BLUE LANTERN LEVEL 3: PRE-LICENSE END-USE CHECK ON

UNCLAS MEXICO 001438 SENSITIVE SIPDIS FOR PM/DTCC - BLUE LANTERN COORDINATOR, WHA/MEX, AND INL/LP E.O. 12958: N/A TAGS: ETTC KOMC SNAR MX SUBJECT: BLUE LANTERN LEVEL 3: PRE-LICENSE END-USE CHECK ON APPLICATION 050152211 REF: STATE 32114 ¶1. (SBU) On 13 May, Poloff conducted a pre-license end-use check in-person interview with Carlos Rodriguez Velazquez of Industrias Velmal S.A. de C.V. During the interview Poloff clarified the relationship between the intermediary distributor, Industrias Velmal, and the end user, Tum Transportistas. Carlos Rodriguez Velazquez is an import agent who jointly ventures with IUSA, a manufacturer, to supply armored vehicles to a customer -- in this specific case Tum Transportistas. During the course of the interview, the process and interactions between participants was explained in detail. Tum Transportistas placed an order with IUSA for armored vans. Issel Perez was the contract specialist for IUSA and the individual responsible for coordinating the order. Industrias Velmal S. A. de C.V is the import agent for ballistic steel for IUSA. Carlos Rodriguez Velazquez requested the license for the import of the armor plating and is the responsible agent for the transaction. Velmal S.A. de C.V. is a pass through agent that does not handle or warehouse any material. The plan is for the product to go directly to IUSA industries for fabrication followed by final product delivery to Tum Transportistas. The order amount was placed to fulfill the request for 40-60 armored vans. ¶2. (SBU) On 21 May, Poloff conducted a pre-license end use check phone interview with Karem Musalan of Tum Transportistas. Musalan confirmed his relationship with IUSA and was fully aware of the business relationship between Industrias Velmal S.A. de C.V. and IUSA. He noted that he was still in negotiations with IUSA for the purchase of 40 large armored trucks for his distribution business. He indicated that his business distributed products for Sony, Nestle, and Colgate-Palmolive throughout Mexico. Musalan said that he has an agreement to purchase but no purchase order has been completed as a result of the on going negotiations. ¶3. (SBU) Responses to reftel questions. -- Does the company have supporting documentation for the proposed transaction? The purchase order request is between Tum Transportistas and IUSA. Because no export license has been granted to Industrias Velmal, an official request has not been generated from IUSA to Industrias Velmal. Additionally, no purchase order exists as of yet between IUSA and TUM Transportistas. TUM Transportistas will confirm purchase when it knows IUSA has the ability to deliver the 40 armored trucks. This is based exclusively on the ability of Industrias Velmal to acquire the ballistic steel. -- Did Tum Transportistas order the exact type and quantity of items listed on this application? Tum Transportistas plans to order a quantity of 40 vans from IUSA. IUSA's request to Industrias Velmal for armor plating is consistent with the amount of vans requiring the material. -- What is the exact end use of this USML item? Armored plating for 40 bullet proof trucks. -- What is the nature of its business? What type of item does it handle? does it serve as a broker? Velmal S.A. de C.V. is an import agent. IUSA is a manufacturer. Tum Transportistas is a distribution firm. -- What type of organizations are among its typical customers and where are the customers located? Velmal S.A de C.V. is an authorized distributor for ballistic steel and works with various companies in the fabrication of armored vehicles, which is the end product. Its customer base includes Logis Transportes, Eurologistic and Expres Milac, all located in Mexico. Tum Transportistas distributes to Nestle, Colgate-Palmolive and Sony throughout Mexico. -- Does Industrias Velmal S.A de C.V. have a firm purchase order from proposed end user Tum Transportistas? No. The importer/fabricator relationship is between Industrias Velmal S.A. de C.V. and IUSA. IUSA has a request from Tum Transportistas for a quantity of 40 armored large trucks. There is a purchase request; however, the official order has not been placed as Tums is waiting for confirmation that IUSA can fulfill the order. The pre-license acceptance will allow the order to be completed. -- Does the company understand the restrictions on United States Munitions List (USML) items, particularly those that prohibit the unauthorized stockpiling of U.S. defense articles? Carlos Rodriguez Velazquez is aware of all restrictions and is cognizant of the fact that he signed paperwork affirming that he would not stockpile such items. Industrias Velmal does not have warehousing capability and maintains office space in Toluca Mexico. Carlos Rodriguez Velazquez is an agent and works from his residence. All material goes directly to fabricators to make armored vehicles. -- Does the company understand the ITAR prohibitions against the unauthorized re-transfer and re-export of USML items? Carlos Rodriguez Velazquez is aware of these prohibitions and emphasized his commitment to compliance based on his signature on the appropriate pre-authorization paperwork. ¶4. Carlos Rodriguez Velazquez ended the meeting with a request for additional information regarding the specific restrictions on stockpiling of restricted items. He indicated that he has several small customers requiring 1-3 armored vehicles and it is not cost effective to order material for such small quantities. He would like to get more information on his ability to have a ready stock of armor plating or the ability to bundle orders from different companies to make the import of these items cost effective. Additionally he had concerns about the 2 month administrative process time it takes to vet and complete orders. The process time greatly affects his ability to meet customer demands for this product. Poloff indicated that he would request this information and clarification on these matters. ¶5. (SBU) Poloff finds that the intended use of the controlled items of the distributor and the end-user meets all requirements stipulated by the law and does not see any adverse intentions of this transaction. Visit Mexico City's Classified Web Site at http://www.state.sgov.gov/p/wha/mexicocity and the North American Partnership Blog at http://www.intelink.gov/communities/state/nap / BASSETT