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Cablegate: Preparation of 2007 National Trade Estimate Report

VZCZCXRO3953
RR RUEHMA RUEHPA
DE RUEHAB #1206/01 3031250
ZNR UUUUU ZZH
R 301250Z OCT 06
FM AMEMBASSY ABIDJAN
TO RUEHC/SECSTATE WASHDC 2089
INFO RUEHZK/ECOWAS COLLECTIVE

UNCLAS SECTION 01 OF 04 ABIDJAN 001206

SIPDIS

SIPDIS

E.O. 12958: N/A
TAGS: ETRD ECON EFIN IV
SUBJECT: PREPARATION OF 2007 NATIONAL TRADE ESTIMATE REPORT

REF: SECSTATE 136302

1. TRADE SUMMARY: The U.S. trade deficit with Cote
d,Ivoire was $1.1 billion in 2005, an increase of $477
million from $597 million in 2004. U.S. goods exports in 2005
were $124 million, up 4.9 percent from the previous year.
Corresponding U.S. imports from Cote d,Ivoire were $1.2
billion, up 67.6 percent. Cote d,Ivoire is currently the
119th largest export market for U.S. goods. The stock of
U.S. foreign direct investment (FDI) in Cote d,Ivoire in
2004 was $247 million, up from $215 million in 2003. Cote
d,Ivoire,s international trade patterns ) especially those
involving trade in the West African region ) have been
significantly affected by the political instability and civil
unrest that have gripped the country in the last few years.

2. IMPORT POLICIES: Cote d,Ivoire is a member of the WTO,
the West African Economic and Monetary Union (known by its
French acronym, UEMOA), and the Economic Community of West
African States (ECOWAS). In January 2000, Cote d,Ivoire
eliminated tariffs on imports from the eight member countries
of UEMOA when UEMOA,s Common External Tariff (CET) entered
into effect. Imports from all other countries are subject to
tariffs based on the CET schedule of five percent for raw
materials and inputs for local manufacture, 10 percent for
semi-finished goods, and 20 percent for finished products.
In 2004, UEMOA suspended its practice of temporary duty-free
status for imported goods destined for another country in the
zone. This change means that goods entering UEMOA from
non-member countries may no longer transit a UEMOA country
duty-free en route to their final destination. Duties are
now assessed at the first port of entry.

A one percent statistical fee is levied on the CIF (cost,
insurance, and freight) value of imports except those
destined for re-export, transit, or donations for
humanitarian purposes under international agreements.
Another tax on imports into Cote d,Ivoire is a one percent
community levy (solidarity tax) on the CIF value, which goes
to a compensation fund to assist WAEMU members, such as
landlocked Niger, Burkina Faso and Mali, which suffered from
revenues losses due to the implementation of the CET. There
are special taxes on fish (between 5 and 20 percent), rice
(between 5 percent and 10 percent based on category), alcohol
(45 percent), tobacco (between 5 and 20 percent), cigarettes
(between 30 and 35 percent), certain textile products (20
percent), and petroleum products (between 5 and 20 percent).
These special taxes are designed to protect national
industries. The Customs office collects a value added tax
(VAT) of 18 percent on all imports, reduced from 20 percent
in 2003. This tax computation is calculated on the CIF value
added to the duty and the statistical fee. Cote d,Ivoire
continues to apply minimum import prices (MIPs) to imports of
certain products such as cooking oil, cigarettes, sugar,
used clothes, concentrated tomato, broken rice, matches,
copybook, tissues, polypropylene sacks, alcohol and milk,
though the WTO waiver it once had allowing it to apply MIPs
on some products has long since expired.

There are no quotas on merchandise imports, although the
following items are subject to import prohibitions,
restrictions, or prior authorization: petroleum products,
animal products, live plants, seeds, arms and munitions,
plastic bags, distilling equipment, pornography, saccharin,
narcotics, explosives, illicit drugs, and toxic waste.
Textile imports are subject to some authorization
requirements by the Department of External Trade.

Rules governing the handling of imported toxic waste were
apparently ignored in the September 2006 incident involving
the illegal dumping of several hundred tons of toxic waste
unloaded by an Ivorian company from a foreign vessel in the
environs of the capital city Abidjan, which according to
official figures left ten dead and thousands ill.

3. STANDARDS, TESTING, LABELING AND CERTIFICATION: All
items imported into Cote d'Ivoire must have a certificate of
compliance to clear customs. Two European companies, BIVAC,
affiliated to the French group Bureau Veritas and the Swiss
firm Cotecna are contracted to carry out all qualitative and
quantitative verifications of goods imported into Cote
d'Ivoire with a value exceeding CFA 1.5 million (USD 3,000).
All merchandise packaging must be clearly labeled as to its
origin. Manufactured food products must be labeled in French
and have an expiration date. Standards generally follow
French or European norms.

4. GOVERNMENT PROCUREMENT: The government of Cote d,Ivoire
regularly and periodically issues notices of procurement
tenders in the local press, in the form of documentation sent
to the U.S. Embassy, or sometimes published in international
magazines and newspapers. On occasion, there is a charge for
the bidding documents. The implementing agency is usually

ABIDJAN 00001206 002 OF 004


the ministry making the request or the ministry under whose
tutelage the office functions. The Bureau National d,Etudes
Techniques et de Developpement (BNETD), the government,s
technical and investment planning agency and think tank,
sometimes serves as an executing agency representing
ministries for major projects to be financed by international
institutions.

In 2005, the Ministry of Finance introduced institutional
changes in the new public procurement code such as:
decentralizing operations, building greater transparency in
the system, creating of commissions in charge of examining
out-of-the-norm procurements, imposing stricter internal
management controls and establishing an appeals process.

The government has created the &Direction des Marches
Publics8 (DMP), a centralized office of public bids in the
Ministry of Finance to help ensure compliance with
international bidding practices. While theoretically the
office is functioning and the procurement process is open,
some well-entrenched foreign companies, through their
relations with government officials, may retain a preferred
position in securing bid awards. Many firms continue to see
corruption as an obstacle that affects procurement decisions.
Cote d,Ivoire is not a signatory to the WTO Agreement on
Government Procurement.

5: SERVICES BARRIERS: Banks and insurance companies are
subject to licensing requirements, but there are no
restrictions on foreign ownership or establishment of
subsidiaries. Foreign participation is widespread in
computer services, education, and training. Prior approval
is required for foreign investment in the health sector,
travel agencies, and law and accounting firms; majority
foreign ownership of companies in these sectors is not
permitted, though foreign companies currently operate in all
these sectors in partnership with local firms and with
government permission. While one U.S. bank, Citibank, is
currently operating in Cote d,Ivoire, American insurance and
reinsurance companies are not present in the Ivorian market.

Cote d,Ivoire does not formally require majority Ivorian
ownership in most sectors other than those noted above.
There are professional associations such as legal and
accountancy associations that serve to regulate professional
services which require Ivorian nationality. For example,
there are restrictions on the registration of foreign
nationals by the accountants, association, unless they have
already been practicing in Cote d,Ivoire for several years
under the license of an Ivorian practitioner. In the case of
legal services, Cote d,Ivoire distinguishes between
providing legal advice and practicing law in court. The
former is liberalized, but to be admitted to the Ivorian bar
and practice in a courtroom, lawyers must be accredited by
the Ivorian lawyers, association which requires Ivorian
nationality.

6. INVESTMENT BARRIERS: The government encourages foreign
investment, but in recent years political instability has
substantially undermined investor confidence. The negative
effects of the 1999 coup d,etat, the ensuing 10-month
military rule, and the upheavals surrounding the elections in
October 2000 had not dissipated when an attempted coup
d,etat that turned into a civil war occurred in September
2002. In November 2004, many (particularly foreign-owned)
businesses were destroyed and looted, further dampening
near-term investment prospects. Ongoing efforts at national
reconciliation have had limited progress, but there has been
no resolution of the crisis. There has been no progress on
privatization since 2002.

The Ivorian investment code provides tax incentives for
investments higher than $1 million, as well as land
concessions for projects. Concessionary agreements, which
would exempt investors from tax regulations, require the
additional approval of the Ministry of Finance and Economy
and the Ministry of Industry, making the clearance procedure
for planned investments, if tax breaks are sought,
time-consuming and confusing. The Center for the Promotion
of Investment in Cote d'Ivoire (CEPICI) was established to
act as a one-stop shop for investment to help alleviate this
problem. Even when companies have complied fully with the
requirements, tax exemptions are sometimes denied with little
explanation, giving rise to accusations of favoritism and
corruption.

In August 2006, the government instituted new rules governing
the rebate of VAT for companies that export more than 70% of
their production, such as multinational cocoa
purchasing-and-export companies. Qualifying companies will
now be subject to initial VAT collections on all their
purchases, both local and imported, vs. simply imported goods
as previously. VAT rebates will be delayed 12 ) 36 months.

ABIDJAN 00001206 003 OF 004


The result is that qualifying companies will see a three or
four fold increase in their VAT payments and a significant
slowdown in already-slow reimbursements.


7. INTELLECTUAL PROPERTY RIGHTS (IPR) PROTECTION: The
Ivorian Civil Code protects the acquisition and disposition
of intellectual property rights. Legal protection for
intellectual property may fall short of TRIPS standards due
in part to lack of customs checks in rebel-held Western and
Northern border areas, which does not allow law enforcement
action on trade of counterfeit textiles, pharmaceuticals and
vehicle parts. Cote d'Ivoire is a party to the Paris
Convention for the Protection of Industrial Property, its
1958 revision, and the 1977 Bangui Agreement covering 16
Francophone African countries in the African Intellectual
Property Organization (OAPI). Effective February 2002,
changes were made to the Bangui Agreement in an effort to
bring it into conformity with TRIPS. Under OAPI, rights
registered in one member country are valid for other member
states. Patents are valid for ten years, with the
possibility of two five-year extensions. Trademarks are
valid for ten years and are renewable indefinitely.
Copyrights are valid for 50 years.

In 2001, Ivorian experts drafted a new law in an effort to
bring Cote d,Ivoire into conformity with TRIPS. The new law
adds specific protection for computer programs, databases,
and authors, rights with regard to rented films and videos.
However, the National Assembly has not yet approved this
legislation and will likely not take action until political
ambiguities concerning the Assembly,s term of office are
clarified. The Assembly,s mandate expired at the end of
2005 and new legislative elections are effectively on hold
until the political reconciliation process moves forward.

The government,s Office of Industrial Property is charged
with ensuring the protection of patents, trademarks,
industrial designs, and commercial names. The office faces
an array of challenges, including inadequate resources, lack
of political will, and the distraction of the ongoing
political crisis. As a result, enforcement of IPR is largely
ineffective. Foreign companies, especially from East and
South Asia, flood the Ivorian market with all types of
counterfeit goods. Government efforts to combat piracy are
modest. The Ivorian Office of Authors, Rights (BURIDA),
established in 1998, has established a new sticker system,
effective January 2004, to protect audio, video, literary and
artistic property rights in music and computer programs.
BURIDA,s operations were hampered by a long-running dispute
between management and board members over policy and
leadership issues, specifically with regard to who should
direct the agency. To resolve the crisis at BURIDA, in March
of 2006 the Minister of Culture invoked a ministerial bylaw
to establish a temporary administration and a commission to
study and propose a global reform of this organization.
Despite the ongoing management issue, the agency does help to
promote IPR enforcement with lawyers and magistrates.

8. ELECTRONIC COMMERCE: Electronic commerce is in its very
early stages in Cote d,Ivoire but is expected to grow over
time. There are a number of cultural barriers to growth,
including the custom of paying with cash and the absence of
widespread issuance and use of credit cards. Despite these
barriers, individuals and businesses have begun experimenting
with electronic commerce, and interest in the medium
continues to gain ground. Hotels, restaurants, retail
outlets and travel agencies are developing the use of credit
cards. Banks also have started implementation of telephone,
Internet and SMS banking in addition to ATMs services.
Citibank, for example, offers an international e-banking
platform to all clients world-wide, a feature that has helped
them to retain clientele in Abidjan and attract new
customers. Effective August 3, 2006, theWest African
Central Bank, &Banque Centrale des tats de l,Afrique de
l,Ouest,8 (BCEAO) establishd the inter-bank automated
payment system to redue delays in bank settlement
operations. Small ad medium-sized businesses continue to
explore elctronic commerce, and interest in the medium
coninues to gain ground.

9. OTHER BARRIERS: ManyU.S. companies view corruption as
an obstacle to nvestment in Cote d,Ivoire. Corruption has
the reatest impact on judicial proceedings, contract aards,
customs, and tax issues. It is common for udges who are open
to financial influence to disort the merits of a case.
Corruption and the recent political crisis have affected the
Ivorian govrnment,s ability to attract and retain foreign
ivestment. Some U.S. investors have raised specifi
concerns about the rule of law and the governmet,s ability
to provide equal protection under the law. In 1997, the
government of Cote d,Ivoire athorized the creation of an
arbitration court, te Joint Court of Justice and

ABIDJAN 00001206 004 OF 004


Arbitration, which is a member of the regional arbitration
board known as the Organization for the Harmonization of
Business Law in Africa (OHADA). Since then, however, the
court has examined 45 cases (only five in 2005). In July
2004, the governing body was strengthened with the added
participation of local Chambers of Commerce, and the rules
governing enforcement of arbitral awards were modified to
allow for a quicker enforcement of awards. The business
community has welcomed the 2004 revisions and the Arbitration
Board has acted effectively as an alternative vehicle for
timely business dispute resolution. In addition to its local
arbitration board, Cote d,Ivoire is a member of the
International Center for the Settlement of Investment
Disputes.

10. ESTIMATED COST OF TRADE BARRIERS. Post conferred with
relevant U.S. businesses engaged in business in Cote
d,Ivoire in an attempt to estimate the value of existing
trade barriers, and they were unable to provide meaningful
approximations. The nature of trade barriers in Cote
d,Ivoire also makes it difficult for Post to provide a
global estimate for the overall costs of trade barriers.
Hooks

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