Vietnam has been grappling with constraints on its shrimp exports to South Korea due to existing quotas. The Vietnam Association of Seafood Exporters and Producers (VASEP) reveals that Korea stands among the top five markets for Vietnamese shrimp, contributing significantly to the industry’s success.

Current Market Standing

In 2022, Korea held the fifth position as a major market for Vietnamese shrimp, recording an export value of USD 468 million. The trend continued in the first 11 months of 2023, where Korea climbed to the fourth spot, with export values reaching USD 316 million.

Projected Growth in Korean Shrimp Demand

The Import-Export Department, under the Ministry of Industry and Trade, highlights a promising outlook for Vietnamese shrimp in Korea. A report by Future Market Insights projects an average annual growth of 8.9% in shrimp demand in Korea from 2023 to 2033. The forecast indicates a substantial surge in shrimp sales, anticipated to rise from USD 2.75 billion in 2023 to approximately USD 6.45 billion in 2033.

Quota Challenges and Implications

To meet the escalating demand in Korea, Vietnamese shrimp exports have surged in recent years, surpassing the allocated quota of 15,000 tons/year as per the Vietnam-Korea Free Trade Agreement (VKFTA). Ms. Nguyen Thi Thu Sac, President of VASEP, notes that this has led to a peculiar situation where Korean importers must participate in competitive bidding to secure a quota, incurring significant costs amounting to 14-16% of the shipment value. This cost aligns closely with the import tax rate of 20% applied to volumes exceeding the quota.

Impact on Competitiveness

Korean importers express concerns that despite the implementation of VKFTA, the additional costs associated with securing quotas make importing Vietnamese shrimp economically challenging. These costs effectively translate into continued taxation ranging from 14% to 20%, eroding the competitive edge of Vietnamese shrimp in the Korean market. Consequently, importers are reconsidering their options and exploring shrimp sources from other countries, such as Peru, where import tax rates have been reduced to 0%, aligning with the FTA provisions with Korea.