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Workers at the ILA Company producing wooden furniture for export. — VNA/VNS Photos

Trần Duy Khánh, head of Marketing and Market Analysis at KNA Certification Company Limited (KNA Cert), highlighted the US as the largest wood product consumer, importing US$24-25 billion annually, with Vietnamese products accounting for 37 per cent of all US imports and nearly 50 per cent of Việt Nam's wood export turnover.

However, evolving US standards emphasise sustainability so Vietnamese enterprises will need to align to these requirements.

In the EU market, Vietnamese wood products account for just 1.9 per cent of the total EU wood imports and 3.2 per cent of Việt Nam's export turnover, due to customer preferences and stringent EU Timber Regulation (EUTR) enforcement.

The European Commission (EC) continues to enforce EU Timber Regulation (EUTR) legislation which presents a notable challenge for the Vietnamese wood industry as of the close of 2024.

Khánh said that FSC certification offers a competitive advantage in the EU market, facilitated by the free trade agreement between Việt Nam and the EU, providing tax reductions and export incentives.

He emphasised how it was important that the Vietnamese wood industry adapt to meet evolving global standards, particularly in terms of sustainable forest development and transparent supply chains and to capitalise on lucrative market opportunities.

Multi-faceted benefits

Vũ Thị Quế Anh, a representative of FSC in Việt Nam, reported that there are currently approximately 310,000 hectares of FSC-certified forests in Việt Nam. This includes over 20,000 hectares of untouched natural forests and planted forests.

The number of Forest Stewardship Council Chain of Custody (FSC/CoC) certifications in Việt Nam is rapidly increasing, with 1,730 units currently certified.

Additionally, Việt Nam has various other certified FSC raw material sources, such as over 9,000 hectares of bamboo and 6,000 hectares of rubber, with rubberwood as a vital export material in the global market.

"For FSC-certified wood, the area is merely one aspect. More crucially, the products must ensure sustainability," Anh told Nông Nghiệp (Agriculture) newspaper.

In Việt Nam, FSC-certified raw materials command a higher price, ranging from 10 to 15 per cent compared to non-certified wood.

"Premium buyers in the global market are willing to pay extra for products made from FSC-certified materials. They recognise the social and environmental values that products derived from FSC-certified materials bring to sustainable forest development," said Anh.

FSC is the standard of choice for global consumers when selecting products for consumption, according to Phạm Đình Sức, chief evaluator of KNA Cert.

While most wood processing and exporting enterprises in Việt Nam are currently certified due to customer demand, proactive FSC certification can lead to many benefits.

FSC operates in 123 markets worldwide, providing an official website where participating enterprises can update contact information and connect with potential customers. By joining FSC, small enterprises can also access ways to collaborate with global partners.

Tô Xuân Phúc, executive director of the Policy, Trade, and Finance Programme of Forest Trends, emphasised two core requirements for wood products to circulate in the EU market: avoiding deforestation and ensuring legality.

Currently, many customers in the region adhere to various voluntary sustainable production and consumption standards, including the necessity for FSC sustainable forest management certification.

Under the Voluntary Partnership Agreement between Việt Nam and the EU on forest law enforcement, governance, and trade in timber products (VPA/FLEGT Agreement), Việt Nam has agreed that all wood products exported to the EU are legal, necessitating enterprises to adjust and comply accordingly.

The EU Deforestation Regulation (EUDR) came into force in June 2023 and the new rules will become applicable as of December 30, 2024.

This development brings fresh challenges for Việt Nam's wood industry.

Effective from December 30, 2024, agricultural imports originating from Việt Nam, particularly wood products and destined for EU will necessitate certification verifying their origins are free from deforestation. Consequently, the majority of wood processing enterprises in Việt Nam are keenly watching evolving EUDR regulations.

According to Anh, the core requirement of the EUDR is that the listed products must originate from legal sources, extracted from areas without deforestation or forest degradation. Products produced on converted land after December 31, 2020, will not be accepted by the EU market.

Before being exported to European countries, these products will undergo rigorous scrutiny by the EU to determine if they are linked to deforestation or forest degradation.

Anh said :"The essence of the EUDR regulation is to curb the influx of unregulated or illicitly sourced timber and wood products into the European market. The time from June 2023 to December 2024 marks a crucial period for Vietnamese enterprises to gear up and align with the EUDR regulations."

Turning challenges into opportunities

Ngô Sỹ Hoài, deputy chairman of the Việt Nam Timber and Forest Products Association (VIFOREST), said wood, coffee and rubber are the three commodities directly affected by the EUDR regulation, with the wood industry having more advantages due to the implementation of the Forest Law Enforcement Governance and Trade Voluntary Partnership Agreement (FLEGT-VPA).

This bilateral trade pact between Việt Nam and the EU is aimed at providing a legal framework for Việt Nam's wood and wood product exports to the EU market.

The Vietnamese wood industry perceives the EUDR regulation as more of a gateway than a hurdle and a well-executed approach could lead to a significant surge in Vietnamese wood products entering the under-served European market.

Presently, Vietnamese wood products account for a mere 1.9 per cent of the total value of wood imports in the EU.

Furthermore, with opposition to the EUDR from neighbouring countries, Việt Nam's compliance could facilitate smoother market access for its goods in the EU.

Hoài said that there are still many obstacles for enterprises to comply with the EUDR regulations so that they need specific guidance.

The Ministry of Agriculture and Rural Development is actively negotiating with the EU to address these obstacles and the Forestry Department is preparing a forest soft map of Việt Nam before December 30, 2020, to serve as a reference basis.

Sustainable raw material sources

According to the Forestry Department, the global furniture market, valued at approximately $405 billion annually, will create a demand for wood and wood products totaling around $230 billion. Việt Nam's wood and wood product exports currently hold a mere 6 per cent of the global market share, indicating significant opportunities for expansion and market development.

In wood processing for export, raw materials account for 40-60 per cent of a product's cost structure. Between 2017 and 2021, Việt Nam's demand for raw wood increased from over 34 to 41 million cubic metres annually, with domestic timber extraction accounting for approximately 77.4 per cent of the supply.

However, Việt Nam still imports 5-6 million cubic metres of round wood annually to meet production needs, showing a heavy reliance on imported raw materials, said Đỗ Xuân Lập, chairman of VIFOREST.

With over 5,000 wood processing enterprises exporting to 140 countries and territories worldwide, Việt Nam's wood industry heavily depends on imported raw materials, especially since the ban on natural forest logging in 2016.

By 2023, Việt Nam had reduced its raw wood imports to just over $2.1 billion, a 28.3 per cent decrease from 2022, implementing systems to ensure the legality of imported wood, particularly in preparation for EUDR regulations.

With over a million households participating in the timber supply chain from planted forests, efforts are underway to help smaller-scale forest owners, often with less than a hectare, meet EU regulatory standards.

According to Hoài, the motivation for forest planting in Việt Nam has been supported by land use reform in forestry, resulting in between three and four million hectares of additional planted forests.

With over 3.93 million hectares of planted forests, Việt Nam can provide over 30 million cubic meters of wood annually for processing and export, contributing significantly to the industry's growth and sustainability efforts, Hoài said. — VNS