Many countries strengthen protection of steel production
Recently, most countries have applied policies to limit the import of steel products through anti-dumping, anti-subsidy, origin fraud or limiting the import quantity each year...
Domestic steel enterprises suffer losses and reduce production
Most recently, at the end of 2022, the European Commission considered anti-subsidy duties on steel imports from producers in India, Algeria, Türkiye and Vietnam. The reason is that Southeast Asian and Indian steel mills are the largest suppliers of hot-rolled coil (HRC) to the EU in the past year, with the bloc's HRC import market share increasing to 46%, up from 38% in 2021.
Therefore, steel mills in Japan as well as Asia have been more cautious in exporting HRC hot-rolled steel to the EU due to concerns about the possibility that the EU will introduce trade defense measures. Previously, the EU also included Vietnam in the group of countries applying import quotas of 2.1 million tons of HDG hot-dip galvanized steel from July 1, 2021 to June 30, 2022 and increased by 4% in the following 2 years. Or cold-rolled steel from Vietnam, if using hot-rolled steel imported from Taiwan and South Korea, when exported to the US market, will be subject to anti-dumping and anti-subsidy taxes totaling more than 450%. Similarly, galvanized steel products are subject to these two taxes totaling nearly 240%...
Not only the US, EU, Canada, Mexico… have imposed very high taxes on imported steel products, but also other countries in the ASEAN and Asian regions. In addition to applying tax policies, many countries have also set up strict technical barriers to limit the amount of steel imported into the domestic market.
For example, to export steel to Indonesia, products must be certified with SNI, which is the Indonesian National Standard. Foreign manufacturers applying for SNI need to register through a representative (company or individual) in Indonesia. This representative will be authorized to work on behalf of the foreign manufacturer in the SNI certification process. SNI certification is granted through the production process, audit of the relevant management system and testing supervision at the factory or in the market...
In addition, after being granted the SNI certificate, enterprises must apply for a license to use the SNI label. Next, imported goods that are required to have SNI certification according to regulations will be required to be controlled through the NPB code - through obtaining a certificate of conformity issued by a specific conformity assessment organization...
Many enterprises said that applying for steel export documents to many countries is an arduous process with many strict criteria and regulations. Meanwhile, in Vietnam, data released by the Ministry of Finance shows that statistics from the General Department of Customs show that hot-rolled steel in group 72.08 in 2018 reached 5.3 million tons with a total import turnover of about 3.09 billion USD. Of which, 88% of the total import turnover is subject to the normal preferential import tax rate (MFN) of 0%, such as HRC products imported from China.
In Vietnam, in 2019, the Ministry of Finance proposed a draft to increase the tax on HRC products (in group 72.08) to 5% instead of the current 0%. The reason for the proposed tax increase on this item given by the Ministry of Finance is that the US-China trade war is raising concerns that cheap Chinese steel may flood into Vietnam, causing steel prices in the market to drop sharply.
Citing a report from the Steel Association, the Ministry of Finance said that the domestic demand for hot-rolled coil steel is about 10 million tons/year. Domestic production capacity in 2018 only met about 50% (it is expected to meet about 70% of domestic demand by the end of 2019). Because the country has so far produced a number of HRC products and domestic production capacity has met about 50% of domestic and export demand, the Ministry of Finance proposed to increase the MFN preferential import tax on hot-rolled coil steel products in group 72.08 from 0% to 5%. Hot-rolled steel products are the input for the production of cold-rolled steel and color-coated steel products with a basic tax rate of 5 - 25%, which is consistent with the principle of increasing import tax from raw materials to finished products. However, this proposal was not implemented. And imported steel in general and steel from China in particular are still pouring into the domestic market.
Apply multiple appropriate solutions
Vietnam has also begun considering applying trade defense measures to some imported steel products such as steel billets, steel coils, and steel wire imported from some countries and territories. Similarly, Vietnam also increased the import tax on alloy steel bars and rods from 0% to 10%. The reason is that steel coils containing boron (to harden steel) from China are declared as alloy steel, in order to enjoy a 0% import tax instead of the usual 12% tax on steel coils used for construction...
Many businesses said that the above tax policies have contributed to reducing the influx of foreign steel into Vietnam, reducing trade fraud, and protecting domestic consumers from being confused with poor quality goods. Therefore, tax policies or technical barriers need to continue to be applied and may be stronger in the near future.
According to economist Dinh Trong Thinh, the previous proposal of the Ministry of Finance was appropriate because the number of imported products increased sharply, which could have a major impact on domestic production activities. That proposal was to protect domestic manufacturing enterprises and ensure fair competition between imported products. As for imposing separate trade defense taxes on goods originating from each country, a specific investigation is needed to determine how much the amount of imported goods threatens the domestic manufacturing industry. In addition to tax measures, technical barriers are also a solution that can be considered if deemed necessary to protect both manufacturing enterprises and consumers, avoiding the flooding of poor quality products on the market.
Meanwhile, Dr. Nguyen Quoc Viet, Deputy Director of the Vietnam Institute for Economic and Policy Research (VEPR) - University of Economics (Vietnam National University, Hanoi), said that the consideration of tax solutions must ensure compliance with the free trade agreements that Vietnam has participated in. However, state management agencies need to pay attention to avoiding the phenomenon that Vietnam is at risk of becoming a transit point for goods of other countries through fraudulent origin for export to third countries. This requires clear regulations and control over the issuance of certificates of origin of goods from Vietnam. At the same time, it is necessary to review related technical regulations, but the most important issue is implementation and supervision. According to him, Vietnam still has many "elephant passing through the eye of the needle" phenomena, causing many imported products to the market to not ensure quality, trade fraud... although the regulations and technical standards are complete and follow world standards.
Data from SUMEC Group (China) shows that Vietnam is the second largest market for purchasing all kinds of steel from China in 2022. Of which, hot-rolled coil is China's main export product to Vietnam with a quantity of 3 million tons, accounting for 25% of the country's total HRC export output. The average price difference between Chinese HRC products and Southeast Asian products is 25 USD/ton, showing that export profits are higher than domestic sales. At the same time, due to weak demand for steel in China, exports are likely to increase in 2023. Therefore, the amount of HRC from China imported into Vietnam with a 0% tax rate may continue to increase.
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