Taking advantage of UKVFTA: Vietnam should import raw materials from the UK

To maximize the benefits from preferential tariffs brought about by the UK-Vietnam Free Trade Agreement (UKVFTA), international trade experts have suggested that Vietnamese enterprises should import raw materials from the UK to produce for export or domestic consumption because these are also the products that Vietnam offers preferential tariffs to the UK and are groups of goods with high import value.

[caption id="attachment_605643" align="aligncenter" width="640"] Footwear is among Vietnam's key export products. Photo: Tran Viet/VNA[/caption]

Under the trade agreement, from 1 January 2021, Vietnam commits to eliminating 48.5% of tariff lines on goods imported from the UK; 91.8% from 1 January 2027 and 98.3% from 1 January 2029. The remaining 1.7% will be partially opened through tariff quotas (the quota amount corresponds to Vietnam's commitment to the WTO and tariffs in the quota will be eliminated before 2031) or not enjoy special preferences.

In particular, 61% of tariff lines for machinery and equipment imported from the UK have been eliminated from January 1, 2021, while import tariffs for all other products will be eliminated after 9 years. Based on the assessment of the Department for International Trade (UK), this is a product group that the UK exports with a large turnover to Vietnam, at the same time, Vietnam also has a high import demand. The average MFN tariff applied by Vietnam in 2020 for mechanical products and equipment (HS 84) is 4.9%, while for electrical machinery and equipment (HS 85) it is 8.7%.

For pharmaceutical products, Vietnam has eliminated 71% of tariff lines from January 1, 2021. All other products will be exempt from import tax after 4 to 6 years.

For the group of raw materials for the textile and footwear industries, Vietnam has reduced 80% of the tax lines imposed on this product group from January 1, 2021, while taxes on all other products will be eliminated after 4 to 6 years.

Preliminary statistics from the General Department of Customs show that Vietnam imported nearly 726.6 million USD worth of goods from the UK in the first 11 months of 2023.

The items that accounted for a large proportion of Vietnam's import turnover from the UK in the 11 months included machinery, equipment, tools and spare parts with a value of over 191 million USD (26.3%); pharmaceuticals with a value of 73.8 million USD (10.2%); chemicals with a value of 43.4 million USD (6%); textile materials, leather products, and footwear materials with a value of 35.1 million USD (4.8%); and aquatic products and aquatic products materials with a value of 29.8 million USD (4.1%).

The above goods are all items that Vietnam needs to import to produce for export and domestic consumption.

A recent survey by Vietnam Report shows that the top priority of Vietnamese enterprises is to diversify their supply sources, especially for imported raw materials. According to the report, 72.7% of all companies participating in the survey said they want to find new suppliers with lower prices and they intend to do so in the near future./.

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