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International Traffic in Arms Regulations (ITAR) & US Trade

International Traffic in Arms Regulations (ITAR) & US Trade. Brian Blasser GMU ICP 701 Malawer. Agenda. Background American Interests Legal Authority ITAR Process Enforcement of exports control violations Federal Policies Controversy around ITAR Issue: ITAR Reform Policy Proposal.

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International Traffic in Arms Regulations (ITAR) & US Trade

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  1. International Traffic in Arms Regulations (ITAR) &US Trade Brian Blasser GMU ICP 701 Malawer

  2. Agenda • Background • American Interests • Legal Authority • ITAR Process • Enforcement of exports control violations • Federal Policies • Controversy around ITAR • Issue: ITAR Reform • Policy Proposal

  3. Background • Trading With The Enemy Act of 1917 (WWI) • Neutrality Act of 1935 (WWII) • Export Control Act of 1949 (Cold War) formalized export controls outside wartime. • Essentially embargo Eastern Bloc esp. in defense. • Tool for American foreign relations/policy. • Nuclear non-proliferation. • Through North Atlantic Treaty Org (NATO) formed the Coordinating Committee for Multilateral Export Controls (Cocom) in 1949.

  4. Background Continued • New policy era of “détente” i.e. easing of tensions between US & West with Cold War adversaries. • Increasing political pressure to liberalize export controls but to also refine US regime vice NATO’s. • ITAR attempted to refine defense export controls to accommodate these pressures. • One half of the two major federal agencies involved. Commerce Dept works non-defense exports (Export Admin Regulations).

  5. American Interests • Safeguard American foreign policy (external) and national security (internal) interests. • Two drivers of this overarching goal: • Refuse sales of defense items to adversaries • Foster greater military ties with allies • Economic goals: Increase US exports, help build and sustain industrial base, and jobs. • Security beats economy at the policy debate.

  6. Legal Authority • Statutory Foundation: Arms Export Control Act of 1976, 22 USC Chapter 39. • Authorizes POTUS to determine import and export controls for defense items. POTUS delegates to State Department. • ITAR’s administration law: Code of Federal Regulations under Title 22 (Foreign Relations), Chapter I (State Dept), Subchapter M

  7. Organization within State Department • Bureau of Political Military Affairs' Directorate of Defense Trade Controls (DDTC) • Three offices: • Policy (DTCP) • Licensing (DTCL) • Compliance (DTCC) • Defense Trade Advisory Group (DTAG) formal channel for consulting & coordinating w/ US private sector on policy and regulatory issues.

  8. ITAR Process • Before exporting defense or defense-related info, products, or services, a U.S. exporter must register w/ State Dept if their product is on US Munitions List (USML) which includes dual-use. • Registration cost $2,250 per annum and takes 30 calendar days. • Registration doesn’t give a company export rights. Only a precondition to become considered for State Dept review. • Back fees assessed for those who didn’t register

  9. Types of authorization • Foreign Military Sales (FMS) • Export License • Warehouse and Distribution Agreement • Technical Asst Agreement • Manufacturing License Agreement • Armaments Cooperative Projects e.g. F-35 Joint Strike Fighter • Re-exports: Third Party Transfer Approval • Dual & Third Country Nationals roadblock

  10. Enforcement • State Dept imposes “positive obligation”, on US exporters, including their subsidiaries, to disclose ITAR breaches. , i.e. self-reported wrong doing as well as reverse onus: prove you are innocent. • If not reported, penalties involving fines and jail time increase sharply. • Since 1999 far higher enforcement actions. • Notable enforcement: $100m fine on ITT Corp • Highly recommends internal export compliance and tracking programs. • Portion of fines go back into internal compliance prgms. • Public research and basic marketing material are safe from USML but be careful about gray areas.

  11. Controversy: Safety at what expense? • Hurting U.S. companies by holding back potential exports. • Legal and Admin Expenses: Increasing red tape • Schedule delays: Joint Strike Fighter • Example: ITAR-Free Satellites. • Restrictions on retransfers: affects allies’ commercial interests. • Damages US exports in space industry.

  12. Controversy Continued • Roadblocks facing Dual and Third Party Nationals hurting UK and Canadian interests • Furthermore, complicates services like IT support outsourcing and in-house services in countries w/ high foreign populations. E.g. Dubai, Singapore, etc. • Academia fears best int’l students will be prevented from helping US R&D

  13. Encouraging Developments • Since 2007, US has engaged in cooperative Defense trade treaties with major Allies: UK and Australia but only ratified by Senate in 2010 after both countries updated their export control regimes. Removes major ITAR hurdles between respective countries. • Obama seeks to standardize and streamline ITAR and USML through revamping export controls into one list. Held interagency discussions since 2010 and is currently in public comments period.

  14. Policy Proposal • Considerations to factor: • Cumbersome two list process that is not user friendly especially for small and medium size enterprises. • US economy and political climate seeks to make American exports more competitive. • Looming domestic spending cuts esp. in the defense industry • Allied Governments cutting defense budgets • Hacking by PRC and others into US defense databases: cat already out of the bag?

  15. Policy: Verify and Liberalize • Continue with Obama’s prudent regulatory reforms. • Check to see if items on USML have similar industrial substitutes. • Allow companies to challenge State Dept’s USML determinations in court. • Broaden defense trade treaties with NATO allies, Japan, ROK, and Singapore.

  16. Works Cited • DDTC: http://pmddtc.state.gov/index.html • USML: http://www.access.gpo.gov/nara/cfr/waisidx_99/22cfr121_99.html • Official ITAR Regulations: http://pmddtc.state.gov/regulations_laws/itar_official.html • DOJ Release on Tennessee Professor: http://www.justice.gov/opa/pr/2008/May/08_nsd_449.html • Consent Agreements: http://pmddtc.state.gov/compliance/consent_agreements/baes.html • Federation of American Scientists’ ITAR Background: http://www.fas.org/nuke/control/export/provisions.htm • CJ Requests: http://www.pmddtc.state.gov/commodity_jurisdiction/documents/cj_guidelines.pdf • UK J-35 ITAR Friction: http://news.bbc.co.uk/2/hi/uk_news/politics/6219122.stm • Satellite Issues: http://www.satellitetoday.com/via/features/23649.html • Brazilian ITAR Frustration: http://www.wopular.com/brazilian-brigadier-bashes-us-defense-export-policies-youtube • Obama’s Export Reform Initiative http://export.gov/ecr/index.asp • Senate ratifies UK and Australia Defense Treaties: http://www.reuters.com/article/2010/09/22/us-aero-arms-treaties-idUSTRE68L01K20100922 • Congressional Research Service on Export Controls: http://www.fas.org/sgp/crs/secrecy/RL31832.pdf • MIT reviewing ITAR and effect on Space Industry: http://web.mit.edu/mgr/www/Portfolio/Balancing%20the%20Needs%20for%20Space%20Research%20and%20National%20Security%20in%20the%20ITAR.pdf • Economist on ITAR’s effect on US Space Exports: http://www.economist.com/node/11965352

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