Vietnam Tightens Timber Laws to Ease U.S. Tariff Threats

(Bloomberg) -- Vietnam’s wood industry, under investigation by the U.S. Trade Representative for allegedly importing illegally harvested or traded timber, is vowing to tighten regulations and buy more American lumber to avoid punitive tariffs that would devastate the sector.

Vietnamese officials are concerned the Trump administration could hit Vietnam with new tariffs on timber as well as other products before it leaves power Jan. 20, said Do Xuan Lap, chairman of the Vietnam Timber and Forest Product Association.

“We’ve been buying more and more timber from the U.S.,” he said in a phone interview Friday, adding such imports from the U.S. may increase at least 15% this year. “A high tariff will seriously damage our wood industry, but it will also hurt U.S. companies.”

The U.S. is the biggest market for Vietnamese wood products, representing an estimated $6.5 billion in 2020, about half of the nation’s total agricultural shipments to America last year, said Nguyen Do Anh Tuan, spokesman for Vietnam’s agriculture ministry. Last year, Vietnam bought about 40% of its timber from the U.S., he said.

U.S. Trade Representative Robert Lighthizer announced the timber investigation in early October along with a probe into Vietnam’s currency policy to determine whether an undervalued dong hurts American businesses. The U.S. Department of Commerce in November imposed a preliminary anti-subsidy tariff on car and truck tires from Vietnam, citing the Southeast Asian nation’s “undervalued currency” among the reasons for the decision.

In December, the U.S. Treasury designated Vietnam a currency manipulator, which comes with no immediate penalties but can escalate trade tensions. A virtual hearing on the timber allegations was held Dec. 28.

Vietnam’s Minister of Industry and Trade Tran Tuan Anh told Lighthizer in a Thursday phone call that the U.S. probe of Vietnam’s currency policy and use of timber could damage bilateral relations and U.S. and Vietnamese businesses, according to a post on the ministry’s website.

Vietnamese wood-furniture makers, whose customers include Walmart Inc. and Ashley Furniture Industries Inc., will buy as much as 1.3 million cubic meters of wood in 2021, up from about 800,000 cubic meters in 2019, according to Lap, who is also chief executive of Tien Dat Furniture Corp.

A 25% U.S. tariff on Vietnamese wood products would “devastate” the sector and its 10,000 workers, Lap said.

Vietnam is cracking down on illegal timber imports from countries such as Laos and Cambodia, Tuan said. The government has doubled its fine for such activities to about $22,000 with prison sentences as much as 10 years, he said.

(Updates with forecast in third paragraph)