sanctions. U.S. companies will continue to
face restrictions against trade with Iran until
Iran renounces its unacceptable behavior. No
changes are foreseen for the multilateral U.N.
sanctions against Iraq and Libya or the U.S.
sanctions against Cuba.

The afternoon sessions opened with a sum-
mary of DTAG activities since the March 1995
plenary meeting. A formal process has been
instituted for the DTAG to submit recommen-
dations to the Department, and the COMSAT
Task Force and Automated Export System
Task Force have used it. The DTAG provided
recommendations on the draft Federal Regis-
ter notice on an exemption for cryptographic
products for persanal use. Several policy pa-
pers were completed, including one on U.S.
arms transfer policy towards Latin America
Transfer. New task forces were established,
including ones on various sections of the
ITAR, offsets, and defense export financing.
To keep DTAG members informed about the
wide range of DTAG activities, DIAG Quar-

terly Reports will be published.

After PM/ATEC’s Stephen Geis briefly out-
lined U.S. policy towards platform upgrades,
Vann Van Diepen, Director of the Office of
Chemical, Biological and Missile Nonprolif-
eration (PM/CBM), spoke on countries pre-
senting missile/WMD concerns. Bringing
new member states into the Missile Technol-
ogy Control Regime (MTCR) is an important
part of multilateral nonproliferation efforts.
Russia and South Africa, both significant sup-
pliers, joined recently, Agenda items for the
October MTCR plenary meeting included the
problems of transshipment points, increased
cooperation among member states, and halt-
ing specific shipments. In addition, there are
plans to review the MTCR Annex.

Assistant Secretary McNamara gave the con-
cluding presentation on the New Forum. The
organization’s primary goals are to focus on
preventing destabilizing buildups by encour-
aging transparency, holding consultations,
and adopting common policies; and to deal
firmly with countries of concern (Iran, Iraq,
North Korea, and Libya) by restricting trans-

fers of arms and sensitive dual-use technolo-
gies. Members will share intelligence on
threats and global trends; provide informa-
tion on transfers of arms and sensitive dual-
use articles to countries of concern; and define
common approaches, including restraint poli-
cies when appropriate.

Even though COCOM has been abolished,
controls have not ended. Interim guidance
and guidelines on sensitive transfers will
remain in place until the New Forum is estab-
lished. Russia and the Visegrad-Four nations
have agreed to the same terms as other par-
ticipants: They will institute adequate export
controls, adhere to the requirements of the
nonproliferation regimes, and establish re-
sponsible export policies towards pariah
states. Specifically, Russia has agreed not to
make any new sales to Iran. The
organization’s Working Groups met in Paris
during September - October to complete re-
maining tasks, including defining procedures
and modalities for arms and dual-use exports
and compiling lists of the munitions and
dual-use items which will be controlled.

Significant obstacles to establishing the New
Forum have led individuals to question
whether the institution will be able to accom-
plish its objectives. Assistance Secretary
McNamara noted that similar skepticism sur-
rounded the establishment of the MTCR.
When the MTCR was being established, some
felt that the resources needed to halt WMD
proliferation were beyond the range of the
United States and other participating nations.
Assistance Secretary McNamara conceded
that some nations, such as Russia, will face
difficulties in controlling unauthorized WMD
exports. Nevertheless, he is convinced that
over time the value of the New Forum, like
the value of the MTCR, will be demonstrated.
New Forum member countries may have dif-
ferent perspectives, but they share common
goals. @

Page 20

Defense Trade News, Volume 7, Number 1, May 1996



Contacting the Office of Defense Trade Controls

Postal Address

Office of Defense Trade Controls
Bureau of Political-Military Affairs
SA-6, Room 200

U.S. Department of State
Washington, D.C. 20522-0602

Express Mail/Courier Delivery Address
Office of Defense Trade Controls

Bureau of Political-Military Affairs

SA-6, Room 200

U.S. Department of State

Washington, D.C. 20522-0602

(Deliver to Main Department of State Bldg.
2201 C Street, NW

Use 21st Street "Joggers' Entrance")

Fax Numbers

Director; Licensing Division;
Defense Trade News:

Compliance Division;
Computer Support Staff:

(703) 875-6647

(703) 875-5663

General Telephone Numbers
General Information:

Office Director & Deputies:
Defense Trade News:

(703) 875-6644
(703) 875-7050
(703) 875-5671

Licensing Division: (703) 875-6644
Registration/Compliance: (703) 875-6650
Commodity Jurisdicfion: (703) 875-5655

Status Inquiry Telephone Numbers
Case Status Inquiries: (703) 875-6652
Congressional Case Status: (703) 875-6641
Automated License
Status System (ALISS):
Remote On-Line
Bulletin Board (ROBB):

(703) 875-7374

(703) 875-6650

Contacting the Deputy Assistant
Secretary for Export Controls

Deputy Assistant Secretary for Export Controls
Bureau of Political-Military Affairs

PM, Room 7325A

U.S. Department of State

Washington, D.C. 20520-7325

Contacting the Office of
Export Control Policy

Office of Export Control Policy
Bureau of Political-Military Affairs
PM/EXP, Room 2242

U.S. Department of State
Washington, D.C. 20520-2242

Telephone — (202) 647-4231
Fax (202) 647-4232

Ordering Forms and Regulations

To order license application forms, write the Office of Defense Trade Controls or fax (703) 875-6647.
Please mark your message “Attn: Forms.” Specify the type and quantity of forms needed, and
provide a phone number and point of contact along with your address. To order a copy of the
International Traffic in Arms Regulations, call the Government Printing Office at (202) 783-3238 from
8:00 - 4:00 EST; cite stock number 069-001-000-58-1. Please note that DTC doesnot distribute the ITAR

and GPO does not carry application forms.

Department of State Publication 10358
Bureau of Political-Military Affairs
Revised January 1996


Part 130 - Political Contributions, Fees & Commissions

Retainer Fee Interpretation, 22 C.F.R. § 130.5

In 1976, the Department originally proposed
Part 130. The regulatory history of that
proposed Part 130 included public comments
on “fee or commission.” Those comments
expressed concern that the definition of “fee
or commission” was so broad as to include
salaries.

Consequently, the original definition was
changed by inserting language, now found at
§ 130.5(b)(2) of the International Traffic In
Arms Regulations (ITAR). Thus, the term
“fee or commission” excludes “a normal sal-
ary (excluding contingent compensation) es-
tablished at an annual rate and paid to a regu-
lar employee . . .” See 41 Federal Register
40608 (September 20, 1976)). Except to the

extent that what might otherwise be called a
retainer fee falls within this language, it
would not appear to be exempted from the
definition of “fee or commission” under Part
130.

If you have questions on this matter, please
contact Mary Sweeney, Compliance Special-
ist, DTC. She may be reached at (703) 875-
6650

Page 14

Defense Trade News, Volume 7, Number 1, May 1996



Ly
—

Personnel Updates

Out...

Foreign Service Officer Robert Mosher,
formerly Chief of DTC’s Research and
Analysis Branch was reassigned to FSI to
prepare for his new foreign post
appointment.

John Pisa-Relli, an attorney in the
Compliance Enforcement Branch, resigned
from the Department of State in September to
assume a position with a private law firm.

DTC Licensing Officer, Martin O’Mara
departed in September to assume new duties
with the Office of Arms Transfer and Export
Control Policy.

MAJ Robert S. Kovac, a licensing officer
responsible for TAAs and MLAs, retired from
the Army. He has assumed new duties at
DoD as an Export Control Analyst.

Licensing Officer Sandy Snyder departed
DTC in October 1995 for new responsibilities
at DoD as an Export Control Analyst.

Foreign Service Officer Jefferey Cellars
completed a one-year tour as Special
Assistant to the Director of thé Office of
Defense Trade Controls and Executive Editor
of Defense Trade News and Export Policy
Bulletin. He has assumed new duties in the
Bureau of Near Eastern Affairs as a Foreign
Service Personnel Officer.

MAJ Mike Lucas served as a Defense Trade
Analyst, retired in October 1995 from the
Anny.

In...

Lana C. Chumley joined DTC in September
1995 as Special Assistant to the Director and
as Executive Editor of Defense Trade News and
Export Policy Bulletin. A Foreign Service
Officer, Ms. Chumley has served in Mexico,
Korea, Nicaragua, the United Kingdom, and
State’s former Bureau of International
Narcotics Matters.

William L. (Bill) Shelton, Jr. (Major, USAF)
joined DTC in July 1995 as a Defense Trade
Analyst. He is a career acquisition officer,
having worked on the F-22 Advanced Tactical
Fighter and F-16 fighter programs. He comes
to us from Project Air Force, RAND, Santa
Monica CA, where he was a Research Fellow
focusing on Acquisition Reform, Weapon.
Systems Cost Drivers, and Viability of the
Defense Industrial Base. Additionally, he has
a technical education as an aeronautical
engineer.

Don Paarlberg is the new Chief of DTC’s
Research and Analysis Branch. He is a
Foreign Service Officer with previous
assignments in Korea, Micronesia, Hong
Kong, and Panama, plus the State
Department and DOD.

James B. Allen joined DTC’s Compliance
Division in September 1995 as an analyst. A
Foreign Service Officer, he has served in San
Salvador, Cape Town;Naples, Italy; and
Mexico City, as well as State’s Bureau of
Intelligence and Research and Bureau of
Consular Affairs.

MAJ Bill Wade joined DTC in November
1995 and serves as a Defense Trade Analyst.
An Army aviator, Bill comes to DTC from an
assignment as the Deputy Assistant Chief of
Staff, Information Management for the 19th
TAACOM in Taegu, Korea.

MAJ Jim Bagwell serves in DTC as a Defense
Trade Analyst. An Army aviator, MAJ
Bagwell’s most recent assignment was as
company commander for B company (Au
Assault/UH-60) 1-501 Aviation Regiment at
Camp Humphreys, Korea.

Page 24

Defense Trade News, Volume 7, Number 1, May 1996



a

Compared to other supplier nations, the
United States is doing well. While overall
sales have declined, the relative U.S. share of
the market has grown. The U.S. is now the
largest arms exporter, capturing roughly half
of new sales.

Because U.S. purchases of armaments have
greatly decreased, sales abroad have become
increasingly important for the financial well-
being of U.S. firms. We remain committed to
facilitating responsible arms transfers to meet
the legitimate defense needs of our friends
and allies.

The USG supports responsible transfers in
several ways, including:

~ Tasking U.S. Embassy personnel to
support overseas marketing efforts of U.S.
firms.

-— Involving senior USG officials in pro-
moting sales especially important to U.S. in-
terests.

-~ Supporting DOD participation in in-
ternational air and trade shows, when the
Secretary of Defense determines that such
Participation is in the national interest and
notifies Congress.

Let me turn to specific cases in which we uti-
lized these and other methods to the benefit
of U.S. firms. My first example is a recent sale
to the UK.

Apache Helicopters for the UK

Last August after a two-year competition,
Westland /McDonnell Douglas secured the $4
billion contract to provide the Apache attack
helicopter to the UK. Two of the six compet-
ing consortia involved U.S. firms. Embassy
London actively supported the U.S. bidders.

From the outset, in London the Office of De-
fense Cooperation (ODC), ambassador, and
other relevant country team members worked
closely with senior McDonnell-Douglas and
Bell-Textron executives to develop suitable
marketing strategies.

In Washington an interagency team (State,
Commerce, and DOD) expedited all USG ac-
tions supporting the U.S. competitors. Some
of its most important activities involved the
release of technical data. Because it was cru-
cial to assure the UK that problems of releas-
ability would not arise, the team processed
requests for manufacturing licenses and tech-
nical assistance‘agreements prior to the final
selection for both U.S. competitors.

In this and other cases, the UK government
faced pressures to buy European. Both
McDonnell-Douglas and Bell-Textron
worked through a UK prime contractor to
mitigate these demands.

— The embassy and the American manu-
facturers downplayed European vs. U.S. ar-
guments and stressed the operational and.
economic advantages of U.S. aircraft.

~ The U.S. gained the MOD’s recom-
mendation by emphasizing the offer’s perfor-
mance, cost, and risk advantages.

In the future, we can expect the UK to de-
mand more offsets. This became clear to-
wards the end of the competition, when, al-
ready promised substantial benefits of 100%
offsets and 3,000 new jobs, the UK lobbied for
even more offsets.

Apache Helicopters for the Nethelands

My next two examples involve the Nether-
lands. In June the Dutch bought thirty
McDonnell Douglas Apache helicopters for
their airmobile brigade.

As in the UK case, the USG and the American
manufacturer used similar tactics to win ma-
jor defense contracts. There was interagency
coordination for the Dutch helicopter compe-
tition: the Embassy’s ODC was the central
point of contact, and State, USIS, FCS, DOD
were all involved.

-- The Embassy’s extensive contacts en-
abled U.S. players to gain insights into politi-
cal trends and decisionmaker sentiment, al-
lowing USG officials and McDonnell Douglas

Defense Trade News, Volume 7, Number 1, May 1996

Page 5





Country Policy Briefs

Angola

On July 28, 1995, President Clinton
announced his finding that the furnishing of
defense articles and services to the
Government of the Republic of Angola will
strengthen the security of the United States
and promote world peace. On August 22, the
President announced the same finding
regarding the govenment of Mongolia. The
State Depatment will henceforth consider
applications for the export of U.S. Munitions
List articles and services to these govern-

ments on a case-by-case basis. [Angola: Vol.

60, Federal Register, page 40255 (August 7,
1995); Mongolia: Vol. 60, Federal Register,
page 50069 (September 28, 1995)].

Ecuador and Peru

Effective November 13, 1995, it is no longer
the policy of the United States to deny all re-
quests for licenses and other approvals to
export or otherwise transfer lethal items to
Ecuador or Peru. All requests will henceforth
be reviewed on a case-by-case basis.

Exports will be evaluated in light of the recent

conflict between these countries and the de-
sirability of promoting multilateral restraint
in arms transfers to Peru and Ecuador.

The licenses and approvals subject to this
policy include those which permit commer-
cial defense and service exports of any kind
(e.g. exemptions and licenses and other ap-
provals for licenses for manufacturing, license
agreements, technical assistance agreements,
and technical data exports) involving Ecuador
and Peru under the authority of the Arms
Export Control Act. [Vol. 60, Federal Register,
page 57049 (November 13, 1995)].

Nigeria

On November 10, 1995, President Clinton
announced a ban on the sale and repair of
military goods and services to Nigeria. It is
thus the policy of the U.S. Government to
deny all new, and suspend all previously is-
sued, licenses and other approvals to export
or otherwise transfer commercial defense
articles and defense services to Nigeria. This
action is being taken to underscore the impor-
tance the United States attaches to an orderly
and timely transition to unhindered elected
civilian government, as well as to respect for
human rights.

The licenses and approvals subject to this
policy include those which permit commer-
cial defense article and service, including re-
pair service, exports of any kind (e.g. licenses
and other approvals for manufacturing li-
cense agreements, technical assistance agree-
ments, and technical data exports), involving
Nigeria, subject to the Arms Export Control
Act. [Vol. 60, Federal Register, page 66334
(December 21, 1995)].

Defense Trade News, Volume 7, Number 1, May 1996

Page 21



Defense Trade News, Volume 7, No. 1

Questions For the Forum

Readers Inquiries

The office of Defense Trade Controls will answer selected questions regarding export
policies or procedures in the Defense Trade News and Export Policy Bulletin. Please make
your question(s) as concise and focussed as possible. Simply print or type your
question(s) in the space below and mail it to DTC (Attn: Question and Answer Forum)
or fax it to (703) 875-5663. We look forward to hearing from you.

Question(s):

1.



The U.S. Customs Service, Office of Investigations is willing and prepared to receive any
information on potential illegal exports and to assist you when you feel there is suspicious
activity occurring. To contact a Special Agent of U.S. Customs applicable phone listing are pro-
vided below:

a * 202/927-1540

“< Baltimore. L410/962-2620

< Buffalo 716/551-4375

Denver... = 303/784-6480

etioit \ ELPaso. =>.) 915/540-5700
Houston . Los,Angeles.. -..- 310/514-6231
“Miami. * 305/597+6030- * New Orleans. - 504/589-6499
~New York. 212/466-4080: “San Antonio..- “210/229-4561
“San Diego. 619/557-6850 ~~ San Fransico’ =... 415/705-4070
© San Juan” 809/729-6975) Seattle 2. 206/553-7531
“Tampa: 813/348-1881 ° “9. Tueson -) 520/670-6421

Detense Trade News, Volume 7, Number 1, May 1996 Page 23





DEPARTMENTS

U.S. DEPARTMENT OF STATE|

4

SuIV4dV AUVLOIA-TVOLLIOd 40 NvaHNE

DTAG Developments

Assistant Secretary of State for Political-Mili-
tary Affairs Thomas McNamara spoke on the
Conventional Arms Transfer (CAT) Policy,
USG support for legitimate defense sales, and
emerging markets. He summarized the Au-
gust 1995 reorganization of export control
functions. PM’s Office of Export Control
Policy and part of the Office of Defense Rela-
tions and Security Assistance joined to form
the new Office of Arms Transfer and Export
Control Policy (PM/ATEC), thereby moving
foreign military sales and commercial arms
transfer responsibilities into one office.

The Conventional Arms Transfer (CAT)
Policy prohibits destabilizing transfers and
requires that sales be consistent with
multilateral restrictions, including the non-
proliferation regimes, the New Forum, and
U.N. arms embargoes and sanctions. Major
USS. objectives are to promote multilateral
restraint and transparency among the major
suppliers. The CAT policy also dictates that

the USG should support transfers which ad-
vance U.S. security and foreign policy inter-
ests. The USG tasks embassies to support
marketing efforts, involves senior Washing-
ton officials in promoting sales crucial to U.S.
interests, and supports DOD participation in
international trade shows. In several recent
competitions -- Westland/McDonnell Dou-
glas’ August 1995 Apache sale to the UK,
McDonnell Douglas’ June 1995 Apache sale to
the Netherlands, and Hughes/Raytheon’s
June 1995 AMRAAM missile sale to the Neth-
erlands -- the USG helped U.S. companies
obtain significant defense contracts.

Assistant Secretary McNamara offered guid-
ance on emerging and potentially lucrative
markets. In the Middle East, the United
States transfers advanced conventional weap-
onry to Israel; maintains a rough ratio of arms
sales to Egypt and Israel in order to meet
Egypt's legitimate defense needs; supports
marketing efforts of U.S. firms in Saudi Ara-
bia; reviews arms sales to the Gulf Coopera-
tion Council (GCC) states on a case-by-case
basis; and is committed to help Kuwait meet
its legitimate defense requirements.

Concerning South Asia, Pakistan cannot re-
ceive any FMS transfers under Pressler
Amendment sanctions. The Department's
Pressler Review Committee allows transfers
of defense equipment commercially con-
nected with repairs and maintenance of
equipment transferred before 1990.

China can only receive USML items if the
President waives Tiananmen sanctions for
exports which he determines are in the na-
tional interest. These sanctions also apply to
dual-use items intended for the People’s Lib-
eration Army, but, with the exception of high
tech transfers, the Department of Commerce
generally approves applications for dual-use
exports for commercial end-uses. U.S. arms
transfer policy towards Taiwan remains un-

Page 18

Defense Trade News, Volume 7, Number 1, May 1996



government review, but companies must
keep records on higher performance ship-
ments that will be provided to the U.S. gov-
ernment as directed).

¢ Group B (South America, South Korea,
ASEAN, Hungary, Poland, Czech Republic,
Slovak Republic, Slovenia, South Africa):
General license up to 10,000 MTOPS with
record-keeping and reporting as directed;
Individual license (requiring prior govern-
ment review) above 10,000 MTOPS. Above
20,000 MTOPS, the government may
require certain safeguards at the end-user
location.

¢ Group C (India, Pakistan, all Middle
East/Maghreb, the former Soviet Union
China, Vietnam, rest of Eastern Europe):
Gneral license up to 2,000 MTOPS. Indi-
vidual license for military and proliferation-
related end-uses and end-users and general
license for civil end-users between 2,000
MTOPS and 7,000 MTOPS, with exporter
record keeping reporting as directed. Indi-
vidual license for all end-users above 7,000
MTOPS. Above 10,000 MTOPS, additional
safeguards may be required at the end-user
location.

¢ Group D (Iraq, fran, Libya, North Ko-
rea): Current policies continue to apply (i.e.
virtual embargo on computer exports).

For all these groups, reexport and retransfer
provisions continue to apply. The revised
controls will become effective after they are
implemented in formal Commerce Depart-
ment Regulations.

The U.S, will continue to implement the En-
hanced Proliferation Control Initiative (EPCI),
which provides authority for the government
to block exports of computers of any level in
cases involving exports to end-uses or end-
users of proliferation concern or risks of di-
version to proliferation activities. Criminal as
well as civil penalties apply to violators of the
EPCI.

The Deparment of Commerce is developing
additional measures to inform exporters of
their obligations and of potential proliferation
and other security risk. Commerce will pub-
lish regulations clarifying exporters’ duty to
check suspicious circumstances and inquire
about end-uses and end-users. Exporters will
be advised to contact the Department of Com-
merce if they have any concern with the iden-
tity or activities of the end-users. Regular
briefings and other industry outreach on pro-
liferation and other security issues will be
made available for computer companies pro-
ducing or marketing high-performance com-
puters. @

Page 10

Defense Trade News, Volume 7, Number 1, May 1996



e Sign Up for
State Department Export Licensing Training

The State Department's Office of Defense Trade Controls (DTC) can design a seminar on export
licensing policies and procedures with your specific needs in mind. We hold our seminars at our
office in Arlington, Virginia, minutes from the District of Columbia. .

We normally hold four half-day seminars per year, combining participants from different firms,
with attendance limited to 30. We encourage small companies to apply. To sign up, please mail
this application to DTC (Attn: Training Seminars Coordinator) or fax it to (703) 875-6647.

TO: Training Seminars Coordinator, Office of Defense Trade Controls
FAX: (703) 875-6647

FROM:
(Company Name)

We would like to send attendees to a seminar including training on these topics:

____ Completion of Applications ___Registration Requirements
_____Country Licensing Policies ____ Congressional Requirements
____Proscribed Country Requirements ___ Agreement Requirements
___U.S. Customs EXODUS Program ___ Commodity Jurisdiction Requests
_____Processing of Requests ___Licensing Foreign Nationals

Other subject areas we would like covered

Number wishing to attend:

Primary U.S. Munitions List categories of defense articles, services, and/or technical data with
which our firm deals: 1. 2. 3. 4.

Our attendees would/would not be interested in briefing DTC about our products and services.

DTC Registration Code ______
Address
City , State, ZIP
Point of Contact for Training
Phone ( ) Fax ( )





Kuwait faces the difficult task of securing its
borders against the principal threats in the
region -- Iran and Iraq -- and the U.S. has a
standing commitment to assist Kuwait in
meeting its legitimate defense requirements.

The U.S. and UAE signed a bilateral defense
cooperation agreement in July 1994. The UAE
- purchased U.S. military equipment im-
proves interoperability with U.S. forces, a key
to the UAE’s continuing security.

To assure the free flow of oil, the United
States strives to prevent Iraq or Iran from
gaining military advantage in the region. Un-
til Iraq complies with UN Security Council
resolutions, it will remain subject to rigorous
international restrictions prohibiting any non-
humanitarian imports. The United States
prohibits any arms transfers to [ran.

Regarding other countries in the region, we
review proposed transfers to Algeria ona
case-by-case basis, giving human rights con-
cerns more emphasis and imposing a pre-
sumption of denial on lethal exports. We
would approve proposed sales to Jordan
which sustain the Jordanian armed forces,
but would deny those giving Jordan new sys-
tems or significant upgrades.

Pakistan and India are our chief concerns in
South Asia. These countries have a history of
armed conflict and both have advanced pro-
grams to acquire WMD and their ballistic
missile delivery systems. The United States is
wary of allowing transfers which would de-
stabilize the region, undermine our nonprolif-
eration objectives, or advance offensive capa-
bilities.

Under Pressler Amendment sactions imposed
in 1990, Pakistan cannot receive any FMS
transfers. The Department's Pressler Review
Committee allows commercial transfers con-
nected with repairs and maintenance of
equipment transferred before 1990.

Because the United States does not want to
contribute to instability in South Asia by up-
setting the current balance of forces, the USG
closely examines proposed arms sales to In-
dia.

In East Asia, Tiananmen sanctions against
China will probably not be lifted in the near
future because of the country’s human rights
abuses. The only way for China to receive
USML items is for the President to waive
these sanctions for exports which he deter-
mines are in the national interest.

Dual-use items intended for the People’s Lib-
eration Army are captured by the Tiananmen
sanctions. The USG closely scrutinizes
proposed exports of dual-use items covered
by the Enhanced Proliferation Control Initia-
tive (EPCI). License applications for dual-use
exports for commercial end-uses, other than
high tech transfers, are handled by the De-
partment of Commerce and are generally ap-
proved.

USS. arms transfer policy towards Taiwan
remains unchanged. Our policy has success-
fully advanced U.S. interests, addressing
Taiwan’s security and economic needs and
furthering democracy in that nation. The
USG has lully met Taiwan’s legitimate defen-
sive needs while upholding our commitments
under the August 1982 Communique.

The United States has significant commercial,
political, and security interests in Indonesia,
but its human rights abuses have led us to
deny requests to export small arms and lethal
crowd control items. We closely scrutinize
requests to export non-lethal items applicable
to crowd control or police work.

Human rights concerns also cause us to re-
strict exports of certain equipment to Sri
Lanka, but we are monitoring recent im-
provements in the country’s human rights
record.

Vietnam remains a proscribed country under
the ITAR, and constraints on arms exports are
not expected to be eased soon.

Defense Trade News, Volume 7, Number 1, May 1996

Page 7



(SS

representatives to respond to concerns about
the future of European arms cooperation and
emphasize the benefits of cooperation with
the United States.

Testimony from U.S. Apache pilots about the
Apache’s technical merits overcame the pro-
European bias of Dutch Defense Ministry
State Secretary Meijling.

Senior USG officials weighed in for
McDonnell Douglas. While high-level French
and German officials lobbied for their indus-
tries, the President and Secretaries of State,
Defense, and Commerce all made personal
appeals to Dutch representatives to counter
this.

AMRAAM Missiles for the Netherlands

The Dutch made another major purchase in
June. The Defense Ministry announced its
intent to buy two hundred Hughes/Raytheon
AMRAAM missiles worth $90 million. The
missiles are co-produced by the two firms for
overseas sales, and would be delivered dur-
ing 1998 - 99.

Although the Economic Affairs Ministry must
still approve the offsets package, and even
though the sale is subject to parliamentary
review in September, Dutch officials say both
parties will probably allow the sale.

The entire country team, led by the ambassa-
dor and the ODC, actively supported Hughes
and Raytheon. At one point the Netherlands
blocked consideration of AMRAAM because
of an unrelated U.S. trade measure, and the
embassy worked closely with Washington to
separate one issue from the other.

In the final stages of the competition, the am-
bassador met with Defense State Secretary
Meijling at the Paris Air Show. Later he met
with a key member of parliament. The
embassy’s pol-mil officer accompanied parlia-
mentarians to the Hughes/Raytheon presen-
tation at the Paris Air Show, briefing Dutch
officials on the program and responding to
questions.

Emerging Markets

These three examples illustrate the substantial
resources the USG is willing to invest in sup-
port of legitimate defense sales. Such sales
further commercial as well as security and
foreign policy interests, producing advan-
tages for both government and industry.

But these examples consist of sales to major
European allies. Many industry wonder what
U.S. arms transfer policy will be towards po-
tentially emerging and lucrative markets in
the Middle East, South Asia, East Asia, and
Latin America.

In the Middle East, the United States transfers
advanced conventional weaponry to Israel.
This is consistent with our commitment to
sustain Israel's qualitative military advantage
over potential adversaries.

We maintain a rough ratio of arms sales to
Egypt and Israel in order to meet Egypt's le-
gitimate defense needs, reinforce our strong
bilateral relationship, and illustrate that we
accord Egypt significant advantages for being
the first Arab state to make peace with Israel
and for being actively engaged in the peace
process.

Concerning Saudi Arabia, Saudi security and
the country’s ability to defend itself have al-
ways been our paramount concern. The Sau-
dis are our largest foreign military sales cus-
tomer. We expect the commercial market to
grow in the years ahead as the current cash
crunch eases. We fully support U.S. compa-
nies working in Saudi Arabia and continue to
encourage marketing efforts.

U.S. arms sales policy among the Gulf Coop-
eration Council (GCC) states is handled ona
case-by-case basis, given the unique needs of
the various countries in the Arabian Gulf.
Overall, however, our goal is to enable these
countries to provide the first line of defense in
the region.

Page 6

Defense Trade News, Volume 7, Number 1, May 1996



changed. Human rights abuses have caused
the United States to restrict arms transfers to
Indonesia and Sri Lanka. Indonesia cannot
receive small arms and lethal crowd control
items, and proposed exports of non-lethal
items applicable to crowd control or police
work are closely scrutinized.

In order to preserve the existing military bal-
ance in Latin America, the United States
prohibits transfers of advanced conventional
weapons. But the Administration also sup-
ports modernizing the Latin American armed
forces in a limited and balanced way. In Sep-
tember 1995, the Administration lifted the
blanket arms embargo imposed on Peru and.
Ecuador during border hostilities. Both Ecua-
dor and Peru are now eligible to receive non-
lethal FMS items, and the Administration has
reinstated its previous policy of considering
transfers of lethal weapons on a case-by-case
basis. Proposed exports to Guatemala are
reviewed on a case-by-case basis, but those
involving lethal equipment are closely exam-
ined because of human rights concerns.

Next, speakers from the Air Force, Army, and
Navy gave their organizations’ perspectives
on arms transfer objectives. Major General
Hale Burr, Jr., Principal Assistant Deputy Un-
der Secretary of the Air Force for Interna-
tional Affairs, noted that the United States
faces new challenges in the post-Cold War
era: combating WMD proliferation, restrain-
ing aggressor states, and combatting threats
to emerging democracies and our economic
security. The USAF seeks to advance interna-
tional peace and democratic values through
expanding CINC coalition warfare capabili-
ties, building security coalitions, and estab-
lishing and sustaining democracies.

Frank S. Besson, Director of Security Assis-
tance for the U.S. Army, remarked that secu-
rity assistance supports the military’s goals of
improving the military capabilities of the
United States and its allies, promoting demo-
cratic ideals, alleviating suffering throughout
the world, and enhancing regional stability.
The Army has created a new position of
Deputy Under Secretary of the Army for In-

ternational Affairs to coordinate the Army's
international activities, has established policy
oversight for security assistance, and has
instituted an action team to define how the
Army should implement the CAT policy.

Rear Admiral John W. Snyder, Deputy Direc-
tor of the Navy International Program Office
(Navy IPO), noted that the services’ overall
expertise and perspective can improve the
arms transfer process. Because the U.S. mili-
tary knows a country’s military needs, re-
gional balances of power, and the strengths
and weaknesses of armed forces around the
world, it should have a substantial role in
developing arms transfer policy. As the
Navy’s expert on technology transfer issues,
Navy IPO can contribute to this.

Snyder noted that since European and Israeli
defense firms are selling to Latin America
while U.S. producers face constraints in these
regions, the United States needs to rethink its
arms transfer policy for the region. Because
U.S. companies must compete against “Buy
European” pressures on European contracts,
US. firms should concentrate on initiating
more U.S.-European cooperative programs.
As South Africa produces arms and makes
large arms purchases, the United States must
factor South Africa into its nonproliferation
efforts. U.S. arms transfer policy towards the
Central European states is still evolving. The
CEE countries want U.S. weaponry, but lack
of money may force them to settle for Euro-
pean articles.

Shaun Donnelly, EB Deputy Assistant Secre-
tary for Energy, Commodities and Sanctions,
noted that the Office of Economic Sanctions
Policy coordinates U.S. unilateral economic
sanctions within State and with Commerce
and Treasury, and the U.S. implementation of
U.N. mandated sanctions with Treasury. EB
ensures that economic consequences are fac-
tored into the arms transfer issues largely
handled by PM. State’s Coordinator for Busi-
ness Affairs and EB will be initiating quar-
terly sessions with industry on economic

Defense Trade News, Volume 7, Number 1, May 1996

Page 19



a
Revised Computer Export Controls

Regulatory Revisions to Focus On National Security

On October 6, the White House announced
the Presidents decision on revising computer
export controls, In his statement, the Presi-
dent made it clear that effective export con-
trols are a critical part of national security,
especially a strong nonproliferation policy.
He further stated that our control regulations
must focus principally on exports that have
ignificant national security applications and
which are not so widely available in open
commerce that controls are ineffective.

The President took this action in the wake of a
careful study by the Department of Defense
that considered (1) the rapid advance of com-
puting technology since 1993, when controls
were last reviewed, (2) our security and non-
proliferation interests, and (3) the need for a
policy that would remain effective over the
next 18 to 24 months.

This study found that enormous advances in
the power and capabilities of computing sys-
tems coming into widespread commercial use
have occurred and will continue to occur over
the next two years. The commercial computer
market is being transformed by the emer-
gence of workstations containing multiple
high-speed microprocessors, the ready avail-
ability of high-speed communications links,
and the continuing rapid progress in software
to permit difficult problems to run in parallel
and on networks.

Trying to regulate the export of computers
that are increasingly avilable in markets
abroad is a recipe for an ineffective nonprolif-
eration policy. It imposes serious regulatory
burdens without improving our national se-
curity and diverts resources from the pursit of
other important nonproliferation objectives.

This decision will strengthen our nonprolif-
eration policy by targeting our export control
resources on those areas where they can

make a difference. It will complement our
work in the new forum, the multilateral re-
gime we are forming to control arms and sen-
sitive dual-use technologies, where we will
work with our partners to encourage devel-
opment of multilateral transparency and con-
trols on computers consistent with our na-
tional controls. It will reinforce other steps
we have taken in this administration to
achieve concrete goals — such as the indefinite
extension of the Nuclear Non-Proliferation
Treaty, denuclearization of Ukraine, stopping
the North Korean nuclear weapons program,
and a negotiation of a comprehensive test ban
~ in our efforts to combat proliferation.

Synopsis of New Computer Controls

The proposed new computer export controls
are designed around the following goals:

* To permit the government to calibrate
control levels and licensing conditions de-
pending upon the national security or prolif-
eration risk posed at a specific destination;

* To enhance U.S. national security and
preserve the U.S. computer industrial base by
ensuring controls on computer exports are
effective and do not unnecessarily impede
legitimate computer exports; and

* To permit the government to track
global sales, thereby illuminating how high-
performance computing may be used to pur-
sue critical military applications.

The revised controls center around four coun-
try groups as follows:

* Group A (Western Europe, Japan,
Canada, Mexico, Australia, New Zealand):
General license for all computers (i.e. no prior

Defense Trade News, Volume 7, Number 1, May 1996

Page 9



Office of Defense Trade Controls
Customer Service Survey

The Office of Defense Trade Controls would like your opinion on the attached Customer
Service Plan and your perception of the service you have received from our office. Please mail or
fax your response to the address at the bottom of the survey by July 31, 1996. We also request that

registrants/applicants only submit a single response.

1. How would you rate the Office of Defense Trade Con- 2. Do you feel DTC meets its customer service
trols’ (DTC’s) customer service standards? standards?
1 Excellent OO) Fair 1 Yes, definitely
1 Very Good OC) Poor CI Yes, somewhat
1 Good LO No
3. From what unit within DTC have you received 4. Have you found the person (s) who assisted you
service? at DTC knowledgeable?
(C1 Licensing 1 Administration OC Yes
C1 Registration Computer Services OU No
(1 Compliance Not applicable
4a. How knowledgeable did you find the person (s) at DTC? 5 Was the service completed?
(4 Very knowledgeable [] Somewhat knowledgeable C1 Sooner than expected L] As expected
1 Knowledgeable L4 Not knowledgeable C1 Later than expected
6. Where you treated in a courteous and professional 7. Is there any issue you feel needs to be reviewed in
manner by DTC personnel? DTC's Customer Service Plan? Identify the issue.
O Yes 1 Not applicable (J Yes 0 No
O No
8. Do you feel DTC’s Customer Service Plan is 8a. If no, please state the issue (s) that have not been
complete? addressed.
OO Yes 1) No
9. Are you aware of other agencies offering like or 10. Have you sought services from an agency that
similar service? Identify the agency and service. offers like or similar service? Identify the agency
O Yes O No and service.
1 Yes O No
11. From what other government agency/offices have 12. How does DTC rate against other government

you sought services?

offices in the area of customer service?
C1 Better than others 1 Worse than others

(1 Same as others

Mail to: — Office of Defense Trade Controls
Customer Service Survey
PM/DTC, Room 200, SA-6

Washington, D.C. 20522-0602

Fax Number: (703) 875-6647

Defense Trade News, Volume 7, Number 1, May 1996

Page 25



United States Department of State bd Bureau of Political-Military Affairs

Defense Trade News

and Export Policy Bulletin

Volume 7, Number 1 . Washington, D.C. . May 1996
Policy

Remarks by Thomas E. McNamara 4

The CAT Policy and USG Assistance in Specific Procurement Cases

Revised Computer Export Controls 9

Regulatory Revisions to Focus On National Security

Offshore Procurement 11

A Comprehensive View

Part 130 - Political Contributions, Fees & Commissions 14

Retainer Fee Interpretation, 22 C.F.R. §130.5

Operations

Registration of Manufacturers 15
Compliance Benefits All

Question & Answer Forum 16
Now You Know....

Departments

Defense Trade Advisory Group Developments 18
Country Policy Briefs 21
US Customs Report 22
Personne! Updates 24
Customer Service Survey 25
Customer Service Plan 26
Questions for the Forum 27
Arms Transfer and Export Control Chart 29

Feedback, ELLIE & Training Forms 30


fense article (s) to be produced to only the
person in the United States or to an agency of
the U.S. Government;

b. limit the use of the technical data to
the manufacture of the defense article re-
quired by the contract /purchase order;

c. prohibit the disclosure of the data to
any other person except subcontractors
within the same country. However, any sub-
contracts between foreign persons must con-
tain all the limitations and conditions as
specified in 123.9 and 124.13 (c);

d. prohibit the acquisition of any rights
in the data by the foreign person (s) (includ-
ing subcontractors);

e. require the foreign person, including
subcontractors, to destroy or return to the
person in the US all of the technical data ex-
ported pursuant to 124.13; and

f. require delivery of the defense
article(s) manufactured abroad only to the US
person or to the US Government.

Only the initial contract/purchase order for
each foreign party must be submitted to the
Office of Defense Trade Controls. It must
reference the license number (of the bid pack-
age license) and clearly identify the defense
article to be produced. Extensions of con-
tracts placed against the license need not be
submitted to ODTC but must be retained as a
part of the applicant’s records. However, a
new DSP-5 is required when dealing witha
new foreign party.

Renewals: If offshore procurement is to ex-
tend beyond the license validity period, a new
license submission is required. Blocks 10 and
20 (end use information) should state “Re-
newal of (insert license number) in further-
ance of offshoure procurement IAW 124.13”.
See sample license application.

Canada: While no license is required for
Canada, when engaging in offshore procure-
ment with Canadian parties, U.S. companies
need not apply fora DSP-5. (See 22 CFR 126.5
and 124.13) However, compliance with all
other provisions of 22 CFR 124.13, and the
guidelines notes above, is required.

Page 12

Defense Trade News, Volume 7, Number 1, May 1996



Offshore Procurement

A Comprehensive View

What is Offshore Procurement?

Although the ITAR currently does not define
offshore procurement, the term is interpreted
to mean the purchase of defense articles from
foreign sources who have the resident capa-
bility to manufacture an article from U.S. pro-
vided build-to-print unclassified technical
data for delivery solely to U.S. persons in the
United States or to the U.S. Government.

Offshore Procurement a condition of export
off shore procurement that the capability and
know-how necessary to produce the product
is resident with the offshore source. Thus,
only build-to-print is being defined as pro-
ducing an end item (ie., system), sub-system,
or component from technical drawings and
specifications (which contain no process or
manufacturing know-how) without the need
for any technical assistance. The ability to
“puild-to-print” is dependent upon a recipi-
ent already having the capability to use the
technical drawings and specifications to gen-
erate a manufacturing data package that in-
cludes indigenous process specifications that
allow the defense article to be produced. Re-
lease of supporting documentation (e.g., ac-
ceptance criteria, object code software for nu-
merical machines) is permissible. Any effort
going beyound build-to-print constitutes a
defense service as defined in 22 CFR 120.9(1)
and would require the submission of either a
technical assistance agreement or a manufac-
turing license agreement in accordance with
22 CFR 124.1.

What are the Requirements of Offshore
Procurement (22 CFR 124.13)?

Application Submission: Applications (DSP-
5) for bid packages for export offshore pro-
curement submitted to the Office of Defense
Trade Controls must contain the following
(See page 14 for an example of a completed
DSP-5) :

a. Block 10 (commodity block), or as an
attachment, providing technical descriptions
of the product (s) involved. Block 10 should
state “unclassified technical data, ie., draw-
ings, and specifications required to support
the offshore procurement of the (insert com-

b. Blocks 14, 16, and/or 18, or as an at-
tachment, identifing all foreign parties to
which the bid package will be released. En-
sure that the data package is limited to only
build-to-print information and that the for-
eign recipients maintain an accounting of the
data provided to them to ensure that the data
will either be returned to the US or destroyed
upon nonselection or termination of effort.
To ensure compliance with 124.13 and 123.9,
prior to delivery of the bid package contain-
ing build-to-print technical data to the foreign
end-user (s), a signed statement must be ob-
tained from the foreign end-user (s). The
statement must declare that the data will not
be retransferred to any unauthorized parties
or toa third country without the prior written
approval of the U.S. Government. The state-
ment should be retained as a part of the
exporter’s records as required in 22 CFR
122.5.

c. Block 20 (specific end use informa-
tion) stating “Build-to-print bid package for
offshore procurement of (def
accordance with (IAW) 22 CFR 124.13”.

Acceptance: Upon selection of the foreign
party, the requirement of 22 CFR 124.13 must

be complied with when entering into an off-
shore procurement arrangement. A contract
or purchase order therefore, must dothe fol-
lowing:

a. indicate approval of both the US per-
son and the foreign person the contract/pur-
chase order and limiting delivery of the de-

Defense Trade News, Volume 7, Number 1, May 1996

Page 11





Log onto ELLIE
State’s Electronic License Entry System

The State Department’s Office of Defense Trade Controls (DTC) now offers on-line
electronic license submission via ELLIE, the Electronic License Entry System. Since its
inception in late 1993, ELLIE has processed over 2000 applications. Having successfully
completed the pilot stage of the project, DTC has gradually increased the number of
companies participating in the ELLIE program to over 300.

ELLIE is a free service. To use ELLIE, you must have access to DTC’s Remote On-line
Bulletin Board (ROBB). Access to ROBB and ELLIE requires a PC, a modem, and commu-
nications software, which your firm may already possess.

To sign up for ELLIE, please mail this application to DTC (Attn: Computer Support
Staff) or fax it to (703) 875-5663.

TO: Director, Computer Support Staff, Office of Defense Trade Controls
FAX: (703) 875-5663

FROM:
(Company Name)

We would like to sign up to submit license applications electronically via ELLIE.
Wedo/do not already use ROBB.
Our firm submits approximately. license applications to DTC per year.

DTC Registration Code
Address
City , State, ZIP
Point of Contact for ELLIE
Phone ( ) Fax ( )



So as to maintain the existing military balance
in Latin America, the United States will not
introduce advanced conventional weaponry
into the region. But it is in our interest to sup-
port modernization of the Latin American
armed forces in a limited and balanced way.

In February we imposed a general suspension
on munitions exports when a border conflict
erupted between Peru and Ecuador. As hos-
tilities have ceased and progress is being
made towards resolving the dispute, the
United States modified the policy in early
May to allow case-by-case review of transfers
of non-lethal defense items.

This month the Administration decided to lift
the blanket arms embargo imposed during
the border conflict.

~— Non-lethal FMS sales to Ecuador are
already allowed. We now extend this to Peru.

— We have returned to considering
transfers of lethal weapons on a case-by-case
basis. In accordance with the CAT policy, we
would prohibit transfers of sophisticated
weapons systems which would upset the
regional balance of power, and continue to
encourage Peru and Ecuador to limit their
arms purchases.

We review export requests to Guatemala on a
case-by-case basis, but are closely scrutinizing
proposed exports of lethal equipment because
of human rights concerns. @

Page 8

Defense Trade News, Volume 7, Number 1, May 1996



U.S.

Customs
Report

Indications of Potential
Illegal Exports

The U.S. Customs Service, Office of Investiga-
tions, solicits the assistance of private indus-
try and concerned citizens to provide infor-
mation relating to suspicious circumstances
surrounding the acquisition of controlled
technology and defense articles. Listed below
are some of the possible indicators of an ille-
gal export or diversion:

© The customer is willing to pay cash for
a high value order rather than a standard
method of payment

* The customer is willing to pay in ex-
cess of the market value for a commodity

© The customer is reluctant to provide
information on the end use and/or the end
user of the commodity

© The end use information provided is
incompatible with the customary purpose for
which the product is designed

© The final consignee is a trading com-
pany, freight forwarder, export company, or
other entity with no apparent connection to
the purchaser

© The customer appears unfamiliar with
the product, its application, support equip-
ment, or performance

® The packaging requirements are in-
consistent with the shipping mode or ate oth-
erwise unusual

© The customer orders products that do
not correspond with its line of business

© The customer has seemingly little or
no business background

© The order is placed by firms or indi-
viduals from foreign countries other than the
country of stated end use

© The order is being shipped via circui-
tous or economically illogical routing

® The customer declines the normal ser-
vice, training, and/or installation contracts

© The product is inappropriately or
unprofessionally packaged (e.g., odd sized/
re-taped boxes, hand lettering in lieu of print-
ing, altered labels, or labels that cover other
Jabels)

® The size and weight of the package
does not fit the product described

¢ “Fragile” or other special markings on
the package that are inconsistent with the
commodity described

These are just some indicators. As a part of
the defense industry, you know your business
best and also know when orders, sales, ship-
ments seem out of place, or just not right. The
protection of your business, its reputation and
ability to continue to operate, should be your
first concern, not simply potential sales.

Page 22

Defense Trade News, Volume 7, Number 1, May 1996



Tape Edge Before Mailing

| Postage |
Here |

Question and Answer Forum
PM/DTC, SA-6, Room 200

Office of Defense Trade Controls
Bureau of Political-Military Affairs
U.S. Department of State
Washington, D.C. 20522-0602


POLICY

Remarks by Thomas E. McNamara
The CAT Policy and USG Assistance in Specific Procurement Cases

Assistant Secretary of State for Political-Military
Affairs Thomas E. McNamara before the Defense
Trade Advisory Group on Wednesday, September
20, 1995 reviewed how the United States govern-
ment applies the broad principles of the Conven-
tional Arms Transfer Policy to determine whether
proposed sales are appropriate, and discuss ed how
industry was helped in obtaining significant de-
fense contracts in specific instances.

PM Reorganization

“Before getting to my main topic, let me com-
ment on PM’s reorganization of export con-
trol functions which became effective on Au-
gust 1, 1995”(See: Defense Trade News, Vol. 6,
No. 1, October, 1995).

This restructuring is intended to streamline
PM functions by allowing a reduced number
of personnel to handle PM’s considerable
responsibilities. Specifically, export control
policy making for both FMS and commercial
sales is now consolidated within PM/ATEC.
This change will improve our ability to carry
out the President's CAT policy.

Restraint

The CAT policy advances U.S. national secu-
rity and foreign policy goals by either re-
straining or supporting defense sales as ap-
propriate. CAT seeks to restrain arms trans-
fers which are destabilizing and which
threaten regional peace and security.

You are all familiar with the criteria applied
to policy decisions in arms transfers, so I will
not belabor those points. | would note, how-
ever, that the sale of U.S. defense articles and
services must be consistent with multilateral
restrictions.

These include U.N. arms embargoes against
Iraq, Libya and the former Yugoslav repub-
lics; efforts to enhance transparency such as
the U.N. Register of Conventional Arms and
regional initiatives in the Organization of
American States and ASEAN; and arms con-
trol and confidence building measures
involving the Middle East and Europe.

We impose unilateral restraints for overriding
foreign policy reasons. The countries in Sec-
tion 126.1 of the U.S. Munitions List cannot
receive any U.S. defense articles and services.
These include aggressor states and states
which support terrorism: Cuba, Iran, Iraq,
Libya, North Korea, Sudan, and Syria.

A prime focus of our efforts continues to be
the furtherance of multilateral restraint and
transparency as exemplified in measures
stemming from the COCOM successor regime
negotiations, particularly in the New Forum.

Dr. Davis has just returned from deliberations
on the New Forum, but unfortunately she
cannot be with us today. I will speak in her
place this afternoon on this subject.

Support

I'll outline ways in which we are prepared to
support U.S. arms transfers and cite some
specific recent examples. | will also attempt a
brief but frank analysis of emerging markets
for defense articles and services.

We all recognize that the arms market is
shrinking. The volume and value of global
arms transfers has fallen sharply, and the
market may contract by at least another 25
percent by the end of the decade. This has
heightened already fierce competition among
suppliers. Many will not survive.

Page 4

Defense Trade News, Volume 7, Number 1, May 1996



OPERATIONS

Registration of Manufacturers

Compliance Benefits All

The Arms Export Control Act and the ITAR
under Section 122.1 state that “any person
who engags in the United States in the busi-
ness of either manufacturing or exporting of
defense articles . . . is required to register with
the Office of Defense Trade Controls. Manu-
facturers who do not engage in exporting
must nevertheless register.”

There has been a disconcerting increase in the
numbers of export license applications where
the source is a manufacturer who has not reg-
istered or who has failed to keep registration
current.

The aim of the Office of Defense Trade Con-
trols is full compliance with the requirements
of the Act and the ITAR. In helping us to

meet this goal, which in turn helps you, we
advise you to carefully check your application
prior to submission to ensure that manufactur-
ers from whom you are acquiring defense ar-
ticles for export are currently registered. In
this process, you need not be aware of or note
your manufacturer's registration number. You
should only satisfy yourself that your manu-
facturer is currently registered. Checking this
before submitting an export license application
can help avoid processing delays. @

Defense Trade News, Volume 7, Number 1, May 1996

Page 15



ee

Compliance is good business. It ensures that
everyone knows what the rules are and fol-
lows them, and should provide a thorough
tracking system of defense export transac-
tions. This knowledge and its application in
business practices allow firms to prevent vio-
lations and avoid penalties.

Compliance is cost-effective. The penalty for
criminal violations of the Arms Export Con-
trol Act and the International Traffic in Arms
Regulations can be up to 10 years in prison
and/or $1 million per count. Civil penalties
can amount to $500,000 per count and involve
the suspension/denial of export provileges.

For information on how you can present
your questions to the Forum, see page 27. @

Defense Trade News, Volume 7, Number 1, May 1996 Page 17



Editor’s Note

After a longer than expected hiatus, the Defense Trade News and
Export Policy Bulletin is back on schedule with the first issue of
1996 covering remarks by Assistant Secretary Thomas E. McNamara
on policy issues.

This issue also introduces a new addition, “Now You Know....”, a question and answer
forum, will allow our readers to pose policy, operational, or regulatory questions to the
Department's experts.

Your opinion, questions, and concerns are important to us. Please take a minute to
complete the “Office of Defense Trade Controls Customer Service Survey” on page 25.

We want to hear from you! @

Registration List of Munitions Manufacturers and Exporters

This fite contains the names of companies which have registered with the
Department of State in accordance with the provisions of the Arms Export Control
Act and the International Traffic in Arms Regulations (ITAR). The companies in the
Registration List are those which have obtained licenses for the manufacture or
export of munitions or both as required by the ITAR. In addition to the Registration
List, the following lists are included: 1) Washington area representatives of
munitions manufacturers and exporters; 2) associations connected to munitions
manufacture and export; 3) U.S. customs offices; 4) U.S. Government offices with an
interest in munitions export; and 5) foreign embassies. The Registration List is
organized into two parts: a short list of addresses with a field designating the
number of copies of State Department issuances the addressee is to receive and a long
list with no designation of number of copies to be received by the addressee.

To order, call the National Technical Information Service, 5285 Port Royal Road,
Springfield, VA 22161, (703) 487-4650 or (703) 321-8547, NTIS Order Number:
PB93-502912.

Defense Trade News, Volume 7, Number 1, May 1996 Page 3



DEFENSE TRADE NEWS
United States Department of State
Washington, D.C. 20522-0602

OFFICIAL BUSINESS
PENALTY FOR PRIVATF USF $300
Address Correction Requ

BULK RATE
POSTAGE & FEES PAID
US Department of State
Permit No. G-130

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FON ‘210A


DTC’s Customer Service Plan
Commitment to Our Customers

In accordance with the Administration's National
Performance Review, all Federal agencies that
provide significant services directly to the public
are required to publish a customer service plan.
The plan below explains DTC's mission, services
DTC provides, and DTC’s commitment to quality.
As a part of our continuing effort to provide qual-
ity service, DTC will periodically survey the com-
munity it serves.

Our Mission

The Office of Defense Trade Controls, in ac-
cordance with Sections 38-40 of the Arms Ex-
port Control Act (AECA or 22 U.S.C. 2778)
and the International Traffic in Arms Regula-
tions (ITAR), controls the permanent and
temporary export and temporary import of
defense articles and defense services by tak-
ing final action on license applications and
other requests for approval for defense trade
exports and retransfers, and handling matters
related to defense trade compliance, enforce-
ment and reporting.

Service to Customers

In order to promote world peace, further U.S.
foreign policy and national security interests,
and facilitate legitimate export of commodi-
ties and services covered by the U.S. Muni-
tions List and to facilitate the best customer
service possible DTC is committed to:

* Providing timely, professional,
knowledgeable, and courteous service to
customers seeking guidance on registration,
making applications for a defense export
license or other approvals, requesting the
status of specific licensing cases, or seeking
guidance regarding compliance with export
law and regulations.

* Taking initial action on all license
applications (approve, disapprove, return
without action, or coordinate with other
offices) within 10 working days of receipt.

¢ Informing each registered individual and
company with timely information on the sta-
tus of their license application. For persons
who do not have electronic access to the DTC
(system) timely telephone responses are pro-
vided. Telephone inquiries are responded to
by a responsible officer within 24 hours of
receipt.

* Providing timely and authoritative guid-
ance to the U.S. defense industry regarding
export policies, procedures, and practices,
based on interpretation of the International
Traffic in Arms Regulations (ITAR), the Arms
Export Control Act (AECA) and other perti-
nent laws, national interests, and multina-
tional agreements or arrangements. This in-
cludes the presentation of and participation in
organized seminars, in-house training, and
other public outreach efforts, such as the De-
fense Trade News.

«Enhancing automated data processing to
facilitate the electronic handling of requests
for licenses and other approvals and to in-
crease responsiveness to U.S. government
requests for assistance.

¢ Ensuring proper compliance with US.
regulations, effective investigative and
prosecutorial enforcement actions, as well as
administrative procedural follow-up against
violators of the AECA and the ITAR.

* Surveying customer satisfaction periodi-
cally to solicit suggestions for improving DTC
services.

Commitment to Quality

The Office of Defense Trade Controls recognizes its responsibility to the American public and other
governmental offices to provide the finest service possible at all times. As part of DTC’s quest for
improvement, the office uses an analytical approach, with statistical methods and other
problemsolving tools, to accomplish its licensing and compliance missions. @


Secretary of State
Warren Christopher

Assistant Secretary
of State for
Political-Military
Affairs
Thomas E. McNamara

Deputy Assistant
Secretary for
Export Controls
Martha Caldwell Harris

Executive Editor
Lana C. Chumley

Managing and
Production Editor
Nadia L. Brown

Defense Trade Advisory
Group: Linda Lum

Layout Design
Paula M. Lorfano

Graphics Design
Richard E. Florence

Defense Trade News (ISSN 1051-2845) is a quarterly publication
(January, April, July, October) of the Bureau of Political-Military Affairs,
USS. Department of State. Its purpose is to provide American industry,
the public, and Congress with information on defense trade policy,
licensing practices, and compliance issues. Contents include official
policy statements and other official documents. Special features, articles,
and other materials (such as maps, charts, graphs, tables, and photo-
graphs) provide additional information on current issues but should not
necessarily be interpreted as official U.S. policy statements. The
Secretary of State has determined that the publication of this periodical
is necessary in the transaction of public business required by law.

Subscription and Address Changes: DTC Registrants — Every firm
registered with the Office of Defense Trade Controls as a manufacturer
or exporter should automatically receive this publication at its registered
address in the name of the registrant in Block 14 of Form DSP-9. To
change a mailing address, a registrant must notify the Office of Defense
Trade Controls in writing, citing its applicant code and amending Form
DSP-9 (see ITAR §122.4).

Non-Registrants — Defense Trade News is also available to U.S. govern-
ment agencies, foreign governments, non-registrant firms, and other
interested parties. To subscribe or to submit an address change, write to
Editors, Defense Trade News, PM/DTC, SA-6, Room 200, Department of
State, Washington D.C. 20522-0602, or fax (703) 875-5663.

Copyright: Unless otherwise marked, this publication’s contents are in
the public domain and are not copyrighted. Such items may be
reprinted; we would appreciate citation of Defense Trade News as the
source. You must obtain permission to reproduce any copyrighted
material (including photographs) from its original source.

Limited Reprint Authorization: DTC registrant companies may
reproduce this entire edition (excluding postal mailing label) for internal
distribution. This permission is given to ensure proper distribution
throughout firms with multiple locations, and to reduce mailing costs.

Corrections, Contributions, and Correspondence: Address to Editors,
Defense Trade News, PM/DTC, SA-6, Room 200, Department of State,
Washington, D.C. 20522-0602.

~ Postmaster: Send address changes to Defense Trade News, PM/DTC,
SA-6, Room 200, Department of State, Washington, D.C. 20522-0602.

Postage: Third-class postage paid in Washington, D.C. 20522-0602.



Tape Edge Before Mailing

Training Seminars

* PM/DTC, SA-6, Room 200
Office of Defense Trade Controls
Bureau of Political-Military Affairs
U.S. Department of State
Washington, D.C. 20522-0602


Defense Trade News, Volume 7, No1

© €) Feedback

Please circle or fill in your responses, add any
comments, and mail to DTC (Attn: DTN
Feedback) or fax to (703) 875-6647.

1. Your organization is a...

. Manufacturer

. Exporter

. Consulting or law firm

. Freight Forwarder

U.S. Embassy or Consulate

U.S. Customs element

U.S. DOD/Military element

. Other U.S. Government element

. Foreign government element

10. Other (please explain in Comments)

SOMmNanPoOne

2. How many people will read this issue?

1. 1 person

2. 2-5 people

3. 4-10 people
4 people

3-15 se rate the usefulness of each article
on: e of 1 (worst) to 5 (best). Rate as "0"
an cles you did not read.

16-28. Rate readability (style and physical
presentation) ona scale of 1 (worst) to 5
(best); rate as “0” articles you did not read.

29-31. Please circle the numbers of the three
topics you would most like to see covered.

1. Defense trade policy

2. Non-defense trade policy

3. Country-specific trade issues
4. Trade legislation

Licensing procedures

Regulatory and legal issues
Licensing case studies

Compliance case studies

Other (please explain in Comments)

WEN

Comments:

We welcome lengthier comments,
suggestions, and criticism.


(U.S. DEPARTMENT OF STATE USE ONLY)

SEAL

‘Signature

Ucense is hereby granted to the applicant for the described commodity to be

manently exporied from the United States. This license may be revoked, sus-

pended or amended by the Secretary of State without prior notice whenever the LICENSE No. LICENSE VALID FOR,

Secretary deems such action advisable, 7 MONTHS FROM ABOVE DATE
2G. UNITED STATES OF AMERICA DEPARTMENT OF STATE

APPLICATION/LICENSE FOR PERMANENT EXPORT OF UNCLASSIFIED |
DEFENSE ARTICLES AND RELATED UNCLASSIFIED TEGHNICAL DATA , -

1. Date Prepared 2, PM/OTC AppicantRegistrant Code ‘3. Country of Uitimate Destination ‘4, Probable Port of Exit from U.S,
01/09/99 0000-8888 United Kingdom Los Angelos

5. Applicant's Name, Address, ZIP Code, Tel, No. 6. Narnae, agency and telephone numbers of U.S. Goverment personne!
Applicant is: Goverment 3fXManuiectse 1 Exportetrigh torwardar | (not PM/OTC) familiar with the commodity
ABC Company WARY GS? capt. Jones, 703-697-0000

1 Washington Blvd., Suite 730 Rana lac nora ol spENCR Sorie VOTE. Govan
Arlington, VA 22200 additional information.

Ms. Jones, 202-697-2001

TELEPHONE NUMBER:
8. Daseription of Trensaction

‘4. This application represents: # ONLY completaly new shipmant, J ONLY the unshipped balance of license no, ——_________

8. The IDENTICAL commodity Owes heensed tothe county In block 8 under Neanse no.) was loansed to other courtles under
(Cl was retumed without action under volded icenes na: LI wan denied ta the country In block 3 under
was never cansed for this appicant.

ing financed under C Foreign Miltary Sele (FMS); () Foreign Miltary Financing (FMF) of; £) Grant Aid Program (GAD), give the case

10, COMMODITY Titieriware (¥] Technical Date 14, USML CAT. 12. VALUE

Lot Unclassified technical data in the form of drawings xI No Value
and specifications required to support the offshore
procurement of the xxx widget (insert commodity).

\u / 13. ToTAL vate: ¢ No Value

14. Name and address of foreign and—user N iy 18D) Source or iq] Manuiecirer of Gammnoaihy

BBD Company, Inc. ABC Company

L Lincoln Street 1 Washington Blvd., Suite 730
London, England Arlington, VA 22200

76, Name and address of foreign consignee \ 17. Name and address of seller in United States
BED Conpany Same as 5

1 Lincoln Street |

London, England

ee 19. Name and address of consignor and/or freight forwarder in United States

* None United Letters
. 2100 Rose Lane
Alexandria, VA 22300

20. Specie purpose for which the materalis requlred, notding specie 21. APPHIOANT'S STATEMENT (Gee ratuctors)
progranvend hem ames Anthony hereby apply for a license to complete
Build-to-print Bid Package for Offshore Procure+ Tips rare) "ee tabs chan seterente
the transaoton devcrved above; warrant the truth made here
ment of xxx widget (defense article) in accord-| te jeecrined above: werrant fhe tut of al taterente mace bere:
ance with 22 CFR 126.13. 120 ~ 190, and any conditons and imitations imposed.
CHECK ALL THAT APPLY:
22, LIGENGE TO BE SENT TO: Name, address, ZIP code Dor R IAT PEn ES GER See leo te renkton cf ta Ter have Deon te

>

FAPSSP HSS. rete ia ethane ecty Pica rectineconstions

ABC Company 10 US. consignor{a) andlor freight forwarder llst(a) ia/ere attached,
1 Washington Blvd., Suite 730 {am not senpomnred by the appre wo catty fat he sanciare of 22 CFR $20.19
Arlington, VA 22200 22 CFR 150 ae ated cry everse of tua form hae boon matin Rl Pass
” “inchedntr fa wich oosion
q Signature
Fon oars 7 - APPLICATION/LICENSE Bireanon bare t2-at-oe
= UNLESS OTHERWISE EXEMPT IN THE ITAR, APPROVED LICENSE MUST BE PRESENTED ESTIMATED BURDEN: 1/2 HOUR

Defense Trade News, Volume 7, Number 1, May 1996 Page 13



Question and Answer Forum

Now You Know...

In our continuing efforts to be responsive to
your concerns, we are offering a new service.
The Defense Trade News and Export Policy
Bulletin will accept written questions from
our readers, the response to be published in
the next issue. We would ask that you direct
to this Forum only questions which are of
general interest, rather than case specific.

The following questions were raised earlier in
several of the seminars we have held. We
thought that enough readers might be
interested in the answers and that they would
serve as useful examples of the kinds of
questions which might be raised here.

Q: What is the proper thing to do when an
Export Coordinator is aware of technical data
being erroneously sent to a foreign country
without an export license? (The mail was
opened by the addressee.) Who do we report
this to?

A: Such violations should be reported, in
writing, in the form of a detailed Voluntary
Disclosure. The report should be addressed
to the DTC Director. Please see Section 127.12
of the International Traffic in Arms Regula-
tions for a discussion of the voluntary disclo-
sure process.

Of course, internal company efforts — such as
fostering employee awareness regarding ex-
port controls -- should be taken to ensure that
unlicensed exports do not recur.

Q: Is there any move to drop-the requirement
to register and the registration fee?

A: Registration of any person (individual or
legal entity) who engages in the United States
in the business of either manufacturing or
exporting defense articles or furnishing de-
fense services is required by law (Arms Ex-
port Control Act) and the International Traffic
in Arms Regulations (Part 122).

There are no plans to eliminate registration.
DTC believes that registration is a sound first
line of communication between industry and
the United States government concerning
defense trade controls. Industry, through the
registration submission, advises the USG
about the nature of firms. The USG, by
provding information via media such as
Defense Trade News, communicates policies,
procedures, and practices concerning defense

trade. - -

rigs collected help offset some of the ad-
ministrative costs the Office provides to de-

\

. fense trade registrants.

Q: In today’s era of cutbacks, the costs associ-
ated with establishing an effective compliance
program can be prohibitive. Why should a
company that does not have a history of vio-
lations and seizures, and does not have the
human and economic resources, require one?

A: Compliance, exercised by the USG and
the private sector, protects America’s inter-
ests. Defense trade is regulated to promote
USS. foreign policy and national security ob-
jectives. Company compliance programs help
ensure the fulfillment of those goals.

Page 16

Defense Trade News, Volume 7, Number 1, May 1996