End-Use Monitoring Third Party Transfer of U.S.-Origin Defense Equipment
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End-Use Monitoring Third Party Transfer of U.S.-Origin Defense Equipment

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Objectives. Review the programs under which the equipment was supplied.Know the goals, requirements and responsibilities for End Use Monitoring. Know the requirements for Third party Transfer of U.S. Origin Defense Equipment.Introduce the SCIP SAO Toolbox. . . . . . . . . . . Grave. . . New Requests.
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1. End-Use Monitoring Third Party Transfer of U.S.-Origin Defense Equipment Introduce self Review advance sheet. Reasons for EUM National security for U.S. and allies Regional stability Technology transfer U.S. industrial base Introduce self Review advance sheet. Reasons for EUM National security for U.S. and allies Regional stability Technology transfer U.S. industrial base

2. Objectives Review the programs under which the equipment was supplied. Know the goals, requirements and responsibilities for End Use Monitoring. Know the requirements for Third party Transfer of U.S. Origin Defense Equipment. Introduce the SCIP SAO Toolbox

3. DoD End use monitoring program is a cradle to grave program which US maintains the requirements for Use, Security and No Transfer without permission requirements as required by the AECA and the FAA until the item has lost all of its military aspects. DoD End use monitoring program is a cradle to grave program which US maintains the requirements for Use, Security and No Transfer without permission requirements as required by the AECA and the FAA until the item has lost all of its military aspects.

4. Laws and Regulations Use as summary to remind students that the EUM/Third party transfers are governed by these US Laws and regulations Primary Laws and directives for Third party transferUse as summary to remind students that the EUM/Third party transfers are governed by these US Laws and regulations Primary Laws and directives for Third party transfer

5. Basic U.S. Arms Transfer Programs Military Assistance Program (1950-81)* Military Assistance Program (MAP merger) (1981-90)*** FAA, Sec. 506 drawdown authority* FAA grant EDA programs* Foreign Military Sales (FMFP grant and loan)*** Foreign Military Sales (cash)** Direct Commercial Sales (USML & CCL)*** *FAA 505 **LOA ***DSP 83 These are the various programs which we transferred US origin military arms and services to other nations the asterisks indicate which agreement or document is used to provide the USG assurances that the recipient government will abide by the requirements of the laws of the US. * shows the law and section that the country had to have an agreement before the transfer would take place. In the case of FMFP only one agreement was required even though it is a yearly funding program. ** The LOA serves as the agreement for FMS cash sales and supplements the required 505 agreement for FMFP *** The DSP 83 Non-Transfer and use Certificate is used for DCS but it only covers the aspects of use and non-transfer does not cover security.These are the various programs which we transferred US origin military arms and services to other nations the asterisks indicate which agreement or document is used to provide the USG assurances that the recipient government will abide by the requirements of the laws of the US. * shows the law and section that the country had to have an agreement before the transfer would take place. In the case of FMFP only one agreement was required even though it is a yearly funding program. ** The LOA serves as the agreement for FMS cash sales and supplements the required 505 agreement for FMFP *** The DSP 83 Non-Transfer and use Certificate is used for DCS but it only covers the aspects of use and non-transfer does not cover security.

6. Conditions of Eligibility ? Grants (EDA, MAP, Drawdowns, MAP Merger, FMFP Grant) No defense articles, services, or related training shall be furnished on a grant basis unless the country agrees to the following ?use? provisions: Limits use to government officers, employees, and agents Does not permit unauthorized transfers Does not permit use for purposes other than those for which furnished Maintains required security Furnishes observation and information ?Reversionary rights?, or returns equipment to the U.S. when no longer needed [?505, FAA] This is the basic requirements of the FAA as a quick review Emphasis the intent of Reversionary rights, This means that even though we transfer title we can recall the item/(s) at any time and that we will direct how the country can dispose of them. This is the basic requirements of the FAA as a quick review Emphasis the intent of Reversionary rights, This means that even though we transfer title we can recall the item/(s) at any time and that we will direct how the country can dispose of them.

7. Non-Transfer, Security, Use Provisions-FMS FMS (Including FMFP, MAP Merger) or DCS Furnishing of defense articles / services must strengthen U.S. security & promote world peace. No retransfers without Presidential consent No use of articles / services for purposes other than for which furnished Recipient to maintain security and protection of such article or service Requirements identified in LOA or Non-transfer & Use Certificate (DSP-83**) Credit (repayable) items: proceeds to USG until loan paid off ** Does not include provisions for security As a review these are the requirements contained in the LOAAs a review these are the requirements contained in the LOA

8. Now we will look at the various aspects of EUM Goals of the Golden Sentry Program Levels of monitoring Difference between ?Golden Sentry? and ?Blue Lantern? programs Responsibilities Visits Now we will look at the various aspects of EUM Goals of the Golden Sentry Program Levels of monitoring Difference between ?Golden Sentry? and ?Blue Lantern? programs Responsibilities Visits

9. EUM Goal Preserve the technological advantages enjoyed by U.S. military forces over potential adversaries by impeding access to militarily significant items and technologies to military significant items and technologies, including those which contribute to the proliferation of weapons of mass destruction, to ensure global competitiveness and continued technological advantages enjoyed by U.S. military forces over potential adversaries, and; concerning the sale, transfer, and end-use of defense equipment and services. to military significant items and technologies, including those which contribute to the proliferation of weapons of mass destruction, to ensure global competitiveness and continued technological advantages enjoyed by U.S. military forces over potential adversaries, and; concerning the sale, transfer, and end-use of defense equipment and services.

10. Legal Basis For Program Section 40A of the Arms Export Control Act (AECA) enacted in 1996 (Public Law 104-164) The President shall establish a program that provides for End-Use Monitoring in order to improve accountability with respect to Defense articles sold, leased, or exported under the AECA or FAA. Requires, to the extent practicable, monitoring of U.S. arms transfers by providing ?reasonable assurance? that recipients comply with USG export control requirements regarding the use, transfer, and security of defense articles and services.

11. EUM Controls System of check and cross checks Release is properly cleared with USG Items ordered are authorized Protection of articles or information Delivery to designated government representative (DGR) Required inventories by PN and US (Golden Sentry) Summary of EUM controls Summary of EUM controls

12. USG End-Use Monitoring Programs Defense Department Golden Sentry State Department Blue Lantern Commerce Department Extrancheck

13. DoD EUM Program

14. Golden Sentry Program Designed to provide assurance that: Recipient is complying with USG end-use, third country transfer, and security requirements, and Provide for end-use verification of sensitive technologies vulnerable to diversion or misuse.

15. Levels of Monitoring Routine EUM : Conducted on defense articles/services transferred to a trusted partner LOAs require no unique notes or conditions Performed by SCO and host country Enhanced EUM (EEUM): Sensitive defense articles and/or services LOAs may contain notes and/or special conditions Contingent on Trust with Verification May require compliance visit by DSCA team

16. ?Enhanced EUM? Defense Articles Communication Security (COMSEC) Equipment STINGER Missiles and Gripstocks Night Vision Devices JAVELIN Missiles and Command Launch Units TOW-2B Missiles AMRAAM (AIM-120) AIM-9X Advanced Sidewinder Missiles SLAM-ER Harpoon Block II (JASSM) (JSOW under consideration)

17. Enhanced EUM Defense Articles (Con?t) Joint Munitions, e.g., Joint Air-to-Surface Standoff Missile Unmanned Aircraft System (UAS) Standard Missile-3 (SM-3) Tomahawk Missile Large Aircraft Infrared Countermeasures (LAIRCM) Special Provisions pertaining to Physical Security and Accountability with the transfer documents

18. Defense Articles Section 505 of the FAA: Grant Assistance Equipment provided through EDA, Military Assistance Program (MAP), FMF, etc. Country to provide annual inventory Country to certify what happened to items provided that are no longer found.

19. New T & C paragraph for EUM

20. Tracking and Monitoring-Iraq Registration and Monitoring System Registration of serial numbers of all small arms A program of EUM of all lethal defense articles A detailed record of the origin, shipping, and distribution

21. DSCA Responsibilities Manage DoD EUM program Provide policy and guidance Coordinate all EUM notes and provisos on LOAs Forward reports of possible violations to DoS Manage DSCA visit program Publish reports of lessons learned

22. Familiarization Visit and Regional Forum Foreign country representatives, SCO, Unified Command and DSCA work together to mutually develop effective EUM compliance plans. Prompted by a request or the introduction of new equipment Determine requirement(s) for future Compliance Assessment Visit

23. Compliance Assessment Visit Review and Assess SCO and host nation?s EUM compliance programs This visit is always coordinated with the recipient country/ international organization. Facility visits, inventories

24. EUM Investigation Visit Investigate possible violations of AECA Section 3 or FAA Section 505 Prompted by information reports or other sources Closely coordinated with the foreign government via the U.S. Embassy in country and/or State and Defense Departments Directed by DoS

25. MILDEP & IA Responsibilities Identify sensitive technologies and defense articles to be candidates for EEUM Include non-standard notes for articles and services that require physical security and accountability procedures ** Provide delivery records w/serial #s of all EEUM items to SCO and PN Input item serial # into SCIP Report possible violations to DSCA Provide DSCA with quarterly report (Chap 8 SAMM) Incorporate EUM into workforce training programs

26. Area Combatant Commands Responsibilities Conduct Region Forums in conjunction with DSCA Assess effectiveness of EUM compliance Ensure all EUM activities are reported. Maintain a Golden Sentry POC

27. SCO Responsibilities Conduct routine EUM and EEUM visits/inventories as required Establish reporting procedures w/ PN for EEUM articles and information Report to DSCA when required inventories are completed (via SCIP, EUM Toolbox) Provide DSCA projected dates of future compliance visits Support Golden Sentry team visits and coordinate w/ PN

28. SCO Conduct of EUM Develop a combined EUM Compliance plan with PN Review all LOAs with SAMM Table C5.T5 notes for EEUM requirements. Keep records of visits/inventories and PN provided inventories Keep records of the authorization of Third Party Transfers. Keep records of reports of expended and consumed items provided by PN Request EEUM funding requirements in annual budget

29. Partner Nation EUM Responsibilities Comply with LOA EUM requirements Develop EUM plan with SCO Maintain good internal accountability Keep records of Inventories Items Damaged or destroyed Transferred Change of end Use

30. Host Nation Receipt Date

31. Blue Lantern EUM Program Department of State Program that focuses on monitoring Direct Commercial Sales (DCS) of defense articles by U.S. Industry to a foreign government. Initiated by DoS in 1990 for DCS Systematic process aimed at enforcing the AECA and the ITAR DoS approves the export license and primarily focuses on ?pre-delivery? controls (licensing checks) and limited post delivery checks. Country POCs are located in the Embassy and work for the Ambassador/Department of State. (7) The President shall, in coordination with law enforcement and national security agencies, develop standards for identifying high-risk exports for regular end-use verification. These standards shall be published in the Federal Register and the initial standards shall be published not later than October 1, 1988. This provision of the AECA was the genesis of Blue Lantern (7) The President shall, in coordination with law enforcement and national security agencies, develop standards for identifying high-risk exports for regular end-use verification. These standards shall be published in the Federal Register and the initial standards shall be published not later than October 1, 1988. This provision of the AECA was the genesis of Blue Lantern

32. EXTRANCHECK EUM Program Department of Commerce Program that focuses on monitoring Dual-Use Items transfers by U.S. Industry to a foreign government via the Export Administration Regulation (EAR). DoC approves the export license and primarily focuses on ?pre-delivery? controls (licensing checks) and conducts post delivery checks. Post delivery checks are performed by Bureau of Industry and Security (BIS) Attaches, ?Sentinel Teams? from DoC BIS and U.S. Foreign and Commercial Service Officers.

33. What Are Third Party Transfers? Ask students for responsesAsk students for responses

34. The transfer, sale, disposal or change in end-use of any U.S.-Origin Defense Article, including all associated components, services, and training, acquired through any USG Security Assistance Program. Definition of TPT Definition of TPT

35. Types of Third Party Transfers

36. All U.S.- Origin Defense Articles, Services, Training, or Data Require USG Authorization Before Transfer or Sale Emphasize Requirement for USG authorization for TPTEmphasize Requirement for USG authorization for TPT

37. USG Authorization is also required for Demonstrations, Exhibits, and Displays (Intangible transfers)

38. Justifications Internal Security Legitimate Self-Defense To Prevent the Proliferation of Weapons of Mass Destruction Participation in Collective Arrangements Consistent with the UN Charter Economic and Social Development Activities Note same reasons that are used to make an original sale to a countryNote same reasons that are used to make an original sale to a country

39. Critical To USG Decision USG may not authorize transfer, if it is not willing to do same thing (AECA, Sec. 3) Generally approved for eligible FMS countries (subject to NDP considerations) Exception basis to non-FMS eligible countries or private entities End-use and retransfer assurances required from both intermediate and final recipients Private Entity: Assurances from both Government and EntityUSG may not authorize transfer, if it is not willing to do same thing (AECA, Sec. 3) Generally approved for eligible FMS countries (subject to NDP considerations) Exception basis to non-FMS eligible countries or private entities End-use and retransfer assurances required from both intermediate and final recipients Private Entity: Assurances from both Government and Entity

40. NATO Members, Australia, Israel, Japan, Korea, and N. Zealand 15-Day Formal Notification Period MDE $25 Million Threshold All Other Articles $100 Million Threshold Congressional Notification A quarterly report is also made to congress for all TPTs of $ 1 M or more.A quarterly report is also made to congress for all TPTs of $ 1 M or more.

41. Private Entities Presumption of denial Limited exceptions for entities with proof of government contract or static display

42. Submitting Requests for DoD Transferred Items Requests for TPT can be made by various means to include through the SCO or US embassyRequests for TPT can be made by various means to include through the SCO or US embassy

43. Send Your Request To: PM/DDTC, SA-1, 12th Floor Directorate of Defense Trade Controls Bureau of Political Military Affairs U.S. Department of State Washington, D.C. 20522-0112 (202) 663-1282 www.pmdtc.org

44. Requirements for Consideration An Official Request from the Divesting Government A Completed Standard Questionnaire End-Use, Retransfer, and Security Assurances from all parties involved

45. Official Request Requests are only considered official when signed and forwarded by a Bona Fide Representative of the Divesting Government

46. Official Requests Recipient Entities CANNOT submit Requests

47. Using a Broker?

48. Office of Defense Trade Controls Compliance (PM/DTCC) Directorate of Defense Trade Controls U.S. Department of State www.pmdtc.org

49. Standard Questionnaire Consists of fifteen (15) questions Required questions must be answered Provide as much detail as possible about transfer http://www.state.gov/t/pm/rsat/c14031.htm

50. Standard Questionnaire Important Questions Type of Transfer Description and Quantity Method of Acquisition Original Acquisition Value and Year Contact Info for All Participating Parties

51. Temporary Transfer Coalition Operations Refurbishment/Repair Integration Upgrades Loans

52. The use of any U.S.-Origin Defense Article, Service or Training for purposes other than for which it was acquired Change In End-Use

53. Change In End-use Training Static Display Demonstrations Exhibits Cannibalization (Grant items only) Any change in the usage of defense articles and services which deviates from the original purpose for which it was transferred. Examples: Placing military items in government museums/other government institutions De-militarization & redistribution of defense articles to other government agencies Transfer to private museums, educational institutions, individuals or companies Cannibalization (MAP/505/Grant EDA Only)Any change in the usage of defense articles and services which deviates from the original purpose for which it was transferred. Examples: Placing military items in government museums/other government institutions De-militarization & redistribution of defense articles to other government agencies Transfer to private museums, educational institutions, individuals or companies Cannibalization (MAP/505/Grant EDA Only)

54. Disposal All components require demilitarization in accordance with USG standards before change in end use or destruction All participating parties must be listed on request DRMS adds items to its worldwide screening list Possible Screening Outcomes: Transfer to USG Agency/MILDEP Transfer to a MAP/FMFP/EDA/506 Drawdown recipient Sale to an FMS customer No need exists: Turn over item for USG disposal, or In-country disposal authorized DRMS adds items to its worldwide screening list Possible Screening Outcomes: Transfer to USG Agency/MILDEP Transfer to a MAP/FMFP/EDA/506 Drawdown recipient Sale to an FMS customer No need exists: Turn over item for USG disposal, or In-country disposal authorized

55. De-militarization Manual (DoD 4160.21-M-1) Graphic and written de-mil procedures for types of end items Different procedures based on intended end use Deviation from procedures should be approved by USG Detailed information from proponent military department. DRMS adds items to its worldwide screening list Possible Screening Outcomes: Transfer to USG Agency/MILDEP Transfer to a MAP/FMFP/EDA/506 Drawdown recipient Sale to an FMS customer No need exists: Turn over item for USG disposal, or In-country disposal authorized DRMS adds items to its worldwide screening list Possible Screening Outcomes: Transfer to USG Agency/MILDEP Transfer to a MAP/FMFP/EDA/506 Drawdown recipient Sale to an FMS customer No need exists: Turn over item for USG disposal, or In-country disposal authorized

56. The destruction or scrapping of any U.S.-Origin Defense Article Disposal Identification of recipient Description of equipment, components, & spares Serial numbers of major items Identification of MDE/SME End-item identification for components/spares Stock item class or NSN listing Identification of recipient Description of equipment, components, & spares Serial numbers of major items Identification of MDE/SME End-item identification for components/spares Stock item class or NSN listing Photos or any other method to help DoS understand request Original value & current scrap value Identification of recipient Description of equipment, components, & spares Serial numbers of major items Identification of MDE/SME End-item identification for components/spares Stock item class or NSN listing Identification of recipient Description of equipment, components, & spares Serial numbers of major items Identification of MDE/SME End-item identification for components/spares Stock item class or NSN listing Photos or any other method to help DoS understand request Original value & current scrap value

57. Description and Quantity If known, provide NSN of each article Provide total of each type of article separately Provide as much detail as possible on condition of article

58. Method of Acquisition Foreign Military Sale (FMS) Foreign Military Financing Program (FMFP) Military Assistance Program (MAP) Drawdown Cooperative Development Program Direct Commercial Sales (DCS)

59. Net Proceeds The return of all net proceeds from the sale, including scrap, of any U.S-origin component acquired through a MAP or grant EDA.

60. Net Proceeds (Con?t) WAIVER A waiver may be granted by the Under Secretary of DoS, if the justification warrants, for articles acquired through the Military Assistance Program before 1985 (Last year items were delivered under the MAP-M grant Program)

61. Assurances All recipients, including Private Entities, must Provide assurances Assurances must be signed by a representative authorized to legally bind the Recipient Government Assurances must also be provided by the Government exercising legal jurisdiction over a foreign Private Entity Recipient Average receipt time for assurances is 6 months Blanket Assurances

62. Blanket Assurance 25 Signatories

63. The transfer, sale, disposal or change in end-use of any U.S.-origin component without USG authorization is a

64. Providing access to any U.S.-origin component for Governments or Entities for intangible transfers without approval is also a

65. Congressional Requirement U.S. law requires the Department of State to report possible Third-Party Transfer violations to Congress

66. Violation Penalties The President and Congress have legal authority to impose penalties Law does not require imposition of specific penalty Penalties may range from suspension to termination of FMS programs

67. Security Cooperation Information Portal (SCIP)

68. End-Use Monitoring Third Party Transfer of U.S.-Origin Defense Equipment Introduce self Review advance sheet. Reasons for EUM National security for U.S. and allies Regional stability Technology transfer U.S. industrial base Introduce self Review advance sheet. Reasons for EUM National security for U.S. and allies Regional stability Technology transfer U.S. industrial base

69. SCO Toolbox Community Supports the DSCA EUM Program Office, Combatant Commands and SCO/ODC Offices worldwide

70. EUM Home Page

71. ADHOC Report

72. Inventory Report

73. EUM Support

74. Total Number of Unfavorable Blue Lanterns by Region Analysis of Unfavorable Checks by Region: FY 2004 - 2006 Over time, numbers of unfavorable Blue Lantern checks by region can fluctuate considerably. Despite a high number of unfavorable cases in the Americas (36) for FY 2006, last year?s total for the same region was relatively low (10). Conversely, Europe dropped from twenty-seven unfavorable cases in FY 2005 to seventeen in FY 2006. East Asia maintained relatively high numbers of unfavorable cases over the past three years and the Near East, regionally the site of relatively low numbers of licenses, held fairly steady. Analysis of Unfavorable Checks by Region: FY 2004 - 2006 Over time, numbers of unfavorable Blue Lantern checks by region can fluctuate considerably. Despite a high number of unfavorable cases in the Americas (36) for FY 2006, last year?s total for the same region was relatively low (10). Conversely, Europe dropped from twenty-seven unfavorable cases in FY 2005 to seventeen in FY 2006. East Asia maintained relatively high numbers of unfavorable cases over the past three years and the Near East, regionally the site of relatively low numbers of licenses, held fairly steady.

75. FY 2008 Unfavorable Blue Lanterns: Leading Commodity Types by Region Analysis of Unfavorable Checks by Commodity and Region The chart below (Figure 5) illustrates the types of commodities most often the subject of unfavorable Blue Lanterns by region. Of particular note is the very high incidence of unfavorable cases involving firearms and ammunition in the Americas (over 70% of all cases for the region). The high incidence of unfavorable checks involving firearms and ammunition in the region is a fairly regular pattern in recent years. Especially high numbers this year reflect increased scrutiny of unfamiliar importers in Central and South America, and several cases involving unauthorized brokers and dealers possibly illicitly re-exporting firearms. Also in keeping with an observable pattern over recent years are the high numbers of unfavorable Blue Lantern cases involving aircraft components and spares in East Asia. This trend appears to reflect a lack of understanding of ITAR controls by foreign intermediaries as well as likely attempts to re-export these commodities to embargoed countries such as China and Iran. The recent drop in unfavorable checks in Europe not withstanding, annual results of the Blue Lantern program continue to demonstrate the presence of ?gray market? activity in Europe and among other close U.S. allies and defense trade partners.Analysis of Unfavorable Checks by Commodity and Region The chart below (Figure 5) illustrates the types of commodities most often the subject of unfavorable Blue Lanterns by region. Of particular note is the very high incidence of unfavorable cases involving firearms and ammunition in the Americas (over 70% of all cases for the region). The high incidence of unfavorable checks involving firearms and ammunition in the region is a fairly regular pattern in recent years. Especially high numbers this year reflect increased scrutiny of unfamiliar importers in Central and South America, and several cases involving unauthorized brokers and dealers possibly illicitly re-exporting firearms. Also in keeping with an observable pattern over recent years are the high numbers of unfavorable Blue Lantern cases involving aircraft components and spares in East Asia. This trend appears to reflect a lack of understanding of ITAR controls by foreign intermediaries as well as likely attempts to re-export these commodities to embargoed countries such as China and Iran. The recent drop in unfavorable checks in Europe not withstanding, annual results of the Blue Lantern program continue to demonstrate the presence of ?gray market? activity in Europe and among other close U.S. allies and defense trade partners.

76. Reasons for Unfavorable Checks One or more parties deemed unreliable recipient of USML based on Blue Lantern check, or other derogatory information about parties uncovered: 37% End-user reported that that they did not order the items of the license ? indicating possible intent on the part of the exporter or other parties to violate the ITAR and AECA: 19% End-use different than that stated on the license: 18% Parties not listed on the license involved in the transaction: 11% One or more parties violated terms of an agreement or proviso on the license: 5% Unable to contact/locate a party to license: 4% Evidence of diversion or unauthorized re-export: 3% Refusal to cooperate: 2%

77. Interested Parties Congress The Government Accountability Office State Department DoD ? especially DSCA Defense Industry (Stake-holders) U.S. Partners (Customers) The Press The Public

78. Verification Statement Effective 29 Nov 99, any agreement for the USG sale (FMS) or lease of USML items will include a statement that the USG retains the right to verify credible reports that such items have been used for purposes other than agreed upon.

79. EUM Visits Familiarization Visit and Regional Forum Compliance Assessment Visit EUM Investigation Visit

80. Partner Nation EUM Responsibilities Demonstrate support for U.S: principles, laws, regulations, policies and practices By compliance with the requirements embodied in signed agreements for: Security, Third party transfer, End-use

81. USG Authorization is also Required for Demonstrations, Exhibits, and Displays

82. Countries Eligible for Advanced Consent


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