- Investors looking to taking advantage of the recently ratified EVFTA must understand and comply with rule of origin guidelines.
- Rules of origin guidelines can be complex and manufactures should harmonize them according to rules of the EVFTA.
- While sourcing materials from third party states may decrease the overall cost of production, they will compromise competitiveness if entering EU markets.
Recently ratified by Vietnam’s National Assembly, the European Union Vietnam Free Trade Agreement (EVFTA) presents exciting opportunities in a multilateral trading partnership between both parties.
Not only has the agreement slashed tariffs on nearly 99 percent of all Vietnamese exports to the EU, but measures have also been taken to ensure that the FTA stays updated in the face of future agreements on both sides. For those seeking to tap into the agreement’s cost-saving measures, an important consideration, and the focal point of this article, are the EVFTA’s rules of origin.
In the face of low-cost sourcing options in close proximity to the Vietnamese market, and increasing regional integration on the part of the Association of Southeast Asian Nations (ASEAN) – of which Vietnam is a member, existing producers, and newcomers to the region alike will be hard-pressed to deny the benefits of regionally integrated supply chains.
However, while sourcing materials from third party states may decrease the overall cost of producing a given good, the introduction of third party inputs may compromise coverage under the EVFTA – leading to reduced competitiveness upon export to European markets.
The following paragraphs highlight the conditions under which goods will be granted coverage under EVFTA and outline the documentation that should be expected as part of the customs compliance process.