Australia

Last year President Bush signed defense trade cooperation treaties with Britain and Australia to make trade in military items easier. The treaties are intended to eliminate the many export licenses companies must obtain before they can sell their products. These treaties will create “approved communities” consisting of companies whom can freely buy and sell MOST military items under circumstances. This should eliminate about two-thirds of the export licenses that the US Department will have to issue for military goods going to Britain and Australia.

This week President Bush has made it clear that he wants senate to put a rush on the ratifications of both treaties. Unfortunately, for both Bush and exporters the Senate has made it very clear that they will not be rushed. On May 21, 2008 members of the Senate Foreign Relations Committee explained that they need to see all the treaties details and the implementing regulations before anything will be ratified. Currently these details are being drafted, but will not be ready until the end of the summer. Read More

The DDTC has published Implementing Arrangement for US-Australia Defense Trade Cooperation Treaty (Word doc). The 24-page Word document consists of 16 sections that recognize principals established between the two governments concerning their Defense Trade Cooperation.

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)

BAE Systems in South Australia, a defense company, has been granted an exemption from the equal opportunity laws. The company may discriminate on the basis of nationality when selecting employees for US contracts in order to satisfy the US International Traffic in Arms Regulations.

Linda Matthews, the South Australia Equal Opportunity Commissioner argued that basic human rights should not be overridden by commercial considerations. Her strong opposition of BAE’s application was not enough to convince the Department of Justice to deny their application. BAE’s legal counsel is denying all allegations that the company ever violated South Australia Equal Opportunity laws before the date of the approval of the company’s application.

This development allows BAE to comply with US ITAR requirements that certain foreign nationals not access US defense articles without violating the laws of Australia.

More information:

http://www.tradingmarkets.com/.site/news/Stock News/1058903/

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. Read More

“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. Read More

Special Guest Article from Pillsbury Winthrop Shaw Pittman LLP

The U.S. Government recently completed the negotiation of two defense trade cooperation treaties, one with the United Kingdom and the other with Australia. These treaties establish a bilateral framework with each country to enhance defense cooperation and reduce barriers to the exchange of defense goods, services and information. If ratified, the treaties will allow the U.S. to streamline licensing for items subject to the International Traffic in Arms Regulations (ITAR) when exported to members of an “Approved Community” in each country for specified programs. Read More

The Australia-United States of America Treaty on Defense Trade Cooperation is underway and, if ratified, would permit some license-free exporting of defense goods and services between the two countries. The important point is that if US Senate ratifies the treaty, there could be significant relaxations in US export restrictions on defense articles under the International Traffic Arms Regulations (ITAR). The State Department approved 2361 licenses and 312 agreements for Australia in 2006. The United Kingdom is the only other country to have such a treaty United States, but the US Senate has not yet ratified the UK-US treaty. The ITAR already gives certain favorable and license free treatment to exports to Canada. Read More

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.

Part 1: Expedited License Review

Don’t Tell Anybody-Expedited Treatment Available for ITAR Exports to Australia?

According to Kerry Clarke AO, in the Australian Department of Defence, the US State and Defense departments have agreed to give streamlined processing for exports to Australia under two new policies known as Expedited License Review I (ELR I) and Expedited License Review II (ELR II).

But, according to Kerry Clarke, the expedited processing might not yet be in operation and is “dependent on the continued implementation of D-Trade — [which] — the State Department hopes — to have fully implemented by the end of 2007. Until then, licence and TAA approvals may take longer than the 10 and 30 day target times, but hopefully less than the current approval times.”

(Not sure I agree with the hopefulness of Kerry Clarke.)

OK, so the bottom line appears to be that the expedited system might not be in operation yet and hopefully it will be up and running by the end of the year. (I personally am not going to use up my limited supply of personal hope hoping for streamlined processing. I plan to spend all my hope on hoping I win the lottery so I can retire to the mountains.)

Anyway, according to an Australian Department of Defence memo (see end of this article for a copy), here are the two expedited procedures the US and Australian agreed upon:

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While most college-age Australians have nothing more to remember their birthdays than hangovers and bad sunburns, a rather more sober Australian twenty-year-old recently celebrated its first twenty years stemming the spread of chemical and biological weapons. I am speaking of course of the Australia Group, the informal multilateral export control regime which returned to its place of birth earlier this year for its twentieth annual plenary session. Speaking at the plenary, Australian Foreign Minister Alexander Downer recounted a bit of the organization’s history:

It is 20 years since Australia convened the first meeting of 15 like-minded countries in 1985 in Brussels.

That meeting was a response to the findings of a UN investigation, led by an Australian - Dr Peter Dunn, that Iraq had used chemical weapons in the Iran-Iraq war. It posed the question of how to prevent Iraq from acquiring materials for the production of chemical weapons through otherwise legitimate commercial trade.

The response - a proposal to harmonize national export controls - was endorsed by all present at that meeting, and the Australia Group was born.

But the plenary wasn’t all talk with the AG participants agreeing on three control list changes to refine limits on illegitimate trade in items with chemical or biological weapons end uses:

1. Simplification of the types of pumps subject to controls due to their usefulness in manufacturing chemical weapons (the US controls such equipment under ECCN 2B350.i).
2. New controls on spraying or fogging systems designed for use with aircraft or unmanned aerial vehicles (UAVs) and capable of delivering droplets of less than 50 m in diameter at a rate of greater than 2 liters per minute (ECCN 2B352).
3. A revision to the technical note clarifying that the controls applicable to genetic elements and genetically-modified organisms also cover nucleic acid sequences that represent a significant hazard to human, animal or plant health or enhance the ability of AG-controlled or other microorganisms to cause harm. (This change in particular has potentially significant implications for firms and universities involved in biotechnology research. The revised technical note can be found under ECCN 1C353).

It may have taken nearly four months, but the US Bureau of Industry and Security did finally turn up with a gift in honor of the AG’s first twenty years on August 5 - a regulation implementing the group’s new rules. In addition to the control list and technical note revisions explained above, the BIS rule updates the Export Administration Regulations to reflect a new AG participant (Ukraine), the fact that the tiny Pacific island nation of Niue has acceded to the Chemical Weapons Convention, and a new name for the largest part of the former Yugoslavia (Serbia and Montenegro).

When Congress says “jump,” the State Department responds “we are amending the regulations to spring off the ground or other base by a muscular effort of the legs and feet to an indefinite, indeterminate, and ultimately unknowable height.”

You probably think this is some sort of joke and ordinarily that would be a fair enough assumption, but in this case it would also be an incorrect one. How else to interpret State’s July rule creating a new ITAR provision, Section 126.15, which reads, in part, “Any application submitted for authorization of the export of defense articles or services to Australia or the United Kingdom will be expeditiously processed by the Department of State, in consultation with the Department of Defense.” (The same regulation also makes minor clarifications to the exclusions from the Canadian exemption.)

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I read the July 12 Federal Register notice on expeditious processing of license applications for Australia and the United Kingdom with a chuckle. Just the same day an export administrator had complained to me that their Australia Technical Assistance Agreement (TAA) application was still lying around without staffing after two months, and how her $560 UK license was being pecked at for the most minor technical clarifications by both State and Defense reviewers.

Like the NATO allies mega-license International Traffic in Arms Regulations (ITAR) amendment of years past, which purported to streamline licensing for our closest allies, this notice will probably be inhaled without perception by the licensing bureaucracy. Underneath the well-intentioned words of this rule lies a sluggish Jabba the Hut figure of officialdom whose taste for painfully slow and meticulous license processing will never be satiated.

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Here’s one for those among you with email addresses ending in .au or .uk who have long gazed longingly across an ocean hoping that American-style export controls on defense services would one day reach your tea-drinking shores.  The day you’ve longed for may soon arrive.

Both Australia and the UK are seeking to get a better handle on defense services provided by their private military companies (PMCs, formerly and perhaps less charitably known as mercenaries).  In each case the respective government is motivated in no small part by the rapid increase in firms providing military services in Afghanistan and Iraq.  And in each case proponents of defense service controls are looking to the US International Traffic in Arms Regulations (ITAR) as a positive example.

The Australian Strategic Policy Institute, which gets its funding from the Australian Department of Defense, is recommending in a new report that the government introduce controls on the provision of defense services.  The report’s executive summary makes the case as follows:

“There is an increasing number of unregulated firms providing both paramilitary security services and military training or advice for profit. Without regulation, there’s no guarantee that such firms will act in Australia’s national interest. Consequently, the government should introduce a regulatory regime to control the provision of military, paramilitary and policing services, training and support akin to the export control regime for arms and military technology. The UK is exploring options to regulate firms operating from its jurisdiction, and the US - arguably the world’s most laissez faire economy - already requires export licenses for firms providing such services.”

As the Australian report mentions, the UK is also considering new regulations on defense service exports as reported in The Independent.  The British are actually considering a more expansive regime that includes export controls, but also goes beyond that to include regulation of many aspects of this booming business.  For more details, check out the Foreign Office green paper which kicked off the British debate at http://www.fco.gov.uk/Files/kfile/mercenaries,0.pdf.

Here in the US, of course, anyone providing defense services would ordinarily require a license from the Directorate of Defense Trade Controls (DDTC) unless the export qualified for one of the limited exemptions for NATO countries and other close allies.

During several speeches this summer, copies of which are posted on the Directorate of Defense Trade Controls (DTC) website, Deputy Assistant Secretary of State Lincoln Bloomfield expanded on recent policy and reorganization initiatives at DTC. Perhaps we could see some concrete progress in what virtually every knowledgeable insider agrees can be a bureaucratic nightmare. It’s at least encourage to hear someone at State acknowledge, as Lincoln Bloomfield has, “for a number of years there has been palpable discontent, among US defense exporters and allied governments alike, about the process of obtaining licenses from the State Department.” Slightly understated but encouraging.

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