Small enterprises unprepared to tackle lawsuits

Saigon Investment
The wood export industry in Vietnam is facing two anti-fraud investigations from the US Department of Commerce (DOC) for plywood products and wooden cabinets.
Small enterprises unprepared to tackle lawsuits ảnh 1 Illustrative photo.
During the investigation and preliminary conclusion, there were 36 enterprises of plywood products that did not fully cooperate or provide consistent information. Whereas 40 businesses of wooden cabinets sent information after the prescribed time limit. Saigon Investment had a discussion with Lawyer Nguyen Thanh Ha, Chairman of SB Law Firm about issues related to these lawsuits.

Journalist: - Sir, is it correct that these two cases concerning the wood export industry highlighted the low response of many Vietnamese enterprises to defend lawsuits?

Mr. Nguyen Thanh Ha: - First of all, it should be said that Vietnamese enterprises have not yet acted and complied with the requirements of the DOC. The 36 plywood enterprises have not cooperated and responded because they have not opened an account on the DOC website to answer questions or have an account as the information is inconsistent. It can be said that many wood export enterprises are still Small Medium Enterprises (SMEs) and do not have the adequate resources, or do not understand well how to apply financial and accounting methods according to international standards.

However, if you look at the case of wooden cabinets, out of 40 enterprises of kitchen cabinets and bathroom cabinets rejected by DOC, many enterprises on this list are large wood enterprises such as Cam Ha Joint Stock Company, and the Thuan An Wood Processing Joint Stock Company. These are companies that have sufficient economic and human resources, but it is a pity that they still submit their comments past the deadline or due to technical mistakes.

It is easy to see that many businesses do not have a legal team and staff with knowledge of international laws to have a plan to deal with trade remedy lawsuits. In addition, businesses do not know how to take advantage of the resources of industry associations, and Vietnam's diplomatic deals abroad have had a lot of experience in dealing with similar cases.

- Sir, in your opinion can Vietnamese enterprises avoid the US investigating cases of tax evasion?

- On August 23, the Vietnam Timber and Forest Product Association (VIFOREST) released a press release about the two above cases. Regarding the investigation case for hardwood plywood imported from Vietnam, VIFOREST said that plywood using hardwood material is a product made from layers of peeled plywood glued together, then covered with 1 or 2 layers of hardwood planks at the surface. Currently, the US side has not imposed the tax on Vietnamese goods but is applying an anti-dumping tax of 183.36 percent and an anti-subsidy tax of 22.98-194.9 percent on this Chinese product.

On June 17, 2020, on the basis of accusations from the domestic industry, DOC initiated an investigation into trade remedy evasion with Vietnam's hardwood plywood products, in order to ensure the effectiveness of trade remedy measures being applied to China's hardwood plywood. On July 25, 2022, the DOC announced the preliminary conclusion of the case, stating that if plywood from Vietnam has a core using peeled wood imported from China, it will be subject to anti-dumping and anti-subsidy tax as applied to plywood imported from China. If there are cores using raw materials which are peeled boards manufactured in Vietnam or in other countries, they will not be subject to anti-dumping and anti-subsidy tax.

VIFOREST has cooperated with the Trade Protection Department to send comments of the association and the Ministry of Industry and Trade on this preliminary conclusion to the DOC to support enterprises, and at the same time guide relevant businesses on the DOC's subsequent investigation regulations. Until August 22 the DOC had not made a final decision that Vietnam's hardwood plywood products exported to the US are subject to anti-dumping and anti-subsidy tax. However, according to the latest announcement, the DOC extended the time to issue the final conclusion in this case to October 17 2022.

Nonetheless, whether to apply this trade remedy measure or not on the US side also depends a lot on the actions of Vietnamese enterprises. If enterprises provide sufficient information, clear legal basis, and deny the allegations of tax evasion from the plaintiff, the possibility of not applying the applicable tax rate will be reconsidered.

- Sir, what is the role of the state management agencies and how should enterprises prepare not to be embarrassed by trade remedies?

- The state management agency on trade remedies is an affiliated Trade Protection Department under the Ministry of Industry and Trade which needs to perform the function of advising and assisting the Minister of Industry and Trade on trade remedies. In the context of countries increasing the use of trade remedies for Vietnamese exports, the work of assisting enterprises in handling foreign trade remedy investigation cases is institutionalized in the Law on Foreign Trade Management.

In order to support enterprises to proactively respond to trade remedy cases, the Ministry of Industry and Trade has actively coordinated with ministries, branches, localities, associations, and enterprises to effectively handle this through early warning of risk of being investigated for trade remedies so that enterprises can proactively develop a plan. In addition, the requirement for enterprises is to improve their capacity to apply safeguard measures in international trade.

Enterprises must prepare documents and vouchers to prove production costs. To do this, enterprises need to maintain a transparent accounting system, and at the same time regularly monitor warning systems about the risk of trade fraud to prepare in advance.

- Thank you very much.

By Thanh Lam

Other news