The Plant Protection Department stood by its decision after meetings in the past week involving the Agriculture Ministry and Indian diplomats, even though businesses said they would refumigate the shipments to get import clearance, traders close to the deal said.

"They insisted on the re-export of the goods," said a trader in HCM City who declined to be identified.

Officials at the Indian embassy in Hanoi could not immediately be reached for a comment.

A vessel docked at HCM City port that had earlier received verbal approval for refumigation must now leave port, and another vessel has to depart from the northern port of Hai Phong.

The two ships, plus a number of containers, carried a total of 50,000 tonnes of corn and soymeal from India, traders said.

The cargoes arrived in late January infected with destructive khapra beetles, even though the goods carried Indian certificates of fumigation.

"The re-export will hurt Vietnamese businesses first, because they will not have raw material in time for feed production, and switching to another origin means waiting a long time before delivery," the HCM City trader said.

Traders from the two countries have said Vietnam could be forced to turn to more expensive South American supplies, pushing up prices when the authorities are already battling inflation.

It takes an average 13 days to deliver corn or soymeal from India to Vietnam, India's main buyer of the commodities.

More expensive supplies could come from Argentina or Brazil, but it could take two months for that cargo to arrive, the trader said, and the season for corn and soymeal from South America does not start until April.

Traders said they were still hopeful of a last-minute change of heart by Vietnam as Indian diplomats were probably still trying to get the ruling reversed.

"But since Vietnam is a key buyer, no strong measures are likely to be taken by India to protect the overall relationship," said another trader who deals with India.

Reuters - February 24, 2011