Goods imports applied preferential tariffs VKFTA must meet four basic conditions are: under Tariff VKFTA; imported from South Korea to Vietnam; shipped directly from Korea to Vietnam as stipulated by the Ministry of Industry and Trade; meet the rules of origin in Vietnam-South Korea free trade agreement; certificates of origin of goods prescribed by the Ministry of Industry and Trade.The free trade agreement (FTA) between Vietnam and the Republic of Korea (RoK) came into effect on December 20, the preferential tax rates in this Tariff will be formally implemented from the same day.
The ministry said the FTA will contribute to boosting trade and investment co-operation between the two countries. The two sides will establish a ministerial level joint committee and subcommittees on goods trade, customs, trade defence, sanitary and phytosanitary (SPS) measures and technical barriers to trade (TBT) to accelerate the implementation of the agreement.
In 2014, the RoK was the third largest trade partner of Vietnam, after China and the US, while Vietnam is the RoK's sixth largest export market. Two-way trade value recorded an increase of 5.7% from 2013, with Vietnam's exports to the RoK at US$7.1 billion, up 7.9%, and its imports at US$21.7 billion, up 5%. According to the General Department of Customs, in the first 11 months of this year, bilateral trade hit US$33.6 billion, a year-on-year rise of 27.6%.
According to the Ministry of Planning and Investment, as of October 20 this year, the RoK is the biggest among 105 nations and territories investing in Vietnam, with 4,777 projects worth US$43.6 billion in total. The RoK projects are mainly poured into industrial processing and manufacturing, real estate, retail and wholesale, and construction, with total investment exceeding US$5 billion. There are nearly 3,000 RoK enterprises operating in Vietnam. They create jobs for more than 400,000 labourers.
According to a spokesperson for the ministry’s Foreign Investment Agency, it is expected to fuel expanded economic cooperation and commercial and services trade between the two nations. “The governments of the two nations agreed on the accelerated effective date through diplomatic channels, with both sides wanting the accord to come into force as soon as practical,” said the spokesman.
He continued on to say that under the deal, tariff reductions would be reduced to zero on substantially all trade line items and phased in over the next few years at the beginning of each year. “So January 1, 2016 will mark the start of the ‘second year’ of rate cuts,” said the spokesperson.
Once the agreement is in place, it will become easier for domestic companies to do business in each other’s country. Seoul has agreed to open 94.7% of its market, while corresponding figures for Hanoi will reach 92.4%. "It is also anticipated that the trade pact will create a more stable business and investment environment. This is important because Vietnam is the RoK’s third-largest export market after China and the US. Meanwhile, businesses headquartered in the RoK collectively represent the largest foreign investment group in Vietnam,” he said.
He said besides textiles and car parts, the trade deal will open the Vietnam market up to a host of RoK consumer goods including electronics and even cosmetics, providing more export opportunities for small Korean businesses.
In particular, Vietnam is the first FTA partner that Korean market access, tariff elimination schedule for the very sensitive products in countries such as fresh fruits, processed (30% tax rate to 50%); some tropical vegetables and especially on items like garlic, ginger, honey, sweet potato, red bean ... (the tax rate is very high for these items from 241% to 420% especially sensitive because South Korea).
The textile products, footwear exports to Korea of Vietnam was removed from 10-13% down to 0% in 2016. As for shrimp, Vietnam will enjoy 0% tax rate on with 10,000 tons / year and increase in 5 years reached 15,000 tons / year. Consumer goods (cosmetics), household electrical appliances (air conditioner, refrigerator, microwave, oven, etc.) will be tariff reduction roadmap from 7 to 10 years.
Vietnam has committed to open more to South Korea for 200 tariff lines the route for 15 years, accounting for 5.9% of total imports, contributing to increasing the number of tariff lines tariff reduction commitments with South Korea over 8520 tariff lines.
The list of 200 items bilateral access commitments with major Korean industrial groups such as materials for the textile and garment; Plastic raw materials, electronic components, automotive parts, electrical appliances, some iron and steel products, power cables, lines 10-20 ton trucks and cars from 3.000cc upwards.
The majority of these are the raw and auxiliary materials to be imported for production in the country, contributing to reduced manufacturing input costs, help reduce dependence on imports from a few other countries. This is one of the directions of restructuring the economy and is one of the objectives of this FTA signing Vietnam.
The signing of the Vietnam - South Korea FTA is considered as a concrete step to actively implement integration strategies, including international economic integration is the focus, supporting the restructuring process, performing industrialization and modernization of the country and also contribute actively developing strategic partnerships Vietnam - South Korea towards a stable, long term, contribute maintaining and strengthening peaceful environment, stability in the region.
