VZCZCXYZ0000
RR RUEHWEB

DE RUEHFR #0872/01 1771418
ZNR UUUUU ZZH
R 261418Z JUN 09
FM AMEMBASSY PARIS
TO RUEHC/SECSTATE WASHDC 6556
INFO RUEKJCS/DEPT OF DEFENSE WASHDC
RUCPDOC/USDOC WASHDC
RUEHZL/EUROPEAN POLITICAL COLLECTIVE

UNCLAS PARIS 000872 
 
SENSITIVE 
NOT FOR INTERNET DISTRIBUTION 
 
SIPDIS 
 
DOD FOR RAMAKDAWALA 
 
E.O. 12958: N/A 
TAGS: EAIR ETRD ECON ETTC FR
SUBJECT: AVIATION EXPORT CONTROL MEETINGS JUNE 15-22 
 
¶1. (SBU) Summary:  On the margins of the Paris Air Show, Post 
facilitated meetings among USG, GOF, and industry representatives to 
discuss export control systems related to aviation.  A strong 
turn-out confirmed a common interest in improving awareness and 
transparency of export licensing systems, and stepped-up dialogue 
among policymakers and industry majors.  Priority issues raised by 
the 63 participants included: license processing time, paperless 
applications, transactional- based versus global and program 
licensing; embedded sub-systems in higher end-use products; 
certified companies; prospects for an integrated export control 
regulatory entity; and the impact of new EU directives on U.S.-EU 
defense export trade.  See Para 15 for consensus follow-up 
recommendations/actions.  End summary. 
 
Meeting Participants 
-------------------- 
 
¶2.  (U) On June 16-17 Robert S. Kovac, Acting Deputy Assistant 
Secretary for Defense Trade, led a U.S. interagency delegation in 
meetings with European industry leaders, a high-level bilat with GOF 
export control officials, and a working lunch with U.S. and European 
aerospace industry executives.  Separately, the Commerce Department 
led two educational outreach technical seminars in Paris (June 17) 
and Toulouse (June 22), with roughly 40 participants in each and 
support from US and European trade associations, GIFAS, AIA, and 
USAIRE. 
 
The Evolving Context for Export Controls 
--------------------------------------- 
 
¶3.  (U) Kovac opened the meetings by noting changes in the defense 
product market since the enactment of the Arms Export Control Act 
(AECA).  No longer are end-users limited to foreign governments who 
import mature, tested technologies designed solely for military use. 
 With increased leveraging of commercial technologies, the 
definition of a defense article has evolved and certain products 
have valid non-military applications that may no longer pose threats 
to national security.  The point was echoed by an EADS executive who 
noted that the aviation sector's trend toward globalization renders 
some export legislation out-of-date.  Although the U.S. and French 
and European systems differ in terms of requirements, basis in law 
and objectives, participants agreed on the need to adapt to the new 
context and work together for a more efficient and effective 
system. 
 
License Processing Time 
----------------------- 
 
¶4.  (U) The U.S. delegation highlighted recent improvements in 
license processing time: 15 days instead of the previous 45-day 
average.  Cases running over 60 days are due to specific national 
security concerns, of which two-thirds stem from Congressional 
notification requirements.  GOF officials noted it takes four months 
for France's two-stage licensing process.  Within two months, 
companies obtain prior approval to enter into contract negotiations. 
 The remaining processing time is for licensing of exports once a 
contract has been signed.  Out of the nearly 10,000 applications per 
year, France grants prior approval to negotiate to 6,000 applicants. 
 Export license processing for dual-use goods is roughly 18 days. 
 
Global and General Licenses 
---------------------------- 
 
¶5.  (U) GOF officials explained their use of Global Prior Approvals 
and Global Export Licenses for non-sensitive military goods with the 
EU and associated countries.  The Global License is considered at 
the request of the exporting company, which argues its case and 
presents a list of equipment, subcontractors, and partners.  For 
companies with a small number of applications for a single end-user 
(nearly 20 percent of all cases), a simplified electronic procedure 
is now used that saves up to 30 days.  Other global licenses exist 
for non-sensitive transfer between national branches of European 
companies (e.g. EADS, Thales, Eurocopter).  The GOF exempts from 
licensing procedures some products that fall within the framework of 
an approved technical cooperation agreement on aircraft programs 
(e.g. Airbus A400M, Tiger Helicopter).  The companies involved, and 
equipment allowed, are narrowly defined by France's 
Inter-ministerial Commission for the Study of War Material Exports 
(CIEEMG). 
 
¶6. (U) The GOF grants "General Licenses" for transfers of dual-use 
goods published in the national customs regulations.  These 
transfers occur among certified EU members and seven associated 
countries, including the United States, GOF officials explained. 
GOF representatives said this approach represents a cultural shift 
in Europe for export-control policies. 
 
Dialogue on USG Policy 
---------------------- 
 
¶7.  (U) AIA representatives expressed regret over the USG's 
perceived lack of trust in U.S. companies.  They encouraged 
dissemination of information to U.S. companies and the Congress on 
the impact of U.S. export controls on the defense product market. 
EADS Group Export Compliance Officer recommended increased dialogue 
among Congress, the European Parliament, and European industry 
majors. In Europe, there needs to be more transparency regarding USG 
policy.  Thales VP for Ethics and Corporate Responsibility pressed 
for GOF/USG officials to build confidence, trust, and increase 
exchanges with companies. 
 
End-User Liability 
------------------ 
 
¶8.  (SBU) GOF and French industry representatives pointed out that 
the U.S. transaction-driven system does not recognize the EU as a 
"trusted community" benefitting from a blanket waiver.  A/DAS Kovac 
raised his concerns on coordination and procedures to remove a 
company or country from the EU community.  How will differing 
judgments on bona fide status be reconciled?  Who evaluates the 
company, influences the certification process, and ensures integrity 
of compliance with the license and other approval conditions?  If no 
national government takes responsibility, is there an independent 
certification authority for effective liaison and coordination with 
ombudsmen? 
 
¶9.  (SBU) With growing numbers of company mergers and acquisitions, 
shipment tracking has become more difficult.  Liability and 
responsibility concerns also surround transfers from tier-one 
companies to subcontractors or partners in another country, Kovac 
noted.  It is crucial to identify the end-use in order to address 
successor liability and meet certification standards.  This reduces 
the risks posed by front companies, and the number of problems 
clearing U.S. customs. 
 
¶10.  (U) GOF officials described their due diligence on companies 
seeking export licenses.  But it was unclear who manages "certified 
companies" and obtains assurances of ongoing compliance with license 
requirements.  Kovac recommended that French companies indicate 
whether they have obtained prior approval for a specific product 
from the Prime Minister's office (SGDN) when applying for a USG 
license; such approval can be viewed as prima facie evidence the 
company is bona fide and the product has a proper end-use. 
 
End-use issues 
------------- 
 
¶11.  (SBU) EADS told the group its biggest challenge is the 
incorporation of U.S. products into EU programs.  The company wants 
to comply with both GOF and USG rules, and is on occasion forced to 
ground aircraft and redesign parts to gain full control over its 
product.  Some companies have resorted to advertising "Itar-free" 
products for a competitive advantage, Kovac noted.  Such companies 
could be considered by the USG as less-than-responsible partners in 
export decisions. 
 
Intra-EU Transfers Directive 
---------------------------- 
 
¶12.  (U) GOF and European industry drew attention to the 
recently-approved EC Defense Package that establishes a pan-European 
defense market through licensing and defense acquisition reform. 
The EU directive on intra-EU transfers simplifies terms and 
conditions for defense-related products.  Within two years, EU arms 
transfer procedures will be under the purview of the European 
Commission.  In coming months, the GOF plans to replace its national 
export control list (in existence since 1991) with the European 
common list of military equipment which includes the regular updates 
of the Wassenaar Munitions List. 
 
¶13.  (U) Participants underscored the importance of the creation of 
a European Base for Industrial and Technological Defense (EDTIB), 
which underpins European Security and Defense Policy.  They noted 
that EDTIB aims at developing an integrated, less duplicative, 
European equipment and systems supply marketplace with lower 
transaction costs, enhanced security of supply and greater 
industrial cooperation.  Given that the USG does not recognize the 
"EU trusted community", ITAR restrictions will apply to re-exports 
of USG-controlled items throughout the EU, while European-made 
equipment will benefit from cheap, simplified and accelerated 
procedures regarding transfers among member states.  (Comment:  This 
could constitute a comparative advantage for European suppliers in 
the assessment of security of supply criteria by favoring 
procurement in the EU, a situation likely to disadvantage U.S. 
bidders.  End comment.) 
 
Educational Outreach Technical Seminars 
--------------------------------------- 
 
¶14. (U) Commerce/BIS, Defense/DTSA and State/DDTC export control 
specialists conducted introductory and intermediate educational 
outreach seminars on dual-use and ITAR controlled trade at the PAS 
and in Toulouse.  For those wishing to discuss company-specific 
export control issues, they also held individual counseling 
sessions.  USG speakers presented their insights to a total of 80 
participants on how commodity jurisdictions and license applications 
are evaluated by various agencies, the information they weigh, and 
how this information substantiates recommendations.  In Toulouse, 
their program also included a visit to the A380 mock-up facility. 
 
 
Follow-up topics for discussion 
------------------------------- 
 
¶15.  (SBU) The following areas were flagged for follow-on discussion 
or action: 
 
-- hold a second bilateral meeting this year once senior GOF MFA and 
USG senior export control officials have been named (the MFA 
recalled it is in the midst of creating a new interagency 
secretariat that it will chair to cover dual-use items); 
 
-- USG review of the ITAR licensing jurisdiction and determination 
of products that can be removed from control; 
 
-- French officials stated they are conducting a comprehensive 
review of the national export control list; 
 
-- DDTC will inform GOF and industry on possible modifications to 
AECA/ITAR; 
 
-- bolster bilateral dialogue on irresponsible countries; 
 
-- discuss a system to work out compliance problems using an 
ombudsman or hotline so European companies understand U.S. law; 
 
-- further discussions on creating harmonized procedures for 
licensing multinational companies in a manner that capture differing 
laws, sanctions, commitments; 
 
-- discuss intangible transfers and shared concern about the 
protection of highly sensitive know-how in areas of safeguarded 
technologies; 
 
-- complete conversion to paperless license processing procedures, 
and improve processing delays to respond to industry's concerns; 
 
-- further discussion on embedded Itar-controlled subsystems in 
civil aircraft; 
 
-- strengthen USG awareness of GOF regulations and practices that 
ensure ongoing company compliance with U.S. export control rules; 
 
-- create European mechanisms for tracking and auditing company's 
bona fide status, operations and documents to avoid diversion or 
unauthorized use of U.S. origin products; 
 
-- ASD proposed that the Society for International Affairs (SIA) add 
an export control conference for transatlantic dialogue between 
companies (in 2010) and asked for DDTC support. 
 
¶16.  Comment: A diplomatic as well as technical success, the 
export-control meetings clearly met a transatlantic demand for 
governments and industries to engage more frequently.  It also 
underscored a shared commitment to improve efficiency of existing 
systems.  Participants indicated they appreciated learning about how 
the process works, but perhaps more importantly simply having an 
opportunity to meet those involved in the process in Washington. 
Embassy Paris expresses its appreciation USDOC/BIS, Defense/DTSA and 
State/DDTC for supporting this program. 
 
¶17.  (U) This cable was cleared by Acting DAS Kovac. 
 
Pekala