Thai-origin sugar evades tariffs, attracts anti-circumvention duty
Vietnam's Ministry of Industry and Trade said sugar imported from Cambodia, Indonesia, Laos, Malaysia, and Myanmar using Thai sugar materials will be subjected to the same anti-dumping and anti-subsidy tariffs applied to Thai sugar from August 9.
In its final draft conclusion on the results of a duty evasion probe, the ministry confirmed that Thai-origin sugar was evading import tariffs and entering the Vietnamese market through re-exports via the above-mentioned five regional countries.
A 47.64% tariff on imported cane sugar originating from Thailand has been in effect since June 2021. Accordingly, sugar materials imported from the five countries will be subjected to a total tariff of 47.64%, which comprises an anti-dumping tax of 42.99% and an anti-subsidy tax of 4.65%. This tax will be applied from August 9, 2022 to June 15, 2026.
However, anti-circumvention taxes will not apply if exporters from Cambodia, Indonesia, Laos, Malaysia, and Myanmar can prove that their products are made from locally harvested sugarcane.
Harvesting sugarcane in central Vietnam. Photo courtesy of Vietnam News Agency.
S&P Global, which provides economic intelligence, quoted an unnamed sugar trader as saying: "Local producers in these five ASEAN countries who can produce a wholly obtained certificate, which is a note in the certificate of origin that states 100% of the product is from sugarcane harvested in their local origin, will be allowed to export to Vietnam at the 5% tax rate."
To date, six companies are exempted from the anti-circumvention tax - three from Laos, two from Myanmar and one from Indonesia. The companies are: Mitr Lao Sugar, Savannakhet Sugar, and TTC Attapeu Sugar Cane in Laos; Ngwe Yi Pale Sugar, Than Daung Oo from Myanmar; and Perusahaan PT Kebun Tebu Mas from Indonesia.
S&P Global quoted an unidentified Singapore-based trade analyst as saying: "I do not think there will be a big change in trade flows following this decision. The local producers exempted from this tariff are the ones mainly doing this re-export flow to Vietnam. About 65% of the Indonesian sugar flowing to Vietnam is from KTM, the exempted Indonesian company."
According to Platts Analytics's latest estimates, annual domestic sugar production in Myanmar and Indonesia is around 400,000 tons and 2.2 million tons, respectively, and this could still sustain outflows to Vietnam. Myanmar and Indonesia are deficit in sugar but if the arbitrage economics in exporting domestically produced sugar to Vietnam and subsequent imports to fulfill domestic needs proves positive, it would be a viable flow.
However, in the short term, Indonesian producers that have imported raw sugar under re-export licenses expect difficulties in shipping to Vietnam. The anti-circumvention tax will thus put a cap on total imports under such licenses and moderate the outlook for Indonesia's total raw import demand for 2022 and 2023, the S&P Global report said.
Sugar imports into Vietnam jumped five times year-on-year to 527,200 tons in the period between October 2020 and June 2021, according to the Ministry of Industry and Trade. However, imports from Thailand in the period decreased by 38%. This was the period that Vietnam trade officials investigated Thai sugar for dumping and subsidizing. Then, the ministry’s July 14 final draft conclusion confirmed that Thai-origin sugar was evading import tariffs and entering the local market through five other countries in the region.
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