Vietnam shrimp exports to Korea: Take advantages from VKFTA
(11/13/2019 12:00:00 AM)
South Korea is fifth largest importer of
Vietnamese shrimp. From 2008 to 2013, Vietnam shrimp exports to Korea
ranged from US$85 million to US$225 million. After the Vietnam - Korea
Free Trade Agreement (VKFTA) came into effect in 2015, from 2016 to
2018, Vietnam shrimp exports to South Korea increased from US$285
million to US$386 million. Thus, VKFTA has had positive impact on
Vietnam shrimp exports in the past time.
VKFTA
was signed on May 5, 2015 and officially took effect from December 20,
2015. Compared with the ASEAN-Korea FTA (AKFTA), in VKFTA, Vietnam and
South Korea offer more incentives to each other in goods, services and
investment sectors. However, VKFTA does not replace AKFTA. Currently,
both FTAs are valid and businesses can choose the FTA which is more
beneficial.
According
to South Korea's commitment in VKFTA, shrimp products exports from
Vietnam to Korea from 20% tax rate will be reduced to 0% immediately
after the Agreement comes into effect, including shrimp products HS code
0306161090, 0306169090, 0306171090 , 0306179090, 0306261000,
0306271000, 1605219000 (frozen cold-water shrimp peeled, shell on
cold-water shrimp, other shrimp and prawn shrimps that have been peeled,
shrimp and other prawn shrimps not peeled, live/ fresh/chilled
cold-water shrimp, live/ fresh/ chilled shrimp and other prawn shrimp,
shrimp and shrimp prawn are not airtight canned). The quota of duty-free
shrimp from Vietnam to the Korean market reached 10,000 tons in the
first year VKFTA took effect. Meanwhile, Thailand, Indonesia and
Malaysia were only granted 5,000 tons of quotas. This opportunity helps
Vietnamese shrimp easily compete and dominate the Korean market.
According
to the commitment in the next 5 years from the effective date of VKFTA,
Korea will raise Vietnam's shrimp export quotas to this market to
15,000 tons (an increase of 10% each year) and maintain the level of
15,000 tons from the 7th year onwards.
The
mechanism of tariff quotas under VKFTA is applied in parallel with
Korea's conventional tariff rate quotas (Harmonized System of Korea -
HSK). Therefore, products subject to tariff quotas under VKFTA can still
use tariff quotas under HSK when it expired under VKFTA.
From
2008 to 2013, Vietnam shrimp exports to Korea ranged from US$85 million
to US$225 million. After VKFTA came into effect, from 2016 to 2018,
Vietnam shrimp exports to Korea climbed from US$285 million to US$386
million. Although the increase was not much, it is clear that Vietnamese
shrimp has maintained a stable position in the Korean market.
Vietnam
is the largest supplier of shrimp to South Korea accounting for an
overwhelming 50.5% market share while other competitors such as Thailand
accounting for 9.6%, Ecuador at 13.5% and China at 5.2%. In the Korean
market, Vietnam must to compete on price with China, India and Ecuador.
In
the first four months in 2019, Vietnam shrimp exports to Korea reached
US$94.6 million, down 20.6% compared to the same period in 2018. Shrimp
exports to South Korea fell in the early months of this year in the
context of the general decline in shrimp exports to major markets and
the impact of declining in world shrimp prices.
There
are many incentives from VKFTA. However, taking advantage of incentives
have not been highly effective. Specifically, Vietnam is exempted from
shrimp imports into South Korea with a quota of 10,000 tons/year, it
will raise to 15,000 tons/year by 2020. However, currently Vietnam only
use of 2,500 tons/year.
In
order to improve the preferential utilization rate that VKFTA brings,
Vietnamese enterprises need to raise the awareness of taking initiative
in accessing information on VKFTA to select incentives suitable to the
conditions of the enterprises while changing technology, development
orientation of product in line with the needs of importer.
VIFEP (Vasep)
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