UPDATE 1-U.S. slaps heavy duties on Chinese steel shipped from Vietnam

(Adds details on case, background)

WASHINGTON, May 21 (Reuters) - The U.S. Commerce Department on Monday slapped steep import duties on steel products from Vietnam that originated in China after a final finding they evaded U.S. anti-dumping and anti-subsidy orders.

The decision marked a victory for U.S. steelmakers, who won anti-dumping and anti-subsidy duties against Chinese steel in 2015 and 2016 only to see shipments flood in from elsewhere. The industry has argued that Chinese products are being diverted to other countries to circumvent the duties.

U.S. customs authorities will collect anti-dumping duties of 199.76 percent and countervailing duties of 256.44 percent on imports of cold-rolled steel produced in Vietnam using Chinese-origin substrate, the Commerce Department said in a statement.

Corrosion-resistant steel from Vietnam faces anti-dumping duties of 199.43 percent and anti-subsidy duties of 39.05 percent, it said.

The department has said it would apply the same Chinese anti-dumping and anti-subsidy rates on corrosion-resistant and cold-rolled steel from Vietnam that starts out as Chinese-made hot-rolled steel.

The duties will come in addition to a 25 percent tariff on most steel imported into the United States that resulted from the Trump administration’s “Section 232” national security investigation into steel and aluminum imports.

Although the steel subject to the latest anti-dumping and anti-subsidy duties was processed in Vietnam to be made corrosion resistant or cold-rolled for use in autos or appliances, the Commerce Department agreed with the claims of American producers that as much as 90 percent of the product’s value originated from China.

The global steel industry is struggling with a glut of excess production capacity, much of it located in China, that has pushed down prices.

The decision followed a European Union finding in November that steel shipments from Vietnam into the EU also circumvented tariffs.

The Commerce Department said that after anti-dumping duties were imposed on Chinese steel products in 2015, shipments of cold-rolled steel from Vietnam into the United States shot up to $215 million annually from $9 million, while corrosion-resistant steel imports rose to $80 million from $2 million.

The case stems from a petition filed by U.S. producers ArcelorMittal USA, Nucor Corp, AK Steel Holdings Corp and United States Steel Corp alleging that Chinese producers began diverting their steel shipments to Vietnam “immediately” after the duties were imposed. (Reporting by Eric Walsh Editing by Leslie Adler and Diane Craft)