Flexible rules of origin, online transactions boost Vietnam-RoK trade
Flexible rules of origin, online transactions boost Vietnam-RoK trade
The Republic of Korea (RoK) has become a major trade and investment partner of Vietnam due to the flexible rules of origin and high tariff reduction commitments in the Vietnam-Korea Free Trade Agreement (VKFTA) over the past five years.
Flexible rules of origin
Economists say the rules of origin in the VKFTA, in force since December 2015, are relatively simple. For example, under the EU-Vietnam Free Trade Agreement (EVFTA), if a fabric originating in the RoK is brought to Vietnam and further processed, it can be considered as originating in Vietnam and applicable to the tariff break. The VKFTA tariff commitments are based on those in the ASEAN-Korea Free Trade Agreement (AKFTA). However, the VKFTA has more tax reduction provisions than the AKFTA.
Specifically, the RoK has eliminated 11,679 tariff lines (accounting for 95.44 percent of the total) in accordance with VKFTA and AKFTA.
The agreement also allows for exemption from submission of certificates of origin for imported goods with an FOB (free on board) value of up to US$600. Other free trade agreements Vietnam has signed only exempt certificates of origin for goods with an FOB value of up to US$200.
The VKFTA is boosting trade between Vietnam and the RoK
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The flexible rules of origin and high tariff reduction commitments in the VKFTA are benefiting trade between Vietnam and the RoK. In the first two months of 2021, bilateral trade reached more than US$11.56 million, an encouraging figure in the context of the Covid-19 pandemic.
According to the Vietnamese Ministry of Industry and Trade, VKFTA has benefited the export value of Vietnamese seafood, textile, wood products, footwear, fibers, fruit and vegetables, and Korean computers, electronic products and components, textile, leather and footwear materials and accessories, and electrical wires and cables.
Simple rules of origin benefit Vietnamese exports
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Online trading
Despite the Covid-19 pandemic, the Korea Trade-Investment Promotion Agency (KOTRA) has made efforts to organize trade promotion activities in Vietnam.
Online trading has allowed KOTRA to respond quickly to the needs of Vietnamese businesses looking for reputable Korean suppliers, arranging online work schedules, and providing interpretation services. Vietnamese businesses do not have to pay for these support activities, according to Lee Jong Seob, President of KOTRA in Southeast Asia-Oceania. In 2020, KOTRA Hanoi conducted more than 50 online trade events, helping more than 1,200 Korean businesses connect with nearly 1,000 Vietnamese businesses, conducting some 1,800 effective trade exchanges. KOTRA will conduct more than 60 online exchange events with nearly 2,000 online transactions between Korean suppliers and Vietnamese buyers in 2021.
In addition, KOTRA will organize three large-scale exhibitions in Hanoi, namely the Vietnam International Trade Fair (Vietnam Expo 2021), the Vietnam International Medical, Hospital and Pharmaceutical Exhibition (Vietnam Medipharm Expo 2021), and the Vietnam International Industrial Fair (VIIF 2021).
The Vietnamese Ministry of Industry and Trade will promote Korean investment in Vietnam, help Korean businesses in Vietnam maintain and increase exports to the RoK, help and encourage Vietnamese enterprises to export to the RoK textiles and garments, footwear, wood products, farm produce, seafood and processed foods. It will also seek to enhance technology transfer and technical assistance from the RoK to improve the competitiveness of Vietnam’s automobile, textile-garment, chemical, mechanical and component industries.
