Local textile, garment firms yet to reap FTA benefits

A shirt production line (Photo: VNA)

HCM City (VNA) – Domestic garment and textile firms have, for the most part,
missed out on the much-touted benefits of free trade agreements (FTAs) that Vietnam
has signed, experts said at a seminar on August 2.

The firms
in the country that have taken advantage of FTA breaks are in the FDI sector,
they noted.

Vietnam has signed 12 free trade agreements, of
which 10 FTAs have come into force: VN-ASEAN, ASEAN-India, ASEAN-Australia-New
Zealand, ASEAN-Republic of Korea, ASEAN-China, ASEAN-Japan, Vietnam-Chile, Vietnam-Japan,
Vietnam-Republic of Korea and Vietnam – Eurasian Economic Union, said Nguyen Ngoc
Hoa, deputy director of the HCM City Department of Industry and Trade.

In the
2016-20 period, most tariff lines under the FTAs have entered the period of
being deeply cut or completely removed, he said.

Garments and textiles are key export items for the
country in general and HCM City in particular. If enterprises can take good
advantage of FTA opportunities, the country will be able to increase export
revenues as well as expand export markets, he said.

But to be able to enjoy preferential tariffs under
FTAs, the products must meet requirements under the rules of origin, he added.

With weak
materials supply and supporting industries, businesses in the garment and
textiles face a big challenge in complying with the rules of origin, Hoa said.

Pham Xuan
Hong, Chairman of the Garment-Textile-Embroidery-Knitting Association in HCM
City, said the garment and textile industry has to import around 70 percent of
its materials for production, mainly from China.

“Domestic garment and textile businesses have not taken much advantage of FTAs
since they cannot meet rule of origin requirements.”

“And one of the main reasons for this is that
Vietnamese firms lack knowledge on this issue,” he said.

Hoa said the seminar was organised by the
department in collaboration with the Ministry of Industry and Trade to help
garment and textile businesses get updated information on rules of origin so
that they can capitalise on preferential treatments under FTAs to boost exports.

Trinh Thi
Thu Hien, head of the origin of goods division under the Ministry’s
Export-Import Department, said that currently, more than 50 percent of Vietnam’s
garment and textile products are making full use of opportunities provided by
FTAs, but these are mainly FDI companies.

“Rules of origin can neutralise preferential tariffs under FTAs,” she said.

Goods eligible for preferential treatment under
FTAs have to meet general or product-specific rules of origin, and have
appropriate documentation, known as the certificate of origin (C/O).

Each FTA has its own certificate of origin form,
she said.

[Path to EU widened for Vietnamese garments-textiles]

A product
can qualify for the C/O if it is cut-made-trimmed in Vietnam under the ASEAN
FTA, but under other FTAs like ASEAN-Japan and Vietnam-Japan pacts, firms must
meet the rules of origin from the fabric onwards, which is a big challenge for
Vietnamese firms since the country still relies heavily on imported fabric.

Under the
EU-Vietnam FTA, the ministry has negotiated to apply more flexible rules of
origin, Hien said. While this FTA also requires rules of origin to apply from
fabric onwards, meaning that exports to the EU must use fabric produced in Vietnam
or the EU, the agreement also allows firms to use fabric from one third country
which has FTAs with both Vietnam and the EU.

At the
seminar, Hien answered several questions raised by enterprises about FTA rules
and procedures regarding C/Os.

Hoa said
exports in the garment and textile sector were still focused on a few main
markets. He urged exporters to diversify their export markets, especially those
with which Vietnam has signed FTAs, so as to avoid or minimise risks.

Firms need to study carefully the characteristics of each market as well as its
rule of origin requirements, he said.

Hong said garment and textile exports reached over
14 billion USD in the first half of the year, a year-on-year increase of 11 percent.

the solid first half performance, the industry is confident of achieving its
2017 export target of 30-31 billion USD, an increase of 10 percent over last
year, he said.-VNA

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