Introduction
Over the past decade, Vietnam's wood processing industry has experienced significant growth, positioning itself as a leading player in global furniture production and exports With wood product exports accounting for approximately 6% of the global market share, Vietnam has become a key supplier to major markets including the United States, Japan, China, and the European Union, as well as emerging markets like Canada, Russia, and India Despite challenges posed by the pandemic, Vietnam's timber and non-timber forest product exports are projected to reach USD 15.6 billion in 2021, marking an 18% increase from 2020, with wood product exports alone totaling USD 14.5 billion This growth underscores Vietnam's rising status as a "new star" in the Asian furniture industry, bolstered by its participation in Free Trade Agreements (FTAs) that enhance its international market presence.
The signing of the Voluntary Partnership Agreement (VPA) and the Forest Law Enforcement, Governance, and Trade Agreements (FLEGT) with the European Union, effective June 1, 2019, alongside the European Union Vietnam Free Trade Agreement (EVFTA) and the UK-Vietnam Free Trade Agreement (UKVFTA), has significantly enhanced the development of Vietnam's forestry industry These agreements facilitate access to challenging yet lucrative markets and improve competition with similar products from other countries.
Since the implementation of the UK-Vietnam Free Trade Agreement (UKVFTA) in May 2021, the wood processing and exporting industry in Vietnam has experienced significant growth, with an export turnover of USD 5.24 billion, reflecting a more than 15% increase compared to 2020, according to the Vietnam Timber and Forest Products Association.
In 2021, the UK's demand for wooden furniture surged, particularly for living and dining room products, followed by wooden bedroom furniture and frame chairs The UK-Vietnam Free Trade Agreement (UKVFTA) has significantly boosted Vietnamese wood processing and export businesses, enhancing consumer choices Traditionally, the Netherlands has served as a gateway to the EU market, and the EU-Vietnam Free Trade Agreement (EVFTA) is unlocking new opportunities for both Vietnamese and Dutch enterprises Vietnam ranks as the Netherlands' fourth-largest supplier of non-blocking wooden furniture, trailing only China, Indonesia, and India, with an import value of 37.3 million euros (approximately 44.4 million USD), reflecting a 15% increase compared to 2020.
This study will analyze the status of Vietnam's wooden furniture export industry by gathering information from reliable secondary data sources It aims to identify the international trade requirements that Vietnamese businesses need to understand to enhance their export efficiency The findings will provide essential recommendations for policymakers and help businesses prepare for competition in the export furniture sector, particularly with the implementation of the EVFTA.
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Main contents
a The UK market
The United Kingdom, comprising England, Scotland, Wales, and Northern Ireland, ranks as the world's fifth-largest economy by GDP and fourth in total imports as of 2020, making it an attractive market for Vietnamese exporters, particularly in the timber and wooden products sector In the first nine months of 2021, the UK's timber and wood products import market reached approximately US$ 201.2 million, reflecting a 25% increase from the previous year Notably, the UK is the leading global importer of wooden furniture, with 91,637 shipments and 1,376 buyers from 70 countries, as reported by Volza.com in March 2022.
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Despite the challenges posed by the Covid-19 pandemic, the export of wood and wood products to the UK continues to experience stable growth According to mordorintelligence.com, the UK’s demand for imported home furniture is projected to increase at an average rate of over 3.2% from 2021 to 2026 This growth can be attributed to several factors, including the surge in new office developments, the expansion of hospitality infrastructure, and the growing need for modern interiors in both homes and workplaces.
The UK primarily sources its wood and wood products from Poland and China, while India, Vietnam, and Indonesia stand out as significant exporters of wooden furniture Key imported items include construction furniture, chairs, and kitchen and bedroom decorations Notably, Vietnam ranks as the third-largest supplier of wood furniture to the UK, following China and Poland.
EU, accounting for 7.9% of the total British wooden furniture imports value.
When exporting to the UK, it is crucial to understand its unique business culture and practices Key aspects include the importance of courteousness, discipline, and humor in communication Exporters should pay attention to greetings, invitations, punctuality, and dress codes to foster positive relationships Additionally, a grasp of the primary language, English, along with regional dialects like Welsh, is vital The UK’s multi-faith society, primarily influenced by Christianity, also subtly impacts business operations, making cultural awareness essential for successful engagement.
The wooden furniture market in the UK sees a high demand for wooden kitchen furniture, with IKEA being a leading retailer in this sector Renowned for its professionally designed products, IKEA also significantly influences the Vietnamese furniture market through its production and export activities For those seeking guidance on selecting wooden furniture, UK online resources recommend popular wood types including beech, pine, oak, teak, ash, and maple.
b The Netherlands market
The Netherlands, often referred to as Holland, is a strategically located Western European country with Amsterdam as its nominal capital Renowned for its advanced logistics and distribution infrastructure, the Netherlands serves as a vital hub for international commerce, connecting to various European nations and beyond In 2020, the country ranked as the 17th largest economy globally by GDP and the 8th in total imports, highlighting its significant role in the global market.
The Netherlands boasts the 6th largest furniture market in Europe and ranks among the most dynamic globally, with annual furniture imports reaching around US$ 2 billion In the timber and wood product sector, wooden furniture dominates, showing a significant import value of US$ 57.2 million in the first eight months of 2021, which marks a remarkable 46.3% increase compared to the same period in 2020.
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 download by : skknchat@gmail.com the Netherlands dropped sharply in August and September of 2021 due to the impacts of the Covid-19 pandemic, however, it has been recovering steadily since.
The Netherlands exhibits a diverse import structure in its wooden furniture market, with a notable decline in imports from the same region and a rise in imports from other countries In the first eight months of 2021, significant increases were observed in the importation of wood planks, flooring, wooden handicrafts, and mirror frames, while imports of wooden doors saw a sharp decline Vietnam ranks as the fourth largest exporter of wooden furniture to the Netherlands outside of Europe, following China, Indonesia, and India, yet its imports represent only 2.8% of the total market value.
The Netherlands shares similarities with UK business culture, emphasizing honesty, reliability, and courtesy Dutch businesses are known for their welcoming nature, yet they can be tough negotiators Exporters should prioritize punctuality and proper greetings, as these are key aspects of Dutch etiquette While English is commonly spoken, not all Dutch individuals are fluent, making it crucial to provide labels and manuals in Dutch Additionally, the Netherlands is characterized by its religious tolerance, embracing a variety of faiths, including Roman Catholicism, Protestantism, and Islam.
In the Netherlands, consumers often purchase furniture from retailers like IKEA and Leen Bakker due to their affordable prices Notably, the most commonly imported wooden furniture in the country includes living room and kitchen pieces, as well as wooden-framed chairs.
Comparison and analysis of legal provisions associated with international trade from the
international trade from the selected markets.
a Important contents from FTA agreements between VN and the UK and the
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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Number (the Netherlands) (the UK)
Export products under Chapter 94, particularly wooden furniture for offices, kitchens, and bedrooms, will benefit from a 0% tariff rate as stipulated by the EVFTA and UKVFTA agreements This significant reduction in tariffs will take effect as soon as the agreements are implemented, aligning with the EU's commitment to similar regulations.
Chapter 44 products, which encompass wooden parts and various wooden goods, currently feature approximately 83% of tariff lines with a base tax rate of 0-6% Upon the Agreement's implementation, these tariffs will be reduced to 0% The remaining 17% of tariff lines, subject to a base tax rate of 7-10%, will see a gradual elimination of tariffs to 0% within six years following the Free Trade Agreement's entry into force.
2 Rules of Products of Chapter 94: The Commodity On the basis of
The Origin Code Conversion (CTH) rule, which is derived from the EVFTA, imposes a percentage limit on non-originating materials under the UKVFTA Specifically, the regulations stipulate that the content of non-originating materials (VL) is calculated based on the ex-works pricing commitments, adhering to a universally applicable rate similar to that of the EVFTA, set at 70%.
For some raw wood products: Applying rules of specific processing stages.
Certification: Exporters must use the C/O form EUR1.
3 Non-tariff The EVFTA includes commitments The UKVFTA has no barriers regarding sustainable forest management other obligatory and forest products: requirements
Vietnam has made commitments to promote trade in non-tariff timber sourced from sustainably managed forests, while also addressing barriers related to wood harvested from these areas in line with domestic legislation Notably, Vietnam signed a bilateral FLEGT agreement with the European Union, which took effect on June 1, 2019, to enhance sustainable forestry practices and ensure compliance with international standards.
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The two Parties have committed to enhancing information sharing and collaboration to promote the consumption of timber and wood products sourced from sustainably managed forests, while actively combating illegal logging and trade practices.
b Timber Regulation and Standard of technical barriers to trade (TBT) in the UK and
The Netherlands, being a member of the European Union, adheres to technical regulations and standards akin to the EU Timber Regulation Following the UK's official departure from the EU in January 2020, the European Timber Regulation (EUTR) and Forest Law Enforcement Governance and Trade (FLEGT) no longer apply to Great Britain, which includes England, Scotland, and Wales However, the UK Government continues to implement certain regulations.
EU Timber Regulation (EUTR), it is gradually tightening environmental regulations.
Criteria Netherlands (EUTR) United Kingdom (UKTR)
The European Union Timber Regulation (EUTR), which came into effect in 2013, prohibits the sale of illegally logged timber in the EU market It mandates that EU operators conduct thorough due diligence checks to verify the legality of timber products before they are introduced to the market.
The essence of 'due diligence' is that operators engage in a risk management process to reduce the likelihood of illegally harvested timber or timber products entering the EU market.
The three key elements of the "due diligence system" are:
Operators are required to have comprehensive information regarding timber and timber products, including details about the country of harvest, species, quantity, supplier information, and compliance with national legislation.
Operators must conduct a thorough risk assessment of illegal timber within their supply chain, utilizing the previously identified information and adhering to the criteria established by relevant regulations.
To effectively mitigate the risk of illegal timber in the supply chain, it is essential to obtain additional information and verification from suppliers when assessments indicate potential risks Timber can be classified as legally harvested if it meets specific criteria set forth in compliance with regulations.
It has a Convention on International Trade in Endangered Species (CITES) import permit
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It’s accompanied by a valid Forest Law Enforcement, Governance and Trade (FLEGT) license
It has a Forest Stewardship Council (FSC) certificate You don’t need to carry out due diligence on this timber.
Countries with a FLEGT-VPA agreement with the EU and UK are exempt from conducting due diligence for directly imported timber or wood products, provided these items are accompanied by a valid FLEGT license.
All species in composites must be considered separately, but where they are a mix of virgin and recycled timbers, only the former need to be assessed.
To ensure that timber is legally placed on the GB market, it must be harvested in compliance with the relevant laws of its country of origin Therefore, anyone looking to sell timber in the GB market must identify the harvesting country, comprehend its applicable legislation, and confirm that the timber was sourced in accordance with these legal requirements.
Applicable legislation pertains to the laws governing timber harvesting in the country where the timber is sourced While these laws differ across nations, they commonly address key topics related to sustainable forestry practices, environmental protection, and the rights of indigenous communities.
• trade and customs laws that relate to timber harvesting;
• rights to harvest and legally harvestable species;
• payments for harvest rights and duties related to the harvesting of timber;
• biodiversity conservation and forest management;
• legal rights of third parties with regards to use and tenure that are affected by timber harvesting;
Regulations on Compliance with REACH regulation, which is a new regulation in the EU on chemical chemicals and the safe use of chemicals substances
No specified Importers have to use paper materials for lining furniture, instead of plastic
Materials used as before The British government for timber also encourages the use of recycled lining materials with international certifications for environmental protection.
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c Trade remedy regulations that Vietnamese businesses need to understand when
understand when exporting goods to the market
Number (the Netherlands) (the UK)
1 Anti-dumping and countervailing duties
1.1 Commitment - Publicize written information to stakeholders On the basis of to procedures to give average opinions on related contents inheriting and - Related parties should have the opportunity EVFTA, transparency to express their standpoints during the trade UKVFTA has remedy investigation regulations on
- English is the common language used the form of between VN and the EU during the trade commitments remedy investigation similar to
1.2 Commitment - EVFTA stipulates the application of the rule EVFTA. on tax rate of choosing a lower tax rate.
When Vietnam or the European Union implements anti-dumping or countervailing measures, the applicable tax rate should correspond to the margin of dumping or subsidy These measures must be set at a level that is adequate to remedy the injury caused.
Vietnam and the European Union are implementing this rule in their domestic laws, applying it voluntarily to all partners; however, it is mandatory for use with EU partners and vice versa.
Measures are implemented only when all three WTO conditions are met: the presence of dumping, significant injury, and a clear cause-and-effect relationship Additionally, a fourth factor must be considered, ensuring that the measures do not negatively impact public interest.
2 Global safeguard measures EVFTA stipulates that parties comply with On the basis of
WTO regulations on global safeguard inheriting measures, and adds the following additional EVFTA, requirements: UKVFTA has regulations on
The party initiating a safeguard investigation under the EVFTA must provide written notification that includes all relevant background information and the rationale behind their decision.
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On the basis of inheriting EVFTA, UKVFTA has regulations on the form of commitments similar to EVFTA.
To implement the safeguard measure effectively, it is essential to increase the tax without surpassing the lower of the two applicable tax rates: the Most Favored Nation (MFN) rate at the time the safeguard measure is applied and the original negotiated base rate.
With the implementation of the EVFTA and UKVFTA, Europe is increasingly utilizing trade remedy measures and emphasizing compliance with rules of origin, especially as it faces a growing trade deficit Vietnam's wooden furniture sector, a key export to the Netherlands and the UK, must navigate these protective measures in the European market Therefore, it is crucial for exporters to carefully adhere to the rules of origin to successfully promote their products in this competitive landscape.
The Ministry of Industry and Trade has established a legal framework for implementing the EVFTA through Circular No 14/2021/TT-BCT, which outlines trade remedies Additionally, the Law on Foreign Trade Management and its guiding documents, including Decree 10/2018/ND-CP, provide specific provisions regarding trade remedies This legal foundation enables Vietnamese businesses to effectively utilize bilateral safeguard measures, anti-dumping measures, and anti-subsidy measures under the EVFTA and UKVFTA Furthermore, Vietnamese enterprises are committed to adhering to the stringent requirements of import markets, such as the EU Timber Regulation.
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- Temporarily suspending tariff reduction as committed in the Agreement.
- Bilateral consultations with the other party should be made before the initiation of an investigation.
- The investigation limitation is 1 years.
- In special cases, a provisional safeguard measure may be applied during the investigation, but for no longer than 200 days.
- The measure is applied only during the first
10 years when the Agreement takes effect.
- An increase in import products from other party due to the reduction of duties under this Agreement and is the cause of serious injury to the domestic industry.
- To facilitate bilateral exchanges between the two sides and only officially apply safeguard measures 30 days after the failure of bilateral exchanges.
Regulation (EUTR 995/2010) for the European market to create transparency, reputation for VN’s wooden furniture when exporting to the Netherlands and the UK.
The Vietnamese Government has implemented Decree No 102/2020/ND-CP, which establishes the Vietnam Timber Legality Assurance System (VNTLAS) to regulate the import and export of wood This decree outlines risk management criteria based on the geographical status of the exporting country and the classification of wood species In conjunction with this decree, the Ministry of Agriculture and Rural Development (MARD) issued Decision No 8432/QD-BNN-TCLN, which lists active geographical regions and wood species permitted for import into Vietnam These legal frameworks are crucial for mitigating risks faced by wood enterprises engaged in international trade.
Vietnamese businesses must thoroughly understand the legal regulations and practices related to trade remedy investigations in key export markets To proactively develop effective strategies, they should consistently monitor recommendations and early warnings from the Trade Remedies Authority of Vietnam (TRAV) Additionally, staying updated with timely information is crucial to avoid anti-dumping lawsuits, as reliance on outdated data can negatively impact the outcomes of investigations.
d Other trade barriers in the two markets arise in the current context affecting the
The ongoing Russia-Ukraine conflict has led EU countries, including the UK and the Netherlands, to impose strict economic sanctions on Russia, significantly hindering the export of wood materials from Russia to Vietnamese furniture enterprises Additionally, following Britain's exit from the EU, the British government will implement changes to the EU Timber Regulation (EUTR), requiring Vietnamese businesses to adapt to these new challenges in the timber trade.
Explanation Trade barriers Affect to VN’s enterprises
On March 1st, major shipping lines such as MSC, Maersk, and CMA CGM announced the suspension of transporting goods to Vietnam from Russia, which will significantly impact the export of Vietnamese wooden products In 2021, Vietnam's wooden product exports to Russia were valued at approximately $3 million, representing only 0.05% of the total export market Despite being a major exporter of wooden furniture, Vietnam relies heavily on imported raw materials, making the trade relationship with Russia crucial The recent Western sanctions following Russia's military actions in Ukraine have further complicated this trade, affecting the overall turnover of wood products exported by Vietnamese companies.
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IKEA USA is a major supplier of wooden products globally and has joined the growing wave of companies boycotting Russia As of March 7, 2022, over 250 organizations, including IKEA, have withdrawn their operations in Russia in protest against the war, leading to significant disruptions in the supply chain for wooden materials This withdrawal is expected to intensify competition for imported raw wood among Vietnamese furniture manufacturers, who rely heavily on these materials.
Vietnamese businesses must adapt to the implications of Britain's departure from the EU, particularly regarding the export of wooden furniture to the UK To enhance export turnover, it is crucial for these businesses to focus on compliance with strict UK regulations and standards for imported goods As the market for wood products in the UK becomes increasingly competitive, understanding and addressing these barriers will be essential for future success.
Procedures for exporting Government's regulations wooden furniture to the UK market are getting more and more difficult.
As of March 25th, 2020, importers must declare their product associations for materials used in Vietnam's wood furniture, adhering to strict regulations set by the British government This includes a mandatory shift from plastic to paper materials for furniture lining Additionally, the UK government encourages Vietnamese enterprises to enhance the value and quality of their products by utilizing recycled materials, thereby boosting their competitiveness in the international market To further support environmental protection, the UK is accelerating the implementation of a DNA testing program for wood products to verify their legal origin.
The British government will VN’s enterprises need to require exporters using pay more attention to the input wood materials to importance of social have FSC certification (a responsibility, and
Download the voluntary standard for transparent information that supports responsible forest management at a global scale This initiative aims to enhance production practices and prepare for emerging challenges in sustainable forestry.
The ongoing Russia-Ukraine war poses significant challenges for Vietnamese wood processing companies, as they face intensified competition for imported wood raw materials, leading to increased prices and diminished competitive advantages in the global market Additionally, heightened pressure from environmental and human rights organizations against the use of Russian wood, coupled with new UK regulations, threatens to boycott wooden furniture products sourced from Russia, including those imported through China This conflict is likely to impact global economic growth and inflation, placing further strain on Vietnam, especially as the country seeks to recover and develop post-COVID-19 While Vietnam's trade relations with the UK and the Netherlands remain stable for now, the long-term effects of these factors could hinder trade and investment opportunities, complicating the benefits of the EVFTA agreement.
Three most urgent notes to help businesses prepare well to increase export efficiency in
Vietnam's timber and timber products export to the Netherlands and the United Kingdom is significantly enhanced by the EVFTA and UKVFTA agreements, which provide various benefits and tax incentives These advantages will empower Vietnamese businesses to boost exports and enhance the trade value of essential commodities like timber While the EU market presents substantial opportunities for timber products, it imposes strict standards To maximize the efficiency of timber exports in 2023, specific recommendations should be implemented.
Vietnamese companies need to enhance their management processes in timber production and ensure strict control over the origin of materials, as well as the factors affecting workers' livelihoods According to Gellert Horvath, Vice President of the European Chamber of Commerce (Eurocham), this focus is essential for sustainable growth in the industry.
European consumers prioritize ethical production conditions, including environmental sustainability and labor welfare, creating significant market potential for Vietnamese wooden furniture that meets these standards The EU Timber Regulation (EUTR), effective since 2013, prohibits the sale of illegally harvested timber within the EU, mandating that operators ensure the legality of their timber products through due diligence This regulation emphasizes the necessity of certifications like FLEGT, CITES, and FSC to verify wood origins To facilitate compliance, governments must implement policies that enable companies to acquire afforestation rights and sustainably develop raw materials When exporting timber products to the UK and Netherlands, businesses must carefully manage the supply chain, verify the origin of their products, adhere to due diligence requirements, and obtain the necessary certifications and permits.
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Second, in order to increase export efficiency, exporters must grasp the growth potential, business practices, and demand characteristics of timber and timber products in the Dutch and
The UK has established itself as the world's largest importer of timber and timber products, with an import market valued at around 201.2 million USD in the first nine months of 2021 Additionally, the demand for house furniture in the UK is projected to grow at an annual rate exceeding 3.2 percent from 2021 onwards, indicating significant growth potential in this sector.
In 2026, UK consumers show a preference for various woods, including beech, pine, oak, teak, ash, and maple The British business culture emphasizes civility, discipline, and a good sense of humor For exporters looking to engage with UK partners, understanding effective communication is crucial, encompassing greetings, invitations, punctuality, dress codes, and other essential business etiquette.
The Netherlands market shows a strong demand for wooden furniture, with imports valued at 57.2 million USD in the first eight months of 2021 Notable increases in imported wooden planks, flooring, handicrafts, and mirror frames contrast with a significant decline in wooden door imports Vietnam ranks as the fourth largest wood furniture exporter to the Netherlands, following China, Indonesia, and India, but accounts for only 2.8 percent of the total market value In the Dutch business community, qualities such as honesty, trustworthiness, and civility are paramount, and while they maintain an open and friendly demeanor, they are also known for being tough negotiators Exporters should prioritize punctuality and adhere to local customs to foster positive business relationships.
Vietnamese enterprises must implement strategies to mitigate the impacts of the Russia-Ukraine conflict and upcoming changes in UK and EU timber regulations As a major exporter of wooden furniture, Vietnam relies heavily on imported raw materials, particularly from Russia, making it vulnerable to sanctions that have led to a shortage of these resources Additionally, rising fuel costs due to Russia's embargo have caused freight rates to surge by 30-40% The UK is expected to soon require FSC certification for wood inputs, alongside the introduction of a DNA testing program to verify the legal origin of wood products This situation has been anticipated for several years, emphasizing the need for Vietnamese wood exporters to develop effective plans to navigate these challenges.
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Conclusion
This study enhances the understanding of export performance in the wooden furniture industry within a developing country, specifically focusing on the implications of the Vietnam-EU Free Trade Agreement Additionally, it contributes to the expanding research on exportation by examining its dynamics in the post-COVID-19 era.
To enhance the export of wooden products, Vietnamese businesses must prioritize effective management processes and ensure the responsible sourcing of materials while considering the well-being of their workers It is essential for these companies to design their products in a consumer-friendly manner, providing clear and transparent information about the origin of the wood and sustainable forest management practices, which can effectively encourage consumer purchases Additionally, investing in robust and efficient website servers or applications is crucial to ensure a seamless e-commerce experience for customers, minimizing disruptions during online transactions.
The Russia-Ukraine conflict is significantly affecting Vietnam's export market to the UK and the Netherlands, highlighting the urgent need for Vietnamese businesses to proactively develop strategies to mitigate these challenges Companies should consider sourcing alternative, cost-effective suppliers for imported wood materials and invest in infrastructure improvements to alleviate supply chain disruptions These insights offer valuable guidance for Vietnamese business owners in planning, executing, and refining their business strategies.
This study offers valuable insights into the export of Vietnam's wooden furniture to the UK and Netherlands; however, it has notable limitations Primarily, the data was primarily sourced from newspapers and articles, lacking direct interviews with Vietnamese business owners, which means our findings represent a narrow perspective Additionally, as the research is based in Vietnam, the results may not be applicable to customers from diverse cultural or demographic backgrounds Therefore, caution should be exercised when generalizing these findings, and future research should aim to address these limitations.
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