This record is a partial extract of the original cable. The full text of the original cable is not available.

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