CWC: INDUSTRY CLUSTER MEETINGS, NOVEMBER 13-14,

UNCLAS THE HAGUE 000977

SENSITIVE
SIPDIS

STATE FOR ISN/CB, VCI/CCA, L/NPV, IO/MPR,
SECDEF FOR OSD/GSA/CN,CP>
JOINT STAFF FOR DD PMA-A FOR WTC
COMMERCE FOR BIS (ROBERTS AND DENYER)
NSC FOR FLY
WINPAC FOR WALTER

E.O. 12958: N/A
TAGS: PARM PREL CWC
SUBJECT: CWC: INDUSTRY CLUSTER MEETINGS, NOVEMBER 13-14,
2008

REF: A. THE HAGUE 972

B. GRANGER-ISN/CB E-MAIL 11-17-08

C. THE HAGUE 609

D. FERGUSON-ISN/CWC-DEL E-MAIL 11-12-08

E. THE HAGUE 898

This is CWC-56-08.

--------------
SUMMARY
--------------


1. (U) The three industry cluster meetings on
November 13-14 were informative and somewhat
productive. The Technical Secretariat (TS) presented
their latest paper on Sampling and Analysis (S&A) and
answered delegations' questions during the first
meeting. Two new industry facilitations began:
Schedule 2A/2A* low concentrations under Giuseppe
Cornacchia (Italy),and enhanced OCPF declarations
under Marthinus van Schalkwyk (South Africa). While
states' views diverged predictably on both issues,
delegates welcomed the new round of facilitations and
most seemed ready to get to work. Both facilitators
expressed their intention to continue facilitations
in early 2009 and to hold consultations on a regular
basis. The TS promised to publish a tentative
schedule of meetings for the first half of 2009.

--------------
SAMPLING AND ANALYSIS
--------------


2. (U) On November 13, the Industry Cluster Vice-
Chair Amb. Benchaa Dani (Algeria) opened the first of
the three scheduled Industry Cluster meetings. After
giving brief introductory remarks, Amb. Dani turned
the meeting over to Bill Kane (Head, Industry
Verification Branch),who presented the recently
released Schedule 2 S&A paper (S/719/2008). (Note:
Copies of slides sent by unclassified email to
Washington, ref B.) Gary Mallard (Head, OPCW Lab)
followed Kane's presentation with an overview of the
annex to the TS's S&A paper before opening the floor
to questions from delegations.


3. (U) In response to Delrep's question on the site
selection methodology for S&A, Kane said that the TS
does not exclude any Schedule 2 sites from
consideration; however, during the start-up period
(September 2006 to March 2008),the TS focused on
batch/multi-purpose Schedule 2 sites. Responding to
a later follow-up question from Germany, Kane said
that S&A had been geographically distributed during
the start-up period but that geography was no longer
a factor in selection. In 2009, the TS plans to
conduct ten Schedule 2 inspections with sampling and
analysis; these will be conducted partly at sites in
States Parties that have not yet had S&A inspections
and the rest among the 17 States Parties that have
already hosted S&A inspections since September 2006.


4. (U) China noted that it sees S&A as an important
tool and will be hosting its second S&A inspection
soon. In response to China's question on using S&A
during an initial inspection of a Schedule 2 site,
Kane said that, while the CWC does not make a
distinction between initial and subsequent
inspections for S&A use, the TS will continue to
focus on using S&A only during subsequent
inspections. However, he did not rule out using S&A
during initial inspections in the future.


5. (U) In contrast to China, Japan stated that it had
been a hasty decision to continue using S&A after the
start-up period without proper consultation, and
noted that there had been some procedural problems
Qnoted that there had been some procedural problems

related to the two S&A inspections hosted by Japan
since September 2006. Two problems highlighted by
Japan included the inability to identify some
scheduled chemicals using the OPCW Central Analytical
Database (OCAD),and the inability to analyze some
scheduled chemicals with the gas chromatograph mass
spectrometer (GCMS),both of which are key components
of sampling and analysis.


6. (U) France asked how the TS prepares for "false
positive" identification of scheduled chemicals
during S&A. Kane replied that TS chemical analysts
consult open-source material to familiarize
themselves with a selected site's chemical processes.
They also run test samples in the OPCW lab to see if
anything other than expected chemicals is identified.
Mallard added that these preparatory experiments are
used to answer any questions that arise during actual
inspections and have helped the TS anticipate most
problems, including "false positives."


7. (U) Turning to France's other questions on the
costs of conducting S&A and any future plans for
extending S&A use to Schedule 3 or OCPF inspections,
Kane reported the average cost for S&A is
approximately EUR 15,000 in addition to the normal
costs for Schedule 2 inspections. He also said that
the TS currently does not have any plans to extend
S&A use to Schedule 3 and OCPF inspections, although
he noted that the CWC allows for such an extension.
Australia indicated its support for extending the use
of S&A; Italy did also, but qualified that any
extension should be done after careful review and
consultation.


8. (U) Kane stated that in the 19 S&A inspections
held to date, 11 had identified "false positives";
the majority of these were resolved through further
analysis, but two cases had to be referred to a
commercial chemical database. In addition to the
"false positives," there were two instances where
scheduled chemicals were discovered -- to the
surprise of the facility -- resulting from process
impurities. Iran raised concerns about the
reliability of the verification regime and asked how
errors in S&A can be corrected to avoid so many
"false positives" in the future. Kane and Mallard
both said that "false positives" occur all the time
and are an expected, inherent part of the process.

--------------
LOW CONCENTRATIONS
--------------


9. (U) Industry Cluster consultations continued on
November 13 with the first meeting on Schedule 2A/2A*
Low Concentrations chaired by facilitator Giuseppe
Cornacchia (Italy). Cornacchia gave an introduction
on the issue, stressing that the Scientific Advisory
Board (SAB) declared the issue to be purely
regulatory and political -- rather than scientific --
in nature. He asked delegations to be mindful that
industry in many countries has called for a level
playing field and harmonization, and that setting a
threshold contributes to the common effort to
strengthen the CWC without being aimed at any
particular party. Cornacchia underlined his desire
not to pick up where the last consultations on the
issue left off in 2006 (EC-24/DEC/CRP.6),stating
that time has since elapsed and that he welcomes new
Qthat time has since elapsed and that he welcomes new
ideas and positions.


10. (U) Russia started the discussion by stating that
it would like the clear differentiation between 2A
and 2A* chemicals enshrined in the CWC to be
maintained in regard to threshold limits. Citing a
decision on transferring scheduled chemicals (C-

V/DEC.16),Russia suggested a limit in the range of
1-10%.


11. (U) After quoting Isaac Newton and noting its
appreciation for the previous facilitator's work, the
Iranian delegate stated that his government does not
have a new position on the issue. Iran had supported
the previous facilitator's proposed 0.5% threshold
but would consider any new proposals. The delegate
went on to express sentiments that were later echoed
by a number of delegations (including Sweden and the
UK),namely that there was a lot of merit in all of
the previous work and discussion on this very
complicated and technical issue and that it should
not be wholly disregarded.


12. (U) China stated its readiness to play a
constructive role and its openness to a level low
enough to address proliferation concerns.


13. (U) Delrep, Germany, Japan, France and South
Korea all stated their national thresholds are set at
30% but indicated flexibility and willingness to
reach a compromise. Germany noted that it does not
see a compelling reason to go below 30% as there have
not been any problems at that level for more than ten
years. However, the German delegate understood calls
for level playing field and suggested a level between
1% and 30%. Citing the SAB report on low
concentrations (SAB-IV/5),Japan suggested a level of
10% as a compromise.


14. (U) Italy stated its threshold is 0.5% and that a
low limit is good due to the toxicity of the
chemicals concerned. But, the delegate stressed his
government's flexibility and desire to reach
agreement on the issue. Italy's goal is for
harmonization of regulations and fair competition for
industry. Australia -- also with a 0.5% threshold --
echoed Italy's comments on the need for
harmonization, stating that lack of a decision leaves
a critical gap in the CWC.


15. (U) Canada stated its threshold is also 0.5% and
said that this was based on the SAB report referred
to by Japan; Canada said that, unlike Japan, it had
opted for the low end of the spectrum offered by the
SAB. While noting its openness to compromise, Canada
said it wants to keep the previous facilitator's
proposal (0.5% threshold) on the table for
consideration. The Netherlands echoed Canada,
calling for transperancy and a level playing field,
and indicated openness to a level between 0% and 1%.
Finland also supported a threshold between 0% and 1%,
calling for the level to be as low as possible.


16. (U) The UK and Switzerland each stated their
threshold is 1%. Switzerland commented that a low
threshold is necessary not to weaken the CWC. It
also asked the TS to provide an impact assessment of
applying various thresholds, specifically asking how
many sites would be affected at each proposed level;
Australia and Ireland supported the request. Germany
said the information would be helpful but noted that
data would be limited only to those who currently
declare facilities and would therefore be incomplete;
it suggested that States Parties might voluntarily
provide information on undeclared sites to give a
more complete picture. Cornacchia promised to have
the TS present Switzerland's requested assessment and
Qthe TS present Switzerland's requested assessment and
data at the next consultation, which he expects to
hold in early 2009.


17. (U) Amb. Javits observed a disparity of views
concentrated at the upper and lower ends of the
spectrum and proposed the idea of any threshold
within a percentage range as a compromise. He also

suggested that two papers -- one each from countries
at either end of the scale -- be circulated to
explain the reasons for their positions and
specifically to address safety and risk concerns.
Italy agreed with the suggestion, calling for the
papers not just to look at thresholds but also to
delve into process issues, including purification and
isolation. Japan supported the idea of a range
threshold, rather than a precise level, as a way to
reach consensus.

--------------
OCPF DECLARATIONS
--------------


18. (U) The third Industry consultation was held on
November 14, chaired by Marthinus van Schalkwyk
(South Africa),to discuss enhancements to OCPF
declarations. Van Schalkwyk opened the meeting by
saying that enhancing OCPF declarations is one point
at which to start to tackle the larger issue of OCPF
inspections. Bill Kane (Head, Industry Verification
Branch) made a presentation (ref B) on the TS's and
DG's notes on OCPF declarations (EC-53/S/5 and EC-
53/DG.11, respectively),updated since he first
presented it in July (ref C). He said that the TS
has updated the Declarations Handbook based on the
DG's Note and that it will be released in early
December. Kane also said that by implementing the
proposed changes to declarations in the TS's Note,
OCPFs could be divided into three categories of
relevance, with the last two categories made up
mostly of continuous and/or dedicated plants:
- High: approximately 700 (16%) inspectable sites;
- Medium: approximately 1400 (31%) inspectable sites;
- Low: approximately 2400 (53%) inspectable sites.


19. (U) After Kane's presentation, the Chinese
delegate spoke in favor of directing OCPF inspections
to the most relevant sites. He said that any
refinement to the verification regime needs careful
consideration and called for full discussion of all
proposals, including those in the DG's Note. China
supported TS outreach efforts to assist States
Parties in addressing problems with their
declarations and also supported the annual
replacement of OCPF declarations. However, he
disagreed with the TS's claim that the DG's Note --
particularly updates to the Declarations Handbook --
could be implemented without a decision by the
Executive Council (EC).


20. (U) Italy asked for more information on how the
TS expects the proposals to be implemented and what
it expects the results to be. The delegate commented
that the numerical value attached to plant site
characteristics (referred to as "R" in the TS's Note)
will be critical. Italy went on to ask which factor
is most relevant in the A-14 algorithm and whether
the updated Declarations Handbook would have a new
table of relevant product codes (SITCs). Kane
responded that each factor is relevant to the
algorithm; Steve Wade (Head, Declarations Branch)
said that the TS did not plan to include a new table
of SITCs.


21. (U) Switzerland referenced its national paper on
OCPF plant site characteristics and noted its support
for the TS's Note. The Swiss delegate called for the
reduction of inspections at non-inspectable sites and
noted that the proposals would aid this goal, with
Qnoted that the proposals would aid this goal, with
benefits offsetting any burdens. Australia also
supported both the DG's and TS's notes, saying that
both will work together to address inspecting the
most relevant OCPF plant sites.


22. (U) India said that the two notes mark a

departure from the Second Review Conference (RevCon)
by imposing additional declaration obligations and
asked whether the voluntary use of SITC sub-codes by
some States Parties (per the DG's Note) would
adversely affect those States Parties not using them.
Echoing Switzerland and Australia, France countered
that industry can deal with SITC sub-codes and would
not be burdened by them, especially when balanced
against reducing wasted inspections. France noted
its readiness to implement the proposals voluntarily.


23. (U) Germany also spoke in favor of the DG's Note
and said it did not foresee any major problems in
implementing it voluntarily. While agreeing on the
need to focus inspections on the most relevant sites,
on the TS's Note, Germany agreed with Italy on the
importance of defining a value for "R" and also noted
there might be legal problems with adding questions
about plant site characteristics. Germany also
posited that there might be exponential effects from
all of the changes to the OCPF verification regime --
from the new site selection methodology to
declarations enhancements -- and that these will need
to be considered aggregately.


24. (U) Canada and the UK both expressed support for
both notes and stated that they each had taken steps
to implement them as soon as possible, starting with
their 2008 declarations. Japan, supporting the
voluntary use of SITC sub-codes, asked when national
authorities would need to start using them. Wade
responded that, due to their voluntary nature, there
is no specific implementation date for using the sub-
codes. Canada asked two separate times when it could
expect to benefit from using the sub-codes. Kane,
citing the DG's Note (para 45, EC-53/DG.11),
confirmed that the TS will start incorporating the
sub-code into the OCPF site selection process in 2009
for 2010 inspections. China ackhowledged that some
states would derive benefits from implementing the
proposals but, echoing India's earlier remarks, that
should not be at the cost of other States Parties.
It stressed the need to know the full impact --
including costs and benefits -- of using the sub-
codes.


25. (U) On the TS's Note, Japan asked about possible
legal implications of amending the declaration form.
Japan also said that the impact of adopting the
proposal needed further consideration. Mexico and
the Netherlands each noted their general support for
the two notes and called for further discussion and
consideration; the Netherlands reiterated Germany's
call for information on the impact of the proposals.


26. (U) Delreps also welcomed the two notes but asked
the TS to provide more information on the true
benefit of the Proposals. Drawing on guidance (ref
CD, Delreps tabled a proposal to replace the sub-
codes with a catch-all code for bulk chemicals.
Delreps also asked if the TS had considered how new
declaration information -- specifically the
verification of equipment characteristics for an
entire plant site -- would be incorporated into the
inspection regime.


27. (U) Iran interjected that a thorough conceptual
discussion needs to take place before even discussing
Qdiscussion needs to take place before even discussing
the technical aspects of either note. It claimed
that the consultation's mandate came from the RevCon
report (para 9.65, RC-2/4),saying on the one hand
that it was necessary to keep the consultation's
scope and discussion within that mandate, while going
on -- and ignoring the blatant contradiction -- to
say that discussion should not be limited to the DG's
and TS's notes and that it was open to other
proposals -- including the U.S. proposal on a code

for bulk chemicals. It rejected discussion of the
TS's Note as premature, falling outside of the
consultation's mandate because the proposal violated
the RevCon report by imposing additional obligations.
Therefore, Iran concluded that the proposal is no
longer on the table for consideration.


28. (U) Amb. Javits countered that both notes were
prepared in response to the RevCon and clearly
complied with the request in para 9.65 (RC-2/4) for
the DG and TS to submit proposals to direct OCPF
inspections towards facilities of greater relevance.
He also stated that additional bureaucratic
obligations do not represent a real burden: the real
burden is wasted inspections at non-inspectable
sites. France and Germany both agreed, with Germany
stressing that all proposals are on the table for
consideration, whether or not they are accepted by
all delegations.


29. (U) Van Schalkwyk wrapped up the meeting, first
noting his mandate came from the title of the two
notes ("enhancement of OCPF declarations"),and then
re-capping key points of the discussion. He noted
strong support for the TS's and DG's notes although
some delegations still have questions and concerns
about them. He also noted general support for
focusing OCPF inspections despite differing ideas on
how to do this.

--------------
OTHER INDUSTRY MEETINGS
--------------


30. (U) After the Industry Cluster consultation on
November 14, visiting Commerce officer Joe Cristofaro
and Delrep met with Bill Kane (Head, Industry
Verification Branch) and Peter Boehme (Senior
Industry Officer, IVB). Delreps asked about
thresholds for OCPF mixtures. Kane said that the TS
has not considered the issue and has not received any
input from other States Parties, nor are they
familiar with other States Parties' regulatory
requirements; however, he promised to give the issue
some thought. Cristofaro next asked about mixed
plant sites and whether the results of one type of
inspection (e.g., Schedule 2) are factored into the
information available on the plant site. Kane and
Boehme explained that data essentially are kept in
"silos." The TS has not "connected the dots," so
inspection information does not affect selection of
other plants on the same site.


31. (SBU) Kane then turned to sequential inspections
in the U.S., asking if there is any flexibility in
the current distance limit of 150 miles between
inspected sites. Cristofaro explained the U.S.
position, indicating that experience with sequential
inspections this years affirms that 150 miles is the
farthest distance that can be reasonably accommodated
to allow for sequential inspections within the same
week.


32. (SBU) Turning to Schedule 3 inspections,
Cristofaro noted that the U.S. has had a larger-than-
expected increase in Schedule 3 inspections in 2008.
While an increase in OCPF inspections had been
anticipated due to the new site selection
methodology, a similar increase in Schedule 3
inspections had not been planned due to the static
number of Schedule 3 inspections. Kane responded
that 50% of Schedule 3 facilities have been inspected
in approximately 30 States Parties; eight States
Qin approximately 30 States Parties; eight States
Parties still have sites yet to be inspected, with
China and the U.S. having the largest share. Kane
explained that -- due to the re-inspection rate being
limited to 5% of the annual number of Schedule 3

inspections -- more and more Schedule 3 inspections
will be focused on a decreasing number of States
Parties. He described the situation as a train wreck
coming the next 3-4 years and suggested that it could
be avoided either by increasing the re-inspection
rate or by decreasing the overall number of Schedule
3 inspections.


33. (SBU) Delreps reiterated the U.S. proposal to
replace the SITC sub-codes (in EC-53/DG.11) with a
catch-all code for bulk chemicals (ref D). Boehme
thought the proposal was a useful simplification;
Kane noted that it was an interesting proposal but
confirmed that the updated Declaration Handbook would
soon be printed, with no chance of stopping the
process. However, he recognized the need to update
the Handbook on a more regular basis and suggested
that the U.S. proposal might be considered for the
next update. (Del comment: Del will continue to push
for inclusion of the U.S. proposal in the updated
Declarations Handbook before its release.)


34. (SBU) After meeting with Kane and Boehme, Delreps
briefly met with Susan Atego (Senior Policy Officer,
Policy and Review Branch) to discuss the U.S.
Schedule 1 Facility Agreement deferred from the last
EC session (ref E). Atego told Delreps that no
States Parties -- including Iran -- had informed the
TS of concerns with or questions about the facility
agreement, noting that the agreement had obviously
been deferred for political reasons. Cristofaro
asked whether the agreement could be put on the
agenda of the special EC meeting for consideration
before the upcoming Conference of the States Parties
(CSP). Atego promised to look into the possibility.
Atego also told Delreps that Iran had not yet
provided any justification for changing its Schedule
1 Facility Agreement to a "facility arrangement" (ref
E).


35. (U) Javits sends.
FOSTER