Free trade agreements (FTAs) are when two or more countries agree on the terms of trade between them. They determine the value of tariffs and duties that countries impose on imports and exports. In 2007, with Vietnam’s ascension into the World Trade Organization (WTO) – it took a significant step in integrating with world trade and subsequently entered into several free trade agreements. One of the FTAs that is said to create many opportunities for the Vietnamese wood industry in the European Union (EU) market is the EVFTA. Let's follow Fomex Global to indicate some benefits that we have from this agreement.
Over the past few years, Vietnam has been active in signing bilateral trade agreements with countries throughout the world. With recent trade agreements such as the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP), EU-Vietnam FTA (EVFTA), UK-Vietnam FTA (UKVFTA) in effect, and the upcoming Regional Comprehensive Economic Partnership (RCEP) – Vietnam seems to prioritize international trade integration trade partners outside ASEAN.
Such trade agreements will allow Vietnam to take advantage of the reduced tariffs, both within the ASEAN Economic Community (AEC) and with the EU and US to attract exporting companies to produce in Vietnam and export to partners outside ASEAN.
The EVFTA is assessed to open a broad roadmap for the wood industry when most of Vietnam's wood products entering the EU market will enjoy a tax rate of 0%. The roadmap to reduce under the agreement about 83% of tariff lines for wood products from 6% to 0% immediately after the Agreement comes into effect, 17% of the remaining items will be reduced to 0% after 5 years, including plywood, fiberboard, chipboard,….
In terms of export value, when the Agreement comes into effect, an additional 17% of the total export value of timber and products to the EU will enjoy 0% tax. In which, items under HS code 4401-4409 - EU taxed from 2-4% and items under HS code 4414/15/18/20/21 - EU taxed from 2.5-4% will enjoy tax 0% right after the signing of the agreement, currently this group of products accounts for 10% of Vietnam's export value to the EU. In the group that enjoys 0% tax after the Agreement comes into force, there are also products such as furniture used in the kitchen (HS 9403.40); furniture parts (HS 9403. 90); furniture combined with other materials (HS 9403.80), the current EU tax rate is from 2.7 -5.6%, the export value of this group accounts for 7% of the total export value to the EU.
Thus, after the Agreement comes into effect, 99% of the total export value of Vietnam's wood and wood products will enjoy 0% export tax, only 1% of the export value of fiberboard, wood products will remain, chips and plywood will return to 0% after 4-6 years.
Starting negotiations in 2011, after 6 years of negotiations, Vietnam and the European Union (EU) officially signed a Voluntary Partnership Agreement on forestry law enforcement, forest governance, and trade in forest products. (VPA/FLEGT) on October 19, 2018, in Belgium.
This is a legally binding trade agreement aimed at improving forest governance and promoting trade in legal timber and timber products exported from Vietnam to the EU market. The VPA/FLEGT agreement will bring benefits to Vietnam in all three fields of the economy - society - environment, notably expanding export markets, improving institutions on forest management, and addressing the situation. illegal logging and trade, contributing to the sustainable development of Vietnam's export wood processing industry.
Vietnam will develop the VNTLAS Timber Legality Assurance System, conduct business classification, control the timber supply chain and proceed to FLEGT licensing.
Choosing a professional service to evaluate FTAs for your business
Finding one’s way through the legalese that many of these FTAs use to spell out their rules and regulations can often be cumbersome. This often is one of the most cited reasons why businesses fail to take advantage of the benefits available to them. Therefore, it is strongly suggested that businesses and investors consult with a professional service with strong experience in the region. This will allow a business to have a reliable, and clear source of information before making an investment.
With 20 years of experience in law and foreign trade, Fomex Global is gradually gaining the trust of customers by bringing a lot of value to customers by taking advantage of tariff preferences. Please contact us for free and most dedicated advice on products and laws.
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