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Cablegate: Apparel Industry Responds to Gvn Export License Plan

VZCZCXRO6585
PP RUEHCHI RUEHDT
DE RUEHHM #0208/01 0650915
ZNR UUUUU ZZH
P 060915Z MAR 07
FM AMCONSUL HO CHI MINH CITY
TO RUEHC/SECSTATE WASHDC PRIORITY 2185
INFO RUEHHI/AMEMBASSY HANOI PRIORITY 1562
RUCPDOC/DEPT OF COMMERCE WASHINGTON DC
RUEATRS/DEPT OF TREASURY WASHINGTON DC
RUEHRC/DEPT OF AGRICULTURE WASHINGTON DC
RUEHC/DEPT OF LABOR WASHINGTON DC
RUEHZS/ASSOCIATION OF SOUTHEAST ASIAN NATIONS
RUEHGV/USMISSION GENEVA 0029
RUEHHM/AMCONSUL HO CHI MINH CITY 2359

UNCLAS SECTION 01 OF 02 HO CHI MINH CITY 000208

SIPDIS

USDOC
SENSITIVE
SIPDIS

STATE FOR EAP/MLS AND EB/TPP/BTA/ANA
STATE PASS USTR DAVID BISBEE
USDOC FOR OTEXA
USDOC FOR 4431/MAC/AP/OPB/VLC/HPPHO
TREASURY FOR OASIA
GENEVA FOR USTR

E.O. 12958: N/A
TAGS: ETRD ECON KTEX WTRO VM
SUBJECT: APPAREL INDUSTRY RESPONDS TO GVN EXPORT LICENSE PLAN

REF: HCMC-DEPT/USTR EMAIL 2/9/07 B) HCMC 1399

HO CHI MIN 00000208 001.2 OF 002


Sensitive But Unclassified. Not for Internet distribution.

1. (SBU) Summary: Representatives of the apparel industry
based in Ho Chi Minh City report that the GVN has agreed to
implement a system of export licenses for garments exported
to the United States. The HCMC branch of the American
Chamber of Commerce proposed export licenses as a means of
responding to USG special textile monitoring mechanisms.
Exporters tell us that U.S. buyers continue to cut their
orders and that the Ministry of Trade is under pressure
from Vietnamese apparel manufacturers to respond to the USG
monitoring mechanisms. End Summary.

2. (SBU) Representatives of Vietnam's apparel industry met
March 1 with the Ministry of Trade (MOT), the Ministry of
Industry, the Office of Government (the Prime Minister's
office), the Ministry of Finance and the Customs Department
to discuss the future of Vietnamese garment exports to the
United States in the wake of the USG commitment to monitor
and consider self-initiating anti-dumping investigations of
those exports. At the meeting, the GVN released an inter-
ministerial circular that laid out a system of
"supervising" garment exports to the United States. AmCham
members who attended the meeting said the circular sets up
system of export licenses similar to that recommended by
AmCham in a February 8 letter to the GVN. (Ref A) This
system is meant to prevent transshipment and to monitor the
prices of garments exported to the United States in the
"sensitive categories" covered under the USG monitoring
mechanism.

3. (SBU) According to AmCham's Apparel Committee, Minister
of Trade Truong Dinh Tuyen said at the meeting that the GVN
did not agree with the USG special monitoring program, but
that the GVN wanted to establish confidence among U.S.
importers, hence the export licensing plan. Deputy
Minister of Industry Bui Xuan Khu said the export license
system would aim to ensure there would be "no subsidies, no
transshipment and no dumping." One U.S. buyer said the
export license system would be based on the Electronic Visa
Information System (ELVIS) that was used by Vietnam and
other countries exporting to the United States when they
were subject to apparel quotas.

4. (SBU) Industry representatives told us the GVN decision
would be helpful in the short term to mitigate uncertainty
created by the USG commitment to Senators Dole and Graham
to monitor apparel imports from Vietnam and consider self-
initiating anti-dumping investigations of Vietnamese
garment exports. Representatives told the GVN they would
be making decisions this month about order volumes for
July-December 2007.

5. (SBU) U.S. buyers say customers continue to cut orders
placed in Vietnam. MAST Industries, for example, has thus
far shifted USD 70 million in orders from Vietnam to China
and Cambodia. This represents one-third of the value of
orders placed by MAST in Vietnam in 2006. MAST plans to
shift all orders out of Vietnam by the end of the year
pending further clarification from the USG regarding its
commitment to monitor and possibly self-initiate anti-
dumping investigations.

6. (SBU) At the March 1 meeting, an MOT official told MAST
that the MOT was under pressure to respond to the USG
special monitoring mechanisms from Vietnamese apparel
manufacturers, who are starting to experiences the effects
of the decline in orders. Vietnamese apparel
manufacturers, especially small and medium-sized companies
located in northern Vietnam, are being hurt more than
foreign-invested factories, MAST said. The foreign firms
keep orders from U.S. buyers and simply shift production
from Vietnam to other countries. Foreign factories located
in Vietnam often sub-contract with Vietnamese manufacturers
to meet order requirements, and it is these sub-contracts
that are being lost. MAST reported it was aware of at
least one Vietnamese factory that had closed as a result of

HO CHI MIN 00000208 002.2 OF 002


the shift in MAST orders out of Vietnam.

7. (SBU) Comment: U.S. retailers and Vietnamese apparel
manufacturers continue to voice complaints about the USG
special monitoring mechanisms. (Ref B) They praised the
GVN's willingness to be responsive to the industry with the
export license plan and expressed the hope that it would
minimize the threat of anti-dumping lawsuits. They also
called on the USG not to self-initiate anti-dumping
investigations. One U.S. buyer said the reason that
Vietnam is so critical to U.S. retailers is that it is the
most competitive location to source high-end apparel. U.S.
buyers have long praised Vietnam as a source for
consistently high-quality garments. End Comment.
WINNICK

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