive measures under U.S. domestic law. The PFC designation is the first step towards subsequent disadvantages that Vietnam may face. According to the Trade Act of 1974, following a PFC designation, the USTR must decide within 30 days whether to initiate a formal Section 301 investigation. Such an investigation could lead to severe trade sanctions, including the imposition of additional tariffs on Vietnamese exports, similar to what the U.S. did to China in 2017. In response to this pressure, the Vietnamese Government has launched unprecedented enforcement campaigns, notably Official Telegram No. 38/CĐ-TTg dated May 5, 2026, aimed at urgently preventing and handling IPR infringements and tightening discipline in the IP field nationwide. 

In-depth Analysis of the 2026 Special 301 Report and Vietnam’s Legal Status 

The Special 301 Report is an annual tool used by USTR to assess the IPR protection and enforcement status of trading partners, safeguarding the interests of U.S. creators, inventors, and trademark owners globally. In 2026, USTR reviewed over 100 trading partners and identified a list of 26 countries with notable concerns. 

The difference between being on the PWL and the PFC is significant in terms of legal consequences. While countries like China or India, despite serious issues, remain on the PWL for continued consultations, Vietnam’s PFC status means the U.S. considers IPR infringements there as “flagrant and most harmful” to the U.S. economy. USTR emphasized that Vietnam failed to resolve longstanding concerns despite bilateral dialogues since 2020 and proposed IP Action Plans in 2023. 

Five Pillars of Concern Leading to PFC Designation 

USTR specifically listed five core issue groups that they consider evidence of Vietnam’s lack of adequate protection efforts. 

First, online copyright enforcement is considered inconsistent and ineffective. Although Vietnam has taken actions against platforms like Xoilac or Fmovies, these platforms can easily reappear under new domain names, revealing loopholes in the current access-blocking system. 

Second, anti-counterfeiting and trademark infringement efforts are deemed insufficiently robust, especially as counterfeit goods continue to flood e-commerce platforms and social networks. 

Third, border enforcement mechanisms remain limited, as Customs lacks the ex officio authority to suspend suspicious transit shipments. 

Fourth is the issue of unlicensed software use in enterprises, an area where USTR claims Vietnam has seen virtually no significant enforcement activity for many years. 

Finally, there is a lack of criminal sanctions for cable and satellite signal piracy, causing direct harm to the U.S. content and sports industry. 

Legislative Revolution: Amended Intellectual Property Law 2025 and New Standards 

Prior to the release of the Special 301 Report, Vietnam took a strategic step to modernize its legal framework by enacting Law No. 131/2025/QH15, also known as the Amended Intellectual Property Law 2025. This law took effect on April 1, 2026, marking a major effort to meet high standards under the CPTPP, EVFTA, and address “bottlenecks” frequently mentioned by the U.S. 

• Breakthroughs in Artificial Intelligence (AI) and Digital Transformation 

The 2025 Law is Vietnam’s first legal document codifying AI-related issues in IP. Clause 5, Article 6 of the Law assigns the Government to provide detailed regulations on establishing rights over IP objects created with the assistance of AI. This is a pioneering step to address legal ambiguity as machines increasingly participate in the creative process. Concurrently, the Law permits the use of published data and text for AI training – a provision aimed at promoting scientific research while setting limits to avoid unreasonably prejudicing the legitimate rights of authors. 

Regarding digital transformation, Article 11b establishes a legal framework for the comprehensive digitalization of IP activities, from unified electronic filing for all procedures to building a national IP database applying Big Data and AI. This aims to increase transparency and accelerate application processing speeds, addressing one of the frequent complaints from foreign investors about cumbersome administrative procedures in Vietnam. 

• Reform of Examination Procedures and Industrial Property Rights Enforcement 

To directly respond to USTR concerns regarding the speed of rights establishment, the 2025 Law significantly shortens examination and opposition periods. The application of these provisions began on April 1, 2026, for new filings, promising a more dynamic rights establishment environment. 

The “Fast-track Examination” mechanism provided in Article 14a of Decree No. 100/2026/NĐ-CP is a new highlight, allowing strategic technology enterprises or cases of medical or national security emergency to obtain protection titles within just 3 months from the date of application publication. However, shortening the trademark opposition period to 3 months also poses challenges for rights holders, requiring them to have highly responsive market monitoring systems to promptly detect and prevent infringements. 

• Roles of Ministries in the New Enforcement System 

Inter-ministerial coordination is key to the 2026 campaign. The Ministry of Science and Technology acts as the lead technical agency, providing expert evaluations on industrial property. The Ministry of Public Security is assigned the crucial task of dismantling high-tech criminal networks operating pirate film websites and football betting platforms. Notably, the Ministry of Finance, via Customs, has begun implementing stricter border controls over goods suspected of trademark counterfeiting. A national IP enforcement database connecting enforcement forces with the Ministry of Public Security is expected to be completed in 2026 to enhance the ability to track repeat offenders. 

“Purge” Campaign against Pirate Websites and Enforcement Crackdown in May 2026 

The issuance of Official Telegram No. 38/CĐ-TTg on May 5, 2026, demonstrates the highest level of political resolve in Vietnam to immediately change the IP enforcement landscape. This Telegram is not just an ordinary administrative document but an order for a “high-intensity period” to combat IP crimes nationwide, taking place from May 7 to May 30, 2026. 

The Government set a specific target: the number of IPR infringement cases handled in May 2026 must increase by at least 20% compared to the same period in 2025. The ripple effect of this telegram led to many of Vietnam’s largest infringing websites and applications ceasing operations or quietly shutting down to avoid inter-agency inspections. 

The closure of long-standing, high-traffic websites such as XoilacTV and various film fansub groups demonstrates that pressure from authorities, especially the Ministry of Public Security and the Ministry of Culture, Sports and Tourism, has reached a threshold where infringers no longer feel safe operating in Vietnam. Many experts believe this is the largest IP enforcement campaign ever, with no “exceptions” or “off-limits” zones. 

Impact on Key Export Industries 

Industries with large export turnover to the U.S., such as electronics, textiles, footwear, and seafood, are “in the crosshairs.” The Vietnam Association of Seafood Exporters and Producers (VASEP) has issued urgent recommendations to its members regarding IP compliance, after seeing signs of declining export turnover to the U.S. due to policy pressures. 

IP issues are no longer an isolated legal risk but are compounding with U.S. supply chain and labor investigations, creating a double barrier for Vietnamese goods. Major U.S. FDI corporations will also become more cautious in transferring advanced technologies to Vietnam if they lack confidence in the host legal system’s protection capacity. The greatest threat is a Section 301 investigation, which could lead to punitive tariffs on Vietnamese goods. The lesson from the U.S. Section 301 investigation against China in 2017 shows that when IP issues are politicized and linked to trade balances, tariff measures can be broadly applied and last for years. 

Vietnamese enterprises need to shift their mindset from “reacting” to “proactive compliance.” Intellectual property must be considered a core component of modern corporate governance and long-term competitiveness, not just a purely legal issue. 

Conclusion and Future Outlook 

Vietnam’s placement in the Priority Foreign Country (PFC) group in 2026 is a powerful wake-up call about the gap between paper commitments and actual enforcement results. However, from a positive perspective, this “bitter medicine” may drive Vietnam to complete a more sustainable IP ecosystem. 

The combination of the epoch-making Amended Intellectual Property Law 2025 and the vigorous enforcement campaigns under Official Telegram 38/CĐ-TTg is setting a new precedent for discipline in protecting intellectual capital in Vietnam. The prospect of Vietnam soon leaving the PFC list depends on its ability to maintain these enforcement efforts continuously and consistently, not only short-term campaigns. For businesses, investing in IP compliance today is the best insurance for stable growth and access to high-end markets in the future. 

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