Workers process fruit for export at the factory of the Nafoods Group JSC in Khanh Hoa Tay commune of Duc Hoa district, Long An province (Photo: VNA)Hanoi (VNS/VNA) - Preferential export taxes offered by theComprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP)are expected to be promulgated this month. However, the tax reduction is onlyone of the incentives for Vietnamese goods when entering markets, not a‘lifesaver’ for businesses, said the Ministry of Industry and Trade (MoIT).
The Ministry of Finance (MoF) submitted a decree on preferential export tariffsand special preferential import tariffs of Vietnam under the CPTPP from theperiod January 14, 2019 to December 31, 2022.
Under the decree, the MoF and General Department of Customs tried to comparethe taxes of free trade agreements (FTAs) with the CPTPP so that businesses canchoose appropriate preferential tax rates.
The preferential tariffs include two country groups. One group has implementedthe CPTPP since the end of 2018, including Canada, Australia, New Zealand andSingapore and another group will start from 2019. Accordingly, when enterprisesimport goods, they need to read the tariff to understand the tax reductionschedule. For example, if the goods are imported from Australia, the roadmap isthe second year, while imports from Mexico will come under the first year.
It is expected that the tax reduction would be applied to some 300 products.However, businesses are required to have preferential certificate of origin(C/O) to enjoy the preferential tariffs. C/O in CPTPP is a certificate that canbe issued to multiple shipments on condition of not exceeding 12 months and canbe issued to many different importers.
Earlier, Canada immediately eliminated tariffs on fishery products, especiallykey products of Vietnam. Rice and products containing rice, coffee, green tea,fruit and vegetables also saw the majority of tariffs eliminated at the timethe commitments started.
According to the MoIT’s Import-Export Department, many exporters of garment andtextile and leather shoes have taken advantage of the C/O principles under theCPTPP when exporting to Canada. In the Japanese market, the majority of seafoodproducts which Vietnam has an advantage, such as frozen and processed shrimp,enjoy zero tax right after the CPTPP took effect.
However, the MoIT said the tax reduction is only one of the preferential itemsfor Vietnamese goods. Businesses still have to ensure their products meetquality and technical standards as well as have certificates of origin fromimporters.
Pham Thiet Hoa, director of the Investment and Trade Promotion Centre of HCMCity (ITPC), said import and export activities of local businesses are subjectto control of CPTPP's both incentives and strict requirements.
Among 10 members of the CPTPP, Vietnam signed FTAs with seven countries, ofwhich four countries have relatively high bilateral import-export turnover,reaching nearly 7 billion USD. For countries that have not signed bilateralFTAs such as Canada or Mexico, export turnover stood at 4.6 billion USD and 3.4billion USD in 2018, respectively. Particularly, in the first quarter of 2019,Vietnamese goods exported to Canada reached 864 million USD, up 42.7 percentover the same period last year.
However, for these markets, Vietnam's exports account for only 1-2 percent ofthe total import turnover of each country. With a large market capacity and thedifference in tax incentives before and after the CPTPP took effect, Canada andMexico will be potential export markets for Vietnamese enterprises. Inparticular, Vietnamese industries which have advantages such as footwear,textiles, aquatic and wood products are predicted to have high export growthrates, if they make good use of incentives.
In reality, Vietnamese enterprises have often only paid attention to tradeissues such as quality, quantity of goods, time of delivery and receipt, butneglect the legal factors such as applicable law and provisions on disputeresolution. In order to limit this, even at the negotiation stage, Vietnameseenterprises need to actively agree with partners on these components as a wayto prevent possible disputes.
After four to five months of CPTPP implementation, Vietnam's trade with somemember countries has increased compared to the same period last year. Forexample, Vietnam's trade with Canada was increased by over 70 percent, Mexicoover 8 percent. With Japan, Vietnam has an agreement within ASEAN, but trade inthe past four months has also increased by 4 percent. — VNS/VNA
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