Coming into the Trans-Pacific Partnership Agreement (TPP), when opportunities and challenges are facing Vietnam’s exports, which sectors should Vietnamese enterprises pay attention to? To provide answers to these questions, Vietnam Business Forum have an interview with Mr Nguyen Thai Duong, Deputy Director of the General Department of Vietnam Customs. Le Hien reports.
Can you tell us about the customs related content which Vietnamese businesses should pay attention to when joining the TTP?
Customs authorities of the TPP members always try our best to perform customs regulations in line with each other and in accordance with standards from the World Customs Organization. Business should take note of some information:
- Express Shipment: One of the priorities written in Customs Chapter is procedures for express shipments, in which call for quick clearance time, specific procedures to create favourable conditions for this type of shipment because of its’ characteristic requiring to go through quickly.
- Next is the pre-specify policy: TPP appreciates the pre-specify rules, considering it one of the useful tools to facilitate trade by reducing clearance time and preventing trouble during customs procedures, such as problems relating to determining the dutiable value, number and origin of the shipment. Under this policy, if businesses make request beforehand, customs authorities shall grant pre-specify documents on HS codes, goods value origin prior to shipments’ arrival.
- Mechanism of origin certification: TPP uses self-certification mechanism in the procedure of inspection and certification shipments’ origin, which allows enterprises to declare the origin of their own shipments. This mechanism is completely different to current customs management, which requires businesses to submit to the customs authorities a C/O certificate of origin issued by the appropriate authority of the exporting country in order to enjoy preferential tariffs. Therefore, businesses must adhere to the TPP regulations on origin and submitting documents to avoid possible problems while working under the agreement.
- For textile and apparel: As listed as sensitive items, monitoring mechanism for this kind of shipment is quite strict. Customs authorities of the TPP countries build and maintain domestic monitoring programs to oversee the whole process of import, production, export and transit (including transmission) garments. They also maintain a program to ensure that governmental agencies can check on textiles shipments at any time, whether it is already imported, awaiting export or in transit through a member country, to make sure that goods were properly labelled and documents accurate.
One of the problems when Vietnam comes into the “playground” of TPP is the reduction or total elimination of tariff barriers. How will this affect the customs revenues, especially in this difficult time, sir?
Participating in TPP, Vietnam has the opportunity to promote institutional reform, improving business environment, enhancing competitiveness, further involving in global value chains, facilitating socio-economic development.
The reduction of tariff barriers will create favourable conditions for exports of Vietnam as a member of TPP and also for goods from TPP members to “land” in Vietnam with preferential tax rates.
As for budget revenues from commodity exports, in recent years, this revenue has accounted for 7-10 percent of total customs revenues. So joining TPP poses great challenges for Vietnam, especially in the context of current difficult in making revenue.
Export goods of high revenues are mineral oil, coal, and ore of many types. For the immediate future, maintaining tax rates in export is one effective measure to control the export of discouraged items: natural resources and raw materials; to encourage deep processing, to protect domestic production and increase revenues for the state budget. Besides, it’s necessary to have alternative taxes, to restrict the export of discouraged goods, to raise import taxes on some key imported commodities of Vietnam.
For revenue from imported goods: Reducing tax revenue from imports after joining TPP is unavoidable. The tariff reduction can increase the flow of imports into Vietnam, with more competitive prices. Budget revenues then will shift to domestic taxes. In addition, post-clearance inspection and anti-smuggling investigations need to be strengthened to prevent revenue loss to the state budget.
How do Vietnamese enterprises, especially exporters, need to prepare to seize the opportunities of TPP?
Vietnam has export advantages in textiles and garments, footwear and agricultural products, however to enjoy the preferential tax, exporters need to pay attention to the rigorous standards of origin.
One of the basic principles in order to enjoy preferential tariffs when exporting textiles to the TPP countries is raw materials used for the products must be manufactured in a TPP country. The strict origin inspection therefore is inevitable because it is closely related to tax preferences. In addition, with the mechanism of self-certification of origin, businesses should also be prepared.
In your opinion, for the time ahead, what should the customs service do to promote administrative reform to get ready for this new playground?
Administrative reform is the top target of Vietnam customs authorities in order to accelerate the modernization of customs service, get Vietnam’s economy ready for the new playground, of which one of the most significant is the amending of Customs Act 2005.
Amendment for Customs Law was submitted to the National Assembly during the sixth session (October and November 2013) under Governmental Document 342/TTr-CP dated September 12, 2013. The proposed amendments aim to create favourable conditions for businesses to save time and money by simplifying customs clearance procedures, for example adding the rule of fully applying risk management principles in customs regulations, amending customs agent procedures to support agents’ development, smoothing customs procedures for businesses; adjusting regulations on customs locations to facilitate the document process in the model of centralized process at the Department and General Department level; and amending and supplementing regulations on customs procedures towards shorter clearance time.
Mr John Kerry, U.S. Secretary of State
Two-way trade between the United States and Vietnam has increased since 1995 more than 50-fold. Once finalized, TPP will raise standards, including labour standards, and open markets up. It will create millions of new jobs, not just in the United States and Vietnam, but throughout the Asia Pacific. We are working very closely with Vietnam and other regional partners in order to complete the TPP negotiations as quickly as possible.
The trade between the United States and Vietnam since 1995 has increased by 50 times and it is growing on a constant basis. And we believe that if we can quickly come to agreement on the Trans-Pacific Partnership, the TPP trade agreement, that will create a trade alliance where you have almost 40 percent of world GDP combined in this region, which is a very, very powerful trading entity.
So we think that this trade agreement is really one of the most significant steps that both of our nations can take to create jobs at home. Jobs will be created in America, jobs will be created in Vietnam, and we will both do better as a result.
Ms Nguyen Thi Thanh Huyen, General Director of May 10 Company
Textile and garment exports in 2013 was about VND 20 billion, of which 50 percent was exported to the United States. As we know, goods origin is a difficult problem, an obstacle in the TPP negotiations, of which the “yarn forward” policy is considered the greatest. Overall, it can be said that Vietnamese businesses are quite a competitor in the region, in terms of quality, design and labour. Therefore, to solve the issues of origin, Vietnam textile garment industry needs the support from the United States such as invest or co-invest in Vietnam’s textile garment companies to accelerate the process of TPP. In addition, Vietnam’s businesses must also self-invest, prepare to deal with the origin issue after 5-7 years. On one hand, Vietnam should proactively look for materials sources in TPP members, on the other, we hope that the US will support Vietnam not only in the textile garment sector, but also more broadly in training and educating human resources.
Mr Diep Thanh Kiet, Deputy Chairman of Vietnam Leather, Footwear and Handbag Association (Lefaso)
It’s difficult for Vietnamese businesses to purchase materials from each other, or to support each other in terms of loans, therefore it’s also hard for us to compete with foreign enterprises who have their own raw material supply systems. Big foreign groups in Vietnam currently are busily making preparation, raising the concern that they would soon be able to meet the TPP requirements thanks to their available global systems to supply raw materials.
US$ 10 billion of leather, footwear and handbag exports of Vietnam in 2013, 70 percent came from FDI enterprises. When TPP come into effect, there will be more oreign enterprises to invest in Vietnam, domestic businesses then will have no choice but to join in direct labour competition. Vietnamese labour sources are limited, therefore it can be predicted that the upcoming time will be quite a challenge.
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