The International Networks:
Working with the U.S. to Improve
Export Controls
Executive Export Control
Workshop
21 June 2010
Ronald Genemans, M.A.
Chairman: Defense MoU Attachés Group
([email protected])
(202) 274-2692
Jennifer Stewart, Ph.D.
Chairman: Foreign Procurement Group
([email protected])
202 682-7604
Topics
• About the international defense materiel networks
• Issues with U.S. export controls for defense items
and technology
• Progress in improving export controls since 2006
• Work and input from the international networks
• Success stories and solutions
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About the international defense
materiel networks
• Defense MOU Attachés Group (DMAG)
– 21 U.S. allies with reciprocal defense procurement
Memorandum of Understanding (MOUs) with the U.S.
Department of Defense facilitating bilateral defense
trade cooperation
• Foreign Procurement Group (FPG)
– 33 countries who purchase from the U.S. government
via the Security Assistance program and/or buy
commercially from U.S. suppliers
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Issues with U.S. export controls
• Primarily with the International Traffic in Arms
Regulations (ITAR)
• Perception of “tightened” requirements since 9/11,
leading to increased paperwork, processing time
and costs
• Resulting impacts on budgets and schedules of
allies’ defense programs
• Wastes scarce resources – in the end 99% of all
submissions are approved
• Reduces capability of key allies by restricting
access to best U.S. technology
• Impedes interoperability
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Issues with U.S. export controls
(cont’d)
• Treatment of “dual nationals” conflicts with many
countries’ human rights legislation
• “Reach” of ITAR into products and technology of
other counties
• Hurts U.S. industry by motivating foreign
countries and companies to avoid American
systems and components
• U.S. may be denying itself valuable technology
from its partners when overseas contractors avoid
information transfer with their U.S. primes due to
ITAR hurdles
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Foreign Military Sales retransfers
• Approval from the Department of State is
not required for the initial government-togovernment purchase
• Contained in the Letter of Offer and
Acceptance (LOA)
– Disclosure/releasibility determinations,
Congressional notification (as required) precede
LOA
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End use assurance in LOA
• “The Purchaser will not transfer title to, or
possession of, the defense articles, components
and associated support materiel, related training or
other defense services (including plans,
specifications, or information), or technology
furnished under this LOA to anyone who is not an
officer, employee, or agent of the Purchaser
(excluding transportation agencies)… unless the
written consent of the USG has been obtained.”
(LOA standard terms and conditions, Section 2.3.)
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Definition of “agent”
• In early 2000s, the international community
believed that this definition could include certain
contractors
• In 2004, the Department of State’s Office of
Regional Security and Arms Transfers clarified
that “agent” is a transportation agent – i.e., freight
forwarder – only and that retransfer approval is
required for sharing with any other third party
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Definition of agent (cont’d)
• Many countries recognized that they may have
disseminated FMS data and materiel without
seeking the requisite approval
• The Foreign Procurement Group (FPG) argued
that the current definition impedes military
programs, which require a combined effort by
governments and their contingent workforces of
contractors
• Made a proposal for redefinition of agent one of
their top 10 priorities
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Dual national issue
• ITAR precludes exports to nationals of U.S.
proscribed countries (ITAR section 126.1)
• Under current practice, this includes individuals
who are nationals of other countries, but were
born in a country listed in section 126.1
• Applying this provision of the ITAR is in effect
discrimination based on place of birth
• For many countries, this poses a dilemma of
complying with the ITAR, or facing human rights
challenges from their citizens
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ITAR extra-territoriality?
• Another ITAR conflict with many countries’
values and legislation is the requirement for
foreign governments to sign country over private
entity assurances (COPE) when they wish to use
overseas contractors to work on ITAR-controlled
kit.
• Many foreign governments are unwilling to sign –
possibly because of extra-territoriality
considerations
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U.S. initiatives to improve export
controls
• Proposals of the Coalition for Security and
Competitiveness announced in March 2007
• Over 20 studies by the Administration, think tanks and
academia
• Amended dual national provision in the ITAR (section
124.16) December 2007
• Provisions for defense trade controls improvement were
included in a number of House bills in 2007 and 2008 –
but the bills were not passed into law
• However, a number of the Coalition and Congressional
recommendations were picked up and mandated in a 2008
Presidential Directive
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U.S. initiatives to improve export
controls (cont’d)
• HR 2410, the 2009 Foreign Relations Act includes
as Title VIII a Defense Trade Controls
Performance Improvement Act
• House Foreign Relations Committee working on
future legislation also aimed at major export
controls reform
• Administration’s export control reform study and
initiative:
– Announced by the President on 11 March
– Outlined in detail by Secretary Gates on 20 April
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Input from the international
networks
• The DMAG and FPG developed a number of
presentations and white papers as input to these
initiatives, including:
– Top 10 priorities of the Foreign Procurement Group
(2004 and updated annually)
– Greater use of ITAR exemptions (2006)
– FMS Third Party Transfers (2006)
– Towards an Integrated International Export Control
Regime (first draft 2007, updated 2009)
– Problems and Impacts: U.S. Export Control Regime
(first draft 2007, updated 2009)- aka the ITAR “horror
stories”
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Input from the international
networks (cont’d)
• A paper of proposals on the 2009 Defense Trade
Controls Performance Improvement Act
• Some of these proposals were included in the
House Foreign Affairs Committee Report directive
that accompanied HR 2410
– Most notably, the recommendation “that the State
Department, from time to time, consult with relevant
government and industry representatives from major
foreign allies and trade partners for their perspectives.”
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Input from the international
networks (cont’d)
• Exchanges with AIA on the Coalition’s export control
reform proposals (starting in 2006)
• Participated in the Center for Strategic and International
Studies’ 2007 Export Control Project and the Defense
Business Board’s 2008 Task Group on Best Practices for
Export Controls
• Provided input to the National Academies of Science 2009
study of export controls: “Beyond Fortress America”
• Applied for membership for the DMAG and FPG Chairs in
the Defense Trade Advisory Group (2010-12 term)
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Towards an integrated
international export control
regime
• Main thesis:
– Need for a global perspective
– Control of end use and retransfers requires cooperation
of purchasing countries and coordination with their
export control regimes
• Vision of an “inner circle” of countries in which
specific export controls would be handled through
more global, strategic processes
• Criteria for membership – willingness and ability
to put in place a number of safeguards and
sanctions
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Integrated international export
controls regime (cont’d)
• “Building blocks”
– More global, strategic, “bundled” licensing approaches
– Streamlined/reduced transactions along four
dimensions: bilateral, multilateral, government to
industry, by commodity”
• “Circle of trust” benefits from increased defense
capability, interoperability, faster logistics supply
chain, more focused and effective protection of
sensitive technologies
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Integrated international export
controls regime (cont’d)
• Would address many of the ITAR “horror stories”
• Canadian example presented in June 2007 to the
Congressional Export Control Working Group
– CF-18 Modernization Program
– Fleet of F/A-18 aircraft bought commercially in the late
70’s. Approximately 100 separate transactions have
been needed for hardware, data, software,
documentation, equipment and tools related to support
and upgrades
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Integrated international export
controls regime (cont’d)
• From the August 2009 DMAG presentation on
“Problems and Impacts: U.S. Export Controls”:
– Example 1: A NATO country acquired a weapons
systems under a temporary export license, but was not
allowed to train the operators until a permanent export
license was received
– Example 8: A country ordered a space heater for an
Artic tent, and is now required to seek State approval
each time the heater is used in another country
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Integrated international export
controls regime (cont’d)
• Example 12
– U.S. parts for a radar system authorized for
retransfer to Malaysia
– Malaysia ran into funding issues, U.S. needed
the same radars
– Company applied for a retransfer
– Questions about the end user (U.S. Navy)
– Approval took 11 months
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Integrated international export
controls regime (cont’d)
• Example used by Secretary Gates:
– Not too long ago a British C-17 spent hours
disabled on the ground in Australia – not
because the needed part wasn’t available, but
because U.S. law required the Australians to
seek U.S.permission before doing the repair.
These are two of our very strongest allies for
God’s sake!”
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Success stories
• The Administration's export control reform
initiative
• Improvements to processing times
• A breakthrough on FMS third party
transfers
• A possible solution to the dual national
conflict
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Processing times
• A few years ago the major complaint of
international companies
• Through efforts of State and a 2008 Presidential
Directive, timeframes for licenses and agreements
greatly reduced
• Cases over 60 days require review by the Deputy
Assistant Secretary of State for Defense Trade
Controls and Regional Security
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Processing times (cont’d)
• Accelerated processing for cases associated with
coalition operations (e.g., Operation Enduring
Freedom, Operation Iraqi Freedom)
• At the ComDef 2009 Conference, the Assistant
Secretary of State for Political-Military Affairs
noted that average processing time for the 60,000
licenses issued in the past 8 months is down to just
over 2 weeks
• Not the case, however, for FMS retransfers
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A breakthrough on FMS
retransfers?
• In May 2007, State briefed the FPG on a proposed
redefinition of agent and associated streamlined
third party transfer process to include a country’s
registered, in house contractors
• In April 2009, they notified the international
networks that the proposal had been approved by
State Legal Counsel
• Briefings given to the FPG and DMAG in June
and July 2009
• However, since then, no further news
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Dual national issue
• U.S. government has three definitions of dual/third country
national
• In March 2009, State asked the National Security Council
to review these definitions and, if possible, recommend a
consistent definition
• Issue taken up by the Administration’s export control
review
• One of two immediate steps that the President announced
he was prepared to take in his March 11 address was
“eliminating unnecessary obstacles for exporting products
to companies with dual-national and third-country-national
employees”
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The Administration's export
control review
• Comprehensive set of recommendations to create
a new U.S. export control system
• Two immediate steps:
• Streamlined process for products with encryption
technology and ITAR dual national revision
• Instructs the task force to draw upon the expertise
of U.S. industry and allies, particularly those from
countries with regulatory regimes that could serve
as a model
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In summary
• Challenges remain, but progress has been made
• Export control modernization/improvement very
much on the radar screen, with highest and widest
level of support ever
• Myths persist and success stories are perhaps not
widely known
• The international networks have a wealth of ideas
and experience to offer
• Greater international involvement and cooperation
would add value to the way forward
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