VZCZCXRO4926
PP RUEHCHI RUEHDT
DE RUEHHM #1399/01 3481023
ZNR UUUUU ZZH
P 141023Z DEC 06
FM AMCONSUL HO CHI MINH CITY
TO RUEHC/SECSTATE WASHDC PRIORITY 1878
INFO RUEHHI/AMEMBASSY HANOI PRIORITY 1317
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 0023
RUEHHM/AMCONSUL HO CHI MINH CITY 1975

UNCLAS SECTION 01 OF 02 HO CHI MINH CITY 001399 
 
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: GARMENT AND APPARAL EXPORT ISSUES 
 
REF: HO CHI MINH CITY 1150 
 
HO CHI MIN 00001399  001.2 OF 002 
 
 
¶1. (U) Sensitive But Unclassified. Not for Internet 
distribution. 
 
¶2. (SBU) Summary:  U.S. garment retailers, the largest 
indirect employers in Vietnam's apparel industry, are 
cutting Vietnam orders as a result of the USG special 
textile monitoring mechanisms.  Well over one hundred 
thousand workers could be affected over the next year. 
 
¶3. (SBU) Apparel industry representatives including U.S. 
buyers continue to criticize the September 28 USTR/USDOC 
commitment to Senators Dole and Graham to monitor apparel 
imports from Vietnam and consider self-initiating anti- 
dumping investigations of Vietnamese garment exports. 
Producers and buyers claim that the commitment's reference 
to "critical circumstances" would allow preliminary dumping 
duties to be applied retroactively.  Major U.S. purchasers 
including Nike, Victoria's Secret, GAP, and the Limited 
report that they are moving orders out of Vietnam to avoid 
this contingent liability.  End Summary. 
 
RESPONSES TO USTR/DOC COMMITMENT TO DOLE AND GRAHAM 
--------------------------------------------- ------ 
 
¶3.  (SBU) The Apparel Committee of the American Chamber of 
Commerce, the Vietnam Textile and Apparel Association 
(VITAS), and the Association of Garment, Textile, 
Embroidery and Knitting of HCMC (AGTEK) are holding a 
variety of workshops and meetings in December to improve 
understanding of the USTR/USDOC commitment and of U.S. 
anti-dumping procedures.  Continuing with the criticism 
they made two months ago (reftel), industry 
representatives, both American and Vietnamese, charge the 
commitment is a violation of the U.S.-Vietnam WTO bilateral 
market access agreement signed in May which contained an 
agreed mechanism to enforce the elimination of prohibited 
subsidies. 
 
¶4. (SBU) The possibility of self-initiated investigations 
and retroactive duties is causing key U.S. importers to cut 
their Vietnam orders for 2007.  The head of the Vietnam 
branch of MAST Industries, a subsidiary of the Limited that 
produces apparel for stores like The Limited, Victoria's 
Secret and Lane Bryant, told EconOff that MAST is phasing 
 
SIPDIS 
out its production in Vietnam.  MAST plans to reduce orders 
in Vietnam by USD 100 million in the first quarter of 2007 
and then continue to reduce orders so that by the end of 
the year all MAST purchases in Vietnam, with a value of as 
much as USD 350 million, will be shifted to other 
countries in Asia, including China, Indonesia, Sri Lanka, 
Cambodia and the Philippines.  According to MAST, as many 
as 150,000 garment workers, mostly in Korean and Taiwanese 
owned plants, could be affected.  Nike Vietnam, which 
indirectly employs 62,000 garment workers through Nike 
contractors, told EconOff that Nike apparel procurement in 
Vietnam will be cut by at least 17 percent.  Gap Inc. 
reports it will reduce placements in Vietnam by an 
unspecified amount.  U.S. retailers indirectly employ a 
significant segment of Vietnam's approximately 2 million 
apparel workers; some of these jobs could be in jeopardy if 
U.S. garment retailers pull their business out of the 
country. 
 
SENSITIVE CATEGORIES AND CRITICAL CIRCUMSTANCES 
--------------------------------------------- -- 
 
¶5. (SBU) In addition to viewing the USG letter as a 
violation of the US-Vietnam WTO agreement, industry 
representatives are worried about the list of "sensitive" 
categories outlined in the letter and about the willingness 
of the USG to make allowances for critical circumstances, 
which would allow for the retroactive application of 
dumping duties.  They say the list (i.e., trousers, shirts, 
underwear, swimwear and sweaters) is vague and broad, and 
could potentially affect 500 different products in these 
categories.  The head of VITAS and Vinatex, Vietnam's 
largest state-owned apparel producer, said this would mean 
 
HO CHI MIN 00001399  002.2 OF 002 
 
 
monitoring 50 to 60 percent of Vietnamese apparel exports 
to the United States.  They charge that possible 
application of critical circumstances adds a layer of 
uncertainty to the costs of doing business in Vietnam 
compared with its competitors. 
 
VIETNAMESE PRODUCERS PREPARING FOR POTENTIAL INVESTIGATIONS 
--------------------------------------------- -------------- 
 
¶6. (SBU) Vietnamese producers, meanwhile, are discussing 
ways to self-police their manufacturing so as to keep 
apparel exports to the United States from expanding too 
rapidly after quotas are lifted.  The head of the 
Association of Garment, Textile, Embroidery and Knitting of 
HCMC (AGTEK) told EconOff that representatives of Vietnam's 
largest producers have met with representatives of the 
Ministry of Trade (MOT) to discuss ways to head off an 
anti-dumping investigation by limiting exports to the 
United States.  Vietnamese producers are also looking to 
take advantage of WTO membership to diversify into markets 
in South America, for example, that were previously 
closed as a result of high tariffs.  In addition, industry 
leaders are starting to educate themselves about U.S. anti- 
dumping procedures so as to be able to mount an effective 
response to a potential anti-dumping case. 
 
COMMENT 
------- 
 
¶7. (SBU) The complaints by U.S. retailers and Vietnamese 
apparel producers have not changed since the September 
USTR/USDOC commitment to Senators Dole and Graham. 
However, U.S. companies now have begun to act.  Importers 
and retailers have made business decisions that they will 
not shoulder the contingent liability of retroactive duties 
and are moving orders to other Asian countries where the 
cost of risk is lower. 
 
¶8. (SBU) We have provided industry representatives a copy 
of the December 4 Federal Register notice so that they can 
take their concerns about the monitoring system directly to 
the Department of Commerce. 
WINNICK