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EU-VIETNAM FREE TRADE AGREEMENT IN RE:SOURCE - ALL YOU NEED TO KNOW

By Andrew Leighton | 13 December 2018

So the EU Vietnam Trade Agreement, or EVFTA, as it's commonly known, could be live as early as January 2019 and it's creating a bit of a buzz. At the moment, trade between Vietnam and the European Union is subject to a general scheme of preferences (GSP) which isn't a ‘free’ trade agreement; it's a trade preference agreement which offers rates lower than the WTO’s MFN (Most Favoured Nation) rates.

With the new trade agreement, there is the promise of duty free, but in many cases not for some years. But with Vietnam being a growing and important clothing manufacturing nation, this new trade agreement could open up lots of trade from Vietnam to the EU. It's understandably welcomed by the industry, but there's very little information on what it means for apparel sourcing professionals… until now.

Profiling the trade agreement

re:source provides a trade agreement profile, which describes the latest situation regarding the agreement and its rules of origin, in plain English (click here to view, if you already have access to re:source).

Tariffs phase-out schedule

The trade agreement profile has an Excel file detailing the phase-out schedule of the agreement, which lasts eight years and shows the tariffs at the 8-digit HS code level and how they step down to zero eventually. So you will know how much duty you will need to pay from year one through to year eight by analysing this schedule.

Did you know? Some 13% of apparel products will still carry duties into year seven.

Calculating the law of averages

We’ve taken the phase-out schedule and created the year-one tariffs at the 6-digit HS code level, which you can find in re:source’s Tariff Finder database here. However, there are some HS codes with multiple tariff percentages at the 8-digit level that need to ‘roll up’ to 6-digits.

But don’t worry. We’ve calculated the average of the trade and the duty value, to produce a 6-digit average percentage. We ran Ad-Valorem calculations for the following codes:

610130 (men’s manmade fibre coats)

611231 (men’s synthetic swimwear)

611241 (women’s synthetic swimwear)

620212 (women’s cotton coats)

620213 (women’s manmade fibre coats)

620459 (women’s skirts)

621132 (men’s cotton “other” garments)

621133 (men’s manmade fibre “other” garments)

621142 (women’s cotton “other” garments)

621143 (women’s manmade fibre “other” garments)

Comparing tariffs product by product

When you search in Tariff Finder, between EU and Vietnam, you'll see GSP which is the live trade agreement. You'll find the MFN rate next to it (as you will with all tariff lines), but you'll now also see a red exclamation mark (signifying the FTA is pending but not yet live), and all of the EVFTA tariffs for year one. So if you’re thinking about sourcing apparel from Vietnam for import to the EU, we now have a handy tariff rate comparison live in re:source.

Did you know? By year five the average duty saving across all apparel categories will be just under 8%, compared to GSP.

Why will this help me?

We’ve had enquiries from customers wanting to know what the forthcoming tariff rates will be, product by product. People want to get their hands on this information, without having to do all the calculations and putting this information into a database in order to compare GSP, MFN, EVFTA.

So if I have this information, what will I be able to do with it? In short, forward planning. With this pending agreement, users will be able to look at the data available and think, Okay, Vietnam has cost us roughly 10% on average up until now, so what's it going to cost us from January 2019 onward [or whenever the trade agreement goes live]? People want to know the answer to this question, product by product.

So this ‘free’ trade agreement isn’t all free, not in year one at least?

Some 57% of apparel products will still carry a tariff in year one compared to 43% that will enjoy zero duty from the outset. The other twist in this tale is that some of the new EVFTA tariffs are actually higher than their equivalent GSP tariffs in year one, at least. However, as we explain in the EVFTA profile, importers will still only need to pay the lowest-available duty rate on their goods from Vietnam to the EU.

As always, we’ll keep working to make sure that re:source remains the best place for clear information on apparel trade agreements and tariffs.


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