What should businesses pay attention to when being investigated by the US for trade defense?

VCN - The United States is the country that investigates and applies the most trade defense measures to Vietnamese export goods. Vietnamese export businesses when being investigated by the US for applying trade defense measures need to pay attention to choosing the country and replacement value.
Proactive in trade defense to maintain export advantages Proactive in trade defense to maintain export advantages
Many export product groups are at risk of being investigated and subject to trade defense measures Many export product groups are at risk of being investigated and subject to trade defense measures
Early warnings reduce risks in trade defense Early warnings reduce risks in trade defense
Illustrative photo.
Illustrative photo.

The Department of Trade Defense (Ministry of Industry and Trade) said that according to statistics from the World Trade Organization (WTO), the United States is currently the world's leading country in investigating and applying trade defense measures and is also the country that investigates and applies the most trade defense measures against Vietnam's export goods.

To date, the United States has investigated 64 cases out of a total of 253 foreign investigations against Vietnam (accounting for 25%), including: 28 anti-dumping cases (CBPG), 11 anti-subsidy cases (CTC), 22 anti-trade defense tax evasion cases and 3 self-defense cases.

According to the Department of Trade Defense, the fact that the United States has not recognized Vietnam as a market economy may affect the results of anti-dumping and anti-subsidy investigations.

In anti-dumping investigations, because the United States has not recognized Vietnam as a market economy, the United States will use the costs of a third country (surrogate country) to calculate the normal value in anti-dumping cases, causing the anti-dumping tax rate to increase, not reflecting the true state of our production and export.

The list of countries that are substitutes for Vietnam is updated by the United States based on 2 criteria, including: having an economic development level equivalent to Vietnam; having a significant number of manufacturers of products similar to the investigated product. If there is more than one country that meets both of the above requirements, the United States can choose a single country with the most available and quality data. The latest list updated in August 2023 includes 6 countries: Indonesia, Jordan, Egypt, Philippines, Morocco and Sri Lanka.

According to the new regulation on trade defense investigations officially effective from April 24, 2024 of the United States, when selecting a replacement country to calculate the anti-dumping margin for non-market economies (including Vietnam), the US Department of Commerce will exclude and not select countries that widely subsidize exports/ have subsidies or are subject to anti-dumping duties related to surrogate value/ do not enforce and have weak, ineffective enforcement mechanisms on issues related to intellectual property rights, human rights, labor, and the environment because the replacement value, benchmark or production cost in these countries is likely to be distorted or inconsistent with market principles.

In case there is no suitable replacement value proposal from a country with a market economy with a level of development equivalent to Vietnam, the US Department of Commerce will use the replacement value of a country with a market economy with a level of development not equivalent.

In addition, this provision also allows that in the event that there is no suitable alternative value proposal from a country that is a significant producer of goods comparable to the investigated goods, DOC can use the alternative value of a country with a market economy that is not a significant producer of goods comparable to the investigated goods. This may lead to DOC choosing a substitute country that is more developed than Vietnam or is not representative for comparison, increasing the alternative value, pushing the dumping margin higher.

The Trade Defense Department said that according to US regulations, relevant parties have the right to submit comments on the selection of countries and alternative values ​​within 30 days before the DOC issues a preliminary conclusion of the case (within 140 days from the date of initiation of the investigation - with the possibility of extension).

Parties can also propose alternative countries not on the above list for DOC to consider. This is an opportunity for investigated enterprises to propose alternative countries and data sources suitable for their production costs. In fact, many enterprises exporting cat fish, warm water shrimp, tires, etc. from Vietnam have used this right to propose suitable alternative countries and thereby enjoy a 0% anti-dumping tax rate.

In CTC investigation cases, the US also uses the benchmark of the alternative country when calculating the subsidy margin, causing the CTC tax rate to increase. For example, the United States may use other countries' loan interest rates or land rents as a benchmark (usually at a high level) to compare with Vietnamese enterprises' loan interest rates or land rents (usually at a lower level) to calculate the benefits that enterprises receive, causing the subsidy margin to be pushed up.

Therefore, to get the best results, the Trade Defense Department notes that Vietnamese exporting enterprises when being investigated by the United States for applying trade defense measures need to proactively develop proposals for alternative countries (in or out of the DOC list) and appropriate alternative data sources for each cost item as soon as information about the case is available.

Enterprises can proactively contact and consult information from associations, enterprises in the industry, foreign or international associations related to the investigated products, importers; Refer to the experience of associations and enterprises with low tax rates to search and identify alternative countries and data sources that are publicly available, consistent with DOC criteria, and appropriate to the investigation stage.

Develop arguments and submit alternative country and value proposals within the prescribed time; and fully cooperate with the US investigating agency throughout the process of the case.

By Ngoc Linh/ Huu Tuc

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