Notices for textile and footwear enterprises from EVFTA

Textile products must meet requirements of two stages in order to be entitled to preferential tariffs of EVFTA. Photo: Nguyễn Huế

Notice on origin

In particular, for textiles, according to Mrs. Trinh Thi Thu Hien, Head Division of Origin of Goods, Import – Export Department, Ministry of Industry and Trade, the EVFTA required Vietnam’s textile products exported to the EU to meet requirements of two stages in order to be entitled to preferential tariffs. In particular, for an exported textile product into this market, not only the fabric must originate from Vietnam but also the manufacturing must be performed in Vietnam for it to be considered a product originating from Vietnam.

However, the EVFTA also allowed enterprises to apply the principle of expanded accumulation. Accordingly, materials from countries that have signed FTAs ​​with the EU and Vietnam will also be entitled to preferential tariffs. Currently, only Korea meets this requirement. Enterprises must take advantage of this principle to reduce pressure on supply shortage.

For the footwear industry, if enterprises have exported to the EU within the framework of the general system of reference (GSP) and are taking advantage of the rules of origin in GSP, the rules of origin are not much different in the EVFTA, except for a few items related to the input materials and output products need to be different at level 4 and some have specific rules for shoe soles and shoe caps. This is a great advantage for the leather and footwear industry when the EVFTA comes into effect.

Regarding the legal framework of rules of origin, "the Ministry of Industry and Trade is currently drafting a circular guiding the implementation of rules of origin in the framework of EVFTA. It is expected that when the construction is completed, the ministry will collect enterprises’ opinions. When the EVFTA is officially valid, the guidance circular of the Ministry of Industry and Trade will also be applied,” Mrs. Hien said.

Another point to note, according to representatives of the Ministry of Industry and Trade, is the enterprises which are exporting to the EU are eligible for self-certification in accordance with GSP, when the EVFTA takes effect, it will switch to the mechanism of granting C/O by state agencies for the first time. Until Vietnam is ready to announce to the EU and then the company will be self-certified. However, only enterprises that meet certain EU requirements can self-certify C/O.

The self-certification of origin will help enterprise improve responsibility and transparency in export activities. However, in the origin verification mechanism, the EU will strengthen post-clearance audit. The period of post-clearance audit lasts for 5 years, so from the beginning, enterprises have to prepare fully documents and vouchers, clearly and consistently, at the same time, keep dossiers carefully even though the goods have been cleared.

Enterprises must pay more attention

The opportunities are great but in order to take advantage of this, enteprises must take care not only of the high demands on rules of origin but also very simple things. The reason is that according to Mr. Nguyen Hai Minh, Vice Chairman of EuroCham, the level of information access of Vietnamese enterprises is very low, so many enterprises still do not know the tax reduction schedule of the Agreement.

For example, there are some items such as coffee that are entitled to a tax reduction of 0% right after the Agreement comes into effect but, currently, many export enterprises have not grasped this information. Mr. Nguyen Hai Minh suggested the Ministry of Industry and Trade to take measures to support enterprises in grasping the most basic information such as training, instructions on how to look up products to the difficult information relating to rules of origin, ”Mr. Minh said.

With the experience of a footwear company that is successfully exporting to the EU market, Mr. Pham Van Viet, CEO of Viet Thang Company, said that in order to conquer this difficult market, for many years, Viet Thang Jean has promoted investment in environmental issues as well as technological equipment from Europe. Currently, the company is using Spanish laser technology, ozone treatment technology of Italy and eco-friendly wash technology of Germany. When using technology from Europe for environmental issues, Viet Thang Jean's products can be exported to Europe with higher prices of more than 30%.

With the same view, Mr. Vu Duc Giang, Chairman of the Vietnam Textile and Apparel Association, said that the EVFTA is a long-awaited agreement for the textile industry. Therefore, in order to take advantage of this agreement, besides the solutions of compensation for the shortage of supply, the association also strives to implement the greening program of Vietnam's textile and garment industry in order to ensure environmental protection. In particular, promoting enterprises to apply Industry 4.0 technology and investing in European technology equipment in manuacturing.