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Update: Export Controls Kachajian's Revenge
 

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Finally, in one of the longest reenactments of David and Goliath on record, "Kachajian's Rebellion" (INC., October 1986) has brought reward to the just.

On the morning of March 17, George Kachajian learned that the U.S. Department of Commerce had officially overturned the export restrictions that had nearly destroyed his company, Silicon Technology Corp. (STC). Anxiously waiting in a Moscow hotel room when the news arrived, he first danced a jig and then, a few hours later, sold $130,000 worth of previously banned equipment to a Soviet semiconductor manufacturer. "It's given me new life," says Kachajian of the recent ruling. "Yes, that's it -- new life."

When we left Kachajian last fall his prognosis was far less hopeful, though he (and STC) had almost completed an agonizing convalescence from the astonishment that in 1980 nearly floored him. That year, without warning, Commerce Department authorities told him he could no longer sell his only product -- an internal-diameter silicon wafering saw -- to a crucial market, the countries of the Eastern Bloc. There, officials said, it could be used to manufacture things that might conceivably jeopardize U.S. national security. Then the other shoe fell when a Swiss competitor invaded Kachajian's Western markets with cut-rate prices underwritten by its Eastern Bloc monopoly profits.

Battered but belligerent, Kachajian set out on a seven-year jihad to restore sanity to export controls. His saws had about as much secret high-tech content as "glorified salami slicers," he said. And besides, he continued, there were provisions in existing regulations of the Export Administration Act that exempted products such as his by virtue of their "foreign availability" to Eastern Bloc countries from other manufacturers, namely the price-slashing Swiss. Kachajian carried his pleas for relief to senators, representatives, and all manner of bureaucrats high and low -- over and over, letter after letter, phone call after phone call. In the process, Kachajian touched off such a fierce squabble between the Commerce Department (voting for him) and the Defense Department (voting strongly against) that his case ultimately required a judgment by the National Security Council itself, which on May 15, 1986, decided in his favor.

Even so, there were to be many more months of anxiety ahead as Kachajian waited for yet another ruling, this time from the Coordinating Committee for Multilateral Export Controls (COCOM), a regulatory body headquartered in Paris that coordinates export controls among the United States and its NATO allies. COCOM's deliberations, which Kachajian had expected to take place in the fall, did not occur until December. Given translation and other procedural delays, the formal ruling allowing him access once again to Eastern Bloc markets did not reach him in Moscow until St. Patrick's Day.

But if relief was slow in coming, its effects have been swift. Kachajian's backlog of orders has doubled since March, and recently he left for Warsaw to wind up negotiations for a huge sale of 30 saws. Meanwhile, back home, his personnel office has been open on weekends to interview the new employees that the company's revivified future now requires.

Although Kachajian has made history as the first instance of export decontrol under the foreign-availability provision of the Export Administration Act, the future applicability of that provision remains questionable. Paul Freedenberg, assistant secretary of commerce for trade administration, views Kachajian's successful campaign as a "major precedent-setting case that shows these things could be done on a regular basis." As a result, Freedenberg confidently predicts that several other foreign-availability cases will be settled during the next year, including a major break-through on minicomputers. But down in the pits, where the hand-to-hand fighting is going on, the differences of opinion between Defense and Commerce are still viewed as substantial obstacles to progress. "It [Kachajian's case] did help to establish a procedure for the U.S. government through COCOM," says Anatoli Welihozkiy, a representative of the Commerce Department's Office of Foreign Availability, "but the interagency relations are still just as difficult. It hasn't changed that." How the Defense Department feels is anybody's guess. Presumably Kachajian's victory has dulled the department's appetite for public comment. Several calls to the formerly cooperative Stephen Bryen, deputy undersecretary for trade security policy, elicited no response whatsoever.

Kachajian himself thinks his victory "sticks out like a sore thumb" and that decisions in other cases will be few and "agonizingly slow." Although he may take to the hustings once again, at the moment Kachajian is preoccupied with harvesting sales, the fruits of his long hegira. In addition, he has at last taken time out to heal an old battle wound. About a year ago, as if to symbolize STC's plight, the letters announcing the company's name above the front door of its Oakland, N.J., headquarters broke in the middle. Now, Kachajian is getting them fixed.

Last updated: Aug 1, 1987




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