RCEP Trade Remedies Enforcement – International Trade and Investment

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On January 1, 2022, the Regional Comprehensive Economic Partnership Agreement (RCEP) officially entered into force for Vietnam. RCEP is the world’s largest free trade area between ASEAN countries, China, South Korea, Japan, Australia and New Zealand. It accounts for about 30% of the world’s population with a total gross domestic product of about $25.527 billion. RCEP not only promises to eliminate about 90% of tariffs between the contracting parties within 20 years, but also requires the companies of the contracting parties to increase their ability to compete in the difficult free trade market. It should provide many opportunities for contracting parties to strengthen the value chain. In this context, effective tools available to contracting parties to protect their domestic manufacturing companies are trade remedies, which are authorized by the World Trade Organization (WTO) and commonly recognized under free trade agreements (ALE). Trade remedy measures such as anti-dumping, countervailing and transitional safeguard measures are prescribed in Chapter 7 of the RCEP. Circular No. 07/2022/TT-BCT (Circular 7) was issued by the Ministry of Industry and Trade (ME) and provides additional guidance on the implementation of trade remedy measures as stipulated in the RCEP.

This update highlights several noteworthy points from Circular 7 regarding transitional safeguard measures and anti-dumping measures.

1. Transitional safeguard measures

1.1. Application of transitional safeguard measures

1.1.1. The transition period

Under RCEP, the transitional safeguard measures are applied during the transition period beginning on Vietnam’s effective date. Since each product to be imported into Vietnam will be subject to different deadlines for the elimination or reduction of customs duties in accordance with Vietnam’s list of tariff commitments under the RCEP, the transition period varies depending on the aforementioned period applied to each particular product.

It does not last for more than eight years after the date on which the elimination or reduction of the customs duty on this good is carried out.

1.1.2. Principles of application

As defined in Circular 7, transitional safeguard measures under RCEP are defined as the special safeguard measures prescribed in the Foreign Trade Management Act 2017. Accordingly, the MOIT will decide whether these special safeguard measures should be imposed on imports into Vietnam deemed detrimental to domestic manufacturing. Since the special safeguard measures, which can only be applied during the transition period, are distinct from the general safeguard measures prescribed in the Foreign Trade Management Act 2017, Circular 7 explicitly provides that the transitional safeguards and safeguard measures cannot be applied at the same time for the same imported goods.

1.2. Grounds for applying transitional safeguard measures

According to Circular 7, any organization or person in Vietnam manufacturing goods that are similar or considered to be in competition with goods imported from other RCEP member states has the right to submit a request to MOIT for the imposition of transitional safeguard measures on such goods. . Accordingly, as prescribed in Circular 7, the MOT will investigate the affected imported goods and then decide whether the transitional safeguard measures should be applied based on all of the following grounds:

  • There is an absolute or relative increase in the quantities of imported goods benefiting from the special incentive customs duty rates under RCEP, compared to those of “like goods” and directly competitive goods produced in Vietnam;

  • The domestic manufacturing industry will be or threaten to be seriously impaired; and

  • There is a causal link between the above-mentioned increase in imports and the serious or potentially serious injury caused to the domestic manufacturing industry.

The process for processing a request for the imposition of transitional safeguard measures is illustrated in the table in Annex 1 of this update.

1.3. Corrective measures in the event of application of the transitional safeguard measures

In accordance with Circular 7, the following measures may be imposed:

  • Suspend further reduction of any RCEP rate of duty on goods originating in a RECP party; Where

  • Impose the safeguard duty in the form of an additional customs duty on the originating product, provided that the sum of the customs duty under Vietnam’s schedule of tariff commitments and the safeguard duty does not exceed the lower amount of the applied rate of customs duty of the most favored nation in force on the day:
    • when the transitional safeguard measures are applied; Where

    • immediately preceding the effective date of RCEP for Vietnam, January 1, 2022.

2. Methods of calculating the margin of dumping

The margin of dumping is a method of trade protection aimed at preventing exporting countries from selling goods at low prices in a domestic market. The margin of dumping must be calculated to assess whether the anti-dumping measure should be applied. For example, if the dumping margin exceeds the de minimis level, for example 2%, the anti-dumping duty may be applied.

In accordance with the Agreement on Implementation of the General Agreement on Tariffs and Trade 1994 (GATT 1994) (Anti-dumping agreement), and Decree No. 10/2018/ND-CP which guides the implementation of the Foreign Trade Management Act 2017 provides the following methods for calculating the margin of dumping:

  1. Comparison of the weighted average normal value with a weighted average export price (WA-WA); Where

  2. Comparison of normal value and export prices on a transaction-to-transaction (TT) basis.

(Methods of calculating the margin of dumping)

According to the dumping margin calculation methods, all individual dumping margins will retain their original value, whether positive or negative. In the practice of zeroing, all export transactions that have negative calculation results between domestic market prices and export prices will not be considered. This prevents negative results from being outweighed by positive ones. As stipulated by RCEP and recalled in Circular 7, zeroing cannot be applied to the aforementioned Dumping Calculation Methods.

3. Conclusion

For those who do business in Vietnam and have produced products in competition with products from other exporting countries, it is worth paying more attention to the trade remedies provided by the treaties and using these protective measures. more effectively to protect its national production in the context of global competition and economic integration.

The content of this article is intended to provide a general guide on the subject. Specialist advice should be sought regarding your particular situation.

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