US embassy cable - 03HANOI1615

UNCLAS SECTION 01 OF 05 HANOI 001615 
 
SIPDIS 
 
SENSITIVE 
 
STATE FOR EAP/BCLTV; INL/AAE; L/LEI (Sandage) 
 
E.O. 12958: N/A 
TAGS: SNAR, PREL, EAID, VM, CNARC 
SUBJECT:  GVN RESPONSE TO DRAFT LOA 
 
Ref:  Wise/Gatz fax of 6/27/03 
 
1.  (U)  This is an action request.  Please see paragraph 
3. 
 
2.  (U)  Embassy received MFA's long-awaited response to 
the draft LOA on counternarcotics on June 26.  It appears 
that the USG and GVN views still differ in the areas of 
taxes, immunities, certification, and Leahy.  Full text 
of GVN response in para 5. 
 
3.  (U)  ACTION REQUEST:  Post requests that Department 
consider the GVN response and provide a formal response. 
 
4.  (SBU)  COMMENT:  While there is still a long way ago, 
we find it mildly encouraging that the MFA finally 
responded.  The detailed and lengthy response may 
demonstrate that the GVN, while still holding its ground 
on what it views as the key issues, is at least making a 
good faith effort to keep the process moving. END 
COMMENT. 
 
5.  (U)  Begin Text -- 
 
DRAFT LETTER OF AGREETMENT ON US-VN COUNTERNARCOTICS 
COOPERATION 
 
Vietnam has carefully studied the latest draft Letter of 
Agreement on Counter-Narcotics Cooperation between the 
USG and the GVN (LOA) presented by the US and the 
accompanying non-paper. 
 
Actually, a number of consultations on the papers have 
been held between the two sides. Vietnam has expressed 
and shared the need to enhance cooperation of the two 
countries, including in this field. 
 
In the discussions, Vietnam has also explained its points 
and made suggestions that it believes to have taken care 
of the legitimate concerns and interests of both sides. 
 
Again, Vietnam wishes to share the following comments and 
suggestions in the hope that this would further speed up 
the concurrence of the two sides. 
 
COMMENTS AND SUGGESTIONS 
 
TITLE OF THE LOA 
-    The addition of `and Law Enforcement' is newly added 
and needs to be clarified as it may expand the scope of 
the LOA beyond counternarcotics cooperation. 
 
-    The Title should be kept as: `Letter of Agreement on 
Counternarcotics Cooperation between the Government of 
the United States of America and the Government of the 
Socialist Republic of Vietnam,' which would already cover 
the law enforcement element of counternarcotics 
cooperation. 
 
Part I: General 
-    It is proposed to place the 2nd and 3rd sentences in 
paragraph 2 (`Total US assistance... Law Enforcement 
Affairs') as a 3rd paragraph of Part II (`Project 
Description'), as they relate directly to the proposed 
projects and their possible extension (future funding). 
 
 
STANDARD PROVISIONS 
3.  Property and Personnel 
 
3.A. Property: 
 
-    Paragraph 1, last sentence: The `sale of property' 
in this paragraph should be read together with the 
`import and disposition of property' in 7.A. 
 
-    While the property imported into Vietnam is free of 
taxes (7.A.), it is not always true that the funds 
derived from the sale of such property could be all 
designated as from the project.  The price of certain 
items of such imported property, if sold on Vietnam's 
market, could be much more appreciated because of the 
taxes.  Let's give a technical example to clarify this: 
 
A car imported into Vietnam free of taxes: 10,000 USD 
--     Import tax (10,000 x 100%):         10,000 USD 
--     Special excise/VAT (2x10,000x100%): 20,000 USD 
--     Actual market value at import:      40,000 USD 
 
(30,000 USD different and not from the project, if sold 
in Vietnam) 
 
70%  Original value after 2 years:          7,000 USD 
 
70% Actual market value after 2 years:     28,000 USD 
 
(21,000 USD different and not from the project, if sold 
in Vietnam) 
In both cases, the difference is the tax to be paid by 
the purchaser, not the seller, and is the tax revenue of 
the GVN. 
 
-    The last sentence of 3.A.1. should be then revised 
to take care of the above distorted price, for example: 
`Funds, which are to be derived from the sale of any 
property furnished by the USG to a project in accordance 
with the provisions of 7.A., shall be used in the 
furtherance of the objectives of that project.' 
 
-    See also comments and suggestions on 7.A. on the 
sale/disposition of the property: the law of Vietnam 
provides that such property is to be taxed on the part of 
the purchaser if sold in Vietnam and is to be tax exempt 
if re-exported.  As result, it must be understood that 
the property imported tax-free, if sold on Vietnam's 
market, can only be bought at a price equivalent to 
`actual market price minus eligible tax' and the 
purchaser, not the seller, shall be obliged to pay this 
tax amount. 
 
 
3.B. Personnel: Paragraph 1 
-    See comments and proposals on Annex 1 
(Certification). 
 
3.B. Personnel:  Paragraph 2 
-    The last sentence is not what had been previously 
consulted and agreed and it is unreasonable to require 
written agreement of the USG in this case (of positioning 
Vietnamese officials). 
 
-    Vietnam proposes to retain the previously agreed 
wording: `This requirement may be waived by appropriate 
notification to the USG by the GVN.'  Vietnam can also 
accept the addition of `written' before `notification' if 
the US so wishes. 
 
5.  Applicable Laws: Paragraph B: 
 -   Vietnam prefers to retain what had been previously 
consulted and agreed with regard to the last phrase: `or 
otherwise agreed by both parties' (instead of the 
currently revised wording: `or otherwise authorized by 
the USG'). 
 
7.  Taxes: Paragraph A: 
-    The `disposition' of property in this paragraph 
should be viewed in the context of the comments made on 
the last sentence of 3.A.1. above. 
 
-    The law of Vietnam provides that such property is to 
be taxed on the part of the purchaser if sold in Vietnam 
and is to be tax exempt if re-exported.  As a result, the 
property imported tax-free, if sold on Vietnam's market, 
can only be bought at a price equivalent to `actual 
market price minus eligible tax' and the purchaser, not 
the seller, shall be obliged to pay this tax amount. 
 
-    Paragraph A should be revised as follows: Delete the 
two words `disposition' in the paragraph and add the 
following to the end of the paragraph: `and the 
disposition of any such property shall be made in 
accordance with the law of the Socialist Republic of 
Vietnam, which provides for the exemption of taxes if re- 
exported or the obligation of the purchaser to pay the 
required taxes if sold in Vietnam.' 
 
7.  Taxes:  Paragraph B: 
-    The provision in this paragraph is not justified and 
is beyond the law of Vietnam and usual international 
practices. 
 
-    Under law, Vietnam can only provide preferential 
taxation treatment similar to that applicable to ODA 
projects and in the case of double taxation avoidance 
agreement, even in the absence of such an agreement 
between the two countries. Paragraph B should be revised 
accordingly. 
 
8.  Status of USG Personnel in Vietnam: Paragraph A: 
-    It is unreasonable to demand the full privileges and 
immunities equivalent to the staff of the US Embassy 
(diplomatic mission) to the `persons' mentioned in this 
paragraph who are not related to any diplomatic 
responsibilities, are only on short-term missions (few 
days to one or two weeks) and may include consulting firm 
personnel from the US or third countries. 
 
-    Vietnam proposes that: these `persons' shall be 
accorded with the privileges and immunities similar to 
those granted to personnel of other countries working 
with an ODA project.  This provision, as in the case of 
other countries, would adequately ensure the full 
discharge of their missions under the LOA. 
 
-    (It should be noted that initially there had been a 
provision included in the draft which would stipulate: 
the USG personnel working in Vietnam under the agreement 
shall observe the laws effective in Vietnam). 
 
8.  Status of USG Personnel in Vietnam: Paragraph B: 
-    As explained on 8.A. above, Vietnam proposes that: 
such personnel shall be accorded preferential taxation 
treatment similar to that granted to personnel of other 
countries working with an ODA project. 
 
-    In the current draft: The addition of `and not 
resold in Vietnam' is welcome but that alone is not yet 
adequate.  It is not justifiable to request the same 
import tax exemption treatment as is accorded to 
diplomatic agents of the US Embassy and the exemption of 
income tax with respect to `income earned while in 
Vietnam' (this may apply only to the income earned from 
the project). 
 
9.  Annex Two: 
-    See comments and suggestions on Annex 2. 
 
10.  Termination:  Paragraph B: 
-    Paragraph B is totally new and the addition has not 
been consulted.  Further, this paragraph is just to re- 
incorporate the problematic elements of the proposed US 
exclusive right to terminate, which would bring the 
drafting back to the initial stage of the discussions in 
the 1990s.  The US had dropped it years ago.  Vietnam had 
then explained that both sides would equally have `the 
right to terminate' their respective obligations under 
the agreement and this would be covered by 10.A. 
 
-    Vietnam again insists on the deletion of this 
Paragraph B. 
 
Annex One (Certification): 
-    Vietnam holds that the law of Vietnam, not that of 
the US, applies here, especially in the case of criminal 
prosecution (all acts and activities serving as grounds 
for prosecution would be on the territory of Vietnam, not 
that of the US, including the training to be provided 
under the LOA).  The GVN would subject its personnel to 
the law of Vietnam only, while it shall ensure the 
nomination of `qualified' personnel. 
 
-    On the other hand, the US concerns would be already 
guaranteed in all stages of consultations on considering, 
granting and execution of the training, by rejecting a 
nominee or terminating the training of a person 
concerned. 
 
-    Vietnam therefore proposes: either not to annex such 
a provision of certification; or, to revise Annex One as 
follows: 
 
(i) Delete the Notice and its two footnotes; and, 
(ii) Replace the current paragraph 2 with a new one: `I 
understand that the USG and the GVN may terminate my 
training if it is determined that I engaged in the above 
conduct during the last ten years or during my training 
funded under the LOA.' 
 
-    Proposed revision (i) is to solve the issue of the 
applicability of law especially in the case of criminal 
prosecution; proposed revision (ii) is to stipulate the 
natural and legitimate right of both Vietnam and the US 
to terminate a person's training, especially when the 
training is expected to be on the territory of Vietnam 
and for personnel from Vietnam. 
 
-    Vietnam had earlier proposed to have both GVN and 
USG personnel to execute a certification, which is not 
included here, but is still seen as relevant as all 
involved in one same exercise, either with one role or 
the other, would be so required. 
 
Annex Two (Leahy Amendment): 
-    As consistently explained, Vietnam recognizes the 
importance of protecting human rights but rejects the use 
of human rights as a condition for aid provision and as a 
pretext for inference in the internal affairs of states. 
 
-    Vietnam prefers the deletion of this Annex from the 
LOA. If the US finds it mandatory to stipulate its 
responsibility under its law, this stipulation should 
only be a statement of the fact and should be general in 
nature to serve the purpose of stipulating that fact. 
 
-    Vietnam therefore proposes the Annex to be as 
follows: 
 
'Annex Two 
The USG and the GVN recognize the importance of 
protection of human rights and this Annex is made 
pursuant to the provisions of Article 9 of the LOA. 
 
On the US Leahy Amendment Provisions 
The USG holds that the protection of human rights is an 
important element of any bilateral agreement of this 
nature.  It is bound by the US Leahy Amendment 
Provisions, which stipulate that USG narcotics (and 
crime) control assistance is conditioned on the active 
protection of human rights on the part of recipient 
governments.' 
 
-    Vietnam believes that the above has adequately taken 
care of the USG responsibility. Vietnam cannot accept the 
current paragraph B of the Annex. The following will be 
subjected to further consultations: If the US really 
needs it and as an accommodation, Vietnam could, at the 
most, consider a following addition: 
 
`and that, in certain cases, USG assistance or funds, 
including the funds covered by this agreement and its 
annexes, may not be provided to a foreign government, 
unless the US Secretary of State certifies otherwise.' 
 
-    The above proposals are for the purpose of 
accommodation. In all cases, Vietnam had wished and had 
proposed either to delete the Annex or to add in the 
Annex the following: `No governments, agencies or 
individuals, including those of the US and Vietnam, are 
entitled to interpret this Annex on the US Leahy 
Amendment Provisions as to make an assessment or judgment 
on human rights of other states, or to use them as a 
condition for assistance or as a pretext for interference 
in the internal affairs or affairs under the jurisdiction 
of other states.' 
 
Annex Three (Projects): 
-    While the `Standard Provisions' of the LOA are yet 
to be discussed and agreed, the projects proposed in the 
Annex have not been touched upon.  Those projects, both 
the content and scope, shall be subject to later 
consultations by the two sides. 
 
-    The US has also recognized that the US Department of 
State does not prepare project documents and that once 
the LOA is concluded, the scope, timing, and 
implementation of the proposed projects can be determined 
by the implementing agencies of the two sides. 
 
*** 
 
The discussion of this issue between the USG and the GVN 
has been initiated at least since 1997. Understanding has 
been reached, progress has been made and concurrence has 
been achieved on both the need to enhance cooperation in 
this field and on many elements in the drafting. 
 
This should be built upon to expedite the drafting of the 
LOA. In particular, at this stage of consultation, the 
two sides should devote their focus, on the one hand, on 
the main elements directly related to counternarcotics 
cooperation, and on the other, on how best ensure and 
accommodate the legitimate concerns of both sides, rather 
than just to re-institute what is termed as `standards' 
but has no relevance in the case. 
 
Vietnam respectfully presents the above comments and 
proposals out of the will of accommodation and in the 
hope to facilitate the early conclusion of the drafting 
of the LOA on counternarcotics cooperation of the two 
countries. 
 
Vietnam hopes that they would be accepted or otherwise 
commented in the same spirit of understanding and 
accommodation. 
(Hanoi, June 2003) 
End text 
PORTER