International Defense and Security Business Development

Report
SOUTHCOM
Total,
$75,068M, 5%
Global Military Spending 2011
AFRICOM Total,
$45,001M, 3%
CENTCOM
Total,
$131,904M, 8%
PACOM Total,
$262,861M,
16%
NORTHCOM
Total,
$762,562M,
46%
EUCOM
Total,
$367,893M,
22%
Excludes
•
•
•
•
•
•
China
Russia
North Korea
Iran
Cuba
Syria
Top 5:
• India
• Saudi Arabia
• France
• UK
• Turkey
Top 5:
• EU
• India
• GCC
• Turkey
• Korea
• Largest single long term defense equipment and services market
• Market behavior:
- Increasingly integrated decision making
- Internally harmonized military requirements
- Transnational defense and security policy
- Centralizing procurement authority
• Recommended penetration strategy:
- Create an intra-EU operating presence to become a “local”
supplier
- Consider teaming with EU multinationals
20-year trend closing this market to U.S. bidders will continue
• Market structure
- Saudi Arabia “leads”
- UAE, Qatar, Kuwait, Bahrain, Oman “follow”
• Broad characteristics
- Stable demand
- Open to U.S. companies
- Role of alliances evolving with changing aspirations
(employment, infrastructure development, economic
diversification)
• Policies and Principles
• The U.S. Foreign Military Sales Participants
- The Security Cooperation Team
- Homeland Security Special Case
• Processes
- Licensing: International Traffic in Arms Regulation and Export
Administration Regulation
- Contracting: FMS and DCS
- Congressional Oversight
o Javits Report
o AECA 36(b) and 36(c) Notification
• Offsets
• Foreign Corrupt Practices Act
“The U.S. Government views the sale, export, and re-transfer of
defense articles and defense services as an integral part of
safeguarding U.S. national security and furthering U.S. foreign
policy objectives.”
U.S. Department of State Directorate of Defense Trade Controls
Security Cooperation IS about:
• Implementing U.S. Foreign Policy
• Strengthening National Security
- Building Coalitions
- Burden Sharing
- Forward Basing
- Supporting the Combatant
Commanders
Security Cooperation IS LESS about:
• Industrial Policy
• Employment
• Economic Development
22 U.S.C. 2778 of the Arms Export Control Act (AECA) provides the
authority to control the export of defense articles and services, and charges
the President to exercise this authority.
Subchapters:
I
Foreign And National Security Policy Objectives And Restraints
II Foreign Military Sales Authorizations
II A Foreign Military Construction Sales<
II B Sales To United States Companies For Incorporation Into End Items
II C Exchange Of Training And Relate Support
III Military Export Controls
III A End-Use Monitoring Of Defense Articles And Defense Services
IV General, Administrative, And Miscellaneous Provisions
V Special Defense Acquisition Fund
VI Leases Of Defense Articles And Loan Authority For Cooperative Research And
Development Purposes
VII Control Of Missiles And Missile Equipment Or Technology
VIII Chemical Or Biological Weapons Proliferation
IX Transfer Of Certain CFE Treaty - Limited Equipment To NATO Members
X Nuclear Nonproliferation Controls
Secretary of
State
Under
Secretary for
Political Affairs
Under
Secretary for
Arms Control /
International
Security Affairs
Regional
Assistant
Secretaries
Assistant
Secretary
PoliticalMilitary Affairs
Secretary of
Defense
Under
Secretary of
Defense for
Policy
Assistant
Secretary of
DefenseInternational
Security Affairs
Defense
Security
Cooperation
Agency
“The Secretary of State provides continuous supervision and general direction for SA [Security
Assistance], including determining whether what SA programs a given country will have, as well
as their scope and content. The Secretary of Defense implements programs to transfer defense
articles and services on a government-to-government basis.”
Defense Security Cooperation Agency
•
•
CSTC-A
Combined
Security
Transition
Command–
Afghanistan
NTM-A NATO
Training
MissionAfghanistan
}
Joint Staff
Combatant
Commands
CSTC-A
NTM-A
Policy Assistant
Secretaries of
Defense
US Forces Iraq
Under Secretary of
Defense for Acquisition,
Technology, and Logistics
Office of the Defense
RepresentativePakistan
Typical
Industry Points
of Contact
Military
Services
Defense Security
Cooperation
Agency
Defense Technology
and Security
Administration
US Embassies
Security Cooperation
Organizations
Office of the
Secretary of Defense Comptroller
US Agency for
International
Development
Office of
Management and
Budget
State
Department
US Congress
Commerce
Department
US Industry
U.S. Country
Team
• Office of Defense
Cooperation
• Commercial Service
• Defense Attaché
• Counselor for Political Affairs
• Counselor for Political Military Affairs
• Counselor for Economic Affairs
Defense
Department
Military Services
• US Army Security Assistance Command (USASAC)
• Air Force International Affairs (SAF-IA)
• Navy International Programs Office (Navy IPO)
Combatant Commands
•
•
•
•
Defense Technology and
Security Administration
• Licensing Directorate
• International Security Directorate
Commerce
Department
• Export Advocacy Center
• Bureau of Industry and
Security (Licensing)
State Department
• Bureau of Political Military
Affairs
J3 Director Operations
J4 Director Logistics
J5 Director Strategic Plans & Policy
J7 Director Operational Plans and Joint Force
Development
• J8 Director Force Structure, Resources and Assessment
• Office of International Security Operations (PM/ISO)
• Directorate of Defense Trade Controls (DDTC)
(Licensing)
State Department International Traffic in Arms
Regulations
Commerce Department Export Administration
Regulations
Executive Order 11958, as amended, delegated this AEC
statutory authority to the Secretary of State. The
International Traffic in Arms Regulation (ITAR) implements
this authority.
The Bureau of Industry and Security develops, implements
and interprets U.S. export control policy for dual-use
commodities, software, and technology through Export
Administration Regulations codified at Title 15 of the Code
of Federal Regulations Parts 730 through 774. (Dual-use
items subject to BIS regulatory jurisdiction have
predominantly commercial uses, but also have military
applications.)
Parts:
120 Purpose and Definitions
121 The United States Munitions List
122 Registration of Manufacturers and Exporters
123 Licenses for the Export of Defense Articles
124 Agreements, Off-Shore Procurement and Other
Defense Services
125 Licenses for the Export of Technical Data and
Classified Defense Articles
126 General Policies and Provisions
127 Violations and Penalties
128 Administrative Procedures
129 Registration and Licensing of Brokers
130 Political Contributions, Fees and Commissions
Key Regulatory Areas
•
High Performance Computers
•
Encryption
•
Deemed Exports
•
Antiboycott Regulations
•
Regional Considerations
•
Multilateral Export Regimes
•
Technical Advisory Committees
•
Wassenaar Arrangement
Is a License
Required?
Is this
an
Export
?
YES
ITAR – International Traffic
in Arms Regulation
EAR – Export
Administration
Regulation
USML - U.S. Munitions List
CCL – Commerce Control
List
Action Steps:
Defense
Article or
Service?
On the
CCL
(“dual
use”)?
YES
YES
ITAR: State
Department
Directorate
of Defense
Trade
Controls
State Department
• DTrade website (for
nearly all applications)
http://www.pmddtc.state
.gov/DTRADE/index.ht
ml
EAR:
Commerce
Department
Bureau of
Industry and
Security
Commerce Department
• Simplified Network
Application Process
Redesign (SNAP-R)
website
http://www.bis.doc.gov/s
nap/index.htm
Secure qualified export compliance counsel, and
Register with online licensing sites as required
Sending or taking a defense article out of the United
States; transferring registration, control or
ownership to a foreign person of any aircraft,
vessel, or satellite covered by the U.S. Munitions
List, whether in the United States or abroad;
Disclosing or transferring any defense article to an
embassy, any agency or subdivision of a foreign
government (e.g., diplomatic missions) in the U.S.;
or (disclosing or transferring technical data to a
foreign person, whether in the United States or
abroad; or performing a defense service on
behalf of, or for the benefit of, a foreign person,
whether in the United States or abroad.
Caution!
Examples of unintended exports:
• Technical data posted to a web site
• Technical data attached to an email
Out of
the
Country?
YES
It’s an
Export
To a
Foreign
Person?
YES
Foreign Person Any natural person who is not a U.S. citizen, or an
alien who is lawfully admitted for permanent residence, or certain
persons admitted temporarily. Any foreign corporation, business
association, partnership, trust, society or any other entity or group
that is not incorporated or organized to do business in the United
States. International organizations, foreign governments and any
agency or subdivision of foreign governments (e.g diplomatic
missions).
U.S. Person A natural person who is a U.S. citizen, or is an alien who
is lawfully admitted for permanent residence, or certain persons
admitted temporarily. Any corporation, business association,
partnership, society, trust or any other entity, organization or group
that is incorporated to do business in the United States. Any U.S.
governmental (federal, state or local) entity.
Defense Article or Service (a) Is specifically designed, developed,
configured, adapted, or modified for a military application, and (i)
Does not have predominant civil applications, and (ii) Does not
have performance equivalent (defined by form, fit and function) to
those of an article or service used for civil applications; or (b) Is
specifically designed, developed, configured, adapted, or modified
for a military application, and has significant military or intelligence
applicability such that control under § 120.3 is necessary.
Caution!
Definitions can be
confusing, so get expert
compliance advice
Public Domain Information which is published and which is
generally accessible or available to the public through
sales at newsstands and bookstores, through
subscriptions which are available without restriction to any
individual who desires to obtain or purchase the published
information; through second class mailing privileges
granted by the U.S. Government; at libraries open to the
public or from which the public can obtain documents;
through patents available at any patent office; through
unlimited distribution at a conference, meeting, seminar,
trade show or exhibition, generally accessible to the
public, in the United States; through public release in
any form after approval by the cognizant U.S.
government department or agency; through
fundamental research in science and engineering at
accredited institutions of higher learning in the U.S. where
the resulting information is ordinarily published and shared
broadly in the scientific community.
Caution!
“Leaked” information that
has not been approved by
the U.S. government for
public release is not
necessarily in the public
domain.
FMS
DCS
Nature of
Relationship
US prime contracts with US Government;
US Government contracts with customer
government
US prime contracts with customer
government
US Government
Approvals
USG approvals are identical; minor differences in export license process
Contract
Negotiation
USG negotiates, but applies relatively
inflexible FAR terms and conditions
Contractor negotiates within export license
authority
Contract
Administration
USG administers
Customer administers
Pricing
Estimated
Fixed or other pricing agreements
permitted
Support
USG usually proposes comprehensive
package
More tailoring possible
Program price
Often benefits from larger procurement
quantities; FMS case management fees
added; Non-recurring charges required by
may be waived
May benefit from more pricing flexibility;
some contractors add risk premiums; no
FMS case management fees; Non-recurring
charges not required
Through Life
Logistics Support
Provided through USG system
Contractor responsibility
Defense Institute of Security Assistance Management DISAM
Phase
(Duration)
Event
Preliminary
(Indefinite)
• Customer determines requirements
• Customer obtains specific systems information
Definition
(Indefinite)
• Customer and U.S. exchange technical information
Request
(Indefinite)
•
•
•
•
Customer prepares and submits an LOR for price
and availability (P&A) data
Customer prepares and submits LOR for
an LOA
Development of Offer
(Policy for the response to
LOR by LOA is 120 days for
80% of
LORs)
(Congressional review if
required is from 15-50 days.)
•
•
•
•
•
•
Implementing agency (IA) receives the LOR
IA develops an LOA data (LOAD)
DSCA-CWD writes LOA
DoS/DSCA/Congress review LOA
DSCA countersigns LOA
IA issues LOA to customer
Acceptance of the Offer
(Policy is 60 days to accept a
LOA)
•
•
•
•
•
Customer signs LOA
Customer sends signed copy of LOA and
initial deposit to Defense Finance Accounting
Service-Indianapolis Center (DFAS-IN)
Customer sends signed copy of LOA to IA
DISAM, Chapter 5
Javits Report
Annual, 1 February report to Congress regarding expected arms sales for the current calendar year (subject to
specified U.S. Dollar thresholds)
Arms Export Control Act Notification
36(b) FMS or 36(c) Commercial
Threshold
Days
Most customer countries
• Major defense equipment $14M
• Defense articles or services $50M
• Design and construction services
$200M
Informal- 20
Formal- 30
NATO member states, NATO, Japan,
Australia, South Korea, Israel, or
New Zealand
• Major defense equipment $25M
• Defense articles and services $100M
• Design and construction services
$300M
Informal- 20
Formal- 15
Remember to Build Congressional Notification Into Your Program Plan
“… the practice by which the award of defense contracts
by foreign governments or companies is conditioned upon
commitments from the defense contractor to provide
some form of compensation to the purchaser.” Commerce
Department Bureau of Industry and Security Definition
Common Forms
• Direct: Transactions directly related to the articles or services exported under
the sales agreement.
• Indirect: Transactions unrelated to the articles or services exported
• Multiplier: A factor applied to the actual value of certain offset transactions to
calculate the credit value earned.
• Co-production/Licensed Production: Foreign manufacture all or part of U.S.origin defense articles.
• Investment: Investment in the customer country.
• Countertrade: Procurement of items from the customer country.
• Technology Transfer: Technology concession to the customer country.
• The primary purpose is to create a favorable
political climate for a major procurement.
• The offset authority should always be
treated like a customer.
• Commitments and credits may be
denominated in currency, but are not “cash.”
• Cost-to-credit ratios vary widely by market
and offset project type
• Offset programs are expensive to
implement:
- Competitive environment may allow
offset costs to be priced
- Pricing approaches may differ between
FMS and DCS contracting methods
Caution!
Beware potentially
corrupt transactions
masquerading as offset
projects.
“The Foreign Corrupt Practices Act of 1977, as amended, 15 U.S.C. §§
78dd-1, et seq. ("FCPA"), was enacted for the purpose of making it unlawful
for certain classes of persons and entities to make payments to foreign
government officials to assist in obtaining or retaining business. Specifically,
the anti-bribery provisions of the FCPA prohibit the willful use of the mails or
any means of instrumentality of interstate commerce corruptly in furtherance of
any offer, payment, promise to pay, or authorization of the payment of money
or anything of value to any person, while knowing that all or a portion of such
money or thing of value will be offered, given or promised, directly or indirectly,
to a foreign official to influence the foreign official in his or her official capacity,
induce the foreign official to do or omit to do an act in violation of his or her
lawful duty, or to secure any improper advantage in order to assist in obtaining
or retaining business for or with, or directing business to, any person.”
http://www.justice.gov/criminal/fraud/fcpa/
•
•
•
•
•
•
•
•
•
•
•
•
Third Party refuses to certify compliance with anti-bribery or FCPA requirements
Third Party refuses to complete agent/ consultant/third party questionnaire regarding
relationship with or interests involving foreign government officials
Third Party does not appear to be qualified to perform the duties for which it is
engaged to assist your company
Third Party is related to a government official
Country has a reputation for corruption and bribery
The industry has a history of FCPA and anticorruption problems
Breakup of a company or association with one or more foreign companies is
unexplained or inadequately explained
Requests for commissions to be paid in a third party country, to a third party, or in cash
or untraceable funds
Heavy reliance by party on political or government contacts as opposed to
knowledgeable staff and investment of time to promote the Company’s interests
Refusal or inability to develop or implement a market strategy
A desire to keep third party representation secret
Relationship problems with other foreign companies
“Identification of ‘Red Flags’ for Possible Violations of Key U.S. Laws for Companies Operating Overseas,”
Corporate Compliance Insights, September 9, 2009, by Sharie Brown, partner at DLA Piper (US) LLP
Anti-Bribery Provisions
• Prohibit making a bribe or promising to give anything of value in an attempt
to influence the action or inaction of a foreign official is strictly prohibited
• This includes payments to consultants, agents, or any other intermediary
or representative when the party making the payment knows or has reason
to believe that some part of the payment will be used to bribe or influence
a foreign official
• Severe penalties may be imposed for violations of the FCPA, both against
individuals and companies
Books and Records Provisions
• Two Sets of Requirements:
- Accuracy of books and records
- Internal accounting controls
• Apply to publicly traded companies and their employees and agents
• Enforced by the SEC
Published Source: “Understanding the FCPA,” Mark Rush, K&L Gates LLP, Henry W. Oliver Building,
535 Smithfield Street, Pittsburgh, PA 15222
Action Steps:
Secure qualified FCPA compliance counsel, and
Model compliance while training your team regularly
“If you aren’t working on sales or the
things that enhance the profitability of this
company, then you are working on the
wrong things.”
Inscribed above the main employee exist at Wal-Mart Headquarters in Bentonville, Arkansas.
 Rule One – Do everything that could or should be done to win.
 Rule Six – For each significant customer, know what he thinks, how he
thinks, what sort of information is best supplied to him, understand his past,
present and future, understand where he is going and what our proposal
means to his probable future.
 Rule Seven – Every key decision maker needs a champion to lead the way
and do his work for him.
 Rule Ten – Staff marketing strong enough to stand up to senior executives,
program managers, engineering and others who command respect… Totally
self-motivated and self-reliant.
 Rule Eleven – Engineering should engineer, manufacturing should
manufacture, marketing should sell
 Rule Twenty-one – Ultimately present a proposal with a competitive price
from which you are the logical winner.
GUNNSIGHTS: Taking Aim on Selling in the High Stakes Industry of International Aerospace
“The Best Listener Wins”

similar documents