Đỗ Xuân Lập, Chairman of the Việt Nam Timber and Forest Products Association. Photo laodong.vn

Businesses are urgently preparing plans to be ready to respond if the US Department of Commerce investigates tax evasion with Vietnamese wooden cabinets.

Pháp Luật Thành Phố Hồ Chí Minh (Hồ Chí Minh City Law Newspaper) interviews Đỗ Xuân Lập, Chairman of the Việt Nam Timber and Forest Products Association, about this issue.

The US Department of Commerce recently said it had received an application to review the product scope and investigate tax evasion with imported kitchen and bathroom cabinets from Việt Nam. What is exactly the story here?

This investigation was conducted because the American Kitchen Cabinet Alliance accused Vietnamese manufacturers and exporters of importing cabinets and cabinet parts from China (which is subject to a high level of defensive trade tax), and then fully assembling them in Việt Nam for export to the US. It is expected that after 30 days of consideration, the DOC will officially announce whether or not it has decided to initiate an investigation.

However, when I contacted the units involved in this lawsuit, they confirmed that it is most likely that DOC will initiate lawsuits and investigations in this area.

If the case is investigated and Vietnamese manufacturers and exporters are to be imposed higher taxes, how will it cause damage to Việt Nam's timber industry?

Currently, the US is the largest market for wooden cabinets, accounting for 99 per cent. Last year alone, the export value of Việt Nam's kitchen cabinets and bathroom cabinets to the US reached about US$$2.7 billion. The export turnover of wooden cabinets to the US accounts for about 20 per cent of the total export turnover of the Vietnamese wood industry.

Therefore, if a high tax is imposed, manufacturers producing this item to export to the US will face many difficulties and suffer great damage, or even have to close down. That affects the whole timber industry such as reducing sales, affecting the jobs of workers, and at the same time affecting the reputation of the Vietnamese timber industry in the international market.

This year, the timber industry aims to export US$18 billion. With the current context, achieving the above goal will be challenging. Because at present, although the DOC has not officially begun the investigation, there have been decreases in the number of orders. Along with high inflation, people's demand also decreases.

So how do the Việt Nam timber association and stakeholders plan to respond and prove transparency to protect exported wooden cabinet products?

On May 12, the Ministry of Industry and Trade and wood associations held a meeting in Hồ Chí Minh City to discuss how to deal with this issue. This is the second meeting since the DOC received the American Kitchen Cabinet Alliance's application. The content of the meeting is to equip the business with knowledge and critical skills.

Before that, we also had a report sent to the ministries of Agriculture and Rural Development, Finance, and Planning and Investment on this issue. The Ministry of Planning and Investment also issued an official dispatch to enterprises on the control of FDI (foreign investment capital) in the production of products that are currently subject to tax in third countries.

The units in the timber industry are also working closely with related parties to complete the dossier, meeting the requirements from the US side. Wooden cabinets are an important and key product of our country's wood industry, so they need to be protected to maintain exports.

For a long time, there have been many opinions warning about the situation of hidden investment or origin fraud in the wood industry for export. So what solutions does the wood industry have to prevent this situation?

The first solution is not to use products or materials that have been taxed by our purchasing country in a third country. At the same time, there must be a solution to switch to using domestic raw materials for stable and sustainable development and to minimise lawsuits.

In addition, we have promoted cooperation with American wood furniture import and export associations, Forest Trend organisation and Trade Remedy Department (Ministry of Industry and Trade) to support businesses that can handle the investigation. VNS

BOX: Export of cabinets to the US increased sharply

In April 2020, the US issued an order to impose anti-dumping and anti-subsidy duties on wooden kitchen cabinets and bathroom cabinets originating from China. The anti-dumping tax rate for the above product is from 4.37 per cent to 262.18 per cent, respectively; anti-subsidy tax rates from 13.33 per cent to 293.45 per cent.

According to preliminary data from the US International Trade Commission, between 2019 and 2021, after the US imposed tariffs on China, imports of this product from China into the US decreased by 54 per cent, from $2.5 billion to $1.6 billion. In contrast, exports from Việt Nam to the US increased by more than 130 per cent, from $1.37 billion to $2.7 billion.