Rules of origin in the Korea-South Korea Free Trade Agreement are considered to be a flexible rule that helps businesses make better use of the tariff preferences Korea has given to Vietnam. However, it is noteworthy that enterprises can be subject to high tax arrears if the South Korean "cunning" C / O. See C / O application service
"Trade" benefits
After more than two years of negotiations, the Vietnam - Korea Free Trade Agreement (VKFTA) was officially signed in May 2015. Accordingly, South Korea pledged to cut 95.4 percent of tariff lines for Vietnam, more than the number of Korean tariff lines cut for its competitors (such as China, Indonesia, Malaysia). , Thailand ...) about 5%. This greatly increases the competitiveness and penetration of Vietnamese goods into the Korean market.
With this FTA, textiles are considered the most advantageous item. As soon as VKFTA comes into effect, most textiles and clothing from Vietnam into Korea will be taxed at zero percent instead of the current 8 to 13 percent. Aquaculture is the second group to benefit greatly from this agreement, especially shrimp. Korea is tax-free for Vietnam with a quota of 10 thousand tons per year and gradually increased in 5 years to 15 thousand tons per year tax-free. While Vietnam currently only makes use of 2,500 tons per year of duty free of 5,000 tons per year for 10 ASEAN countries. Notably, Vietnam is the first FTA partner to open sensitive markets such as garlic, ginger, honey, sweet potato, etc. (tax rates are 241-420%).
In order to gain the core benefits, especially the benefits of agricultural and aquacultural products, Vietnam had to "trade" other benefits for Korea. Mr. Pham Khac Tuyen, Head of Northeast Asia Department, Asia-Pacific Market Department (Ministry of Industry and Trade) said that Korea has high protection for agricultural products, cattle, poultry and dairy products. Fruit, industrial plants, cassava chips, starch, sesame, potatoes, sweet potatoes, garlic, peppers, pepper, peas, wheat, barley etc. Hence, taxes on these items are very high. There are even tariffs of up to 241-420%, which makes it impossible for Vietnam's exports to enter the Korean market.
So, for sensitive items such as sweet potatoes, garlic, ginger, chilli, or shrimp, crabs and fish to enter the market, Vietnam has to choose open for a number of Korean items. The items selected by the Vietnamese side are automobiles, automobile parts, textile raw materials, etc. According to Tuyen, these are items that Vietnam needs to serve domestic production, When your side also encourage exports, negotiators have accepted.
Liquid rules of origin
These opportunities will only be "pie" if we do not take advantage. Bui Kim Thuy, deputy director of the Department of Commodity Exchanges, Ministry of Industry and Trade, said: "In order to enjoy the ideal tariff preferences, there is no other way of complying with the rules of origin ". Thuy also emphasized that rules of origin are always the most important factor in all FTAs as well as tools to determine whether imported goods are eligible for preferential tariffs.
Actually, since the signing of the ASEAN-Korea FTA (AKFTA) in 2006, Vietnamese enterprises have become accustomed to importation within ASEAN-ROK. As evidenced by this, the utilization rate of preferential tariffs in AKFTA accounts for 85%, the highest among FTAs that Vietnam has been implementing. One of the reasons is that the rules of origins of AKFTA are relatively loose, so it is easy for enterprises to obtain C / O form AK. At the same time, enterprises understand this regulation to apply and make good use of it. Meanwhile, rules of origin of VKFTA is also considered to be relatively liquid and flexible to help businesses make better use of.
Flexibility of rules of origin in the VKFTA manifests itself in the fact that common rules of origin allow enterprises to either select RVC 40% or CTH. For example, exporters worth US $ 100,000 (FOB price) have to prove that US $ 40,000 was created in Vietnam and the processing took place in Vietnam. If the company can not prove RVC 40%, then the CTH rule can be used. When converting the HS code, enterprises do not have to prove to the C / O issuer where to buy the raw materials but just prove the HS code has been converted to 4-digit level.
In particular, VKFTA has a "superiority" clause than the AKFTA that allows the application of De Minimis from Chapter 1 to Chapter 97 and de minimis flexibility (or weight value) for textile chapters. Accordingly, De Minimis is a flexible rule that allows the user to be violated at the 10% threshold of value or weight. For example, enterprises request C / O form VK for export to Korea with a FOB value of USD 100,000 (or 1 ton of goods). Under the De Minimis rule, DNs are allowed to breach $ 10,000 (or 100 kg) of unqualified rules of origin (if that line allows a violation of value or weight). "Flexible provisions allow businesses not because of a small amount of violations of rules of origin that container containers can not export and enjoy preferences," Ms. Thuy said.
Also related to the issue of C / O, Thuy Thuy special warning business is that the export of goods to Korea does not mean that it is finished, but three years later to complete. Ms. Thuy said that the Korean customs agencies often "dug" the dossier and request verification of C / O Vietnam granted to enterprises. On average, the Ministry of Industry and Trade receives thousands of letters requesting verification of C / O. "If the C / O issuer fails to explain, it will have to ask the enterprise to explain it again. If the company can not explain, in 6 months Korea will immediately apply MFN tariff. This is a terrible thing, "Thuy said. Therefore, in the VKFTA, the negotiation team has increased the C / O verification period to 10 months for enterprises to have time to explain C / O. Ms. Thuy further recommends: "Enterprises when processing export documents must be very careful with Korean partners because no partners are as prescribed Korea." See more import-export services
Sugar is a protected Vietnamese product and the rules of origin for sugar are extremely tight. If in the AKFTA, the sugar rules of origin are CTH or RVC 40%, the CC excludes Chapter 12 in the VKFTA. This means that the sugar must originate in Korea to be exported to Vietnam.
In AKFTA and many other FTAs, cashew nuts are of pure origin, ie the whole process of growing, harvesting, processing and canning takes place in the territory of Vietnam. However, there are times when Vietnamese companies have to import raw materials from countries for picking, drying ... then export and still be considered originated from Vietnam. Therefore, in the VKFTA, the negotiating delegation also applied for loose rules of cashew nuts, ie any importing country where processing of export is possible to apply for C / O form VK. However, the down side of the rule of thumb is that the added value created in Vietnam is not so great, requiring loose rules of origin to make the value added in Vietnam low, only strict rules of origin can be upgraded. We up If you go to ask for rules of origin loose, the value created in Vietnam is low and Vietnam will forever do the processing.
(Source: internet)