Exporters from Vietnam worry that U.S. rules on Xinjiang could hurt their business.
(Reuters) – HANOIConcerned exporters in Vietnam want to make sure they don’t break a U.S. ban on products made with raw materials from China’s Xinjiang region. This is because Washington is paying more attention to the trade of profitable goods like clothes and solar panels.
This week, U.S. Trade Representative Katherine Tai is in Vietnam. Executives and other people who know about the situation say that some industries in Vietnam may be importing raw materials from Xinjiang, sometimes without knowing it, or without being able to prove that they are not.
A statement from the media said that the U.S. Embassy in Hanoi had nothing to say about the issue and that Tai did not plan to talk about it with the Vietnamese government.
Since the U.S. Uyghur Forced Labor Prevention Act went into effect last June, the U.S. customs agency has stopped more than 1,500 shipments from all over the world to the U.S. that were worth about $500 million.
Washington says that China is rounding up ethnic Uyghurs and other Muslims in Xinjiang and putting them in camps as part of a plan to kill them all. Beijing says it hasn’t done anything wrong in Xinjiang, but it has set up “vocational training centres” to stop terrorism, separatism, and religious extremism.
Last year, Vietnam had a trade surplus with the U.S. of $116 billion. Goods like electronics, clothing, and shoes were shipped to the U.S. from Vietnam.
Solar panels could be especially at risk because they depend a lot on polysilicon, which is mostly made in Xinjiang and used in solar cells. About 80% of the panels used in the United States come from Vietnam and other Southeast Asian countries. In 2020, Vietnam will send $3.4 billion worth of solar panels to the United States.
“This is a big worry if the silicon comes from the area in question,” said Kheng Joo Ung, Managing Director of the Vietnam branch of First Solar Inc. (NASDAQ:FSLR), which is one of the biggest exporters of solar panels to the U.S.
He said that First Solar didn’t use polysilicon in its panels, but that some of its competitors in Vietnam did. He didn’t say which companies those were, though. Ung said that some polysilicon is made in Vietnam.
Investment consulting firm Dezan Shira says that, other than First Solar, most of the top solar panel makers in Vietnam are Chinese.
Two industry experts said that more Chinese companies that make parts and offer services like plastic moulding and die casting plan to invest in Vietnam to supply solar panel makers there. They didn’t want to be named because the information was private.
So far, no proof has been made public that polysilicon from Xinjiang has been used in Vietnam.
When asked for a comment, the Vietnamese government did not answer right away.
A third trade expert who met with U.S. customs officials in private meetings in the past few weeks told Reuters that Vietnam was often mentioned as one of the countries most likely to run afoul of U.S. trade restrictions. Because the matter was sensitive, the expert didn’t want to be named.
Some U.S. officials have said that Vietnam’s efforts to follow the new rules are good, while others have said that this may just be a temporary setback.
Even companies that want to follow the rules face risks when it comes to compliance.
One executive in Vietnam said that it might be hard for smaller actors to get the paperwork they need because of higher due diligence costs and complicated supply chains. He also said that the textile industry is also cautious because Xinjiang is a big producer of cotton yarn. The executive didn’t want to be named because he couldn’t talk to the media.