VIETNAM-CHINA TRADE: REPORT FROM LANG SON PROVINCE

UNCLAS SECTION 01 OF 02 HANOI 000678

SIPDIS

SENSITIVE
SIPDIS

DEPT FOR EAP/MLS
DEPT PASS USTR FOR BWEISEL AND GHICKS

E.O. 12958: N/A
TAGS: ETRD ECON CM VM
SUBJECT: VIETNAM-CHINA TRADE: REPORT FROM LANG SON PROVINCE

SENSITIVE BUT UNCLASSIFIED PROTECT ACCORDINGLY.

REF: (A) Guangzhou 5377 (B) Guangzhou 4831


1. (SBU) Summary: Econ Counselor met with provincial and
customs officials in Lang Son province, one of two main
transit provinces for goods to and from China on March 16-

17. Customs officials at Tan Thanh claimed that 80 percent
of goods crossing the checkpoint were fruit, smuggling of
pirated goods was no longer a problem, and that the ban on
poultry imports from China is effective. While Trafficking
in Persons (TIP) is an infrequent occurrence, drug smuggling
remains a problem, and customs, police, and the border army
in both Vietnam and China cooperate on both these issues.
Customs officials' confidence regarding the degree of
monitoring and control at this small border checkpoint begs
the question as to how so many counterfeit products from
China end up in Vietnam. End Summary.

A Major Transit Point for Trade with China
--------------


2. (SBU) Econ/C visited Lang Son province March 16-17, and
met with provincial and customs officials. Located 180 km
from Nanning in China and to the northeast of Hanoi, Lang
Son is one of two main transit provinces for goods to and
from China. The total volume of trade with China through
Lang Son reached a high of USD 700 million in 2001, of which
USD 450 million were imports to Vietnam. In 2005 the amount
of two-way trade fell to USD 380 million, of which USD 305
million were imports to Vietnam. The province has a 253 km
border with China, two international border checkpoints, and
3 additional crossings that permit Vietnamese and Chinese
citizens to move through the border to the nearest province.
Several of Vietnam's major transportation routes traverse
Lang Son, including highway 1A (Vietnam's main north-south
thoroughfare) and an international railroad line. An
expressway linking Nanning to Lang Son City has been
completed on the Chinese side; officials hope to begin
construction on the Vietnamese side next year.


3. (SBU) In addition to meeting with officials, Econ/C
visited the Lang Son market, famous in northern Vietnam for
its electronics. Televisions, DVD players, karaoke
machines, kitchen appliances, as well as other goods were
readily available at bargain prices. While the majority of
products for sale were Chinese brands, and possibly
smuggled, many computer products appeared to be counterfeit.
Also readily available were digital terrestrial decoder
boxes, used to receive the 100 percent pirated Vietnam
Television Technology Investment and Development Company
(VTC) programming.

How DO those counterfeit goods end up in Hanoi?
-------------- --


4. (SBU) Econ/C visited the Tan Thanh "frontier economic
zone," a border checkpoint established to permit the
movement of Vietnamese and Chinese citizens and goods from
border areas, and the least formal of the five border
crossings in Lang Son province. Citizens of the two
countries are allowed to cross without visas, but cannot go
more than 30 kilometers from the border. According to
customs officials, there has been a significant increase in
cross-border trade in recent years, evidenced by increased
tax revenues. Officials claimed that fruit comprises 80
percent of imports through the Tan Thanh checkpoint.
(Comment: Given the amount of cheap Chinese electronics for
sale in the Lang Son market and the fact that Tan Thanh
customs officials inspect only 13 percent of shipments, this
statistic could easily be unreliable. We also note that Ref
B reports that according to the Vietnamese Consul General in
Nanning, China primarily exports machinery equipment and raw
materials to Vietnam and Vietnam exports bananas and
agricultural products to China. End comment.) Machines,
consumables, and motorbikes enter Lang Son through one of
two international or two national checkpoints.


5. (SBU) Customs officials claimed that they have not seen
counterfeit goods at the Tan Thanh checkpoint, but noted
that by law, they are allowed to stop goods only if they
receive a petition from enterprises, which has not occurred.
A number of raids have been have carried out in the border
area in cooperation with the police and border army, and
customs officials suggested this has resulted in a decrease
in smuggling counterfeit goods through the checkpoint.
Seized products included DVDs that were destroyed by a

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specially convened taskforce. Customs officials said they
have made efforts to strengthen IPR enforcement by paying
increased attention to trademarks, but cited the need for
training and more detailed regulations.

Avian Influenza, TIP, Drugs, and Textiles
--------------


6. (SBU) Officials said that measures implemented to prevent
the import of poultry infected with avian influenza (AI)
from China through Lang Son province, which has not had any
reported cases of AI, were effective, and have resulted in
an 80-90 percent decrease in the number of smuggled birds.
However, smugglers have continued using unofficial crossings
on Lang Son's long border with China. Customs officials
said that any discovered birds were promptly destroyed.
(Note: Vietnamese media reported recently that Chinese
chickens and ducks are being smuggled in large numbers due
to their low price compared to birds raised in Vietnam. End
Note.)


7. (SBU) Customs officials stated that they had not seen
many cases of Trafficking in Persons (TIP),though they were
aware of the problem and said that a number of victims had
escaped from China and returned to Vietnam, where they
received assistance from the Government. In most cases,
young women are lured to China with the promise of high
paying jobs that end up being prostitution. The customs,
police and border armies of both countries work closely
together on this issue. Drug smuggling continues to be a
problem in the area. Police have intercepted a number of
smuggling operations, and seized 3.6 kilos of heroin in the
largest drug bust.


8. (SBU) Officials also stated that there had been no
instances of textile transshipments through the checkpoint.
They claimed that no completely or partially finished
garments were imported, only fabric and fiber.

Valuation Procedures
--------------


9. (SBU) Customs officials were aware of Vietnam's
requirement that duties from most countries be assessed
based on transaction value. They stated that customs
officers inspect receipts, which they can check against an
information system, and may adjust the price if they suspect
fraud. While the office had computers, they can only
process email. A World Bank customs project is expected to
provide funding for them to link to a modern system.

Comment:
--------------


10. (SBU) Geography has given Lang Son province the
potential to benefit from growing trade between Vietnam and
China. However, the poor and winding road from Tan Thanh to
Lang Son City will have to improve for this to become a more
important trade route. While officials appeared confident
in their assertions that most of what came in was fruit,
they were not entirely convincing. For one thing, many
Vietnamese in Hanoi will not eat fruit from China since the
popular notion is that it contains excessive amounts of
chemicals. A popular Hanoi anecdote is of an allegedly
Chinese apple that retained its apparent freshness for two
months outside. Given this apparent consumer distaste for
Chinese fruit, it is entirely possible that this border
crossing affords an attractive entry point for the many
illegal items such as counterfeit DVDs and handbags that are
evident in Hanoi and elsewhere.

MARINE