VietNamNet Bridge – Nearly 100 percent of petroleum imports are now from South Korea. This occurred after the import tariff was cut to 10 percent.
Meanwhile, imports from the traditional ASEAN market have dropped dramatically because of the higher tariff of 20 percent.
Since January 1, 2016, the imports from South Korea have been taxed 10 percent in accordance with the Vietnam-South Korea FTA.
Meanwhile, imports from ASEAN (Singapore and Thailand) still bear a 20 percent tariff. This prompted Vietnamese petroleum importers to shift to import from South Korea instead of the traditional ASEAN market.
According to the General department of Customs (GDC), in 2016, Vietnam imported $1.25 billion worth of petroleum products, of which 75 percent was from South Korea.
In 2017, imports from South Korea soared rapidly with 97 percent of turnover from the country in the first nine months of the year.
Analysts believe that the figure will be 100 percent in the time to come and South Korea will be the only supply source of petroleum products to Vietnam.
GDC has proposed to cut the import tariff applied to imports from ASEAN from 20 percent to 12 percent in order to ensure a reasonable difference between the tariffs for the ASEAN and South Korean markets.
The agency said the tariff cut would help diversify supply sources, because the reliance on one market is risky.
Meanwhile, analysts warned that the revenue of the state budget from petroleum import tax collections would decrease notably as 97 percent of imports come from South Korea.
The 20 percent import tariff doesn’t exist in reality because enterprises no longer import products from ASEAN.
GDC confirmed that the tax amount from petroleum in 2016 decreased by VND10 trillion.
The analysts also warned that the big gap in the import tariff may put Vietnamese importers at a disadvantage. They may have to pay higher than the average market price or other buyers, and bear disadvantageous conditions in contracts.
The chair of the Vietnam Petroleum Association Phan The Rue confirmed this is likely to happen. With the low import tariff, Vietnamese would still buy products from South Korea even though they have to pay higher prices.
However, he noted that importers must obtain the C/O to prove that they are importing products from South Korea to enjoy the 10 percent tariff. Meanwhile, this is not an easy task.
“It is very difficult for small enterprises to get a C/O, or they have to pay a high price for the C/O,” Rue said.
The different tariffs could lead importers to commit trade fraud. “They import products from another market, but play tricks to obtain South Korea C/Os to enjoy the 10 percent tariff,” Rue said.
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