Meet rules of origin- key to making use of EVFTA

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Vietnam’s textiles and garments industry is currently confident in meeting the requirements of the rules of origin in the EVFTA. Photo: N.T

Rules not new but complex

According to the Import-Export Duty Department (under the Ministry of Industry and Trade), provisions on rules of origin in the EVFTA are are not entirely new to Vietnamese businesses asthese rules weredeveloped and negotiated based on rules in the regime of General System of Preferences (GSP). This is the preference regime the EU has given to Vietnam for many years. However, rules of origin in EVFTA provide many new contents in criteria and enclosed provisions compared to other FTAs acceded by Vietnam.

Phan Van Chinh, Director of Import and Export Duty Department, said some items such as textiles, processed squid and octopus canadd origin with materials from non-member countries of the agreement and enjoy preferential treatment for specific territories or divide goods in a third country outside the agreement.

Chinh added that as per the commitment, the agreement allows the mechanism of issuing certificate of origin (C/O form EUR.1) and self-certification of goods origin. Before applying this mechanism, Vietnam will notify the EU and issue domestic guidelines.

For Vietnam's export goods, for shipments worth less than 6,000 euro, any exporter is subject to self-certification of goods origin (similar to current GSP regulations); shipments worth more than 6,000 euro shall be issued C/O by agencies and organizations authorised by the Ministry of Industry and Trade. For goods imported into Vietnam, shipments worth less than 6,000 euro, any exporter can implement self-certification of goods origin. For shipments worth more than 6,000 euro, only exporters that satisfy the EU’s regulations are subject to self-certification of goods origin.

Develop domestic material sources

Is it easy to meet rules of origin in the EVFTA to enjoy preferential tariffs? Nguyen Thi Thu Trang, Director of the WTO and International Trade Centre under the Vietnam Chamber of Commerce and Industry (VCCI),said it is not easy. Because commitments under new generation FTAs ​​such as the EVFTA or CPTPP have increased requirements on environment related to fishing,if enterprises want quality seafood, they must comply with regulations on labour and the environment. Notably, compliance with these regulations can increase production costs, leading to higher production price.

Le Hang, Deputy Director of VASEP (Vietnam Association of Seafood Exporters and Processors), emphasised that enterprises must understand and apply flexibly and honestly rules of origin; strengthen chain links; control food safety and hygiene, focusing on regulations and standards on labour and the environment.

For the textile and garment industry, to better gain opportunities from the EVFTA, Chairman of the Vietnam Textile and Garment Association Vu Duc Giang said the industry aims to promote building manufacturing chain links from upstream (weaving, dyeing) to tailoring of finished products, improving added value and competitiveness for textile products. The Government, Ministry of Industry and Trade and association will play an important role to accompany enterprises in forming these chains.

According to Chinh, in thenear future, to strengthen State management of the issuance of certificates of origin and fight against goods origin fraud, the Import and Export Department will support Vietnamese enterprises to handle, implement and review requests from the EU to protect the legitimate interests of Vietnamese enterprises. To prevent origin fraud, in addition to implementing capacity building programmes of C/O issuers, the department will set up delegations to directly inspect and verify origin in manufacturing facility of the enterprise to ensure compliance with the rules of origin in the EVFTA.

For businesses, Chinh said that because the rules of origin in the EVFTA require a large participation of raw materials in the FTA area, such as seafood, textiles or footwear, Vietnamese enterprises need to improve production capacity, implement deep processing andseek raw materials in the region or develop domestic raw materials. "In addition, businesses need to actively participate in trade promotion activities with EU partners to find new sources of raw materials as well as new partners, expand the supply chain in the region and expand markets to the EU countries that have not been exploited before,"Chinh said.