Vietnam to Restrict Surging Scrap Imports

August 22, 2018 Posted by Vietnam Briefing Written by Koushan Das Reading Time: 3 minutes

Vietnam has tightened control over the imports of scrap such as plastic, paper, and metals. With China banning imports of various types of scrap metal and waste products, imports into Vietnam has increased rapidly since 2017. Going forward, the Vietnamese government will only issue import licenses if the importers can prove that their shipments meet the environmental standards and they have a demand and capacity to process the scrap as raw materials for their production activities.

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Inspections

The Ministry of Natural Resource and Environment (MoNRE) has set up an inspection department that is responsible for verifying scrap imports and is also authorized to revoke business licenses and permits in case the scrap imports do not meet environmental standards, lacks information about the origin, or exceeds import quotas. MoNRE is working closely with the Minister of Industry and Trade to ensure effective management and use of scrap imports.

The inspections have already started and the relevant government departments will submit their final reports to the Prime Minister by October. Meanwhile, new licenses for scrap import activities will not be granted, except in cases where an importer can ensure that it meets the environmental standards and that they have a requirement and capability to process the scrap.

They are also planning on restricting temporary import and re-export of certain categories of scrap in the near future. Currently, around 900 firms in Vietnam are involved in the import of paper, plastic, and metal scrap which are used as raw materials for production.

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Increase in scrap imports

For decades, China was one of the largest importers of waste and scrap materials. However, in the last few years, it has restricted imports on various types of waste and scrap material to reduce pollution. This has led to shipments being diverted to countries such as Vietnam and Malaysia, causing congestion at major ports.

In 2017, the total volume of scrap imported in Vietnam including iron, steel, plastics, and paper was twice that of 2016. Plastic scrap import during the first five months of 2018, is almost double compared to the total volume of imports in 2017. The rapid growth in imports has led to congestion in all the major ports in Vietnam, with around 6,000 containers stuck in Cat Lai Port and Hai Phong Port.

Apart from port congestion and environmental concerns, the major reasons for restricting imports and increasing inspections include the growing use of false permits, mislabeling of imports, and illegal imports.

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Industry impact

With the government restricting imports and increasing inspections, industries such as plastic, paper, and steel which are highly dependent on scrap imports will face a bigger impact than other industries.

Paper

According to the new regulations, imported scrap paper will be inspected by two government agencies, the inspection agency under MoNRE and the Customs Inspection Agency to ensure that imports meet the environmental standards.

Delays due to inspections and restrictions have already led to losses of around VND 30 billion (US$ 1.3 billion) from June 26 to July 10 for importers.

Steel

The Vietnam Steel Association (VSA) has requested the government to allow steel producers to allow annual imports of 1.9 million tonnes of scrap for their industry. In addition, they have also proposed to extend licenses of existing importers if they meet the environmental standards.

The association has highlighted the fact that steel produced from steel and iron scrap is an environmentally friendly process and produces only a fifth of the emissions compared to iron ore. Furthermore, as the domestic supply of metal scrap only meets 40 percent of the industry demand, imports are a major source for steel producers.

Plastic

Since June 25^th, 2018, the government has banned containers of imported plastic scrap. This ban is expected to continue till October 15^th. The government is in the process of inspecting and verifying import documents of existing containers that are stuck in ports. Around 5,000 containers of plastic scrap are stuck at Vietnamese ports for the last two months.

According to the new regulations, only plastic scrap with less than two percent impurity or “clean” plastic can be imported into Vietnam. However, plastic scrap importers have asked for further clarity on what constitutes as “clean” plastic or impurities. Proving that a shipment of plastic scrap has less than two percent impurity is not feasible for importers.

The plastic industry, which depends on imported plastic scrap for 80 percent of its productions due to the low quality of domestic plastic scrap, will face huge losses if the government is unable to speed up inspections, provide clarity about its regulations, and restart imports.

Plastics is one of the fastest growing industries in Vietnam, growing annually by 15 to 20 percent in the last decade. In just the first five months of 2018, plastic scrap imports increased by 200 percent compared to the total shipments in 2017.

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Going forward, to control the growth in scrap imports and reduce the impact on industries, the government agencies not only need to work closely amongst themselves but also with industries to ensure a smoother transition towards a more efficient and cost-effective management of scrap imports.

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