The Commerce Department announced Friday that it has made the decision to continue classifying Vietnam as a non-market economy country for purposes of calculating US antidumping duties on imports from Vietnam.
The announcement comes amid pressure from Congressional lawmakers and US industry to retain Vietnam’s non-market economy status. Much of the opposition to granting Vietnam market economy status stems from the belief that China is using Vietnam is evade US tariffs imposed on its own products.
Commerce said it received over 36,000 pages of comments from US domestic industry and the government of Vietnam, which launched the investigation by requested market economy status.
The finding means that the methodology used in calculating U.S. antidumping duties on imports from Vietnam remains the same.
Despite Vietnam’s substantive reforms made over the past 20 years, the extensive government involvement in Vietnam’s economy distorts Vietnamese prices and costs and ultimately render them unusable for the purpose of calculating US antidumping duties, Commerce said.
Commerce will continue to use market-based prices and costs from a country at a comparable level of economic development to Vietnam that produces comparable merchandise to calculate ADs.
Vietnam has implemented notable market-oriented economic reforms for nearly two decades under a broader economic initiative known as the “Doi Moi” (often translated as “renovation” or “innovation”). Those reforms aimed to transition Vietnam out of an economic system that relied on intensive government direction and intervention, which Commerce characterized as an NME for purposes of U.S. AD laws when it last reviewed Vietnam’s NME status in 2002.
Despite Vietnam’s impressive reforms and economic growth, Commerce now determines in this 2024 review that Vietnam remains an NME country for purposes of U.S. AD law. As
this review will explain, based on the assessment of the record evidence, persistent structural and institutional issues in Vietnam remain. The extensive and pervasive government involvement in Vietnam’s economy that pertains to the six statutory factors Commerce relies upon in making a market economy determination distorts Vietnamese prices and costs, and ultimately renders them unusable for purposes of calculating U.S. AD duties
In reviewing a country’s market or non-market economy status under the statute, Commerce is directed to consider six factors[Factor 1] The Extent to Which the Currency of the Foreign Country is Convertible Into the Currencies of Other Countries.
While the dong is more responsive today to market forces than it was at the time of Commerce’s 2002 determination, it maintains restrictions on its convertibility. The GOVN continues to conduct foreign exchange interventions to influence the value of the dong and Vietnam’s central bank (the State Bank of Vietnam, or SBV) is not independent of the policy making apparatus.
[Factor 2] The Extent to Which Wage Rates in the Foreign Country are Determined by Free Bargaining Between Labor and Management.
The Vietnam Labor Code (2019) has legalized not only the formation of labor unions but the rights of those unions to bargain collectively. Despite the GOVN’s legal reforms in this area, Vietnam’s labor market does not reflect free bargaining between labor and management. The state-controlled Vietnam General Confederation of Labor (VGCL) and its affiliates are the only labor organizations in existence in Vietnam. In addition, strikes are generally illegal in Vietnam and the country’s dispute resolution system does not effectively address labor conflicts and grievances.
The report also notes “despite improvements in the legal provisions in place and the formal adoption of certain ILO standards, significant gaps in Vietnam’s legal structure allow some of the worst forms of child labor to persist.”
[Factor 3] The Extent to Which Joint Ventures or Other Investments by Firms of other Foreign Countries are Permitted in the Foreign Country.
A deeper analysis of official Vietnam FDI inflows, as well as an investigation into comparative, dynamic, and other economic indicators, suggest that considerable challenges to foreign investment in Vietnam remain. Notably, foreign investment is still restricted in an excessive number of commercial sectors and activities, in part or in whole. The challenges also include general market access barriers, red tape, lack of transparency in regulatory processes, and failure to protect firms’ intellectual property rights. The report notes that China is not the most dominant source of FDI in Vietnam. China represents the fourth largest source of FDI flows to Vietnam (after Singapore, South Korea, and Japan).
[Factor 4] The Extent of Government Ownership or Control of the Means of Production.
According to GOVN statistics, the size of the state sector has declined from 40 percent in 2002 to 20.6 to 30.2 percent today,771 although the figure would be higher if it accounted for minority or indirect government ownership.
State owned enterprises s in Vietnam are present across all major sectors of the economy and are either key players or maintain effective monopolies or oligopolies in important sectors.
[Factor 5] The Extent of Government Control Over the Allocation of Resources and Over the Price and Output Decisions of Enterprises.
Vietnam’s “Doi Moi” economic reforms have helped liberalize the economy from excessive
reliance on the government to allocate resources and make price and output determinations for enterprises.
According to Vietnamese statistics and Commerce estimates, GOVN ownership in the banking sector has fallen from the 70 to 80 percent range in 2002 to at least 50 percent today, although the exact figure is unknown due to the lack of publicly available information concerning joint-stock banks.
The GOVN has also reduced the number of price controls over commodities since 2002.
Despite these important market-oriented reforms, Commerce finds that considerable resource allocation is still being conducted by the government, and that extensive price controls have lingered since 2002. Moreover, the GOVN still heavily relies on state planning as a means through which it directs business decisions to achieve output and other economic outcomes
[Factor 6] Such Other Factors as the Administering Authority Considers Appropriate.
Vietnam has implemented notable legal reforms by improving the protection of legal rights to corporations, facilitating fairer competition, and promoting better transparency in corporate governance. It has also expanded anti-corruption measures and introduced stricter asset declaration requirements. Despite these efforts, the report finds, the persistent influence of the Communist Party of Vietnam (CPV) in Vietnam’s legal system continues to undermine judicial independence and effective law enforcement.
The report concludes that, while Vietnam has implemented notable market-oriented reforms, the extent of government involvement in the economy continues to distort market conditions, rendering Vietnamese prices and costs unusable for U.S. antidumping duty calculations. Therefore, based on the totality of the six factors analyzed, Commerce determines that Vietnam remains a non- market economy for purposes of U.S. antidumping law.
From the Policy Memorandum [Case A-552-833]
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