VZCZCXRO6551
PP RUEHCN RUEHGH
DE RUEHHK #0232/01 0240846
ZNR UUUUU ZZH
P 240846Z JAN 07 ZDK
FM AMCONSUL HONG KONG
TO RUEHC/SECSTATE WASHDC PRIORITY 0247
RUCPDOC/USDOC WASHDC
INFO RUEHBJ/AMEMBASSY BEIJING 0131
RUEHGH/AMCONSUL SHANGHAI
RUEHGZ/AMCONSUL GUANGZHOU 0358
RUEHCN/AMCONSUL CHENGDU 1026
RUEHSH/AMCONSUL SHENYANG 3491
RUEHIN/AIT TAIPEI 4347

UNCLAS SECTION 01 OF 02 HONG KONG 000232 
 
SIPDIS 
 
State/EB/TPP/ABT LERSTEN 
Commerce/ITA/OTEXA D'ANDREA 
STATE PASS TO USTR QUESENBERRY, HEYLINGER 
STATE PASS TO CBP LABUDA 
 
SIPDIS 
 
E.O. 12958: N/A 
TAGS: ECON ETRD KTEX HK CH
SUBJECT:  CBP'S LABUDA URGES HKG TO IMPROVE TEXTILE ENFORCEMENT 
COOPERATION 
 
SENSITIVE BUT UNCLASSIFIED. PLEASE HANDLE ACCORDINGLY. 
 
¶1. (SBU) Summary:  Janet Labuda, Director of Textile Enforcement and 
Operations Division, Office of International Trade at U.S. Customs 
and Border Protection (CBP), and Scott Quesenberry, USTR Special 
Textile Negotiator, met with Hong Kong government (HKG) officials to 
discuss the Memorandum of Understanding on U.S. - Hong Kong 
Cooperation in Trade in Textiles and Apparel Goods.  Labuda 
expressed concern that the 2005 and 2006 Joint Observation Visits 
(JOVs) reveal that the United States still receives high levels of 
textile and apparel imports from Hong Kong textile factories that 
either have been reported as closed or have cancelled their 
registrations to export to the United States.  Labuda urged the HKG 
to proactively provide CBP with information on all factories that 
cancel or fail to renew their factory registration.  The HKG 
responded that legal mechanisms in Hong Kong do not allow for 
sharing of such confidential material, but were willing to open 
investigations on companies that the U.S. suspects of committing 
textile violations.  END SUMMARY. 
 
¶2. (SBU) Labuda opened the meeting by stating that the United States 
finds the Memorandum of Understanding on U.S. - Hong Kong 
Cooperation in Trade in Textiles and Apparel Goods (MOU) a useful 
tool in reducing textile violations and ensuring legitimate trade. 
The MOU, signed in 2005, covers U.S. and Hong Kong Customs 
cooperation in the form of Joint Observation Visits (JOVs) to 
provide both governments with information to stop illegal textile 
and apparel shipments.  Labuda noted, however, that CBP is concerned 
about the continued inability to visit many "high risk" factories. 
During the November 2005 and December 2006 JOVs, the majority of 
Hong Kong factories targeted for investigation could not be visited 
because they had closed, cancelled their factory registration, or 
outright refused admission to the investigating team (see para 3 for 
data on visits). 
 
¶3. (SBU) The JOV figures for 2006 and 2005 were: 
 
December 2006 JOV: 
 
206       factories targeted; 
139 (67%) could not be visited; 
92/139    were closed or had cancelled registration; 
15/139    refused admission to the team; 
32/139    are under investigation; 
 
November 2005 JOV: 
 
172       factories targeted; 
127 (74%) factories could not be visited; 
65/127    were closed or had cancelled registration; 
24/127    refused admission to the team; 
38/127    were under investigation (high 
 
          potential); 
3/172     were visited with evidence of illegal 
          transshipment uncovered; 
8/172     were visited and determined to have high 
          potential for transshipment; 
26/172    were visited and determined to have low potential 
          for transshipment; 
3/172     were visited with no evidence of transshipment 
          Uncovered; 
 
¶4. (SBU) Labuda also explained that CBP uncovered a large number of 
factories that have cancelled their factory registration, but still 
ship textiles to the United States.  She asked repeatedly for Hong 
Kong to provide CBP with the names of factories that fail to renew 
their registration or suddenly renew it after it has lapsed.  This 
information, she reiterated, would facilitate CBP's ability to 
identify illegal shipments, take law enforcement action, and impose 
penalties on violators.  The HKG responded that providing such 
information outside of an active law enforcement investigation 
violated Hong Kong's privacy regulations.  Belinda Kwan, Assistant 
Director-General for Trade and Industry at the Hong Kong Trade and 
Industry Department, noted numerous times that the decision not to 
renew a factory registration is not necessarily an indication of 
fraud.  The HKG views such actions as a business decision over where 
a company hopes to sell its products.  She noted that if there is no 
evidence of illegal activity, neither the HKG nor its employees can 
share that information with a third party without the consent of the 
 
HONG KONG 00000232  002 OF 002 
 
 
people or companies concerned.  She proposed that, if the U.S. was 
concerned about a specific factory, it could provide the HKG with 
the name and reasons for its concern.  The HKG would subsequently 
use this information to open an official law enforcement 
investigation if the suspicion was legitimate and resources allow. 
 
 
¶5. (SBU) Labuda also remarked that the U.S. and Hong Kong have 
different methods for gathering statistics and analyzing data.  She 
stated that these differences were effective in determining 
companies to target for a JOV, particularly when both sides - using 
different methodologies - identified the same manufacturing facility 
as a factory of concern.  She urged increased data-sharing and the 
comparison of statistics to help refine the procedures for 
identifying companies of concern that should be visited in future 
JOV's.  She also requested further information on how the HKG 
targets companies to undergo a Factory Audit Check (FAC) and stated 
that the U.S. will continue to detain goods from facilities under 
FAC investigation.  Kwan responded by stating a FAC is technically a 
law enforcement investigation and, therefore, the HKG only conducts 
such checks on companies it suspects of textile violations.  Labuda 
also stated that any information that the HKG provides to CBP in 
order to assist in the detection of instances of violations would be 
extremely helpful.  Labuda mentioned that other economies in the 
region are working very closely with CBP by providing information on 
suspect containers and shipments. 
 
¶6. (SBU) Labuda concluded the meeting by proposing an additional JOV 
in 2007, which the HKG welcomed.  Labuda then provided the HKG with 
a list of Hong Kong companies that are connected with seizures of 
illegal textiles into the United States and asked for information to 
determine whether these entities actively participated in textile 
violations or were unaware of their connection to an illegal 
shipment.  She noted that CBP would like to re-invigorate 
information sharing, including the quarterly targeting initiative, 
and would provide the HKG with information on high-risk companies on 
a regular basis.   The HKG reiterated that they would follow up on 
her requests, as resources allow.  The HKG also asked CBP to refrain 
from identifying the MOU and JOV's as reasons for detaining textile 
shipments from Hong Kong at U.S. ports of entry, noting that it 
increases public pressure on the HKG, with some Hong Kong businesses 
opposing their close cooperation with the USG on textiles.  Labuda 
responded that CBP never provides the specific intelligence that 
leads to detaining or seizing a shipment. 
 
7 (SBU) The following people attended the meeting: 
 
Hong Kong Government: 
 
-- S.Y. Cheung, Head of Trade Controls, Hong Kong Customs and 
Excise 
-- Paul Sit, Principal Trade Controls Officer, Hong Kong Customs and 
Excise 
-- Belinda Kwan, Assistant Director-General, Trade and Industry 
(Systems), TID 
-- Eliza Lam, Principal Trade Officer (Systems), TID 
-- Erica Ng, Assistant Director-General of Trade and Industry 
(Americas), TID 
-- Doris Chan, Principal Trade Officer (Americas), TID 
 
U.S. Government: 
 
-- Janet Labuda, CBP Director, Textile Enforcement Operations 
Division 
-- Scott Quesenberry, Special Textile Negotiator, USTR 
-- Richard Powell, Senior CBP Representative, U.S. Consulate 
General, Hong Kong 
 
¶8. (U) Janet Labuda of CBP has cleared this cable. 
 
Cunningham