What is trade origin fraud?
In recent times, trade origin fraud has often found in many forms through acts of fraudulent, frauds about the origin of goods, labeling of goods in violation of regulations, illegal exports, imports of goods or using other illegal acts of the laws of the host country to enjoy tariff preferences or to evade trade remedies.
What is the impact of the U.S.-China Phase 1 Trade Deal on Vietnam and its influence on the combat against trade origin fraud in Vietnam?
Although on January 15th, 2020, the US and China signed a first-phase trade agreement between two countries at the White House, besides the positive aspects of trade, investment and economy to the world, it may not reduce the risk of increasing the object of enterprises seeking to conduct trade origin fraud of goods, taking advantage of goods origin of Vietnam as before the agreement was signed.
For Vietnam, it can be seen that, most of the prominent cases related to trade frauds are related to Vietnam’s key export industries and sectors such as farming, processing and exporting of shrimp, industrial wood, aluminum, steel, etc. The highlight among them is the case of Vietnam Customs in coordination with the US Department of Homeland Security to stop 1.8 million tons of aluminum imported to Vietnam to forge origin for export to the US and other countries, origin surveys for Vietnam’s aluminum and shrimp industry, etc.
Facing such trade frauds and counterfeiting investigations, regardless of the US-China trade agreement, Vietnam’s exports will always bear the risk of being in the target is investigated by relevant countries, causing damage to Vietnamese producers and farmers, reducing its competitiveness, losing credibility in the international market or restricting export to these markets if being imported by the importing country in case of being detected and applied trade remedies such as anti-dumping tax, countervailing duties, safeguard tax, etc. with very high rates.
Is the US-China trade war the only reason leading to the increase in trade origin fraud in Vietnam?
It can be seen that the US-China trade war is an important cause leading to an increase in origin frauds, labeled “made in Vietnam”. However, as a whole, there are many factors that directly affect this increase, including:
(1) Vietnam has been a member and is negotiating 17 Free Trade Agreements (FTA); during the implementation of said FTAs, the majority of goods originating from Vietnam benefit from import duty exemption when exported to other members of the FTA. Recently, on February 12th, 2020, the European Parliament (EP) voted to ratify the Free Trade Agreement between the European Union (EU) and Vietnam, also known as the EVFTA agreement;
(2) As a result of many countries and partners in the world increasingly adopting trade remedies namely anti-dumping tax, countervailing duties, safeguard tax, etc. with rates so high that lead to many consequences and impair export capabilities of countries which said taxes are imposed on (typically from the US-China trade war has affected the movement of business objects from China), some enterprises attempt to falsify goods origin and exploit Vietnamese origin of goods to receive benefits and goodwill or to evade trade remedies illegally;
(3) The increase in risks of disease outbreaks from China such as the Novel Coronavirus(2019-nCoV) has led to many investors choosing safer and more stable destinations including Vietnam;
(4) Diverse and abundant material sources and labor costs are still keeping at a good competitive level of Vietnam; and;
(5) GDP growth has always been in a high and stable group compared to other developing countries with Government policy on promoting manufactures; maintain import and export development sustainably; attract foreign cooperation and investment in projects, including Chinese investors;
The legal measures that Vietnam is applying
In order to solve the problems of commercial origin fraud in Vietnam, this must have a strict and effective direction and implementation of the Government of Vietnam. In particular, most recently, the Government issued Resolution No. 119/NQ-CP dated December 31st, 2019 on a number of urgent measures to strengthen state management of the prevention of frauds of origin and transmission of illegal goods with the following specific legal measures:
(1) Developing legal systems regarding goods origin, goods origin examination and verification to effectively implement prevention and stringent sanctions against origin fraud, illegal transport and trade remedy evasion, especially in Facilitate implementation of incentive policies on development and investment attraction in supporting industries to increase import substitution rates in product composition in order to satisfy domestic value contents and regional value contents to raise use rates of preferential C/O, take advantage of tax reduction of the FTAs, reduce probability of being investigated for combat against origin fraud and trade remedy evasion by other countries;
(2) Enhancing capacity of supervising and examining bodies to effectively implement prevention and stringent sanctions against origin fraud, illegal transport and trade remedy evasion, especially in capacity with respect to issuance of Certificate of Origin (C/O), including reform systems of C/O issuing bodies and examination and verification of goods origin in order to ensure operational effectiveness of the systems in a modern and efficient fashion;
(3) Proactively examining, investigating and verifying to detect violations, origin fraud, illegal transports and trade remedy evasion, and stringently take actions against found violations, especially in establishment of interdisciplinary inspectorates to inspect origin of goods of enterprises suspected with origins and labeling fraud and illegal transport of goods; the inspectorates consist of Ministry of Industry and Trade, Ministry of Finance, Ministry of Public Security, Vietnam Chamber of Commerce and Industry and relevant industry associations, inspection on issuance of C/O;
(4) Increasing publicizing and raising awareness to deter and prevent violations regarding goods origin fraud and illegal transport in import and export; and
(5) Promoting international cooperation in deterring and taking actions against goods origin fraud and illegal transport in import and export.
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This article is for general information only and is not a substitute for legal advice.