Archive for the ‘UK’ Category

3 Men & Illegal Exports to Syria

Tuesday, July 12th, 2016 by Danielle McClellan

By: Danielle McClellan

In November 2012, three individuals and one company were indicted with charges of criminal conspiracy, wire fraud, illegal export of goods, money laundering, and false statements. Until now the indictment remained under seal pending the arrest of the defendants.

Between 2003 and 2012, d-Deri Contracting & Trading (owned by Ahmad Feras Diri of London) was exporting goods originally from the US from Global Parts Supply (owned by Harold Rinko of Hallstead, PA) to his brother and business partner Moawea Deri who was located in Syria.  The goods purchased from Rinko’s US company were done so based on false invoices, undervalued and mislabeled goods.  Then the purchased goods were exported by falsely listing their identity and final geographic location on all documentation. The items would be shipped from the US to Jordan, the UAE, and the UK, and finally transshipped to Syria.

The items exported allegedly included:

  • a portable gas scanner used for detection of chemical warfare agents by civil defense, military, police and border control agencies;
  • a handheld instrument for field detection and classification of chemical warfare agents and toxic industrial chemicals;
  • a laboratory source for detection of chemical warfare agents and toxic industrial chemicals in research, public safety and industrial environments;
  • a rubber mask for civil defense against chemicals and gases;
  • a meter used to measure chemicals and their composition;
  • flowmeters for measuring gas streams;
  • a stirrer for mixing and testing liquid chemical compounds;
  • industrial engines for use in oil and gas field operations and a device used to accurately locate buried pipelines

Note: Nearly all exports to Syria will be denied, other than a few items categorized under humanitarian food and medicine. The goal of the embargo on Syria is to shut down the supply chain used by the Syrian state to support terrorism and create proliferate weapons of mass destruction, and in this specific case, chemical weapons.

Fast forward to this month, Ahmad Feras Diri (age 43) of London has plead guilty to conspiracy to illegally export items used to detect chemical warfare agents to Syria. He lost his extradition fight in the UK in November 2015 at which point he was brought to the US to face the charges. Diri admitted that he conspired to export items from the US through third party countries to customers in Syria without obtaining the required US Commerce Department licenses.

Harold Rinko (age 73 of Hallstead, PA) was indicted by a grand jury in November 2012 and admitted in court that he conspired to export the items from the US through third party countries to customers in Syria without an export license.

Moawea Deri remains at large and is considered a fugitive but will likely remain in Syria as extradition is unlikely to occur.

“This extradition demonstrates HSI’s commitment to use all its resources to prevent sensitive and restricted technology from being exported to Syria through the black market,” said HSI Philadelphia Special Agent in Charge John Kelleghan. “No good comes of illegal exports to Syria, especially during this time of gross misgovernment and civil strife. As the principal enforcer of export controls, HSI will continue to do everything in its power to ensure that sensitive technology doesn’t fall into the wrong hands in Syria. I applaud our colleagues at the Department of Commerce, the U.S. Attorney’s Office for the Middle District of Pennsylvania, along with our law enforcement counterparts in the United Kingdom. This coordinated effort helped us make this complex investigation a success.”

More Information: https://www.ice.gov/news/releases/uk-resident-connected-syrian-export-scheme-extradited-us-face-federal-charges

After Extradition to the US, British Citizen Gets 33 Months for $11,357 Iran Deals

Thursday, January 17th, 2013 by Danielle McClellan

By: John Black

Christopher Tappin, a British citizen, pled guilty to trying to buy missile batteries from undercover American agents and resell them to Iran. Tappin pled guilty at his hearing in El Paso, Texas and his deal gets him 33 months in prison and a fine of $11,357, which is the amount he would have profited from the missile parts deal.

This case is another example that shows that certain foreign courts/governments (e.g., UK and Singapore) are willing to extradite their citizens to the United States to face charges related illegal exports and reexports.

Tappan became the subject of a US federal indictment in 2007 which said that a cooperating defendant gave investigators computer files showing Tappin planned to send Hawk surface to air missile batteries to Iran. In 2006, Robert Gibson, a British citizen, contacted an undercover company in the US and attempted to sell the Hawk missile batteries. Eventually Gibson was arrested by US Immigration and Customs Enforcement officers. Gibson pleaded guilty in 2007 and was sentenced to 24 months in prison.

The February 2012 extradition of Tappin from the United Kingdom to the United States demonstrates the real possibility that foreign authorities may cooperate with US authorities. Just this year we have seen extraditions from Singapore and the United Kingdom. Of course, it would be going too far to say that these cases prove that all other countries will extradite their citizens to the US to face export/reexport control violations.

But, there is some good news for Tappin. Apparently, there is a reasonable chance that Tappin will be able to spend the bulk of his prison time in a prison in the UK after serving some time in a US prison, if approved by the US Justice Department and a UK prison accepts him.

DDTC Slips in Change to 123.9(b) ITAR Destination Control Statement

Friday, November 2nd, 2012 by Danielle McClellan

By John Black

Under the deep regulatory cover of the Federal Register notice with the new ITAR UK exemption, the Directorate of Defense Trade Controls (DDTC) slipped in some changes to the ITAR 123.9(b).  Depending on how you read the changes, they may create a troublesome hassle to change your automated systems and export paperwork, or they also may create a significant new compliance burden.

It seems to me that the likely case is that you, unlike many of your colleagues, have not even read the changes yet.   Based on my analysis, this change creates at least two issues you should address.

If I read the new 123.9(b) literally, see three primary changes, based on the words in bold face below in the new 123.9(b):

ITAR 123.9(b) The exporter shall incorporate the following statement as an integral part of the bill of lading, airway bill, or other shipping documents, and the invoice whenever defense articles are to be exported or transferred pursuant to a license, other written approval, or an exemption under this subchapter, other than the exemptions contained in § 126.16 and § 126.17 of this subchapter (Note: for exports made pursuant to § 126.16 or § 126.17 of this subchapter, see § 126.16(j)(5) or § 126.17(j)(5)):

‘‘These commodities are authorized by the U.S. Government for export only to [country of ultimate destination] for use by [end-user]. They may not be transferred, transshipped on a noncontinuous voyage, or otherwise be disposed of, to any other country or end-user, either in their original form or after being incorporated into other end-items, without the prior written approval of the U.S. Department of State.’’

Issue 1) The ITAR now requires the statement be on “the airway or other shipping documents” in addition to the previous requirement that it be on the bill of lading and invoice. The new “other shipping documents” words seem to expand the documents on which the statement is required to include, but the ITAR, in its typical fashion, does not define what other shipping documents means, so you have to come with your best educated guess, or  interpretation.  Some other documents that might be shipping documents are for example, packing lists and shipper’s letters of instruction.

Issue 2) The ITAR now requires that the statement be used when defense articles are to be transferred in addition to previous requirement that is be used when defense articles are to be exported. The ITAR does not define “transfer” or “transferred.” Since the ITAR does not control transfers within the United States, I do not think the statement is required for transfers within the United States. The ITAR defines and controls “retransfers.” It could be logically inferred that all retransfers are also transfers so for the first time DDTC wants this statement put on documents for retransfers in addition to exports.  If you were naïve, you might assume that DDTC would either use a defined term such as “retransfer” or define a term it uses.

Issue 3) In the actual required new 123.9(b) statement, the word “to” replaces the former word “in” and the words “or end-user” was added after “country.” This means that all such statements need to be updated to reflect the new language.  Take care of this means tracking down all the automated systems and non-automated procedures that apply the statement to documents and updating the language.

My issues 1) and 3) above require the attention of companies in the United States, at least.  My issue 2) creates issues primarily for companies outside the United States who transfer/retransfer defense articles—companies outside the United States have to decide whether they think this extends the 123.9(b) requirement to retransfers and take appropriate steps to revise their compliance programs accordingly.

DDTC Implements New UK Exemption

Friday, May 11th, 2012 by John Black

It’s here.  The ITAR exemption for the UK.  After years and years of failed attempts to get the US Congress to change the Arms Export Control Act to allow an exemption for the UK, the Bush Administration decided to use US-UK treaty as the basis for the exemption because the US House of Representatives does not have the authority to block treaties.  Then the US and the UK negotiated the treaty.  Then we waited while the two governments worked out the details involved in implementing the treaty.  There were preliminary regulations, draft regulations, proposed regulations.

Now we have the real regulations.  We have the ITAR exemption for the UK.  So now it is time to export away!

NOT!

Maybe your boss or your sales department heard the new exemption gets rid of ITAR issues for the UK.  Unfortunately, the ITAR exemption for the UK is not a free ticket to export.  Instead it is a complex exemption with multiple requirements, limitations, and burdens.

As I approach my 28th year in export compliance I wonder if I have ever seen anything as complicated as this.  Certainly many exporters right now still prefer to get an export license over trying to use the new exemption.  I guess the first test of whether the exemption is for you, is to see whether you can even finish reading this article.

Before you use this new exemption in ITAR 126.17, you need to ask, answer and act on at least these questions:

  • What are the eligible exports from the US to the UK?
  • What are the eligible transfers within the UK?
  • What are the eligible retransfers from the UK?
  • What are the eligible defense articles and defense services?
  • What are the eligible parties—The “UK Community”?
  • What are the eligible end-uses?
  • What are the mandatory marking and destination control statement requirements?
  • What are the mandatory recordkeeping requirements?
  • What are the mandatory EEI requirements?
  • What compliance procedures should I put in place to make sure we use this properly?

Let’s get some background before we start. The general idea is that UK exemption authorizes movements of ITAR items within a trusted community, which consists of the “US Community” and the “UK Community,” as long as the item and the end-use are eligible.

The exemption has some special definitions that apply only for the exemption:

“Export” means the initial export from the US to the UK.

“Transfer” means the movement of an item inside of the UK Community or between a member of the US Community and the UK Community.

“US Community” is the US Government and US persons registered with DDTC and eligible to export under the ITAR.

“UK Community” is UK Government entities identified on the DDTC website and UK non-governmental entities identified on the DDTC website.  (Funny that DDTC will publish the names of eligible UK companies on its website but it will not publish the names of eligible US companies.)

“Intermediate Consignee” is an entity that receives defense articles, but does not have access to them, for the purpose of effecting movement to members of the approved Community.

Special Webpage:  The exemption and this article frequently refer to something being on the DDTC website.  That “Treaties” webpage is:  http://pmddtc.state.gov/treaties/index.html.  The Federal Register notice is http://www.pmddtc.state.gov/FR/2012/77FR16592.pdf.

Now let’s take a look at answering some of these questions

What are the eligible exports from the US to the UK?    ITAR 126.17(a)(3)

An export from an entity registered with DDTC to a member of the UK Community involving only intermediate consignees who are not ITAR ineligible.  The export must be for an eligible end-use as defined in 126.17(e) and (f).  The item must not be excluded from eligibility by 126.17(g) or the new Supplement No. 1 to Part 126.  If Congressional Notification is required, you have to satisfy the requirements of 126.17(o) before you export.

What are the eligible transfers within the UK?

You may only transfer items exported pursuant to 126.17(a)(3) or transitioned from an approved license or other approval according to the requirements of 126.17(i).  The transferor and transferee must be members of the UK Community.  The end use must be eligible per 126.17(e) and (f).  The item must not be excluded from eligibility by 126.17(g) or the new Supplement No. 1 to Part 126.  If Congressional Notification is required, you have to satisfy the requirements of 126.17(o) before you export.

What are the eligible retransfers from the UK?   126.17(h)

First, as you probably guessed the item and end use have to be eligible as discussed above for exports and transfers.  Also, the authorized retransfer does not apply to items excluded by 126.17(g) or Supplement No. 1 when they are embedded into a larger system that is eligible—for example, an electronically scanned array radar embedded in a ship or aircraft.   Here are the eligible retransfers/reexports:

Eligible items from a member of the US Community or the UK Community to UK Ministry of Defence (MOD) elements deployed outside of the UK and engaged in an authorized end use.

Eligible items from a member of the US Community or the UK Community to another member of the US Community or the UK Community operating in direct support of UK Ministry MOD elements deployed outside of the UK and engaged in an authorized end use.

Eligible items for delivery to the UK MOD for an authorized end use.  The UK MOD may use the items for official business inside or outside of the UK.  The items must remain under the effective control of the UK MOD and access may not be given to unauthorized third parties.

What are the eligible defense articles and defense services?  126.17(g)

ITAR 126.17(g) defines the items excluded from the exemption and says that the items in the new Supplement No. 1 to Part 126 are not eligible.  This new Supplement No. 1 is a lengthy document that identifies the items ineligible for the ITAR exemptions for Canada and the UK, and eventually Australia.

You really need to read the entire Supplement No. 1 before you decide whether your defense article or defense service is eligible.  Do not fail to read the Notes at the end of Supplement No. 1 because they often play a critical role in defining the scope of what is eligible.  Also, the way the supplement works is an item might appear to be eligible if you read only one area of the supplement, when in fact it may be made ineligible by another area in the supplement.  For example, you may open up the supplement and jump to the USML Category VIII and see that your marketing technical data related to complete aircraft in Category VII are eligible.  The problem with that approach is that at the very beginning of the supplement, long before you get to the Category VIII, there is an exclusion that says you may not use the exemption for technical data in every Category (I-XXI) if it is going to be used for marketing items that DDTC has not previously licensed for export.

In addition to saying the items in Supplement No. 1 are ineligible, paragraph 126.17(g) has these limitations on eligible items:

  • You may export eligible items for marketing defense articles only if DDTC has previously approved the export of the eligible item.
  • Defense articles specific to the existence of (e.g., reveals the existence of or details of) anti-tamper measures made at the direction of the US Government are ineligible.
  • 126.17(g)(3) has special rules for classified items.
  • 126.17(g)(4) has special rules for development systems that have not obtained Milestone B approved for the US Department of Defense.
  • 126.17(g)(5) has special rules for certain items that are eligible but incorporate an item that is ineligible—for example, an electronically scanned array radar embedded in an eligible aircraft or ship.
  • 127.17(g)(8) explains that items that are on the European Union Dual Use List are not eligible.  These items are actually in Supplement No. 1.  This just points out that if the EU (and the UK) does not apply their military export controls to something that the US controls with the ITAR, the US is going to exclude them from the exemption.

What are the eligible parties—The “Approved Community”?

At the beginning of this article we defined the US Community and the UK Community.  The exemption applies only when the parties involved are in the approved communities or an eligible intermediate consignee.

ITAR 126.17(k) defines when and which intermediaries may be involved in an eligible transaction.

Don’t forget the ITAR requires that a party is eligible at the time of shipment.  The ITAR warns you that some UK parties may be removed from the UK Approved Community.  That means you might not want to just check the list once for Company X and assume that Company X is always ok.

What are the authorized end-uses?   126.17(e) and (f)

126.17(e) talks about the types of end uses that will be eligible.  126.17(e) gives you an idea of the eligible end uses but for an actual end use to be eligible for your export or transfer, it has to be listed on the DDTC webpage, identified in a DDTC letter, or a DOD contract as required by 126.17(f).

126.17(e) says these end uses are the types that will be authorized

(1) United States and United Kingdom combined military or counter-terrorism operations;

(2) United States and United Kingdom cooperative security and defense research, development, production, and support programs;

(3) Mutually determined specific security and defense projects where the Government of the United Kingdom is the end-user; or

(4) U.S. Government end-use.

126.17(f) tells you how to determine if an end-use is eligible.  It says that only these end uses are eligible:

  • Operations, programs and projects that can be publicly identified will be posted on the DDTC website.
  • Operations, programs and projects that cannot be publicly identified will be confirmed in written correspondence from DDTC.
  • US Government end-use will be identified specifically in a US Government control or solicitation as eligible under the Treaty.

So if your end use is described by 126.17(e) but does meet the 126.17(f) requirement that it be listed on the DDTC website, identified in a DDTC letter, or in a DOD contract, you may not use the exemption.

What are the mandatory marking and labeling requirements?  126.17(j)

When you use the exemption for exports or transitions, you have to mark the defense articles and services with a special marking.  The two primary markings are:

1)      [126.17(j)(1)(i)]  For exports of classified defense articles and defense services the standard marking or identification shall read: “//CLASSIFICATION LEVEL USML//REL GBR and USA Treaty Community//.” For example, for defense articles classified SECRET, the marking or identification shall be “//SECRET USML//REL GBR and USA Treaty Community//.”

2)      [126.17(j)(1)(ii)]   For exports of unclassified defense articles and defense services exported under or transitioned pursuant to this section shall be handled while in the UK as “Restricted USML” and the standard marking or identification shall read “//RESTRICTED USML //REL GBR and USA Treaty Community//.”

There is a third marking to be used in a special circumstance:

Where U.S.-origin defense articles are returned to a member of the United States Community,  any defense articles marked or identified pursuant to paragraph (j)(1)(ii) above as “//RESTRICTED USML //REL GBR and USA Treaty Community//” will be considered unclassified and the marking or identification shall be removed;

Different types of items have to be marked in these ways:

  • For defense articles other than tech data, the items must be individually labeled with appropriate statement from above.  If you cannot label an individual item (e.g., a powder or propellant) then you must include with such items documents (e.g., contracts or invoices) that have the marking.
  • Technical data must be individually labeled with appropriate statement from above.  If you cannot label an individual item (e.g., a powder or propellant) then you must include with such items documents (e.g., contracts or invoices) that have the marking or by a verbal notification of the marking.
  • Defense services must be accompanied by documentation (contracts, invoices, shipping bills or bills of lading) clearly labeled with the marking.

In addition to the above marking, there is a special destination control statement required for exports:

“These U.S. Munitions List commodities are authorized by the U.S. Government under the U.S.-UK Defense Trade Cooperation Treaty for export only to United Kingdom for use in approved projects, programs or operations by members of the United Kingdom Community. They may not be retransferred or reexported or used outside of an approved project, program, or operation, either in their original form or after being incorporated into other end-items, without the prior written approval of the U.S. Department of State.”

What are the mandatory recordkeeping requirements?  126.17(l)

The exemption says that US exporters must keep records for their exports and transfers.  Interestingly, the paragraph 126.17(l) does not say that UK parties have to keep records.

US exporters who use the exemption must keep these records:

(i) Port of entry/exit;

(ii) Date of export/import;

(iii) Method of export/import;

(iv) Commodity code and description of the commodity, including technical data;

(v) Value of export;

(vi) Reference to this section and justification for export under the Treaty;

(vii) End-user/end-use;

(viii) Identification of all U.S. and foreign parties to the transaction;

(ix) How the export was marked;

(x) Security classification of the export;

(xi) All written correspondence with the U.S. Government on the export;

(xii) All information relating to political contributions, fees, or commissions furnished or obtained, offered, solicited, or agreed upon as outlined in paragraph (m) of this section;

(xiii) Purchase order or contract;

(xiv) Technical data actually exported;

(xv) The Internal Transaction Number for the Electronic Export Information filing in the Automated Export System;

(xvi) All shipping documentation (including, but not limited to the airway bill, bill of lading, packing list, delivery verification, and invoice); and

(xvii) Statement of Registration (Form DS-2032

What are the mandatory EEI requirements?  ITAR 126.17(l)

When you file your Electronic Export Information (EEI) for your US export “shipments” you must fill in the appropriate field in your EEI as follows:

  • For exports in support of United States and United Kingdom combined military or counter-terrorism operations identify §126.17(e)(1) (the name or an appropriate description of the operation shall be placed in the appropriate field in the EEI, as well);
  • For exports in support of United States and United Kingdom cooperative security and defense research, development, production, and support programs identify § 126.17(e)(2) (the name or an appropriate description of the program shall be placed in the appropriate field in the EEI, as well);
  • For exports in support of mutually determined specific security and defense projects where the Government of the United Kingdom is the end-user identify 126.17(e)(3) (the name or an appropriate description of the project shall be placed in the appropriate field in the EEI, as well); or
  • For exports that will have a U.S. Government end-use identify 126.17(e)(4) (the U.S. Government contract number or solicitation number (e.g., “U.S. Government contract number XXXXX”) shall be placed in the appropriate field in the EEI, as well). Such exports must meet the required export documentation and filing guidelines, including for defense services, of §§123.22(a), (b)(1), and (b)(2) of this subchapter.

What compliance procedures should I put in place to make sure we use this properly?

If you are still reading, you may have decided that you will just stick to the old fashioned DSP-5s, TAAs, and the like.  If you want to use the new exemption, you need to put in place compliance procedures to make sure you comply with the complex, complicated and lengthy requirements.   Before you put in place procedures or use the exemption, you need to spend time reading and studying the exemption.

  • Procedures for determining if a specific export or transfer is eligible by assessing the items, parties, and end use.  You may want to check some or all of these things on a shipment-by-shipment basis.
  • Procedures for doing the proper markings, destination control statement, EEI information.
  • Procedures for recordkeeping.
  • Procedures for other things such as Congressional Notification and reporting political contributions, fees and commissions.
  • Procedures for training your export compliance people and everybody else who will be involved in your activities under the exemption.  You need to train your management too because implementing these procedures will require significant resources.  You may also want to train the other companies and entities that will be involved in your activities under the new exemption.

Honestly, I am just highlighting the tip of the iceberg on compliance procedures.  You most likely already do things that are similar to what you have to do under the exemption—for example, you already do EEI filing so you just have to modify the existing procedure to do EEI properly for the exemption.

These things may be similar to what you already do, but significantly different.  For example, you already screen for prohibited parties and at first glance you might think you could tweak that system to screen for approved parties.  The prohibited parties lists are published and you can do batch screening.  The UK Community list is not published.  You have to get the UK party’s ACID and enter it into the tool on the DDTC website to find out if it is valid.  It might be valid today and invalid tomorrow so you might have to check an ACID on a case-by-case basis.

(Note: It is an ACID, not an ACID number, because ACID number would be an Approved Community Identification Number number.)

Off the record, a couple of days ago I actually went to the tool and since I didn’t have an ACID, I made up a few using what I thought would be reasonable combinations of letters and numbers.  I got a couple replies that the ACID was invalid and then the tool told me if I entered another invalid ACID I would be in a heap of trouble.  Just now, as I was writing this article, I went back to the tool to try again and this time I got this message when the tool opened:  “Recursion too deep; the stack overflowed.”

Exactly.

Be careful using the new UK exemption. If you are not careful the next thing you know you will be up to your eyeballs in recursion with no hope of capping your stack.

State/DDTC Posts New Agreement Guidelines for US-UK Exchange of Notes re ITAR 126.18 Dual/3rds Exemption

Monday, March 5th, 2012 by Holly Thorne

Licensing: New agreement guidelines pursuant to the US-UK Exchange of Notes regarding ITAR section 126.18, the UK has provided appropriate implementation guidance which can be found at the following link:http://www.bis.gov.uk/policies/export-control-organisation/eco-summary-guidance

UK Establishes Baseline for Compliance Procedures for ITAR Foreign National Exemption for Foreign Parties

Tuesday, January 3rd, 2012 by Holly Thorne

UK BIS/ECO Posts Exchange of Diplomatic Notes Concerning New Dual/3rd National ITAR Exemption

United States Department of State

Bureau of Political-Military Affairs

Directorate of Defense Trade Controls

Washington, DC

11 August 2011

Mr. William Mark Jesselt

Minister -Counselor (Defense Material)

British Embassy

Sir:

I have the honor to refer to discussions which have taken place between our two Governments concerning access of employees and in particular dual nationals and third country nationals to United States defense articles and technology. These discussions reflect the shared objectives of ensuring the security of defense articles, including technical data, in order to facilitate enhanced defense cooperation between our two Governments. As a result of these discussions it is the understanding of the Government of the United States of America that arrangements of mutual interest have been reached which are described below and will apply between our two Governments.

Our two Governments recognize that it is in the sovereign national security interests of both the United States and the United Kingdom to provide for protection of their own and each other’s defense articles and technical data, in furtherance of defense cooperation between our two Governments. It is understood that the Government of the United Kingdom has instituted security procedures for governmental and industrial operations concerning access to sensitive assets and information.

The Government of the United Kingdom requires a Baseline Personnel Security Standard (BPSS) for employment screening of civil servants, members of the armed forces and temporary staff, and for government contractors undertaking contracts involving sensitive information. It is understood that this screening covers nationality rules for government service where appropriate, verification regarding immigration and nationality, screening to guard against persons posing as prospective employees for commercial or personal gain, verification regarding criminal records, and screening for other factors indicating an individual’s suitability for access to sensitive government assets. It is also understood that a BPSS allows employee access to secret assets of United Kingdom origin, custody of secret assets and entry to work areas where secret assets are stored.

In acknowledgement of the aforementioned mutual interests and security procedures, the Government of the United States of America hereby recognizes that HMG’s BPSS, constitutes a screening process meeting the screening requirements of the International Traffic in Arms Regulation (ITAR), section 126.18(c)(2).

The two Governments further recognize that, in the course of investigations involving diversions of defense articles, including technical data, it may become necessary to exchange information concerning industrial security programs and individual data that may be considered private. It is understood that existing protocols and agreements between our two Governments provide for the sharing of such programs and data for the purposes of law enforcement under specified conditions, which include a requirement to protect such information within Government channels and to prevent it from public release. The two Governments intend accordingly to adhere to applicable, agreed procedures when requesting, receiving, and exchanging such information.

Additionally, it is noted that certain defense articles, including technical data, may be classified, in addition to being export controlled by the ITAR. In such cases, it is understood that employees possessing appropriate security clearances issued by the United Kingdom Government may be given access to United States’ classified defense articles, including technical data, consistent with and in accordance with the General Security Agreement of April 14, 1961, between the United Kingdom and the United States of America, as amended.

If the arrangements set out above are acceptable to the Government of the United Kingdom, I have the honor to propose that this Note and your reply to that effect, which instruments are not intended to be binding under international law, will place on record the understanding of our two Governments in this matter which will come into operation on the date of your reply.

I avail myself of this opportunity to renew to Your Excellency the assurance of my highest consideration.

 

For the Secretary of State:

s/

Beth M. McCormick

British Defense Staff — United States

British Embassy

3100 Massachusetts Ave, NW

Washington, DC

11 August 2011

 

Deputy Assistant Secretary McCormick

Bureau of Political-Military Affairs

US Department of State

Washington DC

Dear Deputy Assistant Secretary McCormick,

EXCHANGE OF NOTES BETWEEN THE UNITED KINGDOM OF GREAT BRITAIN AND NORTHERN IRELAND MINISTRY OF DEFENSE AND THE UNITED STATES DEPARTMENT OF STATE DIRECTORATE OF DEFENSE TRADE CONTROLS

I have the honour to acknowledge receipt of your Note dated 11th August 2011 concerning the access of employees and in particular dual national and third country nationals to Unites States ITAR controlled defence articles and technology and to confirm that the arrangement set out in your Note are acceptable to the Government of the United Kingdom that these instruments are not intended to be binding under international law.

I furthermore confirm that the arrangements set out in your Note will place on record the understanding of our two Governments in this matter which will come into operation on today’s date.  I avail myself of this opportunity to renew to you the assurances of my highest consideration.

Yours sincerely,

s/

Will Jessett CBE

Minister (Defense Materiel)

UK BIS/ECO Posts Q&A Matrix on Implementation of New Dual/3rd National ITAR Exemption

Tuesday, January 3rd, 2012 by Holly Thorne

Introduction

1.            This Table sets out a number of questions put to and answered by the US Department of State (DoS) (Director of Policy, Directorate of Defense Trade Controls) by HM Government (HMG) and UK industry, concerning this rule change which alters the way in which access by Dual and Third Country Nationals (DTCN) employees of importing (non-US) entities to ITAR-controlled material is controlled.  The effective date of the rule was 15th August 2011.

2.            This UK-specific Questions and Answers Matrix has been agreed by DoS to help UK End Users and Consignees comply with the rule change requirements and complements the Technology Security Plan (TSP) that HMG has also agreed with DoS.  The information suggested in this document is for guidance only and made without any endorsement, representation or warranty.  It is not intended to provide legal or professional advice, and any party seeking to rely on it should ensure that it has obtained its own legal advice to ensure that it is applied in accordance with UK law.

 

Clarification Question

 

DoS Clarification

1.  Is ITAR 124.16 still available for use as an alternative to ITAR 126.18 in TAA and MLA?

 

Yes ITAR 124.16 is still available.
2.  Does the new rule change offer two genuine alternatives to compliance by foreign consignees/end users; as employers they either obtain formal Government security clearance for their affected employees, or subject them to bespoke screening?

 

There are two genuine alternatives, ITAR 126.18(c)(1) and ITAR 124.18 (c)(2).  The screening procedures and associated requirement only apply to the second, and not the first which is solely concerned with security clearance of employees.
3.  What level of a formal Government Security clearance will suffice to meet the requirements of ITAR 126.18(c)(1)?

 

Any security clearance approved by the host Government of the end user/consignee is sufficient to meet these requirements. In the UK, Security Check (SC) clearance meets these requirements.
4.  Does the new rule apply to the export of UNCLASSIFIED ITAR-controlled material only? What then is the position in relation to the export of classified material? The ITAR 126.18 exemption is only available for UNCLASSIFIED US ITAR-controlled exports (below US CONFIDENTIAL). The US-UK Exchange of Notes (EoN) makes it clear that classified exports are to be dealt with separately under the UK-US General Security Agreement
5.  Does the new rule extend to all ITAR-controlled exports, or only to those governed by TAAs and MLAs? The new rule applies to the export of all ITAR-controlled material and hence all forms of US arms export licence.  DoS has recently published guidance on how to implement the new rule for licenses and Warehouse and Distribution Agreements.

 

6.  Why does the scope of the new rule include technical data but exclude “defense services”, even though both are encompassed by TAA/MLA?

 

“Defense services” cannot be retransferred as such.  “Defense services” do however remain a feature of retained ITAR 124.16 (amended) for MLA/TAA.
7.  How does the new rule treat sub-licensees and how do sub-licensing provisions work in relation to hardware licensing?

 

The new rule applies equally to sub-licensees as it does to licensees.  It has no bearing on formal applications for re-transfer. For hardware licensing see 5 above.
8.  Does conflict exist between ITAR 126.18 and ITAR 126.1(a), if so how will this be dealt with?

 

No conflict exists, because of the insertion of the phrase “notwithstanding any other provision of this part” into ITAR 126.18.  “Part” here means Part 126. Hence the exemption applies to 126.1(a) nationals and dual nationals who have undergone the UK’s Baseline Personnel Security Standard (BPSS).

 

9.  How does the new rule apply to end users and foreign consignees? Is there a distinction?

 

The new rule applies equally to end users and foreign consignees wherever they operate.
10.  Does the ITAR 126.18 requirement for NDAs (for employers with non-security cleared employees) apply to employers, employees or both?

 

How will this requirement work in relation to foreign governments and international organisations (NATO, EDA etc?)

Only the employer itself needs to enter into an NDA on a self-certification basis.  Individual employees need not do so.  This does not prohibit use of employee NDAs to support employer NDAs, but this is not an ITAR requirement and is a matter for the end user/consignee.

 

End users and consignees should note that the NDA required for the purpose of this rule change is not the same as the NDA referred to under existing Dept of State/DDTC Agreements Guidelines (Tab 11 refers).

 

HMG may follow the same process.

 

The NDA requirement does not apply to international organisations such as NATO and EDA.

 

11.  What form should the NDA take? A model NDA is to be found in the TSP and has been endorsed by DoS. This forms part of the agreed TSP for the UK and meets the NDA requirements for all exports.  DoS have also confirmed that the NDA process will involve self-certification without any need for delivery to DoS.
12.  Does the new rule permit transfers to employees outside of “the physical territories of the country where the end-user is located or the consignee operates”?

 

The transfer of defense articles pursuant to this section must take place completely within the physical territory of the country where the end-user is located, where the governmental entity or international organization conducts official business, or where the consignee operates, and be within the scope of an approved export license, other export authorization, or license exemption.
13.  How does the rule apply to personnel within the UK’s Armed Forces?  Are these to be treated as “bona fide, regular employees, directly employed by the….foreign government entity” (ITAR 126.18 (a) refers)? HM Armed Forces personnel are to be treated by the rule in the same way as other employees.

 

14.  Will the new rule require or imply the use of certification by end users/foreign consignees to exporters, that they have screened their affected employees for risk of diversion?

 

No certification is required. Indeed certification should not be requested by exporters.

 

15.  Does the rule require the disclosure of personnel records of employees of UK employers to DoS? DoS understands that any disclosure must be in accordance with UK law.  The EoN between the US and UK Governments recognises this and acknowledges the existence of previously agreed bilateral arrangements between the two Governments.  Any disclosure requests by DoS or its agents will be made via HMG.
16.  ITAR 126.1 cross-reference – Is it accepted that employees can travel for business, family and personal reasons? Yes.
17.  What about current employees who don’t have Baseline Personnel Security Standard (BPSS) clearance? Those affected employees already handling ITAR controlled materiel should already be covered under existing licences.  Other employees will be covered when the consignee has a BPSS process in place.
18.  Under ITAR 127.1(b), compliance obligations fall to the licensor.  Is this still the case with ITAR 126.18? This is not specifically addressed in the final rule change, but the answer is no.  DoS guidance on their website makes it clear that licensors have no obligation to obtain written statements or certifications from foreign companies with regard to 126.18.

 

19.  What about supply chains?  How are UK primes to ensure compliance by their sub-contractors, including those across the EU? There is no requirement to flow down ITAR 126.18 requirements to suppliers (sub-licensees).  Each supplier must take responsibility for complying with ITAR 126.18 etc.  Prior DDTC consent is still required for retransfers to third country suppliers.

 

20. To what extent, if any, could S 2(3)(B) of the Protection of Trading Interests Act 1980 render any discovery type activity by US authorities inadmissible? There is no restriction on the UK Secretary of State’s powers under the 1980 Act.  The EoN makes it clear that exchange of information must adhere to applicable agreed bilateral US UK protocols. It will not therefore be necessary to invoke the PTIA.
21. Is HMG content there are no conflicts with national regulations on employment law, privacy law etc? It is for each end user/consignee to ensure that their implementation of the rule change is effected in a manner which complies with UK law.  The TSP, model NDA and this Q&A Matrix are provided as guidance to assist end users/consignees in this exercise, but in the event of specific issues end users/consignees should obtain their own legal advice.

 

22. Will Non-Disclosure Agreements (NDAs) still be required even if a company has BPSS in place?

 

Yes.  A model NDA can be found in the TSP.
23. Will there be legal conflicts if employers have to screen certain employees for substantive contacts with ITAR prohibited nations (for e.g. Syria)?

 

Dept of State has confirmed that adopting the BPSS will meet the screening requirements.  Those UK end users/consignees who decide not to adopt the BPSS will have to introduce their own screening arrangements in order to comply with the rule change.
24. Will employers have to disclose private information to the US Dept of State about employees who are deemed as ‘diversion risks’? If an end user/consignee decides not to use BPSS to meet the screening requirements of the rule change then they may follow the guidance issued by DoS on their website dated 31 August 2011.

 

25. Will employers need to refuse or remove an employee to work on a project on the basis of a risk of diversion?

 

The end user/foreign consignee must assess the risk and act reasonably and proportionately in accordance UK law.

 

26. Currently the use of 124.16 permits the exchange of defence articles with DTCN employees of the approved sub-licensees provided they are nationals of countries that are members of NATO, the European Union, Australia, Japan, New Zealand, and Switzerland, without the need to sign a personal Non-Disclosure Agreement. Where this does not apply or cannot be used 126.18 to provide a mechanism for approval for DTCNs outside of the exempt 124.16 countries. Currently this approval is satisfied using 124.8(5) which must be specifically approved within the MLA/TAA agreement. Subsequently approved individuals are obliged to sign personal NDA’s before access to defence articles is permitted. The issue with the current approach, with many European countries, is the conflict with anti-discrimination, human rights and data protection laws when requesting an employee’s place of birth or nationality.

 

The new rule provides additional flexibility which avoids the issues pertaining to the current approach. It is potentially a simpler process provided risks of diversion are accounted for. It provides a choice – end users/foreign consignees could use either approach. Whether adoption of 126.18 clearance or screening procedures in other countries is practical or consistent with their domestic law is a matter for them.
27. Section 124.8(5) will now direct DTCN approvals through 124.16 and 126.18.  Does this mean 124.8(5) can no longer be used to approve nationals from countries outside of 124.16? No. Licensing can still be used pursuant
28. Will existing agreements remain valid but require amendment to incorporate the appropriate 126.18 wording? DoS have issued updated guidance on this transitional matter through their website.

 

29. As agreements are amended for other reasons will it be mandatory for the new 124.8(5) clause to be incorporated in place of the old one?

 

Yes.
30. Can the use of 124.16 and 124.8(5) still be used to approve employees access to defence articles in new agreements or must the provision at 126.18 be used?

 

DoS have confirmed that end users/consignees have a choice.
31. Who determines if a end user/consignees screening process is robust enough to meet the rule change requirements? Will the TSP only need to be provided at the request of the Dept of State or DDTC or its agents for civil and criminal law enforcement purposes? If a company uses the standard UK TSP agreed with DoS, there is no requirement in the new rule to have an individual company’s security plan endorsed by DoS.  Guidance is provided by DoS if a company wishes to pursue or develop its own TSP. The TSP only needs to be provided for civil and criminal law enforcement purposes and DoS understands any disclosure must be in accordance with UK law.

 

32. Do the screening results need to be provided to the US agreement holder? No.

 

33. Is there any requirement for the foreign consignee to maintain records of its sub-licensee DN/TCN approvals? No.
34. What responsibility does the foreign consignee have towards its sub-licensees? None.  The sub-licensee must ensure that it is compliant with the rule change. The foreign consignee may report its sub-licensees’ compliance preferences to the UK exporter.
35. ‘Regular Employees’ as defined in new 120.39 – that is permanent direct employees plus individuals ‘in a long term contractual relationship’ with the employer.

(i) Please confirm that sublicensees and contract employees, except those meeting the above criteria are not covered?

(ii) What does “long term” mean?

 

(i) This is correct.

 

(ii)  Per 120.39, Dept of State has confirmed that a regular employee generally includes individuals working under the direction and control of the company, working full time and exclusively for the company and where the staffing agency has no role in the work the individual performs.  This excludes sub-licensees and those working under short term contracts less than a year in length.

36. Can ‘temporary staff’ be taken to be ‘contract employees’ as defined in para 3.9b of the DDTC’s Agreement Guidelines, i.e. will contract employees with a UK Government BPSS clearance be covered by the 126.18 (c) (2) exemption?

 

Probably, but HMG is awaiting final guidance from DoS.
37   The provisions of this rule apply explicitly to governments / end users. Is it the intention of government end users to comply with them?

 

Dept of State understands HM Government will follow the TSP guidance, at its discretion and in accordance with UK law.
38.   Do the four key elements of the BPSS fully meet the screening requirements of 126.18 (c) (2)? Yes – the EoN agreed between the US Government and HMG on 11 August states that the BPSS meets the screening requirements of the rule change.

UK BIS/ECO Posts ITAR Guidance for UK Entities

Tuesday, January 3rd, 2012 by Holly Thorne

(Source: http://www.bis.gov.uk/exportcontrol)

If you a UK end-user or consignee company that handles material covered by the United States’ controls specified by the International Traffic in Arms Regulations (ITAR) then, you should make yourself aware of an important ITAR rule change and associated guidance information. This rule change issued by the US Department of State concerns Dual and Third Country National (DTCN) employees. The rule change came into force on 15 August 2011.

To help UK industry comply with this particular aspect of the US ITAR controls, the UK government have issued a number of guidance documents concerning the rule change including a Technology Security Plan and a Question and Answer Matrix. This guidance has been produced in consultation with industry representatives from the Export Group for Aerospace and Defence (EGAD).

The Notice to Exporters (published by the UK’s Export Control Organisation)below provides an overview of the rule change and links to guidance documents (published on the export control pages of both the Department for Business and Businesslink websites). It also includes some initial questions to understand how the rule change might impact on you and your company.

Details of ITAR rule change (76 FED REG 28174)

1.        The US Department of State (DoS) has issued a final rule amending the International Traffic in Arms Regulations (“ITAR”)[1] to include a new license exemption for transfers of defence articles[2] to Dual National or Third Country National (DTCN) employees[3] of foreign end-users. The new rule came into force on 15 August 2011 and eliminates the need to obtain prior approval from DoS for the transfers of unclassified defence articles  (including unclassified technical data) to DTCN employees of foreign business entities, foreign government entities, or international organisations that are approved end-users or consignees (including approved sub-licensees) for such defence articles.

2.        Those UK end users/consignees who handle US ITAR controlled material should be aware that the exemption is subject to satisfying certain screening and recordkeeping requirements.  In particular, in lieu of prior approval, the new ITAR Section 126.18 requires eligible companies and organisations to implement “effective procedures to prevent diversion to destinations, entities, or for purposes other than those authorised by the applicable export license or other authorisation.”

3.        To this end, the US Government and Her Majesty’s Government (HMG) have agreed an approach confirmed in a diplomatic Exchange of Notes.[4]  This means that HMG’s pre-existing Baseline Personnel Security Standard (BPSS) constitutes a screening process meeting the screening requirements of ITAR 126.18(c)(2).  Those UK end users/consignees who decide not to adopt the BPSS will have to introduce their own screening arrangements in order to comply with the rule change.  Further information can be found in the guidance documents, which can be referred to in the links at paragraph 4 (below).

Published guidance material

  1. Following a number of meetings between the Export Group for Aerospace and Defence (EGAD) and HMG officials[5] a series of guidance documents have been agreed to help UK End Users/Consignees comply with the rule change.  The guidance documents include:

These documents are published on the export control pages of the Businesslink website at:
http://www.businesslink.gov.uk/bdotg/action/layer?r.l1=1079717544&r.l2=1084228483&r.l3=1084228526&r.s=tl&topicId=1097086699

You can also download the documents from the Department for Business website at: http://www.bis.gov.uk/policies/export-control-organisation/eco-summary-guidance

5.        UK end users/consignees should also note that the Ministry of Defence intends to communicate the guidance through the Defence Contracts Bulletin and Acquisition Operating Framework in due course.

6.        The US Dept of State has been consulted on all of the UK’s guidance documents and has endorsed the approach taken.  The US Dept of State also intends to issue its own guidance to US exporters making them aware of the specific bilateral arrangements/protocols, which have been agreed between the US Government and HMG.

Initial questions about the rule change

7.     To understand how the rule change might impact on you and your company see the questions below:

Ques1: This is a ruling from the International Traffic in Arms Regulations (ITAR).  I do not manufacture or trade in arms related equipment – will this ruling affect me?

Answer: Yes it could. ITAR controls the import and export of all defence related items and services on the United States Munitions List. For more details about ITAR controls see: http://www.pmddtc.state.gov/regulations_laws/itar.html

Ques2: I employ British citizens and some US citizens – does this security procedure apply to me?

Answer: Yes if either you or your employees handling US ITAR unclassified material are dual nationals or third country nationals

Ques3: If I want to adopt BPSS screening procedures what should I do?

Answer: You should refer to the guidance contained in the Technology Security Plan referred to at paragraph 4 above.

Ques4: I already comply with UK Export Control requirements and have licenses in place.  Do I also need to comply with these ITAR requirements?

Answer:  Yes – the ITAR requirements are separate from UK export control requirements.

Link to notice and contact information: http://www.bis.gov.uk/assets/biscore/eco/docs/notices-to-exporters/2011/nte201124.doc>



[1] ITAR is the set of United States government regulations that control the export and import of defence-related articles and services on the US Munitions List (USML).

[2] ‘Defense Articles’ mean items or technical data designated in Ch 121.1 of the US ITAR regulations.  This includes technical data, recorded or stored in any physical form (including electronic transfers), models and mock ups.

[3] DoS defines a Third Country National as ‘an individual holding nationality from a Country or Countries other than the Country of the foreign signatory to the agreement.  A Dual National is defined as an individual who ‘holds nationality from the Country of a foreign signatory and one or more additional foreign Countries.

[4] Exchange of Notes refers to the agreement between the US Government and Her Majesty’s Government on 11 August 2011 confirming that the UK’s BPSS meets the screening requirements of the new Rule Change.

[5] Ministry of Defence, Foreign & Commonwealth Office, Dept for Business, Innovation and Skills and the UKTI Defence & Security Organisation

 

10 Shipping Companies & 3 Individuals Affiliated with Iran’s National Shipping Line- Denied

Wednesday, July 13th, 2011 by Anna Barone

Continuing efforts to target the financial underpinnings of the Islamic Republic of Iran Shipping Lines (IRISL), the U.S. Department of the Treasury’s Office of Foreign Assets Control (OFAC) announced the designation of 10 shipping companies and three individuals affiliated with IRISL. Responding to Iran’s continued efforts to evade sanctions and its ongoing creation and use of new front companies, subsidiaries, and affiliates to protect IRISL and to advance its proliferation activities, today’s actions targeted IRISL’s operations in the United Arab Emirates (UAE), Singapore, China and the United Kingdom (UK).
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Study Points at ITAR as Hurting US Defense Industry’s Competitiveness

Thursday, October 15th, 2009 by Danielle McClellan

A recent study was published in the book “Fortresses & Icebergs: The Evolution of the Transatlantic Defense Market and the Implications for U.S. National Security Policy” outlining the decline of US defense firms market position in Europe. The study was funded by the Department of Defense and Johns Hopkins in order to get a feel for the transatlantic defense market. The US, UK, France, Germany, Italy, Poland, Romania and Sweden were all examined for market obstacles and restrictions, especially the ITAR in the US.

The book, written by Bialos, Christine Fisher and Stuart Koehl dives into the current state of the defense market and takes the reader through the present and future of the international industry and explains what the US needs to do to keep from drowning. “Fortresses & Icebergs” describes the negative trend that US firms are facing in Europe, increased cooperative buying among European nations and an ITAR backlash are turning the market upside down. In the past European nations bought nearly all of their defense article from the US but the recent study shows that more and more international companies are purchasing their defense articles outside the US. The study also confirmed that the number US firms buying from European firms is growing. This may be because of the Obama Administrations’ need to procure defense articles based on affordability and competition with the dwindling defense budget, a very positive sign for European companies wanting to compete in the US market. (more…)