Businesses advised to obey rules of origin to boost exports to Asia

To seize these advantages and make the most of the opportunities presented by free trade agreements (FTAs), businesses have been advised to comply with the rules of origin set by FTAs.

According to statistics released by the Ministry of Industry and Trade (MoIT), Vietnam’s exports in 2017 to ASEAN, China, Japan and the Republic of Korea reached US$21.7 billion, US$35.3 billion, US$16.8 billion and US$15 billion, respectively.

During the first nine months of the year, the country’s total turnover to the Asian market surged by 21% to US$96 billion, accounting for 53.5% of total export turnover. Of which, exports to ASEAN, the Republic of Korea and India increased by 10.2%, 26.1% and 88.6% on-year, respectively.

Potential remains untapped

At a recent seminar on trade promotion within the Asian market, Le Hoang Tai, deputy director general of the Vietnam Trade Promotion Agency (Vietrade) under the Ministry of Industry and Trade highlighted Asia as Vietnam’s largest import-export market, which holds key trading partners such as ASEAN, China, Japan, the Republic of Korea and India.

Vietnam has also signed up to a number of multilateral and bilateral FTAs with ASEAN and Asian nations such as the ASEAN Trade in Goods Agreement (ATIGA),the ASEAN-Japan Comprehensive Economic Partnership Agreement (AJCEP), the Vietnam-Japan Economic Partnership Agreement (VJEPA), the ASEAN Korea Free Trade Agreement (AKFTA) and the ASEAN-India Free Trade Area (AIFTA).

The country has also strengthened its trade promotion activities to other Asian nations with a major focus on markets such as ASEAN, China, Japan, the Republic of Korea and India.

Regarding the ASEAN market, Nguyen Duong Kien, Deputy Head of pision at Asia - Africa Market Department at the Ministry of Industry and Trade, said despite the strengths of many Vietnamese products, they are not utilizing them by exporting large quantities to these markets.

Moreover, the rate of Vietnamese businesses fully complying with the certificate of origin (C/O form D) for import-export goods within ASEAN remains as low as 30% while transactions within the bloc account for less than 25% compared to 65% of nations within the EU.

In order to support businesses make deeper inroads into the Asian market, the department has proposed the exchange of business delegations in India under the framework of the National Trade Promotion Program. This proposal comes with the aim of helping businesses seize trade opportunities and take advantage of the current climate where the US has imposed import tariffs on Chinese goods.

Additionally, the department has also invited Asian importers to get involved in transactions with Vietnamese businesses at a host of exhibitions, trade fairs, supermarket chains, retail and wholesale distribution channels within Japan, the Republic of Korea, and China.

Tightening post-control over the rules of origin

To support businesses’ import-export activities, the government and the Ministry of Industry and Trade have issued several new documents regarding the rule of goods origin including the Decree No. 31/2018/ND-CP and circular 05/2018.

Trinh Thi Thu Hien, head of the MoIT’s Export-Import Department said despite preferential tariffs and rights regarding the self-certification of goods origin, strict post-control over the rules of origin have been tightened.

If fraud over the rules of origin is detected, markets in the region will stop providing incentives. This has been proved in some FTAs such as the Vietnam-EAEU, FTA, and EVFTA.

Under the recently issued Circular 39 regarding the inspection and verification of origin of export goods by the Ministry of Industry and Trade, businesses are advised to strengthen control over the rules of origin to avoid possible violations in the future.

In addition, as tensions between the US and China in their trade war gradually reduce, Chinese goods are able to take advantage of Vietnam’s origin to export their goods to the US.

Ms Hien said the MoIT warned about commodities in the US$200 billion reduction package that the US wants to reduce imports from China. There exists a high chance that these goods could go through Vietnam before penetrating the US.

She advised businesses to go online to check whether their goods belong to the list of commodities in the US$200 billion package or not so they can take preventive measures.

Ms Hien said China has increased additional duties for goods with US origin, noting that American goods are able to enter Vietnam to avoid additional taxes and then penetrate the Chinese market.