10:01 | 12/05/2016 Cooperation
(VEN) - The Trans-Pacific Partnership (TPP) is considered a relatively comprehensive free trade agreement reflecting via numbers and contents of chapters and terms. It is also seen as the strangest agreement due to promoting links among countries with disparities in the level of economic development, differences in political institutions, not similarities in culture and language, and not adjacency to the geographical location.
Goods must meet rules of origin to enjoy tax incentives
However the TPP will bring the greatest benefits because it will drive FDI flows towards member countries, adjust the value and supply chains, and limit countries outside the TPP to benefit thanks to the application of rules of origin which force a number of key products to use partial or entire materials originating from the TPP.
Compliance with TPP rules of origin is a key factor helping member countries enjoy tax incentives. If Vietnam’s key exports do not meet these requirements, the country will not be able to enjoy tax incentives.
A specific example is in the garment and textile sector. Following free trade agreements that Vietnam has implemented, not including the ASEAN-Japan Comprehensive Economic Partnership (AJCEP) and the Vietnam-Japan Economic Partnership Agreement (VJEPA), raw materials for the garment and textile sector may import from anywhere. These products will enjoy tax incentives in exports to ASEAN countries, China, the Republic of Korea and Chile if they prove the final stages taking place in Vietnam. Regarding the ASEAN, Australia, New Zealand Free Trade Agreement (AANZFTA) and the ASEAN-India Free Trade Agreement (AIFTA), rules of origin are a bit more difficult as it requires at least 35-40 percent of the value of finished products created within member countries.
The TPP represents the most difficult level due to the application of the yarn forward rules of origin, meaning that all steps must be produced within the TPP.
In terms of plastic products, at least 50 percent of its polymer content used to create the finished products must originate from the TPP, while materials cannot be produced domestically and must be imported from China, the Republic of Korea and the Middle East.
However TPP rules of origin will be equal to most of free trade agreements Vietnam has participated, even easier for some products such as rubber, cement, limestone powder, machinery, phones, electronic equipment, and some industrial products processed from minerals serving construction.
Recognizing the importance of the TPP in general and its rules of origin in particular in promoting sustainable export growth and controlling imports, the Ministry of Industry and Trade’s Agency of Foreign Trade in coordination with the Industry and Trade Review organized a seminar on TPP opportunities and challenges to Vietnam’s export-import activities in order to provide the core contents for the business community and relevant agencies. The TPP will offer opportunities for businesses if they have a thorough grasp of the Harmonized Commodity Description and Coding System and meet rules of origin. Meanwhile, the TPP will pose difficulties if businesses do not fully understand about criteria of origin and actively earmark material sources, leading to a failure in enjoying tax incentives.
To enjoy preferential tariffs offered by free trade agreements, goods must meet rules of origin that are designed specifically for these agreements. Tariff negotiations would be meaningless if rules of origin were missing.
Bui Kim Thuy – Deputy Head of Origin of Goods Division under the Ministry of Industry and Trade’s Agency of Foreign Trade