2011-12628. Statutory Debarment and Reinstatement of BAE Systems plc

ACTION:

Notice.

SUMMARY:

Notice is hereby given that the Department of State, acting pursuant to section 127.7(c) of the International Traffic in Arms Regulations (“ITAR”) (22 CFR Parts 120-130), imposed a statutory debarment on BAE Systems plc (“BAES”) as a result of its conviction of conspiracy (18 U.S.C. 371) to violate certain provisions of U.S. law, including section 38 of the Arms Export Control Act, as amended, (“AECA”) (22 U.S.C. 2778) and at the same time reinstated BAES. Concurrently, pursuant to section 126.7 of the ITAR, the Department of State is providing notice of a presumption of denial (also referred to as a policy of denial) regarding certain of BAES' non-U.S. subsidiaries because of their substantial involvement in activities related to the conviction. These non-U.S. subsidiaries are: BAE Systems CS&S International, Red Diamond Trading Ltd., and Poseidon Trading Investments Ltd.

DATES:

Effective Date(s): May 16, 2011.

FOR FURTHER INFORMATION CONTACT:

Office of Defense Trade Controls Compliance, Bureau of Political-Military Affairs, Department of State [phone].

SUPPLEMENTARY INFORMATION:

Section 38(g)(4) of the AECA, 22 U.S.C. 2778(g)(4), prohibits the Department of State from issuing licenses or other approvals for the export of defense articles, including technical data, or defense services where the applicant, or any party to the export, has been convicted of violating certain statutory provisions, including provisions of the AECA, and conspiracy (18 U.S.C. 371) to violate the AECA. The statute permits limited exceptions to be made on a case-by-case basis. In implementing this provision, section 127.7(c) of the ITAR provides for a “statutory debarment” of any person who has been convicted of violating or conspiring to violate the AECA. Persons subject to a statutory debarment are prohibited from participating directly or indirectly in the export of defense articles, including technical data, or in the furnishing of defense services for which a license or other approval is required. Statutory debarment is based solely upon conviction in a criminal proceeding, conducted by a court of the United States, and as such the administrative debarment procedures outlined in Part 128 of the ITAR are not applicable.

On March 2, 2010, the United States District Court in the District of Columbia, filed judgment against BAES for conspiracy to violate, inter alia, the AECA and the ITAR, in violation of section 38 of the AECA and parts 127 and 130 of the ITAR. Notice is hereby given that, pursuant to section 38(g)(4) of the AECA and section 127.7(c) of the ITAR, BAES, headquartered in Farnborough, England, in the United Kingdom of Great Britain and Northern Ireland, was statutorily debarred on May 16, 2011, but that in accordance with section 38(g)(4) of the AECA and section 127.7 of the ITAR, and in conjunction with a Consent Agreement between the Department and BAES, the statutory debarment was concurrently rescinded. Ineligible status and statutory debarment may be terminated after consultation with other appropriate U.S. agencies, after a thorough review of the circumstances surrounding the conviction, and a finding that appropriate steps have been taken to mitigate any law enforcement concerns. The Department of State reviewed the circumstances and consulted with other appropriate U.S. agencies, and determined that BAES took appropriate steps to address the causes of the violations and to mitigate any law enforcement concerns.

Further notice is hereby given that the Department of State, pursuant to section 38 of the AECA and section 126.7 of the ITAR, imposed on May 16, 2011 a policy of denial on the following BAES' non-U.S. subsidiaries: BAE Systems CS&S International, Red Diamond Trading Ltd., and Poseidon Trading Investments Ltd., including their divisions and business units, and successor entities. This means that there will be an initial presumption of denial for all applications for licenses and other approvals involving these subsidiaries unless upon case-by-case review the Department determines that it is in the foreign policy or national security interests of the United States to provide an approval. Section 126.7(a) of the ITAR provides that any application for an export license or other approval under the ITAR may be disapproved, and any license or other approval or exemption granted may be revoked, suspended, or amended without prior notice, in part, whenever: (1) An applicant or any party to the export or the agreement has been convicted of violating any of the U.S. criminal statutes enumerated in section 120.27 of the ITAR, which include the AECA; (2) the Department of State believes that 22 U.S.C. 2778, any regulation contained in the ITAR, or the terms of any U.S. Government export authorization has been violated by any party to the export or other person having a significant interest in the transaction; or, (3) whenever the Department of State deems such action to be in furtherance of world peace, the national security or the foreign policy of the United States, or is otherwise advisable. All new applications for licenses or other approvals to which BAE Systems CS&S International, Red Diamond Trading Ltd., and Poseidon Trading Investments Ltd., including their divisions and business units, and successor entities are a party will be reviewed consistent with this presumption of denial.

Exceptions, also known as “transaction exceptions,” may be made to the policy of denial on a case-by-case basis. However, such a “transaction exception” would be granted only after a full review of all circumstances, and paying particular attention to the following factors: whether an exception is warranted by overriding U.S. foreign policy or national security interests; whether an exception would further law enforcement concerns that are consistent with the foreign policy or national security interests of the United States; or, whether other compelling circumstances exist that are consistent with the foreign policy or national security interests of the United States and that do not conflict with law enforcement concerns. Even if exceptions are granted, the policy of denial for BAE Systems CS&S International, Red Diamond Trading Ltd., and Poseidon Trading Investments Ltd., including their divisions and business units, and successor entities will continue until it is lifted by the Department.

This notice is provided for the purpose of making the public aware that BAE Systems CS&S International, Red Diamond Trading Ltd., and Poseidon Trading Investments Ltd., including their divisions and business units, and successor entities are under a policy of denial and are presumed not to be qualified to participate directly or indirectly in activities regulated by the ITAR except as outlined herein. This includes engaging in any brokering activities; use of exemptions by or for the benefit of the BAES non-U.S. subsidiaries listed above; and, in any export from or temporary import into the United States of defense articles, related technical data, or defense services in all situations covered by the ITAR. Notwithstanding the foregoing language, all licenses, agreements, and other authorizations involving those parties under a policy of denial issued prior May 16, 2011 are not affected and are not revoked. In the event of reorganization, the terms of the policy of denial will follow and apply to all affected entities or units.

Dated: May 16, 2011.

Andrew J. Shapiro,

Assistant Secretary of State for Political-Military Affairs, Department of State.