US deputy assistant secretary: India not availing US export licence exemptions

By Ajai Shukla

Business Standard, 19th July 19

US government experts on defence export licensing on Thursday completed a four-day visit to Delhi, during which they held multiple briefings with the government and defence industry about the benefits available to India from the Strategic Trade Authorisation – Tier One (STA-1) status that India was accorded last year.

On July 30, 2018, US Commerce Secretary Wilbur Ross announced that India was being upgraded to STA-1 status, making Indian entities eligible to import a range of high-tech US defence products without export licences.

However, Indian importers do not appear to have fully understood the benefits that STA-1 status confers on them, said Matthew Borman, US Deputy Assistant Secretary, Bureau of Industry and Security, Department of Commerce, who heads the US delegation.

“We’ve just scratched the surface of Indian and US companies taking advantage of the current regulatory framework,” Borman told an industry gathering organised by the US India Business Council in Delhi on Thursday.

Not only are Indian importers eligible under STA-1 licence exemptions to bring into India an expanded range of US high-tech products; they are also eligible to re-export them without US permission to other countries that enjoy STA-1 status, said Borman.

For example, Hindustan Aeronautics Ltd (HAL) no longer requires a US licence to import American sub-systems that go into the Dhruv advanced light helicopter. Nor does HAL require a licence for re-exporting those US systems, in case another STA-1 country buys the Indian helicopter.

The US delegation pointed out that India had been granted STA-1 licence exemption despite disquiet in Washington about New Delhi’s heavy volume of defence trade with Russia, which raises the possibility of US technology leaking to the Russians.

The 37 countries with STA-1 status – which the US Department of Commerce terms “Country Group A:5” – includes Argentina, Australia, Austria, Belgium, Bulgaria, Canada, Croatia, Czech Republic, Denmark, Estonia, Finland, France, Germany, Greece, Hungary, Iceland, India, Ireland, Italy, Japan, Latvia, Lithuania, Luxembourg, Netherlands, New Zealand, Norway, Poland, Portugal, Romania, Slovakia, Slovenia, South Korea, Spain, Sweden, Switzerland, Turkey and the UK.

Licence exemptions under STA-1 extend to a category of goods called “600 Series”. In the aerospace segment, this includes fuselages and cockpits, control systems, aircraft tyres, hydraulic system filters and hoses, cockpit panel knobs, switches, dials and parachutes and life support systems.

Also eligible for STA-1 licence exemptions are items such as carbon fibre, which is commonly used in fabricating aerospace structures, including for the Tejas fighter; and complex machine tools used in aerospace and defence manufacture.

However, licences are still required for fully built aircraft (e.g. F-16, F/A-18E/F), assembled aircraft engines, weapons pylons and bomb racks, mission systems, fire control computers and fire control radars.

India was accorded STA-1 status by virtue of two qualifications: Being designated a Major Defence Partner (MDP) of the US in 2016; and obtaining membership of three of the four global multilateral export control regimes: Missile Technology Control Regime, the Australia Group and the Wassenaar Arrangement. India fulfils the conditions for membership of the fourth – the Nuclear Suppliers Group – but its membership is still being processed.

New Delhi has met strict non-proliferation conditions for entry into the multilateral export control regimes. For example, it has harmonised its definition of dual-use items with global norms by listing them out in a so-called “Special Chemicals, Organisms, Materials, Equipment and Technologies (SCOMET)” list. Washington has assisted New Delhi in this.

“India and the US have a long tradition of working together, on matters related to export controls, and we have developed, a strong foundation, for further enhancing, this valuable cooperation,” said Indra Mani Pandey of the Ministry of External Affairs at a Ficci conference on Wednesday, in which the US delegation explained STA-1.