Furniture and Wood Sourcing – Export opportunities for Canadian Timber and Vietnamese Furniture

Thanks to the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP), Vietnam now is Canada’s largest trade partner in ASEAN and fifth largest in Asia. In fact, two-way merchandise trade between Canada and Vietnam reached CAD$7.98 billion in 2019 compared to CAD$6.5 billion in 2018. This free trade agreement has opened business opportunities for many categories between Vietnam and Canada, especially forestry products like woods, lumber, furniture, as well as agri-food. By leveraging zero tax and fewer export barriers, Vietnam has imported Canadian timber and exported furniture to Canada. As a result, Vietnam now becomes Canada’s fourth-largest furniture supplier.

 

In the previous session we reviewed export opportunities for agri-food and seafood between Canada and Vietnam with The Honorable Keith Colwell, Ministry of Agriculture and Ministry of Aquaculture & Fisheries of Nova Scotia, Canada. This interview session, we had a great honor to interview Ms. Minh Tue, Director of Business Development at Minh Duong Furniture Corporation. She’s also a standing committee member at Handicraft & Wood Industry Association of Ho Chi Minh City (HAWA), a non-government and volunteer association established in 1991. HAWA’s mission is to connect and support members with training and education as well as connection activities to promote trading and business performance for its members. Currently, HAWA has 560 members including wood processing, handicraft, machinery and raw material trading.

A sincere thanks to Ms. Minh Tue to join this interview with Warehouse Transport Group. Here are our questions for her and her sharing as following:

1) WTG: What is Minh Duong Furniture’s history & experience in manufacturing & exporting to the North American market?

Ms. Minh Tue: Minh Duong has entered into the North American market since the early years of our establishment. It’s nearly 10 years since our first trading with the US market which is 40% of our business volume today. Just like other international markets, we had to face plenty of challenges and barriers to supply our products into North America. From a small factory with just 60 workers only shipped to Korean market, we have grown to a size of 2,500 worker corporation thanks to the focus and dedication of management and office staffs. In order to meet the standards of Costco, our first and biggest US customer, we have set up our factory to become a modern and synchronous wood processing system. Most of our machines and equipment were purchased from Taiwan, Italy and Germany, such as automatic paint spraying system, CNC laminate machine, mortis and tenon, CNC bandsaw, sanding machines,…turning production in Minh Duong into a closed process from raw materials to finished products. In addition, quality is one of the most crucial factors leading to the successful business and we are trusted by many customers for our quality. Our products must comply to a standard inspection procedure prior to shipping, from incoming materials to the packaging, as well as throughout the production flow. We consult and seek support of various experts within Vietnam and from international to design a quality management team to ensure final products pass all criteria of our customers.

Most markets have strict regulation on imported goods to ensure consumers’ safety and health as well as CSR for employees. Therefore, we maintain our factory yearly quality, social and CTPAT audit for US market. We also cover Product Liability Insurance worldwide to prevent potential risk and loss involved in consumers’ complaints that we may encounter. Besides, we regularly update new requirement of products from different markets (US, Mexico, Canada, UK…), ensure we renew Law Label certificates for upholstered chairs sold in different US states annually, and frequently monitor quality compliance to meet the standards as stated in California Proposition 65, TSCA Title VI…

2) WTG: As a very active committee member of HAWA, could you please share export opportunities for Vietnam wood processing (furniture) & handicraft in international markets, especially North America & Mexico in the next few years?

Ms. Minh Tue: The United States is the most important export market for Vietnam’s wood industry. The share of furniture export into US from Vietnam has increased rapidly, from 38% in 2015 to 50% in 2019, and in the first 8 months of 2020, 55% of furniture export out of Vietnam is to US market.

The US – China trade war with new import tariffs on China has dropped Chinese export turnover to US down to 29 billion USD in 2019, in comparison to 38 billion USD in 2018. Therefore, Vietnam has become a highlighted destination for US buyers, proven by the fact that the export turnover grew from 2.5 billion USD in 2018 to 3.25 billion USD in 2019 with the following major product categories: Office furniture, Kitchen and Bedroom furniture, Kitchen Cabinet, and Sofa.

  • Office furniture: in the period of 2018-2019, the turnover rose from 147.3 million dollars to 236.5 million, and in the first 7 months of 2020, the amount reached 119.1 million USD.
  • Kitchen furniture: between 2018 and 2019, the export revenue increased from 140 million to 219,7 million, and then went up to 236 million in the first 7 months of 2020.
  • Bedroom furniture: climbed up from 809,9 million USA in 2018 to 944 million USD in 2019, and reached 471,8 million USD in 7 months of 2020.
  • Others: from 950 million dollars in 2018 to 1,2 billion in 2019.

Regarding Mexico, 2 years ago in a trade meeting, our Vietnam Trade Promotion Agency (Vietrade) emphasized that Mexico was a very important and potential market. Currently, Mexico imports 4 billion USD total worldwide; out of which 1.5 billion USD is from US; 1.2 billion USD from China but only around 40 million USD from Vietnam (only account for 1%). Therefore, there are plenty of opportunities for Vietnamese furniture manufacturers to reach out to this market. What we lack of is market insight because we have been always focusing too much on US, EU market. It may be the time to start a more thorough research on Mexico market.

3) WTG: Does Minh Duong Furniture face any supply chain challenges when shipping to North American markets? If any, could you please share some challenges here with us?

Ms. Minh Tue: Covid occurred from February to March and many factories have to shrink their production abruptly and temporarily while waiting for a recovery of the market. Around September, we start to see a strong comeback from our customers with a sharp demand for more shipments. It seems during lockdown, consumers have more time at home, they start to decorate more of their house, and this increases the need of more furniture. They now get used to the idea of buying furniture online and many do not feel a must to go to a store. Many retailers especially internet retailers said they are optimistic for 20% – 30% growth next year. Definitely, capacity will be the number one point of concern and each factory will need to put on top of their consideration in their strategy meeting for 2021.

Another issue that Vietnam and many other Asian manufacturing countries facing is severe shortage of containers from carriers or vessel companies. Getting booking confirmation for empty container is so difficult and this leads to extra logistics fee, warehouse rental, inventory expense. In another hand, price for raw materials such as wood, MDF, hardware, packaging is also on the rise.

We however see 2021 still a very potential year. We think that labor cost will at least be stable and we believe in the flexibility of Vietnamese factories. Thanks to our small size, we are easier to maneuver; our supply chain has become more tightly connected. Many factories are also very dynamic in applying technology into production and management.

4) WTG: Regarding international wood sourcing, Canadian Wood really wants to promote lumber to Vietnam wood processing & furniture manufacturers, is there any potential for Canadian lumber here? If yes, please help to share some opportunities for them?

Ms. Minh Tue: Since Vietnam begins to be recognized by international buyers as a new furniture hub, many factories see strong increase of orders in the last quarter of 2020 and this will continue in 2021. However, we are facing a shortage of wood supply and unstable pricing. This will be an opportunity for Canadian suppliers to promote lumber to Vietnam’s wood processing and furniture manufacturers in Vietnam. The important point is always in any market entry strategy, Canadian lumber suppliers need to research and understand the need of Vietnam market (species, usage, season, pricing, competitors…) and start to build awareness and trust about Canadian lumber with Vietnamese buyers. HAWA can provide support in organizing events for Canadian lumber suppliers to introduce their products to Vietnam market.

5) WTG: How do you see the CPTPP benefits to wood/ furniture export between Canada & Vietnam? What are the best practices Minh Duong furniture has done to leverage all CPTPP benefits to promote furniture/ wood processing exports?

Ms. Minh Tue: In 2019, Vietnam was Canada’s fifth largest trading partner in Asia, having imported about US$ 25 million worth of Canadian timber. Vietnam is also the fourth largest furniture supplier to Canada.

Canada imports about 15 billion USD worth of wood products each year. Out of which, 2.8 billion USD in furniture are imported from the US while only 368 million USD from Vietnam. With CPTPP, furniture exported to Canada from Vietnam will enjoy 0% tax compared to 6-9% from other non-CPTPP countries. As we know, the United States has withdrawn from this agreement, giving many advantages for Canadian buyers to purchase directly from Vietnam.

In the beginning, we also do not have much clear understanding of CPTPP. However, thanks to participating in activities with furniture associations, we were educated better about this. Minh Duong has reviewed products which are our strengths and their HS code. We then begin to notice our existing Canadian buyers about the potential that they should expand more product categories or items for Vietnam to take more advantage of this agreement. Recently buyers have started to pay more attention and request more documents for CPTPP purpose. We also reach out to new Canadian buyers to promote our prospective furniture.

We are here to help, please do not hesitate to contact us any time for supply chain requirements to ASEAN regions and Vietnam as well:

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