Wto quotas and tariffs

The Ministry of Industry and Trade said it recently received a diplomatic note from the Eurasian Economic Commission saying that while the quota for jerseys, pullovers, cardigans, and waistcoats was 1,520 tonnes a year, exporters had shipped over 1,640 tonnes. Exports of knitted women’s suits also exceeded the quota of 382.7 tonnes, with 414.9 tonnes being shipped.

The agreement incorporates safeguard measures against exceeding quotas, and accordingly Vietnamese textile-garment exporters will not be entitled to preferential tariffs for a period of six to nine months and instead will have to pay Most Favored Nation import duties.

But Pham Xuan Hong, chairman of Ho Chi Minh City Textile and Garment Association, told local media that members had not received any warnings from their partners in the EAEU market.

Nguyen Ly Truong An, deputy CEO of logistics firm SeaAir Global, said there are textile companies with factories in Vietnam who import products from China and pass them off as made in Vietnam, thus causing export volumes to surge.

“If strong measures are not taken to deal with the origin fraud, Vietnam’s textile and garment industry will be severely affected.”

The Trade Remedies Authority of Vietnam announced a list of 13 other products also likely to face trade origin fraud or illegal transshipment investigations, including plywood made from hardwood, foam cushions and wooden cabinets exported to the U.S., and car tire exports to the U.S. and the EU.

The news has caught attention from the public as this is believed to be a great opportunity for Vietnamese people to buy Rolls-Royce, Bentley, Cadilac, Jaguar, Lamborghini and Ferrari vehicles at reasonable prices.

As tax falls, more cars will arrive

Under the CPTPP trade agreement commitments, Vietnam offers preferential import tariffs to a certain number of used cars to be imported from CPTPP-member countries under a quota.

MOIT plans to organize the bidding session for the right to import used cars in May this year. Seventy-two used cars are allowed to be imported in 2021, including 36 cars with the cylinder capacity of over 3,000 cubic meters and 36 others with the cylinder capacity of 3,000 cubic meters or less.

The taxes on the used imports from CPTPP countries will be based on the preferential import tariff for 2019-2022 stipulated in the government Decree 57/2019, which will be mixed taxes, including percentage tax and fixed tax.

The import tax rate for quota-based cars with 9 or fewer seats is 52.5 percent in 2021, while the fixed taxes are $7,500 for less than 2,500 cc cars and $11,250 for cars with cylinder capacity of 2,500 cc or higher.

The tax rates are much lower than the rates for non-quota imports.

Car dealers estimate that a quota-based used car with cylinder capacity of 2,500 cc which has the declared price of $10,000 would have the pre-luxury tax cost price of $26,500 if counting the 52.5 percent and $11,250 taxes.

Meanwhile, a non-quota used car of the same kind would have the pre-luxury tax cost price of $35,000-40,000 because of the high tariffs of 150 percent or 200 percent, depending on models, and the high fixed tax of $10,000.

In principle, the higher value the used imports are, the bigger the benefits will be. As Covid-19 has had an impact all over the world, many wealthy people have sold their luxury cars to tighten their purse strings. This is a great opportunity to bring luxury Rolls-Royce, Bentley, Cadilac, Jaguar, Lamborghini and Ferrari cars to Vietnam.

Not easy to earn money

However, experts warned that it would be not easy for car dealers to make money.

In principle, importers will have to attend bidding for the right to import cars.

Meanwhile, car importing is a conditional business field implemented in accordance with Decree 116 released in 2017.

All businesses have the right to auction for tariff quotas to import used cars, but only the businesses which have licenses for car import can import cars. Importers have to make commitments on maintenance services and recalls, if necessary.

With the requirements, the businesses which have licenses for importing cars and have maintenance facilities will have advantages in bidding, while ‘empty handed’ businesses will be at a disadvantage.

When winning bids, they may authorize the enterprises with licenses to import for them. But this won’t be easy, because the enterprises with licenses may charge very high fees.

Used cars are the cars registered for circulation in exporting countries before they arrive in Vietnam. Of the 11 CPTPP member countries, six countries use right-hand driving cars, including Japan, Australia, New Zealand, Malaysia, Brunei and Singapore, which don’t fit Vietnamese laws.

Therefore, Vietnamese businesses can only import quota-based left-hand driving cars from four CPTPP countries, namely Canada, Mexico, Chile and Peru.

It will not be easy to find used cars which meet the requirements. The target countries are in America, which is far from Vietnam with high

MOIT organized an auction for tariff quotas for used car imports on August 14, 2020. Only two businesses won the bid. King F&B Co Ltd won the bid to import 10 cars, while Long Bien Investment Trade won for five cars. Meanwhile, the quota for 2020 was 66 products. Many enterprises with car import licenses did not attend the bid.

Nguyen Tuan from Thien An Phuc commented that the bidding for tariff quotas to import used cars is not attractive to Vietnamese businesses without licenses. Even if they win the bids, they will find it difficult to import cars.

Tuan said even if the tax rates are lower in 2021 and the used car prices in the world decrease, the business is still unattractive because of the strict regulations.

Tran Thuy

In a statement released on January 12, the European Commission expressed its regret over the US’ decision to impose new tariffs on further EU products. It added that it is looking forward to engaging constructively with the new US administration to resolve this long-lasting dispute as part of a renewed transatlantic agenda.

The statement was made immediately following the Trump administration’s announcement of additional tariffs on a range of EU exports to the US. According to the Office of US Trade Representative, tariffs of 15% and 25% will be levied on aircraft components and some types of alcoholic drinks, respectively.

The new wave of tariffs is Washington’s latest move in a 16-year spat over subsidies for aircraft manufacturers Airbus and Boeing that turned increasingly sour under US President Donald Trump.

The tariff war has become more tense since October 2019 when a WTO ruling allowed the US to impose tariffs on EU goods worth US$7.5 billion each year. The figure is based on the estimated damage caused to the US due to EU subsidies for Airbus. With the greenlight, the US then imposed high tariffs on a range of EU goods, including aircraft parts and alcoholic drinks.

One year later, the WTO issued another ruling but in the EU’s favour. Accordingly, the EU is permitted to impose tariffs on US goods and services worth US$4 billion each year, equal to the damage to the EU as a result of US subsidies for Boeing. Earlier, the US and the EU had been on the brink of a trade war in 2018 when the US levied tariffs on EU aluminium and steel. In retaliation, the EU made a long list of US goods subject to high tariffs when imported to the bloc.

In recent years, the US-EU alliance has faced constant tensions due to disagreement on various issues, from security, climate to technology, and especially trade. Long-standing disputes and tit-for-tat tariffs threaten to destroy transatlantic trade relations, with two-way value estimated at US$1,300 billion. Escalating trade conflicts have also undermined the confidence and activity of investors and businesses, posing risks to the financial market as well as the economies of both sides and the world at large.

Aware of the fact that there is no winner in a tariff war, both the EU and the US wish to negotiate. In July 2018, the two sides agreed to a truce and started negotiations on a new bilateral trade agreement. But waves of tariffs on each other’s goods have continued to throw both sides into disagreement. Both the EU and the US have announced that they are willing to engage in talks, but no considerable concessional moves have been made.

The US now has a new administration and President-elect Joe Biden conveyed a message of change, in which he shared that US protectionist policies and moving away from multilateralism and global cooperation can be reversed. Along with the EU’s statement on the desire to look for a truce agreement on trade with the US, hopes of a positive transatlantic agenda have flared up.