Vietnam has a trade deficit with China as it imports more from China more than it exports. However, in wooden furniture exports, Vietnam has gained an export surplus of $600 million a year.
Unlike the US and the EU which buy processed products such as tables, chairs and wardrobes, China mostly buys low value-added products and materials to make pulp.
While the US and the EU importers require Vietnamese exporters to show certificates on timber origin, Chinese importers do not ask for these.
However, this is not good news for Vietnam as the country’s forests have been devastated, while the State cannot collect taxes on the exports to China.
Chinese businesses have been flocking to Vietnam to collect wood under the names of Vietnamese companies.
In the Dong Ky wooden furniture craft village in Bac Ninh province, for example, there are many Chinese timber collectors in the Dong Ky craft village in the northern province of Bac Ninh which specialize in making products from wood.
“They buy a set of table and chairs for $1,000, which they can sell later for $1,300. However, they declare to the customs agencies that they bought the product for $700 only, and therefore, they can reduce the tax they have to pay,” Quyen explained.
Quyen noted that Vietnamese businesses should not be satisfied with doing business with Chinese just because they don’t need certificates of wood origin and don’t need to prove the legal origin of timber.
“This would do more harm than good. This leads to Vietnamese businesses ignoring international standards,” he said.
The highest risk in doing business with Chinese is that they manipulate Vietnamese buyers to sell young trees to them as well, he said.
“Chinese pay for the forests now but they will only get deliveries in two or three years. A lot of Vietnamese farmers are very poor and they have to sell wood to get money to cover basic needs,” Quyen added.
In fact, the state has been aware of the danger and has tried to stop ‘bleeding of forests’ and the excessive exports to China. It has released a legal document on prohibiting export of round timber to China, and it plans to raise the export tax rate on wood shavings from the current zero percent.
However, it still needs to consider the plan thoroughly before making a decision, because the taxation may affect forest planters’ livelihoods.
