Vietnam – Transport – Logistics - Trade - Customs- Dramatic Changes ahead: The WTO Trade Facilitation Agreement - The IMPACT

1. Vietnam – Transport – Logistics - Trade - Customs- Dramatic Changes ahead: The WTO Trade
Facilitation Agreement - The IMPACT
Dr. Oliver Massmann PhD
Sixty-five million years ago, the last of the dinosaurs went extinct. The event caused dramatic changes to
the planet and provided space for new species on earth. A similar event and change is about to happen in
Vietnam and all other WTO members. It is the entry into force of the WTO Trade Facilitation Agreement
(TFA).
What is the TFA?
The TFA is a document adopted by WTO member countries at the 9th
WTO Ministerial Conference in Bali,
Indonesia on 6th
December 2013 after 10-year negotiation.
In order for the TFA to take place, two-thirds of the 164 WTO members have to notify their ratifications to
the WTO after forming a National Committee on Trade Facilitation.
In November 2015, Vietnam became the 60th
country to ratify the TFA. On 22nd
February 2017, the TFA
officially entered into force after Rwanda, Oman, Chad and Jordan submitted instruments of acceptance of
the TFA to the WTO, bringing the total number of acceptances to 112 while only 110 ratifications are
needed for the TFA’s entry into force. At the time of writing this article, there have been 118 ratifications
received by the WTO.
What is the TFA about?
The TFA aims at expediting the movement, release and clearance of goods across borders, helping to cut
trade costs globally and creating a significant boost for global trade and commerce system.
The TFA is a self-contained agreement and includes three separate sections. Section I includes 12 Articles
covering a range of specific trade facilitation measures. Section II covers special and differential treatment
for developing country members and least developed country members. The final section deals with
institutional arrangements (i.e., establishment of a Committee on Trade Facilitation within the WTO and at
a national level) and miscellaneous provisions. The TFA will interact with other legal commitments
specified in the WTO Agreement and Multilateral Agreements on Trade in goods.
The agreement requires its members to ensure the availability and prompt publication of information about
cross-border procedures and practices, mandates that rights of appeal for traders be improved, fees and
formalities connected to the import and export of goods be reduced, customs clearance procedures be faster
and conditions for freedom of transit of goods be improved, just to name a few. The TFA also contains
measures for effective cooperation between customs and other authorities involved in the facilitation of
trade and customs compliance issues. Overall, the main purpose of the TFA is to simplify and harmonize
customs procedures among all WTO member countries, which will later result in cutting red tape that slows
down and impedes international trade, thereby speeding up of the goods flow across borders.
Different from other agreements, the TFA pays particular attention to developing and least developed
countries when allowing them to set their own implementation schedule. While developed countries have
to immediately implement the agreement, developing countries will only have to implement the TFA
provisions that they have designated as Category A commitments. Other categories of commitments are
Category B commitments, which will be implemented after a given period; and Category C commitments,
which will apply to the countries after they are provided with technical assistance and capacity building

2. support. Based on the latest WTO’s statistics, there have been 46% of 240 notifiable article items notified
to the WTO, of which Category A measures account for 40.5%, Category B measures account for 3.3% and
the remaining 2.3% is for Category C measures.1
Vietnam has already submitted to the WTO its Category
A commitments on 31 July 2014.
Why is the TFA important?
The impact of the TFA implementation can even be compared with the worldwide tariffs reduction and
elimination. According to the WTO, full implementation of the TFA can reduce trade costs by 14.3% on
average with many developing countries and least-developed countries forecast to enjoy the highest
reduction (15.8-23.1%) (including Vietnam). This could result in up to US$1 trillion of gains around the
world annually. In addition, the time needed to import and export goods (thanks to streamlined customs
procedures) is much more reduced. Full implementation of the TFA also adds 2.7% a year in global export
growth by 2030, and creates more jobs and growth on a global scale (i.e., more than 0.5% to world GDP
growth). For developing countries and least-developed countries, their annual exports will increase by 3.5%
together with an increase in the diversity of exported goods because of the TFA implementation. In US
dollar, “the TFA has the potential to increase merchandise exports of developing countries by up to 730
billion dollars per annum.”
The TFA is vitally important and has the potential to fundamentally reform global customs practices. One
could question why. Here are some of the main reasons:
 The TFA includes provisions on facilitating rapid movement of goods across borders such as
advance rulings, pre-arrival processing, allowing the release of goods prior to final determination
of customs duties, taxes, fees and charges.
 The TFA helps to ensure the predictability of rules and procedures related to trade and customs by
requiring its members to timely publish relevant documents preferably on the Internet and
establishing enquiry points to respond to enquiries by interested parties.
 The TFA aims at creating harmonized process and standards which traders find it familiar and
predictable when doing customs procedures in different countries.
 The TFA recognizes the importance of growth and benefits for every member states. Thus, it
provides for special and differential treatment for developing and least developed countries to make
sure these countries receive sufficient assistance to reap the full benefits of the TFA
implementation. In addition, the WTO Trade Facilitation Agreement Facility will support
developing and least developed countries in addressing their needs and concerns.
Overall, the agreement demonstrates the commitment of the WTO member states to trade reform, and
increased confidence in the multilateral trading system.
Impacts on Vietnam?
The TFA is expected to boost national and business competitiveness as a result of Vietnam’s
implementation of its commitments under the agreement.
On 13 October 2016, the Prime Minister issued Decision No. 1969/QD-TTg on approving the “Plan of
preparation and implementation of the TFA of the WTO”, and identifying specific responsibilities of each
ministry in upcoming years (Decision 1969).
1
https://www.tfadatabase.org/notifications/by-measure

3. According to Decision 1969, the Ministry of Finance (MOF) is the national agency to implement the TFA.
In particular, the MOF is responsible for, among others:
 Implementing national outreach plans to provide information on the TFA;
 Operating the single-window system;
 Classifying Categories A, B, and C provisions;
 Seeking technical support and assistance for capacity building;
 Formulating roadmap for implementation of Categories B and C provisions; and
 Reviewing relevant legal framework for further amendments.
Other ministries are tasked with coordinating with the MOF in the implementation of the TFA: the Ministry
of Transport, the Ministry of Health, the Ministry of Science and Technology, the Ministry of Agriculture
and Rural Development, etc.
Following the issuance of Decision 1969, Vietnam has formulated plans to implement Categories A, B and
C. The Prime Minister also signed the decision to formally establish on the National Steering Committee
on ASEAN Single Window and the National Single Window regime on trade facilitation. On 06 February
2017, the Government also issued Resolution No. 19/2017/NQ-CP on improving the business environment
and national competitiveness. The Prime Minister once said: “It is not acceptable to take 4 days to complete
customs procedures for exports which is 2 times higher than the regional average, and 4 days for imports
while the regional average is only 3 days.” Following the Government’s directive and strong momentum
for reforming customs procedures caused by the TFA implementation, Vietnam has been reviewing
thousands of customs procedures and revising several legal documents to bring them into conformity with
its commitments in the TFA.
The Government cannot act otherwise if it hopes to help Vietnamese businesses to be competitive in the
global marketplace. These improvements will greatly facilitate trade across borders, thereby reducing the
costs in both time and money for Vietnamese businesses. In general, it is expected to reduce the time needed
to import goods by over a day and a half and to export goods by almost two days. For Vietnam, the TFA
could reduce trade costs by 20% and trade facilitation measures will help businesses in formal international
trade. According to Mr. Nguyen Dinh Cung, Director of the Central Institute for Economic Management,
one-day reduction in customs clearance time could result in a saving of VND1.6 billion. It is a huge amount
given the busy customs activities in Vietnam’s ports.
A lot of work has been done so far to implement the TFA. However, there is still a long way ahead and we
have good reasons to expect further dramatic changes to come.
***
If you have any question on the above, please do not hesitate to contact Dr. Oliver Massmann PhD under
omassmann@duanemorris.com. Dr. Oliver Massmann PhD is the General Director of Duane Morris
Vietnam LLC.
Thank you very much!