The U.S. Department of Commerce has launched a formal investigation earlier this week into Chinese steel companies over unregulated export practices.
The decision to launch this probe comes after intelligence was found that shows China shipping their steel through Vietnam in order to avoid U.S. import tariffs. This also comes a few months after U.S. steelmakers petitioned the government to stop Chinese made metal from entering the country, as it has completely overwhelmed their markets in the past.
Overall, this inquiry could mean that the U.S. will have to add new tariffs on steel imported from China through Vietnam under new rules designed to prevent the tariff-evading practice, circumvention.
U.S. steel producers claim that the Chinese are sending their steel to Vietnam, making enough changes to it so they could then classify it as Vietnamese, then ship it to the U.S. under lower tariff rates on Vietnamese steel. As this practice is highly illegal, the issue at the center of the probe is that whether the changes made to the steel in Vietnam modifies it enough to label it as a separate product.
According to the Wall Street Journal, the U.S. has imposed tariffs as high as 266% on four categories of steel from China. This move originally allowed U.S. steel producers to charge more, until Vietnamese steel started flooding the market.
There is independent trade data to support the U.S. Steelmaker’s claims. The data firm Global Trade Information Services shows that within the first six months of 2016, shipments of steel from Vietnam to the U.S. increased to 312,329 tons from the previous year’s 25,756. In that same time period, the steel exports from China to Vietnam grew 46%.
The United States, on the other hand, chooses to recycle its steel once it has served its purpose. In fact, North America recycles 69% of its steel annually.
However, China’s commerce ministry alleges that the U.S. Department of Commerce has not officially told the country about their investigation.