NETHERLANDS RESPONSE TO ADC DEMARCHE

1. (U) Please see action request paragraph 4.



2. (C) Summary. The Netherlands Ministry of Economic
Affairs confirms that Dutch electronics manufacturer Philips
plans to ship 14-bit ADCs to China, but has not completed the
transaction. The GONL has not yet made a determination on
the export license, but is leaning toward approving the sale.
The GONL requests consultations with USG officials. End
Summary.



3. (C) On August 22, Jan Huner, Senior Export Control
Official at the Netherlands Ministry of Economic Affairs,
forwarded a message to EconOff regarding Analog-to-Digital
Converters (ADCs). The message is in response to ref A and
the July 15 visit of ECNP Director Kessler to the Hague.

Begin Text:

Title: Reply by the Netherlands to the United States note on
exports of analog-to-digital converters (ADC's).

The Netherlands has examined the concerns expressed by the
United States on the possible export by Philips Electronics
N.V. of 14-bit ADC's to China for use in base stations for a
mobile telecommunications network.

We have discussed the issue both with Philips Electronics and
with experts of the Royal Netherlands Air Force (RNLAF).

Philips confirms that there is a distinct possibility that it
may supply large numbers of 14-bit ADCs to China for use as
indicated above. It is aware that these converters are
subject to export controls. No contracts have been signed as
yet.

Experts of the RNLAF confirm that the 14-bit ADCs as produced
by Philips represent the most advanced ADCs that are
commercially available at this moment. They also confirm
that such advanced ADCs play an important role in radar
systems for combat aircraft. However, it is not yet clear
which performance requirements will apply to the ADCs for the
JSF radar system.

In examining a possible application license for exports of
14-bit ADCs to China, the above considerations will clearly
play a role. However, as things stand now, it is doubtful
whether these considerations would provide sufficient grounds
to refuse such an export license. There is no indication of
a risk of unwarranted military application of these
commercially available ADCs. Also, it is very difficult to
demonstrate that allowing exports of these ADCs to China
would pose a risk to the effectiveness of the JSF.

We would, however, welcome an opportunity to discuss this
issue with our counterparts in the U.S. We would therefore
like to invite a delegation of U.S. experts to come to The
Hague to further explore the possible risks of allowing
exports of 14-bit ADCs to China.

End Text



4. (U) Action Request: Post recommends Department respond
directly to MEA Official Huner regarding the invitation for
bilateral consultations. Post stands ready to assist in
making arrangements. Embassy POC is EconOff Robert Gerber at
Tel: XXXXXXXXXXXX or Email: XXXXXXXXXXXX
SOBEL