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261. Memorandum From the Deputy Secretary of State Designate (Christopher) to President Carter 1

SUBJECT

  • Proposed Regulation to Control Arms Sales Promotion by U.S. Firms

This memorandum describes a regulation under consideration within the Department of State to require U.S. firms promoting international arms sales to obtain our approval before making significant sales proposals. Your approval is requested for the publication of a notice inviting public comment on the proposed regulation.

Present Controls

U.S. arms transfers take place through two main channels—government-to-government sales and direct commercial sales by United States firms. Government-to-government foreign military sales (FMS) are made in response to requests received from a foreign government. The FMS program is administered by the Department of Defense under the direction and supervision of the Department of State. A license from the Department of State is required for the export of military equipment or technology which is sold commercially.

U.S. firms engaged in the manufacture and sale of military equipment are involved in widespread marketing efforts to sell their products abroad. These marketing efforts are subject to U.S. Government control only to the extent they include the export of demonstration models or of military technology for which an export license is required. Companies frequently consult with the Departments of State and Defense to ensure against conflict with United States policy and to avoid the expense of promoting sales which will ultimately be disapproved. However, we have no assured involvement in an arms sale until the foreign government makes a request under the government-to-government FMS program or we receive a license application for the export of items for which a commercial sales contract has been signed. At that point, where the foreign purchaser has already been persuaded that it needs the items in question, it is often more difficult to achieve restraint. Refusal to sell under FMS or denial of an export license to [Page 640]carry out a commercial sale can give offense to a friendly foreign government and may result in a sale of comparable items by some alternative supplier.

Under the present regulations, a U.S. firm has the option of seeking our advice before it begins an effort to market its product in a given country or of proceeding without consultation in the hope that the expressed desires of the purchasing country will help to secure the required U.S. approval.

Proposed Controls

The new regulation we are considering would require the Department of State’s approval before a proposal, recommendation or presentation is made which is designed to induce a decision to purchase significant combat equipment valued at $7 million or more. The regulation would describe the kinds of activity that would require such approval. (The items which constitute significant combat equipment are identified in the present regulations.) A similar prior approval requirement would be established for proposed agreements to produce, assemble or maintain significant combat equipment in a foreign country. This would formalize and make mandatory the informal consultation that now precedes many, but by no means all, major arms sales promotion initiatives.

Procedures

A preliminary draft of the proposed regulation was circulated to the directly affected companies and to industry associations in December. The text has been substantially revised to take into account the initial industry reactions. The next step in the rulemaking procedure would be to publish the revised draft in the Federal Register with an invitation for public comment. The published notice would also announce a public meeting, following a thirty-day period for written comments, at which members of the public could express their views orally to the responsible officials of the Departments of State and Defense.

In light of the comments received from the public, we could adopt the regulation, with or without change; we could begin again with a new text if it appeared substantial revision was required; or we could abandon the proposal.

A notice of proposed rulemaking has been prepared for publication in the Federal Register. A copy is attached.2 I favor proceeding with this proposal because it could provide a valuable tool for the enforcement of policies developed to restrain the further proliferation of [Page 641]conventional arms. The Department of Defense and the Arms Control and Disarmament Agency also support the adoption of a regulation along these lines. The staffs of the concerned Congressional committees have told us they believe the regulation would be well received in Congress.

Other Pending Actions

Two other regulatory amendments are pending. One, designed to change the definition of significant combat equipment with respect to military electronics, has been published as a proposed rule. Written comments have been received and a public meeting was held on February 4. The other, which would institute a system of civil penalties and administrative remedies for export control violations, is ready for informal distribution to industry in advance of publication. Both of these amendments implement legislation enacted last year and are relatively uncontroversial.

Recommendation

That you authorize publication of the attached notice in the Federal Register.

  1. Source: Carter Library, National Security Affairs, Staff Material, Global Issues, Mathews Subject File, Box 3, Arms Sales: Procedures: 6/76–3/77. No classification marking. Brzezinski informed Christopher in a February 24 memorandum that he had forwarded the memorandum and the proposed regulation to Carter and said “I agree that publishing the proposed regulation at this time would be beneficial.” (Ibid.)
  2. Attached but not printed.