USTR Releases Determination on Action and Ongoing Monitoring Following U.S. - Vietnam Agreement on Vietnam’s Currency Practices

On July 23, 2021, the Office of the United States Trade Representative issued a formal determination in the Vietnam Currency Section 301 investigation reflecting the agreement reached earlier this week between the Department of the Treasury and the State Bank of Vietnam. The determination finds that the Treasury-SBV agreement provides a satisfactory resolution of the matter subject to investigation and accordingly that no trade action is warranted at this tim. USTR, in coordination with Treasury, will monitor Vietnam’s implementation going forward.

The Federal Register notice summarizing the determination is available here.

The USTR investigation was initiated in October 2020 under Section 301 of the Trade Act of 1974. On January 15, 2021, USTR issued a determination that Vietnam’s acts, policies, and practices including excessive and one-sided intervention in the foreign exchange markets and other related actions, taken in their totality, are unreasonable and burden or restrict U.S. commerce. The determination was supported by a comprehensive report, which is published on USTR’s website.

Vietnam Removed from List of Countries Manipulating Their Currency

On April 16, 2021, the U.S. Department of the Treasury released a Report to Congress on Macroeconomic and Foreign Exchange Policies of Major Trading Partners of the United States.

In a December 2020 Report,the U.S. Department of the Treasury found that Switzerland and Vietnam practiced currency manipulation for the four quarters through June 2020. For the four quarters ending in 2020, based on initial enhanced engagements with Vietnam and Switzerland further analysis, and data, Treasury has determined that there is insufficient evidence to make a finding that either economy manipulates its exchange rate.

Treasury has also established a Monitoring List of major trading partners that merit close attention to their currency practices and macroeconomic policies. The Monitoring List comprises China, Japan, Korea, Germany, Ireland, Italy, India, Malaysia, Singapore, Thailand, and Mexico.

USTR Finds Vietnam's Currency Manipulation is Unreasable and Burdenous Restriction on U.S. Commerce, but Declines to Take Action

The U.S. Trade Representative has issued findings in the Section 301 investigation of Vietnam’s acts, policies, and practices related to currency valuation, concluding that Vietnam 's acts, policies, and practices including excessive foreign exchange market interventions and other related actions, taken in their totality, are unreasonable and burden or restrict U.S. commerce. In making these findings, USTR has consulted with the Department of the Treasury as to matters of currency valuation and Vietnam’s exchange rate policy.

USTR is not taking any specific actions in connection with the findings at this time but will continue to evaluate all available options. The Section 301 investigation was initiated in October 2020.

Several Industry Organizations Urge USTR to Delay the Comment periods for its Vietnam 301 investigation

On October 8, 2020, the U.S. Trade Representative (USTR) announced that it had initiated two separate investigations—pursuant to Section 301 of the Trade Act of 1974—with respect to Vietnam’s trade with the United States. The USTR will review, in consultation with the Treasury Department, any practices that may have contributed to the alleged under valuation of Vietnam’s currency and thus may have impaired the competitiveness of U.S. products (by making them more expensive to foreign buyers). The USTR has requested consultations with the government of Vietnam, sought public comments on the investigations, and will hold virtual public hearing on December 29, 2020. Post-hearing rebuttal comments are due by January 7, 2021.

On December 16, 2020, the Department of the Treasury released Report on Macroeconomic and Foreign Exchange Policies of Major Trading Partners of the United States, finding that Vietnam is a currency manipulator.

The release of this report occurred after the comment period deadline and deadline to appear at the December 29, 2020 hearing passed. Several industry organizations have requested USTR to reopen the comment period, to allow interested parties to request to appear at the hearing, and to delay the hearing and post-hearing comment deadline.

"This finding could have substantial impact on the ongoing investigation," said the interested parties, "Our view is that the law provides that interested parties that are engaged in administrative proceedings are entitled to a meaningful opportunity to be heard both under the Administrative Procedures Act (APA) and the Constitution. We therefore respectfully request an opportunity to comment on the highly relevant information contained in Treasury’s report."

The signatories organizations are:
Accessories Council
American Home Furnishings Alliance
American Apparel & Footwear Association
Consumer Technology Association
Council of Fashion Designers of America
Fashion Accessories Shippers Association
Fashion Jewelry & Accessories Trade Association
Footwear Distributors & Retailers of America
Gemini Shippers Association
Halloween Industry Association
Hardwood Federation
Home Furnishings Association
International Wood Products Association
Juvenile Products Manufactures Association
Outdoor Industry Association
National Foreign Trade Council
National Marine Manufacturers Association
National Retail Federation
Recreational Vehicle Industry Association
Retail Industry Leaders Association
Semiconductor Industry Association
Toy Association
Travel Goods Association
U.S. Chamber of Commerce

U.S. Treasury Names Vietnam a Currency Manipulator

On December 16, 2020, the Department of the Treasury released Report on Macroeconomic and Foreign Exchange Policies of Major Trading Partners of the United States.

The Report concluded that both Vietnam and Switzerland met all three criteria under the Trade Facilitation and Trade Enforcement Act of 2015 (the 2015 Act) during the period under review. Treasury consequently conducted enhanced analysis of Vietnam and Switzerland in the Report and will also commence enhanced bilateral engagement with each country in accordance with the 2015 Act. This engagement will include urging the development of a plan with specific policy actions to address the underlying causes of currency undervaluation and external imbalances.

Treasury also determined that, under the Omnibus Trade and Competitiveness Act of 1988 (the 1988 Act), both Vietnam and Switzerland are currency manipulators. For each country, Treasury assessed, based on a range of evidence and circumstances, that at least part of its exchange rate management over the four quarters through June 2020, and particularly foreign exchange intervention, was for purposes of preventing effective balance of payments adjustments and, in the case of Vietnam, for gaining unfair competitive advantage in international trade as well. Consistent with the 1988 Act, Treasury will press for the adoption of policies that will permit effective balance of payments adjustments and eliminate the unfair advantages in trade that result from their actions.

No other major U.S. trading partner met the relevant 1988 or 2015 legislative criteria for currency manipulation or enhanced analysis during the relevant period. Treasury urged China to improve transparency with respect to the management of its exchange rate, in particular regarding official foreign exchange intervention, and increase public understanding of the relationship between the PBOC and the foreign exchange activities of the state-owned banks, including the use of foreign exchange derivatives and activities in the offshore RMB market.

Treasury found that ten economies warrant placement on Treasury’s “Monitoring List” of major trading partners that merit close attention to their currency practices: China, Japan, Korea, Germany, Italy, Singapore, Malaysia, Taiwan, Thailand, and India, the last three being added in this Report.

The report comes at a time when Vietnam is already on the Trump Administration's radar as a currency manipulator. On October 2, 2020, the U.S. Trade Representative (USTR) announced that it had initiated two separate investigations—pursuant to Section 301 of the Trade Act of 1974—with respect to Vietnam’s trade with the United States. The USTR will review Vietnam’s importation of timber that may have been illegally harvested or traded, used as inputs for its manufacturing of timber products, and subsequently exported to the United States. The agency will also review, in consultation with the Treasury Department, any practices that may have contributed to the alleged under valuation of Vietnam’s currency and thus may have impaired the competitiveness of U.S. products (by making them more expensive to foreign buyers). The USTR has requested consultations with the government of Vietnam, sought public comments on the investigations, and will hold virtual public hearings on December 28 and 29, 2020.

Section 301 investigations generally take months to complete, as the USTR reviews public comments, holds consultations with the foreign government, and reports findings and recommendations. For example, the Section 301 investigation of China's Acts, Policies, and Practices Related to Technology Transfer, Intellectual Property, and Innovation was initiated on August 18, 2017, and the first tranche of 301 tariffs was implemented on July 6, 2018. From this history we expect that the determination on whether to take action in these cases relating to Vietnam will likely occur during the 117th Congress.

The Department of Commerce Amends Countervailing Duty Process

On May 23, 2019, under the leadership of President Donald J. Trump, the U.S. Department of Commerce announced that it has issued a notice of proposed rulemaking to impose countervailing duties on countries that act to undervalue their currency relative to the dollar, resulting in a subsidy to their exports. U.S. law defines a countervailable subsidy as a financial contribution from a government or public entity that is specific and that provides a benefit to a foreign producer or exporter.

“This change puts foreign exporters on notice that the Department of Commerce can countervail currency subsidies that harm U.S. industries,” said Commerce Secretary Wilbur Ross. “Foreign nations would no longer be able to use currency policies to the disadvantage of American workers and businesses. This proposed rulemaking is a step toward implementing President Trump’s campaign promise to address unfair currency practices by our trading partners.”

The draft regulation identifies the criteria the Department would use to determine if countervailing duties should be imposed for currency undervaluation.

Since the beginning of President Trump’s term in office, the strict enforcement of U.S. trade laws has been a focus of his Administration. Just in the area of antidumping and countervailing duty enforcement, Commerce has initiated 164 new investigations – a 215 percent increase from the comparable period in the previous administration.

The Enforcement and Compliance unit within the International Trade Administration of the Department of Commerce is responsible for countervailing duty proceedings and determinations. Along with antidumping laws, countervailing duty laws provide American businesses and workers with an internationally accepted mechanism to seek relief from the harmful effects of unfairly traded imports into the United States.

Commerce currently maintains 481 antidumping and countervailing duty orders which provide relief to American companies and industries impacted by unfair trade.

President Obama Sets Forth How Currency Manipulation Law Will Be Administered

On July 27, 2016, Executive Order 13733 of July 22, 2016, Delegation of Certain Authorities and Assignment of Certain Functions Under the Trade Facilitation and Trade Enforcement Act of 2015 was published in the Federal Register.