According to the Ministry of Industry and Trade (MoIT), to benefit from tax slashes in the EVFTA, Vietnamese textiles and garment industry must source materials from Vietnam or the EU, and the cutting and sewing processes must take place in either, too. The EVFTA also allows materials sourced from South Korea, with which the EU and Vietnam have an FTA, to be eligible for tax incentives.

Still, VitaJean was not qualified for preferential tariffs as it mainly sources materials from Taiwan and mainland China. If the company sourced materials from elsewhere, it would face another challenge in quality and design. For example, Thai materials generally do not have versatile design and quality like those from China. It is also difficult to import materials from Thailand than China due to higher logistics costs and slower delivery times.

On the same note, Garmex Saigon Corporation is going to be in a tough position once the EVFTA comes into force as it will not meet the EVFTA’s fabric-forward rules because it mainly relies on Chinese materials. At present, the EU market accounts for 40 per cent of the company’s export revenue.