VZCZCXRO5397
RR RUEHMT
DE RUEHC #0099/01 3270604
ZNR UUUUU ZZH
R 201855Z NOV 09
FM SECSTATE WASHDC
TO RUEHOT/AMEMBASSY OTTAWA 0426-0429
RUEHMT/AMCONSUL MONTREAL 0043-0046
RUEHON/AMCONSUL TORONTO 0020-0023
INFO RHMCSUU/FBI WASHINGTON DC 7001-7004
RUEAIIA/CIA WASHINGTON DC
RUCPDOC/USDOC WASHINGTON DC 6078-6081
RUEKJCS/SECDEF WASHINGTON DC
RUEPINS/HQ BICE INTEL WASHINGTON DC 0767-0770

UNCLAS SECTION 01 OF 04 STATE 120099 
 
SENSITIVE 
 
C O R R E C T E D  C O P Y (SENSITIVE CAPTION ADDED) 
 
SIPDIS 
STATE 
 
E.O. 12958: N/A 
TAGS: ETTC KOMC CA
SUBJECT: BLUE LANTERN OUTREACH TO CANADA: DISCUSSIONS WITH 
 EMBASSY AND CONSULATES, GOC OFFICIALS, AND INDUSTRY 
 
REF: 2006 BLUE LANTERN GUIDEBOOK 
 
STATE 00120099  001.2 OF 004 
 
 
¶1.  (SBU) Summary:  Representatives from the Bureau 
of Political-Military Affairs, Office of Defense 
Trade Controls Compliance (PM/DTCC) met October 13-16 with 
Mission Canada staff in Montreal, Ottawa, and Toronto, GOC 
officials, and local defense industry to discuss 
the Blue Lantern end-use monitoring program and 
related defense trade compliance issues.  PM/DTCC reps 
briefed 
embassy and consular staff on implementing the 
Blue Lantern program at post and shared results of 
a research project involving U.S. companies' 
use of the Canadian exemption to export defense articles 
to Canada.  Preliminaryresults of the research indicate as 
many as 154 third party transfer violations involving U.S. 
defense articles exported under the Canadian exemption; DTCC 
team agreed to further consultations with ICE 
attach office as additional results are obtained. 
Team also conducted a Blue Lantern site visit 
in Montreal to Unisource Technology, Inc., a private 
company which provides ITAR-controlled defense articles 
to National Defense Canada.  Washington believes the 
outreach visit achieved goals of improving GOC and industry 
understanding of U.S. export control laws and regulations, 
strengthening country team's knowledge of Blue Lantern 
program, and enhancing DTCC's understanding of Canadian 
defense industry and GOC export/import and technology 
security procedures. 
 
--------------------------------------------- --- 
PURPOSE OF TRIP AND MEMBERS OF BLUE LANTERN TEAM 
--------------------------------------------- --- 
 
¶2.  (U) Administered by the Office of Defense 
Trade Controls Compliance (PM/DTCC) and pursuant 
to the Arms Export Control Act (AECA), Blue 
Lantern is a global program designed to verify 
the end-use, end-users, and final disposition 
of U.S. defense articles, 
technology and services subject to the 
International Traffic in Arms Regulations (ITAR). 
This visit was part of ongoing PM/DTCC's efforts 
to improve the effectiveness of Blue Lantern 
through outreach visits with embassies, foreign 
industry, and host governments.  The DTCC Blue 
Lantern team consisted of Research and Analysis 
Division (RAD) Chief Ed Peartree and PM/DTCC/RAD 
Compliance Specialists Kyle Ballard and Tim Mazzarelli. 
 
--------------------------------------------- -------- 
MONTREAL CONSULATE TEAM BRIEF AND INDUSTRY SITE VISIT 
--------------------------------------------- -------- 
 
¶3.  (U) The Blue Lantern team briefed Political 
Officer Peter Martin, Assistant ICE attach David Denton, 
and Foreign Commercial Specialist Gina Bento on the 
Department's program for end-use monitoring of defense 
articles and services, guidelines for implementing the 
program at post, and the importance of preventing the 
unauthorized re-export and retransfer of U.S. defense 
articles.  Team also briefed participants on its research 
project involving U.S. companies' use of the 
Canadian exemption and Department's concern that the 
exemption may be abused by certain parties to facilitate 
illegal exports. 
 
¶4.  (U) Embassy Ottawa Economic Officer Lori 
Balbi and Peter Martin accompanied Blue Lantern 
team on a site visit to Unisource Technology, Inc. 
(Unisource).  Team met with Unisource President 
& CEO Rudy Rutenberg, Executive Director Bruce 
Rutenberg, and Contracts Administration Director 
Cathy Jones.  Unisource staff provided background 
information on export requests and business operations, 
as well as Unisource's physical security measures 
 
STATE 00120099  002.2 OF 004 
 
 
for handling sensitive U.S. defense articles. 
Based on verification of order and documentation 
establishing Canadian Armed Forces as final end user 
and evidence of a long standing business relationship 
with National Defense Canada, team was confident that 
Unisource is a reliable recipient of USML items. 
 
--------------------------------------------- -------------- 
OTTAWA CONSULATE TEAM AND GOC OFFICIALS BRIEF 
--------------------------------------------- -------------- 
 
¶5.  (U) Blue Lantern team PM/DTCC reps briefed Senior Case 
Officer, 
Controlled Goods Directorate (CGD), Public Works and 
Government Services Canada, Serge Poirier and colleague 
Mary Hyde on the Blue Lantern end-use monitoring 
program.   Team emphasized that Blue Lantern is not an 
investigation 
or law enforcement activity but rather a cooperative 
program designed to improve security and integrity of 
defense trade relationship between U.S. and international 
partners. 
 
6  (U) Poirier in turn provided a detailed 
accounting of the CGD's compliance program including 
Canada's SOP for registration of companies dealing in 
strategic goods. According to Poirier, companies go 
through a general vetting process which assesses a 
firm's history and ownership.  Registration lapses 
after a five year period at which time the company 
must re-justify/re-apply.  During the five year 
registration period companies must maintain all business 
records and visitation logs, must internally vet all 
employees, and are subject to inspection by the CGD. 
Poirier noted that all registered companies will be 
inspected at least once during the five year 
registration period.  Should inspections reveal 
noncompliance, company registration can be suspended 
or revoked. Problems that reveal possible criminal 
violations are referred to the Royal Canadian Mounted 
Police (RCMP). 
 
¶7.  (SBU) Blue Lantern team met with ICE attach 
Craig Healy, Deputy ICE attach Bobby Fuentes, Assistant 
ICE attach Spencer Schneider, ATF attach Bob Thomas, 
and FBI Legal Attach Bob Doherty to discuss Blue Lantern 
end-use monitoring and related defense trade issues. 
ICE attach office was 
familiar with the Blue Lantern program and is highly 
focused on export-related cases.  Healey noted that there 
is strong cooperation at the working level with Canadian 
Border Security Agency (CBSA) and the RCMP; less so at senior 
levels where legal complications and obstacles to joint 
cooperation arise. 
 
¶8.  (SBU) Canadian export controls enforcement 
has traditionally been viewed mainly as a regulatory issue, 
rather than as a criminal enforcement matter; this 
according to Healy, is gradually changing.  CBSA is Canada's 
Customs 
agency but has limited enforcement capability; RCMP is 
the body that investigates potential criminal cases. 
During the meeting it was noted that an obstacle in 
the U.S.-CA law enforcement relationship is that 
RCMP has a tendency to over-classify information, creating 
barriers to information exchange.  Furthermore, Canadian 
laws on privacy inhibit the free exchange of information 
regarding Canadian citizens, even among GOC agencies. 
Healy noted, however, that with regard to Blue Lantern 
requests information seems to flow more freely.  ICE 
will approach CBSA or RCMP to find out what they might 
know about a Canadian company (subject of a Blue Lantern 
check) and/or to share Department's concerns. 
 
 
¶9.  (SBU) PM/DTCC team met with CBSA Counterproliferation 
Section Manager George Webb, RCMP Staff Sergeant, 
Tim Ranger, and ICE attachs.  Webb and Ranger described 
their 
respective agencies' missions and discussed shared agency 
goals.  Webb indicated that destination of an export is the 
primary factor scrutinized by CBSA, and that they also 
consider 
the track record and reputation of exporters.  The agency 
does not have discretionary authority to ban a problematic 
exporter (Comment: DTCC can place a company/entity under 
 
STATE 00120099  003.2 OF 004 
 
 
a "policy of denial" based on documented concerns, without 
criminal indictment or conviction) without a 
criminal conviction but can detain goods as long as the 
agency deems 
appropriate.  The GOC is currently reviewing 
counterproliferation 
legislation that would further criminalize proliferation 
activity, 
and presumably expand their powers with regard to export 
investigations.  Webb also noted that CBSA has an "alert" 
system similar to DTCC's Watch List that flags potentially 
problematic entities. 
 
¶10.  (SBU) DTCC discussed its research findings 
from export filings citing the Canadian exemption 
and noted that there were 154 instances of possible 
exports (or re-exports) to third countries (Comment: 
exports under the Canadian exemption are for end-use 
in Canada only).  Webb indicated that CBSA could 
put an alert on the companies involved into their system. 
Webb and Ranger noted that traditionally, both CBSA 
and RCMP have been focused on in-bound shipments and 
are only now becoming more focused on exports. 
ICE attach Craig Healy suggested that a further avenue of 
U.S.-Canada cooperation might include the creation of 
an international task force that would bring 
Canadian-U.S. DOJ prosecutors together to create pressure 
at higher levels in support of export enforcement. 
DTCC indicated that it would pass this information to 
the U.S. DOJ, National Coordinator for Export Enforcement 
Cases, Steve Pelak. 
 
¶11.  (U) Blue Lantern team also met with Canadian 
Department of Foreign Affairs and International 
Trade (DFAIT) Senior Export Control Officer 
Lynne Sabatino to discuss the respective 
features of Canadian and U.S. export controls. 
Sabatino exhibited extensive knowledge of ITAR 
regulations and provided a detailed 
description of the Canadian export control review process. 
Sabatino explained that DFAIT export controls cover 
both munitions and dual-use commodities, and consider 
Canadian foreign policy in addition to national security 
and international regimes 
when making export decisions.  Sabatino noted 
that all license permit applications are reviewed 
by technical experts who pre-screen authorization 
requests for licensing permit officers.  She 
also explained procedural features that are 
incorporated into the permit process which act to 
safeguard transactions involving USML items. For 
example, applications for permits have fields 
for "country of manufacture" and "U.S. content". 
If the end-items for export are listed as including 
any U.S. content, the system will automatically prompt 
the license permit officer to demonstrate compliance 
with U.S. law.  In items that include USML, the 
applicant is  required to obtain U.S. re-export 
authorization.  The system, however, relies on the 
applicant for full disclosure.  The improper re-export 
of USML (by either failing to note content or false 
declaration) thus is not only a violation of U.S. 
law but of Canadian law as well. 
 
¶12.  (U) Canada conducts "post audit" 
checks via their overseas Embassies.  Pre- 
permit checks are conducted from Ottawa and 
consist mostly of background research and analysis. 
Audits are initiated based on a variety of factors 
including commodity sensitivity and destination 
and are conducted at the discretion of the 
permit officer.  Sabatino stressed that DFAIT is 
committed to maintaining the Canadian exemption 
and that Canada applies appropriate security 
and control measures to ensure the safe handling of USML. 
 
--------------------------------------------- ---- 
TORONTO CONSULATE TEAM BRIEF 
--------------------------------------------- ---- 
 
¶13.  (SBU) In Toronto, Blue Lantern team met with Economic 
and Political Section Chief, Lee MacTaggart and ICE 
attach John Ward.  MacTaggart and Ward emphasized 
that Toronto - given its status as a business center 
and ethnically diverse community - is where the 
majority of export enforcement cases arise within the 
 
STATE 00120099  004.2 OF 004 
 
 
province. 
They indicated that, due to equal opportunity laws 
in Canada, dual citizens are often not required 
to present themselves as such, making it difficult 
to monitor possible ITAR violations involving 
foreign nationals.  MacTaggart also noted that 
Canadian companies commonly establish post office 
boxes in the United States through which they could receive 
shipments, further complicating ITAR enforcement. 
 
¶14.  (SBU) Ward echoed many of the sentiments expressed 
by ICE Ottawa indicating that at the working level, 
the relationship between U.S. law enforcement and 
the CBSA/RCMP is good but becomes less cooperative 
at higher levels.  MacTaggart indicated that a 
possible avenue for better U.S.-CA enforcement 
cooperation is through DFAIT, as the agency's 
international trade component is the 
"center of gravity" given its strong interest 
in preserving positive U.S.-CA trade relations 
and maintaining special status as it relates to the 
Canadian exemption.  DTCC team 
briefed the preliminary results of 
Canadian exemption research project, which had been 
the basis for several recent Blue Lantern checks, 
including an unfavorable check in Toronto.  MacTaggart 
requested information updates from Washington on 
final disposition of Blue Lantern cases so that 
Consulate team members can increase their own understanding of 
local exporters and possible companies of concern 
in the Toronto area. 
 
¶15.  (SBU) Comment: PM/DTCC Blue Lantern outreach 
team found high interest and strong cooperation 
from GOC officials and a motivated and well-informed 
Mission Canada team with respect to the conduct 
of Blue Lantern end-use monitoring. 
The visit also appears to have met the 
objectives of improving understanding of the 
Blue Lantern end-use monitoring program and 
USG munitions export laws and regulations.  DTCC 
team agreed to further consultations with ICE 
attach office as additional results 
are obtained regarding the use of the Canadian 
exemption for license-free exports to Canada. 
Outreach visit achieved goals of improving 
industry's understanding of U.S. export control 
laws and regulations, strengthening country 
team's knowledge of Blue Lantern 
program, and enhancing DTCC's understanding 
of Canadian defense industry and GOC export/import 
and technology security procedures. 
 
¶16.  (U) DTCC would like to express its gratitude 
to Embassy Ottawa and Missions Montreal and Toronto, 
and especially control officer Lori Balbi for 
her assistance in arranging and executing this visit. 
CLINTON