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Cablegate: Peru National Trade Estimate Report 2010

VZCZCXYZ0023
RR RUEHWEB

DE RUEHPE #1912/01 3411419
ZNR UUUUU ZZH
R 071418Z DEC 09
FM AMEMBASSY LIMA
TO RUEHC/SECSTATE WASHDC 0224
INFO RHEBAAA/DEPT OF ENERGY WASHINGTON DC
RUCPDOC/DEPT OF COMMERCE WASHINGTON DC
RUEATRS/DEPT OF TREASURY WASHINGTON DC
RUEHAC/AMEMBASSY ASUNCION
RUEHBO/AMEMBASSY BOGOTA
RUEHBR/AMEMBASSY BRASILIA
RUEHBU/AMEMBASSY BUENOS AIRES
RUEHCV/AMEMBASSY CARACAS
RUEHLP/AMEMBASSY LA PAZ
RUEHMN/AMEMBASSY MONTEVIDEO
RUEHPE/AMEMBASSY LIMA
RUEHQT/AMEMBASSY QUITO
RUEHSG/AMEMBASSY SANTIAGO

UNCLAS LIMA 001912

SIPDIS
PLEASE PASS TO USTR/GBLUE
EB/TPP/BTA

E.O. 12958: N/A
TAGS: ASEC ECON EINV PGOV PE
SUBJECT: PERU NATIONAL TRADE ESTIMATE REPORT 2010

REF: SECSTATE 105824

1. (U) In response to State 105824, Embassy Lima reports the
following update for its National Trade Estimate Report. This
report has also been sent as a Word document with track changes to
USTR by email on December 4.

2. (U) TRADE PROMOTION AGREEMENT

The United States and Peru signed the United States-Peru Trade
Promotion Agreement (PTPA) on April 12, 2006. Peru's Congress
ratified the Agreement in June 2006 and a protocol of amendment in
June 2007. On December 14, 2007, President Bush signed into law
the PTPA Implementation Act which approved the PTPA. The PTPA
entered into force on February 1, 2009.

The PTPA is a comprehensive free trade agreement. The PTPA will
result in significant liberalization of trade in goods and services
between the United States and Peru. Under the PTPA, Peru
immediately eliminated most of its tariffs on U.S. exports, with
all remaining tariffs phased out over defined time periods. The
PTPA also includes important disciplines relating to: customs
administration and trade facilitation, technical barriers to trade,
government procurement, services, investment, telecommunications,
electronic commerce, intellectual property rights, and labor and
environmental protection.

3. (U) IMPORT POLICIES

Tariffs

Under the terms of the PTPA, 80 percent of U.S. exports of consumer
and industrial products to Peru became duty free immediately, with
remaining tariffs phased out over 10 years. More than two-thirds
of current U.S. farm exports gained immediate duty-free access to
Peru. Tariffs on most of the remainder of U.S. farm products will
be phased out within 15 years, with all tariffs eliminated in 17
years. Peru has also agreed to eliminate its price band system on
trade with the United States.

Nontariff Measures

The government of Peru has eliminated many nontariff barriers, and
under the PTPA subjects remaining measures, including subsidies and
import licensing requirements, to additional disciplines. Peru
currently restricts imports of certain used goods, including used
clothing and shoes (except as charitable donations, which are
subject to the 19 percent value added tax), used tires, cars over
five years old, and heavy trucks (weighing three tons or more) over
8 years old. Used cars and trucks that are granted import permits
must pay a 45 percent excise tax (compared to 20 percent for a new
car) unless they are refurbished in an industrial center in the
south of the country after importation, in which case they are
exempted entirely from the excise tax. Under the PTPA, Peru
affirmed that it would not adopt or maintain prohibitions or
restrictions on trade in remanufactured goods, and that certain
existing prohibitions on trade in used goods would not apply to
remanufactured goods. This commitment opens new and significant
export opportunities for firms involved in remanufactured products


such as engines, automotive parts, mining and construction
equipment, transportation machinery, medical equipment, and
computers.

4. (U) STANDARDS, TESTING, LABELING, AND CERTIFICATION

In 2008, Peru issued a new technical regulation on footwear
labeling to address concerns of dumping from Asian countries. The
new regulation requires that footwear have a label that includes
the fiscal identification number (Registro ????nico de Contribuyente
-R.U.C.) of the manufacturer or importer of the finished product,
as well as for the manufacturer of the materials that comprise the
four major components of the footwear. In 2008, the three main
footwear items imported by Peru amounted to $110.6 million. Of
these $98,592 (less than 0.1% of the total) originated in the
United States. Industry has voiced legitimate concerns that this
regulation is onerous and unnecessary. In order to comply with the
regulation, a major footwear importer requires its suppliers to
comply, while another importer has addressed the issue by attaching
additional labels at the local bonded warehouse before clearing
Customs (at the importer's expense).

Sanitary and Phytosanitary Measures

Peru has addressed a number of significant sanitary and
phytosanitary (SPS) and technical regulation issues that had
impeded or stopped U.S. exports of beef, pork, poultry, and rice.
However, Peru's national animal and plant health agency, SENASA
(Servicio Nacional de Sanidad Agaria) continues to ban U.S. live
cattle imports based on Bovine Spongiform Encephalopathy (BSE)
restrictions that are inconsistent with the May 2007 World
Organization for Animal Health (OIE) classification of the United
States as a "controlled risk" country for BSE. OIE standards
specify that trade in live cattle of a "controlled risk" country
should be permitted. U.S. officials continue to engage Peru's
authorities in pursuit of science-based import requirements with
respect to such trade. Peru, along with Bolivia, Ecuador and an
Andean Community representative, participated in an August 2008
trip organized by the U.S. Department of Agriculture to evaluate
the U.S. live cattle system in hopes of improving access for U.S.
live cattle to these nations. In May 2009, the CAN published a
proposed regulation with the requirement that only live animals
under 24 months of age would be allowed to be imported. Such a
restriction has no technical justification and is inconsistent with
the OIE. APHIS submitted technical comments on the draft in July
and comments are currently under review by the CAN and the four
member countries.

5. (U) GOVERNMENT PROCUREMENT

Since 2002, Peru has applied a 20 percent price preference to bids
by Peruvian firms in government procurement. The price preference
may no longer be applied against U.S. companies in procurement
covered by the PTPA. The PTPA requires the use of fair,
nondiscriminatory, and transparent procurement procedures for
procurement covered by the PTPA. Also, under the PTPA, U.S.
suppliers are permitted to bid on the procurement of most Peruvian
central government entities, including state-owned enterprises such
as Peru's oil company and Peru's public health insurance agency.
The anticorruption provisions in the PTPA require Peru to ensure
under its domestic law that bribery in matters affecting trade and
investment, including in government procurement, is treated as a
criminal offense or is subject to comparable penalties.

Peru is not a signatory to the WTO Agreement on Government
Procurement.

6. (U) INTELLECTUAL PROPERTY RIGHTS (IPR) PROTECTION

Peru has put in place laws and regulations to implement its
obligations under the PTPA, bringing about a number of important
improvements in IPR protection and enforcement. Some of these
improvements include: protecting trademarks used in Internet domain
names, strengthening measures to prevent the circumvention of
technological devices for preventing Internet-based copyright
piracy, removing burdens for patent registration, protecting
against unfair commercial use of test data and other undisclosed
information submitted in connection with regulatory approval for
pharmaceutical and agricultural chemical products, and providing
deterrent-level penalties for piracy and counterfeiting.

Trademarks, Patents, and Data Protection

Peru amended its law on industrial property as well as related laws
and regulations to put in place state-of-the-art protections for
trademarks and patents. Peru has developed an online system for
registering and maintaining trademarks. Peru also ensures that the
first person to acquire a right to a trademark or a geographical
indication (GI) is the only person who has the right to use it.

In the area of patents, Peru removed unnecessarily burdensome
requirements in its patent application process and put in place
procedures and remedies to prevent the marketing of unauthorized
copies of pharmaceutical products. Consistent with its PTPA
obligation, Peru established a data protection regime that protects
test and other data submitted in connection with marketing approval
for medicines and agrochemical products. The regime seeks to
balance the promotion of pharmaceutical innovation with access to
medicines.

Copyrights

As part of its PTPA obligations, Peru amended its Copyright Law to
reflect the realities of copyright in the digital age. For
instance, Peru has established strong anti-circumvention provisions
to prohibit tampering with technologies designed to prevent piracy
and unauthorized distribution of songs, movies, or other works over
the Internet. Other improvements include extending the term of
protection for copyright protected works, ensuring that Peru's
government will use only legitimate computer software, and setting
out legal obligations to prevent piracy of satellite signals.

Enforcement

Peru has amended its laws and regulations to provide procedures and
remedies for improved enforcement of IPR. As part of this effort,
Peru reorganized the Intellectual Property Office of Peru
(INDECOPI) to help expedite the hearing and granting of


precautionary measures (injunctive relief), revised its customs law
and regulations to strengthen the procedures for suspending IPR
infringing goods and ensuring that those infringing goods are
seized and destroyed absent the allowable exceptions, and put in
place deterrent-level penalties for copyright and trademark
infringement both in civil and criminal violations.

7. (U) SERVICES BARRIERS

Under the PTPA, Peru assumed commitments to provide
nondiscriminatory treatment and market access in a substantial
number of services sectors. These commitments significantly
improved upon Peru's WTO commitments in terms of sectors covered
and elimination of restrictions in sectors such as advertising,
construction and engineering, energy, information, express
delivery, and entertainment, including audiovisual services and
broadcasting. Peru also committed to increased regulatory
transparency and to free transfers associated with the supply of a
service.

Financial Services

The PTPA provides for market opening and nondiscriminatory
treatment across most financial services sectors, including
banking, insurance, and securities. Under the PTPA, U.S. companies
have increased ability to provide portfolio advice and certain
kinds of insurance on a cross-border basis.

Telecommunications

In recent years, U.S. companies have complained that Peru's
telecommunications regulator (OSIPTEL) has not done enough to lower
the average mobile termination rates in the country, which has
resulted in significant barriers to competition in the wireless
sector. The current maximum rate scale, which U.S. companies claim
to be well above cost, is scheduled to expire at the end of 2009.
OSIPTEL recently began the process through which it will establish
new rates, and it is expected that a public comment proceeding on
this matter will be conducted later in 2009 that will culminate in
the establishment of new mobile termination rates for the coming
years. Continued oversight and review of these rates by OSIPTEL
will be important to achieving progress in addressing concerns
raised by suppliers.

8. (U) INVESTMENT BARRIERS

Under the PTPA, Peru assumed obligations relating to national
treatment and most favored nation treatment, ensured the right of
U.S. investors to make financial transfers freely and without
delay, applied international legal standards for expropriation and
compensation, and provided access to binding international
arbitration.

Peruvian law restricts majority ownership of broadcast media to
Peruvian citizens. Foreigners are also restricted from owning land
or investing in natural resources within 50 kilometers of a border,
but they may operate within those areas with special authorization.

Under current law, foreign employees may not comprise more than 20
percent of the total number of employees of a local company
(whether owned by foreign or Peruvian persons) or more than 30
percent of the total company payroll. Under the PTPA, Peru agreed
not to apply most of its nationality-based hiring requirements to
U.S. professionals and specialty personnel.

U.S. firms remain concerned that executive branch ministries,
regulatory agencies, the tax agency, and the judiciary often lack
the resources, expertise, or impartiality necessary to carry out
their respective mandates. U.S. investors have also complained
about the reinterpretation of rules and the imposition of
disproportionate fines by the tax agency.

The Peruvian government has tried to address institutional
weaknesses in the executive branch and has also offered plans for
judicial reform. In July 2005, the Supreme Court issued an edict
stating that final binding arbitration awards cannot be disputed in
the domestic judicial system. The U.S. Government has worked with
the government of Peru both before, and in parallel with, the PTPA
negotiations to ensure the fair resolution of U.S. investor
disputes, consistent with Peruvian law.
MCKINLEY

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