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Viewing cable 06DAKAR2114, SENEGAL LIFTS SAFEGUARD MEASURE FOR WAEMU OIL IMPORTS, BUT

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Reference ID Created Released Classification Origin
06DAKAR2114 2006-09-01 16:50 2011-08-24 16:30 UNCLASSIFIED//FOR OFFICIAL USE ONLY Embassy Dakar
VZCZCXRO3465
PP RUEHMA RUEHPA
DE RUEHDK #2114/01 2441650
ZNR UUUUU ZZH
P 011650Z SEP 06
FM AMEMBASSY DAKAR
TO RUEHC/SECSTATE WASHDC PRIORITY 6185
INFO RUCPDOC/USDOC WASHDC
RUEHZK/ECOWAS COLLECTIVE
RUEHKL/AMEMBASSY KUALA LUMPUR 0011
RUEHGV/USMISSION GENEVA 0753
UNCLAS SECTION 01 OF 02 DAKAR 002114 
 
SIPDIS 
 
SIPDIS 
SENSITIVE 
 
STATE FOR AF/EPS - HASTINGS, AF/W AND EB/TPP/MTA 
STATE PLS PASS TO USTR - JEFFREY FARRAH 
AID/W FOR AFR/WA AND AFR/SD 
USDOC FOR 4510/OA/PMICHELINI/AROBINSON-MORGAN/KBOYD 
USDOC FOR 3131/CS/ANESA/OIO/DHARRIS/GLITMAN/MSTAUNTON 
 
E.O.12958: N/A 
TAGS: ETRD EAGR ECON PGOV EAID EINV IV MY SG
SUBJECT: SENEGAL LIFTS SAFEGUARD MEASURE FOR WAEMU OIL IMPORTS, BUT 
DECLARES INCREASE OF REFERENCE VALUE 
 
 
1.  (U) SUMMARY: In response to ongoing controversy surrounding 
Senegal's application of a safeguard measure in 2005, President Wade 
signed a revised law on July 21, 2006, applying a 25 percent 
provisional safeguard tax on refined and palm oils originating 
outside the West African Economic and Monetary Union (WAEMU) member 
states.  Under current law, there is no safeguard measure applied to 
imports of other vegetable oils.  Importers have accepted the new 
measure since most of their oils are imported from Cote d'Ivoire 
although they complain of unnecessary complications at the port as 
well as a governmental increase in their reference values for palm 
oil.  The Government of Senegal (GOS) is encouraging domestic oil 
producers to modernize their facilities while benefiting from the 
protectionist measures.  END SUMMARY. 
 
THE NEW LAW 
----------- 
2.  (U) President Wade signed a law on July 21, 2006, applying a 25 
percent provisional safeguard tax on refined and palm oils 
originating outside the West African Economic and Monetary Union 
(WAEMU) member states.  The new law, No. 2006-23, annuls previous 
law No. 2005-30 that applied the safeguard measure to all imports of 
refined, palm and vegetable oils for six years.  The new law is now 
in compliance with World Trade Organization (WTO) and with the 
Uruguay Round Agreement on Safeguards. 
 
3.  (U) Law 2006-23, titled "Law on the Application of the Safeguard 
Measure on Imported Refined Palm Oils" applies a 25 percent 
safeguard tax only to refined palm oil imports from non-WAEMU 
countries, not for industrial use, for a provisional period of 200 
days.  As required by the Agreement on Safeguards, it also calls for 
an investigation during the provisional period of whether imported 
palm oils pose a serious threat to Senegal's domestic oil 
production.  Senegal's Ministry of Commerce (MOC) already provided a 
preliminary determination of imports' negative impact and will 
conduct a more detailed investigation in the future. 
 
DUTIABLE REFERENCE VALUE INCREASED BY 67 PERCENT 
--------------------------------------------- --- 
4.  (U) The safeguard tax is the second measure, the GOS has 
recently taken to protect the domestic cooking oil industry.  The 
first protectionist measure this year took effect on June 12, when 
the President issued a decree increasing the reference value for 
imported refined palm oils from 300 CFA francs (CFAF) (USD .37) to 
500 CFAF (USD .93) per kilogram (1 kilo equals roughly 1 liter). 
Oil importing members of "Union Nationale des Commercants et 
Industriels du Senegal" (UNACOIS) expressed outrage at the increase 
because GOS did not consult with them in regard to their costs and 
failed to provide the transition period mandated by Senegalese law. 
In spite of disagreeing with the decree, the transition period would 
have allowed them to take the increased costs into account prior to 
placing orders and borrowing money from banks to finance 
international transactions. 
 
5.  (U) Consequently, there are currently 334 containers holding 
approximately 6,680 tons of imported refined palm oil blocked at the 
port.  Importers are unable to come up with the money needed to pay 
the increased taxes, storage fees and port penalties.  Although the 
containers arrived prior to the presidential decree raising the 
reference value, importers, without having been informed of the 
decree, did not declare the goods until after June 12.  The 
Senegalese Customs Bureau is demanding that taxes be paid on the new 
reference value before the containers are released.  UNACOIS leaders 
are trying to meet with Prime Minister Macky Sall to discuss the 
situation. 
 
6.  (U) UNACOIS Secretary General Serigne Ndongo told EconOff that 
the GOS established the new reference value because SONACOS had 
recently re-valued its imports of non-refined palm oils at 500 
CFAF/kg.  The government action is based on the logic that refined 
oils cannot be worth less than non-refined oils.  Both private 
brokerage firms and importers are speaking out against the 
administration's value declaration, reasoning that it is the 
importer's responsibility to declare the value of goods. 
 
COTE D'IVOIRE VS. MALAYSIA: PREVENTING TRANSSHIPMENT 
--------------------------------------------- ------- 
7.  (U) All Senegalese oil imports must be accompanied by a 
certificate of origin.  If the Senegalese Customs Bureau of Origins 
and Values questions the authenticity of the certificate, the 
importer is obliged to pay a consignment tax equal to the safeguard 
measure (25 percent) until the certificate of origin is verified to 
be imported from a WAEMU country, at which point the consignment tax 
 
DAKAR 00002114  002 OF 002 
 
 
will be reimbursed.  To date, the Customs Bureau has not formally 
requested WAEMU to conduct any investigations on the origins of the 
imported palm oils, although they are generally wary of transshipped 
oils from Malaysia, and tend to give importers an unnecessarily 
difficult time in releasing their imported oils in a timely manner. 
 
8.  (U) Total taxes on imports of refined palm oils now amount to 65 
percent of the reference value.  Taxes include: the 25 percent 
safeguard tax, a 20 percent common external tariff, an 18 percent 
value added tax, and a 2 percent processed goods tax.  Importers 
fear liquidation of their industry if the reference value is not 
reduced.  This would undoubtedly have a negative impact on the 
roughly 600 people employed in the oil import industry. 
 
9.  (U) As reported to the United Nations Commodity Trade Statistics 
Database, Senegalese importers have declared greater palm oil 
imports from Cote d'Ivoire than Cote d'Ivoire has declared in 
exports to Senegal for the same period.   Coincidentally, Senegal's 
Customs Bureau recorded less in volume and value of palm oil imports 
from Malaysia than Malaysia declared in exports to Senegal. 
Although transshipment has yet to be officially proved, customs 
officials will be watching for increased imports of palm oil from 
Cote d'Ivoire during the upcoming year as an indication of Malaysian 
transshipments and will be paying close attention to certificates of 
origin. 
 
10.  (U) In 2005, Senegal recorded 23,960 metric tons of refined 
palm oils from Cote d'Ivoire valued at almost USD 14 million and 
31,721 tons of refined palm oils from Malaysia valued at USD 17.3 
million.  Information on exports declared in 2005 by Malaysia and 
Cote d'Ivoire is not available. 
 
FOOD SAFETY NORMS: WHO IS THE STATE PROTECTING? 
--------------------------------------------- -- 
11.  (U) The GOS has also begun to apply more strictly Codex 
Alimentarius or Food Safety Norms to cooking oil imports since it 
reportedly passed a law on October 12, 2005, requiring that all 
foreign oil producers meet the international norms.  Commerce 
Minister Mamadou Diop Decroix, referring to the new law, stated that 
3,900 tons of cooking oils have already been refused entry to the 
Senegalese market due to quality issues.  Customs is required to 
take a sample of cooking oil from each shipment for laboratory 
analysis to verify the quality.  (COMMENT: Whereas some importers 
view the claims as a non-tariff barrier, an indiscriminate 
application would be a welcome improvement to Senegal's food and 
consumer safety standards.  END COMMENT.) 
 
12.  (U) Diop Decroix has also encouraged all protected oil 
companies benefiting from the safeguard measure to invest in 
modernization and restructuring in order to become more competitive. 
 Earlier in 2006, Advens, the private investment group that bought 
SONACOS from the GOS, signed a five-year agreement with the GOS to 
restructure and to modernize SONACOS facilities, including 4 billion 
CFAF, or USD 7.9 million, to address a layoff of approximately 600 
workers. 
 
COMMENT 
------- 
13.  (SBU) The new law while WTO compliant is unfavorable to 
importers because of the increased reference value.  We believe the 
GOS is protecting SONACOS but hurting consumers by subjecting them 
to higher prices for a basic good such as oil.  This type of 
government interference is worrisome as it is unpredictable what GOS 
would do in the future in an effort to "protect" SONACOS and the 
domestic oil industry. 
 
14.  (SBU) An interesting aspect of this debate is that in spite of 
its parliamentary majority, the Government lost two key votes in the 
National Assembly before the law ultimately passed.  SONACOS 
employees and Senegalese who want to protect the peanut oil industry 
remain opposed to all measures that permit foreign cooking oil to 
enter the country.  END COMMENT. 
 
JACOBS