VZCZCXYZ0007
RR RUEHWEB

DE RUEHRB #0453/01 0721054
ZNR UUUUU ZZH (CCY ADA323C9 MSI0595-695)
R 131054Z MAR 06
FM AMEMBASSY RABAT
TO RUEHC/SECSTATE WASHDC 3074
INFO RUEHCL/AMCONSUL CASABLANCA 1381
RUCPDOC/USDOC WASHDC
RUEHRC/USDA FAS WASHDC 0861

UNCLAS RABAT 000453 
 
SIPDIS 
 
SENSITIVE 
SIPDIS 
 
C O R R E C T E D COPY ADDED SIGNATURE 
 
USTR FOR DOUG BELL 
STATE ALSO FOR NEA/MAG AND NEA/OFI 
STATE ALSO FOR EB/TPP 
USDOC FOR ITA/MAC/ANESA - DAVID ROTH 
USDA FOR ITP - BOB MACKE 
 
E.O. 12958: N/A 
TAGS: ETRD EAGR BEXP KIPR KTIA MO
SUBJECT: FTA Implementation:  First Bumps in the Road 
 
 
(U)  This cable is sensitive but unclassified.  Please 
protect accordingly. 
 
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SUMMARY 
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¶1.  (SBU)  Summary:  During the first 75 days of FTA 
implementation Moroccan and U.S. businesses have experienced 
a few difficulties.  The most pressing and disturbing 
implementation difficulties have been in the area of 
agricultural trade, including an unfavorable rules of origin 
determination for U.S. almonds, a delay in Washington 
approval of a system for auctioning wheat tariff rate quotas 
(TRQs), and two sanitary/phyto-sanitary (SPS) issues related 
to apples and meat.  Moroccan textile and garment exporters 
report that U.S. customs officials at ports of entry are 
unaware of Moroccan FTA provisions.  Post believes a meeting 
of the FTA Agricultural Committee (including the SPS 
Subcommittee) and/or the Customs/Rules of Origin (ROO) 
committee should be convened in the near future to address 
these and other issues of mutual interest.  The U.S. 
intellectual property rights (IPR) industry, while thrilled 
with the FTA provisions, has begun campaigning for improved 
IPR enforcement. End Summary. 
 
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AGRICULTURE 
----------- 
 
¶2.  (SBU)  The most pressing and disturbing implementation 
difficulties have been in the area of agricultural trade. 
Three separate issues have arisen:  The distribution system 
for FTA wheat importation quotas has not been finalized; a 
shipment of U.S. almonds failed to meet rules of origin 
requirements because it was ostensibly not shipped 
"directly" from the United States to Morocco; and U.S. 
apple, beef, and poultry meat exporters are facing sanitary 
and phyto-sanitary challenges.  Post believes that these 
issues alone warrant convening a meeting of the FTA's 
Agricultural Committee soonest. 
 
Wheat Quota Auction on Hold 
--------------------------- 
 
¶3.  (SBU)  In April 2005, the GOM sent USTR a proposed 
procedure for auctioning wheat TRQs.  Moroccans officials 
are still awaiting approval from Washington before holding 
these auctions.  If no answer is received, no importer will 
have the right to import U.S. wheat under the negotiated TRQ 
during the March-May 2006 timeframe.  Emboffs understand 
that Washington is struggling with issues of marketing year 
definitions, but Agatt and Econoffs are worried that the 
first 700,000 ton wheat quota will be lost without quick 
resolution of this issue. 
 
Indirect Almonds 
---------------- 
 
¶4.  (SBU)  Two containers of Californian almonds 
(approximately 40 tons) arrived in Tangier on January 3, 
2006, just after the FTA came into effect.  The exporter, 
Campos Brothers, apparently intended to use the 50 ton 
annual quota for U.S. almonds.  Moroccan Customs officials 
note that the almonds arrived from in-bond storage in Spain. 
Bills of lading indicate shipment from Houston to Algeciras, 
Spain and no onward shipment to Morocco.  This, argue 
Moroccan customs officials, does not fulfill the "direct 
shipment" rule of origin contained in Article 5.1 of the 
agreement.  Furthermore, they argue, in-bond storage is not 
covered by the transshipment exceptions to Direct Shipment 
contained in Article 5.9.  Moroccan officials note that 5.1 
provisions regarding direct shipment were a U.S. demand 
during the FTA negotiations.  The Ambassador, EconCouns and 
Agatt have repeatedly raised the issue with Moroccan Customs 
officials, arguing Campos Brothers case.  The Moroccan chief 
of Customs told the Ambassador he would "look into" the 
matter.  Moroccan customs officials say a finding by U.S. 
Customs that the almonds fulfill FTA ROO would satisfy them 
enough to change their ruling.  Congressman Devin Nunes (R- 
CA), whose family farms almonds, has contacted the 
Ambassador regarding this case.  Emboffs believe that the 
direct shipment ROO interpretation precedent will prove 
important for a wide range of other U.S. agricultural 
exporters.  A meeting of U.S. and Moroccan customs officials 
under the aegis of an FTA Committee might prove invaluable 
to resolving an interpretative difference with potential 
long-term and wide ranging impacts that reach far beyond 
this initial shipment. 
 
Sanitary and Phyto-Sanitary 
--------------------------- 
 
¶5.  (SBU)  Two SPS issues have arisen.  We believe that 
either the FTA Agricultural Market Access Committee or its 
SPS Subcommittee are the proper venues for resolving these 
two issues.  The first involves apples.  Moroccan 
Agricultural Ministry officials requested new certification 
requirements on January 25, 2006.  While USDA is working to 
meet these new requirements, we fear that due to the short 
shipping season for the TRQ - February 1 through May 31 - 
export opportunities will be lost in the interim.  The 
second SPS difficulty relates to sanitary health 
certification for beef and poultry.  Under the FTA, the 
United States is entitled to a four thousand ton TRQ for 
high quality beef and a similar quota for poultry.  While 
the major sanitary obstacles to trade were addressed during 
the FTA negotiations, other issues (such as BSE) have since 
arisen.  These require renewed efforts to finalize a model 
health certificate to facilitate trade. 
 
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TEXTILES 
-------- 
 
¶6.  (U)  Moroccan textile and garment exporters have 
reported that their U.S. importers are experiencing 
difficulties with U.S. Customs at ports of entry.  U.S. 
officials are apparently unaware of new FTA market access 
provisions.  One Moroccan exporter, SOMITEX, told Econoff 
that its importer had to pay tariffs on a product it thought 
was duty free under the FTA.  The MEPI-funded IESC Morocco 
Fast Track Trade Program reported similar difficulties 
experienced by its Moroccan SME customers.  U.S. garment 
importers (e.g. a Liz Claiborne executive) and Casablanca- 
based trade lawyers have complain about the complexity of 
the FTA's textile provisions.  A U.S. Customs official who 
is preparing instructions for dissemination to ports of 
entry admitted to IESC representatives that the Morocco 
FTA's textile provisions are the most complicated they have 
encountered.  These anecdotes reinforce accusations that 
U.S. Customs may not have distributed proper instructions to 
agents at ports of entry.  Post would appreciate any 
guidance on the status of information dissemination so that 
emboffs can brief Moroccan government officials and 
exporters.  Encouragingly, these negative experiences are 
limited to textile and garment exporters.  Other Moroccan 
manufactured goods exporters report no difficulties (in fact 
they have been impressed by U.S. customs preparedness). 
 
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IPR 
--- 
 
¶7. (SBU)  While U.S. industry is largely thrilled with the 
exceptionally high levels of IPR protection contained in the 
FTA, representatives of U.S. companies have already begun 
complaining about inadequate enforcement, especially for 
pirated software, CDs and DVDs.  Microsoft (as local 
Business Software Alliance representative) has approached 
econoffs regarding Morocco's failure to enforce adequately 
laws governing software licensing.  Most egregiously, 
Microsoft claims (but has yet to provide a detailed 
quantitative report on the breadth or magnitude of the 
problem, and it refuses to "name names") that Moroccan 
ministries are using unlicensed products, in explicit 
contravention of FTA provisions.  Trademark holders 
(including Mars candies) have complained that court cases 
take too long and that without injunctions, infringers 
continue to operate with impunity during legal proceedings. 
Emboffs note that MEPI-funded USPTO technical assistance for 
patent and trademark protection, MEPI-funded CLDP training 
for copyright and ISP liability, and USAID's Business New 
Business Environment Program will address IPR enforcement 
issues. 
 
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COMMENT: 
-------- 
 
¶8.  Comment: Having worked hard for more than three years 
within the USG and with our GOM and private sector partners 
on both sides of the Atlantic not only to negotiate and 
implement the accord, but to raise its profile through 
persistent public diplomacy campaigns, Embassy Rabat wants 
to ensure that the FTA fulfills its promise.  As the GAO 
found in its report on monitoring and enforcing trade 
agreements (GAO 05-537), diplomatic posts and Washington 
trade agencies should redouble efforts to follow-through on 
our negotiated agreements.  Toward that end, we strongly 
recommend convening appropriate ad hoc experts meetings or 
meetings of appropriate FTA committees as set out in the FTA 
to address these initial difficulties and to reduce the 
probability of new issues arising in the future. 
BUSH