Nguyen Liem, chair of the Binh Duong Furniture Association (BIFA), said FDI (foreign direct investment) in the wood industry was very high in 2022-2023. Twenty-two projects were registered in Binh Duong in 2023 and 25 in Binh Phuoc. Seven projects in Binh Duong and eight in Binh Phuoc were licensed this year. The biggest investors are from China.

In general, investors have to spend at least $30-40 million to set up one factory, including expenditures on land.

Chinese investors spend $5 million per project, because they only lease workshops (instead of buying land to set up factories), lease equipment and machines, or import secondhand products.

Chinese investors often develop chains of small enterprises, which consist of one major business which makes investment for export, while other small businesses lease small workshops to make chairs, tables and beds for the major business.

He called on state management agencies to strictly supervise the production and business of foreign invested enterprises (FIEs), especially ones from countries with ‘sensitive issues’.

“If we cannot do this (strictly supervise FIEs’ production and business) and cannot discover the FIEs with non-transparent investment activities, we will face risks when exporting products. The products may be subject to claims of illegal origin,” Liem said.

Do Xuan Lap, Chair of the Vietnam Timber and Forest Products Association (Vifores), also emphasized the need to strictly control imported wood. If any activity of false or unclear origin is discovered, there will be potential trade disputes.

In recent years, Vietnamese wooden furniture enterprises have not used much imported wood, but used domestic wood to make high-quality products that meet requirements from importers (the US, Europe and Northeast Asia) in terms of forestry origin.

“Over the last 6-7 years, high-quality woodworks in Binh Dinh have been made from Vietnam’s planted forests, which replace imports, especially from Russia and China, and thereby helps to avoiding trade fraud when exporting finished products to the US,” Lap explained.

According to Huynh The Du from Indiana University, the US requires legal origin of timber used to make wooden products, so if Vietnam cannot control imports and investments from China, it may suffer negative impact.

For many years, Vietnam’s woodwork exports have been facing investigations raised by the US, including trade defense investigation on plywood, tax evasion investigation on wooden cabinets, and investigation on Vietnam's timber exploitation and trade under Section 301 of the US Trade Act.

Chu Thang Trung, deputy head of the Ministry of Industry and Trade’s (MOIT) Department of Trade Remedies, said Vietnam's wood industry may face investigation for anti-dumping, anti-subsidy, and trade defense, not only from the US, but also from Korea and other markets. 

Anti-dumping and anti-subsidy investigations are much more complicated than tax avoidance investigations. Vietnamese businesses must be ready to face the risks.

To Xuan Phuc from Forest Trends warned of unusual signs from the supply of disassembled wooden products imported to Vietnam recently, including the high 100 percent growth rate within one year. It is necessary to find out if the products ‘borrowed’ Vietnamese origin to export to third markets.

“We need to find out which markets these products come from, whether they stop in Vietnam or are re-exported to other countries, and provide detailed information to businesses,” Phuc said. 

“Vifores can propose that the Government take stricter measures to manage wood import supply flows to avoid risks related to origin fraud,” Phuc said.

Technological assistance

Vifores has had working sessions with the General Department of Customs and Ministry of Agriculture and Rural Development (MARD) on identifying forestry product origin and ensuring the legality of timber in timber supply chains.

Asked about what Vietnam’s woodwork enterprises need to do to adapt to the changes of export markets, Lap said the top priorit is improving competitiveness to be ready to satisfy the strict requirements of import markets, including low-emission production, transparent production, legal timber and traceability, competitive prices, and good design.

“Enterprises need to accelerate digital transformation and digital transition, apply software in business governance, and use new technologies in production,” he said.

“Technology can help trace origin effectively, thus minimizing risks,” Lap said.

Binh Minh