GSP facilities and Free Trade Agreements in Vietnam

GSP facilities

Vietnam enjoys Generalised Scheme of Preferences (GSP) status with many partners and countries, such as the EU (including all 28 member states), Australia, New Zealand, Canada, Norway, Switzerland, Japan, Russia and Belarus, China as well as another 42 states and the MERCOSUR trade bloc under the Global System of Trade Preferences among Developing Countries (GSTP). GSP provides exporters with reduced or zero duties when exporting seafood products to one of these states. The EU market Vietnam does not benefit from GSP+ status. However, it is on the list of GSP countries. Import duties for seafood apply and vary depending on the species and product to be imported. For example, tilapia and pangasius are taxed at 4.5% when imported whole (fresh, chilled or frozen) and 5.5% in filleted form. While shrimp products (L. vannamei and P. monodon) are taxed at 7% in any form. In 2015 Vietnam and the EU concluded a three years negotiation over a Free Trade Agreement (FTA), which outcomes have been published February 2016. The outcome of the negotiations unlock a huge potential market for European companies and supports Vietnam’s transition towards a more competitive, smarter and green economy (European Commission, 2017). At the moment the negotiated text is still under legal review and will be followed by a translation into the EU’s official languages and Vietnamese. After that, the proposal agreement has to be approved by the Council of Ministers and if approved, ratified by the European Parliament. Once in force (expected in early 2018), import duties on most trade items in both directions will be eliminated, including duties on seafood products (except surimi products and canned tuna, for which tariff rate quotas (TRQs) will apply). The US market Although the recently signed Trans-Pacific Partnership (TPP) agreement should provide Vietnam access to preferential export treatments for seafood products to the USA. The signed agreement will be more beneficial for USA seafood exporters than the other way around. While the USA will benefit from zero import duties on seafood products to Vietnam, it is not clear whether seafood exports from Vietnam to the USA will enjoy the same advantage. While these exports have been faced with competitive pressures and trade barriers, such as costly anti-dumping duties or additional food safety inspections for pangasius and shrimp products in the past. The Japanese market Vietnam has an Economic Partnership Agreement (EPA) with Japan that is in force since October 2009. Japan is signatory to the Trans-Pacific Partnership (TPP) agreement under which seafood exports from Vietnam to Japan will enjoy zero import duties to Japan. It is expected that this will further increase seafood exports to Japan.

Duties on imports

Vietnam is increasingly becoming an important hub for seafood processing, importing large quantities of raw seafood from India, Ecuador and other countries to process and sell as value added products. This resulted in repeated protests from Vietnamese seafood processors who are currently facing high import duties. According to the Vietnam Association of Seafood Exporters and producers (VASEP), current import tariffs are 10-15% for shrimp, 12-24% for tuna and 10-17% for squid and octopus. This will likely change under some of the major Free Trade Agreements that Vietnam has recently signed.

Free Trade Agreements

Vietnam has agreed on seven Free Trade Agreements of which three have already been signed and are in effect:
  • Vietnam – Japan Economic Partnership Agreement (EPA) Status: Signed in December 2008, effective entry into force since 1 October 2009
  • Vietnam – Chile FTA Status: signed in 11 November 2011, effective entry into force since 1 January 2014
  • Vietnam – South Korea Status: signed in 5 May 2015, effective since 20 December 2015
  • Vietnam – Eurasia Economic Union (Members: Vietnam, Russia, Belarus, Armenia, Kyrgyzstan and Kazakhstan) Status: signed in 29 May 2015, effective since 5 October 2016
Another two FTAs are already concluded, but not yet effective, since they are either pending for signature, ratification, or both:
  • Vietnam – TPP (Trans-Pacific Partnership) Agreement Status: signed in 4 February 2016, on 23 January 2017 Vietnam has resigned from this agreement due to the development in the United States 
  • Vietnam – European Union FTA Status: concluded in December 2015, pending for signature and ratification, expected to enter into force in early 2018
Furthermore, Vietnam is also negotiating an FTA with EFTA (European Free Trade Agreement):
  • Vietnam – EFTA (European Free Trade Agreement) Status: negotiations launched in April 2012, it is still going on.
Finally, Vietnam is a member of the Association of Southeast Asian Nations (ASEAN) and benefits from free trade agreements within the ASEAN group and from future free trade agreements between ASEAN and the trade partners China, India, Japan, Korea, Australia and New Zealand respectively.