Grasping advantages from UKVFTA, but tuna exports still face difficulties due to lack of empty containers

The free trade agreement between Vietnam and the United Kingdom and Northern Ireland (UKVFTA) effective on December 31, 2020 has created advantages for seafood exporters of Vietnam, including tuna enterprises. However, transportation costs are on the rise due to the lack of empty containers.

Advantage from UKVFTA

According to statistics of Vietnam Customs, in the past 5 years, the UK has always been one of the 17 largest tuna export markets of Vietnam. But in 2020, Vietnam's tuna exports to the UK have not been as expected. The value of Vietnam's tuna export to this market for the whole of 2020 reached nearly US$7 million, down 2% compared to 2019.

According to experts' analysis, the cause of the decline was the impact of the Covid-19 pandemic and the exit from the European Union (EU) changed the consumption behaviour of British people.

Currently, Vietnam exports mainly fresh and frozen tuna to the UK, especially frozen tuna meat/fillets with HS code 0304, accounting for 88% of the total tuna export value to this market. Compared to 2019, the export of this product group from Vietnam to the UK decreased, while the export of canned tuna increased.

According to the Vietnam Association of Seafood Exporters and Producers (VASEP), despite the growth, the value of Vietnam’s canned tuna exported to this market was still very modest.

Therefore, the fact that Vietnam signed a free trade agreement with the UK and this agreement officially came into effect from 23:00 on December 31, 2020 has created advantages for Vietnam's seafood export enterprises. including tuna enterprises.

By 2020, although the UK has left the EU, Vietnam's tuna exports to this market still enjoyed tax under the EVFTA until December 31, 2020. After this time, Vietnamese tuna products exported to the UK would no longer enjoy tax incentives, if Vietnam did not have a free trade agreement with the UK.

In addition, VASEP said that according to the statistics of the International Trade Center (ITC), the UK was the sixth largest importer of canned tuna in 2020. For many years, the UK was also the largest canned tuna importer in the EU.

According to ITC statistics, Vietnam was the 11th largest supplier of tuna outside of the EU to the UK market, after Thailand, the Philippines and Indonesia. All three countries had not signed a Free Trade Agreement with the UK, so this would be an advantage for Vietnam. It is expected that, according to the commitment in the UKVFTA, the UK will exempt tax on Vietnamese tuna products within the quota of 1,566 tons per year.

Crisis of lack of empty containers

Tuna exporters are currently facing huge obstacles due to the shortage of containers, causing tuna exporters to worry about soaring shipping costs.

According to Mr. Nguyen Xuan Nam, Chairman of Hai Vuong Company Limited (HAVUCO), the current price of a 20-foot container was between US$7,000 - 8,000, 3-4 times higher than the usual price. This company usually exports canned tuna (and other tuna products) to markets such as the Middle East, Africa, EU, Canada, and the US.

With the current container crisis situation, this company is facing delays in delivery and loss of freight. There was a time when the company accepted high rates but then still did not have empty containers for delivery.

Another manufacturer of canned tuna said its company was facing a cost increase of three times compared to November. Currently, the cost of a 20-foot container filled with cargo to be shipped to the EU was around US$6,000. The lack of empty containers had also caused the company to delay deliveries and it might take several months before regaining balance.

The markets have a high level of inventory so there is no shortage of raw materials, but this situation is expected to change in the second quarter. The current container crisis is unlikely to abate and exporters will have to overcome this wave of price increases.

Source: Customs News