SPC exports to US at risk due to questions on origin claims

Exporters of Vietnamese construction materials must show due caution, photo Le Toan

The Ministry of Industry and Trade earlier in October released a list of 18 products exported to the US that are at risk of being under investigation for trade defence measures, origin fraud, and illicit transshipment. The move has caused stone-polymer composite (SPC) flooring manufacturers in Vietnam to be concerned about the consequences of Chinese SPC exports to the US, but not exports from China. This list includes plywood made from hardwood materials, kitchen cabinet and bathroom cabinet products, sofas with wooden frames, ceramic tiles, exported electric bicycles, solar batteries, large household washing machines, hot-rolled steel, and more.

The manufacturers of SPC flooring have legitimate worries. Dr. Thai Duy Sam, general secretary of the Vietnam Association for Building Materials, told VIR last week that the US-China trade conflict “represents plenty of uncertain aspects”.

“Consequently, despite the fact that the SPC’s false origin has not yet had a direct impact on Vietnamese exports to the US, market players will still have to be cautious” as the trade conflict persists,” Sam said.

The Uyghur Forced Labour Prevention Act (UFLPA) of the US came into effect just over a year ago, influencing the production and commerce of plastic goods and SPC flooring. Many manufacturers assume that once targeted, these businesses would have 30 days to return to US Customs and Border Protection to prove that these products were not produced using forced labour.

If the business can show that it was not in breach of the new law, it will confront a second problem: storage fees. If the company cannot demonstrate that its products are free of compelled labour within 30 days, the products will be incinerated or re-exported with additional fees.

The ULFPA also affects US consumers. Le Quang, CEO of Vietnamese flooring company Neo Floor, claims that only large purchasers will be able to fill the SPC floor deficit in the US market because some smaller purchasers have not been able to determine delivery schedules for agents and customers.

“Limited information could cost producers millions of US dollars, creating uncertainty for small purchasers,” he explained. “Currently, numerous consumers in the US nevertheless rely on China for their distribution system; they have little capacity to decline this supply. Several other buyers are unable to increase their SPC inventory from non-Chinese sources.”

According to a report released by the US Department of Commerce in August, the market for construction materials in the US began to recover in July, aided by a 3.5 per cent rise in building investment in June over the same month in 2022.

In a report released in mid-September, Yuanta Securities Vietnam noted that housing demand in the US had recovered. The number of monthly private housing starts in the US appears to be stabilising at 1,340 units per month. Moreover, Fedwatch’s calculations indicated that the likelihood of declining interest rates is highest; the most likely scenario is that interest rates will progressively decline from March next year to the end of 2024.

Vietnamese manufacturers are attempting to demonstrate the cleanliness of their SPC flooring supply chain to the US.

“We generate extra procedures to check goods before sending them to the US to guarantee that these goods do not have any components related to forced labour,” Quang said. This is a difficult task for manufacturers, particularly small and medium-sized manufacturers, who lack the resources to complete it.

“We support ULFPA completely. Therefore, with all imports into America, the company strives to provide authorities with everything they request,” Quang added.

Additionally, the business works effectively with ingredient suppliers to ensure that their ingredients have no ties to the Uyghur region or coerced labour.

A sound comprehension of current market trends and future growth projections for the SPC flooring market is deemed crucial for making robust strategic decisions. In September, An Phat Holdings signed an MoU for strategic partnership, product, and service development from now to 2028 in Texas with five enterprises namely Dakota Western, CJ Bio, Katoen Natie, Hellmann Worldwide Logistics, and One Circle Logistics.

Pham Do Huy Cuong, managing director of An Phat Holdings, stated that the US is a significant market for the company’s packaging, SPC flooring, biodegradable products, and materials. According to Cuong, the bilateral trade turnover between An Phat and the US market has been increasing consistently, hitting about $100 million in both 2021 and 2022.

“According to the new scenario, An Phat Holdings has to satisfy requirements and obtain specific quality approvals for every item to enter the US market,” Cuong said. “Some US partners have their own safety, factory hygiene, and production enhancement standards. These factors require An Phat Holdings to show its ability to meet the aforementioned criteria.”

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