US may investigate suspected Chinese 'steel laundering' in Vietnam

The WSJ cited a source familiar with the matter as saying that the US Commerce Department may begin a formal investigation into Chinese companies exporting steel to the US via Vietnam to enjoy lower tariffs.

In September, four steel companies — US Steel, Nucor, AK Steel Holding and ArcelorMittal — filed a petition with the US Commerce Department, alleging that Chinese companies had shipped steel to Vietnam and made necessary changes to make it appear as Vietnamese steel, allowing the companies to export the products to the US at lower tariffs. A Commerce Department spokesperson declined to comment on the matter.

The crux of the issue is whether such a change, such as galvanizing to prevent corrosion, can transform the steel into a completely new product that can be labeled “Made in Vietnam.” The lawyers for the American companies assert that coating the product with another layer “is only a small investment, brings too little value and does not add new components.”

US companies say Chinese rivals are evading import taxes through Vietnam. Photo: Reuters

Asian companies importing steel to the US say they are being treated unfairly. Minmetals, a New Jersey-based steel trader, has objected to the investigation. In a letter to the US Department of Commerce, they asserted that steel has "changed significantly".

Last year, under pressure from American steelmakers, US officials imposed higher import tariffs, some as high as 266%, on at least four categories of Chinese steel. That allowed US steelmakers to raise prices. Now they are worried that steel from Vietnam will flood into US ports.

According to data service company Global Trade Information Services, in the first 6 months of the year, the amount of steel exported from Vietnam to the US was more than 312,000 tons, a sharp increase compared to more than 25,700 tons in the same period last year. Also during this period, Chinese steel exports to Vietnam increased by 46%, to 6.3 million tons. Last year, this figure was only 4.3 million tons.

China’s slowing economy is causing a serious oversupply in many of its manufacturing industries, especially steel. The World Steel Association predicts that demand will fall by about 5.5% this year. This means China will have a surplus of tens of millions of tons of products. And they will actively export, drowning other markets with unbeatable prices.

Beijing is accused of dumping steel in many markets, forcing rivals to close factories and putting thousands of people out of work. European officials say about 40,000 steel jobs have been lost in the region in the past few years. In January, the European Union (EU) announced it would impose import duties of up to 13% on Chinese steel.

According to VNE