Cloth imported into China shirt: Origin of Vietnam or China?

The origin criterion is not purely applied to the different categories of goods (for example, the criteria for textiles and clothing differ from the criteria for cars).


One of the important contents of the Free Trade Agreement (FTA) in general and the TPP is the rule of origin (QTXX). As the full text of the TPP has not been announced yet, we have not yet grasped the full text of the chapter on QTXX in this agreement. However, to give readers a better understanding of this technical issue, based on the information provided, the article will briefly describe the nature of the QTXX in the TPP Agreement as well as give some Predict the effect it brings.

What are rules of origin?

Without going into a specific concept, it is possible to understand the nature and origin of goods as a nationality of goods (HH) and QTXX which are the rules established to determine this nationality. The QTXX basically consists of two main parts: the origin criteria and the rules relating to certification and inspection procedures. This article will focus on the first part.

On the whole, there are two groups of origin criteria applied to two different HH subjects. The first is that the HHs are produced in only one country / territory; HH is considered to be of pure origin in the country / territory (for example, rice grown and harvested in the United States). The pure TPP origin criterion will basically be the same as other FTAs: list of cases where HH is considered to be of pure origin (mainly agriculture, forestry, fishery and minerals).

The second type is more complex, that is, HHs produced in different countries / regions, or HHs, are not purely produced. For example, imported fabrics from China (China) to Vietnam (VN) for processing into shirts will be originated in China or Vietnam? The answer depends on whether the HH meets the corresponding criteria of origin.

Origin criteria not applied to each HH group are often different (for example, the criteria for textiles and clothing differ from the criteria for cars). Basically, the TPP as well as other FTAs ​​that formulate origin criteria based on the HH principle have been fully processed; mean:

(I) HH has converted the tariff number (tariff number of HH in the tariff) in comparison with imported raw materials. For example: wood (Chapter 44) of Chinese origin is used for furniture production in Vietnam (Chapter 94); or

(Ii) HH reaches a certain regional value. For example, the value of a regional value for a car in a TPP is 45%; or

(Iii) HH undergoes certain processing stages. For example, the rule "from fiber onwards" applies to textiles in the TPP.

In addition to the main origin criteria, there are other detailed rules to help determine whether a country originates in an FTA country such as the TPP. Typically, the rules on cumulation of origin are mentioned later in the article.

QTXX - locking block with Chinese goods

So what is the TPP as well as the FTAs ​​in general putting out for the QTXX? To answer this question, imagine what would happen without QTXX. Suppose item X origin of China; Import tax on this item to the US is 20%, to Vietnam is 5%. China may import goods into Vietnam (at a 5% tax rate) and then re-export to the US to enjoy zero or zero tariffs on TPP. If so, China will benefit from the TPP no differently than a member of this agreement. See the service for import and export permits

This will not happen because of QTXX. Only when item X originates from China meets TPP's QTXX after processing in VN, it has the opportunity to enjoy the privilege (and then X has transformed into a TP with origin TPP ). If it is simply re-exported or simply processed, X will still carry Chinese origin and will not be entitled to import incentives while traveling the US.

The right beneficiaries are the most important goals of the QTXX in FTAs ​​in general and TPPs in particular. This is a fundamental reason why China does not benefit directly from TPP because it is not a member of the TPP.

However, caution should also be taken: if TPP members use materials / semi-finished products from China to produce finished products that meet origin criteria then the finished product will still be eligible. Some TPP member countries have signed previous FTAs ​​with China, for example, Vietnam and China are both members of the ACFTA (ASEAN-China Free Trade Area). As a result, China's raw materials / semi-finished products can still be imported into Vietnam at low rates (thanks to ACFTA), processed to meet the standards of origin and then exported to TPP member countries. And enjoy preferences under this Agreement. China in this case still indirectly benefits.

However, the import of raw materials / semi-finished products from China can be reduced for two reasons: (i) reduced raw material / semi-finished products tariffs from TPP member countries make them more competitive; (Ii) the principle of cumulation of origin when calculating the regional value content - only raw materials / semi-finished products of TPP origin are added together - would encourage TPP members to buy one another instead of Bought from China.

Some issues for Vietnam

Firstly, it is important to understand that QTXX is not only a block for foreign TPPs, but it is also a barrier between TPP members themselves as only those who meet QTXX will be eligible for preferential treatment. For Vietnam, in addition to the pure product group, the products using imported inputs (especially from outside the TPP) will face many difficulties because generally the TPP origin criteria are quite tight. With the localization rate is low now, although Vietnam joined TPP, many items also difficult to meet QTXX to enjoy preferential.

Secondly, to reach the 40-45% level by value criterion is not easy, so as with other FTAs, the TPP allows aggregate value of raw materials / finished goods of the members. together. For example, if HH has 25% of the value created in Peru and 25% is produced in Vietnam, HH will have a TPP value of 50%. As mentioned above, this principle will encourage TPP members to buy more in the block.

This will promote the export of many raw materials of Vietnam but will also have implications. Vietnam may still export only raw materials (especially increased demand); Or continue to import raw materials / finished goods from TPP countries for processing with low added value (reliance on cumulation).

Third, the competition with domestic HH will be the fastest from the importers who initially met the QTXX of the TPP without any adjustment of production. For example, the items of pure origin such as meat, eggs, milk, sugar ... from the United States, Australia will massively flood into Vietnam. In response to this situation, it is necessary to set up appropriate technical barriers to protect consumers and domestic producers. In the long run, improving the competitiveness of domestic production and reducing production costs is a vital issue, especially when the proportion of imported seafood meets the increasing demand. See Certificate of Origin (CO)

In short, although there are potential challenges, the TPP's QTXX is also an opportunity to push Vietnam to change its production as well as its import and export structure to meet export and neighboring benefits. Compete with HH NK.

When the full text of the TPP Agreement is published, a training program on QTXX needs to be rapidly developed and disseminated to the business community, which recommends each sector based on the criteria applicable to the product. Products of that industry. Utilizing QTXX or not, as well as how much to take, depends largely on the business community as well as the macro policies of the government in the near future.

 (Internet source)

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