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COMPREHENSIVE AND PROGRESSIVE AGREEMENT FOR TRANS-PACIFIC PARTNERSHIP (CPTPP)

The Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) was signed in Santiago, Chile, on 8 March 2018.

The CPTPP entered into force for Australia, Canada, Japan, Mexico, New Zealand and Singapore on 30 December 2018. The CPTPP entered into force for Vietnam on 14 January 2019. The CPTPP will enter into force for Brunei Darussalam, Chile, Malaysia and Peru 60 days after they complete their respective ratification processes.

Following conclusion of the agreement on 23 January 2018 in Tokyo, Japan, the CPTPP text was subject to a process of legal review, translation and verification. English, French and Spanish language versions of the legally verified CPTPP text were released on 21 February 2018. The CPTPP text is equally authentic in English, French and Spanish. In the event of any inconsistencies, the English text will prevail.

CPTPP  members commitment on reduction and elimination import duties in CPTPP are divided into three groups:

  • Immediate  elimination:  Import  duties  will  be  immediately  eliminated  while  the Agreement enters into force.
  • Elimination after a period of time: Import duties will be eliminated after a specific period of time. In CPTPP, most of tariffs will be eliminated after 3 – 7 years, nonetheless, in some cases, the period of time may reach 10 years. In a few special cases, a few tariff lines will be eliminated after more than 20 years.
  • Tariff quotas: import duties of such tariff lines will be reduced or eliminated within a specific quantity of imports. For the imports exceeding such quantity, import duties will be higher or not subject to preferential tariffs.

Commitments on import duties from CPTPP members for Viet Nam

CPTPP members will eliminate import duties of 97% - 100% tariff lines for goods originating from Viet Nam. Most of Vietnamese goods when imported into CPTPP members will be subject to import duties of 0% immediately when the Agreement enters into force.  Some preferential import duty commitments of CPTPP members are as follows:

  • Canada commits to eliminate import duties for 95% of tariff lines, which is equivalent to 78% of exports from Viet Nam to Canada when the Agreement enters into force. Of which, 100% of exports of seafood and wood furniture will be subject to import duties at 0% when the Agreement enters into force.
  • Japan commits to eliminate import duties for 86% of tariff lines, which is equivalent to
  • 93.6% of exports from Viet Nam to Japan when the Agreement enters into force, import duties of 90% tariff lines will be 0% after 5 years. In this Agreement, for the first time, Japan commits to eliminate import duties for most of agricultural and seafood products of Viet Nam.
  • Peru commits to eliminate import duties for 80.7% of tariff lines, which is equivalent to 62.1% of exports from Viet Nam to Peru when the Agreement enters into force and import duties of 99.4% tariff lines will be 0% after 17 years.
  • Mexico commits to eliminate import duties for 77.2% of tariff lines, which is equivalent to 36.5% of exports from Viet Nam to Mexico when the Agreement enters into force, and import duties of 98% tariff lines will be 0% after 10 years.
  • Chile commits to eliminate import duties for 95.1% of tariff lines, which is equivalent to 60.2% of exports from Viet Nam to Chile when the Agreement enters into force, and import duties of 99.9% tariff lines will be 0% after 8 years.
  • Australia commits to eliminate import duties for 93% of tariff lines, which is equivalent to 95.8% of exports from Viet Nam to Australia (about 2.9 billion USD) when the Agreement enters into force.  Import duties of other tariff lines will be 0% after a maximum of 4 years.
  • New Zealand commits to eliminate import duties for 94.6% of tariff lines, which is equivalent to 69% of exports from Viet Nam to Chile (about 1010 million USD) when the Agreement enters into force, and import duties of other tariff lines will be 0% after 7 years.
  • Singapore commits to eliminate import duties for all tariff lines when the Agreement enters into force.
  • Malaysia commits to eliminate import duties for 84.7% of  tariff  lines  when  the Agreement enters into force while other tariff lines will be subject to import duties at 0% after a period of time. After 11 years, 99.9% of tariff lines of Malaysia will be reduced or eliminated.
  • Brunei commits to eliminate import duties for 92% of tariff lines (about 7,639 tariff lines) when the Agreement enters into force. Import duties of 99.9% tariff lines will be 0% after 7 years and 100% tariffs will be eliminated after 11 years.

CPTPP provides three methods to determine the origin of a good, including:

  1. Wholly obtain
  2. goods manufactured from raw materials in the CPTPP areas,
  3. Product-Specific Rules of Origin (PSR)

Besides, the provision on accumulation regulates that Each Party shall provide that an originating good or material of one or more of the Parties that is used in the production of another good in the territory of another Party is considered as originating in the territory of the other Party.

Origin procedures

To facilitate trade, reduce transaction time and import and export cost, CPTPP allows exporters, producers and importers to certify origin themselves. This is a new provision which is not regulated in other FTAs signed by Viet Nam.

For Viet Nam, certification of origin by the importers has not been applied widely so Viet Nam can have a transitional period to help Vietnamese state agencies and enterprises get used to such methods. Some regulations on the transitional period are as follows:

  • For imported goods: Viet Nam reserves the right to apply certification of origin by the importers after 5 years of entering into force.
  • For exported goods: There are two methods which are applied flexibly: (a) certification of origin issued by a competent authority; and (b) certification of origin issued by an approved exporters within a maximum of 10 years. After 10 years, Viet Nam will apply only self certification of origin.

The CPTPP Agreement has a separate chapter on textiles. In addition to applying the same general regulations as other goods, textiles and garments have their own specific regulations.

For textiles and garments, the applicable rule of origin is “yarn-forward” or the so-called “3-stage” rule, meaning the entire spinning, weaving, dyeing, finishing and sewing process. Austria must be done within the CPTPP. This rule encourages the development of the supply chain of the textile industry in the vertical sector, encourages investment in the development of the yarn and fabric industry, creates opportunities for Vietnamese enterprises to participate more deeply in the supply chain within the CPTPP. .

Compared with previous FTAs ​​that Vietnam has signed, this is a rule that places high requirements. However, the members also agreed on some cases where there are more flexible rules of origin such as:

- 3 groups of garments with one-step rule of origin applied, cutting and sewing, including suitcases, bags, women's bras, synthetic fiber children's clothing;

- The short supply list includes 194 types of fibers and fabrics that are allowed to be used from outside the CPTPP area, of which 186 items will be permanently applied and 8 items will only apply this mechanism within 5 years.

The main contents of labor in the CPTPP Agreement

  • Regarding the issues related to the elimination of forced labor, child labor, and elimination of discrimination in labor, basically, the legal system of Vietnam is in accordance with ILO standards. and the Agreement's commitment. Vietnam has been implementing a number of national action programs to implement the above standards in practice. With regard to the commitment on ensuring working conditions related to minimum wages, working hours and occupational safety, the Vietnamese legal system basically provides for these contents. requirements for amendments and supplements.
  • Regarding the right to establish representative organizations of workers, according to the CPTPP Agreement and also in accordance with the provisions of the ILO, Vietnam and all countries participating in the CPTPP Agreement must respect and ensure the rights of workers. in the establishment and joining of organizations of employees at enterprise establishments.
  • The CPTPP Agreement as well as the ILO's regulations confirm that all labor organizations must comply with the Constitution and laws of the host country and according to ILO standards.
  • The CPTPP Agreement also contains provisions that protect the employee's organization from interference and discrimination by the employer in order to invalidate or impair the ability to represent and protect rights and employee benefits. This is also consistent with ILO regulations.

The CPTPP Agreement provides for 4 key obligations:

  • National Treatment (NT): The Member State must ensure that service providers in other CPTPP countries are treated no less favorably than domestic service providers.
  • Most favored nation treatment (MFN): A Member State must ensure that service providers of a CPTPP are treated no less favorably than service providers of other member countries or of any other any country or territory that is not a member of the agreement.
  • Market Access (MA): Member States are not allowed to maintain market access restrictions on foreign service suppliers. Restrictions on market access are classified into 5 categories as follows: (i) Restrictions on the number of service providers; (ii) Restrictions on the total value of transactions or assets; (iii) Restrictions on the total number of service activities or the number of services provided; (iv) Limits on the number of employees; and (v) Restrictions on the form of business establishment.
  • Local presence (LP): Member States may not require CPTPP service providers to establish or maintain a representative office or any form of company or require them to respond. Meet the requirements for permanent residence as a condition of the provision of the service.

Major Investment Obligations

In addition to the obligations of national treatment (NT) and most favored nation treatment (MFN) as in the field of trade and service, the Investment chapter of the CPTPP Agreement has some main obligations as follows:

  • Minimum standard of treatment: The countries commit to give foreign investors fair and adequate treatment when conducting criminal, civil or administrative proceedings. In addition, CPTPP countries need to ensure safety for foreign investors' investments in accordance with international law.
  • Deprivation of ownership: When it is absolutely necessary, for example, for public purposes, governments can take ownership of foreign investors. However, this must be done on a non-discriminatory basis and with adequate compensation for foreign investors, in accordance with the provisions of law and the obligations of the CPTPP Agreement.
  • Money transfer: Foreign investors are allowed to freely transfer their investment money or profits earned from investing activities. However, in some cases, governments of CPTPP countries may restrict this activity of foreign investors, for example for the purpose of capital control in the context of balance of payments crisis or crisis. health.
  • Do not impose "performance requirements" (PR): Countries are not allowed to maintain requirements that force foreign investors to fulfill in order to obtain investment licenses or enjoy investment incentives.
  • Does not impose personnel appointment requirements (SMBD): Countries are not required to require foreign-invested companies to appoint senior personnel of a certain nationality.

 

CPTPP Agreement outlines the rules and procedures in the contractor selection process, however, at a higher level of impartiality, openness and transparency. The main contents of the MSCP chapter include: Non-discrimination; Not using preferential measures for goods or domestic contractors; and Schedule of commitments to open the market MSCP determines the scope of the opening of each country.

Accordingly, Vietnam commits to open the door and comply with the following subjects:

  1. The Employer, or the Procuring Entity itself, is composed of entities listed in the offer as 21 central level agencies, and does not make a commitment to the bodies of the National Assembly, the Office of the State President, Supreme Court, Supreme Procuracy. For the Ministries of Transport and the Ministry of National Defense, Vietnam only committed to open procurement packages for certain types of goods and services, Vietnam also committed to open bidding for 38 non-business units. , including hospitals under the Ministry of Health, Vietnam Academy of Social Sciences, Academy of Natural Sciences, Ho Chi Minh National Academy of Politics and Administration, Vietnam News Agency.
  2. The opening threshold of bidding package is specified for each type of investor, including threshold for procurement of goods and services in general, and threshold for construction services procurement. For example, for central agencies, after 15 years of transition, the threshold for opening is 8.5 million SDR for construction and installation packages, after 25 years, the threshold for packages of goods and services is 130,000 SDR.

Particularly for 34 hospitals affiliated to the Ministry of Health, the opening threshold of the package is applied to a package of drug purchase for each hospital that has a contract duration of one year or more, or a procurement package. Contractor selection is organized by the Ministry of Health on behalf of hospitals. In case the hospital's drug procurement package has a contract performance period of less than one year, the opening threshold for this package is SDR 500,000. In case the package only includes a single drug, the opening threshold is 180,000 SDR.

  1. For goods, services and construction sectors to be purchased within the open scope, Vietnam only reserves the necessary contents, for example, to reserve the purchase of gasoline, a part of the drug market, and rice. Rice, books, newspapers, etc. The service section only lists the types of services open to contractors from CPTPP countries participating in bidding. Vietnam has also committed to open bidding for pharmaceutical bidding packages, however, the opening schedule is quite long, 15 years after the entry into force of the agreement, Vietnam has only opened up to 50% of the total contract value. bidding packages subject to adjustment. The types of drugs that Vietnam must give priority to allow bidding in the following order: Generic drugs in Group 1, generic drugs in Group 2, generic drugs in Group 3, generic drugs in Group 4, generic drugs in Group 5, until buy enough drugs at the opening percentages for that year.
  2. Members may also apply exclusions, exceptions and measures during the transition period. For example, Vietnam is excluded from bidding for the construction of martyrs' cemeteries, excluding petroleum purchases in the Goods and services section, excluding domestic purchases for consumption outside the territory, excluding packages for procurement of national reserve, procurement for the purpose of promoting health, welfare, socio-economic development of ethnic minorities, bidding packages for small and medium enterprises, bidding packages for security and defense reasons.

The CPTPP Agreement allows developing countries to apply a number of measures during the transition period. For example, within 5 years from the date of entry into force of the Agreement, Vietnam will not be subject to the dispute settlement mechanism related to its obligations under the GP Chapter. During this period, Vietnam only consulted with CPTPP countries with concerns about the implementation of its obligations.

Viet Nam is permitted to request, consider, apply or exercise any form of domestic preference during any phase of the contractor selection process within 10 years from the date of entry into force of the Agreement. including price incentives, up to 40% of the total contractual price of bidding packages under the scope of adjustment for each year; This rate will be reduced to a maximum of 30% from the 11th year to the end of the 25th year. Domestic preferential measures will be eliminated from the 26th year from the date the Agreement enters into force for Vietnam.

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