After the United States imposed a "heavy" tax, has Vietnamese steel encountered difficulties?

VCN- The US has officially decided to impose a 456 percent tax on Vietnamese cold-rolled steel (CRS) and corrosion-resistant steel (CORE) exportedto the US, which cannot prove that the origin of hot-rolled steel material is using South Korean- or Taiwanese-origin substrate. Facing a "heavy" tax rate is assessed not to significantly affect Vietnam's steel production and export.
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after the united states imposed a heavy tax has vietnamese steel encountered difficulties
Vietnamese enterprises have gradually used input materials (hot-rolled steel) from many other sources and bought domestichot-rolled steel. Photo: Nguyen Thanh

Applying taxes on par with Chinese steel

On December 16, the US Department of Commerce (DOC) announced the final conclusion in the anti-circumvention of anti-dumping duty, countervailing duty against Vietnamese CRS and CORE steel with input materials from Korea and Taiwan (China). The DOC found these items, which are manufactured from Korean and Taiwanese hot-rolled steel, did not meet the US’significant conversion requirements. Therefore, it is considered tax evasion.

With this conclusion, the US Customs willcollect taxes on Vietnamese steel products. Accordingly, the shipments of CR and CORE from Vietnam, which cannot prove the origin of hot-rolled steel materials, are subject to 456 percent tax (the same tax rate as on Chinese steel).If enterprises can prove their hot-rolled raw materials are imported from Korea or Taiwan, the applied tax rate will be equivalent to Korea’s tax rate (29.4 percent for CORE steel; and 24.2 percent for CRS steel) and Taiwan’s tax rate (10.34 percent for CRS steel).Thus, if enterprises can prove their production materials are from Vietnam or other countries/territories, except for the three countries above, they will not be subject to tax evasion measures (i.e. they do not have to pay taxes).

Assessing the US’ latest tax rate, Le Trieu Dung, Director general of the Trade Remedies Authority (Ministry of Industry and Trade),said this case was initiated by the US in August 2018. The Ministry of Industry and Trade had cooperated with the Vietnam Steel Association and businesses to provide information for the US’ investigation.“Before 2017, Vietnam imported a lot of hot-rolled steel from abroad to make raw materials. However, after 2017, some factories have produced this material, leading to a decrease in the amount of imports, so the impact of this tax measure has been minimised," said Dung.

Pham Chau Giang, DeputyDirector of the Vietnam Chamber of Commerce and Industry, said the Ministry of Industry and Trade had followed closely since the DOC started the investigation and issued preliminary conclusions.The US market only accounts for six percent of Vietnam's total steel exports worldwide. The big enterprises exporting steel to the US have cooperated with the US to certify the origin and input materials. According to Giang, this incident has no significant impact on the export of Vietnam's steel industry in general.

Increase the initiative of raw material sources

The Ministry of Industry and Trade assessed that the domestic steel industry, especially large producing and exporting enterprises, has actively developed production and business plansin the context of the US investigation against tax evasion. Specifically, businesses have used input materials (hot-rolled steel) from other sources, bought domestic hot-rolled steel, and built their management system for self-certification.

Nguyen Van Sua, an expert in the steel industry, said the same tax rate had been imposed by the US before, but Vietnam was affected fora short time. That is because hot-rolled steel has been produced by Ha Tinh Formosa to make cold-rolled steel and rust-proof steel (galvanised steel, coloured coated steel). From June 2017 to the end of 2017, Vietnam produced nearly 1.4 million tonnes of hot-rolled steel. The production reached 3.4 million tonnesin 2018 and is expected to be 4.5 million tonnes in 2019. "We recommend Vietnamese enterprises did not use materials imported from Taiwan and South Korea to avoid being imposed tax," said Sua.

Some experts stated in the situation of imposing taxes on Vietnamese steel from the US, businesses should be more proactive in their raw materialsources to avoid damage. The Ministry of Industry and Trade has continued to work closely with the Vietnam Steel Association, the Vietnam Commercial Counselor in the US and related Vietnamese businesses to strictly monitor and discuss with the DOC. As a result, businesses can cooperate and provide sufficient information at the request of the US investigation agency about the production process, and the level of added value of products in Vietnam to get fair and equitable treatment.

According to US statistics, in the first ten months of 2019, Vietnam's CORE and CRS exports to the US reached more than US$260 million. The US market currently accounts for 6.5 percent of Vietnam's total steel export (ASEAN is the largest export market of Vietnam, accounting for 65 percent).

By Thanh Nguyen/ Ha Thanh

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