EVFTA: Taxes reduced for shrimp exports to EU

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Exported shrimp in 2020 is forecasted to be better than in the previous year.

Most taxes are 0%

According to the Vietnam Association of Seafood Exporters and Producers (VASEP), the EU is Vietnam's largest shrimp import market, accounting for 20.5% of Vietnam's total shrimp export value. In 2019, Vietnam's shrimp exports to the EU market reached US$689.8 million,down 17.7% compared to 2018. In the last quarter of 2019,shrimp exports to the EU tended to be better, not falling as deep as in the first three quarters.In the whole of 2019, shrimp exports to the EU increased only slightly in July and November, while they decreased in the remaining months.

In 2019, in the three main import markets of Vietnamese shrimp in the EU (the UK, the Netherlands and Germany), exports to the UK and the Netherlands decreased by double digits, respectively 15% and 34%, while exports to Germany decreased by 5%.

White-leg shrimp is the main product exported to the EU, accounting for 79.9% of total shrimp products exported to the EU.Black tiger shrimp accounts for 12.2%, the rest are marine shrimp products. The export value of white-leg shrimp products to the EU in 2019 fell more than the export value of black tiger shrimp to this market.

When shrimp exports to the EU have not been revised in the past year,shrimp exporters expect the EVFTA to create momentum and open the door for Vietnamese shrimp to export to thismarketin 2020.

According to the EVFTA, the import tax for most raw shrimp (fresh, frozen, chilled) to the EU will be reduced from the basic tariff of 12-20% to 0% after the agreement comes into effect, and the import tax for processed shrimp will return to 0% after seven years from the date of entry into force of the agreement.

In terms of competitive advantage of import tax tothe EU compared to other producing countries, exported frozen black tiger shrimp and white leg shrimp take an advantagewhen black tiger shrimp is reduced from 4.2% GSP tax rate to 0% as soon as the agreement is in effect,taxes for frozen white shrimp will be reduced to 0% after 5 years,while Thailand is not entitled to GSP, does not sign FTA, and a base tax of 12%,India without FTAbelong to GSP tax of 4.2%, Indonesia belong to GSP tax of 4.2%, Ecuador’s basic tax is 12%.

Big potential for Vietnamese shrimp

According to VASEP's analysis, the EU's per capita income is high, the more favored products arepopular, the high-end market segment is sufficient for Vietnamese shrimp enterprises to choose aquatic distribution systemsin line with their supply.The final of the European National Football Championship (UEFA Euro 2020) will happen, which couldincreasedemand for seafood including shrimp in the region.

In the first half of January 2020, Vietnam's shrimp exports to the EU reached US$17.5 million, down 10.3% compared to the same period in 2019. It is expected that Vietnam's shrimp exports to the EU in the first quarter of 2020 will still decline sharply due to Covid-19, EU importers have not bought much due to waiting for prices to fall.Vietnam has to compete strongly with Ecuador on the EU market because Ecuador cannot export to China, redirecting to the EU.

It is forecasted that shrimp exports to the EU for the whole year of 2020 will be better than 2019 because the shrimp industry can take advantage of tariff preferences from the FTA, which is more competitive than India, Thailand and Indonesia. It is possible that these three countries will not focus on the EU market when their output is forecasted not to increase this year.

In addition, due to Covid-19, shrimp exports to China have been interrupted, Vietnamese enterprises will seek to increase market share in the EU. However, the import demand of the EU market has tended notto increase much in recent years, so it is forecasted that Vietnam's shrimp exports to the EU will increase by 15% to reach US$800 million in the year.