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Cablegate: U.S. - Vietnam Bta Review

DE RUEHHI #1661/01 1871035
O 061035Z JUL 06





E.O. 12958: N/A
SUBJECT: U.S. - Vietnam BTA Review

HANOI 00001661 001.4 OF 006


1. (SBU) Summary: On June 19, the Ministry of Trade hosted the
annual meeting of the Bilateral Trade Agreement (BTA) Joint
Committee. During the meeting, Vietnam clarified the steps it has
taken and those underway to implement BTA commitments. The
Vietnamese team made a concerted effort to address issues raised by
the United States. In large part, Vietnam is in compliance with its
BTA commitments, but some U.S. concerns remain, particularly in
areas where comprehensive legislation has recently been passed and
implementing regulations have not been finalized. END SUMMARY.

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2. (SBU) After Vice-Minister of Trade Luong Van Tu welcomed the U.S.
delegation, Deputy Chief of Mission Boardman emphasized that
successful implementation of the BTA will build support for
Vietnam's Permanent Normal Trade Relation status in Congress.
Barbara Weisel, Assistant USTR for Southeast Asia and the Pacific
and Pharmaceutical Policy chaired the day-long meeting for the
United States while Office of the Government International Relations
Department Director Bui Huy Hung chaired for the Vietnamese side.
The U.S. delegation included Victoria Espinel, Assistant USTR for
Intellectual Property; David Bisbee, Director, Office of Southeast
Asia and the Pacific, USTR; Jennifer Ness, Attorney Advisor, U.S.
Patent and Trademark Office; Hong-Phong Pho, Country Desk Officer,
U.S. Department of Commerce; John Wade, Agriculture Attache, USDA;
and Janet Speck, Deputy Chief of Economic Section.

Intellectual Property Rights (IPR) - BTA Chapter 2
--------------------------------------------- -----

3. (SBU) Status of 2005 Intellectual Property (IP) Law and
Implementing Regulations: Vietnam provided the United States with
an update on the 2005 IP Law, which will take effect on July 1, and
will have four implementing decrees covering copyright, industrial
property, plant varieties, and enforcement as well as circulars from
each ministry, regulations on courts from the Supreme Court and
three decrees on administrative violations. The four main decrees
were originally going to be issued at the time the IP Law entered
into force; however, the Vietnamese side explained that they are now
scheduled to come out sometime before the end of July. Drafts of
the enforcement and industrial property decrees are currently on the
National Office of Intellectual Property (NOIP) website for public
comment. The Vietnamese also provided the U.S. side the latest
version of the copyright decree. When asked for clarification on
the legal status of existing decrees pending finalization of the new
decrees, Vietnam responded that existing IP-related decrees, if
consistent with the new law, will remain in force, unless replaced
by a new decree. Even though the new decrees will not be issued
before the law comes into effect, Vietnam plans to implement the IP
Law immediately. The U.S. side offered to help Vietnam with plans
to educate the public on the new law.

4. (SBU) Enforcement: The U.S. side expressed concern that
provisions in the IP Law that limit criminal liability to violations
exceeding a certain monetary amount or to repeated violations did
not meet the BTA and WTO requirement that infringement be criminal
if it is willful and on a commercial scale. AUSTR Espinel noted
that the United States has grave concerns about China's system,
which, like Vietnam's, sets monetary thresholds before conduct is
considered criminal. In response, the Vietnamese side cited
circulars and guidelines that defined the factors making
infringement criminal. Article 131 in the Criminal Code defines a
crime and Trial Circular No. 2 from the Second People's Court
provides greater detail. By Vietnamese law, the IP law's
implementing decrees cannot supersede the criminal code; therefore,
the decrees cannot be more specific than the code in this area. In
response to questions from the United States, the Vietnamese side
promised to provide further clarification on the definition of
"seriousness" in Vietnam's criminal code and to provide the United
States with an English language translation of Circular 2/2001
(12/25/2001), which deals with criteria for criminal thresholds.

5. (SBU) Remedies: The U.S. side asked which provisions of the new
law provided remedies for civil, criminal and administrative
violations that included seizure, forfeiture and destruction.
According to Vietnam, Article 202(5) of the IP Law provides these
remedies in civil proceedings and Article 214(2) provides them for

HANOI 00001661 002.4 OF 006

administrative proceedings. They promised to provide citations to
the appropriate provisions in the Criminal Code. The U.S. side,
noting that the IP law permits courts to order that infringing goods
be used for noncommercial use, asked the Vietnamese to clarify
"noncommercial use." The Vietnamese said "noncommercial use" could
mean giving the goods to charity or using them in public agencies.
The U.S. side responded that donating seized goods to charity is
acceptable, but distributing them to public agencies raised
concerns. GVN noted that the Common Decree on Enforcement clarified
the circumstances under which infringing goods could be used for
non-commercial purposes.

6. (SBU) Re-exporting: The U.S. asked for an explanation of the
rationale for permitting the re-export of pirated and copyright
goods once the infringing element has been removed because, unlike
for counterfeit goods, pirated and copyright goods, as a whole, are
infringements and the infringing element cannot be removed. Vietnam
explained that the broad language prevented situations where the law
would, in effect, require that valuable goods be destroyed even
though it is possible to remove the infringing element or where
destruction is environmentally harmful or excessively expensive.
The United States suggested clarifying this issue.

7. (SBU) Administrative Remedies: The two sides discussed how
monetary penalties would be calculated under the new law, with the
United States expressing concern that the low fines for
counterfeiting under administrative remedies in the IP law might not
sufficiently deter criminals or signal Vietnam's seriousness about
intellectual property rights. The administrative fines for
counterfeiting in the IP law are one to five times the value of the
infringing good, which could be lower than the value of the real
good. Vietnam noted that many National Assembly members felt the
penalty is too high because it might bankrupt counterfeiters and
would be difficult to enforce. Furthermore, Vietnam's ability to
modify the penalties is restricted because decrees cannot increase
the administrative penalties already set out in the IP Law. The
U.S. noted that it would be better to have a penalty equal to the
value of the genuine good than a penalty equal to five times the
value of the infringing good.

8. (SBU) Geographical Indications (GI): When asked if Vietnam has a
separate system for geographical indications and how trademarks and
geographical indications interact, the Vietnamese side said that
geographical indications are separate from trademarks. GIs are
covered in the decrees on enforcement and industrial property and
the Ministry of Science and Technology will also issue a circular.
The IP Law only provides for GIs in Vietnam; U.S. companies seeking
geographical indication protections must apply directly to the
Vietnamese government.

9. (SBU) Data Protection: Article 128 of the IP Law has two
paragraphs; the first requires the government to protect data from
disclosure or unfair commercial use and the second denies a license
to a subsequent applicant who uses data without permission. The
U.S. side emphasized that draft implementing decrees should apply to
both parts of Article 128 and that the U.S. would want to see draft
decrees before Vietnam's WTO accession. The WTO working party
report should provide clarity on Vietnam's data protection law. The
Vietnam side asked the U.S. side to provide written comments and
promised to convey U.S. concerns to the committees drafting the
implementing decrees.

Copyright - BTA Chapter 2

10. (U) The discussion on IPR enforcement and other IPR issues took
up the morning, therefore the Joint Committee split into two
sections in the afternoon. One group, led on the U.S. side by AUSTR
Victoria Espinel, discussed copyright issues, while the rest of the
group moved on to other issues.

11. (SBU) Phonograms: In response to questions from the U.S. side,
the Vietnamese clarified that Article 30 of the IP Law gives
phonogram producers exclusive rights to distribution and that
Article 30(2) only means the producer has the right to receive
benefits and does not detract from exclusive distribution rights.
The Vietnamese also explained that the phrase "provided they do not

HANOI 00001661 003.4 OF 006

influence the copyrights exercise" in Article 17(4) is a
mistranslation and that the phrase meant "without prejudice to the
rights of the copyright holder" as required by the Rome Convention.

12. (SBU) Exceptions and Compulsory Licensing: The U.S. side
expressed concern that Article 25(1) provisions on the use of
copyrighted works without obtaining permission or paying royalties,
specifically, 25(1)(a),(d'),(e) and (k), were too broad. (Note:
Article 25(1) contains both a (d) and a (d'). End note.) AUSTR
Espinel noted that the United States has some exceptions similar to
Vietnam's, however, the U.S. exceptions are drafted in very specific
language while the Vietnamese exceptions are more general.
Vietnam's intentions may be compatible with WTO requirements, but
the law's drafting could open a loophole. Regulations could make
the exceptions more specific. The Vietnamese side pointed out that
25(1)(k) (importation for personal use) was mistranslated; the
exception was limited to one copy. The Vietnamese side said it
would welcome suggestions on how to draft language for the
implementing decree that would narrow the exceptions.

13. (SBU) Importation Rights: The U.S. side asked if copyright
holders' rights included the right to control importation, noting
that they understood that the Civil Code included this right. The
Vietnamese side said that in Vietnamese, Article 20(d) of the IP Law
says "to distribute to the public and import". The phrase "and
import" had been erroneously omitted from the English version.

14. (SBU) Compulsory Licensing: According to the U.S. side, the
language in Articles 26 and 33 - allowing for use without obtaining
permission, but paying royalties - was far too broad and inclusion
of language taken from the Berne Convention on not prejudicing the
rights of copyright holders ("three-step test") was not enough to
solve the problem. AUSTR Espinel pointed out that Article 26 would
cover all commercial broadcasting. The Vietnamese representatives
explained that the provision was needed because Vietnam used the
public broadcasting system to disseminate information to the public.
The National Assembly had been "tough" on this issue because most
broadcasting stations use government funds. They confirmed that
compulsory licensing would also apply to hotels, bars and
restaurants. AUSTR Espinel took note of the political difficulty of
the issue, but also noted that the current language in the draft
implementing decree compounded the problem. She said that the
United States also has some broadcasting and public performance
exceptions and offered to send suggestions on narrowing the language
in the draft decree.

15. (SBU) Term of Copyright Protection: The Vietnamese said that
although Articles 27 and 30 provide for only 50 years of protection,
instead of the 75 years required by the BTA, U.S. authors would be
entitled to 75 years by virtue of Article 5, which states that the
provisions of international treaties prevail in the case of a
conflict with the IP law. The U.S. side asked for this assurance in
writing. AUSTR Espinel said that the WTO provisions on MFN meant
that Vietnam would have to extend the term to other countries. The
Vietnamese retorted that when negotiating the BTA, the U.S. team had
claimed that Article 4(b) would exempt them from the MFN
requirement. The U.S. side promised to look into this issue and get
back to them.

16. (SBU) Copyright Registration and Presumptions: The Vietnamese
side confirmed that copyright holders do not need to register or to
obtain a certificate in order to enforce their copyrights. A
registration/certificate only provides a presumption of authorship
and ownership. AUSTR Espinel asked why it did not also provide a
presumption that the work was protected by the state, which can be
useful. The Vietnamese said that they did not want people to assume
that registration was mandatory. The U.S. side also asked whether
Vietnam's law provided, as required by the Berne Convention, for a
presumption of authorship where the author's name appears on the
work in the "usual manner." The Vietnamese pointed to the provision
allowing authors to prove ownership through various documents,
including copies of the work. The United States asked for
clarifying language.

Trade in Goods - BTA Chapter 1

HANOI 00001661 004.4 OF 006

17. (SBU) Sanitary and Phytosanitary Measures (SPS):
The Law on Standards is expected to be passed this session of the
National Assembly, which ends June 21, and will govern Technical
Barriers to Trade and Sanitary and Phyto-sanitary measures (SPS).
The draft law contains BTA consistent language. (Note: The Law on
Standards has been passed. End note.) The GVN has already set a
central SPS inquiry point to meet WTO standards and plans to set up
regional inquiry points. The Ministry of Agriculture and Rural
Development (MARD) representative declined the U.S. proposal for a
general technical assistance plan for SPS, but asked for additional
assistance to produce risk assessment reports for several varieties
of fruits that Vietnam would like to export to the United States.

18. (SBU) The U.S. side confirmed the USG commitment made during the
recent U.S.-Vietnamese WTO accession talks to provide assistance in
SPS trade capacity building. USDA's Foreign Agricultural Service
(FAS) has already arranged for 11 Vietnamese officials to receive
short-term training in the United States covering various SPS
issues. This will occur over the next several months. FAS will
continue working with the International Cooperation Department of
MARD to fulfill needs as defined by Vietnam. Certain assistance
that requires equipment and facilities such as a recent request for
animal quarantine facilities is beyond FAS's ability. The U.S. side
suggested that if this type of assistance remained important that
Vietnam should reiterate the need and possibly other U.S. agencies
might be able to accommodate Vietnam.

19. (SBU) Customs Valuation: The U.S. side sought answers to
questions previously submitted in writing and mentioned complaints
from importers about inappropriate use of reference prices. The GVN
noted that it believed all customs evaluations issues were resolved
during WTO negotiations in May and that technical issues would be
addressed with written exchanges. Vietnam agreed to provide written
responses to the U.S. questions at the earliest possible date.
Regarding minimum valuations, the GVN said that, contrary to
complaints made by U.S. firms, Vietnam does not apply minimum
valuations on imports, and uses its customs price database as a
reference for verifying declarations from importers, not as a data
source for reference pricing. The sources of data for this database
are Vietnamese and foreign customs data. For transactions between
related parties, Vietnam will use reference data from arms-length
relationships. Vietnam stated that Decree 155 and Circular 113
provide guidance and are the sole documents governing customs
valuation and reference pricing. Vietnam also added that the
Ministry of Finance intends to increase the kinds of payment
accepted as guarantees for importing.

20. (SBU) Trading Rights: Discussion of trading rights focused on
clarifying the process for companies to avail themselves of trading
rights and whether the licensing requirements that exist for BTA
eligible firms constituted a two-tier system inconsistent with the
intent of the BTA. AUSTR Weisel asked if more specific guidance on
trading rights would supplement Decree 12 and Circular 4. The GVN
commented that trading rights are within the scope of the Commercial
Law, and that four of the seven associated decrees have been
drafted. Two decrees relate to foreign invested enterprises trading
in goods and representative offices trading in goods. The GVN did
not describe the contents or timetable for issuing these decrees or
the associated circulars, but promised to supply the United States
with draft versions for comment. The GVN indicated that it did not
know if licensing would still be required seven years after entry
into force of the BTA (2008) when full and equal trading rights were
to be provided to both Vietnamese and U.S firms.

21. (SBU) Currently, U.S. companies may avail themselves of BTA
rights by petitioning the contact point put in place after the 2005
annual review and specified in a July 2005 diplomatic note. Vietnam
took note of U.S. concerns about the need for greater clarity with
respect to its plans to implement trading rights. Vietnam noted
that it would provide additional decrees to the United States that
are currently only in Vietnamese. Vietnam further explained that
Article 7 of the draft decree for foreign companies involved in
trading will provide additional guidance. The U.S. side stated that
the rights of U.S. companies must be in writing and requested
written instructions detailing the process for U.S. companies to
gain trading rights. AUSTR Weisel noted that requiring U.S.

HANOI 00001661 005.4 OF 006

companies to apply separately for each shipment violated the
national treatment principle.

Trade in Services - BTA Chapter 3

22. Unified Enterprise Law (UEL): The two sides also engaged in a
detailed discussion of the impact the new unified enterprise law
will have on existing joint ventures in general and specifically in
the services sector where joint ventures continue to be required in
many areas. The new UEL, which no longer provides for joint
ventures as a distinct category of entity, must be reconciled with
provisions of the BTA that state Vietnam's commitments in terms of
joint ventures, previously the only vehicle for U.S. investments in
certain sectors. The U.S. side asked what would happen to existing
joint ventures, how U.S. companies could use rights given to joint
ventures under the BTA and WTO services schedule with new enterprise
forms, and whether equity proportion rules specified for joint
ventures in the BTA would apply to other enterprise forms. The
Vietnamese side explained that the new enterprise law contained the
concept of the joint venture in Article 2(2) and that a joint
venture would overlap with the forms of enterprises set out in the
new law, including limited liability and joint stock companies.
Existing joint ventures can choose whether to continue indefinitely
as joint ventures or transform themselves into other forms of
enterprises. In either case, their rights will be preserved, but if
a company chooses to reregister, UEL provisions would apply.
Entities choosing not to reregister will be restricted from
expanding their business sectors and will expire according to the
timetable in their original joint venture agreement. A draft decree
expected in early July will provide guidance for the registration of
enterprises. A Ministry of Justice (MOJ) representative stated that
the requirements for equity contributions are no longer in place.
(Note: We would want to see confirmation of her point in the
implementing regulations for the UEL, which are not yet drafted. End

23. (SBU) Legal Services: Vietnam stated that the National
Assembly is expected to pass the Law on Lawyers, which covers
domestic and foreign law firms, this session and that its contents
exceed the requirements of the BTA. The GVN claimed that Decree 87
currently fulfills its BTA commitments on legal services.

24. (SBU) Market Research and Audio Visual Services:
The U.S. side asked if, under the Commercial Law, market research
and audio visual services are conditional sectors and what
conditions would need to be met for U.S. firms to avail themselves
of rights under the BTA. The GVN said that market research is not a
conditional sector, so domestic and foreign invested companies can
participate in this sector and that Vietnam does not exercise its
right under the BTA to limit U.S. market research companies. The
audio visual sector is a conditional sector under the Commercial
Law, but, Vietnam said, the Ministry of Culture and the Ministry of
Planning and Investment will issue criteria for foreign investment
that are consistent with BTA obligations. The U.S. also requested
clarification of the article in the Investment law that stated that
certain sectors were considered conditional but were not identified.
Vietnam agreed to provide clarification.

25. (SBU) Distribution: In response to the U.S. request for an
update on Vietnamese implementation of this commitment, Vietnam
explained that a decree covering distribution and trading rights is
in the legislative plan. The U.S. requested to review this decree.
[Note: Implementing decrees cover both trading rights and
distribution rights].

Investment - BTA Chapter 4

25. (SBU) Common Investment Law (CIL): This new legislation
eliminates the differential treatment afforded to Vietnamese
nationals and U.S. entities that existed when the BTA was
negotiated. To meet BTA commitments, the CIL provides equal
treatment for domestic and foreign investors. According to Vietnam,
seven decrees will implement the CIL: 1) a general decree on the
details of the law; 2) a decree on investment abroad; 3) a decree on
build-operate-transfer, build-transfer-operate, and build-transfer

HANOI 00001661 006.4 OF 006

projects; 4) a decree on business registration; 5) a decree on
transforming foreign invested enterprises; 6) a decree on
transforming state-owned enterprises; and 7) a decree on state
administered business licenses. Vietnam promised to provide drafts
of these decrees and also agreed to clarify which sectors are
included in the "other" category in Article 19 of the Investment

26. (SBU) Entry, Sojourn and Employment of Aliens: AUSTR Weisel
asked whether there are decrees covering employment of aliens
besides Decree 105. GVN explained that the CIL supersedes Decree
105, which limits foreign personnel to three percent of the
workforce, and, under Article 14(3) of that law, an investor can
hire management personnel without regard to nationality. Decrees
associated with this law should not include any restrictions on
hiring foreigners, although a professional certificate will still be
required where applicable.

Transparency - BTA Chapter 6

27. (SBU) The U.S. side offered additional assistance to help the
GVN implement the transparency requirements of the BTA. According
to the GVN, large cities and some provinces now have an official
gazette for normative legal documents, but there are too few
resources to achieve the objective of providing English versions of
all laws, including laws from the local level. In the near future
the GVN intends to publish, with the assistance of the USAID-funded
STAR Project, four reports on the BTA's impact on: 1) the economy in
2006, 2) the legal system, 3) FDI and 4) transparency in Vietnam.

The Future of the BTA

28. (SBU) AUSTR Weisel emphasized that the BTA would not end with
Vietnam's WTO accession. Many BTA commitments go beyond the WTO,
and the United States intends to continue to use the BTA, along with
other vehicles, to build our bilateral relationship. The Vietnamese
side responded that the idea of the BTA ending upon WTO accession
"never entered our minds" and affirmed that the GVN also desired to
maintain and strengthen the bilateral relationship. AUSTR Weisel
noted that Vietnam's implementation was generally good and most of
the discussion had been simply to clarify issues.


29. The talks were lengthy and detailed and the level of
preparedness of the Vietnamese side was impressive. Vietnamese
experts were able to respond to virtually all of the detailed and
technical questions posed by the U.S. side. Where they could not
respond or where the U.S. side pointed out conflicts with BTA
requirements, the Vietnamese promised to make every effort to take
our concerns into account and often asked the U.S. side to suggest
solutions. It was clear that the GVN took the meeting, and BTA
implementation, very seriously and was determined to make a good


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