Vietnam imposes 47.64% anti-circumvention duty on sugar imports from 5 ASEAN countries

Vietnam's Ministry of Industry and Trade announced Aug. 1 that it will impose a 47.64% anti-circumvention tax on Thai sugar entering the country via five ASEAN countries, namely Indonesia, Malaysia, Cambodia, Laos and Myanmar.

This decision comes after Vietnam's Ministry of Industry and Trade released its final draft conclusion on the results of its sugar duty evasion probe on July 14, in which it confirmed that Thai-origin sugar was evading import tariffs and entering the domestic market through re-exports via these five ASEAN, or Association of Southeast Asian Nations, member countries.

The ministry said that sugar imported from Cambodia, Indonesia, Laos, Malaysia, and Myanmar using Thai sugar materials will be subjected to the same anti-dumping and anti-subsidy tariffs that are applied to Thai sugar. Currently, a 47.64% tariff on imported cane sugar originating from Thailand has been in effect since June 16, 2021.

Accordingly, these five countries will be subjected to a total tariff of 47.64%, which comprises an anti-dumping tax of 42.99% and an anti-subsidy tax of 4.65%. This tax will be applied from Aug. 9, 2022 to June 15, 2026.

However, anti-circumvention taxes will not apply if exporters from these five countries can prove that their products are made from locally harvested sugarcane.

A sugar trader said: "Local producers in these five ASEAN countries who can produce a wholly obtained [WO] certificate, which is a note in the certificate of origin that states 100% of the product is from sugarcane harvested in their local origin, will be allowed to export to Vietnam at the 5% tax rate."

Thus far, six companies are exempted from the anti-circumvention tax, including three from Laos, two from Myanmar, and one from Indonesia.

"I do not think there will be a big change in trade flows following this decision. The local producers exempted from this tariff are the ones mainly doing this re-export flow to Vietnam," a Singapore-based trade analyst said. "About 65% of the Indonesian sugar flowing to Vietnam is from KTM (the exempted company)."

According to Platts Analytics' latest estimates, domestic sugar production in Myanmar and Indonesia is around 400,000 mt and 2.2 million mt, respectively, and this could still sustain outflows to Vietnam. Myanmar and Indonesia are deficit in sugar but should the arbitrage economics to export their domestically produced sugar to Vietnam and subsequent import to fulfill domestic needs is positive, it would be a viable flow.

However in the short term, Indonesian producers that have imported raw sugar under re-export licenses expect that there would be difficulties in shipping to Vietnam. The anti-circumvention tax will thus put a cap on total imports under such licenses and moderate the outlook for Indonesia's total raws import demand for 2022 and 2023.