The Office of the U.S. Trade Representative (USTR) announced it has launched a new investigation into Vietnam’s currency policy to determine whether the country has been undervaluing the dong ( the official currency in Vietnam), a step that could result in tariffs on imports of the country’s products.
The USTR states that available data analytics indicate that the Vietnamese government actively intervened in the exchange market and that the country’s currency has been undervalued over the last three years. The probe follows a determination in August by the Department of Treasury that Vietnam manipulated its currency in a specific case involving passenger-vehicle tires. As a result of its investigation, the Treasury Department determined that the State Bank of Vietnam had depressed the exchange rate by purchasing $22 billion of foreign-exchange reserves, which made the country’s currency weaker by 4.7% and its goods cheaper on the international markets.
“Unfair currency practices can harm U.S. workers and businesses that compete with Vietnamese products that may be artificially lower-priced because of currency undervaluation,” Trade Representative Robert E. Lighthizer said. “President Trump is firmly committed to combatting unfair trade practices that harm America’s workers, businesses, farmers, and ranchers… We will carefully review the results of the investigation and determine what, if any, actions it may be appropriate to take.”
Imports from Vietnam have grown substantially in recent years, from $14.9 billion a decade ago to $66.6 billion in 2019, according to data published by the Department of Commerce. The Asian country has become a popular destination for importers seeking to avoid tariffs and for manufacturers looking to move their operations out of China to avoid trade tensions or by those seeking lower labor costs.
In a statement issued on Friday, the USTR also announced it would launch a separate investigation into Vietnam’s illegally harvested and traded timber imports. According to the USTR, evidence suggests that a significant portion of Vietnam’s timber imports were harvested or traded not only in violation of Vietnam’s own domestic laws, but also the laws of the exporting countries as well as international trade rules. As one of the world’s largest exporters of wood products, with over $3.7 billion worth of wood furniture shipped to the U.S. in 2019, Vietnam relies heavily on imports of timber harvested in other countries.
Both investigations will be carried out under Section 301 of the Trade Act of 1974, the same authority that the USTR previously used to impose tariffs on more than $350 billion worth of imports from China. If the USTR determines that Vietnam’s trade practices unfairly undermine American businesses, the U.S. will likely impose tariffs, quotas, or other restrictions on imports from Vietnam. In particular, Importers of wood products could be affected by any such restrictions.
USTR Seeks Public Comments
Importers will have until November 12, 2020 to submit comments to the USTR relating to both investigations. Specifically, the USTR is seeking comments on issues such as:
- whether Vietnam’s currency is, in fact, undervalued, and if so, by how much;
- the extent to which Vietnam’s acts, policies, and practices contributed to the undervaluation; and
- the nature and level of any burden or restriction on American commerce caused by the undervaluation.
For assistance preparing or submitting comments, or for more information on the potential impact of these investigations, please contact a member of our Compliance Department at Compliance@oceanair.net.
OCEANAIR will continue to monitor the situation and provide status updates as they become available.
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Sources:
- Sandler, Travis & Rosenberg, Tariffs on Imports from Vietnam Threatened in New Investigations
- The Wall Street Journal, S. to Investigate Vietnam for Currency Manipulation
- The New York Times, Trump Administration Opens Investigation Into Vietnam’s Trade Practices
- Bloomberg, S. Opens Trade Case to Probe Vietnam Currency Undervaluation
- Reuters, S. probing whether Vietnam undervalues its currency
