ponents and ancillary equipment consigned from points in Canada. to points in the United States, all of which are intended for incorporation in, or use with, the aircraft being manufactured by the Lockheed Company for the Canadian Armed Forces.

Shipments from the Canadian companies to the U.S. companies will be by commercial air or surface transportation. Ports of entry cannot be predetermined in view of the complexity of interrelationships and geographical distribution of Canadian and American subcontractors.

The period for which this blanket clearance is requested is retroactive to January 1, 1977, and up to December 31, 1981.

All shipments will be identified by the code name LONG RANGER.

It would be appreciated if a blanket clearance could be established at all ports of entry and that the Collectors of Customs be authorized to permit duty-free entry as an act of international courtesy.

Dept. of State File No. P77 0123-634.

Portions of the legal memorandum follow:

This office has carefully reviewed the... note from the Canadian Embassy. . . . We have also closely examined the underlying contracts and related arrangements between the Government of Canada and Lockheed, . . . . As a result of this review, we are satisfied that according duty-free entry treatment to such materiel under Item 842.10 of the Tariff Schedule of the United States, relating to "articles which are the property of a foreign government," would be appropriate and consistent with the requirements of U.S. law

As you are aware, Item 842.10 of the TSUS provides in pertinent part for duty-free entry "[u]pon the request of the Department of State, [for] articles which are the property of a foreign government... which, while in the United States, will remain the property of such government . . . and which will be used only in connection with non-commercial functions of such government. . . ." As the LRPA here involved will be used by the Canadian Forces in connection with the defense of Canada and that country's responsibilities as a member of NATO, the "non-commercial function" criterion is not at issue. Thus, the sole question becomes whether the items sought to be imported under Item 842.10 may properly be characterized as "property" of the Government of Canada [G.O.C.].

These items fall into either of two categories. The first is that of Canadian Government-supplied material (GSM). This comprises material bailed to Lockheed by the G.O.C. pursuant to an agreement entered into in July of last year. That agreement makes clear that the G.O.C. is "sole owner" of the GSM, that title thereto "now and at all times hereafter" remains vested in the G.O.C., that it is provided to Lockheed for purposes of the LRPA program only, and that it may not be sold, transferred or otherwise disposed of except in connection with that program. All the GSM must be returned to the G.O.C. when no longer required for purposes of the LRPA con

tract. The property interest of the G.O.C. in the GSM is virtually exclusive, and seems beyond doubt sufficient to satisfy the criteria of Item 842.10.

The second category involves those items of LRPA equipment and componentry which Lockheed is required to obtain from Canadian firms under the basic LRPA contract. These include certain specified structural components, airborne avionics, and integrated logistics support systems, with an aggregate value approximating $247 million over the life of the program. Under the scheme established by the LRPA contract, these elements are to be produced in Canada under subcontract to Lockheed, thence imported into the United States for incorporation into the finished aircraft for delivery to the G.O.C.

The equipment and componentry in this category present a somewhat different problem from the GSM in that title to these items remains in Lockheed, not the G.O.C., pending completion of the LRPA contract. However, this fact is by no means dispositive of whether the Canadian Government nevertheless has in fact a property interest sufficient to support the conclusion that the goods are the "property" of that party for the purposes of Item 842.10. In our view, the G.O.C. has such a property interest in these second category items.

The concept of title no longer plays a significant role in determining property interests under the Uniform Commercial Code (UCC), which has been enacted by 49 States as the basic law applicable to commercial transactions generally. (Although the UCC represents State, as opposed to Federal, law its virtual universality has been held to render it tantamount to "national law" in this subject matter area, to which Federal courts may look as a source of law in resolving Federal questions, United States v. Wegematic Corp., 360 F.2d 674, 676 (2d Cir. 1966). Thus, reference to the UCC is appropriate in construing Federal statutes employing concepts found in the UCC.)

In particular, section 2-501 of the UCC provides that a purchaser of goods "obtains a special property . . . interest in goods by identification of existing goods as goods to which the contract refers . . . ." It is significant in this regard that the non-GSM goods sought to be imported have been made the subject of an elaborate agreement between the G.O.C. and Lockheed. The effect of this agreement is to create a secured interest on behalf of the G.O.C. in all items identified to the LRPA contract and purchased by Lockheed from Canadian sources. This secured collateral includes, along with the equipment and componentry themselves, all contract rights of Lockheed with its Canadian subcontractors. Lockheed may not sell, transfer, assign, or otherwise encumber the secured collateral without the written consent of the G.O.C. Lockheed is also required to identify and segregate the secured collateral, and to promptly identify it to the LRPA contract.

We would regard the property interest vested in the G.O.C. by this security agreement as sufficient to constitute "property" of the G.O.C. within the meaning of TSUS Item 842.10. The manifest purpose of Item 842.10 is to insulate foreign governments from the

payment of duties on the importation of specific goods destined solely for official, non-commercial purposes. The articles in this case do not form part of Lockheed's general inventory, but are specifically identified to the LRPA contract and are in fact expressly directed by that contract to be produced in Canada for subsequent incorporation in the United States into the finished aircraft for delivery to the G.O.C. The G.O.C. has a property interest in and exercises ultimate control and direction over these articles. All benefits from duty-free treatment will accrue to the G.O.C. in the form of reduced costs for which reimbursement would be due Lockheed under the contract. (We note in this connection that the G.O.C. has itself taken the view that it is the "equitable owner" of all LRPA merchandise exported from Canada for assembly in the United States, on the reasonable ground that the bulk of the incidents of ownership are vested in the G.O.C.)

Apart from purely legal considerations, the United States has undertaken to ensure that the most favorable customs treatment possible under the law will be given to items exported from Canada in fulfillment of the LRPA contract. We are concerned that failure to accord such treatment where a reasonable construction of the governing law would so permit would be viewed by the G.O.C. as inconsistent with that undertaking.

On June 23, 1977, the U.S. Department of Commerce announced that it denied the Control Data Corporation (CDC) of Minneapolis, Minnesota, a license to export a Cyber 76 computer system to the Soviet Union for use in weather research and forecasting. The Office of Export Administration within the Commerce Department indicated that the denial pursuant to the Export Administration Act of 1969 was due to the absence of satisfactory safeguards to detect and prevent the diversion of the computer for significant military applications. The decision was reached after extensive consultation with other agencies of government, including the Departments of State and Defense and the Energy Research and Development Administration. as well as with CDC.

In a notice of rejection to CDC, Rauer H. Meyer, Director of the Office of Export Administration, explained the denial action :

Because of their significant military and military support applications, the export of computers to nations which threaten or potentially threaten our security are controlled by the United States and other Western countries that cooperate in an international system of security trade controls. Exports are permitted only when it can be satisfactorily determined that the transaction would not make a significant contribution to the military potential of those nations that would be detrimental to U.S. and Western security.

After extensive interagency review it was concluded that such a finding could not be made in this instance. The Cyber 76 is a scientifically-oriented computer that has wide uses in the United States for military research, development, and support. Its value in these activities can scarcely be overstated. Because it is far more powerful than any computer known to be available to the Soviet Union, the likelihood of diversion to military or strategic uses is of serious concern.

A special task group under the leadership of Commerce's National Bureau of Standards was convened to study the possibility of safeguarding the computer against diversion to unauthorized uses. After exhaustive examination of the problem, including consideration of specific safeguards proposed by CDC, the task group concluded that technically viable and economically feasible safeguards could not be devised. Safeguards considered adequate for the far less powerful computers previously approved for sale to the Soviet Union were found completely ineffective in the case of the Cyber 76.

U.S. Dept. of Commerce News G 77-92 (June 23, 1977).

On July 1, 1977, the U.S. Nuclear Regulatory Commission (NRC), acting through its Secretary, Samuel J. Chilk, amended its regulations effective July 8, 1977, to exempt U.S. Government agencies from the requirements for an export license for small quantities of special nuclear material intended for use in U.S. Government sponsored or cooperative activities in foreign countries. The action was taken as a result of a request from the National Aeronautics and Space Administration to export special nuclear material to the Soviet Union for use in a joint space experiment, and in order to facilitate U.S. participation in international programs pursuant to intergovernmental cooperative agreements. Portions of the NRC's notice concerning this new regulation and the regulation itself follow:

Section 57d. of the Atomic Energy Act, 42 U.S.C. 2092, authorizes the Commission to "exempt certain classes or quantities of special nuclear material or kinds of uses or users from the requirements for a license. . . when it makes a finding that the exemption

...

.. would not be inimical to the common defense and security and would not constitute an unreasonable risk to the health and safety of the public." To date the Commission has not exercised this authority.

Recently, the Commission has received a request from the National Aeronautics and Space Administration to export to the U.S.S.R. 0.65 gram of high-enriched uranium (special nuclear material) for use in a joint U.S./U.S.S.R. space experiment to take place soon pursuant to the U.S./U.S.S.R. Space Cooperation Agreements of 1972 and 1977. Under present regulations, the Commission is precluded from issuing an export license for this material because there is no agreement for cooperation with the U.S.S.R. pursuant to section 123 of the Atomic Energy Act. Recently, another export by Energy Research Development Administration to the U.S.S.R. of 2.0 milligrams of plutonium-244, for a scientific experiment with U.S. scientists participating, has been withheld in the absence of an agreement for cooperation.

Therefore, the Commission having found that the exemption will not be inimical to the common defense and security and would not

257-179 0-79-48

constitute an unreasonable risk to the health and safety of the public, has decided to exercise the authority granted under sections 53, 54, and 57d. of the Act to facilitate United States participation in international programs pursuant to intergovernmental cooperative agreements.

Accordingly, pursuant to the Atomic Energy Act of 1954, a: amended, and the Energy Reorganization Act of 1974, as amended, and Sections 552 and 553 of Title 5 of the United States Code, the following amendment to Title 10, Chapter 1, Code of Federal Regulations, Part 70 is published.

A new § 70.15 is added to read as follows:

§ 70.15 Intergovernmental cooperative activities.

Any U.S. Government agency is exempt from the regulations in this part and from the requirements for a license set forth in section 53 of the Atomic Energy Act to the extent that such agency exports up to three (3) grams of any type of special nuclear material to be used for or in support of activities authorized by intergovernmental cooperative agreements between the U.S. and a foreign nation, group of nations, or international organization, and such agency is required to notify the Nuclear Regulatory Commission of the destination and purpose of the export.

42 Fed. Reg. 35160-35161 (1977).

The United States entered into an Agreement with the Soviet Union concerning Cooperation in the Exploration and Use of Outer Space for Peaceful Purposes on May 24, 1972 (TIAS 7347, 23 UST 867; expired on May 24, 1977), and on May 11, 1977, entered into a new Agreement concerning Cooperation in the Exploration and Use of Outer Space for Peaceful Purposes (TIAS 8732; entered into force May 24, 1977).

Customs Cooperation

Revised TIR Convention

On July 26, 1977, President Carter transmitted to the Senate for advice and consent to ratification the revised Customs Convention on the International Transport of Goods under cover of Transport International Routier Carnets (TIR Convention), done at Geneva on November 14, 1975. The 1975 TIR Convention is based on the Customs Convention on the International Transport of Goods under Cover of TIR Carnets, with annexes and protocol of signature, done at Geneva on January 15, 1959 (TIAS 6633; 20 UST 184; 348 UNTS 13; entered into force for the United States on March 3, 1969).

In his July 26, 1977, transmittal message to the Senate, President Carter described the improvements contained in the revised Convention, which is designed to facilitate international transportation of goods by road vehicle and container through, inter alia, the use of an