Cablegate: Missile Technology Control Regime (Mtcr): "Brokering Controls in the United States On Dual-Use Items


DE RUEHC #9845 2882008
P R 142003Z OCT 08

C O N F I D E N T I A L STATE 109845


E.O. 12958: DECL: 10/14/2033

1.(U) This is an action request. Please see paragraph

2.(C) ACTION REQUEST: Department requests Embassy Paris provide the interagency cleared paper "Brokering Controls in the United States on Dual-Use Items" in paragraph 3 below to the French Missile Technology Control Regime (MTCR) Point of Contact (POC) for distribution to all Partners. Department also requests Embassy London provide paper to the MTCR Information Exchange (IE) Co-Chair (John Andrews), Embassy The Hague provide paper to the Licensing and Enforcement Experts Meeting (LEEM) Co- Chair Klaas Leenman, and Embassy Canberra provide paper to the Australian MTCR Plenary Chair for 2008/2009 and/or appropriate staff. Info addressees also may provide to host government officials as appropriate. In delivering paper, posts should indicate that the U.S. is sharing this paper as part of our preparation for the Information Exchange and the Licensing and Enforcement Experts Meetings that will be held in conjunction with the MTCR Plenary in Canberra (November 3-7). NOTE: Additional IE papers will be provided via septels. END NOTE.

3.(U) BEGIN TEXT OF PAPER: Brokering Controls in the United States on Dual-Use Items U.S. Department of Commerce Establishing controls over arms brokering activities can play a key role in preventing unauthorized and illicit arms transfers. Requiring arms brokers to register with the government is an important measure in providing transparency to arms transfers. Moreover, requiring brokers to obtain governmental approval for arms transfers provides the government with the ability to ensure that its territory, as well as its citizens and other persons subject to its jurisdiction, do not contribute to international insecurity and weapons proliferation. In the United States, export controls are predominately administered by two agencies, the Department of State for the export of munitions and the Department of Commerce for the export of dual-use items. Given the vast differences between the commodities being regulated by the two agencies, it is appropriate for two different approaches to be used in the regulation of brokering and related activities. This paper will look at the approaches that the U.S. Government uses to address concerns about illicit brokering in dual use items. Dual Use Items The Department of Commerce, Bureau of Industry and Security, administers export controls on the dual-use items of the Nuclear Suppliers Group, Missile Technology Control Regime, Wassenaar Arrangement and the Australia Group as well as numerous unilateral foreign policy controls and other items. Given the breadth of items controlled under the Export Administration Regulations (computers, machine tools, automobiles, materials and thousand of other items), an approach for controlling "brokering type" activities that could aid in WMD proliferation was needed. Given the vast amount of legitimate trade and all the many forms that it may take including consulting services, shipping services and related, it is not feasible or desirable to attempt to register all "brokers." Unlike arms exports, where a military the end use can nearly always be assumed, the vast majority of dual use transactions do not have such a nexus. Therefore, an approach was needed to address those activities and transactions which could aid a WMD proliferation activity while not overly burdening the general flow of Commerce. The following is the approach the Department Commerce took in Part 744.6 of the Export Administration Regulations:


(a) General prohibitions (1) Activities related to exports (i) No U.S. person as defined in paragraph (c) of this section may, without a license from BIS, export, reexport, or transfer to or in any country any item where that person knows that such items: (A) Will be used in the design, development, production, or use of nuclear explosive devices in or by a country listed in Country Group D:2 (see Supplement No. 1 to part 740 of the EAR). (B) Will be used in the design, development, production, or use of missiles in or by a country listed in Country Group D:4 (see Supplement No. I to pan 740 of the EAR); or (C) Will be used in the design, development, production, stockpiling, or use of chemical or biological weapons in or by any country or destination, worldwide. (ii) No U.S. person shall, without a license from BIS, knowingly support an export, reexport, or transfer that does not have a license as required by this section. Support means any action, including financing, transportation, and freight forwarding, by which a person facilitates an export, reexport, or transfer without being the actual exporter or reexporter.

(2) Other activities unrelated to exports. No U.S. person shall, without a license from BIS: (i) Perform any contract, service, or employment that the U.S. person knows will directly assist in the design, development, production, or use of missiles in or by a country listed in Country Group D:4 (see Supplement No. 1 to part 740 of the EAR); or (ii) Perform any contract, service, or employment that the U.S. person knows will directly assist in the design, development, production, stockpiling, or use of chemical or biological weapons in or by any country or destination, worldwide.

(3) Whole plant requirement. No U.S. person shall, without a license from BIS, participate in the design, construction, export, or reexport of a whole plant to make chemical weapons precursors identified in ECCN 1 C350, in countries other than those listed in Country Group A:3 (Australia Group) (See Supplement No. 1 to part 740 of the EAR). (b) Additional prohibitions on U.S. persons informed by BIS BIS may inform U.S. persons, either individually or through amendment to the EAR, that a license is required because an activity could involve the types of participation and support described in paragraph (a) of this section anywhere in the world. Specific notice is to be given only by, or at the direction of, the Deputy Assistant Secretary for Export Administration. When such notice is provided orally, it will be followed by a written notice within two working days signed by the Deputy Assistant Secretary for Export Administration. However, the absence of any such notification does not excuse the exporter from compliance with the license requirements of paragraph (a) of this section. (c) Definition of U.S. person For purposes of this section, the term U.S. person includes: (1) Any individual who is a citizen of the United States, a permanent resident alien of the United States, or a protected individual as defined by 8 U.S.C. 1324b(a)(3); (2) Any juridical person organized under the laws of the United States or any jurisdiction within the United States, including foreign branches; and (3) Any person in the United States. (d) Exceptions No License Exceptions apply to the prohibitions described in paragraphs (a) and (b) of this section. (e) License review standards Applications to engage in activities otherwise prohibited by this section will he denied if the activities would make a material contribution to the design, development, production, stockpiling, or use of nuclear explosive devices, chemical or biological weapons, or of missiles.

This approach has the benefit of not having a mandatory requirement for registration or review of legitimate trade and services outside of the normal export control review based on the item being exported. However, it has the flexibility to require government review of almost any export or export-related activity destined to a WMD project. It also allows the Government to inform on a case by case basis that a particular transaction and/or service will require licensing and review. Again this approach works well for the United States because of the strength of its Dual- Use Export Control System. Export license applications require the identification of the purchaser, intermediate and ultimate consignees and the end user. In the review process, these parties are reviewed by both intelligence and law enforcement agencies, and giving the government the ability to deny applications or remove unsuitable parties from the transaction.

In addition, the U.S. has the ability to perform pre license and post shipment checks to further ensure that the parties on the transaction are the true parties and that the items are intended for the stated end-use. This applies to re export of U.S. origin items as well. Conclusion: In summary, the U.S. approach of using end-use based control for dual-use items works well. Much like a catch all control, the U.S. dual-use brokering controls grant U.S. authorities the ability to step in and impose a license requirement when a U.S. person is involved in a transaction that poses a proliferation concern, even if that person is unaware of the proliferation nexus. In addition, this regulation goes beyond traditional licensing, because it includes activities unrelated to exports; such as services, contracting and financial transactions. The dual-use brokering control gives the U.S. the ability to impose a license requirement where a U.S. person is not transferring any controlled technical data that would that otherwise trigger a licensing requirement. The U.S. approach recognizes the practical limitations of licensing all brokering activities related to dual-use items and is predicated on the fact that the overall U.S. export control system is robust.

4. (U) Please slug any reporting on this or other MTCR issues for ISN/MTR. A word version of this document will be posted at XXXXXXXXXXXX. RICE

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