Woodworking industry meets troubles on all sides

After struggling through the global economic crisis in 2009 and just enjoying the recovery for a while, Vietnamese woodworking exporters are still encountering difficulties on all sides.

They now have to buy more expensive input materials while facing many stricter regulations from importing markets. Vietnamese woodwork exporters critically need support from authorities.

Soaring material prices

According to the Dong Nai Forest Products Processing Association, timber companies in Dong Nai province (accounting for more than 60 percent of Vietnam’s wood processers) now face material prices 20-30 percent higher than at the end of last year. Meanwhile, they cannot offset this by increasing export prices since they signed contracts months earlier. Apart from surging prices, raw material suppliers demand immediate payment.

In a letter calling for assistance from the authorities, the Dong Nai Forest Products Processing Association pointed out that the price escalation was blamed on hoarding in Binh Duong and Dong Nai provinces by Chinese importers. Specifically, Chinese companies simply process raw materials into finished products, thus enjoying zero tax when they are exported to China. With this technique, Chinese firms still make a profit although they purchase raw materials at higher prices.

Multiple hardships

Besides, according to the Vietnam Timber and Forest Products Association (Vietfores), the Lacey Act, effective from April 1, 2010, which requires timber importers to certify where timbers come from when they are imported into the US market. At present, the EU is also preparing to enact the Due Diligence Regulation (DDR). When this regulation is enacted, all manufacturers and importers in the EU must prove the legality of timbers to ensure they have not supported illegal logging.

The US and the EU are the two largest importers of Vietnamese woodworks with up to 70 percent of value. These regulations will raise more barriers for Vietnamese woodworks when they are exported to these markets.

Opportunities for Vietnam

In 2003, the European Commission adopted the Forest Law Enforcement, Governance and Trade (FLEGT) Action Plan. This action plan set out a number of strategies providing technical, financial and consulting support for countries exporting wood to the EU market, including Vietnam.

Currently, the EU is negotiating voluntary partnership agreements with some countries in the world. When these countries officially join negotiations on such agreements with the EU, the EU will provide them with technical and financial support. When the negotiations are concluded and agreements are signed, wood products imported to the EU market will be deemed legal and satisfy DDR standards. This opens a corridor for imported furniture in the EU market and helps increase product value. Currently, most Southeast Asian countries have officially joined negotiations on voluntary partnership agreements with the EU. To quickly solve difficulties for woodwork exporters, Vietfores has requested the Prime Minister to assign the Ministry of Agriculture and Rural Development to expeditiously construct national action plans regarding the FLEGT and Lacey Acts, officially join negotiations with the EU for bilateral cooperation to tackle obstacles in the production, import and export of wood products.

Besides, according to the Dong Nai Forest Products Processing Association, the Vietnamese authorities should closely monitor timber exports that enjoy zero tax. Particularly, wood products exported to China must be carefully checked for the level of processing they have undergone, to avoid the export of raw materials disguised as refined products. – VCCI

Tags: Vietnam Woodworking industry