30-6-2023 (HANOI) Vietnam, the world’s second-largest coffee exporter, is set to face compliance challenges with the European Union’s new anti-deforestation trade law. The EU is Vietnam’s main market for coffee, with 50 to 60 percent of the country’s total coffee exports heading there each year. The European Parliament passed legislation in April 2021 to ban goods linked to deforestation, including coffee, and requires proof that imports are deforestation-free. The new law will affect Vietnamese farmers and exporters, who will have to grapple with complex paperwork to provide verifiable evidence.
Vietnam’s Agriculture and Rural Development Minister, Le Minh Hoan, said the regulation would directly affect stakeholders in the supply chains and impact the livelihoods of farmers, particularly smallholders, who make up the majority of Vietnam’s coffee production. He added that they would face many challenges, particularly in terms of location data, traceability, monitoring systems, and deforestation-free supply chain management.
Industry players said that most of Vietnam’s coffee production does not flout the new EU rule, as a majority of its plantations were established decades ago. The main challenge is the process of providing evidence that their goods comply with the new law. The European Union Deforestation Regulation mandates companies to prove their goods are not produced on land deforested after 2020. This means Vietnamese farmers and exporters need to adhere to strict rules on the traceability of their coffee beans and the geolocation of each coffee farm.
Most of the coffee produced in Vietnam, some 90 percent, is farmed by smallholders, making tracking each bean difficult. Major Vietnamese coffee exporters are working with independent agencies in the international coffee industry to promote and obtain certificates on sustainable production. However, the EU’s new requirements are much stricter and demand more details than current standard sustainability certificates.
Vietnam has 18 months, until December 2024, to comply with the new regulation. Some major coffee exporters have launched pilot programmes to collect information and data in an attempt to devise solutions. While some industry insiders believe the new EU rules will help transform the country’s coffee industry into a more sustainable trade, observers have warned that the added compliance will likely increase the cost of coffee production in Vietnam. Without close government scrutiny, the increasing price of coffee in the country could prompt some farmers to clear forests for land to grow coffee plants, putting their exports at risk of being banned by the EU.
