1994 U.S.-Japan NTT Agreement

November 1, 1994

The Honorable Michael Kantor
United States Trade Representative
Office of the U.S. Trade Representative
Washington, D.C. 20506
U. S. A.

Dear Ambassador Kantor:

I refer to the arrangements on procurement by Nippon Telegraph and Telephone Corporation (NTT), which were set forth in the exchange of letters between Dr. Saburo Okita and Ambassador Reubin O'D. Askew on December 19, 1980, then supplemented and extended by the subsequent exchanges of letters between the Government of Japan and the Government of the United States, the last of which being the exchange of letters between Foreign Minister Michio Watanabe and Ambassador Carla A. Hills on December 28, 1992 (hereinafter referred to as the "arrangements"). The Government of Japan confirms that the arrangements continue in effect and anticipates that they will remain in force until September 30, 1997.

I also refer to the recent consultations between the representatives of the Government of Japan and the Government of the United States regarding the arrangements. As part of the consultations, the representatives of the two Governments discussed the areas in which the arrangements have been and can be improved. In this connection, the Government of Japan is pleased that NTT has decided to introduce improvement measures to its procurement procedures set forth in "Improvement Measures of NTT Procurement Procedures", attached to this letter. We are of the view that these improvement measures will further promote the purpose of the arrangements of achieving an open, transparent and competitive telecommunications market in Japan, and providing increased nondiscriminatory competitive opportunities to both domestic and foreign suppliers.

The Government of Japan recognizes and welcomes that NTT believes that the improvement In NTT's procurement procedures will increase access to its procurement opportunities and can lead to an increase in the foreign value and share of its procurement over the medium term. This, of course, presupposes outstanding capabilities and sales efforts on the part of many foreign firms to provide competitive products and technologies that NTT needs.

Considering that the annual meetings to review the operation of the arrangements have been useful, the Government of Japan will continue to meet annually with the Government of the United States to review the operation of the arrangements, including the attached improvements. In the annual meeting, it would be appropriate to consider, inter alia, (i) implementation of NTT's improved procurement procedures and the extent of access of foreign suppliers to NTT's procurement opportunities, (ii) efforts of foreign suppliers to utilize these procurement opportunities, and (iii) changes in the value and share of NTT's procurement from foreign suppliers.

The Government of Japan anticipates that there will be a review in 1997 concerning the treatment of the present arrangements beyond September 30, 1997. The Government of Japan also anticipates that the application of the present arrangements may be mutually reconsidered, when deemed necessary, prior to this review.

The Government of Japan and the Government of the United States will continue their discussion on procurement procedures to be adopted by NTT for resale products and conclude it as soon as possible.

Sincerely,

Yohei Kono
Minister for Foreign Affairs of Japan

The Honorable Shun Oide
Minister of Posts and
Telecommunications
3-2, Kasumigaseki, 1-chome,
Chiyoda-ku, Tokyo, 100-90 Japan

Dear Mr. Minister:

I refer to the procurement procedures of Nippon Telegraph and Telephone Corporation (NTT). It is the primary goal of procurement of NTT to enhance its competitive strength in the increasingly competitive business environment. NTT has sought to increase its access to the beat products and technologies through the introduction of procurement procedures designed to provide nondiscriminatory competitive opportunities to both domestic and foreign manufacturers since 1981. In order to increase such opportunities, NTT has improved its procurement procedures and their operations several times during the intervening years. In the meantime NTT's procurement from foreign suppliers increased from 41.4 billion yen in JFY1988 to 119.0 billion yen in JFY1993.

Because of NTT's continuing need for the most competitive products and technologies in the rapidly changing telecommunications industry, NTT has decided to introduce further improvement measures to its procurement procedures as set forth in Attachment I to this letter titled "Improvement Measures of NTT Procurement Procedures." In this connection, NTT will collect data in accordance with Attachment 2 to this letter titled "Data Collection."

NTT believes that the improvement in NTT's procurement procedures will increase access to its procurement opportunities and can lead to an increase in the foreign value and share of its procurement over the medium term. This, of course, presupposes outstanding capabilities and sales efforts on the part of many foreign firms to provide competitive products and technologies that NTT needs.

Sincerely,

Masashi Kojima
President
Nippon Telegraph and Telephone Corporation

I. Provision of Information Regarding Major Procurements

1. NTT will publish an announcement in the official gazette as early as possible in the fiscal year, and whenever possible subsequently, regarding major projected Procurements for the fiscal year.

2. The announcement will include the following:

1. General description of the products that NTT intends to procure;
2. Anticipated procurement quantity;
3. Names and addresses of contact points; and
4. Planned date of the notice of procurement, if known.

3. NTT will hold annual meeting(s) between its procurement officials and domestic and foreign suppliers, and seminars overseas, to discuss (1) information about NTT's major Procurements in the fiscal year; (2) as much as possible the future outlook and prospects of business activities which may relate to major Procurements in the longer term; and (3) as early as possible, the scope and trend of all major long term research and development, in as much detail as possible.

II. Restriction on Single Tendering

Single tendering will be used only in exceptional cases, justified in accordance with Code procedures and will not be used to favor or exclude domestic or foreign suppliers or to contravene any provision. intent or purposes of these procurement procedures.

III. Request for Information

1. In the context of Track II, NTT will place a Request for Information (RFI) announcement in the official gazette to request information from suppliers, prior to the procurement or determination of procurement activities, unless NTT has collected sufficient information to prepare specifications regarding similar products and technology through a RFI placed during the preceding 12 months.

2. The announcement of the RFI will include the following:

1. Outline of the RFI including the name of the product or the product and the best possible assessment of the projected procurement value
2. Deadline to submit information;
3. Addresses for submitting information;
4. Names and addresses of contact points, and
5. an invitation to interested suppliers to express interest in subcontracts involved in the procurement

3. The Request for information will invite suppliers to submit materials and comments on technical information that the supplier believes relevant to the procurement, available products and technology, the supplier's view of the appropriate products or services to meet NTT's needs or any other aspect of the procurement, including the supplier's view on the appropriate cost of the procurement. Nothing in this paragraph requires NTT to provide information in the RFI other than that described in paragraph 2 above.

4. The deadline to submit information specified in paragraph 3 above will be 30 days following the RFI announcement.

5. In the event that a procurement is urgent in order to respond to customer needs in a timely manner, NTT can shorten the period of a RFI provided that it is not less than 10 days.

6. When NTT amends or supplements any RFI, NTT will make an announcement in this respect in the official gazette. If the amendment or supplement is major, NTT will allow reasonable time for suppliers to consider and respond to the amendment or information.

IV. Request for Comments

1. NTT will issue a Request for Comments (RFC) for all Track III Procurements by placing an RFC announcement in the official gazette. The RFC will invite suppliers to submit materials and comments on technical information that the supplier believes relevant to the procurement, available products and technology, the supplier's view of the appropriate products or services to meet NTT's needs or any other aspect of the procurement, including the supplier's view on the appropriate cost of the procurement and, if available, draft specifications. Nothing in this paragraph requires NTT to provide information in the RFC other than that described in paragraph 2 below.

2. The announcement of the RFC will contain the following:

1. Outline of the RFC including the name of the product or the product category and the best possible assessment of the projected procurement volume.
2. Addresses for obtaining draft specifications, if available;
3. Deadline to submit comments;
4. Names and addresses of contact points; and
5. an invitation to interested suppliers to express interest in subcontracts involved in the procurement.

3. The deadline to submit information specified in paragraph 1 above will be 30 days following the RFC announcement.

4. In the event that (1) a procurement is urgent in order to respond to customer needs in a timely manner or (2) an announcement of the procurement would reveal confidential business plans, NTT can choose not to issue an RFC.

5. In case that draft specifications are not available at the time of an RFC announcement or if NTT amends the substance of its draft specifications, NTT will provide them to all suppliers that have responded to the Request for Comments and allow adequate time for suppliers to comment on the draft specifications prior to publication of the Notice of Procurement. Nothing in this paragraph requires NTT to distribute amended specifications in response to comments more than once for any procurement.

6. When NTT amends or supplements any RFC, NTT will make an announcement in this respect in the official gazette. If the amendment or supplement is major, NTT will allow reasonable time for suppliers to consider and respond to the amendment or information.

V. Technical Specifications

1. Any technical specifications prescribed by NTT will be, where appropriate, (1) specified in terms of performance rather than design or descriptive characteristics and (2) based on international standards, where such exist, and otherwise based on national technical regulations or recognized national standards. In cases where international standards do not exist, NTT will give full consideration to using de facto international standards in addition to using national technical regulations and recognized national standards.

2. NTT will prepare technical specifications with the minimum necessary detail to define the performance criteria. Features not essential to those performance criteria will not be required.

3. NTT will formulate specifications in an impartial manner. NTT will not prepare, adopt or apply any technical specification with the intent of creating obstacles to any supplier or class of suppliers, including foreign suppliers. If the procurement will replace or interconnect with an existing system, the specifications will not be designed to impede competition.

4. NTT will not prescribe a technical specification that requires or refers to a particular trademark or name, patent, design or type, specific origin or producer or supplier, unless there is no other sufficiently precise or intelligible way of describing the procurement requirements and provided that, in such cases, words such as "or equivalent" are included in the procurement documentation.

VI. Procurement Documentation

In addition to the information specified in the NTT arrangement. Procurement documentation will include all criteria that will be applied to determine the successful supplier that will be awarded the contract, including all evaluation factors and, if any, sub-factors, described in terms of priority and their relative importance* in the evaluation process and the cost elements to be included in evaluating prices such as transportation, insurance and inspection costs.

* This will not be interpreted to require numerical weighting of factors and, if any, subfactors.

VII. Evaluation

NIT will conduct overall evaluation of applications and proposals as follows:

1. When NTT evaluates applications and proposals and awards contracts for procurement, NTT will consider functional and performance factors, price and other factors specified in the procurement documentation.
2. NTT will evaluate applications and proposals based on the selection criteria specified in the procurement documentation. The price-cost evaluation may be based on the total life cycle cost of procurement.
3. NTT will conduct technical evaluations and system performance evaluations, when used, under the same conditions for all suppliers in the tendering process.
4. In the process of evaluating suppliers, NTT will consider net worth and business activities outside of Japan.
5. No applicant will be allowed to modify contents of an application or proposal once submitted.

After the overall evaluation, if NTT cannot find applications or proposals that satisfy its needs specified in procurement documentation, NTT may identify the deficiencies in the applications or proposals for the benefit of all applicants who have demonstrated the possibility of meeting NTT's needs, and ask them to resubmit applications or proposals. Upon receiving the revised applications or proposals, NTT will reinstate the evaluation and selection process.

VIII. Track III Procurement

1. NTT will encourage the involvement of invested firms in Track III-A Procurements through the provision of projected procurement information as early as possible in each fiscal year.

2. NTT will have a pre-tender conference for the announced Track III procurement, and, upon request, exchange views regarding the future outlook and prospects for commercialization of the products. In the pre-tender conference. NTT will give its best possible assessment of the market potential for such products.

IX. Subcontracting

When NTT publishes a Request for Information or Request for Comments, it will also publish an invitation for suppliers to express interest in subcontractors involved in that procurement. NTT will provide a list of potential subcontractors having expressed such interests, indicating names and contact points of subcontractors, to those who (1) request such a list, (2) respond to the Request for Information or Request for Comments and (3) request procurement documentation, with the presumption that NTT is not responsible for the competency of the suppliers listed.

Data Collection

NTT will collect the following information and data for each fiscal year. The information and the data will be treated as strictly confidential unless otherwise specified by NTT.

1. The total number of procurement announcements
2. The total number of RFI/RFC announcements
3. International procurement promotion activities
4. For the product categories identified below,

• the number of procurement applications by foreign suppliers;
• the number of procurement selections of foreign suppliers; and
• the number of all procurement selections

Thee following identifies the major categories of telecommunications products, with illustrative but not exclusive lists of the products for which procurement data would be compiled.

1. Network System (Node)

-- Central office switches, local and toll (including digital and ATM) Data/packet switches

2. Network System (Link)

-- Multiplexers (including SONET and ATM)
-- Cross connect systems (including SONET and ATM)
-- Optical amplifier systems
-- Transmitter/receiver/transceiver/amplifier equipment
-- Antennas
-- Satellite earth stations
-- Toll optical fiber cable and related equipment (including splicing equipment and connectors)

3. Network System (Access)

-- Subscriber loop equipment (including FITL/FTTH, SONET, and ATM)
-- Network terminating devices
-- Local optical fiber cable and related equipment (including splicing equipment and connectors)
-- Premises distribution equipment and in-building wiring systems
-- Transmitter/receiver/transceiver/amplifier equipment for subscriber connection

4. User System

-- Telephone sets
-- Facsimile machines
-- Private branch exchanges
-- Modems
-- Local area networks

5. Operation systems

-- Operation systems designed to administer and manage all network elements as well as provisioning, trouble shooting, and restorations.

November 1, 1994

His Excellency Yohei Kono
Deputy Prime Minister
Minister of Foreign Affairs
Ministry of Foreign Affairs
Tokyo, Japan

Dear Mr. Minister:

I acknowledge receipt of your letter of today's date and its attachment on the subject of procurement procedures by Nippon Telegraph and Telephone Corporation (NTT).

I confirm, on behalf of my Government, that the improved procurement procedures referred to in the attachment are acceptable to the United States. I also confirm that the Government of the United States will maintain the views and pursue the policies mentioned in paragraphs 3 and 4 of Ambassador Askew's letter to Dr. Okita dated December 19, 1980, in particular, bearing in mind its commitment and the commitment of the Federal Communications Commission in particular, to the openness and transparency of the U.S. telecommunications market.

The Government of the United States recognizes that it is the primary goal of procurement of NTT to enhance its competitive strength in the increasingly competitive business environment. The Government of the United States welcomes that the arrangements (as defined in your letter) have contributed to an increase in non-discriminatory competitive opportunities for NTT's procurement and to an increase in NTT's procurement from foreign suppliers from 41.4 billion yen in JFY1988 to 119.0 billion yen in JFY1993. The Government of the United States expects that the improvement in NTT's procurement procedures will increase access to its procurement opportunities and can lead to an increase in the foreign value and share of its procurement over the medium term. This, of course, presupposes outstanding capabilities and sales efforts on the part of many foreign firms to provide competitive products and technologies that NTT needs.

Considering that the annual meetings to review the operation of the arrangements have been useful, the Government of the United States will continue to meet annually with the Government of Japan to review the operation of the arrangements, including the attached improvements. In the annual meeting, it would be appropriate to consider, inter alia, (i) implementation of NTT's improved procurement procedures and the extent of access of foreign suppliers to NTT's procurement opportunities, (ii) efforts of foreign suppliers to utilize these procurement opportunities, and (iii) changes in the value and share of NTT's procurement from foreign suppliers.

The Government of Japan and the Government of the United States will continue their discussion on procurement procedures to be adopted by NTT for resale products and conclude it as soon as possible.

Sincerely,

Michael Kantor