Benefits for both sides in UK trade deal

July 24, 2021 | 08:00
Vietnam and the United Kingdom are expecting to cash in on bonanzas from their fresh bilateral free trade deal, which is believed to be the key driving force for both nations to improve their trade and investment cooperation.
Vietnam’s shrimp exports will benefit greatly from the UVFTA, which will bolster bilateral trade, Photo Le Toan
Vietnam’s shrimp exports will benefit greatly from the UVFTA, which will bolster bilateral trade. Photo Le Toan

In the afternoon of July 7, Heather Wheeler, the UK‘s Trade Envoy to Cambodia, Laos, and Vietnam, paid a visit to the Vietnamese Embassy in London. She and Nguyen Hoang Long, Vietnamese Ambassador to the UK, discussed strong solutions to further strengthen both nations’ strategic partnership in the coming time, with a focus laid on trade and investment via continued connection between enterprises from both countries.

Wheeler was invited to enjoy a number of imported Vietnamese fruits, such as pink pomelo, dragon fruit, and lychee. The lychee was part of a two-tonne batch just imported by London-based TT Meridian Company on June 30 under the UK-Vietnam Free Trade Agreement (UVFTA) that officially took effect in May

To meet the strict food safety standards of the UK market, TT Meridian has cooperated with FUSA Organic Agriculture JSC in Vietnam to select lychees grown in farms meeting Global GAP standards in Luc Ngan district of the northern province of Bac Giang.

The lychees are packed in clear plastic boxes with traceability stamps of the Vietnam Trade Promotion Agency under the Vietnamese Ministry of Industry and Trade (MoIT) enabling consumers to quickly look up the origin of the product.

Driving force

Ambassador Long and Wheeler also agreed on some measures to boost bilateral trade, including trading items such as Vietnam’s agricultural products like rice and speciality fruits and the UK’s milk, cheese, and products in heavy industries like steel and iron.

According to Long, one of the biggest drivers of both countries’ trade and investment relationship outlook is the UVFTA.

“The agreement is ushering in many opportunities for UK businesses. Two-way trade has strongly increased since the agreement’s entry into force, and it will continue developing in the coming time,” said Long.

“The UK’s larger businesses active in Vietnam will also help the country attract small- and medium-sized enterprises’ investment from the UK. Investors and businesses can participate in many types of projects like infrastructure, healthcare, pharmacy, and vaccine production.”

Inked last December as the UK transitioned out of the EU, the UVFTA aims to strengthen the existing relationship between Vietnam and the UK. In reality, about 65 per cent of all tariffs have already been removed on UK-Vietnam trade. In the first six years, the UK will remove tariffs on 99.2 per cent of Vietnam’s exports. Vietnam vowed to phase out about 48.5 per cent of tariffs, matching other EU nations following the EU-Vietnam FTA.

Upon the UVFTA’s entry into force, items with immediate exemption of non-quota import tariffs consist of cashew, mango, pepper, coconut, longan, rambutan, and lychee. Other items such as fragrant rice, tuna, ground fish, and shrimp, as well as other agricultural products, will also be exempted from tariffs under quotas.

Furthermore, many industrial products with immediate tariff exemptions include swimwear, nightclothes, bags, wallets, purses, suitcases, shoes, and many more.

Under the UVFTA, tariffs on almost all shrimp materials into the UK are decreased from 10-20 to zero upon the agreement’s entry into force. For vegetables and fruits, right after the deal took effect, over 94 per cent out of 547 tariff lines enjoy a zero tax rate.

“The UVFTA will create positive effects in attracting investment for Vietnam in the long term. Together with Vietnam’s continued reform of policies and opening of the economy, the trade deal will encourage overseas investors in Vietnam to expand production and business. Some owners of UK businesses in China and Myanmar may relocate their production establishments to Vietnam,” Nguyen Canh Cuong, trade counsellor at the Vietnamese Embassy to the UK, told VIR.

Boosted deployment

With a view to carrying out the UVFTA, Vietnam has enacted a number of policies that investors should pay attention to so as to capitalise on benefits from the agreement and pare down costs when they trade goods between the two markets.

On June 11, Vietnam’s MoIT promulgated Circular No.02/2021/TT-BCT guiding the implementation of the rules of origin in the UVFTA. According to the circular which will come into force on July 26, an exporter is allowed to self-certify the origin of export and import shipments with a value of around $7,000 between Vietnam and the UK.

For an export valued at over $700, exporters are required to have a certificate of origin form EUR 1 authorised by the MoIT. For imports worth more than $7,000 into Vietnam, exporters registered in an electronic database authorised by the UK customs authorities are permitted to self-certify.

Circular 02 also states that proof of origin shall be submitted within two years of importation to Vietnamese customs. Customs authorities may require a translation if not in English. Certificates of origin are valid for 12 months and must be submitted to customs authorities of either nation within the validity period.

Besides Circular 02, the Vietnamese government on May 21 enacted Decree No.53/2021/ND-CP on Vietnam’s preferential export and import tariffs for the implementation of the UVFTA for the next two years.

Notably, Decree 53 boasts two appendixes. Appendix I features Vietnam’s preferential export tariff structure for the implementation of the UVFTA, which comprises commodity codes, descriptions, and preferential export tariffs for each commodity code when exported to the UK.

Meanwhile, Appendix II clarifies Vietnam’s special preferential import tariff structure to carry out the UVFTA, which embraces commodity codes, descriptions, and special preferential import tariffs for each commodity code when imported into Vietnam from the UK and non-tariff zones.

Goods exported from the Southeast Asian market will be eligible to enjoy the preferential export tariffs when they are imported into the UK, have transport documents (copies) showing the UK as their destination, and import customs declarations for goods originating in Vietnam that are imported into the UK.

To be eligible for special preferential import tariffs, import items must be imported into Vietnam from the UK or from non-tariff zones. In addition, the goods must meet the regulations on the rules of origin and have documents certifying the origin of goods as set out in the UVFTA.

The British embassy in Vietnam has forecast that Vietnam will save $151 million in tariffs from the UVFTA while the UK stands to save as much as $36 million.

Statistics from the General Department of Vietnam Customs showed that the Vietnam-UK two-way trade value totalled $5.64 billion in 2020, with Vietnam earning $4.95 million from exporting goods to the UK. In the first half of this year, Vietnam’s total export-import turnover hit $3.29 billion, up 25 per cent on-year. This included $2.88 billion worth of export revenue, and $413.4 million for imports.

According to the Vietnamese Ministry of Planning and Investment, as of June 20, Vietnam had $3.92 billion registered for 424 valid projects invested by UK investors. In the first half of 2021, the total newly-registered, newly-expanded, and stake acquisition-based capital from the UK in Vietnam sat at $56.13 million.

Vietnamese Ambassador Long said the trade and investment cooperation between Vietnam and the UK will have much room for further development.

“Both sides wish to refresh and strengthen the UK-Vietnam strategic partnership. We will set an upward trajectory for the next 10 years with shared ambition to lift the partnership to a higher level in the future,” Long said.

Excerpt of joint statement upon the UVFTA’s entry into force

- The UVFTA secures access to staged tariff reductions between the UK and Vietnam. The deal locks in the 65 per cent of all tariffs that have already been eliminated on UK-Vietnam trade. This will increase to 99 per cent of tariffs after six years. This includes eliminating tariffs for UK exporters of machinery, mechanical appliances, and pharmaceutical products. The preferential tariffs of the UVFTA will provide identical opportunity for Vietnam to increase exports of key products such as phones and components, garments, footwear, and fish to the UK. Vietnam continues to receive duty-free tariff quotas for its 14 products, including rice, with improved market access.

- Under the UVFTA, trade in services can continue to flourish. Vietnam has not only opened additional sub-sectors for UK service providers, but also made commitments deeper than those outlined in the World Trade Organization’s commitments – offering the UK favourable access to Vietnam’s market. Sub-sectors that have higher commitments under the agreement include financial services, telecommunications, and education services.

- On intellectual property rights, both sides continue to commit to a high level of protection. Iconic British products, including Scotch whisky and Scottish salmon as well as 36 of Vietnam’s agricultural products, including Moc Chau tea, Buon Ma Thuot coffee, Hai Hau rice, and Phu Quoc fish sauce, continue to be protected.

- The UVFTA also maintains access to public procurement markets in Vietnam, so that UK firms have more opportunity to bid for public procurement contracts.

- It also serves as a stepping-stone towards the UK’s membership of Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP), a priority for the UK. Vietnam supports and welcomes the UK’s application for accession to the CPTPP. This is expected to bring both nations closer to the CPTPP’s vision of advancing economic integration and supporting the liberalisation of trade and investment globally.

By Thanh Thu

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