Summary of Investigation into U.S. Data on Imports from Vietnam Used to Determine Quotas in U.S. - Vietnam Bilateral Textile Agreement

Background: The United States and Vietnam negotiated a textile/apparel bilateral trade agreement in April 2003. During the late stages of the negotiation, U.S. Customs and Border Protection raised concerns to U.S. negotiators regarding the possibility that counterfeit Vietnamese certificates of origin were accompanying imports of apparel into the United States. As a result of these allegations, the U.S. negotiated a provision in the U.S. - Vietnam Bilateral Textile Agreement to allow for possible reductions in quota limits if the U.S. could present evidence that imports attributed to Vietnam, which were the basis of the negotiations, did not originate in Vietnam.

Summary of Actions: At the request of the Secretary of Commerce on behalf of the Committee for the Implementation of Textile Agreements (CITA), U.S. Customs and Border Protection (CBP) undertook an extensive verification process to validate the origin of goods exported from Vietnam, which formed part of the basis for the quota limits in the U.S. - Vietnam Bilateral Textile Agreement. Since November 1998, four Customs teams have visited Vietnam and reported that the country has the capacity to produce large quantities of apparel. The Secretary of Commerce requested that CBP review U.S. trade data to validate Vietnam as the country of origin for apparel imported into the United States for the period on which the bilateral quotas were based - March 2002 through February 2003.

CBP developed and implemented the Vietnam Apparel Import Action Plan, a multi-faceted analysis that identified and focused on high-risk shipments for the period of time under review. CBP performed a thorough investigation using shipment documents, U.S. importer documents, Vietnamese exporters, and shipping line documents. CBP also sent three three-person teams of enforcement personnel to Vietnam in August 2003 to conduct production verification visits to individual factories. Throughout this process, Vietnamese Government officials were responsive to requests for detailed information and facilitated the on-site visits by CBP personnel.

At the conclusion of this verification process, CBP confirmed that Vietnam has the capacity and is manufacturing large quantities of apparel. During the August 2003 visit, the CBP visited nearly 100 factories and found most to be actively producing and were able to provide requested documentation. Based on information gathered in the factory visits along with additional sources of information, CBP provided CITA with evidence to seek adjustments to the negotiated quotas of approximately 1 million dozen garments. CITA has determined that these shipments were not produced in Vietnam because factories were closed, factories refused admission, or the Government or the factories could not provide sufficient documentation to substantiate production.

Conclusion: CBP did a thorough investigation of Vietnamese exports of textile/apparel products. They found extensive manufacturing capacity and the government provided valuable assistance during the investigation. Vietnam exported $2.4 billion worth of apparel/textiles to the U.S. in the past 12 months. For those categories under quota, the exports were $1.8 billion. The approximately 1 million dozen garments represents about 2.5% of the volume of imports in the quota categories. This represents about 4.5% of the value of those quota categories. The reductions will vary by quota category. The quota levels for 2004 will be adjusted (reduced) to reflect this action.

This exercise had benefits beyond the specific investigation:

1. CBP had the opportunity to instruct Vietnamese officials on the types of documentation factories need to retain and how to detect illegal transshipments. As a result, the Vietnamese have already revoked quota from factories they discovered engaging in illegal activities.
2. Vietnam recognized the serious nature of illegal transshipment and immediately began taking the necessary steps to implement an Electronic Visa Information System (ELVIS) which helps minimize visa fraud. ELVIS transmissions between the U.S. and Vietnam began on March 22, 2004, thereby eliminating a problem of identity theft whereby illegal trade could have entered the U.S. using counterfeit invoices of legitimate Vietnamese manufacturers. CBP continues to carefully monitor imports from Vietnam, using its established procedures. Employing such methods, CBP prevented nearly 100 shipments from entering the commerce of the United States because the importers were unable to prove that the country of origin was Vietnam.