VZCZCXRO1701
PP RUEHAG RUEHDF RUEHLZ
DE RUEHRL #0992/01 2251502
ZNR UUUUU ZZH
P 131502Z AUG 09
FM AMEMBASSY BERLIN
TO RUEHC/SECSTATE WASHDC PRIORITY 4940
INFO RUCNFRG/FRG COLLECTIVE
RUEHFR/AMEMBASSY PARIS 0649

UNCLAS SECTION 01 OF 06 BERLIN 000992 
 
SENSITIVE 
 
SIPDIS 
STATE FOR EUR/CE PETER SCHROEDER 
STATE FOR ISN/CB 
 
E.O. 12958: N/A 
TAGS: ETTC KOMC PARM PGOV PREL PINR TBIO KSTC FR GM
SUBJECT: AUSTRALIA GROUP: GERMANY TO SUBMIT PROPOSAL FOR 
PARIS PLENARY 
 
¶1.  (U) THIS IS AN ACTION REQUEST.  PLEASE SEE PARA 4. 
 
¶2.  (SBU) On August 11, MFA Export Control Division Deputy 
Office Director, Markus Klinger, provided EconOff with a 
German proposal for Australia Group (AG) "Best Practice 
Guidelines for Implementing End-Use Controls."  Germany 
intends to submit this proposal at the Australia Group (AG) 
Plenary next month in Paris.  Klinger requested USG feedback 
on this proposal before the plenary and, if possible, by the 
end of the week -- even if it is informal feedback.  Klinger 
mentioned that this proposal is very similar to "end-use best 
practices" already adopted by the Wassenaar Arrangement, the 
Nuclear Suppliers Group, and the Missile Technology Control 
Regime. 
 
¶3.  (SBU) Begin Text of German Non-Paper: 
 
 
--------------------------------------------- ------------- 
                     AUSTRALIA GROUP 
 
                     German Proposal 
 
                          for 
 
Best Practice Guidelines for Implementing End-use Controls 
--------------------------------------------- ------------- 
 
 
The principal objective of Australia Group participants is to 
use national licensing measures to ensure that exports of 
certain chemicals, biological agents, and dual-use chemical 
and biological manufacturing facilities and equipment do not 
contribute to the spread of chemical and biological weapons 
(CBW). 
 
The Group agreed to achieve this on the basis of the 
Australia Group Guidelines, recognizing inter alia the need 
for harmonizing participating countries' national export 
licensing measures. 
 
The question of end-use is crucial in the endeavor to limit 
the risk of proliferation of weapons of mass destruction. 
The goal of end-use controls is to help ensure that transfers 
of AG controlled items, equipment and technology actually 
reach and remain with the intended end-user and are not/not 
used for CBW activities.  Australia Group participants agreed 
in their Guidelines to especially evaluate the 
appropriateness of the stated end use and pay special 
attention to the assessment of assurances of the end user 
when judging on export control applications.  The Australia 
Group Guidelines further serve this objective of the Group by 
stating that Australia Group participants implement the 
Guidelines in accordance with the Group's agreed common 
approach on End User Undertakings (AG/Dec93/ExC/Chair/48). 
 
Furthermore, the topic and importance of end-use controls is 
addressed in different Australia Group agreed documents on 
Chemical & Biological Export Control and in Australia Group 
Statements.  Reference Papers and Best Practice Guidelines, 
such as the Framework of Effective Licensing Arrangements 
(AG/Dec92/ExC/Chair/32), the Common Approach to Controls of 
Exports to Distributors (AG/May06/ExC/D/28) and the Awareness 
Raising Guide (AG/Nov03/ExC/Chair/105). 
 
 
Purpose of Proposal 
------------------- 
 
The purpose of the attached proposal of Best Practice 
Guidelines for Implementing End-use Controls is to help 
Australia Group participants to implement effective and 
transparent end-use controls on a case-by-case basis.  They 
contain an Annex with a reference list of possible basic and 
additional elements of end-use controls.  The proposed 
Guidelines aim at drawing a common approach that serves 
Australia Group participants to implement effective end-use 
controls in a flexible way accommodating all agreed Australia 
Group documents related to this topic, and in accordance with 
their national laws and practices. 
 
The Best Practice Guidelines are based on the Australia Group 
Guidelines, Australia Group consensus decisions, the 
Australia Group Enforcement Officers Manual, on the results 
of the Berlin Export Control Seminar 2006 entitled "End-use 
Verification - A Core Element of Export Control-" and on 
Germany's own experience in this area. 
 
BERLIN 00000992  002 OF 006 
 
 
 
 
Recommendation for Plenary 
-------------------------- 
 
In order to facilitate end use controls as a crucial element 
of export controls, Germany proposes the following decision: 
 
Australia Group participants agree on the "Best Practice 
Guidelines for Implementing End-use Controls" as an outline 
to implement end-use controls in a flexible way in accordance 
with national laws and practices." 
 
 
--------------------------------------------- ------------- 
                         Proposal 
 
                     Australia Group 
 
Best Practice Guidelines for Implementing End-use Controls 
--------------------------------------------- ------------- 
 
 
The Australia Group Guidelines serve the objective of the 
Group to limit the risks of proliferation and terrorism 
involving chemical and biological weapons (CBW) by 
controlling tangible and intangible transfers that could 
contribute to CBW activities by states or non-state actors. 
 
Australia Group participants thus reaffirm to maintain a 
flexible and effective system of controls that help ensure 
that AG controlled items, equipment and technology reach the 
intended end-user and are not used for CBW (end-use 
controls).  The proper evaluation of each individual export 
license application is important to minimize the risk of 
undesirable diversion.  Based on an intelligent risk 
management, the sensitivity of such export transactions 
should be analyzed case by case.  Factors for consideration 
include information about the consignee (including the 
country of consignment), the reliability of the parties 
involved in the transactions, the nature of the AG-controlled 
items to be transferred and their stated end-use.  The 
following Guidelines are taken into consideration when 
implementing end use controls: 
 
¶1.  The underlying principle for end-use controls is that 
sensitive cases should be subject to a greater degree of 
scrutiny than less sensitive cases.  Australia Group 
participants therefore can combine basic and additional 
elements (as set out in the reference list to theses Best 
Practices Guidelines) depending on the risk assessment. 
Basic elements should always be applied. 
 
¶2.  There are three phases of an export when dealing with 
end-use controls: the pre-license phase, the application 
procedure and the post-license phase.  There is a close 
interrelationship between the phases. 
 
¶3.  When selecting which elements from the reference list to 
use, account must be taken of the different questions that 
will arise depending on the nature of the items to be 
exported. 
 
¶4.  All elements of the end-use controls process should be 
linked together to form a coherent initiative that would 
include industry outreach programs, close co-operation 
between licensing and enforcement authorities and exporter 
compliance audits.  These should be supplemented by 
proportionate and dissuasive penalties for non-compliance. 
While end-use certificates are an essential element of 
end-use controls they are not a substitute for a full risk 
assessment involving both licensing authorities and the 
exporter. 
 
¶5.  Australia Group participants may review progress on 
implementation of this Best Practice Guide as appropriate. 
 
 
Annex: Reference List 
--------------------- 
 
There are three phases of an export to be distinguished when 
dealing with end-use controls: the pre-license phase, the 
application procedure and the post-license phase.  There is a 
close interrelationship between the phases.  To control 
end-use most effectively, the following basic elements within 
the three phases of an export should be applied while 
 
BERLIN 00000992  003 OF 006 
 
 
additional elements can be applied depending on the risk 
assessment in each individual case: 
 
 
¶1.  Pre-License Phase 
--------------------- 
 
End-use controls need to be considered in the run-up to the 
submission of an export license application by the exporter. 
Competent authorities need to raise the exporter's awareness 
for legal requirements and his share of the responsibility 
for controlling sensitive items.  Thus, a key element for the 
exporter is an efficient and transparent Internal Compliance 
Program (ICP), for which a responsible person should be 
nominated. For their part, the licensing authority should 
ensure that sufficient information is available on national 
legislation, international commitments and administrative 
procedures to enable exporters to understand what their 
obligations are. Governments also need to ensure that all 
agencies involved in the licensing process at national level 
share relevant information 
(e.g. on end-users). 
 
The following basic elements should be applied in this phase. 
They are to be distinguished as to be related to the 
competent authority or related to the exporter: 
 
a)  Basic Elements for competent Authorities (Pre-License 
Phase) 
 
  --  Awareness-Raising measures, i.e. providing information 
on export control and exporters' duties e.g.: 
    --  web sites 
    --  participation in and/or organization of industry out 
reach programs 
    --  written guidance material to explain laws, 
regulations and procedures 
 
  and as described in the Australia Group Awareness Raising 
Guide and recommended in the Australia Group Framework for 
Effective Licensing Arrangements for CBW- relevant Export 
Controls 
 
  --  Establishment of points of contact to exchange 
information between competent authorities inside a 
Participating Government's administration (as recommended in 
the Australia Group Framework for Effective Licensing 
Arrangements for CBW- relevant Export Controls, too.) 
 
  --  Evaluation of Information i.e. about proliferation and 
terrorism involving CBW, including any proliferation or 
terrorism-related activity, or about involvement in 
clandestine or illegal procurement activities, capabilities 
and objectives of the chemical and biological activities of 
potential recipient states. 
 
 
b)  Basic Elements for Exporter (Pre-License Phase) 
 
  --  Internal Compliance Program (ICP), i.e. to establish 
export control compliance standards within a company, which 
may include, depending on the structure of the company as 
well as other specific circumstances: 
    --  nomination of a person at senior management level (to 
be responsible for export control compliance) 
    --  selection of competent staff members to oversee 
day-to-day compliance with relevant export control regulations 
    --  sample quality checks of staff work 
    --  training, and periodic refresher training, of staff 
in export control law and procedures. 
 
  --  Providing transparency on end user as part of ICP by 
confirming as far as possible end-use/final destination 
through use of all available information. Indications for 
sensitive cases include: 
    --  customer's identity or existence cannot be verified 
    --  customer reluctant to offer information about the 
end-use of the items or of other relevant data 
    --  customer lacks of skills, technical knowledge or 
equipment for the stated end-use of the items 
    --  quantities or performance capabilities of the goods 
significantly exceed the quantities or performance 
capabilities usually required for the stated end-use 
    --  unusually favorable payment terms 
    --  unusual shipping/packaging/labeling arrangements 
    --  there are requests for excessive spare parts or lack 
of interest in any spare parts usually required 
 
BERLIN 00000992  004 OF 006 
 
 
    --  routine installation, training or maintenance 
services declined 
    --  customer has unusual on-site security standards 
    --  any other unusual business behavior. 
 
  --  Exporter's duty to keep relevant documentation for a 
set period of time, esp. on the points mentioned above 
 
 
The following additional elements may be applied in this 
phase to facilitate end use controls according to the risk 
assessment of the individual case.  They are to be 
distinguished as to be related to the competent authority or 
related to the exporter, too: 
 
a)  Additional Elements for competent Authorities 
(Pre-License Phase) 
 
  --  Maintenance of end-user "red-flags" or other early 
warning systems and destination country profiles 
  --  Manuals and training for licensing officers on 
processing license applications for exports to sensitive 
countries (as e.g. recommended in the Australia Group 
Framework for Effective Licensing Arrangements for CBW - 
relevant Export Controls 
  --  Outreach-programs to non-AG Partners (as e.g. described 
and foreseen in the AG Action plan for the Asia-Pacific 
region or the AG Regional Action Plan for the Balkans) 
  --  Establishment of points of contact where information 
can be exchanged among Australia Group participants (e.g. on 
suspicious or unusual transactions) as described in the AG 
document complementary information sharing 
(AG/May03/Pol/Aus/2). 
 
 
b)  Additional Elements for Exporters (Pre-License Phase) 
 
  --  Seeking advice from and rendering information to 
competent authorities on business contacts, to sensitive 
end-users or in unclear or suspect cases. 
 
 
¶2.  Application procedure 
------------------------- 
 
The application assessment procedure during the licensing 
process itself covers most measures that need to be taken 
into consideration from an end-use control perspective. 
Here, special attention should be given inter alia to verify 
that the data was provided with the export license 
application, and ultimately to come to a final decision. 
 
The following basic elements to facilitate end use controls 
should be applied in this phase.  They again are to be 
distinguished as to be related to the competent authority or 
related to the exporter: 
 
a)  Basic Elements for competent Authorities (application 
procedure) 
 
  --  Plausibility check on the information provided, 
assessing among others the following: 
    --  technical aspects (e.g. data sheets, technical 
specifications and reference lists supplied, plausibility of 
quantities) 
    --  internal knowledge and other information, esp. with 
regard - but not limited - to the end-use/end-user 
    --  end-use and other documents submitted in support of 
the application 
    --  reliability of the persons involved in the 
transaction (exporter. consignee, end-user and others) 
    --  risk analysis 
 
  Additionally, all end-use related and other criteria of the 
non-exhaustive list of factors as described in the 
Guidelines of the Australia Group should be considered. 
 
  --  Consideration of denial notifications inter alia 
according to all agreements related to the "Non Undercut 
Policy" of the AG (see also recommendations in the Australia 
Group Framework for Effective Licensing 
Arrangements for CBW - relevant Export Controls point 4) 
 
  --  Consideration of information about proliferation and 
terrorism involving CBW and other, related to the individual 
case. 
 
 
BERLIN 00000992  005 OF 006 
 
 
b)  Basic Elements for Exporter (application procedure) 
 
  --  Presentation of a factually complete license 
application form, including all necessary supporting 
documentation. Minimum information: 
    --  exporter 
    --  consignee/end-user/purchaser/others involved in the 
transaction 
    --  description and specification of goods 
    --  description of end use 
    --  signature of applicant (verifiable), and other 
contact information 
 
  --  Submission of end-use statements containing minimum 
information as described in the Australia Group Common 
Approach to End user Undertakings. 
 
 
The following additional elements may be applied and required 
in this phase according to the risk assessment of the 
individual case.  They are to be distinguished as to be 
related to the competent authority or related to the exporter: 
 
a)  Additional Elements for competent Authorities 
(application procedure) 
 
  --  Liaison with intelligence services 
  --  Inter-ministerial consultation on export transactions 
  --  Consult with other national or foreign competent 
authorities via points of contact 
  --  Take into account the capability of importing country 
to exert effective export controls 
  --  Apply special procedures in special cases: 
    --  Including conditions / obligations to a license (e.g. 
submission of governmental or private Delivery Verification 
Certificates (DVC)) 
    --  Check authenticity of governmental or private end-use 
certificates 
    --  Pre-license check to confirm existence of the 
end-user and bona fide need for controlled items 
    --  Special attention to export licenses involving 
distributors applying the non exhaustive list of elements as 
described in the Australia Group common approach to controls 
of exports to distributors (AG/May06/ExC/D/28). 
 
b)  Additional Elements for Exporters (application procedure) 
 
  --  Thorough explanation of facts 
  Presentation of additional supporting documentation in 
support of export license application: 
    --  company's profile with detailed information on 
consignee/end-user 
    --  project description 
    --  information on service contracts or acceptance reports 
    --  Letter of credit, L/C 
 
  --  Submission of separate confirmation of specific data by 
person responsible for exports 
 
  --  Presentation of end-use certificates with additional 
elements as specified by the competent authority. 
 
 
¶3.  Post-License Phase 
---------------------- 
 
This phase is dedicated to confirm that the rationale for 
granting an export license was correctly based.  This happens 
in particular through an exchange of information among those 
government agencies involved in the licensing process as well 
as through checks made by the exporter.  Information exchange 
may also include information from other Australia Group 
participants.  In addition, government or private delivery 
verification certificates could be obtained and checked as 
well as compliance with any other requirements placed on the 
end-user could be monitored. 
 
The following basic elements should be applied and ought to 
be considered important in this phase.  Again, these elements 
are to be distinguished as to be related to the competent 
authority or to be related to the exporter: 
 
a)  Basic Elements for competent Authorities (Post-License 
Phase) 
 
  --  Control of actual exports (e.g. annotate export license 
to show actual exports made (by customs/exporter)) 
 
BERLIN 00000992  006 OF 006 
 
 
  --  Start of information exchange process about denied 
applications (e.g. denial exchange with Australia Group 
participants) 
  --  Co-operation and information exchange between 
authorities and with other Australia Group participants (i.e. 
between the licensing and enforcement authorities; where 
appropriate with other Australia Group participants) 
  --  Enforcement through regular compliance checks on 
exporters (e.g. as described in the Australia Group 
enforcement officers manual and in the Australia Group Best 
Practices to implement controls on intangible technology 
transfers (ITT)) 
  --  Have in place and apply if necessary proportionate and 
dissuasive penalties to deter and to sanction infringements 
of the regulations. 
 
b)  Basic Elements for Exporter (Post - License Phase) 
 
  --  Records associated with license applications must be 
retained for a set minimum period 
  --  Encourage the reporting of suspicious activity or 
evidence of diversion or misuse of item(s) to authorities 
 
 
The following additional elements may be applied in this last 
phase according to the individual case.  They are to be 
distinguished as to be related to the competent authority or 
related to the exporter: 
 
a)  Additional Elements for competent Authorities 
(Post-License Phase) 
 
  --  Monitoring end-user obligations and exporter 
obligations and acting where they are in default of those 
obligations 
  --  Monitor actual use of export licenses issued to 
detect/prevent fraud and or other abuse of the license 
  --  Governmental Post Shipment Inspection (1) 
  --  Export reports / import reports, i.e. exchange of 
information between the competent authorities of exporting 
country and the country of consignment to reveal unlicensed 
transfers or attempts of diversion. 
  --  Co-operation and information exchange where appropriate 
with other Australia Group participants 
  --  Monitoring re-export conditions, where resale by the 
consignee is subject to a reservation from the original 
exporting state. 
 
b)  Additional Elements for Exporters (Post - License Phase) 
 
  --  Submission of Delivery Verification Certificate (DVC) 
(government or private verification certifying delivery or 
reception of the goods) 
  --  Give export notice (a requirement that could be placed 
on industry to report to their authorities on potential 
future exports) 
  --  Private Post-Shipment Inspection (1) (Contracted 
provision of operational or maintenance services at the 
end-user's facilities or other verification mechanisms 
undertaken by the exporter) 
  --  Publication of collateral clauses towards consignee: as 
a transparency and compliance measure the exporter has to 
inform the consignee about any legal or administrative 
condition under which, the license was granted. 
 
(1) A possible additional element is the so-called 
governmental or private post-shipment inspections at the 
end-user's site, which may be applied on a mutually voluntary 
basis.  Permanent end-use safeguards in accordance with the 
provisions can also not be guaranteed by regular on-site 
inspections.  Therefore, the additional benefit of post 
shipment inspections is to gain information for future 
licensing procedures. 
 
End Text of German Non-Paper. 
 
 
¶4.  (SBU) ACTION REQUEST:  Post requests Department guidance 
in responding to the feedback requested in paragraph 2. 
Bradtke