PMT 313 Advanced Technology Security Control Workshop SIA Back to Basics 2004 PMT 313 Advanced Technology Security Control Workshop Terry L. Davis Deputy Director of Licensing Directorate of Defense Trade Controls Intro. to ITAR & DDTC

Objectives Explain State Dept./DDTC Role in Defense Trade Legal/Regulatory Requirements Sensitize You to Interactions With Foreign Parties in Technology Transfer Situations Explain Purpose of Controls and Country Policies Who Are the Players? Roles? President’s Export Control Reform Initiative

Directorate of Defense Trade Controls Our Mission: Advance National Security and Foreign Policy Through the Licensing of Direct Commercial Sales of Defense Articles and Enforcement of Defense Trade Export Control Laws, Regulations and Policies

Foreign Military Sales vs Direct Commercial Sales State vs Commerce Control Foreign Military Sales Program Direct Commercial Sale Hybrid Programs/“Pseudo FMS” Exports Critical for Defense Industry Greater Degree of Technology Transfer Than In the Past!

Key FMS Advantages Total Package Approach US Military Assistance In Developing Requirements Standardization With US Forces Use of DOD Acquisition Process US Logistics/Product Improvements Access USG Resolves Dispute With Company

Key DCS Advantages Country Negotiates With US Company Firm Fixed Pricing Advantages for Nonstandard Items May Be Faster/No FMS Surcharge Advantages of Competition Improvements Access Country Resolves Disputes With Company

DDTC Organization Ken Handleman Deputy Assistant Secretary Defense Trade Vacant Managing Director Directorate of Defense Trade Office of Defense Trade Controls Policy (PM/DTCM) Office of Defense Trade Controls Licensing (PM/DTCL) Office of Defense Trade Controls Compliance (PM/DTCC)

Office of Defense Trade Controls Compliance (DTCC) Office Director Deputy Director Compliance and Registration Division Enforcement Division Research and Analysis Division ICE Liaison

Office of Defense Trade Controls Licensing Director, Office of Defense Trade Controls Licensing Aircraft and Toxicological Agent Division Military Vehicle and Naval Vessel Division Electronic Systems and Helicopter Division Space and Missile Division Firearms/Lt Weapons Division Emerging Technologies

Purpose of Controls Foreign Policy: Bilateral/Multilateral Relationships/Objectives National Security: Technological Sensitivity Human Rights: Exports Impact on Human Rights Abuses Regional Stability: Balance of Power In the Region Proliferation: Sensitive Capabilities

Foreign Policy Objectives Support Allies in Mutual Foreign Policy and National Security Goals Increase Global Stability Promote Interoperability With Allies Keep Defense Technology Out of the Hands of Adversaries!

Agency Roles State Department Commerce Department Homeland Security (Customs and Border Protection, Immigration Customs Enforcement) Justice (ATF) Department of Defense DTSA, Armed Services, DSS

Elements of an Export Control System Legal Foundation Arms Export Control Act Regulatory Guidelines International Traffic In Arms Regulations Control List U.S. Munitions List

Arms Export Control Act (AECA) Controls Exports/Imports of Defense Articles & Services Establishes Munitions List Mandates Registration of Manufacturers and Exporters Mandates Registration/Licensing of Brokers

Arms Export Control Act (AECA) Broad Authority of the Directorate to Approve, Deny, Suspend, Revoke and Halt Shipments from U.S. Ports Congressional Oversight – 36(c), 36(d) and 36(f) End Use and Retransfer Assurances Stringent Retransfer Provisions 38(f) Notification For Removal From USML

Arms Export Control Act (AECA) Require Monitoring/Reporting Fees, Contributions, and Commissions Confirm Bona Fides of End Use and Users Establishes Fines and Penalties Foundation of Regulatory Process

Registration – 122.1 Any Person Who Engages in the U.S. in the Business of Either Manufacturing or Exporting Defense Articles or Furnishing Defense Services is Required to Register With the Office of Defense Trade Controls Manufacturers Who Do not Engage in Exporting Must Nevertheless Register

International Traffic In Arms Regulations Implements AECA Regulations for Export of USML Articles Contains the U.S. Munitions List Under Part 121 Designates Defense Articles/Services Subject to Department of State Export Jurisdiction

ITAR Organization Definitions Registration Requirements Licensing Requirements Documentation, Support and Recordkeeping Compliance Enforcement Provisions Exemptions

U.S. Munitions List - 121 Designates Articles, Services, and Related Technical Data as Defense Articles and Defense Services Subject to Department of State Export Approval Items preceded by an asterisk are designated as “Significant Military Equipment” (SME) and Warrant Special Export Controls Categories Contain All Up End Items, Parts & Components & Technical Data and Services

Commodity Jurisdiction 120.4 Purpose To Make a Determination As to Whether an Article/Technology is Considered to Be a Defense Article Covered By the USML Otherwise Subject to Commerce Control End Use/User Does Not Determine Jurisdiction!

Designating/Determining Defense Articles - 120.3 Policy criteria Specifically Designed, Developed, Configured, Adapted, or Modified for Military Application Has Significant Military or Intelligence Applicability Such That ITAR Control is Necessary ECR Will Have Significant Impact

What Is an Export? Defense Article - 120.6 Defense Service - 120.9 Technical Data - 120.10 Export – 120.17

Defense Article (120.6) Any Item or Technical Data Designated Under Part 121 of the ITAR Typically Considered As Hardware, e.g. All Up End Item or Parts and Components Most Visible, Easily Recognized and Controlled

Technical Data (120.10) Information Required for Design/Development/Manufacture/ Assembly/Repair/Operation of Defense Articles Blueprints, Drawings, Photographs, Software Classified/Subject to Secrecy Order Not In Public Domain (120.11)

Defense Service (120.9) Furnishing of Assistance To Foreign Persons In Design, Development, Engineering, Manufacture, Production, Testing, Assembly, etc of Defense Articles Whether In US or Abroad Most Significant Technology Transfer

Foreign vs U.S. Persons 120.15 & 120.16 Not Just a Citizen But Someone Who has Been Granted Permanent Resident Status In the US Countries, Organizations and Individuals Outside the Territory of the Country In Question

Brokering Part 129 Any Person Who Acts as An Agent for Others Negotiating Arranging Sales of Defense Articles/Services In Exchange for Fee/Commission Registration/Prior Approval/Notification US Persons and Foreign Persons Subject to US Jurisdiction ECR Revision

Licensing Venues Permanent Export (DSP-5) Temporary Export/Import (DSP 73/61) Technical Assistance/Manufacturing License Agreements: Instruments of Technology Transfer Exemptions: Personal Use, Country, Hardware, Technical Data, Defense Services Licensing Foreign Nationals

Compliance & Enforcement License Support Documentation: From Foreign End User All Parties to License Screened Non Transfer and Use Assurances Blue Lantern End Use Checks

Government Exemptions No Catch All Exemption In Terms of “The Government Told Me to Do It” Memorandum of Understanding/ Agreements Do NOT Constitute Transfer Authority Under the AECA for Companies Contractual Clauses/Direction Should Not Mandate Exemption Use Beware DOD Exemption Certification Which is Not Based on AECA/ITAR

Government Exemptions 126.4 By or For USG Agencies Temporary Import and Export Under (a) For Official Use or Pursuant to Foreign Assistance Cooperative Sales Project Authorized By Law Export Affected By USG Agency or Bill Of Lading 126.4(c) For Exports To USG Overseas, e.g. Not Foreign. APO Not Exempt!

Other Government Exemptions 125.4(b)(1): Technical Data Pursuant to Official Written Direction of DOD 125.4(b)(3) Technical Data Pursuant to a Contract Between USG Agency and Exporter If It Provides For the Export of Technical Data Not for Hardware or Services

Prohibited Destinations Part 126.1 Policy of Denial for Specified Countries UN Arms Embargoes Specifies Countries Providing Support for International Terrorism

NSPD 56 Defense Trade Reform National Security Presidential Directive (NSPD) 56 Defense Trade Reform January, 2008 60 Day Limit on Adjudication of Export License Applications Carve Outs for Congressional, DOD Review, Sanctions, Compliance Issues Fully Electronic Licensing

Defense Trade Treaties Ratified and Implemented Under 126.16 Exemption in the ITAR Limited to UK/Australia Extremely Detailed Compared to Existing Exemption for Canada Under 126.5

President’s Export Control Reform Initiative Responds to Demands to Overhaul Cold War Era Export Control Process Most Comprehensive Effort In Terms of a Bottom to Top Approach Complaints From Allies/Companies Regarding the Timelines of US Export Controls and Competitiveness of US industry

Four Pillars of ECR One Single Comprehensive New Agency Single Control List vs CCL and USML One Computer System One Export Enforcement Agency Legal Changes and Congressional Approval Requiried

US Munitions List Rewrite All Categories Being Rewritten Pending Completion of Single List “Bright Lines” To Better Distinguish Sensitive Technologies Significant Reduction in State Licenses as Items Moved to Commerce Congressional Notification of Removal Required Under Section 38(f) Congressional Notification Reform

US Munitions List Rewrite All Categories Specifically Enumerated and Called Out - No “Catch All” Sections Definition of Specifically Designed Revised Under 120.41 “Catch and Release” Rule Order of Review Tool On Web Site Category X/Transition Rules

ECR Trends High Return Without Action Rate Elimination of “Catch All” Sections on USML, e.g. Components, Parts, Accessories No Bulk Licenses/Distribution Agreements Mass Movement of Items from USML to CCL Aircraft In Particular Decrease In DDTC Licenses Exceeds DOC Increase (???)

USML vs CCL Fewer Exemptions No Strategic Trade Authorizations Retransfer Provisions/”See Through Rule” More Stringent Denial Authority Broader License Support Documentation Extensive Proscribed Destinations

ECR Implications DOC Increased Role In National Security/Foreign Policy More DOD Foreign Sales Program Involve Commerce Exports Increase Degree of Confidence For Industry To Determine Item Is Not USML Most of Diversion Risk Is With Items That Have Transitioned to the CCL

SUMMARY Export Control System a Fundamental Element in Protecting National Security and Ensuring Sensitive Technologies Are Not Compromised Export Control System Subject to a Myriad of Contrasting Issues and Organizations Challenge To Find the Appropriate Balance and Control