You want to import agricultural products from Vietnam, but the complexity of tariffs and the paperwork keeps you from moving forward. Are you struggling with such worries?
RCEP (Regional Comprehensive Economic Partnership), which took effect in January 2022, became a major turning point for Vietnamese agriculture. This article concretely explains everything from the basic mechanism of RCEP, to the procedure for obtaining a certificate of origin, and which agricultural products are benefiting.
What Is RCEP? The World's Largest FTA, with 15 Participating Countries
RCEP (Regional Comprehensive Economic Partnership) is a regional trade agreement that took effect on January 1, 2022. In addition to the 10 ASEAN countries, Japan, China, South Korea, Australia, and New Zealand participate, for a total of 15 countries.
It is the largest FTA in history, covering about 30% of the world's GDP and about 28% of its trade.
| Participating country group | Country |
|---|---|
| ASEAN (10 countries) | Vietnam, Thailand, Indonesia, Malaysia, the Philippines, Singapore, Myanmar, Cambodia, Laos, Brunei |
| Non-ASEAN (5 countries) | Japan, China, South Korea, Australia, New Zealand |
Vietnam had previously concluded individual FTAs with ASEAN plus various countries, but RCEP unified trade rules with 15 countries under a single framework. In terms of simplifying procedures, too, the practical benefits are significant.
The Tariff-Elimination Effect on Vietnamese Agricultural Products
RCEP's greatest appeal is the phased elimination of tariffs. Within 20 years of taking effect, tariffs are expected to reach zero on about 90% or more of items.
We have organized the changes in tariffs on major agricultural products bound for Japan.
| Crop | Tariff before RCEP | Target rate after RCEP | Elimination schedule |
|---|---|---|---|
| Coffee beans (green) | 0% | 0% | Immediate (already duty-free) |
| Cashew nuts | 6% | 0% | Within 10 years |
| Shrimp (frozen) | 1〜4% | 0% | Eliminated in phases |
| Tropical fruits | 3〜6% | 0% | Up to 15 years |
| Rice (milled) | 341 yen/kg | Negotiations ongoing | A long-term challenge |
Rice continues to be treated as an exception item, but coffee, cashew nuts, and seafood can benefit relatively early. For Japanese importers, this is a direct opportunity to cut procurement costs.
How to Obtain a Certificate of Origin (RCO)
To apply RCEP's preferential tariffs, you must obtain an "RCEP Certificate of Origin (RCO)" showing that the exported goods meet RCEP rules.
The Three Patterns of Rules of Origin
Under RCEP, rules of origin are set for each item. The main patterns relevant to agricultural products are as follows.
- Wholly obtained goods: Those grown or harvested within Vietnam (most agricultural products apply)
- Substantial transformation criterion: Those that, even using third-country raw materials, undergo sufficient processing in Vietnam
- Value-added criterion: Those for which a certain percentage or more of value is created in Vietnam
Agricultural products grown and harvested on Vietnamese farmland are certified as "wholly obtained goods." This is the simplest category and the easiest to obtain.
The Steps to Apply for an RCO
The actual application proceeds in the following flow.
- Exporter registration: Register as an exporter with Vietnam's Ministry of Industry and Trade (MOIT) or a designated body
- Preparing documents: Assemble documents that can prove origin, such as commercial invoices, packing lists, and farm records
- Application and issuance: Submit the documents to the registering body and obtain the RCO
- Submission in the importing country: Submit the RCO at the time of import declaration to have the preferential rate applied
From document preparation to issuance usually takes 3 to 5 business days. It is essential to work on a schedule with some leeway.
The Benefits Vietnamese Agriculture Receives
Let us look concretely at what changes RCEP is bringing to Vietnamese agriculture as a whole.
Exports Reach a Record Level
In 2022, Vietnam's agriculture, forestry, Seafood exports reached about US$53 billion, setting a new record. After RCEP took effect, exports to China, Japan, South Korea, and Australia have trended upward.
Drawing particular attention is the South Korean market. The situation in which high tariffs had made entry difficult is changing, and exports of pineapple and dragon fruit are increasing.
A Change in Farmers' Incomes
Improved export competitiveness is also spilling over into the prices paid to farmers. Among coffee farmers, there are reports that incomes are rising as the climb in international prices coincides with improved market access through RCEP.
However, for the benefits to reach farmers at the end of the chain, building mechanisms through cooperatives and intermediaries remains a challenge, and the reality is that regional disparities still exist.
Meeting Quality Standards Is the Next Hurdle
Many RCEP member countries set strict food-safety standards. For exports to Japan, conformity with pesticide-residue standards (the positive-list system) is mandatory.
The Vietnamese government is also strengthening support for spreading GAP (Good Agricultural Practices) certification, and the quality of export-bound agricultural products is steadily being raised.
Three Points for Japanese Companies When Sourcing
We have organized the points that Japanese importers and agriculture-related parties should keep in mind when making use of RCEP.
(1) Use the cumulation rule wisely
RCEP has a "cumulation rule." Raw materials produced in RCEP member countries can be regarded as originating materials of the processing country, making it easier to satisfy the rules of origin.
For example, even when cashew nuts primarily processed in Vietnam are secondarily processed in Japan, this cumulation rule may allow the preferential rate to apply.
(2) Secure a reliable local partner
From obtaining the RCO to quality control, the reality is that it is hard to proceed without a local partner. Build mechanisms to guarantee quality in advance, such as farm visits and regular sample inspections.
(3) Prepare for exchange-rate risk as well
Fluctuations in the exchange rate between the Vietnamese dong (VND) and the yen directly affect procurement costs. We recommend considering risk-management measures in advance, such as using long-term contracts and forward exchange contracts.
Summary
RCEP is steadily changing the trade environment surrounding Vietnamese agricultural products.
- An FTA with 15 participating countries that phases out tariffs (covering about 90% of items)
- Most agricultural products are easy to obtain a certificate of origin for as "wholly obtained goods"
- 2022 agriculture, forestry, and fishery exports reached a record level of about US$53 billion
- Meeting quality standards and a reliable local partner are the keys to success
To receive RCEP's benefits, accurately obtaining the RCO (RCEP Certificate of Origin) is a prerequisite. Because there are cases where a flaw in the documents prevents the preferential rate from applying, it is surest to proceed on the first occasion in cooperation with an expert or a local partner.
At VN AGRI, we share the latest information on Vietnamese agriculture.
