Adopting the rule of comprehensive origin has helped Vietnam’s garment companies meet the standard of “two-stage” origin, and boost export of weaving materials to ASEAN and Japan. Under the Economic Partnership Agreement (EPA), Vietnam garments exported to Japan will be tax free.
One of Japan’s requirements in the EPA (expected to be complete by the end of this year and take effect immediately) is that Vietnam’s garment exports to Japan must satisfy the “two-stage” standard. That means garments exported to Japan must be manufactured from domestic sources in Japan or in ASEAN members.
This is seen as a difficult puzzle for Vietnam’s garment industry. Deputy Industry and Commerce Minister said if this criterion is not met, Vietnam’s garment exports will plunge and be unable to compete with powerful garment exporters who already benefit from tax free status. The current biggest issue for Vietnam’s garment industry is that Japan has accepted the “two-stage” origin from six ASEAN members (Singapore, Malaysia, Philippines, Brunei, Indonesia and Thailand) and these countries all have tax free status.
The itinerary to meet EPA preferences is not easy for Vietnam’s garment companies because the industry largely relies on imported materials, 80 per cent of which does not come from Japan or ASEAN.
Japan is a massive garment export market. China takes the lead in market share of 73.6 per cent, followed by EU 8.1 per cent, America 2.5 per cent, Taiwan 1.3 per cent, ASEAN 7.5 per cent. Vietnam is currently Japan’s most important partner among ASEAN members, with 34.4 per cent of the block’s total garment export value to the market.
Advised by commercial experts to hold firm export targets, the solution to increase Vietnam’s garment share in Japanese market is to adopt the ASEAN – Japan Comprehensive Economic Partnership Agreement (AJCEP) by using materials imported from the ASEAN or Japan. This will help Vietnam win tax free status and compete with China in price (as China is not deducted from import tariff), and with other ASEAN members in quality and price.
The advantage of the comprehensive origin principle is that Vietnam can easily meet standards proposed by Japan, and develop material sources from ASEAN and Japan. The deeper meaning of applying this rule is strengthened cooperation within ASEAN, expanded market share in Japan and more profit; enhancing the global competitiveness of the domestic garment industry, generating more jobs and attracting investment in Vietnam’s garment industry from Japan.
Commercial specialists also expect that when EPA becomes valid, if 10 per cent of China’s garment export revenue is replaced by Vietnam, then our knitted garment export revenue from the Japanese market is estimated to go up by 279 per cent from USD465 million (in 2007) to USD1,299 million, and export revenue from shuttle woven garments will be up by 909 per cent from USD113 million (in 2007) to USD1,027 million.
VTIC
Vietnamese
