Modernizing Export Controls for
Coalition Interoperability
Presentation to ComDef 2009
Washington D.C.
Jennifer Stewart, Ph.D.
Director General of Defence Procurement,
Canadian Embassy and Chairman of the
Foreign Procurement Group
([email protected]); 202 682-7604
Topics
• Issues with U.S. export controls for defense items
and technology
– From the perspective of the international community
– From a Canadian perspective
• Canada-U.S. export controls cooperation and
defense industry integration
• Progress in modernizing export controls since
2006
• Success stories and solutions
Issues with U.S. export controls
• From the perspective of the international defense
materiel community, main issues are with
– the International Traffic in Arms Regulations (ITAR)
– Foreign Military Sales retransfers
• Two international defense materiel networks
– Defense MOU Attachés Group
– Foreign Procurement Group
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
ITAR issues
• U.S. regime was designed for the Cold War
• “Tightened” requirements since 9/11
• Have led 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
ITAR issues (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
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
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.)
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
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
Canadian perspective
• Export controls cooperation with U.S.
• Integration of defense industrial bases
• Issues with U.S. export controls
Canadian export controls
cooperation with U.S.
• Canada is the only country with an “exemption” under
ITAR (Section 126.5)
• Covers goods of less concern only, and not technical data
• Canada has in place measures to control U.S. goods
transiting Canada
• Since 2001, Canada has:
– Harmonized our Export Control List with the U.S. Munitions List
– Put in place a Controlled Goods Program for Canadian industry
– Required re-export authorization before U.S. goods in Canada can
be exported to a third country
Integration of Canadian and U.S.
defense trade and industries
• Canada First Defence Strategy
– $395 billion total investment to modernize the Canadian military
and enhance the role of the Canadian forces as a partner in global
security operations
– Significant share of Canada First procurements will go to U.S.
companies and their Canadian subsidiaries
• Over 600 formal agreements between the two countries
covering all aspects of North American defense and
security
• Unique relationship underpinned by a highly integrated
North American defense industrial base
• Recognized in U.S. law and regulations
Canadian issues with U.S. export
controls
• Processing times
• Conflict between dual national provisions
and Canadian human rights legislation
Processing times
• A few years ago the major complaint of Canadian
companies
• Through efforts of State and a 2008 Presidential
Directive, timeframes for licenses and agreements
greatly reduced
• Cases over 60 days require review by a Deputy
Assistant Secretary of State
• Accelerated processing for cases associated with
coalition operations (e.g., Operation Enduring
Freedom)
Processing times (cont’d)
• Average processing time has continued to decline
since June 2007, when many internal changes
were implemented
• In response to a GAO report to the House
Committee on Foreign Affairs (November 2007),
State noted that for cases that require referral to
other agencies, the average timeframe is 39 days,
and 24 days for cases that do not require referral
Dual national issue
• ITAR precludes exports to nationals of U.S.
proscribed countries (ITAR 126.1)
• Under current practice, this includes Canadians
born in those countries
• Application of ITAR requires discrimination based
on country of origin
• Poses a dilemma of complying with ITAR, or
facing challenges from employees on human
rights grounds
Initiatives to modernize U.S.
export controls
• Proposals of the Coalition for Security and
Competitiveness announced in March 2007
• Over 20 studies by the Administration, think
thanks 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
Initiatives to modernize U.S.
export controls (cont’d)
• However, a number of the Coalition and
Congressional recommendations were picked up
and mandated in a 2008 Presidential Directive
• HR 2410, the 2009 Foreign Relations Act includes
as Title VIII a Defense Trade Controls
Performance Improvement Act
• August 2009 - President orders inter-agency
review to overhaul system, spearheaded by
Secretary of Defense, supported by National
Security Advisor, Undersecretary of State for
Arms Control and International Security
Input from international networks
• The DMAG and FPG developed a number of
presentations and white papers as input to these
initiatives, including
– Towards an Integrated International Export Controls
Regime
– Examples of issues with U.S. Export Controls
– 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
Other success stories
• A breakthrough on FMS third party
transfers
• A possible solution to the dual national
conflict
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
• Plans and procedures being developed for the new
process to be operational by September 2009
Towards solving the dual national
conflict
• Exchanges of letters with Canada (2007) and the
Netherlands (2008) on a solution based on nationality in
the context of security
• Access for citizens with Secret clearance, need to know dual nationality/country of birth not called out
– Government defense and national security employees only
– Canadian embedded contractors also included, but no other
industry personnel
• Allowed initial Canada First defence procurements to
proceed
Redefining foreign national
• U.S. government has three definitions
– Commerce, State (DDTC and RSAT)
• In March 2009, State asked the National Security
Council to review these definitions and, if
possible, recommend a consistent definition based
on citizenship, rather than place of birth
• Potential to resolve most, if not all, of the
international community’s dual national conflict
In summary
• Challenges remain, but progress has been made
• Export control modernization/improvement on the
radar screen
• Myths persist and success stories perhaps not
widely known
• Greater international involvement and cooperation
would add value to the way forward
Back-up slides
• Initiatives to modernize U.S. export controls
Initiatives to modernize export
controls
• Proposals for export control modernization by the
Coalition for Security and Competitiveness
• Congressional Export Controls Working Group
• Defense Trade Treaties for the UK and Australia
• “Defense Trade Controls Performance Improvement Act of
2007” - HR 4246 (introduced in the House in Nov 07)
• Department of State amended the ITAR effective 19 Dec
2007, to remove the requirement for dual and third country
nationals of NATO/EU, plus 4 countries, to sign nondisclosure agreements in retransfers authorized under
Technical Assistance Agreements and Manufacturing
License Agreements
Initiatives to modernize export
controls (cont’d)
• Security Assistance and Arms Export Control Reform Act HR 5916 (passed by the House in May 2008)
• Presidential Export Controls Directive – January 21, 2008
• Integrated Process Team within DoD; 2008 Defense
Business Board Task Group on Best Practices in Export
Controls
• Several GAO reports and recommendations
• Studies by CSIS, Heritage Foundation, NATO Industrial
Advisory Group, National Academy of Sciences, and
others
Initiatives to modernize export
controls (cont’d)
• White papers and briefs by the DMAG and FPG
– Towards an Integrated International Export Controls
Regime
– Problems and Impacts: U.S. Export Controls
– FMS Third party transfers
– Greater use of ITAR exemptions
– 2005 Global Defense Cooperation and Trade
Conference and series of Roundtables on Capitol Hill
(with CSIS and Jane’s Advisory Services)
Initiatives to modernize export
controls (cont’d)
• Title VIII of HR 2410: Foreign Relations Act
(passed by House in June 2009) incorporates
export control modernization provisions from
previous legislation (HR 4246, 5916)
• August 2009 - President orders inter-agency
review to overhaul system, spearheaded by
Secretary of Defense, supported by National
Security Advisor, Undersecretary of State for
Arms Control and International Security
2009 Defense Trade Controls
Performance Improvement Act
• Directs the President to perform a strategic review
and assessment of the U.S. export controls system
• Provides for specified performance requirements
for ITAR license applications
• Ensures that the Directorate of Defense Trade
Controls has the necessary staff and resources
• Calls for a review the International Traffic in Arms
Regulations and the United States Munitions List
to determine those technologies and goods that
warrant different or additional controls
Defense Trade Controls Performance
Improvement Act (cont’d)
• Provides for special licensing authorization, under
specified conditions, for exports of spare and
replacement parts or components of defense items
NATO member states, Australia, Japan, Israel,
South Korea, and New Zealand
• Authorizes the President to remove satellites and
related components from the United States
Munitions List, except for any satellite or related
component that may be transferred to, or launched
into outer space by, the PRC