Hundreds of tons of cinnamon essential oil are left in inventory due to export regulations

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Talking to Customs Magazine, Mr. Vu Van Thang, Director of Trieu Duong Company Limited - an enterprise specializing in producing and exporting cinnamon essential oil in Lao Cai province, said that now is the time to start harvesting cinnamon, but the company does not dare to produce much, signing export orders is also very cautious. The cause of this situation comes from the fear of not being able to export cinnamon essential oil due to regulations.

Mr. Thang said that in 2018, the Ministry of Health issued Circular No. 48/2018/TT-BYT promulgating the List of medicinal materials; extracts from medicinal herbs and essential oils for medicinal purposes; Traditional drugs, imported and exported herbal drugs are determined with product codes according to Vietnam's List of Exported and Imported Goods. Accordingly, many products such as garlic, ginger, onions, lemongrass; cinnamon, orange, lemon, lemongrass essential oils, etc must go through import and export procedures similar to medicinal herbs. Specifically, when carrying out export procedures, the Customs authority will require businesses to present a license to meet pharmaceutical business conditions.

Cinnamon essential oil production equipment system at Trieu Duong Company. Photo: DNCC

This means that businesses must meet a series of criteria regarding factories, vehicles, processing equipment, sanitary conditions, staff qualifications, etc according to the provisions of Circular 35/2018/TT-BYT of the Ministry of Health regulating Good Manufacturing Practices for drugs and medicinal ingredients. While cinnamon essential oil products are mainly used in the fields of food, beverages, home cleaning, etc., such management is unnecessary and causes great difficulties for businesses.

After many requests, the Ministry of Health has removed the problems for businesses by allowing businesses to declare according to their intended use. However, by November 2023, the Ministry of Health requires export items declared under HS code 3301.29.10 (HS code for essential oils of cinnamon, lemongrass, ginger, etc) to comply with legal regulations about medicine. Thus, the cinnamon essential oil product has returned to the same problem as the previous period.

The above problems are not the story of Trieu Duong company alone. According to the Vietnam Pepper and Spice Association (VPSA), businesses exporting cinnamon essential oil in Lao Cai and Yen Bai are currently facing difficulties in exporting due to having to meet regulations on trading in medicinal herbs. Accordingly, this regulation is not suitable for production conditions, products and consumption markets as well as the small-scale processing capacity of Vietnam's cinnamon essential oil processing industry today. Therefore, it generates a lot of costs, requiring additionally conditional business licenses while this is a value-added product, helping to exploit and maximize 100% of the value of the cinnamon tree.

According to Ms. Hoang Thi Lien, President of VPSA, cinnamon essential oil products require processing technology and create added value for the product, this is a salvaged product of the cinnamon tree, its branches and leaves when pruned (the production rate is 150 tons of leaves and branches to produce 1 ton of essential oil) and is not used as medicine but is mainly exported as raw material for food and beverages according to import market requirements.

The raw material for producing cinnamon essential oil is the leaves and branches used when pruning. Photo: DNCC

Mr. Thang also believes that this regulation is inappropriate because cinnamon essential oil is a salvaged product from branches and leaves, so its medicinal properties are much lower than cinnamon bark. Meanwhile, cinnamon bark products have been removed from the list subject to pharmaceutical management. Even more broadly, looking at other essential oil production industries such as lemongrass, ginger, etc which have lower value, the ability to meet the above regulations of the Ministry of Health will be even more difficult. This has invisibly closed the export door of these products.

According to VPSA, facing the above difficulties, in the raw material area, there is currently about 100 tons of inventory that cannot be exported and it is estimated that at the end of the cinnamon season in March-April 2024, there will be about more 400 tons essential oil. The market value of cinnamon essential oil is currently about 400 million VND/ton.

The group of essential oils in general and cinnamon essential oil in particular is a dual-use group of goods, currently used for a huge demand for food in the world. In the future, other Vietnamese spice crops will also have the ability to develop deep processing into essential oil products. Therefore, VPSA has written a proposal to the Government that management should create conditions to support maximum exports, especially the export of value-added products and circular agriculture, to support carbon emission reduction, is the livelihood of highland ethnic people.

VPSA and localities have also reported to the Ministries of Agriculture, Industry and Trade, and the General Department of Customs and at the same time proposed to the Ministry of Health to consider creating conditions for cinnamon essential oil to be exported according to business declarations, which is the groups of ordinary export goods, intended for use other than as raw materials for drugs or medicinal materials.