Mass layoffs occurred in the textile and footwear industries. The United States is called the culprit of this problem. This is due to new American rules regarding the prohibition of raw materials from Xinjiang, China. Previously, Washington imposed a ban on raw materials or components produced with forced labor in Xinjiang under the Uyghur Forced Labor Protection Act (UFLPA). The US still insists there is forced labor in the region even though China rejects it. This ultimately has a bad impact on the world garment industry. Noted, 90,000 jobs in this industry lost because of the many goods that the US refused under this rule.
The most severely affected by this rule is Vietnam. according to US customs data as of April 3, of the US$15 million shipment of clothing and footwear held for UFLPA inspection, more than 80% came from Vietnam. Of that figure, only 13% of its cargo was allowed entry.
"Many US importers are still optimistic, but their supply chains could still be disrupted as Vietnamese clothing makers rely on China for about half of their input materials," the country's industry association told Reuters on Friday (28/4/2023).
In addition, compliance risks could lead to a more painful adjustment for Vietnam. Moreover, Vietnam is the main source of cotton clothing for Americans.
"Vietnam's heavy dependence on cotton textiles from China poses a significant risk of containing Xinjiang cotton, as the province produces more than 90% of Chinese cotton," said Sheng Lu, Director in the Department of Fashion and Apparel Studies at the University of Delaware.
He said there was no way Vietnam could drastically reduce this dependency, also because many of the manufacturers there were owned by Chinese investors.
The Federal Maritime Commission, the US agency responsible for international maritime transport, warned earlier this month of potential supply chain disruptions caused by UFLPA inspections.
In a survey last year, nearly 60% of US fashion industry managers said they scoured countries outside of Asia for their supplies in reaction to forced labor laws.
Sheng Lu said it would be difficult for US companies to find alternative suppliers soon, therefore more checks on Vietnamese cargo were expected.
"Western companies should make more significant efforts to map out their supply chains, find out where production at each stage occurs and demonstrate adequate due diligence," he said.
