POSCO under the steely glare of tax evasion scrutiny

POSCO under the steely glare of tax evasion scrutiny

A Vietnam Customs report shows that in July 2016, POSCO imported steel plates from China using the HS code 72254090, enjoying a 0 per cent import tax rate for two whole shipments.

However, after post-clearance checks, Haiphong’s Customs Department announced in May 2017’s Decision No.1871/QD-HQHP that these steel products would have had to apply HS code 72249000 which means a safeguard tariff of 23.3 per cent to block Chinese products.

According to Haiphong’s Customs Department, POSCO sold these two shipments to VSC-POSCO Steel Corporation (also known as Thep Viet-Han), where these steel plates were cut to make steel billets for rolling steel construction.

VSC-POSCO is a joint venture between the state-run Vietnam Steel Corporation, POSCO, and locally-invested firm Hascom.

POSCO-VNPC and VSC-POSCO, both invested by POSCO, raised suspicions about tax avoidance, although POSCO Vietnam Holdings maintains that the firms are two completely separate legal entities.

In 2016, the Ministry of Industry and Trade made a decision to impose import tariffs on steel billets and steel bars to protect domestic production. Specifically, steel billets have incurred a tax duty of 23.3 per cent since March 22, 2017. The tariff will be adjusted down to 7.3 per cent in March 2019, and to 0 percent on March 22, 2020.

POSCO Vietnam Holdings said that how VSC-POSCO uses steel products is not the responsibility of companies under the POSCO Vietnam Holdings umbrella.

Almost one year after Haiphong’s Customs Department’s decision, the two sides have yet to find common ground and await a final decision. A document issued by Vietnam Customs in January has not given direction to the case, saying only that “if there is reason for doubt and signs of tax evasion during post-clearance checks, they shall have to file dossiers on the cases and submit to the Ministry of Industry and Trade’s Trade Remedies Authority for investigation.”