VIETNAM: TEXTILE QUOTAS AND TRANSSHIPMENT

UNCLAS HANOI 003273

SIPDIS

FOR UNDERSECRETARY LARSON FROM THE AMBASSADOR

STATE PASS USTR SPOONER
STATE ALSO PASS USTR BRYAN
STATE FOR EB/TPP/ABT/BTT
COMMERCE FOR OTEXA DAS JIM LEONARD
BANGKOK FOR CUSTOMS ATTACHE

E.O. 12958: N/A
TAGS: ETRD PREL KTEX VM
SUBJECT: VIETNAM: TEXTILE QUOTAS AND TRANSSHIPMENT

SENSITIVE BUT UNCLASSIFIED PROTECT ACCORDINGLY


1. (SBU) I understand that the Committee for the
Implementation of Textile Agreements (CITA) may soon
consider requesting textile consultations with the GVN to
discuss the findings of a U.S. Customs Textile Production
Verification Team (TPVT) that visited Vietnam for three
weeks last August. In their out briefing with me, as well
as in their final report, the TPVT team indicated they had
found clear evidence of some textile transshipment.
However, at the same time, the team confirmed that Vietnam's
textile and garment industry clearly has sufficient
production capacity to produce at or above the quota levels
established in the bilateral textile agreement.


2. (SBU) I believe that bilateral consultations with the GVN
on transshipment issues could prove extremely useful. As
Vietnamese officials themselves have acknowledged, the GVN's
technical capacity to prevent transshipment is limited. In
his meeting earlier this month with DOC U/S Bodman, which I
attended, Deputy Prime Minister Vu Khoan spoke of the need
for a bilateral dialogue on transshipment issues. I
strongly support any effort to increase bilateral
cooperation efforts to prevent future occurrences.


3. (SBU) I am concerned, however, that these consultations
may be used as an opportunity to re-open or re-negotiate the
quota levels established in the textile agreement. I
strongly oppose a reduction in Vietnam's quota levels for
several reasons:

-- The level of transshipment is relatively low. U.S.
Customs has estimated that it is around two percent of total
quota.

-- The majority of this "transshipment" occurs outside the
control of the Vietnamese authorities. The vast majority of
these goods never enter Vietnam. They are not in fact
"transshipped." They have "made in Vietnam" labels put on
them by Chinese in China. A reduction in quota would be
seen as "punishment" for something that was largely outside
the control of the Vietnamese.

-- The GVN is taking steps to address transshipment problems
- providing electronic information to U.S. customs on
textile visas and pursing implementation of an electronic
visa system (ELVIS).

-- The quota levels in the agreement were established in
good faith. A reduction in quota levels should only take
place in the face of substantial transshipment problems -
particularly as it is clear that Vietnam has more than
enough capacity to legitimately meet quota levels.

-- A reduction in quota now would be, in the words of U.S.
buyers and manufacturers, "disruptive" to their business and
quota allocation in general in Vietnam.
BURGHARDT