Under its WTO commitments, Vietnam will not be considered by default as non-market economy anymore after 31 December 2018. Dr. TRAN VIET DUNG – Partner of Victory LLC, has given his expressionvia an interview with Enternews, that it is a positive signal for Vietnam in lawsuits related to commercial safeguard.
1. What are the effects caused with respect to commercial safeguard lawsuits, taking into consideration the fact that Vietnam is no longer to be seen by default as a non-market economy, sir?
For Vietnam, this is really a positive and beneficial for Vietnam in lawsuits related to safeguard. Upon joining the WTO, Vietnam committed to accept to be regarded as a non-market economy for 12 years since its accession to Anti-dumping and Countervailing Duties.
This non-market economy regulation started with GATT’s trading system for countries following the socialist economy model. The second note in paragraph 1.2 of Article VI of GATT 1947 stipulates: “Recognizing that in the case of imports from a country where trade is entirely exclusive or essentially exclusive or the entirety of domestic prices is determined by the State, the determination of comparability of prices for the purposes of paragraph 1 may have special circumstances and in such cases, the contracting parties may need to consider the possibility that it is not always appropriate to compare exactly with that country’s domestic price”.
Accordingly, some WTO members did not accept the prices or production costs of goods in non-market economy as an appropriate basis for calculating the ordinary value, owning to the reason that such prices and costs are regulated by the Government and thus do not follow market rules. The Investigating Agency will then use the prices and production costs of a third country as a basis for calculating the ordinary price. As a result, enterprises belonging to non-market economy countries will be subject to discrimination when compared to enterprises of countries following market rules. This has been the biggest disadvantage of Vietnam in anti-dumping case ever since.
When Vietnam is no longer to be considered as a non-market economy such calculation shall not be applied anymore and it will help to put an end to the disadvantages mentioned above. From there on, the Investigating Agency of the importing country shall be obliged to calculate the ordinary value of Vietnamese goods based on the selling price in Vietnam. This will ensure that the dumping margin will be more accurate for Vietnamese exports.
2. So, what are your thoughts on the capacity of Vietnamese businesses in dealing with lawsuits related to safeguard?
Taken the fact that the world is being operated under deeper globalization and economic integration situation, enterprises in general and specifically Vietnamese enterprises will have to cope with more and more disputes and complaints regarding safeguard measures.
Recently, businesses have become more aware in order to protect themselves when many commercial lawsuits have arisen, proven by the fact that enterprises have actively cooperated and provided investigating agencies of importing countries with relevant information when subject to investigation. Regarding businesses that are “familiar” with anti-dumping lawsuits, especially businesses in fisheries, steel or galvanized steel, I am of view that they have been prepared and taken measures to minimize losses. But for other industries or for businesses that are not familiar, anti-dumping lawsuits are still a big challenge to overcome.
3. To prevent losses from safeguard lawsuits, do Vietnamese businesses need to change their business strategy, sir?
Indeed! When exporting to certain markets, they must calculate the market impact of the host countries, recognize the market patterns and the risks regarding lawsuit or safeguard tax imposition, and on such ground, make adjustments to price and business strategy in order to limit the possibility of being sued.
Enterprises should also consider soft solutions such as joint venture or shares acquisition with “competitors” of importing countries, which will help to “dilute” competitors in domestic industry of the exporting country. In addition, Vietnamese companies must continuously expand and diversify markets, which then enables them to conduct export in an alternative market in case of being sued for dumping.
4. In your opinions, what do Vietnamese businesses need to do when dealing with the safeguard lawsuits?
Vietnamese enterprises must cooperate actively with investigating agencies instead of avoiding them. Accordingly, they need to submit forms and provide supplementary information accurately in a timely manner as per requested for the purpose of investigating sample, which will facilitate the procedures thereof. The final tax rate of the sample businesses is usually lower than the national anti-dumping/ countervailing duty rate. It is important for companies to appoint legal consultants with intensive expertise for better implementation.
Vietnamese enterprises engaging in import activities should also apply simultaneously the International Financial Reporting Standards (IFRS) to their books record systems beside the Vietnamese Accounting Standards (VAS) (as required by Vietnamese laws). This will help enterprises under investigation save more time when required to convert data in accordance with local requirements of investigating agencies.
Thank you, Sir!
(Published on Enternews dated 09 Dec 2018)