The Plastics Association in distress as a Korean company demands an increase in import tariffs for PP plastic raw materials News 11/08/2021
TTO – Hyosung Vietnam Co., Ltd., a 100% Korean-owned enterprise, has proposed to the Ministry of Finance to increase import taxes on two HS codes of PP plastic resin from 3% to 6% and 6.5%, despite the fact that this company only meets approximately 1/7 of the demand, amounting to 2 million tons of PP per year.
Polypropylene (PP) plastic resin is widely used in the industrial and household plastic sectors – Photo: T.T.D.
Mr. Ho Duc Lam, Chairman of the Vietnam Plastics Association, has recently submitted a petition to the Ministry of Finance, urging against an increase in import tariffs for two HS codes (codes used for classifying goods for import and export worldwide according to the World Customs Organization’s Harmonized System) related to polypropylene (PP) plastic resin. The proposed increase, from the current rate of 3% to 6% and 6.5%, aligns with the proposal put forth by Hyosung Vietnam Co., Ltd.
According to the Vietnam Plastics Association, the supply of polypropylene (PP) plastic resin (used in the production of industrial and household plastic products) in Vietnam is currently at 850,000 tons per year (at full design capacity) from three factories. These include Binh Son Refining and Petrochemical Company Limited (150,000 tons per year), Nghi Son Refinery and Petrochemical LLC (400,000 tons per year), and Hyosung Vietnam Co., Ltd. (300,000 tons per year).
However, due to Nghi Son Refinery and Petrochemical LLC’s commitment to exporting 300,000 tons annually, the total supply of PP for domestic demand is only 550,000 tons per year, assuming ideal operating capacity of 100% as designed.
Meanwhile, the demand for PP raw materials by plastic industry businesses in 2020 was approximately 1.85 million tons, of which 1.43 million tons of PP were imported, accounting for 30% from ASEAN countries, and 70% from countries with free trade agreements with Vietnam.
It is expected that in 2021, businesses will consume approximately 2.045 million tons of PP raw materials.
Mr. Lam believes that based on the designed production capacity of the three aforementioned businesses, the ability to meet the domestic PP supply would only reach approximately 41.55% of the demand. However, if we consider the actual operating capacity, the supply would only meet about 26.89% of the PP raw material demand in 2021 for businesses.
Currently, the import price of PP raw materials is approximately $1,300 per ton.
According to the calculations by the Vietnam Plastics Association, if the import tax is increased from 3% to 6%, the projected additional tax expenses that plastic enterprises importing from the Middle East, Japan, South Korea, China… will have to bear in the next 5 years could exceed 3,000 billion VND.
Even if businesses can switch to purchasing PP raw materials from countries within the FTA region with a 0% tariff, the selling price of PP will also increase for businesses within the FTA bloc, corresponding to the prices outside the FTA region, result in an expected cost increase of nearly 7,000 billion VND in the next 5 years.
“The government will not receive any revenue from this cost, and countries within the FTA region will benefit entirely from the adjusted tariff rates if the proposal by Hyosung Vietnam Co., Ltd. is approved. In that case, plastic businesses will hesitate to invest and expand their production and operations,” Mr. Lam emphasized.
Moreover, according to the Vietnam Plastics Association, when the cost of importing PP raw materials increases, it will inevitably lead to an increase in the price of PP materials used in production. As a result, the cost of products will rise, making them less competitive compared to imported products from other countries.
