October 14, 2019 11:32

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Will Vietnamese steel decline after the United States’tax measures?

15:15 | 10/07/2019

VCN- The United States has just officially adopted a temporary anti-tax avoidance measure oncold rolled steel (CR) and corrosion resistant steel products (CORE) imported from Vietnam. However, this move is not expected to have too much of a negative impact on the Vietnamese steel industry.  

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In case CR, CORE steel is produced from materials of Vietnam or other countries and territories, there will be no tax imposed. Photo: Internet

Minimize losses

On July 2, the US Department of Commerce (DOC) issued preliminary conclusions in the case of anti-dumping and countervailing duty investigation for Vietnam's CR and steel CORE using raw materials of hot rolled steel material imported from Taiwan (China) and South Korea. According to DOC, the production of CR and CORE steel from hot rolled steel imported from Taiwan (China) and South Korea is negligible, helping to avoid the anti-dumping and anti-subsidy tax that the US applies to Taiwan (China) and South Korea territories. Based on preliminary conclusions, DOC will apply temporary tax avoidance measures onCR and CORE steel products imported from Vietnam through the collection of escrow deposits. Margins will depend on each type of product imported from Korea and Taiwan (China).

Referring to the above tax problem, Mr. Le Trieu Dung - Director of the Department of Trade Protection (Ministry of Industry and Trade) saidthis case was initiated by the United States in August 2018. The Ministry of Industry and Trade has cooperated with Vietnam Steel Association and businesses to provide information for the US investigation. The DOC has issued preliminary conclusions on the application of 456% tax on Vietnamese CR and CORE steel. However, this is the investigation to determine tax evasion behavior with materials from South Korea and Taiwan (China). In case CR, CORE steel is produced from materials of Vietnam or other countries and territories, there will be no tax imposed.

"Before 2017, Vietnam has to import a lot of hot rolled coils from abroad to make materials. However, after 2017, some factories have produced this material, so the amount of import also decreases, thereby the impact of this tax measure has been reduced,"Mr. Dung said.

Mr. Nguyen Van Sua, an expert in the steel industry saidthe decision to impose US taxes on some Vietnamese steel products would not have a negative impact on the domestic steel industry. Mr. Sua explained the same taxation has been done before by the United States, but Vietnam wasaffected fora short time because the source of hot rolled steel was produced by Formosa HaTinh to make cold rolled steel and stainless steel (galvanized steel, color coated steel). Starting from June 2017 to the end of 2017, Vietnam produced nearly 1.4 million tons of hot rolled steel. In 2018, production reached 3.4 million tons and is expected to be 4.5 million tons in 2019.

Taiwan materials

Despite the assumption that the US tax decision does not negatively affect the steel industry because it has partly been able to source hot rolled steel, but Mr. Sua also notes the amount of hot rolled steel can only meet 40% to 50% of domestic demand, the rest still has to be imported.

A typical example is the case of Nam Kim Steel Joint Stock Company (NKG). The 2018 annual report of this enterprise stated that hot rolled steel is the main material for the production of galvanized steel sheet, steel pipe, and accounting for about 80-90% of Nam Kim's input cost. Currently, thanks to the Formosa and Dung Quat projects, the domestic steel industry has been able to produce hot rolled steel by itself, but the output has not been enough. Therefore, Nam Kim has to import a large amount of this material.

Mr. Suasaid "We recommend that Vietnamese enterprises do not use imported materials from Taiwan (China) and Korea markets to avoid being subject to tax."

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Pham Chau Giang, deputy director of the Trade Protection Department, said that it is important to be active inraw materials. The Ministry of Industry and Trade has also made many petitions to the Government to approve the scheme to avoid the avoidance of origin with Vietnamese goods; combating the avoidance of trade defense measures; early warning of trade defense measures that foreign countries can investigate Vietnam.

It is expected that the DOC will announce the final decision on the investigation in September 2019. The Ministry of Industry and Trade saidthe Ministry will continue to coordinate with relevant agencies, associations, businesses and the US side in the next stages of the case to protect legitimate rights and interests of enterprises in accordance with the provisions of law and WTO agreements, and at the same time prevent acts of illegal avoidance and origin fraud.

By Duc Quang/Bui Diep