“HTCG Dialogue on Defense Technology, Data Privacy, and Export Licensing”
A Public-Private Forum Under the Auspices of the U.S.-India High Technology Cooperation Group
November 18, 2004
Summary of Proceedings
Prepared by the U.S.-India Business Council
On November 18, 2004, the United States and India convened in Washington, D.C the “HTCG Dialogue on Defense Technology, Data Privacy, and Export Licensing,” the fourth public-private forum held under the auspices of the U.S.-India High Technology Cooperation Group (HTCG). The half-day forum featured discussions on expanding business opportunities in the areas of defense technology and information technology, and culminated in a set of joint recommendations by the U.S. and Indian private sector participants to the U.S. and Indian Governments. The event also included a session on various aspects of the U.S. export licensing process.
Under Secretary of Commerce for Industry and Security, Kenneth I. Juster opened the event by thanking the various trade associations – the Confederation of Indian Industry (CII), the Federation of Indian Chambers of Commerce and Industry (FICCI), the National Association of Software and Service Companies (NASSCOM), and the U.S.-India Business Council (USIBC) – for organizing the forum; the Indian delegation for making the trip to Washington; and Under Secretary of Commerce for Technology Phillip Bond and Indian Foreign Secretary Shyam Saran for their demonstrated commitment to promoting U.S.-India high technology trade. Juster noted how far the United States and India have come from the formation of the HTCG in November 2002 to the announcement of the conclusion of Phase I of the Next Steps in Strategic Partnership (NSSP) initiative in September 2004. He also highlighted the increase in U.S.-India trade, as well as the increase in approval rates for export licenses to India, over the last several years. Finally, Juster emphasized the importance of this type of forum for shaping policy areas that have an impact on bilateral high-technology trade. He expressed the hope that the forum would help to change old mindsets, institutionalize habits of cooperation, deepen commercial ties, and strengthen the overall relationship between the United States and India.
Foreign Secretary Shyam Saran noted that the HTCG is a unique U.S.-India process in which no other two countries are engaged. He indicated that this forum takes place at a time of growing high technology trade and follows several months of very broad and intense U.S.-India interaction, including the September 2004 meeting between President Bush and Prime Minister Singh, and the conclusion of Phase I of the NSSP. He reiterated the considerable interest in the HTCG process on the part of both governments and both private sectors. Foreign Secretary Saran indicated that biotechnology and nanotechnology remain key areas for the HTCG, and although not specifically addressed during the public-private forum, these topics would be discussed in the November 19, 2004 government-to-government talks. Foreign Secretary Saran suggested that, in order to make a real difference in high technology trade, the Government of India must engage in continuous consultations with Indian industry. In addition, bilateral HTCG meetings must become more regular with greater advance notice. Finally, Foreign Secretary Saran thanked Under Secretary Juster and the industry organizations for hosting the forum.
Under Secretary Bond welcomed the participants, including Foreign Secretary Saran, and reiterated the U.S. Department of Commerce’s commitment to the high technology dialogue led by Under Secretary Juster. Under Secretary Bond opined that technology and innovation are the keys to competitiveness, economic growth, and prosperity, and present opportunities for international cooperation. But he cautioned that these opportunities come with challenges and responsibilities that, in turn, require critical attention. Bond suggested that bilateral trade is a tide that lifts all boats and that the HTCG continues in the spirit of Thomas Jefferson who sought “peace, commerce and honest friendship” with all nations. Finally, Under Secretary Bond characterized the forum as an opportunity to tap private sector expertise and input.
Defense Technology Roundtable
- Moderator: Mr. Claudio Lilienfeld, Director for South Asian Affairs, Office of the Under Secretary of Defense for Policy, U.S. Department of Defense
- U.S. Industry Co-Chair: Mr. Allan Tarkenton, Senior Vice President, Government and Defense Relations, General Electric
- Indian Industry Co-Chair: Mr. N. Srinivasan, Director General, CII
During the event’s defense technology roundtable discussion, participants reviewed U.S. and Indian government policies concerning defense cooperation and procurement, as well as issues confronting U.S. companies interested in the Indian market and Indian companies looking to purchase defense technologies from American companies. The following is a list of the issues raised during the discussion, without any attempt to reconstruct the entire session or to attribute remarks to specific individuals. The recommendations developed by industry participants for the U.S. and Indian governments on how to expand cooperation in defense technology are summarized later in this document.
- United States-India defense cooperation dates back to the 1950s when the two countries engaged in joint exercises along with the British and Australians. In 1984, India and the United States signed a Memorandum of Understanding on sensitive technologies.
- Defense cooperation, beginning with the first meeting of the revived Defense Policy Group (DPG) in December 2001, has “led the charge” in accelerating the overall U.S.-India relationship during the past several years. The DPG’s Joint Technical Group has met six times to date, and the DPG’s Security Cooperation Group is scheduled to meet for the fifth time in December 2004. In addition, Lt. Gen. Kohler, head of the Defense Security Cooperation Agency (DSCA), U.S. Department of Defense recently visited India to discuss further cooperation.
- Old mindsets remain powerful and more work, interaction, and information is required to change them. For example, public and private sector Indian participants expressed concerns about the reliability of U.S. suppliers, including product and lifetime support, based on their past experiences with U.S. sanctions.
- The Government of India’s defense policy is changing. New defense procurement policies and bodies (e.g. the Defence Procurement Board) are in place. The GOI increased the threshold for foreign direct investment in the Indian defense sector (up to 26%) in May 2001. The Kelkar Committee is in the process of formulating policy recommendations (due in early 2005) to govern Indian private sector involvement in the defense area, with the intent of encouraging greater public-private engagement and collaboration. It is expected that such engagement would also provide new opportunities for foreign firms.
- The Indian defense industry is changing by becoming more competitive, more productive, and more efficient. Some participants suggested that India should be recognized not only as a burgeoning market, but also as a potential research and design source, a potential supplier of components and sub-systems, and a potential partner for joint exports to third countries.
- The U.S. Department of Defense pursues international armaments cooperation to reduce the cost to the U.S. Government of acquiring systems by tapping into technology from other countries, to promote interoperability, and to bolster strategic alliances and friendships. While this program has not yet led to concrete projects between the United States and India, the February 2004 signing of a U.S.-India Master Information Exchange Agreement and the current negotiation of a Master Research, Development, Testing, and Evaluation Agreement is expected to lay the groundwork for greater Indian participation in the Foreign Comparative Testing Program, acquisition and servicing agreements, and personnel exchanges. The Indian participants expressed interest in learning more about how such agreements could be translated into tangible actions and programs.
- Participants suggested that a major cooperative project is necessary to “force” the U.S. and Indian government gears to mesh. They indicated that just creating opportunities for industry is not enough because cooperation is not yet the default position.
- U.S. defense companies need to put people on the ground in India, include technology transfer/co-production/licensing as a component of any bid, collaborate with Indian industry, utilize the Foreign Military Sales (FMS) route, and simultaneously pursue both “small” opportunities as well as major platform tenders. The U.S. defense companies face significant competition to satisfy Government of India defense requirements, and may not always offer the most advanced technology.
- Several American participants suggested that there may be greater opportunities for technology transfer/co-production/licensing with legacy rather than next generation systems.
- Indian participants requested more industry-to-industry outreach, and several participants indicated a willingness and availability to consult with their American counterparts.
- Indian participants also expressed interest to better understand U.S. Government defense requirements, and to access opportunities to supply components and sub-systems to the U.S. military.
- Indian participants also expressed confusion about U.S. export licensing processes. They requested greater clarity on the implications of being a “friendly foreign country,” one-time vetting of Indian buyers of U.S. equipment, and a clear negative list of items requiring a license. Several Indian participants indicated that because of the perceived complexity and delays of the U.S. export licensing regime, some Indian firms avoid purchasing from U.S. suppliers if possible.
- There is a disconnect, most notably in terms of timing, between Indian requests for proposals (RFPs) and U.S. export licensing processes.
Data Privacy Roundtable
- Moderator: Mr. Benjamin Wu, Deputy Under Secretary for Technology, Department of Commerce
- U.S. Industry Co-Chair: Mr. Rick Rossow, Director, USIBC
- Indian Industry Co-Chair: Mr. Richard Garnick, Chief Executive—Americas & EAS, Wipro Technologies
During the Data Privacy Roundtable, participants discussed various approaches to protecting data as well as India’s existing regulatory and legal framework for data privacy. The following is a list of the issues raised during the discussion, without any attempt to reconstruct the entire session or to attribute remarks to specific individuals. The recommendations developed by industry participants for the U.S. and Indian governments concerning data privacy are summarized later in this document.
- The U.S. and Indian private sectors have been sharing information on data privacy issues for nearly two years.
- The U.S. and Indian governments have not previously raised privacy regulation as a major topic for bilateral discussion, so the privacy forum at the HTCG broke new ground. Some participants thought that further government-to-government discussions on this subject would be helpful, especially given the number of bills concerning IT services currently pending in U.S. local, state, and federal legislatures.
- Along with cyber security, data privacy is one of the key legal underpinnings for the development of a vibrant IT-enabled services market.
- U.S. and Indian participants agreed that both sides had an equal stake in the issue of data privacy regulation since more than 80% of India’s IT-enabled service exports go to the United States.
- Both sides acknowledged that much of the legislation in the United States that attempts to control cross-border services now focuses on questions of data privacy and cyber security regimes abroad.
- Several American industry participants recognized that there is a perception problem among U.S. officials and businesses with regard to the adequacy of India’s data privacy regime, and expressed their view that India's legal system provides significant protections for data. Nevertheless, they indicated that it was necessary for India to enhance its data privacy framework to meet fully the requirements of U.S. businesses operating in India or working with companies in India.
- American participants reiterated their desire that India not attempt to adopt European Union-style privacy legislation, as its restrictive nature would cause many American companies to send data service work to markets other than India.
- Indian participants requested that U.S. participants become more active in relaying their views on India’s privacy laws to U.S. legislators.
- American participants expressed an interest in greater Government of India and Indian industry involvement in privacy and other information technology discussions at the OECD, APEC, and other multilateral forums.
- Indian participants indicated that the Government of India, in consultation with the private sector, was reviewing some targeted amendments to the Information Technology Act in order to better define privacy crimes and to strengthen penalties for such crimes.
- American participants asked to be consulted in the process of amending the Information Technology Act, since many experts are working with model language in other international forums and can provide valuable insights.
- Indian participants expressed an interest in learning more about their compliance obligations under Gramm Leach Bliley, HIPPA, and other U.S. laws.
- American participants promised to deliver a more substantive briefing to their Indian counterparts on U.S. privacy laws, as well as the privacy laws being developed in the OECD, APEC, and other multilateral forums, at a program to be organized in India in 2005.
Export Licensing Session
- U.S. Industry Co-Chair: Mr. Pete Martinez, Vice President, International Programs, Raytheon
- Indian Industry Co-Chair: Dr. Amit Mitra, Secretary General, FICCI
During the Export Licensing Session, participants discussed the U.S. licensing process and requirements for exports of both dual-use and munitions items. The following is a list of the issues raised during the discussion, without any attempt to reconstruct the entire session or to attribute remarks to specific individuals. The bulk of the session consisted of presentations by Ann Ganzer, Director, Office of Defense Trade Controls Policy, Bureau of Political-Military Affairs, U.S. Department of State, and Steven Goldman, Director, Office of Nonproliferation and Treaty Compliance, Bureau of Industry and Security, U.S. Department of Commerce. Given the information sharing nature of the session (with government disseminating information to and taking questions from industry), there was no development of private sector recommendations.
- The U.S. Department of State administers controls on munitions items and the U.S. Department of Commerce administers controls on dual-use items.
U.S. Department of State
- The definition of an “export” includes shipments out of the U.S., disclosing/transferring of technology in the U.S. or abroad, the provision of defense services in the U.S. or abroad, and intangible transfers such as emails, phone calls, or faxes.
- The U.S. Department of State’s goals and responsibilities derive from the President’s National Security Strategy. The mission of the Directorate of Defense Trade Controls (DDTC) within the U.S. Department of State is to “advance national strategic objectives and U.S. foreign policy goals through the timely enforcement of defense trade controls and the formulation of defense trade policy.”
- DDTC works under the Arms Export Control Act, the International Traffic in Arms Regulation (ITAR), and the U.S. Munitions List and is subject to significant Congressional oversight. For cases involving India, DDTC is required to notify Congress of all sales of greater than $50 million, as well as all sales of “major defense equipment” greater than $14 million. If Congress does not pass a Joint Resolution objecting to a sale within 30 days, then it is approved. DDTC does not notify when Congress is not in session and this can cause delays in the issuance of export licenses, which must be factored into planning.
- In making licensing decisions, the DDTC considers the eligibility of the U.S. company to export, the intended end user, and the intended end use. It also assesses the impact of the transaction on U.S. national security and U.S. foreign policy interests (including regional stability, multilateral control regimes, and human rights).
- DTC licenses include the DSP-5 (a permanent export of an item), DSP-73 (a temporary export), the TAA (technical assistance agreement, which permits a U.S. company to exchange information with a foreign company), and the MLA (manufacturing license agreement, which permits the export of manufacturing know-how).
- License applications can be approved, approved with provisos, denied, or returned without action.
- Processing times for license applications are available at www.pmdtc.org. Applications that require consultation with other U.S. agencies require more time to process.
- DDTC tries very hard not to send mixed signals. While in no way a guarantee of approval for final export, the approval of a marketing license or TAA early in the process is a good sign that, if the facts do not change, the ultimate export may be approved.
U.S. Department of Commerce
- Clauses imposing time limits on obtaining export licenses included in some recent contracts with Indian firms are problematic because the clauses may not provide sufficient time for the U.S. government to make a licensing determination, and U.S. companies have little control over the length of the export licensing process.
- Dual-use items are defined as those with both: (1) a legitimate civil use; and (2) a potential military use.
- The U.S. Department of Commerce administers the Export Administration Regulations (EAA), which includes the Commerce Control List (CCL).
- Dual-use items on the CCL are controlled for national security (NS), nuclear proliferation (NP), missile technology (MT), chemical/biological (CB), regional stability (RS), and anti-terrorism (AT) reasons.
- Depending on the reason for control of the item and the country of destination, a license may be required for an export.
- A license exception may be available depending on the nature of the transaction and the country to which the technology is being exported.
- All dual-use items not specifically listed on the CCL are categorized as EAR99 items, which generally do not require a license for export to most destinations.
- Licenses for export from the U.S. Department of Commerce are subject to certain conditions specified on the license. At a minimum, the export license is only for the end-use specified.
- In most cases where applications are returned without action, it is because no license is required. Applications returned without action always include an explanation as to why such action was taken.
- The “entities list” of organizations to which dual-use exports are restricted is available at www.bis.doc.gov/entities/default.htm. The number of Indian entities on the list has been significantly reduced.
- There are currently no sanctions that apply to India and a very small percentage of U.S. trade with India requires a license prior to export.
Private Sector Recommendations
- We urge the U.S. and Indian governments to continue with the pace and intensity of their bilateral engagement, both at the broadest strategic levels and in the specific area of high technology trade and cooperation.
- We will constitute a bilateral Defense Industry Working Group to address the following five key areas:
- Identify two to four defense programs of mutual benefit to the Government of India, the U.S. Government, and the Indian and American private sectors. For these specific programs, we will identify the key hurdles to Indo-U.S. cooperation, as well as specific ways to accelerate the required government processes on both sides.
- Provide greater clarity to U.S. industry regarding the Government of India Ministry of Defence procurement processes. Exact formats to achieve this outcome will be formulated by the Working Group.
- Provide greater clarity to Indian industry regarding the U.S. Government’s export licensing regime. Exact formats to achieve this outcome will be formulated by the Working Group.
- Create a mechanism to enable Indian industry to better understand U.S. Government defense requirements, to participate in joint research and development, and to access opportunities to supply components, sub-systems and systems to the U.S. military.
- Provide opportunities for industry-to-industry contact, relationship building, and commercial partnering between U.S. and Indian companies.
- We request that the U.S. and Indian governments each identify a specific point of contact to interface with this bilateral Defense Industry Working Group, and to act as a conduit to other government officials and resources.
- We believe that high technology cooperation must be treated not only one or two times per year under the auspices of an official dialogue, but on a more continuous basis. To this end, we would like to consider scheduling defense-related high technology cooperation meetings in conjunction with other industry events, and request that the governments make the appropriate officials—including the points of contact for the bilateral Defense Industry Working Group—available to participate in these periodic meetings.
- We will organize a full set of briefing materials on India’s data privacy and cyber security rules, industry best practices, and case notes on successfully prosecuted cyber crimes.
- We will use this core document to educate relevant state and national governments and consumers in both the U.S. and India about India’s existing data privacy protections.
- We would like India’s foreign partners to have a more formal role in reviewing potential amendments to India’s privacy laws prior to their introduction to Parliament. U.S. companies have as much stake in such laws as their Indian partners, and U.S. companies rarely have privacy professionals situated in their India operations.
- We urge both government and private sector privacy experts in the U.S. to keep their Indian counterparts better informed and more engaged in privacy discussions in multilateral forums such as APEC, the OECD, and the EU.
- We will organize a data privacy forum in India in 2005, focusing on international privacy standards, industry best practices, and compliance with U.S. privacy law (HIPAA, Gramm-Leach-Bliley, etc.).
- We will begin to develop a media plan to inform U.S. industry, likely through trade publications, about India’s current data privacy regime.
- We will share and develop best practices for internal privacy regulation.
Links to Presentations
The following presentations made at the November 18, 2004 HTCG Dialogue on Defense Technology, Data Privacy, and Export Licensing are available to the public:
- Mr. Serge Buchakjian, Vice President—International, Honeywell
- Dr. Anup Chatterjee, Director (International Cooperation), Defence Research & Development Organization (DRDO), Ministry of Defence, Government of India
- Mr. Martin Ischinger, International Program Manager, Office of the Under Secretary of Defense for Acquisition, Technology and Logistics, U.S. Department of Defense
- Mr. Claudio Lilienfeld, Director for South Asian Affairs, Office of the Secretary of Defense, U.S. Department of Defense.
- Lt. General (retired) S.S. Mehta, Principal Advisor, CII
- Mr. Joseph Alhadeff, Vice President and Chief Privacy Officer, Oracle
- Ms. Ann Ganzer, Director, Office of Defense Trade Controls Policy, Bureau of Political-Military Affairs, U.S. Department of State
- Mr. Steven Goldman, Director, Office of Nonproliferation and Treaty Compliance, Bureau of Industry and Security, U.S. Department of Commerce
- Dr. Amit Mitra, Secretary General, FICCI
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