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UNIVERSITY OF UEHBUSINESS SCHOOLFACULTY OF INTERNATIONAL BUSINESS - MARKETINGFINAL EXAM REPORTSUBJECT: INTERNATIONAL TRADEInstructor: Ms. Hoàng Thu HằngClass Code: 22D1BUSGrade - Class: K46 - FTCGroup participants: Group 2Ho Chi Minh City, April 17th, 2022Group: 2No Student ID Name EmailAssignment o...

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UNIVERSITY OF UEH BUSINESS SCHOOL FACULTY OF INTERNATIONAL BUSINESS - MARKETING

FINAL EXAM REPORT SUBJECT: INTERNATIONAL TRADE Instructor: Ms. Hoàng Thu Hằng Class Code: 22D1BUS50311001 Grade - Class: K46 - FTC01 Group participants: Group 2

Ho Chi Minh City, April 17th, 2022

Group: 2

No

Student ID

Name

Email khanhdoan.31201027082 @st.ueh.edu.vn

1

31201027082 Đoàn Kiều Gia Khánh

2

31201025705

Trần Minh Bảo Anh

3

31201025108

Nguyễn Đức Trí Dũng

dungnguyen.31201025108 @st.ueh.edu.vn

4

31201024693

Nguyễn Phương Uyên

uyennguyen.31201024693 @st.ueh.edu.vn

anhtran.31201025705 @st.ueh.edu.vn

Assignment of duties Part 2.1 Part 2.3c References Part 2.4 Part 2.3.b References Part 2.2 Part 2.3.a References Part 2.3.d Introduction Conclusion References

Contribution Percentage 100%

100%

100%

100%

TABLE OF CONTENTS Page 1. Introduction .............................................................................................................................3 2. Main contents ..........................................................................................................................4 2.1. Overview of VN's exports of wood and wood products to export markets ........................4 2.2. Characteristic analysis of two selected export markets .....................................................5 2.2.a. The UK market.......................................................................................................5 2.2.b. The Netherlands market .........................................................................................6 2.3. Comparison and analysis of legal provisions associated with international trade from the selected markets .....................................................................................................................7 2.3.a. Important contents from FTA agreements between VN and the UK and the Netherlands markets regarding wooden furniture .............................................................7 2.3.b. Timber Regulation and Standard of technical barriers to trade (TBT) in the UK and the Netherlands ................................................................................................................9 2.3.c. Trade remedy regulations that Vietnamese businesses need to understand when exporting goods to the market ........................................................................................11 2.3.d. Other trade barriers in the two markets arise in the current context affecting the export efficiency of Vietnamese enterprises ...................................................................13 2.4. Three most urgent notes to help businesses prepare well to increase export efficiency in 2023 in these two markets.....................................................................................................15 3. Conclusion ............................................................................................................................17 4. References.............................................................................................................................18 5. Appendix ..............................................................................................................................21

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TABLE OF ACRONYMS EU UK US VN VNFOREST GDC EVFTA UKVFTA WTO MARD TRAV VNTLAS FLEGT VPA EUTR CITES FSC

Europe Union The United Kingdom The United States Vietnam Vietnam Administration of Forestry General Department of Vietnam Customs EU-Vietnam Free Trade Agreement UK- Vietnam Free Trade Agreement World Trade Organization Ministry of Agriculture and Rural Development Trade Remedies Authority of Vietnam Vietnam Timber Legality Assurance System The Forest Law Enforcement, Governance, and Trade Agreements The Voluntary Partnership Agreement The European Union Timber Regulation Convention on International Trade in Endangered Species Forest Stewardship Council

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1. Introduction Through an oriented development strategy, VN's wood processing industry has seen remarkable growth in the last ten years, with export turnover of wood products and furniture consistently ranking among the top commodity groups. the country's main export commodity VN is now one of the world's "brightest stars" in wood-based furniture production and exports, with furniture exports accounting for approximately 6% of the global market share, with large markets such as the United States, Japan, China, the European Union, Korea, and some new potential markets such as Canada, Russia, India... Despite a difficult year as a result of the pandemic, VN's exports of timber and non-timber forest products are expected to reach USD 15.6 billion in 2021, up by 18 percent compared to 2020. In which, the exports of wood and products reached USD14.5 billion, up by 17.2 percent compared to 2020. VN's wood processing industry is steadily expanding to become a "new star" of the Asian furniture industry, confirming its position and prestige in the international market through the signing of FTA agreements. With the signing of the Voluntary Partnership Agreement (VPA); the Forest Law Enforcement, Governance, and Trade Agreements (FLEGT) with the EU (European Union) on the implementation of the Law on Forestry, Forest Governance, and Trade in Forest Products, effective June 1, 2019, and other FTA agreements such as the European Union Vietnam Free Trade Agreement (EVFTA) and the UK-Vietnam Free Trade Agreement (UK-Vietnam FTA) (UKVFTA), many favorable conditions have been created for the development of Vietnam's forestry industry, which aids in gaining access to difficult, but highly profitable markets and increasing competition with similar products from other countries. According to the Vietnam Timber and Forest Products Association, the wood processing and exporting industry has seen a high import volume in the market since the UK-Vietnam free trade agreement (UKVFTA) took effect in May 2021, reaching an export turnover of USD 5.24 billion, a more than 15% increase over 2020. The export of Vietnamese wooden furniture to the UK increased dramatically in 2021, with products for living rooms and dining rooms. They are followed by wooden bedroom furniture and wooden frame chairs. The UKVFTA is the driving force for Vietnamese wood processing and exporting businesses to provide more options to consumers. For a long time, the Netherlands has been regarded as the entry point to the EU market, and the EVFTA is opening up a slew of new opportunities for Vietnamese and the Netherlands businesses. VN is the Netherlands' fourth-largest non-blocking wooden furniture supplier, after China, Indonesia, and India. VN's import value reached 37.3 million euros (equivalent to 44.4 million USD), a 15% increase over the same period in 2020. As a result, this study will gather information from reliable secondary data sources to analyze the status of VN's export wood processing industry's wooden furniture. The study aims to examine the requirements associated with international trade in the export market that Vietnamese businesses must understand to increase export efficiency. The study's findings will be important recommendations for the state in the policymaking process, as well as for businesses in preparing to compete in the export furniture industry when the EVFTA comes into force.

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2. Main contents 2.1. Introduction and overview of VN's exports of wood and wood products to export markets. In the context that the country's economy has been heavily affected by the COVID-19 pandemic along with the innovation of the economy, the wood processing industry has achieved great achievements in both quantity and quality of processing enterprises, in terms of export turnover and product consumption markets. The proportion of export of wood and wood products still has marked development, contributing significantly to the increase of VN's export capacity. Instead of just focusing on re-exporting to a third country like before, VN's processed wood products are now stably present in more than 140 countries and territories around the world with many businesses direct export to consumer markets, in which the main markets are the US, Japan, China, the EU, the UK, and Korea. The export turnover of wood and wood products is increasing steadily. According to the announcement of the VNFOREST, in the 11 months of 2021, the export turnover of the wood and wood products group reached 14.5 billion USD, up 17.2% compared to 2020 including wooden furniture products reached 10.87 billion USD, up 14 %; all kinds of wood reached USD 3.6 billion, up 28%. In December 2021, according to data from the GDC, VN's exports of wood and wood products reached 1.43 billion USD, up 12.4% over the previous month, and up 6.84%. compared to December 2020. In which, the export turnover of wood products reached US$1.074 billion, up 17.3% over the previous month and 2.67% compared to December 2020.

(Source: Gỗ Việt analyzed from data of the GDC) Figure 1: Export turnover of VN's wood and wood products by month from 2018 to 2021

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In the European market - one of the largest markets for VN's wood products consumption, especially the Netherlands and the UK, both are the 2nd and 3rd largest trading partners of VN, respectively in recent years. Although experiencing many difficulties due to the response to the COVID-19 epidemic, the export turnover of VN's wood processing and export industry in 2021 in the two this potential markets is recovering and still exceeds the expectations of the whole branch. As for the Netherlands, according to data from the GDC, in the first 9 months of 2021, VN's export turnover of wood and wood products reached 70 million USD, up 36.9 % compared to the same period last year. Wooden furniture is the main product that VN exports in the first 8 months of 2021, reaching 57.2 million USD, up 46.3% over the same period in 2020; accounting for 85.7% of the total export turnover of wood and wood products to this market. Moreover, VN is the 4th largest wooden furniture supplier to the Netherlands. VN has a distinct advantage when the EVFTA is signed, according to which the tax rates of Vietnamese products are more competitive than big markets such as China and India. As for the UK, according to data from the GDC, the export turnover of wood and wood products in 2021 reached 254.44 million USD, up 14.5% compared to 2020. Following the success, in January 2022, the export turnover continued to increase strongly, reaching 30.7 million USD, up 11.6% compared to December 2021, up 47.7% compared to January 2021. Moreover, the UKVFTA plays an important role, the wood industry also benefits when many wood products and wood products have a tax rate of 0% within 5 years, contributing to increasing competition with many generic products from other countries. However, from 2021 until now, the proportion of imports from VN to the Netherlands accounted for only 1.21% and 2.8% of the total value of the Netherlands' wooden furniture imports. At the same time, VN's goods only account for 1% of the total number of goods imported from other countries into the UK. This indicates that these two countries still have a lot of fiscal space for wood products and wood products, this is a potential opportunity for our group to carry out a project to research and show what Vietnamese business need to understand to increase export efficiency to these two markets in the future. 2.2. Characteristics of the selected markets. 2.2.a. The UK market The UK, or the United Kingdom of Great Britain and Northern Ireland, is made up of four countries: England, Scotland, Wales, and Northern Ireland. Regarding market size, as a whole, in 2020 the UK was the number 5 economy in the world in terms of GDP, and the number 4 in total imports according to OEC.world. It is considered a valuable destination for Vietnamese exporters including those in the timber and wooden products sector. The timber and wood products import market to the UK netted about US$ 201.2 million in the first 9 months of 2021, increased by 25% compared to the same period in the previous year. On the subject of wooden furniture, the UK is the largest importer in the world with 91,637 shipments and 1,376 buyers from 70 countries (figures are updated till March 2022), according to Volza.com.

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Regarding its growth potential, in spite of the disadvantages created by the Covid-19 pandemic, wood and wood products exported to the UK still see a stable growth rate. The UK’s demand for importing and consuming home furniture is forecasted to grow at a growth rate averaging over 3.2% in the period of 2021 – 2026 according to mordorintelligence.com. This can be explained by several factors such as the rise in the development and construction of new offices, hospitality infrastructure, or the need for modern interiors of households and workplaces. The UK imports most of its wood and wood products from Poland and China. In regards to wooden furniture, India, VN, and Indonesia are three of the key exporters of the UK. Some of the key imported categories consist of construction furniture, chairs, kitchen, and bedroom decorations. Vietnam is the third-largest wood furniture supplier to the UK, after China and the EU, accounting for 7.9% of the total British wooden furniture imports value. To do business in the UK, exporters should consider looking into its business culture and practices. The UK’s business respects courteousness, discipline as well as humor. One of the first things exporters to the UK should know is the way to communicate to their business partners, this includes greetings, invitations, punctuality, dress codes, and other aspects. Another essential is the understanding of the UK’s language and religion: the main language spoken in the UK is English but there are also Welsh spoken in Wales and other regional dialects; the UK is a multi-faith society with the official being Christianity, religion has an indirect effect on how a business in the UK functions. In the wooden furniture market, reports show that one of the most imported products to the UK is the wooden kitchen furniture section. British often buy their furniture from famous retailers such as IKEA – the largest furniture retailers. IKEA also has a considerable impact on the Vietnamese furniture market with producing and exporting professionally designed products. On another note, some UK’s online guides on choosing wooden furniture recommend choosing the following types of wood: beech, pine, oak, teak, ash, and maple. 2.2.b. The Netherlands market The Netherlands, or Holland, is a Western European country with the nominal capital being Amsterdam. The Netherlands occupies a highly strategic location for international commerce. Along with its developed logistics and distribution network, the country has become a strong link to other European countries and more. Regarding market size, as a whole, in 2020 the Netherlands was the number 17 economy in the world in terms of GDP, and the number 8 in total imports according to OEC.world. The Netherlands market for furniture is the 6th biggest in Europe and one of the most active markets in the world. The Netherlands imports approximately US$ 2 billion worth of furniture each year. Wooden furniture is the prevalent product in the timber and wood product sector imported to the Netherlands market with the import value of US$ 57.2 million in the first 8 months of 2021, an increase of 46.3% compared to the same period the previous year. On the subject of the growth potential of the Netherlands wooden furniture market, the volume of imports increased dependably in the 2015 – 2019 period. Timber and wood products imported to 6

the Netherlands dropped sharply in August and September of 2021 due to the impacts of the Covid19 pandemic, however, it has been recovering steadily since. The Netherlands import structure for the wooden furniture market is diverse. Import from the same region is predominant but decreasing while import from other nations is increasing. In the first 8 months of 2021, wood plank and flooring, wooden handicraft, and mirror frame are the imports that increased substantially while wooden doors plummeted. VN is the 4th largest outside of Europe wooden furniture exporter to the Netherlands, after China, Indonesia, and India. However, Vietnamese imports only accounted for 2.8% of the total value of the market. Also from Europe, the Netherlands business culture and practices resemble those of the UK in some way. Businesses in the Netherlands value honesty, reliability, and courtesy. They can be open and welcoming and also forceful and tough negotiators. Apart from the general cultural awareness mentioned in the previous part, exporters should pay close attention to punctuality and greetings in the Netherlands. English is widely used in the Netherlands including business English. However, not all Dutch people understand English, hence, it is essential to provide adequate labels and manuals in Dutch. The Netherlands has a religiously tolerant society as various religions are accepted in the country such as Roman Catholic, Protestant, Muslim, and other religions. Like the UK, Dutch people tend to buy their furniture from retailers such as IKEA or Leen Bakker – a Netherlands furniture company. The reason is that they offer cheap prices. Additionally, the most noticeable imported wooden furniture into the Netherlands include Livingroom and Kitchen furniture and wooden-framed chair. 2.3. Comparison and analysis of legal provisions associated with international trade from the selected markets. 2.3.a. Important contents from FTA agreements between VN and the UK and the Netherlands markets regarding wooden furniture. As a member of the EU, the Netherlands provides Vietnamese exporters with competitive advantages as regulated in the EVFTA - a new generation FTA between VN and 28 European Union member states, entering into force on 01/08/2020. Negotiated on the basis of inheriting the commitments in the EVFTA along with necessary adjustments to conform with the bilateral trade framework of VN and the UK, the UKFTA officially comes into force on 01/05/2021. The following table covers the key commitments in the two FTAs regarding the subject of wooden furniture imported to the Netherlands and the UK.

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Table 1: Ordinal Number 1

Content Export tariffs

EVFTA (the Netherlands)

UKVFTA (the UK)

Products of Chapter 94 including wooden furniture of a kind used in offices, kitchens, bedrooms, and other wooden furniture: all items will be reduced to 0% by the EU as soon as the Agreement comes into force.

On the basis of inheriting the EVFTA, the UKVFTA has regulations on the form of commitments similar to the EVFTA.

Products of Chapter 44: including wooden parts and other wooden products: about 83% of tariff lines, currently with base tax rate of 0-6%, will be eliminated by the EU to 0% as soon as the Agreement comes into effect; the remaining 17% of tariff lines, group with a base tax rate of 7-10% that the EU is applying, will be gradually eliminated to 0% within 6 years from the date of entry into force of the FTA. 2

Rules of Origin

Products of Chapter 94: The Commodity Code Conversion (CTH) rule or percentage limit on non-originating materials (VL) content of non-originating materials is calculated based on ex-works prices and a universally applicable rate of 70%.

On the basis of inheriting the EVFTA, the UKVFTA has regulations on the form of commitments similar to the EVFTA.

For some raw wood products: Applying rules of specific processing stages. Certification: Exporters must use the C/O form EUR1. 3

Non-tariff barriers

The EVFTA includes commitments The UKVFTA has no regarding sustainable ...