Chinese-made Vietnamese-branded Steel: Lawful Competition

Responding to the Prime Minister’s request in resettling the proposal from the Vietnam Steel Association, the Ministry of Trade issued document 2019/BTM-XNK dated April 10, 2007, stating that the import of Chinese steel labelled with Vietnamese VIS brand of Vietnam - Italy Steel Company (VIS) to sell in the country is lawful.

Before giving the conclusion, the Ministry of Trade carefully reviewed the business contract between Vietnam-Italy Steel with its Chinese partner and consulted with National Office of Intellectual Property (NOIP). Vietnam - Italy Steel’s agreement to let its Chinese partner label its steel with the VIS brand, and import that steel into Vietnam, complies with Vietnamese laws on brand sovereignty and does not infringe upon the Intellectual Property Law.

 

However, the point of debate is that the VIS brand is labelled on bundles, not on individual billets. Each bundle weighs 2.5-3 tonnes. The manufacturer gives full technical indicators and specifications on the label (manufacturing date, series numbers, etc.) However, it is difficult for buyers to identify the origin and other information on separated billets. Full information about the steel is only on the sub-label on every bunch.

 

According to the Ministry of Trade, if Vietnam - Italy Steel is forced to label every single product, products of other companies must have the same labelling requirements because of the “national treatments” principle.

 

Vietnam - Italy Steel sent a sub-label to the Ministry of Trade, detailing the origin of the steel as Hunan (China), satisfying Clause 11, Decree 89 on goods labelling. With this sub-label, consumers can identify where the steel was made, China or Vietnam.

 

The Ministry of Trade said the bearing of sub-label on the product would be checked by the Ministry of Science and Technology and market management organisations.

The reason for the controversy lies in the quality of Chinese steel, labelled with VIS brand. Steelmakers question whether the quality of the Chinese steel meets Vietnamese standards. This is also a top concern for consumers. The Directorate for Standards and Quality checked the technical specifications of the product (length, durability, plastic melting limit, etc) and said the steel satisfied Vietnamese standards for import. Besides, the Transport and Communication Science and Technology Institute, and the Construction Science and Technology Institute also checked the import batch and confirmed the steel met steel standards for Group CIII -TCVN1651-85.

 

After reviewing the reports from these quality examiners, the Ministry of Trade concluded that the Made-in-China steel labelled VIS does not violate regulations on quality management of imported goods.

Many measures have been proposed to cope with massive penetration of Chinese steel into the Vietnamese market, after Vietnam Italy Steel’s imports, including protective measures against antidumping. If there is sufficient evidence to accuse the Chinese side of selling at a price lower than the rate provided by law, the Vietnam Steel Association and steelmakers can ask for an investigation in order to impose protective measures as stipulated by law.

 

However, it is very difficult to conclude that the Chinese are dumping steel. In the WTO game, healthy competition, including quality and price competition, is vital for enterprise survival. This case is a failure of steelmakers in Vietnam. Within two months, from February to March 2007, domestic market steel prices increased by VND200,000-500,000/tonne (US$13-31) against January 2007. There were various reasons for the price rise, including shortage of domestic steel ingot supply and dependence for ingots on Chinese suppliers. As a result, the price of steel ingot in Vietnam is higher than in China by US$35/tonne. The price of Vietnamese finished steel is higher than the Chinese product by US$85/tonne. Meanwhile, the quality of Chinese and Vietnamese steel is similar because the ingot for Vietnamese steel production is imported from China.

 

Therefore, it is expected, that Chinese steel is cheaper than Vietnamese by some VND1 million (US$62.5) a tonne. Under the circumstances, it is difficult to accuse the Chinese side of dumping steel in order to introduce protective measures under WTO rules. Furthermore, China also has an advantage in low labour cost, in addition to domestic steel billet supply.

From the perspective of competition, the Vietnam Steel Association objection to VIS’ activity seems irrational because it fails to pull down domestic steel price. Continuously rising steel prices cause more harm than good to consumers. Price hikes shrank consumption by 5-8 per cent in February against January.

 

From the perspective of integration, this is a matter of new business confrontation for steelmakers, which cannot continue relying on state protection, but must enter the fierce competition with their best strength.

 

The Ministry of Trade asked the Ministry of Finance to study and consider a possible tax adjustment on billets. However, according to the Ministry of Trade, any tax change must carefully take domestic demand and market factors into account. At present, the price of domestically made steel is soaring, and if the imports do not have a serious impact on consumers and the competition of the domestic steel industry, a tax rise is unnecessary.