Does VIS violate the law?

Arguments have been raised over the legitimacy of the Vietnam-Italia Steel Joint Venture Company’s (VIS), listed at HCMC stock exchange, plan to order Chinese steel mills to make steel under VIS trademark. The steel will be imported to Vietnam for domestic consumption.
VIS’ plan has been facing strong opposition from local steel producers, who said that this is the violation of the laws, while VIS has insisted that it is legal.
Le Ngoc Son, Head of the International Cooperation Division under VIS, said that there are four factors leading to the company’s decision to place orders with Chinese steel producers.

First, the ingot steel prices keep skyrocketing in the domestic market, at VND8,800/kg, while in China, the price is just at VND8,200-8,900/kg. With the price gap of VND500,000/tonne in ingot steel, local producers will suffer heavy losses if they make steel domestically. This has prompted VIS to find out new ways of business in order to minimise risks.

Second, the steel price in Chinese market is staying at high levels as the world has put pressure on the country, forcing Chinese producers to reduce steel output by shutting down a lot of mills in order to improve the environment pollution. As the result, the steel supplies have decreased, leading to higher prices of finished steel.

Third, according to Mr Son, there are no reasons for local producers to condemn VIS, as the company just provides only 180,000 tonnes of steel every year to the domestic market. Therefore, the VIS’ said plan would not badly affect the operation of other steel mills.
Fourth, VIS wants to order C3 steel product with big diameter, which will be provided to high-rise buildings’ investors, the big clients of VIS.

However, all local steel producers have raised strong protests against the argument. The Thai Nguyen Cast Iron and Steel Company, Nam Do, Vinakansai and Vinashin all said that they have been asked by Chinese steel mills to make and distribute steel in this way, but they have rejected.

Representative from Pomina Company said: “The order of 5,000 tonnes would not have impact in the short term, but would be the threat to the whole steel industry in the long term”.
The representative pointed out that this is a kind of counterfeiting goods, and this must be prevented right now. He stressed that this must not considered as a kind of doing outwork. If Chinese producers do outwork for VIS, they must use the material provided by VIS. Meanwhile, in this case, 100% of material and technology are Chinese and the product is made in China.
Commenting about the legitimacy of VIS’ move, Tran Anh Son, Deputy Head of the Competition Management Administration under the Ministry of Trade said that in fact, this is a 100% Chinese made product, which is labelled with VIS trademark.

Mr Son, referring to the Dispatch No 548 promulgated by the Government, said that in case a company commissions a foreign company to make a product and then imports the product back to Vietnam, only the production steps that cannot be made domestically would be allowed to be made abroad.

An official from the Ministry of Industry has warned that there latent big risks in the VIS’ plan. In the first phase of the market access, the producer will sell at low prices, and after that, when its product becomes familiar to consumers, it will raise the selling prices. As the result, the foreign made product will dominate the market and kill local production.

Source: VEN