Vietnam Tariff Threat Sparks AAFA Outcry

Date: Monday, October 5, 2020
Source: Sourcing Journal

Fashion isn’t thrilled at the growing prospect of tariffs on goods out of Vietnam, a major sourcing destination for footwear and apparel.

A move by the U.S. Trade Representative (USTR) to launch a Section 301 investigation on Vietnam, which could open the door to imposition of punitive tariffs on U.S. imports from the country, drove the American Apparel & Footwear Association (AAFA) to urge the government to “refrain from sowing further supply chain disruption” during the Covid-19 pandemic.

Late Friday, USTR said it was initiating an investigation at the direction of President Trump addressing two significant issues with respect to Vietnam. USTR will investigate Vietnam’s acts, policies and practices related to the import and use of timber that is illegally harvested or traded, and will investigate Vietnam’s acts, policies, and practices that may undervalue its currency and thus damage U.S. commerce.

USTR said it will conduct the investigation under Section 301 of the 1974 Trade Act, the same action that resulted in a trade war with China over the past two years and resulted in steep tariffs levied on a wide range of goods, including apparel, textiles and footwear, between the two countries. As part of its investigation on currency undervaluation, USTR said it will consult with the Department of the Treasury on issues of currency valuation and exchange rate policy.

“Vietnam is an important trading partner for the U.S. apparel, footwear and travel goods industry, and has become even more important as U.S. companies have implemented diversification strategies away from China,” said Steve Lamar, AAFA president and CEO. “As brands did their best to restructure their sourcing models to protect American consumers and American global value chain workers from increased costs caused by the administration’s tariffs, and follow the administration’s edict to diversify from China, many turned to their trusted partners in Vietnam.

“Imposing new punitive tariffs on imports from Vietnam would cause extreme disruption, directly threatening those investments and increasing prices for hard-working American families at the register or costs on the supply chains that directly support millions of U.S. jobs,” he added.

USTR Robert E. Lighthizer said the government charged Vietnam with using illegal timber in wood products exported to the U.S. market that harms the environment and is unfair to U.S. workers and businesses who use legally harvested timber.

“In addition, unfair currency practices can harm U.S. workers and businesses that compete with Vietnamese products that may be artificially lower-priced because of currency undervaluation,” Lighthizer said. “We will carefully review the results of the investigation and determine what, if any, actions it may be appropriate to take.”

However, Lamar said this is not the time to impose new costs on U.S. supply chains, particularly on job creators still recovering from the impacts of the coronavirus pandemic.

“Further, new punitive tariffs could make it even harder to source the personal protective equipment that our communities need to safely regrow the economy,” he said. “Tariffs are taxes on American consumers and American workers. It is time for the administration to take a different approach to trade policy, one that does not punish American consumers, American workers, and the American communities they support.”

Vietnam is the second-largest supplier of apparel, footwear, and travel goods to the U.S. market, and has experienced dramatic growth since 2016. For the year to date through July, U.S. companies imported $6.94 billion worth of apparel from Vietnam, a, 11.06 percent decrease compared to the same period in 2019. During the same time, Vietnam’s footwear shipments were down 8.6 percent to $3.62 billion.

USTR said it will issue two separate Federal Register notices this week that will provide details of the investigation and information on how members of the public can provide their views through written submissions.


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