EVFTA ATTRACTS INVESTORS IN FISHERY AND GARMENT SECTORS
Trinh Thi Thu Hien
Head of Division, Division of Rules of Origin
Agency of Foreign Trade, MOIT
The rules of origin (ROO) in the EU-Vietnam Free Trade Agreement (EVFTA) which was agreed where fundamental contents are similar to some FTAs that Vietnam concluded. However, the EVFTA ROO allows the application of a breakthrough provision in cumulation principle, thus, promoting the foreign investment in two Vietnamese main export products to the EU, namely fishery products and garment/textile products.
1. Rules of origin for fishery products
Vietnamese negotiators have persuaded the EU partners to apply the extended cumulation provision in EVFTA. This provision enables cuttlefish and octopus can be imported from ASEAN countries to produce the processed cuttlefish and octopus products to export to the EU market and receive the preferential tariff in the framework of EVFTA. This is a good chance for ASEAN investors to invest in the fishery processing plant in Vietnam to facilitate the regional supply chain and benefit from EVFTA.
2. Rules of origin for garment/textile products
The EVFTA ROO for garment/textile products is double transformation, which means (i) fabric and (ii) cut and sew process must be done in Vietnam or the EU. With such rule, the fabric has to obtain Vietnam or EU origin. This provision encourages foreign investors to build or expand their fabric production in Vietnam.
Besides, the EVFTA also allows the flexible mechanism for Vietnam garment and textile products. In particular, Vietnam is allowed to apply the cumulation principle where fabric is imported from the mutual FTA partners of the EU and Vietnam. Currently, South Korea is a mutual FTA partner of Vietnam and the EU when signing the EU- Korea Free Trade Agreement (EKFTA) and the Vietnam-Korea Free Trade Agreement (VKFTA). This means that Vietnamese enterprises are allowed to use the fabric originating from South Korea to produce garment products to export the EU and benefit the EVFTA preferential tariff treatment. This regulation, in the one hand, creates favorable conditions for Vietnam manufacturers using the South Korean fabric and on the other hands, promotes the South Korean investors to build fabric manufacturing plants in Vietnam to complete the value chain in order to meet the rules of origin requirement and being granted the preferential tariff when export to the EU. In the future, when the EU and Vietnam have more mutual FTA partners, the cumulation provision will encourage more investors to develop the supply chain and production in Vietnam./.