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Office of Defense Trade Controls Policy Bureau of Political Military Affairs

Implementation of the Dual/Third Country National Rule in the ITAR. Office of Defense Trade Controls Policy Bureau of Political Military Affairs. Problems with the Old Rule. Nationality or Place of Birth was criteria for access to ITAR defense articles & technology

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Office of Defense Trade Controls Policy Bureau of Political Military Affairs

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  1. Implementation of the Dual/Third Country National Rule in the ITAR Office of Defense Trade Controls Policy Bureau of Political Military Affairs

  2. Problems with the Old Rule • Nationality or Place of Birth was criteria for access to ITAR defense articles & technology • Equated citizens themselves to “proscribed” destinations • Absolute bar to citizens of §126.1(a) countries • Not a valid indicator of loyalty or trustworthiness • Overly broad criteria led to unintended results • Went beyond AECA requirement

  3. Risks of Diversion The intent of the new rule is to create a policy for transfers to certain dual-third country nationals in a manner that would prevent diversions of defense articles to unauthorized end-users. • The rule recognizes the vested interests within companies, organizations, foreign governments to carefully screen employees.

  4. Risks of Diversion • Front companies • Some operate on behalf of governments • Some operate for private interests • Individual profiteers • Some specialize in certain destinations • Others are indiscriminate for ultimate destination(s)

  5. Dual/Third Country National Rule • Applies only to transfers to licensed end-users and consignees (and sub-licensees) - § 126.18 (a) • Limited to transfers within the scope of the license and within scope of employment - § 126.18 (a) • Regular, full-time employees, & embedded contractors – see also §120.39 (a) • Either clearance or screening required - § 126.18 (c) • If screening option used, then NDA is required.

  6. Substantive Contacts – §126.18 (c) • Government contacts • Business contacts • Allegiance • Proprietary interests • Foreign travel • Other contacts indicating a risk of diversion

  7. Canadian Model Exchange of Letters with Canada recognized the Controlled Goods Program (CGP) as an acceptable screening IAW 126.18(c)(2) http://ssi-iss.tpsgc-pwgsc.gc.ca/dmc-cgd/bulletins/bulletin3-eng.html

  8. The New Rule • Ends the requirement for separate licensing for dual and third country nationals • Requires end-user employees have clearances or be screened for risk of diversion • Requires end-users have technology security programs

  9. The New Rule does not • Force foreign end-users to layoff workers who are dual or third country nationals • Require foreign end-users to layoff an employee because of his/her place of birth • Automatically disqualify anyone because of family ties, travel, or other contacts with foreign nationals

  10. Summary • New rule moves us away from mere nationality or place of birth as criteria • not a good measure of trustworthiness • no real nexus to national security • New rule recognizes core concern as risk of diversion • behavior/activities aimed at breach of security • Trusted community – mutual security interests • share our best defense technology

  11. Implementing § 126.18 • Guidance for non-agreement authorizations • Process for amending authorizations • Required changes • Submission options • Process for DDTC vetting of individuals • Implementation trends

  12. § 126.18(a) applies to the transfer of defense articles exported under/within scope of: Approved Export License (DSPs) Other Written Authorizations (WDAs, GCs) License Exemptions No change in current policy No need to specifically request or identify the use of § 126.18 Non-Agreement Authorizations

  13. First Required Change to Utilize § 126.18 • Agreements must be amended to include updated §124.8(5) prior to using exemption: “(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.”

  14. § 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).” Agreements must be amended to include this new language prior to using exemption: Second Required Change to Utilize §126.18

  15. Amending to Utilize New Policy Countries Restricted via Proviso Currently Approved Agreements

  16. Amending to Utilize New Policy Amendment will: Modify § 124.7(4) to update required language Modify § 124.8(5) to reflect new clause Must be executed prior to implementation of new policy Submission As a minor amendment pursuant to § 124.1(d) Uploaded to the latest DSP-5 vehicle As part of the next major amendment pursuant to §124.1(c) Currently Approved Agreements

  17. Countries Restricted via Proviso If your agreement has a proviso specifically removing a country for dual/third country nationals You need a Proviso Reconsideration Major amendment must be submitted Provisos must be specifically requested for deletion via a proviso reconsideration There is no process for the “blanket” deletion of provisos Currently Approved Agreements

  18. DDTC Vetting: General Correspondence Option • § 126.18(c)(2) affords the option for DDTC to make the determination on substantive contacts • Should be requested in accordance with § 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

  19. § 126.18(c)(2) affords the option for DDTC to make the determination on substantive contacts Should be requested in accordance with § 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 Identified in Block 18 by full legal name Specific to that agreement only! DDTC Vetting: § 124.8(5) Option

  20. Difficult to judge use of the exemption Many companies adding as a proactive measure § 126.18(c)(2) vetting requests Very few submissions received Those received have been for non-countries of concern Agreements concerns: New § 124.8(5) verbatim statement missing NDAs not consistent Old § 124.16 language Implementation Trends

  21. References • DDTC Response Team 202-663-1282 • DDTC Website: http://pmddtc.state.gov/

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