In an October 24 press release, the U.S. Department of Commerce (“Commerce”) announced that it will initiate a review of Vietnam’s current status as a “nonmarket economy”. Commerce’s decision follows an official request submitted by the Government of Vietnam on September 8, 2023, to recognize the country as a market economy, and a recent meeting between U.S. Secretary of Commerce Gina Raimondo and Vietnamese Prime Minister Phạm Minh Chính on September 19, 2023. Commerce will undertake this review using a so-called “Changed Circumstances Review”, as stated in the U.S. government’s most recent Federal Register Notice published on Oct. 30.
Commerce will review information presented by the Vietnamese government regarding the country’s market reforms. The investigation will be conducted as expeditiously as possible, in accordance with U.S. law. Commerce’s review process, which will include a public comment period, must be completed within 270 days before a final determination is made. Interested parties can submit comments and access public records related to this investigation on access.trade.gov. Interested parties now have 30 days to file comments and then 14 days thereafter to file rebuttal comments.
Vietnam’s Nonmarket Economy Status
Commerce currently considers 12 countries to be non-market economy countries for the purposes of U.S. anti-dumping duty law, including Russia (which became the first country to be re-added to the list last year), China, Vietnam, and nine former Soviet republics. Non-market economy status generally results in significantly higher duty rates through the use of surrogate costs from comparable market economy producers. An August 24, 2023 memorandum published by Commerce identifies Indonesia, Egypt, Jordan, Morocco, Philippines, and Sri Lanka as countries that are economically comparable to Vietnam based on their relative gross national income (GNI) per capita in 2022.
Section 771(18) of the Tariff Act of 1930, as amended (the “Tariff Act”), outlines six specific factors that Commerce must consider to determine whether it should be classified as a non-market economy. These factors include currency convertibility, wage determination, access for foreign investment, government ownership or control of the means of production, government control over resource allocation, and any “other factors as the administering authority considers appropriate.”
While Vietnam has made significant strides toward market-oriented policies since Commerce’s last assessment in 2002, an “improvement” alone does not meet the statutory criteria for market economy designation. Independent assessments have also revealed that significant government intervention still persists in Vietnam’s economy, including the following issues:
- Foreign ownership limits enforced by the government in Vietnam’s banking sector.
- The State Bank of Vietnam, the country’s central bank, operates under strict government oversight.
- State-owned enterprises continue to represent a substantial percentage of Vietnam’s GDP, particularly in its energy, transport, telecommunications, and finance sectors.
- Foreign direct investment remains subject to strict regulations.
If Vietnam’s non-market economy status is revoked following Commerce’s review, the agency will then analyze Vietnamese dumping by comparing U.S. sales prices against Vietnamese sales prices and costs, in accordance with Section 773(a) of the Tariff Act.
Crowell & Moring, LLP continue to monitor this development and the potential impact to businesses and consumers moving forward.