US to investigate tariff busting Chinese steel imports

The US Commerce Department will reportedly begin a formal investigation on Monday into Chinese steel companies; the Wall Street Journal reported citing sources. The companies are accused of shipping steel through Vietnam to avoid US import tariffs.

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China’s foreign trade facing long-term pressure

The probe follows last month’s complaint from US steel producers who want to stop a flood of low priced steel from China. The steelmakers claim Chinese companies are shipping to Vietnam, making some changes to it and then shipping it to the United States using Vietnam's lower US tariff rate.

In a letter to the Commerce Department Asian steel importers said“a substantial transformation occurs” when steel is coated. US producers argue that coating the steel involves “relatively small investment, adds relatively little value, and adds no components or mass whatever,” which is not enough to make it essentially a brand new product that is ‘Made in Vietnam’.

Data from Global Trade Information Services show shipments of steel from Vietnam to the US increased to 312,329 tons in the first six months of 2016, from 25,756 tons in the same period last year. Chinese exports of steel to Vietnam rose almost fifty percent over the same period to 6.3 million tons.

In May the US introduced a 266 percent anti-dumping duty on some Chinese steel products, including cold-rolled flat steel which is used in car manufacturing, shipping containers and construction. The tax hike followed complaints from the US and European steel producers that China was distorting the global market by exporting excess aluminum and steel. They also accused Chinese firms of unfair trade practices in overseas markets such as dumping products at low prices.

China’s steel exports reached a record 112.4 million tons last year.

China produces half of the world's steel and has been criticized of not doing enough to address overproduction. Beijing is trying to save its steel sector which is suffering from overcapacity due to slowing domestic demand, claiming overcapacity is a global problem. The country has announced 500,000 job cuts in its steel mills.