California Apparel News

Vietnam is being touted as the newest frontier for making affordably priced clothes, and it will become even more attractive after it joins the World Trade Organization on Jan. 11. But California apparel manufacturers are proceeding with caution.

“We won’t place orders past March until we know what is happening with Vietnam,” said one Southern California apparel maker, who wished to remain anonymous. Her company makes a lot of juniors tops in that country.

After it becomes the WTO’s 150th member, Vietnam’s apparel and textile products can sail into the United States without quota limitations, although tariffs will still apply.

But the United States is imposing certain rules and regulations on Vietnam that could stymie its apparel and textile imports coming into this country.

There are a few requirements that Vietnam has to meet before the Bush administration will open the import door. First, Vietnam must stop the subsidies of textile and apparel manufacturers that have kept many factory doors opened and thousands of workers employed in this densely populated country of 84 million. Under WTO rules, such subsidies are illegal. The United States has 12 months to monitor progress on this situation. If subsidies aren’t dropped, the U.S. government will resurrect quotas.

Second, because U.S. textile factories are fearful that Vietnamese apparel and textile makers will dump cheaply priced goods on the U.S. market at below cost, the U.S. Department of Commerce every six months will monitor apparel prices coming from Vietnam. If dumping is found, the Bush administration said it will impose quotas on apparel and textiles.

And this is where the uncertainty occurs. No one is sure if or when antidumping measures will take place.

“We will place orders in Vietnam, but we will be very, very careful because of the possibility of the antidumping issues,” said John Clark, executive vice president of production and import administration at Paul Davril Inc., a Los Angeles company that makes most of its licensed clothing labels, including Ecko Red and Kenneth Cole, as well as its private labels, in overseas factories. “We will do business in the first two-thirds of the year, and the last third, we’ll be more cautious.”

Still, only about 5 percent of Paul Davril’s production is done in Vietnam, where the company produces some of its blue jeans, knitwear and sweat suits.

Vietnam is an attractive alternative to China. Labor costs are cheaper, resulting in an about 10 percent savings, garment makers said. Also, the Vietnamese make high-quality clothing in their factories, predominantly owned by Chinese manufacturers who have diversified their factory holdings. “The country is highly motivated to produce, particularly those in the south instead of the north,” said one apparel maker.

Vietnam, if it maintains its quota-free status, will be a good alternative to China for certain items. That’s because the United States in late 2005 imposed import quotas on 34 different Chinese-made apparel and textile items until the end of 2008. Those items include bras, cotton-knit shirts, cotton trousers, man-made fiber knit shirts, man-made fiber trousers, men’s and boys’ wool suits, socks, swimwear, sweaters, and underwear.

Vietnam’s apparel exports to the United States consist primarily of goods under quota from China, its northern neighbor. That includes man-made fiber coats, cotton trousers and shorts, women’s knit blouses, and men’s cotton woven shirts.

But Vietnam is still a small player. In 2005, the United States imported $2.9 billion in apparel and textiles from Vietnam. That’s a drop in the bucket compared with China, which sent $22.4 billion in apparel and textiles to the United States in 2005.

Still, Vietnam’s apparel industry is poised to grow rapidly. One estimate has Vietnam exporting as much as $14 billion in apparel and textiles to the United States in 2010.

But that will only come true if antidumping measures are not initiated by the U.S. Department of Commerce, measures that were promised to Sens. Elizabeth Dole (R.–N.C.) and Lindsey Graham (R.–S.C.) for their votes in the Senate this month to grant Vietnam normal trade-relations status. Dole and Graham are concerned that more apparel imports would hurt the textile factories in their home states. On Dec. 20, President Bush signed the comprehensive trade bill that grants Vietnam permanent normal trade relations.

With antidumping measures threatened down the road, customs attorneys are telling their clients to wade into Vietnam with caution. “There is a lot of uncertainty,” said Brian Murphy, an attorney with Stein Shostak Shostak Pollack & O’Hara LLP in Los Angeles. “A lot of people haven’t rushed in.”

He noted that antidumping petitions are more uncertain to deal with than quotas. “Antidumping can hit you after the fact. Entries can remain unliquidated for a long time,” he noted. “You may have a huge duty bill many years later. It is 10 times worse than quotas.”