Trang 1 FOREIGN TRADE UNIVERSITYSCHOOL OF ECONOMICS AND INTERNATIONAL BUSINESSTRADE FACILITATION ASSIGNMENTTOPIC:VIETNAM’S IMPLEMENTATION OF FREEDOM OF TRANSIT PROVISIONARTICLE 11 OF THE
FOREIGN TRADE UNIVERSITY SCHOOL OF ECONOMICS AND INTERNATIONAL BUSINESS TRADE FACILITATION ASSIGNMENT TOPIC: VIETNAM’S IMPLEMENTATION OF FREEDOM OF TRANSIT PROVISION (ARTICLE 11) OF THE TRADE FACILITATION AGREEMENT (TFA) Group : 14 Course : TMA410E(HK1-2324)1.1 GVHD : Ms Nguyen Thi Yen Ha Noi, 2023 Name Student ID Pham Kim Hoa 2011140204 Doan Vu Nhat Mai 2011140210 Nguyen Mai Ngoc 2011140202 Nguyen Ha Phuong 2015140202 Nguyen Phuong Thao 2011140217 Nguyen Quoc Viet 2011140219 INTRODUCTION Transit activities taking place in the territory of Vietnam in recent years have become more and more exciting Vietnam is a country located in Southeast Asia with a favourable geographical position and a sea border gate located deep on the mainland, so transit activities take place a lot in Vietnam In the era of opening up, Vietnam has also established diplomatic relations with more than 185 countries and economic - trade - investment relations with more than 224 countries and territories By actively participating in trade agreements, Vietnam's economy will open up even more to countries around the world, thereby making transit activities stronger and busier The Trade Facilitation Agreement that Vietnam joined took effect on February 22, 2017, and Article 11 stipulates freedom of transit with commitments that Vietnam fully complies with With the above reasons, our group decided to choose the research topic: "Vietnam’sImplementationofFreedomofTransitprovision(Article11)of the Trade Facilitation Agreement(TFA)" Based on the information and the current status of the application of Article 11 of the Trade Facilitation Agreement (TFA) in Vietnam, along with the analysis, we will clarify the theoretical basis and make an assessment of the regulations’ implementation on freedom of transit in Vietnam, thereby making a number of proposals and suggestions for Vietnam The group essay is divided into three parts: Part 1: Theoretical framework Part 2: Implementation and evaluation of Article 11 in Vietnam Part 3: Recommendations for effective implementation of Article 11 on Vietnam’s trade We sincerely thank Ms Nguyen Thi Yen for giving us the opportunity to learn about one of the aspects of trade facilitation, apply theory to analyse the current situation, and then make suggestions for Vietnam Due to the limited time, the group's essay is not truly thorough, and we look forward to any comments and corrections Theoretical framework 1.1Overviewof TradeFacilitationAgreement(TFA) 1.1.1.OverviewoftheTradeFacilitationAgreement(TFA) In December 2013, during the Ministerial Conference in Bali, WTO members negotiated the Trade Facilitation Agreement (TFA) On November 27th, 2014, in Geneva, the legal document of the agreement was reviewed for the final time and officially came into effect on February 22nd, 2017, with the consent of two-thirds of WTO member countries The TFA aims to achieve several goals, which include facilitating trade, ensuring a balance between facilitation and compliance with the law, and expediting the clearance of goods Moreover, the TFA has a significant role in promoting cooperation between Customs authorities and other agencies, and enhancing technical assistance and capacity building 1.1.2.StructureoftheTradeFacilitationAgreement The TFA consists of 24 articles, which are divided into three main sections, with a focus on facilitating the movement, release, and clearance of goods (including transit goods) Part I: Provisions on technical measures related to the publication and management of information, including five main contents: ● Publication, ensuring access to information related to imports, exports and transit; ● Enhancing transparency and objectivity without discrimination; ● Promoting the process of release and clearance of goods, including transit goods; ● Clarifying and developing Articles V, VIII, and X of GATT (1994); ● Customs cooperation Part II: Special and Differential Treatment (SDT) provisions for developing and least-developed countries (LDCs), allowing these countries to implement certain commitments of the Agreement immediately upon receiving technical assistance and support To benefit from the special and differential treatment, TFA member countries must classify each TFA provision into groups and inform other WTO member countries of the specific implementation timelines: ● Group A includes commitments to be implemented immediately or within one year from the date the TFA officially takes effect for developing and least-developed countries ● Group B includes commitments to be implemented after a standard preparation period following the TFA's entry into force ● Group C includes commitments to be implemented after a standard preparation period and requires technical support and capacity building When classifying provisions into Groups B and C, specific, clear implementation dates must be specified Part III: Institutional Arrangements and Final Provisions The Agreement provides for the establishment of a Standing Committee on Trade Facilitation within the WTO to periodically review the implementation of the Agreement It also establishes committees in each member country to facilitate domestic coordination and implementation of the Agreement Additionally, it includes specific provisions regarding the legal status of the commitments made by Groups A, B, and C, provisions for reservations, and dispute resolution The TFA has opened up new opportunities for developing and least-developed countries It is the first WTO agreement that allows member countries to determine a suitable implementation timeline based on their technical and financial capabilities WTO, WTO member countries, and organisations including the World Bank, the World Customs Organization, and the United Nations Conference on Trade and Development (UNCTAD) collaborate to provide technical assistance and capacity building Alongside the TFA, the Trade Facilitation Agreement Facility (TFAF) was established in July 2014 to ensure assistance to developing and least-developed countries in effectively implementing the Agreement when requested 1.1.3.BenefitsoftheTradeFacilitationAgreement Estimates suggest that comprehensive implementation of the TFA will reduce trade costs by approximately 14.3% This will result in global trade growth of $1 trillion per year, with the poorest countries in the world benefiting the most A 2015 research and analysis report by WTO economists highlighted the benefits of TFA implementation: ● Removing trade cost bottlenecks - eliminating obstacles for developing countries, narrowing the economic gap between nations, and unevenly affecting small and medium-sized enterprises (SMEs) ● Simplifying and reducing costs in customs and trade procedures, thus reducing trade costs ● Increasing global export volumes by 2.7% per year and global GDP by over 0.5% per year Developing countries will benefit from nearly $1.9 trillion in export growth, contributing to 0.9% annual economic growth ● Diversifying product offerings and export markets The number of new export products will increase by 20% in developing countries and 36% in least-developed countries ● Reducing administrative burdens on small and medium-sized enterprises ● Attracting foreign direct investment (FDI) The TFA includes provisions aimed at improving transparency, predictability in cross-border trade and creating a business environment with minimal discrimination, including consultation and dispute settlement rules The TFA's provisions enhance the availability and public disclosure of information on cross-border procedures, improve traders' rights, reduce fees and related methods for importing and exporting goods and services, automate and digitize customs procedures, and enhance conditions for the free transit of goods 1.2 Analysis of Article 11 - FreedomofTransitinaccordance withTradeFacilitation Agreement(TFA) 1.2.1Terminologyexplanation Transit is the flow of goods from an exporting country through one or many other countries' territory without commercially trading before their arrival in the importing country In Vietnam, according to the 2005 Commercial Law, "Transit of goods is the transportation of goods by foreign organizations and individuals through Vietnamese territory, this includes transhipment, relocation of shipments, storage, separation of shipments, change of mode of transport, or other work that is performed during the time of transit." Goods in transit refers to merchandise and other types of inventory that have left the shipping dock of the exporting country, going through one or many other countries' territory before arriving at the importing country Article 38 of the 1982 United Nations Convention on the Law of the Sea states: “Transit passage means the exercise in accordance with this Part of the freedom of navigation and overflight solely for the purpose of continuous and expeditious transit of the strait between one part of the high seas or an exclusive economic zone and another part of the high seas or an exclusive economic zone However, the requirement of continuous and expeditious transit does Document continues below Discover more from: International trade policy Trường Đại học… 381 documents Go to course 28 ANALYSIS OF VIETNAM'S… International trade policy 100% (4) ĐỀ CƯƠNG KINH TẾ 19 Chính TRỊ International trade policy 100% (4) 04.07.2021 Final Test TMAE302 International trade policy 100% (2) Package (Mỹ sửa lại theo ý Mỹ, bài gốc củ… International trade policy 100% (2) Cstmqt International trade policy 100% (2) Hợp đồng ngoại thương mẫu: Hợp… 49 not preclude passage through the strait for the purpose of entering,International leaving, or returning from a 100% (2) trade policy State bordering the strait, subject to the conditions of entry to that State.” 1.2.2Content Article 11 - Freedom of Transit in accordance with TFA was made to ease and expedite the movement of goods across countries, particularly for landlocked nations With this goal in mind, 17 regulations are introduced in the article as part of a measure, This measure aims to ensure the flow of traffic in transit by applying rules, regulations, and processes in a way that does not restrict trade, by getting rid of all formalities and regulations that are unnecessary, by outlawing any voluntary restraints on traffic in transit, and by ensuring that goods in transit are treated fairly Some key points to be taken from the measure introduced in Article 11 are (Organization, 2023): No Discrimination: Article 11 requires that goods (including means of transport) in transit should not be subject to any unnecessary delays or restrictions and should not be conditioned on any customs duties, charges, or any other imposition Most Favored Nation Treatment: Traffic in transit should receive treatment not less favorable than that accorded to the transit traffic of any other country This means, for instance, a country cannot discriminate against transit traffic from one country while favoring another Charges and Regulations: Charges and regulations tied to traffic in transit should be reasonable, having regard to the conditions of the transit They must be justifiable and not represent a disguised restriction on trade Infrastructure Maintenance: Charges can be imposed for transportation services or for the use of infrastructure related to transit, but they must be in proportion to the costs incurred, and should not represent a hidden trade barrier Non-discrimination in Transport: Member countries must permit the selection of means of transport and cannot favor one means of transport over another Advance Filing: For the purpose of speeding up transit procedures, countries can require that documentation and data be submitted in advance before the goods arrive Guarantees: Some countries require guarantees (like bonds) to ensure compliance with customs and transit requirements Article 11 states that these guarantees should not be higher than the duty/tax at risk, and once the goods have exited the country, the guarantee should be quickly discharged Delays and Blockages: In case of delays or blockages, member countries are supposed to provide for the temporary storage of goods in appropriate facilities, at the risk and cost of the parties involved In conclusion, Article 11 - Freedom of Transit in accordance with TFA addresses one of the primary pain points in international trade — the challenges of goods in transit By establishing clear rules, it seeks to reduce trade costs, increase predictability, and in essence, facilitate smoother and more efficient global trade It is particularly significant for landlocked countries, which often face challenges in accessing the global market due to their geographical constraints Implementation and evaluation of Article 11 in Vietnam 2.1ImplementationofArticle11 2.1.1InregardofVietnam’sgovernmentagencies The government has implemented a number of measures to carry out the freedom of transit in Vietnam (Article 11), such as enforcing circulars, decrees on Goods Export and Import management, or regulations on Commercial Law exercise in International Goods trading activity By signing the Trade Facilitation Agreement (TFA), the Vietnamese government demonstrated its willingness to alter and complete the Legal Framework in order to comply with the concluded Agreement It could be clearly seen that right after the ratification of TFA by the National Assembly of Vietnam (November, 2015), promulgated legal documents such as Circular No 247/2016/TT-BTC of the Ministry of Finance on charge rate, mode of charge, pay, manage, and use of customs fees and fees of commodities and vehicles, or Circular No 59/2018/NĐ-CP on April 20th, 2018 of the Government’s amendments and supplements some of provisions of Circular No.08/2015/NĐ-CP on January 21st, 2015 about details and measures on Promulgating Law on Customs of customs procedures, customs check, and customs examination Besides that, the government also prioritises technical investment, modern vehicles, and advanced technology in order to ensure efficiency in customs management; encourages organisations and individuals to participate in technology development and advanced means of technique to guarantee the application of effective customs administration methods A vivid example could be traced to the ASEAN Customs Transit System (ACTS) According to the system, all commodities transiting through ACTS across other member nations and imported into Vietnam must adhere to all management regulations applicable to imported goods related to Vietnam Organisations and individuals involved in Goods Export and Import activity are responsible for participating in the development and implementation of e-commercial transactions and e-custom procedures 2.1.2InregardofVietnam’sbusinessmen In the operation of trade, businessmen and export firms in Vietnam must not only comply with laws and regulations on transit of goods but also other related requirements In addition, Vietnamese traders also actively learn about the proclaimed regulations and commitments on freedom of transit through mass media and documents issued by the government area, where the flow of goods is strong and the economy is over 200% open, Vietnam was assessed by experts at the "Vietnam Logistics Forum 2022" on November 26 as having a lot of potential to develop logistics services but needing to solve the problems of policy, infrastructure, and human resources to make it a reality The implementation of Freedom of Transit provision can also help overcome these challenges and pave the way for further development The implementation of the Trade Facilitation Agreement entitles Vietnam to the opportunity to attract more foreign investment by reducing the costs of transporting goods into and out of the country Vietnam's economic and trade connections with other nations will be improved by the proper execution of the Trade Facilitation Agreement, which will encourage foreign investors to start paying closer attention to the Vietnamese market, making Vietnam a more competitive and attractive destination for businesses This creates the possibility of business establishment and investment collaboration between foreign investors and Vietnam Additionally, as customs procedures in Vietnam can be complex and time-consuming, which can discourage businesses from using Vietnam as a transit country, the implementation of the Freedom of Transit provision can optimise the process by ensuring the movement of traffic in transit through the application of the rules, regulations, and processes in a non-trade restrictive manner, eliminating all unnecessary regulations and formalities, prohibiting any voluntary restraints to traffic in transit, and securing a non-discriminatory treatment of the goods in transit As mentioned in the obligation of Article 11, once goods have been authorised to proceed from the point of origin in the Member’s territory to the point of culmination of the transit in that country Moreover, this Article specifies that the goods in transit will not be subjected to the requirements of the Agreement on Technical Barriers to Trade (TBT) d Threats Businesses have found loopholes in Article 11 so as to evade trade safeguard measures, as it states that “Members are required not to apply cumbersome requirements [ ] other than those [ ] identify the goods in transit [ ] and [ ] fulfilment of transit process requirements.” They have exploited this open policy during the inspection and control process for importing goods in transit to Vietnam for export to a third country, together with the long transit route, to engage in deceptive declarations, smuggling, and the fraudulent manipulation of origin information In addition, Article 11 also requires Members to “allow and provide for advance submission and processing of documents for goods in transit, ahead of the arrival of goods.” With the present electronic customs clearance system, companies can access information in advance about the selectivity of customs for their export and import shipments Consequently, they can efficiently manage and, in some cases, evade legal regulations (To Uyen, 2021) While combating counterfeiting at the international level is a mutual objective of most countries, achieving this objective should not be such as to give rise to potential conflicts with other international principles protecting free trade between Vietnam and other countries (Abdelgawad, 2018) Being in mutual agreements with many other nations can be an advantage for Vietnam, but it can also be a barrier for itself to effectively ratify Article 11 due to the lack of harmonisation Besides, the Freedom of Transit provision is uniform for every member of WTO that has accepted it, which can result in some situations where some changes are crucially needed for negotiation The financial sector in Vietnam may not be able to provide guarantees and other appropriate financial instruments to reduce the risk of transit trade The insufficient guarantees provide incentives to traders to stay in-country; ACTS/the need for guarantees might better equip the authorities to ensure that goods in transit leave the country (USAID, 2020) The reality is that Vietnam's objectives for global competition not prioritise facilitating foreign trade Therefore, creating a system for state management agencies and customs to coordinate while implementing TFA will be a significant problem in the future for Vietnam The environment is a concern when implementing Freedom of Trade provision According to Environment Magazine (VEM), Vietnam currently has over 1,700 transport vessels, along with nearly 130 fishing vessels, corresponding to a fuel consumption of nearly million tons/year It can be said that this is the source of infectious pollution in the sea, coastal areas, and many other places, causing death to the marine ecosystem, destroying the environment of marine resources, and endangering human health The implementation of the Freedom of Trade provision could lead to environmental damage in Vietnam, as it would increase the number of trucks and ships on the roads and waterways, worsening the already severe pollution problems and destroying the ecosystems 2.3.2Reasonsforlimitations As a small country, Vietnam is particularly vulnerable to external shocks and fluctuations in large countries’ trade policies, such as increasing tariffs and applying technical barriers to protect domestic production The US-China trade dispute has had a significant impact on the Vietnamese economy, especially in the context of Vietnam having joined most of the trade agreements and treaties related to tariff preferences This tariff wall renders Chinese businessmen unable to access the US market Therefore, Chinese businesses have sought avenues to “borrow origins” from countries that have not been subject to high or low tariffs by the US (Bach Hue, 2019) These fraudulent acts lead to the risk of Vietnamese export goods being investigated and subjected to anti-dumping, safeguard, and subsidy tariffs by foreign countries, causing damage to domestic producers and affecting the production and business activities of legitimate businesses Corruption can also be a problem in Vietnam, which can be a reason for limitations in the implementation of the Freedom of Transit provisions Despite recent improvements, corruption is still regarded as widespread throughout the nation, and Vietnam continues to lag behind other Asian nations in terms of both the management of corruption and the majority of governance metrics (Martini, 2012) Corruption leads to the misallocation of funds and resources, lags in project implementation, weakened border agency cooperation, and inefficient maintenance, while implementing Freedom of Transit requires substantial upfront investment, especially when it comes to transit-related infrastructure It might be suggested that Freedom of Transit is not prioritised by the Vietnamese Government, as this article is particularly beneficial for “landlocked countries and regions” (UNCTAD, 2020) As analysed above, Vietnam is located in a strategic position, with a coastline stretching from the South to the North and allowing international waters, together with a long border bordering many countries; therefore, the prioritisation of Article 11 would not be a sensible decision Vietnam may prioritise TFA articles that address its most pressing trade challenges or bottlenecks, including ones related to customs clearance, information availability, or reducing trade costs that have a more direct impact on everyday trade operations Recommendations for effective implementation of Article 11 on Vietnam’s trade Considering the above SWOT analysis and TOWS matrix (Heinz, 1982), our research team opts for the Weakness - Opportunity (WO) strategy, i.e., the defensive strategy, which involves countering weakness through exploiting opportunities, in combination with Strength Threat (ST) strategies, which involve leveraging strengths to minimise threats, in order for Vietnam government to effectively regulate and implement Article 11, on the basis of the following characteristics of Vietnam: Tobeginwith,Vietnam is a developing nation: Such countries often contend with deficits in infrastructure and administrative shortcomings (OECD, 2020) The adoption of WO strategies can empower them to harness existing prospects, such as foreign investment and market expansion, to rectify these weaknesses and stimulate economic advancement Secondly,Vietnam is a country in transition: Since the Doi Moi reform in 1986, Vietnam has undergone a gradual shift in institutions coupled with rapid economic expansion (Angelino et al., 2021) Nations navigating through political or economic transitions can benefit from WO strategies to effectively navigate uncertainties and exploit opportunities that arise during these transitional phases Thirdly, Vietnam is economically and politically stable: Countries with stable economies and strong institutions can use ST strategies to minimise threats from economic downturns or external shocks by leveraging their existing strengths to protect against these threats Vietnam's economy has demonstrated resilience even in the face of diverse crises The projection for GDP growth anticipates a decline to 6.3 percent in 2023, down from the percent observed in 2022, primarily due to a moderation in domestic demand and exports The trajectory of Vietnam's economic growth is poised to rebound to 6.5 percent in 2024, as domestic inflation is forecast to subside from 2024 onwards (World Bank, 2023) In the political stability index compiled by the World Bank for 2011 - 2021, Vietnam secured a ranking surpassing that of more than half of the world's nations Notably, it outperformed numerous Asian counterparts, including China, India, Indonesia, Thailand, and the Philippines Figure: Political Stability: Vietnam vs Asian Peers Source: World Bank 3.1ForVietnam’sgovernmentagencies Improveinfrastructure(WO) The government should set up separate physical infrastructure – including separate berths, lanes, and corridors – to facilitate traffic in transit “where practicable” This is clause in Article 11, stating that “due to its best-endeavour nature, Members are not obliged to enforce this specific provision; However, they are encouragedtodosoiftheyconsideritfeasibleonthebasis oftheirnationalresourcesandcapacities.” Feasibility: Considering only the internal resources available, this scheme can be deemed insensible However, with the opportunity of FDI attraction brought about by effectively implementing Article 11, Vietnam stands a great chance of directing and utilising these funding to further improve transit infrastructure Improveborderagencycooperation(WO) In accordance with the World Trade Organization (WTO) guidelines, achieving harmonious coordination among relevant national agencies plays a pivotal role in achieving success The WTO recommends that all these agencies collaborate closely to create a comprehensive inventory of existing documentation, procedures, operations, and infrastructure Additionally, engaging with the private sector to gain insights into identifying bottlenecks and critical problem areas is encouraged Feasibility: By adhering to the stipulations of Article 11, Vietnam has the opportunity to become a transit hub, thus strengthening diplomatic ties with other nations, particularly those sharing common borders This can open avenues for Vietnam to exchange information and expertise related to transit cooperation and potentially receive technical support from countries with more advanced technologies Focusontrainingandcapacitybuildingoftheborder-relatedofficials (ST) The opportunities presented by implementing Article 11 for Vietnam drive an increased focus on enhancing the quality of its human resources to meet international standards Consequently, the government should prioritise the provision of training in areas such as maintenance management systems, contracting, and other essential business skills Furthermore, Customs officers, recognized as pivotal figures in the nation's international trade landscape, are often at the forefront of dealing with the challenges associated with export activities, such as smuggling and commercial fraud, notably within anti-smuggling investigation units (Viet Khanh, 2019) Therefore, the government should place special emphasis on improving the ethical code of customs officers Feasibility: Vietnam’s one-party system and stable government leadership ensures that training and quality enhancement initiatives for government personnel can be efficiently implemented The government can rely on a stable source of funding to support its cadre training system Officials, in addition, experience a greater sense of security Therefore, when they perceive that the government values their professional development and invests in training opportunities, they are more likely to commit to continuous learning Settingupamonitoringsystemofregularreview(ST) The objective of this system is to guarantee that governments refrain from imposing voluntary constraints on transit traffic or introducing cumbersome new documentation and procedures, which would effectively aid in the implementation process (WTO, 2020) Feasibility: This strategy should be designated as a long-term aspiration Given that the establishment of a monitoring system demands resources encompassing technology, personnel,