EVFTA to benefit European beverage exporters

Under the EU-Vietnam Free Trade Agreement (EVFTA), which is expected to be signed later this year and take effect in 2019, Vietnam will eradicate or ease the limitations in manufacturing beverages, wine and spirits. The country has also gradually removed the existing 45% import tariff for spirits that it had inflicted on items sourced from the EU.

The tariffs for wines and spirits will be annulled after seven years upon the EVFTA’s entry into force, and champagne will be fully protected after a transitional period of 10 years. Meanwhile, the tariff for European beer will follow suit after 10 years.

According to the Ministry of Industry and Trade, wine and spirits are special items that can affect human health, thus they will need a long time to be totally duty-free when entering Vietnam.
Many European enterprise associations and firms such as spiritsEurope, the Scotch Whisky Association (SWA), and France’s Pernod Ricard have both welcomed the EVFTA.
Jean Rodesch, vice president of Government Affairs and Corporate Social Responsibility of Pernod Ricard, which is the world’s leading producer of high-grade spirits, recently flew to Vietnam to seek business opportunities.

The firm is preparing to engage more in Vietnam, where demand for spirits and wine are growing strongly. The EVFTA will enable the firm to do bigger business in Vietnam, said Rodesch.
Pernod Ricard is now operating more than 85 branches and 100 production workshops worldwide. Its revenue in 2015 totaled over EUR8.5 billion (US$9.02 billion).

A representative from spiritsEurope, which represents producers of spirit drinks at the EU level, said that Vietnam is a high growth market for European spirits producers. The country witnessed a 730% climb in exports over the last decade, from EUR5 million (US$5.3 million) in 2004 up to EUR42 million (US$44.6 million) in 2014.

Imported products currently account for only 19% of Vietnam’s beverage market, and the EVFTA will lift the barriers that have been an obstacle to grow EU market share, said the representative, who recently came to Vietnam to work with the local government and distributors and firms to seek co-operation.

The Wine and Spirit Trade Association (WSTA), representing more than 340 enterprises in the United Kingdom, is also expecting to boost its British gin exports to Vietnam. WSTA said the removal of the existing import tariff will put imports closer to a level playing field with local products. At present, as much as 80% of spirits consumed in Vietnam are vodka, and 95% of which are locally produced.

Italy’s Alleanza delle Cooperative Mercuri - which occupies over 50% of Italy’s national wine output, and wine maker M.G.M Mondo del Vino S.r.l, as well as Portuguese wine producer Real Companhia Velha, also want to do the same as Pernod Ricard in Vietnam via slashed tariffs under the EVFTA.

Representatives of these three enterprises have worked with Vietnam’s agencies and enterprises on plans to import wine into the country under long-term contracts.

However, at present, under Vietnam’s Law on amending a number of articles of the Law on Special Consumption Tax No.70/2014/QH13, which took effect on January 1, 2016, all wine and spirit products in Vietnam are subject to high special consumption tax (SCT) levels.

Vietnam has increased SCT for alcoholic beverages by 5% annually, from 2016 to 2018. Taken together, the new regulations will make imported alcoholic beverages much more expensive.

Specifically, the SCT for alcoholic beverages containing 20% alcohol by volume or more (mainly spirits) was raised to 55% from January 1, 2016, to 60% from January 1, 2017, and to 65% from January 1, 2018.

These tax hikes have also been applied to beer. SCT for alcoholic beverages containing less than 20% alcohol by volume has been raised to 30% from January 1, 2016 and to 35% from January 1, 2018.