Textiles go “straight ahead” into EU thanks to accumulation of origin with South Korea?

illustration image. Photo: Thanh Nguyễn

Recently, Minister of Industry and Trade Tran Tuan Anh and Minister of Trade, Industry and Energy of South Korea Sung Yunmo signed many important documents, especially the Letter of Exchange between the Vietnamese Government and the South Korean government to implement the provision of accumulation principle on origin of fabric materials between Vietnam and South Korea in the EVFTA.

The EU is the largest market in terms of consumption demand for textiles and garments with an import turnover of more than $250 billion/year. With the EVFTA, economists forecast the export turnover of Vietnam's textile and garment to the EU market would increase rapidly by about 67% by 2025 compared to without an agreement.

According to the commitments in the EVFTA, besides meeting strict quality criteria, to enjoy the benefits of tariff reduction, businesses must ensure strict requirements on origin. In particular, "fabric forwards" rules require the material used to make clothes must be woven in Vietnam, or by EU member countries.

Previously, many said this was still the weakness of the domestic textile and garment industry because most textile and garment materials were imported from non-EVFTA member sources.

Therefore, the Ministry of Industry and Trade assessed the above agreement was very important to help Vietnamese enterprises take advantage of high quality textile and garment raw materials from South Korea to produce and export to the EU market.

From an enterprise perspective, Le Tien Truong, Chairman of the Board of Vietnam Textile and Garment Group (Vinatex) also emphasised that in the EVFTA, Vietnamese textile firms were worried about the rule of origin of fabric because fabric production source was often congested in Vietnam for many reasons.

Therefore, the agreement was very important to help Vietnamese enterprises take advantage of high-quality textile and garment raw materials from South Korea to produce, removing bottlenecks in origin of fabric materials for textiles and garments exported to the EU, because South Korea has also signed a trade agreement with the EU.

In the past five years, Vietnam has imported the second largest amount of fabrics from South Korea, after China, with an average level of up to $2 billion/year, accounting for 17-18% of total import turnover of Vietnamese fabric per year. Vietnam has 30% of domestically produced fabric and 70% of imported fabric.

Now with the agreement between Vietnam and South Korea on the implementation of the provision of accumulation principle on origin of fabric materials between the two countries in the EVFTA, garment products from Vietnam imported to the EU have a rate that meet the rules of origin up to 50% (plus the amount of fabric from Vietnam and fabric imported from South Korea).

"This was very convenient for Vietnamese textiles to enjoy preferential tariffs on exports to the EU. Vietnamese textile enterprises would consider using more fabrics from South Korea besides the amount of fabric produced in Vietnam to fulfill orders to the EU, meeting the rules of origin of fabric," Truong emphasised.