A warning for Vietnamese garment exports
By Duong Van Hoc
|Vietnamese enterprises should acquire a thorough understanding of and the ability to double-check the origin of imported cotton fiber to see whether it is relevant to forced labor – PHOTO: TRAN NGOC LINH|
The Japanese press have recently reported extensively on the difficulties faced by Fast Retailing Uniqlo, a giant casual wear manufacturer, in the American market. In January, a Uniqlo batch of men’s cotton shirts was blocked at the Port of Long Beach in Los Angeles by an order called “Withhold Release Order” (WRO). This should be a warning for U.S.-bound Vietnamese garment exports because of the complexity of the issue.
The order is in fact a trade tool for denying imports suspected of being manufactured by or related to forced labor, which has been condemned and deemed to be eliminated by the International Labor Organization (ILO).
What does it have to do with Uniqlo?
Many of us may have known that China and Vietnam are the two biggest outsourcing destinations for this Japanese garment giant. Uniqlo, as well as other garment manufacturers in general, find it hard to seek out overnight a replacement for a key manufacturing location like China, particularly when it comes to cotton fiber supplies. Latest statistics show that China provides some 22% of cotton fiber for the entire world. The problem is 88% of this volume of cotton fiber is harvested in the autonomous region of Uyghur in Tibet, China.
Recently, the human rights issue in Tibet has become a sensitive problem in Sino-American relations. In addition to this bilateral conflict, the European Union has just entered the fray by temporarily halting the enactment of the comprehensive investment treaty this trade bloc has signed with China. By voicing the suspicion of the use of forced labor in the cotton fiber industry, the U.S. Government has resorted to WRO, a tool readily available in her complicated law system.
Notably, this measure is effective on not only cotton fiber to be used as materials shipped to the American market but also products made from materials of this type—garments. So far, U.S. authorities have made use of WRO three times in September 2020, November 2020 and January 2021 as they were skeptical about the sources of materials related to forced labor in Tibet.
What is WRO?
In the United States, the issue of products made by forced labor dated back in 1890. However, it was only legislated in 1930. Until 2015, WRO remained incomplete because the U.S. law still allowed the import of part of suspected products which met what she called “consumptive demand clause.” However, this clause has been no longer effective, which means that the U.S. has in principle said no to any products relevant to forced labor.
In that sense, anybody who believes or has evidence that goods imported to the U.S. are relevant to forced labor may directly inform the U.S. Customs and Border Protection (CBP) or the head of the port to which the suspected goods are unloaded, or may simply send an email notifying the authorities of the case. The CBP will consider the complaint and, when obtaining reliable evidence showing that the goods in questions are made by forced labor, issue a WRO.
The order will be applicable to specific imports by each manufacturer on a case by case basis. However, because of concerns about human rights in Tibet from the U.S. Government as well as the “unanimous consensus” of the American garment industry, the WRO in January 2021 has been imposed on all cotton fiber and its downstream products originated from Tibet. There is a political factor behind this WRO as U.S. legislators are discussing the Uyghur Forced Labor Protection Act.
As per regulations, businesses affected by a WRO have three months to prove that their products have nothing to do with forced labor. Actually, Uniqlo did not have enough time to produce adequate evidence for its non-involvement as requested by U.S. law enforcement bodies. The related imported goods would be either redirected to another country or destroyed in the U.S.
What does this story mean to Vietnamese garment exports to the U.S.?
The issue here is to consider the relationship between material supplies and forced labor. Elimination of forced labor has been an accompanying article in trading activities in two “new-generation” free trade agreements (FTAs) recently signed by Vietnam, the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTTP) and the European Union-Vietnam Free Trade Agreement (EVFTA). However, Vietnam and the signatories have the obligation to wipe out forced labor only in Vietnam and the respective countries. Vietnam has no way to eliminate it in a third country from which she imports materials.
The challenge here is the whole process of production must be monitored—from cultivation, harvesting and preliminary processing to yarn production and fabric weaving. Every of these phases must be cleared of forced labor.
According to industry experts, it is very hard to implement such a comprehensive supervision in the short-term if an enterprise has no careful preparations beforehand. Only garment giants which can afford costs, have negotiation capabilities and manage material replacements can comply with it.
According to the General Department of Vietnam Customs, Vietnam currently heavily depends on imported materials from China for her textile and garment, and leather-shoe industries. This source of supplies accounted for up to 47% of Vietnam’s total import value in this regard in 2019.
As Tibet is the overwhelming source of cotton fiber in China, Vietnam’s imported materials used for the local textile and garment industry may be suspected of being related to forced labor. In other words, some of Vietnam’s garment exports bound for the U.S. may face a risk of being subject to WRO. If so, the task of proving non-involvement can be a tough problem. Three months may be too short a time to gather utterly convincing evidence. So, what could we do to reduce the WRO risk?
First, Vietnamese enterprises should acquire a thorough understanding of and the ability to double-check the origin of imported cotton fiber to see whether it is relevant to forced labor. The Sino-U.S. conflict is by nature a confrontation of ideology over the role the State plays in economy and society. There is no feasible solution to it, at least in the immediate future. While the U.S. always insists on forced labor in Tibet, China adamantly denies it.
Vietnam may pay attention to whether this actually happens or not. However, what she needs is stability and the confidence from the U.S. market. We can do nothing to the sovereignty of the nation from which we import materials, but we are able to select our own supplies. We also need to carefully consider the forced labor issues at the replacing destinations to avoid the same awkward situation.
In addition, Vietnamese garment enterprises should include articles about forced labor in material supplying contracts signed with foreign partners. This may prove to be useful legally in the U.S. market should a dispute about contract violation occur.