Vietnam targets tariff-dodging export detours
The Vietnamese government is moving to clamp down on shipments of products from China and elsewhere that pass through the country and are relabelled as Vietnamese to avoid US tariffs.
The crackdown follows a series of reports by the local newspaper Tuoi Tre that revealed that Vietnamese-made televisions by the home electronics maker Asanzo were made almost entirely from imported Chinese parts.
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 imported LCD panel, 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 revelations are troubling for the government as Vietnam is enjoying an influx of manufacturers shifting production out of China amid the trade war. Vietnam’s trade surplus with the US jumped more than 40% on the year to US$21.6 billion for the five months through May.
Hanoi is now drafting rules to prevent illegitimate transshipments, modelled on global standards. They will likely spell out requirements for a product to be considered domestically made, such as the percentage of the content sourced from Vietnam, as well as how much of the assembly process was handled in the country.
Authorities hope the crackdown
will mollify Washington, which has been paying closer attention to Vietnam amid a swelling trade imbalance.
The crackdown aims to fix loose labelling rules for goods imported for domestic sale, which can be re-exported to third countries with their real origins obscured. This loophole has made Vietnam an attractive target for rerouting, drawing scrutiny from Washington.
Exports to countries with which Vietnam has free trade agreements must have 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 industrialised nations as Japan, the US 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 labelling is based on the ethics of individual companies,” said an executive at a local arm of a Japanese company with a plant in Vietnam.