1. JSF Licensing October 26, 2011 Lt Col Kris Eggehorn Directorate of Defense Trade Controls

2. D ISCUSSION T OPICS JSF Licensing at a Glance Sustainment Construct

3. Licensing Construct Offer an export licensing construct for JSF sustainment that leverages existing licensing processes with obtainable efficiencies Caveats: –Socialized among staff from DDTC, DTSA, JSFPO, Lockheed Martin Corp, United Technologies, and IMSG Currently focused on air vehicle Applicable across the weapon system –Construct is a work in progress

4. JSF Licensing at a Glance Nine partner nations (DCS) Additional sales territories (FMS) Numerous foreign production locations 500+ Approved Development/ Production licenses

5. JSF Sustainment Global Logistics Construct –Real time management by Lockheed Martin team using ALIS (Autonomic Logistics Information System) –Deliver replacement parts worldwide using Global Distribution Centers Complexities of global logistics construct warrants efficiencies in licensing

6. Licensing Foundations Applicant** Commodity** End-user – MODs and industry** End-use** Compliance –Reporting –Verification **already established by JSF program

7. Affected Defense Articles Unclassified, non-SME Unclassified, SME* Classified* Non-U.S. sourced articles Non-U.S. derived articles *Additional End Use Assurances Required (usually a DSP-83)

8. Sustainment Authorizations Technical Assistance Agreements (TAAs) –Defense services Manufacturing License Agreements (MLAs) –Foreign manufacturing Warehouse Distribution Agreements (WDAs) –Foreign distribution centers Subject defense articles (DSP Licenses) –Exports from CONUS –Non-U.S. sourced Retransfers amongst partnership

9. Technical Assistance Agreement (TAA) Training –Pilot –Maintenance Flight test ALIS –Managing database –IT support Traditional processes sufficient

10. Defense Articles Management Exports from CONUS –Program DSP-5s (unclassified) and DSP-85s (classified) Non-U.S. sourced –Procured abroad under currently approved TAA or MLA Require amendment to expand sales territory Non-U.S. derived articles –ITAR-controlled upon entry into U.S. –Integration into ITAR-controlled articles

11. Retransfer Transfer from the Distribution Centers –To end-user’s military bases and other Distribution Centers (covered under Distribution Agreements for unclassified and classified defense articles) –To non-U.S. sources (covered under amended TAA or MLA) Repair/replacement and maintenance –U.S.-origin defense articles DSP-5, DSP-85 TAA or MLA –Non-U.S. sourced articles

12. Retransfer (cont’d) Amending TAA or MLA –Allow direct shipment to Distribution Center or end-user military bases –Repair and replacement, maintenance of procured defense articles –End-use assurances executed under agreement applicable to sustainment activities

13. End-Use Assurances Distribution Centers –Incorporated into their distribution authority End-user (i.e., partner governments) –Overarching assurances Non-U.S. sources –Pursuant to amended TAA or MLA

14. Compliance Export construct contingent on ALIS capability for tracking and reporting of all transfers –Tracking –Electronic Reporting –Tailored ALIS access for DDTC and DTSA Disclosure process for unauthorized access and/or transfer

15. Summary First steps –Identified the requirements for the sustainment construct –Review of potential mechanisms Final construct is not set in stone –Is driving a review of overall licensing requirements –Congressional notification implications Large programs like JSF demand smarter licensing

16. Backup Charts

17. Regulation Updates Pending Actions –USML Category Revisions VI, VII, VIII – public comment forthcoming XIX – new engine category Proposed Rules –Spare Parts Exemption 22 CFR 123.28 –“See Through” Rule Clarification

18. Regulation Updates Future Actions –Discontinuation of DSP-53 –Defense Service Definition –Part 124 Re-write

19. Dual/Third Country Nationals (DN/TCN) –DN – An individual who holds nationality from the country of their employer who is a foreign licensee (or sublicensee) to the agreement, and also holds nationality from one or more additional countries –TCN – An individual who holds nationality from a country other than the country of their employer who is a foreign licensee (or sublicensee) to the agreement –When determining nationality, the Department of State does consider the country of origin or birth in addition to citizenship –Export of defense articles or services to a foreign person, inside or outside the U.S., is adjudicated as if it were an export to that foreign country. However: Approval of a Dual/Third Country National employee only authorizes transfer to that employee. It does not authorize export to the country from which the employee derives. Definition of DN/TCN

20. Provides options for the vetting of dual and/or third country national employees –New 22 CFR 126.18 implementation –Utilize current policy (specific country identification) U.S. agreement holder is responsible for coordinating with the foreign licensees which option will be utilized and ensure the appropriate language is included Either way requires change to 22 CFR 124.8(5) for all TAAs/MLAs. Implementing Federal Register Notice 7428 “Big Picture”

21. Updated 22 CFR 124.8(5) for all TAAs/MLAs “(5) The technical data or defense service exported from the United States in furtherance of this agreement and any defense article which may be produced or manufactured from such technical data or defense service may not be transferred to a foreign person except pursuant to §§124.16 and 126.18, as specifically authorized in this agreement, or where prior written approval of the Department of State has been obtained.” Required Change: 22 CFR 124.8(5) Clause

22. 22 CFR 124.7(4) requires the identification of all countries of transfer New required statement for delegation of DN/TCN vetting “Transfers of defense articles, to include technical data, to dual nationals and/or third country nationals by foreign licensees (and its approved sublicensees – if applicable) must be conducted in accordance with the provisions of 22 CFR 124.8(5).” Will replace the separate paragraphs for 22 CFR 124.16 and 22 CFR 124.8(5) Optional Change: 22 CFR 124.7(4) Statement

23. Dual/Third Country Nationals (DN/TCN) – 22 CFR 124.16 –The provisions of 22 CFR 124.16 for Dual/Third Country National employee(s) are applicable only if all of the following criteria are met: The Dual/Third Country National employee does not hold nationality from any other country outside those countries prescribed under 22 CFR 124.16 The foreign signatory or approved sub-licensee is located inside those countries prescribed under 22 CFR 124.16 Only access to unclassified technical data, defense services, and defense articles for the Dual/Third Country National Employees will occur Any retransfer between the foreign signatory or approved sub- licensee(s) and dual/third country national employees of the foreign signatory or approved sub-licensee(s) must take place completely within the physical territories of those countries prescribed under 22 CFR 124.16 22 CFR 124.16 Overview

24. Dual/Third Country Nationals (DN/TCN) – 22 CFR 126.18 –If the criteria of 22 CFR 124.16 does not apply, DN/TCNs may be handled per 22 CFR 126.18: A) Security Clearance issued by the foreign licensee’s government, or B) Individual is screened by the foreign licensee and a Non- Disclosure Agreement (NDA) is executed. Make determination on substantive contacts with restricted or proscribed countries in 22 CFR 126.1 Determine risk of diversion C) May provide details of screening on specific individuals to DDTC for final determination –Limited to unclassified defense articles or technical data 22 CFR 126.18 Overview

25. 22 CFR 126.18(c)(2) affords the option for DDTC to make the determination on substantive contacts Should be requested in accordance with 22 CFR 124.8(5) (as specifically authorized in this agreement) –Follow the current guidance –Support Documentation Full legal name of specific individual, date/place of birth, copy of passport, resume, and a detailed job description Information concerning substantive contact concerns Specific to that agreement only! 22 CFR 124.8(5) Option

26. 22 CFR 126.18(c)(2) affords the option for DDTC to make the determination on substantive contacts Should be requested in accordance with 22 CFR 124.8(5) (“where prior written approval of the Department of State has been obtained”) Submitted by foreign licensee (employer) –Support Documentation Full legal name of specific individual, date/place of birth, copy of passport, resume, and a detailed job description Information concerning substantive contact concerns Applicable to any future agreement –Copy of GC provided to applicant upon request General Correspondence Option

27. 22 CFR 124.16 and 22 CFR 126.18 are limited to unclassified defense articles and/or technical data Any dual/third country nationals requiring access to classified defense articles and/or technical data must be requested in accordance with 22 CFR 124.8(5) and identified by country in the agreement (as specifically authorized in this agreement) 22 CFR 124.7(4) should include the following language: –“Pursuant to 22 CFR 124.8(5), this agreement authorizes access to classified defense articles and/or retransfer of technical data/defense services to individuals who are dual/third country national employees of the foreign licensees and the approved sublicensees. The exclusive nationalities are limited to: insert country list. These individuals are required to execute a Non- Disclosure Agreement (NDA) which will be maintained by the applicant for 5 years in accordance with 22 CFR 122.5.” Classified Transactions

28. The country specific clauses for Canada, Australia and The Netherlands are predicated on the issuance of a security clearance by the respective government. If implementing the new policy these clauses are no longer necessary as the requirements are met at 22 CFR 126.18(c)(1) covering security clearances If retaining and/or utilizing the current policy these clauses are still relevant and may be used as desired by Canada, Australia or The Netherlands If authorization includes classified, these clauses are still applicable and may be used Country Specific Clauses

29. Current language is unchanged by the new policy –“Contract employees to any party to the agreement hired through a staffing agency or other contract employee provider shall be treated as employees of the party, and that party is legally responsible for the employees’ actions with regard to transfer of ITAR controlled defense articles to include technical data, and defense services. Transfers to the parent company by any contract employees are not authorized. The party is further responsible for certifying that each employee is individually aware of their responsibility with regard to the proper handling of ITAR controlled defense articles, technical data, and defense services.” “Contract employee” does not equal “regular employee” The new dual/third country national policy is applicable to contract employees (pursuant to 22 CFR 120.39) Contractor Labor Clause

30. Part 120 - Definitions Regular Employee – 120.39 –Individual permanently and directly employed by the company, or –Individual in a long term contractual relationship with the company where he/she: Works at the company’s facilities Works under the company’s direction / control Works full-time and exclusively for the company Executes NDA –Staffing agency that seconded the individual has no: Role in the work performed Access to any controlled technology (without authorization)

31. Elements of a Non-Disclosure Agreement (NDA) –Acknowledge Understanding of Parts 120-130 and that retransfer will not take place without DDTC approval –22 CFR 124.8 clauses for TAA –22 CFR 124.8 and 22 CFR 124.9 clauses for MLA –Contract Labor clause can be added For 22 CFR 126.18 DN/TCNs not holding a clearance For individuals requested pursuant to 22 CFR 124.8(5) For transactions not meeting 22 CFR 124.16/22 CFR 126.18 Non-Disclosure Agreement