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Cablegate: Usg Officials Discuss Tifa, Ipr and Trade Implementation

VZCZCXRO4244
OO RUEHHM
DE RUEHHI #0310/01 0530635
ZNR UUUUU ZZH
O 220635Z FEB 07
FM AMEMBASSY HANOI
TO RUEHC/SECSTATE WASHDC IMMEDIATE 4656
INFO RUEHBK/AMEMBASSY BANGKOK PRIORITY 5425
RUEHHM/AMCONSUL HO CHI MINH 2582
RUEHRC/DEPT OF AGRICULTURE USD FAS WASHINGTON DC
RUCPDOC/DEPT OF COMMERCE WASHINGTON DC
RUEATRS/DEPT OF TREASURY WASHINGTON DC

UNCLAS SECTION 01 OF 05 HANOI 000310

SIPDIS

DEPT FOR EAP/MLS
DEPT PASS TO USTR DAVID BISBEE
COMMERCE FOR 4431/MAC/AP/OPB/VLC/HPPHO AND EMIKALIS
BANGKOK for USPTO JNESS

SENSITIVE
SIPDIS

E.O. 12958: N/A
TAGS: ETRD ECON ECPS KIPR EAGR USTR VM
SUBJECT: USG OFFICIALS DISCUSS TIFA, IPR AND TRADE IMPLEMENTATION
WITH GVN


(U) THIS CABLE IS SENSITIVE BUT UNCLASSIFIED. NOT FOR INTERNET.

REF: A) HANOI 233
B) HANOI 294

1. (SBU) Summary: Officials from USTR and the Department of
Commerce discussed a range of current trade issues with Government
of Vietnam (GVN) officials during a Febrary 6-9 visit to Hanoi,
including: a potential Tade and Investment Framework Agreement
(TIFA); itellectual property rights (IPR) enforcement; signl
piracy; the GVN IT procurement policy; sanitar and phytosanitary
(SPS) measures; recent decreeson cosmetics and labeling; data
protection; a ne chemicals law; trading rights; updated tariff
shedules; customs valuations; and pharmaceutical reresentative
offices. The GVN interlocutors indiated their willingness to work
cooperatively to rsolve outstanding trade issues, and in many cases
have already begun to address USG concerns. The isit laid the
groundwork for ensuring Vietnam imlements its World Trade
Organization (WTO) commiments. End Summary.

TIFA
----

2. (SBU) UST's Director for Southeast Asia David Bisbee and
epartment of Commerce's (DOC) ASEAN Director ElenaMikalis met with
a series of GVN officials to ure a positive response to USTR's
proposal to initate negotiation of a Trade and Investment Framework
Agreement (TIFA) under the Enterprise for ASEAN nitiative. In
meetings with the major stakeholdrs, including the Office of the
Government (OOG) Ministry of Foreign Affairs (MFA), Ministry of
rade (MOT) and Ministry of Finance (MOF), GVN officals
consistently expressed support for a TIFA, bt explained that they
must reach inter-ministeril consensus prior to formal agreement.
An MOT oficial commented that an agreement on the TIFA textcould
be reached "in ten minutes," after receivin approval from the Prime
Minister. Bisbee agree, adding that the TIFA is a very general
framewok document requiring no new market access commitmets from
either party. Once in place, the two sies can develop an evolving
work plan to address mre specific trade and investment issues of
mutua interest. The MOT contact confided that the PM'soffice has
signaled its agreement, and MOT hopesfor formal written approval
soon.

3. (SBU) Seeral GVN agencies raised questions about the structre
of a TIFA Joint Council (reftel D) and its ineraction with the
existing Joint Council under te Bilateral Trade Agreement (BTA).
Bisbee explaied that there would be no need to duplicate the
tructure of the BTA Joint Council, adding that the TA structure
could be appropriate for TIFA meetigs as well. A TIFA Joint
Council could, among oher functions, conduct the annual BTA review
in consolidated process, Bisbee said.

Intellectua Property Rights (IPR)
---------------------------------

4. (U) IPR enforcement agencies in Hano and HCMC briefed the USG
officials on the statu of implementation of Vietnam's new
IPR-related egal framework. Vietnam's enforcement agencies mut
familiarize themselves with the new regulationsand changing
responsibilities, a contact at NOIPexplained, but these changes
should ultimately iprove the GVN's enforcement capacity. The MOT'sMarket Management Bureau (MMB) reported that it ha been tasked to
chair an inter-ministerial task force to coordinate better IPR
enforcement with local enforcement agencies, which may help shorten
the adjustment period.

5. (U) IPR officials from various agencies stressed the need for
additional training for enforcement staff, particularly at the local
level, to understand better IP rights and how to prosecute,
adjudicate and enforce those rights. Foreign language capabilities
prevent many local officials from participating in donor-funded
training courses, and GVN officials requested that future
USG-sponsored training events provide for interpretation. The USG
visitors suggested the two sides work together to develop a joint
strategy to strengthen IPR enforcement, including plans for future
training. An IPR strategy could be an important element of a TIFA
work plan.

6. (U) Bisbee and Mikalis also relayed IPR concerns raised by U.S.
industries in HCMC (reftel C) and in Washington. At each stop,
Bisbee urged Vietnam to submit a robust report on its IPR
enforcement activities as part of USTR's annual Special 301 Review

HANOI 00000310 002 OF 005


process. The GVN officials agreed that it is important to
demonstrate Vietnam's progress in protecting IPR. The various
agencies stated that they are sending details of their recent
enforcement actions to the Embassy and/or Consulate General.

Signal Piracy
-------------

7. (SBU) The Ministry of Posts and Telematics (MPT) International
Cooperation Department Deputy Director General Dr. Phan Tam conceded
that Vietnam has not yet fulfilled its BTA and WTO commitments to
issue a regulation mandating that all cable and broadcast providers
only transmit licensed content. He reported that MPT has given
"clear guidance" to Vietnam Television Technology Investment and
Development Company (VTC), a digital terrestrial service provider
operated by MPT, and other cable companies to cease broadcasting
pirated signals. (Note: VTC illegally broadcasts overspill
satellite signals to end users using the state-owned fiber optic
network for a one-time decoder box purchase fee. End Note.) Bisbee
pointed out that MPT's failure to end VTC's distribution of stolen
signals, when it is clearly in a position to do so, is a major
concern of the United States. This issue will likely arise in the
upcoming Special 301 Review of IPR enforcement in Vietnam, Bisbee
said. Dr. Tam requested that U.S. industry provide a list of
programs and channels that VTC is pirating so MPT can better
intervene with VTC.

IT Procurement
--------------

8. (SBU) Bisbee thanked MPT's Dr. Tam for his assistance in working
to address outstanding USG concerns with the government IT
procurement policy set forth in the 2006 Decisions 169 and 223. The
current draft circular to guide implementation of these Decisions
includes language that addresses some of the USG concerns with
respect to Vietnam's WTO commitments by clearly excluding
state-owned enterprises (SOEs) from coverage by the policy. Bisbee
suggested that MPT drafters undertake efforts to consolidate the
various policy elements in Decisions 169, 223 and the new guiding
regulation into one document, making the policy more clear and easy
to follow.

9. (SBU) The U.S. IT industry has ongoing concerns over the
preferences and local content requirements of the policy, Bisbee
continued. Tam and Bisbee agreed that some of these concerns may be
rooted in a misunderstanding of the policy's scope and intent. A
meeting between MPT and the industry would allow MPT to explain the
policy to IT firms, while the industry could provide some "best
practices" to help the GVN design a more technology-neutral and
non-preferential procurement policy to meet its IT procurement
needs, Bisbee said. USTR and the Embassy will continue to work with
MPT to support such a meeting.

New Cosmetics Regulation
------------------------

10. (U) The head of the Ministry of Health's (MOH) Cosmetics
Division explained that the November 2006 Decision 35, which
significantly broadened the range of foreign cosmetics products
which must be registered before coming into Vietnam, was issued to
harmonize Vietnam's regulations with ASEAN cosmetics standards. MOH
recognizes the immediate impact these new requirements have on U.S.
cosmetics firms, and is therefore seeking to delay implementation to
allow for an adjustment period. It therefore issued Decision 13 to
postpone the date of effectiveness for new products until April
2007. Domestic transparency requirements dictate that the decision,
and therefore the policy's temporary suspension, will not take
effect until March 1 -- 15 days after it was published in Vietnam's
Official Gazette. In the interim, MOH is sympathetic to, but can do
little to allay, the potential difficulties foreign firms may
encounter with customs officials.

Sanitary and Phytosanitary (SPS) Measures
-----------------------------------------

11. (SBU) The Ministry of Agriculture and Rural Development (MARD)
International Cooperation Department (ICD) Deputy Director General
Ms. Hoang Thi Dzung informed the USG officials that her department
will serve as Vietnam's SPS Enquiry Point and Notification
Authority. MARD requested additional USDA-funded programs to
enhance Vietnam's SPS procedures. Ms. Dzung also reported that the
Minister of Agriculture supports ICD's recommendation to implement

HANOI 00000310 003 OF 005


Vietnam's SPS commitments following the U.S. model. The minister
also called for improving the national enquiry point network and
creating better linkages to foreign networks, especially the U.S.
Department of Agriculture (USDA). To meet these goals, the ministry
is developing an SPS action plan, which Dzung committed to share
with USTR and the Embassy for comments before it is finalized in
late March. MARD plans to publish a guidebook to help domestic
producers and traders understand the requirements of the WTO SPS
agreement.

12. (SBU) USTR's Bisbee responded by suggesting that Ms. Dzung work
with the MOT to develop a prioritized list of technical assistance
requests, which could be included in a future TIFA work plan. He
encouraged MARD to share future SPS regulations with the WTO as
early as possible to avoid confusion and to meet Vietnam's WTO
commitments. Vietnam issued a new regulation in December requiring
that all animal proteins imported for feed be DNA tested. Even
though Vietnam was not at the time a WTO member, Bisbee said,
efforts should have been undertaken to follow a more transparent
notification process in order to allow the United States to consult
on the new requirements. Furthermore, under the BTA, MARD should
have consulted with the USG on technical regulations even prior to
WTO membership. Ms. Dzung said that because MARD did not notify the
WTO of this new regulation, the Department of Animal Health has
delayed implementation until June 30.

13. (U) Under the U.S.-ASEAN TIFA, the United States is working with
ASEAN member states to raise fruit irradiation standards to
facilitate access to the U.S. market. Dzung said that MARD has
received the U.S. questionnaire, and intends to submit the
information requested so that Vietnamese fruits, such as lychee and
dragon fruit, stand a better chance of qualifying for import to the
United States.

Data Protection
---------------

14. (U) The USG officials relayed concerns over Vietnam's procedures
for registering agrochemicals and data protection measures.
Vietnam's new IP Law and its WTO commitments require Vietnam to keep
confidential data submitted as part of a registration dossier. DDG

SIPDIS
Dzung acknowledged these commitments, and assured that MARD will
keep dossier data secret and will not rely upon it for future
license approval. As a sign of its commitment, Dzung pointed to
Vietnam's December accession to the International Union for the
Protection of New Varieties of Plants (UPOV), which entails data
protection measures.

Labeling Decree
---------------

15. (SBU) Bisbee raised concerns over the August 2006 Decree No. 89
on Labeling of Goods with officials from the Ministry of Trade's
Multilateral Trade Policy Department. The Decree appears contrary
to Vietnam's commitments on shelf-life contained in a May 31, 2006
exchange of letters between Minister of Trade Truong Dinh Tuyen and
Deputy United States Trade Representative Karan Bhatia. In the
exchange of letters, Vietnam committed to accept voluntary
manufacturer-determined "best-if-used-by" dates on food products
except for raw food materials and food additives. Decree 89,
however, mandates that all food, foodstuffs and drink labels must
include an expiry date.

16. (SBU) MOT's Multilateral Trade Policy Department Deputy Director
Luong Hoang Thai asserted that the May 31 exchange of letters
applied to the MOH's Food Hygiene Law prohibiting the import of food
raw materials or additives with less than two-thirds shelf life
remaining. In his opinion, the letters commit Vietnam to accept
"best-if-used-by" dates to permit the import of goods, and do not
apply to Vietnam's labeling requirements. Thai reported that per
the May 31 letters, Vietnam has decided not to implement the
ordinance on food imports, and will consult with other WTO members
before instituting any new rules in this area. Thai continued by
stating that these actions bring Vietnam in full compliance with its
commitments.

17. (SBU) Bisbee responded that U.S. negotiators disagree with his
interpretation of the intent of the letter. The United States
understands that the letters relate to the establishment of shelf
life and not simply the use of shelf life for entry. He asked for
MOT's cooperation in seeking revisions to the Labeling Decree.


HANOI 00000310 004 OF 005


18. (SBU) DDG Thai explained that all products in Vietnam are
labeled with the same phrase, which directly translates to mean
"date to use." He insisted that all domestic and foreign products
were required to use the same wording, and that regardless,
Vietnamese consumers would not recognize the difference between
expiry and "best-if-used-by." Decree 89 does not distort trade or
in any way violate Vietnam's commitments, Thai declared. Vietnamese
regulations permit the manufacturer to determine the most
appropriate standard to use in order to determine the "date to use"
and do not require a mandatory standard for expiration date, said
Thai. He suggested that the United States provide evidence that the
Decree distorts trade if it wants to protest further the labeling
provisions. Bisbee said he would consult with his USG counterparts
and would follow up with MOT in the near future. (Note: Foreign and
domestic food products currently on the market in Vietnam all carry
a "date to use" mark, confirming that Decree 89 does not change
existing practice.)

Chemicals Law
-------------

19. (U) Ministry of Industry's (MOI) International Cooperation
Department Director Mr. Cao Quoc Hung reported that the MOI is
completing a three-year drafting process for a new comprehensive
Chemical Law. According to Hung, the most recent draft has been
posted to MOI's website and will soon be available for review in
English on the OOG website. The law aims to modernize Vietnam's
chemical regulations and to comply with APEC commitments on the
Globally Harmonized System (GHS) for the Classification and Labeling
of chemicals. Hung also noted that Vietnam's chemical industry is
growing rapidly -- 18 percent in 2006 -- and there is a growing need
for government regulation.

20. (U) USTR's Bisbee encouraged the MOI to have an open dialogue
with the USG and U.S. chemical industry as it prepares the draft
law. U.S. industry wants to help Vietnam establish a manageable
administrative system. As a first step, he proposed a digital video
conference (DVC) with U.S. industry representatives to review and
understand the draft law better, as well as to gain a clearer
picture of what the new legislation aims to accomplish. For
example, U.S. experts could help Vietnam create a comprehensive list
of permissible chemicals by combining lists developed by the U.S.
Environmental Protection Agency (EPA), Japan and Australia. Bisbee
also offered to work with MOI to develop chemical registration
regulations, which will be necessary before this law takes effect.


21. (U) Hung thanked the USG for the offers of assistance. He said
that MOI is very concerned with ensuring that the final law can be
effectively implemented and would therefore propose the idea of a
DVC to his minister. In response to Bisbee's questions about
chemical registrations, Hung stated that the GVN intends to
recognize the chemical lists of the United States, Japan, China and
the European Union, and therefore chemicals on those lists will not
be considered "new" to Vietnam. He explained that after the law is
posted on the OOG website, it will be available for public review
and comment for at least 60 days. Comments received during this
period will then be incorporated and a new version will be re-posted
for additional comments. MOI intends to make a presentation on the
law before the National Assembly in May with the goal of passing the
law by the end of 2007.

Trading Rights
--------------

22. (U) Vietnam's WTO commitments distinguish between (a) the right
to import and (b) trading, or distribution, rights (i.e., the
services of warehousing and distribution). Ministry of Trade
officials affirmed Vietnam's commitment to provide the right of
import for most goods into Vietnam immediately upon WTO accession.
Distribution services, however, are to be phased in until 2009.
(Note: Under Vietnam's WTO commitments, a foreign company can
perform distribution services as a 49 percent partner in a joint
venture in 2007; up to a 99 percent partner in a joint venture in
2008; and a wholly-foreign owned company can apply for distribution
licenses in 2009. End note.) MOT's Import/Export Department is
currently finalizing a decree that will codify Vietnam's commitments
on importation rights. This version, which should be promulgated in
the next several weeks, incorporates earlier comments submitted by
USG negotiators, Multilateral Trade Department DDG Thai said. MOT
officials report that Minister Tuyen has approved the draft, which
is now before the inter-agency process for approval. USTR's Bisbee

HANOI 00000310 005 OF 005


requested to see a draft. Reminding the MOT that it committed to
complete the Decree within 30 days of accession, Bisbee asked if the
ministry could provide an official letter or some other document to
provide interim coverage until the Decree takes effect.
Multilateral Trade Department DDG Thai agreed to raise this
possibility with the minister.

23. (U) The GVN has not yet developed a license application form for
companies interested in performing distribution services. Absent an
official application, MOT's America's Department Deputy Director
Nguyen Hong Dzung reported that a U.S. firm must first find a local
partner and then jointly send a letter requesting a license to MOT.


Tariff Schedules
----------------

24. (U) In meetings with Ministry of Finance (MOF) and Ministry of
Trade, Bisbee conveyed U.S. industry reports that some Customs
officials in HCMC continue to use pre-WTO tariff schedules. MOF
International Cooperation Department Director General Madame Nguyen
Thi Bich said that the new tariff schedule, dated December 29, 2006,
has been distributed to all local customs offices. She committed to
follow up with local HCMC Customs offices to verify use of the
correct schedule. MOT's Mr. Thai agreed to work with MOF to ensure
a mechanism exists for companies to recover costs in cases such as
this.

Pharmaceutical Representative Offices
-------------------------------------

25. (U) Foreign pharmaceutical companies continue to worry about
restrictions on the establishment of representative offices in
Vietnam, Bisbee reported. MOT officials requested additional
information about the type of activities foreign pharmaceutical
firms wish to perform. USTR's Bisbee explained that it would be
useful for MOT to sit down with the industry to understand the
concerns better, warning that the restrictive regulations are
causing some pharmaceutical companies to consider pulling out of
Vietnam - something which is in neither country's interests. MOT
appeared open to the idea and Bisbee said he would follow up with
industry representatives.

Customs Valuation
-----------------

26. (U) Ministry of Finance's Madame Bich reported that MOF
submitted a draft Decree on Valuations to the OOG in January.
Several other ministries raised concerns over the draft, however,
and inter-ministerial discussions are ongoing. Madame Bich has
conveyed USG comments on the draft decree to the drafting committee,
and assured Bisbee that they have been taken into account. She
stated that the final language would comply with Vietnam's WTO
commitments, and hopes the Decree will be finalized by the end of
February.

Comment
-------

27. (SBU) Throughout the week's meetings, the GVN interlocutors
reciprocated the U.S. officials' desire to capitalize on current
momentum to enhance bilateral trade relations. Despite the "thorny"
issues raised in some of these meetings, the discussions were
productive and atmospherics remained consistently positive. Though
the GVN has many issues that will require much work to resolve, this
visit helped lay the groundwork for further cooperation in making
sure Vietnam meets its obligations as the WTO's newest member.

28. (U) This cable has been cleared by USTR's David Bisbee.

ALOISI

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