FAVORABLE BLUE LANTERN ON EUROPAVIA (LICENSES

UNCLAS MADRID 000722

SIPDIS

EUR/WE FOR STACIE ZERDECKI
PM/DTCC FOR BLUE LANTERN COORDINATOR RACHAEL-THERESE S.
JOUBERT-LIN

E.O. 12958: N/A
TAGS: ETTC KOMC SP
SUBJECT: FAVORABLE BLUE LANTERN ON EUROPAVIA (LICENSES
050097913 AND 050051555)

REF: STATE 64206


1. (SBU) SUMMARY: Pol-Mil officer, Econoff, and POL intern
made July 9 site visit requested reftel to foreign consignee
Europavia Espana, S.A. in connection with subject cases.
Europavia officers were knowledgeable, forthcoming, and
cooperative, and made a detailed presentation about the
company's history and primary customers and suppliers.
Ministry of Defense contacts confirm Europavia is a regular
provider for the Spanish MOD, primarily for maintenance of
airplanes and military helicopters, and that the company is
registered with the Directorate General of Armament and
Materiel (DGAM). Europavia works frequently with European
Aeronautic Defense and Space (EADS)-CASA, the global leader
in aerospace, defense, and related services and Indra, and
Europavia's role in these transactions is as a parts
purchaser and distributor. Europavia delivers the imported
components as they are received from the manufacturer, with
rapid delivery averaging one-day turn-around, and is not
involved with their internal technology. Europavia maintains
strict internal controls on all inventory and on parts in
transit. More general information regarding Europavia's
business dealings can be found beginning at para 5. Please
see a question from Europavia regarding International Traffic
in Arms Regulations (ITAR) at para 8. END SUMMARY.


2. (SBU) Regarding the specific post-shipment check
requested, answers below are keyed to questions in ref A,
para 4:

-- Is Europavia Espana an official supplier/contractor for
the Spanish MOD? Does the company have any
other contracts with the Spanish MOD that involve the
procurement of USML items?

Captain Eladio Ferreiro, Head of the Export Control Unit
within the Directorate General of Armament and Materiel
(DGAM) at Spanish MOD confirmed July 7 that Europavia is a
regular supplier, primarily for military aircraft
maintenance, registered with DGAM. Because the company
contracts "habitually" with MOD for aircraft maintenance,
some of the parts acquired in the United States are by nature
USML-controlled items. Europavia officers briefed Emboffs
that the company has mostly maintenance contracts with the
MOD, and that the Spanish ministry normally goes direct to
defense components manufacturers. There are currently no
other open contracts for procurement of munitions list items.

-- Can the company provide documentation from the Spanish
Ministry of Defense (MOD) and/or the Spanish Air Force (e.g.
purchase order, contract, or letter of intent) establishing
it as the final end user of the USML items?

Europavia provided Emboffs with extensive documentation on
both subject cases, all of which can be provided via FAX to
PM/DTCC upon request. In support of license #050097913,
Europavia provided the Spanish Army's repair request dated
March 6, 2006; evidence that Eurocopter was not able to make
the necessary repairs and turned to Europavia; Europavia's
2007 repair quote and subsequent Eurocopter purchase order
number 608/4300035296/02.07.2007; an end-use certificate
signed by Rafael Garcia and provided to Goodrich Corporation;
DSP-5 signed by Bruce Schwingler in April 2008; shipment
record that accompanied the cargo from Los Angeles on May 2,
2008; and invoices and packing slips for the winch delivered
in working order on May 12, 2008. The end-use certificate
specified that Europavia place purchase order # N07/0214/M on
Goodrich Corporation for the supply of helicopter rescue
hoist systems to be installed on CH-47D operated by the
Spanish Army.

Europavia provided in support of license #050051555, an
invoice from Indra for repair of a receiver/transmitter;
e-mail correspondence related to export licensing to have the
repair performed by L-3 Communications in Grand Rapids,
Michigan; packing slips; and repair quotes.

-- Have all of the items ordered on these licenses been
provided to the Spanish MOD? Does Europavia continue to hold
any of the USML items?

(Regarding case 050097913: Are you familiar with Freight
Forwarder Integral Transport Service, S.A. (Madrid)'s exact
role? Were there any additional foreign parties (e.g.
consignees, freight forwarders, etc.) involved in this
transaction?)

All items have been provided. Europavia does not continue to

hold nor does it habitually store USML items, or any other
components ordered on behalf of clients. The only items
presently in its small-volume warehouse are civil aviation
products en route to customers. Most equipment is delivered
to the warehouse space that Europavia rents in the garage
below its owned office space at calle Jorge Juan, 30 in
Madrid, and subsequently leaves the space via courier
services with global insurance. In the case of larger
materials, Europavia may instead inspect arriving freight and
sign it over directly to a freight forwarder.


3. (SBU) In the case of license #050097913 for the helicopter
cargo winch, in answer to the question of whether the parts
have been transferred to the MOD (ref A),as documented above
and confirmed by MOD, they were received by Europavia and
delivered May 12, 2008 to Eurocopter, thence via
transportation agent and foreign intermediate consignee
Integral Transportation Service, S. A. (a forwarding company)
to the Spanish Army (not/not Air Force). DGAM's Ferreiro
clarifies said cargo winch was the property of the Spanish
Army (FAMET),sent to U.S. company Goodrich for repair
through Europavia and Eurocopter Espana (the Army's
contractor),and subsequently returned to the end user and
original owner, the Spanish Army. In this an in other
instances, Europavia sometimes buys direct and sells to the
Spanish Army or, depending on the timeline and the
circumstances of the sale, may sell to the Army via
Eurocopter, a company that repairs Chinook helicopters. In
almost all such cases, Europavia is working directly with the
Spanish military or with three major defense companies in
Spain.


4. (SBU) In the case of license #050051555, Europavia
officers explained they signed the Letter of Intent (LOI) on
June 13, 2007 in order to be able to procure parts via
Caravan International (a seller with whom Europavia works
only for large-volume contracts) for the Spanish MOD for a
period of four to five years up to a value of USD $4 million.
The Spanish Army sought Europavia's assistance in
guaranteeing delivery of critical parts for military
airplanes and helicopters (ref A) as a "work-around" at a
time when their negotiations with Boeing had stalled.
Europavia officers briefed Emboffs that while still valid,
the original LOI is no longer much used, because the Spanish
Army is now procuring the intended maintenance and repair
supplies via Foreign Military Sale (FMS). DGAM's Ferreiro
confirms that parts totaling only USD $23,084.82 (of the $4
million ceiling) have been acquired and delivered to date
under license 050051555, and that there has been no activity
under this LOI since 2007. Ferreiro notes that Caravan's
license was tied to its LOI with Europavia, in essence an
"open license" up to a stated financial limit for aircraft
parts and components, "in order to avoid delays in material
orders" that needed to be fulfilled in as given moment.
Seven specific items, all ordered through Europavia N07/0249
were supplied by EADS CASA or Indra Sistemas, S.A. The
entire order was requested and delivered the same day, on
October 3, 2007, according to MOD. The following parts
valued at $1,527 received by Europavia from EADS had as their
end user the Spanish Air Force's C-130 program:

P/N MS9501-07 Bolt
P/N 3313872-1 Pad, Pedal
P/N 899981-2 Atomizer Assembly
P/N 976761-1 Spacer
P/N MS20073-03-05 Bolt

The remaining parts ordered through Indra were installed by
the Spanish Air Force in F-5s. Indra program manager
Virginia Hornillos and MOD's purchasing offices confirm these
materials were delivered at the time of the order to the
Spanish Air Force and should have been installed in aircraft
a long time ago:

P/N 064-104-7-61 Receiver transmitter $15,922.20
P/N 071-137-7-01 CD-413B VAL CTL $ 5,635.62


5. (SBU) Europavia Espana was established in 1965 and
currently employs 15 people in its Madrid office. The
company reported 120 million Euros in orders between 2004 and

2008. It is dedicated to the commercialization and
distribution of equipment and high-technology systems and
logistical management in the aeronautics and defense sectors.
Europavia is privately held, wholly owned by principal
French shareholder Eurotradia International, a consulting and
services industry which in turn is held by major European
aeronautics, defense, electronics, and energy entities
including Total, EADS, Thales, Dassault, MBDA Missile

Systems, and Safran. Their institutional structure and
financial resources allow Europavia to take on any project
acting either as distributors or as representatives according
to their clients' interests. Between 2004 and 2008,
Europavia reported 88 million Euros as representatives
compared to 31 million Euros in distribution activities. The
company's earnings have risen steadily an average of 18 per
cent per year. Repair and maintenance contract management in
particular has risen nearly 30 per cent annually.


6. (SBU) Europavia officers told Emboffs they work with a
number of suppliers and manufacturers, primarily French
companies, and deal in logistics (including
repair/maintenance and technical assistance contracts; buying
and selling of components represents about 40 per cent of
total sales); commercial promotion for commission (50 - 60
per cent of sales, with the client responsible for all
end-use assurances); and a small percentage of consulting
business. They are slightly more active in the private
sector (approximately 55 per cent of sales) than in the
public sector (primarily military clients). The directors
told Emboffs that Europavia was trying to break out of its
reputation as the "French defense firm operating in Spain."
Nonetheless, Europavia deals mostly in French-manufactured
parts (80-85 per cent),and less frequently in U.S. parts.


7. (SBU) Although Europavia deals in civil aviation as well,
military sales represent more than half of the company's
business. Europavia prides itself on its helicopter supply
business, claiming it is capable of providing any system
except for motors and cells. Its helicopter clients include
all three of the Spanish military services, the Spanish
Ministry of Interior, and major private operators. Europavia
has also been involved in braking barrier installation
projects at civil and military airfields throughout Spain for
the past ten years.

-- Does Europavia Espana understand the restrictions on USML
items (especially the prohibition against unauthorized
re-transfers, re-exports, or changes in end use)?

Yes. Nonetheless, Europavia acts as a consultant and advisor
in most of its procurements deals and specifies that DSP-83
compliance responsibilities rest with their end-user clients.



8. (SBU) Europavia's General Director Rafael Garcia Tudela
further sought Post's assistance in clarifying when its
transactions might be subject to end-use prohibitions.
Garcia posed questions regarding the ITAR list for
significant military equipment (SME) and dual-use items
versus "spare parts" deemed not subject to end-use
certificates. If the manufacturer does not ask, Europavia
assumes a DSP-83 is not required. Garcia needs to advise
clients that parts described as "stock" may not be
immediately available if they are subject to U.S.
restrictions, which could result in a four-week delay. When
does a given aircraft part "count" if the same equipment can
be installed in either military or civil aircraft? How can
the company determine whether the parts it is requested to
obtain are contained in the USML? Europavia's team shared
DSP-83s and other paperwork related to April 2009 and May
2009 orders for spare parts (cicuit card assembly amd power
supply) for maintenance activities for a Lockheed C-130
Hercules aircraft operated by the Spanish Air Force and close
tolerance screws for the Spanish Navy, respectively, and
sought Emboffs opinions of whether everything appeared to be
complete and in order. NOTE: Post would appreciate a direct
PM/DTCP point of contact for Europavia in this regard, in the
event they have additional questions or recommendations for
periodic review of the list. END NOTE.


9. (SBU) -- Who are Europavia Espana's other customers, what
is the nature of their business, and where are they located?

Europavia works primarily with the Spanish Air Force and EADS
CASA, which together represent over half of Europavia's
sales. Other clients include, on the public side, the
Spanish Army and other defense and security entities. In
addition to EADS, Europavia supplies Spanish shipbuilder
Navantia, aeronautical operators, the Spanish airports
administrator AENA, and Eurocopter Espana. Europavia also
has business with the Basque Police. Madrid staff of the
U.S. Commercial Service (USCS) confirm that Europavia is a
company in good standing representing several U.S. firms in
Spain. Senior International Trade Specialist Carlos
Perezminguez describes Europavia director Miguel Angel Tapia
as "one of the best professionals in this sector" and adds

the company enjoys an excellent reputation. USCS is familiar
with Europavia based on previous inquiries on behalf of U.S.
companies including Dillon Aero, and has included Europavia
in past "Gold Key" meetings with U.S. companies seeking
partners in Spain. Representatives from Europavia were
invited by USCS to attend the reception at U.S. Embassy Paris
during the June 15-21, 2009 Paris Air Show at Le Bourget.
Europavia Espana represents select Japanese, German, Italian,
and UK firms as well as a long list of French suppliers. Its
U.S. representations include American Fuel, ETC, Microstrain,
Engineered Arresting Systems Corporation, Cobham Defense
Electronic Systems, Defense Technology Equipment, and
Goodrich (both French and U.S. subsidiaries).

CHACON