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The International Networks: Working with the U.S. to Improve Export Controls ComDef West 2010 Jennifer Stewart, Ph.D. Chairman of the Foreign Procurement.

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Presentation on theme: "The International Networks: Working with the U.S. to Improve Export Controls ComDef West 2010 Jennifer Stewart, Ph.D. Chairman of the Foreign Procurement."— Presentation transcript:

1 The International Networks: Working with the U.S. to Improve Export Controls ComDef West 2010 Jennifer Stewart, Ph.D. Chairman of the Foreign Procurement Group (jennifer.stewart@pwgsc.gc.ca); 202 682-7604jennifer.stewart@pwgsc.gc.ca

2 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

3 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

4 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

5 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

6 Foreign Military Sales retransfers Approval from the Department of State is not required for the initial government-to- government purchase Contained in the Letter of Offer and Acceptance (LOA) –Disclosure/releasibility determinations, Congressional notification (as required) precede LOA

7 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.)

8 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

9 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

10 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

11 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

12 U.S. initiatives to improve U.S. export controls HR 2410, the 2009 Foreign Relations Act includes as Title VIII a Defense Trade Controls Performance Improvement Act August 2009 - President ordered an interagency review to overhaul the U.S. export controls regime led by the National Security Advisor and Director of the National Economic Council –All stakeholder agencies engaged at the Deputy Secretary level –Reforms divided into short-to-medium term improvements and longer-term reforms House Foreign Relations Committee Chairman is working on 2010 legislation also aimed at major export controls reform

13 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)

14 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.”

15 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)

16 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

17 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

18 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

19 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 order a space heater for an Artic tent, and is now required to seek State approval each time the heater is used in another country

20 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

21 Success stories Improvements to processing times A breakthrough on FMS third party transfers A possible solution to the dual national conflict

22 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

23 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

24 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

25 Redefining foreign national 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 We understand that this is now one of the initiatives under consideration by Deputy Secretaries in the Administration's Export Control Review

26 The Administration's export control review Coalition for Security and Competitiveness submits 11 recommendations to the President (01- 11-10) Article in Space News (01-15-10) reports: –The President has directed his Administration to recommend, by 29 January, steps leading to an overhaul of the U.S. export control regime (Presidential Directive 01-21-09) –Based on the findings of a sweeping interagency review announced by the White House August 13

27 The Administration's export control review (cont’d) –Results to be used to prepare a comprehensive set of recommendations to create a new U.S. export control system –Recommendations to be delivered to members of Cabinet (commerce, defense, energy, homeland security, state and treasury), U.S. Attorney General and Director of National Intelligence –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

28 In summary Challenges remain, but progress has been made Export control modernization/improvement very much on the radar screen 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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