Identifier
Created
Classification
Origin
04NEWDELHI7249
2004-11-16 12:50:00
UNCLASSIFIED//FOR OFFICIAL USE ONLY
Embassy New Delhi
Cable title:  

INDIAN COMPANIES REQUIRE ADDITIONAL COMMITMENTS IN

Tags:  ETTC ECON ETRD PREL KSTC MASS IN 
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This record is a partial extract of the original cable. The full text of the original cable is not available.
UNCLAS SECTION 01 OF 02 NEW DELHI 007249 

SIPDIS

SENSITIVE

DEPT ALSO FOR EB/TPP AND SA/INS
USDOC FOR 4530/MAC/AMESA/OSAO/LDROKER/ASTERN
USDOC FOR 3131/USFCS/OIO/DHARRIS
USDOC FOR 6430/ITA/TD/ITI/KJENCI/EHOLLOWAY
USDOC FOR 532/BIS/TANDRUKONIS
DEPT PASS USTR FOR SOUTH ASIA - AWILLS/JROSENBAUM/BSTILLMAN

E.O. 12958: N/A
TAGS: ETTC ECON ETRD PREL KSTC MASS IN
SUBJECT: INDIAN COMPANIES REQUIRE ADDITIONAL COMMITMENTS IN
HIGH TECH TRADE

REF: A. BRYAN LOPP-MARCO DICAPUA/ROBERT WINSHIP EMAIL
NOVEMBER 11 2004

B. MAYANK BHATT-YASH KANSAL EMAIL NOVEMBER 2 2004

C. 03 NEW DELHI 4810

UNCLAS SECTION 01 OF 02 NEW DELHI 007249

SIPDIS

SENSITIVE

DEPT ALSO FOR EB/TPP AND SA/INS
USDOC FOR 4530/MAC/AMESA/OSAO/LDROKER/ASTERN
USDOC FOR 3131/USFCS/OIO/DHARRIS
USDOC FOR 6430/ITA/TD/ITI/KJENCI/EHOLLOWAY
USDOC FOR 532/BIS/TANDRUKONIS
DEPT PASS USTR FOR SOUTH ASIA - AWILLS/JROSENBAUM/BSTILLMAN

E.O. 12958: N/A
TAGS: ETTC ECON ETRD PREL KSTC MASS IN
SUBJECT: INDIAN COMPANIES REQUIRE ADDITIONAL COMMITMENTS IN
HIGH TECH TRADE

REF: A. BRYAN LOPP-MARCO DICAPUA/ROBERT WINSHIP EMAIL
NOVEMBER 11 2004

B. MAYANK BHATT-YASH KANSAL EMAIL NOVEMBER 2 2004

C. 03 NEW DELHI 4810


1. (U) Summary. Some Indian companies that buy high tech
goods are asking potential U.S. exporters to agree to
additional requirements regarding U.S. export controls, in
some cases limiting the exporters' ability to sell in the
Indian market. The buyers require clauses in sales contracts
that state: 1) that U.S. export licenses will be obtained by
a prescribed date, or the exporter and agent will be liable
for damages to the buyer for late delivery; 2) that the
exporter will take full financial and legal responsibility in
the event that the exporter does not comply with relevant
export licensing regulations; or 3) that licensing for all
phases of a project be complete on submission of the bid.
End Summary.


2. (U) Embassy recently received indications that U.S. high
tech exporters were being subject to unusual contract clauses
by Indian public entity importers, requiring the U.S. firms
to guarantee delivery times regardless of the status of
export license applications. At Embassy's request, the
American Chamber of Commerce in India (AmCham) took a survey
of its members to determine the extent of the time
constraints and export control clauses. Some companies
reported problems that affected their ability to do business
in India.

Specified Date Clause
--------------


3. (SBU) Some U.S. companies have reported clauses in
purchase agreements that require the delivery of goods within
a specified period of time, and impose potential penalties
for delays. These delivery dates reportedly are based on the
assumption that export licenses will be obtained by the
exporter and do not allow for flexibility due to delay or

denial of these licenses. For example:

-- Oracle reported that it could not respond to a recent
tender from Bharat Electronics Ltd (BEL). BEL required the
bidder to guarantee that it will continue their
supply/support even in the event that BEL or India comes
under sanctions from the U.S. Government. Oracle could not
make that commitment and so did not bid, and the sale went to
SAP of Germany.

-- Agilent representatives claim that they volunteer time
commitments in their bids, and factor in wait times due to
licensing requirements. They claim that these commitments do
not seriously affect their business.

-- IBM claims that it encountered one such request, though it
did not bid on the tender. It provided no details of this
tender.

-- Codem Systems was not a respondent to AmCham's survey, but
it has reported to the Commercial Service's Advocacy Center
that it was penalized by Indian Space Research Organization's
(ISRO) Telemetry Tracking & Command Network (ISTRAC) for a
licensing delay (Ref A). In this instance, Codem Systems had
obtained a TAA 90 days before the contract signing, but the
DSP-5 license took longer than expected. ISTRAC would not
begin technical discussions of the product until the license
was obtained, and ISTRAC nullified the contract due to the
delay.

-- Beachcraft, also not a respondent to AmCham's survey, has
reported through other sources that the delivery date clause
has made it impossible for them to bid successfully (Ref B).


4. (SBU) Other companies have reported clauses that put the
legal responsibility for obtaining all applicable export
licenses on the exporter and seem to absolve the Indian buyer
from legal or financial obligations of not obtaining the
license.

-- Sun Microsystems noted a clause in a contract with ISRO
which states: "Procedures as required by Law of the Country
of Export has been followed and necessary export license has
been obtained wherever required as and when the Exporter
indemnifies the consignee against any loss or expense he may
incur due to any fault of the Exporter in the above matter."
(Comment: The Indira Gandhi Center for Atomic Research
(IGCAR) recently faced legal action from the U.S. government
for buying a product for which the exporter, Technology
Option, did not obtain necessary export licenses (Ref C).
This clause may be to protect ISRO from legal or financial
liability should a similar problem arise in the future. End
Comment.)

-- Pratt & Whitney has also reported bid tender clauses
specifying that export licenses by the bidder's country of
origin are the bidder's responsibility, though the tenders
acknowledge that Indian licenses are then the buyer's
responsibility. A Pratt & Whitney representative states that
this requirement forces them to apply for licenses well in
advance of potential bids.

Other Issues
--------------


5. (SBU) Though Honeywell Defense has not had any specific
problems with licensing deadlines, they report that they face
tenders that require three phases be complete on submission:
1) Buy; 2) Buy and assemble; and 3) Build locally with
technology transfer. Because Honeywell is unable to obtain
licenses to build locally until a formal contract is in
place, they report that they lose business when faced with
these tender requirements.

Comment
--------------


6. (SBU) India has made no international commitments on the
openness of government contracts, and most of the examples
given above are for contracts involving Indian public sector
undertakings (PSU). However, contractual requirements that
penalize U.S. companies for adhering to export control
regulations seem to run counter to the spirit of the HTCG and
NSSP goals. The insertion of these clauses may indicate the
confusion that many Indian firms are experiencing in
negotiating the complexity of U.S. export control
requirements. Greater outreach to Indian buyers might be an
effective way to deal with some of the problems that U.S.
exporters are experiencing.
BLAKE