By: John Black
One it is only a proposed rule, so it does not help anybody yet. But if DDTC ever implements this proposed change, it will have made a big step in the direction of making life easier for countries who deal with US defense articles. This proposal, if implemented, would, for example, eliminate the requirement that foreign (i.e., non-US) end-users and consignees on Technical Assistance Agreements and Manufacturing License Agreements first identify the nationalities of their dual national and third country national employees in the agreement application and thereafter limit access to US defense articles to only those nationalities approved on the application. Of course, all burdens eliminated by one hand must be replaced by burdens imposed by the other hand—we will look at the details of the proposal below.
If implemented, this proposal would immediately reduce the number of ITAR violations. First, if implemented, the proposal would bring into compliance those foreign companies who currently are allowing unauthorized dual and third country nationals to have access to US defense articles. Second, if implemented, it would bring into compliance those US companies who have failed to collect the currently required non-disclosure agreements from all of those dual and third country national employees of the foreign parties. (As we say in the South, now bless your little non-compliant hearts, we know yall aren’t complying will all of that. Haha)
So what has DDTC proposed to do? DDTC proposed to create an ITAR 126.18 exemption. (By the way, wouldn’t it be nice if DDTC put all of its exemptions together in one place so that for the rest of our lives we are not always required to remember all of the obscure places that DDTC hides exemptions in the ITAR?) The proposed exemption would allow the transfer of defense articles including technical data within a foreign entity to all bona fide, regular employees of the foreign entity, including dual and third country nationals. The authorized transfers have to occur where the foreign entity is located—so, a French company can transfer US ITAR data to its Estonian engineer Sven when he is in the company facility in Toulouse, but the French company cannot email the ITAR data to Sven if he is in Canada in a hotel or at an affiliated company site or if he is in DC at an SIA seminar.
Oops, sorry for pointing out a problem, this is a feel good article.
In exchange for not having to get ITAR authorization for all dual and third country nationals, the foreign party has to do three things. First, the foreign party must implement “effective procedures to prevent diversion destinations other than those authorized.” The effective procedures can be either of these:
- A security clearance approved by the host nation government for its employees; or
- The foreign party has a process in place to screen its employees and have signed non-disclosure agreements that provides assurances that the employee will not transfer any information to other persons unless authorized by the foreign party.
Second, in addition to choosing one of the above “effective procedures” the foreign party “must screen its employees for substantive contacts with restricted or prohibited countries listed in 126.1 [e.g., China]. Substantive contacts include, but are not limited to, recent or regular travel to such countries, recent or continuing contact with agents and nationals of such countries, continued allegiance to such countries, or acts other indicating a risk of diversion.”
(So Sven the Estonian engineer in the French company is ok, but what if his wife is a Chinese citizen? Does marriage constitute “recent or continuing contact with …nationals of [China]”? And what does the French company have to do to determine if Sven is having continuing contact with a Chinese national? Hahaha.)
Ok, let’s get serious again. Check out this from the proposed rule, “Though nationality does not, in and of itself, prohibit access to defense articles or defense services, an employee that has substantive contacts with persons from countries listed in § 126.1(a) shall be presumed to raise a risk of diversion, unless DDTC determines otherwise.” This implies that the exemption applies to all employees of the French company, regardless of their nationality, as long as they don’t have substantive contacts with 126.1 persons. So, apparently the French company can share the US defense articles with Shao Shin, its employee with dual French-Chinese citizenship as long as he does not have substantive contact.
But wait, some ITAR hardcore nerds are no doubt thinking to themselves, what does nationality mean anyway? Is it country of birth? Citizenship? Favorite Olympic team? This rule does not define nationality, that is another issue, but it seems to lessen the significance of that question.
The third thing the foreign party would have to do is “maintain a technology security/clearance plan that details its procedures for screening employees for such substantive contacts and maintain records of such screening. The technology security/clearance plan and screening records will be available to DDTC or its agents upon request.”
So, there you have it. The proposal significantly eliminated the pesky dual and third country national issues at foreign entities, as long as the foreign entities are will to do those three things. If this rule is implemented, it would make life significantly easier and more compliant for US exporters. Foreign entities will have to determine for themselves whether this proposed approach is better than the current system.
If you really read this proposal carefully and closely, you will see that some things are not perfectly clear. I didn’t really do a thorough analysis of the details of the proposal, because this is just a proposal so it does not matter if we know what it really means. If you see things that are not clear or you don’t like, you can complain about them. But, better yet, you can actually send your written comments to DDTC until September 10, 2010, to tell DDTC what it should do to make the proposal clearer or better.
The proposal is not perfect, for sure. But it certainly has a lot of merits. I applaud this step in the right direction. Credit for this proposal goes to the President’s Task Force for Export Control Reform. And, while I still am not a believer in the Task Force’s goal of creating a single export control agency, control list and regulation, I salute this proposal.
For the details of the proposal and to see how to submit your public comments, go to http://www.pmddtc.state.gov/FR/2010/75FR48625.pdf