German Market

Opportunities from EVFTA commitments on Rule of Origin

In order to enjoy EVFTA tariff preferences when exporting to Germany or importing from Germany into Vietnam, products must meet the EVFTA's rules of origin (ROO) and procedures for certification of origin.

Commitments on origin in the EVFTA are stipulated in Protocol 1 - Concerning the Definition of the Concept of "Originating Products" and Methods of Administrative Cooperation. This Protocol includes two main contents:

  • Text: includes general principles of ROO and procedures for certification of origin, and

  • 08 Annexes: include detailed commitments or specific instructions on some related contents in the Text (Certificate of Origin form, additional explanations...). In which, Annex II - List of required working or processing –  is a List of specific ROO for each product group (also known as the PSR List - Product Specific Rules) applicable to both Vietnamese and EU goods.

Note: When reading Annex II, it is necessary to read Annex I – Introductory Notes to understand terms and provisions in Annex II. The ROO of the EVFTA are essentially the same as those of Vietnam's existing FTAs, but the language and some contents are new or different from the existing FTAs.

Note to businesses

In the EVFTA, ROO are used for the purpose of determining whether goods are eligible for preferential tariff treatment of the EVFTA or not. Therefore, businesses that want to enjoy tariff preferences of the EVFTA when exporting goods to Germany or importing goods from Germany to Vietnam need to know and understand EVFTA’ ROO and origin certification procedures.

Basically, the ROO in the EVFTA have many similarities with the ROO in the GSP of the EU. However, the EVFTA’s ROO still have some differences which are more flexible in application, so businesses need to carefully study each rule applied to their specific product in order to properly and fully meet it.

It is noted that to meet the ROO of the EVFTA, companies need to prepare from the beginning of the production process, for example, from selecting the source of raw materials, collecting certificates of origin of raw materials, storing supporting documents, etc.). Thus, it is necessary to pay attention to these issues to arrange the supply, the production process early, and do not wait until the time of import/export.

 

According to the EVFTA, goods shall be considered as originating in one of the two cases:

Case 1: Wholly Obtained Products

This case includes products that are naturally formed within the territory of Vietnam or EU member states (e.g. minerals, naturally formed animals, plants and products of these plant and animal species).

Goods considered as wholly obtained are specified in Article 4 in the Protocol 1 of the EVFTA. For example: minerals extracted in the territory of Vietnam/EU, fruits and vegetables grown and harvested or gathered in the territory of Vietnam/EU, live animals born and raised in Vietnam/EU…

Case 2: Materials have undergone sufficient working or processing

This case includes products that are formed from materials originating in whole or in part from the EU/Vietnam and worked or processed in Vietnam/EU, and fulfill conditions specified in Annex II in the Protocol 1 of the EVFTA.

There are 3 basic types of origin criteria in the EVFTA for this case, specifically:

  • Change in Tariff Classification (CTC): This is the criterion that requires that the HS code of final product be different from the HS code of the non-originating materials at the 2-digit level (CC - Change in Chapter), 4-digit (CTH - Change in Tariff Heading), or 6-digit (CTSH - Change in Tariff Sub-Heading).

In the EVFTA, there is only 1 case having the rule of CC (HS 7306 – Tubes, pipes and hollow profiles, of iron or steel), the rest is CTH or CTSH.

  • Value limit of non-originating materials (VL): This criterion limits the value (set maximum percentage) of non-originating material used in the working and processing. In other words, Regional Value content (RVC) of originating materials must meet a certain minimum percentage.

Similar to other FTAs, the EVFTA allows the cumulation of materials originating in the EU and Vietnam. However, unlike other FTAs, the EVFTA also allows the cumulation of materials originating in Korea and ASEAN for some products.

In addition, it should be noted that unlike many other FTAs, the VL calculation in the EVFTA uses the ex-work price for the product instead of the transaction price in the CPTPP or the FOB price in other FTAs.

  • Specific Production Process: This criterion requires that non-originating materials undergo specific working or processing in the country of origin; or the product must be worked or processed from certain wholly obtained materials.

In the EVFTA, the ROO for each product can be one of the above criteria or a combination of some above criteria, it is specified for each product group in Annex II- List of required working or processing of for each specific product group in Protocol 1 of the EVFTA.

EVFTA full text for more information: https://wtocenter.vn/chuyen-de/12778-eu-vietnam-trade-and-investment-agreements 

Source: "Business Handbook: Exploiting the EVFTA  to import and export goods between Vietnam and Germany" - Center for WTO and International Trade

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