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EVFTA fabric origin rule a challenge for Vietnamese firms

Aug '20
Pic: Shutterstock
Pic: Shutterstock
Despite the European Union (EU)-Vietnam Free Trade Agreement (EVFTA), which came into force on August 1, being considered as a great opportunity for the Vietnamese textile and apparel industry, there are concerns that the origin criteria ‘from fabric onwards’ will make it difficult for domestic products to enjoy the benefits of the trade deal.

According to the commitments outlined in the EVFTA, among the key export items of the nation to the trading bloc, the EU will eliminate tariffs on 77.3 per cent of all textile and apparel exports from the country, while removing the remaining 22.7 per cent over the following seven years.

In addition to enjoying advantageous tax rates, the EVFTA also promises to offer domestic textile enterprises the chance to import high-quality machinery, whilst simultaneously having access to EU standard raw materials.

Many domestic businesses have invested methodically into workshops, machinery and technology to meet the technical standards set by importers.

Despite this, with an export scale of approximately $5 billion per year to the bloc, the issue of how to make the textile and apparel industry meet the origin criteria to qualify for tax reductions remains a challenging issue, according to Vietnamese media reports.

The textile industry has failed to be proactive in sourcing fabrics that qualify for exports to the EU.

Additionally, the purchase of domestic fabrics is subject to 10 per cent VAT, meaning that it is more expensive than imported fabrics, ultimately making the benefits of tariff reductions insufficient to offset the selling prices and to compete with items from other nations.

Nguyen Van Cam, vice chairman of Vietnam Textile and Apparel Association (VITAS), said that the rules of origin remain the most difficult issue for the textile and apparel industry when it comes to capitalising on the EVFTA.

Fibre2Fashion News Desk (DS)

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