Taking advantage of FTA incentives to increase exports

Từ năm 2023 đến 2024, doanh thu xuất khẩu hưởng ưu đãi thuế quan theo FTA tăng trung bình 12,7% hàng năm.

From 2023 to 2024, export revenue enjoying tariff incentives under the FTA will increase by an average of 12.7% annually.

Although Vietnam has signed 18 FTAs, opening up the global market, the rate of taking advantage of tariff incentives is only 30-40%. What barriers are hindering businesses, and what is the way out to turn challenges into opportunities?

Not yet utilized effectively

In the context of increasingly deep international economic integration, Vietnam has affirmed its position through the signing and implementation of 18 Free Trade Agreements (FTAs), of which 17 have come into effect, opening the door to access more than 60 countries and territories, accounting for nearly 90% of global GDP. Important FTAs such as CPTPP, EVFTA, UKVFTA and RCEP not only promote exports but also attract investment, enhancing the position of Vietnamese goods in the international arena.

Enterprises have not yet taken full advantage of these tariff incentives, with the utilization rate only at an average of 30-40%.

According to the Ministry of Industry and Trade , in 2024, total trade turnover will reach 786.29 billion USD, with exports increasing by 14.3% over the same period in 2023, resulting in a trade surplus of 24.8 billion USD. Notably, the FDI sector contributes up to 71.8% of total export turnover, especially in high-tech industries such as computers, electronic products and phones. From 2023 to 2024, export revenue enjoying tariff incentives under FTAs will increase by an average of 12.7% annually, demonstrating the great potential that these agreements bring.

However, in reality, businesses have not yet fully taken advantage of these tariff incentives. Ms. Bui Hoang Yen, Representative of the Southern Trade Promotion Agency (Ministry of Industry and Trade), pointed out that the utilization rate is only at an average of 30-40%. Analysis of data on the issuance of Certificates of Origin (C/O) in 2024 shows a clear difference: high in traditional markets such as India (65.12% with form AI), China (41.84% with form E) and ASEAN (40.11% with form D), but low in new generation FTAs such as RCEP (1.83%) and CPTPP (8.84%).

The main reason lies in internal and external barriers. Specifically, Vietnamese enterprises are heavily dependent on large markets such as the US and China, where low localization rates make production require many imported raw materials, making it difficult to meet strict rules of origin. Ms. Ho Thi Quyen, Deputy Director of the Ho Chi Minh City Investment and Trade Promotion Center (ITPC), emphasized the challenges from increasingly high requirements on quality standards, social responsibility and sustainable development, combined with fierce competition from foreign enterprises in the domestic market.

Furthermore, the risk of supply chain disruption and the pressure to comply with international standards on environment, labor, and intellectual property are becoming a burden. According to the Ministry of Industry and Trade, exports in the first 6 months of 2024 recorded 57 cases of warnings about banned substance residues, an increase of 80% compared to the same period in 2023, focusing on five items such as dragon fruit, durian, okra, chili and herbal spices - products that often violate the maximum allowable residue level (MRL).

Ms. Dinh Thi Huong Giang, Consulting Director of Grant Thornton Vietnam Auditing and Consulting Company, added that businesses still lack transparency in reporting, have not digitized their accounting systems, lack international standard KPIs, and are weak in financial risk management, making it difficult to evaluate suppliers when participating in the global supply chain. These shortcomings not only reduce competitive advantages but also cause businesses to miss opportunities from FTAs, leading to a situation of "open doors but not yet stepped through".

Need a synchronous solution

To overcome the above situation, a synchronous strategy is needed from both the State and enterprises, turning challenges into development motivation. The Government has issued Resolution 93/NQ-CP and Directive 38/CT-TTg to enhance the exploitation of FTAs, while the Trade Promotion Agency actively organizes training, propaganda and trade connections. Ms. Bui Hoang Yen suggested that enterprises proactively invest in improving environmental quality and working conditions to comply with international standards, while developing supporting industries and intra-bloc linkages to meet rules of origin. Close cooperation between small and medium enterprises and the FDI sector will create a synergistic strength in the global supply chain, while financial and credit support policies from the State are important levers for small enterprises.

Enterprises should adjust packaging, use C/O, switch to recycled materials... to take advantage of incentives from FTAs.

Regarding the complex rules of origin, especially in RCEP, Ms. Nguyen Thi Trong Nghia, Deputy Head of the Import-Export Management Department in Ho Chi Minh City (Import-Export Department, Ministry of Industry and Trade), explained in detail the "Tariff differentials" mechanism, where preferential tax rates depend on the specific country of origin.

For example, Japan immediately imposed 0% tariffs on textiles from ASEAN, Australia and New Zealand, but gradually reduced them over 16 years for goods from China and South Korea. Enterprises need to accurately calculate intra-bloc values, with a threshold of 20% to determine origin, or apply fallback rules if below that level. Ms. Nghia emphasized that this helps optimize incentives, requiring Vietnamese enterprises to improve their cost calculation capacity.

From a practical perspective, Mr. Vu Hoang Nam, General Director of Sienna Vietnam Co., Ltd., shared the benefits from EVFTA through the product of surface tension testing pen for plastic packaging film (HS 96082000), reducing tax from 25% (WTO) to 0% from 2023, thanks to the preparation of complete documents such as invoices with REX number and B25 code on the declaration.

Ms. Tran Thi Ngoc Lan, Deputy Head of Market Planning Department of Chien Thang Garment Joint Stock Company, affirmed the success of achieving 90% of export revenue to the EU thanks to domestic supply, and exporting to Korea and the Netherlands with tax exemption thanks to GMP standards and SGS inspection. She advised businesses to adjust packaging, use C/O, switch to recycled materials, apply blockchain for traceability, participate in international fairs and update market laws.

The fact that Vietnamese enterprises have not yet fully utilized FTA incentives stems from internal barriers, but with synchronous solutions, from capacity building to state support, Vietnam can completely transform itself, turning integration into a driving force for sustainable growth.

FTA utilization rate is only average

Current situation : Vietnamese enterprises only take advantage of 30-40% of tariff incentives from 18 FTAs, much lower than the potential. The rate is high in traditional markets such as India (65.12%), but only 1.83% (RCEP) and 8.84% (CPTPP) in new generation FTAs (Source: Ministry of Industry and Trade, 2024).
Key barriers : Dependence on imported raw materials, low localization rate, pressure to comply with international standards and lack of transparency in governance.
Key solutions : Invest in improving quality, linking within the bloc, applying traceability technology and taking advantage of financial support from the state to meet rules of origin.
Source: Ministry of Industry and Trade