World’s apparel, sneakers hub Vietnam struggles as US ban on Xinjiang cotton bites

Reuters  :
Tighter US rules to ban imports from China’s Xinjiang are compounding pressure on Vietnam’s apparel and footwear makers, hitting a sector that has already shed nearly 90,000 jobs since October in the global manufacturing hub as demand slowed.

Among garment exporters, Vietnam has faced the worst hit from the the Uyghur Forced Labor Protection Act (UFLPA), a Reuters review of official US data showed. The law, in place since June, requires companies to prove that they do not use raw material or components produced with Xinjiang’s forced labor.

The US clampdown hurts as it comes on top of a drop in clothing demand from richer nations that has already dented industrial output and exports from the Southeast Asian manufacturing powerhouse, a major supplier to big brands such as Gap GPS.N, Nike NKE.N and Adidas ADSGn.DE.

Of the $15 million worth of apparel and footwear shipments held up for UFLPA checks more than 80% were from Vietnam, and only 13% of its cargoes were cleared for entry, US customs data up to April 3 showed.

Many US importers are still sanguine, but their supply chains could still be disrupted as Vietnam’s apparel makers depend on China for about half of their input materials, according to the country’s industry association.

Vietnamese manufacturers, trade associations and the industry ministry did not reply to Reuters questions about the impact of UFLPA.

The value of shipments from Vietnam that have been denied entry to the US exceeded $2 million, three times more than those from China – with the sanctions having increased exponentially in the first months of this year.

While US controls have been far more frequent for the electronics industry, especially for solar panels which could be made with
polysilicon from Xinjiang, only 1% of electronics cargoes checked were denied entry, as opposed to 43% of apparel and footwear shipments.

In total, customs checked nearly 3,600 shipments worth more than $1 billion from a range of countries to ascertain they did not carry goods with input from forced labor in Xinjiang, US customs data showed.

While the halted shipments represent a tiny portion of the $27 billion worth of garments and footwear Vietnam exported to the US last year, compliance risks may lead to more painful adjustments for Vietnam.