Take advantages from FTA
- Tuesday - 30/08/2016 15:14
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There are 2 free trade agreements (FTA) that had great influence on Dong Nai’s import and export markets, they are the Vietnam-Korea FTA and the Vietnam-EU FTA. The rules of origin and the tax exemption methods are mostly concerned by the enterprises since they affect the concessionary export-import to and from the above markets.
Timber export in Dong Nai shall receive huge benefit when the FTA takes effect. Photo: Timber manufacturing for export in Ho Nai Co. Ltd (Bien Hoa)
According to Department of Industry and Trade, the EU and Korean were Dong Nai’s 2 great export markets; which made the EU the provincial second biggest export market (after the U.S) and Korea in the provincial top 6 biggest markets. Footwear, handbag, textile and timber… are the products that Dong Nai export to the EU and Korea; and machine, equipment, mechanic accessory, medicine, and textile material are those which Dong Nai import mostly from the two markets.
Pay more attention to product origin
According to European Trade Policy and Investment Support Project (EU – MUTRAP) Board of Management, when the Vietnam-EU FTA takes effect, Vietnam export value to the this market shall increase significantly. In 2020, Vietnam export turnover is expected to increase 50% and 93% in 2025. The most increasing values come from textile, footwear, timber. Vietnam-Korea FTA was signed and took effect from 2015. However, enterprises who take the best advantages from the 2 FTA shall pay more attention to the rules of product origin since it shall decide the benefit from tax reducing. The average export tax applied to Vietnam products to EU is 7% of the export turnover. When the Vietnam-EU FTA takes effect, about 99% of the taxes shall be 0%; but if the enterprises want to receive such benefit, they shall be responsible to the rules of product origin.
Mr. Truong Dinh Tuyen – Former Minister of Ministry of Trade, Government Counselor of Negotiation said that if the enterprises want to receive benefit from the Vietnam-EU FTA, they shall initiatively prepare the material from the domestic source or import from the EU countries. The EU is included of 27 countries. Thus, our export shall be expanded to many countries in the region.
The Vietnam-Korea FTA was signed in May-2015. The taxes have been significantly reduced. Accordingly, Korea has applied 95% of tax exemption to Vietnam and Vietnam has applied 90% of tax exemption to Korea. Rules on many groups of product were made to be easier, unlike the strict rules from the EU. The agreement allows Vietnamese Enterprises to import material from the other countries, as long as the final products are manufactured in Vietnam, when being export to Korea, the tax exemption shall still be applied.
*The nontariff barriers
The nontariff barriers are the methods used to prevent or interfere the products from being imported but with no tariff related. There are 2 types of barriers: the Administrative Barrier and the Technical Barrier. Enterprises who export their products shall pay attention to those 2 barriers since they decide if the products are allowed to be imported or not.
The Vietnam-Korea FTA is not really strict; it mainly focuses on the technical cooperation. The Vietnam-EU FTA is extremely strict in the other hand with very detailed rules, especially the investigations, examination, recognition corresponding to each standard in each specific in each region. According to Mr. Tran Viet Cuong – Deputy Director of SPP Office Vietnam, (Department of International Cooperation, Ministry of Agriculture and Rural Development), in order to avoid risks from the nontariff barriers, Dong Nai enterprises shall be up to date with the information from the SPS regulations of the other countries and especially with the ASEAN’s standard harmonization. At the same time, the enterprises shall focus on the product quality and safety; promote Vietnam products by applying international standards. The enterprises shall also have clear marketing strategies; understand the customers’ need as well as the customs and religions in different countries to export to.
According to Nguyen Viet Nga – Deputy Director of Department of International Cooperation (Central Custom Agency) The nontariff barriers helped reduce production cost since the import cost for input material was reduced, attracted more FDI and expanded the export market. But it was also a challenge for small enterprises that had finance and technology limitations that were hard to meet the request of the technical barriers. Besides, supporting industries were not well developed; thus, imported material with no guarantee about the origin could not receive any tax exemption.
Huong Giang