U.S Steel Tariffs On Viet Nam And Its Opportunities

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U.S Steel Tariffs On Viet Nam And Its Opportunities

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02/07/2018

VLC Industries Newsletter – July 2018

U.S Steel Taffis On Viet Nam: Its Impact And Best Practices 

From May 2018, U.S imposed a 25% tariff on steel imports and a 10% tariff of aluminum imports under Section 232 of the Trade Expansion Act of 1962 citing national security issues. Commerce Department increased import duties on steel products specifically from Viet Nam which originated from China as they evaded anti-dumping and anti-subsidy rules. Viet Nam ranks as the 12th largest exporter of steel to the U.S, the rise in tariffs will impact its steel industry.


Vietnam - U.S steel trade

U.S, the second largest steel export market for Viet Nam after ASEAN, accounted for 11.1% of the total steel exports in 2017. However, steel imports from Viet Nam accounted for only 2% of the total U.S imports in 2017.

2017 exports

The top three exports from Viet Nam to the U.S. are the cold-rolled coil (CRC), hot-dipped galvanized coil (HDG), and other metallic-coated coils. CRC exports grew from 33,199 tonnes in 2015 to 155,169 tonnes in 2017, while HDG’s volumes grew from 292 tonnes in 2014 to 124,799 tonnes in 2017. Other metallic-coated flat steel exports grew from 181 tonnes in 2013 to 130,440 tonnes in 2017.

2018 exports

In the first two months of 2018, Viet Nam steel exports to the U.S doubled compared to same period last year to 124,600 tonnes worth US$104.2 million.

Impacts

According to new tariff, corrosion resistant steel (CORE) from Viet Nam, which originated in China, will face anti-dumping duties of 199.43% and countervailing duty duties of 39.05%. Cold-rolled steel imports will face anti-dumping duties of 199.76% and countervailing duties of 256.44%.
The rise in tariffs will affect the local manufacturers, but the impact on the overall economy will be minimal. In 2017, the U.S accounted for 11.1% of Viet Nam’s steel exports, but steel accounted for less than 2% of Viet Nam’s total exports. However, the tariff rise will increase competition for local firms, especially in the domestic market.

Conclusion

With the rise in U.S tariffs, Vietnamese firms will need to diversify its export markets and product portfolio to minimize losses.
Moreover, local firms have to invest in technology, increase their product quality, and reduce production costs if it wants to access new markets or support domestic industries.

Best practices while exporting to the U.S.

With the new tariffs in place, exporters and importers should take certain measures to avoid unnecessary penalties.
- Ensuring the HS classification is correct: Exporters and Importers should be clear about the HS classification codes that a product has in the U.S, as U.S customs sometimes inquire about the technical details and manufacturing process to ensure that the correct HS codes are applied.
- Declaration of the customs value: Parties need to thoroughly check the contracts, purchase orders, and invoices to ensure that the customs value declared is correct to avoid attracting civil customs penalties.
- Avoid transshipment.

Opportunities

To U.S Market

Actually, Viet Nam is a not major market for US steel and aluminum imports (less than 2% of total U.S steel import volume). Although the rise in tariffs will impact the steel industry in Viet Nam, but Vietnamese economist believe that, it will not have a major effect on the overall economy.  Besides, this impact may lead to a result that Vietnamese firms will focus on other sectors which have higher export value and strong growth in U.S market, such as: footwear (12.79%), textiles (8.85%), seafood (8.16%), coffee and tea (8.01%), wood products (3.27%)…

To Other Markets (AU/EU/ASIA…)

According to Viet Nam Steel Association (VSA), the major export markets for Vietnamese steel are ASEAN, EU, South Korea, India, Taiwan, and Australia. With the U.S tariffs in place, local firms have an opportunity to focus on the other  markets to offset the reduction in U.S exports.  With numerous FTAs already in effect, and FTAs such as the European Union-Viet Nam Free Trade Agreement (EVFTA) and Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) currently  under ratification, Viet Nam will have increased access to new markets. According to the World Steel Association, steel demand will continue to grow globally in 2018 and Vietnamese firms would focus on the new markets that will open up once the all the FTAs are in place.

Growth in Steel Demand

  • EU: 1.4%
  • Other Europe: 5.2%
  • NAFTA: 1.2%
  • CIS: 3.8%
  • Central and South America: 4.7%
  • Africa: 3.3%
  • Middle East: 4.8%
  • Asia: 1.2%
  • ASEAN: 6.8%

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