How has the export of wooden planks been affected when the US investigates tax evasion?

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In the period of 2007 to 2017, there were only three cases initiated for the investigation of trade defense with wooden products, but from 2018 to now there have been four cases. Photo: Nguyen Thanh

The level of investigation increase

As of June 2020, the Ministry of Industry and Trade has dealt with 176 trade remedies applied by foreign countries to Vietnam's exports. In the first six months of the year, the Ministry of Industry and Trade is dealing with 13 cases of trade remedies initiated by foreign countries to investigate Vietnamese goods and six cases have possibly investigated in the near future (higherthan the number of cases in 2019).

Diverse exported products were investigated, of which seven cases of wooden products were investigated, accounting for 4%. Although accounting for a small proportion of the total number of commercial cases, the Ministry of Industry and Trade noted that the level of investigation onwooden products is rising.

Specifically, during the 2007 - 2017 period, there were only three cases with wood products, but from 2018 to now there have been four cases.

The export turnover of wooden products is much higher than those in the 2007-2017period. For evidence, the MDF anti-dumping case investigated by India in 2015 had an export turnover about US$3.1 million, while the Korean plywood investigation in 2019 has an export turnover ofUS$170 million.

Most recently, on June 17, 2020, The US Department of Commerce (DOC) has initiated an anti-dumping and countervailing duty investigation to be applied to Chinese plywood products imported from Vietnam. The export turnover of this product to the United States of Vietnam in 2019 is about US$300 million.

If the DOC concludes that Vietnam's plywood products evade trade remedy duty imposed on similar products from China, the United States will issue a tax imposition order on this Vietnamese product from the time the initiation of the investigation with the highest tax rate being imposed on China (dumping tax is 183.36%; anti-subsidy tax is 22.98% - 194.9%).

From the story of initiating the investigation against tax evasion, speakingwith a Customs Newspaper correspondent, Mr. Bui ChinhNghia, Director of the Department of Forestry Production Development (General Department of Forestry, Ministry of Agriculture and Rural Development), said that suing each other in commercial competition is normal when Vietnam increasingly penetrates deeply into the international economy and large trade.

This is an opportunity for businesses to review. Businesses have good conditions to assert themselves.

Does not affect exports much

From the perspective of the US initiated a lawsuit against tax evasion affecting wooden planks exports, Mr. Nghia said: “In 2019, this product will be exported mainly to the US and China markets. In the first half of this year, export value was still similar to the same period last year. Certainly, this move will affect the export value but there is a certain delay.”

Currently, Vietnam Administration of Forestryis cooperating with Vietnam Timber and Forest Products Association and localities to guide businesses in pursuing the lawsuit; report to Ministry of Agriculture and Rural Development leaders, coordinate with the Ministry of Industry and Trade to overcome US lawsuits.

The Ministry of Industry and Trade stated that, in the cases of anti-avoidance investigations so far, the measures against tax evasion have not significantly affected Vietnam's export turnover because enterprises have used raw materials from domestic or other countries instead of Chinese raw materials to produce exports.

Timber materials harvested in Vietnam annually are sufficient to produce 8.4 million m3 of plywood while Vietnam's total plywood export in 2019 was2.5 million m3. Therefore, in terms of input materials, Vietnam is capable of supplying plywood factories.

In order to effectively respond to trade remedies with the current timber industry and the plywood cases in particular, the Ministry of Industry and Trade recommends that Vietnam's plywood exported enterprises pay attention to learn mechanisms and regulations, U.S. investigative procedures.

The United States has frequently changed its regulations and procedures to make them easier to initiate and apply. In many cases, investigating authorities (such as U.S. Customs and Border Protection) can take the initiative to investigate without making them public.

In addition, regulations on "significant transformation" or requirements for "cooperation" and "provision of information" may change from case by case, so businesses need to find out in order to catch up and meet the relevant conditions.

In addition, the Ministry of Industry and Trade said that businesses also need to develop strategies to diversify products and export markets; have a strategy of developing domestic raw material sources, this is also a long-term solution to cope with the growing anti-evasion investigations.