Group project topic planning to export robusta coffee from vietnam to italy

Production situations Vietnam is one of the world's largest producers of Robusta coffee beans, and theproduction situation of Robusta beans in Vietnam has been significant for several ye

VIETNAM MARITIME UNIVERSITYINTERNATIONAL SCHOOL OF EDUCATION

GROUP PROJECT TOPIC: PLANNING TO EXPORT ROBUSTA COFFEE FROM VIETNAM TO ITALY

COURSE: INTERNATIONAL BUSINESS II INSTRUCTOR: MSc LUONG THI KIM OANH

TABLE OF CONTENTS

2.2.1 Barriers about Technical barriers to trade (TBT) and Sanitary and

2.2.2 Barriers to satisfying rules of origin 11

2.3 Solutions to help meet non-tariff requirements to help promote coffee

PART 1 POTENTIALS OF EXPORTING/IMPORTING1.1 Exporting market

1.1.1 Production situations

Vietnam is one of the world's largest producers of Robusta coffee beans, and theproduction situation of Robusta beans in Vietnam has been significant for several years.Vietnam consistently ranks as one of the top Robusta coffee producers in the world Thecountry's Robusta coffee production has been on the rise for many years, with annualproduction often exceeding 1 million metric tons Vietnam's climate and geography arewell-suited for Robusta coffee cultivation The Central Highlands, which includesprovinces like Dak Lak, Gia Lai, and Kon Tum, is the primary region for Robusta coffeeproduction The region's highlands have the right altitude, rainfall, and temperatureconditions for coffee cultivation

Robusta coffee exports account for the largest proportion, accounting for 76% of exportturnover in 2022, reaching 1.35 million tons, worth 3 billion USD, an increase of 14% involume and an increase of 34% in value compared to compared to 2021 The 2022Import-Export Report recorded that coffee exports reached 1.78 million tons, worth 4billion USD, an increase of 13.8% in volume and an increase of 32% in value compared

to 2021 Price The average export for the whole year 2022 will reach about 2,282USD/ton, an increase of 16% compared to 2021

The majority of coffee exports nearly 40% of overall exports in 2022, valued at 1.49billion USD go to the EU market This represents a 45% increase in value over 2021.Specifically, the volume of coffee exported climbed dramatically to a few countries:Belgium saw a 130.5% increase, Spain saw a 90.9% increase, the Netherlands saw a170.9% increase, France saw a 104.6% increase, and Portugal saw a 43.5% increase Thevalue of coffee exports to the Japanese market increased by 22.6% to $277.6 millionUSD from 2021 to 2022

The General Department of Customs reports that, in May 2023, Vietnam's coffee exportsreached 150,000 tons, valued at 384.69 million USD—a decrease of 3.5% in value and8.5% in volume Price increased by 5.1% in volume and 18.6% in value when compared

to May 2022, but not when compared to April 2023

Coffee exports totaled 866,000 tons in the first five months of 2023, valued at over 2billion USD This represents a 3.9% decrease in volume and a 0.4% decrease in valuewhen compared to the same period the previous year The price of coffee exported hasincreased dramatically Vietnam's average coffee export price in May 2023 was 2,570USD/ton, up 12.8% from May 2022 and 5.4% from April 2023 Vietnam's averagecoffee export price in the first five months of 2023 was 2,323 USD/ton, a 3.3% increaseover the same period the previous year

Over the same time period, coffee exports to Italy, the US, Russia, and the Netherlandsclimbed while shipments to Germany, Japan, Spain, and Russia fell

Page 2

1.1.2 Crop seasons

- Main Harvest Season: The main Robusta coffee harvest season in Vietnam typicallytakes place from October to December This period is known as the primary or main cropseason

- Off-Season or Minor Crop: After the main harvest season, there is often a smaller,secondary harvest season, which is sometimes referred to as the off-season or minorcrop This usually occurs from April to June, and the volume of coffee produced duringthis period is lower than the main harvest

1.1.3 Techniques

Vietnam has recorded a steady increase in the coffee export market in recent years Tomaintain that stable development, coffee farms must also be equipped with advancedtechnology along with innovative farming techniques To increase productivity duringthe harvest season, coffee growers have applied automatic coffee harvesters, which helpscut production costs compared to traditional methods that use a lot of labor

Drip irrigation system with artificial intelligence is also included This technology readsmoisture levels, indicating when to add water and fertilizer at the appropriate dose.Thai Anh Tuan, manager of one of Simexco's three warehouses in Vietnam, whichexports over 80,000 tons of coffee annually, also observed a consistent rise inVietnamese coffee exports in recent years, but with an increasing use of cutting-edgefarming practices, such as intercropping various crops and utilizing new irrigation andfarming technologies

Vietnamese coffee capital Dak Lak province's Ksor Tung, a grower on a 10-hectareproperty, claims that intercropping coffee with durian trees improves crop protectionfrom the sun directly and pests, bringing in more profit

1.1.4 Export volume/value, export markets:

Figure 1.1: Vietnam’s coffee export volume and value, 2018-2020

(Source: The Ministry of Agriculture and Rural Development (MARD)

Page 3

Vietnam exports 1.5–1.8 million tons of goods annually, with a projected value of $3billion Germany, the US, and Italy are the three countries that purchase the most coffeefrom Vietnam; in the first 11 months of 2020, their respective shares of Vietnam's coffeeexports were 12.8%, 9.3%, and 8.4%

As of 2020, the Ministry of Agriculture and Rural Development's Agro-Processing andMarket Development Authority anticipated that the world's coffee market would generateUS$2.66 billion in revenue, or 1.5 million tons of coffee

Figure 1.2: Types of coffee exports of Vietnam

(Source: Agency of foreign trade)According to the Agency of Foreign Trade, the amount of Robusta coffee exported inJuly was close to 150 thousand tons, valued at 295 million USD This is a 33.6%increase in value and a 3% increase in output over January 2021 In the meantime,production fell by 3.6% and value fell by 1.7% as compared to December 2021.Vietnam is expected to export 293 thousand tons of coffee in the first two months of

2022, valued at 674 million US dollars This represents a 3.4% increase in volume and a37% increase in value over the same period in 2021 The average export price ofVietnamese coffee is anticipated to be 2,299 USD/MT, an increase of 31% over the sameperiod in 2021

The EU (Germany, Belgium, Italy, Spain, Netherlands), the UK, Russia, the USA, andthe Philippines are the top export destinations for Vietnamese Robusta coffee, according

to data from the General Department of Vietnam Customs The product is sold to over 60countries and territories overall The German, Italian, and British markets saw a notableincrease in the export of Robusta coffee

1.2 Importing market

1.2.1 Consumption situations

Robusta coffee, known for its strong and bold flavor, is commonly consumed in Italy invarious situations While Italy is more renowned for its espresso culture and the use ofArabica beans, Robusta coffee has its own niche in the Italian coffee scene

Page 4

According to data from the European Statistics Agency, in the first 11 months of 2022,Italy imported coffee from the world reaching 653.41 thousand tons, worth 2.28 billionEUR (2.43 billion USD), an increase of 10,000 tons, 5% in volume and 69.7% increase

in value compared to the same period in 2021

Italy's coffee imports from Vietnam in the first 11 months of 2022 increased by 16.4% involume and 80.4% in value compared to the same period in 2021, reaching 139.56thousand tons, worth 324.22 million EUR (345.36 million USD)

Vietnam's coffee market share in Italy's total imports from the world increased from20.28% in 11 months of 2021 to 21.36% market share in 11 months of 2022

1.2.2 Demand volume/value, import markets

Leading Vietnamese coffee consumption in the first 6 months of 2020 is Germany withover 228 million USD, equivalent to more than 151 thousand tons; Next, the US spentnearly 143 million USD importing nearly 79 thousand tons of Vietnamese coffee.Besides, Italy, Spain, and Japan are markets that spend over hundreds of millions ofdollars to import coffee from our country

Figure 1.3: Top 10 coffee import markets in the first half of 2020

(Source: Data from the General Department of Customs)

Figure 1.4: Structure of coffee types imported by Italy

Page 5

(Source: Calculation from data of the General Department of Customs)The proportion of Robusta coffee imports increases from 93.32% in the first 9 months of

2022 to 96.29% in the first 9 months of 2023 On the contrary, the proportion of Arabicacoffee imports and processing decreased from 5.52% and 1.16% in the first 9 months of

2022 to 2.56% and 1.15% in the first 9 months of 2023, respectively

Vietnam's coffee market share in Italy's total imports from foreign markets increasedfrom 22.7% in the first 8 months of 2022 to 26.64% in the first 8 months of 2023.Figure 1.5: Coffee imports from the EU outside the EU in the period of 2023

(Source: Calculated from the European Statistical Office)

The European Union and the United States are the two largest coffee consuming markets

in the world Therefore, the reduction in coffee imports from these two markets will have

a negative impact on the world coffee industry However, coffee imports from Vietnaminto these two markets have been growing positively in recent times, especially in thecontext of the EU's coffee consumption preferences shifting to Robusta specialty coffee

Page 6

According to the European Statistics Agency, in the first 4 months of 2023, the EUimported coffee from the world to 6.38 billion EUR (equivalent to 7.1 billion USD),down 1.7% over the same period last year Meanwhile, the EU sharply increased coffeeimports from Vietnam, up 34.1%, reaching 540 million USD (equivalent to 601 millionUSD) Vietnam's coffee market share in the EU's total coffee import value from theworld accounts for 8.46% in the first 4 months of 2023.

Page 7

PART 2 TRADE BARRIERS2.1 Tariff Barrier

On June 30, 2019, the European - Vietnam Free Trade Agreement (EVFTA) was signed

in Hanoi, marking a historic milestone in the partnership between the two economies.The European - Vietnam Free Trade Agreement (EVFTA) took effect on August 1, 2020.The EVFTA has had certain impacts on Vietnam's coffee exports to the European Unionmarket For Vietnam's exports, as soon as the Agreement comes into effect, the EU willeliminate most of the tariff barriers while the non-tariff barriers remain

2.2 Non tariff Barrier

In the global coffee export market, Vietnam has long been a familiar name Vietnamesecoffee is primarily grown in the Central Highlands, an area with a climate and soilconditions highly suitable for coffee cultivation Furthermore, the quality of Vietnamesecoffee is also gradually improving to enhance its value The European Union is thelargest consumer market for Vietnamese coffee, accounting for 40% of the total volumeand 38% of the export turnover of the entire country The countries with significantimport shares and market presence for Vietnamese coffee in the EU include Germany,Italy, Belgium,

The EU is regarded as the world's major import market with stringent standards in thedeveloped countries' markets Two basic condition must be met for Vietnamese exports

to the EU to be eligible for this preferential tariff benefit Firstly, the goods must complywith the necessary market requirements, which include Sanitary and PhytosanitaryMeasures (SPS) and Technical Barriers to Trade (TBT), and secondly, the product mustadhere to origin regulations

2.2.1 Barriers about Technical barriers to trade (TBT) and Sanitary and Phytosanitary

a) Measures (SPS)

While countries are increasingly removing tariff barriers, they have also strengthenednon-tariff trade barriers, such as sanitary and phytosanitary measures and technical tradebarriers According to EVFTA, The EU imposes extremely strict standards onVietnamese exports, including coffee

Previously, the EU's basic tax rate on Vietnamese coffee was within the range of 11.5% According to EVFTA's commitment, 100% of tariff lines on coffee wereeliminated immediately after the Agreement took effect Implementing EVFTAcommitments, not only products such as green coffee beans or coffee pods and skins, buteven processed coffee will have their tax reduced immediately to 0%

7.5%-b) Technical Barriers to Trade (TBT)

Technical Barriers to Trade (TBT) are expressed in the form of mandatory technical

Page 8

measures to ensure safety, hygiene, human health, animal protection, flora, andenvironment; protect the interests and national security, the interests of consumers Theform of technical measures is very diverse For example, it can be requirements forquality, packaging, packaging process, means and means of transportation of plants andanimals, quarantine, sampling methods, and statistics, …

- Quality standards

EU standards are developed according to the standards of the United Nations EconomicCommission for Europe (UNECE) and the Codex Standard (Codex Alimentarius).Imported coffee varieties must comply with common market standards Productsconforming to UNECE standards will be considered to be in line with market standards.Market standards include regulations regarding minimum quality, grading, sizing,packaging, and marking In addition, a certificate of conformity issued by an officiallyrecognized testing body is also required

To meet these standards, coffee must be produced and processed using strict methodsand processes from planting to harvesting, processing and packaging the product

In addition, other standards such as hygiene, food safety and quality are also highlydemanded Coffee exported to Europe must be free of toxic substances and bannedchemicals, but still ensure good flavor and quality

- Regulations on plant quarantine

The EU has regulations on the quarantine of plants and plant products from outside the

EU to protect crops from harmful organisms such as pests and diseases Regulation No.2005/15/EC11 of 28/02/2005 regulates packaging and wooden lining material based onISPM15 requires that packaging materials for plants or plant products made from woodshould also not contain pests The new EU Plant Health Act 2016 No 2016/203112October 26, 2016 updated in 2019 establishes more control measures on the importation

of plants and plant products

Accordingly, all live plant products require phytosanitary certificates and are subject tomore stringent pest regulations Phytosanitary requirements apply at the time of shipmentinto the EU This means that pests that can enter the product during transport areconsidered non-compliant and the product cannot enter the EU

- Plant health control

Crops and plants with the potential to harbor pests (e.g in wood, soil, tubers, etc.) mustqualify according to the protections of EU Regulation No 2019/207225, dated 28November 2019 updated in 2021

- Packaging

Page 9

Standards for packaging, labeling, preservation and transportation are also specified inTCVN 4913:2005 and cited from TCVI 1279:1993:

- Coffee is stored in woven bags made of soaked jute or in specialized containers

- The bag must be firmly woven and sewn, not loose, punctured or broken when notcontaining, transporting and preserving coffee The bag must be uniform in color, dry,clean, and free of strange odors

- The net weight of each bag of coffee is 60kg ± 0.18kg but the average weight of eachbag when checked is not less than 60 kg

- If goods are shipped by container, the container size must match the standard size of themeans of transport or according to the customer's request Containers must be tight anddurable and not deformed during loading, unloading and transportation

- The container is made of odorless material, has good moisture insulation and does notcontaminate the coffee

- Net and gross weight;

- Name and address of the place of import;

- Shipment symbols and instructions when requested by customers

- Letters and numbers printed on the label must be clear On jute bags, dark ink must beused Paint must be used on containers

- In a shipment, labels must be printed in the same color, letter color, and model number.c) Sanitary and Phytosanitary Measures (SPS)

SPS are all regulations, conditions, and requirements required for imported goods toprotect the life and health of people, animals, and plants, through ensuring food safetyand/ or preventing the entry of diseases of plant and animal origin As developedcountries, EU members (including Italy) pay great attention to SPS measures and setvery high standards for imported goods This is one of the most difficult barriers forVietnamese goods, especially agricultural products to access the EU market

- Regulations on food safety and hygiene

Page 10

When it comes to food products such as coffee, the main focus in European Unionlegislation is on food safety and food hygiene.

Businesses need to identify risks in their supply chains, show how to prevent orminimize and monitor these risks, as well as what to do if something goes wrong Thedevelopment of a Hazard Analysis Critical Control Point (HACCP) plan can be done incoordination with training experts specializing in the implementation of foodmanagement principles

Another strategy to ensure food safety as a producer is to follow good agricultural

practices The main standards in this field are provided by GLOBALG.A.P

- Contaminant control in food

Contaminants are substances that are not intentionally added to food but can be present

as a result of various stages during production, packaging, transportation, or storage Toavoid negative impacts on food quality and risks to human health, the EU has set limitsfor certain contaminants EC Regulation No 1881/200623, 19/12/2006 updated to 2022,establishes maximum concentrations for certain contaminants in food to be permitted forimport into the EU market Regulations on concentrations of toxins, heavy metals, PCBs,PAHs, 3-MCPD, melamine, erucic acid, and nitrates are determined by commodity and

by season

2.2.2 Barriers to satisfying rules of origin

The government often does not allow unrestricted imports for all types of products.Instead, certain products are subject to import restrictions and specific regulations.Importation is typically controlled and governed by the government through the issuance

of import permits Businesses can only import specific goods after being granted importpermits by the government However, for products that the government wishes to control

or restrict, permits may not be issued or may be issued in limited quantities to businesses

To get benefit from preferential tariff rates under the Vietnam-European Union FreeTrade Agreement (EVFTA), goods imported from Vietnam into the EU market mustcomply with strict rules of origin as stipulated in the EVFTA Generally, to qualify forpreferential tariffs, the raw materials used in the production of goods must meet a fixedpercentage of domestic content (originating from both the EU and Vietnam) However,many Vietnamese export-oriented businesses still rely on imported raw materials fromChina and some other Asian countries Consequently, compliance with the rules of origin

in the EVFTA poses a significant challenge for Vietnamese enterprises

2.3 Solutions to help meet non-tariff requirements to help promote coffee exports from Vietnam to Italy

Vietnamese goods must overcome many barriers that are challenging for the EVFTA toresolve in order to be exported to the EU market in general and Italian in particular.These barriers include the EU's mandatory import regulations and procedures, which

Page 11

include rules on pesticide residues, food hygiene and safety standards, and environmentalprotection labeling and packaging Extra criteria from German importers include socialand environmental credentials, as well as certificates for food safety and cleanliness.Therefore, Vietnamese enterprises need to take the following actions in order to gainentry to the Italy market:

a) Actively participate in coffee processing and export associations

Vietnamese coffee exporters, mainly small and medium enterprises, face challenges inaccessing information, policies, and applying technical standards Vicofa Coffee andCocoa Association The association is the channel of communication and informationcapture between the government and businesses Participation in associations like Vicofa

is vital, providing support, updating international standards, and resolving disputes.These associations serve as a bridge between the government and businesses, helpingaddress issues related to export standards and practical limitations They also facilitatethe exchange of information on new standards, allowing businesses to proactively planfor compliance with international requirements

b) Innovating processing technology to provide products that meet internationalstandards in general and EU and Italian standards in particular

A problem facing Vietnam's coffee exports is that coffee is mainly exported in raw form,and the tax on raw coffee to the EU is very low (specifically, coffee beans) On thecontrary, the EU's non-tariff barriers on this product are increasingly strict and complex.Therefore, the optimal solution to overcome this barrier is to invest in a moderntechnology chain system, apply appropriate management systems such as HACCP, ISO10470:2004, An effective measure is Invest in acquiring technology lines, transferringtechnology or purchasing licenses from businesses operating in the same field in the EUmarket to obtain a similar technology level This will ensure that we can create productsthat are completely suitable for the EU market in general and the Italian market inparticular In fact, the price of technology imported from the EU is very high, so not allbusinesses can afford it Therefore, to import these technologies, it requires cooperationfrom businesses and help from the government

c) Proactively apply EU import regulations for coffee

Developing technical standards and harmonizing the technical standard system to complywith EU regulations is not something that can be done overnight Therefore, in theimmediate future, businesses must proactively engage with EU standards and apply theseregulations This contributes to promoting exports to the EU and expedites theharmonization process of technical standards in Vietnam Because the current problem isthat there are standards, appropriate standards, compatible with world standards, but theapplication and implementation of these standards by businesses is very limited Theimplementation of these regulations is transparent Some specific solutions are as follows:

Page 12