US embassy cable - 04THEHAGUE3156

S E C R E T THE HAGUE 003156 
 
SIPDIS 
 
STATE FOR EUR/UBI/HOLLIDAY 
STATE PLEASE PASS DOD FOR N.BRELAND 
 
E.O. 12958: DECL: 12/02/2014 
TAGS: KSTC, ETTC, PARM, NL, CH 
SUBJECT: DUTCH PROPOSE PARTS CONTROL PLANS FOR 14-BIT ADC 
SALES 
 
REF: 239012 
 
Classified By: Economics Counselor Richard Huff for Reasons 1.4 (B) and 
 (D). 
 
1.  (S) On November 15, Chris Kessler, Export Control 
Non-Proliferation office director, Nicole Breland, Department 
of Defense export control policy advisor, and embassy econoff 
(note taker) briefed the non-paper (reftel) to Dutch ministry 
of foreign affairs, economic affairs and defense officials 
responsible for dual use technology export policy.  George 
Bontenbal, director of the Ministry of Economic Affairs' 
office of Export Control and Strategic Goods policy led the 
Dutch delegation 
 
2.  (S) Bontenbal thanked the U.S. side for its information 
and remarked that Huawei, for example, was among the largest 
telecommunications base station manufacturers in China and a 
probable Philips customer.  Note:  Philips manufactures 
14-bit ADCs, but according to the Dutch as yet has not sold 
these to Chinese companies. End Note.  He thought the USG and 
GONL should draw a distinction between Huawei's civilian 
telecommunications manufacturing and their defense related 
work for the PLA. 
 
3.  (S) Kessler countered that it was unreasonable to expect 
that the civilian division of a partially PLA-owned company 
would not share its western bought technology with the 
defense division.  Firms that are established "defense 
contractors" to the PLA and have extensive ties to PRC 
national security agencies cannot be expected or trusted to 
maintain impermeable "fire-walls"; we know they do not.  The 
only companies that can be trusted, even on the basis of the 
rigorous conditions and parts control plan approach we have 
discussed, are those that are strictly focused on the 
civilian market, and therefore have strong incentives to 
avoid leakage. 
 
4.  (S) Nevertheless, Bontenbal said the GONL preferred 
requiring end-use conditions and parts control plans, 
requiring ADC buyers to track and account for their ADC 
inventory, rather than prohibiting altogether ADC sales to 
certain companies.  "It would be hard," he concluded, "to 
shut out Huawei, one of the biggest players" in China's third 
generation cell phone program.  Bontenbal suggested the Dutch 
would agree to require parts control programs for ADC sales 
to Chinese companies, rather than excluding the companies all 
together.  He confided that Philips wants to sell 14-bit ADCs 
to Huawei soon.  With this in mind, the GONL had been 
drafting sales contract language requiring 14-bit ADC buyers 
to put parts control programs in place for the converters. 
He offered to share the Dutch contract conditions with the 
U.S., probably sometime in mid-December. 
RUSSEL