Indonesia Announces Imposition of Anti-dumping Duty on Steel Imports from Vietnam and China

Source: KADI

According to market reports, Indonesian Anti-Dumping Committee (KADI) has imposed anti-dumping duty on the imports of colour-coated steel sheets coming from Vietnam and China.

KADI determined that steel sheet imports from Vietnam dumped into the country stood between 12% and 28.5% of the Indonesian market and caused significant injury to the domestic steel industry.

Based on this conclusion, the Indonesian Trade Security Committee (KPPI) proposed the application of anti-dumping measures on Vietnamese colour-coated steel products for a five-year period.

KADI said that from July 2015 to June 2016, Indonesia imported 224,120 tonnes of colour-coated steel, of which 196,191 tonnes came from Vietnam and China, accounting for 87.5% of the country's total steel imports.

The anti-dumping duty investigation was initiated by KADI on December 23, 2016, following complaints by PT NS BlueScope Indonesia (one of the coated steel manufacturers in Indonesia) that alleged that the illegal trade practices devastated country's production and employment as well as caused damage to the Indonesian steel industry.

The colour-coated steel imports under the HS codes of 7210.70.70.00, 7212.40.10.00 and 7212.40.20.00 were investigated.

Is there bigger picture behind anti-dumping duty imposition on Vietnam?

Indonesia is highly dependent upon imports to meet its steel requirements amid the rapidly increasing domestic steel consumption and low utilisation level of national steel production capacity which is partly triggered by the relatively high industrial gas prices in Indonesia compared to its regional peers. In 2017, the country's annual steel production capacity stood at 14.04 MnT but the utilization was only half of the figure.

According to Indonesian Iron and Steel Association (IISIA), the country imported about 6.43 MnT of steel in 2017 equating to 48% of Vietnam's total steel demand with the majority of imports coming from China, Japan, South Korea, Russia, followed by Vietnam.

Now if this is the case then what made Indonesia impose trade restrictions on steel imports from Vietnam.

In Nov'17, the Vietnamese government issued a non-tariff barrier in the form of VTA (Vehicle Type Approval) certification with an intention to restrict car imports in to the country and to promote domestic automobile market. This order came into effect from 1 Jan'18.

As per this order, the car importers in Vietnam are required to obtain VTA certification which details the imported vehicles' quality, safety and environmental protection. Through the new regulation, Vietnam requires international standards related to vehicle safety and emissions for incoming cars.

Indonesia is the third largest car exporter for Vietnam as the country exported about 15,101 units of cars to Vietnam in 2017. Now, while Vietnam acknowledges that cars manufactured in Indonesia comply with the local Indonesian National Standard (SNI), it believes that the SNI is not fully in accordance with the desired international criteria. Indonesia, however, emphasizes that the local standard complies with international standards because both standards use the same process and test equipment.

However, the key area of the problem is that Indonesian authorities only issue a VTA for the domestic market (based on domestic road conditions), not for export markets. A bigger problem is that the new regulation orders all car units that are shipped to Vietnam to undergo a safety and emissions check (prior to the implementation of the new regulation only the first shipment was required to undergo such tests) creating additional cost burden to the Indonesian car exporters. This has impacted the Indonesia auto sector quite severely.

Thus, although Indonesia tried to solve this issue via trade talks Vietnam refused to withdraw this non-tariff restriction. In response to this, Indonesia may have adopted a harsh approach in the form of imposition of anti-dumping duty on steel imports to hurt Vietnam. Reports also suggest that Indonesia may file a complaint with WTO over Vietnam's decision to tighten regulations related to car imports.