Business associations have suggested state management agencies to tighten control over the origins of domestic export goods in a move to avoid risks for Vietnamese firms amidst the simmering US-China trade war.

Vietnam is the US’s second largest garment product supplier after China

The agencies should impose stricter control over export goods that are the same to Chinese products subject to high tariffs in the US market, the associations suggested. They have also called on their members to apply the cross-control mechanism to local exports to prevent possible negative impacts.

The associations explained that Chinese enterprises have raised the orders of products manufactured or processed in Vietnam for export to the US. This will bring short-term benefits to Vietnamese enterprises but may cause a surge in export revenue from these products, thus posing a high risk of increased tariffs imposed by the US Department of Commerce (DOC).

Thus, if the DOC detects Vietnamese enterprises outsourcing products to their Chinese partners, not only will the outsourcing firms face high duties but their peers in other sectors will as well.

According to the Ministry of Industry and Trade, Chinese enterprises may target the Vietnamese textile-garment and leather-footwear sectors as China’s apparel and footwear products are quite similar to those manufactured in Vietnam.

Vietnam is the second-largest supplier of textile-garment and leather-footwear products to the US after China. Therefore, China may ship its products to Vietnam to complete simple stages and then export those products stateside, bearing the labels of Vietnamese enterprises to avoid high tariffs.

Avoiding trade defense

Importing countries have trended to apply lawsuits against tax avoidance and evasion, Tran Lan Huong from the Department of Trade Defense under the Ministry of Industry and Trade (MoIT) said, adding that all cases of tariff avoidance for Vietnam relate to accusations of avoiding taxes from China. Therefore, when the tariffs were imposed on China, Vietnamese businesses have faced risks of competing fiercely with the products in markets which slap duties on China.

Huong said when the incident has happened to China, similar incidents will also happen to Vietnam over the next two years in the form of anti-dumping, tax avoidance and evasion.

Business associations said the media in foreign markets have continually reported on import origin fraud, so they suspected that a large volume of items from other countries had been moved to Vietnam to falsify origin of goods to take advantage of preferential tariffs on Vietnamese commodities.

James Maeder, acting deputy assistant secretary for Antidumping and Countervailing Duty Operations at the DOC’s Enforcement and Compliance, said in many trade remedy cases, exporting companies successfully proved their innocence and were not subject to duties.

Therefore, exporters should have a good grasp of legal regulations in the countries initiating probes and comply with procedures in those countries, he said.

Deputy director of the MoIT’s Export-Import Department Tran Thanh Hai also noted the launch of investigations on Vietnamese goods by a country may lead to similar actions regarding the same imports from Vietnam by other countries.

MoIT Deputy Minister Tran Quoc Khanh suggested to minimize the risk of being sued and raise their chances of success in trade remedy cases, businesses should equip themselves with knowledge about relevant regulations and contact business associations and state management agencies to learn about export markets.

He also recommended domestic firms enhance relations with foreign partners whose interests will also be affected if trade remedy cases are initiated, diversify markets and products and compete using high quality and good trademarks instead of low prices.

Additionally, they should cooperate with investigation agencies and work together to respond to trade remedy cases, Khanh added.

Hanoitimes