On 12 February 2020, the signed European Union–Vietnam Free Trade Agreement was finally greenlighted by the European Parliament and later wrapped up by the Council on 30 March 2020. The historic agreement, which two parties signed on 30 June 2019, marks a whole new chapter in the EU and Vietnam’s partnership since the two parties started formal relations in 1996.
As products coming into Vietnam from the EU countries are on course for tariff elimination, there arise more and more opportunities for European manufacturers in general and Dutch manufacturers in specific. Goods producers, ranging from industrial to agricultural fields, can now expand their clientele and introduce their products to a market of nearly 100 million Vietnamese consumers without worrying about high tariffs.
Yet, some challenges remain to address before producers can start their foray into the Vietnamese market and start exporting products from the Netherlands to Vietnam.
The rising prominence of foreign goods in Vietnam
As the Vietnamese economy continues its remarkable climb in recent years, the demand for imported foreign products is proportionally increasing in the SEA countries. Furthermore, the belief in quality variation between foreign and domestic-produced goods has motivated consumers to go for higher quality products, believed to be reserved for markets renowned for their high standards like the US, Japan, or the EU.
Having been aware of the trend, small businesses endorsing “hand-carried goods” or so called “Xach Tay” in Vietnam are emerging and growing immensely fast like mushrooms after rain and riding the momentum. Goods produced and reserved for the markets mentioned above are bought in retail and transported into Vietnam by passengers on vehicles like buses, planes, or ships in small-volume shipments and reported as products that are subject to lower duty. Thanks to this, importers can avoid the high import tariffs imposed on these product categories by the Vietnamese authority, which might even come up to approximately 50% for some lines.
From the government’s perspective, this is detrimental to the economy. These operations are subject to tax evasion, thus causing a significant loss for the government. Besides, it also bears a high risk of fake products, amongst others for consumers. And since the supply volume is limited, consumers have to pay heavily inflated prices for these products.
Take the case of Nutrilon formula milk as an example. A product of Nutricia, one of the renowned Danone’s subsidiaries. The product is sold mainly in the Netherlands and Europe but is also well-known in Vietnam. Since Nutricia only sells this product outside Vietnam, the only way Vietnamese consumers (those who don’t have connections or friends from abroad to help them buy foreign goods) can use them is to buy them through hand-carried goods shops. Currently, a can of Nutrilon formula milk powder in The Netherlands costs 13 EUR in retail, approximately 351,000 VND. Yet, to obtain one, Vietnamese consumers would have to pay around 800,000 to above 1,000,000 VND, meaning three to four times the original price. Much of the difference was to cover the transport expenses for the shipments. And oftentimes, due to limited stock scarcity, customers have to place and pay for orders at least a month in advance to save their spot.
Exporting to Vietnam opportunities with EVFTA
To counter this detriment and protect consumers’ wellbeing and rights for using authentic products with a fair price range, the Vietnamese government is encouraging EU suppliers to seek more opportunities.
The good news is now that the European Union–Vietnam Free Trade Agreement (EVFTA) is in place, exporting to Vietnam is getting more lucrative, yet less challenging for European manufacturers, and vice versa, Vietnamese manufacturers are finding the gateway to Europe for their products wide open. Here’s what Dutch manufacturers can expect a gradually decreasing tariff on when exporting to Vietnam:
- Frozen pork meat will be duty-free after seven years, dairy products after five years, and food preparations after seven years. Chicken will be fully liberalized after ten years.
- As for fisheries, Vietnam has accepted liberalization at entry into force for salmon, halibut, trout and rock lobster, and others after three years.
- Wines and spirits products will be liberalized after seven years, while beer will be cleared after ten years.
- Vietnam will maintain existing WTO tariff rate quotas (albeit with a reduction of the in-quota rate to zero over ten years) for refined sugar, salt, and eggs.
However, many challenges remain on the way that Dutch exporters would need to address if they want to do business with Vietnamese partners. Amongst the most concerning is the disparage between the mindset. This can be detrimental if left unaddressed. Thus, you would need to find someone who can help you maintain a seamless collaboration and exchange of information with your trading partners, like an importer or exporter.
Working with importers or exporters can be a good way to get your product known in Vietnam. However, with importers and exporters, the markup price is layered, making the retail price for the end-users increase and thus becoming less accessible to many of your intended audience. Moreover, should any problems arise, the efforts and resources needed for back and forth communication and to address the issues might hinder the profit you can gain and simultaneously discourage the importers who have to deal with accrued issues. Subsequently, it’s your expanding journey that has to bear the brunt of these variations.
So, to make the most out of your exported products while delivering the most affordable to consumers, and thus gaining your reputation easier, a commercial representative can be a good choice for you.
And this is where VIEC can help you best: To help you find out how you can best export your products to Vietnam and make a name for your product in the Vietnamese market.
VIEC – Think BIGGER
What we do:
At VIEC, we act as your trusted commercial representative and:
- Connect Vietnamese manufacturers with potential sellers and act on their behalf for seamless collaboration, besides omitting the supply chain complexity of employing importers and exporters.
- From Farm to Fork—Support manufacturers in setting up their proprietary retail system and making their ground in the foreign Dutch or Vietnamese markets.
VIEC aims to become the go-to commercial representative facilitating bilateral trading between F&B manufacturers and sellers in both Vietnamese and Dutch markets, bringing them closer and bringing their trading successes through credible, cost-efficient, and low-risk supply chain optimizations.
To faithfully maximize the benefits of all parties in the supply chain, from the Netherlands to Vietnam, and vice versa:
- The manufacturers with expanding clientele in foreign markets
- The sellers with exclusive and steady supplies of high-quality products
- The consumers with bolstered satisfaction and wellbeing
Kickstart your products journey to Vietnam easily with VIEC
We are committed to helping you introduce your products to the extensive Vietnamese market, and help set up your distribution system in Vietnam, thanks to our extensive network of partners to maintain a steady output of your product in the Vietnamese market.
Unlike importers and exporters, we connect you directly to your clients and act on both parties’ behalf and address any issue that occurs within the movement of your products from the Netherlands until they reach end-users in Vietnam. So there is less added markup on your product’s selling price, and your products are more accessible to a wider audience, while your communication efforts are at ease with us helping you handle any inquiries.
For more info, you can take a look at our past projects.
For any inquiries, contact us HERE.