group project topic planning to export st25 rice from viet nam to the united states

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VIETNAM MARITIME UNIVERSITYINTERNATIONAL SCHOOL OF EDUCATION

GROUP PROJECT

TOPIC: PLANNING TO EXPORT ST25 RICE FROM VIET NAM TO THE UNITED STATES

COURSE: INTERNATIONAL BUSINESS II

INSTRUCTOR: MSc. BUI THI THUY LINH

GROUP MEMBERS:

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TABLE OF CONTENTS

PART 1. POTENTIALS OF EXPORTING/IMPORTING...2

1.1 Exporting Market (Vietnam)...2

1.1.1. General Situation of Rice Production Volume...2

1.1.2. General Situation of Viet Nam’s Exporting Rice in the World...3

1.1.3. General Situation of Viet Nam’s Exporting ST25 Rice in the World...5

1.1.4. Quality Standards...7

1.2 Importing Market (The United States)...8

1.2.1 General Situation of US Rice Market...8

1.2.2 The Trend Of Rice Consumption In The US...9

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LIST OF FIGURE

1.1 Volume and Turnover of Viet Nam's Rice Exports in the Period of

1.1 Vietnam's Rice Production in the Period of 2017 – 2020 3

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PART 1. POTENTIALS OF EXPORTING/IMPORTING

1.1 Exporting Market (Vietnam)

1.1.1. General Situation of Rice Production Volume

Vietnam has favorable conditions for rice production (land, soil, cultivationexperience, intensive cultivation level, specialty traditional rice varieties...). As a result,rice production has made great progress. From 2017 to 20200, the rice area decreasedyear by year (down from 7,705 million hectares in 2017 to 7,279 million hectares in2020), but rice yield increased (increased from 5.55 tons/ha in 2017 to 5.87 tons/ha).Vietnam's rice production in this period ensures food security and so meets the exportneeds of 6-7 million tons of rice per year. In the first 6 months of 2021, the rice growingarea is 3,628 million hectares, and rice production is estimated at 21,769 million tons,and rice production is estimated at 14,228 million tons, accounting for 5.48% of worldrice production.

Table 1. 1. Vietnam's Rice Production in the Period of 2017 – 2020

Area (Thousand Hectares) 7.705,2 7.570,9 7.469,5 7.279,0 3.628.5

Production(Thousand) 42.738,9 44.046,0 43.495,4 42.760,9 21.769,2

Rice Output (ThousandTons)

27.258,9 28.748,8 28.211,1 27.871,6 14.228,3

Source: General Statistics Office Data

The data in Table 1.1 shows that the average rice growing area of Vietnam is 7,506million hectares, the average rice yield is 5.77 tons/ha, the average rice production is43.26 million tons, the average rice production is 28,022 million tons in the period 2017 -2020. Vietnam's rice production has ensured national food security and met export needs.

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1.1.2. General Situation of Viet Nam’s Exporting Rice in the World

Vietnam has suitable natural conditions for rice crops with two main granaries, theRed River and Mekong Delta. Rice production area ranks 6th and rice export ranks 3rd inthe world, Vietnamese rice has been exported to over 150 countries and territories,accounting for 10.48% of the global rice market share in the period of 2017 - 2020 andalso initially penetrated markets with quality requirements like EU, America, Nigeria,...

Vietnam's rice exports in the period of 2017 - 2020 achieved results. Vietnam's riceexport volume tends to increase from 2017 to 2020, up from 5,818 million tons per yearto 6,249 million tons in 2020, accounting for an average of 11.84% of the world's totalrice export volume.

Figure 1. 1. Volume and Turnover of Viet Nam's Rice Exports in the Period of2017 – 2020

Source: Data of the General Department of Customs

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Figure 1. 2. Vietnam's Rice Export Situation in Quarter 1 - 2022 in the Period of2010 – 2022

Source: thoibaotaichinhvietnam.vn

In the first quarter of 2022, rice is one of 8 agricultural, forestry, and fishery productswith a higher export value over the same period. Data from the Ministry of Agricultureand Rural Development (MARD) showed that the volume of exported rice in the first 3months of this year reached nearly 1.48 million tons, equivalent to 715 million USD, anincrease of 24% in volume and an increase of 10.5% in value over the same period lastyear. In the world market, Vietnamese rice prices still maintain their leading positionamong rice-exporting countries. Typically, at the beginning of the week of April 2022,the price of 5% broken rice exported increased by 12-15 USD/ton compared to thebeginning of the year and about 10 USD/ton compared to the beginning of March, to $415 / ton - the highest in more than 3 months.

1.1.3. General Situation of Viet Nam’s Exporting ST25 Rice in the World

In the first 5 months of this year, Vietnam's ST25 rice exports continued to have abreakthrough growth with a volume of nearly 4,700 tons, a value of 5 million USD, a

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sharp increase of 82.8% in volume and doubled in value over the same period last year.Thus, after only the first 5 months of the year, ST25 rice exports were almost the same aslast year. It is known that in 2021, Vietnam's ST25 rice exports will reach 5,200 tonswith a value of 5.1 million USD, an increase of more than 4 times in both volume andvalue compared to 2020. Currently, although ST25 rice only accounts for a smallproportion, about 0.4% of Vietnam's total rice export turnover, with recognized qualityand brand, this will be the key product for Vietnamese rice grains to penetrate the high-end market segment in the world. In the future, ST25 rice is expected to be able tocompete fairly with some other famous rice in the world such as Hom Mali rice ofThailand or Basmati rice of India.

Figure 1. 3. Volume and Turnover of Viet Nam's ST25 Rice Exports in thePeriod of 2020 – 5M/2022

Source: vietnambiz.vn

Although it has only been put into export in the past few years, Vietnam's ST25 ricehas conquered many fastidious markets in the world such as the US, EU, Japan,Australia, Canada. In particular, the US is still the largest consumption market with

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high due to the rapidly growing Asian-American population. Notably, ST25 rice exportsto Germany increased by 45 times over the same period, reaching 875 tons. Therebybringing this market to the second position in terms of ST25 rice consumption ofVietnam with the proportion accounting for 19%. Similarly, ST25 rice exports toAustralia increased 10 times, reaching 187 tons; to Canada increased 3 times, to 64 tons.Besides, some new markets that ST25 rice has set foot in such as Japan (100 tons),Singapore (28 tons).

THE FASTIDIOUS MARKETS IN THE WORLD OF IMPORTING ST25 RICE

Figure 1. 4. The Fastidious Markets in the World of Importing ST25 Rice

Source: vietnambiz.vn1.1.4. Quality Standards

In recent years, fragrant rice, specialty rice of Vietnam such as ST24, ST25, andJasmine has had a chance to enter some major markets such as the EU, helping toincrease export turnover. This opportunity came from The ST25 variety from Vietnamwon the World's Best Rice Contest in 2019. Vietnam's rice exports in 2022 to the EUmarket reached at least 60,000 tons, especially in traditional markets such as Germany,the USA, Italy, and Poland. The rice industry also aims to improve the quality and valueof Vietnamese rice grains. Thereby, forming and improving the value chain of theindustry, helping to adapt to climate change, and raising incomes for farmers as well asthe needs of consumers to meet high-quality rice.

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Moreover, confidence in Vietnamese rice in general, and ST25 rice, in particular, hasincreased when Vietnam exports ST25 rice to the Japanese market. That is proof thatVietnam not only exports a lot of rice but also exports delicious rice, meeting the veryhigh standards of the Japanese market. The Vietnamese Ambassador in Japan also said:"To bring ST25 rice into the Japanese market, we must pass more than 600 technicalstandards. 600 technical standards is a very strict requirement, plus the fastidiousness ofJapanese consumers, so I think this is a huge success for producers as well as traders whohave brought ST25 rice into the Japanese market."

1.2 Importing Market (The United States)

1.2.1 General Situation of US Rice Market

According to the latest data from the World Bank, the United States has a populationof approximately 331,9 million people (2021), ranking 3 in the list of countries byrdpopulation with GDP per capita of 70,248.6 $US in 2021, making it one of high-incomecountries in the world. Therefore, the US market has a tendency to diversify importedagricultural products (including rice) and a diverse demand of rice varieties to meet thediverse needs of US consumers. During the trade year 2016-2017, rice imports to the USamounted to about 787 thousand metric tons, worth 688.8 million USD and haveincreased to just over 1.3 million metric tons in the period of 2021-2022 (Statista.com).This figure is expected to increase remarkably to reach a peak of 1.4 million metric tonsin 2023. Especially, the United States Census Bureau data shows that there were over 20million Asian Americans and about 62.65 million people of Hispanic origin living in theUS (2021) who consume a large amount of rice, so the US has an increasing demand ofrice with high quality. This is a big opportunity for many major rice exporters in theworld (including Vietnam) to increase the market share in the US market.

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Figure 1. 5. Total Volume Of Rice Imports In The United States From 2013/2014To 2022/2023

Source: Statista.com1.2.2 The Trend Of Rice Consumption In The US

According to United States Department of Agriculture, imported rice currentlyaccounts for more than a quarter of the total rice consumption in the United States, as aresult of the growing consumer preference for Asian aromatic rice. Although the UnitedStates does produce aromatic rice, the varieties are not the same as those produced inAsia. To be more specific, the bulk of the increase in U.S. rice imports in the period of2019-2020 came from Thailand, up almost 29 percent from a year earlier. In recentyears, 80-85 percent of Thailand’s shipments to the United States has been its jasminerice, a premium aromatic variety. Likewise, combined U.S. imports from India andPakistan increased 24 percent in 2019/20 to a record 262,000 tons, with most of this ricebeing basmati rice, which is also known as a premium aromatic variety. In addition to thelong-grain Asian aromatic varieties, since 2011, the United States has been importing amuch smaller volume of non-aromatic milled long-grain rice from South Americansuppliers to take advantage of competitive prices. For the combined medium and shortgrain rice, a 41-percent increase of imports is predicted for the period of 2022-2023. Thisis due to the fact that increasing imports are spurred by reduced production in California,where a second consecutive year of drought has reduced the size of the rice harvest and

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available domestic supplies. The California rice crop is forecast down 38 percent from ayear earlier and is expected to be the smallest crop since 1977-1978. California growsalmost exclusively medium and short-grain rice and typically accounts for around 70percent of U.S. medium- and short-grain production. Besides, the United States regularlyimports medium- and short-grain rice from Thailand, India, China, and Italy, with nearlyall the rice from China going to Puerto Rico, the US territory.

Especially, ST25 rice is increasingly asserting its position in the international marketand becoming more familiar with U.S consumers thanks to its deliciousness andfragrance. Another important factor is that ST25 rice has a very high nutritional contentand is superior to other conventional types of rice. In detail, it contains a large amount ofprotein, magnesium, calcium, fiber, which is extremely beneficial for health. As a result,in recent years, ST25 rice has become more popular in the US market.

Figure 1. 6. US Rice Imports By Country Of Origin And As A Share OfDomestic Use (1990-2021)

Source: Data of the United States Department of Agriculture

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1.2.3 Competitors

In addition to Viet Nam, the US also imports rice from the world’s largest riceexporting countries such as Thailand, India and Pakistan as well as other nationsincluding Brazil, China, Italia, Canada…It is predicted that in the next few years, the riceexport from these countries to the US continues to witness a considerable growth, soVietnamese rice may have to face a fierce competition when entering the US market.

Table 1. 2. Major Rice Exporters To The US (2017-2020)

Unit: Thousand USD

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PART 2. TRADE BARRIERS

2.1. Tariff Barrier

2.1.1 Export Tariff

In recent years, the Vietnam's rice exports has consistently changed in a positive way,especially when Vietnam enters into more free trade agreements. For this reason, this hascreated numerous chances for Vietnam rice enterprises to enter global markets andexpand their market. When it comes to taxes, enterprises that export ST25 rice must paytwo kinds of taxes namely: VAT and export tax:

Value Added Tax (VAT): Under current export legislation, VAT on exported

commodities, including exported rice, is 0%.

Export Tax: There is now no export tax on rice.

2.1.2 Import Tariff

Import tariff is levied by the government on goods imported from other nations.When an import tax is imposed, the prices of imported items will rise. This will reducethe appeal of imported goods to domestic customers so domestic goods may retain theircompetitive edge over imported items. Tariffs are established primarily to safeguarddomestic industries or to increase income of the government. The imposed tariff forbroken rice in USA (HS Code: 10064000) is 0.44 cents/kg under MFN treatment.

2.2 Non-tariff Barrier

2.2.1. Intellectual Property Right Barrier

In 2020, four California-based firms registered and were waiting to be protected for

five ST25 rice brands in the United States. The first is the trademark "The world's bestrice gao thom ST25 dac san Soc Trang ngon nhat the gioi 100% tu nhien khong beophi - khong tieu duong", which was registered on October 22. The second and third

trademarks pending registration on the USPTO site are both entitled ST25 and wereregistered on June 18 and August 10, respectively, by two businesses, I&T enterprise,Inc. Corporation and TTM International Inc. Corporation. The fourth and fifth

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trademarks issued by Transworld Foods, Inc. Corporation registration are "No.1 VietnamST25 rice the world's greatest rice" and "Vietnam's ST25 rice, dac san Soc Trang"registered on July 31 and September 1. If four firms in the United States succeed, theVietnamese company selling ST25 rice will be unable to use words such as "best ST25rice in the world" and will be unable to access the US market unless the owner brandallows it.

2.2.2 Technical barrier

Rice shipments that export to the USA will go through official inspections of ricebased on established official U.S. standards. Inspection services are divided into twobasic types: "inspection for grade" or "factor analysis" without grade. Inspection forgrade involves analyzing the sample according to the quality factors listed in the OfficialU.S. Standards for Rice and certifying the applicable numeric grade designation, thequality factors responsible for the grade assignment, and any other quality factors thecustomer requests.

The Food and Drug Administration (FDA) will inspect rice imports before decidingwhether or not they are acceptable. According to provisions of American law included inthe U.S. Federal Food, Drug, and Cosmetic Act, exporters of rice are in charge of makingsure the goods are secure, hygienic, and labeled in accordance with U.S. standards. Whenoffered for import at U.S. ports of entry, imported food goods are subject to FDAinspection, and FDA has the authority to delay shipments of products if the FDAdiscovers that the shipments do not meet U.S. requirements.

Besides, Prior Notice is required for all commercial rice imports into the UnitedStates, and overseas exporters of rice products must register with the FDA before theirgoods may be approved. There are two ways to submit a Prior Notice:

CBP (Customs and Border Protection of the United States): Prior Notice can

be submitted to the FDA via the existing CBP-FDA link.

PNSI (Prior Notice System Interface): Individuals or companies that do not

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Two kind of certificates that are crucial for importing rice into US market arePhytosanitary certificate and Fumigation certificate. In order to import rice goods, thebuyer must request for APHIS (Animal & Plant Health Inspection Service) importapproval as well as a phytosanitary certificate from Vietnam to guarantee that the ricehas been evaluated for quality prior to export. According to the Secretary of Agriculture,importing rice from other countries can introduce harmful fungal diseases like downymildew (Sclerospora macrospora), leaf smut (Entyloma oryzae), blight (Oosporaoryzetorum), and glume blotch (Melanomma glumarum), as well as harmful insect pestssuch as the khapra beetle, into the United States. The Secretary has established astringent system for importing rice in order to avoid the entry of the plant pests anddiseases mentioned above into the United States. A phytosanitary certificate or a re-export certificate with the additional declaration "The shipment was inspected andproven free of khapra beetle (Trogoderma granarium)" is required for commercialimports of rice from any nation where the Khapra beetle is present. At the port of entry,every shipment of imported rice will undergo inspection. If there are more than 28contaminated hulls in a quart sample obtained during inspection, the shipment won't bepermitted to enter the import country; only 28 or fewer hulls are acceptable.Furthermore, rice must be fumigated with Methyl Bromide or Phostoxin not more than10 days prior to packaging in a quantity and manner sufficient to destroy all stages ofweevil or other insect infection.

Exporters must also strictly adhere to the Packing, Labeling, and MarkingRequirements, as labeling and marking offer vital information to those who handle theirgoods and are necessary for transit through the United States border. Failure to complywith FDA labeling standards is one of the primary causes of shipment rejection.Everything from a nutritional information chart, font, and size to country of origin andfood allergies must be given on the label for the authorities to guarantee a simplerinspection of your goods.

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