VZCZCXRO3586
RR RUEHLMC
DE RUEHUM #0316/01 1532230
ZNR UUUUU ZZH
R 022230Z JUN 07
FM AMEMBASSY ULAANBAATAR
TO RUEHC/SECSTATE WASHDC 1154
INFO RUEHBJ/AMEMBASSY BEIJING 5583
RUEHUL/AMEMBASSY SEOUL 2771
RUEHKO/AMEMBASSY TOKYO 2502
RUEHMO/AMEMBASSY MOSCOW 1782
RUEHML/AMEMBASSY MANILA 1390
RUEHLO/AMEMBASSY LONDON 0138
RUEATRS/DEPT OF TREASURY WASHDC
RUCPODC/USDOC WASHDC 1287
RUEHLMC/MILLENNIUM CHALLENGE CORP WASHINGTON DC 0594
RHEHNSC/NSC WASHDC
RUEHRC/USDA FAS WASHDC
RUEHGV/USMISSION GENEVA 0300
RUEHBS/USEU BRUSSELS

UNCLAS SECTION 01 OF 02 ULAANBAATAR 000316 
 
SIPDIS 
 
SIPDIS 
 
STATE PASS USTR, USTDA, OPIC, AND EXIMBANK 
USTR FOR M SANDLER, T STRATFORD, AND T WINELAND 
STATE FOR EAP/CM, EAP/PD, AND EB/TPP 
USAID FOR ANE FOR D. WINSTON 
MANILA AND LONDON FOR ADB, EBRD USEDS 
TREASURY FOR USEDS TO IMF, WORLD BANK 
 
E.O. 12958: N/A 
TAGS: ETRD PREL EAID ECON EFIN PGOV MG
SUBJECT: Third US-Mongolia TIFA Joint Council, March 12, 2007, Part 
3 of 3: USTR's Mongolian GSP Roadshow 
 
Ref:  Ulaanbaatar 157 
 
¶1. (U) SUMMARY: Immediately following the March 12 Third US-Mongolia 
Trade and Investment Framework Agreement (TIFA) Joint Council 
meeting, Marideth Sandler, Executive Director of USTR's Generalized 
System of Preferences (GSP) program, spearheaded a GSP education and 
outreach drive March 13-15 in Mongolia's three largest cities.  The 
outreach presentations detailed how businesses of all types might 
take better advantage of U.S. import tariff exemptions on a wide 
assortment of handcrafted products, as well as manufacturered items, 
minerals, and agricultural goods.  Ms. Sandler addressed the 
specific needs of low-income producers of handicrafts, delivering a 
detailed explanation of about opportunities for these small-scale 
producers under GSP in general and under the handicrafts agreement. 
In these and in presentations to larger, more prosperous producers, 
USG presenters also highlighted the need for producers to 
acknowledge that gains from GSP duty-free treatment  would be 
increased by quality improvements in exports and enhanced capacity 
to distribute and market Mongolian products. END SUMMARY. 
 
¶2. (U) Piggybacking on March 2007's TIFA talks in Ulaanbaatar, post 
worked with USTR GSP Program Executive Director Marideth Sandler to 
develop a GSP road show that could take our message directly to the 
Mongolian producers and exporters best positioned to profit from the 
GSP program and opportunity for Mongolia to enter into a 
U.S.-Mongolia certified handicraft arrangement note: reftel contains 
background on Mongolia's GSP usage, and Mongolia's non-energized 
response to the U.S. handicrafts proposal). Previously, some 
officials in the Ministry of Industry and Trade (MOIT) offered 
gloomy predictions with respect to handicraft producer interest and 
product volumes.  However, Ms. Sandler's GSP presentations in 
Ulaanbaatar, Darkhan and Erdenet played to standing room only 
audiences of enthusiastic  small-scale cottage and medium-sized 
producers eager to learn about duty free import opportunities. 
 
¶3. (U) Numbering some 200 participants total in the three cities, 
attending firms ranged from small  individual business owners 
working with the USAID/USDA-funded Grow Entrepreneurs Rapidly (GER) 
Initiative to the larger member companies of the Mongolian National 
Chamber of Commerce and Industry (MNCCI). The firms ranged in size 
from single mothers producing felt slippers to molybdenum and steel 
rod producers, and garment and leather goods manufacturers employing 
several hundred workers.  Products included handmade items of wool, 
cashmere, felt, wood, stone etc, foodstuffs, textile and 
metallurgical products. For many of the attendees, it was the first 
time they had heard about duty free export opportunities to the 
United States. Previously, these same producers had focused their 
energies on exports to the European Union under the GSP Plus 
Program, but strict quality requirements and small scale orders from 
European buyers made GSP Plus unprofitable, unviable and generally a 
disappointment for Mongolia's exporters. 
 
¶4. (U) All participants wanted to learn which products fall under 
the GSP program, saying the information was difficult for them to 
obtain and impossible to comprehend from the information they 
currently possessed. In response, a representative from the MNCCI 
promised to have the U.S. Harmonized Tariff System of Preference 
(USHTSP) translated into Mongolian and posted on its website so 
exporters could better access and understand the list. 
 
¶5. (U) To ensure that eligible exports enter the U.S. duty free, Ms. 
Sandler reminded her audiences of the importance of correctly 
marking the letter "A" on the U.S. Customs Entry Form as well as 
making sure that exported products are categorized with the proper 
name and code from the Harmonized Tariff Schedule of the United 
States.  A Mongolian Customs Official who attended the presentations 
echoed this point. 
 
¶6. (U) Rules of Origin regulations were also a matter that confused 
many producers.  MNCCI had been issuing Certificates of Origin to 
every U.S.-bound shipment, but both MNCCI and exporters were 
surprised by Ms. Sandler's statement that such certificates were not 
 
ULAANBAATA 00000316  002 OF 002 
 
 
required under the GSP program, and that U.S. importers, rather than 
Mongolian exporters, bore the burden of proving country of origin. 
Nevertheless, MNCCI and MOIT representatives noted that both 
Mongolian exporters and U.S. Customs needed to cooperate to prevent 
products of fraudulent origin from being exported to the U.S. 
 
¶7. (U) Besides learning the ins and outs of GSP paperwork, 
Mongolians wanted to know how to locate potential buyers for their 
products in the U.S., a theme hit upon in all three cities.  Several 
ideas were mentioned to help increase awareness of Mongolian 
handicraft products including the organization of a handicraft expo 
and the creation of catalogues that could be distributed via 
commercial contacts in the U.S.  Catalogues were seen as the best 
near term solution, as most handicraft producers in Mongolia are low 
income individuals or families who could not possibly afford the 
costs of participating in U.S. expos. Excellent quality catalogues 
are already being produced by CHF, the contract agency for USAID's 
Ger Initiative, to market the wares of affiliated producers. 
 
¶8. (U) Speaking from her own experience in marketing handicrafts 
abroad, Margaret Herro, Director of CHF-Mongolia, encouraged 
producers to improve the quality of their handicraft products before 
engaging in expensive promotional campaigns.  Recent promotional 
efforts in Germany, for example, failed because the quality of the 
products did not meet consumer demands. The MOIT representative felt 
producers should first focus on developing and improving their 
products locally by targeting foreign tourists to Mongolia in 
hotels, gift shops, tourist camps and other channels.  She also 
suggested consolidating all handicraft products before export to 
address the quantity and shipping issue. 
 
¶9. (U) COMMENT: Our GSP outreach was a timely and useful event, 
judging by the enthusiastic and interested reactions of the 200+ 
producers, and it underscored the USG's commitment to taking real 
steps that will increase bilateral trade. Mongolian exporters are 
eager to take advantage of any opportunity to sell their products 
abroad, but they often lack the correct information and capacity to 
make it happen.  Ms. Sandler's presentations also sparked 
discussions that drove home the point to Mongolians that elimination 
of tariff barriers alone -- such as through an often-requested 
bilateral free trade agreement (FTA) -- would not by itself increase 
exports.  Instead, Sandler and company emphasized that product 
quality, consistent and reliable product supply, and effective 
marketing are at least as important to exports as tariff rates. 
Post will monitor the progress of the handicraft agreement and 
especially the effects it may have on Mongolia's handicrafts 
industry over the next year.  Post also wishes to express its thanks 
to Ms. Sandler and the others involved in making this outreach 
effort a success.  END COMMENT. 
 
¶10. (U) USTR GSP Executive Director Sandler cleared this message. 
 
Goldbeck