Reliance on petrol imports from ROK may bring risks
Nearly 100% of petroleum imports are now from the Republic of Korea (ROK) especially after the import tariff was cut to 10%.
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Meanwhile, imports from the traditional ASEAN market have dropped dramatically because of the higher tariff of 20%.
Since January 1, 2016, the imports from the ROK have been taxed 10% in accordance with the Vietnam-ROK FTA.
Meanwhile, imports from ASEAN (Singapore and Thailand) still bear a 20% tariff. This prompted Vietnamese petroleum importers to shift to import from the ROK instead of the traditional ASEAN market.
According to the General department of Customs (GDC), in 2016, Vietnam imported US$1.25 billion worth of petroleum products, of which 75% was from the ROK.
In 2017, imports from the ROK soared rapidly with 97% of turnover from the country in the first nine months of the year.
Analysts believe that the figure will be 100% in the time to come and the ROK 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% to 12% in order to ensure a reasonable difference between the tariffs for the ASEAN and the ROK 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% of imports come from the ROK.
The 20% 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 the ROK 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 the ROK to enjoy the 10% 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 the ROK C/Os to enjoy the 10% tariff," he said.
