A new study released by the Hinrich Foundation in July 2023 evaluated the impact of the implementation of the Uyghur Forced Labor Prevention Act (UFLPA) on Vietnam’s textile and apparel industry.
The study’s findings were based on interviews with “senior leaders and owners of Vietnam’s garment and textile small and medium-sized enterprises (SMEs).” (Note: However, the study didn’t specify when and how many interviews were conducted.) Below are the summarized key findings:
#1: Vietnam’s textile and apparel industry heavily uses cotton imported from China. As noted in the study, in 2021, China accounted for nearly 30% of Vietnam’s cotton imports (ranked #1, $1.48 billion out of total $4.99 billion imports), surpassing the US ($1.05 billion).
#2: Vietnam’s garment exports may contain Xinjiang cotton. According to the study, “Once the cotton arrives in Vietnam, international intermediary manufacturers create finished garments from semi-finished products to export globally, often using the same materials from banned Chinese suppliers. This results in the ‘laundering’ of Xinjiang cotton.”
#3: Vietnam textile and apparel SMEs report challenges in proving the origin of cotton in fabrics. For example, one respondent says, “Differentiating between cotton products coming from different sources is challenging as they might have been blended while being transported by sea. Suppliers from China, Vietnam, Bangladesh, India, and Pakistan may engage in this practice to falsely label Xinjiang cotton as coming from other locations to circumvent this act.”
#4: Vietnam’s textile and apparel SMEs say the UFLPA implementation has negatively affected their exports to the United States.
- CBP’s statistics show that (current as of July 1, 2023), since UFLPA’s implementation in June 2022, a more significant amount of Vietnam’s textiles, apparel, and footwear were affected by law enforcement than those from China (e.g., $20 million vs.$16.2 million investigated and $3.53 million vs.$1.04 million denied access).
- US fashion companies are sourcing LESS from Vietnam due to forced labor concerns. According to one respondent, “My company is producing apparel products for several US-based fashion brands and uses materials from China and exports to the US. Since UFLPA was in place in June 2022, they have ordered less from us. It seems that our partners feel pressure from the regulators, so they are looking for alternative risk-free suppliers.”
- The surveyed SMEs also expect MORE of Vietnam’s textile and apparel exports to be investigated under the UFLPA enforcement down the road. Some SMEs commented that “it would be hard for US firms to rapidly find alternative suppliers in a short time, therefore more checks on Vietnamese cargoes are to be expected.”
- The study acknowledges that “In the worst-case scenario, Vietnamese SMEs may lose market access if their American importers are unable to verify that the supply chain is free from inputs produced via forced labor.”
#5: UFLPA also increased the trade compliance costs of “Made in Vietnam,” a significant challenge to many SMEs. One respondent commented, “Compliance with the UFLPA may pose a challenge for SMEs due to the higher costs associated with providing the necessary documentation of their supply chains. This could be due to the need to conduct additional audits, hire external consultants, or implement new tracking systems.”
Additionally, the report called for Vietnam’s textile and apparel SMEs to 1) diversify the supply chain, especially using more cotton imports from the US, India, Australia, and Brazil. 2) enhance supply chain traceability (note: how to make it happen remains a big question mark); 3) engage in dialogue with US authorities.
FASH455 Global Apparel & Textile Trade and Sourcing 
After reading, it is clear the the regional production trade network in Asia (aka the flying geese model) is relatively unbreakable. I think that although many countries want to pull away from China due to UFLPA, this trade network Asia has designed and grown over the years might not allow for an actual decoupling of China. With the deteriorating relationship between US and China, I think that US apparel brands trying to overcome UFLPA, will be met with struggles. If China continues on its path towards de-globalization, this might mean supply chains in the US could potentially be cut off from Asian supply chains in the future.
Thank you for your thoughtful comment. I agree that breaking the integrated regional supply chain in Asia or expecting Asian countries to decouple from China is not easy. However, we should not underestimate the long-term impacts of UFLPA. As the study mentioned, garment manufacturers in Vietnam are concerned about using XUAR cotton and actively seeking alternative sources. (for example: https://www.reuters.com/markets/asia/worlds-apparel-sneakers-hub-vietnam-struggles-us-ban-xinjiang-cotton-bites-2023-04-27/). Also, unlike price, ensuring no forced labor in the supply chain is non-negotiable.
One aspect of this article I found interesting was the “laundering” of cotton from Xinjiang, China. As we have learned, Xinjiang has a negative connotation and thus sourcing from there would be completely frowned upon if exposed. Therefore, learning about how Vietnam circumvents this issue by creating products from semi-finished products with materials originating from Xinjiang is enlightening. This makes me think about how enacting strict regulations for rules of origin is very important. In order to be productive in mitigating unethical sourcing practices, it is essential to be precise and clear about where products are sourced from, especially when creating a product with a blend of fabrics. From the perspective of a consumer, I think about all the products I have bought with a blended fiber composition – this makes me question the legitimacy of the country of origin. Similarly, the article discusses the difficulties Vietnam has encountered with tracing and differentiating fiber origins, especially when they are being transported by sea and coming from multiple different countries. This highlights a con with global sourcing – the challenge of accurately tracking garments when they are being transported all over the world. Perhaps with continuous advancements in technology, there can be ways to modernize the tracking process to be more error-free. Overall, I hope as the industry continues to modernize, it becomes easier to track the origins of fabric/cotton so that more socially responsible practices can be achieved.
Based on the report, the implementation of the UFLPA has negatively affected SMEs in Vietnam, and the potential solutions are not so simple. At the end of the report, the authors suggest that Vietnam diversifies its supply chain particularly when it comes to importing cotton, but this is easier said than done. This is especially difficult to do because of Asia’s intraregional trade network and the flying geese model. Each Asian country plays a different role in the trade network from raw material to finished product, and the countries have relied on each other for years for textile and apparel manufacturing. Also, the suggested countries are not as convenient and affordable as Asian countries for cotton imports. Vietnam does not have a FTA with Brazil, it would be more costly to ship cotton from the US, and India does not export as much cotton as the other two countries. Therefore, Australia is most likely the best option. But again it is tricky to ensure that the cotton coming from Australia does not contain cotton from the Xinjiang region, which means Vietnam will have to invest in traceability technology that may not be affordable for the SMEs. My hope is that the Vietnamese government along with the US and other countries will work together to implement traceability tools that will be accessible to businesses big and small across the globe.
The Hinrich Foundation’s study on the impact of the Uyghur Forced Labor Prevention Act on Vietnam’s textile industry reveals some concerning trends. Vietnam relies heavily on Chinese cotton, and it is worried that Xinjiang cotton may be present in their garment exports. Enterprises in Vietnam are facing challenges in proving the origin of cotton. After reading the study, it indicates a negative effect on Vietnam’s exports to the US and increased compliance costs. I think the suggestion of diversifying supply chains by using cotton from other countries and enhancing traceability is a smart move.