By Sarah Galeski, Counsel, Tilleke & Gibbins –
The current landscape presents a pressing issue significantly impacting businesses in Vietnam: supply chain legislation. If you’re involved in exporting to major markets, understanding these changes is crucial.
The American Uyghur Forced Labor Prevention Act (UFLPA) has reshaped how companies approach their supply chains. Enacted in 2021 and effective since June 2022, this legislation was designed to address serious human rights concerns regarding forced labor in the Xinjiang region of China. Under the UFLPA, any products containing components from Xinjiang—or sourced from blacklisted entities—are presumed to involve forced labor and are banned from import into the U.S.
As of May 2024, the implications for Vietnam have been significant. Data shows that Vietnam has the highest volume of shipments denied entry into the U.S. due to Uyghur forced labor risks. 
Notably, the apparel and textile industries are particularly affected; in April 2024, over 80% of the $15 million worth of apparel and footwear shipments held up for UFLPA checks originated from Vietnam.
Cotton sourced from Xinjiang presents a particular challenge. It accounts for 20% of the world’s cotton supply and 80% of China’s. Despite its high quality—often cited as the best in the world—its availability has created temptations for manufacturers. Many may consider using Xinjiang cotton in hopes of evading detection by U.S. Customs. However, as recent data indicates, such attempts are frequently unsuccessful.
In May 2024, the Department of Homeland Security announced a Textile Enforcement Plan, adding 26 new entities from the textile sector to the UFLPA Banned Entities list, now totaling 73 companies. This expansion emphasizes the need for rigorous due diligence when engaging with Chinese firms.
Sarah Galeski at the recent Canadian Business Chamber in Vietnam workshop on Foreign Supply Chain Legislation and its Impact on Vietnam
Moreover, as we look to the future, the necessity for thorough sourcing practices will become even more critical, especially with upcoming regulations like the EU Forced Labor Regulation and the EU Corporate Sustainability Due Diligence Directive set to take effect in 2027. Exporters in Vietnam must recognize that diligent labor compliance and meticulous supply chain mapping are essential for accessing American and EU markets.
In conclusion, the evolving regulatory landscape necessitates a proactive approach to ensure that supply chains align with legal and ethical standards. Businesses must adapt to these changes to thrive in an increasingly complex global market.
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