Vietnam cracks down on tariff-dodging export detours
The Vietnamese government has begun taking steps to clamp down on shipments of products from China and elsewhere that pass through Vietnam and are relabeled as Vietnamese to avoid U.S. tariffs. TOMOYA ONISHI reports on Nikkei
The crackdown follows a series of reports by local newspaper Tuoi Tre that revealed that Vietnamese-made televisions by home electronics maker Asanzo were almost entirely made from Chinese imports.
One of the most important tasks of the workers in the Vietnam plant was to remove “made in China” from a sticker placed on every LCD panel imported from China, Tuoi Tre reported.
After being assembled through a simple six-step process, the televisions were sold as having been made in Vietnam with Japanese technology. Other products, such as ovens, were imported in finished form.
The expose is troubling for the government as Vietnam enjoys an influx of manufacturing companies shifting production out of China amid the trade war. Vietnam’s goods surplus with the U.S. jumped more than 40% on the year to $21.6 billion for the five months through May.
Hanoi will begin a cross-agency effort to hammer out rules to prevent illegitimate transshipments, modeled on global standards, local media have reported.
The new rules will likely spell out requirements for a product to be considered domestically made, such as the percentage of the content of each product that was sourced from Vietnam, as well as how much of the assembly process was handled here. Penalties are expected to be imposed on violators.
Hanoi hopes that the crackdown will mollify Washington, which has been paying closer attention to the Southeast Asian country amid a swelling trade imbalance.
Trump hinted in June that Vietnam could face tariffs if it did not tackle the rerouting problem, calling the country “almost the single worst abuser” on trade.
The crackdown aims to fix loose labeling rules for goods imported for domestic sale, which can be reexported to third countries with their real origins obfuscated. This loophole has made Vietnam an attractive target for rerouting, drawing scrutiny from Washington as its trade war with Beijing drags on.
Exports to countries with which Vietnam has free trade agreements are already required to come with certificates of origin, with strict rules defining what products can be said to be made in Vietnam. Goods imported for the domestic market are a different story.
Such industrialized nations as Japan, the U.S. and European countries each have clear standards for distinguishing locally made products from imports. But in emerging markets like Vietnam, “standards are vague, and there are times when the laws are not applied appropriately,” said Masahiro Ishikawa, acting head of the trade and investment consultation division at the Japan External Trade Organization.
“In reality, country-of-origin labeling is based on the ethics of individual companies,” said an executive at a local arm of a Japanese company with manufacturing facilities in Vietnam.
Nguyen Bich Lam, director general of Vietnam’s General Statistics Office, acknowledged that the country now has no clear rules to deal with such cases as the Asanzo televisions. He said he believes that many domestic and foreign companies regularly engage in similar behavior, doing some simple processing of mostly finished Chinese products before marketing them to Vietnamese consumers as locally made.
This practice has contributed to the transshipment problem. This past May, authorities caught in the northeastern port city of Haiphong a shipment of Chinese shoes about to be reexported after being labeled as Vietnamese.
According to Nikkei, The U.S. Commerce Department imposed duties of up to 456% this month on certain steel products originating from Taiwan and South Korea that undergo final processing in Vietnam. While this does not affect goods from mainland China, it does signal a tougher stance on relabeling.