The rule of orgin which benefits Vietnam garment manufacturer the most - cut and sew rule

On the set of rules of origin, which benefits Vietnam garment manufacturer the most and also is favored by apparel importers is "cut and sew" rule. Under this rule, textiles could be sourced from any country, as long as they are cut and sewn into apparel by a Vietnam garment manufacturer and Vietnam will be listed as the country of origin for those garment products.

This "cut and sew" rule has proved to facilitate the exports of most Vietnam garment manufacturer. As a result of the aprovement on "cut and sew" rule applied for trading between Korea/ASEAN, the export growth rate to the Korean market reached over 70% in 2010 and of course, every Vietnam garment manufacturer gained benefit from this FTA.

This is the reason why in the recent negotiation of TPP, one of the main points that Mr Vice President of Vietnam Textile and Apparel Association, the representative of Vietnam garment manufacturer was trying to persuade is the application of "cut and sew" rule if Vietnam is included in the TPP. This attempt is to improve the competitiveness of Vietnam garment manufacturer in exporting textile and apparel products.

Vietnam clothes manufacturers with a concern called "rules of orgin" - fabric-forward rule

Apart from yarn-forward rule of origin, another rule called "fabric forward" also should be taken into account by Vietnam clothes manufacturers.

Considered as the less strict rule amongst those rules of origin that Vietnam clothes manufacturers have to bear with before their products are legal to be exported, Fabric-forward rule means the fabric that Viet nam clothes manufacturers used in their production must be processed (i.e woven or knit) in the countries belonging to the trade agreement. Which makes it less strict is that the yarns used for making fabric are not required to be originated in the countries in partnership.
 

Before, this rule of origin was applied in the agreement Japan-ASEAN FTA and Japan-Vietnam Economic Partnership (JVEPA), in fact, the benefit from the rule for Vietnam clothes manufacturers is not that much because the fabrics that are produced in Vietnam are not enough to satisfy all the demand for production of Vietnam clothes manufacturers. They still have to rely much on importing fabrics from overseas especially China.
 

Having looked beyond the situation, Vietnam Government is paying more attention in the development of textile companies focusing on supplying Vietnam clothes manufacturers with required materials for their production.

Vietnam clothing manufacturer with a concern called "rules of orgin" - yarn-forward rule

One of the rules of origin that each Vietnam clothing manufacturer should take into account before considering for exports opportunities is the "yarn-forward" rule which is listed as the basic origin rule for textile and apparel articles.
This means the yarn Vietnam clothing manufacturer used to form the fabric (which may later be used to produce wearing apparel or other textile products) must originate in a country which is on the list. In the circumstance of TPP Agreements, to apply "yarn-forward" rule, Vietnam clothing manufacturer has to make sure that the yarns are originated from those countries in the Partnership, i.e: USA, Australia, NZ...

To be more clear, assume that Vietnam is included in the TPP, a wool shirt made by Vietnam clothing manufacturer from fabric woven in Vietnam of wool yarn produced in China (not including in TPP) would not be considerer originating as the fact that the origin of the yarn is not within TPP countries.
In other case, if China wool fiber was imported by Vietnam clothing manufacturer and they spun it into wool yarn, which was then used to produce the wool fabric, the shirt would be considered originating.

In fact, Vietnam clothing manufacturer has no experience in dealing with "yarn-forward" rule of origin in any trade agreement before.

Results of 7th round negotiation of TPP in the view of Vietnam garment exporters.

After a week of negotiation in HCM City which grabbed full attention of Vietnam garment manufacturers, the Trans-Pacific Partnership Negotiations (TPP) yields promising results for Vietnam  garment factories while being expected to attain several improvement by year-end.
 

Vietnam Textile and Apparel Association, on behalf of Vietnam clothes manufactures presented at the TPP event to persuade the negotiators in the attempt to claim for benefit from a TPP Agreement, from which improve the competitiveness of Vietnam clothing factories. It is said that in order to reduce the risks to the Vietnam garment industry in joining TPP and benefit from that the rules of origin should be applied as they are in the "cut and sew" process. In fact, if the "yarn forward" rules are applied to the TPP as condition for Vietnam to join, Vietnam garment factories will hardly have the chance to expand their production.
 

Therefore, one of the main target of Vietnam garment manufacturers is to fight for "cut and sew" rules in TPP. Currently, It is estimated that in a finished garment product, the cost of fabrics accounts for maximum 50%, however garment factories in Vietnam still heavily depends on imports of materials especially from China. In reality, clothes manufacturers of Viet Nam are too underdeveloped to make fabrics that are used in products exported and thus could not satisfy the "fabric forward" rule to be able to claim priority tariffs according to those FTAs. This also means tariffs applied for apparel exports from Viet Nam (a TPP partner) will be the same as those for non-TPP partners, including China.
Some fear a "cut and sew" rule would lead to a flood of Vietnam garment products in the markets of TPP partner markets.  In fact, the "cut and sew" rule was accepted by Korea and other countries, including TPP countries such as Australia and New Zealand, in previous FTAs but the trade volume for Vietnam garment exporters didn't gain a great boost. That's proof that imported countries should not worry about any sudden surge of apparel products from Viet Nam after a TPP.
 

Some optimists think that if "yarn forward" rule is the final decision of TPP countries, at least it would help to attract more foreign investment in the clothing factory of Viet Nam to serve national development.
 

However, In the context of globalisation and the free trade tendency, Vietnam clothes manufacturers are trying to persuade  all partners that they should understand the position and situation of each country and make reasonable concessions for a TPP beneficial to all partners.
 

For textile and apparel issues, Garment factories in Vietnam urge the TPP negotiators to adopt the "cut and sew" rules for the benefits of Vietnamese clothes manufacturers and all TPP consumers.

Vietnam clothes manufacturers are on the way to fulfill the development target for the 2011-20 period.

It is stated recently that total garment export turnover was estimated to reach US$6.16 billion in the first half of the year 2011, which is 30% increase compared with last year and is the highest growth rate in the past five years. At this rate, it is promising that Vietnam garment exporters could reach the target of $13.2 billion revenue earned from garment exports at the end of the year and only the way to pursue the target of $18 billion in export value by 2015 and $25 billion by 2020, as written in the Development Plan for Garment and Textile for the 2011-20 period by the Government.

At present, TPP is still ongoing negotiation and the parties involved have not put forward any suggestions on the origin principle of garment products. However the nine countries have aimed to made a conclusion before the summit of the 21-member Asia-Pacific Economic Copperation forum in Honolulu in November. Among the other eight negotiating countries for TPP, the US is Vietnam clothes manufacturers' biggest export market and garment export value to this market accounts for 55% of the Southeast Asian region's total garment exports.

To take the great trade opportunity of joining the Partnerships and to be proactive on the run to deepen the penetration into the US market, as part of the development plan for the 2011-20 period, the Government has made some outlined points to concentrate on developing which include the plan to focus on research and development of raw materials production and using technologies in production, from which Vietnam garment factories to take control all over the procedures of production from raw materials to finished products. If the implementation of this plan is proved to be efficient, the chance of Vietnam clothing factories to meet even the strict rules of origin from the TPP is achievable.

Vietnam garment exporters are planning to meet the rule of origin from Trans Pacific Partnership.

A good news is the construction of the Dinh Vu polyester fibre plant in Hai Phong city, the north of Vietnam is almost complete and will be ready to launch by August this year. In addition, PetroVietnam Petrochemiacl and Textile Joint Stock (PVTex) company and some foreign partners have signed five contract to provide services to the factory.

With the total investment capital of US$324.85 million and promising production capacity of 500 tones of fibre a day, Dinh Vu polyester and fibre plant has been destined to be the supplier for many garment factories in Vietnam. It is said that once going into commercial operation, the plant will meet about 40 percent of market demand of Vietnam clothes manufacturers for raw materials.

It is a promising future for garment industry in Vietnam to fulfill the strict requirement of origin from the Trans Pacific Partnership which would open a straight and easier way for Vietnam clothes manufacturers to export their products into their target markets namely the U.S. Currently, Vietnam garment factories depend much on Chinese supplier of raw materials which put these clothes manufacturers in the situation of trade deficit and reliance on China as the Chinese yuan keeps appreciating.

To enhance and smooth the exports procedure of Vietnam clothes manufacturers, it is critical to take into account all the steps in making finished products from sourcing materials to finishing products as Vietnam is known as being lack of profession in terms of weaving, dyeing and finishing fabrics. 

Practically 60% to 70% the fibre produced in Vietnam are being exported but Most of Vietnam garment factories have to import fabrics for production. To prevent this redundancy, it is necessary to develop the supplementary factories so that Vietnam garment exporters could take the initiative in the whole process on the way to enhance the textiles industry in Vietnam.

It is a proactive approach that should be taken into account by any party related. No exception, Vietnam Garment Factory has looked beyond the situation to be more localization in the production of garment products. 

Rising revenue for Vietnam clothes manufacturers on exports to the US.

There are some facts about the current situation of Vietnam-US trade revenue in the viewpoint of Vietnam garment factories while the negotiation on Trans Pacific Partnership is happening. 

In fact, all of Vietnam garment exporters hope the result would be favorable to their sides.
 

In the first four months of the year 2011, total export value of Vietnam garment factories is US$2 billion, making garment on top of the major products exported to the US from Vietnam.
With all of the rising results, it is predicted by experts that Vietnam clothes manufacturers with their exports to the US will surpass US$154 billion at the end of this year and Vietnam is likely to become the US's largest exporter in the ASEAN region.
 

It will be a promising future for Vietnam clothes manufacturers especially if Vietnam is agreed to join the Partnership.
 

However, the result is still left unfolded until the meeting closes on 24th June. 

Vietnam clothing manufacturer discussion in Ho Chi Minh City- TPP

The negotiations on the Trans-Pacific Partnership Agreement (TPP) is taking place in Saigon at the moment with the participation of New Zealand, Chile, Singapore, Brunei Darussalam, Peru, United States, Australia, Malaysia and Vietnam. If an agreement is made with the inclusion of Vietnam in to the TPP, Vietnam clothing manufacturers will be given a great opportunity to expand their market shares in the US. Recently, there are some issues made by 51 members of the US Trade Representative about the fact that Vietnam clothing manufacturers can take import tax advantages from the Agreement which may lead to the dominance of Vietnamese clothes in the US market and the reduce of textile and apparel jobs for U.S people. These concerns are critical because Vietnam clothing manufacturers are already the second largest supplier of textiles and apparel to the US behind China. Therefore, the meeting would concern about the extent to which some new rules should be presented if Vietnam is given the right to join the Partnership. The meeting will end on 24th June and until that time, it will grab the most attention of Vietnam clothing manufacturers.