With the total volume of agriculture imports reaching $117 billion annually, the US market is any exporters’ dream market. However, fierce competition and technical requirements are hurdles to be overcome for any prospective exporters approaching this market.

Vietnam’s agricultural sector must overcome steep technical barriers in order to access the US market

The beguiling $117 billion market

According to David Lennarz, deputy chairman of the US-backed Registrar Corporation, which specialises in consulting for businesses exporting to the US, in 2015, the world’s largest economy imported $116.7 billion in agricultural products.

Of this figure, seafood accounted for $17.2 billion, fruit and chilled fruit juice $9.9 billion, vegetables $9.9 billion, and meat products made up $11.9 billion.

The market’s large scale and diversified distribution systems, from giant supermarkets to small shops, together with 317 million consumers, and diversity in both taste and income levels, has caught the attention of Vietnam’s exporters of agricultural produce.

Over recent years, the US has become a major market for Vietnamese agricultural exports, with 30-40 per cent of key products exported Stateside.

Nguyen Duy Khien, head of the American Market Department under the Ministry of Industry and Trade offered this assessment, “Vietnam exports many high-value agricultural products to the US, such as coffee, pepper, cashews, seafood, honey, and fruit. And now we’re seeing both volume and revenue rising. The majority of exports are supplementary to the US’ local products, including rice, catfish, and sugar, while only a few are substitutes. In the time to come, if the Trans-Pacific Partnership comes into effect, agricultural trade between the two countries will certainly see strong growth”.

The export of Vietnamese agricultural products to the US has witnessed dramatic growth over the past two decades.

Despite the decline in exports in 2015, this is still one of Vietnam’s most important markets, with a total of $30.8 billion exported last year.

“In 2016, the Ministry of Agriculture and Rural Development (MARD) will continue to promote the trade of products that meet quality requirements and have high added-value, such as seafood, wood, cashew nuts, pepper, and tea,” affirmed Le Van Banh, head of the Department of Processing and Trade for Agro-Forestry-Fisheries Products and Salt under MARD.

According to MARD, in 2015, exports to the US significantly decreased against 2014 (except for wood, cashew nuts, pepper, and rattan sedge and mats).

For instance, seafood fell 23.4 per cent, coffee fell 13.3 per cent, rubber was down 7.5 per cent, rice dropped 21.7 per cent, and tea also dipped 18.3 per cent.

The decrease was the result of several contributing factors including more intense competition, more complicated technical barriers, as well as impacts from currency devaluations by other countries, which  made Vietnamese goods relatively more expensive.

Le Van Quang, chairman of the Minh Phu Seafood Corporation, said that due to other exporting countries’ devaluation of their domestic currencies, the price of shrimp exports to the US became very cheap, effectively undercutting Vietnamese products.

Also, the anti-dumping duty that the US levied on Vietnamese shrimp was a factor.

Diverse competition and technical barriers

With over 20 years of experience exporting honey to the US market, Dinh Quyet Tam, chairman of the Vietnam Beekeepers Association, noted that 40 tonnes of Vietnamese honey entered the US market for the first time in 1992.

Since then, the volume has rapidly increased to peak at 47,000 tonnes in 2014, which is worth $132 million.

This 1175-fold increase over the 20 year period made Vietnam the largest exporter of honey to the US, accounting for 35.6 per cent of total import volume.

However, last year saw a sharp fall in Vietnamese honey exports to the US, down to just 37,000 tonnes, equivalent to $93 million.

“The competition is cut-throat. Besides the main competitors, India and Argentina, there are also emerging exporting countries such as Thailand and Myanmar.

Due to natural conditions, Vietnamese honey is somewhat darker in colour in comparison with some other countries’ products, which makes our brands less competitive.

Despite our efforts to change the colour through physical or chemical methods, this process remains very difficult.

Another reason for the drop in exports is the importer’s stipulation that the level of Carbenazim (a casting worm control agent) must be at 0 per cent.

This strict requirement is a technical barrier,” said Tam.

Tam hopes that the Vietnamese government will negotiate with the US government to ease the Carbendazim level requirement.

If the situation is not remedied, this year’s export of honey could decrease by 60 per cent in volume.

Likewise, the seafood sector also faces many difficulties. In 2015, exports fell to $1.3 billion from the previous year’s level of $1.7 billion.

However, the US market still accounted for 20 per cent of seafood exports, with shrimp, Pangasius/catfish, tuna, and crab making up the majority.

According to many exporting firms, the US market is one of the largest markets for Vietnamese seafood, while also containing the most technical barriers.

Vietnamese shrimp and pangasius/catfish will continue to face such barriers, including, most notably, anti-dumping duties.

Most recently, in March 2016, the US Department of Commerce (DOC) released a temporary conclusion over the anti-dumping duty on Vietnamese shrimp imported between February 1, 2014 and January 31, 2015.

Accordingly, a higher duty level has been imposed on voluntary respondents at the 10th administrative review (POR 10).

The anti-dumping duty on voluntary respondents was established at 3.56 per cent, nearly four times higher than the official 0.91 per cent set in POR9.

The tariff on other Vietnamese firms, those exporters not examined as mandatory or voluntary respondents in POR10, remains at 25.76 per cent.

This will certainly have an adverse impact on Vietnamese shrimp exporters, especially as the tax rate that Thai enterprises – Vietnam’s main competitor – have to pay is only 1.35 per cent.

Also in March 2016, the DOC announced their final decision on Vietnamese frozen fish fillets (between August 2013 and July 31, 2014), again imposing a higher level of anti-dumping duty against the last review.

Moreover, since March 2016, the US Farm Bill 2014 has come into force, posing many other pressures in terms of technical barriers for the importation of pangasius to the market.

Commenting on the issue, MARD’s Banh said, “The appeal of this market must be accepted in tandem with fierce competition from China, Thailand, and Indonesia – countries that have similar export structures for their goods. The technical barriers are also considerable challenges to Vietnamese firms”.

He also said that in the time ahead, MARD will continue to support exports in terms of accelerating negotiations to tackle the reasons leading to the drop of pangasius exports to the US market.

At the same time, MARD will organise campaigns to connect the business community and pave the way for tea products to enter the market in the second quarter of 2016.

Another challenge to Vietnamese products is the devaluation of exporting countries’ currencies. As a consequence, the price of Vietnamese products became relatively more expensive in 2015.

Importance of an agriculture trade counsellor in the US

The US government has initiated many investigations and lawsuits against Vietnam’s goods, for instance anti-dumping and countervailing cases.

However, MARD does not have any agricultural counsellor in the US, which makes this struggle particularly difficult.

Vietnam’s trade counsellor in the US, Dao Tran Nhan, said “We [trade counsellors] are spending most of our time dealing with agriculture-related issues in the US market, despite the fact that we are not specialists in agriculture. As such, we propose that MARD appoints a counsellor based in the US very soon.”

Regarding the US Farm Bill, although the US Department of Agriculture assessed earlier that the act would not affect export of Vietnamese pangasius, Vietnam still has to be on alert since this is a form of protection measure.

In fact, pangasius exports from Vietnam to the US fell significantly in 2015.

It is very costly for the farmers and exporters to meet the set requirements under the bill.

To tackle technical barriers set by markets like the US, experts in this field have suggested that Vietnam should build similar barriers to the US’ products.

“It is two-way trade. Both countries are markets for exports. Recently, our import volumes of US chicken thighs and wings rose dramatically. In the near future, pork imports may also increase with the implementation of the Trans-Pacific Partnership. Production cost in the US is equal to one third of that in Vietnam, while the Vietnamese market also holds great potential with a population of 93 million consuming pork,” Nhan said.

However, rather than erecting technical hurdles, the most important solution is to enhance the quality of Vietnamese exports to the US market, and to further accelerate chain productions.

“The drawback of Vietnam’s agriculture production is its small scale and quality relative to international standards. This prevents products from meeting US technical requirements,” said Nguyen Duy Khien.

Khien said that Vietnamese firms need to solve the problem so that their agriculture exports can be stimulated.