ECTI Blog » NATO

DDTC Clarifies NATO+ Parts Exemption

Danielle McClellan — Fri, 16 May 2008 18:44:57 +0000

The Department of State issued a final rule amending section 123.9(e) of the International Traffic in Arms Regulations to allow for NATO and its agencies, the governments of NATO members, and the governments of Australia and Japan to reexport or retransfer US origin components incorporated into a foreign defense article without any prior approval from the Directorate of Defense Trade Controls. Prior to the revision/clarification, 123.9(e) did not authorize retransfers to agencies of NATO-it only authorized retransfers to the member governments themselves, plus Australia and Japan.

To refresh your memory on the ITAR 123.9(e) NATO+ parts exemption, there are several limits however to what components can be reexported or retransferred. First of all, to qualify for the exemption the US origin components must have been initially authorized for export from the US either through license or an exemption. The following are US origin components that are NOT eligible for the exemption:

Significant military equipment;
Major defense equipment sold under a contract in the amount of US $14 million or more;
Defense articles or defense services sold under a contract in the amount of US $50 million or more;
Identified as items in the Missile Technology Control Regime of ITAR.

Finally the person reexporting the defense article must provide written notification to DDTC about the retransfer no later than 30 days after the transaction, and the notification must identify the articles reexported and the recipient government or NATO entity. After receiving this documentation the DDTC has the option to place restrictions on the component.

More information:

State Dept. Notices: ITAR Clarified for NATO Re-exports; U.S., Chile to Hold Environment Meeting (WorldTrade Interactive)

Some Nuts and Bolts of New ITAR Agreements Requirements

Danielle McClellan — Wed, 19 Dec 2007 23:53:05 +0000

On December 19, 2007, an amendment to the ITAR was published that revised the licensing procedures with regards to third party/dual nationals for technical assistance and manufacturing license agreements. It is no longer required that additional approval for a release of technical data, defense services, and access to defense articles for third part/dual national employees from NATO, EU, Australia, New Zealand, Japan, and Switzerland.

When determining nationality, the Department of Defense Trade Controls will consider an individuals country of origin or birth in addition to citizenship. The individuals must be physically located within one of the countries to receive access to the technical data.

The “Guidelines for Preparing Agreements” available on the DDTC website will be revised to incorporate this change and are effective February 1, 2008. Any submission that does not meet the following requirements will be subject to being Returned Without Action:

On pages 10 and 22 of the Guidelines, insert the following statement: This agreement (does/does not) request retransfer of defense articles and defense services pursuant to ITAR 124.16. (Change or No Change on page 22)
On page 15 of the Guidelines, the applicant must include the following statements (if applicable) which are required by the ITAR. Both the second and third statement my be used in conjunction depending on the location of the foreign licensees and or sublicensees:
1. If Not Requesting Third Country/Dual Nationals: This agreement does not authorize access to defense articles or transfer of technical data/defense services to third country/dual national employees of the foreign licensees (or approved sublicenses – if applicable).
2. If Requesting Third Country/Dual Nationals Who Do Not Qualify for ITAR 124.16: Pursuant to ITAR 124.8(5), this agreement authorizes access to defense articles and/or retransfer of technical data/defense services to individuals who are third country/dual national employees of the foreign licensees (and its approved sublicensees – if applicable). The exclusive nationalities authorized are listing all foreign nationalities of the employees who are not eligible for application of ITAR 124.16. Prior to any access or retransfer, the employee must execute a Non-Disclosure Agreement (NDA) referencing this DTC case number. The applicant must maintain copies of the executed NDAs for five years from the expiration of the agreement.
3. If Requesting Third Country/Dual Nationals Who Do Qualify for ITAR 124.16: Pursuant to ITAR 124.16, this agreement authorizes access to unclassified defense articles and/or retransfer of technical data/defense services to individuals who are third country/dual national employees of the foreign licensees (and its approved sublicensees – if applicable). The exclusive nationalities authorized are limited to NATO, European Union, Australia, Japan, New Zealand, and Switzerland. All access and/or retransfers must take place completely within the physical territories of these countries or the United States.

More information available at: www.pmddtc.state.gov/dual_nationals.htm

At this time the Department of State is reviewing and modifying the current Guidelines for Preparing Agreements. Here are some key links. State says it will publish comprehensive new Agreements Guidelines this summer.

DDTC Announces New Dual and Third Country National TAA and MLA Rule

John Black — Wed, 19 Dec 2007 23:30:51 +0000

“Beware of apparently good news.” — John Black

In the December 19, 2007 Federal Register, the Directorate of Defense Trade Controls (DDTC) of the State Department announced its new policy for dual and third country nationals. The change primarily is related to the requirement that when you apply for a Technical Assistance Agreement (TAA) or Manufacturing License Agreement, you must identify the foreign nationalities of the foreign signatories to the agreement.

For example, under the old rules if you apply for a TAA with a company in Germany, your application must identify any employees of the German company who will have access to the defense articles and have a nationality other than German. This would include a third country national who is a citizen of France, and a dual-national who has dual German and Mexican citizenship. In addition, under the old rules you have to get a Non-Disclosure Agreement (NDA) from the third country national (but not the dual national).

(For more information on the nuts and bolts related to preparation and submission of TAAs and MLAs under the new policy, see the next article.)

The new rule raises three issues:

Relaxed TAA and MLA requirements for to Nice Nationals
Implied Clarification of Requirements for Employees of Sub-Licensees
Implied Non-Clarification of the Term “Nationality”

Let’s take these one at a time.

1. Relaxed TAA and MLA Requirements for Nice Nationals

When you apply for a TAA, you no longer have to identify countries of nationality for dual and third country nationals who are nice nationals. Nice nationals are people with nationality exclusively of nice countries — for purposes of this ITAR rule, the nice countries are NATO member countries, EU member countries, Australia, New Zealand, Japan, and Switzerland, and you also do not have to get NDA from the same people.

Instead of listing individual countries and getting NDAs, you must include the new paragraph (a)(10) in ITAR 124.12 in which you request retransfer authorization for the nice nationals in ITAR 124.16. Once DDTC approves your TAA or MLA, items may be retransferred to nice nationals from any of the nice countries, and you don’t have to get NDAs. The blanket 124.16 authorization applies only to transfers within the United States or the nice countries. In addition, 124.16 does not authorize permanent retransfer of hardware-if a nice national needs to have access to ITAR hardware while doing his job he may have access, but if hardware actually needs to be permanently retransferred permanently to another party, that must be approved in the actual TAA/MLA or in a separate General Correspondence authorization.

There is one more requirement under the 124.16: the new benefits apply only to nice nationals employed parties who have either signed the TAA or MLA or who have signed an NDA. This leads us to the next point…

2. Implied Clarification of Requirements for Employees of Sub-Licensees

Well, after a dose of good ITAR news, I know all you experienced ITAR veterans are expecting some bad news. Here it is: (Insert funeral dirge tune here.) The ITAR now implies that you have to get NDAs from dual and third country nationals who are employees of sublicenses covered by your TAA and MLAs, in addition to having to get NDAs from duals and third employees of signatories to your TAAs and MLAs.

Ouch. Get NDAs from duals and third employed by sub-licensees.

OK, here are the details. The new ITAR 124.16 says you do not have to get NDAs from nice nationals employed by signatories who have signed the TAA/MLA or nice nationals employed sub-licensees who have signed the NDA. So, you might read this as implying that you have to get NDAs from non-nice nationals employed by sub-licensees.

There is nothing in the ITAR that explicitly or directly (much less clearly) says you have to get NDAs from foreign employed by sub-licensees. The Agreement Guidelines almost say that. The Guidelines include a reference to such a requirement but never actually impose the requirement-that is what you find, I should say, if you make a literal reading of the guidelines (using English grammar, an English language dictionary and logic). I am not going to give you the exact details of the almost requirement in the Guidelines-if you are not aware of it already, cherish your ignorance.

So there you go, the ITAR now implies that you have a huge new burden of getting NDAs from non-nice country nationals employed by sub-licensees. (Logically I would say that if, for example, a TAA includes a sub-licensee in Mexico, if the sub-licensee company signs the NDA, I certainly would not try to get NDAs from Mexican citizens who work for the sub-licensee.)

So, now the ITAR implies you have to get NDAs from non-nice country nationals employed by sub-licensees. Do you take the next step and say, well, if we have to get NDAs from those employees of the sub-licensees, shouldn’t we have to identify all of the nationalities of those employees in our TAA and MLA applications? My answer: Neither the Guidelines nor the ITAR require that you do so. Many of you do not have resources available to attempt to comply with an unstated extension of an implied requirement. If DDTC tells you to do it, then do it. If your compliance program is at a place where you can do it, it won’t hurt, until, of course, you put forth a great deal of effort trying to get a list of all of the dual and third nationalities from all of the sub-licensees in your TAA/MLA (or until you learn that your sub-licensee in France employees a dual French-Venezuelan national).

OK, now that you ITAR veterans have shifted from the initial good mood about the new rules to the more familiar irritated, overwhelmed and exasperated mood, let’s go to the last issue of this rule.

3. Implied Non-Clarification of the Term “Nationality”

In the Supplementary Information section of the Federal Register notice, DDTC made this statement, “In addition to citizenship, DDTC considers country of birth a factor in determining nationality.”

Importantly, DDTC does not define “nationality” with the above statement. DDTC only lets you know that it looks at citizenship and country of birth when it tries to determine a person’s nationality. It doesn’t say how it looks at those two factors nor does it tell you what other factors are involved (e.g., nationality of parents, time the person lived in various countries, passports the person holds, passports the person is eligible to hold, the first letter of the first name of the US exporter, DDTC policy of the week, current state of mind of licensing officer). So, DDTC raises the question of the definition of nationality, and refuses to define it.

I conclude that DDTC does not want to publish a definition of nationality because it wants to have the leeway to define it however it wants and change its definition, and, ultimately use one definition in one case and another definition in another case. Say a guy is born in Mexico, but moves to Canada when he is 1 year old, and is a Canadian citizen and has lived in English-speaking Canada his whole life-maybe DDTC thinks he is Canadian, but if the same guy were born in Iran and has only Canadian citizenship, maybe DDTC would like to call him Iranian. And, of course, if a guy is born in Iran and moves to the US when he is 21 and gets a US permanent resident alien status, well, of course DDTC treats him like a US citizen.

Editorial Comments

(as if the above is not already editorialized!)

I recognize that nationality is a complex issue and there are clear national security issues involved. If we need to protect our country by using country of birth to define nationality, DDTC is failing to protect our country by not defining nationality as such. Other government agencies are able to come up with relatively precise and often complex definitions of complicated term to serve the interests of our country. Lacking definitions, DDTC and exporters are left to make reach a wide range of conclusions on case-by-case decisions about nationality. If DDTC would publish a rule, most exporters would try to follow it.

So, DDTC tells you it considers citizenship and country of birth, but does not even put this statement of what it considers into the ITAR, and it publishes no definition of “nationality.” So where does that leave applicants, signatories and sub-licensees when it comes to figuring out an employee’s nationality? Well, it leaves everybody some leeway, so choose a standard approach. It appears to me that most companies look at passport information, so if a guy holds a British and Mexican passport, he has those two corresponding nationalities-sure, if a guy was born in China and just last month renounced his Chinese citizenship/passport and now is a Mexican citizen with a Mexican passport, consider his country of birth. If you choose an alternative reasonable approach, that is fine, just choose an approach and stick with it until the ITAR is changed, DDTC tells you specifically to do it differently, or DDTC gives other guidance.

So, there you go, that is my analysis of the good, the bad, and the ugly of the recent Federal Register notice. The best thing about this analysis is the line, “Cherish your ignorance.” Unfortunately, I guess there ain’t much left to cherish.

For the details of the new rule, go to www.pmddtc.state.gov.

ITAR Rumors from Washington

John Black — Fri, 31 Aug 2007 02:43:32 +0000

Well, these are a bit more solid than rumors:

First: the State Department has said that it relaxed its burdensome dual-national/third country national requirements for foreign nationals from NATO, Australia, Japan and New Zealand. If an employee of a company on a TAA or MLA is a national of one of these countries, they will be considered to be authorized to receive the US defense articles covered by the TAA and MLA and the applicant will no longer be required to obtain a non-disclosure agreement form such nationals. This policy change should reduce the current TAA and MLA burdens once (if) the State Department actually implements the policy.

Second: State plans to put out new brokering regulations soon. We will not know if this is good news or bad news until the regulations come out.