US embassy cable - 04RANGOON768

UNCLAS SECTION 01 OF 02 RANGOON 000768 
 
SIPDIS 
 
STATE FOR EAP/BCLTV AND CA; USPACOM FOR FPA 
COMMERCE FOR ITA JEAN KELLY 
TREASURY FOR OASIA JEFF NEIL 
 
E.O. 12958: N/A 
TAGS: ETRD, ECON, CVIS, KTEX, TH, BM, Economy 
SUBJECT: BURMESE USING THAIS TO VIOLATE U.S. IMPORT BAN 
 
REF: 03 RANGOON 1337 
 
1.  SUMMARY: BURMESE GARMENT FACTORY OWNERS ADMITTED TO AN 
EMBASSY OFFICER THAT THEIR COMPANY IS CIRCUMVENTING THE U.S. 
IMPORT BAN ON BURMESE PRODUCTS BY EXPORTING THEIR "U2" AND 
"ADIDAS" BRAND GARMENTS OVERLAND TO BANGKOK, AND THEN 
RE-EXPORTING THROUGH A THAI COMPANY DIRECTLY TO THE UNITED 
STATES.  THE FACTORY OWNERS SAID THEIR COMPANY WAS INITIALLY 
HURT BY THE JULY 2003 IMPORT BAN, BUT WAS ABLE TO RECOVER BY 
SHIPPING TO THE UNITED STATES USING THIRD COUNTRY 
RE-EXPORTERS.  POST BELIEVES THIS "RE-EXPORT" FORMULA IS NOT 
UNUSUAL, WITH TRANSSHIPMENTS BY OTHER COMPANIES POSSIBLY 
BEING MADE THROUGH THAILAND, S. KOREA (REFTEL), AND PERHAPS 
SINGAPORE, HONG KONG, AND TAIWAN.  END SUMMARY. 
 
2.  DURING VISA INTERVIEWS AT THE EMBASSY JUNE 10, TWO 
CO-OWNERS OF THE RANGOON-BASED D. FREDERICK INTERNATIONAL 
COMPANY, LIMITED TOLD THE INTERVIEWING CONSULAR OFFICER (WHO 
IS ALSO THE EMBASSY POLOFF) THAT THEY WERE GOING TO THE 
UNITED STATES IN LATE JUNE OR EARLY JULY TO VISIT A NAMED 
U.S. CITIZEN WHO WORKS AT A CULVER CITY, CA IMPORT/EXPORT 
BANK TO SCOUT OUT BUSINESS OPPORTUNITIES FOR THEIR COMPANY. 
ONE OF THE OWNERS, MR ABOO BACKER, SAID HE WAS VERY PROUD OF 
HIS COMPANY'S QUICK RECOVERY AFTER THE JULY 2003 U.S. IMPORT 
BAN.  HE TOLD POLOFF HOW HIS COMPANY IMPORTS FABRIC FROM 
THAILAND OR CHINA, TURNS IT INTO FINISHED GARMENTS WITH 
EITHER THE "U2" OR "ADIDAS" LABEL AT HIS 850-PERSON RANGOON 
GARMENT FACTORY, THEN EXPORTS THE GARMENTS OVERLAND THROUGH 
THE BORDER TOWN OF MYAWADDY TO BANGKOK.  THEIR BANGKOK 
PARTNER COMPANY, SAKON M.D. COMPANY, LTD, RE-EXPORTS THE 
GARMENTS DIRECTLY TO THE UNITED STATES FOR A SLIGHT FEE.  MR. 
ABOO BACKER PROUDLY CONFIDED THAT THIS RE-EXPORT ARRANGEMENT 
"ONLY COSTS A LITTLE MORE." 
 
3.  IN HOPES OF STRENGTHENING THEIR VISA CASE, THE TWO 
CO-OWNERS PRODUCED A LETTER ADDRESSED TO THE U.S. CONSULAR 
OFFICER IN RANGOON FROM THEIR THAI BUSINESS PARTNERS AT SAKON 
M.D. CO., AND A COPY OF THE THAI COMPANY'S REGISTRATION. 
INTERESTINGLY, THE LIST OF COMPANY DIRECTORS AND SHAREHOLDERS 
INCLUDES NOT ONLY NAMES OF THAIS, BUT ALSO A BURMESE AND A 
CHINESE WITH A TAIWANESE NAME, INDICATING TIES TO OTHER THIRD 
COUNTRIES FOR THE BURMESE COMPANY.  (NOTE: POST IS ENTERING 
THE NAMES OF THE SMD SHAREHOLDERS INTO THE CONSULAR LOOKOUT 
SYSTEM.)  THE TWO APPLICANTS WERE EVENTUALLY DENIED UNDER INA 
214(B), FOR INTENDING TO VIOLATE U.S. IMPORT LAWS. 
 
4.  THE LARGE SCALE OF D. FREDERICK'S MANUFACTURING 
OPERATIONS IS TYPICAL OF THE DOZENS OF BURMESE GARMENT 
MANUFACTURES WHO MAY ALSO BE RE-EXPORTING TO THE U.S. THROUGH 
THAILAND OR OTHER NEARBY COUNTRIES.  IN A GIVEN MONTH, D. 
FREDERICK BUYS $50,000 WORTH OF COTTON AND POLYESTER FABRIC 
FROM THE ZAINSHAN DONGFENG KNITTING GARMENT CO., IN NINGBO, 
CHINA.  THEN THE 850 FACTORY WORKERS TURN THE FABRIC INTO 
FINISHED GOODS WITH LABOR COSTS OF $34,000 A MONTH.  BURMESE 
CUSTOMS EXPORT DECLARATIONS FROM A TWO-WEEK PERIOD IN JULY 
AND AUGUST 2003 LIST THREE D. FREDERICK CO. SHIPMENTS OF 
MEN'S SUITS AND COTTON POLO SHIRTS TO A NAMED AMERICAN 
COMPANY IN LOS ANGELES (VIA SINGAPORE) WORTH $100,000. 
THOUGH WE DON'T KNOW ALL THE TRANSPORTATION AND OTHER 
OVERHEAD COSTS UNDER THE CURRENT RE-EXPORT ARRANGEMENT, THE 
BURMESE CO-OWNER U SAN YU SAID THAT HE MAKES ABOUT $50,000 TO 
$80,000 A MONTH FROM THE BUSINESS. 
 
5.  COMMENT:  THAT THIS COMPANY WAS ABLE TO SHIP OVER 
$100,000 WORTH OF GARMENTS TO THE UNITED STATES DURING THE 
FINAL PRODUCTION SPIKE THE MONTH PRIOR THE AUGUST 2003 IMPORT 
BAN INDICATES THE SCALE OF IMPORT BAN VIOLATIONS COULD BE 
RATHER LARGE.  THE QUESTION REMAINS AS TO HOW MANY OF THE 
OTHER REMAINING GARMENT FACTORIES IN BURMA THAT EXPORTED TO 
THE UNITED STATES BEFORE AUGUST 2003 ARE NOW USING THIS 
"RE-EXPORT" FORMULA. 
 
6.  A FEW MONTHS AFTER THE JULY 2003 IMPORT BAN, MANY GARMENT 
FACTORY OWNERS TOLD US THAT EU BUYERS WERE KEEPING THEM IN 
BUSINESS WITH INCREASED ORDERS FOR BURMESE-MADE GARMENTS.  WE 
NOW HAVE SOLID EVIDENCE THAT RE-EXPORTING THROUGH A THIRD 
COUNTRY HELPED AT LEAST ONE BURMESE GARMENT MANUFACTURER 
RECOVER FROM THE IMPORT BAN.  END COMMENT. 
MARTINEZ