Overcoming the challenge of rules of origin to make good use of CPTPP

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Vietnamese enterprises still face many difficulties in meeting the rules of origin to enjoy incentives from the CPTPP. Photo: N.Thanh

However, meeting the rules of origin is still one of the challenges that Vietnamese goods need to overcome to get more "sweet fruits" from the CPTPP in the near future.

Exports increased by nearly 39%

According to the Ministry of Industry and Trade, in 2021 as well as the first eight months of 2022, exports to CPTPP member countries recorded a sharp increase. Specifically, in 2021, Vietnam's total export turnover to the CPTPP market will reach about 45.7 billion USD, an increase of about 18.1% compared to 2020. In the first 8 months of 2022, the export value will reach about 41 billion USD, up to 38.7% over the same period in 2021.

However, the extent to which Vietnamese enterprises take advantage of commitments from the CPTPP is not highly appreciated. In a report just sent to the National Assembly on the implementation of the CPTPP, the Government said due to the lack of scientific and practical research, no clear methodical strategy, and low level of readiness, enterprises have not made good use of the incentives from the CPTPP. In addition, import-export activities of many provinces and cities currently focus on traditional markets, not promoting new markets included in the CPTPP. There are localities with very large export turnover, but the proportion of important markets in the CPTPP such as Canada and Mexico is still relatively modest.

Notably, Vietnam faces many challenges when implementing its commitment to rules of origin in the CPTPP. Taking advantage of the import tax incentives from the CPTPP and sometimes not strict management in the control of imported goods by state agencies, some businesses have taken advantage of declaring the wrong name and origin of goods to apply a code with a favorable tax rate.

“If there are no corrective and control measures, it will create conditions for many importers to increase import tax fraud, evade taxes, cause losses of state tax revenue, and affect the stability of Vietnam's economic security," the Government report stated.

In terms of exports, according to Nguyen Cam Trang, Deputy Director of the Import-Export Department (Ministry of Industry and Trade), the CPTPP's rules of origin to enjoy preferential tariffs are relatively complicated and different from other FTAs, requiring businesses to have time to learn and adjust production. Therefore, in recent times, Vietnamese enterprises have not caught up quickly.

The support of the authorities has not yet achieved the desired effect. In addition, the "domestic law" regulation of the CPTPP is still slow, affecting enterprises' opportunities to participate in the market.

“The rate of using Certificates of Origin (C/O) in Vietnam's exports to the markets of countries participating in the CPTPP is not high, because enterprises have not been able to proactively source raw materials to make up products to meet the rules of origin to benefit from preferential tariffs. Typically, textiles, leather and footwear are limited in supporting industries. Agricultural products and fishery products have improved in quality and food safety, but they are not uniform and do not meet the standards set by the importing country," said Nguyen Cam Trang.

In addition to the above issues, the Government believes that Vietnam also faces difficulties in capacity building and human resources. Basically, the quality of human resources for management in the field of international economic integration has not improved much. Notably, there are differences in the implementation of social security, environmental protection and sustainable development policy groups between agencies and localities.

There are places that do drastic work, and there are places that have not paid enough attention. There are tasks outlined in the Government's Implementation Plan that has so far not been implemented, such as assessing the impact of the CPTPP on the labor, employment and social sectors.

Enhancing the competitiveness of the industry

The Government recognizes that the problems that exist in the implementation of the CPTPP can be attributed to a number of reasons. For example, many localities have not really taken the initiative in building orientations and strategies to take advantage of the CPTPP for businesses in their localities. Enterprises, especially small and medium-sized enterprises, have weak competitiveness, and high prices, and have not really focused on improving their management skills and human resource quality.

According to Vo Hong Anh, Deputy Director of the European-American Market Department (Ministry of Industry and Trade), in order to better take advantage of opportunities from the CPTPP, businesses must consider and focus on adding value to their products through improving product quality, conforming to the criteria, tastes and requirements of the market; towards green products and sustainable development.

According to economist Le Duy Binh, with the CPTPP, Vietnam should not only take advantage of opportunities to increase exports but need a broader perspective. When Vietnamese enterprises focus on exporting to the CPTPP market, goods from these markets are also entering Vietnam very strongly.

This requires businesses to improve their competitiveness. “This should be considered an opportunity to innovate and upgrade the capacity of Vietnamese enterprises, especially in terms of production processes, to meet the criteria of sustainability, labor, innovation and productivity. This is the advantage gained against the pressure of integration, thereby allowing enterprises to have stronger competitiveness in the domestic market and be able to penetrate other markets outside the CPTPP," Mr. Binh said.

In order to deal with existing problems in order to better implement and take advantage of the CPTPP, the government is expected to study and consider amending current legal documents that are creating barriers to market access for CPTPP goods and services.

In addition, continuing to focus on administrative procedure reform measures, strengthening measures to support and improve competitiveness for industries and businesses; remove difficulties and obstacles in terms of policies to facilitate the development of domestic raw materials to help enterprises meet the CPTPP's rules of origin; further promote the work of improving the competitiveness of enterprises, especially small and medium enterprises.