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Viewing cable 06LIMA3804, POST'S ACTIVE TRADE AGREEMENT COMPLIANCE EFFORTS

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Reference ID Created Released Classification Origin
06LIMA3804 2006-09-26 12:33 2011-08-25 00:00 UNCLASSIFIED Embassy Lima
VZCZCXYZ0016
RR RUEHWEB

DE RUEHPE #3804/01 2691233
ZNR UUUUU ZZH
R 261233Z SEP 06
FM AMEMBASSY LIMA
TO RUEHC/SECSTATE WASHDC 2443
INFO RUEHGV/USMISSION GENEVA 0471
RUCPDOC/DEPT OF COMMERCE WASHINGTON DC
RUEATRS/DEPT OF TREASURY WASHINGTON DC
RUEHRC/DEPT OF AGRICULTURE WASHINGTON DC
RUEHRC/USDA FAS WASHDC 1538
RHEHAAA/NATIONAL SECURITY COUNCIL WASHINGTON DC
UNCLAS LIMA 003804 
 
SIPDIS 
 
SIPDIS 
 
DEPT FOR WHA/AND, WHA/EPSC, EB/CBA, EB/TPP 
COMMERCE FOR 4331/MAC/WH/MCAMERON AND TCC/4110 
PASS USTR FOR HIRSH, BHARMAN AND MCARRILLO 
GENEVA FOR USTR 
USDA FOR ITP/FAS/BERTSCH 
 
E.O. 12958: N/A 
TAGS: ETRD ECON EINV PE
SUBJECT: POST'S ACTIVE TRADE AGREEMENT COMPLIANCE EFFORTS 
 
REF: STATE 152063 
 
1. (U) Trade agreement compliance and monitoring continue to be a 
central priority for Embassy Lima.  In April 2006, the U.S. and Peru 
signed a comprehensive free trade agreement (U.S.-Peru Trade 
Promotion Agreement, or PTPA), which is currently pending approval 
by the U.S. Congress.  In the meantime, the Andean Trade Preference 
Act remains in force until December 31, 2006.  The Ambassador and 
the Embassy played a key role in facilitating the PTPA, promoting 
the agreement to Peruvian audiences, and securing its passage by the 
Peruvian Congress on June 28, 2006. 
 
2. (U) Once implemented, the PTPA will improve the treatment of U.S. 
exports and investors in Peru as follows: 
 
- Levels the playing field for U.S. companies which will enjoy 
tariff-free access into Peru; 
- Reduces sanitary and phytosanitary (SPS) barriers to agricultural 
trade; 
- Provides new market access for U.S. consumer and industrial 
products such as machinery and agriculture goods; 
- Liberalizes the services sectors; 
- Provides unprecedented, non-discriminatory access to government 
procurement and the telecom market; 
- Opens the Peruvian market to remanufactured goods; 
- Protects U.S. investments through a more secure and predictable 
legal framework that provides equal footing with locals; 
- Creates new, transparent dispute settlement mechanisms; 
- Strengthens protections for U.S. patents, trademarks, and trade 
secrets, and e-commerce; 
 
SIPDIS 
- Improves customs facilitation; 
 
- Addresses government transparency and corruption, worker rights, 
and protection of the environment; and 
- Includes express shipment provisions that benefit courier and 
express delivery companies (unique to PTPA). 
 
Post will closely monitor the implementation of the agreement in 
Peru, and will continue to inform U.S. businesses of the 
opportunities and protections it creates. 
 
3. (U) Following are post's responses to reftel questions: 
 
A) Embassy Peru has Economic, Foreign Commercial Service (FCS) and 
USDA (both FAS and APHIS) sections, as well as a USAID mission that 
manages key trade-related programs.  Our Public Affairs efforts have 
also focused on trade and investment disputes, and on explaining the 
provisions of the trade agreements.  The Ambassador chairs weekly 
meetings of these sections to share information and to coordinate 
action. 
 
B) Contact at Post:  Economic Counselor Adam Shub, 
011-51-1-618-2413, shubam@state.gov.  The FCS Counselor is Margaret 
Hanson-Muse, 011-51-1-618-2442, mhansonm@mail.doc.gov.  The FAS 
Counselor is Eugene Philhower, 011-51-1-6180-2650, 
eugene.philhower@usda.gov. 
 
C) The Commercial Service files reports via the Advocacy Center and 
Trade Compliance databases and convenes Compliance working groups 
that include USTR, MAC, PTO, and DHS representatives.  The Economic 
Section reports by cable and through the State Department's Bureaus 
of Western Hemisphere Affairs (WHA) and Economic and Business 
Affairs (EB).  USDA reports to both FAS and APHIS/IS. 
 
Here are a few of the success stories recently reported to EB and 
FCS: 
 
Date Resolved: July 2006 (LIMA 2942) 
Company: Le Tourneau Company 
Issue: GOP paid Le Tourneau for road construction services rendered 
between 1954 and 1968 by granting the company land.  The military 
government subsequently expropriated the land, so Le Tourneau filed 
suit in 1970.  After 35 years of haggling over value, GOP paid Le 
Tourneau a $10 million settlement on July 26, 2006, plus committed 
to pay $400k interest in August 2006. 
Specific Actions Taken: Embassy and USTR advocacy, September 2002 
ATPDEA commitment, FTA pressure.  Ray Le Tourneau wrote that outcome 
would have been impossible without Embassy and USTR. 
 
Date Resolved: June 2006 (LIMA 2529) 
Company: Pfizer 
Issue: In 2002, Pfizer filed a patent infringement case against an 
Indian company illegally copying its Lipitor patent.  After a 
four-year battle, the GOP IPR agency issued two decisions in June 
2006 in favor of Pfizer.  The Indian company can no longer sell its 
copy and was fined $8,500. 
Specific Actions Taken: Embassy and USPTO assisted Pfizer in 2005 
when it encountered difficulties with its patent defense. 
 
Date Resolved: June 2006 
Company: Exxon Mobil 
Issue: SUNAT (tax authority) announced in October 2004 that it was 
levying taxes for fuel supplied to outbound international carriers 
and would be collecting these taxes on sales (IVG) for the past four 
years.  For Exxon, these back taxes amounted to $15 million.  The 
GOP, in an effort to resolve the problem, passed a new tax law in 
January 2005 that classified future sales of fuel for international 
transport (air and sea) as exports, exempting the sales from IVG. 
The law, however, failed to make the tax exemption retroactive.  To 
rectify the situation, the Ministry of Finance drafted two bills, 
which were passed by Congress on October 6, 2005 and published 
November 18, 2005, that allowed for retroactive credit of the back 
taxes.  This allowed Exxon to recoup over three years its previously 
paid fuel taxes ($15 million) as a credit for future taxes. 
Specific Actions Taken: Continuous advocacy by Embassy since 
November 2004 (with SUNAT, USTR, Peruvian Congress, Ministry of 
Finance, and Prime Minister). 
 
Date Resolved: January 2006 
Company: Parsons Brinckerhoff, Inc. /Parsons Engineering Science 
/CESEL 
Company Headquarters: Pasadena, CA 
Issue: Parsons (CESEL in Peru) did not receive payment for potable 
water/waste work done for the state-run Sanitary Sector Reform 
Assistance Program (PARSSA).  Parsons initiated arbitration in June 
2001; in March 2004, the arbitration panel found in favor of Parsons 
and ordered PARSSA to pay approximately $1.5 million (plus 
interest); PARSSA and the Housing Ministry unsuccessfully appealed 
twice.  Parsons received a $1.9 million partial payment for its 
arbitration award in December 2005, and a second payment of $600,000 
in January 2006. 
Specific Actions Taken: Embassy counseling began July 2004.  Embassy 
met with CESEL to develop and pursue advocacy strategy, including 
meetings with Vice Minister and letters to Minister from Embassy. 
Post and USTR raised case during FTA negotiations. 
 
Date Resolved: December 2005 
Company: Scientific Games 
Company Headquarters: New York, NY 
Issue: Formed consortium in Peru employing 600 handicapped 
Peruvians, and providing revenue to handicapped associations and the 
GOP.  Scientific Games requested post assistance July 1, 2005 in 
saving its $30m investment in the Peruvian lottery system, as a 
competitor had introduced a law headed for approval that would have 
changed the legal framework under which the investment had been made 
and forced Scientific Games out of business.  The President of Peru 
vetoed the bill on July 6, 2005.  Competitor again introduced 
problematic bill in December 2005; bill died in committee, and a 
version introduced by Scientific Games was passed. 
Specific Actions Taken: Post delivered letter to and discussed issue 
with President of Peru on July 5, who then vetoed the bill.  Post 
counseled Scientific Games on countering competitor's second attempt 
and contacted Ministry of Economy & Finance. 
 
Ongoing compliance issue: 
 
Peru's Customs (SUNAT) doesn't live up to its WTO commitments 
because it continues to use reference pricing rather than accepting 
invoices for valuation purposes.  Customs officials confuse 
objectivity with literal interpretation and do not apply "good 
faith" principles.  Scale and proportionality are not applied when 
determining penalties, resulting in severe distortions that 
sometimes force companies into total bankruptcy. 
 
D) The Ambassador is very active with the business community in all 
sectors and serves as the honorary chair of the large American 
Chamber of Commerce in Peru.  Economic and Commercial Counselors are 
also honorary members of the AmCham.  Post has an open door policy 
for U.S. businesses, and enjoys excellent working relationships with 
in-country representatives.  At the working level, we meet regularly 
with the relevant ministries and regulatory agencies.  The Embassy 
has hosted training programs in compliance, monitoring and 
standards, and has sent numerous officials from the Peruvian 
customs, IPR, judiciary, police, and prosecutor's offices to 
training and conferences in the U.S. and elsewhere.  FCS supported 
TDA grants to GOP telecommunications entities designed to strengthen 
the regulatory framework, improve transparency and provide greater 
access and lower operating costs for SMEs. 
STRUBLE