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TPP: Invest in Vietnam, Now or Never

“If you’re sourcing apparel, and you’re not already in Vietnam, it may be too late for you.”

That key takeaway from a talk on the Trans-Pacific Partnership (TPP) at the Fashion Institute of Technology Tuesday came from Julia Hughes, president of the United States Fashion Industry Association (USFIA).

FIT’s International Trade and Marketing program hosted a panel moderated by Edward Hertzman, founder and publisher of Sourcing Journal, with speakers including Hughes; Beth Ring, senior member at trade law firm Sandler, Travis & Rosenberg, P.A.; and Thomas Crockett, director of government and regulatory affairs at the Footwear Distributors and Retailers of America (FDRA).

Companies need to move quickly if they are going to make their way into Vietnam, the country that stands to benefit most from the trade agreement. Hughes explained that there has already been considerable of investment in Vietnam with TPP, and, in addition, the EU has also signed an FTA with Vietnam, that has simpler rules and will likely pass before TPP.

“My recommendation would be if you’re not in Vietnam now, and you want to do an exploratory mission, you better go now, like next month.” Hughes said. “Or really, you’re behind the curve of your competitors, and then you ought to start looking at Malaysia where it’s a longer-term opportunity.”

Though Malaysia has a much smaller production capacity, in some ways, there are more opportunities there as everyone’s not vying for a slice of the production, Hughes explained.

Panelists agreed that now is the time to invest in Vietnam, though it’s likely TPP will take some time to come into effect. As Ring explained, past FTAs have faced difficulties with uniform enforcement, even beyond the staggered duty schedule.

“The enforcement aspect has been extremely difficult in terms of how a customs administration is going to require an importer to prove that the product qualifies under the rules of origin of the agreement,” Ring said.

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For example, under CAFTA-DR, customs officials at different ports of entry were requiring different documentation. “That’s a big potential issue,” Ring said. “After it’s all signed, sealed and delivered, it’s customs issues, it’s regulations, and then it’s a question of how is it actually going to get implemented at the court level or the seed level?”

Implementing TPP will require much training as soon as it’s clear the bill is going to pass, Hughes said. The USFIA and other trade advocacy groups will go into teaching mode to talk to all-size companies, law firms and foreign trade organizations. A great amount of planning will have to take place to avoid major problems, as the U.S. has never done a trade deal quite on this scale.