Vietnam is facing more lawsuits over evasion of trade remedies, posing concern for exporters. To “fight” origin fraud and avoid more lawsuits, businesses are determined to play a key role.
Steel sued the most
According to the Ministry of Industry and Trade, by December 2019, there have been 20 cases of anti-tax evasion initiated by foreign countries, applied to Vietnam’s export goods, accounting for 12.6 percent of the total number of investigated cases of application of trade remedies of Vietnam’s export products. The places that regularly investigate anti-tax evasion trade remedies with Vietnamese goods include: the US, the EU and Turkey. These countries conducted 19/20 investigations, accounting for 95 percent of the total number of evasive investigations.
Most cases conclude that evasive behaviour exists and then trade remedies are applied. A number of cases in recent years have been quite complicated. From 2014 to now, there have been a total of 11 anti-evasion investigations, more than the total number of evasive cases investigated from 2013 and earlier (nine cases).
Regarding the industry perspective, the Ministry of Industry and Trade stated that: among cases investigated by foreign countries against tax evasion, frauds of origin, steel products were most sued with six cases, accounting for 30 percent. Most cases of tax evasion investigations with steel products are conducted by the US, of which, specifically for corrosion-resistant steels (CORE) and cold-rolled steel (CRS), the US has conducted investigations into five cases. The latest case was in December 2019, the US issued final conclusions on the investigation of anti-tax evasion with CORE, CRS on allegations of evading trade remedies measures applied to South Korea and Taiwan (China). With the conclusion that tax evasion exists, the US will apply an anti-avoidance tax equivalent to that applied to Chinese, Korean and Taiwanese (Chinese) goods exported to the US.
The situation of goods origin fraud is increasingly complicated, which is the source of the increase in lawsuits against evading trade remedies measures from other countries with Vietnam exporting goods. Analysis on this in more detail, Trinh Thi Thu Hien, Head of Goods Origin Department (Import and Export Department, Ministry of Industry and Trade) said there are many types of origin fraud. Firstly businesses forge local certifications or fake manufacturers supplying raw materials. Secondly, they can cut and paste fake seals to bypass domestic and foreign authorities.
“The deceptive ways of doing business make it difficult for domestic consumers to accept, not to mention foreign consumers in fastidious markets,” Hien said.
Businesses play a key role
Chu Thang Trung, Deputy Director of the Vietnam Chamber of Commerce and Industry (Ministry of Industry and Trade) said fraudulent acts of origin, illegal goods transportation from other countries to Vietnam for export only bring temporary benefits for businesses. However, this behaviour increases the costs for genuine businesses when they want to prove compliance with the regulations of exporting countries.
The Ministry of Industry and Trade stated that to minimise the damage from lawsuits against trade remedies and to protect the interests of genuine businesses, besides the timely support of the Government through exchanges and working with investigating agencies, the preparation and participation of enterprises plays a key role. Specifically, businesses must raise their awareness about the risk of being sued, investigated, and groups of goods often sued. The risk of being investigated for origin fraud and evasion is increasing, especially in Vietnam’s major export markets such as the US, the EU, and Canada.
In addition, businesses also do not participate, abetting the frauds of origin, illegal transmission Trung said: “The reality shows that, if these acts were detected, the importing country will apply sanctions. In many cases, enterprises will lose the related export market. Besides, if signs of violations were detected, enterprises should actively coordinate with functional agencies to investigate, prevent and avoid the behaviour of a few enterprises which affect genuine production and business enterprises.”
Some experts said that in the context of Vietnam’s economy having a large degree of openness today, to avoid getting involved in commercial lawsuits, businesses need to pay more attention to the development of product diversification strategies and export markets. This is aimed at dispersing risks, avoiding focusing on exporting large volumes into a market, creating a basis for countries to sue or apply trade remedies in case of a sudden increase in exports from Vietnam.