Vietnam Plastics Association Recommends No Increase In Import Duty On Polypropylene

The Ministry of finance of Vietnam issued letter No. 10756/BTC-CST to the Vietnam Plastics Association (VPA), which recommended that the government should revise and supplement the draft agreement No. 125/2017/N-CP, in which the Department recommended that the import duty of polypropylene (PP plastics, tariff code No. 3902) be increased from 3% to 5%.

Vietnam Plastics Association sent a letter to the Ministry of finance, Ministry of Commerce and industry, and the Vietnam Congress technology and environmental protection committee to recommend that 3% of import tax on polypropylene should be maintained at no rate of 5%.

In the letter of recommendation, the Vietnam Plastics Association said that the Vietnam plastics industry association supports the establishment of Vietnam's petrochemical industry, such as the production of polypropylene plastic raw material factories in the Dung Quat refinery area and the production of polypropylene (PP) and polyethylene (PE) plants in the Nghi Son refining and petrochemical complex area.

However, at present, the annual output of 3 Vietnamese manufacturers of PP has not reached 150 thousand tonnes (Binh Son), 300 thousand metric tons (Nghi Son) and 300 thousand metric tons (Hyosung Vietnam) respectively, of which Hyosung Vietnam only produces 1/3 of its output for PP emission, and the remaining 2/3 is devoted to the textile industry.

Vietnam's demand for plastic pellets in recent 5 years has increased by 200 thousand tonnes per year, from 582761 tonnes in 2014 to 1274988 tonnes in 2018. It is estimated that the demand for PP raw materials will grow by 11.38% over the 2019-2023 years, from 1420081 tonnes in 2019 to 2185453 tonnes in 2023.

However, based on the design power and data analysis of the actual production and design of the products, the supply capacity of the 3 Vietnamese manufacturers will gradually decrease, that is, Vietnamese enterprises must look for the source of foreign PP raw materials.

Ho Duc Lam, chairman of Vietnam Plastics Association, suggested that the import duty of PP should not be increased at the 2019-2023 stage, because if the insurance policy is to avoid an impact on the production and business activities of an industry, the object of protection should be more than 50-75%.

According to the Vietnam Plastics Association's estimate, according to the current import price, if the import tax is raised to 5%, Vietnamese enterprises will be able to import derivatives from the Middle East, Japan, South Korea and Mainland China in the next 5 years to 1 trillion and 200 billion. When the import tax is raised, enterprises can turn to the countries in the FTA area to purchase PP raw materials, but Vietnamese enterprises will not be able to purchase them at the previous price (although the import tax is 0% in the area), because the seller will raise the price equivalent to the price outside the FTA area. Thus, within 5 years, Vietnamese enterprises will have to pay 3 trillion and 628 billion of the fee to the FTA member countries. The cost is income from the member states in the FTA region, and the Vietnamese government is unable to collect the fees. This will lead to an increase in the cost of products and can not compete with products imported from Southeast Asia, Korea, mainland China and Japan.

The chairman of the Vietnam Plastics Association also said that when studying the types of enterprises that increase import taxes, the investment funds that affect the decision power belong to foreign-funded enterprises, which have enjoyed many preferential benefits such as land tax and business income tax when they invest in Vietnam. However, the use of engraved proposals to increase import tax manufacturers' products as producers of raw materials is facing competition from FTA zero tariff import products. This has made Vietnam's plastics industry suffer from highly unfair treatment in the course of production and operation.