US embassy cable - 05LIMA4629

UNCLAS SECTION 01 OF 03 LIMA 004629 
 
SIPDIS 
 
DEPT PASS AID 
 
DEPT FOR WHA/AND, EB/TPP/IPE, WHA/EPSC 
COMMERCE FOR 4331/MAC/WH/MCAMERON 
DOC FOR J. BOGER 
USTR FOR BWILSON, BHARMAN 
USPTO FOR INTERNATIONAL - JACKIE MORALES 
CUSTOMS AND BORDER PROTECTION FOR J. TODD REEVES 
 
SENSITIVE 
 
E.O.: N/A 
TAGS: KIPR, ECON, EINV, ETRD, PE 
SUBJECT: SUCCESSFUL IPR CONFERENCE HIGHLIGHTS BORDER 
MEASURES 
 
1.  (SBU) Summary.  Post, in collaboration with the U.S. 
Patent and Trade Office and U.S. Customs and Border 
Protection, hosted a two-day conference October 24-25, 
highlighting the urgent need for Peru to better protect 
intellectual property rights.  During the conference, 70 
officials from Peruvian Customs/SUNAT and Indecopi (Peru's 
Intellectual Property Rights Administrator) heard 
presentations from private sector and government officials 
on how Peru's IPR system functions, the dire situation with 
optical disc piracy in Peru, an overview of the WTO TRIPS 
Agreement, and best practices from U.S. Customs on 
cooperation efforts and risk analysis.  After two days, it 
became apparent that the Peruvian entities responsible for 
protecting IPR, including Customs/SUNAT, Indecopi, police, 
and the judiciary, need to improve cooperation to achieve 
desired results.  Additionally, local Customs officials are 
woefully ignorant of Peru's customs obligations under the 
TRIPS agreement, foreshadowing possible difficulties with 
the implementation of TRIPS plus customs measures under a 
U.S.-Andean Free Trade Agreement.  End Summary. 
 
Helping Customs and Indecopi Understand 
Why IPR Really Matters 
--------------------------------------- 
 
2.  (U) Since 2001, USTR has listed Peru on its Special 301 
Priority Watch List.  Piracy can be found in all sectors, 
including textiles and apparel, pharmaceuticals, software, 
literature, music and movies/media.  Optical disc piracy is 
rampant; 98 percent of the music industry, 80 percent of the 
motion picture industry and 55 percent of the software 
industry is pirated in Peru.  Imports of optical discs 
totaled 130 million in 2004 -- Indecopi officials expect 
this amount to increase to approximately 140 million units 
in 2005.  85 percent of blank optical discs imported exhibit 
the name of Princo, manufactured in Taiwan.  Of the total 
130 million imported discs, only 10 million CDs and DVDs are 
used for legitimate purposes, with the rest used to produce 
pirated products. 
 
3.  (U) Because Peru's optical disc piracy levels continue 
to worsen annually, Post and the U.S. Patent and Trade 
Office co-sponsored a training seminar for Peruvian 
officials entitled "The Application of Intellectual Property 
Rights: the Case of Optical Discs," October 24-25 in Lima. 
Customs officials from Lima's Port of Callao, six customs 
officials from key border areas including Tacna, Arequipa, 
Iquitos and Tumbes, and officials from Indecopi attended the 
conference, where they heard presentations explaining why 
Peru needs to improve its efforts to protect IPR. 
 
4.  (U) Experts from both the public and private sector 
emphasized the need to eliminate optical disc piracy.  In 
addition to noting how IPR protections will encourage 
creative thinking and the development of new products, 
particularly in Peru's robust software industry, Richard 
Llaque, Head of the Tax Control Office at SUNAT, noted that 
Peru loses between $15-20 million in tax revenue annually 
due to piracy of optical discs.  The loss of revenue, he 
emphasized, means that the GOP does not have the money to 
improve social development programs or build infrastructure, 
such as improving the Port of Callao. 
 
5.  (U) Jacqueline Morales from the U.S. Patent and Trade 
Office then reviewed the WTO TRIPS Agreement, highlighting 
sections 51-60, which detail member countries' customs 
obligations.  During her presentation, several Customs 
officials noted that, despite provisions for Ex Oficio 
action under TRIPS, Peruvian Customs is prohibited under the 
law from taking such action. 
 
Emphasis on Border Measures 
--------------------------- 
 
6.  (U)  After laying the foundation, the presentations 
became more specific, detailing U.S. Customs efforts and 
practices in its daily fight against shipments of contraband 
and IPR violations.  J. Todd Reeves, Legal Advisor at U.S. 
Customs and Border Protection, explained best practices in 
the United States, highlighting the need for agencies to 
share information, how to establish a database of 
information on patents and trademarks, and why a good 
relationship with the private sector can make it easier to 
stop fakes.  Kimberly Wachtel, Import Specialist with U.S. 
Customs, reviewed how to conduct targeted risk analysis, 
noting that Customs officials need to pay attention to 
details, such as where a product is imported from, whether 
the company is one that is suspect, and how bad packaging 
can signal a contraband shipment. 
 
7.  (U)  Local Customs and Indecopi officials responded well 
to these presentations, asking questions about how they can 
better improve their efforts.  We also engaged participants 
in a discussion on how they conduct their searches locally; 
most officials admitted that they had never conducted a 
search before because they were unaware of telltale signs of 
IPR infringements or contraband.  Customs officials, who 
appreciated the information, noted that they will take the 
information back to headquarters and incorporate some of the 
U.S. best practices into their daily activities 
 
Inherent Tension between Customs and Indecopi 
--------------------------------------------- 
 
8.  (SBU)  During our discussion on a day in the life of a 
local Customs officers, several participants noted that in 
Peru, Customs does not have the authority to determine 
whether a good is legitimate or a pirated copy.  Instead, 
that responsibility remains with Indecopi officials, who 
must give their official approval before Customs can seize a 
shipment of allegedly pirated goods.  One Customs official 
noted that it often takes Indecopi several days to return 
their call or make a determination; often too late, as 
Customs turns over goods to the importer within 48 hours. 
For example, one Customs agent who works at courier office 
at the Jorge Chavez Airport in Lima explained that she often 
receives shipments of optical discs on a spindle -- most of 
these discs are "software" programs.  She noted that she 
believes these discs, which do not come in a jewel case or 
in any official packaging, to be pirated.  However, as there 
is no Indecopi official at the airport to determine the 
legitimacy of the shipment, she cannot detain the shipments 
without cause, letting the pirated product enter the market. 
 
9.  (SBU)  Several Indecopi officials noted that Indecopi is 
working with SUNAT to place officials at the ports.  One 
agent was recently assigned to the Port of Callao.  Martin 
Moscoso, Director of Indecopi's Office of Derechos de Autor, 
explained that while Indecopi is willing to give 
Customs/SUNAT officials Ex Oficio ability, SUNAT agents do 
not have immunity under Peruvian law to protect them if they 
detain a legitimate shipment.  Customs/SUNAT officials have, 
he stated, rejected their ability to make immediate 
determinations, even though they have the ability to access 
Indecopi's records of Peruvian right holders. 
 
Comment 
------- 
 
10.  (SBU)  During the two day conference, several issues 
became apparent.  In addition to continuing tension and lack 
of communication and understanding between Customs and 
Indecopi officials, we noted that many of the Customs agents 
were unaware of Custom's obligations under the TRIPS 
Agreement.  Peruvian Customs officials receive minimal 
training before becoming an agent; most of our participants 
from Customs could not explain what TRIPS was, let alone 
describe how Customs is meeting its TRIPS obligations.  This 
phenomenon foreshadows potential problems in the future, as 
Peru draws near to the conclusion of FTA negotiations with 
the United States.  Under our FTA trade capacity building 
measures, we will look to educate Peruvian Customs officials 
on their WTO TRIPS obligations and support them as they move 
to implemented TRIPS-plus commitments under an FTA. 
 
STRUBLE