Beginners’ guide: How to take full advantage of FTAs

Businesses need to pay more attention to meeting rules of origin to enjoy tax incentives

Providing more information

Le An Hai, deputy director of the Asia-Africa Market Department under the Ministry of Industry and Trade, says each FTA needs time to evaluate its efficacy and provide solutions to help businesses make better use of the incentives it offers. The Ministry of Industry and Trade (MoIT), with a pivotal role in the enforcement of FTAs, accompanies business and provides them with support. The widespread dissemination of information on FTAs is a central task in this regard.

The MoIT is coordinating with the Republic of Korea’s Ministry of Trade, Industry and Energy on building a website introducing the Korea-Vietnam Free Trade Agreement (KVFTA) that went into effect at the end of 2015. The website will be linked to those of tax and customs authorities, trade associations and organizations related to export-import activities in order to help businesses quickly and accurately find relevant incentives and ways to enter the Korean market.

To take full advantage of the opportunities provided by FTAs, strong support from Vietnamese trade offices in foreign markets is also essential.

Vietnamese Trade Representative in Australia Nguyen Thi Hoang Thuy said that in addition to participating in policy development, conducting market opening negotiations, and supporting anti-dumping and anti-subsidy lawsuits, Vietnamese trade offices abroad guide businesses on market access.

The Vietnam Trade Office in Australia tries to provide the necessary information for businesses to help them understand the market and strengthens trade promotion activities. In addition to participating in the organization of trade fairs, exhibitions and business forums, the office often organizes trade promotion activities specifically on litchi, mango, dragon fruit and seafood exports, she said.

Businesses need to pay more attention to meeting rules of origin to enjoy tax incentives. Hansung Kim from the RoK’s Aiou University suggested Vietnam improve its system of certificates of origin. Vietnam and the RoK can coordinate to build a consistent system for certificates of origin in accordance with the country’s practices. This is an effective way to help Vietnamese businesses better utilize tax incentives and promote trade in goods, Hansung Kim said.

Changing production methods

Vietnam Leather, Footwear and Handbag Association General Secretary Phan Thi Thanh Xuan said the Vietnamese leather and footwear industry is likely to grow faster in 2018 for many reasons. First, the EU-Vietnam Free Trade Agreement (EVFTA) is scheduled for conclusion this year. When compared with China, Vietnam’s biggest rival, Vietnamese footwear will enjoy a reduction of 3.5-4.2 percent in export tariffs to the EU. After the EVFTA takes effect, the tariff will drop to zero percent. In particular, the tariff on Vietnamese sports shoes, which account for two-thirds of Vietnamese footwear exports to the EU, will be cut immediately, rather than being subject to the seven-year protection tariff on leather footwear. Similarly, the tariff on handbags will be slashed to zero. “For sure, many orders will come to Vietnam. The only question is how domestic businesses take advantage of this agreement,” said Xuan.

To improve the utilization rate of FTAs, in addition to the efforts of state management agencies in improving the business environment and developing attractive mechanisms and policies, businesses should also adopt appropriate adjustments to help their access member markets.

Tran Van Quyen, a representative of the Woolmark Company of Australia in Vietnam, said businesses must have a social responsibility certificate to qualify for exports.

In addition, businesses need to be more active in understanding market information, diversifying goods and improving quality of export products to increase the competitiveness of Vietnamese goods. Implementing chain linkages is also essential as it will meet large-scale production, shorten the time between production and consumption, reduce costs and ensure uniformity in terms of quality.

In particular, Vietnamese businesses need to focus on promoting branding for export goods. The best solution is to provide new products with high added value and clear origin. This will help elevate Vietnamese brands, winning consumer trust.