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Incorporating Customs & Trade Compliance Management in Your ESG Strategy
Looking for a leg up on the competition? ESG may be your answer! Continue reading to find out why!
In August 2020, European Union concluded the EU-Vietnam Free Trade Agreement (EVFTA) with Vietnam. It is the fourth free trade agreement that the EU signs with an Asian country and, as all previous FTAs, it eliminates customs duties and provides investment protection. Its main objective is to stimulate rapid economic growth between Vietnam and the European Union — a massive combined market with a total population of around 550 million.
As an emerging economy in the ASEAN region, Vietnam’s GDP is growing at a steady annual rate of 5.1% over the last ten years (pre-pandemic figures). It is an export-oriented economy which saw a total export value of USD 281 billion (FOB) and a total import value of USD 261 billion (CIF) in 2020. As for the most exported commodities from Vietnam to the rest of the world, the following breakdown is provided by the national government:
EVFTA offers many benefits to traders and investors in both Vietnam and the EU. The following are the major highlights of the agreement1 :
Tariff Removal: As the largest exporter of goods from the ASEAN region into the EU, traders in Vietnam enjoy the following benefits from the EVFTA
In return, Vietnam has committed to offer the following tariff reductions on exports from EU:
Besides tariff reductions, other chapters and provisions of the EVFTA greatly help to enhance the economic development between the EU member-states and Vietnam and strengthen the on-going partnership and cooperation. For instance:
Rules of Origin (RoO): simplification measures concerning the RoO definition and procedures. Goods that originating in the European Union which are imported into Vietnam (and vice versa) will be entitled to the tariff concession stated in the EVFTA upon the submission of any of the following proof of origin documents:
Mutual recognition of standards: In order to safeguard health, safety and the environment of signatory members of the EVFTA,the agreement covers several mutual recognitions of standards to promote trades between the EU and Vietnam, such as: Sanitary and Phytosanitary measures (SPS), Geographical indications (GIs), Labour Standards and Corporate Social Responsibility..
Promoting and protecting investment: With the passing of the EVFTA, the Vietnamese Government has committed to open its economy to investments in the manufacturing industry under several key sectors, such as food products and beverages, fertilizers and nitrogen composites, tires and tubes, gloves and plastic products, ceramics and construction materials. This will greatly help to increase foreign direct investments in Vietnam, especially from the EU member states.
To protect the interests of investors from Vietnam and the EU, a permanent investment dispute resolution mechanism to be established under the EVFTA by creating an independent Investment Tribunal System to handle any commercial disputes.
Intellectual property rights: The EVFTA requires customs authorities to be actively involved in customs seizure of any suspected IP-infringing goods, and to cooperate with the right holders in the investigation, including providing them with relevant information for risk analysis. This provision will further strengthen the protection enjoyed by right holders in Vietnam and the EU.
“Thanks to the EVFTA, economic growth between Vietnam and the European Union is set to skyrocket in the coming years due to slashed tariffs and simplified Rule of Origin requirements."
While international trade regulations and free trade agreements may appear highly complex and opaque, having a thorough understanding of the details unlocks substantial tangible benefits to those companies operating in different countries and regions.
As the world’s leading customs brokerage service provider, GEODIS provides a full range of professional customs & trade management solutions to all our clients globally. We have more than 1100 professional trade experts worldwide to support our customers in researching customs regulations and free trade agreements, as well as providing effective cross-border solutions to ensure efficient cargo shipping, duty & tax optimization with full customs compliance at all times.
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1 Source: EU-Vietnam – Texts of the Agreements (European Commission - https://policy.trade.ec.europa.eu/eu-trade-relationships-country-and-region/countries-and-regions/vietnam/eu-vietnam-agreement/texts-agreements_en)