WASHINGTON — Retailers and importers are poised to take advantage of a new agreement between the U.S. and Vietnam that allows direct passenger and cargo flights between the two countries for the first time since the end of the Vietnam War.
“This agreement allowing the first direct U.S.-Vietnam air service will help meet current market demand as well as stimulate future growth in tourism and other commercial activity between our two nations,” Norman Y. Mineta, U.S. Secretary of Transportation, said in a statement.
Under the agreement, initialed by U.S. and Vietnamese officials in Hanoi on Oct. 9, a limited number of scheduled all-cargo carriers can operate freely with no limits on weekly frequencies, according to the U.S. Department of Transportation.
Retailers, importers and apparel manufacturers have shifted a significant amount of production to Vietnam since the two countries signed a bilateral trade pact that went into effect in December 2001. Imports from Vietnam increased 335.3 percent to 800.8 million square meters equivalent, valued at $2.41 billion, for the year ended Aug. 31, according to Commerce Department data.
Responding to significant surges in apparel and textile imports from Vietnam, the U.S. negotiated a separate bilateral textile agreement with the country in April and placed 38 categories under quotas. While the bulk of the apparel produced in Vietnam is shipped back to the U.S. via ocean carriers, many fashion companies rely on air cargo for quick turns, sample lines and production changes.
“Minimizing time spent in transit is one of the highest priorities for U.S. retailers,” said Julia Hughes, vice president of international trade at the U.S. Association of Importers of Textiles & Apparel. “To have direct flights between the U.S. and Vietnam is a tremendous breakthrough for importers and, as an obvious corollary, it is a tremendous benefit for U.S. exports to Vietnam.”
Several apparel categories from Vietnam have already hit their quota limits for the year and the U.S. has placed embargoes on them. Facing the likelihood of more embargoes, executives might need to turn to air cargo, which is more expensive than ocean freight, to transfer their existing products out of the country before the U.S. closes the door. On average, the cost of shipping air cargo from Asia to the U.S. is 10 to 20 times higher than shipping by sea.The agreement, which expires in October 2008, also allows two passenger carriers from each country to provide U.S.-Vietnam service immediately. A third passenger carrier will be given a green light in the third year. Passenger carriers are restricted to seven weekly round-trip flights between the two countries. Prior to the recently initialed agreement, U.S. passengers flying to Vietnam had to change planes in a third country that flew to Vietnam.
Officials have not yet determined which passenger and cargo airlines would handle the flights. That is expected to occur soon and flights would likely commence shortly thereafter.
Both countries have agreed to meet within four years to consider a further expansion of air service. At that time, the U.S. plans to seek a fully liberalized Open-Skies agreement, one that does not limit the number of carriers or flights.
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