Nearly one million certificates issued to exporters under FTA terms

06:00 | 27/05/2021 Trade

(VEN) - In 2020, authorized agencies and organizations granted nearly one million sets of preferential certificates of origin (C/Os) for goods exported to markets having free trade agreements (FTAs) with Vietnam worth US$52.8 billion - an increase of about six percent in value and nine percent in volume compared to 2019.

nearly one million certificates issued to exporters under fta terms
Commodity exports to markets with which Vietnam has FTAs are expected to increase

Steady application increase

According to the Ministry of Industry and Trade (MoIT), exported goods using preferential C/Os accounted for 33 percent of the total export turnover to FTA markets. Exports with preferential C/Os to the Republic of Korea (RoK) accounted for 52.01 percent, followed by Japan with 38.35 percent and China with 31.6 percent. As for export commodities granted C/Os, textiles and garments lead with 58 percent, timber and wood products ranked second with 32 percent, and seafood 68 percent.

The MoIT underlined that the number of applications for preferential C/Os is increasing. The current rate of 33 percent of export revenue using preferential C/Os does not mean that 67 percent of the remaining export turnover is subject to high taxes. Some of them enjoy preferential tax rates due to their MFN (most favored nation) status. In such cases, enterprises do not apply for preferential C/Os as they do not make a difference in tariffs.

For example, Australia and New Zealand have imposed zero percent MFN taxes on many Vietnamese seafood products, rendering C/Os superfluous.

nearly one million certificates issued to exporters under fta terms

C/O form E ranks first

In the framework of the ASEAN-China Free Trade Area (ACFTA), the preferential C/O form E ranked first with a value of more than US$15.5 billion, equal to about 31.7 percent of the total export turnover to the Chinese market; followed by form D worth US$8.98 billion, equal to about 39 percent of total export turnover to ASEAN countries. In the third place, the total value of C/Os form AJ (ASEAN - Japan) reached US$5.8 billion, equaling about 30.7 percent of total export turnover to the Japanese market. C/Os form VJ (Vietnam-Japan) were worth about US$1.52 billion, accounting for nearly eight percent of the total export turnover to Japan. Two other forms: the VK (Vietnam-RoK) and the AK (ASEAN-RoK), both have high values, reaching US$5.08 billion and US$4.87 billion, accounting for 26.6 percent and 25.5 percent of total export turnover to the RoK market, respectively.

The total value of C/Os form D under the ASEAN Trade in Goods Agreement (ATIGA) reached US$8.97 billion. The MoIT pointed out that since 2015, the ratio of exported goods using form D has reached saturation and has not changed much. The rate of form D use in 2020 was 38.8 percent. In addition, the import MFN tax rate of some more developed ASEAN members (such as Singapore, Malaysia, Indonesia) is zero percent, which also reduced the use of this C/O form when exporting to these markets.

Meanwhile, the use of C/O forms when exporting to CPTPP markets is not high because most of the partner countries already have FTAs with Vietnam with looser rules of origin and more preferential tax rates than the CPTPP in its early years of implementation. As for Mexico and Canada, with which Vietnam now has FTAs for the first time, the export turnover granted with C/O was quite high, at US$867.3 million and US$402 million, respectively, accounting for about 27.45 and 9.2 percent, respectively of the total export turnover to these two markets.

Five months after implementation of the EU-Vietnam Free Trade Agreement (EVFTA) began, the total value of C/Os form EUR.1 issued to goods exported to 27 EU countries and the UK has reached US$2.66 billion, equaling about 14.83 percent of the total export turnover in the last five months of 2020 to this market. The use of preferential C/Os in total export turnover may even increase because currently there are two GSP and EVFTA incentives. Enterprises are still applying both and choosing C/O form EUR.1 or C/O form A or self-certification under the REX mechanism to enjoy corresponding preferential tariffs when exporting to the EU.

In order to facilitate the issuance of C/Os, the MoIT issued Circular No. 15/2018/TT-BCT dated June 29, 2018 clearly stipulating the process of granting preferential C/Os and fostering C/O issuance over the internet.

Bao Ngoc