VZCZCXYZ0023
RR RUEHWEB

DE RUEHPE #1912/01 3411419
ZNR UUUUU ZZH
R 071418Z DEC 09
FM AMEMBASSY LIMA
TO RUEHC/SECSTATE WASHDC 0224
INFO RHEBAAA/DEPT OF ENERGY WASHINGTON DC
RUCPDOC/DEPT OF COMMERCE WASHINGTON DC
RUEATRS/DEPT OF TREASURY WASHINGTON DC
RUEHAC/AMEMBASSY ASUNCION
RUEHBO/AMEMBASSY BOGOTA
RUEHBR/AMEMBASSY BRASILIA
RUEHBU/AMEMBASSY BUENOS AIRES
RUEHCV/AMEMBASSY CARACAS
RUEHLP/AMEMBASSY LA PAZ
RUEHMN/AMEMBASSY MONTEVIDEO
RUEHPE/AMEMBASSY LIMA
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RUEHSG/AMEMBASSY SANTIAGO

UNCLAS LIMA 001912 
 
SIPDIS 
PLEASE PASS TO USTR/GBLUE 
EB/TPP/BTA 
 
E.O. 12958: N/A 
TAGS: ASEC ECON EINV PGOV PE
SUBJECT: PERU NATIONAL TRADE ESTIMATE REPORT 2010 
 
REF: SECSTATE 105824 
 
¶1. (U) In response to State 105824, Embassy Lima reports the 
following update for its National Trade Estimate Report.  This 
report has also been sent as a Word document with track changes to 
USTR by email on December 4. 
 
 
 
¶2. (U) TRADE PROMOTION AGREEMENT 
 
 
 
The United States and Peru signed the United States-Peru Trade 
Promotion Agreement (PTPA) on April 12, 2006.  Peru's Congress 
ratified the Agreement in June 2006 and a protocol of amendment in 
June 2007.  On December 14, 2007, President Bush signed into law 
the PTPA Implementation Act which approved the PTPA.  The PTPA 
entered into force on February 1, 2009. 
 
 
 
The PTPA is a comprehensive free trade agreement.  The PTPA will 
result in significant liberalization of trade in goods and services 
between the United States and Peru.  Under the PTPA, Peru 
immediately eliminated most of its tariffs on U.S. exports, with 
all remaining tariffs phased out over defined time periods.  The 
PTPA also includes important disciplines relating to: customs 
administration and trade facilitation, technical barriers to trade, 
government procurement, services, investment, telecommunications, 
electronic commerce, intellectual property rights, and labor and 
environmental protection. 
 
 
 
¶3. (U) IMPORT POLICIES 
 
 
 
Tariffs 
 
 
 
Under the terms of the PTPA, 80 percent of U.S. exports of consumer 
and industrial products to Peru became duty free immediately, with 
remaining tariffs phased out over 10 years.  More than  two-thirds 
of current U.S. farm exports gained immediate duty-free access to 
Peru.  Tariffs on most of the remainder of U.S. farm products will 
be phased out within 15 years, with all tariffs eliminated in 17 
years.  Peru has also agreed to eliminate its price band system on 
trade with the United States. 
 
 
 
Nontariff Measures 
 
 
 
The government of Peru has eliminated many nontariff barriers, and 
under the PTPA subjects remaining measures, including subsidies and 
import licensing requirements, to additional disciplines.  Peru 
currently restricts imports of certain used goods, including used 
clothing and shoes (except as charitable donations, which are 
subject to the 19 percent value added tax), used tires, cars over 
five years old, and heavy trucks (weighing three tons or more) over 
8 years old.  Used cars and trucks that are granted import permits 
must pay a 45 percent excise tax (compared to 20 percent for a new 
car) unless they are refurbished in an industrial center in the 
south of the country after importation, in which case they are 
exempted entirely from the excise tax.  Under the PTPA, Peru 
affirmed that it would not adopt or maintain prohibitions or 
restrictions on trade in remanufactured goods, and that certain 
existing prohibitions on trade in used goods would not apply to 
remanufactured goods.  This commitment opens new and significant 
export opportunities for firms involved in remanufactured products 
 
 
such as engines, automotive parts, mining and construction 
equipment, transportation machinery, medical equipment, and 
computers. 
 
 
 
¶4. (U) STANDARDS, TESTING, LABELING, AND CERTIFICATION 
 
 
 
In 2008, Peru issued a new technical regulation on footwear 
labeling to address concerns of dumping from Asian countries.  The 
new regulation requires that footwear have a label that includes 
the fiscal identification number (Registro ????nico de Contribuyente 
-R.U.C.) of the manufacturer or importer of the finished product, 
as well as for the manufacturer of the materials that comprise the 
four major components of the footwear.  In 2008, the three main 
footwear items imported by Peru amounted to $110.6 million.  Of 
these $98,592 (less than 0.1% of the total) originated in the 
United States.  Industry has voiced legitimate concerns that this 
regulation is onerous and unnecessary.  In order to comply with the 
regulation, a major footwear importer requires its suppliers to 
comply, while another importer has addressed the issue by attaching 
additional labels at the local bonded warehouse before clearing 
Customs (at the importer's expense). 
 
 
 
Sanitary and Phytosanitary Measures 
 
 
 
Peru has addressed a number of significant sanitary and 
phytosanitary (SPS) and technical regulation issues that had 
impeded or stopped U.S. exports of beef, pork, poultry, and rice. 
However, Peru's national animal and plant health agency, SENASA 
(Servicio Nacional de Sanidad Agaria)  continues to ban U.S. live 
cattle imports based on Bovine Spongiform Encephalopathy (BSE) 
restrictions that are inconsistent with the May 2007 World 
Organization for Animal Health (OIE) classification of the United 
States as a "controlled risk" country for BSE. OIE standards 
specify that trade in live cattle of a "controlled risk" country 
should be permitted. U.S. officials continue to engage Peru's 
authorities in pursuit of science-based import requirements with 
respect to such trade. Peru, along with Bolivia, Ecuador and an 
Andean Community representative, participated in an August 2008 
trip organized by the U.S. Department of Agriculture to evaluate 
the U.S. live cattle system in hopes of improving access for U.S. 
live cattle to these nations. In May 2009, the CAN published a 
proposed regulation with the requirement that only live animals 
under 24 months of age would be allowed to be imported.  Such a 
restriction has no technical justification and is inconsistent with 
the OIE.  APHIS submitted technical comments on the draft in July 
and comments are currently under review by the CAN and the four 
member countries. 
 
 
 
¶5. (U) GOVERNMENT PROCUREMENT 
 
 
 
Since 2002, Peru has applied a 20 percent price preference to bids 
by Peruvian firms in government procurement.  The price preference 
may no longer be applied against U.S. companies in procurement 
covered by the PTPA.  The PTPA requires the use of fair, 
nondiscriminatory, and transparent procurement procedures for 
procurement covered by the PTPA.  Also, under the PTPA, U.S. 
suppliers are permitted to bid on the procurement of most Peruvian 
central government entities, including state-owned enterprises such 
as Peru's oil company and Peru's public health insurance agency. 
The anticorruption provisions in the PTPA require Peru to ensure 
under its domestic law that bribery in matters affecting trade and 
investment, including in government procurement, is treated as a 
criminal offense or is subject to comparable penalties. 
 
Peru is not a signatory to the WTO Agreement on Government 
Procurement. 
 
 
 
¶6. (U) INTELLECTUAL PROPERTY RIGHTS (IPR) PROTECTION 
 
 
 
Peru has put in place laws and regulations to implement its 
obligations under the PTPA, bringing about a number of important 
improvements in IPR protection and enforcement.  Some of these 
improvements include: protecting trademarks used in Internet domain 
names, strengthening measures to prevent the circumvention of 
technological devices for preventing Internet-based copyright 
piracy, removing burdens for patent registration, protecting 
against unfair commercial use of test data and other undisclosed 
information submitted in connection with regulatory approval for 
pharmaceutical and agricultural chemical products, and providing 
deterrent-level penalties for piracy and counterfeiting. 
 
 
 
Trademarks, Patents, and Data Protection 
 
 
 
Peru amended its law on industrial property as well as related laws 
and regulations to put in place state-of-the-art protections for 
trademarks and patents.  Peru has developed an online system for 
registering and maintaining trademarks.  Peru also ensures that the 
first person to acquire a right to a trademark or a geographical 
indication (GI) is the only person who has the right to use it. 
 
 
 
In the area of patents, Peru removed unnecessarily burdensome 
requirements in its patent application process and put in place 
procedures and remedies to prevent the marketing of unauthorized 
copies of pharmaceutical products.  Consistent with its PTPA 
obligation, Peru established a data protection regime that protects 
test and other data submitted in connection with marketing approval 
for medicines and agrochemical products.  The regime seeks to 
balance the promotion of pharmaceutical innovation with access to 
medicines. 
 
 
 
Copyrights 
 
 
 
As part of its PTPA obligations, Peru amended its Copyright Law to 
reflect the realities of copyright in the digital age.  For 
instance, Peru has established strong anti-circumvention provisions 
to prohibit tampering with technologies designed to prevent piracy 
and unauthorized distribution of songs, movies, or other works over 
the Internet.  Other improvements include extending the term of 
protection for copyright protected works, ensuring that Peru's 
government will use only legitimate computer software, and setting 
out legal obligations to prevent piracy of satellite signals. 
 
 
 
Enforcement 
 
 
 
Peru has amended its laws and regulations to provide procedures and 
remedies for improved enforcement of IPR.  As part of this effort, 
Peru reorganized the Intellectual Property Office of Peru 
(INDECOPI) to help expedite the hearing and granting of 
 
 
precautionary measures (injunctive relief), revised its customs law 
and regulations to strengthen the procedures for suspending IPR 
infringing goods and ensuring that those infringing goods are 
seized and destroyed absent the allowable exceptions, and put in 
place deterrent-level penalties for copyright and trademark 
infringement both in civil and criminal violations. 
 
 
 
¶7. (U) SERVICES BARRIERS 
 
 
 
Under the PTPA, Peru assumed commitments to provide 
nondiscriminatory treatment and market access in a substantial 
number of services sectors.  These commitments significantly 
improved upon Peru's WTO commitments in terms of sectors covered 
and elimination of restrictions in sectors such as advertising, 
construction and engineering, energy, information, express 
delivery, and entertainment, including audiovisual services and 
broadcasting.  Peru also committed to increased regulatory 
transparency and to free transfers associated with the supply of a 
service. 
 
 
 
Financial Services 
 
 
 
The PTPA provides for market opening and nondiscriminatory 
treatment across most financial services sectors, including 
banking, insurance, and securities. Under the PTPA, U.S. companies 
have increased ability to provide portfolio advice and certain 
kinds of insurance on a cross-border basis. 
 
 
 
Telecommunications 
 
 
 
In recent years, U.S. companies have complained that Peru's 
telecommunications regulator (OSIPTEL) has not done enough to lower 
the average mobile termination rates in the country, which has 
resulted in significant barriers to competition in the wireless 
sector.  The current maximum rate scale, which U.S. companies claim 
to be well above cost, is scheduled to expire at the end of 2009. 
OSIPTEL recently began the process through which it will establish 
new rates, and it is expected that a public comment proceeding on 
this matter will be conducted later in 2009 that will culminate in 
the establishment of new mobile termination rates for the coming 
years.  Continued oversight and review of these rates by OSIPTEL 
will be important to achieving progress in addressing concerns 
raised by suppliers. 
 
 
 
¶8. (U) INVESTMENT BARRIERS 
 
 
 
Under the PTPA, Peru assumed obligations relating to national 
treatment and most favored nation treatment, ensured the right of 
U.S. investors to make financial transfers freely and without 
delay, applied international legal standards for expropriation and 
compensation, and provided access to binding international 
arbitration. 
 
 
 
Peruvian law restricts majority ownership of broadcast media to 
Peruvian citizens.  Foreigners are also restricted from owning land 
or investing in natural resources within 50 kilometers of a border, 
but they may operate within those areas with special authorization. 
 
Under current law, foreign employees may not comprise more than 20 
percent of the total number of employees of a local company 
(whether owned by foreign or Peruvian persons) or more than 30 
percent of the total company payroll.  Under the PTPA, Peru agreed 
not to apply most of its nationality-based hiring requirements to 
U.S. professionals and specialty personnel. 
 
 
 
U.S. firms remain concerned that executive branch ministries, 
regulatory agencies, the tax agency, and the judiciary often lack 
the resources, expertise, or impartiality necessary to carry out 
their respective mandates.  U.S. investors have also complained 
about the reinterpretation of rules and the imposition of 
disproportionate fines by the tax agency. 
 
 
 
The Peruvian government has tried to address institutional 
weaknesses in the executive branch and has also offered plans for 
judicial reform.  In July 2005, the Supreme Court issued an edict 
stating that final binding arbitration awards cannot be disputed in 
the domestic judicial system.  The U.S. Government has worked with 
the government of Peru both before, and in parallel with, the PTPA 
negotiations to ensure the fair resolution of U.S. investor 
disputes, consistent with Peruvian law. 
MCKINLEY