US embassy cable - 03HANOI3273

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