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President Donald Trump may not have said much, if anything, about China’s steel exports during his recent tour. Both European and U.S. legislators, however, are carrying out investigations into not just simple dumping but more complex and illegal activities, such as shipping via third parties to hide the origin and avoid pre-existing dumping tariffs.
A Reuters article this week explains how the European Union’s anti-fraud office (OLAF) said it has found Chinese steel was shipped through Vietnam to evade the bloc’s tariffs.
In part, the current case may be a matter of timing.
The quantities involved are said to be relatively small and the case in question was concluded last year. There is strong evidence, however, to support the belief that China shipped organic coated steel via Vietnam, utilizing Vietnamese certificates of origin and, as a result, avoided roughly 8.2 million euros ($9.5 million) of anti-dumping duties.
Since then, China has closed a portion of its excess steelmaking capacity and exports have fallen, but that doesn’t lessen the charge that this was an illegal program to avoid duties, and charges should be brought if the case holds up.
Western steelmakers are hoping similar duties will be applied to Vietnamese origin steel to close the loophole. This would be rather hard on the legitimate Vietnamese steel producers, but may be the only way to prevent the deception being repeated in the future.
Reuters went on to say the U.S. is due to rule shortly on whether Chinese steelmakers subject to U.S. duties also diverted their shipments to Vietnam for minor processing into cold-rolled and corrosion-resistant steel before selling them on to the United States.
By some estimates, the report says up to 90% of the value of the Vietnamese steel shipped to the U.S. was produced in China.
General import data supports the allegations.
Imports Drop From China, Rise From Vietnam
The report states that after duties were imposed in 2016, U.S. imports of cold-rolled and corrosion-resistant steel from China almost ceased, falling to just over 45,000 metric tons from 1.2 million in 2015, according to International Steel Statistics Bureau (ISSB) figures.
Yet over the same period, U.S. imports of the two products from Vietnam surged ten-fold to nearly 700,000 tons, as the graph below illustrates.
Tellingly, the same thing happened in Europe where imports of Chinese corrosion-resistant steel, which nearly doubled last year, steadied in the year to August, Reuters reported — just as imports from Vietnam surged from historically negligible levels. Subsequently, the E.U. imposed provisional duties on Chinese corrosion-resistant steel in August this year.
It is no surprise the E.U. and U.S. are at the forefront of such actions. Both are home to mature steel industries and carry significant legacy costs of pension funds, labor costs and environmental compliance that Chinese steel mills do not have.
In addition, the E.U. and the U.S. are the top two largest steel importers in the world – right in emerging market producers’ sweet spot.