Lê Triệu Dũng, Director general of the Trade Remedies Authority under the Ministry of Industry and Trade. — VNS Photo Đoàn Tùng

Earlier this month the US Department of Commerce (DOC) announced a preliminary ruling on the circumvention inquiries into Vietnamese cold-rolled steel and corrosion-resistant steel exports made from raw materials imported from Taiwan and South Korea. Việt Nam News’ reporter Thu Ngân asks Lê Triệu Dũng, director general of the Trade Remedies Authority, about it.

The DOC has announced a preliminary ruling on Vietnamese steel imported into the US. Please tell us about the case and the reaction of the Vietnamese Government and companies?

On July 2, 2019, the DOC preliminarily determined that imports into the United States of certain cold-rolled steel flat products (CRS), certain corrosion-resistant steel products (CORE) produced in Việt Nam are circumventing the antidumping duty (AD) and countervailing duty (CVD) orders on CRS and CORE from South Korea, and imports of CORE produced in Việt Nam are circumventing the antidumping duty order on CORE from Taiwan.

Based on the DOC’s determination, the United States Customs and Border Protection has been instructed to collect cash deposits on imports of CORE and CRS produced in Việt Nam using Korean- or Taiwanese-origin substrates. These duties will be imposed on future imports and on any unliquidated entries since August 2, 2019, the date on which the DOC initiated the circumvention inquiries. The deposit will be equivalent to the highest AD and CVD tax rates that the United States is applying for CORE and CRS originating from mainland China, South Korea or Taiwan.

The applicable cash deposit rates depend on the origin of the substrate and the type of steel product exported to the United States. The final rulings are expected to be issued in September this year.

In this case, prior to initiation of the investigation, the Ministry of Industry and Trade provided information and warnings to relevant exporters and the Việt Nam Steel Association about the risk of being investigated due to affirmative decision of a previous case with substrates from China. 

Based on the early warnings, Vietnamese producers and exporters considered appropriate business strategies, including use of domestic materials or those imported from markets other than China, South Korea or Taiwan to avoid potential anti-circumvention duties. Thus, the negative impacts of DOC’s recent decision have been minimised.

The ministry is closely following the investigation and co-ordinating with relevant agencies to protect the legitimate rights of our exporters in the final phase of the investigation. At the same time the ministry has been working with agencies and partners to prevent illegal circumvention activities. 

How will the steel industry be affected?

Obviously, the DOC decision to impose anti-circumvention duties is likely to affect the volume of steel exported from Việt Nam due to the fact that Việt Nam’s domestic industry has not been able to fully serve the need for materials to manufacture CR and CORE and imports of substrate from other countries/territories not subject to US AD and CVD orders may lead to higher costs of production.   

However, with the increasing domestic capacity and output of hot-rolled steel and substrate to serve domestic production of cold-rolled steel and stainless steel (galvanised steel, colour-coated steel), it is projected that the domestic steel industry will be able to gradually minimise the negative impacts of the DOC decision. 

In 2018 production of hot-rolled steel reached 3.4 million tonnes and is expected to be 4.5 million tonnes in 2019. With that direction, the decision may even be considered a chance for the steel industry to improve its capability to move up the production value chain. 

In the last five years the steel industry has faced protectionism on many occasions in many markets. What do you think are the main reasons?

Globally, there have been more than 1,500 cases of trade remedies, of which the steel industry accounts for more than 30 per cent. Especially in the last two years steel and steel products have regularly been subject to investigations to apply trade remedial measures with very high duty rates. 

In this context, Việt Nam's steel exports have been facing major challenges with import markets continually investigating and applying measures against Việt Nam's steel. One of the main reasons lies in the fact that there is a surplus of global steel production capacity and output and the United States is applying a 25 per cent tax on imported steel on the grounds of ensuring national security. Therefore, it seems that some other countries follow suit and use trade remedial tools to limit imports of steel.

What should Vietnamese steel producers do to avoid the situation? 

In order to avoid risks, businesses should improve their understanding of international trade, international regulations on export of goods and laws of countries, especially laws and regulations on trade remedies and anti-circumvention. 

Besides, enterprises should diversify their markets to avoid the risk of disruption of business activities should there be barriers in a specific market. A sudden growth in exports to any market could be used to initiate an investigation.

More importantly, in the context of a global steel output surplus and increasing trade protection measures, the ministry has warned the steel industry and enterprises several times to carefully consider their business strategy, especially when making investment plans.

For the time being Việt Nam producers still partly depend on imported inputs from various sources.

This could lead to possible determination that steel produced in Việt Nam does not qualify as being of Vietnamese origin. As a result, to sustain exports, especially to qualify for preferential treatment offered by many free trade agreements that Việt Nam Nam is a party to, steel manufacturers in Việt Nam should consider moving up the value chain or switching to using materials made in Việt Nam to produce CR or CORE.  

What has the trade ministry done to support Vietnamese steel industry to prevent such a situation?

With regard to exports, the ministry is upgrading the early warning system to provide up-to-date information to exporters/domestic industries.

Thus, the domestic industry can actively consider business strategies to avoid the risk of being investigated or defend trade remedial investigations. Besides, the ministry actively provides relevant information, including through workshops, documents, etc., on trade remedial laws, practices and the trends in trade remedies to domestic industries and enterprises. The ministry might take trade remedial measures applied by foreign countries to the Dispute Settlement Body of the WTO if it finds the measures inconsistent with relevant WTO agreements.

In the domestic market, the ministry may initiate investigations to protect the legitimate interests of domestic industries which suffer from serious injuries due to increases in imports.

How do you think FTAs will help the steel industry and what should it do to take advantage of these deals?

With the free trade agreements we have signed, we could optimise tariff incentives to boost exports to many export markets. FTAs will help the Vietnamese steel sector expand export markets and increase exports thanks to market access preferences stipulated in such FTA. To take advantage of these deals, steel enterprises should study carefully the FTAs to comply with the rules on origins in the most effective way while continuing to modernise technology to meet technical standards. As I said above, moving up the value chain will be a decisive factor in taking advantage of FTAs. 

At the same time, to maintain their share in the domestic market and expand markets, steel enterprises should take appropriate measures to improve their competitiveness, enhance product quality, reduce costs, and provide better customer service. — VNS