UNCLAS SECTION 01 OF 06 HANOI 001044

SIPDIS

SENSITIVE

STATE FOR E, EB AND EAP/BCLTV
STATE ALSO PASS USTR BRYAN
STATE ALSO PASS USAID
USDOC FOR 4430/MAC/AP/OPB/VLC/HPPHO
USDOC PASS USPTO FOR NESS
USDA FOR FAS
BANGKOK ALSO FOR CUSTOMS ATTACHE

E.O. 12958: N/A
TAGS: ETRD EINV EFIN ECON VM BTA IPROP WTO
SUBJECT: Vietnam: BTA Joint Committee Review

SENSITIVE BUT UNCLASSIFIED -- PLEASE PROTECT ACCORDINGLY.


1. (SBU) Summary and Introduction: DAUSTR Elena Bryan led
the U.S. delegation and Nguyen Thu Do, Deputy Director,
Office of the Government, led the GVN side at the expert-
level meeting of the Bilateral Trade Agreement (BTA) Joint
Committee in Hanoi April 11-12. Other USG participants in
the Joint Committee meetings included USPTO Attorney-Advisor
Jennifer Ness, U.S. Copyright Office Policy Planning Advisor
Steven Tepp, Econoffs from Hanoi and HCMC and Econ
Assistant. The GVN participants included representatives
from the Ministries of Trade (MOT), Finance (MOF), Planning
and Investment (MPI), Culture and Information (MOCI),
Justice (MOJ), Science and Technology (MOST), Public
Security (MPS), Labor, Invalids and Social Affairs (MOLISA),
Agriculture and Rural Development (MARD), Fisheries (MOFI),
Post and Telematics (MPT), Industry (MOI), Foreign Affairs
(MOFA) and the State Bank of Vietnam (SBV). The two sides
thoroughly reviewed the status of Vietnam's implementation
of all BTA obligations. Vietnam provided the U.S. delegation
with an article-by-article summary of its implementation
efforts. The two sides agreed to prepare a chart
summarizing BTA implementation in advance of the BTA Joint
Committee at the vice minister level (date to be
determined.) This cable summarizes the Joint Committee's
review of the BTA. End Summary and Introduction.

Chapter 1: Trade In Goods
--------------


2. (SBU) ARTICLE 1/MOST FAVORED NATION (MFN) TREATMENT. The
GVN implemented this obligation through promulgation of a
2002 Ordinance on MFN and national treatment.


3. (SBU)ARTICLE 2/TECHNICAL AND SANITARY AND PHYTO-SANITARY
STANDARDS. The U.S. delegation noted it has received
multiple complaints from U.S. companies about problematic

regulations and lack of transparency in these areas. One
example is a Ministry of Health (MOH) requirement that
importers of wine and spirits provide two bottles (of each
kind of product imported) for "testing" purposes each time a
shipment arrives in Vietnam. The U.S. side noted that while
the USG supports Vietnam's right to ensure that imports do
not endanger health and safety, regulations in this area
need to be reasonable. The Vietnamese delegation asked for
more information in writing and promised to convey U.S.
concerns to the MOH.


4. (SBU) ARTICLE 2/TRADING RIGHTS: Vietnam is obligated to
liberalize trading rights over a three to six year period.
Beginning in December 2004, Vietnam was required to allow
U.S. companies with capital invested in production and
manufacturing to engage in trading rights and to allow U.S.
companies to engage in joint ventures in trading activities.
The U.S. delegation noted that this is a fundamental
obligation, but the GVN has not implemented the necessary
regulations. The Vietnamese delegation said the GVN is in
the process of drafting the regulations. (Note: the GVN
side was not sure if the revisions will be included in the
revisions to the Commercial Law (slated for approval by the
National Assembly in May) or in a separate Government
Decree. End Note.) The GVN estimated it will complete the
regulations by the end of 2005. The U.S. delegation
emphasized that this obligation is overdue. The lack of
action on the part of the GVN has resulted in U.S. companies
being denied their rights under the BTA. GVN Customs'
officials have refused to allow companies to import products
that fall outside the parameters of their investment
licenses. The U.S. side requested, as an interim measure,
that the GVN issue an instruction to the General Department
of Customs to allow U.S. companies to exercise their rights.


5. (SBU) ARTICLE 3/CUSTOMS VALUATION: Vietnam was obligated
to implement WTO level standards for customs valuation by
December 2003. A June 2002 Decree and a December 2003
Circular established the legal framework for customs
valuation. A March 2004 Official Letter eliminated the use
of minimum prices on all remaining commodities.


6. (SBU) ANNEX A/ELIMINATION OF NATIONAL TREATMENT
EXCEPTIONS: Vietnam agreed to eliminate national treatment
(NT) exceptions for 1) the special consumption tax (SCT) on
vehicles (under twelve seats) and inputs to produce
cigarettes as well as for 2) the supplemental tax on fuels,
metals and fertilizers. The GVN has eliminated the NT
exception for the supplemental taxes. However, obligations
related to the SCT have not been implemented. The GVN
delegation noted that the MOF is drafting language to be
included in the revised SCT Law that would set uniform SCT
rates for inputs to cigarette/cigar production. The
National Assembly is scheduled to approve this law in
October. On autos, the GVN delegation said the GVN plans to
phase out the NT exceptions on the auto SCT upon accession
to the WTO. The U.S. delegation reminded the GVN that the
two sides have been discussing the auto SCT since 2002 and
that the current GVN "roadmap" for the auto sector has
resulted in significant increases in the SCT and endangered
U.S. investment in the auto sector in Vietnam. The U.S.
delegation emphasized USG interest in seeing the make its
auto roadmap public, and adopt a "reasonable" level of SCT.


7. (SBU) ANNEX B1/QUANTITATIVE RESTRICTIONS. The GVN is
obligated to phase out quantitative restrictions (QRs) on a
variety of agricultural and industrial imports over a period
of three to ten years. The GVN has phased QRs on all
products except sugar. Annex B1 does not require the
removal of the QR on sugar until December 2011.


8. (SBU) ANNEX E/TARIFF REDUCTIONS: Vietnam was obligated
to reduce tariffs on a broad range of goods by one-third to
one-half no later than December 2004 (December 2007 for a
few products.) The Ministry of Finance implemented this
obligation through promulgation of an Ordinance in November

2004.

Chapter 2: Intellectual Property Rights
--------------


9. (SBU) ARTICLE 1/INTERNATIONAL CONVENTIONS: Vietnam is
obliged to join several international IPR conventions
"promptly." The GVN delegation confirmed that Vietnam has
been a member of the Paris Convention since 1949 and became
a member of the Berne Convention (copyright) in October

2004. Vietnam is not yet a member of the Geneva Convention
(Phonograms), the International Convention for the
Protection of New Varieties of Plants (UPOV) or the Brussels
Convention (Satellite Signals). The MOCI has submitted
proposals to join the Geneva Convention and the Brussels
Convention to the President for approval and expects to
finalize this process by the end of 2005. The MARD is
currently circulating for comments a draft proposal to join
UPOV.


10. (SBU) ARTICLE 3/NATIONAL TREATMENT FOR FEES AND CHARGES.
The GVN delegation confirmed that in December 2004 Vietnam
established a uniform level of IPR fees and charges
applicable to both foreign and domestic entities.


11. (SBU) ARTICLE 4/COPYRIGHT AND RELATED RIGHTS. The GVN
delegation confirmed that Vietnam has not fully implemented
its obligations related to copyright protection, but
emphasized that the new IPR Law scheduled to be approved by
the National Assembly in October will address outstanding
copyright issues. Additionally, the MOCI has set up a
committee to begin drafting optical disc regulations, which
MOCI hopes to finalize by the end of 2005.


12. (SBU) ARTICLE 5/SATELLITE SIGNALS: The GVN delegation
noted that Vietnam's Civil Code provides some protection for
satellite signals, but confirmed that Vietnam has not fully
implemented its obligation in this area. The MOCI has
incorporated provisions pertaining to protection for
satellite signals in the draft IPR Law.


13. (SBU) ARTICLE 6 AND 7/PATENTS AND TRADEMARKS: The GVN
delegation confirmed that Vietnam has not fully implemented
its obligations related to the protection of patents and
trademarks. The GVN has not yet codified the certification
of trademarks in law or revised the procedures for patent
disputes (moving the burden of proof from the plaintiff to
the defendant). The new comprehensive IPR Law will address
these issues, but the GVN will need to promulgate additional
implementing regulations to fully meet BTA and WTO
obligations in these areas. The National Office of
Intellectual Property (NOIP) has started work on the
implementing regulations.


14. (SBU) ARTICLE 9/TRADE SECRETS AND DATA EXCLUSIVITY. The
GVN delegation confirmed that the 2002 Decree (54) that
deals with trade secrets does not fully address BTA
requirements with respect to either trade secrets or data
exclusivity (protection of test data). The new IPR Law will
fully implement Vietnam's obligations related to data
exclusivity and pharmaceutical management agencies will be
able to apply the provisions as soon as the law is approved.
The IPR law will also address trade secrets, but will
require passage of subsequent implementing regulations
in order to comply fully with BTA and WTO obligations in
this area.


15. (SB) ARTICLE 11/ENFORCEMENT: The U.S. delegation asked
what plans the GVN has to upgrade the existing Criminal Code
(from 2000) to improve enforcement of IPR. The GVN noted
that the new IPR Law will criminalize the commercial scale
production of counterfeit and pirated goods. This is the
first time the GVN has considered including language on
criminal penalties in an economic law. The U.S. delegation
emphasized that the USG views enforcement of IPR very
seriously. The best way to combat IPR violations is strong
enforcement, including significant civil and criminal
penalties, large fines and jail sentences. The U.S.
delegation urged the GVN to ensure the new IPR Law
adequately addresses the need for more effective penalties
for IPR infringement.

Chapter 3: Trade in Services

TELECOM REFERENCE PAPER
--------------


16. (SBU) ANNEX F/TELECOM REFERENCE PAPER. The U.S.
delegation noted concern that Vietnam is not meeting the
requirements of the WTO Telecommunications Reference Paper,
which is incorporated into the BTA. The U.S. delegation
highlighted the following questions about Vietnam's
implementation of the Reference Paper: 1) it is not clear
whether there is impartial regulation of the telecom sector;
2) there is not adequate separation between operators and
the regulatory authority; and 3) Vietnam lacks a legal
framework clearly prohibiting anti-competitive behavior.
The Vietnamese delegation responded that in 1995 the
Ministry of Post and Telematics (MPT) was separated into
regulatory and business functions, and regulation is now
"fully impartial." In addition, the Vietnam Post and
Telecommunications Company (VNPT) recently moved out of the
building it shared with MPT, eliminating the "last concern"
about linkages between MPT and commercial operators.


17. (SBU) ANNEX G/TELECOMMUNICATIONS SERVICES. Vietnam
committed to consider increasing U.S. equity limits in the
telecom sector by December 2004, to allow joint ventures
with up to fifty percent U.S. equity in value-added telecom
by December 2003 and to allow joint ventures with up to
fifty percent U.S. equity in Internet services by December

2004. However, a March 2003 Decree allows only "business
cooperation contracts" (BCCs) in the telecom sector in
Vietnam. The GVN has not issued any supplemental
regulations specifically granting U.S. companies expanded
market access in accordance with Vietnam's BTA commitments.
This lack of regulations represents a serious barrier to
investment. The U.S. delegation emphasized that the GVN's
implementation of key services commitments such as telecom
will serves as an indicator of how well prepared Vietnam is
to meet its WTO obligations. The Vietnamese delegation
explained that the new Law on Investment (scheduled to be
approved by the National Assembly in October) will address
market access for services in accordance with both BTA and
WTO commitments. In the interim, the GVN committed to issue
a letter clarifying market access privileges for U.S.
companies.


18. (SBU) ANNEX G/TELECOMMUNICATIONS SERVICES. The
Vietnamese delegation reported that Vietnamese telecom
companies seeking to enter the U.S. market and establish
Point of Presence (POP) companies have faced difficulties.
These companies have been told (by private sector U.S.
lawyers) that Vietnamese companies do not qualify for the
necessary license from the Federal Communications Commission
(number 214) because Vietnam is not yet a member of the WTO.
The U.S. delegation noted this is the first time this issue
had been raised and committed to provide the GVN with more
information on the rules for licensing in this area.


19. (SBU) ANNEX G/AUDIO VISUAL SERVICES: Vietnam committed
to allow joint ventures with up to 49 percent U.S. equity in
audiovisual services. The Vietnamese delegation informed
the U.S. side that a March 2003 Decree permits both BCCs and
joint ventures in audiovisual services. The GVN has
licensed two joint ventures in this sector to date,
including one with a U.S. company (VisionNet International,
Inc).


20. (SBU) ANNEX G/DISTRIBUTION SERVICES: Vietnam committed
to allow joint ventures with up to 49 percent U.S. equity in
wholesale and retail distribution services. However, no
regulations permitting this type of investment have been
promulgated. The Vietnamese delegation said the GVN is in
the process of drafting the necessary regulations, which it
hopes to complete by the end of 2005. (Note: As with
implementation of trading rights obligations, the GVN will
either include the regulations on distribution services in
the revised Commercial Law (slated for approval by the
National Assembly in May) or in a separate Government
decree. End Note.) The U.S. delegation emphasized that
this obligation is overdue and requested, as an interim
measure, that the GVN issue a letter authorizing U.S.
investment in distribution services.

Chapter 4: Development of Investment Relations
-------------- --


21. (SBU) ANNEX H PARAGRAPH 3/EXPORT REQUIREMENTS. Vietnam
agreed to accord national treatment to U.S. investments
(Chapter IV, article 2), but it maintained an exception that
allows the GVN to require that U.S. investment projects in
certain sectors export at least eight percent of their
production (until December 2008). In December 2001 (three
days before the BTA entered into force), the MPI issued
Decision 718 revising the list of sectors subject to export
requirements. Most of the sectors identified in Decision
718, however, are not in the list agreed upon in the BTA.
The U.S. delegation reminded the Vietnamese side that this
issue has been raised in prior Joint Committee meetings and
the GVN still has not addressed the problem. The Vietnamese
delegation committed to take immediate action to address the
issue.


22. (SBU) ANNEX H, PARAGRAPH 4.3/PRICES AND FEES. Vietnam
agreed to phase out discriminatory prices and fees in a
number of sectors by December 2005. The U.S. delegation
noted that state-owned enterprises (SOEs) in some sectors
charge higher fees to foreign customers and asked if any
SOEs have special privileges that enable them to operate on
a non-commercial basis. The Vietnamese delegation explained
that the GVN has been eliminating discriminatory fees
charged by the state; the GVN only maintains dual prices for
electricity. (Note: The BTA requires the GVN to eliminate
dual prices for electricity by December 2005. End Note.)
Fees that are set by enterprises are determined by market
conditions, according to the GVN delegation.


23. (SBU) ANNEX H, PARA 4.1B/REQUIREMENTS ON INVESTMENT
CAPITAL. Vietnam agreed to eliminate certain requirements
on U.S. investment capital no later than December 2004
including: minimum contribution levels in joint ventures
and the right of first refusal on transfer of interest in a
joint venture. Vietnam also agreed to allow U.S companies
to establish joint ventures and issue bonds and/or shares to
the public no later than December 2004. However, the GVN
has not issued any regulations implementing these
obligations. The Vietnamese delegation explained that all
of these obligations will be addressed in the new Investment
Law and the new Enterprise Law scheduled for approval by the
National Assembly in October this year. As an interim
measure, the Vietnamese side agreed to draft a letter
confirming implementation of these obligations for U.S.
companies.


24. (SBU) ANNEX H, PARAGRAPH 4.2/ORGANIZATION AND MANAGEMENT
OF JOINT VENTURES. Vietnam agreed to eliminate certain
requirements pertaining to the organization and management
of joint ventures by December 2004. These include
requirements that the General Director (or Deputy General
Director) of a joint venture be a Vietnamese citizen and
that certain decisions on the operation of a joint venture
be made on the basis of consensus. However, the GVN has not
issued any regulations implementing these obligations. The
Vietnamese delegation explained that all of these
obligations will be addressed in the new Investment Law and
the new Enterprise Law. As an interim measure, the
Vietnamese side agreed to draft a letter confirming
implementation of these obligations for U.S. companies.




25. (SBU) ARTICLE 1/PUBLICATION OF LAWS, REGULATIONS AND
ADMINISTRATIVE PROCEDURES. The U.S. delegation expressed
appreciation for the steps the GVN has taken to implement
the BTA's transparency obligations. However, the U.S. side
reiterated a long-standing concern that although policy
issues are often covered in "official letters" the GVN does
not publish this type of document in the Official Gazette
and does not make them available upon request. (Note: The
2002 amendments to the Law on Laws required publication of
legal normative documents (LNDs) but does categorize
official letters as LNDs. End Note.) The Vietnamese
delegation informed the U.S. side that a new decree (104)
(issued in December 2004) required the publication of
certain kinds of non-LNDs (including official letters)
subject to agreement between the Chairperson of the OOG and
the head of the drafting agency/ministry. In addition, an
instruction issued by the Prime Minister in early April
prohibited drafting agencies from including legal norms in
non-LNDs. The U.S. side welcomed the steps taken by the GVN
and noted it would monitor implementation of these new
rules.


26. (SBU) ARTICLE 2/ACCESS TO DATA. Vietnam committed to
provide U.S. companies and nationals with access to
economic, sectoral and trade data. The U.S. delegation
expressed concern that while data does appear to be
available, it can be very expensive to obtain. Recently,
the U.S. Foreign Commercial Service requested trade data on
two items from Vietnamese Customs. The Customs office told
FCS the data was unavailable. Ultimately, FCS paid USD 1600
to a private company that specializes in providing trade
data to obtain the information. The Vietnamese delegation
responded that the GVN is working to improve access to
information and acknowledged that this is a "weak point" in
its system. However, the General Department of Customs is
updating its website to include more information. Tariff
information is now available online and export and import
data will be available soon.


27. (SBU) ARTICLE 3/PUBLIC COMMENT: Vietnam committed to
allow the USG and U.S. nationals the opportunity to comment
on the formulation of laws, regulations and administrative
procedures. The U.S. delegation emphasized that drafting
agencies regularly ignore or refuse requests for drafts from
the U.S. Embassy or U.S. companies. The Vietnamese
delegation noted that opportunities to comment on drafts
have increased in recent years but the GVN "needs time to
change the habits" of its officials. In 2001, the Prime
Minister instructed all ministries and agencies to consult
with the business community on drafts through the Vietnam
Chamber of Commerce and Industry (VCCI). VCCI regularly
published drafts and comments on its website.


28. (SBU) ARTICLE 7/ADMINISTRATIVE REVIEW. Vietnam agreed
to ensure prompt review and correction of administrative
actions and judicial review of final administrative
decisions. However, currently the appeals system in Vietnam
does not allow judicial review of an administrative
decision. (Note: This is a problem for both foreign
investors and Vietnamese nationals. End Note.) The
Vietnamese delegation replied the GVN has realized it needs
to improve the system that deals with complaints and
appeals. For that reason, revisions to the Law on
Complaints and Denunciations have been added to the
legislative calendar for 2005. A draft of the revisions
will be available for comment soon.
COMMENT
--------------


29. (SBU) Comment. Mission believes the GVN has made
significant efforts to implement its obligations under this
very comprehensive bilateral agreement, particularly in key
areas such as customs valuation, transparency and tariff
reductions. We fully believe the GVN recognizes that
implementation of the BTA not only improves trade and
investment conditions for U.S. companies, but also advances
Vietnam's case for WTO accession. However, there are
important areas in which GVN implementation is lagging,
including in the protection of intellectual property rights,
liberalization of trading rights, telecommunications
services and distribution services and revision of rules on
investment. The common element in these delays appears to be
that these sections are the subject of WTO accession
negotiations and the Vietnamese intend to change the laws
only once. We need to ensure that the Vietnamese stick to
the legislative timetable adopted by the National Assembly
that provides for passage of the laws in question by
November, regardless of the progress of the WTO process. The
head of delegation at the Joint Committee took careful note
of these areas and pledged to take measures to implement
many of these overdue obligations soon. Mission will work
with USTR and the Department to pressure the GVN to fulfill
these commitments prior to the meeting of the Chairman of
the Joint Committee this spring (date TBD).


30. (U) DAUSTR Elena Bryan cleared this cable.

MARINE