EXCHANGE OF LETTERS RAISING COVERAGE THRESHOLD TO 100 GFLOPS

EXECUTIVE OFFICE OF THE PRESIDENT

THE UNITED STATES TRADE REPRESENTATIVE

WASHINGTON, D. C. 20508

Mar 31, 2000

Shunji Yanai

Ambassador of Japan

Embassy of Japan

Washington, DC 20008

Dear Ambassador Yanai:

I am pleased to receive your letter of today’s date concerning revisions to the procurement of supercomputers in the public sector pursuant to the "Procedures to Introduce Supercomputers" (the "Procedures") as amended. It is also my Government's view that the threshold in Section I (3) of the Procedures needs to be raised, and I understand that Section I (3) of the Procedures has been amended to read as follows:

"These Procedures will apply to the introduction of supercomputers with theoretical peak ratings of 100 billion floating point operations per second (GIGAFLOPS) and over. This coverage will be reviewed as necessary. "I also understand that this threshold will apply to procurements by the entities listed in ANNEXES I and II of the Procedures that are initiated on or after April 1. 2000.

I confirm that the procurement of computers with theoretical peak ratings of below 100 GIGAFLOPS initiated on or after April 1,2000, will be covered by the 1992 "Measures Related to Japanese Public Sector Procurement of Computer Products and Services" (the "Measures"), provided that the procurement is above the threshold for application of the Measures and is by an entity covered by the Measures.

I welcome your Government’s decision to amend the Procedures to take account of advances in supercomputer technology and to keep the Procedures under continual review. In this regard.

I look forward to our next annual review and discussions with your Government on the Procedures in order to assure their continued effectiveness in providing non-discriminatory, transparent, and competitive government procurement of supercomputers.

Sincerely,

Charlene Barshefsky

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Dear Ambassador Barshefsky:

With regard to the procurement of supercomputers in the public sector, I am pleased to you inform you of the following.

The Government of Japan has decided to revise the "Procedures to Introduce Supercomputers" (the "Procedures"), implemented in August 1987, revised in June 1990 as communicated to Ambassador Hills in a June 15, 1990 letter from Ambassador Murata and further revised in March 1995 as communicated to Ambassador Kantor in a March 31, 1995 letter from Ambassador Kuriyama and in April 1999 as communicated to Ambassador Barshefsky in a April 30, 1999 letter from Minister Plenipotenriary Kobayashi. Section I (3) of the Procedures sets out a theoretical peak ratings threshold for coverage of the Procedures of 50 billion floating point operations per second (GIGAFLOPS) and over and provides that the coverage be reviewed as necessary.

In order to reflect technological advances in the supercomputer market, this coverage threshold needs to be raised. Accordingly, we have amended Section I (3) of the Procedures to read as follows: "These Procedures will apply to the introduction of supercomputers with a theoretical peak ratings of 100 billion floating point operations per second (GIGAFLOPS) and over. This coverage will be reviewed as necessary." The new threshold will become effective April 1, 2000. It will govern all procurements of supercomputers by the entities listed in ANNEXES I and II of the Procedures that are initiated on or after April 1, 2000.

I would like to confirm that the procurement of supercomputers with a theoretical peak ratings of below 100 GIGAFLOPS initiated on or after April 1, 2000, will be covered by 1992 "Measures Related to Japanese Public Sector Procurement of Computers Products and Services" (the "Measures"), provided that the procurement is above the threshold for application of the Measures and is by an entity covered by the Measures.

Because the supercomputer market is dynamic, it will be necessary to review the Procedures as events and technology develop. Accordingly, my Government will keep the Procedures under continual review. In this regard, we remain prepared to review and discuss with your Government annually, or at any time upon request, the implementation of the Procedures in order to ensure a non-discriminatory, transparent, and competitive marketplace for the introduction of supercomputers. If necessary to ensure such a marketplace, we will implement the appropriate revisions of the Procedures.

Sincerely,

Shunji Yanai

Ambassador of Japan

The Honorable Charlene Barshefsky

United States Trade Representative

Office of the U.S.T.R.

Washington, D.C. 20508