Tighter US rules banning imports from China's Xinjiang are increasing pressure on Vietnam's apparel and footwear makers, which have lost nearly 90,000 jobs since October due to a slump in demand in the global manufacturing hub.
Among apparel exporters, Vietnam has been among the worst hit by the Forced Labor Protection Act (UFLPA), a review of official US data showed. The law, in effect since June, requires companies to prove they are from Xinjiang. Do not use raw materials or components produced by forced labor.
Many US importers are still optimistic, but their supply chains could still be disrupted as Vietnam's apparel makers rely on China for nearly half of their input materials. In total, customs checked nearly 3,600 shipments worth more than $1 billion from multiple countries to find they did not carry goods with inputs from forced labor in Xinjiang, the U.S. Customs data shown.
According to the US Department of Commerce, this will affect US consumers, as Vietnam is their main source of cotton apparel. "Vietnam's heavy reliance on cotton textile material from China poses a significant risk to Xinjiang cotton, as the province produces more than 90% of China's cotton," said Sheng Lu, director of the Department of Fashion and Apparel Studies at the University of Delaware.
He added that it is unlikely that Vietnam can substantially reduce this dependence, as many manufacturers there are owned by Chinese investors. A government official confirmed that some Vietnamese suppliers may find it difficult to comply with the new rules, either because they import cotton from Xinjiang or because they are unable to prove that they do not.
In a survey last year, nearly 60% of US fashion industry managers said they were looking to countries outside Asia for their supplies as a response to forced labor legislation. Sheng Lu said it would be difficult for US firms to find alternative suppliers faster, so more scrutiny on Vietnamese cargoes could be expected. Western companies should "make a more significant effort to map their supply chains, trace where production occurs and perform due diligence at each stage".
The country's exports fell by 11.9% and production by 2.3% in the first quarter. Nearly one out of every three pairs of shoes sold globally by Nike and Adidas and 26% and 17% of their clothing, respectively, are manufactured in Vietnam. However, according to its latest annual report updated to May 2022, Nike has significantly reduced its production of apparel and footwear, despite its main manufacturing center in Vietnam. It did not answer questions about the UFLPA. Adidas also did not comment on the UFLPA, but said shortlisting its Vietnamese suppliers would respect local law.
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