In September 2009, the Ministry of Finance started taxing products made from imported raw materials, including floor boards. Under the new regulations, floor boards destined for export were taxed. Previously, they had not been subject to any taxes.

According to the ministry, the regulations were aimed at minimising trade fraud and illegal logging as authorities were having difficulties distinguishing which wood was cut from natural forests and which was imported.

Two months since the law came into effect, floor board producers complained that they could not continue exporting as they were suffering losses.

Director of Au A Company Huynh Cong Tin explained that floor board producers had signed contracts months before the regulation took effect. Prices in these contracts obviously did not include the tax. These contracts ran until the end of the year and even into 2009.

The general director of the Sao Nam Company Do Thi Kim Loan, said that her company had to stop exporting altogether, while previously it was shipping roughly 10 containers totalling nearly 12,000sq.m of floor boards a month.

Loan said that the company had to cut production and lay-off two-thirds of its employees.

She noted that one foreign partner, which had planned to co-operate with Sao Nam Company to expand production, decided to postpone the partnership due to the new costs.

Pro Concepts Company is encountering similar problems. It has 10 containers worth US$800,000 stuck at port, because the company could not afford to pay the new taxes.

The situation was even more dismal for the newly established Van Viet Company, as it had produced its first batch destined for Europe. Under the new tax, it had to hold onto that batch, according to the company’s deputy general director Tran Dinh Gia Minh.

Minh said that his company tried to re-negotiate with customers to include the tax in the price, but they refused.

To get these producers back in business, National Assembly (NA) deputy for Binh Duong Province Mai Huu Tin in a recent NA meeting asked the finance minister to reconsider the regulation, saying that it was irrational to put legal and illicit businesses in the same basket.

Tin believed that relevant bodies could look at customs declaration papers to distinguish wood originating from natural forests or from import.

Loan, meanwhile, asked the Ministry of Finance to issue the tax with a more manageable itinerary so that floor board producers could have time to prepare.