Safeguard measures – the battle between domestic products and imports

The plaintiffs have proposed to impose the tax rate of 2 percent of the import value to be applied to two kinds of products – refined soya and palm oil

Vocarimex now holds 28.27 percent of the domestic market share, thus meeting the requirements for eligible for asking safeguard measures (the minimum required figure was 25 percent). Besides, Vocarimex has been supported by some other enterprises, namely the Tuong An Oil Vegetable Company, the Cai Lan Vegetable Oil Company, Golden Hope Nha Be.

Vocarimex said that the rapid increase in the vegetable oil imports to Vietnam recently has made Vocarimex’s and other enterprises’ market shares narrowed. Especially, in 2012, when the import tariff was cut to zero percent, vegetable oil products flooded the Vietnamese market, thus making domestic enterprises suffer.

A report showed that in 2012, Vietnam imported 604,375 tons, which was double the imports in 2011 and 2010. This has led to the sharp falls in Vocarimex’s turnover and profit in 2012 by 66 percent and 197 percent, respectively.

In the letter to the Competition Administration Department (CAD), an arm of the Ministry of Industry and Trade, Vocarimex, while asking to apply safeguard measures, emphasized that the imports in large quantities have forced domestic manufacturers to reduce the sale prices of finished products, even though the input costs have been increasing rapidly.

Will Vocarimex succeed?

Vocarimex is not the first Vietnamese enterprise which asks for safeguard measures since the day Vietnam joined WTO in 2007. However, very few businesses have proposed the measures, for many reasons.

In principle, applying safeguard measures is the action aiming to temporarily restrict the imports of one or several products, if the imports of the products increase too rapidly and threaten to cause serious damages to the domestic production.

With the safeguard measures, the import countries can only temporarily prevent the imports to avoid the possible damages to the domestic production in some special cases, and for the time long enough for domestic enterprises to find out the solutions to get adapted to the new circumstances.

Import countries can only apply safeguard measures after they take investigations and prove the co-existence of many conditions that may threaten the domestic production. Meanwhile, very few enterprises can prove that.

To date, CAD has received two petitions from Vietnamese enterprises asking for safeguard measures.

Le Danh Vinh, former Deputy Minister of Industry and Trade, also said while safeguard measures are considered as the “lifebuoy” in case of emergency, they are still unfamiliar to Vietnamese enterprises, which still have limited knowledge about the procedures to follow and the necessary skills to use the protection instruments.

Bach Van Mung, Head of CAD, said the department would have to consider the case in different aspects, before making decision on whether to apply safeguard measures.

“We are considering the Vocarimex case before making the final decision in the next six months,” Mung said.

In 2009, Viglacera and the Vietnam Floating Glass Company proposed to apply safeguard measures against the floating glass imports by taxing $0.6 per square meter. The two manufacturers said the rapid increase in the import volume and might lead to the domestic companies to stop production.

However, CAD decided not to apply safeguard measures in this case.

Vietnamnet