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Zone of Free Trade Agreement Signed by EAEU and Vietnam Takes Effect

Zone of Free Trade Agreement Signed by EAEU and Vietnam Takes Effect

10/6/2016

A Free Trade Zone Agreement signed by the Eurasian Economic Union and Vietnam took effect on October 5.

The most important provision of the agreement is the provision stipulating mutual abolition of trade duties. According to the document, Vietnamese party will abolish import customs duties not only in respect of 12% of goods (which are not considered by Russia among strategically important) from the range of products exported to the country. According to the agreement, Vietnam will undertake to abolish import customs duties charged on more than 59% of the items exported by the Union Member States immediately. Customs duties charged on another 29% of exported goods will be set to zero within the transitional periods ranging from 5 to 10 years.

The agreement stipulates that Vietnam should open its market for a whole spectrum of goods exported from the Union Member States, including products of the

- agricultural sector: beef, pork and poultry, processed meat products, canned fish, seeds, flour, dairy products, cheese, vegetable oil, feeds for animals, alcoholic products;

- industrial sector: precious stones, tires, asbestos, pipes, rolled iron, ships, mechanical equipment, electronic equipment, parts for cars, steel products, farm machinery, buses, cars, trucks, petroleum products.

The agreement promotes further diversification and intensification of turnover of goods traded in the free trade zone.

"The parties perceive the agreement as mutually rewarding and think that it will give our importers and producers using Vietnamese components in their production cycles a cutting edge. A simple average rate of duty charged on the goods imported from Vietnam to the Union Member States will drop to 2% by 2025. General conditions for the export of goods from the Union Member States to Vietnam will be no worse than the conditions for other Vietnam's key free trade partners, which means that producers from EAEU will be more competitive in this market. At the same time, the rates of duties charged on majority of important for our common market goods will remain unchanged. The agreement does not require us to decrease customs duties we charge on meat, milk, tea, coffee, sugar, pipes, aircrafts and cars," said EEC Minister in charge of Trade Veronika Nikishina.

The agreement sets forth the mechanisms of protection against unfair competition and uncontrolled increase of the volume of imports. The agreement also stipulates that in case Vietnam exceeds the maximum allowed volume of exports established for certain light industry goods, a "triggering" mechanism implying the application of a tariff shelter will be applied. Another protective mechanism in a form of bilateral protective measures (allowing to raise the duty rates to the level outlined in the Common Customs Tariff) will be applied in case the volume of incoming goods (increased during the transitional period and due to the free trade regime) puts at risk the respective industry of the EAEU. By today, EAEU has already developed a viable procedure allowing to promptly apply protective mechanisms whenever necessary.

The document also sets forth explicit criteria for the identification of the origin of exported goods and outlines a compliance monitoring procedure. In order to implement the measures described above, integrated mechanisms of administrative collaboration and information exchange between the monitoring services of the countries trading in the free trade zone are being developed. Verification procedures are also being introduced.

In addition, the agreement stipulates how the parties should cooperate in the domains of protection of intellectual property rights, sustainable development, e-commerce and government procurement. It sets forth common principles regulating the protection of competition.

The agreement also covers the trade in services and investment cooperation. However, the latter provisions apply only to the relations between Russia and Vietnam. Other countries of the Union can accede to these covenants at a later time.

According to the expert assessments, EAEU exporters could save almost $40 million dollars as a result of abolition of duties and decrease of duty rates in the first year of the agreement. After the completion of all transitional periods, the annual effect from the agreement should reach $55-60 million.​