Many Post-Hearing Comments on Vietnam 301 Tariffs Say Evidence Lacking for USTR Claims

In post-hearing comments over the argument that Vietnamese imports of illegal timber hurt U.S. furniture manufacturers, several parties said the Office of the U.S. Trade Representative is not following the law, because it provided no concrete evidence of illegal timber in furniture exporters' supply chains.

The International Wood Products Association said: “Placing this investigation on a weak foundation of broad and vague allegations makes it impossible for interested parties to provide accurate and actionable information to the administration.” The IWPA said USTR must provide more specifics before any action, with another opportunity to comment.

The American Home Furnishings Alliance was blunter, writing that “there is not even a scintilla of evidence that any alleged illegal timber trade in Vietnam impacts wood products exported to the United States.” The AHFA said that if USTR were to act against Vietnam in this case, the group “can only conclude that such actions must be based on information that either does not exist or was not made public during ... the investigation.” They said that means AHFA and others did not have a reasonable opportunity to defend themselves on why the furniture industry should be targeted, or that there is illegal timber trade at all, and therefore, the USTR is not following Administrative Procedure Act. “The record here is devoid of any evidence of [a detrimental] impact on U.S. commerce, and, therefore, any action by USTR under Section 301 would be at significant risk of a declaratory judgment in the courts.”

However, the American Furniture Manufacturers Committee for Legal Trade said that USTR should pay attention to the fact that during the hearing, witnesses testified that illegally harvested timber is only used domestically, and is not in exported products. “Vietnamese manufacturers willing to use illegal timber for domestic production directly are able to offset their legal production costs with illegal product costs,” the group said.

The National Retail Federation was asked during the hearing to elaborate on due diligence by retailers, and in its written follow-up, summarized several companies' compliance efforts. One example: “We primarily deal with pine, oak, birch, beech and acacia woods, so our overall solid wood risk is much lower than just by the types of woods used. Regional understanding also plays an important part in a company’s risk assessment. We do a large volume out of China. We know that there have been issues with harvesting practices in Russia and timber going across the border to China to be used in a number of ways, including board material. As a result, we will perform more reviews of the chain of custody documentation and perform more forestry audits for our suppliers in China who have sourcing of raw materials out of Russia. If during one of these audits or reviews we identify any discrepancies or missing documents, we will review these issues with the supplier and that supplier’s risk assessment will increase because of these discrepancies. This means these suppliers will get reviewed more often until the corrective actions are shown to have been put in place and are working. If the supplier is not able to correct the issues, we have and will stop using a supplier for non-compliance with our corporate forestry standards.”

In the currency manipulation hearing, many of the commenters did not make new arguments, but just asked that tariffs not be imposed, as they would be damaging to business. One of those submissions was a letter signed by more than 200 trade groups and companies.

Samsung President-CEO Kyungsik Choi, among those signing the letter, commented in a separate posting dated Jan. 7 in the same docket. “Our company has moved a significant portion of its manufacturing operations to Vietnam from elsewhere in the region over the past several years,” Choi said. “[W]e have found Vietnam to be a reliable partner that has welcomed substantial private investment from companies based in advanced industrialized economies like South Korea and the United States.”

Samsung sources “a predominant share” of its smartphones, network equipment and other mobile products from Vietnam, the CEO said. Tariffs on Vietnam imports would jeopardize the U.S. government’s “strategic priority of leading in 5G telecommunications deployment with trusted supply chain partners,” he said. “[A]t a time when the U.S. economy is starting to rebound, tariffs on Samsung’s popular smartphones, tablets, displays, home appliances, memory products, and PCs would be a significant drain on U.S. consumers.”

U.S. Fashion Industry Association President Julia Hughes noted that apparel imports from Vietnam increased almost 12% from 2018 to 2019, even though the dong appreciated significantly in 2019. She said that apparel is more than 20% of Vietnam's total exports to the U.S., and last year's total was $13.6 billion in value. In USFIA's 2020 survey, 95% of respondents said they source from Vietnam, and 29% said they planned to source more from Vietnam than from China in 2020.

“From a policy perspective, U.S. Government officials may or may not like the fact that apparel imports from Vietnam are increasing, but, when those imports have increased during a period in which the exporting country’s currency is appreciating, it seems clear that a 'managed,' 'undervalued' currency is not the reason for the increase in imports,” she wrote.

US Steel, in its submission, dismissed arguments like those. “Hearing testimony denying the unfair advantage undervalued [dong] confers to Vietnamese manufactures is not compelling or otherwise misses the mark,” they wrote. They also said that addressing currency undervaluation through individual countervailing duty cases “is unlikely to halt Vietnam’s trade-distorting policies.” They said tariffs would bring Vietnam to the table to quickly comply.

The United States Footwear Manufacturers Association told USTR that its companies “went through the demanding and costly process of altering their supply chains” after Section 301 tariffs were imposed on Chinese products. Vietnam is one of the only other sources for footwear components, they said. “Manufacturers rely on the domestic supply chain to the full extent possible but the existing capacity is simply not at the scale to meet the full demands for finished footwear production.”