Defense Market Report - EN

THE US MARKET
FOR DEFENSE-RELATED
OR DUAL-USE GOODS AND OPPORTUNITIES
FOR PORTUGUESE SMES
VOLUME ONE: REPORT
Produced by CH Academy
Commissioned by the Associação Empresarial de Portugal (AEP) and the Industry of Porto
Funded by the European Union (EU), / European Regional Development Fund (ERDF)
Lead authors: Dr Laura J White and Jacob Ford, Marq Consulting Group
Editors: Julie Peterson, Marq Consulting Group, and Carlos Lacerda, CH Academy
Graphic design: Filomena Jorge, CH Academy
January 2017
2 • USA NEXT CHALLENGE
Table of Contents
Executive Summary 7
Acronyms 9
Lists of Figures and Tables 11
Section 1: Introduction 13
1.1 Report Parties 13
1.2 Report Focus 14
1.3 Report Methods 17
1.4 Conclusion 19
Section 2: The Dual-Use Goods Market 21
2.1 Introduction 21
2.2 Characterizing the Market 21
2.3 Political economic changes to the US Market 34
2.4 Security-Related Changes to the US Market 39
2.5 Competitiveness Factors Influence the US Market 43
2.6 Conclusion 47
Section 3: Legal Regulations and Compliance 53
3.1 Introduction 53
3.2 A Practical Overview to Dual-Use Goods
Exports and Imports 54
3.3 International Traffic in Arms Regulations (ITAR) 59
3.4 Export Administration Regulations (EAR) 62
3.5 Licenses, Certifications, and Standards 63
3.6 Effects of Legislation 70
THE US MARKET FOR DEFENSE-RELATED OR DUAL-USE

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GOODS AND OPPORTUNITIES FOR PORTUGUESE SMES
3.7 Import and Distribution Structure and Partnerships 73
3.8 Conclusion 76
Section 4: Market Access Opportunities 79
4.1 Introduction 79
4.2 Public, Government Market 79
4.2a Supplying the US Military Overseas 79
4.2b Federal Agencies, Non-Military Contracting 89
4.2c Federal Grant Programs 98
4.3 Private, Commercial Market 101
4.4 Conclusion 112
Section 5: Conclusion 119
5.1 Introduction 119
5.2 Portuguese SMEs’ Strengths and Challenges 121
5.2a Challenges 122
5.2b Strengths 127
Portuguese Defense Related Economy (key figures)
Contribution of IdD 133
Members List of IdD 141
Ministerial order Nº 6488/2015 155
References 161

Statement
of Legal Disclosure
The report parties, defined as Marq Consulting Group, CH Academy,
Plataforma das Indústrias da Defesa Nacionais (IdD) and the
Associação Empresarial de Portugal (AEP) and the Industry
of Porto offer this report as a source of market education and
information. This report, including generalized assessments and
recommendations, is not intended to promote the manufacture,
export (permanent or temporary), re-export, or transfer of any
defense article, in full compliance with Part 129 of the International
Traffic in Arms Regulation (ITAR).

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Executive
Summary
This report was conducted by Marq Consulting Group and
CH Academy for the Next Challenge USA project that was
commissioned by the Associação Empresarial de Portugal (AEP)
Chamber of Commerce and Industry of Porto. It was financially
supported by European Union (EU) through Le Fonds Européen
de Développement Regional (FEDER) or, in English, the European
Regional Development Fund (ERDF) as part of the Compete
2020 project. It contains two volumes. This volume (Volume One)
contains the report content, and Volume Two includes all necessary
appendices referenced in the report. The projects and report aim to
improve and assess export development and growth opportunities
for Portuguese small and medium-sized enterprises (SMEs) through
trade facilitation with the United States (US).
Section 1 introduces the report, report parties, and report focus by

providing an overview of global and Portuguese defense trade. The
section highlights current overall Portuguese trade competitiveness
– ranked 38th out of 190+ countries by the World Economic Forum for
2015 to 2016 – and how defense-related civilian goods or “dual-use”
goods exports support Portuguese growth, gross domestic product
(GDP), and economic recovery. The term “dual-use” is defined
as goods that have both military and commercial applications
and markets; the most common example of a dual-use good is
weapons, used in military, government, and law enforcement, as
well as in hunting and emergency preparedness.
The repot uses a multi-factor analysis to examine how Portuguese

SMEs can enter and grow in the US defense market. Export
development is promoted as a sustainable path towards enhanced
economic competitiveness and financial independence in
response to post-2008 global recession challenges. From 2011 to
2014, Portuguese defense exports broke records, almost doubling
their European market share with a 96% average annual growth
rate. Their US market has also increased by an average annual
rate of 60%. However, the loss of critical resources and macro and
microeconomic imbalances threaten Portugal’s continued export
competitiveness. This landscape gives context to the report and
Next Challenge USA project.
There are two primary markets for dual-use goods exports in the
US: the public, government and private, commercial market. The
government market represents the bulk of the market. It is also the
only market for which there are reliable market value indicators,
such as national defense spending. The report identifies in Section
1 that there are complexities and anomalies in statistical reporting
of US and global defense trade, which has shaped the contents of
this report. As such, Section 2 ambitiously aims to characterize the
US defense market through values assigned to the US Department
of Defense spending, cross-references with values from the global

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defense and aerospace market, where the US is in overseas operations, through contracting with
the top exporter. A step-by-step analysis reveals federal, state, and local government agencies, or
the US defense-related goods market to be within in federal grant programs – can reveal lucrative
the range of $65 billion to $100 billion annually. gains for Portuguese SMEs. One critical difference
This market is dominated by large, multinational between the government and commercial market
defense companies that are prime government is the pace of innovation, which is sluggish in the
contractors – 60% of which are US companies. government market and impacts access and usage.
When market distribution characteristics are Opportunities on the commercial market are
taken into the account, the assessment finds, at diverse, and the pace of innovation is rapid. Like
minimum, a $7.7 billion annual import market is other industries assessed in the Next Challenge
open to Portuguese SME. The section finds that USA project, if SMEs have products that are
export competitiveness has led the US to be seen compliant, innovative, and well marketed, the US
as the primary global market for defense, and commercial market offers a plethora of partnership
it is growing. In addition to political economic options. Brand, product, and country of origin
and security-related issues, the policies of the marketing, price and product competitiveness,
new Trump administration affect where growth and technological innovations are the keys to
continues – import or export markets, aerospace or sustainable export development in the commercial
naval, etc – and at this juncture, these policies are market. The section concludes with a table that
in early of stages. The 2018 and 2019 US defense summarizes advantages and disadvantages of
budgets – due to begin negotiations on February entering the US market through these primary
2, 2017 – will provide a better indication of the entry points, as well as highlighting key trade shows
future changes to the US defense market. However, for Portuguese SMEs exporting dual-use goods.
with an annual national defense budget of almost
$600B and the world’s largest single-nation Section 5 concludes the report with a summary
commercial import market, the opportunities for of the previous sections, highlighting key market
Portuguese SMEs on the US remain vast, despite entry points, developments, and sustainable
the scope of any such changes. export development strategy recommendations.
The key finding is that the more resources SMEs
Legal regulations and compliance are the crux have to develop towards export development, the
of Section 3, particularly 1) the International better their chances of success. Although typical
Traffic in Arms Regulations (ITAR) and the Export for developing most export markets, this finding is
Administration Regulations (EAR) 2) product particularly true for the US dual-use goods market
licensing, certifications, and standards, 3) relevant where large, US and multinational companies
legislation, such as the Export Control Reform lead with strong, inherit advantages. The goal
(ECR), Buy American Act (BAA), Trade Agreements of the report is to offer SMEs access to the very
Act (TAA), Bayh and Berry Amendments, and resources and knowledge that enables them to
Make It In America Manufacturing Communities compete more effectively and efficiently.
Act (MAMCA), and 4) import and distribution
structure and partnerships. The overall finding of This final section highlights financial, visibility,
the section is that SMEs must first identify where consistency, and competition challenges
they aim to develop exports by identifying and that Portuguese SMEs face in the US market.
targeting final application and in usage in each Comparative advantages in advanced
the governmental and commercial markets to manufacturing, geography, and sophisticated
ensure export readiness in terms of regulation, trade-related infrastructure can be leveraged to
certification, and compliance. build sustainable relationships with potential
partners. Company and product-specific market
Section 4 provides Portuguese SMEs with critical intelligence can help SMEs identify competitive
insight into those two primary US market access advantages to support export development. These
points – the government and commercial markets challenges and advantages reflect the report
– through characterizations of opportunities, parties’ perspectives but also that of US industry
competitors, and partnership tips. The overall experts. Portugal has numerous advantages and
finding of the section reiterates that the bulk of the resources that support SMEs’ export development,
US market is in the public, government contracting and the report finds that investing in the US
sector. Finding one’s niche in the government market offers unprecedented demand and
market – whether in supplying the US military opportunities for growth.

Acronyms
ACE Automated Commercial Environment

AEP Associação Empresarial de Portugal
AFRICOM US African Command
AI Artificial Intelligence
APL Approved Products List
B Billion
BAA Buy American Act
BITs Bilateral Investment Treaties
BIS Bureau of Industry and Security
CAGR Compound Annual Growth Rate
CBP Customs and Border Protection
CCL Commerce Control List
DDTC Directorate of Defense Trade Controls
DLA Defense Logistics Agency
DoD Department of Defense
DUNS Data Universal Numbering System
EAR Export Administration Regulations
ECR Export Control Reform
ECCN Export Control Classification Number
EDA European Defense Agency
ERI European Reassurance Initiative
EU European Union
FDI Foreign Direct Investment
FTAs Free Trade Agreements
GDP Gross Domestic Product
GSA Government Services Administration
HS Harmonized (Tariff) System
ICT Information, Communication, and Technology
IMCP Investing in Manufacturing Communities Partnership
IMF International Monetary Fund
ICT Information and Communications Technology
ISO International Organization for Standardization
ITA International Trade Administration
ITAR International Traffic in Arms Regulations
K Thousand
MAMCA Make It In America Manufacturing Communities
Act

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M Million
MoD Ministry of Defense
MOU Memorandum of Understanding
NAFTA North American Free Trade Agreement
NCAGE NATO Commercial and Government Entity
NISP National Industrial Security Program
OCO Overseas Contingency Operations
RFPs Request for Proposals
SAM System for Award Management
SME Small to Medium-Sized Enterprise
TAA Trade Agreements Act
UK United Kingdom
US United States
USML US Munitions List
WTO World Trade Organization

List of Figures
and Tables
1.1 Portuguese Net Contributions to Real GDP Growth in Per- 10
centage Points
Table 1.1 – Portugal’s Global Defense-Related Goods Export 11

and respective CAGRs
Figure 2.1 Growth in US Defense Exports (2013-2016, billions) 20
Figure 2.2 US Government Defense and Military Budgets 22

(2010-2020, projected, billions)
Figure 2.3 Market shares of defense and aerospace exporting 25

countries (ranks 1-5, 2011-2015, billions)

countries (ranks 6-10, 2011-2015, billions)

countries (ranks 11-20, 2011-2015, millions)
Figure 2.6 – 2016 US DoD Spending Composition (Billions) 39
Figure 2.7 – US Defense-Related Goods Market Composition 40

(Billions)
Table 4.1 – Comparison of the Primary Entry Points for the US 93

Dual-Use Goods Market

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Section 1:
Introduction
In 2015, countries around the world continued to recover from
on-going global crises by focusing internally, and, perhaps
relatedly, global trade flows declined. Forecasts for global trade
growth throughout the second-half of 2016 remained modest
at approximately 3%, unchanged from 2015; political instability,
currency fluctuations, oversupply of basic commodities (oil,
steel, aluminum), and restricted business lending continued
to affect growth (WTO 2016; Banco de Portugal 2016). Early
2017 has revealed that the challenges of 2016 have not been
remedied. Advancements in automation and robotics are shaping
manufacturing, near-term job creation, and growth, and large
regional trade agreements between major trading powers remain
unfinished or unimplemented. The absence of a clear and feasible
plan for exit of the United Kingdom (UK) from the European Union
(EU) adds to instability.
In spite of this instability and uncertainty, there is reason to be

optimistic about trade and export development in 2017. Trade
flows are predicted to considerably improve across 2017 to 2018
at a growth rate of 3.6% to 3.8%; British manufacturing has grown
competitive due to a weak pound; science and technology are
demonstrating how innovation can be used to address global
commodity issues - over or undersupply (WTO 2016; Banco de
Portugal 2016). This report is similarly optimistic about Portugal’s
ability to utilize global trade growth in the short and long-term with
sustainable export development strategies to continue its economic
recovery and financial independence.
1.1 Report Parties
This report offers guidance on how Portugal can enhance dual-use

goods exports to the US market and is one of five market reports
in the Next Challenge USA project. Next Challenge USA was
commissioned by the Associação Empresarial de Portugal (AEP)
Chamber of Commerce and Industry of Porto and is supported
by EU through Le Fonds Européen de Développement Regional
(FEDER) or, in English, the European Regional Development Fund
(ERDF). Part of the wider Compete 2020 project, Next Challenge
USA works to improve market access for over 150 Portuguese small
and medium-sized enterprises (SMEs) through trade facilitation
with the United States (US). Next Challenge USA supports
SMEs’ role in fostering sustainable market development and is
orchestrated through a series of reports, workshops, and seminars,
hosted by the Portuguese consulting group, CH Academy, and their
American contracting partner, Marq Consulting Group.

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1.2 Report Focus
This report reflects on general and specific issues that shape

sustainable export development strategies through increased
US market access and growth. The analysis takes into account
the historical origins of Portugal’s export economy, dating back
to Portugal’s 15th century leadership in early mercantilist trade.
Portuguese exports across sectors have remained strong, but the
2008 global financial crisis has had deep effects on Portuguese
trade from which SMEs are still recovering. Specifically, the crisis
and underlying governance factors contributed to Portugal’s
need for financial assistance from the EU and International
Monetary Fund (IMF). After instituting reform with great success:
“the Portuguese economy has made significant progresses in the
correction of a number of macroeconomic imbalances, having
implemented measures of a structural character in several areas”
(AICEP 2016: 4). The report addresses these examples of general and
specifically Portuguese trade-related triumphs and challenges.
Painting a general economic landscape of Portugal’s current trade

profile, the latest projections from Banco de Portugal indicated
growth in gross domestic product (GDP) between 1.5 and 1.7%
for 2016. Growth figures were based on increased demand and
continued exports in Portuguese goods and services and tourism
promotion (Banco de Portugal 2016; see Figure 1.1 below). There is,
naturally, a strong link between Portugal’s continued economic
progress and expanding its export market. According to Banco de
Portugal (2016), export volume in GDP terms should continue to
recover across the coming years, and the World Bank (2016) expects
Portuguese GDP will rise to pre-2008 crisis levels (Figure 1.1). Five-
year trends show steady progress since GDP declined considerably
from $244.9 Billion (B) in 2011 to $216.4B in 2012 (World Bank 2016).
Figure 1.1 – Portuguese Net Contributions to Real GDP Growth

in Percentage Points (Banco De Portugal 2016)
◼ Domestic demand
◼ Exports
◼ GDP (%)

Next Challenge USA’s goal is to improve Portuguese export
competition, particularly through the growth of SMEs, and this
report looks at US, global, European, and Portuguese competition.
The World Economic Forum’s Competitive Index ranked Portugal
as the 38th (out of 190+) most competitive nation for 2015 to 2016;
from 2014 to 2015, it was ranked 36th. Portugal’s most similar
export competitors, across a five-year trend analysis, are the Czech
Republic, Greece, Poland, and the UK.1 Portugal consistently
outcompetes Croatia, Finland, Ireland, and Belgium-Luxemburg; it
occasionally outcompetes the Netherlands, Malta, and Sweden and
is consistently outcompeted by Bulgaria, Estonia, Latvia, Lithuania,
and Slovakia in global trade (WTO 2015).2 However, Portugal’s
position within the World Economic Forum’s Competitive Index
reveals inconsistent progress, and this report targets how more
consistent export development and growth can contribute to
increased, overall Portuguese competitiveness.
Portugal’s position within the top 50 most competitive export

nations has been fairly consistent and reflects the fluctuations
in GDP and post-2008 recovery factors presented above. These
factors have affected Portugal’s export industry; however, Portugal’s
dual-use goods exports appear to have fared better than other
industries. The terms “dual-use” and “defense-related” goods are
used interchangeably throughout this report. Both terms indicate
that these goods have “dual” – civilian and military – uses. Because
these goods have, in part, military application, they are more heavily
regulated to prevent them from ending up in the possession of those
that seek to harm civilian or military populations through terrorism.
Because dual-use export and defense-related goods are more

heavily regulated, the statistical tracking of trade in dual-use goods
is both more complex and obscure than statistical reporting in
other areas of trade – discussed further in Section 1.3. Generally
speaking and according the Portuguese Ministry of Defense (MoD),
Portuguese military goods and technology exports3 have increased
at a compounded average annual rate of 62% from 2011 to 2014
(2015; 2011).4 Table 1.1 below highlights the continental markets
where Portugal exports defense-related goods and the respective
compounded annual growth rate (CAGR) using data taken from the
MoD reports (2015; 2014; 2012; 2011).
1 The report was written before “Brexit” was negotiated, and the inclusion of the UK among
Portugal’s most similar competitors is subject to change.
2 “Consistently outcompetes” is measured by competition in all 4 or 5 years of the trend
analysis; “occasionally outcompetes” refers to competition within 2 or fewer years.
3 The phrase “military goods and technology” is used here rather than dual-use goods
because this nomenclature is used in the source from which the data is extracted.
4 This figure includes “permanent” and “temporary” exports. Permanent indicates that the
exported product is for “end-use”; whereas, “temporary” exports are products included in
global supply chain that contribute to a finished product but are not, themselves, a finished
product at the point of import.

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Table 1.1 – Portugal’s Global Defense-Related Goods Export and
Respective CAGRs
Export Destination 2011 2012 2013 2014 CAGR
Africa $8.5M $4.2M $13.3M $16.4M + 18%
Americas $9.1M $4.6M $24.6M $41.1M + 46%
Asia $616K $5.3M $6M $2.4M + 40%
EU $6.4M $15.3M $101.1M $93.7M + 96%
Oceania $1K - $507K $1.6M + 78%*
US $3.1M $2.9M $20.3M $23.3M + 66%
“-” indicates missing data

* CAGR was calculated from 2013 to 2014 due to data reporting inconsistency
As evident from Table 1.1, Portuguese dual-use goods exports have

grown the most within Europe – almost doubling in four years.
Outside of Europe, exports have improved almost as significantly
in Oceania, with Australia as the primary export destination.
Regionally, Portuguese dual-use goods exports to the Americas
showed the third-best improvement since 2011, and Portuguese
exports to the US were 20% higher, on average, than those to
the greater Americas region. This indicates that Portuguese dual-
use goods exports are not only competitive on the US market,
but also that the US market presents considerable opportunities
for Portuguese SMEs’ export development. A 2015 Deloitte
study of global defense markets categorized Portugal as a “slow
grower” in the global defense industry, as compared to the US,
UK, Netherlands, Germany, Denmark, Brazil, Japan, Switzerland
(“shrinkers”). They also placed Portugal in the same “high-income
spender” category – indicating a GDP per capita above $20,000 and
defense spending more than 2% of GDP – as France, Greece, Israel,
South Korea, the UK, and US (Deloitte 2015). As a general indicator,
a nation’s defense industry can be measured by the health of its
military funding, and in 2017 increased yet again by a modest 0.3%
to $2.34B (Barreira 2016).
As the report will reveal, there are unique challenges for Portuguese
SMEs’ export development in the US dual-use goods market –
particularly market dominance by large, multinational companies
and import / export regulations and compliance. Despite the positive
Portuguese export figures in table 1.1, the report parties believe
that these numbers could increase with the attribution to idD –
Portuguese Platform for Defence Industries the responsibility for the
implementation of a national strategy for the external promotion of

Portuguese DTIB – Defence Technology and Industrial Base, in order
to develop national capacities in this area, assuming Portugal as a
producer and exporter of technology and services within the scope of
the Defence Economy.
These attributions, delegated by ministerial order Nº 6488/2015 (see

attachment) and reinforced by the mission letter of October 2016,
derive from the revision of the Strategic Concept of National Defense
that identifies as a vector and as a priority strategic line of action
the consolidation of the external relations of the Defence, through
actions that potentiate opportunities in the Defence Economy
domain, taking in account the advantages that can be obtained
for external activities of national economy that aim the pursuit of
this goal, whether it is in a ministerial level or in other dimensions
regarding Defence structures, including the Armed Forces.
With this action, the Portuguese State, intends to contribute and

promote conditions that increase Portuguese exportations from
companies which operate in the Defence Economy market, as well
as, to contribute with this external action, for the maintenance and
creation of highly qualified workplaces in Portugal.
Relatedly, it is unlikely that SMEs’ exports comprise a significant

majority of the enhanced competitiveness of Portuguese dual-
use goods exports reflected in Table 1.1. It is more likely that these
enhanced export opportunities have gone to larger Portuguese
defense-related companies – such as OGMA, Indústria Aeronáutica
de Portugal SA, Edisoft, and Arsenal do Alfeite – that maintain close
contracting ties to the Portuguese government and military.
Therefore, this report focuses on building and outlining specific

and sustainable dual-use goods export strategies for the US market
that can specifically boost SMEs and Portugal’s overall economic
recovery by enhancing Portuguese export competitiveness
and GDP. With current trade growth forecasts, Portugal has
opportunities for US exports to return to pre-crisis levels, although
competitors have capitalized on Portuguese export decline to
grow their US market. This report focuses on how SMEs exporting
dual-use goods can contribute to an economic recovery to pre-
2008 crisis levels through short and long-term sustainable export
development strategies.
1.3 Report Methods
The report presents a market analysis for Portuguese SMEs looking

to develop their export strategy for the US defense-related goods
market by focusing on six unique factors that influence sustainable
strategy development, including:
»» the US dual-use goods market

»» legal regulations and compliance
»» market access opportunities
»» future market trends
»» Portuguese SMEs’ challenges
»» Portuguese SMEs’ comparative and competitive advantages.
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The analysis of these factors produces an assessment of Portuguese
dual-use goods export opportunities in the US, the world’s largest
import market for goods outside of the European Union (WTO
2015). The assessment relies on primary and secondary data and
qualitative and quantitative research methods, such as
»» one-on-one interviews with US companies

»» secondary research
»» case studies
»» comparative and statistical analysis.
These methods were selected based on their appropriateness and

effectiveness in addressing the needs of the report. For example, the
analysis requires in-depth, regional, and state-specific information
from American defense-related government agencies, companies,
and trade associations. Interviews are the most appropriate source
for this data; whereas, competition analysis is most appropriately
conducted through statistical analyses. The majority of data utilized
in the report is from 2015, as data from 2016 is not yet available, but
in some cases, data from 2014 is the most recent.5
Trade in defense-related goods is not as straightforward as, for

example, trade in agrifoods or home décor. In the defense-related
and dual-use goods industry, the issue is primarily a statistical
and reporting one. For example, some goods imported / exported
for military and governmental use are included in defense trade
statistics; other times this is not the case (Council of the European
Union 2016). The process known as demilitarization – “the act of
destroying the military offensive or defensive advantages inherent
in certain types of equipment or material” or transferring military
control of a body to civilian authorities, such as a police force – has
increased trade in dual-use goods but also made the process of
statistical trade tracking more problematic and less transparent than
intended (National Archives and Records Administration 2002).
“There are no dedicated statistics, and estimates can only be based

on the corresponding production data for the largest relevant
sectors” (Council of the European Union 2016: 19). This leads to a
situation – that Section 2 of the report confronts in-depth – where
trade in defense-related goods becomes a process of comparing
apples to oranges to lemons and limes, colloquially speaking. In
some countries, military spending is fully transparent; in others,
this is not the case. In some cases, goods used for military – not
commercial – purposes are distinguished in trade reporting, and in
other cases, dual-use goods imports are not reported at all.
One critical issue the report parties confronted was how to

methodologically approach this study in a manner that was as
rigorous as possible despite persistent issues with data reporting
and availability. Comparing Portuguese dual-use goods exports
to, for example, Dutch defense-related goods exports involves
considering the methodological implications of comparing the
5 For example, the Portuguese Ministry of Defense’s report for defense-related trade in 2015
has not yet been released.

exports of two highly similar but also somewhat different categories
of goods based on the recipient of those goods between two
countries that do not report data consistently and / or similarly.
In this respect, this report aims to avoid unnecessary complexity
where possible, but essential distinctions are made throughout the
relevant assessments.
Additionally, defense-related trade data reporting is intrinsically

complex by the, at times, ambiguous division between goods and
services, including the process of demilitarization itself, which is
interpreted as both a commercial process and a concept relating
to national security. To use a specific example, software – a highly
traded defense-related product – is at times categorized as a good
and, in other instances, as a service, depending on the degree of
customization, product service, and delivery method.6 In asking
industry experts, the report parties were unable to determine with
a high degree of certainty whether software was a good or service.
In many cases – with software and with other dual-use goods trade
questions – experts replied: “it depends”. The report parties found
the most appropriate mechanism for dealing with the various issues
identified in this section is to note divisions, discrepancies, and
delineations when reporting statistical or numerical figures.
An expansive discourse exists on varied methods for collecting and

analyzing data, and in the case of this report, the data itself presents
challenges to the selected methodology. As such, the report relies
more on qualitative methods – interviewing, description, analysis,
and forecasting – than quantitative statistical and econometric
methods. The methods employed in the report are consistently
deemed the most appropriate across this industry and companies
and individuals engaged in dual-use goods exports. The methods
are designed to fit the nature of the inquiry. Similarly, the report
aims to minimize detail that does not increase clarity, such as
excessive detail on US Export Administration Regulations (EAR)
when it does not apply to Portuguese SMEs’ export development.
1.4 Conclusion
This introductory section has covered the “who”, “what”, and “how”
of this market report on dual-use goods exports. The report is
structured by the six analytical factors presented in Section 1.3. The
first factor (Section 2: the US dual-use goods market) provides a
detailed snapshot of the US defense-related goods market, changes
over the last five years, and extensive competition SMEs face in the
US market.
Section 3 examines legal regulations and compliance issues –

essential information for SMEs in all stages of export development
– as well as licensing, pertinent legislation, and import and
distribution details. The section’s key theme is that there are many
issues – from compliance to partnerships – for SMEs to consider
before developing exports for the US market. US companies
interviewed emphasized that the results of failing to consider these
6 See Interview 1, Appendix 3 for further detail.

• 19
factors can range from improperly assessed import tariffs to being
banned from the US defense market and registered on a global
watch list. The fourth analytical factor provides Portuguese SMEs an
insider’s perspective of market entry points in the US, which offers
SMEs unprecedented development opportunities.
In Section 4, US market access opportunities for SMEs exporting

defense-related goods are explored through two primary access
points: the public, government market, including law enforcement
agencies, and the private, commercial market. Through each market
access point, the section explores the nature of the opportunity,
market features – demand, trends, products – a sampling of the top
companies, and partnership tips for SMEs. Unlike the other Next
Challenge USA reports that have focused on specific subsectors and
product categories, this defense market report has considered export
opportunities for a broad range of goods – from steel brackets to
satellites, finished and unfinished products.
The vast nature of goods included in the production of this report

makes the presentation of precise information less common.
However, the data available does not separate aerospace
manufacturing from the 21 types of manufacturing – plastic, metal,
machinery, computer and electronic manufacturing are all involved
in aerospace manufacturing – nor is aerospace manufacturing for
military use distinguished from commercial use. Therefore, the
subsector and product-specific assessments produced in the other
Next Challenge USA reports are simply not possible in this industry.
Despite these challenges, Section 4 provides far-reaching insight for
a range of SMEs looking to service the defense-related industry.
The report concludes with Section 5 where the previous

sections’ findings are reviewed and holistically assessed to offer
recommendations to Portuguese SMEs looking to enter this US
market. Challenges to SMEs are analyzed and responded to, and
their comparative and competitive advantages are evaluated. The
section offers benchmarking assessments and concludes that
continued export development of defense-related civilian goods
can continue to contribute to Portuguese GDP, economic recovery,
and financial independence.

Section 2:
The US Dual-Use Goods
Market
2.1 Introduction
The US is the largest single-country import destination for goods

and services. It is also a highly competitive market. Compete 2020,
Next Challenge USA, and the report all focus on competition
because of the dynamic nature of the US market. Because it is the
largest import market, the US market has the unique ability to
easily replace one exporter’s products with another if products do
not conform to price, quality, and delivery expectations. Within the
defense-related goods industry – as this section will detail – this has
especially been the case in the last five years.
The focus of this section of the report is to outline the characteristics

that influence the US dual-use goods market, such as market size,
makeup, political economic landscape, security-related influences,
and competition. This characterization is made by examining key
market indicators for dual-use goods imports, such as national
defense budgets and global defense and aerospace competition. By
characterizing the US dual-use goods market, Portuguese SMEs will
have a better understanding of the scale of opportunities available
in the US. This information is intended to help SMEs avoid critical
misjudgments when attempting to enter and access the US market
and approaching potential partners. The section aims to provide a
snapshot of the US dual-use goods market that begins to form a
picture of competition and opportunities for Portuguese SMEs.
2.2 Characterizing the Market
This section further introduces the US dual-use goods market

by providing valuable characterizations, such as market value
and domestic and international composition. Both of these
characterizations are methodologically difficult to pinpoint with
exact certainty, as discussed in Section 1.3. There are issues with
assigning monetary amounts to production and trade within the US
dual-use goods market because:
»» not all transactions are reported, due to government and military

purchases
»» what is reported is a mix of government and commercial market
purchases
»» some of what is reported includes defense-related services, as well
as goods
»» defense “sector” trade reporting, like “animal products” or
“footwear and headwear” by comparison, does not, for the most
part, exist.

• 21
To the latter point, specifically, the US Census Bureau reports on US
imports across six categories of goods, including those which are of
interest to this report, such as:
»» Industrial supplies and materials

»» Capital goods, except automotive
»» Automotive vehicles, parts, and engines
»» Consumer goods
»» Other goods.
Within the category of industrial supplies and materials, for

example, the US import market was valued at $362.6B as of October
2016, down 12.3% from 2015 (Census Bureau 2016). Several items in
this category reflect dual-use goods that are at the center of this
report, including:
»» Chemicals-organic
»» Chemicals-inorganic
»» Materials, excluding chemicals
»» Nonmonetary gold
»» Plastic materials
»» Iron and steel, advanced
»» Glass-plate, sheet, etc.
However, the issue faced in reporting the figures for US imports in

each of these items is that not all organic chemicals, nonmonetary
gold, plastic materials, etc. are dual-use goods. The same can be said
of the remaining five categories of goods; some include defense-
related items, but they also include items that are not related to
the defense industry. This compounds the issue of reporting on
characteristics of the US defense-related goods market.
The most reliable sources of data are twofold: national defense

spending and global defense and aerospace competition. National
defense spending statistics are utilized because they indicate
the health of dual-use goods markets. Competition in the global
defense and aerospace market is used to analyze the value of
the US market because it is indicative of the health of the global
market where 1) the US is the market leader, and 2) trade in
defense-related goods in government and commercial markets are
equally reflected. The report relies on these data sources – which
primarily characterize the government market, not the commercial
market, which is characterized in Section 4.3 – and extracts data
points where they can be useful in characterizing the US dual-use
goods import market. For example, Defense News (2016), focuses
mainly on government defense-related goods and services, and
it estimated that the exchange of goods and services on the US
defense market among the top 100 global defense companies7 in
2015 was $356.7B. Two immediate analytical issues come to mind.
The first and most obvious is that this figure is for the top 100 global
7 See Appendix 1, Volume 2.

defense companies, of which the US has 41 of the top 100 or 60%
of total global defense revenue (Defense News 2016). This figure has
little bearing on the US import market. The second analytical issue is
that in the paragraph above the US Census Bureau reported that the
import category of industrial supplies and material, alone, was valued
at $362.6B (2016). However, the paragraph above also stated that not
all items in this category were dual-use goods, and so this figure also
has little bearing on the US dual-use goods import market.
The issue that is of critical importance here is that while it is highly

difficult to report on the size of the US dual-use goods import
market, the report is tasked with characterizing the US market
value. Similar reports on US defense-related trade from the
International Trade Administration (2016) and Deloitte (2016) make
no attempt to characterize the size of the US defense-related goods
import market, and the reason – that this section highlights – is
because to do so is practically impossible, as in it is not possible
to produce a practical estimate of such a figure.8 Now begins the
process of comparing similar but not exactly the same elements
to, in some way, characterize the value of the US dual-use goods
market. For example, while the precise value of the US dual-use
goods import market may be practically impossible, an estimate
can be produced by assessing similar markets, such as the US dual-
use goods and services market.
The figure that is the most useful in beginning to estimate the

US dual-use goods import market is that from Defense News
(2016). The top 100 global defense companies produced $356.7B
in government-contracted trade in goods and services. From
primary and secondary research, it is surmised that these top 100
companies represent the bulk of global defense trade. The top 10
companies alone account for 54%, and the top 25 account for 73%
of the $356.7B figure (Defense News 2016). A more useful figure
for estimating the size of the US dual-use goods import market
begins by extracting the portion that US companies occupy ($214B).
Therefore, non-US, exporting companies comprise $142.7B of mainly
government-contracted trade in goods and services.
From here, the report acknowledges that government-contracted

defense-related trade does not represent the entire dual-use goods
and services market, but like the top 100 companies, it represents
the bulk of defense-related trade. “It’s a mixture of government
contracting and the private sector market, but it’s definitely a
heavier mixture on the government contracting side.”9 The 2016 US
Department of Defense’s (DoD) discretionary budget was estimated
at $534.3B – almost one and half times the size of the global market
that the top 100 global defense companies occupy, including goods
and services and commercial and military-use items (Department
of Defense 2015).
8 As a point of reference and comparison, see US Congressional Budget Office Director Douglas
W. Elmendorf’s March 11, 2015 letter to to US House of Representatives’ Budget Committee
Member Chris Van Hollen confirming the absence of defense-related data and figures
(Congressional Budget Office 2015); see also Schwartz, Sargent, Nelson, and Coral (2016).
9 Interview 5, Appendix 3.

• 23
Therefore, it can be concluded that public, government contracting
represents the bulk of the US market. There is the continued issue
that both the DoD and above estimate of $142.7B includes services,
as well as goods. The Center for Strategic and International studies
found that, on average, 45% of DoD contracts were for goods and
41% for services (Ellman, Hunter, McCormick, and Sanders 2016).10
With these acknowledgements and abstractions in mind, the report

estimates that the 2016 US dual-use goods market (public and
private sector, foreign and domestic) was likely valued between $65B
and $100B annually. Section 2.4 will support that there is no definitive
estimate of how much of this market is domestic verses imported
goods. However, experts believe the bulk of the services market is
domestic-controlled due to security-related factors, such as security
clearances needed to conduct US defense-related work that ranges
from cable installation to analytical and intelligence processing.
The US market for imported dual-use goods is also much more

complex due to expansive global supply chain – the focus of several
expert interviews conducted for this report. As several experts said,
it would be impossible to provide a percentage of the US dual-use
goods market that is composed of imported goods; however, the
section is, again, charged with providing an estimate – further detail
below. The highlight of this extensive calculation is that the US
market for imported dual-use goods is large, likely in the range of
tens of billions of dollars.
The estimate of an approximately $100B dual-use goods market

appears relatively sound as a basis for moving forward, with the
understanding that this number includes foreign and domestic
goods. The US controls 60% of the global defense market; US
exports in 2015 were $143.3B, and US defense-related exports
continue to increase, by 54% alone between 2014 and 2015
(Defense News 2016). The US’ defense spending also continues to
outpace the rest of the world, accounting for 36% of total global
defense spending (ITA 2016). However, trade flows across sectors
and industries were restricted in 2016, and US defense spending
declined from 2015 to 2016. US government agencies and fiscal
allowances remain allocated by a process known as a “continuing
resolution” as a result of a sequester that threatened a federal
government shutdown in 2016 (and going into 2017) as federal
budget cap limits were surpassed – more in Section 2.3 below
(Fuller 2016).
Therefore, the 54% growth rate seen across 2015 would not have
been as significant across 2016. ITA (2016) reports that global
defense spending, however, grew in 2015 for the first time in five
years to approximately $1.7 trillion; this increase is expected to
continue across nations due to shared global security concerns.
The US – the top global defense exporter, explored further below
10 The authors go on to say that as of 2014, the share of DoD contract funds for services
has increased to 44%, but they did not indicate whether increased funding for services
detracted from funding of goods contracts or research and development - only that both
(goods and research and development) had slowed. Schwartz, Sargent, Nelson, and Coral
(2016) found that 44% of contracts went to services, 47% to goods, and 9% to research and
development in 2015.

– defense industry, led by more than 40 of the top 100 global
companies, is unlikely to allow budget constraints to inhibit further
export growth, market competitiveness, and technical innovation.
Moving to the distribution of domestic and international

competitors on the US market, the US defense-related goods
import market is also growing, although the rate at which is even
more difficult to determine than the import market size – evaluated
above. The increasing US import market is partly the result of three
factors. First, companies in the US and across the world are more
reliant on global supply chains for price competitiveness, and new
communications networks and software has increased ease of
developing, communicating, and streamlining global supply chains.
Second, the US defense industry has seen increased transparency

in procurement and deregulation of dual-use goods, particularly
through the “commodity jurisdictions” process, where items are
evaluated for removal from the US munitions list (USML), governed
by the International Traffic in Arms Regulations (ITAR) – a notoriously
challenging trade barrier in the defense industry discussed in detail
in Section 3.
Thirdly, the US has lowered import barriers to a host of countries,

including Cuba, Iran, Japan, Vietnam, and Myanmar, and these
lowered barriers have, in part, compensated for increased barriers
for Russian defense imports. However, this is a slow and laborious
process. The significance of the US (and EU) sanctions on Russian
exporters – combined with increased French efficiency in aircraft
manufacturing and assembly, where the US historically dominated
– is beginning to impact the US and other global defense markets.
France is expected to overtake Russia as the second-largest (to the
US) global defense exporting country by 2018 (Business Wire 2016;
Makortoff 2016).
The US defense import market, unlike most other sectors and

subsectors in the Next Challenge USA series, is not the world’s largest,
although the US remains, overall, the largest import market globally.
The top ten 2016 global defense import markets are, respectively:
1. Saudi Arabia: $10.1B

2. India: $4B
3. United Arab Emirates: $3.1B
4. South Korea: $2.5B
5. Iraq: $2.3B
6. Australia: $2.1B
7. Egypt: $2B
8. Taiwan: $2B
9. Algeria: $1.8B
10. Qatar: $1.7B (Business Wire 2016).
While the US is not one of the top ten global defense import
markets, it remains a growing dual-use export market. However,
there is a strong concentration of US companies supplying the US

• 25
defense industry with goods and services, and their businesses are
beginning to grow internationally as the strong dollar continues to
attract cheaper imports to the US market (see Figure 2.1).
Figure 2.1 – Growth in US Defense Exports (2013-2106, billions)11
When asked about the portion of domestic to international

companies supplying the US, the majority of US defense industry
experts and representatives interviewed said it was difficult to say,
and indeed, the report parties found this, like other areas of the
report, impractical to quantify precisely. In lieu of offering a percent
of the US defense-related goods market that is domestic and
international in composition, the report analyzes why, from arms to
aerospace, the US is the largest global defense exporter.
The biggest explanation for why US companies dominate the US

and global defense market is simply financial. In 2015, the US spent
approximately $600B on its defense and military capacity – greater
than that of the next eleven largest national defense budgets12
(US News 2016). The extent of US defense and military spending
indicates the competitive advantages that US businesses and
contractors possess in fiscal resources alone. Extensive financial
resources support advanced manufacturing and expenditure in
research and development – 14%, on average, of total DoD contract
funds – coupled with short and long-term field testing, highlight
reasons why the bulk of the US defense-related goods market
is supplied by US businesses (Ellman, Hunter, McCormick, and
Sanders 2016). However, there may be areas of the US dual-use
goods market that are more heavily supplied by US companies and
other areas that are less so where SMEs can be competitive. An
export specialist offered insight.
I would guess there’s a fair amount of aerospace imports – chips,

electronics, boards, computers; there’s probably is a fair bit of
trade in chemicals. Machine tools and production and measuring
equipment are also big products in the US market. I see a lot of
11 Figures sourced from Business Wire (2016).

12 In order of largest (following the US) to smallest, the largest 11 global defense budgets are
in: China, Saudi Arabia, the UK, Russia, India, France, Japan, Germany, South Korea, Brazil,
and Australia.

European production test equipment. There’s probably some
in the area of imaging – cameras sensors, different types of
electronics.13
The three biggest areas of US defense manufacturing from 2013 to

present have been centered in 1) aircraft, such as the F-35 fighter
jet – a $379B federally-funded project – or the Boeing corporation,
2) aircraft and military parts, and 3) tanks, artillery, missiles, rockets,
guns, and ammunition (Baker 2016; ITA 2016). The dominance US
companies hold over these areas of the defense-related goods
market has also been bolstered by low oil prices.
Another reason similarly concerns the US government. In the

hundreds of thousands of patent applications (intellectual property
rights) filed each year in the US, “one for every 6,628” is flagged
for their defense-related applications (Brustein 2016). A keyword
search for the word “defense” yielded over 55,000 patents in the US
Patent and Trademark Office, “aerospace” over 38,000, and “military”
over 80,000. These patents are registered by private companies
or individuals to increase their market competitiveness; simply
put, having the resources to innovate and protect defense-related
intellectual property has supported the dominance of US industry.
Additionally, the US government can seize control of patents it
deems a “national security” interest in the technology or product
and legally prevent any foreign or domestic non-governmental
authority from further developing or using the intellectual property.
This allows the US to create a monopoly over certain defense-
related technologies that: “can even help [US] defense contractors
keep rivals in the dark”, effectively reducing their competition
(Brustein 2016).
The US dual-use goods industry is also home to a wealth of

resources designed to enhance US companies’ domestic and
foreign market competitiveness, such as funded support for
export development and compliance. The US Department of
Commerce administers the EAR – which regulates US dual-use
goods exports, ensuring US exports have secure supply lines – and
the EAR has become the global standard for export regulation,
adopted in other foreign markets, such as Japan. The Department
of Commerce also administers the Bureau of Industry and Security
(BIS) which advances: “US national security, foreign policy, and
economic objectives by ensuring an effective export control and
treaty compliance system and promoting continued US strategic
technology leadership” (BIS 2016). In addition to the financial
resources supporting US companies’ competitiveness on domestic
and foreign markets, they benefit from substantial export resources,
which help US companies emerge as market leaders.
DTrade is an electronic defense export licensing system managed

by the Directorate of Defense Trade Controls (DDTC), administered
by the US Department of State. The DDTC, in general, supports:
“any US person who is a defense trade registrant and wishes to …
export unclassified defense articles”, and this offers US companies
a competitive advantage in the private sector, as well as the public

• 27
sector (DDTC 2016). The DDTC and DTrade offer valuable resources
for coping with trade-related issues in global defense supply chains.
Additionally, the International Trade Administration maintains the
website www.export.gov, which provides critical resources to US
aerospace and defense businesses, including logistics support, trade
leads, events, trade missions, webinars, and assistance with trade
problems or barriers to trade.
The report parties highlight this wealth of governmental resources

– which is not to overlook the private sector and trade associations’
support – available to US defense companies to demonstrate the
scale of market and trade-related assistance that bolsters the US
defense industry and companies’ competitiveness. While it would
be idealistic to suggest that Portuguese SMEs could identify and
allocate such extensive resources, small-scale supports systems –
public or private – can impact and shape continued Portuguese
dual-use goods export competitiveness on US and global markets.
By exploring these resources, Portuguese SMEs and relevant
authorities, interest groups, and trade associations can begin
forming long-term plans to support Portuguese dual-use goods
export development on a smaller scale.14
As highlighted previously, government contracting comprises the

bulk of US defense-related market opportunity, and US companies
are more likely to be contracted by their government, discussed
below. Figure 2.2 below highlights the progression of US defense
spending, which has declined relative to the previous five years.
Federal defense spending is on a slow rebound relative to 2015’s
peak decline ($560B), with a $607B ten-year average federal
defense budget (2010-2020). The projections for years 2018 to 2020
remain estimates because the current defense budget – due to be
renegotiated beginning February 2017 – continues through fiscal
year 2017.
Figure 2.2 – US Government Defense and Military Budgets

(2010-2020, projected, billions)15
14 See Arsenal AD and Elvior in Appendix 2 for examples.

15 Figures sourced from DoD (2016).

The impact of the new Trump administration on the federal defense
budget is uncertain. President Trump has both indicated that he
will focus on enhancing the US defense industrial base through
domestic manufacturing and work towards driving down the cost
of big ticket defense spending, such as Lockheed Martin’s $379B
F-35 by soliciting a bidding war with Boeing’s F-18 comparable
fighter jet (Baker 2016; Drew 2016; Sandler, Travis, and Rosenberg
2016). Future advances and competitive advantage in US defense
manufacturing are expected to be in hypersonic weapons,
robotics, undersea systems, cyber warfare, and other cutting-
edge technologies in the areas of next generation intelligence,
surveillance, and reconnaissance (ITA 2016).
While a significant portion of the US defense budget is reserved for

military spending, there are considerable resources for acquisitions
and procurement from the private industry in government
contracting. From 2008 to 2014, an average of 51% of total DoD
spending is allocated to contracting, where private industry
responds with bids to government tender announcements. DoD
contracting funds peaked in 2009 at $412B (53%) when total
DoD funding also peaked at $775B; as a percent of DoD funding,
contracting peaked in 2008 at 55% (Ellman, Hunter, McCormick,
and Sanders 2016). In 2012 and 2014, the share of DoD contracting
funds was at their lowest, at 48% and 46%, respectively. This
includes export opportunities for SMEs. However along with having
a wealth of resources – financial, intellectual property rights, trade
facilitation, and export development – US companies receive
preference on government defense contracts.
Certain provisions – such as the Buy American Act (BAA), discussed

further in Section 3 – limit when government contracting can
procure goods and services from foreign companies. Gourley,
McCarthy, and Cliffe (2009) argue that limiting procurement
to US companies is relatively rare in practice due to extensive
exceptions in DoD procurement rules, US free trade agreements,
and WTO rules. Preference in government contracting supports US
companies’ competitiveness on the US dual-use goods market, but
it does not prohibit foreign competitors in most cases.
The Information Technology and Innovation Foundation estimates

there are approximately 2,700 prime US government contractors –
foreign and domestic – and about 30 of these “primes” receive more
than 40% of contracts (Steinbock 2014). ITA (2016), however, reports
that between 60% to 70% of the federal defense contracting
budget is subcontracted (from prime contractors to subcontractors),
which is consistent with interview data from industry experts.16
While primes may lead the US defense-related goods supply chain,
subcontractors are free to determine their own goods suppliers,
many of which are SMEs. ITA (2016) also suggests that while large-
scale defense prime contractors have substantial control over global
defense supply chains, building relationships with both prime and
subcontractors offers significant opportunities.
Again, Section 4 will further discuss such opportunities, but the
16 See Interview 4, Appendix 3.

• 29
Center for Strategic and International Studies (2016) found that
in 2014 – the year with the most recent data when the study was
published – small businesses accounted for their largest share of
DoD contracting, almost 20% (Ellman, Hunter, McCormick, and
Sanders 2016). In the same year, medium-sized businesses received
just over 20%, large businesses just over 30%, and the “Big Five”
– Lockheed Martin, Boeing, Northrop Grumman, Raytheon, and
General Dynamics – around 28% of government defense contracts,
down from around 32% in 2013 (Ellman, Hunter, McCormick,
and Sanders 2016). A defense contractor gave an idea of how the
industry breaks down contracting requirements and business size.
For example, when Lockheed Martin won a large contract, they not
only split part of the contract with Northrop Grumman but also
small business contractors.
[Northrop Grumman] would provide up to 10% of staff, and when

it comes to smaller defense companies, we would probably have
on staff, probably, about 4 people. In my group from Lockheed
Martin, there were roughly 100 people. If that gives you an idea,
you’re working with 5 to 10% of Northrop Grumman and 5 to10%
with the small contractor… There are other parts of the project that
I would not have been read into and wouldn’t know about those
subcontractors. I don’t know the general size of their firms; people
tend to hold back the size of their firms in our industry. You know
the rough size, say about 50 to 100 employees, but you don’t have
insight into their multi-regional operations, which makes it difficult
to quantify. On the second program I worked on for one of the
Big Five, I was a subcontractor through Itec, which has 50 to 100
employees; they are considered relatively small in scale.17
The opportunities for small to medium-sized businesses in US

government defense contracting – around 40% of all contract
recipients in 2014 – are supported by recent governmental
requirements These state that a percentage of government
contracts must be awarded to small businesses and / or minority-
run businesses, such as women, veterans, and ethnic minorities
like Native Americans. “Specialty provisions and a push on behalf
of the [Small Business Administration] SBA have increased their
share.”18 This percentage ranges between 12% and 24%, and the US
government has set goals to continue increasing this contracting
share (GSA 2015). Therefore, while there are provisions on the US
defense-related market that support US businesses, there are also
provisions that generally support SMEs, which includes foreign SMEs.
Sections 3, 4, and 5 will detail the extent that these provisions present
opportunities for Portuguese SMEs exporting dual-use goods.
In exploring the non-US competitors on the market, there are two

general ways of understanding competitiveness: North American
Treaty Organization (NATO) members and non-NATO members.
NATO members and major US allies – France, Canada, Germany,
and the UK – are the top four exporting countries on the US
defense market (Census Bureau 2015; Shanker 2016). From 2011 to
2015, France maintained its position as the top country exporting

defense-related goods, particularly in aerospace, and Canada as
the second largest exporting country on the US market; in 2013,
Germany temporarily outcompeted the UK, and it has held its
fourth-place position since (Census Bureau 2015). Italy is the only
other NATO member that lands in the top ten US defense and
aerospace exporting countries. Belgium, Hungary, the Netherlands,
Poland, and Turkey are the remaining NATO members that fall in
the top 20 (Census Bureau 2015).
Non-NATO members fall into two categories: NATO partners – which

are not members – and non-partners. NATO partners – part of
NATO’s Euro-Atlantic Partnership Council, Mediterranean Dialogue,
or partners across the globe programs – that are top 20 countries
exporting defense-related goods to the US include: Australia,
Japan, Israel, Russia, South Korea, Sweden, and Switzerland. It is
worth highlighting that Australia, Japan, Israel, and South Korea,
in particular, have exceptional defense relationships with the US
(Census Bureau 2015; Shanker 2016). A select few non-NATO partners
are top US defense exporting countries, including: Brazil, China,
Mexico, Singapore, and Taiwan (Census Bureau 2015; Shanker 2016).
Looking at aerospace in particular, the 20 countries that comprise

the top exporting countries rankings hold, on average from 2011
to 2015, 96% of the total US market (Census Bureau 2015). The
Information Technology and Innovation Foundation argues that
domestic companies and those from NATO allied countries
previously dominated the US defense-related goods market, but
in recent years, price competition from China and other emerging
economy countries has changed the composition of foreign
competition on the US market (Steinbock 2014). “I don’t think it’s
an issue of buying specifically Chinese or German goods; if it’s out
there, they’ll go after it; if someone has a particularly good they
want, they can go after it.”19
A former US government defense trade official explained how non-

NATO countries are becoming more competitive on the US market.
“We do get a lot of computer products from Asia, and it puts some
competitiveness questions into perspective; our regulations are the
best, and so if we’re taking their products, then they are perfectly
safe and competitive on the US and global market.”20 She further
stated that the US State Department must balance its concern for
regulation, which can pose market barriers for non-NATO countries,
with its mission to promote US defense exports in foreign markets,
particularly those top global defense-related goods (non-NATO)
importing countries detailed above. This requires the government
to make tradeoffs. “Defense is such a huge segment of the US
economy, $400B a year.”21 To maintain its growing export market,
the US cannot afford to discriminate against dual-use goods –
especially those with fewer regulations – from non-NATO countries.
Figure 2.3 explores the individual market shares of each of the top
five countries exporting specifically defense and aerospace goods to
the US (2011-2015); Figure 2.4 reflects the individual market shares
21 Ibid.

• 31
of each exporting country that fall below the top five but in the
top ten, and Figure 2.5 examines the market shares breakdown
of the collection of countries that come in and out of the ranks
between top ten and top 20. The top five (Figure 2.3) exporting
countries comprise an average of 71.5% of the US market (five-year
average of $37.9B), but their dominance over the US market share
has declined, reaching a peak low of 70.6% of the market in 2015
(Census Bureau 2015). The top ten (including those in Figures 2.3
and 2.4) comprise 86.8%, and those exporting countries ranking in
the top six through ten positions (Figure 2.4) account for an average
of $8.1B (15.3%) of the US market (Census Bureau 2015). The top 20
(Figures 2.3, 2.4, and 2.5) comprise just under 96% of the total US
aerospace market, and those exporting countries ranking in the top
eleven through 20 positions (Figure 2.5) account for an average of
$4.9B (9.2%) of the US market (Census Bureau 2015).
Figure 2.3 – Defense and aerospace exporting countries by

market share (ranks 1-5, 2011-2015, billions)
◼ France
◼ Canada
◼ Japan
◼ UK
◼ Germany

market share (ranks 6-10, 2011-2015, billions)22
◼ Mexico
◼ Italy
◼ Brazil
◼ China
◼ Israel
22 In 2015, China and Israel were displaced from the top ten by Singapore and Korea.

market share (ranks 11-20, 2011-2015, millions)23
◼ Korea
◼ Poland
◼ Beligum
◼ Australia
◼ Switzerland
◼ Netherland
◼ Sweden
◼ Turkey
◼ Singapore
The calculations in the paragraph above indicate that over a five-

year period, these top 20 to 22 defense and aerospace exporting
countries occupy an average annual US import market of $50.9B, and
this market has grown steadily, without interruption, from $40.7B
in 2011 to $59.1B in 2015 (Census Bureau 2015), further validating the
assessment above that the US defense import market is growing.
These top exporting countries also maintain 96% of the total US
defense and aerospace import market, leaving an average of 4% of
the US import market, open to competitors from other countries –
NATO members, NATO partners, and non-NATO countries.
While this would initially appear discouraging for Portuguese SMEs

looking to export aerospace or defense-related goods to the US,
on average, the market value of this remaining 4% equates to $2.1B
(Census Bureau 2015). More encouraging yet, this value has also
steadily increased from $1.6B in 2011 to $2.5B in 2015 – in aerospace
alone (Census Bureau 2015). Given the rapid development of
the Portuguese aerospace and defense industry’s exports, this
assessment highlights the extent of opportunities for SMEs on the
US dual-use goods market. Additionally, while Defense News (2016)
maintains that the US controls 60% of the global defense market – a
hallmark of its competitiveness – Foreign Affairs magazine estimates
the US’ global market share at only to 30% due to inefficiencies
in defense-related procurement and acquisitions (Caverley and
Kapstein 2012).
Moriarty (2013), also writing for Foreign Affairs, argued that: “even if
that were true, it would be a secondary concern” because the market
is simply accommodating for diverse new suppliers, such as India
or Portugal. The US defense market is a highly sought after export
destination for many companies and countries exporting dual-use
goods, and there is evidence to suggest that cost competitiveness
has become more important than whether a country / company is a
NATO member or partner (Steinbock 2014). However, with a new US
23 To maximize figure readability, exporting countries that were not in the top 20 three or
more years (out of five) are not included in the figure. This includes Taiwan - ranked 20th in
2011 and 19th in 2014 - and Russia - ranked 20th in 2015.

• 33
executive administration in office, it has yet to be seen if economic
concerns will supersede security concerns, particularly with dual-use
electronic goods that can be hacked or tracked.
2.3 Political economic changes to the US market
This section attempts to highlight some political and economic

changes that may impact the US defense-related goods market.
These changes can be and are similar to trends in that they affect
both short and long-term markets. In the defense market, short-
term changes have a longer duration, compared to other industries,
such as home décor. Short-term changes in home décor would
be seasonal, lasting three to four months; whereas, in defense,
short-term changes can be expected to last one to two years, such
as federal defense budgets. Long-term defense-related market
changes can last for several years to decades. The reason that short
and long-term changes have a longer impact on the US dual-use
goods market is deeply embedded in national security strategy.
As the above section has highlighted, the bulk of the US dual-use

goods market is centered on government contracting. Therefore, the
US executive and legislative branches’ funding priorities for national
defense budgets is the primary factor influencing political economic
changes to the US defense-related goods market.24 Secondary, the
next most important political economic factor for the US defense-
related goods market is the new executive administration.
This section will focus on breaking down these two changes to

outline what SMEs can expect in a 2017 and 2018 (and onward) US
defense-related goods market. To begin, a Congressional budget
expert summed up the political economic juxtaposition facing the
future of US defense spending.
Going forward, any of the strategies that existed in the past are
not going to be the same; we have a new Congress and a new
administration – a very different new administration. The Obama
administration has used things like the Budget Control Act and
a need to raise domestic spending in the past to keep defense
spending in line; they were very successful over the years at
keeping the budget defense down. In most cases, if you look at
Congressional records, you’re going to see that Congress feels
strongly against raising the defense budget.25
Figure 2.2 from Section 2.3 highlights that US national defense

budgets have scaled down since their peak but are also slowly
building back up. National defense spending for goods and services
peaked upwards in 2009 at $775B and downwards in 2015 at
$496.1B (Department of Defense 2015). Estimates for 2018 to 2020
US defense budgets are expected to increase at a CAGR of 1% but
to remain under $600B as Congress has taken a firmer stance on
reducing national defense spending.


An example of Congressional oversight into national defense
spending, some of the “Big Five” defense contractors – Lockheed
Martin, Boeing, Northrop Grumman, Raytheon, and General
Dynamics – have been challenged by Congress for their failure to
deliver more cost-effective, on-time products. Lockheed’s $379B
fighter jet, Northrop Grumman’s $15.3B Triton drone program,
and Raytheon’s $3.6B OCX GPS ground station have each faced
Congressional inquiry over doubling budgets, delayed delivery,
and compatibility concerns (Robotics Business Review 2014;
Clark 2016). Congress’ dissatisfaction with US defense-related
businesses’ performances culminated in December 2016 when
Congress discovered that the DoD effectively ignored a report from
the Defense Business Board proposing $125B of waste-reduction
measures to the DoD’s budget (Gould 2016).
Further, Senate Minority Whip and ranking member of the Senate

Appropriations Defense Subcommittee Dick Durbin suggested
an additional $36B could be saved through reforms in contracting
dual-use goods and services (Gould 2016). Durbin highlights that
private sector goods and labor are two to three times more cost-
effective than government or military, and: “despite numerous
reports and proposed reforms by the Government Accountability
Office, the Department [of Defense] does not adequately utilize this
information” (Gould 2016).
Relatedly and almost simultaneously, it appears that even when

budget cuts come from inside the federal defense agencies, these
cuts are also ignored. Defense Secretary Ash Carter ordered that
the US Navy cut $17B from its budget over the next five years, and
the Navy failed to submit a budget that incorporated the cuts
(Larter 2016). Carter had directed the Navy to cut large shipbuilding
programs and transfer funding to weapons systems and aircraft,
and Navy Secretary Ray Mabus has refused the 2018 budget
cuts in lieu of continuing to build a fleet of ships (Larter 2016). A
Congressional budget expert in defense explained that: “you’ll often
see [the defense budget] be brought down in one area but up in
another. There’s more fretting about how to protect certain things
than bring things down, overall.”26 Negotiations for the 2018 and
2019 defense budgets begin in February 2017, and it is likely that
defense budget cuts will return to the Congressional agenda.27
Combined, Congress is looking for $140B to $180B in budget cuts

to US defense-related goods and services over the next five years.
However, the US defense industry has demonstrated greater
autonomy and authority over its budget than the agencies that
fund it. Perhaps this is because government contractors are aware
of how budget cuts have “suppressed the industry” in the past.28
Again, Figure 2.2 outlines the 2018 (projected) US defense budget at
$556.4B. A $160B budget cut – average between $140B and $180B
in cuts – represents almost 30% of the 2018 US defense budget.
Although the US has scaled down its military operations, a 30% cut
across any government agency – much less one with over $24B in

• 35
2016 exports and growing – is unlikely. As the Congressional defense
budget expert argued: “When you look at the amendments, folks
are increasing defense spending more than decreasing, and if they
are cutting, it’s to put the money somewhere else.”29
This is particularly the case as the DoD expects the 2018 to 2020
defense budgets to continue to increase at the 1% CAGR, discussed
above. As the second political economic factor discussed in this
section will further below, there are many unknown changes that
will come from President Trump, and the US defense budget and
related market for imported dual-use goods are likely to be affected
whether or not Congress and defense agencies can agree. “A lot of
times what they cut is about finding the path of least resistance;
that will continue to be the case. That maybe is the best strategy
going forward – looking at where there is the least public and
political resistance in the defense budget.”30
The culmination of these political economic events begins to

outline why the US defense-related goods (and services) market
is opening to cost-effective solutions, and this could present
considerable opportunities for Portuguese SMEs. Section 2.2
found that, increasingly, non-NATO members or partners are
top US defense exporting countries (see Figures 2.4 and 2.5),
including: Brazil, China, Mexico, Singapore, and Taiwan. Steinbock
(2014) argues that the US dual-related goods import market has
historically been dominated by NATO allies and advanced Western
economies, but new defense-related goods competitors are offering
innovative technologies with more cost-efficient options.
Steinbock points to China’s unmanned aerial vehicle industry,

particularly Yilong by Aviation Industry Corporation, Russia’s arms
exports, and Sweden’s Saab Gripen fighter as key examples (2014).
On the link between cost-competitiveness of imported goods,
US defense alliances, and defense spending, an industry expert
highlighted that: “China and India are coming up more in these
discussions, whether you’re talking about nuclear weapons or
defense budget. It’s going to be interesting with respect to the
defense budget to see what direction the Trump administration
chooses to go. Are they going to invest in heavy weapons systems,
are they going to pull back from traditional alliances?”31
Steinbock (2014) also found that US defense company executives

feel secure in their technological advancements but threatened by
increasing competition from developing and recovering economies
that offer comparable goods for lower prices. This highlights
an emerging market gap where Portuguese SMEs can develop
a competitive edge. Unmanned aerial platforms, intelligence
surveillance, and reconnaissance, missiles, and satellites are
particular areas where cost-efficiency appears more favorable than
traditional national security and geopolitical relations. Portuguese
SMEs that can offer cost and product innovation are well poised to
continue growing small businesses’ share of the US defense market
30 Ibid.
31 Ibid.

(see Ellman, Hunter, McCormick, and Sanders 2016).
Moving to the second political economic factor influencing the
US dual-use goods market, predicting or estimating changes as a
result of the new executive administration has been the focus of the
global media since President Trump won the election in November
2016. The media offers insights but little certainty on what can be
expected. This discussion aims to establish some degree of certainty
between two polar developments from the incoming Trump
administration: a focus on cost-efficiency and a ramping up of the
US military manufacturing industry.
Beginning with the new administration’s focus on cost-efficiency,

Section 2.2 highlighted that President Trump indicated that should
Lockheed’s F-35 continue to be practically and fiscally problematic,
he would solicit a bidding war between Lockheed and Boeing
to drive down the cost of the next generation of fighter planes.
Indeed, Lockheed recently announced delays and increased
costs associated with the delivery of the fighter plane (Seligman
2016). This is an early indication that the Trump administration
intends to play a stronger role in reducing the size of the US
defense budget, which some have argued puts US defense-related
goods manufacturing at a distinct disadvantage due to higher
production costs (Drew 2016). For example, one US naval and
aerospace manufacturer agreed that there is a feeling of insecurity
surrounding the new administration’s policies and the future of
aerospace funding.
With the space side, we don’t know so much about what will
happen with the new administration, particularly with NASA,
which is where the money comes from for our – and most others’
– projects. For instance, we’re involved with the new Boeing
space launch rocket. [Trump] could turn that spigot off, and that
would take away about 40% of our sales. It wouldn’t likely happen
overnight; those decisions tend not to happen quickly.32
Defense industry experts indicated that Trump may look to

increase the defense budget in more traditional areas, such as
naval destroyers, submarines, and bomber aircraft (Erwin 2016).
The US manufacturer and government contractor quoted above
also offered that: “if we’re talking about the funding horizon for
government programs, the Navy seems very stable. Submarines are
key assets, in terms of surveillance and defense, and there’s a push
for more. Even with the new administration, I think that’s secure.
With that being half of our business, we feel pretty secure.”33 This
would align with the interests of the base of voters that helped
him into office, but it represents a strong departure from the US
defense industry’s shift – under President Obama – to more modern
weapons systems, such as cybersecurity, electronics, robotics,
artificial intelligence (AI) technology, autonomous systems, additive
manufacturing, and software (Erwin 2016).
This shift has seen an increased role from the private sector in the
defense industry, and defense industry expert and former staffer

33 Ibid.

• 37
in the Senate Armed Services Committee Lucian Niemeyer finds
it unlikely that the Trump administration would reverse the US
defense industry’s shift to enhanced reliance on the private sector
(Erwin 2016). This was confirmed in interviews with industry experts.
“One thing to keep in mind is how the military does its business; it
is becoming increasingly reliant on private suppliers. This has been
the general trend for last 10 to 15 years and is continuing.”34
Several experts agreed that the increased role of the private sector
under President Obama looks to continue under President Trump
given recent rhetoric and campaign pledges. An editor from a
leading defense journal offered: “what everyone is saying that
there will likely be an uptick in defense-related business with the
new administration.”35 While this could signal positive news for
Portuguese SMEs, it is more difficult to say what areas of defense
will be prioritized among the private sector and how open the
US defense market will be to foreign suppliers. President Trump
promised in December an “arms race” and, in particular, to ramp up
the US’ nuclear armaments, and more recently, he seems to have
targeted North Korea for a potential competitor in this arms race.
While this development has the potential to present opportunities for

the US’ NATO allies in export cooperation, President Trump has also
indicated that, in a historic shift, he intends to de-prioritize the US’
relationship with NATO and other NATO countries. It would appear
that his strategy on re-establishing the health of the American
manufacturing base will be, at least in part, orchestrated through
the defense industry, and this could present difficulty for Portuguese
SMEs looking for opportunities on the US defense market. Continuing
the air of uncertainty that surrounds President Trump’s effect on the
US defense industry, an expert offered her analysis.
It’s really fascinating. It’s all about business for him, and so I don’t
know if – and this is speculation – he runs against China and
bullying doesn’t work, does he fall back to more traditional allies?
Does he go more towards Europe in deals that can be made
without having that PR fight first? …It will be very interesting; it’s
so hard to tell right now how much of the new administration’s
manufacturing restoration rhetoric is lip service. I suspect a lot of
it, and it will be hard to move things.”36
Major geopolitical shifts with the incoming administration could

also open up market opportunities for Portuguese SMEs. President
Trump has been vocal about the US’ trade relationship with China
and Mexico – two of the largest exporting countries on the US
market across industries. Increased tariffs and decreased access
to the US market for these two exporting countries could produce
a market gap in the defense-related goods market. There is also
speculation that the incoming president’s fondness for Russian
President Vladimir Putin could result in the US market opening
back up to Russia after years of sanctions following Russian military
aggression in Eastern Europe.

However, in early January 2017, Congress has initiated further
sanctions against Russia, and despite President Trump’s somewhat
unclear relationship with President Putin, even Congressional
republicans are standing in strong support of continued – and
in some cases, increased – economic sanctions against Russia
(Pilkington and Pengelly 2016; Kopan 2017). Russia – along with China
and Mexico – is a significant competitor on the US defense-related
goods market, and any measures against their exports could enhance
a supply gap in dual-use goods’ supply chains (Shanker 2016).
This discussion of the second-most impactful factor influencing the

political economy of the US defense-related goods market reflects
the current state of affairs in the US – uncertainty (Warwick 2016).
However, the report clarifies that the state of uncertainty under
which the report was written is unlikely to persist through the third
quarter of 2017. At this time, the 2018 and 2019 defense budgets
will be debated, negotiated, and possibly funded in Congress, and
the Trump administration’s positions on trade, defense, technology,
manufacturing, China, NAFTA, Russia, and foreign imports will begin
to manifest into a more coherent and cogent landscape.
In summary, the report’s assessment of political economic factors

influencing the US dual-use goods market highlights a number of
conclusions, including:
»» The US defense budget will continue to increase at a low rate

(1-2%) unless the new administration enters into a serious foreign
military campaign.
»» Non-NATO member or partners will become increasingly
competitive on the US defense-related goods market, including
China, Mexico, and Russia unless the Trump administration
initiates tariff barriers for Chinese goods.
»» The most in-demand dual-use goods cannot be determined
due to political economic changes expected in early to mid-
2017. It is likely that if more traditional goods for shipbuilding
and bombing take priority, US manufacturing will be promoted
and preferred over foreign suppliers. However, if more modern,
technology-driven goods are prioritized, foreign suppliers that are
cost-competitive should continue to find opportunities on the US
defense market.
»» The private sector will continue to play an important role in the US
defense market.
»» Though presently unknown, President Trump’s trade policy could
induce a market gap in the US defense-related goods market and
/ or reinvigorate US defense manufacturing.
»» Portuguese SMEs can secure competitive and comparative
advantages through NATO relations, cost-innovation and
cost-efficiency, and small business “set-asides” in government
contracting, discussed further in Section 4.
2.4 Security-Related Changes to the US market
The most significant security-related changes influencing the US

dual-use goods market are a shift further east (Browne 2017). As

• 39
President Trump continues to 1) deprioritize the US’ contribution
and leadership in NATO and among its European allies, 2) use
forceful rhetoric about the US’ role in the fight against ISIS in Iraq
and Syria, 3) indicate that relations with Iran could return to what
they were before the nuclear deal reached in 2015, 4) inflame
tensions with the increasingly nuclear-minded North Korea, and
5) suggest potential partnerships and improved relations with
Russia, the potential for monumental security-related changes
to the US market loom. However, it is not only President Trump’s
administration that will affect security-related changes to the US
defense-related goods market.
Mitigation of foreign ownership, control, or influence (referred

to as FOCI) in the US defense-industry greatly impacts the US
dual-use goods market, particularly by increasing regulation
to ensure dual-use goods do not find their way into terrorist
networks. Apprehension around foreign companies in the US
defense supply chain has conditioned the US market to prefer US
companies in recent years. As supply chains become increasingly
complex, regulation and licensing – two subjects of Section 3 – are
increasingly important, which could present challenges to SMEs.
Security-related threats and challenges to Portuguese SMEs

represent largely unpredictable events and circumstances; for
example, the BIS made further changes on January 15, 2017 to
their May 2014 existing rules and regulations on export controls on
satellites and related articles (Sandler, Travis, and Rosenberg 2017ii).
If SMEs are not well connected to the US defense industry and
related market communication, these changes could pass without
SMEs’ awareness. This section examines the various security-related
changes that could the potential to impact Portuguese SMEs
opportunities to supply the US market. The aim is to contextualize
challenges that SMEs may face in export development to better
prepare sustainable paths into the US dual-use goods market.
Perhaps the most significant security-related issue that will shape

the immediate future of the US dual-use goods import market
is President Trump. Across interviews, industry experts – mid-
level career professionals and veterans with several decades of
experience – were unable to provide definitive information on
what security-related changes can be expected as he settles into
executive office. According to the editor of a leading defense
journal: “I can’t say for certain, but from what I am hearing, it would
be more in domestic manufacturing than imports.”37
Reflecting on the five security-related positions regarding President

Trump that were highlighted in the introduction to this section,
none have the potential to affect the US market for imported
defense-related goods more than his campaign promise to restore
the health of domestic manufacturing. Several primary and
secondary sources confirm that there is significant likelihood that
the US defense-industrial sector will play a key role in his immediate
policies, particularly in naval and air defense-related manufacturing
(Thompson 2016).

However, President Trump has also made related campaign
promises that these domestic manufacturing jobs will offer a
decent wage to American workers, and as American labor is costlier
than many foreign competitors, defense contractors and the
private sector may continue to opt for cheaper, foreign imports over
American-made defense-related goods. One exception to this could
be made through public policy, such as enhancing provisions in the
Buy American Act (BAA) – discussed further in Section 3. Therefore,
at this time, as interviews have confirmed, it is difficult to project
how President Trump will shape security-related concerns. As
highlighted above, NATO and other strategic alliances – with the UK
or Australia, for example – could become less of an influence when
narrowing partnerships and purchasing defense-related goods.
Strong anti-China, anti-Mexico – and to a degree, anti-Russia –

sentiments are evolving in US security circles (Congress, Trump’s
cabinet, defense contractors), as well as distrust of key Middle
Eastern / Asian countries, such as Turkey, Iran, and North Korea,
and this could enhance preference for European – and particularly
Portuguese – products and partnerships if marketed strategically.
“Portugal remains a relatively neutral country, politically, speaking
for the US to do business. It’s easy for us to get along with them.
There’s nothing political that would serve as barrier, compared to
other suppliers like China or Russia.”38
Other security-related concerns that have the potential to shape the

US defense-related goods market include climate change, cyber
security, and technological innovation. Beginning with climate
change, increasingly volatile weather and erosion of habitable and
farmable land due to increasing ocean levels pose public health
and security threats. For example, small group populations in Alaska
and Louisiana have already lost habitable land to rising sea levels.
In Louisiana, this is occurring at a rate of one inch every three years,
which is the rate of land loss on the “mainland” (EPA 2016). Though
not well known, there are number of habitable – increasingly
less so – islands and peninsulas off the coast of Louisiana where
populations are increasingly affected by climate change.
Farmland in states that border the Gulf of Mexico, including Texas,

Louisiana, Mississippi, Alabama, and Florida, and farms along
major rivers and others reliant on large, underground aquifers
have witnessed and are expecting agricultural yield decline (EPA
2016i). Additionally, lethal and infectious diseases trapped in more
northerly permafrost are beginning to emerge as a public health
threat with the potential to: “reverse the last 50 years of public
health advances” (Sarfaty 2016).
The effect of these climate-related changes on the US defense-

related goods market is that the US government, cities, counties,
and individual citizens will be increasingly encouraged to prepare
for food volatility / insecurity, climate-related disasters, public safety,
and emergency responses. The commercial market for certain
defense-related goods – such as unmanned aerial vehicles to
survey damage, emergency water purification systems, or satellite

• 41
communications – may be better suited than government to supply
these emergency preparedness needs.
A defense trade lawyer suggested that when the government

cuts defense funding, many of his clients look the private sector.
“It was more a re-evaluation and evolution of the market for the
businesses I worked with.”39 This presents opportunities for SMEs
that can quickly get cost-competitive and certified products
– discussed further in Section 3 – to those in need, whether in
response to a devastating hurricane like Katrina (2005) or Sandy
(2012) or to stock small town hardware and farm supply stores.
A defense market advisor contributed that: “in Hurricane Sandy,
there was no infrastructure to handle the storm, and that exposed
flaws and needs. There weren’t that many tie-ins with defense to
the environment before that. In Hurricane Katrina, you did see a
need for military–grade equipment for rescue operations. There’s
definitely an environmental component now.”40
Secondly, cyber security has become a, if not the top, concern

for governments, companies, and individuals, and the scale of
the threat appears to progress more rapidly than solutions. The
“2016 Dyn Hack” was compounded by the interconnectedness of
global servers and the “Internet of things” and resulted in several
major websites, including Paypal, Twitter, and major media sites
going offline (Peterson 2016). In this respect, there is no greater
intersection between international trade and defense companies
than the risk cybersecurity threats pose to international commerce.
SMEs that are able to market their cybersecurity products effectively
to those engaged in global commerce can uncover extensive
opportunities with small to large-scale partners in the US. With the
EU leading data security and privacy innovation, Portugal is well
suited to supply US governments, companies, and individuals, and
the expansive US private healthcare market could also become key
new partners with the shift towards digitization in the medical field
(European Commission 2016).
Thirdly, technological innovation poses not only a security-related

risk but also a solution. One US defense industry expert said the
best way for Portuguese SMEs to get on the US market is to: “look
for bigger partners that want to support and collaborate with their
innovation and demonstrate [innovation] – new tech products,
weapons systems”.41 This was confirmed by another industry expert’s
advice that SMEs should: “look at big players in the market; they can
rely on the Portuguese MoD’s contacts with the US military. The MoD
probably has an industry promotion angle as well.”42
The sharing economy, additionally, will link cybersecurity and

technological innovation in new and opportunistic ways. If SMEs are
producing IT products that enhance data security, they could find an
emerging market with US and global companies like Uber, Facebook,
AirBNB, Amazon, and PayPal, companies providing Internet-

connected products, or with new virtual reality companies also
working with big data security requirements. While these companies
have dedicated teams to address emerging security needs, SMEs
may uncover where their product(s) address immediate needs, cost-
effectively or have their technology acquired through partnership. If
companies are willing to sell related intellectual property rights along
with products, SMEs can take the advice of the defense industry
expert quoted above and market their products with a focus on how
they address bigger partners’ needs.
In summary, the report’s assessment of security-related factors

influencing the US defense-related goods market highlights a
number of conclusions, including:
»» A strategic shift to the east (China, Russia, Syria, Iraq, Iran, North
Korea) for US security priorities
»» President Trump’s effect on the US defense-related market has
yet to be determined; however, he has already taken action and
pledged to restore American manufacturing. Several interviews
reflected that this could affect the defense industry. President
Trump has also concurred with Congress that defense spending
in certain areas, such as aircraft, needs to be reevaluated with a
priority on reducing spending through increased competition,
although the focus on competition may be exclusively domestic
»» A key issue with US manufacturing, compared to Chinese or
Portuguese, is higher production costs, and with President Trump
and Congress’ displeasure with the size of the US DoD budget,
cost-innovative solutions may find a greater market in the US than
in the past
»» Climate change, cybersecurity, and technological innovation
could stimulate new opportunities for Portuguese SMEs exporting
defense-related goods in diverse new or emerging industries, such
as agriculture, public health and safety, emergency preparedness,
global finance and commerce, and within the sharing economy.
2.5 Competitiveness Factors Influencing the US Market
The final characteristic that helps to outline the US market for

dual-use goods is competitiveness, which has been featured
throughout Section 2. For example, Section 2.2 characterized
the US import market for defense-related goods. This section
highlights the highly competitive nature of the US defense market
through profiling the US domestic market, top US import market
competitors, Portugal’s competitiveness, and exporting countries
with profiles similar to Portugal.
Beginning with the composition of the domestic US defense market,

it is fair to say that large companies dominate, although no expert
interviewed was able to offer a percentage of the US domestic
market that large companies occupy. In this case, the nomenclature
“Big Five” is an indication that large companies – and a few large
companies at that – control the majority of the domestic market.

• 43
Generally, when a company becomes a primary [contractor
for a US government project], they will split and share the
responsibility among even their competitors. The defense industry
is unique like that. In my case, all Big Five companies bid for the
contract, but because Lockheed Martin had control, they won
the bid and split the contract with Northrop Grumman. I’ve also
worked on projects and programs with Honeywell.43
Of the top 100 global defense companies in 2016, the Big Five
ranked first (Lockheed Martin), second (Boeing), fourth (Raytheon),
fifth (General Dynamics), and sixth (Northrop Grumman), and these
rankings have remained fairly consistent for a decade with minor
fluctuation (Defense News 2017).44 US companies occupied 41 of
top 100 defense companies globally in 2016 or 60% of total global
defense revenue, up from 54% in 2014 (Defense News 2017).
However as discussed in Section 2.2, there are government

contracting requirements in place that are beginning to affect
market dominance by large companies. More than half of top 25
global defense companies in 2016 have lost more than 10% in
revenue from 2014 to 2015 (Defense News 2017). Several small to
medium-sized defense-related businesses have grown, and from
a sampling of top small and medium-sized US businesses, the
majority supply on aerospace, cybersecurity, and information and
communications technology (ICT) products and services. The US
domestic market, therefore, is highly competitive in these areas.
“The foreign competitors I can think of are Canadian and British.

Certainly, we have a special relationship with the “Five Eyes”.”45
The Five Eyes are an intelligence alliance between the US, UK,
Australia, Canada, and New Zealand. This community – where
intelligence and defense-related products and services flow more
easily – is facilitated through cooperative defense treaties, the
US-UK and US-AUZ Defense Trade Cooperation Treaties. Of the
top 100 global defense companies in 2016, only ten were British46
and one Canadian (Defense News 2017). There is no ranking of top
US defense import countries (only strictly aerospace). Strategic
alliances like the Five Eyes community alter competitiveness on
the US defense market – compared with competitiveness on the
global market – although the US comprises at least 60% of the
global defense market in terms of global market value, exports, and
number of companies.
Europe benefits from similar – albeit less impactful – alliances with

the US. As one industry expert said: “Overall, yes, being a European
or NATO ally does give you an advantage [in the US]; it doesn’t
mean it’s impossible if you’re outside an alliance to get in the
supply chain, but there are less barriers.”47 There are no figures on
44 See Appendix 1.
46 See Appendix 2 for a profile of a British defense company ranked in the top 100 global
defense companies.

Europe’s market share or value in the US defense market, but there
are figures about Europe’s global defense market. The majority of
top global European defense companies are NATO members or
allies. Europe occupied almost 30% of the top 100 global defense
companies in 2016, the second-most competitive region behind the
US’ 40% share of the global market (Defense News 2017). Europe’s
share has remained constant with limited exception to 2012, when
there was one additional European company in the top 100 global
defense companies (Defense News 2017).
From interviews with industry experts, it was determined that most

significant import competitors – with strongest ties and largest
revenues from defense – on the US market are Canada, Britain,
France, and Australia. However, these findings represent a vast
defense market, and not all of these countries are top competitors
in all areas of funding.48 For example, Canada and Britain are more
competitive in government contracting and defense-related services.
France is most competitive in both military and civilian aerospace
and avionics, although Italy (Finmeccanica) and the Netherlands
(Airbus) are also top competitors in these markets. Germany is highly
competitive in weapons and automotive.49 Finland, Sweden, and
Italy are highly competitive in naval areas of defense-related trade;
whereas, Italy is, like Spain, also competitive in ICT.
Competitiveness on the US market, therefore, is more related

to products and services than country of origin, although as
highlighted throughout this section, strategic alliances are a
conditioning factor in determining competitiveness. “In the
government defense sector, it’s all program based50. Program wise,
it’s important to have a US partner, especially for big systems51.
Smaller systems, it’s a different story. For example, when we were
competing, we went to six different consortiums52 that were asked
to bid and formed an alliance for the program.”53
A survey of Portuguese companies registered across leading

Portuguese trade agencies and MoD reports indicate that Portugal’s
competitiveness, globally and in the US, is in naval, weapons,
automotive, textiles, and ICT. Its competitiveness in a wide array
of defense-related goods and services is due to historical factors
that led Portugal to develop a self-sustaining defense-industry as a
result of numerous embargos prior to the country democratizing
in the 1970s. Until recently, export data suggests that Portugal
has had difficulty expanding their market. Portuguese national
defense spending has continued to increase at modest rates, and
this facilitates industry development and innovation, which could
48 See Appendix 2 for top competitors across all defense-related exports.

49 See an example of a highly competitive German weapons and automotive defense
manufacturer in Appendix 2.
50 “Program” refers to the area of work, such as the F-35 program, but it can also refer to an
agency, such as NASA or the Department of the Army.
51 “Systems” refers to co-operative projects, such as weapons systems developed between
contractors or communications systems developed by government agencies and private
sector companies.
52 “Consortiums” refer to groups of industry leaders, such as the Big Five.

• 45
further support export development (Strategic Defense Intelligence
2012; (Strategic Defense Intelligence 2016). However while national
defense spending is a positive indication of the health of a country’s
defense industry, it has limited utility in determining a country’s
export competitiveness, particularly on the US market where
strategic alliances have a significant impact on competitiveness.
From the data in Table 1.1 in Section 1.2, the report calculated that
Portugal’s defense-related exports increased 62% from 2011 to 2014
using Portuguese MoD reports. The analysis found that Portuguese
defense-related exports grew most significantly within Europe, 96%
in four years. On the US market, Portuguese defense-related exports
have increased 66% within this same time period, higher than the
annual growth rate for Portugal’s overall, global defense exports.
This indicated that Portuguese exports were competitive and
growing on the US market.
Because of considerable export controls, Portuguese SMEs are often

required to obtain authorization / licensing and register exports
with the MoD. Previously, EMPORDEF was the largest holding
company for Portuguese dual-use goods exporters, connecting
suppliers with potential global partners and conducting excellent
trade facilitation work that supported the 62% CAGR calculated
in Section 1.2. However, in the report parties’ December 2016
communication with EMPORDEF, it has been discovered that
EMPORDEF is in the final stages of liquidation, which detracts from
the resources available to SMEs’ export development – discussed
in Section 5.2. Without EMPORDEF, SMEs may find identifying
target markets, potential partners, and export opportunities on
the US market more difficult, but perhaps other Portuguese trade
associations will be able to take a stronger role in trade facilitation
and export development. The aim of this report and the Next
Challenge USA project is to provide SMEs with critical intelligence
about the US market to support their export development.
Considering the limitations that Part 129 of ITAR places on the report
parties’ ability to support SMEs’ defense-related export development,
special analytical importance has been given to identifying markets,
industries, and sectors where Portuguese SMEs can continue to be
competitive on the US dual-use goods market. Section 4 will provide
further detail; however, the analysis of competitiveness factors
shaping the US market, MoD annual reports, and DoD past and
future purchasing assessments indicate that Portuguese SMEs can
be the most competitive in the US defense-related market in the
following categories (in no certain order):
»» Textiles54
»» Unmanned aerial vehicles (UAVs)
»» Aerospace / avionics supply chain parts and construction
»» Biometrics and biosecurity products
»» ICT composite electronics, particularly those in automation,
autonomous communication, GIS, signaling, and laser technology
»» Infrastructure supplies, support, and construction.
54 See the Berry Amendment discussed in Section 3.5 and footnotes 92 and 128 for a further
assessment of textiles competitiveness.

There is no single source of the US dual-use goods market – in
terms of size and competitors’ shares – between the primary
government and commercial markets – shaped by the regulatory
environment around diverse products, the subject of Section 3.
Utilizing data from NATO, the complex regulatory framework,
knowledge of export products, and other political, economic,
and security factors, Portugal’s most likely competitors on the US
market are the Netherlands, Czech Republic, Estonia, and Greece.
This is not to say that countries such as Spain and Norway are not
similar competitors on the US market; rather that because of the
complexity of data reporting identified throughout the report, that
it is more difficult to pinpoint these countries as close competitors.
To summarize, the report’s assessment of competitiveness factors

influencing the US defense-related goods market highlights a
number of conclusions, including:
»» The composition of the domestic US defense market is heavily

weighted towards larger firms, with the Big Five winning
the majority of large government contracts. However, these
companies also subcontract to a considerable extent with small
and foreign businesses.55
»» Those foreign business on the US market range from large, such
as Serco (UK), to small (often through individual licensing), and
the most competitive countries supplying the US defense market
are those with strategic alliances.
»» The Five Eyes community – US, UK, Canada, Australia, and New
Zealand – are often the most preferred importing countries;
however, this preference can be stronger with services. Other
competitive countries exporting to the US include major
European allies, such as France, Italy, Germany, and Norway. NATO
members and allies are more likely to be competitive in the US
market than non-members or allies.
»» Portugal’s competitiveness on the US dual-use goods market
could decline if short and long-term export development
strategies are not prioritized.
»» There are at least six key areas where Portuguese SMEs can retain
competitive advantages, although with fewer government-backed
resources export development could require more on internal
business development efforts and support from agencies, brokers,
and market access specialists in the US.
»» Data reporting complexities confound attempts to quantify
Portugal and its most similar competitors export competitiveness
on the US market. However using the knowledge constructed in
this report, the Netherlands, Czech Republic, Estonia, and Greece
were found to be some of Portugal’s closest competitors on the
US market.
2.6 Conclusion
This analysis of the US dual-use goods market has yielded important

findings, which in many ways form the core of the report by helping

• 47
Portuguese SMEs understand the market conditions and competition.
This section will summarize the findings and introduce how they
connect to Section 3’s focus on legal regulations and compliance.
Section 2 focused using cross-sectional data to characterize

the US market with a focus on determining market value and
domestic and international market presence. There are two paths
for understanding what share of the US defense market is open
to Portuguese dual-use goods imports. The first is using national
defense spending as a measure (Figure 2.6). The 2016 DoD total
budget for goods and services was $534.3B, and 45% or $240.4B was
spent on goods. While this measure indicates how much of the US
market is open to dual-use goods, it does not indicate what share
imports comprise.
Figure 2.6 – 2016 US DoD Spending Composition (Billions)
◼ Goods
◼ Services
The second path for understanding the US market for dual-use

goods imports would be to abstract or use deductive logic to assess
how much of this market is domestic (Figure 2.7). Using deductive
logic, the section found that $142.7B of the US government’s 2016
contracting market in defense and aerospace goods and services;
if that same 45% allocation for goods is applied to this figure, then
$64.2B is an approximation for defense-related goods. From here,
it can be estimated that $19.3B of the US market for imported
defense-related goods is open to Europeans, based on their 30%
share of the global market. These figures reflect government
contracting, and US data suggests small to medium-sized
businesses, collectively, are awarded around 40% of government
contracts. Utilizing the principles of abstraction, it can be estimated
that European SMEs’ share of the US government defense-related
goods market is $7.7B. This is the prime market where Portuguese
dual-use goods will compete.

Figure 2.7 – US Defense-Related Goods Market Composition
(Billions)
◼ Defense-Related Goods & Services

◼ Defense-Related Goods
◼ European Defense-Related Goods
◼ European SME’s Defense-Related
Goods
Section 2.2 estimated that $2.1B of the US aerospace goods market

– only aerospace – is open to competitors from NATO and non-
NATO competitors that do not rank in the global top 20 aerospace
exporters (see Figures 2.3-2.5 for top 20), which would also be a
prime market for Portuguese SMEs exporting aerospace products.
Though it cannot be confirmed with industry figures – because they
are not available – considering that aerospace is a smaller part of
the total defense-related goods market, market indicators confirm
that the two pathways that lead to a conclusion of an approximate
$7.7B annual US market open to Portuguese dual-use goods is
accurate.
Some factors influencing the size of the US market for imported

dual-use goods are:
»» A growing market for imported goods – although a CAGR

is unavailable – due to the US defense industry’s increasing
reliance on global supply chains for program, system, and export
development
»» Increased transparency in government procurement, mandated
use of small businesses in government contracting, and reduced
regulatory barriers for dual-use goods
»» Reduced import barriers for some countries (Cuba, Iran, Japan,
Vietnam, and Myanmar) and increased sanctions against Russia
may affect competition on the dual-use goods import market,
although removal of barriers and increased flow of goods is slow.
The US is not one of the top ten global import markets for defense-
related goods, although it is the largest global exporter and a billion
dollar import market for defense-related goods. To confirm the
initial calculation of a $65B to $100B import market for dual-use
goods, the section conducted a sample analysis of the aerospace
industry, which only comprises part of the US market for dual-use
goods, although a lucrative part. The analysis showed a five-year
average annual import market for aerospace goods of around $53B,

• 49
and this analysis confirms that the US market for all imported dual-
use goods, not exclusively aerospace, can be estimated between
$65B and $100B annually. The majority of this will likely go to large
companies, but conservative estimates suggest that between $2B
and $4B remain open for competition.
Section 2.3 focused on identifying political economic factors

that could affect the US dual-use goods import market. The US
defense budget looks to increase at a modest 1% to 2% CAGR
pending major changes from the new Trump administration. While
President Trump has decried several high-cost defense items and
spending, such as Lockheed Martin’s F-35 and Boeing’s contract
for a new Air Force One, he has also pledged to restore American
manufacturing through the defense industry, making it difficult
to predict how his presidency may affect the import market. One
industry expert offered her expertise on President Trump, the F-35,
and Congressional defense budget changes.
Maybe he’ll really like the F-35 program, and it looks like something
that he can play out in his favor. Maybe he’s going to save only
a million dollars on that or another program, but it looks like a
big PR win. He seems to be more concerned about the public
perspective than the actual savings. Maybe he wants to appear
to win more than he actually does in reality. You could also see a
more adversarial relationship between Congress and the executive,
which could make cutting the defense budget difficult. Overall,
doing anything that would result in job cuts wouldn’t be path of
least resistance, such as cutting the F-35 program. I don’t see a
major change coming in US defense spending.56
The US defense market may also become less open to non-NATO

competitors, such as China, but similar to the assessment above,
increased competition (from non-NATO countries) could be welcomed,
as President Trump does not appear to place strong emphasis on the
importance of NATO alliances. The section highlighted that a new
defense budget will emerge by early to mid-2017, which will likely
provide answers to many of these unknown factors shaping the import
market. Overall, the major political economic changes to the US dual-
use goods import market look to be:
»» A focus on domestic manufacturing, which will have difficulty

maintaining its competitive edge with higher production costs
compared to imports (unless President Trump opts for increased
tariff rates on certain industrial products)
»» Overall growth, particularly in the private sector, and in naval,
missile, air, weapons, and cyber defense
»» Competitive advantages in cost-innovation and cost-efficiency
within government procurement and product-innovation through
multiple product applications in the private sector.

Section 2.4 highlighted security-related concerns, such as a change
in strategic priorities as a result of the new administration, climate
change, cybersecurity, and technological innovation. President Trump
has said that terrorist networks in Syria and Iraq are his security
priorities, but with US-Russian tensions at a new high, particularly
within Congress and his cabinet selections, President Trump may be
forced into security-related concerns in Eastern Europe, including
Poland, Estonia, Lithuania, Ukraine, and Georgia. Portuguese SMEs
could be in relatively competitive positions to supply US defense
needs. Despite political economic, new administration, and security-
related changes that will likely shape the US market for dual-use
goods, it remains the largest global defense market – where vast
opportunities in diverse markets are ample.
Additionally, SMEs may consider that dual-use goods have

applications in agriculture, public health and safety, emergency
preparedness, global finance and commerce, within the sharing
economy, and in construction. These may offer less challenging
points of entry to the US governmental market than, for example,
government contracting where large firms, the Big Five, and the
Five Eyes community dominate the market. One industry expert
advised how Portuguese SMEs can market dual-use goods to sell in
both the public and private sector markets.
These countries in Europe are already producing competitive

products, and if they want to stay in the defense and military
market, that can be done. It can be more difficult with regards
to staying on top of the market and regulations, but they may
want to transition to the dual-use goods market, something more
commercial. That involves finding a new use for a defense-related
good, like UAVs in medical care.57
Examining Portuguese exports while taking into account the

dominance of the US domestic and large companies, the analysis
puts into focus six key areas of defense-related exports where
Portuguese SMEs might leverage competitive advantages –
discussed further in Section 4.3 and 5.2. The potential loss of
EMPORDEF means that SMEs will likely have fewer resources;
however, US market access specialists and brokers, for example,
could fill this void. Portugal’s ICT sector continues to grow at an
impressive pace, and Portugal is highly competitive in aircraft,
automotive, textiles, and infrastructure. Portugal’s most similar
competitors on the US continue to reflect Portugal’s closest
competitors at the global level, identified in Section 1.2.
Having assessed the US dual-use goods import market, the report

turns to legal regulations and compliance, which are more significant
in defense than any of the other reports in the Next Challenge USA
project. Defense-related goods are so highly regulated because
while some goods have practical applications, these goods also have
military applications. If these goods were not so tightly regulated,
they could supply governments, groups, and individuals that seek to
harm other countries, companies, or citizens.

• 51
While Section 2 remains instrumental in helping SMEs understand
the US market for dual-use goods, Section 3 attempts to lead
SMEs into understanding the scope and scale of legal compliance
necessary to export dual-use goods to the US. A portion of SMEs
will likely have working knowledge of these regulations, licensing,
certification, and legislative issues if currently exporting within the
EU or to other countries. However, US regulation can change within
a year; therefore, SMEs exporting to the EU or other foreign markets
may find US legal and regulatory compliance challenging.

Section 3:
Legal Regulations and
Compliance
3.1 Introduction
While the US market is the largest single-country import destination

for global goods and services, it is also highly competitive. For
Portuguese SMEs in the defense-related goods industry to develop
long-term, sustainable export development and growth strategies, a
solid foundation in US legal regulations and compliance is essential.
This section focuses on legal, regulatory, and compliance issues
SMEs will face when exporting to the US.
Part 129 of ITAR prohibits the report parties from “facilitat[ing]

the manufacture, export, or import or a defense article or defense
service”. As a result, the information in this section remains
educational, designed to offer SMEs a familiarity with regulatory
issues and agencies. For more detailed compliance and regulatory
information, the report encourages SMEs to contact a US
Customs and Border Protection Agency (CBP), a division of the US
Department of Homeland Security, or an attaché, representative,
or specialist at one of the European foreign offices. Several experts
interviewed suggested that a licensed customs broker or highly
specialized defense trade lawyer is recommended for Portuguese
SMEs looking to export dual-use goods to the US market.
SMEs should be aware that compliance with US import “entry” – a

process that includes advanced notice of arrival, payment of tariffs
or duties, and export/import documentation, such as product
classification, value, number of units, certifications / licensing
evidence – must be followed precisely. Failure to comply with CBP’s
import procedures can result in shipments being detained, re-
assessed (tariff rates), and / or rejected, and mistakes at the port of
entry are costly to SMEs and partners.
A customs broker – if SMEs are unable to secure a dedicated

import or distribution agent in their initial US market access – can
facilitate the effective and efficient clearing of customs. These
officials will most likely also be able to assist exporters with the
transition from the Automated Commercial Environment (ACE) –
how US imports and exports are currently processed – to the Single
Window, a paperless system designed to improve efficiency and
ease in compliance with US import regulations and compliance.
For example, the transition requires exporters to include relevant
data for the DDTC for the import of defense-related goods on the
US Munitions List, which CBP will electronically submit to DDTC –
removing the requirement for exporters to separately notify DDTC
(Sandler, Travis, and Rosenberg 2017). The transition was expected to
be completed by December 2016 and is currently in place.

• 53
Portuguese SMEs are encouraged to familiarize themselves with
US import regulations and compliance beginning with the 200-
page document, “Importing into the United States: A Guide for
Commercial Importers”, from CBP. The document includes advice
on expedited merchandise clearance, full scope documentation,
foreign trade zones, bonded warehouses, packing, invoicing, and
country of origin marking. The Importing Guide is a general resource
and not specifically tailored to dual-use goods.
As a resource for guidance, this section of the report is intended to

provide an overview and does not contain the sort of verification
and detail that parties like licensed brokers or trade attorneys would
be legally authorized to provide. It, nonetheless, serves an excellent
starting point for SMEs without resources for such extensive export /
import service professionals. A defense export compliance specialist
highlighted the importance in understanding US regulations and
compliance for small and foreign suppliers.
Foreign companies are often working with large, sophisticated

US businesses that have a certain level of expectations on
compliance, supply chain management, and that people know
what they are doing. These large companies consider working
with SMEs or companies new to the US market, but they hold
them to the same expectations as large businesses that have
been in the market for some time.58
3.2 A Practical Overview to Dual-Use Goods Exports

and Imports
Getting a practical understanding of the various US regulations,

authorities, agencies, and acts that govern the importing dual-use
goods to the US market is the first step in comprehending US legal
regulations and compliance in this industry. This was confirmed by
a few of the top foreign competitors on the US defense market. “The
US defense market is complex and hard to understand; this market
is distinct from other industry markets and others in the world. The
first thing to learn is how US market works.”59
This section aims to slowly walk SMEs through this acronym-laden

industry to provide such an understanding. Unlike other industries
where the exporter is responsible for only the procedures before
exports reach US port, the US dual-use goods supply chain is so
intricate that foreign exporters must also be aware of US import and
export procedures.
For example, if they are making something in Europe and

someone in the US wants a custom or tailored version,60 the US
provides them with the technology, and the European company
uses that technology for that specification. The issue is when
the US company then wants to sell [the product] to another
60 See Interview 4, Appendix 3 for better understanding of the US government’s
customization needs.

company, the product is subject to US [export] controls, and so
the European company has to consider this from the onset.61
First, not all countries can export dual-use goods to the US. Portugal
can; at present, Cuba, Iran, Iraq, Libya, North Korea, and Sudan
cannot. Second, not all defense-related goods can be imported into
the US. There are import restrictions (quotas, tariffs, anti-dumping
and countervailing duties) and / or limitations, such as product
certifications and testing and licensing requirements. One industry
expert believed that licensing requirements may be the biggest
challenge to small or foreign suppliers on the US defense-related
goods market. “It’s very difficult to gain access to the US market, and
in some cases, small or foreign players will partner with the bigger
contractors. The issue is they need certain licenses or accreditations
to work with them, say for a subcontract with the US Army. There
are some hurdles, rules that need to be followed, but it is possible.”62
CBP maintains lists of prohibited or restricted goods and prohibited

suppliers. While dual-use goods – goods that may have been
originally designed for commercial usage but otherwise have
military applications – are not entirely prohibited or restricted, there
are prohibitions (a good’s origin) and restrictions (classification and
licensing) that apply. This includes not only the physical good itself
but also its components and related technology, such as the software
that directs sensors that are part of a missile defense system.
US defense-related goods are classified by the level of export control

on the good and related technology, such as those that are listed
on the Commerce Control List (CCL) and those that are listed on the
US Munitions List (USML). Licenses may be required for exporting
goods on either list into the US; registration with the Department
of State Directorate of Defense Trade Controls (DDTC) may also be
required. Generally, defense-related goods imported into the US do
not require a license, but there are exceptions – specifically to new
products / technologies.
A CBP attaché or DDTC “DTrade” response team member can be

of further assistance in verifying whether licensing or registration
is necessary. DTrade advised the report parties on Part 129 of ITAR
for this report, and the process in speaking to a DTrade response
team member was fairly easy and effective. Items on the CCL are
governed by the Department of Commerce BIS through the EAR
– detailed further in Section 3.4; those on the USML are governed
by the DDTC through ITAR – detailed in Section 3.3. How a good is
classified – on the CCL or USML – determines which regulations are
applied to defense-related goods.
For items on the USML: “there are two routes [into the US market]…
There’s the military route and the diplomatic route. There’s Foreign
Military Sales or Direct Commercial Sales, the latter of which is based
out of [Department of] State... We have set up end-user controls [for

• 55
each route]”.63 For goods entering the US market through Foreign
Military Sales – applicable to SMEs supplying goods through joint
US-EU operations, such as NATO or EUCOM – goods must clear the
Golden Sentry program before entering the US. The US’ Golden
Sentry program is designed to: “verify end-use, accountability,
and security of defense articles and services, and Compliance
Assessment” (Defense Security Cooperation Agency 2017). While this
level of goods clearance is unlikely to apply to SMEs new to the US
market, this is the highest-level of security control and regulation. It
serves as a primary division and starting point for understanding the
overlapping and extensive levels of regulatory compliance involved in
defense-related goods entering the US market.
For goods entering the US through Direct Commercial Sales –

applicable to SMEs supplying goods through government (sub)
contracting – goods must clear the Blue Lantern program. Blue
Lantern is designed to build confidence in trading relationships
between foreign suppliers and US government agencies, regulate
hardware and technology transfer, and impede illicit arms trade
(Rutledge 2015). Section 2 has assessed that government contracting
represents the bulk of opportunity on the US market, and Section
4 details the process of becoming a government contractor and
identifies potential partnership opportunities for SMEs.
Additionally, it may, initially, appear unlikely that SMEs would be

exporting goods on the USML; however, Rutledge (2015), of the
Regional Affairs and Analysis Division Office of Defense Trade
Controls Policy Bureau of Political-Military Affairs, highlights some
case studies where goods were flagged under the Blue Lantern
control program, including:
»» Those considered “especially sensitive” (ie: night vision, unmanned

aerial systems, missile-related goods or related technology)
»» Military aircraft and helicopter parts
»» Microwave filters
»» Satellite components.
For items on the CCL, which are likely applicable to the majority
of defense-related / dual-use goods SMEs are aiming to export to
the US market, there are end-user checks required before goods
can enter the US. One defense trade expert and former analyst for
the DDTC commented that it would be advantageous for SMEs to
have a thorough understanding of US export controls and offered
that the DDTC has: “set up end-user controls where we train other
countries out of the [local, US] embassy” – highlighting a potential
resource for SMEs looking to export to the US.64 She also added that:
“the US is the model for [the recent] EU export reform.”65 Therefore,
familiarization with US import regulations can also have a positive
impact on SMEs’ EU export processes.
65 Ibid.

The EU’s Dual-Use Regulations have been under review since
2015, and changes agreed at the end of 2016 are coming into
force in late 2017. These changes have been harmonized with
several international controls, including those in the US, to prevent
dual-use goods from reaching those that would seek to harm
governments, companies, or individuals. The expert quoted above
further highlighted how harmonization of regulatory control affects
competition and the role of the private sector.
For us, it’s more about leading and establishing mutually

beneficial regulatory control schemes. Regulation, in any capacity,
is better for us than no regulation and [defense trade] being
completely open to the private market. The need for regulatory
control has evolved because of the private sector; they are the
ones leading innovation and new technology development,
and the questions have become who’s good at what now; how
to cooperate more internationally, on products, services, and
regulatory reform. However, the US defense industry wouldn’t
characterize it as a global network. We still have our preferred
networks and those who are outside of our networks, but again,
it’s not just about countries. It’s about state and non-state actors,
public and private sectors when it comes to competition.66
A defense contractor confirmed that European suppliers are in

the “preferred network” and compliance with both EU and US
regulations increases opportunities for Portuguese SMEs. “The US
global presence is global, and so supply chains may be compliant
and consistent with, say, [United States European Command]
EUCOM. We will still subcontract portions of our systems to those
allies. For example, I worked in Germany, and we’d use import /
export-controlled Deutsche Telekom. We’d work with whichever
contractors that meet our security needs.”67
With the EU harmonizing regulations with the US, Portuguese SMEs

may find they have an advantage on the US market. “Doing these
export and regulatory deals is good way to form an alliance with
the US; if you want to trade with the US, we should have similar
regulations”, a regulatory expert advised.68 Another industry expert
also advised that good relations with the US can open other allied
markets to Portuguese SMEs and vice versa. “You see that the goods
are the same in Oakland and London; the countries who are in on
the supply chain are on good relations with the US.”69
This section will not detail the scope of changes to EU Dual-

Use Regulations, most particularly because these changes are
continually evolving for implementation and product-specific;
some items have had export controls removed or loosened and
others added or increased. Further information can be found by
consulting Annexes I and IV of Council Regulation 428/2009 (Bauer
and Bromley 2016). SMEs may also want to consider consulting the
66 Ibid.

• 57
second edition of Export Control Law and Regulations Handbook.
A Practical Guide to Military and Dual-Use Goods Trade Restrictions
and Compliance (2011), which offers export / import guides for
several of the larger global defense markets. SMEs should keep in
mind, however, that defense-related goods regulations can change
frequently, and this guide could be, in parts, out of date. However,
like this section, the book offers a “practical guide”, which is most
essential for SMEs new to exporting dual-use goods.
This section concludes by emphasizing that Portuguese SMEs

face challenges in complying with copious EU and US defense
control programs and export regulations. “It’s sort of like ensuring
compliance with two regulatory markets. It can be a lot to
manage.”70 Though SMEs will not be exporting from the US, import
provisions comply with US export provisions, and EU export controls
are increasingly harmonized with those in the US. Therefore, it is
essential that SMEs are at least familiar with procedures on either
side of the port of entry. As the former DDTC analyst explained,
the US is the leader in establishing defense-related goods trade
regulations, and confirming her assertion, a US defense trade
lawyer explained further. “The US laws are very extraterritorial, and
companies in, Japan, for example, will want to know more about
US export regulations because it affects their US imports and global
competitiveness.”71
This, perhaps, not only reinforces why a customs broker, (defense)

trade lawyer, or CBP attaché are recommended heavily throughout
this report and in interviews, but also why the defense-related
goods export industry is dominated by large companies that
can afford such extensive compliance resources. A high-level
government defense official commented that entering the US
market: “absolutely is not something you can do part-time or have
someone do it as their second responsibility... They should think of
the services of these people like insurance; it’s almost absolutely
necessary, but hopefully you never have to use it.”72 A Big Five
contractor agreed.
I believe that it would be easiest if they sought a broker because

of the nuances involved in procurement, especially when dealing
with the US military or DoD. It would be the easiest to start with
a broker to avoid litigation or other hang-ups, and when they
find they don’t need such deep services, they don’t have to use
the broker anymore. It would be worse to have suppliers get
frustrated when they are making good products than to utilize
the services of someone like a broker.73
Again, the aim of this section has been to provide an overview to

help SMEs develop defense-related exports should such resources
not be available, which is why the section focused on all levels
of defense-related trade (USML and CCL). Section 3 now turns to

helping SMEs understand the more narrow and specific defense-
related goods market regulations that operate internationally, in the
US, and in Portugal.
3.3 International Traffic in Arms Regulations (ITAR)
The progressive analysis of defense-related legal regulations

and compliance starts at the widest, most comprehensive
point of origin – international regulations – and shifts to the
narrower, US-specific regulations. Section 3.2 began to detail how
understanding defense-related goods and related legal regulations
and compliance requires knowing the regulations and laws that
apply to specific goods, as well as specific market destinations. A
defense trade broker or lawyer should be informed about not only
the regulations around SMEs’ specific products and markets but
also the related regulations. These unique requirements create a
complex regulatory environment, which can be difficult for those
new to exporting outside of the EU.
For example, a civilian aircraft, produced by Boeing, can have supply

lines in multiple countries among many companies. Cockpits
can be assembled in one country with parts from five or more
companies that must ensure compatibility; the software that
cockpits rely on can originate with another country / company,
and the fully cohesive cockpit can connect with fuel storage and
distribution parts that are manufactured in and by another point
of origin. The civilian aircraft may have surpassed ten points of
manufacture or origin before half the aircraft is assembled. This
rudimentary example exemplifies the need and scope of ITAR; the
goal of ITAR is to prevent governments, groups, or individuals that
may wish to harm countries, companies, or citizens from acquiring
dual-use goods through extensive supply chain regulation.
The State Department, through the DDTC, developed and updates

items on the USML through Part 121 of ITAR. Many items covered
by the ITAR have commercial uses, hence the term dual-use, and
research conducted for this report uncovered many instances
of companies – from small research centers to the Big Five –
unintentionally and unknowingly violating ITAR, which carries heavy
fines and even more severe punishment if adverse intent is evident.
At times ITAR has demonstrated so problematic to the defense

trade that many companies have undergone what is called the
Commodity Jurisdiction process – an application to transfer goods
from the USML to the CCL – to limit ITAR restrictions. Many items
were originally listed on ITAR – due to ambiguity in the classification
of an item’s of “original purpose” (military or commercial) when a
good was first developed, which in some cases was in the 1950s –
but have since been transferred to the CCL. In part, the treaties that
the US has with the Five Eyes community have been implemented
to circumvent the impact of ITAR on defense cooperation and
trade, hence why Canada, Australia, and the UK are some of the
most competitive countries exporting dual-use goods to the US as
assessed in Section 2. As a defense trade lawyer highlighted the
effect the Commodity Jurisdiction process had on the liberalization
of dual-use goods trade.
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The [Commodity Jurisdiction] CJ process’ success in getting
products off ITAR has gone down... Before you had a loose defense
definition of what constituted a defense article, which left a situation
where a steel bracket that was a little thicker was now defense-
related good or maybe it had an extra bolt going through it to be
blast resistant. These were determined really to be just an ordinary
bracket. In that case, you could file CJ requests. We had a lot of luck
getting them out of ITAR; we called it a “who cares” ruling.
Now, the agency is a little tighter with Commodity Jurisdiction

products because the number of products has gone down
with the initial cleanout, which leaves you with the stuff that’s
really important to be controlled.... perhaps that’s opened up
companies’ ability to export products that weren’t eligible before
because they were ITAR controlled. Companies didn’t want to
deal with ITAR, and this [transfer] may have caused a liberalization
of exports – making it easier to export some products.74
ITAR poses a challenge to SMEs looking to enter the US defense-

related goods market, as it can be difficult to determine if a
certain product or service is subject to ITAR (on the USML) or EAR
(on the CCL) – discussed in Section 3.4 – with millions of items
between both lists and classification, in part, dependent on end-
use. The difficulty is compounded because exporters are asked
to “self-assess” under which jurisdiction goods fall (ITAR or EAR),
further emphasizing why SMEs with limited resources must
possess a sophisticated understanding of US legal regulations and
compliance. Problems can and do arise when an exporter believes
their product is on the CCL but CBP – or the various US government
agencies involved in defense-related goods trade, including
Homeland Security and Immigration and Customs Enforcement –
differently classify goods at the US point of entry.
Whether goods are classified through ITAR or EAR, there are

processes where exporters can request confirmation or classification
– especially for a new product or technology – prior to arrival at US
port, such as the Commodity Jurisdiction process explained above or
by contacting a DTrade response team member. Again, compliance
clarity is further compounded because not all dual-use goods are
listed on CCL; it is not comprehensive, which makes it difficult to
exclude goods from being subject to ITAR. Generally, a dual-use good
is not subject to ITAR if it is not on the USML, rather than it not being
subject to ITAR because it is explicitly listed on the CCL.
The USML contains twenty-one categories of defense-related

articles and services, and when referenced the DDTC uses Roman
numerals rather than numerical digits:
1. Firearms, Close Assault Weapons, and Combat Shotguns

2. Guns and Armament
3. Ammunition and Ordnance

4. Launch Vehicles, Guided Missiles, Ballistic Missiles, Rockets,
Torpedoes, Bombs and Mines
5. Explosives and Energetic Materials, Propellants, Incendiary
Agents, and Their Constituents
6. Surface Vessels of War and Special Naval Equipment
7. Ground Vehicles
8. Aircraft and Related Articles
9. Military Training Equipment and Training
10. Personal Protective Equipment
11. Military Electronics
12. Fire Control, Range Finder, Optical and Guidance and Control
Equipment
13. Materials and Miscellaneous Articles
14. Toxicological Agents, Including Chemical Agents, Biological
Agents, and Associated Equipment
15. Spacecraft and Related Articles
16. Nuclear Weapons Related Articles
17. Classified Articles, Technical Data, and Defense Services Not
Otherwise Enumerated
18. Directed Energy Weapons
19. Gas Turbine Engines and Associated Equipment
20. Submersible Vessels and Related Articles
21. Articles, Technical Data, and Defense Services Not Otherwise
Enumerated (GAO 2017i).
Part 121 of ITAR offers further, detailed descriptions of these items,

which better allows exporters to self-assess (see GAO 2017). SMEs
should note that Category XXI – Articles, Technical Data, and
Defense Services Not Otherwise Enumerated – serves as a broad,
catchall category. If a good or service on the USML fails to meet
immediate categorization, it is classified under Category XXI until
an appropriate designation can be amended. Additionally as
highlighted in Section 3.2, the USML includes the relevant technical
data associated with the good or service, defined as the required
information for the: “design, development, production, manufacture,
assembly, operation, repair, testing, maintenance or modification of
defense articles” (GAO 2017:10). Practical examples of technical data
include blueprints, photographs, software, or schematics.
If a good or service is listed on the USML, SMEs should be aware

of the requirements that they may be required to register with
the DDTC. The regulations for imported goods are not as strict
as exported goods. However, US defense supply chains are often
global, and foreign companies exporting to the US are often
required to follow US export regulations as well. Most pertinent
to SMEs, an authorization for import of defense-related items and
services may be required under ITAR. The report recommends
checking with CBP or the DTrade response team because failure
to comply with ITAR regulations could not only bring fines or more
serious criminal penalties but also being listed as “debarred” or
“denied” person by the State Department, which could result in

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goods being rejected without inspection from US ports (Sandler,
Travis, and Rosenberg 2017ii).
3.4 Export Administration Regulations (EAR)
Similar to the State Department’s delegation of ITAR to the DDTC,

the Department of Commerce delegates maintenance and
execution of EAR to BIS. Though the use of “export” in this regulation’s
naming indicates that EAR would only be relevant for US companies
exporting dual-use goods to foreign markets, an export compliance
specialist highlighted that: “there are problems if [foreign suppliers]
use US technology – applying the specifications and requirements
– in manufacturing their own products, which can result in foreign
companies being subjected to US export controls.”75 EAR has become
a global standard that other nations use not only to comply with
US import regulations but also to establish their own domestic
export control procedures. Just as the previous section detailed
administration of ITAR and items on the USML, this section details
administration of EAR and items on the CCL.
To begin, items on the CCL are dual-use, and while there are
significantly high-risk defense-related goods on this list, they are not
regulated as tightly as those on the USML. The CCL is broken into
ten chapters:
0. Nuclear & Miscellaneous

1. Materials, Chemicals, Microorganisms and Toxins
2. Materials Processing
3. Electronics
4. Computers
5. Part 1 Telecommunications
5. Part 2 Information Security
6. Sensors and Lasers
7. Navigation and Avionics
8. Marine
9. Aerospace and Propulsion (BIS 2017).
Items on the CCL are given an alphanumerical entry code called

an Export Control Classification Number (ECCN). The first number
in the ECCN corresponds to the CCL chapter; for example, a non-
military unmanned aerial vehicle is listed as 9A012. As a reminder
from Section 3.3, the CCL is not an exhaustive list. Identifying the
ECCN should be SMEs’ first step in developing dual-use goods
exports for the US market; the ECCN will reveal if a license is
required under the EAR. Similar to ITAR, license may be required
for some items on the CCL; licensing requires disclosing the nature
of the article’s use or manufacture, along with its final destination,
purpose, and intended end use.

3.5 Licenses, Certifications, and Standards
The report thus far has referred to licensing in terms of companies’

licenses to export or import. This section discusses licensing in terms of
intellectual property rights, and there are two ways of understanding
licensing: original product licensing and entering into a licensing
agreement with a company that holds intellectual property critical to
a manufactured good. This section will discuss both.
Original product licensing, also referred to as “certification”, can

appear intimidating, but for SMEs that innovate new technologies
and products, efficient product licensing may be key to highly
lucrative sustainable export development for the US market.
Before SMEs begin showcasing new technologies – or new uses for
technologies – they should ensure that their products or technology
is licensed for use in the US, which can involve going through a
product certification process or applying for a patent or trademark.
Both of these processes can take several weeks to months, and

with the pace that technology moves, SMEs looking to enter the US
market through new products / technologies, should build in the
licensing, certification, patent, or trademark process into their export
development plans. An industry expert explained that: “there’s
a specific review timeline that needs to be [integrated] before
the deal closes. It can throw off the deal time, and it can inflame
business transactions and relationships.”76
Delays in the US defense industry are common. “The defense sector

is a very long process; you have to interact with the government
to tweak the product, and ultimately you can get a big order.
That’s how the US acquires defense-related goods; you can see
it’s a long process, an intensive process, and not a very efficient
one.”77 However, just because they are common occurrences does
not mean that delays impair sustainable business development.
Rather, if SMEs can anticipate delays in the licensing process and
inform potential partners, they may find timely updates support
sustainable export development.
Because there are multiple entry points for new products to enter
the US market – detailed in Section 4 – there are multiple ways to
certify products. A general example of the product certification
process for commercial goods can be understood as follows:
1. Submit application for product approval

2. Initial review conducted
3. (If product passes initial review) Validation that product complies
with federal, state, and / or local codes and regulations
4. (If product validation is certified) Product submitted for
evaluation and quality assurance
5. (If product passes evaluation and quality assurance assessment)
Product submitted for testing
6. (If product passes testing) Product approved by relevant
authority (fee may be applicable).

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This process can vary from state to state, even county to county,
and as such, SMEs are encouraged to identify their target market
in the US before initiating a product certification process. However,
for new products – ie: those without established Harmonized Tariff
System codes, which are required on US port of entry / clearance
documentation – the certification process must be completed prior
to developing potential partnerships in the US. Industry experts
have indicated that government or commercial sector business
development professionals are unlikely to consider purchasing a
new product if it does have the proper certifications or licenses.
Without knowing if the potential partner will purchase the product,
selecting the state or county for testing becomes challenging.
SMEs are advised that many counties, regions, and states have
harmonized certification procedures and that International
Organization for Standardization (ISO) certifications are almost
universally recognized – discussed further below.
For SMEs interested in entering the US market through government

contracting, the DoD, in particular, has its own product certification
process. For existing products – ie: not new products or technologies
– the DoD maintains the Unified Capabilities Approved Products
List (APL) of approved products that have completed the List
Interoperability and Information Assurance certification (DISA 2016).
An industry expert that has worked for two of the Big Five – both
in the US and Europe – advised one of the most effective ways
for SMEs to supply US defense-related goods needs would be to
integrate themselves into the US’ field mission supply chain. To
do so, SMEs need to ensure their products are compliant with US
government standards.
It is possible to supply the US market without being in the US; we

call this a “distributed supply chain” – supply US needs in non-US
position. Most of the time we work with large vendors because
they are reputed to be very secure, which makes things easier,
but if you are good at what you do, there’s always a possibility.
Sometimes parts – specialized aerospace metals, for example – if
your government has access to distribute these resources or can
access your services, you could be competitive for, say, customized
welded pieces at US global outposts. It is possible to supply the
US beyond software and hardware; there is a market for antennas
or parts that go on satellites, as well.
The key is [companies] have to be working to international

standards and have been found compliant by the US
government... As long as something had been reviewed by the
government, it can be used in the supply chain. Anything that is
of this nature (defense-related) that goes inside a classified area
has to be reviewed to prevent espionage. As long as [companies]
go through the proper channels to be compliant, there shouldn’t
be a problem.78
The process of government product certification and compliance

testing is much the same as the general, private sector process
described above, and includes the following steps:

1. Submit product for Approved Products List (APL) testing
2. Receive tracking number and submit and receive information
on product stakeholders (full Portuguese-US supply chain)
3. Testing requirements, business model, and device type
identified and detailed
4. Schedule testing program
5. Determine interoperability, troubleshoot issues or concerns
6. Receive appropriate certification
7. Product placed on APL (DISA 2016).
Some steps require three to five business days, and others can
take weeks, such as the full testing phase; all timelines and
documentation requirements are detailed in the Department of
Defense Information Network (DoDIN) APL Process Guide (DISA
2016). SAE International, a global trade association of aerospace,
automotive, and commercial-vehicle industry engineers and
experts, also provides product certification and standards
information and has a dedicated “solutions” key for SMEs.79
To introduce the second understanding of licensing, the report

draws on an example from Northrop Grumman – one of the
Big Five. While the majority of Northrop’s business comes from
government contracting, licensing intellectual property – such as
software, patents, and trademarks – supports further research and
development. Northrop’s intellectual property spans commercial
markets, including textiles, toys, video games, healthcare, robotics,
energy, ICT, and defense. One US defense manufacturer interviewed
suggested that licensing was likely the best way for European SMEs
to begin a partnership with them. “Supplying products to us is a
long shot for Europeans. However, there’s a conversation to be had;
let’s say there’s a company in France that wants to do business
with us. They could potentially become a licensed producer of our
products, if they can prove that they are trustworthy and such.”80
Licensing of another company’s intellectual property can serve dual

purposes. Licensed technology or products may be used as part of
another product, such as the licensing of sensors as part of software
program that interprets sensors’ data, feeding information to satellite
or other information systems. Licensed products may also be used
in “co-production” – another US market point of entry. A US defense
trade expert offers a brief history of co-production and how co-
production has contributed to global defense trade liberalization.
After World War II, in heyday of the Cold War, the US released its
technology to allies fighting our mutual causes. At first, this was
a big deal – allowing them to buy our defense manufactured
products – and then we shifted to co-production, where the US
would sell allies some parts. Now, what we are promising allies
is the ability to manufacture defense-equipment themselves
through licensing and also use their own manufactured parts.
There is a lot of talk about this with Japan, allowing them to
79 See SAE International Standards at http://standards.sae.org/.


• 65
use Japanese components. It’s a rapidly shifting landscape
because innovation moves so rapidly, and the question is how
does defense trade keep up – not just on the market side but
on the regulatory side. For example, Germany leads the way in
producing [licensed] parts and components, particularly through
3D printing, and as demand increases and evolves, it’s unclear
who is going to corner the market on certain products and areas
like naval, cyber, or other areas of industry. Who will be making
the designs, and who will be printing those designs? A lot of this
depends on who places [export] controls on the market first.81
The scope of US field missions – particularly within Europe – could

also offer Portuguese SMEs significant opportunity to supply the
US market through co-manufacture – licensed manufacture of
US defense-related goods. SMEs that have established defense
manufacturing facilities may find this opportunity to be a
relatively low-cost way to enter the US market or supply chain.
Co-manufacturing could also serve as a useful mechanism
for developing a wider US market through building trust and
relationships; through co-manufacturing, SMEs can begin to
establish the “insider knowledge” necessary for sustainable US
market export development, firsthand.
Cooperation through co-manufacturing has the potential to deepen

relationships between companies and countries, leading to even
more lucrative market opportunities. For example, the US and India
are close to completing an agreement on co-production of anti-
tank missile (Raghuvanshi 2016). Swedish embassy officials engaged
in defense trade highlighted that their co-production with the US
began with a Memorandum of Understanding (MOU) – discussed
further in next following section.
There’s the MOU committee at the top, and they are split
between the US DoD and the Swedish Defense Ministry. The
US Army, Navy, Air Force, research labs’ high-ranking officials –
colonels, sergeants, etc – meet with their Swedish counterparts
regularly, and they are interested in new capabilities and
developing new technologies. This will lead to co-development,
co-production between the Swedish military and, say, the US
Army, and then the manufacturing will be outsourced to various
domestic companies from each country, for example, with the
joining of BAE Systems (US) and Bofors (Sweden).82
Co-production differs from co-manufacture in that there is greater

opportunity for creative and innovative collaboration between
the two parties. With co-manufacture, one party licenses the
manufacture of their product or intellectual property to a second
party; however, the second party has no creative input or opportunity
to grow or develop new products without continuing to pay the
license fee. In co-production, the product or intellectual property
– unless expressly stated in the contract – belongs to both parties,
allowing for further development among and between both parties.

The potential of co-manufacturing as a component of a long-term
sustainable development program is considerable for Portuguese
SMEs if they can demonstrate greater cost competiveness than is
currently available. This is because the US government, including
the executive and legislative branches, is mandated to search for
ways to lower defense spending. As such, SMEs are advised to
prepare calculation on potential savings for potential partnership
meetings. An industry expert advised that SMEs identify:
“companies that are defense contractors that are producing
something that your product is used in and the possibility of
entering into a development agreement. Maybe they’d be
interested in a technology that you have that can improve what
they are currently providing and entering partnership would
help develop it more.”83 Focusing on other, qualitative merits
of co-manufacture or production, SMEs should also emphasize
peace, prosperity, and security benefits in potential partnerships,
highlighting geopolitical and supply chain advantages that co-
manufacture or production in Portugal offers to US partners.
The defense trade expert that provided the history and impact of
co-manufacturing on global markets also referenced 3D printing
as it pertains to defense trade. This is an area of rapid industry
development and regulation of which SMEs should be aware. The
industry expert highlighted a key case where regulation is evolving
called the “Defense Distributed Case”.
It started when a so-called non-profit out of Texas [called Defense

Distributed] was founded by ex-law school student… He began
hosting [computer-aided design and drafting] CADD files for
download. This allowed people to obtain software to instruct a
3D printer to print a handgun (known as a Liberator); eventually,
it came to be agreed that guns of this kind are controlled under
ITAR. However, the question was: is this a license of the tech data
used for creating USML weapons or is this weapons trade…
My work is increasingly focused on this digitalization of weaponry,

and this corresponds to Pentagon’s [Defense Innovation Unit
Experimental] DIU’s partnership, which is about the increasing
role of the private sector in innovating defense trade and our
existing open source84 technology’s ability to support the
next generation of weapons, [artificial intelligence] AI, robotic
weapons, neurologically-enhanced soldier type-stuff – essentially
all hackable, adding another component to an already tricky
area of regulatory policy. We could be looking at increased rate
of distribution of weapons across the world if we aren’t tough on
regulation, but what do we do; do we change regulations…
If the US places controls on the global market, well, the US does

not allow US-based firms to export this without a license, and
so that will change the global marketplace. However, if other
countries allow exporting, printing, manufacturing without a
license, the US is going to fall behind the global market. There is a
bit of a race, then, on regulatory agreements.85
84 See Interview 4 for an explanation of “open source” products.

• 67
As of this writing, Defense Distributed has lost their case against the
federal government, curtailing their release of the CADD files that
facilitate printing of a 3D gun. A request for a retrial has been filed
at the district court and Supreme Court levels, citing a violation of
First Amendment (freedom of speech) rights and calling for ITAR
to be invalidated. However, Defense Distributed’s court loss has not
halted 3D printing of defense-related and dual-use goods.
As the industry expert mentioned, Germany is rapidly establishing

itself as a leader in 3D printing of components and parts. Airbus
is beginning 3D printing of titanium aircraft structural parts at a
production site in France, and the material for the parts is supplied
by a US company – exemplifying what the defense trade expert
said above of the difficulty of regulating global supply chains in an
industry that is moving so rapidly, across borders (Warwick 2017). For
example, the US Army is looking to 3D print swarms of mini-drones
within 24 hours while in the field (Tucker 2017). The crux of the
Army’s reasoning is that mission needs change dynamically in the
field, and drones can have multiple purposes and features. When
flexibility in drone manufacturing does not permit such dynamism,
3D printing can supplement precise needs, and this brings back
issues with intellectual property, modification of licensing, and legal
regulations and compliance.
The ISO attempts to create certification standards that can support

dynamic needs and services required in the dual-use goods industry.
ISO certifications can be an ideal mechanism for marketing and
building trust with potential US partners. The Big Five contractors rely
on ISO standards, particularly in quality management.86 Certifications
offer potential partners and customers a widely recognized assurance
that the good or service provided meets expectations. ISO develops
the standards but are not the certification body; certifications
are obtained through third party, external bodies, such as trade
associations. A specific example is the Performance Review Institute –
a nonprofit trade association – that conducts aerospace, automotive,
medical, and government / industry standards reviews and audits.
There are 40 two-digit industry classifications that ISO uses to
categorize certifications, including:
»» Mechanical systems and components for general use

»» Manufacturing engineering
»» Electronics
»» Information technology
»» Image technology
»» Aircraft and space vehicle engineering
»» Textile and leather technology
»» Military affairs; military engineering; weapons.
The number of certifications under each industry classification

varies; for example, the last classification – military affairs; military
engineering; weapons – has three subcategories. Subcategories

are five-digit codes, and from the five-digit subcategory there are
a plethora of certifications that appear in a format similar to ISO
8399-1:1998 Aerospace -- Accessory drives and mounting flanges
(Metric series) -- Part 1: Design criteria. The number behind the colon
indicates when the certification was last updated, ie: 1998 in the
example above.
From interviews with industry professionals, the report suggests

some ISO certifications that may be essential to Portuguese SMEs’
export development for the US market, including:
»» ISO 9001:2015 Quality management systems -- Requirements

»» ISO 14001: 2015 Environmental management systems --
Requirements with guidance for use
»» ISO 37001: 2016 Anti-bribery management systems --
Requirements with guidance for use
»» ISO/IEC 16022: 2006 Information technology -- Automatic
identification and data capture techniques -- Data Matrix bar
code symbology specification
ISO 17025: 2005 General requirements for the competence of
testing and calibration laboratories.87
SMEs should be aware that they could use ISO resources as well
to help develop their target markets in the US. The ISO conducts
an annual survey of new certifications, allowing SMEs to see how
many entities gained ISO certification, what entities granted those
certifications, what certifications were gained, and where entities
operate. ISO is not the only body that develops certifications; for
example, AS – originally named ARD – develops highly similar
certifications to ISO, such as the AS 9100, which is similar to ISO 9001.
AS certifications are primarily related to aerospace (AS 9104, AS

9110, AS 9120, AS 6081, AS 5553, AS 00-56) but are also used in the
wider defense industry, particularly with aircraft and supply chains.
The advantages of ISO or AS should be evaluated on a case-by-
case basis for each SME by examining their products, network,
and potential partners’ preferences and certifications. There are
also industry and service-specific standards for those working
on defense contract, such as the ANSI/EIA-649B Configuration
Management Standard, which is controlled by the private sector,
and the global trade association, SAE International, provides
further guidance. SAE International has a wide array of certification
resources for defense-related SMEs, such as the Unified Numbering
System for Metals and Alloys (UNS).
Depending on the product category or sector, there are registration

and certification databases run by various trade groups that SMEs
should ensure they research in becoming and staying competitive in
the US market, such as the Online Aerospace Supplier Information
System (IAQG-OASIS). Assimilating with the US defense business
culture is essential for SMEs sustainable export development.
Associations like the National Defense Industrial Association, SAE
87 This list (and the AS list below) are not exhausted and intended to reflect a sample of
relevant ISO certifications that SMEs may be interested in obtaining.

• 69
International, or the Performance Review Institute provide SMEs with
critical insight and resources in understanding US industry standards
and certifications that will bolster US market successes.
3.6 Effects of Legislation
This section explores key legislation that could impact Portuguese

SMEs’ US market access and growth. Again, a trade association
representative, broker, or trade lawyer is most suitable to provide
specific guidance, as the US defense-related goods market is highly
regulated compared to some other markets within the US. There
are six pieces of legislation that SMEs should be aware of before
they begin the process of becoming export ready, beginning with
the Export Control Reform (ECR). This section provides a concise
overview of each.
An industry expert argued that one of the primary drivers of

industry developments over the past five years has been the
ECR.88 The ECR sought to strengthen US competitiveness through,
partially, loosening regulations and restrictions on the trade of
defense-related articles covered by the USML. As discussed under
Section 3.3 and 3.4, certain items on the USML were reexamined
to reduce inefficiencies and redundancies in trade-related
requirements. If goods were not found to have significant or
distinct military applications for classified purposes, the items were
redesignated to the CCL. As mentioned in the previous sections,
goods on the CCL face lower barriers to trade, and as of the end
of 2016, changes have been made in 18 of the 21 USML categories.
As many as 30,000 parts and components listed under the USML
in 2010 have been transferred to the CCL as a result of the ECR
(Goodman 2016).89
The second piece of US legislation that SMEs looking to export to

the US should be aware of is the Buy American Act (BAA) provision
of the American Recovery and Reinvestment Act – otherwise known
as the Stimulus Package or Recovery Act. The US, like many nations,
enacted legislation after the 2008 global financial crisis to aid
recovery efforts, and BAA attempts to encourage US companies to
purchase American-made products by way of public policy. It has
since been argued – across academic, public, private, national, and
international fora – that BAA borders on trade protectionism and
has, in part, prompted retaliatory actions across the globe, further
restricting trade flows, trade growth, and economic development.
The BAA, in short, requires that American goods and services be used
for certain federal, state, or local projects. For example, BAA requires
military supplies be contracted and delivered from US businesses.
The exception – and a significant exception at that – is if a country,
typically a strategic ally, has a Memorandum of Understanding (MOU)
with the US.90 Portugal also has a MOU with the US, and, therefore,
there are opportunities for SMEs to overcome BAA’s significant

89 Ibid.
90 See Interviews 11 and 14.

legislative barrier to the US defense-related goods market.
In addition to MOUs, if a country has a bilateral investment treaty

or free trade agreement with the US, the BAA provision can be
circumvented through the Trade Agreements Act (TAA) – the
third piece of legislation of which SMEs should be aware. The TAA
amends the BAA for US government contractors from foreign
countries that have trade agreements or investment promotion
with the US. Products from these countries are designated as trade-
compliant under the TAA – viewed similarly as domestically made
goods. There are two other exceptions to BAA – applicable to other
industries, such as construction – including:
»» A foreign product may be purchased and used for federal

contracts if a contracting officer believes that the lowest domestic
price offer is unreasonable
»» Exceptions apply to:
——Acquisitions for small US businesses
——Acquisitions of weapons, ammunition, or “war materials”
for national security / defense purposes, including those
supporting overseas military forces
——Acquisitions of some telecommunications, transmission
services, and automatic data processing
——End products for resale
——Goods contracts below a $169,000 value threshold91 (GSA 2014).
Fourth and related to the BAA, the DoD Appropriation Act of 1973,
known as the Bayh Amendment, was enacted to support US
businesses – particularly when foreign goods and services are available
at a lower cost – for military or government contracts. Fifth and similar
to the Bayh Amendment, the Berry Amendment (1941) – a permanent
feature of the DoD’s appropriations act since 1994 and further
modified in 2007 – established limits on DoD materials contracting,
particularly textiles, to keep US cotton, wool, and silk products
competitive. These textiles are also highly protected in other industries
like home décor (DPAP 2014). There are a number of exceptions to the
Berry Amendment, as there are with BAA, including:
»» Contracts below a certain value threshold

»» US goods that cannot be acquired in a timely manner, with
sufficient quality and quantity at US market prices
»» Acquisitions made outside the US to support combat or field
operations, particularly in times of contingent or urgent need
(DPAP 2014).92
SMEs should note that there are special exceptions to US legislation
91 This threshold changes to adjust for currency fluctuations, inflation, and other economic
factors; for more detailed guidance, see https://www.fedmarket.com/contractors/Federal-
Acquisition-of-Foreign-Supplies-and-Services.
92 There are a number of additional, detailed exceptions that are generally incorporated
into the last bullet, but SMEs looking for opportunities on the US defense-related market for
textiles should especially understand these exceptions. See citation in bibliography and also
Interview 3, Appendix 3.

• 71
like the Berry Amendment when supplying US field operations
or overseas missions, such as through US African Command
(AFRICOM). Textiles are a highly protected US industry; Portugal is
also highly competitive in textiles, particularly within the defense
industry. Supplying textiles to the US defense-related market –
government or commercial – poses some challenges, in terms of
related legislation. However, the report parties do not find that
these challenges present undue barriers to Portuguese SMEs’
export development. Similar to export development for other dual-
use goods, SMEs will need to be strategic, prepared to highlight
exceptions to legislation like the Berry Amendment, and consider
supplying overseas missions, such as AFRICOM, as an access point
to the US market. Portugal’s has strong and growing dual-use goods
export markets in Angola, Cape Verde, and Mozambique – all areas
of the US’ AFRICOM missions. These export markets may be an area
where SMEs can use US legislation and foreign supply lines to their
advantage, further discussed in Section 4.2a.
SMEs should also be aware of the National Industrial Security

Program (NISP). Established in 1993, the NISP is the governing
authority when determining how classified information is
distributed to private sector and / or foreign partners. The NISP
Operating Manual, or NISPOM, establishes and regulates standards
required for government contracts when classified or sensitive
information is involved. A high-level US government official
indicated that NISPOM procedures could influence whether a
foreign company is considered for US government contracting.
It really depends on what the product or service is. A lot of what I

was involved in buying for the government really wasn’t a big deal.
If we were sending tractors or cranes, that sort of equipment…
wasn’t a big deal, but computer software was a big issue. Services
are kind of the same thing, although that depends a lot on
the agency and the services you’re providing. The companies I
worked for in the last ten years, we had to work exclusively with
US companies because it was all intelligence-based work with
security clearances; in that, it would have been unusual to do
business with a foreign company.93
The key reason that SMEs should be aware of NISPOM is because of

the opportunity Portuguese SMEs have to supply dual-use goods to US
field operations. This opportunity also highlights why SMEs producing
textile-based defense-related goods should be aware of the various
exceptions in the Berry Amendment (see footnote 92). A salient
characteristic of the NISP for Portuguese SMEs to be aware is the
facility requirements for government contractors operating in the field
or supplying field missions.
The industry expert who advised on this market opportunity offered

that: “if suppliers can prefabricate [products] for our needs, there
is good opportunity to provide, but, of course, this means that the
defense customer AND suppliers need to plan ahead a long way. If you
can meet these advance schedules, this can put you in a good potion

to meet future supply gaps.”94 The DOD, CIA, Department of Energy,
or the Nuclear Regulatory Commission are the respective agencies
involved in ensuring requirements are met, and industry officials
highlighted that though the process can be lengthy, payoffs are large
(Gourely, McCarthy, and Cliffe 2009). Obtaining a “Facility Security
Clearance” supports SMEs interested in supplying US field missions,
DoD remote operating bases, and / or licensed co-manufactured
products that require or facilitate access to classified information.
The final piece of legislation that SMEs considering opportunities on

the defense-related goods market should be aware of is the Make
It In America Manufacturing Communities Act (MAMCA), which
enhanced the October 2015 Obama administration measure –
Investing in Manufacturing Communities Partnership (IMCP). Working
in conjunction with the IMCP, the MAMCA aims to revitalize and
rejuvenate struggling US manufacturing hubs through competitive
grants to cities and states. Knowledge of these two policies may be
essential as SMEs begin identifying their target market.
Just as free trade zones are areas of highly protected competition,

the MAMCA designates “manufacturing communities” for
prioritization for federal funding within the program, and SMEs
would be advised to seek US market entry points outside of
these communities. However, these areas also may be prime
opportunities for subcontracting. Many are located within the
“Rust Belt” of the US – stretching from the Northeast to the
Midwest – including areas between Buffalo, New York, Pittsburgh,
Pennsylvania, Cleveland, Ohio, and Chicago, Illinois. These are
also key bases of support for President Trump, and some industry
experts suspect that his initial policies will further protect and
attempt to revitalize manufacturing in these areas. Discerning
whether these communities and respective companies are
competitors or potential partners requires knowledge of specific
products, supply chains, and US distribution networks. Additionally,
SMEs must identify if their potential partners are in the government
or commercial market, as this will determine their import and
distribution structure.
3.7 Import and Distribution Structure and Partnerships
The importance of import and distribution structure and channels

cannot be understated for SMEs that are looking to enter the US
market through the private, commercial market. For SMEs looking
to partner with the larger, government market, the responsibility for
US import and distribution ends when goods leave European port
(if the US is the goods’ final destination). Section 4 will highlight the
scope of each market (government and private sector), as well as
potential partnership opportunities. In advance, this section outlines
the responsibilities of SMEs partnering with the commercial
market, as they are responsible for negotiating the US import and
distribution process with commercial partners. The section also
discusses potential challenges SMEs may face when entering the
US market, particularly as first-time exporters to the US market or
for new products.

• 73
The conventional structure for exporting goods to the US for SMEs
should start and end in Europe, and this remains accurate if SMEs
partner with the US government. Depending on the arrangement,
SMEs’ responsibility for their products’ export journey typically
terminates at a Portuguese port. However, there are two exceptions.
The first exception is that goods can be shipped from another
European country. Though the Next Challenge USA project, the
report parties have learned that Portuguese goods are not always
exported from Portugal, which has – in some cases – made Portuguese
export data less reliable. There are simple, economic arguments
from exporting Portuguese goods from a non-Portuguese port, such
as contribution to supply chains, crate sharing, if shipping by sea, or
partnering with companies in other, nearby countries due to similar
US destinations for similar industry goods. For example, a Portuguese
SME exporting avionics parts may find partnering with French or
Dutch manufacturers of more sophisticated, further assembled
avionic systems may not only bring cost benefits but may reduce the
administrative burden of exporting dual-use goods to the US.
The second exception – becoming more common in other industries,

such as consumer goods in general – is that, at times, SMEs’
responsibility for exporting products to the US does not end at the
point of departure in Europe. The conventional import and distribution
structure in the US is changing, particularly for the private, commercial
market, and while dual-use goods are more strictly regulated and
changes may take time to be implemented in this industry compared
to others, the change is the result of US consumers wanting more
product options, delivered in shorter time periods.
In the conventional export-import-distribution route, a US importer,

broker, or freight forwarder takes responsibility for goods once they
arrive in the US port. This eases burdens that can arise due to issues
with CBP, such as import duty assessments. Because exporters
are allowed to self-certify the product classification, there can be
discrepancies with how CBP classifies goods upon arrival and how
the exporter classified goods at departure. This can particularly
be the case if the full landing documentation or “entry” is not
completed by the exporter or with highly regulated goods, such as
dual-use items. Brokers, freight forwarders, or US importers assume
responsibility once the shipment reaches US port, and this has,
traditionally, eased the burden on the exporter and flow of goods.
However, as US consumers are looking for enhanced product options

and reduced “lead times” – the time between ordering and receiving
the order – import and distributive responsibilities have fallen back
on the exporter. The report parties have learned of shipments being
detained at port for further inspection, rejected with or without further
inspection, and withheld until further duty payment is received by CBP
(in the case that product classification differs between exporter and
CBP). A defense trade lawyer advised that SMEs should: “make your
US buyer the importer of record, so that if something comes along to
increase the duties, they are stuck with it.”95
These issues are particularly challenging for SMEs that have
invested in exporting goods, have burgeoning relationships with

new US partners, and / or are exporting new products into the US
market. SMEs may be overwhelmed by the financial, administrative,
and / or business relationship costs. For these reasons, industry
experts suggest that the conventional model for US import and
distribution presents fewer challenges to SMEs that are new to the
US market. “The producer has responsibility for the product from
the entire time it’s in the EU until it gets to the US customer’s door.
Sometimes an importer, a US company’s customs broker, or freight
forwarder will provide their services here. Foreign companies should
work with freight forwarders or US importers.”96
Though offering reduced lead times and faster shipping rates to

US customers appears a competitive advantage on the US market,
this expedited export-import-distribution route often requires
advanced knowledge and experience of the US import process
that SMEs new to the US market do not possess. There appears to
be increasing pressure to reduce lead times on the US commercial
market, and SMEs should be aware that without significant on-the-
ground resources in the US (such as an importer, broker, distributor,
or freight forwarder), costs and distribution issues could quickly
arise. For all US government contracts, the government or an
appointed agency, organization, or business acts as the importer
and distributor for the exporter – a key advantage in government
contracting for foreign companies in the dual-use goods market.
This includes acting as subcontractor or part of the US government
defense supply chain.
The key to understanding US import and distribution structure and

partnership is highly dependent on whether SMEs intend to do
business with the US government or private, commercial dual-use
goods market. The US government is the bulk of the US defense-
related goods market, and they will assume most, if not all, of the
import and distribution responsibility for SMEs’ products once they
leave Europe. Though the government is the bulk of the market,
this does not indicate that there is no market in the commercial
sector. One US state’s commercial market – in terms of GDP – often
surpasses that of entire European countries. For example:
»» Italy’s GDP is comparable to California

»» Spain’s GDP is equivalent to that of Texas
»» Poland’s is similar to Virginia or Massachusetts
»» Portugal’s GDP is most similar to Alabama or South Carolina
»» Greece’s GDP is between South Carolina and Kentucky
»» The Czech Republic’s GDP is akin to South Carolina’s (Bureau of
Economic Analysis 2016; World Bank 2016).
As Section 4 will highlight, there are considerable opportunities for

SMEs looking for export opportunities in the commercial market.
However, the import and distribution structure is more likely to
present financial, administrative, and practical challenges, as SMEs
will need to work with commercial partners to identify importers
and distributors to get their products to market. Some commercial

• 75
partners will fully assist SMEs with these supply line logistics; while
others will attempt to shift the bulk of the responsibility onto SMEs.
SMEs should be aware, however, that the scope of these challenges
will depend on their US partner, and import and distribution
logistics should be appropriate for the SMEs’ level of export and US
market experience.
Rather than seeing potential challenges of exporting dual-use

goods as barriers to the US market, they should be seen as part of
the partnering negotiation process. With the knowledge of import
and distribution supply chain structures, SMEs are better able to
identify US partners that are suitable to long-term, sustainable
export development. Just as SMEs would not seek to partner with
US companies who product needs exceed that of a SME’s capacity,
SMEs that are establishing their US dual-use goods market should
not seek to partner with US companies without an active role in the
import and distribution supply structure and channels.
3.8 Conclusion
This section aimed to provide SMEs with an introductory but

comprehensive understanding of US dual-use goods legal and
regulatory compliance and did so through discussing 1) ITAR and
EAR, 2) licensing, certifications, and standards, 3) relevant legislation,
such as the ECR, BAA, TAA, Bayh and Berry Amendments, and the
MAMCA, and 4) import and distribution structure and partnerships.
The overall finding of this section is that there are advantages and
disadvantages, examples of successes and challenges, in both the
government and commercial dual-use goods markets in the US,
including in legal regulations and compliance and import and
distribution. A defense trade lawyer rated the ease of doing business
in the US defense market “in the 70s” out of 100. “I think [foreign
companies] do have pretty open opportunities here. You may
have a Buy USA provision here, and that may be an obstacle, but I
don’t see any real barriers other than being able to make the initial
investment in the US.”97
The challenge of this section has been to provide such an

understanding knowing that some SMEs may find greater
opportunity in the US dual-use goods market through public,
government contracting; other SMEs will find the private, commercial
market is the more appropriate point of entry for their products.
The challenge of this section, therefore, is also the most exciting
feature for SMEs exporting dual-use goods; there are two, primary
markets. While the government market is the bulk of the US market,
the size of the commercial market is still substantial. Not only is this
exciting for the scope of opportunities that await Portuguese SMEs
producing defense-related goods for the US market, but also there
are mechanisms and examples of companies – some that began as
SMEs – to supply both of these primary markets.
The next section aims to help SMEs better understand the

advantages and disadvantages, opportunities of successes and

challenges, for these two primary US dual-use goods markets.
First, the government market for dual-use goods is introduced,
and the opportunity and market scope are outlined, highlighting
partnership opportunities. Attention is then turned to the
commercial market for dual-use goods. The section’s goal is
to provide SMEs with the opportunity to self-assess the most
appropriate point of US market entry for their dual-use goods.

• 77
Section 4:
Market Access
Opportunities
4.1 Introduction
After providing an extensive assessment of US legal regulations

and compliance factors for dual-use goods, this report aims to
help SMEs narrow the scope of wide-ranging legal issues that
most impact them by characterizing the two primary US markets
for dual-use goods. This knowledge helps SMEs better prepare for
sustainable export development through identification of target
markets. For example, if SMEs identify the commercial market as
more suitable for their products, ECR and end-user controls may be
less relevant; however, for SMEs looking to sell software for missiles
systems, knowledge of the government market and how to ensure
software is “export ready” operate in tandem.
For the public, government sector and the private, commercial

market, the scope of opportunity, trends, demand, products,
top companies, and partnerships are discussed, including the
differing business culture in both sectors. Section 3.7 highlighted
that the challenge of providing guidance on legal regulations and
compliance with the vast nature of products on the US defense
market, from brackets to lasers, and the challenge of this section is
to help SMEs see the diverse opportunities for export development
through these primary access points. As such, SMEs are encouraged
to be innovative and creative in developing sustainable strategies
for US dual-use goods export development.
4.2 Public, Government Market
This section presents the market access opportunities for

Portuguese SMEs on the US dual-use goods market through the
public sector. Just as not all countries or companies are eligible to
export dual-use goods to the US, not all countries and companies
are able to do business with the US government. Cuba, Iran,
Lebanon, North Korea, Somalia, Sudan, and Syria are barred from
doing business with the US – government or private sector. While
the government market is one of two primary US market entry
points, there are several opportunities within the government
market, and this section begins with the opportunities to supply
the US military, progresses to general government contracting and
subcontracting without specifying product area, and ends with
opportunities to supply law enforcement through federally funded
grants, which can be more like a private market than government.
4.2a Supplying the US Military Overseas

Like Section 3, this section begins with the highest regulatory level
of dual-use goods – those with military-related applications – and

• 79
this opportunity is in supplying the US military. The assessment
will begin with opportunities to supply the US military overseas,
including allied missions, and will progress with more direct and
US-based market entry points. SMEs may find that supplying
the US military overseas offers relief from regulatory burdens –
at least in terms of ensuring end-user controls and CBP entry
procedures – and opportunities to directly supply the US market
through building trust. It is likely that SMEs supplying the US
military overseas will still be subject to demanding administrative
requirements to ensure clean supply chains and a trustworthy
supply of goods and services.
Getting in is more difficult. Having one’s military involved, if they

are a NATO or [United Nations] UN ally, can help get in the supply
chain. They can provide to their military, and their military can
exchange and trade things. There is an internal footing that gives
them; the military acts as a middleman for them, but this also
may provide them with direct access to other military markets,
as well. In supplying US needs in the field, it depends on who has
control of the geographic military site [and / or] who the suppliers
are. Countries sometimes share geographic locations; for instance,
a US presence within Germany is a shared allied position.98
Portugal is the tenth largest NATO supplier among the 28 countries

that comprise the organization, and in 2015, Portugal received
33.8M Euros in NATO contracts (IDD 2016). With this and Portuguese
defense-related exports increasing at a CAGR of 96% within Europe,
it is likely that SMEs supply chains are well networked in areas of
US overseas operations. “Portugal is on the main continent, and so
that’s less travel to fill continental supply needs for field locations.”99
If Portuguese SMEs are involved in EUCOM or European Defense
Agency (EDA) supply chain networks, they may be able to leverage
this to their advantage in supplying the US military overseas. Military
buyers are, as one US military official characterized, “highly risk
adverse“.100 The most appropriate market entry point for selling to
the US military overseas for Portuguese SMEs is through relationship
and contracts with the Portuguese military and / or MoD. “They can
rely on the Portuguese MoD’s contacts with the US military. The MoD
probably has an industry promotion angle as well.”101
To an extent, EMPORDEF may have served as the Portuguese

industry promotion authority, but at the present idD appears as
the reference for the external promotion of Portuguese companies
to the Defense and Security market. With this action, idD helps
the national industry to find markets and international partners,
encourages the creation of business partnerships, to act in the
global defence market.
Nevertheless Direção-Geral de Recursos da Defesa Nacional,

Ministry of Economy, stakeholders at the Portuguese Defence
99 Ibid.

Technological and Industrial Base (DTIB), Offsets Permanent
Commission (CPC), Portuguese Investment and Foreign Commerce
Agency (AICEP), the constituting members of Aeronautic, Space
and Defense Federation (AED) – the industrial federation of
Aeronautic (PEMAS), Space (PROESPAÇO) and Defence (DANOTEC)
– and other trade associations also play a role102.Research uncovered
that DANOTEC and the Portuguese Association for the Mould
Industry (CEFAMOL) maintain the sort of institutional relationships
that potentially facilitate SMEs potential recommendation for
the US military’s overseas supply chain. This is the type of critical
network SMEs need as they seek market expansion in the supply
the US military overseas. US military agencies: “tend towards doing
business that they know with companies that they know. They are
not typically going to be very entrepreneurial about doing business
in new ways. It’s really important to build relationships.”103
The US “tests the waters” for potential new suppliers by mentioning

projects or supplies in which they may be interested through US
military agency visits to their counterparts in foreign countries,
US military officials’ visits to their embassies abroad, or foreign
embassies’ defense attachés in the US. Foreign officials will reflect
on their network and often return to the US military official with
suggestions of possible companies with which they could seek to
partner. A former US defense trade official said that company and
product reputation drive the US military to work with particular
suppliers following their recommendation from a foreign official.
She added that: “it’s pretty important for us where someone also
trades their defense goods. Stay out of countries or markets with
dictators, for example.”102 Portuguese companies with established
markets in Angola, Mozambique, and Equatorial Guinea, for
example, may need to make a concerted effort to demonstrate
clean supply lines in defense trade (Kenyon 2010).
If SMEs are currently doing business with the Portuguese military,

MoD, or other Portuguese government agencies, then they are
in a particularly advantageous position to sell to the US military
or DoD customer. While the US military is a “highly risk-adverse”
customer, their methods of finding new suppliers are much the
same as other industries: traditional networking and word of mouth
recommendation about reputation and quality of service.
That same agency does a lot of direct contracting with foreign

companies under some of their special programs. They have a global
presence, and they do a lot of foreign security cooperation. They will
direct contract with indigenous companies to do construction work
or even providing goods and services (computers, software). Those
connections often come through their local government; Defense
Departmental Reporting System (DDRS) will travel to some country
and will work with that government on enhancing biomedical
capabilities, for example, and local government will point to local
companies [for] that work.103

103 Ibid.

• 81
Another potential point of US market entry is working through the
US’ Overseas Contingency Operations’ (OCO) European Reassurance
Initiative (ERI); however, ERI’s future funding (post-2017) is uncertain.
ERI began as an initiative of former President Obama in response
to Russian aggression in the Crimea and Eastern Europe to reassure
European allies of continued American support. “It supported
increased US investment across five categories: (1) presence;
(2) training and exercises; (3) infrastructure; (4) prepositioned
equipment; and (5) building partner capacity” (Cancian and Sawyer
Samp 2016). While Portuguese SMEs may not be geographically
located in Eastern Europe or areas where “war games” with Russia
are taking place, such as Finland and Estonia, SMEs can use their
military networks to become engaged in ERI’s supply chain, which
has a direct investment link with the US defense-related goods
market. An industry expert that specializes in ERI funding admitted
that with what is known of Trump’s relationship with Russian
President Vladimir Putin, ERI faces some uncertainty.
I can predict that the OCO budget will continue to be funded and
perhaps at a higher level. ERI is a very specific line item because
of everything Trump has said about NATO and continuing
alliances… ERI has come up continually; it’s a new investment. Last
year it was bumped up; whether or not we continue to fund it
hangs in the balance. It pays for a lot of the buildup in the Baltics,
the posturing against Russia. It would require us to change things
significantly in our posturing against Russia to bring that down.
This would be a big decision on [Trump’s] part; it might be one
he chooses to cut, to make a big splash, and play out Russian
relations differently… Ultimately, ERI is in more danger than other
items. I’ll be watching it closely with the EU.104
While the future of ERI remains uncertain, the importance of the

US’ overseas “distributed supply chain” remains. A US industry
expert that worked on overseas military bases offered that they also:
“have your regular clerical needs that we contract out”, from parts
to security access hardware.105 If SMEs are within their government’s
network of suppliers, their chance of supplying urgent US overseas
needs are significantly greater.
Most of the time we work with large vendors because they are
reputed to be very secure, which makes things easier, but if you
are good at what you do, there’s always a possibility. Sometimes
parts – specialized aerospace metals, for example – if your
government has access to distribute these resources or can access
your services, you could be competitive for, say, customized
welded pieces at US global outposts. It is possible to supply the
US beyond software and hardware; there is a market for antennas
or parts that go on satellites, as well.106
There are times when these traditional methods of identifying new

suppliers are not an option for the distributed supply chain. This
industry expert also offered that at times US overseas missions can

106 Ibid.

have urgent supply needs or situations where conventional supply
lines break down, and this presents opportunities for SMEs to
supply US defense missions inside of Europe.
Working at a foreign location within Europe, you would always
have supply chain issues. Generally, what people run into when
they are supported “in the field” – meaning geographically isolated
from supply chains – they will keep a small supply of parts, if it’s
affordable enough, and they will try to geographically disperse
them when needs arise. But if something fails within the system
and you can’t have something within a few days – more complex
parts can take weeks – if you are in a correct geographic location,
it might make for easier sourcing and distribution. What I’m
saying is that if you produce parts that we need and we have a
failure and find you nearer to us than someone else we typically
work with, it could be a good opportunity…
Instability happens, for example, the Iceland volcano. We couldn’t

fly products over when we needed to and were reduced to
shipping across the ocean; there was no flight-based transport of
goods. Having a distributed supply chain – where you can access
things by multiple suppliers in varied locations, if they follow
these standards ahead of time – helps us out.107
Entering the US market through selling to the US military overseas

cannot only sustain SMEs development in the short-term but
also in the long-term. For example, supplying other European
allied missions in Europe through NATO, UN, EUCOM, EDA, or ERI
networks may open up access to the US military’s supply lines, but
there is no reason that this cannot work the other way around. If
SMEs find their way into the US overseas supply chain, this can also
open up opportunities in NATO, UN, EUCOM, EDA, or ERI supply
lines where the US military also procures dual-use goods.
There [are] good access opportunities with the UN military and

humanitarian missions that could benefit Portuguese SMEs… One
thing to keep in mind is how the military does its business; it is
becoming increasingly reliant on private suppliers. This has been
the general trend for last ten to 15 years and is continuing. With
uncertainties in how military supply chains will evolve, in the US, in
the UK, uncertainties within the UN itself, it would be better for these
companies to be proactive and persuasive to fill future private supply
contracts. Another good partner, geopolitically, is Israel. The US
works closely with Israel, and it would be easy for [Portugal] to have
Mediterranean access to supply our joint forces there.108
Knowing that the US military is a highly risk-adverse customer, one

way to decrease risk is demonstrating a history of reliable supplier
relations by working with other US government, non-military
agencies – discussed further in Section 4.2b. This presents SMEs with
US market access with lower investment costs and lower regulatory
burdens by supplying dual-use goods to other federal agencies,
such as the US Agency for International Development (USAID),
107 Ibid.
108 Ibid.

• 83
Department of Homeland Security, Department of Transport,
Department of Energy, etc, as advised by a former US military
agency official.
Another possibility is responding to broad agency announcements

to present innovative technologies and methodologies, and that’s
actually a pretty good way to get introduced to those [military]
agencies. It’s fairly low cost. The first step is a simple whitepaper
– not spending a lot of business development funds to respond
to [requests for proposals] RFPs. Other agencies operate very
differently, but that has been my experience.
Agencies like USAID are a lot more comfortable working with

foreign partners. The defense industry is certainly a big one, and
it’s understandable that foreign companies want a piece of that
pie. Getting in and working for other agencies however, gives
companies that experience and past performance – those are
KEY in proposal evaluations! If you’ve done business with the US
government at this agency or that agency, that adds a comfort
level and gives experience working with US military customer.109
The above demonstrates that are many ways to gain access to and
build credibility with US organizations that can contribute to both
short and longer-term sustainable export development strategies.
A record of reliable contracting with US government agencies can
lead to opportunities supplying the US military overseas, just as
supplying NATO, the UN, EDA, or ERI can lead to opportunities with
the US military overseas. It becomes immediately clear that the
opposite is also true. Supplying the US military overseas – in local
(Portuguese or European) projects, when traditional supply lines
are unavailable, or in cases of urgent need – can not only serve as a
point of US market entry with the US military but with other allied
missions and other government agencies. It becomes a regenerative
market, or as the report parties were colloquial told: “once you’re in
with the government, the possibilities are endless”.
Before shifting to the next market access opportunity for SMEs in

the public, government market, there is an essential and natural
point of continuation. This section did not begin by discussing
opportunities for SMEs to supply the US military directly for two
obvious reasons. The first is that competition is fierce, and the
second reason is that foreign companies that supply the US
military – domestically, in the US, not through overseas missions
– have spent 20 to 30 years in the US developing the networks
and relationships necessary to do so. However, in terms of a long-
term export development strategies, supplying the US military
domestically is a viable option, and SMEs should consider the varied
access points along the supply chain that offer opportunities.
The market barriers for directly supplying the US military are

extremely high for any foreign company new to the US market. The
majority of US military suppliers interviewed were American, and
in part, this is due to American military-industrial competitiveness

– at least, historically. A National Defense Industrial Association
(NDIA) executive highlighted that though US companies are highly
competitive in the US market, it is primarily the Big Five that supply
the US military domestically.
Here’s what the US defense industry really is, as opposed to

what you think it really is… [former US President Dwight D]
Eisenhower’s defense industrial manufacturing complex110 doesn’t
happen. It’s not real. There are only five companies out there – the
Big Five… The real message is that the industrial base has shifted
from a lot of large companies that make large things to a handful
of large companies that make large things. There are a thousand
or so smaller, mid-level companies that make a part, piece, or
component, give it to Boeing who fix it to a B-1 bomber. It’s been
a big change.111
The Information Technology and Innovation Foundation (2016)

provided further statistics about this “reconfiguration of the US
defense and aerospace industry” or consolidation112 through
government contracting. Almost 2,700 primes contractors bid
across the nine primary US government programs, ranging from
aerospace to weapons to vehicles, but as the industry expert
above highlighted, only 6% of these contractors comprise 70% or
more of the contracting workforce – the Big Five (Steinbock 2014).
The aircraft sector is the most concentrated – in government and
commercial markets – with 43% of funding going to only 10% of
contractors (Steinbock 2014).
This report uncovered that it is not only the Big Five that limit
competition in the US military market. The US military procurement
procedures – intentionally or unintentionally – also deter
competition, something many industry experts argued requires
a complete overhaul. For example, a Californian defense-related
goods company whose primary markets are in naval and aerospace
products said about half of all their business is with the US Navy
because they produce a “niche” product.
With that being half of our business, we feel pretty secure. The
government is reluctant to change suppliers; they are slow to
innovate, but their reluctance is good for us. On the one hand,
it’s easier that we can depend on the business to remain, but it’s
difficult to grow our market share because, we think, we have
most of the market. The government doesn’t want to be sole
source, which is why we don’t have all of the market. They like that
competitiveness or a sense of it.113
The industry expert quoted above believed his company had between
80-85% of the US military market for their particular product. This
demonstrates that – whether at the level of the Big Five or this
110 See also Steinbock (2014) pg 19-20.

112 See also Ellman, Hunter, McCormick, and Sanders (2016).

• 85
medium-sized company – US military supplier competition is so fierce
in the domestic market that it is beyond the reach of foreign SMEs
new to the US market. However, this does not indicate that supplying
the US military domestically is beyond the limits of a longer-term
plan for Portuguese SMEs. Several industry experts have highlighted
throughout the report that one way of accessing the US government
market for dual-use goods is through diplomatic channels. As such,
the report parties interviewed several, European, defense attachés
at their respective Washington, DC embassies. Almost all said that
supplying the US military within the US is “a long process”.114
For example, the defense attachés at the Swedish embassy have

been engaged with the US military to support Swedish military
and dual-use goods exports for 30 years, since Sweden and the US
signed a MOU in 1987.
Before this, there was no trade in defense, and just opening up

the market is not enough. The US defense market is complex and
hard to understand; this market is distinct from other industry
markets and others in the world. The first thing to learn is how
the US market works. One thing we did to understand the US
market was to have a unit based at the embassy to educate
Swedish defense contractors and facilitate American exports to
Sweden. We started by making it easier for Swedish businesses
coming to do business in the US, helping them see where are the
opportunities, but only in the defense sector because there are
so many government-to-government relations that are important
in this industry. Then we established an industry group back in
Sweden to support this work.
We work at trade shows, as well, but we will not be supporting

companies when at trade shows. It’s more of a way of introducing
ourselves to others and helping our industry. We guide Swedish
companies to which shows are important, and we do events and
talks at the trade shows where we invite US government persons
of interests. The work is government-to-government but also
industry-wide…
The government-to-government link is very important in the US

defense industry. The US government isn’t going to buy radars, for
example, from private contractors; they are going to work through
governments. Portugal probably has a MOU.115 The MOU itself isn’t
going to get sales. You pretty much have to do it yourself; you have
to get out there and find the customers yourself. To do that, you
need the middle contact that knows who is buying, and that’s
what we – and others – do. Success also depends on how advanced
the organization you’re working with is; we’ve been here for over 20
years, and that’s helped us not only grow our US market but also
in other foreign markets from what we’ve learned about how to do
business through government-to-government relations.116
114 See Interviews 11, 12, and 13; the report parties also exchanged communications with the
Bulgarian, Czech Republic, Estonian, Irish, Polish, and Spanish embassies in Washington,
DC, although formal interviews were unable to be arranged with the appropriate attachés
within the time frame of the report.
115 See a MOU agreement between the US and Portugal in defense procurement at: http://
www.acq.osd.mil/dpap/Docs/mou-portugal.pdf.
To give another example, the British Embassy in Washington, DC
hosts British MoD staff to conduct this sort of military-to-military,
government-to-government work. A British MoD representative at
the Embassy explained that their work was: “primarily government-
to-government, like the US Department of Commerce overseas; we
do trade and investment promotion, and the defense trade and
general trade policy team work together. We have a somewhat
separate relationship between the trade promotion people and
trade policy people.117
He added that the British MoD’s mission changed somewhat

because: “increasingly, small companies were looking at US market,
looking at trade policy context, federal acquisitions context, and
implications of new admin language (Buy American), and they
needed representation here to understand the market and
compete effectively.”118 The UK’s mission revealed intricacies about
the US dual-use goods market that are important for Portuguese
SMEs’ export development.
For most countries selling to the US, they won’t be selling an end
product. That’s because that’s where the US is competitive, and
so we won’t try to sell the end system…Be aware that things are
done differently here. For example, even if a product is developed
in the UK, it will probably be made in the US. A good example for
us is Harrier, which in the US is built under license by McDonald
Douglas… That can be a shock for people who are used to just
getting on a train to France to meet and do a deal.
More than anything, there’s a reputation piece there that is useful

for British companies – to say: my products have been used by
both countries’ military operations. There’s the specific policy tool
that we have, the UK-US [Defense Cooperation] Treaty, which
fosters better technology sharing in terms of treaty itself. There is
a provision in it to make it slightly easier to get products through
export control. It works well for us and for Australia, as well. One
thing that is also helpful is US Export Control Reform [ECR],
which has made the export process easier for everyone, but it
also reduces the utility of our treaty, in that everyone is having an
easier time on the US market now. However, there are constraints
on things you can’t use the treaty for; for example, higher
technological products, more sensitive products in terms of
competitiveness and national security, those goods are still hard
to move. For the really hard stuff, the treaty doesn’t help anyway.119
It is especially interesting that despite the UK’s “special relationship”,

defense cooperation treaty, and “many MOUs” with the US, that
British dual-use goods continue to face such competitiveness issues
on the US market. However, the British MoD representative also
emphasized that supplying parts or components for the US military
has been sustainable market for smaller businesses. He also added
that because US regulation is so extensive, going through a US
partner or a US supply chain can be a way for these small businesses

118 Ibid.
119 Ibid.

• 87
to enhance their competitiveness in other global markets – not only
because of the enhanced reputation of having their products used
by the US military, which is how a Swedish company profiled in
Appendix 2 developed their extensive US market.
A key issue is that you need to have enough information about a

product to sit down in a sales meeting with a potential partner
company without a signed (security) agreement, and this can
be a bit of a problem with all the overlapping defense [export]
regulation. Some countries may actually find it easier to get
products through to other countries through the US because
of the extensive export controls on end-users and such but also
because the US is the key global market for defense.120
Further demonstrating that there is no one way to supply the US

military, the Greek defense attachés offered still a different view
of how they are using the US military to enhance their US and
global dual-use goods exports. Unlike the Swedish Embassy’s
30-year relationship with the US military, the Greek defense
attachés’ mission is relatively new. They agreed that the overlapping
regulation – particularly EU laws – “make company-to-company
contact a bit difficult.”121
We haven’t had any open meetings. We have to have procurement

agreements. We are working on establishing our procurement
operating procedures. The difficultly is trying to make direct
company connections if there is not procurement procedure.
We try to help Greek companies see how the US market works,
having them take seriously lobbying and the services of consulting
companies. Because to do it on their own, it is [almost] impossible.
It’s a long process. Right now, we are making contacts with our
counterparts in the US military and in the new administration. We
hope that these relationships are productive, and going into a bit
further in the years, we are hoping to provide to the US what Turkey
does not through NATO.122
Presently, Greek dual-use goods exporters are supplying the US

military through overseas operations, particularly those based in the
Middle East. This, the defense attachés highlighted, is the short-
term plan for the Greek defense industry while they begin making
connections in Washington.
We are here to figure out what we can get through building

relationships though army, navy, air force channels, with
companies we are interested in. We hope to go on to make
agreements and procurements. We changed this because we
have to promote Greece to US government-to-government
relations. You can’t close business by phone or email. We are the
personal contact between the government of Greece and US. This
is a goal for the future…
We are going to pursue another MOU that has to do with military
120 Ibid.
122 Ibid.

equipment financial aid. Through this, long-term US investment
in Greece, we are looking to have a US market impact. This
process will affect our fleets, and depending on how much,
probably extend agreements to other fields. For right now, it is a
slow process because we lost a lot of our defense manufacturing,
and we are looking to the US to invest to help us modernize our
industry. Most of our expertise relies on technology, not advanced
manufacturing. This is part of a longer-term strategy to become
competitive on the US market because of strategic partnerships,
but right now we are in our initial mission.123
The focus of this report and the Next Challenge USA project is
sustainable export development, and there are various strategies
for sustainable dual-use goods export development, demonstrated
through the Swedish, British, and Greek examples.124 Prior to
this report, Portuguese SMEs may have expected supplying the
US military to be far beyond their capabilities. While this may
be the immediate case, this section has demonstrated several
opportunities for SMEs to supply the US military overseas that is
within their capacity, particularly SMEs that are already working with
the Portuguese military, MoD, EDA, ERI, or other defense-related
government and non-government agencies like trade associations.
Visibility, networking, and establishing credibility are critical

to supply the US military overseas or allied missions, as well as
other US governmental and private sector partners. A key way of
increasing visibility, networks, and trust is by better understanding
the various market entry points and pathways through established
supply chains. Selling a few shipments of goods or supplying
one need for US overseas operations will not yield the resources,
networks, and reputation necessary. This is only the starting
point. Harnessing this point of access and translating it to short
and long-term sustainable export development will require the
establishment of networks and relationships.
4.2b Federal Agencies, Non-Military Contracting

Federal government agencies represent another US market entry
point in the public, government market for dual-use goods, and
one – as highlighted in the previous section – that can lead to
opportunities in other markets (governmental and commercial).
This section will first discuss where Portuguese SMEs exporting
dual-use goods could find US market entry opportunities,
characterize what goods might be in demand, and discuss
the process of becoming an effective and efficient US federal
government contractor.
The US government is comprised of many federal, state, and local

agencies that contribute to the US governmental contracting system.
While not all agencies contract for goods, a general sample of some
government agencies that may serve as market entry points for SMEs
exporting dual-use goods include (but are not limited to):
123 Ibid.
124 See Appendix 2.

• 89
»» Agency for International Development (USAID)
»» AmeriCorps
»» Bureau of Prisons
»» Capitol Police
»» Centers for Disease Control and Prevention
»» Central Command (CENTCOM)
»» Central Intelligence Agency
»» Chemical Safety Board
»» Citizenship and Immigration Services
»» Community Oriented Policing Services (COPS)
»» Community Planning and Development
»» Computer Emergency Readiness Team (CERT)
»» Customs and Border Protection
»» Department of Agriculture
»» Department of Defense
»» Department of Education
»» Department of Energy
»» Department of Homeland Security
»» Department of Interior
»» Department of Justice
»» Department of Transport
»» Farm Service Agency
»» Federal Bureau of Investigations
»» Federal Law Enforcement Training Center
»» Federal Maritime Commission
»» Federal Protective Services
»» Fleet Force Command
»» Food Safety and Inspection Service
»» Forest Service
»» Geological Survey (USGS)
»» Immigration and Customs Enforcement
»» Maritime Administration
»» Marshals Service
»» Missile Defense Agency
»» National Aeronautics and Space Agency
»» National Central Bureau (Interpol)
»» National Institute of Corrections
»» National Oceanic and Atmospheric Association
»» National Park Service
»» National Security Agency
»» Northern Command
»» Pacific Command
»» Peace Corps
»» Pentagon Force Protection Agency
»» Postal Service (USPS)
»» Rural Utilities Service

»» Saint Lawrence Seaway Development Corporation
»» Secret Service
»» Southern Command
»» Special Forces Operations Command
»» Strategic Command
»» Transportation Security Administration (TSA).
As evident from the above list, there are opportunities for SMEs
in defense-related and non-defense agencies. When asked about
which present the greatest market entry options for foreign SMEs,
a senior official replied: “that, again, in my experience, is almost
agency by agency. For example, the Defense Threat Reduction
agency is a huge buyer.”125 There are over a dozen US federal
agencies whose name begins with Defense, such as the Defense
Advanced Research Projects Agency (DARPA), Defense Information
Systems Agency, and Defense Security Cooperation Agency.
Surveying all agencies – defense and non-defense specific – and
their needs, the report parties find opportunities for SMEs exporting
dual-use goods related to:
»» Aerospace, aeronautics
»» Aquatic transport and utility
»» Automotive
»» Avionics
»» Biomedical
»» Biometrics
»» Camouflage
»» Cloud networks
»» Cyber security
»» Construction and engineering
»» Electronics
»» Energy technology, storage, and development
»» Environment protection and security
»» Extreme temperature protection systems
»» Geographic information systems
»» Food storage (long-term)
»» Health and human safety, including radiological devices or
devices that use radiation
»» Information, communications, and technology (ICT)
»» Information and data security
»» Personal and physical security, including open air, land, and sea
and buildings
»» Robotics and automation, including unmanned aerial vehicles,
unmanned underwater/aquatic vehicles, and unmanned ground
vehicles
»» Software
»» Storage systems – flexible, dynamic, temporary

• 91
»» Textiles126
»» Telecommunications (secure)
»» Transport systems, including for heavy equipment
»» Weapons and ammunition127
»» Any parts, pieces, or components related to the above.
The most in-demand goods in the public, government market

are those in emerging areas of technology, such as robotics
and automation. Below, US industry experts directly involved in
government procurement discuss what product trends they see as
escalating in demand on the US market.
»» “My work is increasingly focused on this digitalization of

weaponry… and our existing open source technology’s ability to
support the next generation of weapons, [artificial intelligence] AI,
robotic weapons, neurologically-enhanced soldier type-stuff.”128
»» “In subs, we’re excited about large diameter underwater unmanned
vehicles, LDUUVs. That is coming, just like autonomous cars are
coming. If we could get an unmanned sub that lasts for six months
of the coast of China, [the Navy would] pay lots of money for that!
… What we’re excited about in space is CubeSat stuff. It’s not single
satellites; it’s networks. Imagine 900 Kleenex [tissue]-sized boxes
that float over North America and provide wifi.”129
»» “Counter armed aerial systems; there’s a lot of money being
put into autonomy in military application. Generally, we are
developing technology that enhances government and military
capabilities – using technology to defer the risk to human beings
in defense applications.”130
»» “Computer processing, artificial intelligence, sensor fusion,
and growth in autonomy of large and small platforms without
needing human intervention… I know [Defense Advanced
Research Projects Agency] DARPA131 has already developed these
technologies.”132
126 The report parties continue to encourage SMEs exporting textile-based dual-use goods
to develop their exports for the US market and are aware that the report has also continually
enforced that textiles, specifically, are highly protected in the US defense-related and other
industry markets. This is because the Berry Amendment and, to a lesser extent, the Buy
American Act make specific exceptions for when textiles are and are not permitted to be
sourced from outside the US. For example, SMEs may find there is a market for Kevlar-based
products but not cotton or silk-based textile products or a market for dual-use textiles goods
in the US’ overseas supply chain. Additionally, these exceptions would not apply to the
private, commercial market, which is additionally why the report continues to recommend
these products for SMEs’ export development.
127 The DoD’s acquisitions process for weapons systems is slightly different, and if SMEs are
interested in supplying this demand, they should familiarize themselves with the Defense
Acquisition System. More information on this can also be found in Interview 11, Appendix 3.
131 The report parties reached out to DARPA to inquire further about future trends and
supply needs in the US defense industry. The communications representative responded
that they simply receive too many similar inquires to answer individually and suggested
exploring DARPA’s YouTube channel.

This section has discussed US government market entry
opportunities and characterized what goods are in demand; this
section turns now to the process of becoming a US government
contractor and how to pursue opportunities effectively and
efficiently. First, there is a highly bureaucratic agency-specific,
regulatory discussion that Portuguese SMEs should be aware of in
regards to US government procurement, including:
»» How the General Services Administration (GSA) purchases goods,

supplies, telecom services, and technology products for the
federal government133
»» How to become a GSA vendor (with and without contracting),
including outreach, mentoring, and prime and subcontracting
advice134
»» Familiarization with FedBizOpps.gov (Federal Business
Opportunities, also available at www.fbo.gov) – a database of
current RFPs, events for small business government contractors,
and vendor cooperation and collaboration on bids.
Each of these resources and the level of detail necessary are highly
individualistic, which is why the report references rather than
discuss them in detail. More essential for SMEs is to know that the
process of becoming a US government contractor is free135 and fairly
simple, and specific guidance is available for foreign companies.
The process begins with registering with the System of Award
Management (SAM) at www.sam.gov. While there is a good amount
of business registration information required throughout the
process – which typically takes between seven to ten days (Grants.
gov 2017) – SMEs will require, generally, two things before they can
register as a government contractor: a Data Universal Numbering
System (DUNS) number and NATO Commercial and Government
Entity (NCAGE) code.
A DUNS number can be obtained for free through Dun and

Bradstreet via fedgov.dnb.com/webform or www.dnb.com/duns-
number.html and requires approximately five business days for
processing (IAE 2017). Guidance on obtaining at NCAGE code can
be found at https://cage.dla.mil/Content/forms/SOP.pdf and requires
approximately three business days (IAE 2017).136 The registration
information used for the DUNS number and NCAGE code should
be identical, or SMEs may experience problems registering. In such
cases SAM has a dedicated Federal Service Desk that can be reached
by email or phone. This guidance has been provided with the
133 See “GSA: Acquisition – Products and Services”, updated October 14, 2016, at https://www.
gsa.gov/portal/category/21027 and “How GSA Buys: Schedules and Contracts”, updated April
8, 2016, at https://www.gsa.gov/portal/content/104109.
134 See “GSA: Acquisition – For Businesses Without GSA Contracts” updated September 15,
2016, at https://www.gsa.gov/portal/content/104121 and the GSA’s Office of Small Business
Utilization, updated on January 10, 2017, at https://www.gsa.gov/portal/category/21015.
135 SMEs should be aware that new SAM registrants can be subjected to phishing scams
where they are contacted by email or phone and prompted to pay for their SAM registration;
SAM is completely free to register and bid.
136 See also the NATO Support and Procurement Agency (NSPA) portal at https://eportal.
nspa.nato.int/public/eportal.aspx.

• 93
assumption that the majority of SMEs engaged in this project will not
have a US headquarters or hub and not be subject to US taxation. If
this is not the case, the SAM registration process requires a DUNS and
Taxpayer Identification Number rather than a NCAGE code. In either
event, SAM also offers an excellent “Quick Start Guide for New Foreign
Registrations” with seven steps for registering as a US government
contractor (IAE 2017). The report parties are, themselves, government
contractors; the process is fairly straightforward.
Once registered as a government contractor, engagement is the key

to becoming an effective and efficient US partner, and particularly for
small businesses, there are free newsletters, mentoring services, and
webinars that can help Portuguese SMEs become acquainted with
government contracting. As with any US market, a solid command
of English is essential, and there are particular networks with which
SMEs should be familiar. With networking, there are two keys to
becoming an effective US government contractor: subcontracting
and networking with the agencies with which SMEs would like to
work, which remains achievable even remotely from Portugal.
The first consideration is to determine what contract role is

appropriate at various stages of export development. A US military
contracting expert advised that: “going after prime contracts is
certainly worthwhile, but a quicker way in and a great to start to
learn is be a sub[contractor] (to some big contractor like Booz Allen
or Raytheon); find those big contractors and start out as a sub is the
quickest path into working as a government contractor.”137 Starting
off as a subcontractor to some of the larger – even the Big Five – is
one of the most effective ways in the US government market. If this
point of access appeals to SMEs, they should also be aware of the
GSA Schedule – discussed below – which is often a faster way to
those smaller, subcontracting opportunities.
Secondly, a sustainable strategy for becoming a prime contractor

in the long-term can be developed by first identifying one’s
primary product market. SMEs should aim to network and build
relationships with prime contractors currently doing business with
government agencies involved their primary markets. The long-
term goal becomes networking with those agencies directly to
become a prime contractor. An effective networking strategy would
be to target approximately a dozen agencies. This fosters close,
personal relationships with targeted agencies – rather than cursory
relationships with many more agencies – and supports SMEs’
identification of two to four primary potential partner agencies
while networking with agencies that work closely with those two
to four agencies. With limited resources, SMEs must be strategic in
their networking.
For government contracting, the GSA schedule138 is: “the premier

acquisition vehicle in government, with approximately $40 billion
a year in spending or 10% of overall federal procurement spending”
and used to serve the needs of the US government’s long-term or

138 See “GSA Schedule FAQs” at http://gsa.federalschedules.com/gsa-schedule/gsa-schedule-faq/, which also
links to several more helpful guidance websites.

reoccurring contracting needs when projects fall below a certain
financial threshold (GSA 2017). If projects are not over a certain
financial limit (typically over $1M), the government can contract directly
from the GSA schedule and is not required to publically submit RFPs.
Just like exporting dual-use goods, not all countries are eligible to
list their products and services on the GSA Schedule – only countries
who have implemented the WTO’s Agreement on Government
Procurement139, those with a free trade agreement with the US, least
developed countries, or Caribbean Basin countries. Beyond this, to be
eligible for the GSA Schedule, companies must have:
»» Financial stability with at least two years of generated revenue,

evidenced by profit / loss statement, invoices, warranty / refund
policy, and / or insurance policies
»» A past performance evaluation from customers or partners,
evidenced through Dun & Bradstreet open ratings
»» Commercially available goods or services, identified through a
Special Item Number (SIN) from over eleven million goods and
services categories in approximately 40 GSA schedules
»» For DoD contracting or dual-use goods, end-user controls
compliance.
139 47 countries have implemented the WTO’s Agreement on Government Procurement,

including all 28 EU member states; for a list of the 47 countries, see https://www.wto.org/
English/tratop_e/gproc_e/memobs_e.htm.

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Portuguese SMEs are eligible and should be aware that while SAM
is a relatively simple and free registration process, getting on the
GSA Schedule is not as straightforward. Additionally, unlike SAM, the
timeline for getting on the GSA schedule is not as brief or precise.
There is time associated with completing the application, and by
the estimates given to the report parties, the application is between
200 and 500 pages. Following, there is time associated with the
government’s processing of the application, and the estimates given
to the report parties range from three to four months.140 There are
specialty agencies that will help SMEs with this process,141 and the
report parties learned that the average fee for this service ranges
between $5,000 and $7,000. While a costly investment,142 the report
parties support that it is an effective and easier way to get on the
GSA schedule where genuinely transformative opportunities for
government contracting exist.143 Once a company is on the GSA
schedule, they remain listed for three, consecutively renewable five-
year terms (up to 15 consecutive years). Therefore, the GSA is not only
a point of US government market entry – following registration on
SAM, a prerequisite – it can also be part of a long-term, sustainable
export development strategy.
Being on the GSA schedule is also a highly effective mechanism

for supplying urgent DoD needs or DoD needs overseas, and SMEs
can look to enhance their competitiveness through “set-asides”.
Set-asides are special categories of contracts that must be procured
from disadvantaged businesses. Section 2 discussed how such
policy and regulatory requirements boosted small businesses’ share
of DoD contracting in recent years. There are few categories of set-
asides – 8(a) small business, historically underutilized business zone
small business, service-disabled veteran-owned small business,
and women-owned small business – but the most applicable for
Portuguese SMEs is the general category of small business.
140 GSA offers tips for how to generate business with the US government while waiting on
GSA schedule applications to be processed, and most involve some form of subcontracting;
see GSA “How can I do business with the government while I am waiting to get on a GSA
Schedule? at https://www.gsa.gov/portal/category/27115.
141 As with SAM, SMEs should be aware that there are many GSA phishing scams where
companies are contacted by email or phone, offered an unusually low price to get their
goods or services on the GSA schedule. There are websites that list companies that have
been involved in such scams in the past. If SMEs decide to use a GSA schedule application
service – and there are many with excellent reputations and services that ease the burden
the process – they should research the company extensively and ask for past client
references with contact information to cross-check testimonials.
142 The GSA offers a “Vendor Toolkit” to help companies assess whether getting on the
GSA schedule is a good fit for their business; see more at https://vsc.gsa.gov/RA/toolBox.
cfm and a particular assessment tool for small businesses at https://www.gsa.gov/portal/
category/108071. There is also a larger site for GSA vendor support at https://vsc.gsa.gov/.
143 The report parties cannot definitively confirm the accuracy of the following statement,
but in considering several GSA schedule application services, the report parties find this
assessment consistent. “The average GSA contractor makes $2.5M in the first 2-3 years, and
most companies take this long to do business well on GSA; most are doing some business
within 2-3 months of getting on the schedule. The top third of GSA contractors make
$20M annually, and most of these have hired an ex-government employee who has good
connections with the 2-4 agencies that they want to work with. The middle third makes
about $1M annually from GSA goods or services, and this is because they haven’t fully
devoted someone to GSA business development. The bottom third who don’t make up to
$1M annually don’t do so because they are waiting for contracts to come to them. Getting
GSA contracts without actively working the schedule is possible, but it is not as lucrative as
actively seeking business, like any other form of business development.”

Through their SAM registration, SMEs can “self-certify” as a small
business by submitting detailed financial and employment
information. Prior to registering on SAM, SMEs can confirm that they
meet the requirements for a small business within their specific
industry through the US Small Business Administration (SBA).144
Federal agencies are required to contract at least 23% of prime
contracting needs from small businesses, and in 2015 – the year
with the most recent data available – the government’s goal was
to contract 32% of prime contracting and 29% of subcontracting
needs from small business (GSA 2015). This does not include the
additional percentages required from the other set-asides, such
as women and veteran-owned small businesses. These set-asides
are another strategy for US government market access, sustainable
export development, and enhanced competitiveness.
Just as being a subcontractor can lead to becoming more

competitive as a prime contractor with the US government,
obtaining contracts through the GSA schedule can lead SMEs to
becoming more competitive on SAM, where contractors compete
for awards in the range of several millions of dollars. While it is
unlikely that SMEs would be competitive for the billion dollar
contracts that the Big Five compete for, this long-term export
development strategy aimed at increasing competitiveness and
export volume and value over time is precisely the kind of contract
suited for SMEs producing top-tier, niche dual-use goods. A US
defense technology expert argued that: “there are two ways to
differentiate yourself on the US market: one is political and other is
technological… Technologically, things are evolving so rapidly. They
have to find a niche that’s not already carved out by someone else
or by another sector.”145
The idea of identifying and exploiting a product niche is

reminiscent of the example of the Californian Navy contractor
discussed previously, which believed they have about 80-85% of
the government market for their particular product. Government
contracting – particularly through the GSA schedule in the short-term
and SAM bidding in the longer-term – offers a consistent, sustainable
market for Portuguese SMEs to grow and develop new technology
and new products. The Swedish defense attachés believed that there
were two keys to their success on the US dual-use goods market:
innovation and the financial freedom many Swedish businesses
have to take risks in that innovation. “We spend a lot on innovation,
and that’s important to be on the US market. If you don’t have the
best product on the market, there aren’t a lot of buyers because
there’s so much competition. The Swedes come here with state-
of-the-art products… If you are not top-notch tech wise, you can’t
win.146 Therefore, SMEs with cutting-edge technological dual-use
products should particularly explore the opportunity to supply the
US government through the GSA schedule.
144 See https://www.sba.gov/contracting/getting-started-contractor/make-sure-you-meet-

sba-size-standards for industry-specific size requirements.

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4.2c Federal Grant Programs
This final exploration of opportunities in the US government
market looks to help SMEs understand how they may enter
the US market by supplying government or affiliated agencies
through federal grant programs. The US federal grants program is
extensive, covering everything from repairing potholes to money for
individuals’ university tuition and fees. There are many federal grant
programs that may be of interest to Portuguese SMEs exporting
dual-use goods, including those available to higher education
facilities, public schools, hospitals, and non-profit and commercial
organizations. There is almost always a corresponding website for
each federal grant program, ranging from the general – such as
www.grants.gov – to the specific – such as the Agency for Healthcare
Research and Quality run by the US Department of Health and
Human Services.
To be clear, SMEs do not apply for grants. Rather, SMEs can use these
websites as points of business development research in order to see
where active new project funding is taking place. For example, by
searching grants available for federally subsidized housing for new
projects on or near military or defense-related operations, SMEs could
locate organizations that have received funds and are in need of
dual-use goods and defense-related building supplies in developing
potential partnerships. How SMEs use resources around federal
grant programs depends entirely on their strategies for business
development, potential partner searches, export development
investment resources, goods, and capabilities.
Because the scope of possibilities and opportunities are so
large and requires in-depth knowledge about individual SMEs’
businesses, products, and goals, this section examines one of the
most relevant opportunities for Portuguese SMEs exporting dual-
use goods – the Law Enforcement Support Office (LESO) Program,
better known as the 1033 Excess Property Program. The 1033
program was created though the National Defense Authorization
Act (1997) as part of the Defense Logistics Agency (DLA), which
replaced the 1208 program (1990) that was mostly focused on
supplying counter-drug activities (DLA 2017). The US spends over
$100B annually on police agencies, and a US export compliance
specialist suggested that: “for European companies that are looking
to or able to sell to government agencies, I would direct them to
the police and border security agencies; the US is a huge market for
that” (Justice Policy Institute 2012).147
The US controls the third largest police force, globally, behind China
and India. State and local police agencies represent a large market
for dual-use goods, and the 1033 program focuses on supplying law
enforcement with “tactical” goods, including weapons, ammunition,
high-performance uniforms and gear, communications devices,
specialty utility or armored vehicles, crowd control devices, optical
equipment, and robotic equipment. As explained by a state
public safety and 1033 program distribution official, “the Federal
Government has authorized that local governments, including
police agencies, may acquire excess military equipment”.148 The 1033


program began as a way that the federal government could issue
savings by passing equipment down the military supply chain to
law enforcement.
The equipment that is available has been turned in to the military;

they’ve basically said we don’t need it anymore, and they turned
it in. The military doesn’t waste anything. The Defense Logistics
Agency, the DLA, acts as the overseer of all of the equipment
transferred from the military to the states… For example, if an
army base decides to refurbish their offices, they would turn in
their old desks for another department that maybe didn’t have
a desk. The same principle works for the military equipment and
ammunition and other articles transferred in the 1033 Program.
The military doesn’t just get rid of these types of equipment; there
is always a better way to use excess goods.149
Following the “war on terror” in response to the September 11th

attacks in the US, state and local government gained access to a
new source of federal funds. “With 9/11, the window was opened,
creating the largest government department (Homeland Security).
At the local level, everyone needed an emergency management
plan and supplies. The money started flowing.”150 Ammunition,
electrical wiring, assault rifles, cold weather gear, optics, and
scopes were the materials transferred most frequently, as well as
crowd-control chemicals and riot gear.151 All-terrain vehicles (ATVs)
and mine-resistant ambush-protected (MRAPs) vehicles were
the largest value items transferred to states, and so began the
excessive purchasing referred to as the “militarization” of the US’
law enforcement agencies. While the 1033 program started as a
method of redistributing used dual-use goods from the military, it
has evolved into mechanism for law enforcement to purchase new
goods from private market suppliers.
The top recipients were in Florida, Texas, California, Tennessee,

Arizona, and Virginia, and the 1033 program experts confirmed that
there is no discrimination where the supplies are sourced. “They
don’t seem too picky from whether the equipment comes from
India or Indiana.”152 However, it does appear that there are suppliers
that law enforcement officials prefer, and these suppliers are
competitive on a global level.
We get access to the same stuff everyone has, in Israel, the

other allies; we’re getting in on an existing market among our
allies. I don’t think it’s an issue of buying specifically Chinese or
German goods; if it’s out there, they’ll go after it. If someone has
a particular good they want, they can go after it. You see that the
goods are the same in Oakland and London; the countries [that]
are in on the supply chain are on good relations with the US…
When municipalities have money – and some do, Chicago, San
149 Ibid.

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Francisco – there is this convention that happens every year.153 All
of the private industry contractors are there (Lockheed, Siemens),
and they offer catalogues for discretionary funding.154
In January 2015, former President Obama signed an executive

order limiting certain types of militaristic equipment transfers to
state and local police agencies, and transfers to state / local police
agencies fell by over 50% from 2014 to 2015 (Skorup and O’Sullivan
2014). Excess goods from the military have become less available to
law enforcement agencies, but their demand for dual-use goods
has not decreased. Growing urban populations, intensive protests
– such as those in Ferguson, Missouri that persisted off and on
for almost a year – large-scale environmental disasters (tornados,
floods, hurricanes), and counter-terrorism operations are factors
that influence a growing demand for dual-use goods among law
enforcement officials.
They haven’t scratched the surface of purchasing; there is a lot

coming online for retinal scanning, biometrics. These are flowing
to municipalities as well. A lot of the media looks at the flashy
goods – guns, tanks – but the software that’s used to operate the
drones, that’s a rapidly evolving market… There’s also this whole
movement with body cameras and increasing technology to
fight cyber-attacks. Oakland [California] is a great example; some
of the technology that was deployed was electronic jammers to
prevent cyber-attacks. Since then there’s been an outshoot and
the market has responded.155
When looking to enter the market for supplying law enforcement,

SMEs should not exclusively focus on large metropolitan areas.
The 1033 program experts and secondary research confirmed that
smaller, more rural law enforcement agencies were searching
for and receiving dual-use goods in larger volumes than urban
centers.156 This is because most urban law enforcement agencies
receive state funding. Local and county law enforcement receive
less state funding but are able to apply for federal funding to stock
up on supplies. “You want to look at where these goods are flowing
– it’s not just New York; it’s in North Dakota for the pipeline protest.
Maybe schools as well, especially the private or extremely well-
funded public schools.”157
SMEs are encouraged to assess application and usage of their

products in law enforcement and public safety, and it is worth
highlighting that the above section on law enforcement and federal
funding applies equally to local transport authorities158 and US
prisons, where diverse opportunities for dual-use goods are present.
For example, drones are being used for crowd control, in emergency
153 See the end of Section 4.3 for relevant trade shows.
155 Ibid.
156 Export.gov maintains up-to-date information on where trade flows are occurring in all US
states and major urban areas that are classified by North American Industry Classification System product codes.
157 Ibid.
158 The majority of American city or county transport authorities have specially funded
defense units.
response situations, or to deliver emergency provisions to remote
areas. Perhaps when developing new technologies, SMEs should
also consider how public schools and universities could use that
technology to communicate or protect students in emergency
situations. Several defense industry experts suggested to us that
one key area where dual-use goods are growing is in areas where
previously only military applications were conceived. Additionally,
if products can be used to protect schools and universities, the
technology can likely be applied to other public settings, such as
hospitals, cinemas, nightclubs, restaurants, markets, and malls that
often experience the same threats and emergency situations.
4.3 Private, Commercial Market
Though the private market is significantly smaller than the

government market, the commercial market remains worth billions,
annually. For example, the US is the world’s largest export destination
for handguns and other firearms, a $985.4M market in 2015, the most
recent year for which there is data (Comtrade 2017). In the same year,
Portugal exported $14.3M handguns and other firearms to the US. In
2015, Portugal supplied 1.5% of the US’ commercial weapons, which is
a significant market share, although down from 1.7% in 2014 when the
US import market was valued at $1.02B (Comtrade 2017). The Guardian
estimates that there are more guns than individuals in the US, and
though the US market for weapons declined in the most recent year,
a strong and growing market exists for many dual-use goods (Beckett
2016). This section will begin by characterizing and exploring key
features of the commercial market, examples of market entry points,
and pathways for commercial opportunities for SMEs looking to build
their market in the US.
Strict regulatory provisions also remain applicable to dual-use

goods within the US commercial market; however, the extent to
which the regulations and laws from Section apply depends on
SMEs’ products and their US partners. Within the commercial
market, the most important regulatory authority resides within
the federal government through the Bureau of Alcohol, Tobacco,
Firearms, and Explosives, but the sale of weapons is mostly
governed by individual states. Compared to their European
counterparts, few US states have what Europeans would consider
“moderate” levels of gun control. In fact, in many US states,
individuals may carry weapons – openly or concealed – into
commercial establishments, demonstrating the importance of
knowing state weapons laws in identifying potential target markets,
as well as market demographics.
One factor that characterizes the strong and growing US market for
dual-use goods is the US’ extensive culture of self-preservation and
emergency preparedness linked to the rugged frontier on which
the country was settled. A cultural component shapes this historical
factor, and SMEs’ ability to understand this culture can guide their
strategies for sustainable export development. The need for self-
preservation and emergency preparedness began, historically, with
major crises that shaped the US, such as the Great Depression or
Cold War. Following the large-scale starvation that occurred in the

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early 20th century, shelf-stable pantries and survival equipment
become commonplace in the American home, particularly as Cold
War tensions escalated and nuclear fallout shelters were seen as
practical necessities. Not only do these shelters survive today, but
new emergency preparedness shelters also continue to be built
in response to new (perceived) threats, such as climate change or
economic collapse.
The Federal Emergency Management Agency (FEMA) prepares

and implements disaster relief, and they also encourage Americans
to, themselves, prepare for diverse disasters scenarios, particularly
through a National PrepareAthon! Day (FEMA 2015). Because the
US has such a large population, preparing for diverse disasters
and responding to them for all citizens is a practical and financial
impossibility for the government, and Hurricane Katrina remains
a poignant example of this reality. As such – not unlike other
American services like health care – responsibility has been pushed
to the private sector, stimulating a strong market for dual-use goods
in emergency preparations. A popular US TV show, “Doomsday
Preppers” is the epitome of how fear-based preparations can
quickly stimulate demand for dual-use goods, culminating, in one
instance, in a $3M “doomsday bunker condo” (CNN 2017).
There is a strong market for SMEs that are able to think about
emergency preparedness, personal security, and hazard protection
creatively, for example marketing dual-use goods as emergency
preparedness alternatives to weapons, where US demand and
Portuguese exports declined last year. For some, emergency
preparedness is a staple of life, such as in mountainous regions
where heavy snowfall interrupts power and water supply for weeks
at a time. For others, dual-use goods supply hobbies like skeet
shooting and paintball, and this is not exclusive to basic dual-use
goods. In interviews, the report parties learned of an individual in
Colorado that maintains a personal satellite monitoring station in
their basement; there are also several individuals who, as a matter
of necessity, maintain their own radio communication networks in
Nevada farmland.
With extensive rural populations throughout the US, dual-use goods

have many practical applications, beyond emergency preparedness,
due to the vast distances that may exist between where individuals
live and “civilization”. In Portugal, the distance between large or
medium-sized cities is not nearly as great as it is within the US. For
example, the population density of Montana – one of the largest
US states in size – is 7.1 people per square mile, compared to 9,518
per square mile in Washington, DC; Alaska has only 1.3 people per
square mile (World Atlas 2016). Eight other states – Kansas, Idaho,
Nebraska, Nevada, New Mexico, North Dakota, South Dakota, and
Wyoming – have comparatively low population densities, and these
states face significant natural and environmental hazards for which
dual-use goods are in high demand (World Atlas 2016).
For products already on the US commercial market, there are two,

interconnected features that affect opportunities for Portuguese
SMEs: dual-use goods regulation and US supply chains. The
majority of dual-use goods on the commercial market originate

with government or military supplies being handed down or
decommissioned for commercial sales and use. The reason that
dual-use goods in the US originate with government supply chains
is because they are strictly regulated, and the costs of regulatory
compliance often exceeds commercial benefits for those new to
the US market. There are, of course, exceptions, including a Swedish
scope manufacturer profiled in Appendix 2 that is dominant in
both markets; however, this company’s success on the commercial
market was also a product of brand reputation that originated with
a contract with the US Army.
Dual-use goods on the commercial market, typically, have an

origin point with the US government, which is why so much of
this report has focused on the government sector. For example, if
a US consumer wanted to purchase low-cost, high-performance
boots, the most common historical source is army-navy surplus
stores, which range from small shops in rural areas to large,
commercial warehouse in the outskirts of urban areas. The
transition to online retail has affected the prevalence and success
of military surplus stores, but it has not – for the most part –
extracted the government’s role in the commercial supply. Today,
fewer US consumers go to a brick-and-mortar army-navy surplus
store; instead, they go online to www.govliquidation.com, www.
gsaauctions.gov, www.usa.gov/state-surplus-sales, or one of the
countless online government and military surplus sources.159
However – just as with the 1033 program – while the majority of
dual-use goods that come to supply the US commercial market
originate with government, there is a growing market of individuals,
associations, or organizations actively seeking out dual-use goods. A
military surplus retailer contributed that their supply: “started with
auctions, military surplus auctions. We would go and buy as much
for as cheap as possible then turn that around to the public. Back
then, there was a lot of extra gear from the boys coming back from
Vietnam. We’ve expanded because we’ve been in the business for
50 years, and now, we buy direct from Europe.”160
Although this particular retailer had not come across any

Portuguese dual-use goods, European dual-use goods can be
competitive with the military surplus that pervades the commercial
market. The challenge for this project and Portuguese SMEs is how
to increase Portuguese dual-use goods’ visibility and stimulate
US consumer demand. There are three noteworthy mechanisms
for increasing visibility: product marketing, price and product
competitiveness, and technological innovation. Before these
mechanisms are presented, some examples of US commercial
market entry points for dual-use goods are highlighted to give SMEs
an idea of where visibility requires strategic focus.
The most abundant commercial market for dual-use goods is among

hunting, sporting, or outdoor goods retailers and distributors. Some
of the larger examples in the US are Cabela’s – recently merged with
another outdoor retail giant, the Bass Pro Shop – WalMart, Costco,
159 It should be noted that 2 of these examples are run by government, indicated by the
.gov extension.

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Academy, Dick’s Sporting Goods, Sportsman Warehouse, Gander
Mountain, Tractor Supply Co, and online retail superstore, Overstock.
com. SMEs can also find smaller and medium-sized competitors in
target market areas through online searches. For example, an online
search of “hunting stores Montana” results in potential commercial
partners, such as Big Bear, Schnee’s, Scheel’s, Bob Ward’s, Shedhorn
Sports, High Caliber Sports, and Shipton’s Big R. Targeted market
research can reveal the most appropriately-sized potential partners
for Portuguese SMEs once their target market (region or state) has
been identified and import and distribution channels negotiated,
as discussed in Section 3, and once the target market is identified,
market intelligence can reveal how SMEs can leverage comparative
and competitive advantages – the subject of Section 5 – to increase
their visibility.
Beginning with how SMEs can use product marketing to increase

their visibility, campaigns should not be limited to individual
potential partners but focused on industry-wide communications
through embassies, trade associations and shows, high-traffic
public areas, and strategic advertising cooperation. SMEs that are
able to pool collective resources may discover that coordinated
marketing for similar or related dual-use goods can multiply the
number of potential partners and consumers exposed to SMEs’
products. Marketing that focuses on, emergency preparedness,
that showcases SMEs’ products is also an effective strategy to reach
a vast American audience. Marketing products to manufacturers
of emergency response or survival kits can yield sustainable, low-
investment exports. In the US market, investing in innovative
marketing can produce highly effective results.
Coordinated and collaborative marketing campaign should not

be limited to SMEs producing dual-use goods. For example, a
Portuguese biometrics company could work in conjunction with
a Portuguese supplier of biomedical devices to cross-market their
products to defense and medical industries with an emphasis on
innovation in Portuguese bio-industries. Homeowners’ associations
and private schools, hospitals, prisons, security firms – some of
which are contracted by federally and state-funded agencies, such
as Departments of Transportation, Corrections, Justice, or Education
– are strong markets for dual-use goods. As recommended above,
SMEs should be creative in how their dual-use goods can be
used, such as applying biometric access technology for gated
communities, using drones to distribute medicine to remotely
incarcerated populations, or marketing charcoal water purification
tablets in areas with high incidences of lead in drinking water. It
is also important for SMEs to be open to re-branding products
if, for example dual-use goods can be better used in application
to agriculture or the oil and gas industry instead of defense-
related commercial markets. Working with US market intelligence
specialists will also help SMEs understand the mediums that best
target their potential partners.
Unlike the government market, in the commercial market there

are dual-use goods that are advertised as “top products”, “proven
effective”, “reliable”, but without certifications, testimonials, or
demonstrations potential US partners may doubt the authenticity

of this marketing, particularly those that are underpriced. Whether
combat boots or communications devices, cheap, sometimes
dysfunctional, alternatives to the more costly and effective dual-
use goods are present on the US market. The importance of
demonstrating regulatory compliance and competence to potential
partners through licenses, certifications, or demonstrations helps
SMEs establish trusting relationships and genuine, sustainable
markets for their products, rather than rely on marketing alone.
Sustainable US partners want quality products, at competitive
prices, with demonstrated utility, product and service guarantees,
and a trusting relationship, built over time, increases the likelihood
that SMEs will receive repeat orders rather than one or two. Similar
to the government market, building relationships in the private
sector requires resource investment.
In developing relationships, SMEs must demonstrate awareness

of their competition, and throughout the research for this report
and the Next Challenge project in general, industry experts advised
that this requires investing in US market intelligence. For example,
the Greek defense attachés encouraged Greek dual-use goods
exporters to seek the services of lobbyists or market consultants.161
The Swedish defense attachés – where resources are perhaps more
plentiful – encourage companies to come to the US themselves.
They would need to select someone to spend a year in the US,

working with an insider, and then, bring them back to Portugal; you
can give responsibility to that person. That’s definitely true for the US
defense market. Most of the people I’ve seen be successful here have
done it that way. It’s hard work; you need to get out there. In many
countries, they want to stay at home and do the work. You just have
to get out there [in the market] and do the work.162
Expertise about the commercial dual-use goods market also

enhances SMEs’ ability to identify their point(s) of differentiation on
the US market. Product, brand, or country of origin differentiation
is not only key in commercial and retail markets in the US but
specifically for defense. Throughout this report, industry experts
have highlighted that defense supply chains operate through
extensive global trade value chains. The industry is becoming so vast
in terms of highly specialized products, which require significant
investment into research and development. It is increasingly the
case that countries will emerge with specialization(s) in certain
products, systems, or components of the supply chain. Previously
the example of Germany emerging as a leader in 3D printing was
given; other examples include the UK, Canada, France, Italy, and
the Netherlands’ competitiveness in aerospace and avionics and
Finland, Sweden, and Italy’s specialization in naval goods.
Companies in allied supply chains – especially those involved in

the EDA – are pressured deepen defense-related specialization.
In a Center for Strategic and International Studies webinar on
international joint defense development, Vidar Skjelstad – Executive


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Vice President of KONGSBERG Defense System Inc, a leading
Norwegian supplier or aerospace and defense systems with over
a dozen North American facilities – argued that: “Norway is the
world leader in medium-range strike missiles, and you need to
be the best in the world in those niche areas to go out there [in
the global market].” Knowing what makes Portuguese dual-use
goods, and SMEs’ products in particular, distinct and valuable on
the US commercial market is an essential exercise in developing
sustainable strategies for export development.
As a general strategy and point of differentiation, an excellent

technique with US partners is to address an issue or problem
before it becomes troublesome – to provide the answer without
being asked the question. For example, if Portugal emerged as
the leader in producing equipment that autonomously detected
and interpreted suspicious gesture-based human activity in high-
traffic public areas and triggers corresponding emergency alerts to
security personnel. With one of the highest incidences of doctoral
degrees and a growing ICT sector, Portuguese SMEs could look to
resolve public security issues before they are initiated. This is the
optimal marketing strategy, but if SMEs are still finding their niche
in defense-related industries, identifying a supply gap and offering
an innovative solution is equally as effective. For example, several
industry experts highlighted that a growing problem as a result
of varied products on the US defense market is that not all parts,
systems, or programs are cooperative. Specializing in Microsoft or
Unix-system compatible products – used by the majority of the Big
Five – could address an existing and growing supply gap.
Second, price and product competitiveness can help SMEs increase

their visibility on the US commercial dual-use goods market, and
like differentiation, competitiveness should be based on market
intelligence and target market demographics. For example,
intelligence on what suburban parents pay for “bulletproof
backpacks”163 compared to inner city parents can help SMEs identify
their product pricing structure. Awareness of key demographic
information to support SMEs’ product pricing will not only save
SMEs time in potential partner searches, but accurate market
intelligence is more likely to generate sustainable partnerships
through price competitiveness. Price competitiveness should always
match the target market. For example, if SMEs’ target market is
online, they should be aware that prices must be competitive
with military surplus or Amazon to gain the attention of partners
who predominately sell dual-use goods online. On the contrary, if
SMEs’ target market is that brick-and-mortar outdoor store in rural
Montana, product pricing may be more flexible.
SMEs should be aware of a debate within the commercial

community as to whether price is a reliable point of
competitiveness. Within the defense industry, government contracts
on the F-35 program were awarded to foreign businesses because
uncovered net savings in the range of hundreds of millions of
dollars by reducing the amount of titanium necessary; the same
emphasis for cost savings persists in the commercial market. The
163 Bulletproof backpacks are an excellent example of innovating new uses for dual-use goods.

costs of commercial dual-use goods may not be as high as to the
F-35 program and orders may be considerably smaller for a rural
Montana outdoor store than the US Army. However, cost savings is
almost always a positive selling point. The risk SMEs take in using
price as a point of competitive advantage is that, eventually, another
competitor will offer lower prices.
A pricing “race to the bottom” strategy may not be intentional

or malicious among market competitors; over time, the price of
new or technological products declines. The commercial drone
market is a perfect example. When commercial market drones first
appeared, a model in the low hundreds of dollars was competitive.
Today, Amazon retailers offer $50 drones. Part of this is due to
the technology becoming more common, but it is also due to
competitors with lower production costs exporting to the US. While
price competitiveness is an effective short-term strategy, it may be
less of a sustainable strategy.
It is also important for SMEs to know that in the US commercial

market, pricing structures must accommodate for each time a
dual-use good changes hands, and this is also more relevant for
the defense industry than other sectors. Because dual-use goods
are more strictly regulated, each time the product moves from one
point to the next in the supply chain, the cost of that exchange
must be accounted for realistically. This is another reason why many
foreign companies enter the US market through the government
sector – where goods change hands less frequently – invest in a
US representative, or establish a US hub to move goods. Being
realistic about pricing may also involve reconsidering initial market
profit margins, which may be lower or negligible as SMEs establish
their initial market in the US. For example, SMEs may benefit from
developing three tiers of pricing options for approaching US suppliers
– their preferred price, their negotiable price, and their bottom line
price. The bottom line price may help them gain market entry, but a
plan to increase prices in one to two years could help SMEs sustain
short-term losses encountered through this strategy.
Other strategies to enhance competitiveness are product quality

ratings, a record of outstanding and reliable customer service,
offering product guarantees or custom and smaller-sized orders,
and specializing products to specifications. However, with regard
to the latter point, SMEs should be aware that incorporating any
US technology into product specializations can lead to challenging
regulatory issues.
If they are making something in Europe and someone in the US

wants a custom or tailored version, the US provides them with the
technology, and the European company uses that technology for
that specification. The issue is when the US company then wants
to sell that later to another company, the product is subject to US
controls, and so the European company has to consider this from
the onset.164

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A strong online presence can also be an effective strategy for
increased competitiveness, especially in social media, even if the
current online presence is within Portugal or Europe. A strong
online and social media presence enhances SMEs’ credibility and
increases trust when communicating value or reflecting leadership
in a particular product category.165 If SMEs are behind on their
online development, a defense and aerospace industry publication
offer that: “One of the best things a defense contractor can do to
improve their marketing effectiveness is to start a company blog”
(Burdett 2015). Larger and rapidly growing retailers will place
greater emphasis on social media and online product engagement
and promotion, and this could be the deciding factor for retailers to
carry SMEs’ dual-use goods and not their competitors’.
Demonstrating successfully executed online company, product,

and brand promotion and engagement highlights to potential
partners that SMEs are aware of the importance of this growing
marketplace and have the ability to pivot to new modes of product
and service delivery. Social media, especially Twitter, is growing
in industry importance and now being used to reduce lead
times, communicate with customers about orders, and product
development. In this regard, mobile purchasing is growing in the
US, slowly but steadily, and strategies for mobile engagement and
promotion may also support increased visibility.
A final point of clarification about competitiveness on the US

market that leads into the third and final mechanism for increasing
SMEs’ visibility on the US market – technological innovation. Some
commercial partners – typically the larger retailers and distributors –
may require exclusive rights to sell and distribute SMEs’ products. It
is important for SMEs to consider, prior to conducting a US partner
search, if they would grant US retailers and / or distributors exclusive
license to sell SMEs’ products. Perhaps nowhere is this as important
a consideration as it is for SMEs producing technologically
innovative dual-use goods or defense-related software.
For example, a defense trade lawyer advised SMEs to network

with: “companies that are defense contractors that are producing
something that your product is used in and the possibility of
entering into a development agreement. Maybe they’d be
interested in a technology that you have that can improve what
they are currently providing and entering partnership would help
develop it more.”166 In this scenario, SMEs would likely face the
decision whether to grant that US partner exclusive rights to their
technology in exchange for development investment. There are
advantages and disadvantages to giving US commercial partners
exclusive rights. A disadvantage could be discovering that the US
partner does not actively promote or seek new markets for SMEs’
products, and SMEs success could be largely hindered. Conversely,
an exclusive US brand-Portuguese product synergy can escalate
visibility and drive demand.
Again, while access points shape the product and company
165 Compare the example of Elvior, an Estonian dual-use good exporter on the US market,
to the Bulgarian example, Arsenal AD, in Appendix 2.

registrations and / or certifications that are required on the US
market, leveraging technological innovation can be an effective
mechanism to increase SMEs’ visibility for both government and
commercial market success. Almost every expert interviewed
believed that innovation in the defense industry is occurring in the
private sector, which runs contrary to historical defense-related
goods development. The reason that the private sector has emerged
as the stronger market for technological innovation is linked to the
extensive regulatory and legal requirements required in procurement
of new dual-use goods. For example, the report parties learned that
government contractors are required to submit RFPs on paper made
of a certain percentage of recycled materials or timelines extended
by months to comply with administrative requirements.
Government still has a long way to go, particularly in regards

to technology. There are hurdles to overcome in personnel and
bureaucracy in procurement that don’t allow government to
move as quickly or be as innovative as the private sector is able to
be… The private sector can be incredibly innovative and help move
things forward.167
Almost all experts also highlighted that the way the government
approaches procurement and technological innovation is at a
critical point, and slowly, the government is beginning to change.
Some industry experts working with the government are hopeful
that President Trump’s anti-regulatory policy platform may make it
easier for the government to conduct defense-related businesses,
but removing regulatory burdens will be a cumbersome process,
likely to move at a glacial pace. An effect of this government
marketplace procurement and business procedure is that it has, in
some areas, also pervaded the private sector, as they look to pass
administrative and bureaucratic burdens down the supply line.
Partnerships with technologically progressive commercial

companies can be just as cumbersome. ESCO Technologies, for
example, requires company and product auditing, compliance with
a code of conduct, and extensive paperwork and documentation
for potential suppliers, in addition to fees for any late deliveries
or technological deliveries that do not match their expectations.
ESCO Technologies is not unique; other high-tech defense-related
US companies, such as KLX or 3M Biometrics, can seem sluggish
in moving partners and products to market. A cultural product
of many years of government partnering, a long-term defense
contractor explained that: “there’s not a lot incentive to be lean,
but we need to stay commercially competitive to grow our market.
That’s the single biggest challenge… There’s a culture that comes
along with government contracts that you need to be aware of. It’s
hard to shake once it evades your company; that hungriness of the
small business entrepreneur goes away.”168
That “hungriness”, another industry expert argued, is precisely

what is driving the private sector’s technological innovation in the
defense industry.


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In the commercial sector, it’s more about figuring out what the
customer wants and preparing the product. What has changed
is that, historically, most of the innovation traditionally was in the
government defense sector, thinking especially about aerospace
in the 1960s and 1970s. Now, all the great technologies come
out of Silicon Valley or Stockholm, on our side. When they are
developing a new technology or product, they aren’t thinking
about the defense market; they are thinking about how many
teenagers will download their app, and that’s a change from the
past. They are leading the way in technology, which is why the
US government defense industry is looking to integrate more of
the commercial technology. That is also why DoD put up a hub in
Palo Alto [California].169
Overall, it appears that if Portuguese SMEs are looking to make an

impact on the US market with technologically innovative products
– such as those in AI or autonomous systems that are particularly
high in demand at this juncture – they should seek partners in the
private sector. Perhaps, these partners are more heavily linked to
the technology market than defense, and again, SMEs that are
creative and innovative in their partner searches are likely to reap
greater rewards. The medical, oil and gas, agricultural, or emergency
services sectors could reveal themselves as excellent partners for
technologically innovative dual-use goods.
This is the exciting challenge of producing and marketing dual-use

goods; SMEs are faced with so many opportunities and options.
Presently, in the US, the commercial market is where technological
innovation is growing. “The private sector is in a good spot; the
innovation is out there, and …it’s an opportune moment for
innovators.”170 Additionally, Portuguese SMEs may have – consciously
or unconsciously – benefited from how imposed austerity measures
have shaped technological innovation. The British defense industry
representative highlighted how the private sector has become
more competitive on the US market through coerced private sector
investment and development.
The private sector is leading British innovation; if anything,

we think we’re slightly ahead of the US in getting benefits of
innovation. That’s because we have had to cope with the financial
squeeze of the budget reductions over the years, and our industry
has [become highly] surgical at applying money in its research
base… We’ve worked on changing our business model of how
[we] deliver innovation – reversing that flow. We’re working on
enterprising cultural change through innovative defense products
and not just technological change.171
When developing a “launch plan” in order to create impact for

technologically innovative defense-related products onto the US
commercial market, there are options, and SMEs are encouraged


to carefully and intentionally review how the avenue they select to
introduce their innovative products can affect their potential US
partnerships. One industry expert advised that a more intimate
product demonstration could enhance the level of impact. “I
recommend face-to-face demonstrations; you can get some
attention at a trade show, but if you can get an acquisition person
to get excited and tell other people at what you showcased –
especially face-to-face – that’s going to create more traction.”172
Several other industry experts said that the most appropriate

and high-impact avenue for new technological developments is
trade shows, particularly through product demonstrations, and
US industry experts appeared to attend international trade shows
as much as US trade shows, linked to the importance of global
supply chains and allied joint development. Additionally, unlike
some other industries, it is not only the big trade shows that
present opportunities for SMEs; smaller, specialty, or niche market
trade shows may be a better option for demonstrating innovative
technological developments. It is also recommended that as part of
SMEs’ networking they follow potential partners or companies that
are producing similar products websites or social media, as they
often post in advance what trade shows and industry events that
they attend. Some trade shows for SMEs’ consideration include:
»» Association of the US Army (AUSA) Global Force Symposium and

Exposition
»» Air and Space Conference and Technology Exposition
»» Aircraft Electronics Association (AEA) International Convention
and Trade Show
»» Aircraft Interiors Expo
»» Armed Forces Communications and Electronics Association
Intelligence Symposia
»» Army Aviation Mission Solutions Summit
»» Commercial Marine Expo 2017
»» Cyberspace Symposium
»» Defence Systems and Equipment International
»» Dubai Air Show
»» Eurosatory
»» Future Forces
»» Generis American Aerospace and Defense Summit
»» Homeland Security Conference 2017 - Armed Forces
Communications & Electronics Association
»» IndoDefense
»» International Conference on Unmanned Aircraft Systems
»» International Defence Exhibition & Conference
»» Le Bourget Paris Air Show
»» National Association of Police Equipment Distributor Annual
General Meeting & Trade Show
»» Police Security Expo

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»» Police Fleet Expo
»» Sea Air Space Exposition
»» Space Symposium
»» Space and Missile Defense Symposium
»» XPONENTIAL 2017 - Association for Unmanned Vehicle Systems
International.173
This section has examined various market entry points for

Portuguese SMEs’ dual-use goods export development in the
private sector. The range of possible partners is as vast as SMEs
imagination for products’ application and usage. The most
important consideration for SMEs looking to export sustainability is
to develop intentional market strategies that are based on accurate
and up-to-date US market intelligence. This section has offered
three key mechanisms for increasing brand, product, and country of
origin visibility to enhance SMEs’ US partnerships potential. As one
industry expert quoted above recommended, the more potential
partners that SMEs can get excited about their products, the better
opportunities are for short and long-term sustainable development.
To conclude the section, the report offers a brief summary of
Section 4 and a table where SMEs can compare the advantages
and disadvantages of various US market entry points. This allows
them to make strategic decisions regarding the primary markets
– government and / or commercial – they chose to employ those
intentional strategies.
4.4 Conclusion
This section of the report has helped SMEs become export ready by
characterizing the two primary US markets for dual-use goods: the
public, government and private, commercial markets. For both the
scope of opportunity, trends, demand, products, top companies,
and partnerships were assessed, including cultural factors that
shape demand and business relationships, to help SMEs recognize
the diverse opportunities available. SMEs were encouraged to
be innovative and creative in developing sustainable strategies,
thinking about dual-use goods demands from the perspectives of
different sectors and industries.
The government market is larger, in terms of both market value

and frequency of domestic and experienced foreign competitors.
The DoD alone – one of many federal agencies with which SMEs
could partner – had a 2016 budget of $534.3B, and SMEs should
recall there are federal, state, and local-level agencies engaged in
international procurement. Section 4.2 began with opportunities
to supply the US military, including allied missions such as NATO,
the UN, EUCOM, EDA, ERI, AFRICOM, and in Israel or Pakistan.
Supplying the US military overseas may offer SMEs relief from
regulatory burdens – end-user controls and CBP entry procedures
173 This list represents a mere sampling; for more US-based trade shows and events, see:
http://www.eventsinamerica.com. The relevant industry SMEs are targeting (medical,
government, business, etc) can be selected from a drop-down menu and further narrowed
as needed for SMEs’ searches.

– and opportunities to directly supply the US market in the long-
term through trust-building, but demanding administrative
requirements persist. Getting into the US military’s supply chain
– domestically or overseas – presents potential access points, and
SMEs have a plethora of opportunities for supply chain integration
within Portugal and Europe while building knowledge of how to
become a government contractor.
The most direct avenue for US military supply chain integration

is through the Portuguese military or MoD, and with Portuguese
exports growing at annual rate of 96% within Europe over the last
five years, SMEs’ supply network may already extend much further
than Portugal’s borders. This is advantageous, as US military buyers
were characterized as “highly risk-adverse”, and being present in
European and allied supply lines decreases perceived risk. Industry
experts suggested that opportunities to supply the US military
overseas in urgent or emergency supply situations are particularly
worth SMEs’ attention.
Section 4.2 progressed to other pathways for reducing the US

military’s perceived risk for working with new Portuguese suppliers.
One recommendation was to work other US federal agencies –
in domestic or overseas operations – and this may also present
opportunities for US market access with lower investment costs
and fewer regulatory burdens. A record of reliable contracting with
US government agencies can lead to opportunities supplying the
US military overseas, just as supplying US allies in Europe can lead
to opportunities with the US military overseas. It is also true that
supplying the US military overseas can lead to supplying allied
European operations, demonstrating how the US government
market presents opportunities for long-term, sustainable export
development – evidenced by the Swedish, Greek, and British dual-
use goods export development strategies.
A total of 53 government agencies were recommended for SMEs’

dual-use goods, and almost 30 categories of goods were suggested
with AI, robotics, cyber security, automation, and intelligence,
surveillance and reconnaissance technology the most in demand.
In order to work with federal government agencies, SMEs must
register as government contractors. The SAM registration option
was easy and free but more difficult to emerge as competitive
among large companies like the Big Five. The GSA option is more
challenging initially and may require serious investment; however,
there are ways to enhance competitiveness, and with $40B in
contracts available annually, SMEs were encouraged to assess their
options and resources.
Once registered as a government contractor, engagement is the key

to becoming an effective and efficient US partner, and like anything,
it takes effort and constant development efforts. A sustainable
approach involves:
»» Start with subcontracting

»» Network with a dozen agencies to identify the two to four that are
SMEs’ target

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»» Increase competitiveness through set-asides
»» Utilize many free online resources that are available remotely
»» Identify a product niche and address how to fill supply gaps
before they become problems.
The characterization of the US government market concluded by

discussing opportunities through federally funded grant programs
where SMEs were encouraged to use databases to consistently
identify potential dual-use goods users – again, addressing supply
gaps before they present an issue for a US partner. A key opportunity
for SMEs that was discussed was the 1033 program. Previously, a
cost-savings program (military to law enforcement) from the 1990s,
the 1033 program has become more of a private, shoppers’ market
for dual-use goods supporting the expanded market of military
products by the US law enforcement agencies, as well as federal
prisons and Departments of Transport, Education, Corrections,
and Justice. The assessment revealed that the suppliers in the 1033
program seemed to be part of an allied supply chain with the same
branded goods seen in London and California. Top recipients were in
Florida, Texas, California, Tennessee, Arizona, and Virginia, and in 2015,
former President Obama deescalated the range of military goods
that could be acquired. Strong market demand persists, especially
in tech products (biometrics, optics, cyber security, fraud detection
/ prevention). The 1033 program is also an efficient way to network
into other US commercial security markets in public places (malls,
theatres, private hospitals and prisons).
Section 4.3 then characterized the market entry possibilities in the

private, commercial market, and although it is significantly smaller
than the government market, the commercial market remains
worth billions, annually. The range of market entry points is only
limited to SMEs’ understanding the potential application in the vast
US government agency network. The section explored key features
of the commercial market, examples of market entry points, and
pathways for commercial opportunities for SMEs looking to build
their market in the US. There are historical, cultural, and practical
factors that, if integrated into export development and marketing
approaches, can increase the probability of success. For example,
dual-use goods have many practical applications in a country with
rugged outdoorspeople, weapons enthusiasts, and privately funded
self-preservation and emergency preparedness.
SMEs were encouraged to think about emergency preparedness,

personal security, and hazard protection creatively, as well as
the varied potential partners with uses for dual-use goods.
Homeowners’ associations, farm supply stores, private hospitals,
schools, and prisons, skeet shooting ranges, and even individuals
are markets for basic and sophisticated dual-use goods. The
challenge SMEs face is finding their place in the US commercial
market between the supply chain that originates with the US
military (surplus stores and supply re-selling) and cheaper dual-
use goods. This reflects the specific, regulatory challenges faced by
those exporting, importing, distributing, and selling dual-use goods.
For each time a dual-use good changes hands in the commercial
market, SMEs should expect to build in a cost for responsible

handling. These costs can add up, making it difficult for SMEs’
product pricing to be competitive between the military surplus and
cheaper dual-use goods supply chain.
Accurate, up-to-date market intelligence can help SMEs locate their

target market and reveal the most appropriate potential partners.
Following, comparative and competitive advantages – the subject
of Section 5 – should be developed to increase brand, product, and
country of origin visibility. This section highlighted three noteworthy
mechanisms for increasing visibility: marketing, price and product
competitiveness, and technological innovation. In marketing, this
report encourages SMEs to:
»» focus on comparative and competitive advantages

»» pool collective resources to expand market reach for dual-use
goods (medical, agricultural, personal security)
»» cross-market with SMEs producing other, related dual-use goods
to build relationships and market awareness
»» invest in market research to assess how SMEs compare to their
competitors or spend a year in the US, at trade shows, gathering
market product and market feedback, establishing a network,
doing demonstrations, etc
»» be able to differentiate their brand and products from
competitors’
»» develop market foresight – address supply issues before they
become problems.
The second mechanism for enhancing SMEs’ visibility involves

price and product competitiveness, which should also be based on
market intelligence and market demographics. Key demographic
knowledge will not only save SMEs time in potential partner
searches, but accurate market intelligence is more likely to
generate sustainable competitive advantages. The International
Trade Association’s “Top Markets: A Market Assessment Tool for
US Exporters” features 27 sectors and lists of top competitors,
including defense products. In the 2016 report on defense products,
competitors from the UK, Western Europe, and Eastern Europe
are assessed – with a focus on product specialization – and this
is another free resource that SMEs can utilize in developing
competitive advantages. The reports are fairly detailed, offered
assessments of top markets and competitors for aircraft parts,
technical textiles, health IT, industrial automation, medical devices,
oil and gas equipment, etc, which will help SMEs understand if
some of the defense-related markets in these other industries may
be better potential partners.
Section 4’s assessment highlighted that though price must be

competitive on SMEs’ target market – and used the examples of
Amazon and a rural outdoor store – but it may not be a sustainable
basis for betting SMEs’ competition, using the examples of the F-35
and commercial drones. Other points of market differentiation are
quality ratings, a record of outstanding and reliable customer service,
offering custom and smaller-sized orders, and specializing products
to specifications, although there are export controls that come into

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effect if specialized dual-use goods are re-exported from the US.
A discussion about the advantages and disadvantages of

exclusive rights transitioned the section to the final mechanism
for increasing brand, product, and country of origin visibility
– technological innovation. Almost all experts believed that
technological innovation is being led by the private sector, which
marks a historical shift away from the government-led defense
innovation. The majority of experts also believed that government
procurement procedures must change to more rapidly respond
to technological innovation, and they are, slowly. The effect of the
cumbersome government-style of procurement has also left its
mark on some large private sector potential partners, such as ESCO
Technologies, KLX, and 3M Biometrics. The result of this assessment
was the recommendation that perhaps SMEs should look at other
private sector industries with need for dual-use goods (private
medical, educational, and correctional, oil and gas, agricultural, or
emergency services markets), which demonstrated the beauty and
challenge of the dual-use goods market; SMEs are faced with so
many opportunities and options that it may become overwhelming.
To help SMEs find their way in the US market, key advantages and
disadvantages of both markets – government and commercial – are
organized in Table 4.1.

Table 4.1 – Comparison of the Primary Entry Points for the US
Dual-Use Goods Market
Market
Advantages Disadvantages
Access Points
Many potential partners and access

Long procurement process
points
Cross-marketing to other industries Elite access to decision-makers / pro-

(medical, transportation, etc.) curement officials
Highly integrated access to diverse

Restrictive US legislation (Buy Ameri-
supply chains (NATO, UN, EUCOM,
can, Berry and Bayh Amendment)
EDA, ERI, etc)
Market entry point for majority of du- Competition primarily among the Big
Governmental
al-use Five
Relatively stable funding sources (US Demand fluctuates based on political

Navy, Army, and DoD) economic factors
Policies in place for small business Increasingly, country-by-country prod-

competitiveness uct specialization / discrimination
Ability to build short and long-term Increased competition can destabilize

export markets price as differentiator
Many potential partners and access Fractional market compared to gov-

points ernmental
Cross-marketing to other industries Pricing structures must accommodate

(medical, transportation, etc) multiple points in supply chain
Better able to responsively pivot to Potential for more risky partnerships

Commercial consumer demands / trends / techno- (and user controls, dysfunctional du-
logical innovation al-use goods)
Exclusive production / sales rights can Private sector partners may not pro-
drive demand, increase visibility mote products
Culture strongly influenced by govern-

Creativity and innovation in searching
ment (administrative / bureaucratic
for potential partners encouraged
challenges)

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Using Table 4.1 and knowledge of SMEs’ products, resources, and
export goals, the section concludes by highlighting that both
markets present diverse and plentiful opportunities for SMEs export
development. Both require considerable investments in critical
resources, most notably time, and both carry potential for lucrative
development. Finally, it is essential to highlight that neither of these
primary market options need to be seen in opposition to the other.
Several companies – domestic and foreign – are not only active in
both markets but use positioning in one to augment their business
development in the other. SMEs will need to pivot and remap
strategies for development as their exports grow and diversify.
For example, SMEs could devote 80% of their US export

development to the government market and 20% to the
commercial or 50/50 and should keep in mind that the public-
private market crossover potential is strong in the US dual-use
goods market. Along with the Pentagon’s partnership with the
private sector and DoD’s hub in high tech development areas of
the US, the CIA backs a defense technology early stage investment,
venture capital firm called In-Q-Tel (IQT), which has invested more
than $3.9 billion in private-sector funds for product development
in less than 20 years (Steinbock 2014). One final recommendation
is that tenacity and persistence pay off in both markets; there is
a market for most dual-use goods in the US. The first step is to
identify the most appropriate market for SMEs’ products, export
development resources, production capacity, and goals. Reverting
to the advice given by the Swedish defense attachés, this requires
leaving one’s country and spending time learning about the US
market. Alternatively, there is the advice given by the Greek defense
attachés, which requires investing into marketing research.

Section 5:
Conclusion
5.1: Introduction
This report has analyzed, evaluated, and recommended strategies

for export development and growth in the US dual-use good
market. Section 1 began export strategy development by painting
a general economic, trade, and competitiveness landscape of
Portugal. Figures from 2016 indicate that Portuguese economic and
export-related progress is expected to continue; however, the global
trade community faces uncertainty that seems unprecedented
within recent history. The World Economic Forum’s Competitive
Index ranked Portugal in the top 20%; listed at 38th (out of 190+)
most competitive nation for 2015 to 2016. This was a slight decline
from the 36th position held during 2014 to 2015. One of the primary
objectives of this report was to assess how Portuguese SMEs
can utilize dual-use goods export development to restore their
competitiveness trajectory. A strong export foundation exists that
can be further developed.
Due to complexities in governmental international joint

development, global defense supply chains, and anomalies in
reporting dual-use goods trade reflected in Part 129 of ITAR, the
report parties were required to take an alternative approach to
this assessment when compared to the other Next Challenge USA
project reports. As such, this report did not focus on assessing
competitiveness and opportunities for certain products by analyzing
US supply, demand, and import competition. Rather, this report
focused on providing Portuguese SMEs with a comprehensive
understanding of the US dual-use goods market characteristics,
legal regulations and compliance issues, and points of market entry
and access opportunities – the subjects of Sections 2, 3, and 4.
Section 2’s analysis of the US dual-use goods market yielded

important findings that form the core of the report. Despite
challenges in defense trade statistical reporting – which the report
previously characterized as comparing apples to oranges to lemons
and limes – cross-sectional data was used characterize the US
market for defense-related goods. Non-US companies comprised
a $143B share of the US defense-related goods and services market
in 2016. Large companies control the majority of either market –
goods or services – and by applying the principles of abstraction,
it was estimated that Portuguese SMEs compete for a share of a
$7.7B US defense-related goods import market (annual). Overall, the
statistical analysis found a growing market for imported goods and
increased regulatory transparency and inclusion of small businesses
in defense contracting.
Though the new Trump administration leaves several pertinent

questions unanswered, such as the size of the 2018 to 2019 DoD
budget, most experts advised that they do not see major changes
on the horizon, such as the continued downsizing of the defense

• 119
budget initiated under former President Obama. Some of these
unanswered questions that will shape SMEs’ dual-use goods export
development reflect uncertainty with respect to:
»» President Trump’s support of NATO

»» Revitalization of the American defense manufacturing industry
»» Impacts of climate change, cyber threats, and rapidly changing
terror-related threats.
The report introduced SMEs to outside of the traditional military

environment, but within the scope of needs from other US federal
government agencies where they might find markets for dual-use
goods, including medical, agricultural, public safety, emergency
preparedness and response, and construction – many of which
were carried throughout other sections of the report. Section 2
also introduced key competitors on the US market, such as the Big
Five – Lockheed Martin, Boeing, Northrop Grumman, Raytheon, and
General Dynamics – and the Five Eyes Community – the US, UK,
Canada, Australia, and New Zealand. Examining Portuguese exports
and where domestic and large companies dominate the US market,
the analysis highlighted that Portuguese SMEs are likely to find
competitive advantages in six key areas of defense-related exports:
»» Textiles
»» Unmanned aerial vehicles (UAVs)
»» Aerospace / avionics supply chain parts and construction
»» Biometrics and biosecurity products
»» ICT composite electronics, particularly those in automation,
autonomous communication, GIS, signaling, and laser technology
»» Infrastructure supplies, support, and construction.
Portugal has also grown in: “1) monitoring and controlling national
air, land and sea routes; 2) developing high-bandwidth, real-
time communications and data systems capable of transmitting
information across military echelons and government organizations;
3) and developing unmanned air, land and sea systems” (Kenyon
2010). Simply because a specific defense-related article was not
included in the report by name does not indicate that there is
no significant demand. Indeed, the beauty of the dual-use goods
export industry is that there is such vast demand for diverse goods.
The US is a strong market for a quality products, with competitive
prices, that are well marketed, especially those with multiple uses
and applications.
Having assessed the US dual-use goods import market, the

report turned to legal regulations and compliance, which are
more significant in defense than any of the other reports in the
Next Challenge USA project. Defense-related goods are so highly
regulated because while some goods have practical applications,
these goods also have military applications. If these goods were
not so tightly regulated, they could supply governments, groups,
and individuals that seek to harm other countries, companies, or

citizens. Section 3 led SMEs into understanding the scope and
scale of legal compliance necessary to export dual-use goods to
the US with the caveat that US regulation can change within a year
(Sandler, Travis, and Rosenberg 2017i).
With an introductory but comprehensive understanding of

1) ITAR and EAR, 2) licensing, certifications, and standards, 3)
relevant legislation, such as the ECR, BAA, TAA, Bayh and Berry
Amendments, and the MAMCA, and 4) import and distribution
structure and partnerships, Section 3 began to help SMEs become
export ready. The section found that SMEs would need to identify
whether their target market was in the public, government or
private, commercial market before they would be able to accurately
explore the regulatory and compliance issues that most affected
them. Section 4 – which immediately preceded this section’s
introductory summary – supported SMEs’ export readiness by
characterizing these two primary market access points: government
and commercial.
The findings of all the previous sections highlight that to succeed in

the US, SMEs must have:
»» Clear understandings of EU export and US regulations and

compliance
»» A target market supported by market intelligence about that
market’s demographics
»» Quality (licensed) products with competitive prices
»» Short and longer-term strategies for enhancing brand, product,
and country of origin visibility
»» Strong relationships and industry connections
»» Knowledge of US market access points, advantages and
disadvantages, to develop marketing approaches
»» Understanding of how to utilize resources to gain a competitive
edge
»» Creative and innovative approaches for cross-marketing dual-use
goods to other industries and applications.
5.2 Portuguese SMEs’ Strengths and Challenges
In this final section, the report explores what it sees as Portugal’s

strengths and challenges in the US dual-use goods market.
Intended to complement recommendations for differentiation
and competitiveness (Section 4), this summary draws the report
to a close by offering critical insight into how comparative and
competitive advantages can be leveraged for sustainable US market
export development.
Beginning with challenges, this final section examines:
»» critical resources SMEs need to increase their competitiveness

and respond to opportunities to supply dual-use goods on the US
market

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»» difficulty SMEs may encounter when building Portuguese product
visibility and recognition
»» outcompeting European competitors who have more experience
leveraging their competitive advantage(s) on the US market.
Following a discussion of these challenges, the report closes by

highlighting strengths that should motivate SMEs to seek access or
export growth to the US market via:
»» comparison of Portuguese SMEs’ export potential to that of their

European (and/or global) competitors
»» assessment of advantages that Portuguese SMEs possess
»» underscoring how strategy-led growth can help SMEs work
towards recommendations from previous sections, such as:
——consistent export volume
——securing market knowledge to better under potential markets
(agencies) and applications of their product(s)
——understanding the regulatory, compliance, and certification
structures that can boost competitiveness
——establishing visibility through marketing and partnerships
——building relationships and establishing a US presence / industry
network
——utilizing access points or momentum in other foreign markets
and goodwill towards US-EU trade relationships
——building a model for sustainable export development and
growth.
5.2a Challenges
Portuguese SMEs face significant challenges in the US market;
the report parties are similarly SMEs and know first-hand the
challenges of developing and growing in the dynamic US business
environment, even in government contracting. The most thorough
export development and growth strategies can easily go wrong.
Succeeding at any level of business – in the US, Portugal, or globally
– requires the ability to think strategically and pivot at critical
moments. This requires solid market knowledge about the overall
government structure, buyers, and the many ways to access supply
chains within the system. This requires persistent action and skill,
and the best way to prevent unforeseen events from disrupting
export development strategies is to be resourceful and flexible as
market opportunities evolve.
The most critical resource SMEs require to succeed in the US market

will be financial; the report has repeated that market development
and compliance costs pose barriers to exporters but particularly
SMEs. A good anecdote to help SMEs realize the financial burden
of growing their export market in the US is looking back at the
US market around or before 1995. While market barriers and
communications technology that seem limited now were more
burdensome to foreign producers looking to access the US market,
attending a few trade shows, product demonstrations, and short-
term relationship-building were simple keys to success.

Quite simply, there were less (capable) foreign producers on
the US market at this time. Globalization has lowered market
and technology barriers, but it has also narrowed competition
through regulatory expansion, corporate dominance, and product
specialization in a manner that puts SMEs at a distinct disadvantage.
Over the years it has become difficult for people who want to
do business in the industry, EAR, ITAR – all that creates barriers…
I try to make two points to them; number one: this industry is
incredibly different than when they entered. Number two is that a
lot of rules, regulations, audits, and reports that if you required this
in a real marketplace, this is not something anyone else would
tolerate. It drives up overhead… The result is that fewer people
want to be in this business.174
Collaboration with Portuguese, European, and US industry, as well

as among SMEs, is a second line of defense should Portuguese
SMEs be initially or ultimately unsuccessful in their endeavors
to enhance their financial resources. Establishing a US network,
following budgetary trends, supplying diverse dual-use goods needs
in other industries, building relationships, and employing a market
consultancy, broker, or trade lawyer, are all expensive and complex
tasks for a single small or medium-sized business.
The report realizes that Portuguese SMEs are in competition with

each other – although perhaps less so in this industry because the
scope of dual-use goods is so vast – but collaboration demonstrates
a SME’s ability to “swim within a school of fish” rather than go it
alone, which can make export development even more challenging
– reinventing the wheel rather than pooling collective resources.
The emergence of idD would not only demonstrate to potential
investors and funding sources that SMEs can think creatively about
how to grow their businesses, but also that they are capable of
cooperating in the service of a shared goal: export development and
growth across Portuguese (and European) dual-use goods exports.
Additionally, SMEs’ may find at idD an effective way to present a

wider dual-use goods product catalogue – along with building
the “Made In Portugal” brand, discussed further below. Importing
and distributing highly regulated dual-use goods is expensive, and
offering a wider array of quality and competitive products to US
partners – government or commercial – may present a resourceful
option for SMEs’ export development. Various US, European, and
Portuguese trade associations and industry resources have been
highlighted throughout the report, and these sources can also help
SMEs better understand the US market, identify niche submarkets,
and facilitate government-to-government or business-to-business
exchanges. Financial support for trade liberalization is the most
critical resource that will help SMEs juggle the many elements that
contribute to coherent and cogent export strategies, and for the
first time in a long time, this issue is starting to draw the attention of
major institutions with the power to assist SMEs.

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Trade and SME financing are now top priorities for the WTO,
particularly after the annual WTO Public Forum’s focus on inclusive
trade. The lack of positive funding and global export opportunities
for SMEs is affecting trade, economic development, and
sustainability. Though Portugal has made great headway in meeting
the terms of their IMF and EU economic and financial readjustment
deals, Portuguese SMEs are unlikely to receive any further financial
assistance from the European Commission (European Commission
2016). SMEs can look for loans to finance their export development,
but Portuguese banks are unlikely have resources or lending
capability, due to the on-going recovery from the global and
domestic financial crisis. Even if Portuguese or foreign banks could
offer financing for SME trade development, banks often require
resources that SMEs lack to guarantee loans.
The International Trade Centre – an institution that ensures coherence

between the WTO and the United Nations’ trade and economic
development agencies – published How to Access Trade Finance: A
Guide for Exporting SMEs in 2009, and it remains a vital source for
SMEs engaged in international trade. The guide opens by conceding
that banks are no longer a viable source of financing for SMEs before
providing information on other financial instruments that may be
better suited to SMEs’ needs, including application advice.
In applying for other sources of trade financing, SMEs may find it

beneficial to highlight Portugal’s strong track record of satisfied
foreign direct investment (FDI) customers. “FDI, in net terms,
registered an amount close to €5.4B in 2015, [down] 5.2% in relation
to 2014. The highest value in the last five years was registered in
2012, when FDI reached €6.9B and in 2014 with €5.7B” (AICEP 2015:
8). Portugal’s top sources of FDI in 2105 were the Netherlands and
Spain (with 24.9% and 22.6% of the total respectively), Luxembourg
(18.5%), the UK, and France (7.3% and 4.9% respectively). FDI from
non-European countries reached 11.8% of total FDI in 2015, and key
contributors were Brazil (2.3%), Angola, Switzerland and the US
(with 1.6% each) and China (1.2%) (AICEP 2016).
A second challenge Portuguese SMEs face in developing or growing

in the US dual-use goods market is building brand, product, and / or
country recognition and increasing Portuguese products’ visibility.
Across interviews, the report parties did not find a strong visibility
and awareness of Portuguese dual-use goods on the US market.
Three mechanisms for increasing Portuguese dual-use goods
visibility were recommended in Section 4.3 – marketing, price and
product competitiveness, and technological innovation. Visibility
and Portuguese product recognition can also be established
through relationship-building and networking in the US. A strong
US presence may ease burdens US suppliers have in doing business
in Portugal, whether the presence is consistent attendance at
trade shows, spending a year on the US market, or a US trade
office headed by Portuguese embassy officials and defense trade
attachés. As the Greek defense attachés commented: “You can’t
close business by phone or email.”175 Face-to-face relationship-
building is key in the US, especially in the government market.
Once visibility and presence have been established, the goal is to

improve Portuguese product recognition. SMEs must understand
that with the vast scope of the US dual-use goods market, product
quality, price, and supplier relations must be highly competitive;
SMEs’ should develop strategies and marketing pitches that
demonstrate how their products can improve potential partners’
efficiency and profitability. The objective is to place Portuguese
dual-use goods in the front of potential partners’ minds, which
requires industry-wide collaboration, particularly in regard to
product specialization.
US consultancy and marketing firms will be infinitely more

experienced in reaching US consumers than Portuguese marketing
firms, although the latter may offer SMEs cost savings. Networking
with US businesses and firms will also expose SMEs to a much larger
networking base, including potential partners. Networking should be
viewed as a cost-effective strategy for short and longer-term export
development and growth rather than something a SME must do. It
is relationship-building, not sales-generation, in the short-term, but
in the long-term, networking is key to sustainability in this market
with “highly risk-adverse” buyers. For example, gaining access to
US government officials or agencies may not result in immediate,
direct sales, but SMEs may be able to network their way into better
understanding how to be competitive in supplying product needs or
present solutions to with large-scale challenges, such as supply chain
optimization and other joint development operationalization.
After establishing a presence, the most important variable in

building brand and product recognition is consistency, in both
export volume and continued presence. Having contacted over 100
US defense industry experts, the report can attest that SMEs must
demonstrate tenacity and persistence. For the purposes of data
collection for this report, rarely was an email answered once initially
sent. However, response rates were highly reliable when a brief
follow-up email was sent three to five days after the initial message.
Each message was well tailored, and in the case that an email
remained unanswered after the second attempt, a phone call was
almost always successful in making contact. Not every successful
contact resulted in a positive outcome, but this is to be expected in
all fields – consulting or business development. The report parties
found that unlike other industries, email was more effective than
phone contact, as defense partners are more often at their desks
than in a warehouse. Above all, person-to-person contact is the
most advisable method for SMEs to grow their exports in the US,
but gaining access is easier said than done.
SMEs should ensure they are fully informed about all their products’
particulars, including compliance (certifications, licensing, etc), as
well as how products fit in the specific distribution structure and
business model for email, phone, or face-to-face meetings with
potential partners. An industry expert mentioned that one of the
most important things for SMEs to know is that they are competing
in the same market with the Big Five, and any potential partner
will expect SMEs to demonstrate the same level of regulatory and
market competency.
A final challenge SMEs face in the US market is outcompeting their

• 125
European competitors. There are many facets of this challenge,
and the first is to secure funding from regional, European sources;
this may require SMEs to build relationships with Portuguese
representatives active in Brussels to advocate for their interests.
A second facet is that some of Portugal’s European competitors
(such as Bulgaria and Estonia) have only recently joined the EU.176
Various domestic conditions — such as low labor costs, taxation,
and momentum around development in the newly industrialized,
capitalist economies — have helped these countries to establish an
advantage in the US market that makes them more competitive
against high-volume exporting countries like Sweden or France,
compared to Portuguese SMEs.
A third facet, the US may have bilateral investment treaties with

many of Portugal’s European competitors where market access and
trade facilitation are better funded and focused. Within Europe, the
US has investment deals with Albania, Bulgaria, Croatia, the Czech
Republic, Estonia, Georgia, Latvia, Lithuania, Moldova, Poland (two
BITs), Romania, Slovakia, and Ukraine. Some of these countries
have outcompeted Portugal in defense-related exports in recent
years, and some are Portugal’s overall (global) competitiveness
targets. Among Portugal’s European competitors, from 2015 to 2016,
the fastest growing defense exporters were: Romania, Lithuania,
Austria, Estonia, Latvia, and Poland (Business Wire 2016). The report
also examined how MOUs and defense cooperation treaties, such
as those with the UK and Australia, affect Portuguese and other
European competitors.
Working with Portuguese embassies located near target markets

may also offer critical opportunities to build relationships that
enhance competitiveness. Recall that the British defense trade
representative said that regulatory reform, such as the ECR in the
US, has decreased the utility of their treaty with the US in becoming
competitive; SMEs could take advantage of this market adjustment.
Above all, SMEs will also be well served to recall the Swedish
defense attachés’ advice. “It’s hard work; you need to get out there.
In many countries, they want to stay at home and do the work. You
just have to get out there and do the work.”177
AICEP (2016) reported that Portuguese goods and services exports

to the US have doubled in the last five years because of bilateral
relations and export development cooperation. However, with no
forward progress or foreseeable conclusion to the Transatlantic
Trade and Investment Partnership (TTIP), other export countries
receive preferential treatment or investment priority over Portugal,
even those from non-allied countries like China and India. SMEs
must mobilize all aforementioned resources and strategies to
outcompete other foreign producers in the US market, including
networking, consistent export volume, and combining short and
long-term strategies for export development. Many exporters will
have an already established and consistent export presence in the
US defense market, compounding the challenge.
176 See Appendix 2 for profiles of Bulgarian and Estonian dual-use goods exporters on the
US market.

5.2b Strengths
Confronting these challenges – rather than attempting to avoid
them – is instrumental to SMEs’ success, as is leveraging strengths.
When comparing Portuguese SMEs’ export potential to that of
their European or global competitors, it’s important to consider
comparative advantage. A comparative (economic) advantage is
the ability of one country or company to produce a product more
efficiently, using fewer resources, given all the other products that it
could produce. Comparative advantage is one variable in a complex
formula that country and company leaders use to assess costs and
benefits of production. At the global trade level, this is how trade
deficits / surpluses are configured, and why it is good business for a
country to import products that they also produce for domestic and
foreign markets – essential in the success of large trading nations,
such as the US, Germany, and China.
Obvious reasons for utilizing comparative advantage are to supply

diverse needs, cope with dynamic markets, negotiate investment or
trade costs, and respond to consumer demands and preferences.
US suppliers – governmental and commercial – can be averse to
changing suppliers without substantial justification. As such, SMEs
should aim to offer what no other competitor can by leveraging
their inherit advantages. There are many US companies that prefer
to work with SMEs. The US company, Honeywell – a top ten global
defense company – has a small business liaison reserved for working
with small businesses. A government and commercial defense
industry veteran advised that: “When I was with the Army, the small
businesses were the ones setting the pace of technology, and
we looked to them.”178 Section 4.3 highlighted that technological
innovation is a mechanism for increasing SMEs and Portugal’s
general visibility in defense-related trade. With Portugal shifting
to advanced manufacturing and higher-technological modes of
research and development, SMEs have a comparative advantage in
that some of their European competitors, such as Greece, have lost
their manufacturing sector.
Another comparative advantage lies in geography, and one industry

expert commented that Portugal’s: “location is very strong for
supporting transatlantic trade; it gives them cheaper trade cost.
They are also close in proximity with our major allies.”179 Portugal
is nine days by sea to Newark, New Jersey – one of the US’ busiest
ports – and 20 to 40 days by sea to Houston, Texas, another very
large port. Networking to discern retailers or distributors import
supply network could place SMEs in an advantageous position
to leverage shipping times as a key comparative advantage. Lead
times, particularly in the commercial market, are a prime concern
in developing new supply lines with foreign partners. Portuguese
SMEs could demonstrate reliability to US retailers or distributors by
sending an initial order of products to ensure quick availability and
a larger supply immediately following, staggering supply to reduce
lead times and ensure consistent product supply. Portuguese
SMEs also have access to a national shift towards more advanced
and technologically innovative modes of production, supply,


• 127
and exporting, which hold potential comparative advantages.
Additionally, the costs of exporting heavy materials is a much larger
concern for distant exporters like China or India, giving Portugal
another comparative advantage.
Portugal also avoids paying tax to use the Panama Canal in

accessing east coast US ports, which is a consideration for US
suppliers in selecting new products. Portugal’s trade infrastructure
(road, rail, air, sea, and broadband networks) is also already well
established, and this existing infrastructure, combined with high
levels of English language proficiency, will contribute to further
comparative advantages for Portuguese SMEs (AICEP 2013).
Portugal has established thriving European and export industries;
the comparative advantage is in understanding the extent to which
these export industries can be expanded to the US. The mere five-
hour time difference between Portugal and US is also important to
note. This offers a significant advantage in ease of doing business,
particularly compared to more eastern European countries.
Second, competitive advantage, as opposed to comparative, is

the ability of a country or company to produce products more
effectively by offering better value, quality, and service; the goal is
to establish competitive advantage that is sustainable, as discussed
extensively in Section 4.3. Utilizing market intelligence to carefully
understand what various potential partners are paying for their
products has two core benefits. The first is that products should
not be offered on the US market until pricing structure can, at
the very least, match comparable to products on similar markets
– recall the example of targeting pricing to particular markets like
Amazon or the rural outdoor store in Montana. The second is that
this assessment will also help SMEs determine if there is greater
competitive value in hiring US consultancies, trade lawyers, or
brokers, investing in a trade association membership (and at what
level), or establishing a US presence should they find themselves
priced out of the US market.
A very important point of clarification here, government customers

will often be less concerned with price competitiveness, if they know
SMEs can deliver the products on time, within an estimated budget.
For some technologically innovative products – such as the example of
an unmanned underwater submarine that can remain in operation for
six consecutive months – the government customer would: “pay lots of
money for that!”180 Additionally, some commercial markets are willing
to be less price-sensitive, such as the medical or oil and gas industries,
and even pre-fund research and development for products that SMEs
are widely recognized for being able to produce.
In addition to the resources highlighted in Section 6.2a, SMEs

should also remain alert to possible financial resources, including
grants and opportunities to participate in nationally and EU-funded
research. For example, several universities and research institutions
receive European Research Council funding to investigate barriers
to SME growth, and the WTO and UN are focusing on SMEs as
part of their new agendas. Some newly developed SMEs may find

that they are eligible for Portuguese or EU start-up investment
tax credits, local tax and stamp duty exemptions, or research and
development opportunities funded by tax. Participation in seminars
and workshops, such as those held by the report parties, trade
associations, and US government associations, as highlighted in
Section 4.2b, are also cost-effective investments for SMEs.
The combination of quality dual-use goods at competitive prices

has helped Portuguese companies increase exports at impressive
rates within the last five years. Flexible labor laws, high education
standards, a highly skilled labor force, low minimum wages,
and existing US partnerships in business and research all create
advantages that SMEs can leverage to increase their US market
access. SMEs also tend to have more flexibility in supplying
demand with the ability to do customized orders, tailor products to
specialization requests, and negotiate on price. They can replicate
successes they and other larger companies have had in the
European and Oceania markets in the US (see Table 1.1).
SMEs can also devote resources to deepen relationships through

their existing networks in order to establish an eventual partnership
with various agencies or one of the contractors. Becoming the
supplier of a single dual-use good for a government building
project – in the US, Portugal, or within Europe – is an effective way to
establish a competitive advantage and develop industry networks
and word of mouth recommendations. Supplying the Rhode
Island Department of Transportation with innovative “intelligent”
transportation systems and services or a private security firm with
anti-riot equipment that is priced below German manufacturers, for
example, is also a competitive strategy.
Third, Portuguese SMEs can overcome the difficulty of

implementing the recommendations in this report by
“operationalizing” – dividing a complex process into actionable
steps. Strategy becomes a process of development, assessment,
revision, analysis, and achievement. For example, the process of
exporting in appropriate and consistent volumes involves:
1. gathering subsector or product category export volume data

and analyzing five to ten year trends181
2. conducting a series of statistical analyses to determine average
export volume182
3. assessing how competitive advantage could help improve
export volume consistency183
4. using forecasting models to predict irregularities in export
volume, and applying predictive modeling to production cycles
to fill supply gaps before they present a problem; this not only
181 The report does not advise analyzing trends beyond 2008, as the export volume and
trade data will not be consistent with continued post-recession economic patterns and
trade flows.
182 The report would recommend conducting a “box and whisker plot” analysis to see
means, medians, and outliers of export volume.
183 The report suggests a highly complex “multivariate regression analysis” to indicate what
variables likely contributed to irregular export volume and to incorporate supply and value
chain analyses.

• 129
ensures that export volumes stay consistent, but also establishes
SMEs as industry leaders
5. applying predictive modeling to benchmark consistent export
volume to know when to launch new US relationship building
campaigns to advance from development to growth.
As indicated in the fifth step, relationships can be built through

campaigns, and it is essential that campaigns target the most
appropriate potential partners for SMEs’ specific dual-use goods.
Through operationalization, challenges appear more manageable,
and markets that seemed unattainable to SMEs open up via a series
of revisable step-by-step actions. With limited exception, all export
businesses began as SMEs, and the challenges presented in Section
6.2a are not unique to Portugal or the dual-use goods industry. They
have been overcome in the past and can be overcome again, even
in the world’s largest single-nation import market.
Fourth, SMEs can become large exporters by capitalizing on

momentum in allied country markets, within Europe and with
Australia and New Zealand, particularly. SMEs should also
capitalize on their success with these top export destinations when
approaching potential US partners, as knowledge of Portuguese
innovation, product quality, and legacy in global trade may not
be as prevalent in the US as it is in western Europe. However,
knowledge of British and French defense-related production and
quality is common in the US. SMEs should embrace Americans’
preferences for these European exporters’ quality and reliability
while exploiting their lack of differentiation among European
exporters. Portuguese SMEs may find, for example, that associating
their naval products with those of Italy or Norway, rather than
Greece, provides better leads in the US.
In making presentations at trade shows or in face-to-face sales

calls or networking events, Portuguese SMEs should introduce
their companies and products with images and stories about
the successes of the Portuguese dual-use goods industry. The US
is a large market, and first impressions are essential; SMEs must
make a lasting impression on US buyers and decision makers.
Any association that SMEs can make with innovation in dual-use
goods and their products – such the LIFE Project’s recent Crystal
Cabin Award, NASA’s utilization of Portuguese software – should be
heavily featured (AICEP 2017). Additionally, one senior defense trade
expert told us that a lot of US government procurement of dual-use
goods “really wasn’t a big deal… but computer software, that was a
big issue”.184 Therefore, SMEs struggling to work through regulatory
issues should seek the advice, guidance, and mentorship of other
Portuguese companies that have successfully navigated the US
defense-related market.
This brings the report to its final point; SMEs are also encouraged to
utilize work that local and national business chambers and trade
associations have done to support Portuguese development and
growth. For instance:

»» www.iddportugal.pt: web site idD Portuguese Platform for
Defence Industries
»» www.btid.iddportugal.pt: web site Portuguese Defence
Technology and Industrial Base
»» Portugal is better: 3-minute video showcasing Portugal’s strengths
in technology, infrastructure, investment, trade, product quality,
quality of life, and business opportunity
»» Choose Portugal: 6-minute video about Portuguese natural and
human resources and continued capacity for development and
growth in various sectors
»» Invest in Portugal: 35-page PDF featuring Portugal’s competitive
advantages, including information on correction of structural
imbalances and implementation of reforms and support services
»» Web summit 2016: conference event that featured 21 sector
summit meetings, 500,000 international guests that gained
global press, including coverage by Bloomberg, the New York
Times, CNBC, and the Guardian and participation by Google,
Apple, Microsoft, IBM, Cisco, Tesla and SpaceX.
Finally, Portuguese SMEs have many report recommendations,

resources, and strengths that contribute towards building a model
for sustainable development and growth. To build a suitable
and sustainable model, this report suggests that SMEs examine
conditions that led to the following:
»» Portugal’s World Economic Forum’s Competitiveness Index

Rankings (out of approximately 190):
——2015-2016: 38th
——2014-2015: 36th
——2013-2014: 51st
——2012-2013: 49th
——2011-2012: 45th
——2010-2011 46th.
»» Within Europe, Portugal’s exports outcompeting:

——Croatia
——Finland
——Ireland
——Belgium-Luxemburg.
»» Within Europe, Portuguese exports being outcompeted by:

——Bulgaria
——Estonia
——Latvia
——Lithuania
——Slovakia.

• 131
»» Within Europe, Portugal’s exports being similar to:
——The Czech Republic
——Greece
——Poland
——The UK.
The core competitiveness issues that SMEs should consider in build-
ing this model are:
»» Ensuring partnerships are appropriate in size, scope, and

expectations
»» Understanding why:
——Countries with considerably lower GDPs, such as Bulgaria,
Estonia, Latvia, Lithuania, and Slovakia with an average GDP of
$45.3B, outcompete Portugal
——In consideration of the above: Portugal, with $199B GDP,
outcompetes Croatia, Finland, Ireland, and Belgium-Luxemburg,
which have an average GDP of $143.5B
——Portugal exports in similar volumes to countries, such as the
Czech Republic, Greece, Poland, and the UK, which have a
much higher average GDP of $925.4B (IMF 2015).
This report has taken an in-depth examination to Portuguese

SMEs’ opportunities for export development on the US dual-
use goods market and has found bountiful opportunities. The
projections for SMEs that are able to quickly become export ready,
develop sustainable relationships with US partners, and offer
quality products at competitive prices while also giving consistent
consumer and product service are overwhelmingly positive for
business growth. SMEs’ sustainable US export development will
not only serve their own interests but will also enhance Portuguese
competitiveness and GDP. In turn, Portuguese export levels could
continue to rise rapidly to pre-2008 levels, demonstrating the
extensive role SMEs play in Portugal’s continued economic recovery
and independence.

Portuguese Defense
Related economy
(key figures)
Contribution of IdD
Portuguese Defence Industries (Estimates)
»» +330 COMPANIES (2017);

»» 1.72€ BILLION EUROS OF TURNOVER (2015);
»» 88% EXPORTED (2015);
»» 20.000 JOBS (2015);
idD in Action
idD helps the national industry to find markets and international

partners, encourages the creation of business partnerships, to act
in the global defence market, promotes partnership between the
Armed Forces and Defence industries, supports R&D efforts for
excellence and promote technology dual military-civilian use and
supports the creation of Defence start-ups. Since September 2014,
idD has organized and participated in the following actions:
»» MORE THAN 200 PORTUGUESE COMPANIES JOIN TO DTIB AND

THEY ARE REPRESENTED IN idD (2017);
»» ORGANIZE 14 DEFENCE ECONOMY CONFERENCES (2017);
»» ORGANIZE 29 NATIONAL & INTERNATIONAL CORPORATE
MISSIONS (2017);
»» PARTICIPATED IN 12 SECURITY & DEFENCE FAIRS (2017);
»» idD SIGNED 11 NATIONAL AND INTERNATIONAL COOPERATION
PROTOCOLS (2017);
»» HELD MORE THAN 160 MEETINGS WITH FOREIGN ENTITIES
(2017);
»» idD VISITED 18 COUNTRIES (2017);
»» PUBLISHED 222 OPORTUNITIES TENDER SHARED (2017);
Evolution of DTIB
In April 2015, the Portuguese Defence Technological and Industrial

Base - BTID started with 149 registered companies. In December
2016 the Portuguese DTIB reached the number of 333 registered
companies, corresponding to an increase of 123.5% during one year
and a half.
This growth trend is due to a refined work of exploration and

identification of companies that fall within the definition of

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Portuguese DTIB, as well as to the sectoral scope of the Economy
of Defence. The idD’s activity along with the prominence that this
theme has at the present time should be considered, with equal
importance, in the remarkable increase of new organizations in the
Portuguese DTIB.
Although the companies develop their activity directed to a main

cluster, they have the capacity and competences to work in other
clusters and that is the reason why the companies are allowed to be
registered in several clusters in the Portuguese DTIB.
Evolution of the Portuguese DTIB between April 2015 and

December 2016.
DTIB Managment DTIB Managment December

Rate of Change
April 2015 2016
149 333 +123.5%
Monthly evolution of the Portuguese DTIB in 2016.
Subtitle: Number of new companies.

Comparative growth of Portuguese DTIB to the previous month.

Annual evolution of the Portuguese DTIB by cluster in 2016.
Although the Portuguese DTIB companies develop their activity

directed to a main cluster, they have the capacity and skills to act
in other clusters, which is why some companies are allowed to be
registered in several clusters in the Portuguese DTIB. Therefore the
total sum of companies in clusters in 2016 is higher than the real
number of companies of the Portuguese DTIB.

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DTIB National Geo - referencing
Defense market opportunities published
Whereas the objectives of the idD to strengthen the participation

in international programs of the Portuguese DTIB companies and
estimulate partnerships with international organizations of which
Portugal is member, a series of opportunities tender request are
being launched by NATO organisations, European Maritime Safety
Agency – EMSA, the Ministry of Defence of Algeria and also by the
Ministry of Defence of the Republic of India.
The Defense Economics opportunities, published like an

international public tender, represent excellent business
opportunities for the Portuguese Defence industries. From February
2015 to December 2016, 222 opportunities were published.

Economy Defence oportunities tender shared by idD with
Portuguese DTIB companies between 2015 and 2016.
No. published opportunities No. clusters No. DTIB companies
222 18 297
Tenders request of NATO shared by idD with Portuguese DTIB

companies between 2015 and 2016.
No. published opportunities Budget No. clusters No. DTIB companies
97 834 502 440,80 € 15 287
Tenders request of Ministry of Defence of Algeria shared by idD

with Portuguese DTIB companies between 2015 and 2016.
No. published opportunities No. clusters reached No. DTIB companies reached
121 16 258
Tenders request of Ministry of Defence of India shared by idD

with Portuguese DTIB companies since September 2016.
3 2 47
Tenders request of EMSA shared by idD with Portuguese DTIB

companies since December 2016.
1 1 20
Participation of the Portuguese DTIB companies in the idD’s

actions
With the idD’s activity 197 Portuguese DTIB companies participated in

more than 30 relevant actions aimed at the promotion, development
and support of these companies ranging from presence in Defence
and Security fairs, national and international business missions, or
information sessions, workshops and conferences.

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Participation of the Portuguese DTIB companies in the idD’s
actions between 2015 and 2016.
No. idD’S actions No. DTIB participations
35 197
WEB – Portuguese DTIB
In order to embody the strategy defined to leverage the

opportunities regarding the Defence economy, idD - The
Portuguese Platform for Defence industries was created with the
responsibility and mission of promoting and developing, nationally
and internationally, the companies’ activity in the Defence sector,
including the enterprises that belong to DTIB, contributing
therefore, for the development of the national economy.
Portuguese DTIB companies site.

More information: www.btid.iddportugal.pt

The idD’s national and international cooperation protocols
With the recognize and the importance of cooperation in the area
of Defence Economics to strengthen this sector and will make every
effort to strengthen cooperation between the idD and other entities,
the idD assigned protocols to moving towards a stronger industrial
base that is as integrated as possible for the goals of both parts.
List of entities with Industrial Cooperation Protocol with the

idD.
ENTITY PROTOCOL DATE
ACIMDA
October 2014
(Colombia)
ABIMDE
April 2015
(Brazil)
FIBRENAMICS
June 2015
(Portugal)
AIP-CCI
August 2015
(Portugal)
AEP
September 2015
(Portugal)
PGZ
November 2015
(Poland)
NKGBS
November 2015
(Japan)
CCILB
November 2015
(Baltic Countries)
ISCTE
January 2016
(Portugal)
Exército Português
October 2016
(Portugal)
AAPJ
December 2016
(Japan)

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Members List of IdD
Organização Cluster Site
1 A Penteadora Têxtil http://www.penteadora.pt/
2 A.Silva Leal Serviços

A. Silva Matos Ambiente/Construção e
3 www.asilvamatos.pt
Metalomecânica Engenharia/Energia
http://www.emfa.pt/www/po/
4 Academia da Força Aérea Pesquisa e Investigação
unidades/unidade-10D00
5 Academia Militar Pesquisa e Investigação http://www.academiamilitar.pt/
Associações/Bens e
6 ACHAR http://www.achar.pt/
Restauração/Serviços
7 ACOS IBER Aeroespacial www.acos-alcen.com
Active Space Technologies
8 Aeroespacial http://www.activespacetech.com/
S.A.
AD CAPITA Executive
9 Serviços www.adcapita.com
Search
10 ADENE - Energy Agency Associações/Energia http://www.adene.pt/
http://www.aresources.pt/index.
11 Advanced Resources Serviços
php
12 AED Associações http://www.aedportugal.pt/
13 AEP Portugal Associações/Serviços http://www.aeportugal.pt/

Materiais Tecnológicos/UAV-
14 Aeroazores http://www.aeroazores.com/
UUV-UGV
15 Aeroequipo Aeroespacial www.aeroequipo.com
16 Aerohelice Aeroespacial http://www.aerohelice.com/

Aeroespacial/Materiais
17 Aerostec Services Lda www.aerostecservices.com
Tecnológicos/Tranportes
Aerotécnica Grupo Seven
18 Aeroespacial http://www.aerotecnica.pt/
Air LDA
19 AEROVIP Aeroespacial
20 AFCEA Portugal Associações/TIC http://www.afceaportugal.pt/

AFF - A. FERREIRA & FILHO
21 Têxtil http://www.aferfi.com
S.A.
22 AFN Terrestre/Transportes http://www.afn.pt/
Agência Portuguesa do
23 Ambiente/Associações http://www.apambiente.pt/
Ambiente
24 AHM Eletrónica e Serviços Energias/Serviços
25 AICEP Associações/Serviços http://www.portugalglobal.pt/

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26 AIP Associações/Serviços http://www.aip.pt/

Albatroz Engenharia, Aeroespacial/Construção
Investigação, e Eng., Energia/ Pesquisa/
27 www.albatroz.engineering
Desenvolvimento e Robótica e Automatização/
Inovação, S.A. UUV-UAV-UGV
28 ALERTA PRO Segurança http://alertapro.pt/
29 ALMA DESIGN Aeroespacial http://www.almadesign.pt/
30 Alternative 4U Ambiente/Energia www.a4u.pt
31 Altitude PRO Segurança http://www.altitude-pro.com/
32 ALTRAN Aeroespacial/Serviços www.altran.pt
33 ALTRONIX TIC http://www.altronix.pt
34 Amb3e Associações/Serviços http://www.amb3e.pt/
35 Ambergo Ambiente http://ambergo.pt/
36 AmBioDiv Ambiente http://www.ambiodiv.com/
37 Ametto Medical Saúde http://www.amettomedical.com/
38 AMF SHOES Calçado http://www.amfshoes.com/
39 Amorim Cork Materiais Tecnológicos http://www.amorimcork.com/
40 ANETIE Associações/TIC http://www.anetie.pt/
41 ANTERO LOPES LDA Segurança/Serviços/TIC N/A

https://www.anubisnetworks.
42 ANUBIS NETWORK Cibersegurança/Serviços/TIC
com/
43 Apcol Serviços
44 APICCAPS Associações/Calçado http://www.apiccaps.pt/
45 Arsenal do Alfeite Naval http://www.arsenal-alfeite.pt/

Associação das Indústrias
46 Associações/Naval http://www.ain.pt
Navais - AIN
AST- Soluções e Serviços de
47 Ambiente www.ast-ambiente.com
Ambiente
48 AtlanticEagle Shipbuilding Naval www.aeshipbuilding.com
49 Atomic - Irmãos Mota Transportes www.irmaosmota.pt
50 AVP Aeroespacial http://www.avp.com.pt

Aeroespacial/Ambiente/
51 Baquelite Liz Construção e Engenharia/ www.baquelite.com
Materiais Tecnológicos/Naval
Batistas Reciclagem de
52 Ambiente/Serviços http://www.batistas.pt/
Sucatas SA
53 BERD Construção e Engenharia www.berd.eu
54 Bernardo da Costa Segurança http://www.bc.pt/

BORGES & CANTANTE
55 Construção e Engenharia http://www.cbc.pt/
CONSTRUÇÕES
56 Bright Partners TIC http://www.brightpartners.com/
57 Browning Viana Segurança/Serviços http://www.browning.eu/

Ambiente/Construção e
Engenharia/Energia/Materiais
BTL - Indústrias
58 Tecnológicos/Naval/Pesquisa/ www.btl.pt
Metalúrgicas
Robótica e Automatização/
Serviços/TIC/UAV-UUV-UGV
59 CABLOTEC Materiais Tecnológicos http://www.cablotec.com/
60 Cacicambra Serviços http://www.cacicambra.pt/

http://www.caetanoaeronautic.
61 CAETANO AERONAUTIC Aeroespacial
pt/
62 Caetano Coatings Materiais Tecnológicos http://www.caetanocoatings.pt/
63 CAETANOBUS, S.A. Terrestre http://www.caetanobus.pt/
64 CARDIO-ID Materiais Tecnológicos/Saúde www.cardio-id.com
65 Casa Angola Internacional Bens e Restauração www.cai-sa.pt/
66 Casa Serras Materiais Tecnológicos www.casaserras.pt
67 Casais Engenharia S.A. Construção e Engenharia http://www.casais.pt/

Construção e Engenharia/
68 CATARI www.catari.pt
Naval
69 CAVEDIGITAL Serviços/TIC www.smartgovernance.com
Associações/Construção e
70 CEFAMOL http://www.cefamol.pt/
Engenharia
Aeroespacial/Terrestre/TIC/
71 CEIIA www.ceiia.com
UAV-UUV-UGV
72 Celfinet Serviços http://www.celfinet.com/
73 CeNTI Pesquisa e Investigação http://www.centi.pt/
74 Centimfe Materiais Tecnológicos http://www.centimfe.com/

CIGeoE - Instituto
75 TIC https://www.igeoe.pt
Geográfico do Exército
76 CIMERTEX www.cimertex.pt
Serviços
CINAV - Centro de Aeroespacial/Cibersegurança/
77 http://cinav.marinha.pt
Investigação Naval Naval/Pesquisa
78 CITEVE Pesquisa/Têxtil www.citeve.pt
79 Clearenergy lda Energia http://clearenergy.pt/
80 COBA Construção e Engenharia http://www.coba.pt/
81 COBENG Construção e Engenharia www.cobeng.com

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82 Cogedir Construção e Engenharia http://www.cogedir.pt/
83 Coldkit Ibérica Bens e Restauração www.coldkit.com

Aeroespacial/Robótica e Auto/
84 CONTROLAR www.controlar.pt
TIC/Transportes
85 CONTROLVET Saúde/Serviços http://www.controlvet.pt/
Materiais Tecnológicos/
86 Coriant Portugal http://www.coriant.com/
Pesquisa/Serviços/TIC
87 Corpdefense NGTT , LDA Segurança/Serviços http://www.corpdefense.eu/
88 Couro Azul Materiais Tecnológicos/Têxtil http://www.couroazul.pt/

http://www.critical-materials.
89 Critical Materials Materiais Tecnológicos
com/
Aeroespacial/Cibersegurança/
90 Critical Software S.A http://www.criticalsoftware.com/
Naval/TIC
91 Cunhol Materiais Tecnológicos http://www.cunhol.com/
92 Cybermap TIC http://www.cybermap.pt/
93 Damel Têxtil http://www.damel.pt/
94 DANOTEC Associações/TIC http://www.danotec.pt/
95 DDDD TIC http://www.4dproducoes.com/
96 Defmat Segurança http://www.defmat.com/
97 Demarca Têxtil http://www.demarca.eu/
98 Dias&Vicentes Têxtil www.diasevicentes.pt
99 Distrim 2 Aeroespacial/Ambiente/Saúde http://www.distrim2.pt/
100 D-Orbit Aeroespacial / TIC www.deorbitaldevices.com
101 Driveline Materiais Tecnológicos http://www.driveline.pt/pt
102 DVM GROUP, SGPS Construção e Engenharia http://www.dvmgroup.pt/
103 E.Dias Serrras SA Materiais Tecnológicos http://www.casaserras.pt/
104 ECO. PATROL Ambiente http://www.ecopatrol.pt
105 Ecopilhas Ambiente http://www.ecopilhas.pt/

106 EDAETECH http://www.edaetech.pt/
Tecnológicos/Naval
107 Edigma TIC http://www.edigma.com/
108 EDISOFT http://www.edisoft.pt/
Naval/TIC
109 EFACEC Energia http://www.efacec.pt/
110 EID Naval/TIC http://www.eid.pt/
111 EIP Construção e Engenharia http://www.eip-sa.pt/

Aeroespacial/Construção e
112 ELECNOR DEIMOS http://www.deimos.pt/pt
Engenharia/Naval/TIC
113 ENKROTT Ambiente www.enkrott.com
114 ESCOLA NAVAL Pesquisa e Investigação http://escolanaval.marinha.pt/
115 Espaço Mar Serviços http://www.espacomar.pt/
116 Espingardaria Belga Serviços http://www.esp-belga.com/
117 ESRI Portugal TIC http://www.esriportugal.pt/

118 EST http://www.est.pt/
Energia
ESTALEIROS NAVAIS
119 Naval http://www.enp.pt/
PENICHE
120 ESTORIL MONTE Construção e Engenharia www.estorilmonte.com
121 ET Materiais Tecnológicos/Têxtil http://www.etlda.pt/
122 ETE Logística Naval/Serviços/Transportes http://www.ete-logistica.org

Aeroespacial/Naval/Serviços/
123 ETI http://www.eti.pt/
TIC
124 Eurocover Têxtil http://www.eurocover.pt/
Associações/Pesquisa e
125 Eurodefense http://www.eurodefense.pt/
Investigação
Calçado/Segurança/Têxtil/
126 EUROFIRESAFE www.eurosafe.pt
Transportes
http://protective.sherwin-
127 Euronavy Tintas Materiais Tecnológicos williams.com/?WT.mc_
id=euronavy.net
http://www.eurosportaircraft.
128 EUROSPORTAIRCRAFT Aeroespacial/UAV-UUV-UGV
com/
129 Exide Technologies Serviços http://www.exide.com/pt/pt/
130 Extincêndios Calçado/Segurança http://extincendios.pt/
131 FABREQUIPA Terrestre http://www.fabrequipa.com/
132 Falck SCI Segurança http://www.falck.com/
133 Fapomed Saúde/Têxtil http://www.fapomed.pt/

Ambiente/Calçado/Segurança/
134 FARPROTEC www.farprotec.com
Serviços/Têxtil
135 FCUL Pesquisa e Investigação https://www.fc.ul.pt/
136 FEUP Pesquisa e Investigação www.fe.up.pt/
137 FIBERSENSING TIC http://www.fibersensing.com

http://www.web.fibrenamics.
138 FIBRENAMICS Pesquisa/Têxtil
com/pt/
139 Fisipe Têxtil/Materiais Tecnológicos http://www.fisipe.pt/

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140 Fonseca e Flora http://www.fonsecaeflora.com/
Tecnológicos
141 Frezite Materiais Tecnológicos http://www.frezite.com/
Construção e Eng./Mat.
142 Frigoríficos Brígido www.fbrigido.pt
Tecnologicos
Cibersegurança/Pesquisa/
143 G9Telecom www.g9telecom.pt
Serviços/TIC
Galtrailer - Industria e
144 Transportes http://www.galtrailer.pt/
Comercio, Lda
145 GEMAC Pesquisa e Investigação https://www.ua.pt/gemac/
146 GLEXYZ Aeroespacial http://www.glexyz.pt/
147 Globaleda TIC http://www.globaleda.pt/
148 Globaltronic TIC http://www.globaltronic.pt/
149 GMV Aeroespacial/Cibersegurança http://www.gmv.com/pt/
150 GRAVINER Construção e Engenharia http://www.graviner.pt/
151 GRUPEL Energia/Serviços www.grupel.eu

http://www.grupomoldoeste.
152 Grupo Moldoeste Materiais Tecnológicos
com/
153 H.J Pavão de Sousa Serviços -
Aeroespacial/Serviços/
154 HELIBRAVO www.helibravo.com
Transportes/UAV-UUV-UGV
155 Hespor Construções, Lda Construção e Engenharia http://www.hespor.pt/
156 HF Diving Center Naval/Serviços http://www.hfcenter.pt/
157 His e-Health Saúde/TIC http://www.his.pt/
158 Holos TIC http://holos.pt/

http://www.emgfa.pt/pt/
Hospital das Forças
159 Saúde organizacao/hospitalFA/
Armadas
hfargabasocial
160 HPS Materiais Tecnológicos http://www.hps-lda.pt/
161 HR Group Segurança/Têxtil http://www.hrproteccao.pt/
162 Hydraplan Transportes http://hydraplan.pt/
163 Iberomoldes Materiais Tecnológicos http://www.iberomoldes.pt/
164 Ibersol Bens e Restauração http://www.ibersol.pt/

idD - Desmilitarization and
165 Ambiente/Segurança/Serviços -
Material Deactivation
166 IdMind Lda Robótica e Automatização http://www.idmind.pt/
167 IDN Pesquisa e Investigação http://www.idn.gov.pt/
168 IDNT TIC http://www.idnt.pt/

169 IEMA Serviços http://www.iema.pt/
170 IUM Pesquisa e Investigação http://www.iesm.pt/

Cibersegurança/Materiais
171 inCentea www.incentea.com
Tecnológicos/Serviços/TIC
172 Indra Sistemas Cibersegurança/TIC http://www.indracompany.com/

Induma – Máquinas
173 Naval http://www.induma.pt/
Industriais
174 INEGI Pesquisa e Investigação http://www.inegi.up.pt/
175 INESC Porto Pesquisa e Investigação https://www.inesctec.pt/
176 INESC-ID Pesquisa e Investigação http://www.inesc-id.pt/
177 InfoSistema Serviços http://www.infosistema.com/
178 InoCrowd Serviços www.inocrowd.com
179 Inov- Inesc TIC http://www.inov.pt/

Inovaworks - Command
180 Cibersegurança/Naval http://www.inovaworks.com/
and Control, Lda
181 Instituto Hidrográfico TIC http://www.hidrografico.pt/
182 Instituto Pedro Nunes Pesquisa e Investigação https://www.ipn.pt/
183 INTELI Serviços http://www.inteli.pt/pt
184 INTERFIRE Segurança http://interfire.pt/
185 INTERTRÁFEGO TIR Transportes www.intertrafego.pt

186 INTROSYS http://www.introsys.eu/
UAV-UUV-UVG
187 INVENTARIUM SR&D Segurança http://inventarium-srd.com/
188 I-SETE Energia http://www.isete.com/

189 I-SKYEX www.iskyex.com
UAV-UUV-UVG
Aeroespacial/Ambiente/Bens
e Restauração/Construção e
Tecnológicos/Naval/Pesquisa/
190 ISQ www.isq-group.com
Saúde/Segurança/Serviços/
Terrestre/Transportes/UAV-
UUV-UGV
191 IST Pesquisa e Investigação https://tecnico.ulisboa.pt/
192 ITS Associações/TIC http://www.its-portugal.eu/

Ambiente/Calçado/Construção
193 ITURRI PORTUGAL e Engenharia/Segurança/ www.iturri.com
Serviços/Têxtil

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194 Jacinto Marques Serviços http://www.jacinto-lda.com/

Jorge Lozano - Trabalhos
195 em Altura, Formação e Construção e Eng./Segurança www.jorgelozano.pt
Serviços
196 JOTA 96 Energia http://www.jota96.com/
197 Know Food Bens e Restauração http://www.knowfood.pt/
198 LASI Materiais Tecnológicos http://www.lasi.pt/
199 LATINO Confecções Lda Têxtil http://www.latinogroup.net/
200 LAUAK Portugal Aeroespacial http://www.groupe-lauak.com/
201 LAVORO Calçado http://www.lavoro.pt/
202 LCG Serviços http://lisboncg.com/
203 LEPABE Pesquisa e Investigação http://paginas.fe.up.pt/~lepabe/
204 Let’s Talk Group Serviços www.letstalkgroup.com
205 Link Consulting TIC/Serviços http://www.link.pt/
206 Lissa TIC/Transportes http://www.lissa-lda.com/

http://www.exercito.pt/sites/
207 LMPQF Saúde
LMPQF/Paginas/default.aspx
208 LNEG Pesquisa e Investigação http://www.lneg.pt/
209 Luis Simões, SA Transportes http://www.luis-simoes.pt/
210 Lusis Serviços http://www.lusis.pt/

LusoSpace – Tecnologia
211 Aeroespacial http://www.lusospace.com/
Aeroespacial
Luz e Riscos - Comércio
212 de Material Eléctrico Energia http://www.luzeriscos.pt/
Unipessoal Lda
213 MARSENSING www.marsensing.com
Engenharia/Pesquisa/Serviços
Construção e
214 MATEREO Eng;Energia;Materiais www.matereo.com
Tecnológicos; UAV-UUV-UGV
215 Me & You Innovate www.meandyouinnovate.pt
Tecnológicos/Saúde/TIC
216 MedicineOne Saúde/TIC http://www.medicineone.net/
217 Metatheke TIC http://metatheke.com/pt/
218 MICOTEC Segurança http://www.micotec.pt/
219 MICROSEGUR Segurança http://www.microsegur.pt/

Bens e Restauração/
Calçado/Energia/Materiais
220 MILICIA Tecnológicos/Saúde/ www.grupomilicia.com
Segurança/Serviços/Têxtil/
Transportes
221 MJL Aeroespacial http://mjlparts.com/
222 MME Robótica e Automatização http://www.mme.pt/inicio
223 Molfil Têxtil http://www.molfil.com/
224 MOON Serviços http://www.moonlisboa.com/
225 MORPHIS TIC wwww.morphis-tech.com
226 MOTA-ENGIL Construção e Engenharia http://www.mota-engil.pt/

http://grupomotofil.com/
227 MOTOFIL Aeronautica Aeroespacial
wordpress/index.php/pt/inicio/
228 MSF – CONSTRUÇÕES Construção e Engenharia http://www.msf.pt/
229 Multiware Materiais Tecnológicos http://www.multiware.pt/

http://www.mw-technologies.
230 MW Technologies Materiais Tecnológicos
com/
Cibersegurança/Energia/Naval/
231 NAUTEL www.nautel.pt
Pesquisa/Segurança/Serviços/
Terrestre/TIC/UAV-UU-UGV
232 Nautiber Naval http://www.nautiber.pt/
Naval/Robótica e
233 Nautiradar www.nautiradar.pt/
Automatização
234 NAVALRIA Naval http://www.navalria.pt/
235 NetVigi Segurança http://www.netvigi.com/
236 Newtextiles Têxtil http://www.newtextiles.pt/
237 NNC - Transportes Transportes http://nnc.pt/

Naval/Robótica e http://www.norasperformance.
238 NORAS
Automatização/UUV-UAV-UGV com/
239 NorSafe Segurança http://www.norsafe.pt/
http://www.recnor.pt/nortenha.
240 Nortenha Terrestre
php?id=1
241 Novabase Cibersegurança/Serviços/TIC http://www.novabase.pt/
242 NovaCable Materiais Tecnológicos http://www.novacable.pt/
243 Novo Norte Robótica e Automatização http://www.novonorte.pt/
244 NTGroup Lda Serviços http://www.ntgroup.pt/

Oceano XXI - Fórum
245 Naval http://www.oceano21.org/
Oceano

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Naval/Robótica e
246 OceanScan http://www.oceanscan-mst.com/
Automatização/UUV-UAV-UGV
247 OGMA Aeroespacial http://www.ogma.pt/
http://www.exercito.pt/SITES/
248 OGME Terrestre
OGME/Paginas/default.aspx
249 OMNIDEA Energia http://omnidea.net/
250 OPTIMAL Aeroespacial http://optimal.pt/
251 OutSystems Portugal Serviços http://www.outsystems.com/
252 Palbit Materiais Tecnológicos http://www.palbit.pt/
253 Palmeiro Foods Bens e Restauração www.palmeirofoods.pt

PARA-EQUIPA-
254 PARAQUEDAS Equip. Segurança
Militares
Cibersegurança/Construção e
Tecnológicos/Naval/Pesquisa/ http://www.hp-group.org/
255 PartYard | HP Group
Robótica e Automatização/ military/
Segurança/Serviços/Terrestre/
TIC/Transportes/UAV-UUV-
UGV
256 Passion4Sky Serviços/TIC http://www.passion4sky.com
Cibersegurança/Pesquisa/
257 PDM&FC http://www.pdmfc.com/
Serviços/TIC
258 PEMAS Aeroespacial/Associações http://www.pema.pt/
Aeroespacial/Pesquisa/Saúde/
259 PERFORMETRIC www.performetric.net
Serviços/TIC
260 PIEP Pesquisa e Investigação http://www.piep.pt
261 Pinto & Bentes www.pintoebentes.pt
Energia
262 PJF Materiais Tecnológicos/UAV- www.pjf.pt
UUV-UGV
263 Planeta Vivo Pesquisa e Investigação http://www.planetavivo.net/
264 Poaviation Aeroespacial/Serviços http://poaviation.com/
265 Pool-Net Materiais Tecnológicos http://www.toolingportugal.com/

Portugal Telecom Inovação
266 TIC http://www.ptinovacao.pt/
(Altice Labs)
267 Primavera Materiais Tecnológicos/TIC http://pt.primaverabss.com/pt/
268 Procalçado Calçado http://www.procalcado.com/
269 PROESPAÇO Associações/Aeroespacial http://www.proespaco.pt/

270 PROHERAL Segurança/Serviços/Têxtil http://www.proheral.pt/
271 Projecto.Detalhe Naval / Outros www.projectodetalhe.com
272 PROSKIPPER Têxtil www.proskipper.pt
273 Protectedmode Têxtil http://shop.protectedmode.pt/
274 QUADRI Segurança http://www.quadrisistemas.pt/
275 QUALIFIRE Segurança http://www.qualifire.pt/
276 Quarkson, Lda Aeroespacial www.quarkson.com

http://www.quasarhumancapital.
277 QUASAR HUMAN CAPITAL Serviços
com/
278 QUIZAmbiente Ambiente www.quizambiente.pt
279 Rangel Transportes www.rangel.com
280 REBONAVE Naval www.rebonave.pt
281 RFS Telecomunicações Serviços http://www.rfs.pt/

282 RIBERMOLD Tecnológicos/Robóticia e www.ribermold.pt
Auto./Saúde/Serviços
283 RIOPELE Têxtil http://www.riopele.pt/
284 RPCK Saúde http://www.rpck.pt/

Cibersegurança/Materiais
285 S21sec Tecnológicos/Segurança/ www.s21sec.com
Serviços/TIC
Materiais Tecnológicos/
286 Salemo & Merca http://www.salemoemerca.pt/
Serviços
287 Sciencentris Materiais Tecnológicos http://www.sciencentris.com/pt/
288 Scope Materiais Tecnológicos http://scope.pt/
289 Searibs Lda Naval -
290 Selfenergy Energia http://www.vivapower.pt/blog/
291 Setronix TIC http://www.setronix.pt/
292 SINDOCAL Calçado www.sindocal.com

http://www.sinepower.com/pt/
293 Sinepower Serviços
home/
SIPAMAR PEÇAS E
294 Naval -
ACESSÓRIOS MARÍTIMOS
Construção e Engenharia/ http://www.3-l-d.com/sisint/
295 SISINT
Energia index1.html
296 SKYPRO (ABOTOA) Calçado www.buyskypro.com
http://www.soaresdacosta.com/
297 Soares da Costa Construção Construção e Engenharia
pt/

• 151
Sociedade Com. Crocker,
298 Robótica e Automatização -
Delaforce
299 Sociedade Ponto Verde, SA Ambiente http://www.pontoverde.pt/
300 Sodarca Segurança http://sodarca2.pt/
301 Somague Construção e Engenharia http://www.somague.pt/

SOPROMAR – Estaleiro
302 Naval http://www.sopromar.com/
Naval de Lagos, Lda
303 Spin.Works Aeroespacial http://www.spinworks.pt/
304 STAL Construção e Engenharia http://www.sociedadetecnica.pt/
305 Sunviauto Terrestre http://www.sunviauto.pt/pt

TAP Maintenance &
306 Aeroespacial http://www.tapme.pt/
Engineering
307 TAP Portugal Aeroespacial http://www.flytap.com/
308 TEandM Materiais Tecnológicos http://www.teandm.pt/

309 TECCI www.enkrott.com
Energia/Serviços
310 TECNIQUITEL Engenharia/Segurança/ www.tecniquitel.pt
Serviços
Ambiente; Construção e Eng.;
311 TECNOPLANO Energia; Saúde; Segurança; www.tecnoplano.pt
Serviços;
312 TecnoVeritas Const. Eng./Naval/TIC/Energia http://www.tecnoveritas.pt/pt/
313 Tecradio Comunicações TIC http://www.tecradio.pt/
314 TEIXEIRA DUARTE Construção e Engenharia http://www.teixeiraduarte.pt/

Aeroespacial/TIC/UAV-UUV-
315 TEKEVER www.tekever.com
UGV
316 TELWINDOW Segurança/Serviços/TIC http://www.telwindow.pt
www.thalesgroup.com/pt-pt/
317 THALES TIC
homepage/portugal
318 TIMESTAMP Materiais Tecnológicos/ www.timestamp.pt
Segurança/Serviços TIC
319 TINCOMIL Aeroespacial www.tincomil.pt
320 Tojaltec Robótica e Automatização http://www.tojaltec.com/
321 TORFAL Têxtil www.torfal.com

Bens e Restauração/
322 TRIVALOR www.trivalor.pt
Segurança/Serviços
323 TROFAL Calçado www.trofal.com
Calçado/Saúde/Segurança/
324 TROTINETE www.trotinete.pt
Têxtil

325 UAVision Aerospace Aeroespacial/UAV-UUV-UGV http://www.uavision.com/
326 UBI Pesquisa e Investigação www.ubi.pt

327 UEpro Tecnológicos/Saúde/ www.uepro.com
Segurança
Aeroespacial/Bens e
Restauração/Construção e
328 UNOBVIOUS SOLUTIONS www.unobvious-solutions.com
Egenharia/Pesquisa/Serviços/
TIC/UAV-UUV-UVG
329 UTi Portugal Transportes www.go2uti.com
330 Valinox Materiais Tecnológicos http://www.valinox.pt/
331 VALORPNEU Ambiente http://www.valorpneu.pt/
332 VANGUARD MARINE Naval www.vanguardmarine.com

Const. Eng/Energia/TIC/UAV-
333 VIATEL www.visabeiraglobal.com
UUV-UGV
Aeroespacial, Ambiente,
Associação, Cibersegurança,
Construção e Engenharia,
Energia, Materiais
Vieira de Almeida
334 Tecnológicos, Naval, Pesquisa, www.vda.pt
Associados
Robótica e Automatização,
Saúde, Segurança, Serviços,
Terrestre, Têxtil, TIC,
Transportes e UAV-UUV-UGV
335 Vision Box Segurança http://www.vision-box.com/
336 VisionSpace Aeroespacial/TIC http://www.visionspace.com/
337 Westsea Naval http://www.west-sea.pt/

Naval/Pesquisa/Segurança/
338 XSEALENCE www.xsealence.com
TIC/UAV-UGV-UUV
339 YDreams Portugal TIC http://www.ydreams.com/

• 153
Ministerial order
Nº 6488/2015

• 155
• 157
• 159
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THE US MARKET

THE US MARKET FOR DEFENSE-RELATED OR DUAL-USE

4 • USA NEXT CHALLENGE

THE US MARKET FOR DEFENSE-RELATED OR DUAL-USE

Section 1 introduces the report, report parties, and report focus by

The repot uses a multi-factor analysis to examine how Portuguese

THE US MARKET FOR DEFENSE-RELATED OR DUAL-USE

8 • USA NEXT CHALLENGE

ACE Automated Commercial Environment

THE US MARKET FOR DEFENSE-RELATED OR DUAL-USE

10 • USA NEXT CHALLENGE

Table 1.1 – Portugal’s Global Defense-Related Goods Export 11

Figure 2.1 Growth in US Defense Exports (2013-2016, billions) 20

Figure 2.2 US Government Defense and Military Budgets 22

Figure 2.3 Market shares of defense and aerospace exporting 25

Figure 2.4 Market shares of defense and aerospace exporting 26

Figure 2.5 Market shares of defense and aerospace exporting 26

Figure 2.6 – 2016 US DoD Spending Composition (Billions) 39

Figure 2.7 – US Defense-Related Goods Market Composition 40

Table 4.1 – Comparison of the Primary Entry Points for the US 93

THE US MARKET FOR DEFENSE-RELATED OR DUAL-USE

In spite of this instability and uncertainty, there is reason to be

1.1 Report Parties

This report offers guidance on how Portugal can enhance dual-use

THE US MARKET FOR DEFENSE-RELATED OR DUAL-USE

This report reflects on general and specific issues that shape

Painting a general economic landscape of Portugal’s current trade

Figure 1.1 – Portuguese Net Contributions to Real GDP Growth

14 • USA NEXT CHALLENGE

Portugal’s position within the top 50 most competitive export

Because dual-use export and defense-related goods are more

THE US MARKET FOR DEFENSE-RELATED OR DUAL-USE

Export Destination 2011 2012 2013 2014 CAGR

Africa $8.5M $4.2M $13.3M $16.4M + 18%

Americas $9.1M $4.6M $24.6M $41.1M + 46%

Asia $616K $5.3M $6M $2.4M + 40%

EU $6.4M $15.3M $101.1M $93.7M + 96%

Oceania $1K - $507K $1.6M + 78%*

US $3.1M $2.9M $20.3M $23.3M + 66%

“-” indicates missing data

As evident from Table 1.1, Portuguese dual-use goods exports have

16 • USA NEXT CHALLENGE

These attributions, delegated by ministerial order Nº 6488/2015 (see

With this action, the Portuguese State, intends to contribute and

Relatedly, it is unlikely that SMEs’ exports comprise a significant

Therefore, this report focuses on building and outlining specific

1.3 Report Methods

The report presents a market analysis for Portuguese SMEs looking

»» the US dual-use goods market

»» one-on-one interviews with US companies

These methods were selected based on their appropriateness and

Trade in defense-related goods is not as straightforward as, for

“There are no dedicated statistics, and estimates can only be based

One critical issue the report parties confronted was how to

18 • USA NEXT CHALLENGE

Additionally, defense-related trade data reporting is intrinsically

An expansive discourse exists on varied methods for collecting and

Section 3 examines legal regulations and compliance issues –

6 See Interview 1, Appendix 3 for further detail.

THE US MARKET FOR DEFENSE-RELATED OR DUAL-USE

In Section 4, US market access opportunities for SMEs exporting

The vast nature of goods included in the production of this report

The report concludes with Section 5 where the previous