Vietnam EU Agreement: Reducing Illegal Logging, Promoting Timber Trade

January 11, 2019 Posted by Vietnam Briefing Written by Koushan Das Reading Time: 2 minutes

Last year, Vietnam and the EU signed the Voluntary Partnership Agreement (VPA) on Forest Law Enforcement, Governance, and Trade (FLEGT). The agreement focuses on improving forest governance, reducing illegal logging, and promoting trade in verified legal timber from Vietnam to the EU.

Business Intelligence

Once ratified by both parties, the VPA will further boost timber exports to the EU.

VPA

The VPA is a legally binding agreement between the EU and a country exporting timber products to the EU. The agreement ensures that all timber and timber products exported to the EU are in compliance with the exporting country’s laws.

In addition, the agreement also focuses on the issues of illegal logging and forest governance. Vietnam is one of the 15 tropical nations that are currently negotiating or implementing such agreements with the EU.

FLEGT

Once the VPA commitments are implemented by a country, they can issue verified legal timber products with FLEGT licenses. A VPA partner country can issue FLEGT licenses only through a timber legality assurance system, set up by the partner country and the EU.

Vietnam: Wood Products Exports to Reach Record High in 2018

Established in 2003, the EU’s FLEGT Action Plan aims to reduce illegal timber trade, improve supply chain, and strengthen forest management.

Products with FLEGT licenses automatically meet the conditions of the EU Timber Regulation (EUTR), which prohibits the placing of illegally harvested timber on the EU market. According to the EUTR, which came into effect in 2013, operators need to conduct due diligence to ensure that the products are legal.

Vietnam EU VPA

Vietnam and the EU began negotiations in November 2010 and signed the agreement in October 2018. Once ratified, VPA commitments will be legally binding.

Vietnam needs to build a timber legality assurance system (VNTLAS), which will verify that the timber products are legal and in accordance with the VPA commitments. Once the system is ready, Vietnam will be able to issue FLEGT licenses for timber products exported to the EU.

Need to do more

Certain VPA commitments are already part of the recently adopted Forestry Law, which came into effect on January 1, 2019. Vietnam has made tremendous progress in the implementation of the VPA and strengthening import regulations and forest management.

Investment Protection in EU Vietnam FTA

However, more needs to be done. The crucial commitment Vietnam must focus on is the legality of timber imports into the country. There have been several cases of illegal imports from Laos and Cambodia.

Vietnam needs to strengthen control of imports, ensuring that imported timber is legally harvested and traded in accordance with the exporting country’s relevant laws.

Positive Outlook for European Businesses in Vietnam

Going forward

According to some estimates, the VPA/FLEGT agreement will increase the price of the timber products by 20 to 25 percent, leading to a growth in trade value.

A joint committee will continue to oversee how the VPA commitments are implemented, and once all of them are fulfilled, Vietnam will be able to issue FLEGT licenses. Until then, Vietnam timber exports will be subjected to the EUTR.

Vietnam Briefing is produced by Dezan Shira & Associates. The firm assists foreign investors throughout Asia from offices across the world, including in Hanoi and Ho Chi Minh City. Readers may write vietnam@dezshira.com for more support on doing business in Vietnam.