What do businesses do to cope with foreign trade traps?

Vietnamese businesses and foreign businesses exchanged and explored cooperation opportunities at the Mechanical Industry Trade Conference in early July 2024. Photo: TH

Risk of trade disputes

That was shared by VIAC experts at the Conference "Current foreign trade transactions: Changes in business strategy and dispute management" held in Ho Chi Minh City last weekend.

Through many years of experience supporting domestic and foreign businesses in legal matters, experts have analyzed and summarized a number of outstanding issues that often arise in transactions with international partners. Through the reality of the case and the losses that Vietnamese businesses have suffered, experts believe that businesses need to fully understand the nature and characteristics of foreign trade contracts and legal documents governing as well as potential political or cultural risks. In addition, businesses need to review and evaluate the capacity of the contracting parties, transaction conditions, and legal regulations of the host country to proactively respond to risks that may arise during the implementation.

From a legal perspective, Lawyer Bui Van Thanh, Head of New Sun Law Office shared "Contractual solutions for some key import-export markets and methods to limit  partners' influence in resolving disputes with foreign elements”. According to Mr. Thanh, through statistical data on import and export activities in Vietnam in 2023 and the first 4 months of 2024, the unstable import-export chart of this industry compared to others proves that this industry is easily vunerable to market fluctuations. Therefore, to transact effectively, businesses must be very "sensitive" to new changes and new situations that may arise, especially related to legal matters. For dispute resolution activities, Lawyer. Thanh believes that the important factors when managing disputes in foreign trade transactions are applicable laws and dispute resolution agencies. In order not to be disadvantaged when a dispute arises, businesses need to be very careful when drafting terms regulating the above contents.

Sharing about the import-export picture of wood industry enterprises, as well as avoiding trade disputes, Mr. Vu Quang Huy, General Director of TEKCOM Joint Stock Company, said that Vietnam's import-export rate of wood and wood products increased by 24.5% and 19.5% respectively year on year. However, along with such significant increase, enterprises are exposed to challenges in terms of sustainability criteria set by import and export markets such as: Key export markets are increasingly implementing stricter regulations on the legality and sustainability of wood products. Requirements for low carbon emissions in operations across the supply chain to achieve Net-zero goals. European anti-deforestation regulations, which took effect from the end of June 2023; The US requested to increase the frequency of investigations applying trade remedies to the wood industry. Most recently, DOC continued to extend the investigation of tax evasion with wooden cabinets imported from Vietnam. In addition, some importing countries introduce non-tariff barriers to limit  imported goods.

Analyzing some foreign trade trap risks such as commercial fraud, unclear contracts, payment and transportation risks, market fluctuations and policies, legal and compliance risks, Mr. Huy offered some experience in preventing foreign trade traps is that businesses need to carefully evaluate partners, draft clear and detailed contracts, have safe payment methods, insure goods, monitor and update market information.

Green transformation meets export markets

In addition to important notes for export businesses when signing foreign trade contracts to avoid disputes, experts attending this conference also discussed a lot about green transformation. Answering the question "Why must we be green?" Dr. Vo Tri Thanh, Director of the Institute for Brand Strategy and Competitiveness Research, VIAC Arbitrator said that this is an order and demand of the market itself, international commitments... that businesses must meet.

Thus, pressure from the market requires businesses to move and adapt the trend of transforming the economic structure from "brown" to "green". To meet this requirement, Mr. Thanh recommended that businesses should be flexible in choosing and approaching partners and target markets, and actively make appropriate adjustments to key products. In addition, "greening" in businesses should also be given due attention. In particular, the implementation of ESG is a "vital" factor in branding and sustainable development of businesses. “On when Vietnam needs to remove two inherent bottlenecks: infrastructure and human resources can Vietnam add value, strongly attract FDI capital, and take advantages to "rethink, redesign, rebuild" in a volatile world" - Dr. Vo Tri Thanh proposed.

Regarding taking advantage of commitments and agreements related to import and export to facilitate transactions between Vietnamese businesses and international partners, Mr. Nguyen Huu Nam, Deputy Director of the Vietnam Federation of Commerce and Industry Nam (VCCI), Ho Chi Minh City regional branch, said that besides the advantages, FTAs ​​also put a lot of pressure on businesses as they force them to quickly change and catch up with new standards. Otherwise, they can be excluded and unable to increase competitiveness. Through research, Mr. Nam believes that major markets will strengthen the tightening of standards and regulations on goods so businesses have to map out strategies and plans to change production processes, import raw materials, and "greenize" quickly so that trade activities do not stagnate, and at the same time find many new opportunities in new markets.