Vietnam applies safeguard measure to restrict vegetable oil imports

VietNamNet Bridge – Vietnam has decided, for the first time in history, to impose safeguard duty on vegetable oil imports from September 7.

After the eight month investigation, the Ministry of Industry and Trade released the decision on applying safeguard measures against vegetable oil imports.

After the eight month investigation, the Ministry of Industry and Trade released the decision on applying safeguard measures against vegetable oil imports.

Under the decision, the imports will not enjoy the preferential tariff of zero percent any more. They will be taxed five percent, while the tax rate would be gradually reduced to 2 percent by 2017.

The case was initiated by Vocarimex which asked to conduct the investigation for safeguard measures in November 2012. Four other vegetable oil manufacturers then also voted for the safeguard measures, namely Tuong An, Tan Binh, Cai Lan and Golden Hope – Nha Be.

Vocarimex affirmed that the sharp rise in the refined vegetable oil imports was the main reason that caused big damages to the local production.

The investigation by the Competition Administration Department (CAD) under the Ministry of Industry and Trade found that in 2009-2010, domestic manufacturers held 52 percent of the market share, while imports got the other 48 percent.

However, in 2011, the imports’ market share has risen to 56 percent. The market share held by domestic manufacturers dropped sharply to 27 percent in 2012, while the imports overwhelmed the domestic market with 73 percent.

As a result, domestic enterprises in 2012 had to cut down the production by 2/3, even though their designed capacity was big enough to satisfy the domestic demand until 2015.

Meanwhile, they have to lower their sale prices in accordance with the imports’ prices instead of setting up the prices based on their production costs.

In 2009-2010, the prices of imports and domestic products both increased due to the input material price increases. Meanwhile, since the fourth quarter of 2011, the domestic products’ prices have been purely depending on the imports’ prices.

In 2012, domestic manufacturers had to slash the sale prices by 6.3 percent, despite the input material price increases, just because the imports’ prices decreased by 12 percent.

In 2010, the domestic sale turnover of vegetable oil products increased by 50 percent over 2009, while the 2011’s turnover was double that of 2010. Meanwhile, the turnover unexpected dropped by 38 percent in 2012 in comparison with 2011.

The figures have shown the big damages to the local production by the imports, which has made the investigation agency come to the conclusion on applying safeguard measures on the imports.

The bitterness of safeguard measures

While the government decides to protect domestic manufacturers, it would make the consumers’ pocketbooks scantier.

Import products are very cheap on the domestic market, priced at VND13,000 per liter. Meanwhile, domestically made soybean oil products have been sold at VND44,000.

In 2012, the vegetable oil import tariff was cut from five percent to zero percent under the ASEAN Trade in Goods Agreement ATIGA. The preferential tariff has led to the sharp rise in the oil imports.

Analysts have noted that the tariff cut must be anticipated by domestic enterprises, which should have prepared well for this. However, this has been described as “unexpected” and “beyond the control” for domestic enterprises.

They have also commented that domestic manufacturers need to cut down the production costs in order to market cheaper products instead of calling on to impose high taxes on imports.

Pham Huyen