US embassy cable - 04MAPUTO1502

UNCLAS SECTION 01 OF 03 MAPUTO 001502 
 
SIPDIS 
STATE FOR AF/S - HTREGER 
STATE PLEASE PASS USTR FOR PATRICK COLEMAN 
USDOC FOR RTELCHIN 
PRETORIA FOR USDA/FAS 
E.O. 12958: N/A 
TAGS: ETRD, EAGR, ECON, MZ, Tobacco 
SUBJECT: MOZAMBIQUE - REQUEST FOR TARIFF RATE QUOTA FOR TOBACCO 
 
 
1. This is an action request for USTR. See para 3. 
 
2. Below is the text of correspondence received October 14 from 
the International Relations Directorate of the Ministry of 
Industry and Trade, in which the GRM requests that it be allowed 
to export tobacco to the United States under the tariff rate 
quota system. 
Begin Text: 
Dear Ambassador, 
Mozambique has an interest in exporting processed tobacco 
products to the United States. However, the United States 
currently has a tariff rate quota (TRQ) on those processed 
tobacco products that Mozambique will be producing. We are 
kindly requesting your assistance in helping us enter into 
bilateral discussions with the United States to see if there is 
any possibility of obtaining TRQ for tobacco processed in 
Mozambique. 
As you are well aware, exports are of critical importance for 
Mozambique. They will assist in creating jobs, improving our 
economic growth and reducing poverty in our country. One area 
that we feel there is substantial possibility to export is in 
tobacco. 
Tobacco production started in Mozambique in the early 1990s and 
is bringing far-reaching change to parts of the central-northern 
provinces by dramatically improving household incomes and 
introducing modern production techniques that are then 
transferred to other crops. Approximately 128,000 farms depend 
on tobacco production (see table 1). 
TABLE 1 
Distribution of Tobacco Production by Province and Company 
Province Company Number of Farmers 
Niassa JFS 27,303 
STANCOM 7,510 
Cabo Delgado JFS, CANAM 2,050 
Nampula JFS 12,000 
SONIL 8,000 
Zambezia JFS 10,156 
STANCOM 8,500 
Tete MLT 39,000 
DIMON 4,464 
Manica MLT, STANCOM, 
DIMON, TABACO, 9,000 
DE MOCAMBIQUE 
Sofala DIMON 791 
Gaza JFS 22 
Source: Ministry of Agriculture and Rural Development 
? 
Mozambique currently does not have the capacity to process 
tobacco beyond the burley and flue-cured stages; thus, tobacco is 
exported raw to Malawi and Zimbabwe for processing before being 
re-exported for final manufacture. There are a few companies 
that are investing millions of dollars to create tobacco- 
processing plants in Northern and Central Mozambique. On such 
factory will begin operations in June 2005 and will have an 
initial capacity of 37,000 tons, expandable up to 52,000 tons by 
2007. This 50 million dollar investment is expected to create 
approximately 1,500 jobs, bring significant value-adding 
advantages and eliminate dependence on the uncertain trade flows 
with Malawi that currently beset the industry. 
In order to ensure the viability of investors that are creating 
tobacco-processing plants in Mozambique, bringing much needed 
capital and jobs to the country, we feel that tobacco TRQ into 
the United States is necessary. 
Our analysis shows that in 2001, over 57,000 Metric Tons of US 
tobacco TRQ was left unfilled. In 2002, approximately 34,000 
Metric Tons of TRQ was left unfilled. And in 2003, there was 
approximately 16,000 Metric Tons of tobacco TRQ left unfilled 
(see Table 2). A significant portion of this is unused TRQ from 
Zimbabwe. In 2001, Zimbabwe did not use 6,704 Metric Tons of 
their quota. Zimbabwe's unused quota has continued to increase 
since 2001, reaching 7,067 Metric Tons in 2002 and 7,331 Metric 
Tons in 2003. Given the political and economic hardships in 
Zimbabwe, we feel the unused TRQ in Zimbabwe will continue to 
rise over the years. 
TABLE 2 
Unused TRQ (Metric Tons) 2001 2002 2003 
Total Unused TRQs 57,044 28,136 8,911 
Of Which is Unused EC TRQ 4,763 5,449 6,492 
Other Unused TRQ -4,246 470 574 
Total Unused TRQs 57,044 34,055 15,977 
(Comment: Post cannot reconcile the numbers in this table. End 
comment.) 
? 
REQUESTS FROM MOZAMBIQUE TO THE UNITED STATES 
Given this background, Mozambique kindly requests the following: 
-- To enter into bilateral discussions with the United States on 
Tobacco (specifically those products listed in Table 3). 
-- To understand in greater detail how to obtain part of the 
3,000 Metric Tons of TRQ that falls in the "Other" category, and 
if necessary, to receive assistance to export tobacco under this 
"Other" TRQ category. 
-- To explore the opportunities of redistributing unused Tobacco 
TRQ to eligible least-developed countries (LDCs) like Mozambique, 
perhaps through new rules that require unused quota to be 
redistributed. 
-- To explore the opportunities of increasing the present TRQ of 
150,000 metric tons by about 20 percent and setting aside this 
increase to new LDC-tobacco producers, like Mozambique. 
-- To explore the opportunities of eliminating the TRQ altogether 
for certain LDCs that meet certain eligibility (perhaps similar 
to that of the Millennium Challenge Corporation, of which 
Mozambique is a potential beneficiary). 
TABLE 3 
Harmonized System (HS) Tobacco Products in which Mozambique 
Request TRQ 
HS NUMBER HS DESCRIPTION 
2401.10.63 Tobacco, not stemmed or stripped, not or not over 35 
percent wrapper tobacco, flue-cured burley, etc., described in 
additional US note 5 to chap 24 
2401.20.33 Tobacco, partly or wholly stemmed/stripped, 
n/threshed or similarly n/threshed or similarly proc, not or 
n/over 35 percent wrapper, des. in addl US note 5 to ch. 24 
2401.20.85 Tobacco, partly or wholly stemmed/stripped, 
n/threshed or similarly processed, not from cigar leaf, described 
in addl US note 5 to chap 24 (eligible under AGOA) 
2401.30.33 Tobacco refuse, from other tobacco, for cigarettes, 
described in addl US note 5 to chap 24, tobacco stems, not cut, 
ground or pulverized 
2401.30.35 Tobacco refuse, from other tobacco, for cigarettes, 
described in addl US note 5 to chap 24, tobacco stems, cut, 
ground or pulverized 
2401.30.37 Tobacco refuse, from other tobacco, for cigarettes, 
described in addl US note 5 to chap 24, not tobacco stems 
2403.10.60 Smoking tobacco, whether or not containing tobacco 
substitutes, other, to be used in cigarettes, described in addl 
US note 5 to chap 24 
2403.91.45 "Homogenized" or "reconstituted" tobacco, not 
suitable for use as wrapper tobacco, to be used in cigarettes, 
des. in addl US note 5 to chap 
2403.99.60 Other manufactured tobacco, tobacco substitutes, 
tobacco extracts or Essences, to be used in cigarettes, described 
in addl US note 5 to chap 
Your assistance would be greatly appreciated. 
Sincerely, 
Luis Eduardo Sitoe 
National Director 
End Text. 
 
3. Action Request: Post requests guidance from USTR on how to 
respond to this request from the Mozambican government. 
LA LIME