1. Export Control and the International Networks ComDef Export Control Workshop 3 December 2009 Washington D.C. 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 networks Issues with U.S. export controls for defense items and technology Progress in improving export controls since 2006 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. Initiatives to improve 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 However, a number of the Coalition and Congressional recommendations were picked up and mandated in a 2008 Presidential Directive

12. Initiatives to improve U.S. export controls (cont’d) 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 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 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.”

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

15. 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 a Deputy Assistant Secretary of State 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 past 8 months is down to just over 2 weeks

16. 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

17. 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 first phase of the Administration's Export Controls Review

18. 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 Greater international involvement and cooperation would add value to the way forward