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Viewing cable 06HANOI1661, U.S. - Vietnam BTA Review

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Reference ID Created Released Classification Origin
06HANOI1661 2006-07-06 10:35 2011-08-25 00:00 UNCLASSIFIED//FOR OFFICIAL USE ONLY Embassy Hanoi
VZCZCXRO2384
OO RUEHHM
DE RUEHHI #1661/01 1871035
ZNR UUUUU ZZH
O 061035Z JUL 06
FM AMEMBASSY HANOI
TO RUEHC/SECSTATE WASHDC IMMEDIATE 2622
INFO RUEHHM/AMCONSUL HO CHI MINH CITY 1457
RUEATRS/DEPT OF TREASURY WASHDC
RUEHGV/USMISSION GENEVA 1096
RUCPDOC/USDOC WASHDC
RUEHRC/USDA WASHDC
RUEHRC/USDA FAS WASHDC
RUEAIIA/CIA WASHDC
RHEHNSC/NSC WASHDC
RUEHZU/APEC COLLECTIVE
RUEHZS/ASEAN REGIONAL FORUM COLLECTIVE
UNCLAS SECTION 01 OF 06 HANOI 001661 
 
SIPDIS 
 
STATE FOR EAP/MLS AND EB/TPP/BTA/ANA 
STATE PASS USTR DBISBEE, BWEISEL 
USDOC FOR 4431/MAC/AP/OPB/VLC/HPPHO 
TREASURY FOR OASIA 
 
SENSITIVE 
SIPDIS 
 
E.O. 12958: N/A 
TAGS: ETRD ECON KIPR WTRO VM
SUBJECT: U.S. - Vietnam BTA Review 
 
 
HANOI 00001661  001.4 OF 006 
 
 
SENSITIVE - DO NOT POST ON INTERNET 
 
1. (SBU) Summary: On June 19, the Ministry of Trade hosted the 
annual meeting of the Bilateral Trade Agreement (BTA) Joint 
Committee. During the meeting, Vietnam clarified the steps it has 
taken and those underway to implement BTA commitments.  The 
Vietnamese team made a concerted effort to address issues raised by 
the United States.  In large part, Vietnam is in compliance with its 
BTA commitments, but some U.S. concerns remain, particularly in 
areas where comprehensive legislation has recently been passed and 
implementing regulations have not been finalized.  END SUMMARY. 
 
2. (SBU) After Vice-Minister of Trade Luong Van Tu welcomed the U.S. 
delegation, Deputy Chief of Mission Boardman emphasized that 
successful implementation of the BTA will build support for 
Vietnam's Permanent Normal Trade Relation status in Congress. 
Barbara Weisel, Assistant USTR for Southeast Asia and the Pacific 
and Pharmaceutical Policy chaired the day-long meeting for the 
United States while Office of the Government International Relations 
Department Director Bui Huy Hung chaired for the Vietnamese side. 
The U.S. delegation included Victoria Espinel, Assistant USTR for 
Intellectual Property; David Bisbee, Director, Office of Southeast 
Asia and the Pacific, USTR; Jennifer Ness, Attorney Advisor, U.S. 
Patent and Trademark Office; Hong-Phong Pho, Country Desk Officer, 
U.S. Department of Commerce; John Wade, Agriculture Attache, USDA; 
and Janet Speck, Deputy Chief of Economic Section. 
 
Intellectual Property Rights (IPR) - BTA Chapter 2 
--------------------------------------------- ----- 
 
3. (SBU) Status of 2005 Intellectual Property (IP) Law and 
Implementing Regulations:  Vietnam provided the United States with 
an update on the 2005 IP Law, which will take effect on July 1, and 
will have four implementing decrees covering copyright, industrial 
property, plant varieties, and enforcement as well as circulars from 
each ministry, regulations on courts from the Supreme Court and 
three decrees on administrative violations.  The four main decrees 
were originally going to be issued at the time the IP Law entered 
into force; however, the Vietnamese side explained that they are now 
scheduled to come out sometime before the end of July.  Drafts of 
the enforcement and industrial property decrees are currently on the 
National Office of Intellectual Property (NOIP) website for public 
comment.  The Vietnamese also provided the U.S. side the latest 
version of the copyright decree.  When asked for clarification on 
the legal status of existing decrees pending finalization of the new 
decrees, Vietnam responded that existing IP-related decrees, if 
consistent with the new law, will remain in force, unless replaced 
by a new decree.  Even though the new decrees will not be issued 
before the law comes into effect, Vietnam plans to implement the IP 
Law immediately.  The U.S. side offered to help Vietnam with plans 
to educate the public on the new law. 
 
4.  (SBU) Enforcement:  The U.S. side expressed concern that 
provisions in the IP Law that limit criminal liability to violations 
exceeding a certain monetary amount or to repeated violations did 
not meet the BTA and WTO requirement that infringement be criminal 
if it is willful and on a commercial scale.  AUSTR Espinel noted 
that the United States has grave concerns about China's system, 
which, like Vietnam's, sets monetary thresholds before conduct is 
considered criminal.  In response, the Vietnamese side cited 
circulars and guidelines that defined the factors making 
infringement criminal.  Article 131 in the Criminal Code defines a 
crime and Trial Circular No. 2 from the Second People's Court 
provides greater detail.  By Vietnamese law, the IP law's 
implementing decrees cannot supersede the criminal code; therefore, 
the decrees cannot be more specific than the code in this area.  In 
response to questions from the United States, the Vietnamese side 
promised to provide further clarification on the definition of 
"seriousness" in Vietnam's criminal code and to provide the United 
States with an English language translation of Circular 2/2001 
(12/25/2001), which deals with criteria for criminal thresholds. 
 
5.  (SBU) Remedies:  The U.S. side asked which provisions of the new 
law provided remedies for civil, criminal and administrative 
violations that included seizure, forfeiture and destruction. 
According to Vietnam, Article 202(5) of the IP Law provides these 
remedies in civil proceedings and Article 214(2) provides them for 
 
HANOI 00001661  002.4 OF 006 
 
 
administrative proceedings.  They promised to provide citations to 
the appropriate provisions in the Criminal Code.  The U.S. side, 
noting that the IP law permits courts to order that infringing goods 
be used for noncommercial use, asked the Vietnamese to clarify 
"noncommercial use."  The Vietnamese said "noncommercial use" could 
mean giving the goods to charity or using them in public agencies. 
The U.S. side responded that donating seized goods to charity is 
acceptable, but distributing them to public agencies raised 
concerns.  GVN noted that the Common Decree on Enforcement clarified 
the circumstances under which infringing goods could be used for 
non-commercial purposes. 
 
6.  (SBU) Re-exporting:  The U.S. asked for an explanation of the 
rationale for permitting the re-export of pirated and copyright 
goods once the infringing element has been removed because, unlike 
for counterfeit goods, pirated and copyright goods, as a whole, are 
infringements and the infringing element cannot be removed.  Vietnam 
explained that the broad language prevented situations where the law 
would, in effect, require that valuable goods be destroyed even 
though it is possible to remove the infringing element or where 
destruction is environmentally harmful or excessively expensive. 
The United States suggested clarifying this issue. 
 
7.  (SBU) Administrative Remedies:  The two sides discussed how 
monetary penalties would be calculated under the new law, with the 
United States expressing concern that the low fines for 
counterfeiting under administrative remedies in the IP law might not 
sufficiently deter criminals or signal Vietnam's seriousness about 
intellectual property rights. The administrative fines for 
counterfeiting in the IP law are one to five times the value of the 
infringing good, which could be lower than the value of the real 
good.  Vietnam noted that many National Assembly members felt the 
penalty is too high because it might bankrupt counterfeiters and 
would be difficult to enforce.  Furthermore, Vietnam's ability to 
modify the penalties is restricted because decrees cannot increase 
the administrative penalties already set out in the IP Law.  The 
U.S. noted that it would be better to have a penalty equal to the 
value of the genuine good than a penalty equal to five times the 
value of the infringing good. 
 
8. (SBU) Geographical Indications (GI):  When asked if Vietnam has a 
separate system for geographical indications and how trademarks and 
geographical indications interact, the Vietnamese side said that 
geographical indications are separate from trademarks.  GIs are 
covered in the decrees on enforcement and industrial property and 
the Ministry of Science and Technology will also issue a circular. 
The IP Law only provides for GIs in Vietnam; U.S. companies seeking 
geographical indication protections must apply directly to the 
Vietnamese government. 
 
9. (SBU) Data Protection:  Article 128 of the IP Law has two 
paragraphs; the first requires the government to protect data from 
disclosure or unfair commercial use and the second denies a license 
to a subsequent applicant who uses data without permission.  The 
U.S. side emphasized that draft implementing decrees should apply to 
both parts of Article 128 and that the U.S. would want to see draft 
decrees before Vietnam's WTO accession.  The WTO working party 
report should provide clarity on Vietnam's data protection law.  The 
Vietnam side asked the U.S. side to provide written comments and 
promised to convey U.S. concerns to the committees drafting the 
implementing decrees. 
 
Copyright - BTA Chapter 2 
------------------------- 
 
10.  (U) The discussion on IPR enforcement and other IPR issues took 
up the morning, therefore the Joint Committee split into two 
sections in the afternoon.  One group, led on the U.S. side by AUSTR 
Victoria Espinel, discussed copyright issues, while the rest of the 
group moved on to other issues. 
 
11.  (SBU) Phonograms:  In response to questions from the U.S. side, 
the Vietnamese clarified that Article 30 of the IP Law gives 
phonogram producers exclusive rights to distribution and that 
Article 30(2) only means the producer has the right to receive 
benefits and does not detract from exclusive distribution rights. 
The Vietnamese also explained that the phrase "provided they do not 
 
HANOI 00001661  003.4 OF 006 
 
 
influence the copyrights exercise" in Article 17(4) is a 
mistranslation and that the phrase meant "without prejudice to the 
rights of the copyright holder" as required by the Rome Convention. 
 
12.  (SBU) Exceptions and Compulsory Licensing:  The U.S. side 
expressed concern that Article 25(1) provisions on the use of 
copyrighted works without obtaining permission or paying royalties, 
specifically, 25(1)(a),(d'),(e) and (k), were too broad.  (Note: 
Article 25(1) contains both a (d) and a (d').  End note.)  AUSTR 
Espinel noted that the United States has some exceptions similar to 
Vietnam's, however, the U.S. exceptions are drafted in very specific 
language while the Vietnamese exceptions are more general. 
Vietnam's intentions may be compatible with WTO requirements, but 
the law's drafting could open a loophole.  Regulations could make 
the exceptions more specific.  The Vietnamese side pointed out that 
25(1)(k) (importation for personal use) was mistranslated; the 
exception was limited to one copy.  The Vietnamese side said it 
would welcome suggestions on how to draft language for the 
implementing decree that would narrow the exceptions. 
 
13.  (SBU) Importation Rights:  The U.S. side asked if copyright 
holders' rights included the right to control importation, noting 
that they understood that the Civil Code included this right.  The 
Vietnamese side said that in Vietnamese, Article 20(d) of the IP Law 
says "to distribute to the public and import". The phrase "and 
import" had been erroneously omitted from the English version. 
 
14.  (SBU) Compulsory Licensing:  According to the U.S. side, the 
language in Articles 26 and 33 - allowing for use without obtaining 
permission, but paying royalties - was far too broad and inclusion 
of language taken from the Berne Convention on not prejudicing the 
rights of copyright holders ("three-step test") was not enough to 
solve the problem.  AUSTR Espinel pointed out that Article 26 would 
cover all commercial broadcasting.  The Vietnamese representatives 
explained that the provision was needed because Vietnam used the 
public broadcasting system to disseminate information to the public. 
 The National Assembly had been "tough" on this issue because most 
broadcasting stations use government funds.  They confirmed that 
compulsory licensing would also apply to hotels, bars and 
restaurants.  AUSTR Espinel took note of the political difficulty of 
the issue, but also noted that the current language in the draft 
implementing decree compounded the problem.  She said that the 
United States also has some broadcasting and public performance 
exceptions and offered to send suggestions on narrowing the language 
in the draft decree. 
 
15.  (SBU) Term of Copyright Protection:  The Vietnamese said that 
although Articles 27 and 30 provide for only 50 years of protection, 
instead of the 75 years required by the BTA, U.S. authors would be 
entitled to 75 years by virtue of Article 5, which states that the 
provisions of international treaties prevail in the case of a 
conflict with the IP law.  The U.S. side asked for this assurance in 
writing.  AUSTR Espinel said that the WTO provisions on MFN meant 
that Vietnam would have to extend the term to other countries.  The 
Vietnamese retorted that when negotiating the BTA, the U.S. team had 
claimed that Article 4(b) would exempt them from the MFN 
requirement.  The U.S. side promised to look into this issue and get 
back to them. 
 
16.  (SBU) Copyright Registration and Presumptions:  The Vietnamese 
side confirmed that copyright holders do not need to register or to 
obtain a certificate in order to enforce their copyrights.  A 
registration/certificate only provides a presumption of authorship 
and ownership.  AUSTR Espinel asked why it did not also provide a 
presumption that the work was protected by the state, which can be 
useful.  The Vietnamese said that they did not want people to assume 
that registration was mandatory.  The U.S. side also asked whether 
Vietnam's law provided, as required by the Berne Convention, for a 
presumption of authorship where the author's name appears on the 
work in the "usual manner."  The Vietnamese pointed to the provision 
allowing authors to prove ownership through various documents, 
including copies of the work.  The United States asked for 
clarifying language. 
 
Trade in Goods - BTA Chapter 1 
------------------------------ 
 
 
HANOI 00001661  004.4 OF 006 
 
 
17. (SBU) Sanitary and Phytosanitary Measures (SPS): 
The Law on Standards is expected to be passed this session of the 
National Assembly, which ends June 21, and will govern Technical 
Barriers to Trade and Sanitary and Phyto-sanitary measures (SPS). 
The draft law contains BTA consistent language.  (Note: The Law on 
Standards has been passed.  End note.)  The GVN has already set a 
central SPS inquiry point to meet WTO standards and plans to set up 
regional inquiry points.  The Ministry of Agriculture and Rural 
Development (MARD) representative declined the U.S. proposal for a 
general technical assistance plan for SPS, but asked for additional 
assistance to produce risk assessment reports for several varieties 
of fruits that Vietnam would like to export to the United States. 
 
18. (SBU) The U.S. side confirmed the USG commitment made during the 
recent U.S.-Vietnamese WTO accession talks to provide assistance in 
SPS trade capacity building.  USDA's Foreign Agricultural Service 
(FAS) has already arranged for 11 Vietnamese officials to receive 
short-term training in the United States covering various SPS 
issues.  This will occur over the next several months.  FAS will 
continue working with the International Cooperation Department of 
MARD to fulfill needs as defined by Vietnam.  Certain assistance 
that requires equipment and facilities such as a recent request for 
animal quarantine facilities is beyond FAS's ability.  The U.S. side 
suggested that if this type of assistance remained important that 
Vietnam should reiterate the need and possibly other U.S. agencies 
might be able to accommodate Vietnam. 
 
 
19.  (SBU) Customs Valuation:  The U.S. side sought answers to 
questions previously submitted in writing and mentioned complaints 
from importers about inappropriate use of reference prices.  The GVN 
noted that it believed all customs evaluations issues were resolved 
during WTO negotiations in May and that technical issues would be 
addressed with written exchanges.  Vietnam agreed to provide written 
responses to the U.S. questions at the earliest possible date. 
Regarding minimum valuations, the GVN said that, contrary to 
complaints made by U.S. firms, Vietnam does not apply minimum 
valuations on imports, and uses its customs price database as a 
reference for verifying declarations from importers, not as a data 
source for reference pricing.  The sources of data for this database 
are Vietnamese and foreign customs data.  For transactions between 
related parties, Vietnam will use reference data from arms-length 
relationships.  Vietnam stated that Decree 155 and Circular 113 
provide guidance and are the sole documents governing customs 
valuation and reference pricing.  Vietnam also added that the 
Ministry of Finance intends to increase the kinds of payment 
accepted as guarantees for importing. 
 
20.  (SBU) Trading Rights:  Discussion of trading rights focused on 
clarifying the process for companies to avail themselves of trading 
rights and whether the licensing requirements that exist for BTA 
eligible firms constituted a two-tier system inconsistent with the 
intent of the BTA.  AUSTR Weisel asked if more specific guidance on 
trading rights would supplement Decree 12 and Circular 4.  The GVN 
commented that trading rights are within the scope of the Commercial 
Law, and that four of the seven associated decrees have been 
drafted.  Two decrees relate to foreign invested enterprises trading 
in goods and representative offices trading in goods.  The GVN did 
not describe the contents or timetable for issuing these decrees or 
the associated circulars, but promised to supply the United States 
with draft versions for comment.  The GVN indicated that it did not 
know if licensing would still be required seven years after entry 
into force of the BTA (2008) when full and equal trading rights were 
to be provided to both Vietnamese and U.S firms. 
 
21.  (SBU) Currently, U.S. companies may avail themselves of BTA 
rights by petitioning the contact point put in place after the 2005 
annual review and specified in a July 2005 diplomatic note.  Vietnam 
took note of U.S. concerns about the need for greater clarity with 
respect to its plans to implement trading rights.  Vietnam noted 
that it would provide additional decrees to the United States that 
are currently only in Vietnamese.  Vietnam further explained that 
Article 7 of the draft decree for foreign companies involved in 
trading will provide additional guidance.  The U.S. side stated that 
the rights of U.S. companies must be in writing and requested 
written instructions detailing the process for U.S. companies to 
gain trading rights.  AUSTR Weisel noted that requiring U.S. 
 
HANOI 00001661  005.4 OF 006 
 
 
companies to apply separately for each shipment violated the 
national treatment principle. 
 
Trade in Services - BTA Chapter 3 
--------------------------------- 
 
22.  Unified Enterprise Law (UEL):  The two sides also engaged in a 
detailed discussion of the impact the new unified enterprise law 
will have on existing joint ventures in general and specifically in 
the services sector where joint ventures continue to be required in 
many areas.  The new UEL, which no longer provides for joint 
ventures as a distinct category of entity, must be reconciled with 
provisions of the BTA that state Vietnam's commitments in terms of 
joint ventures, previously the only vehicle for U.S. investments in 
certain sectors.  The U.S. side asked what would happen to existing 
joint ventures, how U.S. companies could use rights given to joint 
ventures under the BTA and WTO services schedule with new enterprise 
forms, and whether equity proportion rules specified for joint 
ventures in the BTA would apply to other enterprise forms.  The 
Vietnamese side explained that the new enterprise law contained the 
concept of the joint venture in Article 2(2) and that a joint 
venture would overlap with the forms of enterprises set out in the 
new law, including limited liability and joint stock companies. 
Existing joint ventures can choose whether to continue indefinitely 
as joint ventures or transform themselves into other forms of 
enterprises.  In either case, their rights will be preserved, but if 
a company chooses to reregister, UEL provisions would apply. 
Entities choosing not to reregister will be restricted from 
expanding their business sectors and will expire according to the 
timetable in their original joint venture agreement.  A draft decree 
expected in early July will provide guidance for the registration of 
enterprises.  A Ministry of Justice (MOJ) representative stated that 
the requirements for equity contributions are no longer in place. 
(Note: We would want to see confirmation of her point in the 
implementing regulations for the UEL, which are not yet drafted. End 
note.) 
 
23.  (SBU) Legal Services:  Vietnam stated that the National 
Assembly is expected to pass the Law on Lawyers, which covers 
domestic and foreign law firms, this session and that its contents 
exceed the requirements of the BTA. The GVN claimed that Decree 87 
currently fulfills its BTA commitments on legal services. 
 
24.  (SBU) Market Research and Audio Visual Services: 
The U.S. side asked if, under the Commercial Law, market research 
and audio visual services are conditional sectors and what 
conditions would need to be met for U.S. firms to avail themselves 
of rights under the BTA.  The GVN said that market research is not a 
conditional sector, so domestic and foreign invested companies can 
participate in this sector and that Vietnam does not exercise its 
right under the BTA to limit U.S. market research companies.  The 
audio visual sector is a conditional sector under the Commercial 
Law, but, Vietnam said, the Ministry of Culture and the Ministry of 
Planning and Investment will issue criteria for foreign investment 
that are consistent with BTA obligations.  The U.S. also requested 
clarification of the article in the Investment law that stated that 
certain sectors were considered conditional but were not identified. 
 Vietnam agreed to provide clarification. 
 
25.  (SBU) Distribution:  In response to the U.S. request for an 
update on Vietnamese implementation of this commitment, Vietnam 
explained that a decree covering distribution and trading rights is 
in the legislative plan.  The U.S. requested to review this decree. 
[Note: Implementing decrees cover both trading rights and 
distribution rights]. 
 
Investment - BTA Chapter 4 
-------------------------- 
 
25.  (SBU) Common Investment Law (CIL):  This new legislation 
eliminates the differential treatment afforded to Vietnamese 
nationals and U.S. entities that existed when the BTA was 
negotiated.  To meet BTA commitments, the CIL provides equal 
treatment for domestic and foreign investors.  According to Vietnam, 
seven decrees will implement the CIL: 1) a general decree on the 
details of the law; 2) a decree on investment abroad; 3) a decree on 
build-operate-transfer, build-transfer-operate, and build-transfer 
 
HANOI 00001661  006.4 OF 006 
 
 
projects; 4) a decree on business registration; 5) a decree on 
transforming foreign invested enterprises; 6) a decree on 
transforming state-owned enterprises; and 7) a decree on state 
administered business licenses.  Vietnam promised to provide drafts 
of these decrees and also agreed to clarify which sectors are 
included in the "other" category in Article 19 of the Investment 
Law. 
 
26.  (SBU) Entry, Sojourn and Employment of Aliens:  AUSTR Weisel 
asked whether there are decrees covering employment of aliens 
besides Decree 105.  GVN explained that the CIL supersedes Decree 
105, which limits foreign personnel to three percent of the 
workforce, and, under Article 14(3) of that law, an investor can 
hire management personnel without regard to nationality.  Decrees 
associated with this law should not include any restrictions on 
hiring foreigners, although a professional certificate will still be 
required where applicable. 
 
Transparency - BTA Chapter 6 
---------------------------- 
 
27.  (SBU) The U.S. side offered additional assistance to help the 
GVN implement the transparency requirements of the BTA.  According 
to the GVN, large cities and some provinces now have an official 
gazette for normative legal documents, but there are too few 
resources to achieve the objective of providing English versions of 
all laws, including laws from the local level.  In the near future 
the GVN intends to publish, with the assistance of the USAID-funded 
STAR Project, four reports on the BTA's impact on: 1) the economy in 
2006, 2) the legal system, 3) FDI and 4) transparency in Vietnam. 
 
 
The Future of the BTA 
--------------------- 
 
28.  (SBU) AUSTR Weisel emphasized that the BTA would not end with 
Vietnam's WTO accession.  Many BTA commitments go beyond the WTO, 
and the United States intends to continue to use the BTA, along with 
other vehicles, to build our bilateral relationship.  The Vietnamese 
side responded that the idea of the BTA ending upon WTO accession 
"never entered our minds" and affirmed that the GVN also desired to 
maintain and strengthen the bilateral relationship.  AUSTR Weisel 
noted that Vietnam's implementation was generally good and most of 
the discussion had been simply to clarify issues. 
 
Comment 
------- 
 
29.  The talks were lengthy and detailed and the level of 
preparedness of the Vietnamese side was impressive.  Vietnamese 
experts were able to respond to virtually all of the detailed and 
technical questions posed by the U.S. side.  Where they could not 
respond or where the U.S. side pointed out conflicts with BTA 
requirements, the Vietnamese promised to make every effort to take 
our concerns into account and often asked the U.S. side to suggest 
solutions.  It was clear that the GVN took the meeting, and BTA 
implementation, very seriously and was determined to make a good 
showing. 
 
MARINE