Peru

BARRIERS IDENTIFIED BY USTR IN 2014

(Details in extracts below)

NATIONAL TRADE ESTIMATES REPORT

  • Higher taxes for imported spirits
  • Restrictions on imports of certain used goods
  • 45% excise tax on used cars and trucks
  • “Batch Release Certificate” required for biopharmaceutical companies
  • Allowance for biosimilars of biological drugs without clinical testing means local companies can register biosimilar products that infringe on patented biologic drugs
  • Pirated and counterfeit goods remain widely available
  • Inadequate resources for law enforcement for IPR
  • Improvements needed for border controls and judicial system in relation to IPR
  • Internet piracy of music, software, and video content
  • Lack of clarity of protections for biotechnologically-derived pharmaceutical products
  • New privacy law affects companies dependent on cross-border data flows
  • Majority foreign ownership not permitted in the broadcast media sector
  • Restrictions on foreigners owning land or investing in natural resources near the border
  • Caps on foreign employees (may not be more than 20% of the total number of employees of a local company, or more than 30% of the total company payroll)
  • Some executive agencies and the judiciary considered to lack the resources, expertise, or impartiality necessary to carry out their respective mandates
  • Disproportionate fines by SUNAT (Peru’s tax agency)

REPORT ON TECHNICAL BARRIERS TO TRADE 2014

  • Act to Promote Healthy Eating Among Children and Adolescents: unreasonable timeline, possible preference for the domestic food industry, lack of a scientific basis, possibility to create unnecessary fear in consumers
  • Regulations on planting biotechnology crops to apply for a minimum of ten years
  • Draft Supreme Decree requiring disclosure of all genetically engineered ingredients on processed products labels would create a misleading impression that GE posed unique dangers and would undermine work at Codex

REPORTON SANITARY AND PHYTOSANITARY MEASURES 2014

  • 10 year moratorium on cultivation of biotech crops
  • Peru lacks capacity to conduct risk assessments where exceptions apply
  • Steep penalties for GE materials in imported seeds even where inadvertent
  • Requirement that U.S. pork be shipped frozen or be tested for trichinae
  • Ban on U.S. live cattle imports

SPECIAL 301 REPORT 2014 (IP)

  • Widespread availability of counterfeit and pirated products
  • Need increased resources for IPR enforcement, better coordination among enforcement agencies, enhanced border controls and strengthened judicial system
  • Pursue prosecutions under the law that criminalizes sale of counterfeit medicine
  • Implement obligations under the U.S. – Peru FTA to prevent government use of unlicensed software and protect against piracy over the internet
  • Clarify protections for biotechnologically-derived pharmaceutical products
NTE REPORT: Peru http://www.ustr.gov/sites/default/files/2014%20NTE%20Report%20on%20FTB%20Peru.pdf

IMPORT POLICIES

Tariffs

Under the PTPA, more than 80 percent of U.S. exports of consumer and industrial products now enter Peru duty free. All remaining tariffs on these goods will be phased out by 2018. More than two-thirds of current U.S. agricultural exports enter Peru duty free, and remaining tariffs on U.S. agricultural exports to Peru will be completely phased out by 2025.

In accordance with its PTPA commitments, Peru has eliminated its price band system on trade with the United States. Imported spirits are assessed an effective tax rate that is higher than the tax assessed on domestically-produced Pisco products, thus putting distilled spirits produced in the United States at a competitive disadvantage.

Nontariff Measures

The government of Peru already has eliminated many nontariff barriers, and, under the PTPA, is subjecting remaining measures, including subsidies, to additional disciplines. Peru currently restricts imports of certain used goods, including used clothing and shoes (except as charitable donations), used tires, cars over five years old, and heavy trucks (weighing three tons or more) more than eight years old. A 45 percent excise tax applies to used cars and trucks (compared to 20 percent for a new car). However, if these used cars and trucks undergo refurbishment in an industrial center in the south of the country (located in Ilo, Matarani, or Tacna) after importation, no excise tax applies.

Peru currently requires that biopharmaceutical companies submit a “Batch Release Certificate” issued by the competent authority of the country of origin. The United States Food and Drug Administration (FDA) does not issue such certificates for all types of biological pharmaceuticals. As a result, this requirement adversely affects market access for some biologics produced in the United States.

Other administrative processing requirements and duplicative product testing have a negative impact on access to the Peruvian market. For instance, the Peruvian Ministry of Health allows the registration of biosimilars of biologic drugs without clinical testing. The registration need only include an affidavit that successful clinical trials have taken place and that the drug is safe for use. As a result, local companies can register biosimilar products that infringe on patented biologic drugs.

GOVERNMENT PROCUREMENT

The PTPA requires that procuring entities use fair, nondiscriminatory, and transparent procurement procedures, including advance notice of purchases and timely and effective bid review procedures for procurements covered by the Agreement. Under the PTPA, U.S. suppliers also can bid on procurements of most Peruvian central government entities on the same basis as Peruvian suppliers. This includes procurements by state-owned enterprises, such as Peru’s oil company and Peru’s public health insurance agency. Peru is not a signatory to the WTO Agreement on Government Procurement.

INTELLECTUAL PROPERTY RIGHTS PROTECTION

Peru was listed on the Watch List in the 2013 Special 301 Report. Pirated and counterfeitgoods remain widely available in Peru. Inadequate resources for law enforcement, lack of coordination among enforcement agencies, and the need for improvements at Peru’s border and in its judicial system remain. Piracy over the Internet continues to be a growing problem, especially with respect to music, software, and video content (movies and television programs). There has been improvement in removing pirated and unlicensed software from government computers, but in accordance with provisions of the PTPA, Peru needs to take further steps. There is a lack of clarity regarding Peru’s protections for biotechnologically-derived pharmaceutical products. The United States looks forward to continuing to work with Peru to address these and other issues, including through the TPP negotiations, as well as facilitating training for Peruvian prosecutors on IPR issues, and organizing programs highlighting the benefits of IPR to Peru and its citizens.

SERVICES

Telecommunications and E-Commerce

In 2012, Peru promulgated a privacy law that affects companies dependent on cross-border data flows. While no specific problems have been identified, the United States will continue to monitor the development of implementing regulations for this new regime.

INVESTMENT BARRIERS

Peruvian law prohibits majority foreign ownership in the broadcast media sector. Peruvian law also restricts foreigners from owning land or investing in natural resources located within 50 kilometers of its border, although the Peruvian government may grant special authorization to operate within those areas.

Under current law, foreign employees may generally not comprise more than 20 percent of the total number of employees of a local company (whether owned by foreign or Peruvian persons) or more than 30percent of the total company payroll.

Both U.S. and Peruvian firms remain concerned that executive branch ministries, regulatory agencies, the tax agency, and the judiciary often lack the resources, expertise, or impartiality necessary to carry out their respective mandates. U.S. and Peruvian investors have also complained about the reinterpretation of rules and the imposition of disproportionate fines by SUNAT, Peru’s tax agency.

TBT REPORT (pg. 90): Peruhttp://www.ustr.gov/sites/default/files/2014%20TBT%20Report.pdf

Bilateral Engagement

The United States discusses TBT matters with Peru during and on the margins of WTO TBT Committee meetings, and in the WTO TBT Committee of the United States–Peru Trade Promotion Agreement (TPA). The first meeting of the TBT Chapter Committee was held in September 2013.

Nutritional Labeling and Restrictions on Advertising of Food to Adolescents

On May 16, 2013, Peru enacted the Act to Promote Healthy Eating Among Childrenand Adolescents. This law will require a mandatory warning statement for prepackaged foods considered to have high contents of sugars, sodium, saturated fat, and trans fats. This warning statement must be displayed on the front display panel of the foods and warn potential consumers to “avoid excessive consumption” or, in the case of trans fats, to “avoid consumption” entirely. The Act also lays out restrictions with respect to the advertising and promotion of certain affected foods to children and adolescents. Although the United States understands the public health objective that this law is aiming to address, it has raised concerns to ensure that Peru provides a reasonable timeline for the enactment of implementing regulations and to ensure that such regulations do not cause unnecessary trade disruptions and are applied fairly. For example, it appears at present that are “foods and non-alcoholic beverages in their natural states, not subject to processes of industrialization” are excluded from the scope of the Act.  This could result in preferential treatment for Peru’s domestic food industry, such as street vendors, whose food products may contain the same levels in sodium, sugars, and saturated and trans fat as the prepackaged foods targeted under the Act. The United States submitted written concerns about the regulatory implementation timeline to Peru’s Inquiry Point on May 9, 2013, and followed up with a diplomatic note outlining concerns on May 13, 2013. Additionally, on September 24, the Peru Prime Minister’s Chief of Staff and his Healthy Eating Committee met with U.S. representatives from the Food and Drug Administration’s Center for Food Safety and Applied Nutrition and the U.S. Department of Agriculture’s Foreign Agricultural Service and Food and Nutrition Service.

This issue has also been discussed in the framework of the United States –Peru FTA, with senior level officials in Lima, at the WTO TBT Committee in June and October 2013, with supporting interventions by Argentina, the EU, Guatemala, Mexico, and Switzerland, and on the margins of other meetings. In the WTO TBT Committee, some Members highlighted concerns that less trade restrictive approaches exist, that the present maximum daily nutrient thresholds lack a scientific basis, and that mandatory symbols and warning statements that are inconsistent with international standards might create unnecessary fear in consumers. In 2014, the United States will continue to monitor the development of the implementing regulations, continue its discussions with the government of Peru, and explore opportunities for technical exchanges.

Moratorium on Planting Genetically Engineered Crops

On November 14, 2012, Peru published implementing regulations, for a minimum of ten years, on planting biotechnology crops. The implementing regulations, which would impose stiff penalties for noncompliance, appear to lack requisite details and guidance necessary to understand their application. Accordingly, on June 21, 2013, the United States submitted comments on the implementing regulations, noting that the level of the fines established by the proposed fine schedule appeared unreasonable and is a significant deterrent to shipping seed products to Peru. In addition, the U.S. comments noted that the fine schedule did not provide adequate clarity as to how the violations listed will be identified. The United States urged Peru to notify the implementing regulations to the WTO at the June and October 2013 WTO TBT Committee meetings, as well as during bilateral discussions in the context of the United States-Peru TPA meeting held in 2013. The United States also asked Peru questions related to this issue during the November 2013 WTO Trade Policy Review of Peru. The United States, other trading partners, and Peruvian domestic interests, have actively engaged with Peru on this matter. Peru is presently in the process of considering amendments to the implementing regulations. The United States will continue to carefully monitor this issue in 2014.

Labeling of Biotech Foods

On June 27, 2011, Peru notified to the WTO its Draft Supreme Decree Approving the Regulations Governing the Labeling of Genetically Modified Foods. The proposal would mandate that all genetically engineered (“GE”) ingredients must be included on processed products labels.

The United States submitted comments on the notification on September 14, 2011. Peru has not responded to the comments. In 2013, Peru renewed efforts to move forward on this proposal. The United States is concerned that this measure, by requiring mandatory labeling, would suggest that GE foods present unique dangers as compared to their conventional counterparts. Moreover, the United States is concerned that Peru’s measure might undermine work being undertaken by the relevant international body, the Codex Committee on Food Labeling (CCFL). In the CCFL, Members agreed to a compendium text that can be used for the development of a labeling policy for GE foods, which states it “is not intended to suggest or imply that foods derived from modern biotechnology are necessarily different from other foods simply due to their method of production.” This issue was raised in the WTO TBT Committee by multiple Members, including the United States, at the March and June 2013 meetings of the WTO TBT Committee. At the October 2013 WTO TBT Committee meeting, Peru reiterated that the expected date of publication of the regulation had not yet been established. The United States understands that the measure is currently undergoing an internal review by the Peruvian government. The United States is unaware presently whether Peru will allow for public comments to be submitted on any revised proposal. The United States will continue to monitor this issue in 2014.

SPS Report (pg. 73): Peruhttp://www.ustr.gov/sites/default/files/FINAL-2014-SPS-Report-Compiled.pdf

Agricultural Biotechnology

In December 2011, Peru adopted a ten-year moratorium on cultivation of biotech crops. The moratorium excluded products used in research in a confined environment, in pharmaceutical or veterinary products, or GE products used for food, feed or processing. A risk assessment must be performed for these excepted products, and to date Peru has not conducted any GE-related risk assessments. The United States is concerned that Peru’s potential lack of capacity to conduct risk assessmentsfor GE products and to test for the presence of GE products in imported commodities could create uncertainty in the market and potentially disrupt U.S. exports. In November 2012, Peru published Implementing regulations for the enforcement of the moratorium. The regulations do not provide necessary practical guidance for implementation, such as specifying the sampling size or procedures for testing of imported seeds. The regulations also include steep penalties for the presence of GE materials in imported seeds, even if in advertent or in low levels. The United States continues to raise concerns with Peru in multilateral and bilateral meetings and to ask Peru to formally notify the implementing regulations at the TBT Committee in Geneva, as required by the TBT Agreement.

Food Safety

Pork

Peru requires U.S. pork to be shipped to its market frozen or be tested due to concern over trichinae. The United States believes that this requirement is unnecessary as U.S. producers maintain stringent biosecurity protocols that serve to limit the incidence of trichinosis in the United States to extremely low levels. The United States has requested that Peru revise these requirements for fresh and chilled pork and provided evidence to Peru in May 2012 that supports this request. The United States raised the issue at the United States-Peru FTA SPS Committee meeting in June 2012. In March 2013, Peru requested the United States to complete a questionnaire so that it could initiate a risk assessment of pork shipments. The United States submitted the completed questionnaire in September 2013 and a response from Peru is pending. The United States will continue to engage Peru to resolve this trade concern.

Animal Health

Peru continues to ban all U.S. live cattle due to BSE-related concerns following the detection of a BSE-positive animal in the United States in 2003. Prior to April 2010, Peru and the other three CAN Member States (Bolivia, Colombia, and Ecuador) maintained that CAN rules prevented them from lifting their BSE-related restrictions on live cattle. In 2009, the United States submitted comments on a proposed risk assessment published by CAN that stipulate that only live animals under 24 months of age could be imported. CAN Resolution 1314, published April 2010, stipulated that all CAN Member States are able to elaborate their own requirements regarding the importation of live cattle from the United States in accordance with the CAN risk assessment.

USDA provided updated information to Peru in May 2012 to support the U.S. request for market access, and the U.S. official subsequently raised the issue with Peruvian counterparts the June 2012 meeting of the United States-Peru FTA SPS Committee. In September 2013, the United States answered questions from Peru in a new proposal addressing BSE and other diseases concerns and is awaiting a response from Peru. The United States will continue to engage with Peru to re-open its market for U.S. live cattle based on science, the OIE guidelines, and the negligible risk status of the United States.

301 (IP) Report (pg. 55): Peruhttp://www.ustr.gov/sites/default/files/USTR%202014%20Special%20301%20Report%20to%20Congress%20FINAL.pdf

Peru remains on the Watch List in 204. The United States remains concerned about the widespread availability of counterfeit and pirated products in Peru.

The United States urges Peru to devote additional resources for IPR enforcement, improve coordination among enforcement agencies, enhance its border controls, and strengthen its judicial system. The United States encourages Peru to coordinate enforcement and pursue prosecutions under the law that criminalizes the sale of counterfeit medicines.

In addition, the United States urges Peru to take steps to implement its obligations under the United States-Peru Trade Promotion Agreement regarding the prevention of government use of unlicensed software, and likewise urges steps to implement obligation with respect to protections against piracy over the Internet, which continues to be a growing problem.

Peru also needs to clarify its protections for biotechnologically-derived pharmaceutical products.

The United States looks forward to continuing to work with Peru to address these and other issues, including through the TPP negotiations.