Vietnam vegetable oil firms seek tariff to secure market share

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With the government's announcement of new tariffs on imported vegetable oil, Vietnamese firms will finally benefit from legislation designed to protect them against foreign competitors.

The new 5-percent tax on refined palm and soybean oil imported into Vietnam, set to take effect September 7, is the first action taken by the government since passing an ordinance aimed at safeguarding local firms in 2002.

The tax is scheduled to decrease to 2 percent by May 2017.

The Industry and Trade Ministry established the tax after an investigation started late last year revealed that local oil producers' market share had declined by a half to 27 percent in 2012 compared to three years earlier, with their output dropping by a third last year.

Between 2009 and 2012, imports of palm oil doubled, and that of soybean oil skyrocketed by nearly 24 times.

The ministry stepped per the request of the National Company for Vegetable Oils, Aromas and Cosmetics of Vietnam (Vocarimex) and seven other producers who claimed rising imports of cooking oil were hurting the domestic industry.

The World Trade Organization allows participating countries to use tariffs to protect their domestic firms if foreign rivals begin to threaten their health.

The upcoming tax imposed on imported vegetable oil is only the second time Vietnam has taken advantage of the provision since joining the WTO in 2007.

In 2009 two local producers VIFG and VFG filed an application to have the ministry impose a tax on imported float glass, but they failed to prove that the rise of foreign competitors' market share was harming local manufacturing.

Nguyen Thi Thu Trang, director of the WTO center of the Vietnam Chamber of Commerce and Industry, said most local companies were unprepared to compete against rivals that use dumping or receive financial subsidies from their governments.

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We have a "self-defense weapon" but firms are neither aware of its existence nor well-informed how to use it, she said.

She also pointed out the lack of unity among local firms as having hindered the filing of lawsuits against foreign competitors, which require that plaintiffs account for at least 25 percent the market share of an industry.

Pham Van Chat, an arbitrator with the Vietnam International Arbitration Centre, said the government and local firms should pay more attention to taking advantage of defense measures.

He urged the Vietnam Competition Council to manage more effectively and called for the establishment of stronger links between different associations of industries.

In May local stainless steel maker Inox Hoa Binh and South Korea's Posco VST filed an anti-dumping lawsuit against imports from China, Taiwan, Malaysia, and Indonesia.

The lawsuit was the first of its kind in Vietnam.

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