US embassy cable - 04NEWDELHI7249

UNCLAS SECTION 01 OF 02 NEW DELHI 007249 
 
SIPDIS 
 
SENSITIVE 
 
DEPT ALSO FOR EB/TPP AND SA/INS 
USDOC FOR 4530/MAC/AMESA/OSAO/LDROKER/ASTERN 
USDOC FOR 3131/USFCS/OIO/DHARRIS 
USDOC FOR 6430/ITA/TD/ITI/KJENCI/EHOLLOWAY 
USDOC FOR 532/BIS/TANDRUKONIS 
DEPT PASS USTR FOR SOUTH ASIA - AWILLS/JROSENBAUM/BSTILLMAN 
 
E.O. 12958: N/A 
TAGS: ETTC, ECON, ETRD, PREL, KSTC, MASS, IN, Export Control Initiatives 
SUBJECT: INDIAN COMPANIES REQUIRE ADDITIONAL COMMITMENTS IN 
HIGH TECH TRADE 
 
REF: A. BRYAN LOPP-MARCO DICAPUA/ROBERT WINSHIP EMAIL 
        NOVEMBER 11 2004 
     B. MAYANK BHATT-YASH KANSAL EMAIL NOVEMBER 2 2004 
     C. 03 NEW DELHI 4810 
 
1. (U) Summary.  Some Indian companies that buy high tech 
goods are asking potential U.S. exporters to agree to 
additional requirements regarding U.S. export controls, in 
some cases limiting the exporters' ability to sell in the 
Indian market.  The buyers require clauses in sales contracts 
that state: 1) that U.S. export licenses will be obtained by 
a prescribed date, or the exporter and agent will be liable 
for damages to the buyer for late delivery; 2) that the 
exporter will take full financial and legal responsibility in 
the event that the exporter does not comply with relevant 
export licensing regulations; or 3) that licensing for all 
phases of a project be complete on submission of the bid. 
End Summary. 
 
2. (U) Embassy recently received indications that U.S. high 
tech exporters were being subject to unusual contract clauses 
by Indian public entity importers, requiring the U.S. firms 
to guarantee delivery times regardless of the status of 
export license applications.  At Embassy's request, the 
American Chamber of Commerce in India (AmCham) took a survey 
of its members to determine the extent of the time 
constraints and export control clauses.  Some companies 
reported problems that affected their ability to do business 
in India. 
 
Specified Date Clause 
--------------------- 
 
3. (SBU) Some U.S. companies have reported clauses in 
purchase agreements that require the delivery of goods within 
a specified period of time, and impose potential penalties 
for delays.  These delivery dates reportedly are based on the 
assumption that export licenses will be obtained by the 
exporter and do not allow for flexibility due to delay or 
denial of these licenses.  For example: 
 
-- Oracle reported that it could not respond to a recent 
tender from Bharat Electronics Ltd (BEL).  BEL required the 
bidder to guarantee that it will continue their 
supply/support even in the event that BEL or India comes 
under sanctions from the U.S. Government.  Oracle could not 
make that commitment and so did not bid, and the sale went to 
SAP of Germany. 
 
-- Agilent representatives claim that they volunteer time 
commitments in their bids, and factor in wait times due to 
licensing requirements.  They claim that these commitments do 
not seriously affect their business. 
 
-- IBM claims that it encountered one such request, though it 
did not bid on the tender.  It provided no details of this 
tender. 
 
-- Codem Systems was not a respondent to AmCham's survey, but 
it has reported to the Commercial Service's Advocacy Center 
that it was penalized by Indian Space Research Organization's 
(ISRO) Telemetry Tracking & Command Network (ISTRAC) for a 
licensing delay (Ref A).  In this instance, Codem Systems had 
obtained a TAA 90 days before the contract signing, but the 
DSP-5 license took longer than expected.  ISTRAC would not 
begin technical discussions of the product until the license 
was obtained, and ISTRAC nullified the contract due to the 
delay. 
 
-- Beachcraft, also not a respondent to AmCham's survey, has 
reported through other sources that the delivery date clause 
has made it impossible for them to bid successfully (Ref B). 
 
4. (SBU) Other companies have reported clauses that put the 
legal responsibility for obtaining all applicable export 
licenses on the exporter and seem to absolve the Indian buyer 
from legal or financial obligations of not obtaining the 
license. 
 
-- Sun Microsystems noted a clause in a contract with ISRO 
which states:  "Procedures as required by Law of the Country 
of Export has been followed and necessary export license has 
been obtained wherever required as and when the Exporter 
indemnifies the consignee against any loss or expense he may 
incur due to any fault of the Exporter in the above matter." 
(Comment:  The Indira Gandhi Center for Atomic Research 
(IGCAR) recently faced legal action from the U.S. government 
for buying a product for which the exporter, Technology 
Option, did not obtain necessary export licenses (Ref C). 
This clause may be to protect ISRO from legal or financial 
liability should a similar problem arise in the future.  End 
Comment.) 
 
-- Pratt & Whitney has also reported bid tender clauses 
specifying that export licenses by the bidder's country of 
origin are the bidder's responsibility, though the tenders 
acknowledge that Indian licenses are then the buyer's 
responsibility.  A Pratt & Whitney representative states that 
this requirement forces them to apply for licenses well in 
advance of potential bids. 
 
Other Issues 
------------ 
 
5. (SBU) Though Honeywell Defense has not had any specific 
problems with licensing deadlines, they report that they face 
tenders that require three phases be complete on submission: 
1) Buy; 2) Buy and assemble; and 3) Build locally with 
technology transfer.  Because Honeywell is unable to obtain 
licenses to build locally until a formal contract is in 
place, they report that they lose business when faced with 
these tender requirements. 
 
Comment 
------- 
 
6. (SBU) India has made no international commitments on the 
openness of government contracts, and most of the examples 
given above are for contracts involving Indian public sector 
undertakings (PSU).  However, contractual requirements that 
penalize U.S. companies for adhering to export control 
regulations seem to run counter to the spirit of the HTCG and 
NSSP goals.  The insertion of these clauses may indicate the 
confusion that many Indian firms are experiencing in 
negotiating the complexity of U.S. export control 
requirements.  Greater outreach to Indian buyers might be an 
effective way to deal with some of the problems that U.S. 
exporters are experiencing. 
BLAKE