On April 30, the US Trade Representative designated Vietnam as a Priority Foreign Country for intellectual property, the most severe classification in the annual Special 301 Report and the first time in 13 years any country has been tagged with the label.
The designation rests on five grounds: online piracy, counterfeiting, inadequate border enforcement, unlicensed software use and the absence of criminal penalties for cable and satellite signal theft. Within 30 days, the USTR must decide whether to open a Section 301 investigation.
The report frames the designation around a “persistent failure to resolve long-standing concerns” dating back to 2020. But parts of it sit uneasily with that framing. In the 2025 report, Vietnam was on the Watch List, the lowest tier. It skipped the Priority Watch List entirely to reach the top.
It is worth separating three dimensions that the report covers but does not clearly distinguish: legislative reform, administrative reorganization and operational enforcement.
On legislation, Vietnam has been active. Decree 341 overhauled the copyright enforcement framework in February 2026. The 2025 Amended IP Law, effective from April 2026, modernized IP protection and strengthened enforcement mechanisms.
Both predate the USTR’s designation. The USTR acknowledged enforcement actions, including the shutdown of Fmovies, Y2Mate and HiAnime.to. Vietnam’s government said criminal prosecutions for IP offenses had increased.
On operational enforcement, the numbers declined. The Ministry of Industry and Trade reported that the value of detected violations fell by 31.8% in 2025, a year in which the transfer of provincial enforcement to local authorities took effect mid-stream.
Pending IP cases were canceled or left pending transfer. The introduction of specialized intellectual property (IP) courts may be delayed until 2027. The USTR cited these disruptions in its case.
The picture is split: legislative modernization continued at the top while operational enforcement capacity collapsed at the bottom. The Special 301 methodology focuses on enforcement outputs, so a framework built that way is unlikely to give Vietnam credit for reforming its laws.
This may partly explain why the framework produced such a severe result. But it does not explain it entirely.
The administrative reorganization is central to understanding the operational decline. In February 2025, the National Assembly approved a sweeping restructuring of the government, reducing the number of ministries from 22 to 17.
The General Department of Market Management, the national agency responsible for anti-counterfeiting enforcement and market surveillance, was downgraded to a regular departmental unit with six divisions and 166 civil servants, a central coordination body for a consumer market of over 100 million people. All 63 provincial Market Surveillance Departments were transferred to local People’s Committees by June 2025.
This was part of a larger administrative overhaul. Vietnam consolidated 63 provinces into 34, abolished the district level of government entirely and cut roughly 80,000 civil service positions, marking the most comprehensive administrative reform since reunification.
The stated aim was to cut bureaucratic layers and support economic growth, not to shrink the state’s enforcement capacity. International law firms and foreign governments nonetheless anticipated that the transition would cause delays in approvals, licensing and enforcement.
The old General Department coordinated raids nationally, maintained relationships with rights holders, and accumulated institutional knowledge about counterfeiting networks. When it was downgraded and its 63 provincial offices transferred to local People’s Committees, the vertical command line between the center and the provinces was severed.
The coordination networks, case histories and operational relationships did not follow the organizational chart. The 31.8% decline in detected violation value is consistent with the loss of those networks.
That is a different phenomenon from a government choosing not to enforce. The USTR report notes the restructuring disruptions, but treats them as an aggravating factor rather than a mitigating one.
There is a reasonable alternative reading. Vietnam’s IP enforcement problems predate the restructuring by years, and the USTR could argue that the reorganization compounds longstanding deficiencies rather than addressing them. But comparing Vietnam’s treatment with other countries in the same report complicates it.
For example, Indonesia has been on the Priority Watch List for years with similar categories of concern, including weak enforcement and procedural delays. Indonesia also reorganized its IP governance under President Prabowo Subianto, moving the Directorate General of Intellectual Property to a restructured Ministry of Law.
But Indonesia retained its central IP administrative body and its enforcement channels (police and government enforcement officers). Vietnam downgraded its central enforcement body and decentralized its operational arms to local authorities, significantly reducing its national enforcement reach.
Indonesia was not escalated in the USTR’s designation rating. The difference in outcome may partly reflect this structural difference, but it also raises the question of whether the USTR applied a consistent standard or whether trade considerations shaped the result.
The trade context adds weight to that question. The report insists the designation is “solely based on IP-related concerns.” It then cites Vietnam’s failure to make “meaningful progress” during negotiations for an Agreement on Reciprocal, Fair, and Balanced Trade as evidence.
The Vietnam Chamber of Commerce and Industry assessed the designation as a risk that could trigger further tariff measures. With a 20% reciprocal tariff already in place and a 30-day statutory clock ticking toward a formal Section 301 investigation that could authorize additional trade sanctions, the commercial pressure on Hanoi to return to the table is considerable.
On the available evidence, trade leverage and the framework’s own limitations both likely contributed to a designation more severe than the IP record alone would support.
Vietnam responded with a nationwide enforcement campaign from May 7-30, with targets to increase enforcement cases by at least 20% and daily reporting to the prime minister. The mobilization was fast and notably centralized: a prime ministerial directive that activated the same kind of top-down coordination the old General Department used to provide on a standing basis.
The restructuring was meant to decentralize enforcement, but the response to the PFC shows the system still defaults to centralized activation. Whether the decentralization will deliver the intended capacity gains, or whether it has significantly reduced a functioning apparatus without yet building a replacement remains an open question.
If the Special 301 framework is to function as a credible assessment tool, it may need to account for countries in the middle of institutional reform. A government rebuilding its enforcement architecture looks, in the annual statistics, much the same as one that has given up.
Vietnam’s case suggests the USTR’s framework currently makes no distinction between the two.
Lam Duc Vu is a Vietnam-based risk analyst focused on regional trade and geopolitics