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Defense Trade Advisory Group. “21 st Century Export Control System”. December 4, 2009. The Overall “Vision” for a 21 st Century Export Control System. “National Security is paramount ” AECA & EAA written for a different time – the world has changed

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Defense Trade Advisory Group

“21st Century Export Control System”

December 4, 2009


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The Overall “Vision” for a 21st Century Export Control System

“National Security is paramount”

  • AECA & EAA written for a different time – the world has changed

  • Transition from multiple agencies with differing controls (some overlapping) to a single USG coordinated export system with a single point of entry for U.S. industry

    • Transfer responsibility of defense industrial policy issues from the legislative to the executive branch

  • Transition from a transactional base system to one built on a “trusted” relationship between the USG, U.S. industry, and friendly foreign governments

    • Entities must earn this trust based on their actions and their internal compliance programs

    • Exemptions to permit transfers of hardware, data and services to support items previously approved for sale.

      • Annual reporting of transfers, sales


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The Overall “Vision” / continued

  • Transition from an expanding universe of controlled commodities to a more dynamic system based on existing National Security concerns

    • Global trend suggests a focus on lesser scope of controlled items and technologies

      • Military capabilities are no longer just developed in the defense sector

      • The U.S. does not have a lead in all civil/militarily critical technologies

    • Annual review of controlled items to eliminate unnecessary controls

    • e.g., what, why and how

    • USG senior level concurrence for items controlled unilaterally


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The Overall “Vision” / continued

  • Recognition that the U.S. industrial base is an element of National Security

    • Globalization of technologies, foreign availability of products needs to be taken into consideration in the decision making process

      • Minimize controls over commodities whose design/production is based on widely available technology

        • Minor parts/components

    • Permit U.S. industry to compete in foreign markets on a competitive basis

      • e.g., Permit marketing, including “bid & proposal” efforts, to friendly foreign governments based on precedent cases (e.g., NATO)

      • e.g., Permit retransfer of non-sensitive U.S. origin items when embedded in a foreign system to remove the “ITAR free” label from foreign designed products


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Near Term Steps

Process recommendations:

  • Creation of a “turbo” type electronic licensing system

  • Increase the types of exemptions to reflect current business practices

    • Intra-country transfers and collaboration among affiliated businesses

    • Vehicle crash investigations

    • Other DTAG exemption recommendations

      • e.g., DoD foreign officer exchange program

  • Right of appeal throughout the process

  • Eliminate the requirement for a DSP-83 end use certificate

  • Eliminate unnecessary referrals of license requests by State

    • Formulate internal guidelines for decision making that would assist State personnel in the staffing decision making process


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Near Term Steps / continued

Designation of items that warrant control:

  • Establish an industry / USG dialogue on DTAG proposed definitions

  • Establish specific criteria for identifying which items should be designated as Significant Military Equipment (SME) – limit to those items based on their inherent capability

  • Delete controls over items at the bottom of the food chain

    • Where global production is so wide and diverse that the controls are not meaningful

      e.g., Fasteners, raw materials, hydraulic/mechanical/electrical commodities


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Near Term Steps / continued

  • Establishment of a “sunset” review of individual items

    • Predefined period of time to review (e.g., 15 years)

      • Establish validity for control

  • Establish criteria for unilateral controls of individual items

    • Items not controlled by international regimes

      • Wassenaar Arrangement, MTCR, Chemical Weapons Convention

  • Emphasis for control should be based on capability rather than origin of design

    e.g., avoid classification strictly based on “end use” or “designed or modified” for military applications.


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Near Term Steps / continued

Pre-approval in principle:

  • Establish a series of Tier groups for individual countries

    • Certain items are authorized for export to specific Tier group countries under an exemption

      • Country / item matrix is based on an interagency working group with U.S. industry input

    • Countries are placed in a specific Tier level

      • Based on international alliances (e.g., NATO, EU)

      • Individual gov-to-gov agreements (e.g. MoUs)

      • International regimes (e.g., Wassenaar, MTCR, CWC)

  • Establish a country / capability matrix

    • Based on the matrix – industry could market (including bid/proposal efforts) to foreign governments without an individual export authorization.

      • Only the sale of the item would require a formal authorization


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Near Term Steps / continued

  • Lifecycle authorizations for defense articles previously approved for sale

  • No additional authorizations are required to provide spare parts, organizational and intermediate level maintenance support

    • Limited to the same end use and end user

      • e.g., foreign governments, maintenance centers

    • Limited to supporting a specific quantity of items

      • e.g., “x” number of aircraft previously approved for sale

    • Limited to the approved configuration

      • Spare parts must not provide enhanced capability

  • Change in quantity or configuration would require a reauthorization (i.e. new license)

  • U.S. industry would provide USG with an annual report of hardware and services provided


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Near Term Steps / continued

Congressional notification

  • Update notification thresholds to the 21st century

  • Amend the re-notification criteria

    • Replace the 10% threshold to initial notification increments

      • e.g., original notification at $50M or $100M, re-notification thresholds would be $100M and $200M

  • Eliminate double notifications

    • Notifications of agreements under section (c) that involve off-shore procurement of non-SME items – does not involve any sale

    • Notifications of agreements under section (c) of an international cooperative project (F-35) even when the cooperative agreement was notified under 22 USC 2767(g)


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Other Considerations

  • Clarify liability [Section 127.1(b]

    • Exporter of record is responsible for their own actions

    • Permits more than one U.S. applicant to be on an agreement

  • Effective implementation of single comprehensive export authorizations for multi-lateral government to government cooperative programs (Section 126.14)

    • Correct deficiencies of previous Global Project Authorizations (JSF Program)

  • Eliminate the requirement for foreign parties to sign an agreement (TAA/MLA)

    • In lieu of signing the agreement the foreign parties sign individual “Compliance Certificates” which are filed with the executed agreement

      • Certificates are unique to each foreign party and identify their sub-licensees and/or dual/third country nationals

    • Certificates are amended (resigned) only when there is a change such as a new address, addition/deletion of either sub-licensees and/or dual/third country nationals.


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Other Considerations / continued

  • Eliminate identification of dual/third country nationals in export authorizations for access to unclassified hardware/data/services if they hold a security clearance from a NATO, x, y, and z country

  • Eliminate retransfer requirements for non-SME parts/components which are incorporated as an integral part of a foreign designed system for end use by a non 126.1 government entity


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