REPLY TO BLUE LANTERN 050204437

UNCLAS MADRID 000060 SIPDIS PM/DTCC - FOR BLUE LANTERN COORDINATOR, MEREDITH SUNDLOF HANOI FOR MICHAEL ORONA E.O. 12958: N/A TAGS: ETTC KOMC SP VN SUBJECT: REPLY TO BLUE LANTERN 050204437 REF: A. STATE 130501 ¶B. MURRAY-SUNDLOF-ORONA E-MAILS ¶C. GENERAL CORRESPONDENCE 2821-09 ¶1. SUMMARY: Post has made pre-license inquiries requested reftel regarding dealings between Vietnamese security forces and Spanish aerospace and defense leader European Aeronautic Defense and Space (EADS) CASA. David de Teran, Head of Export Compliance for EADS CASA, informed Pol-Mil officer that EADS Casa is currently at different stages of negotiating two separate aircraft orders for two different branches of the Vietnamese security forces. The fact that the sales are not yet finalized may explain the impossibility of independent verification of either sale so far. The commodities included in license application number 050204437 -- yoke balls and pins used to assemble electric motor pumps that are subsequently installed on C-295 aircraft -- are part of a an as-yet unsigned contract with the Vietnamese Marine Police, related to which the Department is already in possession of the end-use certificate for the pumps. This deal is now moving forward and could be completed during 2010, after delays due to Vietnamese priority on the chronologically newer, now more advanced contract. In this latter transaction, EADS is pursuing the sale of five aircraft to the Vietnamese Air Force, as described in General Correspondence 2821-09 submitted to the Department (ref C). END SUMMARY. //General Correspondence 2821-09// ¶2. The more advanced of the two contracts is between EADS Casa and the Vietnamese Air Force (VAF) for five (5) C295 aircraft. This is the subject of General Correspondence 2821-09 from November 2009 (ref C),which stated EADS Casa had initiated commercial contacts with the Vietnamese Air Force (VAF). (NOTE: the original GC referenced a total of six planes, but the number has since been reduced to five. End note.) According to de Teran, EADS decided to send the General Correspondence based on the fact that the planes incorporate U.S.-origin ITAR-listed items and knowing that USG policy toward Vietnam is to approve such export licenses on a case-by-case basis. EADS was contacted by the Department in December 2009 and subsequently is seeking to have the Government of Vietnam sign an end-user statement in relation to EADS Casa's request to DDTC to approve the retransfer of C-295s to the VAF. De Teran said EADS does not expect to be able to provide the signed end-user statement it has already drafted and shared with the GOV until the end of February or beginning of March. Nonetheless, he confirmed the bona fides of the potential sale of five C295s which do contain ITAR-controlled equipment to end-user Vietnamese Air Force for the stated end use of transport and passenger carriers. //Case Number 050204437// ¶3. The second contract -- this one with the Vietnam Marine Police (VMP) -- actually pre-dates the first and includes two (2) CN235s and one (1) C295 aircraft, key components for which EADS submitted end-user certificates as early as September 2009. According to de Teran, discussions between the VMP and EADS Casa actually began in late 2008 but were "paralyzed" in 2009 when the GOV diverted its resources to the VAF deal described above. Negotiations are moving again, and EADS expects the contract to be activated "at some point" during 2010. In response to Pol-Mil officer's request for documentation to verify end-use and establish the bona fides of the proposed VMP sale, de Teran clarified that EADS Casa has not yet signed a contract with the VMP for C295 or similar aircraft, nor signed any contract with the GOV to supply aircraft whose intended end-user could be the VMP. De Teran further indicated EADS Casa has yet to receive any equipment related to license application 050204437, its purchase orders frozen pending a firm commitment on the part of the Vietnam Marine Police. ¶4. EADS Casa nonetheless prefers to pursue subject license application, with the understanding that such a license would remain in effect for 48 months, and confident that a period of four years would be sufficient to finalize this contract. A responsible recipient of USML items, EADS assured Post that in the event the sale falls through or negotiations go beyond 48 months, the company would advise its suppliers (including Eaton Aerospace Vickers Systems) and ensure that the Department is notified. EADS CASA further understands Federal Register Notice Vol. 72, No. 63 prohibitions on the exports of components for lethal defense articles destined for Vietnam. SOLOMONT