Vietnamese steel, shoes and other imports get stuck in India’s quality red tape

More than two dozen Vietnamese companies have been awaiting certification from the Bureau of Indian Standards for several months now, prompting Hanoi to raise the issue with the Indian government multiple times, according to two officials aware of the development.

Vietnam's trade ministry has written to New Delhi for expediting BIS certification for 26 companies, stating that the delays are hurting business, according to the officials. Most of these companies are engaged in the trade of shoes or steel.

The delays in issuing BIS certification to Vietnamese companies come at a time when Indian manufacturers, especially steelmakers, have raised concerns of increasing imports from the southeast Asian country.

To be sure, manufacturers from other countries too are facing delays in securing BIS certification, especially Chinese companies. Although country-wise data wasn’t available, Vietnam accounts for the second highest number of applicants for BIS certification, after China, according to the officials mentioned earlier.

India-Vietnam bilateral trade reached $14.70 billion in 2022-23, as per data from the Indian embassy in Hanoi. Of this, Vietnam’s exports to India were $8.8 billion, while about $5.9 billion worth of goods moved in the other direction.

The Indian government has asked the Bureau of Indian Standards reasons for the delay in issuing certificates to the Vietnamese companies, the officials said, asking not to be identified as the discussions are not public.

The 26 Vietnamese companies chiefly include manufacturers and traders of steel and footwear, and one company each in the polyester, tyres, chemicals, toys, batteries, and MDF plywood sectors. While about half the applications are for renewal of certification, the rest are for fresh certificates.

The Vietnam embassy in New Delhi and the BIS did not respond to Mint’s queries.

The quality barrier

Applications for BIS certification have gone up following an increase in Quality Control Orders by New Delhi aimed at curbing substandard imports as well as boosting domestic production.

The QCOs require Indian traders to produce BIS certificates of the manufacturing facility while importing goods, or face penalties.

“Vietnam is becoming a major global supplier with whom even India has a trade deficit despite the large disparity in the size of the two economies,” said Bipin Sapra, indirect tax partner at EY. 

“Vietnam also benefits from India's free trade agreement with Asean countries, so tariffs can't be levied to balance the trade. In that scenario, QCOs are an effective non-tariff barrier that can be used for the benefit of the Indian industry to restrict at least the cheap and substandard quality imports,” Sapra added.

Also read | More goods to come under quality control orders in Make-in-India step

QCOs are issued by different line ministries and standards of products are prepared by the Bureau of Indian Standards, an arm of the ministry of consumer affairs.

The number of applicable QCOs has increased sharply in recent years—from 14 such orders covering 106 products in 2014 to 156 QCOs covering 672 products currently, India’s commerce and industry minister Piyush Goyal said in January.

Recently issued QCOs include those for footwear, chemicals, toys, tyres, and synthetic fibers, apart from steel. The QCO for the footwear industry will be applicable from 1 August after multiple extensions.

Also read | India issues quality orders on textiles to take on China

Fear of Chinese steel

India recorded a surge in steel imports to 8.3 million tonnes in 2023-24, surpassing the country’s exports of 7.5 million tonnes. A tenth of the steel imports came from Vietnam, making it the fourth-largest exporter of the alloy to India, behind South Korea, China and Japan.

“Vietnam exported nearly 1 million tonnes of steel to India in FY24. Before that, exports were negligible,” said Dhruv Goel, the chief executive of market intelligence firm BigMint.

Steel shipments from Vietnam to India, however, slowed after the steel ministry last year issued a Quality Control Order for Vietnamese steelmakers, effective October. Of the 26 Vietnamese companies seeking BIS certification, 10 deal in steel or stainless steel.

When BIS issued certification to Vietnamese steelmaker Formosa Ha Tinh earlier this month, several Indian steelmakers raised concerns of a resurgence in imports from the country.

Domestic steel manufacturers are also wary of Chinese companies using Vietnam and other countries for routing their products to India by leveraging New Delhi’s free trade agreement with the Association of Southeast Asian Nations bloc, of which Vietnam is a member.

India remains one of the few large economies globally with a growing appetite for steel, making the country an obvious destination for exports.

Also read | Why Vietnamese steel makes Indian industry uneasy

"Vietnam has a high level of steel exports and there are very few avenues left for steel exporters in the global market besides India and to some extent the Middle East,” said Ranjan Dhar, director and vice president, sales and marketing, AM/NS India, a joint venture of ArcelorMittal and Nippon Steel.

“So if the government doesn't take safeguard measures like QCOs, imports from countries like Vietnam, China, etc., will surge at the expense of local manufacturers, who are heavily investing in expansion,” Dhar added. “Countries like China can also set up manufacturing sites in Vietnam to take advantage of the FTA with India.”

China, with a billion tonnes of annual steelmaking capacity, accounts for more than half of the global steel production every year. But as China’s appetite for steel declines amid challenges in the domestic real estate sector, the country's steel mills are left with surplus production. 

The result: Chinese mills have in recent months flooded global markets with steel, dragging down prices.