US embassy cable - 05SANTODOMINGO4386

UNCLAS SECTION 01 OF 02 SANTO DOMINGO 004386 
 
SIPDIS 
 
DEPT FOR WHA/CAR, EB/CBA, EB/IFD/OMA; 
TREASURY FOR DO:MWAFER; SOUTHCOM ALSO FOR POLAD 
USDOC FOR 4322/ITA/MAC/WH/CARIBBEAN BASIN DIVISION 
USDOC FOR 3134/ITA/USFCS/RD/WH; DHS FOR CIS-CARLOS 
ITURREGUI; 
 
E.O. 12958: N/A 
TAGS: PGOV, BEXP, EFIN, KCOR, DR 
SUBJECT: DOMINICAN CUSTOMS SUSPENDS EXPRESS CLEARANCES FOR 
4 DAYS TO PUSH ANTI-CORRUPTION REFORMS 
 
 
1.  Summary.  A Dominican government initiative to reform 
customs handling and to institute closer controls against 
fraud briefly disrupted express courier services to and from 
the Dominican Republic September 15-20.   After exchanging 
with the government formal commitments to cooperate, three 
international handlers were able to resume service on 
September 20 and the thirteen Dominican members of their 
industry association re-opened on September 21.  End summary. 
 
2.  Dominican Director General of Customs Miguel Cocco 
withdrew customs services on September 15 from all bonded 
warehouses used by international express mail couriers, 
including U.S. firms UPS and FEDEX, German firm DHL, and 
thirteen Dominican firms making up the Express Couriers 
Association.  All imports and exports of courier documents, 
express packages express cargo stopped.  Nothing moved over 
the weekend or on Monday morning. 
 
3.  The Charge spoke at length to Cocco four times during 
that period and the commercial attache was regularly in 
contact with UPS manager Griselda Hernandez, who is also 
president of the Association.  Cocco had initiated a general 
audit of the sector to detect corruption and under-invoicing. 
 In remarks to the press on September 19 he expressed anger 
and his conviction that many importers were bringing in 
under-invoiced or incorrectly labeled goods and bribing their 
way through customs when the subterfuges were detected.  &We 
are not clowns,8 Cocco declared, "and as long as those firms 
refuse to submit to the authority of Customs and fail to 
invoice correctly, we will keep the doors shut on private 
courier services." 
 
4.  Customs officials required the three international 
operators to produce invoices for their own purchases and 
asked for copies of invoices for all shipments handled over 
the previous two years.  Hernandez pointed out that Customs 
itself has the originals of those invoices already; UPS, for 
its part, retains only the previous six months of billings. 
While UPS, FEDEX and DHL were permitted to stay open to 
accept and hold items for processing, all other courier 
operators were instructed to close their doors.  The 
international operators were losing revenue of USD 60,000 to 
70,000 per day, but on volume that could be mostly recouped 
with the reopening of clearance services.  In the meantime, 
firms both in the Dominican Republic and abroad were facing 
disruption and uncertainty. 
 
5.  Complicating the matter was Cocco,s annoyance with the 
Express Couriers Association for their reactions to his plans 
to modernize customs services.  He and his staff had drawn up 
plans and a new presidential decree that would make it 
possible to extend working hours and reform procedures so as 
to speed processing while reducing the possibilities of 
bribery and corruption.  Cocco had worked on a similar effort 
during his tenure in the same position in the first Fernandez 
administration, but because of illness he had not been able 
to carry it out.  The new service would require investment in 
additional staffing and equipment; Cocco convoked the 
couriers in March to inform them that he intended to charge a 
fee equivalent to 3 percent of their turnover.  Association 
members sought to negotiate with him concerning the nature 
and extent of service fees. 
 
6.  President Fernndez signed the Customs-drafted decree 
authorizing the new services on July 26.  It has not yet been 
published in the Official Gazette as required by law, but 
Cocco dismissed that fact as a technicality, and argued that 
he could proceed, based on authority granted to him by law 
governing Customs.  He advised the firms in writing that new 
arrangements would go into effect on September 15 and 
required their written assent.  The firms provided replies 
that reserved their rights to petition for changes, including 
to the courts; Cocco replied with the shut-down. 
 
7.  Upon his return on September 20, the Ambassador called 
Cocco to express USG support for measures to counter 
corruption and to emphasize the need to assure regular, 
uninterrupted import and export operations.  Cocco told him 
at 5 p.m. that matters at issue had already been cleared up. 
The Embassy learned subsequently that Cocco and his staff did 
not meet the international operators until later that 
evening, for a long session that ended with an exchange of 
letters with essentially the same content as earlier: 
acknowledgement of Customs authority with an explicit 
reservation of the right to appeal administratively and 
through the courts as appropriate.  Customs re-opened its 
services to the three the next morning, with additional 
personnel. 
 
8.  Similar arrangements were made with Dominican members of 
the Association on September 21. Those firms re-opened. 
Newspapers carry reports that - - some 300 unregistered and 
unauthorized express companies - - remain closed.  Embassy 
cannot confirm the accuracy of these reports. 
9.  Comment.  Customs Director General Miguel Cocco was 
immediately available to the Ambassador and Embassy personnel 
throughout these incidents and he stressed repeatedly that he 
did not suspect the international firms of illegal practices. 
 He said that his targets were Dominican firms engaged in 
corruption and his desire was to modernize clearance 
procedures for better service and greater accountability. 
His approach was heavy-handed and his public rhetoric was 
feisty, as befitted an official who had already busted 
several smuggling rings and had bested some of the more 
influential wholesalers of the country.  For a time, however, 
it appeared as if his measures were on the way to becoming an 
obstacle to legitimate trade and business, with potential 
fallout for CAFTA-DR, the free trade agreement with the U.S. 
and other countries recently ratified by the Dominican 
Congress.  With trade now back on the tracks, that is no 
longer the case. 
KUBISKE