Barriers and potential markets

While preparing to deal with new bills in traditional import markets, businesses should not neglect new potential markets.

Overcoming barriers

Nguyen Ton Quyen, president of the Vietnam Timber and Forest Product Association (Viforest), said that Vietnam’s timber exports to the EU and the US will face a number of difficulties in the future as they will be required to prove the origin of wood as well as dealing with complicated procedures. 

While the EU has announced a draft of its Forest Law Enforcement, Governance and Trade (FLEGT) which will come into effect from January 2012 the US’s Lacey Act has been applied into Vietnamese products since June 2010.

Mr Quyen said that at that time no shipments of Vietnamese timber products faced any difficulties because of the Lacey Act, but he warned that Vietnamese businesses should prepare for all the necessary procedures to minimise risks in the future. Vietnam has asked the US to assist and provide it with updated information to help businesses as they have to clarify the origin of the wood used to make products and provide details of any chemicals used. Businesses will be fined heavily if they are found to be making false declarations.

However, only 190 out of a total of 2,500 businesses have Certificates of Competency (CoC) which are needed to export products to Japan and the US.

Main content of LACEY Act :

(1) Prohibits all trade in plant and plant products, including timber and timber products that are from an illegal source.

(2) Importers must declare the country of origin and the names of all the woods used in their products.

(3) Violations of the Act, result in the forfeiture of goods, vessels, fines and even prison.

At a recent seminar on exporting timber to the US and the EU, legal experts referred to two actions which are considered to be violating the Lacey Act – wood with an illegal origin and illegal trading between US states and countries overseas.

Due to the strict regulations, lawyers can help Vietnamese businesses follow the Act by collecting information about the origin of wood, keeping records and providing importers with the details.

Mr Quyen said that many other strict regulations from importing markets will come into effect in 2010, such as controlling the amount of lead in paint and formaldehyde in glue, forcing businesses to invest more in quality control.

New potential markets

Nguyen Ton Quyen said that through market surveys, the Viforest have declared that Russia, India and Central Asia are promising markets for Vietnam’s wooden products and handicrafts.

He also noted that in India, Kazakhstan, Kyrgyzstan and Uzbekistan, there is a big demand for wooden products as those countries’ wood processing industries can not meet domestic demands.

Besides, those markets are not too strict, with exporters about designs or standards of goods.

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Due to the speed of its urbanization, every year Russia has to import over 40 percent of its wooden products, and is a huge potential market for Vietnamese exporters.

In particular, Vietnamese timber businesses should draw experience from other countries and sell their products directly to the Russian market, not through intermediaries. So, it’s necessary to start up joint ventures to produce and sell wooden products in Russia, Mr. Quyen emphasised.

He suggested that the government make an agreement with Russia on mutual assistance. He noted that Vietnamese exporters want to pay in USD, but Russian importers can only accept payments in rouble and despite the setting up a joint Vietnam-Russia bank, the amount of foreign currency is not enough available to meet the demand. 

Developing the domestic market

After conducting surveys, the demand for wooden products in Ho Chi Minh City, Hanoi and Hai Phong is substantial, from between US$800 million to US$1 billion per year, said Quyen.

He added that in HCM City, a middle-class family consumes wooden products worth VND6-7 million per year, followed by in Hanoi at VND3 million and in rural areas VND1 million. In addition, the wood demand in hotels is rather big.

The domestic wood market is divided into two main groups, famous trade names that focus on the big cities and urban areas and small businesses in rural areas.

For a long time, wood businesses only concentrated on exports, paying little attention to the domestic market, however, the recent world’s economic crisis has forced them to think again.

Many wood businesses have now started to ensure enough supplies to both the domestic and overseas markets.

Mr. Quyen emphasised that the government should have policies to encourage businesses to develop the domestic market and conduct more research on market’s demands.

He said that Viforest will place a number of issues before the Ministry of Industry and Trade relating to the growth of the domestic market in the future.