Tiểu luận assignment vjepa technical barriers to lychees’ exporation and its challenges

UNIVERSITY OF ECONOMICS, HCMC
Department of International Business – Marketing

ASSIGNMENT: VJEPA - TECHNICAL BARRIERS TO
LYCHEES’ EXPORATION AND ITS CHALLENGES
Lecturers: Nguyen Huu Loc
Student: Tran Thi Minh Thu
Course: 45 – KM001
ID: 31191025084
INTRODUCTION
Over the past few years, Japan has been one of the most important partners of Vietnam. After the
Vietnam – Japan Economic Partnership Agreement (VJEPA) was signed, it has created a great
opportunity for Vietnamese goods to be exported to Japan in general and agricultural products in
particular. Especially when the demand for Japanese agricultural products is increasing, this can be
seen through special incentives for agricultural products in the VJEPA. Agricultural products for export
is currently one of the items with increasing export turnover and accounting for a large proportion of
the items being exported to Japan. However, Japan is a rather difficult market with strict requirements
for the purpose of ensuring health, hygiene and the environment. Therefore, for Vietnam's agricultural
products to meet the strict requirements of the Japanese market is not an easy thing for Vietnamese
agricultural production. Recently, Vietnamese agricultural products have made a great leap forward,
which is the conquest of technical barriers and the success in exporting lychees to Japan. The following
assignment discusses the process of bringing lychees to Japan as well as the opportunities and
challenges of the lychees market in particular as well as the agricultural market in general of Vietnam.

KEYWORD
VJEPA: Vietnam – Japan Economic Partnership Agreement; Tariff barriers and Non-tariff
barriers; TBT: Technical Barriers to Trade; Lychees exportation; Opportunities and challenges.

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Table of Contents
1. RESEARCH PROPOSAL............................................................................................................. 3
2. THEORIES....................................................................................................................................... 3
3.
ITS

VJEPA & TECHNICAL BARRIERS TO LYCHEES’ EXPORTATION AND

CHALLENGES..............................................................................................................................

3.1. About the lychees market and its importance to the ec

3.2. Vietnam - Japan Economic Partnership Agreement (VJ

3.3. How did Vietnam enter successfully one of the toughes
3.3.1. Certificate of origin lychees....................................................................................

3.3.2. Requirements for garden
3.3.3. Requirements for the fresh lychees to export........................................................

3.3.4. Customs duties................
3.3.5. The lychees’ exportation process after accepting the Japanese’s approval........

3.4. Opportunities and challenges of Vietnam after the lych

3.5. Conclusion........................................................................
4. REFERENCES.....................................................................................................................

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1. RESEARCH PROPOSAL
Research overview of trade barriers in general and technical barriers for agricultural products in
particular, particularly lychees; research on market characteristics of agricultural products of the two
countries Vietnam - Japan; the journey of Vietnam overcomes technical barriers to bring lychees to
conquer the Japanese market, thereby drawing opportunities and challenges for agricultural export.
Based on the results of such research to propose solutions in the coming time to increase the value of
exports as well as improve the quality and position of Vietnamese agricultural products in the Japanese
market in particular and international market in general.

2. THEORIES
Striving for global free trade is the goal of many countries around the world. However, in
today's international trade, in order to enter a market, enterprises need to overcome two types
of barriers, namely: Tariff barriers and Non-tariff barriers.
Technical Barriers to Trade (TBT) is a form of trade protection through the fact that importing
countries have standards for goods imported into the country. If imported goods do not meet
one of the given standards, they are not allowed to be imported into the importing country.
The main technical barrier is the quality and safety criteria for consumers of goods that
countries put in place to limit the importation of goods into their country. Technical barrier is a
very important measure and used by many countries. Countries applying technical barriers
often impose very strict and insurmountable regulations on quality and technical standards of
goods. Market requirements for imported goods can be divided into the three basic categories:
•

Quality standards and specifications of the product

•

Standards of food hygiene and safety for users

•

Environmental standards

World trade faces many obstacles and difficulties because countries have in turn set up technical
barriers to protect the domestic market, hindering the development of free trade. And these barriers
actually do great damage to countries when they encounter them thereby leading to retaliation between
countries that distort international trade. Due to their diverse and flexible forms, technical barriers have
a very wide range of influence. Once the importing countries use technical barriers, the exporting
countries will face many difficulties: declining exports,

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destroyed or returned goods, causing great losses for these countries. In fact, there have been
many cases of world trade being hindered and damaged by encountering trade barriers.

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VJEPA - TECHNICAL BARRIERS TO LYCHEES’ EXPORTATION AND

ITS CHALLENGES
3.

Vietnam has become the second largest exporter of lychees in the world, accounting for 19 per cent
of the global market share, according to the International Society for Horticultural Science (ISHS).
According to consumers and companies on the global market, the quality of Vietnam lychees was
much better than similar products from other mass exporting countries.

3.1.

About the lychees market and its importance to the economy

Lychees and some fruits of Sapindaceae play an important role in the economies of many
countries. With the increasing demand for fresh and processed fruits in the international
market, this is a great prospect for production of lychees, logan and some species of
Sapindaceae in Vietnam as well as the countries that produce these kinds of fruit in general.

According to the Fruits and Vegetables Research Institute (FAVRI), Vietnamese logan, lychees account
for only a very small part of China's output. However, due to higher quality and harvest season, we
have strongly exported logan and lychees to China, and to many markets of the world, since over the
years, many scientific and technical advances have been applied in the production of these special fruits
in Vietnam for a better quality exported product.

According to the statistics of the General Department of Vietnam Customs, in 2018 Vietnam’s
enterprises exported more than 92 thousand tons of lychees (including fresh and dried lychees)
with a value of more than 40.8 million USD, up to 172% in volume and 126% in value
compared to the results achieved in 2017.
In which, fresh lychees exports reached more than 75 thousand tons (accounting for 81.5% in
terms of volume), worth 30.9 million USD; meanwhile, the dried lychees reached more than
17 thousand tons with a value of more than 9.9 million USD.

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Also in 2018, Vietnam's lychees were presented in 27 countries and territories around the
world, more than in 2017 (only 19 countries and territories). Markets in which Vietnamese
lychees are presented in 2018 include: China, United Arab Emirates, Australia, Saudi Arabia,
Canada, Laos, UK, Bahrain, Malaysia, Turkey, Korea, Japan, Netherlands, Thailand, Belgium,
USA, Norway, Germany, France, Russia, Switzerland, Oman, Kuwait, Sweden, Ireland,
Singapore and Cambodia.

To be specific, the exports volume of lychees in 2018 to China reached more than 83.5
thousand tons with a value of more than 33.9 million USD, up to 151% in volume and 91% in
value compared to the year of 2017. The amount of lychees exported to the Chinese market
accounted for 90.7% of the country's total lychees’ exportation of the season.

Statistics of the General Department of Vietnam Customs (GDVC) show that the number of
enterprises participating in lychees’ exportation in 2018 has also increased significantly, twice
as high as in 2017. 97 enterprises participate in exporting, while this figure in 2017 was only
44 enterprises.

In the past crop year, Vietnam's lychees exports were registered for export declarations at the
border gates of Lang Son, Lao Cai and Ha Giang. Lychees of all kinds are mainly exported by
road transport and only a very small amount of lychess are exported by air.
3.2.

Vietnam - Japan Economic Partnership Agreement (VJEPA)

Japan is the seventh most populous country in the world with 126.1 million inhabitants; GDP
per capita is relatively high, the cost of living is huge. Therefore, Japan is an important target
market for exporters. However, Japan is also a difficult market with very high requirements for
imported goods. Japanese consumers are familiar with goods of high quality and guaranteed
about sanitary conditions, food safety and environmental standards, especially agricultural
products. Like other countries, Japan also provides many regulations and standards for
imported goods for the purpose of protecting consumers and protecting the environment in the
country. And these regulations and standards have raised real technical barriers for goods
imported into the Japanese market.
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Japan is now the target market for Vietnamese agricultural products, especially since the
VJEPA was signed at the end of 2008 and takes effect from October 2009; Promoting
advantages and overcoming the limitations is the way for Vietnamese agricultural products to
have a chance to enter a "difficult" market like Japan.
Directly benefiting from the VJEPA agreement is the export of agricultural products.
Specifically, according to VJEPA's commitments, Japan has pledged to reduce taxes on items
equivalent to nearly 84% of Vietnam's agricultural export value. Japan will also continue to
reduce and eliminate import tariffs on 72 agricultural lines in 7 years and 214 lines with a 10year tariff reduction and elimination schedule. In particular, it is noteworthy that there are
items of vegetables, fruits specifically in this assignment - lychees which are the products that
Vietnamese enterprises have a lot of advantages when exporting to this market. Currently,
Vietnamese agricultural products have become very familiar to Japanese consumers and reach
great value.
3.3.

How did Vietnam enter successfully one of the toughest market – Japan?

Given the fact that Japan is one of the most fastidious markets in the world with strict
requirements, Vietnamese functional enterprises have paid special attention to ensuring the
quality of lychees in export areas (Bac Giang, Hai Duong). Although Vietnamese lychees have
entered many difficult markets, but if the US and Australia markets only require irradiation,
Japan will request treated by fumigation. It took more than 2 years to perform the steam
sterilization experiment, in the end, the Japanese expert came to check directly and approved".
This is a new breakthrough. It was the first time that Vietnam conducted a successful steam
sterilization and received a nod from Japan. Most especially, this success is not only for
lychees but also a premise for other fruits to enter Japan, even Korea - the two countries only
accept fumigation, not irradiation. To be specific, here are some requirements of Japan lychees
exportation
3.3.1. Certificate of origin lychees
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The Vietnamese government does not require exporter to make Vietnam origin for exports.
However, in many cases, buyers will require the exporter to provide a Certificate of Origin in
Vietnam. For customers in countries that have signed free trade agreements with Vietnam,
they may require Certificates of Origin in the form so that buyers can enjoy special
preferential import tax.
3.3.2. Requirements for gardens
Lychees gardens must ensure traceability, lychees orchards exported to Japan must prepare
and keep production records and logs, be inspected and issued a code by the Plant Protection
Department.

Regarding to the management of harmful organisms: apply integrated management measures
for the oriental fruit fly (Bactrocera dorsalis).

Regarding to food safety: on lychees gardens exported to Japan, it is absolutely forbidden to
use pesticides banned from use, and at the same time, comply with the four-right rule to
ensure that the Japanese regulations are met, about the maximum permissible residue level for
fresh lychees fruit for export.
3.3.3. Requirements for the fresh lychees to export
Detailed regulations on fumigation treatment facilities, packing, packaging and labeling
facilities, phytosanitary inspection for export and import of Vietnam fresh lychees. To be
specific export batches must be packed and fumigated with Methyl Bromide - recognized by
the Plant Protection Department and MAFF - with a minimum dose of 32g / m3 within two
hours, under the supervision of quarantine staff. The batch of lychees exported for export must
be accompanied by the Phytosanitary Certificate issued by the Plant Protection Department.
3.3.4. Customs duties
Lychees is not in Vietnam’s nomenclature of taxable exports, therefore, the exporters do not
have to pay export tax, VAT on exported commodity is 0%
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Japan is a difficult market with high standards, so Vietnamese enterprises need to comply with
the above requirements in order to export fresh lychees to Japan.

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3.3.5. The lychees’ exportation process after accepting the Japanese’s approval
The Plant Protection Department worked with Hai Duong and Bac Giang, two localities with
the largest lychees growing area in the country, implementing everything to prepare for the

first shipment of lychees to Japan this year. At the same time connect export businesses to
participate in the program; guide localities and enterprises on the process of planting, caring
and handling phytosanitary products and packaging according to Japanese regulations.

In order for lychees to be exported to Japan, in February 2020, Vietnam started building the
first three commercial-scale fumigation treatment systems in Vietnam at Post-Import Center 1
(Hanoi), the factory of Global Company (Bac Giang) and the factory of Hung Viet Company
(Hai Duong).
Bac Giang and Hai Duong also establish lychees growing areas to meet the export standards to
Japan.

However, in early May, when the harvest season was near, the Ministry of Industry and Trade
sent a document to the two Departments of Industry and Trade of Hai Duong and Bac Giang
stating MAFF announced that it could not send experts to Vietnam to check and recognize the
system. Vietnam's export of fresh lychees fumigation treatment due to epidemic effects. It is
seemed that the exportation to Japan will never be wide-opened.

But, thanks to the non-stop efforts, the Ministry of Agriculture and Rural Development
continued to negotiate with the Japanese side to move towards to transfer the supervision to
the Vietnamese side by considering special and creative measures in the context of the Covid19 epidemic to remove difficulties for the export of fresh lychees to Japan. In recent times, the
Ministry of Agriculture and Rural Development and Ministry of Industry and Trade have
proactively coordinated with relevant enterprises and localities to select and grant 19 eligible
production unit codes for 103 hectares of lychees and 107 households. The total output is
expected to reach over 600 tons.
According to the Vietnam Trade Office in Japan, the batches of lychees were packed in small
boxes of 200g and sold at supermarkets with a promotional price of JPY489 (original price
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JPY537), equivalent to VND 100,000 for each. Accordingly, 1kg of Vietnamese lychees priced
up to over VND 500,000. On the first day of opening, the batch of Vietnamese 2-ton fresh
lychees, transported by plane to Japan, sold out within hours. Japanese businesses and
consumers highly appreciate and praise Vietnam's lychees for its good quality.
Lychee is a short-term fruit; therefore, its appearance in Japan and the high appreciation of
Japanese consumers will be a good springboard to expand its consumption to other fastidious
markets and improve its value. Especially, exports will eliminate serious depreciation of the
fruits’ prices.

From the success of lychees, lychees will be positioned in the high-end segment, when
exported to Japan, it is possible to confidently conquer other markets.

Currently, Japan is the third largest import-export market of Vietnam. Data from the General
Department of Customs shows that, in the first 5 months of 2020, despite the Covid-19
epidemic, bilateral trade between Vietnam and Japan still reached $ 15.6 billion, up 2.2% over
the same period. period of 2019. In which, Vietnam's merchandise exports to Japan reached
7.83 billion USD, and imports were 7.77 billion USD.
Pandemic developments in the world are complicated and unpredictable; Therefore, the
economy still faces many difficulties and challenges. The supply of raw materials and the
output of products by manufacturing industries, especially those with export value, accounts
for a large proportion, being negatively affected.

Up to now, after years of trying to open up the market, Vietnamese lychees have been
presented in more than 30 countries and territories. As a result, the recent lychees crops have
no output bottlenecks, and there is no longer a drop in prices.
Typically in 2019, despite the crop failure, the revenue from lychees increased sharply. In Bac Giang,
some fruits bring farmers a revenue of 6,300 billion VND, an increase of more than 500

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billion VND compared to 2018. Lychees growers in Hai Duong also earn nearly 1,000 billion
VND.
3.4.

Opportunities and challenges of Vietnam after the lychees’ exportation to Japan

Exporting a large amount of lychees to Japan, a demanding market with an emphasis on not
only quality but also shape and size, along with customs that have been passed down for
hundreds of years, not only helps to increase our production volume but also help the Japanese
and other neighboring countries to know about the promotion and consumption of Vietnamese
products as a premise for exporting products fruits and others products.
However, there are many things to deal with in the short-term and long-term future. Recently,
the major agricultural export markets of Vietnam have continuously made changes in
requirements for agricultural imports. The market is stricter, the export is more difficult. For
example, China is stepping up the inspection and supervision of food safety, quarantine
testing, and traceability ... for imported goods due to the Covid-19.
Meanwhile, the Korean Ministry of Food Safety and Pharmaceutical (MFDS) has announced
the method of document checking for food manufacturers exporting to Korea. This is the
provisional test method to be carried out in 2020 due to the complicated development of the
Covid-19 epidemic in the world. Without meeting the requirements, it will be difficult to
export Vietnamese agricultural and food products to these markets. Moreover, the problem of
product traceability is always a weakness of Vietnamese agricultural products. Vietnam wants
to be a logistics provider to the world. To do this, we must build a system of value chain
linking links together. However, looking at the reality, Vietnam's processing technology is
outdated, the rate of deep-processed agricultural products is limited, very few enterprises are
deeply involved in this issue. To do this, it is a must in changing the farmers' rudimentary

thinking of farming. Farmers should do agriculture with industrial thinking.

In the new context, many other enterprises are promoting the construction of raw material
areas. Create clean products, create a separate direction to regain the confidence of domestic
consumers, and this is also the foundation for businesses to export with high value to many
world markets. After a period of cooperation with enterprises, farmers receive a more stable
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benefits and prices. Therefore, doing business with enterprises helps to reduce risks, even
without risks. Since then, people realize how to do and how to plant. We have an agriculture
that can be exported to big markets, fastidious markets, well competitive in the domestic
market, and even sold in major markets in China.
The agricultural market still has a very high demand and will return to rapidly increase
demand in the near future. The problem is how to maintain the productivity of enterprises and
farmers associated with enterprises to overcome this critical moment, to promptly restore
production and business as soon as the epidemic ends in the world. Enterprises need to focus
on investing in building links between processing factories, business enterprises with farmers
producing in raw material areas to ensure quality on the basis of applying high-tech
agricultural techniques. This is a strategic solution to create high competitiveness and
promptly dominate the market in the coming future.

Post-harvest storage is also a big problem when it comes to only manual levels. We are also
facing some difficulties in farming techniques and post-harvest technologies. With far away
countries such as the US, France, UK ..., lychees often have to be transported by air, which
causes large logistics costs, leading to low profitability of importers. The requirement for
exported lychees is the need to broaden the preservation technology to extend the freshness of
the lychees to at least 5 weeks for shipping by sea. By doing this, the selling price of

Vietnamese lychees will become more competitive and attractive to consumers while the
quality of lychees fruit is still guaranteed. In addition, it is necessary to increase trade
promotion, introduce images of Vietnamese lychees, both fresh and canned with the best
quality in the world, to new markets. At the same time, to promote trade in canned processed
lychees products, in order to create more domestic surplus value, reduce shipping costs, and
bring Vietnamese lychees fruit deeper into the global value chain.
3.5.

Conclusion

Tariff barriers, particularly technical barriers in import and export are always difficult problems for
exporting countries. In order to be able to meet the technical requirements, countries must always make
every effort to come up with appropriate, and innovative production models and
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methods. The successful exportation of lychees to Japan is of a great importance to Vietnam's
agriculture in particular and the Vietnamese economy in general. This is a solid springboard to
bring lychees to many other fastidious markets around the world and become an even more
popular, expensive, and luxury item, accounting for an increasing share in structure of
agricultural products in Vietnam.
However, it also poses many problems that we need to deal with in order to develop more
about agricultural products. As after the Covid-19 pandemic, countries became more cautious,
tightening the requirements on imported goods, so businesses should have a mindset of doing
agriculture in an industrial way. Businesses and farmers should cooperate sustainably to
overcome difficulties. In the future, the demand for agricultural products will increase strongly
so enterprises need to focus on investing in building links between processing factories,
applying high-tech agricultural techniques. Finally, about post-harvest storage, shipping both

fresh and canned lychees to the international market, building a valuable supply chain.

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4.

REFERENCES

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