VZCZCXYZ0018
RR RUEHWEB

DE RUEHEG #2406 3291349
ZNR UUUUU ZZH
R 241349Z NOV 08
FM AMEMBASSY CAIRO
TO RUEHC/SECSTATE WASHDC 0912
INFO RUCPDOC/USDOC WASHDC 0425

UNCLAS CAIRO 002406 
 
SENSITIVE 
 
SIPDIS 
 
E.O. 12958:  N/A 
TAGS: ETRD EINV ECON EG
SUBJECT:  AMBASSADOR RAISES COKE, NIKE COMPLAINTS WITH TRADE 
MINISTER 
 
Sensitive but unclassified.  Please handle accordingly. 
 
¶1.  (SBU)  SUMMARY:  Ambassador met November 23 with Minister of 
Trade Rachid Rachid to discuss two ongoing complaints by US firms, 
Coca Cola and Nike.  In Coke case, which Rachid described as a 
commercial dispute rather than a trade mark issue, he gave his 
assurances that his ministry would not intervene on the side of 
either party to the dispute as long as the case was in the courts. 
Rachid was well aware of Nike's concerns about the Egyptian 
requirement that labels be sewn into items imported into Egypt, and 
said the labels were for the protection of the exporters, but said 
he would be willing to discuss other options with Nike.  END 
SUMMARY. 
 
¶2.  (SBU)  The Ambassador asked Minister of Trade Rachid about the 
status of an ongoing dispute that Coca Cola is having with its 
former bottler, SONUT, a prominent Egyptian bottling company.  She 
said that while she understands that the case is in the courts, that 
it is important that Coca Cola get some immediate, short term legal 
relief as the case could drag on for some time.  Rachid responded 
that he was very familiar with the case, and, having been a licensed 
bottler himself in the 1970s, knew both the Coke and the SONUT 
officials personally.  He said Egypt is pleased to have Coke 
operating in Egypt, and that the company has been a very successful 
one.  At the same time, he said, SONUT is a very distinguished 
Egyptian firm.  He was disappointed that the two sides had not been 
able to reach an amicable agreement and that they had wound up in 
court.  He is also concerned that Coke appears to be turning to the 
301 process for redress, when the case is not a trademark case but 
in fact a commercial, contractual dispute.  He said that his 
ministry would provide all reasonable protection to Coke but would 
not step into the legal case. 
 
¶3.  (SBU) If, Rachid said, a third company had started bottling 
beverages using one of the Coke trademarks, Egypt would not hesitate 
to enforce the case as a trademark infringement.  In this case, 
however, SONUT had been the licensed bottler for the products in 
question and that the two companies disputed whether or not the 
contract was still in force. Coke says that they have cancelled the 
contract, and awarded it to another bottler, which is now producing 
under license.  SONUT claims that the contract has not, in fact, 
been cancelled and that they still have the exclusive right to 
produce Coke products in Egypt.  Coke says the syrup is adulterated 
that SONUT is using is adulterated; SONUT says it is from their 
legitimately-acquired Coke stocks.  Rachind said that he had had 
both sides in his office and tried to work out a compromise but had 
been unsuccessful, and that the dispute had turned "ugly." 
 
¶4.  (SBU) In response to Coke's charged that the SONUT production is 
adulterated and unfit for human consumption, Rachid said that this 
was something his labs were capable of addressing.  What they could 
not do, he said, was determine if the SONUT production was a 
legitimate Coke product, from a chemical point of view, or not.  The 
Ambassador noted that the ministry's own enforcement officers had 
been to the new bottling company with which Coke had signed a 
contract, had shut them down and confiscated their stocks.  Rachid 
acknowledged that this had happened, but that as soon as he had 
heard about it he had overturned the action.  The ministry had since 
returned everything that had been seized, and Rachid had written to 
the judge noting that the action had been in error.  Now, Rachid 
said, his ministry is under orders to not to interfere with Coke's 
bottling operations, or on behalf of SONUT, and to await the outcome 
of the legal process.  For this, he said, he is taking some heat 
politically as the Egyptian Federation of Industry and others have 
tried to intercede on SONUT's behalf.  In the meantime, the case has 
been assigned to one of the economic courts and he is hoping for a 
quick resolution of the case. 
 
Labeling 
-------- 
¶5.  (SBU)  The Ambassador also raised concerns expressed to us by 
Nike about Egypt's labeling laws, which require importers to sew a 
permanent label into textiles.  The manufacturers have complained 
that this adds time and cost to shipments into Egypt.  Rachid said 
that he had discussed this rule with Nike, and said that the purpose 
of the law is to protect legitimate suppliers.  He said that the 
label prevents others from flooding the market with counterfeit, or 
unlicensed goods.  What can happen, according to Rachid, is that 
sub-contract manufacturers in China, for example, gather up all the 
production at the end of the year that hasn't been shipped for Nike 
including products rejected by Nike, and sell it as legitimate Nike 
production.  To address Nike's concerns, Rachid agreed that any 
permanent label or sticker would serve the same purpose, "as long as 
it isn't something they can put on in the store" and that he would 
be happy to talk to Nike if they had some other proposal. 
 
Scobey