END-USE ASSURANCES: FRANCE'S PERSPECTIVE ON THIRD PARTY

S E C R E T PARIS 001361

STATE FOR T, PM, EUR/WE and EEB/CBA
SECDEF FOR DTSA

NOFORN
SIPDIS

E.O. 12958: DECL:09/24/19
TAGS: ETTC PARM PREL ETRD EUN FR
SUBJECT: END-USE ASSURANCES: FRANCE'S PERSPECTIVE ON THIRD PARTY
TRANSFER

CLASSIFIED BY EMIN SETH WINNICK FOR REASONS 1.4 B & D

REFS: A) BRUSSELS 1238
B) PARIS 0872
C) FRENCH EMBASSY WASHINGTON NOTE VERBALE NO. 737
D) LISTON-RUETER EMAIL SENT 4/9/2009 5:02 PM (NOTAL)


1. (S) SUMMARY AND ACTION REQUEST: Several major allied military
systems, including Belgium's A400M military air transport project
(ref A),have been delayed for months, pending GOF end-user
assurances (EUA). GOF will now provide necessary EUA in these cases,
based on a previously existing bilateral commitment to the U.S. to
account for certain encryption items on its territory. However, the
broader issue of a European Union that will soon treat its national
markets as a single "trusted community," in which sensitive
technology can be transferred with a single European license (see ref
B),is increasingly at odds with U.S. export control laws and
regulations. Post recommends that Washington agencies engage with
the European Commission and member states to find ways to bridge what
will be a growing gap between our respective export control systems.
In the interim, Embassy recommends Department review closely and
respond to the confidential April 8, 2009 Note Verbale from the
French Embassy in Washington (ref C) and clarify whether it satisfies
EUA requirements for all/all transfers of covered encryption items to
France. END SUMMARY AND ACTION REQUEST.

Major Allied Defense Systems Held Up by EUA Issue
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2. (S) The French government regularly signs end-use assurances (EUA)
to the USG when France is the end-user of sensitive or arms-related
items. It has refused, however, to give such assurances for
controlled items ultimately destined for systems outside France, in
the absence of a government-to-government framework agreement. This
has led to delays in a number of major European defense projects
impacting both U.S. exporters and defense cooperation interests as
well as French defense contractors. The United Kingdom's Future
Strategic Tanker Aircraft (FSTA) program as well as A400M military
air transport projects in Luxembourg, Belgium and Spain have been
delayed many months pending GOF EUA for Thales France, one of several
key firms involved in these programs.

The French Position
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3. (S/NF) The senior MOD export control coordinator has told Embassy
Paris that the GOF has no problem with signing EUA's for items or
technical data for which it is the end-user. When the end-user is a
foreign or private entity, the GOF's view is that it is not in a
position to provide a meaningful end-use assurance because the GOF is
not a party to the contract; and because the GOF does not have
mechanisms or legal authority to ascertain or control the whereabouts
of all ITAR items within its territory. The GOF considers EUAs the
responsibility of the contracting/sub-contracting party, barring a
government-to-government agreement.

An Unauthorized Lapse
--------------

4. (S/NF) In 2006, Paris learned that a former French defense
cooperation attach in Washington was signing EUAs for temporary
third-party transfer to private entities in France without
authorization. This practice was then stopped. According to the
MOD, the only such temporary EUAs it has been asked to sign related
to encryption, but the USG never specified the limits, or extent, of
the EUA requirement. Under these circumstances, the GOF suspended
the signing of all EUA's where the GOF is not the end-user.

Government-to-Government Framework Offer a Solution
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5. (S/NF) GOF export control officials have told us that one way
around the GOF's lack of legal authority to provide EUAs is if the
items in question are covered by a government to government
agreement. Under a 1999 NSA Memorandum of Agreement with its French
counterpart, the SCSSI, the GOF put in place mechanisms to track and
assure secure storage and non-transfer of all NSA-designated
encryption items in its territory, regardless of end-use. In a March
20, 2009 internal review of the EUA request related to the UK's FTSA
program, the Prime Minister's office committed to finding a way to
allow the UK program to go forward. On April 8, the French Embassy
in Washington provided PM/RSAT with a diplomatic note confirming that
the 1999 MOA covers transfer of cryptographic components and
confirming GOF end-use assurances for such items. MOD contacts state
that the GOF has not received a response to this note.


6. (S) As in the Belgian case (ref A),the FTSA case involved
Multifunctional Info Distribution System (MIDS) cryptographic
chipsets, manufactured in the United States. The GOF position is
that all encryption items covered by the 1999 MOA (not just for the
FTSA, as mentioned in the dipnote) have GOF end-use assurance and

require no further GOF documentation. Post request Department's
clarification on whether the April 8 note satisfies EUA requirements
for all third-party transfers of encryption items in France, or just
MIDS chipsets, or only the MIDS chipsets in the FTSA.

Broader Issue of Integrated European Defense Industry
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7. (S) Although the immediate problem of EUAs for temporary transfers
to France involving encryption may be solved, the broader question of
an increasingly integrated European defense industry -- and a
European export control system that treats it as such - presents the
USG with a growing challenge. On the margins of the June 2009 Paris
Air Show (ref B),GOF and industry representatives noted that the
European Base for Industrial and Technological Defense will be based
upon "global licenses" that rely on common EU criteria that national
government authorities will use to certify companies (for up to five
years). However, no "global end use assurance" exists for re-export
by one purchaser to another member of the "EU trusted community", a
concept the USG does recognize. A/DAS for Defense Trade Robert S.
Kovac raised with GOF and industry officials concerns on procedures
to remove a company or country from the EU "trusted community." It
was unclear how effective liaison and coordination among member
states would occur.


8. (S) The GOF also recognizes a need for better coordination on
export control practices. MOD officials have told us they favor
focusing on a limited number of "highly sensitive" items such as
encryption. GOF export control officials have told us, however, that
the GOF does not desire to be held accountable for all/all ITAR items
temporarily transferred to private parties in France.

COMMENT
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9. (S) The armaments industry and the European Union have evolved so
that cases of temporary third-party transfer during systems
production are increasingly common. It is likely that the absence of
French (or other) end-use assurances for non-encryption items will
block or delay future allied defense projects which may be of
substantial commercial and security interest to the U.S. Thus,
while we may have a possible solution for encryption items, Embassy
has had no success in engaging the GOF in a process to address
end-use assurances for other ITAR items destined for third parties.
We recommend Washington agencies engage with their French and EU
counterparts on agreements or other appropriate ways to prevent
significant EUA-related delays in future allied defense systems. End
Comment.

RIVKIN