By  on July 31, 2007

HO CHI MINH CITY, Vietnam — Vietnam's apparel manufacturers are looking to European and Asian markets because of U.S. monitoring to determine if some items made here are being dumped.

The U.S. is the biggest importer of Vietnamese goods and accounts for 55 percent of the share of textile and garment exports.

If dumping is proved "it would be a disaster, it could kill our industry," said Pham Gia Hung, chief of external affairs with the Vietnam Textile and Apparel Association. "Companies are very panicked....The problem is psychological. U.S. buyers don't feel safe here."

Perry Ellis, Liz Claiborne, Guess, Macy's and J.C. Penney have shifted some production from Vietnam to China, Hung said.

The creation of the monitoring program was the outgrowth of a political bargain between the Bush administration and two textile-state senators, Elizabeth Dole (R., N.C.) and Lindsey Graham (R., S.C.), last year to gain their support for permanent normal trade relations status for Vietnam, which became a member of the World Trade Organization in January.

U.S. textile producers fought for the monitoring and the possibility of the U.S. self-initiating antidumping cases because they fear being inundated by apparel imports from Vietnam now that quotas have been lifted. Dumping occurs when companies sell goods in another country below the cost of manufacturing or below market price in the country of origin.

In the first six months of the year, Vietnam textile and apparel exports totaled $3.4 billion, according to the Vietnam Textile & Apparel Association. That is 47 percent of the industry's 2007 export target of $7.35 billion and marks an annual growth rate of 25.9 percent. Vietnam's exports in 2006 totaled $39.6 billion, with the export category of crude oil leading the list, followed by textiles and apparel.

The U.S. Department of Commerce is collecting data on some Vietnamese imports of trousers, shirts, underwear, swimwear and sweaters under the monitoring program.

"If not for the unfair U.S. monitoring program, our export growth would have been 40 percent," said Diep Thanh Kiet, vice chairman of the Ho Chi Minh City Garment & Textile, Embroidering and Weaving Association. Indonesia's textile and garment industry grew more than 50 percent in the first half of this year, and that of China's grew at more than 60 percent, he said. Neither country is subject to U.S. monitoring, although many categories of Chinese apparel and textile remain subject to quota through 2008.Vietnamese manufacturers are turning to European and Asian markets, said Dau Tuong Minh, a trade promotion executive with the Ho Chi Minh City Trade Promotion Center.

"We want to diversify our markets to reduce our risk," she said.

In 2006, 20 percent of Vietnam's textile and apparel exports went to Europe, she said, noting that in 2007 the goal was to increase that to 30 percent.

Apparel firms working for U.S. companies have seen their orders this year reduced an average 10 percent, said Le Quoc An, president of the Vietnam Textile & Apparel Association.

"Our members have to find orders in Japan and Europe," he said.

Kiet explained that Vietnam had two kinds of U.S. customers. Companies such as Adidas, Mast Industries and Nike that have diversified their sourcing throughout Southeast Asia and have around 20 percent of their production in Vietnam have not reduced orders, he said. Firms with more than 50 percent of their volume coming from Vietnam have been most seriously affected because of U.S. monitoring, Kiet said. They are waiting until the U.S. Department of Commerce announces the results of its inquiry next month before placing orders for 2008, Kiet said.

The monitoring has affected how sourcing is done from Vietnam. Vendors for Target, which had said it did not plan to pull out of Vietnam, have switched their manufacturing to other countries, said Pham Minh Huong, director of export-import at Phong Phu Corp. She added that one South Korean vendor for Target spent $100,000 for independent auditors to ensure that transactions from its Vietnam factory were clear.

"They wanted to prove there is no dumping," she said.

Phong Phu Corp. does denim work for Liz Claiborne, Benetton, Target and DKNY, Huong said. But production has not been hurt because their categories aren't among those being monitored or their products are exported to Europe. Her firm exports 100,000 pieces of denim monthly, she estimated.

At least one U.S. company is negotiating with Vietnamese apparel firms that have lost U.S. business to buy their capacity, she said.

"They have strong confidence there will be no antidumping cases against Vietnam," she said.Hung said that some U.S. buyers are routing their orders from Vietnam through companies in South Korea and Bangladesh.

Adidas, which has apparel made in Vietnam, has not made any moves in its production, said Kemp Chalmers, the firm's apparel country manager.

"We're prepared to make moves if necessary, but we're now just watching the U.S.." Chalmers said. "We aren't making any preemptive moves at this time."

If a move were necessary, he said production could be moved easily to China, Indonesia, the Philippines or Cambodia. Vietnam provides 10 percent of Adidas' global supplies, Chalmers said, adding that China is the biggest producer for Adidas.

The Vietnam apparel industry is trying to boost its profits by focusing on more value-added production, said An of the Textile & Apparel Association. Some 70 percent of material must be imported and Vietnam is focusing on building its textile industry, he said, adding, "Our textile and cloth industry will develop, but the rate will depend on trade with the United States."

Minh of the Ho Chi Minh City Trade Promotion Center said: "Our competitive advantage is reduced if we have to import material. We are encouraging big textile companies to come in."

Much of the investment in Vietnam's textile sector is coming from South Korea and Taiwan. The Korea Trade Investment Promotion Agency reported that South Korean textile companies boosted investment in Vietnam in 2006 by 53.7 percent. Taiwan's Formosa Group is now the biggest manufacturer of cloth and fiber in Vietnam, with a project capitalized at more than $450 million in southern Dong Nai province, according to the Saigon Times Weekly.

Kiet said despite the uncertainty of trade with the U.S., he is optimistic about Vietnam's textile and apparel industries. A fashion center is planned for Ho Chi Minh City by 2012, so Vietnamese designers can contribute to the world market, he said. In addition, three or four trading centers for ready-made textile and apparel are planned for Ho Chi Minh City, and a training center to remedy Vietnam's labor shortage has also opened. Last year, almost 500 people took short-term courses, he said.

Huong of Phong Phu Corp. predicted that it will take five years for Vietnam to build its textile industry. Her firm just signed a $100 million agreement with W.L. Ross & Co. for expansion of its textile and garment plants in Da Nang."We're seeing huge growth of our spinning, knitting and weaving industries," she said. "In the future, we'll enjoy good growth in garments and will be in a better position in our textile industry."


The Fiber Price Sheet
The last Tuesday of every month, WWD publishes the current, month-ago and year-ago fiber prices. Prices listed reflect the cost of one pound of fiber or, in the case of crude oil, one barrel.
 
Price on
Price on
Price on
Fiber
7/30/07
6/25/07
7/24/06
Cotton
56.24 cents
50.67 cents
54.10 cents
Wool
$3.61
$3.67
$2.53
Polyester staple
88 cents
88 cents
85 cents
Polyester filament
84 cents
84 cents
82 cents
June Synthetic PPI
114.9
114.9
116
Crude Oil
$77.02
$69.14
$74.43

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