Situation of Vietnam's Textile and Garment Exports to the US Market

U.S. trade laws are increasingly used as import restrictions. In other words, they are essentially legal barriers and are often used when U.S. goods or a U.S. industry cannot compete with foreign imports in the U.S. market.

c) Quantitative restriction measures

This group of measures includes three measures: import quotas, import licenses and import bans. However, for textiles, the United States does not have import bans.

Import quotas: The United States has no quota limits unless a textile agreement provides for quotas. However, U.S. trade law allows the U.S. government to unilaterally impose administrative quotas on textiles. Specifically, under textile quotas, U.S. customs controls the importation of cotton, wool, yarn, mixed silk, and other products made from fibers obtained from plants or produced in certain countries. The control of textile quotas is based on the guidance documents of the Chairman of the Customs Committee during the implementation of the Textile Agreements. Since January 11, 2007, when Vietnam officially became a member of the WTO, quotas on textiles exported from Vietnam to the United States have been abolished, in accordance with the provisions of the bilateral agreement on Vietnam's accession to the WTO as well as the provisions of Article 20(B) of the Textile Agreement.

Import license:

- Textile VISA , textile visa is a symbol in the form of a stamp/mark placed by a foreign government on an invoice or on an export license. The visa is used to control the import of textile products into the United States and to prohibit the import of illegal goods into the United States. Visas can be used for quota- or quota-free items. Conversely, quota-based items may or may not require a visa, depending on the country of origin.

- ELVIS (Electronic transmission visa information) is an electronic visa for textiles imported into the United States. Depending on the agreement with each country, most textiles imported into the United States must have a textile visa, except for categories 300 - 369, to prevent illegal transshipment and incorrect delivery of quotas.

2.3.1.2 Technical barriers

The Consumer Product Safety Commission (CPSC) flammability standards under the Flammable Fabrics Act. This law regulates the flammability of textiles and requires that all clothing or other products made from the fabric comply with these standards. However, some products are imported into the United States and then reprocessed to reduce their flammability to meet the standards. In this case, the invoice or other shipping documentation must be clearly noted.

Labeling regulations under the Textile Fiber Products Identification Act and Care Labeling Rule.

US customs law requires that foreign-made goods must be marked with codes in visible, clear, and difficult-to-erase locations, in accordance with the contents of the goods. Specific regulations on labeling imported goods are as follows: the label must clearly state on the packaging the name of the final buyer in the United States and the English name of the country of origin. When goods reach the final consumer, the packaging and items containing the consumer packaging of the product must also clearly state the country of origin of the goods inside. Through the trademark, US consumers must know the country of origin of the goods.

U.S. law requires that trademarks be registered with the U.S. Customs Service. Goods bearing counterfeit trademarks or copies or imitations of a registered trademark of a U.S. or foreign company are prohibited from being imported into the United States. A copy of the trademark registration must be submitted to U.S. Customs and retained as required. Goods imported into the United States bearing counterfeit trademarks are subject to confiscation.

Under the Copyright Revision Act, goods imported into the United States that reproduce registered trademarks without the copyright owner's permission are in violation of copyright law and will be seized and confiscated, and copies of such trademarks will be destroyed. Copyright owners who want to be protected by the US Customs Service must file a copyright complaint with the copyright office according to current procedures. One issue to note is that regulations on labeling of imported goods into the United States can easily be converted into non-tariff barriers or means for the United States to implement a policy of protecting its industries.

Thus, the very strict regulations regarding the use of trademarks and labeling of goods threaten to become barriers to textile imports into the United States. Under U.S. law, violations of trademark rights can result in sanctions and large fines. Goods deemed counterfeit are seized and destroyed at the border, and civil penalties are imposed up to twice the value of the goods. Failure to comply with these regulations could become a trade barrier to textile imports into the U.S. market.

Regulations on product labels: mandatory information on labels 4 :

- Name of the country where the product is processed or manufactured: On imported products, the name of the country of origin must be written in an easily recognizable, accessible and legible place, the last line must be the name of the country of origin, in English.

- To implement the Law on Identification of Textile Fiber Products, in addition to the prescribed information, the following information must be recorded on a commercial invoice of a shipment of textile fibers with a value of over 500 USD and such goods must comply with the provisions on labeling of goods of the Law on Identification of Textile Fiber Products: The fiber or synthetic fiber material, identified by the name of the type of natural fiber or artificially produced fiber in order of weight ratio from low to high if that fiber has a weight of 5% or more in the total weight of that product; The weight ratio of each fiber contained in that product; The name or other identifying characteristics of the manufacturer or of one or more persons as prescribed in Part 3 of the Law on Identification of Textile Fiber Products.

4 Textile labeling requirements of 4 main import markets, Trade Magazine 6/2007.

textile fiber product identification, issued and registered with the Federal Trade Commission; Name of the country of processing or manufacturing. Wool products have separate regulations on product labeling according to the Wool Product Labeling Law. Wool products according to this Law must include: + The weight ratio of the total fibers in the wool product (excluding the weight of the decorative elements) does not exceed 5% of the total weight of the wool fiber, recycled wool; + Maximum weight ratio of the wool product, of non-fiber materials; + Importer name: when importing wool products with a value of over 500 USD and subject to the provisions of the Wool Product Labeling Law, it is mandatory to state the name of the manufacturer.

- All invoices for imported textile products must include information on: + Yarn weight;

+ Single or spun yarn; + Whether the yarn is for retail sale; + Whether the yarn is for sewing thread; If the weight is mainly silk, the invoice must clearly state whether the silk is spun or filament. Some products, such as cotton, rayon, and textile products, are subject to additional labeling requirements. Importers should check the specific requirements for each type of product.

Country of origin regulations

- General principles:

+ Country of origin is the country where all goods are produced (except for exceptions regarding minimum raw materials that have been specified)

+ For yarn (including monofilament and multifilament), the country of origin of the yarn, thread, braid, rope, cordage, cable, or braided cord is the country where these goods are produced.

+ For fabric, the country of production is the country where the fabric is woven.

+ For other textile products, the country of origin is the country where the finished product is assembled.

- Special principles

If the origin of a textile or clothing product cannot be determined by one of the above principles and because the product is produced in two or more countries, the country of origin is:

+ The country where the most important assembly process or the most important manufacturing process takes place.

+ If it is not possible to determine which process is the most important, the country of origin is the country in which the assembly or production takes place.

- Declaration of origin for use by the US committee for implementation of textile agreement (CITA)

A declaration of origin must accompany any imported shipment. Quota restrictions are country-specific and based on the country of origin of the textile. The country to which the textile shipment is last exported to the United States is not necessarily the country of origin. The declaration of origin is submitted to customs upon entry. The date of exportation shown on the declaration is the date the carrier departed the last port of origin in the country of origin as determined by customs. Transit of goods during the journey does not affect the date of exportation. Customs will determine the country of origin based on the information shown on each declaration unless the information is incomplete. If the information is incomplete, customs will request additional information. The shipment will not be released until the determination is made.

Declare manufacturer code

Since October 5, 2005, the US Customs and Border Protection Agency has required importers of textiles and apparel into the US to declare the manufacturer's code. The subject of application is all textiles and apparel imported from all countries including apparel subject to special safeguard provisions and countries that are not members of the WTO.

2.3.2 Situation of Vietnam's textile and garment exports to the US market

Before the normalization of Vietnam-US relations, Vietnamese textiles and garments were mainly exported to Eastern European countries and the former Soviet Union. The US market was almost closed until the US lifted the embargo in 1994. In 2000, Vietnam signed a bilateral trade agreement with the US, called USBTA, allowing Vietnam to enter the market with more favorable conditions, reducing tariffs.

The average tariff rate was reduced from 35% to 5%. In particular, the garment industry has a special advantage with a tariff reduction from 60% to 5%. Thanks to this agreement and the Normal Trading Relations (NTR) status, Vietnam enjoys MFN tariff rates. As a result, garment exports to the United States increased dramatically by 20 times in just one year, 2002. The growth of the US market is the main driving force behind the export turnover of all Vietnamese textiles and garments [35].

2.3.2.1 Export turnover

In 1998, the growth rate of Vietnam's textile and garment exports to the United States was 1.82% with an export turnover of 26.40 million USD. In 2000, the Vietnam-US Trade Agreement was signed, and textile and garment exports to the US market began to improve with an export turnover of 49.87 million USD. In 2002, when this Agreement began to really take effect, textile and garment exports to the US increased dramatically to 900 million USD, rising to the top, surpassing exports to the EU market (570 million USD) and the Japanese market (500 million USD). Textiles and garments became the second item after crude oil in terms of export turnover.

Textiles and garments exported to the United States continued to grow strongly in 2003 and 2004. In 2005, the quota system for WTO member countries was abolished, but Vietnam was still on the list of countries subject to quotas when exporting to the US market. Therefore, the export rate of textiles and garments to the United States decreased in the first 8 months of 2005, with export turnover reaching only 1 billion 74 million USD, down 10.03% compared to the same period last year. However, in the last months of the year, the situation improved. In 2005, the United States imported approximately 3 billion USD worth of textiles and garments from Vietnam, an increase of about 6% compared to 2004. In 2006, this turnover reached about 3.5 billion USD. In 2006, Vietnam ranked 6th after China, India, Mexico, Pakistan, Indonesia in textile and garment export turnover to the US market with a market share of more than 3%. In the first 9 months of 2007, textile and garment export turnover

Garment exports to the United States reached 2.5 billion USD5 , and it is expected that the whole year of 2007 can reach 4.3 billion USD. Currently

5 http://www.vinanet.com.vn/EconomicDetail.aspx?NewsID=128109: Textile and garment exports in 2007 will reach 7.3-7.5 billion USD

Today, textiles are still the item with the highest export turnover among Vietnamese exports to the United States.

	EXPORT TURNOVER
Value (Million USD)
4500			4400
4000
3500		3500
3000		3000 2820
2500		2416
2000
1500
1000	900
500
41

2001	2002	2003 2004 2005 2006	2007

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Chart 2.4: Vietnam's textile and garment export turnover to the US market in the period 2001 - 2007 (million USD)

Source: Textile Association Report 2007

With the abolition of textile quotas in early 2007, Vietnam's textile exports will enter a new phase with great potential for growth. However, because the United States is applying a mechanism to monitor Vietnamese textile imports and has declared that it will conduct its own anti-dumping investigation if it finds signs of dumping; therefore, the risk of being investigated and imposing anti-dumping taxes is very high if Vietnam does not have effective measures to avoid rapid growth in quantity and sharp decline in price.

2.3.2.2 Export method: Export processing by consignment (CMT)

The method of exporting Vietnamese textiles and garments is mainly done in the form of processing, accounting for about 60-70% of the total export turnover of the entire Vietnamese textile and garment industry because the domestic raw materials are not enough to supply for export garments, moreover, the quality of these raw materials and accessories is also low, so they are not accepted by customers. Passivity in raw materials and accessories leads to Vietnamese enterprises being passive in organizing production and reducing production efficiency, leading to low added value and loss of human resources.

The form of export processing entrusted (CMT - Cutting, Making, Trimming) is also widely applied in Vietnam. Accordingly, domestic textile and garment enterprises only perform three stages of cutting, sewing and finishing with all raw materials provided by foreign partners. Specifically, foreign customers will provide raw materials such as main fabric, lining fabric, accessories such as zippers, buttons, make fabric, etc. Customers also provide good equipment to measure the smallest dimensions, necessary when making hard samples and cutting on fabric. Not only that, they provide specific instructions on cutting and sewing techniques according to design samples, embroidery details from the smallest to the most sophisticated. The finished garment will be purchased by foreign customers and the processing unit will be paid the processing fee (CMT fee). CMT processing is a form of production circulation under the "undertaking" regime.

Direct export (FOB export)

In contrast to the CMT processing form, when exporting FOB, Vietnamese enterprises are self-sufficient in raw materials and then sell products to foreign customers. There are 3 levels of direct production and export:

- Top level: the enterprise is responsible for all stages, from sample design, arranging raw materials, production to building a brand and gaining a market. To do so, the enterprise needs to be very solid and stable in production experience as well as have great economic potential, because although

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