If you are thinking of exporting farm produce from Vietnam to the EU, the EVFTA (EU-Vietnam Free Trade Agreement) is a system you absolutely want to have a firm grasp of. But many people may be at a loss over "how much will tariffs fall?" and "how do I meet the rules of origin?"
This article explains in detail everything from the basic overview of the EVFTA to the tariff-reduction effects on farm produce, key points of the rules of origin, and actual cases of utilization.
What is the EVFTA? The background to its entry into force and basic overview
The EVFTA (EU-Vietnam Free Trade Agreement) officially entered into force on August 1, 2020. It is a comprehensive free trade agreement concluded between the European Union (EU) and Vietnam.
Reaching agreement after about nine years from the start of negotiations, it is drawing attention as the agreement under which, as a major ASEAN country, Vietnam concluded a comprehensive FTA with the EU for the first time.
At the point of entry into force, the EU immediately abolished about 85.6% of the tariffs it had imposed on Vietnamese products. The remaining tariffs are also scheduled to be phased down over a period of up to ten years.
Vietnam has also agreed to abolish tariffs on EU products within up to ten years, and two-way expansion of trade is expected.
Why the EVFTA is important for agriculture
Vietnam is agricultural power isn't it. Coffee, rice, pepper, and Cashew nuts and others—it is known as one of the world's foremost farm-produce-exporting countries.
The EU market has many wealthy consumers with a high willingness to pay for quality, making it an attractive export destination for Vietnam's farm produce.
With tariff barriers lowered by the EVFTA, the price competitiveness of Vietnamese farm produce rises substantially.
Tariff-reduction effects on farm produce and the main items
The impact of the EVFTA on farm produce differs by item. Please check the tariff-reduction schedule for the main items in the table below.
| Items | Tariff rate before entry into force | After entry into force (immediate) | Final year of reduction |
|---|---|---|---|
| Coffee (green beans) | 7.5% | 0% | Immediate |
| Pepper | 7.5% | 0% | Immediate |
| Cashew nuts | 9% | 0% | Immediate |
| Rice (general) | 45〜175% | Reduced within the tariff quota | Phased |
| Vegetables and Fruit | 5〜15% | 0〜5% | 5–7 years |
| Fishery products | 10〜20% | 0〜5% | 3–7 years |
Coffee and pepper became zero-tariff at the same time as entry into force. Across farm produce as a whole, there are also many items to which a preferential rate applies as long as they are within the tariff rate quota (TRQ) set by the EU.
How the tariff rate quota (TRQ) works
Some farm products receive preferential treatment through the "tariff rate quota" system. It is a mechanism in which a low tariff applies within the range of the allocated quantity, and the normal tariff rate applies to the amount exceeding it.
In the case of rice, the annual quota for the EU is set at 80,000 tonnes. Within this frame, you can export under significantly advantageous conditions.
The quota quantity and application method for each item need to be checked thoroughly in advance.
Requirements and cautions regarding the rules of origin
To receive the benefits of the EVFTA, you need to meet the rules of origin. These are rules for proving that something "is a product of Vietnam."
Rules of origin for farm produce
In the case of farm produce, if it is produced or harvested within Vietnam, it meets the origin requirement as a "wholly obtained product."
When processing using imported raw materials, you need to prove that "sufficient processing" was carried out. Because the standard for the degree of processing differs by item, individual confirmation is necessary.
How to obtain a certificate of origin
To utilize the EVFTA, you certify origin by one of the following methods.
| Method of certification | Overview | Scope |
|---|---|---|
| EUR.1 certificate | An official certificate issued by Vietnam's customs authorities | All exporters |
| Origin declaration | A method in which the exporter themselves declares it on commercial documents | Approved exporters only |
| REX registration | Self-certification based on the EU's Registered Exporter system | Registered exporters |
The EUR.1 certificate is issued by Vietnam's Ministry of Industry and Trade (MOIT) or customs. The application requires documents such as the export declaration and the product's manufacturing-process documents.
If there are deficiencies in the documents, the tariff preference may not be recognized at EU customs. Prepare carefully.
Items whose exports are expanding through use of the EVFTA
Nearly five years after entry into force, there are items that are actually growing their exports with the benefit of the EVFTA.
Coffee
Vietnam is the world's second-largest coffee exporter after Brazil. It exports more than 1.7 million tonnes a year, and large volumes of coffee are also exported to the EU.
After the EVFTA entered into force, coffee exports to the EU have been expanding steadily. The increase in exports of high-value processed goods (instant coffee and canned coffee) in particular stands out.
Combining not only green beans but also high-value products is drawing attention as a strategy going forward.
Fishery products
Fishery products such as shrimp and seafood are also major beneficiary items of the EVFTA. EU-bound Seafood exports has shown an upward trend after entry into force.
However, caution is needed regarding the EU's regulations on IUU fishing (illegal, unreported, and unregulated fishing). Responding to the "yellow card" that the EU issued to Vietnam in 2017 remains a challenge for fishery exports.
Appropriate fisheries management and the preparation of certification documents are prerequisites for continuing exports.
Vegetables and Fruit
Tropical fruits such as mango, dragon fruit, and lychee are also items drawing attention. Interest in Asian fruits in the EU market is rising, and they are items that are easy to differentiate.
Because conformity with plant-quarantine (SPS) standards is a prerequisite for export, thorough residual-pesticide management and Sanitary management are required.
Concrete cases utilizing the EVFTA
Case 1: expansion of tilapia exports by a seafood processor
A major Vietnamese seafood processor is using the EVFTA to expand tilapia exports to the EU.
By combining tariff reductions using the EUR.1 certificate with quality assurance through HACCP certification, it has achieved differentiation from competing countries.
Combining certification with the preparation of documents leads to building long-term trading relationships.
Case 2: direct exports to European supermarkets through GAP certification
In the suburbs of Ho Chi Minh City in the south, agricultural cooperatives advanced obtaining GAP certification (good agricultural practices) on the occasion of the EVFTA.
There is a case of opening up a direct export route to German and French supermarket chains by conforming to the EU's food-safety standards.
Direct trade without intermediaries also leads to improved take-home returns.
Case 3: raising added value by a coffee processor
A coffee processor in Dak Lak province used the EVFTA to begin EU exports of specialty coffee.
By selling it not as mere green beans but as value-added coffee that has been refined and roasted, it has succeeded in raising the unit price to more than three times the previous level.
The key to success is layering a "price advantage" through added value on top of the "entry advantage" of tariff reduction.
Summary
The EVFTA (EU-Vietnam Free Trade Agreement) is bringing a major opportunity to Vietnam's farm-produce exports. Let us organize the key points.
| Point | Details |
|---|---|
| Date of entry into force | August 1, 2020 |
| Items with immediate zero tariff | Coffee, pepper, cashew nuts, and others |
| Certificate of origin | An EUR.1 certificate or REX registration is required |
| Tariff rate quota | Rice has an annual quota frame of 80,000 tonnes |
| Cautions | Compliance with food-safety standards (SPS) and IUU regulations is essential |
To make the most of the EVFTA, an accurate understanding of the rules of origin and conformity with the EU's food-safety standards are indispensable. Obtaining certification and preparing documents take time and cost, but over the long term a large return can be expected.
For Japanese food importers as well, trends in the European distribution of Vietnamese farm produce using the EVFTA are important reference information in considering future sourcing strategies.
At VN AGRI, we share the latest information on Vietnamese agriculture.
