On Friday, October 2, 2020, the United States Trade Representative (USTR) announced that, at the direction of the President, a two-part investigation is being initiated into Vietnam under Section 301 of the Trade Act of 1974. USTR, in conjunction with the Department of the Treasury, will review policies related to the import and use of timber that may have been illegally harvested or traded. The two agencies will also review any practices that may have contributed to the undervaluation of Vietnam’s currency, the Dong (VND), resulting in harm to U.S. commerce.
In the announcement, United States Trade Representative Robert E. Lighthizer said, “President Trump is firmly committed to combatting unfair trade practices that harm America’s workers, businesses, farmers, and ranchers. Using illegal timber in wood products exported to the U.S. market harms the environment and is unfair to U.S. workers and businesses who follow the rules by using legally harvested timber. In addition, unfair currency practices can harm U.S. workers and businesses that compete with Vietnamese products that may be artificially lower-priced because of currency undervaluation. We will carefully review the results of the investigation and determine what, if any, actions it may be appropriate to take.”
The announcement follows a 2019 decision by the Treasury Department to include Vietnam on a watch list for its currency practices and changes in federal regulations in February of this year that allows currency undervaluation to be considered as part of subsidy investigations conducted by the Department of Commerce. The change to federal regulations was prompted in part by a Treasury Department report in January outlining the scale and persistence of foreign exchange intervention among most major U.S. trading partners and in the context of a widening trade deficit with Vietnam and weakening VND against the dollar.
In August, for the first time, the Department of Commerce accepted evidence, under the new regulations, from a valuation assessment conducted by the Treasury Department in an ongoing countervailing duty (CVD) investigation of an alleged subsidy pertaining to currency undervaluation on passenger vehicle and light truck tires from Vietnam.
Friday’s announcement was met with mixed reactions but universal concern over the possible effects on domestic industry. USTR is expected to release two separate Federal Register notices next week that will provide details of the investigation and information on how members of the public can provide their views through written submissions.