Nguyen Thi Thu Trang

The Center for WTO and Economic Integration - VCCI

THE TRANS-PACIFIC PARTNERSHIP AGREEMENT (TPP)

What enterprises need to know

What is TPP? And how will it be?

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Overview of TPP

New generation Free Trade Agreement

(FTA) with high standards

12 Members

- 07 “old” partners

- 04 new partners: United States, Canada,

Mexico, and Peru

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Overview of TPP

New generation of Free Trade Agreement

(FTA) with high standards

30 Chapters:

- Traditional trade issues (goods, service…)

- New trade issues (State owned enterprises - SOEs, Government procurement…)

- Trade-related issues (Labour, Environment…)

- Issues related to improvement of business environment (transparency, competitiveness, cooperation, and capacity support, small and medium enterprises - SME…)

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Official signing date: 4/2/2016

Internal approval period: about two years

3 ways to have effect:

- Automatical effect?

- Conditional effect?

Changing TPP in the future?

- Number of members?

- Commitments?

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Overview of TPP

Tariff preferences in TPP

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Import tariff

Tariff commitment schedule

- A general schedule: 07 members (including Vietnam)

- Specific schedules: 05 member (including United

States)

Level of commitments

- Immediately eliminate;

- Eliminate under schedule: mainly in the period of 3-7

years, some: 10 years, 15 years, and very few: 20 years;

- Tariff quotas.

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Import tariff

Commitments of TPP partners for Vietnam:

Immediately eliminate tariff of about 78-95% total tariff

lines

After the tariff schedule finishes, 97-100% total tariff

lines will be eliminated

Tariff elimination schedule: with regard to normal goods:

about 5-10 years; with regard to sensitive goods: above

10 years or applying tariff quotas.

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Import tariff

Commitments of Vietnam for TPP partners

65,8% of total tariff lines will be eliminated immediately

86,5% of total tariff lines will be eliminated in the 4th year

97,8% of total tariff lines will be eliminated in 11th year

Remaining tariff lines will be eliminated in the 16th year

as maximum, or applied tariff quotas.

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Export tariff

• Gradually eliminate within 5-15 years

• After the schedule finishes, only preserve the

tariff of 70 products (including raw minerals,

and precious metal)

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Rules of Origin

General rules of origin for all TPP partners

- The method to determine general rules of origin

- TPP originating goods will get preferential tariff in all TPP

members.

03 cases:

- Wholly obtained goods

- Goods Produced Exclusively from TPP Materials Product

- Specific Rules

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Rules of origin

In case goods are produced in TPP, and having a part of materials not originating in TPP

Product-Specific Rules of Origin:

- Annex on Product-Specific Rules of Origin under Chapter 3;

- Annex on Textiles and Apparel Product-Specific Rules of Origin Under Chapter 4;

03 main-methods of calculation:

- The applicable change in tariff classification requirement

- Regional value content

- Production process

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Origin Procedures

The mechanism of certification of origin

(CO):

- By the producer

- By the importer

- By the exporter

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Origin Procedures

Reservation of Viet Nam

- With regard to imports: the mechanism of CO

issued by importers shall be implemented no later

than 05 years

- With regard to exports: the mechanism of parallel

application (both authorities and exporters can issue

CO) shall be implemented no later than 05 years

Time limit

- CO could be subimitted within 01 year from the date

of importation for preferential tariff treatment.

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Textile and Apparel

Specific Rules of Origin

- General Principles:

“yarn forward” = “three stages”

- Exceptions:

03 items are applied the 02-stage principle

(fabrics; and, apparel and made-up textile

articles)

De Minimis

Short Supply List

Mechanism of exchange one for one 16

Textile and Apparel

Special safeguard

- The increase of the textile and apparel

import causes or threatens to cause

dramatical damage

- Consultation

- Ceasing the preferential tariff treatment

(returning to MFN tariff)

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Non-tariff measures in TPP

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Import and Export Restrictions

Prohibit import and export restriction measures (listing)

Viet Nam: reserve measures under Decree

187/2013/NĐ-CP and Circular 04/2014/TT-BCT

- right-hand drive motor vehicles, motor vehicles more

than five years old, and used items (including clothing,

footwear, laptop, wooden products, medical equipment,

tricycles...)

- Prohibit the exportation of round and sawn timber from

domestic natural forests, wooden products (except

handicrafts and products produced from wood of

cultivated forests, imported wood or artificial pallet)

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Trade Remedies

Safeguard

- Global safeguard measures: possibly exclude TPP-originating

goods

- Safeguard measures during the transfer phase: Safeguard

measures applying to goods from one or some TPP members

Antidumping and subsidies

- Basically no new commitments

- Recognition of some practices on coordinance, and

transparency

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Technical Barrier to Trade (TBT)

Reaffirm obligations under WTO

Some new commitments:

- Conformity assessment procedures in a Party: The

conformity assessment bodies are not required to be

located within the territory of that Party.

- Some requirements for TBT of some specific goods

(such as wine, distilled spirits, and cosmetics,...)

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Sanitary and Phytosanitary Measures (SPS)

Reaffirm obligations under WTO

New commitments:

- Science and Risk Analysis: Based on international

standards, guidelines or recommendations

- Import Checks: based on certain risks, without undue

delay, under a quality assurance programme consistent

with international laboratory standards.

- Emergency measures

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Services and Investment

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General Principle

Method of negotiation on market access: negative

list

Principles of cross-border trade in services

- National Treatment (NT)

- Most-favoured Nation (MFN)

- Market Access: no limitation on quantity

- Local presence: no condition of presence in the local

country

- Some other principles ( domestic regulations, approval

of certification, payment and transfer, transparency)

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General Principle

Principle of investment

- NT and MFN

- Performance Requirements

- Minimum Standard of Treatment

- Board of Management and senior managers

- Some other principles (about expropriation, profit

transfer)

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Exception/ Reservation

General exception

- List of exceptions under Chapter of Cross-Border Trade in Services (public

services, government procurement, airline services,...)

- Exceptions for each specific principle of investment.

Non-conforming measures list (specific members)

- Annex I: list of existing non-conforming measures which are maintained by

a member

- Annex II: list of non-conforming measures which may be applied in the

future

Specific reservations of each member

E.g.. Viet Nam:

- Reserve 3 years under Annex I

- Reserve some issues relevant to express delivery

- Reserve the commitment of land expropriation

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Example

Some non-conforming measures of Viet Nam

Professional Services: Legal services, auditing services, veterinary

services, technical testing and analysis services,

Distribution

Audio-visual services

Entertainment, live bands, and circus services

Education services

Travel agencies and tour operator services

Transportation (By air, sea, inland waterway, rail, road, and port)

Production services (outsource)

Energy, mining, air

Imports/ exports

Real estates

Issues related to real estates …

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Investor-state dispute settlement (ISDS)

Who can make a claim:

- TPP investor (on behalf of himself, or the enterprise he

contributes share)

- Except oversea Vietnamese person having Vietnamese

nationality; TPP investor only has investment in Vietnam

Respondent:

- Government authorities (center, local);

- State Owned Enterprises, other authorized entities

proceeding the government function;

Legal base:

- 2 conditions: (i) Infringement (obligations under Chapter on

Investment, investment certification, investment contract); and

(ii) investor’s damages;

- Consent of the Government: automatic (except listed cases) 28

Investor-state dispute settlement (ISDS)

Time limit: 3,5 years from when investor should have

knowledge of the government’s infringement and

damages to him

Dispute settlement body: ICSID, UNCITRAL, any

arbitral institutions agreed by both sides

Procedures: Quite specific (increase transparency,

reduce unreasonable dispute)

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Government Procurement and SOEs

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Government Procurement

Scope of application

1. Vietnam’s Specific List:

o Listing authorities bodies: 21 central ministries, 38 units

o Kind of goods and services;

o Threshold limit value: depending on kind of goods, services and

procurement entity

2. Exceptions: measure related to morality, social security, and

health…

3. Excluding cases: Non-contractual agreement, financial

functions of government,...

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Government Procurement

General Principles

- Transparency

- Non-discrimination

- Compulsory open tendering

- Application of integrity methods

- Usage of electronic instruments

Specific Principles

- Open tendering

- Selective tendering (open tendering with short listed

suppliers to submit a tender)

- Limited tendering

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State-Owned Enterprises (SOEs)

Scope of application

Enterprises satisfy all of three conditions:

- Having more than 50% charter capital which is held by the State, or the

State controls more than 50% voting right;

- Being principally engaged in commercial activities

- Income threshold: in the first five-year: 15.700 billion VND/year during all

of three previous years (for Vietnam only); in the years to come: general

threshold of TPP

Exceptions:

General list of all TPP member

- Kind of activities;

- Fields;

- Kind of SOEs. 33

State-Owned Enterprises (SOEs)

Regulated SOEs’ obligations

- To act in accordance with commercial considerations

- Not to discriminate when buying goods, services

- To comply with the TPP obligations if authorized by the Government

Viet Nam has reservation of obligations in some cases:

- SOEs produce and act in order to stabilize the macroeconomic

- SOEs produce and act in order to develop the mountainous area

- Preferential treatment of SME

- SOEs in the field of mass communication

- Specific reservation for some listed SOEs (Petrovietnam, EVN, SCIC,

Vinacomin, DATC, Banknet, VDB, Agribank…)

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State-Owned Enterprises (SOEs)

Obligations of the State in the relation with SOEs

- No non-commercial assistance that negatively affect other TPP

members’ benefits

- Objective act of administrative authorities in managing and

controlling SOEs

- Domestic courts shall hear the cases submitted by/against FDI

enterprises in its territory

- Transparency in basic information of SOEs: Vietnam reserves this

commitment in 5 years and a half.

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Intellectual Property

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Intellectual Property

General commitment

- Acceding IP treaties

- Principles (NT, Transparency)

- Coordinance and cooperation

Commitment on IPRs protection standards

- Trademark

- Geographical Indications

- Patents

- Copyrights, and related rights

- Industrial designs

IPRs protection of some specific products

- Pharmacy

- Agricultural Chemical Products

Enforcement of IP commitment

- General issues

- Civil remedies, Criminal remedies

- Border Measures37

Trademark

- Protection of sound (encourage protection of scent)

- Famous trademarks

- Domain names that is identical or confusingly similar to a trade mark

with a bad faith intent to profit.

Geographical indications (GIs)

- No protection for GIs that cause confusion with registered or protected

trademark.

- No protection for GIs that are customary in common language or

common name for the associated good.

Industrial designs

- Protection for industrial designs embodied in a part of an article.

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Intellectual Property

Copyright and related rights

Term of protection: the life of the author + 70 years

Prevent the activities considered as a tool for IP infringement (Technological Protection Measures - TPM, Rights Management Information - RMI)

- Activities: Manufacture, import, distribute, offer for sale or rental to the public for the purpose of circumventing any effective TPM, RMI

- Remedies:

+ Criminal remedies and payment of damages with respect to intended activities for commercial purpose

+ Compensation for damages in case of intended activities without commercial purpose

+ Exceptions: library, museum, archive, educational institution, or public on-commercial broadcasting entity.

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Intellectual Property

Intellectual Property

Patent

Scope of application:

Add one of three subjects:

- new function,

- new methods of using, or

- new way of using procedure of a known product

Raising concern of evergreening?

Procedure of registration

- Compensation for unnecessary due delay ( Vietnam reserves three

years)

- Make available to the public the registration application

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Intellectual Property

Agriculture Chemicals:

- Protection of undisclosed test or other data for at least 10 years

Pharmaceutical Products

- Protection of undisclosed test or data for 3 or 5 or 8 years (depended) (Viet Nam reserves 10 years for the case of BTA)

- Compensate the unnecessary delay due to application for marketing approval: Viet Nam reserves 5 years

- Patent linkage: notify and give chance for patent holders to protect their rights before granting marketing approval of protected pharmaceutical products

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Penalties:

Infringe the protection of trade secret

- Wilfully and unauthorizedly access to a trade secret

- Wilfully and unauthorizedly acquire a trade secret

- Wilful and fraudulent disclosure of a trade secret

Infringe copyright (and related rights)

- Wilfully import/ export counterfeit and pirated trademark goods in

commercial scale or for profit

- Wilfully import or use counterfeit labels, package in commercial scale or

for profit

- Re-film the movie in a cinema that causes considerable damages

Behaviours of IP infringements (TPM, RMI)

- Manufacture, import, distribute, offer for sale or rental to the public TPM

- Erase or change RMI; produce, import/export, distribute, offer for sale

the product of which PMI has been erased or changed42

Intellectual Property

Penalties

- Conditions: Willfulness, commercial scale, profit purpose

- Method: without request

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Intellectual Property

Labour

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Labour

04 Principles under ILO Declaration 1998

- Freedom of association and the effective recognition of

the right to collective bargaining

- The elimination of all forms of forced or compulsory

labour

- The effective abolition of child labour, a prohibition on the

worst forms of child labour

- The elimination of discrimination in respect of

employment and occupation

Principles of acceptable conditions of work

Other (e.g.. consultation…)

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Labour

Viet Nam – United Stated bilateral commitments

Specific requirements and targets that Viet Nam shall

perform to comply with TPP compulsory commitments

- freedom of association and

- mechanism, institution, and resource of enforcement

Remedies if Viet Nam does not implement

- Unilateral right of US to review

- Unilateral right of US to cease all tariff elimination

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Electronic Commerce47

Electronic Commerce

• Commitments on electronic commerce policies

- no import tariff on electronic transmission;

- no discrimination among digital products

• Commitment of consumers protection

- Adopt or maintain consumer protection laws to proscribe

fraudulent and deceptive commercial activities that cause

harm to consumers engaged in electronic commerce;

- Adopt or maintain law to protect personal information of

consumers engaged in electronic commerce

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Electronic Commerce

• Commitments to recognize the freedom right of parties

engaged in electronic commerce

About the freedom right of businessman

- Allow to transfer cross-border information via electronic devices to

enable trade activities;

- Do not have to put or using computing facilities of the host country to

perform electronic commerce;

- Do not have to provide transfer conditions or allow to access source

code of software.

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Electronic Commerce

• Commitment to recognize the freedom right of parties

engaged in electronic commerce

About the freedom right of consumer

- Access and use services and applications available on the

Internet;

- Connect the end-user devices, and access information on the

network management practices of a consumer’s Internet

access services supplier.

About the freedom right of interconnection supplier

- Recognize that the supplier has the freedom right of

negotiation on common commercial basis to seeking

international Internet connection50

Thank you!

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The Center for WTO and Economic Integration (VCCI)Tel: 04 35771458Email: banthuky@trungtamwto.vnwww.trungtamwto.vn