VAFIE proposes new circular on rules of origin under EU-Vietnam FTA

The Vietnam’s Association of Foreign Invested Enterprises (VAFIE) on Friday proposed the Ministry of Industry and Trade promptly issue a new circular on the rules of origin in the EU-Vietnam Free Trade Agreement (EVFTA) to facilitate trade and supply chains.

At a working session with the ministry’s Agency of Foreign Trade (AFT), VAFIE vice chairman Nguyen Van Toan said on August 23, the association submitted a document to the Ministry of Industry and Trade (MoIT) proposing the prompt issuance of a circular amending or replacing Circular 11/2020/TT-BCT regarding the rules of origin in the EVFTA.

The document highlighted that on June 8, 2022, the Ministry of Finance issued Circular 31/2022/TT-BTC on the list of export and import goods in Vietnam, effective from December 30, 2022. This list aligns with the Harmonized System (HS) 2022 list issued by the World Customs Organization (WCO).

To revise the rules of origin in the EVFTA to reflect changes in HS codes, the government assigned the MoIT to develop a circular amending Circular 11 to make it align with EVFTA requirements and Circular 31.

However, there has been no update on the process of amending Circular 11 to date, leaving companies exporting to the EU uncertain about applying the regional value content (RVC) or the change in tariff heading (CTH) due to discrepancies between HS codes for exported finished goods and raw materials (HS 2022) and those in Circular 11 (HS 2017). Companies fear that incorrect application could lead to penalties and retroactive payments related to origin certificates.

VAFIE said many firms have temporarily halted their C/O applications for EU exports, impacting their business as European partners are unable to benefit from preferential tariffs under the EVFTA. Some others have adjusted their business plans, paused EU exports, and sought alternative markets while waiting for the amended circular, it added.

In response, Tran Thanh Hai, deputy director of the Agency of Foreign Trade (AFT), said that since Circular 11 was in effect four years ago, some issues have arisen regarding unclear regulations and challenges in implementation.

The trade ministry is currently working with EU partners to draft a new circular amending Circular 11 to better align with practical needs and both parties' regulations, he noted.

According to Hai, the authority hopes to complete the draft new circular by the end of October 2024, which will be posted online for feedback from relevant agencies and business associations. It is expected to be issued after the Lunar New Year in 2025 (February).

The EVFTA was signed in June 2019, and then ratified by legislative bodies on both sides. It took effect in August 2020.

Vietnam’s exports to Europe surged from €35 billion ($37.9 billion) in 2019 to over €48 billion in 2023. Growth was particularly pronounced in electronics, textiles, footwear, agriculture and seafood. The increase in EU exports to Vietnam in the same period was far more modest – from €11 billion to €11.4 billion, official data shows.

VAFIE is the parent entity of The Investor (www.theinvestor.vn).