VZCZCXRO6321
PP RUEHCHI RUEHDT RUEHFK RUEHHM RUEHKSO RUEHNAG RUEHNH RUEHPB
DE RUEHHI #0137/01 0500629
ZNR UUUUU ZZH
P 190629Z FEB 09
FM AMEMBASSY HANOI
TO RUEHC/SECSTATE WASHDC PRIORITY 9155
INFO RUEHHM/AMCONSUL HO CHI MINH 5582
RUCNASE/ASEAN MEMBER COLLECTIVE
RUEHZU/ASIAN PACIFIC ECONOMIC COOPERATION
RUEATRS/DEPT OF TREASURY WASHINGTON DC
RUCPDOC/DEPT OF COMMERCE WASHINGTON DC

UNCLAS SECTION 01 OF 02 HANOI 000137 
 
EAP/MLS FOR BROWN 
USTR FOR DBISBEE 
 
SIPDIS 
SENSITIVE 
 
E.O. 12958: N/A 
TAGS: ECON EAID EFIN EINV KCOR KPRV PGOV VM
SUBJECT: IMPORT LICENSING: A HALF-HEARTED DEFICIT-BUSTING SCHEME 
 
REF: A) 08 Hanoi 1139 ("Reviewing the Trade Agenda "); 
B) 08 Hanoi 847 ("Economic Highlights: Import Licensing") 
 
HANOI 00000137  001.2 OF 002 
 
 
(U) This cable is Sensitive but Unclassified.  For official use 
only, not for dissemination outside USG channels or posting on the 
internet. 
 
¶1. (U) Summary:  Vietnam's import licensing regime was implemented 
in response to the unprecedented rise in imports that caused a 
record $18 billion trade deficit in 2008.  Although potentially 
burdensome, the licensing scheme has not inhibited U.S. exports to 
date and its scope is much narrower than when it was introduced. 
Despite this, Mission Vietnam continues to engage with the 
Government of Vietnam to ensure that the system does not become an 
obstacle in our growing trade relationship.  End summary. 
 
AUTOMATIC IMPORT LICENSING COVERAGE 
------------------------------ 
 
¶2. (U) Vietnam's automatic import licensing system, introduced in 
August 2008, requires importers of a wide category of goods to 
obtain a license from the Ministry of Industry and Trade (MOIT) to 
get their goods through Customs.  Licenses must be issued within 
five working days and are truly automatic, in that none are turned 
down.  The latest list of goods includes mostly consumer goods like 
cosmetics, kitchen and house appliances, furniture, cell phones and 
automobiles.  The system, which originally had a sunset clause, was 
extended indefinitely last December. 
 
JUSTIFICATION: "DO SOMETHING" 
---------------------------- 
 
¶3. (SBU) MOIT officials told Econoff that the import licensing 
system was needed in order for the Government of Vietnam (GVN) to 
have better statistics on trade flow numbers.  MOIT officials claim 
that Customs does not keep a good record of imports, especially of 
some consumer goods.  (Comment: If this is true, it is hard to 
understand why the GVN simply doesn't require Customs to keep better 
numbers or why it is keeping tabs on only 155 tariff line items.) 
Most observers believe that the timing of the scheme -- at a time 
when Vietnam's trade deficit was rising rapidly -- was not a 
coincidence.  In private, MOIT officials call the system "a mess," 
and acknowledge that they were tasked to "do something" about the 
deficit. 
 
DEFANGING A MUCH-CRITICIZED SYSTEM 
---------------------------------- 
 
¶4. (U) When the system first came out in August 2008, it immediately 
came under criticism.  Over double the amount of imports were 
subject to import licensing, took longer than the required five 
days, and was laden with red-tape and paperwork.  After much 
criticism, including from businesses in the export sector who 
claimed the measure would actually exacerbate the deficit by making 
it harder for them to import the inputs and machinery that they 
needed, the GVN narrowed down the list, removed export industry 
inputs and machinery, shortened the issuance time and drew down the 
number of required documents.  The importers applauded the changes. 
They also welcomed the GVN's leaving the December 2008 sunset clause 
in place.  However, the GVN subsequently reversed its position, and 
on December 12, 2008 renewed the system indefinitely. 
 
OPEN-ENDED AND STILL POTENTIALLY PROBLEMATIC 
------------------------------------ 
 
¶5. (SBU) MOIT officials tell us now that they do not know when the 
system will cease to operate.  Criticism has abated ("we haven't had 
a single complaint about how it operates," they claimed), lessening 
the pressure on the GVN to put an end to it.   Although the deficit 
has gone down and demand for imports is lower, Vietnam still ran a 
deficit in January 2009. 
 
COMMENT: KEEPING UP THE PRESSURE 
-------------------- 
 
¶6. (SBU) The GVN remains concerned about trade flows and will be 
loath to give up a system that helps it identify and target imports 
in a category that the GVN itself refers to as "non-essential." 
Mission Vietnam, USTR representatives and other USG interlocutors 
have raised concerns on import licensing with the GVN on numerous 
occasions (Reftels), and have discussed it with like-minded missions 
in Vietnam.  Bilateral trade with Vietnam was up 25% in 2008 from 
the previous year, and our exports were up by over 38%.  We will 
continue to engage with the GVN and our exporters to ensure that 
import licensing does not affect our trade relationship. 
 
HANOI 00000137  002.2 OF 002 
 
 
 
MICHALAK