Cashew processing and exporting enterprises are worried because they are stuck between managing raw materials, orders and complying with import and export regulations.

Despite the continuous fluctuations in the market, Vietnam has always maintained its position as the world’s largest cashew processing and exporting country with increasing export output. However, enterprises are worried because they are stuck between managing raw materials, orders and complying with import and export regulations.

Mr. Bach Khanh Nhut, Vice President of the Vietnam Cashew Association (Vinacas), said: In 2023, cashew nut exports set a record with 644,000 tons, bringing in 3.6 billion USD. By the end of October 2024, the export turnover of cashew nuts is estimated to reach 3.6 billion USD. The processing capacity of Vietnamese factories needs about 3 – 3.5 million tons of raw cashew nuts each year.

Meanwhile, domestic raw cashew output is only about 300,000 – 350,000 tons (equivalent to 10%). Thus, businesses have to import about 3 million tons of raw materials each year; of which, nearly 80% are from Africa.

African raw cashew materials contribute greatly to the export results of the Vietnamese cashew industry, but businesses importing raw cashews from Africa are facing difficulties from import-export control regulations and food hygiene and safety.

Specifically, according to Point a, Clause 1, Article 14, Decree 15/2018/ND-CP detailing the implementation of a number of articles of the Law on Food Safety: imported plant products used as food must originate from a country or territory with a food safety control system that meets Vietnam’s regulations, complete registration procedures and be considered by a competent authority of Vietnam and included in the list of countries and territories registering to export food of plant origin to Vietnam.

However, currently, African countries are not on the “list of countries and territories registering to export food of plant origin to Vietnam” of the Plant Protection Department, Ministry of Agriculture and Rural Development. Thus, raw cashews from African countries are only allowed to be imported as raw materials for export processing, not qualified to be used as food for domestic consumption.

According to the Vice President of Vinacas, this regulation is correct and necessary to create a barrier to control the quality of imported goods used as food. However, when applied to raw cashew materials, it causes difficulties for businesses. Imported raw cashews must go through plant quarantine before being processed. However, for whatever reason, they cannot be sold domestically. If violated, businesses can be prosecuted for smuggling.

According to statistics from the Binh Phuoc Customs Department, the capital of Vietnam’s cashew industry, from 2022 to present, this agency has prosecuted 9 cases related to cashew smuggling by businesses in the area. The common point of these cases is that businesses all import raw cashews from Africa for the purpose of making raw materials for processing and export, but then switch to domestic consumption (selling to other businesses) without declaring to customs.

Ms. Nguyen Thi Thao, Deputy Head of the Business Department, Binh Phuoc Provincial Customs Department, said: According to current regulations, enterprises importing raw materials for processing and exporting are exempt from import tax when they have full processing facilities and export contracts. In case they want to change the purpose of use for imported raw materials, enterprises must re-declare customs and pay taxes according to regulations.

In theory, enterprises can re-declare customs to change the purpose of use, but in reality, African raw cashews do not meet the conditions for domestic consumption, so enterprises cannot trade with each other.

Mr. Ta Quang Huyen, Director of Hoang Son 1 Company (Binh Phuoc) shared: Cashew processing activities depend heavily on imported raw materials, so enterprises often take advantage of the crop season in African countries to buy quality goods at good prices. However, business and export are not always favorable. In the first half of 2024, many processing enterprises lack raw materials because raw cashew suppliers in Africa are slow to deliver goods and deliver goods of poor quality.

According to Mr. Ta Quang Huyen, the application of Decree 15/2018/ND-CP, although applicable to other industries, is unintentionally creating bottlenecks in raw materials for many cashew enterprises. Specifically, when raw materials are purchased but the export partner cancels or postpones the contract, the enterprise cannot sell the raw materials to other enterprises, nor can it process for domestic consumption.

This causes enterprises to keep raw cashews in stock for a long time, reducing quality and increasing costs. At the same time, other enterprises have export orders but do not have raw materials, leading to missed opportunities.

Mr. Dau Anh Tuan, Deputy General Secretary, Head of Legal Department, Vietnam Federation of Commerce and Industry (VCCI) analyzed: Decree 15/2018/ND-CP is considered a step forward in Vietnam’s food safety control policy when switching from pre-inspection to post-inspection. Controlling the quality and safety of imported food is essential to ensure the health of consumers and contribute to protecting domestic production.

While applying it to the cashew industry, it creates certain disadvantages for businesses because this is a rather specific industry, heavily dependent on raw materials imported from Africa. At the same time, the procedures for African countries to register for import into Vietnam are quite complicated and many countries are not interested in registering for export.

“To solve the immediate difficulties, the Cashew Association needs to proactively review the impacts, count the specific immediate and long-term damages that the regulations cause to the industry, and report to the competent authority for consideration and adjustment. On that basis, it is possible to propose an “exception” mechanism when applying some provisions of Decree 15/2018/ND-CP to the cashew industry or a mechanism allowing enterprises to transfer imported raw cashews to another unit with the same purpose of processing for export.”, Mr. Dau Anh Tuan recommended.

Regarding this issue, Vinacas recently sent an official dispatch to the Prime Minister, the Ministry of Agriculture and Rural Development, the Ministry of Health, the Ministry of Industry and Trade and the General Department of Customs on removing obstacles in importing raw cashews from African countries.

Accordingly, Vinacas recommends that the Prime Minister and relevant ministries consider unilaterally accepting raw cashews imported from Africa and cashew nuts processed from this source to fulfill financial obligations and be able to be sold domestically with strict requirements on food safety inspection.

In particular, cashew nuts processed from imported raw cashews from Africa are eligible to be of Vietnamese origin according to Decree 31/2018/ND-CP detailing the Law on Foreign Trade Management on the origin of goods and Circular 05/2018/TT-BCT regulating the origin of goods. Vinacas recommends that relevant ministries and sectors consider and apply this regulation so that cashew nuts are allowed to be sold domestically after fulfilling financial obligations with imported raw cashews.

In the long term, businesses propose that the Ministry of Agriculture and Rural Development and relevant agencies soon negotiate with African countries so that they can register raw cashews as a food product of plant origin to be imported and consumed in Vietnam.