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Viewing cable 09BUENOSAIRES366, Argentina: License For Nil - GoA Imposes New Import

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Reference ID Created Released Classification Origin
09BUENOSAIRES366 2009-03-30 15:59 2011-08-25 00:00 UNCLASSIFIED//FOR OFFICIAL USE ONLY Embassy Buenos Aires
VZCZCXYZ0000
RR RUEHWEB

DE RUEHBU #0366/01 0891559
ZNR UUUUU ZZH
R 301559Z MAR 09
FM AMEMBASSY BUENOS AIRES
TO RUEHC/SECSTATE WASHDC 3422
RUCNMER/MERCOSUR COLLECTIVE
UNCLAS BUENOS AIRES 000366 
 
USDOC FOR 4321/ITA/MAC/OLAC/PEACHER 
 
SIPDIS 
SENSITIVE 
 
E.O. 12958: N/A 
TAGS: ETRD ECON AR
SUBJECT: Argentina: License For Nil - GoA Imposes New Import 
Licenses to Slow Imports 
 
REF:   (A) Buenos Aires 294 
   (B) Buenos Aires 259 
        (C) 08 Buenos Aires 1723 
       (D) 07 Buenos Aires 1648 
 
Summary 
------- 
 
1. (SBU) In a context of global concerns over increasing 
protectionist pressures, Argentina, which signed onto a November 
2008 G-20 standstill agreement on new barriers to trade, is actively 
expanding a list of products which require non-automatic import 
licenses.  U.S. firms and others importing goods into Argentina have 
complained frequently to Post in 2009 that both automatic and 
non-automatic import license applications are being delayed beyond 
time periods permitted by GoA regulations and, they suspect, WTO 
standards.  Strict enforcement of safety standards are also delaying 
imports of some goods, and new rules on toy imports to take effect 
soon could prevent most, if not all, toy imports.  Post has also 
received complaints of informal GoA pressure on importers to reduce 
overall import levels, which will be reported Septel.  The GoA is 
clearly concerned about the effect of rapidly falling exports (Ref 
C) on its trade balance and foreign currency reserves, and they are 
taking steps to limit imports accordingly.  End Summary. 
 
2. (SBU) Despite a pledge at the November 2008 first G-20 summit to 
"refrain from raising new barriers to investment or to trade within 
the next 12 months," Argentina has imposed new licensing measures 
which, while ostensibly WTO consistent, are delaying and even 
preventing imports, according to U.S. firms and other importers 
operating in Argentina.  Argentina requires import licenses - both 
automatic and non-automatic - on a fairly extensive list of 
products, many of which have been added since this G-20 meeting. 
Adrian Makuc, National Director of Trade Policy in the Ministry of 
Production, told Econoffs March 23 that non-automatic licenses 
covered 7% of imports from Brazil by value, while approximately 20% 
total of imports from Brazil required some license.  The licenses 
are not country-specific, but appear designed to reduce import flows 
from China and Brazil, the top two exporters to Argentina in 2008. 
Brazilian Ambassador to Argentina told Ambassador Wayne that while 
Foreign Minister Amorim and other are very upset and frustrated by 
the GoA moves, a political decision was taken not to go to the WTO 
and to seek instead to negotiate sector by sector solutions between 
business leaders and officials from both countries. 
 
3. (SBU) Brazil is Argentina's largest overall trading partner and 
supplied 31% of Argentine imports in 2008.  Brazilian officials, 
including President Lula and Foreign Minister Amorim, have publicly 
expressed frustration with the new measures.  Amorim was quoted in 
local press as saying, following a February 17 meeting in Brazil 
with the Argentine Foreign Affairs, Economy, and Production 
Ministers, that "the existence of measures such as these isn't 
positive."  Brazilian frustration helped bring about high-level 
government-to-government talks in Brazil and subsequent private 
sector discussions in Argentina seeking to alleviate bilateral trade 
frictions. 
 
Non-Automatic Licenses: Making Things "Unviable" 
--------------------------------------------- --- 
 
4. (SBU) The GoA has long required non-automatic import licenses for 
a variety of products considered "sensitive" (read: with local 
production of similar goods, especially when local producers of 
those goods have complained to the GoA about competition from 
imports).  These include textiles, apparel, footwear, household 
appliances, tires, and motorbikes.  The list of products is now 
approximately 230 tariff lines long, with new items added frequently 
by GoA resolutions over the past year.  Fifty-eight new tariff lines 
were added effective March 25, including products such as household 
appliances, furniture, bed sheets, and agricultural machinery. 
Non-automatic licenses are, according to GoA regulations, supposed 
to be adjudicated within 60 days, in line with WTO standards. 
 
5. (SBU) Numerous U.S. company exports to Argentina (the vast 
majority from Asia) have been affected by this proliferation of 
non-automatic licenses.  Carlos Restaino, a local consultant who 
works for U.S. toy company Mattel and is also a director of the 
Argentine Importers Chamber, told Post that in his experience 
dealing with toy and shoe imports, recent applications for 
non-automatic licenses always took over 60 days to process.  Local 
Nike CEO told Ambassador that his Asian imports face regular delays, 
which he believes are aimed at favoring local production of a 
competing brand.  Hewlett Packard representative Jorge Rankov told 
Econoff March 19 that a shipment of their backpacks, manufactured in 
Thailand, had been held by Customs for six months while HP was 
awaiting an import license.  He said the delays seemed to be growing 
longer on average and are now long enough to make some transactions 
unviable.  Rankov also stated that, in cases where a similar product 
is produced locally, the GoA simply doesn't issue an import license. 
 
 A textile consultant member of the American Chamber of Commerce 
(AmCham) told Econoff March 18 that non-automatic license requests 
for textile products never took less than 60 days, and that requests 
for explanations from GoA officials went unanswered. 
 
6. (SBU)  Agricultural machinery manufacturer John Deere has 
contacted post about the March 25 addition of agricultural machinery 
to the list of products requiring non-automatic licenses, expressing 
fear that imports of their products manufactured in Brazil could be 
delayed.  John Deere's local President, Aldo Torriglia, told Emboffs 
March 27 that Argentine Industry Secretary Fernando Fraguio told him 
the measure was imposed because "we don't want local manufacturing 
to fail."  Starbucks Argentina Country Manager Diego Paolini told 
Emboffs that shipments of furniture for new stores and imports of 
holiday cups were both held up pending import license applications - 
in the latter case not for the cups themselves, but for the cloth 
wrapping.  The cups reached stores almost beyond the holiday season. 
 An Argentine machine tool importer told Ambassador that more and 
more machine tools are being added to licensing lists and his 
customs contacts have told him to import as many products as he can 
quickly because they expect more items to be added to the list 
requiring licenses.  In recent meetings with European, Japanese and 
Chinese Ambassadors to Argentina, Ambassador heard many similar 
complaints (Refs A and B). 
 
Automatic Licenses: "Lesser Problem," but a Problem 
--------------------------------------------- ------ 
 
7. (SBU) While no new automatic licenses have recently been imposed, 
Argentina has long imposed automatic license requirement for 
considerably more tariff lines than covered by non-automatic 
licenses.  Automatic licenses are required for some products in 
about half of the chapters in the tariff code, such as textiles, 
clothing, furniture, toys, and products made of steel, aluminum, or 
copper.  Implementing regulations state that automatic licenses will 
be issued within 10 working days, in accordance with the World Trade 
Organization's Agreement on Import Licensing. 
 
8. (SBU) According to local importer contacts, automatic licenses 
are "a lesser problem" than the non-automatic kind, and the GoA 
largely adheres to the 10-day maximum.  However, there apparently 
are exceptions.  Restaino told Econoff that the GoA will sometimes 
ask for additional information which was not required on the 
original application, effectively delaying some license requests 
well beyond the 10-day period.  Rankov noted an example of a delay. 
HP server racks are considered furniture and require a license, 
despite being manufactured (in the U.S.) to precise standards and 
therefore having no local equivalent.  He said license requests for 
those products had taken a minimum of 60 days and in some cases over 
180.  Rankov also commented that, besides the server racks, the GoA 
imposes license requirements on a variety of products not 
manufactured in Argentina. 
 
Safety Issues: Legitimate Aim, De Facto Barrier 
--------------------------------------------- -- 
 
9. (SBU) While regulations to limit unsafe and unhealthy imports are 
both understandable and permitted under WTO guidelines, some GoA 
measures have effectively blocked imports.  A new regulation 
requiring imported toys to be tested to prove they are 
phthalate-free has been postponed twice thus far by the Minister of 
Health and is now set to take effect in August, after originally 
being set for September 2008.  Under the new regulation, toy imports 
will be permitted if they prove phthalate-free, but the GoA 
regulation limits testing to only the government-owned National 
Institute of Industrial Technology (INTI).  Contacts tell us that 
INTI's capacity for such testing is nowhere near enough to 
accommodate all toy imports.  Restaino told Econoff that this would 
essentially "shut down" toy imports.  Multiple members of the AmCham 
noted in a Trade Committee meeting March 18 that used import 
restrictions, motivated in part by safety concerns, require numerous 
GoA certifications, and commented that the lengthy process to get 
all the certifications delays imports.  Rankov noted that delays due 
to certification requirements for imports of used ATM parts have 
prevented HP from providing support for some of its customers, and 
therefore they are violating the local consumer protection law. 
Rankov also stated that Argentine Customs was inconsistent in its 
application of electrical safety standards, and that testing in this 
area was causing significant delays. 
 
Comment 
------- 
 
10. (SBU) The WTO Agreement on Import Licensing says that import 
licenses, when applied, "should be implemented in a transparent and 
predictable manner."  The stories we are hearing suggest the new 
license requirements are being imposed in response to pressures by 
domestic industrial lobbies and are not meeting this requirement. 
Recent GoA actions are not directed primarily at China, as earlier 
 
non-tariff barriers imposed in 2007 appeared to be (Ref D).  Leading 
trade partner and neighbor Brazil appears to be the most affected by 
the recent measures.  The GoA's willingness to antagonize its fellow 
Mercosur member and most important trading partner (as well as being 
Argentina's primary source of imports, Brazil received more of 
Argentina's exports, 19%, in 2008 than any other country) shows the 
depth of the GoA's commitment to maintaining its local manufacturing 
base and its concern over current trade levels.  This policy 
reflects more than half a century of Peronist attachment to 
import-substituting industrialization.  But some of these non-tariff 
barriers affect imports that do not compete with domestic 
production.  Those measures are probably designed to reduce imports 
and to limit pressure on Argentina's trade balance, and are part of 
broader efforts to maintain substantial capital reserves. 
 
WAYNE