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Cablegate: Burmese Using Thais to Violate U.S. Import Ban

This record is a partial extract of the original cable. The full text of the original cable is not available.

UNCLAS SECTION 01 OF 02 RANGOON 000768

SIPDIS

STATE FOR EAP/BCLTV AND CA; USPACOM FOR FPA
COMMERCE FOR ITA JEAN KELLY
TREASURY FOR OASIA JEFF NEIL

E.O. 12958: N/A
TAGS: ETRD ECON CVIS KTEX TH BM
SUBJECT: BURMESE USING THAIS TO VIOLATE U.S. IMPORT BAN

REF: 03 RANGOON 1337

1. SUMMARY: BURMESE GARMENT FACTORY OWNERS ADMITTED TO AN
EMBASSY OFFICER THAT THEIR COMPANY IS CIRCUMVENTING THE U.S.
IMPORT BAN ON BURMESE PRODUCTS BY EXPORTING THEIR "U2" AND
"ADIDAS" BRAND GARMENTS OVERLAND TO BANGKOK, AND THEN
RE-EXPORTING THROUGH A THAI COMPANY DIRECTLY TO THE UNITED
STATES. THE FACTORY OWNERS SAID THEIR COMPANY WAS INITIALLY
HURT BY THE JULY 2003 IMPORT BAN, BUT WAS ABLE TO RECOVER BY
SHIPPING TO THE UNITED STATES USING THIRD COUNTRY
RE-EXPORTERS. POST BELIEVES THIS "RE-EXPORT" FORMULA IS NOT
UNUSUAL, WITH TRANSSHIPMENTS BY OTHER COMPANIES POSSIBLY
BEING MADE THROUGH THAILAND, S. KOREA (REFTEL), AND PERHAPS
SINGAPORE, HONG KONG, AND TAIWAN. END SUMMARY.

2. DURING VISA INTERVIEWS AT THE EMBASSY JUNE 10, TWO
CO-OWNERS OF THE RANGOON-BASED D. FREDERICK INTERNATIONAL
COMPANY, LIMITED TOLD THE INTERVIEWING CONSULAR OFFICER (WHO
IS ALSO THE EMBASSY POLOFF) THAT THEY WERE GOING TO THE
UNITED STATES IN LATE JUNE OR EARLY JULY TO VISIT A NAMED
U.S. CITIZEN WHO WORKS AT A CULVER CITY, CA IMPORT/EXPORT
BANK TO SCOUT OUT BUSINESS OPPORTUNITIES FOR THEIR COMPANY.
ONE OF THE OWNERS, MR ABOO BACKER, SAID HE WAS VERY PROUD OF
HIS COMPANY'S QUICK RECOVERY AFTER THE JULY 2003 U.S. IMPORT
BAN. HE TOLD POLOFF HOW HIS COMPANY IMPORTS FABRIC FROM
THAILAND OR CHINA, TURNS IT INTO FINISHED GARMENTS WITH
EITHER THE "U2" OR "ADIDAS" LABEL AT HIS 850-PERSON RANGOON
GARMENT FACTORY, THEN EXPORTS THE GARMENTS OVERLAND THROUGH
THE BORDER TOWN OF MYAWADDY TO BANGKOK. THEIR BANGKOK
PARTNER COMPANY, SAKON M.D. COMPANY, LTD, RE-EXPORTS THE
GARMENTS DIRECTLY TO THE UNITED STATES FOR A SLIGHT FEE. MR.
ABOO BACKER PROUDLY CONFIDED THAT THIS RE-EXPORT ARRANGEMENT
"ONLY COSTS A LITTLE MORE."

3. IN HOPES OF STRENGTHENING THEIR VISA CASE, THE TWO
CO-OWNERS PRODUCED A LETTER ADDRESSED TO THE U.S. CONSULAR
OFFICER IN RANGOON FROM THEIR THAI BUSINESS PARTNERS AT SAKON
M.D. CO., AND A COPY OF THE THAI COMPANY'S REGISTRATION.
INTERESTINGLY, THE LIST OF COMPANY DIRECTORS AND SHAREHOLDERS
INCLUDES NOT ONLY NAMES OF THAIS, BUT ALSO A BURMESE AND A
CHINESE WITH A TAIWANESE NAME, INDICATING TIES TO OTHER THIRD
COUNTRIES FOR THE BURMESE COMPANY. (NOTE: POST IS ENTERING
THE NAMES OF THE SMD SHAREHOLDERS INTO THE CONSULAR LOOKOUT
SYSTEM.) THE TWO APPLICANTS WERE EVENTUALLY DENIED UNDER INA
214(B), FOR INTENDING TO VIOLATE U.S. IMPORT LAWS.

4. THE LARGE SCALE OF D. FREDERICK'S MANUFACTURING
OPERATIONS IS TYPICAL OF THE DOZENS OF BURMESE GARMENT
MANUFACTURES WHO MAY ALSO BE RE-EXPORTING TO THE U.S. THROUGH
THAILAND OR OTHER NEARBY COUNTRIES. IN A GIVEN MONTH, D.
FREDERICK BUYS $50,000 WORTH OF COTTON AND POLYESTER FABRIC
FROM THE ZAINSHAN DONGFENG KNITTING GARMENT CO., IN NINGBO,
CHINA. THEN THE 850 FACTORY WORKERS TURN THE FABRIC INTO
FINISHED GOODS WITH LABOR COSTS OF $34,000 A MONTH. BURMESE
CUSTOMS EXPORT DECLARATIONS FROM A TWO-WEEK PERIOD IN JULY
AND AUGUST 2003 LIST THREE D. FREDERICK CO. SHIPMENTS OF
MEN'S SUITS AND COTTON POLO SHIRTS TO A NAMED AMERICAN
COMPANY IN LOS ANGELES (VIA SINGAPORE) WORTH $100,000.
THOUGH WE DON'T KNOW ALL THE TRANSPORTATION AND OTHER
OVERHEAD COSTS UNDER THE CURRENT RE-EXPORT ARRANGEMENT, THE
BURMESE CO-OWNER U SAN YU SAID THAT HE MAKES ABOUT $50,000 TO
$80,000 A MONTH FROM THE BUSINESS.

5. COMMENT: THAT THIS COMPANY WAS ABLE TO SHIP OVER
$100,000 WORTH OF GARMENTS TO THE UNITED STATES DURING THE
FINAL PRODUCTION SPIKE THE MONTH PRIOR THE AUGUST 2003 IMPORT
BAN INDICATES THE SCALE OF IMPORT BAN VIOLATIONS COULD BE
RATHER LARGE. THE QUESTION REMAINS AS TO HOW MANY OF THE
OTHER REMAINING GARMENT FACTORIES IN BURMA THAT EXPORTED TO
THE UNITED STATES BEFORE AUGUST 2003 ARE NOW USING THIS
"RE-EXPORT" FORMULA.

6. A FEW MONTHS AFTER THE JULY 2003 IMPORT BAN, MANY GARMENT
FACTORY OWNERS TOLD US THAT EU BUYERS WERE KEEPING THEM IN
BUSINESS WITH INCREASED ORDERS FOR BURMESE-MADE GARMENTS. WE
NOW HAVE SOLID EVIDENCE THAT RE-EXPORTING THROUGH A THIRD
COUNTRY HELPED AT LEAST ONE BURMESE GARMENT MANUFACTURER
RECOVER FROM THE IMPORT BAN. END COMMENT.
MARTINEZ

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