Q&A Vietnam-EU Voluntary Partnership Agreement

The VPA is a legally-binding bilateral trade agreement that aims to improve forest governance and promote trade in legal timber from Vietnam to the EU.

• Under the VPA both parties commit to trading only in legal timber products.
• Among other things, the VPA describes a timber legality assurance system capable of verifying the legality of timber products. When fully operational the timber legality assurance system will issue FLEGT licences to accompany Vietnam’s exports of verified legal timber products to the EU.
• Vietnam will then only export FLEGT-licensed timber products to the EU. The EU will only allow Vietnam’s timber exports to enter the EU if they are accompanied by a valid FLEGT licence. FLEGT-licensed timber is considered as meeting the requirements of the EU Timber Regulation, which prohibits EU importers and domestic producers from placing illegally harvested timber and timber products on the EU market.
• The VPA is the first that the EU has ever concluded with a major timber processing country and is the EU’s second VPA with an Asian country (after Indonesia).
• Learn more about VPAs in VPA Unpacked. Learn more about the Vietnam - Publish date: 18 November 2016

The full text of the VPA and its annexes is available on the European Commission’s website. Download the PDF here. Ministry of Agriculture and Rural Development. An inter-ministerial FLEGT-VPA Steering Committee has been in place since 2011. In 2011, Vietnam established two Working Groups: one to prepare the timber legality definition and another to prepare the legality assurance system. These Working Groups include representatives from government, industry association and one international NGO (WWF).

Products covered by the VPA include all those required by the EU regulation establishing a FLEGT licensing scheme, which are a minimum requirement for VPAs: logs, sawn timber, railway sleepers, plywood and veneer.
In addition to the minimum requirements of the product scope of a VPA, the VPA also covers other timber products such as wood in chips or particles, parquet flooring, particle board and wooden furniture.

Once operational, the VPA’s timber legality assurance system will cover all timber and timber products produced, acquired and/or in circulation in Vietnam. This includes wood and timber products imported into Vietnam. Vietnam’s timber legality assurance system and related regulations apply to all markets. However, only exports to the EU will receive a FLEGT licence.

The scope of the agreement covers all export markets and the domestic market in Vietnam. In terms of sources, the agreement covers imported timber and all domestic sources in Vietnam, including natural and plantation forests, confiscated timber (under specific circumstances), timber from home-gardens, farms and scattered trees, and rubberwood.

The specific references to timber from home-gardens and to rubberwood reflects the importance of these two sources associated with widespread micro-scale tree ownership and the growing volume of timber extracted from rubber plantations no longer productive for latex.

Vietnam’s timber legality assurance system and related regulations apply to all export markets, as well as the domestic market.

• With this commitment, the control and verification of operations will be the same for all timber and timber products produced, acquired and/or in circulation in Vietnam. FLEGT licences, however, will be only issued – at least initially - to exports destined for the EU market.
• FLEGT alone cannot stop trade in illegal timber, especially if major markets remain less regulated. Indeed, under the FLEGT Action Plan, the EU seeks to work with other major timber consumers to develop a more comprehensive framework to reduce imports of illegally harvested timber.
• China, which is the world’s largest importer of tropical timber and also a major buyer of Vietnamese timber products, is developing its own legality assurance system and there are efforts to link it to FLEGT under the EU-China Bilateral Coordination Mechanism on Forest Law Enforcement and Governance (FLEG).
• Other markets have implemented or are designing measures to eradicate illegal timber from their imports. These markets include the United States, Australia, Japan and South Korea.

After the entry into force of a VPA, there is typically a period of intense technical work to establish all systems and procedures required for its implementation. Once the Vietnam Timber Legality Assurance system (VNTLAS) has been fully operationalised, FLEGT licensing will begin after a joint assessment of the VNTLAS by Vietnam and the EU confirms that the system fully meets the requirements described in the VPA.

A FLEGT licence is a licence issued by a timber-producing country that has a Voluntary Partnership Agreement with the European Union. The licence attests to the legality of the timber or timber products.

When Vietnam’s timber legality assurance system is fully working as described in the Vietnam-EU Voluntary Partnership Agreement (VPA), Vietnam will issue FLEGT licences for timber bound for the EU.

The FLEGT licence looks like the template in Annex IV of the Vietnam-EU Voluntary Partnership Agreement (VPA). Download the PDF here.

Timber from species that are subject to the provisions of CITES are subject to the same control and verification procedures under Vietnam’s timber legality assurance system as other timber.

The CITES Management Authority of Viet Nam will issue CITES permits for shipments into the EU that contain only timber that are subject to the provision of CITES. In line with the FLEGT Regulation, timber and timber products which are subject to the CITES provisions shall be exempted from FLEGT licensing requirements. Shipments which do not contain timber subject to the provision of CITES shall be subject to a FLEGT licence.

(i.e. product scope) of the VPA and exported to the EU market provided that such shipment and the exporter have met with all the requirements set out in Annex II and supply chain control and verification under Vietnam’s timber legality assurance system (VNTLAS).

FLEGT licenses shall be issued prior to the shipment export process.

FLEGT licenses shall be granted by a Competent Authority assigned by the Government of Vietnam (see below).

The Viet Nam CITES Management Authority shall serve as the FLEGT Licensing Authority (referred to as the Licensing Authority).

Until the start of FLEGT licensing, timber products Vietnam exports to the EU will have to go through the normal due diligence process under the EU Timber Regulation (EUTR), if they are covered under its product scope. The EUTR prohibits the placing on the market of illegal timber and requires companies placing timber on the EU market to assess and mitigate the risk of illegal timber entering their supply chain. Once FLEGT licensing starts, FLEGT-licensed products automatically meet the EUTR requirements, meaning that no due diligence is required.

The core of the VPA describes Vietnam’s timber legality assurance system (VNTLAS), which will ensure that timber products are verified legal according to specified requirements for all stages of the supply chain, from the forest or the point of import to the point of final sale or export.

The VNTLAS has seven elements:

1. Legality definition: The legality definition states the aspects of a VPA partner country’s law for which the timber legality assurance system evaluates evidence of compliance. Vietnam’s legality definition is divided into two sections: one for ‘organisations’ (i.e. businesses, including private, state-owned and cooperatives) and one for ‘households’ (i.e. domestic households, individuals and village communities). See question below for more information on the legality definition under the EU-Vietnam VPA.

2. Verifiers of legal compliance: Verifiers are documents referred to in the legality definition that are used for organisations and households to demonstrate legal compliance. There is a distinction between static and dynamic verifiers:

• Static verifiers are used to verify the legal compliance of the establishment and operations of Organisations and Households in timber harvesting, processing, transportation and trade.
• Dynamic verifiers are used to verify the legal compliance of timber origin and timber in circulation at each stage of the supply chain.

3. Supply chain controls: Supply chain controls ensure that timber products verified as legal remain legal throughout all processes associated with the supply chain. Supply chain controls also prevent verified legal products being tainted by unverified products entering the supply chain. They apply to all three supply-chain critical control points in the VNTLAS:

• Timber sources entering the VNTLAS: Vietnam maintains strict control over the management and harvesting of timber from domestic natural forest, and for allowing confiscated timber to enter the VNTLAS supply chain. To ensure compliance of imported timber, Vietnam shall issue legislation requiring importers to conduct due diligence to ensure that imported timber has been legally harvested, produced and exported in accordance with the legislation in the country of harvest.
• Intermediate stages: The controls include systems to support data analysis to monitor timber volumes within and between stages of supply chains; and physical inspections particularly on the basis of the analyses of supply-chain data.
• Export to any market: A risk-based approach will apply, based on the OCS category (see below), for the verification of shipments of timber destined both for EU and non-EU markets.

4. Verification of compliance: Verification of compliance involves checks that all the requirements of the VPA legality definition and supply chain controls have been met to ensure that timber products are legal. Vietnam will develop a new Organisations Classification System (OCS) to assess periodically the risk level of all organisations with regard to their compliance with VNTLAS requirements in order to apply appropriate verification measures in an effective, efficient and timely manner. The OCS will be operated by the Forest Protection Department or other entities authorised by the government. The OCS will also support the Forest Protection Department in its management of violations of the law on forestry and other key sectors under the legality definition.

5. FLEGT licensing: Once the VNTLAS is operational, it will provide for the issuance of a FLEGT licence for each shipment of timber products that is exported to the EU market. Such shipments and their exporters must meet all the requirements set out in the VNTLAS legality definition, supply chain controls and verification procedures.

6. Internal inspections and a feedback mechanism: Government agencies may make inspections to detect loopholes in laws, regulations and management mechanisms and to recommend solutions; as well as to prevent and combat corruption and to detect and handle violations of the law. There will be a mechanism for stakeholder complaints and feedback concerning the VNTLAS and FLEGT licensing.

7. Independent evaluation: An independent evaluator will periodically assess the implementation, efficiency and credibility of the VNTLAS in order to identify, document and report any non-compliances and weaknesses in the system. The independent evaluator will propose measures for improvement to the EU-Vietnam Joint Implementation Committee.

The VPA defines "legally produced timber" as timber products harvested or imported and produced in accordance with legislation of Vietnam, as set out in the legality definition and other relevant provisions of the VPA. In the case of imported timber, it means timber products harvested, produced and exported in accordance with relevant legislation of the country of harvest (covering rights to harvest, forestry activities, taxation and fees, and trade and customs).

The VPA legality definition itself sets out the core requirements of legislation applicable to timber in Vietnam in the form of principles, criteria and verifiers. All elements of the legality definition need to be complied with in order for the timber to be considered to have been legally produced. The VPA legality definition is divided into two sections: one for ‘organisations’ (operators registered as a business, including private, state-owned and cooperatives) and one for ‘households’ (including domestic households, individuals and village communities).

Each section of the legality definition includes seven principles:

1. Principle I: Harvesting of domestic timber complies with regulations on land use rights, forest use rights, management, environment and society

2. Principle II: Compliance with regulations on handling confiscated timber

3. Principle III: Compliance with regulations on importing timber

4. Principle IV: Compliance with regulations on timber transportation and trade

5. Principle V: Compliance with regulations on timber processing

6. Principle VI: Compliance with regulations on export

7. Principle VII (Organisations): Compliance with regulations on tax and labour; and Principle VII (Households): Compliance with regulations on tax.

To comply with the legality definition and show that their timber has been legally produced, ‘organisations’ and ‘households’ shall comply with all the applicable indicators under the seven principles.

Vietnam’s VPA addresses the legality of not only its own timber products but also those Vietnam imports, from around 80 countries, often for processing and export. To do this, the VPA includes requirements for Vietnamese operators to exercise due diligence to assess the legality of timber and timber products they import.

• Vietnamese importers will now have to gather information from their suppliers in other countries, analyse this information to identify the risk of illegality, and adopt measures to mitigate the risk of importing illegal timber.

• This means that when the VPA is implemented, it will not only ensure that all Vietnamese timber exports to the EU are legal. It will also raise standards throughout supply chains in the 80 countries that supply timber to Vietnam

• Vietnam’s timber legality assurance system will apply three risk-based filters and measures to the verification of all imports:

• Customs risk assessment measures
• Timber species risk categories
• Risk associated with geographic origin
• In addition to issuing legislation requiring importers to conduct due diligence over the legal origin of imported timber, Vietnam will apply adequate, proportionate and dissuasive sanctions in case of non-compliance with this legislation.

The concept of due diligence is an important element of Vietnam’s risk-based approach for the implementation of the VNTLAS. Vietnam will develop dedicated legislation to set out the details of this approach. The key pillars of due diligence included in the design of the VNTLAS are as follows:

• When importing timber, Vietnamese importers shall complete a self-declaration that documents their due diligence exercise, including the collection of information, risk assessment and mitigation of any risk related to the legal origin. Compliance with due diligence requirements will be verified by Vietnam Customs in cooperation with other relevant agencies. This exercise of due diligence will be in addition to a requirement to provide documentation demonstrating legality of timber for those sources identified as presenting a greater risk of illegality.
• When buying timber on the Vietnamese domestic market, organisations and households take responsibility for the legal origin of the timber and must check the conformity of the timber product dossier with the timber to ensure that the sourced timber is of legal origin.

Transit timber remains segregated from timber entering Vietnam’s timber legality assurance system (VNTLAS). Such transit timber is not subject to VNTLAS legality verification and will not be covered by the FLEGT licensing scheme. However, it remains under the supervision of the Customs Authority from the entry point into Vietnam until its exit from Vietnam.

Yes. Operators that hold voluntary certification will be subject to the same requirements as non-certified operators. All exporters need to get FLEGT licences to export timber products.
Vietnam shall assess voluntary certification and national certification schemes according to VNTLAS requirements in order to recognise schemes that can then be taken into account as a supplementary verifier for the risk-based verification of timber imports. Vietnam will also consider during implementation how voluntary certification schemes can be taken into account in the Organisations Classification System to assess the risk of operators.

Special attention will be paid to ensuring that the voluntary certification schemes' recognition process is both credible and fully owned at the national level: the Vietnam-EU Joint Implementation Committee will play an important role in endorsing the methodology for assessment of schemes, while the independent evaluation will monitor their use during implementation.

The VPA legality definition includes provisions for timber coming from conversion of forests. For example, the legality definition describes the legal basis for the decision on land-use change, the approval of measures on compensation for site clearance, and the approval of the environmental impact assessment.

The VPA is expected to bring economic, social and environmental benefits to Vietnam.

• The VPA should strengthen the market position of verified-legal timber products in the EU and elsewhere.
• FLEGT-licensed timber will automatically meet the requirements of the EU Timber Regulation so will be exempt from any due diligence assessment process, saving time and money. This should increase EU importer confidence in Vietnam’s timber products and make their products more attractive compared with equivalent products without FLEGT licences.
• The VPA will increase government revenues by blocking access to export and domestic markets for illegal operators who do not pay appropriate taxes and fees.
• The VPA will make it easier for Vietnam to manage forest resources in a sustainable way, notably through better monitoring and data for sustaining yield.
• The VPA will help small holders and small or medium enterprises to gain international market access.
• The VPA will raise the international profile of Vietnam as it will highlight Vietnam’s efforts to improve governance in one of its main economic sectors.

Several positive developments have emerged during the VPA negotiations:

• Consolidation of legislation and regulations: Vietnam has taken steps to consolidate the legislative and regulatory framework. In 2012, for example, the Ministry of Agriculture and Rural Development introduced a new Circular on timber supply chain controls, which brought together previously scattered regulations into a more coherent framework. Preparation of the VPA legality definition has, for the first time, brought together forestry-specific legislation and regulations with those of other sectors in a comprehensive framework.
• Streamlining and simplification of regulations: The Ministry of Agriculture and Rural Development issued a new Circular on harvesting of forest products. It includes several improvements that are consistent with recommendations of the VNGO-FLEGT Network – such as shifting the authorization level for notification / approval for harvesting closer to the forest owner (e.g. a shift from provincial authority to district, or district to commune); and simplifying the requirements that apply to households and communities wanting to harvest timber for basic needs (i.e. for non-commercial purposes).
• Clarification of forest land use rights: forest land use rights are fully incorporated in the legality definition for both Organisations and Households, in order to establish the legality of domestic timber supplies. Vietnam has taken an inclusive approach to defining forest land use rights, so that in addition to formal Land Use Certificates, the legality definition identifies a range of other documents used as evidence of land use rights. This responds to the current situation whereby some households have still not been allocated formal Land Use Certificates, but are nonetheless legal land users.
• Management and protection of domestic natural forests: Vietnam is taking steps to strengthen management and control exploitation of domestic natural forest. While these measures are not only linked to the VPA process, they reflect increased commitment to addressing FLEGT-related issues – for example in 2014, the Government introduced a prohibition on harvesting natural forest timber, with the exception of State Forest Companies (SFCs) that have SFM certification. Vietnam is developing a comprehensive national framework for sustainable forest management and certification.
• Stakeholder consultations: as compared to other trade negotiations in Vietnam, stakeholder consultations on the VPA have been wider and more frequent. A variety of consultation mechanisms have been used, and there is an increased level of public disclosure of information.
• Civil society engagement: There is an increased level of understanding and engagement of Vietnamese NGOs in FLEGT issues, in particular through the VNGO-FLEGT Network. As a result, government is more positive about the capacity and contributions of VNGOs and their ability to engage in policy work. This is evidenced by the involvement of one member of the VNGO-FLEGT Network in the independent review of the forest law that was initiated and received by VNFOREST in 2013; and involvement of others in ongoing work with VNFOREST to develop a national smallholder/tree farmer association. These developments show how the VPA has opened a space for work and discussions on forest governance in the margins of the negotiations.

Yes, the VPA legality definition is divided into two sections: one for ‘organisations’ (operators registered as a business, including private, state-owned and cooperatives) and one for ‘households’ (including domestic households, individuals and village communities).

This structure reflects the different compliance requirements of various regulations that apply to these two target groups. The division between organisations and households enabled Vietnam to design a clear, specific and feasible timber legality assurance system (VNTLAS).

The VPA legality definition identifies the various ways in which forest and land use rights are awarded. It states that the government of Vietnam: “aims to ensure that conducive conditions are created whereby domestic timber growers can produce and sell their products.” The legality definition therefore sets out a comprehensive and inclusive framework of verifiers on land-use rights and forest-use rights.

Vietnam will need to revise or issue new legislation to realise the commitments of the agreement. It will then need to develop the VNTLAS elements and build capacity to operate the system.

Several government agencies will be involved in the enforcement of the timber legality assurance system both at central and provincial levels. They include the Ministry of Agriculture and Rural Development (in charge of forests); the Ministry of Natural Resources and Environment; the Ministry of Labour, Invalids and Social Affairs; the Customs authority; and the Ministry of Industry and Trade.

VPA implementation will also require continuation of consultation with stakeholders in Vietnam, continued involvement of the EU delegation in Hanoi, external technical assistance and support, and for Vietnam to mobilise resources to implement the VNTLAS.

Before the FLEGT licensing scheme can become operational, the EU and Vietnam will undertake a joint assessment to confirm that the VNTLAS is operating as described in the VPA.

A Vietnam-EU Joint Implementation Committee (JIC) will oversee implementation of the VPA and will handle any issues as they arise.

The national process for providing feedback on implementation is outlined in the VPA as follows:

“Questions, complaints and denunciations from organisations or individuals will be received by the Verification Authority and FLEGT Licensing Authority either independently to VNFOREST or through established feedback mechanisms through the representative timber industry associations and socio-political organisations.”

“Feedback on VNTLAS implementation may go through policy dialogues and forums organised by the government, by representative industry associations, by socio-political organisations and by civil society organisations according to the laws of Viet Nam. The JIC will be regularly informed on the outcome of any policy dialogues or forums related to VNTLAS implementation.”

The VPA also states that the procedures of the independent evaluation of the VNTLAS “will specify how information received from relevant stakeholders will be recorded and utilized by the independent evaluator, notably NGOs, forest associations, enterprise, trade unions, local communities and people living in the forest areas.”

Vietnam will appoint the independent evaluator following discussions with the EU, through the Vietnam-EU Joint Implementation Committee.

Once independent evaluation starts, public summaries of the reports will be made available.

If and when illegal timber is shown to have passed through Vietnam’ timber legality assurance system undetected, this will provide opportunities to strengthen the system to avoid a reoccurrence of the breach.

• The VPA is part of a holistic yet gradual improvement of forest governance in Vietnam.
• The VPA will not eliminate illegal logging overnight.
• The timber legality assurance system is adaptive and subject to continuous improvement, informed by regular reports from internal controls and evaluations, independent observers and the VPA independent evaluator.
• The Vietnam-EU Joint Implementation Committee oversees the agreement and will take remedial actions if systematic failures are identified.