Vietnam to Reduce Import Duty on Japanese Steel; Limited Impact Seen

With the start of 2018, Vietnam’s Ministry of Finance announced zero percent tariffs on imports from Japan in line with the Southeast Asian country’s commitments to lower tariffs, outlined in the Vietnam- Japan Economic Partnership Agreement (VJEPA) and the ASEAN – Japan Comprehensive Economic Partnership Agreement (AJCEP) for 2016-19.

Under Vietnam’s new import tariffs, steel imported from Japan will have zero tax rates with effect from 1 April 2017.

VJEPA was the first bilateral free trade agreement that Vietnam entered into after the country joined the World Trade Organisation in January 2007. The agreement covers comprehensive contents, including trade in goods and services, investment and improvement of the Japan- Vietnam business environment.

When VJEPA came into effect in October 2009, Vietnam committed to eliminate 91% of tariffs on Japanese products within 16 years, while Japan pledged to eliminate some 94% of tariffs on Vietnamese products within 10 years.

What will be the impact of the import tariff change?

According to the Ministry of Industry and Trade, Vietnam is able to satisfy about 40% of domestic steel requirement from its in-house production while remaining 60% is met through imports.

Japan is one of the key exporters of steel for Vietnam. According to country’s customs data, Vietnam imported 2.09 MnT of steel from Japan during Jan-Nov’17, contributing to 15% of the country’s total steel imports.

However, with this tariff change there will be no impact on Vietnam’s steel imports from Japan. This is because Vietnam majorly imports HRC and plates from Japan and these products already enjoy zero percent import duty.

According to the reports, Vietnam is unable to manufacture hot rolled steel sheets which is essential input material to produce cold-rolled steel, galvanized steel and steel pipe and is vital for shipbuilding and mechanical engineering industry. Thus HRC and plates are already exempted from import duty by the country.

The removal of import duty on steel imports by Vietnam may benefit billet import from CIS countries as currently the same attract import duty of 4.5%. However, as Vietnam is a self-sufficient country in terms of billet requirements, any major impact of import duty removal on steel imports from CIS countries is also unlikely.