TAIWAN RESPONSE TO TEXTILE TRANSSHIPMENT MOU

UNCLAS TAIPEI 003509

SIPDIS

STATE FOR EAP/RSP/TC AND EB/TPP/ABT, STATE PASS AIT/W,
DHS/CUSTOMS, DHS/CUSTOMS FOR JANEST LABUDA, USTR FOR DAVID
SPOONER, COMMERCE FOR JAMES LEONARD

E.O. 12958: N/A
TAGS: ETRD EIND KTEX TW
SUBJECT: TAIWAN RESPONSE TO TEXTILE TRANSSHIPMENT MOU
DEMARCHE

REF: STATE 224893


1. This is an Action Request. Please see Para 8.


2. Summary: AIT/T delivered reftel demarche to Taiwan's
Board of Foreign Trade (BOFT) Import/Export Director Peter Ho
November 5. Ho was accompanied by several staff and
representatives from the Taiwan Textile Federation (TTF). Ho
protested that there was not enough time to fully consult
with manufacturers before the end of 2004. He had several
concerns on the draft Memorandum of Understanding (MOU),most
significantly the question of whether Taiwan could provide
manufacturer (as opposed to exporter) information on the
invoice, and whether this MOU would require Taiwan to retain
some type of licensing requirement for textile exporters. He
asked that AIT/T request additional information from
Washington agencies on these and other questions in order to
allow him to discuss the MOU with appropriate government
offices and private industry contacts. The TTF
representatives suggested that its members might be reluctant
to support such an MOU. End summary.


3. AIT/T shared the text of the draft MOU with BOFT November
5 and discussed the possibility of signing such an agreement.
Ho began by noting that AIT and TECRO had been negotiating a
textile transshipment agreement in 2001, but that those
discussions had been suspended. He protested the short time
frame, noting that the Agreement on Textiles and Clothing
(ATC) is scheduled to expire January 1, 2005. Ho objected
that it would be very difficult to consult within the
government and with manufacturers in time to have an
agreement ready to be signed before January 1. He then
outlined several specific concerns with the draft MOU.


4. Ho noted that with the end of the Multi-fiber Arrangement
(MFA) and the ATC, many of the U.S. laws and regulations that
governed trade in textiles might lapse. He requested
information regarding new U.S. regulations governing textile
trade after January 1, 2005. BOFT was concerned that the MOU
would require Taiwan to revise its regulations to mandate
that manufacturer information be included on invoices and
other documentation. Currently, only export information is
required. Ho wondered if this kind of requirement by the
U.S. would violate WTO principles. Econoff reminded BOFT
that this draft MOU was based on one that was currently being
negotiated with Hong Kong and that voluntary regulation to
prevent illegal transshipment would not violate WTO rules.


5. BOFT and TTF expressed concern that Taiwan manufacturers
could react negatively to provisions allowing for joint
visits to determine whether rules of origin were being
circumvented. TTF representatives advised that many
manufacturers were eagerly looking forward to expected
savings from reduced regulatory requirements when the MFA and
ATC go out of force. They would not likely be eager to
continue devoting resources to complying with a new licensing
or inspection regime.


6. BOFT also questioned whether all textile products would
be covered by the proposed MOU or just those at risk of
transshipment. Ho asked whether Hong Kong and Macao were
planning to continue their current licensing regime or adopt
some other mechanism to certify textile exporters. He also
suggested including language from the abandoned 2000 draft
textile transshipment MOU that would require the U.S. to
provide prior notice when denying entry.


7. Comment: The initial reaction from BOFT to signing the
proposed draft MOU indicates that more work needs to be done
to educate the government and industry about the need for
this agreement. While BOFT is willing to consider signing an
MOU, given the short time horizon, it is not likely that an
agreement can be reached before the end of 2004 without a
significant investment of resources.


8. Action Request: Please provide answers to BOFT questions
contained in Paras 4-6 and advise whether EB/TPP/ABT and USTR
would be willing to allow for more time to negotiate an
agreement that could be signed early in 2005.
PAAL