Goods origin fraud a mounting threat to Vietnamese exports

By Hung Le   November 5, 2019 | 04:47 pm PT
Goods origin fraud a mounting threat to Vietnamese exports
A worker drives a forklift to transport aluminum bars at a factory in Anshun, Guizhou Province, China. Photo by Reuters/Stringer.
Authorities are finding more and more Chinese-made exports masquerading as Vietnam-made goods, threatening both domestic production and legitimate exports.

In the latest case Vietnam Customs said it recently discovered signs of origin fraud in 1.8 million tons of aluminum imported. The aluminum was falsely labeled as Vietnam products and headed for the U.S. The consignment was worth around $4.3 billion.

Customs found it had been imported by a company in Ba Ria – Vung Tau Province which has its own production facilities but had been importing semi-finished aluminum products from China and other markets to export to the U.S., customs chief Nguyen Van Can said.

By rerouting the consignment of aluminum through Vietnam, the company was seeking to sidestep U.S. tariffs of 374 percent on aluminum from China since Vietnamese exports are taxed at 15 percent, he said.

His agency is currently working with U.S. authorities, which has sent officials to Vietnam to investigate the matter, Can said.

Trinh Khoi Nguyen, vice chairman of the Vietnam Steel Association (VSA), said customs had recently uncovered a series of cases, some involving imported steel, where goods were found to have been fraudulently labeled.

This week customs authorities said they had seized 313 bicycles suspected to be falsely labeled as Vietnamese products in the southern Binh Duong Province. On inspection, almost all of them were found to have been imported and assembled in Vietnam and given false labels for export.  

At a port in Hai Phong, they detained dozens of containers of machinery and equipment, which were similarly imported and assembled and given Vietnamese labels, Can said.

At ports in Ho Chi Minh City, Binh Duong and Hai Phong, many containers of clothes, shoes and electronics, imported for domestic distribution, were found to have made-in-Vietnam labels despite being produced abroad, he noted.

Many plywood exporters have also recorded abnormal rises in both imports and exports.

And, when filling out forms to obtain certificates of origin from customs, they produce fictitious domestic sources, Can said.

Vietnam's plywood exports to the U.S. rose by 95 percent year-on-year in the first quarter to $47 million, according to customs figures. Imports from China rose 37 percent in the period to $61 million, or 84 percent of all plywood imports.

Mounting threat

Nguyen of VSA said: "The latest aluminum case is the same: It will be very dangerous if Vietnam is found to have been a transshipment destination for foreign goods to avoid tax. The whole aluminum industry could be involved, affecting all other exporters when just one was fraudulent."

"Secondly, domestic enterprises will be devastated if shipments cannot be exported and have to be consumed in Vietnam."

The aluminum case is a major warning for Vietnam, which is at risk of being caught in the cross-fire of the U.S.-China trade war. "The biggest worry is that, just like steel, the U.S. could punish Vietnamese aluminum with rates high enough to kill the industry," Prof Dinh Trong Thinh of the Academy of Finance said.

In July the U.S. slapped anti-dumping duties of up to 456 percent on some steel products imported from Vietnam, which it alleged were produced overseas.

Marketing expert Vu Quoc Chinh of the Ho Chi Minh City University of Economics said to protect its domestic industry Vietnam needs to work closely with the U.S. to "vindicate" its aluminum industry at all costs.

Though there is no overt threat from the U.S., sanctions could suddenly be imposed on countries suspected of being used by China to bypass tariffs, and to cope with this, Vietnam needs to be flexible and vigilant, and monitor all imports of raw materials and exports of finished products, he added.

The seizure of 1.8 million tons of aluminum comes just one month after the Ministry of Industry and Trade decided to impose anti-dumping duties of 2.49 - 35.58 percent on aluminum products imported from China in October.

Can said the country would continue to closely monitor import-export activities to combat origin fraud.

"Vietnam must not become a transshipment destination for trade fraud. We must protect our national interests from exports of falsely labeled products."

The trade ministry is drafting a policy that will define a product as "made in Vietnam" if it has manufacturing added value of 30 percent of its price in this country.

Vietnam has yet to clearly define what locally made is, but would clearly define it to prevent tariff circumvention by Chinese firms, the ministry said in a statement in August. 

The U.S. is Vietnam’s largest export market and China is its largest source of imports. While several global companies have shifted their production from China to Vietnam because of the trade tensions, experts have warned that major Vietnamese export items such as wood and seafood would become possible U.S. tariff targets if the country fails to prevent origin-related fraud.

Shipments to the U.S. reached $49.9 billion in the first ten months, up 26.6 percent year-on-year, according to the General Statistics Office.

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