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