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

UNCLAS  CARACAS 001851 
 
SIPDIS 
 
 
SECSTATE EB/TPP/ABT/BTT 
USDOC FOR 6500/ITA/IA/OTEXA/NFREEMAN 
USDOC FOR 4110/ITA/MAC/OAC/TCC/ABARNETT-DAHL 
USDOC FOR 3134/OIO/WH/DDEVITO 
 
E.O. 12958: N/A 
TAGS: ECON ETRD KTEX VE
SUBJECT: VENEZUELA'S REFERENCE PRICES FOR TEXTILES IMPORTS: 
POSSIBLE TRADE BARRIER? 
 
REF: USDOC 079690 
 
¶1.   We will attempt to answer the questions posed by reftel 
providing the reasons for the measures and background 
information which might be useful in the evaluation of the 
measures. 
 
¶2.   Upon receipt of the Official Gazette announcement that 
textile reference prices will be applied to calculate import 
duties, we made inquiries with customs and with importers 
including several customs agents used by importers. We found 
no indication that these prices would result in import 
barriers but they might result in some paperwork for the 
importers and possibly problems in obtaining the documents to 
prove details on previous imports, which will be explained 
below. All of our contacts agreed that these measures are 
intended to further curb corruption in or by customs. It must 
be admitted that Venezuela over the last few years has made 
great strides in curbing the rampant and scandalous level of 
corruption from both sides - customs and importers - and 
complaints are rare now. 
 
¶3.   The increasing use of data banks covering previous 
imports by tariff number, by importer and by foreign exporter 
has resulted in customs being more aware of average or 
customary price levels which are being used to confront an 
importer whose customs declaration appears to be 
unrealistically low or high. High prices of course would 
result in more duties to be paid. If the importer provides 
proof of higher than normal price, customs can check comparing 
this with previous imports for the same goods, and it can 
request proof that the exchange control board has authorized 
the import at that level. Such overpriced bills have been used 
and are being used as a means of capital flight with 
cooperation by the foreign exporter, of course. Under- 
invoicing on the other hand, is being used by the importer, 
also usually in cooperation with the foreign exporter, to pay 
less customs duties. Containers are often used for this 
purpose. Since customs is allowed to process containers 
holding the same type of product with the same tariff number, 
it can process it as such without opening it. Sporadic checks 
have revealed, however, that far too frequently the containers 
hold far greater numbers of the products than declared. This 
also has been used in the case of tires. The import of used 
tires is prohibited and it was found that containers declared 
to hold new tires did have several rows of new tires visible 
upon opening the container but the majority in the back of the 
container were used tires. This is reported only for the 
purpose of illustrating the schemes being used of which there 
were and still are many. The government by the reference price 
scheme is attempting to cover such and other attempts to 
bypass established fees and rules and, in addition to curbing 
corruption by customs, attempts now to put more attention on 
the importers. The data banks used by customs are rather 
complete and were compiled using the details of imports and 
average price levels over the last six years. 
 
¶4.   Customs is not responsible for dumping matters. A dumping 
investigation can only be triggered by the importers or their 
association and will be handled only by the Dumping and 
Subsidies Commission of the Ministry of Production and 
Commerce. This commission might request from customs, however, 
data banks revealing import levels and lists of importers and 
of foreign manufacturers and exporters for specific goods from 
specific countries. Customs cannot and will not trigger an 
"alarm" of suspected dumping but can be asked to provide 
supporting information during an antidumping investigation. 
 
¶5.   Article 3 of Resolution No.377 of the Ministry of Finance 
clearly states that under no condition may customs use the 
reference prices as obligatory basis for calculating duties or 
as official prices nor as substitute for a declared 
transaction value except under the condition under Article 10 
of the resolution when no method of valid evaluation is 
possible in which case customs may apply the average reference 
price. 
 
¶6.   Proof of the value of a transaction as required in some 
instances by customs can be furnished by any of the following 
documents (not all of them). This list is contained in Article 
52 of the Regulations to Decision 571 of the Andean Community 
Commission: 
 
 a)   proof of foreign exchange transfer effected 
b)   export price lists or similar quotations 
 c)   offers or published quotations for export by the same or 
     other exporter for the same products 
d)   specialized publications with export price lists 
applicable for the Venezuelan market 
 
 
 e)   insurance policy covering the insured and payable value 
 f)   correspondence had with the supplier discussing the 
     agreed upon purchase and export 
g)   any other correspondence supporting the veracity of the 
claimed price paid or to be paid. 
 
¶7.   Customs will not reject an import if all of the required 
documents are not furnished. The importer in the ultimate case 
of refusal by customs to accept proof of veracity of price 
levels claimed, has the choice of re-exporting the shipment 
but customs will not confiscate the import. Customs also might 
be agreeable to have the shipment kept in a bonded warehouse 
until the needed documents are obtained or re-export is 
arranged. This storage would be at the cost of the importer. 
We would assume that such a measure would be extremely rare 
because the importer would most likely accept the ruling of 
the customs officials although he always has the recourse of 
an administrative complaint through customs headquarters or 
even the recourse of legal action. 
 
¶8.   There are no definite measures or methods in case of 
price levels which exceed the established maximum price 
levels. Again, the suspicion of capital flight might arise 
unless the importer can provide documents which confirm the 
price in comparison with previous shipments of the same class 
of products, which also can be verified by customs through its 
data banks. However, this would have been the responsibility 
of the exchange control board which upon receiving from the 
importer the request for foreign exchange would have requested 
such confirmation and customs most likely would not be 
concerned. 
 
¶9.   Customs officials have told us that there have been some 
problems with excessively low prices of some textile products, 
mainly clothing items, in which case customs suspects an 
attempt to pay extremely low duties. These cases have always 
been on behalf of importers of "seconds" (products with small 
defects) or out of fashion items. The importers of such 
products, mostly from Colombia or Central America, are low- 
priced stores in low- income neighborhoods. Customs in such 
cases, we are told, is not concerned with dumping but with 
attempted imports of used clothing which is prohibited. In 
those cases, customs apparently accepts the information of its 
own data banks, the final invoice of the exporter and the 
decision of the exchange control board which authorized the 
dollar transfer. Since the reference prices cannot be used for 
customs valuation according to Article 3, customs will accept 
the claimed price levels for calculating the duty. 
 
¶10.  Customs agents at the principal airport of Caracas we 
have talked to informed us that they have not received any 
guidance in addition to the text of the resolution. They admit 
that this, nor any other possible regulation, can cover any 
eventuality given the huge variety of imports and they appear 
to use their own judgment in cases of doubts or they discuss 
the case with their supervisor who, however, can always 
inquire with customs headquarters to obtain a decision. The 
customs agents report that there have been some discussions 
with individual importers but so far no actual complaints. As 
they put it: "nobody likes to pay duties" and everybody tries 
to find a way to pay less. 
 
¶11.  In general, we find that there is no burden to speak of 
for the exporter in complying with these new regulations nor 
do we see any evidence that they might result in trade 
barriers. The possible protectionist aspects of the 
regulations mentioned in our original message would seem to 
exist only in tightening the honesty of importers and thus 
making it difficult to import textile products at prices which 
appear to be not based on industry realities. Nowhere in the 
resolution is it mentioned that customs has the right to 
reject an import or to confiscate merchandise once supporting 
evidence on prices is supplied if requested nor do there 
appear to be unrealistic time delays in processing imports. 
U.S. exporters, however, should reject any attempts by their 
Venezuelan clients to be partner in preparing shipping 
documents or invoices which contain false information, thus 
becoming partners to a customs fraud. While the resolution 
does not contain any information on fines or other measures 
against foreign exporters, customs fraud will certainly cause 
severe harm to the local companies. Customs agents at the 
airport we interviewed stated that exports arriving from the 
United States very seldom need verification and that their 
attention is focused mainly on imports from Asia and Central 
America. 
 
While we have made every effort to verify the information 
provided in this report, we cannot guarantee its veracity and 
have not tried to have the contents of this message evaluated 
 
 
by legal experts. The report should be considered informative 
only and should not be used to make legal or commercial 
decisions. 
BROWNFIELD 
 
 
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      2005CARACA01851 - UNCLASSIFIED