Products must comply with rules of origin

Vietnamese garments and textiles are considered one of the products that benefit the most from the EVFTA. However, enterprises can only enjoy such incentives if they meet rules of origin of goods. Thus, the Vietnam National Textile and Garment Group (Vinatex) has prepared thoroughly for years to satisfy the rules of origin of goods as required from its partners.

Vinatex Executive Director Cao Huu Hieu said under the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP), garment products must meet the yarn-forward rule of origin to enjoy preferences while the EVFTA stipulates fabric-forward rules which requires the use of fabrics produced in Vietnam with the only exception being of fabrics produced in the Republic of Korea (RoK), another FTA partner of the EU. Vietnam currently imports about 14% of fabric from RoK.

To prepare for FTAs, Vinatex has long implemented many measures regarding investment and market development, as well as disseminating information to enterprises to understand FTAs thoroughly. The group also encourages its companies to establish a chain of links towards the goal of improving the product quality and lowering prices while satisfying rules of origin.

Secretary General of the Vietnam Leather, Footwear and Handbags Association Phan Thi Thanh Xuan said China is now the biggest competitor of Vietnamese footwear in the world market. After the effectiveness of the EVFTA, the Vietnam's leather and footwear products will enjoy a tax gap of 3.5-4.2% compared to Chinese products when exporting to the EU, creating a huge competitive advantage for Vietnamese enterprises.

The EU is also currently offering unilateral incentives for a large number of goods originating from Vietnam under the Generalised System of Preferences (GSP). In addition, the rules of origin stipulated in the EVFTA are not much different from GSP, so domestic leather and footwear enterprises can fully meet the stipulations.

Since the beginning of 2019, Vietnamese exporters exporting goods to the EU need to self-verify their products origin, if they want to qualify for GSP. This is quite a large change for leather and footwear enterprises because they are currently following traditional practices and it will take time for them to get familiar with this change. However, the Association is trying to support businesses. “We realise that this is only a temporary difficulty and when enterprises get used to it, they will not face many obstacles in following these procedures, thus taking advantage of incentives when the EVFTA takes effect"- Xuan said.

Agricultural products need to ensure quality and standards

Along with garments, leather and footwear, agricultural products are also the group to benefit the most from the EVFTA. However, agricultural enterprises must meet the standards set out by EU countries to take advantage of EVFTA incentives.

Phan Van Thuong, director of G.O.C Food Processing Export JSC, one of the enterprises handling many successful export orders to the EU, said that after the effectiveness of the EVFTA, tariffs on agricultural Vietnamese products to the EU will reduce significantly from 14% to 0%. This is a great opportunity for Vietnamese agricultural products to increase their turnover in this market.

“However, enterprises must know that exports to the EU not only looks towards quantity, but also towards high value-added products. Then, enterprises will not only gain profits, but opportunities to invest in manpower, production technology, management capacity, thereby improving their competitiveness in the market”- Thuong said.

On the other hand, the EU is a very fastidious market with strict requirements on safe material zones, fair trade, high technical standards in production, environmental protection, energy saving and policies for workers. When firms can successfully export their products to the EU, they can easily export to other markets including Northern Europe, America, Japan, RoK, and others as these markets usually apply EU standards.

Deputy Secretary General of the Vietnam Association of Seafood Exporters and Producers (VASEP) Nguyen Hoai Nam said that along with opportunities, Vietnamese seafood enterprises are faced with challenges on rules of origin, risks of trade defense measures and goods quality assurance. Therefore, enterprises need to proactively master commitments of Vietnam and its partners in order to meet requirements and standards on labour, environment and related issues of sustainable development, while building appropriate export plans.

To conquer EU consumers, VASEP has planned to implement communication campaigns to promote images of Vietnamese seafood and information on improved quality and compliance of Vietnamese seafood with EU standards. VASEP has also carried out trade promotion programmes, including the participation in seafood trade fairs and exhibitions in EU countries to introduce high-quality tra fish products to local consumers.

Meanwhile, Vietnamese seafood exporters are also aware of developing a self-contained production line from breeding, farming to processing to produce high quality products with the policy of competition based on quality and not prices for sustainable development, Nam emphasised.

The EVFTA was officially signed on June 30, in Hanoi. After the signing, the EVFTA needs to be submitted to the European Parliament for consent. The trade deal will also be concluded by the European Council to enter into action. The deal is expected to take effect in 2020 and create many positive impacts on Vietnam’s export activities. Vietnam still has time to prepare for the deal and enterprises should continue to learn about the EU market demands and their requirements in order to make the best use of the deal.